By Tim Alger, Arbitrator and Mediator with Alger Resolutions and the American Arbitration Association
The California Court of Appeal’s recent decision in Cruz v. Tapestry (decided August 27, 2025) serves as a crucial reminder that even in our digital age, fundamental principles of contract formation still apply to arbitration agreements. As an arbitrator who regularly handles consumer disputes, this case highlights the delicate balance between business efficiency and genuine consumer consent that courts continue to navigate.
The Facts: When Small Print Gets Too Small
Leslie Cruz’s experience shopping on Tapestry’s subsidiary websites is familiar to millions of online consumers. After making purchases in early 2024, she discovered what she believed were deceptive pricing practices – the classic “fake sale” scenario where items are rarely sold at the purported “regular” price, making the advertised discounts misleading.
When Cruz filed suit alleging unfair competition and false advertising, Tapestry moved to compel arbitration based on terms buried in their website’s Terms of Use. The critical issue? The only notice of these binding terms was a single line of small, gray text below the purchase button stating that clicking would constitute agreement to the Terms of Use and Privacy Policy.
The Court’s Analysis: Conspicuousness Matters
Both the trial court and the Court of Appeal focused on a fundamental question: Did Cruz receive reasonably sufficient notice that her purchase would bind her to an arbitration agreement?
The court’s answer was no. The decision emphasized several key factors:
Visual Prominence: The notice text was less prominent than other elements on the checkout page, failing to draw the consumer’s attention to the significance of the agreement.
Transaction Context: Unlike signing up for an ongoing service where extensive terms might be expected, a simple retail purchase doesn’t typically signal to consumers that they’re entering into a comprehensive legal agreement with dispute resolution provisions.
Design Choices: The gray, small-font presentation suggested the notice was intentionally de-emphasized rather than designed to ensure informed consent.
What This Means for My Practice as a Consumer Arbitrator
In my experience handling consumer cases, the enforceability of the underlying arbitration agreement often determines whether a case proceeds at all. The Cruz decision reinforces several principles I’ve observed:
Arbitration Works Best with Knowing Consent: When consumers feel blindsided by an arbitration clause they never noticed, it not only creates an adversarial dynamic from the start but also frequently leads to threshold challenges about arbitrability itself. Rather than focusing on the merits of their dispute, parties end up litigating whether the case belongs in arbitration at all – exactly what happened in Cruz.
Context Matters: A consumer downloading software or opening a bank account might reasonably expect extensive terms. A consumer buying a handbag online typically does not. Courts increasingly recognize these contextual differences.
Good Faith Notice Benefits Everyone: While businesses may worry that conspicuous arbitration clauses will deter customers, clear notice actually serves everyone’s interests by ensuring only parties who genuinely consent to arbitration end up in the process.
Practical Implications for Businesses
The Cruz decision doesn’t spell doom for online arbitration agreements, but it does require businesses to be more thoughtful about implementation:
Make It Visible: Use contrasting colors, adequate font sizes, and prominent placement. If other elements on your checkout page are more noticeable than your terms notice, you have a problem.
Consider Timing: Present terms at a point in the transaction where users have time to review them, not buried in a rushed checkout flow.
Match Expectations: Ensure your terms notice aligns with the reasonable expectations of your transaction type. Luxury retail purchases and software licenses create different expectation frameworks.
Document the Process: Maintain clear records of how terms were presented, as courts will scrutinize the actual consumer experience.
Consumer Protection Perspectives
From a consumer protection standpoint, the Cruz decision strikes an appropriate balance. It doesn’t prohibit online arbitration agreements but requires genuine notice and consent. This approach:
- Preserves consumer choice while allowing businesses to use arbitration
- Prevents the most egregious “gotcha” arbitration clauses
- Maintains arbitration as a viable dispute resolution option for knowing participants
Looking Forward: The Evolution of Digital Consent
As our economy becomes increasingly digital, courts must continually evaluate how traditional contract principles apply to new technologies and business models. The Cruz decision suggests that California courts will continue to require meaningful notice and consent for arbitration agreements, regardless of the medium.
For businesses, this means investing in clear, honest communication about dispute resolution procedures. For consumers, it reinforces that arbitration agreements can’t be hidden in fine print. As an arbitrator, I see this as positive for the integrity of the arbitration process overall.
Conclusion
The Cruz v. Tapestry decision isn’t anti-arbitration – it’s pro-consent. By requiring businesses to provide clear, conspicuous notice of arbitration agreements, the court helps ensure that arbitration serves its intended purpose: providing an efficient, fair alternative to litigation for parties who knowingly choose it.
In my practice, I’ve found that arbitrations work best when all parties understand the process they’ve agreed to. The Cruz decision helps ensure more consumers enter arbitration with that understanding, ultimately strengthening the process for everyone involved.
