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Nguyen v. Barnes & Noble Inc. - 763 F.3d 1171 (9th Cir. 2014)

Rule:

The Federal Arbitration Act (FAA), 9 U.S.C.S. § 1 et seq., requires federal district courts to stay judicial proceedings and compel arbitration of claims covered by a written and enforceable arbitration agreement. 9 U.S.C.S. § 3. The FAA limits the district court's role to determining whether a valid arbitration agreement exists, and whether the agreement encompasses the disputes at issue.

Facts:

Defendant Barnes & Noble, Inc. was a national bookseller that owned and operated hundreds of bookstores as well as the <website www.barnesandnoble.com>. In Aug. 2011, Barnes & Noble, along with other retailers across the country, liquidated its inventory of discontinued Hewlett-Packard Touchpads ("Touchpads"), an unsuccessful competitor to Apple's iPad, by advertising a "fire sale" of Touchpads at a heavily discounted price. Acting quickly on the liquidation, plaintiff Kevin Khoa Nguyen purchased two units on Barnes & Noble's website on Aug. 21, 2011, and received an email confirming the transaction. The following day, Nguyen received another email informing him that his order had been cancelled due to unexpectedly high demand. Nguyen filed a putative class action lawsuit against Barnes & Noble in federal district court, alleging that, as a result of Barnes & Noble's representations, as well as the delay in informing him it would not honor the sale, he was unable to obtain an HP Tablet during the liquidation period for the discounted price and was forced to rely on substitute tablet technology, which he subsequently purchased at considerable expense. Barnes & Noble filed a motion to compel arbitration and to stay court proceedings pursuant to an arbitration agreement contained in its website's Terms of Use. The district court denied the motion, and Barnes & Noble appealed.

Issue:

Did the district court properly deny Barnes & Noble's motion to compel arbitration and stay proceedings pursuant to the FAA, 9 U.S.C.S. § 3?

Answer:

Yes.

Conclusion:

The appellate court affirmed the district court's denial of Barnes & Noble's motion to compel arbitration and to stay court proceedings. The Terms of Use on the Barnes & Noble website was part of a "browsewrap" agreement, where the website's terms and conditions of use were generally posted on the website via a hyperlink at the bottom of the screen. The court held that Nguyen had insufficient notice of the Terms of Use, and thus did not enter into an agreement with Barnes & Noble to arbitrate his claims. The court held that there was no evidence that Nguyen had actual knowledge of the agreement. The court further held that where a website made its terms of use available via a conspicuous hyperlink on every page of the website but otherwise provided no notice to users nor prompts them to take any affirmative action to demonstrate assent, even close proximity of the hyperlink to relevant buttons users must click on—without more—was insufficient to give rise to constructive notice. The court also held that the district court did not abuse its discretion in rejecting Barnes & Noble's estoppel argument.

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