Arash Homampour
Sole Shareholder, The Homampour Law Firm PC
15303 Ventura Blvd.
Sherman Oaks , CA 91403
Phone: (323) 658-8077
Fax: (323) 658-8477
Email: arash@homampour.com
Southwestern Univ SOL; Los Angeles CA
Arash Homampour, of the Homampour Law Firm, is a trial attorney who represents individuals in catastrophic injury/wrongful death, employment and insurance bad faith matters throughout California.
It was a classic case of the Mouse that Roared. Terms and conditions buried in the fine print of a standard clickwrap license for a grieving widower's Disney + trial subscription threatened to move his wrongful death lawsuit into the Never Never Land of arbitration. Jeffrey Piccolo's wife had died after eating supposedly allergen-free food at a restaurant in a Florida Disney theme park. The husband's only other link to Disney was that short-lived trial subscription.
Like the Sorcerer's Apprentice, however, Disney saw a chance to
create its own perfect legal world, to shrink a potentially huge judgment to a
manageable size. The company
asserted that Piccolo could not sue it in court; he had agreed to settle any and all lawsuits through arbitration as a condition of
his one-month Disney+ trial subscription.
But the Mouse changed its mind after an overwhelming PR backlash threatened to topple it from the Matterhorn of family-friendly corporate citizens. Disney backed away from its original position, waiving its right to pursue arbitration of Piccolo's claim.
A good outcome for the plaintiff, perhaps, but an unsettling reminder to clickwrap licensees everywhere - virtually the entire U.S. population - that the arbitration monster is still lurking out there for Disney + subscribers, as well as purchasers of products and services from thousands of businesses across the globe.
Arbitration agreements and waivers of the right to a jury trial raise important questions about access to justice and the protection of individual rights. While arbitration can offer a faster and potentially less costly method of dispute resolution, it also removes cases from the public court system, potentially reducing transparency and the development of case law. The waiver of jury trial rights, often included in these agreements, means individuals may lose the opportunity to have their cases heard by a diverse group of their peers. This shift away from traditional court proceedings can impact the balance of power between consumers or employees and larger corporations, potentially limiting the ability of individuals to fully advocate for their interests in certain disputes.
Clickwrapping the world
In today's world, the clickwrap agreement is as ubiquitous as the air we breathe. We cannot watch, purchase or take part in anything without "clicking to accept." Any choice is no choice at all: Accept our terms and conditions or return to the last century. Clickwraps are the quintessential contracts of adhesion; you have no choice but to agree.
In addition to clickwraps, California law recognizes browsewraps, scrollwraps, and sign-in wraps, each type classified "by the way in which the user purportedly gives their assent to be bound by the associated terms." (Sellers v. JustAnswer LLC, 73 Cal.App.5th 444, 289 Cal. Rptr. 3d 1, 15 (2021)). A clickwrap agreement requires users to click on an "I agree" box after being presented with the terms and conditions of use. California courts have "routinely found clickwrap agreements enforceable." (Meyer v. Uber Techs. Inc., 868 F.3d 66, 75 (2d Cir. 2017))
Because work, commerce and life now happen primarily online, there is little that falls outside the wrap; Disney + subscribers are just the tip of the clickwrap iceberg.
The corporate web is as intricately interwoven as the Worldwide Web, so a single click might trigger a domino effect across dozens of affiliated companies. Consider the Disney family, which includes ABC, ESPN, Marvel and many other major players. Pull one strand and watch an entire sweater unravel.
Clickwrap terms are drafted by attorneys looking to tilt the scales for the benefit of their corporate clients. We all know this going into our transactions, but even the most cautious among us don't take the time to read the licenses we click. If we want to buy a product or service, travel on a train or airline, or interact with others online, we must click.
We - as attorneys - also know that arbitration will be part of any boilerplate, a fact not known or fully appreciated by most consumers. Few expect that the products they purchase will explode, catch fire or otherwise harm them. Only when the worst happens do they discover that the worst terms govern their claims.
Some courts have recognized that the trap or "gotcha" approach to arbitration may not be the fairest, or ultimately enforceable. In Chilutti v. Uber Technologies (2023) 300 A.3d 430, a Pennsylvania Superior Court ruled that Uber failed to provide sufficiently clear notice of its arbitration clause. The court emphasized that the constitutional right to a jury trial should be afforded the highest protection and found that Uber's interface did not adequately inform users they were waiving this right.
For an arbitration agreement to be valid in this context, the
court said, the waiver of jury trial rights must be "explicitly stated on
the registration websites and application screens" and "appear at the
top of the first page in bold, capitalized text" when users click to view
the full terms. This, however, is not the final word on the matter. On Aug. 27,
2024, a Petition for Allowance of Appeal was granted by the Supreme Court
of Pennsylvania. Among the issues presented for decision on appeal are the
following:
(1) Does the
Superior Court's new special notice rule for enforcing online arbitration
agreements violate the [Federal Arbitration Act], as interpreted and applied by
the Supreme Court of the United States?
(2) As a matter of Pennsylvania law, should
online arbitration agreements be enforced under the same rules applicable to contracts generally?
Clickwraps in the Golden
State
Conspicuous is generally enough
The Mouse roared in Florida, but it could just as easily have roared in California, where the click may be as mighty as the pen. California courts have consistently upheld online agreements, even when the terms applied broadly across multiple entities and claims, the end user had neither read nor understood them, and some could not be enforced as a matter of law.
If the terms of an online agreement, including its arbitration provision, are conspicuous, users will generally be bound to those terms. The Ninth Circuit recently ruled, in Keebaugh v. Warner Bros. Entertainment Inc. (100 F.4th 1005, April 26, 2024), that notice is sufficiently conspicuous if it is "displayed in a font size and format such that the court can fairly assume that a reasonably prudent Internet user would have seen it." (Citing Berman v. Freedom Financial Network, LLC (9th Cir. 2022) 30 F.4th 849)
If the terms and conditions are disclosed through hyperlinks, the presence of those hyperlinks "must be readily apparent." "Simply underscoring words or phrases ... will often be insufficient to alert a reasonably prudent user that a clickable link exists." (Berman, supra at 857.)
As long as the notice is sufficiently conspicuous and the end user has clicked to accept, it is immaterial that the user failed to read the terms and conditions. In B.D. v. Blizzard Entertainment, Inc. ((2022) 76 Cal.App.5th 931), the California Court of Appeal stated that "mutual assent is determined under an objective standard applied to the outward manifestations or expressions of the parties, i.e., the reasonable meaning of their words and acts, and not their unexpressed intentions or understandings."
The court further explained that if an offeree objectively manifests assent to an agreement, the offeree cannot avoid a specific provision of that agreement on the ground the offeree did not actually read it. To establish mutual assent for the valid formation of an internet contract, a provider must demonstrate that the contractual terms were presented to the consumer in a manner that made it apparent the consumer was assenting to those very terms when clicking a box or button, not that the consumer actually read each provision.
Possible escape clauses
Essentially, the only ways to bypass arbitration when the terms are conspicuous and the user has clicked or otherwise signaled agreement is to show either lack of clarity as to what is covered by those terms or to establish that the agreement itself, or its arbitration provision, is unconscionable.
However, recent cases suggest courts are becoming more willing to scrutinize clickwrap agreements, particularly when they involve arbitration clauses. In Herzog v. Superior Court of San Diego ((2024) 101 Cal.App.5th 1280), the court refused to enforce an arbitration provision in Dexcom's terms of service for users of its glucose monitoring app. The actual defendant in the case, Dexcom, asserted that each plaintiff had entered an agreement to arbitrate all disputes when they installed a mobile medical application on their personal smart devices to read their glucose levels and clicked the box "I agree to Terms of Use," where a hyperlink was provided to a separate webpage with contractual terms, including an arbitration provision.
The court found that Dexcom's sign-up interface created ambiguity about what users were agreeing to. While there was a checkbox to agree to terms of service, the accompanying text focused on privacy and data sharing rather than arbitration. The court ruled this was insufficient to create a binding arbitration agreement, as it did not provide clear notice that users were waiving their right to pursue claims in court.
The court said that even though clickwrap agreements are generally enforceable, "Dexcom undid whatever notice it might have provided of the contractual terms by explicitly telling the user that clicking the box constituted authorization for Dexcom to collect and store the user's sensitive, personal health information."
Dexcom, the court said, "cannot meet its burden of demonstrating that the same click constituted unambiguous acceptance of the Terms of Use, including the arbitration provision." Citing Sellers v. JustAnswer LLC ((2021) 73 Cal.App.5th 444, 460; 289 Cal.Rptr.3d 1), the court said that the "principle of knowing consent applies with particular force to provisions for arbitration, including arbitration provisions contained in contracts purportedly formed over the internet."
In the context of an internet transaction, the Herzog court stated, "assent may be inferred from the consumer's actions on the website -- including, for example, checking boxes and clicking buttons -- but any such action must indicate the parties' assent to the same thing, which occurs only when the website puts the consumer on constructive notice of the contractual terms." To establish mutual assent for the valid formation of a contract, the terms must be presented in a manner that makes it "apparent the consumer was assenting to those very terms when checking a box or clicking on a button." (Sellers, supra at p. 461, 289 Cal.Rptr.3d 1, second italics added.)
When arbitration provisions have been challenged on unconscionability grounds, courts have generally been unwilling to rule for plaintiffs. In the Keebaugh case, the Ninth Circuit found that, even though Warner Bros. included an unenforceable ban on seeking public injunctive relief, its arbitration agreement was not unconscionable. In the Blizzard Entertainment case, the plaintiff contended that the company's arbitration agreement was unconscionable, to which the appellate court responded that the agreement "clearly and unmistakably" delegated disputes concerning its "validity, enforceability or scope" to the arbitrator. Only an arbitrator could rule on the question of arbitration unconscionability - which arguably creates an obvious and inherent conflict of interest.
Conclusion
Jeffrey Piccolo will have his wrongful death claim heard and decided by a jury, but this was not a foregone conclusion. Disney likely had every right to compel arbitration based on the minuscule print of its defense-friendly terms and conditions. That the Mouse pulled back in this case is all about PR, not the law.
For the millions of consumers (and employees and contractors) who regularly click to accept, there is nothing acceptable about the current state of the law. Whether in Florida or California, we should be prepared for even the most horrific cases of malfeasance to end up in arbitration because of just a few clicks.