Stanfield v. Tawkify, Inc.

Background

Jeremy Stanfield paid Tawkify, Inc. $3,700 to arrange six dates. Two dates occurred, but Stanfield was dissatisfied. He sought to cancel the contract and receive a full refund. Tawkify initially provided only a partial refund, and Stanfield filed a putative class action based on California’s Dating Services Contract Act. Tawkify later gave Stanfield a full refund.

When Stanfield signed up for Tawkify’s dating service, he clicked a box stating that he had read Tawkify’s terms of use. Those terms were ten pages long, with substantive provisions covering nine pages. On the last page, under a section titled “Governing Law,” the terms stated that each user agreed that any disputes or causes of action arising out of or connected with Tawkify would be resolved through arbitration in San Francisco, California. The agreement did not identify an arbitrator, specify arbitration rules, or explain who would pay arbitration costs.

The parties’ positions

Tawkify moved to compel arbitration, meaning it asked the court to require Stanfield to pursue the dispute in arbitration instead of court. Tawkify argued that the motion was controlled by the Court of Appeals’ decision in the 23andMe case. Stanfield argued that the arbitration provision was unconscionable, meaning unfairly imposed or unfair in its terms, and therefore should not be enforced.

Court’s analysis

The court found both procedural and substantive unconscionability. Procedural unconscionability concerns the way an agreement was presented and whether the weaker party had a meaningful choice. The court found that Tawkify’s arbitration provision was presented on a take-it-or-leave-it basis, without an opportunity to negotiate or opt out. The provision was hidden on the last page of the terms under “Governing Law,” rather than in a section identified as arbitration. The word “arbitration” appeared only twice in the ten-page document and was not highlighted. The court also noted that Tawkify separately sent users a “Client Agreement” that discussed information and rules for using the service but did not mention arbitration or the separate terms of use.

Substantive unconscionability concerns whether the agreement’s actual terms are excessively unfair. The court found that the arbitration provision did not identify an arbitrator or the rules that would govern the proceeding. In the court’s view, this left users to guess about how the arbitrator would be selected, what discovery would be available, and who would pay the arbitrator. Resolving those basic questions could require additional litigation and expense before arbitration even began.

The court also found a lack of mutuality. The provision said that “each user agrees” to resolve disputes through arbitration, but Tawkify made no corresponding promise to arbitrate its own disputes. The court pointed to other terms showing that Tawkify knew how to make promises when it chose to do so, including a privacy provision and provisions allowing Tawkify to change the terms or take legal action. The court therefore concluded that users were required to arbitrate their claims while Tawkify could go to court.

The court distinguished the 23andMe agreement because that agreement specified arbitration under American Arbitration Association rules, created a mutual arbitration obligation for disputes other than intellectual-property disputes, clearly identified the exclusion, and was supported by stated business reasons for that exclusion. Tawkify’s agreement did not establish comparable limits or mutuality, and Tawkify presented no legitimate business need for its one-sided provision.

Disposition

For these reasons, the court held that Tawkify’s arbitration requirement was procedurally and substantively unconscionable. Judge William Alsup denied Tawkify’s motion to compel arbitration.