The Ninth Circuit reviewed a website disclosure form – for a marketing website that generates leads – to determine when consumers assent to terms through interacting with a website. The Ninth Circuit analyzed the factors of: (1) reasonably conspicuous notice, (2) manifestation of assent, and (3) use of the word – arbitration – in the notice itself. Berman v. Freedom Financial LLC, 30 F.4th 849 (9th Cir. 2022). Many similar federal court rulings concern websites in which the consumer is engaging in a transaction – such as buying a product – so Berman has a different factual basis because the marketing website was giving away free items as a means of obtaining leads for other companies.
In the facts underlying this case, Fluent is a digital marketing company that generates consumer leads for its clients by collecting information about consumers who visit Fluent’s websites. Fluent offers free items via its websites such as gift cards and free product samples as an enticement to get consumers to provide their contact information and answer survey questions. Fluent then uses the information it collects in targeted marking campaigns conducted on behalf of its clients.
Defendants used the contact information provided by consumers like plaintiffs to conduct a telemarketing campaign on behalf of defendants.
Plaintiffs filed a TCPA class action on behalf of consumers who received unwanted calls or text messages from defendants during the telemarketing campaign. Defendants filed a motion to compel arbitration which was denied. The Ninth Circuit reviewed the denial of the motion.
The Ninth Circuit noted that the Federal Arbitration Act (“FAA”) limits the court’s role to determining whether a valid arbitration agreement exists and, if so, whether the agreement encompasses the dispute at issue. Plaintiffs did not contest that the arbitration provision on the websites’ terms and conditions encompasses their TCPA claims. Thus, the only legal issue was whether either plaintiff assented to the terms, including the arbitration agreement.
The Ninth Circuit first discussed whether New York or California law governs, and the result would be the same under either state’s law because both states require mutual consent. Absent a showing of “actual knowledge” of the contract terms by the consumer-plaintiff, inquiry notice will result in a contract only if: (1) the website provides “reasonably conspicuous” notice and (2) the consumer makes an “unambiguous” manifestation of assent. The Ninth Circuit ruled that neither condition is satisfied and analyzed:
- Reasonably conspicuous notice: Website users are entitled to assume that important provisions – such as those that disclose the existence of contractual terms – will be prominently displayed. The Ninth Circuit looked at:
- Font size: the size of the text in the disclosure was smaller than the font in the surrounding website elements
- Color: the gray color of the text containing the hyperlink to the full terms and conditions made the disclosure hard to read
- Phrase: the specific phrase used on the button that users click to agree to the terms and conditions was generically phrased as “continue”
- Underlining: the underlining for the hyperlinks to the arbitration agreement did not sufficiently denote the hyperlink
- Manifestation of assent: The “continue” button did not indicate to the user what action would constitute assent to those terms and conditions. Further, the text of the button itself gave no indication that it would bind plaintiffs to a set of terms and conditions.
- Including “arbitration” in the notice: Merely because the notice references the word “arbitration” is not enough because the key question is whether the plaintiffs can be deemed to have manifested their assent to the terms.
The Ninth Circuit affirmed the denial of the motion to compel arbitration.
In sum, websites should comply with the three bullet-point analysis – reasonably conspicuous, manifestation of assent, and use of “arbitration” in the notice – to create enforceable contracts via website disclosures.