Judge upholds Tesla arbitration agreement that drivers called “unconscionable”

Four Tesla drivers who sued the company over its allegedly deceptive “self-driving” claims will have to go to arbitration instead of pursuing a class action, a judge ruled.

The complaint sought class-action status on behalf of “consumers who purchased or leased a new Tesla vehicle with Tesla’s ADAS [Advanced Driver Assistance Systems] technology but never received the self-driving car that Tesla promised them.” Self-driving claims made by Tesla and CEO Elon Musk “have proven false time and time again,” the lawsuit said.

While the plaintiffs agreed to terms including an arbitration clause when they purchased cars, they argued that “Tesla’s arbitration agreement is unconscionable, and thus [un]enforceable.” They said the arbitration agreement “is not referenced on the Order page” and “is buried in small font in the middle of an Order Agreement, which is only accessible through an inconspicuous hyperlink.”

Judge Haywood Gilliam Jr. of US District Court for the Northern District of California did not agree. Gilliam issued an order on Saturday granting Tesla’s motion to compel arbitration and denied the plaintiffs’ motion for a preliminary injunction.

Judge: Tesla “provided conspicuous notice”

Gilliam said the Tesla website offers “a type of hybrid browsewrap agreement where the terms of the agreement are hyperlinked above the ‘Place Order’ button.” Contrary to plaintiffs’ claims, Gilliam did not think that Tesla’s references to the arbitration agreement were too inconspicuous:

As explained above, the text reads: “By placing this order, I agree to the Model [3 or Y] Order Agreement,” and the agreement is hyperlinked. Despite Plaintiffs’ urging, the text of this sentence was the same size as the “Place Order” button text below it, and was the same size as other text on the webpage. The hyperlinked agreement was highlighted in blue, which courts have routinely found indicates to a user that there is a hyperlink. And this blue text is some of the only colored text on the screen. There are no other distracting details on the webpage, and the relevant language about the order agreement is therefore conspicuous. It also clearly indicates that clicking the “Place Order” button will manifest the customer’s consent to the agreement.

Gilliam decided that Tesla’s “order payment screens provided conspicuous notice of the order agreements.”

Plaintiffs also argued that the agreement’s 30-day opt-out clause is “illusory” because it “typically takes much more than 30 days for Tesla to configure and deliver a car, which deprives customers of any opportunity to inspect before the 30 days expire.” The agreement also “compels consumers to waive their right to participate in class arbitration,” a factor that “weighs in favor of substantive unconscionability,” they said.

But Gilliam didn’t find the 30-day opt-out clause or other parts of the agreement to be unconscionable. He noted that “the order agreements themselves are just a few pages long, and the arbitration provisions within them are offset from the rest of the agreement with a large text box.” The text included the provision that customers “may opt out of arbitration within 30 days after signing this Agreement by sending a letter” to Tesla.

Gilliam also rejected plaintiffs’ claims that the arbitration agreement violates California’s McGill rule, a precedent in which arbitration provisions are unenforceable if they waive a plaintiff’s right to seek public injunctive relief.

“Plaintiffs do not explain how the [Tesla] arbitration agreement at issue here waives their right to pursue public injunctive relief through arbitration and the Court sees no indication that it does. The Court therefore finds that the arbitration agreements are enforceable,” he wrote.

https://arstechnica.com/?p=1972657