On August 18, 2014 the 9th Circuit Court of Appeals affirmed a district court’s holding that Kevin Khoa Nguyen could not be compelled into arbitration with Barnes & Nobel for a claim arising out of Mr. Nguyen’s online purchase of a HP Touchpad that Barnes & Nobel later cancelled.
While the 9th Circuit’s analysis focused on the applicability of the arbitration provision, their holding calls into question the validity of browsewrap agreements in general.
In Nguyen v. Barnes & Nobel, the 9th Circuit found that Mr. Nguyen did not have actual or constructive knowledge of Barnes & Nobel’s browsewrap TOU. They held that since there was no evidence Mr. Nguyen read the TOU or that he even clicked on the TOU hyperlink, he did not assent to the TOU and therefore cannot be bound by the TOU’s terms. This is despite the fact Barnes & Nobel had placed hyperlinks to its TOU on every page of their website and in the online checkout process, and such links were underlined and off-set in green typeface. Without more, the court held that this did not surmount to constructive notice of the TOU.
What’s more? The court provided examples from caselaw where the courts found users had assented to browsewrap agreements:
- com, Inc. v. Verio, Inc.: Defendant admitted that it was fully aware of the terms on which plaintiff offered access to its online service and defendant repeatedly accessed plaintiff’s service;
- Airlines Co. v. Boardfirst, LLC: Defendant continued its breach after being notified of the terms in a cease and desist letter;
- Ticketmaster Corp. v. Tickets.com, Inc.: Defendant continued to breach the TOU after receiving a letter from plaintiff quoting the browsewrap contract terms.
- Zaltz v. JDATE : The court enforced the forum selection clause of the browsewrap agreement where prospective members had to check a box next to the statement “I confirm that I have read and agreed to the Terms and Conditions of Service.”
- Fteja v Facebook, Inc.: The court enforced the forum selection clause in a browsewrap TOS where notice below the “Sign Up” button stated “By clicking Sign Up, you are indicating that you have read and agree to the Terms of Service” where “Terms of Service” was a hyperlink and there was evidence the plaintiff had clicked “Sign Up.”
- Cairo, Inc. v. Crossmedia Servs, Inc, No. 04-04825, 2005 WL 756610 (N.D. Cal. Apr. 1, 2005): The court enforced the forum selection clause in website’s TOU where every page on the website had a textual notice that read: “By continuing past this page and/or using this site, you agree to abide by the TOU for this site, which prohibit commercial use of any information on this site”).
- Compare the decision in Cairo with Pollstar v. Gigmania where the court refused to enforce a browsewrap agreement where textual notice appeared in a small gray print against a gray background.
Interestingly, the 9th Circuit affirmed the district court’s second holding that Mr. Nguyen was not prevented from denying the applicability of the arbitration clause even though he took advantage of the TOU’s choice of law provision when bringing this lawsuit. The court distinguished this case from previous cases which applied the doctrine of direct benefit estoppel because Mr. Nguyen was not a third party beneficiary to the TOU, but a primary party to the TOU; and the choice of law provision was not a benefit intended to benefit Mr. Nguyen specifically.
Although browsewrap agreements were not technically invalided per se by the court, this opinion and the court’s recommendations on the extra steps make browsewrap agreements the much less attractive option.