Caseflicks

Court of Appeals for the Second Circuit • 2017

Meyer v. Uber Technologies, Inc.

868 F.3d 66 | 2017 U.S. App. LEXIS 15497

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Takeaway

In short, this case holds that a mobile-app user can be bound to linked terms, including arbitration, when a clear and conspicuous sign-up screen states that account creation constitutes agreement; the remaining question was whether Uber and Kalanick waived arbitration by litigating first.

Background

Spencer Meyer downloaded Uber’s Android app in 2014, registered for an account, entered his credit-card information, and later took about ten Uber rides. On the final registration screen, immediately below the registration controls, Uber stated: “By creating an Uber account, you agree to the TERMS OF SERVICE & PRIVACY POLICY.” The linked terms included a broad mandatory-arbitration clause, a jury-trial waiver, and a class-action waiver. Meyer said he did not recall seeing the hyperlink or reading the terms.

Meyer brought a putative antitrust class action against Uber cofounder Travis Kalanick, alleging that Uber’s app facilitated illegal price fixing by third-party drivers. Uber was later joined as a defendant. Kalanick and Uber moved to compel arbitration, but the district court denied their motions. It held that the app did not give Meyer reasonably conspicuous notice of Uber’s terms and that he did not unambiguously assent to them. Because it found no agreement, the district court did not decide whether the defendants had waived arbitration through litigation conduct or whether Kalanick, a nonsignatory, could invoke the clause. The Second Circuit vacated and remanded.

Issues

Issue #1

Whether Meyer formed an enforceable agreement to arbitrate when he registered for an Uber account through the app.

Holding

Yes. Uber’s registration interface gave Meyer reasonably conspicuous notice of the Terms of Service, and he unambiguously assented by creating his account.

Reasoning

The Federal Arbitration Act favors enforcement of arbitration agreements, but it does not create an agreement where state contract law recognizes none. Applying California contract law, the court asked whether a reasonably prudent user had notice of the contractual terms and whether the user’s conduct objectively manifested assent. Because the material facts consisted of undisputed screenshots and registration records, the court reviewed the contract-formation issue de novo.

Meyer lacked actual notice because he did not remember seeing the linked terms or reading the arbitration clause. The relevant question therefore was inquiry notice: whether Uber’s screen would put a reasonably prudent smartphone user on notice that terms existed and that registering would bind the user to them. Labels such as clickwrap, browsewrap, and sign-in-wrap may help describe an interface, but they do not themselves resolve this fact-sensitive notice inquiry.

Uber’s payment screen provided sufficiently conspicuous notice. It was uncluttered, showed all relevant information without scrolling, and placed the notice directly below the registration controls. The text contrasted with the white background, while “TERMS OF SERVICE & PRIVACY POLICY” appeared in blue, underlined hyperlink text. A reasonable smartphone user understands that blue, underlined text links to additional information.

The notice was also both spatially and temporally connected to the act of enrollment. The statement that “[b]y creating an Uber account, you agree” appeared in the registration flow beside the means of completing registration. Unlike a website that supplies contractual notice only after a transaction, Uber presented the terms at the moment Meyer was obtaining an account and entering a continuing commercial relationship with Uber.

The fact that the terms were available through a hyperlink did not defeat notice. The language clearly directed users to the linked Terms of Service and warned that account creation constituted agreement. Nor was the arbitration provision impermissibly buried: once a user opened the terms, the “Dispute Resolution” heading and the jury-trial waiver were bolded. The interface was not misleading in the way that some online contracting screens have been.

Meyer’s click on “REGISTER” unambiguously manifested assent. Although the button both created an account and accepted the terms, a reasonable user would understand from the nearby notice that those consequences went together. Meyer voluntarily downloaded the app, supplied personal and payment information, and sought an ongoing service relationship; in that context, he had the choice either to register subject to the disclosed terms or not to use the service. No further factual hearing was necessary because Uber’s evidence established the registration process and Meyer identified no genuine factual dispute.

Issue #2

Whether Kalanick, though not a signatory to Uber’s Terms of Service, could rely on the arbitration agreement.

Holding

Yes. As Uber’s disclosed agent, Kalanick was protected by the arbitration provision between Uber and Meyer.

Reasoning

The court noted that employees and disclosed agents of a contracting entity may invoke that entity’s arbitration agreement even when they did not personally sign it. Kalanick, Uber’s cofounder and former chief executive officer, fell within that established rule and was therefore entitled to the agreement’s protection.

Issue #3

Whether Uber and Kalanick waived their right to compel arbitration through their litigation conduct.

Holding

The Second Circuit did not decide the waiver question and remanded it to the district court for an initial determination.

Reasoning

Waiver based on litigation conduct is ordinarily for the court, rather than the arbitrator, when the party seeking arbitration has participated in the lawsuit concerning the underlying dispute. Meyer argued that the defendants had litigated actively enough to relinquish their arbitration right.

The district court had never reached waiver because it had first concluded that no arbitration agreement existed. Once the Second Circuit held that Meyer had agreed to arbitrate, it remanded so that the district court could determine in the first instance whether the defendants’ conduct nevertheless waived enforcement of that agreement.