Berman v. Freedom Fin. Network, LLC

• Citation: 30 F.4th 849
• Decision Date: 05 April 2022
• Docket Number: 20-16900
• Parties: Daniel BERMAN; Stephanie Hernandez; Erica Russell, Plaintiffs-Appellees, v. FREEDOM FINANCIAL NETWORK, LLC; Freedom Debt Relief, LLC; Fluent, Inc. ; Lead Science, LLC, Defendants-Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

30 F.4th 849

Daniel BERMAN; Stephanie Hernandez; Erica Russell, Plaintiffs-Appellees,

v.FREEDOM FINANCIAL NETWORK, LLC; Freedom Debt Relief, LLC; Fluent, Inc. ; Lead Science, LLC, Defendants-Appellants.

No. 20-16900

United States Court of Appeals, Ninth Circuit.

Argued and Submitted October 21, 2021 San Francisco, California

Filed April 5, 2022

Jay T. Ramsey (argued), Sheppard Mullin Richter & Hampton LLP, Los Angeles, California; Matthew G. Halgren, Sheppard Mullin Richter & Hampton LLP, San Diego, California; for Defendants-Appellants.

Matthew W.H. Wessler (argued), Gupta Wessler, Washington, D.C.; Anthony I. Paronich, Paronich Law P.C., Hingham, Massachusetts; Beth E. Terrell, Terrell Marshall Law Group PLLC, Seattle, Washington; for Plaintiffs-Appellees.

Before: Paul J. Watford and Andrew D. Hurwitz, Circuit Judges, and M. Miller Baker,^** International Trade Judge.

Concurrence by Judge Baker

WATFORD, Circuit Judge:

We revisit an issue first addressed by our court in Nguyen v. Barnes & Noble, Inc. , 763 F.3d 1171 (9th Cir. 2014) : Under what circumstances can the use of a website bind a consumer to a set of hyperlinked "terms and conditions" that the consumer never saw or read?

In this case, plaintiffs used defendants' websites but did not see a notice in fine print stating, "I understand and agree to the Terms & Conditions which includes mandatory arbitration." When a dispute arose and plaintiffs filed this lawsuit, defendants moved to compel arbitration, arguing that plaintiffs' use of the websites signified their agreement to the mandatory arbitration provision found in the hyperlinked terms and conditions. The district court rejected this argument, and so do we. Plaintiffs did not unambiguously manifest their assent to the terms and conditions when navigating through the websites, and as a result they never entered into a binding agreement to arbitrate their dispute. We therefore affirm the district court's order denying defendants' motion to compel arbitration.

I

Defendant Fluent, Inc. is a digital marketing company that generates leads for its clients by collecting information about consumers who visit Fluent's websites. Fluent's websites offer rewards like gift cards and free product samples as an enticement to get consumers to provide their contact information and answer survey questions. Fluent then uses the information it collects in targeted marketing campaigns conducted on behalf of its clients.

The plaintiffs involved in this appeal, Stephanie Hernandez and Erica Russell, each visited a website operated by Fluent. The two websites differed in certain respects, but as described below, both contained a set of hyperlinked terms and conditions that included a mandatory arbitration provision, the enforceability of which is the principal issue raised on appeal.

According to Fluent's records, Hernandez visited the Fluent website www.getsamplesonlinenow.com from a desktop computer. Because Hernandez had visited a Fluent website before and had previously entered some of her contact information, the webpage she saw stated, in large orange letters across the top of the page, "Welcome back, stephanie!" See Appendix A.¹ In the middle of the screen, the webpage proclaimed, "Getting Free Stuff Has Never Been Easier!" and included brightly colored graphics. In between those two lines of text appeared a box that stated at the top, "Confirm your ZIP Code Below," followed immediately by a pre-populated text box displaying the zip code 93930. Below that, the page displayed a large green button inviting Hernandez to confirm the accuracy of the zip code so that she could proceed to the next page in the website flow. The text inside the button stated, in easy-to-read white letters, "This is correct, Continue! >>." Clicking on this button led to the next page, which asked Hernandez to provide personal information in order to obtain free product samples and promotional deals.

Between the comparatively large box displaying the zip code and the large green "continue" button were two lines of text in a tiny gray font, which stated: "I understand and agree to the Terms & Conditions which includes mandatory arbitration and Privacy Policy." The underlined phrases "Terms & Conditions" and "Privacy Policy" were hyperlinks, but they appeared in the same gray font as the rest of the sentence, rather than in blue, the color typically used to signify the presence of a hyperlink. If Hernandez had seen the "Terms & Conditions" hyperlink and clicked on it, she would have been taken to a separate webpage displaying a lengthy set of legal provisions, one of which stated that any disputes related to telemarketing calls or text messages received from Fluent or its marketing partners would have to be resolved through arbitration.

According to Fluent's records, Russell visited a different Fluent website, www.retailproductzone.com, using a mobile phone. The key webpage she viewed while registering to receive a free gift card stated at the top, "Shipping Information Required," and below that, "Complete your shipping information to continue towards your reward." See Appendix B. What followed were several fields requiring Russell to input her name, address, telephone number, and date of birth. Below a line instructing the user to "Select Gender," two buttons appeared side by side marked "Male" and "Female." Below that was a large green button with text that stated, in easy-to-read white letters, "Continue >>." Russell had to click on the "continue" button to proceed to the next page in the website flow.

As with the webpage Hernandez viewed, sandwiched between the buttons allowing Russell to select her gender and the large green "continue" button were the same two lines of text in tiny gray font stating, "I understand and agree to the Terms & Conditions which includes mandatory arbitration and Privacy Policy." The hyperlinks were underlined but again appeared in the same gray font as the rest of the sentence. The "Terms & Conditions" contained a mandatory arbitration provision similar to the one described above.

Fluent and defendant Lead Science, LLC used the contact information provided by consumers like Hernandez and Russell to conduct a telemarketing campaign on behalf of defendants Freedom Financial Network, LLC and Freedom Debt Relief, LLC (collectively, Freedom). As part of the campaign, Fluent and Lead Science allegedly placed unsolicited telephone calls and text messages to hundreds of thousands of consumers, including Hernandez and Russell, marketing Freedom's debt-relief services.

Plaintiffs filed this putative class action on behalf of consumers who received unwanted calls or text messages from defendants during the telemarketing campaign conducted on Freedom's behalf. They allege that the calls and text messages were made or sent without their consent and therefore violated the Telephone Consumer Protection Act (TCPA), 47 U.S.C. § 227 et seq.

Defendants moved to compel arbitration, arguing that, by clicking on the "continue" buttons, Hernandez and Russell had agreed to the hyperlinked terms and conditions, including the mandatory arbitration provision. The district court denied defendants' motion. The court concluded that the content and design of the webpages did not conspicuously indicate to users that, by clicking on the "continue" button, they were agreeing to Fluent's terms and conditions.

Shortly after the district court denied defendants' motion to compel arbitration, defendants filed a motion for reconsideration. They asserted that testimony given by plaintiffs in depositions taken two months earlier was material to the motion to compel. The district court denied the reconsideration motion, concluding that defendants had failed to act with reasonable diligence in producing the new evidence and, alternatively, that plaintiffs' deposition testimony was not materially different from the facts the district court had previously considered.

On appeal, defendants challenge the denial of both motions. We review de novo the denial of a motion to compel arbitration, while underlying factual findings are reviewed for clear error. Nguyen , 763 F.3d at 1175. We review the denial of a motion for reconsideration for abuse of discretion. Kona Enterprises, Inc. v. Estate of Bishop , 229 F.3d 877, 883 (9th Cir. 2000).

II

The Federal Arbitration Act (FAA) requires district courts to compel arbitration of claims covered by an enforceable arbitration agreement. 9 U.S.C. § 3. The FAA limits the court's role to "determining whether a valid arbitration agreement exists and, if so, whether the agreement encompasses the dispute at issue." Lifescan, Inc. v. Premier Diabetic Services, Inc. , 363 F.3d 1010, 1012 (9th Cir. 2004). Plaintiffs do not contest that the arbitration provision in the websites' terms and conditions encompasses their TCPA claims. Thus, the only issue we must resolve is whether an agreement to arbitrate was validly formed.²

In determining whether the parties have agreed to arbitrate a particular dispute, federal courts apply state-law principles of contract formation. See First Options of Chicago, Inc. v. Kaplan , 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995). Here, the parties agree that either New York or California law governs. "New York and California apply ‘substantially similar rules for determining whether the parties have mutually assented to a contract term.’ " Meyer v. Uber Technologies, Inc. , 868 F.3d 66, 74 (2d Cir. 2017) (quoting Schnabel v. Trilegiant Corp. , 697 F.3d 110, 119 (2d Cir. 2012) ). As in Nguyen , we need not decide which State's law governs "because both California and New York law dictate the same outcome." 763 F.3d at 1175.

To form a contract under New York or California law, the parties must manifest their mutual assent to the terms of the agreement. See id. (applying New York law); Specht v. Netscape Communications Corp. , 306 F.3d 17, 29 (2d Cir. 2002) (applying California law). Parties...