Court Confirms One Way to Prevent Website Privacy Class Action Is Through Arbitration Provision Referenced in Cookie Banner

In the last six or so years, businesses have been assaulted with demand letters and lawsuits asserting website privacy claims under the Electronic Communications Privacy Act, California Information Privacy Act, and other similar state statutes and common law claims. The basic assertion is that the website owner installed cookies on the consumer’s device without consent, allowing a third party to obtain information about the consumer. These claims come with the potential for stiff penalties. For example, CIPA claims have a $5,000 statutory damage per violation.

One of the best prophylactic measures is a cookie banner, which pops up upon each visit, to obtain consent from the user. Problems with these banners abound. Plaintiffs regularly assert that the cookies were immediately installed before the user could consent or that even after the user declined cookies, they were installed anyway.

Regardless of the actual technological issues, the cookie banner can still assist in a critical way. The cookie banner can provide a mechanism to force individual arbitration of these claims by providing notice of the website owner’s terms and conditions. 

These terms and conditions can, and in many cases likely should, include an arbitration provision with a class action waiver. Effective individual arbitration provisions can significantly reduce a website owner’s risk arising from these claims. Rather than a class of all website visitors in the last year, for example, under CIPA, the claim would be limited to the individual making the claim.

This scenario was analyzed in a recent California case, Penning v. Nvidia Corp. The plaintiff came to the Nvidia website where a popup banner was displayed asking him to make elections regarding tracking cookies. After declining cookies, he asserted that the website still tracked him.

The website owner asserted that the terms referred to in the banner, including an arbitration agreement and a class action waiver, were binding on the user while the plaintiff contended that he did not agree to arbitration. 

The court sided with the website owner, finding that the plaintiff had notice of the Terms of Service (including the arbitration provision) and assented to them by clicking an action button within the cookie banner.  

The court found the cookie banner’s key characteristics bound the user to the arbitration provision in the website’s terms of service:

• The cookie banner included a hyperlink to the Terms of Service, which was underlined in green (a contrasting color), was in the same size font as the surrounding text, had initial capitalization, and included a parenthetical that the Terms of Service contain important waivers;

• The cookie banner stated that a user accepts the Terms of Service by clicking one of the buttons on the banner, and the hyperlink to the Terms of Service appeared within the cookie banner immediately before the action buttons; and

• The cookie banner was persistent and would not disappear without engagement.

What Website Owners Should Do

The Nvidia banner mitigated risk, even in the face of a technology snafu. To best attempt to prevent claims, website owners should obtain consent from users before tracking. This practice usually means having a cookie banner, and not deploying cookies until consent is obtained. 

As a backup, best practices likely include language in a persistent cookie banner that also obtains direct or constructive agreement to the website owner’s terms and conditions, including an arbitration agreement and a class action waiver. This should follow Nvidia’s formatting in the bullets above with the information before the buttons, either above or to the left, so that the user sees the terms before agreeing.

Companies can go further by greying out the site and not permitting any interaction until after a user accepts the terms directly.

While there is no perfect banner, companies should take steps to obtain consent to track users and utilize arbitration agreements.  

If you receive one of these claims or have any questions on these topics, please contact your Payne & Fears attorney.