Safeway Can’t Unilaterally Modify Online Terms Without Notice
This is a lawsuit against Safeway alleging that it charges slightly different (and higher) prices for items ordered online than purchased in-store. The court previously denied Safeway’s motion to dismiss and now grants summary judgment in favor of plaintiffs on their contract claim. The in-store prices varied day-to-day. Typically, after a customer placed an online order, the items were actually selected from a physical store and delivered to the customer. The key question was whether Safeway’s online terms promised the customer the in-store prices.
The language of the agreement: Safeway’s online terms contained the following language:
The prices quoted on our web site at the time of your order are estimated prices only. You will be charged the prices quoted for Products you have selected for purchase at the time your order is processed at checkout. The actual order value cannot be determined until the day of delivery because the prices quoted on the Web site are likely to vary either above or below the prices in the store on the date your order is filled and delivered.
According to plaintiffs, this language meant that the prices displayed in the online store attempted to estimate the in-store prices on the date the order is actually processed. Safeway argued that the “prices in the store” language references the online store, and the quoted language explains that if a customer places an order on Monday for delivery on Thursday, the customer will be charged the price that the online store displays on Thursday.
The court does not entirely agree with either side, but the court says the language is more susceptible to plaintiffs’ interpretation. The key question was whether the term “checkout” in the quoted language refers to something that occurs at the online or the physical store. The sentence immediately following references “the prices in the store” but it’s unclear whether that references the online store or the physical store. The court says a more reasonable interpretation is the physical store. A shopping website is more commonly referred to as an “online store” (as opposed to merely a “store”). In other instances of the agreement, “store” clearly refers to the physical location. Safeway’s argument on the other hand means that “on the website” refers to the online store, but “in the store” also refers to the online store. This seems unlikely. If it means online store, Safeway could have merely used the same language. Safeway’s argument would also mean that “processed at checkout” refers to the online checkout process; but most customers would equate the online checkout process with when their order is “placed” (i.e., when the online component of the transaction is completed).
Extrinsic evidence: Given the ambiguity in the terms, the court also looks to the extrinsic evidence to shed light on what the parties intended. Safeway pointed to two portions of the website FAQ that supported Safeway’s interpretation. One advising customers that certain in-store specials would not be available online and a second that explains that the online “order confirmation” is only an estimate and that the final would vary for products sold by weight and due to “sale changes”. While these did not seem to move the needle for the court, there’s a larger issue with trying to rely on these: the online terms had a term that the operative agreement would not be varied by representations on the website. [Venkat: this term is usually helpful in helping neutralize assurances made in online terms but it cuts the other way here.]
Plaintiffs also relied on two additional arguments: (1) Safeway’s later amendment to the online terms (were reflective of Safeway’s understanding of the original terms) and (2) customer surveys and Safeway’s own course of performance. The court says consideration of this extrinsic evidence is unnecessary and ultimately says Plaintiffs’ interpretation is the operative one.
Safeway’s attempted amendment: While the dispute was pending, Safeway amended the online terms to make clear that the online store does not offer the same prices as the physical store. Thus, Safeway argued that damages should be cut-off as of the date of the amendment. One key problem with Safeway’s attempted amendment: Safeway never provided any notice to its online customers of the amendment. Safeway argued that it did not need to provide any such notice because online customers who previously agreed to terms automatically agreed to be bound by amendments to the online terms. The court rejects this argument:
The safeway.com agreement did not give Safeway the power to bind its customers to unknown future contract terms, because consumers cannot assent to terms that do not yet exist. A user confronting a contract in which she purports to agree to terms in whatever form they may appear in the future cannot know to what she is are agreeing. At most, this term in the safeway.com agreement could be read to indicate that a customer agrees to read the terms and conditions every time she makes a purchase on the website in the future. But the Court also concludes that, even in light of their agreement to the Special Terms at the time of registration, customers’ assent to the revised Terms cannot be inferred from their continued use of safeway.com when they were never given notice that the Special Terms had been altered.
The court cites to Douglas v. U.S. Dist. Court (a case involving AOL’s attempt to impose a set of revised terms without notice) and Nguyen v. Barnes and Noble, a case where B&N wholly failed to have in place a check-the-box implementation. Barnes and Noble was a browsewrap case and there the court focused on the lack of notice. That same lack of notice is an impediment here, and the court says there’s no de facto obligation on a contracting party’s part to periodically check for updates to the contract, and one party (Safeway) cannot force that term upon the other party (the consumer). Beyond the offer and acceptance/contract formation issue, it’s also fundamentally unfair, and Safeway is in the best position to make sure people have the necessary information:
But beyond the impracticality of expecting consumers to spend time inspecting a contract they have no reason to believe has been changed, the imposition of such an onerous requirement on consumers would be particularly lopsided, as Safeway is aware that it has — or has not — made changes to the Terms and is the party to the contract that wishes for the new terms to govern. “[T]he onus must be on website owners to put users on notice of the terms to which they wish to bind consumers.” Nguyen, 763 F.3d at 1179. Safeway is best positioned to make sure customers are aware of changes that Safeway has made to its contract with Class Members. After making a change, Safeway can take any number of actions to alert users that the Special Terms they agreed to at registration have been altered. For instance, Safeway could ask customers to click to indicate that they agree to the new Special Terms or send all existing safeway.com customers an email in order to ensure that every consumer is aware of a change in the Special Terms prior to making a purchase. When Safeway changed the Special Terms on November 15, 2011, it opted to do neither.
Finally, Safeway argued that even if all customers can’t be charged with knowledge of and assent to the revised terms, Safeway sent an email to all Safeway.com customers who had opened an email in the past six months advising that “[g]rocery delivery prices, promotions, discounts, and offers may differ from your local store.” This email is also ineffective because it fails to make any reference to the online terms, or advise that these terms have been changed. (The court also notes that it’s inaccurate.)
Yikes, this is a rough result for Safeway. It’s easy to second guess contract drafting, but given that there are two stores and two checkout processes, its failure to be clear about terminology is a gaffe (which if drafted by outside lawyers may result in Safeway trying to recoup its losses from them).
The real zinger is the court’s rejection of Safeway’s attempt to impose amendments to the online terms without providing notice to customers. This is something companies do all the time, and in this regard the ruling is on par with Harris v. Blockbuster. The court takes an incredibly common contracting practice of online companies and pokes a major hole in it. Eric has posted a bunch about the different options available to companies in order to notify their customers of changes to online terms (e.g., RSS; notification via email). None of the options are fool-proof, but e-commerce websites do have an option available to them that other companies (e.g., Facebook; Twitter) do not: they can include notice of the changes in the checkout process and force the customer to acknowledge that they have read and agreed to the changes. That would have been trivially easy to do here and would have effectively stanched the flow of damages.
Eric’s comment: Sorry, guys. I know we can find the “amend-at-will-without-notice” clause in basically every online contract, but it’s toxic. I don’t have a great substitute for it, but I can say with confidence what doesn’t work.
Case citation: Rodman v. Safeway Inc., 2014 WL 6984703 (N.D. Cal. Dec. 10, 2014)