Subway Learns an Expensive Lesson

Court Refuses to Enforce Online Arbitration in TCPA Lawsuit

As detailed in prior articles, a formula exists for securing valid TCPA consent online. The form submission page must include a properly placed disclosure that informs consumers that by undertaking a particular action (i.e., checking a box, clicking submit), they are consenting to contact by one or more named parties by text or phone using an automated telephone dialing system or prerecorded voice.  In addition, the consumer must be given an opportunity to designate the number to which calls may be placed, and the disclosure must be on the same page as the form field that collects the phone number.

Even armed with a valid consent mechanism, you still run the risk of a long and expensive legal fight if someone elects to challenge it unless consumers are required to submit their claims to arbitration, which is a faster and far less expensive method to resolve legal disputes.   As also discussed in other articles, mandatory arbitration is also one of the most effective methods to circumvent a TCPA class action.

However, just as there are specific requirements to obtaining valid TCPA consent online, numerous court decisions have made it clear that a specific formula must also be followed to ensure that a website’s mandatory arbitration provision is enforceable. This fact is illustrated by a recent decision issued by an appellate court in Connecticut, which determined that the mandatory arbitration provision a TCPA defendant was hoping to enforce was not presented in a clear and conspicuous manner sufficient to provide adequate notice to consumers that they were subject to the provision.

In Soliman v. Subway Franchisee Adver. Fund Trust, Ltd, the Connecticut district court refused to enforce an arbitration provision applicable to a Subway landing page advertising a text messaging program, stating that the page “was relatively cluttered, did not use a conspicuous size or font in the terms and conditions link, and did not adequately inform consumers that by clicking ‘I’M IN’ they were agreeing to anything other than the receipt of a coupon.”  In other words, users were not given sufficient notice that they were also agreeing to forgo their right to sue Subway in court.

Subway appealed the district court’s decision but encountered similar objections at the appellate level.  The Second Circuit Court of Appeals upheld the decision, ruling that visual elements in the website’s call-to-action display effectively distracted consumers from important disclosures lower down on the page.  In addition, the Appellate Court found that viewing the page that included the arbitration provision was also a challenge for consumers accessing the site with a mobile device, and the page itself referenced terms and conditions for the use of “this website” as opposed to the landing page for the text message program.

Therefore, keep in mind that employing a valid online TCPA consent mechanism is not enough to keep you out of court.  Your web properties should always include a mandatory arbitration provision, and to be certain your terms are enforceable, follow these suggestions:

• Include a disclosure informing users that by undertaking a certain action (e.g., clicking a button or checking a box), they are agreeing to the website Terms of Service which includes a mandatory arbitration provision.

•  Be certain the disclosure is placed above the form submission button, alongside an unchecked box that consumers must check to confirm their agreement.

• The disclosure should be in a clear font in an easily visible size and color.

• Include a link to the Terms of Service that is underlined or in a contrasting font.

• The page on which the disclosure is presented should be clean and free of distractions.

The Soliman case was an expensive lesson for Subway, the cost of which it apparently bore without difficulty. Many of us are not as fortunate.