Seventh Circuit Declines to Enforce Arbitration Provision

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In Sgouros v. TransUnion Corp., the Seventh Circuit recently declined to compel arbitration because the defendant’s website failed to clearly inform users that they were agreeing to arbitrate their claims.  Judge Wood, writing for the majority and interpreting Illinois contract law, framed the analysis:

we might ask whether the web pages presented to the consumer adequately communicate all the terms and conditions of the agreement, and whether the circumstances support the assumption that the purchaser receives reasonable notice of those terms.  This is a fact-intensive inquiry: we cannot presume that a person who clicks on a box that appears on a computer screen has notice of all contents not only of that page but of other content that requires further action (scrolling, following a link, etc.) Indeed, a person using the Internet may not realize that she is agreeing to a contract at all, whereas a reasonable person signing a physical contract will rarely be unaware of that fact. We need, therefore, to look more closely at both the law and the facts to see if a reasonable person … would have realized that he was assenting to the [agreement]….”

Ultimately, the court held that TransUnion had failed to ensure consumers “would see the critical language before signifying [their] agreement.”  The court noted in particular that while a block of bold text told users that clicking on the box constituted their authorization, it said nothing about contractual terms.  … Read more

Court Declines to Compel Arbitration in Wireless Litigation—At Least For Now

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Judge William Alsup of the Northern District of California issued in order last week declining to compel arbitration since a trial would be “necessary to determine whether plaintiffs agreed to the terms and conditions of defendants’ service, which included [the applicable] arbitration clauses.” Barraza v. Cricket Wireless LLC, No. C 15-02471, 2015 WL 6689396 (Nov. 3, 2015).

The court began by noting a split in opinions regarding whether documents enclosed in a wireless phone package give rise to inquiry notice of the arbitration clause.  Compare Dang v. Samsung Electronics Co., Ltd., No. 14-00430, 2015 WL 4735520 (N.D. Cal. Aug. 10, 2015) (granting motion to compel arbitration where the arbitration clause was on the fifth page of an “Important Information” booklet enclosed in the phone packaging); with Norcia v. Samsung Telecoms. Am., LLC, No. 14-00582, 2014 WL 4652332 (N.D. Cal. Sept. 18, 2014) (denying the motion to compel arbitration because the arbitration provision was inconspicuously located in a 101-page booklet called “Product Safety & Warranty Information”).

Rather than weighing in on one side or the other of the split, the court distinguished the earlier cases on their facts, noting that in this case, the arbitration clause appeared in a “Quick Start Guide” that “lacked any indication of its contractual nature.”  Barraza, 2015 WL 6689396, at *5. … Read more