Smith v. RPA Energy, Inc.

Background

James Smith and Tylar Spencer brought a putative consumer class action against RPA Energy, Inc., also referred to as Green Choice Energy, and its co-defendants Brian Trombino and Adam Bashe. The plaintiffs alleged that the defendants used deceptive and unlawful pricing practices by falsely representing how the prices charged under variable-rate energy contracts were calculated. They sought to represent nationwide and Michigan-only customer classes.

The defendants moved to compel arbitration based on an arbitration provision in the plaintiffs’ energy contract. The court said the motion turned on whether the plaintiffs agreed to that provision. The plaintiffs did not dispute that their claims fell within the provision’s scope, but they argued that they had not agreed to arbitrate.

RPA Energy used door-to-door sales representatives and an electronic enrollment process. A representative entered customer information into a program that sent the customer a link by text message or email. The customer could select “Prepare preview contract(s)” to view the full six-page contract, but did not have to click that button. The customer did have to proceed through the enrollment process, electronically sign, and click “Continue.” The customer then received an executed copy of the contract by text message or email.

The arbitration provision appeared on page five of the contract in capital letters. It required disputes relating to the agreement to be resolved exclusively and finally through American Arbitration Association arbitration in Michigan. It also stated that the customer could not pursue the arbitrable claims in court or participate in a representative or class action concerning those claims.

Spencer stated that she reviewed information on a mobile device and electronically signed her name, but did not sign while viewing the page defendants identified as containing her signature. She also stated that she did not see the “fine print” terms and did not agree to the Terms of Service or arbitration.

Legal standard

The court applied a standard similar to the summary-judgment standard to the motion to compel arbitration. It had to determine whether the parties agreed to arbitrate and whether the claims fell within the arbitration agreement. Because the plaintiffs did not contest the scope of the provision, the court addressed only whether they entered into a valid agreement to arbitrate.

The court applied Michigan contract law, which the parties agreed governed. Under that law, mutual agreement is judged objectively, based on the parties’ words and observable conduct rather than their unexpressed intentions. The court noted that electronic signatures have the same legal effect as handwritten signatures under Michigan law.

The court applied a two-part test for digital contracts: whether a reasonably prudent user would have been on notice of the relevant terms and whether the user’s conduct clearly showed agreement to them. The court described the enrollment process as a form of “modified clickwrap,” meaning that the customer had to take an affirmative action but the terms were not displayed on the same screen as the button used to complete the transaction.

Court’s analysis

The court found that the plaintiffs were on inquiry notice of the arbitration provision. The “Prepare preview contract(s)” button was bright green on an otherwise uncluttered page, appeared below the “Preview your contract(s)” heading, and had to be passed while completing enrollment. The court concluded that a reasonable user would understand that the button could be pressed to view the proposed contract.

The court also found that the arbitration clause itself was sufficiently noticeable. The contract was only six pages long, and the clause appeared on the fifth page in capital letters. The plaintiffs’ lack of actual notice did not defeat enforcement because the court applied an objective notice standard.

The court further found unambiguous assent. The message sending Spencer the enrollment link stated, “Your Contract with Green Choice Energy is ready to sign.” The enrollment page asked the user to review the information and provide a signature, and Spencer electronically signed after having the opportunity to preview the contract. The court concluded that a reasonable consumer would understand the electronic signature to accept the overall contract, including the arbitration provision.

The court rejected the argument that the signature applied only to the rescission language immediately above it. The rescission section had its own separate agreement button, so the court found that the larger “Click to add Signature” button referred to the overall contract. It also rejected the argument that the different headings in the contract made unclear whether the Terms of Service were part of the agreement. The court concluded that the document’s presentation and its specific energy-sale terms showed that the entire document governed the transaction.

Finally, the court held that Spencer’s declaration did not create a factual dispute requiring a trial. Her statements that she lacked actual notice and did not subjectively agree were not decisive under the objective contract-formation standard. Her statement that she did not sign while viewing the final contract was also consistent with defendants’ evidence that she electronically signed during enrollment and later received the completed contract.

Disposition

The court granted defendants’ motion to compel arbitration. It stayed the case and placed it on the suspense calendar pending resolution of the arbitration under 9 U.S.C. § 3. The opinion addressed the existence and enforceability of the arbitration agreement; it did not resolve the plaintiffs’ allegations about the defendants’ pricing practices.