plaintiffs application for complex designation

Cal. Super. - 1st Dist.November 3, 2021

[CGC-20-586616] APPLICATION FOR COMPLEX DESIGNATION 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TIMOTHY ELDER (SBN 277152) TRE LEGAL PRACTICE 1155 Market Street, Tenth Floor San Francisco, CA 94103 Telephone: (415) 873-9199 Facsimile: (415) 952-9898 Email: telder@trelegal.com [Additional counsel appear on signature page] Attorneys for Plaintiff SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF SAN FRANCISCO LISA IRVING, on behalf of herself and all others similarly situated, Plaintiff, v. THE CONTAINER STORE, INC., Defendant. Case No. CGC-20-586616 PLAINTIFF’S APPLICATION FOR COMPLEX DESIGNATION Department 304 Trial Date: None Set ACCOMPANYING DOCUMENTS: EXHIBIT 1 (Complaint and Civil Cover Sheet) ELECTRONICALLY F I L E D Superior Court of California, County of San Francisco 04/16/2021 Clerk of the Court BY: JUDITH NUNEZ Deputy Clerk - 1 - [CGC-20-586616] APPLICATION FOR COMPLEX DESIGNATION 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 APPLICATION FOR COMPLEX DESIGNATION PLEASE TAKE NOTICE THAT, pursuant to California Rule of Court 3.400 and Local Rule 3.5, Plaintiff Lisa Irving respectfully requests that this case be designated complex and be assigned to a single judge for all purposes. �is case is presumptively complex, as it involves a claim for class relief, California Rule of Court 3.400(c)(6), and it also qualifies as complex under California Rule of Court 3.400(b) as it (1) will likely involve numerous pretrial motions raising difficult or novel legal issues that will be time-consuming to resolve; (2) will likely involve management of a large number of witnesses and a substantial amount of documentary evidence; and (3) may require coordination with related actions in courts in other states. �is application is being made in accordance with San Francisco Superior Court Local Rule 3.5(C)(2). A copy of the operative complaint and civil case cover sheet are attached as Exhibit 1. A. Background On July 20, 2015, Plaintiff and representatives of sub-classes in other states filed suit against Defendant in the United States District Court for the District of Massachusetts on behalf of a national class for injunctive relief under the Americans with Disabilities Act and several state sub-classes for similar relief and monetary damages. Nat’l Fed’n of the Blind et al. v. The Container Store, Inc., No. 1:15-cv-12984-NMG (D. Mass. July 20, 2015). One issue in the case was the enforceability of mandatory arbitration as applied to the various sub- classes in several states. �e First Circuit held that the arbitration provision, as part of the terms and conditions, was illusory under governing Texas law. Nat’l Fed’n of the Blind v. The Container Store, Inc., 904 F.3d 70, 86 (1st Cir. 2018). On August 18, 2020, after years of litigation during which Defendant adopted many of the recommendations of Plaintiffs’ expert in modifying some of its in-store technology, the District Court dismissed Plaintiffs’ federal claims as moot, and opted not to assert continuing supplemental jurisdiction over any state class claims. Plaintiff refiled the action in the San Francisco Superior Court pursuant to 28 C.F.R. § 1367(d), under a tolled statute of limitations for violations of California law dating back to July 20, 2013 for Unruh and Disabled Persons Acts violations, and back to July 20, 2012 for Consumers Legal Remedies Act (CLRA) violations. - 2 - [CGC-20-586616] APPLICATION FOR COMPLEX DESIGNATION 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 One of the other class representatives in the federal case similarly filed suit in Massachusetts with state claims involving related actions and inactions against Defendant �e Container Store, Inc. in the Suffolk County Superior Court, pursuant to 28 C.F.R. § 1367(d), under a tolled statute of limitations for violations of that state’s analogous disability antidiscrimination and consumer protection laws. Mark Cadigan et al. v. The Container Store, Inc., No. 2084CV02119 (Suffolk Cnty. Superior Ct. Sep. 17, 2020). In the instant California case, Plaintiff paid the complex assignment fee at the time of filing the Complaint on September 17, 2020; Defendant paid the complex assignment fee at the time of filing their Answer on December 7, 2020. B. Argument �e California Rules of Court define a “complex case” as one that “requires exceptional judicial management to avoid placing unnecessary burdens on the court or the litigants and to expedite the case, keep costs reasonable, and promote effective decision making by the court, the parties, and counsel.” (Cal. R. Ct. 3.400(a).) Rule 3.400 designates a class action, such as this one, as “provisionally complex,” and lists five non-exclusive factors for a court to consider in ultimately deciding whether a case is complex. (Cal. R. Ct. 3.400(b).) In addition to being presumptively complex by virtue of being a class action (Cal. R. Ct. 3.400(c)(6)), this case is likely to implicate at least three of the five factors: First, this case will likely involve numerous pretrial motions raising difficult or novel legal issues that will be time-consuming to resolve, including the novel questions of technology, privacy, and disability and the relationship between state law and prior federal rulings regarding matters such as arbitration provisions. Second, this case will likely involve management of a large number of witnesses and a substantial amount of documentary evidence, including the collection of additional information from class members and the incorporation of discovery that has already been substantially developed in the previous dismissed federal litigation. And third, this case may require coordination with related actions in courts in other states, including a similar case, Mark Cadigan et al. v. The Container Store, Inc., No. 2084CV02119 (Suffolk Cnty. Superior Ct. Sep. 17, 2020), filed by representatives of injured classes in the state of Massachusetts against the same Defendant. - 3 - [CGC-20-586616] APPLICATION FOR COMPLEX DESIGNATION 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 C. Conclusion As this class action involves complicated and novel legal issues, is likely to involve managing a significant amount of documentary evidence, numerous witnesses, and the potential coordination with actions in other states, Plaintiff respectfully requests that the Court deem this matter complex pursuant to Rule 3.400 and Local Rule 3.5 and assign it to a single judge for all purposes. DATED: April 16, 2021 Respectfully submitted, TRE LEGAL PRACTICE Timothy Elder Jeremy Weltman, Esq. (PHV pending) HERMES, NETBURN, O’CONNOR & SPEARING, P.C. 265 Franklin Street, 7th Floor Boston, MA 02110 (617) 728-0050 Karla Gilbride, Esq. (SBN 264118) PUBLIC JUSTICE, P.C. 1620 L St. NW, Suite 630 Washington D.C. 20036 (202) 797-8600 Jana Eisinger, Esq. (PHV pending) LAW OFFICE OF JANA EISINGER, PLLC 4610 South Ulster Street, Suite 150 Denver, CO 80237 (303)209-0266 Scott C. LaBarre, Esq. (PHV pending) LABARRE LAW OFFICES, P.C. 1660 South Albion Street, Suite 918 Denver, CO 80222 (303) 504-5979 Attorneys for Plaintiff Exhibit 1 ., I \J] ,., -~ \ ""Tl Q) '---<"' fp, .... "I 1 2 3 TIMOTHY ELDER (SBN 277152) TRE LEGAL PRACTICE 1155 Market Street, Tenth Floor San Francisco, CA 94103 Telephone: (415) 873-9199 . Facsimile: (415) 952-9898 F I L E .D · Superior Court of Cahforn1a County of San Francisco SEP 17 4 ' Email: telder@trelegal.com E COURT 5 6 7 8 9 lO 11 12 13 14 15 16 17 ]8 19 20 21 22 23 24 25 26 27 28 [Additional counsel appear on signature page] Attorneys for Plaintiff Deputy Clerk SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF SAN FRANCISCO 6 6 CGC-20-586 1 LISA IRVING, on behalf of herself and all Case No.________ - ' others similarly situated, Plaintiff, V. THE CONTAINER STORE, INC., Defendant. CLASS ACTION COMPLAINT FOR DECLARATORY AND INJUNCTIVE RELIEF AND DAMAGES 1. Unruh Civil Rights Act (Cal. Civ. Code § 51 et seq.) 2. Consumer Legal Remedies Act (Cal. Civ. Code § 17 50 et seq.) DEMAND FOR JURY TRIAL CLASS ACTION CO]'v!PLAINT ,. 1 Plaintiff, individually and on behalf of all others similarly situated, makes the following allegations 2 upon information and belief, except as to allegations specifically pertaining to Plaintiff, which are based 3 on her personal knowledge. 4 INTRODUCTION 5 I. This class action seeks redress for discriminatory, unlawful, and unfair actions committed by 6 Defendant The Container Store, Inc. ("The Container Store" or "Defendant") against blind people at its 7 retail store locations in California, and seeks damages and declaratory relief with respect to the illusory 8 adhesion terms of Defendant's customer loyalty program. 9 2. On July 20, 2015, Plaintiff and representatives of classes in other states filed suit against l O Defendant for these and other violations, including violations of Title III of the Americans with 11 Disabilities Act, 42 U.S.C. § 12rn1 et seq., in the United States District Court for the District of 12 Massachusetts. 13 3. On August 18, 2020, after years oflitigation during which Defendant adopted many of the 14 recommendations of Plaintiffs' expert in modifying some of its in-store technology, that court dismissed 15 Plaintiffs' federal claims as moot, and opted not to assert continuing supplemental jurisdiction over any 16 state class claims. 17 4. Plaintiff is refiling this action here pursuant to 28 C.F.R. § 1367( d), under a tolled statute of 18 limitations for violations of California law dating back to July 20, 2013 for Unruh and Disabled Persons 19 Acts violations, and back to July 20, 2012 for Consumers Legal Remedies Act (CLRA) violations. 20 5. For years, The Container Store knowingly denied blind individuals equal access to the goods and 21 services it provides to its sighted customers in its retail stores. Blind customers at The Container Store's 22 California locations could not participate in The Container Store's promotional programs without having 23 to verbally disclose their personally identifying information, including their email address or phone 24 number. See, e.g., Bus. and Prof. code§ 22576(a); Civ. Code§§ 1798.8o(e) and 1798.140(0)(1)(A) 25 (telephone number and email addresses are personally identifying information subject to privacy 26 protections). The Container Store failed to provide the same access to its blind or visually impaired 27 customers that its sighted customers enjoyed, and has compromised the privacy and security of its blind 28 customers by forcing them to disclose private information in order to participate in its Loyalty Program. -1- CLASS ACTION COMPLAINT ,, ,II 1 6. Many blind persons, including Plaintiff, shop at The Container Store's numerous locations 2 throughout California. ~ey are entitled to the same privileges and advantages that are available to 3 sighted customers-the ability to verify pricing and other product information, and to obtain the benefits 4 and discounts available to other customers without compromising their privacy. By providing access to 5 its Loyalty Program only via touch screen interfaces at its stores, The Container Store required its blind 6 customers to publicly verbally disclose private and confidential information-at least their personal 7 telephone number or email address-in order to register or receive continuing benefits. In addition, The 8 Container Store required all of its customers to agree to Loyalty Program Terms and Conditions (which 9 include a waiver of the customer's right to pursue a claim or class actions against The Container Store in 1 O court) that only appeared visually on a flat-screen computer (hereafter referred to as a "kiosk") that had 11 no features to render it accessible to the blind. 12 7. The Container Store's Loyalty Program provides various advantages to customers who enroll, 13 including special discounts and rewards, and the ability to return any product for a full refund without a 14 receipt. 15 8. In order to enroll in the Loyalty Program and continue to receive its benefits, a customer must 16 provide his or her private email address or phone number. In order to obtain the benefits associated with 17 the Loyalty Program, shoppers must register each purchase through the Loyalty Program. Because the I 8 point-of-sale interface on which customers were asked to enter this information had an entirely visual 19 interface and provided no alternative method for entering the information, blind customers could not 20 independently enter their email address or telephone number to register their purchases, and they were 21 required to disclose this information verbally-not just once to enroll in the program, but repeatedly, in 22 connection with each store visit and purchase. 23 9. The Container Store only changed its enrollment process recently, after years of litigation. 24 IO. The Container Store is well aware of the significance of protecting its customers' personal 25 information, having previously been sued for violating the privacy rights of its customers. The Container 26 Store settled a class action lawsuit brought in Massachusetts, alleging that The Container Store violated 27 Mass. Gen. Laws ch. 93 § 105(a) by its "unlawful invasion of its customers' privacy and disregard for the 28 laws of the Commonwealth of Massachusetts .... " Complaint at 1, Monteferrante v. Ihe Container Store, Inc., No. 1:13-cv-11362-RGS (Dist. Mass. June 6, 2013), ECF No. I (attached as Exhibit A). In that case, -2- [ j CLASS ACTION crnvIPLAINT ., 1 The Container Store was alleged to require its customers to disclose personal ZIP code information in 2 connection with a credit card transaction, although the collection of that information was not required in 3 order to complete the transaction. 4 n. Having settled a case involving its alleged invasion of the privacy rights of all its customers, The 5 Container Store should be and should have been particularly aware of the significance of its obligation to 6 protect and preserve the personal information of all its customers-including its blind customers. It is 7 well understood that disclosure of email addresses and phone numbers may lead to significant additional 8 security threats when data security is breached. Because email is widely deployed and used to 9 communicate with untrusted external organizations, it is frequently the target of attacks. Because phone l O numbers are frequently used as a second means of authenticating a person's identity, their disclosure is 11 equally dangerous. Common threats of malicious use of this data include identity theft and the use of 12 software to change privileges, gain access to sensitive information, monitor users' activities, and 13 perform other malicious actions. 14 12. Compromised email addresses may result in floods of unsolicited commercial email and "spam." 15 They also increase risk of identity theft due to "phishing" attacks involving deceptive emails that appear 16 to come from a trusted source and that trick individuals into disclosing sensitive information such as 17 banking usernames or passwords. They also increase risk of identity theft due to "spoofing," where an 18 attacker fraudulently masquerades as another by falsifying the sender information using a compromised 19 email address. Compromised telephone numbers involve the same risks, and also increase the risk when 20 associated with an email address due to their use as an additional means of verifying identity. 21 13. Because blind customers cannot see the people who are within earshot of their confidential 22 information, they are vulnerable to identity theft and other potential security risks in being forced to 23 repeatedly reveal their email or telephone numbers in a manner that is not secure. 24 14. The Container Store has taken steps to protect the privacy of its sighted customers' personal 25 information by allowing them to independently enter the information on a kiosk or other electronic 26 device; it refused to do the same for its blind customers until forced to do SO' by litigation-years after it 27 was on notice of the need and importance to preserve the independence and privacy of its blind 28 customers. -3- CLASS ACTION C0:1v1PLAINT 1 15. Shockingly, not only had The Container Store refused for years to provide equal and secure 2 access to its kiosks for blind customers to independently enroll in and secure the benefits of its Loyalty 3 Program, but The Container Store also provided its sighted customers with other valuable benefits 4 through its in-store kiosks that were not available to its blind customers in the same efficient, secure and 5 independent manner. For example, the Container Store offers a "rolling receipt" during the checkout 6 process that displays product and pricing information as each item is rung up. This enables non-blind 7 customers to confirm these details are correct during checkout without offering equivalent information to 8 blind customers. 9 16. In addition, The Container Store offered its own proprietary credit card that provided significant l O benefits to customers, including a promotion that offered financing to cardholders with no interest for as 11 long as 24 months. Although sighted customers could easily enroll in the credit card program on the 12 same kiosks that were available at each checkout station, these kiosks could not be independently 13 operated by The Container Store's blind customers. 14 17. Only after Plaintiffs brought this issue to The Container Store's attention did it belatedly and 15 hurriedly remove the ability for its customers to apply for credit cards via kiosk. The only reason this 16 was done was because of the threat of litigation-not because The Container Store was looking out for 17 the interests of its blind customers. 18 18. Tue credit card application process required the input of highly confidential personally 19 identifying information, including the customer's name, address, date of birth, phone number, email 20 address, income level and social security number. Because the kiosk were not independently accessible, 21 blind customers who wished to apply for a credit card at a store location were required to use sighted 22 assistance to enter the necessary information, disclosing that information verbally in public not only to a 23 cashier or other unknown member of Defendant's staff, but also within earshot of other customers and 24 staff persons. The credit card application also required the applicant to attest to the receipt of various 25 terms and disclosures (including reference to dispute resolution procedures that limit the applicant's 26 ability to pursue claims in court) that were not available in an accessible format. It was thus impossible 27 for a blind customer to truthfully electronically sign to affirm that he or she had received and agreed to 28 all the terms of the disclosures that were provided, when these multi-page disclosures were not available in a format that a blind customer could read. -4- CLASS ACTION COl'vlPLAINT 1 19. Despite years oflitigation over the accessibility of various features of The Container Store's 2 retail operations, The Container Store persisted in its failure to provide any training and oversight to its 3 employees to ensure that the benefits it made available to all its customers were also made available to 4 its blind customers in an equally secure and accessible manner. 5 Unenforceable Arbitration Provision 6 20. In addition to failing to provide accessible and secure devices that would protect the privacy 7 rights of its blind customers in signing up for the Loyalty Program, The Container Store rolled out an 8 extensive set of Terms and Conditions that it required customers to read and approve before enrolling in 9 the Loyalty Program at a retail store or online ("Terms and Conditions"). These Terms and Conditions l O require all claims to be arbitrated ("Arbitration Provision"), and further include provisions that purport 11 to waive a customer's right to act in a representative capacity in asserting claims of any type against The 12 Container Store, while giving The Container Store the ability to unilaterally alter these Terms and 13 Conditions at any time. 14 21. These terms and conditions were judged to be illusory, unenforceable, and unlawful by the 15 United States District Court for the District of Massachusetts on July 27, 2016. 16 22. That court found that The Container Store could not enforce the Arbitration Provision against any 17 of the Plaintiffs. See Report and Recommendation on Defendant's Motion to Enforce Arbitration and 18 Class Action Waivers and Stay Action at 13-15, Nat'! Fed'n of the Blind v. The Container Store, Inc., 1:15- 19 cv-12984-NMG (D. Mass. July 20, 2015), ECF No. 62 (attached as Exhibit B) ("Ex. B, Magistrate's 20 Report"); Memorandum and Order, Nat'! Fed'n of the Blind v. The Container Store, Inc., 1:15-cv-12984- 21 NMG (D. Mass. July 20, 2015), ECF No. 83 (attached as Exhibit C) ("Ex. C, Judge Gorton Order"). 22 23. It found that the Arbitration Provision, as governed by the Change of Terms provision allowing 23 The Container Store to unilaterally amend or rescind it, was illusory and unenforceable, and the United 24 States Court of Appeals for the First Circuit affirmed that ruling on September 14, 2018. Ex. B, 25 Magistrate's Report at 18-23, ECF No. 62; Ex. C, Judge Gorton Order at 6, ECF No. 83; Nat'! Fed. of the 26 Blind v The Container Store, Inc., 904 F.3d 70, 87-88 (1st Cir. 2018). 27 24. The Container Store only recently modified its terms and conditions to address the violations that 28 rendered them unenforceable. -5- CLASS ACTION crnvlPLAINT 1 25. The Container Store promotes itself as a proponent of "Conscious Capitalism"-the view that a 2 business should focus on a purpose beyond profit. Yet in promoting its culture of "trust and care" it has 3 failed to provide equal treatment to its blind customers, while at the same time forcing all customers to 4 agree to arbitrate pursuant to Terms and Conditions that the First Circuit has already found are unfair 5 and illegal. 6 26. On behalf of herself and all others similarly situated, Plaintiff is asking this Court to provide 7 compensation to the blind customers who have shopped at The Container Store and have been deprived 8 of equal access to its goods and services and to declare that Defendant's illusory terms and conditions 9 were unconscionable and unlawful. 10 JURISDICTION AND VENUE 11 27. This Court has subject matter jurisdiction over this class action pursuant to Civ. Code§§ 52, 54.3, 12 1780, 1781, and Code Civ. Proc. §§ 382 and 1060. 13 28. The Court has personal jurisdiction over Defendant pursuant to Code Civ. Proc. § 410.rn because 14 Defendant conducts extensive business at numerous retail locations throughout the State of California. 15 29. Venue is proper in San Francisco County pursuant to Code Civ. Proc. § 395(a) because liability 16 arises in part in San Francisco County, Defendant maintains a retail store in this County, Defendant is a 17 non-resident corporation, and Plaintiff designates this venue. Venue is also proper pursuant to Civ. Code 18 § 1780( d) because Defendant does business in San Francisco County. 19 PARTIES 20 30. Lisa Irving is and, at all times relevant hereto, was a resident of the state of California. She is 21 and, at all times relevant hereto, has been legally blind and is therefore a member of a protected class 22 under Cal. Civ. Code§ 51(e)(1), and Cal. Civ. Code§ 54(b)(1). 23 31. Defendant The Container Store is a corporation incorporated in Delaware and headquartered at 24 500 Freeport Parkway, Coppell, Texas. The Container Store owns, leases, or operates business 25 establishments and places of public accommodation in the State of California pursuant to Cal. Civ. Code 26 §§ 51 and 54.1. 27 28 -6- CLASS ACTION CONIPLAINT 1 FACTUAL ALLEGATIONS 2 32. Defendant currently operates approximately ninety-three (93) stores in the United States, 3 including the District of Columbia. On information and belief, the Defendant operates thirteen (13) 4 stores in California. 5 33. The Container Store promotes itself as the original and leading specialty retailer of storage and 6 organization products in the United States and the only national retailer solely devoted to the category. 7 Defendant promises creative, multifunctional, customizable storage and organization solutions that help 8 its customers save time, save space and improve the quality of their lives. 9 34. The Container Store's sales revenue from its retail sales in recent years reached nearly $900 10 million. 11 35. On information and belief, on an annual basis, Defendant processes hundreds of millions of 12 dollars in sales transactions annually, including millions of dollars in sales to its blind or visually 13 impaired customers. 14 36. It is estimated that approximately two percent of the population of California has a visual 15 disability, and that approximately thirty percent of those Californians are legally blind. Although precise 16 numbers are not available at this time, there is no reason to believe that those Californians do not 17 represent the same relative percentage of Defendant's sales in California. In California alone, between 18 FY 2014 and FY 2018, The Container Store estimates that roughly 4 million customers shopped at its 19 retail locations, including approximately 1.75 million Loyalty Program members. That reflects a:n 20 estimated 24,000 blind customers, and an estimated rn,500 blind Loyalty Program members. 21 37. This case arises out of Defendant's failure to comply with the legal regulations requiring it to 22 provide equal access to its products and services to blind or visually impaired customers. 23 38. Like many other retail establishments, The Container Store developed its Loyalty Program, credit 24 card program, and in-store technology to provide additional benefits to its customers. According to The 25 Container Store's website, members are "rewarded with valuable discounts and surprises, and you may 26 receive valuable communications, tips, exclusive invitations and product previews ("POP! Perks") that 27 will help get you started on your next organizational project." According to The Container Store's 28 website, in order to enroll in the POP! Program and become a member, a customer must visit a The Container Store retail location and provide at a minimum, their email address. A customer may also -7- CLASS ACTION CO?vlPLAINT 1 provide their phone number, name, street address, and/or birthday information, but is not required to do 2 so. For a customer to credit a transaction to their POP! Program membership-and receive whatever 3 benefits the program affords-they must sign-in to their POP! Program account by providing their email 4 address or phone number at the point of checkout. 5 39. Until late 2019, had a blind customer wished to partake in the additional goods and services being 6 offered by the POP! Program, they were required to forego their right to privacy and disclose personal 7 identifying information in a public manner that was not required of sighted customers. 8 40. The individual plaintiff in this case is legally blind. Just as sighted customers, blind customers 9 also tum to The Container Store for specialty storage and organization products. l 0 41. In 2015, before commencing the Massachusetts federal court action against The Container Store, 11 Plaintiff and the other plaintiffs in that action provided pre-suit notice to the Defendant of the 12 discriminatory actions alleged herein. They again provided notice and demand for corrective action to 13 the Defendant in 2016, pursuant to Cal. Civ. Code§ 1782(2). That demand notified The Container Store 14 of the additional violations of California law occasioned by its refusal to discontinue use of the illusory I 5 and unenforceable Arbitration Provisions from its customer contracts and demanded restitution. The 16 Container Store never responded to that demand. 17 THE STATE LAWS AT ISSUE 18 42. The California legislature has enacted comprehensive civil rights laws prohibiting discrimination 19 in the state of California on the basis of disability. The laws prohibit discrimination in business 20 establishments and places of public accommodation and entitle individuals with a disability, including a 21 visual disability, full and equal enjoyment of the goods, services, facilities, privileges, advantages, or 22 accommodations of a place of public accommodation, and provide statutory damages for each violation. 23 See California Financial Code§ 13082, Cal. Civ. Code§§ 51 et seq., and Cal. Civ. Code§§ 54-54.3. 24 FACTS PERTAINING TO NAMED PLAINTIFF 25 43. On or about May of 2015, and subsequently, Lisa Irving visited Defendant's store located in San 26 Diego, California. She has subsequently visited Defendant's store located in San Francisco, California. 27 44. Lisa Irving was repeatedly unable to independently participate in the POP! Program offered by 28 The Container Store because the devices that The Container Store employed to enable customers to privately enter their personal identifying information could not be used by Ms. Irving. Ms. Irving was -8- l CLASS ACTION COl'vlPLAINT 1 forced to verbally disclose her personal information to the store clerk in order to enroll in the program. 2 Ms. Irving was repeatedly denied the full enjoyment of the facilities, goods and services of Tue 3 Container Store, as a result of accessibility barriers at Defendant's stores. 4 45. Ms. Irving was not informed and did not agree or otherwise understand that (a) there were any 5 purported Terms and Conditions of the Loyalty Program, or that (b) the purported Terms and Conditions 6 that Tue Container Store claims were incorporated into its Loyalty Program bound her to mandatory 7 arbitration and forced her to waive her right to access the court on behalf of a class of other similarly 8 harmed individuals. 9 CLASS ALLEGATIONS l O 46. Plaintiff brings this action on her own behalf and on behalf of all other persons similarly situated 11 pursuant to the provision of Code of Civil Procedure § 382 and Civil Code § 1781. 12 4 7. Plaintiff seeks certification of the following California Classes (referred to herein as the 13 "California Class" or "California Classes: California Class 1): "all legally blind individuals in California 14 who registered for or made purchases through Defendant's Loyalty Program, or were deterred from 15 registering for Defendant's Loyalty Program and made purchases at any of Defendant's California 16 stores, at any time during the applicable limitation period through the present"; and California Subclass 17 2, "all residents of California who registered for Tue Container Store's Loyalty Program from the date 18 when The Container Store first began to use the Arbitration Provision that the U.S. District Court for the 19 District of Massachusetts held to be illusory and unenforceable, through the date when the Arbitration 20 Provision's illegal and illusory aspects were cured." 21 48. Plaintiff reserves the right to modify or narrow the above class definition, or to seek certification 22 of additional subclasses, as warranted based on further investigation and discovery. 23 49. Numerosity and Ascertainability of the Class: Tue members of each Class are so numerous that 24 joinder of all such persons is impractical and the disposition of their claims in a class action is a benefit 25 to the parties and to the Court. The identities of individual members of the Class are ascertainable 26 through Defendant's records of customers who have registered with its Loyalty Program, and through 27 community networks of blind people such as the National Federation of the Blind, American Council of 28 the Blind, American Foundation for the Blind, San Francisco LightHouse for the Blind and Visually Impaired, and similar entities in touch with large numbers of blind Californians. -9- CLASS ACTION COMPLAINT 1 50. Existence and Predominance of Common Questions of Fact and Law: There are common 2 questions of law and fact involved affecting the parties to be represented in that they all have been 3 and/or are being denied their civil rights to full and equal access to, and use and enjoyment of, 4 Defendant's goods, facilities and/or services due to the lack of equal access to Defendant's goods and 5 services as required by law for persons with disabilities. In addition, they have all been required to agree 6 to an illusory and otherwise unenforceable Arbitration Provision as a condition of joining Defendant's 7 Loyalty Program. Common questions of law and fact include: (1) Whether The Container Store's retail 8 establishments denied the full and equal enjoyment of its goods, services, facilities, privileges, 9 advantages or accommodations to the blind in violation of California laws; (2) If so, what measures are l O legally required to bring The Container Store into compliance with state law; (3) Whether the members 11 of California Class 2 were harmed by being required to agree to an illusory and otherwise unenforceable 12 Arbitration Provision as a condition of joining the POP! Loyalty Program; and (4) the calculation of 13 statutory damages due each member of each class. 14 51. Typicality: The claims of the named Plaintiff are typical of those of the Classes, and the proposed I 5 class members have similarly suffered harm arising from Defendant's violations of the law, as alleged 16 herein. 17 52. Adequacy: Plaintiff will fairly and adequately represent and protect the interests of the members 18 of the Nationwide Class and each Subclass. Her interests do not conflict with, and are not antagonistic 19 to, the interests of the members of that Class. Plaintiff has retained and is represented by counsel 20 competent and experienced in complex class action litigation. 21 53. Superiority: A class action is superior to other available means for the fair and efficient 22 adjudication of Plaintiff and the proposed Class members' claims. 23 FIRST CAUSE OF ACTION 24 Violation of California Civil Code§§ 51 et seq.-the Unruh Civil Rights Act 25 On behalf of Plaintiff Lisa Irving, and California Class 1 26 54. Plaintiff incorporates by reference the preceding allegations of this Complaint. 27 55. The California Unruh Civil Rights Act, Cal. Civ. Code§§ 51 et seq., guarantees equal access for 28 people with disabilities to the accommodations, advantages, facilities, privileges, and services of all business establishments of any kind whatsoever. -10- . CLASS ACTION CO}'vJPLAINT 1 56. Defendant has systematically violated the Unruh Civil Rights Act, Cal. Civ. Code§§ 51 et seq. 2 Defendant has discriminated against Plaintiff Irving and California Class I in that it has failed to provide 3 equal access to the goods and services available at its retail stores, specifically by failing to provide in- 4 store electronic devices that would permit blind customers to independently register for and participate 5 in The Container Store's Loyalty Program, credit card program and/or other important benefits without 6 having to publicly disclose personal information. 7 57. Defendant acted with intent, or with deliberate indifference to the rights of blind Californians. 8 58. Defendant's past acts also violated Title III of the Americans with Disabilities Act of 1990, 42 9 U.S.C. § 12rn1 et seq., constituting an independent violation of the Unruh Act, regardless of Defendant's 10 intent. Civ. Code§ 51(f). 11 59. Defendant is liable to Plaintiff Irving and California Class I for statutory damages for each 12 violation of the Unruh Act. Civ. Code§ 52(a). 13 60. It would not have been an undue hardship for Defendant to provide accessible in-store 14 technology so that blind customers would have equal access to Defendant's in-store services. 15 SECOND CAUSE OF ACTION 16 Violation of California Civil Code §§ 54-54.3---the Disabled Persons Act 17 On Behalf of Plaintiff Lisa Irving and California Class 1 18 61. Plaintiff incorporates by reference the preceding allegations of this Complaint. 19 62. California Civil Code § 54(a) states that "Individuals with disabilities have the same right as the 20 general public to the full and free use of the streets, sidewalks, walkways, public buildings and facilities, 21 and other public places." 22 63. California Civil Code § 54.1 guarantees full and equal access for people with disabilities to all 23 accommodations, advantages, facilities, and privileges of "all places of public accommodation" and 24 "other places to which the general public is invited." 25 64. Defendant's retail stores and kiosks throughout California constitute "places of public 26 accommodation" or "other places where the public is invited" within the meaning of Cal. Civ. Code § 27 54.1. 28 65. Retail stores and payment or Loyalty Program enrollment and transaction review kiosks constitute accommodations, advantages, facilities, and privileges provided by Defendant to members of -11- CLASS ACTION COwlPLAINT 1 the public in California and are, therefore, subject to the access requirements of Cal. Civ. Code § 54.1 2 applicable to "all places of public accommodation" and "other places to which the general public is 3 invited." 4 66. Defendant violated the rights of blind or visually impaired persons to full and equal access to 5 public places by denying full and equal access to The Container Store's Loyalty Program, its credit card 6 program, and other benefits offered on its in-store kiosks in violation of Cal. Civ. Code§§ 54-54.3. 7 67. Defendant's past acts also violated Title III of the Americans with Disabilities Act of 1990, 42 8 U.S.C. § 12101 et seq., constituting an independent violation of the Disabled Persons .f\ct. Civ. Code§ 9 54.1(c). 10 68. As a result of Defendant's wrongful conduct, Plaintiff Irving and California Class I are entitled to 11 statutory minimum damages under Cal. Civ. Code § 54.3 for each offense. Plaintiff does not seek 12 injunctive relief under Cal. Civ. Code § 55. 13 THIRD CAUSE OF ACTION 14 Violation of Cal. Civ. Code § 1750 et seq. - the Consumer Legal Remedies Act 15 On Behalf of Plaintiff Lisa Irving and the California Classes 16 69. Plaintiff incorporates by reference the preceding allegations of this Complaint. 17 70. Defendant is a "person" within the meaning of Cal. Civil Code § § 1761( c) and 1770 and provides 18 "services" within the meaning of Cal. Civil Code§§ 1761(b) and 1770. Defendant's customers, including 19 Plaintiff Irving and the members of Class 2 are "consumers" within the meaning of Cal. Civil Code§§ 20 1761(d) and 1770, because they purchased The Container Store goods for their personal, family or 2 I household use. 22 71. The Consumers Legal Remedies Act ("CLRA") prohibits the undertaking of any unfair or 23 deceptive acts or practices in consumer transactions for goods and services. Civ. Code§ 177o(a). 24 72. "Representing that a transaction confers or involves rights, remedies, or obligations that it does 25 not have or involve, or that are prohibited by law," is an unfair or deceptive act or practice prohibited by 26 the CLRA. Civ. Code § 177o(a)(14). 27 73. The CLRA also prohibits use of unconscionable contract provisions. Civ. Code§ 177o(a)(19). 28 74. By forcing its customers to agree to illusory terms and conditions, including an illusory agreement to arbitrate disputes, Defendant represented that agreement to such terms and conditions -12- CLASS ACTION COMPLAINT 1 conferred or involved obligations that it did not have and did not involve, or that were prohibited by law, 2 in violation of the CLRA. 3 75. By using unconscionable provisions in its terms and conditions, including an unconscionable 4 arbitration provision, Defendant violated the CLRA. 5 76. As a result of Defendant's violations, Plaintiff and members of Class 2 have suffered damages. 6 77. Pursuant to the provisions of Cal. Civ. Code§ 1782, Plaintiff notified Defendant of these 7 violations in a 2016 demand letter. 8 78. Defendant did not respond to Plaintiff's 2016 demand letter. 9 FOURTH CAUSE OF ACTION 10 Declaratory Relief 11 On behalf of Plaintiff Lisa Irving and California Class 2 12 79. Plaintiff incorporates by reference the preceding allegations of this Complaint. 13 80. Plaintiff contends that the terms and conditions of Defendant's loyalty program contained 14 provisions that were illusory and/or unconscionable, as was found by the United States District Court for 15 the District of Massachusetts and the United States Court of Appeals for the First Circuit. 16 81. Defendant disagrees with Plaintiff's contentions. 17 82. Plaintiff seeks a judicial declaration at this time, pursuant to Civ. Code § 1060 in order that each 18 of the parties may know their respective rights and duties and act accordingly. 19 RELIEF REQUESTED 20 WHEREFORE, Plaintiff, on behalf of Lisa Irving and the Classes, pray for: 21 a. An Order certifying each Class proposed by Plaintiff, and naming Plaintiff as a representative 22 of each Class, and appointing counsel as Class Counsel; 23 b. A declaration of the respective rights of the parties with respect to Defendant's illusory and 24 unconscionable terms and conditions; 25 c. An award of statutory damages to the individual named Plaintiff and members of each Class 26 as provided for under California law; 27 d. Payment of Plaintiff's and class counsels' reasonable attorneys' fees and costs; 28 e. Punitive and/or exemplary damages as permitted by law; and f. Tue provision of whatever other relief the Court deems just, equitable, and appropriate. -13- CLASS ACTION COivIPLAINT 1 2 3 4 5 6 7 8 9 lO 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 JURYDEMAND Plaintiff demands a jury trial on all issues. DATED: September 16, 2020 Respectfully submitted, TRE LEGAL PRACTICE ~fik_ Timothy Elder Jeremy Weitman, Esq. (PHV pending) HERMES, NETBURN, O'CONNOR & SPEARING, P.C. 265 Franklin Street, 7th Floor Boston, MA 02110 (617) 728-0050 Karla Gilbride, Esq. (SBN XXXXX) PUBLIC JUSTICE, P.C. 1620 L St. NW, Suite 630 Washington D.C. 20036 (202) 797-8600 Jana Eisinger, Esq. (PHV pending) LAW OFFICE OF JANA EISINGER, PLLC 4610 South Ulster Street, Suite 150 Denver, CO 8023 7 (303)209-0266 Scott C. LaBarre, Esq. (PHV pending) LABARRE LAW OFFICES, P.C. 1660 South Albion Street, Suite 918 Denver, CO 80222 (303) 504-5979 Attorneys for Plaintiff -14- CLASS ACTION COl'vIPLAINT J ' Exhibit A Case 1:13-cv-. 32-RGS Document 1 Filed 06/06, Page 1 of 10 UNITED STATES DISTRICT COURT . DISTRICT OF MASSACHUSETTS JUDITH MONTEFERRANTE, on behalf of herself: and all others similarly situated, Plaintiff, -against- THE CONTAINER STORE, INC. Defendant. Civil Action No. ---- Class Action Complaint Jury Trial Demanded Plaintiff, Judith Monteferrante, by her attorneys, Meiselman, Packman, Nealon, Scialabba & Baker P.C., as and for her class action complaint, alleges, with personal knowledge as to her own actions, and upon information and belief as to those of others, as follows: Nature of this Case 1. This action seeks to redress The Container Store, Inc.'s ("Container Store") unlawful invasion of its customers' privacy and disregard for the laws of the Commonwealth of Massachusetts desi$ned to protect consumers' rights to be free from intrusive corporate data collection and marketing. In callous disregard for the rights of Massachusetts consumers, Container Store collects ZIP codes from its customers when they make purchases using credit cards at its retail stores. Container Store's employees do not ask customers for their ZIP codes because the credit card companies require that Defendant do so, nor do Container Store's employees request ZIP codes for verification purposes. 2. Rather, Container Store collects ZIP codes for its own business purposes. Defendant uses a customer's ZIP code and name to identify that customer's address and/or Case 1:13-cv- 52-RGS Document 1 Filed 06/06 Page 2 of 10 telephone number using commercially available databases. Container Store is thus able to use that personal identification information for intrusive marketing purposes, which include Container Store's own direct marketing, such as sending junk mail directly to consumers' homes without their permission. Container Store can also sell that personal identification information to third parties. 3. As Container Store, a sophisticated multinational corporation, is fully aware, the collection of ZIP codes from consumers using credit cards violates Mass. Gen. Laws ch. 93 § 105, which provides that: No person ... that accepts a credit card for a business transaction shall write, cause to be written or require that a credit card holder write personal identification information, not required by the credit card issuer, on the credit card transaction form. Personal identification info~ation shall include, but shall not be limited to, a credit card hold~r's address or telephone number. 4. Thi~ suit is brought pursuant to Mass. Gen. Laws ch. 93 § 105 and ch. ~3A § 9 on behalf of a class of Massachusetts consumers whose personal identification information was wrongfully collected by Container Store from April 15, 2009 to the present. It seeks, inter alia, injunctive relief, statutory damages, treble damages, attorneys' fees;and the costs of this suit. Jurisdiction and Venue 5. Jurisdiction in this civil action is authorized pursuant to 28 U.S.C. § 1332(d), as minimal diversity exists, there are more than 100 class members, and the amount in controversy is in e~·cess of $5 million. Parties 6. Plaintiff Judith Monteferrante is a citizen and resident of the Commonwealth of· Massachusetts. When making a credit card purchase at a Container Store in Massachusetts within the last four years, Ms. Monteferrante was asked to provide her ZIP code. Under the 2 Case 1:13-cv- 52-RGS Document 1 Filed 06/064 Page 3 of 10 mistaken impression that she was required to do so in order to complete the transaction, she complied. 7. Defendant The Container Store, Inc. is a corporation its principal place of business located in Coppell, Texas. Container Store maintains a policy of writing consumers' credit card numbers, ZIP codes and names on an electronic credit card transaction form in connection with credit card purchases. Operative Facts 8. Data mining is one of the more pernicious practices in which retailers engage. Like crows collecting shiny bits of silver to line their nests, retailers like Container Store use whatever means necessary to collect customer data so that they can better market their wares. Indeed, the collection of personal identification information is rampant, and it results in intrusive direct marketing and the invasion of consumers' privacy, as consumers' identities and purchasing habits become valuable commodities which can be bought and sold without their consent. 9. Responding to consumers' cries for protection, many states, including the Commonwealth, have enacted laws such as Mass. Gen. Laws ch. 93 § 105(a), which is designed to protect consumers' privacy by preventing retailers from using a consumer's decision to pay with a credit card as an excuse for collecting personal identification information. 10. In applying this statute, the Massachusetts Supreme Judicial Court has held that a consumer's ZIP code is "personal identification information" within the meaning of the statute: [AJ consumer's zip code, when combined with the consumer's name, provides the merchant With enough information to identify through publicly available databases the consumer's address or telephone number, the very information § 105 (a ) e~pressly identifies as personal identification information. In other words, to conclude in those circumstances that zip codes are not "personal identification information" under the statute would render hollow the statute's 3 Case 1:.13-cv- _ 32-RGS Document 1 Filed 06/06~ Page 4 of 10 explicit prohibition on the collection of customer addresses and telephone numbers, and undermine the statutory purpose of consumer protection. Tyler v. Michaels ~tores. Inc., 464 Mass. 492, *4 (2013). 11. Container Store violates Mass. Gen. Laws ch. 93 § lOS(a). When consumers use credit cards to make purchases at a Container Store retail store, the employees at check-out ask consumers for their ZIP codes. The employee subsequently writes that ZIP code into the electronic credit card transaction form located on the register. Container Store uses this info1mation not for verification, but instead for its own improper purposes. In particular, Container Store has the ability to match the customer's name and ZIP code with an address and/or telephone number, the very information § 105(a) prohibits it from obtaining. 12. Con~umers, like Plaintiff, have a statutorily created privacy interest in not having to divulge their per1onal identification information, including ZIP codes, which Container Store violates. Defendant's violation of§ 105(a) causes distinct injury and harm to consumers like ' Plaintiff. Plaintiff and members of the proposed Class were injured as a result of Container Store's unlawful collection of the their ZIP codes because Container Store used that personal identification information to identify consumers' mailing addresses, and subsequently send unwanted marketing materials to Plaintiff and other Massachusetts consumers. 13. In addition to sending unwanted junk mail, Container Store can use Plaintiffs and Class members' ZIP code for other purposes, such as selling to third parties the addresses it obtains by matching consumers' names and ZIP codes, or by collecting ZIP codes to determine where to target adv~rtising or open new stores. Disgorgement of Container Store's profits ; derived from these ·activities provides an appropriate means of calculating Plaintiffs and the Class's damages. Container Store does not simply place customers' ZIP codes in a file where it never uses the information for any purpose thereafter. 4 Case 1:13-cv- 52-RGS Document 1 Filed 06/06i Page 5 of 10 Class Action Allegations 14. Plaintiff bring this action on her own behalf and additionally, pursuant to Rule 23 of the Federal Rules of Civil Procedure, on behalf of a class of all persons whose ZIP code was recorded by Container Store in Massachusetts when such persons made a purchase using a credit card from April 15, 2009 to the present. 15. Excluded from the Class is Defendant; any parent, subsidiary, or affiliate of Defendant; any entity in which Defendant has or had a controlling interest, or which Defendant otherwise controls or controlled; and any officer, director, employee, legal representative, predecessor, successor, or assignee of Defendant. 16. This action is brought as a class action for the following reasons: a. The Class consists of thousands of persons and is therefore so numerous thatjoinder of all members, whether otherwise required or permitted, is impracticable; b. There are questions oflaw or fact common to the Class that predominate over any questions affecting ·only individual members, including: i. whether Defendant violated Mass. Gen. Laws ch. 93 § 105, thereby violating Mass. Gen. Laws ch. 93A § 2; · ii. whether Defendant is being unjustly enriched by, among other things, selling Plaintiff and the Class's personal identification information to third parties; iii. whether Plaintiff and the Class have sustained damages and, if so, the proper measure·_.thereof; and iv. whether Defendant should be enjoined from the continued collection of ZIP codes from consumers using credit cards, and whether such a practice should be declared unlawful. 5 Case 1:13-cv- 52-RGS Document 1 Filed 06/06, Page 6 of 10 c. The claims asserted by Plaintiff are typical of the claims of the members of the Class; d. Plaintiff will fairly and adequately protect the interests of the Class, and Plaintiff has retained attorneys experienced in class and complex litigation, including litigation involving consumer protection and § 1 OS(a); e. Prosecuting separate actions by individual Class members would create a risk of inconsistent or varying adjudications with respect to individual Class members that would establish incompatible standards of conduct for Container Store, to wit, whether it can lawfully collect ZIP codes from consumers who make purchases using credit cards; f. Container Store has acted on grounds that apply generally to the Class, namely unlawfully collecting consumer ZIP codes, so that final injunctive relief prohibiting Container Store from continuing to do so is appropriate with respect to the Class as a whole; g. A class action is superior to other available methods for the fair and efficient adjudication of the controversy, for at least the following reasons: ; · i.. Absent a class action, Class members as a practical matter will be unable to obtain reqress, Defendant's violations of its legal obligations will continue without remedy, additional consumers and purchasers will be harmed, and Defendant will continue to retain its ill-gotten gains; ii. It would be a substantial hardship for most individual members of the Class if they were forced to prosecute individual actions; . iii. When the liability of Defendant has been adjudicated, the Court will be able to determine the claims of all members of the Class; 6 ·62-RGS Document 1 Filed 06/064 Page 7 of 10 iv. A class action will permit an orderly and expeditious administration of Class claims, foster economies of time, effort, and expense and ensure uniformity of decisions; v. The lawsuit presents no difficulties that would impede its management by the Court as a class action; and vi. Defendant has acted on grounds generally applicable to Class members, making class-wide monetary and injunctive relief appropriate. 17. Defendant's violations of Mass. Gen. Laws ch. 93 § 105(a), itself a violation Mass. Gen. Laws ch. 93A § 2, are applicable to all members of the Class, and Plaintiff is entitled to have Defendant enjoined from engaging in illegal, deceptive and unfair conduct in the future. FIRST CAUSE OF ACTION (Violation of Massachusetts Unfair Trade Practices Act, Mass. Gen. Laws ch. 93A) 18. Plai~tiff repeats and re~alleges the allegations contained in the paragraphs above as if fully set forth herein. 19. Mas.s. Gen. Laws Ch. 93 § 105(a) provides that: No person, firm, partnership, corporation or other business entity that accepts a credit card for a business transaction shall write, cause to be written or require that a credif card holder write personal identification information, not required by the credit card issuer, on the credit card transaction form. Personal identification information shall include, but shall not be limited to, a credit card holder's address or telephone number. The provisions of this section shall apply to all :credit card transactions. 20. Container Store is a corporation that accepts credit cards for retail transactions. 21. When a consumer uses credit cards at Container Store's retaiJ stores in Massachusetts, a Container Store employee requests that consumer's ZIP code. The Container Store employee then writes that ZIP code into the credit card transaction form, which is on the :, computerized check-out register used to process the point-of-sale transaction. Consumers 7 Case 1:'i3-cv- 52-RGS Document 1 Filed 06/064 Page 8 of 10 typically provide this information in the mistaken belief that providing a ZIP code is necessary to complete the transaction. 22. The ZIP code is part of a credit card holder's address, and is therefore personal identification information under Mass. Gen. Laws Ch. 93 § 105(a). Container Store and other retailers are also able to use a customer's name and ZIP code to determine their address or telephone number tjsing commercially available databases. 23. Mas.s. Gen. Laws ch. 93 § 105(c) provides that the collection of personal identification information is a per se violation of Mass. Gen. Laws ch. 93A § 2: "Any violation of the provisions of this chapter shall be deemed to be an unfair and deceptive trade practice, as defined in section 2 of chapter 93A." 24. Mas~. Gen. Laws ch. 93A § 9 provides that: Any person ... who has been injured by another person's use or employment of any method, act or practice declared to be unlawful by section two . . . may bring an action in the superior court ... for damages and such equitable relief, including aJ.J. injunction, as the court deems to be necessary and proper ... Any persons entitled to bring such action may, if the use or employment of the unfair or deceptive act or practice has caused similar injury to numerous other persons similarly situated and if the court finds in a preliminary hearing that he adequately ~d fairly represents such other persons, bring the action on behalf of himself and such other similarly injured and situated persons. 25. Plaintiff and the Class have been injured by Container Store's collection of ZIP codes and Defendai1t's subsequent use of their personal identification information. Mass. Gen. Laws. Ch. 93 § 105 creates a protected privacy interest held by consumers in not having to divulge personal identification information, including their ZIP codes, merely to use a credit card. In addition, Plaintiff and the Class were injured by Container Store appropriation and use of their economically valuable personal identification information without consideration, and the profit derived from _Defendant's use of Plaintiff's and the Class's ZIP codes is a measure of their 8 Case 1:13-cv- 52-RGS Document 1 Filed 06/064 Page 9 of 10 damages. Plaintiff and the Class were also injured by the receipt of unwanted junk mail from Container Store. 26. In compliance with Mass. Gen. Laws. Ch. 93A § 9(3), on March 15, 2013, Plaintiffs counsel sent Defendant a written demand for relief by Federal Express, identifying Ms. Monteferrante as a claimant and reasonably describing the unfair or deceptive act alleged herein and the injury she and other Class members suffered. SECOND CAUSE OF ACTION (Unjust Enrichment) 27. Plaintiff repeats and re-alleges the al1egations contained in the paragraphs above as if fully set forth herein. 28. Defendant knowingly and willingly accepted benefits from Plaintiff and the Class, to wit, their economically valuable personal identification information which Defendant used for its own profit, while providing Plaintiff and the Class nothing in return. 29. Und.er the circumstances described herein, it is inequitable for Defendant to retain the full monetary benefit of that information at the expense of Plaintiff and the Class. 30. By ~ngaging in the conduct described above, Defendant has unjustly enriched . ' itself at the expense of Plaintiff and the Class and is required, in equity arid good conscience, to compensate Plaintiff and the Class for the appropriation of their personal identification information, the amount of such compensation to be determined at trial. WHEREFORE, Plaintiff respectfully requests that the Court enter judgment against Defendant as follows: A. Certifying this action as a class action, with a Class as defined above; 9 Case 1:13-cv-l i2-RGS Document 1 Filed 06/06/ Page 10 of 10 B. On Plaintiff's First Cause of Action, awarding against Defendant statutory damages that Plaintiff and the other members of the Class have. suffered as a result of Defendant's actions in the amount of $25.00 per Class member, trebled; C. On Plaintiffs Second Cause of Action, awarding against Defendant damages that Plaintiff and the other members of the Class have suffered as a result of Defendant's actions; D. Awarding Plaintiff and the Class interest, costs and attorneys' fees; and E. Awarding Plaintiff and the Class such other and further relief as this Court deems just and proper. DEMAND FOR TRIAL BY JURY Pursuant to Federal Rule of Civil Procedure Rule 38, Plaintiff hereby demands a trial by jury. White Plains, New York DATED: June 6, 2013 Respectfully submitted, MEISELMAN, PACKMAN, NEALON, SCIALABBA & BAKER P.C. By: Isl D. Greg Blankinship 10 D. Greg Blankinship (BBO No. 655430) Todd S. Garber (pro hac vice application to be filed) 1311 Mamaroneck A venue White Plains, New York 10605 Tel: (914) 517-5000 Fax: (914) 517-5055 gblankinship@mpnsb.com tgarber@mpnsb.com Attorneys for Plaintiff and putative class ' . Exhibit B Case 1:15-cv-1 4-NMG Document 62 Filed 03/11·- ,_ Page 1 of 24 UNITED STATES DISTRICT COURT DISTRICT OF MASSACHUSETTS NATIONAL FEDERATION OF THE BLIND, on behalf of their members and themselves, MARK CADIGAN, MIKA PYYHKALA, LISA IRVING, ARTHUR JACOBS, JEANINE KAY LINEBACK, and HEATHER ALBRIGHT, on behalf of themselves and all others similarly situated, Plaintiffs, v. THE CONTAINER STORE, INC., Defendant. Civil Action No. 15-12984-NMG REPORT AND RECOMMENDATION ON DEFENDANT'S MOTION TO ENFORCE ARBITRATION AND CLASS ACTION WAIVERS AND STAY ACTION (#42). KELLEY, U.S.M.J. This is a putative class action alleging discrimination in violation of the Americans with Disabilities Act, 42 U.S.C. § 121.01 et seq (the "ADA") and the discrimination laws of Massachusetts, New York, Texas, and California. Specifically, Plaintiffs allege that blind individuals who shop at Defendant The Container Store's locations across the country should have equal access to Defendant's payment methods and loyalty programs. Defendant has moved to compel arbitration and to stay the litigation, contending that Plaintiffs enrolled in Defendant's I Case 1:15-cv-1 · · 4-NMG Document 62 Filed 03/11' ·, Page 2 of 24 loyalty program, which requires that disputes be submitted to arbitration.1 For the reasons set forth below, I do not agree that this matter is subject to arbitration. Accordingly, I recommend that Defendant's Motion to Enforce Arbitration and Class Waivers and Stay Action be DENIED. I. BACKGROUND The National Federation of the Blind ("NFB")2 and six legally blind individuals residing in the states of Massachusetts, New York, Texas, and California filed this lawsuit alleging that Defendant violated and continues to violate the ADA and discrimination laws of the aforementioned states. (#17.) Plaintiffs' core allegation is that Defendant's point-of-sale ("POS") devices and kiosks are not accessible to blind individuals.3 (#17 if 3.) Defendant maintains POS devices that use a visual, touch-screen interface, rather than tactually discernable keypad surfaces. Id. Unlike Defendant's touch-screen devices, POS devices with tactually discernible keypads are independently usable by a visually impaired person. (#17 if 39.) As a result, Plaintiffs allege that Defendant prevents blind customers from independently entering a personal identification number ("PIN") to make a debit card purchase or credit card transaction that requires a PIN. (#17 ifif 2-3.) 1 Defendant has not moved to compel arbitration of the claims of Plaintiffs Cadigan and Albright, presumably because neither is a member of the loyalty program at issue. (See #55, Ex. E.) At oral argument, the parties disagreed as to whether The National Federation of the Blind's claims are subject to mandatory arbitration. Given this Court's ultimate resolution, however, the issue need not be decided. Thus, for purposes of this Report and Recommendation the term "Plaintiffs" refers to The National Federation of the Blind, Mika Pyyhkala, Lisa Irving, Arthur Jacobs, and Jeanine Kay Lineback. 2 NFB is the largest organization of blind and low vision people in the United States. (#17,I 19.) NFB's purpose "is two-fold- to help blind persons achieve self-confidence and self-respect, and to act as a vehicle for collective self expression by the blind." Id. NFB provides advocacy services for the protection of the civil rights of blind persons in furtherance of its mission. Id. 3 The parties do not dispute that Defendant's stores qualify as places of public accommodation under the ADA, and therefore Defendant has an obligation to provide equivalent access to its goods and services to persons with disabilities. 42 U.S.C. § 12181(7)(E). 2 Case 1:15-cv-1 4-NMG Document 62 Filed 03/1'. Page 3 of 24 Plaintiffs further allege that Defendant does not provide equal access for blind customers to the benefits of Defendant's loyalty program, POP! - Perfectly Organized Perks (the "Loyalty Program"). (#17 if 7.) The Loyalty Program provides various advantages to customers, including special discounts and rewards, and the ability to return any product for a full refund without a receipt. Id. To enroll in the Loyalty Program and to continue to receive its benefits, a customer must provide her personal email address or telephone number. Id. ,r 8. Additionally, shoppers must register each purchase through the Loyalty Program. Id. Because blind customers cannot visually read the POS devices, they cannot independently enter their email address or telephone number to register their purchases, and therefore they must verbally disclose their personal information in connection with each purchase. Id. Without the ability independently to enter their personal information, Plaintiffs bear privacy and security risks that sighted customers do not. Id. ,r 2. The Loyalty Program's terms and conditions contain a mandatory arbitration and class action waiver provision, which provides: You agree that The Container Store and you will resolve any disputes through binding and final arbitration instead of through court proceedings. YOU HEREBY WAIVE ANY RIGHT TO A JURY TRIAL OF ANY DISPUTE YOU HA VE WITH THE CONTAINER STORE. NEITHER YOU NOR THE CONTAINER STORE MAY BRING A CLAIM AGAINST THE OTHER AS A CLASS ACTION, REPRESENTATIVE ACTION, OR PRIVATE ATTORNEY GENERAL ACTION. NEITHER YOU NOR THE CONTAINER STORE MAY ACT AS A PRIVATE ATTORNEY GENERAL OR CLASS REPRESENTATIVE, NOR PARTICIPATE AS A MEMBER OF A CLASS OF CLAIMANTS WITH RESPECT TO ANY DISPUTE OR CLAIM BETWEEN US. These POP! Program terms evidence a transaction in interstate commerce, and thus the arbitration will be subject to the Federal Arbitration Act ... In the event of any dispute concerning the POP! Program or these terms, the parties unconditionally and irrevocably agree the dispute will be resolved by arbitration ... exclusively in Dallas, Texas, in accordance with the rules of the American Arbitration Association. The arbitration will be heard and determined 3 Case 1:15-cv-1 4-NMG Document 62 Filed 03/1'. Page 4 of 24 by a single arbitrator. The arbitrator's decision will be final and binding upon the parties and may be enforced in any court of competent jurisdiction. The prevailing party will be entitled to recover its attorneys' fees and arbitration costs from the other party .... (#42-2 at 4-5.) Defendant contends that as a condition of enrollment in the Loyalty Program, customers must agree to the Loyalty Program's terms and conditions. (#42-1 ,r 2.) To enroll at one of Defendant's stores, an individual must press a box on the POS device that reads "I ACCEPT" and displays the Loyalty Program's terms and conditions. Id. When enrolling online, the user must check a box that reads"• I agree to the POP! terms and conditions" and contains a link to the terms and ~pnditions. Id. According to Defendant, the enrollment process cannot be completed without consent to the terms and conditions. Id. Defendant maintains that Plaintiff Pyykhala enrolled in the Loyalty Program on a POS device at the register in one of Defendant's stores by providing an email address on December 14, 2014; Plaintiffs Jacobs and Irving enrolled in a similar manner on May 7, 2015 and May 18, 2015, respectively. Id. ,r,r 3-5. According to Defendant, a cashier or customer representative was available to read the terms and conditions of enrollment. Id. ,r,r 3-5. Defendant also sent an email to Plaintiffs Pyykhala, Irving, and Jacobs at the time of enrollment which contained a link to the terms and conditions. Id. ,r,r 3-5. In accordance with company practice, several promotional emails are sent each month to members of the Loyalty Program, including Pyykhala, Irving, and Jacobs, and each email contains a link to the terms and conditions. Id. ,r,r 3-5. Plaintiffs Pyykhala, Irving, and Jacobs (collectively, the "In-Store Plaintiffs") claim that they were unable independently to use the POS devices at their local stores and were forced verbally to disclose their personal information to the store clerk in order to enroll in the Loyalty 4 Case 1:15-cv-1 4-NMG Document 62 Filed 03/1: Page 5 of 24 Program. Id. ,r,r 69, 71, 73. They further contend that they were never presented with the Loyalty Program's arbitration provision in an accessible manner, nor were they even aware of the existence of the arbitration provision. (#55, Exs. A, B, C.) According to Defendant, Plaintiff Lineback enrolled in the Loyalty Program online by providing an email address on May 28, 2015. (#42-1 ,r 6.) As a condition of enrollment, Lineback had to agree to the Loyalty Program's terms and conditions by checking a box that contained a link to the terms and conditions. Id. As with the other individual plaintiffs, Defendant asserts that Lineback could not have completed the enrollment process without agreeing to the terms and conditions, and that an email was sent to Lineback at the time of enrollment, which contains a link to the terms and conditions. Id. Defendant also contends that Lineback receives several promotional emails per month, and each email contains a link to the terms and conditions. Id. ,r 6. Plaintiff Lineback, however, has previously stated that she was not presented with any terms and conditions that were accessible to her when she enrolled online and did not agree to any arbitration provision. (#55, Ex. E.). Interestingly, Lineback originally attempted to enroll at her local store but was unable to do so because she could not use the POS device. (#17 'i! 75.) Defendant has moved to compel arbitration pursuant to the Federal Arbitration Act, 9 U.S.C. § 1 et seq; (the "F AA"),4 seeking an order compelling Plaintiffs to submit their claims to arbitration and to waive their right to assert class representative claims, and requesting a stay.· (#42 at 1.) The parties fully briefed the issues and this Court heard oral argument. As indicated above at note 1, because Defendant has not moved to compel arbitration of the claims of 4 The parties do not dispute that their relationship involves interstate commerce and is therefore governed by the FAA. 5 Case 1:15-cv-: 14-NMG Document 62 Filed 03/1 Page 6 of 24 plaintiffs Cadigan and Albright, this Report and Recommendation addresses Defendant's motion only with respect to Plaintiffs NFB, Pyykhala, Irving, Jacobs, and Lineback. II. STANDARD OF REVIEW A party seeking to compel arbitration "must demonstrate that a valid agreement to arbitrate exists, that the movant is entitled to invoke the arbitration clause, that the other paiiy is bound by that clause, and that the claim asserted comes within the clause's scope." Soto- Fonalledas v. Ritz-Carlton San Juan Hotel Spa & Casino, 640 F.3d 471,474 (1st Cir. 2011) (internal quotation marks omitted). Under the FAA, a written provision in a contract "to settle by arbitration a controversy thereafter arising out of such contract ... shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contracts." 9 U.S.C. § 2. As the United States Supreme Court has stated, "the FAA was designed to promote arbitration, and ... embodies the national policy favoring arbitration and places arbitration agreements on equal footing with all other contracts." AT&T Mobility LLC v. Concepcion, 563 U.S. 333,345 (2011); Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 443 (2006). Although the federal policy in favor of arbitration is strong, "[ e ]ven strong policies ... have boundaries. A court may order parties to arbitrate a given dispute only if they have agreed to submit such a dispute to arbitration." Escobar-Noble v. Luxury Hotels Int 'l of Puerto Rico, Inc., 680 F.3d 118, 121-22 (1st Cir. 2012) (internal citations omitted). Therefore, "a court should not compel arbitration unless and until it determines that the parties entered into a validly formed and legally enforceable agreement covering the underlying claim(s)." Id. (internal citation omitted). "To satisfy itself that such agreement exists, the court must resolve any issue that calls into question the formation or applicability of the specific arbitration clause that a party seeks to 6 Case 1:15-cv-1 4-NMG Document 62 Filed 03/1: Page 7 of 24 have the court enforce." Granite Rock Co. v. Int'! Bhd. of Teamsters, 561 U.S. 287,297 (2010). Whether an agreement to arbitrate exists is a question of state contract law. Rosenberg v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 170 F.3d 1, 19 (1st Cir. 1999). III. DISCUSSION Defendant asserts that Plaintiffs' claims are subject to the mandatory arbitration provision set forth in the Loyalty Program's terms and conditions. Specifically, Defendant alleges that Plaintiffs consented to the arbitration provision when they enrolled in Defendant's Loyalty Program. It is undisputed that Plaintiffs enrolled in the Loyalty Program. However, Plaintiffs argue that, for several reasons, no enforceable agreement to arbitrate exists. A. Arbitration of Plaintiffs' ADA Claims When a party relies on the FAA to compel arbitration of a claim arising under the ADA, the court "must undertake a supplemental inquiry." Campbell v. Gen. Dynamics Gov 't Sys. Corp., 407 F.3d 546, 552 (1st Cir. 2005). The ADA provides that "[w]here appropriate and to the extent authorized by law, the use of alternative means of dispute resolution, including ... arbitration, is encouraged to resolve disputes arising under this Act." 42 U.S.C. § 12212 ( emphasis added). Therefore, a party may prevail on its demand for arbitration [ of an ADA claim] if it can establish: (1) that the provision for mandatory arbitration is part of a valid contract within the purview of the FAA; and (2) enforcement of the arbitration provision would be appropriate. Campbell, 407 F.3d 554-55; see also Rosenberg, 170 F.3d at 18-19. Here, "the burden is on the party resisting arbitration to show ... that Congress, in enacting a particular statute, intended to preclude a waiver of a judicial forum for certain statutory claims." Campbell, 407 F.3d at 552. 7 Case 1:15-cv-1 4-NMG Document 62 Filed 03/1'. Page 8 of 24 As a threshold matter, assuming arguendo that the agreement to arbitrate is valid, subjecting Plaintiffs' ADA claims to arbitration would be inappropriate under the circumstances here. In Campbell, the First Circuit determined that the arbitration of an ADA claim is appropriate only when the communication of the agreement afforded minimally sufficient notice of waiver of the right to proceed in a judicial forum. 407 F.3d 554-55. The court considered whether, under the totality of the circumstances, the communication would have provided a reasonably prudent party waiver of such waiver. Id. This is an objective standard and the analysis is performed on a case-by-case basis. Id. at 555. The factors to consider include the method of communication, the context and the content of the communication. Id. Applying this framework to the present case, Plaintiffs were not afforded the "minimal level of notice" sufficient to apprise them that they were agreeing to the Loyalty Program's terms and conditions and so had waived their rights to pursue their ADA claims in court. See Campbell, 407 F.3d at 554. To begin, the method of in-store communication-an inaccessible POS device-rendered the communication meaningless. More specifically, on the evidence presented, it appears the In-Store Plaintiffs had no notice of the existence of the Loyalty Program's terms and conditions, let alone that their enrollment would effect a waiver of their rights to litigate an alleged violation of the ADA. The context of the communication is significant as well. Campbell, 407 F.3d at 555. The Plaintiffs have shown that the manner in which the Loyalty Program's terms and conditions were presented did not signal that they were at risk of "replacing court access with arbitration." Id. Indeed, it seems Plaintiffs believed they were merely agreeing to enroll in a customer benefits and perks program. While Defendant states that customer representatives were available to read the Loyalty Program's terms and conditions, Defendant has not demonstrated that in fact its 8 Case 1:15-cv-1 4-NMG Document 62 Filed 03/1: Page 9 of 24 employees alerted the In-Store Plaintiffs to the existence of the Loyalty Program's terms and conditions. It is quite plausible that Defendant "disguised the import of the communication," by not providing the communication in an accessible manner. Id. at 557. Further, Plaintiffs understood the Loyalty Program to provide customer perks and benefits. Nowhere does the Loyalty Program itself signal that by agreeing to its terms, a customer agrees to arbitrate statutory discrimination claims. In that same vein, the Loyalty Program's arbitration provision broadly covers all claims between Defendant and customer but does not expressly enumerate claims of discrimination. See Soto-Fonalledas, 640 F .3d at 4 78 (arbitration appropriate where governing provision expressly covered claims of discrimination based on protected status). Given the nature and context of the agreement here-a customer loyalty program-such broad language does not provide adequate notice that Plaintiffs were '"agreeing to arbitrate statutory discrimination claims."' Salvi v. TRW Automotive US. LLC, No. 11-40085, 2012 WL 274755, at *4 (D. Mass. Jan. 30, 2012) (quoting Soto-Fonalledas, 640 F.3d at 478). Accordingly, compelling arbitration of Plaintiffs' ADA claims would be inappropriate. This Court finds no reason to differentiate between the In-Store Plaintiffs and Plaintiff Lineback for the purposes of whether arbitration of Plaintiffs' ADA claims is appropriate under the circumstances.5 Plaintiff Lineback does not deny that she enrolled in the Loyalty Program using her home computer. (#55, Ex. D.) However, like the In-Store Plaintffs, it would be inappropriate here to compel Lineback' s ADA claims to arbitration, 6 because the Loyalty ' 5 As discussed infra, this Court believes a distinction exists between the In-Store Plaintiffs and Plaintiff Lineback with respect to the questions of whether an agreement was formed and whether such an agreement is unconscionable. 6 Indeed, Plaintiffs' complaint alleges that Lineback was unable to register for the Loyalty Program at her local store because she was unable to use the POS device. (#17 ,r 75.) It would not be unreasonable to 9 Case 1:15-cv-1~ (-NMG Document 62 Filed 03/11~ Page 10 of 24 Program's tenns and conditions themselves fail to convey a waiver of her right to pursue statutory discrimination claims in a judicial forum. More fundamentally, discrimination laws, such as the ADA, "reflect a Congressional finding that certain groups are especially in need of federal protection . . . [ and access to courts] continues to play a critical role[] in the legal and social changes that strike at the core of the purpose of discrimination laws." Campbell v. General Dynamics Gov 't Systems Corp., 321 F. Supp.2d 142, 148 (D. Mass. 2004), aff'd, 407 F.3d 546 (2005) (internal citations omitted). Thus, under the framework set forth in Campbell, this Court finds it would not be appropriate to arbitrate Plaintiffs' ADA claims. B. Plaintiffs' Claims Under State Law Contract Principles Because the First Circuit expressly limited its holding in Campbell to ADA claims, the inquiry as to Plaintiffs' claims does not end there. Awuah v. Coverall North America, Inc., 703 F.3d 36, 45 (1st Cir. 2012) (recognizing Campbell holding limited to ADA claims). Setting Campbell aside, with respect to the In-Store Plaintiffs, Defendant has not shown that a valid agreement exists under "ordinary state-law principles that govern the formation of contracts." First Options of Chicago v. Kaplan, 514 U.S. 938,944 (1995). Therefore, under basic contract principles, it would be similarly inappropriate to compel In-Store Plaintiffs to arbitrate. A party seeking to compel arbitration must show that a valid agreement to arbitrate exists and that the other party is bound by the clause. lnterGen N V v. Grina, 344 F .3d 134, 142 (1st Cir. 2003). Defendant, as the movant, has not satisfied its burden to show that arbitration is proper here for three reasons. First, Defendant has not established that the In-Store Plaintiffs had infer that she was forced into attempting to register for the Loyalty Program online due to her in-store difficulties. 10 Case 1:15-cv-1~ ·(-NMG Document 62 Filed 03/11 · Page 11 of 24 knowledge of the Loyalty Program's terms and conditions and therefore has not established that a valid agreement to arbitrate was formed. Second, even assuming a valid agreement exists, such an agreement is unenforceable with respect to In-Store Plaintiffs, because it is unconscionable. Finally, the agreement is illusory with respect to all Plaintiffs.7 a. The In-Store Plaintiffs Lacked the Requisite Knowledge to Contract i. Characterization of Plaintiffs' Lack-of-Knowledge Claim At the outset, a determination must be made whether it is for the court or the arbitrator to decide whether a contract was formed between the parties. Plaintiffs argue that they were never provided with the Loyalty Program's terms and conditions and therefore lacked the requisite knowledge to consent to a contract. Defendant contends that Plaintiffs' argument amounts to an attack on the contract as a whole, rather than the arbitration clause contained therein. Defendant's characterization of Plaintiffs' argument is fair, simply because any failure by Plaintiffs to consent would render the entire contract a nullity, let alone its arbitration clause. However, Defendant is incorrect that the issue of contract formation should be decided by an arbitrator. The Supreme Court has differentiated between two types of challenges to the validity of arbitration agreements: (1) challenges to the validity of an entire contract which contains an arbitration clause, and (2) challenges to the validity of the specific agreement to resolve the dispute through arbitration. Rent-A-Center, 561 U.S. 63, 70 (2010); Buckeye Check, 546 U.S. at 444. In a line of cases beginning with Prima Paint Corp. v. Flood & Conklin Manufacturing Co., 388 U.S. 395 (1967), the Supreme Court has held that challenges of the first type are for the 7 These three grounds for denying Defendant's motion apply equally to the In-Store Plaintiffs' ADA claims, because any right to arbitrate must be part of a valid, enforceable contract. 11 Case 1:15-cv-1: ~-NMG Document 62 Filed 03/lJ Page 12 of 24 arbitrator to decide, whereas challenges of the second type are for the courts to decide. Farnsworth v. Towboat Nantucket Sound, Inc., 790 F.3d 90, 96 (1st Cir. 2015) (citations omitted). Put another way, the Supreme Court teaches that "as a matter of substantive federal arbitration law, an arbitration provision is severable from the remainder of the contract[,]" and that, "unless the challenge is to the arbitration clause itself, the issue of the contract's validity is considered by the arbitrator in the first instance." Buckeye Check, 546 U.S. at 445--46. There is, however, a distinction between challenges to the issue of whether a contract containing an arbitration clause is valid and the issue of whether the contract was ever formed. Rent-A-Center, 561 at 70 n. 2; Buckeye Check, 546 U.S. at 444 n.1. This is because the doctrine of severability applies only to the former circumstance. Farnsworth, 790 F.3d at 97 (citing Rent-A-Center, 561 U.S. at 70 n. 2). Because the parties here dispute the contract's formation, the severability doctrine is not implicated. In Farnsworth, the First Circuit expressly recognized the importance of distinguishing between contract validity and formation. 790 F.3d 90, 97. Although the First Circuit has not directly addressed whether the issue of contract formation is for the court or the arbitrator, in Farnsworth, the court observed that a number of courts have held that where a party argues that no contract was formed, the question of the formation or existence of the contract is for the court, rather than the arbitrator. Id. at 97 n.7. This conclusion makes sense because "[ a ]rbitration is strictly a matter of consent and thus is a way to resolve those disputes-but only those disputes-that the parties have agreement to submit to arbitration." Granite Rock, 561 U.S. at 299 (internal quotation marks omitted) (emphasis in original). As the First Circuit noted in Farnsworth, other courts are in accord. See SBRMCOA, LLC v. Bayside Resort, Inc., 707 F.3d 267, 274 (3rd Cir. 2013) ("[R]elevant distinction is between challenges to a contract's validity, 12 Case 1:15-cv-1~ (-NMG Document 62 Filed 03/11 Page 13 of 24 which are arbitrable, and challenges to a contract's formation, which generally are not."); Sanfordv. Memberworks, Inc., 483 F.3d 956, 962-64 (9th Cir. 2007) (challenge to whether a contract was concluded must be determined by the court prior to arbitration); Spahr v. Secco, 330 F.3d 1266, 1268, 1272-73 (10th Cir. 2003) (holding that courts hear a party's challenge to the whole contract based on the claim that the signor did not have mental capacity to sign); Sphere Drake Ins. Ltd. v. All Am. Ins. Co., 256 F.3d 587, 591 (7th Cir. 2001) ("[A]s arbitration depends on a valid contract[,] an argument that the contract does not exist can't logically be resolved by the arbitrator .... "); In re Morgan Stanley & Co., Inc. 293 S.W.3d 182, 189-90 (Tex. 2009) (holding court should hear challenge to existence of contract containing arbitration provision); Thompson v. Lithia Chrysler Jeep Dodge of Great Falls, Inc., 185 P .3d 332, 33 8 (Mont. 2008) (same). In light of this weighty authority, questions regarding the formation or existence of a contract that contains an agreement to arbitrate is a gateway question for the court, not the arbitrator. See Granite Rock, 561 U.S. at 296 ("[W]here the dispute at issue concerns contract formation, the dispute is generally for the courts to decide.") (internal citations omitted). Holding otherwise would be putting the cart before the horse. Here, Plaintiffs argue that they never formed a contract with Defendant because they lacked knowledge of the Loyalty Program's terms and conditions. As such, a challenge to the contract's existence is an issue for the court. See, e.g., Foss v. Circuit City Stores, Inc., 477 F. Supp.2d 230, 234-35 (D. Me. 2007) ("The distinction first articulated in Prima Paint[] regarding the appropriate role for the court and the arbitrator is not determinative on questions regarding the very formation of a contract ... . [A] challenge to whether a contract was ever validly concluded is for the court, and not the arbitrator, to decide."); see also Alan Scott Rau, Everything You Really Need to Know about 13 Case 1:15-cv-1: ~-NMG Document 62 Filed 03/11 Page 14 of 24 "Separability" in Seventeen Simple Propositions, 14 AM. REV. INT'L ARB. 1, 15 (recognizing same). 11. The Existence of a Contract Having determined that the issue of contract formation is properly for the court, the analysis turns to whether the parties indeed formed a contract under ordinary principles of state contract law. It is axiomatic that absent notice of a contract's terms and conditions there can be no "meeting of the minds" required for contract formation. 8 Situation Mgmt. Sys. v. Malouf, 430 Mass. 875, 878 (2000); see also McCarthy v. Azure, 22 F.3d 351, 354-55 (1st Cir.1994) ("[A] party seeking to substitute an arbitral forum for a judicial forum must show, at a bare minimum, that the protagonists have agreed to arbitrate some claims .... The federal policy presumes proof of a preexisting agreement to arbitrate disputes arising between the protagonists."). Therefore, without knowledge of the existence of the agreement's terms and conditions, Plaintiffs could not have assented to the Loyalty Program. Campbell, 321 F. Supp.2d at 148 n. 2 ("[K]nowledge of the offer is obviously a necessity for the inference of acceptance to hold."). Defendant offers a slew of cases involving "clickwrap" agreements, where courts have found acceptance of the agreement by a party who affirmatively clicked a box labeled "I agree" on a screen that contained a link to the relevant terms and conditions. (#42 at 8-11.) Such agreements are routinely enforced by state and federal courts. See, e.g., Bagg v. HighBeam Research, Inc., 862 F. Supp.2d 41, 45 (D. Mass. 2012); Ajemian v. Yahoo, 83 Mass. App. Ct. 565, 576 (2013) (collecting cases). Defendant also cites numerous cases that stand for the 8 The parties appear to disagree over whether Texas or Massachusetts law applies to the issue of whether a valid contract was formed. Because this Court finds the principles relied upon to be so basic and can discern no material difference between the states, it need not determine which law applies. For ease of reference, however, this Court will apply Massachusetts law to the issue of contract formation. 14 Case 1: 15-cv-1: ~-NMG Document 62 Filed 03/11~ Page 15 of 24 unremarkable principle that ordinarily, "one who signs a written agreement is bound by its terms whether he reads and understands them or not." St. Fleur v. WPI Cable Sys./Mutron, 450 Mass. 345, 355 (2008). However, all of the cases Defendant relies on presume the party to be charged at least had minimal notice of the terms of the agreement. Cf Specht v. Netscape Communications Corp., 306 F.3d 17, 35 (2nd Cir. 2002) ("Reasonably conspicuous notice ofthe existence of the contract terms and unambiguous manifestation of assent to those terms by consumers are essential if electronic bargaining is to have integrity and credibility."). Therefore the cases Defendant cites are of little relevance to this dispute. Where, as here, the terms and conditions of the purported agreement were presented in a completely inaccessible manner, such that the In-Store Plaintiffs were not aware of their existence, there simply is no agreement to be enforced. See Dialysis Access Center, LLC v. RMS Lifeline, Inc., 638 F.3d 367, 376 (1st Cir. 2011) (''[T]he first principle that underscores ali of the Supreme Court's arbitration decisions is that ' [ a ]rbitration is strictly a matter _of consent, and thus is a way to resolve those disputes-but only those disputes-that the parties have agreed to submit to arbitration.'" (internal quotation omitted) (emphasis in original). The many cases Defendant cites presume, at the very least, that the resisting party had an opportunity to review, or a minimal awareness of, the contract terms at issue. Not so here. Defendant has failed to proffer any evidence that the In-Store Plaintiffs comprehended that the Loyalty Program's terms and conditions existed. For Plaintiffs, who are blind customers, simply displaying the terms and conditions on the POS devices, without more, is insufficient to provide notice. Defendant has not demonstrated that the agreement to arbitrate was provided to the In-Store Defendants in any meaningful way. See 1 Williston on Contracts§ 4:16 (4th ed.) ("As a general principle, an 15 Case 1:15-cv-1: ~-NMG Document 62 Filed 03/1~ Page 16 of 24 offeree cannot actually assent to an offer unless the offeree knows of its existence.").9 This Court, however, finds that Plaintiff Lineback is bound by the Loyalty Program's terms and conditions. Plaintiff Lineback admits that she enrolled in the Loyalty Program using her home computer and by providing her email address, but does not "recall" being presented with the terms and conditions. (#55, Ex. D.) Defendant presented evidence, however, that to enroll online, Plaintiff Lineback must have checked a box that reads"• I agree to the POP! terms and conditions". The underlined portion of the text directly next to the box serves as a link to the terms and conditions. (#42-1 ,r 6.) The In-Store Plaintiffs' circumstances are different because it is unclear whether they were aware of the existence of the terms and conditions. Here, Plaintiff Lineback used her computer to enroll, was required to click the box to enroll, and had an opportunity to review the terms and conditions by clicking on the link next to the acceptance box. Because Plaintiff Lineback was able independently to enroll in the Loyalty Program, she is bound-by its terms and conditions. Whether she "recalls" being presented with the terms and conditions is irrelevant, because Plaintiff Lineback is subject to the basic rule that one who signifies assent to an agreement is bound by its terms whether or not she reads them. See, e.g., Spritz v. Lishner, 355 Mass. 162 (1969). Here, under ordinary principles of state contract law, Defendant has failed to meet its 9 At oral argument, Defendant argued that the In-Store Plaintiffs had constructive notice of the terms and conditions because they remained enrolled in the Loyalty Program. However, Defendant has submitted no evidence demonstrating that the terms and conditions were subsequently communicated to the In-Store Plaintiffs in any meaningful way. While Defendant states that follow-up emails containing a link to the terms and conditions are sent to members of the Loyalty Program, Defendant has failed to demonstrate whether those links are conspicuously displayed or rather buried among a deluge of information. Defendant further suggested at argument that the In-Store Plaintiffs are bound by the Loyalty Program because they continued their membership and therefore received the program's benefits, similar to an employee who becomes bound by the terms of her employment by remaining employed, thereby reaping the benefits of employment. Defendant has not submitted any evidence, however, to demonstrate the In- Store Plaintiffs reaped the benefit of the Loyalty Program. Without any such evidence, Defendant has not met its burden and no agreement can be presumed. 16 Case 1:15-cv-1.-NMG Document 62 Filed 03/119 Page 17 of 24 burden to demonstrate that the In-Store Plaintiffs properly consented to the arbitration provision found in the Loyalty Program's terms and conditions. However, the terms and conditions are binding on Lineback. b. Unconscionability of the Agreement to Arbitrate Plaintiffs argue that the Loyalty Program's arbitration clause cannot be enforced because it is unconscionable. For many of the reasons stated above, this Court agrees that the arbitration clause is unconscionable with respect to the In-Store Plaintiffs but not with respect to Plaintiff Lineback. Assuming arguendo an agreement was formed, under Texas law, 10 agreements to arbitrate are valid unless grounds exist at law or in equity for revocation of the agreement. Royston, Rayzor, Vickery, & Williams, LLP v. Lopez, 467 S.W.3d 494, 500 (Tex. 2015). Because arbitration is favored, the burden of proving such a defense-e.g., fraud, unconscionability or voidness under public policy-falls on the party opposing the contract. Id. As the Texas Supreme Court recently explained: Arbitration agreements may be either substantively or procedurally unconscionable, or both. See In re Halliburton Co., 80 S.W.3d 566, 572 (Tex.2002) (' [C]ourts may consider both procedural and substantive unconscionability of an arbitration clause in evaluating the validity of an arbitration provision.'). 'Substantive unconscionability refers to the fairness of the arbitration provision itself, whereas procedural unconscionability refers to the circumstances surrounding adoption of the arbitration provision.' In re Palm Harbor Homes, Inc., 195 S.W.3d 672,677 (Tex.2006). Arbitration is strongly favored. J.M Davidson, 128 S.W.3d at 227. Royston, 467 S.W.3d at 499 (emphasis added). The circumstances surrounding the arbitration agreement at the time it was formed determine whether the provision is procedurally unconscionable. BBVA Compass Investment Solutions, Inc. v. Brooks, 456 S.W.3d 711, 724 10 Unlike the question of contract formation, Texas law applies to determine whether the agreement to arbitrate is illusory or unconscionable, because the Loyalty Program's terms and conditions provide that Texas law governs questions of interpretation. 17 Case 1:15-cv-1: i-NMG Document 62 Filed 03/1~ Page 18 of 24 (Tex. App. 2015). In the case of the In-Store Plaintiffs, there is no evidence to show that they had notice of the Loyalty Program's terms and conditions, and therefore enforcement of the arbitration clause contained therein would result in oppression and unfair surprise. BBVA Compass Investment Solutions, Inc., 456 S.W.3d at 724 ("Situations that are procedurally unconscionable involve those in which one of the parties was incapable of understanding the agreement without assistance, and the other party did not provide that assistance .... "); see also Delfingen US-Texas, L.P. v. Valenzuela, 407 S.W.3d 791, 801 (Tex. App. 2013) (agreement to arbitrate procedurally unconscionable where relevant documents not provided in an accessible manner to illiterate party and contents of the documents mischaracterized). As noted above, in determining procedural unconscionability courts typically focus on the facts surrounding the bargaining process. See In re Halliburton Co., 80 S.W.3d at 571. Here there was no bargaining process. Thus, the circumstances surrounding the In-Store Plaintiffs' purported acceptance of the Loyalty Program's terms and conditions are "sufficiently shocking" and support a finding of unconscionability. Delfingen US-Texas, L.P., 407 S.W.3d at 798; see also Estate of Benitez v. Sears, Roebuck and Co., No. 13-CV-0468, 2013 WL 4223875, at *4 (N.D.Tex. 2013) (Typically, "where illiteracy has given rise to unconscionability, not only has the signatory been illiterate, but other facts have indicated that he was not informed of the arbitration provision."). Conversely, this Court finds nothing shocking about the circumstances surrounding Plaintiff Lineback's enrollment in the Loyalty Program and therefore the arbitration agreement is not unconscionable with respect to her. c. The Agreement to Arbitrate is Illusory Plaintiffs further argue that the arbitration clause at issue is illusory because the Loyalty Program's terms and conditions provide Defendant with the right to modify the terms at any 18 Case 1:15-cv-1: ~-NMG Document 62 Filed 03/ll Page 19 of 24 time. Under Texas law, an arbitration clause is illusory if one party "can avoid its promise to arbitrate by amending the provision or terminating it altogether." In re 24R, Inc., 324 S.W.3d 564, 567 (Tex. 2010). Stated differently, if one party to the agreement "can suddenly change the terms of the agreement to avoid arbitration, then the agreement was illusory from the outset." Carey v. 24 Hour Fitness, USA, Inc., 669 F.3d 202, 205 (5th Cir. 2012). "The crux of this issue is whether [ one party] has the power to make changes to its arbitration policy that have retroactive effect, meaning changes to the policy that would strip the right of arbitration from [the other party] .... " Id. The Fifth Circuit's decision in Morrison v. Amway Corp. is instructive. 517 F .3d 248 (5th Cir. 2008). The Morrison case concerned a distribution agreement that required all distributors to comply with certain "Rules of Conduct" as they were "amended and published from time to time in official Amway literature." Id. at 253. The Rules of Conduct contained an arbitration provision, and the court determined that there was "nothing in any of the relevant documents which preclude[d] ... elimination of the entire arbitration program or its applicability to cetiain claims or disputes so that ... mandatory arbitration would no longer be available even as to disputes which had arisen and of which Amway had notice prior to publication [ of the change]." Id. Applying Texas law, the court in Morrison reasoned that because Amway retained the ability to amend its arbitration policy even as to disputes already underway, the agreement to arbitrate was illusory. Id. In so holding, the court in Morrison distinguished the facts from those in In re Halliburton Co., 80 S.W.3d 566 (Tex. 2002). In In re Halliburton Co., the court found the arbitration agreement at issue was not illusory based on two key provisions: one stated that "no amendment shall apply to a [d]ispute of which [Halliburton] had actual notice on the date of 19 Case 1:15-cv-1 i-NMG Document 62 Filed 03/1:l Page 20 of 24 amendment"; and the second stated that any termination of the arbitration program "shall not be effective until 10 days after reasonable notice of termination is given to [ e ]mployees or as to [d]isputes which arose prior to the date of termination." Id. at 569-70. Based on these two provisions, the court determined that "Halliburton cannot avoid its promise to arbitrate by amending or terminating it altogether." Id. Further, it was the lack of such a "Halliburton type savings clause[]" that led the court in Morrison to hold that the arbitration clause at issue was illusory. 517F.3dat257. More recently, in Carey, the Fifth Circuit relied on Morrison and Halliburton in holding that an arbitration provision that was silent as to retroactive application was illusory. Carey, 669 F.3d at 206. The court found it crucial that "[a]s in Morrison, there is no 'Halliburton type savings clause' to preclude the employer's ability to make retroactive modifications to the arbitration provision." Id. ("In effect, the agreement allows [the employer] to hold its employees to the promise to arbitrate while reserving its own escape hatch. "). 11 Applying these principles, this Court finds that Defendant's agreement to arbitrate is illusory and therefore unenforceable. As in Morrison and Carey, nothing in the Loyalty Agreement's terms and conditions prevents Defendant from retroactively eliminating its arbitration obligation, "which is the critical inquiry for determining whether an agreement is illusory." Carey, 669 F.3d 207. Here, in a provision labeled "Changes to the Terms," the Loyalty Program's terms and conditions provide: We reserve the right, at our discretion, to change, modify, cancel, add or remove any or all portions of these terms, any policy, FAQ, or guideline pertaining to the [Loyalty Program] at any time. If any terms change in the future, we will let you 11 Although these cases occurred in the employer-employee context, this Court sees no reason why their rationale should not apply with equal force here, particularly given the import of the discrimination claims at issue. 20 Case 1:15-cv-1: i-NMG Document 62 Filed 03/1:1 Page 21 of 24 know by posting an update to www.containerstore.com/pop with the most recent modification date. Any changes or modifications will be effective immediately upon posting the revision and you waive any right you have to receive special notice of such change. By continuing to use the [Loyalty Program], you agree to the revised terms. (#42-1, Ex. A at 1.) Yet another paragraph labeled "Additional Terms" states: "[Defendant] reserves the right, without limitation, to terminate, change, limit, modify, or cancel any [Loyalty Program] terms, conditions, rules, regulations, benefits ... at any time, with or without notice, even though such changes may affect the value of already-issued ... benefits. Id. at 3. Taken together, these provisions clearly imbue Defendant with the unilateral right to modify the arbitration clause set forth in the Loyalty Program's terms and conditions. The court in Carey expressly rejected this type of arbitration clause, observing that "silence about the possible retroactive application of amendments to the arbitration policy [is] interpreted as allowing amendments to apply retroactively." 669 F.3d at 206-07 (citing Torres v. S.G.E. Mgmt., LLC, 397 Fed. Appx. 63, 68 (5th Cir. 2010) (unpublished opinion)). As an additional matter, the notice requirements under the Loyalty Program's terms and conditions are in conflict. Under the paragraph labeled "Changes to the Terms," any amendment will be posted to Defendant's Loyalty Program website, while the customer expressly waives any right to individual notice. (#42-1, Ex. A at 1.) Under the paragraph labeled "Additional Terms," Defendant reserves the right to terminate or modify any Loyalty Program term or condition at any time, with or without notice. Even assuming the "Changes to the Terms" requires notice of a modification, such notice is not enough. Nor is acceptance by the customer of any such changes sufficient to save the clause. As Carey makes clear, mere notice and acceptance of the changes are not sufficient safeguards when retroactive amendment is possible. 669 F.3d 202 (citing the holdings in Morrison and Torres in support of this rule). 21 Case 1:15-cv-l ~-NMG Document 62 Filed 03/11 Page 22 of 24 Defendant argues that tpe arbitration provision is not illusory because Plaintiffs were free to cancel their membership in the Loyalty Program at any time, including after any change in terms. 12 (#42, Ex. A at 2.) This argument misses the point. Defendant maintains the unilateral right to modify the terms and conditions of the Loyalty Program, including the arbitration provision therein. The Loyalty Program's language is silent on the possibility of retroactive modification and therefore implicates "the fundamental concern driving this line of case law" which is "the unfairness of a situation where two parties enter into an agreement that ostensibly binds them both, but where one party can escape its obligations under the agreement by modifying it." Carey, 669 F.3d at 209; see also Domenichetti v. Salter School, LLC, No. 12- 11311-FDS, 2013 WL 1748402, at *5 (D. Mass. Apr. 19, 2013) (citing Carey, while applying Massachusetts law, in holding unilateral discretion to alter terms of arbitration provision rendered agreement to arbitrate illusory); Douglas v. Johnson Real Estate Investors, LLC, 470 Fed. Appx. 823, 825 (11th Cir. 2012) (under Massachusetts law, declaring employee's agreement to arbitrate was unenforceable because employer retained unilateral right to alter terms) (unpublished opinion). This concern is particularly acute under the circumstances of this. case, where Plaintiffs have asserted discrimination claims. See Carey, 669 F.3d at 209 (recognizing concern heightened where no definite notice window required and potential for amendments to become binding immediately upon '"official written notice"'). Because Defendant retains the unilateral right to change the terms of the arbitration 12 In its Reply, Defendant also argues that the duty of good faith and fair dealing makes "'change-in- terms"' provisions non-illusory as a matter oflaw. (#60 at 8-10.) However, Defendant fails to cite any Texas law in support of this proposition. As previously mentioned at note 10, Texas law governs the interpretation of the Loyalty Program's terms, pursuant to the choice-of-law provision contained therein. In its opening Memorandum of Law, Defendant urged this Court to apply Texas law to the parties' relationship. (#42 at 7.) 22 Case 1:15-cv-1 .. -NMG Document 62 Filed 03/lJ- Page 23 of 24 provision, such a right renders any promise to arbitrate illusory. The agreement to arbitrate is therefore unenforceable. IV. CONCLUSION For the foregoing reasons, I RECOMMEND that Defendant's Motion to Enforce Arbitration and Class Action Waivers and Stay Action (#42) be DENIED. V. REVIEW BY DISTRICT COURT The parties are hereby advised that any party who objects to these proposed findings and recommendations must file a written objection thereto within fourteen days ofreceipt of this Report and Recommendation. The written objections must identify with speci4city the portion I of the proposed findings, recommendations, or report to which objection is ma4e, and the basis I for such objections. See Fed. R. Civ. P. 72(b); 28 U.S.C. § 636(b). The partieslare further I advised that the United States Court of Appeals for this Circuit has repeatedly ihdicated that I I I failure to comply with Rule 72(b) will preclude further appellate review of the Ipistrict Court's I order based on this Report and Recommendation. See Keating v. Secretary of Ff ealth & Human I Servs., 848 F.2d 271, 274-75 (1st Cir. 1988); United States v. Valencia-Copete,1792 F.2d 4, 6 (1st Cir. 1986); Scottv. Schweiker, 702 F.2d 13, 14 (1st Cir. 1983); United Statls v. Vega, 678 I F.2d 376, 378-79 (1st Cir. 1982); Park Motor Mart, Inc. v. Ford Motor Co., 616 F.2d 603, 604- ! 05 (1st Cir. 1980); see also Thomas v. Arn, 474 U.S. 140, 153-55 (1985). 1 /s / M. Page Kelley M. Page Kelley I United States Magistrate Ju 1 dge March 11, 2016 23 Case 1:15-cv-1: (-NMG Document 62 Filed 03/11 Page 24 of 24 24 ..J r l ,J Exhibit C J I I • Case 1:15-cv-: 14-NMG Document 83 Filed 07/2- 5 Page 1 of 6 United States District Court District of Massachusetts NATIONAL FEDERATION OF THE BLIND, MARK CADIGAN, MIKA PYYHKALA, LISA IRVING, ARTHUR JACOBS, HEATHER ALBRIGHT, and JEANINE KAY LINEBACK, Plaintiffs, v. THE CONTAINER STORE, INC., Defendant. ------------------- ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) Civil Action No. 15-12984-NMG MEMORANDUM & ORDER GORTON, J. The defendant, The Container Store, Inc., has filed objections to the Report and Recommendation ("R&R") of Magistrate Judge M. Paige Kelley, which the Court addresses and overrules as follows: As plaintiffs note in their response to defendant's objections (Docket No. 69), most of defendant's arguments were presented to Magistrate Judge Kelley through defendant's reply brief. Accordingly, those arguments were considered and ruled upon by the Magistrate Judge. Defendant's objections do, however, raise one item of evidence not presented to Magistrate Judge Kelley and one argument presented only at oral argument. Neither persuades this Court to sustain the objections. -1- • I \ J Case 1:15-cv-: 34-NMG Document 83 Filed 07/~ :> Page 2 of 6 Furthermore, the Court notes that the issue of whether it should resolve plaintiffs' contention that the arbitration agreement was unconscionable and illusory rather than deferring to the arbitrator with respect to those issues was not clearly addressed in the R&R. As explained below, because a resolution by this Court leads to the most efficient outcome, it will decide those issues and accept and adopt the R&R in full. A. Issues Raised by Defendant's Objections 1) Defendant's Training Manual In response to Magistrate Judge Kelley's holding that the In-Store Plaintiffs did not receive notice that they were entering into an agreement which would waive their right to proceed in court, defendant now claims that the In-Store Plaintiffs must have received notice because its training manual instructs employees to explain the terms and conditions to customers. Defendant's argument is, nevertheless, unavailing. The manual does not instruct employees to tell customers that the terms and conditions exist, nor does it instruct them to explain the terms and conditions to customers. Instead, it states that employees should [a]llow the -customer the opportunity to review [the terms and conditions on the screen] and then ask them to press the I Accept button. -2-