Berman v. Freedom Financial Network, LLC

Background

Defendants Fluent, Inc., Freedom Debt Relief, LLC, Freedom Financial Network, LLC, and Lead Science, LLC sought permission to file a motion asking the court to reconsider its September 1, 2020 order. That earlier order denied defendants’ motion to compel arbitration of the claims brought by plaintiffs Stephanie Hernandez and Erica Russell.

The case concerns defendants’ texting campaigns and whether people contacted through those campaigns consented to receive the texts by agreeing to terms on defendants’ websites. Defendants argued that the same websites and click-through agreements also created binding arbitration agreements for the claims of putative class members.

Before the motion at issue, defendants had unsuccessfully sought to compel plaintiff Daniel Berman to arbitrate. After Hernandez and Russell were added as plaintiffs, defendants moved to compel them to arbitrate. The parties conducted limited discovery related to that motion. Hernandez and Russell submitted declarations stating that they did not remember seeing an arbitration agreement and that the webpages defendants presented did not look like the websites they had visited. Defendants later deposed both plaintiffs, but did not ask the court to supplement the record with those depositions before the court ruled against them on arbitration.

Motion for Reconsideration

Under Federal Rule of Civil Procedure 54(b), a court may revise an interlocutory order, meaning an order that does not finally resolve all issues in the case. The court explained that reconsideration is an extraordinary remedy generally limited to newly discovered evidence, clear error or manifest injustice, or an intervening change in controlling law. Local Rule 7-9 also required defendants to show reasonable diligence and one of several specified grounds for reconsideration. A party may not use reconsideration to repeat earlier arguments or present evidence that reasonably could have been presented before the original ruling.

Defendants argued that Hernandez’s and Russell’s deposition testimony showed they had actual notice of the arbitration provision and understood they were entering binding agreements. The court rejected that argument for two independent reasons.

First, the court found that defendants could have obtained the deposition testimony with reasonable diligence. Defendants had notice for months that Hernandez and Russell would be added as plaintiffs and knew who they were before filing the motion to compel arbitration. Defendants also received the plaintiffs’ declarations several weeks before the reply deadline and had obtained extensions of the briefing and discovery schedules. The court found that defendants had ample time to take the depositions before the motion was decided. After taking the depositions in June 2020, defendants still did not seek permission to add the testimony to the arbitration-motion record. They offered it only after the court denied the motion to compel arbitration.

Second, the court found that the new evidence would not be material to its earlier decision. The earlier order had found an evidentiary dispute about whether the plaintiffs had seen the website pages defendants relied on. It had also concluded that, even if those webpages had caused the plaintiffs’ phone numbers to be recorded as leads, the pages did not clearly tell users that they were agreeing to terms and conditions containing a mandatory arbitration provision. The court explained that defendants were trying to use reconsideration to advance a different theory—actual notice—after failing to prevail on their earlier theory concerning whether a reasonably careful website user would have been alerted to the terms.

The court further stated that the deposition testimony did not contradict the plaintiffs’ declarations. According to the court, the testimony indicated that the pages defendants showed during the depositions looked different from the websites the plaintiffs had visited, that the plaintiffs did not recall seeing an arbitration provision or specific terms and conditions, and that they would have read terms and conditions if they had seen a link to them.

Ruling

The court DENIED the motion for leave and the motion for reconsideration. It stated that defendants’ lack of diligence and attempt to present a different theory did not justify giving them another opportunity to support arbitration. The order terminated Docket No. 268.

In a reply, defendants also argued for the first time that the court should consider the late deposition evidence because denying arbitration would require an evidentiary hearing about whether an arbitration agreement was formed. The court said it was not clear that the hearing provision applied where the court had found that the purported agreement did not put a reasonably careful user on notice of its terms. The court also stated that the prior order was on appeal in the Ninth Circuit and that the appeal had been stayed while the court considered reconsideration. Given that posture, Judge Yvonne-Gonzalez Rogers believed the court would lack jurisdiction to conduct such a hearing at that time.