Case Report – January 2023

The California Court of Appeal recently held that a patron of a Massage Envy franchise in San Rafael had not entered into a contract with franchisor Massage Envy (“MEF”) when assent to the contractual agreement was hidden in the franchisee’s General Consent electronic document.  Doe v. Massage Envy Franchising, No. A161688, 2022 Cal. App. LEXIS 1066 (Ct. App. Dec. 29, 2022)

In 2017, Jane Doe entered into a “Wellness Agreement” with a Massage Envy franchisee in San Rafael.  The Agreement was a paid monthly membership continuing until the patron cancelled. The Agreement never mentioned arbitration.  In August 2017, Jane Doe checked-in for a massage at the San Rafael parlor and was allegedly sexually assaulted by a massage therapist during the massage. She sued MEF and the San Rafael Massage Envy franchisee for damages based on causes of action including sexual battery and fraud.  MEF filed a motion to compel arbitration on the basis of a “Terms of Use Agreement” presented to Jane Doe when she checked in for the massage.

The check-in process involved electronically consenting two electronic forms, one of which was developed by MEF for is franchisees, entitled “In-Store Application.” That Application was inserted into the General Consent form as a hyperlink. The General Consent form was for the San Rafael franchisee. 

The General Consent form required Jane Doe to scroll through the Terms and Conditions. However, the Application did not and as Jane Doe was pressured to sign, she did not see the binding arbitration provision that MEF inserted in its separate Terms and Conditions

The trial court concluded that there was no agreement to arbitrate between Jane Doe and MEF.  The Court of Appeal affirmed, rejecting MEF’s argument that the “Terms of Use Agreement,” was a valid and enforceable “clickwrap” agreement of the sort that courts routinely enforce. The court held that Jane Doe did not have reasonable notice that she was entering into any agreement with MEF, much less notice of the terms of the agreement. The court explained that the transaction was nothing like the typical transactions in which clickwrap agreements are used; Jane Doe went to a physical location, where she was already a member, and was handed a tablet to check in for a massage.

The court explained that Jane Doe did not actually consent under circumstances because she was justified in believing that the “Terms of Use Agreement,” consisted of the multiple pages through which she had just scrolled, and not a separate contract that would have appeared on the screen had she clicked on a hyperlink, particularly in view of the fact that the General Consent was clear that the agreement was only between Jane Doe and the San Rafael location.

Contracts presented on computer screens require sufficient notice to consumers regarding contractual terms contained in separate hyperlinked pages. In this case, everything about the check-box next to the to the words agreeing to MEF’s terms of use made it appear to be a part of the franchisee’s General Consent.  The set-up process did not provide Jane Doe with any indication that she was agreeing to an entirely different contract with a different entity.  MEF’s click-wrap argument failed because there was no evidence that Jane Doe was using a website to check in for her massage or that she had constructive notice. The court noted that the sentence containing the hyperlink to the “Terms of use Agreement” was not presented in bold, even though boldface was used to highlight portions of the General Consent agreement. The enforceability of a click wrap agreement is dependent upon its design and terms to ensure they encompass notice, consent and fairness. 

This case serves as a reminder to franchisors that click wrap agreements will not be enforced unless notice, consent and fairness are present. 

This case report was prepared by Sam Wolf (Samwolf464@gmail.com)