Li v. STOCKX.com

Filing 19

MEMORANDUM OPINION. Signed by Chief Judge James K. Bredar on 10/17/2018. (kw2s, Deputy Clerk)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND

GUANYU LI,

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Plaintiff,

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v.

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STOCKX.COM,

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Defendant.
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CIVIL NO. JKB-18-0911

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MEMORANDUM
Guanyu Li (“Plaintiff”) filed this putative class action against StockX.com (“Defendant,”
or “StockX”1), alleging violations of Maryland’s Consumer Protection Act, fraud, and
negligence in the operation of StockX’s online marketplace. (Compl., ECF No. 2.) Defendant
moved to compel arbitration and stay proceedings, or, in the alternative, to dismiss the action,
under the Federal Arbitration Act, 9 U.S.C. §§ 3 and 4 [“FAA”]. (Mot. Compel Arbitration at 1,
ECF No. 7.) No hearing is required. See Local Rule 105.6 (D. Md. 2016). For the reasons set
forth below, Defendant’s Motion will be granted in part, and the case will be stayed pending
arbitration.
I.

Background
According to undisputed facts, StockX maintains an online marketplace allowing users to

buy and sell merchandise, including athletic wear. (Compl. ¶ 22; Luber Decl. ¶ 2, Exh. in Supp.
Mot. Compel, ECF No. 7-2.) Li registered for an account on StockX.com on November 2, 2017

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The Complaint styles Defendant’s corporate name as “STOCKX.com,” but Defendant refers to itself as “StockX
LLC” or “StockX,” indicating that it was “improperly named” in the Complaint. (Mot. Compel Arbitration at 1,
ECF No. 7.) Neither party raised any legal objections related to the error. Plaintiff adopts Defendant’s styling of the
name (“StockX”) in his opposition brief. (See Opp’n to Mot. Compel, ECF No. 8.) The Court will do the same.

(Li Decl. ¶ 3, Exh. in Opp’n to Mot. Compel, ECF No. 8-1; Luber Decl. ¶ 7), at which time he
was provided with terms of service dated October 17, 2017. (Li Decl. ¶ 3 (misstating the year on
the referenced document); Luber Decl. ¶ 14.) Those terms of service read in part:
14. Disputes with StockX. . . . You and StockX each agree that
any and all disputes or claims that have arisen or may arise
between you and StockX relating in any way to or arising out of
the Terms or your use of or access to StockX’s Services, shall be
resolved exclusively through final and binding arbitration, rather
than in court, except that you may assert claims in small claims
court or tribunal located in your jurisdiction, if your claims qualify.
IN ALL EVENTS, EACH PARTY HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY, WAIVES (TO THE
EXTENT PERMITTED BY APPLICABLE LAW) ANY RIGHT
IT MAY HAVE TO A TRIAL BY JURY OF ANY DISPUTE
ARISING UNDER OR RELATING TO THESE TERMS AND
AGREES THAT ANY SUCH DISPUTE SHALL BE TRIED
BEFORE A JUDGE SITTING WITHOUT A JURY. The Federal
Arbitration Act governs the interpretation and enforcement of this
Agreement to Arbitrate.
. . . e. Opt-Out Procedure. You can choose to reject this
Agreement to Arbitrate (‘opt-out’) by mailing us a written opt-out
notice (‘Opt-Out Notice’).
The Opt-Out Notice must be
postmarked no later than 30 days after the date you accept the User
Agreement for the first time. You must mail the Opt-Out notice to
1046 Woodward Ave., Detroit, MI 48226.
For your convenience, we are providing an Opt-Out Notice form
you must complete and mail to opt out of the Agreement to
Arbitrate. You must complete the Opt-Out Notice form by
providing the information called for in the form, including your
name, address[,] . . . phone number and the email address(es) used
to log in to the StockX account(s) to which the opt-out applies.
You must sign the Opt-Out Notice for it to be effective. This
procedure is the only way you can opt out of the Agreement to
Arbitrate. If you opt out of the Agreement to Arbitrate, all other
parts of the User Agreement will continue to apply.
(Terms of Service, Li Decl. Exh. A, ECF No. 8-4, at 8–10; Terms of Service, Luber Decl. Exh.
A, ECF No. 7-3, at 10–12.) According to Li, StockX did not provide an Opt-Out Notice form
when he registered, nor did it provide one by email at a later date. (Li Decl. ¶¶ 4–8.)
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II.

Legal Standard
The FAA stipulates that, in any contract involving interstate commerce, a provision

through which the parties agree to arbitrate their disputes shall be “valid, irrevocable, and
enforceable, save upon such grounds as exist at law or in equity for the revocation of any
contract.” 9 U.S.C. § 2. The Act “reflects an ‘emphatic federal policy in favor of arbitral dispute
resolution.’” KPMG LLP v. Cocchi, 565 U.S. 18, 21 (2011) (per curiam) (quoting Mitsubishi
Motors Corp. v. Soler Chrysler–Plymouth, Inc., 473 U.S. 614, 631 (1985)). The “party resisting
arbitration bears the burden of proving that the claims at issue are unsuitable for arbitration.”
Green Tree Fin. Corp.–Ala. v. Randolph, 531 U.S. 79, 91 (2000).
Despite this presumption favoring alternative dispute resolution, arbitrability is at bottom
a question of contract interpretation: a party cannot be required to arbitrate a dispute if he has
not contractually agreed to do so. Thus, in the Fourth Circuit,
a litigant can compel arbitration under the FAA if he can
demonstrate ‘(1) the existence of a dispute between the parties, (2)
a written agreement that includes an arbitration provision which
purports to cover the dispute, (3) the relationship of the transaction,
which is evidenced by the agreement, to interstate and foreign
commerce, and (4) the failure, neglect or refusal of the [opposing
party] to arbitrate the dispute.’
Whiteside v. Teltech Corp., 940 F.2d 99, 102 (4th Cir. 1991); see also Adkins v. Labor Ready,
Inc., 303 F.3d 496, 500–01 (4th Cir. 2002). Although arbitrability is a question of federal law,
applicable state contract law controls whether the parties have a valid agreement to arbitrate.
Adkins, 303 F.3d at 501. “[G]enerally applicable state contract defenses, such as fraud, duress,
or unconscionability, may be applied to invalidate arbitration agreements without contravening
[the FAA].” Doctor’s Assocs., Inc. v. Casarotto, 517 U.S. 681, 687 (1996). However, state law
defenses must not be applied “in a fashion that disfavors arbitration,” AT&T Mobility LLC v.

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Concepcion, 563 U.S. 333, 341 (2011), and they must not “rely on the uniqueness of an
agreement to arbitrate” to invalidate it, id. (quoting Perry v. Thomas, 482 U.S. 483, 493 (1987)).
When a party moves to compel arbitration and the validity of the purported arbitration
agreement between the parties is disputed, the motion is treated as one for summary judgment.
See, e.g., Roach v. Navient Sols., Inc., 165 F. Supp. 3d 343, 347 (D. Md. 2015); accord Rose v.
New Day Fin., LLC, 816 F. Supp. 2d 245, 251 (D. Md. 2011). When evaluating a motion for
summary judgment, the Court will grant judgment to a movant who “shows that there is no
genuine dispute as to any material fact and the movant is entitled to judgment as a matter of
law.”

Fed. R. Civ. P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986) (citing

predecessor to the current Rule 56(a)). No genuine issue of material fact exists if the opposing
party fails to make a sufficient showing on an essential element of the case as to which he would
bear the burden of proof. Celotex Corp., 477 U.S. at 322–23. The “mere existence of a scintilla
of evidence in support of the [opposing party’s] position” is insufficient to defeat the motion.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986). The facts, and inferences drawn
therefrom, must be viewed in the light most favorable to the party opposing summary judgment.
Scott v. Harris, 550 U.S. 372, 378 (2007); Iko v. Shreve, 535 F.3d 225, 230 (4th Cir. 2008).
III. Analysis
As the party resisting arbitration, Li bears the burden to prove that arbitration is not
appropriate in this case. Green Tree Fin. Corp., 531 U.S. at 91. In evaluating his arguments,
facts and inferences will be viewed in the light most favorable to him. Scott, 550 U.S. at 378.
The parties do not dispute three of the four Whiteside factors: that there is a dispute, that
the transaction relates to interstate commerce,2 and that Li, by filing suit in federal court, has

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The Fourth Circuit does not require specific evidence of the relationship to interstate commerce: “Where . . . the
party seeking arbitration alleges that the transaction is within the scope of the Act, and the party opposing

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failed to arbitrate that dispute. (Mot. Compel Mem. Supp. at 6–7, ECF No. 7-1; Opp’n to Mot.
Compel at 5–6, ECF No. 8 (contesting only the existence of a valid agreement to arbitrate).) Nor
does Li dispute that the Terms of Service presented to him upon registration included an
arbitration provision. (Li Decl. ¶ 3 (confirming that he was presented with a copy of the terms of
service); Terms of Service, ECF No. 8-4, at 8–10 (including clauses requiring arbitration).) Both
parties also agree that Michigan law governs under the choice-of-law provision in the Terms of
Service. (Mot. Compel Mem. Supp. at 6; Opp’n to Mot. Compel at 5.) Li’s sole ground for
contesting arbitration is that the agreement to arbitrate was not valid under Michigan contract
law. (Opp’n to Mot. Compel at 5.)
Li makes four arguments under Michigan law to resist arbitration, all of which turn on
the mechanics of the opt-out procedure3:

first, that the arbitration agreement lacked

consideration and mutuality of obligation (id. at 7–8); second, that StockX materially
misrepresented the terms of the arbitration agreement (id. at 8–9); third, that the arbitration
agreement is unconscionable (id. at 10–15); and, fourth, that the agreement to arbitrate was an
“illusory contract” (id. at 9–10). None succeed.
Li’s first argument that the arbitration provisions lacked consideration and mutuality fails
as a matter of law. Under Michigan law, “whatever consideration is paid for all of the promises
[in a contract] is consideration for each one.”

High v. Capital Senior Living Props. 2–

Heatherwood, Inc., 594 F. Supp. 2d 789, 799 (E.D. Mich. 2008) (quoting Hall v. Small, 705
application of the Act does not come forward with evidence to rebut jurisdiction under the federal statute, we do not
read into the Act a requirement of further proof [of a nexus to interstate commerce] . . . .” Dwyer v. Discover Fin.
Servs., Civ. No. WMN-15-2322, 2015 WL 7754369, at *3 (D. Md. Dec. 2, 2015) (quoting Maxum Founds., Inc. v.
Salus Corp., 779 F.2d 974, 978 n.4 (4th Cir. 1985)).
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Plaintiff advised the Court on October 15, 2018, that StockX updated its terms of service as of October 9, 2018,
removing the reference to a specific, required Opt-Out Notice form and permitting registrants to opt out by sending
certain information to StockX. (Misc. Correspondence to the Court, ECF No. 18.) Because the question currently
before the Court is whether or not Li and StockX had an agreement to arbitrate under the Terms of Service dated
October 17, 2017, this recent amendment does not affect the analysis.

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N.W.2d 741, 744 (Mich. Ct. App. 2005) (per curiam)). An arbitration clause need not be
supported by “separate mutuality of consideration apart from the consideration supporting the
rest of the contract.”

Id. (citing Wilson Elec. Contractors, Inc. v. Minnotte Contracting

Corp., 878 F.2d 167, 169 (6th Cir. 1989)).4 Notwithstanding those general principles, Li argues
that the arbitration clause in this case lacked mutuality because StockX failed to fulfill a
necessary condition precedent—the provision of the Opt-Out form. Under Michigan law, there
is a presumption against finding a term to be a condition precedent unless “compelled by the
language of the contract plainly expressed.”

MacDonald v. Perry, 70 N.W.2d 721, 725

(Mich. 1955); accord Real Estate One v. Heller, 724 N.W.2d 738, 741 (Mich. Ct. App. 2006).
No language in the contract suggests that providing the Opt-Out Notice form was a condition
precedent to the arbitration agreement. Rather, the Terms of Service indicate that the form
would be provided as a matter of “convenience.” (Terms of Service, ECF No. 8-4, at 10.)
Therefore, the provision of the form was not a condition precedent, and the agreement to
arbitrate was sufficiently mutual and supported by adequate consideration as a matter of law.
Second, Li argues that the arbitration clause is void under the doctrine of material
misrepresentation, because StockX misrepresented that an Opt-Out Notice form would be
provided to him. Both intentional and innocent misrepresentation defenses under Michigan law
require that the party asserting the defense “acted in reliance upon” the misrepresentation. See
Arim v. Gen. Motors Corp., 520 N.W.2d 695, 702 (Mich. Ct. App. 1994) (per curiam) (requiring
reliance for a defense of intentional misrepresentation); U.S. Fid. & Guar. Co. v. Black, 313
N.W.2d 77, 84 (Mich. 1981) (same for innocent misrepresentation). Li provides no evidence
that he relied on the existence of an Opt-Out Notice form when entering the agreement—Li’s
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That general principle applies to uphold even arbitration agreements allowing one party the exclusive power to
elect arbitration, Wilson Elec. Contractors, 878 F.2d at 169, which is not the case here. (See Terms of Service, ECF
No. 8-4, at 8 (obligating both parties to arbitrate all disputes).)

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declaration acknowledges only that an opt out procedure existed, but he does not claim to have
read the clause or even to have been aware of it when registering. (See Li Decl. ¶ 4 (stating only
that, “[a]pparently, the Terms of Service included an ‘OPT OUT’ Procedure.”).) Therefore, Li
failed to meet his burden on an essential element of a misrepresentation defense.
Third, Li argues that the arbitration agreement is unconscionable. Under Michigan law,
the defense of unconscionability requires both procedural and substantive unconscionability.
Clark v. DaimlerChrysler Corp., 706 N.W.2d 471, 474 (Mich. Ct. App. 2005). Li argues that the
clause is unconscionable because it is included in an adhesion contract and because StockX
never provided the Opt-Out form. If StockX’s failure to provide the form made it impossible to
opt out of arbitration such that Li had “no realistic alternative to acceptance of the term,” the
arbitration provision might be considered procedurally unconscionable under Michigan law. Id.
However, even if so, Michigan courts “will not invalidate adhesion contracts as a matter of law
as long as the challenged provision is [substantively] reasonable.” Rembert v. Ryan’s Family
Steak Houses, Inc., 596 N.W.2d 208, 226 (Mich. Ct. App. 1999). As a matter of law, Michigan
courts hold arbitration agreements to be substantively reasonable provided they do not mandate a
waiver of statutory rights and provided the arbitration process is procedurally fair. Id.; see also
Lozada v. Dale Baker Oldsmobile, Inc., 91 F. Supp. 2d 1087, 1103 (W.D. Mich. 2000). Li has
failed to point to any aspects of the arbitral forum under the challenged clause that would be
procedurally unfair or to any impact on his statutory rights. Thus, Li failed to carry his burden of
showing that the arbitration agreement is substantively unreasonable.
In his final argument, Li contends that the arbitration agreement was illusory. Under
Michigan law, an agreement to arbitrate may be illusory if it “allows one party the unfettered
right to alter the arbitration agreement’s existence or its scope.” Tobel v. AXA Equitable Life Ins.

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Co., Civ. No. 298129, 2012 WL 555801, at *4–5 (Mich. Ct. App. Feb. 21, 2012) (quoting
Dumais v. Am. Golf Corp., 299 F.3d 1216, 1219 (10th Cir. 2012)). Li appears to argue that the
arbitration agreement was illusory in practice because StockX required the use of a particular
Opt-Out Notice form, it was in StockX’s exclusive power to provide that form, and, simply by
failing to provide it, StockX could unilaterally amend the arbitration agreement by rendering it
impossible to opt out.5 (Opp’n to Mot. Compel at 9–10.) Indeed, the arbitration provision
expressly states that the only way to opt out of the agreement is to complete a specific form, a
form which the Defendant never claims to have provided. (Terms of Service, ECF No. 8-4, at 10
(“You must complete the Opt-Out Notice form . . . . This procedure is the only way you can opt
out of the Agreement to Arbitrate.”).) At root, this is an argument that the Defendant breached
its obligations under the arbitration provision by failing to provide Li with the Opt-Out Notice
form and, because of that breach, Li should be excused from performance under that same
provision. Li’s argument would be stronger if, for example, he provided evidence that he
contacted StockX to request a form and was ignored, or that he submitted his own version of an
opt-out form and had it rejected; however, he puts forward no evidence to that effect. Under the
facts provided, it is not abundantly clear that it would have been impossible in fact to opt out.
However, Li need only raise a genuine dispute of material fact. Li points out that Defendant has
not produced the Opt-Out Notice form referenced in the terms, raising doubt as to whether such a
form exists. (Opp’n to Mot. Compel at 6.) Li also provided a declaration from his counsel,
suggesting that the failure to provide an Opt-Out form upon registration was not a one-time
glitch unique to Li’s experience, but may have been a recurrent feature of StockX’s registration

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The Terms of Service also include a clause that provides StockX the right to unilaterally amend the arbitration
agreement prospectively, if it provides thirty days’ notice and an additional opportunity to opt out. (See Terms of
Service, ECF No. 8-4, at 8–9 (marked as ¶ 14f).) However, Li does not challenge that clause, and, therefore, the
Court does not address it.

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process under the October 2017 terms. (Emejuru Decl. ¶¶ 3, 6–7, Exh. in Opp’n to Mot.
Compel, ECF No. 8-5.) Such a suggestion is troubling.
However, even considering all these facts in the light most favorable to plaintiff, Li’s
argument still fails as a matter of law. Even assuming StockX’s conduct in failing to provide the
form constituted a material breach of the arbitration provision under Michigan law, Li’s
continued performance under the contract without any protest at the time of the breach waived
his right to refuse to perform on those grounds. In Schnepf v. Thomas L. McNamara, Inc., the
Michigan Supreme Court held that, where one party unilaterally amended the location of
performance under the contract, the opposing party’s failure to object at the time of breach
waived its right to refuse to perform later:
‘It was [the non-breaching party’s] duty, when it discovered the
apparent breach of the contract, if it intended to insist upon []
forfeiture, to do so at once. By permitting [the breaching party] to
proceed with the performance of the contract[,] it waived a breach
[on that ground].’ . . . ‘Where there has been a material breach
which does not indicate an intention to repudiate the remainder of
the contract, . . . [a]ny act indicating an intent [by the injured party]
to continue will operate as a conclusive election . . . depriving him
of any excuse for ceasing performance on his own part.’
Schnepf, 93 N.W.2d 230, 232 (Mich. 1958) (internal citations omitted) (first quoting GraysonMcLeod Lumber Co. v. Slack-Kress Tie & Stave Co., 143 S.W. 581, 583 (Ark. 1912); then
quoting Sinclair Refining Co. v. Costin, 116 S.W.2d 894, 898 (Tex. Ct. Civ. App. 1938)); accord
Midfield Concession Enters., Inc. v. Areas USA Inc., 130 F. Supp. 3d 1122, 1132–33 (E.D.
Mich. 2015). Li offered no evidence suggesting that he objected to StockX’s failure to provide
the Opt-Out form at any time prior to this litigation. According to his own statements, it appears
that he continued to use StockX’s services after the 30-day opt-out period expired, despite never
having received an Opt-Out Notice form. (Compare Compl. ¶ 27 (alleging that he received the
allegedly fraudulent merchandise in or around January 2018), with Li Decl. ¶ 4 (stating that he
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registered and was provided with the Terms of Service, including the 30-day opt-out provision,
on November 2, 2017).) Therefore, under Michigan law, even if the Defendant’s failure to
provide the form constituted a material breach of the arbitration provision such that Li might
have been excused from his own obligation to arbitrate, his failure to object or assert his rights at
the time of the breach waived any right to do so later.
In a supplemental filing, Li provided an additional citation to Whitten v. Apria
Healthcare Group, Inc., as support for his argument that his declaration provides sufficient
evidence to defeat the motion to compel. (Suppl. in Opp’n at 1–2, ECF No. 9.) In Whitten, the
plaintiff challenged whether she had ever agreed to—or even been presented with—a contract to
arbitrate disputes with her employer. Civ. No. PWG-14-3193, 2015 WL 2227928, at *4 (D. Md.
May 11, 2015). Whitten, though clearly correct on its facts, is distinguishable from this case, and
Plaintiff misreads its treatment of the evidence. The plaintiff’s affidavit in Whitten contested the
authenticity of records suggesting that the employer’s online learning program incorporated an
agreement to arbitrate at the time she completed it. Id. Far from “accept[ing] the Plaintiff’s
wholesale argument that she did not bind herself to an arbitration agreement simply through
sworn affidavit” (Suppl. in Opp’n at 2), the court in Whitten determined that the affidavit called
the credibility of defendant’s evidence into doubt.

Whitten, 2015 WL 2227928, at *4

(highlighting questions about the authenticity and reliability of screenshots and other evidence
defendant offered to prove the existence of an arbitration agreement and plaintiff’s assent to it).
On that basis, the court found that the plaintiff created a genuine dispute on a material fact:
whether an agreement to arbitrate ever existed between the plaintiff and her employer. Id.
Unlike the plaintiff in Whitten, Li does not argue that he never assented to the Terms of Service
when creating his account. Nor does he dispute that the Terms of Service applicable at that time

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included an arbitration agreement. All of his arguments turn on the Opt-Out Notice form.
Unlike the plaintiff’s affidavit in Whitten, and for the reasons explained above, Li’s
declaration—and any other evidence he provides—fails to carry his burden to raise a genuine
factual dispute on a material question under any of his theories of relief.
The final question before the Court is whether to grant a stay pending arbitration or to
dismiss the case. (Mot. Compel Mem. Supp. at 5 n.2 (indicating a preference for a stay); Opp’n
to Mot. Compel at 15 (arguing for dismissal)). The Fourth Circuit has suggested on occasion
that dismissal may be appropriate where all issues within a lawsuit are subject to arbitration. See
Choice Hotels Int’l, Inc. v. BSR Tropicana Resort, Inc., 252 F.3d 707, 709–10 (4th Cir. 2001)
(referring to the possibility of dismissal in dicta). More recently, however, the Fourth Circuit
noted tension between Choice Hotels and other cases holding that “the FAA commands the
federal courts to stay ongoing judicial proceedings” once it is determined that the FAA “covers
the matter in dispute.” Noohi v. Toll Bros., Inc., 708 F.3d 599, 605 n.2 (4th Cir. 2013) (quoting
Hooters of America, Inc. v. Phillips, 173 F.3d 933, 937 (4th Cir. 1999)); see also Adkins, 303
F.3d at 500 (declaring that “[the] stay-of-litigation provision [under § 3] is mandatory”). The
Fourth Circuit acknowledged the existence of a circuit split on the question but, to date, has
declined to adopt a definitive position on it. Noohi, 708 F.3d at 605 n.2; Aggarao v. MOL Ship
Mgmt. Co., Ltd., 675 F.3d 355, 376 n.18 (4th Cir. 2012). In light of these precedents, although
either disposition might be justified, the Court will issue a stay, rather than dismissing the case.
IV. Conclusion
For the foregoing reasons, an Order shall enter granting Defendant’s motion to the extent
that it seeks to compel arbitration and stay proceedings pending arbitration of the dispute. In

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light of that decision, Defendant’s motion shall be denied in part to the extent that it seeks the
alternative relief of dismissal.
DATED this 17th day of October, 2018.

BY THE COURT:

/s/
James K. Bredar
Chief Judge

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