Inostroza v. Amazon.com

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JUSTIN INOSTROZA et al. Plaintiffs and Respondents, v. AMAZON.COM, INC., et al. Defendants and Appellants.

A166726

California Court of Appeals, First District, Fourth Division

August 21, 2024

NOT TO BE PUBLISHED

Alameda County Super. Ct. No. RG20062641

SMILEY, J. ^[*]

Amazon.com Inc., Amazon.com Services LLC, and Amazon Web Services, Inc. (collectively, Amazon) appeal the denial of their motion to compel arbitration in an action brought by online sellers pursuant to the Private Attorneys General Act of 2004 (PAGA; Lab. Code, § 2698 et seq.). Amazon maintained that plaintiffs agreed to arbitrate any disputes with Amazon relating to their use of Amazon's services when they clicked a checkbox to accept the terms of a hyperlinked business agreement during their online registration to become sellers on Amazon.com. The trial court ruled that the validity of the arbitration agreement would be decided by the court, not an arbitrator, and denied the motion based on Amazon's failure to prove the existence of an agreement to arbitrate. We reverse the denial of the motion to compel arbitration and otherwise affirm.

I. BACKGROUND

Amazon provides an online marketplace for the sale of products through its website, Amazon.com. In November 2020, Justin Inostroza and Mackenzie Grissom (collectively, plaintiffs) - who use this marketplace to sell products under their own names - filed an action against Amazon alleging numerous violations of the Labor Code under PAGA, including that Amazon improperly classified them, and other California sellers they represent by proxy, as independent contractors instead of as employees. Amazon disputes these contentions.

A. Amazon's Motion to Compel Arbitration and Dismiss Case

On July 29, 2022, Amazon moved to compel arbitration on the ground that plaintiffs agreed to individually arbitrate disputes when they signed up to become sellers on Amazon.com.^[1] As evidentiary support for the motion, Amazon submitted a declaration prepared by its employee, Clarice Cohn.

Cohn declared that she has worked for Amazon since 2017 and, at the time of executing the declaration, worked as a litigation paralegal. She stated that "[b]ased on [her] job responsibilities and [her] review of Amazon's business records, as well as [her] years of work in Amazon's Legal Department, [she was] familiar with the process for registering a seller account to sell products on [the] website, including the agreements that sellers enter into when they complete the registration process." Her declaration was "based on personal knowledge and [her] review of records that Amazon keeps in the ordinary course of business," and she claimed to be "competent to testify" to the matters stated in her declaration.

Cohn asserted that Amazon provides a service called "Selling on Amazon" where people sell products through the website. When registering to sell, all sellers must enter into the Amazon Services Business Solutions Agreement (BSA) governing how they sell products on the website. Amazon maintains records "in the ordinary course of business showing certain information about users' account histories, including when users complete the registration process to sell products on Amazon." Cohn was "personally familiar with these records" and, "[i]n her experience, the electronic systems used by Amazon to maintain such records are reliable and kept in a good state of repair."

Cohn further stated that she was familiar with the registration process in place in 2017 and 2018 when plaintiffs became sellers. Then, as now, sellers were required to accept the terms and conditions of the BSA. New registrants would not be able to complete the sign-up process unless they first checked a box indicating that they have "read and accepted the terms" of the BSA. Cohn's declaration included a screenshot image depicting the registration web page for new sellers as it would have appeared in December 2017 and January 2018.

Cohn described the online sign-up process for new sellers to include a requirement that registrants provide a unique email address, password, and legal name for the account. Next to the checkbox, there is a blue hyperlink comprised of the words Amazon Services Business Solutions Agreement. By clicking on that link, users would be taken to a page displaying the full terms of the BSA which Cohn attached to her declaration as Exhibits A and B. "Exhibit A is a true and correct copy of the BSA in effect on December 31, 2017 when [plaintiff Inostroza] signed up . . . Exhibit B is a true and correct copy of the BSA in effect on January 9, 2018, when [plaintiff Grissom] signed up." The computer user is not required to view the hyperlinked BSA to complete the registration process. Sellers cannot list products for sale on the Amazon marketplace without first accepting the BSA.

On page six of the thirty-three-page BSA is a paragraph entitled "Miscellaneous" that includes the following language in boldface: "Amazon and you both consent that any dispute with Amazon or its Affiliates or claim relating in any way to this Agreement or your use of the Services will be resolved by binding arbitration as described in this paragraph, rather than in court . . . There is no judge or jury in arbitration, and court review of an arbitration award is limited. However, an arbitrator can award on an individual basis the same damages and relief as a court . . . and must follow the terms of this Agreement as a court would .... Amazon and you each agree that any dispute resolution proceedings will be conducted only on an individual basis and not in a class, consolidated or representative action. If for any reason a claim proceeds in court rather than in arbitration Amazon and you each waive any right to a jury trial." (Some bolding omitted.) Every version of the BSA since plaintiffs signed up as sellers has included identical language related to arbitration and waiver of class, consolidated, or representative actions in bold, regular-sized font. The BSAs do not contain signatures, initials, dates, or other markings that associate them with a particular registrant.

Cohn reviewed account history records that showed that Inostroza "accepted the BSA" on December 31, 2017, and Grissom "accepted the BSA" on January 9, 2018.

B. Plaintiffs' Opposition and Amazon's Reply

Each plaintiff submitted a declaration stating they had no prior understanding of the concept of arbitration and that during the sign-up process, they did not see and were never alerted to the existence of an arbitration provision. They claimed, "If there was an arbitration provision, I was deprived of an opportunity to negotiate or understand the terms of the purported agreement or consult with an attorney before continuing with the seller sign-up process." Both also declared they did not electronically sign the BSA or any arbitration agreement or provision. They had reviewed the exhibits attached to Cohn's declaration but did not remember the documents. Grissom added that when she "signed up as a seller, [she recalled] a terms and conditions pop up window that had a lot of terms, it was in a pop-up window that was much smaller than my webpage and difficult to read. I never received a copy of this from Amazon and nor do I have any record of it."

In reply, Amazon argued that plaintiffs acknowledged signing up as sellers and did not dispute that they accepted the BSA. Amazon requested that plaintiffs' claims, including the issue of arbitrability, be ordered to individual arbitration.

C. Hearing and Trial Court Decision

The trial court issued a tentative decision denying Amazon's motion to compel arbitration. At a subsequent hearing, the court characterized Cohn's declaration as "rather pro forma" and noted that it "doesn't really show foundation . . . [or] knowledge." The court remarked, "[W]hat you have here is a . . . very weak declaration by an in-house paralegal who says, 'I'm familiar with it and I have personal knowledge of it.' Having personal knowledge of something you're familiar with, . . . that's really pretty weak foundation for it." The court announced its intention to confirm the tentative decision.

Amazon then requested a continuance to supplement the record. The court denied the request.

The trial court issued a written order denying the motion to compel as a result of Amazon's failure to meet its initial burden to show an agreement to arbitrate by attaching a copy of the contract bearing plaintiffs' signatures, and separately because the Cohn declaration lacked personal knowledge and not did not establish, by a preponderance of the evidence, the existence of an agreement. In response to Amazon's claim that the parties "clearly and unmistakably" delegated to the arbitrator the question whether a valid arbitration agreement exists, the court disagreed and ruled that it had the authority to determine that issue.

II. DISCUSSION

A. Motion to Compel Arbitration

1. Applicable Law

When a party to an arbitration agreement refuses to submit to arbitration, the other party may petition the court to compel arbitration and stay court proceedings. (Condee v Longwood Management Corp. (2001) 88 Cal.App.4th 215, 218 (Condee); Code Civ. Proc., §§ 1281.2, 1290.2.) California statutes create a summary proceeding for resolving these petitions where the trial court sits as the trier of fact, weighing all declarations and other documentary evidence to reach a determination. (Chambers v. Crown Asset Management, LLC (2021) 71 Cal.App.5th 583, 590 (Chambers).) "California law governs whether an arbitration agreement has been formed in the first instance, and whether an arbitration agreement exists is an issue for judicial determination." (Baker v. Osborne Development Corp. (2008) 159 Cal.App.4th...