Ballou v. Asset Mktg. Servs., LLC

46 F.4th 844

William BALLOU ; Joan Williamson, Plaintiffs - Appellees

v.ASSET MARKETING SERVICES, LLC, doing business as govmint.com, Defendant - Appellant

William Culver, on behalf of himself and all others similarly situated, Plaintiff - Appellee

v.Asset Marketing Services, LLC, doing business as govmint.com, Defendant - Appellant

No. 21-3913

No. 21-3917

United States Court of Appeals, Eighth Circuit.

Submitted: June 15, 2022

Filed: August 30, 2022

Counsel who presented argument on behalf of the appellant was Christopher William Madel, of Minneapolis, MN. The following attorneys appeared on the appellant brief; Charles E. Spevacek, of Minneapolis, MN., Mack H. Reed, of Minneapolis, MN., Cassandra B. Merrick, of Minneapolis, MN.

Counsel who presented argument on behalf of the appellee and appeared on the brief was Bruce W. Steckler, of Dallas, TX. The following attorneys also appeared on the appellee brief; Jeffrey D. Bores, of Minneapolis, MN., Bryan L. Bleichner, of Minneapolis, MN., Austin Paul Smith, of Dallas, TX.

Before GRUENDER, BENTON, and GRASZ, Circuit Judges.

BENTON, Circuit Judge.

Three elderly individuals spent tens of thousands of dollars buying collectible coins, often priced far above market value, from Asset Marketing Services, LLC ("AMS"). They sued AMS for violating Minnesota law. AMS moved to stay the case and compel arbitration. The district court refused, and AMS appeals. Having jurisdiction under 9 U.S.C. § 16(a)(1), this Court reverses and remands for trial on the extent to which the parties agreed to arbitrate.

I.

The three plaintiffs are William Ballou, an elderly man who lives in Florida, Joan Williamson, an elderly woman who lives in California, and William Culver, an elderly man who lives in Texas. Each, over 62 years old, subsists on a fixed income.

AMS, doing business as GovMint.com, sells commemorative and collectible coins, often charging thousands of dollars or more. Registered in Delaware, its principal place of business is in Burnsville, Minnesota. In 2016, after investigating AMS's use of aggressive marketing tactics on an elderly, ill woman, the Commissioner of the Minnesota Department of Commerce entered a Consent Order with AMS, prohibiting it from "rely[ing] on any of its written terms or conditions" for sales unless it complied with Minnesota law, or it and the buyer signed a written purchase agreement disclosing the terms. Consent Order at 7-8, DCD 1-1.

Between 2015 and 2019, AMS solicited Ballou, Williamson, and Culver more than 50 times over the phone and email. AMS induced Ballou to purchase 127 coins at a price totaling over $630,000. He once paid over $38,995 for one coin. AMS never told Plaintiffs that the market value of their coins was substantially less than what they paid. Similarly, an AMS salesperson sold Williamson 10 coins for $13,000. Once, he told her she might receive a 400% return on investment. She provided her checking and savings account information. When her checking account was too low to cover AMS's costs, the salesperson withdrew the funds from her savings account. Meanwhile, AMS sold Culver $45,816 in coins, now worth less than a third of what he paid.

On March 12, 2021, Ballou and Williamson sued AMS in the District of Minnesota for violating Minnesota laws prohibiting consumer fraud, deceptive trade practices, and deceptive acts against senior citizens. They sued for themselves and two classes: (1) "All Class members who were also age 62 or over at the time they made the purchase"; and (2) "All ascertainable persons in the United States who purchased one or more coins from either GovMint, or any of its affiliates, successors, predecessors or assigns from 2015 until the present." On May 18, 2021, Culver filed a similar suit in the District.

The district court consolidated the suits. AMS moved to compel arbitration and stay proceedings, based on arbitration provisions in its Terms and Conditions—variously referenced on its website, in emails, during some phone calls, and on invoices shipped with products. The parties produced a voluminous record supporting and opposing the motion. After a hearing, the district court denied AMS's motion. AMS now appeals.

II.

This Court reviews de novo denial of a motion to compel arbitration. Foster v. Walmart, Inc. , 15 F.4th 860, 862 (8th Cir. 2021). When the parties submit evidence supporting or opposing the motion, this Court "treats the motion akin to a motion for summary judgment, viewing the record in the light most favorable to the nonmovant." Duncan v. Int'l Markets Live, Inc. , 20 F.4th 400, 403 (8th Cir. 2021). If the record supporting the motion has a genuine issue of material fact about whether an arbitration agreement exists, this Court remands for trial on the issue. 9 U.S.C. § 4 ("If the making of the arbitration agreement or the failure, neglect, or refusal to perform the same be in issue, the court shall proceed summarily to the trial thereof."); Foster , 15 F.4th at 862 ; see id. at 864 ("If a factual issue exists regarding the formation of the arbitration agreement, remand to the district court for trial is necessary." (cleaned up) (quotations omitted)).

A.

Agreements to arbitrate are " ‘a matter of contract,’ meaning that disputes are arbitrable only to the extent an agreement between the parties says so." Foster , 15 F.4th at 862, quoting Rent-A-Center, W., Inc. v. Jackson , 561 U.S. 63, 67, 130 S.Ct. 2772, 177 L.Ed.2d 403 (2010). "When deciding whether to compel arbitration, this [C]ourt applies a two-part test: we must first consider whether a valid agreement to arbitrate exists. If a valid agreement exists, we then consider the scope of the agreement." United Steelworkers of Am., AFL-CIO-CLC v. Duluth Clinic, Ltd. , 413 F.3d 786, 788 (8th Cir. 2005) (quotations omitted). The party seeking to compel arbitration bears the burden to prove a valid contract. Duncan , 20 F.4th at 402.

"When deciding whether the parties agreed to arbitrate a certain matter ..., courts generally ... should apply ordinary state-law principles that govern the formation of contracts." First Options of Chicago, Inc. v. Kaplan , 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995) ; accord Donaldson Co. v. Burroughs Diesel, Inc. , 581 F.3d 726, 731 (8th Cir. 2009). "Courts should not assume that the parties agreed to arbitrate arbitrability unless there is clear and unmistakable evidence that they did so." First Options , 514 U.S. at 944, 115 S.Ct. 1920 (quotations omitted).

The parties agree that Minnesota's law applies. Under its law, contract formation requires an offer, acceptance, and consideration. See Pine River State Bank v. Mettille , 333 N.W.2d 622, 625, 627 (Minn. 1983). "The formation of sales contracts requires mutual assent among the parties involved in the transaction." SCI Minn. Funeral Servs., Inc. v. Washburn-McReavy Funeral Corp. , 795 N.W.2d 855, 864 (Minn. 2011). Mutual assent, in turn, is assessed under an objective standard. Id.

In this case, there are genuine issues of material fact about whether and when the parties formed contracts that incorporated the arbitration agreement.

B.

The parties dispute whether they formed valid contracts that included the arbitration clause when the Plaintiffs purchased goods over the phone and AMS sent the goods with shipping invoices that mentioned its Terms and Conditions. This issue lies at the intersection of "shrinkwrap"—packaging that lists additional terms—and Section 2-207 of the Uniform Commercial Code.

AMS argues that the shipping invoices formed shrinkwrap contracts, while Plaintiffs counter that the invoices merely proposed additions to the contract. Ultimately, their disagreement hinges on which party was the offeror and which the offeree. This Court concludes that, under Minnesota law, Plaintiffs were the offerors for phone orders, § 2-207 applies to those orders, and AMS has raised a genuine issue of material fact whether some shipping invoices created valid contracts that included the arbitration clause.

Because this issue turns on the offeror and the timing of contract formation, this Court must analyze how shrinkwrap and § 2-207 mesh and apply here.

1.

In a "shrinkwrap agreement," a customer pays first, later receiving a good with the seller's full terms of sale and an opportunity to return the purchase. See, e.g. , ProCD, Inc. v. Zeidenberg , 86 F.3d 1447, 1451-52 (7th Cir. 1996). Often, the seller provides an adequate right to return the product and specifies that not returning the product before a deadline constitutes acceptance of its full terms; a consumer who retains the goods beyond the deadline is bound by those terms. See id. In a "clickwrap agreement," a seller displays terms on a computer screen, and the user can proceed only by clicking a button to affirmatively accept the terms. See id. at 1449, 1452 (describing clickwrap without using the term); Foster , 15 F.4th at 863.

Two Seventh Circuit cases, ProCD, Inc. v. Zeidenberg , 86 F.3d 1447 (7th Cir. 1996), and Hill v. Gateway 2000, Inc. , 105 F.3d 1147 (7th Cir. 1997), delineate and uphold shrinkwrap agreements. Many courts, including the U.S. District Court for the District of Minnesota, have applied them. See, e.g. , Rasschaert v. Frontier Commc'ns Corp. , No. CIV. 12-3108, 2013 WL 1149549, at *6 (D. Minn. Mar. 19, 2013) (collecting cases).

The core logic is that the " ‘vendor ... may invite acceptance by conduct, and may propose limitations on the kind of conduct that constitutes acceptance. A buyer may accept by performing the acts the vendor proposes to treat as acceptance.’ " Hill , 105 F.3d at 1149, quoting ProCD , 86 F.3d at 1452. The shrinkwrap specifies the performance that constitutes acceptance; the buyer accepts by performing as specified. See ProCD , 86 F.3d at 1452-53.

In ProCD a man bought ProCD software, packaged in a box that listed terms of use, including that a software license controlled its use. See id. at 1450-51. The court recognized, "Notice on the outside,...