289 F. Supp. 3d 537
S.D. Ill.2018Background
- Plaintiffs (Plazza and Naude) sued Airbnb alleging it acted as an unlicensed real estate broker and committed deceptive practices, fraud, and unjust enrichment on behalf of a putative New York class.
- Airbnb's Terms of Service (TOS) were modified several times; since Aug. 15, 2011 the TOS included a mandatory arbitration clause with a class-action waiver and broad retroactive language.
- Airbnb's signup and post-modification consent process: historic signup screens contained a hyperlinked "Terms of Service" notice; after TOS revisions users logging in were shown a scrollable TOS and had to check an "I agree" box and click an "I Agree" button to continue.
- Airbnb's records show both plaintiffs clicked to consent to the TOS on multiple occasions after the arbitration clause was added; plaintiffs admit receiving update emails but say they did not read the TOS and do not recall seeing some signup notices.
- Airbnb moved to compel arbitration and dismiss; court considered whether a valid agreement to arbitrate existed, whether the dispute fell within its scope, and whether defenses (fraudulent inducement, unconscionability) barred enforcement.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether parties entered a valid arbitration agreement | Plaintiffs say they lacked actual notice and did not read or assent to the arbitration clause | Airbnb points to signup screens, required post-modification assent, and emails notifying users of TOS changes | Court held there was valid assent: inquiry notice via signup UI, post-modification click-throughs, and emails established constructive assent |
| Whether the arbitration clause covers plaintiffs' claims (scope/retroactivity) | Plaintiffs argued clause insertion and placement meant it shouldn’t apply retroactively to pre-2011 claims | Airbnb argued the clause’s broad language covers disputes "arising out of or relating to these Terms," including prior claims | Court held the broad arbitration clause applies retroactively and covers the dispute |
| Fraudulent inducement defense to enforcement | Plaintiffs alleged Airbnb secretly inserted the clause and hid it in the TOS | Airbnb contended plaintiffs point to no misrepresentation, reliance, or supporting evidence | Court rejected fraudulent inducement: plaintiffs offered no evidence of misleading conduct or detrimental reliance |
| Unconscionability (procedural/substantive) | Plaintiffs argued adhesion, surprise, lack of rule attachment, and one-sided class waiver/ carve-outs made clause unconscionable | Airbnb argued conspicuous presentation, mutuality of obligations, availability of AAA rules online, and FAA/Concepcion preemption of attack on class waiver | Court found minor procedural adhesion but no unfair surprise or oppression; substantive unconscionability not shown (class waiver permissible); arbitration clause enforceable |
Key Cases Cited
- Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (federal policy favors arbitration and FAA enforces arbitration agreements)
- AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (FAA preempts state rules that invalidate class-action waivers in arbitration clauses)
- Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (court decides issues of contract validity unless challenge is to arbitration clause specifically)
- Meyer v. Uber Techs., Inc., 868 F.3d 66 (2d Cir.) (online TOS presented via mobile app can provide reasonably conspicuous notice)
- Nicosia v. Amazon.com Inc., 834 F.3d 220 (2d Cir.) (standard for enforcing online agreements; summary-judgment-like review of arbitration motions)
- Schnabel v. Trilegiant Corp., 697 F.3d 110 (2d Cir.) (inquiry notice doctrine and formation principles for online contracts)
- Katz v. Cellco P'ship, 794 F.3d 341 (2d Cir.) (district courts should stay, not dismiss, proceedings when compelling arbitration)
- Specht v. Netscape Commc'ns Corp., 306 F.3d 17 (2d Cir.) (users must have reasonably conspicuous notice of terms; submerged links insufficient)
- Register.com, Inc. v. Verio, Inc., 356 F.3d 393 (2d Cir.) (repeated exposure to terms and acknowledgement can establish assent)