## Facts

- Consumers who made online purchases were allegedly enrolled, without fully informed consent, in defendants’ discount membership programs and charged recurring monthly fees.
- Defendants contended the membership terms included an arbitration provision that was (1) available via a hyperlink on the enrollment page and (2) sent in an email after enrollment.
- Plaintiffs alleged they were unaware of any arbitration term when the membership relationship was formed and did not cancel during the free-trial period because they believed they had not agreed to arbitration.
- Plaintiffs filed a putative class action in the District of Connecticut asserting statutory and common-law claims based on alleged deceptive enrollment practices.
- Defendants moved to compel arbitration; the district court denied the motion, finding no agreement to arbitrate.
- Defendants appealed the denial of the motion to compel arbitration.

## Issues

1. Whether plaintiffs assented to an arbitration provision based on post-enrollment notice in an email containing or linking to terms and conditions.
2. Whether plaintiffs were bound to arbitrate based on constructive notice from a hyperlink on the enrollment page when that theory was not raised in the district court.
3. Whether the record raised a genuine issue of material fact as to formation of an agreement to arbitrate.

## Decision

- The Second Circuit affirmed the order denying the motion to compel arbitration.
- The court held the post-enrollment email did not provide sufficient notice of the arbitration provision under applicable state contract principles, so plaintiffs could not be deemed to have assented by failing to cancel.
- The court declined to consider the hyperlink-notice theory because defendants forfeited it by not raising it in the district court.
- The court concluded there was no genuine issue of material fact that could support a finding that the parties agreed to arbitrate.

## Legal Principles

- Arbitration is a matter of contract; a party cannot be compelled to arbitrate absent mutual assent determined under objective state-law contract principles.
- For terms delivered after enrollment, an arbitration clause is not enforceable where the method of delivery fails to provide reasonable notice that binding contractual terms are being imposed and that continued participation or failure to cancel will constitute acceptance.
- A party generally may not raise on appeal a new ground for compelling arbitration that was not presented to the district court.
- When reviewing denial of a motion to compel arbitration, the court assesses whether the record shows a triable factual dispute on contract formation; absent such a dispute, arbitration cannot be compelled.

## Conclusion

The Second Circuit refused to compel arbitration because plaintiffs lacked sufficient notice and therefore did not objectively manifest assent to an arbitration clause provided only through a post-enrollment email, and because defendants forfeited any separate argument based on hyperlink notice by failing to raise it below.


Schnabel v. Trilegiant Corp., 697 F.3d 110 (2d Cir. 2012)