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Product Liability—Eighth Circuit Adopts Narrow View: Only APLA Failure-to-Warn/Mislabeling Claims Against Generic Manufacturers Are Preempted Under Mensing; Design- Defect and Implied-Warranty Claims Are Still Viable The Court of Appeals for the Eighth Circuit recently issued a pair of opinions interpreting the United States Supreme Court’s decisions in PLIVA, Inc. v. Mensing, 131 S. Ct. 2567 (2011), and Mutual Pharmaceutical Co. v. Bartlett, 133 S. Ct. 2466 (2013). The Eighth Circuit’s decisions concerned federal preemption over claims against generic drug manufacturers under the Arkansas Product Liability Act (APLA) and interpreted the viability of APLA claims against brand-name drug manufacturers brought by plaintiffs who only came into contact with the generic equivalent of the brand-name products. Bell v. Pfizer, Inc.,

The Eighth Circuit interpreted the APLA to bar any
claims brought against brand-name drug manufacturers by plaintiffs who were prescribed brand-name medications but filled those prescriptions with generic equivalents. The court determined these claims fail the necessary element of proximate cause through brand identification. The Eighth Circuit also interpreted the APLA proximate-cause standard as applying to all claims against product manufacturers, even if plaintiffs couch their claims in common-law theories of negligence, fraud, or misrepresentation, instead of strict product liability. Regarding APLA claims against generic drug manufacturers, the Eighth Circuit held that the United States Supreme Court’s decision in Mensing preempted failure-to-warn claims based on the labeling of generic medications. However, the Eighth Circuit declined to extend this preemption to APLA claims for design defect The Bell opinion arose out of multiple claims brought by Shirley J. Bell, who was prescribed the brand-name drug Reglan (manufactured by Pfizer) in January 2008 to treat abdominal pain. As permitted by Arkansas law, Bell’s pharmacist substituted Reglan with a generic form of metoclopramide (manufactured by Pliva). Bell took the generic drug through December 2008 and alleged that she developed tardive dyskinesia, a neurological disorder that the Food and Drug Administration (FDA) has since linked to prolonged exposure to Reglan and metoclopramide. In 2004, the FDA approved new labeling for Reglan that warned use should not exceed twelve weeks. However, Pliva did not add this new warning language to its metoclopramide products. In 2009, after Bell’s prescription expired, the FDA began requiring all metoclopramide manufacturers to include a black box warning specifically addressing the risks of tardive dyskinesia. Bell faulted Pliva and the brand-name manufacturers for not adequately informing her and her doctor, prior to 2009, of the risks Bell filed a product-liability action against the generic and brand-name manufacturers on April 12, 2010, claiming negligence, failure to warn, strict liability, breach of warranty, misrepresentation, suppression of evidence, fraud, and gross negligence. Bell also brought a cause of action against Pliva for failing to incorporate the 2004 warning language. The United States District Court for the Eastern District of Arkansas dismissed all claims asserted Chief Judge Riley, writing for the Eighth Circuit, upheld the dismissal of all claims against the brand-name defendants because Bell stipulated that she had never ingested Reglan (the brand-name drug manufactured by Pfizer). Therefore, she failed the necessary threshold showing of proximate cause through brand identification, as required for all product-liability claims——even claims based in common-law theories not explicitly brought under the APLA. Chief Judge Riley based this decision on an earlier Eighth Circuit opinion—Mensing v. Wyeth, Inc., 658 F.3d 867 (8th Cir. 2011)—that interpreted a Minnesota statute similar to the APLA and found brand-name manufacturers do not owe a duty of care to users of their Additionally, the Eighth Circuit upheld the dismissal of a portion of Bell’s claims against Pliva. First, the Eighth Circuit upheld the dismissal of Bell’s claim based on Pliva’s failure to incorporate the 2004 warning language, concluding that the claim was not viable under Arkansas’s learned-intermediary doctrine. Bell’s physician, who prescribed Reglan (which included the warning), should have known of the recommended 12-week warning. Therefore, the physician’s failure to communicate this warning to Bell broke the causal chain to Pliva’s failure to update. (citing Ehlis v. Shire Richwood, Inc., 367 F.3d 1013, Next, the Eighth Circuit addressed Bell’s claim that even the 2004 language would have been an insufficient warning, and therefore, a failure-to-warn action still existed at the time of Bell’s exposure. Upholding the Eastern District’s dismissal, Chief Judge Riley noted that the United States Supreme Court’s 2011 decision in Mensing held that the Federal Food, Drug, and Cosmetic Act (FDCA), 21 U.S.C. § 301, et seq., which requires generic drugs to carry exactly the same warning labels as their brand-name equivalents, preempted any claims brought against generic manufacturers under failure-to-warn theories. (citing PLIVA, Inc. v. Mensing, 131 S. Ct. 2567, 2572 (2011). Therefore, under Mensing, the Eighth Circuit held that the FDCA preempted Bell’s claims based on Pliva’s failure to create its own warning prior to the 2009 FDA update because Pliva had the legal right to independently issue such a warning under federal law. However, noting a growing circuit split over the scope of Mensing’s preemption holding, the Eighth Circuit reinstated Bell’s claims against Pliva for design defect and breach of warranty, adopting the narrow view offered by the Court of Appeals for the First Circuit in Bartlett v. Mutual Pharmaceutical Co., 678 F.3d 30 (1st Cir. 2012), rev’d 133 S. Ct. 2466 (2013), which interpreted New Hampshire law. Under Bartlett, the federal generic drug- labeling restrictions do not preempt claims that are not tied specifically to a failure to warn, such as design defect and implied warranty. Bartlett, 678 F.3d at 37-38. But on June 24, 2013, just two weeks after the Eighth Circuit’s decision in Bell, the United States Supreme Court overturned the First Circuit’s holding in Bartlett. Mut. Pharm. Co. v. Bartlett, 133 S. Ct. 2466 (2013).

Fullington v. Pfizer, Inc.,
In wake of the Supreme Court overturning the First Circuit’s Bartlett opinion—which was a significant basis for the Eighth Circuit’s decision in Bell—Circuit Judge Gruender reaffirmed Bell, holding that, under Arkansas law at least, federal law does not preempt design-defect claims against generic drug manufacturers. With facts almost identical to Bell, Joyce Fullington brought the same slate of claims against Pfizer and Pliva under Arkansas law. Like Bell, the District Court for the Eastern District of Arkansas dismissed all of Fullington’s claims as either not viable under the APLA or preempted Once again, the Eighth Circuit overturned the Eastern District’s dismissal of the plaintiff’s claims for design defect, holding that such claims did not fall under the Supreme Court’s Mensing standard for federal preemption. The Eighth Circuit distinguished Bell from the First Circuit’s now-overturned Bartlett opinion by observing differences between the elements of design defect under New Hampshire and Arkansas law. Whereas New Hampshire design-defect claims rely on a risk-utility analysis (that incorporates elements of failure to warn) to find an “unreasonably dangerous product,” the Eighth Circuit interpreted Arkansas’s design-defect standard for finding an unreasonably dangerous product as a consumer- expectations test. (citing ARK. CODE ANN. § 16-116- 1. Although the Eighth Circuit asserts that Arkansas law applies the consumer-expectations test, other courts have observed ongoing confusion as to whether Arkansas courts have explicitly adopted any standard. See Freeman v. 102(7)(A) (Repl. 2006 & Supp. 2013); Purina Mills, Inc. v. Askins, 317 Ark. 358, 875 S.W.2d 843, 847 (1994); Berkeley Pump Co. v. Reed-Joseph Land Co., 279 Ark. 384, 653 S.W.2d 128, 133 (1983)). The Eighth Circuit held that, because of this different standard, the possibility exists for bringing a design-defect claim in Arkansas without running afoul of the federal generic-drug-labeling requirements. Writing separately in concurrence, Circuit Judge Murphy noted that the United States Supreme Court’s broad application of federal preemption over generic-drug claims in Mensing and Bartlett has “severely eroded” the basis for the Eighth Circuit’s earlier Wyeth opinion (on which the Eighth Circuit relied in Bell and Fullington), which found that brand-name manufacturers do not have a duty to the users of generic equivalents. (citing Mensing v. Wyeth, Inc., 588 F.3d 603, 613 n.9 (8th Cir. 2009)). Judge Murphy observed that, under federal law and the recent Supreme Court opinions, brand-name manufacturers are now “solely responsible” for the labeling and manufacturing of the generic equivalents to their drugs; therefore, they cannot argue that such decisions are not directed at the consumers of those generic products. Caterpillar, Inc., No. 3:02–CV–00039 GTE, 2006 WL 6850715, at *9-10 (E.D. Ark. July 17, 2006). Foreclosure—The Eighth Circuit Interprets Arkansas Law as Allowing Out-of-State Financial Institutions to Utilize the State’s Non-Judicial Foreclosure Procedure Even If They Are Not Registered with the Secretary of State to Do JPMorgan Chase Bank, N.A. v. Johnson,

The Eighth Circuit recently interpreted Arkansas law
as allowing nationally chartered banks to use the Arkansas non-judicial foreclosure statute, even if they are not registered with the Secretary of State to do business in This opinion arose after several Arkansas borrowers challenged the foreclosure of their homes by JPMorgan Chase through Arkansas’s statutory, non-judicial foreclosure process. The borrowers sought relief by filing for Chapter 13 protection in the United States Bankruptcy Court for the Eastern District of Arkansas. Because the court needed to determine the amount of arrearage owed on the homes for purposes of confirming a Chapter 13 plan, the bankruptcy judge held a hearing on the validity of the In challenging the foreclosures, the borrowers relied on the Arkansas Statutory Foreclosure Act (SFA), ARK. CODE ANN. § 18-50-101, et. seq., which governs the process whereby banks and mortgage companies can initiate foreclosure proceedings without judicial supervision. In 2003, the Arkansas General Assembly amended the SFA to restrict use of the SFA-created, non-judicial foreclosure process, stating that no bank or mortgage company “shall avail themselves of the procedures under this chapter unless authorized to do business in the state.” (quoting ARK. CODE ANN. § 18-50-117 (Repl. 2003)). The borrowers interpreted this authorization language to mean only banks registered to do business with the Arkansas Secretary of State could use the non-judicial foreclosure process. Therefore, JPMorgan Chase, who was not so registered, had improperly foreclosed on the borrowers’ homes. The bankruptcy court agreed with the borrowers’ interpretation, holding that JPMorgan Chase’s non-judicial foreclosure violated the SFA. JPMorgan Chase appealed to the United States District Court for the Eastern District of Arkansas, which reversed the bankruptcy court’s decision. The district court interpreted the statute’s authorization requirement to include any valid authorization to do business, not limited specifically to a registration with the Arkansas Secretary of State. Since JPMorgan Chase is a federally chartered bank regulated at the United States Office of the Comptroller of the Currency, the court concluded the bank was sufficiently authorized to do business anywhere in the country, including Arkansas. Therefore, JPMorgan Chase was “authorized to do business” in the state for the purposes of In affirming the district court’s decision, Judge Bye, writing for the Eighth Circuit, relied on similar logic. Though Judge Bye mentioned the Arkansas General Assembly had implemented the “authorization” requirement in 2003 in response to concerns over “foreign entities” using the non-judicial foreclosure process “often times . . . to the detriment of Arkansas citizens,” he concluded that such concerns were not directed at nationally chartered banks, which derive their authorization on a national level through the National Bank Act (NBA) and federal regulation. (quoting Act 1303, 2003 Ark. Acts Judge Bye based this prediction of Arkansas law primarily on the construction of authorization language within other provisions of the SFA. In particular, he focused on the relationship between the broad “shall avail” language in the SFA’s 2003 amendment and section 18-50- 102(a)(2), which allows “any ‘[b]ank or savings and loan authorized to do business under the laws of Arkansas or those of the United States’” to serve in the role of a trustee as part of a non-judicial foreclosure. (emphasis omitted) (quoting ARK. CODE ANN. § 18-50-102(a)(2) (Repl. 2003). In discussing this reasoning, Judge Bye broadly interpreted the meaning of “avail” in the 2003 language as prohibiting such non-registered entities from any participation in the non-judicial foreclosure process, not just initiation of the process, as the borrowers argued. Therefore, the court determined that a narrow reading of the 2003 amended authorization as requiring Arkansas- specific authorization to do business in the state, combined with a broad interpretation of “avail,” would create an inconsistency within the statute. If section 18-50-117 prohibited nationally chartered banks from any participation in the non-judicial foreclosure process, it would conflict with section 18-50-102(a)’s explicit authorization for nationally chartered banks to serve as Since the Eighth Circuit would not assume the Arkansas General Assembly intended such an inconsistency within the Arkansas Code, it interpreted the broad authorization language of section 18-50-102(a)— which provides that federal authorization is sufficient for the purposes of authorization to participate as a trustee—as governing the definition of “authorization” throughout the remainder of the SFA portion of the Arkansas Code. TILA/Mortgage Recision—The Eighth Circuit Interprets TILA as Requiring Mortgage Borrowers to File a Recision Lawsuit Within the Statutory Three-Year Window Following a TILA Disclosure Violation; Written Notice to the Lender of Intent to Rescind Is Insufficient Keiran v. Home Capital, Inc.,

The Court of Appeals for the Eighth Circuit recently
considered a circuit split regarding preservation of mortgagee recision rights under the Truth in Lending Act (TILA). The court adopted the view that borrowers must file a lawsuit to rescind their mortgages within the three- year window provided by TILA to preserve their right to rescind the mortgage after a lender violates the Act’s notice At closings for loans secured by a principal dwelling, TILA requires the lender to provide two copies of: (1) the notice of the borrower’s right to rescind unconditionally within three days; and (2) a TILA disclosure statement outlining the terms and conditions of the loan repayment. If a creditor fails to make these disclosures in the exact manner prescribed, the borrower may rescind the mortgage anytime within three years after the date of consummation of the transaction under 15 U.S.C. § 1635(f). Two couples, the Keirans and Sobieniaks, filed separate actions to rescind their mortgages after their lenders failed to provide two copies of the TILA disclosure agreement at closing. Within three years of this TILA disclosure violation, both couples sent written recision notices to their mortgage holders, believing such written notice was sufficient to preserve their rights within the three-year statute of repose. After the mortgage holders denied the written recision notices, the couples filed recision lawsuits. Because the three-year window had lapsed by the time the couples filed their lawsuits, the district court dismissed both suits as untimely. Both couples appealed, arguing that the TILA statutory language only requires written notice within the three-year window In opening its discussion of the issue, the Eighth Circuit noted a circuit split on interpreting the repose provision. The court noted that the Third and Fourth Circuits have adopted the view that written notice of the intent to rescind within three years is sufficient to satisfy the statute of repose. (citing Sherzer v. Homestar Mortg. Servs., 707 F.3d 255 (3d Cir. 2013); Gilbert v. Residential Funding LLC, 678 F.3d 271 (4th Cir. 2012)). In adopting this view, both circuits relied heavily on Regulation Z (the regulation implementing TILA), which states: “To exercise the right to rescind, the consumer shall notify the creditor of the recision by . . . written communication.” (quoting 12 C.F.R § 226.23(a)(2)). These circuits read Regulation Z’s plain language as establishing that a borrower must only provide written notice to his creditor to properly exercise his right of recision under TILA. Both circuits noted that the regulation does not mention the need for a formal However, the Eighth Circuit sided with the alternate view promulgated by the Ninth and Tenth Circuits—that, generally, courts must strictly construe statutes of repose as completely extinguishing the right concerned at the time the repose period lapses. (citing Rosenfield v. HSBC Bank, USA, 681 F.3d 1172, 1188 n.12 (10th Cir. 2012); McOmie- Gray v. Bank of Am. Home Loans, 667 F.3d 1325, 1328 (9th Cir. 2012)). According to the Tenth Circuit, such provisions are to “‘serve[] as an unyielding and absolute barrier to a cause of action’” intended to provide defendants with peace. (quoting Rosenfield, 681 F.3d at 1182-83). If borrowers could preserve their right to rescind through only written notice of their intent to rescind at some future date, such a threat could cloud the lender’s ability to act on its right to title through a foreclosure. The Eighth Circuit agreed and held that such an uncertain scenario defeats the presumed purpose of a statute of In her dissent, Judge Murphy noted that Congress intended TILA to be a remedial statute “construed broadly in favor of consumers.” (quoting Rand Corp. v. Yer Song Moua, 559 F.3d 842, 845 (8th Cir. 2009)) (internal quotation mark omitted). Therefore, where the statutory language does not mention a requirement that plaintiffs file a lawsuit to preserve a consumer right, the court should presume that Congress did not intend such an anti-consumer provision. Further, Judge Murphy pointed out that any extended cloud on the lender’s rights as the result of a written recision notice would be due to the lender’s own inaction. Once a lender receives such notice, it has the right either to negotiate with the borrower or to deny the borrower’s right completely and proceed to litigation (as occurred with the notices provided in the instant case). Finally, Judge Murphy echoed the First Circuit’s holding that the obvious legislative intent in TILA was to encourage lenders and borrowers to work out recision matters privately without always relying on the slower and more costly formal court proceedings. (citing Belini v. Wash. Mut. Bank, FA, 412 Jesinoski v. Countrywide Home Loans, Inc.,
729 F.3d 1092 (8th Cir. 2013) (per curiam).
In a per curiam opinion issued on September 10, 2013,
addressing facts nearly identical to those in Keiran, the sitting panel of judges wrote that the Keiran precedent required them to affirm the district court’s dismissal of the borrower’s recision suit as outside the statute of repose. However, Judges Melloy and Colloton wrote separately to express their belief that the court wrongly decided Keiran. Sentencing—Arkansas Supreme Court Denies Judges’ Discretion to Suspend Enhanced Criminal Sentences Imposed by Statute and Holds All Suspensions of Enhanced Sentences Allowed Under Law Must Run Concurrently with the Primary Sentence
State v. Colvin,
2013 Ark. 203, ___ S.W.3d ___ (May 16, 2013). The Arkansas Supreme Court recently held that state judges do not have the discretion to suspend or otherwise alter enhanced sentences when a statute mandates such sentences. Within this opinion, the court also found that Arkansas law requires all suspended enhanced sentences to run concurrently with the primary sentence. Telecia Colvin was convicted of aggravated assault on a family member after testimony revealed that she purposefully crashed her vehicle into the driver’s side of a car driven by Robert Redmon, the father of Colvin’s infant daughter. Testimony also revealed that the infant daughter was in Colvin’s vehicle at the time of the assault. After a bench trial, the Pulaski County Circuit Court suspended the imposition of a sentence for five years. The court sentenced Colvin to a one-year enhancement under section 5-4-702 of the Arkansas Code for committing the offense in the presence of a child. Over the prosecution’s objection, the court also suspended the one-year enhancement, which Colvin was to serve consecutive to the suspended, primary The prosecution appealed, claiming the suspension of the statutory enhancement constituted an illegal sentence that interfered with the uniform administration of the enhanced-sentencing law. Colvin argued that section 5-4- 702 was not a mandatory sentencing provision and that the Arkansas statutes prohibiting alternative sentencing for certain enumerated offenses—sections 5-4-104 and 5-4-301 of the Arkansas Code—do not mention assault in the Justice Courtney Hudson Goodson, writing for the majority, agreed with the prosecution and overturned the judge’s suspension of the enhanced sentence. The court noted section 5-4-702 provides that a person found to have committed certain acts in the presence of a child “may be subject to an enhanced sentence of an additional term of imprisonment of not less than one (1) year” that must be served “consecutive to any other sentence imposed.” (quoting ARK. CODE ANN. § 5-4-702(a), (d) (Repl. 2006)) (internal quotation marks omitted). The court noted, however, that “if the enhanced sentence is suspended, other sentencing law requires periods of suspension to run concurrently with other suspended sentences and other terms of imprisonment.” (citing ARK. CODE ANN. § 5-4- The prosecution, along with the majority, cited to Sullivan v. State, 366 Ark. 183, 234 S.W.3d 285 (2006), as standing for the proposition that the word “may” in section 5-4-702 refers to the prosecution’s option to decide whether to seek an enhancement, not a judge’s discretion on the manner in which to apply the enhancement. Furthermore, the court determined that section 5-4-307’s “concurrently” requirement for any suspended sentence conflicts with “Accordingly, suspension defeats the clear legislative intent for the enhanced sentence to be served consecutively to the sentence imposed for the designated felony.” Therefore, the court held that sentencing enhancements are not Consistent with Sullivan, the Colvin court read the statutory language as evidencing a clear legislative intent that the enhancement be mandatory and not subject to alternative sentencing. Although the court affirmed that, generally, courts must strictly construe penal statutes with any doubts resolved in favor of the defendant, the “obvious” legislative intent of section 5-4-702 placed it outside the reach of any doubt that might trigger the In their dissenting opinions, Justices Baker and Hart argued that the majority abandoned the established precedent that courts must strictly construe criminal statutes by their plain language and that the plain language of section 5-4-702 does not mandate imprisonment or exclude the alternative sentencing otherwise available under Arkansas law. Further, the dissent argued section 5- 4-307(b)(1)—the statute that the majority construed to disallow suspended enhancements—is a general statute that does not apply where a specific statute exists (such as the “consecutive” language in section 5-4-702). Therefore, a consecutively running, suspended enhancement is a viable option under Arkansas law, and the presence of the “consecutive” language does not speak at all to the legislative intent regarding alternative sentencing Finally, Justice Hart wrote that in Sullivan—the precedent relied on by the majority—the Arkansas Supreme Court actually affirmed a trial court’s sentence that included a one-year suspended enhancement. Taxation of Fees/Sovereign Immunity—The Arkansas Supreme Court Holds the State’s Sovereign Immunity Trumps Arkansas Supreme Court Rule 6-7, Prohibiting Taxation of Appellate Costs Against the State. Kiesling-Daugherty v. State,
The Arkansas Supreme Court recently held that the State of Arkansas, under sovereign immunity, does not have to award appellate costs—which Arkansas Supreme Court Rule 6-7 might otherwise allow—to a litigant whose criminal conviction was overturned on appeal. After successfully appealing a criminal speeding violation, Partne Kiesling-Daugherty sought an award of appellate costs against the Attorney General under Rule 6- 7, which allows the court to assess such costs against an unsuccessful party. Kiesling-Daugherty contended that such an award did not violate the doctrine of sovereign immunity because the State, through the local prosecutor and Attorney General, voluntarily waived such immunity when it submitted itself to the power of the court as the moving party seeking specific relief in bringing the initial Writing for the majority, Chief Justice Hannah recognized that sovereign immunity might be overcome where the State is a moving party seeking specific relief under Arkansas law. (citing Ark. Dep’t of Cmty. Corr. v. City of Pine Bluff, 2013 Ark. 36, at 4, ___ S.W.3d ___, ___ ). Nonetheless, he rejected the idea that criminal prosecutions For support, Chief Justice Hannah relied on Arkansas Department of Human Services v. State (ADHS), 312 Ark. 481, 850 S.W.2d 847 (1993), where the Department of Human Services (DHS) was held liable for restitution and court costs arising from offenses committed by juveniles over whom DHS had custody. In ADHS, the trial court had made such assessments after finding DHS had waived its immunity and submitted itself to the power of the court when it first applied for custody of the children (seemingly prior to, or at least separate from, the criminal proceedings) and appeared on behalf of the children in the criminal proceedings. According to Chief Justice Hannah, the Arkansas Supreme Court reversed that assessment because DHS had not acted voluntarily but, rather, had performed its assigned duties by taking custody over and appearing on In applying ADHS, Chief Justice Hannah held that the “moving party seeking specific relief” exception merely extends the doctrine that allows the State to waive voluntarily its constitutionally granted immunity and that a State official performing enumerated duties of his office cannot create such a voluntary waiver. Since a prosecutor has a duty to bring charges against those he deems guilty and because the Attorney General has a duty to defend the State on appeal, the performance of those duties does not constitute a voluntary waiver. Therefore, such performance may never serve as the basis for an exception to sovereign immunity. Although the intended scope of the majority opinion might be limited to criminal prosecutions, one could interpret the court’s reasoning as prohibiting any assessment of costs against the State under Rule 6-7 when a state official brings the underlying trial-court action in the course of performing his official duties. In their dissenting opinions, Justices Baker and Hart contended that such a broad holding goes against the long- established precedent of Powell v. State, 233 Ark. 428, 345 S.W.2d 8 (1961), which held that appellants are entitled to an award of appellate costs against the State when their criminal convictions are overturned. Both judges contended that the majority conflated the power to award costs and the execution of that award. Moreover, they asserted that the supreme court undeniably has the power to assess liability for costs against the State. Once the court creates such liability, the appellant may seek payment of costs under section 16-92-105(d) of the Arkansas Code or through the Arkansas State Claims Commission. Judge Hart wrote that the majority opinion diminishes the court’s constitutionally granted rule-making authority and allows the executive to effectively “neutralize” the judiciary’s power over the orderly administration of justice. Venue/Internet Contracts—The Arkansas Supreme Court Holds Hyperlinked Terms and Conditions Are Not Effective Communication and Cannot Create the Basis for a Valid
Roller v. TV Guide Online Holdings, LLC,

The Arkansas Supreme Court recently held that online “browsewrap” agreements based on hyperlinked terms and conditions of website use are not valid contracts because the hyperlink alone does not effectively communicate the terms of the agreement to the website user. The decision arose from a class-action suit filed in the Washington County Circuit Court against TV Guide by users of the TV Guide website who claimed the site downloaded a data-mining “Flash cookie” onto their computers without permission. TV Guide filed a motion to dismiss, challenging venue and subject-matter jurisdiction. As the basis for their motion, TV Guide claimed the terms and conditions listed on their site require plaintiffs to bring any action regarding use of the site in Los Angeles, California. Because the site communicated the terms and conditions, TV Guide argued that visitors’ continued use of the site created an enforceable browsewrap contract. Based on this argument, the circuit court granted TV Guide’s motion and dismissed the suit. Reversing the circuit court and reinstating the suit, Justice Baker, writing for the Arkansas Supreme Court, noted that TV Guide did not make available the terms and conditions, including the choice of venue clause, on the face of its website. Rather, they were only available through a hyperlink, which a user would have to activate before seeing the terms of use. The court held that the mere existence of such a hyperlink was insufficient to show that TV guide effectively communicated the terms and conditions to site users. Because assent cannot exist without an effective communication of the contract terms, TV Guide failed to demonstrate that an enforceable contract existed over the choice of venue clause that was the basis for its motion to dismiss. (citing Crain Indus., Inc. v. Cass, 305 Ark. 566, 810 S.W.2d 910 (1991)).

Source: http://media.law.uark.edu/arklawreview/files/2013/12/66-ArkLRev-907-RecentDevelopments.pdf