Key Points

  • The Oregon Court of Appeals affirmed a trial court order denying a petition by Christopher Arends to compel arbitration of investors' securities fraud claims under ORS 59.115.
  • The court said Oregon had not previously addressed contractual assent through an online interaction and treated the Ninth Circuit's criteria in Berman v. Freedom Fin. Network, LLC as persuasive.
  • Because the checkbox on CASL's website asked users only to certify that their information was correct, the court held the hyperlinked Note Purchase Agreement operated more like a browsewrap than a clickwrap agreement.
  • Relying on Chabolla v. Classpass Inc., the court held that reasonable conspicuousness of terms alone does not bind a user who was not told that checking the box meant agreeing to them.
  • The party seeking arbitration bore the burden of proving assent, and the record supported the trial court's implicit finding that the investors never assented, so the arbitration provision was severed from the agreement.

The Oregon Court of Appeals ruled Wednesday that investors in a cryptocurrency hedge fund did not agree to arbitrate their securities fraud claims by checking a box on the fund's website. The instruction beside the box said only that checking it certified that the information the investors had entered was correct.

The three-judge panel affirmed a Multnomah County Circuit Court order that denied a petition to compel arbitration filed by Christopher Arends, a member of CASL LLC, the company with which the investors placed their funds. Judge Egan wrote the opinion for a panel that also included Presiding Judge Aoyagi and Judge Pagán. The ruling keeps the investors' claims against Arends under Oregon's securities laws in court rather than before a private arbitrator.

The decision takes up a question Oregon's courts had left open: how a person agrees to a contract online. "Oregon has not yet addressed the issue of contractual assent through an online interaction," Egan wrote. To fill that gap, the panel looked to two decisions of the U.S. Court of Appeals for the Ninth Circuit, Berman v. Freedom Fin. Network, LLC, and Chabolla v. Classpass Inc., which hold that a website must tell users explicitly that clicking a button or checking a box means accepting its terms.

The plaintiffs are the Wolcott Family Living Trust, Tyche Investment Fund LLC, Noelle Wolcott and Ryan Weber. According to their complaint, Arends solicited them to invest in a cryptocurrency hedge fund that would put their money into arbitrages on currencies and cryptocurrencies. He promised, they alleged, that CASL would repay their principal plus 5 percent interest every 42 business days and would return their full principal within 30 days of a request.

The investors completed an "onboarding" process on CASL's website, invested significant sums and received promissory notes. They alleged that when they learned their money was not being invested as promised and demanded it back, Arends and CASL did not return it.

Arends petitioned to compel arbitration. He relied on a Note Purchase Agreement with CASL that required disputes to go first to mediation and then to binding arbitration before JAMS, a private dispute-resolution provider, under the Federal Arbitration Act. Arends argued that he was a third-party beneficiary of the arbitration provision. He also moved to dismiss the suit because the investors had not first pursued mediation and arbitration.

The trial court denied both requests in what the appeals court called "a rather cryptic order." On appeal, Arends argued that the evidence required a finding that the investors had agreed to the clause during onboarding. To proceed, investors had to check a box beside a blue hyperlink labeled "Onboarding Agreement," which led to the Note Purchase Agreement. Investors who tried to click "Confirm" without checking the box saw a banner telling them that they "must agree to the terms to proceed."

In a footnote, the court quoted Arends's argument to the trial judge that such a design is a familiar one: "That's a matter of the way the world works now. And has worked for perhaps the last 20 years or more." Arends also argued that the investors were sophisticated, that an agreement on one investor's own website was modeled after CASL's, and that their complaint alleged they had "signed" Note Purchase Agreements.

The investors answered that Arends had explained the investment terms to them orally and had never mentioned arbitration. They submitted declarations stating that they never noticed or used the hyperlink and did not see the agreement until the litigation began.

Egan wrote that Arends, as the party seeking arbitration, "bore the burden to prove the existence of an agreement to arbitrate." The panel agreed with both sides that Berman supplied the right test. "But, as we read Berman, the articulated criteria favor plaintiffs' position here," Egan wrote.

Berman distinguishes two kinds of online agreements. A clickwrap agreement presents terms and requires the user to check a box stating "I agree," and courts routinely enforce it. A browsewrap agreement offers terms only through a hyperlink, and courts are more reluctant to enforce it. The panel concluded that "CASL's website presented the Note Purchase Agreement more as a 'browsewrap' than as a 'clickwrap.'"

Even if the link was easy to see, the panel held, visibility was not enough. It quoted Chabolla: "[r]easonable conspicuousness alone is not sufficient to bind a user—a user must agree to the terms, not merely see them." Egan wrote that "There was no requirement on the CASL website to agree to or confirm acceptance of the terms of the Note Purchase Agreement and its arbitration provision."

The checkbox, Egan added, "reasonably could be understood by plaintiffs to confirm only that the information plaintiffs provided was correct, not to agree to all of the provisions of the Note Purchase Agreement." The panel held that the record supported the trial court's implicit finding that the investors did not assent. It therefore held that the arbitration clause is not part of the parties' agreement and is severed from the rest of the Note Purchase Agreement.

The opinion did not separately analyze Arends's arguments about the investors' sophistication or their pleading that they had "signed" the agreements. Nor did it reach the investors' alternative arguments that their claims fall outside the clause and that the clause is unconscionable. No judge wrote separately.

James L. Buchal argued for Arends, with Murphy & Buchal LLP also on the briefs. Carsen S. Nies argued for the investors, with Stoll Stoll Berne Lokting & Shlachter P.C. also on the brief.

The appeals court affirmed the trial court's order in full, including its denial of Arends's motion to dismiss. The case is docketed in Multnomah County Circuit Court as No. 23CV20953.