Amazon Arbitration Agreement Doesn’t Bar Class Action Appellate Court Rules

In this online shopping age, when consumers click “place your order” on or any retail website, do they really know what they are agreeing to? The U.S. Court of Appeals for the Second Circuit recently considered the question in Nicosia v., Inc., No. 15‐423‐cv (2nd Cir. 2016).

In 2013, Dean N. bought a weight loss pill on Amazon called “One Day Diet,” which unbeknownst to him, contained sibutramine, a controlled, prescription-only substance that had been pulled from the market by the FDA in 2010 because of health risks. Sibutramine was not listed on the site as one of the product’s ingredients, nor did Amazon require a prescription for purchase. The FDA revealed in November 2013 that One Day Diet contained sibutramine.

Dean brought a putative class action against Amazon, alleging the online retailing giant had sold and was continuing to sell weight loss products containing sibutramine in violation of federal law and state consumer protection laws. He alleged breach of implied warranty and unjust enrichment, seeking both damages and an injunction prohibiting Amazon from further sale of products containing sibutramine.

The federal district court dismissed his complaint on the grounds that Dean was bound by the mandatory arbitration provision in Amazon’s “conditions of use,” which he’d consented to when he’d placed his order on the site. The court relied on Amazon’s Order Page and Registration Page, where Amazon claimed Dean had created an account.

On appeal, the Second Circuit vacated the dismissal, noting that under the law of Washington state, where Amazon is based, general contract principles apply to online agreements. “Manifestation of assent to an online contract is not meaningfully different [from traditional contracts] and can be accomplished by ‘words or silence, action or inaction,’ so long as the user ‘intends to engage in the conduct and knows or has reason to know that the other party may infer from his conduct that he assents,’” the court wrote, quoting the Restatement (Second) of Contracts.

Online sellers impose their rules on buyers through “clickwrap” agreements—which require buyers to click “I agree” after being presented with terms inside a scroll box—and “browsewrap” agreements, which post terms via a hyperlink usually found at the bottom of the screen, and which do not require manifestation of assent. Dean claimed Amazon’s terms were browsewrap agreements, while Amazon argued they were neither clickwrap nor browsewrap; the Second Circuit concluded they were a hybrid of the two.

While the court found that Amazon’s Order Page and Conditions of Use were part of Dean’s contract with Amazon, “the question is whether a reasonably prudent offeree would know that the 2012 Conditions of Use governed, such that [his] purchase manifested implied assent to the additional terms,” Judge Chin wrote. “Notably, unlike typical ‘clickwrap’ agreements, clicking ‘Place your order’ does not specifically manifest assent to the additional terms, for the purchaser is not specifically asked whether [he] agrees or to say ‘I agree.’”

Chin noted that the message on the page: “By placing your order you agree to Amazon’s conditions of use,” was not sufficiently conspicuous on a webpage that contained a great deal of other content and links. “In a seeming effort to streamline customer purchases, Amazon chose not to employ a clickwrap mechanism,” which is the easiest way of ensuring that terms are agreed to, Chin wrote.

Because “reasonable minds” could differ on whether Dean received adequate notice, the court held that Amazon had failed to show he had agreed to mandatory arbitration as a matter of law. However, it affirmed the denial of Dean’s requested injunction, because he had not established a likelihood of continuing harm from purchasing additional products containing sibutramine from Amazon.

Our Elgin, Illinois consumer rights private law firm handles individual and class action gift card, data breach, privacy rights, deceptive advertising, predatory lending, unfair debt collection, lemon law and other consumer fraud cases that government agencies and public interest law firms such as the Illinois Attorney General may not pursue. Class action lawsuits our law firm has been involved in or spear-headed have led to substantial awards totalling over a million dollars to organizations including the National Association of Consumer Advocatesthe National Consumer Law Center, and local law school consumer programs. The Chicago consumer lawyers at Lubin Austermuehle are proud of our achievements in assisting national and local consumer rights organizations obtain the funds needed to ensure that consumers are protected and informed of their rights. By standing up to consumer fraud and consumer rip-offs, and in the right case filing consumer protection lawsuits and class-actions you too can help ensure that other consumers’ rights are protected from consumer rip-offs and unscrupulous or dishonest practices.

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