Column: Uber 'clickwrap' contract gets blessing from NY’s top court. But there’s a twist.
The opinions expressed here are those of the author, a columnist for Reuters.
By Alison Frankel
Nov 26 (Reuters) -New York’s highest state court on Monday joined the nationwide consensus in state and federal courts that consumers can be compelled to arbitrate claims if they have been offered a real opportunity to review online contract terms and have clicked their assent.
But that, as I'll explain, may not be the end of the story.
The New York Court of Appeals ruled 5-2 that Emily Wu, who was struck by a car and suffered serious injuries when her Uber driver dropped her off in the midst of traffic, must arbitrate her personal injury claims against Uber because she consented to mandatory arbitration in an online contract in 2021. The state high court rejected arguments by Wu’s lawyer, Josh Kelner of Kelner & Kelner, that Wu cannot be bound by contract terms that were misleadingly characterized and impossible for an ordinary consumer to parse.
“For essentially as long as there have been written contracts, parties have entered them without first carefully reviewing their terms,” wrote Judge Anthony Cannataro for the five-judge majority. “That failure can have legal consequences, whether the party is a sophisticated entity or an ordinary consumer, and whether the contract is presented on paper or through an electronic pop-up window.”
The court’s endorsement of so-called clickwrap agreements isn’t much of a surprise. As Uber’s lawyers at Perkins Coie noted in their Court of Appeals brief, and the U.S. Chamber of Commerce’s Mayer Brown team echoed in an amicus brief, courts around the country, after years of litigation over the minutiae of online contracts, now generally agree that the agreements are binding as long as companies offer consumers a fair and easy way to review contract terms and require users to click to confirm their consent.
More intriguingly, the Court of Appeals majority also said that under the terms of Wu's binding contract with Uber, she cannot contest the enforceability of the agreement in court.
Wu’s lawyer had strenuously pushed for the court to deem the contract unenforceable because of the unusual circumstances of the case.
Wu was a frequent Uber user who had consented to the company’s 2016 terms of service. After her accident, she filed a lawsuit against Uber in November 2020. She served the company with her complaint at its New York office.
Uber contends it never saw the complaint because its New York office was closed under pandemic regulations. The company insists that it learned of the suit only in March 2021, when Wu moved for a default judgment.
By then, Wu had clicked her assent to Uber’s revised service terms — which included a provision requiring pending personal injury lawsuits to be resolved in arbitration.
Wu counsel Kelner has asserted throughout the litigation that Uber should be sanctioned for asking his client to consent to contract terms that affected her personal injury suit without notifying him.
Wu, he argues, could not be expected to anticipate that Uber would cloak a retroactive provision requiring her to arbitrate in what appeared to her to be a routine update to its service rules.
“She was entitled to assume that matters relating to her pending lawsuit would be directed to her counsel,” Kelner said in Wu’s brief to the Court of Appeals. “There is no such thing as contract by trickery.”
Kelner obtained evidence that Uber responded to dozens of other lawsuits served at its New York office when that office was closed for the pandemic, but a trial judge in New York State Supreme Court in the Bronx concluded that Uber was not aware of Wu’s lawsuit when the company asked her and its other users to consent to the updated contract.
The trial judge also ruled that Wu was not entitled to sanctions based on Uber’s allegedly improper exparte contact because (among other reasons) it was Wu who initiated contact with Uber by requesting a ride.
Both the trial court and the intermediate appellate court concluded that because the Uber clickwrap contract included a provision requiring an arbitrator to decide threshold challenges to the agreement, they were not empowered to rule on whether the contract was enforceable in light of Kelner’s claims of trickery and deception.
At the Court of Appeals, advocacy group Public Citizen filed a brief backing Kelner’s argument that the court must hold Wu’s contract invalid because it was “obtained under misleading and coercive circumstances.” The Chamber of Commerce, meanwhile, cautioned the New York high court that if it adopted Wu’s position, companies would face a heavy burden of carving out every litigation adversary from routine contract updates.
The Court of Appeals majority did not rule on the merits of Wu’s enforceability challenge, instead concluding that it’s a matter for the arbitrator because of the delegation clause in the contract she entered.
In a dissent joined by Chief Judge Rowan Wilson, Judge Jenny Rivera said Wu cannot be bound by Uber's contract because she did not know of the impact it would have on her lawsuit — in part because Uber did not inform her lawyer of the update to its terms of service.
In an email statement on the decision, Wu counsel Kelner cited that dissent. His client, he said, “had the right to expect that communications about her lawsuit would be directed to her lawyer,” adding that courts should protect plaintiffs in these circumstances. Kelner said he is confident an arbitrator will ultimately agree that it’s “flagrantly improper and unconscionable for a sophisticated corporation to weaponize its terms of use.”
Uber lawyer Michael Huston of Perkins Coie said in an email statement that the evidence in the case showed Wu had agreed to Uber’s terms, including mandatory arbitration, multiple times before and after the accident in 2020. “We’re confident that the arbitration process will allow all parties to resolve this matter in a fair and timely manner,” the statement said.
Read more:
Sending your kid to public school isn’t consenting to arbitration, Calif judge says
Friend bought you a ticket to the big game? You still have to arbitrate, says US appeals court
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
