Amazon Screws Up Its TOS Amendments (Again)–Jackson v. Amazon
This case involves “Amazon Flex” drivers. Allegedly, “Amazon monitored and wiretapped the drivers’ conversations when they communicated during off hours in closed Facebook groups.” Amazon claimed its TOS mandated arbitration. The Ninth Circuit disagrees.
At issue are two versions of the TOS from 2016 and 2019. The named plaintiff, Jackson, agreed to the 2016 TOS. It required arbitration for any related claim. The 2016 TOS provided an opt-out for the arbitration provision, but Jackson didn’t exercise it. The 2016 TOS also contained this unilateral amendment provision:
Amazon may modify this Agreement, including the Program Policies, at any time by providing notice to you through the Amazon Flex app or otherwise providing notice to you . . . . If you continue to perform the Services or access Licensed Materials (including accessing the Amazon Flex app) after the effective date of any modification to this Agreement, you agree to be bound by such modifications.
Amazon updated the TOS in 2019 to make explicit that arbitrability would be decided by an arbitrator, and it emailed the drivers the new TOS. “Amazon claimed Jackson accepted [the 2019 TOS] by continuing to make deliveries after being emailed a copy of the new terms….Amazon, however, did not produce a copy of the 2019 email notifying drivers of the new TOS, nor did it provide any evidence that Jackson received such an email.”
The court is not impressed with Amazon’s position:
the burden is on Amazon as the party seeking arbitration to show that it provided notice of a new TOS and that there was mutual assent to the contractual agreement to arbitrate. Although we have experienced a technological revolution in the way parties communicate, technological innovation has not altered these fundamental principles of contract formation…
there is no evidence that the email allegedly sent to drivers adequately notified drivers of the update. The district court did not have the email, so it could not evaluate whether the email (assuming it was received at all) sufficed to provide individualized notice. Nor did the court have other evidence that might allow it to assess notice, such as a description of the email. Amazon provided only a declaration with a vague statement that a notice of updated terms was sent via email
As a last-ditch argument, Amazon points to its 2016 TOS, which said Flex drivers were “responsible for reviewing this Agreement regularly to stay informed of any modifications.” The court shreds this argument:
That assertion stands the law’s notice requirement on its head. The burden is on the party seeking arbitration to show notice and assent. We have previously observed the importance of notice in the analogous context of electronic consumer contracts. We stated that “the onus must be on website owners to put users on notice of the terms to which they wish to bind consumers” as “consumers cannot be expected to ferret out hyperlinks to terms and conditions to which they have no reason to suspect they will be bound.”
The court also cites the new Restatements of Consumer Contracts, which says “It is not sufficient to provide ‘[a] general notice of the possibility of future modifications.'”
Thus, “For the drivers’ continued performance of services to constitute assent to be bound by new 2019 terms, Amazon needed to show that it actually provided notice of those terms. It did not do so.”
The court then says that the lawsuit is outside the scope of the 2016 TOS because it doesn’t relate to the contract. Instead, allegedly “Amazon essentially spied on Flex drivers while they were not working, by monitoring and wiretapping private conversations in closed Facebook groups without the drivers’ knowledge… Jackson’s claims do not depend on any terms of his contract as a driver for Amazon Flex.” Any other non-driver member of the closed groups would have identical claims as the drivers. Thus, “Neither Amazon’s motive nor the violation of any provision of this contract would be an element of any of Jackson’s claims. The alleged misconduct would be wrongful even if there had been no contract. ”
Judge Graber dissents in part. She agrees the 2016 TOS applies. However, based in part on the general preference for arbitrating cases, she thinks the claim is within the arbitration’s scope. Also, the class limitation to Amazon Flex drivers ensures that all plaintiffs have a contractual relationship with Amazon.
Overall, cases like this make my head hurt. Amazon is one of the wealthiest companies in human history, it has armies of top-tier in-house and outside lawyers, and consumer contracts are the lifeblood of its business. How is it possible for Amazon to ever lose an online contract formation case…and what appears to be on a technicality? And how is it possible that this isn’t even Amazon’s first run-in at the TOS amendment rodeo? (see, e.g., its problems in the long-running Nicosia litigation).
In terms of the facts, the court says Amazon didn’t submit the TOS notification email or even describe it. Why would Amazon hide the ball here? Was the email text lost? Was it barred from being introduced as evidence? Did Amazon make a tactical or strategic choice not to tender the evidence? Without additional context, the absence of the notification email is baffling. Yet another reminder: EVERY TIME you touch your TOS, you need to maintain airtight records of EVERYTHING so that you can persuasively walk the judge step-by-step through what consumers saw and how they manifested assent. (See more about this in my online contracts chapter). As this opinion indicates, the burden is on YOU to prove the formation. Make it easy for judges.
In terms of the law, because of the missing notice, the Ninth Circuit once again dodges the critical question: is new affirmative consumer assent needed for each amendment, or can some vaguer “notice” to consumers sometimes substitute? The opinion has language supporting both propositions. Without legal clarity from the Ninth Circuit, I expect lower courts will continue to impose increasingly stringent assent-like requirements on TOS amendments, a trend that kicked into gear in 2022 (see, e.g., the Sifuentes case). Note: if you are still relying on a TOS clause telling consumers it’s their burden to check the site for amendments, you need to stop living in the 1990s.
Case citation: Jackson v. Amazon.com, Inc., 2023 WL 2997031 (9th Cir. April 19, 2023)
BONUS: Another Ninth Circuit case involving a formation process that’s neither a “clickwrap” or “browsewrap” (which, given the semantic deficiencies of both terms, is like a majority of cases):
while Appellees’ Terms meet the reasonably conspicuous standard, this hybrid form of agreement is not without its risks and invites second-guessing. To ensure that an online agreement passes muster, clickwrap is the safest choice
That last line is a warning from the Ninth Circuit. Use a 2 click TOS formation process or take your chances.
Oberstein v. Live Nation Entertainment, Inc., No. 21-56200 (9th Cir. Feb. 13, 2023)