CURRENT MONTH (May 2020)

Data Privacy

Court Enforces Arbitration Clause Against Contractor of Customer

By John Ottaviani, Partridge Snow & Hahn LLP

A Pennsylvania federal court recently enforced the arbitration clause in an online license agreement where each log-on displayed a link to the terms and stated that use of the system constituted acceptance of the terms. Healthplan CRM, LLC d/b/a Cavulus v. Avmed, Inc., No. 2:19-cv-1357NR (W.D. Pa. April 28, 2020).

Avmed subscribed to Cavulus’s cloud-based customer relationship management (CRM) software for insurance companies managing Medicare Advantage plans, pursuant to a license agreement that contained an arbitration clause.  Avmed decided to replace Cavulus with another CRM platform.  Instead of asking Cavulus to provide Avmed’s customer information in a suitable electronic format, Avmed decided to engage NTT to transition its historical customer data to the new CRM platform, granted NTT a sublicense to access the Cavulus platform to do so, and notified Cavulus of the arrangement.  When Cavulus suspected that NTT was going beyond mere copying of data and was copying Cavulus’s “customized and proprietary workflows and recreating them” in the new CRM platform, Cavulus filed a demand for arbitration against Avmed and NTT for breach of contract, theft of trade secrets, and violations of the Pennsylvania Uniform Trade Secrets Act.  After NTT refused to participate in arbitration, and Avmed objected to arbitrability of the claims, NTT sued to enforce arbitration.  The court agreed with Cavulus and ordered the parties to arbitration.

The court disagreed with NTT that it was not bound by the arbitration provisions of the license agreement.  Evidence revealed that 9 NTT employees logged into the Cavulus system more than 75 times on behalf of Avmed.  Each time, the NTT employee was presented with a screen that required the entry of a user name and password, and to click on a LOG ON button.  About one inch below the entry boxes, was a single sentence reading “Use of Cavulus constitutes acceptance of the End User License Agreement,” with a hyperlink to the Agreement itself.  The court found the presentation of terms to be reasonably conspicuous and enforceable against NTT.  In particular, the link was not concealed at the bottom of the webpage or in fine print, the blue hyperlink stood out against the white background of the page, and the link appeared in a sentence that straightforwardly advised the user that use of the platform constitutes acceptance of the linked terms.

The case also follows the recent (and very helpful) trend of including screen shots in the opinion to demonstrate how the user engages with the website.

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