Williams v. Eaze Solutions, Inc.

Background

Farrah Williams alleged that Eaze Solutions, Inc. violated the Telephone Consumer Protection Act by sending her unsolicited, automatically generated text messages. She brought the case as a proposed class action. Eaze operates a marijuana mobile application and online marketplace.

Before creating her Eaze account, Williams checked a box consenting to Eaze’s hyperlinked terms of service. The terms included an arbitration clause and a class-action waiver. Williams did not dispute that she clicked the consent box or that this type of online agreement was enforceable.

Williams nevertheless argued that no contract had been formed because the agreement’s purpose was to facilitate the sale and distribution of marijuana, which she said was illegal under federal law. Eaze moved to compel arbitration. After requesting additional briefing, the court denied Williams’s motion for permission to file a sur-reply.

Court’s analysis

The court held that the Federal Arbitration Act governed the arbitration issues. The terms of service specifically stated that the Federal Arbitration Act would govern the interpretation and enforcement of the dispute-resolution provisions. The court also concluded that the activity covered by the terms affected interstate commerce.

The court explained that, under California law, an unlawful contract object generally makes a contract void and unenforceable rather than proving that no contract was formed. Relying on the United States Supreme Court’s decision in Buckeye Check Cashing, Inc. v. Cardegna, the court concluded that an arbitration provision can be treated separately from the rest of a contract challenged as illegal. The court said the arbitration agreement could therefore be enforced even if Williams’s underlying contract with Eaze had an unlawful object.

The court then addressed delegation. A delegation provision is a contract term assigning questions about whether a dispute must be arbitrated to the arbitrator rather than the court. Eaze’s terms required arbitration under the American Arbitration Association’s rules. The court held that incorporating those rules was clear and unmistakable evidence that the parties agreed to delegate arbitrability questions to the arbitrator.

Williams did not specifically challenge the delegation provision itself. Her objections concerned the overall arbitration agreement, including the allegedly broken links to the American Arbitration Association rules and other arbitration-related issues. The court held that the broken links did not defeat delegation because the terms did not require the rules to be attached and provided a toll-free number for obtaining them. Because Williams did not specifically challenge the delegation provision, the court declined to decide whether the arbitration clause itself was unconscionable.

Disposition

The court granted Eaze’s motion to compel arbitration of Williams’s claims, denied Williams’s motion for permission to file a sur-reply, and dismissed the case. The opinion does not specify whether the dismissal was with or without prejudice.