Prepared by Shyam Rajan, student at Santa Clara University School of Law.
This federal district court opinion provides guidance on the enforceability of arbitration provisions that appear as part of the terms and conditions of a retail website. The case involved antritrust claims against e-cigarette maker Juul and tobacco giant Altria. U.S. District Judge William H. Orrick held that customers who purchased directly from Juul were bound by arbitration clauses they agreed to when making purchases through Juul’s website.
Purchasers of e-cigarettes brought a class action alleging Altria and Juul violated antitrust laws when Altria acquired a 35% stake in Juul for $12.8 billion and then agreed to refrain “from competing, or otherwise acquiring an interest in an entity competing, in the e-Vapor business for a period of at least six years.” In re Juul Labs, Inc., Antitrust Litigation, 555 F.Supp.3d 932, 11 (2021).
Juul moved to compel arbitration or strike the class claims due to an arbitration and class action waiver included within Juul’s terms and conditions as displayed on its website. Juul argued that, when the named class representatives created their online accounts, they agreed to arbitration and waive their right to pursue class action lawsuits.
Result and Reasoning
The district court agreed that the named plaintiffs were bound by the arbitration clauses that appeared on the terms and conditions page of Juul’s website between August 2018 and July 2019. That page required users to click a box to consent to the hyperlinked Terms and Conditions before accessing and using the website to pace an order.
According to the Federal Arbitration Act, 9 U.S.C. § 1, federal district courts must stay proceedings and compel arbitration of claims when consumers consent or assent to a written and enforceable arbitration agreement. The validity of that agreement is determined by state contract law and forum state law in diversity cases. Even considering the advent of the internet, a consumer is bound if a “reasonably prudent Internet consumer” would be put on “inquiry notice” of the “agreement’s existence and contents.” Nguyen v. Barnes & Noble Inc., 763 F.32 1171, 1175 (9th Cir. 2014), see also Long v. Provide Commerce, Inc., 245 Cal.App.4th 855, 862 (2016).
Juul used a “clickwrap-like” agreement on its website, which has been deemed sufficient for disclosure and assent, and therefore is a valid and enforceable. In re Facebook Biometric Info. Priv. Litig., 185 F. Supp. 3d 1155, 1165-66 (N.D. Cal. 2016). Therefore, the district court concluded that the arbitration clause could be enforced because “clicking a checkbox” is sufficient for assent to a terms and conditions, which here included the arbitration clause. La Force v. GoSmith, Inc.m 17-CV-05101-YGR, 2017 WL 9938681, at *4 (N.D. Cal. Dec. 12, 2017).
The district court noted that terms and conditions that lie conspicuously above or are hyperlinked above a Pay Now button are considered adequately disclosed. Snow v. Eventbrite, Inc., 3-20-CV-03698-WHO, 2020 WL 6135990, at *7 (N.D. Cal. Oct. 19, 2020). Although the plaintiffs argued that Juul’s hyperlinks were not conspicuous, the court disagreed because the website included an affirmative assent clickbox, a highlighted terms and conditions link following it, an uncluttered sign-up link, and was written in a conspicuous font both underlined and italicized.
The district court granted the motion to compel the named class representatives into arbitration, but stayed the order for 30 days to allow plaintiffs to substitute a class representative who would not be subject to arbitration .