Peni v. Daily Harvest, Inc.

Background

Breeanne Buckley Peni filed a products-liability action after she was hospitalized with gastrointestinal illness following her consumption of Daily Harvest’s “French Lentil + Leek Crumbles” product. She asserted strict-liability, negligence, and breach-of-warranty claims for herself and others similarly situated. Daily Harvest moved to compel arbitration based on terms connected to Peni’s Daily Harvest account and purchase.

To create an account, a user entered an email address and ZIP code and clicked a registration button. Directly below the button, a disclosure stated that clicking above meant the user agreed to Daily Harvest’s Terms of Use and Terms of Sale and consented to its Privacy Policy. The linked Terms of Use included a mandatory individual-arbitration provision and a waiver of participation in class actions or class-wide arbitration. The arbitration provision also incorporated the JAMS Streamlined Arbitration Rules and Procedures.

Agreement to Arbitrate

The court applied New York contract-formation principles and considered whether Peni had inquiry notice—meaning whether the terms were presented clearly enough that a reasonably careful user would have been prompted to investigate them. The court used the framework from Second Circuit cases concerning web-based agreements.

The court found that Daily Harvest’s registration interfaces were uncluttered, placed the disclosure directly below the registration button, used dark text and underlined hyperlinks, and did not require the user to scroll to find the terms. The court also found that the disclosure clearly told users that registering meant agreeing to the Terms of Use. Based on these features, the court held that Peni was on inquiry notice of the Terms of Use and manifested assent to them by creating her account.

The court rejected Peni’s argument that a factual dispute existed because the screenshots submitted by Daily Harvest showed the current interface rather than the exact interface used when she registered. The evidence stated that the only relevant change was that one combined hyperlink had later become two separate hyperlinks. The court concluded that this change did not alter the overall layout or analysis. Because Peni assented to the Terms of Use when she registered, the court found it unnecessary to decide whether she assented a second time when placing her order.

Delegation of Arbitrability

After finding an arbitration agreement, the court considered whether the parties had clearly and unmistakably agreed that an arbitrator would decide threshold questions about arbitrability, such as the agreement’s scope and enforceability. The arbitration provision broadly covered disputes arising out of or relating to the Terms of Use and incorporated JAMS rules authorizing the arbitrator to decide jurisdictional and arbitrability disputes, including questions about the agreement’s formation, validity, interpretation, and scope.

The court held that the broad language, together with the incorporated JAMS rules, clearly and unmistakably delegated arbitrability questions to the arbitrator. It rejected Peni’s argument that limited exceptions for small-claims proceedings and certain intellectual-property injunctions made the clause too narrow. The court characterized those provisions as minor exceptions to an otherwise broad arbitration agreement and found that Peni’s personal-injury claims did not fall within them.

The court also rejected Peni’s arguments based on a class-action-waiver provision, the alleged unfairness of the arbitration agreement, her lack of sophistication, and the potential costs and procedures involved in arbitrating her personal-injury claims. The court explained that these arguments challenged arbitration of her claims, rather than the separate delegation of arbitrability questions, so they had to be decided by the arbitrator.

Disposition

Judge Denise Cote granted Daily Harvest’s July 27 motion to compel arbitration. The opinion did not decide the merits of Peni’s products-liability claims.