Defense Digest, Vol. 29, No. 3, September 2023

Pennsylvania Superior Court Refuses to Enforce Online Binding Arbitration Agreement Located in Hyperlink

By
Brent A. Green

Key Points:

  • A consumer’s passive acceptance of online arbitration agreements will not be enforced.
  • A jury trial is a paramount constitutional right requiring clear manifestations of any waiver.
  • The court issues strict standards in Pennsylvania to enforce an arbitration agreement.

In many claims with a binding arbitration agreement, enforcing the agreement to waive a jury trial is a relatively straightforward procedure. Online agreements in Pennsylvania now have an additional burden; there must be a clear and conspicuous waiver of the right to a jury trial showing acceptance by the consumer. The Pennsylvania Superior Court recently provided guidelines on what is considered an enforceable waiver of a jury trial.

In the case Chilutti vs. Uber Technologies, Inc., 2023 WL 4611931 (Pa. Super. July 19, 2023), Shannon Chilutti requested an Uber drive her from a medical appointment. The Uber driver secured her wheelchair in his van, but did not provide her with a seatbelt that she requested. The driver allegedly made an aggressive turn, and Mrs. Chilutti fell out of her wheelchair and was injured. Mr. and Mrs. Chilutti then filed suit against Uber. The company petitioned to compel arbitration, arguing that the terms and conditions of the Uber application website required that the plaintiffs proceed to a mandatory arbitration. The trial court granted Uber’s petition to compel arbitration. The Superior Court of Pennsylvania then reversed and ordered the case remanded to a jury trial.

The Superior Court addressed a decision of the United States Court of Appeals for the Ninth Circuit where it described two different types of internet contracts. The “clickwrap” contract is when the terms of the contract appear on a pop-up screen and the consumer must explicitly agree to the terms by checking a box before proceeding on the website. Courts generally find these contracts enforceable because the consumer received and acknowledged notice of the terms of the contract.

The “browsewrap” contract is one in which the terms of the contract are not disclosed until the consumer clicks on a hyperlink. The consumer can continue on the website without clicking and opening the hyperlink. Courts are more reluctant to enforce these contracts because the terms of the contract may not have been clear or even read by the consumer.

The Superior Court stated it was clear the Uber agreements were “browsewrap” agreements. The plaintiffs were not aware of the terms of the contract nor were they aware that, by continuing in the Uber website, they were bound by the contract. The arbitration agreement was found in a hyperlink for “terms and conditions” when the plaintiffs registered for the ridesharing service on the internet. The plaintiffs admitted they never read those provisions and did not dispute the terms were available if they followed the hyperlink. They completed their registration process without accessing the terms and conditions.

Several reasons were identified why Uber’s website and application did not set forth reasonable and conspicuous notice of the contract. When Mrs. Chilutti registered for an Uber ride through the company’s website, the terms and conditions were “encapsulated in tiny, blue font at the very bottom of a cluttered webpage. The relevant text was not underlined or capitalized.” When Mr. Chilutti used the Uber app on his phone, the terms and conditions were in a small font and not underlined or capitalized.

The Superior Court emphasized that since 1847 the Pennsylvania Supreme Court has safeguarded the Seventh Amendment of the Constitution and that the right to a jury trial should be afforded the greatest protection in the courts. The court stated that a “stricter burden of proof is necessary to demonstrate a party’s unambiguous manifestation of assent to arbitration.” Previous standards articulated by the Ninth Circuit Court of Appeals were reviewed and found insufficient to protect this fundamental right.

In Pennsylvania, the Superior Court held that an unambiguous manifestation of assent to arbitration will be required and is accomplished by: 

  1. explicitly stating on the registration websites and application screens that a consumer is waiving a right to a jury trial when they agree to the company’s ‘terms and conditions,’ and the registration process cannot be completed until the consumer is fully informed of that waiver; and 
  2. when the agreements are available for viewing after a user has clicked on the hyperlink, the waiver should not be hidden in the ‘terms and conditions’ provisions but should appear at the top of the page in bold, capitalized text. In this case the plaintiffs were not informed in an explicit and upfront manner that they were giving up their constitutional right to seek damages through a jury trial proceeding.

Therefore, there was no valid agreement to arbitrate.

The Pennsylvania Superior Court made it very clear that it discourages online arbitration agreements. The Chilutti opinion sets the bar high to enforce such clauses. Much of the opinion discussed the need to preserve the consumer’s constitutional right to a jury trial. The court went through an analysis of what it described as a “copious usage of arbitration agreements in present day contracts” and noted that arbitration provisions have substantially weakened the right to a jury trial in Pennsylvania civil proceedings. The parties have unequal bargaining power, and such agreements will be closely scrutinized. Any fundamental consumer right addressed in an online contract will predictably need to comply with these guidelines to be enforced in Pennsylvania.

*Brent is a shareholder in our King of Prussia, Pennsylvania, office. He can be reached at 484.895.2319 or BAGreen@mdwcg.com.

 

 

Defense Digest, Vol. 29, No. 3, September 2023, is prepared by Marshall Dennehey to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. ATTORNEY ADVERTISING pursuant to New York RPC 7.1. © 2023 Marshall Dennehey. All Rights Reserved. This article may not be reprinted without the express written permission of our firm. For reprints, contact tamontemuro@mdwcg.com.