Outsourcing Justice

Smartphone’s Popup Keypad Frustrates Formation of Arbitration Agreement

A recent decision involving the Uber ride-sharing app demonstrates an important principle in arbitration law.  A party may have a well-drafted arbitration agreement, and the terms of the agreement may be appropriate.  However, if the agreement is not implemented properly, the agreement may not be enforceable.  The drafters of the FAA, in section 4 of the statute, very wisely instructed courts to examine the circumstances surrounding “the making of the agreement.”  If there is a problem with the “making” of an agreement, a well-drafted clause will not be enforceable.

In Metter v. Uber Technologies, No. 16-cv-06652-RS (N.D. Cal. Apr. 17, 2017) (click here for a copy of the decision), the district court denied Uber’s motion to compel arbitration.  The passenger had registered for the Uber service using an app on his smartphone, and at the bottom of the screen, the app contained an alert stating that the user agrees to Uber’s terms of service by creating an account.  However, at the top of the screen, the app contained a field for one’s credit card number, and to enter one’s credit card number, the smartphone’s keypad would pop up.  Because this popup keypad obstructed the visibility of the alert at the bottom of the screen, it is not clear that the user had proper notice of the arbitration agreement.  Accordingly, the court denied Uber’s motion to compel arbitration.

The arbitration clause at issue also contained a delegation provision, by which the parties delegated all arbitrability issues to an arbitrator.  However, the court, in a brief footnote, stated that the delegation clause was not triggered because it was not clear that an agreement was formed.

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