Eighth Circuit Provides Guidance Regarding The Enforceability Of Browsewrap Arbitration Agreements

In Foster v. Walmart, Inc., the Eighth Circuit was confronted with claims brought by Walmart gift-card purchasers who did not receive a refund after third parties allegedly tampered with, and stole the funds that were loaded onto, the cards. Walmart sought to compel arbitration of the claims, invoking a notation on the back of the cards that directed purchasers to “[s]ee Walmart.com for complete terms.” According to Walmart, a visit to the referenced website would lead the gift card purchaser to “an arbitration provision covering ‘ALL DISPUTES ARISING OUT OF OR RELATED TO THESE TERMS OF USE OR ANY ASPECT OF THE RELATIONSHIP BETWEEN YOU AND WALMART.’” The website further provided that customers “accep[ed]” arbitration by “[u]sing or accessing the Walmart sites.”

As the Eighth Circuit explained, the district court erred when it denied Walmart’s motion to compel without holding an evidentiary hearing to determine whether the plaintiffs had notice of the arbitration provision. As the Eighth Circuit explained, the Walmart cards constituted an example of a “browsewrap” arrangement, whereby assent to the contract terms is imputed “through the user’s performance of some specific act–here, ‘using or accessing’ Walmart’s website.”

Once a user clicks on the url, “notice can come in one of two forms”–actual notice (“which occurs “most commonly after clicking on a hyperlink and reviewing [the terms of use]”) or inquiry notice (which “depends on ‘whether the website puts a reasonably prudent user on inquiry notice of the terms'”). Here, according to the Eighth Circuit, “the district court got ahead of itself when it concluded, on this ‘meager record[],’ that inquiry notice was absent.” Instead, the district court was required to conduct a hearing to obtain the necessary facts to render a conclusion as to whether the plaintiffs were on inquiry notice of the existence of an arbitration agreement.

The Eighth Circuit provided guidance that is useful to all companies that use browsewrap arrangements to refer customers to arbitration provisions. In particular, “the exact
location and prominence of the terms-of-use hyperlink, how many clicks it would
have taken for the user to discover the arbitration provision, and whether the website
changed during the relevant period” are key to determining whether a “case belongs in arbitration or litigation.” Moreover, the court also noted that specifics about the size and placement of the gift card directive that customers should go to “Walmart.com for complete terms” might be significant in whether customers were provided adequate “notice to inquire further by telling them where to go for more information.”

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