State Appeals Court Invalidates Uber’s Hyperlinked User Arbitration Pact

An arbitration agreement buried behind a hyperlink that does not give consumers clear notice they are waiving their right to a jury trial when they agree to the company’s terms and conditions is not valid, a Pennsylvania appeals court has ruled in a case of an Uber rider injured in a motor vehicle accident.

Uber argued that when riders register for its ridesharing service they signify that they agree to be bound by the mandatory arbitration provision found in the hyperlinked terms and conditions, thereby relinquishing their right to a jury trial. A trial court agreed and granted Uber’s motion to compel arbitration but on appeal the Pennsylvania Superior Court has reversed, ruling that a stricter burden of proof is necessary to demonstrate a party’s assent to arbitration where the important right to a jury trial is at stake.

In a strongly-worded opinion by Judge Daniel McCaffery that calls for more judicial scrutiny of the growing use of arbitration agreements, the court ruled that the Uber approach is inadequate because it does not inform users in an “explicit and upfront manner” that they are giving up a constitutional right to seek damages through a jury trial proceeding.

The opinion guides firms on how they may achieve this stricter burden of proof by: (1) 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.

The appeal arose out of a motor vehicle accident that occurred in 2019. Shannon Chilutti, who is wheelchair bound, was injured while riding in a car provided by Uber Technologies on the way home from a medical appointment. After Uber insisted her injury claims must go to arbitration, Chilutti and her husband both filed suits.

The court said the case concerned whether parties 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 application that they never clicked on, viewed, or read.

The trial court granted Uber’s petition to compel arbitration of the claims, determining the plaintiffs had not been forced out of court. But the Superior Court has now decided that the trial court failed to consider the importance of the protected constitutional right to a jury trial. The Superior Court reversed and remanded the case back to the lower court, concluding that plaintiffs are legally entitled to relief and that they demonstrated there was a “lack of a valid agreement to arbitrate; therefore, they are entitled to invoke their constitutional right to a jury trial.”

In Shannon Chilutti’s case, according to the court, the “terms and conditions” agreement was encapsulated in tiny, blue font at the very bottom of a cluttered webpage. The relevant text was not underlined or capitalized. With respect to Keith Chilutti, he was on the fifth screen of the registration process, after he had already provided substantive personal information, when the “Terms and Conditions” page could be reviewed in small font that, again, was not underlined or capitalized.

The appeals court said Uber did not inform the Chilluttis in an “explicit and upfront manner” that they were giving up a constitutional right to seek damages through a jury trial proceeding. Instead, the court noted, the plaintiffs did not click on or access the terms and conditions before their registration process was completed; rather they merely created a user account. Furthermore, the definition of arbitration is not in the agreement; nor is there any explanation of binding and non-binding arbitration. Notably, if a party wants to review the rules that govern arbitration, they must click on a second hyperlink.

Further, the court said the term, “arbitration,” is ambiguous in that there is “nothing to explain its meaning and any non-lawyer subscriber could easily believe that arbitration is simply another step in the litigation process that does not involve relinquishing the constitutional right to a jury trial in its entirety.”

The court noted that Pennsylvania has a well-established public policy that favors arbitration, and this policy aligns with the federal approach of the Federal Arbitration Act [(FAA]. However, the court noted that the FAA does preempt state law in all cases, warning that “the evolution and effect of arbitration provisions has substantially weakened the constitutional right to jury trial in civil proceedings.” The court further noted that the Pennsylvania Supreme Court has stated that one of the consequences of the shift away from the civil justice system and toward private adjudication is that “corporations are routinely stripping individuals” of their constitutional right to a jury trial.

“The sluggish recognition regarding the copious usage of arbitration agreements in present day contracts and the ramifications of these agreements on a party’s right to a jury trial raises concern, especially in the context of Internet contracts like the one at issue herein where the parties are of purported unequal bargaining power,” the opinion continues. While some courts have taken small bites at the issue, there is a need for greater scrutiny regarding a party’s waiver of their constitutional right to a jury trial in terms of these arbitration agreement matters, the opinion states.

The opinion further contends that if the issue on appeal involved a confession of money judgment, the court would have no qualms in striking a judgment based on the “inconspicuous use” of the provision in question. The same would apply to a criminal conviction where no colloquy was provided, or the defendant was not advised of his right to a jury trial. “We see no reason why the same analysis should not be afforded herein where a constitutional right a jury trial in a civil action is “clicked away” without the benefit of any protections the law provides,” Judge McCaffery wrote.

In ruling as it did, the state appeals court went beyond a federal appeals court standard (Berman v. Freedom Fin. Network, U.S. 9th Cir. 2022) that held so-called “clickwrap” agreements that use pop-ups to grab users’ attention generally more acceptable that “browsewrap” agreements that use only hyperlinks, like Uber’s.

Judge Alice Beck Dubow joined in the opinion written by Judge McCaffery. Judge Victor Stabile dissented.