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Knutson v. Sirius XM Radio Inc. - 771 F.3d 559 (9th Cir. 2014)

Rule:

The party seeking to compel arbitration has the burden of proving the existence of an agreement to arbitrate by a preponderance of the evidence.

Facts:

In November 2011, Plaintiff Knutson purchased a vehicle from Toyota that included a 90-day trial subscription to Defendant Sirius XM satellite radio. About a month after his trial subscription was activated, Knutson received a “Welcome Kit” from Sirius XM that contained a Customer Agreement. Knutson alleged that during his trial subscription, he received three unauthorized calls from Sirius XM on his cellphone. In response to these calls, Knutson brought a class action suit in February 2012 against Sirius XM alleging violations of the federal Telephone Consumer Protection Act. 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, alleging 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, were unconscionable.

Issue:

  1. Did Knutson consent to enter into a binding Customer Agreement with Sirius XM?
  2. Was the arbitration clause enforceable?

Answer:

1) No. 2) No.

Conclusion:

The Court of Appeals for the Ninth Circuit held that when Knutson purchased a truck from Sirius XM, he did not receive any documents from the latter and he did not know that he was entering into a contractual relationship with it by using the service. According to the Court, nothing in the record indicated that Sirius XM’s offer was clearly and effectively communicated to plaintiff by mailing him the customer agreement. Anent the second issue, the Court held that the arbitration clause in the customer agreement was unenforceable for lack of mutual assent. The Court reversed the district court's order granting defendant's motion to compel arbitration, and the case was remanded for further proceedings.

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