Starke v. SquareTrade, Inc., No. 17-2474-cv (2d Cir. Jan. 10, 2019) [click for opinion]
In January 2016, Plaintiff purchased a 2-Year Electronics Protection Plan (the “Protection Plan”) from SquareTrade to protect a CD player that he purchased from Staples. Plaintiff purchased this Protection Plan online through Amazon.
The Amazon purchase page advised Plaintiff that his “Service Contract [would] be delivered via email … from SquareTrade Warranty Services … within 24 hours of purchase.” The purchase page also contained a series of hyperlinks leading to a two-page document titled “Terms and Conditions.” This document (the “Pre-Sale T&C”) set out the terms purporting to govern the transaction, but did not contain an arbitration provision or a class action waiver.
Also included on the Amazon purchase page was a heading for “Things to know,” which advises consumers that “SquareTrade Protection Plans are only valid for new products purchased at Amazon within the last 30 days.” Plaintiff did not read either the Pre-Sale T&C or the “Things to know” portion of the purchase page.
Following his purchase, Plaintiff received an email from SquareTrade with the subject line “SquareTrade Protection Plan on Amazon.com – Contract is Enclosed.” The email contained several prompts and texts in various formats. Nothing in the body of the email referred to arbitration, and the email did not contain or reference any attachments. However, the email did contain a small hyperlink in the bottom left corner, labeled “Terms & Conditions.” This link directed users to an eleven-page document titled “Protection Plan Terms & Conditions.”
This document (the “Post-Sale T&C”) was a different document from the Pre-Sale T&C, and contained several terms that were absent from the Pre-Sale T&C, including an arbitration provision that bound the consumer to arbitration of “[a]ny controversy or claim arising out of or relating to this Protection Plan, or breach thereof ….” The Post-Sale T&C also contained a class action waiver and a California choice of law clause. Plaintiff did not click on the “Terms & Conditions” hyperlink and did not review the Post-Sale T&C.
Plaintiff followed the instructions directing him to send SquareTrade a copy of the receipt for his CD player from Staples. Two days later, SquareTrade confirmed receipt. Several months later, Plaintiff’s CD player required repair or replacement, and Plaintiff made a claim for coverage under the Protection Plan. SquareTrade denied the claim on the basis that Plaintiff had not purchased the CD player through Amazon. SquareTrade offered Plaintiff a refund for the full price of the Protection Plan.
Plaintiff filed a putative class action against SquareTrade, alleging fraudulent and deceptive practices in the selling and marketing of protection plans. Plaintiff also alleged that SquareTrade failed to disclose other material terms and restrictions prior to the sale, and deceives customers by providing them with pre-sale terms and conditions that differ from the more restrictive post-sale terms and conditions that are disclosed via a deliberately obscure hyperlink only after the purchase has already been completed.
SquareTrade, in response, filed a motion to stay the action and compel arbitration, citing the arbitration clause and class action waiver contained in the Post-Sale T&C, and arguing that Plaintiff had reasonable notice of the Post-Sale T&C. Applying New York law, the district court denied SquareTrade’s motion, which SquareTrade subsequently appealed to the Second Circuit.
On appeal, the court affirmed the district court’s decision and found that under the totality of the circumstances, Plaintiff was not on sufficient notice of the terms of the Post-Sale T&C, including its arbitration clause, and therefore did not manifest assent to those terms. The court offered several reasons for its decision.
Specifically, the court found that none of the various communications put Plaintiff on notice that his “Service Contract” would ultimately be delivered in the form of an obscure hyperlink, and that the email itself failed to provide such notice. While the email from SquareTrade contained a chart titled “Your Protection Plan,” none of its language directed Plaintiff’s attention to the hyperlink containing the Post-Sale T&C. The cluttered, diverse text, displayed in multiple colors, sizes and fonts, and featuring various buttons and promotional advertisements, further distracted the consumer from the relevant hyperlink, which was among the smallest text in the email. Nor did the SquareTrade email signal to Plaintiff in any way that he should click on the link, or advise him that the service contract would be found via the hyperlink. In fact, the second sentence of the email proclaimed to Plaintiff that “You’re all set!”—which encouraged him to look no further.
The hyperlink to the Post-Sale T&C was also neither spatially nor temporally coupled with the transaction. The hyperlink was spatially decoupled from the transaction because it was not provided near the portion of the Amazon purchase page requiring Plaintiff’s attention (i.e., the “Add to Cart” button), or anywhere else on the purchase page. The Post-Sale T&C were also temporally decoupled from the transaction because Plaintiff purchased the Protection Plan from the Amazon website, but had no way to review the Post-Sale T&C until he received the SquareTrade confirmation email.
The court noted it would have been “virtually costless” for SquareTrade to provide the governing terms and conditions to consumers before they purchased protection plans. The court also emphasized that while Plaintiff did have a duty to read the terms of the contract presented to him, he must have been put on notice of the existence of additional contract terms before it can be said that he has assented to them.
For these reasons, the court found that Plaintiff was not on sufficient notice of the terms of the Post-Sale T&C, including its arbitration clause, and could not manifest assent to those terms. Accordingly, the order of the district court was affirmed, and SquareTrade’s motion to compel arbitration was denied.
A version of this post originally appeared in the March 2019 edition of Baker McKenzie’s International Litigation & Arbitration Newsletter, which is edited by David Zaslowsky.
