Last month, the Ninth Circuit affirmed a Washington district court’s decision to deny Huuuge’s bid to arbitrate a proposed class action based on a browsewrap agreement.
In early 2017, Sean Wilson downloaded the Huuuge Casino smartphone app, which allows users to gamble with chips to play casino games. Users can gamble either with a limited number of free chips or with chips purchased through the app. Wilson played for more than a year until he filed suit against Huuuge, alleging the app violated Washington gambling and consumer protection laws by charging users for chips.
Huuuge countered with a motion to compel arbitration, alleging that Wilson was on notice of its terms, which include a binding arbitration provision that prohibits class actions. Users can access Huuuge’s terms by reading them before downloading the app (although users are not required to do so) or by viewing the terms during game play (also not required in order to play). Wilson argued that he was unaware of the arbitration provision and did not affirmatively acknowledge or agree to the terms. The district court agreed, denying the motion to compel arbitration, and the Ninth Circuit affirmed.
In order to be bound by an arbitration provision, an individual must “unambiguously manifest assent,” the panel wrote, but in the case of the Huuuge app, “the user would need Sherlock Holmes’s instincts to discover the terms.” If the user downloads the app in the smartphone app store, the user does not view anything that alerts him to the existence of the terms, the court said. If a user downloads the app from Huuuge Casino’s landing page, he must click on small blue text stating “more” in the app’s description and then scroll through several screen-lengths of text to find a paragraph that includes a link to the terms of use, although the link must by copied and pasted (or manually typed) into a web browser for access to the terms.
While playing the game, it is not necessary for a user to open the settings menu while playing; nor is there a requirement to acknowledge or agree to the terms when opening the app, creating an account, playing the game—or at any other point, the court added.
With this system, Wilson had neither actual notice nor constructive notice, the Ninth Circuit ruled. “Wilson was not required to assent to Huuuge’s terms before downloading or using the app—–or at any point at all,” the panel wrote. “Huuuge did not notify users that the app had terms and conditions, let alone put them in a place the user would necessarily see. Instead, a user would need to seek out or stumble upon Huuuge’s terms, either by scrolling through multiple screens of text before downloading the app or clicking the settings menu within the app during gameplay.”
The court rejected the defendant’s argument that Wilson’s repeated use of the app placed him on constructive notice, finding no reason to assume that users will click on the settings menu simply because it exists, particularly when users can play the game unencumbered by any of the settings.
“Nothing points the user to the settings tab and nowhere does the user encounter a click box or other notification before proceeding,” the panel said. “Only curiosity or dumb luck might bring a user to discover the terms.”
Instead of requiring that users affirmatively assent to the app’s terms, “Huuuge chose to gamble on whether its users would have notice of its terms,” the Ninth Circuit wrote. “The odds are not in its favor. Wilson did not have constructive notice of the terms and thus is not bound by Huuuge’s arbitration clause in the terms.”
To read the opinion in Wilson v. Huuuge, click here.
Why it matters: The Ninth Circuit frowned upon the defendant’s attempt to enforce an arbitration provision buried in terms that users were not notified about and that required “dumb luck” or “Sherlock Holmes’s instincts” to find. In a previous high-profile case addressing the issue of whether a browsewrap agreement by itself results in an enforceable electronic agreement, the Ninth Circuit held in Nguyen v. Barnes & Noble Inc. that the presence of hyperlinks directing users to a website’s Terms of Use alone (even when in close proximity to buttons on which users must click, such as a “checkout” button)—without more—was insufficient to give constructive notice to users of those Terms of Use. In light of this lack of notice, the Ninth Circuit held Barnes & Noble’s arbitration provision was unenforceable due to the absence of users’ express agreement to the online Terms of Use. Thus, browsewrap agreements are typically only enforced when there is evidence that users have actual or constructive notice of their terms, leaving companies that rely on them in a precarious position when they try to enforce their Terms of Use since these issues of actual and constructive notice will ultimately be left up to courts to decide.
The placement and implementation of a website or app’s Terms of Use will be the determining factor as to whether or not the arbitration clause and class action waiver contained within the Terms of Use will be enforceable against users. Relying solely on a browsewrap agreement as the mechanism to enforce Terms of Use can be a huuuge gamble when looking to quickly get rid of a pesky class action lawsuit filed based on online business practices. Manatt’s Advertising, Marketing & Media practice excels in reviewing companies’ websites and apps and advising how to implement your online agreements to help ensure they are enforceable as clickwrap agreements. We are happy to audit your websites and apps and advise on how simple changes can help ensure that you win big the next time you are looking to enforce the arbitration provision/class action waiver in your Terms of Use.