‘Sign-in Wraps’ Face the Judicial Microscope in New York

April 21, 2015

There are, generally speaking, four different kinds of online contracts that businesses use to obtain consent via the Internet from consumers: browsewrap, clickwrap, scrollwrap, and sign-in wrap agreements. Browsewrap exists where an online host dictates that assent is given merely by using the site. Clickwrap refers to the assent process by which a user must click “I agree,” but not necessarily view the contract to which he or she is assenting. Scrollwrap requires users to physically scroll through an Internet agreement and click on a separate “I agree” button in order to assent to the terms and conditions of the host website. Sign-in wrap couples assent to the terms of a website with signing up for use of the site’s services.

Although much has been written about these kinds of online agreements, including in this column,1 disputes over their enforceability continue to arise. Now, Senior U.S. District Judge Jack B. Weinstein of the Eastern District of New York has joined the fray. Earlier this month, in Berkson v. Gogo,2 Weinstein examined a sign-in wrap agreement used by Gogo, which provides passengers with Wi-Fi access on many domestic airlines, and—after declaring that it was a “questionable form of Internet contracting”—ruled that it was not enforceable.

Companies that sell over the Internet should pay careful attention to this ruling. In many instances, it may require changes to their contracting procedures and even their websites.

Background

Gogo arose on Feb. 25, 2014, when Adam Berkson filed a class action complaint in the U.S. District Court for the Eastern District of New York against Gogo LLC and Gogo Inc., which provide passengers with Wi-Fi access on many domestic airlines. Berkson alleged that the companies improperly increased their sales and profits by misleading customers into purchasing a service that charged a customer’s credit card, on an automatically-renewing continuing monthly basis, without adequate notice or consent.

In particular, Berkson, a New York resident, asserted that on Sept. 25, 2012, he paid $34.95 to subscribe to Gogo’s in-flight Wi-Fi on a Delta Airlines flight from New York to Indianapolis. According to Berkson, his credit card was billed $34.95 on Sept. 25, 2012, Oct. 25, 2012, Nov. 26, 2012, and Dec. 25, 2012 and the billings stopped only after he complained to Gogo at or around “late December 2012.”

Berkson said that he had never received a monthly bill or other communication notifying him that he had signed up for automatic renewal of Gogo’s in-flight Wi-Fi, and that he was not aware of the charges being made to his credit card. He said that when he contacted Gogo to request a refund for the time periods he was charged for the service but did not use it, the company refused his request.

Gogo moved, among other things, to compel arbitration or to transfer venue to the Northern District of Illinois. It premised its motions on its “terms of use,” which, Gogo argued, Berkson had assented to online when he had subscribed to Gogo’s in-flight Wi-Fi.

For his part, Berkson asserted that the terms and conditions had been “hidden,” that he never had seen them, and that he never had agreed to them.

Berkson’s Sign-in Wrap

As the court explained, in September 2012, when Berkson purchased Gogo’s Wi-Fi service, a potential user was confronted with two sign-in buttons on the Gogo website. The “SIGN IN” button in the upper right-hand corner sat alone, and no language either above it or near it required a consumer to agree to any “terms of use.” Toward the bottom of the page, a second “SIGN IN” button appeared, above which stated: “By clicking ‘Sign in’ I agree to the terms of use and privacy policy.” The court said that the “terms of use” and “privacy policy,” which appeared in lowercase and in a font “considerably smaller” than the all caps “SIGN IN” button, appeared to be hyperlinked. Clicking on the “SIGN IN” button, the court said, did not display either the “terms of use” or Gogo’s “privacy policy.”

The court said that if a potential user wanted to sign up for use of Gogo’s Wi-Fi in September 2012, a “create account” page would be activated for the user to create a username and password. This page told the consumer, “By clicking ‘NEXT’ I agree to the terms of use and privacy policy.” The court pointed out that the “terms of use” and “privacy policy” only would be displayed if the user clicked on these terms’ hyperlinks. Clicking on the “NEXT” button itself would not present the “terms of use” or the “privacy policy” in a pop-up window; rather, it would merely take the user to the following screen, the court said.

If Berkson had clicked on the “terms of use” hyperlink, the court continued, he would have found a choice of law provision3 after scrolling down to the seventh page of the document—but he would not have found an arbitration provision (which, according to the court, first was inserted into Gogo’s “terms of use” in December 2012).

The Court’s Decision

The court denied Gogo’s motions, finding the sign-in wrap unenforceable with respect to Berkson because Gogo had not demonstrated that a reasonable person in Berkson’s position would have known what he or she was assenting to.

The court reasoned that the hyperlink for the “terms of use” that had been presented to Berkson was “not related to an in-person transaction,” where, the court suggested, it might be more likely to be enforceable. The court also pointed out that Gogo did not have a practice of emailing or mailing the contents of the “terms of use” to its customers and, in fact, that Berkson never had a hardcopy in his possession to refer to.

Moreover, according to the court, Gogo had not made an effort to draw Berkson’s attention to its “terms of use,” noting that the “terms of use” presented to Berkson, aside from assuming his “knowledge of the significance of a hyperlink,” did not use the word “contract,” did not address the reader in large font, all caps, or in bold, did not indicate where to find the contract, and did not include the word “important” or the phrase “please read.”

The “terms of use” was not accessible from multiple locations on the website, the court added. Moreover, the court stated, the importance of the “terms of use” was obscured by the physical manifestation of assent, in this case clicking the “SIGN IN” button, expected of a consumer seeking to purchase in-flight Wi-Fi. Once Berkson clicked “SIGN IN,” the “terms of use” did not appear in a new screen or in a pop-up window on the same screen, the court said, and Berkson was not required to scroll through the contract and its terms in order to click “accept” or “I agree.”

Simply put, Weinstein decided, Gogo had not demonstrated that Berkson had known that he was binding himself to more than a one-time offer of service in exchange for money. The court ruled that the design and content of the Gogo website, including the homepage, did not make the “terms of use” readily and obviously available to Berkson and, accordingly, that Gogo’s sign-in contract was “not binding on Berkson.”

Conclusion

Certainly, not every court that has considered the issue has found a sign-in wrap to be unenforceable.4 Yet the importance of Weinstein’s ruling cannot be overstated. Indeed, it may prompt companies to change the way they try to ensure that Internet users have a realistic opportunity to read the “terms of use” on their websites. More and more websites may be designed so that a user has to scroll through the “terms of use” and click “accept” in order to complete an Internet transaction—a “scrollwrap” form of agreement.5

Endnotes:

1. See, e.g., Shari Claire Lewis, “Website Terms of Use: Recent New York Rulings,” NYLJ (June 17, 2014).

2. Berkson v. Gogo, No. 14-CV-1199 (E.D.N.Y. April 9, 2015).

3. The choice of law provision stated:

Governing Law and Venue. This Agreement shall be governed by the laws of the State of Illinois, without giving effect to any conflict of laws principles that may provide the application of the law of another jurisdiction. The parties agree that any claim or dispute one party has against the other party arising under or relating to this Agreement (including claims in contract, tort, strict liability, statutory liability, or other claims) must be resolved exclusively by a court of competent jurisdiction, federal or state, located in Chicago, Illinois, and no other court. Each party agrees to submit to the personal jurisdiction of such courts and to accept service of process from them (emphasis in original).

4. See, e.g., Fteja v. Facebook, 841 F. Supp. 2d 829 (S.D.N.Y. 2012) (applying both New York and California law).

5. Cf. Hancock v. Am. Tel. & Tel. Co., 701 F.3d 1248 (10th Cir. 2012) (holding Internet agreement valid under Florida and Oklahoma law where process gave customer opportunity to review Internet terms in scrolling text box; customer had to click an “I Agree” button to manifest assent to Internet terms in order to continue with registration process and activation of Internet service).

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Reprinted with permission from the April 21, 2015 issue of the New York Law Journal.  All rights reserved.

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