TCPA Defendant Can’t Compel Arbitration Based on Provision in “Terms of Use” Published on Website

Yesterday, a California federal judge ruled that Dick’s Sporting Goods Inc. (DSG) can’t compel arbitration of a consumer’s proposed class action alleging violations of the Telephone Consumer Protection Act (TCPA) because the consumer wasn’t aware of an arbitration provision published in the DSG’s website’s “Terms of Use”.

The case is Nghiem v. Dick’s Sporting Goods, Inc. (Case No. 8:16-cv-00097, United States District Court, Central District of California).

Background

Plaintiff Phillip Nghiem brought this action against Defendants DSG and Zeta Interactive Corporation (Zeta) for violations of the TCPA. The Complaint sought statutory damages, treble damages, attorney’s fees, and an order certifying a class.

The Complaint alleged that DSG administers a marketing program centered on what they call “mobile alerts”—text messages sent to subscribers. Consumers can sign up for mobile alerts on DSG’s website or by sending a text message with the word “JOIN” to a number associated with DSG, called a “short code.”

On May 4, 2015, Plaintiff enrolled in DSG’s mobile alert program by texting the word “JOIN” to DSG’s short code. Thereafter, on December 6, 2015, Plaintiff texted the word “Stop” to that same short code, indicating that he no longer wished to receive mobile alerts from DSG. DSG sent Plaintiff a text message indicating that he had unsubscribed and would no longer receive mobile alerts.

But, the Complaint alleges that DSG continued to send Plaintiff text messages, including on at least eight particular occasions between December 11, 2015 and January 22, 2016.

On June 13, 2016 DSG and Zeta filed a motion to compel arbitration arguing that Plaintiff was on notice of the Terms of Use on DSG’s website, which contain an arbitration agreement Defendants say cover the TCPA claims at issue.

Plaintiff insists that he was unaware of the arbitration agreement and had no reason to know of it. And even if he did agree to an arbitration agreement, Plaintiff says, the agreement did not cover TCPA claims, and the agreement cannot be enforced by third parties like Zeta.

The Honorable Cormac J. Carney, United States District Court Judge, denied Defendant’s motion.  The order denying the Defendant’s motion to compel arbitration can be found here.

Judge Carney wrote:

“The arbitration agreement at issue here is contained within the Terms of Use that govern visitors to DSG’s website. The Terms of Use constitute what is known as a“browsewrap agreement.” As the Ninth Circuit has explained,

Contracts formed on the Internet come primarily in two flavors: “clickwrap” (or “click-through”) agreements, in which website users are required to click on an “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.  Browsewrap agreements do not require the user to manifest assent to the terms and conditions [of a website] expressly. Instead, the agreements purport to bind users simply by their existence, no matter whether the user has actually viewed them. Because of this lack of assent on the part of consumers, courts enforce browsewrap agreements with “reluctance,” and will generally only do so when a consumer has “actual or constructive knowledge of a website’s terms and conditions.”

Defendants argued that Plaintiff both had actual knowledge of, and constructive knowledge of, DSG’s Terms of Use.

On the issue of “actual knowledge” of the terms, Defendants claim that the Plaintiff is a lawyer whose former firm routinely handles TCPA cases, including TCPA cases against DSG and its affiliates. As such, Defendants say, Plaintiff can be expected to have been familiar with DSG’s arbitration agreement and have been fully aware of it when he enrolled in the mobile alerts program.  Defendants also provided evidence that Plaintiff enrolled in a number of text messaging programs in a short period of time – “fishing” for a TCPA lawsuit.

For his part, Plaintiff stated that he “never worked on any matter, including any TCPA matter, involving DSG,” and that while at his former firm, he “did not litigate as an attorney the enforceability of an arbitration clause in [any type of] matter, TCPA or otherwise.”

Judge Carney ruled:

“These facts are insufficient to permit the Court to infer actual knowledge of the Terms of Use on Plaintiff’s part. To be sure, as an attorney who sometimes litigates TCPA claims, Plaintiff surely has a greater level of understanding of the significance and prevalence of arbitration agreements. And Plaintiff did sign up for a significant number of mobile alerts programs within a few months. Nonetheless, actual knowledge is not something to be “safely assumed,” as Defendants would have it, based on a plaintiff’s occupation. Instead, Defendants were required to put forth “evidence” that Plaintiff had “actual knowledge of the agreement” at issue.”

On the issue of “constructive knowledge” of the terms and conditions Judge Carney wrote:

“Whether a consumer is on such notice “depends on the design and content of the website and the agreement’s webpage. The “conspicuousness and placement” of a hyperlink to a website’s terms of use, any “other notices given to users” of those terms, and the “website’s general design” should all be consulted when determining whether a user is on inquiry notice of terms of use containing an arbitration agreement. When a hyperlink to a website’s terms is “buried at the bottom of the page or tucked away in obscure corners of the website,” users cannot be said to be on constructive notice.

Materials provided to the Court indicate that the hyperlink to DSG’s Terms of Use appears “in the website footer” of DSG’s home page, as well as its page containing information about its mobile app. The link appears in a grouping of 27 other hyperlinks, arranged in four columns, that cover topics as diverse as “Careers,” “Gift Cards,” “Commercials & Films,” and “Find a Store.” “Terms of Use” is sandwiched between “Only at DICK’s” and “California Disclosures,” near the bottom of the third column of links. (Id.) This placement is not conspicuous enough, alone, to put consumers on inquiry notice of the Terms of Use.”

As the Court has concluded that Plaintiff neither had actual knowledge of the Terms of Use, nor was on inquiry notice of those terms, he cannot be bound by the arbitration clause contained in DSG’s browsewrap agreement. Defendants’ motion to compel arbitration is therefore DENIED.”

insideARM Perspective

“Terms and Conditions” buried in a robust website are not the best way to have an enforceable arbitration provision, even if the Plaintiff is an attorney with prior TCPA experience and even if you are arguing that the attorney is “fishing” for TCPA cases.

Relying on any arbitration provision is going to be even more difficult or altogether impossible if the Consumer Financial Protection Bureau (CFPB) has their way.  See this article by Jane Luxton from the Clark Hill law firm insideARM published on May 9, 2016.