Judge David S. Cunningham, Case 22STCV03531 2022-07-26 Tentative Ruling

Judge: David S. Cunningham, Case: 22STCV03531, Date: 2022-07-26 Tentative Ruling

ILF is a company that makes and sells sex toys. (See First Amended Complaint (“FAC”), ¶ 1.)

On 9/21/21, Plaintiff purchased a product called Stamina Training Unit from ILF’s website. (See Weeks Decl., ¶ 2.)[1]

Plaintiff alleges that ILF’s representations and advertisements about the product were untrue. He asserts causes of action for negligent misrepresentation, violation of the Consumer Legal Remedies Act, violation of the False Advertising Law, breach of express and implied warranties, and violation of the Unfair Competition law, and he seeks to represent a class of similar California customers. (See, e.g., FAC, ¶¶ 19-72.)

Notably, ILF’s representative claims the ILF website had a “Terms of Use” hyperlink, which included an arbitration agreement. (See Custer Decl., ¶¶ 2-6.)

Plaintiff declares that he never saw the link and did not agree to the terms. (See Weeks Decl., ¶ 3.)

“[W]hen a petition to compel arbitration is filed and accompanied by prima facie evidence of a written agreement to arbitrate the controversy, the court itself must determine whether the agreement exists and, if any defense to its enforcement is raised, whether it is enforceable.” (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4^th 394, 413.)

“Under ‘both federal and state law, the threshold question . . . is whether there is an agreement to arbitrate.’” (Cruise v. Kroger Co. (2015) 233 Cal.App.4^th 390, 396, emphasis in original.)

The burden of proof rests with the petitioner. (See Rosenthal, supra, 14 Cal.4^th at 413 [requiring the petitioner to prove the existence of the agreement “by a preponderance of the evidence”].) To meet the burden, “the provisions of the written agreement and the paragraph that provides for arbitration . . . must be stated verbatim or a copy must be physically or electronically attached to the petition and incorporated by reference.” (Cal. Rules of Court, rule 3.1330; see also Condee v. Longwood Management Corp. (2001) 88 Cal.App.4^th 215, 218 [same].)

“Competent evidence is required to establish both the existence of the arbitration agreement and any ground for denial.” (Knight, et al., Cal. Practice Guide: Alternative Dispute Resolution (The Rutter Group December 2021 Update) ¶ 5:321.) “The verified petition (and attached copy of the agreement) normally proves the existence of the arbitration agreement. Affidavits or declarations may be necessary when factual issues are tendered.” (Ibid.)

ILF’s representative claims the purported arbitration agreement appeared on the “Terms of Use” pages of ILF’s website. (See Custer Decl., ¶¶ 2-6.)

THE TERMS OF USE SET FORTH BELOW (THE "TERMS") GOVERN YOUR USE OF THE SITE VIA THE INTERNET, THE WORLD WIDE WEB, MOBILE NETWORKS, OR ANY OTHER COMMUNICATION METHODS NOW KNOWN OR IN THE FUTURE DEVELOPED. IN CONSIDERATION FOR ACCESS TO AND/OR USE OF THE SITE, YOU ("YOU", “YOUR”, “USER”, OR, COLLECTIVELY, "USERS”) AGREE TO READ THE TERMS CAREFULLY BEFORE ACCESSING THE SITE, YOU ACKNOWLEDGE THAT YOU HAVE READ AND UNDERSTOOD THE TERMS, AND YOU AGREE TO BE BOUND BY THE TERMS. THE TERMS ARE A LEGAL CONTRACT BETWEEN YOU AND ILF, AND GOVERN YOUR ACCESS TO AND/OR USE OF THE SITE.

PLEASE READ THE FOLLOWING CAREFULLY AS IT AFFECTS YOUR LEGAL RIGHTS. THESE TERMS CONTAIN AN AGREEMENT TO ARBITRATE THAT REQUIRES THE USE OF ARBITRATION ON AN INDIVIDUAL BASIS TO RESOLVE DISPUTES RATHER THAN JURY OR ANY OTHER COURT PROCEEDINGS, OR CLASS ACTIONS OF ANY KIND. IF YOU DO NOT AGREE WITH ANY OF THE TERMS, CLOSE THE SITE DOWN IMMEDIATELY AND DO NOT ACCESS OR OTHERWISE USE THE SITE OR ANY INFORMATION CONTAINED ON THE SITE OR OBTAIN ANY GOODS, SERVICES OR PRODUCTS FROM US.

BY ACCESSING OR OTHERWISE USING THE SITE YOU AGREE TO THESE TERMS & CONDITIONS. Any person or entity who interacts with the Site through the use of crawlers, robots, browsers, data mining or extraction tools, or other functionality, whether such functionality is installed or placed by such person or entity or a third party, is considered to be using the Site.

You agree first to try to resolve any controversy, claim, or dispute arising out of or relating to the Terms or the access and/or use of the Site, with the help of a mutually agreed upon mediator in Austin, Travis County, Texas. Any costs and fees other than attorneys’ fees associated with the mediation shall be shared equally by the parties. Attorneys’ fees associated with the mediation shall be paid by the respective parties for their own attorneys.

If it proves impossible to arrive at a mutually satisfactory solution through mediation, You agree to submit the dispute to binding arbitration in Austin, Travis County, Texas. YOU AGREE TO ARBITRATE ON AN INDIVIDUAL BASIS TO RESOLVE DISPUTES RATHER THAN JURY OR ANY OTHER COURT PROCEEDINGS, OR CLASS ACTIONS OF ANY KIND. YOU AND ILF AGREE THAT IN THE EVENT OF ANY CLAIM, DISPUTE, OR CONTROVERSY (WHETHER IN CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF, RELATING TO, OR CONNECTED IN ANY WAY WITH THE SITE, OR THE BREACH, ENFORCEMENT, INTERPRETATION, OR VALIDITY OF THESE TERMS, SUCH CLAIM, DISPUTE OR CONTROVERSY WILL BE RESOLVED EXCLUSIVELY BY FINAL AND BINDING ARBITRATION, EXCEPT AS OTHERWISE SET FORTH IN THESE TERMS. ARBITRATION IS MORE INFORMAL THAN A LAWSUIT IN COURT AND USES A NEUTRAL ARBITRATOR INSTEAD OF A JUDGE OR JURY. ARBITRATION IS SUBJECT TO VERY LIMITED REVIEW BY COURTS, BUT ARBITRATORS CAN AWARD THE SAME DAMAGES AND RELIEF THAT A COURT CAN AWARD.

Such arbitration shall be conducted in accordance with the then prevailing consumer arbitration rules of the American Arbitration Association (“AAA”), and judgment on the award rendered by the arbitrator(s) may be entered in the state or federal courts in and for Austin, Travis County, Texas. The parties agree to abide by all decisions and awards rendered in such proceedings. Such decisions and awards rendered by the arbitrator shall be final and conclusive and may be entered in any court having jurisdiction thereof as a basis of judgment and of the issuance of execution for its collection. All such controversies, claims or disputes shall be settled in this manner in lieu of any action at law or equity. The arbitrator shall not have the right to award punitive damages or speculative damages to either party and shall not have the power to amend this Agreement. The arbitrator shall be required to follow applicable law.

IF FOR ANY REASON THIS ARBITRATION CLAUSE BECOMES INAPPLICABLE, THEN YOU, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY AS TO ANY ISSUE RELATING HERETO IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER MATTER INVOLVING THE PARTIES HERETO.

Plaintiff contends the motion should be denied because the declaration of ILF’s representative is not properly signed and fails to authenticate the screenshot of ILF’s website. (See Opposition, pp. 2-3 n.2.)

The copy of the declaration submitted with the moving papers is electronically signed. (See Custer Decl., p. 3.)

When a document to be filed electronically provides for a signature under penalty of perjury, the document is deemed to have been signed by that person if filed electronically, provided that:

[1] The declarant has signed the document using an electronic signature and declares under penalty of perjury under the laws of the state of California that the information is true and correct. If the declarant is not the electronic filer, the “electronic signature must be unique to the declarant, capable of verification, under the sole control of the declarant, and linked to data in such a manner that if the data are changed, the electronic signature is invalidated [citations]; or

[2] The declarant, before filing, has physically signed a printed form of the document. By filing it electronically, the filer certifies that the filer has the signed original and will make it available for inspection and copying upon request by the court or any party. [Citations.] (If such a request is made, the filer must make the original available for inspection and copying by all other parties within 5 days after the request is served; [citation]. Alternatively, the court may order it produced at a specified time and place; [citation].)

(Weil & Brown, Cal. Prac. Guide: Civ. Proc. Before Trial (The Rutter Group 2022) ¶ 9:94.10, emphasis in original; see also Cal. Rules of Court, rule 2.257, subd. (b).)

Plaintiff claims the declaration fails to comply with requirement [1]. (See Opposition, pp. 2-3 n.2.)

In reply, ILF submitted a hand-signed copy of the declaration. (See Reply Johnson Decl., Ex. 1, p. 3.)

Plaintiff has not had an opportunity to respond to the reply evidence, but the hand-signed copy appears to satisfy requirement [2]. The Court declines to deny the motion on this ground.

However, the Court agrees with Plaintiff’s second argument. ILF’s representative declares that he printed the screenshot and the purported arbitration agreement from ILF’s website on 6/9/22. (See Custer Decl., ¶ 6; see also Weeks Decl., ¶ 2.) He also asserts:

Since at least 2012, a hyperlink to ILF’s Terms of Use has appeared on every page of ILF’s website. ILF’s most recent update of its Terms of Use was active and accessible through the Terms of Use hyperlink on ILF’s website since January 2020 to the present, including at the time of the Weeks Purchase in September 2021.

(Ibid.) These statements fail to authenticate the screenshot and the agreement because:

* Plaintiff purchased the product on ILF’s website nearly nine months before the representative printed the documents (see Weeks Decl., ¶ 2); and

* the representative fails to cite facts showing personal knowledge that the website was the same on 9/21/21 (date of purchase) and 6/9/22 (date of printing). (See Custer Decl., ¶ 2 [representative admitting that he “took a leave of absence” from July 2020 to mid-September 2021 and was not employed by ILF at the time of Plaintiff’s purchase].)

This is reason enough to find ILF’s burden unsatisfied and to deny the motion.

Another reason is ILF’s failure to show assent. The “Terms of Use” hyperlink is at the bottom right corner on the fifth page of the screenshot. (See id. at Ex. C, p. 5.) “Terms of Use” is written in gray over a black background, blending and “making it inconspicuous and difficult to locate.” (Opposition, p. 3.) The font size is tiny to the point of being illegible and unnoticeable. (See ibid. [noting that “[t]he font size . . . is . . . much smaller than “the links immediately preceding it for its Customer Care (e.g., faq, contact us, order status, my account), Shop (sex toy categories), and Discover (e.g. social media links) sections”].) Nothing on page five indicates that the “Terms of Use” include an arbitration agreement. Moreover, Plaintiff says he did not navigate to the bottom of page five when he bought the product, he never saw the link, and he did not agree to any of the provisions. (Weeks Decl., ¶¶ 2-3.) ILF fails to cite evidence contradicting Plaintiff’s testimony. (See Motion, p. 5 [opining, without citing evidence, that “Plaintiff either knew of the arbitration agreement or intentionally failed to read it so that he could claim ignorance”].) These facts disprove the existence of an agreement to arbitrate.

Assuming arguendo that ILF demonstrates the existence of an agreement to arbitrate, the next issue concerns enforcement.

“Most courts now have identified at least four types of internet contract formation, most easily defined by the way in which the user purportedly gives their assent to be bound by the associated terms: browsewraps, clickwraps, scrollwraps, and sign-in wraps.” (Sellers v. JustAnswer LLC (2021) 73 Cal.App.5^th 444, 463.)

“A ‘browsewrap’ agreement is one in which an internet user accepts a website's terms of use merely by browsing the site.” (Ibid., emphasis in original.) “A ‘clickwrap’ agreement is one in which an internet user accepts a website's terms of use by clicking an ‘I agree’ or ‘I accept’ button, with a link to the agreement readily available.” (Ibid., emphasis in original.) “A ‘scrollwrap’ agreement is like a ‘clickwrap,’ but the user is presented with the entire agreement and must physically scroll to the bottom of it to find the ‘I agree’ or ‘I accept’ button[.]” (Id. at 463-464, emphasis in original.) “‘Sign-in-wrap’ agreements are those in which a user signs up to use an internet product or service, and the sign-up screen states that acceptance of a separate agreement is required before the user can access the service.” (Id. at 464, emphasis in original.) “While a link to the separate agreement is provided, users are not required to indicate that they have read the agreement's terms before signing up.” (Ibid.) “Instead, ‘the website is designed so that a user is notified of the existence and applicability of the site's “terms of use” [usually by a textual notice] when proceeding through the website's sign-in or login process.” (Ibid.)

California and “federal courts have reached consistent conclusions when evaluating the enforceability of agreements at either end of the spectrum, generally finding scrollwrap and clickwrap agreements to be enforceable and browsewrap agreements to be unenforceable.” (Sellers, supra, 73 Cal.App.5^th at 466, emphasis added.) In Sellers, the Court of Appeal additionally found the sign-in-wrap agreement unenforceable. (See id. at 453.)

Plaintiff contends ILF’s arbitration agreement is a browsewrap agreement. (See Opposition, pp. 6-9.)

ILF does not contest Plaintiff’s characterization, and, in fact, ILF’s description of the agreement and the website match the characterization. (See, e.g., Motion, pp. 1-5, 7-8 [claiming Plaintiff impliedly consented to the arbitration agreement by using the website].)

Bottom line, it is undisputed that the agreement is a browsewrap agreement. The facts show that agreement simply appeared on the website via the hyperlink, and, unlike a clickwrap or scrollwrap agreement, Plaintiff was not required to affirmatively click an “I agree” or “I accept” button.

Because it is a browsewrap agreement, the Court finds it unenforceable. (See Sellers, supra, 73 Cal.App.5^th [recognizing that California and federal courts consistently find browsewrap agreements unenforceable]; see also Long v. Provide Commerce, Inc. (2016) 245 Cal.App.4^th 855, 866-867 [Second District finding browsewrap agreement too inconspicuous to put a reasonable user on notice of the website’s terms of use]; Nguyen v. Barnes & Noble Inc. (9^th Cir. 2014) 763 F.3d 1171 [finding browsewrap agreement unenforceable because the website pages failed to put a reasonably prudent user on inquiry notice of the terms of use and did not prompt the user to take affirmative action to demonstrate assent].) The Court reiterates that the hyperlink is tiny, illegible, and inconspicuous, and Plaintiff never saw it or agreed to any provisions. The design and content of ILF’s website pages were insufficient to put a reasonable user or Plaintiff on notice of the terms of use and the arbitration agreement.

ILF argues that the Federal Arbitration Act (“FAA”) preempts the case law, especially Sellers and Long, to the extent they rely on an “objective” standard of “conspicuousness.” (Motion, pp. 8-10; see also Reply, pp. 2-4 [citing AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 333].)

The argument fails. In both Long and Nguyen, the defendants moved to compel arbitration pursuant to the FAA, yet the courts applied the objective standard and still found the browsewrap agreements unenforceable. (See Long, supra, 245 Cal.App.4^th at 869; see also Nguyen, supra, 763 F.3d at 1174.) Concepcion regards preemption of California law as to class action waivers; it says nothing about the conspicuousness standard for browsewrap agreements. More importantly, even under the FAA, “courts apply ordinary state law principles governing formation of contracts” to decide “whether [the] parties agreed to arbitrate a particular dispute[.]” (Knight, supra, at ¶ 5:111.3; see also id. at ¶ 5:150.3 [“In determining whether an arbitration provision is enforceable, the court ‘should apply ordinary state-law principles that govern the formation of contracts.’”]; id. at ¶ 5:94.4 [“[T]he FAA does not preempt a neutral state law contract formation requirement simply because it can be applied to invalidate an arbitration agreement.”], emphasis in original.)[3]

[1] The FAC alleges:

[T]he Stamina Training Unit “was created to help men last longer while having sexual intercourse” and “is also a good device to use for individuals who may experience premature ejaculation.” Thus, on the product’s online marketing materials and on Interactive’s online stores, Interactive claims that the Stamina Training Unit can help users “increase sexual stamina, improve sexual performance and techniques, and heighten and intensify orgasms.” Among other things, Interactive claims that its Stamina Training Unit products make users “Perform better,” “Last longer,” “Improve Sexual Stamina,” and “forces users to be better in bed.”

(FAC, ¶ 5.)

[2] Plaintiff also claims the motion should be denied because, “by its own language,” the arbitration agreement “does not apply to purchases made on Interactive’s websites, but instead only the ‘use of the site’” – i.e., Plaintiff contends the arbitration agreement does not cover Plaintiff’s causes of action. (Opposition, pp. 2, 11.) The Court is inclined to disagree. (See Reply, pp. 5-6 [arguing, in part, that “the use of a website to purchase a product is the use of the website”].) Nevertheless, ILF fails to meet its burden, and the motion should be denied, for the reasons stated above, namely, unauthenticated evidence and failure to show assent.

[3] Plaintiff contends the arbitration agreement is unenforceable under McGill v. Citibank, N.A. (2017) 2 Cal.5^th 945 because Plaintiff seeks public injunctive relief. (See Opposition, pp. 11-13.) It is unnecessary to reach this issue.