2024 NY Slip Op 05869

A clickwrap agreement containing an arbitration clause is enforceable if the user is given reasonable notice of the terms and manifests assent, even if the user doesn’t read the terms; however, challenges to the enforceability of the arbitration agreement based on misrepresentation or unconscionability are for the arbitrator to decide if the agreement includes a delegation provision.

Summary

In Wu v. Uber, the New York Court of Appeals addressed the enforceability of an arbitration agreement within Uber’s updated terms of service, to which Wu purportedly assented through a clickwrap process. The court held that the clickwrap process, involving an email and in-app pop-up, provided reasonable notice of the terms, including the arbitration clause, and that Wu’s act of checking the box and confirming constituted assent. The court further determined that challenges to the arbitration agreement’s scope, specifically whether it applied to a pending lawsuit, were matters for the arbitrator, given the presence of a delegation provision. The court found that the delegation provision was valid, thus obligating Wu to arbitrate these disputes.

Facts

Emily Wu was injured while using Uber’s service, and she initiated a personal injury lawsuit against Uber. Uber later updated its terms of service, including an arbitration agreement, which were presented to users via an email and a clickwrap process in the app. Wu received the email and, upon logging into the app, checked a box and confirmed her agreement to the updated terms. The new terms provided that all disputes, including those regarding personal injury and claims that had accrued before the user agreed to the new terms, would be settled through arbitration. Uber subsequently demanded arbitration, and Wu moved to stay the arbitration and requested sanctions for an alleged violation of the Rules of Professional Conduct. The lower courts compelled arbitration and stayed the litigation, and Wu appealed to the Court of Appeals.

Procedural History

Wu initiated a personal injury action. Uber updated its terms and demanded arbitration based on the clickwrap agreement. The trial court denied Wu’s motion to stay arbitration and granted Uber’s motion to compel, finding an agreement to arbitrate and that the challenges to the agreement were for the arbitrator. The Appellate Division affirmed. The Court of Appeals granted leave to appeal, and certified a question regarding whether the Appellate Division’s order was properly made.

Issue(s)

1. Whether the clickwrap process used by Uber constituted a valid agreement to arbitrate.
2. Whether the scope of the arbitration agreement, including its applicability to a pending lawsuit, should be determined by the court or the arbitrator.
3. Whether Uber’s communications violated Rule 4.2 of the Rules of Professional Conduct.

Holding

1. Yes, because the clickwrap process provided reasonable notice of the terms and Wu manifested her assent by checking the box and clicking confirm.
2. Yes, because the arbitration agreement contained a delegation provision granting the arbitrator exclusive authority to resolve disputes relating to the agreement’s interpretation, enforceability, and applicability.
3. No, because the lower court did not abuse its discretion in declining to sanction Uber.

Court’s Reasoning

The court began by recognizing New York’s strong public policy favoring arbitration. Citing the FAA, the court noted that arbitration agreements are treated like any other contracts. Thus, the court determined that a valid contract requires a manifestation of mutual assent. The Court stated that a person must be put on “inquiry notice” of the terms and agree to them to be bound by a web-based contract. The clickwrap process used by Uber, including the email and in-app pop-up, put Wu on inquiry notice of the terms. The Court held that a reasonably prudent user would understand that clicking the “confirm” button and checking the box constituted assent. The court also pointed out that the enforceability challenges were for the arbitrator because the agreement contained a delegation provision. The delegation provision granted the arbitrator exclusive authority over any disputes relating to the agreement’s interpretation, applicability, and enforceability. Finally, the court held that the lower court did not abuse its discretion in declining to invalidate the arbitration agreement or impose sanctions for the alleged rule 4.2 violation, as Uber lacked actual knowledge of the lawsuit at the time it sent the communications to Wu.

Practical Implications

This decision reinforces the enforceability of clickwrap agreements in New York, provided that the process gives reasonable notice of the terms and a clear mechanism for assent. Attorneys should advise clients using digital platforms of the importance of reviewing terms of service and the consequences of agreeing to arbitration clauses, particularly delegation provisions. Businesses must ensure that their clickwrap processes are conspicuous and provide clear notice of the terms. This case highlights the critical importance of delegation provisions, which can shift disputes over arbitration’s scope and enforceability from courts to arbitrators. This case is also a strong reminder that communications with a represented party should always go through the party’s attorney. Note that the dissent argued that the inclusion of a provision requiring arbitration of a pending lawsuit was not obvious to the consumer and that such a term required separate notice.