An Issue Of First Impression -- Did A Smartphone App Impart Constructive Knowledge Of An Arbitration Agreement?
The Ninth Circuit has decided an issue of first impression for the court: "[U]nder what circumstances does the download or use of a mobile application ('app') by a smartphone user establish constructive notice of the app's terms and conditions?" Not under the circumstances here, holds the court in Wilson v. Huuuge, Inc., No. 18-36017 (9th Cir. 12/20/19) (McKeown, Bybee, Gaitan)..
What were those circumstances? Plaintiff Wilson brought a class action alleging Huuuge Casino, which allows online gambling with a smartphone app, had violated Washington law by charging users for chips in its app. Huuuge moved to compel arbitration. The district court denied the motion, and the Court of Appeal affirmed: "Because Huuge did not provide reasonable notice of its Terms of Use . . . Wilson did not unambiguously manifest assent to the terms and conditions or the imbedded arbitration provision."
Huuuge failed to establish actual knowledge of the terms and conditions, so the issue hinged on whether there was constructive knowledge. Unlike a "clickwrap agreement", requiring users to affirmatively assent to terms of use before accessing a website for its services, the agreement here at issue was a "browsewrap", not requiring "the user to take any affirmative action to assent to the website terms." And the hoops through which the user would have had to jump to obtain notice meant that a reasonably prudent user would not be "on constructive notice of the terms of the contract for a browsewrap agreement to be valid." If a picture is worth a thousand words, then the opinion is helpful, because it provides shots of the five screens a user would have had to follow through and read to find the arbitration agreement.
Judge McKeown colorfully writes, "the user would need Sherlock Holmes's instincts to discover the terms."
Sherlock Holmes Portrait By Sidney Paget. 1904. Wikipedia.
Judge McKeown adds: "When downloading the app, the Terms are not just submerged-- they are buried twenty thousand leagues under the sea." The user is urged to read the Terms, but there isn't a link to the Terms: "This is the equivalent to admonishing a child to 'please eat your peas' only to then hide the peas. . . . Only curiosity or dumb luck might bring a user to discover the terms."
As the Judge sardonically concludes, "Huuuge chose to gamble on whether its users would have notice of its Terms" -- a gamble the online casino lost.
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