Print Ad’s “Terms and Conditions” Don’t Create Binding Arbitration Clause–Soliman v. Subway

June 10, 2021 · by · in E-Commerce, Licensing/Contracts, Marketing

Subway ran a promotion offering deals if customers signed up for text messages. The stores displayed the following print ad:

The language in the bottom right:

Limited Time Only. Message and data rates may apply. Max10msgs/mo-Msgs may be autodialed from SUBWAY Restaurants. Consent not required to buy goods/svcs. Terms and conditions at subway.com/subwayroot/TermsOfUse.aspx and Privacy Policy at subway.com/subwayroot/PrivacyPolicy-FWH.aspx. For help, text HELP to 782929. To opt-out, text STOP to 782929. Valid at participating restaurants. Additional changes for extra and deluxe. Plus tax. May not be combined with other offers, coupons or discount cards. SUBWAY® is a Registered Trademark of Subway IP Inc. © 2016 Subway IP Inc. submul 26184[.]

The named plaintiff claims she signed up for the text messages but then sent STOP. However, Subway allegedly didn’t stop sending text messages. She sued for TCPA violations. Subway invoked the arbitration clause contained in the terms of use that the ad linked to. The Second Circuit holds that the plaintiff didn’t consent to arbitration:

Subway has failed to demonstrate that such terms and conditions would be clear and conspicuous to a reasonable person in Soliman’s position for the following reasons: (1) Subway failed to provide evidence regarding the size of the advertisement at issue, or the print size contained within that advertisement; (2) the reference to “[t]erms and conditions” was buried on the advertisement in a paragraph that was printed in significantly smaller font relative to the other text on the advertisement, and the reference itself was surrounded by a substantial amount of unrelated information; (3) the advertisement only vaguely referenced “[t]erms and conditions,” and did not state that a consumer would be agreeing to those terms if she sent a text message to Subway’s short code, nor did it otherwise direct the consumer to such terms; (4) access to the terms and conditions on the Subway website required Soliman to type in the URL text provided on the hardcopy print advertisement into an internet browser on her cell phone or some other device with internet browsing capabilities; and (5) once linked to the Subway website, the heading stated that it contained “terms of use for this website,” thus potentially suggesting to a reasonable person (searching for conditions of the promotional offer) that the website did not contain any terms or conditions beyond those relevant to the use of the website. This combination of barriers leads us to conclude that the terms and conditions in this case were not reasonably conspicuous under the totality of the circumstances and, thus, a reasonable person would not realize she was being bound to such terms and conditions by texting Subway in order to begin receiving promotional offers.

This is a logical result, but the court could have be more concise in its explanation. For me, point #3 should have been dispositive–the print ad never had a proper call-to-action that said if you do X, you agree to the terms. (The court says that language isn’t 100% required, but it kind of is). On that issue, Point #5 is also problematic. If you’re going to refer someone to T&Cs, make sure they expressly cover the circumstances you are trying to govern.

Even if the print ad cross-reference failed, why Subway didn’t include the T&Cs in the text message signup process? Subway required the plaintiff to text back her zip code to confirm consent to future texts, so it would have been easy to include a call-to-action referencing the T&Cs in that interaction. Adding the T&C formation to a text message signup process isn’t rocket science or even cutting-edge thinking, so I’m baffled how Subway missed that. Indeed, Subway had properly confirmed the T&Cs in a prior campaign with text message signups, so they knew what to do.

A few more comments on the court’s discussion:

  • The court uses a “reasonably prudent person” standard. This is a variation from the Meyer v. Uber ruling, which used a “reasonably prudent smartphone user” standard. As usual, the court intuits what reasonably prudent consumers would do without any supporting empirical evidence.
  • The court says the circumstances are “very distant” from those in Meyer v. Uber. Instead, they “more closely resemble those in which courts have found cluttered websites with a hyperlink to terms and conditions to be insufficiently conspicuous to provide inquiry or constructive notice to the consumer,” like Nicosia v. Amazon (although Amazon did get to arbitration in that case eventually).
  • The decision raises some obvious red flags about incorporating terms by URL into print materials. The court says there’s no absolute prohibition against it, but “companies relying on the mixed-media incorporation of contractual terms involving a combination of a print advertisement, text messaging, and a website (rather than a purely paper or purely web-based medium) must take into account the practical obstacles in each situation relating to the conspicuousness of the notice, as well as access to the terms and conditions, that may be created by the various modes of communication being utilized”
  • The court says it’s open to different paths to contract formation, just not what Subway did: “as with purely web-based contracts, we impose no particular features that must be present to satisfy the reasonably conspicuous standard in the context of a mixed-media communication with a consumer such as the case here, involving the use of a “call to action” print advertisement with the consumer and containing a reference to terms and conditions that requires the consumer to then respond by utilizing text messaging on a cellphone. The panoply of technological variations available to companies in the internet/smartphone age, as it relates to the form and content of communication interfaces with consumers, makes any bright-line rule for reasonable conspicuousness in this arena extremely difficult to discern, and we do not attempt to do so here. Instead, each situation will continue to require careful examination on a case-by-case basis under the applicable legal standard.”

Surely a disappointing result for Subway, especially in light of how easily avoided it was.

Case citation: Soliman v. Subway Franchisee Advertising Fund Trust, Ltd., No. 20-946 (2d Cir. June 8, 2021)