McGhee v. North American Bancard, LLC
Filing
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ORDER denying 13 Defendant's Motion to Compel Arbitration; granting 18 Defendant's Request to Strike Declaration Filed Concurrently with Motion to Compel. Signed by Judge Anthony J. Battaglia on 7/21/2017. (acc) (Additional attachment(s) added on 7/21/2017: # 1 Rejected Document) (acc).
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UNITED STATES DISTRICT COURT
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SOUTHERN DISTRICT OF CALIFORNIA
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GERALD MCGHEE, An Individual, On
Behalf of Himself and All Others
Similarly Situated,
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Case No.: 17-CV-0586-AJB-KSC
ORDER:
Plaintiff,
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(1) DENYING DEFENDANT’S
MOTION TO COMPEL
ARBITRATION, (Doc. No. 13); AND
v.
NORTH AMERICAN BANCARD, LLC,
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Defendant.
(2) GRANTING DEFENDANT’S
REQUEST TO STRIKE
DECLARATION FILED
CONCURRENTLY WITH MOTION
TO COMPEL, (Doc. No. 18)
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Presently before the Court is Defendant North American Bancard, LLC’s (“NAB”)
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motion to compel arbitration. (Doc. No. 13.) Plaintiff Gerald McGhee (“McGhee”) opposes
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the motion. (Doc. No. 23.) Having reviewed the parties’ arguments in light of controlling
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authority, and pursuant to Local Civil Rule 7.1.d.1, the Court finds the matter suitable for
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disposition without oral argument. For the reasons set forth below, the Court DENIES
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NAB’s motion.
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BACKGROUND
The facts underlying this dispute are simple and largely undisputed. NAB is the
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provider of mobile credit card processing services called “PayAnywhere.” McGhee, a
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merchant, acquired a card reader from NAB, but never used it. After more than one year,
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NAB began deducting a monthly non-use fee from McGhee’s bank account. Despite
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contacting NAB to stop the charges and demand a refund, NAB continued to charge
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McGhee for several months and has refused to issue him a refund.
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McGhee instituted this lawsuit on March 24, 2017, by filling the class action
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complaint. (Doc. No. 1.) McGhee brings this nationwide putative class action on behalf of
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“[a]ll persons in the United States charged a Fee as a result of obtaining [NAB]’s Card
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Reader beginning at the start of the applicable statute of limitations period and ending on
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the date as determined by the Court . . . .” (Doc. No. 1 ¶ 20.) On May 15, 2017, NAB filed
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the instant motion to compel arbitration, asserting that McGhee agreed to arbitrate his
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claims when he signed up for NAB’s services. (Doc. No. 13.) McGhee filed an opposition,
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(Doc. No. 23), and NAB replied, (Doc. No. 25). This order follows.1
LEGAL STANDARD
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The Federal Arbitration Act governs the enforcement of arbitration agreements
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involving interstate commerce. 9 U.S.C. § 2. Pursuant to § 2 of the FAA, an arbitration
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agreement is “valid, irrevocable, and enforceable, save upon such grounds as exist at law
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or in equity for the revocation of any contract.” Id. The FAA permits “[a] party aggrieved
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by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement
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for arbitration [to] petition any United States district court . . . for an order directing that
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such arbitration proceed in the manner provided for in [the] agreement.” Id. § 4.
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Given the liberal federal policy favoring arbitration, the FAA “mandates that district
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courts shall direct parties to proceed to arbitration on issues as to which an arbitration
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agreement has been signed.” Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 (1985)
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On May 23, 2017, NAB withdrew the declaration submitted concurrent with its motion
to compel arbitration. (Doc. No. 18.) The Court GRANTS NAB’s request to strike that
declaration from the record.
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(emphasis in original). Thus, in a motion to compel arbitration, the district court’s role is
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limited to determining “(1) whether a valid agreement to arbitrate exists and, if it does, (2)
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whether the agreement encompasses the dispute at issue.” Kilgore v. KeyBank Nat’l Ass’n,
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673 F.3d 947, 955–56 (9th Cir. 2012) (citing Chiron Corp. v. Ortho Diagnostic Sys., Inc.,
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207 F.3d 1126, 1130 (9th Cir. 2000)). If these factors are met, the court must enforce the
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arbitration agreement in accordance with its precise terms. Id.
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While generally applicable defenses to contract, such as fraud, duress, or
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unconscionability, may invalidate arbitration agreements, the FAA preempts state law
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defenses that apply only to arbitration or that derive their meaning from the fact that an
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agreement to arbitrate is at issue. AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339
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(2011). There is generally a strong policy favoring arbitration, which requires any doubts
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to be resolved in favor of the party moving to compel arbitration. Moses H. Cone Mem.
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Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24–25 (1983). However, where a party
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challenges the existence of an arbitration agreement, “the presumption in favor of
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arbitrability does not apply.” Goldman, Sachs & Co. v. City of Reno, 747 F.3d 733, 742
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(9th Cir. 2014).
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DISCUSSION
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NAB asserts that when McGhee signed up for NAB’s credit card processing
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services, McGhee was required to accept the “Terms and Conditions” by clicking on a
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button next to the words “I have read and agree to the Terms and Conditions.” (Doc. No.
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13 at 9.) Because he agreed to the Terms and Conditions by checking the box, NAB argues
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he also agreed to the User Agreement, a hyperlink to which was contained on the Terms
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and Conditions page. (Id. at 9–10.) In turn, the User Agreement contains the arbitration
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clause that NAB now invokes. (Id. at 10–11; Doc. No. 19 at 2–3 ¶¶ 4, 6–8.) That arbitration
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clause states, in pertinent part, the following:
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22. Disputes: PA [PayAnywhere] and you each agreement that any dispute
or claim arising out of or relating to this Agreement or the Services (each, a
‘Dispute’), shall be settled by following the procedures: . . .
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c. IN THE ABSENCE OF RESOLVING THE DISPUTE, AND
INSTEAD OF SUING IN COURT, PA AND YOU AGREE TO
SETTLE AND RESOLVE FULLY AND FINALLY ALL
DISPUTES EXCLUSIVELY BY ARBITRATION . . . . THE
AGREEMENT TO HAVE DISPUTES RESOLVED BY
ARBITRATION IS MADE WITH THE UNDERSTANDING
THAT EACH PARTY IS IRREVOCABLY, KNOWINGLY AND
INTELLIGENTLY WAIVING AND RELEASING ITS RIGHT
TO LITIGATE DISPUTES THROUGH A COURT AND TO
HAVE A JUDGE OR JURY DECIDE DISPUTES.
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(Doc. No. 19 at 36.) Based on this arbitration clause, NAB argues that because McGhee
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clicked the box stating he accepted the Terms and Conditions, he agreed to binding
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arbitration. (Doc. No. 13 at 12.) Thus, NAB asserts the Court must compel the parties to
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arbitrate McGhee’s claims. (Id. at 15.) In opposition, McGhee makes two arguments: (1)
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the User Agreement was a “browsewrap” agreement that cannot be enforced; and (2) even
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if the User Agreement is enforceable, the claims brought in this case fall outside the
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arbitration clause’s purview. (Doc. No. 23.) Because the Court finds McGhee did not assent
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to the User Agreement, the Court does not reach McGhee’s argument that his claims do
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not fall within the arbitration clause’s scope.
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If the facts of this case were as simple as NAB suggests, it would present a clear-cut
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case of assent to a modified clickwrap agreement. The Ninth Circuit recently explained the
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spectrum of ways website operators attempt to establish mutual manifestation of assent.2
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At one end of this spectrum are “‘clickwrap’ (or ‘click-through’) agreements, in which
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website users are required to click on an ‘I agree’ box after being presented with a list of
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terms and conditions of use[.]” Nguyen v. Barnes & Noble Inc., 763 F.3d 1171, 1175–76
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The User Agreement identifies Michigan law as controlling, while the Terms and
Conditions identify Georgia. (Doc. No. 19 at 24, 36.) Under either state’s laws,
manifestation of assent is a necessary element of contract formation. See Rood v. Gen.
Dynamics Corp., 507 N.W.2d 591, 598 (Mich. 1993) (“A basic requirement of contract
formation is that the parties mutually assent to be bound.”); Thomas v. Chance, 754 S.E.2d
669, 671 (Ga. Ct. App. 2014) (listing “assent of the parties to the terms of the contract” as
one element of a valid contract).
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(9th Cir. 2014). At the other end of the spectrum are “‘browsewrap’ agreements, where a
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website’s terms and conditions of use are generally posted on the website via a hyperlink
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at the bottom of the screen. . . . Unlike a clickwrap agreement, a browsewrap agreement
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does not require the user to manifest assent to the terms and conditions expressly . . . [a]
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party instead gives his assent simply by using the website.” Id. at 1176 (citation and internal
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quotation marks omitted).
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Between a pure clickwrap and a pure browsewrap is a hybrid, sometimes referred to
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as a “modified clickwrap.” E.g., Swift v. Zynga Game Network, Inc., 805 F. Supp. 2d 904,
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910–12 (N.D. Cal. 2011). A modified clickwrap agreement is similar to a browsewrap in
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that the user is not required to scroll through a list of terms and conditions before reaching
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the “I Agree” button, but the user is otherwise “required to affirmatively acknowledge the
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agreement before proceeding with use of the website.” Nguyen, 763 F.3d at 1176. When
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faced with these modified clickwrap presentations, “[c]ourts have [] been more willing to
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find the requisite notice for constructive assent . . . .” Id.
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As the Court stated above, if the facts were as straightforward as NAB presents, then
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the User Agreement and its arbitration clause would be a prototypical modified clickwrap
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agreement, and the Court would be required to find that McGhee had assented to
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arbitration. But it is not so simple. The arbitration agreement that NAB invokes is not found
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simply by clicking on the “Terms and Conditions” hyperlink located on the application
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page. Rather, McGhee would have been required to click on the “Terms and Conditions”
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hyperlink and click again on the “View User agreement here” link in order to reach the
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“Pay Anywhere User Agreement” containing the arbitration clause that NAB asserts
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controls. (Doc. No. 19 at 2–3 ¶¶ 4, 6–8.)
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Even this two-step process could conceivably fall within the parameters of a
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modified clickwrap agreement. After all, the “View User agreement here” hyperlink is
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located near the top of the Terms and Conditions page, (id. at 13), so this is not a situation
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where the second hyperlink is embedded at the bottom of a lengthy webpage, see, e.g.,
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Nguyen, 763 F.3d at 1177 (“Where the link to a website’s terms of use is buried at the
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bottom of the page or tucked away in obscure corners of the website where users are
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unlikely to see it, courts have refused to enforce the browsewrap agreement.”). But what
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throws a wedge in NAB’s analysis is the fact that the Terms and Conditions page itself—
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the page that contains the second hyperlink to the User Agreement—also contains
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“PayAnywhere
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AGREEMENT.” Those Terms and Conditions do not require the website’s user to click a
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link; rather, they are listed on the Terms and Conditions page itself. And significantly,
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those Terms and Conditions contain the following forum selection clause:
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TERMS
AND
CONDITIONS
OF
MERCHANT
SERVICE
Global, Member, and Merchant agree that all actions arising out, relating to,
or in connection with (a) this Agreement, (b) the relationships which result
from this Agreement, or (c) the validity, scope, interpretation or enforceability
of the choice of law and venue provision of this Agreement shall be brought
in either the courts of the State of Georgia sitting in Fulton County or the
United States District Court for the Northern District of Georgia, and
expressly agree to the exclusive jurisdiction of such courts. Merchant hereby
agrees that claims applicable to American Express may be resolved through
arbitration as further described in the American Express Merchant
Requirements Guide (the “American Express Guide”) attached as an appendix
to the Card Acceptance Guide.
(Doc. No. 19 at 24.) The webpage also contains a merger clause, which provides that “[t]he
[Merchant Service] Agreement, including these Terms and Conditions and the Merchant
Application, constitutes the entire Agreement between Merchant, Global Direct, and
Member and supersedes all prior memoranda or agreements relating thereto, whether oral
or in writing.” (Id.)
NAB protests, however, contending that these Terms and Conditions have no
bearing on the instant dispute because McGhee did not fill out a Merchant Service
Application. (Doc. No. 25 at 7–8 & n.1.) If that is the case, then why would the Terms and
Conditions hyperlink located on the application McGhee filled out link to these
“PayAnywhere
TERMS
AND
CONDITIONS
OF
MERCHANT
SERVICE
AGREEMENT”? And if they are not the controlling Terms and Conditions, why is every
page of these terms captioned “PayAnywhere – Terms and Conditions” at the top of the
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page? (See Doc. No. 19 at 13–29.) It stretches credulity to assert that the actual page that
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is linked to the application McGhee filled out does not govern that application, but rather
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another page linked to the page that is linked to the application does.3
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If NAB intended to have the “Pay Anywhere User Agreement” control McGhee’s
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claims, perhaps NAB should have linked the application to that agreement. Instead, NAB
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linked the application to the “PayAnywhere TERMS AND CONDITIONS OF
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MERCHANT SERVICE AGREEMENT.” Following the case law that NAB itself cites,
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the Court finds it is to this agreement to which McGhee assented. See Crawford v.
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Beachbody, LLC, No. 14cv1583–GPC(KSC), 2014 WL 6606563, at *3 (S.D. Cal. Nov. 5,
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2014) (concluding the parties agreed to terms and conditions where the page with the full
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terms was directly hyperlinked to the order form page); Swift, 805 F. Supp. 2d at 910–12
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(same); see also Van Tassell v. United Mktg. Grp., LLC, 795 F. Supp. 2d 770, 792–93
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(N.D. Ill. 2011) (finding there was no valid agreement to arbitrate in part because of the
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“multi-step process” required to find the arbitration agreement).
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For these reasons, the Court finds that McGhee’s act of checking the box indicating
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he read and agreed to the Terms and Conditions indicated his assent to the Terms and
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Conditions located on the page that that hyperlink takes him to, specifically, the
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“PayAnywhere
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AGREEMENT.” To the extent NAB seeks to hold McGhee to the Pay Anywhere User
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Agreement and the arbitration clause contained therein, the Court finds there was no assent
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to that agreement’s provisions; thus, there is no valid agreement to compel arbitration of
TERMS
AND
CONDITIONS
OF
MERCHANT
SERVICE
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NAB argues that McGhee’s assent to the Terms and Conditions applies to both the Terms
and Conditions of Merchant Service Agreement and the Pay Anywhere User Agreement.
(Doc. No. 25 at 7.) However, NAB cites no authority for this position. Furthermore,
accepting this assertion poses more problems than solutions: Does the forum selection
clause in the Terms and Conditions of MSA control, or the arbitration agreement? Which
state’s laws control, Georgia (as identified in the Terms and Conditions) or Michigan (as
identified in the User Agreement)? In light of the dearth of authority supporting NAB’s
position, the Court declines to wade into these murky questions.
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these claims.4
CONCLUSION
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Based on the foregoing, the Court DENIES North American Bancard, LLC’s motion
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to compel arbitration. (Doc. No. 13.)
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IT IS SO ORDERED.
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Dated: July 21, 2017
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While McGhee may have won the day, the Court notes that the Terms and Conditions
McGhee himself points to as controlling include a forum selection clause and class action
waiver. (Doc. No. 19 at 24.) Those provisions, however, are not before the Court at this
time, and the Court expresses no opinion on their effect on this case.
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