Lopez v. Terra's Kitchen, LLC et al
Filing
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ORDER Denying 8 Defendant's Motion to Compel Arbitration. The Court denies Defendant's motion to compel arbitration and to stay the case. Signed by Judge Michael M. Anello on 9/19/2018. (rmc)
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UNITED STATES DISTRICT COURT
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SOUTHERN DISTRICT OF CALIFORNIA
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MATTHEW LOPEZ, Individually and on
behalf of all others similarly situated,
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v.
TERRA'S KITCHEN, LLC,
Defendant.
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ORDER DENYING DEFENDANT'S
MOTION TO COMPEL
ARBITRATION
Plaintiff,
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Case No.: 18cv842-MMA (JLB)
[Doc. No. 8]
Plaintiff Matthew Lopez (“Plaintiff”), individually and on behalf of all others
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similarly situated, brings this action against Defendant Terra’s Kitchen, LLC
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(“Defendant”) alleging causes of action for violations of California’s Automatic Renewal
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Law (“ARL”), California Business and Professions Code § 17600, et seq., and
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California’s Unfair Competition Law (“UCL”), California Business and Professions Code
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§ 17200, et seq. See Doc. No. 1 (“Compl.”). Defendant moves to compel arbitration and
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stay this case pursuant to the Federal Arbitration Act (“FAA”). Doc. No. 8-1 (“Mtn.”).
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Plaintiff filed an opposition [Doc. No. 10 (“Oppo.”)], to which Defendant replied [Doc.
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No. 11 (“Reply”)]. The Court, in its discretion, decides the matter on the papers
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submitted and without oral argument pursuant to Civil Local Rule 7.1.d.1. For the
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reasons set forth below, the Court DENIES Defendant’s motion to compel arbitration
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and to stay.
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18cv842-MMA (JLB)
BACKGROUND
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Defendant operates a website which markets and offers various subscriptions for
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ready-made meals. Compl., ¶¶ 8, 18. According to Plaintiff, these subscription programs
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“constitute[] . . . automatic renewal and/or continuous service plan[s] or arrangement[s] .
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. . .” Compl., ¶ 18. Plaintiff purchased a subscription plan from Defendant and seeks to
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represent a class of “all persons in California who, within the applicable statute of
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limitations period up to and including the date of judgment in this action, purchased
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subscriptions for products (such as ready-made meals and related products) from
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[Defendant].” Compl., ¶¶ 1, 22.
Plaintiff alleges that: (1) Defendant’s automatic renewal or continuous service
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offers failed to present the offer terms in a clear and conspicuous manner and in visual
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proximity to the request for consent to the offer prior to purchasing the subscription; (2)
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Defendant charged Plaintiff’s and class members’ credit or debit cards, or third-party
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accounts, without first obtaining the subscriber’s consent to the agreement containing the
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terms of the offer; and (3) Defendant failed to provide an acknowledgment including the
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automatic renewal or continuous service offer terms, cancellation policy, and information
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regarding how to cancel in a manner capable of being retained by the consumer. Compl.,
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¶ 2.
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Specifically, Plaintiff alleges that “[o]n the pages where the subscriber makes the
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purchase, there was no description of the [automatic renewal offer terms or continuous
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service offer terms].” Compl., ¶ 19. As such, Plaintiff alleges that Defendant “failed to
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obtain Plaintiff’s and Class Members’ affirmative consent to the automatic renewal offer
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terms or continuous service offer terms . . . .” Compl., ¶ 20. Further, after subscribing to
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one of Defendant’s subscription plans, Defendant sends a follow-up email to the
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subscriber. Compl., ¶ 22. Plaintiff alleges that these emails fail “to provide an
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acknowledgment that includes the automatic renewal or continuous service offer terms,
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cancellation policy, and information on how to cancel in a manner that is capable of
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being retained by Plaintiff and Class Members . . . .” Id.
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18cv842-MMA (JLB)
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As a result, Plaintiff alleges “all goods, wares, merchandise, or products, sent to
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Plaintiff and Class Members under the automatic renewal or continuous service
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agreements are deemed to be an unconditional gift . . . .” Compl., ¶ 2. Based on these
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allegations, Plaintiff raises the following causes of action: (1) failure to present automatic
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renewal or continuous service offer terms clearly and conspicuously and in visual
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proximity to the request for consent offer in violation of the ARL; (2) failure to obtain the
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consumer’s affirmative consent before the subscription is fulfilled in violation of the
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ARL; (3) failure to provide acknowledgment with automatic renewal terms and
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information regarding the cancellation policy in violation of the ARL; and (4) violations
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of California’s UCL for unlawful and/or unfair business practices. Compl., ¶¶ 34-58.
LEGAL STANDARD
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The FAA permits “[a] party aggrieved by the alleged failure, neglect, or refusal of
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another to arbitrate under a written agreement for arbitration [to] petition any United
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States district court . . . for an order directing that . . . arbitration proceed in the manner
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provided for in [the arbitration] agreement.” 9 U.S.C. § 4. Upon a showing that a party
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has failed to comply with a valid arbitration agreement, the district court must issue an
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order compelling arbitration. Id.
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The Supreme Court has stated that the FAA espouses a general policy favoring
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arbitration agreements. AT&T Mobility v. Concepcion, 563 U.S. 333, 339 (2011).
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Federal courts are required to rigorously enforce an agreement to arbitrate. See id.
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Courts are also directed to resolve any “ambiguities as to the scope of the arbitration
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clause itself . . . in favor of arbitration.” Volt Info. Scis., Inc. v. Bd. of Trs. of Leland
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Stanford Jr. Univ., 489 U.S. 468, 475–76 (1989).
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In determining whether to compel a party to arbitration, the Court may not review
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the merits of the dispute; rather, the Court’s role under the FAA is limited “to
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determining (1) whether a valid agreement to arbitrate exists and, if it does, (2) whether
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the agreement encompasses the dispute at issue.” Cox v. Ocean View Hotel Corp., 533
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F.3d 1114, 1119 (9th Cir. 2008) (internal quotation marks and citation omitted). If the
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18cv842-MMA (JLB)
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Court finds that the answers to those questions are “yes,” the Court must compel
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arbitration. See Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 (1985). If there is
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a genuine dispute of material fact as to any of these queries, a district court should apply
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a “standard similar to the summary judgment standard of [Federal Rule of Civil
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Procedure 56].” Concat LP v. Unilever, PLC, 350 F. Supp. 2d 796, 804 (N.D. Cal.
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2004).
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Agreements to arbitrate are valid, irrevocable, and enforceable, save upon such
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grounds as exist at law or in equity for the revocation of any contract. 9 U.S.C. § 2.
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Courts must apply ordinary state law principles in determining whether to invalidate an
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agreement to arbitrate. Ferguson v. Countrywide Credit Indus., Inc., 298 F.3d 778, 782
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(9th Cir. 2002). As such, arbitration agreements may be invalidated by generally
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applicable contract defenses, such as fraud, duress, or unconscionability. Concepcion,
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563 U.S. at 339-41.
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DISCUSSION
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According to Defendant, Plaintiff’s claims against it are subject to arbitration
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pursuant to the following arbitration provisions contained within the Terms & Conditions
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on Defendant’s website:
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DISPUTE RESOLUTION
25. WE AGREE TO ARBITRATE IN OUR INDIVIDUAL CAPACITY
25.1 If we have a dispute that we cannot resolve, both you and [Defendant]
agree to resolve all claims . . . exclusively through binding arbitration, in
accordance with the rules of the American Arbitration Association, by a
neutral arbitrator in a location within one hundred (100) miles of your
residence.
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Doc. No. 8-2, Declaration of Brendan Connors in Support of Motion of Terra’s Kitchen
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to Compel Arbitration (“Connors Decl.”), Exhibit 2, ¶ 25. Additionally, the first page of
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Defendant’s Terms & Conditions also provides:
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REALLY IMPORTANT LEGAL STUFF
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3. IF WE HAVE A BAD BREAK UP, YOU HAVE TO ARBITRATE
SOLO. These Terms and Conditions dictate how we’ll settle any disputes.
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18cv842-MMA (JLB)
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Specifically, and very importantly, you are agreeing to exclusively use
binding arbitration on an individual basis to resolve disputes. That means no
jury trials, and no class actions.
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Id., Exhibit 2, ¶ 3. In opposition, Plaintiff contends that it never assented to the Terms &
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Conditions on the website. Oppo. at 8-16.
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A.
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Type of Agreement
“‘Before a party to a lawsuit can be ordered to arbitrate and thus be deprived of a
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day in court, there should be an express, unequivocal agreement to that effect. Only
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when there is no genuine issue of fact concerning the formation of the agreement should
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the court decide as a matter of law that the parties did or did not enter into such an
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agreement.’” Cordas v. Uber Techs., Inc., 228 F. Supp. 3d 985, 988 (N.D. Cal. 2017)
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(quoting Three Valleys Mun. Water Dist. v. E.F. Hutton & Co., 925 F.2d 1136, 1141 (9th
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Cir. 1991)). “While new commerce on the Internet has exposed courts to many new
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situations, it has not fundamentally changed the principles of contract.” Register.com,
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Inc. v. Verio, Inc., 356 F.3d 393, 403 (2d Cir. 2004). “Questions of contract formation
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are questions of state law.” Cordas, 228 F. Supp. 3d at 988. In California, “mutual
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assent [by word or conduct] is the key to contract formation.” Id.; see Specht v. Netscape
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Commc’ns Corp., 306 F.3d 17, 29 (2d Cir. 2002) (applying California law).
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The arbitration agreement at issue here is contained within the Terms & Conditions
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that govern visitors to Defendant’s website. As explained by the Ninth Circuit,
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“[c]ontracts formed on the Internet come primarily in two flavors: ‘clickwrap’ (or ‘click-
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through’) agreements, in which website users are required to click on an ‘I agree’ box
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after being presented with a list of terms and conditions of use; and ‘browsewrap’
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agreements, where a website’s terms and conditions of use are generally posted on the
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website via a hyperlink at the bottom of the screen.” Nguyen v. Barnes & Noble Inc., 763
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18cv842-MMA (JLB)
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F.3d 1171, 1175-76 (9th Cir. 2014).1 While clickwrap agreements require the user to
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expressly manifest assent to the terms and conditions, browsewrap agreements do not;
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rather a party assents to a browsewrap agreement simply by using the website. Id. at
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1176 (quoting Hines v. Overstock.com, Inc., 668 F. Supp. 2d 362, 366-67 (E.D.N.Y.
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2009). “The defining feature of browsewrap agreements is that the user can continue to
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use the website or its services without visiting the page hosting the browsewrap
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agreement or even knowing that such a webpage exists.” Be In, Inc. v. Google Inc., No.
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12-CV-03373-LHK, 2013 WL 5568706, at *6 (N.D. Cal. Oct. 9, 2013). Additionally,
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courts have held that a hybrid between a clickwrap and browsewrap agreement is binding
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where the consumer is provided with an opportunity to review the terms of service in the
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form of a hyperlink immediately under an “I Accept” button and then clicks that button.
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Swift v. Zynga Game Network, Inc., 805 F. Supp. 2d 904, 911-12 (N.D. Cal. 2011); see
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Fteja v. Facebook, Inc., 841 F. Supp. 2d 829, 834-35 (S.D.N.Y. 2012) (finding that the
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user was put on inquiry notice when the user clicked on the “Sign Up” button and right
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below the button was a sentence that “By clicking Sign Up, you are indicating that you
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have read and agree to the Terms of Service”).
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Plaintiff argues the arbitration provision within the Terms & Conditions is
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contained within a browsewrap agreement and Defendant contends the agreement is a
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hybrid agreement. Oppo. at 7-8; Reply at 4. If the agreement is not a hybrid, Defendant
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argues the agreement is a browsewrap agreement to which Plaintiff manifested assent.
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Reply at 6-9.
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The Court finds that the agreement is not a hybrid between a clickwrap and a
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browsewrap agreement. Defendant asserts that on the first page of the Terms &
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Conditions the consumer is notified that “[i]f you keep going and use the Services—even
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just browsing the Site—you agree to comply with and be bound by all these Terms and
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In Nguyen, the Ninth Circuit applied New York law, but acknowledged that “California and New York
dictate the same outcome.” Nguyen, 763 F.3d at 1175.
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18cv842-MMA (JLB)
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Conditions . . . .” Mtn. at 10; Connors Decl., Exhibit 2, ¶ 5. Essentially, Defendant
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moves the Court to hold that language contained within the Terms & Conditions provides
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the consumer an opportunity to review the terms of service in the form of a hyperlink
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merely because the hyperlink is below a button the consumer must click on. See Reply at
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4; Mtn. at 10. The Court is unpersuaded that this creates a hybrid agreement.
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Importantly, this scenario distinguishes this case from the cases Defendant cites to in
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support of its argument. For example, in Meyer v. Uber Techs., Inc., “[b]elow the input
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fields and buttons on the Payment Screen is black text advising users that ‘[b]y creating
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an Uber account, you agree to the TERMS OF SERVICE & PRIVACY POLICY.”
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Meyer v. Uber Techs., Inc., 868 F.3d 66, 71 (2d Cir. 2017). Similarly, in Fteja, a putative
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Facebook user must click a “Sign Up” button which appears directly above text advising
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the user that “[b]y clicking Sign Up, you are indicating that you have read and agree to
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the Terms of Service.” Fteja, 841 F. Supp. 2d at 835. Here, Defendant points to no
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language on its webpages indicating that by clicking a button on its webpage, the
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consumer is indicating that he or she has read and agrees to the Terms & Conditions;
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rather, Defendant argues that the language contained within the Terms & Conditions is
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sufficient. See Mtn.; see also Reply.
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The Court finds that the agreement at issue in this case is a browsewrap agreement
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because the consumer assents to the Terms & Conditions simply by using the website or
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purchasing a subscription, without visiting the Terms & Conditions page or even
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acknowledging that use of the website constitutes assent to the Terms & Conditions. See
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Nguyen, 763 F.3d at 1176 (quoting Hines v. Overstock.com, Inc., 668 F. Supp. 2d 362,
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366-67 (E.D.N.Y. 2009); Be In, Inc., 2013 WL 5568706, at *6 (“The defining feature of
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browsewrap agreements is that the user can continue to use the website or its services
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without visiting the page hosting the browsewrap agreement or even knowing that such a
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webpage exists.”); see also Connors Decl, Exhibit 2, ¶ 5 (“If you keep going and use the
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Services—even just browsing the Site—you agree to comply with and be bound by all of
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these Terms and Conditions and our Privacy Policy.”).
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18cv842-MMA (JLB)
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B.
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Notice
Because the Court finds that the arbitration provision within the Terms &
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Conditions is contained within a browsewrap agreement, the Court must next determine
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whether Plaintiff has manifested assent to the agreement. Courts have consistently found
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that users manifest assent to browsewrap agreements where the user: (1) had actual notice
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of the agreement; and/or (2) where the website puts a reasonably prudent user on inquiry
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notice of the terms of the agreement. Nguyen, 763 at 1176-77.
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1.
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As an initial matter, Plaintiff declares that he was in fact unaware of the arbitration
Actual Notice
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agreement provision in Defendant’s Terms and Conditions. Doc. No. 10-1, Declaration
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of Matthew Lopez in Support of Plaintiff’s Opposition to Defendant’s Petition to Compel
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Arbitration and Request for Stay (“Lopez Decl.”), ¶¶ 3-7. Plaintiff represents that he did
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not see, let alone read, the Terms & Conditions containing the arbitration provision at the
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time he made a purchase on Defendant’s website. See id. In fact, Plaintiff avers that he
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only learned of the Terms & Conditions and arbitration provision when Defendant filed
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the instant motion. Id. Defendant has not adduced any evidence challenging Plaintiff’s
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declaration.2 See Mtn.; see also Reply. Accordingly, the Court finds that Plaintiff did
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not have actual notice of the arbitration terms.
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2.
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With respect to inquiry notice, courts have refused to enforce browsewrap
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agreements “[w]here the link to a website’s terms of use is buried at the bottom of the
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page or tucked away in obscure corners of the website where users are unlikely to see it .
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. . .” Nguyen, 763 F.3d at 1177 (citing Specht, 306 F.3d at 30-31; In re Zappos.com, Inc.
Inquiry Notice
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Defendant argues that Plaintiff had actual knowledge because he is “a sophisticated internet user” and
a “professional plaintiff.” Reply at 8. Defendant provides no legal authority in support of its argument.
See id. Moreover, the Ninth Circuit has found that a plaintiff’s “experience with the browsewrap
agreements found on other websites . . . has no bearing on whether he had . . . notice of [defendant’s
browsewrap agreement].” Nguyen, 763 F.3d at 1179.
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18cv842-MMA (JLB)
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Customer Data Sec. Breach Litig., 893 F. Supp. 2d 1058, 1064 (D. Nev. 2012); Van
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Tassell v. United Mktg. Grp., LLC, 795 F. Supp. 2d 770, 792-93 (N.D. Ill. 2011); Hines,
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668 F. Supp. 2d at 367). Conversely, “where the website contains an explicit textual
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notice that continued use will act as a manifestation of the user’s intent to be bound,
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courts have been more amenable to enforcing browsewrap agreements.” Id. (citing
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Cairo, Inc. v. Crossmedia Servs., Inc., No. 04-04825, 2005 WL 756610, at *2, *4-5 (N.D.
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Cal. Apr. 1, 2005); Pollstar v. Gigmania, Ltd., 170 F. Supp. 2d 974, 981 (E.D. Cal.
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2000)). The Ninth Circuit explained that “where a website makes its terms of use
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available via a conspicuous hyperlink on every page of the website but otherwise
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provides no notice to users nor prompts them to take any affirmative action to
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demonstrate assent, even close proximity of the hyperlink to relevant buttons users must
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click on—without more—is insufficient to give rise to [inquiry] notice.” Id. at 1178-79.
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Here, Defendant argues that Plaintiff “agreed to the arbitration provision by
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accepting and using [Defendant’s] meal delivery service” because “[a] voluntary
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acceptance of the benefit of a transaction is equivalent to a consent to all obligations
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arising from it, so far as the facts are known, or ought to be known, to the person
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accepting.” Mtn. at 9 (citation omitted). According to Defendant, Plaintiff knew that
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Defendant’s service was subject to the Terms & Conditions because they were made
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available on Defendant’s website. Id. at 10. Specifically, Defendant contends that the
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Terms & Conditions hyperlink appears in two places which put Plaintiff on inquiry
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notice. See id. at 9; see also Reply at 7-8. First, the hyperlink “appear[s] on the
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company’s homepage, and in the same place on every other page.” Mtn. at 9. Second,
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the Terms & Conditions hyperlink is “feature[d] prominently on the check-out page,
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appearing in different color and centered on the page below the button to complete the
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purchase.” Mtn. at 9. Plaintiff concedes that the hyperlink is available on every page of
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Defendant’s website and below the “place order” button on Defendant’s order summary
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page. Oppo. at 7-8. However, Plaintiff argues that the hyperlink on every webpage is
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inconspicuous and that the hyperlink below the “place order” button does not provide
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18cv842-MMA (JLB)
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notice that completing the order manifests assent to Defendant’s Terms & Conditions.
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Id. at 7-8.
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Materials provided to the Court indicate that the hyperlink to Defendant’s Terms &
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Conditions appears in the bottom left-hand corner of the website footer of Defendant’s
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webpages, below a grouping of 21 other hyperlinks, arranged in five columns, that cover
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topics like “Careers,” “Buy a Gift Card,” “Mediterranean Diet,” and “Newsroom.” Doc.
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No. 10-2, Declaration of Scott J. Ferrell, Esq. in Support of Plaintiff’s Opposition to
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Defendant’s Motion to Compel Arbitration (“Ferrell Decl.”), Exhibit B at 4. The
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hyperlink is the same font-size and color as the other hyperlinks, with no noticeable
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attributes. Id.; see Cullinane v. Uber Techs., Inc., 893 F.3d 53, 63-64 (1st Cir. 2018)
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(noting that some characteristics make a term conspicuous, like larger size, typeface).
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The hyperlink also appears on the “order summary” page below the “place order” button
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and below text regarding the purchase. Ferrell Decl., Exhibit A at 9. The text in between
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the hyperlink and the “place order” button states in gray typeface:
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* Your card will be charged on 2017-05-05 for this order and you will no
longer be able to make changes to your weekly delivery at that time.
** Sales tax will be applied to orders in AR and IL when your card is charged.
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Id. The hyperlink itself is in green typeface. Id.
Based on the materials provided to it, the Court finds this case to be analogous to
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Nguyen. Nguyen, 763 F.3d at 1178. As in this case, the hyperlink in Nguyen was placed
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“in the bottom left-hand corner of every page on the [defendant’s] website” and on some
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webpages was “directly below the relevant button a user must click on to proceed in the
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checkout process.” Id. at 1177-78. Nonetheless, the Ninth Circuit held that the proximity
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18cv842-MMA (JLB)
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or conspicuousness of the hyperlink, which was “underlined and set in green typeface” in
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Nguyen was insufficient to give rise to constructive notice.3 Id. at 1174, 1178.
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Here, the Terms & Conditions hyperlink is more or less buried at the bottom of
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Defendant’s webpage. Under Nguyen, without more, this is insufficient to give rise to
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inquiry notice. Nguyen, 763 F.3d at 1178-79. The Court finds that the “more” in this
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case—the proximity of the hyperlink in green typeface to the “place order” button,
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without affirmative acknowledgment of the agreement before proceeding with the
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purchase—is not enough to give rise to inquiry notice. See id. As in Nguyen, the
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proximity or conspicuousness of the Terms & Conditions hyperlink is insufficient to give
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rise to inquiry notice. See Nguyen, 763 F.3d at 1178. As such, Plaintiff did not assent to
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the Terms & Conditions and, therefore, he is not bound by Defendant’s arbitration
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agreement.4 See id. at 1178-79.
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CONCLUSION
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For the foregoing reasons, the Court DENIES Defendant’s motion to compel
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arbitration and to stay the case.
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Dated: September 19, 2018
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Curiously, despite Nguyen’s holding, Defendant argues that “[t]he proximity to the very important
Place Order button along with the green text that stands out on the website does put a reasonably prudent
user on notice of it.” Reply at 7.
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In light of the Court’s finding that Plaintiff did not assent to the arbitration provision within
Defendant’s Terms & Conditions, the Court declines to address Defendant’s arguments regarding the
scope and enforceability of the arbitration agreement. Mtn. at 10-14.
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18cv842-MMA (JLB)
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