Lopez v. Square Payroll, Inc.

• Court: District Court, N.D. California
• Decided: September 5, 2025
• Docket: 3:25-cv-00648
• Status: Unknown

Opinion

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 PHILLIP LOPEZ, Case No. 25-cv-00648-AMO

8 Plaintiff, ORDER GRANTING MOTION TO 9 v. COMPEL ARBITRATION AND STAYING PROCEEDINGS 10 SQUARE PAYROLL, INC., Re: Dkt. No. 14 Defendant. 11

12 13 This is a putative class action involving Defendant Square Payroll’s alleged delay and 14 withholding of wages. Before the Court is Square Payroll’s motion to compel arbitration. Dkt. 15 No. 14. The motion is fully briefed and because it is suitable for decision without oral argument, 16 the Court VACATES the September 11, 2025 motion hearing. See Fed. R. Civ. P. 78(b); Civ. 17 L.R. 7-6. Having carefully considered the parties’ papers and the arguments made therein, as well 18 as the relevant legal authority, the Court hereby GRANTS the motion for the following reasons. 19 I. BACKGROUND 20 On September 18, 2020, Plaintiff Phillip Lopez signed up for a Square point of sale 21 account (“Seller Account”).1 Declaration of Caleb Mennen (“Mennen Decl.”) (Dkt. No. 14-1) 22 ¶¶ 6-8. To create this account, Lopez was required to enter an email address, create a password, 23 and indicate the country in which he was located and in which he would use Square’s services. 24 Mennen Decl. ¶ 6. To create his account, Lopez had to click a box attesting “I agree to Square’s 25

26 1 Courts considering a motion to compel arbitration apply a standard similar to a motion for summary judgment, construing all facts and reasonable inferences in the light most favorable to 27 the non-moving party. See Lomeli v. Midland Funding, LLC, No. 19-CV-01141-LHK, 2019 WL 1 Terms, Privacy Policy, and E-Sign Consent.” Mennen Decl. {| 7. Registration for an account 2 || cannot be completed until a user clicks that box. Mennen Decl. {] 8. The word “Terms” was a 3 || hyperlink, and when clicked, it linked to the General Terms of Service (“General TOS”). Mennen 4 || Decl. § 7. Square Payroll presents the following representation of the webpage as it would have 5 appeared at the time Lopez saw it: 6 Let's create your account. 4 8 9 % 10 Create a password Country 11 12 Terms, Privacy Policy, E-Sign Consent

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15 || Mennen Decl. 47.

16 The General TOS included a provision titled “Binding Individual Arbitration,” which

= 17 provided that the user and Square agree to arbitrate any and all Disputes and that

Z 18 any arbitration under these general terms will only be on an individual basis; class arbitrations, class actions, representative 19 actions, and consolidation with other actions are not permitted. You waive any right to have your case decided by a jury and you waive 20 any right to participate in a class action against Square. 21 Mennen Decl. Ex A § 21. “Disputes” was defined as “any claim, controversy, or dispute between 22 || you and Square, its processors, suppliers or licensors (or their respective affiliates, agents, 23 directors or employees), including any claims relating in any way to these Terms or the Services, 24 |) or any other aspect of our relationship.” Mennen Decl. Ex A § 20. Square Payroll is an affiliate 25 of Square. Van Brunt Decl. 2. Lopez created the Seller Account to see if he might want to use 26 Square payment services for his construction business, but never used the account again after 27 || initially creating it. Declaration of Phillip Lopez (“Lopez Decl.”) (Dkt. No. 15-1) 4] 4. 28 On March 26, 2022, Lopez created a Square Payroll team member account (‘Payroll

1 Account”) linked to his employer, Secured Venue Safety Management. Declaration of Scott Van 2 || Brunt (“Van Brunt Decl.”) (Dkt. No. 14-2) 9] 6-7. Lopez’s employer began the registration 3 || process by providing Lopez’s name and email address to Square Payroll. Van Brunt Decl. {] 6. 4 || Square Payroll then emailed Lopez an invitation with a link to “Accept Invitation.” Jd. To create 5 || his Payroll Account, Lopez followed the link, which directed him to a “Setup Your Account” 6 || page, on which Lopez entered his personal information. Van Brunt Decl. 48. Jd. At the bottom 7 || of that page was the following disclosure: “By continuing, you agree to the terms of service and 8 || privacy notice.” Id. “Terms of service” was a hyperlink indicated by its blue text and linked to 9 the Square Team TOS. Jd. Lopez could not have created his Square Payroll account without 10 || completing this page and clicking the “Next” button. Van Brunt Decl. {f] 8-9. Square Payroll 11 presents the following representation of the page as it would have appeared when Lopez saw it: 12 Personal info 13 □□□□□□□□□□□□□□□□□□□□□□□□□□

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1 Van Brunt Decl. ¶ 8. 2 The Square Team Terms of Service (“Square Team TOS”) includes a section titled 3 “Binding Arbitration” that requires that “any and all Disputes” be arbitrated, and requires that such 4 arbitration proceed solely on an individual basis: 5 You and Square agree that any and all Disputes, except those that are resolved informally or brought in a small claims court, will be 6 arbitrated by a neutral arbitrator who has the power to award the same individual damages and individual relief that a court can. ANY 7 ARBITRATION UNDER THIS AGREEMENT WILL ONLY BE ON AN INDIVIDUAL BASIS; CLASS ARBITRATIONS, CLASS 8 ACTIONS, REPRESENTATIVE ACTIONS, AND CONSOLIDATION WITH OTHER ARBITRATIONS ARE NOT 9 PERMITTED. YOU WAIVE ANY RIGHT TO HAVE YOUR CASE DECIDED BY A JURY AND YOU WAIVE ANY RIGHT 10 TO PARTICIPATE IN A CLASS ACTION AGAINST SQUARE. 11 Van Brunt Decl., Ex. A at § 24. “Disputes” is defined in the Square Team TOS as 12 any claim, controversy, or dispute between you and Square, its processors, suppliers or licensors (or their respective affiliates, 13 agents, directors or employees), whether arising before or during the effective period of these Terms, and including any claim, 14 controversy, or dispute based on any conduct of you or Square that occurred before the effective date of these Terms, including any 15 claims relating in any way to these Terms or the Services, or any other aspect of our relationship. 16 17 Id. at § 23. Both the General TOS and Square Team TOS include an identical delegation 18 provision stating that “the Arbitrator shall be responsible for determining all threshold arbitrability 19 issues, including issues relating to whether the General Terms and/or Additional Terms (or any 20 aspect thereof) are enforceable, unconscionable or illusory and any defense to arbitration, 21 including waiver, delay, laches, or estoppel.” Mennen Decl. Ex. A § 21 (General TOS); Van 22 Brunt Decl. Ex. A § 24 (Square Team TOS). 23 Lopez filed the instant action in Alameda County Superior Court on December 12, 2024, 24 asserting a negligence claim and violations of the Consumer Legal Remedies Act, California’s 25 Unfair Competition Act, and the Electronic Funds Transfer Act related to Square Payroll’s alleged 26 delay and withholding of payments. Dkt. No. 1-1 at 5. Square Payroll removed the case on 27 January 16, 2025, Dkt. No. 1, and filed the instant motion on March 26, 2025, seeking to compel 1 on April 9, 2025, Dkt. No. 15, and Square Payroll replied on April 16, 2025, Dkt. No. 16. 2 II. DISCUSSION 3 Square Payroll moves to compel arbitration on the basis that both the General TOS and 4 Square Team TOS require arbitration of Lopez’s claims. See Dkt. No. 14. The Federal 5 Arbitration Act (“FAA”) provides that written arbitration agreements in contracts “evidencing a 6 transaction involving commerce . . . shall be valid, irrevocable, and enforceable, save upon such 7 grounds as exist at law or in equity for the revocation of any contract.” AT&T Mobility LLC v. 8 Concepcion, 563 U.S. 333, 339 (2011) (quoting 9 U.S.C. § 2). The FAA reflects a “liberal federal 9 policy favoring arbitration agreements.” Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 10 25 (1991) (quoting Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 11 24 (1983)). “By its terms, the [FAA] leaves no place for the exercise of discretion by a district 12 court, but instead mandates that district courts shall direct the parties to proceed to arbitration on 13 issues as to which an arbitration agreement has been signed.” Dean Witter Reynolds Inc. v. Byrd, 14 470 U.S. 213, 218 (1985) (emphasis in original). 15 “A purported arbitration agreement presents a few ‘gateway’ issues: First, whether an 16 agreement to arbitrate was actually formed. Second, whether that agreement is ‘valid,’ in other 17 words, whether there are any defenses. Third, ‘whether the agreement encompasses the dispute at 18 issue.’ ” Davenport v. Nvidia Corp., 719 F. Supp. 3d 1019, 1025 (N.D. Cal. 2024) (internal 19 citations and quotation marks omitted). Typically, these gateway issues are resolved by a court, 20 but some, including validity and arbitrability, can be delegated to an arbitrator by agreement. 21 Ahlstrom v. DHI Mortg. Co., Ltd., L.P., 21 F.4th 631, 634 (9th Cir. 2021) (citing Green Tree Fin. 22 Corp. v. Bazzle, 539 U.S. 444, 452 (2003). Accordingly, “when presented with a contract that 23 includes both an arbitration provision and a delegation provision, a reviewing court must first 24 ‘resolve any challenge that an agreement to arbitrate was never formed.’ ” Tanner v. Tax Servs. of 25 Am., Inc., No. 25-CV-01940-DMR, 2025 WL 1580737, at *3 (N.D. Cal. June 4, 2025) (quoting 26 Caremark, LLC v. Chickasaw Nation, 43 F.4th 1021, 1030 (9th Cir. 2022)). If the reviewing court 27 finds an agreement to arbitrate was formed, it must then “resolve any challenge directed 1 if the parties did form an agreement to arbitrate containing an enforceable delegation clause, all 2 arguments going to the scope or enforceability of the arbitration provision are for the arbitrator to 3 decide in the first instance.” Id. Accordingly, the Court first considers whether an agreement to 4 arbitrate was formed when Lopez created his Seller Account or Payroll Account. The Court then 5 considers the enforceability of the delegation clause. 6 A. Formation of Agreement to Arbitrate 7 Square Payroll argues that in creating both his Seller Account in 2020 and his Payroll 8 Account in 2022, Lopez entered into a valid and enforceable agreement to arbitrate any dispute 9 with Square Payroll, including the instant action. Lopez argues that no valid arbitration agreement 10 exists because he did not agree to the arbitration provision when he created either account and, 11 accordingly, there was no mutual assent. “[M]utual manifestation of assent, whether by written or 12 spoken word or by conduct, is the touchstone of contract.” Nguyen v. Barnes & Noble Inc., 763 13 F.3d 1171, 1175 (9th Cir. 2014) (citing Specht v. Netscape Commc’ns Corp., 306 F.3d 17, 29 (2d 14 Cir. 2002)). A party’s conduct may manifest assent, but only if they “intend[] to engage in the 15 conduct and know[] or ha[ve] reason to know that the other party may infer from [their] conduct 16 that [they] assent.” Berman v. Freedom Fin. Network, LLC, 30 F.4th 849, 855 (9th Cir. 17 2022) (citation omitted). The “principle of knowing consent” required to establish contract 18 formation “applies with particular force to provisions for arbitration.” Knutson v. Sirius XM Radio 19 Inc., 771 F.3d 559, 566 (9th Cir. 2014). 20 Because Lopez created those accounts online, the Court must examine his conduct in 21 creating the accounts. Courts view online agreements as falling on a spectrum between 22 “clickwrap” and “browsewrap.” Berman, 30 F.4th at 856. A clickwrap agreement is one in which 23 “website users are required to click on an ‘I agree’ box after being presented with a list of terms 24 and conditions of use,” while a browsewrap agreement is one where the “website’s terms and 25 conditions of use are generally posted on the website via a hyperlink at the bottom of the 26 screen.” Nguyen, 763 F.3d at 1175-76. Courts routinely find agreements falling closer to the 27 clickwrap end of the spectrum to be enforceable because the consumer has received notice of the 1 conduct that he assents” to those terms. Berman, 30 F.4th at 856. However, courts are “more 2 reluctant to enforce browsewrap agreements because consumers are frequently left unaware that 3 contractual terms were even offered, much less that continued use of the website will be deemed 4 to manifest acceptance of those terms.” Id. A “modified clickwrap agreement” or “sign-in 5 agreement” exists where a user is “notified of the existence of the website’s terms of use and 6 advise[d] that by making some type of affirmative act, often by clicking a button, she is agreeing 7 to the terms of service.” Moyer v. Chegg, Inc., No. 22-CV-09123-JSW, 2023 WL 4771181, at *4- 8 5 (N.D. Cal. July 25, 2023) (finding that a modified clickwrap agreement demonstrated mutual 9 assent to arbitrate). 10 Here, when creating a Seller Account in 2020, Lopez was presented with a clickwrap 11 agreement, as he was required to check a box directly next to the phrase “I agree to Square’s 12 Terms, Privacy Policy, and E-Sign Consent.” Mennen Decl. ¶ 7. In contrast, when creating his 13 Payroll Account in 2022, Lopez was presented with a page that included the following disclosure: 14 “By continuing, you agree to the terms of service and privacy notice.” Van Brunt Decl. ¶ 8. In 15 this way, the Payroll Account registration is “somewhat like a browsewrap agreement in that the 16 terms are only visible via a hyperlink, but also somewhat like a clickwrap agreement in that the 17 user must do something else – click [“Next”] – to assent to the hyperlinked terms.” DeVries v. 18 Experian Info. Sols., Inc., No. 16-cv-02953-WHO, 2017 WL 733096, at *5 (N.D. Cal. Feb. 24, 19 2017) (citation omitted). Thus, the agreement is most like a “modified clickwrap agreement” or 20 “sign-in wrap” because the Payroll Account setup page screen informs users that if they click the 21 “Next” button, they agree to the Square Team TOS. 22 To determine whether Lopez entered into an agreement when creating either account, the 23 Court considers whether “(1) the website provides reasonably conspicuous notice of the terms to 24 which the consumer will be bound; and (2) the consumer takes some action, such as clicking a 25 button or checking a box, that unambiguously manifests his or her assent to those terms.” 26 Oberstein v. Live Nation Ent., Inc., 60 F.4th 505, 515 (9th Cir. 2023) (quoting Burman, 30 F.4th at 27 856). As for the Seller Account, the website provided reasonably conspicuous notice of the terms 1 surrounding text in bright blue font, making its presence readily apparent.” Id. at 516. And by 2 checking the box next to the disclosure, Lopez manifested his assent to the General TOS.2 See id. 3 Having found the Seller Account signup page gave conspicuous notice of the terms of use, 4 the Court next considers whether Lopez unambiguously manifested assent to the General TOS 5 when creating his Seller Account, Oberstein, 60 F.4th at 517, and easily finds that he did. “A 6 user’s click of a button can be construed as an unambiguous manifestation of assent only if the 7 user is explicitly advised that the act of clicking will constitute assent to the terms and conditions 8 of an agreement.” Berman, 30 F.4th at 857. Lopez does not contest that in creating his Seller 9 Account he clicked the box indicating he “agree[d] to Square’s Terms, Privacy Policy, and E-Sign 10 Consent.” As such, there is no reasonable dispute that Lopez assented to the General TOS. 11 Lopez’s arguments do not persuade otherwise. He argues that due to his “minimal 12 interaction” with the Seller Account and the fact that he had “no awareness that arbitration terms 13 would extend to separate payroll services created nearly two years later,” there is no basis for 14 extending those arbitration terms to his payroll-related claims. Opp. at 5, 13-14. He contends he 15 had no reason to suspect, and was never informed, that any arbitration terms associated with the 16 Seller Account could govern unrelated services, such as those relating to future payroll records. 17 Id. This argument challenges the conscionability – and thus enforceability – of the agreement, not 18 whether an agreement was formed in the first place. Lopez points to no authority that any 19 expectation he had regarding the scope of the agreement is relevant to the Court’s analysis 20 regarding whether an agreement was formed.3 Lopez also points to the provision in the Square 21 2 Because the Court finds Lopez manifested his assent to the General TOS, it need not determine 22 whether he also manifested his assent to the Square Team TOS. However, due to the distance between the terms of use disclosure and the button users are required to click to complete the 23 account registration process, the Court is skeptical that the page gave users conspicuous notice of the Square Team TOS. See, e.g., Schlueter-Beckner v. SimpliSafe, Inc., No. 3:25-CV-01764 24 (CRB), 2025 WL 2162948, at *4 (N.D. Cal. July 30, 2025) (finding no conspicuous notice in part where the disclosure was placed “off to the side” and “not directly above or below” the button). 25

3 Lopez argues that courts regularly decline to compel arbitration where the plaintiff had no clear 26 notice or reasonable expectation that the arbitration terms agreed upon in one context would extend to other contexts involving distinct and separate services. While Lopez’s expectations may 27 be relevant to the arbitration agreement’s enforceability – an analysis the Court does not reach, see 1 Team TOS indicating that “[i]n the event of a conflict between this Agreement and any other 2 Square agreement or policy, this Agreement shall prevail on the subject matter of this Agreement,” 3 and argues that this provision “plainly invalidates Square Payroll’s contention that the arbitration 4 provision from the Seller [A]ccount can apply to payroll-related disputes governed by the distinct 5 and controlling terms of the [Square Team TOS].” Id. at 15. But because the General TOS and 6 Square Team TOS both require arbitration, there is no conflict between them, and Lopez has 7 identified none. Finally, Lopez argues the arbitration provisions associated with the Seller 8 Account must be narrowly construed with ambiguities resolved strictly against the drafter, Opp. at 9 15-16 (citing Victoria v. Superior Court, 40 Cal.3d 734, 739 (1985); Sandquist v. Lebo Auto., Inc., 10 1 Cal.5th 233, 247-48 (2016)), but identifies no ambiguity in the arbitration provisions that the 11 Court should construe in his favor. 12 The Court therefore concludes that an agreement to arbitrate was made upon Lopez’s 13 creation of his Seller Account, as the webpage gave conspicuous notice of the terms of use to 14 which Lopez assented by checking the box and completing his account registration. 15 B. Delegation Clause 16 Square Payroll argues the parties have agreed to delegate questions of arbitrability to the 17 arbitrator, so the arbitrator – not this Court – must resolve disputes relating to the interpretation or 18 enforceability of the agreement. Mot. at 19-21. The Supreme Court “has consistently held that 19 parties may delegate threshold arbitrability questions to the arbitrator, so long as the parties’ 20 agreement does so by ‘clear and unmistakable’ evidence.” Henry Schein, Inc. v. Archer & White 21 Sales, Inc., 586 U.S. 63, 69 (2019) (quoting First Options of Chicago, Inc. v. Kaplan, 514 U.S. 22 938, 944 (1995)). Here, the General TOS unambiguously delegate to the arbitrator “all threshold 23 arbitrability issues, including issues relating to whether the General Terms and/or Additional 24 Terms (or any aspect thereof) are enforceable, unconscionable or illusory and any defense to 25 – the one case cited by Lopez – does not hold otherwise. See Longnecker, 23 F. Supp. 3d at 1109 26 (compelling the matter to arbitration having found valid arbitration agreements existed between the parties, and despite noting that an arbitration agreement within a contract of adhesion is 27 unenforceable where it does not fall within the reasonable expectations of the weaker party, 1 arbitration, including waiver, delay, laches, or estoppel.” Mennen Decl. Ex. A § 21. Courts 2 regularly find arbitration agreements containing similar delegation clauses constitute clear and 3 unmistakable evidence of an intent to delegate. See, e.g., Cordero v. Coinbase, Inc., No. 3:25-CV- 4 04024-CRB, 2025 WL 2223495, at *2 (N.D. Cal. Aug. 5, 2025) (finding delegation provision 5 constituted clear and unmistakable evidence of parties’ intent where arbitration agreement granted 6 arbitrator the “exclusive authority to resolve any Dispute, including . . . disputes arising out of or 7 related to the interpretation or application of the Arbitration Agreement, including the 8 enforceability, revocability, scope, or validity of the Arbitration Agreement or any portion of the 9 Arbitration Agreement”); see also Tanner v. Tax Servs. of Am., Inc., No. 25-CV-01940-DMR, 10 2025 WL 1580737, at *4 (N.D. Cal. June 4, 2025). Lopez’s only argument against the Court’s 11 enforcement of the delegation clause is that he did not assent to any arbitration terms, and 12 therefore did not assent to agree to delegate issues of arbitrability to the arbitrator. The Court has 13 already concluded that Lopez agreed to the General TOS. Accordingly, the Court finds there is 14 clear and unmistakable evidence that the parties’ agreement delegates threshold arbitrability 15 questions to the arbitrator. 16 III. CONCLUSION 17 In sum, the Court finds that when Lopez created his Seller Account, the parties formed an 18 agreement to arbitrate containing an enforceable delegation provision. Accordingly, the parties’ 19 remaining arguments regarding the enforceability of the arbitration agreement, including those 20 related to the class action waivers, are left to the arbitrator to decide in the first instance. See 21 Caremark, 43 F.4th at 1030. Square Payroll’s motion to compel arbitration is therefore 22 GRANTED. Accordingly, its request for a stay pending arbitration, Dkt. No. 14 at 26, is 23 GRANTED as well. See Smith v. Spizzirri, 601 U.S. 472, 478 (2024) (“When a district court 24 finds that a lawsuit involves an arbitrable dispute, and a party requests a stay pending arbitration, 25 // 26 // 27 // 1 § 3 of the FAA compels the court to stay the proceeding.”). Square Payroll SHALL file a status 2 || report regarding arbitration on December 4, 2025 and every 90 days thereafter, and within 14 days 3 of the completion of arbitration. 4 5 IT IS SO ORDERED. 6 || Dated: September 5, 2025 cob Moc 8 ARACELI MARTINEZ-OLGUIN 9 United States District Judge 10 11 a 12

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