I have to admit that there are a lot of things I love about Amazon.com. That it tries to require its customers to arbitrate their claims and waive the right to participate in class actions is not one of them.
In an opinion issued today, the United States Court of Appeals for the Second Circuit held that Amazon.com's arbitration agreement may not be enforceable—at least as to some of its customers—because its order page doesn't require customers to click a button saying they agree to Amazon's terms when they place an order.
The case, Nicosia v. Amazon.com, Inc., has some disturbing facts. In 2013, the plaintiff, Dean Nicosia, bought a dietary supplement billed as a weight-loss aid, called 1 Day Diet, on Amazon.com. Unbeknownst to him (and, I would guess, Amazon), the product contained sibutramine, a controlled substance that was available on a prescription-only basis until it was withdrawn from the market at the FDA’s request in 2010 because of concerns over health risks including heart attack and stroke.
Yikes. Who knew you could buy products containing dangerous banned drugs on Amazon.com? (The company has since stopped allowing sales of 1 Day Diet.)
Nicosia filed a class action seeking monetary and injunctive relief in a federal district court in New York. Amazon moved to dismiss the action on the ground that it was barred by Amazon’s arbitration agreement. The district court granted the motion to dismiss. It held that Nicosia had agreed to the terms when he bought the product by clicking on a button on the order page reading “Place your order.” (I know that button all too well.) Elsewhere on the order page was a line of text saying “By placing your order, you agree to Amazon.com’s privacy notice and conditions of use.” The words “conditions of use” were in blue and had a hyperlink to the text of the terms, which included the arbitration agreement. The district court held that the order page gave Nicosia enough notice that he was agreeing to something that he could be held to it even though he hadn’t read it.
The Second Circuit disagreed and ordered Nicosia’s case reinstated. The court’s opinion contains a lengthy discussion of some procedural complexities that only a lawyer (and maybe not many lawyers, at that) could love, as well as an extensive discussion of the enforceability of “shrink-wrap,” “browse-wrap,” and “click-wrap” agreements.
But the nub of the opinion is that to bind a customer to contractual terms, a website has to give him actual or “constructive” notice of the terms. That is, it has to be structured in such a way that a reasonable user would know that he is agreeing to some terms that are readily available for his review if he cares to read them.
Amazon.com’s order page, however, doesn’t use a classic “click-wrap” format where there is a button that a user must click on stating that he has agreed to terms. Instead, the order button and the statement that placing an order is an agreement to terms are separated, and there is a lot of other stuff on the web page that would distract a user from the significance of the statement about agreeing to terms. Under those circumstances, the court held, “reasonable minds could disagree” about whether the site put a reasonable user on notice that he was agreeing to arbitrate. Therefore, the case had to be sent back to the lower court for resolution of that issue.
The opinion leaves some important questions unanswered. Because of the aforementioned procedural complexities, it doesn’t address whether registering for an Amazon account constitutes agreement to Amazon’s terms, or to possible future changes in those terms (an important question because Amazon changed its terms to require arbitration long after many of its users registered their accounts). And it doesn’t say exactly how the lower court is supposed to determine the factual issue of whether the order page gave reasonable notice, or what evidence (besides the page itself, which both the court of appeals and district court accepted as a given) is relevant. The court did say such questions are ordinarily for the jury, suggesting that a jury will eventually have to look at the page and decide for itself whether a reasonable person would realize he was agreeing to something.
A few points bear emphasis. The court made clear that one reason the issue in the case was difficult was that Amazon had chosen not to use a “click-wrap” agreement, which would make finding an agreement much easier. And it also made clear that users don’t actually have to read terms to be bound by them. So the opinion won’t revolutionize the law about enforceability of agreements formed on the internet. And it certainly won’t get us off the hook for all those things we’ve agreed to on websites without reading them.
But it does call into serious question the enforceability of the arbitration agreement used by the nation’s largest on-line retailer.
That is something.