Ninth Circuit Rejects Claim That Amazon’s Terms and Conditions Are an Unconscionable Contract
In an unpublished opinion, the Ninth Circuit affirmed a lower court’s ruling that had sent a putative class action against Amazon over its pricing practices to arbitration, as per Amazon’s terms of service. (Wiseley v. Amazon.com, Inc., No. 15-56799 (9th Cir. Sept. 19, 2017) (unpublished)). In finding that Amazon’s “Conditions of Use” were not unconscionable and presented in a reasonable manner, this holding differs from a Second Circuit decision from last year that declined to compel arbitration because reasonable minds could disagree regarding the sufficiency of notice provided to Amazon.com customers when placing an order through the website. (On remand, a New York magistrate judge ruled that the court should grant Amazon’s motion to compel arbitration on other grounds based upon the plaintiff’s constructive knowledge of the terms.)
In Wiseley, plaintiffs brought deceptive advertising and consumer protection claims against Amazon based upon certain advertising practices. As with any consumer, plaintiffs were required to complete orders by reviewing a final checkout page, with a final callout that provided links to the relevant terms of service: “By placing your order, you agree to Amazon.com’s privacy notice and conditions of use.” Amazon moved to compel arbitration based on the arbitration provision in the Conditions of Use, and the lower court granted the motion, finding that the terms were neither illusory, nor procedurally or substantively unconscionable.
In affirming the lower court’s ruling, the appeals court rejected the argument that the terms were unconscionable because they were adhesive in nature. The court found that adhesion alone is not enough to support a finding of unconscionability under Washington or California law (the laws potentially applicable to the dispute). Regarding the presentation of the terms, the court dismissed the argument that plaintiffs were not on sufficient notice of the terms when they completed a transaction because the callout was in a somewhat smaller font and did not dominate the entire checkout page and was not located directly adjacent to the “Place your order” button:
“The notices on Amazon’s checkout and account registration pages, which alerted Wiseley that clicking the corresponding action button constituted agreement to the hyperlinked COU, were in sufficient proximity to give him a ‘reasonable opportunity to understand’ that he would be bound by additional terms.”
The appeals court also rejected the plaintiffs’ arguments for substantive unconscionability based upon several provisions in Amazon’s terms. It held that the inclusion of a unilateral modification clause did not render the arbitration provision substantively unconscionable because Amazon is limited by the implied covenant of good faith and fair dealing. The court also held that the arbitration clause’s exemption of intellectual property claims for injunctive relief does not make the provision overly one-sided and that the arbitration clause’s grant of right of Amazon to seek attorney’s fees for frivolous claims comports with applicable law.
In general, courts will often enforce clickwrap agreements where a user is reasonably presented with notice that completing a transaction will bind the user to terms of service. However, that is not always the case. While it is an unpublished opinion, the Ninth Circuit’s endorsement of Amazon’s presentation of its terms and some of the substantive provisions within, including its arbitration clause, is a helpful ruling for companies looking to enhance the likelihood that their terms will be deemed to be enforceable in the event of a dispute.