Charles F. Forer, Alternative Resolution Services

ADR

Editor's note: This article describes a hypothetical situation.

A ride-hailing company entered into an arbitration agreement with its customer who signed up for the program through the company's mobile phone application. The arbitration agreement covered personal injury claims:

"You and the company agree that any dispute, claim or controversy arising out of or relating to this agreement or the breach, termination, enforcement, interpretation or validity thereof or the use of service or application will be settled by binding arbitration … You acknowledge and agree that you and the company are each waiving the right to a trial by jury …"

The customer allegedly suffered a personal injury while on a ride she procured through the ride-hailing company. The ride-hailing company retained Bob to knock out the customer's lawsuit in favor of an arbitration proceeding. Who better than Bob, the drafter of the arbitration provision, to move the case to arbitration?

The Bob-drafted arbitration provision was crystal clear. But that is not the end of the story. The injured passenger argued she did not "accept" its terms because she never read them. If the court accepted this Hail Mary, Bob argued, contracting parties would always be able to wiggle out of contractual obligations by claiming they did not read the contract.

So how did Bob lose his argument? Because his client had a well-drafted arbitration provision (thank you Bob!), but did not have a well-designed system to implement the provision (Bob?).

Bob surely knew the ride-hailing customers would come up with all kinds of excuses to escape arbitration:

• "I did not receive the arbitration provision."

• "How was I supposed to know there was an arbitration provision?"

• "No one told me to read the arbitration provision."

• "I didn't read the arbitration provision."

• "What does an arbitration provision have to do with ride-hailing?"

However, Bob had anticipated these and lots of other excuses. His supposed foolproof electronic system to overcome them included the following:

• When electronically registering for the ride-hailing program, the customer would enter contact and payment information. The customer then would see a screen that said, "By creating an account with the company, you agree to the terms of service."

• The new customer had easy access to the terms of service because a box would appear on the customer's screen. The box read terms of service and had a hyperlink. After clicking the hyperlink, the customer would see the terms of service, which included the arbitration provision.

Bob's system was elegant, but ineffective. Under Pennsylvania law, there cannot be a contract—regarding arbitration or anything else—if the offerer and offeree do not agree on the material terms of the proposed agreement. That does not mean all material terms must be highlighted or conspicuous. For instance, a court will not throw out an arbitration provision just because it is smudged, blurry and in small print. "Minimum conspicuity standards are not a requirement to establish the formation of a contract," see Fellerman v. PECO Energy, 159 A.3d 22, 27 (Pa. Super. 2017).

On the other hand, the parties do not agree on the material terms of an arbitration agreement if, for instance, the contract contains blanks for the names of the parties and the date of the agreement, and does not attach a referenced brochure that describes the arbitration program and is expressly made part of the agreement, as in Bair v. Manor Care of Elizabethtown, 100 A.3d 94 (Pa. Super. 2015).

But how do these rules relate to the ride-hailing company's arbitration agreement? The customer could not have registered for Bob's client's program without seeing and being able to use a clickable hyperlink that displayed everything about the arbitration program. Why should it matter if the customer voluntarily chose not to click through? Since when does contract law reward intentional ignorance? After all, unlike the alleged agreement in Bair v. Manor Care of Elizabethtown, the ride-hailing's electronic arbitration "brochure" was readily accessible by clicking through.

In Kemenosh v. Uber Technologies, 2020 Phila. Ct. Com. Pl. LEXIS 1 (C.P. Phila. Jan. 3, 2020), the court faced these very issues. Sadly for Bob, the court did not enforce the arbitration provisions and refused to send the case to arbitration. Reason: the electronic screens presented to the customer in the ride-hailing-company's online sign-up process did not properly communicate an offer to arbitrate.

According to the court, the sign-up process was ineffective. Although it gave the customer the option to click on the hyperlink, it did not tell the customer to access and read the hyperlinked content "carefully." Nor did it require the customer to check a box certifying the customer had read and agreed to the terms of service. And the hyperlink "contained no indication that it contained further essential terms other than the implicit agreement of offering transportation in exchange for money and a privacy policy."

The court concluded: Therefore, the words "by creating an Uber account you are agreeing to the terms of service and privacy policy"' convey that by creating an Uber account one is agreeing to pay money in exchange for transportation, and to the terms of the privacy policy. They do not convey an offer to arbitrate, or notify the user in any way the offered terms of service contain a waiver of jury trial and an arbitration clause.

None of this made sense to Bob. As he argued in his appellate brief:

"Since when is a contract void because the contract does not say it is important to read the contract terms? Since when are portions of a contract unenforceable when a party fails to read some or all the contract? And since when is a contract invalid when the "main portion"—whatever that is—does not conspicuously summarize the attachments, appendices, references and other things that also are part of and electronically attached to the contract?

As a matter of law, Bob may be right or he may be wrong. But he was dead wrong when it came to designing and implementing an arbitration process that would withstand attacks from customers. Bob probably would not have lost his preliminary objection if his arbitration system had included the following simple steps in the electronic registration process:

• A conspicuous statement directing the customer to read the "important" arbitration provisions: "READ CAREFULLY BEFORE SIGNING."

• Stating that the offered terms of service include a mandatory arbitration provision and a waiver of a jury trial.

• As a condition of completing the sign-up process, requiring the customer to click through the hyperlink and see the terms of service.

• As a condition of completing the sign-up process, requiring the customer to certify that he had received and agrees to the terms of service including the mandatory arbitration provision and waiver of a jury trial.

Sure, Pennsylvania law does not require "minimum conspicuity standards." But sometimes a little conspicuity goes a long way by warding off an expected attack. Bob—you think?

Charles F. Forer independently provides arbitration, mediation and all other neutral services. He is the current co-chair of the Philadelphia Bar Association's alternative dispute resolution committee. He is a former chair of the association's fee disputes committee. He is a frequent lecturer and writer on the use of ADR in a variety of settings. You can reach him at 610-999-5764 and c[email protected].