Case Information
IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA Mary Makuc, No. CV-24-00633-PHX-ROS
Plaintiff, ORDER
v.
Gabor Smatko, et al.,
Defendants.
Defendants filed a Motion a Compel Arbitration against Plaintiff. (Doc. 16, “Mot.”). The matter is fully briefed. (Docs. 16, 17, 18). For the reasons that follow, the Court will grant Defendants’ Motion.
I. Background
The Complaint alleges, on April 20, 2021, Plaintiff purchased an electric tricycle from www.mobility4less.com (the “Website”) [1] for $2,950.27 via electronic check deposited to a bank account registered to Mobilitytrend, LLC. (Doc. 1, “Compl.” at ¶¶ 32-33, 36). The tricycle was delivered to Plaintiff on July 7, 2021. ( Id. at ¶ 39). Plaintiff alleges the tricycle “did not operate as advertised” and “was unstable and dangerous” “due to defects.” ( Id. at ¶¶ 40-41). Further, Plaintiff contends “the electronic monitor on the tricycle showed error symbols,” “there was no manual to explain what the errors were and/or how to fix them,” and “the tricycle did not come with a Certificate of Quality as promised by Mobilityless, LLC.” ( Id. at ¶¶ 42-44). When Plaintiff contacted Defendant Mobilityless, LLC for assistance, it directed her to purchase a manual for the tricycle from Epizontech, LLC. ( Id. at ¶ 45). She “paid $16.00 to Epizontech for a manual which she never received.” ( Id. ). Plaintiff alleges Defendant Mobilityless, LLC “refused to exchange the tricycle, permit a return of the tricycle, or otherwise refund [Plaintiff’s] payment for the tricycle,” and subsequently made no contacts with Plaintiff. ( Id. at ¶¶ 46-47).
Over two months later, on September 19, 2021, Defendant Mobilityless, LLC drew an unauthorized check from her bank account in the amount of $125.00 and deposited it into a Mobilityless, LLC bank account. ( Id. at ¶¶ 48-49). The memo line of the check stated “Liftgate Fee.” ( Id. at ¶ 49). Plaintiff contends she “was not notified of the transaction before it was completed and did not consent to the transaction.” ( at ¶ 50). Plaintiff then alleges, the following day, Defendants Mobilityless, LLC and Gabor Smatko received a demand letter sent on behalf of Plaintiff pursuant to the Massachusetts Consumer Protection Act, to which Defendants did not respond. ( at ¶¶ 51-52). Consequently, Plaintiff, individually and on behalf of a consumer class, [2] brought claims for violation of (1) the Massachusetts Consumer Protection Act, (2) the Racketeer Influenced and Corrupt Organizations Act, (3) conspiracy, and (4) the Uniform Fraudulent Transfer Act.
After these claims were brought against Defendants, Defendants filed their Motion to Compel Arbitration. (Doc. 16, “Mot.”). The Motion is supported by the Declaration of Defendant Gabor Smatko. (Doc. 16-1). In his Declaration, Defendant Smatko states that in 2018, he was involved in, and has personal knowledge about, the Website’s creation. ( Id. at ¶ 3). He contends since its launch in 2018, the Website has posted each of the following policies and agreements: (1) “Our Policy”; (2) Shipping Delivery Policy; and (3) a “Privacy Policy.” ( Id. at ¶ 6). Defendant Smatko further states that in June 2020, he added to the Website a “Waiver” policy, specifically entitled “Dispute Resolution Agreement & Class Action Waiver” (the “Arbitration Agreement”), which has never changed since it was added to the Website in June 2020. ( Id. at ¶¶ 10, 12).
In relevant part, the Arbitration Agreement provides that it “is governed by the Federal Arbitration Act, 9 U.S.C. § 1 et seq.,” “evidences a transaction involving commerce,” and “applies to any legal dispute, past, present, or future arising out of or related to Customer . . . purchasing any of our products from us (‘Company’) or relationship with any of its agents, employees, affiliates, successors, assigns, subsidiaries or parent companies (each of which are third party beneficiaries of this Agreement).” ( Id. at ¶ 13).
Moreover, the Arbitration Agreement states it “is intended to apply to the resolution of disputes that otherwise would be resolved in a court of law, and therefore this Agreement requires that all such disputes to be resolved only by an arbitrator through final and binding arbitration and not by way of court or jury trial.” ( Id. at ¶ 14). Such disputes expressly include, but are not limited to, “disputes arising out of or relating to interpretation or application of this Agreement, including the scope, formation, enforceability, revocability or validity or the Agreement or any portion of the Agreement.” ( Id. at ¶ 15). The Arbitration Agreement also informs each customer that “with your purchase, you automatically and expressly waive any right you may have to arbitrate a class action and automatically agree to these terms.” ( Id. at ¶ 17).
Defendant Smatko explains in his Declaration that each customer who places an order for a product through the Website must enter their name, address, and other information. ( at ¶ 18). Before being able to place the order, the customer must click a box confirming “I have read and agree to the website terms and conditions* ) (bold emphasis in original). ( at ¶ 19). Defendant Smatko further states the box is not automatically checked, and each customer must affirmatively click it to place an order through the Website. ( Id. at ¶ 21). The phrase “terms and conditions” is bolded and hyperlinks to the Website’s various policies. ( Id. at ¶ 22). When a customer clicks on the hyperlink, all the Website’s terms and conditions—including the Arbitration Agreement— appear, allowing the customer to scroll through and read each policy. ( Id. at ¶ 23).
In response to the Motion, Plaintiff submitted her Declaration stating, “I did not check a box agreeing to arbitration and did not review an arbitration clause at the time I purchased goods from the website.” (Doc. 17-1 at ¶ 20). Nor did she claim to have clicked on any links titled “Policy” or “Waiver.” ( Id. at ¶ 19). Plaintiff states she would have remembered if there had been (1) “a requirement for me to click a box agreeing to website policies” and (2) “an arbitration waiver on the website.” ( Id. at ¶¶ 17-18).
Included in Plaintiff’s Response was the Declaration of her attorney, Adam Deutsch. (Doc. 17-2). Mr. Deutsch states that in 2019, he represented two individuals in a lawsuit against Defendants, and during that litigation “there was no mention of arbitration” by Defendants. ( at ¶¶ 3-4). [3] Additionally, Mr. Deutsch references an attachment (Exhibit C) depicting the webpage www.mobility4less.com/policy “as it is maintained by [an internet archive website, www.web.archive.org] as of June 24, 2021, after Ms. Makuc ordered her electric tricycle,” and states “there was no reference to arbitration or waiver of class claims on the policy page” as of that date. ( at ¶¶ 13, 17). [4]
II. Legal Standard
Under the Federal Arbitration Act (“FAA”), “[a] party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration may petition any United States District Court ... for an order directing that ... arbitration proceed in the manner provided for in [the arbitration] agreement.” 9 U.S.C. § 4. The district court must compel arbitration if a party has failed to comply with a valid arbitration agreement. Id. The district court must also stay the proceedings pending resolution of the arbitration at the request of one of the parties bound to arbitrate. at § 3; see also Smith v. Spizzirri , 601 U.S. 472, 478 (2024) (holding that “[w]hen a district court finds that a lawsuit involves an arbitrable dispute, and a party requests a stay pending arbitration, § 3 of the FAA compels the court to stay the proceeding” rather than dismissing the suit) (emphasis added).
In determining whether to compel arbitration, the court must limit its review to (1)
whether a valid agreement to arbitrate exists and, if so, (2) whether the agreement
encompasses the dispute at issue.
Chiron Corp. v. Ortho Diagnostic Sys., Inc.
, 207 F.3d
1126, 1130 (9th Cir. 2000). If the answer is affirmative on both queries, then the court
must enforce the arbitration agreement in accordance with its terms. As a general
matter, “any doubts concerning the scope of arbitrable issues should be resolved in favor
of arbitration.”
Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp.
,
Arbitration agreements governed by the FAA are presumed to be valid and
enforceable.
See Shearson/Am. Exp., Inc. v. McMahon
, 482 U.S. 220, 226-27 (1987).
However, the FAA’s saving clause “permits agreements to arbitrate to be invalidated by
generally applicable contract defenses, such as fraud, duress, or unconscionability.”
AT&T
Mobility LLC v. Concepcion
, 563 U.S. 333, 339 (2011) (internal quotation marks and
citation omitted). Thus, “[i]n determining the validity of an agreement to arbitrate, federal
courts ‘should apply ordinary state-law principles that govern the formation of contracts.’”
Cir. City Stores, Inc. v. Adams
,
III. Discussion
Plaintiff argues (1) a valid Arbitration Agreement was not formed because the terms were not reasonably communicated to Plaintiff, Plaintiff did not accept the terms of the Agreement, and consideration was not received by Defendant Mobilityless, LLC; and (2) as a dissolved LLC, Mobilityless, LLC cannot compel arbitration. The Court will address the arguments in turn.
A. Enforceability of the Arbitration Agreement
Online agreements typically fall in one of three categories: (1) clickwrap
agreements, “where website users are required to click on an ‘I agree’ box after being
presented with the website’s terms and conditions,”
Nguyen v. Barnes & Noble Inc.
, 763
F.3d 1171, 1175-76 (9th Cir. 2014); (2) browsewrap agreements, “where a website’s terms
and conditions are generally posted via hyperlink at the bottom of the website screen,”
id.
;
and (3) hybridwrap agreements, “a hybrid variation where a hyperlink of the terms and
conditions are placed near a box that a consumer must click to continue.”
Scribner v. Trans
Union LLC
, No. 2:23-CV-02722-JAM-CKD,
Although these characterizations are non-dispositive of whether an agreement is
enforceable, they are helpful guideposts in framing the analysis.
See Gaker v. Citizens
Disability, LLC
,
clickwrap agreement. Hybridwrap is the most accurate characterization of the Arbitration Agreement. See Myers v. Experian Info. Sols. Inc. , No. CV-23-01901-PHX-DJH, 2024 WL 2278398, at *4 n.2 (D. Ariz. May 20, 2024) (characterizing a similar agreement as a hybrid); see also Williams v. Experian Info. Sols. Inc. , No. CV-23-01076-PHX-DWL, 2024 WL 3876171, at *12 (D. Ariz. Aug. 20, 2024) (same).
As a general matter, “[f]or an enforceable contract to exist, there must be ‘an offer,
acceptance, consideration, a sufficiently specific statement of the parties’ obligations, and
mutual assent.’”
Buckholtz v. Buckholtz
, 435 P.3d 1032, 1035 (Ariz. Ct. App. 2019);
JPMorgan Chase & Co. v. Casarano
,
1. Reasonably Communicated Terms
First, to establish that Plaintiff had constructive or inquiry notice of the terms and
conditions containing the Arbitration Agreement, Defendants must show the terms were
“displayed in a font size and format such that the court can fairly assume that a reasonably
prudent Internet user would have seen it.”
Berman
,
The Court finds that a reasonable Internet user in Plaintiff’s position would have seen the terms and conditions and would have been able to locate the Arbitration Agreement via the hyperlink because (1) Plaintiff (and every customer who purchases a product through the Website) was required to affirmatively click the box confirming “I have read an agree to the website terms and conditions* ,” (2) the box is not automatically checked, (3) the phrase “terms and conditions” is bolded and hyperlinks to the Website’s policies, including the Arbitration Agreement, (4) when the hyperlink is clicked on, each of the Website’s policies appears in a window directly above, and (5) both the check box and the bolded phrase “terms and conditions” are located directly above the “Place Order” button to complete the customer’s purchase. Based on these features, the Court finds the website design provides constructive notice of the terms and conditions containing the Arbitration Agreement.
2. Manifestation of Assent Second, Defendant must show Plaintiff unambiguously manifested her assent to be bound by the Agreement. See Berman , 30 F.4th at 857. For Internet agreements, a consumer’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.” (internal citation omitted).
Plaintiff argues she did not take action manifesting assent to be bound by the Agreement because she declares under oath that she did not click a box agreeing to the Website’s Terms and Conditions. Plaintiff further contends “Defendants have not provided the Court with computer records establishing that [Plaintiff] has actual knowledge of the arbitration policy” (Doc. 17 at 7), and Defendants “ha[ve] no contemporaneous records establishing that [Plaintiff] viewed and/or accepted the alleged terms of service” of the Website. ( at 10).
Plaintiff cites to
Roberts v. Obelisk, Inc.
, No. 18CV2898-LAB (BGS), 2019 WL
1902605 (S.D. Cal. Apr. 29, 2019) in her Response. ( ). However, this case refutes
Plaintiff’s argument that Defendants failed to meet their burden because they did not
produce “contemporaneous records” that Plaintiff actually viewed and assented to the
Website’s terms and conditions. The
Roberts
court stated, “Plaintiff’s second primary
argument is that Obelisk has not provided an ‘executed’ version of the Terms and therefore
cannot demonstrate that Plaintiffs assented to the agreement. Were the Court to accept this
argument, it would unravel nearly every clickwrap agreement on the Internet.”
Roberts
,
Here, like in Roberts , Defendants have submitted evidence—“a declaration by its [principal Gabor Smatko]—showing that Plaintiff[] … was required to accept the [terms and conditions] prior to completing the transaction” as well as a copy of the Arbitration Agreement in effect on the date Plaintiff made her purchase. See id. Accordingly, that “Plaintiffs ‘do not recall’ agreeing to the terms is immaterial.” See id. What is dispositive here is that all customers purchasing products through the Website, including Plaintiff, had to affirmatively click the box confirming that “I have read and agree to the website terms and conditions* ” before completing the transaction. See Kauders , 486 Mass. at 575 (holding an agreement unenforceable where user needed not affirmatively check an “I agree” box and stating “[r]equiring an expressly affirmative act, therefore, such as clicking a button that states ‘I Agree,’ can help alert users to the significance of their actions. Where they so act, they have reasonably manifested their assent.”). Plaintiff may deny checking the “I agree” box, but she does not provide admissible evidence showing she purchased the tricycle from a website that does not require customers to do as much before making a purchase.
Additionally, “[f]ederal courts likewise have recognized the general enforceability
of similar online agreements that require affirmative user assent.”
See, e.g., In re Holl
, 925
F.3d 1076, 1084-85 (9th Cir. 2019) (“Here, there is no question Holl affirmatively assented
to the UPS My Choice Service Terms. He checked a box acknowledging as much.”);
Houtchens v. Google LLC
,
3. Adequate Consideration
Mutual promises to arbitrate serve as adequate consideration for agreements to
arbitrate.
Cir. City Stores, Inc. v. Najd
, 294 F.3d 1104, 1108 (9th Cir. 2002) (“Circuit
City’s promise to be bound by the arbitration process itself serves as adequate
consideration.”) (internal citations omitted);
Perez-Tejada v. Mattress Firm, Inc.
, No. CV
17-12448-DJC,
Plaintiff argues no agreement to arbitrate was formed because no consideration was exchanged between Plaintiff and Mobilityless, LLC at the time of purchase; instead, her initial payment was received by Mobilitytrend, LLC. This argument fails, because whether there was sufficient consideration to form an arbitration agreement is wholly separate from the issue of consideration as to the contract for the sale of goods. It is immaterial that Plaintiff received initial payment from Mobilitytrend, LLC rather than Mobilityless, LLC—by clicking the box and placing her order, Plaintiff and Defendants (including Mobilitytrend, LLC as a third-party beneficiary) made mutual promises to arbitrate their disputes and forgo the judicial forum. Thus, the Court finds adequate consideration existed to support the Arbitration Agreement.
B. A Dissolved LLC Can Compel Arbitration
Notwithstanding the Arbitration Agreement’s enforceability, Plaintiff argues that Mobilityless, LLC, as a dissolved LLC, cannot compel arbitration. (Doc. 17 at 14). Plaintiff argues a dissolved company may “prosecut[e] and defend[] suits,” M.G.L. ch. 156C, § 45, in relation to “business [] necessary to wind up and liquidate its affairs,” M.G.L. ch. 156C, § 70, but compelling arbitration is not within the scope of these powers. ( at 15). This argument fails.
Courts have upheld a dissolved company’s right to compel arbitration pursuant to
contract on the theory that the dissolved company continues to exist for a certain time for
the purpose of winding up its affairs. W. J. Dunn, Annotation,
Dissolved Corporation’s
Power to Participate in Arbitration Proceedings
,
IV. Conclusion
The Court finds the Website’s checkout page provided Plaintiff with sufficient notice of the terms and conditions containing the Arbitration Agreement. By purchasing the tricycle, she necessarily checked a box next to the words “I have read and agree to the website terms and conditions* , manifesting her assent to the hyperlinked terms, including that “all disputes [] be resolved only through an arbitrator.” Thus, a binding arbitration agreement governing this dispute exists between Plaintiff and Defendants. Accordingly,
IT IS ORDERED that Defendants’ Motion to Compel Arbitration (Doc. 16) is GRANTED .
…
…
…
…
…
… IT IS FURTHER ORDERED this action is stayed pending the completion of arbitration between Plaintiff and Defendants. The parties shall file joint status reports with the Court every ninety (90) days and a status report within five (5) days of the final arbitration order.
Dated this 17th day of September, 2024.
Honorable Roslyn O. Silver Senior United States District Judge
Notes
[1] The Website serves as the store for Defendant Mobilityless, LLC, a dissolved 24 Massachusetts corporation. (Compl. at ¶¶ 6, 29). “Through the Website, Mobilityless, LLC sold a variety of products, including [] affordable electric vehicles, such as electric bicycles, tricycles, and wheelchairs.” (Doc. 16-1 at ¶ 4). Defendant Gabor Smatko is the owner and sole member of Mobilityless, LLC, as well as the operator of the Website. ( at ¶¶ 4, 29). The Complaint also makes allegations against Defendant Monica 25 26 Smatko—Mr. Smatko’s wife—and their five LLCs: Fountainmoons, LLC (an Arizona 27 corporation owned by Mrs. Smatko), Mobilitytrend, LLC (an Arizona corporation owned by Mr. Smatko), Epizontech, LLC (a Massachusetts corporation owned by Mr. Smatko), Mogavike2020, LLC (an Arizona corporation owned by Mrs. Smatko), and Hillsunion, 28 LLC (an Arizona corporation owned by Mrs. Smatko). ( at ¶¶ 5-11).
[2] Plaintiff seeks certification of a single class as follows: “All persons within the United States, other than any of Plaintiff’s counsel, who (1) purchased merchandise from Mobilityless, LLC through its website www.mobilityless.com [sic]; (2) during the time period from September 2018 to December 31, 2021; (3) who were charged a lift gate fee deposited to the Mobilityless, LLC bank account at TD Bank ending in 7648.” (Compl. at ¶ 55).
[3] The issue of mandatory arbitration would not have arisen in 2019 if the Arbitration Agreement was added to the Website in June 2020. Plaintiff provides no evidence to refute Defendants’ assertion that the Agreement was only in place as of June 2020.
[4] Defendants have not claimed the Arbitration Agreement is located in the “Policy” section. 27 The Arbitration Agreement is found in the Website’s “Waiver” section, ( See Doc. 16-1 at ¶¶ 10, 12), which is visible in Exhibit C. The Court’s research of the webpage www.mobility4less.com/waiver via internet archive, as of April 15, 2021—days before 28 Plaintiff purchased the tricycle—reveals the Arbitration Agreement is clearly posted.
[5] Plaintiff contends Massachusetts law applies, and Defendants contend Arizona law
applies. “Before a choice of law question arises, there must first be a true conflict between
the potentially applicable bodies of law.”
Starr Indem. & Liab. Co. v. Rolls-Royce Corp.
,
No. CV-14-02594-TUC-RM,
[6]
See Williams v. Experian Info. Sols. Inc.
, No. CV-23-01076-PHX-DWL, 2024 WL
3876171, at *12 n.9 (D. Ariz. Aug. 20, 2024) (“Although
Berman
addressed the
requirements for proving assent under California and New York law, its analysis is equally
instructive here because those states, like Arizona [and Massachusetts], apply the rule that
‘[p]arties traditionally manifest assent by written or spoken word, but they can also do so
through conduct.’”) (quoting
Berman
,