Pilon v. Discovery Communications, LLC

Background

Brian Pilon and Russell Stephen asserted claims against Discovery Communications, LLC concerning alleged violations of federal and California privacy laws. The parties agreed that the disputes belonged in arbitration but disagreed over the arbitration provider.

Earlier versions of Discovery+’s Visitor Agreement and Privacy Notice selected Judicial Arbitration and Mediation Services (JAMS). Those agreements also said Discovery could modify the terms with notice and included a provision delegating disputes about the agreement’s validity, interpretation, enforceability, or formation to an arbitrator.

Discovery later issued a Second Visitor Agreement selecting National Arbitration and Mediation (NAM). The new agreement included procedures for mass arbitration, including staged processing of claims, mediation after stages, tolling of limitations periods, and an option to opt out of arbitration after the staged process. It also stated that its arbitration provisions applied to claims that arose before the new agreement.

Pilon created his account in 2021 and continued paying for and using Discovery+. After Discovery notified users of the updated agreement, Pilon clicked through notices and continued using the service. Stephen created his account in 2021, but his subscription expired in April 2022. He later logged into his account, but Discovery did not have records showing what he did afterward and did not state that he continued subscribing after receiving notice of the Second Visitor Agreement.

Pilon and Stephen filed individual arbitration demands with JAMS. Discovery objected and argued that the disputes had to proceed before NAM under the Second Visitor Agreement. Pilon and Stephen then petitioned the court to compel JAMS arbitration. Discovery filed a cross-motion seeking to compel NAM arbitration and requested limited discovery about whether Stephen had accepted the Second Visitor Agreement.

Court’s analysis

The court applied the Federal Arbitration Act, which permits courts to enforce written arbitration agreements. It treated the motions under a standard similar to the standard used for summary judgment, considering the evidence submitted by the parties.

Stephen

The court concluded that Stephen did not assent to the Second Visitor Agreement. His subscription had ended before that agreement was issued, and Discovery showed only that he logged into his account later. The notices identified continuing to subscribe as the action that would show acceptance. Possible use of Discovery+ through another person’s account, without continued subscription, was at most ambiguous and did not establish unambiguous consent under California law.

Because Stephen did not accept the Second Visitor Agreement, he was not bound by its NAM provision. The First Visitor Agreement therefore governed his arbitration, and Discovery did not make a legal objection to that agreement other than its argument that the Second Visitor Agreement had replaced it. The court granted the petition to compel Stephen’s arbitration before JAMS and denied Discovery’s cross-motion as to Stephen. The court also denied Discovery’s request for further discovery about Stephen’s assent because Discovery’s own position made that discovery futile.

Pilon

The court concluded that Pilon accepted the Second Visitor Agreement through a sign-in-wrap contract. Pilon received reasonably conspicuous notice of the updated terms, clicked through the notices, and continued subscribing to and using Discovery+. Those actions unambiguously showed assent under California law.

The court addressed a conflict between the First Visitor Agreement’s delegation clause and the Second Visitor Agreement’s provision directing arbitrability and enforcement issues to a New York court. Because Pilon accepted the Second Visitor Agreement, that agreement superseded his earlier right to have arbitrability issues decided by an arbitrator.

For contract formation, the court applied California law. For enforceability challenges, including the challenge based on unfairness, it applied New York law because both agreements selected New York law. The court held that the Second Visitor Agreement validly modified the First Visitor Agreement. It rejected the argument that the modification violated the implied duty of good faith and fair dealing because the parties could mutually modify their agreement, including with respect to previously accrued claims.

The court also rejected Pilon’s unconscionability challenge. Although Pilon had no opportunity to negotiate the updated terms, the court found that this created only a limited degree of procedural unfairness. The court found no sufficient substantive unfairness in the retroactive arbitration provisions, notice and affidavit requirements, staged claim process, or opt-out procedure. It therefore held that the NAM procedures were enforceable as to Pilon.

Ruling

Judge James Oetken granted the petition to compel arbitration before JAMS as to Russell Stephen and denied it as to Brian Pilon. He denied Discovery’s cross-motion to compel NAM arbitration as to Stephen and granted it as to Pilon. He denied Discovery’s motion for discovery concerning Stephen’s assent to the Second Visitor Agreement.

The court stayed the action until the arbitrations required by the parties’ agreements were completed and directed the Clerk of Court to mark the case as stayed.