The recent Ninth Circuit decision in Chabolla v. ClassPass, Inc. highlights the challenges of enforcing arbitration agreements in online Terms of Use. Katherine Chabolla sued ClassPass, alleging violations of California’s Automatic Renewal Law, Unfair Competition Law, and Consumers Legal Remedies Act after her subscription auto-renewed following a pandemic-related pause. ClassPass argued that Chabolla had agreed to arbitration through a “sign-in wrap” agreement, which linked the Terms of Use without requiring explicit user consent. Unlike traditional “clickwrap” agreements that demand clear acknowledgment, sign-in wrap agreements rely on user actions like signing up as implicit consent.
The court found that ClassPass’s website design did not provide sufficiently clear notice of the arbitration clause. While ClassPass displayed hyperlinks to the Terms of Use on three different sign-up screens, the court concluded that the terms were not conspicuous enough. The panel emphasized that the terms were in a smaller font, appeared on the “periphery” of the sign-up box, and did not provide a clear indication that clicking “Sign up” or “Continue” would bind the user to arbitration. The absence of explicit acknowledgment made it difficult to prove that Chabolla had knowingly consented to the agreement.
This ruling has significant implications for businesses using online agreements. It highlights the need for companies to ensure their websites present arbitration clauses in a clear and conspicuous manner. Retailers should carefully review their website designs and consult with legal counsel to strengthen their terms of use agreements. Adopting more explicit consent mechanisms, such as “clickwrap” agreements that require users to actively confirm acceptance, can reduce legal risks and improve enforceability in consumer disputes.
For any questions about ensuring your business’s online arbitration agreements remain compliant, please contact us at info@mnklawyers.com.
