Court Finds Uber Arbitration Agreement Invalid, In-App Terms and Conditions Not Enough

 A Pennsylvania Appeals Court considered the extent that a purported arbitration agreement is enforceable for riders on the Uber app. It is increasingly commonplace for users to "agree" to clickthrough, scroll through, or hyperlinked terms and conditions, in order to use an app or other sort of online program. While these sorts of agreements are generally considered to be acceptable, there may be certain provisions which require further attention.

Shannon Chilutti filed a lawsuit against Uber after being injured while riding in the car. Uber contends however, that Chilutti may not file a lawsuit and request a jury trial because of the mandatory arbitration agreement which is included in Uber's terms and conditions. On the first page of the court's decision, the court tips its hand, characterizing the central issue as "whether a party should be deprived of their constitutional right to a jury trial when they purportedly enter into an arbitration agreement via a set of hyperlinked 'terms and conditions' on a website or smartphone applications that they never clicked on, viewed, or read." Chilutti v. Uber Technologies, Inc., Pa. Super. Ct., No. 1023 EDA 2021, 10/12/22, (Emphasis omitted). 

The Pennsylvania trial court ruled in favor of Uber, granting Uber's petition to compel arbitration. The Appellants raised one issue on the appeal, "Did the trial court err in granting [Appellee's] Petition to Compel Arbitration . . . [when] Appellees failed to establish that Uber's registration process and/or subsequent emails properly communicated an offer to arbitrate? Chilutti, No. 1023 EDA 2021.

The first issue considered by the court was whether the trial court's order compelling arbitration is considered a final and appealable order, and therefore, whether jurisdiction is proper.  The court states that the an interlocutory order is final and appealable if it is "(1.) separable from and collateral to the main cause of action; (2.) the right involved is too important to be denied review; and (3.) the question presented is such that if review is postponed until final judgment in the case, the claimed right will be irreparably lost." Commonwealth v. Wells, 719 A.2d 729, 730 (Pa. 1998). 

The court's analysis here primarily arises under the third prong. Namely that should the appeal be denied and Chilutti be required to go through arbitration, there will be no further judicial action, as the arbitration proceedings would have been completed. The standard to review arbitration is in fact, virtually impossible. Courts may only intervene in nonjudicial arbitration when there is some sort of unjust award which results from fraud, misconduct, corruption, or other irregularity. Sage v. Greenspan, 765 A.2d 1139, 1142 (Pa. Super.2000). 

The next section is the primary substantive issue causing the appeal. The second portion involved arbitration, browse wrap agreements, and the right to a jury trial. Chilutti argues that the agreement does not represent a meeting of the minds, but cedes that perhaps registrants do in fact agree to pay money for ride sharing services with the company. Chilutti, No. 1023 EDA 2021. The court adopts a two part test to decide whether arbitration should in fact be compelled. The test first asks whether there is in fact a validly formed contract including an arbitration agreement; and the second portion asks whether the dispute arises within the cope of the validly formed agreement. Smay v. E.R. Stuebner, Inc., 864 A.2d 1266, 1270 (Pa. Super. 2004).

The court largely cites to a Ninth Circuit case, where the court affirmed the district court's denial of a motion to compel when the design and content of the websites did not properly call attention to the terms and conditions, or when pressing "continue" constituted acceptance. The court here cites to that standard and notes that the terms and condition tab here is on a website which is not underlined, capitalized, or italicized, and also after significant personal information was already provided by the user. Berman v. Freedom Fin. Network, LLC, 30 F.4th 849, 855-56 (U.S. 9th Cir. 2022). 

Despite the use of Berman, the court eventually rules that the Berman standard is not enough, rather it is necessary to show that a party unambiguously manifested asset to a specific arbitration agreement. The test outlined by the court and now established requires, "explicitly stating on the registration websites and application screens that a consumer is waiving a right to a jury trial when they agree to the company's "terms and conditions," and the registration process cannot be completed until the consumer is fully informed of that waiver; and (2.) when the agreements are available for viewing after a user has clicked on the hyperlink, the waiver should not be hidden in the "terms and conditions" provision but should appear at the top of the first page in bold, capitalized text." Chilutti, No. 1023 EDA 2021.

In short, compelling arbitration, at least in Pennsylvania, will require a company to explicitly state that the user is waiving his or her right to a trial by jury. Further, this need to be bold and capitalized at the top of the first page an agreement. While lawyers may understand what an arbitration agreement entails, the terms are too ambiguous for a non-attorney to understand that the "arbitration agreement" in the middle of page three, actually amounts to a voluntary renouncement of a constitutionally protected right to a trial by jury.

While this decision is by no means binding on the rest of the country, it provides an important incite into what sorts of requirements may be necessary in order to establish valid contracts in the digital age. 

Chilutti v. Uber Technologies, Inc., Pa. Super. Ct., No. 1023 EDA 2021, 10/12/22.