Uber, Lyft, and similar rideshare apps have quickly become culturally iconic, making traditional cabs all but extinct. One would be hard pressed to find a smartphone without a rideshare app. With the current trend of internet apps and clickable contracts, it is now easier than ever for corporations to bind inexperienced, unaware, and unsuspecting consumers to arbitration agreements with the simple click or swipe of their finger — all from the convenience of 3-inch by 6-inch phone screen. This was the issue explored in a recent Pennsylvania Superior Court ruling that directly impacted Uber’s operations and policies while strengthening passenger rights.
In the case of Chilutti v. Uber Techs., Inc., Ms. Shannon Chilutti appealed to the PA Superior Court to dispute Uber’s mandatory arbitration clause contained within their terms and conditions.
The Chilutti v. Uber Techs., Inc. case arose from a 2019 motor vehicle accident. Ms. Chilutti, who uses a wheelchair for mobility assistance, called an uber for a ride home. When the driver arrived, he secured the chair but failed to provide a seatbelt for Ms. Chilutti, despite her request for one. The driver made a sharp left-hand turn and Ms. Chilutti fell out of her wheelchair, struck her head, and was rendered unconscious. Ms. Chilutti filed a complaint in the Philadelphia Court of Common Pleas seeking to recover for her injuries. Uber filed a petition to move the matter to arbitration due to the mandatory dispute resolution clause contained within Uber’s terms and conditions. The Philadelphia Court of Common Pleas granted Uber’s petition and stayed the matter.
The Uber app registration page contains a browsewrap agreement, whereby to use the app, the registering user must input certain personal information and click the “Create Account” button at the bottom of the webpage. Below the “Create Account” button, a user would have seen the following:
“By clicking ‘Create Account’, you agree to Uber’s Terms and Conditions and Privacy Policy.”
The terms, “Terms and Conditions” and “Privacy Policy” were hyperlinks, which, if clicked on, would have redirected the user to another website that displayed a 12-page document. On the ninth page of the document was a “Dispute Resolution” Section where the agreeing party agreed to arbitrate any disputes.
A clickwrap agreement is an online agreement between a user and a company that requires the user to click a box or a button before they download content, make a purchase, or use a website. The box or button confirms that the user agrees to an online contract with the company, and substitutes for the user’s signature. When examining clickwrap agreements, Courts have routinely found clickwrap agreements to be enforceable as the consumer has received notice of the terms being offered and, in the words of the Restatement, “knows or has reason to know that the other party may infer from his conduct that he assents” to those terms. Restatement (Second) of Contracts § 19(2).
A browsewrap agreement on the other hand is where a website offers terms that are disclosed through a hyperlink and the user supposedly manifests assent to those terms by continuing to use the website. Courts are more reluctant to enforce browsewrap agreements because consumers are frequently left unaware that contractual terms were even offered, much less that the continued use of the website is deemed acceptance of the terms.
To avoid the unfairness of enforcing contractual terms that consumers never intended to accept, courts confronted with online agreements such as those at issue here created a test to determine whether meaningful assent has been given. Unless the website operator can show that a consumer has actual knowledge of the agreement, an enforceable contract will be found only if: “(1) the website provides reasonably conspicuous notice of the terms to which the consumer will be bound; and (2) the consumer takes some action, such as clicking a button or checking a box, that unambiguously manifests his or her assent to those terms.” Chilutti v. Uber Techs., Inc., supra; citing, Berman v. Freedom Fin. Network, LLC, 30 F.4th 849, 856 (9th Cir. 2022).
On appeal, the Court dealt with the issue of whether the trial court erred in granting Uber’s petition to compel arbitration.
The Court began by taking into consideration the public policy behind arbitration provisions. First, Pennsylvania has a well-established public policy that favors arbitration. This policy aligns with the federal approach expressed in the Federal Arbitration Act (“FAA”). The fundamental purpose of the FAA is to relieve the parties from expensive litigation and to help ease the congestion of court calendars. On the other hand, the Commonwealth of Pennsylvania guarantees its citizens a constitutional right to a jury trial. But the Superior Court noted that the recent evolution and effect of arbitration provisions has substantially weakened the constitutional right to a jury trial, which has become of increasing concern to the Pennsylvania judiciary. See Taylor v. Extendicare Health Facilities, Inc., 147 A.3d 490 (Pa. 2016).
Next, the Court discussed the requirements to waive the right to a jury trial, such that a party must be fully informed of their right to a jury trial and the effect of waiving that right. The court did not suggest that an on-the-record colloquy is necessary in civil litigation, like in criminal proceedings, but just that, the waiver must be clearly described and the signing party must understand that they are giving up a constitutional right to a jury trial.
Notably, the Court acknowledged that Pennsylvania has a stricter burden of proof to demonstrate a party’s unambiguous manifestation of assent to arbitration. The Court provided the following test to determine if an arbitration provision is valid; (1) explicitly stating on the registration websites and application screens that a consumer is waiving a right to a jury trial when they agree to the company’s “terms and conditions,” and the registration process cannot be completed until the consumer is fully informed of that waiver; and (2) when the agreements are available for viewing after a user has clicked on the hyperlink, the waiver should not be hidden in the “terms and conditions” provision but should appear at the top of the first page in bold, capitalized text.
In its holding, the Superior Court noted that Uber’s agreement did not contain the definition of arbitration nor was there a link to the definition. Therefore, the Court determined that the term, “arbitration,” is ambiguous and that any non-lawyer could easily believe that arbitration is simply another step in the litigation process and not the relinquishment of the constitutional right to a jury trial. As such, the Court reversed and remanded the lower court decision and held that Uber’s website did not provide reasonably conspicuous notice of the terms to which the Chiluttis were bound.
Judge McCaffery called for more judicial scrutiny of the growing use of arbitration agreements and a party’s waiver of their constitutional right to a jury trial. The Chilutti case heightened the standard for the enforceability of arbitration clauses and jury waivers in terms and conditions. Due to this holding, it is prudent to advise clients with arbitration provisions that their provisions;
While the Chilutti case explicitly applied to browsewrap and clickwrap agreements, Judge McCaffery’s call for a heightened standard as it relates to arbitration agreements could raise the Pennsylvania standard as a whole, and we will likely see increased litigation regarding the enforceability of such arbitration provisions.
The information contained in this publication should not be construed as legal advice, is not a substitute for legal counsel, and should not be relied on as such. For legal advice or answers to specific questions, please contact one of our attorneys.
Madison is an attorney in Obermayer’s Litigation Department. She represents financial institutions, real estate developers and investors, healthcare providers, and individuals in a variety of litigation matters, including product liability, construction defect...
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