Schlueter-Beckner v. SimpliSafe, Inc.

Background

Travis Schlueter-Beckner and Zach Babka purchased security-system hardware from SimpliSafe online and later enrolled in free trials of SimpliSafe’s alarm-monitoring service. They alleged false advertising and unfair business practices concerning the hardware sales. Schlueter-Beckner also alleged a violation of California’s Automatic Renewal Law.

SimpliSafe moved to compel arbitration and stay the case. It argued that the plaintiffs agreed to arbitration through SimpliSafe’s Terms of Sale when they bought the hardware and through its Terms of Service when they enrolled in monitoring. Those agreements required arbitration before the American Arbitration Association under its Consumer Arbitration Rules.

Contract Formation at the Hardware Sale

The court applied California contract law, under which an online user must take an action that clearly shows agreement to the disclosed terms. At the final step of the hardware purchase, SimpliSafe displayed a small, gray disclosure with hyperlinks to the Terms of Sale and Terms of Service. The disclosure was positioned to the side of the “Place Order” button, and the links were distinguished from surrounding text mainly by underlining.

The court held that this disclosure was not reasonably noticeable. It was in relatively small text, was not directly above or below the order button, and appeared in the context of a one-time hardware sale rather than an ongoing relationship. The court therefore concluded that neither plaintiff agreed to a contract at the time of sale.

Contract Formation During Monitoring-Service Enrollment

Both plaintiffs saw a notice above a “Next” button stating that, by submitting contact information, they agreed to “SimpliSafe Terms and Consent to Communicate, for Notifications and Alerts.” Although the notice was visibly placed, the court found that its wording suggested consent only to communication-related terms, not to the entire Terms of Service. Neither plaintiff therefore agreed to the Terms of Service through that screen. Because Babka did not encounter another terms-acceptance screen, he was not bound by SimpliSafe’s contractual terms.

Schlueter-Beckner later encountered a separate screen instructing him to read the Terms of Service and enter his name if he accepted them. The court found that this screen clearly referred to the entire Terms of Service, even though it also highlighted provisions concerning liability limits, warranties, and indemnity. The court held that Schlueter-Beckner accepted the Terms of Service through this screen. The Terms of Sale did not apply because none of the monitoring-service disclosures referred to them.

Enforceability of the Arbitration Agreement

Schlueter-Beckner argued that the arbitration provision was unconscionable, meaning unfairly one-sided or formed through an unfair process. The court found that the arbitration provision itself was enforceable because the Terms of Service gave him 60 days to opt out by email. The court did not decide his challenges to the forum-selection clause, jury waiver, or other contract provisions at this stage, and it did not reach substantive unconscionability because those issues were for the arbitrator or a later proceeding.

Who Decides Arbitrability

The Terms of Service incorporated the American Arbitration Association’s Consumer Arbitration Rules, which state that the arbitrator may decide questions about the arbitration agreement’s scope and validity. The court held that this incorporation did not clearly and unmistakably show that an unsophisticated party such as Schlueter-Beckner agreed to delegate those questions to the arbitrator. The court therefore decided for itself which claims were covered by the arbitration agreement.

Claims Covered by Arbitration

The Terms of Service required arbitration of disputes arising from or relating to that agreement, including auto-renewal, billing, and service disputes. The court held that Schlueter-Beckner’s Automatic Renewal Law claim was covered by this language and had to be sent to arbitration.

The court held that Schlueter-Beckner’s remaining claims were not covered. Those claims concerned advertising and the earlier sale of hardware, not the separate monitoring service. Because Babka was not bound by the Terms of Service, none of his claims was subject to arbitration.

Ruling

The court granted in part SimpliSafe’s motion to compel arbitration as to Schlueter-Beckner’s Automatic Renewal Law claim. It denied the motion as to Schlueter-Beckner’s other claims and all of Babka’s claims. The court stated that the case would proceed on all counts except Schlueter-Beckner’s Automatic Renewal Law claim.