No Assent Without Affirmative Action – Challenges in Binding Former Subscribers to TOS Amendments
Two decisions from earlier this year illustrate the difficulty in enforcing terms of service (TOS) amendments against former subscribers or customers. Even when a company provides the former subscriber with notice of the TOS amendment, that alone is not likely to be sufficient to bind former subscribers to the amended terms—and to any changes in the arbitration provision—without independent evidence of an unambiguous manifestation of assent.
As set forth below, companies can take steps to avoid these risks by requiring former subscribers to click on buttons or include provisions in original TOS that address amendment after the subscription ends.
Brooks v. WarnerMedia
In Brooks v. WarnerMedia, 23 Civ. 11030 (KPF) (S.D.N.Y. July 8, 2024), a number of former subscribers to streaming service HBO Max (now just Max) sued its distributor WarnerMedia Direct, LLC ("WarnerMedia") for alleged violations of the Video Privacy Protection Act, 18 U.S.C. § 2710. On December 22, 2022 (prior to the suit), WarnerMedia emailed all current and former subscribers, including the plaintiffs, to notify them that WarnerMedia was updating its TOS, including the existing arbitration provision, changing "the arbitral forum for consumer disputes" from AAA to NAM (National Arbitration and Mediation). The notice stated that the updated TOS would go into effect for all current and former subscribers on the first of the date their subscription renewed or 30 days from the date of emailing (January 21, 2023), whichever came first. It included hyperlinks to the updated terms and stated that "subscription to and/or access of HBO Max" constituted acceptance of the updated terms. Each of the plaintiffs attempted to reject the change in arbitral forum and did not dispute that after they received notice of the TOS amendment, they navigated to the HBO Max website and reviewed the updated terms. "After all, without reviewing the terms, Petitioners could not have rejected the proposed changes to the AAA Agreement."
After litigation began, WarnerMedia attempted to enforce the TOS amendments changing the arbitral forum to NAM under a theory of inquiry notice. While the plaintiffs did not (and could not) dispute that they received notice of the change in arbitral forum to NAM, they argued that WarnerMedia lacked evidence that they had unambiguously assented to the amended TOS. The court agreed.
First, the court rejected WarnerMedia's argument that the plaintiffs assented by clicking through and accessing the updated TOS on HBO Max's website. The court noted that the website access came before the terms actually went into effect (first of the date that a subscription renewed or 30 days from receipt of the TOS amendment email). The court rejected the notion that proactively clicking on a link in the email to view the terms constituted acceptance because that would mean that the plaintiffs assented to the terms before they had the opportunity to read them.
Second, the court rejected WarnerMedia's argument that maintenance of an active HBO Max account without logging into their account constituted unambiguous assent. The court noted that even though the plaintiff's subscription remained active for six months after receiving notice of the amended TOS, a plaintiff must take "some action" for the court to infer assent. Simply letting the existing subscription expire, even though the expiration occurred more than 30 days after receipt of the TOS amendment, did not constitute unambiguous assent.
Third, the court rejected WarnerMedia's argument that a former subscriber assented to the amended TOS by logging into an inactive HBO Max account months after expiration. Even though the login occurred after the TOS amendment purportedly went into effect, the subscriber would still need to take some action, such as clicking a button or checking a box, to manifest assent.
Finally, the court did order limited discovery to determine if any of the plaintiffs had nonetheless assented to the updated TOS by using the Max platform as an "authorized user" on someone else's Max account after the updated TOS was posted. The court also noted that the updated TOS included consideration for plaintiffs (new dispute resolution rights), rejected the plaintiffs' arguments that the updated TOS was unconscionable, and held that the claims of each individual plaintiff were covered by whatever arbitration agreement was in place at the time (either the old or updated TOS).
Marshall v. Georgetown Memorial Hospital
In Marshall v. Georgetown Mem'l Hospital, 112 F. 4th 211 (4th Cir. 2024), the 4th Circuit rejected a motion to compel arbitration, finding that plaintiff's previous assent to an agreement to arbitrate in 2016 as part of the online job application process did not carry over to a subsequent application in 2020. In 2016, plaintiff could not submit her application until she scrolled past the pre-employment statement and checked the "I ACCEPT" box, which she did, binding her to terms that included an agreement to arbitrate. Plaintiff was not hired in 2016, but in 2020 plaintiff applied for another job with the defendant hospital using the same online application process. Id. Upon logging in as a returning user of the online job application system, plaintiff faced a different process than she had in 2016. A current, pre-populated application form appeared (using information from her previous application), and users could click on a "submit" button at the top of the page to apply. Scrolling down, the applicant could access the terms, pre-populated with a prior assent to the arbitration agreement. In this case, plaintiff's 2020 application included a checked "I ACCEPT" box, with her name and the date of her application in 2016. Plaintiff, however, was not required to scroll through the arbitration agreement before submitting her application as she had in 2016.
After defendant rejected plaintiff's application, she commenced a putative class action in federal court, and the defendant promptly moved to compel arbitration based on the agreement that plaintiff assented to in 2016, arguing that the 2016 arbitration agreement governed all future employment applications, including the one submitted by plaintiff in 2020. The district court denied the motion to compel, and the defendant appealed. The 4h Circuit affirmed the district court's denial and discussed in detail the lack of an unambiguous manifestation of assent.
First, the court rejected defendant's argument that plaintiff was on notice of the 2016 arbitration agreement because she could have scrolled down and read it when applying in 2020. The court specifically noted that because the application page had a "Submit" button at the top, plaintiff could enter the necessary updates and submit her application without ever scrolling down to the agreement. Even though the plaintiff had already agreed to the same provision when she first applied, the court emphasized that her "duty to read" the contract did not require her to look for terms that were not readily visible.
Second, the court also rejected defendant's argument that the arbitration notice at the top of the webpage (which read: "ARBITRATION NOTICE: THIS APPLICATION AND APPLICATION PROCESS IS SUBJECT TO ARBITRATION PURSUANT TO THE SOUTH CAROLINA UNIFORM ARBITRATION ACT, S.C. CODE ANN. § 15-48-10, ET SEQ.") put plaintiff on sufficient notice of the agreement to arbitrate. The court found that while the arbitration statement was conspicuous, it failed to provide or refer to the terms of the actual arbitration agreement. Had the notice told plaintiff to scroll down to view the terms or otherwise notified her of the existence of those terms, it may have been sufficient. The court held that the arbitration notice merely told a user that the application was subject to South Carolina arbitration law; not that it was subject to "terms and conditions" found elsewhere in the application.
Third, the court held that even if the plaintiff had scrolled down, she still would not have been put on proper notice. It reasoned that scrolling down would show that the plaintiff had already agreed to arbitration terms in 2016 when she first applied; not that she was being asked to form a new agreement to arbitrate. Notifying someone that they had agreed to arbitrate in 2016 did not put them on notice of an offer to agree to arbitrate in 2020.
Finally, the court also found that there was no affirmative assent. The 2020 application did not require plaintiff to scroll through the agreement to arbitrate and click "I ACCEPT." Plaintiff's mere use of the website that contained the arbitration agreement was insufficient to show assent by conduct. And while plaintiff was required to click on a "submit" button to complete her application, the court reasoned that the term "submit" in its ordinary meaning does not constitute assent to an agreement, unlike "accept" or "agree." The court found that there was nothing in the 2020 application process to inform plaintiff that by clicking the "submit" button she was agreeing to arbitrate any dispute.