California Court Ruling Strengthens Consumer Rights in Online Arbitration
A recent California court ruling, Cruz v. Tapestry, Inc., has set a significant precedent for online businesses using arbitration clauses. The decision, issued on September 3, 2021, emphasizes the importance of clear notice and consent for such agreements, particularly in digital commerce.
The case involved a retailer attempting to enforce a hidden arbitration clause on a customer. The clause was presented as a single line of small, gray text beneath the order button on a cluttered checkout page, making it difficult to read and less prominent than other elements. The court found that this lack of conspicuous notice and clear assent from the customer rendered the arbitration agreement unenforceable.
The decision highlights recurring issues in arbitration agreements, providing clear steps for businesses to structure dispute resolution effectively. The court stressed the importance of visual prominence, transaction context, and design choices to ensure reasonable notice and consent. As commerce becomes increasingly digital, courts will continue to scrutinize how traditional contract principles apply to new technologies and business models, with a focus on meaningful notice and genuine consent.
To reduce risk and strengthen the enforceability of arbitration clauses, businesses should ensure these clauses are visible, consider their presentation timing, match customer expectations, document the process, and rest on genuine notice and consent. The Cruz v. Tapestry ruling strikes a balance between preserving business interests and consumer protection, ensuring that arbitration agreements are built on genuine notice and consent.
