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Williams v. Eaze Solutions, Inc.

United States District Court, N.D. California

October 21, 2019




         In this putative class action, plaintiff Farrah Williams alleges that defendant Eaze Solutions violated the Telephone Consumer Protection Act (“TCPA”), 47 U.S.C. § 227, by sending her unsolicited, autodialed text messages. Eaze seeks to compel arbitration of her claims pursuant to its terms of service. Dkt. No. 17. While the case raises interesting issues about “ganjapreneurship” and the budding legal marijuana industry, the questions presently before the Court are limited to whether there was an agreement to arbitrate and, if so, whether the Court or an arbitrator decides the arbitrability of plaintiff's claims.

         After an initial set of briefing on the motion to compel and oral argument, the Court called for supplemental submissions from the parties on the application of Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006). Dkt. No. 35. In light of the Court's request for supplemental briefing, Williams's motion for leave to file a sur-reply on similar topics, Dkt. No. 25, is denied. Eaze's motion to compel arbitration is granted.


         The parties do not dispute the salient facts. Eaze operates a marijuana mobile application (“app”) and online marketplace. Dkt. No. 1 (“Compl.”) ¶¶ 13-15. The app facilitates the delivery of cannabis products from dispensaries to consumers. Williams signed up for Eaze's service in September 2017. Dkt. No. 17-1, Declaration of Daniel Erickson ("Erickson Decl.") ¶ 17; see also Dkt. No. 21 at 2. Before creating her Eaze account, Williams checked a box consenting to Eaze's terms of service. Erickson Decl. ¶ 17. The sign-up screen looked like this:

         (Image Omitted)

         Dkt. No. 17-1, Ex. A.

         Eaze's terms of service, which were hyperlinked in the sign-up box, contained a clause providing for arbitration of disputes with a class-action waiver. Id., Ex. E at ECF pp. 28-30. Specifically, the terms of service state that the customer and Eaze "agree that any dispute, claim or controversy arising out of or relating to this Agreement or the breach, termination, enforcement, interpretation or validity thereof or the use of the Service or Application (collectively, "Disputes") will be settled by binding arbitration." Id. at ECF p. 28. Williams does not deny that she clicked the box stating she consented to the terms of service, or that such a "clickwrap" agreement is enforceable. See In re Facebook Biometric Info. Privacy Litig., 185 F.Supp.3d 1155, 1165-66 (N.D. Cal. 2016).

         Even so, Williams contends that no contract was ever formed between her and Eaze. She argues that, because the contract's purpose was to facilitate the selling and distribution of marijuana, which is illegal under federal law, the contract lacked a “lawful object, ” as required by California law, and so no contract or enforceable arbitration clause was ever formed. Cal. Civ. Code § 1550.



         The parties disagree about the governing legal standards. Eaze says that the Federal Arbitration Act (“FAA”) applies for two reasons: (1) the terms of service state that the “Federal Arbitration Act will govern the interpretation and enforcement” of its dispute resolution provisions, Dkt. No. 17-1, Ex. E at ECF p. 29; and (2) the contract involves interstate commerce as contemplated by the FAA. See 9 U.S.C. § 2. Williams contends that California law controls because: (1) the terms of service state the parties' agreement will be “governed by the laws of the State of California, ” Dkt. No. 17-1, Ex. E at ECF p. 30; and (2) the contract does not involve interstate commerce.

         The FAA governs the arbitration issues in this case. It applies to contracts “evidencing a transaction involving commerce.” 9 U.S.C. § 2. The Supreme Court has interpreted “involving commerce” “as the functional equivalent of the more familiar term ‘affecting commerce' -- words of art that ordinarily signal the broadest permissible exercise of Congress' Commerce Clause power.” Citizens Bank v. Alafabco, Inc., 539 U.S. 52, 56 (2003) (per curiam).

         The activity covered by Eaze's terms of service are within Congress's commerce power, and so the FAA applies here. In Gonzales v. Raich, 545 U.S. 1, 17 (2005), the Supreme Court determined that even purely intrastate marijuana possession and distribution in compliance with California's Compassionate Use Act had a “substantial effect on interstate commerce, ” and that regulation of that activity was within Congress's commerce power. By similar reasoning, Williams's own formation argument assumes the presence of interstate commerce. Since Eaze's business is legal under California state law, ...

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