Federal District Court Enforces Arbitration Clause Included in Clickwrap Terms Reply

E-Commerce News provided by BuckleySandler LLP for informational purposes only, and should not be construed as legal advice on any subject matter.

April 7, 2012

On March 26, the U.S. District Court for the Northern District of Illinois required arbitration of a dispute regarding alleged overcharging by an Internet service provider (ISP) because the consumer had agreed to an arbitration provision included in the ISP’s clickwrap terms of service. Sherman v. AT&T Inc., No. 11-C-5857, 2012 WL 1021823 (N.D. Ill. Mar. 26, 2012). The court held that the plaintiff’s assent to the terms during the online activation process constituted acceptance of those terms, regardless of when he believed the contract was formed. To activate his Internet service, the plaintiff was required to confirm through an online process that he had read and agreed to the ISP’s terms of service. The activation and confirmation page included a link to the terms of service, which included an agreement to arbitrate all disputes. The plaintiff argued (i) that his contract with the ISP was formed during a phone call with an ISP customer service agent pursuant to which he ordered the service, prior to the online activation process, and therefore the terms of service do not apply, and (ii) the terms were not expressly incorporated into the broader conditions of his contract and were procedurally unconscionable. The district court granted the ISP’s motion to compel arbitration of the plaintiff’s allegation (made on behalf of a putative class) that the ISP systematically overcharged consumers for residential Internet service by advertising promotional plans while actually charging standard rates. The court reasoned that vendors may enclose the full legal terms with their products rather than reciting them prior to purchase, for practical purposes, even if the full terms are not delivered until after the consumer’s order and payment. The court also held that the terms were not procedurally unconscionable, as they were not difficult to find, read or understand, and the plaintiff had a full and fair opportunity to review the terms prior to activation.

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