Tieszen v. Ebay, Inc.

• Decision Date: 20 September 2021
• Docket Number: 4:21-CV-04002-KES
• Parties: RYAN TIESZEN, Plaintiff, v. EBAY, INC., LG CHEM LTD., LG CHEM AMERICA, INC., VAPAH, INC., and the FIRST DOE through THIRTIETH DOE, inclusive, Defendants.
• Court: U.S. District Court — District of South Dakota

RYAN TIESZEN, Plaintiff, v. EBAY, INC., LG CHEM LTD., LG CHEM AMERICA, INC., VAPAH, INC., and the FIRST DOE through THIRTIETH DOE, inclusive, Defendants.

No. 4:21-CV-04002-KES

United States District Court, D. South Dakota, Southern Division

September 20, 2021

ORDER GRANTING DEFENDANT EBAY, INC.'S MOTION TO COMPEL ARBITRATION

KAREN E. SCHREIER UNITED STATES DISTRICT JUDGE

Plaintiff Ryan Tieszen, filed this suit in the State of South Dakota Second Circuit Court for Minnehaha County. Docket 1-1. Defendants include eBay, Inc., LG Chem, Ltd., LG Chem America, Inc (LGCAI), Vapah, Inc., and DOES 1 through 30 Id. LGCAI removed the matter to federal court under 28 U.S.C. §§ 1332, 1441(b), and 1446. Docket 1. eBay consented to removal. Docket 3. LGCAI was later dismissed as a named defendant. Docket 47. eBay moves to compel arbitration. Docket 17. Tieszen opposes the motion. Docket 27. For the following reasons, the court grants eBay's motion to compel arbitration.

FACTUAL BACKGROUND

Tieszen is a resident of the state of South Dakota. Docket 1-1 ¶ 1. eBay is incorporated in California with its principal place of business in San Jose, California. Id. ¶ 2. eBay operates an online marketplace. Docket 18 at 2. It derives a large portion of its sales from third-party vendors because eBay does not own or sell the items listed on its website. Id.; Docket 1-1 ¶ 3. In order to create a user account on eBay, a potential user must register on the website and agree to comply with eBay's User Agreement, Privacy Policy, and other policies. Docket 19 ¶ 3. Acceptance of the User Agreement is mandatory for a user to create an eBay account. Id. ¶ 12.

eBay's business records indicate that Tieszen created an eBay account under the username “rtieszen.” Id. ¶ 4; see also Docket 19-1 at 1. Tieszen agreed to eBay's User Agreement and Privacy Policy on August 12, 2004. Docket 19 ¶ 4. Tieszen created a second account under the username “rtagent5” on September 30, 2008. Id.; see also Docket 19-1 at 2. Tieszen was required to affirmatively accept eBay's User Agreement to confirm his registration on his second eBay account. See Docket 19 ¶ 11. The 2008 version of the User Agreement would have been in effect when Tieszen registered his second eBay account. Id. ¶ 13. The 2008 User Agreement states that eBay “may amend this Agreement at any time by posting the amended terms on this site[, ]” and “all amended terms shall automatically be effective 30 days after they are initially posted.” Docket 19-2 at 3.

In August 2012, eBay posted an update to the User Agreement concerning dispute resolution between eBay and its users. Docket 19 ¶ 16. eBay notified its users of the change which went into effect on October 10, 2012. Id.; Docket 19-3. In the Introduction section, the 2012 User Agreement states that it “contains provisions that govern how claims you and [eBay] have against each other are resolved....It also contains an Agreement to Arbitrate unless you opt-out of the Agreement to Arbitrate[.]” Docket 19-4 at 1. Under the Legal Disputes section, the User Agreement provides that Utah law will govern the User Agreement “and any claim or dispute that has arisen or may arise between you and eBay, except as otherwise stated[.]” Id. at 7. The Legal Disputes section also states that the user and eBay:

[A]gree that any and all disputes or claims that have arisen or may arise between you and eBay shall be resolved exclusively through final and binding arbitration, rather than in court, except that you may assert claims in small claims court, if your claims qualify. The Federal Arbitration Act governs the interpretation and enforcement of this Agreement to Arbitrate.

Id. (bold in original). The 2012 User Agreement also includes an option for a user to opt-out of arbitration, which provides that:

You can choose to reject this Agreement to Arbitrate (“opt-out”) by mailing us a written opt-out notice (“Opt-Out Notice”)....If you are already a current eBay user and previously accepted the User Agreement prior to the introduction of this Agreement to Arbitrate, the Opt-Out Notice must be postmarked no later than November 9, 2012. You must mail the Opt-Out Notice to eBay Inc., c/o National Registered Agents, Inc., 2778 W. Shady Bend Lane, Lehi, UT 84043.

The Opt-Out Notice must state that you do not agree to this Agreement to Arbitrate and must include your name, address, and the user ID(s) and email address(es) associated with the eBay account(s) to which the opt-out applies. You must sign the Opt-Out Notice for it to be effective. This procedure is the only way you can opt-out of the Agreement to Arbitrate.

Id. at 9. Tieszen did not submit an Opt-Out Notice to eBay and his eBay accounts remain open and active. Docket 19 ¶ 20. Tieszen purchased items from sellers on eBay in 2013, 2014, 2015, and 2016. Id. ¶ 22.

eBay's User Agreement has been amended several times since 2012. Id. ¶ 21. The agreement to arbitrate claims portion of the User Agreement has remained materially unchanged since the 2012 User Agreement. Id. The 2016 User Agreement contained essentially the same agreement to arbitrate as the 2012 User Agreement, including the Utah choice of law provision. See Docket 19-5 at 7-10. But the 2016 User Agreement expanded upon the scope of the arbitration agreement, providing:

You and eBay each agree that any and all disputes or claims that have arisen, or may arise, between you and eBay relating in any way to or arising out of this or previous versions of the User Agreement, your use of or access to eBay's Services, or any products or services sold, offered, or purchased through eBay's Services shall be resolved exclusively through final and binding arbitration, rather than in court.

Id. at 8. The 2016 User Agreement also contains a similar opt-out procedure for new users, but the procedure is not available to current users because they would have had to opt-out under previous versions of the User Agreement. See id. at 9. The 2016 User Agreement went into effect for existing users on September 29, 2016. Id. at 1.

On or around November 6, 2016, Tieszen purchased two LG lithium-ion 18650 batteries on eBay. Docket 1-1 ¶ 11. The batteries were purchased from Vapah, a third-party seller on eBay. Id. ¶ 2. On December 14, 2017, the batteries allegedly burst into flames in Tieszen's pocket, causing first and second-degree burns to Tieszen's right thigh. Id. ¶¶ 12, 15. Tieszen asserts claims of product liability, strict liability, negligence, and breach of various warranties against all defendants. See id.

eBay argues that it is entitled to an order (1) compelling Tieszen to arbitrate his claims against eBay under the arbitration agreement, (2) staying Tieszen's claims against eBay pending arbitration, and (3) staying eBay's deadline to respond to Tieszen's complaint and any other discovery deadline pending the resolution of eBay's motion. Docket 17. Tieszen contends that he should not be compelled to arbitrate his claims against eBay because the User Agreement and its included arbitration agreement is unenforceable. Docket 27 at 2. Thus, the court will address whether the User Agreement and its arbitration agreement is enforceable and whether it encompasses Tieszen's claims.

DISCUSSION

Congress enacted the Federal Arbitration Act (FAA) “to overrule the judiciary's long-standing refusal to enforce agreements to arbitrate.” Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 219-20 (1985). Under the FAA, a written agreement to arbitrate in a contract involving interstate commerce “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or equity for the revocation of any contract.” 9 U.S.C. § 2. The FAA provides two mechanisms for enforcing an agreement to arbitrate: (1) a stay of judicial proceedings where an issue may be referred to arbitration under § 3; and (2) an order compelling arbitration where one party refuses to adhere to an arbitration agreement under § 4. 9 U.S.C. §§ 3-4.

When a contract is within the scope of the FAA, courts engage in a two-part inquiry to determine whether to stay the case and compel arbitration. See Faber v. Menard, Inc., 367 F.3d 1048, 1052 (8th Cir. 2004). The first inquiry is whether a valid arbitration agreement exists. Id. The second inquiry is “whether the particular dispute falls within the terms of that agreement.” Id. (citations omitted). These two issues are for the court to decide “[u]nless the parties clearly and unmistakably provide otherwise.” Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83 (2002) (alteration in original) (quoting AT & T Tech., Inc. v. Commc'ns Workers, 475 U.S. 643, 649 (1986)). If an issue of fact remains as to the making of the arbitration agreement, then a trial on the issue of arbitrability is necessary. Erickson v. Thrivent Ins. Agency, Inc., 231 F.Supp.3d 324, 328 (D.S.D. 2017). “When the parties agreed to arbitrate and the particular dispute falls within the agreement, the FAA allows courts to stay the case and compel arbitration.” Id.

Here, the FAA applies to the User Agreement between Tieszen and eBay. The User Agreement, including the arbitration agreement, was in writing. See Dockets 19-2, 19-4, 19-5. Tieszen's purchase of LG 18650 lithium-ion batteries from Vapah, a Georgia corporation with its principal place of business in Georgia, on eBay meets the FAA's interstate commerce requirement. See Docket 1-1 ¶¶ 2, 4. Neither of the parties allege that the court cannot decide the issue of arbitrability in this case, and nothing in the contract clearly and unmistakably provides otherwise. Thus, the first issue for the court to decide is whether a valid arbitration agreement exists between Tieszen and eBay.

I. Validity of Arbitration Agreement

A. Choice of Law...