Unilateral Addition of Arbitration Clause Enforceable. The Colorado Court of Appeals in Macasero v. ENT Credit Union (2023COA40) addressed a party’s ability to add an arbitration clause to a contract through constructive electronic notice. The plaintiff took out an auto loan. The terms of the loan agreement provided for notices to be delivered by electronic means and for amendments with notice to the plaintiff. The terms also indicated that “[b]y utilizing your account and related services described herein, you agree to amendments to the terms of this Agreement which have been made available to you by mail, electronically on our website or in person.” Several years later, the lender electronically notified the plaintiff by e-mail of amendments to the agreement adding an arbitration clause. The lender did give the plaintiff the option to opt out of the arbitration clause by giving timely notice within 30 days.
Eventually, a dispute arose related to the terms of the agreement. The plaintiff filed a class action lawsuit because the dispute alleged affected many other borrowers. The lender moved to compel arbitration, but the district court denied the motion finding that the plaintiff did not have actual or constructive notice of the arbitration agreement.
The court of appeals reversed. The court noted that the key was whether the plaintiff had given assent to the arbitration clause and ruled that “[w]hen evaluating assent in the context of email and the internet, the threshold issue is . . . did the consumer have reasonable notice, either actual or constructive, of the terms of the putative agreement and did the consumer manifest assent to those terms.” (internal quotations omitted) (ellipsis in original). According to the court, “[c]onstructive notice occurs when a party abstains from inquiry when inquiry ought to be made . . . .” (internal quotations omitted). The court further explained that “[w]hen determining whether a plaintiff had constructive notice of an arbitration agreement based on email correspondence, courts consider the parties’ prior course of dealing, whether the email was designed in such a way that the notice or hyperlink was reasonably conspicuous, and the accessibility of the change in terms.” The court of appeals concluded that the plaintiff had an ongoing and persistent electronic relationship with the lender, that the notice of the amendment adding the arbitration clause was reasonably conspicuous because it was not buried or hidden on the screen, and the new terms were easily accessible through a series of hyperlinks with clear instructions. Thus, there was constructive notice of the amendment.
The plaintiff argued that there was no assent to the new arbitration clause, asserting that the addition of the arbitration clause was not the type of change contemplated by when the parties entered the original agreement. The plaintiff relied on Badie v. Bank of America, 79 Cal. Rptr. 2d 273, 275-77 (Ct. App. 1998). However, the proposed amendment in that case did not include an opt-out. In the plaintiff’s case, she was given the opportunity to opt out. Instead, she had constructive notice of the proposed amendment, did not opt out within the prescribed window of time, and continued using the lender’s services (which she agreed would act as her consent to amendments). Thus, the court concluded that the plaintiff assented to the new arbitration clause.
The court of appeals’ decision seems just and reasonable. The test articulated by the court seems practical and suitable to the new digital age where many customers with ongoing vendor relationships handle their business through electronic means.