Hidalgo v. Amateur Athletic Union of the United States, Inc.

Background

Timothy Hidalgo brought this putative class action against the Amateur Athletic Union of the United States, Inc. (AAU) arising from a data breach that the AAU disclosed in September 2019. The alleged breach involved private information, including credit- and debit-card information, from people who conducted transactions on the AAU website between October 1, 2018, and July 2, 2019. Hidalgo alleged that the AAU failed to use reasonable security measures and inadequately responded to the resulting injuries.

Hidalgo asserted claims for common-law negligence, negligence per se, breach of implied contract, unjust enrichment, violations of the Rhode Island Deceptive Trade Practices Act, and violations of New York General Business Law § 349(a). He applied for AAU membership online on or about May 16 or 17, 2019, paid a $32 fee for a coach’s certificate, and was accepted as an AAU member on May 29, 2019.

The membership application contained a section labeled “Terms and Conditions – Digital Signature.” Applicants had to check a box stating that they understood and agreed to the listed terms and conditions before submitting the application. The application said that submitting it meant agreeing to comply with the AAU Code, including its constitution, bylaws, policies, procedures, regulations, and rules. Hyperlinks led to the AAU Code Book, whose membership policies included a binding-arbitration provision.

That provision required the applicant or member and the AAU to submit all civil disputes arising out of or during the membership term to binding arbitration administered by the American Arbitration Association under its consumer arbitration rules. It also stated that the arbitrator would decide all questions about arbitrability, including the existence, scope, or validity of the arbitration agreement.

Legal standard

Under the Federal Arbitration Act, a court must order arbitration when it is satisfied that an arbitration agreement exists and that the party seeking arbitration has failed to comply with it. The court ordinarily decides whether a valid agreement exists and whether the dispute falls within its scope. But the parties may clearly and unmistakably delegate questions of arbitrability—meaning whether a dispute must be arbitrated—to the arbitrator.

For online contracts, the court applies ordinary contract-formation principles. A user must have reasonable notice of the arbitration provision and must manifest assent, such as by checking an agreement box in a clickwrap agreement. A clickwrap agreement is an online contract in which a user indicates acceptance by clicking an “I agree” or similar box.

Court’s analysis

The court held that Hidalgo had reasonable notice of the AAU’s contractual terms, including the arbitration provision. It found that the relevant portion of the application was relatively uncluttered, prominently labeled, visually distinctive, and contained clearly marked hyperlinks to the AAU Code Book. The terms-and-conditions section appeared at the end of the application, where an applicant would look before completing the process.

The court also found that Hidalgo could not complete the application without checking the box agreeing to the terms and conditions. The notice of the terms was both spatially and temporally connected to the act of applying for membership. The court rejected Hidalgo’s arguments that the application’s lack of smartphone compatibility prevented reasonable notice, that the AAU Code Book appeared to be only a general code of conduct, and that the arbitration provision was effectively hidden within the approximately 170-page Code Book. The court stated that a person generally cannot avoid contractual terms merely by failing to read them, and noted that the Code Book’s table of contents identified a “Binding Arbitration” section.

The court concluded that Hidalgo assented to the arbitration provision when he checked the box agreeing to the terms and submitted his application. It then declined to decide whether the data-breach claims arose “out of or during the term of membership.” Because the agreement clearly delegated questions of arbitrability to the arbitrator, the court ruled that the arbitrator must decide whether any of Hidalgo’s claims fall outside the arbitration provision. The court therefore ordered all of Hidalgo’s claims to arbitration.

Disposition

Judge John G. Koeltl granted the AAU’s motion to compel arbitration. The court also granted the AAU’s motion to stay this action pending the outcome of arbitration. The Clerk was directed to stay the case, and the parties were directed to report promptly to the court when the arbitration concluded.