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By the Consumer Financial Services Group
For that reason, the appeals court in Nguyen v. Barnes & Noble, Inc. [enhanced opinion available to lexis.com subscribers] affirmed the district court’s denial of the company’s motion to compel individual arbitration of the named plaintiff’s class action claims. This ruling demonstrates that, even though the U.S. Supreme Court has affirmed the enforceability of class action waivers in arbitration agreements, proof of a contractual agreement to arbitrate is still required.
The Ninth Circuit agreed with the plaintiff. It characterized the company’s terms as a “browsewrap” agreement, where the terms and conditions of use are posted on the website through a hyperlink at the bottom of the screen. It contrasted this with a “clickwrap” agreement, in which website users are required to click on an “I agree” box after being presented with the terms.
The appeals court acknowledged the longstanding general principle that failure to read a contract does not relieve a party of its terms, but ruled that “the onus must be on website owners to put users on notice of the terms to which they wish to bind consumers.” The court emphasized that “consumers cannot be expected to ferret out hyperlinks to terms and conditions to which they have no reason to suspect they will be bound.”
The Nguyen opinion is a potent reminder that even after the Supreme Court upheld the validity of class action waivers in AT&T Mobility LLC v. Concepcion [enhanced version available to lexis.com subscribers] and American Express Co. v. Italian Colors Restaurants [enhanced opinion], courts still require proof that an agreement to arbitrate was formed contractually. Even the Concepcion majority noted that “[s]tates remain free to take steps addressing the concerns that attend contracts of adhesion—for example, requiring class-action waiver provisions in adhesive agreements to be highlighted,” as long as such steps do not conflict with the FAA or frustrate its purpose of ensuring that arbitration agreements are enforced according to their terms.
Ballard Spahr’s Consumer Financial Services Group pioneered the use and implementation of pre-dispute arbitration provisions in consumer financial services agreements. It is nationally recognized for its guidance in structuring and documenting new consumer financial services products, its experience with the full range of federal and state consumer credit laws, and its skill in litigation defense and avoidance.
The CFS Group also produces CFPB Monitor, a blog that focuses exclusively on important Consumer Financial Protection Bureau developments. To subscribe to the blog, use the link provided to the right.
For more information, please contact CFS Practice Leader Alan S. Kaplinsky at 215.864.8544 or firstname.lastname@example.org, or Mark J. Levin at 215.864.8235 or email@example.com.
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