Court Enforces Arbitration Clause in Amazon’s Terms of Service–Fagerstrom v. Amazon

2 01 2017

This lawsuit alleges that Amazon overstated the extent of discounts it offered customers (in stating the extent of the discount customer achieved when shopping at Amazon versus competing retailers). Amazon moved to compel arbitration, and the court grants the motion. The efficacy of arbitration clauses in online terms of service agreements is an evergreen topic of interest, so although it was decided in late October I thought the case was worth noting.

The court agrees with Amazon that Washington law applies. Plaintiffs argued for application of California law, but were unable to point to a fundamental conflict between the laws of the two states.

The terms are not illusory. The agreement reserved the right for Amazon to make changes at any time and without prior notice. Plaintiffs argued that this rendered the agreement illusory. The court disagrees, and says that Amazon has agreed to arbitrate disputes as to products purchased. This obligation remains unchanged and cannot be altered by a later revised term. Additionally, Amazon is bound by the duty of good faith. So even if it can alter the agreement freely, this right is subject to limitations.

The terms are not undermined by procedural unconscionability. Plaintiffs raised three main arguments in support of procedural unconscionability:

  • the text of order affirming agreement to the terms were not sufficiently prominent
  • the arbitration clause was buried because it was included in a longer document that was only linked
  • the arbitration clause incorporated a set of AAA rules but were vague about which ones were incorporated

These arguments get no traction.

The terms were not substantively unconscionable: Plaintiffs’ substantive unconscionability arguments similarly failed. The court previously addressed plaintiffs’ argument that the unilateral right to amend rendered the agreement illusory. In addition to this, plaintiffs raised two other arguments.

First, plaintiffs argued that the carveout from the arbitration clause for intellectual property claims was one-sided, and in effect allowed Amazon to litigate the claims that were most important to it, while forcing consumers to arbitrate claims that were most important to them. The court finds this unpersuasive, noting that customers include rightsowners who may litigate intellectual property disputes against Amazon. Second, even if this represented some imbalance, this wasn’t a provision that shocked the conscience. It was within the realm of the typical give-and-take in a contract.

Second, plaintiffs focused on a provision voluntarily limiting Amazon’s right to seek attorney’s fees unless the arbitrator found the claims were frivolous. The court rejects this as well. First, it re-states state law on this point. Second, Washington law has a mandatory reciprocal fee provision, so whatever the effect of this provision, plaintiffs get the benefit of it as well. Finally, the provision does not limit plaintiffs right to seek fees in any way.

Although the court finds that it is not “a paragon of consumer protection” it says the agreement is not unconscionable.


(The ruling has been appealed.)

Case citation: Fagerstrom v. Amazon, Inc., 15-cv-96 BAS (S.D. Cal. Oct. 20, 2015)


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