On August 8, 2024, the U.S. District Court for the Eastern District of Virginia in Lovinfosse v. Lowe’s Home Centers, LLP addressed the enforceability of an arbitration clause in Lowe’s terms of service, serving as a reminder of the problems that may arise from terms of service (TOS) language allowing unilateral modifications.
The plaintiff, Eleanor Lovinfosse, alleged that the retailer’s use of Online Choice Architecture (OCA) led her to purchase a water hose labeled as “Required for Use” while buying a washing machine online. Lovinfosse later discovered the washing machine came with all necessary parts, rendering the additional purchase unnecessary. She subsequently filed a class action lawsuit against the retailer, alleging deceptive practices.
Lowe’s maintained the dispute is subject to the arbitration requirement in its TOS; arguing that Lovinfosse agreed to the terms by clicking the “Place Order” button during checkout.
Directly below the “Place Order” button, hyperlinked text states: “By placing an order, I agree to Lowe’s Terms and Privacy Statement.” This allows users to reference the full text of the terms if they click the link. Lovinfosse did not click on the hyperlinked terms and asserted that she was not aware of their contents, including the arbitration clause.
The court agreed with the defendant on this point, reasoning that based on the layout and language of the website, Lovinfosse had constructive notice of the terms and had manifested assent by moving forward with the order.
The court then turned its analysis to the unilateral modification clause within the TOS, which stated:
“You agree that Lowe’s may change, terminate, modify, add, end or delete any of these terms and conditions (including, without limitation, the Terms) under which the Site is offered at any time and without notice to you. Lowe’s, in its sole and absolute discretion, reserves the right to update, change, terminate, suspend, modify, add, end or delete any of these Terms . . . , in whole or in part, at any time with or without notice.”
Although the arbitration clause existed as part of the TOS at the time Lovinfosse agreed to them, the unilateral modification clause purported to allow the retailer to change its terms at any time and without notice. The court concluded that, while Lovinfosse may have agreed to the TOS, the unrestricted ability to modify the terms without notice made the arbitration clause illusory and unenforceable.
The court further reasoned that a customer who makes a single transaction would have no way of knowing if the terms had changed unless they constantly checked the website, highlighting that the lack of required notice distinguished this case from others where unilateral modification clauses were upheld.
The court’s reasoning in Lovinfosse is reminiscent of the conclusions drawn in Harris v. Blockbuster Inc., a Northern District of Texas decision from 2009. In that case, the court similarly held that the unilateral modification clause in Blockbuster’s online terms of use rendered the arbitration clause illusory and unenforceable. The court reasoned that Blockbuster could, in theory, unilaterally modify the arbitration provisions and apply those modified provisions to earlier disputes.
The case law regarding unilateral modification in online terms has shifted over the years. After Harris, unilateral modification requirements appeared to loosen, as evidenced by the 2014 San Francisco Supreme Court decision in Rodriguez v. Instagram. In Rodriguez, Instagram’s terms stated that users would be notified of material changes to the terms, and the meaning of “material change” would be determined at Instagram’s sole discretion.
Though Instagram had sole discretion to determine when to give notice of a change in its terms, the court upheld the unilateral modification of its terms of use – noting that Instagram had in fact provided reasonable advance notice via email and that continued use of the service constituted Rodriguez’s acceptance of the new terms.
More recently, decisions like Sifuentes v. Dropbox have permitted unilateral modification but made it much harder to meet the requirement for giving notice. In Sifuentes, the United States District Court for the Northern District of California reviewed Dropbox’s ability to enforce amendments to its terms, which contained a notice provision that was similar to Instagram’s. The court held that Dropbox could not enforce its amended TOS because it failed to show that the plaintiff’s continued use of the service was conditioned on agreement to the amendments.
The court found that the plaintiff also didn’t have actual notice of the modified terms because Dropbox did not show that the plaintiff had read the email notifications of the amendments. The Sifuentes court further characterized the provision as “essentially disavow[ing] any obligation to alert [users] to changes.” This decision underscored practical challenges of meeting the necessary notice standard, but these cases did not focus on or require the Harris standard of only enforcing unilateral amendment provisions where the terms themselves required the provider to give notice (presumably in addition to such notice being given where applicable to the case’s facts).
Lovinfosse appears to mark a return to the stricter stance seen in Harris, serving as a reminder of the limitations and potential pitfalls of unilateral modification clauses in TOS. While the court acknowledged that the plaintiff had agreed to the terms, the ability to change those terms without notice made the arbitration clause illusory and unenforceable.
In many ways, this is a frustrating standard for companies that have followed best practices when implementing enforceable terms, only to face the risk that agreed upon contractual terms which have not changed might be declared unenforceable simply because they could change. As companies navigate the complexities of digital contracts, Lovinfosse underscores the necessity of transparency in consumer agreements.