GLASSER, Senior United States District Judge:
On January 30, 2013 and April 19, 2013, Plaintiff Dean Nicosia went on Amazon.com and placed orders of 1 Day Diet, a product marketed as a weight-loss supplement, which contained the harmful compound sibutramine. The account from which these purchases were made was held in his wife's name and was previously
The Court adopts the R&R's conclusion that arbitration be granted, finding that it is supported by its careful analysis of the facts and the law which is manifest, and not impugned by Plaintiff's objections to it, which are denied. The Court is driven to this conclusion upon its de novo review of the evidentiary record, parties' motion and objection papers, and applicable legal authority, as mandated by 28 U.S.C. § 636(b)(1) and Federal Rule of Civil Procedure 72(b)(3), for the reasons expanded upon below.
In deciding a motion to compel arbitration, "courts apply a `standard similar to that applicable for a motion for summary judgment.'" Nicosia v. Amazon.com, Inc., 834 F.3d 220, 229 (2d Cir. 2016) (quoting Bensadoun v. Jobe-Riat, 316 F.3d 171, 175 (2d Cir. 2003)). Accordingly, the Court will "consider all relevant, admissible evidence submitted by the parties and contained in the pleadings, depositions, answers to interrogatories, and admissions on file, together with ... affidavits." Id. (quoting Chambers v. Time Warner, Inc., 282 F.3d 147, 155 (2d Cir. 2002)). "In so doing, the court must draw all reasonable inferences in favor of the nonmoving party." Id. (citing Wachovia Bank, Nat. Ass'n v. VCG Special Opportunities Master Fund, Ltd., 661 F.3d 164, 171-172 (2d Cir. 2011), cert. denied, 566 U.S. 1010, 132 S.Ct. 2439, 182 L.Ed.2d 1063 (2012)). "If there is an issue of fact as to the making of the agreement for arbitration, then a trial is necessary." Nicosia, 834 F.3d at 229 (quoting Bensadoun, 316 F.3d at 175); see also 9 U.S.C. § 4. "But where the undisputed facts in the record require the matter of arbitrability to be decided against one side or the other as a matter of law, [the Court] may rule on the basis of that legal issue and `avoid the need for further court proceedings.'" Nicosia, 834 F.3d at 229 (alterations omitted) (quoting Wachovia Bank, 661 F.3d at 172).
Plaintiff Dean Nicosia (
On June 9, 2008, an Amazon account was created in the name of "Annemarie Nicosia" (the
It is undisputed that, at the time the Account was created, Amazon's Conditions of Use (
(Id.; Ressmeyer Decl. Ex. M, at AMZ000365, ECF No. 116-15) (bold in original). The arbitration provision was also accompanied by a class action waiver, which provides that "
Amazon Prime (
Amazon Mom (
Amazon Mom was explicitly promoted as a kind of free trial for Prime. In the promotional FAQ, the free shipping benefits were expressly referred to as "Amazon Prime benefits." (Ressmeyer Decl. Ex. J, at AMZ000369, ECF No. 116-10). Extending these benefits by making qualifying purchases on Mom gave the accountholder "more free months of Prime." (Id.). The Amazon Mom sign-up page contained text reading: "
Annemarie testified that, while she was pregnant with her second son, she heard about Amazon Mom from a friend, Albert Dennis (
(Id. at 58:8-18).
As of September 30, 2011, in order to sign up for Amazon Mom, a customer would be required to complete a two-step process. (Ressmeyer Decl. ¶ 27; Ressmeyer Decl. Ex. J, at AMZ000371-372). First, the customer would enter certain information about themselves and click a button that says "Continue." (Ressmeyer Decl. Ex. J, at AMZ000371). Directly above the "Continue" button was a line that read: "By clicking the
(Ressmeyer Decl. Ex. K, at AMZ000494, ECF No. 116-13). The Mom T&C further provide: "Once your free shipping benefits have expired, you may continue to receive Amazon Prime shipping benefits by enrolling in
Second, the customer was taken to a page where they must input their payment and billing information and click a button that says, "Sign up for Amazon Mom." (Id. Ex. J, at AMZ000372). Directly below this button was text that read: "By signing up, you acknowledge that you have read and agree to the Amazon Prime Terms and Conditions ...." (Id.). The underlined term was a link to the
(Ressmeyer Decl. Ex. L, at AMZ000345, ECF No. 116-14). The underlined "
The Amazon Mom sign-up flow is reproduced in
In September or October 2012, Annemarie's membership in Amazon Mom expired. (Ressmeyer Decl. ¶ 33; Ressmeyer Dep. at 200:9-20).
1 Day Diet was a product promoted and sold for weight loss. On January 30, 2013 and April 19, 2013, Plaintiff made two purchases of 1 Day Diet, using Annemarie's Account. (Ressmeyer Decl. ¶ 41; Tusa Ex. B ¶ 5, ECF No. 122-2). In order to execute each purchase, Plaintiff would have been required to click through a checkout page which contained a button that said, "Place your order," and text which read, "By placing your order, you agree to Amazon.com's
In November 2013, the U.S. Food and Drug Administration (
Plaintiff brought this action on July 28, 2014, claiming that Amazon's sale of 1 Day Diet violated the Consumer Product Safety Act, 15 U.S.C. § 2051, et seq., and state law. (Compl., ECF No. 1). On December
On appeal, the Second Circuit disagreed with Amazon and the District Court that the format of the checkout page was sufficient, as a matter of law, to bind Plaintiff to the Conditions of Use. See 834 F.3d at 238. At the same time, the Court of Appeals rejected Plaintiff's invitation to declare as a matter of law that no arbitration agreement was formed. See id. Instead, the Second Circuit found that "reasonable minds could disagree" as to whether the checkout page "provided reasonably conspicuous notice" of the Conditions of Use, so as to bind Plaintiff to the arbitration provisions set forth therein. 834 F.3d at 237-238. The Court of Appeals' reasoning makes it clear that the Court regarded "the reasonableness of notice" on the checkout page to be a question of fact that must be resolved by a jury. Id. at 238 & n. 6.
After discovery, Amazon brought this motion to compel arbitration and dismiss or, in the alternative, stay these proceedings. The matter was referred to the Honorable Lois Bloom pursuant to 28 U.S.C. § 636(b)(1) and Rule 72(b) of the Federal Rules of Civil Procedure, who issued a Report and Recommendation recommending that Amazon's motion be granted.
In support of its motion, Amazon argued that Plaintiff was bound by the Prime T&C because Annemarie's Account, from which the purchases were made, had enrolled in Amazon Mom and Amazon Prime. (ECF No. 114, at 18-22; ECF No. 123, at 4-5). Amazon styled this argument as its "derivative rights" theory. (ECF No. 123, at 4). The R&R did not make a definitive recommendation with respect to Amazon's "derivative rights" theory. (R&R at 28-30). Instead, the R&R recommended that the motion be granted on the grounds that Plaintiff agreed to the COU directly through the checkout page. Specifically, the R&R accepted Amazon's argument that Plaintiff agreed to the COU by making purchases after this lawsuit was commenced, and hence after he acquired actual notice of the fact that the COU incorporated an arbitration provision. (Id. at 19-22). Alternatively, the R&R accepted Amazon's argument that Plaintiff was on constructive notice of the COU by virtue of his status as a repeated user of Amazon who frequently encountered the checkout page when shopping online. (Id. at 22-25).
Plaintiff timely objected to the R&R, although he did not specifically object to the R&R's treatment of Amazon's "derivative rights theory." (ECF No. 159, at 1-2). Amazon reasserted its "derivative rights" argument in its statement in support of the R&R and reply memorandum to Plaintiff's objections. (ECF No. 158, at 2; ECF No. 160, at 16-20).
In reviewing a magistrate judge's report and recommendation with respect to a dispositive matter, "[t]he district judge must determine de novo any part of the magistrate judge's disposition that has been properly objected to." 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72(b)(3). As to those sections of the magistrate's report to which no objections are made, the district court may adopt such sections "as long as the magistrate's decision was not `facially erroneous.'" Aminov v. EC Commodities Corp., No. 16-CV-4800 (AMD) (SMG), 2018 WL 542245, at *1 (E.D.N.Y. Jan. 24, 2018) (quoting Markey v. Lapolla Industries, Inc., No. 12-CV-4622 (JS) (AKT), 2016 WL 324968, at *3 (E.D.N.Y. Jan. 26, 2016)). However, the Court, in its discretion, may also review such sections de novo. See Mathews v. Weber, 423 U.S. 261, 270-271, 96 S.Ct. 549, 46 L.Ed.2d 483 (1976); U.S. v. Male Juvenile (95-CR-1074), 121 F.3d 34, 39 (2d Cir. 1997) ("Although defendant did not object to the magistrate judge's recommendation,... [t]he record indicates that the district court made a de novo determination of the Report and Recommendation.... The court's review was well within its discretion"). At the conclusion of its review, the district judge "may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge." 28 U.S.C. § 636(b)(1); see also Fed. R. Civ. P. 72(b)(3).
In this case, the Court exercises its discretion to review de novo Amazon's "derivative rights" argument. The Court finds that this argument has merit, and therefore compels arbitration on these grounds.
Section 2 of the FAA declares 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. This mandate is enforced by the two sections that follow. Under Section 3, courts must, upon the request of a party, stay litigation in any proceedings in which the underlying claims are arbitrable. See id. § 3. Under Section 4, the court must also, on request, issue an order compelling such arbitration "in the manner provided for in such agreement." 9 U.S.C. § 4. Additionally, because the purpose of the FAA was to "overrule the judiciary's longstanding refusal to enforce agreements to arbitrate and to place such agreements upon the same footing as other contracts," Granite Rock Co. v. International Broth. of Teamsters, 561 U.S. 287, 302, 130 S.Ct. 2847, 177 L.Ed.2d 567 (2010) (quoting Volt Information Sciences, Inc. v. Board of Trustees of Leland Stanford Junior University, 489 U.S. 468, 478, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989)), the statute preempts defenses to enforceability (such as unconscionability) which single out arbitration clauses for disfavored treatment, see Perry v. Thomas, 482 U.S. 483, 492 n. 9, 107 S.Ct. 2520, 96 L.Ed.2d 426 (1987).
To determine whether arbitration must be compelled, a court must resolve two issues: whether the parties agreed to arbitrate, and whether the dispute at hand falls within the scope of the arbitration agreement. See Mehler v. Terminix Intern. Co. L.P., 205 F.3d 44, 47 (2d Cir. 2000). Both questions are decided under state contract law. See Applied Energetics, Inc. v. NewOak Capital Markets, LLC, 645 F.3d 522, 526 (2d Cir. 2011) ("[I]n deciding whether a contractual obligation to arbitrate exists, `courts should generally apply state-law principles that govern the formation of contracts'") (quoting Mehler, 205 F.3d at 48); Bechtel do Brasil Construcoes Ltda. v. UEG Araucaria Ltda., 638 F.3d 150,
On questions of contract formation —whether a valid arbitration agreement exists in the first place—state law must be applied neutrally, that is, without any special presumption that the parties agreed to arbitrate. See Citigroup Global Markets Inc. v. Abbar, 761 F.3d 268, 274 (2d Cir. 2014) ("Because the parties here are disputing the existence of an obligation to arbitrate, not the scope of an arbitration clause, the general presumption in favor of arbitration does not apply"); Applied Energetics, 645 F.3d at 526 ("[T]he presumption [of arbitrability] does not apply to disputes concerning whether an agreement to arbitrate has been made"). By contrast, on questions of contract scope—what the arbitration agreement says—the FAA imposes a presumption of arbitrability, pursuant to which "any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration[.]" Moses H. Cone, 460 U.S. at 24-25, 103 S.Ct. 927; see also Holick v. Cellular Sales of New York, LLC, 802 F.3d 391, 395 (2d Cir. 2015).
As any internet user knows, website terms and conditions are burdensomely long. One rarely reads the fine print when they create a social media account, buy an e-book or movie, use a ridesharing service, or download a mobile app. This phenomenon is not new to the internet age, but is endemic to standardized form agreements wherever they appear, from credit card terms to car rentals. These agreements are contracts of adhesion, in that they contain preprinted terms offered on a take-it-or-leave-it basis, which, in light of the parties' respective bargaining positions, are not realistically susceptible to negotiation or customization. See generally Todd D. Rakoff, Contracts of Adhesion: An Essay in Reconstruction, 96 Harv. L. Rev. 1173, 1177 (1983).
Standardized adhesion contracts are necessary in a busy, commercial society. The costs in time and effort of scrutinizing non-essential boilerplate are seldom worth the benefits. See Wayne R. Barnes, Toward a Fairer Model of Consumer Assent to Standard Form Contracts: In Defense of Restatement Subsection 211(3), 82 Wash. L. Rev. 227, 254-256 (2007) ("[H]umans have limited capacities both for the amount of information they can consider in their decisions and for processing the information that they do take into account"); Michael I. Meyerson, The Efficient Consumer Form Contract: Law and Economics Meets the Real World, 24 Ga. L. Rev. 583, 596-600 (1990). Instead, it is usually more economical to "trust ... the good faith" of the merchant and "the tacit representation that like terms are being accepted regularly by others similarly situated." Restatement (Second) of Contracts § 211 cmt. b (1981). Enforcing such terms, even when they are not actually read or understood, permits consumers to trade information for convenience.
The traditional view of adhesion contracts was that the consumer had a "`duty to read' the document before signing it," and that his "signature on a document... which he had the opportunity to read, will be taken to signify his assent...." Rakoff, supra, at 1185-87. The modern view accepts that this is a legal fiction: consumers do not read boilerplate. The reality is that there is a true meeting of the minds as to only a small number of terms (price, quantity, etc.), and the consumer, by adopting the boilerplate as-is, "delegate[s]" to the merchant the power to make the rest. W. David Slawson, Standard
Plaintiff raises no unconscionability argument here, but this prompts one to inquire why Plaintiff has objected so strenuously to arbitration at all. The trope that arbitrators are biased toward defendants does not appear to have been borne out by recent scholarship. See Peter B. Rutledge, Whither Arbitration?, 6 Geo. J. L. & Pub. Pol'y 549, 556-560 (2008) (surveying the data and concluding that "most measures —raw win rates, comparative win rates, comparative recoveries, and comparative recoveries relative to amounts claimed—do not support the claim that consumers and employees achieve inferior results in arbitration compared to litigation"); Sarah Rudolph Cole, On Babies and Bathwater: The Arbitration Fairness Act and the Supreme Court's Recent Arbitration Jurisprudence, 48 Hous. L. Rev. 457, 471-476 (2011) (surveying data on consumer arbitration and concluding that "consumers can save money while achieving results similar to or better than they would in court"); Christopher R. Drahozal & Samantha Zyontz, An Empirical Study of AAA Consumer Arbitrations, 25 Ohio St. J. on Disp. Resol. 843, 908-916 (2010) (finding no evidence of arbitrator bias in favor of repeat business in AAA consumer arbitrations). Perhaps the true motivation for resisting arbitration lies the arbitration clause's accompanying class action waiver. Indeed, a number of state high courts have found such clauses unconscionable where they appear in adhesive consumer contracts, reasoning that they make it uneconomical for small-dollar plaintiffs to pursue relief. See, e.g., Scott v. Cingular Wireless, 160 Wn.2d 843, 854-857, 161 P.3d 1000 (Wash. 2007); Muhammad v. County Bank of Rehoboth Beach, Delaware, 189 N.J. 1, 18-24, 912 A.2d 88 (N.J. 2006); Discover Bank v. Superior Court, 36 Cal.4th 148, 158-163, 30 Cal.Rptr.3d 76, 113 P.3d 1100 (Cal. 2005). However, this line of reasoning, whatever its merits, was rejected by the Supreme Court in AT & T Mobility LLC v. Concepcion, 563 U.S. 333, 131 S.Ct. 1740, 179 L.Ed.2d 742 (2011) (abrogating Discover Bank).
Therefore, the scope of the Court's review in analyzing Amazon's adhesive arbitration agreement is very limited. If the Court is satisfied that an arbitration agreement exists and that it covers the dispute in issue, it must stay or dismiss these proceedings and compel arbitration in accordance with the agreement's terms. See 9 U.S.C. §§ 2-4.
While "new commerce on the Internet ... has not fundamentally changed the principles of contract," Register.com,
Some websites—such as Amazon— prompt the user to manifest their assent to particular terms by engaging in some dual-purpose action, such as creating an account, see, e.g., Meyer v. Uber Technologies, Inc., 868 F.3d 66, 70-71, 81-82 (2d Cir. 2017); Berkson v. Gogo LLC, 97 F.Supp.3d 359, 372-373, 374-375 (E.D.N.Y. 2015), executing a purchase order, see, e.g., Nicosia, 834 F.3d at 227, 241-242, or downloading an application, see, e.g., Specht v. Netscape Communications Corp., 306 F.3d 17 (2d Cir. 2002). In determining whether these "hybridwrap" terms should be enforced, the focal point of the inquiry is whether "a reasonably prudent offeree would know that the [terms and conditions] governed," such that their performance of the action (such as creating the account or executing the purchase) "manifested implied assent to the additional terms." Nicosia, 834 F.3d at 236. Courts will give effect to hybridwrap terms where the button required to perform the action manifesting assent (e.g., signing up for an account or executing a purchase) is located directly next to a hyperlink to the terms and a notice informing the user that, by clicking the button, the user is agreeing to those terms. See, e.g., May v. Expedia, Inc., No. 16-CV-1211 (RP) (ML), 2018 WL 4343445, at *3 (W.D. Tex. Jul. 19, 2018), report and recommendation adopted, 2018 WL 4343427 (W.D. Tex. Aug. 27, 2018); Church v. Hotels.com L.P., No. 18-CV-18 (RMG), 2018 WL 3130615, at *2 (D.S.C. Jun. 26, 2018); Bernardino v. Barnes & Noble Booksellers, Inc., No. 17-CV-4570 (LAK) (KHP), 2018 WL 671258 (S.D.N.Y. Jan. 31, 2018), appeal dismissed, 763 Fed. Appx. 101 (2d Cir. Mar. 7, 2019); Selden v. Airbnb, Inc., No. 16-CV-933 (CRC), 2016 WL 6476934, at *5 (D.D.C. Nov. 1, 2016); Forby v. One Technologies, LP, No. 15-CV-757 (DRH) (PMF), 2016 WL 1321194 (S.D. Ill. Apr. 5, 2016); Crawford v. Beachbody, LLC, No. 14-CV-1583 (GPC) (KSC), 2014 WL 6606563, at *3 (S.D. Cal. Nov. 5, 2014); Starke v. Gilt Groupe, Inc., No. 13-CV-5497 (LLS), 2014 WL 1652225, at *3 (S.D.N.Y. Apr. 24, 2014). The more the hybridwrap design diverges from this basic layout—such as by placing the notice further away from the action button, cluttering the screen with potentially distracting content, or omitting the language explicitly saying that by performing the action the user agrees to be bound by the terms—the less likely courts are to find that inquiry notice has been provided. See, e.g., Nicosia, 834 F.3d at 236-237 (holding that Amazon's checkout page was not sufficient as a matter of law to place a user on inquiry notice of the COU, because the notice and accompanying hyperlink was "not directly adjacent to the `Place your order' button so as to indicate that a user should construe clicking as acceptance," and the page was spatially cluttered with unrelated options and promotions which rendered the notice not "conspicuous in light of the whole webpage"); Lee v. Intelius
Plaintiff raises several evidentiary objections in his Opposition to Amazon's Local Rule 56.1 Statement of Undisputed Facts, as well as his memorandum of law opposing this motion. Because the Court grounds its decision solely in Amazon's "derivative rights" argument, some of these objections are rendered academic. Only three need be addressed here: (1) Plaintiff's objections (Pl. 56.1 Opp. ¶¶ 15, 18, 94-95, ECF No. 119; ECF No. 121, at 17) to the images of the Prime sign-in flow (Ressmeyer Decl. Exs. B, C, D, N); (2) Plaintiff's objections (Pl. 56.1 Opp. ¶¶ 83-84, 86; ECF No. 121, at 17) to the images of the Mom sign-in flow (Ressmeyer Decl. Ex. J); and (3) Plaintiff's objections (Pl. 56.1 Opp. ¶¶ 29, 94-95) to the declaration of Karen Ressmeyer, Amazon's Associate General Counsel for Marketing and Prime, insofar as it describes the process to sign up for Prime. (Ressmeyer Decl. ¶¶ 19, 35).
Amazon did not produce a copy of the Prime sign-up flow that a customer would have seen on October 11, 2012, claiming that it "does not have a depiction" of these webpages. (Ressmeyer Decl. ¶ 35). Instead, Amazon provided several "current and historical examples" of the Prime sign-up screens. (Ressmeyer Decl. Exs. ¶ 11 & Exs B, C, D, N). But the record shows that none of these screens could have been the ones viewed by Annemarie when she re-enrolled in Prime in 2012.
Plaintiff objects that the Mom sign-up flow produced by Amazon bears a 2012 copyright notice, and therefore could not have been the exact screen that Dennis viewed when the Account enrolled in Mom on September 30, 2011. (Pl. 56.1 Opp. ¶ 83). But Ressmeyer's declaration establishes that the same sign-up flow "was in place on September 30, 2011." (Ressmeyer Decl. ¶ 27). Therefore, Plaintiff's objections to the Mom sign-up images are denied.
Other than the Prime sign-up images, which the Court disregards as irrelevant, see Discussion II.1, supra, the only other evidence pertaining to the 2012 Prime sign-up process is Ressmeyer's description of the process in her declaration.
However, reliance on these statements would contravene the best evidence rule, codified in Federal Rule of Evidence 1002, which provides that "[a]n original writing is required in order to prove its content unless these rules or a federal statute provide otherwise." See Rui Chen v. Premier Financial Alliance, Inc., No. 18-CV-3771 (YGR), 2019 WL 280944, at *1 n. 3 (N.D. Cal. Jan. 22, 2019) (finding that declaration of defendant's attorney describing online arbitration agreement was precluded by the best evidence rule). Although an exception to the best evidence rule provides that "[a]n original is not required and other evidence of the content of a writing, recording, or photograph is admissible if ... all the originals are lost or destroyed, and not by the proponent acting in bad faith," Fed. R. Evid. 1004, Amazon has not provided even the faintest excuse for its failure to produce the 2012 Prime sign-up flow. See Bobcar Media, LLC v. Aardvark Event Logistics, Inc., 354 F.Supp.3d 375, 382 (S.D.N.Y. 2018) (where "nothing in the declaration[ ] [or] deposition testimony ... addresses what happened to the original [document], ... the `factual predicates' for invoking the Rule 1004 exception are not satisfied").
Even if Ressmeyer's description of the Prime sign-up process were not precluded by the best evidence rule, it would not be sufficient to establish, as a matter of law, that Annemarie entered into a binding arbitration agreement when she signed up for Prime. See Rui Chen, 2019 WL 280944, at *3 ("Defendants have not offered evidence explaining the design and content of the webpage .... [T]he Court cannot determine other factors that might contribute to determining plaintiffs' notice of the terms, such as the size of the font or other aspects of the appearance and presentation of the terms online"). The declaration is certainly probative as to how the Prime sign-up screen would have appeared in 2012, but it is not conclusive. At most, it raises a question of fact as to the appearance of the Prime sign-up screen in 2012. See id. Under the FAA, such questions must be submitted to trial. See 9 U.S.C. § 4; Nicosia, 834 F.3d at 229; Bensadoun, 316 F.3d at 175. Because the Court finds that arbitration can be compelled on other grounds, see Discussion III-IV, infra, it need not give further consideration to the 2012 Prime sign-up process or Ressmeyer's descriptions thereof.
Amazon argues that Annemarie assented to the arbitration provision when she (through her agent, Dennis) enrolled in Mom in 2011. For the reasons that follow, the Court agrees.
Under Washington law, "[a]n agent can bind his or her principal to a contract when the agent has either actual or apparent authority." Steadman v. Green
Here, Annemarie testified that Dennis told her about the Mom program (A. Nicosia Dep. at 16:4-7, 58:8-11, 73:11-13), that she gave Dennis the password to her Account (id. at 44:4-11), that Dennis told her he was signing her up for Mom (id. at 39:3-8), and that he did so with her "permission" (id. at 37:1-5). From this record, there can be no dispute that Annemarie authorized Dennis to sign her up for Mom, thus establishing a principal-agent relationship. See Hofer v. Gap, Inc., 516 F.Supp.2d 161, 175 (D. Mass. 2007) (holding that plaintiff was bound by Expedia's terms and conditions because plaintiff's friend booked plaintiff's travel arrangements on Expedia's website); Adsit Co., Inc. v. Gustin, 874 N.E.2d 1018, 1023-24 (Ind. App. 2007) (where defendant provided her credit card to her mother-in-law to complete an online purchase "on her behalf," the defendant was bound by the online agreement's forum selection clause).
The Court now turns to whether Annemarie (through her agent, Dennis) agreed to be bound by the arbitration provision. This provision appears in the COU, which is expressly "incorporated" into the Prime T&C. Therefore, the relevant question is whether the Mom sign-up flow provided reasonably conspicuous notice of the Prime T&C and required the user to manifest assent to those terms. See Starke, 913 F.3d at 289; Nicosia, 834 F.3d at 233.
The Court has no difficulty finding that it does. The second Mom sign-up screen contains a notice directly below the "Sign up for Amazon Mom" button, which reads, "By signing up, you acknowledge that you have read and agree to the
Inquiry notice of the arbitration clause is buttressed by the first page of the sign-in flow, which contains a "Continue" button and, directly above that button, a notice that, "By clicking the
Therefore, by signing up for Mom, Annemarie (through her agent) agreed to be bound by Amazon's arbitration clause. For the convenience of the reader, the remainder of this opinion shall refer to this agreement as the
Plaintiff objects that the Amazon Mom Arbitration Agreement and the Prime T&C are "inapplicable and irrelevant" to this case because Plaintiff's purchases of 1 Day Diet were not Prime-eligible. (Pl. 56.1 Opp. ¶¶ 22, 30, 81-83, 90; Ressmeyer Dep. at 138:14-139:23, 209:13-15). But this cramped reading of the agreement's scope cannot withstand a plain reading of its text. Nothing in the COU, the Prime T&C, the Mom T&C, or the Amazon Mom offer terms limits the scope of the arbitration clause to purchases for Prime-eligible products. The COU, which are "incorporated" into the Prime T&C, and to which Annemarie agreed when the Account enrolled in Mom, broadly state that "
Plaintiff further objects that Annemarie's enrollment in Amazon Mom is "irrelevant" because her membership in the program expired in 2012, prior to Plaintiff's purchases of 1 Day Diet (Pl. 56.1 Opp. ¶¶ 81-88). The Court disagrees. When a user signs up for Amazon Mom—essentially a temporary, free trial of Prime, see Background I.3, supra—and thereby agrees to an arbitration provision, that arbitration provision continues to govern if the user signs up for a paid Prime subscription after their free trial expires.
We turn first to the relevant contractual language. The COU itself places no temporal limitations on the arbitration clause. It states only that "[a]ny dispute or claim relating in any way" to the accountholder's use of Amazon "will be resolved by binding arbitration." A literal reading of this clause, therefore, would suggest that it applies to all future disputes.
The Prime T&C provide that "[t]he [Prime T&C], together with applicable terms and conditions related to any promotional offers provided to you for use with Prime, constitute the entire agreement between you and Amazon.com related to the Prime membership" (emphasis added). The Prime T&C further provide that, "[i]f you sign up for a Prime membership, you accept these terms, conditions, limitations and requirements" (emphasis added). This emphasized language must be read in conjunction with the Mom T&C, which provide: "Once your free shipping benefits have expired, you may continue to receive Amazon Prime shipping benefits by enrolling in Amazon Prime for an annual membership fee of $79" (emphasis added). Read together, this language refutes Plaintiff's argument that, by signing up for Amazon Mom, an accountholder is only governed by the Prime T&C for the duration of their "free" Amazon Mom benefits. Instead, under these terms, one who
Because nothing in the text of the Amazon Mom Arbitration Agreement supports the temporal limitation urged by Plaintiff, any such argument must rely on context. In other words, Plaintiff's argument must be that a reasonable consumer entering into an arbitration agreement as part of a free trial would not understand the clause to survive if they convert to a paid subscription. But Plaintiff cites no authority for this proposition, and the Court has difficulty accepting it. It is fairly routine for vendors to offer free trials of certain goods or services, which automatically roll over to paid subscriptions unless the consumer affirmatively cancels. There can be no doubt that one who agrees to a contract term as part of a free trial remains bound if they automatically convert to a paid subscription. See, e.g., E. G. Ground Management v. YCharts, Inc., No. 15-CV-55 (RGK), 2015 WL 13357669 (C.D. Cal. May 8, 2015) (limitation of liability clause, which accountholder agreed to in order to sign up for free trial, barred negligence claims against vendor which accrued after accountholder upgraded to paid subscription).
Here, Amazon Mom was described by Amazon as, and understood by Annemarie to be, a kind of Prime membership. See Background I.3, supra. The sign-up screen for Mom read: "
In arriving at this conclusion, the Court does not hold that the 2012 sign-up process for Prime, on its own, provided sufficient inquiry notice of the Prime T&C. As previously stated, there is insufficient evidence to support this conclusion as a matter of law. See Discussion II.1, II.3, supra. However, in light of the broad presumption of arbitrability that governs to the scope and meaning of an arbitration agreement, Moses H. Cone, 460 U.S. at 24-25, 103 S.Ct. 927; Holick, 802 F.3d at 395, the Court finds that the Amazon Mom Arbitration Agreement remained effective when Annemarie re-enrolled in Prime.
The preceding analysis shows that Annemarie entered into a binding arbitration agreement by signing up for Amazon Mom and that the agreement covered purchases of products, whether Prime-eligible or not, made after Annemarie re-enrolled in Prime in 2012. Thus, if it were Annemarie herself who purchased 1 Day Diet, she would be bound to arbitrate this dispute. The question at the heart of Amazon's "derivative rights" argument is whether the Amazon Mom Arbitration Agreement can be circumvented when it is a third party (i.e., the Plaintiff), rather than Annemarie herself, who makes purchases on the Account.
To ask this question is to answer it. Password-sharing is a "ubiquitous, useful, and generally harmless" activity that "millions
Although Plaintiff himself did not enter into the arbitration agreement described above, "a nonsignatory party may be bound to an arbitration agreement if so dictated by the `ordinary principles of contract and agency.'" Thomson-CSF, S.A. v. American Arbitration Ass'n, 64 F.3d 773, 776 (2d Cir. 1995) (quoting McAllister Bros., Inc. v. A & S Transp. Co., 621 F.2d 519, 524 (2d Cir. 1980)). State law, rather than the federal substantive law of arbitrability, furnishes the relevant contract principles. See Arthur Andersen v. Carlisle, 556 U.S. 624, 630, 129 S.Ct. 1896, 173 L.Ed.2d 832 (2009) (the FAA does not "purport[ ] to alter background principles of state contract law regarding the scope of agreements (including the question of who is bound by them)").
Several district courts have considered facts analogous to this case and have held that a third-party user of an account is bound by the terms governing the account. See Roberts v. eBay, No. 14-CV-4904 (HMH) (MGB), 2017 WL 9289378, at *8 n. 6 (D.S.C. Jul. 29, 2017); Burcham v. Expedia, Inc., No. 07-CV-1963 (CDP), 2009 WL 586513, at *4 (E.D. Mo. Mar. 6, 2009); Motise v. America Online, Inc., No. 04-CV-1494, 2005 WL 1667658, at *2 (E.D. Va. Jun. 24, 2005) (Motise II); Motise v. America Online, Inc., 346 F.Supp.2d 563, 565-566 (S.D.N.Y. 2004) (Motise I). In Motise I, the case upon which all of the others rely, the Court held that the plaintiff, who used his stepfather's AOL account, was bound by a forum-selection provision appearing in the account's member agreement. See 346 F.Supp.2d at 566. The court reasoned that the plaintiff was a "sub-licensee" of his stepfather and "could not, therefore, have greater rights" than his stepfather. Id.; see also Metropcs Wireless, Inc. v. Virgin Mobile USA, L.P., No. 08-CV-1658 (SAF), 2009 WL 3075205, at *22 (N.D. Tex. Sept. 25, 2009) (observing that the situation in Motise I was "analogous to an assignment [of the license] because the user [stood] in the shoes of the account holder to assume his place in the contract with the service provider"). The court further held that "[a]ny other conclusion would permit individuals to avoid the Defendant's Terms of Service simply by having third parties create accounts and then using them as the Plaintiff did." Motise I, 346 F.Supp.2d at 566. The Court agrees with the result of Motise I, but it finds that the doctrine of equitable estoppel,
Equitable estoppel has been formulated differently in different contexts. The indelible feature of estoppel, as it has been traditionally defined, is that one party has made a representation, upon which another party justifiably relies to their detriment, such that it would be inequitable for the first party to take a subsequent position inconsistent with the truth of that representation. See Republic of Ecuador v. Chevron Corp., 638 F.3d 384, 400 (2d Cir. 2011) ("[E]quitable estoppel is properly invoked where the enforcement of the rights of one party would work an injustice upon the other party due to the latter's justifiable reliance upon the former's words or conduct") (quoting Kosakow v. New Rochelle Radiology Associates, P.C., 274 F.3d 706, 725 (2d Cir. 2001)); 4 Williston on Contracts § 8:3 (4th ed.); 3 J. Pomeroy, Equity Jurisprudence §§ 804-805 (1941). Washington law is substantially in accord. See Hartman v. Smith, 100 Wn.2d 766, 769, 674 P.2d 176 (Wash. 1984) ("[W]here a person, by his acts or representations, causes another to change his position or to refrain from performing a necessary act to such person's detriment or prejudice, the person who performs such acts or makes such representations is precluded from asserting the conduct or forbearance of the other party to his own advantage"); Nickell v. Southview Homeowners Ass'n, 167 Wn.App. 42, 54, 271 P.3d 973 (Wash. App. 2012) (under Washington law, equitable estoppel requires "(1) an admission, statement, or act inconsistent with the claim afterwards asserted; (2) action by the other party on faith of such admission, statement, or act; and (3) injury to such other party resulting from allowing the first party to contradict or repudiate such admission, statement, or act") (citing Thomas v. Harlan, 27 Wn.2d 512, 518, 178 P.2d 965 (Wash. 1947)). Traditional principles of equitable estoppel apply in the arbitration context just as they apply to other types of contractual disputes. See Jacks v. CMH Homes, Inc., No. 15-CV-44 (VM), 2015 WL 5604005, at *4 (W.D. Okla. Sept. 23, 2015) (citing Carter v. Schuster, 227 P.3d 149, 154 (Okla. 2009)); Haskins v. First American Title Ins. Co., 866 F.Supp.2d 343, 348-349 (D.N.J. 2012) (citing Angrisani v. Financial Technology Ventures, L.P., 402 N.J.Super. 138, 153, 952 A.2d 1140 (N.J. App. Div. 2008)); Kingsley Capital Management, LLC v. Sly, 820 F.Supp.2d 1011, 1023, 1024-25 (D. Ariz. 2011). A fruitful statement of the doctrine was given in the English case of Cornish v. Abington, 4 Hurl. & N. 549, 556 (Pollack, C.B.), cited, Pomeroy, supra, § 805, p. 194 n. 15:
In the arbitration context, most courts have applied a modified test for equitable estoppel, known as the "direct benefits test," pursuant to which a nonsignatory may be compelled to arbitrate where it "`knowingly accepts the benefits' of an agreement with an arbitration clause." MAG Portfolio Consult, GMBH v. Merlin Biomed Group LLC, 268 F.3d 58, 61 (2d Cir. 2001) (quoting Deloitte Noraudit A/S v. Deloitte Haskins & Sells, U.S., 9 F.3d 1060, 1064 (2d Cir. 1993)); see also Mundi v. Union Sec. Life Ins. Co., 555 F.3d 1042, 1046 (9th Cir. 2009) ("[A] nonsignatory may be held to an arbitration clause `where the nonsignatory "knowingly exploits the agreement containing the arbitration clause despite having never signed the agreement"'") (quoting Comer v. Micor, Inc., 436 F.3d 1098, 1101 (9th Cir. 2006)); Payne v. Amazon.com, Inc., No. 17-CV-2313 (PMD), 2018 WL 4489275, at *6-*7 (D.S.C. Jul. 25, 2018) (applying Washington law); Townsend v. Quadrant Corp., 173 Wn.2d 451, 461, 268 P.3d 917 (Wash. 2012); 21 Williston on Contracts § 57:19 (4th ed.); 1 Alt. Disp. Resol. § 8:8 (4th ed.). The direct benefits test "closely approaches the paradigm for [traditional] equitable estoppel," although it is not a "perfect overlap." Kingsley, 820 F.Supp.2d at 1024.
Consider the facts in Bridge v. Credit One Financial, 14-CV-1512 (LDG) (NJK), 2016 WL 1298712 (D. Nev. Mar. 31, 2016), a case which in all relevant respects resembles this one. The plaintiff's mother held an account at the defendant bank, Credit One. See id. at *1. In order to establish this account, she was acquired to sign a "cardholder agreement," which included an arbitration provision. See id. at *1-*2. She underwent surgery and was hospitalized, and the plaintiff, concerned about her finances in the event that she should pass away, called Credit One's toll-free automated information system in order to inquire about her account. See id. at *1. The automated system prompted the plaintiff to enter "your sixteen digit card number" and "the last four digits of your social security number," to which the plaintiff entered his mother's card number
Although the court in Bridge analyzed Credit One's motion to compel under the direct benefits test rather than traditional equitable estoppel, it is easy to see how the same result could have been reached under the latter theory. When the plaintiff provided his mother's personal information to Credit One's automated information system, he implicitly represented that he was the true accountholder. Credit One justifiably relied on that representation when it subsequently provided the information plaintiff sought.
This case is essentially no different from Bridge. When Plaintiff accessed the Annemarie Account and used it to place purchases of 1 Day Diet, he, like the plaintiff in Bridge, implicitly represented that he was the true accountholder. Like the plaintiff in Bridge, he directly benefited from the making of that representation, in that it allowed him to step into the shoes of his wife and enjoy the same contractual rights she enjoyed, viz., the right to place an order on Amazon.com. Because plaintiff knowingly accepted the benefit of Annemarie's contractual relationship with Amazon, he must also be held to the arbitration clause that governs that relationship.
For these reasons, under either a traditional theory of equitable estoppel or direct benefits estoppel, Plaintiff is bound by the Amazon Mom Arbitration Agreement.
Plaintiff argues that the Court should deem Amazon's derivative rights argument waived because it was not specifically pleaded in Amazon's responsive pleadings. (ECF No. 121, at 20-21). See Fed. R. Civ. P. 8(c)(1) ("In responding to a pleading, a party must affirmatively state any avoidance or affirmative defense, including:... arbitration and award; ... [and] estoppel...."). The Court disagrees. In its Answer, Amazon asserted that "Plaintiff's purported claims ... are subject to mandatory arbitration ... pursuant to one or more agreements binding on the Plaintiff or applicable to the claims he purports to set forth." (ECF No. 84, at 34) (emphasis added). This broad phrasing put Plaintiff on notice that Amazon would seek not only to enforce the purported arbitration agreements that he entered into, but those that were "binding on [him]."
Plaintiff argues that Amazon waived its right to arbitrate because it had previously moved to dismiss under Rule 12(b)(6). (ECF No. 121, at 5-8; ECF No. 159, at 6-11). The R&R is hereby adopted insofar as it rejected this argument. (R&R at 12-15).
The thrust of Plaintiff's objection is that Amazon should not be permitted to take a "heads-I-win-tails-you-lose" approach, where it is able to move to dismiss on the merits, winnow out certain claims in court, and only proceed to arbitration on the claims that were not dismissed. (ECF No. 159, at 3, 11). While this argument would have force if Amazon had only moved to dismiss on the merits, it must be rejected in this case, where Amazon moved to dismiss on both arbitrability and merits grounds. To find prejudice under these circumstances would be to endorse a rule that a defendant who has a colorable argument for dismissal on either merits or arbitrability grounds must choose one argument and abandon the other. Such a rule would work substantial prejudice— against the defendant.
The Court also rejects Plaintiff's argument (ECF No. 159, at 10-11) that the 32-month delay between Amazon's motion to dismiss and its motion to compel warrants a finding of waiver. (R&R at 13 ("[T]he 32-month period between commencement of the lawsuit and the instant motion, although significant, `does not by itself support a finding of waiver'") (quoting Chehebar v. Oak Fin. Grp., Inc., No. 14-CV-2982 (LDW), 2017 WL 946292, at *2 (E.D.N.Y. Mar. 7, 2017)). Nor does the Court find compelling Plaintiff's argument that Amazon was able to gain an unfair advantage by "see[ing] the strength of Plaintiff's case on the merits." (ECF No. 159, at 10). Finally, Plaintiff's argument that there has
Accordingly, the Court finds that Amazon's right to arbitration has not been waived.
The Court has reviewed Plaintiff's objections to those portions of the R&R which concluded that Plaintiff had actual (id. at 19-22) and constructive (id. at 22-25) notice of the COU through his use of the Amazon.com checkout page, and finds that they are academic in light of the Court's disposition above, which is based on the Amazon Mom Arbitration Agreement. Therefore, these objections are denied.
Plaintiff argues that he is not required to arbitrate this dispute because Amazon never lawfully modified the pre-August 19, 2011 Conditions of Use, which did not contain an arbitration clause. (ECF No. 159, at 11-14). However, as the Second Circuit clarified, Washington law permits unilateral modifications to a contract "if there is notice and assent to the changed terms." Nicosia, 834 F.3d at 235 (citing Gaglidari v. Denny's Rests., Inc., 117 Wn.2d 426, 435, 815 P.2d 1362 (Wash. 1991)). By enrolling in Amazon Mom, Annemarie (through her agent) was notified of and assented to the arbitration clause. See Discussion III, supra. Therefore, insofar as the Amazon Mom Arbitration Agreement constituted a "modification" of the existing contractual relationship between Annemarie and Amazon, this modification was validly effected under Washington law.
Finally, the Court has reviewed Plaintiff's challenge to the validity of Amazon's agreement to sell 1 Day Diet on grounds of illegality (ECF No. 159, at 22-24), and finds that this objection is academic in light of the Court's disposition above, as Plaintiff does not challenge the legality or enforceability of the Amazon Mom Arbitration Agreement. In any event, the Court adopts the R&R insofar as it held that, if Plaintiff entered into an agreement to arbitrate by purchasing 1 Day Diet, the illegality of the contract would be a question for the arbitrator. (R&R at 30-32).
Amazon seeks, in addition to an order compelling arbitration, "an order ... dismissing or staying these proceedings." (ECF No. 113). Although Section 3 of the FAA only speaks of staying proceedings, it is well-settled that an arbitrable dispute may be dismissed in lieu of a stay if the defendant requests dismissal. See Zambrano v. Strategic Delivery Solutions, LLC, No. 15-CV-8410 (ER), 2016 WL 5339552, at *10 (S.D.N.Y. Sept. 22, 2016). In this case, the Court will dismiss Plaintiff's claims.
The conclusion that arbitration should prevail was arrived at within the legal framework set forth by the Court of Appeals, namely, whether a reasonably prudent internet user would have notice of Amazon's Conditions of Use. The conclusion is reached after substantial research and discussion of the cases and relevant literature summoned in the struggle created by the advent of the internet—the struggle to make the common law of contracts
However, the rule that the "existence" of additional contract terms must be made "reasonably conspicuous" is, this Court submits, largely a superfluity. The cases specify that such terms must be reasonably conspicuous from the point of view of a "reasonably prudent" user. Meyer, 868 F.3d at 77; Berkson, 97 F.Supp.3d at 401. But is there any question that reasonably prudent internet users know that there are terms and conditions attached when they log onto Facebook, order merchandise on Amazon, or hail a ride on Uber? They know this, not because a loud, brightly-colored notice on the screen tells them so, but because it would be difficult to exist in our technological society without some generalized awareness of the fact. See Selden, 2016 WL 6476934, at *5 ("The act of contracting for consumer services online is now commonplace in the American economy. Any reasonably-active adult consumer will almost certainly appreciate that by signing up for a particular service, he or she is accepting the terms and conditions of the provider"); Nancy S. Kim & D. A. Jeremy Telman, Internet Giants as Quasi-Governmental Actors and the Limits of Contractual Consent, 80 Mo. L. Rev. 723, 734 & n. 32 (2015) (observing that terms of service for online contracts are "widely mocked in popular culture").
It could be argued that the purpose of providing "reasonably conspicuous" notice of the hyperlinked terms is not merely to notify the user that these terms exist, but to encourage him or her to read them. But most consumers will not read the terms and conditions, no matter how prominently the notice is displayed, and those that do will usually not understand them. See Jeff Sovern, Elayne E. Greenberg, Paul F. Kirgis and Yuxiang Liu, "Whimsy Little Contracts" With Unexpected Consequences: An Empirical Analysis of Consumer Understanding of Arbitration Agreements, 75 Md. L. Rev. 1, 47 (2015); Yannis Bakos, Florencia Marotta-Wurgler and David R. Trossen, Does Anyone Read the Fine Print? Consumer Attention to Standard-Form Contracts, 43 J. Legal Stud. 1, 32 (2014). Among those that both read and understand the terms of use, most will proceed with the transaction anyway, because the terms are presented on a take-it-or-leave-it basis. The "reasonably conspicuous" notice rule is therefore one which is unlikely to have much effect, if any, on overall consumer welfare. See Erin Canino, Note, The Electronic "Sign-In-Wrap" Contract: Issues of Notice and Assent, the Average Internet User Standard, and Unconscionability, 50 U.C. Davis L. Rev. 535, 566 (2016) ("[M]ost consumers do not ever read these online contracts, so regardless of increased notice, users are still not informed. Recognizing this reality then suggests that this heightened notice is merely formulaic, but not necessarily a solution for putting a user on notice"); Mark A. Lemley, Terms of Use, 91 Minn. L. Rev. 459, 469-470 (2006) ("Since no one reads [clickwrap or shrinkwrap] anyway, and owners can include whatever terms they want, it seems a sort of formalism to require them to go through the effort of requiring some weak manifestation of assent"); Robert A. Hillman, Online Boilerplate: Would Mandatory Website Disclosure of E-Standard Terms Backfire?, 104 Mich. L. Rev. 837, 850 (2006) ("Mandatory website disclosure may not increase reading and [term-]shopping because most of the rational, cognitive, and emotional reasons consumers do not read terms still apply regardless of when businesses display the terms").
This Court suggests that Llewellyn had the answer: rather than scrutinizing hybridwrap agreements for contract formation issues, courts should recognize that such agreements, like other adhesive contracts, represent in substance a "blanket assent" to any terms that are not objectively unreasonable. Llewellyn, Common Law Tradition, supra, at 370; see also Restatement (Second) of Contracts § 211 cmt. f. Accepting this framework, such terms should be rigorously scrutinized for substantive unreasonableness, perhaps to a greater degree than they have been subjected thus far. See Robert L. Oakley, Fairness in Electronic Contracting: Minimum Standards for Non-Negotiated Contracts, 42 Hous. L. Rev. 1041, 1064 (2005) (finding that "the number of cases in which [unconscionability] has actually been found is relatively small"). True, where an arbitration agreement is concerned, a court's latitude to declare certain provisions unconscionable, such as class arbitration waivers, is heavily circumscribed by the FAA, as interpreted by the nation's highest Court. See Concepcion, supra. But as a general principle, a judicial approach which shifts the inquiry away from the formal trappings of the contract, e.g., notice and acceptance, to the substance of its terms, will much more readily honor the merchant's legitimate commercial expectations while safeguarding the consumer from abuse.
Exquisitely applicable and responsive to the stubborn problems presented by this case and countless others like it is the observation by Oliver Wendell Holmes, Jr. in his 1881 Lectures on the Common Law: "The life of the law has not been logic: it has been experience. The felt necessities of the time ... have had a good deal more to do than the syllogism in determining the rules by which men should be governed." Oliver Wendell Holmes, Jr., The Common Law 1 (1881). Experience, not logic, has taught that a purchase on the internet is determined by rules different from a purchase of milk at the corner grocery, a thought expressed more simply and vividly by Judge Cardozo in MacPherson v. Buick Motor Co.: "Precedents drawn from the days of travel by stage coach do not fit the conditions of travel today." 217 N.Y. 382, 391, 111 N.E. 1050 (N.Y. 1916).
For the reasons set forth in the previous sections and the R&R as adopted, Amazon's motion to compel arbitration is
SO ORDERED.
