In re Zappos, Inc. - 893 F. Supp. 2d 1058 (D. Nev. 2012)

Rule:

A reference to the existence of license terms on a submerged screen is not sufficient to place consumers on inquiry or constructive notice of those terms.

Facts:

This Multidistrict Litigation ("MDL") proceeding arose out of a security breach of servers belong to Defendants Amazon.com, Inc. ("Amazon"), doing business as Zappos.com, and Zappos.com, Inc. ("Zappos") in January 2012. Zappos is an online retailer of apparel, shoes, handbags, home furnishing, beauty products, and accessories. Plaintiffs are Zappos customers who gave personal information to Zappos in order to purchase goods via Zappos.com and/or 6PM.com. In mid-January 2012, a computer hacker attacked Zappos.com and attempted to download files containing customer information such as names and addresses from a Zappos server (the "Security Breach"). Plaintiffs alleged that on January 16, 2012, Zappos notified Plaintiffs via email that their personal customer account information had been compromised by hackers. Plaintiffs have filed complaints in federal district courts across the country seeking relief pursuant to state and federal statutory and common law for damages resulting from the Security Breach. Zappos filed a Motion to Compel Arbitration and Stay action. The arbitration agreement at issue, was found in the Disputes section of the Terms of Use of the Zappos.com website.

Issue:

Did a valid agreement to arbitrate exist?

Answer:

No.

Conclusion:

The court held that there was no acceptance by the Plaintiffs of the Terms of Use. The Terms of Use hyperlink can be found on every Zappos webpage, between the middle and bottom of each page, visible if a user scrolls down. The link was the same size, font, and color as most other non-significant links. The website did not direct a user to the Terms of Use when creating an account, logging in to an existing account, or making a purchase. Without direct evidence that Plaintiffs click on the Terms of Use, the court cannot conclude that Plaintiffs ever viewed, let alone manifested assent to, the Terms of Use. The Terms of Use is inconspicuous, buried in the middle to bottom of every Zappos.com webpage among many other links, and the website never directs a user to the Terms of Use. No reasonable user would have reason to click on the Terms of Use, even those users who have alleged that they clicked and relied on statements found in adjacent links, such as the site's "Privacy Policy." This case was therefore factually similar to cases that have decline to enforce arbitration clauses, such as Hines v. Overstock.com, wherein the Court refused to enforce an arbitration provision because the plaintiff "lacked notice of the Terms and Conditions because the website did not prompt her to review the Terms and Conditions and because the link to the Terms and Conditions was not prominently displayed so as to provide reasonable notice of the Terms and Conditions." From the foregoing, the court held that there was no meeting of the minds, and no manifestation of assent, hence there was no contract pursuant to Nevada law.