Judge Mark E. Windham, Case Number: 24STCP01227, Date: 2024-08-21 Tentative Ruling

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Heinz v. TikTok, Inc., et al.

PETITION TO COMPEL ARBITRATION AND STAY PROCEEDINGS

On April 17, 2024, Petitioner Brian Heinz (“Petitioner”) filed the instant Petition to Compel Arbitration against Respondent TikTok, Inc., fka Musical.ly, Inc. (“Respondent”). An Amended Petition to Compel Arbitration with a supporting memorandum of points and authorities was filed on May 7, 2024. Respondent filed a response on July 31, 2024 and Petitioner replied on August 13, 2024.

The Petition is brought pursuant to Code of Civil Procedure section 1281, et seq., which provides in relevant part:

On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate such controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists, unless it determines that:

Petitioner contends that the parties entered into an agreement containing an arbitration provision, which is purportedly attached to the supporting declaration of Angel Getsov at Exhibit. (Pet., ¶10.) Exhibit B to the Getsov declaration, however, is Petitioner’s demand for arbitration submitted to the American Arbitration Association ("AAA"). (Pet., Getsov Decl., Exh. B.) It appears that the agreement to arbitration upon which Petitioner is relying is contained in Respondent’s February 2019 Terms of Service, at paragraph 11. (Pet., ¶¶3-5.) In its response, Respondent contends there is no agreement to arbitrate because the February 2019 Terms of Service on which Petitioner relies had been replaced by multiple, subsequent terms of service in July 2023 that did not contain a provision for arbitration with the AAA. (Opp., Nguyen Decl., Exhs. A-F.) Petitioner makes multiple arguments in reply, including that the question of conflicting terms of service is one for the arbitrator to decide. Respondent contends that the scope of this question is governed by the terms of the later agreement, pursuant to case law. The Court must address this issue by first determining “what the parties have agreed to—i.e., which contract controls.” (Coinbase, Inc. v. Suski (2024) 144 S. Ct. 1186, 1190.)

Petitioner initiated the dispute resolution process outlined in the February 2019 Terms of Service on or around July 10, 2023. (Pet., Getsov Decl., ¶3.) By that time, Respondent had released multiple Terms of Service subsequent to the February 2019 Terms of Service. (Opp., Nguyen Decl., Exhs. B-F.) Those were released on May 6, 2023, July 17, 2023, and July 31, 2023. (Ibid.) The May 6, 2023 Terms of Service specifically state “This Arbitration Agreement shall apply to all Claims, including those that arose or were asserted before the effective date of this Arbitration Agreement.” (Id. at Exh. C, §12(B)(1) [emphasis added].) The July 17, 2023 Terms of Service, which eliminate the arbitration provision, do not indicate that the informal dispute resolution procedure set forth therein applies to claims that arose or were asserted before its effective date, however. Instead, it broadly states that “[t]hese Terms constitute the whole legal agreement between you and TikTok and govern your use of the Services and completely replace any prior agreements between you and TikTok in relation to the Services.” (Id. at Exh. F, §§ 11-12.) In this respect, Respondent’s citation to Coinbase is not helpful in determining which terms of service control. Coinbase did not concern a dispute that arose or was asserted between the two different agreements at issue. Both the agreements in Coinbase were entered into before the conflict came to a head. (Coinbase, Inc., supra, 144 S. Ct. at 1191-1192.)

Nor is Respondent’s citation to Jarboe v. Hanlees Auto Grp. (2020) 53 Cal. App. 5th 539, 552 for the rule that “an earlier arbitration agreement is nullified by a subsequent agreement that ‘expressly superseded the prior [agreement]” helpful. The claims in Jarboe, like Coinbase, and unlike this case, arose after the parties executed both agreements that were purportedly in conflict. Respondent argues that the language “any claims” in the July 2023 Terms of Service applies to claims regardless of when they arose. This language, however, is distinctly different from the language, “all Claims, including those that arose or were asserted before the effective date of this Arbitration Agreement” from the May 6, 2023 Terms of Service. In fact, the July 2023 Terms of Service refer to “any claims, causes of action, of any kind or character, or demand arising out of or relating to the Terms,” which specifically excludes the temporally all-encompassing language previously used by Respondent. Failing to include language that the new terms of service apply to claims that arose prior to the date of those terms deprives the other party of notice of Respondent’s intent to change the dispute resolution procedures with respect to those claims. (See Morse v. ServiceMaster Global Holdings Inc. (N.D. Cal. 2012) 2012 WL 4755035, at *4 [“the contractual language in this case, “any and all claims,” is not retroactive on its face.”].) Accordingly, the July 2023 terms of service do not control this dispute.

Petitioner also argues in the reply that the 2023 terms of service, including the one dated May 6, 2023, do not apply because Respondent’s pop-up notice was insufficient and Petitioner did not consent to those terms. Petitioner points to case law regarding what kind of hyperlink is necessary to provide consumers notice of a clickwrap agreement (an agreement where a website requires users to click an “I agree” box) and argues that the hyperlink in Respondent’s pop-up notice did not meet the requirements for what a reasonable person would understand was a link to the applicable terms. The Court will consider the case law raised in the reply.

In Sellers v. JustAnswer LLC (2021) 73 Cal.App.5th 444, the court held that “the full context of any transaction is critical to determining whether any particular notice is sufficient to put a consumer on inquiry notice of contractual terms contained on a separate, hyperlinked page.” (Sellers v. JustAnswer LLC (2021) 73 Cal.App.5th 444, 453.) “[C]lickwrap agreements, “ ‘in which website users are required to click on an “I agree” box after being presented with a list of terms and conditions of use’ ” to “confirm their assent to the agreement's terms,” are generally considered enforceable.” (Id. at 470.) This is because clickwrap agreements “necessitate an active role by the user of a website.” (Ibid [citing Berkson v. Gogo LLC (E.D.N.Y. 2015) 97 F.Supp.3d 359, 397].) Sellers, however, did not concern a clickwrap agreement but a sign-in wrap agreement and its discussion regarding hyperlinks did not take into account a clickwrap agreement. (Sellers, supra, 73 Cal.App.5th at 462-466.) It does not follow, as Petitioner argues, that the criteria for a sufficiently conspicuous hyperlink in a sign-in agreement necessarily applies to hyperlinks in clickwrap agreements. Instead, the Court must consider the full context of the transaction.

In Berkson v. Gogo LLC (E.D.N.Y. 2015) 97 F.Supp.3d 359, a case cited by Sellers, the district court identified three principles for evaluating contract formation over the internet: (1) “the validity of the [internet] agreement turns on whether the website puts a reasonably prudent user on inquiry notice of the terms of the contract;” (2) “terms of use” will be enforced when a user is encouraged by the design and content of the website and the agreement's webpage to examine the terms clearly available through hyperlinkage; and (3) “terms of use” will not be enforced where the link to a website's terms is buried at the bottom of a webpage or tucked away in obscure corners of the website where users are unlikely to see it. (Berkson v. Gogo LLC (E.D.N.Y. 2015) 97 F.Supp.3d 359, 401-402.) Here, the nature of the pop-up notice necessarily made Petitioner aware of the updated terms of service and required Petitioner to take action to indicate assent to those terms. (Opp., Nguyen Decl., Exh. C.) This is not a situation where the hyperlink to the terms of service was somewhere on Respondent’s website and could only be located by hyperlink signage such as large font, high contrast text, and underlining. While the hyperlink to the May 6, 2023 Terms of Use was not particularly high contrast, it was contained within the popup notice, which was impossible to avoid. (Ibid.) Furthermore, the hyperlink was in bold font, making it distinct from the remainder of the short paragraph indicating that an updated terms of service was now in effect. Therefore, the Court finds that Petitioner was on inquiry notice of the May 6, 2023 Terms of Service as binding on the parties.

Those terms of service require the parties to first attempt to informally resolve the dispute by emailing informaldisputeresolution@tiktok.com. (Opp., Exh. C, § 12A.) Respondent then starts the informal dispute resolution process by messaging the party at its TikTok account box. (Ibid.) If the dispute is not resolved informally within the time to respond (90 days) or the date of any conference, either party can initiate arbitration. (Ibid.) Finally, “Engaging in this informal dispute resolution process is a requirement that must be completed before commencing arbitration (or, if permitted below, the filing of a legal action), and an arbitrator or court shall dismiss any claims filed without fully and completely complying with these informal dispute resolution procedures.” (Ibid.) Petitioner’s papers do not demonstrate that they complied with the dispute resolution process set forth above. Instead, the papers insist that the 2019 Terms of Service apply and that Petitioner complied with those procedures. The opposition presents evidence that Petitioner did not comply with the May 6, 2023 Terms of Service: notice of the informal arbitration procedure was sent to the wrong email address and was sent on behalf of a class of persons instead of solely on behalf of Petitioner. (Opp., Weibell Decl. Ex. A at 4; Nguyen Decl., Exh. C, §12.) As Petitioner did not comply with the informal dispute resolution process, as agreed, the parties cannot proceed to arbitration.

Finally, Petitioner argues that the question of arbitrability must be decided by the arbitrator as required by the 2019 Terms of Service. As already discussed, however, those terms do not apply. It is for the Court to first determine which agreement controls.