KEVIN JOHNSON V. WALMART INC., No. 21-16423 (9th Cir. 2023)
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Plaintiff purchased a set of tires from Walmart.com, which included a Terms of Use with an arbitration provision. Plaintiff had the tires shipped to and installed at a Walmart Auto Center, and while waiting for the tires to be installed, he purchased the lifetime balancing and rotation Service Agreement. Plaintiff received tire services once in 2019 but was later denied service on several occasions in 2020 at multiple Walmart Auto Centers. Plaintiff brought a putative class action alleging breach of contract and breach of the duty of good faith and fair dealing. Walmart sought to compel individual arbitration of its dispute with Plaintiff pursuant to the arbitration provisions of the Terms of Use. The district court found that the plain meaning of the Terms of Use precluded the applicability of the arbitration provision to in-store purchases.
The Ninth Circuit affirmed the district court’s denial of Walmart Inc.’s motion to compel arbitration and agreed with the district court that Plaintiff contested the existence, not the scope, of an arbitration agreement that would encompass this dispute. As the party seeking to compel arbitration, Walmart bore the burden of proving the existence of an agreement to arbitrate by a preponderance of the evidence. The panel held that substantial evidence supported that the two contracts between Plaintiff and Walmart were separate, independent agreements. The two contracts—though they involved the same parties and the same tires—were separate and not interrelated. Therefore, the arbitration agreement in the first did not encompass disputes arising from the second.
Court Description: Arbitration The panel affirmed the district court’s denial of Walmart Inc.’s motion to compel arbitration of the claims asserted against it by Kevin Johnson, who brought a putative class action alleging breach of contract and breach of the duty of good faith and fair dealing arising out of a lifetime tire balancing and rotation service agreement that Johnson purchased from a Walmart Auto Care Center. Johnson purchased a set of tires from Walmart.com, which included a Terms of Use with an arbitration provision. Johnson had the tires shipped to and installed at a Walmart Auto Center, and while waiting for the tires to be installed, he purchased the lifetime balancing and rotation Service Agreement. Johnson received tire services once in 2019 but was later denied service on several occasions in 2020 at multiple Walmart Auto Centers. Johnson commenced this action in September 2020. Walmart sought to compel individual arbitration of its dispute with Johnson pursuant to the arbitration provisions of the Terms of Use. The district court found that the plain meaning of the Terms of Use precluded applicability of the arbitration provision to in-store purchases. The panel agreed with the district court that Johnson contested the existence, not the scope, of an arbitration agreement that would encompass this dispute. As the party seeking to compel arbitration, Walmart bore the burden of JOHNSON V. WALMART, INC. 3 proving the existence of an agreement to arbitrate by a preponderance of the evidence. Walmart agreed that Johnson did not consent to an arbitration agreement at the time he purchased the Service Agreement at the Walmart Auto Care Center, but argued that Johnson’s in-store purchase was subject to the same pre-existing arbitration agreement that he accepted when he purchased tires from Walmart.com and agreed to the Terms of Use. The panel held that Johnson’s claim against Walmart did not arise out of the contract containing the arbitration agreement, but rather arose out of an entirely separate transaction at a Walmart store. Because the panel concluded that the existence of an arbitration agreement was at issue and thus the presumption in favor of arbitrability did not apply, the panel used general California state-law principles of contract interpretation to decide whether a contractual obligation to arbitrate existed. The panel held that the Terms of Use had a clear, delineated purpose—to regulate use of Walmart’s online resources and content. No provision of the Terms of Use addressed any form of in-store engagement with Walmart. Because the Terms of Use covered a defined subset of consumer interaction with Walmart—access to and use of Walmart Sites—the nested arbitration provision of the Terms of Use could not apply to the controversy over the in- store purchase of the Service Agreement. Walmart argued that Johnson’s two purchases were “merely interrelated contracts in an ongoing series of transactions” such that the arbitration agreement of the first necessarily applied to the second. The panel held that substantial evidence supported that the two contracts between Johnson and Walmart were separate, independent agreements. The two contracts—though they involved the 4 JOHNSON V. WALMART, INC. same parties and the same tires—were separate and not interrelated. Therefore, the arbitration agreement in the first did not encompass disputes arising from the second.
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