Amazon.com subsidiary Zappos lost an attempt on Thursday to force customers into arbitration over damages allegedly caused by a data leak in January.
U.S. District Court Judge Robert Clive Jones rules that the arbitration clause in Zappos' standard terms and use agreement did not apply because it was too obscure and could be altered unilaterally by the company. Customers sued Zappos after 24 million customer accounts, which included sensitive information such as credit card numbers, were exposed when hackers penetrated the company's database early this year.
Zappos uses what is called a browsewrap agreement, in which terms are spelled out on a page accessed by a link on the website. The other type used by website owners, called a clickwrap, requires customers to click on a box to confirm they have read and agree to an adjacent agreement.
"A (customer) cannot assent to terms of which it has no knowledge or constructive notice, and a highly inconspicuous hyperlink buried among a sea of links does not provide such notice," Jones wrote in a 14-page ruling.
The Zappos use agreement links are generally placed in the bottom half of a page so that "no reasonable person would have reason to click" on it.
Further, Zappos reserved the right to change the terms at any time, while customers lacked that option. A contractual term in which one side can redo it to suit its purposes is not valid, Jones wrote.
Contact reporter Tim O'Reiley at email@example.com or 702-387-5290.