ROBERT PITMAN, District Judge.
Before the Court is Defendant Netgear, Inc.'s ("Netgear") Motion to Compel Arbitration and to Dismiss Plaintiff's Claims, (Dkt. 21), along with the parties' responsive filings, (Dkts. 25, 30). Also before the Court is Netgear's motion for a hearing regarding its motion to compel. (Dkt. 32). Having considered the parties' briefs, the evidence, and the relevant law, the Court finds that the motion to compel should be granted in part without a hearing.
In August 2017, Plaintiff Ryan Klebba ("Klebba") bought a baby monitor from Netgear called the Arlo Baby. (Compl., Dkt. 1, at 1-3). Klebba lives in Austin, Texas; Netgear is headquartered in Cailfornia and incorporated in Delaware. (Id. at 3). Klebba bought the Arlo Baby online. (Id. at 11). The Arlo Baby allegedly did not work as advertised: the video and audio stream was unreliable, and the camera frequently disconnected from the display. (Id. at 4-13). Netgear also never produced a companion tablet that would connect to the monitor without an active internet connection. (Id. at 15-18). Accordingly, Klebba has now sued Netgear for violations of Texas, California, and federal laws governing express and implied warranties; violations of California false advertising and unfair competition statutes; and unjust enrichment. (Id. at 21-38). He seeks to represent a class of similar dissatisfied consumers. (Id. at 18-21).
Anyone who buys an Arlo Baby has to create an Arlo account on Netgear's website or through a smartphone app. (Mot. Compel, Dkt. 21, at 2). Klebba created an Arlo account online. (Resp. Mot. Compel, Dkt. 25, at 3). To create an Arlo account online, a customer must visit a sign-in webpage in which he or she must populate a set of fields: first and last name, email address, and password. (Mot. Compel, Dkt. 21, at 3-4). At the bottom of that page, beneath the fields, is an empty checkbox next to the words "I agree to the
The Terms advise customers that they agree to the Terms by using the Arlo Baby. (Id. at 7). The Terms contain arbitration, choice-of-law, and venue provisions, along with a class action waiver. (Id. at 8). Netgear now seeks to enforce that arbitration provision. (Id. at 9-16). Klebba objects that he never agreed to arbitrate this dispute, and that even if he did, his agreement is unenforceable. (Resp. Mot. Compel, Dkt. 25, at 4-16).
The Federal Arbitration Act permits a party to file a motion to compel arbitration based on "the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration." 9 U.S.C. § 4. "Enforcement of an arbitration agreement involves two analytical steps. The first is contract formation—whether the parties entered into any arbitration agreement at all. The second involves contract interpretation to determine whether this claim is covered by the arbitration agreement." Kubala v. Supreme Prod. Services, Inc., 830 F.3d 199, 201 (5th Cir. 2016). That analysis changes "where the arbitration agreement contains a delegation clause giving the arbitrator the primary power to rule on the arbitrability of a specific claim." Id.
When there is a purported delegation clause, a court "performs the first step—an analysis of contract formation—as it always does. But the only question, after finding that there is in fact a valid agreement, is whether the purported delegation clause is in fact a delegation clause—that is, if it evinces an intent to have the arbitrator decide whether a given claim must be arbitrated." Id. at 202. "If there is a delegation clause, the motion to compel arbitration should be granted in almost all cases." Id. Netgear's arbitration agreement contains a delegation clause because it incorporates the JAMS Streamlined Arbitration Rules & Procedures, which provide that:
(Mot. Compel, Dkt. 21, at 8, 13). The express adoption of these rules, if in fact the parties formed a contract, "presents clear and unmistakable evidence that the parties agreed to arbitrate arbitrability." Petrofac, Inc. v. DynMcDermott Petroleum Operations Co., 687 F.3d 671, 675 (5th Cir. 2012); Cooper v. WestEnd Capital Mgmt., L.L.C., 832 F.3d 534, 546 (5th Cir. 2016) (finding unmistakable evidence of intent to arbitrate arbitrability where the parties' agreement adopted the JAMS Rules).
Klebba's contention that Netgear's Terms are unconscionable under California law and that his false advertising claims are not covered by the arbitration clause are questions of validity and scope, respectively. Edwards v. Doordash, Inc., 888 F.3d 738, 746 (5th Cir. 2018) (finding that unconscionability is not a contract formation issue under California law, but rather a validity issue to be decided by an arbitrator pursuant to a delegation clause).
Netgear argues that California law applies to the parties' contract-formation dispute because the Terms state that the agreement is governed by California law. (Mot. Compel, Dkt. 21, at 10). Klebba acknowledges that state law governs contract formation but takes no position on which state's law applies here. (Resp. Mot. Compel, Dkt. 25, at 3-4).
Klebba invokes this Court's diversity jurisdiction as modified by the Class Action Fairness Act, 28 U.S.C. § 1332(d). (Compl., Dkt. 1, at 3); see also Audler v. CBC Innovis Inc., 519 F.3d 239, 248 (5th Cir. 2008) ("CAFA is based on diversity jurisdiction."). Federal courts sitting in diversity apply the choice-of-law rules of the forum state. Williams v. Liberty Mut. Ins. Co., 741 F.3d 617, 620 (5th Cir. 2014) (citing Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941)). The Court therefore must apply Texas's choice-of-law rules, which provide that a contract dispute is governed by the law of the state with the "most significant relationship to the transaction and the parties." Maxus Expl. Co. v. Moran Bros., Inc., 817 S.W.2d 50, 53 (Tex. 1991). The following factors are relevant to the mostsignificant-relationship analysis in the context of contract disputes: "(1) the place of contracting; (2) the place of negotiation; (3) the place of performance; (4) the location of the subject matter of the contract; and (5) the domicile, residence, nationality, place of incorporation, and place of business of the parties." Reddy Ice Corp. v. Travelers Lloyds Ins. Co., 145 S.W.3d 337, 344 (Tex. App.-Houston [14th Dist.] 2004, pet. denied) (citing Minn. Mining & Mfg. Co. v. Nishika Ltd., 953 S.W.2d 733, 735-36 (Tex. 1997)); see also Chesapeake Operating, Inc. v. Nabors Drilling USA, Inc., 94 S.W.3d 163, 170 (Tex. App.-Houston [14th Dist.] 2002, no pet.).
The Court finds that Texas law applies to the parties' contract-formation dispute because Texas has a more significant relationship to the transaction and the parties than California.
The Court therefore looks to Texas law to determine whether Klebba agreed to the Terms when he checked the checkbox next to the words "I agree to the
Unfortunately for Klebba, Texas law does not favor his position that he did not agree to the Terms, which the parties agree is a "clickwrap" agreement,
In light of these principles, "Texas courts recognize the validity of clickwrap agreements." Fieldtech Avionics & Instruments, Inc. v. Component Control.Com, Inc., 262 S.W.3d 813, 818 n.1 (Tex. App.-Fort Worth 2008, no pet.) (citing, inter alia, Barnett, 38 S.W.3d at 203-04). In Barnett, for example, the plaintiff claimed that he was not aware of a forum selection clause in an online registration agreement because it was "hidden in the . . . agreement." Id. at 203-04. Barnett's agreement required more of him than Netgear required of Klebba: Barnett had to scroll through the agreement before he could accept its terms. Id. at 204.
Because determining whether Klebba formed a contract is a question of state law, the Court's task is to predict Texas law, not create it. Keen, 702 F.3d at 243. Texas courts recognize the validity of clickwrap agreements. Fieldtech Avionics, 262 S.W.3d at 818 n.1.
Netgear asks the Court to dismiss this action rather than stay it for the duration of arbitration. (Mot. Compel, Dkt. 21, at 14-15). The Federal Arbitration Act provides that a federal court should stay a civil action upon finding that an issue is referable to arbitration. 9 U.S.C. § 3. When all of the issues in an action must be submitted to arbitration, a court may (not must) dismiss the action. Alford v. Dean Witter Reynolds, Inc., 975 F.2d 1161, 1164 (5th Cir. 1992); see also Apache Bohai Corp. v. Texaco China, 330 F.3d 307, 311 & n.9 (5th Cir. 2003) (finding that the decision of the district court to stay the case pending arbitration was not an abuse of discretion). The arbitration agreement's scope remains in dispute, and an arbitrator may conclude that Klebba's false advertising claim is not subject to arbitration. The Court therefore finds that a stay, rather than dismissal, is appropriate.
For the reasons given above,