MA Supreme Court Blesses Uber’s TOS Clickthrough Formation–Good v. Uber

June 10, 2024 · by · in E-Commerce, Licensing/Contracts

This opinion addresses the aftermath of an Internet lawyer’s nightmare. In Kauders v. Uber Techs., 486 Mass. 557 (Mass. Sup. Ct. Jan. 4, 2021), the Massachusetts Supreme Court struck down Uber’s TOS because it wasn’t properly formed. Maybe I missed the coverage of Kauders’ four-alarm-fire implications during the pandemic confusion (I only covered the ruling in a quick links), but this was a Big Deal. Following Kauders, Uber apparently had no TOS protection in Massachusetts and maybe beyond, leaving it extremely legally vulnerable.

[Note: The majority opinion doesn’t expressly reference Uber’s post-Kauders vulnerability, but the dissent says: “It is undisputed that as a consequence of Kauders, no enforceable contract existed between Good and Uber before the evening of April 25, 2021.” The majority opinion would have been stronger if it had better contextualized Uber’s situation.]

In response to Kauders, in April 2021, Uber forced all of its users in Massachusetts (and maybe beyond, I’m not sure) through a new TOS formation process. Ordinarily, I would have called this an amendment to the existing TOS (because all of its existing users had clicked through Uber’s prior process), but since Kauders said Uber had no TOS, the judges treat Uber’s move as a TOS formation in the first instance.

Uber’s re-do was a high-stakes affair because (1) it had no existing TOS in place, and (2) it knew judges would critically scrutinize its every decision in the inevitable legal challenge. To address these risks, Uber went above-and-beyond industry standard for TOS formation processes, including a displaying a signature graphic and making four on-screen references to the TOS formation.

The Massachusetts Supreme Judicial Court blessed the TOS formation re-do in a 6-1 vote, so Uber’s patch worked from a legal standpoint and it gets to send this case to arbitration. I hope Uber’s Internet lawyers are getting a better night’s rest now.

The impact of this ruling is less clear for everyone else. One scenario is that other services will embrace-and-extend Uber’s higher-than-standard protocols for TOS formation to avoid the risk of a future court saying “Uber did X and you did less than X, so you lose.” Those additional steps aren’t overly onerous, but they reflect how the goalposts for TOS formation keep getting raised. If you are still using a single-click process that resembles what we were doing in the 1990s, you are definitely doing it wrong.

For consumers, the trend has been clear for a long time: online disclosures will be noisier, more intrusive, and filled with additional steps. As a result, it takes consumers more cognitive processing power and time to get from point A to point B. If they are getting frustrated with the barrage of legalese (ranging from EU cookie walls to California’s CRPA Do Not Sell disclosures to intrusive TOS formations) when they just want to use a service, they can thank their regulators for “protecting” them.

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If you’re a casual reader who doesn’t write or implement TOSes for a living, you should stop reading here. The rest of this post will dig into the details of the very long majority and dissent opinions (86 pages!), so it will be mind-numbing/mind-bending legal geekery.

* * *

Here is Uber’s 2021 TOS formation screen as seen on a mobile device (the court calls it an “in-app blocking pop-up screen”–yay for proliferating legal jargon!):

In light of the post-Kauders meltdown, the reference to “updates” to Uber’s TOS is confusing. In fact, per Kauders, Uber had no TOS at all to update. The majority is relatively sanguine about Uber’s lack of candor about its TOS vulnerability, even though calling the TOS an “update” might have reduced consumers’ motivation to investigate because it seemed like a routine TOS evolution. (This may also explain why Uber didn’t provide a redline of the “updated” terms–per Kauders, the whole TOS would have been redlined).

The plaintiff, Good, registered an Uber account in 2013. Soon after clicking through the 2021 screen, Good took a tragic Uber ride where an accident left him paralyzed. He claims the driver and Uber were negligent. Uber sought to send the case to arbitration based on the terms of the 2021 TOS. Over a vigorous dissent, the Massachusetts Supreme Court agrees.

The Majority

The majority calls Uber’s presentation a “clickwrap” and praises how: “The interface was focused and uncluttered; it clearly alerted Good multiple times, in prominent boldface text, that the purpose of the blocking screen was to notify Good of Uber’s terms of use. It encouraged Good to review those terms and provided an identifiable hyperlink directly to the full text of the terms of use document.”

Actual Notice

Despite all that, the court says Good didn’t have “actual notice” of the TOS terms by clicking on the checkbox. “It is entirely plausible, indeed likely, that Good did not review the terms. Uber’s interface did not require Good to click on the hyperlink to the terms themselves.” Notice how a “scrollwrap” could correct this gap if necessary.

Reasonable Notice

The majority then considers if Good had reasonable notice of the TOS terms, considering (as required by Kauders) the totality of the circumstances.

Nature of transaction. Uber rides are a modest-priced transaction, and Good had ordered them many times before. “The circumstances giving rise to Good’s activation of the app to secure transportation certainly would not call upon the reasonably prudent consumer to believe that the advice of an attorney was required or even to suggest such advice might be beneficial.”

Nature of the notice’s presentation. “despite the nature of the transaction and the electronic, online presentation, Uber’s interface focused the reasonably prudent consumer on the terms being offered by Uber for the continued use of its services. The interface unequivocally and transparently communicated to such a consumer that by checking the checkbox and clicking “Confirm” on the blocking pop-up screen, the user was agreeing to Uber’s terms of use.” In support of the presentation, the majority notes that Uber repeated the formation request four times and displayed the graphic with the hand signing, signaling that a contract was being formed.

Also, “The link to the terms of use was not buried on a cluttered screen or presented inconspicuously at the tail end of a cumbersome registration and payment process.” The TOS links were clear, in blue, and underlined.

Also, the interruptive nature of the interstitial “prevented the user from proceeding to order a ride using Uber’s services without first interacting with the interface.” The majority thinks it’s a good thing to force that yes/no decision when the user is eager to order a ride because “this is when the user most likely is thinking actively about using Uber’s services and weighing the trade-offs and costs.” That’s quite a vendor-favorable stance, especially when transportation needs are often time-sensitive.

Good argued that Uber needed to use a scrollwrap, but the majority responds that such a requirement would “confuse[] reasonable notice with actual notice.” In a footnote, the majority casts some shade on scrollwraps: “there is reason to be skeptical that requiring a user to scroll through the terms would increase the likelihood of a user in fact reading the terms,” because consumers rarely read terms under any circumstance.

Full Terms Communicated. “The interface then conspicuously linked to those terms of use, making “readily available” the entirety of the terms to which the user would be bound upon indicating assent.” In a footnote, the majority adds: “the requirement as set forth in Kauders is to put users on reasonable notice that there are terms and to make those terms readily available,” which Uber did.

The majority notes that Uber’s TOS is “a nonnegotiable contract of adhesion.” However, “The fact that the terms offered by Uber were nonnegotiable does not make their contractual nature any less apparent. Nonnegotiable, “take it or leave it” contracts are not new….Such contracts generally ‘are enforceable unless they are unconscionable, offend public policy, or are shown to be unfair in the particular circumstances.'”

The majority rejects a layered notice obligation: “demanding that the offeror highlight particular terms, even if one could agree as to which terms to highlight, ignores the well-established and widely recognized principle that offerees have a duty to read the terms of a contract to which they assent and are not excused from a contract’s terms solely by virtue of having chosen not to do so.”

Assent

The majority blessed the two-click process: “the interface required Good to affirmatively manifest his assent twice,” first by checking the box, then by pressing the confirm button. The “connection between checking the box and indicating assent to the terms was express and unambiguous, particularly as Good could not proceed past the screen without so indicating his assent.”

Defenses

The majority says contracts of adhesion should be strictly construed, and the arbitrator can consider all relevant defenses, including unconscionability.

The Dissent

I’ve flagged a few comments from the dissent opinion. For me, the standout issue is how often the dissent makes empirical claims without providing any empirical support for those claims. That’s especially problematic for an appellate court, which ordinarily isn’t a fact-finder. If the dissent felt like there were empirical gaps in the case, it should have favored a remand to determine those facts.

* “This case is not in any way ordinary, as the court contends. The terms and conditions that Uber seeks to impose through the click of a box differ greatly from what a user would ordinarily expect in such a simple transaction.” An empirical claim without empirical support. Note that the Second Circuit in Meyer v. Uber made a directly contradictory fact claim (consumers always expect TOSes) also without empirical support. How should we reconcile divergent appellate court assumptions about empirical matters?

* “nothing on the blocking pop-up screen alerted the user as to the scope and substance of the terms.” That’s true, I guess, but pretty standard for TOS formations. Plus, a reminder Good created his Uber account in 2013, and I’m curious what he learned about the terms then or in his years of usage thereafter?

* “It is not at all clear why the court considers a notice that has little or no effect on most users to be reasonable.” If consumers all make the same choice not to review the terms, does that have any bearing on what is “reasonable” in the circumstances? But yes, I share the puzzlement over the legal fiction that consumers “know” the terms of mass-market contracts.

* “Users would reasonably expect Uber to be responsible for those services and the drivers providing them. The terms provide for the opposite of these expectations.” An empirical claim without empirical support.

* “The blocking pop-up screen, which all users would see when accessing the Uber app, did not use the term “contract” or “agreement,” which would better alert users as to the significance of the transaction that they were to enter into with Uber.” An empirical claim without empirical support.

* “contracting over the Internet in the Twenty-first Century is different. Thus, the meaning of reasonable notice must adapt to the times.” I love debating Internet exceptionalism, but this statement was too conclusory to support a debate.

* “technology companies, like Uber, that can easily provide clear notice of their terms of use on screens that users will actually see, as opposed to providing hyperlinks users will not open, should be affirmatively required to do so, to ensure that consumers have a reasonable notice and understanding of the contracts they are asked to sign.” Noisier disclosures FTW.

Implications

These opinions are painful to read. The opinions spend a lot of time parsing the 43-page Kauders opinion, producing a complex and difficult-to-decipher text. I do think this opinion does serious damage to Kauders as a precedent. I’m not sure what’s left of Kauders, so any future citations to it should be made gingerly.

The ruling is a win for Uber (after its devastating Kauders loss), but why did it take the majority dozens of pages, and dozens of footnotes, to reach the seemingly obvious conclusion that Uber’s formation was an enforceable “clickwrap”? To me, this reinforces how the TOS formation bar keeps rising. Even an above-industry-standard TOS formation presentation requires angst and hang-wringing from the courts.

(Also, an interesting question I can ask my students: Uber won the ruling, but could you still recommend changes to improve the presentation?)

Finally, Uber’s moves provide a cautionary tale about the stressful and dangerous consequences if a court strikes down TOS formation. Not only did it leave Uber legally naked for months, but it took a lot of legal work and marketing expertise to repair the problem. Lawyers in charge of TOS formation MUST avoid this outcome. If in doubt, make conservative choices when it comes to TOS formation mechanics. Or else you may “enjoy” some sleepless nights like Uber’s counsel had.

Case Citation: Good v. Uber Technologies, Inc., 2024 WL 2869582 (Mass. Sup. Judicial Ct. June 7, 2024)

Selected Prior Blog Posts on Uber’s TOS Formation