Court Upholds Airbnb’s Terms of Service–Selden v. Airbnb

This lawsuit alleges that Airbnb’s “hosts” racially discriminate when accepting customers’ bookings. Airbnb sought to send the case to arbitration per its Terms of Service, which the plaintiffs challenges.

Contract Formation

Trying to sort through the nomenclature confusion created by the Berkson v. GoGo and 9th Circuit’s Nguyen) opinions, the court tries to taxonomize online contracts:

A “browsewrap” agreement is one in which an internet user accepts a website’s terms of use merely by browsing the site. A “clickwrap” agreement is one in which an internet user accepts a website’s terms of use by clicking an “I agree” or “I accept” button, with a link to the agreement readily available. A “scrollwrap” agreement is like a “clickwrap,” but the user is presented with the entire agreement and must physically scroll to the bottom of it to find the “I agree” or “I accept” button. Finally, many internet websites—including Airbnb during the relevant time period—now use “sign-in-wraps” (although “sign-up-wrap” is a more appropriate name). “Sign-inwrap” agreements are those in which a user signs up to use an internet product or service, and the signup screen states that acceptance of a separate agreement is required before the user can access the service. While a link to the separate agreement is provided, users are not required to indicate that they have read the agreement’s terms before signing up.

As you know, this nomenclature proliferation is unhelpful and unnecessary. Browsewraps aren’t a contract. Clickwraps, scrollwraps and sign-in/sign-up wraps are synonyms and should all be equally enforceable; except that scrollwraps as defined by this court well go above and beyond the steps required for proper formation.

The court then relies on *none* of this background discussion to easily reach a pragmatic result:

The Court finds that Airbnb’s mobile sign-up screen adequately placed Selden on notice of Airbnb’s Terms of Service, and that he assented to those terms by clicking the sign-up box and using the service. The text “By signing up, I agree to Airbnb’s Terms of Service” is conspicuous. [see image above] It is placed in roughly the middle of the page, in close proximity to all three sign-up buttons. The text also appears in dark font, in sharp contrast to the white background. It is, moreover, clearly legible, appropriately sized, and unobscured by other visual elements. Although the text is not directly under the first or second alternative sign-up buttons, any reasonably-observant user would notice the text and accompanying hyperlinks. So even if Selden only clicked “Sign up with Facebook” at the top of the page, he would have seen the relevant text from a quick glance down the rest of the page. Thus, by choosing to sign up for Airbnb, Selden manifested his assent to the Terms of Service.

In online contract formation cases, I’m routinely seeing courts doing what this court did: try to summarize the increasingly confusing and unhelpful precedent, only to bypass that background and rely instead on first principles of contract formation. So the precedent cases’ citation counts go up but they are not really influencing the law any more. We’d all be better off if we could wipe the cruft clean.

As the court indicates, Airbnb was using Facebook Connect. Successful contract formation while using Facebook Connect is not a guaranteed outcome. I’ve seen many poor Facebook Connect implementations where the online contract is not clearly linked to the Facebook logins. If you’re using Facebook Connect to allow sign-ups, then (a) you’re giving Facebook a lot of power over your userbase, and (b) cross-check Airbnb’s successful contract formation process with yours to make sure a court would see it as favorably.

Other Issues

The arbitration clause says “[the user] and Airbnb agree that any dispute, claim or controversy arising out of or relating to these Terms or the breach, termination, enforcement, interpretation or validity thereof, or to the use of the Services or use of the Site or Application (collectively, ‘Disputes’) will be settled by binding arbitration.” The court says this clearly includes the discrimination allegations against Airbnb and rejects arguments that federal statutes prohibit discrimination claims from being arbitrated. The unconscionability challenge fails, in part, because Airbnb covers the arbitration costs. NB: if your arbitration clause does not cover arbitration costs, it should.

The Judge’s Summary

The court summarized his views on the whole online contract formation mess:

No matter one’s opinion of the widespread and controversial practice of requiring consumers to relinquish their fundamental right to a jury trial—and to forego class actions—as a condition of simply participating in today’s digital economy, the applicable law is clear: Mutual arbitration provisions in electronic contracts—so long as their existence is made reasonably known to consumers—are enforceable, in commercial disputes and discrimination cases alike. And Airbnb’s sign-up procedures were sufficiently clear to place Mr. Selden on notice that he was agreeing to the company’s Terms of Service when he created an account. While that result might seem inequitable to some, this Court is not the proper forum for policy objections to mandatory arbitration clauses in online adhesion contracts. Such objections should be taken up with the appropriate regulators or with Congress.

Case citation: Selden v. Airbnb, Inc., 2016 WL 6476934 (D.C.D.C. Nov. 1, 2016). Amended complaint.