Kaplan v. The Athletic Media Company

Background

Rebecca Kaplan, John Murphy, Johnny Pappas, Michael Tisa, Charlene Egizi, and Jeff Tibayan purchased subscriptions to The Athletic, which automatically renewed subscriptions monthly or annually. The Athletic updated its Terms of Service and Privacy Policy on August 5, 2021. It displayed an overlay stating that users acknowledged and consented to the updated policies by clicking “I Accept.” The overlay blocked access to content until the user clicked the button, and each plaintiff did so.

The 2021 Terms of Service included an arbitration agreement requiring disputes relating to the terms to be resolved by binding arbitration in San Francisco after good-faith negotiations. The agreement also incorporated JAMS rules, which state that an arbitrator decides jurisdiction and arbitrability issues. The plaintiffs later sued, alleging that The Athletic’s automatic-renewal practices violated California’s Automatic Renewal Law. They asserted claims under California’s Unfair Competition Law, False Advertising Law, and Consumer Legal Remedies Act, as well as claims for conversion, unjust enrichment, negligent misrepresentation, and fraud, individually and on behalf of a proposed class.

Contract Formation

The court applied California law to determine whether the parties formed an arbitration contract. It held that the overlay provided reasonably conspicuous notice because it appeared on the users’ screens, blocked access to content, used language concerning agreement to the Terms of Service and Privacy Policy, and included a bold hyperlink. The court also held that clicking “I Accept” was an unambiguous manifestation of assent because the notice expressly stated that clicking the button meant the user acknowledged and consented to the updated policies.

The plaintiffs argued that the 2021 terms could not apply because their claims were connected to events occurring when they first subscribed. The court treated that argument as concerning whether the terms covered the dispute, rather than whether a contract existed. It also noted that the 2021 terms stated that they superseded prior agreements. The plaintiffs further argued that the terms did not satisfy the Automatic Renewal Law’s notice requirements, but the court found no authority extending those requirements to arbitration agreements.

Delegation of Arbitrability

The court held that incorporating the JAMS rules was not enough to show a clear and unmistakable agreement that the arbitrator, rather than the court, would decide arbitrability—the question of whether the arbitration agreement covers a particular dispute. The court relied on decisions stating that incorporation of arbitration rules may establish such an agreement between sophisticated parties, but that this district routinely declines to extend that rule when at least one party is unsophisticated. The court therefore did not delegate the arbitrability question to the arbitrator.

Unconscionability

The plaintiffs also challenged the arbitration agreement as unconscionable, meaning unfairly imposed or unfairly one-sided under generally applicable contract law. The court held that the plaintiffs had not shown procedural unconscionability, which concerns oppression or surprise. Although the terms were presented in a standardized contract, the agreement allowed subscribers to opt out of arbitration by mailing written notice within 30 days of acceptance. Because both procedural and substantive unconscionability are required to invalidate the agreement, the court did not decide whether the agreement was substantively unconscionable.

Scope of the Arbitration Agreement and Disposition

The court held that the arbitration agreement covered the plaintiffs’ claims. The agreement applied to disputes “arising out of or relating to” the subject matter of the terms, which included sections addressing subscriptions, automatic renewal, and reaffirmation of authorization. The court concluded that those provisions expressly described the automatic-renewal practices underlying all of the plaintiffs’ claims.

The court granted The Athletic’s motion to compel arbitration and stayed the proceedings rather than dismissing the case. The Clerk was directed to administratively close the file. The court expressly stated that the order was not a dismissal or disposition of the action against any party and that further proceedings could be initiated in the same manner if necessary.