In Clickwrap Data Pass Contract Dispute. Second Circuit Sacks E-mail Notice Of Post-Transaction Terms

In an important opinion on the enforceability of online contract terms, Senior Circuit Judge Robert D. Sacks walks through the last decade and a half of online contracting law on the way to invalidating an arbitration provision in an agreement involving a so-called Web loyalty program. Judge Sacks concluded in Schnabel v. Trilegiant Corp., 2012 U.S. App. LEXIS 18875 (2d Cir. 2012), that an arbitration provision contained in an e-mail sent to consumers after they enrolled in such a program did not provide sufficient notice to support a conclusion that they had assented to arbitrate.

It is worth noting that two forms of notice of the arbitration provision were actually alleged to have been provided to the consumer: the post-transaction e-mail, and a clickable link to the "Terms and Conditions" of the agreement that was presented at the time of enrollment in the disputed program. The efficacy of the second form of notice was not before the court, however, because that issue was deemed to have been waived at the lower court level. Thus, whether the presentation of the clickable link to the terms was sufficient notice of the arbitration provision was addressed with the comment that it "might have created a substantial question" as to whether the arbitration provision was enforceable.

(Trilegiant proffered screen shots purporting to depict a transaction confirmation page similar to that displayed to the plaintiffs, which the court made available on its Web site here, along with screen shots of the enrollment offer page purporting to be similar to the display of the clickable link to the plaintiffs, here and here.)

Data Pass Marketing

This case involves a "data pass" marketing program. These programs, also referred to as "Web loyalty" programs, typically are presented by third-party marketers to consumers at the conclusion of a transaction with an online retailer, in the form of a discount or cash back offer. If the consumer responds to the offer, whether by an affirmative "click" or by the provision of personal information, their payment data is provided directly to the third-party marketer by the online retailer who collected it in connection with the underlying transaction. The consumer is then enrolled in a program in which their payment card is charged a monthly fee.

As of 2010, the direct passing of payment data in this manner is prohibited by the Restore Online Confidence Act unless, among other things, the consumer's "express informed consent" is obtained...