Costa v. Rd. Runner Sports, Inc., D079393
| Docket Number | D079393 |
| Decision Date | 28 September 2022 |
| Citation | 84 Cal.App.5th 224,299 Cal.Rptr.3d 785 |
| Parties | Susan COSTA, Plaintiff and Respondent, v. ROAD RUNNER SPORTS, INC., et al., Defendants and Appellants. |
| Court | California Court of Appeals Court of Appeals |
The Weitz Law Office and Michael Weitz, La Jolla, for Defendants and Appellants.
Blood Hearst & O'Reardon, Timothy G. Blood, Leslie E. Hurst, Thomas J. O'Reardon II, San Diego, Jennifer L. MacPherson ; Johnson Fistel, Frank J. Johnson, San Diego, and Chase M. Stern for Plaintiff and Respondent.
Michael O'Connor signed up for a loyalty program when he bought a pair of shoes and socks from Road Runner Sports, Inc. and Road Runner Sports Retail, Inc. (collectively, "Road Runner"). He alleges Road Runner did not tell him the loyalty program was an automatic renewal subscription and that his credit card would be charged an annual subscription fee. After discovering he had been charged for four years of subscription fees, he joined as the named plaintiff in a class action lawsuit alleging Road Runner had violated California's Automatic Renewal Law and consumer protection statutes.1
Road Runner asserts O'Connor is bound by an arbitration provision it added to the online terms and conditions of the loyalty program, some three years after he enrolled. Although Road Runner concedes O'Connor did not have actual or constructive notice of the arbitration provision, it contends O'Connor created an implied-in-fact agreement to arbitrate when he obtained imputed knowledge of the arbitration provision through his counsel in the course of litigation and failed to cancel his membership. We disagree this is sufficient under California law to prove consent to or acceptance of an agreement to arbitrate. Accordingly, we affirm the trial court's order denying Road Runner's motion to compel arbitration.
Road Runner is a running shoe and athletic apparel company with more than 35 retail outlets in California and other states, and an online store. Road Runner offers its customers discounts and rewards through its loyalty program, the "VIP Family Rewards Membership." It encourages customers to sign up for the loyalty program during the checkout process. To entice customers, Road Runner offers the loyalty program membership for a marginal amount—just $1.99 as of 2021—and offers a 10% discount and 5% cash back incentive on the customer's first purchase, typically worth more than the membership purchase price. The customer must have a credit or debit card on file to sign up and, once enrolled, Road Runner automatically charges the customer an annual renewal fee of $39.99, or more, each year.
O'Connor signed up for the loyalty program at a Road Runner retail store sometime in 2016.3 O'Connor used his membership to receive a discount on a pair of shoes and socks when he first enrolled. He used his membership again to receive a discount in 2017. That was the last time O'Connor used his membership. Still, Road Runner automatically charged O'Connor's credit card annual subscriptions fees ranging from $27.99 to $39.99 in November of 2017, 2018, 2019, and 2020. O'Connor paid his credit card bill each time, allegedly without noticing the membership charges.
According to Road Runner, customers like O'Connor who signed up for a membership while making a purchase in a retail store in 2016 would have received a "retail handout[ ]" from the sales associate making the sale. The handout was a trifold pamphlet, and each of the three panels was approximately 5 inches by 7 inches. One panel looked like this:4
At the bottom of that panel, the small print read: "TO ENSURE YOU NEVER MISS OUT ON A BENEFIT, YOUR MEMBERSHIP WILL AUTOMATICALLY RENEW EACH YEAR AT $27.99 AND BE CHARGED TO A VALID CREDIT/DEBIT CARD ON FILE ... YOU MAY CANCEL YOUR MEMBERSHIP AT ANY TIME TO RECEIVE A PRORATED REFUND BY
CALLING 800.543.7309." In smaller print below that, it read: Road Runner also sent O'Connor a mailer regarding his membership before each of the renewal charges in 2017, 2018, and 2019.5 The mailers from 2017 and 2018 were substantially the same. Each had the general appearance of a letter, with a $15 gift certificate at the bottom. The letter portion stated, in relevant part,
There was no reference to an arbitration provision, or any other terms and conditions, in the retail handout O'Connor received when he signed up for the loyalty program in 2016, or in the mailers sent to him in 2017 and 2018. That is because the arbitration provision did not exist in those years.
The mailer from 2019 also had the general appearance of a letter, with a notification regarding a $20 "VIP Anniversary Rewards Gift " at the bottom. The letter portion stated, in relevant part: Rather than including an actual gift certificate, the bottom half of the mailer sent to O'Connor stated,
The back of the 2019 mailer had three separate sections, each with a heading in bold capitalized text. The following text appeared below the second heading: "YOUR ANNUAL RENEWAL DETAILS ":
Included in the 2019 mailer, for the first time, was a reference to terms and conditions of the loyalty program. There was an asterisk (directly below the text we just quoted) that said, in the same small size font as the text but without capital lettering: "*See complete program terms and conditions at roadrunnersports.com/viprewards." Like the previous 2016 to 2018 materials, the 2019 mailer itself did not contain any reference to an arbitration provision.
If O'Connor had gone to roadrunnersports.com/viprewards, he would not have been presented with the "complete program terms and conditions," nor would he have easily discovered them. Instead, if he scrolled to the bottom of the referenced webpage, he would find this:6
Each question could be expanded to reveal the answer and, at the bottom, in the same small print and font as the questions, the webpage stated: The word "here" was a hyperlink which, if clicked, would take the user to another webpage containing the terms and conditions.
The terms and conditions were approximately six pages long. On the final page, in the same size font and typeface as the rest of the terms and conditions, there was a section titled "Binding Arbitration ." It said:
Road Runner began sending renewal notices by email in 2020. It did not have a valid email address on file for O'Connor, so O'Connor did not receive any notice in 2020 regarding his loyalty program membership, or its automatic renewal.
The class action lawsuit was filed against Road Runner in May 2020, alleging that Road Runner's loyalty program violated the Automatic Renewal Law ( Bus. & Prof. Code, §§ 17601 - 17606 ) and the Consumer Legal Remedies Act ( Civ. Code, § 1750, et seq. ), by (1) failing to disclose clearly and conspicuously the terms of its automatic renewal membership program before enrolling customers; (2) automatically charging customers renewal fees without first obtaining their affirmative consent; and (3) failing to provide an easy-to-use method for cancellation. (See Bus. & Prof. Code, § 17602, subds. (a) - (c).) Road Runner answered the complaint, generally denying all allegations and asserting 15 affirmative defenses. In its first affirmative defense, Road Runner asserted "the parties agreed to arbitrate this dispute and therefore this matter is not properly before the Superior Court."
In February 2021, O'Connor joined the lawsuit and replaced the original named plaintiff with the filing of the FAC. The FAC included new factual allegations specific to O'Connor, but was otherwise substantially the same as the original complaint. Road Runner answered the FAC, and again asserted arbitration as its first affirmative defense. This time, Road Runner added that "the parties agreed to arbitrate this dispute under the terms and conditions of the membership, the Plaintiff continues to accept the benefits of the membership at issue without cancellation and with knowledge of the terms and conditions , and therefore this matter is not properly before the Superior Court." (Italics added.)
Road Runner then moved to compel O'Connor to arbitrate his claims individually. It asserted O'Connor had "demonstrative knowledge" of the loyalty program's online terms and conditions, and the included arbitration provision, because (1) the 2019 mailer "expressly...
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