US Court of Appeals Affirms Enforceability of Amazon’s Terms of Service

On September 19, 2017, in an unpublished memorandum, the United States Court of Appeals for the Ninth Circuit affirmed a lower court’s ruling that had sent a putative class action against Amazon over its pricing practices to arbitration, as per Amazon’s terms of service.

The Court found Amazon’s terms of use enforceable. The terms included a clause requiring the parties to settle disputes through arbitration. The notices on Amazon’s checkout and account registration pages, which alerted the appellant that clicking the corresponding action button constituted agreement to the hyperlinked agreement, were found to be in sufficient proximity to give him a “reasonable opportunity to understand” that he would be bound by additional terms.

The Court disagreed with the appellant’s arguments that the agreement was unconscionable. First, the unilateral modification clause was found not to render the arbitration provision substantively unconscionable because Amazon was limited by the implied covenant of good faith and fair dealing. Second, the arbitration clause’s exemption of intellectual property claims for injunctive relief did not make the provision overly harsh or one-sided. Third, the attorneys’ fees provision did not create substantive unconscionability because it mirrored the state’s statutory right to attorneys’ fees for frivolous claims.

Summary By: Lisa Danay