85 F.4th 695
2d Cir.2023Background:
- Klarna offers a "Pay in 4" buy-now-pay-later product that charges the first installment at checkout and automatically deducts three subsequent payments from a customer’s bank account.
- Plaintiff Najah Edmundson used Klarna via GameStop’s website and the Klarna smartphone app in late 2020–early 2021; two automatic deductions triggered $70 in overdraft fees charged by her credit union.
- Edmundson sued on behalf of a putative class, asserting common-law fraud and CUTPA claims for allegedly concealing the risk of bank overdraft fees.
- Klarna moved to compel arbitration under a mandatory arbitration clause in its Services Terms; the district court denied the motion, finding no reasonably conspicuous notice or unambiguous assent across the three interfaces Edmundson encountered.
- On interlocutory appeal, the Second Circuit reversed as to the Klarna "widget" interface, holding that the widget gave reasonably conspicuous notice and that clicking "Confirm and continue" unambiguously manifested assent to the Terms (including arbitration); the case was remanded to compel arbitration.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Klarna's on-screen presentation gave a reasonably prudent user inquiry notice of the Terms (including arbitration) | The linked terms were not conspicuous amid varying labels and small text across interfaces; the widget and other screens were unclear. | The Klarna widget (and other interfaces) displayed hyperlinked terms adjacent to the assent mechanism at the point of purchase, giving inquiry notice. | The Klarna widget provided reasonably conspicuous notice as a matter of law. |
| Whether Edmundson unambiguously manifested assent to the Terms by using Klarna (clicking buttons) | Clicking ‘‘Confirm and continue’’ or signing in did not clearly communicate assent to an arbitration clause; actions could be understood as merely completing a purchase or logging in. | The statement "I agree to the payment terms" immediately above the "Confirm and continue" button put a reasonable user on notice that clicking constituted assent to the terms. | Clicking "Confirm and continue" on the widget constituted an unambiguous manifestation of assent; arbitration agreement enforceable. |
| Scope of decision as to other screens (Pay-with-Klarna Screen, App Login Screen) | Those screens also failed to give clear notice or require assent. | Klarna urged that repeated links across interfaces supported notice. | Court did not decide whether the other two screens independently provided notice; decision rests on the widget alone. |
Key Cases Cited
- Specht v. Netscape Commc'ns Corp., 306 F.3d 17 (2d Cir. 2002) (requires reasonably conspicuous notice and unambiguous manifestation of assent for online contracts)
- Meyer v. Uber Techs., Inc., 868 F.3d 66 (2d Cir. 2017) (smartphone interface with adjacent hyperlinked terms can supply inquiry notice and assent)
- Schnabel v. Trilegiant Corp., 697 F.3d 110 (2d Cir. 2012) (acceptance may be inferred from conduct if user knew or should have known terms governed the benefit)
- Nicosia v. Amazon.com, Inc., 834 F.3d 220 (2d Cir. 2016) (cluttered interfaces with many links can defeat inquiry notice)
- Starke v. SquareTrade, Inc., 913 F.3d 279 (2d Cir. 2019) (lack of clear, repeated notice at point of transaction defeats assent to arbitration)
- Soliman v. Subway Franchisee Advert. Fund Tr., Ltd., 999 F.3d 828 (2d Cir. 2021) (buried fine-print terms may not be reasonably conspicuous)
- AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (U.S. 2011) (Federal policy favors enforcement of arbitration agreements)