Barraza v. Cricket Wireless LLC, 2015 WL 6689396, No. C 15-02471 (N.D. Cal. Nov. 3, 2015)
Cricket advertised a “No Contract” wireless phone plan with an arbitration clause in its purported contract terms. As Omri Ben-Shahar pointed out, advertising “No Contract” has some risks in terms of … contract formation. Here, Cricket still gets a chance to prove that there was a contract, but it can’t force these false advertising plaintiffs immediately to arbitration.
Until May 2014, Cricket advertised “No Contract” wireless service, then switched to “No Annual Contract.” Plaintiffs bought wireless service and accompanying phones at Cricket-owned stores; employees opened the boxes and activated the phones. One panel on those boxes included a paragraph that discussed signal frequency and battery performance, and also said: “Use of phone requires purchase of Cricket® service, which must be purchased separately. By activating Cricket® service, you agree to the enclosed terms and conditions of the service.” The terms and conditions were in in a 3x4 inch booklet titled “Quick Start Guide.”
The first page of the Quick Start Guide described Cricket as “the home of no contract, no hassle wireless,” and did not mention that the booklet contained terms and conditions for the use of Cricket’s service. Pages 6-15 had “numerous terms and conditions written in a smaller font than the rest of the contents of the booklet.” These included (in much smaller font than here displayed):
IMPORTANT: WHEN YOU START SERVICE OR USE THE SERVICE … YOU INDICATE YOUR ACCEPTANCE OF THIS AGREEMENT. IN ADDITION, EACH TIME YOU PAY FOR SERVICE FROM US, YOU CONFIRM YOUR ACCEPTANCE OF THIS AGREEMENT. IF YOU DO NOT WANT TO ACCEPT THIS AGREEMENT, DO NOT START SERVICE OR USE THE SERVICE AND RETURN YOUR WIRELESS DEVICE...FOR A REFUND
The Quick Start Guide also included an arbitration provision and class-action waiver:
YOU AND WE ARE WAIVING RIGHTS TO PARTICIPATE IN CLASS ACTIONS …
Cricket also required its employees to hand any customer purchasing a new phone Cricket’s “Half Is More” promotional pamphlet (or to have it stapled to the receipt), which stated, “Terms, conditions and other restrictions apply” to Cricket’s services, written in five-point font. Cricket made yet another handbook called “My Cricket Guide” available within its stores, which also said in five-point font that “Your Agreement … includes terms of your service plan …. Carefully read all the Cricket Terms and Conditions of Service which include, among other things, a MANDATORY ARBITRATION of disputes provision.” The named plaintiffs averred that they saw the “Half as More” pamphlet and “My Cricket Guide” handbook on display, but that they weren’t given those materials and never reviewed them.
One of the plaintiffs also purchased a Cricket PAYGo card in 2013 at a gas station in order to reload the balance on her account. That card read, “By using your Cricket service or phone, or by increasing your account balance, you acknowledge your consent to the current Cricket Terms and Conditions of Service.” Cricket also argued that she went to a store to change her service; the back of Cricket’s printed receipts in the store included a reference to the terms and conditions, including that the terms and conditions included an “agreement to dispute resolution by binding individual arbitration instead of jury trials or class actions.”
The FAA governs the enforcement of the arbitration provisions. The “existence of a contract as a whole must be determined by the court prior to ordering arbitration.” Although a party generally cannot avoid the terms of a contract because she failed to read it, that rule does not apply “when the writing does not appear to be a contract and the terms are not called to the attention of the recipient.” Here, “the Quick Start Guide lacked any indication of its contractual nature.” Thus, its inclusion in the box was insufficient to place plaintiffs on inquiry notice of the terms and conditions. By opening the boxes before giving them to plaintiffs, Cricket’s employees “obviated the need for plaintiffs to review the Quick Start Guide and signaled that it was unimportant to review the text on the box before activating the service.”
Cricket argued that plaintiffs had 60 days to opt out of the arbitration provisions and that numerous consumers exercised that option, but that didn’t matter if plaintiffs never agreed to be bound by the provisions in the first place. “An employee of a telephone service provider or an attorney may be attuned to the possibility that an arbitration agreement would be buried in a document titled ‘Quick Start Guide,’ while a reasonable consumer is unaware of that possibility.” Nor did plaintiffs have reason to consult the other materials in the store, or to read the inconspicuous references to terms and conditions on the back of a PAYGo card or an in-store receipt.
The court did, however, reject plaintiffs’ argument that equitable estoppel applied based on the “No Contract” ads. It is “[a]n essential element of equitable estoppel is that the party to be estopped...‘intended by [its] conduct to induce reliance by the other party, or acted so as to cause the other party reasonably to believe reliance was intended.’ ” Even if plaintiffs relied on the “No Contract” ads to buy wireless service, “they have failed to demonstrate that Cricket acted with the intention or expectation that Cricket intended such reliance.” “No Contract” claims are meant to distinguish services with annual commitments to those without such commitments; there was no evidence that Cricket intended to get consumers to assent to arbitration instead of to convey that more limited message. Nonetheless, at the upcoming summary trial to determine whether a contract was actually formed (and to assess the credibility of named plaintiffs’ claims that they didn’t review the materials), the “No Contract” ads could be taken into account in determining the reasonable expectations of the parties.