Moyer v. Chegg, Inc.

Background

Sheri Moyer alleged that she purchased an electronic textbook from Chegg on or about August 29, 2022. She claimed that Chegg then enrolled her in an automatic-renewal subscription without her knowledge and charged her $19.99 on October 17, 2022. She sued under the California Consumer Legal Remedies Act and California’s Unfair Competition Law, and sought certification of a nationwide class of people who purchased Chegg products or services through an automatic-renewal plan or continuous-service offer during the four years before the complaint was filed.

Chegg moved to compel arbitration under its Terms of Use. Chegg’s account-creation screen stated that, by clicking “Create account,” the user agreed to the Terms of Use and Privacy Policy. The Terms of Use included an arbitration agreement requiring individual binding arbitration of covered disputes and a waiver of participation in class actions or classwide arbitration. The Terms also allowed users to opt out of arbitration by sending written notice within 30 days of first receiving the Terms.

Court’s Analysis

Under the Federal Arbitration Act, a court must enforce a written arbitration agreement covering the dispute if the agreement is valid and enforceable. The parties did not dispute that Chegg’s arbitration agreement, if enforceable, covered Moyer’s claims. The issue was whether an arbitration agreement existed.

The court held that it, rather than the arbitrator, had to decide whether an arbitration agreement existed. Although the Terms incorporated rules giving the arbitrator authority to decide questions about the agreement’s existence, scope, and validity, a court must decide whether the parties formed an arbitration agreement when one party contests the making of the contract.

Applying California contract-formation principles, the court concluded that Chegg’s website provided constructive notice of the Terms of Use. The notice appeared directly below the required “Create account” button, used black text on a white background, and displayed “Terms of use” in blue, hyperlinked text. The court viewed this arrangement as a “modified” clickwrap agreement: a website agreement in which a user is told that taking an identified action means agreeing to linked terms. The court found the notice reasonably conspicuous, particularly because the account-creation process suggested an ongoing relationship with Chegg.

Moyer argued that she did not assent because she clicked the Google icon instead of the “Create account” button and never saw or clicked the Terms of Use link. Chegg submitted evidence that a user still had to click “Create account” after entering Google account information, and also submitted records indicating that Moyer did not use a Google, Apple, or Facebook account to create her Chegg account. The court concluded that the evidence showed Moyer must have clicked “Create account” and that there was no genuine dispute about her assent. It therefore held that an arbitration agreement existed between Moyer and Chegg.

Ruling and Effect

The court GRANTED Chegg’s motion to compel arbitration and STAYED all further litigation pending completion of arbitration. The court did not decide the merits of Moyer’s consumer-protection claims or certify the proposed class in this order. The parties were ordered to file a joint status report every 180 days about the arbitration, including when the stay might be lifted, and to notify the court within five court days after arbitration was completed.