Ninth Circuit Rejects Walmart’s Arbitration Contention
Assent by Online Purchaser of Goods to Arbitrate Disputes Doesn’t Carry Over to Subsequent In-Store Purchase of Lifetime Service Agreement That Lacks Arbitration Proviso, Though Relating to Same Goods, Opinion Says
By a MetNews Staff Writer
The Ninth U.S. Circuit Court of Appeals, applying California law, yesterday rejected the argument by Walmart Inc. that a customer who bought tires through Walmart.com, which entails an assent to arbitrate any disputes, necessarily consented to arbitration in connection with the subsequent in-store purchase of a lifetime tire balancing and rotation service agreement.
Asserting that Walmart auto care centers had refused to perform under the lifetime service agreement (based on the discontinuation of the service that had been purchased), consumer Kevin Johnson on Nov. 23, 2020, brought a putative class action in the U.S. District Court for the Eastern District of California. Judge Dale A. Drozd on July 29, 2021, denied Walmart’s motion to compel arbitration.
He spelled out:
District Court’s Conclusion
Drozd drew this conclusion:
“[D]efendant here seeks to impose an arbitration clause from a previous contract onto a new, separate agreement from which a dispute arose. By clicking ‘Place Order’ on defendant’s website, plaintiff did not agree to arbitrate all disputes related to a separate, in-person purchase that was made well after the online purchase.”
Ninth Circuit’s Affirmance
The Ninth Circuit affirmed in an opinion by William K. Sessions III, a senior District Court judge of the District of Vermont, sitting by designation.
Sessions cast aside the usual presumption in favor of arbitrability, saying that it doesn’t apply where the issue is whether an agreement to arbitrate exists, not what the terms are. He relied on California’s general principles of contract law.
Rejecting that logic, he declared that “Johnson’s claim against Walmart does not arise out of the contract containing the arbitration agreement; it arises out of an entirely separate transaction at a Walmart store.”
“The two contracts—though they involve the same parties and the same tires—are separate and not interrelated. Therefore, the arbitration agreement in the first does not encompass disputes arising from the second.”
The case is Johnson v. Walmart, 21-16423.
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