Court Opinion

ID: 4565515
Source: CourtListenerOpinion
Date Created: 2020-09-15 15:00:37.246786+00
Date Added: 2024-06-11T12:43:50.013808
License: Public Domain

19-3057-cv
Arnaud v. Doctor’s Associates, Inc.

                                      UNITED STATES COURT OF APPEALS
                                         FOR THE SECOND CIRCUIT

                                          SUMMARY ORDER
Rulings by summary order do not have precedential effect. Citation to a summary order filed
on or after January 1, 2007, is permitted and is governed by Federal Rule of Appellate
Procedure 32.1 and this Court’s Local Rule 32.1.1. When citing a summary order in a
document filed with this Court, a party must cite either the Federal Appendix or an
electronic database (with the notation “summary order”). A party citing a summary order
must serve a copy of it on any party not represented by counsel.

       At a stated term of the United States Court of Appeals for the Second Circuit, held at
the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York,
on the 15th day of September, two thousand twenty.

PRESENT:             JOSÉ A. CABRANES,
                     RAYMOND J. LOHIER, JR.
                     SUSAN L. CARNEY,
                                  Circuit Judges.

LUIS ARNAUD, ON BEHALF OF HIMSELF
AND ALL OTHERS SIMILARLY SITUATED

                               Plaintiff-Appellee,                  19-3057-cv

                               v.

DOCTOR’S ASSOCIATES INC., D/B/A SUBWAY,

                               Defendant-Appellant.

FOR PLAINTIFF-APPELLEE:                                   C.K. Lee, Lee Litigation Group, PLLC,
                                                          New York, NY.

FOR DEFENDANT-APPELLANT:                                  Ian Charles Ballon, Lori Chang,
                                                          Greenberg Traurig, LLP, Los Angeles,
                                                          CA, William Wargo, Greenberg Traurig,
                                                          LLP, New York, NY

        Appeal from a September 10, 2019 order of the United States District Court for the Eastern
District of New York (Nicholas G. Garaufis, Judge).

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     UPON DUE CONSIDERATION WHEREOF, IT IS HEREBY ORDERED,
ADJUDGED, AND DECREED that the order of the District Court be and hereby is
AFFIRMED.

        Plaintiff-Appellee Luis Arnaud brought this putative class action alleging that Defendant-
Appellant Doctor’s Associates, Inc. d/b/a Subway (“Subway”) sent him unsolicited text messages in
violation of the Telephone Consumer Protection Act, 47 U.S.C. § 227. Subway filed a Motion to
Compel Arbitration in the District Court, contending that Arnaud had agreed to arbitrate any claims
against Subway at the moment he entered his phone number on a promotional page of Subway’s
website and then clicked a button labeled “I’M IN” in order to receive a free sandwich the next time
he purchased a 32-ounce beverage. According to Subway, such an action constituted assent to the
terms and conditions contained on a separate webpage that was accessible via a hyperlink on the
promotional page—terms and conditions that included an agreement to arbitrate.

        Nevertheless, the District Court denied Subway’s Motion, finding that no arbitration
agreement existed between the parties since the terms and conditions were not reasonably clear and
conspicuous on the promotional page itself. As a result, Arnaud was not on notice of the arbitration
provision. Subway now appeals the denial of its Motion, arguing (1) that the District Court applied
the wrong standard in evaluating whether the terms and conditions were reasonably clear and
conspicuous to Arnaud; and (2) that Arnaud did not provide sufficient evidence, in the form of an
affidavit or otherwise, to create a factual dispute over whether he manifested his assent to the terms
and conditions. We assume the parties’ familiarity with the underlying facts, the procedural history
of the case, and the issues on appeal.

         “A district court’s denial of a motion to compel arbitration is reviewed de novo.” Specht v.
Netscape Commc’ns Corp., 306 F.3d 17, 26 (2d Cir. 2002). Although there is a “federal policy . . . to
construe arbitration clauses as broadly as possible,” Collins & Aikman Prods. Co. v. Bldg. Sys., Inc., 58
F.3d 16, 19 (2d Cir. 1995) (quotation marks omitted), we only undertake such broad construction
once we have answered “[t]he threshold question facing any court considering a motion to compel
arbitration”: that of “whether the parties have indeed agreed to arbitrate.” Schnabel v. Trilegiant, 697
F.3d 110, 118 (2d Cir. 2012). This is a question of law that “is governed by state-law principles of
contract formation.” Starke v. SquareTrade, Inc., 913 F.3d 279, 288 (2d Cir. 2019). In this case, the
District Court applied New York law after determining that the outcome would not be different
under New York law or Connecticut law, the two contenders. Arnaud v. Doctor’s Associates, Inc., No.
18-CV-3703, 2019 WL 4279268 at *5 (E.D.N.Y. Sept. 10, 2019). Since Subway does not challenge
the application of New York law on appeal, and argued below that either New York or Connecticut
law should apply and that the outcome would be the same under either state’s law, we apply New
York law as well. See id. at *3.

       Under New York law, “courts look to the basic elements of the offer and the acceptance to
determine whether there is an objective meeting of the minds sufficient to give rise to a binding and

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enforceable contract.” Express Indus. & Terminal Corp. v. N.Y. State Dep’t of Transp., 693 N.Y.S.2d 857,
860 (1999).

        “Where an offeree does not have actual notice of certain contract terms, he is nevertheless
bound by such terms if he is on inquiry notice of them and assents to them through conduct that a
reasonable person would understand to constitute assent. In determining whether an offeree is on
inquiry notice of contract terms, New York courts look to whether the term was obvious and
whether it was called to the offeree’s attention.” Starke, 913 F.3d at 289. More specifically, “[i]n the
context of web-based contracts, we look to the design and content of the relevant interface to
determine if the contract terms were presented to the offeree in [a] way that would put her on
inquiry notice of such terms.” Id. Indeed, as we have noted in a case applying Washington law, what
we must look for in determining whether “there was notice of the existence of additional contract
terms” is whether the “design and content of [a] webpage rendered the existence of [those] terms
reasonably conspicuous.” Nicosia v. Amazon.com, Inc., 834 F.3d 220, 233 (2d Cir. 2016).

         In that case, we concluded that “reasonable minds could disagree” about whether Amazon’s
order page put the user on inquiry notice of Amazon’s hyperlinked terms and conditions. Id. at 238.
We reached that conclusion because of, among other things, the font of the terms and conditions
hyperlink, the fact that it was hard to find on a cluttered webpage, and the fact that nothing about
the button to be clicked—“Place your order”—indicated that additional terms applied. Id. at 236-
37. There, the language linking the button to the terms and conditions—“By placing your order,
you agree to Amazon.com’s . . . conditions of use”—was “not bold, capitalized, or conspicuous in
light of the whole webpage.” Id. at 237. By contrast, in a more recent case we noted that where,
among other things, the webpage is relatively sparse, the link to additional terms is immediately
visible, the prompting language introducing the terms to the user (i.e. “By creating an Uber account,
you agree to the [terms and conditions]”) is “spatially coupled” with the registration button, a user
would be on inquiry notice of the hyperlinked terms. Meyer v. Uber Techs., Inc., 868 F.3d 66, 78-79 (2d
Cir. 2017).

         As the District Court aptly noted, “the webpage in this case falls somewhere in between
those two examples”—though ultimately it is closer to the webpage in the former case than in the
latter. Arnaud, 2019 WL 4279268 at *6. The District Court found that because the Subway webpage
was relatively cluttered, did not use a conspicuous size or font for the terms and conditions link, and
did not provide language informing the user that by clicking “I’M IN” the user was agreeing to
anything other than the receipt of a coupon, the user would not have been on inquiry notice of the
arbitration provision. Id.

          We agree with the District Court and conclude on our own review of the Subway webpage
that it is insufficient to provide inquiry notice. A reasonable user would not find the terms and
conditions link contained on the page to be conspicuous, since the link was at the bottom of the
page, in relatively small font, and was introduced by no language other than the shorthand

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“T & Cs.” A reasonable user would therefore not recognize that by clicking “I’M IN” he agreed to
be bound by those terms and conditions.

         Subway argues that Arnaud’s failure to submit any evidence, such as a sworn affidavit
substantiating his version of the facts, left the District Court without a basis to conclude that he was
not, in fact, on actual notice of the terms of the contract. Subway claims that Arnaud’s general
denials on this point were not enough. But this argument assumes that Subway itself has adduced
some evidence that Arnaud was on actual notice. As we have noted it is only when “the party
seeking arbitration has substantiated the entitlement by a showing of evidentiary facts [that] the party opposing
may not rest on a denial but must submit evidentiary facts showing that there is a dispute of fact to
be tried.” Oppenheimer & Co. v. Neidhardt, 56 F.3d 352, 358 (2d Cir. 1995) (emphasis added). Since
Subway has not provided facts demonstrating Arnaud’s knowledge of the terms and conditions,
Arnaud needed to do no more to substantiate his factual allegations at this stage.

                                              CONCLUSION

       We have reviewed all of the arguments raised by Subway on appeal and find them to be
without merit. For the foregoing reasons, we AFFIRM the September 10, 2019 order.

                                                             FOR THE COURT:
                                                             Catherine O’Hagan Wolfe, Clerk

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