Starke v. SquareTrade, Inc.

Filing 34

MEMORANDUM & ORDER re 29 Motion to Compel, Square Trade's motion to compel arbitration and stay the action is DENIED. So Ordered by Judge Nicholas G. Garaufis on 8/2/2017. (Lee, Tiffeny)

UNITED STATES DISTRICT COURT

F/r

EASTERN DISTRICT OF NEW YORK
-X

ADAM J. STARKE,individually and on behalf of
all others similarly situated.
MEMORANDUM & ORDER

Plaintiff,

16-CV-7036(NGG)

-againstSQUARETRADE,INC.,
Defendant.
-X

NICHOLAS G. GARAUFIS,United States District Judge.

In this putative class action. Plaintiff Adam Starke alleges that Defendant SquareTrade
engaged in fraudulent and unfair business practices in connection with its protection plans for
consumer goods. (Compl.(Dkt. 1).) Pending before the court is SquareTrade's motion to

compel arbitration and stay the action(the "Motion"). (Def. Mot.(Dkt. 29).) SquareTrade seeks
to enforce an arbitration provision that first appeared in a "terms and conditions" document

provided via hyperlink in an email confirming Starke's purchase of a SquareTrade protection
plan on amazon.com ("Amazon"). For the following reasons, the court DENIES SquareTrade's
Motion.

I.

BACKGROUND

A. Starke's Allegations

SquareTrade markets, sells, and administers extended warranties, service contracts, and
accident protection plans for consumer products, including household appliances and electronic
devices. (Compl.^ 18.) SquareTrade has sold its protection plans to "over 25 million
customers ...through a number of major retailers, such as [Amazon], Costco, Sam's Club,

Target, Staples, Office Depot and Toys'R' Us." (Id.

1

19-20.) Starke alleges that SquareTrade

relies on several deceptive practices in connection with the sale of its protection plans on
Amazon, with the result that consumers are often unaware ofterms and conditions that would

restrict their coverage and limit their available remedies. (See id.

31-49.) Most relevant for

Defendant's Motion is an arbitration provision that appeared for the first time in a set of post-sale
terms and conditions. (See id. fl 41-42.)

Starke's individual claims arise out of a SquareTrade 2-Year Electronics Protection Plan

(the "Protection Plan") purchased through Amazon on January 5,2016. (Starke Decl.

(Dkt. 30-1) H 5.) Starke purchased the Protection Plan to cover a CD player that he ordered from
Staples on December 27, 2015. (Id H 3.)
1. The Amazon Purchase Page

The Amazon product page (the "Purchase Page")for the Protection Plan contains several
disclosures in the area ofthe screen next to the "Add to Cart" button a consumer would click to

purchase the plan. (Purchase Page (Dkt. 30-2 at ECF pp.19-22) at ECF p.19.) In addition to the
price, the disclosures provide as follows:
•
•
•
•

Coverage for product breakdowns and malfunctions
24/7 customer support
Free shipping on all repairs with no deductibles or hidden fees
Fully transferable with gifts. Cancel anytime,full refund in the first
30 days
• If you purchase this service plan and eligible product for this service plan,
you acknowledge that Amazon may send the service plan seller relevant
product and price information for the purpose of administering the plan
*PIease note: Your Service Contract will be delivered via email and not mailed to

you. It will come from Square Trade Warranty Services
([e-mail]) within 24 hours of purchase. If you don't
receive it, please visit www.squaretrade.com/help.
m

Several screens further down on the Purchase Page, under a section called "Things to

know," the first bullet point reads: "SquareTrade Protection Plans are only valid for new

products purchased at Amazon within the last 30 days." (Id at ECF p.20(emphasis added).)
Starke alleges that he was unaware that the Protection Plan he purchased did not cover items

purchased through retailers other than Amazon. (Starke Deck ^5.) He believed that he was
purchasing a valid plan to protect the CD player he ordered days earlier from Staples. (See id)
Still further down on the Purchase Page, in a section called "Product information," under

the heading "Technical Specifications," is a blue hyperlinked word:"Warranty." (Purchase Page

at ECF p.20.) Starke did not click the "Warranty" hyperlink. (Starke Decl.^ 6.) Had he done
so, he would have accessed a document previewing the terms and conditions(the "Pre-Sale

T&C")governing the Protection Plan.^ (Id; see also Pre-Sale T&C(Dkt. 1 at ECF pp.33-34).)
The Pre-Sale T&C do not mention arbitration. (See Pre-Sale T&C.) SquareTrade admits that, as

a result ofthis lawsuit, it discovered that, at the time ofPlaintiffs purchase,the Pre-Sale T&C

available on the Amazon Purchase Page were outdated.^ (Saram Decl.(Dkt. 29-3)13; Def.
Mem.in Supp. ofDef. Mot.("Def. Mem.")(Dkt. 29-1)at 5.)
2. The Confirmation Email

On January 5,2016,the day Starke purchased the Protection Plan, he received an email
(the "Confirmation Email")from [e-mail] with the subject line:
"SquareTrade Protection Plan on Amazon.com - Contract is Enclosed." (Confirmation Email

'
The first two lines ofthe Pre-Sale T&C read: "Congratulations on purchasing this Protection Plan. Please read
these terms and conditions carefully so that you fully understand your coverage under this Protection Plan." (PreSale T&C(Dkt. 1 at ECF pp.33-34) at ECF p.33.)
^ SquareTrade's Director of Growth and Strategy declared that upon discovering the mistake he instructed Amazon
to update the hyperlink on its product page to link to the current terms and conditions; he believes this correction
was made. (Saram Decl.(Dkt. 29-3)^3.) Starke contends that Amazon still provided pre-sale terms without an
arbitration provision for an entire line of SquareTrade Protection Plans, as of the filing of his brief. (PI. Mem.in
Opp'n to Def. Mot.(Dkt. 30)at 6 n.2.)

(Dkt. 30-1 at ECF p.10).) The Confirmation Email had no attachments. (Id.) The Confirmation
Email began:

Thank you for purchasing your new Electronics item protection plan. You're all
set! If you'd like to manage your SquareTrade account online,just click the link
below.

IMPORTANT: You'll need your receipt to file a claim. Submit your receipt
now,and we'll keep track of it for you.

(Id.) Starke immediately sent SquareTrade a copy ofthe receipt, which clearly indicated that the
CD player was purchased at Staples. (Starke Decl. H 11.) Two days later, SquareTrade
confirmed that it had received the copy of his receipt. (Id U 12.)

Below the "Thank you" text described above,the body ofthe Confirmation Email was
introduced with the heading "Your Protection Plan." This section contained a summary chart

that listed plan details including: Coverage Amount,Protection Plan Price, Coverage Type,
Covered Product, Deductible, Quantity, Coverage Term, Coverage Start Date, Coverage End
Date, and Waiting Period. (Confirmation Email.)

At the bottom ofthe Confirmation Email,the phrase "Terms & Conditions" appeared as a

blue hyperlink. (Id) This text linked to a set of post-sale terms and conditions(the "Post-Sale
T&C")that Starke characterizes as significantly more restrictive than the Pre-Sale T&C.
(Compl.

39-41; see also Post-Sale T&C(Dkt. 1 at ECF pp.36-46).) In particular, the Post-

Sale T&C include a provision (the "Arbitration Provision") purporting to bind the parties to
arbitration of"[a]ny controversy or claim arising out of or relating to this Protection Plan, or
breach thereof... in accordance with the Commercial Arbitration Rules of the American

Arbitration Association." (Compl. K 42; Post-Sale T&C § 15.) The Post Sale T&C also contain
a class action waiver and a California choice-of-law clause. (Post-Sale T&C § 15.) None of

these three provisions appear in the Pre-Sale T&C,nor are they referenced in the body ofthe
Confirmation Email. (See Pre-Sale T&C;Confirmation Email.)

Starke "did not click on the hyperlink to the Post-Sale T&C,did not read the Post-Sale
T&C,and was unaware that it or any other document ever received from SquareTrade contained
an arbitration provision or class action waiver." (Starke Deck ^ 9.)
3. Starke's Claim Under the Protection Plan

In October 2016, Starke's CD player required repair or replacement. (Id H 13.) He made

a claim for coverage under the Protection Plan, which SquareTrade denied. (Id) A SquareTrade

Customer Care Specialist told Starke via email on October 20,2016,that his Protection Plan was
invalid because the CD player was not purchased at Amazon. (Rejection of Claim Email(Dkt.
30-1 at ECF p.l3).) The Customer Care Specialist told Starke that the Protection Plan could only
be canceled "for a full refund as an exception" as opposed to a prorated refund. (I^
B. Starke's Causes of Action

Starke initiated this action on December 21,2016, asserting three putative class claims.

(Compl. nil 92-110.) First, Starke asserts that SquareTrade violated New York's laws prohibiting
deceptive acts and practices, N.Y. Gen. Bus. Law §§ 349-50, by failing to reveal material facts
about its protection plans. (Id HH 92-98.) Second, Starke asserts a claim under the federal
Magnuson-Moss Warranty Act, 15 U.S.C. §§ 2301 et seq., based on SquareTrade's failure to

provide "full, clear and conspicuous disclosure of[the] terms and conditions" ofthe Protection
Plans prior to purchase. (Id HH 99-107.) Third, Starke contends that it would be inequitable,
under the doctrine of unjust enrichment, to allow SquareTrade to retain profits traceable to its
alleged misrepresentations. (Id^fl 108-10.)

n.

DISCUSSION

SquareTrade seeks to enforce the Arbitration Provision contained in the Post-Sale Terms
and Conditions for the Protection Plan, Because the transaction at issue is centered in New

York,the court applies New York law. The court finds that SquareTrade failed to establish
(1)that Starke had actual knowledge ofthe Arbitration Provision in the Post-Sale T&C,or

(2)that Starke had reasonable notice ofthe Arbitration Provision and offered an objective
manifestation of assent to the Protection Plan's terms. Therefore,the court will not enforce the
Arbitration Provision. Because the court finds that there was no enforceable agreement to

arbitrate, the court need not, at this time, assess the scope ofthe Arbitration Provision or the

validity ofthe class-action waiver.^ The Motion is denied in its entirety."^
A. Choice of Law

1. Legal Standard

"Whether or not the parties have agreed to arbitrate is a question of state contract law."
Schnabel v. Trilegiant Corp.. 697 F.3d 110,119(2d Cir. 2012). "In determining which state law

controls, the Court applies the choice-of-law rules ofthe forum state.

Hines v. Overstock.com,

^ SquareTrade argues that the scope ofthe Arbitration Provision covers the claims at issue and,furthermore, that
questions ofscope must be resolved by an arbitrator in the first instance because the language ofthe Arbitration
Provision "constitutes the requisite 'clear and unmistakable evidence' that the parties intended the arbitrator to
answer questions of arbitrability." (Def. Mem. at 13-14 (citing First Options of Chi.. Inc. v. Kaplan. 514 U.S. 938,
943-47(1995).) SquareTrade also argues that the terms ofthe Arbitration Provision require arbitration on an
individual basis because they include a class-action waiver that reads:"We also agree not to participate as a class
representative or class member in any class action litigation, any class arbitration or any consolidation of individual
arbitrations against each other." (Id. at 9(citing Post-Sale T&C § 15).) These issues are not relevant to the
preliminary question of whether Starke agreed to the Arbitration Provision. Because the court determines that he
did not so agree, it is not necessary to address the Arbitration Provision's scope or consequences.

SquareTrade sought an order(1)directing that Plaintiffs claims be arbitrated on an individual basis and(2)staying
this action pending the conclusion of any arbitration. (See Def. Mem. at 1, 16-18.)
^ Hines's choice-of-law analysis draws on Second Circuit precedent holding that'"a federal court sitting in diversity
iurisdictionFl'... is obligated to 'apply the [choice-of-law rules] ofthe forum state.'" Cap Gemini Ernst & Young.
U.S.. L.L.C. V. Nackel. 346 F.3d 360,365(2d Cir. 2003)(emphasis added)(quoting Fieger v. Pitnev Bowes Credit
Corp.. 251 F.3d 386, 393(2d Cir. 2001)); see also Thea v. Kleinhandler. 807 F.3d 492,497(2d Cir. 2015); Kdaxon
Co. V. Stentor Blec. Mfg. Co.. 313 U.S. 487,496(1941). In this case, Starke asserts federal jurisdiction on diversity
grounds under 28 U.S.C. § 1332(d), and also under 28 U.S.C. § 1337 based on the argument that the MagnusonMoss Warranty Act is an "Act of Congress regulating commerce." (Compl. 12-13.)

Inc.. 668 F. Supp. 2d 362,366(E.D.N.Y. 2009), afPA, 380 F. App'x 22(2d Cir. 2010)(citing
Can Gemini Ernst & Young. U.S.. LLC, v. Nackel. 346 F.3d 360, 365(2d Cir. 2003)). In

contract cases where there is no applicable choice-of-law clause, courts in New York apply a
"center of gravity" approach. Brink's Ltd. v. S. Afr. Airways. 93 F.3d 1022, 1030(2d Cir.
1996). cert, denied. 519 U.S. 1116(1997)rdting In re Allstate Ins. Co. and Stolarz. 613 N.E.2d

936,940(N.Y. 1993)); see, e.g.. Mumin v. Uber Tech.. Inc.. — F. Supp. 3d —No.15-CV-7387
(NGG)
(JO),2017 WL 934703, at *7(E.D.N.Y. Mar. 7, 2017).
2. Application

The Post-Sale T&C include a California choice-of-law provision. (Post Sale T&C § 15.)

However,"[a]pplying the choice-of-law clause to resolve the contract formation issue would
presume the applicability of a provision before its adoption by the parties has been established."
Schnabel.697 F.3d at 119. At this stage, the court will not give effect to a choice-of-law clause

contained within the very contractual provisions whose validity is presently being adjudicated.^
The court, therefore, must locate the contract's "center of gravity" by considering "the

place of contracting, the places of negotiation and performance,the location ofthe [contract's]
subject matter, and the domicile or place of business ofthe contracting parties." Brink's. 93 F.3d

In some "cases arising under [] federal statutes," the Second Circuit has "applied a federal common law
choice of law rule." Pescatore v. Pan Am. World Airways. Inc.. 97 F.3d 1,12(2d Cir. 1996)(internal quotation
marks and citations omitted). However,"the Supreme Court has cautioned that it is appropriate for courts to apply
federal common law in only a 'few and restricted' instances." Eli Lilly Do Brasil. Ltda. v. Fed. Express Corp.. 502
F.3d 78,80(2d Cir. 2007)(quoting O'Melvenv & Mvers v. FDIC.512 U.S. 79,87(1994)). The court will therefore

apply state choice-of-law rules. The court recognizes, moreover,that federal and state choice-of-law rules would
likely produce the same outcome. "[W]hen conducting a federal common law choice-of-law analysis, absent
guidance from Congress,[courts] may consult the Restatement(Second) of Conflict of Laws." Id (citing Pescatore.
97 F.3d at 12). The Restatement provides that, in the absence ofa choice-of-law provision, the validity of a contract
is to be decided pursuant to the local law ofthe state in which the services are to be rendered, or which "has the most
significant relationship to the transaction and the parties." Restatement(Second)of Conflict ofLaws §§ 188,196
(1971). For purposes of this case, the Restatement's approach appears similar to New York's "center of gravity"
approach, as described in the text.

^ In any event, a recent decision from this court concluded that New York and Califomia law are "substantively
similar with respect to the issue of contract formation." Berkson v. Gogo LLC.97 F. Supp. 3d 359,388(E.D.N.Y.
2015).

at 1030-31 (citing In re Allstate, 613 N.E.2d at 940). Here, the places of contracting,

negotiation, and performance are either online, unknown, or non-existent. SquareTrade is
domiciled in Delaware, where it is incorporated, and in California, where it has its principal

place of business. (Compl. H 17.) The subject matter ofthe contract and Starke's domicile favor
application ofNew York law: Starke is a resident of Brooklyn, New York, and purchased the
Protection Plan to cover a CD player in New York. (Id

15,69-70.) The court finds that the

"center of gravity" approach favors New York law. Moreover,the parties both applied New
York law in their motion papers without briefing choice-of-law issues.
B. Legal Standards
1.

Motions to Compel Arbitration

The Federal Arbitration Act("FAA")provides that a written arbitration agreement "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 FAA has been interpreted as a "federal policy

favoring arbitration" and requiring federal courts to "rigorously enforce agreements to arbitrate."
Mumin.2017 WL 934703, at *7(quoting Shearson/Am. Exp.. Inc. v. McMahon,482 U.S. 220,

226 (1987)). Even so,"arbitration is a matter of contract and a party cannot be required to
submit to arbitration any dispute which he has not agreed so to submit." AT&T Techs.. Inc. v.
Cnmmc'ns Workers of Am.,475 U.S. 643,648(1986)(internal quotation marks and citation
omitted).

In adjudicating a motion to compel arbitration,"a court must begin by answering two
questions:'(1) whether the parties agreed to arbitrate, and if so,(2)whether the scope ofthat
agreement encompasses the asserted claims.'" Hines.668 F. Supp, 2d at 366(quoting Chelsea
Square Textiles. Inc. v. Bombav Dveing & Mfg. Co.. 189 F.3d 289, 294(2d Cir. 1999)). "The

party seeking arbitration has the burden of establishing an agreement to arbitrate." Resorb
8

Networks. Inc. v. YouNow.com,30 N.Y.S.Sd 506, 510(N.Y, Sup. Ct. 2016)(citing Seneca Ins.
Co. V. Secure-Southwest Brokerage. 741 N.Y.S.2d 690(N.Y. App, Div. 2002); Allstate Ins. Co.
V. Roseboro. 667 N.Y.S.2d 914(N.Y. App. Div. 1998)).

For motions to compel arbitration, the court applies a "standard similar to that applicable
for a motion for summary judgment." Mumin,2017 WL 934703, at *7(quoting Bensadoun v.
Jobe-Riat 316 F.3d 171,175 (2d Cir. 2003)). "Therefore, courts must'consider all relevant,
admissible evidence submitted by the parties.'" Id (quoting Chambers v. Time Warner,Inc.,

282 F.3d 147,155 (2d Cir. 2002)). In considering the evidence,"the court must draw all
reasonable inferences in favor ofthe non-moving party." Nicosia v. Amazon.com. Inc.. 834 F.3d

220,229(2d Cir. 2016). If there is a genuine dispute of material fact regarding the making of an
agreement to arbitrate, then a trial is necessary. Bensadoun. 316 F.3d at 175 (citing 9 U.S.C.
§ 4). If, however,the relevant facts are uncontroverted, the court may rule as a matter oflaw.

See Specht v. Netscape Commc'ns Corp.. 306 F.3d 17,27-28(2d Cir. 2002); see also Schnabel.
697 F.3datl28.

2.

Common-Law Contract Principles

Fundamentally,"arbitration is simply a matter of contract between the parties." First

Options of Chi.. Inc. v. Kaplan. 514 U.S. 938,943(1995). "To create a binding contract" under
New York law,"there must be a manifestation of mutual assent sufficiently definite to assure

that the parties are truly in agreement with respect to all material terms." Express Indus. &
Terminal Corp. v. N.Y. Dep't Transp.. 715N.E.2d 1050,1053(N.Y. 1999).

Internet commerce "has not fundamentally changed the principles of contract."
Register.com. Inc. v. Verio. Inc.. 356 F.3d 393,403(2d Cir. 2004)(applying New York law);

see, e.g.. Stonehill Capital Mgmt.. LLC v. Bank of the West. 68 N.E.3d 683,689(N.Y. 2016).
The rise of electronic contracts of adhesion and passive online contracting suggest that modem
9

consumer contracting has departed somewhat from the ideal offully informed assent.^ In an
opinion by then-Judge Sonia Sotomayor,the Second Circuit emphasized that "[r]easonably
conspicuous notice ofthe existence of contract terms and unambiguous manifestation of assent
to those terms by consumers are essential if electronic bargaining is to have integrity and

credibility." Specht 306 F.3d at 35. Since that decision, New York courts analyzing online
contract formation have applied Specht's requirements of reasonable notice and manifestation of
assent. See e.g.. Jesmer v. Retail Magic. Inc.. 863 N.Y.S.2d 737, 745-46(N.Y. App. Div. 2008)

(finding digital license agreement unenforceable when it never appeared on plaintiffs computer

screen and plaintiff never expressly agreed to it); Jerez v. JD Closeouts. LLC.943 N.Y.S.2d 392,
398(Nassau Dist. Ct. 2012)(finding terms unenforceable because they were "buried" and
"submerged" on a webpage only accessible through an inconspicuous hyperlink).

In Berkson v. Gogo LLC.97 F. Supp. 3d 359(E.D.N.Y. 2015), District Judge Jack B.

Weinstein surveyed the case law and empirical research on online contracting, then derived a test
for determining the enforceability of electronic adhesion contracts. Ifr at 402-03. This test

operationalizes the requirements of reasonable notice and objective manifestation of assent by
directing courts to assess four factors:

(1) Is there substantial evidence that the consumer"was aware she was binding herself
to more than an offer of services or goods in exchange for money?" If not, the
terms "should not be enforced against the purchaser."

(2) Did the "design and content" ofthe electronic communication make the terms
"readily and obviously available?" If not,the terms should not be enforced against
the purchaser.

(3) "Was the importance ofthe details ofthe contract obscured or minimized by the []
manifestation ofassent expected" to purchase the service? If so,the terms should
not be enforced against the purchaser.
^ See, e.g.. Jonathan A. Obar «& Anne Oeldorf-Hirsch, The Biggest Lie on the Internet: Ignoring the Privacy Policies

and Terms of Service Policies of Social Networking Services(Aug.4,2016)(unpublished working paper)
(available at http;//ssm.coni/abstract=2757465)(reporting that 74% ofstudy participants did not read privacy policy
and 100% agreed to terms of service requiring payment in the form ofa first-bom child).
10

(4) "Did the merchant clearly draw the consumer's attention to material terms that
would alter what a reasonable consumer would understand to be her default rights,"

such as the ability to "bring a civil consumer protection action ... in the courts in
her state of residence"? If not, such terms should not be enforced against the
purchaser.

Id. at 402. The Berkson test has been favorably cited and applied by federal and state trial
courts. See, e.g.. Annlebaum v. Lvft. Inc.. No. 16-CV-7062(JGK),2017 WL 2774153, at *6

(S.D.N.Y. June 26, 2017); Mever v. Kalanick. 200 F. Supp. 3d 408,416-21 (S.D.N.Y. 2016);
Resorb Networks. 30 N.Y.S.3d at 511; see also Kai Peng v. Uber Tech.. Inc.. — F. Supp. 3d —,

No. 16-CV-545(PKC)
(RER),2017 WL 722007, at *9(E.D.N.Y. Feb. 23,2017)(distinguishing
Berksonl: Nancy S. Kim, Online Contracting. 72 Bus. Law. 243,243(2017)(citing Berkson as
evidence that "courts are taking a more sophisticated approach to assess what conspicuous notice
means in the online context").
C. Analysis

Starke declares, and SquareTrade does not dispute, that he never accessed or viewed any
version ofa "terms and conditions" document from SquareTrade that contained an arbitration

provision. (Starke Decl.

6, 9.) Drawing all reasonable inferences in favor of Starke, see

Nicosia, 834 F.3d at 229,the court concludes that Starke did not have actual notice ofthe
Arbitration Provision. In the absence of actual notice, the court applies the Berkson test to

determine whether Starke is nonetheless bound by the Arbitration Provision. The court finds that

SquareTrade's interactions with Starke failed to satisfy the Berkson analysis, and that the
Arbitration Provision is therefore not enforceable against Starke.
1. Awareness of Contract

The first Berkson prong asks whether Starke was "aware [he] was binding [himself] to
more than an offer of services or goods in exchange for money." Berkson. 97 F. Supp. 3d at 402.

SquareTrade points out that Starke's "purchase of a SquareTrade Plan was itself the purchase of
11

a contract." (Def. Reply in Supp. of Def. Mot.("Def. Reply")(Dkt. 31) at 3.) SquareTrade
argues that Starke therefore had reasonable notice offorthcoming contractual terms because
Starke "set out to purchase a contract... and in fact purchased and received that contract." Qd.
at 4(footnote omitted).) The court agrees. This factor alone, however, does not dispose ofthe
outcome. The first Berkson factor considers whether the consumer was aware ofthe existence of

any contractual terms; the remaining three factors require a more nuanced determination of
which contractual terms the consumer could reasonably be expected to discem and agree to.

Those factors suggest a finding that, though Starke knowingly entered into a contract with
SquareTrade, the Arbitration Provision was not part ofthat enforceable agreement.
2. Design and Content of Communication

The design and content ofthe Confirmation Email did not make the Post-Sale T&C
"readily and obviously available." Berkson,97 F. Supp. 3d at 402. The Post-Sale T&C were not

displayed in the body ofthe Confirmation Email, and the "Terms & Conditions" hyperlink was
inconspicuously placed in small font at the very bottom ofthe email. tSee Confirmation Email.)
New York courts have declined to enforce agreements "where the link to the agreement is buried

at the bottom of a webpage or tucked away in obscure comers ofthe website." Resorb
Networks.30 N.Y.S.3d at 511 (intemal quotation marks and citations omitted); see also Jerez,

943 N.Y.S.2d at 398 (finding no notice of"submerged" terms on a web page accessible only by
clicking on inconspicuous link).

Nothing in the Confirmation Email prompted consumers to look for the Post-Sale T&C
or directed consumers' attention to the "Terms & Conditions" hyperlink. On the contrary, the

pithy statement "You're all set!" at the top ofthe Email could have led a reasonably pmdent
consumer to believe that nothing more was required ofthem. In two other places in the

Confirmation Email, SquareTrade used stylistic methods to draw attention to certain features: the
12

word "IMPORTANT" appeared in all caps and bold font to prompt consumers to upload their

receipt, and a bright red box framed the phrase "WRITE A REVIEW"to solicit reviews of

SquareTrade's Protection Plans on Amazon. No such frills adorned the "Terms & Conditions"
hyperlink; its placement and formatting made it is easy to miss, even for a consumer who was

looking for it. Compare, e.g., Berkson. 97 F. Supp. 3d at 404 ("The hyperlink to the 'terms of
use'" was not "readily and obviously available" because it "was not in large font, all caps, or in
bold," whereas "the 'SIGN IN' button [was] very user-friendly and obvious, appearing in all

caps,in a clearly delineated box in both the upper right hand and the lower left hand comers of
the homepage."), with Kai Peng,2017 WL 722007, at *9(finding that the business "drew []
attention to the terms ofthe Service Agreement with bold, capitalized statements").

SquareTrade argues that Starke had reasonable notice ofhow and when terms would
become available because of a disclosure on the Purchase Page instmcting that the "Service
Contract will be delivered via email... within 24 hours of purchase." (Def. Mem. at 1;

Purchase Page; see also Def. Reply at 5(making a similar argument with regard to subject line of
the Confirmation Email and a separate confirmation email sent by Amazon).) It was entirely
reasonable, however,for Starke to assume that the text of the Confirmation Email constituted the

anticipated Service Contract. As Starke points out, neither the Purchase Screen nor any post-sale
communication specifically directed his attention to the "Terms & Conditions" hyperlink.
(PI. Mem.in Opp'n to Def. Mot.(Dkt. 30)at 3-4, 16; see also Confirmation Email.) Thus, the
disclosure did not provide effective notice of—or legitimately incorporate—^the Post-Sale T&C
by reference. See Cooperativa Agraria Indus. Naraniillo Ltda. v. Transmar Commodity Grp.,
No. 16-CV-3556(LLS),2016 WL 5334984, at *4-5 (S.D.N.Y. Sept. 22,2016)(finding
incorporation ineffective where documents were titled in confusing manner and reference

13

language "did not reveal the existence of an arbitration provision"); Torres v. Major Auto. Grp.,
No. 13-CV-0687(NGG)
(CLP),2014 WL 4802985, at *7(E.D.N.Y. Sept. 25, 2014)("[T]he
agreement must specifically reference and sufficiently describe the document to be
incorporated.").
3. Manifestation of Assent

SquareTrade did not require any affirmative manifestation of agreement to its Post-Sale

T&C. The importance ofthe details ofthe contract were "obscured" and "minimized" by the
lack ofa clear manifestation of assent required to complete the transaction. Berkson,
97 F. Supp. 3d at 402.

SquareTrade argues that post-sale delivery of service contracts, such as the Protection
Plan, is "expressly authorized" under New York law. (Def. Reply at 3 n.2 (citing N.Y. Ins. Law

§§7901 et seq.T) Even if SquareTrade is correct, however, the legality of post-sale delivery of
terms for service contracts, as a general matter, would not automatically vindicate all post-sale
terms irrespective of how they were phrased or delivered.

SquareTrade asserts that the Arbitration Provision is binding on Starke because he had

"express notice that, if he changed his mind and did not wish to purchase the Plan(because of
the [Arbitration Provision] or for any other reason), he could have cancelled the Plan for a full
refund within the first 30 days." (Def. Mem. at 2-3.) This argument is unsound because the

"duty to read" principle "[does] not nullify the requirement that a consumer be on notice ofthe
existence of a term before he or she can be legally held to have assented to it." SchnabeL
697 F,3d at 110. Furthermore,"[i]n order to constitute acceptance, the failure to act

affirmatively must carry a significance that reasonable people in the parties' positions would
understand to be assent." Id. at 128. Starke was unaware ofthe Post-Sale T&C and did not have

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a meaningful opportunity to review them, and so failing to cancel the Protection Plan cannot
constitute assent to the Arbitration Provision.

Finally, SquareTrade argues that "SquareTrade's post-sale delivery ofthe governing
Terms and Conditions could not have come as a surprise" given that Starke "previously had

made^other SquareTrade Protection Plan purchases on Amazon." (Def. Mem. at 12; see also
Su Decl.(Dkt. 29-2) UK 9-15.) This argument is unavailing, however, due to the lack of evidence
that Starke was ever, in any of his interactions with SquareTrade, given clear notice ofthe full

set of post-sale terms and conditions, or of any pre- or post-sale terms that contained a
mandatory arbitration provision. Compare Register.com. 356 F.3d at 401 (finding a binding
agreement where "Verio was daily submitting numerous queries, each of which resulted in its
receiving notice ofthe terms," and where "Verio admits that it knew perfectly well what[the]

terms [] demanded"), with Specht. 306 F.3d at 35 (declining to enforce an arbitration provision
because "a reasonably prudent offeree in plaintiffs' position would not have known or learned,

prior to acting on the invitation to download, ofthe reference to [the] license terms hidden below
the 'Download' button on the next screen").
4. Attention to Material Terms

SquareTrade did not "clearly draw the consumer's attention" to the Post-Sale T&C in
general or to the Arbitration Provision in particular, a term that alters the "default right[]" to
initiate a civil action in a consumer's state ofresidence. Berkson. 97 F. Supp. 3d at 402. The

Confirmation Email summarized several key provisions ofthe Protection Plan, but neither that
email, nor the Purchase Page, nor any other communication from SquareTrade called attention to
the limitation on remedies buried in the Post-Sale T&C.

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In sum,it cannot be said that SquareTrade provided reasonable notice and secured
Starke s assent to the Post-Sale T&C or to the Arbitration Provision contained therein.

SquareTrade mistakenly provided outdated Pre-Sale T&C,which did not include the Arbitration

Provision. SquareTrade notified consumers ofa post-sale "Service Contract," but never directed

them to examine the "Terms & Conditions" document tucked away in a hyperlink at the bottom

ofthe Confirmation Email, which could itself be reasonably mistaken as providing the Service
Contract's terms. SquareTrade did not require any affirmative manifestation ofassent to the

Post-Sale T&C. These choices,taken together, compel the court to find that SquareTrade failed
to establish an enforceable arbitration agreement with Starke. Therefore, Starke may not be
compelled to arbitrate his claims against SquareTrade.
III. CONCLUSION

For the reasons state above, SquareTrade's motion to compel arbitration and stay the
action(Dkt. 29)is DENIED.
SO ORDERED.

s/Nicholas G. Garaufis

Dated: Brooklyn, New York
August

IICHOLAS G. GARLAUFIS

,2017

United States District Judge

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