Arbitration Clauses in Electronic Agreements May Be Difficult to Enforce

Electronic agreements have become a staple of today’s e-commerce world, and such agreements generally are as enforceable as those written on parchment and signed with a quill pen. One notable exception, however, is where the proponent of such an agreement seeks to enforce an arbitration provision. In that case, more may be required than simply having a clause stating that all disputes must be resolved through arbitration at the AAA, JAMS, or some other organization. Indeed, that is the hard lesson the defendants in Cruz v. Jump City Everett LLC (34 Mass.L.Rep. 586) learned earlier this year.

In 2015, after visiting the defendants’ recreational trampoline facility with his two minor children, Elmer Cruz filed suit in Suffolk Superior Court, claiming that he suffered an injury at the establishment. The defendants moved to dismiss that claim, contending that Mr. Cruz had affixed his electronic signature to a “Participant Agreement” that included a clause requiring all disputes to be resolved via arbitration. Mr. Cruz countered by submitting an affidavit in which he asserted that (i) he does not speak English; (ii) his son, who does speak English, led Mr. Cruz to a computer screen, where the son entered various information and made the “click” that generated what the defendants claimed to be Mr. Cruz’s electronic signature; and (iii) Mr. Cruz did not know what was represented on the computer screen and did not authorize his son to “sign” on Mr. Cruz’s behalf.

In their motion to dismiss, the defendants argued that, even if what Mr. Cruz averred was true, he still was bound by the arbitration agreement because his son was his legal agent and/or had apparent authority to sign his father’s name to the agreement.

In ruling on that motion, the Superior Court judge first noted that the burden was on the defendants to show that a binding agreement to arbitrate existed, and meeting that burden required them to come forward with proof that “the provision in question was reasonably communicated and understood.” The judge then quickly found that this burden had not been met, because there was nothing to establish that “the entry of Mr. Cruz’ electronic signature by his 15-year-old son bound the plaintiff to the terms of the Agreement, including the arbitration provision.”

As for the apparent authority argument, the judge found that the “simple act of standing by while [Mr. Cruz’s] 15-year-old [son] entered information in to the computer, under the circumstances presented, does not establish apparent authority as a matter of law or undisputed fact.”

The lesson to be learned from Cruz is pretty straightforward: You can’t rely on boilerplate in an electronic document if you want to enforce an arbitration provision. (And one has to wonder what other provisions might fall into that same category.) Rather, while having a well-written agreement, no doubt, is necessary, you also need to have protocols and systems in place so that you can credibly contend that the electronic signatures you obtain were knowingly and willingly provided. If you can’t do that, you may end up in a court of law, rather than in arbitration.