In re HomeAdvisor, Inc. Litigation

          ORDER

          PHILIP A. BRIMMER CHIEF UNITED STATES DISTRICT JUDGE.

         This matter is before the Court on defendant HomeAdvisor, Inc.'s Motion to Compel Arbitration and to Stay Claims [Docket No. 51].^[1] The Court has jurisdiction pursuant to 28 U.S.C. § 1332(d)(2).

         I. BACKGROUND

         Defendant HomeAdvisor, Inc. (“defendant”) is an online business that connects consumers with home service professionals (“HSPs”). Docket No. 51 at 6. An HSP is generally an independent contractor in the business of doing home repairs, remodeling, or inspections. See Docket No. 1 at 15-20, ¶¶ 8-15. HomeAdvisor's business model is that HSPs become members of its network. Docket No. 51 at 6. HomeAdvisor charges the HSP for each potential customer referral, or a “lead, ” that it provides. Docket No. 1 at 24, ¶¶ 35-36. Plaintiffs are all former members of HomeAdvisor's network. Id. at 15-20, ¶¶ 8-15. Plaintiffs allege that HomeAdvisor misrepresented the quality of its leads as “project-ready homeowners.” Id. at 24-25, ¶ 37. In reality, plaintiffs claim, the leads were materially defective in that they contained incorrect contact information, included individuals who had no home service needs and had not contacted HomeAdvisor, and included contacts for vacant or non-existent residences, among other things. Id. at 27, ¶ 40-41.

         Each plaintiff became a HomeAdvisor member through a telephone sign-up process. Docket No. 73 at 5. After speaking with a HomeAdvisor representative, agreeing to become a HomeAdvisor member, and providing payment information, an interested HSP is transferred to a “voice log” while the HomeAdvisor representative stays on the line. Docket No. 74-5 at 5. A pre-recorded voice message then states, “This confirmation process should be completed with the principal of the business. At the tone, as confirmation that you are an authorized principal of the company, and that you agree to HomeAdvisor's terms and conditions, please state your full name and company name.” Docket No. 51 at 10; Docket No. 73 at 7. Each plaintiff did so. Docket No. 51 at 11. The voice log did not recite the terms and conditions and did not inform the individual of a way to access the terms and conditions. Docket No. 46-7 at 2.^[2]

         Upon completion of the voice log process, the HSP is subject to a background check by HomeAdvisor, which usually is completed within 24 hours. Docket No. 73 at 9. HomeAdvisor then automatically bills the initial fee to the credit card the HSP provided over the telephone. Id. Afterwards, the HSP receives a “welcome email” and a “confirmation email.” Id.; Docket No. 46-7 at 3-4.

         The welcome email directs the HSP to click a hyperlink to access his or her HomeAdvisor account on the HomeAdvisor “Pro Site.” Id. at 3. Underneath that hyperlink, the email states, “By using this site, you are agreeing to our Terms & Conditions.”^[3] Id. There is a corresponding hyperlink to the terms and conditions. Id. The confirmation email also references the company's terms and conditions, stating, “See Terms & Conditions, ” which also contains a hyperlink. Id. at 4. By clicking on the terms and conditions hyperlink, the recipient is provided with the full terms and conditions, including an arbitration agreement. Docket No. 46 at 8, ¶ 13. The confirmation email states, “Membership fees are non-refundable and are charged automatically on each renewal date until canceled.”^[4] Docket No. 46-7 at 4. Neither the confirmation or welcome email, however, provides the terms and conditions in the body or in an attachment. Docket No. 51 at 11.

         II. LEGAL STANDARD

         The Federal Arbitration Act (“FAA”) “manifests a liberal federal policy favoring arbitration.” Comanche Indian Tribe v. 49, L.L.C., 391 F.3d 1129, 1131 (10th Cir. 2004) (quoting Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 25 (1991)). Consequently, the Court must “resolve ‘any doubts concerning the scope of arbitrable issues . . . in favor of arbitration.'” P & P Industries, Inc. v. Sutter Corp., 179 F.3d 861, 866 (10th Cir. 1999) (quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983)). “In addition, this liberal policy ‘covers more than simply the substantive scope of the arbitration clause,' and ‘encompasses an expectation that [arbitration] procedures will be binding.'” Id. (citation omitted).

         “[A]lthough the presence of an arbitration clause generally creates a presumption in favor of arbitration, this presumption disappears when the parties dispute the existence of a valid arbitration agreement.” Bellman v. i3Carbon, LLC, 563 Fed.Appx. 608, 613 (10th Cir. 2014) (unpublished) (citations omitted). Determining whether a dispute is subject to arbitration “is similar to summary judgment practice.” Id. at 612 (quoting Hancock v. Am. Tel. & Tel. Co., 701 F.3d 1248, 1261 (10th Cir. 2012)). The party moving to compel arbitration must present “evidence sufficient to demonstrate the existence of an enforceable agreement.” Id. The burden then shifts to the nonmoving party “to raise a genuine dispute of material fact regarding the existence of an agreement.” Id. “The district court, when considering a motion to compel arbitration which is opposed on the ground that no agreement to arbitrate has been made by the parties, should give to the opposing party the benefit of all reasonable doubts and inferences that may arise.” Vernon v. Qwest Comm. Int'l, Inc., 857 F.Supp.2d 1135, 1149 (D. Colo. 2012), aff'd, 925 F.Supp.2d 1185 (D. Colo. 2013).

         III. ANALYSIS

         Defendant argues plaintiffs assented to the terms and conditions during the voice log process. Docket No. 51 at 10. Plaintiffs oppose the motion, arguing that, because they were never informed about the terms and conditions before the voice log process, and had no opportunity to read or access the terms and conditions before being prompted to accept them, they could not have assented to them before they became members. Docket No. 73 at 13.

         A. Choice of Law

         Defendant argues that the terms and conditions contain a choice of law provision that Colorado law applies. Plaintiffs challenge the validity of the choice of law provision, but do not challenge the use of Colorado law. Docket No. 73 at 13, n.8. The Court will therefore apply Colorado law to the question of contract formation. See Terlizzi v. ...