‘Flash Sale’ Website Defeats Class Action Claim With Mandatory Arbitration Clause–Starke v. Gilt

This is a straightforward ruling, but I liked it because it nicely illustrates what’s happening in the field and the courts right now. Gilt Groupe runs the “flash sale” website Gilt.com. I know some folks love these sites but I’ve never understood the appeal. To me, they seem like a close cousin to the fake “going out of business” sales where the business trucks in millions of dollars of new inventory right before declaring its demise.

In this case, the plaintiff alleges he bought swaddling blankets advertised as “100% bamboo,” but in fact the blankets were rayon, a bamboo derivative. He claims false advertising and sued on behalf of a class of buyers. Gilt invoked its membership agreement, which included mandatory arbitration and a no-class-action clause.

Gilt implemented its membership agreement using a standard mandatory clickthrough procedure with links to the actual terms. Citing Fteja v. Facebook, the court says:

The question here is whether Starke is bound by the written terms of a transaction which he did not see or read, although he was aware that there were terms which governed his purchase, that he would be taken as having agreed to them by making the purchase, and that he could read them by one or two clicks of the mouse.

Framed this way, the result is obvious:

When Starke clicked “Shop Now,” he was informed that by doing so, and giving his email address, “you agree to the Terms of Membership for all Gilt Groupe sites.” Regardless of whether he actually read the contract’s terms, Starke was directed exactly where to click in order to review those terms, and his decision to click the “Shop Now” button represents his assent to them.

OK, as I trust you’ve learned by now, please please please always use mandatory non-leaky clickthrough procedures to form online agreements. They work in court. To me, the bigger takeaway is the necessity of a mandatory arbitration clause with the no-class-action provision. With proper contract formation procedure and substantive terms, Gilt wipes out the whole bam-boo-hoo lawsuit instantly. Those of us who practiced Internet law in the 2000s got skittish about using mandatory arbitration clauses and no-class-action provisions following Comb v. PayPal. However, since Concepcion and Wal-mart, I think the pendulum has swung completely. Unless the legislatures or the courts changes the rules again, it seems crazy for any online business not to include a mandatory arbitration and no-class-action provision in its user agreement.

Case citation: Starke v. Gilt Groupe, Inc., 2014 WL 1652225 (S.D.N.Y. April 24, 2014).

Related posts:

* Some Thoughts On General Mills’ Move To Mandate Arbitration And Waive Class Actions
* How To Get Your Clickthrough Agreement Enforced In Court–Moretti v. Hertz
* Court Rules That Kids Can Be Bound By Facebook’s Member Agreement
* Court Blesses Instagram’s Right to Unilaterally Amend Its User Agreement–Rodriguez v. Instagram
* Effort to Game Website User Agreement Rules Fails -– Traton News v. Traton Corp.
* JDate Member Agreement Upheld–Zaltz v. JDate (Forbes Cross-Post)
* How Zappos’ User Agreement Failed In Court and Left Zappos Legally Naked (Forbes Cross-Post)
* Barnes & Noble’s Online Contract Formation Process Fails –Nguyen v. Barnes & Noble
* Court Disregards Check-the-Box Agreement and Doesn’t Enforce Venue Clause — Dunstan v. comScore
* Forum Selection Clause in “Submerged” Terms of Service Presumptively Unenforceable — Hoffman v. Supplements Togo
* Second Circuit Says Arbitration Clause in Terms Emailed After-the-Fact Not Enforceable – Schnabel v. Trilegiant
* Clickthrough Agreement With Acknowledgement Checkbox Enforced–Scherillo v. Dun & Bradstreet
* Contract Formed Even If Customer Never Received It–Schwartz v. Comcast