Companies that provide services to consumers have often sought to reduce the risk of class action lawsuits by requiring that their customers agree to arbitrate any disputes.  Such arbitration agreements may require customers to arbitrate on an individual basis only, with customers being obligated to waive any rights they might otherwise have to pursue claims through class actions.  In recent years, many such arbitration provisions, particularly those that included class action waivers, had been held unenforceable under state law contract doctrine.  In April 2011, however, the U.S. Supreme Court held in AT&T Mobility v. Concepcion that the Federal Arbitration Act preempts most state law challenges to class action waivers.

How broadly lower courts will interpret the AT&T decision remains to be seen.  For example, on February 1, 2012, the Second Circuit held in In re American Express Merchants’ Litigation that the AT&T decision did not preclude invalidation of an arbitration waiver where the practical effect of enforcement would impede a plaintiff’s ability to vindicate his or her federal statutory rights.

Nonetheless, in the wake of AT&T, many companies that provide online products or services to consumers are exploring whether to include an arbitration clause and class action waiver in their online Terms of Service.  For those companies that decide to adopt an arbitration provision, whether with or without a class action waiver, it is important to ensure that such arbitration provision will not be invalidated on the ground that no contract was formed with the consumer.

Courts have enforced the arbitration provision in an online Terms of Service agreement where the consumer clearly assents to – or “click-accepts” – the terms and conditions of such agreement, e.g., by checking a box stating “I agree” to such terms and conditions.  For example, in Blau v. AT&T Mobility, decided in December 2011, the plaintiff consumers, who were arguing that AT&T Mobility’s network was not sufficiently robust to provide the promised level of service, had specifically assented to AT&T Mobility’s Terms of Service, which included an arbitration clause.  One of the plaintiffs was bound by an e-signature collected by AT&T Mobility at a retail store.  He asserted that he was not bound because another user of his account had provided the signature.  The court rejected this argument because the user who signed was an authorized user of the plaintiff’s account.  A second co-plaintiff had accepted the Terms of Service by pressing a button on his mobile phone’s keypad; the court held that this acceptance was valid even though the co-plaintiff could not recall whether he had seen the AT&T Mobility Terms of Service.

The enforceability of an arbitration provision becomes more problematic where there is evidence that the consumer did not affirmatively assent to the agreement containing such provision.  In Kwan v. Clearwire Corp., decided in January 2012, the Western District of Washington denied the defendant’s motion to compel arbitration in a putative class action against Clearwire, an Internet service provider, under a variety of state and federal consumer protection statutes in connection with allegedly poorly performing modems.  Clearwire sought to compel arbitration based on an arbitration provision in its online Terms of Service.  Two named plaintiffs, Brown and Reasonover, argued that they could not be bound by the arbitration provision because they had never agreed to the Terms of Service.  The court held that an evidentiary hearing would be required to determine whether an arbitration agreement had been formed with respect to Brown after she introduced evidence that a Clearwire technician who installed her modem, and not Brown, had click-accepted the Clearwire Terms of Service.  Likewise, an evidentiary hearing was required as to Reasonover because Clearwire could not produce a record of a click-acceptance for Reasonover, who testified that she had “abandoned” the Clearwire website without click-accepting the Terms of Service.

What lessons can be drawn from the Blau and Kwan decisions?  First, for an arbitration provision contained in an online Terms of Service agreement to be enforceable against a consumer, there should be clear consent by the consumer to be bound by the agreement.  If the arbitration provision is contained in a passive “browsewrap” Terms of Service, requiring no affirmative consent from the consumer, this may be insufficient – absent other factors – to bind the consumer with respect to arbitration.  In addition, an online Terms of Service containing an arbitration provision should be presented to customers in a reasonably conspicuous manner before the consumer click-accepts the Terms of Service; the agreement should not be “submerged” within a series of links, placed on a part of the screen not visible before the consumer reaches the “I accept” button or buried in small print at the footer of a long email message.

Second, robust records documenting individual consumers’ “click-acceptances” of an online Terms of Service agreement incorporating an arbitration provision will substantially improve the likelihood that such agreement (and the incorporated arbitration provision) will be enforced.  A click-accept record that is linked to the individual who actually click-accepted the agreement is best.  Moreover, the Terms of Service agreement should be drafted to make clear that it applies not only to the individual who originally click-accepted such agreement, but also to other users to whom the individual provides access to his or her account.

To ring in the New Year, the Socially Aware editors provide their predictions regarding social media law and business developments in the coming year (please keep in mind that, if we were good at this prediction thing, we wouldn’t be practicing law for a living) . . .

Watch for an explosion of employment law disputes involving social media in 2012.  It’s coming.  Get ready. You heard it here first.

We’re going out on a limb here, but we believe that the Second Circuit may reverse and remand the lower court’s decision in the widely-followed Viacom v. YouTube litigation, potentially creating turbulence for online companies that rely on user-generated content to attract traffic and boost revenues.  Although the case raises some of the most important copyright issues of the digital era, the lower court’s decision, favoring YouTube, did not dig into the details and nuances of the parties’ respective arguments, and our sense is that the Second Circuit may ultimately reverse that decision and send the case back to the lower court for further proceedings.

With the rise of social media platforms, we are seeing more and more companies — even Fortune 500 companies — entering into extremely one-sided “clickwrap” agreements with platform providers. Although clickwrap agreements are generally enforceable under U.S. law, we expect to see more challenges on public policy and other grounds to particular provisions in these agreements.

Speaking of clickwraps, we often comment on how social media platforms’ terms of service (TOS) are typically long and intricate, branching off into various rules, policies, guidelines and “best practices” that change over time (and not necessarily all at the same time!).  As business users invest more and more time and money in creating and cultivating their social media presences, and as consumers increasingly turn to social media as the way to interact with their favorite brands, we anticipate a resurgence of interest in what these TOS say… not just what they say today, but what they said last week, last month and last year.  We foresee more services adopting Twitter’s practice of maintaining an archive of earlier TOS versions, and perhaps even the institution of a well-stocked third-party clearinghouse, along the lines of, dedicated to tracking social media TOS changes over time. 

Even with Facebook’s recent settlement with the FTC in connection with Facebook’s data collection practices, we anticipate still further privacy law headaches for social media companies in the coming year.  Global privacy laws get tougher and more burdensome each year, and yet many social media providers, anxious to justify astronomical valuations, are undoubtedly feeling pressure to make more aggressive use of the personal information that they have collected from their customers.  Watch for the first skirmishes in 2012 to be initiated by European regulators. 

Online behavioral advertising is a subject that attracts strong bipartisan opposition, even in the current bitterly divided Congress.  Watch for 2011’s call for greater regulation of OBA to grow louder over the coming year, resulting in new legislation or regulations.

We will see even the largest, most conservative Fortune 500 companies adopting internal, company-wide social media platforms of the type offered by Jive, NewsGator and SocialText.  And, in 2013 and beyond, we’ll be seeing a new generation of privacy, employment, defamation and other legal claims arising out of these enterprise social platforms.

We will likely continue to see courts struggle with the limits of the safe harbors provided by Section 230 of the Communications Decency Act.  Ever since the landmark 1997 case Zeran v. America Online, courts have fairly consistently held that Section 230 provides online service providers broad immunity for defamatory or otherwise actionable information posted by users.  But we have also seen courts occasionally impose some limits on the scope of Section 230 — e.g., in the 2008 case Fair Housing Council v. and the more recent Hill v. StubHub case.  And other courts, such as the California Supreme Court in Barrett v. Rosenthal, have expressed discomfort with the broad sweep of Section 230 even while upholding it.  Watch for more Section 230 cases in 2012 as courts continue to explore the outer boundaries of this critically important but controversial statute. 

You don’t need a crystal ball to see that mobile apps will continue to generate much of the growth in social network use and Internet use in general in 2012.  Perhaps more interesting is the question of what form those apps will take and where users will get them. Various app stores and marketplaces, large and small, will continue to offer consumers many choices to shop for apps for different mobile platforms. And the emergence of HTML5-based apps as an alternative to native apps adds another dimension to the issue.  We will likely see continued volatility in this area in 2012, but, if we were going to make a prediction — and that’s what we’re doing here, right? — our money is on HTML5-based apps to start taking market share from native apps in the coming year.

As the major global social media platforms vie for local eyeballs, we foresee more announcements like Twitter’s recently-reported arrangement withMixi,Japan’s long-time favorite social media platform, to collaborate on new products and services. Partnerships like this, coupled with geographic expansion (Twitter opened an office inTokyo in early 2011), could help the leading U.S. social media providers to establish brand recognition and ultimately market share in countries that are still ruled by homegrown incumbents.