Nicosia v. Amazon.com, Inc.

834 F.3d 220

Dean Nicosia, on behalf of himself and all others similarly situated, Plaintiff–Appellant,

v.Amazon.com, Inc., Defendant–Appellee.

Docket No. 15–423–cv

August Term 2015

United States Court of Appeals, Second Circuit.

Argued: November 30, 2015

Decided: August 25, 2016

Joseph Seth Tusa , Tusa P.C., Southold, New York, Peter D. St. Phillip, Jr., Scott V. Papp, Lowey Dannenberg Cohen & Hart, P.C., White Plains, New York, Timothy G. Blood, Paula M. Roach, Blood Hurst & O'Reardon, LLP, San Diego, California, and Gregory S. Duncan, Esq., Charlottesville, Virginia, for Plaintiff–Appellant.

Gregory T. Parks , Ezra D. Church, Morgan Lewis & Bockius LLP, Philadelphia, Pennsylvania, and Regina Schaffer–Goldman, Mary Claire Dekar, Morgan Lewis & Bockius LLP, New York, New York, for Defendant–Appellee.

Before: Sack, Chin, and Lohier, Circuit Judges.

Chin, Circuit Judge:

In 2013, plaintiff-appellant Dean Nicosia purchased 1 Day Diet , a weight loss product containing sibutramine, a controlled substance that had been removed from the market in October 2010, on the website of defendant-appellee Amazon.com, Inc. (“Amazon”). Nicosia brought this action below, asserting claims under the Consumer Product Safety Act (the “CPSA”), 15 U.S.C. § 2051 et seq ., and state law.

The district court (Townes, J. ) dismissed the complaint on the ground that the parties are bound by the mandatory arbitration provision in Amazon's Conditions of Use. It found that Nicosia was on constructive notice of the terms and that he assented to mandatory arbitration when he placed his order on the website. In the same memorandum and order, the district court treated Nicosia's motion for preliminary injunctive relief as a motion for a preliminary injunction in aid of arbitration, and denied the motion on the ground that he lacked standing to seek an injunction blocking Amazon from selling items containing sibutramine and requiring Amazon to send remedial notices to consumers.

We affirm the district court's denial of injunctive relief, vacate the dismissal for failure to state a claim, and remand for further proceedings.

BACKGROUND

I. The Facts

A. As Alleged in the Complaint

Nicosia is an Amazon customer. On both January 30 and April 19, 2013, he used the Amazon website to purchase 1 Day Diet (One Day Diet) Best Slimming Capsule 60 Pills (“1 Day Diet ”), a weight loss drug containing sibutramine. Sibutramine is a Schedule IV stimulant that was withdrawn from the market in October 2010 by the Food and Drug Administration (the “FDA”) because its association with cardiovascular risks and strokes outweighed its limited weight loss value. Prior to the FDA's removal of sibutramine from the market, it was only available to consumers with a doctor's prescription. After its removal, the FDA advised physicians to stop prescribing sibutramine and to advise patients to cease its consumption due to its risks, including “major adverse cardiovascular events.”¹

At the time of his purchase, Nicosia did not know that 1 Day Diet contained sibutramine and he did not have a doctor's prescription. Sibutramine was not listed as an ingredient on Amazon's website or on the 1 Day Diet packaging, and Amazon sold the product without requiring a prescription. It was only revealed in November 2013 by the FDA that 1 Day Diet contained sibutramine.

Amazon has since stopped selling 1 Day Diet but never notified Nicosia that 1 Day Diet contained the stimulant or offered to refund his purchases. As of the filing of the complaint in July 2014, Amazon continued to sell other weight loss products identified by the FDA as containing undisclosed amounts of sibutramine.

B. Additional Factual Assertions

In moving to dismiss the complaint, Amazon submitted a declaration of a paralegal in its legal department, who represented that Amazon's records showed that Nicosia used an Amazon account created on June 9, 2008 to make his purchases and that the purchases were made in January and April 2013. Attached to the declaration was a screenshot of Amazon's account registration webpage apparently in use in 2008, bearing a copyright notice dated “1996–2014” (the “Registration Page”). The declaration also attached a screenshot of Amazon's order page, bearing a copyright notice dated “1996–2014”; a customer purchasing an item in 2013 apparently would have seen this screen before completing a purchase. Amazon later submitted a corrected version of the order page, also bearing a copyright notice dated “1996–2014” (the “Order Page”).²

The Registration Page and the Order Page both included a link to Amazon's “Conditions of Use.” The Amazon declaration provided a copy of the conditions of use apparently in effect in 2013, when Nicosia made his purchases, as they were last updated December 5, 2012 (“2012 Conditions of Use”). They included the following mandatory arbitration provision:

Any dispute or claim relating in any way to your use of any Amazon Service, or to any products or services sold or distributed by Amazon or through Amazon.com will be resolved by binding arbitration, rather than in court.... We each agree that any dispute resolution proceedings will be conducted only on an individual basis and not in a class, consolidated or representative action.

J. App. 20–21 (emphases omitted).

In his opposition to the motion to dismiss, Nicosia challenged Amazon's assertions that he had registered for an Amazon account. He also introduced a copy of Amazon's prior conditions of use, which his counsel contended were in place in 2008 (“2008 Conditions of Use”). These did not include an arbitration provision, but merely included a choice of forum clause designating “any state or federal court in King County, Washington,” as the forum with exclusive jurisdiction and venue over consumer claims exceeding $7,500. J. App. 50.

II. Procedural History

Nicosia brought this putative class action below against Amazon, alleging that Amazon had sold and was continuing to sell weight loss products containing sibutramine to its customers in violation of the CPSA, 15 U.S.C. §§ 2051 –89, and state consumer protection laws. He alleged additional claims for breach of implied warranty and unjust enrichment. The complaint sought both damages and an injunction to prohibit Amazon from further sale of products containing sibutramine.

After suit was filed, Amazon informed the district court that it intended to move to dismiss the complaint on the ground that Nicosia was subject to Amazon's mandatory arbitration provision. The district court stayed discovery pending resolution of Amazon's anticipated motion to dismiss.

On October 2, 2014, Nicosia sought reconsideration of the district court's stay of discovery with respect to “subjects put at issue by Defendant's requested motions to dismiss Plaintiff's individual claims and to compel arbitration.” Pl.'s Ltr. 1, ECF No. 23. Nicosia requested discovery concerning his “individual purchases of 1 Day Diet ... from Amazon, and discovery supporting Amazon's claims that Plaintiff provided his individual consent to arbitrate his claims made in this action.” Id. at 2. The district court denied Nicosia's motion for reconsideration of the discovery stay, clarifying that “all discovery in this action is temporarily stayed pending resolution of the motion to dismiss,” but ruling that “[t]o the extent limited discovery becomes necessary in connection with a factual dispute in the anticipated motion to dismiss, Plaintiff may then submit proposed narrowly-tailored and specific requests to the Court for approval prior to propounding any such request.” Special App. 4.

Nicosia moved for preliminary injunctive relief on December 19, 2014, requesting an order enjoining Amazon from selling weight loss products containing sibutramine and requiring Amazon to provide remedial notices to past consumers of those products.

On December 24, 2014, Amazon moved to dismiss the complaint. Amazon did not move to compel arbitration, but instead argued that the complaint should be dismissed “in favor of individual arbitration” for failure to state a claim because Nicosia had agreed to arbitration. Mot. to Dismiss 5, ECF No. 52–1. Amazon submitted the declaration and the exhibits described above.

The district court granted Amazon's motion to dismiss, concluding that Nicosia failed to state a claim because he was on constructive notice of Amazon's conditions of use. In doing so, the district court relied on the Order Page and the 2012 Conditions of Use as well as Amazon's assertion that Nicosia created an Amazon account in 2008 by signing on through the Registration Page, and used that account to make his purchases of 1 Day Diet . The district court then concluded that Nicosia was given reasonable notice of the conditions of use given: (1) the conspicuousness of the hyperlink to the 2012 Conditions of Use on the Order Page; and (2) the fact that Nicosia signed up for an Amazon account via the Registration Page in 2008, which required assent to the 2008 Conditions of Use that named King County as the forum for suit but provided that the conditions were subject to change.

The district court also concluded that questions as to the validity of the agreement as a whole had to be submitted to arbitration. After acknowledging that courts generally consider the merits of requested injunctive relief even where the underlying claims will be sent to arbitration, the district court then held that Nicosia lacked standing to pursue a preliminary injunction, and that, in any event, he could not obtain this relief because he did not demonstrate a likelihood of prevailing on the merits of his CPSA claim.

This appeal followed.

DISCUSSION

We consider first the district court's grant of Amazon's motion to dismiss and second its denial of Nicosia's motion for a preliminary injunction.

I. The Motion to Dismiss

A. Applicable Law

The principal issue presented is whether Nicosia is bound by the mandatory arbitration provision in Amazon's Conditions of Use. Procedural and...