Pennsylvania: The Cutting Edge of Arbitration Law

Back in 2023, the Superior Court of Pennsylvania, sitting en banc, refused to enforce Uber’s terms of service, finding that Uber’s terms of service were not presented in a manner that put consumers on notice that they were waiving their right under the Pennsylvania constitution to a jury trial. In January, the Pennsylvania Supreme Court reversed in Chilutti v. Uber Technologies, Inc.

The Supreme Court ruled on procedural grounds — the trial court’s grant of Uber’s motion to compel arbitration was not appealable on an interlocutory basis. The law is clear that denials of motions to compel arbitration are not appealable, but there is an exception when a party would face a “substantial loss” of money if they were compelled to arbitrate and only after that arbitration could challenge the grant of the motion to compel arbitration. Here, the Supreme Court found that arbitration of Chilutti’s claims would not involve substantial loss of money. If only substantial loss of time mattered! Ms. Chilutti was injured in 2019 and filed suit in 2020.

The Pennsylvania Superior Court is at it again in Duffy v. Tatum, and this time the appeal is from a denial of a motion to compel arbitration. Denials of motions to compel arbitration are appealable on an interlocutory basis. Daniel Duffy signed up for moving services through Dolly, Inc. (Dolly) by signing up on the company’s website, Dolly.com. The trial court determined that Dolly provided inadequate notice of its mandatory arbitration policy, which did not feature conspicuous notice to Mr. Duffy that, by agreeing to use Dolly’s services, he was waiving his rights under the Pennsylvania constitution to a jury trial.

The Court noted that the Supreme Court had overturned Chilutti without reaching the merits of the decision and opted to “borrow substantially from this Court’s well-founded en banc decision in Chilutti,” finding that the Pennsylvania “constitution provides greater protection of the right to a jury trial” than that provided by Dolly’s website. The issue in Duffy, as set out by the Court is “whether a person should be deprived of their constitutional right to a jury trial when they ostensibly enter into an arbitration agreement through hyperlinked terms of service on a website that the person never clicked on, viewed, or read.”

The Court’s reasoning proceeds in steps. First, the Court stresses the importance of the right to a jury trial under Pennsylvania law. Next, it reviews the evolution and expansion in scope of arbitration, while acknowledging the law’s inability to keep pace with practical developments. The Court notes recent holdings that push back against mandatory arbitration in particular cases: wrongful death actions and confessions of judgment. The Court contrasts the law’s general complacency in the face of routine waivers of a right to a jury trial in the civil context with the pains courts take, at least on a formal level, when criminal defendants waive their rights to a trial by jury.

Turning to the agreement at hand, the Court notes that it combines elements of click-wrap and sign-in wrap. Mr. Duffy could not proceed with his transaction without clicking a box that said “by clicking this box, I accept the Dolly Terms of Service.” For most courts, that would be enough to signify assent to terms. Not in Pennsylvania.

This Court requires: first, that the registration website explicitly state “that a consumer is waiving their right to a jury trial when the person agrees to the seller’s terms of service and the registration cannot be completed until the person is fully informed of that waiver;” and second, if the agreement is available through a hyperlink, the waiver “appear prominently in bold, capitalized text.” The Court imposes these conditions mindful of the fact that, for the typical web browser, the word “arbitration” is ambiguous. Consumers think arbitration is just a step in the litigation process.

Because Mr. Duffy never clicked on the hyperlink, he was never put on notice that by continuing with his purchase he was waiving his right to a jury trial. Dolly’s website did not put Mr. Duffy on notice of its terms, and so the trial court did not err in denying Dolly’s motion to compel arbitration.

Thanks to Timothy Murray to alerting me to the case.