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Moule v. United Parcel Service Co.

United States District Court, E.D. California

July 7, 2016




         United Parcel Service Company seeks to compel arbitration and stay this action initiated by Plaintiff Wayne Moule, doing business as Northwest Metrology. (Doc. 16) For the following reasons, Defendant's motion to compel arbitration is GRANTED.

         I. Background

         Plaintiff's business, Northwest Metrology, provides "calibration services for specific types of equipment such as electronic aviation equipment, oilfield equipment, and hospital equipment." (Doc. 1 at 1, ¶ 3) Plaintiff asserts that in January 2015, he prepared a piece of equipment called the Synthesized Generator Model #HP8673D ("SG") to be shipped to Hawaii, via UPS. (Id. at 2, ¶ 7)

         According to Plaintiff, he "packaged the box with several rounds of bubble wrap and it was taped security [sic]." (Doc. 1 at 2, ¶ 7) He alleges warning stickers were placed on the box, including stickers that indicated "Fragile-Handle With Care" and "High Claim Item." (Id., ¶ 9) In addition, the box had a "75G Shock Watch" sticker, which "contains a device attached to it [and] lights red when rough handling of the box occurs." (Id.) Plaintiff reports that "[t]he 75G Shock Watch sticker contained the following words: "HANDLE WITH CARE; RED INDICATES ROUGH HANDLING. IF RED, NOTE ON THE BILL OF LADING AND INSPECT PRODUCT." (Id.) Plaintiff asserts he "noted on paper with UPS the SG had a value of $27, 000 and paid $528 for the item to be shipped." (Id., ¶ 10)

         Plaintiff alleges that when the box arrived in Hawaii, "the 75 G Shock Watch sticker was red showing that it had been extremely mishandled and the box was crushed and had been taped together." (Doc. 1 at 2, ¶ 11) He asserts the SG "was a total loss." (Id.)

         Plaintiff asserts UPS was notified of the damage and sent an inspector, who "claimed that the equipment was packaged improperly in a ‘used' single walled box." (Doc. 1 at 3, ¶12) Plaintiff contends this was untrue, and "the box appeared used because it had been mishandled badly." (Id.) In addition, Plaintiff reports that when a UPS driver picked up the box, "he indicated it was packaged adequately and that all high value items were inspected at the facility before being shipped." (Id., ¶ 13) Plaintiff contends he "assumed by said representation that had the SG been packaged inappropriately, UPS would have informed Plaintiff of this after it was inspected." (Id.)

         Plaintiff made a claim to UPS, "and a claims representative from Crawford and Company was assigned." (Doc. 1 at 3, ¶ 14) He reports that the representative "informed Plaintiff he would hear from an agent of UPS, " but "Plaintiff never heard from an agent of UPS accepting or denying the claim." (Id.) Plaintiff contends that he hired counsel, who mailed a letter to the claims representative. (Id., ¶ 15) On June 26, 2015, UPS sent a letter "finally denying the claim." (Id.)

         Plaintiff contends that UPS "is liable for the value of the SG, or $27, 000 pursuant to the terms of the Carmack Amendment, 49 U.S.C. 14706." (Doc. 1 at 4, ¶ 20) Defendant filed its answer on March 18, 2016, asserting the "claim is subject to a mandatory arbitration provision contained in the UPS Tariff/Terms and Conditions of Service." (Doc. 6 at 2) Accordingly, Defendant seeks to compel arbitration pursuant to the terms of the arbitration agreement. (Doc. 16)

         II. The UPS Terms

         The "UPS Tariff/Terms and Conditions of Service" ("UPS Terms") are applicable to UPS "shipments within and originating in the United States." (Doc. 18 at 2, Liberatore Decl. ¶ 1) The UPS Terms "contains the general terms conditions of contract under which … [UPS] is engaged in the transportation of Package shipments itself and jointly through interchange with its affiliates." (Doc. 18-1 at 5) The UPS Terms include a section entitled "Claims and Legal Actions: Individual Binding Arbitration of Claims, " which provides:

Claimant and UPS agree that, except for disputes that qualify for state courts of limited jurisdiction (such as small claims, justice of the peace, magistrate court, and similar courts with monetary limits on their jurisdictions over civil disputes), any controversy or claim, whether at law or equity, arising out of or related to the provision of services by UPS, regardless of the date of accrual of such dispute, shall be resolved in its entirety by individual (not class-wide nor collective) binding arbitration.

(Doc. 18-1 at 27, emphasis omitted) Shippers are informed that both parties "are waiving the right to trial by jury, " and "giving up the ability to participate in a class, mass, consolidated or combined action or arbitration." (Id., emphasis omitted) The UPS Terms-including the arbitration provision-is intended to apply to all shipments, whether processed through the UPS WorldShip program or the company's website. (Id. at 5; see also Doc. 18-2 at 5-6, Libertore Decl. ¶¶ 8-9)

         Pursuant to the UPS Terms, "[a]ll issues are for the arbitrator to decide, " though issues related "to the scope, application, and enforceability of the arbitration provision" are reserved for the court. (Doc. 18-1 at 28) Further, the UPS Terms indicate "[t]he Federal Arbitration Act governs the interpretation and enforcement of [the] provision." (Id.)

         III. Legal Standard

         The Federal Arbitration Act ("FAA") applies to arbitration agreements in any contract affecting interstate commerce. See Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 119 (2001); 9 U.S.C. § 2. Here, it is undisputed that Defendant's operate nationwide and its shipping business affects interstate commerce. Thus the FAA governs the arbitration policy.

         Under the FAA, written arbitration agreements "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. A party seeking to enforce arbitration agreement may petition the Court for "an order directing the parties to proceed to arbitration in accordance with the terms of the agreement." 9 U.S.C. § 4.

         The court's role in applying the FAA is "limited to determining (1) whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement encompasses the dispute at issue." Chiron Corp. v. Ortho Diagnostic Systems, 207 F.3d 1126, 1130 (9th Cir. 2000), citing 9. U.S.C. § 4. "If the response is affirmative on both counts, then the [FAA] requires the court to enforce the arbitration agreement in accordance with its terms." Id.; see also 9 U.S.C. § 4 ("The court shall hear the parties, and upon being satisfied that the making of the agreement for arbitration or the failure to comply therewith is not in issue, the court shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement" (emphasis added)). Importantly, because the FAA "is phrased in mandatory terms, " "the standard for demonstrating arbitrability is not a high one [and] a district court has little discretion to deny an arbitration motion." Republic of Nicaragua v. Standard Fruit Co., 937 F.2d 469, 475 (9th Cir. 1991).

         A party opposing arbitration has the burden to demonstrate the claims at issue should not be sent to arbitration. Green Tree Fin. Corp.- Alabama v. Randolph, 531 U.S. 79, 81 (2000); see also Mortensen v. Bresnan Communications, LLC, 722 F.3d 1151, 1157 (9th Cir. 2013) ("the parties challenging the enforceability of an arbitration agreement bear the burden of proving that the provision is unenforceable"). "[A]ny doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration." Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983).

         IV. Discussion and Analysis

         A. Validity of the arbitration agreement

         When determining whether a valid and enforceable agreement to arbitrate has been established for the purposes of the FAA, the Court should apply "ordinary state-law principles that govern the formation of contracts to decide whether the parties agreed to arbitrate a certain matter." First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995); Circuit City Stores v. Adams, 279 F.3d 889, 892 (2002). Because Plaintiff is a resident of California and Defendant seeks to compel arbitration in Kern County, California, the Court looks to the state's law to determine whether there is a valid arbitration agreement between the parties.

         Pursuant to California contract law, the elements for a viable contract are "(1) parties capable of contracting; (2) their consent; (3) a lawful object; and (4) sufficient cause or consideration." United States ex rel. Oliver v. Parsons Co., 195 F.3d 457, 462 (9th Cir. 1999) (citing Cal. Civ. Code § 1550; Marshall & Co. v. Weisel, 242 Cal.App. 2d 191, 196 (1966)). An arbitration agreement may be "invalidated by generally applicable contract defenses, such as fraud, duress, or unconscionability, but not by defenses that apply only to arbitration or that derive their meaning from the fact that an agreement to arbitrate is at issue." AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 333 (2011); see also Cal. Code Civ. Proc. § 1281 (explaining an arbitration agreement may only be invalidated upon the same "grounds as exist for the revocation of any contract").

         Plaintiff contends there is not a binding contract because "there [was] no affirmative action required to demonstrate assent to the terms and conditions."[1] (Doc. 20 at 3) In addition, Plaintiff contends the terms of the arbitration provision are unconscionable and should not be enforced by the Court. (Id. at 5-10)

         1. Consent to arbitrate

         Generally "a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit." AT&T Techs., Inc. v. Communications Workers of America, 475 U.S. 643, 648 (1986). "‘While new commerce on the Internet has exposed courts to many new situations, it has not fundamentally changed the principles of contract.'" Nguyen v. Barnes & Noble Inc., 763 F.3d 1171, 1175 (9th Cir. 2014), quoting, Inc. v. Verio, Inc., 356 F.3d 393, 403 (2d Cir. 2004). One principle that remains unchanged is that "[m]utual manifestation of assent, whether by written or spoken word or by conduct, is the touchstone of contract." Id., quoting Specht v. Netscape Comm. Corp., 306 F.3d 17, 29 (2d Cir. 2002).

         Contracting parties manifest mutual assent when a "specific offer is communicated to the offeree, and an acceptance is subsequently communicated to the offeror." Netbula, LLC v. BindView Dev. Corp., 516 F.Supp.2d 1137, 1155 (N.D. Cal. 2007), citing Russell v. Union Oil Co., 7 Cal.App.3d 110, 114 (Ct. Cal.App. 1970). With the Internet and digital software, the Court must examine how the terms of an agreement were presented to a user, and how a user indicated his or her consent to the terms. Nguyen, 763 F.3d at 1176-77. The Ninth Circuit explained:

Contracts formed on the Internet come primarily in two flavors: "clickwrap" (or "click-through") agreements, in which website users are required to click on an "I agree" box after being presented with a list of terms and conditions of use; and "browsewrap" agreements, where a website's terms and conditions of use are generally posted on the website via a hyperlink at the bottom of the screen.

Id., 763 F.3d at 1175-76. Defendant appears to assert it used a "clickwrap" agreement (see Doc. 21 at 6), while Plaintiff argues UPS uses a "browsewrap" agreement that should not be enforced by the Court (Doc. 20 at 1-3).

         A "clickwrap" agreement requires an affirmative action to indicate consent to terms. Nguyen, 763 F.3d at 1176; see also Fteja v. Facebook, Inc., 841 F.Supp.2d 829, 837-38 (S.D.N.Y. 2012) (describing "pure-form clickwrap agreement" as one in which the website "forces the user to actually examine the terms before assenting");, Inc., 356 F.3d at 429 ("under a clickwrap arrangement, potential licensees are presented with the proposed license terms and forced to expressly and unambiguously manifest either assent or rejection prior to being given access to the product"). Given the indication of assent, courts have "routinely upheld" clickwrap agreements. United States v. Drew, 259 F.R.D. 449, 462 n.22 (C.D. Cal. 2009).

         In contrast, with a "browsewrap" agreement, the user "gives his assent simply by using the website." Nguyen, 763 F.3d at 1176 (quotation omitted). Generally, "the website will contain a notice that - by merely using the services of, obtaining information from, or initiating applications within the website - the user is agreeing to and is bound by the site's terms of service." Drew, 259 F.R.D. at 462 n.22; Fteja, 841 F.Supp.2d at 837 (same). When there is no evidence users "had actual knowledge" of an agreement, the Court must consider the "design and content of the website and the agreement's webpage." Nguyen, 763 F.3d at 1177. "[T]he validity of the browsewrap agreement turns on whether the website puts a reasonably prudent user on inquiry notice of the terms of the contract." Id. Thus, the Court must consider the "design and content of the website and the agreement's webpage." Id.

         Kenneth Liberatore, Functional User Manager at UPS, reports that when using the UPS WorldShip program, "[b]efore a shipper can transmit information (e.g., package size, weight, and destination to UPS…, the shipper must confirm its acceptance of the UPS Terms." (Doc. 18 at 5, Liberatore Decl. ¶ 8) A window on the screen asks, "Are you ready to close today's shipping and send the information to UPS?" (Id.) The shipper is informed: "By clicking the Yes button, you agree to the UPS Tariff/Terms and Conditions, " and provides a link to the UPS Terms. (Id.) If a shipper selects the "No" button, the shipping information is not transmitted to UPS and no transaction occurs. (Id.)

         Similarly, the UPS website requires consent to the UPS Terms. (Doc. 18 at 6, Liberatore ¶ 9) The first time a user processes a package for shipment through the website, and anytime thereafter if the UPS Terms have been amended, the user "is automatically directed" to a screen entitled "Service Terms and Conditions Update." ...

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