642 F.Supp.3d 256
D. Conn.2022Background
- Plaintiff Najah Edmundson used Klarna’s "buy now, pay later" service through Gamestop and alleges automatic Klarna debits over two days caused her account to overdraft, producing bank overdraft fees; she brings fraud and CUTPA claims on behalf of a putative class.
- Klarna moved to compel arbitration, relying on arbitration language contained in its online "Klarna Services Terms," the "Pay later in 4" agreement, and the Klarna app user terms; each was accessible via hyperlinks during checkout or in the app.
- Plaintiff concedes she clicked the visible "Pay with Klarna" and later completed checkout in Klarna’s widget and downloaded the app, but did not click any hyperlinks to the terms.
- Klarna argued assent was formed at up to three points: (1) Gamestop checkout page (hyperlink: "Klarna Service terms"), (2) Klarna checkout widget ("I agree to the payment terms" above "Confirm and continue"), and (3) Klarna app introductory screen (text stating that clicking a sign-in button approves user terms).
- The court examined whether a reasonably prudent user had inquiry notice of the arbitration clause and concluded that, because of page clutter, subdued/unclear hyperlink formatting and placement, ambiguous/insufficient assent language, and a confusing app label (references to a nonexistent "Sign in" button), a reasonably prudent user would not be on inquiry notice.
- Ruling: Defendant’s Motion to Compel Arbitration was DENIED; case proceeds in court and parties were ordered to meet Rule 26(f) deadlines.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability of arbitration agreement | Plaintiff lacked actual or inquiry notice of the arbitration clause; thus no agreement | Plaintiff assented by using Klarna checkout options, widget, and app hyperlinks that led to terms with arbitration | Denied — no enforceable assent because no inquiry notice |
| Gamestop "Pay with Klarna" screen | Hyperlinked terms were not conspicuous (small gray text, not blue, amid a cluttered page) | Clicking "Pay with Klarna" manifested assent to Services Terms (which include arbitration) | Held not sufficient for inquiry notice; page more like Nicosia than Meyer |
| Klarna checkout widget ("I agree to the payment terms") | The widget’s lone sentence lacked language connecting the click to contractual assent; hyperlink styling/substance insufficient | Completing widget manifested assent to Pay Later terms (which contain arbitration) | Held not sufficient — standalone "I agree to the payment terms" did not alert reasonable user to contractual consequences |
| Klarna app introductory screen | Text referenced clicking a nonexistent "Sign in" button, used "approve" (not clearly "agree"), and hyperlinks were unobtrusive — created confusion | Opening/using the app and clicking provided notice and assent to User Terms (including arbitration) | Held not sufficient — confusing/mislabelled UI prevented inquiry notice |
Key Cases Cited
- AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011) (Federal Arbitration Act favors enforcement of arbitration agreements)
- Meyer v. Uber Techs., Inc., 868 F.3d 66 (2d Cir. 2017) (standard for web-based assent; clarity/conspicuousness required)
- Nicosia v. Amazon.com, Inc., 834 F.3d 220 (2d Cir. 2016) (inquiry notice analysis; crowded checkout pages can defeat assent)
- Specht v. Netscape Commc'ns Corp., 306 F.3d 17 (2d Cir. 2002) (conspicuousness of terms central to notice inquiry)
- Schnabel v. Trilegiant Corp., 697 F.3d 110 (2d Cir. 2012) (parties must actually agree to arbitrate; FAA does not create consent)
- Starke v. SquareTrade, 913 F.3d 279 (2d Cir. 2019) (formatting and setting-off terms can affect conspicuousness)
- Applebaum v. Lyft, Inc., 263 F. Supp. 3d 454 (S.D.N.Y. 2017) ("I agree to [Terms]" without more may be insufficient for assent)
- Berkson v. Gogo LLC, 97 F. Supp. 3d 359 (E.D.N.Y. 2015) (sign-in-wrap agreements notice/manifestation standards)