In Oberstein v. Live Nation Ent. Inc. No. 21-56200 (9th Cir. Feb. 13, 2023), the Ninth Circuit addressed the question of whether the arbitration and class action waiver clauses on Ticketmaster’s and Live Nation’s websites effectively prevented plaintiffs from bringing suit. Plaintiffs in the case sought to bring a class action lawsuit against Ticketmaster and Live Nation alleging as the basis for antitrust claims that the companies used their market power to charge above-market prices for concert tickets. Ticketmaster and Live Nation sought to compel the named plaintiffs to individual arbitration under the binding arbitration and class action waiver clauses in the terms of use on Ticketmaster’s and Live Nation’s websites.
Plaintiffs appealed from a decision by Judge George Wu of the United States District Court for the Central District of California upholding the arbitration and class action waiver clauses as enforceable. Plaintiffs appealed the lower court’s decision to uphold the clauses on two principal grounds. First, plaintiffs argued that the terms of use were invalid for failure to properly identify Ticketmaster and Live Nation by their full corporate names. Second, plaintiffs argued that the arbitration clause was unenforceable because plaintiffs were not provided constructive notice of the terms of use, due to a user interface which required the user to click on a separate link to review the terms of use before agreeing to them.
On the first issue, the panel found that California law does not require that corporate parties to a contract use their full legal names. Citing California Civil Code § 1558, the panel reasoned that California law requires only that it be possible for a reasonable user to identify the parties to the contract. The Ninth Circuit distinguished case law relied on by plaintiffs where agreements were invalidated based on the use of vague terms such as “Company” and “parties.” Here, the Court found that repeated references to Ticketmaster’s and Live Nation’s common trade names were an acceptable way to properly identify the entities in the terms of use.
On the second issue, the panel undertook a fact-intensive analysis, ultimately concluding that the user interface provided sufficient notice of the terms to consider plaintiffs constructively bound by them. Although Ticketmaster’s and Live Nation’s websites did not contain “clickwrap,” whereby users are required to click a box to confirm their assent to an agreement before proceeding, the Court held a reasonable user would still be able to locate the terms of use. The Court noted that, at three separate points – when creating an account, signing into an account and completing a purchase – Ticketmaster and Live Nation webpage users are presented with a confirmation button with text above informing the user that by clicking on the button, the user agrees to the terms of use. The fact that the terms of use are accessed via hyperlink to a separate webpage did not transform them into a disfavored “browsewrap” interface. The phrase “Terms of Use” was in bright blue font and located directly next to the box consumers are required to click to confirm their agreement. “Crucially,” the Ninth Circuit noted, the bright color conspicuously distinguished the hyperlink from the surrounding text. In light of these design elements, the website provided sufficient constructive notice of the terms of use as a matter of law. The Court did note that clickwrap remains the safest choice for providing constructive notice of the terms of use.
This case has several key takeaways for businesses or other entities that make use of arbitration and class action waiver provisions in contractual agreements with consumers entered into via a website interface. One takeaway is that it is vital that an arbitration or class action waiver provision adequately identify the parties to the agreement. Although common corporate trade names are typically acceptable, generic terms like “employer,” “business,” or “corporation” are not enough and could invalidate the agreement.
The other key takeaway is that the website terms of use containing the arbitration clause should be sufficiently highlighted to make it easily noticeable to a reasonable consumer. To avoid litigation like the kind faced by Ticketmaster and Live Nation, it is a best practice to use “clickwrap,” which requires users to click a box to confirm their assent to an agreement before proceeding. Of course, there are always tradeoffs between user convenience and legal concerns. At a minimum, any legal review should include not only the language of the arbitration clause, but also the physical interface and visual cues provided to the user.