Ninth Circuit Opens Door For Consumers to Avoid Arbitration

Posted on: August 25th, 2014 by Keith Dubanevich

Magnifying Glass Over Contract PapersOn August 18, 2014, the 9th Circuit Court of Appeals issued an opinion in Nguyen v. Barnes & Noble, in which the Court affirmed a district court order that denied the defendant’s motion to compel arbitration.  The plaintiff, Nguyen, filed a lawsuit in California Superior Court on behalf of himself and a putative class of consumers whose HP Touchpad orders had been cancelled.  Barnes & Noble removed the action to federal court and moved to compel arbitration under the Federal Arbitration Act (“FAA”) arguing that Nguyen was bound by the arbitration agreement on the Barnes & Noble website.  The issue before the 9th Circuit was whether Nguyen, by merely using Barnes & Noble’s website, agreed to be bound by the Terms of Use, even though Nguyen was never prompted to agree to the Terms of Use and never in fact read them.

The Court ruled that “browsewrap” Terms of Use, in which a visitor to a website is not required to assent to the Terms of Use and indeed may never see the Terms of Use, did not create a binding agreement to arbitrate because there was no evidence Nguyen had sufficient notice of Barnes & Noble’s Terms of Use.  Indeed, the Court found that there was no evidence that Nguyen had “actual knowledge” of the agreement.  The Court explained that where a website makes its Terms of Use available via a conspicuous hyperlink on every page of the website but otherwise provides no notice to users nor prompts them to take any affirmative action to demonstrate assent, even close proximity of the hyperlink to relevant buttons users must click on – without more – is insufficient to give rise to constructive notice.