Second Circuit Reverses Judge Rakoff, Finds Uber Arbitration Clause is Enforceable

As part of the ongoing Uber antitrust litigation, the Second Circuit yesterday reversed Judge Rakoff's earlier ruling that the arbitration clause in Uber's terms of service was not enforceable (see our previous coverage of Judge Rakoff's decision here, and the interlocutory appeal here). The Second Circuit found that making the Terms of Service available only by hyperlink does not defeat reasonable notice:

That the Terms of Service were available only by hyperlink does not preclude a determination of reasonable notice.  See Fteja [v. Facebook, Inc.], 841 F. Supp. 2d [829,] 839 [(S.D.N.Y. 2012)] (ʺ[C]licking [a] hyperlinked phrase is the twenty‐first century equivalent of turning over the cruise ticket.  In both cases, the consumer is prompted to examine terms of sale that are located somewhere else.ʺ).  Moreover, the language ʺ[b]y creating an Uber account, you agreeʺ is a clear prompt directing users to read the Terms and Conditions and signaling that their acceptance of the benefit of registration would be subject to contractual terms.  As long as the hyperlinked text was itself reasonably conspicuous ‐‐ and we conclude that it was ‐‐ a reasonably prudent smartphone user would have constructive notice of the terms.  While it may be the case that many users will not bother reading the additional terms, that is the choice the user makes; the user is still on inquiry notice.

The Second Circuit also disagreed with Judge Rakoff that the placement of the arbitration clause prevented reasonable notice:

Finally, we disagree with the district courtʹs determination that the location of the arbitration clause within the Terms and Conditions was itself a ʺbarrier to reasonable notice" . . . . No court has suggested that the presence of a scrollable window containing buried terms and conditions of purchase or use is, in itself, sufficient for the creation of a binding contract . . . .ʺ  Here, there is nothing misleading.  Although the contract terms are lengthy and must be reached by a hyperlink, the instructions are clear and reasonably conspicuous.  Once a user clicks through to the Terms of Service, the section heading (ʺDispute Resolutionʺ) and the sentence waiving the userʹs right to a jury trial on relevant claims are both bolded.

The decision was vacated and the case remanded to Judge Rakoff. Our complete coverage of the Uber antitrust litigation is here.