Berkson v. Gogo LLC
97 F. Supp. 3d 359 (2015)
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Rule of Law:
For an electronic contract of adhesion to be enforceable, the website's design must provide a reasonably prudent user with conspicuous notice of its terms; material terms that alter a consumer's default rights, such as arbitration clauses, forum-selection clauses, or automatic renewal policies, are not binding if they are hidden in a hyperlink and the user is not required to affirmatively manifest assent after being given a realistic opportunity to review them.
Facts:
- Gogo LLC and Gogo Inc. (collectively, 'Gogo') provide in-flight Wi-Fi services on numerous domestic airlines.
- In August 2011, Kerry Welsh subscribed to Gogo's Wi-Fi, believing he was purchasing a single one-month package.
- The 2011 account creation page presented to Welsh had an optional checkbox next to the statement, 'I agree to the Terms of Use,' which was not required to complete the purchase.
- Gogo continued to charge Welsh's credit card monthly for a period of sixteen months.
- In September 2012, Adam Berkson paid for Gogo's in-flight Wi-Fi, also believing it to be a one-month subscription.
- The 2012 account creation page presented to Berkson stated in small font, 'By clicking ‘NEXT’ I agree to the terms of use and privacy policy,' with the terms accessible only via a hyperlink.
- Gogo charged Berkson's credit card for three consecutive months following his initial purchase.
- Neither Welsh nor Berkson received monthly bills or notifications from Gogo about the recurring charges.
Procedural Posture:
- Adam Berkson filed a class action complaint against Gogo in the U.S. District Court for the Eastern District of New York.
- Gogo filed a motion to compel arbitration, transfer venue to the Northern District of Illinois, or, alternatively, dismiss the complaint.
- Berkson, joined by Kerry Welsh, filed an amended class action complaint.
- Gogo renewed its motion to compel arbitration, transfer venue, or dismiss the amended complaint for lack of jurisdiction and failure to state a claim.
- The District Court considered the defendants' motions.
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Issue:
Does a 'sign-in-wrap' agreement, which deems a user to have accepted hyperlinked 'terms of use' by clicking a sign-in or account creation button, provide a reasonably prudent internet user with sufficient notice to form a binding contract as to material terms like automatic payment renewal and forum selection?
Opinions:
Majority - Weinstein, J.
No. A 'sign-in-wrap' agreement does not provide sufficient notice to form a binding contract where the terms are not reasonably conspicuous and assent is not unambiguous. For electronic bargaining to have integrity, a reasonably prudent user must be on inquiry notice of the contract terms. Here, the website design did not adequately draw users' attention to the 'Terms of Use,' which contained material terms such as automatic renewal, a forum selection clause, and, later, an arbitration clause. The court distinguished this from cases involving physical contracts where notice was prominent, like the cruise ticket in Carnival Cruise Lines. The court reasoned that Welsh's 2011 agreement was not binding because assenting to the terms was optional. Berkson's 2012 agreement was also unenforceable because the hyperlink to the terms was inconspicuous, presented in a small font, and did not require the user to view the terms before proceeding. Therefore, the hidden provisions for venue and arbitration were not effectively incorporated into the contract and are unenforceable.
Analysis:
This decision places a significant check on the enforceability of 'sign-in-wrap' and other passive forms of online contracts of adhesion. By establishing a user-centric, four-part test focusing on conspicuous notice and website design, the court raises the bar for online vendors seeking to enforce material terms. This precedent signals to businesses that they cannot rely on buried hyperlinks to bind consumers to unfavorable terms like arbitration clauses or automatic renewals. The ruling reinforces the traditional contract principle of mutual assent and suggests courts will increasingly scrutinize the 'reasonableness' of how terms are presented to online consumers.
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