A California federal court judge has ruled in a breach of contract suit that Safeway is liable to customers who paid more for items online than in the store.
The dispute arose in the context of Safeway’s grocery delivery service. On behalf of a putative class, Michael Rodman alleged that the defendant marked up online items about 10 percent, despite advertising that the cost was the same as what the company was charging in-store that day.
In its motion for summary judgment, Safeway relied upon the following clause in its Terms and Agreements – a phrase that customers were required to accept as part of the registration process: “The prices quoted on our web site at the time of your order are estimated prices only. You will be charged the prices quoted for Products you have selected for purchase at the time your order is processed at checkout. The actual order value cannot be determined until the day of delivery because the prices quoted on the web site are likely to vary either above or below the prices in the store on the date your order is filled and delivered.”
Safeway told the court that the phrase “the prices in the store” meant the prices in the online store. The plaintiff, however, argued the section meant that the customer would be charged for the prices in the physical store where the groceries are selected on the date of purchase.
Although U.S. District Court Judge Jon S. Tigar said the contract language was “reasonably susceptible” to both parties’ interpretations, he found Rodman’s reading more likely. The terms of the delivery registration agreement repeatedly referenced a physical Safeway store, the court said, and nowhere is the word “store” used to mean “online store.”
“The main problem with Safeway’s interpretation is that it argues that very different words in the same sentence mean the same thing,” the court wrote. “Safeway argues that ‘on the web site’ means ‘on the web site’ and that ‘in the store’ also means ‘on the web site.’ This is not a very compelling explanation of the objective meaning of these words.”
Finding the plaintiff’s reading “the more faithful interpretation of what a reasonable contracting party would have understood the terms to promise,” Judge Tigar granted Rodman and the class summary judgment.
The court also held that the class was entitled to recovery, even after Safeway instituted a new pricing model. Although the defendant claimed to have updated its terms to specifically provide that the Web site was not offering the same prices offered in the physical stores, the judge said class members were not provided with conspicuous notice of the change.
“Therefore, those changes represent an offer to which the class members never expressed assent, and class members were therefore not bound by those changes,” the court wrote, even with their continued use of the service.
To read the order in Rodman v. Safeway, Inc., click here.
Why it matters: In addition to highlighting the importance of issues arising from the online and retail store pricing differences, the court made a strong statement about the power of companies to modify online contracts. Judge Tigar emphasized that courts are reluctant to apply browsewrap agreements against consumers who were not provided with sufficient notice that their use of the Web site would be construed as their consent to the agreement’s terms. When Safeway attempted to update its pricing policy, customers were never presented with a subsequent agreement asking them to consent, the court said, nor were they notified by e-mail to ensure they were aware of the changes. The bad news for Safeway: the court extended the recovery period for the class an additional three years.