By Leslie King O’Neal
Lessons from Disney and Uber
Are there any limits on the scope of arbitration agreements? Two recent high-profile cases highlight arbitration clauses with extraordinary breadth. While not common in construction-related contracts now, such clauses may be more widely used in the future, creating disputes about how and by whom disputes should be resolved.
NJ Court Holds Uber Clickwrap Arbitration Agreement Valid in Personal Injury Case
In McGinty v. Uber Technologies, Inc. (unpublished opinion) [i] the McGinty’s were injured while passengers in an Uber vehicle. They sued Uber Technologies, the driver, and others in New Jersey state court. Uber moved to compel arbitration under the terms of Mrs. McGinty’s Uber account and later modifications, which she agreed to by clicking on the “Terms of Use.” The McGinty’s questioned the validity of the agreement, claiming their minor daughter clicked on these terms. [ii] They also asserted it did not cover Mr. McGinty, a non-party to the agreement.
The arbitration agreement encompassed “all disputes with Uber” with limited exceptions[iii] and specifically included personal injury claims to the account owner or “anyone else.” The arbitration clause included a delegation clause[iv] and a third-party beneficiary clause.[v]
The trial court denied Uber’s motion to compel arbitration. Reversing the trial court, the N.J. appellate court upheld the arbitration agreement, finding it met New Jersey’s Atalese test for a valid jury trial waiver. [vi] Because of the delegation clause, the arbitrator rather than the court decides the issues of the minor daughter’s capacity to contract and whether Mr. McGinty’s claims were subject to arbitration. The McGinty’s petitioned the N.J. Supreme Court for review.
Disney Asserts Broad Arbitration Clause in Wrongful Death Suit
Similarly, in Piccolo v. Great Irish Pubs Florida, Inc.[vii] plaintiff sued Walt Disney Parks and Resorts U.S., Inc. (“Disney”) and a restaurant owner for the wrongful death of his wife, who died after suffering a severe allergic reaction allegedly caused by food consumed at the restaurant in the Disney Springs Resort near Orlando.
Disney moved to compel arbitration under the terms of plaintiff’s “Disney+ Subscriber Agreement” and the “My Disney Experience Terms and Conditions” which plaintiff agreed to when purchasing Disney tickets. Both were “clickwrap agreements,” valid under Florida law.[viii]
The “Disney Experience” terms and conditions included “all persons (including minors) for whom you are purchasing or otherwise securing benefits and/or managing those benefits and entitlements such as tickets.” Plaintiff purchased park tickets and registered his deceased wife as his “guest.”
Like the Uber agreement, the Disney arbitration agreement included a delegation clause, giving the arbitrator power to decide the arbitration agreement’s validity and coverage.
Ultimately, Disney chose to waive its arbitration rights, allowing the Piccolo case to proceed in court. However, the case raised awareness of arbitration clauses in “clickwrap” agreements and the breadth of claims subject to arbitration. Also, as in Uber, Disney asserted the arbitration agreement included non-parties.
Are Broad Arbitration Clauses Used in Construction Contracts?
So far, standard form construction contracts haven’t adopted all-encompassing arbitration clauses such as the ones in Disney or Uber. My limited online research found only one similar clause in a construction context, related to using the Lowe’s website for purchases or services. [ix]
The Lowe’s dispute resolution clause covers personal and commercial accounts and applies to disputes:” “(i) arising out of, relating to or concerning this agreement, the Site and your use thereof; (ii) in which the Site and/or this agreement is an issue or a material fact; or (iii) in which the Site or this agreement is referenced in a paper filed in a court, tribunal, agency or other dispute resolution organization.”
This broad language means that, if a general contractor or a subcontractor purchased materials using the Lowe’s website with a personal or a commercial account, these terms and conditions would apply to claims the materials were defective or failed. They could also apply if a complaint in a construction defect suit mentioned that the project included materials purchased through the Lowe’s website. This could create problems in resolving the case by requiring the material defect claims to be arbitrated in Charlotte, NC, while the rest of the case was litigated elsewhere.
Also, Lowe’s arbitration agreement includes a confidentiality clause, prohibiting disclosure of “the existence, content or results of any arbitration, except as may be required by law or for purposes of enforcement or appeal of the arbitration award.” This could also create problems in a construction defect claim by not allowing the GC or sub to use the arbitration result as evidence in the lawsuit.
Takeaways
- Construction lawyers should advise clients to look carefully at “Terms and Conditions” included in “clickwrap” agreements on websites or online purchase agreements; these may contain expansive arbitration clauses or confidentiality agreements. It may or may not be possible to negotiate these terms.
- Be aware that arbitration agreements may have broad language about what is included in the “transaction,” such as tort claims and claims on other legal theories.
- Note that some arbitration agreements include third party claims and cover non-parties’ claims.[x]
[i] Sup. Ct. N.J., Appellate Division, Docket No: A-1368-23; https://www.njcourts.gov/system/files/court-opinions/2024/a1368-23.pdf
[ii] The online agreement included a checkbox stating, “I am at least eighteen years of age.” The daughter checked the “confirm” box, although she was not eighteen at the time. A N.J. court previously upheld an arbitration clause in a “clickwrap” agreement, Santana v. SmileDirectClub, LLC 475 N.J. Super. 279, 285 (App. Div. 2023).
[iii] The exceptions were for small claims court matters, individual sexual assault or sexual harassment claims and intellectual property claims.
[iv] Delegating all threshold questions of arbitrability, including enforceability of the arbitration agreement to the arbitrator. A future post will discuss delegation clauses in more detail.
[v] “This Arbitration Agreement shall be binding upon and shall include any claims brought by or against any third parties, including but not limited to your spouses, heirs, third-party beneficiaries and assigns, where their underlying claims arise out of or relate to your use of the Services.”
[vi] Atalese v. U.S. Legal Services Grp., L.P., 219 N.J. 430 (2014). New Jersey has a long-standing policy of protecting the right to access its courts. Article I, paragraph 9 of the New Jersey Constitution provides “[t]he right of trial by jury shall remain inviolate.”
[vii] Case No: 2024-CA-001616-O, Circuit Court, 9th Judicial Circuit in and for Orange County, Florida.
[viii] MetroPCS Communs., Inc. v. Porter, 273 So. 3d 1025, 1029 (Fla. 3d DCA 2018) (finding online arbitration clause was binding because “a reasonably prudent user would be on inquiry notice”).
[ix] The Dispute Resolution Clause in Lowe’s Terms & Conditions for use of its website (which includes PRO accounts) states: “You agree that this agreement and your use of the Site will be governed by the laws of the state of North Carolina. By using the Site, you consent to the exclusive jurisdiction and venue of the courts, tribunals, agencies and other dispute resolution organizations in Charlotte, North Carolina, in all disputes (i) arising out of, relating to or concerning this agreement, the Site and your use thereof; (ii) in which the Site and/or this agreement is an issue or a material fact; or (iii) in which the Site or this agreement is referenced in a paper filed in a court, tribunal, agency or other dispute resolution organization.”
[x] A future post will discuss recent cases about arbitrating with non-parties.
