Arbitration/Enforceability/Consumers: Reasonable Person Wouldn’t Understand Purchasing A Vehicle Would Simultaneously Bind To Contract With Satellite Radio Service And Require Arbitration

Lack Of Consent Is The Problem With The Arbitration Agreement Here.

     In an opinion authored by Judge Pregerson, the Ninth Circuit reverses the district court’s order dismissing a putative class action and granting Sirius XM Radio Inc.’s motion to compel arbitration.  Knutson v. Sirius XM Radio Inc., No. 12-56120 (9th Cir. Nov. 10, 2014) (Pregerson, Murphy, Berzon).

     The customer purchased a vehicle from Toyota, and received unwanted solicitation calls from Sirius XM.  He sued Sirius XM Radio Inc., alleging the unwanted telemarketing calls were violations of the Telephone Consumer Protection Act.  Sirius XM Radio Inc. successfully petitioned to compel arbitration, and plaintiff appealed.

     The Ninth Circuit panel held Sirius XM failed to prove the existence of an agreement to arbitrate.  A reasonable person could not be expected to understand that purchasing the vehicle would simultaneously bind him to a contract with Sirius XM, and that the contract would require arbitration.  The fact that the plaintiff received some benefit by listening to the radio did not manifest consent to an agreement the plaintiff didn’t know about.

     COMMENT:  I have asked on other occasions whether “consent” is something of a fiction in the arbitration context, given that a procedurally unconscionable agreement involving surprise and ambush, but that is not substantively unconscionable, can nevertheless survive scrutiny.  Let’s just say that being able to apply the label  “lack of consent” can still effectively kill an arbitration agreement, whereas applying the label “procedurally unconscionable” is not dispositive.  The line between “lack of consent” and “procedurally unconscionable” is not necessarily a bright line.

     Also, note that Judge Pregerson dissented in 2013 in Kilgore v. Keybank, attaching as an Appendix to his dissent,  “the dense, small print, and blurry nine-page contract that Silver State thrust on the students at career fairs and open houses.”  [Kilgore is the subject of my April 12, 2013 post].  The Kilgore case rejected an argument that the arbitration clause at issue was procedurally unconscionable.  However, in the Knutson case, the Court of Appeals did not address substantive unconscionability, because its analysis hinged instead on lack of consent.  This time, Judge Pregerson, rather than being the dissenter, penned the opinion.