Schnabel v. Trilegiant Corp.

Decision Date07 September 2012
Docket NumberDocket No. 11–1311–CV.
CourtU.S. Court of Appeals — Second Circuit
PartiesLucy SCHNABEL, Edward Schnabel, & Brian Schnabel, o/b/o Themselves and All Others Similarly Situated, Plaintiffs–Appellee, v. TRILEGIANT CORPORATION, Affinion, Inc., Defendants–Appellants.

OPINION TEXT STARTS HERE

Patrick A. Klingman (James E. Miller, Karen M. Leser–Grenon, James C. Shah, Nathan C. Zipperian, Rose F. Luzon Shepherd, Finkelman, Miller & Shah LLP, Media, PA, Chester, CT, San Diego, CA, David A. Burkhalter, Burkhalter, Rayson & Assoc. P.C., Knoxville, TN, on the brief) for PlaintiffsAppellees.

Kenneth M. Kliebard (Gregory T. Fouts, Morgan Lewis & Bockius LLP, Chicago, IL, James H. Bicks, Wiggin and Dana LLP, Stamford, CT, on the brief) for DefendantsAppellants.

Before: McLAUGHLIN, SACK, and LIVINGSTON, Circuit Judges.

SACK, Circuit Judge:

The question presented to us on this appeal is whether the plaintiffs are bound to arbitrate their dispute with the defendants as a consequence of an arbitration provision that the defendants assert was part of a contract between the parties. Neither of the plaintiffs acknowledge being aware of the existence of the arbitration provision when their contractual relationships with the defendants were formed. But, according to the defendants, the provision was made available to the plaintiffs through a hyperlink appearing on the page the plaintiffs would have seen before enrolling in a service offered by the defendants and an email sent to the plaintiffs after their enrollment.

We conclude that despite some limited availability of the arbitration provision to the plaintiffs, they are not bound to arbitrate this dispute. As regards the email, under the contract law of Connecticut or California—either of which may apply to this dispute—the email did not provide sufficient notice to the plaintiffs of the arbitration provision, and the plaintiffs therefore could not have assented to it solely as a result of their failure to cancel their enrollment in the defendants' service. As regards the hyperlink, we conclude that the defendants forfeited the argument that the plaintiffs were on notice of the arbitration provision through the hyperlink by failing to raise it in the district court.

BACKGROUND

Because this appeal comes to us from the district court's denial of the defendants' motion to compel arbitration, we accept as true for purposes of this appeal factual allegations in the plaintiffs' complaint that relate to the underlying dispute between the parties. Fensterstock v. Educ. Fin. Partners, 611 F.3d 124, 127–28 (2d Cir.2010), vacated on other grounds by Affiliated Computer Servs., Inc. v. Fensterstock, ––– U.S. ––––, 131 S.Ct. 2989, 180 L.Ed.2d 818 (2011). Allegations related to the question of whether the parties formed a valid arbitration agreement—a question the district court answered in the negative—are evaluated to determine whether they raise a genuine issue of material fact that must be resolved by a fact-finder at trial. See Bensadoun v. Jobe–Riat, 316 F.3d 171, 175 (2d Cir.2003) (“In the context of motions to compel arbitration brought under the Federal Arbitration Act ..., the court applies a standard similar to that applicable for a motion for summary judgment. If there is an issue of fact as to the making of the agreement for arbitration, then a trial is necessary.” (citations omitted)); Specht v. Netscape Commc'ns Corp., 306 F.3d 17, 27 n. 12 (2d Cir.2002) (similar). As it relates to the question of whether an arbitration agreement was formed, we interpret the record as a whole in the light most favorable to the defendants, the party against whom the district court resolved the motion to compel arbitration. Cf., e.g., Wachovia Bank, Nat'l Ass'n v. VCG Special Opportunities Master Fund, Ltd., 661 F.3d 164, 171 (2d Cir.2011) (observing that the district court's decision to grant summary judgment is reviewed de novo, “construing the evidence in the light most favorable to the party against which summary judgment was granted”).

Underlying Dispute

Lucy Schnabel, Edward Schnabel, and Brian Schnabel, are the named plaintiffs in this putative class action. Lucy and Edward are married to one another. Brian is their son. All three are residents of Pleasant Hill, California.

The defendants Affinion Group, LLC, and its wholly owned subsidiary Trilegiant Corp., are incorporated in the State of Delaware with their principal places of business in Connecticut. Trilegiant is in the business of marketing and selling online programs that offer discounts on goods and services in exchange for a “membership fee.” The plaintiffs allege that the fee ranges from $8.99 monthly (about $108 annually) to $480 annually. See Class Action Compl. at ¶ 22, Schnabel v. Trilegiant Corp., 10–cv–00957 (D. Conn. June 17, 2010), ECF No. 1 (“Compl.”).

“Great Fun” is the name of one of Trilegiant's services.1 By paying a monthly membership fee to Trilegiant, Great Fun members are eligible to receive discounts on a wide variety of products and services including dining, retail shopping, car repair, and travel.

In 2007, Brian Schnabel was enrolled in Great Fun after making a purchase on the online travel site Priceline.com. In 2009, his father, Edward Schnabel, was enrolled in Great Fun after making a purchase on the sports memorabilia site Beckett.com.2 Neither Edward nor Brian acknowledges intentionally or knowingly enrolling in the service. Trilegiant asserts, and we accept for the purposes of this appeal, however, that in the process of completing purchases from Priceline.com and Beckett.com, respectively, both Edward and Brian were enrolled in Great Fun when they were presented with separate “enrollment offer” pages and entered personal information into fields on those pages.3See Appellant's Brief 6–7.

The initial Great Fun solicitation, which appears on the merchant's order confirmation page confirming that the user has completed an online purchase, invites the purchaser to click on a hyperlink in order to receive “Cash Back” on his or her purchase. Although the plaintiffs allege that the order confirmation page does not indicate that this offer involves a party other than the merchant with whom the user is in the process of completing a purchase, a screenshot of a confirmation page allegedly similar to that viewed by Edward does (1) state that “your Online Price Guide subscription has also been sent to [your email address]; and (2) feature, below the hyperlink “Click here to claim up to $20.00 Cash Back on this purchase!”, a “button” titled “See Details” with a legend beneath reading: “Click above to learn how to get $20 Back from Great Fun.” See Screenshot, citation in footnote 2, supra. “Great Fun” is not further identified on the order confirmation page.

According to Trilegiant, Edward would only have been brought to Great Fun's enrollment page after clicking on the hyperlinked invitation to “See Details,” and Brian after clicking on a similar invitation to “Learn More,” posted on the purchase confirmation pages of the Beckett and Priceline sites, respectively. See Mallozzi Aff., Ex. 1 to Mot. to Dismiss or Stay and Compel Arbitration, Schnabel v. Trilegiant Corp., 10–cv–00957 (D.Conn. Sept. 29, 2010) (“Mallozzi Aff.”) ¶¶ 6, 10.4 According to Trilegiant, neither plaintiff could join Great Fun without affirmatively entering personal information into various fields appearing on the enrollment page. This information included the plaintiff's “city of birth,” and a password created by the plaintiff. It is undisputed, though, that the plaintiffs were not required to reenter credit-card information when signing up for Great Fun. That information had already been entered in connection with the online purchase of goods and services through Beckett (for Edward) and Priceline (for Brian).

The enrollment page, like the original purchase confirmation page, does not plainly indicate that the offer is from a third party—Trilegiant—rather than the merchant with whom the user has just completed a purchase—Beckett or Priceline. Indeed, in the case of the enrollment page for Beckett, there is a statement at the top of the page indicating that the purchaser has received a “Special Award for Beckett Customers.” See Mallozzi Aff. Ex. A. Toward the bottom of the page, near an overview of some of the “Benefits” of the program, though, there do appear the logos of several popular brands besides Beckett, suggesting that by accepting the offer, the purchaser will somehow be able to receive discounts when purchasing other goods or services.

The message on the enrollment page also promises “up to” $20 off on the purchaser's Beckett purchase, along with several benefits for other goods and services, including “10% to 50% [savings] at over 40,000 Participating Restaurants” and “10% to 50% [savings] on Top Attractions and Activities.” Id. It indicates in relatively small print that Great Fun will email the purchaser “Great Fun membership information so [he or she] can start saving today,” but that [t]here's no obligation to continue ... Great Fun benefits.... [The purchaser can] call us to cancel before the end of ... [the] FREE trial and owe us nothing[.] Id.

To the left of the fields where a purchaser can enter his or her City of Birth and password appears a two paragraph description of some of the general terms of the agreement, including a statement that the first month of membership will be free but that the purchaser's credit card will be charged $14.99 per month if he or she does not cancel the membership by toll-free phone call. Id. The text also states that by entering his City of Birth and password and clicking the “Yes” button, the purchaser agrees that the vendor (in this case Beckett) will transmit his or her credit-card information to Great Fun. Id. Further, by clicking the “Yes” button, the purchaser acknowledges that he or she has read the “Terms & Conditions” of the...

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