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.
Online Arbitration FAQs
Q: Are online arbitration agreements still enforceable after Cruz v. Tapestry?
A: Yes, but only if the consumer is given clear, conspicuous notice and an opportunity to consent meaningfully. The case doesn’t ban online arbitration — it just enforces basic contract principles.
Q: What makes an arbitration clause conspicuous enough online?
A: Courts look at font size, color, placement, and whether it draws the user’s attention relative to other elements on the page. Gray text in small font buried below the purchase button — like in Cruz — won’t cut it.
Q: Does this apply to B2B agreements too?
A: While Cruz involved a consumer, courts also scrutinize consent in B2B contexts — especially when there’s a significant power imbalance or click-through terms are involved.
Q: Can businesses still require arbitration for online transactions?
A: Yes, but they need to design the consent process carefully and document it. Think of this like compliance — sloppy implementation invites litigation.
Q: What happens if a court finds the online arbitration clause unenforceable?
A: The case stays in court, often with higher costs and slower resolution. It also means the business may lose the benefits of private dispute resolution.
Q: If we fix our website today, does that help with disputes about purchases made before the change?
A: No. Courts evaluate enforceability based on what the consumer saw at the time of their transaction. This is why documenting your consent process over time matters — you need to show what notice each consumer actually received.
Q: What about mobile apps versus websites — are the standards different?
A: The principles are the same, but mobile presents unique challenges. Smaller screens mean even less room for notices. If anything, mobile interfaces require even more careful design to ensure conspicuous notice. Don’t assume that app store terms cover you.
Q: We use a “browse wrap” agreement where terms are just linked somewhere on the site. Is that still viable?
A: After Cruz, browse wrap agreements look increasingly risky for binding arbitration clauses. The trend is clearly toward “clickwrap” or “sign-in wrap” agreements where the user must take some affirmative action acknowledging the terms. Passive browsing likely won’t create a binding arbitration agreement in California.
Q: Should we have customers check a box specifically for the arbitration clause, separate from other terms?
A: That’s the gold standard. While not legally required, a separate checkbox for arbitration (or at minimum, highlighting it within the terms) demonstrates unambiguous consent and makes challenges much harder. It’s worth the extra friction in your checkout flow.
Q: What if we grandfather existing customers but change terms for new ones — how do we handle that?
A: You’ll need clear records distinguishing which customers are bound by which terms. Consider notification to existing customers if you’re making significant changes, and make the effective date crystal clear. Document everything.
Q: Does the language of the arbitration clause itself matter, or just how it’s presented?
A: Both matter. Cruz focused on notice and consent, but courts also scrutinize whether arbitration clauses are substantively unconscionable (one-sided, unfair). Even perfect notice won’t save a truly abusive clause. But that’s a topic for another post.
Q: We’re a startup with limited resources. What’s the minimum viable compliance approach post-Cruz?
A: At minimum: (1) Bold, contrasting text for your terms notice, (2) Placement above or immediately adjacent to your action button, (3) A checkbox requiring affirmative acceptance, (4) Terms that are actually accessible via the link you provide. This isn’t expensive — it’s design choices. The expensive part is litigating an unenforceable clause later.
Q: If our arbitration clause is found unenforceable, can we just send the customer to arbitration anyway under different terms?
A: No. You can’t unilaterally impose arbitration after the fact. If the original clause fails, the case stays in court unless you negotiate a new agreement. This is exactly why getting it right the first time matters.
