Samuel Estreicher and Holly H. Weiss ()
In Applebaum v. Lyft, 2017 WL 2774153 (S.D.N.Y. June 26, 2017), the U.S. District Court for the Southern District of New York (per Judge John Koeltl) departed from a recent trend of enforcing “clickwrap” agreements by declining to enforce the arbitration provision contained within Lyft’s “clickwrap” agreement but nonetheless compelling arbitration based on Lyft’s subsequent “scrollwrap” agreement. In a scrollwrap agreement, a user must scroll through or view an agreement to proceed. With a clickwrap agreement, by contrast, a user need only click a button to indicate his acceptance, and might never view the agreement itself, before proceeding. At issue in Applebaum was an arbitration agreement contained within Lyft’s terms of service, initially conveyed by a clickwrap agreement but with an update presented as a scrollwrap agreement. Even though clickwrap agreements generally have been held enforceable, see, e.g., Cullinane v. Uber Technologies, 2016 WL 3751652, at *6 (D. Mass. July 11, 2016), the court in Applebaum found that Lyft’s initial clickwrap agreement was not enforceable due to the small print and ambiguity as to what the user was agreeing to. In line with recent precedent, the court did enforce the subsequent terms of service when presented as a scrollwrap agreement. See, e.g., Bekele v. Lyft, 199 F. Supp. 3d 284, 288, 290 (D. Mass 2016); Loewen v. Lyft, 129 F. Supp. 3d 945, 948-49 (N.D. Cal. 2015).
In April 2016, plaintiff Josh Applebaum filed a class action lawsuit against Lyft, claiming that it charged passengers the non-discounted cash price for tolls rather than the discounted toll price that Lyft drivers pay through their use of “E-Z Pass.” Lyft moved to dismiss the action or, in the alternative, to compel arbitration on the basis of a mandatory arbitration clause included in its terms of service agreement. The plaintiff contended that he never knowingly agreed to Lyft’s terms of service, including the mandatory arbitration agreement. Arbitration clauses within two different terms of service were at issue: a Feb. 8, 2016 Terms of Service presented as a clickwrap agreement, and an updated Sept. 30, 2016 Terms of Service presented as a scrollwrap agreement.
When Applebaum first registered for the Lyft mobile application, he did so through a series of screens presented on his smartphone. The plaintiff could not proceed until he entered his phone number and clicked on a box next to “I agree to Lyft’s Terms of Service.” The plaintiff entered his phone number and clicked the box, before continuing with the registration process. This method of clicking a box to indicate agreement with proposed terms of service, without ever viewing or being presented with the terms themselves, is called a clickwrap agreement. The terms of service could be viewed through a hyperlink, but were not present on the registration page.
In making this determination, the court evaluated the totality of the circumstances, considering the design and layout of the mobile application screen. The court took note of the small font size used for the text of “I agree to Lyft’s Terms of Service” compared to the much larger text for the “Next” button and the “Add Phone Number” header at the top. Ultimately, the court determined that the “inconspicuousness of the hyperlink and the absence of cautionary language to indicate that there were contractual terms for review” made it “apparent that a reasonable consumer would not be on reasonable inquiry notice to search for the terms of a contract on the ‘Add phone number’ screen when the consumer clicked on the box.” Applebaum, 2017 WL 2774153 at *8, 9.
After updating its terms of service, Lyft presented its “September 30, 2016 Terms of Service” to its existing users through a scrollwrap agreement. The plaintiff was presented with a screen that stated “Before you can proceed you must read & accept the latest Terms of Service.” The terms of service were presented on the same screen as the message and could be scrolled through. The text began with a warning that “[t]hese Terms of Service constitute a legally binding agreement … between you and Lyft, Inc.” Applebaum had to click a bar indicating his acceptance of these terms before he could proceed. Lyft had previously used this scrollwrap method for its terms of service, and it had been found enforceable. See, e.g., Bekele, 199 F. Supp. 3d at 288, 290; Loewen, 129 F. Supp. 3d at 948-49. Consistent with previous cases, the court found that the arbitration clause in the Sept. 30, 2016 Terms of Service was enforceable and granted Lyft’s motion to compel arbitration.
While the rise of online transactions may have led to new language in the area of contract law, the basic principles themselves remain unchanged. Courts look to precedent concerning the enforceability of agreements such as clickwrap, scrollwrap, browsewrap, and sign-in wrap, but the enforceability of each individual agreement will hinge on “the totality of the circumstances.” Applebaum, 2017 WL 2774153 at *8. Font size and color, clear presentation of terms and conditions, and plain agreement to those terms and conditions are all important factors when a court evaluates whether there was a meeting of the minds and mutual assent. Despite the evolving nature of internet commerce, “it has not fundamentally changed the principles of contract.” Register.com v. Verio, 356 F.3d 393, 403 (2d Cir. 2004).