Kroskey v. Elevate Labs, LLC
5:24-cv-08113
N.D. Cal.
May 27, 2025
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Docket

JONATHAN KROSKEY v. ELEVATE LABS, LLC, et al.

Case No. 5:24-cv-08113-EJD

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION

May 27, 2025

Plaintiff, Jonathan Kroskey (“Plaintiff“), on behalf of himself and a class of other similarly situated individuals, brings claims against Defendants Elevate Labs, LLC (“Elevate Labs“) and MindSnacks, Inc., (“MindSnacks“) (collectively, “Defendants“), affiliated entities that jointly own and operate a mobile meditation application called Balance: Mediation & Sleep (“Balance App“). Compl., ECF No. 1. Plaintiff alleges that Defendants disclosed their users’ personally identifiable information to a third party without authorization in violation of various federal and California state privacy laws. Id. Before the Court is Defendants’ motion to compel arbitration pursuant to the Balance App‘s Terms of Service. Mot., ECF No. 14. This motion is fully briefed. Opp‘n, ECF No. 21; Reply, ECF No. 29.

Having carefully reviewed the relevant documents, the Court finds this matter suitable for decision without oral argument pursuant to Local Rule 7-1(b). For the reasons explained below, the Court GRANTS Defendants’ motion to compel arbitration.

I. BACKGROUND

Plaintiff purchased a subscription membership to the Balance App in July 2023. Compl. ¶ 9. While signing up for a membership, he was directed to an account creation page on the Balance App that reads at the bottom: “By creating your account, you agree to Balance‘s Terms & Conditions and Privacy Policy.” Mot., Ex. A (“Sign Up Screen“), ECF No. 14-2 (emphasis in original). All text in this sentence appears in grey and in the same font and size:

Id.

When a user clicks on ”Terms & Conditions,” they are led to a document titled “Terms of Service.” Mot., Ex. B, ECF No. 14-3. After one paragraph of text, the document states in italicized font:

Arbitration Notice

Unless you opt of arbitration within 30 days of the date you first agree to those terms, you agree that (1) you will only be permitted to pursue claims against Balance on an individual basis, not as a plaintiff or class member in any class or representative action or proceeding, (2) you will only be permitted to seek relief (including monetary, injunctive, and declaratory relief) on an individual basis, and (3) you may not be able to have any claims you have against us resolved by a jury or in a court of law.

Mot., Ex. B, ECF No. 14-3 (emphasis in original).

The full agreement regarding arbitration is found further down the document under the bolded title ”Arbitration,” followed by the description: ”Dispute Resolution by Binding Arbitration: PLEASE READ THIS SECTION CAREFULLY AS IT AFFECTS YOUR RIGHTS” (“Arbitration Clause“). Id. (emphasis in original). The Arbitration Clause then provides in relevant part:

At Balance‘s or your election, all disputes, claims, or controversies arising out of or relating to the Terms of Service or the Service that are not resolved by mutual agreement may be resolved by binding arbitration to be conducted before JAMS, or its successor.” The Terms define the “Service” as Defendants’ “mobile applications and related services,” including the website, and any new features and applications. The Arbitration Agreement also provides that any arbitration shall be “conducted in accordance with the rules and regulations promulgated by JAMS unless specifically modified in the Terms of Service.” Under the JAMS rules for consumer arbitrations, the JAMS-appointed arbitrator must decide any disputes regarding the formation, existence, validity, interpretation, or scope of an arbitration agreement.

Id. (internal citations omitted).

The Terms of Service indicates that it is an agreement between Plaintiff and Elevate Labs. Id. The agreement does not reference affiliate Defendant MindSnacks. Id.

II. LEGAL STANDARD

The Federal Arbitration Act (“FAA“) provides that a “written provision in . . . a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction . . . 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.

As this language makes clear, “an arbitration agreement is a contract like any other.” . And like other contracts, arbitration agreements are subject to generally applicable state law contract defenses. . In determining whether to compel a party to arbitrate, the court must determine: “(1) whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement encompasses the dispute at issue.” (internal quotation marks and citation omitted). Once it is established that a valid agreement to arbitrate exists, the burden shifts to the party seeking to avoid arbitration to show that the agreement should not be enforced. .

Parties seeking to avoid arbitration are subject to the same standards applicable to parties opposing summary judgment under Federal Rule of Civil Procedure 56. See (finding summary judgment standard is appropriate because order compelling arbitration “is in effect a summary disposition of the issue of whether or not there had been a meeting of the minds on the agreement to arbitrate“). Therefore, the moving party bears the initial burden of informing the court of the basis for the motion. (citing ). If the moving party meets this initial burden, the burden then shifts to the opposing party to present specific facts showing that there is a genuine issue for trial. .

III. DISCUSSION

The Court finds that the Arbitration Clause in the Terms of Service is a valid and enforceable contract, and the Court reserves questions regarding arbitrability to the arbitrator pursuant to the parties’ express agreement.

A. Validity of Arbitration Clause

To form a contract under California law, there “must be actual or constructive notice of the agreement and the parties must manifest mutual assent.” . The “principle of knowing consent” required to establish contract formation “applies with particular force to provisions for arbitration,” , and with equal force to contracts formed online, .

In the online context, internet contracts are classified “by the way in which the user purportedly gives their assent to be bound by the associated terms” and generally fall on a spectrum ranging from “clickwrap” to “browsewrap.” (citing ); see also . “[C]lickwrap” agreements are agreements in which a website presents users with specified contractual terms on a pop-up screen and users must check a box explicitly stating “I agree” in order to proceed. . Browsewrap agreements, on the other end of the spectrum, are agreements in which a website offers terms that are disclosed only through a hyperlink and the user supposedly manifests assent to those terms simply by continuing to use the website. Id. In the middle of the spectrum are sign-in wrap agreements, also known as “modified clickwrap agreement[s],” whereby a user is “notified of the existence of the website‘s terms of use and advise[d] that by making some type of affirmative act, often by clicking a button, she is agreeing to the terms of service.” .

The Terms of Service here is a modified sign-in wrap agreement. See Mot. 7; Opp‘n 3. Under California law, a sign-in wrap agreement may be an enforceable contract based on inquiry notice if “(1) the website provides reasonably conspicuous notice of the terms to which the consumer will be bound; and (2) the consumer takes some action, such as clicking a button or checking a box, that unambiguously manifests his or her assent to those terms.” .

For the reasons explained below, the Court finds that Defendants met their burden to show that notice of the Terms of Service on the Balance App was reasonably conspicuous and that Plaintiff manifested his assent to be bound by these terms.

1. Reasonably Conspicuous Notice of the Terms

Reasonably conspicuous notice requires that notice is “displayed in a font size and format such that the court can fairly assume that a reasonably prudent Internet user would have seen it,” and if there is a hyperlink, the “the fact that a hyperlink is present must be readily apparent.” . Courts generally analyze two factors to determine whether notice of the terms was reasonable: (1) the context of the transaction, and (2) the visual placement of the notice. See .

a. Context of the Transaction

When evaluating sign-in wrap agreements, courts generally evaluate the full context of the transaction, including whether the transaction contemplated “a continuing, forward-looking relationship” governed by terms and conditions. ; (“The context of the transaction is a non-dispositive factor under California law, used to evaluate whether a website‘s notice is sufficiently conspicuous. Courts must still evaluate the visual aspects of the notice . . . . “).

The Court finds that, by creating an account and paying for a subscription membership, the context of the transaction was a continuing, forward-looking relationship likely governed by terms and conditions. See, e.g., . Plaintiff does not dispute this point.

Even in this context, however, Defendants still must prove that the visual placement provided Plaintiff the requisite notice. See .

b. Visual Placement of the Notice

“A web designer must do more than simply underscore the hyperlinked text in order to ensure that it is sufficiently ‘set apart’ from the surrounding text.” . “Customary design elements denoting the existence of a hyperlink include the use of a contrasting font color (typically blue) and the use of all capital letters, both of which can alert a user that the particular text differs from other plain text in that it provides a clickable pathway to another webpage.” . Because “online providers have complete control over the design of their websites,” , “the onus must be on website owners to put users on notice of the terms to which they wish to bind consumers,” . For example, in , the Ninth Circuit found that two lines of small gray font that stated, “I understand and agree to the Terms & Conditions which includes mandatory arbitration and Privacy Policy” failed to put the plaintiff on notice of the arbitration provision in part because the underlined terms “appeared in the same gray font as the rest of the sentence, rather than in blue, the color typically used to signify the presence of a hyperlink.” (emphasis in original). However, “when viewed in the context of the overall design and content” of a simpler webpage, courts have also found that underlined text is sufficient. E.g., (finding reasonably conspicuous notice on an underlined hyperlink where (1) the hyperlink appeared “directly below” the action button, (2) the hyperlink was set off by “ample white spacing” and “primarily surrounded by text no larger than the notice itself,” and (3) the “general design of the website,” was “relatively uncluttered and ha[d] a muted, and essentially uniform, color scheme“).

Here, the Court finds that the visual placement of the Terms & Conditions hyperlink provides sufficient notice. For illustrative purposes, Plaintiff cites to the following notices of terms and conditions which courts have found inconspicuous:

(top left); (top right); (bottom left); (bottom right).

The Sign Up Page here differs from those in and other similar cases for several reasons. Most notably, unlike the examples depicted above, the page here is free from clutter. Instead, there are four simple boxes where users can choose how to set up an account, separated by significant white space surrounding the Terms & Conditions notice. The hyperlinks are also not buried in text or otherwise placed in a confusing location—the sentence containing the Terms & Conditions notice is the only text in the white space of the Sign Up Page. Further, though the font is grey, it appears clearly against the white background.1 Finally, while the hyperlinks are not marked in blue or underlined, they are in bold with the first letters capitalized, making them stand apart from the other text in the sentence. In the context of the clean and simple format of the page, the Court finds that a reasonably prudent internet user would see the notice and understand that the phrase ”Terms & Conditions” was a hyperlink to the Terms of Service containing the Arbitration Clause. See (collecting cases).

2. Unambiguous Manifestation of Assent

The second part of the analysis is whether Plaintiff took some action that unambiguously manifested assent to the hyperlinked Terms of Service. . “A user‘s click of a button can be construed as an unambiguous manifestation of assent only if the user is explicitly advised that the act of clicking will constitute assent to the terms and conditions of an agreement.” . “[T]he notice must explicitly notify a user of the legal significance of the action she must take to enter into a contractual agreement.” .

Here, there is no dispute that Plaintiff manifested assent. The notice stated that “[b]y creating your account, you agree to Balance‘s Terms & Conditions and Privacy Policy,” and Plaintiff proceeded to create an account. Therefore, this second element is satisfied, and the Court finds Defendants have met their burden to show a valid agreement to arbitrate.

3. Enforcement by Defendant MindSnacks

Having found that the Arbitration Clause is a valid contract, the Court addresses whether Defendant MindSnacks, as a nonsignatory, may also enforce it.

The Ninth Circuit has “explained that ‘nonsignatories of arbitration agreements may be bound by the agreement under ordinary contract and agency principles.‘” (quoting ). “Agency principles have been held to permit nonsignatory corporations to compel arbitration under arbitration clauses signed by their corporate parents, subsidiaries, or affiliates, at least when the allegations against the nonsignatory corporation do not differ substantially from those against its signatory affiliate.” ; see also (“The common thread [in holding nonsignatories bound by arbitration contracts] is the existence of an agency or similar relationship between the nonsignatory and one of the parties to the arbitration agreement.“).

Here, Plaintiff alleges that Defendant Elevate Labs is an “affiliate” of Defendant MindSnacks, and that together, they “jointly operate, control, program, and run the Balance App.” Compl. ¶¶ 11-13. Plaintiff then goes on to refer to the two companies jointly as “Defendants” in the remainder of the Complaint. There are no individual allegations unique to either Defendant.

Accordingly, because Plaintiff brings identical claims arising from identical conduct, the Court finds that MindSnacks may enforce the arbitration agreement here as an affiliate of the signatory.2

B. Arbitrability

Finally, the parties dispute the arbitrability of Plaintiff‘s claims. However, because the Arbitration Clause explicitly delegates questions regarding arbitrability to an arbitrator, the Court

must defer to the arbitrator for resolution of this question. See Arbitration Clause (“The Arbitration Agreement also provides that any arbitration shall be ‘conducted in accordance with the rules and regulations promulgated by JAMS unless specifically modified in the Terms of Service.’ Under the JAMS rules for consumer arbitrations, the JAMS-appointed arbitrator must decide any disputes regarding the formation, existence, validity, interpretation, or scope of an arbitration agreement.“) (internal citations omitted); see also, e.g., (“Incorporation of the JAMS arbitration rules by reference constitutes clear and unmistakable evidence that the parties agree to arbitrate arbitrability.“); , motion to certify appeal denied sub nom. (“[B]ecause the deposit agreement contains a delegation clause, the Court must defer . . . questions of arbitrability to the arbitrator.“) (internal quotation marks omitted) (quoting and ). Therefore, the Court‘s inquiry ends here.

IV. CONCLUSION

Based on the foregoing, the Court GRANTS Defendants’ motion to compel arbitration. This case is STAYED pending arbitration. (“When a federal court finds that a dispute is subject to arbitration, and a party has requested a stay of the court proceeding pending arbitration, the court does not have discretion to dismiss the suit on the basis that all the claims are subject to arbitration.“). The parties shall notify the Court within 10 days of reaching a final resolution in the pending arbitration.

IT IS SO ORDERED.

Dated: May 27, 2025

EDWARD J. DAVILA

United States District Judge

Notes

1
Though Plaintiff contends the background is actually a light shade of grey, the Court still finds sufficient contrast with the background.
2
Plaintiff failed to address Defendants’ arguments on this point, instead responding only to Defendants’ equitable estoppel argument. Given the Court‘s finding that MindSnacks has standing to enforce the arbitration clause as an affiliate of Elevate Labs under the doctrines cited in this section, the Court need not address the remaining equitable estoppel arguments.
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