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rejecting allegations that plaintiff "did not agree to be bound by" the arbitration agreement and contrasting those allegations against "admissible evidence that all users during the relevant time period were required to affirmatively agree to the Terms of Use."
Summary of this case from Roberts v. Obelisk, Inc.Opinion
For Zeke Graf, individually and on behalf of all others similarly situated, Plaintiff: Matthew M Loker, LEAD ATTORNEY, Seyed Abbas Kazerounian, Kazerouni Law Group APC, Costa Mesa, CA; Joshua B Swigart, Hyde and Swigart APC, San Diego, CA.
For Match.com, LLC, Defendant: Connie Lam, LEAD ATTORNEY, Christopher A Rheinheimer, Donald R Brown, Robert H Platt, Manatt Phelps and Phillips LLP, Los Angeles, CA.
PROCEEDINGS: IN CHAMBERS - COURT ORDER
HONORABLE PERCY ANDERSON, UNITED STATES DISTRICT JUDGE.
Before the Court is a Motion to Compel Arbitration filed by defendant Match.com, LLC (" Match.com" or " Defendant") (Docket No. 12). Pursuant to Rule 78 of the Federal Rules of Civil Procedure and Local Rule 7-15, the Court finds that this matter is appropriate for decision without oral argument. The hearing scheduled for July 13, 2015, is vacated, and the matter taken off calendar.
I. Factual and Procedural Background
Plaintiff Zeke Graf (" Plaintiff") filed this action in Los Angeles Superior Court on April 22, 2015. Plaintiff's Complaint, which he brings on behalf of himself and a proposed class he seeks to represent, alleges that Match.com's internet dating service violates California Civil Code section 1694.2 by failing to provide its consumers with a notice stating:
You, the buyer, may cancel this agreement, without any penalty or obligation, at any time prior to midnight of the original contract seller's third business day following the date of this contract, excluding Sundays and holidays. To cancel this agreement, mail or deliver a signed and dated notice, or send a telegram which states that you, the buyer, are cancelling this agreement, or words of similar effect. This notice shall be sent to: [Name of the business that sold you the contract, Address of the business that sold you the contract].
Cal. Civ. Code § 1694.2(b). According to the Complaint, Plaintiff joined Match.com " [i]n or about 2012]" and paid $30 per month for approximately three months, but he was never provided with the required California Civil Code section 1694.2(b) notice. Plaintiff's Complaint seeks to represent a class consisting of:
All persons within California who purchased a subscription from Defendant via Defendant's website that failed to include the Notice of said consumer's right to cancel the contract with Defendant within the four years prior to the filing of this Complaint.
(Complaint ¶ 32.) The Complaint asserts claims for: (1) violation of California Civil Code section 1694, et seq.; (2) unfair business practices pursuant to California Business and Professions Code section 17200; and (3) unfair competition pursuant to California Business and Professions Code section 17535.
Defendant removed the action to this Court based on the Court's diversity jurisdiction pursuant to the Class Action Fairness Act (" CAFA"), 28 U.S.C. § 1332(d). According to the Declaration of Brett Richards (" Richards Decl.") filed in support of the Motion to Compel Arbitration, during the period when Plaintiff allegedly signed up for Match.com, and throughout the purported class period, Match.com required all users to follow a registration process before they could use the website. (Richards Decl. ¶ 2.) This process required all users to agree to Defendant's Terms of Use, and a link to the Terms of Use was always available. (Id. at ¶ 4.) To access the website's premium features required users to follow an additional process in which they purchased a subscription for a monthly fee. (Id. at ¶ 5.) Throughout the alleged class period, this subscription process required users to agree to the Terms of Use. (Id. at ¶ 6.) According to Mr. Richards, a senior product manager at Match.com, every version of the Terms of Use since September 2011 has included the following language:
Arbitration Agreement. The exclusive means of resolving any dispute or claim arising out of or relating to this Agreement (including any alleged breach thereof), the Service, or the Website shall be BINDING ARBITRATION administered by the American Arbitration Association. The one exception to the exclusivity of arbitration is that you have the right to bring an individual claim against the Company in a small-claims court of competent jurisdiction. But whether you choose arbitration or small-claims court, you may not under any circumstances commence or maintain against Match.com any class action, class arbitration, or other representative action or proceeding.
(Id. at ¶ 7.) The Terms of Use also included a " Notice of Rights" section that provided:
Notice of Rights. By using the Website or the Service in any manner, you agree to the above arbitration agreement. In doing so, YOU GIVE UP YOUR RIGHT TO GO TO COURT to assert or defend any claims between you and Match.com (except for matters that may be taken to small-claims court). YOU ALSO GIVE UP YOUR RIGHT TO PARTICIPATE IN A CLASS ACTION OR OTHER CLASS PROCEEDING. Your rights will be determined by a NEUTRAL ARBITRATOR, NOT A JUDGE OR JURY. You are entitled to a fair hearing before the arbitrator. The arbitrator can grant any relief that a court can, but you should note that arbitration proceedings are usually simpler and more streamlined than trials and other judicial proceedings. Decisions by the arbitrator are enforceable in court and may be overturned by a court only for very limited reasons. For details on the arbitration process, see our Arbitration Procedures.
(Id. at ¶ 8 & Exs. 3 & 4, § 23(b).) The Terms of Use require that " any dispute between you and Match.com shall be governed by the laws of the state of Texas without regard to principles of conflicts of law, provided that this arbitration agreement shall be governed by the Federal Arbitration Act." (Id., Exs. 3 & 4, § 23(c).) Finally, according to Exhibit 2 attached to the Richards Decl., the billing information page that Match.com subscribers were required to fill out and agree to included the notice concerning a subscriber's cancellation rights required by California Civil Code section 1694.2(b). (Id. at ¶ 6 & Ex. 2.)
II. Legal Standard
" The [Federal Arbitration Act (" FAA")] provides that any arbitration agreement within its scope 'shall be valid, irrevocable, and enforceable, ' and permits a party 'aggrieved by the alleged . . . refusal of another to arbitrate' to petition any federal district court for an order compelling arbitration in the manner provided for in the agreement." Chiron Corp. v. Ortho Diagnostic Systems, Inc., 207 F.3d 1126, 1130 (9th Cir. 2000) (quoting 9 U.S.C. § 4). The FAA reflects both a " liberal federal policy favoring arbitration" and the " fundamental principle that arbitration is a matter of contract." AT& T Mobility LLC v. Concepcion, 131 S.Ct. 1740, 1745, 179 L.Ed.2d 742 (2011) (quotations and citations omitted). " In line with these principles, courts must place arbitration agreements on an equal footing with other contracts, and enforce them according to their terms." Id. (internal citations omitted). The FAA " leaves no place for the exercise of discretion by a district court, but instead mandates that district courts shall direct the parties to proceed to arbitration on issues as to which an arbitration agreement has been signed." Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 218, 105 S.Ct. 1238, 1241, 84 L.Ed.2d 158 (1985). " The court's role under the Act is therefore limited to determining (1) whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement encompasses the dispute at issue. . . . If the response is affirmative on both counts, then the Act requires the court to enforce the arbitration agreement in accordance with its terms." Chiron Corp., 207 F.3d at 1130 (citations omitted).
The FAA includes a saving clause that permits courts to declare an arbitration agreement unenforceable " upon any grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. " This saving clause permits agreements to arbitrate to be invalidated by 'generally applicable contract defenses, such as fraud, duress, or unconscionability, ' but not by defenses that apply only to arbitration or that derive their meaning from the fact that an agreement to arbitrate is at issue." Concepcion, 131 S.Ct. at 1746 (quoting Doctor's Associates, Inc. v. Casarotto, 517 U.S. 681, 687, 116 S.Ct. 1652, 1656, 134 L.Ed.2d 902 (1996)). " To defeat an arbitration clause, the litigant must show both procedural and substantive unconscionability, although 'the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa.'" Bridge Fund Capital Corp. v. Fastbucks Franchise Corp., 622 F.3d 996, 1004 (9th Cir. 2010). " Procedural unconscionability involves oppression or surprise due to unequal bargaining power while substantive unconscionability focuses on overly harsh or one-sided results." Id. (internal citation and quotation marks omitted). The party opposing arbitration must prove unconscionability by a preponderance of the evidence. Engalla v. Permanente Med. Grp., Inc., 15 Cal.4th 951, 972, 64 Cal.Rptr.2d 843, 856, 938 P.2d 903 (1997). If the opposing party fails to prove the existence of procedural unconscionability, no finding of unconscionability is possible, and the court's analysis ends. Circuit City Stores, Inc. v. Ahmed, 283 F.3d 1198, 1199-1200 (9th Cir. 2002).
" As a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability." Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth Inc., 473 U.S. 614, 626, 105 S.Ct. 3346, 3353-54, 87 L.Ed.2d 444 (1985) (quoting Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25, 103 S.Ct. 927, 941-42, 74 L.Ed.2d 765(1983)).
III. Analysis
Defendant's Motion to Compel Arbitration seeks to enforce the binding arbitration clause contained in the Terms of Use. According to Defendant, because that clause applies to the claims asserted in Plaintiff's Complaint, and precludes Plaintiff from maintaining the class action he seeks to pursue, this action should be dismissed in favor of arbitration rather than stayed. In his Opposition, Plaintiff maintains that the arbitration clause should not be enforced because the contract created by the Terms of Use is void as a result of Defendant's failure to provide the required notice of cancellation rights. Plaintiff alternatively contends that the arbitration clause is unenforceable because there is insufficient evidence that he agreed to be bound by it. Finally, Plaintiff asserts that the arbitration clause is procedurally and substantively unconscionable under California law.
A. Validity of Arbitration Provision
Plaintiff contends that the arbitration provision contained in the Terms of Use is unenforceable because the entire contract is void as a result of Defendant's alleged failure to provide the notice of cancellation rights required by California Civil Code section 1694.2(b). First, Plaintiff's argument is based solely on the allegation in the Complaint that he did not receive the notice of cancellation rights. Plaintiff has not supported his contention with any admissible evidence. Defendant, by comparison, has provided the Richards Decl., which provides admissible evidence that Plaintiff and the putative class members were provided with the notice of cancellation rights required by section 1694.2(b). (See Richards Decl. ¶ 6 & Ex. 2.) Even under California law, which Plaintiff relies on despite the choice of law provision contained in the Terms of Use that requires application of Texas law, Plaintiff, as the party opposing enforcement of the arbitration provision, bears the burden of proof. See Engalla, 15 Cal.4th at 972, 64 Cal.Rptr.2d at 856 (" [A] party opposing the petition [to arbitrate] bears the burden of proving by a preponderance of the evidence any fact necessary to its defense."); Pinnacle Museum Tower Ass'n v. Pinnacle Mkt. Dev. (U.S.), LLC, 55 Cal.4th 223, 236, 145 Cal.Rptr.3d 514, 523, 282 P.3d 1217 (2012) (" [T]he party opposing arbitration bears the burden of proving any defense such as unconscionability."). Because the only admissible evidence before the Court establishes that Defendant provided the required notice of cancellation rights, Plaintiff has failed to satisfy his burden of proof that the contract between the parties is void. Accordingly, Plaintiff's factual attack on the validity of that contract fails.
Moreover, because the arbitration provision is governed by the FAA, Plaintiff's efforts to avoid the enforcement of that provision by attacking the validity of the entire agreement between the parties fails as a matter of law:
First, as a matter of substantive federal arbitration law, an arbitration provision is severable from the remainder of the contract. Second, unless the challenge is to the arbitration clause itself, the issue of the contract's validity is considered by the arbitrator in the first instance. Third, this arbitration law applies in state as well as federal courts.
Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 445-46, 126 S.Ct. 1204, 1209, 163 L.Ed.2d 1038 (2006). Plaintiff's argument that the contract is void because of Defendant's alleged failure to provide a notice of cancellation rights does not challenge the validity of the arbitration provision. Plaintiff's reliance on Duffens v. Valenti, 161 Cal.App.4th 434, 74 Cal.Rptr.3d 311 (2008), is therefore inapposite because, under the FAA, any provision of California law that invalidates an arbitration provision is not enforceable. See Chavarria v. Ralphs Grocery Co., 733 F.3d 916, 921 (9th Cir. 2013) (" [S]tate rules disproportionately impacting arbitration, though generally applicable to contracts of all types, are nonetheless preempted by the FAA when the rule stands as an obstacle to the accomplishment of Congress's objectives in enacting the FAA." (citing Concepcion, 131 S.Ct. at 1748)). Plaintiff's efforts to void the contract between the parties therefore do not prevent enforcement of the arbitration provision.
B. Assent to Terms of Use
Plaintiff additionally contends that the arbitration provision cannot be enforced because he did not agree to be bound by its terms. Again, Plaintiff improperly relies only on the allegations contained in the Complaint and does not submit any admissible evidence in support of his argument. Defendant, on the other hand, has submitted admissible evidence that all users of the Match.com website during the relevant time period were required to affirmatively agree to the Terms of Use when they clicked on a " Continue" or other similar button on the registration page where it was explained that by clicking on that button, the user was affirming that they would be bound by the Terms of Use, which were always hyperlinked and available for review. (Richards Decl. ¶ ¶ 3-4 & Ex. 1.) This type of " browsewrap" agreement commonly used to bind a website user to a website's terms of use are " consistently enforced." Nguyen v. Barnes & Noble Inc., 763 F.3d 1171, 1176 (9th Cir. 2014) (" [C]ourts have consistently enforced browsewrap agreements where the user had actual notice of the agreement." (citing Register.com, Inc. v. Verio, Inc., 356 F.3d 393, 401-04 (2d Cir. 2004)). Plaintiff's arguments concerning lack of consent to the Terms of Use therefore do not prevent enforcement of the arbitration provision. See Murphy v. DirecTV, Inc., 724 F.3d 1218, 1225 n.4 (9th Cir. 2013).
C. Unconscionability
Plaintiff also argues that the arbitration agreement contained in the Terms of Use is unenforceable because it is unconscionable. " Like other contracts, arbitration agreements can be invalidated for fraud, duress, or unconscionability." Chavarria, 733 F.3d at 921. " Unconscionability under California law 'has both a procedural and a substantive element, the former focusing on oppression or surprise due to unequal bargaining power, the latter on overly harsh or one-sided results.'" Kilgore v. KeyBank Nat'l Ass'n, 673 F.3d 947, 963 (9th Cir. 2012) (quoting Armendariz v. Foundation Health Psychcare Services, Inc., 24 Cal.4th 83, 114, 99 Cal.Rptr.2d 745, 767, 6 P.3d 669 (2000)). California courts apply a 'sliding scale' analysis in determining unconscionability: " the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable and vice versa." Pokorny v. Quixtar, Inc., 601 F.3d 987, 996 (9th Cir. 2010) (quotations and citations omitted). " Thus, although both procedural and substantive unconscionability must be present for the contract to be declared unenforceable, they need not be present to the same degree." Id.
Although the Terms of Use contain a choice of law provision adopting the law of Texas, where Match.com maintains its headquarters, Plaintiff has relied exclusively on California law. Because the result would be the same under either California or Texas law, which is even more favorable to enforcement of arbitration agreements, see Fleetwood Enters. v. Gaskamp, 280 F.3d 1069, 1077 (5th Cir. 2002) (" The only cases under Texas law in which an agreement was found procedurally unconscionable involve situations in which one of the parties appears to have been incapable of understanding the agreement."), the Court will primarily cite to California law.
1. Procedural Unconscionability
" In assessing procedural unconscionability, the court, under California law, focuses on the factors of surprise and oppression in the contracting process, including whether the contract was one drafted by the stronger party and whether the weaker party had an opportunity to negotiate." Pokorny v. Quixtar, 601 F.3d 987, 996 (9th Cir. 2010). Oppression arises " 'from an inequality of bargaining power [that] results in no real negotiation and an absence of meaningful choice.'" Circuit City Stores, Inc. v. Mantor, 335 F.3d 1101, 1106 (9th Cir. 2003) (quoting Stirlen v. Supercuts, Inc., 51 Cal.App.4th 1519, 1532, 60 Cal.Rptr.2d 138, 145 (1997)). Surprise " involves the extent to which the contract clearly discloses its terms as well as the reasonable expectations of the weaker party, " Chavarria, 733 F.3d at 922, and " involves the extent to which the supposedly agreed-upon terms of the bargain are hidden in the prolix printed form drafted by the party seeking to enforce the disputed terms." Stirlen, 51 Cal.App.4th at 1532, 60 Cal.Rptr.2d at 145.
Plaintiff contends that the arbitration provision is procedurally unconscionable because the Terms of Use are a " contract of adhesion" drafted by Defendant and presented to Plaintiff on a take-it-or-leave-it basis. The Court concludes that although drafted by Defendant, the arbitration provision is at most minimally procedurally unconscionable. The provision is presented as its own section of the Terms of Use, uses bold type to draw the reader's attention to it, and its terms are clearly explained in the " Notice of Rights" section immediately following the arbitration provision. (Richards Decl. ¶ 8 & Exs. 3 & 4, § 23(b).) Moreover, because the Terms of Use govern an online dating website, and a monthly expenditure of approximately $30, the interests of Plaintiff and the putative class are far less significant than those that may attach to an employment contract or other important financial relationship. As a result, it is unlikely that users would reject the terms offered by Defendant or otherwise seek to bargain for different terms. See, e.g., Chavarria, 733 F.3d at 922-23. Therefore, although contained within a contract of adhesion, the arbitration agreement is only minimally procedurally unconscionable. See Kilgore, 673 F.3d at 964; see also In re Lyon Fin. Servs., Inc., 257 S.W.3d 228, 233 (Tex. 2008) (" [W]e have held on numerous occasions that adhesion contracts are not per se unconscionable or void.").
2. Substantive Unconscionability
Although Plaintiff has demonstrated a small degree of procedural unconscionability, he must also demonstrate substantive unconscionability to avoid arbitration -- " both [must] be present in order for a court to exercise its discretion to refuse to enforce a contract or clause under the doctrine of unconscionability." Armendariz, 24 Cal.4th at 114, 99 Cal.Rptr.2d at 767. According to Plaintiff, the arbitration provision is substantively unconscionable because it binds " Plaintiff to arbitration for Plaintiff's entire lifetime, for any type of wrong committed by Defendant, regardless of whether or not it was in any way related to Plaintiff's account." (Opposition 15:2-4.) Plaintiff also contends that the arbitration provision is unconscionable because it requires litigation to occur in Dallas County, Texas.
Contrary to Plaintiff's assertions, the arbitration provision applies to " any dispute or claim arising out of or relating to this Agreement (including any alleged breach thereof), the Service, or the Website." (Richards Decl. ¶ 8 Exs. 3 & 4, § 23(a).) The scope of that provision clearly applies to the claims asserted by Plaintiff in this action and is not overly harsh or oppressive. Kilgore, 673 F.3d at 963. The forum selection clause requiring litigation to occur in Dallas County, Texas only applies if the " arbitration agreement is for any reason held to be unenforceable." (Richards Decl. ¶ 8 & Exs. 3 & 4, § 23(c).) Moreover, any binding arbitration may proceed where the user is located and the arbitration agreement additionally allows a user to avoid arbitration in favor of pursuing a claim in small claims court in the location of their choosing. These provisions, and the class action waiver, are not substantively unconscionable. See Concepcion, 131 S.Ct. at 1750-53.
Conclusion
For all of the foregoing reasons, the Court grants the Motion to Compel Arbitration. Plaintiff's claims against Defendant are hereby referred to arbitration. Given that all of Plaintiff's claims are subject to arbitration, this action is dismissed. See Martin Marietta Aluminum, Inc. v. Gen. Elec. Co., 586 F.2d 143, 147 (9th Cir. 1978); Sparling v. Hoffman Constr. Co., 864 F.2d 635, 638 (9th Cir. 1988) (affirming trial court's dismissal of claims referred to arbitration).
IT IS SO ORDERED.