Gracie Foster v. Walmart, Inc.
No. 20-1787, 8th Cir. (2021)
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Rule of Law:
When there is a material dispute of fact regarding whether a browsewrap arbitration agreement was formed, specifically concerning a user's notice and acceptance of its online terms, the Federal Arbitration Act requires a trial to resolve the factual question of arbitrability.
Facts:
- More than two dozen individuals purchased Walmart gift cards.
- Third parties tampered with the purchased gift cards and subsequently stole the funds loaded onto them.
- Walmart refused to provide refunds to the individuals for the tampered and worthless gift cards.
- The purchasers then sued Walmart, Inc., Walmart Stores Arkansas, LLC, and Walmart Stores East, LP in federal court.
- The back of the gift cards contained a notation directing purchasers to 'See Walmart.com for complete terms.'
- Walmart’s website included an arbitration provision covering 'ALL DISPUTES ARISING OUT OF OR RELATED TO THESE TERMS OF USE OR ANY ASPECT OF THE RELATIONSHIP BETWEEN YOU AND WALMART.'
- The website stated that customers 'accept[ed]' arbitration by '[u]sing or accessing the Walmart Sites.'
Procedural Posture:
- Gracie Foster and more than two dozen other plaintiffs (purchasers of gift cards) sued Walmart, Inc., Walmart Stores Arkansas, LLC, and Walmart Stores East, LP (collectively 'Walmart') in the United States District Court for the Eastern District of Arkansas - Central.
- Walmart filed a motion to compel arbitration, arguing that the purchasers had agreed to an arbitration clause found in Walmart.com’s terms of use.
- The United States District Court for the Eastern District of Arkansas - Central denied Walmart’s motion to compel arbitration, concluding that the plaintiffs never had notice of the arbitration clause and therefore could not have assented to it, stating there was no need for a trial on arbitrability.
- Walmart, Inc., Walmart Stores Arkansas, LLC, and Walmart Stores East, LP appealed the district court's decision to the United States Court of Appeals for the Eighth Circuit.
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Issue:
Does a genuine issue of material fact regarding the adequacy of notice and manifestation of assent in a browsewrap agreement preclude a district court from summarily denying a motion to compel arbitration under the Federal Arbitration Act?
Opinions:
Majority - Stras, Circuit Judge
No, a genuine issue of material fact regarding the adequacy of notice and manifestation of assent in a browsewrap agreement does preclude a district court from summarily denying a motion to compel arbitration under the Federal Arbitration Act, requiring a trial instead. The court began by reiterating that arbitration is a matter of contract, requiring mutual assent between the parties, as established in cases like Rent-A-Center, W., Inc. v. Jackson. The court distinguished between 'clickwrap' agreements, where users explicitly click 'I agree,' and 'browsewrap' agreements, where assent is inferred from using a website. For browsewrap agreements, validity hinges on whether there was adequate 'actual or constructive knowledge' of the terms. The court rejected Walmart’s 'point-of-purchase' theory, noting that Walmart, as the 'master of its offer,' explicitly specified acceptance by 'using or accessing the Walmart Sites,' not merely by purchasing a gift card. Regarding the 'using or accessing' theory, the court found multiple material factual disputes. First, it was unclear whether any of the plaintiffs actually 'use[d] or access[ed]' Walmart’s website, as the complaint's references could have been made by their lawyers. Second, the record lacked sufficient detail about the website's structure and design, such as the exact location and prominence of the terms-of-use hyperlink, the number of clicks required to find the arbitration provision, and whether the website changed over time, which are critical for determining 'inquiry notice.' Third, the record was also deficient in specifics regarding the size and placement of the 'Walmart.com for complete terms' notation on the physical gift cards. Because these material facts regarding contract formation were in dispute, the Federal Arbitration Act, 9 U.S.C. § 4, mandated a trial on the issue of arbitrability, rather than a summary judgment decision.
Analysis:
This case significantly clarifies the enforceability of browsewrap arbitration agreements, reinforcing that a valid contract requires demonstrable mutual assent. It establishes a high bar for companies seeking to compel arbitration based on browsewrap terms, requiring them to provide sufficient evidence that a user had, or reasonably should have had, notice of the terms. The ruling highlights the importance of detailed factual records concerning website design, user interface, and user interaction data in contract formation disputes. Future litigants will need to conduct extensive discovery to establish or refute the conspicuousness of online terms, making it more challenging for businesses to enforce arbitration clauses without clear proof of notice and acceptance. This decision ensures that genuine factual disputes regarding arbitrability are resolved through a trial, upholding the Federal Arbitration Act's procedural requirements.
