Opinion
Civil Action No. 1:22-cv-10603-IT
2023-04-21
Amanda OFFLEY, et al., Plaintiffs, v. FASHION NOVA, LLC, Defendant.
L. Timothy Fisher, Pro Hac Vice, Bursor & Fisher, P.A., Walnut Creek, CA, Max S. Roberts, Pro Hac Vice, Bursor & Fisher, P.A., New York, NY, James J. Reardon, Reardon Scanlon LLP, West Hartford, CT, for Plaintiffs. Chad S. Hummel, Pro Hac Vice, Sidley Austin LLP, Los Angeles, CA, Jack W. Pirozzolo, Sidley Austin LLP, Boston, MA, for Defendant.
L. Timothy Fisher, Pro Hac Vice, Bursor & Fisher, P.A., Walnut Creek, CA, Max S. Roberts, Pro Hac Vice, Bursor & Fisher, P.A., New York, NY, James J. Reardon, Reardon Scanlon LLP, West Hartford, CT, for Plaintiffs. Chad S. Hummel, Pro Hac Vice, Sidley Austin LLP, Los Angeles, CA, Jack W. Pirozzolo, Sidley Austin LLP, Boston, MA, for Defendant.
MEMORANDUM AND ORDER
TALWANI, United States District Judge
Plaintiffs Amanda Offley, Jamie Dumelle, Lucy Massa, and Kerry Hines ("Plaintiffs") allege that online clothing retailer Fashion Nova, LLC ("Fashion Nova") intentionally suppressed lower-starred consumer reviews from its online website and in doing so violated consumer protection laws in Massachusetts, Florida, Pennsylvania, and New Jersey. Amended Complaint ("Amend. Compl.") [Doc. No. 18]. Plaintiffs seek to represent a class of residents of these states who made purchases on the Fashion Nova website on various dates up until December 25, 2018. Id. at ¶¶ 40-43. Pending before the court is Fashion Nova's Motion to Compel Arbitration and Stay Action, or, in the Alternative, Dismiss the Complaint ("Motion to Compel") [Doc. No. 30]. Fashion Nova asks the court to order Plaintiffs' claims to arbitration and to stay all further proceedings pending arbitration pursuant to the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1, et seq., in light of an arbitration agreement and class action waiver in its website's Terms of Service ("Terms") that Fashion Nova contends have retroactive effect. Fashion Nova argues in the alternative that the action should be dismissed under Rule 12 of the Federal Rules of Civil Procedure 12(b)(1). Motion to Compel ¶¶ 1-3 [Doc. No. 30]. Plaintiffs oppose the Motion, contending that the Terms do not apply retroactively to their purchases, that Plaintiffs did not have notice of the Terms, and that Plaintiffs have sufficiently plead their claims for relief. Pls. Opp. [Doc. No. 35].
For the following reasons, the court finds the Terms do not cover use of Fashion Nova's website prior to December 26, 2018. Accordingly, Fashion Nova's Motion [Doc. No. 30] is DENIED as to the request to compel arbitration. The Motion [Doc. No. 30] remains under advisement as to the request to dismiss the action.
I. Background
Fashion Nova is a fashion retail company that sells products online on its website www.fashionnova.com ("the Website"). Amend. Compl. ¶¶ 3, 13 [Doc. No. 18]. Plaintiffs are residents of Massachusetts, Florida, Pennsylvania, and New Jersey who purchased at least one product from the Website prior to December 26, 2018. Id. at ¶¶ 8-12 [Doc. No. 18]. Plaintiffs allege that at the time of their purchases, Fashion Nova automatically posted four- and five-star reviews on the Website but did not publish hundreds of thousands of lower-starred product reviews. Id. ¶ 5 [Doc. No. 18].
On December 26, 2018, Fashion Nova revised its then-existing Terms. See Declaration of Roger Satur ("Satur Decl.") ¶ 4 [Doc. No. 33]. As revised, when purchasing products from the Website, customers must scroll to the bottom of the checkout page and click a "Pay now" button. Satur Decl. ¶ 5 [Doc. No. 33]. Near the "Pay now" button is text which reads "By submitting your order you agree to our Terms of Service , Privacy Policy , and Returns Policy ." Id., Exs. B-C [Doc. Nos. 33-2, 33-3] (bolded and underlined in original screenshots from desktop and mobile view). The bolded and underlined text is hyperlinked to take users to different pages on the Website where they can read the full Terms, Privacy Policy, and Returns Policy. Satur Decl. ¶ 5 [Doc. No. 33]; Exs. B-C [Doc. Nos. 33-2, 33-3].
The Terms include the following language in the third paragraph:
THIS AGREEMENT CONTAINS AN ARBITRATION AGREEMENT AND CLASS ACTION WAIVER THAT WAIVE YOUR RIGHT TO A COURT HEARING OR JURY TRIAL OR TO PARTICIPATE IN A CLASS ACTION. ARBITRATION IS MANDATORY AND THE EXCLUSIVE REMEDY FOR ANY AND ALL DISPUTES UNLESS SPECIFIED BELOW OR IF YOU OPT-OUT. YOU MUST REVIEW
THIS DOCUMENT IN ITS ENTIRETY BEFORE ACCESSING, USING, OR BUYING ANY PRODUCT THROUGH THE WEBSITE.Satur Decl., Ex. A 2 [Doc. No. 33-1] (bolded and capitalized on website). Later in the Terms is a section titled "Dispute Resolution by Binding Arbitration and Class Action Waiver," which begins with the following text:
Any dispute relating in any way to your visit to, or use of, the Website, the Products, or any purchase or otherwise related to this Agreement ("Disputes") shall be submitted to confidential arbitration in Los Angeles, California, USA and shall be governed exclusively by the laws of the State of California, excluding its conflict of laws provision.Id. at 3. In the "Dispute Resolution by Binding Arbitration and Class Action Waiver" section, the Terms state that acceptance forfeits the customer's right to litigate these disputes in court and requires them to arbitrate individually:
YOU UNDERSTAND THAT YOU WOULD HAVE HAD A RIGHT TO LITIGATE IN A COURT, TO HAVE A JUDGE OR JURY DECIDE YOUR CASE AND TO BE PARTY TO A CLASS OR REPRESENTATIVE ACTION. HOWEVER, YOU UNDERSTAND AND AGREE TO HAVE ANY CLAIMS DECIDED INDIVIDUALLY AND ONLY THROUGH ARBITRATION. You shall have thirty (30) days from the date that you purchase a product or provide information to the website to opt-out of this arbitration agreement. To opt out of arbitration you must contact us in writing . . . . If more than thirty (30) days have passed from the date that you purchase a product, you are not eligible to opt out of arbitration with respect to claims relating to that product. If more than thirty (30) days have passed from the date that you provide information to the website, you are not eligible to opt out of arbitration with respect to claims relating to the website.Id. at 4 (bolded and capitalized as set forth above on website).
Plaintiffs each made multiple purchases on the Fashion Nova website after December 26, 2018. Satur Decl. ¶¶ 7-10 [Doc. No. 33]. None of the Plaintiffs subsequently emailed Fashion Nova a request opting out of the arbitration agreement. Id. at ¶ 11.
II. Procedural History
Plaintiffs' Amended Complaint [Doc. No. 18] alleges that because of the suppressed reviews, customers suffered actual injuries from their purchase of one or more Fashion Nova products from the Website. Amend. Compl. ¶ 39 [Doc. No. 18]. Plaintiffs seek to represent a class of residents of their respective states who purchased an item on the Website while in that state during the following dates: Massachusetts: April 1, 2018, through and including December 25, 2018; Florida: March 23, 2018, through and including December 25, 2018; Pennsylvania: March 23, 2016, through and including December 25, 2018; New Jersey: March 23, 2016, through and including December 25, 2018. Id. at ¶¶ 40-44 [Doc. No. 18]. Plaintiffs allege violations of the Massachusetts Consumer Protection Law, M.G.L. ch. 93A §§ 1 e t seq. (Count 1), the Florida Unfair and Deceptive Practices Act, Fla. Sta. §§ 501.201 et seq. (Count 2), Pennsylvania Unfair Trade Practices and Consumer Protection Law, 73 Pa. Const. Stat. §§ 201-1, et seq. (Count 3), and New Jersey Consumer Fraud Act, N.J. Stat. §§ 56:8-1, et. seq. (Count 4). Amend. Compl. ¶¶ 52-98 [Doc. No. 18].
In support of its Motion to Compel [Doc. No. 30], Fashion Nova asserts that Plaintiffs assented to the Terms when they made purchases after December 26, 2018, and that the Terms mandate individual arbitration for all purchases, regardless of when those purchases occurred. Mem. 8 [Doc. No. 31].
Fashion Nova argues in the alternative that the Amended Complaint [Doc. No. 18] should be dismissed, inter alia, for failure to state a claim, Mem. 16-25 [Doc. No. 31].
III. Legal Standard
"A written provision in . . . a contract . . . to settle by arbitration a controversy thereafter arising out of such contract . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. The FAA requires judicial enforcement of such written arbitration agreements "according to their terms[.]"
Where a contract falls within the boundaries of the FAA, a party seeking to compel arbitration "must show [1] that a valid agreement to arbitrate exists, [2] that the movant is entitled to invoke the arbitration clause, [3] that the other party is bound by that clause, and [4] that the claim asserted comes within the clause's scope." Ouadani v. TF Final Mile LLC, 876 F.3d 31, 36 (1st Cir. 2017) (internal quotations omitted). "[C]ourts should order arbitration of a dispute only where the court is satisfied that neither the formation of the parties' arbitration agreement nor . . . its enforceability or applicability to the dispute is in issue." Granite Rock v. Int'l Bhd. of Teamsters, 561 U.S. 287, 299, 130 S.Ct. 2847, 177 L.Ed.2d 567 (2010) (emphasis in original).
The Supreme Court and First Circuit have recognized that when a contract contains an arbitration clause, there is a "presumption of arbitrability," Johnson Controls Sec. Sols., LLC v. Int'l Bhd. of Elec. Workers, Loc. 103, 24 F.4th 87, 90 (1st Cir. 2022) (citing AT&T Techs., Inc. v. Commc'ns Workers of Am., 475 U.S. 643, 650, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986)), and have instructed that doubts concerning the scope of arbitrable issues should generally be resolved in favor of arbitration, whether the problem involves construction of the contractual language or otherwise, Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983); see also Bosse v. New York Life Ins. Co., 992 F.3d 20, 31 (1st Cir. 2021).
Although the Supreme Court has repeatedly referenced a "policy favoring arbitration," it has also explained that "[t]he policy is to make 'arbitration agreements as enforceable as other contracts, but not more so.' " Morgan v. Sundance, Inc., 596 U.S. 411, 142 S.Ct. 1708, 1713, 212 L.Ed.2d 753 (2022) (quoting Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 404 n.12, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967)); see also AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339, 131 S.Ct. 1740, 179 L.Ed.2d 742 (2011) (arbitration agreements should be enforced "on an equal footing with other contracts"). Thus, "a court must hold a party to its arbitration contract just as the court would to any other kind" but "a court may not devise novel rules to favor arbitration over litigation." Morgan, 142 S.Ct. at 1713 (citing Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 218-21, 105 S.Ct. 1238, 84 L.Ed.2d 158 (1985)).
When resolving a motion to compel under the FAA, the court may consider the complaint and the record materials submitted in support of or in opposition to the motion. See Air-Con, Inc. v. Daikin Applied Latin Am., LLC, 21 F.4th 168, 171 n.1 (1st Cir. 2021). The court must start with the summary judgment standard, "which evaluates the evidentiary supportability of claims," rather than Rule 12's "plausibility standard, which is limited to a facial analysis of the pleadings," in evaluating "whether a moving party has met its burden of demonstrating that arbitrability is not 'in issue.' " Id. at 175. A party opposing arbitration must "provide prompt notice of 'whatever claims they may have in opposition to arbitration and the evidentiary basis of such claims.' " Id. (quoting Oppenheimer & Co. v. Neidhardt, 56 F.3d 352, 358 (2d Cir. 1995)). As with summary judgment, while "the court must construe the record in the light most favorable to the non-moving party and draw all reasonable inferences in its favor." AirCon, Inc., 21 F.4th at 175.
IV. Discussion
There is no dispute that the Terms fall under the FAA, only whether the Terms should apply retroactively to Plaintiffs' claims, which relate only to transactions that pre-date the adoption of the Terms.
Fashion Nova argues that Plaintiffs' claims are encompassed by the Terms' arbitration provision and class action waiver, regardless of the date of the purchases, consistent with the strong presumption in favor of arbitrability and First Circuit precedent giving similar arbitration language retroactive application. Specifically, Fashion Nova argues that the natural reading of the provision unambiguously extends to claims that arose prior to the adoption of the Terms, consistent with Kristian v. Comcast Corp., 446 F.3d 25, 32-34, 37-38 (1st Cir. 2006), and that Plaintiffs' claims regarding deceptive practices plainly fall within the Terms' scope. Mem. 13-15 [Doc. No. 31].
Plaintiffs assert that arbitration clauses may only apply retroactively where they "clearly and unequivocally" indicate that they have retroactive effect. Opp. 4 [Doc. No. 35] (quoting Long v. Fidelity Water Sys., Inc., 2000 WL 989914, at *4 (N.D. Cal. May 26, 2000)). Plaintiffs contend that Kristian is distinguishable, because the dispute centered on language not present in the Fashion Nova Terms. Opp. 7-8 [Doc. No. 35]. Plaintiffs argue that the Terms do not "clearly and unequivocally" indicate retroactive effect, where they use present tense language and contain a 30-day opt out for the arbitration agreement. Id. at 6-7 (quoting Long v. Fidelity Water Sys., Inc., 2000 WL 989914, at *4 (N.D. Cal. May 26, 2000)). Finally, Plaintiffs argue that the Terms' silence on retroactivity implicates fundamental fairness concerns which the court should take into consideration. Id. at 10.
The First Circuit has held that arbitration provisions may apply retroactively when the language is sufficiently broad, even without explicit language reflecting retroactive effect. Kristian, 446 F.3d at 31-33. In Kristian, the First Circuit evaluated the enforceability of an arbitration provision contained in ongoing service contracts between cable customers and Comcast where the alleged violations occurred in 1999 and 2001 but the specific arbitration clause was only added in 2002. Id. at 29-31. The First Circuit held that while some arbitration agreements will have language that directly indicates an intent to cover or exclude past transactions, such language is not necessary, and instead, arbitration should be compelled retroactively if it is within "natural reading" of the agreement. Id. at 33. The court focused on the contract language "arising out of this agreement or the services provided," and concluded that the phrase "or the services provided" naturally meant that it was intended to extend beyond the agreement and was not limited in time. Id. at 33 (emphasis in original).
The court agrees with Defendant that Kristian does not require the Terms "clearly and unequivocally" indicate retroactive effect but disagrees that Kristian requires the court compel arbitration here. Consistent with Kristian's directive to follow the "natural reading" of the agreement, the court concludes that the arbitration agreement should not be given retroactive effect for three reasons.
First, in contrast to Kristian, the arbitration provision cannot be read naturally to apply to prior purchases. The Terms do not contain language similar to the phrase "or other services provided." Instead, the Terms state that "any dispute relating in any way to your visit to, or use of, the Website, the Products, or any purchase or otherwise related to this Agreement ("Disputes") shall be submitted to confidential arbitration[.]" Satur Decl., Ex. A 3-4 [Doc. No. 33-1] (emphasis added). The phrase "or otherwise related to this Agreement," read naturally, limits the scope of the text that proceeds it. Fashion Nova emphasizes the first piece of the relevant provision-"any dispute relating in any way to your visit to, or use of, the Website"-as sufficiently broad, but ignores the limitation that the purchase be "related to this Agreement." Were the court to read the provision as Fashion Nova suggests, it would render the word "otherwise" mere surplusage. See, e.g., Jimenez v. Peninsular & Oriental Steam Nav. Co., 974 F.2d 221, 223 (1st Cir. 1992) (collecting cases reflecting that courts should construe contract language in a manner to "render no term meaningless.").
Second, the language of the Terms repeatedly uses the present tense "purchase" and "purchases," leaving no indication that the Terms were intended to cover prior transactions. The second sentence of the Terms states that "This agreement governs your . . . purchase of any products" and shortly thereafter is a section titled "Purchases through the Website" which contains repeated references to "purchases" in the present tense. Satur Decl., Ex. A 2 [Doc. No. 33-1]. This repeated use of present tense language cuts against the argument that the Terms were meant to apply to past transactions.
Finally, the court agrees with Plaintiffs that the 30-day opt-out provision cuts against retroactive application. Although Fashion Nova contends that the opt-out provision is not inconsistent with retroactive application because with each purchase after December 2018, the Plaintiffs could have opted out and precluded all previous purchases from arbitration, Reply 5 n.2 [Doc. No. 43], such a reading ignores the Terms express statement that "[i]f more than thirty (30) days have passed from the date that you purchase a product, you are not eligible to opt out of arbitration with respect to claims relating to that product," Satur Decl., Ex. A 4 [Doc. No. 33-1].
Because the Terms do not have retroactive effect and thus do not cover the transactions at issue, the court need not consider whether Plaintiffs had notice of the Terms.
V. Conclusion
For the foregoing reasons, the Motion [Doc. No. 30] is DENIED as to the request to compel arbitration and remains under advisement as to the request to dismiss the action.
IT IS SO ORDERED.