MAJOR WIN FOR THE FRUM COMMUNITY: APPELLATE COURT UPHOLDS THE BAIS DIN SYSTEM

Arbitration provisions are very prevalent in the frum community.

Prior to entering into a business deal, a rental lease, or a divorce proceeding, many members of our community enter into agreements which set forth the terms of their transactions and contain arbitration clauses that in case of a dispute, in lieu of going to court, the parties will adjudicate their claims in Bais Din.

The New Jersey Appellate Division today released a ruling upholding an arbitration provision, thus giving a major boost of support to the Bais Din system.

On April 24, 2022, Nicholas Racioppi, Jr. used Airbnb's website to book a Manhattan rental property from June 6, 2022 through July 29, 2022. On May 18, 2022, his booking was cancelled and fully refunded without explanation. Following various communications initiated by Racioppi, Airbnb offered to find a replacement rental property in New Jersey or Queens. However, Racioppi found the suggested properties unacceptable and, as a result, "expended tens of thousands of dollars more than the agreed-upon price" to book another rental property in Manhattan.

In response to the unpleasant incident, on May 23, 2022, Racioppi filed a lawsuit in Superior Court against Airbnb, alleging breach of contract; breach of the implied covenant of good faith and fair dealing; common law fraud; fraud in the inducement; negligent misrepresentation; and violation of the New Jersey Consumer Fraud Act.

Airbnb filed a motion to compel arbitration. They argued that in creating his Airbnb account, Racioppi completed and clicked through two sign-up screens that required explicit acknowledgement of their Terms Of Service (TOS) and arbitration agreement.

Airbnb showed that on their first sign-up screen were hyperlinks to the TOS, policy documents, and the following disclaimer: "By signing up, I agree to Airbnb’s [TOS], Privacy Policy, Guest Refund Policy, and Host Guarantee Terms." The second sign-up screen contained a second hyperlink to the TOS and a red button which read, "Sign up." Neither screen required scrolling or adjustment of the screen to view the texts and prompts.

Racioppi opposed the motion, arguing that the TOS was designed to conceal their arbitration provisions; he never consented to the TOS; he was never made aware of the TOS prior to litigation; and he was never directed to be aware of the TOS during the Airbnb sign-up process.

Airbnb argued back that: (1) the contract between the parties' mandates arbitration; and (2) Racioppi's assent to Airbnb's TOS was undisputed.

Morris County Superior Court Judge David Ironson sided with Airbnb.

 

"Based on the formatting and wording of Airbnb's TOS, the court finds that the arbitration clause is phrased in "plain language that is understandable to the reasonable consumer" and that it adequately "identifies the specific constitutional or statutory right guaranteeing a citizen access to the courts that is waived by agreeing to arbitration." The wording is clear and unmistakable that by agreeing to the terms, Racioppi was waiving his right to a jury trial and agreeing that he would enter into arbitration to solve any disputes," Judge Ironson stated, dismissing the lawsuit and compelled the matter to arbitration.

Racioppi appealed the ruling, in part arguing that a) the hyperlink to the Terms of Service is not underlined, bolded or enlarged; b) Airbnb's sign-up screens did not indicate he was required to read the Terms of Service; c) Airbnb's sign-up screens did not require him to affirmatively assent or view the Terms of Service.

Appellate Division Judges Gooden Brown and Mitterhoff were not persuaded, and they have now affirmed Judge Ironson's ruling compelling the matter to arbitration.

The court reviewed the New Jersey Supreme Court's ruling in Atalese v. U.S. Legal Servs. Grp. which found that "by its very nature, an agreement to arbitrate involves a waiver of a party's right to have their claims and defenses litigated in court. An average member of the public may not know that arbitration is a substitute for the right to have one's claim adjudicated in court. As such, we take particular care in assuring the knowing assent of both parties to arbitrate, and a clear mutual understanding of the ramifications of that assent. Upon being satisfied that the making of the agreement for arbitration is not in issue, the court shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement."

Here, we are tasked with reviewing Airbnb's TOS and discerning whether, based on the design and layout of the website, Racioppi was provided with reasonable notice of the applicable terms, and knowingly assented to its terms, including the embedded arbitration agreement, when he created an Airbnb account. 

As specifically applied to arbitration agreements, the reasonable notice standard is satisfied if the provision is sufficiently clear, unambiguously worded, and satisfactorily distinguished from the other agreement terms.

Based upon our review of the record and the applicable law, we affirm Judge Ironson's decision to enforce the arbitration agreement in this matter. 

Specifically, we agree with the judge's findings that Racioppi was provided with reasonable notice of Airbnb's TOS and its embedded arbitration agreement because "the wording of the TOS is clear and unmistakable."

Our fact-sensitive inquiry establishes that Airbnb's first sign-up screen required no scrolling and provided the following language in legible red text:

"By signing up, I agree to Airbnb's Terms of Service, Privacy Policy, Guest Refund Policy, and Host Guarantee Terms." Immediately below that disclosure were red hyperlinks to the TOS and referenced policy documents. Airbnb's second sign-up page provided the same, which was clearly displayed in red hyperlinks below a prominent "Sign Up" button.

As to defendants' arbitration provisions, we find that they were similarly unambiguous and satisfactorily distinguished from the other terms of the TOS. There is no question that the clarity and placement of the TOS sufficiently satisfies the "reasonable notice" standard set forth in the Supreme Court ruling in Atalese. Therefore, Racioppi is bound by his agreement to adjudicate his claims before an arbitration panel, the Appellate Division panel concluded.

This case ruling highlights why, as previously reported here on FAA News, Harav Shlomo Miller and Harav Elya Ber Wachtfogel, the preeminent Posek and Rosh Yeshiva in North America, have signed an letter cautioning parties to an eminent divorce or other litigation matter, including parties signing a shtar, to consult with a Toein (a Rabbinical attorney) prior to signing any Arbitration Agreement in Beis Din.

The importance of consulting with a Toein is futher highlighted in a case reported here on FAA News, where the Appellate Division did not compel arbitration in Bais Din because the parties did not stipulate a clear waiver language saying that they waive their rights to sue in court and exclusively choose arbitration as the only means of remedy, as required pursuant to Atalese.

As more recently reported here on FAA News, the State's highest court has agreed to review whether there can be exceptions to this established case law which requires arbitration provisions to include a explicit waiver of the right to seek relief in court.

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