.

Defense Digest

Pennsylvania Superior Court Refuses to Enforce Online Binding Arbitration Agreement Located in Hyperlink

Defense Digest, Vol. 29, No. 3, September 2023

September 1, 2023

Key Points:

  • A consumer’s passive acceptance of online arbitration agreements will not be enforced.
  • A jury trial is a paramount constitutional right requiring clear manifestations of any waiver.
  • The court issues strict standards in Pennsylvania to enforce an arbitration agreement.

In many claims with a binding arbitration agreement, enforcing the agreement to waive a jury trial is a relatively straightforward procedure. Online agreements in Pennsylvania now have an additional burden; there must be a clear and conspicuous waiver of the right to a jury trial showing acceptance by the consumer. The Pennsylvania Superior Court recently provided guidelines on what is considered an enforceable waiver of a jury trial.

In the case Chilutti vs. Uber Technologies, Inc., 2023 WL 4611931 (Pa. Super. July 19, 2023), Shannon Chilutti requested an Uber drive her from a medical appointment. The Uber driver secured her wheelchair in his van, but did not provide her with a seatbelt that she requested. The driver allegedly made an aggressive turn, and Mrs. Chilutti fell out of her wheelchair and was injured. Mr. and Mrs. Chilutti then filed suit against Uber. The company petitioned to compel arbitration, arguing that the terms and conditions of the Uber application website required that the plaintiffs proceed to a mandatory arbitration. The trial court granted Uber’s petition to compel arbitration. The Superior Court of Pennsylvania then reversed and ordered the case remanded to a jury trial.

The Superior Court addressed a decision of the United States Court of Appeals for the Ninth Circuit where it described two different types of internet contracts. The “clickwrap” contract is when the terms of the contract appear on a pop-up screen and the consumer must explicitly agree to the terms by checking a box before proceeding on the website. Courts generally find these contracts enforceable because the consumer received and acknowledged notice of the terms of the contract.

The “browsewrap” contract is one in which the terms of the contract are not disclosed until the consumer clicks on a hyperlink. The consumer can continue on the website without clicking and opening the hyperlink. Courts are more reluctant to enforce these contracts because the terms of the contract may not have been clear or even read by the consumer.

The Superior Court stated it was clear the Uber agreements were “browsewrap” agreements. The plaintiffs were not aware of the terms of the contract nor were they aware that, by continuing in the Uber website, they were bound by the contract. The arbitration agreement was found in a hyperlink for “terms and conditions” when the plaintiffs registered for the ridesharing service on the internet. The plaintiffs admitted they never read those provisions and did not dispute the terms were available if they followed the hyperlink. They completed their registration process without accessing the terms and conditions.

Several reasons were identified why Uber’s website and application did not set forth reasonable and conspicuous notice of the contract. When Mrs. Chilutti registered for an Uber ride through the company’s website, the terms and conditions were “encapsulated in tiny, blue font at the very bottom of a cluttered webpage. The relevant text was not underlined or capitalized.” When Mr. Chilutti used the Uber app on his phone, the terms and conditions were in a small font and not underlined or capitalized.

The Superior Court emphasized that since 1847 the Pennsylvania Supreme Court has safeguarded the Seventh Amendment of the Constitution and that the right to a jury trial should be afforded the greatest protection in the courts. The court stated that a “stricter burden of proof is necessary to demonstrate a party’s unambiguous manifestation of assent to arbitration.” Previous standards articulated by the Ninth Circuit Court of Appeals were reviewed and found insufficient to protect this fundamental right.

In Pennsylvania, the Superior Court held that an unambiguous manifestation of assent to arbitration will be required and is accomplished by: 

  1. explicitly stating on the registration websites and application screens that a consumer is waiving a right to a jury trial when they agree to the company’s ‘terms and conditions,’ and the registration process cannot be completed until the consumer is fully informed of that waiver; and 
  2. when the agreements are available for viewing after a user has clicked on the hyperlink, the waiver should not be hidden in the ‘terms and conditions’ provisions but should appear at the top of the page in bold, capitalized text. In this case the plaintiffs were not informed in an explicit and upfront manner that they were giving up their constitutional right to seek damages through a jury trial proceeding.

Therefore, there was no valid agreement to arbitrate.

The Pennsylvania Superior Court made it very clear that it discourages online arbitration agreements. The Chilutti opinion sets the bar high to enforce such clauses. Much of the opinion discussed the need to preserve the consumer’s constitutional right to a jury trial. The court went through an analysis of what it described as a “copious usage of arbitration agreements in present day contracts” and noted that arbitration provisions have substantially weakened the right to a jury trial in Pennsylvania civil proceedings. The parties have unequal bargaining power, and such agreements will be closely scrutinized. Any fundamental consumer right addressed in an online contract will predictably need to comply with these guidelines to be enforced in Pennsylvania. 

 

 

Defense Digest, Vol. 29, No. 3, September 2023, is prepared by Marshall Dennehey to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. ATTORNEY ADVERTISING pursuant to New York RPC 7.1. © 2023 Marshall Dennehey. All Rights Reserved. This article may not be reprinted without the express written permission of our firm. For reprints, contact tamontemuro@mdwcg.com.

Firm Highlights

graphic announcing our 6 2027 Super Lawyers & Rising Stars

News

Marshall Dennehey Announces 2027 New Jersey Super Lawyers And Rising Stars

Thought Leadership

The Tolling Trap: Filing Alone Will Not Toll the Statute Without Good-Faith Service

The Eastern District of Pennsylvania recently reinforced a critical limitation on bad faith claims, holding that a timely filing alone will not preserve a cause of action absent a good-faith effort to serve the original process. The plaintiff had presented a claim for underinsured motorist benefits to his auto insurer. The insurer evaluated the claim and determined that the plaintiff’s accident-related damages did not exceed the bodily injury liability insurance limits of the at-fault driver and denied his claim. Among other claims, the plaintiff sought to present a claim for insurance bad faith under 42 Pa. C.S.A. § 8371, to which a two year statute of limitation applies. He first filed a praecipe for writ of summons before the expiration of the statute of limitation. However, the plaintiff did not attempt to serve the praecipe or writ until after the statute of limitations had expired. Additionally, the service failed as the plaintiff had mailed the original process to an incorrect address. Despite receipt of the Postal Service’s failure to deliver the original process, the plaintiff did not attempt to re-serve the writ. Two months later, the plaintiff filed a complaint and then successfully served that complaint. The insurer sought to dismiss the plaintiff’s bad faith claim as time-barred by the statute of limitations. The district court agreed. Though the plaintiff had filed a praecipe for a writ of summons prior to the expiration of the statute of limitations, the statute is only tolled if there is a good faith effort to serve that original process. In this case, the court determined that the plaintiff had failed to perform a “good faith effort to serve the original process”. Additionally, though the filing and service of a complaint can serve as alternative original process when the lawsuit is commenced by the filing of a praecipe for a writ of summons, the plaintiff filed his complaint after the statute of limitations had expired. The plaintiff’s bad faith claim was therefore determined to be barred by the statute of limitations and dismissed by the court, with prejudice. A key takeaway for the defense is not to assume that the statute of limitations has been successfully tolled by a plaintiff merely because a praecipe for a writ of summons or complaint has been filed prior to the expiration of the statute. A filed complaint or writ is only part of the equation. The defense should carefully review the docket and filings to confirm that the plaintiff also performed the requisite good faith effort to serve that original process. A thorough review of the docket may reveal that the plaintiff failed to make the good-faith service efforts necessary to toll the statute of limitations.

Marshall Dennehey Named a Standout in Litigation by BTI Consulting Group

News

Marshall Dennehey Named a Standout in Litigation by BTI Consulting Group

Thought Leadership

Florida Supreme Court Rules Florida Statute §627.70152 Does not Apply Retroactively

In a decision that resolves years of appellate uncertainty and confirms that insurers and insureds alike can rely on the legal framework in place when a policy is issued, the Supreme Court of Florida last week found that Florida Statute §627.70152, which involves an insured’s requirement to provide an insurer with pre-suit notice before filing a suit, cannot be applied retroactively. In Universal Property & Casualty Insurance Company v. Hughes, the Court was presented with the issue of whether the statutory pre-suit notice requirement applied retroactively and whether it would apply to a breach of contract of an insurance policy that was issued before the statute went into effect. Before the Court was an appeal from a homeowner, Ms. Hughes, who sued her insurance carrier, Universal Property & Casualty Insurance Company (Universal) for breach of contract under an insurance policy that was in effect from April 24, 2019 through April 24, 2020. During the policy period, Ms. Hughes suffered a loss and, on May 29, 2019, made a claim for water damage. The carrier investigated the loss and issued payment; Ms. Hughes disputed the payment, finding the amount insufficient for repairs. On July 1, 2021, Florida Statute §627.70152 went into effect, which required insureds to provide notice of intent to initiate litigation against the carrier prior to filing a lawsuit; if an insured filed the lawsuit without complying with §627.70152, a court must dismiss the case without prejudice. On August 4, 2021, Ms. Hughes filed her lawsuit against Universal for breach of contract. Universal moved to dismiss based on her failure to comply with §627.70152. Ms. Hughes contended the notice requirement could not be applied retroactively. The trial court disagreed and dismissed the lawsuit without prejudice, and Ms. Hughes appealed. During the appeal, the Fourth District Court of Appeal, in Cole v. Universal Property & Casualty, 363 So. 3d 1089 (Fla. 4th DCA 2023), ruled that Florida Statute §627.70152 did apply retroactively to policies issued before the effective date of §627.70152. However, the Sixth District Court agreed with Ms. Hughes and overturned the trial court’s ruling, finding the statute could not retroactively apply to policies issued prior to the statute effective date. Thereafter, the other district courts weighed in, with the Third District Court agreeing with the Fourth District Court, and the First, Second and Fifth District Courts agreeing with the Sixth District Court. In resolving the conflict amongst the district courts, the Supreme Court advised “as a general rule, ‘the statute in effect at the time an insurance contract is executed governs substantive issues arising in connection with that contract.’ Hassen v. State Farm Mut. Auto. Ins. Co., 674 So. 2d 106, 108 (Fla. 1996). The Court applied the two-step test when deciding whether a statute has retroactive application: “First, the Court must ascertain whether the Legislature intended for the statute to apply retroactively. Second, if such an intent is clearly expressed, the Court must determine whether retroactive application would violate any constitutional principles.” Menendez v. Progressive Exp. Ins. Co., 35 So. 3d 873, 877 (Fla. 2010). In analyzing the Legislature’s intent, the Court must determine whether the Legislature has manifested a clear command for retroactivity in the statutory text.  In review of the statutory text, the Court found nothing in the language of the statute to indicate that the phrase “all suits” was serving another purpose of expanding its reach to suits based on policies that both predate and postdate the enactment of the statute. Buis v. Universal Prop. & Cas. Ins. Co., 394 So. 3d 738, 741 (Fla. 2d DCA 2024). Further, the Court noted the statute has an effective date, which has long been considered to be evidence against retroactive application of a statute. The Court concluded that, on its face, no provision of §627.70152 speaks to application of the statute to insurance policies issued before the statute’s effective date and therefore, the Legislature did not clearly command retroactivity of the statute to include insurance policies issued prior to the enactment of the statute. The Court briefly reviewed Universal’s argument that the presuit notice requirement was procedural, not substantive, and therefore should be applied retroactively; however, the Court agreed with the Sixth District Court’s finding that, in its entirety, §627.70152 transformed an insured’s ability to sue an insurance company under a property insurance policy and an insurer’s obligations to respond to and pay insurance claims, thus making the requirement a substantive change. The Court thereby upheld the decision of the Sixth District and disapproved the decision of the Fourth District in Cole.

Defense Victory Obtained in Workers’ Compensation Case

Result

Defense Victory Obtained in Workers’ Compensation Case

Thought Leadership

Commonwealth Court Reaffirms the Constitutionality of Act 111's IRE Provisions

In this case, the claimant sustained a work injury of January 6, 1994, which was acknowledged by Notice of Compensation Payable (NCP). After the claimant’s receipt of 104 weeks of temporary total disability benefits, the employer filed a Request for an Impairment Rating Examination (IRE). The IRE was performed in May 2023 and the IRE physician found that the claimant had a 5% whole person impairment, under the AMA Guides. The employer filed a Petition based on the IRE results, and the Petition was granted by the WCJ. During litigation, the claimant argued that the IRE provisions of Act 111 (Section 306(a.3) of the Act) were not applicable to her injury, since it predated June 24, 1996, the date Act 57 went into effect, and that the IRE provisions were unconstitutional. The Workers’ Compensation Judge (WCJ)) granted the Petition and the Board affirmed. On appeal to the Commonwealth Court, the claimant argued that Act 111 violated the nondelegation doctrine and that its retroactive application to the claimant’s injury was unconstitutional. The court rejected the arguments on the basis that they had already found the same arguments without merit in multiple, prior cases. The court also addressed an argument made by the claimant that Act 111 was procedurally defective under the Pennsylvania Constitution because it was only considered on two days in each House after having undergone amendments and reassignments. The court noted that the Pennsylvania Constitution requires every bill to be considered on three different days in each House. The claimant maintained that, according to the legislative history, the bill did not receive three separate days of consideration from each House when it was assigned a new bill number. The court pointed out, however, that the bill number, H.B. 1840 remained constant and was considered on three occasions by the House. Further, the court concluded that minor amendments to the bill were germane to its original subject, which was to modify the Act’s IRE process, in accordance with Protz II.

Bret E. Dubbert Joins Marshall Dennehey’s Orlando Office as Special Counsel in the Casualty Department

News

Bret E. Dubbert Joins Marshall Dennehey’s Orlando Office as Special Counsel in the Casualty Department

business meeting photo

Result

Summary Judgment Obtained in Insurance Coverage Case

Complete Victory Obtained in a Workers’ Compensation Matter

Result

Complete Victory Obtained in a Workers’ Compensation Matter

Event

CLM 2026 Focus Conference

Allison joins three insurance industry leaders to discuss how cyber coverage disputes, the growing impact of social inflation on bodily injury claim valuation, and the use of artificial intelligence are reshaping the bad faith landscape. The panel will examine emerging sources of extra-contractual exposure, including evolving cyber insurance coverage issues and the challenges of accurately valuing bodily injury claims. Practical approaches to claim evaluation using AI, along with defense strategies designed to help prevent or successfully defend against bad faith litigation, will also be addressed.