DocketNumber: Case No. 18-cv-00947-BLF
Citation Numbers: 349 F. Supp. 3d 869
Filed Date: 10/3/2018
Status: Precedential
Modified Date: 7/25/2022
G. Future changes to Dispute Resolution Agreement. If Google makes any changes to this Dispute Resolution Agreement (other than a change to Google's Notice Address), Customer or Advertiser may reject any such change by notifying Google via webform as set forth in Section 13(F) within 30 days of the change. It is not necessary to submit a rejection of the future change to this Dispute Resolution Agreement if Customer or Advertiser had properly opted out of arbitration in compliance with the requirements of Section 13(F). By rejecting a future change, Customer or Advertiser is agreeing that it will arbitrate any dispute in accordance with the language of this Dispute Resolution Agreement, as modified by any changes that Customer or Advertiser did not reject.
Finally, Section 14 governs miscellaneous provisions and states:
14 Miscellaneous.... (d) These Terms are the parties' entire agreement relating to their subject matter and supersede any prior or contemporaneous agreements on those subjects.
The 2017 TOS also included, for the first time, an arbitration provision and a class action waiver. Sung Decl. ¶ 8. The arbitration provision covers, in relevant part:
13 Dispute Resolution Agreement.
A. Arbitration of disputes. Google, Customer, and Advertiser agree to arbitrate all disputes and claims between Google and Customer or between Google and Advertiser that arise out of or relate in any way to the Programs or these Terms. This agreement to arbitrate ("Dispute Resolution Agreement" or "Section 13") is intended to be broadly interpreted and includes, for example:
*8741. claims brought under any legal theory;
2. claims that arose before Customer or Advertiser first accepted any version of these Terms containing an arbitration provision;
3. claims that may arise after the termination of Customer's or Advertiser's Use of the Programs; ....
The arbitration provision also included a 30-day opt out period, stating:
F. 30-day opt out period. Customer (both for itself and for any Advertiser that Customer represents) and Advertiser have the right to opt out of this Dispute Resolution Agreement. A Customer or Advertiser who does not wish to be bound by this Dispute Resolution Agreement (including its waiver of class and representative claims) must notify Google as set forth below within 30 days of the first acceptance date of any version of these Terms containing an arbitration provision (unless a longer period is required by applicable law). Customer's or Advertiser's notice to Google under this subsection must be submitted via webform available at adwords.google.com/nav/arbitration. An opt-out notice does not revoke or otherwise affect any previous arbitration agreement between Customer and Google or between Advertiser and Google.
Clicking the link in this section took the advertiser to a webpage containing the opt out procedure. Sung Decl. ¶ 13; see
Google gave notice of the 2017 TOS to the AdWords advertisers through multiple means, including through a direct email to the advertisers, a public blog post, and an alert on the advertisers' AdWords account. Sung Decl. ¶ 7. Each notice directed the advertisers to a webpage where they could review and accept the modified terms, which were displayed in a single embedded window.
Google notified Trudeau of the 2017 TOS by both email and an alert in his AdWords account. Sung Decl. ¶ 16. Trudeau accepted the 2017 TOS on September 15, 2017 and did not attempt to opt out of the arbitration provision. See
II. LEGAL STANDARD
A. Motion to Compel
The Federal Arbitration Act ("FAA") applies to arbitration agreements affecting interstate commerce.
The FAA reflects a strong policy in favor of arbitration.
*875Concepcion ,
A district court faced with a petition to enforce an arbitration clause engages in a limited two-part inquiry: first, it determines whether the arbitration agreement is valid, and second, it determines whether the agreement encompasses the claims at issue. Ashbey v. Archstone Prop. Mgmt., Inc. ,
B. Motion to Dismiss
"A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted 'tests the legal sufficiency of a claim.' " Conservation Force v. Salazar ,
On a motion to dismiss, the Court's review is limited to the face of the complaint and matters judicially noticeable. MGIC Indem. Corp. v. Weisman ,
If the Court concludes that the complaint should be dismissed, it must then decide whether to grant leave to amend. Under *876Rule 15(a) of the Federal Rules of Civil Procedure, leave to amend "shall be freely given when justice so requires," bearing in mind "the underlying purpose of Rule 15... [is] to facilitate decision on the merits, rather than on the pleadings or technicalities." Lopez v. Smith ,
C. Judicial Notice
The Court may generally consider matters properly subject to judicial notice. See Tellabs, Inc. v. Makor Issues & Rights, Ltd. ,
III. DISCUSSION
In order to determine whether these claims must be compelled to arbitration or be litigated in this court, the Court necessarily must decide whether the arbitration clause is unconscionable-if it were unconscionable, then it would be unenforceable. After thoroughly reviewing the briefing on this issue and the declarations submitted in support thereof, as well as hearing argument from each side at the hearing on the motion, the Court holds that the arbitration provision is valid and enforceable and covers the claims at issue here, such that Google's motion to compel arbitration must be granted and its motion to dismiss must be granted as to the claim for declaratory relief that the arbitration provision is unconscionable.
As an initial matter, Trudeau does not dispute several facts important to deciding these motions. It is undisputed that Trudeau accepted the 2017 TOS and did not follow the arbitration opt out procedures. See FACC ¶ 32; Sung Decl. ¶¶ 10, 14-17. It is also undisputed that if Section 13(A) is valid and enforceable as to claims that accrued before the 2017 TOS was enacted (what Trudeau deems to be "retroactive" application), the scope of that provision covers the claims at issue here. See 2017 TOS § 13(A) (governing "all disputes and claims between Google and Customer ... that arise out of or relate in any way to the Programs or these Terms"); Mot. at 12. The key dispute then is whether the arbitration provision can cover claims that accrued before the 2017 TOS was enacted.
It also appears from Trudeau's Opposition that he abandons his declaratory relief claim that the arbitration provision is procedurally and substantively unconscionable. Compare FACC ¶¶ 107-114 (seeking declaratory relief that clause is unconscionable) with Opp. at 4-14 (arguing arbitration provision is unenforceable for *877other reasons). To the extent Trudeau has not waived this argument, the Court rejects it and dismisses this cause of action with prejudice. Under California law, a contractual clause is unenforceable only if it is both procedurally and substantively unconscionable. See Nagrampa v. MailCoups, Inc. ,
This Court finds that the 2017 TOS provided a meaningful opportunity to opt out of the arbitration provision. Accord Adtrader, Inc. v. Google LLC , No. 17-CV-07082-BLF,
Instead, Trudeau argues that the arbitration provision does not apply retroactively for three reasons: (1) the plain language of Section 13(A) in the 2017 TOS "does not say that the new Dispute Resolution Agreement ... will apply retroactively to already-accrued claims"; (2) the retroactivity provisions in the past versions of the TOS bound Google to making only prospectively applicable changes in future versions of the TOS; and (3) California law, specifically the covenant of good faith and fair dealing, "prohibits the retroactive enforcement of late-added contractual terms, at least as to claims that ha[ve] 'accrued' before the clause was added." The Court addresses each argument in turn.
A. The Plain Language of the 2017 Terms of Service
Trudeau argues that, "on its face, the new arbitration clause in Section 13(A) does not apply retroactively." Opp. at 10. Section 12 of the 2017 TOS states in part that "[o]ther than changes made under Section 13(G), changes to the Terms will not apply retroactively ...." 2017 TOS § 12. And Section 13(G) covers only future changes to Section 13's arbitration provision.
At the same time, Trudeau recognizes that Section 13(A)(2) "seems to imbue [Section 13(A) ] with retroactive effect, by providing that the new dispute resolution clause applies to, inter alia , 'claims that arose before Customer or Advertiser first accepted any version of these Terms containing an arbitration provision.' " Opp. at 11 (quoting 2017 TOS § 13(A)(2) ). Trudeau *878argues that Section 13(A)(2) must be read in light of Section 12's "general intent" that no term apply retroactively except for changes made pursuant to Section 13(G).
The Court finds that Trudeau's argument misses the mark, as argued by Google. See Reply at 8-10, ECF 35. Rather than starting with Section 12, the Court starts with the plain language of the arbitration provision. Section 13(A)(2) expressly covers "claims that arose before Customer and Advertiser first accepted any versions of these terms containing an arbitration provision." 2017 TOS § 13(A)(2). On its face then, the arbitration provision applies to claims arising before the 2017 TOS. Trudeau muddies the point by calling this a "retroactive" application of Section 13(A)(2). "Retroactivity" as it relates to this contract is a question of timing : Does the provision apply as if it had been enacted at some time prior to the time of its actual enactment? Section 13(A)(2) does not apply retroactively-that is, it does not apply as if it had been enacted prior to the time of its actual enactment. Instead, it applies prospectively from the time of enactment. That the scope of Section 13(A) covers claims that accrued prior to enactment does not mean that the Section itself has retroactive application.
This distinction is made clear by Section 12. Section 12 states that Google "may make non-material changes to these [2017] Terms at any time without notice, but Google will provide advance notice of any material changes to these Terms.... Other than changes made under Section 13(G), the changes to the Terms will not apply retroactively ...." Put simply, Section 12 states that any future changes to the 2017 Terms will not apply as if they had been present in the original 2017 Terms, i.e. , as if they had been present in the contract before they were actually enacted. The exception to this provision is for future changes made to the Section 13 Dispute Resolution Agreement pursuant to Section 13(G). Section 12 instructs that those changes can have retroactive application, as if they had been present in the TOS all along.
Nothing about the potential retroactivity or nonretroactivity of future changes to the 2017 TOS changes the fact that Section 13(A)'s scope, by its plain terms, covers claims that accrued prior to enactment. That is, Section 13(A) need not apply retroactively in order to cover previously accrued claims. As such, the Court finds no conflict or ambiguity in the terms of the 2017 TOS and holds that Section 12 does not preclude Section 13(A) from covering previously accrued claims.
B. The Impact of Non-Retroactivity Provisions in Previous Versions of the Terms of Service
Trudeau next argues that even if the 2017 TOS does not bar previously accrued claims by its own terms, the existence of non-retroactivity provisions in previous versions of the TOS, which Trudeau signed, precluded the 2017 TOS from covering such claims.
Google claims that this argument is wrong for two key reasons. First, the 2017 TOS is "a novation that extinguished the prior 2013 Terms, including former Section 11." Opp. at 3 (citing
The Court again agrees with Google. A novation requires (1) a previous valid obligation; (2) the agreement of all parties to the contract; (3) the extinguishment of the old contract; and (4) the validity of the new one. See James ,
Given the language of the 2017 TOS and the context in which it was implemented, the Court holds that previous versions of the TOS do not bar the 2017 TOS arbitration provision from applying to previously accrued claims.
C. The Applicability of the Covenant of Good Faith and Fair Dealing Under California Law
Trudeau's final argument is that the arbitration provision is invalid under California's *880implied covenant of good faith and fair dealing ("covenant") because "[e]very Court of Appeal to have considered whether a party may unilaterally modify an arbitration clause to retroactively cover claims that have already accrued has agreed" that the covenant bars such retroactive application. Opp. at 5; see
Trudeau seems to argue both that the retroactivity of the 2017 TOS arbitration provision is unenforceable in its own right, see Opp. at 8-9, and that the non-retroactivity provisions in previous versions of the Terms contribute to that conclusion. As to the 2017 TOS themselves, he relies on the Peleg line of cases to argue that the retroactivity of an arbitration provision is barred wholesale. As to the other versions of the TOS, Trudeau argues that Google's long line of Terms not allowing for retroactive application would have instilled in the advertisers a reasonable expectation that the 2017 TOS also did not apply retroactively. See id. at 8. And, according to Trudeau, the opt out provision would not have changed those expectations.
Google responds that the Peleg line of cases are inapposite because they apply only to unilateral changes to the arbitration agreement. See Reply at 6-8. Google argues by way of example that in Peleg , the Court held a contractual term to be illusory because it would have allowed the employer to "amend the contract in anticipation of a specific claim, altering the arbitration process to the employee's detriment" via mere notice to the employee. Id. at 6; see id. (distinguishing Cobb ). Google argues that the circumstances are vastly different here, where the advertisers had to accept the agreement and were given multiple opportunities to opt out. Finally, Google argues that the advertisers could not have reasonably expected the arbitration provision not to govern previously accrued claims because the express terms of the 2017 TOS in Section 13(A)(2) demonstrate that such claims are covered. See Reply at 5.
The Court agrees with Google that California law does not bar enforcement of the arbitration provision here. The Peleg court was concerned with potentially illusory contract terms by which an employer could change the terms of the arbitration provision at any time, even after a dispute had arisen.
And as to the reasonable expectations of the advertisers, as explained above, the Court does not find the terms of the contract to be uncertain or ambiguous. Section 13(A)(2) expressly applies the arbitration provision to previously accrued claims on its face. The Court finds it would not be reasonable to construe that provision as not applying retroactively, even given the history of the Terms. See Mohamed ,
Because none of Trudeau's arguments is sufficient to rebut the plain language of the 2017 TOS and because Trudeau expressly accepted those terms and refused to opt out, the Court finds that he is bound by the arbitration provision.
IV. ORDER
For the foregoing reasons, Defendant's Motion to Compel Arbitration is GRANTED. Each claim that Trudeau has asserted in this action, except his claim for declaratory relief, is subject to arbitration according to the terms of the 2017 Terms of Service. Google's Motion to Dismiss is GRANTED IN PART, as to Trudeau's claim for declaratory relief that the arbitration provision is unconscionable, and TERMINATED AS MOOT IN PART, as to his other claims which are subject to arbitration. There being no remaining claims outside of arbitration, the entire action is DISMISSED WITHOUT PREJUDICE to filing a later action to confirm or vacate the arbitration award.
IT IS SO ORDERED.
The Court address Trudeau's argument about the expectations created by these provisions in the next section on the covenant of good faith and fair dealing.