     11-1311
     Schnabel v. Trilegiant Corp. & Affinion, Inc.


 1                        UNITED STATES COURT OF APPEALS

 2                            FOR THE SECOND CIRCUIT

 3                               August Term, 2011

 4   (Argued:    April 4, 2012                   Decided:   September 7, 2012)
 5
 6                             Docket No. 11-1311-cv

 7                   -------------------------------------

 8              LUCY SCHNABEL, EDWARD SCHNABEL, & BRIAN SCHNABEL,
 9             o/b/o Themselves and All Others Similarly Situated

10                              Plaintiffs-Appellee,

11                                       - v -

12                  TRILEGIANT CORPORATION, AFFINION, INC.,

13                            Defendants-Appellants.

14                   -------------------------------------

15   Before:     McLAUGHLIN, SACK, and LIVINGSTON, Circuit Judges.

16               Appeal from an order of the United States District

17   Court for the District of Connecticut (Janet C. Hall, Judge)

18   denying the defendants' motion to compel arbitration.         The

19   defendants argue on appeal, inter alia, that the district court

20   erred in concluding as a matter of law that the parties had not

21   mutually assented to a valid arbitration provision and that this

22   Court should remand the case to the district court directing the

23   court to enter an order compelling arbitration.         We conclude that

24   there is no genuine issue of material fact which, if decided in

25   the defendants' favor, would be sufficient to support a fact-
 1   finder's determination that the parties agreed to arbitrate the

 2   dispute.

 3              Affirmed.

 4                             PATRICK A. KLINGMAN (James E. Miller,
 5                             Karen M. Leser-Grenon, James C. Shah,
 6                             Nathan C. Zipperian, Rose F. Luzon
 7                             Shepherd, Finkelman, Miller & Shah LLP,
 8                             Media, PA, Chester, CT, San Diego, CA
 9                             David A. Burkhalter, Burkhalter, Rayson
10                             & Assoc. P.C., Knoxville, TN, on the
11                             brief) for Plaintiffs-Appellees.

12                             KENNETH M. KLIEBARD (Gregory T. Fouts,
13                             Morgan Lewis & Bockius LLP, Chicago, IL
14                             James H. Bicks, Wiggin and Dana LLP,
15                             Stamford, CT, on the brief) for
16                             Defendants-Appellants.

17   SACK, Circuit Judge:

18              The question presented to us on this appeal is whether

19   the plaintiffs are bound to arbitrate their dispute with the

20   defendants as a consequence of an arbitration provision that the

21   defendants assert was part of a contract between the parties.

22   Neither of the plaintiffs acknowledge being aware of the

23   existence of the arbitration provision when their contractual

24   relationships with the defendants were formed.   But, according to

25   the defendants, the provision was made available to the

26   plaintiffs through a hyperlink appearing on the page the

27   plaintiffs would have seen before enrolling in a service offered

28   by the defendants and an email sent to the plaintiffs after their

29   enrollment.

30              We conclude that despite some limited availability of

31   the arbitration provision to the plaintiffs, they are not bound


                                      2
 1   to arbitrate this dispute.   As regards the email, under the

 2   contract law of Connecticut or California –- either of which may

 3   apply to this dispute –- the email did not provide sufficient

 4   notice to the plaintiffs of the arbitration provision, and the

 5   plaintiffs therefore could not have assented to it solely as a

 6   result of their failure to cancel their enrollment in the

 7   defendants' service.    As regards the hyperlink, we conclude that

 8   the defendants forfeited the argument that the plaintiffs were on

 9   notice of the arbitration provision through the hyperlink by

10   failing to raise it in the district court.

11                                BACKGROUND

12             Because this appeal comes to us from the district

13   court's denial of the defendants' motion to compel arbitration,

14   we accept as true for purposes of this appeal factual allegations

15   in the plaintiffs' complaint that relate to the underlying

16   dispute between the parties.   Fensterstock v. Educ. Fin.

17   Partners, 611 F.3d 124, 127-28 (2d Cir. 2010), vacated on other

18   grounds by Affiliated Computer Servs., Inc. v. Fensterstock, 131

19   S. Ct. 2989 (2011).    Allegations related to the question of

20   whether the parties formed a valid arbitration agreement -- a

21   question the district court answered in the negative -- are

22   evaluated to determine whether they raise a genuine issue of

23   material fact that must be resolved by a fact-finder at trial.

24   See Bensadoun v. Jobe-Riat, 316 F.3d 171, 175 (2d Cir. 2003) ("In

25   the context of motions to compel arbitration brought under the



                                       3
 1   Federal Arbitration Act . . . , the court applies a standard

 2   similar to that applicable for a motion for summary judgment.    If

 3   there is an issue of fact as to the making of the agreement for

 4   arbitration, then a trial is necessary." (citations omitted));

 5   Specht v. Netscape Commc'n Corp., 306 F.3d 17, 27 n.12 (2d Cir.

 6   2002) (similar).   As it relates to the question of whether an

 7   arbitration agreement was formed, we interpret the record as a

 8   whole in the light most favorable to the defendants, the party

 9   against whom the district court resolved the motion to compel

10   arbitration.   Cf., e.g., Wachovia Bank, Nat'l Ass'n v. VCG

11   Special Opportunities Master Fund, Ltd., 661 F.3d 164, 171 (2d

12   Cir. 2011) (observing that the district court's decision to grant

13   summary judgment is reviewed de novo, "construing the evidence in

14   the light most favorable to the party against which summary

15   judgment was granted").

16             Underlying Dispute

17             Lucy Schnabel, Edward Schnabel, and Brian Schnabel, are

18   the named plaintiffs in this putative class action.   Lucy and

19   Edward are married to one another.   Brian is their son.   All

20   three are residents of Pleasant Hill, California.

21             The defendants Affinion Group, LLC, and its wholly

22   owned subsidiary Trilegiant Corp., are incorporated in the State

23   of Delaware with their principal places of business in

24   Connecticut.   Trilegiant is in the business of marketing and

25   selling online programs that offer discounts on goods and

26   services in exchange for a "membership fee."   The plaintiffs

                                      4
 1   allege that the fee ranges from $8.99 monthly (about $108

 2   annually) to $480 annually.    See Class Action Compl. at ¶ 22,

 3   Schnabel v. Trilegiant Corp., 10-cv-00957 (D. Conn. June 17,

 4   2010), ECF No. 1 ("Compl.").

 5                "Great Fun" is the name of one of Trilegiant's

 6   services.1    By paying a monthly membership fee to Trilegiant,

 7   Great Fun members are eligible to receive discounts on a wide

 8   variety of products and services including dining, retail

 9   shopping, car repair, and travel.

10                In 2007, Brian Schnabel was enrolled in Great Fun after

11   making a purchase on the online travel site Priceline.com.    In

12   2009, his father, Edward Schnabel, was enrolled in Great Fun

13   after making a purchase on the sports memorabilia site

14   Beckett.com.2    Neither Edward nor Brian acknowledges


          1
             The Schnabels bring this suit on behalf of all persons
     who, after February 15, 2008, were charged for one or more
     Trilegiant services. See Compl. at ¶ 33-34. In addition to
     Great Fun, these services include Shoppers Advantage, a "catalog
     and on-line shopping membership"; Travelers Advantage, a "travel
     services membership"; AutoVantage, an "automobile purchasing
     information, dealer referral, and discount auto repair
     membership"; Buyers Advantage, a "retail product warranty
     extension/product repair membership"; Privacy Guard, a "credit
     report and credit monitoring membership"; Health Saver, a
     "dentist referral and discount prescription drug/medical services
     membership"; and Netmarket.com, a "catalog and online shopping
     membership." See id. at ¶ 22.
          2
             A "screenshot" of an order confirmation page similar to
     the Beckett Internet page that Brian saw when completing his
     purchase on Beckett, including the Great Fun solicitation "10%
     Cash Back" is publicly available at
     http://www.ca2.uscourts.gov/Docs/Video_files/11_1311/Becket_ord_c
     onf.pdf. See also Ex. A to Mallozzi Aff., Ex. 1 to Mot. to
     Dismiss or Stay and Compel Arbitration, Schnabel v. Trilegiant
     Corp., 10-cv-00957 (D. Conn. Sept. 29, 2010), ECF No. 23

                                        5
1   intentionally or knowingly enrolling in the service.   Trilegiant

2   asserts, and we accept for the purposes of this appeal, however,

3   that in the process of completing purchases from Priceline.com

4   and Beckett.com, respectively, both Edward and Brian were

5   enrolled in Great Fun when they were presented with separate

6   "enrollment offer" pages and entered personal information into

7   fields on those pages.3   See Appellant's Brief 6-7.

8             The initial Great Fun solicitation, which appears on

9   the merchant's order confirmation page confirming that the user



    ("Mallozzi Aff.").
           The screenshots in the record, and made available on the
    Court's website, see id. & infra note 3, were created by
    Trilegiant and are substantially similar to the Internet pages
    that Edward and Brian would have seen when enrolling in Great
    Fun. See Mallozzi Aff. ¶¶ 6, 10. All of the screenshots posted
    to the Court's website refer to "Daniel J Eid" as the purchaser
    of Beckett goods and the person enrolling in Great Fun. Although
    Trilegiant does not explain Mr. Eid's relationship with
    Trilegiant, he appears to be a Trilegient or Affinion employee
    inasmuch as his email address (disclosed in the record in an
    example email allegedly similar to one received by Edward and
    Brian after their enrollments in Great Fun, Mallozzi Aff. ¶ 15)
    has an "affinion.com" domain. See Mallozzi Aff. Ex. E.
         3
           Screenshots similar to the enrollment offers to Edward and
    Brian are publicly available at
    http://www.ca2.uscourts.gov/Docs/Video_files/11_1311/Priceline_en
    rol_offer.pdf, see also Mallozzi Aff. Ex. A., and
    http://www.ca2.uscourts.gov/Docs/Video_files/11_1311/Becket_enrol
    _offer.pdf, respectively; see also Mallozzi Aff. Ex. C.
           Both Edward and Brian dispute that they in fact completed
    all the steps said to be necessary to enroll in Great Fun when
    they were making their respective purchase.   Edward asserts that
    at the time, he thought that Beckett.com was collecting his
    information and was unaware that any other entity was involved in
    the transaction. Brian says that, like Edward, he did not
    realize that this solicitation involved a third-party separate
    from Priceline. But Trilegiant has a record of Brian subscribing
    to their service under the username "SCHNABEL22."

                                     6
 1   has completed an online purchase, invites the purchaser to click

 2   on a hyperlink in order to receive "Cash Back" on his or her

 3   purchase.   Although the plaintiffs allege that the order

 4   confirmation page does not indicate that this offer involves a

 5   party other than the merchant with whom the user is in the

 6   process of completing a purchase, a screenshot of a confirmation

 7   page allegedly similar to that viewed by Edward does (1) state

 8   that "your Online Price Guide subscription has also been sent to

 9   [your email address]"; and (2) feature, below the hyperlink

10   "Click here to claim up to $20.00 Cash Back on this purchase!", a

11   "button" titled "See Details" with a legend beneath reading:

12   "Click above to learn how to get $20 Back from Great Fun."     See

13   Screenshot, citation in footnote 2, supra.    "Great Fun" is not

14   further identified on the order confirmation page.

15               According to Trilegiant, Edward would only have been

16   brought to Great Fun's enrollment page after clicking on the

17   hyperlinked invitation to "See Details," and Brian after clicking

18   on a similar invitation to "Learn More," posted on the purchase

19   confirmation pages of the Beckett and Priceline sites,

20   respectively.   See Mallozzi Aff., Ex. 1 to Mot. to Dismiss or

21   Stay and Compel Arbitration, Schnabel v. Trilegiant Corp., 10-cv-

22   00957 (D. Conn. Sept. 29, 2010) ("Mallozzi Aff.") ¶¶ 6, 10.4

          4
             It is not clear from the record whether Edward and Brian
     would have had to click on these hyperlinks in order to enroll in
     Great Fun or whether they could have been enrolled in Great Fun
     without ever seeing the enrollment pages by, for example, in
     Edward's case, clicking on the "Click here to claim up to $20.00
     Cash Back on this purchase!" hyperlink. Because we conclude that

                                       7
 1   According to Trilegiant, neither plaintiff could join Great Fun

 2   without affirmatively entering personal information into various

 3   fields appearing on the enrollment page.    This information

 4   included the plaintiff's "city of birth," and a password created

 5   by the plaintiff.    It is undisputed, though, that the plaintiffs

 6   were not required to reenter credit-card information when signing

 7   up for Great Fun.    That information had already been entered in

 8   connection with the online purchase of goods and services through

 9   Beckett (for Edward) and Priceline (for Brian).

10                The enrollment page, like the original purchase

11   confirmation page, does not plainly indicate that the offer is

12   from a third party -- Trilegiant –- rather than the merchant with

13   whom the user has just completed a purchase -- Beckett or

14   Priceline.    Indeed, in the case of the enrollment page for

15   Beckett, there is a statement at the top of the page indicating

16   that the purchaser has received a "Special Award for Beckett

17   Customers."    See Mallozzi Aff. Ex. A.   Toward the bottom of the

18   page, near an overview of some of the "Benefits" of the program,

19   though, there do appear the logos of several popular brands

20   besides Beckett, suggesting that by accepting the offer, the

21   purchaser will somehow be able to receive discounts when

22   purchasing other goods or services.




     even if Edward and Brian did both see the enrollment pages, no
     binding arbitration agreement was formed, this question need not
     be resolved.

                                        8
 1                The message on the enrollment page also promises "up

 2   to" $20 off on the purchaser's Beckett purchase, along with

 3   several benefits for other goods and services, including "10% to

 4   50% [savings] at over 40,000 Participating Restaurants" and "10%

 5   to 50% [savings] on Top Attractions and Activities."      Id.   It

 6   indicates in relatively small print that Great Fun will email the

 7   purchaser "Great Fun membership information so [he or she] can

 8   start saving today," but that "[t]here's no obligation to

 9   continue . . . Great Fun benefits. . . .      [The purchaser can]

10   call us to cancel before the end of . . . [the] FREE trial and

11   owe us nothing[.]"    Id.

12                To the left of the fields where a purchaser can enter

13   his or her "City of Birth" and password appears a two paragraph

14   description of some of the general terms of the agreement,

15   including a statement that the first month of membership will be

16   free but that the purchaser's credit card will be charged $14.99

17   per month if he or she does not cancel the membership by toll-

18   free phone call.    Id.     The text also states that by entering his

19   "City of Birth" and password and clicking the "Yes" button, the

20   purchaser agrees that the vendor (in this case Beckett) will

21   transmit his or her credit-card information to Great Fun.       Id.

22   Further, by clicking the "Yes" button, the purchaser acknowledges

23   that he or she has read the "Terms & Conditions" of the

24   agreement.    Id.

25                Below these paragraphs are two hyperlinks.   One is to a

26   "Privacy Policy," and the other is to "Terms & Conditions" --

                                          9
 1   apparently referring to those mentioned in the preceding

 2   paragraph.    Id.   Trilegiant suggests, in its briefing to us, that

 3   by clicking on the "Terms & Conditions" hyperlink, purchasers

 4   such as Edward and Brian would be brought to a page that includes

 5   many other terms, including the arbitration provision at issue in

 6   this litigation.    See Appellant's Br. 36; Appellant's Reply Br.

 7   13-14.

 8                Trilegiant also asserts that it was its custom and

 9   practice, to which it routinely adhered, to email to each newly

10   enrolled member a written document entitled "Great Fun Membership

11   Terms and Conditions" following his or her online enrollment in

12   the service.    If the email bounced back, then Trilegiant would

13   send a paper version of the document to the member at his or her

14   billing address.

15                Edward Schnabel acknowledges that after learning of

16   Trilegiant's practice, he reviewed his old emails and determined

17   that in fact he had received "several emails" from Great Fun.

18   Ex. 1 to Opp. to Mot. to Dismiss or Stay and Compel Arbitration,

19   Edward Schnabel Decl. ¶ 7, Schnabel v. Trilegiant Corp., 10-cv-

20   00957 (D. Conn. Oct. 19, 2010), ECF No. 24 ("Edward Schnabel

21   Decl.").   Brian, on the other hand, denies ever having received

22   an email from Great Fun.    Because we conclude that even if Brian

23   and Edward received the terms and conditions, including the

24   arbitration provision, by email, the terms did not form a part of

25   a binding agreement between the parties, the factual dispute



                                       10
 1   among the parties as to whether these emails were ever received

 2   by the plaintiffs is immaterial for present purposes.

 3             The arbitration provision states that any dispute

 4   between the member and "GF" –- or Great Fun5 – can be brought in

 5   either "small claims court or by binding arbitration."      Edward

 6   Schnabel Decl., Ex. A ¶ 5.   It also includes a class-arbitration

 7   waiver providing that "[a]ll disputes in arbitration will be

 8   handled just between the named parties, and not on any

 9   representative or class basis."    Id.     The same provision also

10   requires that all disputes between the parties should be governed

11   by Connecticut law.   Id.

12             In early 2010, Edward Schnabel and his wife Lucy

13   Schnabel discovered that Edward's credit card had been charged

14   $14.99 per month for every month between September 2009 and

15   February 2010 for Edward's membership in Great Fun.      He never

16   made any allegedly discounted purchases for which we was

17   qualified as a Great Fun member.       Instead, he asked for a full

18   refund of the charges.   Trilegiant offered to refund four of the

19   six months of charges, but no more.



          5
              The first provision in the "Terms & Conditions" document
     begins: [T]he "AGREEMENT [is] made between
     Trilegiant . . . providing a service called Great Fun, called
     'GF,' and the person specified on the GF membership card."
     Edward Schnabel Decl., Ex. A. The plaintiffs argue that "[b]y
     its express language, the arbitration provision does not apply to
     disputes between consumers and Trilegiant, but rather disputes
     between consumers and GF." Appellees' Br. at 22. Because we
     conclude that the arbitration agreement would not bind the
     plaintiffs even if it were to "express[ly]" refer to Trilegiant,
     we need not address this argument.

                                       11
 1                In March or April of that year, Lucy Schnabel pointed

 2   out to her son Brian that he had similarly been charged $11.99

 3   per month since December 2007 by Trilegiant for membership in

 4   Great Fun.    Brian asserts that he then called Great Fun to

 5   complain.    In response, he says, Trilegiant offered to refund

 6   four of the thirty months of charges.

 7                District Court Proceedings

 8                On July 17, 2010, the plaintiffs brought suit against

 9   Trilegiant and Affinion in the United States District Court for

10   the District of Connecticut on behalf of a class of themselves

11   and similarly situated plaintiffs.       They alleged, inter alia,

12   that the defendants had engaged in "unlawful, unfair, and

13   deceptive practices [through] . . . unauthorized enrollment

14   practice[s] [known as] . . . 'post transaction marketing' and

15   'data pass.'"    Compl. at ¶ 2-3.

16                According to the plaintiffs, "data pass" occurs when a

17   consumer agrees to pay a third-party service without having to

18   reenter credit card or other payment data initially entered in

19   order to purchase a good or service from a different online

20   merchant.    Id. at ¶ 4.   "Post transaction marketing" occurs when

21   "(1) 'interstitial sales' offer pages, which appear between the

22   checkout page and the confirmation page of the e-retailer from

23   whom the consumer intends to make a purchase, (2) 'pop-up'

24   windows, which appear on top of the confirmation page, and (3)

25   hyperlinks or 'banners' that are included directly on the

26   confirmation page itself."    Id. at ¶ 3.     Central to the factual

                                         12
 1   allegations of the plaintiffs' complaint was a United States

 2   Senate investigation into these allegedly unfair practices.     See

 3   Compl. at ¶¶ 3-5.

 4              The complaint asserted claims under the Racketeer

 5   Influenced and Corrupt Organizations Act, 18 U.S.C. § 1962, the

 6   Electronic Communications Privacy Act, 18 U.S.C. § 2510, the

 7   Connecticut Unfair Trade Practices Act, Conn. Gen. Stat. Ann.

 8   § 42-110a, the California Consumer Legal Remedies Act, Cal. Civ.

 9   Code § 1770, the California False Advertising Law, id. at

10   § 17500, and the California Unfair Competition Law, id. at

11   § 17200.   Compl. at ¶¶ 43-103.   On September 29, 2010, the

12   defendants filed a motion to dismiss and compel arbitration

13   pursuant to the emailed arbitration provision.   On February 24,

14   2011, the district court (Janet C. Hall, Judge) denied the motion

15   to compel arbitration, concluding that the parties had never

16   agreed to arbitrate.   Schnabel v. Trilegiant Corp, 10–CV–957,

17   2011 WL 797505, at *6, 2011 U.S. Dist. LEXIS 18132, at *20-*21

18   (D. Conn. Feb. 24, 2011).

19              The district court began its analysis by deciding that

20   the court was not required to resolve a complex choice-of-law

21   question -- whether California or Connecticut law applied --

22   because "regardless of the law applied, the result is the same."

23   Id. at *3, 2011 U.S. Dist. LEXIS 18132, at *7-*8.    Under either

24   law, the court determined, the defendants had failed to raise a

25   genuine issue of material fact as to whether the plaintiffs had

26   assented to the arbitration provision.   Id. at *4, 2011 U.S.

                                       13
 1   Dist. LEXIS 18132, at *15.   "Even assuming Edward and Brian read

 2   all of th[e] information [on the enrollment screen and in the

 3   subsequent email from Great Fun], the contract that they formed

 4   with Trilegiant did not include an arbitration clause."     Id.,

 5   2011 U.S. Dist. LEXIS 18132, at *13.      In the district court's

 6   view, the contract was formed at the moment the plaintiffs

 7   entered their information into the online enrollment screen and

 8   "included terms exactly as Trilegiant proposed them in their

 9   prompts -- a monthly charge in exchange for online savings."        Id.

10   The court concluded that Brian and Edward never expressly or

11   implicitly assented to additional terms, which included the

12   arbitration provision, which were to follow by email.     Id.

13             The defendants filed this interlocutory appeal pursuant

14   9 U.S.C. § 16(a)(1)(C)6 from the order denying their motion to

15   dismiss and compel arbitration.

16                                DISCUSSION

17             I. Standard of Review and Legal Framework

18             The Supreme Court has repeatedly instructed that the

19   Federal Arbitration Act ("FAA"), 9 U.S.C. § 1 et seq., first

20   enacted in 1925, "embod[ies] a national policy favoring

21   arbitration."   AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740,

22   1749 (2011) (internal quotation marks and brackets omitted).

          6
             9 U.S.C. § 16(a)(1)(C) provides, inter alia: "An appeal
     may be taken [to the Court of Appeals] from an order denying an
     application under section 206 of this title to compel
     arbitration."



                                       14
 1   But this policy is founded on a desire to preserve the parties'

 2   ability to agree to arbitrate, rather than litigate, disputes.

 3   With the FAA, Congress sought to counteract an historic judicial

 4   hostility toward arbitration, which often trumped the parties'

 5   clear intentions.   See Allied-Bruce Terminix Cos., Inc. v.

 6   Dobson, 513 U.S. 265, 272 (1995).       The Act places arbitration

 7   agreements "upon the same footing as other contracts."      Scherk v.

 8   Alberto-Culver Co., 417 U.S. 506, 511 (1974) (internal quotation

 9   marks omitted).   But it "does not require parties to arbitrate

10   when they have not agreed to do so."      Volt Info. Scis., Inc. v.

11   Bd. of Trs. of Leland Stanford Jr. Univ., 489 U.S. 468, 478

12   (1989); accord E.E.O.C. v. Waffle House, Inc., 534 U.S. 279, 293

13   (2002).

14               The threshold question facing any court considering a

15   motion to compel arbitration is therefore whether the parties

16   have indeed agreed to arbitrate.       Inasmuch as the arbitrator has

17   no authority of any kind with respect to a matter at issue absent

18   an agreement to arbitrate, the question of whether such an

19   agreement exists and is effective is necessarily for the court

20   and not the arbitrator.     See AT&T Techs., Inc. v. Commc'ns

21   Workers of Am., 475 U.S. 643, 648-49 (1986); Specht, 306 F.3d at

22   26-27.

23               Under the FAA, "[i]f the making of the arbitration

24   agreement or the failure, neglect, or refusal to perform the same

25   be in issue, the court shall proceed summarily to the trial

26   thereof."   9 U.S.C. § 4.   But a trial is warranted only if there

                                       15
 1   exists one or more genuine issues of material fact regarding

 2   whether the parties have entered into such an agreement.     See

 3   Opals on Ice Lingerie v. Bodylines Inc., 320 F.3d 362, 369 (2d

 4   Cir. 2003).

 5             On appeal, a district court's denial of a motion to

 6   compel arbitration is reviewed de novo.      Specht, 306 F.3d at 26.

 7   The question of whether the parties have agreed to arbitrate is

 8   also reviewed de novo to the extent that the district court's

 9   conclusion was based on a legal determination, but findings of

10   fact, if any, bearing on this question are reviewed under a

11   "clearly erroneous" standard.   Id.7

12             II. State Contract Law

13             Whether or not the parties have agreed to arbitrate is

14   a question of state contract law.      See Specht, 306 F.3d at 26;

15   Chelsea Square Textiles, Inc. v. Bombay Dyeing & Mfg. Co., 189

16   F.3d 289, 295-96 (2d Cir. 1999) ("[W]hile . . . the FAA preempts

17   state law that treats arbitration agreements differently from any

18   other contracts, it also preserves general principles of state

19   contract law as rules of decision on whether the parties have

20   entered into an agreement to arbitrate.") (internal quotation

21   marks and footnote omitted).

22             The terms and conditions at issue here include a

23   choice-of-law provision, which -- like the arbitration clause --

24   was not shown on the enrollment screen.     The provision therefore

          7
             There are no such findings of fact by the district court
     that we review or rely upon on appeal here.

                                     16
 1   does not determine the law that the Court should apply to

 2   determine whether the arbitration clause was part of any

 3   agreement between the parties unless and until it is determined

 4   that the parties have agreed to and are bound by it.   Applying

 5   the choice-of-law clause to resolve the contract formation issue

 6   would presume the applicability of a provision before its

 7   adoption by the parties has been established.   See, e.g., Trans-

 8   Tec Asia v. M/V Harmony Container, 518 F.3d 1120, 1124 (9th Cir.

 9   2008) ("[W]e cannot rely on the choice of law provision until we

10   have decided, as a matter of law, that such a provision was a

11   valid contractual term and was legitimately incorporated into the

12   parties' contract."); B-S Steel of Kansas, Inc. v. Texas Indus.,

13   Inc., 439 F.3d 653, 661 n.9 (10th Cir. 2006) (referring to "the

14   logical flaw inherent in applying a contractual choice of law

15   provision before determining whether the underlying contract is

16   valid").

17              Considering this matter without deciding whether the

18   choice-of-law provision is binding, then, the law of either

19   California -- where the Schnabels were located when they were

20   enrolled in Great Fun -- or Connecticut, where Trilegiant is

21   located -- may apply to this dispute.   But as the district court

22   recognized, neither that court nor this one need resolve this

23   typically thorny choice-of-law question, because both Connecticut

24   and California apply substantially similar rules for determining

25   whether the parties have mutually assented to a contract term.

26   Schnabel, 2011 WL 797505, at *3, 2011 U.S. Dist. LEXIS 18132, at

                                     17
 1   *7-*8.   Which state's law applies is therefore without

 2   significance.

 3              The touchstone of the inquiry under either state's law

 4   is the parties' outward manifestations of assent.   See, e.g.,

 5   Chicago Title Ins. Co. v. AMZ Ins. Servs., Inc., 188 Cal. App.

 6   4th 401, 422, 115 Cal. Rptr. 3d 707, 725 (2010) ("Mutual assent

 7   is determined under an objective standard applied to the outward

 8   manifestations or expressions of the parties.") (internal

 9   quotation marks omitted); Binder v. Aetna Life Ins. Co., 75 Cal.

10   App. 4th 832, 850, 89 Cal. Rptr. 2d 540, 551 (1999) ("To form a

11   contract, a manifestation of mutual assent is necessary. . . .

12   Mutual assent may be manifested by written or spoken words, or by

13   conduct.") (citations to Restatement (Second) of Contracts §§ 17,

14   19 (1981) omitted); Ubysz v. DiPietro, 185 Conn. 47, 51, 440 A.2d

15   830, 833-34 (1981) (observing that a contract is formed when

16   parties assent through "written or spoken words or by other acts

17   or by failure to act") (internal quotation marks omitted).

18             The conduct manifesting such assent may be words or

19   silence, action or inaction, but "[t]he conduct of a party is not

20   effective as a manifestation of his assent unless he intends to

21   engage in the conduct and knows or has reason to know[8] that the
          8

                A person has reason to know a fact, present
                or future, if he has information from which a
                person of ordinary intelligence would infer
                that the fact in question does or will exist.
                A person of superior intelligence has reason
                to know a fact if he has information from
                which a person of his intelligence would draw
                the inference. There is also reason to know

                                     18
 1   other party may infer from his conduct that he assents."

 2   Restatement (Second) of Contracts § 19(2).

 3             In this case, Trilegiant, in the argument it has not

 4   forfeited, asserts that the plaintiffs assented to the

 5   arbitration provision by enrolling in Great Fun, receiving the

 6   emailed terms, and then not cancelling their Great Fun

 7   memberships during the free trial period.     As we explained at

 8   length in Register.com, Inc. v. Verio, Inc., 356 F.3d 393 (2d

 9   Cir. 2004), the mere acceptance of a benefit –- and we assume

10   here that membership in Great Fun, without the use of any of its

11   discounts, is a benefit in itself –- may constitute assent, but

12   only where the "offeree makes a decision to take the benefit with

13   knowledge [actual or constructive] of the terms of the

14   offer . . . ."   Id. at 403.   As Professor Williston's treatise

15   observes, "one who accepts the benefit of services rendered may

16   be held to have impliedly made a promise to pay for them . . .

17   [if] the offeree . . . knew or had reason to know that the party

18   performing expected compensation."    2 RICHARD A. LORD, WILLISTON   ON

19   CONTRACTS § 6:9 (4th ed. 1991); see also Specht, 306 F.3d at 29-30

20   (citing Windsor Mills, Inc. v. Collins & Aikman Corp., 25 Cal.


               if the inference would be that there is such
               a substantial chance of the existence of the
               fact that, if exercising reasonable care with
               reference to the matter in question, the
               person would predicate his action upon the
               assumption of its possible existence.
     Restatement (Second) of Contracts § 19(2), Illus. b.



                                      19
 1   App. 3d 987, 992, 101 Cal. Rptr. 347, 351 (1997) ("[W]hen the

 2   offeree does not know that a proposal has been made to him this

 3   objective standard does not apply.")).

 4               Therefore, in cases such as this, where the purported

 5   assent is largely passive, the contract-formation question will

 6   often turn on whether a reasonably prudent offeree would be on

 7   notice of the term at issue.    In other words, where there is no

 8   actual notice of the term, an offeree is still bound by the

 9   provision if he or she is on inquiry notice of the term and

10   assents to it through the conduct that a reasonable person would

11   understand to constitute assent.      "Inquiry notice is actual

12   notice of circumstances sufficient to put a prudent man upon

13   inquiry."   Specht, 306 F.3d at 30 n.14 (internal quotation marks

14   omitted).   In making this determination, the "[c]larity and

15   conspicuousness [of the term is] important . . . ."     Id. at 30.

16               Edward and Brian assert that they were not on actual

17   notice of the arbitration provision, and Trilegiant cannot point

18   to any evidence in the record upon which a jury could rely to

19   conclude otherwise.   The questions we must address, then, are

20   whether the plaintiffs were on inquiry notice of the arbitration

21   provision through the emails sent after their enrollments and, if

22   so, whether their conduct in enrolling in Great Fun, and then not

23   cancelling their memberships before the free trial period

24   expired, constituted an objective manifestation of their assent

25   to the arbitration provision.



                                      20
 1              III. Analysis

 2              Trilegiant does not dispute (as, of course, it cannot)

 3   that the arbitration provision does not appear on the pages that

 4   either of the plaintiffs would have first encountered during his

 5   enrollment in Great Fun.   It argues, however, that the plaintiffs

 6   were put on notice of the provision, and thus were in a position

 7   to assent to it both through the "terms and conditions" hyperlink

 8   on the enrollment form available before enrollment, and through

 9   the email sent to each plaintiff after his enrollment.

10   A. The Email

11              The issue preserved on appeal9 is the second of those:

12   whether the plaintiffs were put on inquiry notice of the

13   arbitration provision through the transmission of the terms by

14   email after the initial enrollment and then assented to this

15   provision by failing to cancel their Great Fun memberships after

16   the expiration of the free-trial period.

17              1.   Timing of Contract Formation.   "As a general

18   principle, an offeree cannot actually assent to an offer unless

19   the offeree knows of its existence."   1 WILLISTON   ON   CONTRACTS

20   § 4:16.   An offer -- and all of its terms -- therefore ordinarily

21   precede acceptance.

22              Trilegiant nonetheless asserts that the plaintiffs

23   assented to terms emailed to them after the plaintiffs enrolled

          9
             See section III.B, infra, concluding that the defendants
     argument that the "terms and conditions" hyperlink gave the
     defendants requisite notice has been forfeited because it was not
     raised in the district court.

                                      21
 1   in Great Fun.   And indeed there are cases -- Trilegiant argues

 2   that this is one -- where terms are effectively added to an

 3   agreement at the instance of the offeror subsequent to the

 4   establishment of a contractual relationship.      The conventional

 5   chronology of contract-making has become unsettled over recent

 6   years by courts' increased acceptance of this so-called

 7   "terms-later" contracting.   See generally John E. Murray, Jr.,

 8   The Dubious Status of the Rolling Contract Formation Theory, 50

 9   DUQ. L. REV. 35 (2012) ("Murray");     Eric A. Posner, ProCD v.

10   Zeidenberg and Cognitive Overload in Contractual Bargaining, 77

11   U. CHI. L. REV. 1181, 1184 (2010) ("Posner").

12             There are at least two analytical approaches available

13   to Trilegiant to argue that despite the time sequence here and

14   its divergence from the typical offer-with-all-

15   terms-then-acceptance progression, the parties entered into a

16   contract that included the arbitration provision emailed to each

17   plaintiff after his enrollment.

18             First, Trilegiant might contend that the arbitration

19   clause became effective after the plaintiffs received the terms-

20   and-conditions email and then assented to the offer by not

21   cancelling their Great Fun memberships.      This conception of the

22   parties' dealing is similar to the theory undergirding

23   conventional shrinkwrap-license cases.




                                       22
 1                  In shrinkwrap-license cases, the terms at issue are

 2   typically provided inside the packaging of consumer goods.10

 3   Whether or not there is notice to the consumer on the outside of

 4   the packaging that terms await him or her on the inside, courts

 5   have found such licenses to become enforceable contracts upon the

 6   customer's purchase and receipt of the package and the failure to

 7   return the product after reading, or at least having a realistic

 8   opportunity to read, the terms and conditions of the contract

 9   included with the product.       See Hill v. Gateway 2000, Inc., 105

10   F.3d 1147, 1150 (7th Cir. 1997);         ProCD, Inc. v. Zeidenberg, 86

11   F.3d 1447, 1448-49 (7th Cir. 1996); see also Posner, 77 U. CHI. L.

12   REV. at 1184 ("[T]he 'offer' was not 'you may have the product if

13   you pay now,' but 'you may have the product if you pay now and

14   use it later.'").      As we explained in Register.com, "in the

15   shrinkwrap context, the consumer does not manifest assent to the

16   shrinkwrap terms at the time of purchase; instead, the consumer

17   manifests assent to the terms by later actions."        356 F.3d at

18   428.        In this case the "later actions" would be not the failure




            10
             "Shrinkwrap licenses" derive their name from the plastic
     used to seal many consumer products called shrinkwraps.
     Shrinkwraps are created by stretching polymers out straight and
     making them into plastic film. When the film is placed around an
     object and heated, the polymers return to their natural tangled
     state and the sheet shrinks, sealing in the object. These
     "shrinkwraps" are considered relatively tamper proof, moisture
     proof and resistant to light damage. See "How Does Shrink Wrap
     Work," EHOW,
     http://www.ehow.com/how-does_4659120_shrink-wrap-work.html (last
     visited July 25, 2012). Shrinkwraps are, of course, ubiquitous.

                                         23
 1   to return goods but the failure to cancel the Great Fun

 2   membership after receipt of the email.

 3                Alternatively, the plaintiffs' initial enrollment in

 4   Great Fun may be seen, as the district court saw it, to be the

 5   formation of an agreement for each of them to pay a specified

 6   monthly fee in exchange for the membership benefits offered by

 7   Great Fun.    See Schnabel, 2011 WL 797505, at *4, 2011 U.S. Dist.

 8   LEXIS 18132, *13 ("By the time Edward and Brian received an email

 9   from Trilegiant, any contract had already been formed.").      The

10   arbitration provision and other additional terms contained in the

11   email would then be proposed amendments to that existing

12   contract.    According to Trilegiant, the emailed terms would have

13   been accepted by the plaintiffs' acts of continued payments of

14   fees on their credit cards and maintenance of the opportunity to

15   make use of Great Fun -- or, put otherwise, their failure to

16   cancel the service in a timely manner.11

17                The two approaches -- amendment and terms-later

18   contract, like in the shrinkwrap approach -- differ with respect



          11
             In support of that approach, Trilegiant points to cases
     in which courts have held that arbitration provisions were added
     as amendments to pre-existing agreements when the provisions were
     sent to the offeree after contract formation and the offeree
     maintained his or her relationship with the offeror. See, e.g.,
     Walters v. Chase Manhattan Bank, No. CV–07–0037, 2008 WL 3200739,
     at *3, 2008 U.S. Dist. LEXIS 60675, *7-*9 (E.D. Wash. Aug. 6,
     2008); Milligan v. Comcast Corp., 06-cv-00809-UWC, 2007 WL
     4885492, at *2-*3, 2007 U.S. Dist. LEXIS 96377, at *6-*7 (N.D.
     Ala. Jan. 22, 2007); Kurz v. Chase Manhattan Bank USA, N.A., 319
     F. Supp. 2d 457, 463 (S.D.N.Y. 2004); MBNA Am. Bank N.A. v.
     Bailey, No. CV044001079S, 2005 WL 1754881, at *2, 2005 Conn.
     Super. LEXIS 1611, at *4-*6 (Conn. Super. Ct. May 25, 2005).

                                       24
1   to the timing of contract formation: when the consumer enrolls,

2   using the first approach, and when the consumer receives the

3   terms and fails to cancel the service in the second.     But this

4   distinction is ultimately of little importance here.12    We need

5   not determine when the agreement between the parties was formed,

6   for we conclude that the later-emailed terms, including the

7   arbitration clause, were in any event never accepted by either

8   plaintiff.13


          12
            The enrollment page does not include an "incorporation
    clause" incorporating into the contract any terms that may follow
    by email. Cf. 11 RICHARD A. LORD, WILLISTON ON CONTRACTS § 30:25 (4th
    ed. 1991) ("[T]he parties to a contract may incorporate
    contractual terms by reference to a separate, noncontemporaneous
    document . . . including a separate document which is
    unsigned."); Progressive Cas. Ins. Co. v. C.A. Reaseguradora
    Nacional de Venezuela, 991 F.2d 42, 48 (2d Cir. 1993) ("[W]e have
    held that a broadly-worded arbitration clause which is not
    restricted to the immediate parties may be effectively
    incorporated by reference into another agreement."). We
    therefore need not decide whether such an incorporation clause
    could indeed bind the offeree to later-communicated terms unknown
    and effectively unknowable by the offeree at the time the offer
    was accepted.
          13
            Trilegiant, attempting to use the amendment model, may
    be required to clear an additional hurdle: the requirement,
    according to some authorities, that the amendment to a contract
    be supported by separate and additional consideration. See,
    e.g., Lamb v. Emhart Corp., 47 F.3d 551, 559 (2d Cir. 1995)
    (Under Connecticut law, "[a]dditional consideration is required
    for modifications when the changes constitute a new agreement
    bargained for by the parties. The additional consideration is
    required as evidence that the parties have in fact bargained for
    and agreed upon what is essentially a new contract."). There is,
    however, some authority for the proposition that arbitration
    agreements do not require additional consideration because
    "either party may elect arbitration, [and therefore such] clauses
    are mutual." Zawikowski v. Beneficial Nat'l Bank, No. 98 C 2178,
    1999 WL 35304, at *2, 1999 U.S. Dist. Lexis 514, at *7 (N.D. Ill.
    Jan. 7, 1999) (discussing whether an arbitration clause in a new
    agreement could cover disputes arising under an old agreement).
    "Often, consideration for one party's promise to arbitrate is the

                                     25
 1             2.   Notice.   A person can assent to terms even if he or

 2   she does not actually read them, but the "offer [must

 3   nonetheless] make clear to [a reasonable] consumer" both that

 4   terms are being presented and that they can be adopted through

 5   the conduct that the offeror alleges constituted assent.     Specht,

 6   306 F.3d at 29; see also, e.g., Guadagno v. E*Trade Bank, 592 F.

 7   Supp. 2d 1263, 1271 (C.D. Cal. 2008); Murray, 50 DUQ. L. REV. at

 8   49 (citing Hill, 105 F.3d at 1148, for the proposition that

 9   "people who accept an offer assume the risk of unread terms that

10   may prove unwelcome").   "[A]n offeree, regardless of apparent

11   manifestation of his consent, is not bound by inconspicuous

12   contractual provisions of which he is unaware, contained in a

13   document whose contractual nature is not obvious."   Windsor

14   Mills, Inc. v. Collins & Aikman Corp., 25 Cal. App. 3d 987, 993,

15   101 Cal. Rptr. 347, 351 (1972).    We do not think that an

16   unsolicited email from an online consumer business puts

17   recipients on inquiry notice of the terms enclosed in that email

18   and those terms' relationship to a service in which the

19   recipients had already enrolled, and that a failure to act




     other party's promise to do the same." Gibson v. Neighborhood
     Health Clinics, Inc., 121 F.3d 1126, 1131 (7th Cir. 1997). We
     need not address the question under Connecticut or California law
     here, however, because even if additional consideration were not
     required, or it was required but in fact given, the plaintiffs
     never assented to the emailed terms, as we discuss below.

                                       26
 1   affirmatively to cancel the membership will, alone, constitute

 2   assent.14

 3               a.   Law of effective notice in terms-later contracting

 4               Courts have recognized that in the modern commercial

 5   context, there are reasons to allow parties to contract without

 6   consideration of, and the possibility to negotiate, every term.

 7   "Cashiers cannot be expected to read legal documents to customers

 8   before ringing up sales."    Hill, 105 F.3d at 1149.   But cases

 9   applying the "duty to read" principle to terms delivered after a

10   contracting relationship has been initiated do not nullify the

11   requirement that a consumer be on notice of the existence of a

12   term before he or she can be legally held to have assented to it.

13   "While new commerce on the Internet [and elsewhere] has exposed



           14
             The email was also unclear, whether deliberately so or
     otherwise. The subject line reads: "Important information about
     your membership privileges" without mention of the contract or
     terms to be included in it. And the body of the email begins
     with a welcome message, provides a membership number and a
     username, advises that membership materials will arrive soon by
     mail, and outlines at some length "your great benefits." It is
     not until the thirteenth paragraph that the email begins
     recitation of the "Terms & Conditions" (the arbitration provision
     following seven paragraphs later). See Mallozzi Aff. Ex. E.; cf.
     Campbell v. Gen. Dynamics Gov't Sys., 407 F.3d 546, 555 (1st Cir.
     2005) ("[A]n e-mail properly couched, can be an appropriate
     medium for forming an arbitration agreement." (emphasis added)).
     But even had the email more clearly indicated that it contained
     an arbitration clause, the fact that it was delivered after
     enrollment and did not require any affirmative acknowledgment of
     receipt, see id. ("[i]n many cases, a[ party] will be able to
     satisfy th[e] relatively light [notice] burden by producing
     evidence demonstrating that the [other party to the agreement]
     had actual notice of the agreement."), undermines Trilegiant's
     assertion that the plaintiffs received sufficient notice to bind
     them to the additional terms through their inaction.

                                       27
 1   courts to many new situations, it has not fundamentally changed

 2   the principles of contract."    Register.com, 356 F.3d at 403.

 3                What constitutes sufficient inquiry notice of a term

 4   not actually read by the offeree depends on various factors

 5   including, but not limited to, the conspicuousness of the term,

 6   the course of dealing between the parties, and industry

 7   practices.    Cf. L&R Realty v. Conn. Nat'l Bank, 246 Conn. 1, 8

 8   n.6, 715 A.2d 748, 752 n.6 (1998) (discussing similar factors in

 9   determining whether a party had agreed to a contractual jury

10   trial waiver).    Ultimately, however, the touchstone of the

11   analysis is whether reasonable people in the position of the

12   parties would have known about the terms and the conduct that

13   would be required to assent to them.

14                Courts, including this one, have concluded as a matter

15   of law in some circumstances that parties were on inquiry notice

16   of the likely applicability of terms to their contractual

17   relationship even when those terms were delivered after that

18   relationship was initiated.    These decisions appear to have in

19   common the fact that in each such case, in light of the history

20   of the parties' dealings with one another, reasonable people in

21   the parties' positions would be on notice of the existence of the

22   additional terms and the type of conduct that would constitute

23   assent to them.

24                In Register.com, we considered whether a website

25   development service provider, Verio, was on "legally enforceable

26   notice" of contractual terms restricting Verio in making certain

                                       28
 1   uses of information supplied by Register.com although the terms

 2   were submitted to Verio after it had already downloaded the

 3   information from Register.com.    Register.com, 356 F.3d at 401.

 4   We concluded that Verio was on sufficient notice of the terms

 5   because it accessed the information "daily" and was repeatedly

 6   confronted with the same terms.    Id.     Thus, even if the terms

 7   applying to any given download of information were transmitted

 8   after that download, because of the course of dealing between

 9   Verio and Register.com, there was a basis for "imputing . . .

10   knowledge of the terms on which the [information] was offered"

11   each time the download occurred.       Id. at 402.

12              Judge Leval, writing for the Court, provided an

13   extended analogy to a situation in which an offeree would be

14   considered to have assented to a term he or she had not actually

15   read before receiving the benefits of the service or goods

16   offered:

17              A visitor, defendant D, takes an apple and
18              bites into it. As D turns to leave, D sees a
19              sign, visible only as one turns to exit,
20              which says "Apples—50 cents apiece." D does
21              not pay for the apple. D believes he has no
22              obligation to pay because he had no notice
23              when he bit into the apple that 50 cents was
24              expected in return. D's view is that he
25              never agreed to pay for the apple.
26              Thereafter, each day, several times a day, D
27              revisits the stand, takes an apple, and eats
28              it. D never leaves money.
29              P sues D in contract for the price of the
30              apples taken. D defends on the ground that
31              on no occasion did he see P's price notice
32              until after he had bitten into the apples. D
33              may well prevail as to the first apple taken.
34              D had no reason to understand upon taking it

                                       29
 1                that P was demanding the payment. In our
 2                view, however, D cannot continue on a daily
 3                basis to take apples for free, knowing full
 4                well that P is offering them only in exchange
 5                for 50 cents in compensation, merely because
 6                the sign demanding payment is so placed that
 7                on each occasion D does not see it until he
 8                has bitten into the apple.
 9   Id. at 401.15    It is elementary that in such circumstances, a

10   reasonable browser becomes aware of the existence of additional

11   terms -- in Judge Leval's example, that the apples must be paid

12   for -- even if he or she is not then familiar with their precise

13   contours -- i.e., the then-current price of each apple.

14                Similarly in the shrinkwrap cases, when a purchaser

15   opens the packaging for goods and discovers that they are covered

16   by additional provisions, the reasonable purchaser will

17   understand that unless the goods are returned, he or she takes

18   them subject to those provisions.      See Hill, 105 F.3d at 1150

19   ("Competent adults are bound by such documents, read or

20   unread.").    The late-arriving terms are necessarily included with

21   the product -- they are inside the shrinkwrap with the item being

22   transferred.    See, e.g., M.A. Mortenson Co., Inc. v. Timberline

23   Software Corp., 140 Wash. 2d 568, 575, 998 P. 2d 305, 309 (2000)


          15
             The argument may be made that a reasonable purchaser
     would know, even before biting into the first apple, that it is
     likely that the store owner expects to be paid for the piece of
     fruit. "There ain't no such thing as free lunch." See William
     Safire, ON LANGUAGE; Words Out in the Cold, N.Y. TIMES MAGAZINE
     (February 14, 1993), available at
     http://www.nytimes.com/1993/02/14/magazine/on-language-
     words-out-in-the-cold.html (last visited July 11, 2012) (seeking
     the origin of the expression). But Judge Leval's point clearly
     holds with respect to subsequent apple bites.


                                       30
 1   (noting that even though offeree had not actually read the

 2   shrink-wrapped terms, he had actually opened the packaging within

 3   which they were enclosed).   The purchaser therefore cannot begin

 4   using the product until after he or she has been presented with

 5   the terms, whether or not the purchaser actually reads them.     See

 6   Specht, 306 F.3d at 33 ("[T]he purchaser in ProCD was confronted

 7   with conspicuous, mandatory license terms.").     "[A] 'terms

 8   later' [shrinkwrap] offer . . . gives the consumer the leisure to

 9   read the terms, and the consumer who forgoes this opportunity has

10   no right to complain."   Posner, 77 U. CHI. L. REV. at 1188.

11             The amendment cases cited by Trilegiant illustrate

12   other ways in which parties may be put on notice of terms that

13   arrive after a contract is formed –- but all of these cases, too,

14   are rooted, expressly or otherwise, in the reasonable

15   expectations of the parties.16   In many of them, courts observe

16   that the "language of the original agreement expresse[s] the

17   intent of making the separate, future terms and conditions a part

18   of the contract."   Schnabel, 2011 WL 797505, at *5, 2011 U.S.

19   Dist. LEXIS 18132, at *18.   "Unilateral modification terms" –- so

20   called because the offeror retains the power to add terms to the

21   agreement while the offeree has no power to do the same –- are

          16
             Some of the cases Trilegiant cites are not applicable
     because they rely heavily upon the provisions of specific state
     statutes that govern credit-card agreements and explicitly allow
     for the transmission of amendments after initial enrollment.
     See, e.g., Kurz, 319 F. Supp. 2d at 463 (citing Del Code Ann.
     tit. 5, § 952(a)); MBNA Am. Bank, N.A., 2005 WL 1754881, at *2,
     2005 Conn. Super. LEXIS 1611, at *4-*6 (discussing Connecticut
     and Delaware law specifically governing credit card agreements).

                                      31
 1   not necessarily effective.   See generally, Oren Bar-Gill & Kevin

 2   Davis, Empty Promises, 84 S. CAL. L. REV. 1 (2010) (describing,

 3   among other things, the legal status of "unilateral modification

 4   terms").   But the inclusion of such terms at least helps to

 5   bolster the offeror's argument that the offeree is on inquiry

 6   notice of later arriving terms, particularly where the

 7   modification (or amendment) is itself submitted in such a manner

 8   that a reasonable offeree would be likely to see it.

 9              For example, in many of these cases the amendment is

10   transmitted with a bill or billing statement concerning the

11   offeree's continued use of the service.   See, e.g., Milligan,

12   2007 WL 4885492, at *2-*3, 2007 U.S. Dist. LEXIS 96377, at *6-*7

13   (bill); Kurz, 319 F. Supp. 2d 457, 462 (billing statement).     Even

14   there, whether such notice would be effective in the absence of a

15   statute specifically allowing transmission of new terms after

16   enrollment, see supra note 16, or a term in the original contract

17   giving notice of the possibility of amendment, the conveyance of

18   the amendment in such a manner, similar to the sending of the

19   terms of a contract with the product in the shrinkwrap cases, may

20   support a conclusion that a reasonable person would be on actual

21   notice of the amendment's applicability to the contractual

22   relationship.

23              b.   Notice in this case

24              In the case at bar, the plaintiffs were presented with

25   the arbitration provision in an email delivered to each of them



                                      32
 1   after they had enrolled in Great Fun.   Trilegiant asserts that

 2   the fact that we can assume that the email was received by the

 3   plaintiffs is enough to support the conclusion that they were on

 4   inquiry notice of its terms.    But that someone has received an

 5   email does not without more establish that he or she should know

 6   that the terms disclosed in the email relate to a service in

 7   which he or she had previously enrolled and that a failure

 8   affirmatively to opt out of the service amounts to assent to

 9   those terms.   See Campbell v. Gen. Dynamics Gov't Sys., 407 F.3d

10   546, 555-58 (1st Cir. 2005) (concluding that arbitration clause

11   posted on employer's intranet did not apply to employees even

12   though a link to the site was included in an email because, inter

13   alia, there was no evidence "of any other instance in which the

14   company relied upon either an e-mail or an intranet posting to

15   introduce a contractual term. . . ." (emphasis omitted)).    The

16   case law does not support such a "terms later by email"

17   conception of contract formation under these conditions.

18             In this case unlike, for example, Register.com, there

19   was no prior relationship between the parties that would have

20   suggested that terms sent by email after the initial enrollment

21   were to become part of the contract.    See Campbell, 407 F.3d at

22   555-58 (addressing the parties' past dealings in order to

23   determine whether there would be an expectation that contractual

24   terms would follow by email).   Nor would a reasonable person

25   likely understand in some other way that disputes arising between

26   him or her and Trilegiant were to be resolved by an alternative

                                      33
 1   dispute resolution procedure.    Thus, assuming as Trilegiant

 2   asserts that the plaintiffs received the emails in question,

 3   "[t]here was [still] no basis for imputing [to the plaintiffs]

 4   knowledge of the terms on which [Great Fun] was offered."

 5   Register.com, 356 F.3d at 402.

 6                Unlike shrinkwrap agreements, moreover, the recipient

 7   of the terms in this case would not have been confronted with the

 8   existence of additional terms before being able to benefit from

 9   Great Fun.    As noted, even if a purchaser of a shrink-wrapped

10   product is not required to read the shrink-wrapped terms or

11   affirmatively to acknowledge their existence before using the

12   product in order to be bound by the terms, at least he or she

13   necessarily learns of the existence of those terms upon opening

14   the packaging –- or, as is the case in many of the amendment

15   cases cited by Trilegiant, during the course of maintaining and

16   using the service to which the terms apply.

17                By contrast, the arbitration provision here was both

18   temporally and spatially decoupled from the plaintiffs'

19   enrollment in and use of Great Fun; the term was delivered after

20   initial enrollment and Great Fun members such as the plaintiffs

21   would not be forced to confront the terms while enrolling in or

22   using the service or maintaining their memberships.    In this way,

23   the transmission of the arbitration provision lacks a critical

24   element of shrinkwrap contracting –- the connection of the terms

25   to the goods (in this case the services) to which they apply.



                                       34
 1              A reasonable person may understand that terms

 2   physically attached to a product may effect a change in the legal

 3   relationship between him or her and the offeror when the product

 4   is used.   But a reasonable person would not be expected to

 5   connect an email that the recipient may not actually see until

 6   long after enrolling in a service (if ever) with the contractual

 7   relationship he or she may have with the service provider,

 8   especially where the enrollment required as little effort as it

 9   did for the plaintiffs here.   In this context the email would not

10   have "raise[d] a red flag vivid enough to cause a reasonable

11   [person] to anticipate the imposition of a legally significant

12   alteration to the terms and conditions" of the relationship with

13   Trilegiant.    Campbell, 407 F.3d at 557.    And there is nothing in

14   the record to suggest that the email to the plaintiffs

15   "'appear[ed] to be a contract [or that] the terms [were] called

16   to the attention of the [plaintiffs].'"     Specht, 306 F.3d at 30

17   (quoting Marin Storage & Trucking v. Benco Contractor & Eng'g, 89

18   Cal. App. 4th 1042, 1049-50, 107 Cal. Rptr. 2d 645, 651 (Cal. Ct.

19   App. 2001)).

20              To be sure, the "duty to read" rule combined with the

21   "standardized form" contract makes it unlikely in many contexts

22   that a consumer will actually read such a agreement beyond a

23   quick scan, if that.   See Charles L. Knapp, Taking Contracts

24   Private: The Quiet Revolution in Contract Law, 71 FORDHAM L. REV.

25   761, 770 (2002).   "A party who makes regular use of a

26   standardized form of agreement does not ordinarily expect his

                                      35
 1   customers to understand or even read the standard terms.    One of

 2   the purposes of standardization is to eliminate bargaining over

 3   details of individual transactions, and that purpose would not be

 4   served if a substantial number of customers retained counsel and

 5   reviewed the standard terms."   Restatement (Second) of Contracts

 6   §211 cmt. b (1981).   But inasmuch as consumers are regularly and

 7   frequently confronted with non-negotiable contract terms,

 8   particularly when entering into transactions using the Internet,

 9   the presentation of these terms at a place and time that the

10   consumer will associate with the initial purchase or enrollment,

11   or the use of, the goods or services from which the recipient

12   benefits at least indicates to the consumer that he or she is

13   taking such goods or employing such services subject to

14   additional terms and conditions that may one day affect him or

15   her.

16             Here, Trilegiant effectively obscured the details of

17   the terms and conditions and the passive manner in which they

18   could be accepted.    The solicitation and enrollment pages, along

19   with the fact that the plaintiffs were not required to reenter

20   their credit-card information, made joining Great Fun fast and

21   simple and made it appear –- falsely -- that being a member

22   imposed virtually no burdens on the consumer besides payment.

23             Courts endorsing the shrinkwrap-contracting framework

24   often sprinkle their analyses of whether a consumer was on notice

25   of the provision with the policies justifying shrinkwrap

26   contracting.   See, e.g., Hill, 105 F.3d at 1149; ProCD, 86 F.3d

                                      36
 1   at 1452; Brower v. Gateway 2000, Inc., 246 A.D.2d 246, 251, 676

 2   N.Y.S. 2d 569, 572 (1st Dep't 1998).    Some commentators have

 3   observed that the Seventh Circuit endorsed the model precisely

 4   because of the benefits it provides consumers, who can read the

 5   terms attached to the packaging of the good at their own leisure.

 6   Posner, at 1188.   Here, however, there is no policy rationale

 7   supporting Trilegiant's approach inasmuch as there are a plethora

 8   of other ways -- such as requiring express acknowledgment of

 9   receipt of the terms –- through which Trilegiant could have met

10   the minimum requirements of notice.    See Campbell, 407 F.3d at

11   556 ("This defect weighs all the more heavily because it could so

12   easily have been remedied.").    No court, so far as we are aware

13   -- in Connecticut, California, or elsewhere -- has concluded that

14   the "duty to read" covers situations like this one and, for the

15   foregoing reasons, we decline to do so here.

16             3.   Assent.    A requirement that the plaintiffs

17   expressly manifest assent to the arbitration provision together

18   with such assent would likely have overcome the email's defects

19   in providing notice.     See id. (describing emails including

20   employment terms that call for the employee's express

21   acknowledgment of receipt).     Yet Trilegiant argues that the

22   plaintiffs agreed to the provision through far more passive

23   conduct -- continuing to pay their monthly membership fees, which

24   were automatically charged to the plaintiffs' credit cards, after

25   receipt of the emails.    It does not follow, however, from the

26   fact that this conduct may, in other situations, be consistent

                                       37
 1   with assent to a contractual term that there was indeed such

 2   assent here.   In order to constitute acceptance, the failure to

 3   act affirmatively must carry a significance that reasonable

 4   people in the parties' positions would understand to be assent.

 5   See, e.g., Karlin v. Avis, 457 F.2d 57, 61-62 (2d Cir. 1972)

 6   (recognizing that under New York law, silence constitutes assent

 7   only in particular circumstances, such as where there is a duty

 8   to respond or where there is a contemporaneous oral agreement).

 9   A party cannot require an evidentiary trial before a trier of

10   fact simply by asserting that the other party assented through a

11   failure to respond to proffered contractual terms.   There must be

12   facts in the record to support a finding that the counter-party

13   intended to accept the terms.   Such acceptance need not be

14   express, but where it is not, there must be evidence that the

15   offeree knew or should have known of the terms and understood

16   that acceptance of the benefit would be construed by the offeror

17   as an agreement to be bound.    See, e.g., Register.com, 356 F.3d

18   at 403. ("It is standard contract doctrine that when a benefit is

19   offered subject to stated conditions, and the offeree makes a

20   decision to take the benefit with knowledge of the terms of the

21   offer, the taking constitutes an acceptance of the terms, which

22   accordingly become binding on the offeree.").

23             That is not the case here.   The plaintiffs were never

24   put on inquiry notice of the arbitration provision, and their

25   continued credit-card payments, which were auto-debited from

26   their credit cards, were too passive for any reasonable fact-

                                      38
 1   finder to conclude that they manifested a subjective

 2   understanding of the existence of the arbitration and other

 3   emailed provisions and an intent to be bound by them in exchange

 4   for the continued benefits Great Fun offered.

 5             Both parties, and the district court, see Schnabel,

 6   2011 WL 792505, at *6, 2011 U.S. Dist. LEXIS 18132, at *19-*20,

 7   analogize this case to the Supreme Court of Alabama's decision in

 8   Memberworks Inc. v. Yance, 899 So. 2d 940 (Ala. 2004).     There, an

 9   arbitration provision was found to be included in an agreement to

10   participate in a membership club even though that provision was

11   only included in an additional terms letter sent to the plaintiff

12   after he had joined the club in an oral agreement over the phone.

13   See id. at 941-44.     Like the plaintiffs here, the plaintiff

14   argued that he never assented to the term because "he never

15   engaged in any 'intentional conduct' that would have manifested

16   his assent to the arbitration provision[:]     He . . . never had

17   any contact with [the defendant] subsequent to his initial

18   telephone call to a call center, [and he] never availed himself

19   of any of the services available to participants in the

20   [discount] program."    Id. at 943.    Nonetheless, an agreement was

21   formed because the plaintiff "paid his credit-card bill for two

22   years without any question as to the legitimacy of the charge."

23   Id.

24             Assuming that Yance did not read the arbitration

25   provision and actually understand that not cancelling his



                                       39
 1   membership would constitute assent to the provision,17 we think

 2   the Alabama court misconstrued the general principle that a party

 3   can under certain circumstances assent through silence or a

 4   failure to act, see Restatement (Second) of Contracts § 19, by

 5   concluding that conduct that is merely consistent with assent is

 6   enough to establish a binding agreement as a matter of law.

 7   Like the plaintiffs here, Yance was never put on notice of the

 8   possibility of future amendments to the contract during his

 9   initial interaction with the defendants, see id. at 949 (Houston,

10   J. dissenting), and -- unlike the purchaser in a shrinkwrap case

11   -- he would not have been put on inquiry notice of the

12   arbitration provision through the subsequently submitted terms

13   and would not have understood that his continued enrollment in

14   the service would constitute assent to such a provision.   In this

15   context, a merchant "can[not] rely upon the failure of a customer

16   to affirmatively act" to cancel his membership.   Id. at 949.

17   B. The Hyperlink

18             The accessibility of the arbitration provision from a

19   hyperlink on the enrollment screen, as appears to have been the

20   case here, might have created a substantial question as to

          17
            If Yance was on actual notice –- which is not made clear
     in the court's opinion, see id. at 943 (majority opinion) ("[The
     plaintiff] argues that Memberworks at best merely 'proposed
     arbitration' by later sending him a notice that all disputes
     would be resolved by arbitration."), then, we think, the Alabama
     court's analysis is on firmer footing. Even if he was on actual
     notice of the term, however, he did not assent through his
     failure to cancel his membership unless a reasonable person in
     his situation would have understood that his conduct would be
     interpreted by the offeror as assent.

                                     40
1   whether the provision was part of a contract between the

2   parties.18   The issue is not before us, however.   Trilegiant

3   forfeited the argument by not raising it in the district court.




          18
            In Specht, then-Judge Sotomayor wrote at length about
    the status of what would later be termed "browsewrap" agreements,
    which disclose terms on a webpage that offers a product or
    service to an Internet user; the user then assents to the
    provision merely by visiting the website to purchase the product
    or enroll in the service. See 306 F.3d at 30-32; Register.com,
    Inc. v. Verio, Inc., 356 F.3d 393, 429 (2d Cir. 2004) (using the
    term "browsewrap"). Provisions disclosed solely through
    browsewrap agreements are typically enforced if "the website user
    must have had actual or constructive knowledge of the site's
    terms and conditions, and have manifested assent to them."
    Cvent, Inc. v. Eventbrite, Inc., 739 F. Supp. 2d 927, 937–38
    (E.D. Va. 2010) (emphasis added); accord Fteja v. Facebook, Inc.,
    No. 11 Civ. 918, 2012 WL 183896, at *6, 2012 U.S. Dist. LEXIS
    12991, at *14 (S.D.N.Y. Jan. 24, 2012). In Specht, we concluded
    that a provision that a user would not encounter until he or she
    had scrolled down multiple screens was not enforceable because "a
    reference to the existence of license terms on a submerged screen
    is not sufficient to place consumers on inquiry or constructive
    notice of those terms." 306 F.3d at 32.
           Browsewrap agreements are treated differently under the
    law than "clickwrap" agreements. The latter "present[] the
    potential licensee . . . with a message on his or her computer
    screen, requiring that the user manifest his or her assent to the
    terms of the license agreement by clicking on an icon,"
    Register.com, 356 F.3d at 429 (internal quotation marks omitted),
    rather than browsing down through subsequent screens. Users are
    thus "forced to expressly and unambiguously manifest either
    assent or rejection prior to being given access to the product."
    Id.
           The presentation of terms on the screens in the case
    before us falls outside both the clickwrap and browsewrap
    categories. Unlike the paradigmatic browsewrap agreement, in
    this case there is some indication near the button that a user
    must "click" in order to subscribe to the service, that the
    service includes additional terms and that the user assents to
    these terms by clicking the button. In contrast to the typical
    clickwrap agreement, however, the button itself does not make
    explicit reference to these terms in asking the end-user whether
    he or she assents to them. It only suggests that a user can sign
    up for the benefits of the membership by clicking "Yes."

                                     41
 1                "'[I]t is a well-established general rule that an

 2   appellate court will not consider an issue raised for the first

 3   time on appeal.'"    Local 377, RWDSU, UCFW v. 1864 Tenants Ass'n,

 4   533 F.3d 98, 99 (2d Cir. 2008) (per curiam) (quoting Greene v.

 5   United States, 13 F.3d 577, 586 (2d Cir. 1994)).      "[W]e may

 6   consider a forfeited argument [only] if there is a risk that

 7   'manifest injustice' would otherwise result."     Katel Ltd. v. AT&T

 8   Corp., 607 F.3d 60, 68 (2d Cir. 2010).      Trilegiant's inability

 9   to raise a possibly meritorious argument as to why it is

10   contractually entitled to arbitration on the plaintiffs claims is

11   not, in our view, a "manifest injustice."

12                In its Memorandum in Support of the Motion to Compel

13   Arbitration, Schnabel v. Trilegiant Corp., 10-cv-00957 (D. Conn.

14   Sept. 29, 2010), ECF No. 23 ("Mot. to Compel"), Trilegiant failed

15   to mention the hyperlink.    And accompanying the motion was an

16   affidavit from an employee referring only to the emailed

17   arbitration clause sent to each of the plaintiffs after their

18   enrollment in Great Fun, not the clause that they say was

19   available by clicking "Yes" on the sign-up button.     See Mallozzi

20   Aff. ¶ 13.

21                Although the district court record includes the

22   screenshot of the enrollment screen, which displays the

23   hyperlink, Mot. to Compel, Ex. A, under the principle of party

24   presentation, the district court was free to "rely on the parties

25   to frame the issues for decision . . . ."     Greenlaw v. United

26   States, 554 U.S. 237, 243 (2008).      Indeed, it seems likely that

                                       42
 1   the district court not only did not mention the hyperlink, but

 2   pointed out the peculiarity of the fact that the enrollment

 3   screen did not seem to indicate to the user that he or she would

 4   be bound by additional terms, precisely because the issue was not

 5   raised.   See Schnabel, 2011 WL 797505, at *5 n.8, 2011 U.S. Dist.

 6   LEXIS 18132, at *17 n.8 (noting the absence of clickwrap terms).

 7   We will not address this argument in the first instance on

 8   appeal.

 9                               CONCLUSION

10              For the foregoing reasons, we affirm the order of the

11   district court denying the defendants' motion to compel

12   arbitration, and remand the case to that court for further

13   proceedings.




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