FYI: Fla App Ct (3rd DCA) Holds Monthly Text Messages with Link to Term of Service Sufficient to Compel Arbitration

The District Court of Appeal for the Third District of Florida ("3rd DCA") recently reversed a trial court's order denying a defendant's motion to compel arbitration, holding that monthly text messages with a hyperlink to the defendant's terms of service provided the consumer with sufficient notice that disputes regarding his relationship with the defendant was subject to arbitration.

 

A copy of the opinion is available at:  Link to Opinion

 

A consumer ("Consumer") filed a putative class action lawsuit against his cellular telephone provider alleging that it improperly charged the Consumer and other customers sales tax on the full price of mobile phones purchased using a rebate, in supposed violation of Florida's Deceptive and Unfair Trade Practices Act, Fla. Stat. 501.201, et seq. ("FDUTPA").

 

The telecom provider moved to compel arbitration pursuant to a provision within its terms and conditions of service.  The trial court denied the motion.  The defendant appealed, and the 3rd DCA reversed the summary denial "for a determination after an evidentiary hearing of the threshold issue of whether the arbitration clause was contained in a binding agreement between the parties."

 

At the evidentiary hearing on remand, the Consumer disputed receipt of any written documents at the time of sale which put him on notice of the arbitration provision.  This diverged from the testimony of the defendant that a service form provided with all new phones required acknowledgment and acceptance of the company's terms and conditions of service —including arbitration of any disputes — and a "quick start guide" that accompanies all phones included the arbitration provision.

 

The Consumer did acknowledge that he received monthly text messages both reminding him to make payment and acknowledging receipt of same, stating "Terms & Conditions apply," and providing a web link to access the terms and conditions, but stated that he never used the hyperlink and "had no reason to go there."  After the litigation was initiated, the monthly payment reminder texts expressly stated that the Telecom Company's "Terms & Conditions including arbitration apply" and provided a link to terms of service.

 

Based upon the evidence presented, the trial court concluded that there was no binding agreement to arbitrate because the Consumer did not receive the purchase documents and because the text messages did not put Consumer on notice of the arbitration provision.  Accordingly, the motion to compel arbitration was again denied.  The instant appeal ensued.

 

At issue on appeal was whether or not Consumer was on notice of the arbitration provision contained in the defendant's terms and conditions.  Under Florida law, a consumer may be compelled to arbitrate a dispute only if he or she agreed to do so (Basulto v. Hialeah Auto., 141 So. 3d 1145, 1157 (Fla. 2014)), and well-settled legal principles of contract formation suffice to decide cases such as this one, involving contracts entered into and evidenced by electronic means (citations omitted).

 

The 3d DCA turned to its sister court's decision in Vitacost.com, Inc. v. McCants, 210 So. 3d 761, 762 (Fla. 4th DCA 2017) for guidance and analysis of the two types of agreements generally found in internet sales cases which concern issues of notice and assent. 

 

A 'clickwrap' agreement occurs when a website directs a purchaser to the terms and conditions of the sale and requires the purchaser to click a box to acknowledge that they have read those terms and conditions." Id.

 

"A 'browsewrap' agreement occurs when a website merely provides a link to the terms and conditions and does not require the purchaser to click an acknowledgement during the checkout process. The purchaser can complete the transaction without visiting the page containing the terms and conditions." Id.  

 

In Vitacost.com, the Florida appellate court held that the agreement was not sufficiently conspicuous because the purchaser had to scroll through multiple pages of products before locating the hyperlink at the bottom of a final webpage.

 

Here, the Appellate Court concluded that although the agreement did not fit squarely into either category, it was akin to a 'browsewrap' agreement in that the Consumer completed his transaction with the defendant without visiting the web page containing the terms and conditions. 

 

However, the pre-litigation text messages to the Consumer here were more direct and conspicuous than those in Vitacost.com and other 'browsewrap' pages, in that the notice and reference to the Telecom Provider's terms and conditions was a hyperlink at the end of short text messages which Porter could use to read the terms and conditions.  The Consumer did not dispute receipt of the text messages, and in fact, testified that he understood the messages contained a hyperlink which he could use to read the terms and conditions, but simply chose not to click on the hyperlink. 

 

Noting well-established Florida case law that "a person has no right to shut his eyes or ears to avoid information, and then say that he has no notice," the Appellate Court concluded that the Consumer was put on sufficient notice that his contact with the defendant was subject to arbitration.  Sapp v. Warner, 141 So. 124, 127 (Fla. 1932); see also Meyer v. Uber Techs., Inc. 868 F.3d 66, 74-75 (2d Cir. 2017) ("Where there is no evidence that the offeree had actual notice of the terms of the agreement, the offeree will still be bound by the agreement if a reasonably prudent user would be on inquiry notice of the terms.").

 

Accordingly, the trial court's order denying arbitration was reversed and remanded for further proceedings.

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct:  (312) 551-9320
Fax: (312) 284-4751

Mobile:  (312) 493-0874
Email: rwutscher@MauriceWutscher.com

 

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FYI: Wisc Sup Ct Holds Fire Spreading Across Multiple Properties Was Single "Occurrence" Under CGL Policy

Reversing the rulings of both the trial court and intermediate appellate court, the Supreme Court of Wisconsin recently concluded that a fire which spread across several properties was a single 'occurrence' for purposes of the commercial general policy, and not a new 'occurrence' each time the fire crossed a property line.

 

By determining that the fire was a single 'occurrence' under the policy, the policy's reduced per-occurrence limit for property damage "due to fire, arising from logging or lumbering operations" under its incorporated endorsement, rather than its higher aggregate limit, applied.

 

A copy of the opinion is available at:  Link to Opinion

 

In May 2013, a fire broke out on land owned by a forest company which burned 7,442 acres over three days (the "Fire").  The fire allegedly began from a piece of logging equipment owned by a logging company (the "Policyholder"). 

 

At the time of the fire, the Policyholder was insured by a multistate property and casualty insurance company ("Insurer") under a commercial general liability policy (the "Policy") and umbrella policy.  The Policy provided a $2 million general aggregate limit and $1 million per-occurrence limit, and further reduced the per-occurrence limit to $500,00 for property damage "due to fire, arising from logging or lumbering operations" under its Logging and Lumbering Operations Endorsement ("Endorsement").

 

The insurer filed a declaratory judgment action to determine its coverage obligations, and argued on partial summary judgment that the Fire was a single occurrence, thus triggering the $500,000 limit under the Endorsement. 

 

Relying on the Wisconsin Supreme Court's opinion in Wilson Mut. Ins. Co. v. Falk, 2014 WI 136, 36 Wis. 2d 67, 857 N.W. 2d 156 (spread of liquid cow manure contaminating wells of neighboring properties considered 'multiple occurrences' under insurance policy), the trial court concluded that although there was one uninterrupted cause of the fire, each 'seepage' of fire onto another's property constitute[d] a separate occurrence for purposes of the policy." 

 

Thus, the Policy's $2 million general aggregate limit, rather than the $500,000 'per occurrence' limit under the Endorsement applied.  The Insurer appealed.

 

On appeal, the appellate court affirmed the trial court's determination that each time the fire spread into a new piece of property and caused damage constituted an 'occurrence,' and the higher $2 million Policy limit rather than the $500,000 Endorsement limit, applied.  The Insurer petitioned for Supreme Court review of the appellate court's ruling.

 

The issue on review before the Wisconsin Supreme Court was whether or not the Fire constituted a single occurrence for purposes of the Policy, or whether there was instead a new occurrence each time the fire crossed a property line. 

 

The Court initially reviewed the plain language of the Policy, which covers bodily injury or property damage caused by an "occurrence," which the Policy defined as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions."

 

Citing past precedent, the Wisconsin Supreme Court looked to the "cause theory," to analyze whether the Fire constituted a single occurrence or multiple occurrences. 

 

Under the cause theory, "where a single, uninterrupted cause results in all of the injuries and damage, there is but one 'accident' or 'occurrence.'" Welter v. Singer, 126 Wis. 2d 242, 250, 376 N.W.2d 84 (Ct. App. 1985).  The elements of time and geography are crucial to this analysis: if "cause and result are 'so simultaneous or so closely linked in time and space as to be considered by the average person as one event,'" then only a single occurrence has taken place.  Falk, 360 Wis. 2d 67, ¶66 (citing Welter, 126 Wis. 2d at 251). "If, however, that cause is interrupted or replaced by another cause the chain of causation is broken and more than one accident or occurrence has taken place." Olsen v. Moore, 56 Wis. 2d 340, 349, 202 N.W.2d 236 (1972).

 

In review of the appellate court's reliance upon Falk, the Wisconsin Supreme Court found its approach unpersuasive. 

 

Although the manure in Falk seeped over the course of an unspecified amount of time, here, the Fire burned continuously for three days, in a discrete area, and was caused by a single precipitating event.  See Welter, 126 Wis. 2d at 250-251 ("As long as the injuries stem from one proximate cause there is a 'single occurrence.'").  Thus, regardless of how many property lines the fire crossed, because the damage closely follows the cause in both time and space, it would reasonably be considered by the average person to be one event.  Plastics Eng'g Co., 315 Wis. 2d 556.  Moreover, the court's focus in Falk primarily dealt with the policy's pollution exclusion, and provided limited cause theory analysis.  For these reasons, the Supreme Court concluded that Falk was not instructive.

 

The Wisconsin Supreme Court further determined that the appellate court's analysis to determine the number of occurrences incorrectly applied the "effect theory" rejected in earlier rulings. 

 

Specifically, the appellate court's contention that "the fire had to spread to each piece of real property for another property owner to suffer property damage due to the fire" improperly focused on the effect of individual property owners, rather than the cause of the damages.  This evaluation strayed from the Wisconsin Supreme Court's established "cause theory" methodology, and incorrectly led the conclusions that the Fire constituted multiple 'occurrences.'

 

Lastly, the Wisconsin Supreme Court reasoned that a finding that the Fire constituted multiple 'occurrences' would lead to arbitrary and reasonable consequences. 

 

The Court noted that if the exact same fire had burned land owned by only one person instead of several, that it would constitute but one occurrence; thus, an insurer would pay more in the event the same amount of land burned is split among several owners.  It further noted that the appellate courts' assertion that "there was an 'occurrence' each time the fire spread to a new piece of real property and caused damage" leads to unreasonable results, as it is the nature of a fire to "fuel and expand by the consumption of new materials," and its constant refueling and expanding would unnecessarily result in "unfathomably large number of occurrences regardless of how many property lines it crosses."

 

Citing the decisions of state and federal courts throughout the country, the Wisconsin Supreme Court concluded that although the Fire destroyed the property of multiple claimants, it constituted a single occurrence pursuant to the Policy, and the $500,000 Endorsement limit applied.

 

Accordingly, the appellate court's opinion was reversed and the matter was remanded to the trial court for further proceedings.

 

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct:  (312) 551-9320
Fax: (312) 284-4751

Mobile:  (312) 493-0874
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

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FYI: 9th Cir Holds State Contract Law SOL Applies to TILA Rescission Claims Following Timely Cancellation

The U.S. Court of Appeals for the Ninth Circuit recently held that Washington's six-year statute of limitations governing contracts instead of the Truth in Lending Act's ("TILA") one-year statute of limitations applies to claims to enforce rescission under TILA, after a notice of right to cancel was timely submitted.

 

The Ninth Circuit also held that the trial court should have given the borrowers leave to amend the complaint because the borrower's rescission claim under TILA was not time-barred, and amending the complaint would not be futile.

 

A copy of the opinion is available at:  Link to Opinion

 

Husband and wife borrowers obtained a refinance mortgage loan in April of 2010, but the bank that extended the loan ("Bank") allegedly failed to provide notice of the borrowers' right to rescind the loan under TILA. As a result, the borrowers could rescind the loan within three years after the loan was made in April of 2010 under TILA section 1635(f). Two weeks prior to the expiration of the three-year period, the borrowers sent the Bank a notice of intent to rescind the loan. The Bank did not respond.

 

In February of 2017, the Bank filed a non-judicial foreclosure action. The borrowers responded by filing suit in the U.S. District Court for the Western District of Washington, seeking rescission of the loan under TILA section 1635(f), declaratory and injunctive relief, and damages under Washington's Consumer Protection Act ("WCPA").

 

The Bank moved to dismiss the complaint, arguing that the claims were time-barred because the borrowers failed to sue within 3 years after the loan was made.

 

The trial court found that the borrowers "timely rescinded the loan by sending the notice of rescission to the Bank within three years of the loan's consummation[,]" but still granted the motion to dismiss because the borrowers did not file suit within one year as required by section 1640 of TILA, which applies to claims for damages.

 

The trial court "acknowledged that the limitations period applicable to TILA rescission enforcement claims is an 'unsettled issue of law'" after the Supreme Court's decision in Jesinowski v. Countrywide Home Loans in 2015 but, because "some statute of limitations must apply … borrowed the limitations period for monetary damages under TILA, 15 U.S.C. § 1640(3)…. [,]" concluded that all of the borrowers' claims were time-barred and dismissed the complaint without leave to amend. The borrower's appealed.

 

On appeal, the Ninth Circuit explained that "TILA gives borrowers the right to rescind certain loans within 3 business days after consummation of the loan. 15 U.S.C. § 1635(a). However, if the creditor fails to make required TILA disclosures to the borrower, the window for rescission is expanded to three years from consummation of the loan. 15 U.S.C. § 1635(f). Once a borrower rescinds a loan under TILA, the borrower 'is not liable for any finance or other charge, and any security interest given by the [borrower] … becomes void upon such rescission.' 15 U.S.C. § 1635(b); see 12 C.F.R. § 226.23(a)(3). Within 20 days after the creditor receives a notice of rescission, the creditor must take steps to wind up the loan. 15 U.S.C. § 1635(b). 'Upon the performance of the creditor's obligations under this section, the [borrower] shall tender the property to the creditor … [or] tender its reasonable value.' Id. Once both creditor and borrower have so acted, the loan has been wound up."

 

The Court further explained that, until Jesinowski, it "required that borrowers effectuate TILA loan rescissions by giving lenders their notice of rescission and also bringing suit to enforce that rescission … within the three-year window set forth in 15 U.S.C. § 1635(f)."

 

However, the Supreme Court of the United States in Jesinowski "eliminated the need for a borrower to bring suit within the three-year window to exercise TILA rescission. Instead, 'rescission is effected when the borrower notifies the creditor of his intention to rescind.'" In so ruling, the Supreme Court "did not clarify when a suit to enforce the rescission must be brought after a lender's failure to act on that notice of rescission."

 

Thus, the Ninth Circuit was confronted with the following question: "when a borrower effectively rescinds a loan under TILA, but no steps are taken to wind up the loan, when must suit be brought to enforce that rescission?"

 

The borrowers argued that no statute of limitations applies to a rescission action given the Jesinowski, decision. The Bank argued that the applicable statute of limitations was "Washington's two-year catchall statute of limitations."

 

The Court agreed with the trial court that some statute of limitations applied, but rejected the trial court's and the parties' "arguments as to what that limitation period should be."

 

First, the Court reasoned that where "there is no statute of limitations expressly applicable to a federal statute, … 'the general rule is that a state limitations period for an analogous cause of action is borrowed and applied to the federal claim.' … As a 'narrow exception to the general rule,' courts may 'decline to borrow a state statute of limitations only when a rule from elsewhere in federal law clearly provides a closer analogy than available state statutes …."

 

The Court concluded that because "TILA does not provide a statute of limitations for rescission enforcement claims[,] we borrow from analogous Washington state law. … Under Washington's general contract law, the statute of limitations sets forth a six-year limitation period for an 'action upon a contract in writing, or liability express or implied arising out of a written agreement.'"

 

Because the loan documents were written agreements and the right to rescind under TILA "arises out of that written agreement[,] … contract law provides the best analogy" and the Court borrowed "the general contract law statute of limitations. … There is no federal law that provides a closer analogy, nor to TILA policies at stake and the practicalities of TILA rescission litigation make federal law a more appropriate vehicle for interstitial lawmaking."

 

The Court rejected the trial court's holding that "TILA's one-year statute of limitations  for legal damages claims" applied to the case at bar for two reasons.

 

First, the district court's decision "was based primarily on a misreading of [borrowers'] complaint as requesting TILA relief rather than relief under the WCPA."

 

Second, "TILA provides for both legal damages and equitable relief but only includes a statute of limitations for legal damages relief. Because the statute does not provide that the same one-year limitation applies to both damages claims and claims for equitable relief and "Congress surely know how to draft the statute [to so provide but didn't]" the trial court erred when it refused to borrow the analogous limitations statute from state law. "Only when a state statute of limitations would 'frustrate or significantly interfere with federal policies' do we turn instead to federal law to supply the limitation period.

 

The Ninth Circuit held that applying "Washington's longer six-year contract statute of limitations would actually further TILA's purpose, which is to protect consumers from predatory lending practices and promote the informed use of credit. 15 U.S.C. § 1601(a)."

 

The Court rejected the Bank's argument that Washington's two-year catch-all limitations statute applied because "[i]n similar contexts, the Supreme Court previously determined that catchall statutes were not substantively analogous and declined to borrow them." There was no need to resort to the catchall statute when Washington's contract statute was more closely analogous.

 

Finally, since courts "'do not ordinarily assume that Congress intended that there be no time limit on actions at all,' the Ninth Circuit rejected the borrowers' "argument that no statute of limitations applies to TILA rescission enforcement claims."

 

The Ninth Circuit concluded that because the borrowers' "cause of action arose in May of 2013 when the Bank failed to take any action to wind up the loan within 20 days of receiving [the] notice of rescission[,] … the district court erred in dismissing the claim as time barred." The trial court also erred by dismissing with prejudice because the borrowers' rescission enforcement claim was not time barred under Washington's six-year statute of limitations.

 

Thus, the order of dismissal was reversed and the case remanded for further proceedings.

 

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct:  (312) 551-9320
Fax: (312) 284-4751

Mobile:  (312) 493-0874
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

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