Just two weeks after Judge Woodlock enforced the arbitration clause in the Uber EULA (see discussion of the Cullinane case), Judge Rakoff in the Southern District of New York concluded that users did not assent to contract terms in the Uber sign-up process. Meyer v. Kalanick, 2016 WL 4073071 at *1 (S.D.N.Y. July 29, 2016). Plaintiff Spencer Meyer sued Uber CEO Travis Kalanick, alleging antitrust violations. Kalanick moved to join Uber as a defendant, id., and Uber moved to intervene, id. at *2. Uber was joined as a defendant. Id. at *2. The defendants moved to compel arbitration under the Uber EULA. Id.
The judge concluded that no contract was formed, opining: “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.” Id. at 10.
The court considered the threshold question of whether California or New York law applied, settling on California law but concluding that the difference would not have been dispositive. Id. at *3.
The court here described the Uber sign-up process via its mobile app this way:
- It was a two-step process. Id. at *4.
- On the first screen, users “were prompted either to register using Google+ or Facebook, or to enter their name, email address, phone number, and password and click ‘Next.’” Id.
- “The second screen of the Uber registration process features, at the top of the screen, fields for users to insert their credit card details. Beneath these fields is a large, prominent button whose width spans most of the screen; it is labeled “Register.’” Id.
- “Beneath this button are two additional buttons, with heights similar to that of the ‘Register’ button, labeled ‘PayPal’ and ‘Google Wallet.’ These buttons indicate that a user may make payments using PayPal or Google Wallet instead of entering his or her credit card information.” Id.
- The court noted that the terms “consist of nine pages of highly legalistic language that no ordinary consumer could be expected to understand.” Id. at *5.
Note that this process differs from that described in the Cullinane case, in which the court enforced Uber’s arbitration clause.
The court concluded that this case was more like those where a contract was not formed. Id. at *9. Interestingly, it took note of the location of the arbitration clause in the Uber EULA: “Though a party cannot avoid the terms of a contract on the ground that he or she failed to read it before signing, the placement of the arbitration clause in Uber’s User Agreement constituted, as a practical matter, a further barrier to reasonable notice.” Id. (internal quotations and citations omitted).
Attorneys at Sidley and Austin have written a blog post about how the design features of the Uber EULA prevented its enforcement. They concluded “As this ruling makes clear, the design of the process of obtaining consumer consent matters for courts that analyze the issue through the lens of contract formation; and it can determine whether a company’s terms and conditions are enforceable.”