(Article from Insurance Law Alert, March 2019)
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The Second Circuit denied a motion to compel arbitration, ruling that the arbitration clause was not part of the operative contract because an email hyperlink did not provide sufficient notice of the clause. Starke v. SquareTrade, Inc., 913 F.3d 279 (2d Cir. 2019).
Adam Starke purchased a protection plan from SquareTrade for a product he purchased online. In a putative class action, Starke alleged that SquareTrade violated consumer protection laws. SquareTrade moved to compel arbitration, which a New York district court denied. The court ruled that Starke did not have reasonable notice of or manifest his assent to the arbitration clause. The Second Circuit affirmed.
Under New York law, a party to a contract is bound by its terms, even if he does not have actual notice of certain contract terms, if he is on inquiry notice and assents to the terms through conduct that a reasonable person would understand to constitute assent. New York courts look to whether a term is obvious and called to the party’s attention.
The Second Circuit concluded that Starke did not have reasonable notice of the arbitration provision, which was included in a “Terms & Conditions” document provided via hyperlink in an email sent to Starke. The court noted that Starke had received several confirmation emails from Amazon and SquareTrade, but none put him on notice that a “Service Contract” would come in a hyperlink. Further, the court emphasized that the email containing the hyperlink was cluttered with text displayed in multiple colors, fonts, and sizes and that the hyperlink itself was in the smallest font at the very bottom of the email. Finally, the court noted that the email did not direct Starke to click on the link or inform him that the link contained contract terms to which he would be deemed to agree.
The court emphasized the fact-specific nature of its holding, stating:
we in no way hold that the terms of a contract may not be provided by a hyperlinked document. So long as the purchaser’s attention is adequately directed to a conspicuous hyperlink that is clearly identified as containing contractual terms to which the consumer manifests assent by completing the transaction . . . a hyperlink can be an effective device for specifying contract terms.