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Starke v. Squaretrade, Inc.

United States District Court, E.D. New York

August 2, 2017

ADAM J. STARKE, individually and on behalf of all others similarly situated, Plaintiff,
v.
SQUARETRADE, INC., Defendant.

          MEMORANDUM & ORDER

          NICHOLAS G. GARAUFIS, UNITED STATES DISTRICT JUDGE.

         In this putative class action, Plaintiff Adam Starke alleges that Defendant SquareTrade engaged in fraudulent and unfair business practices in connection with its protection plans for consumer goods. (Compl. (Dkt. 1).) Pending before the court is SquareTrade's motion to compel arbitration and stay the action (the "Motion"). (Def. Mot. (Dkt. 29).) SquareTrade seeks to enforce an arbitration provision that first appeared in a "terms and conditions" document provided via hyperlink in an email confirming Starke's purchase of a SquareTrade protection plan on amazon.com ("Amazon"). For the following reasons, the court DENIES SquareTrade's Motion.

         I. BACKGROUND

         A. Starke's Allegations

         SquareTrade markets, sells, and administers extended warranties, service contracts, and accident protection plans for consumer products, including household appliances and electronic devices. (Compl. ¶ 18.) SquareTrade has sold its protection plans to "over 25 million customers ... through a number of major retailers, such as [Amazon], Costco, Sam's Club, Target, Staples, Office Depot and Toys <R' Us." (Id. ¶¶ 19-20.) Starke alleges that SquareTrade relies on several deceptive practices in connection with the sale of its protection plans on Amazon, with the result that consumers are often unaware of terms and conditions that would restrict their coverage and limit their available remedies. (See id ¶¶ 31-49.) Most relevant for Defendant's Motion is an arbitration provision that appeared for the first time in a set of post-sale terms and conditions. (See id. ¶¶ 41-42.)

         Starke's individual claims arise out of a SquareTrade 2-Year Electronics Protection Plan (the "Protection Plan") purchased through Amazon on January 5, 2016. (Starke Decl. (Dkt. 30-1) ¶ 5.) Starke purchased the Protection Plan to cover a CD player that he ordered from Staples on December 27, 2015. (Id. ¶ 3.)

         1. The Amazon Purchase Page

         The Amazon product page (the "Purchase Page") for the Protection Plan contains several disclosures in the area of the screen next to the "Add to Cart" button a consumer would click to purchase the plan. (Purchase Page (Dkt. 30-2 at ECF pp.19-22) at ECF p.19.) In addition to the price, the disclosures provide as follows:

• Coverage for product breakdowns and malfunctions
• 24/7 customer support
• Free shipping on all repairs with no deductibles or hidden fees
• Fully transferable with gifts. Cancel anytime, full refund in the first 30 days
• If you purchase this service plan and eligible product for this service plan, you acknowledge that Amazon may send the service plan seller relevant product and price information for the purpose of administering the plan
*Please note: Your Service Contract will be delivered via email and not mailed to you. It will come from Square Trade Warranty Services (warrantysupport@squaretrade.com) within 24 hours of purchase. If you don't receive it, please visit www.squaretrade.com/help.

(Id.)

         Several screens further down on the Purchase Page, under a section called "Things to know, " the first bullet point reads: "SquareTrade Protection Plans are only valid for new products purchased at Amazon within the last 30 days." (Id. at ECF p.20 (emphasis added).) Starke alleges that he was unaware that the Protection Plan he purchased did not cover items purchased through retailers other than Amazon. (Starke Decl. ¶ 5.) He believed that he was purchasing a valid plan to protect the CD player he ordered days earlier from Staples. (See id.)

         Still further down on the Purchase Page, in a section called "Product information, " under the heading "Technical Specifications, " is a blue hyperlinked word: "Warranty." (Purchase Page at ECF p.20.) Starke did not click the "Warranty" hyperlink. (Starke Decl. ¶ 6.) Had he done so, he would have accessed a document previewing the terms and conditions (the "Pre-Sale T&C") governing the Protection Plan.[1] (Id; see also Pre-Sale T&C (Dkt. 1 at ECF pp.33-34).) The Pre-Sale T&C do not mention arbitration. (See Pre-Sale T&C.) SquareTrade admits that, as a result of this lawsuit, it discovered that, at the time of Plaintiff s purchase, the Pre-Sale T&C available on the Amazon Purchase Page were outdated.[2] (Saram Decl. (Dkt. 29-3) ¶ 3; Def. Mem. in Supp. of Def. Mot. ("Def. Mem.") (Dkt. 29-1) at 5.)

         2. The Confirmation Email

         On January 5, 2016, the day Starke purchased the Protection Plan, he received an email (the "Confirmation Email") from purchaseconfirmation@squaretrade.com with the subject line: "SquareTrade Protection Plan on Amazon.com - Contract is Enclosed." (Confirmation Email (Dkt. 30-1 at ECF p.10).) The Confirmation Email had no attachments. (Id/) The Confirmation Email began:

Thank you for purchasing your new Electronics item protection plan. You're all set! If you'd like to manage your SquareTrade account online, just click the link below.
IMPORTANT: You'll need your receipt to file a claim. Submit your receipt now, and we'll keep track of it for you.

(Id.) Starke immediately sent SquareTrade a copy of the receipt, which clearly indicated that the CD player was purchased at Staples. (Starke Decl. ¶ 11.) Two days later, SquareTrade confirmed that it had received the copy of his receipt. (Id. ¶ 12.)

         Below the "Thank you" text described above, the body of the Confirmation Email was introduced with the heading "Your Protection Plan." This section contained a summary chart that listed plan details including: Coverage Amount, Protection Plan Price, Coverage Type, Covered Product, Deductible, Quantity, Coverage Term, Coverage Start Date, Coverage End Date, and Waiting Period. (Confirmation Email.)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At the bottom of the Confirmation Email, the phrase "Terms & Conditions" appeared as a blue hyperlink, (id.) This text linked to a set of post-sale terms and conditions (the "Post-Sale T&C") that Starke characterizes as significantly more restrictive than the Pre-Sale T&C. (Compl. &para;&para; 39-41; see also Post-Sale T&C (Dkt. 1 at ECF pp.36-46).) In particular, the Post-Sale T&C include a provision (the "Arbitration Provision") purporting to bind the parties to arbitration of "[a]ny controversy or claim arising out of or relating to this Protection Plan, or breach thereof... in accordance with the Commercial Arbitration Rules of the American Arbitration Association." (Compl. ¶ 42; Post-Sale T&C § 15.) The Post Sale T&C also contain a class action waiver and a California choice-of-law clause. (Post-Sale T&C § 15.) None of ...


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