On July 19, 2018, United States Magistrate Judge Mark Lane issued a Report and Recommendation recommending that United States District Judge Robert Pitman for the Western District of Texas grant a motion to compel arbitration and dismiss a putative class action on the grounds that the Plaintiff agreed to the Defendants' website's Terms and Conditions, which contained a mandatory arbitration clause. May, et al. v. Expedia Inc., et al., No. 1:16-cv-01211-RP, Dkt. No. 24.
HomeAway User Files Putative Class Action. HomeAway is an online marketplace for vacation rental properties where property owners can list their properties for rent and "travelers" can book rental properties. HomeAway's original business model was to charge owners a fee to list their properties (either on a one-year subscription or pay-per-booking basis) and to allow travelers to search and book rentals for free. HomeAway was acquired by Expedia in 2015 and changed its business model to charge travelers a fee to book rentals in mid-2016. Plaintiff James May had been a property owner who used HomeAway since 2013.
In November 2016, Plaintiff filed a putative class action against Expedia and HomeAway for breach of contract, fraud, fraudulent concealment, and Oregon and Texas state law claims based on HomeAway's imposition of a "traveler fee" and its negative effect on owners who used HomeAway to rent properties. Defendants moved to compel Plaintiff to arbitrate his claims based on HomeAway's 2016 Terms and Conditions, which contained a mandatory arbitration clause. Defendants argued that Plaintiff agreed to the Terms and Conditions twice: (1) when he renewed his HomeAway subscription in September 2016 and (2) when he booked his property through HomeAway's website in October 2016. Plaintiff argued he did not agree to the Terms and Conditions because (1) he renewed his HomeAway subscription in his wife's name, (2) he did not receive actual or constructive notice that he agreed to the Terms and Conditions when he clicked "Continue" during the booking process, and (3) any agreement to arbitrate is illusory and unenforceable. Following the Fifth Circuit's decision in Arnold v. HomeAway, Inc., 890 F.3d 546 (5th Cir. 2018), the parties agreed that Plaintiff's argument that the arbitration agreement is illusory is precluded and that the only issue before the court was whether the parties entered an arbitration agreement. Magistrate Judge Lane then issued his Report and Recommendation finding Plaintiff contractually bound to the 2016 Terms and Conditions based on his subscription renewal and booking his property through HomeAway.
HomeAway User's Assignment of Account Not Enforceable. First, Magistrate Judge rejected Plaintiff's argument that he did not agree to the 2016 Terms and Conditions on his own behalf because he purchased the renewal subscription in his wife's name on her behalf and with her authorization. Although the Plaintiff specifically renewed the subscription in his wife's name to avoid being bound by the 2016 Terms and Conditions, he offered no legal argument or basis to show that this had any legal effect. The 2015 Terms and Conditions expressly did not allow Plaintiff to assign the Terms and Conditions without HomeAway's consent, and there was no evidence that HomeAway consented to the purported assignment from Plaintiff to his wife.
HomeAway User Was on Notice of Agreement to Terms and Conditions. Second, Magistrate Judge Lane rejected Plaintiff's argument that he was not aware that he was agreeing to the 2016 Terms and Conditions when he booked his property through HomeAway's website because the placement and typeface of the hyperlink were not sufficient to put him on notice. Magistrate Judge Lane distinguished Nguyen v. Barnes & Noble, Inc., 763 F.3d 1171, which involved a hyperlink to the terms at the bottom of a webpage and did not require any affirmative action to demonstrate the user's agreement to the terms. In contrast, HomeAway's website presented the user with a notice directly above the "Continue" button that informed the user that he was agreeing to the hyperlinked Terms and Conditions by clicking the button to continue. A user could not complete the transaction without clicking the "Continue" button. This was sufficient to put Plaintiff on notice that he was agreeing to the hyperlinked Terms and Conditions by continuing the transaction.
HomeAway User Equitably Estopped From Arguing Not Bound. Finally, Magistrate Judge Lane noted that if Plaintiff was not bound by the Terms and Conditions, Plaintiff could gain all of the benefits of his HomeAway account without being bound to terms he did not want to accept. Such a result dictates that even if Plaintiff was not contractually bound, he should be equitably estopped from contending that he is not bound by the Terms and Conditions.
HomeAway Takeaway. Although Judge Pitman has not issued a final order granting or denying the motion to compel arbitration, Magistrate Judge Lane's Report and Recommendation provides a roadmap for how companies can hold users to their agreement to terms even where the user attempts to avoid being bound.
Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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