That’s a Wrap: Ninth Circuit Signals Tougher Standards for Enforceability of Online Agreements

On February 27, 2025, the Ninth Circuit affirmed the district court’s ruling in Chabolla v. ClassPass, finding that the “sign-in wrap agreement” on the ClassPass website was not an enforceable contract because it did not provide reasonably conspicuous notice and unambiguous manifestation of assent

The majority opinion in this case contains some takeaways about how businesses can better design online user agreement formation processes.

Background

ClassPass had moved to compel plaintiff, Katherine Chabolla, to arbitrate her claims against it, arguing that plaintiff was bound by the arbitration agreement in the terms of use policy to which she agreed when signing up for an auto-renewing ClassPass membership.

At the district court, Judge Yvonne Gonzalez Rogers in the Northern District of California denied ClassPass’s motion, holding that the ClassPass terms of use were not reasonably conspicuous on the webpages users saw during the sign-up process and that users could not have unambiguously manifested their assent to the terms through those webpages. In other words, the user did not clearly agree to the terms through their actions.

The court held that the terms did not represent an agreement between the plaintiff and ClassPass and denied the motion to compel arbitration. The ClassPass sign-in wrap agreement spanned three screens and provided links to the terms of use on each page.

Screen 1

Screen 2

Screen 3

Federal Appeals Court Upholds the Decision

The Ninth Circuit held that no screen provided plaintiff with reasonably conspicuous notice of the terms and the screens did not require the plaintiff to take sufficient action that unambiguously manifested her assent to the terms, such as clicking an explicit button or checking a box.

As to reasonably conspicuous notice, the Ninth Circuit held:

The first sign-up screen the user encountered (Screen 1) did not provide reasonably conspicuous notice because the notice of the terms of use appeared below the “Continue” button and below a “Sign up with Facebook” option button, placing the notice “outside of the user’s natural flow.”

• A reasonably prudent user would likely click “Continue” if they did not intend to sign up with Facebook and would not necessarily see the notice of the terms beneath those buttons.
• The size and color of the font of the terms on Screen 1 was “timid” and not prominently displayed. The terms were in a light grey font against a white background.
• While the notice of terms did interrupt the natural flow on the second and third screens in the sign-up process (Screen 2 and Screen 3), Screen 3 “muddled” the flow by placing language about gift cards in close proximity to the notice of Terms.

As to unambiguous manifestation of assent, the Ninth Circuit held:

• Screen 1 had less ambiguous notice than Screens 2 and 3 because the notice language advised the user that by clicking the “Continue” or “Sign up with Facebook” buttons, the user was agreeing to the terms of use.
• Still, a user could not manifest assent on Screen 1 because it failed to provide reasonably conspicuous notice.
• Screen 2 and Screen 3 were ambiguous because the language on the action button (“Continue” on Screen 2 and “Redeem now” on Screen 3) did not match the notice language about the terms of use above the action buttons.
• Considering the webflow of Screens 1 through 3 together does not change the outcome because “three faulty notices do not equal a proper one.”

Therefore, the Ninth Circuit panel held that the plaintiff did not receive reasonably conspicuous notice of the terms of use and did not unambiguously manifest assent to those terms when signing up for an auto-renewing ClassPass membership. Therefore, the arbitration agreement in the terms of use was unenforceable against her.

With respect to the conspicuous notice test, the court spoke more favorably about websites in which disclosures were placed below action items, like entering a name and email address, but above the button the user clicks to proceed.

The court also highlighted websites where the notice of terms was closer to the relevant action items than it was on the ClassPass Screen 1. Regarding unambiguous manifestation of assent, the court spoke favorably about websites in which the user is explicitly told the significance of clicking an action button. For example, a user may unambiguously manifest assent by clicking a “Place Order” button if the notice text states that “by clicking ‘Place Order,’ you agree to our Terms of Use.”

ClassPass has until April 14, 2025, to file a petition for rehearing.

What’s Next

The dissent in Chabolla v. ClassPass stated that the majority’s opinion was a departure from the existing case law and expressed fear that it would “sow great uncertainty” because websites can no longer predict how the court will react from one case to another. In the future, district courts may distinguish Chabolla v. ClassPass on the facts presented to them and issue opinions that are consistent with the existing case law that the dissenting opinion discusses.

But, while it remains to be seen whether Chabolla v. ClassPass becomes the standard or an outlier, websites using some form of sign-in wrap agreement may want to consider implementing changes consistent with the ClassPass court’s majority opinion, including notice language that is within the user’s natural flow and incorporates the action button language.