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Cruz v. Tapestry: California Court of Appeal Rejects Hidden Online Arbitration Clause
California's Second District Court of Appeal upheld a trial court's refusal to compel arbitration after a retailer attempted to bind a customer through a single line of small, gray text placed beneath the order button. The court found the notice "difficult to read and far less prominent" than other elements on an already cluttered two-column checkout page. Without conspicuous notice or clear assent, the arbitration agreement failed.
The Facts: When Small Print Gets Too Small
Leslie Cruz's online shopping with Tapestry's subsidiary websites looks like what millions of consumers do every day. In early 2024, she made a few purchases and later claimed the company's pricing practices were misleading, a classic "fake sale" setup where products are almost never offered at the so-called "regular" price, making the discounts look bigger than they really are.
Cruz sued for unfair competition and false advertising. Tapestry responded by trying to push the case into arbitration, pointing to its website's Terms of Use. The catch was that the only notice of those terms was a single line of small, gray text under the purchase button, stating that completing the order meant agreeing to the Terms of Use and Privacy Policy.
The trial court said that wasn not good enough, and the Court of Appeal agreed in Cruz v. Tapestry, Inc., No. B343637 (Cal. Ct. App. 2d Dist., Div. 1).
The Court's Analysis: Conspicuousness Matters
The Court of Appeal agreed with the trial court that Tapestry's website failed to provide reasonably conspicuous notice of arbitration and required no affirmative assent, since there was no checkbox. The gray, small-font notice sat below a bright purchase button on a crowded, two-column checkout page, where other graphics and text easily distracted the consumer's attention.
The courts framed the issue simply: Did Cruz receive reasonably sufficient notice that clicking "purchase" would bind her to arbitration? Their answer was no.
The decision highlighted three factors businesses should note:
Visual Prominence: The arbitration notice was less noticeable than other page elements and failed to draw attention to its significance.
Transaction Context: While consumers may expect extensive terms when signing up for a subscription or financial service, they do not anticipate hidden legal agreements when making a one-time retail purchase.
Design Choices: The gray, small-font text suggested the notice was intentionally minimized rather than designed to ensure real consent.
Cases like Cruz highlight the recurring issues that decide whether arbitration succeeds or fails. They also point to clear steps businesses can take to structure dispute resolution in ways that are both enforceable and effective.
What Cruz Means for Arbitration
In my experience handling consumer cases, the enforceability of the arbitration agreement often decides whether a matter even gets off the ground. Cruz underscores several principles I see repeatedly:
Arbitration Works Best with Knowing Consent: When consumers feel blindsided by a clause they never noticed, it breeds distrust and often triggers threshold fights over arbitrability. Instead of reaching the merits, parties end up litigating whether the case belongs in arbitration at all, precisely what happened in Cruz.
Context Matters: Consumers expect extensive legal terms when signing up for software, banking services, or other ongoing relationships. They do not expect them in a straightforward retail purchase. Courts are increasingly sensitive to these contextual differences.
Good-Faith Notice Benefits Everyone: Businesses sometimes worry that making arbitration clauses conspicuous will scare customers away. In practice, the opposite is true. Clear notice ensures that only consumers who knowingly agree end up in arbitration, which reduces challenges and helps preserve the efficiency that arbitration is meant to provide.
Practical Implications for Businesses
For in-house counsel and ecommerce teams, Cruz is less about banning arbitration than about highlighting design and compliance gaps that can make arbitration clauses unenforceable. To reduce risk and strengthen enforceability, businesses should:
1. Make It Visible.
Use contrasting colors, adequate font sizes, and prominent placement. If promotions, payment fields, or graphics are more eye-catching than your terms notice, courts may find your arbitration clause unenforceable.
2. Consider Timing.
Present your terms at a point in the transaction when customers have a genuine opportunity to review them. Burying the notice at the very end of a rushed checkout flow increases risk.
3. Match Customer Expectations.
Align the way you present arbitration clauses with the type of transaction. Consumers anticipate detailed terms for software or banking services, but not when buying a handbag or other retail item. Courts are paying attention to these contextual differences.
4. Document the Process.
Keep clear records of how your terms are displayed and when customers consent. Screenshots, UI version histories, and system logs can be decisive evidence if enforceability is ever challenged.
Balancing Business and Consumer Interests
From a consumer protection standpoint, Cruz strikes an important balance. It does not ban online arbitration agreements, but it does require that they rest on genuine notice and consent. This approach achieves three things:
Preserves Choice: Consumers retain the ability to make informed decisions, while businesses still have access to arbitration as a dispute-resolution tool.
Prevents Abuse: The ruling curbs the most egregious "gotcha" tactics, where arbitration clauses are hidden in fine print and never reasonably seen by customers.
Protects Arbitration's Integrity: By ensuring that only participants who knowingly consent are bound, the decision helps maintain arbitration as a viable, efficient alternative to litigation.
Looking Forward: The Evolution of Digital Consent
As commerce becomes increasingly digital, courts will continue to test how traditional contract principles apply to new technologies and business models. Cruz makes clear that California courts will insist on meaningful notice and genuine consent for arbitration agreements, no matter the platform or medium.
For businesses, this means investing in clear, transparent communication about dispute resolution terms and presenting them in ways customers can reasonably notice. For consumers, it reinforces that arbitration agreements cannot be hidden in fine print.
Cruz is not anti-arbitration; it is pro-consent. By requiring businesses to provide conspicuous notice, the court helps ensure arbitration serves its intended purpose: delivering an efficient, fair alternative to litigation for parties who knowingly choose it.
From my perspective as an arbitrator, this strengthens the process. Arbitrations work best when all parties understand the rules they've agreed to. Decisions like Cruz help make sure that happens, ultimately preserving the legitimacy and effectiveness of arbitration for everyone involved.
Businesses should be reviewing their checkout flows and online consent mechanisms now, before a court, as in *Cruz*, tells them their arbitration agreements will not hold up.
Cruz v. Tapestry: California Rejects Hidden Online Arbitration Clause
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