Thursday, March 7, 2019
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Ninth Circuit:
Clicking ‘I Agree’ Button Did Not Indicate Assent to Arbitrate
By a MetNews Staff Writer
A merchant who, in filling out an online application for a credit card processing service, clicked on a button next to the words, “I have read and agree to the Terms and Conditions,” did not thereby consent to the provision in the user agreement that any disputes be arbitrated, the Ninth U.S. Circuit Court of Appeals held yesterday.
The memorandum opinion affirms a July 21, 2017 order by District Court Judge Anthony J. Battaglia of the Southern District of California denying a motion by North American Bancard, LLC (“NAB”) to compel arbitration of an action against it by Gerald McGhee.
NAB relied on a provision in the user agreement between it (designated “PA,” standing for “PayAnywhere”) and the merchant, reading:
“IN THE ABSENCE OF RESOLVING THE DISPUTE, AND INSTEAD OF SUING IN COURT, PA AND YOU AGREE TO SETTLE AND RESOLVE FULLY AND FINALLY ALL DISPUTES EXCLUSIVELY BY ARBITRATION . . . . THE AGREEMENT TO HAVE DISPUTES RESOLVED BY ARBITRATION IS MADE WITH THE UNDERSTANDING THAT EACH PARTY IS IRREVOCABLY, KNOWINGLY AND INTELLIGENTLY WAIVING AND RELEASING ITS RIGHT TO LITIGATE DISPUTES THROUGH A COURT AND TO HAVE A JUDGE OR JURY DECIDE DISPUTES.”
Notice Not Provided
The opinion declares that the website “did not provide constructive notice to a reasonably prudent user that the User Agreement was a part of the contract between NAB and its customers,” explaining:
“Here, the link to the User Agreement webpage on the Terms and Conditions webpage did not require any affirmative action to demonstrate assent; the text simply stated, ‘View the User Agreement here’ and did not indicate that the User Agreement was incorporated into the Terms and Conditions.”
A merger clause on the “Terms and Conditions webpage” set forth that what was being agreed to “constitutes the entire Agreement” between the parties. In light of that, the opinion says, “a reasonably prudent user would not expect to need to look for hyperlinks to webpages other than the Terms and Conditions webpage.”
NAB’s Contention
NAB argued that Battaglia’s order should be reversed because McGhee provided no declaration or other evidence disputing the showing that he had indicated his assent. The opinion responds that “NAB did not make a ‘prima facie’ showing that McGhee assented to the User Agreement and the arbitration clause; therefore, it was unnecessary for McGhee to provide rebutting evidence.”
The appeal—in McGhee v. North American Bancard, LLC, 17-56248—was heard by Circuit Judges A. Wallace Tashima, Kim Wardlaw, and District Court Judge Robert W. Pratt of the Southern District of Iowa, sitting by designation.
McGhee is seeking to maintain a nationwide class action on behalf of merchants who, like he, obtained a PayAnywhere card-reader from NAB, didn’t use it, and then had a non-use fee drawn from his bank account over a period of months, with NAB refusing to provide a refund. The complaint alleges:
“North American Bancard engaged in negligent misrepresentation, fraudulent concealment and intentional misrepresentation. They also breached the covenant of good faith and fair dealing inherent in every agreement.”
The action seeks a refund to merchants who were charged a fee notwithstanding NAB’s alleged representation that it provided a “no-fee” service.
Request for Stay
While the order denying arbitration was on appeal, NAB asked Battaglia to stay proceedings. He said in a Feb. 6, 2018 order:
“NAB argues the Ninth Circuit has not resolved the issue of whether users can be compelled into arbitration agreements by clicking an ‘I accept’ button on a website. NAB cites to a Second Circuit opinion which recently held ‘such agreements are enforceable.’…NAB, therefore, asserts this is an important and novel area of law and ‘that the Ninth Circuit be allowed to consider this critical issue before NAB is required to litigate in this District Court.’…
Battaglia found that the competing considerations weighed in favor of a stay.
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