Kyla Asbury Nov. 13, 2014, 12:27pm

SAN FRANCISCO (Legal Newsline) - An appeals court has ruled Sirius XM Radio Inc. failed to prove the existence of an arbitration agreement in a class action lawsuit against it for allegedly violating the Telephone Consumer Protection Act.

The three-judge panel of the U.S. Court of Appeals for the Ninth Circuit reversed the U.S. District Court for the Southern District of California's order that dismissed the class action under the TCPA and granted Sirius XM's motion to compel arbitration pursuant to the Federal Arbitration Act.

Circuit judges Harry Pregerson, Michael R. Murphy and Marsha S. Berzon made up the unanimous majority, with Pregerson authoring the opinion.

"Sirius XM has failed to prove by a preponderance of the evidence the existence of an agreement to arbitrate," the Nov. 10 opinion states. "Because the arbitration clause in the customer agreement is unenforceable for lack of mutual assent, we need not decide whether the arbitration provision in the customer agreement is unconscionable."

In November 2011, Erik Knutson purchased a vehicle from Toyota that included a 90-day trial subscription to Sirius XM satellite radio. About a month after his trial subscription was activated, he received a "welcome kit" from Sirius XM that contained a customer agreement with an arbitration clause.

The panel held that a reasonable person in the plaintiff’s position could not be expected to understand that purchasing a vehicle from Toyota would simultaneously bind him or her to any contract with Sirius XM.

The panel further held that the plaintiff’s continued use of the satellite radio service after his receipt of the customer agreement did not manifest his assent to the provisions in the customer agreement.

Knutson claimed during his trial subscription, he received three unauthorized calls from Sirius XM on his cell phone.

Knutson filed his class action lawsuit against Sirius on Feb. 15, 2012, and District Judge Anthony J. Battaglia filed his order to dismiss and order on motion to compel on May 31, 2012.

The district court found that both parties consented to enter into the customer agreement and that the arbitration clause was valid and enforceable under the FAA.

Knutson appealed the district court’s order and claimed that he did not consent to enter into a binding customer agreement with Sirius XM, and that the customer agreement as a whole, and the arbitration provision specifically, are unconscionable.

"Here...there is no evidence that Knutson purchased anything from Sirius XM, or ever knew that he was entering into a contractual relationship with the satellite radio service provider," the opinion states.

There was no initial transaction between Knutson and the service provider, Sirius XM - there was only a transaction between Knutson and Toyota, the Ninth Circuit ruled.

"There is no information in the record about what, if any, language regarding the Sirius XM trial subscription was in the Toyota purchase contract," the opinion states.

Knutson is represented by Abbas Kazerounian and Mohammad Kazerouni of Kazerouni Law Group

Sirius is represented by Chad S. Hummel, Becca Wahlquist and Lydia M. Mendoza of Manatt Phelps & Phillips LLP.

U.S. Court of Appeals for the Ninth Circuit case number: 12-56120

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