Antitrust Law Daily Wrap Up, ADVERTISING—9th Cir.: Consumer did not agree to terms on Barnes & Noble website, (Aug 19, 2014)

By Greg Hammond, J.D.

Barnes & Noble, Inc. failed to provide its online consumers with reasonable notice of its terms of use, the U.S. Court of Appeals in San Francisco decided. In affirming the lower court’s decision denying Barnes & Noble’s motion to compel arbitration and to stay court proceedings in a false advertising class action, the court of appeals determined that the named plaintiff never agreed to the company’s terms of use or arbitration agreement (Nguyen v. Barnes & Noble Inc., August 18, 2014, Noonan, J.).

Background. Barnes & Noble is a national bookseller that operates hundreds of book stores and the website, www.barnesandnoble.com. In August 2011, the company advertised a “fire sale” of Hewlett-Packard Touchpads at a discounted rate, due to the product’s poor selling performance. Consumer Kevin Nguyen purchased two units on Barnes & Noble’s website, but he later learned that the order was cancelled due to unexpected high demand. Consequently, Nguyen filed a putative class action, alleging that Barnes & Noble engaged in deceptive business practices and false advertising. The company removed the case to federal court and was denied its motion to compel arbitration under the Federal Arbitration Act. Barnes & Noble appealed the district court’s decision.

Terms of use. According to the court, the website’s terms of use, which contain an arbitration agreement, were made available via a hyperlink located in the bottom left-hand corner of every page of the website. The hyperlink also appears in the lower left-hand corner of every page in the online checkout process. The record reflected that Nguyen never clicked on the hyperlink or read the terms of use. As such, Nguyen argued that he could not be bound by the arbitration provision, because he was never provided notice of the terms of use, and he never assented to them. Conversely, Barnes & Noble argued that Nguyen had constructive notice of the arbitration agreement, which—combined with his use of the site—was enough to bind him to the terms of use.

Notice. The court noted that Barnes & Noble’s terms of use constituted a browsewrap agreement, an Internet contract that does not require users to manifest assent to the terms and conditions expressly, but assents by simply using the website. Because no affirmative action is required by users, validity of a browsewrap contract depends on whether the user has actual or constructive knowledge of a website’s terms and conditions.

In the instant action, there was no evidence that Nguyen had actual knowledge of the terms of use, as he never read them or clicked on the hyperlink. Consequently, the case turned on whether he had constructive knowledge, or whether the website puts a reasonably prudent user on inquiry notice of the terms of use. The court held that “where a website makes its terms of use available via a conspicuous hyperlink on every page of the website but otherwise provides no notice to users nor prompts them to take any affirmative action to demonstrate assent, even close proximity of the hyperlink to relevant buttons users must click on—without more—is insufficient to give rise to constructive notice.” Because Nguyen did not have constructive notice of the website’s terms of use, he was not bound by the arbitration agreement, and the lower court’s decision was affirmed.

The case number is 12-56628.

Attorneys: Michelle C. Doolin, Leo P. Norton, and Erin E. Goodsell (Cooley LLP) for Barnes & Noble, Inc. Gretchen Carpenter and Brian R. Strange (Strange & Carpenter) for Kevin K. Nguyen.

Companies: Barnes & Noble, Inc.

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