U.S. Markets closed

Appeals Court Finds for Uber, Says App Made Service Terms Clear

uber-app

Uber made it clear that users were agreeing to terms and conditions, including the waiving of a jury trial in favor of arbitration, when they downloaded and used the app, the U.S. Court of Appeals for the Second Circuit ruled Thursday.

The decision represents a big win for not only the ride-hailing company, but for creators of online and mobile technologies watching to see how their user agreements would remain valid.

The appellate panel of Judges Reena Raggi, Denny Chin and Susan Carney vacated and remanded an earlier decision by U.S. District Judge Jed Rakoff of the Southern District of New York. Rakoff had previously allowed a class action suit against Uber Technologies Inc. and its former CEO Travis Kalanick to proceed after a user claimed third-party drivers were illegally fixing prices.

Rakoff dismissed the technology company's move to compel arbitration based on its terms and services agreement that the lead plaintiff, Spencer Meyer, had agreed to use the app. The notice was not reasonably conspicuous and Meyer did not unambiguously agree to the terms when he registered, the district court found.

The panel disagreed. Uber's app design, they said, made it clear that proceeding to use the app meant agreeing to terms and conditions based on California state law. The terms of service were made clear and though it required the clicking of a hyperlink to review them, the panel found that the use of clear language that creating an account with Uber meant agreeing to the terms was sufficient. When doing so, the user is signaling that their acceptance of the benefit of registration would be subject to contractual terms.

While it may be the case that many users will not bother reading the additional terms, that is the choice the user makes; the user is still on inquiry notice, the panel wrote.

The panel said that while Meyer's assent to arbitration was not express[ed], he nonetheless did so unambiguously. A reasonable user of a smartphone and downloaded applications would know that by clicking the registration button, he was agreeing to the terms and conditions accessible via the hyperlink, whether he clicked on the hyperlink or not.

The panel found that there was no need to remand the case back to the district court for retrial, since, as a matter of law, that Meyer agreed to arbitrate his claims with Uber.

The panel did, however, send back to Rakoff an alternative argument raised by Meyer that Uber's active defense of his suit represented a waiver of the terms.

When the party seeking arbitration has participated in litigation regarding the dispute, the district court can properly decide the question of waiver, the panel stated.

Gibson, Dunn & Crutcher partner Ted Boutrous, who led Uber's defense, said in a statement that he and his client were thrilled with the decision.

The Second Circuit's powerful and commonsense opinion will serve to protect online contracting and strengthen commerce nationwide, he said.

Cohen & Gresser partner Mark Spatz said the panel's decision adds to a consistent message coming out of the circuit.

What you're seeing is courts are trying to grapple with what is conspicuous and what is not conspicuous, he said. You can see that the appellate court is trying to give you a little bit of a better standard.

Often in these kinds of cases, the issue that gets focused on is not whether or not mandatory arbitration is acceptable, Spatz said, but rather whether the user was given proper and clear notice.

What ends up getting litigated is the notice, he said. That's what they're grappling with: To what extent are we putting the obligation on the consumer to read the things that are provided, versus not.

Harter Secrest & Emery partner Jeffrey Wadsworth, along with attorneys from Constantine Cannon, led the plaintiffs team. They could not be reached for comment.

B. Colby Hamilton is a New York-based financial and white-collar litigation reporter for the New York Law Journal and Law.com. Contact Colby at chamilton@alm.com. On Twitter: @bcolbyhamilton