Hite v. Lush Internet Inc.

• Decision Date: 21 March 2017
• Docket Number: Civil Action No. 16–1533 (JBS/AMD)
• Citation: 244 F.Supp.3d 444
• Parties: Norris HITE, Plaintiff, v. LUSH INTERNET INC., Defendant.
• Court: U.S. District Court — District of New Jersey

244 F.Supp.3d 444

Norris HITE, Plaintiff,

v.LUSH INTERNET INC., Defendant.

Civil Action No. 16–1533 (JBS/AMD)

United States District Court, D. New Jersey.

Signed March 21, 2017

Filed March 22, 2017

Gerald H. Clark, Esq., Clark Law Firm, PC, 811 Sixteenth Avenue, Belmar, NJ 07719, Attorney for Plaintiff

Geoffrey W. Castello, III, Esq., Kelley Drye & Warren LLP, One Jefferson Road, 2^nd Floor, Parsippany, NJ 07054, Attorney for Defendant

OPINION

SIMANDLE, Chief Judge:

I. INTRODUCTION

In this case, Plaintiff Norris Hite alleges that the "Terms of Use" on the website of Defendant Lush Internet, Inc. ("Lush") constitute a consumer contract with exculpatory provisions that violate the New Jersey Truth in Consumer Contract, Warranty and Notice Act ("TCCWNA"), N.J.S.A. 56:12–14 et seq., and other New Jersey laws. Defendant now moves to compel arbitration and strike Plaintiff's class action allegations, stay the action pending arbitration, and in the alternative and to dismiss the amended complaint with prejudice under Fed. R. Civ. P. 12(b)(6). [Docket Item 8.] For the reasons that follow, the Court will deny Defendant's motion to compel arbitration and grant Defendant's motion to the extent it seeks to dismiss the Amended Complaint with prejudice.

II. BACKGROUND¹

The facts in this case, as alleged in the Amended Complaint, are straightforward.

Defendant Lush sells cosmetics on the internet. Plaintiff visited Defendant's website on or about February 17, 2016, and purchased one of Defendant's cosmetic products. (Amended Complaint [Docket Item 3–1] ¶ 4.) Plaintiff does not allege she has any claim about the product that she purchased, such as fraud, product liability or tort. Her quarrel is with the provisions of the terms of use of the website which appeared elsewhere on the site. Defendant's website contains the following "Terms of Use," which are accessible only through a hyperlink at the bottom of the site's homepage. (Screenshot of lushusa.com homepage, Exhibit 1 to Plaintiff's Brief in Opposition to Motion to Compel [Docket Item 11–4]; see also Defendants' Brief in Support of Motion to Compel [Docket Item 9] at 24.) Nothing about the compulsory nature of the Terms of Use appears on the homepage unless the user finds the hyperlink. The parties do not dispute that at the bottom line of each webpage appears the legend in the smallest print on the page that reads "© 2002–2016 LUSH North America. View our Terms of Use and Privacy Policy. " (See Ex. A to Def. Br. at p. 11; Ex. 1 to Pl. Request for Judicial Notice [Docket Item 11–4 and 11–7.] )² At the top of the linked page, the Terms of Use advise users:

If You Want to Use This Site,

then carefully read these entire Terms (including all links to details), as they constitute a written agreement between you and us and they affect your legal rights and obligations. Each time you access and/or use the Site (other than to simply read these Terms), you agree to be bound by and comply with these Terms and any Additional Terms (defined below) then posted. Therefore, do not use the Site if you do not agree.

(Terms of Use, Exhibit A to Defendants' Brief in Support of Motion to Compel [Docket Item 9] at 1 (formatting in original).) There is no opportunity, on the homepage or the hyperlinked Terms, for the user to indicate he or she has read and accepts the terms.

Plaintiff generally alleges that the exculpatory clauses contained in the Terms of Use violate Sections 15 and 16 of the TCCWNA because they unlawfully disclaim all tort liability and purport to absolve Defendant of its duty to protect customers against harm arising from third–party acts, and because they limit consumers' rights under the New Jersey Products Liability Act, New Jersey Punitive Damages Act, and the New Jersey Uniform Commercial Code. The following specific section of the Terms is relevant to the instant motion:

12. Dispute Resolution

B. Binding Arbitration. If we cannot resolve a Dispute set forth in Section 12(A) (or agree to arbitration in writing with respect to an Excluded Dispute) within sixty (60) days of receipt of the notice, then ANY AND ALL DISPUTES ARISING BETWEEN YOU AND LUSH MUST BE RESOLVED BY FINAL AND BINDING ARBITRATION. THIS INCLUDES ANY AND ALL DISPUTES BASED ON ANY PRODUCT, SERVICE OR ADVERTISING CONNECTED TO THE PROVISION OR USE OF THE SITE (WHETHER BASED IN CONTRACT, STATUTE, REGULATION, ORDINANCE, TORT—INCLUDING, BUT NOT LIMITED TO, NEGLIGENCE, FRAUD, ANY OTHER INTENTIONAL TORT OR COMMON LAW, CONSTITUTIONAL PROVISION, RESPONDEAT SUPERIOR, AGENCY OR ANY OTHER LEGAL OR EQUITABLE THEORY—AND WHETHER ARISING BEFORE OR AFTER THE EFFECTIVE DATE OF THESE TERMS. The Federal Arbitration Act ("FAA") shall govern the arbitrability of all disputes between Lush and you regarding these Terms (and any Additional Terms) and the Site, including the No Class Action Matters section below. BY AGREEING TO ARBITRATE, EACH PARTY IS GIVING UP ITS RIGHT TO GO TO COURT AND HAVE ANY DISPUTE HEARD BY A JUDGE OR JURY. Lush and you agree, however, that the State of California or federal law shall apply to and govern, as appropriate, any and all claims or causes of action, remedies, and damages arising between you and Lush regarding these Terms and the Site, whether arising in contract, statute, common law, or any other legal theory, without regard to the State of California's choice of law principles....

C. Limited Time to File Claims. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IF YOU OR WE WANT TO ASSERT A DISPUTE (BUT NOT AN EXCLUDED DISPUTE) AGAINST THE OTHER, THEN YOU OR WE MUST COMMENCE IT (BY DELIVERY OF WRITTEN NOTICE AS SET FORTH IN SECTION 12(A)) WITHIN ONE (1) YEAR AFTER THE DISPUTE ARISES—OR IT WILL BE FOREVER BARRED....

E. No Class Action Matters. YOU AND LUSH AGREE THAT EACH MAY BRING CLAIMS AGAINST THE OTHER ONLY IN YOUR OR ITS INDIVIDUAL CAPACITY, AND NOT AS A PLAINTIFF OR CLASS MEMBER IN ANY PURPORTED CLASS OR REPRESENTATIVE PROCEEDING OR AS AN ASSOCIATION....

G. Small Claims Matters Are Excluded from Arbitration Requirement. Notwithstanding the foregoing, either of us may bring qualifying claim of Disputes (but not Excluded Disputes) in small claims court of competent jurisdiction.

(Terms of Use at 7–9.) Plaintiff states that she did not read, and was not aware of, the Terms of Use of Lush's website at the time she made her purchase. (Declaration of Norris Hite in Support of her Memorandum of Law in Opposition to Defendant's Motion to Compel Arbitration [Docket Item 11–3] at ¶¶ 4–6.)

The motion is fully briefed, and the Court will decide without holding oral argument. Fed. R. Civ. P. 78(b).

III. STANDARD OF REVIEW

A. Motion to Compel Arbitration

In the Third Circuit, when a party moves to compel arbitration based on the terms of an agreement, courts apply a two-tier standard of review. See Guidotti v. Legal Helpers , 716 F.3d 764 (3d Cir. 2013). Where it is apparent on the face of the complaint, or in documents relied upon in the complaint, that the claims at issue in the case are subject to arbitration, the case is considered under a motion to dismiss standard, Fed. R. Civ. P. 12(b)(6). Id. at 774–76. However, where the complaint does not establish on its face that the parties have agreed to arbitrate, or where the party opposing arbitration has come forward with reliable evidence that it did not intend to be bound by an arbitration agreement, then the parties are entitled to limited discovery on the question of arbitrability before a renewed motion to compel arbitration is decided on a summary judgment standard. Id.

B. Motion to Dismiss

Pursuant to Rule 8(a)(2), Fed. R. Civ. P., a complaint need only contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Specific facts are not required, and "the statement need only ‘give the defendant fair notice of what the ... claim is and the grounds upon which it rests.’ " Erickson v. Pardus , 551 U.S. 89, 93, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007) (citations omitted). While a complaint is not required to contain detailed factual allegations, the plaintiff must provide the "grounds" of his "entitle[ment] to relief", which requires more than mere labels and conclusions. Bell Atlantic Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007).

A motion to dismiss under Rule 12(b)(6), Fed. R. Civ. P., may be granted only if, accepting all well-pleaded allegations in the complaint as true and viewing them in the light most favorable to the plaintiff, a court concludes that the plaintiff failed to set forth fair notice of what the claim is and the grounds upon which it rests. Id. A complaint will survive a motion to dismiss if it contains sufficient factual matter to "state a claim to relief that is plausible on its face." Ashcroft v. Iqbal , 556 U.S. 662, 663, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). Although a court must accept as true all factual allegations in a complaint, that tenet is "inapplicable to legal conclusions," and "[a] pleading that offers labels and conclusions or a formulaic recitation of the elements of a cause of action will not do." Id. at 678, 129 S.Ct. 1937.

IV. DISCUSSION

A. Defendant's Motion to Compel Arbitration

First, Defendant seeks to compel arbitration of Plaintiff's dispute, strike the class action allegations, and stay this federal action pursuant to Section 12 of the Terms of Service, which requires that "ANY AND ALL DISPUTES ARISING BETWEEN YOU AND LUSH MUST BE RESOLVED BY FINAL AND BINDING ARBITRATION" or adjudication in small claims court. (Terms of Use Sections 12(B) and (G).) Defendant asserts that by merely using Lush's website, Plaintiff manifested an "agree[ment] to be bound by and comply with" the Terms of Service, including Section 12's arbitration requirement and class action waiver. (Id. at 1.)

The Federal Arbitration Act ("FAA"), 9 U.S.C. § 1 et seq., reflects a federal policy favoring arbitration. Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp. , 460 U.S. 1, 24, 103...