Douglas v. U.S. Dist. Court

Citation: Douglas v. U.S. Dist. Court, 495 F.3d 1062 (9th Cir. 2007).

Factual Background
Joe Douglas (“Plaintiff”) entered into a contract for long distance telephone service with America Online (AOL). Shortly thereafter, Talk America (“Defendant”) took over AOL’s telephone service customers, and added four new provisions to the existing contracts: (1) additional service charges; (2) a class action waiver; (3) an arbitration clause; and (4) a choice of law provision (New York). The new provisions were posted on Talk America’s website.

The Plaintiff continued to use Defendant’s services for four additional years, until he became aware of the additional charges on his bill. Subsequently, he filed a class action lawsuit against the Defendant contending that Defendant changed the service contract without giving notice. Plaintiff’s suit alleged breach of contract, violation of the federal Communications Act of 1934 and violations of various California consumer protection statutes. Defendant moved to compel arbitration in accordance with the arbitration clause in its revised contract.

Trial Court Proceedings
The trial court granted defendant’s motion to compel arbitration. The court also found that the additional clauses in the revised contract were enforceable as a matter of law. Plaintiff petitioned for writ of mandamus.

Appellate Court Proceedings
The 9th Circult Court of appeals granted the Plaintiff’s petition for writ of mandamus. On review, the court determined that Plaintiff was not bound by the terms of the revised contract. The court reasoned that the new contract terms constituted an offer and were not binding unless properly accepted. The Plaintiff did not accept the offer because “an offeree cannot assent to an offer unless he knows of its existence.”

The Defendant placed the revised contract on its website which was not sufficient to give notice to the Plaintiff, since Plaintiff rarely visited the website and paid all his phone bills through automatic credit card charges. Thus, Plaintiff was not bound by the four additional clauses contained in the revised contract.