Nicosia v. Amazon.com, Inc.
384 F.Supp. 3d 254 (2019)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
A non-signatory to an arbitration agreement may be equitably estopped from avoiding arbitration if they knowingly accept the direct benefits of an agreement containing an arbitration clause, or implicitly represent they are bound by the account's terms when using another's online account to transact. Online account terms agreed to during a free trial period can continue to bind the user upon conversion to a paid subscription if the terms of the trial contemplate such continuation.
Facts:
- On June 9, 2008, an Amazon account was created in the name of Annemarie Nicosia.
- On August 19, 2011, Amazon added an arbitration clause and a class action waiver to its Conditions of Use (COU).
- On September 30, 2011, Annemarie Nicosia's friend, Albert Dennis, with Annemarie's permission and using her account password, enrolled her Amazon account in the Amazon Mom program, which offered promotional Prime benefits.
- On October 11, 2012, Annemarie Nicosia signed up for a paid Amazon Prime subscription using her Amazon account after her Amazon Mom membership expired.
- On January 30, 2013, and April 19, 2013, Dean Nicosia (Plaintiff) made two purchases of '1 Day Diet,' a weight-loss supplement, using Annemarie Nicosia's Amazon account.
- In November 2013, the U.S. Food and Drug Administration (FDA) issued a press release stating that '1 Day Diet' contained sibutramine, a controlled substance removed from the market for safety reasons.
- In January 2014, Dean Nicosia discovered the FDA press release about '1 Day Diet' through a Google search.
Procedural Posture:
- On July 28, 2014, Plaintiff Dean Nicosia brought a putative class action against Defendant Amazon.com, Inc. in the United States District Court for the Eastern District of New York, alleging violations of the Consumer Product Safety Act and state law.
- On December 24, 2014, Amazon moved to dismiss the complaint, arguing, among other things, that Plaintiff had agreed to Amazon's Conditions of Use with each purchase.
- On February 2, 2015, the District Court (Judge Sandra L. Townes) granted Amazon's motion to dismiss, finding that all of Plaintiff's claims were subject to mandatory arbitration based on the checkout page terms.
- On appeal, the Second Circuit Court of Appeals disagreed with the District Court's finding that the checkout page was sufficient as a matter of law to bind Plaintiff to the Conditions of Use, and thus reversed and remanded the case, stating that 'reasonable minds could disagree' as to whether the notice was conspicuous.
- After further discovery, Amazon filed a new motion to compel arbitration and dismiss or, in the alternative, stay the proceedings.
- The matter was referred to Magistrate Judge Lois Bloom, who issued a Report and Recommendation (R&R) advising that Amazon's motion be granted, primarily on the grounds that Plaintiff had actual or constructive notice of the Conditions of Use through his use of the Amazon.com checkout page.
- Plaintiff timely objected to the R&R.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does an individual who uses another's online account, which is governed by an arbitration agreement and class action waiver assented to by the account holder during an initial program enrollment and subsequent paid subscription, become bound by that arbitration agreement under principles of equitable estoppel when making purchases through the account?
Opinions:
Majority - Glasser, Senior United States District Judge
Yes, an individual who uses another's online account, which is governed by an arbitration agreement assented to by the account holder, becomes bound by that arbitration agreement under principles of equitable estoppel when making purchases through the account. The court granted Amazon's motion to compel arbitration, primarily based on its 'derivative rights' argument, rather than the Magistrate Judge's Report and Recommendation's (R&R) focus on notice via the checkout page. The court found that Annemarie Nicosia, through her agent Albert Dennis, assented to Amazon's Conditions of Use (COU) containing an arbitration clause when she enrolled in Amazon Mom in 2011. The Amazon Mom sign-up process, a 'hybridwrap' agreement, provided reasonably conspicuous notice of the Amazon Prime Terms and Conditions (which incorporated the COU's arbitration clause) directly below the 'Sign up' button, along with explicit contract-forming language. The court determined that the Amazon Mom Arbitration Agreement continued to apply even after Annemarie's free Amazon Mom membership expired and she manually enrolled in a paid Amazon Prime subscription, as the agreement text itself placed no temporal limitations, and Amazon Mom was promoted as a free trial of Prime. Furthermore, the court held that Dean Nicosia, as a non-signatory, was bound by this arbitration agreement under the doctrine of equitable estoppel. When Dean Nicosia used Annemarie's account to purchase products, he implicitly represented that he was the true accountholder and directly benefited from Annemarie's contractual relationship with Amazon, thereby accepting the benefits of the agreement containing the arbitration clause. The court rejected Plaintiff's arguments that Amazon waived its right to arbitrate or that the arbitration agreement was invalid due to unlawful modification or illegality of the product sold.
Analysis:
This case clarifies how online arbitration agreements can bind non-signatories, particularly within family or shared account contexts. It emphasizes that users implicitly represent they are bound by an account's terms when using it and directly benefit from the underlying contractual relationship, which prevents them from selectively enforcing the parts of the contract that benefit them while disavowing those that do not. The decision reinforces the broad applicability of equitable estoppel in the context of online terms of service, especially where class action waivers are present. Future cases involving shared digital accounts or reliance on another's established online contractual relationship will likely cite this precedent to compel arbitration for non-signatory users.
