Browsewrap vs. Clickwrap: Florida Court Refuses to Enforce Online Arbitration Agreement

Florida law is finally beginning to address questions that arise at the intersection of law and technology. Florida lawyers are now required to take a component of continuing legal education that addresses technology. I have not researched what constitutes 'technology' under the new requirement, and I am skeptical that it can keep up with the reality of the times. More recently, in one of our last posts, the court provided some wise words addressing in general the effect of the Internet and smartphones on how business is conducted.

This week, the Fourth DCA is addressing the circumstances under which an agreement to arbitrate that is contained in a sales website's terms of service is enforceable. The case, Vitacost.com, Inc. v. McCants, No. 4D16-3384 (Fla. 4th DCA Feb. 15, 2017), answered the question whether an arbitration agreement contained in browsewrap terms and conditions linked at the bottom of a sales website could be enforced. Not surprisingly, no published Florida decision had decided that issue yet.

If you're not familiar with the term 'browsewrap,' you may have at least heard the term 'clickwrap.' The court addresses the difference between the two in a manner that makes them both easy to understand:

There are at least two types of agreements found in internet sales, a “browsewrap” and a “clickwrap” agreement. A “clickwrap” agreement occurs when a website directs a purchaser to the terms and conditions of the sale and requires the purchaser to click a box to acknowledge that they have read those terms and conditions. “Clickwrap” agreements are generally enforceable. A “browsewrap” agreement occurs when a website merely provides a link to the terms and conditions and does not require the purchaser to click an acknowledgement during the checkout process. The purchaser can complete the transaction without visiting the page containing the terms and conditions. “Browsewrap” agreements have only been enforced when the purchaser has actual knowledge of the terms and conditions, or when the hyperlink to the terms and conditions is conspicuous enough to put a reasonably prudent person on inquiry notice.
This was a quote from a 2014 case decided by the U.S. Court of Appeals for the 9th Circuit, and in addition to citing that case, the Florida court followed its logic: here the terms and conditions link was at the bottom of the page where the purchaser would only see the link if he/ she scrolled down to it, nothing occurred during the sale transaction that would notify the purchaser that the transaction was governed by the terms and conditions (or that they contained an arbitration clause), and the purchaser testified that he had no actual knowledge of the terms and conditions. Under those circumstances, the arbitration agreement was not enforceable.

The holding is consistent with prior Florida law on contracts, which provides that:

to incorporate a collateral document into an agreement, the agreement must: (i) specifically provide that the collateral document is being incorporated; and (ii) sufficiently describe the collateral document being incorporated.
Florida sellers, if you want your arbitration agreement to apply to online sales, you should make the purchaser click a link opening the terms and conditions including the arbitration agreement and check a box saying that he/ she agrees to the terms of service. If you choose browsewrap instead, the question of enforceability becomes more fact-intensive and therefore less certain.

Two Recent Florida Decisions Limit Scope of Nursing Home Arbitration Clauses

We have blogged before about the principle that arbitration law is basically contract law, which means that ordinary contract principles generally apply. One sort of complication of this basic premise is how to resolve the issue of enforcement of an arbitration agreement against a party who did not sign one. At first blush, it seems like a simple issue: if a party did not agree to arbitrate, that party should not be required to arbitrate.

But a complication to this basic principle occurs when a third party beneficiary sues to enforce obligations of one or more contracting parties to the third party beneficiary. That person is not a signatory to the contract, so under basic principles of arbitration law, that person should not be bound to arbitrate. But under the general principles of contract law, a third party beneficiary does have contract rights and can sue to enforce those rights. So should he/ she be bound to arbitrate?

For a long time, Florida courts said yes, but the issue was recently considered in depth by the Florida supreme court and resolved in favor of the simpler principle that a party can only be bound to arbitrate where that party has specifically agreed to arbitrate or when that party seeks to invoke rights and duties under a contract that calls for arbitration. The issue arose in Mendez v. Hampton Court Nursing Center, LLC, 203 So. 3d 146 (Fla. 2016), that a man signed an agreement admitting his father to a nursing home and that agreement had an arbitration clause. The man's father then died, and the man sued the nursing home for negligence on behalf of his father's estate. The nursing home argued that the father's estate was bound by the arbitration agreement because the father was a third party beneficiary to the agreement between the son and the nursing home.

First the court provided the nutshell version of Florida third party beneficiary law:
The doctrine of third-party beneficiaries provides that under certain circumstances, a person may sue to enforce a contract, even though the person is not a party to the contract. To establish an action for breach of a third party beneficiary contract, [the third-party beneficiary] must allege and prove the following four elements: (1) existence of a contract; (2) the clear or manifest intent of the contracting parties that the contract primarily and directly benefit the third party; (3) breach of the contract by a contracting party; and (4) damages to the third party resulting from the breach. Critically, the third-party beneficiary doctrine enables a non-contracting party to enforce a contract against a contracting party—not the other way around. The third-party beneficiary doctrine does not permit two parties to bind a third— without the third party's agreement—merely by conferring a benefit on the third party.
The last part of this quote foreshadows the rest of the Court's opinion. The most important fact of the case was that the father's estate did not sue for breach of contract as a third party beneficiary. If it had, according to the court, the arbitration clause would apply. But the estate sued only for negligence, and did not seek to invoke contract rights or remedies. Under those circumstances, the court held that the arbitration agreement could not bind the estate.

Just last week, the Second DCA expanded on this issue by considering whether a daughter who signed her mother up to a nursing home had the capacity to bind her mother to an arbitration agreement in the admission documents based on a health care proxy that was in effect at the time the arbitration agreement was signed, due to the mother's incompetence. The decision can be found here. The argument made by the nursing homes was creative, but did not withstand scrutiny, because (1) the health care proxy allowed the daughter to make health care decisions for the mother, and the decision to arbitrate was not a health care decision, and (2) the daughter signed the arbitration agreement in her own capacity not as proxy. Thereafter, all that was left to do was to apply the law of Mendez: since the estate did not invoke third party beneficiary status under the contract, it could not be compelled to arbitrate.

Uber Driver Is An Independent Contractor Under Florida Law

I'm thinking about renaming this blog "The Uber Law Blog." Our last two posts, here and here, discussed the enforceability of Uber's arbitration agreement with its drivers. This week, the Florida Third DCA has ruled that a former Uber driver was an independent contractor, not an employee, and therefore is not entitled to reemployment assistance under Section 443.1216, Florida Statutes.

There are a couple of interesting things about this decision. It discusses in detail how Uber works, which I find fascinating. Additionally, it is noted that the contractor in this case was also a Lyft driver in addition to being an Uber driver. And finally, the court had these wise words to say about the world we live in:
The internet and the smartphones that can now access it are transformative tools, and creative entrepreneurs are finding new uses for them every day. People are being connected in ways undreamed of just a decade ago. This is as true for business relationships (through software like Uber) as it is for social relationships (through software like Facebook). Many more people have access to, and voice in, markets that may once have been closed or restricted. Just as many more people can now publish their own thoughts to a vast audience, many more people can now offer their services or hawk their wares to a vast consumer base.
I'm not sure what that has to do with whether a person is an employee or a contractor -- a decision which in this case seems to have turned on the fact that the contract between Uber and the driver specifically said that the driver was a contractor and therefore not entitled to unemployment benefits, combined with the actual characteristics of the relationship between Uber and the driver -- but as a blogger I approve of the court's sentiment.

California Appeals Court Rules Uber Arbitration Agreement Enforceable

In our last post, we discussed a San Francisco federal court's decision to invalidate Uber's arbitration agreement with its driver on the ground that the delegation provision was ambiguous, not "clear and unmistakeable," based on an apparent conflict with the provision establishing venue in California courts.

The rationale of that decision was recently rejected by the U.S. Court of Appeals for the Ninth Circuit. [Yes, I know, it has been a long time since we've posted on this blog. We've been busy.] The case is Mohamed v. Uber Technologies Inc., 15-16178, and Gillette v. Uber Technologies Inc. 15-1618. The appeals court held that the conflict identified by the district court judge -- i.e. the inconsistency between the arbitration clause's delegation provision and the venue clause -- was 'artificial,' as the venue provision and the arbitration provision were not inconsistent, the venue provision simply applying to actions in court to enforce the arbitration provision or confirm an arbitration award, and to actions that the arbitration provision did not govern.

This is a victory for Uber and a blow to the several class actions pending against it. We are watching this litigation closely as well as the litigation between Uber and certain Lyft drivers [in which Uber was not as successful in applying its arbitration provision]. Stay tuned.