A recent decision delivered by the U.S. District Court for the Northern District of California illustrates how deficiencies in a smartphone app’s user interface can be fatal when the app’s operator attempts to shield itself from consumer litigation by leveraging the protections it has drafted into its terms of use.

Uber Technologies was sued in a putative class action lawsuit. The lawsuit alleged that Uber’s cancellation fees are arbitrarily imposed against riders who are not informed in advance that fees may be automatically charged to their credit cards. In response, Uber filed a motion to compel arbitration, arguing that the plaintiff agreed to Uber’s terms of service which mandate arbitration of disputes rather than court litigation. Arbitration clauses are often inserted into standard form contracts to block consumer class action suits, which are pursuable in court but ordinarily not through arbitration.

In determining the enforceability of Uber’s terms of service, the court looked at whether the plaintiff was bound by them, either by having been under actual or inquiry notice of them and their binding nature. Actual notice occurs when the consumer in question is aware of the terms as a matter of fact. Inquiry notice occurs when notice can be imputed to the consumer ― like a hyperlinked alert that would excite the suspicion of an ordinarily prudent person to consider the terms further ― and the consumer then takes an affirmative action that in the eyes of an ordinarily prudent person manifests the consumer's assent to the terms.

To register his Uber account, the plaintiff was required to click “Register” to complete his sign-up process on a page that displayed the alert: “by creating an Uber account, you agree to the Terms of Service & Privacy Policy”. The underlined words hyperlinked to the full legalese.

The court found that the alert, had it been standing alone, was sufficiently conspicuous to put the plaintiff on notice, and would have bound the plaintiff to a waiver of his right to a jury trial and to dispute resolution by arbitration. Then, in a complete reversal of rhetoric, the court found that a pop-up keypad enabling the plaintiff to enter his credit card information blocked the visibility of the terms of service alert, preventing him from seeing it and assenting to the terms of service.

Since these credit card information fields were found at the top of the screen, and entry of payment information was one of the primary purposes of that page, the Uber app essentially prompted the user to enter his credit card information as soon as he reached the payment and registration screen. The court thus found that the alert would have been obscured immediately when the plaintiff pressed any field asking for his credit card information. The court then concluded that the “keypad obstruction is a fatal defect to the alert’s functioning”.

The court consequently held that it is improper to conclude as a matter of law that the plaintiff had actual notice of Uber’s terms of service, or that he was on inquiry notice of the terms of service and affirmatively assented to them. The court ultimately denied Uber’s motion to compel arbitration.