A tale of B2C arbitration: Insights from the Disney case and beyond

Introduction

Can a consumer waive any and all rights to a court claim against a business through click wrap T&Cs, even if the claim is unrelated to the services obtained? This question was thrust into the spotlight following a wrongful death lawsuit against Disney in the US.

This article examines the Disney case, the broader trend of arbitration clauses in business-to-consumer (B2C) contracts and key considerations for businesses when deciding to include and enforce such clauses.

The Disney Case

In October 2023, Jeffrey Piccolo's wife tragically died after an alleged allergic reaction at a Disney Springs restaurant.

Piccolo filed a claim against Disney and the restaurant in February 2024, seeking damages in excess of $50,000 under Florida’s Wrongful Death Act. Disney responded in May 2024, requesting the case be moved to arbitration based on an all-inclusive arbitration clause in their Terms of Use, which Piccolo had agreed to when creating a Disney+ account in 2019, and again when purchasing park tickets before eating at the restaurant.

Piccolo's counsel described Disney's arguments as "inane" and "border[ing] on the surreal" suggesting that they implied anyone who signs up for a Disney+ account, even for a free trial, would forever waive their right to a jury trial against any Disney entities. Counsel for Piccolo also argued that requiring JAMS Arbitration in this context would be unconscionable on the basis that its rules seek to restrict access to discovery.

Following public criticism, Disney withdrew its motion to compel arbitration in August 2024, leaving the enforceability of the B2C arbitration clause in this context untested. The case will continue in court.

The Disney case is part of a broader trend of disputes involving 'click to agree' arbitration clauses. While Disney's argument may seem far-reaching, it is not alone in seeking to refer B2C disputes to arbitration.

Arbitration clauses in B2C contracts: a global perspective

The rise of globalisation and digital services is driving increasingly sophisticated online terms and conditions that rely on arbitration to resolve B2C disputes. Those provisions have led to several cases in domestic courts in which the relevant provisions have been challenged.

Given the popularity of arbitration as a method of dispute resolution in the US, it is unsurprising that there is a growing use of arbitration clauses in consumer contracts across sectors in this jurisdiction. The Disney dispute is by no means the first example where the use of arbitration has been controversial. There have been a number of disputes involving household consumer brands, for instance, recent cases have involved Airbnb and Walmart – the former saw Airbnb denied its attempt to rely on an online arbitration clause in a claim for negligence after suffering severe injuries at a rental property,¹ whilst Walmart successfully compelled arbitration for a class action lawsuit on the basis of an arbitration clause in its app's terms of use.²

Outside of the US, whilst not at the same height of use as the US, B2C arbitration clauses have grown in prevalence particularly in the cryptocurrency and digital asset space. This has resulted in a expanding body of cases where the enforceability of arbitration has been challenged. In Singapore, in Beltran v Terraform, the court emphasised that the issue will turn on the actual or constructive notice of arbitration provided to the consumer based on the specific facts and gave guidance relating to the T&Cs architecture, in particular the difference between click-wrap and browse-wrap T&Cs. Ultimately, in that decision, the cryptocurrency business had taken steps in court proceedings which prevented it from subsequently challenging the court's jurisdiction in favour of arbitration.³ Meanwhile, in the UK, there have been a number of cases both upholding and rejecting the enforceability of arbitration depending on various factors including: the notice provided to the consumer, whether there was a close connection to the UK such that UK consumer legislation is applicable, and public policy concerns (for instance, in circumstances where the arbitration would be costly due to a foreign seat and arbitrators would be inexperienced in determining certain types of consumer claims under UK consumer legislation).^4,5,6 This serves to highlight that the Disney case is the latest episode in a series of disputes relating to the use of B2C arbitration.

Key takeaways from the Disney tale

The Disney case, and the growing body of other disputes, illustrates the complexities of B2C arbitration clauses. Increasingly, many companies are rightly seeking to rely on, and enforce, the "agreed" arbitration clause in their B2C contracts. However, online B2C arbitration clauses are complex and companies will need to ensure that they carefully consider the scope, terms and applicability of the clause (including the institution, applicable laws and seat of arbitration) and the structure of the T&Cs for their customers in different locations to ensure fairness of application and maximise the likelihood that the parties' agreed terms will be enforceable (legally, commercially and reputationally).

In this regard, it is notable that Piccolo's counsel relied on arguments which go to the wording and online architecture of the T&Cs as well as the appropriateness of arbitral more broadly. For instance, Piccolo made reference to: the lack of explanation of arbitration in the Disney+ terms, the lack of express reference to inclusion of claims relating to wrongful death in the arbitration provision, the absence of mention that the registration waived legal rights and the appropriateness of JAMS arbitration which limits discovery. These arguments were of course ultimately untested and Disney may have succeeded to enforce the arbitration clause. However, this serves as a reminder to businesses that the minutiae of these T&Cs matter. We consider the key practical considerations for businesses utilising B2C arbitration clauses in our Inside Arbitration article on Click to agree: Technology and consumer.

As the numerous cases above reflect, Disney is by no means alone in the use of B2C arbitration provisions – which are becoming the norm rather than the exception. Further, there are many advantages to arbitration for both consumers and businesses – which can include more swift dispute resolution and lower costs. However, businesses must make sure that the appropriateness of arbitration is carefully considered in each instance. A dispute resolution clause is not 'boilerplate' and should not be perceived as a one-size-fits all mechanism.

Conclusion

The growing prevalence of binding arbitration clauses in B2C contracts across various industries is undeniable. The perceived advantages of arbitration for global businesses, particularly in a digital context, means that reliance on B2C arbitration is likely to increase.

However, businesses must consider the terms of their DR clauses carefully (regardless of whether they intend to rely on particular domestic courts or arbitration) to ensure fairness in their application and, consequently, the enforceability of the parties' agreement in a consumer facing context.