New Jersey’s Appellate Division compels arbitration enforcing “clickwrap” agreement requiring arbitration of a product liability dispute

On April 3, 2023, the New Jersey Appellate Division in Jeffrey Santana v. SmileDirectClub, LLC, Docket A-2433-21, __ N.J. Super. __ ( App. Div. April 3, 2023), issued an opinion enforcing an arbitration provision found within an e-commerce “clickwrap” agreement.

The defendant, SmileDirectClub, LLC (“SDC”), offers a platform enabling dentists and orthodontists to provide clear-aligner treatment. In order to receive the treatment, a user must create an on-line account.  In order to create the account, the user must check a blank box that states, "I agree to SmileDirectClub's Informed Consent and Terms & SmilePay Conditions." The hyperlinked "Informed Consent" document contained a mandatory arbitration agreement among other provisions.

After purchasing clear aligners from SDC, the plaintiff, Jeffrey Santana, later filed a products liability action alleging personal injuries resulting from use of the aligners. SDC moved to dismiss the complaint arguing the matter was subject to the mandatory arbitration agreement. The plaintiff opposed, arguing that (a) the agreement was hidden from view; and (b) SDC had waived its right to compel arbitration by engaging in preliminary discovery. The Law Division sided with the plaintiff finding that the plaintiff had to scroll down several pages to review the arbitration agreement and, relying on a prior decision in Wollen v. Gulf Stream Restoration & Cleaning, LLC, 468 N.J. Super. 483 (App. Div. 2021), the judge found "[t]he arbitration clause was not clearly or conspicuously presented to [p]laintiff and is thus not enforceable.” SDC argued on reconsideration that its website used a “clickwrap" agreement, whereas Wollen involved a ‘browsewrap’ agreement. By contrast, a ‘browsewrap’ agreement is one “where the online host dictates that assent is given merely by using the site” and does “not require users to expressly manifest assent.” The trial judge found the difference between the type of agreements to be insignificant and denied the reconsideration motion, which denial gave rise to SDC’s appeal.

The Appellate Division reiterated New Jersey’s long-standing policy favoring arbitration as a means of dispute resolution, but cautioned the favored status is not without limits. Specifically, an arbitration agreement must be the result of the parties' mutual assent, according to customary principles of state contract law. Citing to Wollen, 468 N.J. Super. at 495-96, the Appellate Division noted that “the enforceability of an internet consumer contract often turns on whether the agreement is characterized as a 'scrollwrap,' 'sign-in wrap,' 'clickwrap,' or 'browsewrap'—or a hybrid version of these electronic contract types."

The Appellate Division found SDC’s internet contract was a “clickwrap agreement” which it defined as a contract that requires user consent to terms or conditions by clicking on a dialog box on the screen in order to proceed with the internet transaction. The Santana Court noted that, generally, clickwrap agreements are enforceable because a user is said to be put on inquiry notice of the terms through the requirement of a physical manifestation of assent.

The Appellate Division found that the plaintiff manifested his assent to the contents of SDC's hyperlinked documents by affirmatively clicking on and checking the box next to distinctive text stating, "I agree to SmileDirectClub's Informed Consent and Terms & SmilePay Conditions." The subject arbitration agreement was located within a clearly hyperlinked document—the very first hyperlinked document on the screen entitled "Informed Consent." The title of the hyperlinked document put plaintiff on reasonable inquiry notice that when he checked the "I Agree" box next to the link, he was agreeing to something that specifically asked for his informed consent. Within the hyperlinked "Informed Consent" document, the title of the arbitration provision—"AGREEMENT TO ARBITRATE"—was the only fully capitalized and emboldened text, which alerted a consumer to the importance of the provision in relation to all others. Finally, had plaintiff left the "I agree" box unchecked, the "Finish My Account" bar on the SDC website would not have functioned until plaintiff checked the "I agree" box, signaling his informed assent to the arbitration agreement.

The Santana Court concluded that the structure of SDC’s website did not deny plaintiff reasonable inquiry notice of the arbitration agreement and reversed and remanded for entry of an order compelling arbitration of plaintiff's claims and staying any further action in the Law Division.

TAKEAWAYS:

• New Jersey has long-standing policy favoring arbitration as a means of dispute resolution, but the favored status is not without limits.
• An arbitration agreement must still be the result of the parties' mutual assent consistent with the customary principles of contract law.
• New Jersey courts have recognized the validity of consumer web-based contracts, but the enforceability often turns on whether the agreement is characterized as a 'scrollwrap,' 'sign-in wrap,' 'clickwrap,' or 'browsewrap'—or a hybrid version of these electronic contract types."
• Clickwrap agreements are generally enforceable because a user is put on notice of the terms through the requirement of a physical manifestation of assent.