Using Online Arbitration Agreements to Mitigate BIPA Liability
$92 million. $650 million. These are the settlement figures that TikTok Inc. and Facebook Inc., two of the world's largest social media titans, recently agreed to pay to resolve class actions involving purported violations of the Illinois Biometric Information Privacy Act.
With these settlement figures in mind, it should come as no surprise that BIPA has quickly become the newest class action litigation trend in the nation — and is here to stay for the foreseeable future.
While BIPA filings will continue to flood the courts, companies have several tactics available that can significantly limit their scope of BIPA liability exposure.
Used properly, binding online arbitration agreements can serve as a powerful tool to force class lawsuits out of court and into individual arbitration, and can be deployed at the outset of litigation to procure an early departure from costly BIPA class actions.
Before compelling arbitration, a court must determine: (1) whether a valid agreement to arbitrate exists; and (2) whether the particular dispute falls within the scope of that agreement. In determining whether a valid arbitration agreement exists, courts apply ordinary state law principles that govern the formation of contracts.
Where a plaintiff does not have actual notice of the terms of an online agreement, the determinative question is whether the website puts a prudent user on inquiry notice of the contract terms. Inquiry notice depends on the clarity and conspicuousness of arbitration terms. In the context of internet-based contracts, clarity and conspicuousness are a function of the design and content of the relevant interface.
An arbitration agreement will be found where notice of the arbitration provision is reasonably conspicuous. This is a fact-intensive inquiry that requires courts to look more closely at both the law and the facts to see if a reasonable person in the plaintiff's shoes would have realized that he or she was assenting to a contract.
The Importance of Enforceable Online Arbitration Provisions
Practical Tips and Best Practices
As indicated above, a website or mobile app incorporating an online terms-of-use agreement must provide users with reasonable notice that their use of the site or click of a button constitutes assent to the agreement in order for it to be enforceable.
In the context of online terms-of-use agreements, courts will scrutinize the facts underlying the alleged contract formation with a fine-tooth comb, carefully evaluating the user interface and the manner in which the terms are presented to the user at the time he or she purportedly entered into the agreement.
There are several key best practices that companies should consider to maximize the likelihood that an online arbitration provision will be upheld as enforceable in the event it is challenged in court.
First and foremost, a so-called clickwrap agreement — in which, after being presented with the terms, the user must click an "I agree" button or take similar action explicitly indicating his or her assent to the terms before the user can proceed further on a website — is the preferred method for binding users to internet-based contracts, as clickwrap agreements are routinely enforced by courts.
Companies should implement clickwrap agreements whenever feasible to maximize the likelihood of being able to enforce online terms and arbitration provisions if the need arises.
- The page should be free of any type of clutter — such as extraneous content or intervening buttons between the mechanism for manifesting assent and the hyperlinked terms — which may distract the user or otherwise give the impression that the hyperlinked text is irrelevant, thus preventing users from being put on inquiry notice.
- The page should incorporate prominent, pronounced and explicit notice language that introduces the terms to the user — i.e., "By creating an account, you agree to the terms and conditions" — and explicitly informs the user that continued use of the site will act as manifestation of his or her intent to be bound by the terms.
- Each piece of information on the page should be visually separated and distinct — such as through the effective use of white space, contrasting colors and bold and nonbold fonts — which serve to aid the user in clearly understanding that, by moving forward with the mechanism for manifesting assent, he or she is agreeing to be bound by the company's terms.
- The notice and hyperlinked terms should appear on the same screen as the mechanism for manifesting assent — known as temporal coupling — to inform the users of the connection between the notice, hyperlink and contractual terms to which they are agreeing.
- Lastly, the notice and hyperlink should be placed directly adjacent to the mechanism for manifesting assent — known as spatial coupling — to provide further notice of the relationship between the terms and the action the user is taking.
“Using Online Arbitration Agreements to Mitigate BIPA Liability,” by David J. Oberly was published in Law360 on April 1, 2021.