Tate v. Progress Residential LLC

• Court: District Court, D. Arizona
• Decided: February 12, 2024
• Docket: 2:23-cv-01203
• Status: Unknown

Opinion

1 WO 2 3 4 5 IN THE UNITED STATES DISTRICT COURT 6 FOR THE DISTRICT OF ARIZONA

8 Mitchell L Tate, No. CV-23-01203-PHX-SMM

9 Plaintiff, ORDER

10 v.

11 Progress Residential LLC,

12 Defendant. 13 14 This matter is before the Court on Defendant’s Motion to Compel Arbitration. 15 (Doc. 16). The Motion is fully briefed. (Docs. 16, 17, 18). For the following reasons, the 16 Court denies the Motion. 17 I. BACKGROUND 18 Plaintiff Mitchell Tate rented a residential property managed by Defendant Progress 19 Residential LLC. (Doc. 1 at 2). Beginning in the fall of 2022, Defendant began contacting 20 Plaintiff through Plaintiff’s cellular phone, “attempting to collect purported past due rent 21 obligations.” (Id.) These calls, of which Plaintiff reports dozens, were in the form of 22 automated or prerecorded voice messages. (Id. at 3) Plaintiff believed that the calls were 23 in error because Plaintiff was current on his rent payments. (Id.) Plaintiff contacted 24 Defendant and demanded that the calls cease because Plaintiff did not owe any past due 25 rent to Defendant. (Id.) Despite Plaintiff’s demand, the calls continued. (Id.) 26 On June 30, 2023, Plaintiff brought claims against Defendant for violations of the 27 Telephone Consumer Protection Act (TCPA) and the Georgia Fair Business Practices Act 28 1 (GFBPA). (Id. at 1). Plaintiff brings the TCPA claim as a putative nationwide class 2 action. (Id. at 4). 3 On September 7, 2023, Defendant filed the Motion to Compel Arbitration that is 4 now before the Court. (Doc. 16). Defendant argues that Plaintiff agreed to the Terms of 5 Use1 of Defendant’s website when Plaintiff submitted his online rental application. 6 Contained in Defendant’s Terms of Use is an Arbitration Clause that provides, in relevant 7 part, that “Any claim or dispute arising out of or relating to these Terms of Service or the 8 Services will be settled by binding arbitration.” (Doc. 16-3 at 31). 9 Plaintiff filed a Response in opposition to the Motion to Compel Arbitration, 10 contending that the Plaintiff did not agree to Defendant’s Terms of Use, and even if 11 Plaintiff had agreed, the Arbitration Clause does not cover the claims that Plaintiff brings 12 against Defendant. (Doc. 17). The Motion is fully briefed. (Docs. 16, 17, 18) 13 II. LEGAL STANDARD 14 The enforceability of arbitration agreements in contracts is governed by the 15 Federal Arbitration Act (FAA). 9 U.S.C. § 1 et seq; see Kramer v. Toyota Motor Corp., 16 705 F.3d 1122, 1126 (9th Cir. 2013). As arbitrability is a matter of contract, “a party 17 cannot be required to submit to arbitration any dispute which he has not agreed so to 18 submit.” AT&T Techs., Inc. v. Commc’ns Workers of Am., 475 U.S. 643, 648 (1986). 19 As a general matter, “any doubts concerning the scope of arbitrable issues should be 20 resolved in favor of arbitration.” Moses H. Cone Memorial Hosp. v. Mercury Constr. 21 Corp., 460 U.S. 1, 24–25 (1983). 22 The Court considers two factors when determining whether a dispute should be 23 resolved through arbitration: “(1) whether there is an agreement to arbitrate between the 24 parties; and (2) whether the agreement covers the dispute.” Brennan v. Opus Bank, 796 25 F.3d 1125, 1130 (9th Cir. 2015) (citing Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 26 79, 84 (2002)). If both queries may be answered in the affirmative, the Court must 27 enforce the arbitration agreement. See Lifescan Inc. v. Premier Diabetic Servs., Inc., 363

28 1 The phrases “Terms of Use” and “Terms of Service” are used interchangeably on Defendant’s webpage and will be referred to as “Terms of Use” for consistency. 1 F.3d 1010, 1012 (9th Cir. 2004). The Court does not consider the merits of the claim or 2 any available defenses when determining arbitrability, but instead solely considers 3 whether the arbitration agreement is enforceable. Chiron Corp. v. Ortho Diagnostic Sys., 4 Inc., 207 F.3d 1126, 1131 (9th Cir. 2000). 5 The Court applies state law to determine the validity of the agreement as a whole 6 and federal substantive law to determine the scope of the arbitration provision. See 7 Kramer, 705 F.3d at 1126, 1128. The Court “interpret[s] the contract by applying general 8 state-law principles of contract interpretation, while giving due regard to the federal 9 policy in favor of arbitration by resolving ambiguities as to the scope of arbitration in 10 favor of arbitration.” Wagner v. Stratton Oakmont, Inc., 83 F.3d 1046, 1049 (9th Cir. 11 1996) (citing Intel Corp. v. Advanced Micro Devices, Inc., 12 F.3d 908, 914 (9th Cir. 12 1993), cert. denied, 512 U.S. 1205 (1994)). When all claims in an action are subject to 13 arbitration, courts will generally grant a dismissal of the action. Sparling v. Hoffman 14 Constr. Co., 864 F.2d 635, 638 (9th Cir. 1988); see also Johnmohammadi v. 15 Bloomingdale’s, Inc., 755 F.3d 1072, 1074 (9th Cir. 2014). 16 III. DISCUSSION 17 The parties dispute whether Plaintiff agreed to the Arbitration clause contained in 18 Defendant’s Terms of Use and whether the Arbitration clause encompasses Plaintiff’s 19 claims. Defendant argues that Plaintiff agreed to the Arbitration clause when Plaintiff 20 submitted his online rental application with Defendant. (Doc. 16-1 at 5–7). Plaintiff 21 contends that Defendant’s Terms of Use are contained in a “browsewrap” fashion and 22 thus Plaintiff was never required to accept the Terms. (Doc. 17 at 5–6). Plaintiff further 23 argues that even if Plaintiff did agree to the Terms of Use, Plaintiff’s claims fall outside 24 the scope Defendant’s Terms of Use and thus are not subject to arbitration. (Id. at 11–12). 25 Defendant disputes Plaintiff’s characterization of the Terms of Use and contends that the 26 Terms of Use is a valid “clickwrap” agreement because Plaintiff was required to 27 affirmatively indicate assent to the Terms in Plaintiff’s rental application. (Doc. 18 at 7– 28 8). 1 Determining whether this action should be subject to mandatory arbitration 2 requires that the Court consider the two factors identified by the Ninth Circuit in 3 Brennan: (1) whether the parties agreed to arbitrate potential claims, and if so, (2) 4 whether the scope of the arbitration agreement encompasses Plaintiff’s claims. 796 F.3d 5 at 1130. The Court applies Arizona law to determine the validity of the Terms of Use. 6 See Kramer, 705 F.3d at 1128. The choice of law provision in the Terms of Service, 7 immediately following the Arbitration Clause, provides that “[t]hese Terms of Service are 8 governed by the laws of the State of Arizona without regard to its conflict of law 9 provisions.” (Docs. 16-1 at 10, 16-3 at 31). Plaintiff does not contest the application of 10 Arizona law to this analysis. (Doc. 17). 11 The parties dispute whether Defendant’s Terms of Use are best characterized as a 12 “browsewrap” or a “clickwrap” agreement. The Ninth Circuit considered these types of 13 contracts in Nguyen v. Barnes & Noble Inc., in which the court distinguished the forms 14 of website-based agreements as follows: 15 Contracts formed on the Internet come primarily in two flavors: 16 “clickwrap” (or “click-through”) agreements, in which website users are 17 required to click on an “I agree” box after being presented with a list of 18 terms and conditions of use; and “browsewrap” agreements, where a 19 website's terms and conditions of use are generally posted on the website 20 via a hyperlink at the bottom of the screen. 21 763 F.3d 1171, 1175–76 (9th Cir. 2014). The validity of either form of agreement 22 depends on whether there was a mutual manifestation of assent by the parties. Id. at 1175. 23 Whereas a clickwrap agreement requires the user to signal assent to terms and conditions, 24 a browsewrap agreement, by definition, does not require the user to affirmatively indicate 25 assent to the terms of use. Id. at 1176. Consequently, the validity of a browsewrap 26 agreement depends on whether the user has actual or constructive knowledge of the terms 27 of use. Id. If the circumstances compel the conclusion that the user had actual or 28 constructive knowledge of the terms, such as “where the website contains an explicit 1 textual notice that continued use will act as a manifestation of the user’s intent to be 2 bound,” then the user’s continued use of the website may be found to validate a 3 browsewrap agreement. Id. at 1177. Factors considered in determining whether a 4 reasonably prudent user would have had inquiry notice of a browsewrap agreement 5 include the conspicuousness of the hyperlink to the Terms of Use, other notices given to 6 the user, and the design of the website. Id. The Court in Nguyen reaffirmed the 7 unwillingness of courts to enforce browsewrap agreements and held that: 8 [W]here a website makes its terms of use available via a conspicuous 9 hyperlink on every page of the website but otherwise provides no notice to 10 users nor prompts them to take any affirmative action to demonstrate 11 assent, even close proximity of the hyperlink to relevant buttons users must 12 click on—without more—is insufficient to give rise to constructive notice. 13 Id. at 1178–79. 14 The Terms of Use at issue is available on Defendant’s website and are hyperlinked 15 at various locations. The initial presentation of Defendant’s Terms of Use can be found at 16 Defendant’s landing page at rentprogress.com, which displays a banner at the bottom of 17 the screen that states, “By using this site, you agree to the Terms of Service and Privacy 18 Policy.” The Terms of Use and Privacy Policy are hyperlinked at the underlined text. 19 Within the Terms of Use is the Arbitration clause that Defendant seeks to enforce, which 20 provides, in relevant part. that “[a]ny claim or dispute arising out of or relating to these 21 Terms of Service or the Services will be settled by binding arbitration.” (Doc. 16-3 at 31). 22 Defendant identifies several junctures at which Defendant argues that Plaintiff 23 assented to the Terms of Use. (Doc. 18 at 10–11). Defendant’s primary argument is that 24 Plaintiff agreed to the Terms of Use at the “Additional Information” page of the rental 25 application Plaintiff submitted, where Plaintiff was prompted to—and did—agree to the 26 statement “I agree to abide by the terms and conditions set forth in this lease application.” 27 (Docs. 16-1 at 10–11, 16-3 at 26, 18 at 10–11). However, no hyperlink is contained in the 28 statement; consequently, the Terms are neither a pure browsewrap nor a pure clickwrap 1 agreement. Due to the absence of a hyperlink at this specific juncture, Defendant’s 2 argument relies on the cumulation of hyperlinked references to the Terms of Use in 3 combination with the final indication of assent to the unlinked “terms and conditions set 4 forth in this lease application,” to support Defendant’s conclusion that Plaintiff assented 5 to the Terms. In order to determine whether the parties formed a valid agreement to 6 arbitrate, the Court evaluates each reference to the Terms of Use in turn. 7 As an initial matter, the Court finds that the display of the Terms of Use at the 8 rentprogress.com landing page, when taken in isolation, is presented in a “browsewrap” 9 fashion and does not bind Plaintiff to the Terms of Use. This finding is consistent with 10 Nguyen, in which the Ninth Circuit found that the mere availability of a hyperlink to 11 terms of use that otherwise does not prompt the user’s affirmative assent does not bind 12 the user to the terms of use. 763 F.3d at 1178–79. Neither party disputes that Plaintiff 13 used Defendant’s website in order to submit a rental application. However, though the 14 Terms of Use are hyperlinked on the landing page, the user is not required to 15 affirmatively manifest assent to the terms. Accordingly, this display does not suffice to 16 create a valid contract between the parties. 17 This conclusion also applies to the first references to the Terms of Use in the 18 rental application which Plaintiff submitted. At two pages of the rental application there 19 are displayed hyperlinked prompts which read “Check out our Terms & Privacy” or 20 “please read our Terms & Privacy.” By their plain language, although these prompts do 21 direct the user to the Terms & Privacy, neither indicates that the user agrees to the Terms 22 & Privacy. The user is not required to follow the hyperlinks or acknowledge the Terms in 23 any manner before proceeding to the next page of the rental application. As such, these 24 references to the Terms are also presented in a browsewrap fashion and do not bind 25 Plaintiff to the Terms of Use. 26 Another instance at which Defendant argues that Plaintiff agreed to the Terms of 27 Use is at the “Screening Information” page of the rental application, at which the user is 28 required to indicate assent to the statement “I have read the Renter Screening section of 1 the Terms and Conditions, and I authorize the use of the information and contacts 2 provided in this application to complete a credit, reference, and/or background check. 3 Click here to read the Terms and Conditions.” (Docs. 18 at 10–11, 16-3 at 24). The word 4 “here” is a blue hyperlink. The Court is not persuaded that this indication of assent 5 suffices to manifest Plaintiff’s agreement to the Terms of Service for two reasons: first, 6 because it directs the Plaintiff to read only a specific section of the “Terms and 7 Conditions,” and second, because the neither the Terms of Use nor the Privacy Policy 8 contain a “Renter Screening” section. It is unclear what the user is directed to, and the 9 Court is not inclined to interpret this ambiguous reference as binding Plaintiff to 10 Defendant’s Terms of Use. 11 Defendant’s chief argument is that Plaintiff assented to the Terms of Use when 12 Plaintiff indicated assent to the statement “I agree to abide by the terms and conditions 13 set forth in this lease application” at the “Additional Information” page of the application. 14 As characterized by Defendant, “[o]n the Additional Information page of the 15 rentprogress.com website, there was a dropdown menu next to the statement ‘I agree to 16 abide by the terms and conditions set forth in this lease application.’” (Doc. 18 at 7). 17 Plaintiff selected “yes” for this statement. However, as noted earlier, the statement 18 contains no hyperlink. Defendant argues that because the Terms are hyperlinked at the 19 next question of the application, which concerns the privacy policy, and were hyperlinked 20 at various prior junctures of the application, this set of factors is sufficient to conclude 21 that Plaintiff assented to the Terms of Use. 22 Because there is no hyperlink to expressly denote what the user agrees to, the 23 statement in Defendant’s application incorporates a separate agreement. This Court 24 recently had occasion to address an online agreement in which the incorporation of a 25 separate document was at issue. See Cottonwood Ctrs. Inc. v. Klearman, No. CIV 18- 26 252-TUC-CKJ, 2018 WL 5084657 (D. Ariz. Oct. 18, 2018). The Court observed that 27 “[i]ncorporation of a separate document and agreement requires “the reference must be 28 clear and unequivocal and must be called to the attention to the other party, [the other 1 party] must consent thereto, and the terms of the incorporated document must be known 2 or easily available to the contracting parties.” Id. at *5 (citing United Cal. Bank v. 3 Prudential Ins. Co. of Am., 681 P.2d 390, 420 (Ariz. Ct. App. 1983)); see also Edwards v. 4 Venma Nutrition, No. CV-17-02133-PHX-DCG, 2018 WL 637382, at *3 (D. Ariz. Jan. 5 31, 2018). The Court held that the parties had not validly agreed to arbitrate because the 6 plaintiff was not required to open the separate document and there was no 7 acknowledgement of the incorporation that indicated the plaintiff’s consent. Id. at *6. 8 The Court finds that Plaintiff’s assent to “the terms and conditions set forth in this 9 lease application” does not bind Plaintiff to Defendant’s Terms of Use because the 10 reference is ambiguous. The lack of a hyperlink at this critical juncture requires that the 11 reference to the Terms of Use be “clear and unequivocal” in order to create a binding 12 agreement under Arizona law. See United Cal. Bank, 681 P.2d at 420. However, it is 13 unclear that “terms and conditions” refers to a specific, separate document. Whereas 14 previous references to the Terms of Use clearly titled and hyperlinked the document, the 15 same cannot be said for this reference. Consequently, the terms of the incorporated 16 document could not be “known or easily available” to Plaintiff because it is unclear what 17 “terms and conditions set forth in this application” refers to. This deficiency could have 18 been remedied with the addition of a hyperlink and usage of the proper nouns “Terms of 19 Use” or “Terms of Service.” See, e.g., Berman v. Freedom Financial Network, LLC, 30 20 F.4th 849, 858 (9th Cir. 2022) (“This notice defect could easily have been remedied by 21 including language such as, ‘By clicking the Continue >> button, you agree to the Terms 22 & Conditions.’”). As the Ninth Circuit observed in Nguyen, “consumers cannot be 23 expected to ferret out hyperlinks to terms and conditions to which they have no reason to 24 suspect they will be bound.” 763 F.3d at 1179. 25 Defendant cites to two unpublished Ninth Circuit cases in which the court held 26 that the plaintiffs had validly agreed to arbitrate the disputes because the defendants’ 27 webpages displayed text indicating that the user agreed to the Terms of Use whenever the 28 plaintiffs signed in or placed an order. See Dohrmann v. Intuit, Inc., 823 F. App’x 482, 1|| 484 (9th Cir. 2020); see also Lee v. Ticketmaster LLC, 817 F. App’x 393, 394 (9th Cir. 2 || 2020). These cases are distinct from the action now before the Court in two important || respects: first, the Terms of Use were visibly hyperlinked at the point at which the user 4|| was required to acknowledge or assent to the Terms, and second, the references clearly stated the titles of the incorporated documents. See Dorhmann, 823 F. App’x at 484; see 6|| also Lee, 817 F. App’x at 394—95. Neither are true of the reference to Defendant’s Terms 7\| of Use contained at the “Additional Information” page of the Application. 8 In sum, Defendant’s argument that the Terms of Use is a valid clickwrap || agreement relies on a cumulation of references to the Terms to support the conclusion || that Plaintiff agreed to be bound. However, the Court finds that Defendant’s online rental 11 || application failed at each of these instances to secure Plaintiffs unambiguous assent to 12 || Defendant’s Terms of Use. All of the references are either pure browsewrap agreements 13} or are too ambiguous to have placed Plaintiff on notice of the Terms. As such, the first Brennan factor is not satisfied because there is no valid agreement to arbitrate between 15 || the parties. 796 F.3d at 1130. 16 IV. CONCLUSION 17 The Court finds Plaintiff did not agree to the Terms of Use set forth on 18 || Defendant’s website and, as such, there is no valid agreement to arbitrate between the parties. The Court thus denies the Motion to Compel Arbitration. (Doc. 16). 20 Accordingly, 21 IT IS ORDERED denying Defendant’s Motion to Compel Arbitration. (Doc. 16). 22 IT IS FURTHER ORDERED that Defendant must answer the Complaint or 23 || otherwise respond by appropriate motion within the time provided by the applicable 24 || provisions of Rule 12(a) of the Federal Rules of Civil Procedure. 25 Dated this 12th day of February, 2024. 26 27 — Lil onnnne 28 H orable Stephen M. McNamee Senior United States District Judge

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