Oct 30, 2024

To embed, copy and paste the code into your website or blog: <iframe frameborder="1" height="620" scrolling="auto" src="//www.jdsupra.com/post/contentViewerEmbed.aspx?fid=7c28835b-c370-482a-a8d3-b6445ea05154" style="border: 2px solid #ccc; overflow-x:hidden !important; overflow:hidden;" width="100%"></iframe> On September 25, 2024, the U.S. Court of Appeals for the First Circuit issued its decision in Toth v. Everly Well, Inc. Socially Aware spoke to Lawrence Gallick (of counsel in Morrison Foerster’s Austin office) about the case for a deeper dive into this interesting ruling. SA: Can you give us a brief overview of the case details and why it caught your interest? LWG: Sure. On the surface, it’s just another run-of-the-mill clickwrap/arbitration case, but one with some interesting nuances. The defendant, Everly Well, Inc. (“Everlywell”), sells food sensitivity test kits. Joyce Toth purchased an at-home lab test on a third party retailer’s website for $119.99. Following the instructions on the box, which stated that an online account with Everlywell was required to send in her sample for testing, she created an account. During this process, she clicked a mandatory checkbox indicating that she “read and accept[ed]” Everlywell’s terms of service (she could not submit the form without checking it). When she received her food sensitivity test results back, they made no sense to her since they indicated she was sensitive to eggs, whereas she regularly and recently had eaten eggs with no trouble. Turns out that (allegedly) the test actually measured foods that had been recently eaten, instead of (as advertised) sensitivities to foods. Toth was displeased and filed a class action claim against Everlywell for deceptive marketing practices. SA: That seems pretty straightforward. Did the court address the underlying deceptive marketing claim, or was it limited to arbitration enforceability? LWG: The case is about the enforceability of the arbitration clause, not the merits of the underlying deceptive marketing claim, which are not addressed (since arbitrability is a threshold question). Following the typical fact pattern for these cases, Everlywell moved to compel arbitration pursuant to its terms of service. Toth argued that the arbitration provisions in the Everlywell terms of service were not binding on her for several reasons, including (among other challenges) lack of consideration, lack of notice and assent, and that the contract was illusory due to its unilateral modification clause. The district court didn’t find these arguments compelling and rejected her arguments, so Toth appealed. SA: Which brings us to today. What was the basis of First Circuit’s ruling? LWG: The court found that Toth had both been given reasonable notice of the terms and reasonably manifested assent to those terms. On Everlywell’s account creation page, Toth had to enter some basic information (name, email, and password), below which was a checkbox with text next to it reading “I have read and accept the Terms and Conditions,” where “Terms and Conditions” was a hyperlink displayed in green, setting it off from the rest of the black text. Underneath this verbiage was a green button with the text “Create My Account.” Relying on Massachusetts precedent, the court reasoned that, while Toth was not required to read the terms to proceed (and in fact, she attested that she did not read the terms), the requirement to click a checkbox put Toth on notice that she was entering into a contract and also was a required affirmative action, satisfying the assent requirement under Massachusetts law. SA: Sounds like they drew a sharp line between clickwrap and browsewrap terms in their discussion of Massachusetts precedent. LWG: They did. Toth’s claims that the higher standard under Massachusetts law for binding a user to arbitration applied here were rejected by the court, which noted that, among other things, the precedents cited by Toth dealt with “browsewrap” agreements, which did not require the affirmative acts I mentioned earlier. The court also rejected Toth’s claim that she did not “meaningfully” assent to the terms because she had no ability to get the benefit of the test she had already purchased without completing the registration process. As noted by the court, Toth purchased the test kit from a third-party retailer, not Everlywell, and the box clearly stated that registration and acceptance of Everlywell’s terms are required to obtain test results. SA: Did unilateral modification clauses enter into this somewhere? They seem to be a factor in many of these cases. LWG: Yes. The court rejected Toth’s claim that Everlywell’s right to unilaterally modify its terms of service made those terms an illusory contract, an interesting issue in light of our recent coverage of the Lovinfosse case in the U.S. District Court for the Eastern District of Virginia (which is part of the Fourth Circuit, not the First Circuit as in Toth). Citing First Circuit precedent, the court in Toth noted that since the unilateral modification power was not used by Everlywell to modify the arbitration clause, the unilateral modification clause had no impact on whether arbitration was required – in fact, the court noted that this “is a subject for an arbitrator and not a court.” It is unclear whether Everlywell has since changed its unilateral modification clause (the current version, which was modified in March 2024, appears in Section 8 , but it would be interesting to know if and how the court’s reasoning in Toth squares with Lovinfosse. SA: So the First Circuit and the Fourth Circuit may be at odds? LWG: It remains to be seen. Although the current Everlywell terms contain an obligation for Everlywell to “endeavor” to notify the user of “material changes” (as opposed to the clause in Lovinfosse, which didn’t require legal notice at all), the terms still purport that the changes are effective regardless of notice (as in Lovinfosse). Would the Lovinfosse court enforce the Everlywell terms? Will we ever know? SA: One last question. Which is the better album – Double Nickels on the Dime by The Minutemen, or Zen Arcade by Hüsker Dü? LWG: Please don’t ask me idiotic questions like this. It’s self-evident that they’re each watershed releases by legendary groups at the height of their power. Owning both in multiple formats is the only correct choice. Also, it’s just “Minutemen,” not “The Minutemen.” Are we done here?