Not All Class-Action Waivers Are Created Equal

Since the late eighteenth century, the Constitution of the United States and the constitutions or laws of the several states have guaranteed U.S. citizens the right to a jury trial. This most precious and fundamental right can be waived only if the waiver is knowing and voluntary, with the courts indulging every reasonable presumption against waiver. But in the world of the Internet, ordinary consumers are deemed to have regularly waived this right, and, indeed, to have given up their access to the courts altogether, because they supposedly agreed to lengthy terms and conditions that they had no realistic power to negotiate or contest and often were not even aware of.

So begins the July 29, 2016, opinion of Judge Rakoff of the U.S. District Court for the Southern District of New York in Meyer v. Uber Technologies, Inc. The Court denied Uber’s motion to compel arbitration, thus allowing the plaintiff to pursue a class-action claim for antitrust violations.

The Supreme Court, of course, recognized in 2011 and again in 2015 that class action waivers and arbitration agreements are enforceable. See AT&T Mobility, Inc. v. Concepcion, 563 U.S. 333 (2011) and DirecTV, Inc. v. Imburgia, 577 U.S. ___ (2015). The recent opinion in Meyer suggests that there are limits to the lengths companies may go to in thwarting consumer rights.

The issue was whether, when the plaintiff signed up to use Uber, he agreed to arbitrate any claims he may have against Uber and waive any class claims. Upon evaluating Uber’s registration process, the Court found that the plaintiff “did not have reasonably conspicuous notice” of Uber’s User Agreement, including the arbitration clause and class-action waiver, and that Uber’s registration screen did not adequately call users’ attention to the existence of the terms of service or the fact that, by registering with Uber, a user was agreeing to such terms. The Court even noted that, with respect to the terms themselves, “no ordinary consumer could be expected to understand” the “nine pages of highly legalistic language.”

“At bottom,” the Court concluded, “what is at stake is the integrity and credibility of electronic bargaining. . . . The purveyors of electronic form contracts are legally required to take steps to provide consumers with reasonable notice of contractual terms. User interfaces designed to encourage users to overlook contractual terms in the process of gaining access to a product or service are hardly a suitable way to fulfill this legal mandate.”

Nearly all electronic registration portals explicitly require or passively include the user’s consent to the terms and conditions of use, which now commonly include arbitration provisions and class-action waivers. But not all of these user agreements are created equal, rendering many of them unenforceable.


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