Products Liability Law Daily Amazon cannot force arbitration of CPSA claims by online purchaser of diet product
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Friday, August 26, 2016

Amazon cannot force arbitration of CPSA claims by online purchaser of diet product

By Tony Foley, J.D.

An online shopper who purchased a diet product containing a banned controlled substance from Amazon.com stated a plausible claim that he was not bound by a mandatory arbitration clause in Amazon’s conditions of use, the U.S. Court of Appeals for the Second Circuit ruled. Thus, the court vacated the lower court’s dismissal of the purchaser’s Consumer Product Safety Act claim and other state law claims (Nicosia v. Amazon.com, August 25, 2016, Chin, D.).

The purchaser bought a weight loss product known as the 1 Day Diet on two separate occasions in 2013. Amazon sold the product despite the fact that, in 2010, the Food and Drug Administration withdrew a controlled substance contained in the product (sibutramine) from the market and advised physicians to stop prescribing it. The FDA revealed in 2013 that the product bought by the purchaser contained sibutramine. Amazon discontinued sales of the product subsequent to this notice, but never informed the purchaser that the product contained sibutramine, or offered a refund for his purchases. The purchaser filed the instant action in 2014, asserting claims under the Consumer Product Safety Act as well as state law claims.

Documents purported to show notice. Pursuant to its motion to dismiss the purchaser’s action, Amazon presented a variety of documents that it claimed showed that the purchaser had constructive notice of a provision in Amazon’s conditions of use that required all disputes to be settled by arbitration. Among these documents were Amazon’s account registration page from 2008 ("Registration Page"), which Amazon contended the purchaser used to establish his account, as well as the version of the order page on which the purchaser would presumably have used to complete his 2013 purchases ("Order Page"). Each of these documents contained a link to Amazon’s conditions of use, which, as of 2012, provided for mandatory arbitration ("2012 Conditions of Use"). For his part, the purchaser disputed Amazon’s assertion that he had registered for an account, and added that the conditions of use in effect in 2008 ("2008 Conditions of Use") did not provide for mandatory arbitration, but rather included forum choices restricted to the state of Washington.

After a series of procedural rulings, the district court agreed with Amazon that the purchaser’s complaint should be dismissed "in favor of individual arbitration" for failure to state a claim because the purchaser had agreed to arbitration.

Documents integral to complaint. The appellate court agreed with the district court’s determination that Amazon’s motion should be treated as a motion to dismiss, rather than a motion to compel arbitration, and then analyzed Washington law to determine whether the parties were contractually bound to arbitration. In conducting this analysis, the court discussed the concept of assent to online contracts, in particular pursuant to "clickwrap" agreements (which typically require a user to click on an "I agree" button after being presented with terms of use) and "browsewrap" agreements (which include terms of use being hyperlinked on the page without asking for a manifestation of assent).

The court found that the Order Page and the 2012 Conditions of Use were, as the district court held, integral to the complaint, but also concluded that the district court erred in considering the Registration Page to be integral to the complaint. The purchaser did not admit to or allege that he created an account in 2008. Additionally, because the purchaser disputed the accuracy and authenticity of the 2008 registration, the page should not have been considered in a motion to dismiss. The purchaser could have used a shared account to make his purchase, and even if he did see the Registration Page, nothing in the record suggested that the page had not changed in the intervening six years. Finally, the court said, the relevance of the Registration Page was in dispute with respect to how it affected the contractual relationship of the parties. Even if notice of that page could have bound the purchaser to the 2008 Conditions of Use (which provided for a Washington forum rather than arbitration), the purchaser was not necessarily bound to these terms without notice and assent. Accordingly, the court said, the district court should not have considered the Registration Page or the 2008 Conditions of Use on a motion to dismiss.

Plausible allegation of lack of notice. Considering the purchaser’s allegations, the Order Page and the 2012 Conditions of Use, the appellate court concluded that the purchaser had stated a plausible claim for relief. Specifically, the court was unconvinced that notice of the mandatory arbitration provision was sufficient under Washington law. The court treated Amazon’s presentation of the 2012 Conditions of Use as a hybrid agreement lying somewhere between a clickwrap agreement and a browsewrap agreement. The Order Page contained myriad links in addition to links to the 2012 Conditions of Use, and there was nothing about the "Place your order" button on the page that suggested that additional terms applied. Instead, there was a separate message near the top of the page stating that "[b]y placing your order, you agree" to the 2012 Conditions of Use, with a link to those provisions. The court noted, however, that the message was not bold, capitalized or conspicuous. Accordingly, while the court did not hold that there was no manifestation of mutual assent, it found that reasonable minds could differ as to whether Amazon provided the requisite conspicuous notice. Thus, the court concluded, the district court erred in granting Amazon’s motion to dismiss.

The case is No. 15-423-cv.

Attorneys: Joseph Seth Tusa (Tusa PC) for Dean Nicosia. Ezra Dodd Church (Morgan, Lewis & Bockius LLP) for Amazon.com, Inc.

Companies: Amazon.com, Inc.

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