Summary
finding that where a user had no notification of an amendment on the face of an email, because he had agreed to receive all important notifications in his online banking portal, there was constructive notice
Summary of this case from Macasero v. Ent Credit UnionOpinion
Case No. 20-cv-01883-RS
2020-07-27
Jeffrey NEEDLEMAN, Plaintiff, v. The GOLDEN 1 CREDIT UNION, Defendant.
Dominic R. Valerian, Valerian Law, P.C., Albany, CA, Alexander Darr, Pro Hac Vice, Darr Law LLC, Columbus, OH, for Plaintiff. Janlynn Robinson Fleener, J. Patrick Doust, Downey Brand LLP, Sacramento, CA, for Defendant.
Dominic R. Valerian, Valerian Law, P.C., Albany, CA, Alexander Darr, Pro Hac Vice, Darr Law LLC, Columbus, OH, for Plaintiff.
Janlynn Robinson Fleener, J. Patrick Doust, Downey Brand LLP, Sacramento, CA, for Defendant.
ORDER GRANTING MOTION TO COMPEL ARBITRATION
RICHARD SEEBORG, United States District Judge I. INTRODUCTION
Plaintiff Jeffrey Needleman brings this putative class action against Defendant Golden 1 Credit Union ("Golden 1") for alleged violations of the Equal Credit Opportunity Act ("ECOA"). Golden 1 now moves to compel arbitration. A hearing was held on July 23, 2020. For the reasons set forth below, Golden 1's motion is granted.
II. BACKGROUND
Needleman opened accounts with Golden 1 in 2014 and banked with Golden 1 continuously until June 18, 2020. As part of signing up, Needleman agreed to be bound by Golden 1's Disclosure of Account Information ("Account Disclosure"), the principal contract that governs Golden 1's relationship with its customers. On December 10, 2016, Needleman enrolled in Golden 1's Online Statements program, which provides users online access to account statements and other communications through the Golden 1 website in lieu of receiving them by mail. To enroll, Needleman had to agree to Golden 1's "Combined Member Online Statement Consent to Receive Electronic Communications, Including Consumer Disclosures." Declaration of Tracy Shaikh in Support of Mot. to Compel Arbitration ("Shaikh Decl."), Exh. B, Dkt. 22-4. The first page of this agreement advised as follows:
Needleman makes an array of evidentiary objections to portions of Terry Shaikh's two declarations. Shaikh is Golden 1 manager since 2016, and her job responsibilities include governance oversight for the Service Operations division, and through her role, she is familiar with account disclosures, programs, and practices. See Shaikh Decl., Dkt. 22-4 at ¶ 1. Needleman's primary complaint is that Shaikh fails to establish personal knowledge of various facts. However, at the outset, Shaikh stated that her declaration was "based on my [her] personal knowledge and review of Golden 1's business records kept in the ordinary course of business, as well as on information obtained from other Golden 1 personnel in the course of their duties." Id. This is sufficient to establish personal knowledge of the relevant agreements. See Cordas v. Uber Tech., Inc. , 228 F. Supp. 3d 985, 989 (N.D. Cal. 2017) (overruling evidentiary objections because declaration was based on personal knowledge and business records). Needleman also claims that Shaikh failed to authenticate various exhibits attached to her declarations, or failed to provide the "best evidence" of how a webpage would have appeared to Needleman at the time. These objections likewise miss the mark. Shaikh's introductions to each exhibit are "sufficient to support a finding that the item[s are] what [Shaikh] claims them to be". Fed. R. Evid. 901. As for the purported violations of the "best evidence" rule, screenshots were not required, as they do not fall within the ambit of the rule. See Fed. R. Evid. 1002 ; Cordas , 228 F. Supp. 3d at 989 ("Similarly, no original of the screenshots is required because they are not a writing, recording, or photograph.... It is difficult, if not impossible, to conceive of how an ‘original’ screenshot would be presented."). Accordingly, Needleman's evidentiary objections are overruled.
Please read this consent ("Consent") completely. This Consent covers electronic records, including consumer disclosures, as specified below, provided by The Golden 1 Credit Union (the "Credit Union")....
Electronic Records
By clicking the "I Accept" button, you understand and agree to be bound by the terms and conditions of this Consent, and authorize the Credit Union to provide to you in electronic format, by electronic email, or website posting or
through logged in website interaction, the following communications (collectively referred to herein as "Communications") regarding your accounts:
• Consent to receive combined member account online periodic statements ("Online Statements"), including all disclosures and notices provided with the same, ...
• Any change in terms or subsequent disclosures or notices applicable to your Online Statement. This includes disclosures or notices that federal laws and regulations might require the Credit Union to provide to you, from time to time ....
Id. at 16. Moreover, the "How the Service Works" section on the second page informed enrollees that "you may periodically receive an email notification that an electronic record is available for review and you will be directed to information posed on the Credit Union's website." Id. at 17. It further advised that, "to view some of the Communications, you may need to access the Credit Union's website, open the secure connection for online financial services and click on the necessary tabs." Id. at 17. As required to receive electronic statements moving forward, Needleman agreed to the terms of the Online Statements Consent by clicking "I Accept."
Page numbers refer to ECF pagination.
Similarly, shortly after opening his accounts with Golden 1 in 2014, Needleman enrolled in online banking (separate from the online statements program) and "consent[ed] to receive electronic communications, including consumer disclosures" on nearly identical terms. See Ex. A, Reply Decl. of Tracy Shaikh, Dkt. 29-1 at 6-8. Needleman also accepted the "Golden 1 Online Agreement and Disclosure," which noted:
It is your responsibility to use Electronic Access regularly to check for updates.... Regardless of whether Golden 1 is able to deliver an e-mail notification to you, you agree that Communications will be deemed transmitted and received as soon as Golden 1 makes [them] available to you through Online Banking. You further agree to promptly review Communications made available to you through Online Banking.
Ex. D, Shaikh Decl., Dkt. 22-4 at 26-27.
On July 1, 2019, Golden 1 revised the Account Disclosure to include an arbitration clause and class action waiver. For Golden 1 account holders who still received paper statements, this information was conveyed through a one-page insert mailed with the customers’ monthly statements. The page reads "IMPORTANT NOTICE" at the top, with key provisions in bold. The notice informed members who had banked with Golden 1 since before July 1, 2020 that:
[Y]ou may opt-out of the Arbitration Provision, so long as we receive your opt-out request by August 31, 2019.... Opt-out requests received after that date will not be honored, and you will be bound by the terms of the Arbitration Provision.... Unless you opt-out ... [i]f either party elects to arbitrate a Claim, with limited exceptions, neither you nor we will have the right to litigate such Claim in court or have a trial of such Claim before a judge or jury."
Ex. F, Shaikh Decl., Dkt. 22-4 at 99 (emphasis in original). The notice also informed customers that the scope of the arbitration provision covers "any and all controversies, disagreements, or other disputes ... [and] includes disputes about the validity, enforceability, or scope of this Arbitration Provision." Id. In a separate "Class Action Waiver" section, the notice explains that "[c]laims may not be arbitrated on a class or representative basis." Id. (emphasis in original).
For account holders like Needleman who had elected to receive electronic statements, the primary means by which this information was conveyed was through the "View Statements" page of their online banking portal. Needleman, like other enrollees in the Online Statements program, received monthly emails informing him that his online statement from the prior month had posted. In typical fashion, he received such an email on July 5, 2019, indicating that his June statement was available for review online. The email read: "Dear Member, Your Golden 1 statement is now available online. To retrieve your statement, log in to Online Banking, then select ‘Statements.’ " Ex. C, Needleman Decl, Dkt. 26-1 at 13. The email then contained a "Sign In" button hyperlink. Id. The email contained no indication that there was an important account disclosure regarding arbitration accompanying the statement this month; rather, the email was functionally identical to the typical monthly statement emails, which inform users that a new statement is available.
Needleman attests, and Credit 1 does not deny, that Needleman never logged in to check his June statement. If he had, once on the "View Statements" page, visible without scrolling under a bold "Statement Inserts" heading would have been blue, hyperlinked, underlined text reading "Arbitration Provision." Clicking on this link would have brought Needleman to a PDF of the same one-page "IMPORTANT NOTICE" that had been inserted in the June monthly statement mailings for customers receiving statements by mail. Linking documents under the "Statement Inserts" heading is apparently the typical way in which inserts were delivered to account holders enrolled in the online statements program. This "Arbitration Provisions" link appeared on the "View Statements" page from July 5, 2019 through August 5, 2019.
Golden 1 explains that the new arbitration and class waiver provisions were also accessible by searching the word "arbitration" on the Golden 1 homepage search feature as of July 9, 2019. The new terms were also apparently available by scrolling to page 7 of the revised "Account Disclosure," which was accessible by clicking the "Disclosures" link under the "Terms and Conditions" section of the Golden 1 homepage. Because "reasonably prudent" banking customers do not, without prompting, peruse terms and conditions periodically or enter legal jargon into home page search features, these alternate means of accessing the new terms could not give rise to constructive notice and therefore did not factor into the Court's analysis.
Needleman, having never seen the document, did not mail a letter indicating his intent to opt out within the applicable window.
On March 18, 2020, Needleman filed a putative class action against Golden 1 for alleged violations of the ECOA's notice requirement under 15 U.S.C. § 1691(d). In response, Golden 1 brought this motion to compel arbitration. Golden 1 argues that Needleman's failure to opt out within the allotted time means he consented to and is bound by the arbitration provision. Needleman disagrees, contending he never agreed to Golden 1's arbitration provision, which was inserted into his Account Disclosure without his knowledge or consent.
III. LEGAL STANDARD
Because the arbitration agreement set forth by Golden 1 is "a contract evidencing a transaction involving commerce," it is subject to the Federal Arbitration Act ("FAA"). 9 U.S.C. § 2 ; Chiron Corp. v. Ortho Diagnostic Sys., Inc. , 207 F.3d 1126, 1130 (9th Cir. 2000). "The FAA provides that any arbitration agreement within its scope ‘shall be valid, irrevocable, and enforceable,’ ... and permits a party ‘aggrieved by the alleged ... refusal of another to arbitrate’ to petition any federal district court for an order compelling arbitration in the manner provided for in the agreement." Chiron , 207 F.3d at 1130 (quoting 9 U.S.C. § 4) (second omission in original). The FAA "leaves no place for the exercise of discretion by a district court, but instead mandates that district courts shall direct the parties to proceed to arbitration on issues as to which an arbitration agreement has been signed." Dean Witter Reynolds Inc. v. Byrd , 470 U.S. 213, 218, 105 S.Ct. 1238, 84 L.Ed.2d 158 (1985). The role of a district court under the FAA "is therefore limited to determining (1) whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement encompasses the dispute at issue." Chiron , 207 F.3d at 1130 (citations omitted). "If the response is affirmative on both counts, then the [FAA] requires the court to enforce the arbitration agreement in accordance with its terms." Id.
IV. DISCUSSION
A. Constructive Notice
"Before a party to a lawsuit can be ordered to arbitrate ... there should be an express, unequivocal agreement to that effect. Only when there is no genuine issue of fact concerning the formation of the agreement should the court decide as a matter of law that the parties did or did not enter into such an agreement." Three Valleys Mun. Water Dist. v. E.F. Hutton & Co. , 925 F.2d 1136, 1141 (9th Cir. 1991) (internal quotations omitted). "When deciding whether the parties agreed to arbitrate a certain matter ... courts generally ... apply ordinary state-law principles that govern the formation of contracts." First Options of Chicago, Inc. v. Kaplan , 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995).
Under California law, contract formation requires mutual assent. See Binder v. Aetna Life Ins. Co. , 75 Cal. App. 4th 832, 850, 89 Cal.Rptr.2d 540 (1999). In the context of electronic consumer agreements or transactions, mutual assent frequently turns on whether the consumer had reasonable notice of a merchant's terms of service agreement. See, e.g., Nguyen v. Barnes & Noble Inc. , 763 F.3d 1171, 1173 (9th Cir. 2014) ("We agree with the district court that Barnes & Noble did not provide reasonable notice of its Terms of Use, and that Nguyen therefore did not unambiguously manifest assent to the arbitration provision contained therein."). Reasonable notice requires that a user have either actual or constructive notice of an agreement's terms. See Metter v. Uber Tech., Inc. , No. 16-cv-06652, 2017 WL 1374579, at *2 (citing Nguyen , 763 F.3d at 1176–79 ).
Because Needleman did not have actual notice of the arbitration agreement, Golden 1 must show that it nevertheless provided Needleman constructive notice of the new provision. Constructive notice occurs when a consumer has inquiry notice of the terms of service and takes an affirmative action to demonstrate assent to them. See Nguyen , 763 F.3d at 1176–79. Inquiry notice, in turn, hinges on whether a reasonably prudent user would have been aware of the applicable terms. See Specht v. Netscape Commc'n Corp. , 306 F.3d 17, 31 (2d Cir. 2002) (when resolving a motion to compel arbitration under California law, evaluating inquiry notice in terms of a "reasonably prudent offeree").
Here, the parties agree that Needleman consented to the terms of the "Online Statements Consent and Online Banking Terms and Conditions" in 2016. That agreement necessarily informs how a reasonably prudent user would interact with Golden 1's online banking platform. Golden 1 correctly argues that, pursuant to this election to receive online statements, a reasonable user in Needleman's situation would have understood this as an obligation to utilize the "View Statements" page to stay apprised of important disclosures. Because Needleman explicitly accepted the terms of Golden 1's online statements program, he was "on notice" that critical information would be conveyed to him online rather than through the mail. From this "View Statements" portal, the Arbitration Provision was a conspicuous link under the bold "Statement Inserts" heading, visible without having to scroll. A reasonable user who previously agreed to receive all important documents electronically through the "View Statements" interface would be expected to utilize that very feature.
Needleman's defense that he never used the "View Statements" portal is unavailing. While it establishes he lacked actual notice, it does little to impact the constructive notice analysis. Needleman's failure to view his statements electronically is akin to one of Golden 1's paper statement customers failing to open one's mail and therefore disclaiming knowledge of or assent to the one-page arbitration notice. Some of Credit 1's customers likely do put routine monthly statements into the junk mail pile without ever opening them, but this cannot be considered the expected behavior of a reasonably prudent offeree.
Admittedly, a recent California Superior Court decision evaluating the same electronic agreement reached the opposite conclusion. In Burgardt v. The Golden 1 Credit Union , No. 34-2019-00263962-CU-BC-GDS (Cal. Super. Ct. Sacramento Cnty. Jul. 10, 2020), the court concluded that Golden 1 failed to provide reasonable notice of the arbitration agreement, such that the plaintiff was not held to the agreement despite never having opted out. This decision, however, is both distinguishable and unpersuasive. First, the Burgardt court noted that Golden 1 had failed to introduce evidence of how the July 5 email or the "View Statements" screen appeared to the account holder. By contrast, that evidence was submitted in this case. See Ex. 3, Needleman Decl., Dkt. 26-1 at 13; Ex. 5, Needleman Decl., Dkt. 26-1 at 18 (showing how "Statement Inserts" appear on the View Statements portal). Second, separate and apart from this disparity in the available evidence, the Burgardt court also glossed over the fact that the plaintiff had similarly consented to receiving bank statements online. Therefore, the court likened the arbitration agreement to those in traditional "browsewrap" cases, in which no affirmative assent is required and users are deemed to have consented by continued use of the website. See Statement of Recent Decision, Dkt. 36 at 6-7. Under the browsewrap framework, the court concluded that "[i]nserting a single hyperlink on a webpage not immediately visible on a customer's online banking account is insufficient ‘to put a reasonably prudent Internet consumer on inquiry notice.’ " Id. at 7.
Nor does it furnish a basis for applying the doctrine of collateral estoppel. "Under California law, collateral estoppel only applies if certain threshold requirements are met: First, the issue sought to be precluded from relitigation must be identical to that decided in a former proceeding. Second, the issue must have been actually litigated in the former proceeding. Third, it must have been necessarily decided in the former proceeding. Fourth, the decision in the former proceeding must be final and on the merits. Finally, the party against whom preclusion is sought must be the same as, or in privity with, the party to the former proceeding." In re Cantrell , 329 F.3d 1119, 1123 (9th Cir. 2003). As discussed herein, Burgardt was decided under a "browsewrap" framework, in which the plaintiff's affirmative Online Statement Consent carried scant analytical value. See infra discussion of Burgardt. Because this order assigns considerable weight to Needleman's affirmative Online Statement Consent—and accordingly departs from a standard "browsewrap" analysis—it does not pass upon an issue "necessarily decided" by the California Superior Court. In re Cantrell , 329 F.3d at 1123.
Yet, if the Online Statements Consent is to be given any effect, it must put a reasonable enrollee on notice of the need to check online statements when new ones are available. In this sense, the situation is different in kind from traditional "browsewrap" cases, in which unaware purchasers use a website with no particular reason to check the terms and conditions. See, e.g., Nguyen , 763 F.3d 1171 (holding that Barnes and Noble online shoppers did not have constructive notice of arbitration clause buried in terms of use, which were linked at the bottom of the screen). Indeed, Needleman is not an online shopper who chanced upon the Golden 1 website. Rather, he is a long-time customer who affirmatively elected to receive all important statements through the "View Statements" portal. Accordingly, the Burgardt court's conclusion that a reasonably prudent user would not have been on inquiry notice of the arbitration agreement is unpersuasive here, given it was prominently displayed in the very location in which Needleman agreed to receive all his important banking documents.
B. Consent by Failure to Opt Out
In light of the finding that Needleman did have constructive notice of the document, his failure to opt out of the agreement within the allotted time was sufficient to constitute assent. See Johnmohammadi v. Bloomingdale's, Inc. , 755 F.3d 1072, 1074 (9th Cir. 2014 ("By not opting out within the 30-day period, [plaintiff] became bound by the terms of the arbitration agreement.")); see also Circuit City Stores, Inc. v. Ahmed , 283 F.3d 1198, 1200 (9th Cir. 2002) (holding arbitration agreement enforceable based on employee's failure to opt-out within the 30-day window). Here, the 60-day opt-out window applied equally to all Golden 1 customers, whether they received notice of the arbitration agreement through the mail or through the online banking portal. Because Needleman did not opt out within the allotted time, Golden 1 was justified in treating this as consent to the updated terms.
Admittedly, this case is distinguishable from many others in which arbitration provisions were enforced through a failure to opt out. In Gentry v. Superior Court , 42 Cal. 4th 443, 467, 64 Cal.Rptr.3d 773, 165 P.3d 556 (2007), for example, the California Supreme Court reaffirmed the background rule that "an offeror has no power to cause the silence of the offeree to operate as an acceptance when the offeree does not intend it to do so." Id. (internal quotation omitted). However, the court also noted that "silence can constitute acceptance when ‘the conduct of the party denying a contract has been such as to lead the other reasonably to believe that silence, without communication, would be sufficient’ to create a contract." Id. (citing 1 Corbin on Contracts (rev. ed. 1993) § 3.21, p. 414). In Gentry , the employee vying to disavow the arbitration provision actually signed a document affirming his receipt of the paperwork containing the opt-out provision. In this instance, Needleman signed no such thing. Still, Needleman's constructive receipt of the "IMPORTANT NOTICE" through the online statements portal, equivalent to receiving the same notice in the mail, makes Credit 1's assumption that Needleman consented reasonable. Thus, the parties agreed to arbitrate; the only questions remaining are whether that agreement is valid and whether it encompasses this dispute. See Chiron , 207 F.3d at 1130 (citations omitted).
C. Who Should Decide Whether the Dispute is Arbitrable
If the parties’ contract delegates the question of arbitrability to an arbitrator, courts must defer to the parties’ contract and respect that decision. Henry Schein, Inc. v. Archer & White Sales, Inc. , ––– U.S. ––––, 139 S. Ct. 524, 531, 202 L.Ed.2d 480 (2019). The party seeking to compel arbitration must only show that a valid arbitration agreement exists, which delegates the arbitrability issue to an arbitrator. Id. at 530. For the reasons discussed above, Golden 1 has shown that a valid arbitration agreement exists. Moreover, that agreement explicitly delegates the arbitrability issue to an arbitrator. Ex. F, Shaikh Decl., Dkt. 22-4 at 99. ("A Claim includes disputes about the validity, enforceability or scope of this Arbitration Provision.") Therefore, this matter belongs in arbitration.
V. CONCLUSION
Based on the foregoing, Golden 1's motion to compel arbitration is granted. The action is hereby stayed pending completion of the arbitration proceedings. For administrative purposes, the Clerk is directed to close the file. Any party may move to reopen upon completion of the arbitration or for other good cause shown.