MEMORANDUM AND ORDER
LUNGSTRUM, District Judge.
Plaintiff filed this diversity suit against defendants asserting claims of negligence, misrepresentation, breach of contract and deceptive practices in violation of the Kansas Consumer Protection Act, K.S.A. § 50-623 et seq. This matter is presently before the court on defendant Interland, Inc.'s motion to dismiss plaintiff's complaint and compel arbitration or, in the alternative, to transfer the case to the United States District Court for the Northern District of Georgia (doc. # 3). As set forth in more detail below, defendant's motion is retained under advisement until such time as a jury resolves the issue of whether an agreement to arbitrate was made. If the jury finds that no such agreement was made, then the court will deny defendant's motion; if the jury finds that an agreement was made, then the court will grant defendant's motion and will issue an order directing the parties to proceed to arbitration on all of plaintiff's claims, as explained more fully below. See 9 U.S.C. § 4.
Plaintiff SmartText Corporation ("SmartText") is in the business of selling proprietary business forms to a worldwide customer base. SmartText's products are sold and distributed primarily over the Internet through SmartText's two websites, www.teneron.com and www.smartagreements.com. The smartagreements.com website is the primary source of sales of products for SmartText as well as the primary means by which SmartText collects revenues and delivers software products to its customers. The teneron.com website was a portal website used by SmartText customers to access the software products available on the smartagreements.com website.
Prior to December 2001, SmartText had an oral agreement with Interliant, Inc. (an entity that is unrelated to defendant Interland, Inc.), a web hosting company, whereby Interliant was paid a monthly fee to host SmartText's two websites. In December 2001, defendant Interland purchased certain customer accounts of Interliant, Inc., including the SmartText account. Thereafter, Interland decided to migrate the websites of the customers whose accounts Interland had purchased from Interliant servers located at the Interliant data center to Interland servers located at Interland's data center in Atlanta,
According to plaintiff, it is the custom and practice in the web hosting industry to operate customer websites in parallel during a migration of customer websites so that the old website is not shut down until the new website has been tested and proven to be fully operational. Thus, Interland, in the course of migrating SmartText's websites to Interland's servers, was expected to prepare a new web site on its servers that was the mirror image of the current web site on Interliant's servers. Interland would not begin hosting the new website until SmartText reviewed and approved the "mirror" website and only then would the website on Interliant's servers be shut down. This approach ensures that the migration of any website to a new hosting company does not result in any "down time" for the website.
In early January 2002, Interland began the migration of SmartText's teneron.com website. On January 7, 2002, Interland completed its preparation of the mirror website for teneron.com on Interland's servers and sent an e-mail to Robert J. Sherwood, SmartText's CEO, indicating that he should review the mirrored website and indicate whether the site was acceptable. When Interland did not hear back from Mr. Sherwood, it sent another e-mail message to him. The message stated:
In response to this e-mail, Mr. Sherwood clicked the "Decline" button on January 19, 2002. He subsequently contacted Interland to discuss the problems with the mirrored website.
According to Interland, it corrected the problems highlighted by Mr. Sherwood and then, on January 22, 2002, sent Mr. Sherwood another e-mail message asking him to review the corrected site and then accept or decline the site. Specifically, the e-mail stated, in pertinent part:
Interland received no response from Mr. Sherwood and, thus, sent him another e-mail on or about January 27, 2002.
In its January 27, 2002 e-mail to Mr. Sherwood, Interland again asked Mr. Sherwood to review the updated mirrored site of teneron.com. In relevant part, the e-mail message to Mr. Sherwood stated as follows:
(emphasis added). On January 31, 2002, Mr. Sherwood had neither clicked "Accept" nor "Decline" and, apparently, had not responded to the e-mail in any other manner.
Interland's Terms of Service include a forum selection clause as well as a mandatory arbitration provision. Specifically,
On February 7, 2002, Mr. Sherwood advised Interland of some problems with the teneron.com website and expressed concern about the planned migration of the smartagreements.com website. Specifically, Mr. Sherwood stated that, in light of the fact that the smartagreements.com website functioned as SmartText's e-commerce website, SmartText "could not afford to have this site go through the same serious problems that our other sites are experiencing now." He specifically requested that Interland assign to the smartagreements.com migration project someone "absolutely familiar with commerce site migration and the importance of the customary parallel operation prior to going live."
In mid-February 2002, Interland began the process of migrating the smartagreements.com website. According to plaintiff, Interland encountered numerous problems in the migration process and was ultimately unable to complete the migration successfully. Throughout February and March 2002, Mr. Sherwood reiterated to Interland the importance of having the current smartagreements.com website remain operational until the mirrored site was completely operational in order to avoid an interruption in SmartText's hosting service. On several occasions, both defendant Interland and defendant KFKI Systems, Inc. (a company that was hired by Interland to provide expertise in the migration of websites from Interliant servers to Interland servers) assured Mr. Sherwood that the Interliant server would not be shut down until the new website was fully operational and tested.
On April 2, 2002, Interland sent an e-mail message to Mr. Sherwood announcing that the smartagreements.com site had been mirrored to a server at Interland's data center and asking Mr. Sherwood to review the site for any problems. Much like the previous e-mails with respect to the teneron.com website, this e-mail advised Mr. Sherwood that his customers were still being directed to the existing website on Interliant's servers but that his customers would be redirected to the new site on Interland's servers if Mr. Sherwood clicked the "Accept" button on the Web site review page or if Interland did not hear from Mr. Sherwood within five days. Mr. Sherwood responded to the e-mail message on that same day, April 2, 2002, and notified Interland that the mirrored site simply did not work. Nonetheless, according to plaintiff, Interland shut down the smartagreements.com website on the Interliant server on April 2, 2002 and the website was not operational as of that date.
Thereafter, plaintiff filed this lawsuit asserting claims of negligence and misrepresentation against both defendants for damages plaintiff allegedly sustained as a
In its motion, defendant Interland asserts that the court must dismiss plaintiff's complaint and compel arbitration consistent with the mandatory arbitration provision in Interland's Terms of Service. In the alternative, Interland moves this court to transfer the case to the United States District Court for the Northern District of Georgia consistent with the forum selection clause in Interland's Terms of Service. In support of its motion, Interland asserts that SmartText accepted Interland's Terms of Service by failing to respond to Interland's January 27, 2002 e-mail with respect to the teneron.com website and thereafter accepting the benefits of Interland's web hosting services. Interland further asserts that the arbitration provision found in Interland's Terms of Service is broad enough to cover disputes not only with respect to the teneron.com website but also with respect to the smartagreements.com website despite the fact that SmartText did not separately accept the Terms of Service in connection with the smartagreements.com website.
The Courts of Appeals have uniformly held that "[i]n the context of motions to compel arbitration brought under the Federal Arbitration Act (`FAA'), 9 U.S.C. § 4 (2000), courts apply a standard similar to that applicable to a motion for summary judgment." Bensadoun v. Jobe-Riat, 316 F.3d 171, 175 (2d Cir.2003) (applying a summary-judgment-like standard in ruling on a motion to compel arbitration); see, e.g., Tinder v. Pinkerton Sec., 305 F.3d 728, 735 (7th Cir.2002) (same); Par-Knit Mills, Inc. v. Stockbridge Fabrics Co., 636 F.2d 51, 54 n. 9 (3d Cir.1980) (same); Brown v. Dorsey & Whitney, LLP, 267 F.Supp.2d 61, 66-67 (D.D.C. 2003) (collecting case law on this issue and providing a helpful explanation of why the summary judgment standard applies); Doctor's Assoc., Inc. v. Distajo, 944 F.Supp. 1010, 1014 (D.Conn.1996) (same), aff'd, 107 F.3d 126 (2d Cir.), cert. denied, 522 U.S. 948, 118 S.Ct. 365, 139 L.Ed.2d 284 (1997). Although the Tenth Circuit has not precisely addressed this issue, there is no reason to believe that it would apply a different legal standard. See, e.g., Gibson v. Wal-Mart Stores, Inc., 181 F.3d 1163, 1166 (10th Cir.1999) (reviewing the district court's grant of a motion to compel arbitration under the summary judgment standard where the parties agreed that standard applied); Avedon Eng'g, Inc. v. Seatex, 126 F.3d 1279, 1283 (10th Cir.1997) (holding the district court must hold a jury trial on the existence of the agreement to arbitrate where the parties raise genuine issues of material fact regarding the making of the agreement to arbitrate (citing Par-Knit Mills, 636 F.2d at 54 & n. 9)); see also, e.g., Phox v. Atriums Mgmt. Co., Inc., 230 F.Supp.2d 1279, 1282 (D.Kan. 2002) (applying a summary-judgment-like standard to a motion to compel arbitration); Klocek v. Gateway, Inc., 104 F.Supp.2d 1332, 1336 (D.Kan.2000) (same).
Under this well-settled standard, summary judgment is appropriate if the moving party demonstrates that there is "no genuine issue as to any material fact" and that it is "entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). The moving party bears the initial burden of demonstrating
Once the defendant has done this, the burden shifts to plaintiff to demonstrate a genuine issue of material fact as to the making of the agreement to arbitrate. See Bensadoun, 316 F.3d at 175; Oppenheimer, 56 F.3d at 358. To accomplish this, the facts "must be identified by reference to an affidavit, a deposition transcript, or a specific exhibit incorporated therein." Adams, 233 F.3d at 1246. If the plaintiff demonstrates a genuine issue of material fact, then a trial on this issue is required. 9 U.S.C. § 4 (if the making of the arbitration agreement is seriously disputed, then "the court shall proceed summarily to the trial thereof"); Avedon Eng'g, 126 F.3d at 1283 (holding the district court must hold a jury trial on the existence of the agreement to arbitrate where the parties raise genuine issues of material fact regarding the making of the agreement to arbitrate).
B. Did SmartText accept Interland's Terms of Service with respect to the Teneron.com Website?
Interland contends that SmartText accepted Interland's Terms of Service by failing to respond to Interland's January 27, 2002 e-mail with respect to the teneron.com website and thereafter accepting the benefits of Interland's web hosting services. Interland's argument is based on one of the alternative provisions set out in the Restatement (Second) of Contracts § 69. That provision, subsection (1)(a), provides as follows:
Restatement (Second) of Contracts § 69(1)(a). This provision is consistent with the law of Kansas
In Caterpillar Tractor, for example, the Kansas Supreme Court held that there was ample evidence to support the trial court's conclusion that a farmer and the landlord from whom the farmer leased real property had agreed to eliminate the provision for a payment of cash rent after the first year of the original lease. 149 Kan. at 459, 87 P.2d 503. At trial, the farmer testified that, after the first year of the original lease, he had told the landlord that he would not pay any more cash rent (but would continue to pay him one-third of all crops produced on the land) and that, in response, the landlord simply told him to "go ahead and farm the place." Id. at 459-60, 87 P.2d 503. The trial court found that the landlord was not entitled to any cash rent after the first year of the original lease. Id. at 459, 87 P.2d 503. On appeal, the landlord argued that the evidence at trial demonstrated only that he remained silent when the farmer told him that he would not pay any cash rent. Id. at 460, 87 P.2d 503. The Kansas Supreme Court rejected this argument and held that the landlord had not merely remained silent. Rather, the landlord, by his silence, had permitted the farmer to expend time and money in putting in a crop after the farmer had advised him that he would not pay any more cash rent and he clearly accepted the benefits of the farmer's efforts. Id. Moreover, the trial record reflected that after the farmer indicated that he would not pay any cash rent, he continued to farm the land for four or five years and no payment of cash rent was ever demanded by the landlord. Id. In such circumstances, the landlord was deemed to have accepted the modification of the lease "by conduct or acquiescence." Id.
Interland suggests that the facts of this case fall squarely within the Kansas Supreme Court's holding in Caterpillar Tractor in that SmartText not only failed to respond to the January 27, 2002 e-mail but thereafter accepted the benefits of Interland's web hosting services with knowledge that Interland would provide those services only if SmartText agreed to Interland's Terms of Service. Unlike the circumstances in Caterpillar Tractor, however, the parties in this case dispute whether SmartText willingly enjoyed or accepted the benefits of Interland's services.
Thus, the court concludes that genuine issues of material fact exist concerning whether SmartText had a "reasonable opportunity to reject" Interland's services within the meaning of subsection (1)(a) of section 69 of the Restatement (Second) of Contracts. Similarly, the court concludes that there is a fact issue concerning whether SmartText "[took] the benefit" of Interland's services or whether those services were, in essence, forced upon it after its failure to respond to the e-mail. Finally, there is a factual issue as to whether SmartText, as of January 31, 2002 when Interland asserts the contract was formed, had even used any of Interland's services or received any benefits from those services; it is unclear to the court whether the teneron.com website was functioning properly as of that date and whether SmartText had received any benefit from Interland's hosting of that site as of January 31, 2002.
SmartText also suggests in its papers that it never intended to accept the offer contained in the January 27, 2002 e-mail-an argument that directly implicates subsection (1)(b) of section 69 of the Restatement (Second) of Contracts, another alternative provision of that section. That provision states that an offeree's failure to reply to an offer will operate as an acceptance only "[w]here the offeror has stated or given the offeree reason to understand that assent may be manifested by silence or inaction, and the offeree in remaining silent and in active intends to accept the offer." In other words, Interland cannot turn SmartText's silence into acceptance by simply sending an e-mail that says, in essence, "If we don't hear from you within five days, you are deemed to have accepted our services and the terms thereof." See Farnsworth, supra, § 3.15 at 157 (Offeror cannot impose liability on the offeree that remains silent by adding to the offer the phrase "If I do not hear from you in a week, I will take it that you have accepted my offer."). Rather, when the offeror states in the offer (as Interland did here) that silence will be deemed as acceptance, then the offeree's silence will constitute an acceptance only when the offeree, by his silence, intends to accept the offer. See Restatement (Second) of Contracts § 69(1)(b) (1981); see also id. § 69 cmt. c ("The mere fact that an offeror states that silence will constitute acceptance does not deprive the offeree of his privilege to remain silent without accepting.").
The drafters of the Restatement have provided the following illustration of section 69(1)(b):
Id. § 69 cmt. c, illus. 2. By contrast, if the facts remained the same as set forth in the
In sum, because defendant has failed to show the absence of a genuine issue of fact and has failed to demonstrate, as a matter of law, that the parties agreed to arbitrate their claims, a jury trial on this issue is warranted. See Avedon Engineering, Inc. v. Seatex, 126 F.3d 1279, 1283 (10th Cir. 1997) (a jury trial on the existence of an agreement to arbitrate is warranted unless there are no genuine issues of material fact regarding the parties' agreement).
C. Is the Arbitration Clause Broad Enough to Cover SmartText's Claims?
Assuming that a jury determines that the parties actually had an agreement to arbitrate, the question then becomes whether the arbitration clause is broad enough to include SmartText's claims concerning the migration of the smartagreements.com website.
The scope of an arbitration clause, as a matter of contractual interpretation, is a question of law for the court as long as it does not depend on extrinsic evidence and is susceptible of only one reasonable interpretation. Zink v. Merrill Lynch Pierce Fenner & Smith, Inc., 13 F.3d 330, 332 (10th Cir.1993). The arbitration clause contained in the pertinent Terms of Service provides, in relevant part, that "any dispute between the parties arising out of this Agreement or in any manner relating to the Services must be submitted by the parties to arbitration." The arbitration clause is readily susceptible of an interpretation that includes SmartText's claims concerning the migration of its smartagreements.com website.
According to SmartText, the migration of a website does not constitute a "Service" as that term is defined in the
SmartText also asserts that the arbitration clause does not cover any disputes concerning the smartagreements.com website because SmartText, to the extent it accepted the Terms of Service at all, did so only in connection with the teneron.com website. In a related vein, SmartText contends that its acceptance of the Terms of Service in connection with the January 27, 2002 e-mail concerning teneron.com could not possibly pertain to smartagreements.com because, at the time of the January 27, 2002 e-mail, the process of migrating of smartagreements.com had not even commenced. According to SmartText, then, any disputes concerning the smartagreements.com website would fall outside the scope of any agreement it may have entered with Interland concerning teneron.com.
The broad language of the arbitration clause in the Terms of Service, however, does not support SmartText's contention. For even assuming that the "Agreement" as that term is used in the arbitration clause refers only to the contract for the provision of services with respect to teneron.com,
The court's rejection of SmartText's reading of the arbitration clause is further reinforced by the "strong federal policy favoring arbitration for dispute resolution." Coors Brewing Co. v. Molson Breweries, 51 F.3d 1511, 1514 (10th Cir. 1995) (quotation omitted). While a party may not be compelled to submit a dispute to arbitration unless it has agreed to do so, federal arbitration policy requires that "any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration." Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983); see also AT & T Techs., Inc. v. Communications Workers of Am., 475 U.S. 643, 648-50, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986) (arbitration agreements are favored and are to be broadly construed with doubts being resolved in favor of coverage). Thus, arbitration should be compelled "unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute." United Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582-83, 80 S.Ct. 1347, 4 L.Ed.2d 1409 (1960). The arbitration clause in Interland's Terms of Service is certainly susceptible of an interpretation that covers all of SmartText's claims.
Accordingly, assuming that a jury concludes that the parties agreed to the arbitration clause, then all of the claims, controversies, and disputes between SmartText and Interland are arbitrable under the arbitration clause contained in Interland's Terms of Service.