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Davis v. USA Nutra Labs

United States District Court, D. New Mexico

March 28, 2018

LYNN DAVIS, Plaintiff,
USA NUTRA LABS, a Georgia Company, and GROUPON, INC., a Delaware Corporation, Defendants.


          MARTHA VAZQUEZ, United States District Judge.

         THIS MATTER comes before the Court on Defendant Groupon Goods Inc.'s Motion to Compel Arbitration and Stay Proceedings [Doc. 24]. The Court, having considered the motion, briefs, and relevant law, and being otherwise fully informed, finds that the Motion is well-taken and will be granted.


         In December 2013, Plaintiff Lynn Davis received email advertisements from Defendant Groupon Goods, Inc. (“Groupon”) promoting Garcinia Cambogia, a weight loss product. Doc. 1 at ¶ 7. On or about December 6, 2013, Plaintiff ordered three bottles, or a three-month supply, of Garcinia Cambogia tablets through Groupon's website. Id. at ¶ 9.

         According to the evidence submitted by Groupon, before placing her order, Plaintiff was required to create an account. Doc. 24-1. To create her account, Plaintiff was required to click a box immediately to the left of the words, “I agree to the Terms of Use and Privacy Statement.” Doc. 24-2. Further, before finalizing her order, Plaintiff was required to click a button that said “Complete Order.” Doc. 43-1 at ¶ 7. Directly below the “Complete Order” button was a sentence stating: “[b]y clicking ‘Complete Order' I accept the Terms and Conditions and Privacy Policy.” Doc. 24-4. The phrase “Terms and Conditions” contained a hyperlink that permitted the customer to access the Terms of Use by clicking on the phrase “Terms and Conditions.” Doc. 43-1 at ¶ 9.

         The version of Groupon's Terms of Use that was in effect on December 6, 2013, the date of Plaintiff's purchase of the Garcinia Gambogia tablets, was a 22-page document. The First page had a table of contents, with hyperlinks to each numbered-section, preceded by the following introduction:

Welcome to the Groupon Site. In order to use our Site (as defined below), you must agree to our Terms of Use - The Terms of Use are our “rules of the road” - they are important and contain many legal disclosures that you should read carefully - including terms of sale that apply when you buy something through the Site and terms specifying permissible uses of the Site. If you have any questions about these Terms of Use, contact us here.

Doc. 24-3 at 1. Section 18 of the document was titled, “Arbitration, ” and provided as follows:

We will make every reasonable effort to resolve any disagreements that you have with Groupon. If those efforts fail, by using this Site you agree that any claim, dispute, or controversy you may have against Groupon arising out of, or relating to, or connected in any way with this Agreement this Site or the purchase or sale of any voucher(s), shall be resolved exclusively by final and binding arbitration administered by the American Arbitration Association (“AAA”) and conducted before a single arbitrator pursuant to the applicable Rules and Procedures established by AAA (“Rules and Procedures”). You agree further that: (a) the arbitration shall be held at a location determined by AAA pursuant to the Rules and Procedures (provided that such location is reasonably convenient for you), or at such other location as may be mutually agreed upon by you and Groupon; (b) the arbitrator shall apply Illinois law consistent with the Federal Arbitration Act and applicable statutes of limitations, and shall honor claims of privilege recognized at law; (c) there shall be no authority for any claims to be arbitrated on a class or representative basis; arbitration can decide only your and/or persons or parties who may be similarly situated; (d) in the event that you are able to demonstrate that the costs of arbitration will be prohibitive as compared to the costs of litigation, Groupon will pay as much of your filing and hearing fees in connection with the arbitration as the arbitrator deems necessary to prevent the arbitration from being cost-prohibitive; and (e) with the exception of subpart (c) above, if any part of this arbitration provision is deemed to be invalid, unenforceable or illegal, or otherwise conflicts with the Rules and Procedures established by AAA, then the balance of this arbitration provision shall remain in effect and shall be construed in accordance with its terms as if the invalid, unenforceable, illegal or conflicting provision were not contained therein. If, however, subpart (c) is found to be invalid, unenforceable or illegal, then the entirety of this Arbitration Provision shall be null and void, and neither you nor Groupon shall be entitled to arbitrate their dispute.

Doc. 24-3 at 20.

         Plaintiff received the tablets that she had ordered, and began taking them in late January or early February 2014. Doc. 1 at ¶ 11. In March, she began to feel ill and stopped taking the tablets. Id. at ¶ 12. Thereafter, in May 2014, Plaintiff was hospitalized and found to have nearly no liver function. Id. at ¶¶ 17-18. Ultimately, Plaintiff needed a liver transplant, which she received in June 2014, at the Mayo Clinic Hospital in Phoenix, Arizona. Id. at ¶¶ 18, 19. The Mayo Clinic Hospital determined that the Garcinia Cambogia tablets were the probable cause of Plaintiff's acute liver failure. Id. at ¶ 20.

         As a result, Plaintiff commenced the instant action against, inter alia, Groupon, alleging claims of strict liability for defective product, strict liability for failure to warn, negligence, and unfair trade practices. Id. at ¶¶ 25-49. Plaintiff also seeks punitive damages based on her claims. Id. at ¶¶ 50-51.

         Groupon filed the instant motion to compel arbitration and stay proceedings, arguing that Plaintiff agreed to Groupon's terms of service, and that those terms of service require arbitration of the dispute in this action. Plaintiff opposes Groupon's motion, arguing that no valid arbitration agreement exists, and that even if there is a valid arbitration agreement, her claims are outside the scope of any such agreement.


         The Federal Arbitration Act (“FAA”) applies to arbitration provisions in “a contract evidencing a transaction involving commerce.” 9 U.S.C. § 2. Under the FAA, such arbitration provisions “are valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. Section 2 of the FAA creates “a substantive rule applicable in state as well as federal courts.” Southland Corp. v. Keating, 465 U.S. 1, 16 (1984). To implement this substantive rule, “a party may apply to a federal court for a stay of the trial in an action ‘upon any issue referable to arbitration under an agreement in writing for such arbitration.” 9 U.S.C. § 3. Describing the FAA as “a liberal federal policy favoring arbitration, ” the Supreme Court has emphasized “the fundamental principle that arbitration is a matter of contract, ” and, accordingly, that “courts must place arbitration agreements on an equal footing with other contracts . . . and enforce them according to their terms.” AT&T Mobility LLC v. Conception, 131 S.Ct. 1740, 1745 (2011).

         The FAA, however, “was not enacted to force parties to arbitrate in the absence of an agreement.” Avedon Eng'g, Inc. v. Seatex, 126 F.3d 1279, 1286 (10th Cir. 1997). Rather, Congress' concern “was to enforce private agreements into which parties had entered.” Id. Accordingly, “[t]he existence of an agreement to arbitrate is a threshold matter which must be established before the FAA can be invoked.” Id. at 1287. On a motion to compel arbitration, the district court's role is to determine (1) whether the parties have entered into a valid agreement to arbitrate, and (2) whether the dispute in question falls within the scope of that agreement. See Keena v. Groupon, 192 F.Supp.3d 630, 634 (W.D. N.C. 2016); Cordas v. Uber Tech., Inc., 228 F.Supp.3d 985, 988 (N.D. Cal. 2017).


         Under Section 3 of the FAA, Groupon moves to compel Plaintiff to arbitrate her claims against it. In support of its motion, Groupon argues that its Terms of Use, to which Plaintiff agreed when completing her purchase of Garcinia Cambogia, contains a valid and binding arbitration provision, and that Plaintiff's claims fall squarely within the scope of that provision. Groupon further requests that the Court stay Plaintiff's claims against it pending resolution of the arbitration, or alternatively, dismiss the instant case in its entirety. Plaintiff opposes Groupon's motion to compel, arguing that no valid agreement to arbitrate exists because: (1) the undisputed evidence does not establish that the parties entered into an arbitration agreement; and (2) the purported arbitration agreement is unconscionable and thus unenforceable under New Mexico law. Plaintiff further argues that her claims do not bear a reasonable relationship to the subject matter of Groupon's Terms of Use, and thus do not fall within the scope of the purported arbitration agreement.

         I. A Valid Arbitration Agreement Exists Between the Parties.

         A. The Parties Entered into an Agreement to Arbitrate.

         Plaintiff's first argument against arbitration is that she never agreed to Groupon's Terms of Use and, consequently, never agreed to the arbitration provision included in those Terms of Use. The Court “‘appl[ies] ordinary state-law principles that govern the formation of contracts to determine whether a party has agreed to arbitrate a dispute.'” Bellman v. i3Carbon, LLC, 563 Fed.Appx. 608, 612 (10th Cir. 2014) (quoting Walker v. Techs., Inc., 733 F.3d 1001, 1004)).[1] Where the parties dispute the existence of an arbitration agreement, “a court may grant a motion to compel arbitration if there are no genuine issues of material fact regarding the parties' agreement.” Hancock v. Am. Tel. & Tel. Co., 701 F.3d 1248, 1261 (10th Cir. 2012) (citations omitted). The court “should give to the opposing party the benefit of all reasonable doubts and inferences that may arise.” Id. On a motion to compel arbitration, the moving party “bears the initial burden of ...

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