Allen v. Shutterfly, Inc.

Background

Shawna Allen brought a putative consumer-fraud class action against Shutterfly, Inc., Lifetouch, Inc., and Lifetouch National School Studios, Inc. She alleged that the defendants sent unordered school portraits and other products and requested payment, violating California law. Her claims included alleged violations of California Civil Code sections 1716 and 1584.5, the California Consumers Legal Remedies Act, the California Unfair Competition Law, and unjust enrichment.

Shutterfly moved to compel individual arbitration under an arbitration agreement and class-action waiver in Lifetouch’s 2018 Terms of Service. Shutterfly also filed a motion to dismiss under Rule 12(b)(6), which addresses whether a complaint adequately states a legal claim. The opinion states that Lifetouch’s 2018 terms became effective in July 2018 and included an arbitration provision covering disputes related to Lifetouch’s services, terms, and arbitration agreement. The provision also stated that all issues concerning the agreement’s scope, interpretation, and enforceability would be decided by the arbitrator.

Court’s Analysis

The court held that the parties clearly and unmistakably delegated questions about the arbitration agreement’s scope, interpretation, and enforceability to the arbitrator. The agreement incorporated the American Arbitration Association’s rules, which the court said was clear evidence of that delegation under Ninth Circuit authority. Allen did not oppose delegation and stated that she understood that certain arguments could be made to the arbitrator.

The court rejected Allen’s argument that Shutterfly had conceded that the 2018 Terms of Service did not apply. The court concluded that Shutterfly’s dismissal briefing challenged the application of the terms’ choice-of-law provision to Allen’s substantive claims, not the application of the entire Terms of Service to her purchases.

The court also found that Allen assented to the 2018 Terms of Service when she made online purchases. The Lifetouch website displayed a statement above the “Submit Payment” button saying that clicking the button meant agreeing to the privacy statement and terms of service, with a hyperlink to those terms. The court found this notice sufficient and concluded that Allen validly assented each time she clicked “Submit Payment.” Because Allen had constructive notice through her online purchases, the court did not need to decide whether the paper Family Approval order forms provided adequate notice. The court also denied the need for discovery about how many users clicked the terms link.

The court rejected Allen’s argument that Shutterfly and the restructured Lifetouch entities could not enforce the arbitration agreement. It found that the agreement’s language covered disputes arising from Lifetouch services and was not limited to the original signatories. The court also applied equitable estoppel, a doctrine that can prevent a party from accepting benefits under a contract while avoiding its burdens. The court noted that Allen treated the 2018 Terms of Service as binding on all defendants for purposes of the choice-of-law provision while arguing that Shutterfly could not enforce the arbitration provision.

The court further held that Allen’s purchases were not excluded by the Terms of Service’s school-account exception. That exception applied to services designed for schools’ administrative and educational purposes and used by or at the direction of school employees. The court concluded that portraits purchased by parents or guardians did not fall within that exception.

Finally, Allen argued that purchases made before July 2018 were not subject to arbitration because the 2015 Terms of Service did not contain an arbitration clause. The court treated the dispute over whether the 2018 arbitration agreement applied retroactively as a question about the agreement’s scope. It therefore held that the arbitrator, rather than the court, should decide that issue.

Disposition

Judge Beth Labson Freeman granted Shutterfly’s motion to compel arbitration at ECF 23. The court terminated Shutterfly’s Rule 12(b)(6) motion to dismiss without prejudice because the motion was moot. The opinion does not state that the court decided the merits of Allen’s consumer-fraud claims.