Edmundson v. Klarna, S.A., No. 22-557-cv, 85 F. 4th 695 (2d Cir. 2023)
Klarna, Inc. offers online shoppers the opportunity to purchase products and, free of any interest or fees, repay Klarna for the balance in regular instalments. Najah Edmundson used those services in 2021, and Klarna collected the instalments from her checking account shortly thereafter. Edmundson’s account balance, however, was deficient at the time of collection, so the financial institution associated with her checking account levied overdraft fees. Edmundson then brought suit against Klarna, asserting various consumer-law claims.
Klarna moved to compel arbitration, citing the mandatory arbitration provision in its terms of service, to which Edmundson allegedly agreed. The trial court denied Klarna’s motion, concluding that Klarna had not provided clear and conspicuous notice of the terms and that Edmundson had not clearly manifested assent to those terms. Klarna appealed.
With respect to Edmundson’s purported assent to the terms, the computer interface set forth the following words next to a “Confirm and continue” button: “I agree to the payment terms.” The words “payment terms” were in underlined, bolded typeface, and included a hyperlink that, when clicked, displayed the terms. Edmundson clicked the “Confirm and continue” button and finalized the transaction.
The Decision of the Court of Appeals
The court of appeals rejected the trial court’s conclusion that Edmundson had not clearly manifested assent to the arbitration agreement because the aforementioned language (“I agree to the payment terms”) was unaccompanied by any indication of what action would be sufficient to manifest that agreement. Additionally, the court rejected the conclusion that the hyperlink provided no clear and conspicuous notice of the terms.
In reaching its decision on the issue of notice, the court of appeals reasoned as follows: (1) the website’s interface was not “cluttered” with extraneous information, an assortment of colors, or an excessive number of links; (2) the hyperlinked terms were set off from the surrounding text by bolded, underlined typeface (black) on a white background, despite having been displayed in smaller font; and (3) the hyperlinked terms appeared directly beside the “Confirm and continue” button. In short, the court found that a reasonable internet user could not avoid noticing the hyperlink before opting in. The court acknowledged certain deficiencies—for example, that the hyperlink was in black, rather than blue typeface—but reiterated its decision that notice was, notwithstanding, clear and conspicuous.
Regarding Edmundson’s assent, the court explained that, in these circumstances, it would be unreasonable for an internet user to read the conspicuous and clear statement before clicking the confirmation button and misunderstand that by doing so, he or she was confirming an agreement to the payment terms and continuing forward with the transaction. Again, the court noted possible improvements; for example, the court suggested that Klarna could have provided more detailed instructions. But the court was ultimately unpersuaded by arguments to that effect.
Accordingly, the court concluded that Edmundson had unambiguously manifested her assent to Klarna’s terms and that Edmundson had agreed to arbitrate her claims against Klarna. The court reversed and remanded with instructions to grant Klarna’s motion to compel arbitration.
This Article was originally published in the North America Newsletter.