Keena v. Groupon
192 F. Supp. 3d 630 (2016)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
An online 'clickwrap' agreement, where a user clicks a button to accept terms and conditions provided via a hyperlink, creates a valid and enforceable contract. Under the Federal Arbitration Act (FAA), an arbitration clause within such an agreement will be enforced unless the party challenging it proves it is procedurally or substantively unconscionable under state contract law.
Facts:
- Plaintiff created an account on Defendant Groupon Inc.'s website, which required her to click a box next to the words 'I agree to the Terms of Use,' where 'Terms of Use' was a hyperlink to the full document.
- On February 1, 2015, Plaintiff purchased a voucher for massage services from a company called Mutatio Wellness through Groupon's website.
- To complete the purchase, Plaintiff had to click a 'Complete Order' button located directly above text stating, 'By clicking ‘Complete Order’ I accept the current Terms and Conditions,' which also contained a hyperlink to the terms.
- Plaintiff was subsequently unable to contact Mutatio Wellness to schedule the massage for which she had purchased the voucher.
- After Plaintiff requested a monetary refund from Groupon, Groupon instead credited her account with 'Groupon Bucks,' which could only be used for future purchases on its website.
Procedural Posture:
- Plaintiff filed a lawsuit against Groupon, Inc. in the U.S. District Court, asserting claims for breach of contract, fraud, and unjust enrichment, among others.
- Defendant Groupon, Inc. filed a Motion to Compel Arbitration or, in the alternative, to Dismiss the complaint.
- Plaintiff filed a Response in Opposition to Defendant's motion.
- Plaintiff also filed a Motion to Defer Consideration of Defendant's Motion to Dismiss.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Is an arbitration agreement contained within a website's 'Terms of Use,' which a user accepts by clicking a button to create an account and complete a purchase, an enforceable contract compelling the user to arbitrate their claims against the website operator?
Opinions:
Majority - Graham C. Mullen
Yes. An arbitration agreement contained within a website's hyperlinked Terms of Use is an enforceable contract when a user manifests assent by clicking an 'I agree' button to create an account and complete a purchase. The court reasoned that the Federal Arbitration Act (FAA) establishes a strong federal policy favoring arbitration, which preempts any conflicting state laws. Plaintiff had sufficient notice of the Terms of Use because Groupon provided clear hyperlinks on two separate occasions, and her clicking to agree constituted assent. The court rejected Plaintiff's arguments that the agreement was unconscionable, finding it was neither procedurally unconscionable (the terms were not hidden and take-it-or-leave-it contracts are standard) nor substantively unconscionable (its provisions, like the shortened limitations period and arbitration costs, were not unreasonably one-sided, especially since Groupon agreed to reimburse arbitration fees). Finally, the agreement was not illusory because the mutual promise to arbitrate constitutes valid consideration.
Analysis:
This decision reaffirms the strong legal presumption favoring the enforcement of arbitration clauses within online 'clickwrap' agreements. It illustrates the high bar a plaintiff must clear to invalidate such an agreement on grounds of unconscionability, confirming that providing a hyperlink to terms is generally sufficient notice. The court's application of FAA preemption underscores the difficulty of using state-law contract defenses to avoid arbitration if they are perceived as hostile to it. This case serves as a strong precedent for e-commerce companies seeking to enforce standardized terms and channel all consumer disputes into arbitration rather than court.
Unlock the full brief for Keena v. Groupon