Nicosia v. Amazon.com, Inc.
Nicosia v. Amazon.com, Inc.
Opinion of the Court
On January 30, 2013 and April 19, 2013, Plaintiff Dean Nicosia went on Amazon.com and placed orders of 1 Day Diet, a product marketed as a weight-loss supplement, which contained the harmful compound sibutramine. The account from which these purchases were made was held in his wife's name and was previously *258enrolled in a program called "Amazon Mom." As described below, to enroll in Amazon Mom, a user must accept the "Amazon Prime Terms and Conditions," which incorporate an arbitration provision. Plaintiff subsequently brought a putative class action against Defendant Amazon.com, Inc. ("Amazon" ), asserting that Amazon's sales of 1 Day Diet violated the Consumer Product Safety Act,
The Court adopts the R&R's conclusion that arbitration be granted, finding that it is supported by its careful analysis of the facts and the law which is manifest, and not impugned by Plaintiff's objections to it, which are denied. The Court is driven to this conclusion upon its de novo review of the evidentiary record, parties' motion and objection papers, and applicable legal authority, as mandated by
STANDARD OF REVIEW
In deciding a motion to compel arbitration, "courts apply a 'standard similar to that applicable for a motion for summary judgment.' " Nicosia v. Amazon.com, Inc. ,
BACKGROUND
I. Factual Background
1. The Nicosias' Amazon.com Account
Plaintiff Dean Nicosia ("Plaintiff" ) resides with his wife, Annemarie Nicosia ("Annemarie" ), and his family in North Carolina. (D. Nicosia Dep. at 47:12-48:7, ECF No. 118-2). Before March 2012, he and his family lived in New York. (Id. at 46:25-47:24, 55:7-25).
"Amazon.com" is an online retail website and marketplace through which consumers may purchase hundreds of millions of products. (Ressmeyer Decl. ¶ 3, ECF No. 116). In order to make a purchase on Amazon.com, a customer must create an Amazon account or use an existing account. (Id. ¶ 5). It is not possible to check out as a "guest" on Amazon.com. (Id. ).
On June 9, 2008, an Amazon account was created in the name of "Annemarie Nicosia" (the "Account" ). (Id. ¶ 25). At all relevant times, the Account was used by both Plaintiff and Annemarie, although *259Plaintiff relied on Annemarie to manage it. (D. Nicosia Dep. at 138:9-139:9, 143:18-146:2; A. Nicosia Dep. at 45:3-11; 62:22-63:3, ECF No. 118-3; Def. 56.1 ¶ 57, ECF No. 115).
2. The Amazon Conditions of Use
It is undisputed that, at the time the Account was created, Amazon's Conditions of Use ("Conditions of Use" or "COU" ) did not contain an arbitration provision. (Ressmeyer Decl. ¶ 15). On August 19, 2011, the following arbitration clause was added to the COU:
Any dispute or claim relating in any way to your visit to Amazon.com or to products or services sold or distributed by Amazon or through Amazon.com will be resolved by binding arbitration, rather than in court , except that you may assert claims in small claims court if you qualify.
(Id. ; Ressmeyer Decl. Ex. M, at AMZ000365, ECF No. 116-15) (bold in original). The arbitration provision was also accompanied by a class action waiver, which provides that "any dispute resolution proceedings will be conducted only on an individual basis and not in a class, consolidated or representative action ." (Ressmeyer Decl. Ex. M, at AMZ000365) (bold in original). Finally, the COU contains a choice-of-law clause specifying that "the Federal Arbitration Act, applicable federal law, and the laws of the state of Washington ... will govern these Conditions of Use and any dispute of any sort that might arise between you and Amazon." (Id. at AMZ000366).
3. Amazon Prime and Amazon Mom
Amazon Prime ("Amazon Prime" or "Prime" ) is a bundle of services, including free two-day shipping, discounted one-day shipping, and access to movies and television shows, offered to Amazon accountholders for an annual membership fee. (Ressmeyer Decl. ¶ 8).
Amazon Mom ("Amazon Mom" or "Mom" ) was a free membership program launched by Amazon in September 2011 which offered limited, promotional Prime benefits. (Id. ¶ 13). By signing up for Mom, an accountholder could receive discounts on diapers and baby products, as well as three months of free two-day shipping. (Id. ). By purchasing products on Mom, the accountholder could extend their free two-day shipping benefits to up to one year. (Id. ).
Amazon Mom was explicitly promoted as a kind of free trial for Prime. In the promotional FAQ, the free shipping benefits were expressly referred to as "Amazon Prime benefits." (Ressmeyer Decl. Ex. J, at AMZ000369, ECF No. 116-10). Extending these benefits by making qualifying purchases on Mom gave the accountholder "more free months of Prime." (Id. ). The Amazon Mom sign-up page contained text reading: "After your free period, you'll be charged $79 for a year of Amazon Prime and Amazon Mom benefits ...." (Id. at AMZ000372, ECF No. 116-11). Bolded language near the sign-up button read: "Amazon Prime membership continues until cancelled. If you do not wish to continue for $79/year, select 'Do not renew' from Your Account before your annual renewal date ." (Id. ). Annemarie testified that, before this lawsuit was brought, she believed in her mind that Prime and Mom were the same program. (A. Nicosia Dep. at 59:24-60:3, 93:18-20). Amazon's Associate General Counsel for Marketing, too, viewed Mom as an "an *260addition" to Prime, whose "underlying program is a Prime program." (Ressmeyer Dep. at 204:11-13, ECF No. 118-1).
4. September 30, 2011: The Account enrolls in Amazon Mom
Annemarie testified that, while she was pregnant with her second son, she heard about Amazon Mom from a friend, Albert Dennis ("Dennis" ), who told her that the program offered diapers at a "good price." (A. Nicosia Dep. at 15:20-16:7, 58:8-11, 73:11-13). Annemarie gave Dennis her password (id. at 44:4-11), and Dennis told her that he was signing her up for Mom "to get diapers and formula if [she] needed it" (id. at 39:3-8). On September 30, 2011, Dennis enrolled Annemarie in Mom with her "permission." (Id. at 36:12-37:7):
"Q: And your friend Al Dennis told you, 'There's this Amazon.com Mom program where you can get a discount on diapers,' right?
"A: Yes, sir.
"Q: And that sounded pretty good to you?
"A: Yes, sir.
"Q: So your friend Al Dennis signed you up for that?
"A: Yes, sir.
"Q: And that was okay with you?
"A: Yes, sir."
(Id. at 58:8-18).
As of September 30, 2011, in order to sign up for Amazon Mom, a customer would be required to complete a two-step process. (Ressmeyer Decl. ¶ 27; Ressmeyer Decl. Ex. J, at AMZ000371-372). First, the customer would enter certain information about themselves and click a button that says "Continue." (Ressmeyer Decl. Ex. J, at AMZ000371). Directly above the "Continue" button was a line that read: "By clicking the Continue button, you acknowledge that you agree to the Amazon Mom Terms and Conditions." (Id. ) (bold in original). The underlined term was a hyperlink to the Amazon Mom Terms and Conditions ("Mom T&C" ) (Ressmeyer Decl. ¶ 28), which contained the following language:
Welcome to the terms and conditions ("Terms") for Amazon Mom, which govern the Amazon Mom membership. Please note that your use of the Amazon.com website and the Amazon Mom membership are also governed by our Conditions of Use, ... Amazon Prime Terms and Conditions, as well as all other applicable terms, conditions, limitations and requirements on the Amazon.com Web Site.
(Ressmeyer Decl. Ex. K, at AMZ000494, ECF No. 116-13). The Mom T&C further provide: "Once your free shipping benefits have expired, you may continue to receive Amazon Prime shipping benefits by enrolling in Amazon Prime for an annual membership fee of $79." (Id. ).
Second, the customer was taken to a page where they must input their payment and billing information and click a button that says, "Sign up for Amazon Mom." (Id. Ex. J, at AMZ000372). Directly below this button was text that read: "By signing up, you acknowledge that you have read and agree to the Amazon Prime Terms and Conditions ...." (Id. ). The underlined term was a link to the Amazon Prime Terms and Conditions ("Prime T&C" ) (Ressmeyer Decl. ¶ 30), which contained the following language:
Welcome to the terms and conditions ("Terms ") for Amazon Prime. These Terms are between you and Amazon Services LLC and/or its affiliates ("Amazon.com " or "Us ") and govern our respective rights and obligations. The Terms, together with applicable terms and conditions related to any promotional offers provided to you for use with *261Prime, constitute the entire agreement between you and Amazon.com related to the Prime membership. Please note that your use of the Amazon.com website and Prime membership are also governed by our Conditions of Use and Privacy Notice, as well as all other applicable terms, conditions, limitations, and requirements on the Amazon.com website, all of which (as changed over time) are incorporated into these Terms. If you sign up for a Prime membership, you accept these terms, conditions, limitations and requirements.
(Ressmeyer Decl. Ex. L, at AMZ000345, ECF No. 116-14). The underlined "Conditions of Use" text was a hyperlink to the then-current version of the COU (Ressmeyer Decl. ¶¶ 31, 36), which contained the arbitration clause reproduced above (Ressmeyer Decl. Ex. M).
The Amazon Mom sign-up flow is reproduced in Appendix A to this opinion.
5. October 11, 2012: Annemarie signs up for a paid subscription of Prime
In September or October 2012, Annemarie's membership in Amazon Mom expired. (Ressmeyer Decl. ¶ 33; Ressmeyer Dep. at 200:9-20).
6. January and April 2013: Plaintiff purchases 1 Day Diet
1 Day Diet was a product promoted and sold for weight loss. On January 30, 2013 and April 19, 2013, Plaintiff made two purchases of 1 Day Diet, using Annemarie's Account. (Ressmeyer Decl. ¶ 41; Tusa Ex. B ¶ 5, ECF No. 122-2). In order to execute each purchase, Plaintiff would have been required to click through a checkout page which contained a button that said, "Place your order," and text which read, "By placing your order, you agree to Amazon.com's privacy notice and conditions of use", with the underlined "conditions of use" text hyperlinked to the COU. (Ressmeyer Decl. ¶ 16; Ressmeyer Decl. Ex. E, ECF No. 116-5; Lin Decl. ¶ 4, ECF No. 117; Lin Decl. Ex. 1, ECF No. 117-1).
In November 2013, the U.S. Food and Drug Administration ("FDA" ) issued a press release stating that "laboratory analysis confirmed that '1 Day Diet' contains sibutramine," a "controlled substance that was removed from the market in October 2010 for safety reasons." U.S. Food & Drug Administration, "Public Notification: '1 Day Diet' Contains Hidden Drug Ingredient" (Nov. 21, 2013), available at https://www.fda.gov/drugs/medication-health-fraud/public-notification-1-day-diet-contains-hidden-drug-ingredient. The FDA has advised consumers using 1 Day Diet to "stop using this product immediately and throw it away."
II. Procedural History
Plaintiff brought this action on July 28, 2014, claiming that Amazon's sale of 1 Day Diet violated the Consumer Product Safety Act,
On appeal, the Second Circuit disagreed with Amazon and the District Court that the format of the checkout page was sufficient, as a matter of law, to bind Plaintiff to the Conditions of Use. See
After discovery, Amazon brought this motion to compel arbitration and dismiss or, in the alternative, stay these proceedings. The matter was referred to the Honorable Lois Bloom pursuant to
In support of its motion, Amazon argued that Plaintiff was bound by the Prime T&C because Annemarie's Account, from which the purchases were made, had enrolled in Amazon Mom and Amazon Prime. (ECF No. 114, at 18-22; ECF No. 123, at 4-5). Amazon styled this argument as its "derivative rights" theory. (ECF No. 123, at 4). The R&R did not make a definitive recommendation with respect to Amazon's "derivative rights" theory. (R&R at 28-30). Instead, the R&R recommended that the motion be granted on the grounds that Plaintiff agreed to the COU directly through the checkout page. Specifically, the R&R accepted Amazon's argument that Plaintiff agreed to the COU by making purchases after this lawsuit was commenced, and hence after he acquired actual notice of the fact that the COU incorporated an arbitration provision. (Id. at 19-22). Alternatively, the R&R accepted Amazon's argument that Plaintiff was on constructive notice of the COU by virtue of his status as a repeated user of Amazon who frequently encountered the checkout page when shopping online. (Id. at 22-25).
Plaintiff timely objected to the R&R, although he did not specifically object to the R&R's treatment of Amazon's "derivative rights theory." (ECF No. 159, at 1-2). Amazon reasserted its "derivative rights" argument in its statement in support of the R&R and reply memorandum to Plaintiff's objections. (ECF No. 158, at 2; ECF No. 160, at 16-20).
*263DISCUSSION
In reviewing a magistrate judge's report and recommendation with respect to a dispositive matter, "[t]he district judge must determine de novo any part of the magistrate judge's disposition that has been properly objected to."
In this case, the Court exercises its discretion to review de novo Amazon's "derivative rights" argument. The Court finds that this argument has merit, and therefore compels arbitration on these grounds.
I. Substantive Legal Principles
1. The Federal Arbitration Act,
Section 2 of the FAA declares that a written arbitration agreement "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract."
To determine whether arbitration must be compelled, a court must resolve two issues: whether the parties agreed to arbitrate, and whether the dispute at hand falls within the scope of the arbitration agreement. See Mehler v. Terminix Intern. Co. L.P. ,
*264Bechtel do Brasil Construcoes Ltda. v. UEG Araucaria Ltda. ,
On questions of contract formation -whether a valid arbitration agreement exists in the first place-state law must be applied neutrally, that is, without any special presumption that the parties agreed to arbitrate. See Citigroup Global Markets Inc. v. Abbar ,
2. Adhesive arbitration agreements
As any internet user knows, website terms and conditions are burdensomely long. One rarely reads the fine print when they create a social media account, buy an e-book or movie, use a ridesharing service, or download a mobile app. This phenomenon is not new to the internet age, but is endemic to standardized form agreements wherever they appear, from credit card terms to car rentals. These agreements are contracts of adhesion, in that they contain preprinted terms offered on a take-it-or-leave-it basis, which, in light of the parties' respective bargaining positions, are not realistically susceptible to negotiation or customization. See generally Todd D. Rakoff, Contracts of Adhesion: An Essay in Reconstruction ,
Standardized adhesion contracts are necessary in a busy, commercial society. The costs in time and effort of scrutinizing non-essential boilerplate are seldom worth the benefits. See Wayne R. Barnes, Toward a Fairer Model of Consumer Assent to Standard Form Contracts: In Defense of Restatement Subsection 211(3) ,
The traditional view of adhesion contracts was that the consumer had a " 'duty to read' the document before signing it," and that his "signature on a document ... which he had the opportunity to read, will be taken to signify his assent...." Rakoff, supra , at 1185-87. The modern view accepts that this is a legal fiction: consumers do not read boilerplate. The reality is that there is a true meeting of the minds as to only a small number of terms (price, quantity, etc. ), and the consumer, by adopting the boilerplate as-is, "delegate[s]" to the merchant the power to make the rest.
*265W. David Slawson, Standard Form Contracts and Democratic Control of Lawmaking Power ,
Plaintiff raises no unconscionability argument here, but this prompts one to inquire why Plaintiff has objected so strenuously to arbitration at all. The trope that arbitrators are biased toward defendants does not appear to have been borne out by recent scholarship. See Peter B. Rutledge, Whither Arbitration? , 6 Geo. J. L. & Pub. Pol'y 549, 556-560 (2008) (surveying the data and concluding that "most measures-raw win rates, comparative win rates, comparative recoveries, and comparative recoveries relative to amounts claimed-do not support the claim that consumers and employees achieve inferior results in arbitration compared to litigation"); Sarah Rudolph Cole, On Babies and Bathwater: The Arbitration Fairness Act and the Supreme Court's Recent Arbitration Jurisprudence ,
Therefore, the scope of the Court's review in analyzing Amazon's adhesive arbitration agreement is very limited. If the Court is satisfied that an arbitration agreement exists and that it covers the dispute in issue, it must stay or dismiss these proceedings and compel arbitration in accordance with the agreement's terms. See
3. Hybridwrap agreements
While "new commerce on the Internet ... has not fundamentally changed the principles of contract,"
*266Register.com, Inc. v. Verio, Inc. ,
Some websites-such as Amazon-prompt the user to manifest their assent to particular terms by engaging in some dual-purpose action, such as creating an account, see, e.g., Meyer v. Uber Technologies, Inc. ,
*267Lee v. Intelius Inc. ,
II. Plaintiff's Evidentiary Objections
Plaintiff raises several evidentiary objections in his Opposition to Amazon's Local Rule 56.1 Statement of Undisputed Facts, as well as his memorandum of law opposing this motion. Because the Court grounds its decision solely in Amazon's "derivative rights" argument, some of these objections are rendered academic. Only three need be addressed here: (1) Plaintiff's objections (Pl. 56.1 Opp. ¶¶ 15, 18, 94-95, ECF No. 119; ECF No. 121, at 17) to the images of the Prime sign-in flow (Ressmeyer Decl. Exs. B, C, D, N); (2) Plaintiff's objections (Pl. 56.1 Opp. ¶¶ 83-84, 86; ECF No. 121, at 17) to the images of the Mom sign-in flow (Ressmeyer Decl. Ex. J); and (3) Plaintiff's objections (Pl. 56.1 Opp. ¶¶ 29, 94-95) to the declaration of Karen Ressmeyer, Amazon's Associate General Counsel for Marketing and Prime, insofar as it describes the process to sign up for Prime. (Ressmeyer Decl. ¶¶ 19, 35).
1. Amazon Prime sign-up flow
Amazon did not produce a copy of the Prime sign-up flow that a customer would have seen on October 11, 2012, claiming that it "does not have a depiction" of these webpages. (Ressmeyer Decl. ¶ 35). Instead, Amazon provided several "current and historical examples" of the Prime sign-up screens. (Ressmeyer Decl. Exs. ¶ 11 & Exs B, C, D, N). But the record shows that none of these screens could have been the ones viewed by Annemarie when she re-enrolled in Prime in 2012.
2. Amazon Mom sign-up flow
Plaintiff objects that the Mom sign-up flow produced by Amazon bears a 2012 copyright notice, and therefore could not have been the exact screen that Dennis viewed when the Account enrolled in Mom on September 30, 2011. (Pl. 56.1 Opp. ¶ 83). But Ressmeyer's declaration establishes that the same sign-up flow "was in place on September 30, 2011." (Ressmeyer Decl. ¶ 27). Therefore, Plaintiff's objections to the Mom sign-up images are denied.
*2683. Ressmeyer's description of the Prime sign-up process
Other than the Prime sign-up images, which the Court disregards as irrelevant, see Discussion II.1, supra , the only other evidence pertaining to the 2012 Prime sign-up process is Ressmeyer's description of the process in her declaration.
However, reliance on these statements would contravene the best evidence rule, codified in Federal Rule of Evidence 1002, which provides that "[a]n original writing is required in order to prove its content unless these rules or a federal statute provide otherwise." See Rui Chen v. Premier Financial Alliance, Inc. , No. 18-CV-3771 (YGR),
Even if Ressmeyer's description of the Prime sign-up process were not precluded by the best evidence rule, it would not be sufficient to establish, as a matter of law , that Annemarie entered into a binding arbitration agreement when she signed up for Prime. See Rui Chen ,
III. Annemarie Entered Into an Arbitration Agreement with Amazon
Amazon argues that Annemarie assented to the arbitration provision when she (through her agent, Dennis) enrolled in Mom in 2011. For the reasons that follow, the Court agrees.
1. Dennis acted as Annemarie's agent
Under Washington law, "[a]n agent can bind his or her principal to a contract when the agent has either actual or apparent authority."
*269Steadman v. Green Tree Servicing, LLC , No. 14-CV-854 (JLR),
Here, Annemarie testified that Dennis told her about the Mom program (A. Nicosia Dep. at 16:4-7, 58:8-11, 73:11-13), that she gave Dennis the password to her Account (id. at 44:4-11), that Dennis told her he was signing her up for Mom (id. at 39:3-8), and that he did so with her "permission" (id. at 37:1-5). From this record, there can be no dispute that Annemarie authorized Dennis to sign her up for Mom, thus establishing a principal-agent relationship. See Hofer v. Gap, Inc. ,
2. To sign up for Amazon Mom, a user must agree to an arbitration clause
The Court now turns to whether Annemarie (through her agent, Dennis) agreed to be bound by the arbitration provision. This provision appears in the COU, which is expressly "incorporated" into the Prime T&C. Therefore, the relevant question is whether the Mom sign-up flow provided reasonably conspicuous notice of the Prime T&C and required the user to manifest assent to those terms. See Starke ,
The Court has no difficulty finding that it does. The second Mom sign-up screen contains a notice directly below the "Sign up for Amazon Mom" button, which reads, "By signing up, you acknowledge that you have read and agree to the Amazon Prime Terms and Conditions ...." The proximity of this notice to the "Sign up" button would make it very difficult for any user to miss, and its explicit use of contract-forming language, viz. , "you ... agree to the Amazon Prime Terms and Conditions," leaves no doubt as to the legal consequences of proceeding with the transaction. Courts presented with similar hybridwrap interfaces have routinely found them sufficient. See May ,
Inquiry notice of the arbitration clause is buttressed by the first page of the sign-in flow, which contains a "Continue" button and, directly above that button, a notice that, "By clicking the Continue button, you acknowledge that you agree to the Amazon Mom Terms and Conditions." This notice links to the Mom T&C, which states that "your use of ... the Amazon Mom membership [is] governed by our Conditions of Use [and the] Amazon Prime *270Terms and Conditions." Although it does not appear that the Mom T&C link directly to the Prime T&C or the COU, they provide additional notice that, by proceeding with the enrollment, the user agrees to be bound by these terms.
Therefore, by signing up for Mom, Annemarie (through her agent) agreed to be bound by Amazon's arbitration clause. For the convenience of the reader, the remainder of this opinion shall refer to this agreement as the "Amazon Mom Arbitration Agreement" .
3. The Amazon Mom Arbitration Agreement applies to non-Prime eligible purchases
Plaintiff objects that the Amazon Mom Arbitration Agreement and the Prime T&C are "inapplicable and irrelevant" to this case because Plaintiff's purchases of 1 Day Diet were not Prime-eligible. (Pl. 56.1 Opp. ¶¶ 22, 30, 81-83, 90; Ressmeyer Dep. at 138:14-139:23, 209:13-15). But this cramped reading of the agreement's scope cannot withstand a plain reading of its text. Nothing in the COU, the Prime T&C, the Mom T&C, or the Amazon Mom offer terms limits the scope of the arbitration clause to purchases for Prime-eligible products. The COU, which are "incorporated" into the Prime T&C, and to which Annemarie agreed when the Account enrolled in Mom, broadly state that "[a]ny dispute or claim relating in any way to your visit to Amazon.com or to products or services sold or distributed by Amazon or through Amazon.com will be resolved by binding arbitration.... " Clearly, purchases of all products on Amazon.com-whether Prime-eligible or not-fall within this provision's plain sweep.
4. The Amazon Mom Arbitration Agreement continues to apply when a user enrolls in a paid Prime subscription
Plaintiff further objects that Annemarie's enrollment in Amazon Mom is "irrelevant" because her membership in the program expired in 2012, prior to Plaintiff's purchases of 1 Day Diet (Pl. 56.1 Opp. ¶¶ 81-88). The Court disagrees. When a user signs up for Amazon Mom-essentially a temporary, free trial of Prime, see Background I.3, supra -and thereby agrees to an arbitration provision, that arbitration provision continues to govern if the user signs up for a paid Prime subscription after their free trial expires.
We turn first to the relevant contractual language. The COU itself places no temporal limitations on the arbitration clause. It states only that "[a]ny dispute or claim relating in any way" to the accountholder's use of Amazon "will be resolved by binding arbitration." A literal reading of this clause, therefore, would suggest that it applies to all future disputes.
The Prime T&C provide that "[t]he [Prime T&C], together with applicable terms and conditions related to any promotional offers provided to you for use with Prime, constitute the entire agreement between you and Amazon.com related to the Prime membership " (emphasis added). The Prime T&C further provide that, "[i ]f you sign up for a Prime membership , you accept these terms, conditions, limitations and requirements" (emphasis added). This emphasized language must be read in conjunction with the Mom T&C, which provide: "Once your free shipping benefits have expired, you may continue to receive Amazon Prime shipping benefits by enrolling in Amazon Prime for an annual membership fee of $79" (emphasis added). Read together, this language refutes Plaintiff's argument that, by signing up for Amazon Mom, an accountholder is only governed by the Prime T&C for the duration of their "free" Amazon Mom benefits. Instead, under these terms, one who *271enrolls in a paid subscription after their free trial expires, and thereby reactivates their "Prime membership," remains bound by the Prime T&C to which they previously agreed.
Because nothing in the text of the Amazon Mom Arbitration Agreement supports the temporal limitation urged by Plaintiff, any such argument must rely on context . In other words, Plaintiff's argument must be that a reasonable consumer entering into an arbitration agreement as part of a free trial would not understand the clause to survive if they convert to a paid subscription. But Plaintiff cites no authority for this proposition, and the Court has difficulty accepting it. It is fairly routine for vendors to offer free trials of certain goods or services, which automatically roll over to paid subscriptions unless the consumer affirmatively cancels. There can be no doubt that one who agrees to a contract term as part of a free trial remains bound if they automatically convert to a paid subscription. See, e.g., E. G. Ground Management v. YCharts, Inc. , No. 15-CV-55 (RGK),
Here, Amazon Mom was described by Amazon as, and understood by Annemarie to be, a kind of Prime membership. See Background I.3, supra . The sign-up screen for Mom read: "After your free period, you'll be charged $79 for a year of Amazon Prime and Amazon Mom benefits ," and "Amazon Prime membership continues until cancelled ." If Annemarie's reenrollment in Prime were simply automatic at the expiration of her Amazon Mom membership, there is no question that she would remain bound by the Prime T&C. The fact that she manually re-enrolled in October 2012 only makes the case for arbitrability stronger. By affirmatively rolling her Mom membership over into a paid Prime subscription, Annemarie implicitly manifested an assent to remain bound by whatever contractual obligations previously governed the Account while it was enrolled in Mom.
In arriving at this conclusion, the Court does not hold that the 2012 sign-up process for Prime, on its own, provided sufficient inquiry notice of the Prime T&C. As previously stated, there is insufficient evidence to support this conclusion as a matter of law. See Discussion II.1, II.3, supra . However, in light of the broad presumption of arbitrability that governs to the scope and meaning of an arbitration agreement, Moses H. Cone , 460 U.S. at 24-25,
IV. Plaintiff is Equitably Estopped from Avoiding Arbitration
The preceding analysis shows that Annemarie entered into a binding arbitration agreement by signing up for Amazon Mom and that the agreement covered purchases of products, whether Prime-eligible or not, made after Annemarie re-enrolled in Prime in 2012. Thus, if it were Annemarie herself who purchased 1 Day Diet, she would be bound to arbitrate this dispute. The question at the heart of Amazon's "derivative rights" argument is whether the Amazon Mom Arbitration Agreement can be circumvented when it is a third party (i.e. , the Plaintiff), rather than Annemarie herself, who makes purchases on the Account.
To ask this question is to answer it. Password-sharing is a "ubiquitous, useful, and generally harmless" activity that "millions *272of people" engage in, United States v. Nosal ,
Although Plaintiff himself did not enter into the arbitration agreement described above, "a nonsignatory party may be bound to an arbitration agreement if so dictated by the 'ordinary principles of contract and agency.' " Thomson-CSF, S.A. v. American Arbitration Ass'n ,
Several district courts have considered facts analogous to this case and have held that a third-party user of an account is bound by the terms governing the account. See Roberts v. eBay , No. 14-CV-4904 (HMH) (MGB),
1. Traditional equitable estoppel
Equitable estoppel has been formulated differently in different contexts. The indelible feature of estoppel, as it has been traditionally defined, is that one party has made a representation, upon which another party justifiably relies to their detriment, such that it would be inequitable for the first party to take a subsequent position inconsistent with the truth of that representation. See Republic of Ecuador v. Chevron Corp. ,
If any person, by a course of conduct or by actual expression, so conducts himself that another may reasonably infer the existence of an agreement or license, whether the party intends that he should do so or not, it has the effect that the party using that language, or who has so conducted himself, cannot afterwards gainsay the reasonable inference to be drawn from his words or conduct.
*274Though expressed 160 years ago, Lord Chief Pollock's words describe precisely the inequity that occurs when one profits from the use of another's account on an e-commerce platform without adhering to the terms and conditions that govern the account. When one uses an account to transact online, an implicit representation is made that they are the person identified with the account, and thus are bound by the same terms and conditions previously agreed to by the account's true owner. Platforms such as Amazon fulfill orders and provide other services in reliance on that implied representation. In this case, Plaintiff's use of the Account was tantamount to a representation that he was Annemarie Nicosia (and therefore bound by the arbitration provision to which she had previously agreed). It equity and fairness, he should be bound by the consequences of that representation as though it were true.
2. Direct benefits estoppel
In the arbitration context, most courts have applied a modified test for equitable estoppel, known as the "direct benefits test," pursuant to which a nonsignatory may be compelled to arbitrate where it " 'knowingly accepts the benefits' of an agreement with an arbitration clause." MAG Portfolio Consult, GMBH v. Merlin Biomed Group LLC ,
Consider the facts in Bridge v. Credit One Financial , 14-CV-1512 (LDG) (NJK),
Although the court in Bridge analyzed Credit One's motion to compel under the direct benefits test rather than traditional equitable estoppel, it is easy to see how the same result could have been reached under the latter theory. When the plaintiff provided his mother's personal information to Credit One's automated information system, he implicitly represented that he was the true accountholder. Credit One justifiably relied on that representation when it subsequently provided the information plaintiff sought.
This case is essentially no different from Bridge . When Plaintiff accessed the Annemarie Account and used it to place purchases of 1 Day Diet, he, like the plaintiff in Bridge , implicitly represented that he was the true accountholder. Like the plaintiff in Bridge , he directly benefited from the making of that representation, in that it allowed him to step into the shoes of his wife and enjoy the same contractual rights she enjoyed, viz. , the right to place an order on Amazon.com. Because plaintiff knowingly accepted the benefit of Annemarie's contractual relationship with Amazon, he must also be held to the arbitration clause that governs that relationship.
For these reasons, under either a traditional theory of equitable estoppel or direct benefits estoppel, Plaintiff is bound by the Amazon Mom Arbitration Agreement.
3. Amazon's "derivative rights" argument is not waived
Plaintiff argues that the Court should deem Amazon's derivative rights argument waived because it was not specifically pleaded in Amazon's responsive pleadings. (ECF No. 121, at 20-21). See Fed. R. Civ. P. 8(c)(1) ("In responding to a pleading, a party must affirmatively state any avoidance or affirmative defense, including: ... arbitration and award; ... [and] estoppel...."). The Court disagrees. In its Answer, Amazon asserted that "Plaintiff's purported claims ... are subject to mandatory arbitration ... pursuant to one or more agreements binding on the Plaintiff or applicable to the claims he purports to set forth." (ECF No. 84, at 34) (emphasis added). This broad phrasing put Plaintiff on notice that Amazon would seek not only to enforce the purported arbitration agreements that he entered into, but those that were "binding on [him]."
*276In any event, even where an affirmative defense is not adequately pleaded, a district court may still entertain it at the summary judgment stage "in the absence of undue prejudice to the plaintiff, bad faith or dilatory motive on the part of the defendant, futility, or undue delay of the proceedings." Estate of Hamilton v. City of New York ,
V. Plaintiff's Remaining Contentions
1. Waiver
Plaintiff argues that Amazon waived its right to arbitrate because it had previously moved to dismiss under Rule 12(b)(6). (ECF No. 121, at 5-8; ECF No. 159, at 6-11). The R&R is hereby adopted insofar as it rejected this argument. (R&R at 12-15).
The thrust of Plaintiff's objection is that Amazon should not be permitted to take a "heads-I-win-tails-you-lose" approach, where it is able to move to dismiss on the merits, winnow out certain claims in court, and only proceed to arbitration on the claims that were not dismissed. (ECF No. 159, at 3, 11). While this argument would have force if Amazon had only moved to dismiss on the merits, it must be rejected in this case, where Amazon moved to dismiss on both arbitrability and merits grounds. To find prejudice under these circumstances would be to endorse a rule that a defendant who has a colorable argument for dismissal on either merits or arbitrability grounds must choose one argument and abandon the other. Such a rule would work substantial prejudice-against the defendant .
The Court also rejects Plaintiff's argument (ECF No. 159, at 10-11) that the 32-month delay between Amazon's motion to dismiss and its motion to compel warrants a finding of waiver. (R&R at 13 ("[T]he 32-month period between commencement of the lawsuit and the instant motion, although significant, 'does not by itself support a finding of waiver' ") (quoting Chehebar v. Oak Fin. Grp., Inc. , No. 14-CV-2982 (LDW),
Accordingly, the Court finds that Amazon's right to arbitration has not been waived.
2. Actual and constructive notice
The Court has reviewed Plaintiff's objections to those portions of the R&R which concluded that Plaintiff had actual (id. at 19-22) and constructive (id. at 22-25) notice of the COU through his use of the Amazon.com checkout page, and finds that they are academic in light of the Court's disposition above, which is based on the Amazon Mom Arbitration Agreement. Therefore, these objections are denied.
3. Unilateral modification
Plaintiff argues that he is not required to arbitrate this dispute because Amazon never lawfully modified the pre-August 19, 2011 Conditions of Use, which did not contain an arbitration clause. (ECF No. 159, at 11-14). However, as the Second Circuit clarified, Washington law permits unilateral modifications to a contract "if there is notice and assent to the changed terms." Nicosia ,
4. Illegality
Finally, the Court has reviewed Plaintiff's challenge to the validity of Amazon's agreement to sell 1 Day Diet on grounds of illegality (ECF No. 159, at 22-24), and finds that this objection is academic in light of the Court's disposition above, as Plaintiff does not challenge the legality or enforceability of the Amazon Mom Arbitration Agreement. In any event, the Court adopts the R&R insofar as it held that, if Plaintiff entered into an agreement to arbitrate by purchasing 1 Day Diet, the illegality of the contract would be a question for the arbitrator. (R&R at 30-32).
VI. Dismissal in Lieu of Stay
Amazon seeks, in addition to an order compelling arbitration, "an order ... dismissing or staying these proceedings." (ECF No. 113). Although Section 3 of the FAA only speaks of staying proceedings, it is well-settled that an arbitrable dispute may be dismissed in lieu of a stay if the defendant requests dismissal. See Zambrano v. Strategic Delivery Solutions, LLC , No. 15-CV-8410 (ER),
CONCLUSION
The conclusion that arbitration should prevail was arrived at within the legal framework set forth by the Court of Appeals, namely, whether a reasonably prudent internet user would have notice of Amazon's Conditions of Use. The conclusion is reached after substantial research and discussion of the cases and relevant literature summoned in the struggle created by the advent of the internet-the struggle to make the common law of contracts *278applicable when people interacted with people in the commercial world, fit comfortably in a time when people interact with machines in that world and with each other.
However, the rule that the "existence" of additional contract terms must be made "reasonably conspicuous" is, this Court submits, largely a superfluity. The cases specify that such terms must be reasonably conspicuous from the point of view of a "reasonably prudent" user. Meyer ,
It could be argued that the purpose of providing "reasonably conspicuous" notice of the hyperlinked terms is not merely to notify the user that these terms exist, but to encourage him or her to read them. But most consumers will not read the terms and conditions, no matter how prominently the notice is displayed, and those that do will usually not understand them. See Jeff Sovern, Elayne E. Greenberg, Paul F. Kirgis and Yuxiang Liu, "Whimsy Little Contracts" With Unexpected Consequences: An Empirical Analysis of Consumer Understanding of Arbitration Agreements ,
*279The puzzle, then, is this. On the one hand, the law cannot countenance an environment where unscrupulous merchants are able to insert any contractual term they wish into the hybridwrap agreement and expect automatic enforcement. On the other hand, a legal rule which merely exalts the form and visual layout of the hybridwrap agreement, incentivizing merchants to adopt some judicially-favored website designs while foregoing others, is unlikely to have more than a negligible impact on the way buyers and sellers contract over the internet.
This Court suggests that Llewellyn had the answer: rather than scrutinizing hybridwrap agreements for contract formation issues, courts should recognize that such agreements, like other adhesive contracts, represent in substance a "blanket assent" to any terms that are not objectively unreasonable. Llewellyn, Common Law Tradition, supra , at 370; see also Restatement (Second) of Contracts § 211 cmt. f. Accepting this framework, such terms should be rigorously scrutinized for substantive unreasonableness, perhaps to a greater degree than they have been subjected thus far. See Robert L. Oakley, Fairness in Electronic Contracting: Minimum Standards for Non-Negotiated Contracts ,
Exquisitely applicable and responsive to the stubborn problems presented by this case and countless others like it is the observation by Oliver Wendell Holmes, Jr. in his 1881 Lectures on the Common Law: "The life of the law has not been logic: it has been experience. The felt necessities of the time ... have had a good deal more to do than the syllogism in determining the rules by which men should be governed." Oliver Wendell Holmes, Jr., The Common Law 1 (1881). Experience, not logic, has taught that a purchase on the internet is determined by rules different from a purchase of milk at the corner grocery, a thought expressed more simply and vividly by Judge Cardozo in MacPherson v. Buick Motor Co. : "Precedents drawn from the days of travel by stage coach do not fit the conditions of travel today."
For the reasons set forth in the previous sections and the R&R as adopted, Amazon's motion to compel arbitration is GRANTED , and Amazon's motion to dismiss Plaintiff's claims is GRANTED.
SO ORDERED.
APPENDIX A
Amazon Mom Sign-Up Flow (Ressmeyer Ex. J, at AMZ000371-000372).
In addition, three accounts were created in Plaintiff's name in 2009 and 2010. (Ressmeyer Decl. ¶¶ 21-24). For purposes of this motion, the Court is not concerned with these three accounts.
There is an ambiguity in the record as to whether these benefits expired on September 30, 2012 or October 11, 2012. (Ressmeyer Dep. at 200:9-20).
This case was assigned to me on February 21, 2018.
Exhibit B lists an annual Prime fee of $99; the fee was raised from $79 in March 2014. (Ressmeyer Decl. Ex. B, AMZ000268; Ressmeyer Dep. at 233:6-234:5; Def. 56.1 ¶ 13). Exhibit C contains a 2017 copyright notice. (Ressmeyer Decl. Ex. C; Ressmeyer Dep. at 228:2-230:6). Ressmeyer conceded at her deposition that Exhibit D could not have been the "page Mrs. Nicosia would have seen." (Ressmeyer Dep. at 235:23-236:3). Exhibit N was Prime's "current" sign-in page as of April 6, 2017. (Ressmeyer Decl. ¶ 35).
Although Ressmeyer remarked at her deposition that one of the sign-up screens produced by Amazon had the same "format" as the one used in 2012 (Ressmeyer Dep. at 236:18-19), she did not elaborate on this comment, and it is impossible for the Court to tell what she meant.
Ressmeyer states that, in order to sign up for Prime, a user "would have been required to click a button that stated 'Signup now' or 'Confirm' (or similar language indicating that the user was about to start a Prime membership)." (Ressmeyer Decl. ¶ 35). "Beneath that button was language substantially similar to the following: 'By signing up, you acknowledge that you have read and agree to the Amazon Prime Terms and Conditions....," with the underlined text hyperlinked to the Prime T&C. (Id. ).
Neither party disputes that Washington law applies to questions of agency in this case. (ECF No. 114, at 16; ECF No. 121, at 21).
The caveat that a website account is only bound by past agreements made with due authority prevents the situation where, for example, an accountholder is made liable for an unauthorized purchase.
Amazon did not expressly invoke the principle of equitable estoppel in its papers. It simply referred to Motise I and its progeny, without clearly explaining the theoretical underpinnings of this line of cases. (ECF No. 114, at 22; ECF No. 123, at 4; ECF No. 158, at 2; ECF No. 160, at 16-20). Nevertheless, "[i]t is ... the substance of the claim, and not the language used in stating it, that controls." Blitz v. Boog ,
Care must be taken to distinguish principles of equitable estoppel, upon which the Court relies here, with those of agency, which comprise no part of this analysis. Whether Plaintiff was an "agent" of Annemarie when he purchased 1 Day Diet is relevant only to the question of whether Annemarie could be bound by Plaintiff's actions. It is utterly irrelevant to the present question of whether Plaintiff is bound by Annemarie 's previous agreement to the contract. Indeed, even a stranger whose use of the Account were wholly unauthorized could be bound by the Account's terms and conditions-though he, not being an agent of the accountholder(s), would be unable to bind them to any new liabilities.
The arbitration agreement in Bridge contained a clause stating that "Claims subject to arbitration include not only Claims made directly by you, but also Claims made by anyone connected with you or claiming through you, such as a co-applicant or authorized user of your account, your agent, representative or heirs, or a trustee in bankruptcy." Id. at *2. However, the court did not rely on this provision in reaching its decision. If it had, the court would have had no occasion to ground its ruling in equitable estoppel.
Reference
- Full Case Name
- Dean NICOSIA, on behalf of himself and all others similarly situated v. AMAZON.COM, INC.
- Cited By
- 37 cases
- Status
- Published