Popular fast food restaurant, Subway, is getting somewhat familiar with customer lawsuits. Earlier this year the chain made it back into the news after customers opened a class action lawsuit against them for unwanted text messages/advertising. The original case was filed back in 2019 by customer Marina Soliman after Subway ignored her requests to stop sending her promotional text messages. Subways first move was to move the case to arbitration but they were initially denied. Subway was then hit with a second class action lawsuit in 2019, claiming the same thing: the company was sending the customers text messages without their express permission which is in violation of the Telephone Consumer Protection Act.
The binding arbitration clause controversy continues as the Second Circuit recently concurred with Connecticut U.S. District Judge Jeffrey A. Meyer and denied arbitration for Subway.
Subway asked the appeals court to overturn Judge Meyer’s ruling that an in-store display ad’s link to Subway’s terms and conditions failed to make the arbitration clause conspicuous. The court explained that Subway did not clarify that getting a promotion code would lock consumers into binding arbitration. Subway could not meet the standard required to explain that the consumer agreed to arbitration.
To put it simply: a consumer sued Subway after using a code on an ad to enroll in a promotional program. The consumer tried to opt out of the text messages but then still received text messages from Subway. Subway has argued that the ad informed the consumer about arbitration.
According to Law360, the three-judge panel for the Second Circuit stated, “A combination of barriers relating to the design and content of the print advertisement, as well as the accessibility and language of the relevant website itself, leads us to conclude that the terms and conditions were not reasonably conspicuous under the totality of the circumstances” and “a reasonable consumer would not realize she was being bound to such terms and conditions by sending a text message to Subway in order to begin receiving promotional offers.”
The court noted that the terms and conditions were “buried on the advertisement in a paragraph that was printed in significantly smaller font relative to the other text on the advertisement, and the reference itself was surrounded by a substantial amount of unrelated information.”
The arbitration process creates an uneven playing field that gives large companies an advantage, is expensive, and lacks transparency.
Many policymakers have been fighting against binding arbitration language in contracts, such as the language used in this case. The Second Circuit ruling is a big win for those policymakers.
