In an October 12, 2022 decision in Chilutti v. Uber Technologies, Inc., et. al., No. 1023 EDA 2021, 2022 PA Super 172 (Pa. Super. 2022), the Superior Court of Pennsylvania considered whether a party should be deprived of their constitutional right to a jury trial when they enter into an arbitration agreement via hyperlinked “terms and conditions” on a website or smartphone application (“App”).
In Chilutti, Plaintiff was injured while riding as a passenger in a car that she requested via the Uber Technologies, Inc. (“Uber”) app. When Plaintiff subsequently filed a negligence lawsuit, Uber moved to compel arbitration pursuant to the mandatory arbitration provision found in the hyperlinked terms and conditions on their website and app. Uber argued that Plaintiffs’ conduct on the Uber website and app when plaintiffs registered for Uber’s ridesharing service indicated that they agreed to be bound by the arbitration provision found in the hyperlinked terms and conditions, thereby relinquishing their right to a jury trial.
Plaintiffs argued that no valid agreement to arbitrate exists between the parties because Uber failed to communicate an offer to arbitrate to Plaintiffs such as that no meeting of the minds as to that term existed and forcing Plaintiffs to arbitrate violates their constitutional right to a jury trial.
The Court noted that we live in an age where Internet users are asked to form contracts with companies on a daily basis using web-based or mobile technology. However, the Court also opined that it is critical that a party be fully informed of their right to a jury trial and the effect of waiving that right. In reviewing the proper analysis for a binding arbitration agreement, the Superior Court reviewed the Ninth Circuit’s reasoning in Berman v. Freedom Fin. Network, LLC, 30 F.4th 849, 855-56 (U.S. 9th Cir. 2022), analyzing if: (1) the website provides reasonably conspicuous notice of the terms to which the consumer will be bound; and (2) the consumer takes some action, such as clicking a button or checking a box, that unambiguously manifests his or her assent to those terms.
The Court in Berman found that “the design and content of the webpages [the plaintiffs] visited did not adequately call to their attention either the existence of the terms and conditions or the fact that, by clicking on the ‘continue’ button, they were agreeing to be bound by those terms[,]” and therefore, “an enforceable agreement to arbitrate was never formed.” Applying the Berman standard, the Pennsylvania Superior Court agreed and concluded that “Uber’s website and application did not provide reasonably conspicuous notice of the terms to which Appellants were bound because the “terms and conditions” agreement was condensed in tiny, blue font at the very bottom of a cluttered webpage and the relevant text was not underlined or capitalized.”
The Superior Court refused to apply the second prong of Berman to determine whether Plaintiffs took any action that unambiguously manifested their assent to be bound by the terms and conditions of the arbitration clause, however, finding that because the constitutional right to a jury trial should be afforded a heightened protection the Berman standard is insufficient under Pennsylvania law. Instead, the Superior Court applied a stricter burden of proof to demonstrate a party’s unambiguous manifestation of assent to arbitration as demonstrated by the following: (1) explicitly stating on the registration websites and application screens that a consumer is waiving a right to a jury trial when they agree to the company’s “terms and conditions,” and the registration process cannot be completed until the consumer is fully informed of that waiver; and (2) when the agreements are available for viewing after a user has clicked on the hyperlink, the waiver should not be hidden in the “terms and conditions” provision but should appear at the top of the first page in bold, capitalized text. In analyzing the Uber arbitration terms against this standard, the Court took issue with the fact that Uber did not include the definition of arbitration in their agreement nor did Uber provide a link to a definition. Similarly, no explanation as to the difference between binding and non-binding arbitration was provided in the agreement. The Court noted that the inclusion of terms such as “arbitration,” with nothing to explain its meaning, could be misinterpreted by a non-lawyer who may think arbitration is simply another step in the litigation process that does not involve relinquishing the constitutional right to a jury trial in its entirety. Accordingly, the Court held that Plaintiffs were not informed in an explicit and upfront manner that they were giving up a constitutional right to seek damages through a jury trial proceeding.
The decision was issued as a three-judge panel decision, which Uber sought and was recently granted en banc review of on December 27, 2022. The Superior Court Order withdrew the prior decision, setting up an upcoming argument before the en banc Court concerning the propriety of similar arbitration provisions in the digital age.
he Chilutti decision can be found here.
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