Costa v. Road Runner Sports CA4/1

Filed 9/28/22 Costa v. Road Runner Sports CA4/1
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
SUSAN COSTA, D079393
Plaintiff and Respondent,
v. (Super. Ct. No. 37-2020-
00017100-CU-MC-CTL)
ROAD RUNNER SPORTS, INC., et al.,
Defendants and Appellants.
APPEAL from an order of the Superior Court of San Diego County, Joel
R. Wohlfeil, Judge. Affirmed.
The Weitz Law Office and Michael Weitz for Defendants and
Appellants.
Blood Hearst & O’Reardon, Timothy G. Blood, Leslie E. Hurst, Thomas
J. O’Reardon II, Jennifer L. MacPherson; Johnson Fistel, Frank J. Johnson
and Chase M. Stern for Plaintiff and Respondent.
INTRODUCTION
Michael O’Connor signed up for a loyalty program when he bought a
pair of shoes and socks from Road Runner Sports, Inc. and Road Runner
Sports Retail, Inc. (collectively, “Road Runner”). He alleges Road Runner did
not tell him the loyalty program was an automatic renewal subscription and
that his credit card would be charged an annual subscription fee. After
discovering he had been charged for four years of subscription fees, he joined
as the named plaintiff in a class action lawsuit alleging Road Runner had
violated California’s Automatic Renewal Law and consumer protection
statutes.1
Road Runner asserts O’Connor is bound by an arbitration provision it
added to the online terms and conditions of the loyalty program, some three
years after he enrolled. Although Road Runner concedes O’Connor did not
have actual or constructive notice of the arbitration provision, it contends
O’Connor created an implied-in-fact agreement to arbitrate when he obtained
imputed knowledge of the arbitration provision through his counsel in the
course of litigation and failed to cancel his membership. We disagree this is
sufficient under California law to prove consent to or acceptance of an
agreement to arbitrate. Accordingly, we affirm the trial court’s order denying
Road Runner’s motion to compel arbitration.
1 O’Connor replaced the original named plaintiff, Susan Costa, as the
named plaintiff in the First Amended Complaint (FAC), after Costa settled
her individual claims with Road Runner.
2
FACTUAL AND PROCEDURAL BACKGROUND
I.
Road Runner’s Loyalty Program2
Road Runner is a running shoe and athletic apparel company with
more than 35 retail outlets in California and other states, and an online
store. Road Runner offers its customers discounts and rewards through its
loyalty program, the “VIP Family Rewards Membership.” It encourages
customers to sign up for the loyalty program during the checkout process. To
entice customers, Road Runner offers the loyalty program membership for a
marginal amount—just $1.99 as of 2021—and offers a 10% discount and 5%
cash back incentive on the customer’s first purchase, typically worth more
than the membership purchase price. The customer must have a credit or
debit card on file to sign up and, once enrolled, Road Runner automatically
charges the customer an annual renewal fee of $39.99, or more, each year.
O’Connor signed up for the loyalty program at a Road Runner retail
store sometime in 2016.3 O’Connor used his membership to receive a
discount on a pair of shoes and socks when he first enrolled. He used his
membership again to receive a discount in 2017. That was the last time
O’Connor used his membership. Still, Road Runner automatically charged
O’Connor’s credit card annual subscriptions fees ranging from $27.99 to
2 The facts regarding the loyalty program, at least as they relate to the
motion to compel arbitration, are largely undisputed. Our description of the
program is derived primarily from the FAC.
3 According to Road Runner’s Chief Information Officer (CIO), O’Connor
had previously enrolled in the loyalty program in 2008, 2010, and 2014. The
record does not disclose whether there were recurring charges associated
with those memberships, or whether O’Connor cancelled them.
3
$39.99 in November of 2017, 2018, 2019, and 2020. O’Connor paid his credit
card bill each time, allegedly without noticing the membership charges.
According to Road Runner, customers like O’Connor who signed up for
a membership while making a purchase in a retail store in 2016 would have
received a “retail handout[ ]” from the sales associate making the sale. The
4
handout was a trifold pamphlet, and each of the three panels was
approximately 5 inches by 7 inches. One panel looked like this:4
4 Road Runner’s CIO attached the entire pamphlet as an exhibit to his
declaration and also attached a second image purportedly showing the
5
At the bottom of that panel, the small print read: “TO ENSURE YOU
NEVER MISS OUT ON A BENEFIT, YOUR MEMBERSHIP WILL
AUTOMATICALLY RENEW EACH YEAR AT $27.99 AND BE CHARGED
TO A VALID CREDIT/DEBIT CARD ON FILE . . . YOU MAY CANCEL
YOUR MEMBERSHIP AT ANY TIME TO RECEIVE A PRORATED
REFUND BY CALLING 800.543.7309.” In smaller print below that, it read:
“Benefits and pricing subject to change. Get more info when you visit
roadrunnersports.com/vip.”
Road Runner also sent O’Connor a mailer regarding his membership
before each of the renewal charges in 2017, 2018, and 2019.5 The mailers
from 2017 and 2018 were substantially the same. Each had the general
appearance of a letter, with a $15 gift certificate at the bottom. The letter
portion stated, in relevant part, “YOUR MEMBERSHIP WILL
AUTOMATICALLY RENEW TO YOUR CREDIT/DEBIT CARD ON FILE
FOR $28.99. REST ASSURED YOU CAN CANCEL YOUR MEMBERSHIP
AT ANY TIME . . . BY CALLING 800.255.6422 OR VISITING
ROADRUNNERSPORTS.COM/MYACCOUNT.”
There was no reference to an arbitration provision, or any other terms
and conditions, in the retail handout O’Connor received when he signed up
for the loyalty program in 2016, or in the mailers sent to him in 2017 and
2018. That is because the arbitration provision did not exist in those years.
“approximate actual size” of the relevant panel. We reproduce the image
here in approximately the same size.
5 Road Runner’s CIO attached copies of the “mailer template” for each
year to his declaration. He averred the 2018 and 2019 mailers were sent to
O’Connor in November of those years, but did not provide a date for the 2017
mailer.
6
The mailer from 2019 also had the general appearance of a letter, with
a notification regarding a $20 “VIP Anniversary Rewards Gift” at the
bottom. The letter portion stated, in relevant part: “The best part
. . . there’s nothing you need to do. Your new benefits are now live on
your account, which will automatically renew 11/25/2019 at the new annual
rate of $39.99. **See back for additional details.**” Rather than including
an actual gift certificate, the bottom half of the mailer sent to O’Connor
stated, “Uh oh! We don’t have your email address on file! [¶] Call us
now at 800.543.7309 to add your email address to your account and we’ll
email you when your $20 Gift is ready.”
The back of the 2019 mailer had three separate sections, each with a
heading in bold capitalized text. The following text appeared below the
second heading: “YOUR ANNUAL RENEWAL DETAILS”: “YOUR
MEMBERSHIP IS SET TO AUTOMATICALLY RENEW BY CHARGING
YOUR CREDIT/DEBIT CARD ON FILE . . . UNLESS YOU CANCEL. THE
NEW ANNUAL RATE FOR YOUR MEMBERSHIP IS $39.99. YOU MAY
CANCEL YOUR MEMBERSHIP AT ANYTIME . . . FOR
CANCELLATION . . . CALL 800.543.7309 OR VISIT
ROADRUNNERSPORTS.COM/MYACCOUNT.”
Included in the 2019 mailer, for the first time, was a reference to terms
and conditions of the loyalty program. There was an asterisk (directly below
the text we just quoted) that said, in the same small size font as the text but
without capital lettering: “*See complete program terms and conditions at
roadrunnersports.com/viprewards.” Like the previous 2016 to 2018
materials, the 2019 mailer itself did not contain any reference to an
arbitration provision.
7
If O’Connor had gone to roadrunnersports.com/viprewards, he would
not have been presented with the “complete program terms and conditions,”
nor would he have easily discovered them. Instead, if he scrolled to the
bottom of the referenced webpage, he would find this:6
6 O’Connor’s counsel submitted an attorney declaration attaching a
screenshot of www.roaderunnersports.com/viprewards as an exhibit, which
we reproduce here in approximately the same size and format. But we note
the actual size and format may vary based on the device and web browser
used to access the website.
8
Each question could be expanded to reveal the answer and, at the bottom, in
the same small print and font as the questions, the webpage stated: “Use of
the membership constitutes acceptance of the full terms and conditions of
membership. Please review here.” The word “here” was a hyperlink which,
if clicked, would take the user to another webpage containing the terms and
conditions.
The terms and conditions were approximately six pages long. On the
final page, in the same size font and typeface as the rest of the terms and
conditions, there was a section titled “Binding Arbitration.” It said: “Any
controversy or claim arising out of or relating to this Agreement (including
any breach there of) or the Road Runner Sports Rewards Membership shall
be settled by arbitration in San Diego County administered by the American
Arbitration Association under its Commercial Arbitration Rules. . . . Any
such controversy or claim shall be arbitrated on an individual basis and shall
not be consolidated with any claim or controversy of any other party.”
Road Runner began sending renewal notices by email in 2020. It did
not have a valid email address on file for O’Connor, so O’Connor did not
receive any notice in 2020 regarding his loyalty program membership, or its
automatic renewal.
II.
Road Runner’s Motion to Compel Arbitration
The class action lawsuit was filed against Road Runner in May 2020,
alleging that Road Runner’s loyalty program violated the Automatic Renewal
Law (Bus. & Prof. Code, §§ 17601−17606) and the Consumer Legal Remedies
Act (Civ. Code, § 1750, et seq.), by (1) failing to disclose clearly and
conspicuously the terms of its automatic renewal membership program before
enrolling customers; (2) automatically charging customers renewal fees
9
without first obtaining their affirmative consent; and (3) failing to provide an
easy-to-use method for cancellation. (See Bus. & Prof. Code, § 17602, subds.
(a)−(c).) Road Runner answered the complaint, generally denying all
allegations and asserting 15 affirmative defenses. In its first affirmative
defense, Road Runner asserted “the parties agreed to arbitrate this dispute
and therefore this matter is not properly before the Superior Court.”
In February 2021, O’Connor joined the lawsuit and replaced the
original named plaintiff with the filing of the FAC. The FAC included new
factual allegations specific to O’Connor, but was otherwise substantially the
same as the original complaint. Road Runner answered the FAC, and again
asserted arbitration as its first affirmative defense. This time, Road Runner
added that “the parties agreed to arbitrate this dispute under the terms and
conditions of the membership, the Plaintiff continues to accept the benefits of
the membership at issue without cancellation and with knowledge of the terms
and conditions, and therefore this matter is not properly before the Superior
Court.” (Italics added.)
Road Runner then moved to compel O’Connor to arbitrate his claims
individually. It asserted O’Connor had “demonstrative knowledge” of the
loyalty program’s online terms and conditions, and the included arbitration
provision, because (1) the 2019 mailer “expressly noted terms and conditions
applied to the membership and were available online”; (2) “Road Runner
pleaded the affirmative defense regarding arbitration and noted the terms
and conditions applied”; and (3) “O’Connor’s attorneys [had] direct knowledge
of the current terms and conditions,” as demonstrated by Road Runner’s
demand for arbitration in the pleadings and the attorneys’ own website
advertising the class action litigation, which had a link to the terms and
conditions. So Road Runner asserted O’Connor had “imputed knowledge” of
10
the arbitration provision through his attorneys, and “implicitly consented” to
the arbitration provision by “refus[ing] to cancel” his membership, even after
joining the litigation and learning of the arbitration provision.7
O’Connor responded he was not bound by the arbitration provision
because the online terms and conditions expressly stated a customer would
be bound by the purchase or use of a membership, and he had not purchased
or used his membership since 2017. O’Connor further asserted Road Runner
failed to prove he unambiguously assented to the arbitration provision,
because none of the various pamphlets Road Runner allegedly handed or
mailed to him mentioned arbitration. Rather, the inclusion of the arbitration
provision in the terms and conditions “hidden deep on one Road Runner
webpage” was not sufficient to establish his unambiguous assent. Nor did his
alleged failure to cancel his membership establish assent to the arbitration
provision; rather, he “went so far as to file a lawsuit to cancel his
[m]embership.” Finally, O’Connor disputed Road Runner’s claim that his
knowledge of the arbitration provision could be imputed from his attorneys.8
The trial court denied Road Runner’s motion to compel arbitration.
The court found the evidence demonstrated that O’Connor “was not made
aware of the terms and conditions,” or any arbitration agreement when he
7 Road Runner also asserted any issues regarding the scope or validity of
the arbitration provision, including unconscionability, had been delegated to
the arbitrator. The trial court declined to address this argument because it
found O’Connor was not bound by the arbitration provision in the first
instance. Because we reach the same conclusion as the trial court, we also
decline to address this assertion.
8 O’Connor also asserted Road Runner waived its motion to compel
arbitration due to unreasonable delay. The trial court ruled the delay did not
constitute a waiver. O’Connor does not challenge that ruling on appeal.
11
signed up for the loyalty program, and the “communications” O’Connor later
received from Road Runner “also did not reference or include the terms and
conditions or any arbitration provision within those terms and conditions.”
The court also rejected Road Runner’s argument that O’Connor had imputed
knowledge of the arbitration provision from his attorneys and implicitly
consented to arbitration by refusing to cancel his membership, after joining
the litigation. It explained, O’Connor could not accept the terms of an
agreement that he was not aware of, and Road Runner cited no authority “for
the proposition that knowledge obtained by an attorney during the course of
litigation can somehow be imputed to the attorney’s client for the period of
time predating litigation.”
DISCUSSION
“ ‘[T]he threshold question presented by a petition to compel arbitration
is whether there is an agreement to arbitrate.’ ” (Sellers v. JustAnswer LLC
(2021) 73 Cal.App.5th 444, 460 (Sellers).) While both the Federal Arbitration
Act (the FAA) and California law favor arbitration, a party is not required to
arbitrate his or her claims absent consent.9 (See Armendariz v. Foundation
Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 97 [“California law, like
federal law, favors enforcement of valid arbitration agreements.”]; Sellers, at
pp. 460−461 [“ ‘a trial court has no power to order parties to arbitrate a
9 Road Runner asserts the arbitration provision in the loyalty program
terms and conditions is governed by the FAA, but the parties agree, general
state law principles governing the formation of contracts apply when
determining whether an agreement to arbitrate exists in the first instance.
(See Specht v. Netscape Communications Corp. (2d Cir. 2002) 306 F.3d 17, 26
(Specht); Perry v. Thomas (1987) 482 U.S. 483, 492, fn. 9 [“state law . . . is
applicable if that law arose to govern issues concerning the validity,
revocability, and enforceability of contracts generally”].)
12
dispute that they did not agree to arbitrate’ ”].) The party seeking to compel
arbitration “ ‘bears the burden of proving the existence of a valid arbitration
agreement by the preponderance of the evidence.’ ” (Sellers, at p. 462, citing
Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 972; accord
Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC
(2012) 55 Cal.4th 223, 236 (Pinnacle) [“The party seeking arbitration bears
the burden of proving the existence of an arbitration agreement[.]”].)
The “determination of whether parties have contractually bound
themselves to arbitrate a dispute” is typically a question of law for the courts
to decide. (Specht, supra, 306 F.3d at p. 26; Bustamante v. Intuit, Inc. (2006)
141 Cal.App.4th 199, 208 [“the existence of a contract is a question [of law]
for the court to decide”].) Where, as here, the relevant underlying facts are
largely undisputed, we review the trial court’s order denying the motion to
compel arbitration de novo. (See Pinnacle, supra, 55 Cal.4th at p. 236; see
also Avery v. Integrated Healthcare Holdings, Inc. (2013) 218 Cal.App.4th 50,
60 [appellate court reviews underlying factual findings for substantial
evidence].)
On appeal, Road Runner concedes O’Connor did not have actual or
constructive notice of the arbitration provision. It relies exclusively on its
theory that O’Connor created an implied-in-fact agreement to arbitrate when
he obtained imputed knowledge of the arbitration provision through his
counsel in the course of litigation and still failed to cancel his membership.
And it contends the trial court erred by not adequately considering whether
O’Connor manifested his assent to the arbitration provision by failing to
cancel his loyalty program membership after joining the lawsuit. On our de
novo review, we conclude Road Runner has failed to meet its burden of
proving the existence of a valid arbitration agreement.
13
We begin with Road Runner’s assertion O’Connor had imputed
knowledge of the arbitration provision through his attorneys. Road Runner
devotes all of two short paragraphs to this argument. It relies on the general
rule, set forth in Civil Code section 2332, that “both principal and agent are
deemed to have notice of whatever either has notice of” and states this
general rule of agency applies to the attorney-client relationship. From
there, it simply asserts O’Connor’s attorneys knew of the terms and
conditions and “[t]hat knowledge is imputed by law to . . . O’Connor and
therefore [he] indisputably has knowledge of the terms and conditions.” Road
Runner’s argument fails, for three reasons.
First, Road Runner provides no authority, nor are we aware of any,
that applies this general agency principle to impute an attorney’s knowledge
of an arbitration provision to a client for the purpose of compelling
arbitration. The sole authority that Road Runner does present, Chapman
College v. Wagener (1955) 45 Cal.2d 796, is inapposite. The contract at issue
in Chapman College was a land purchase contract, and the “sole question in
dispute” was the buyer’s knowledge of “whether certain payments on the
[promissory] notes were to be credited solely on principal as claimed by the
sellers.” (Id. at p. 799.) The trial court found there was no mutuality because
the chairman of the college board of trustees “believed” the notes provided
that all payments would be first credited on interest. (Id. at p. 802.) The
appellate court reversed. It concluded that because the attorney for the
college “helped draft the notes” and “had full knowledge of their provisions,”
which specified payments would be credited solely on the principal, that
knowledge was imputed to the college. (Ibid.) Chapman College does not
stand for the proposition that a client’s assent to the actual formation of a
contract can be based on knowledge imputed from his attorney.
14
Second, an attorney’s knowledge is not imputed to a client before the
formation of the attorney-client relationship. (See Rosenthal v. Garner (1983)
142 Cal.App.3d 891, 896 [agent “is under no obligation to communicate any
information to the principal” before he becomes an agent]; Triple A
Management Co., Inc. v. Frisone (1999) 69 Cal.App.4th 520, 534 [“The basis
for imputing knowledge to the principal is that the agent has a legal duty to
disclose information obtained in the course of the agency[.]”]; see also Pillar
Project AG v. Payward Ventures, Inc. (2021) 64 Cal.App.5th 671, 676 [agent’s
acceptance of online terms and conditions prior to formation of any agency
relationship with plaintiff did not bind plaintiff].) Here, O’Connor joined the
lawsuit as the named plaintiff in January 2021. Road Runner does not
present any evidence O’Connor had any relationship with his attorneys, or
the litigation, before that date.10 And as the trial court put it, Road Runner
presents no authority for “the proposition that knowledge obtained by an
attorney during the course of litigation can somehow be imputed to the
attorney’s client for the period of time predating litigation.”
Third, even if knowledge of the arbitration clause could be imputed to
O’Connor through his attorneys, that is not enough to establish an agreement
to arbitrate was formed. Here, the arbitration provision appears only in
terms and conditions displayed on the company’s website. As this court
recently explained, “ ‘[w]hile [i]nternet commerce has exposed courts to many
new situations, it has not fundamentally changed the requirement that
10 Road Runner asserts O’Connor did not provide a declaration, or other
evidence, of the date he joined the litigation. But it is Road Runner’s burden
to prove the existence of a valid agreement to arbitrate, and Road Runner did
not provide any evidence O’Connor had imputed knowledge of the arbitration
clause before January 2021.
15
“ ‘[m]utual manifestation of assent, whether by written or spoken word or by
conduct, is the touchstone of contract.’ ” ’ ” (Sellers, supra, 73 Cal.App.5th at
p. 460, quoting Long v. Provide Commerce, Inc. (2016) 245 Cal.App.4th 855,
862.) “Mutual assent, or consent, of the parties ‘is essential to the existence
of a contract.’ ” (Sellers, at p. 460.) “ ‘Mutual assent is determined under an
objective standard applied to the outward manifestations or expressions of
the parties, i.e., the reasonable meaning of their words and acts, and not
their unexpressed intentions or understandings.’ ” (Ibid.) “ ‘If there is no
evidence establishing a manifestation of assent to the “same thing” by both
parties, then there is no mutual consent to contract and no contract
formation.’ ” (Ibid., italics added.)
Typically, when an arbitration provision appears only in terms and
conditions displayed on the company’s website, a consumer manifests his or
her assent to be bound by taking some action—such as checking a box or
clicking “ ‘I agree’ ”—while interacting with the website. (See Sellers, supra,
73 Cal.App.5th at p. 463.) Here, Road Runner presents no evidence that
O’Connor interacted with its website in any way, at any time, including after
he purportedly gained imputed knowledge of the arbitration provision
through his attorneys. Instead, Road Runner asserts O’Connor manifested
his assent to the arbitration provision by simply “elect[ing] not to call the toll-
free telephone number to cancel [his loyalty program] membership.”
(Boldface omitted.) This is not sufficient to establish mutual manifestation of
assent.
O’Connor took no actions manifesting his assent to be bound by the
arbitration provision, including after he joined the litigation. The loyalty
program terms and conditions provided three ways a customer could manifest
his or her assent to be bound: purchasing a membership, using a
16
membership, or renewing a membership.11 O’Connor first purchased his
loyalty program membership in 2016. He last used it in June 2017. And
Road Runner last charged him a renewal fee in November 2020. All of these
events occurred before he joined the lawsuit in January 2021. Thus, even if
any of those actions could be sufficient to bind a consumer to the online terms
and conditions, they were not sufficient to bind O’Connor to the arbitration
provision in this case because none of them occurred after O’Connor
purportedly obtained imputed knowledge of that provision.
Still, Road Runner argues O’Connor was bound by his inaction in
failing to cancel his membership after he joined the litigation. This argument
fails as well. Even if O’Connor had imputed knowledge of the arbitration
provision after joining the litigation, he had no reason to believe he would be
bound by the terms and conditions simply by failing to call the toll-free
number to cancel his membership. As we have just explained, the terms and
conditions specified three ways in which a consumer could be bound, and
failing to cancel a membership was not one of them.
Further, from the moment O’Connor joined the lawsuit, he and his
counsel asserted he was not bound by any of the loyalty program terms and
conditions, including the arbitration provision, because he never agreed to
enroll in an ongoing, automatically renewing membership program in the
11 The terms and conditions stated: “When you purchase the Membership
and continue to use it, you agree to the following terms and conditions”;
“Purchase or use of a Membership at any time subjects the purchaser and
user . . . to the provisions of this Agreement”; and “By purchasing your
Rewards Membership or renewal, you are affirmatively consenting to the
terms and conditions of this Agreement.” (Italics added.)
17
first place.12 Further still, O’Connor did try to cancel his membership. He
joined the lawsuit as the named plaintiff in the FAC, which sought, among
other relief, a judicial determination that Road Runner’s loyalty program was
unlawful, and an injunction preventing Road Runner from continuing to
charge consumers like him renewal fees. And his attorneys sent at least two
letters to Road Runner; one demanding that Road Runner cease the loyalty
program altogether, and a second demanding Road Runner cancel O’Connor’s
individual membership.
O’Connor’s counsel sent the first demand letter to Road Runner in May
2020, before filing the initial complaint. The letter stated “we hereby demand
on behalf of our client and all others similarly situated that [Road Runner]
immediately . . . ceas[e] the misleading marketing campaign, ceas[e]
dissemination of false and misleading information as described in the
enclosed Complaint, and initiat[e] a corrective advertising campaign to
reeducate consumers regarding the truth of the products at issue. In
addition, Road Runner must offer to refund the annual renewal fee charged to
all consumer purchasers of its VIP Family Membership programs.” (Italics
added.) These demands applied to O’Connor as a “similarly situated”
consumer. By seeking reimbursement of those fees, and cessation of the
marketing campaign, the letter effectively sought to cancel the loyalty
program memberships of all consumers enrolled in the loyalty program,
12 We express no opinion as to whether Road Runner provided adequate
notice of the automatic renewal as required by California law, one of the
primary disputed issues in the underlying litigation. Road Runner asserts
O’Connor failed to provide a declaration supporting his allegation that he was
not aware of the renewal charges when he paid them. This fact does not
change our analysis. It is undisputed that O’Connor had knowledge of the
renewal fees by the time he joined the lawsuit.
18
including O’Connor. The letter was also attached, as Exhibit A, to the
original complaint and the FAC. And once O’Connor joined the lawsuit, he
explicitly joined the ongoing demands that Road Runner cease the loyalty
membership program altogether.
O’Connor’s attorneys sent a second letter to Road Runner in April 2021,
shortly after Road Runner filed its motion to compel arbitration. The letter,
“again demand[ed] that Road Runner Sports cancel the current year VIP
membership it claims it is entitled to renew automatically and cease to renew
it in the future.” The letter stated, further, “[a]s you know, Mr. O’Connor was
unaware of any automatic renewal of his [loyalty program] membership and
has sought to cancel it, including by bringing this lawsuit against Road
Runner seeking cancellation.” Road Runner refused to cancel O’Connor’s
membership. Its attorney responded, in part, “[y]ou and Mr. O’Connor are
aware of how to cancel the membership. Sending a letter to me is not one of
the prescribed methods.”
Despite Road Runner’s refusal to comply with O’Connor’s requests,
O’Connor undoubtedly manifested his intent to cancel his membership.
Viewed in context of these affirmative attempts to reject the membership,
O’Connor’s failure to use Road Runner’s preferred method to cancel the very
same membership cannot be viewed as an objective outward manifestation of
assent to be bound by the associated terms and conditions.13 O’Connor’s
13 It is not apparent from the record before us why O’Connor did not call
the toll-free number to cancel his membership. But, according to the
customer complaints set forth in the initial complaint and the FAC, Road
Runner routinely failed to acknowledge customer requests to cancel loyalty
program memberships even when they did so by calling the toll-free number.
19
conduct after joining the lawsuit does not establish the assent necessary to
the formation of an agreement to arbitrate.
Road Runner relies on two cases to assert a party may be bound by an
implied-in-fact agreement to arbitrate based on a failure to deviate from a
prior course of conduct. Neither case helps Road Runner’s position. In the
first, the court found an employee was bound by an arbitration provision in
the company’s “Dispute Resolution Program,” because the employee
continued to work for the company after receiving a memorandum expressly
stating the program would govern “all future legal disputes between you and
the Company that are related in any way to your employment.” (Craig v.
Brown & Root, Inc. (2000) 84 Cal.App.4th 416, 419.) By contrast here,
O’Connor did not take any affirmative action—such as continuing to work for
a company—manifesting his intent to be bound by the arbitration provision.
Rather, O’Connor objectively manifested an intent to cancel his membership
and, thus, not to be bound by any associated terms and conditions.
The second case Road Runner relies on is an Alabama case applying
Alabama law. (See Memberworks, Inc. v. Yance (2004) 899 So.2d 940.) It is
not binding on this court, nor is it persuasive. The plaintiff there
affirmatively agreed to enroll in a discount membership over the phone after
the operator told him Memberworks would charge him $7 a month billed
annually if he did not cancel in the first 30 days. (Id. at p. 941.)
Memberworks then sent the plaintiff a membership kit with a membership
agreement that included an arbitration provision. (Ibid.) The plaintiff did
not cancel his membership and, instead, made two annual payments after
receiving the kit. (Id. at p. 942.) The court found the plaintiff “manifested
his assent to abide by the terms of the arbitration agreement of which he
20
received notice when he joined the program” by paying the two renewal
fees. (Id. at p. 943, italics added.)
Here, O’Connor was not presented with an arbitration provision when
he joined the program, or before he paid the first two renewal fees, nor does
Road Runner rely on the inconspicuous notice of the loyalty program terms
and conditions in the 2019 mailer. Road Runner alleges O’Connor
manifested his assent to be bound by the arbitration provision by failing to
cancel his membership after he joined the lawsuit, and after he paid the most
recent renewal fee. Road Runner presents no authority suggesting a litigant
may be bound to an arbitration provision by mere inaction in light of imputed
knowledge of the provision through his attorneys.14 For these reasons, we
conclude Road Runner has not met its burden to prove O’Connor manifested
his assent to be bound by the arbitration provision.
Road Runner also asserts, to the extent we agree O’Connor is bound by
the arbitration provision, any further issues regarding the validity and scope
of the arbitration provision must be delegated to the arbitrator. Because we
conclude Road Runner has not established the existence of a valid agreement
14 Road Runner cites two additional cases for the proposition that assent
can be inferred through inaction where there is a prior relationship or course
of dealing between the parties. (See Southern California Acoustics Co. v. C.
V. Holder, Inc. (1969) 71 Cal.2d 719, 722; Beatty Safway Scaffold, Inc. v.
Skrable (1960) 180 Cal.App.2d 650, 655.) Both involve an ongoing business
relationship between sophisticated parties, and neither addresses whether a
consumer can be bound to an arbitration provision in online terms and
conditions by failing to cancel an automatically renewing rewards
membership.
21
to arbitrate, we do not need to reach the issue of delegation of
arbitrability.15,16
DISPOSITION
The order denying Road Runner’s motion to compel arbitration is
affirmed. O’Connor is awarded his costs on appeal. (Cal. Rules of Court, rule
8.278(a)(1) & (2).)
DO, J.
WE CONCUR:
O’ROURKE, Acting P. J.
AARON, J.
15 O’Connor asks us to take judicial notice of four documents related to
the American Arbitration Association’s (AAA) rules and procedures and
asserts they are relevant to Road Runner’s delegation argument. We deny
the request as those items are not necessary to the resolution of this appeal.
(See Mangini v. R. J. Reynolds Tobacco Co. (1994) 7 Cal.4th 1057, 1063;
County of San Diego v. State of California (2008) 164 Cal.App.4th 580, 613,
fn. 29.)
16 We conditionally granted a request by Road Runner to file its
certificate of interested entities or persons (CIP) under seal while the present
appeal was pending. After further consideration by this panel, the CIP may
remain sealed. (See Cal. Rules of Court, rule 8.208(d)(2).)
22