Lopez v. Terra's Kitchen, LLC

• Decision Date: 19 September 2018
• Docket Number: Case No.: 18cv842-MMA (JLB)
• Court: U.S. District Court — Southern District of California
• Parties: Matthew LOPEZ, Individually and on behalf of all others similarly situated, Plaintiff, v. TERRA'S KITCHEN, LLC, Defendant.

331 F.Supp.3d 1092

Matthew LOPEZ, Individually and on behalf of all others similarly situated, Plaintiff,

v.TERRA'S KITCHEN, LLC, Defendant.

Case No.: 18cv842-MMA (JLB)

United States District Court, S.D. California.

Signed September 19, 2018

Scott J. Ferrell, Pacific Trial Attorneys, Newport Beach, CA, for Plaintiff.

Katie Susan Knell, Oakdale, CA, for Defendant.

ORDER DENYING DEFENDANT'S MOTION TO COMPEL ARBITRATION

[Doc. No. 8]

Hon. Michael M. Anello, United States District Judge

Plaintiff Matthew Lopez ("Plaintiff"), individually and on behalf of all others similarly situated, brings this action against Defendant Terra's Kitchen, LLC ("Defendant") alleging causes of action for violations of California's Automatic Renewal Law ("ARL"), California Business and Professions Code § 17600, et seq. , and California's Unfair Competition Law ("UCL"), California Business and Professions Code § 17200, et seq. See Doc. No. 1 ("Compl."). Defendant moves to compel arbitration and stay this case pursuant to the Federal Arbitration Act ("FAA"). Doc. No. 8-1 ("Mtn."). Plaintiff filed an opposition [Doc. No. 10 ("Oppo.") ], to which Defendant replied [Doc. No. 11 ("Reply") ]. The Court, in its discretion, decides the matter on the papers submitted and without oral argument pursuant to Civil Local Rule 7.1.d.1. For the reasons set forth below, the Court DENIES Defendant's motion to compel arbitration and to stay.

BACKGROUND

Defendant operates a website which markets and offers various subscriptions for ready-made meals. Compl., ¶¶ 8, 18. According to Plaintiff, these subscription programs "constitute[ ] ... automatic renewal and/or continuous service plan[s] or arrangement[s]...." Compl., ¶ 18. Plaintiff purchased a subscription plan from Defendant and seeks to represent a class of "all persons in California who, within the applicable statute of limitations period up to and including the date of judgment in this action, purchased subscriptions for products (such as ready-made meals and related products) from [Defendant]." Compl., ¶¶ 1, 22.

Plaintiff alleges that: (1) Defendant's automatic renewal or continuous service offers failed to present the offer terms in a clear and conspicuous manner and in visual proximity to the request for consent to the offer prior to purchasing the subscription; (2) Defendant charged Plaintiff's and class members' credit or debit cards, or third-party accounts, without first obtaining the subscriber's consent to the agreement containing the terms of the offer; and (3) Defendant failed to provide an acknowledgment including the automatic renewal or continuous service offer terms, cancellation policy, and information regarding how to cancel in a manner capable of being retained by the consumer. Compl., ¶ 2.

Specifically, Plaintiff alleges that "[o]n the pages where the subscriber makes the purchase, there was no description of the [automatic renewal offer terms or continuous service offer terms]." Compl., ¶ 19. As such, Plaintiff alleges that Defendant "failed to obtain Plaintiff's and Class Members' affirmative consent to the automatic renewal offer terms or continuous service offer terms...." Compl., ¶ 20. Further, after subscribing to one of Defendant's subscription plans, Defendant sends a follow-up email to the subscriber. Compl., ¶ 22. Plaintiff alleges that these emails fail "to provide an acknowledgment that includes the automatic renewal or continuous service offer terms, cancellation policy, and information on how to cancel in a manner that is capable of being retained by Plaintiff and Class Members...." Id.

As a result, Plaintiff alleges "all goods, wares, merchandise, or products, sent to Plaintiff and Class Members under the automatic renewal or continuous service agreements are deemed to be an unconditional gift...." Compl., ¶ 2. Based on these allegations, Plaintiff raises the following causes of action: (1) failure to present automatic renewal or continuous service offer terms clearly and conspicuously and in visual proximity to the request for consent offer in violation of the ARL; (2) failure to obtain the consumer's affirmative consent before the subscription is fulfilled in violation of the ARL; (3) failure to provide acknowledgment with automatic renewal terms and information regarding the cancellation policy in violation of the ARL; and (4) violations of California's UCL for unlawful and/or unfair business practices. Compl., ¶¶ 34-58.

LEGAL STANDARD

The FAA permits "[a] party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration [to] petition any United States district court ... for an order directing that ... arbitration proceed in the manner provided for in [the arbitration] agreement." 9 U.S.C. § 4. Upon a showing that a party has failed to comply with a valid arbitration agreement, the district court must issue an order compelling arbitration. Id.

The Supreme Court has stated that the FAA espouses a general policy favoring arbitration agreements. AT & T Mobility v. Concepcion , 563 U.S. 333, 339, 131 S.Ct. 1740, 179 L.Ed.2d 742 (2011). Federal courts are required to rigorously enforce an agreement to arbitrate. See id. Courts are also directed to resolve any "ambiguities as to the scope of the arbitration clause itself ... in favor of arbitration." Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Jr. Univ. , 489 U.S. 468, 475–76, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989).

In determining whether to compel a party to arbitration, the Court may not review the merits of the dispute; rather, the Court's role under the FAA is limited "to determining (1) whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement encompasses the dispute at issue." Cox v. Ocean View Hotel Corp. , 533 F.3d 1114, 1119 (9th Cir. 2008) (internal quotation marks and citation omitted). If the Court finds that the answers to those questions are "yes," the Court must compel arbitration. See Dean Witter Reynolds, Inc. v. Byrd , 470 U.S. 213, 218, 105 S.Ct. 1238, 84 L.Ed.2d 158 (1985). If there is a genuine dispute of material fact as to any of these queries, a district court should apply a "standard similar to the summary judgment standard of [ Federal Rule of Civil Procedure 56 ]." Concat LP v. Unilever, PLC , 350 F.Supp.2d 796, 804 (N.D. Cal. 2004).

Agreements to arbitrate are 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. Courts must apply ordinary state law principles in determining whether to invalidate an agreement to arbitrate. Ferguson v. Countrywide Credit Indus., Inc. , 298 F.3d 778, 782 (9th Cir. 2002). As such, arbitration agreements may be invalidated by generally applicable contract defenses, such as fraud, duress, or unconscionability. Concepcion , 563 U.S. at 339-41, 131 S.Ct. 1740.

DISCUSSION

According to Defendant, Plaintiff's claims against it are subject to arbitration pursuant to the following arbitration provisions contained within the Terms & Conditions on Defendant's website:

DISPUTE RESOLUTION

25. WE AGREE TO ARBITRATE IN OUR INDIVIDUAL CAPACITY

25.1 If we have a dispute that we cannot resolve, both you and [Defendant] agree to resolve all claims ... exclusively through binding arbitration, in accordance with the rules of the American Arbitration Association, by a neutral arbitrator in a location within one hundred (100) miles of your residence.

Doc. No. 8-2, Declaration of Brendan Connors in Support of Motion of Terra's Kitchen to Compel Arbitration ("Connors Decl."), Exhibit 2, ¶ 25. Additionally, the first page of Defendant's Terms & Conditions also provides:

REALLY IMPORTANT LEGAL STUFF

...

3. IF WE HAVE A BAD BREAK UP, YOU HAVE TO ARBITRATE SOLO. These Terms and Conditions dictate how we'll settle any disputes. Specifically, and very importantly, you are agreeing to exclusively use binding arbitration on an individual basis to resolve disputes. That means no jury trials, and no class actions.

Id. , Exhibit 2, ¶ 3. In opposition, Plaintiff contends that it never assented to the Terms & Conditions on the website. Oppo. at 8-16.

A. Type of Agreement

" ‘Before a party to a lawsuit can be ordered to arbitrate and thus be deprived of a day in court, there should be an express, unequivocal agreement to that effect. Only when there is no genuine issue of fact concerning the formation of the agreement should the court decide as a matter of law that the parties did or did not enter into such an agreement.’ " Cordas v. Uber Techs., Inc. , 228 F.Supp.3d 985, 988 (N.D. Cal. 2017) (quoting Three Valleys Mun. Water Dist. v. E.F. Hutton & Co. , 925 F.2d 1136, 1141 (9th Cir. 1991) ). "While new commerce on the Internet has exposed courts to many new situations, it has not fundamentally changed the principles of contract." Register.com, Inc. v. Verio, Inc. , 356 F.3d 393, 403 (2d Cir. 2004). "Questions of contract formation are questions of state law." Cordas , 228 F.Supp.3d at 988. In California, "mutual assent [by word or conduct] is the key to contract formation." Id. ; see Specht v. Netscape Commc'ns Corp. , 306 F.3d 17, 29 (2d Cir. 2002) (applying California law).

The arbitration agreement at issue here is contained within the Terms & Conditions that govern visitors to Defendant's website. As explained by the Ninth Circuit, "[c]ontracts formed on the Internet come primarily in two flavors: ‘clickwrap’ (or ‘click-through’) agreements, in which website users are required to click on an ‘I agree’ box after being presented with a list of terms and conditions of use; and ‘browsewrap’ agreements, where a website's terms and conditions of use are generally posted on the website via a hyperlink at the bottom of the screen." Nguyen v. Barnes & Noble Inc. , 763 F.3d 1171, 1175-76 (9th Cir. 2014).¹ While clickwrap agreements require the user to expressly manifest assent to the terms and conditions, browsewrap agreements do not;...