BUFFALO, N.Y. (Legal Newsline) – A federal judge has stayed class action litigation against The Coca-Cola Company pending the completion of arbitration, in a case that alleged the company unfairly redirected its reward points towards charitable causes.
Glenn Coe (individually and on behalf of all others similarly-situated) of Orchard Park, N.Y. first filed suit in the U.S. District Court for the Western District of New York on June 6, 2022 versus The Coca-Cola Company, of Atlanta.
The suit said Coca-Cola’s rewards program began with customers redeeming bottle caps for movie tickets and gift cards, but it was changed to eliminate or reduce the frequency of prices. Instead, customers redeemed points to participate in raffles and contests.
Now, the program no longer provides any things of value, according to the suit.
“Instead, customers are only able to donate their accumulated rewards to pre-selected charities, such as the American Red Cross. While Americans have one of the highest personal charitable donation rates in the world, this is based on their own generosity and ability to choose the organizations they support,” the suit said.
The suit added trading stamps, or small paper stamps issued to customers, were an early form of loyalty programs, but were outlawed by the State of New York – however, the plaintiff contends that Coca-Cola’s rewards program is a modern-day trading stamp system, by virtue of the alphanumeric codes on its bottle caps.
In a subsequent motion to compel arbitration filed on Oct. 24, 2022, Coca-Cola argued that when Coe and other users joined the rewards program, they agreed to a terms of use policy which stated that any disputes would be submitted to individual mandatory arbitration, and included a waiver of any and all class action litigation.
UPDATE
More than one year later and in a Nov. 14 memorandum opinion, U.S. District Court for the Western District of New York Judge William M. Skretny granted Coca-Cola’s motion to move the case to arbitration proceedings, and stay it until those proceedings concluded.
Skretny found that arbitration is “a matter of contract” and applied New York state law to the subject. That requires a party “must establish an offer, acceptance of the offer, consideration, mutual assent, and an intent to be bound.”
“Coke’s plain interface, set out above, put Coe on inquiry notice of the mandatory-arbitration provisions. Coke’s [interface] is uncluttered and warns users that they are agreeing to the hyperlinked Terms of Use and Privacy Policy by clicking the box and proceeding with the account creation. The check box is conspicuously displayed in bold and underlining at the bottom of the page in spatially-reasonable font and size. It is not obscured in any way, nor are there other hyperlinks, advertisements, or other distractions. The only other information appearing on the interface is a simple form requiring biographical and password information. The hyperlinked Terms of Use containing the mandatory-arbitration provisions were thus clearly and conspicuously presented, providing Coe with reasonable notice,” Skretny said.
“Whether Coe actually clicked the hyperlink and read the Terms of Use before agreeing to them is of no moment. First, Coe submitted no evidence that he did not read the Terms of Use. Second, a reasonable user of Coke’s website would know that by clicking the ‘I agree’ box, the user was agreeing to the Terms of Use accessible through the hyperlink. Consequently, regardless of whether Coe actually clicked the hyperlink, he was sufficiently on notice of the Terms of Use. Turning to manifestation of assent, the undisputed record reveals that Coe expressly assented to the mandatory-arbitration provisions. The check box signaling agreement with the Terms of Use is spatially and temporally coupled with the hyperlink containing the terms, as is the directly following ‘submit’ button. Moreover, Coe could not have created his account, which he concedes he created and continuously used, without affirmatively checking the ‘I agree’ box directly beside the Terms of Use hyperlink and clicking ‘submit.’ Finally, the interface makes clear that by checking the box, the user agrees to the Terms of Use. Consequently, by checking the box and completing his account creation, Coe unambiguously and affirmatively accepted the terms in the hyperlinked Terms of Use and Privacy Policy.”
According to Skretny, because Coe “was on inquiry notice of the Terms of Use, and because he unambiguously manifested his assent to those terms, including the mandatory-arbitration provisions, the parties created a binding agreement to arbitrate.”
Skretny added that Coca-Cola’s mandatory arbitration provisions were not “unconscionable”, or “so grossly unreasonable or unconscionable in the light of the mores and business practices of the time and place as to be unenforceable according to its literal terms.”
“Coe first argues that Coke’s Terms of Use containing the mandatory arbitration provisions are procedurally unconscionable because they constitute a contract of adhesion. In so arguing, Coe highlights Coke’s size, its bargaining power and the take-it-or-leave-it nature of the Terms of Use. But these arguments challenge the Terms of Use as a whole. They do not specifically challenge the mandatory arbitration provisions, which is required under U.S. Supreme Court precedent. In any event, the Second Circuit recognizes that unbalanced bargaining power and take-it-or-leave-it provisions do not necessarily render an arbitration agreement procedurally unconscionable. Coe’s specific challenge to the mandatory arbitration provisions themselves is his suggestion that he did not understand the word ‘arbitration,’ lacked sophistication in legal matters and had no opportunity to study the provisions or consult a lawyer. He further suggests that the arbitration provisions were buried in fine print within the Terms of Use document. None of these arguments is persuasive,” Skretny said.
“Coe has presented no evidence, in affidavit form or otherwise, that he did not read the arbitration provisions, did not understand the word ‘arbitration,’ or otherwise lacked sophistication. Moreover, it is clear from the nature of Coke’s programs that there was no immediacy or time-is-of-the-essence required for participation. Coe thus had ample opportunity to read and study the provisions, to educate himself on the meaning of ‘arbitration,’ and to consult a lawyer. And there is no merit to the suggestion that the arbitration provisions were buried in fine print in the Terms of Use document. To the contrary, the provisions are set out in the same font, size and format as the rest of the Terms of Use provisions – no fine print. And unlike other provisions, the mandatory arbitration provision contains an explicit directive to read the terms carefully. Moreover, the very first full paragraph on the first page of the Terms of Conditions advises in bold, underlined, all-capped writing that, “THESE TERMS INCLUDE AN AGREEMENT TO SUBMIT ALL DISPUTES TO INDIVIDUAL MANDATORY ARBITRATION – PLEASE READ CAREFULLY.” Consequently, Coe fails to demonstrate that the mandatory arbitration provisions are procedurally unconscionable.”
Nor did Coe prove substantive unconscionability, Skretny ruled.
“As to substantive unconscionability, Coe raises no factual or legal arguments. Instead, he simply requests a hearing to determine whether the Terms of Use were substantively unconscionable. Again, however, Coe presents no specific challenge to the substantive reasonableness of the mandatory-arbitration provisions, nor does he raise any factual disputes. A hearing is therefore unnecessary, and Coe’s request for one is denied. Making no meaningful arguments, Coe fails to demonstrate that the mandatory-arbitration provisions are substantively unconscionable,” Skretny said.
“A court must grant a motion to compel arbitration ‘if the pleadings, discovery materials before the Court, and any affidavits show there is no genuine issue as to any material fact and it is clear the moving party is entitled to judgment as a matter of law.’ Such is the case here. The undisputed evidence reveals that Coe and Coke agreed to arbitrate any disputes arising from Coe’s participation in Coke’s programs. Because Coe’s challenges to that agreement fall flat, this Court is obligated to compel arbitration. Coke’s motion will therefore be granted, and this action will be stayed pending completion of arbitration.”
The plaintiff is represented by Spencer I. Sheehan of Sheehan & Associates, in Great Neck, N.Y.
The defendant is represented by Steven Lawrence Penaro, Alan F. Pryor, Andrew G. Phillips and Angela M. Spivey of Alston & Bird, in New York, N.Y. and Atlanta, Ga.
U.S. District Court for the Western District of New York case 1:22-cv-00430
From Legal Newsline: Reach Courts Reporter Nicholas Malfitano at nick.malfitano@therecordinc.com