Clicking to Agree: Supreme Judicial Court of Massachusetts Declares Online Agreements Aren’t So Different

In a recent ruling from the Supreme Judicial Court of Massachusetts (“SJC”), the Court held that the Superior Court erred by denying Defendant’s motion to compel arbitration because the contract formation requirements were met, and Plaintiff reasonably manifested his assent to Defendant's
Terms of Use.

In Good v. Uber Technologies, Inc., 494 Mass. 116 (2024), Plaintiff was a chef at a Boston restaurant, and first registered an account with Defendant Uber in August 2013.  On April 25, 2021, when Plaintiff opened Uber's app to secure a ride, he was presented with a screen that stated Uber had updated its Terms of Use.  Plaintiff clicked a checkbox next to text indicating that he had reviewed and agreed to the terms.  Only after performing these actions could Plaintiff proceed to order a ride via Defendant’s rideshare application.  Days later, Plaintiff again used Defendant’s app to secure a ride, during which the Plaintiff’s uber driver collided with another vehicle, causing Plaintiff to be thrust forward, strike his head on the front passenger's seat headrest, and break his neck. Plaintiff was instantly paralyzed and was later diagnosed with a severe spinal injury and quadriplegia.

Defendant Uber’s updated Terms of Use, inter alia, required that users of Defendant’s application agree to resolve all disputes—including personal injury claims—through “final and binding arbitration,” and further waived the right to a trial by jury.

The main issue before the SJC was the enforceability of this arbitration provision or, more generally, whether an enforceable contract had been formed based upon the surrounding facts and circumstances.  For an online contract to be enforceable, the Court stated, “there must be both reasonable notice of the terms and a reasonable manifestation of assent to those terms.”

As to the issue of notice, the Court highlighted the conspicuous nature of Defendant’s Terms of Use—for example, that they were hyperlinked in blue font, and a user could not proceed to use Defendant’s application without checking a box saying the user reviewed and agreed to the terms. 

Significantly, the Court explained that even in the absence of Plaintiff’s actual review of all of Defendant’s Terms of Use, that a reasonable opportunity to review the terms would be sufficient to satisfy the notice requirement.

As to a reasonable manifestation of assent, the Court found that Plaintiff affirmatively manifested his assent twice—first when he was required to check a box immediately adjacent to text stating, “By checking the box, I have reviewed and agree to the Terms of Use,” and second when he was required to click a button stating “Confirm.” The Court found that the connection between checking the box and indicating assent to the terms was express and unambiguous—especially where Plaintiff could not proceed past the screen without indicating his assent.

Based on its analysis, the Court ultimately held that there was an enforceable online contract, and accordingly, that the Superior Court erred in denying Defendant’s Motion to Compel Arbitration.

This decision highlights two significant takeaways:

1. Users of applications and/or digital technologies, need to carefully read through and understand terms of use or service carefully before affirmatively indicating assent to such terms; and

2. Creators of online services, products, or applications, need to ensure that any terms of use or service are conspicuously displayed and that a reasonable opportunity for review of these terms is provided to users in order to have an enforceable, online/digital contract.

Florida Supreme Court Overrules $28.6 Million Jury Verdict in Favor of Bar Owner

On March 7, 2024, the Florida Supreme Court issued a significant ruling in the case of Guardianship of Jacquelyn Anne Faircloth, Petitioner v. Main Street Entertainment, Inc., Respondent, effectively overruling a $28.6 million verdict against Potbelly’s, a bar that served alcohol to an underage patron involved in a serious traffic accident. This case highlights the complexities of Florida’s “Dram Shop” Statute and the intricate relationship between alcohol service, negligence, and liability.

The subject incident occurred in November 2014, when 20-year-old Devon Dwyer collided with 18-year-old Jacquelyn Faircloth as she crossed the street. Both individuals were intoxicated at the time, resulting in catastrophic injuries to Faircloth. In response, Faircloth's guardians filed a lawsuit against Potbelly’s and Cantina 101, alleging violations of Florida’s Dram Shop Statute, Section 768.125, which holds vendors accountable for unlawfully serving alcohol to underage patrons when such service leads to injury.

The Complaint asserted that both Dwyer and Faircloth were intoxicated, with Dwyer’s impaired driving causing the accident and Faircloth’s intoxication leading her to step into the street in front of Dwyer’s vehicle. During the trial, Potbelly’s admitted to knowingly serving alcohol to Dwyer (Cantina 101 defaulted). Critically, Potbelly’s sought to invoke a comparative fault defense, claiming that Faircloth's actions contributed to the accident. The trial court, however, rejected this defense, characterizing the action as an intentional tort due to the willful misconduct required under Section 768.125. The jury found Potbelly’s liable.

Following the trial court's decision, Potbelly’s appealed to the First District Court of Appeals. The appellate court sided with Potbelly’s, asserting that the trial court should have allowed the bar to present a comparative fault defense under Section 768.81. The appellate court clarified that, while the Dram Shop Statute necessitates willful conduct for liability, such conduct does not equate to an intentional tort; rather, it falls under the realm of negligence.  The matter was then appealed to the Florida Supreme Court.

The Florida Supreme Court upheld the appellate court’s conclusions, emphasizing that the willfulness requirement of Section 768.125 does not alter the essential link between the seller’s actions and the resulting injury. The Court elaborated that the statute limits liability to certain actors but does not eliminate the negligence framework established under common law. In its evaluation, the Supreme Court noted that Potbelly’s acknowledgment of serving alcohol to a minor constituted willfulness and created an unreasonable risk of harm. This knowledge, coupled with the circumstances of the case, framed Potbelly’s actions as negligent rather than intentionally tortious. 

The Florida Supreme Court’s ruling in this case serves as a pivotal clarification of the application of Florida’s Dram Shop Statute. By affirming the distinction between negligence and intentional torts, the Court has reinforced the necessity for bars and alcohol vendors to exercise caution in their service practices, particularly regarding underage patrons. This decision underscores the importance of understanding the nuances of negligence law in the context of alcohol service and related injuries.

An Update on New York State Litigation Financing Agreements

In April 2024 the Office of Court Administration (“OCA”) sought public comment on proposed amendments to Sections 202.67 and 207.38 of the Uniform Civil Rules for the Supreme Court and County Court (22 NYCRR §§ 202.67 & 207.38), to require disclosure of information relating to litigation financing agreements. The comment period closed in May 2024 and OCA is scheduled to discuss the proposal in September 2024.

Litigation funding is the practice of a third-party funding litigation for a plaintiff with the promise of repayment after a successful litigation. Generally, this is an unregulated industry in New York. While the proposed rule modifications have been introduced to restrict the use and/or scope of litigation funding agreements, the New York Court’s Advisory Committee on Civil Practice Law and Rules proposes to require disclosure of the agreements in certain cases. Advocates for litigation funding say that the agreements allow plaintiffs who would not otherwise be able to bring claims to court. Opponents of litigation funding argue that the agreements are predatory and reduce the recovery of the injured parties. New York does not currently have any regulations on litigation funding agreements, and the only way to receive information on the agreement is through discovery as part of litigation.

The proposed regulations would require the disclosure of funding agreements in civil cases involving wrongful death and personal injury where the Court must approve the settlement of the case. The disclosures would not just affect litigation funding agreements but also certain other ways of funding litigation. The amended rules affect contingency agreements, deferred payment agreements, and any money borrowed against the anticipated settlement.

The Advisory Committee on Civil Practice Law and Rules requested public comment and the majority of comments wanted to expand the rules to all litigation funding agreements. For example, the City of New York Law Department wrote in support of the proposal that the unregulated litigation funding industry is full of concerns regarding the behavior of the funding companies and the abuses that could and do occur. As an example, the case of Guss v. City of New York is given, where the litigation funding loans were $4,250 at the start of litigation and when litigation was finished and the loans came due, with interest, the amount was $2,838,487.65, an interest rate of over 60%.  The New York State Trial Lawyers Association (“NYSTLA”) opposed parts of the proposal.

If adopted, the proposal would bring the NYCRR in line with other jurisdictional rules, such as Rule 7.1.1 in the United States District Court of the District of New Jersey, requiring: (1) the identity of the funder(s); (2) whether the funder’s approval is necessary for litigation decisions; and (3) a brief description of the nature of the financial interest in the litigation.

Supreme Court of New Jersey Holds Scooters are Ineligible for PIP Benefits

A low-speed electric scooter (LSES) is a common sight in some areas, but how are the riders classified for insurance purposes? In Goyco v. Progressive Insurance Co. the Supreme Court of New Jersey held that a LSES is not considered a pedestrian or an automobile and thus a rider of a LSES is not eligible for PIP benefits.

On November 22, 2021, David Goyco was riding a LSES in Elizabeth, New Jersey, when an automobile struck and injured him. Goyco subsequently made a claim for PIP benefits from his insurer, Progressive. Progressive denied the claim, saying that the LSES was not an automobile, and Goyco was not a pedestrian at the time of the accident as he was operating the LSES. The definitions used in the policy conformed to the definitions used in the New Jersey Automobile Reparation Reform Act, N.J.S.A. 39:6A-1 to -35 also known as the No-Fault Act.

The No-Fault Act defines a pedestrian as “any person who is not occupying, entering into, or alighting from a vehicle propelled by other than muscular power and designed primarily for use on highways, rails and tracks.” N.J.S.A.39:6A-2(h). The No-Fault Act requires PIP benefits for individuals if the insured individual is a pedestrian or “occupying, entering into, alighting from or using an automobile.” Goyco claims that the class of pedestrian should include LSES operators as LSES operators are grouped with bicycles in N.J.S.A. 39:1-1. However, the definitions in N.J.S.A. 39:1-1 only apply to Subtitle 1, and the No-Fault Act is in Subtitle 2, so unless the No-Fault Act brings in the definition explicitly N.J.S.A. 39:1-1 does not apply.

The Court in its analysis of whether Goyco was a pedestrian for purposes of the No-Fault Act, looked to the ordinary meaning of words not explicitly defined in the act. The first was the term “vehicle”, with the Court finding that a LSES falls within the various ordinary definitions of a “vehicle”. Next was whether the LSES was powered by muscular power, Goyco’s LSES was powered by a rechargeable electric battery and was not designed to be operated by other means. In prior case law a moped that could be pedaled manually was declared to be “propelled by other that muscular power” because the plaintiff was using the motor at the time of the accident and had intended to continue in the same manner. Nunag v. Pa. Nat. Mut. Cas. Ins. Co., 541 A.2d 306 (N.J. App. Div. 1988). Using the precedent and the facts present in this matter the court found that LSES are not propelled by muscular power. Finally, the Court used the ordinary meaning of highway to mean a public road and found that the LSES was designed to be used on public roads. All three elements mean that the LSES did not fulfill the requirements to be a pedestrian as defined by the No-Fault Act.

Padilla v. An Concludes Duty Should be Imposed on Vacant Lot Owners to Maintain Reasonable Sidewalks

Plaintiff, Alejandra Padilla, allegedly tripped and fell while walking on the public sidewalk abutting a vacant commercial lot owned by Defendants, Young Il An and Myo Soon An. Plaintiff claimed that the Defendants were negligent for failing to reasonably maintain the sidewalk. Defendants moved for summary judgment, arguing they did not owe Plaintiff a duty of care. The trial court granted Defendants’ motion and the Appellate Division affirmed.

On appeal, the New Jersey Supreme Court was asked to determine whether owners of vacant commercial lots have a common law duty to maintain the public sidewalks abutting those lots in reasonably good condition. The Court began its analysis by noting that whether a duty exists is ultimately a question of fairness. According to the Court, there is something “profoundly unfair” about commercial property owners purchasing vacant lots and having no responsibility whatsoever for maintaining the area where the general public traverses.

Furthermore, the New Jersey Supreme Court pointed out the difficulty of employing a case-by-case, commercial property-by-commercial property approach to determining when a duty is owed. Specifically, Defendants’ suggestion to base liability on profitability or a path to profitability to be an unworkable approach that will lead to inconsistent results and unfairly harm the public. Conversely, a bright-line rule that commercial property owners owe a duty is the most workable rule to protect the general public and to ensure consistency in commercial sidewalk liability law.

Ultimately, the New Jersey Supreme Court held all commercial landowners, including owners of vacant commercial lots, have a duty to maintain the public sidewalks abutting their property in reasonably good condition and are liable to pedestrians injured as a result of their negligent failure to do so. This rule “will clarify the scope of commercial sidewalk liability and provide clear guidance to courts, commercial property owners, and the public.”  Undoubtedly, this ruling will affect how litigants address cases with vacant commercial lots.

The Corporate Transparency Act Found Unconstitutional Only Two Years After Its Passing

In order to reveal or “crack down” anonymous shell companies Congress passed the Corporate Transparency Act. The Act became effective on January 1, 2021, due to Congress’ override. This act requires certain business entities (“reporting companies”) to file, in the absence of an exemption, information on their beneficial owners with the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of Treasury. FinCen is authorized to disclose information: to U.S. federal law enforcement agencies, with court approval to certain other enforcement agencies, to non-US law enforcement agencies, prosecutors or judges based upon a request of a U.S., federal law enforcement agency, and with consent of the reporting company, to financial institutions and their regulators. This Act was to shift the collection burden from financial institutions to the reporting companies. Additionally. it was to impose stringent penalties for willful non-compliance and unauthorized disclosures. More than 32 million entities were estimated to be affected by this Act and required to file.

The filing required the business name, current address, state of information, and tax identification number for each entity. Furthermore, the filing required the name, birth date, address, and a government-issued photo ID. A driver’s license or a passport of every direct and indirect owner sufficed. Since the indirect owners were included in this Act, it created a broad range of who would qualify as an indirect owner and the requirement of their personal information. High penalties were issued to those that failed to comply.

On March 1, 2024, the Corporate Transparency Act was ruled unconstitutional in the U.S. District Court of Alabama. This act was seen as already complicated because it applied to both direct ownership and beneficial ownership. The Plaintiffs in this case were the National Small Business Association (NSBA). One concern about the CTA was that private information is required to be filed such as a driver’s license or passport, home address, and a social security number which can lead to identity theft. Second, there was a short deadline. For example, the time frame for a change including a minor who turned 18 and was an owner of shares must be reported within 30 days. Compliance with the CTA caused a burden on small businesses and large and public businesses were exempt. The high penalty fines for failure to comply included a $500 daily civil penalty, fines of up to $10,000, and a two-year prison term for those that did not submit or update ownership information with FinCen. Furthermore, if parties knowingly failed to comply, that triggered a $500 per day civil penalty, $250,000 in fines, and a five-year federal prison sentence.

The recent ruling only affects the CTA compliance and filing requirements for NSBA members. The CTA still requires that law firms and other professionals that form business entities to file under the CTA. The severe penalties are still intact and business entities should analyze the law and comply with its requirements.