Burzdak v. Universal Screen Arts, Inc.

Background

Karen Burzdak filed a proposed class action against Universal Screen Arts, Inc. (“USA”), alleging that USA deceptively enrolled consumers in a paid, automatically renewing VIP Insider membership program. The complaint asserted violations of California Business and Professions Code §§ 17600 and 17200.

According to the complaint, after a consumer completed an order on one of USA’s websites, a pop-up offered free shipping. Burzdak alleged that selecting the free-shipping option automatically enrolled consumers in a seven-day free trial that renewed monthly for $14.95. She alleged that the enrollment and renewal information was not clear and conspicuous and that canceling the membership was difficult.

Burzdak alleged that she bought an item through USA’s Bas Bleu website in October 2020, responded to the pop-up, and was enrolled in the VIP Insider program without intending to enroll or realizing that enrollment was part of the purchase process. USA charged her debit card $14.95 for three months. She sought to represent a class of California residents charged for a VIP Insider membership.

Motion to Compel Arbitration

USA moved to compel arbitration under the Federal Arbitration Act. USA relied on Terms of Use containing an arbitration clause requiring disputes relating to visits to the VIP Insider website or purchases through it to be submitted to confidential arbitration in Ohio. The clause also stated that arbitration could not be joined with an arbitration involving another party, including through class arbitration.

Burzdak challenged whether the parties had formed an agreement to arbitrate. The court explained that contract formation is governed by state law and is an issue for the court, not the arbitrator, to decide. The court focused on California law because USA indicated that California and Ohio law did not materially differ on contract formation.

The court treated the website arrangement as similar to a browsewrap agreement, in which a user is directed to terms through a hyperlink rather than required to click an “I agree” box. Such terms may be enforced when the user had actual knowledge or when the website gave a reasonably prudent user notice that the terms applied. USA did not argue that Burzdak had actual knowledge, so the question was whether the website provided adequate notice.

Court’s Analysis

The court compared USA’s enrollment screen with websites in prior cases where terms were found sufficiently conspicuous. In those cases, the terms were visually highlighted, clearly linked, and accompanied by explicit statements that clicking a button showed agreement to the terms.

The court found important differences here. The “Terms of Use” text was underlined but not shown in a different color, so it did not have the same visual prominence as a clear hyperlink. Other text, including the free-shipping promotion, was emphasized through bolding, color, or capitalization and diverted attention from the Terms of Use. The screen also used the free-shipping offer and the command “HURRY!” as prominent promotional elements. Although the Terms of Use appeared near the “Submit” button, the court found that the promotional content reduced the significance of that proximity.

The court held that USA’s pop-up screen did not put a reasonably prudent website user on inquiry notice of the Terms of Use. Because the arbitration clause appeared in those Terms of Use, the court concluded that Burzdak was not bound by the arbitration provision.

Disposition

The court denied USA’s motion to compel arbitration. The order did not decide the merits of Burzdak’s California statutory claims. USA had 30 days from the date of the order to respond to the complaint, and the order disposed of Docket No. 20.