The Ninth Circuit recently affirmed a district court decision denying Rugs.com’s motion to compel arbitration in a putative class action brought by two consumers. Although the plaintiffs’ lawyers have portrayed the decision as a significant victory against forced arbitration, the decision is considerably less consequential than their publicity suggests. It does not announce a new rule governing arbitration agreements or impose any new restrictions on their enforceability. Rather, it applies well-established principles of contract formation to an online transaction in which the defendant failed to demonstrate that the consumers had objectively manifested their assent to its Terms of Use.
There is also an important qualification that appears to have received little attention in the plaintiffs’ lawyers’ announcement: the Ninth Circuit issued an unpublished memorandum disposition that is not precedent, except as provided by Ninth Circuit Rule 36-3.
Background
In Perkins v. Rugs.com LLC, No. 25-4155 (9th Cir. Oct. 28, 2026), two consumers brought a putative class action alleging that Rug’s.com sent them false and misleading promotional emails. Among other things, the plaintiffs alleged that Rug’s.com a Memorial Day sale as ending soon, even though the sale continued for several additional days.
Rugs.com sought to compel arbitration based on an arbitration provision contained in its website’s Terms of Use. The Terms of Use provided that users agreed to the terms by accessing or using the website and included a provision requiring arbitration of disputes arising out of or relating to website use and purchases.
Rugs.com argued that the plaintiffs had agreed to the Terms of Use when they entered their email addresses and clicked a “Join Now” button to sign up for promotional emails. The company also argued that the plaintiffs were bound by the Terms of Use simply because they used its website.
The district court denied the motion to compel arbitration, concluding that the plaintiffs had not sufficiently manifested their assent to the Terms of Use. Rugs.com appealed.
The Ninth Circuit’s Decision
The Ninth Circuit affirmed, applying ordinary Washington contract law principles governing contract formation.
The court began with the familiar proposition that the party seeking to compel arbitration bears the burden of establishing, by a preponderance of the evidence, the existence of an agreement to arbitrate. Whether such an agreement exists is determined by applying ordinary state-law principles governing contract formation.
The parties agreed that Washington law applied. Under Washington law, contract formation depends on the objective manifestations of the parties.
The court relied principally on its prior decision in Berman v. Freedom Financial Network, LLC, 30 F.4th 849 (9th Cir. 2022). Under Berman, when a company cannot establish that a consumer had actual knowledge of an alleged agreement, it may establish assent through an inquiry-notice theory, but only if it demonstrates two things: first, that the website provided reasonably conspicuous notice of the terms to which the consumer would be bound; and second, that the consumer took some action, such as clicking a button or checking a box, that unambiguously manifested assent to those terms. The Ninth Circuit concluded that Rugs.com had not satisfied the second requirement.
Although Rugs.com argued that the plaintiffs had entered their email addresses and clicked “Join Now” in close proximity to a Terms of Use hyperlink, the webpage did not disclose that clicking the button would constitute agreement to the Terms of Use. The court emphasized that a consumer’s click can constitute an unambiguous manifestation of assent only when the consumer is explicitly advised that clicking will signify agreement to the applicable terms.
The court also rejected Rugs.com alternative argument that the plaintiffs had agreed to the Terms of Use simply by using the website. That argument relied on what the court characterized as a browsewrap agreement. As the court explained, a browsewrap agreement does not require the user to expressly manifest assent. Instead, the website operator contends that the user has agreed to terms merely by visiting or using the website, even though those terms are available only through a hyperlink.
The court cited its earlier decision in Nguyen v. Barnes & Noble Inc., 763 F.3d 1171 (9th Cir. 2014), for the proposition that courts consistently decline to enforce such agreements. It also relied on Godun v. JustAnswer LLC, 135 F.4th 699 (9th Cir. 2025), which reinforced the requirement that a webpage must explain what particular action will be treated as assent to contractual terms.
Because Rugs.com failed to establish that the plaintiffs had objectively manifested their assent, the Ninth Circuit affirmed the denial of its motion to compel arbitration.
A Conventional Application of Established Contract Law
The plaintiffs’ lawyers have understandably celebrated the result. But the decision should not be confused with a judicial repudiation of arbitration agreements or a meaningful departure from existing online-contract jurisprudence.
The fundamental issue was not whether the arbitration provision was unfair, unconscionable, or otherwise unenforceable. Nor did the court hold that arbitration agreements presented electronically are inherently suspect. The issue was whether the parties had entered into an agreement at all.
That distinction matters. The Federal Arbitration Act does not dispense with ordinary contract-formation requirements. A party cannot compel arbitration merely by pointing to an arbitration provision contained in a document that the other party never agreed to accept. The same principle applies to other contractual provisions. Arbitration agreements are not subject to a special rule that permits a business to establish assent where ordinary contract law would not.
Indeed, the Ninth Circuit’s decision follows a substantial body of existing authority addressing online contract formation. Nguyen, Berman, and Godun had already established the principles the court applied here. The decision did not create a new legal test. It applied those precedents to the particular design of Rugs.com’s website and the actions taken by the plaintiffs.
The court’s treatment of browsewrap agreements is particularly unsurprising. Where a company simply places a hyperlink to its Terms of Use somewhere on its website and declares that continued use of the website constitutes acceptance, it is difficult to establish that a consumer has objectively manifested assent to terms that the consumer may never have seen. Merely making contractual terms available is not the same as obtaining agreement to them.
What Does the Decision Mean for Businesses?
Although the decision does not break new legal ground, it provides another reminder that businesses should carefully review the manner in which they obtain consumer assent to online contractual terms.
Businesses seeking to enforce arbitration provisions should not rely on the mere availability of a hyperlink to their Terms of Use or on language buried in those terms declaring that website use constitutes acceptance. Instead, businesses should use a clearly designed clickwrap process that provides reasonably conspicuous notice of the applicable terms and expressly informs consumers that taking a specified action will constitute acceptance.
For example, a checkbox or button accompanied by language expressly stating that the consumer agrees to the Terms of Use is considerably more likely to establish assent than a “Join Now” button accompanied by a separate hyperlink that does not explain the legal significance of clicking the button.
Although it is not essential that the business expressly mention in the language accompanying the checkbox or button that the agreement contains an arbitration provision which will preclude the consumer from going to court (and having a judge or jury) to resolve a dispute with the business or being part of a class action in court or in arbitration, we typically recommend that the existence of an arbitration provision be highlighted in this or a similar fashion.
Businesses should also ensure that their electronic records preserve evidence of the disclosures presented to consumers and the affirmative actions consumers took to accept them. The design and wording of the actual webpage matter, not simply the language contained in the Terms of Use.