Online agreements are often favored by providers for their flexibility and for reducing friction in the customer contracting process. A particular benefit is the ability to update these agreements by providing notice to customers, typically via email, rather than requiring separate express affirmative assent to the new terms. However, two recent opinions by a California federal court have cast doubt on whether this common approach to updating online agreements is enforceable. In light of these decisions, companies should consider reevaluating their approach to updating their online agreements and consider implementing procedures to obtain affirmative assent from customers to such updates.
On June 29, 2022, the U.S. District Court for the Northern District of California denied Dropbox's motion to compel arbitration against David Sifuentes III in response to his claims that a 2012 data breach caused by the company left Sifuentes' personal information at risk. The court's ruling rested upon whether there was a valid arbitration agreement between Dropbox and Sifuentes. Sifuentes affirmatively checked a box to agree to Dropbox's terms of service when he first registered as a Dropbox user in 2011. Although that version of the agreement did not include an arbitration clause, Dropbox argued that because it later amended the terms to add an arbitration provision and sent email notifications to its users notifying them of the updates and specifically calling out the new arbitration clause, Sifuentes' continued use of Dropbox's services after these changes went into effect indicated his acceptance of the amended terms. Sifuentes alleged that he never read any version of the updated terms, and never opened any of the emails from Dropbox announcing the amendments.
The court acknowledged Sifuentes' initial acceptance of Dropbox's terms of service. However, the court ruled that the amended terms were unenforceable against Sifuentes because Dropbox could not show that Sifuentes had actual knowledge of the revisions. In addition, the court held that there was no inquiry notice (which requires a party to have knowledge of facts or circumstances that would cause a reasonably prudent person to investigate the issue further) to Sifuentes, because the mere existence of a policy to deliver notice via mass email distributions was not enough to prove that Dropbox had provided reasonably conspicuous notice to Sifuentes, and Sifuentes was not forced to take any action to show a manifestation of assent.
In a decision issued this September, the U.S. District Court for the Northern District of California reiterated its stance in mandating affirmative assent to bind users to amendments to online agreements. Harsh Alkutkar brought false advertising claims against Bumble, alleging that the application's premium features failed to deliver his expected results. Bumble sought to compel arbitration. An arbitration provision was not included in the Bumble terms of service when Alkutkar first established an account in February 2016. Bumble later updated its terms to include the provision and sent a mass email distribution to existing users to provide notice of updates to the company's terms. Similar to the Sifuentes case, the email included a hyperlink leading users to the updated terms of service and language calling out a new arbitration provision, in addition to providing an option for users to opt out of accepting the new terms.
Bumble also went beyond Dropbox: it created a pop-up "blocker card" implemented simultaneously with the amendment that included a detailed description of the new arbitration clause and prevented users from proceeding to the application unless they acknowledged acceptance of the terms of service by clicking on an "I accept" button. The company argued that the email notice, coupled with the fact that Alkutkar accessed the Bumble application after the amendment went into effect, meant that Alkutkar must have known about the updated terms. Alkutkar, however, denied having ever seen the email notice or the blocker card.
Although Bumble's motion to compel was granted, the court found that the notice email alone was insufficient to establish that Alkutkar had actual notice of the change in Bumble's terms because Bumble did not track whether these communications were ever received or opened. Instead, the court's decision rested on Bumble's ability to show that Alkutkar saw the blocker card and clicked to accept as an affirmative action demonstrating assent. Bumble's ability to provide an electronic record evidencing that Alkutkar clicked on the blocker card was a critical factor in the court siding with Bumble and agreeing to enforce the updated terms and compel arbitration.
These decisions appear to create a high bar for online service providers seeking to show that users were notified and are bound by amendments to online agreements. They suggest that email notices are insufficient without some electronic record of the user's affirmative assent to the amendments (for example, through a click through agreement or a blocker card). Most online service providers today do not operate in this manner, relying instead on email notifications and continued use as acceptance of amended terms. We will have to wait and see if courts continue with this trend of requiring notice and express assent. In the meantime, service providers should consider including a clear notice and click through for users to demonstrate assent with an opt-out option. Companies should strive for simple, yet creative strategies that do not create a heavy burden for users to accept amended terms and for companies to document such acceptance, such as creating separate buttons to click for acknowledging the existence of an amendment and accepting the terms of an amendment. Simply notifying users and stating that continued use of the service constitutes acceptance of amendments may no longer be adequate.