New Jersey Appellate Division Holds Semblance of Acknowledgement Needed for Internet-Based Terms and Conditions Arbitration Clause to Apply

In Wollen v. Gulf Streams Restoration and Cleaning LLC, the New Jersey Appellate Division, in a to-be-published opinion, reversed a trial court’s determination that a plaintiff was bound to an arbitration provision found on an internet-based company’s website. Specifically, the Appellate Court found that the plaintiff did not “knowingly and voluntarily agree to waive her right to resolve her disputes in court.”

Defendant HomeAdvisor is an internet-based home improvement website that refers potential customers to third-party local service providers. A potential customer would log on to the HomeAdvisor website and create an online account in order to submit a service request. The customer was then required to provide information about the project before reaching the final webpage, which featured a button for the user to press requesting “free project cost information” from contractors in the area. An orange button with the words “View Matching Pros” was at the bottom of the page, with a line of text beneath it stating “[b]y submitting this request, you are agreeing to our Terms & Conditions.” The phrase “Terms & Conditions” was in blue and contained a hyperlink to a separate document entitled “HomeAdvisor Terms and Conditions.” However, a customer could click “View Matching Pros” without viewing the terms and conditions. Further, there was nothing to indicate that a customer had viewed the terms and conditions – no signature was required, nor was there a “click-to-accept” box at the end of the terms and conditions.

After receiving a referral from the HomeAdvisor website, the plaintiff retained a contractor to perform work on her home. The plaintiff was dissatisfied with the contractor’s services and sued the contractor. A year later, the plaintiff amended her complaint to add HomeAdvisor and asserted causes of action for breach of contract, violations of the New Jersey Consumer Fraud Act, property damage, fraud and unjust enrichment, negligence, and violations of the New Jersey Truth-in-Consumer Contract, Warranty and Notice Act. HomeAdvisor asserted that the court lacked subject matter jurisdiction due to the arbitration clause in its terms and conditions.

The trial judge ultimately agreed with HomeAdvisor and concluded that the plaintiff’s claims should be decided by an arbitrator. Specifically, the trial judge was “persuaded that the ‘[hyper]link tab’ was ‘clear and unmistakable’ because it was ‘identified as terms and conditions.’” The trial court added that “even if the ‘plaintiff elected not to click’ on the hyperlinked text, she was not exempt ‘from the obligation to comply with the terms and conditions of the contract.’”

The plaintiff appealed, primarily arguing that HomeAdvisor “failed to demonstrate that she ‘clearly and unambiguously’ assented to the arbitration provision set forth in HomeAdvisor’s terms and conditions.” Noting that an “arbitration provision is not enforceable unless the consumer has reasonable notice of its existence,” the Appellate Division found that the “hyperlink at issue did not provide reasonable notice of HomeAdvisor’s terms and conditions to the reasonably prudent internet user.” According to the court, while the words “Terms & Conditions” were in blue, they were not bolded, underlined, or enlarged, and there was no indication that the “user was required to read the terms and conditions before submitting” a request for service. In fact, a user could submit their request before reading the terms and conditions. The hyperlink was therefore “vague, ambiguous and misleading.”

Further, the plaintiff was “not required to affirmatively assent – or even view – the terms and conditions.” There was no requirement to open the link, scroll to the bottom of the page, and acknowledge that they were read, by either providing a signature or checking a box that they were viewed. “[T]here existed no prerequisite to matching plaintiff with third-party contractors; HomeAdvisor did so regardless of whether plaintiff was aware of the parties’ purported agreement.” As such, the court held that HomeAdvisor “failed to establish plaintiff assented to its terms and conditions, including the arbitration provision at issue, which was masked behind a layer of webpages.”

Given the ever expanding number of internet-based companies, the Appellate Division’s holding is important. It provides useful guidance as to the steps companies must take to bind customers to agreements to arbitrate presented through their websites.

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