Schnabel v. Trilegiant Corp. & Affinion Inc.
An offer to arbitrate must make clear to a reasonable consumer that terms can be adopted, if the consumer engages in conduct that indicates acceptance. The plaintiffs filed a putative class action against the defendants, which sell goods and services at discounts to individuals who pay membership fees. The plaintiffs alleged that the defendants violated RICO, the Racketeer Influenced and Corrupt Organizations Act, the Electronic Communications Privacy Act and CUTPA, the Connecticut Unfair Trade Practices Act. The defendants moved to arbitrate and argued that an arbitration clause was included on a hyperlink that the plaintiffs should have seen when they enrolled online, and also was included in a follow-up e-mail that described the membership terms and conditions. The defendants argued that the plaintiffs assented to arbitration, because they enrolled, received the terms of membership and did not cancel. The plaintiffs objected that they were unaware of the arbitration clause and that they did not receive actual notice. The District Court found that the contract was formed when the plaintiffs entered their information into the online enrollment screen and that the plaintiffs did not agree to arbitrate. The defendants appealed. The 2nd Circuit found that even if the plaintiffs received the e-mail with membership terms, the e-mail did not provide adequate notice of the arbitration clause. No prior relationship existed between the parties that would have suggested that terms sent via e-mail after the initial enrollment were to be included in the contract. "We do not think," wrote the 2nd Circuit, "that an unsolicited email from an online consumer business puts recipients on inquiry notice of the terms enclosed in that email and those terms' relationship to a service in which the recipients had already enrolled, and that a failure to act affirmatively to cancel the membership will, alone, constitute assent." The defendant did not adequately raise before the District Court the defendant's claim that the hyperlink on the initial enrollment screen constituted part of the contract, and the 2nd Circuit did not review that claim. The 2nd Circuit affirmed the District Court's decision to deny the motion to compel arbitration.