News Flash: Guy Who Never Signed Arbitration Agreement Can Not Be Forced into Arbitration

Really?  This is a thing now?  The District Court held that a company can bind a consumer to an arbitration provision and class action waiver in a rolling contract of adhesion.  Fortunately, the Ninth Circuit didn’t buy it, but why is it even a close call?

In November 2011, Erik Knutson bought a Toyota which came with a 90-day subscription to Siriux XM Radio (Sirius).  About a month into his trial subscription, Sirius sent Knutson a “welcome kit.”  That welcome kit included a customer agreement with an arbitration clause and class action waiver.  According to the customer agreement, its terms became binding if Knutson did not contract Sirius to cancel his 90-day trial within three business days.  Knutson also received unsolicited phone calls from Sirius on his cell phone.  He filed a putative class action suit against Sirius for violations of the federal Telephone Consumer Protection Act.  

Sirius cited to the arbitration clause and moved to compel arbitration.  The District Court granted Sirius’s motion to compel.  In Knutson v. Sirius XM Radio, Inc. The Ninth Circuit reversed.  The opinion is unanimous and careful.  The Court explains why Mr. Knutson never assented to any terms and was not bound in any way to Sirius.  Knutson never bought anything from Sirius and never knew that he was entering into a contact.