3:24-cv-02890
N.D. Cal.Oct 10, 2024Background
- Plaintiff Eli Silva purchased products from Temu, operated by Defendant WhaleCo, Inc., and alleges deceptive advertising practices (strikethrough pricing, fake sale countdowns).
- To purchase, Silva had to register for a Temu account, which required clicking through prompts with conspicuously hyperlinked Terms of Use and Privacy Policy.
- WhaleCo’s records show Silva completed registration and thus assented to the Terms of Use, which contain an arbitration agreement and delegation clause.
- Silva claims he was unaware of and not presented with the Terms during registration and challenges the enforceability and unconscionability of the arbitration agreement.
- WhaleCo moves to compel arbitration and stay the lawsuit; the court evaluates whether Silva was on notice of and assented to the arbitration agreement, and whether unconscionability challenges are for the court or arbitrator.
- The court issues an order after considering the parties’ evidentiary submissions and legal arguments.
Issues
| Issue | Plaintiff’s Argument | Defendant’s Argument | Held |
|---|---|---|---|
| Existence of Arbitration Agreement | No valid agreement; not on notice of Terms | Silva was on constructive notice, assented via registration | Valid agreement exists; Silva assented |
| Notice/Conspicuousness of Terms | Terms were not reasonably conspicuous | Terms were hyperlinked, conspicuous, and clear | Notice was conspicuous and sufficient |
| Applicability to Present Claims | Claims should not be subject to arbitration | Agreement covers any dispute from use/purchase | Claims fall within arbitration clause |
| Delegation of Unconscionability Issues | Delegation clause itself is unconscionable | Delegation clause is valid; arbitrator decides unconscionability | Delegation clause is enforceable |
Key Cases Cited
- Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213 (FAA requires federal courts to compel arbitration when a valid agreement exists)
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (arbitration is limited to disputes parties agreed to submit)
- Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63 (delegation clauses in arbitration agreements are enforceable)
- Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126 (court’s role on motion to compel arbitration is limited to existence/scope of agreement)
- Oberstein v. Live Nation Ent., Inc., 60 F.4th 505 ("sign-in wrap" agreements can create binding assent if notice is conspicuous)
- Berman v. Freedom Fin. Network, LLC, 30 F.4th 849 (enforceability of online agreements depends on conspicuous notice and clear assent)