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Financial Services Law Insights and Observations

9th Circuit holds shipping company’s online arbitration agreement is valid

Courts Appellate Ninth Circuit Arbitration Writ of Mandamus Class Action

Courts

On May 30, the U.S. Court of Appeals for the 9th Circuit denied a plaintiff’s writ of mandamus challenging the district court’s order compelling arbitration of the plaintiff’s claims against a national shipping company. According to the opinion, a customer filed a putative class action complaint alleging the company “systematically overcharges” customers by applying delivery surcharge rates through third-parties, which are higher than the company’s advertised rates. The company moved to compel arbitration because the customer enrolled in a free, optional program offered by the company that provides tracking and managing services of packages; and that enrollment in the program required the customer to agree to arbitrate all claims related to the company’s shipping services. The customer argued that while he checked the box agreeing to the service terms and technology agreement when enrolling, he should not be bound by the arbitration agreement because it was, among other things “so inconspicuous that no reasonable user would be on notice of its existence.” The district court rejected the customer’s arguments and granted the motion to compel arbitration.

On review of the writ of mandamus, the appellate court acknowledged that “locating the arbitration clause at issue here requires several steps and a fair amount of web-browsing intuition,” detailing that “...the first hyperlink [is] to the 96-page Technology Agreement. The user must then read the [service terms] and understand that they incorporate [additional terms and conditions of service]…. the user must visit the full [company] website, intuitively find the link [to the additional terms and conditions of service] at the bottom of the webpage, select it, and locate yet another link to the [terms and conditions of service]” in order to read the document and locate the arbitration clause. The appellate court held that the “extraordinary remedy of mandamus” could not be awarded because it could not say “with ‘definite and firm conviction’ that the district court erred by finding the incorporation [of the terms and conditions of service] valid” and found that there is no question the customer affirmatively assented to the terms. While it did not impact its analysis, the appellate court noted that the company’s service terms document now includes a hyperlink to the terms and conditions of service and expressly informs the user that the terms contain an arbitration provision.

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