Starke v. Square Trade, Inc., 011019 FED2, 17-2474-cv

Docket Nº:17-2474-cv
Opinion Judge:Gerard E. Lynch, Circuit Judge.
Party Name:Adam J. Starke, Individually and On Behalf of All Others Similarly Situated, Plaintiff-Appellee, v. SquareTrade, Inc., Defendant-Appellant,
Attorney:Solomon N. Klein (Bradley J. Nash, Schlam Stone & Dolan LLP, New York, NY; Mark Schlachet, Law Offices of Mark Schlachet, Cleveland, OH, on the brief) for Plaintiff-Appellee. Douglas A. Winthrop, Arnold & Porter Kaye Scholer LLP, San Francisco, CA (Michael D. Schissel, Arnold & Porter Kaye Schole...
Judge Panel:Before: Lynch and Droney, Circuit Judges, and Sessions, District Judge.
Case Date:January 10, 2019
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit
 
FREE EXCERPT

Adam J. Starke, Individually and On Behalf of All Others Similarly Situated, Plaintiff-Appellee,

v.

SquareTrade, Inc., Defendant-Appellant,

No. 17-2474-cv

United States Court of Appeals, Second Circuit

January 10, 2019

Argued: April 30, 2018

Solomon N. Klein (Bradley J. Nash, Schlam Stone & Dolan LLP, New York, NY; Mark Schlachet, Law Offices of Mark Schlachet, Cleveland, OH, on the brief) for Plaintiff-Appellee.

Douglas A. Winthrop, Arnold & Porter Kaye Scholer LLP, San Francisco, CA (Michael D. Schissel, Arnold & Porter Kaye Scholer LLP, New York, NY; Elisabeth S. Theodore, Arnold & Porter Kaye Scholer LLP Washington, DC, on the brief) for Defendant-Appellant.

Before: Lynch and Droney, Circuit Judges, and Sessions, District Judge. [*]

Gerard E. Lynch, Circuit Judge.

Appellant SquareTrade, Inc., appeals from the district court's denial of its motion to compel arbitration. SquareTrade argues that the governing terms of its contract with Appellee Adam J. Starke includes an arbitration clause. The district court concluded that the arbitration provision did not become part of the contract because Starke did not have reasonable notice of and manifest his assent to it. The order of the district court is AFFIRMED.

Defendant-Appellant, SquareTrade, Inc., sells protection plans for consumer products. Plaintiff-Appellee Adam J. Starke purchased one such protection plan. Starke filed this putative class action, seeking to hold SquareTrade accountable for alleged violations of consumer protection laws. SquareTrade moved to compel arbitration, contending that its contract with Starke included an arbitration clause. Starke opposed the motion, arguing that the purported arbitration clause had not become part of the contract because he did not have reasonable notice of the clause and did not manifest assent to it. The United States District Court for the Eastern District of New York (Nicholas G. Garaufis, J.) denied SquareTrade's motion, and SquareTrade appealed. For the reasons that follow, we AFFIRM.

BACKGROUND1

SquareTrade sells and administers service contracts called protection plans, which provide protections against defects and damage to a variety of consumer products. Unlike warranties, which are provided by the product's manufacturer and are often included in the purchase price, SquareTrade protection plans cover products made by other companies, and are sold for additional consideration separate from the product price. SquareTrade markets and sells protection plans on its own website as well as through retailers including Costco, Target, Staples, Office Depot, and Amazon.

As relevant here, Starke purchased the "SquareTrade 2-Year Electronics Protection Plan ($50-75)" (the "Protection Plan") for $4.34 plus tax through Amazon. Starke intended the Protection Plan to cover a CD player he had purchased from Staples for $61.83. Starke had previously purchased several SquareTrade protection plans through Amazon and one through Staples to cover other items.

The Amazon webpage on which Starke purchased the Protection Plan looked like this: (Image Omitted)

(Image Omitted)

App'x at 113-14.2

The portion of the purchase page copied above contains several sections of information about the Protection Plan. A block of text towards the top of the purchase page informed Starke that his "Service Contract [would] be delivered via email and not mailed to [him]. It [would] come from SquareTrade Warranty Services . . . within 24 hours of purchase." App'x at 113. Much further down in the excerpted portion of the purchase page (which would likely require scrolling on most computer screens), one encounters the heading: "Product information." Under that heading appears a small hyperlink labeled "Warranty [pdf]." The "Warranty" hyperlink provided access to a two-page document titled "Terms & Conditions" stating: "Congratulations on purchasing this Protection Plan. Please read these terms and conditions carefully so that you fully understand your coverage under this Protection Plan." App'x at 40. The document contains terms purporting to govern the transaction, in addition to those terms appearing on the face of the Amazon purchase page. Notably, this document (the "Pre-Sale T&C") did not contain an arbitration provision or a class action waiver.3 Starke did not click on the "Warranty" hyperlink and therefore, did not review the Pre-Sale T&C. The Amazon purchase page did not contain a hyperlink to anything titled "Service Contract."

Slightly above the "Product information" was another heading, "Things to know." The first bullet point under this heading warns customers that "SquareTrade Protection Plans are only valid for new products purchased at Amazon within the last 30 days." App'x at 114 (emphasis added). The fifth bullet point under this heading informs customers that they "may cancel [their] plan anytime within the first 30 days for a full refund." Id. Starke did not read that part of the purchase page and was not aware that the Protection Plan would not cover items that had not been purchased through Amazon.

After his purchase, Starke received a confirmation email from Amazon which informed him that "[his] protection plan service agreement [would] be sent via a separate e-mail by [the] seller." App'x at 81. As the Amazon purchase page and confirmation email promised, Starke received an email from SquareTrade later that day. The email looked like this: (Image Omitted)

App'x at 83-84.

The subject line of the email says "SquareTrade Protection Plan on Amazon.com - Contract is Enclosed." The email contains several prompts and text in various formats. As relevant to this case, the email contains a hyperlink in the bottom left corner, labeled "Terms & Conditions," that links to an eleven-page document titled "Protection Plan Terms & Conditions." That document (the "Post-Sale T&C") is a different document from the Pre-Sale T&C, and contains several provisions that were absent from the Pre-Sale T&C. One of the provisions appearing in the Post-Sale T&C but not the Pre-Sale T&C purports to bind the parties to arbitration of "[a]ny controversy or claim arising out of or relating to this Protection Plan, or breach thereof . . . in accordance with the Commercial Arbitration Rules of the American Arbitration Association." App'x at 70. The Post-Sale T&C also contained a class action waiver and a California choice-of-law clause. Starke did not click on the "Terms & Conditions" hyperlink and did not review the Post-Sale T&C. Nothing in the body of the email referred to arbitration, and the email did not contain or refer to any attachments.4

After receiving the email, Starke followed the instructions directing him to send SquareTrade a copy of the receipt for his electronics item. Starke alleges that the receipt clearly stated that his CD player was purchased at Staples. Two days later, SquareTrade confirmed that it had received a copy of his receipt.

Some months later, Starke's CD player required repair or replacement, and Starke made a claim for coverage under the Protection Plan. SquareTrade denied the claim, notifying Starke that since the CD player had not been purchased through Amazon, it was not covered, and that his Protection Plan would be cancelled. SquareTrade offered Starke a refund for the full price of the Protection Plan.

Shortly thereafter, Starke filed this putative class action against SquareTrade, alleging fraudulent and deceptive practices by SquareTrade in the selling and marketing of protection plans. The complaint seeks damages and injunctive relief for violations of Sections 349 and 350 of New York's General Business Law, and the Magnuson-Moss Warranty Act, 15 U.S.C. § 2301 et seq., and for unjust enrichment. Starke alleges that SquareTrade knowingly and deceptively sells protection plans for items not purchased on Amazon and therefore, not eligible for coverage, despite knowing that under the terms of the plan, which are not prominently disclosed, the products which its customers have sought to protect are not eligible for coverage. According to the complaint, SquareTrade's limiting of covered products to those purchased through Amazon operates as an intentionally deceptive scheme to take money from unsuspecting customers. If a SquareTrade customer never makes a claim under her plan, SquareTrade keeps her premium and retains the policy until expiration. But if the customer makes a claim that requires SquareTrade to honor the policy, SquareTrade informs the customer that her protection plan is void because the underlying product was not purchased through Amazon.

Starke also alleges that SquareTrade fails to disclose other material terms and restrictions prior to the sale, and hoodwinks customers by providing them with pre-sale terms...

To continue reading

FREE SIGN UP