Cullinane et al v. Uber Technologies, Inc.
Filing
65
Judge Douglas P. Woodlock: MEMORANDUM AND ORDER, entered pursuant to addendum 63 , superseding the Memorandum and Order dated July 8, 2016.. (Woodlock, Douglas)
UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
RACHEL CULLINANE, JACQUELINE
NUNEZ, ELIZABETH SCHAUL, AND
ROSS McDONAGH, on behalf of
themselves and all others
similarly situated,
Plaintiffs,
v.
UBER TECHNOLOGIES, INC.,
Defendant.
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CIVIL ACTION NO.
14-14750-DPW
MEMORANDUM AND ORDER
July 11, 2016
The practice of avoiding consumer class action litigation
through the use of arbitration agreements is the subject of
current scholarly disapproval1 and skeptical investigative
journalism.2
It appears that at least one agency of the federal
government is considering regulating the use of such agreements
in so far as the subject matter is within its jurisdiction.3
Nevertheless, the legal foundation provided in Supreme Court
1
See generally, Judith Resnik, Diffusing Disputes, The Public in
the Private of Arbitration, the Private in Courts, and the
Erasure of Rights, 124 Yale L.J. 2804 (2015).
2 See Jessica Silver-Greenberg & Robert Gebeloff, Arbitration
Everywhere, Stacking the Deck of Justice, N.Y Times, Nov. 1,
2015, at A1.
3 Bureau of Consumer Financial Protection Proposed Rules,
Arbitration Agreements, 81 Fed. Reg. 32830-01, 2016 WL
2958777(F.R.) (May 24, 2016) (to be codified at 12 C.F.R. pt.
1040) (agreements regarding certain financial products and
services).
jurisprudence regarding the Federal Arbitration Act4 for
construction of arbitration agreements that bar consumer class
actions is firmly embedded.
Even Justices who question the
practice find themselves bound to adhere to the blueprint
opinions the Court has provided.5
The plaintiff in this case extends an invitation to
disassemble the judicial construct permitting a bar to class
action litigation for consumer arbitration agreements.
The
invitation suggests teasing out distinctions that truly make no
difference.
This is not an institutionally authorized nor
intellectually honest way to change practice and legal policy
regarding the permissible scope of arbitration.
Change, if it
is to come, must be effected by a refinement through legislation
and/or regulation that imposes restrictions on arbitration
agreements, or by a reversal of direction on the part of the
Supreme Court.
It is not within the writ of the lower courts to
4
See generally AT&T Mobility LLC v. Concepcion, 563 U.S. 333
(2013).
5 See DirecTV, Inc. v. Imburgia, 136 S.Ct. 463 (2015).
Justice
Breyer, the author of DirectTV also wrote the principal dissent
in Concepcion, where he was joined by Justices Ginsburg,
Sotomayor and Kagan. In DirectTV, he observed that “[n]o one
denies that lower courts must follow this Court’s holding in
Concepcion. The fact that Concepcion was a closely divided
case, resulting in a decision from which four Justices
dissented, has no bearing on that undisputed obligation.” Id.
at 468. Justice Breyer was again joined by Justice Kagan in his
majority opinion in DirectTV; Justices Ginsburg and Sotomayor,
however, remained in dissent. Id. at 471.
2
replot the contours of arbitration law when the metes and bounds
have been set clearly, unambiguously and recently by the Supreme
Court.
The plaintiffs in this putative class action are a group of
users of the ride-sharing phone application designed and managed
by defendant Uber Technologies.
They allege that Uber
overcharged them for travel to and from Boston Logan Airport and
East Boston by imposing fictitious fees hidden in charges for
legitimate local tolls.
The plaintiffs seek class action relief
pursuant to MASS. GEN. LAWS ch. 93A, § 9, and accuse Uber of unjust
enrichment.
In response, Uber has filed the motion before me,
seeking to compel arbitration of the dispute pursuant to 9
U.S.C. § 1 et seq, also known as the Federal Arbitration Act
(“FAA”).
I will allow that motion and dismiss this case.
I. BACKGROUND
A.
Factual Background
1.
The Parties
Uber Technologies (“Uber”) is a ride-sharing service that
transports customers throughout Boston for a fee.
Compl., Doc. 54 ¶ 1]
[2d Am.
Uber’s customers call for Uber vehicles,
and pay for the requested ride, through use of Uber’s smartphone
app.
[Id. ¶ 1]
The named plaintiffs seek to represent a class of customers
of Uber residing in Suffolk and Middlesex Counties,
3
Massachusetts.
[Id. ¶¶ 9-13]
Each downloaded the Uber
application and created an account at some point from 2012 to
2014.
[Id. ¶¶ 16-19; Doc. 34 ¶¶ 7-10]
Plaintiff Jacqueline
Nunez used the app to hail a ride from Logan Airport on
September 13, 2013, and was charged an $8.75 “Massport Surcharge
and Toll” (“Surcharge”).
[Id. ¶¶ 41-42]
Plaintiff Rachel
Cullinane used the Uber app to call a ride from Logan Airport on
June 29, 2014, and was charged a $5.25 toll and the $8.75
Surcharge.
[Id. ¶¶ 44-46].
Plaintiff Elizabeth Schaul used
Uber to obtain transportation to and from Logan airport on
numerous occasions between December 20, 2013 and December 1,
2014, and alleges that, each time, she was charged for an
inflated toll and the Surcharge.
[Id. ¶¶ 47-54]
Plaintiff Ross
McDonagh has used Uber to hail taxis to and from East Boston and
Logan Airport, and alleges that he was charged the Surcharge and
other fees multiple times between May 21, 2014 and March 27,
2015.
[Id. ¶¶ 55-65].
The named plaintiffs purport to
represent a putative class of plaintiffs composed of all
Massachusetts residents who, since October 18, 2011, have been
charged either the allegedly inflated toll fees or the
Surcharge.
2.
[Id. ¶ 78]
Account Creation Process
In order to use the Uber application to call for
transportation, users must first create an account, either
4
through Uber’s website, or through its smartphone app.
32-1 ¶ 4]
[Doc.
Each plaintiff created his or her account through the
smartphone app.
[Doc. 54 ¶¶ 16-19; Doc. 32-1 ¶¶ 7-10]
In order to create an account, a user must proceed through
three steps, each with its own screen inside the smartphone app.
[Doc. 32-1 Ex. A-D]
The first screen, entitled “Create an
Account”, prompts the user to input an e-mail address and mobile
phone number, and to create a password for the account she is
attempting to create.
[Doc. 32-1 Ex. A-1, B-1, C-1, D-1]
This
screen also contains gray text on a black background immediately
below the blank white input boxes and above the phone keyboard
that says, “We use your email and mobile number to send you ride
confirmations and receipts.”
[Id.]
A second screen, entitled “Create a Profile”, prompts users
to enter their first and last names and to submit a photograph.
[Doc. 32-1 Ex. A-2, B-2, C-2, D-2]
This screen contains gray
text on a black background that says, “Your name and photo helps
[sic] your driver to identify you at pickup”.
[Id.]
This text
is in the same location as the gray text from the previous
screen.
The third and final screen in the account creation process,
entitled “Link Payment”, prompts the user to enter a credit card
number to link a card to ride requests for payment.
Ex. A-3, B-3, C-3, D-3, D-4].
[Doc. 32-1
In the most recent version of the
5
screen, a version only used by Mr. McDonagh, this screen also
provides an option to link a Paypal account in lieu of a credit
card.
[Doc. 32-1 Ex. D-3].
Immediately below the credit card
information input box, and above the keyboard, appear the words
“By creating an Uber account, you agree to the Terms of Service
& Privacy Policy”.
[Doc. 32-1 Ex. A-3, B-3, C-3, D-3, D-4]
The
words “Terms of Service & Privacy Policy” appear in bold white
lettering on a black background, and are surrounded by a gray
box, indicating a button.
[Id.; Doc. 32-1 ¶ 15]
words are in gray lettering.
[Id.]
The other
If a user clicks the button
that says “Terms of Service & Privacy Policy”, the Terms of
Service then in effect are displayed on the phone.
[Doc. 32-1 ¶
15].
After entering payment information, the user must then
click a button with the word “Done” in the top-right-hand corner
of the screen in order to create an account.
3, B-3, C-3, D-3, D-4; Doc. 32-1 ¶ 15]
[Doc. 32-1 Ex. A-
This button is grayed
out and unclickable until the user enters her payment
information.
[Doc. 32-1 Ex. A-3, B-3, C-3, D-3, D-4]
Users
must complete all of the information requested in the input
boxes on each screen and click the “Done” button on the last
screen in order to create an account.
3.
[Doc. 32-1 ¶ 15].
Uber Terms and Conditions
The Uber Terms & Conditions (“Agreement”) are contained in
6
a 10-page document available to users who click on the box
containing the phrase “Terms of Service & Privacy Policy” on the
final screen of the account creation process.
B, 32-1 ¶ 15]
[Doc. 32-6 Ex. A-
The Agreement contains many headings, each of
which lays out certain terms of use for users of Uber’s app.
[Doc. 32-6 Ex. A-B]
[Doc. 32-6 Ex. B]
Uber changed its Agreement on May 17, 2013.
As a result, the Agreement that Ms. Nunez
would have seen had she clicked on the button on the last screen
(nothing in the complaint indicates than any of the plaintiffs
did click through) would have taken her to a different document
than that available to the other plaintiffs.
[Doc. 32-6 ¶¶ 4-5]
However, the only relevant difference between the two documents
is that the earlier Agreement had slightly larger headings for
each section.
[Doc. 32-6 Ex. A-B]
The Agreement states that it “constitute[s] a legal
agreement between [user] and Uber. . . .
In order to use the
Service [] and the associated Application [], you must agree to
the terms and conditions that are set out below.”
Ex. A-B at 1]
[Doc. 32-6
The contract also states that, by using any of
Uber’s services, the user “expressly acknowledge[s] and agree[s]
to be bound by the terms and conditions of the Agreement.”
[Id.]
The Agreement contains a section starting on page 9 (page 8
of the newer agreement) under the heading “Dispute Resolution.”
7
[Doc. 32-6 Ex. A at 9-10; Doc. 32-6 Ex. B at 8-10].
This
section provides that the user and Uber
agree that any dispute, claim or controversy arising
out of or relating to this Agreement or the breach,
termination, enforcement, interpretation or validity
thereof or the use of the Service or Application
(collectively, “Disputes”) will be settled by binding
arbitration, except that each party retains the right
to bring an individual action in small claims court. .
. . You acknowledge and agree that you and Company
are each waiving the right to a trial by jury or to
participate as a plaintiff or class User in any
purported class action or representative proceeding.
Further, unless both you and Company otherwise agree
in writing, the arbitrator may not consolidate more
than one person’s claims, and may not otherwise
preside over any form of any class or representative
proceeding.
[Doc. 32-6 Ex. A-B at 9] (emphasis in original).
Under a
sub-heading entitled “Arbitration Rules and Governing Law”, the
Agreement states, “The arbitration will be administered by the
American Arbitration Association (“AAA”) in accordance with the
Commercial Arbitration Rules and the Supplementary Procedures
for Consumer Related Disputes (the “AAA Rules”) then in effect.
. . .
The Federal Arbitration Act will govern the
interpretation and enforcement of this section.”
[Id.]
The
Agreement also provides that, should a user’s claim be for an
amount under $75,000, Uber will pay any arbitration-related
fees.
B.
[Id.]
Procedural History
Plaintiffs Cullinane and Nunez, on behalf of themselves and
8
a putative class, filed this case in Massachusetts Superior
Court.
[Doc. 1-1, Original Complaint]
The Original Complaint
alleged five causes of action, four of which contained contractrelated claims that have since been dropped by plaintiffs.
¶¶ 52-63]
[Id
The fifth claim was the remaining claim of unjust
enrichment.
[Id. ¶¶ 60-63]
Uber removed the case to this Court pursuant to the Class
Action Fairness Act (CAFA), 28 U.S.C. § 1332(d).
Plaintiffs
responded with a motion to remand to State Court for lack of
subject matter jurisdiction, claiming that Uber had not shown
that this dispute would meet CAFA’s amount in controversy
requirement of $5 million.
I denied that motion.
Plaintiffs have successively filed two amended complaints.
The first amended complaint added Schaul and McDonagh as named
plaintiffs, and added the East Boston toll (experienced by Mr.
McDonagh) claim to the claims based on the Surcharge.
The
plaintiffs also added a sixth count to their complaint, alleging
that the hidden charges constitute unfair and deceptive acts in
violation of Chapter 93A of the Massachusetts General Laws.
The
plaintiffs thereafter filed a Second Amended Class Action
Complaint, which is currently the operative complaint, dropping
the counts based on breach of contract, leaving only a Chapter
9
93A claim (Count I)6 and a common law unjust enrichment claim
(Count II). [Doc. 54, ¶¶ 85-91].
For its part, Uber filed a motion to compel arbitration and
stay or, in the alternative, to dismiss.
The threshold question
whether arbitration must be compelled will be addressed in this
Memorandum.
Because I conclude the answer to that question is
“yes,” it is for the arbitration tribunal to determine the
merits of the claim.
Since arbitration must be compelled and
nothing else remains for resolution in this court at this time,
I will dismiss the case upon the order to compel arbitration.
II. STANDARD OF REVIEW
A party seeking to compel arbitration “must demonstrate
that a valid agreement to arbitrate exists, that the movant is
entitled to invoke the arbitration clause, that the other party
is bound by that clause, and that the claim asserted comes
within the clause’s scope.”
Soto-Fonalledas v. Ritz-Carlton San
Juan Hotel Spa & Casino, 640 F.3d 471, 474 (1st Cir. 2011).
Section 2 of the FAA provides that an arbitration clause in a
written contract “shall be valid, irrevocable, and enforceable,
save upon such grounds as exist at law or in equity for the
revocation of any contract.”
6
Specifically, plaintiffs
MASS. GEN. LAWS ANN. Ch. 93A
(2015), 940 MASS. CODE REGS.
REGS. 3.13 et seq. (2015),
9 U.S.C. § 2.
allege that Uber’s actions violate
(West 2015), 940 MASS. CODE REGS. 3.04
3.05 et seq. (2015), 940 MASS. CODE
and 940 MASS. CODE REGS. 3.16 (2015).
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III. ANALYSIS
A.
Validity of the Agreement
1.
Contract Formation
In order to assess whether or not the claims raised by
plaintiffs should be resolved by arbitration, I must first
address the question “whether . . . there exists a written
agreement to arbitrate.”
Lenfest v. Verizon Enter. Solutions,
LLC, 52 F. Supp. 3d 259, 262-63 (D. Mass. 2014).
This is the
first step of the analysis because, if the contract containing
the arbitration agreement was never binding on the plaintiffs,
the arbitration clause cannot be enforced against them.
It is fundamental in addressing challenges to arbitration
agreements to recognize that “arbitration is a matter of
contract.”
Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63,
67 (2010).
“The FAA thereby places arbitration agreements on an
equal footing with other contracts . . . and requires courts to
enforce them according to their terms.”
citations omitted).
Id. at 67-68 (internal
However, it is similarly bed rock that the
savings clause of § 2 of the FAA preserves “generally applicable
contract defenses,” as long as those defenses do not “stand as
an obstacle to the accomplishment of the FAA’s objectives.”
AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 131 S.Ct. 1740,
1748 (2011).
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In analyzing any possible contractual defenses to the
formation of the agreement, “[t]he interpretation of an
arbitration agreement is [] generally a matter of state law.”
Tompkins v. 23andMe, Inc., No. 5:13-cv-05682-LHK, 2014 WL
2903752, at *4 (N.D. Cal. June 25, 2014).
In Massachusetts,
“courts may apply generally applicable State-law contract
defenses . . . to determine the validity of an arbitration
agreement.”
St. Fleur v. WPI Cable Systems/Mutron, 450 Mass.
345, 349-350, 879 N.E.2d 27, 31 (2008).
In online adhesion contracts, the analysis under
Massachusetts law is the same as in most courts around the
country that have analyzed issues similar to this one.
When it
comes to specific clauses in adhesion contracts, under
Massachusetts law, courts “have held that such clauses will be
enforced provided they have been reasonably communicated and
accepted and if, considering all the circumstances, it is
reasonable to enforce the provision at issue.”
Ajemian v.
Yahoo!, Inc., 83 Mass. App. Ct. 565, 573-74, 987 N.E.2d 604, 611
(2013).
While Ajemian analyzed the enforcement of forum
selection and limitations clauses, the analysis is the same
here.
The basic inquiry as to enforceability boils down to
basic contract theory of notice and informed assent with respect
to the terms in question.
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2.
Types of Online Adhesion Agreements
In this case, the defense to contract formation asserted by
the plaintiffs is lack of notice of or assent to the terms of
the Agreement.
Plaintiffs argue that the Agreement is an online
“browsewrap” adhesion contract.
The defendants maintain that
the Agreement and its place in the account creation process is
more akin to a “clickwrap” agreement, and call it a “hybrid”
agreement.
I do not find such summary descriptions of detailed
agreements particularly helpful to meaningful analysis.
Rather,
in order better to explain the differences between various types
of online “wrap” agreements, I will provide a few pages of
history.
The “wrap” contract terminology began with the advent of
the “shrinkwrap” agreement.
“The ‘shrinkwrap license’ gets its
name from the fact that retail software packages are covered in
plastic or cellophane ‘shrinkwrap’, and some vendors . . . have
written licenses that become effective as soon as the customer
tears the wrapping from the package.”
ProCD, Inc. v.
Zeidenberg, 86 F.3d 1447, 1449 (7th Cir. 1996).
Although it was
not always the case, courts now generally enforce shrinkwrap
agreements “on the theory that people agree to the terms by
using the [product] they have already purchased.”
Mark A.
Lemley, Terms of Use, 91 Minn. L. Rev. 459, 459-60.
While
shrinkwrap agreements, as the name suggests, formally apply only
13
to tangible goods, agreements entered into online for both
tangible goods and intangible goods and services have developed
a body of terminology that borrows the word’s suffix.
“Browsewrap” agreements or licenses are those in which “the
user does not see the contract at all but in which the license
terms provide that using a Web site constitutes agreement to a
contract whether the user knows it or not.”
Rev. at 460.
Lemley, 91 Minn. L.
Browsewrap agreements have been characterized as
those “[w]here the link to a website’s terms of use is buried at
the bottom of the page or tucked away in obscure corners of the
website where users are unlikely to see it.”
Nguyen v. Barnes &
Noble, Inc., 763 F.3d 1171, 1177 (9th Cir. 2014).
Normally, in
a browsewrap agreement, “the website will contain a notice that
— merely by using the services of, obtaining information from,
or initiating applications within the website — the user is
agreeing to and is bound by the site’s terms of service.”
United States v. Drew, 259 F.R.D. 449, 462 n. 22 (C.D. Cal.
2009).
By contrast, a “clickwrap” agreement is an online contract
”in which website users are required to click on an ‘I agree’
box after being presented with a list of terms and conditions of
use.”
Nguyen, 763 F.3d at 1175-76.
Courts view the clicking of
an “I agree” or “I accept” box (or similar mechanism) as a
requirement that “the user manifest assent to the terms and
14
conditions expressly” before she uses the website or services
covered by the agreement.
Id. (citing Hines v. Overstock.com,
Inc., 668 F. Supp. 2d 362, 366-67 (E.D.N.Y. 2009).
Clickwraps
differ from browsewraps with respect to their enforceability
under contract principles because, “[b]y requiring a physical
manifestation of assent, a [clickwrap] user is said to be put in
inquiry notice of the terms assented to.”
Berkson v. Gogo LLC,
No. 14-CV-1199, 2015 WL 1600755, *28 (E.D.N.Y. 2015).
Clickwrap
agreements permit courts to infer that the user was at least on
inquiry notice of the terms of the agreement, and has outwardly
manifested consent by clicking a box.
As a result, “[b]ecause
the user has ‘signed’ the contract by clicking ‘I agree,’ every
court to consider the issue has held clickwrap licenses
enforceable.”
Lemley, 91 Minn. L. Rev. at 466.
In Berkson, Judge Weinstein coined a new phrase, “sign-inwrap”, to describe certain online agreements that fall between a
browsewrap and a clickwrap.
“Sign-in-wrap couples assent to the
terms of a website with signing up for use of the site’s
services.”
Berkson, 2015 WL 1600755 at *25.
In a sign-in wrap,
a user is presented with a button or link to view terms of use.
It is usually not necessary to view the terms of use in order to
use the web service, and sign-in-wrap agreements do not have an
“I accept” box typical of clickwrap agreements.
Instead, sign-
in-wrap agreements usually contain language to the effect that,
15
by registering for an account, or signing into an account, the
user agrees to the terms of service to which she could navigate
from the sign-in screen.
3.
Uber’s Agreement
For purposes of analyzing the Agreement found in the Uber
sign-up process, I will adopt Judge Weinstein’s taxonomy and
refer to the Uber Agreement as a sign-in-wrap agreement.
Nevertheless, analysis of the Agreement’s validity and
enforceability turns more on customary and established
principles of contract law than on newly-minted terms of
classification.
“While new commerce on the Internet has exposed
courts to many new situations, it has not fundamentally changed
the principles of contract.”
Register.com, Inc. v. Verio, Inc.,
356 F.3d 393, 403 (2d Cir. 2004).
“Mutual manifestation of
assent, whether by written or spoken word or by conduct, is the
touchstone of contract.”
Specht v. Netscape Commc’ns Corp., 306
F.3d 17, 29 (2d Cir. 2002).
Massachusetts courts have not yet had much opportunity to
analyze online wrap agreements.
However, in Ajemian, the
Appeals Court made clear that the analysis in Massachusetts is
the same as it is elsewhere in the jurisprudence of contract
enforcement.
Although the clauses sought to be enforced in
Ajemian were a forum selection clause and a limitations clause,
the essential question presented was the same: what level of
16
notice and assent is required in order for a court to enforce an
online adhesion contract?
The Ajemian court turned to “the
modern rule of reasonableness,” and observed that clauses in
online consumer agreements “will be enforced provided they have
been reasonably communicated and accepted and if, considering
all the circumstances, it is reasonable to enforce the provision
at issue.”
Ajemian, 83 Mass. App. Ct. at 573.
The party
seeking to enforce the contract has “the burden of establishing,
on undisputed facts, that the provisions of the TOS [“Terms of
Service”] were reasonably communicated and accepted.”
574.
Id. at
This requires “[r]easonably conspicuous notice of the
existence of contract terms and unambiguous manifestation of
assent to those terms by consumers.”
Specht, 306 F.3d at 35.
The Ajemian court specifically concluded that the agreement
before it was essentially a browsewrap agreement, and that the
notice provided to the users was insufficient to justify
enforcement of the clauses in question.
Nevertheless, the
Ajemian analysis of contract formation in the online adhesion
contract context remains instructive generally regarding the
Massachusetts approach to such agreements.
In analyzing online agreements, the Second Circuit has used
the analogy of a roadside fruit stand displaying bins of apples;
these apples have a sign above them displaying the price of the
apples for potential consumers.
See Register.com, 356 F.3d at
17
401.
Judge Holwell, analyzing a sign-in-wrap-style agreement in
Fteja v. Facebook, Inc., 841 F. Supp. 2d 829, 840 (S.D.N.Y.
2012), refined this analogy further.
“For purposes of this
case, suppose that above the bins of apples are signs that say,
‘By picking up this apple, you consent to the terms of sales by
this fruit stand.
For those terms, turn over this sign.’”
Fteja, 841 F. Supp. 2d at 839.
Judge Holwell observed that
courts around the country, supported by established Supreme
Court reasoning in Carnival Cruise Lines, Inc. v. Shute, 499
U.S. 585, 111 S.Ct. 1522 (1991), would not hesitate to enforce
such a contract.
In holding that the online sign-in-wrap
agreement was enforceable, Judge Holwell wrote, “[T]here is no
reason why that outcome should be different because Facebook’s
Terms of Use appear on another screen rather than another sheet
of paper.”
Fteja, 841 F. Supp. 2d at 839.
a.
I agree.
Reasonable Notice of Binding Contract
The process through which the plaintiffs established their
accounts put them on reasonable notice that their affirmative
act of signing up also bound them to Uber’s Agreement.
Whether
or not plaintiffs had actual notice of the terms of the
Agreement, all that matters is that plaintiffs had reasonable
notice of the terms.
“In Massachusetts courts, it has long been
the rule that ‘[t]ypically, one who signs a written agreement is
bound by its terms whether he reads and understands them or
18
not.’”
Awuah v. Coverall N. Am., Inc., 703 F.3d 36, 44 (1st
Cir. 2012) (“Awuah II”) (quoting St. Fleur v. WPI Cable
Systems/Mutron, 450 Mass. 345, 355, 879 N.E.2d 27, 35 (2008)).
The placement of the phrase “By creating an Uber account, you
agree to the Terms of Service & Privacy Policy” on the final
screen of the account registration process is prominent enough
to put a reasonable user on notice of the terms of the
Agreement.
Although the paragraph under the heading of “Dispute
Resolution” does not appear until the 8th or 9th page (depending
on when a user accessed it), the heading is in bold and much
larger than the non-heading text in the rest of the Agreement.
A reasonable user who cared to pursue the issue would have
inquiry notice of the terms of the Agreement challenged by the
plaintiffs.
The plaintiffs rely heavily on Judge Weinstein’s decision
in Berkson, where he ultimately found the notice provided to the
plaintiffs in a sign-in-wrap situation to be insufficient.
The
first step of Judge Weinstein’s four-part analysis of such
adhesion contracts suggests that actual notice must be found on
the basis of “substantial evidence from the website that the
user was aware that she was binding herself to more than an
offer of services or goods in exchange for money.”
2015 WL 1600755 at *33.
Berkson,
That step, however, obliquely
disregards the customary contract analysis applied by the vast
19
majority of courts.7
More pertinently, it runs contrary to the
test in Massachusetts, articulated in Ajemian.
A test requiring
a showing by the offeror of actual notice of the offeree
virtually insures a fact intensive analysis in every case and —
as a practical matter — would, through the imposition of such
transactions costs for the contract validation process, make
otherwise legally compliant arbitration agreements for online
7
See, e.g. Defillipis v. Dell Fin. Servs., No. 3:14-CV-00115,
2016 WL 394003 (M.D. Pa. Jan. 29, 2016) (finding that a blue
hyperlink leading to terms and conditions available next to a
box a customer had to click in order to sign up for an account
was sufficient to provide notice to the customer), Whitt v.
Prosper Funding, LLC, No. 1:15-cv-136-GHW, 2015 WL 4254062 at *5
(S.D.N.Y. July 14, 2015) (pointing out that the plaintiff was
not able to cite “authority indicating that a reasonably prudent
website user lacks sufficient notice of terms of an agreement
that are viewable through a conspicuous hyperlink,” and noting
that there is “an abundance of persuisavie authority . . .
supporting a proposition to the contrary.”).
The plaintiff suggests that the holding in Sgouros v.
TransUnion Corp., 817 F.3d 1029 (7th Cir. 2016), embodies a
different and more demanding approach. There, the Seventh
Circuit found that a credit score agency’s website did not
provide notice to its customers sufficient to enforce the
arbitration clause found in its terms of service. But in that
case, “TransUnion's site actively misleads the customer” because
the “Accept” box that users are required to click only mentions
collection of personal data, not consent to the “Terms and
Conditions” that include the arbitration clause. Sgouros, 817
F.3d at 1035. The Court observed that companies could provide
sufficient notice by “placing the agreement . . . or a clearly
labeled hyperlink to the agreement, next to an ‘I Accept’ button
that unambiguously pertains to that agreement” in the sign-up
process. Id. at 136. That is what Uber provided to the
plaintiffs and thus Sgouros does not advance the plaintiffs’
claims.
20
contracts all but impossible to enforce.8
Erosion of the
substance of current arbitration rules, by contortion of means
for their enforcement, makes those substantive rules illusory.
That is not the rule in the majority of jurisdictions; and, in
particular, it is not the rule in Massachusetts.
applied in Massachusetts is reasonable notice.
The test to be
The documents
properly before me on this motion9 establish that Uber has
demonstrated that plaintiffs were given such notice.
b.
Manifested Agreements
Although the plaintiffs were given reasonable notice, in
order to enforce the Agreement, Uber must also show that the
plaintiffs necessarily manifested agreement to the terms.
To
return to the apple analogy, in the Uber sign-up process,
clicking “Done” and ordering the app is akin to the apple eater
taking a bite of the apple.
Although an even more “unambiguous
manifestation of consent,” Specht, 306 F.3d at 35, might be for
the apple eater also to check a box on a piece of paper next to
8
One estimate is that only “one in a thousand” consumers
actually reads such contracts, and, thus, can be said to have
actual notice of their terms. Alina Tugend, Those Wordy
Contracts We All So Quickly Accept, N.Y. Times, July 12, 2013,
at B6.
9 In this connection, I may consider documents such as the
operative agreement incorporated by reference in the complaint.
Carter’s of New Bedford, Inc. v. Nike, Inc. 2014 WL 1311750 at
*2 (D. Mass. Mar. 31, 2014).
21
the words, “I accept the terms on the other side of the sign
above the apple basket,” one bite of the apple is enough.10
The language surrounding the button leading to the
Agreement is unambiguous in alerting the user that creating an
account will bind her to the Agreement.
And the word “Done,”
although perhaps slightly less precise than “I accept,” or “I
agree,” makes clear that by clicking the button the user has
consummated account registration, the very process that the
notification warns users will bind them to the Agreement.
c.
Conclusion
I conclude that the Agreement is a valid contract that is
enforceable against the plaintiffs.
B.
Enforceability of the Arbitration Clause
Having decided that the Agreement is generally valid and
enforceable against the plaintiffs, I must now determine whether
the specific arbitration clause is valid.
The question is
“whether the parties agreed to arbitrate [this] dispute.
10
The
In making use of this appetizing metaphor, rooted in case law
generated by judges from New York, Register.com, Inc. v. Verio,
Inc., 356 F.3d 393, 401 (2d Cir. 2004); Fteja v. Facebook, Inc.,
841 F. Supp. 2d 829, 840 (S.D.N.Y. 2012), I remain mindful of
then Judge Cardozo’s warning to New York lawyers that
“[m]etaphors in the law are to be narrowly watched, for starting
as ways to liberate thought, they end often by enslaving it.”
Berkey v. Third Ave. Ry. Co., 244 N.Y. 84, 94 (1926). That
acknowledged, however, I am satisfied the metaphor retains
nutritional value as food for thinking about how conduct may
manifest acceptance of an offer.
22
court is to make this determination by applying the ‘federal
substantive law of arbitrability, applicable to any arbitration
agreement within the coverage of the [Federal Arbitration] Act.”
Mitsubishi Motors Corp v. Soler Chrysler-Plymouth, Inc., 473
U.S. 614, 626, 105 S.Ct. 3346, 3353 (1985) (citations omitted).
“[A]s a matter of federal law, any doubts concerning the scope
of arbitrable issues should be resolved in favor of
arbitration.”
Moses H. Cone Memorial Hospital, 460 U.S. 1, 24-
25, 103 S.Ct. 927, 941 (1983).
With respect to the sometimes
thorny gateway issue of arbitration jurisdiction, “where the
parties have themselves clearly and unmistakably agreed that the
arbitrator should decide whether an issue is arbitrable, the
Supreme Court has held that this issue is to be decided by the
arbitrator. . . .
[T]he validity of an arbitration clause is
itself a matter for the arbitrator where the agreement so
provides.”
Awuah v. Coverall North America, Inc., 554 F.3d 7,
10-11 (1st Cir. 2009) (“Awuah I”).
In Awuah I, the First Circuit considered whether or not
arbitration was an appropriate remedy for a dispute between
multiple franchisees and Coverall, the franchisor.
The
arbitration agreement in question was as broad as the one at
issue in this case:
all controversies, disputes or claims between Coverall
. . . and Franchisee . . . arising out of or related
to the relationship of the parties, this Agreement,
23
any related agreement between the parties, and/or any
specification, standard or operating procedure of
Coverall . . . shall be submitted promptly for
arbitration. . . . Unless otherwise provided or the
parties agree otherwise, arbitration shall be in
accordance with the then current Rules of the American
Arbitration Association.
Awuah I, 554 F.3d at 9.
As Judge Boudin observed for the court, the Rules of the
AAA include Rule 7(a), which provides, in relevant part, “The
arbitrator shall have the power to rule on his or her own
jurisdiction, including any objections with respect to the
existence, scope, or validity of the arbitration agreement or to
the arbitrability of any claim or counterclaim.”
American
Arbitration Association Commercial Arbitration Rules and
Mediation Procedures Rule 7(a) (American Arbitration Association
2013).
The First Circuit concluded that, where arbitration
agreements unmistakably incorporate AAA rules (in particular
Rule 7(a)), it is left to the arbitrator to decide what issues
are arbitrable, and, further, to decide such defenses to
arbitration clauses as unconscionability.
Once a court decides that the arbitration clause is broad
enough to encompass the issues in dispute and that the parties
agreed to have the contract governed by the AAA Rules, it must
compel arbitration.
To be sure, an exception was recognized by
the Awuah I court.
That exception applies to cases in which the
arbitration itself may “be an illusory remedy.
24
In principle, having the arbitrator decide questions of
validity is required if the parties so agreed; but if the terms
for getting an arbitrator to decide the issue are impossibly
burdensome, that outcome would indeed raise public policy
concerns.”
Awuah I, 554 F.3d 7 at 12.
In such cases, it is up
to the court to determine if arbitration would be an illusory
remedy under the circumstances.
The First Circuit in Awuah I
ultimately remanded the case for the district court to determine
whether or not arbitration was an illusory remedy in that case.
In doing so, it gave guidance for analysis of whether or not
arbitration is an illusory remedy.
The inquiry focuses on
whether the arbitration regime here is structured so
as to prevent a litigant from having access to the
arbitrator to resolve claims, including
unconscionability defenses. The standard for such a
showing of illusoriness would also be high — all
formal dispute resolution involves costs and
inconvenience. But if the remedy is truly illusory, a
court should not order arbitration at all but decide
the entire dispute itself.”
Id. at 13 (emphasis in original).
In defining what makes arbitration an “illusory” remedy,
the First Circuit in Awuah I noted that “excessive arbitration
costs” are a significant concern.
Id. at 13.
Awuah I does not
define precisely what “excessive” costs may be, but, with
respect to Uber’s Agreement before me, this is not necessary.
Uber explicitly states in the Agreement that it will bear the
costs of any arbitration claim under $75,000, thereby relieving
25
any potential plaintiff of bearing the cost of arbitration
unless her claim is substantial.
It might be argued that waiver of the right to bring a
class action also renders dispute resolution terms illusory.
But Supreme Court precedent is clear that “[c]lass arbitration
waivers are enforceable even where the cost of individual
arbitration effectively prevents the pursuit of low-value
claims” that would only be financially viable in a class
context.
Pazol v. Tough Modder, Inc., 100 F. Supp. 3d 74, 76
(D. Mass. 2015), rev’d on other grounds, 819 F.3d 548 (1st Cir.
2016), (citing Am. Express Co. v. Italian Colors Rest., 133
S.Ct. 2304 (2013)).
Thus, so-called forced “single-file”
arbitration is not a bar to arbitration agreements generally.
It follows that objection to “single-file” arbitration is no
basis for a contention that arbitration is an illusory remedy.11
Having concluded that arbitration is not an illusory remedy
for the plaintiffs, I must leave all other issues to the
11
I must, however, register my agreement with Justice Breyer’s
characteristically practical assessment that “nonclass
arbitration over [small sums] will [] sometimes have the effect
of depriving claimants of their claims.” Concepcion, 563 U.S. at
365 (Breyer, J., dissenting). This is because, as Judge Posner
has observed with characteristic pungency, “the realistic
alternative to a class action is not 17 million individual
suits, but zero individual suits, as only a lunatic or a fanatic
sues for $30”. Id. (quoting Carnegie v. Household Int’l Inc.,
376 F.3d 656, 661 (7th Cir. 2004) (emphasis in original)).
26
arbitrator to decide, including the claim of unconscionability.
The language of the Agreement and the case law are clear: when,
as I found, the parties agreed to arbitrate; when, as I have
concluded, the dispute falls within the scope of the arbitration
provision; and when, as here, arbitration is not an illusory
remedy, the court must compel arbitration, and leave all other
matters for the arbitrator to decide.
C.
Stay or Dismiss
The remaining question is whether to stay this case or to
dismiss it.
Section 3 of the FAA requires that where issues
brought before a court are arbitrable, the court shall
stay the trial of the action until such arbitration
has been had in accordance with the terms of the
[arbitration] agreement. However, a court may
dismiss, rather than stay, a case when all of the
issues before the court are arbitrable.
Bercovitch v. Baldwin School, Inc., 133 F.3d 141, 156 n. 21 (1st
Cir. 1998) (citations omitted).
Having determined in resolving
the instant motion that all further issues shall be decided by
the arbitrator, nothing remains for me to decide.
unnecessary to await further developments.
A stay is
Consequently, I will
dismiss the case, with recognition that as a collateral aspect
of that disposition, this decision is immediately appealable to
27
permit plaintiffs a timely opportunity to challenge it if they
so choose.12
IV. CONCLUSION
For the reasons set forth above, I GRANT the defendant’s
Motion to Compel Arbitration [Dkt. No. 31] and direct the Clerk
to dismiss the case.
/s/ Douglas P. Woodlock______
DOUGLAS P. WOODLOCK
UNITED STATES DISTRICT JUDGE
12
See Green Tree Financial Corp.-Alabama v. Randolph, 531 U.S.
79, 87, 121 S.Ct. 513, 520 n. 2 (2000) (noting that a district
court’s decision to dismiss a case was a “final decision within
the meaning of § 16(a)(3) [of the FAA], and an appeal may be
taken,” and that, “Had the District Court entered a stay instead
of a dismissal in this case, that order would not be appealable”
under § 16(b)(1).)
28
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