SquareTrade appealing to Second Circuit over arbitration clause in terms and conditions of purchase

By Charmaine Little | Sep 13, 2017

BROOKLYN, N.Y. (Legal Newsline) – SquareTrade Inc. has filed a motion to appeal a district court's ruling denying the technology company’s request to compel arbitration of a class action lawsuit.

In the latest battle of the legal war, SquareTrade filed a notice of appeal Aug. 10 to the U.S. Court of Appeals for the Second Circuit, a week after the U.S. District Court for the Eastern District of New York had denied SquareTrade’s motion to compel arbitration.

SquareTrade hoped to, “enforce an arbitration provision that first appeared in a ‘terms and conditions’ document provided via hyperlink in an email confirming Starke’s purchase of a SquareTrade protection plan on amazon.com," according to the district court's Aug. 3 motion.

The legal woes began when Adam J. Starke filed the original claim and accused the company of providing fraudulent protection plans for Amazon users.

He alleged he bought a SquareTrade 2-Year Electronics Protection Plan via Amazon on Jan. 5, 2016, for a CD player purchased from Staples on Dec. 27, 2015. Starke noted in the lawsuit that the pre-sale Terms & Conditions (T&C) were different than the post-sale T&C. In the matters that impact this case, it was the post-sale T&C’s “Arbitration Provision” that caused concern.

That section aimed to force parties to arbitration for “[a]ny controversy or claim arising out of or relating to this Protection Plan, or breach thereof… in accordance with the Commercial Arbitration Rules of the American Arbitration Association,” the motion stated. The post-sale T&C also included a waiver that parties could not file a class action.

The agreement between SquareTrade and Starke went awry when the company allegedly denied his claim for replacement or repair of his CD player. A representative for the SquareTrade purportedly informed him via email on Oct. 20, 2016, that his protection plan was unenforceable because the actual item was not purchased through Amazon. He was told he could cancel the plan “for a full refund as an exception” versus a pro-rated refund, the motion states.

That’s when Starke took legal action under three allegations: 1) SquareTrade broke New York regulations about “deceptive acts and practices” when it didn’t disclose all of the terms of its protection plans; 2) the company violated the federal Magnuson-Moss Warranty Act when it did not offer “full, clear and conspicuous disclosure of [the] terms and conditions” before he purchased the Protection Plan; and 3) “it would be inequitable, under the doctrine of unjust enrichment to allow SquareTrade to retain profits traceable to its alleged misrepresentations,” according to the motion.

SquareTrade moved to enforce the arbitration clause of its T&C in hopes of making Starke handle the matter via arbitration and not through the court. Still, the court denied the company’s claims for a few reasons.

For starters, Starke stated that he did never viewed the T&C with the arbitration clause. SquareTrade didn’t challenge this notion. The district court used the Berson analysis to determine that Starke is not subject to the arbitration portion of the T&C as he was not aware of it.

The district court also pointed out, “The design and content of the Confirmation Email did not make the post-sale T&C ‘readily and obviously available.’”

It uses the statement, “You’re all set!” that Starke received in the confirmation email. Considering it didn’t prompt him to the T&C link, the district court decided Starke, or any consumer, could easily miss that portion after being told they were “all set,” without any direction for more action.

SquareTrade pointed out that Starke had fair notice of when terms would be available as he was notified via email. But the court didn’t agree and added the company didn’t require any “affirmation” that the T&C were actually read such as checking an “I agree” box.

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