Respected US District Judge Jed Rakoff refuses to enforce Uber’s arbitration and class action waiver clauses

Posted on: August 4th, 2016 by Keith Dubanevich
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In a strongly worded decision, Judge Rakoff began his opinion by raising suspicion about whether the Federal Arbitration Act could properly be applied in today’s commercial context:

Application of [the federal policy favoring arbitration] to the Internet is said to inhere in the Federal Arbitration Act, as if the Congress that enacted that Act in 1925 remotely contemplated the vicissitudes of the World Wide Web. Nevertheless, in this brave new world, consumers are routinely forced to waive their constitutional right to a jury and their very access to courts, and to submit instead to arbitration, on the theory that they have voluntarily agreed to do so in response to endless, turgid, often impenetrable sets of terms and conditions, to which, by pressing a button, they have indicated their agreement.

The Court then turned to the facts of the case and found that “no ordinary consumer could be expected to understand” the nine pages of highly legalistic language in the Terms and Conditions which contained the dispute resolution clause, even assuming a consumer clicked through the multiple links necessary to find the provision.

Taking note of the context of the case, the Court recognized that “while the Internet may have reduced ever further a consumer’s power to negotiate terms, ‘it has not fundamentally changed the principles of contract.’”

At bottom, what is at stake is the “integrity and credibility” of “electronic bargaining.” … When contractual terms as significant as the relinquishment of one’s right to a jury trial or even of the right to sue in court are accessible only via a small and distant hyperlink titled “Terms of Service & Privacy Policy,” with text about agreement thereto presented even more obscurely, there is a genuine risk that a fundamental principle of contract formation will be left in the dust: the requirement for “a manifestation of mutual assent.”

Judge Rakoff’s opinion is sure to be widely cited and discussed.