Pepper v. Fluent, Inc.

Background

Cody Pepper, Terri Pepper, Julius Bryant, Kimberly Hudson, DeMya Johnson, and Allison Powers brought a proposed class action against Fluent, Inc. and Reward Zone USA, LLC. They alleged that the defendants caused them to receive unsolicited and unauthorized text messages in violation of the Telephone Consumer Protection Act and analogous state statutes.

The defendants moved to dismiss the claims under Rules 12(b)(1) and 12(b)(6) and moved to compel Terri Pepper and Julius Bryant to arbitrate. The defendants argued that each plaintiff had accepted website terms containing a mandatory arbitration clause and a waiver of participation in class actions. Pepper and Bryant denied visiting the websites or agreeing to arbitration.

The court previously found factual disputes about whether the two plaintiffs had agreed to arbitrate. Under the Federal Arbitration Act, the court held an evidentiary hearing limited to whether an arbitration agreement existed.

Legal standard

The court applied New York contract law. The party seeking arbitration had to prove, by a preponderance of the evidence, that a valid contract existed, including offer, acceptance, consideration, mutual assent, and intent to be bound. In an online transaction, a person may assent through conduct if the website provides objectively reasonable notice of the agreement. But a person cannot be required to arbitrate without agreeing to do so.

Terri Pepper

The defendants relied on archived records showing that a user named “Terri Pepper” registered on FindDreamJobs.com in October 2017. The records included an email address, phone number, date of birth, and a Magnolia, Texas, ZIP code, along with information indicating that an iPad using Safari accessed the site. The website displayed references to terms containing mandatory arbitration and a class-action waiver.

The court found that the defendants did not prove that Terri Pepper was the person who visited the website. Pepper credibly testified that she had never visited the site, had not searched for work after retiring, and was likely driving home from a dentist appointment or running errands around the alleged registration time. Although some registration information matched information Pepper possessed, the court found that the general device and browser information did not identify her specific device. The court also noted that the defendants did not establish that other registration details matched her information and that alternative explanations, including use of her information by a third party, were at least as credible.

Julius Bryant

The defendants relied on archived records showing that a user named “Julius Bryant” registered on OnlinePromoUSA.com in August 2016. The records included an email address, an old Dallas work address, a date of birth, a gender designation of “Female,” and information indicating that the user accessed the site from a Windows desktop computer using Chrome. The website displayed links to terms requiring arbitration and waiving class-action participation.

The court found substantial discrepancies between the registration data and Bryant’s testimony. The address was an outdated work address that Bryant had not used since leaving that job in 2013. The recorded date of birth was incorrect, and Bryant did not identify as female. The device information also did not establish that Bryant had accessed the site: although his computers used Windows, they were laptops and used Internet Explorer rather than Chrome. The court found Bryant’s testimony credible and concluded that the defendants had not proved that he visited the website.

Ruling

The court concluded that the defendants had not carried their burden of proving that Pepper or Bryant agreed to arbitrate. Because the defendants did not prove that either plaintiff visited the relevant website, the court did not need to decide whether the websites gave sufficient notice of the arbitration provisions.

Judge Koeltl denied the defendants’ motion to compel arbitration. The court also denied the defendants’ motion to dismiss insofar as it concerned Pepper’s and Bryant’s claims, explaining that the court’s reasons for rejecting the dismissal arguments applied equally to those claims. The Clerk was directed to close all pending motions and lift the stay on the case.