Opinion
CASE NO. 18-cv-01060-YGR
11-12-2020
DANIEL BERMAN, ET AL., Plaintiffs, v. FREEDOM FINANCIAL NETWORK, LLC, ET AL., Defendants.
ORDER DENYING MOTION FOR RECONSIDERATION
Re: Dkt. No. 268
Defendants Fluent, Inc., Freedom Debt Relief, LLC, Freedom Financial Network, LLC, and Lead Science, LLC filed their motion (Dkt. No. 268) for leave to file a motion for reconsideration of this Court's September 1, 2020 Order Denying Motion to Compel Arbitration as to plaintiffs Stephanie Hernandez and Erica Russell (Dkt. No. 266, hereinafter "Order"). The Court directed additional briefing on the motion for reconsideration. Plaintiffs filed their opposition on September 29, 2020, and defendants filed their reply on October 6, 2020.
Having carefully considered the papers submitted, the admissible evidence, and the pleadings in this action, and for the reasons set forth below, the Court DENIES the motion for leave and for reconsideration.
In their opposition, plaintiffs request that the Court strike two exhibits to the Ramsey Declaration which purport to show the full "flow" of the web page interactions with Russell and Hernandez, since that evidence was available to defendants at the time of the motion but they made the strategic choice to not include it. (Dkt. No. 268-2, Exh. 3, 4.) The Court agrees that defendants should not be permitted to submit this evidence in support of their bid for reconsideration of its decision on the motion. The evidence is STRICKEN and the Court has not considered it in connection with this motion.
Under Rule 54(b), a court may revise any interlocutory order in its discretion. However, reconsideration of a prior ruling is an "extraordinary remedy, to be used sparingly in the interests of finality and conservation of judicial resources." Kona Enter., Inc. v. Estate of Bishop, 229 F.3d 877, 890 (9th Cir.2000). "Reconsideration is appropriate if the district court (1) is presented with newly discovered evidence, (2) committed clear error or the initial decision was manifestly unjust, or (3) if there is an intervening change in controlling law." School Dist. No. 1J v. ACandS, Inc., 5 F.3d 1255, 1263 (9th Cir. 1993). A motion for reconsideration cannot be used to raise arguments or present evidence for the first time that reasonably could have been raised in connection with the ruling at issue. Kona Enters., 229 F.3d at 890.
Local Rule 7-9(b) requires that a party seeking leave to file a motion for reconsideration show reasonable diligence in making the motion and one of the following:
(1) That at the time of the motion for leave, a material difference in fact or law exists from that which was presented to the Court before entry of the interlocutory order for which reconsideration is sought. The party also must show that in the exercise of reasonable diligence the party applying for reconsideration did not know such fact or law at the time of the interlocutory order; orPursuant to Local Rule 7-9(c), "[n]o motion for leave to file a motion for reconsideration may repeat any oral or written argument made by the applying party in support of or in opposition to the interlocutory order which the party now seeks to have reconsidered."
(2) The emergence of new material facts or a change of law occurring after the time of such order; or
(3) A manifest failure by the Court to consider material facts or dispositive legal arguments which were presented to the Court before such interlocutory order.
Here, defendants argue that there is a material difference in fact that it did not, or could not with reasonable diligence, have known at the time of the Court's September 1, 2020 Order Denying the Motion to Compel Arbitration as to plaintiffs Hernandez and Russell. Namely, they contend the deposition testimony of Hernandez and Russell shows that they had actual notice of the arbitration provision and admitted they understood they were entering into a binding agreement. Looking at the circumstances surrounding that motion and the deposition testimony defendants now seek to offer, the Court finds defendants could have presented the new evidence had they acted with reasonable diligence prior to the Court's decision. Further, the Court finds that the evidence proffered does not establish a material difference in the facts underpinning its Order.
I. RELEVANT PROCEDURAL HISTORY
The key issue in this TCPA case concerns whether the putative class members who defendants contacted in their texting campaigns consented to receive such texts by virtue of assenting to agreements through defendants' websites. Defendants contend those same websites and same click-through agreements also created a binding agreement to arbitration as to those putative class members' claims.
Defendants previously moved unsuccessfully to compel plaintiff Berman to arbitration due to disputed issues of fact concerning Berman's purported registration on defendants' website using the name "Dunk Loka" and consent to binding arbitration. (Dkt. No. 24 at 5, 7.) Subsequently, the Court denied Berman's bid for class certification without prejudice, finding that, as the then-sole plaintiff, Berman could not represent members of a putative class who defendants alleged would be subject to the arbitration provision due to their interactions with defendants' website. (Dkt. No. 198.)
Thereafter, in the parties' joint case management statement of October 18, 2019, plaintiffs indicated they intended to seek leave to amend to add two new named plaintiffs who had visited defendants' websites and move again for class certification. The parties requested that discovery be reopened for the limited purpose of preparing for the renewed class certification motion and proposed competing schedules for those activities. (Dkt. No. 210.) The Court ordered that a stipulation or motion for leave to amend the complaint to name the additional plaintiffs must be filed by December 9, 2019, and that discovery was reopened discovery for purposes of that motion for the period between October 25, 2019, and March 25, 2020. (Dkt. No. 211.) On December 9, 2019, plaintiffs moved for leave to amend the complaint to add plaintiffs Russell and Hernandez and file a renewed class certification motion. On December 23, 2019, defendants filed a statement of non-opposition to that motion, and the Third Amended Complaint was filed on January 5, 2020. All the foregoing events put defendants on notice that the applicability of the arbitration provision to these two new plaintiffs would be at issue.
On January 21, 2020, defendants filed their motion to compel arbitration of Hernandez and Russell's claims, initially setting it for hearing on February 25, 2020. (Dkt. Nos. 223, 224.) On February 1, 2020, the parties stipulated to an extension of time on the remaining briefing to "enable them to conduct" certain "limited discovery" concerning the motion to compel. (Dkt. No. 232 at 2.) The parties stipulated, in part, as follows:
(1) Defendants' deadline to complete discovery propounded on Plaintiffs Hernandez and Russell, including depositions, will be continued until April 20, 2020; and (2) by Friday, February 7, Plaintiffs will provide Defendants with declarations from Plaintiffs Hernandez and Russell concerning their current knowledge and memory, if any, of what the websites looked like when they visited them.(Id., emphasis supplied.) A little over two weeks later, on February 19, 2020, the parties again stipulated to extend the schedule on the motion to compel based on their ongoing arbitration-related discovery needs. (Dkt. No. 238.) The Court granted that second extension, giving plaintiffs until March 16, 2020 to file an opposition, and defendants until March 24, 2020 to reply, as well as extending the deadline to take discovery from Hernandez and Russell to May 8, 2020. (Dkt. No. 241.)
* * *
[and (3)] Plaintiffs' deadline to respond to the motion is extended to Tuesday, February 25, 2020. Defendants' deadline to reply is extended to Tuesday, March 3, 2020.
The parties submitted discovery disputes regarding arbitration-related discovery to Magistrate Judge Corley. (See, e.g., Dkt. No. 237.)
With their March 16, 2020 opposition, plaintiffs filed the declarations of Erica Russell and Stephanie Hernandez, both signed and dated February 6, 2020. (Dkt. No. 246, 247.) Those declarations stated that plaintiffs did not remember seeing any agreement to arbitrate and the webpages offered by defendants did not look like the websites they visited. (Hernandez Decl. at ¶ 4; Russell Decl. at ¶¶ 4, 5.) Presumably, those declarations were produced to defendants by February 7, 2020, as required by the parties' February 1, 2020 stipulation. (Dkt. No. 232.)
Finally, on March 19, 2020, the parties submitted a third stipulation to extend the briefing on the motion to compel arbitration. The stipulation, also granted by the Court, extended defendants' deadline to file their reply to March 30, 2020. (Dkt. No. 249.)
II. ANALYSIS
A. The New Evidence Could, With Diligence, Have Been Presented Prior to the Court's Ruling
Defendants have not established that the two new plaintiffs' deposition testimony could not, with diligence, have been presented in connection with their motion. At the time of filing the motion on January 21, despite having three months' notice that two new plaintiffs would be added and six weeks' notice of who those new plaintiffs were, defendants did not depose Russell or Hernandez regarding their experience visiting defendants' websites at that time. Despite knowing Russell and Hernandez would be added as plaintiffs by December 9; seeing their allegations in the January 5 Third Amended Complaint; and obtaining a copy of their declarations in opposition to the motion by February 7, defendants elected not to depose Russell and Hernandez at any time during the extended briefing schedule in connection with the motion to compel arbitration. Defendants had their declarations more than seven weeks prior to the filing of their reply and approximately five weeks prior to travel stoppages and office closures forced by the COVID-19 pandemic. Moreover, the Court had been exceedingly accommodating with granting extensions of time had defendants requested one to take those depositions. Had defendants believed that deposing Russell and Hernandez to test the assertions in their February 6 declarations was necessary to provide material evidence, they had ample time to take such discovery before they filed their reply.
Further, once defendants finally took Russell's and Hernandez's depositions on June 29 and July 2, 2020 respectively, they did not seek leave to supplement their filing with that evidence. Rather, as before, they rested on the evidence they previously submitted. Only after the Court issued its decision denying the motion to compel, on September 1, 2020, did defendants come forward with the evidence they now contend shows that Hernandez and Russell individually and affirmatively consented to arbitration when they used defendants' websites.
If defendants truly believed that the evidence was material to the motion, they might have sought leave to supplement their evidentiary submission on the motion to compel. They did not. Instead, they made the tactical decision not to submit the deposition testimony until after their motion was denied. While they offer various excuses for their delay, none of them justifies their apparent lack of diligence. Reconsideration is not properly granted based on such a tactical decision.
B. Defendants Do Not Establish the New Evidence Would Be Material
Moreover, the Court finds that the evidence offered after the Order would not be material to the decision therein. The Court's Order found both that an "evidentiary dispute exist[ed]" as to whether plaintiffs saw the "regenerated images" of a portion of the website "flow" offered by defendants, and further that:
While the Court need not reach the materiality question where reasonable diligence has not been shown, the Court nevertheless considers it for the sake of completeness. See Daghlian v. Devry Univ., Inc., 582 F. Supp. 2d 1231, 1254 (C.D. Cal. 2008) (explaining that a failure to show due diligence obviates the need to analyze the effect on the court's decision).
Defendants now contend that they have presented "uncontroverted" evidence as to how the webpages at issue appeared, and that plaintiffs' sworn statements denying they appeared this way are "irrelevant." Defendants misunderstand the rules of evidence and the summary judgment-like standard applicable to a motion to compel arbitration. The Order found that an "evidentiary dispute exists" as to whether the webpages Hernandez and Russell viewed included notice of the arbitration provision. In so finding, the Court noted that: (1) the webpage screenshots offered by defendants included "regenerated images" of a portion of the website "flow" plaintiffs would have seen but "failed to provide complete information to authenticate the exhibits;" and (2) "plaintiffs each submit declarations disputing seeing elements of these pages." (Order at 4-5.)
Even if there were no dispute that the proffered webpages caused these plaintiffs' phone numbers to be recorded as leads for Fluent, the webpages do not conspicuously indicate to users that they are agreeing to the Terms and Conditions, including an agreement to mandatory arbitration.(Order at 5.) As defendants themselves concede, they based their motion "on the 'reasonably prudent user' and 'inquiry notice' test under Nguyen and their belief that the website alone is sufficient to satisfy that test." (See Reply to Recon., Dkt. No. 175 at 5:12-17.) "It was only after the Court held otherwise that the consequence, import, and relevance of" plaintiffs' depositions occurred to defendants. (Id.) In other words, defendants' failure to prevail on one theory led them to seek to seek reconsideration to argue a different one, and to offer evidence they previously elected not to provide. Plainly, seeking to argue a different legal theory known to defendants at the time of their prior motion provides no ground for reconsideration.
The Order explained, in detail, why the webpage images on which defendants relied in the motion did not meet the standard set forth by the Ninth Circuit in Nguyen. (Order at 5-6, citing Nguyen v. Barnes & Noble Inc., 763 F.3d 1171, 1177 (9th Cir. 2014) [in the absence of evidence that a website user "had actual knowledge of the agreement, the validity of the browsewrap agreement turns on whether the website puts a reasonably prudent user on inquiry notice of the terms of the contract."].) Defendants have failed to establish that the deposition testimony they now offer would be material to the Court's decision on their "reasonably prudent user" theory. Further, offering such evidence for the first time in support of a different theory than previously argued does not warrant the "extraordinary remedy" of reconsideration. Defendants' failure to act diligently and argue persuasively does not entitle them to a second bite at the apple.
The deposition testimony submitted does not contradict plaintiffs' declarations in opposition to the motion to compel. Rather, their testimony indicates that the pages defendants presented during the deposition looked different from the sites they visited, they did not recall seeing any arbitration provision or specific terms and conditions on the webpages they visited, and they would have read any terms and conditions if they had seen a link to them. (Declaration of Beth Terrell, Dkt. No. 271 at Exh. 1 [Russell Depo.] 37:15-41:6, 59:3-61:20 and Exh. 2 [Hernandez Depo.] 55:6-58:20, 68:1-17, 76:12-24, 81:7-83:1.)
In light of the foregoing, the motion for leave and motion for reconsideration are DENIED.
In reply, for the first time, defendants argue that the Court nevertheless should consider the late-offered deposition testimony for the further reason that denial of a motion to compel arbitration would require that they be given an opportunity to conduct an evidentiary hearing regarding the making of the arbitration agreement at issue. See 9 U.S.C. § 4 ("If the making of the arbitration agreement or the failure, neglect, or refusal to perform the same be in issue, the court shall proceed summarily to the trial thereof.") It is not clear how, if at all, this provision applies where the Court has found the purported agreement does not put a reasonably prudent user on notice of its terms. Further, the Order is the subject of defendants' appeal currently pending before the Ninth Circuit but stayed to permit the Court to decide the merits of this request for reconsideration. (Dkt. No. 278.) Given this posture, the Court believes it would be without jurisdiction to conduct such an evidentiary hearing, even if appropriate, at this juncture. --------
This terminates Docket No. 268.
IT IS SO ORDERED. Dated: November 12, 2020
/s/ _________
YVONNE GONZALEZ ROGERS
UNITED STATES DISTRICT COURT JUDGE