Starke v. SquareTrade, Inc.
913 F.3d 279
2d Cir.2019Background
- SquareTrade sold a 2-year electronics protection plan to Starke via Amazon; SquareTrade emailed a confirmation stating the “Contract is Enclosed” with a small “Terms & Conditions” hyperlink but did not include the full contract text in the email body.
- The post-sale Terms & Conditions (accessed only via the hyperlink) contained an arbitration clause, class-action waiver, and choice-of-law provision; pre-sale “Warranty” (a different document on the Amazon page) did not contain arbitration language.
- Starke did not click the post-sale “Terms & Conditions” hyperlink and did not see the arbitration clause; after submitting proof of purchase he filed a claim that was denied because the underlying item was not bought on Amazon.
- Starke sued in state and federal consumer-protection statutes and alleged deceptive practices; SquareTrade moved to compel arbitration based on the post-sale T&C.
- The district court denied the motion, finding no reasonable notice or manifestation of assent to the post-sale arbitration clause because the hyperlink was inconspicuous and the email was cluttered and did not direct attention to the contract.
- The Second Circuit affirmed, applying New York contract law principles to online interfaces and concluding the post-sale hyperlink did not give constructive notice nor elicit objective assent.
Issues
| Issue | Plaintiff's Argument (Starke) | Defendant's Argument (SquareTrade) | Held |
|---|---|---|---|
| Whether the arbitration clause became part of the contract (notice) | Starke: he lacked actual or reasonable notice of arbitration; link was inconspicuous | SquareTrade: notice was adequate because Amazon and SquareTrade emails told him a service contract would follow and provided a hyperlink | Held: No — the hyperlink was obscured; recipient was not on inquiry notice of post-sale T&C |
| Whether Starke manifested assent to post-sale T&C | Starke: no affirmative assent; retention/non-return is not assent when terms were hidden | SquareTrade: retention (no return within 30 days) and prior dealings manifested assent | Held: No — no objective manifestation of assent given the inconspicuous presentation |
| Whether prior course of dealing put Starke on notice | Starke: prior confirmations did not clearly disclose arbitration; one prior email contained T&C in body without arbitration | SquareTrade: repeated similar emails and prior purchases should have put Starke on inquiry notice | Held: No — prior course did not provide conspicuous notice of arbitration; prior emails lacked the arbitration clause |
| Whether post-sale delivery of terms by hyperlink is enforceable here | Starke: post-sale, buried hyperlink is insufficient; duty to read does not require ferreting out hidden links | SquareTrade: regulatory allowances and standard practice permit providing terms after sale by email | Held: No — post-sale hyperlinked terms may be enforceable in some designs, but here the placement, lack of prompt, and clutter made notice and assent lacking |
Key Cases Cited
- Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (U.S. 1983) (federal policy favoring arbitration)
- Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (U.S. 2002) (arbitration is a matter of contract)
- Register.com, Inc. v. Verio, Inc., 356 F.3d 393 (2d Cir.) (prior course of dealing can inform notice of terms)
- Specht v. Netscape Commc’ns Corp., 306 F.3d 17 (2d Cir.) (hidden online terms may not give notice; users must be able to see terms without scrolling past download prompts)
- Schnabel v. Trilegiant Corp., 697 F.3d 110 (2d Cir.) (duty to read applies only where terms were reasonably communicated; inquiry notice required for hidden terms)
- Nicosia v. Amazon.com, Inc., 834 F.3d 220 (2d Cir.) (webpage design and clutter can obscure notice of hyperlinked terms)
- Meyer v. Uber Techs., Inc., 868 F.3d 66 (2d Cir.) (an uncluttered, spatially and temporally coupled hyperlink with clear language can provide reasonable notice)