A medical manufacturer that makes a diabetic monitoring device misled consumers by misrepresenting the nature of the Terms of Use on its website. This deception caused users to avoid clicking on a link that would allow them to avoid mandatory arbitration. A California Court of Appeal ruled the Terms of Use language was misleading, and therefore plaintiffs in five consolidated cases will not have to submit to arbitration and will get a new trial.

Four patients were seriously injured and one died when the Dexcom G6 Continuous Glucose Monitoring System (Dexcom G6) device, manufactured by Dexcom Inc., which they had downloaded, failed to alert them that their glucose levels were either too high or too low. The Dexcom G6 device and its accompanying sensor patch were marketed as a “potentially life-saving medical device capable of detecting and preventing hyperglycemic and hypoglycemic events by alerting users of near-dangerous blood glucose levels that may trigger such events.” Unfortunately, the device malfunctioned and failed to alert users of their dangerous conditions.

Five separate product liability suits and a wrongful death suit were filed against Dexcom. In each case, the company moved to compel arbitration. Dexcom claimed that each Dexcom G6 app user had agreed to arbitration when they clicked on a website link that said, “I agree to the Terms of Use.” San Diego Superior Court Judge Timothy Taylor granted Dexcom’s motion.

The plaintiffs appealed to Division One of California’s Fourth District Court of Appeal, which by a 2-1 margin ordered Taylor to vacate his writ of mandate that compelled arbitration. Taylor was ordered to enter “new and different orders that deny the motions to compel arbitration. “ Justice Truc T. Do wrote the opinion on May 16, which was concurred to by Justice Julie C. Kelety, with a dissent by Acting Presiding Justice Joan K. Irion.

Justice Do wrote that while most “clickwrap agreements” are enforceable, Dexcom’s was not. The company did not tell customers that their clicks to accept Dexcom’s right to receive and store their personal information and agree to the company’s “Terms of Use” were also agreements to accept arbitration. Therefore, the opinion concluded that “Dexcom could not meet its burden of proving the…clicks constituted unambiguous acceptance of the Terms of Use, including the arbitration provision. Consequently, arbitration agreements were not formed with any of the plaintiffs.”

The appellate opinion begins with a detailed description of what Dexcom G6 users had to do before using the free app. The company’s senior manager of data privacy, Eric Lovell, testified at trial, saying that those who purchased the G6 app had to create a username and password, after which they would be directed to a screen that said, “By ticking the boxes below you understand that your personal information, including your sensitive health information, will be collected, used and shared consistently with the Privacy Policy and Terms of Use.”

There were two boxes below that screen that customers could click. The first said, “I agree to privacy policy,” and the other said, “I agree to Terms of Use.” If both boxes were checked, Lovell explained the customer agreed to arbitration. Rather than merely checking the Terms of Use box, Dexcom G6 users could also click on the boxes’ link that would take them to a 22-page legal document. This document included an agreement to submit disputes to arbitration and had the words, “PLEASE NOTE THAT THIS AGREEMENT CONTAINS A MANDATORY ARBITRATION OF DISPUTES PROVISION” at the bottom (capitals in original.) Those who did not use the link, but checked both boxes, as the plaintiffs did, agreed to arbitration without their knowledge.

Do wrote that the threshold question in the appeal was whether, under California law, the website instructions constituted an “agreement to arbitrate.” The opinion explained that the State’s Civil Code for contract law (Civ. Code, § 1550; see also Civ. Code, § 1565) requires “…mutual assent, or consent, of the parties.” It explains that mutual assent is “an objective standard” with both parties judged by the “reasonable meaning of their words and acts.” In addition, Do said that Dexcom “must first establish…the contractual terms were presented to the consumer in a manner that made it apparent the consumer was assenting to those very terms when checking a box or clicking on a button.”

The plaintiffs argued that there was no voluntary or mutual agreement to arbitrate. Do explained that Dexcom had to show that it had “provided prospective G6 App users “with reasonably conspicuous notice of the existence of the terms to which they were to be bound. Importantly here, it was required to show that the content of its “Legal” screen supports the inference that the user’s action on that screen—here, clicking the checkbox—constituted an unambiguous manifestation of assent to those terms, including the arbitration provision.”

The district court wrote “We cannot conclude that a reasonably prudent user in the position of the plaintiffs would understand after reading this text that the Terms of Use were intended to govern any matters other than the scope of the user’s waiver of privacy rights and the management of the user’s personal information.” The opinion said that “a user would have no reason to believe…that by clicking the checkbox next to “I agree to Terms of Use” they were entering an agreement” other than the privacy waiver.” They could not reasonably understand they were agreeing to arbitration.

Justice Irion’s dissent stressed that an enforceable agreement is formed online when a website provides “reasonably conspicuous notice of the terms in which a consumer will be bound” and the consumer takes an action such as clicking. She said that when the plaintiffs clicked the boxes they “unambiguously manifested their assent to the Terms of Use.”

The 2-1 opinion of the appellate court took a stance opposite from the one found in Irion’s dissent, noting, “We conclude plaintiffs did not enter an agreement to arbitrate with Dexcom when they completed this process.” The trial court trial was ordered to “vacate its orders compelling arbitration, and to enter new and different orders denying the motions to compel arbitration.” The plaintiffs will get their day in court.