Pennsylvania Appellate Court Invalidates Online Arbitration Clause in Hyperlinked 'Terms and Conditions'

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October 28, 2022

The Pennsylvania Superior Court recently invalidated Uber’s use of a mandatory arbitration clause in an online registration page for customers, ruling that the arbitration clause was unenforceable because it did not clearly inform customers that they were waiving their right to a jury trial. Chilutti v. Uber Technologies, Inc., No. 1023 EDA 2021 (Pa. Super. Ct. Oct. 12, 2022). An Uber driver was transporting Ms. Chilutti home from a medical appointment when the vehicle made a sharp turn. Ms. Chilutti, who was wheelchair bound, fell from her wheelchair and was injured. Ms. Chilutti and her husband sued Uber for negligence. Uber petitioned the trial court to compel arbitration of the Chiluttis’ claims. The Chiluttis denied they had agreed to any arbitration provision, which was found in a hyperlinked “terms and conditions” document. The trial court nonetheless granted the petition to compel arbitration.

The Superior Court then reversed the trial court’s decision. When creating an Uber rider account, the user would have seen a notice that “by clicking the ‘create account’ button you agree to Uber’s Terms and Conditions and Privacy Policy.” Nonetheless, the Superior Court was troubled that a user could easily miss the hyperlinks for the 12-page document containing the terms and conditions. The Superior Court was also concerned that the mandatory arbitration clause did not appear until page 9, in the same size type as the rest of the document, and that users could create an account without ever reviewing the terms and conditions. For all of these reasons, the Court observed, “[it] is reasonable to assume that if the arbitration provision is buried deep in webpages in tiny print, the person was not aware of the provision and it is unenforceable.”

In Chilutti, the Superior Court found it “imperative” that courts engage in greater scrutiny of a party’s waiver of their constitutional right to a jury trial. The Superior Court also announced a new standard even more stringent than that in a recent federal appeals case, Berman v. Freedom Financial Network, 30 F.4th 849 (9th Cir. 2022). In Berman, the Ninth Circuit approved arbitration waivers via “clickwrap” with hyperlinks and the click of a button or an “I consent” pop-up. Holding that the Berman standard was insufficient under Pennsylvania law, the Court instead mandated that the following factors be present to “demonstrate a party’s unambiguous manifestation of assent to arbitration:”

1)    The company should explicitly state on the registration website and application screen that a customer is waiving their right to a jury trial when they agree to the company’s “terms and conditions.” The customer should not be able to complete the registration process until they are fully informed of that waiver.

2)    When the terms and conditions are available for viewing after a user has clicked on the hyperlink, the waiver should not be hidden in the text but should appear at the top of the first page in bold, capitalized text.

Companies using “clickwrap” or “browsewrap” agreements and forms online should carefully review their agreements with legal counsel to make sure they are “reasonably conspicuous” in light of this new standard. If you have questions about what this means for your business, please contact one of our authors.