Belyea v. GreenSky, Inc.

Background

Elizabeth Belyea, Heidi Barnes, Hazel Lodge, and David Ferguson brought a proposed class action against GreenSky of Georgia, LLC and GreenSky, LLC. They alleged violations of California consumer-protection, lending, and credit-services laws related to home-repair loans that were serviced by GreenSky. GreenSky moved to compel arbitration of Belyea’s, Lodge’s, and Ferguson’s claims and separately moved to dismiss Barnes’s claims. This order addressed the motions to compel arbitration.

The loan agreements offered by GreenSky contained an arbitration provision. The provision stated that claims would be resolved through binding arbitration unless the borrower opted out within 45 days. It also waived class arbitration. The agreements defined “you” and “us” to include certain affiliates and third parties providing products or services connected with the loan.

Legal standard

The Federal Arbitration Act generally requires courts to enforce valid arbitration agreements according to their terms. Before compelling arbitration, however, the court must determine that a valid agreement to arbitrate exists and that it covers the dispute. State contract law governs whether the parties formed an agreement. Under California law, contract formation requires mutual assent, meaning that the parties’ conduct must show an intent to be bound. GreenSky, as the party seeking arbitration, had to prove agreement by a preponderance of the evidence.

GreenSky’s ability to enforce the provision

The court first rejected the plaintiffs’ argument that GreenSky could not enforce the arbitration provision because it did not sign the loan agreements. The provision’s definition of “us” included a third party providing a product, service, or benefit connected with the agreement. Because GreenSky serviced the loans from the beginning, the court held that GreenSky fell within that definition and could seek arbitration.

Assent through the loan application

GreenSky argued that the plaintiffs agreed to the arbitration provision through the GreenSky application. It relied on internal transaction logs and declarations stating that the application showed each plaintiff a loan summary and that each plaintiff certified receiving a copy of the loan agreement.

The court found this evidence insufficient to establish undisputed assent. GreenSky did not provide the actual application screens or evidence showing that each plaintiff, rather than a merchant, clicked the relevant acknowledgment. The logs did not identify who clicked the box, and the declaration relied on by GreenSky was not based on personal knowledge of the plaintiffs’ transactions. The court therefore concluded that GreenSky had not shown that the plaintiffs received notice of, or consented to, the arbitration provision during the application process.

Assent through email

GreenSky also argued that emails sent to the plaintiffs provided notice of the arbitration provision. The sample email supplied by GreenSky invited recipients to activate an account and stated that they could view their loan documents. The court held that the email did not give reasonable notice of the loan terms or state that receiving or using the account would constitute acceptance. It also did not require an affirmative action demonstrating assent. Belyea’s later creation of an account and addition of a payment method did not change the result because GreenSky had not shown that she was required to agree to the loan terms when doing so.

Assent through mailed agreements and failure to opt out

GreenSky invoked the mailbox rule, which creates a presumption that a properly mailed document was received. The court applied that presumption to Belyea’s loan agreement, Ferguson’s 2018 loan agreement, and Lodge’s June 2018 loan agreement. It did not apply it to Lodge’s September 2018 loan agreement because the evidence indicated that the agreement was mailed before she applied for that loan. The court also found that GreenSky’s declaration provided an adequate basis for applying the presumption.

Receipt alone, however, did not establish agreement to arbitrate. The plaintiffs stated that the transactions were completed when they applied for the loans and that they did not authorize or recall authorizing the merchants to use the associated Shopping Pass. The court held that receiving the loan agreements after the transactions had occurred could not establish assent. Under California law, silence or inaction generally does not constitute acceptance, and the plaintiffs’ failure to use the 45-day opt-out procedure was not enough to show agreement.

The court also rejected GreenSky’s argument that the plaintiffs accepted the arbitration provision by retaining the benefits of the loan or making payments. The plaintiffs were entitled to the loan benefits whether or not they opted out, so failing to opt out did not provide an additional benefit or otherwise demonstrate assent. The court further rejected GreenSky’s argument that Lodge’s prior dealings bound her to the arbitration provision in her separate second loan, finding no evidence that she knew about that provision before taking out the second loan.

Disposition

The court denied GreenSky’s motions to compel arbitration. The order did not decide GreenSky’s separate motion to dismiss Barnes’s claims. GreenSky was directed to respond to the amended complaint within 21 days, and the court scheduled a further case-management conference. The order disposed of Docket Nos. 55, 56, and 58.