On Aug. 17, 2017, the Second Circuit issued its decision in Meyer v. Uber Technologies, Inc., 868 F.3d 66 (2d Cir. 2017). The appeals court vacated and remanded the trial court ruling by holding that the registration process for Uber Technologies, Inc.'s mobile application formed a legal contract, thereby requiring the plaintiff to arbitrate his claims that Uber and its then-CEO violated antitrust laws. In doing so, the Second Circuit extended the legal implications of the seeming ubiquity of smartphone use, while also reaffirming the staunch federal court preference towards enforcement of arbitration clauses.

Less than a month later, the Southern District relied on the Meyer decision in granting the defendant's motion to compel arbitration based on the fact that the design and functionality of defendant's amended terms of use placed plaintiffs' on “reasonably conspicuous notice” of the mandatory arbitration and jury trial waiver provisions. See Pincaro v. Glassdoor, No. 16 Civ. 6870 (ER), 2017 WL 4046317 (S.D.N.Y. Sept. 12, 2017). As in Meyer, the district court decision was in part premised on the reality that a “reasonable” Internet user would know that a blue highlighted hyperlink is the archetypal command to a user that the entirety of the referenced document can be viewed by clicking on the hyperlink.

Facts and Procedural Background

Defendant Glassdoor operates a website that provides a database of business reviews, compensation and benefits information, and job postings. A number of Glassdoor users (plaintiffs) sued the website for violations of the Stored Communications Act (18 U.S.C. §§2701 et seq.), which, in certain instances prohibits disclosure of “stored wire and electronic communications and transactional records” in the possession of third-party internet-service providers. Although the holdings in the instant case were determined solely through analysis of the underlying Terms of Use, it is worth noting that two significant cases concerning the scope and extraterritoriality of the Stored Communications Act may be decided by the U.S. Supreme Court in the upcoming 2017 Term.ty

Plaintiffs registered for Glassdoor accounts. Prior to using Glassdoor, plaintiffs were required to create a free account by enrolling with a valid email addresses, or linking to a social media account. At that time, all prospective users creating a Glassdoor account had to assent to a sign-up page containing a statement informing the prospective user that by creating a Glassdoor account, they agreed to the site's then-operative 2009 Terms of Use. The bottom of the sign-up page provided prospective users with a hyperlink to review these Terms. The 2009 Terms of Use: (1) included a mandatory arbitration provision to resolve “[a]ny claim or dispute in connection with” the Terms of Use; and (2) expressly provided that they could be modified from “time to time,” and if “material changes” were made to the Terms of Use, Glassdoor would notify users by email. Any amended Terms of Use would be effective 30 days after the email, and continued use of Glassdoor would constitute acceptance of the amended Terms.

Glassdoor amended its Terms of Use in 2014 and 2016 and followed this notification protocol. The effective date of 30 days after the email also governed the 2014 and 2016 amendments. In July 2016, both plaintiffs were notified by email of the 2016 changes to the Terms of Use (the 2016 Terms of Use).

The July 2016 email notification “expressly advised” plaintiffs that the 2016 Terms of Use were being updated and included a hyperlink to the updated Terms (the July 2016 email). Plaintiffs continued to access and use their Glassdoor accounts. The July 2016 email informed plaintiffs that the 2016 Terms of Use provided users with procedure to opt-out of the arbitration provisions and instead proceed in front of a federal court in California.

The July 2016 email was sent not solely to each plaintiff's individual email account, because the manner in which it was distributed inadvertently allowed each recipient to see the addresses of 999 other Glassdoor members. Plaintiffs alleged that the July 2016 email violated the Stored Communications Act by inadvertently and publicly exposing addresses of its members.

Plaintiffs filed suit in August 2016. Glassdoor moved to compel arbitration pursuant to the 2016 Terms of Use, considered the “operable” agreement by the court.

Legal Analysis and Conclusions

Two questions were presented to the court. First, the court had to address the threshold question of whether the court or the arbitral tribunal was the proper forum to decide the arbitrability of the 2016 Terms of Use. Then, if the court was the proper forum, it had to decide the “gateway issue of arbitrability,” that is, if the 2016 Terms of Use sufficiently evidenced the parties' intent to arbitrate Glassdoor's alleged violations of the SCA.

The court cited Meyer on a number of occasions, including with respect to the initial determination of choice of law, as well as the applicable contract interpretation standard. As in Meyer, the applicable state-law principles to the issue of contract, in this case California for Glassdoor and Georgia and New York for plaintiffs, did not substantively differ and therefore “[w]hich state's law applies is therefore of no moment.” Also, as the Second Circuit held in Meyer, inquiry notice to the plaintiffs satisfactory to manifest assent and therefore form a valid contract required that the “undisputed facts establish” that plaintiffs' had “reasonably conspicuous notice of the existence of the contract terms and unambiguous manifestation of assent” by registering for an account with Glassdoor.

As a “web-based contract,” plaintiffs' inquiry notice depended considerably on the “clarity and conspicuousness” of the Terms of Use, which were a function of the “design and content of [Glassdoor's] web interface.” Only then would the arbitration provision in the 2016 Terms of Use be enforced and Glassdoor's motion to compel be granted.

The court enforced the arbitration provision in the 2016 Terms of Use. It held that the July 2016 email from Glassdoor provided plaintiffs with “reasonably conspicuous notice” of the arbitration provision in the updated 2016 Terms of Use.

First, the “design and language” of the July 2016 email evidenced the “reasonably conspicuous notice.” The July 2016 email contained a blue underlined hyperlink to the 2016 Terms of Use. Specifically, the email indicated that the entirety of the 2016 Terms of Use could be found “here,” with “here” being underlined and in blue. Citing to Meyer, the court observed that plaintiffs, as a “reasonably prudent user,” knew that text “highlighted in blue and underlined is a hyperlink to another webpage where additional information can be found.” See also Meyer, 868 F.3d at 77-78. Most important, the July 2016 email highlighted the notable changes in the 2016 Terms of Use, namely that Glassdoor “updated [its] Dispute Resolution section” to “expand[] the arbitration provision.”

Second, the court held that plaintiffs' manifested “unambiguous consent” to the 2016 Terms of Use and thus the arbitration provisions. The July 2016 email informed plaintiffs that the 2016 Terms of Use would be effective in 30 days and that plaintiffs should delete their accounts to avoid being bound by the updated terms. Neither of the plaintiffs opted out of arbitration or deleted their Glassdoor accounts. Notably, the court went further and held that plaintiffs' assent was predicated solely on continued use of Glassdoor, and that a further, affirmative step was not required, did not render the 2016 Terms of Use inapplicable. See also Sacchi v. Verizon Online LLC, 2015 WL 765940 (S.D.N.Y. Feb. 23, 2015) (arbitration compelled where plaintiff received notice, including by email, informing him of modifications to the terms of use).

Turning to the “substance” of the 2016 Terms of Use, the court held that “several provisions” in these Terms “evidence the parties' intent to arbitrate all issues, including, as is relevant here, the gateway issue of arbitrability[.]” The court cited to the provision stating that “ [plaintiffs] and Glassdoor … agree that any and all disputes between consumer users of Glassdoor and Glassdoor arising under … this Agreement … must be resolved through binding arbitration[.]” The court's holding of assent to arbitration was also premised on: (1) the capitalized notification in the 2016 Terms of Use that plaintiffs waived the right to a jury trial or participation in a class action; and (2) the incorporation of a consumer arbitration rule promulgated by the American Arbitration Association (the association governing dispute resolution under the 2016 Terms of Use) that the arbitrator “ shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope, or validity of … the arbitrability of any claim[.]”

Consequently, the court granted Glassdoor's motion to compel arbitration. However, it stayed the case—rather than dismissing it—even though plaintiffs' claims were directed to arbitration. See Katz v. Cellco P'ship, 794 F.3d 341 (2d Cir. 2015). The court also noted that it “makes no determination on the merits” of plaintiffs' claims.

Richard Raysman is a partner at Holland & Knight and Peter Brown is the principal at Peter Brown & Associates. They are co-authors of “Computer Law: Drafting and Negotiating Forms and Agreements” (Law Journal Press).