Nguyen is a putative class action concerning Barnes & Noble’s online “fire sale” to liquidate, at highly discounted prices, its inventory of a discontinued tablet computer. Nguyen had purchased two of the tablets and received e-mail confirmation. But the next day, due to unexpectedly high demand, Barnes & Noble cancelled his order. Nguyen then sued for damages on behalf of himself and similarly situated consumers.
However, these usage terms were presented to consumers in browsewrap agreements—i.e., an agreement containing mandatory usage terms that can be reviewed via a hyperlink. Barnes & Noble attempted to tie the consumer’s continued site usage with assent to the browsewrap agreement’s terms, even though users could make a purchase without actually seeing the agreement’s terms—or even knowing they exist. This stands in contrast to clickwrap agreements, which force users to affirmatively click a button or box that shows their consent.
What more (other than converting to clickwrap) should Barnes & Noble have done? The court doesn’t exactly say. But it does discuss with approval other browsewraps that, in addition to making terms available via a prominent link, also provided explicit, sufficiently noticeable warnings that continued use of the site would bind users to the terms. For example, the court extols one such browsewrap that contained such a notice at the bottom of every page. But, Barnes & Noble had not provided such a notice.
Two things should be noted about Nguyen. First, the case is likely distinguishable from those involving business-to-business e-commerce. Nguyen concerns consumers, and the opinion expressly notes courts’ traditional willingness to enforce browsewraps against businesses but not against individual consumers. Still, even in the business-to-business context, this may be a situation where an ounce of prevention is worth a pound of cure, and companies may want to take note of this decision and adjust their e-commerce practices accordingly.
Second, the stakes here were certainly larger than just the proper forum for hearing plaintiff’s claims. Under recent Supreme Court precedent, such class waivers in arbitration provisions are enforceable, and enforcing arbitration here would likely have ended the case. Of course, this underscores the potential value of getting consumers’ effective agreement to usage terms.
In sum, Nguyen lends an important lesson for businesses engaging in e-commerce with California consumers, and who want to do all they can to improve the chances of their arbitration agreements being found enforceable. It appears safest to move to clickwrap and require affirmative evidence of consumer assent to usage terms. Otherwise, if businesses still prefer to use browsewraps, they should at the very least make sure that: (1) usage terms are available via a conspicuous link; and (2) the site contains conspicuous textual notices that use constitutes agreement with the usage terms—and, even then, it is not certain that such provisions will be upheld in light of Nguyen. In the end, despite federal courts’ now 30-year record of enforcing arbitration agreements, arbitration is still a matter of contract, which requires both parties’ agreement.
If you have any questions or want more detailed information concerning this case’s impact, please contact any of the authors.
Matthew H. Adler, Kevin Crisp, Jeffrey M. Goldman and Sharon R. Klein
The material in this publication was created as of the date set forth above and is based on laws, court decisions, administrative rulings and congressional materials that existed at that time, and should not be construed as legal advice or legal opinions on specific facts. The information in this publication is not intended to create, and the transmission and receipt of it does not constitute, a lawyer-client relationship.