Erik Knutson v. Sirius Xm Radio Inc.
771 F.3d 559
| 9th Cir. | 2014Background
- Knutson bought a Toyota in Nov 2011 that included a pre‑installed Sirius XM receiver and a 90‑day trial subscription activated Nov 7, 2011.
- Sirius XM mailed a Welcome Kit with a Customer Agreement (including an arbitration clause and class‑action waiver) on Nov 29, 2011; Knutson received it ~Dec 12, 2011—after activation and after he received three telemarketing calls.
- The Customer Agreement stated that failure to cancel within 3 business days of activation meant acceptance; cancellation instructions were in the mailed materials.
- Knutson did not read the mailed agreement, did not cancel the trial, and sued Sirius XM in Feb 2012 alleging TCPA violations and seeking class relief.
- District court compelled arbitration and dismissed the case; the Ninth Circuit reversed, holding no mutual assent to the Customer Agreement (and thus no enforceable arbitration agreement).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Was there a valid agreement to arbitrate? | Knutson: No mutual assent—Agreement arrived after activation and he had no notice or opportunity to accept/reject. | Sirius XM: Mailing of the Customer Agreement plus continued use and failure to cancel constituted assent; shrinkwrap practice is valid. | No. Court held Sirius XM failed to prove mutual assent; arbitration agreement unenforceable. |
| Does silence/continued use constitute acceptance here? | Knutson: Silence is not acceptance where offer/terms were not effectively communicated. | Sirius XM: Retention of benefit and inaction after receiving terms imply acceptance. | Silence/continued use did not manifest assent because the offer and need to act were not effectively communicated. |
| Are post‑transaction mailed terms (shrinkwrap) enforceable against a consumer who did not deal directly with provider? | Knutson: Post‑delivery terms are unenforceable where consumer had no reason to know of a separate contract with provider. | Sirius XM: Courts allow terms to follow initial transaction in mass‑market services. | Distinguishes prior cases: shrinkwrap/enforcement requires a prior direct relationship or effective notice—those facts absent here. |
| Should court decide unconscionability of arbitration clause? | Knutson: Also argued unconscionability; clause limited remedies and had procedural defects. | Sirius XM: Arbitration clause is substantively conscionable. | Court did not decide unconscionability because lack of assent made arbitration unenforceable. |
Key Cases Cited
- AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011) (FAA policy favoring arbitration and arbitration as a matter of contract)
- United Steelworkers of Am. v. Warrior & Gulf Nav. Co., 363 U.S. 574 (1960) (arbitration requires parties' agreement)
- Specht v. Netscape Com. Corp., 306 F.3d 17 (2d Cir. 2002) (post‑offer terms unenforceable where reasonable user had no notice of terms)
- Schnabel v. Trilegiant Corp., 697 F.3d 110 (2d Cir. 2012) (arbitration clause unenforceable where consumer lacked notice of separate merchant’s terms)
- Bischoff v. DirecTV, Inc., 180 F. Supp. 2d 1097 (C.D. Cal. 2002) (upholding post‑sale mailed terms where customer directly contracted with provider)