U.S. Federal Appeals Court Provides 3-Step Roadmap For Creating Enforceable Online Agreements A recent U.S. federal appeals court decision rejecting a business’s attempts at enforcing its online arbitration agreement offers lessons for businesses across the country on how to craft a valid agreement for your website. The Ninth Circuit’s February 27 decision in Chabolla v. ClassPass took issue with an online gym membership page that contained different design elements and language on three distinct sign-up screens, concluding that a reasonable consumer would not have understood the terms of use. What do you need to know about this key ruling and what are the three steps you should take to put yourself in the best position to enforce your online agreements? Consumer Didn’t Appreciate Gym Membership’s Auto-Renewal California resident Katherine Chabolla signed up for a trial gym membership with ClassPass in January 2020, purchasing a package deal access to gyms, fitness studios, and fitness classes through the company’s website. But when the pandemic hit in March 2020, ClassPass suspended charges for all of its customers, including Chabolla. A few months later, it renewed charges when its facilities re-opened – and Chabolla wasn’t pleased to learn that the company auto-renewed her membership. She brought a class action suit in the Northern District of California against ClassPass for violating California’s Automatic Renewal Law, Unfair Competition Law, and Consumer Legal Remedies Act. ClassPass Claimed its Terms of Service Required Arbitration ClassPass argued that Chabolla agreed to its arbitration agreement contained in its online Terms of Use when she signed up for her online membership. At issue was whether the website provided conspicuous notice of the Terms of Use and whether Chabolla unambiguously manifested her consent. But both the lower court and the appeals court ruled in Chabolla’s favor and denied the company’s attempts at enforcing the arbitration agreement. Court Says Website Design Too Confusing for Consumers The Court analyzed how visitors interacted with the ClassPass website, focusing on “Screens 1, 2, and 3.” (See below for screenshots.)
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