## Facts

- The National Federation of the Blind and several blind individuals sued a retail chain alleging disability discrimination tied to in-store checkout technology and loyalty-program enrollment.
- The retailer operated a customer loyalty program with written terms that included mandatory arbitration and a class-action waiver.
- In stores, customers enrolled at checkout on touchscreen point-of-sale devices that blind customers could not independently use; blind customers alleged they had to orally disclose personal information to clerks to enroll and complete purchases.
- The in-store enrollment process did not provide an accessible way for blind customers to review the loyalty program terms, and the record did not show that clerks provided the terms or informed customers about arbitration.
- At least one plaintiff enrolled online and clicked to accept the terms presented on a web interface.
- The loyalty-program terms reserved to the retailer a unilateral right to modify the terms at any time.
- Plaintiffs asserted claims under the ADA and state disability statutes; the appeal concerned only whether those claims had to be arbitrated.
- The district court (applying Texas contract law per the terms) denied the retailer’s motion to stay litigation and compel arbitration, concluding (1) the retailer failed to prove assent by in-store plaintiffs and (2) the agreement was illusory due to unilateral modification.
- The retailer appealed to the First Circuit.

## Issues

1. Whether the retailer proved that in-store blind customers had actual or constructive notice of, and assented to, the loyalty-program arbitration clause.
2. Whether the loyalty-program agreement (including arbitration) was illusory and unenforceable under Texas law because the retailer reserved an unrestricted unilateral right to modify the terms.
3. Whether continued participation in the loyalty program ratified the arbitration agreement despite alleged lack of notice at enrollment.

## Decision

- The First Circuit affirmed the order denying the motion to stay proceedings and compel arbitration.
- For the in-store plaintiffs, the retailer did not carry its burden to show an agreement to arbitrate was formed because it did not show accessible notice of the terms or assent.
- For the online enrollee, even assuming assent, the arbitration clause was unenforceable because the agreement was illusory under Texas law.
- The court rejected ratification based on continued program use where the record did not show plaintiffs learned of the arbitration terms and then chose to continue with that knowledge.
- The case returned to the district court for litigation of the discrimination claims.

## Legal Principles

- A party seeking to compel arbitration must prove the existence of an enforceable arbitration agreement under applicable state contract law.
- Contract formation requires sufficient notice of contract terms and assent; absent actual or constructive notice, arbitration provisions are not enforceable.
- Under Texas law, a contract (including an arbitration obligation within it) may be void as illusory where one party retains an unfettered unilateral right to change terms at any time, defeating mutuality/consideration.
- Ratification of restrictive terms requires evidence that the party had meaningful knowledge of the terms and voluntarily continued under them.

## Conclusion

The First Circuit held that the retailer could not compel arbitration because it failed to prove in-store customers assented to the loyalty-program arbitration terms and, in any event, the loyalty-program agreement was void as illusory under Texas law due to the retailer’s unrestricted unilateral modification power.


Nat’l Fed’n of the Blind v. Container Store, Inc., 904 F.3d 70 (1st Cir. 2018)