Karim v. Best Buy Co., Inc.

Background

Alee Karim purchased a television from Best Buy on February 22, 2020. During the online checkout process, the webpage displayed blue hyperlinked text directly above the “Place Your Order” button stating: “By placing your order, you agree to our BestBuy.com Terms and Conditions.” The terms were also linked at the bottom of the webpage, and customers were not required to open them before completing an order.

The terms contained an arbitration agreement requiring most disputes between the customer and Best Buy to be resolved through individual, binding arbitration rather than in court. The agreement identified the American Arbitration Association as the arbitration provider.

After the purchase, Karim was notified that he had been enrolled in a “Best Buy Total Tech Support Monthly Membership,” an auto-renewing subscription costing $19.99 per month. Karim alleged that he did not request or intend to purchase the service. He filed claims under California’s unfair-renewal laws, unfair-competition laws, and Consumers Legal Remedies Act on behalf of himself and a class of California consumers who were charged subscription fees connected to purchases made on Best Buy’s website. He sought damages, injunctive relief, and attorney’s fees and costs.

Best Buy Co., Inc. and BestBuy.com moved to compel arbitration and stay the litigation. Karim opposed the motion, arguing that he had not received reasonable notice of the terms and that no valid, binding contract had been formed. He also argued that the court, rather than an arbitrator, should decide whether the dispute could be arbitrated.

Court’s analysis

The court explained that the Federal Arbitration Act generally makes arbitration agreements enforceable, but the court must first determine whether a valid agreement to arbitrate exists and whether it covers the dispute. Challenges to the existence of a contract are generally for the court, while challenges to the validity of an existing contract containing an arbitration clause are generally for the arbitrator.

The court did not resolve the parties’ dispute over whether Minnesota or California law governed contract formation because both states apply an objective approach requiring a mutual manifestation of assent. Under that approach, an online agreement may be enforceable when the website gives reasonably noticeable warning of the terms and the consumer takes an action that clearly shows agreement.

The court held that Best Buy’s notice was reasonably conspicuous. The notice was directly above the order button, the text was plainly readable against the white background, and the terms hyperlink appeared in blue, signaling that it was an active link. The court distinguished a case involving much smaller and less visible notice and relied on cases enforcing similar notices placed near purchase or registration buttons.

The court also held that Karim’s click on the “Place Your Order” button unambiguously manifested assent. The notice expressly stated that placing an order meant agreeing to the Best Buy terms. The court rejected Karim’s argument that his intention to make a one-time purchase prevented assent to terms governing a continuing relationship.

The parties otherwise stipulated that the contract delegated the gateway question of arbitrability—the question whether the dispute falls within the arbitration agreement—to the arbitrator. Based on the existence of the contract and that stipulation, the court ordered arbitration. The court expressly stated that it had not determined that all claims in the action were subject to arbitration.

Disposition

The court granted Best Buy’s motion to compel arbitration and stayed the proceedings. It administratively closed the file, but stated that the order was not a dismissal or disposition of the action against any party. If further proceedings became necessary, any party could initiate them as though the administrative closure order had not been entered.