Can someone be required to arbitrate—and waive any right to proceed as a class action in arbitration—by receiving a written agreement containing such provisionsafter the fact of a consumer transaction?   No, according to the Ninth Circuit inKnutson v. Sirius XM Radio Inc., 771 F.3d 559 (9th Cir. 2014).

We previously wrote on one aspect of this issue – internet sales that includes terms and conditions purporting to waive the right to proceed as a class action. See  In Nguyen v. Barnes & Noble Inc., 763 F.3d 1171 (Aug. 18, 2014), the Ninth Circuit distinguished “browsewrap” agreements, which purport to bind a web site user to terms and condition merely through use of the site, and “clickwrap” agreements, which require the user to check an “I agree” box or otherwise make some sort of affirmative indication of assent to the terms.  InNyugen, the court of appeals held the particular browsewrap agreement at issue unenforceable and allowed the putative class action to proceed in the district court.

Not long after Nyugen, the Ninth Circuit faced a similar issue in a different context.  In Knutson, the plaintiff purchased a new truck that included a three-month trial subscription to Sirius XM satellite radio.  The plaintiff did not receive any materials from Sirius XM at the time of the truck purchase.  About a month later, however, the plaintiff received from Sirius XM a “Welcome Kit” that included, among other items, a customer agreement that included an arbitration provision and a class action waiver.  The customer agreement stated that failure to cancel the subscription within three days of activation would bind the user to the agreement.  By the time the plaintiff received these documents, however, the trial subscription had been activated for nearly a month already.  The agreement also provided that the subscription could be canceled at any time.

After receiving several calls from Sirius XM representatives that he claimed to be “unauthorized,” the plaintiff brought suit on behalf of himself and a putative class, alleging violations of the Telephone Consumer Protection Act.  The district court granted Sirius XM’s motion to compel arbitration and dismissed the case.  The Ninth Circuit reversed.

The Ninth Circuit first found that the plaintiff had no notice that he was entering, or would be entering, any agreement with Sirius XM when the plaintiff purchased the truck – after all, the plaintiff received nothing from Sirius XM until about a month after the vehicle purchase.  Sirius XM argued that the plaintiff had the opportunity to review the agreement after he received it, and that the continued use of the service manifested his assent.  The Ninth Circuit disagreed, holding that it was not clear to a reasonable person that he was entering an agreement with Sirius XM.  The court of appeals noted that general rule that acceptance of an offer cannot be inferred from inaction, and the exception that it may be so inferred in the face of a duty to act.  But here there was insufficient notice of any duty to act.  The customer agreement was but one document in the “Welcome Kit” that the plaintiff received, and nothing about the “Welcome Kit” mailing itself gave clear indication that a binding agreement was contemplated.

Some district court cases in the Ninth Circuit had previously enforced written agreements that arrived after the initial consumer transaction was completed.  The Ninth Circuit questioned whether these cases accurately reflected the law of the circuit, but then distinguished them on the ground that in the earlier cases the consumer elected to receive the service directly from service provider.  In Knutson, in contrast, the plaintiff did not request satellite radio service from Sirius XM – that service was included with a new vehicle purchase.  This strikes us as a distinction without much of a difference.  

One of the important lessons from Knutson is similar to the point we made in our blog post on Nyugen.  While the companies in these particular cases failed in their efforts to obtain class action waivers from consumers of their products and services, these opinions suggest how such efforts might be successful.  Regardless of the medium – whether by internet or traditional paper documentation – these cases indicate that agreements may be enforceable, and class action waivers valid, so long as the consumer is on reasonable notice that she is assenting to the terms of a contract. Even continued use of a service or product may be sufficient to manifest that assent if notice is such that a reasonable person would so understand.