Rodman v. Safeway, Inc.

Filing 223

ORDER GRANTING PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT; SETTING CASE MANAGEMENT CONFERENCE by Judge Jon S. Tigar granting 171 Motion for Summary Judgment. (wsn, COURT STAFF) (Filed on 12/10/2014)

1
2
3
4

UNITED STATES DISTRICT COURT

5

NORTHERN DISTRICT OF CALIFORNIA

6
7

MICHAEL RODMAN,

Case No. 11-cv-03003-JST

Plaintiff,
8
v.
9
10

SAFEWAY INC.,
Defendant.

Re: ECF Nos. 171 & 173.

United States District Court
Northern District of California

11
12

ORDER GRANTING PLAINTIFF’S
MOTION FOR PARTIAL SUMMARY
JUDGMENT; SETTING CASE
MANAGEMENT CONFERENCE

I.

INTRODUCTION
In this class action, Plaintiff Michael Rodman (“Plaintiff” or “Rodman”) and members of

13
14

the certified class, bring a single breach of contract action against Defendant Safeway, Inc.

15

(“Defendant” or “Safeway”). Plaintiff argues that Defendant breached the terms of the parties’

16

agreement by charging higher prices for groceries on its online safeway.com delivery service than

17

it charged in the stores where the groceries were selected. Both Plaintiff and Defendant have filed

18

cross-motions for partial summary judgment on the Class’s breach of contract claim. The matter

19

came for hearing on September 11, 2014.

20

II.

BACKGROUND

21

A.

Undisputed Facts and Procedural History

22

Safeway operates an online grocery delivery service on its website, safeway.com. Prior to

23

placing a delivery order with safeway.com, customers must register for an account. Exh. 7 to

24

Declaration of Timothy Mathews (“Matthews Decl.”) (ECF No. 171-9); see also ECF No. 194-5 at

25

2 (ECF No. 194-5) (“Safeway does not dispute that customers must agree to the Special Terms as

26

part of their registration process”). As part of that registration process, a registrant must click a

27

box that states, “Check this box if you agree to the Terms and Conditions.” Id.

28

The referenced Special Terms of Use (“Special Terms”) contain the following language:1

1
2

Customer Agreement

3

[. . .]

4

Your use of the . . . [Safeway] online service and the Site constitute
your agreement to the terms and conditions set forth below.

5

[. . .]

6

Notwithstanding any statements on the . . . [Safeway.com] web
pages or elsewhere, these Terms and Conditions are the agreement
between you and . . . [Safeway].

7
8

[. . .]

9

Responsibilities

10

If [Safeway] accepts your order, [Safeway] shall, in return for your
payment, provide the Product that you order through the online
shopping service. The Product shall be delivered to you . . . at the
delivery address you designate. Your payment for the Product and
shipping and delivery, including any applicable sales taxes, is due
upon completion of the checkout and delivery of your order . . . .
The total amounts you shall pay for the Product per each order shall
be the sums of the respective prices for the items you select and
submit via the online order form, plus all applicable sales taxes and
shipping charges, if any, as reported to you as the “TOTAL” in the
delivery receipt.

United States District Court
Northern District of California

11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

1

The parties have produced competing versions of the Special Terms, and dispute which version
is the parties’ contract. Plaintiff submits his version as Exhibit 8 to the Matthews Declaration,
ECF No. 171-10, while Defendant has produced three versions as Exhibits 9-11 to the Declaration
of Brian Blackman, ECF Nos. 177-1 to 177-3, which are substantially identical to each other but
different than Plaintiffs’ version. The content quoted above appears in all versions of the contract.
The parties agree that the differences are not material to the dispute over whether Safeway
promises the same prices on safeway.com that it charges in its physical stores. See ECF No. 1865, at 16 (Plaintiff) (“In most respects, including all statements concerning pricing, the two versions
are substantively identical, with variation only in the numbering of sub-headings”); ECF No. 1944, at 20 (Defendant) (“What version of the Special Terms was operative has no bearing on whether
Safeway promised price parity”). However, the document contains substantially different
language regarding later amendments to the contract, which the Court discusses infra, at III-C.
The documents contain the same headings, but with differing section numbers, and so the Court
refers to the sections by their heading names rather than their numbers. The Court refers to
language in the preliminary section, under the heading of “Customer Agreement,” as the
“preamble.” Different versions of the contract used different names for different Safeway brand
names - Safeway, Genaurdi’s, Vons, etc. However, the parties agree that the versions were the
same for each brand name. Therefore, the Court has substituted “[Safeway]” and [safeway.com]”
where necessary.
2

1
2
3
4
5
6
7
8
9

[. . .]
Product Pricing and Service Charges
The prices quoted on our web site at the time of your order are
estimated prices only. You will be charged the prices quoted for
Products you have selected for purchase at the time your order is
processed at checkout. The actual order value cannot be determined
until the day of delivery because the prices quoted on the Web site
are likely to vary either above or below the prices in the store on the
date your order is filled and delivered.
[. . .]
A service (delivery) fee applies to all orders, no matter how small or
large, and is nonrefundable. The service fee covers the costs
associated with each order. Please see “about deliveries” in the
customer help section for applicable charges.
[. . .]

11
United States District Court
Northern District of California

10

[Safeway.com] Communications

12
13

On occasion, [Safeway.com] may need to contact you regarding
your account or a significant business issue. These communications
will be marked “Special service notification: Please read.”

14

[. . .]

15

Delivery

16

. . . We reserve the right not to deliver items that your local store,
where your groceries are selected, deem to be excessive in quantity.

17
18
19

[. . .]
Applicable Law

22

These Terms and Conditions and the order form, collectively
constituting the sole and entire agreement between Safeway and you
regarding the online shopping services, are governed by laws of the
State of California without regard to conflict of laws and rules. The
parties agree to jurisdiction and venue for any dispute hereunder
solely in Pleasanton, California and Alameda County, California.

23

[. . .]

24

Changes to Terms and Conditions

25

[Safeway] reserves the right to, from time to time, with or without
notice to you, in [Safeway’s] sole discretion, amend the Terms and
Conditions for use and purchases regarding the online shopping
services. Any amendment by [Safeway] will be effective only as to
orders you place after [Safeway’s] revisions of these Terms and
Conditions as displayed on the Web site. [Safeway] will plan to
notify you of any material amendments to these Terms and

20
21

26
27
28

3

2

Conditions; however, it is your responsibility to review the Terms
and Conditions before submitting each order. [Safeway] has no
responsibility to notify you of any changes before any such changes
are effective.

3

[. . .]

4

Terms and Conditions Govern

5

These Terms and Conditions, as amended from time to time, shall be
the sole terms of the agreement between you and [Safeway]
regarding your online purchases. All statements otherwise made on
the Web site, or otherwise, are intended only for you convenience
and do not form and are not included in our Agreement or the terms
for your purchase.

1

6
7
8

Once registered, customers place orders for home delivery by browsing selections and
9

prices displayed on the website. Declaration of Steve Guthrie (“Guthrie Decl.”) ¶11 (ECF No.

10
175). For each item, the online store describes the item, displays its image, and displays a price
11
United States District Court
Northern District of California

next to the item. Id. ¶12. Customers select a delivery time, which can be several days after the
12
order is placed online. Id. ¶14. Groceries are then selected from a physical Safeway store and
13
14
15

delivered to the customer. Prices for products in Safeway’s physical stores, and in its online store,
change frequently. Declaration of Michael McCready (“McCready Decl.”) ¶ 6 (ECF No. 172-6).
As initially operated from 2001 to 2006, safeway.com “generally priced the items sold in

16
the online store the same as the brick-and-mortar store from which the items were picked and
17
18
19
20
21

delivered,” although “[t]his pricing was never exactly the same due to exceptions . . ., such as
manager specials.” Id. In April 2010, Safeway instituted a new pricing model for regular retail,
non-promotional items on safeway.com, instituting “a markup applied to the prices charged in the
price zone of the physical store from which the customer’s order is picked and delivered.” Id.
¶¶ 9-10. “If the price of an item is between $0.00 and $0.99, the markup adds $0.10, from a $1.00

22
to $1.99, the markup adds $0.20 cents, from $2.00 to $2.99 the markup adds $0.30 cents, and so
23

on.” Id. ¶ 10. Under this new structure, the prices displayed for items on the safeway.com

24
website displayed this marked-up price. Id. ¶ 11.
25
Plaintiff Rodman, who used the safeway.com delivery service and later discovered the
26
prices were higher than those in his local store, brought suit, alleging causes of action for breach
27

of contract and under California’s Unfair Competition Law, Consumer Legal Remedies Act, and

28
4

1

False Advertising Law. Plaintiff argued that he understood the Special Terms to promise the same

2

prices in the local stores as were charged on the website, and Safeway argued that his claims failed

3

as a matter of law. On November 1, 2011, the Court denied Safeway’s motion to dismiss

4

Plaintiff’s claims. 2011 WL 5241113 (ECF No. 38).

5

On November 15, 2011, Safeway revised the Special Terms to include the following

6

language: “Please note before shopping online at [Safeway.com] that online and physical store

7

prices, promotions, and offers may differ.” Exh. 42 to Matthews Decl. (ECF No. 171-44). “All

8

references to ‘store’, ‘online’, ‘website’, or ‘on line store’ as used herein refer to the . . . Online

9

Shopping Services only unless expressly stated.” Id. Safeway did not contact safeway.com
registrants to notify them that it had amended the Special Terms. Exh. 9 to Matthews Decl., at

11
United States District Court
Northern District of California

10

288:13-18 (ECF No. 170-9). On August 29, 2012, Safeway sent an email to customers who had

12

opened an email from Safeway.com in the last six months, informing them that “Grocery delivery

13

prices, promotions, discounts, and offers may differ from your local store.” ECF No. 175-5 at 2.

14

This email also did not reference the Special Terms. Id.

15

On March 9, 2014, the Court granted Plaintiff’s motion to certify a class for purposes of

16

bringing the breach of contract action, although not for the CLRA, UCL and FAL causes of action.

17

2014 WL 988992 (ECF No. 163). The class is comprised of: “All persons in the United States

18

who: (1) registered to purchase groceries through Safeway.com at any time prior to November 15,

19

2011, and (2) purchased groceries at any time through Safeway.com that were subject to the price

20

markup implemented on or about April 12, 2010.” Id. These motions followed.

21

B.

Jurisdiction

22

This Court has jurisdiction pursuant to 28 U.S.C. § 1332(d)(2) & (6), the Class Action

23

Fairness Act of 2005 (“CAFA”), since there are 100 or more Proposed Class Members, the

24

amount in controversy exceeds $5,000,000, and at least one plaintiff and defendant are citizens of

25

different states.

26

C.

27

Summary judgment is appropriate “if the pleadings, depositions, answers to

28

Legal Standard

interrogatories, and admissions on file, together with the affidavits, if any, show that there is no
5

1

genuine issue as to any material fact and that the moving party is entitled to judgment as a matter

2

of law.” Fed R. Civ. Pro. 56(c). In order to prevail, a party moving for summary judgment must

3

show the absence of a genuine issue of material fact with respect to an essential element of the

4

non-moving party's claim. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Once the movant

5

has made this showing, the burden then shifts to the party opposing summary judgment to

6

designate “specific facts showing there is a genuine issue for trial.” Id. The court draws all

7

reasonable factual inferences in favor of the non-movant. Anderson v. Liberty Lobby Inc., 477

8

U.S. 242, 255 (1986). “[A]t the summary judgment stage,” courts are “not permitted to weigh

9

evidence.” Zobmondo Entm’t, LLC v. Falls Media, LLC, 602 F.3d 1108, 1121 (9th Cir. 2010).

10

III.

The parties agree that the Special Terms are fully integrated.2 Therefore, the parol

11
United States District Court
Northern District of California

ANALYSIS

12

evidence rule “generally prohibits the introduction of any extrinsic evidence, whether oral or

13

written, to vary, alter or add to the terms of an integrated written instrument.” Casa Herrera, Inc.

14

v. Beydoun, 32 Cal. 4th 336, 343 (2004). However:

15

When the meaning of the words used in a contract is disputed, the
trial court engages in a three-step process. First, it provisionally
receives any proffered extrinsic evidence that is relevant to prove a
meaning to which the language of the instrument is reasonably
susceptible. If, in light of the extrinsic evidence, the language is
reasonably susceptible to the interpretation urged, the extrinsic
evidence is then admitted to aid the court in its role in interpreting
the contract. When there is no material conflict in the extrinsic
evidence, the trial court interprets the contract as a matter of law.
This is true even when conflicting inferences may be drawn from the
undisputed extrinsic evidence or that extrinsic evidence renders the
contract terms susceptible to more than one reasonable
interpretation. If, however, there is a conflict in the extrinsic
evidence, the factual conflict is to be resolved by the jury.

16
17
18
19
20
21
22
23

Wolf v. Walt Disney Pictures & Television, 162 Cal. App. 4th 1107, 1126-27 (2008), as modified
24
25
26
27
28

2

The text of the preamble differs from version to version, but all versions have the following
sentence: “Notwithstanding any statements on the . . . [Safeway.com] web pages or elsewhere,
these Terms and Conditions are the agreement between you and . . . [Safeway].” A second
integration clause appears in the section entitled “Terms and Conditions Govern,” which is
identical in all four versions of the Special Terms.
6

1

on denial of reh’g (June 4, 2008) (internal citations omitted). The Court must first determine if

2

“the language of the instrument is reasonably susceptible” to the interpretation urged by the party

3

seeking to introduce extrinsic evidence, such that it would be appropriate to provisionally consider

4

extrinsic evidence shedding light on that meaning. If so, the Court will interpret the contract from

5

the language of the contract as a whole as well as in light of any extrinsic evidence that sheds light

6

on any ambiguous terms. Finally, the Court must consider whether members of the Class who

7

used safeway.com after the Special Terms were altered in November 2011 are entitled to damages

8

for purchases they made after that point.

9
10

United States District Court
Northern District of California

11
12
13
14
15
16

A.

Reasonable Susceptibility of the Contractual Language

This contractual dispute turns primarily on the “Product Pricing and Service Charges”
section of the Special Terms, which state:
The prices quoted on our Web site at the time of your order are
estimated prices only. You will be charged the prices quoted for
Products you have selected for purchase at the time your order is
processed at checkout. The actual order value cannot be determined
until the day of delivery because the prices quoted on the Web site
are likely to vary either above or below the prices in the store on the
date your order is filled and delivered.
Both parties maintain that the words of the contract alone entitle them to judgment.

17
Plaintiff interprets this section to promise that, except for otherwise disclosed delivery
18
fees, the customer will be charged the prices charged in the physical store where the groceries are
19
selected, and that the prices quoted on the website are attempts to estimate those in-store prices.
20

Defendant, on the other hand, argues that the phrase “the prices in the store” means the prices in

21
the online store, and that the terms explain to a customer that it if she places an order Monday for
22
delivery Thursday, she will be charged the price that the online store displays for the product on
23
Thursday. Both parties argue that their interpretation is the only plausible interpretation of these
24
25

words, and that the language is not “reasonably susceptible” to the alternate explanation, making it
inappropriate for the Court to even provisionally accept the opposing parties’ proffered extrinsic

26
evidence to aid the court in interpreting the language.
27
The Court does not agree with either party. The language of the contract itself is
28
7

1

“reasonably susceptible” to both interpretations, permitting the Court to allow the admission of

2

extrinsic evidence, for the reasons set forth below.

3
4

1.

Plaintiff’s Interpretation

In denying Defendant’s motion to dismiss Plaintiff’s contractual claims as a matter of law,

5

the Court concluded that “Plaintiff’s interpretation of the contract is more likely the accurate

6

construction which gives meaning to the intention of the parties at the time of contracting.” 2011

7

WL 5241113, at *3. More recently, in conducting the limited, but rigorous, inquiry into the merits

8

that was required to ensure that class certification was proper, the Court concluded that the

9

“language is susceptible to the interpretation that groceries will be purchased at a brick-and-mortar
store, that the prices charged will be those charged at that brick-and-mortar store, and that the

11
United States District Court
Northern District of California

10

prices displayed online are attempts to estimate those prices.” 2014 WL 988992, at *7.

12

It is true that neither of those determinations have become the law of the case. But the

13

relevant words of the Special Terms remain the same as when those orders issued. It can therefore

14

come as little surprise to Defendant that the Court now concludes that the language of the Special

15

Terms is, at the very least, reasonably susceptible to Plaintiff’s interpretation.

16

Defendant characterizes Plaintiff’s interpretation as adding an implied term of price parity,

17

and argues that Plaintiff has not satisfied the very high bar against implying the existence of a term

18

not included expressly within the contract. See Hinckley v. Bechtel Corp., 41 Cal. App. 3d 206,

19

211 (1974). But Plaintiff does not urge the Court to add or imply a term. The term already exists

20

in the contract, and it is an affirmative promise: “You will be charged the prices quoted for

21

Products you have selected for purchase at the time your order is processed at checkout.” The

22

term “checkout” is given meaning by next sentence of the Special Terms, which makes clear that

23

“the prices quoted on the Web site are likely to vary either above or below the prices in the store

24

on the date your order is filled and delivered.” (emphasis added). The only question is whether a

25

reasonable contracting party would have understood the “checkout” that dictates the prices

26

charged to be something that occurs at the physical store or the online store, in light of the

27

accompanying explanation that the prices quoted at “checkout” are correlated with the “prices in

28

the store on the date your order is filled and delivered.”
8

The Special Terms, read as a whole, repeatedly make reference to a physical Safeway store

1
2

as playing a role in the online shopping experience, supporting Plaintiff’s interpretation. The

3

“Delivery” section of the Special Terms states that “your groceries are selected” in “your local

4

store.” By indicating to customers that they will be charged in accordance with the “prices in the

5

store on the date your order is filled and delivered,” the terms can be reasonably interpreted as

6

promising the prices charged in a physical store. But while it is common to refer to an e-

7

commerce website as an “online store,” it is less common to use the simple term “store” to mean a

8

website, without additional explanation.
It might be another matter if some other portion of the contract used the word “store” by

9

itself to refer to the safeway.com website. But in every other use of the term “store” in the Special

11
United States District Court
Northern District of California

10

Terms, the word “store” means a physical store. See Preamble (“If you are not satisfied with any

12

substitution selected, you may return it to the physical store”; “We will make every attempt to

13

deliver on all your orders; however, large orders of specific items will be fulfilled at the discretion

14

of the store. For example, if you were to make an order of 100 bottles of wine, which would use

15

up all the store’s stock, the store may only be able to deliver 50 bottles.”); Delivery (“We reserve

16

the right not to deliver items that your local store, where your groceries are selected, deem to be

17

excessive in quantity”).3 Some of these uses of “store” are modified by the descriptors “physical”

18

or “local,” making clear they mean brick-and-mortar store rather than online store, however

19

nowhere in the Special Terms is the word “store” used on its own to mean “online store.” For

20

instance, when the Special Terms say that an order of “100 bottles of wine” would potentially “use

21

up all the store’s stock,” the Special Terms clearly appear to be referencing a physical store, given

22

the unlikelihood that an order of 100 bottles would deplete the entire inventory of safeway.com as

23

an online store.
Plaintiff’s interpretation of the contract gives effect to every one of three sentences in the

24
25
26
27
28

3

In fact, the version of the Special Terms that Defendant maintains is the parties’ contract
contains an additional term not contained in the version relied upon by Plaintiff, which refers to a
“store” as a concept distinct from the website: “to serve you better, we may combine information
you give us online, in our stores or through our catalogs.” See ECF Nos. 171-9-11, section
entitled “Cookies.”
9

1

first paragraph of the “Product Pricing and Service Charges” section, is consistent with a

2

reasonable objective reading of the language in light of the contract as a whole, and is a very

3

compelling interpretation of the contract.

4
5
6

2.

Safeway’s Interpretation

The Special Terms, on the other hand, are somewhat less susceptible to Safeway’s
interpretation of the term “store.”
The main problem with Safeway’s interpretation is that it argues that very different words

8

in the same sentence mean the same thing. The terms say that “prices quoted on the Web site are

9

likely to vary either above or below the prices in the store on the date your order is filled and

10

delivered.” Safeway argues that “on the Web site” means “on the Web Site” and that “in the

11
United States District Court
Northern District of California

7

store” also means “on the Web site.” This is not a very compelling explanation of the objective

12

meaning of these words. If Safeway meant “on the Web site” both times, it could have said “on

13

the Web site” both times, or simply said “prices quoted on the Web site on the time of your order

14

are likely to vary either above or below the prices on the date your order is filled and delivered.”

15

By adding the phrase “in the store” --a phrase that, everywhere else in the Special Terms, means

16

the physical Safeway store where the groceries are selected-- the Special Terms add to the

17

sentence a concept that a reasonable contracting party would interpret to mean a physical store.

18

It is also difficult to accept Safeway’s argument that when it promised “[y]ou will be

19

charged the prices quoted for Products you have selected for purchase at the time your order is

20

processed at checkout,” it meant at the time the order is processed at the online checkout process,

21

as opposed to a checkout that occurs in the physical grocery store. A customer would presumably

22

have considered her “online checkout” process to be complete once she had completed her order.

23

In introducing the concept of a later-occurring “checkout,” the Special Terms again refer to

24

something a customer would have expected to occur in a physical store.

25

From the words of the Special Terms alone, the Court finds Safeway’s interpretation

26

considerably less compelling that Plaintiff’s. However, Plaintiff’s interpretation does some

27

(lesser) violence to the language as well. Under Plaintiff’s reading of the second sentence -- “You

28

will be charged the prices quoted for Products you have selected for purchase at the time your
10

1

order is processed at checkout” -- “prices quoted” means the prices charged in the physical store.

2

It is not all that common to think of grocery store tags as “quoting” prices. This sentence is

3

reasonably susceptible to the interpretation that “prices quoted” means a price quoted on the

4

website. This provides some support for Safeway’s argument that the rest of the sentence refers to

5

an online checkout. This potential ambiguity is sufficient to allow the admission of extrinsic

6

evidence that might shed light on what a reasonable contracting party might have understood the

7

words of the contract to mean.

8
9

B.

Provisional Consideration of Extrinsic Evidence

The Court can only consider extrinsic evidence that sheds light on the objective meaning
of the language as it would have been understood by a reasonable contracting party. It is not

11
United States District Court
Northern District of California

10

admissible to alter the term of the contract. See Casa Herrera, 32 Cal. 4th at 343. Extrinsic

12

evidence is also not relevant to the extent it is only probative of one party’s subjective

13

understanding of what it was promising. See, e.g., Founding Members of the Newport Beach

14

Country Club v. Newport Beach Country Club, Inc., 109 Cal. App. 4th 944, 956 (2003) (“The

15

parties’ undisclosed intent or understanding is irrelevant to contract interpretation.”).

16

As set forth supra, the Court begins with the conclusion that Plaintiff’s interpretation is

17

more compelling, but is open to extrinsic evidence demonstrating that ambiguous language should

18

be interpreted in the manner Safeway suggests. For the most part, Safeway’s papers resist the

19

incorporation of any extrinsic evidence. However, it does argue in its motion that two types of

20

extrinsic evidence support its interpretation. Mem. Pts. & Auth. In Support of Safeway’s Motion

21

for Summary Judgment, at 20-21 (ECF No. 172-4).

22
23

First, Defendant argues that two “Frequently Asked Questions” (“FAQs”) documents that
appeared on the safeway.com website support its interpretation. The two FAQs state:

24

Will I pay the same prices online that are in your stores

25

Except for certain items, you’ll find most of the same great
promotions online as in your local store. Our goal is to keep our
prices low while giving you choices in how you shop. Some special
offers and promotions, such as manager specials, etc., are limited to
in-store purchases only and are not available for online purchases.
Safeway Club Card specials vary from store to store and Club Card

26
27
28

11

1
2
3
4
5
6
7
8
9
10

United States District Court
Northern District of California

11

prices may not apply to certain products offered online. You will
receive the prices and promotions applicable from your online store
on the day of delivery as noted next to each item. Please note:
Safeway.com does not issue rain checks.
[. . .]
Why does my order confirmation say that the prices are
estimates only
Prices on our web site are estimated due to a number of reasons.
Products sold by weight (for example: produce, meat, etc.) have
estimated prices. The price you pay will be based on the actual
weight of those items at the time your order is picked for delivery.
The order confirmation shows estimated prices only and does not
include sales tax, CRV and other charges. Depending upon the
delivery date you select, prices could vary from the time you place
your order and the time your order is delivered, due to sale changes.
You will be charged the prices charged in the store on the day your
order is picked and delivered.

12

Exhs. 12 & 13 to Blackman Decl. (ECF Nos. 177-4 & 177-5). Safeway argues that since it said

13

“[e]xcept for certain items, you’ll find most of the same great promotions online as in your local

14

store,” it cannot be understood to have represented that safeway.com offers all of the same prices

15

charged in the local store. Therefore, since an accompanying FAQ states that “[y]ou will be

16

charged the prices charged in the store on the day your order is picked and delivered,” Safeway

17

must have been using the term “charged in the store” to mean “charged in the online store.” But

18

the Special Terms explicitly provide that representations on the website are not part of the parties’

19

agreement, and so the FAQs are only probative of Safeway’s understanding of what it was

20

offering in the contract, not what a reasonable consumer would have understood the contract to

21

have been offering. The FAQs therefore do not help the Court understand how a reasonable

22

contracting party would have understood the words in the contract and are of little assistance to the

23

Court’s task. In fact, in the first FAQ, Safeway uses the terms “in-store” and “from store to store”

24

to mean a physical store. The FAQ’s usage of the term “store” to mean a physical store at least

25

some of the time would actually buttress Plaintiff’s interpretation.

26

Second, Safeway argues that it did not amend its Special Terms when it changed its pricing

27

policy to no longer offer the same prices it offered online as it offered in the physical stores.

28

Defendant argues that this reinforces its argument that Safeway must not have understood the
12

1

terms of the contract to promise online parity with prices in physical Safeway stores. Again, even

2

assuming that this is the most persuasive explanation of Safeway not updating the Special Terms,

3

this shows, at most, Safeway’s subjective understanding of what it thought it was offering rather

4

than the objective meaning of the terms.
Plaintiff has submitted significant extrinsic evidence – including the same FAQs, evidence

5
6

of Safeway’s own course of performance, and customer surveys – which he argues tends to show

7

that Safeway understood the terms to represent price parity, and understood its customers to have

8

believed that as well. Safeway objects to the admissibility of all such evidence. In any event, it is

9

unnecessary for the Court to consider Plaintiff’s extrinsic evidence. After considering the
language of the Special Terms, and all extrinsic evidence Defendant has submitted to shed light on

11
United States District Court
Northern District of California

10

the meaning of those terms, the Court concludes that Plaintiff’s interpretation is the more faithful

12

interpretation of what a reasonable contracting party would have understood the terms to promise.

13

No consideration of Plaintiff’s extrinsic evidence is necessary to support this conclusion. The

14

Special Terms promise that, with the exception of the actually disclosed special charges and

15

delivery fees, the prices charged for safeway.com products will be those charged in the physical

16

store where the groceries are delivered. Since Safeway actually marked up the charges for the in-

17

store prices beyond the disclosed delivery and special charges, the Court grants summary

18

judgment that Safeway breached its contract with its customers.

19

C.

November 2011 Amendments to the Special Terms

20

Next, the Court must address is whether Class Members can recover damages for

21

purchases they made after the Special Terms were amended in November 15, 2011.4 Safeway

22

amended the Special Terms in November 2011 to specifically provide that safeway.com was not

23

offering the same prices offered in the physical stores. Safeway did not provide notice of this

24
25
26
27
28

4

Safeway argues that damages should be cut off from June 16, 2011, since that is the date it
updated one of its online FAQs to state that prices online differ from prices in physical Safeway
stores. The Special Terms are a fully integrated contract that specifically provide that it is not
altered by any representations on the website. Changes to the words on the website did not change
the parties’ contract. Therefore, the Court only considers Safeway’s argument to the extent it
argues that damages should be cut off after November 15, 2011.
13

1

change to Class Members and did not conspicuously notify safeway.com users of this amendment.

2

Safeway argues that it did not need to notify Class Members of the change to the Special Terms

3

because, at the time of their registration, safeway.com registrants agreed to be bound to any

4

amended versions of the terms posted to the website. Plaintiff contends that a term whereby

5

website users agree to be bound to any future changes an online retailer makes to a contract

6

without any notice of those changes is unenforceable and that those changes are merely

7

unaccepted offers to amend the contract.5

8

On this point, there are some significant differences between Plaintiff’s version of the

9

Special Terms and Defendant’s. The version submitted by Plaintiff states that the registrants
“agree to these Terms and Conditions, and the form in which they appear at the time your online

11
United States District Court
Northern District of California

10

registration is completed,” while Defendant’s version states that the registrant agrees to the terms

12

“and the form in which they appear at the time your online transaction is processed.” ECF No.

13

187 at 17 (emphases added). Plaintiff’s version provides that Safeway “will plan to notify you of

14

any material amendments to these Terms and Conditions.” Id. Defendant’s versions omit that

15

depiction of Safeway’s intentions, but in both versions, Safeway provides that it “has no

16

responsibility to notify you of any changes before any such changes are effective.” Id. In both

17

versions, Safeway “reserves the right to, from time to time, with or without notice to you, in

18

[Safeway’s] sole discretion, amend the Terms and Conditions.” Id. Defendant’s version

19

reinforces this with an additional term: “We may amend the Agreement at any time by posting the

20

amended terms on the Site.” Id. In both versions, the Special Terms provide that “[a]ny

21

amendments by [Safeway] will be effective only as to orders you place after [Safeway]’s revisions

22

of these Terms and Conditions as displayed on the Web site.” Id.
The Court finds it unnecessary to resolve the factual question of whether Plaintiff or

23
24

Defendant’s version of the Special Terms was operative at any particular moment in time.

25

Regardless of the version of the Special Terms that Class Members viewed when they registered

26

with safeway.com, it is undisputed that Class Members were not provided with conspicuous notice

27
5

28

Plaintiff does not argue that safeway.com’s pricing structure breached the as-amended Special
Terms, and so the Class only includes customers who registered before November 15, 2011.
14

1

that changes had been made to the Special Terms at the time those changes were made. Therefore,

2

those changes represent an offer to which the class members never expressed assent, and class

3

members were therefore not bound by those changes.

4

Defendant argues that, at the time of their safeway.com registration, Class Members agreed

5

to give Safeway the authority to change the terms of the contract without notice to them, by

6

indicating that they agreed to the version of the Special Terms that are in effect at the time they

7

make their subsequent orders. Defendant’s version of the Special Terms states that customers

8

agree to the terms “and the form in which they appear at the time your online transaction is

9

processed.” ECF No. 187 at 16-17 (emphases added). In order to complete their registration,
Customers were required to manifest agreement to the Special Terms shown to them by clicking a

11
United States District Court
Northern District of California

10

link. Defendant contends that, as a result of users’ agreement to this Special Term at the time of

12

their registration, Safeway was not required to notify customers of future changes to the terms for

13

those changes to become effective. Safeway contends that, because Class Members read the initial

14

registration contract, every time they opted to go forward with an online purchase after

15

registration, they were on notice that they were assenting to a new contractual agreement,

16

governed by the Special Terms operative elsewhere on the website at the time of that purchase.

17

The Court rejects this argument. The safeway.com agreement did not give Safeway the

18

power to bind its customers to unknown future contract terms, because consumers cannot assent to

19

terms that do not yet exist. A user confronting a contract in which she purports to agree to terms

20

in whatever form they may appear in the future cannot know to what she is are agreeing. At most,

21

this term in the safeway.com agreement could be read to indicate that a customer agrees to read

22

the terms and conditions every time she makes a purchase on the website in the future. But the

23

Court also concludes that, even in light of their agreement to the Special Terms at the time of

24

registration, customers’ assent to the revised Terms cannot be inferred from their continued use of

25

safeway.com when they were never given notice that the Special Terms had been altered.

26

The Ninth Circuit has taken a skeptical view of contracts in which online retailers have

27

sought to alter the offer and acceptance structure by contending that assent can be inferred by a

28

customer’s continued use of a service even in the absence of notice of the terms in question. In
15

1

Douglas v. U.S. Dist. Court for Cent. Dist. of California, 495 F.3d 1062, 1065 (9th Cir. 2007),

2

the Ninth Circuit held that the District Court had clearly erred in concluding that “a service

3

provider may change the terms of its service contract by merely posting a revised contract on its

4

website” without providing customers with additional notice of the changes. Plaintiff in that case

5

was a customer who had contracted with America Online for long distance telephone service. Id.

6

After Talk America acquired the business from America Online, it changed several material terms

7

in the services contract without informing preexisting customers. Id. The District Court held that,

8

given his continued use of the service, Plaintiff could be bound by the revised contract terms even

9

in the absence of notice. Id. at 1067. The Ninth Circuit, applying California law, disagreed, as
“[p]arties to a contract have no obligation to check the terms on a periodic basis to learn whether

11
United States District Court
Northern District of California

10

they have been changed by the other side.” Id. at 1066. Even if a customer’s continued use of a

12

service could be considered assent to revised terms, “such assent can only be inferred after [that

13

customer] received proper notice of the proposed changes.” Id.
Earlier this year, in Nguyen v. Barnes & Noble, Inc., the Ninth Circuit held that a customer

14
15

had not agreed to be bound to Barnes & Noble’s Terms of Use “by merely using Barnes &

16

Noble’s website” when he “was never prompted to assent to the Terms of Use and never in fact

17

read them.” 763 F.3d 1171 at 1173 (9th Cir. 2014).6 The website’s Terms of Use were available

18

“via a hyperlink located in the bottom left-hand corner of every page on the Barnes & Noble

19

website.” Id. at 1174. But the Terms of Use purported to bind even those users that had not read

20

them, claiming that a user would be deemed to have accepted the terms of use “[b]y visiting any

21

area in the Barnes & Noble.com Site, creating an account, [or] making a purchase.” Id.

22

The Nguyen decision distinguished between two forms of internet contracts: 1)

23

“clickwrap” agreements, “in which website users are required to click on an ‘I agree’ box after

24

being presented with a list of terms and conditions of use,” which courts generally enforce, and

25
26
27
28

6

Barnes & Noble’s Terms of Use included a choice of law provision stating that questions
regarding the validity of the term in question would be governed by New York law. The Nguyen
decision sidestepped the “circular inquiry” into whether the choice of law provision was
enforceable by noting that “both California and New York law dictate the same outcome,” and
applying “New York law, to the extent possible.” Id. at 1175.
16

2) “browsewrap” agreements, “where a website’s terms and conditions are generally posted on the

2

website via a hyperlink at the bottom of the screen,” which courts view with skepticism. Id. at

3

1175-76. Because the Barnes & Noble contract did not require users to assent before it purported

4

to bind them, it constituted a browsewrap agreement. Courts are typically reluctant to apply

5

browsewrap agreements against consumers who were not provided with sufficient notice that their

6

use of a website would be construed as a manifestation of assent to the agreement’s terms. Id. at

7

1177, 1178 n. 2. “While failure to read a contract before agreeing to its terms does not relieve a

8

party of its obligations under the contract, the onus must be on website owners to put users on

9

notice of the terms to which they wish to bind consumers.” Id. at 1179. The Nguyen decision

10

reasoned that “consumers cannot be expected to ferret out hyperlinks to terms and condition to

11
United States District Court
Northern District of California

1

which they have no reason to suspect they will be bound.” Id. Because Nguyen lacked sufficient

12

notice of Barnes & Noble’s Terms of Use, the Ninth Circuit held that he never in fact entered into

13

an agreement to be bound by them.

14

Safeway’s claim that a court could infer a customer’s assent to the revised terms from that

15

customer’s continued use of the safeway.com website resembles the type of browsewrap

16

agreement the Ninth Circuit rejected in Nguyen. Although Class Members were presented with a

17

clickwrap agreement at the time of their registration, they were never presented with a subsequent

18

clickwrap agreement asking them to consent to the revised Special Terms. As was the case in

19

Nguyen, Class Members could have completed all their subsequent purchases on safeway.com

20

without ever visiting the webpage hosting the revised Special Terms which Safeway claims

21

governed the sale and without ever clicking anything on the website that would indicate that they

22

have agreed to those terms. Customers’ lack of awareness that the Special Terms have been

23

altered undermines Safeway’s claim that each purchase on safeway.com constitutes an agreement

24

to those changes. Douglas teaches that assent to a contract’s revised terms “can only be inferred”

25

from a customer’s ongoing use of a service “after [the customer] received proper notice of the

26

proposed changes.” Douglas, 495 F.3d at 1066.

27

Although it is true that a customer could, as matter of course, read the entirety of the

28

Special Terms before every grocery purchase they make from safeway.com, generally “[p]arties to
17

1

a contract have no obligation to check the terms on a periodic basis to learn whether they have

2

been changed by the other side.” Id. Safeway has attempted to impose that obligation onto

3

customers via a contractual term, to which users agree as a condition of their initial safeway.com

4

registration. If the Court gave that term effect, then every individual consumer would be expected

5

to scrutinize the Special Terms every time she seeks to purchase groceries from safeway.com.

6

Such a burden would seriously compromise the convenience that makes online shopping a

7

desirable alternative to the in-store experience.
But beyond the impracticality of expecting consumers to spend time inspecting a contract

9

they have no reason to believe has been changed, the imposition of such an onerous requirement

10

on consumers would be particularly lopsided, as Safeway is aware that it has ‒ or has not ‒ made

11
United States District Court
Northern District of California

8

changes to the Terms and is the party to the contract that wishes for the new terms to govern.

12

“[T]he onus must be on website owners to put users on notice of the terms to which they wish to

13

bind consumers.” Nguyen, 763 F.3d at 1179. Safeway is best positioned to make sure customers

14

are aware of changes that Safeway has made to its contract with Class Members. After making a

15

change, Safeway can take any number of actions to alert users that the Special Terms they agreed

16

to at registration have been altered. For instance, Safeway could ask customers to click to indicate

17

that they agree to the new Special Terms or send all existing safeway.com customers an email in

18

order to ensure that every consumer is aware of a change in the Special Terms prior to making a

19

purchase. When Safeway changed the Special Terms on November 15, 2011, it opted to do

20

neither.

21

Therefore, assent to the revised Special Terms cannot be inferred from Class Members’

22

continued use of safeway.com following November 15, 2011. Instead, Class Members

23

safeway.com use continued to be governed by the Special Terms that were operative at the time of

24

their registration, which promised price parity.

25

D.

August 29, 2012 Email

26

Finally, Safeway argues that, even if damages are not cut off as of November 15, 2011,

27

when the Special Terms were amended without notice to Class Members, damages should still be

28

cut off as of August 29, 2012, the date Safeway sent an email to “all active, lapsed, and RNO
18

1

(registered but not ordered) customers, who had opened an email from Safeway.com in the last six

2

months.” ECF No. 207 at 14. This email stated, under the heading “Helpful Information on

3

Grocery Delivery Pricing and Promotions” that “Grocery delivery prices, promotions, discounts,

4

and offers may differ from your local store.” ECF No. 175-5 at 2. The Court does not agree that

5

this email gave Class Members notice of the change to the Special Terms, as it did not refer to the

6

Special Terms or indicate that Safeway had made any change to them. Moreover, Safeway admits

7

the email was not sent to all Class Members, but instead was only sent to those users who had

8

opened a safeway.com email within the last six months. Finally, the representation contained

9

within the email, which stated that prices “may differ from your local store,” was not even
factually accurate, as Safeway in fact always added a markup to items sold in the online store as

11
United States District Court
Northern District of California

10

compared to items sold in the physical store. ECF No. 172-6 at ¶¶ 8-12.
Therefore, Class Members’ assent to the revised Special Terms can also not be inferred

12
13

from their continued use of safeway.com following the August 29, 2012 email. Even following

14

that date, Class Members safeway.com use continued to be governed by the Special Terms that

15

were operative at the time of their registration, which promised price parity.

16

IV.

CONCLUSION

17

Plaintiff’s motion for summary judgment is GRANTED. The Court finds as follows:

18

1.

19

prices permitted under the terms of the contract;
2.

20
21

Safeway breached the contract by charging Plaintiff and the Class more than the

The Class is entitled to damages even for purchases which occurred after the

Special Terms were amended on November 15, 2011; and
3.

22

Therefore, Safeway is liable to Plaintiff and the Class for the aggregate amount of

23

the online mark-up from April 12, 2010, through the present.

24

///

25

///

26

///

27

///

28

///
19

1

The Court hereby SETS a case management conference for January 21, 2015, at 2:00 p.m.,

2

at which time it will set the remaining dates in this action. A joint case management statement,

3

including a proposed schedule, is due ten court days before the conference.

4
5
6
7

IT IS SO ORDERED.
Dated: December 10, 2014
______________________________________
JON S. TIGAR
United States District Judge

8
9
10

United States District Court
Northern District of California

11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
20