Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_15-cv-02471/USCOURTS-cand-3_15-cv-02471-18/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 28:1446 Petition for Removal

---

United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

FLOR BARRAZA and NIKOLE

HENSON, individuals, on behalf of

themselves and others similarly situated,

Plaintiffs,

 v.

CRICKET WIRELESS LLC and LEAP

WIRELESS INTERNATIONAL, INC.,

Defendants. /

No. C 15-02471 WHA

ORDER DENYING MOTION

TO COMPEL ARBITRATION

AND SETTING SCHEDULE

FOR SUMMARY TRIAL

INTRODUCTION

In this false-advertising action, defendants move to enforce arbitration clauses in their

agreements with plaintiffs. For the reasons stated below, defendants’ motion is DENIED. A trial

is necessary to determine whether plaintiffs agreed to the terms and conditions of defendants’

service, which included those arbitration clauses.

STATEMENT

At all relevant times, defendant Cricket Wireless, LLC, sold wireless telephone service as

well as cellular telephones to consumers. Until May 2014, when it was acquired by AT&T, Inc.,

Cricket advertised that it offered “No Contract” wireless service. After that acquisition, Cricket

began advertising that its service had “No Annual Contract.” Defendant Leap Wireless

International, Inc., contends it is not a proper defendant inasmuch as it does not offer wireless

Case 3:15-cv-02471-WHA Document 70 Filed 11/03/15 Page 1 of 10
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

2

services to consumers. As the parent company of Cricket prior to both companies’ acquisition

by AT&T, it joins in this motion and asserts the same right to compel arbitration.

Plaintiffs Flor Barraza and Nikole Henson each purchased wireless service with

accompanying phones at Cricket-owned stores in 2013. Barraza and Henson respectively

purchased a Samsung Galaxy S4 and a Samsung Galaxy S3. The phones came in boxes, but

when plaintiffs selected their phones, the Cricket employees helping them went to the back of

the store and returned with the boxes already open, and the employees activated the phones

(Henson Decl. ¶¶ 12–13; Barraza Decl. ¶ 5). One panel on those boxes included the following

text, written in small font within a much longer paragraph that also discussed signal frequency

and battery performance (Basham Decl., Exhs. 2, 8):

Use of phone requires purchase of Cricket® service, which must

be purchased separately. By activating Cricket® service, you

agree to the enclosed terms and conditions of the service.

The full terms and conditions for Cricket’s service were included in a 3x4 inch booklet,

which was titled “Quick Start Guide.” The front cover of the booklet included the title of the

booklet, with the subtitle “A Simple Guide to Activating Your Phone.” It also included the

instruction “Read Me First.” The back cover was written upside down and in Spanish, with a

similar design to the front cover. Below is a depiction of the front cover of the booklet (Basham

Decl., Exh. 11):

Case 3:15-cv-02471-WHA Document 70 Filed 11/03/15 Page 2 of 10
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

3

The first page of the Quick Start Guide described Cricket as “the home of no contract, no

hassle wireless,” and did not mention that the booklet contained terms and conditions for the use

of Cricket’s service. Pages six through fifteen of the Quick Start Guide included numerous

terms and conditions written in a smaller font than the rest of the contents of the booklet. The

terms and conditions in the Quick Start Guide included the following provision, enlarged

considerably for the convenience of the reader of this order (id., Section 1(b)):

IMPORTANT: WHEN YOU START SERVICE OR USE THE

SERVICE BY, FOR EXAMPLE, PLACING A CALL, SENDING

A MESSAGE, OR TRANSMITTING DATA ON THE CRICKET

WIRELESS SYSTEM OR ANOTHER SYSTEM THAT’S

AGREED TO CARRY OUR SERVICES, YOU INDICATE

YOUR ACCEPTANCE OF THIS AGREEMENT. IN

ADDITION, EACH TIME YOU PAY FOR SERVICE FROM US,

YOU CONFIRM YOUR ACCEPTANCE OF THIS

AGREEMENT. IF YOU DO NOT WANT TO ACCEPT THIS

AGREEMENT, DO NOT START SERVICE OR USE THE

SERVICE AND RETURN YOUR WIRELESS DEVICE . . . FOR

A REFUND

Section 20(a) of the Quick Start Guide included this arbitration provision and class-action

waiver, again blown up for purposes of legibility of this order:

YOU AND WE ARE WAIVING RIGHTS TO PARTICIPATE IN

CLASS ACTIONS, INCLUDING WITHOUT LIMITATION

CLASS ACTIONS BEGUN BY OTHERS PRIOR TO THIS

AGREEMENT. EVEN IF APPLICABLE LAW PERMITS

CLASS ACTIONS OR CLASS ARBITRATIONS, YOU ARE

WAIVING ANY RIGHT TO PURSUE ANY SUCH CLAIM OR

CONTROVERSY AGAINST US (OUR AFFILIATES,

PREDECESSORS OR SUCCESSORS IN INTEREST) ON A

CLASS BASIS. WE, IN TURN, WAIVE ANY RIGHT TO

PURSUE ANY SUCH CLAIM OR CONTROVERSY AGAINST

YOU ON A CLASS BASIS.

The arbitration provision allowed the party initiating arbitration to select either of two different

arbitration administrators and expressly allowed customers to opt out of the application of the

arbitration agreement within sixty days without any adverse effect on their service.

At the time plaintiffs purchased their phones, Cricket required its employees to hand any

customer purchasing a new phone Cricket’s “Half Is More” promotional pamphlet (or to have it

stapled to the receipt), which stated, “Terms, conditions and other restrictions apply” to Cricket’s

services, written in five-point font (Wisner Decl. ¶ 6, Exh. A). Similarly, Cricket made yet

Case 3:15-cv-02471-WHA Document 70 Filed 11/03/15 Page 3 of 10
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

4

another handbook called “My Cricket Guide” available within its stores (id. ¶ 8). That handbook

included the following text, also written in five-point font (id., Exh. B at 21):

Your Agreement with Cricket Communications, Inc., and its

affiliates doing business as Cricket includes terms of your service

plan (including those outlined below) and the most recent Cricket

Terms and Conditions of Service available at www.mycricket.com.

Carefully read all the Cricket Terms and Conditions of Service

which include, among other things, a MANDATORY

ARBITRATION of disputes provision.

Both plaintiffs aver that they saw the “Half Is More” pamphlet and the “My Cricket Guide”

handbook on display at the Cricket stores where they purchased their phones, but they claim they

were never given those materials and never reviewed them (Barraza Decl. ¶¶ 9, 16; Henson Decl.

¶¶ 15–16).

Henson also purchased a Cricket PAYGo card in 2013 at a gas station in order to reload

the balance on her account. That card read, “By using your Cricket service or phone, or by

increasing your account balance, you acknowledge your consent to the current Cricket Terms

and Conditions of Service” (Basham Decl., Exh. 10). Henson changed her service plan in 2014. 

Henson avers that she made this change over the phone (Henson Decl. ¶ 24). Cricket’s internal

records suggest, by contrast, that she physically went to a store in Roseland Park, Kansas, to

make this transaction, where Cricket contends Henson received a receipt (Towster Decl. ¶¶ 4–6,

Exhs. A–B). The back of Cricket’s printed receipts in the store included a reference to the terms

and conditions, including a reference to the web site that displayed Cricket’s then-current terms

and conditions (Range Decl. ¶ 5, Exh. A). The text on the receipt also mentioned that the terms

and conditions included an “agreement to dispute resolution by binding individual arbitration

instead of jury trials or class actions” (ibid.).

Barraza and Henson terminated their service with Cricket in 2015 and 2014, respectively. 

The Quick Start Guide provided that their obligations under the arbitration agreements would

survive the termination of the underlying agreement.

Barraza commenced this action in state court in California in May 2015, claiming that

Cricket “marketed UNLIMITED 4G/LTE services throughout the United States” but did not

actually have the capability to provide unlimited 4G/LTE services, in violation of various state

Case 3:15-cv-02471-WHA Document 70 Filed 11/03/15 Page 4 of 10
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

5

false advertising laws. Defendants removed the action to federal court here in San Francisco

under the Class Action Fairness Act. After removal, Barraza amended the complaint to include

Henson as a plaintiff. Plaintiffs sue on behalf of a putative class of purchasers of Cricket’s

services from 2012 to 2014, but the facts regarding anyone other than Barraza and Henson are

irrelevant at this stage.

Defendants now move to enforce the arbitration clauses in the terms and conditions for

Cricket’s services as laid out in the Quick Start Guides provided to Barraza and Henson. 

Barraza and Henson do not contest the substantive fairness of those arbitration provisions, but

they argue they never agreed to those provisions in the first place. This order follows full

briefing and oral argument.

ANALYSIS

Defendants contend that when plaintiffs began using Cricket’s wireless service, they

accepted the terms and conditions set forth in the Quick Start Guide, including the arbitration

provisions. Plaintiffs argue that they lacked notice of the terms and conditions in the Quick Start

Guide, so they never agreed to that contract. They also argue that even if they did agree to the

terms and conditions, Cricket should be estopped from enforcing a contract between the parties

because it advertised that it offered “No Contract” service. 

The parties agree that the Federal Arbitration Act governs the enforcement of the

arbitration provisions in Cricket’s terms and provisions. The FAA requires the enforcement of

arbitration provisions “save upon such grounds as exist at law or in equity for the revocation of

any contract,” such as state law defenses to contract enforcement. 9 U.S.C. 2. If there is a

genuine issue of material fact as to the formation of an arbitration agreement, “the court shall

proceed summarily to the trial thereof.” 9 U.S.C. 4.

Plaintiffs presumed that California law applied to both of their claims and defenses, but

for the first time in their reply, defendants noted that Missouri law applies to Henson’s

challenges to the contract because she purchased and primarily used her phone in Missouri,

where she lives. Notwithstanding defendants’ sandbagging, this order considers the issues under

both California and Missouri law and finds each compels the same result — there is a genuine

Case 3:15-cv-02471-WHA Document 70 Filed 11/03/15 Page 5 of 10
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

6

dispute of fact as to whether a contract was formed between the parties, which must be resolved

by a summary trial on that limited issue.

1. CONTRACT FORMATION.

The “existence of a contract as a whole must be determined by the court prior to ordering

arbitration.” Sanford v. MemberWorks, Inc., 483 F.3d 956, 962 (9th Cir. 2007). That

determination is done according to “state-law principles that govern the formation of contracts.” 

Nguyen v. Barnes & Noble, Inc., 763 F.3d 1171, 1175 (9th Cir. 2014). Although a party

generally cannot avoid the terms of a contract on the grounds she failed to read it, that rule does

not apply “when the writing does not appear to be a contract and the terms are not called to the

attention of the recipient.” Marin Storage & Trucking, Inc. v. Benco Contracting and

Engineering, Inc., 89 Cal. App. 4th 1042, 1049–50 (2001). Similarly, under Missouri law, a

party must have reasonable notice, whether actual or constructive, of an agreement in order to

assent to it. Major v. McCallister, 302 S.W.3d 227 (Mo. Ct. App. 2009).

Defendants contend that plaintiffs had ample notice that the Quick Start Guide included

terms and conditions that would apply upon the activation of their service. Plaintiffs admit that

they received the Quick Start Guide itself, which contained the relevant terms and conditions,

but because Cricket’s employees activated their phones at the store, Barraza and Henson had no

reason to review the guide, and because the guide did not appear contractual in nature, they

contend it could not serve as constructive notice of the agreement. 

Plaintiffs primarily rely on Norcia v. Samsung Telecommunications America, LLC, No.

14-00582, 2014 WL 4652332 (N.D. Cal. Sept. 18, 2014) (Judge James Donato), appeal filed,

No. 14-16994 (9th Cir. Oct. 14, 2014). There, after a bench trial to determine the validity of the

arbitration agreement, Judge Donato denied the defendant’s motion to compel arbitration

because the arbitration provision was inconspicuously located in a 101-page booklet called

“Product Safety & Warranty Information.” Arbitration was not mentioned until page 76. The

box included a notice that indicated it contained a “Product Safety & Warranty Brochure,”

although the box was already opened by an employee when it was presented to him. Those facts

did not give rise to inquiry notice. Id. at *6. Defendants attempt to distinguish Norcia because

Case 3:15-cv-02471-WHA Document 70 Filed 11/03/15 Page 6 of 10
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

7

the plaintiff therein did not actually receive the box or the warranty booklet therein, however,

that decision explicitly held that because the plaintiff declined the box voluntarily, he had to be

treated as though he had received it. Ibid.

Nevertheless, several district courts have found inquiry notice based on documents

enclosed in wireless phone packages, contrary to Norcia. 

In Dang v. Samsung Electronics Co., Ltd., No. 14-00430, 2015 WL 4735520 (N.D. Cal.

Aug. 10, 2015) (Judge Lucy H. Koh), appeal filed, No. 15-16768 (9th Cir. Sept. 4, 2015), Judge

Koh granted the defendants’ motion to compel arbitration, finding that an arbitration provision

on the fifth page of an “Important Information” booklet enclosed in the packaging for a wireless

telephone, which was also referenced on a panel of the box that included a long paragraph of

small-font text, was sufficiently conspicuous to constitute constructive notice of the contractual

terms therein. Judge Koh acknowledged the decision in Norcia, but elected to follow four other

district court decisions, also cited by our defendants, which found product safety and warranty

booklets in product packages sufficiently contractual in nature to provide inquiry notice of the

agreements therein. See McNamara v. Samsung Telecommunications America, LLC, No. 14-

1676, 2014 WL 5543955 (N.D.Ill. Nov. 3, 2014) (Judge Harry D. Leinenweber); Sheffer v.

Samsung Samsung Telecommunications America, LLC, No. 13–3466, 2014 WL 506556

(C.D.Cal. Jan. 30, 2014) (Judge George H. Wu); Han v. Samsung Telecommunications America,

LLC, No. 13–3823, 2014 WL 505999 (C.D.Cal. Jan. 30, 2014) (Judge George H. Wu); Carwile

v. Samsung Telecommunications America, LLC, 2013 U.S. Dist. LEXIS 185089 (C.D.Cal. July

9, 2013) (Judge Cormac C. Carney).

Similarly, in Arellano v. T-Mobile USA, Inc., No. 10-5663, 2011 WL 1362165 (N.D. Cal.

Apr. 11, 2011), an arbitration agreement in a document titled “Terms & Conditions,” enclosed in

the box for a cellular phone was held enforceable. Plaintiffs were given inquiry notice of the

contract offer contained in the box both because they signed a service agreement that

incorporated those terms by reference and because the document in the box was titled “Terms &

Conditions,” which was obviously contractual. Id. at *5.

Case 3:15-cv-02471-WHA Document 70 Filed 11/03/15 Page 7 of 10
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 1

 Ultimately, any class might be limited to those customers for whom the boxes were opened and the

phones activated by an employee in the store.

8

This order need not resolve the apparent split among Norcia, Dang, Arellano, and other

similar decisions in our circuit, as our case is distinct from each of them. Here, the Quick Start

Guide lacked any indication of its contractual nature, contrary to the documents considered in

Dang, Arellano, and other prior decisions. The Quick Start Guide, subtitled “A Simple Guide

To Activating Your Phone,” made no mention of contracts, agreements, terms and conditions, or

warranties in the front matter, contrary to each of the decisions discussed above. The contractual

nature of the Quick Start Guide document was far from obvious, so its inclusion in the box was

insufficient to place plaintiffs on inquiry notice of the terms and conditions.

Cricket does not dispute that its employees opened the boxes before giving them to

plaintiffs and then activated plaintiffs’ phones for them. With this conduct, the employees

obviated the need for plaintiffs to review the Quick Start Guide and signaled that it was

unimportant to review the text on the box before activating the service. Thus, plaintiffs lacked

constructive notice of the terms and conditions in the Quick Start Guide based on its inclusion in

the product packages, and they had no reason to review the small text printed on the box.1

Defendants make much of the fact that plaintiffs had sixty days to opt out of the

arbitration provisions without any adverse consequences and that numerous consumers have

exercised that option, but that is irrelevant if plaintiffs never agreed to be bound by the

provisions in the first place. An employee of a telephone service provider or an attorney may be

attuned to the possibility that an arbitration agreement would be buried in a document titled

“Quick Start Guide,” while a reasonable consumer is unaware of that possibility.

Furthermore, plaintiffs had no reason to consult the other materials in the store, and they

contend they never received those materials. Nor did Henson have any reason to read the

inconspicuous references to terms and conditions on the back of her PAYGo card or her in-store

receipt, which she avers she never did. This order rejects, however, plaintiffs’ contention that

the notices on the back panel of the box and in the other materials that Cricket made available

were insufficient to put plaintiffs on inquiry notice that the box contained a contract because

Case 3:15-cv-02471-WHA Document 70 Filed 11/03/15 Page 8 of 10
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

9

those notices referred to “terms and conditions” rather than explicitly using the word “contract.” 

Defendants dispute the credibility of plaintiffs’ declarations that they never reviewed any

of the promotional materials in the Cricket store and so lacked inquiry notice. Specifically,

plaintiffs both recall the materials available in Cricket’s store several years ago with great

specificity (and describe them with similar language), even though they claim they never read

those documents. That issue cannot be resolved as a matter of law. A summary trial is

necessary to resolve the credibility issues regarding whether plaintiffs actually read materials

that would have informed them that certain terms and conditions applied to their service with

Cricket, which would, in turn have led them to consult the documents contained in the product

box or to Cricket’s website.

2. EQUITABLE ESTOPPEL DOES NOT APPLY.

Plaintiffs argue that equitable estoppel should apply to prevent Cricket from enforcing

the arbitration clauses included in the Quick Start Guide because it advertised that it offered “No

Contract” service. Under California law, “the required elements for an equitable estoppel are: 

(1) the party to be estopped must be apprised of the facts; (2) the party to be estopped must

intend his or her conduct shall be acted upon, or must so act that the party asserting the estoppel

had a right to believe it was so intended; (3) the other party must be ignorant of the true state of

facts; and (4) the other party must rely upon the conduct to his or her injury.” Cotta v. City &

County of San Francisco, 157 Cal. App. 4th 1550, 1567 (2007). It is “[a]n essential element of

equitable estoppel is that the party to be estopped . . . ‘intended by [its] conduct to induce

reliance by the other party, or acted so as to cause the other party reasonably to believe reliance

was intended.’” Id. at 1567. Similarly, under Missouri law “[t]he essential elements of an

equitable estoppel as related to the party estopped are: (1) Conduct which amounts to a false

representation or concealment of material facts, or, at least, which is calculated to convey the

impression that the facts are otherwise than, and inconsistent with, those which the party

subsequently attempts to assert; (2) intention, or at least expectation, that such conduct shall be

Case 3:15-cv-02471-WHA Document 70 Filed 11/03/15 Page 9 of 10
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

10

acted upon by the other party; (3) knowledge, actual or constructive, of the real facts.” Ethridge

v. TierOne Bank, 226 S.W.3d 127, 133 (Mo. 2007). 

Whether or not plaintiffs can demonstrate that they relied on Cricket’s “No Contract” ads

in purchasing wireless service, which defendants dispute, they have failed to demonstrate that

Cricket acted with the intention or expectation that Cricket intended such reliance. “No

Contract” in the context of advertisements for telecommunications services is meant to

distinguish services with annual commitments from those that do not require such commitments. 

There is no evidence that Cricket intended its “No Contract” ads to trick consumers into

unknowingly assenting to arbitration, rather than to convey Cricket’s offer of service without an

annual commitment. Defendants cannot now be precluded from enforcing contracts against

plaintiffs, although, as discussed above, a summary trial is necessary to determine whether such

contracts were ever formed.

Nevertheless, at the summary trial, the “No Contract” ads may be a factor to take into

account in determining the reasonable expectations of the parties.

CONCLUSION

For the reasons stated above, defendants’ motion to compel arbitration is hereby DENIED. 

A summary jury trial is necessary to determine whether plaintiffs agreed to the terms and

conditions contained in the Quick Start Guide enclosed with their wireless phones. This will be

a trial only as to plaintiffs inasmuch as this is not yet a class action. The trial shall begin on

DECEMBER 14 AT 7:30 A.M. The pretrial conference is scheduled for DECEMBER 9 AT 2:00 P.M.

Both sides should cooperate in expedited discovery on the factual matters in play on this motion, 

and failure to cooperate may lead to preclusion or adverse inferences as a sanction. Although

certain arguments have been rejected (or accepted) in this order, both sides will be free at the

summary trial to re-assert them in the context of a more comprehensive record.

IT IS SO ORDERED.

Dated: November 3, 2015. 

WILLIAM ALSUP

UNITED STATES DISTRICT JUDGE

Case 3:15-cv-02471-WHA Document 70 Filed 11/03/15 Page 10 of 10