ORDER GRANTING PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT; SETTING CASE MANAGEMENT CONFERENCE
Re: ECF Nos. 171 & 173.
JON S. TIGAR, District Judge.
In this class action, Plaintiff Michael Rodman ("Plaintiff" or "Rodman") and members of the certified class, bring a single breach of contract action against Defendant Safeway, Inc. ("Defendant" or "Safeway"). Plaintiff argues that Defendant breached the terms of the parties' agreement by charging higher prices for groceries on its online safeway.com delivery service than it charged in the stores where the groceries were selected. Both Plaintiff and Defendant have filed cross-motions for partial summary judgment on the Class's breach of contract claim. The matter came for hearing on September 11, 2014.
A. Undisputed Facts and Procedural History
Safeway operates an online grocery delivery service on its website, safeway.com. Prior to placing a delivery order with safeway.com, customers must register for an account. Exh. 7 to Declaration of Timothy Mathews ("Matthews Decl.") (ECF No. 171-9);
Once registered, customers place orders for home delivery by browsing selections and prices displayed on the website. Declaration of Steve Guthrie ("Guthrie Decl.") ¶11 (ECF No. 175). For each item, the online store describes the item, displays its image, and displays a price next to the item.
As initially operated from 2001 to 2006, safeway.com "generally priced the items sold in the online store the same as the brick-and-mortar store from which the items were picked and delivered," although "[t]his pricing was never exactly the same due to exceptions ..., such as manager specials."
Plaintiff Rodman, who used the safeway.com delivery service and later discovered the prices were higher than those in his local store, brought suit, alleging causes of action for breach of contract and under California's Unfair Competition Law, Consumer Legal Remedies Act, and False Advertising Law. Plaintiff argued that he understood the Special Terms to promise the same prices in the local stores as were charged on the website, and Safeway argued that his claims failed as a matter of law. On November 1, 2011, the Court denied Safeway's motion to dismiss Plaintiff's claims. 2011 WL 5241113 (ECF No. 38).
On November 15, 2011, Safeway revised the Special Terms to include the following language: "Please note before shopping online at [Safeway.com] that online and physical store prices, promotions, and offers may differ." Exh. 42 to Matthews Decl. (ECF No. 171-44). "All references to `store', `online', `website', or `on line store' as used herein refer to the ... Online Shopping Services only unless expressly stated."
On March 9, 2014, the Court granted Plaintiff's motion to certify a class for purposes of bringing the breach of contract action, although not for the CLRA, UCL and FAL causes of action. 2014 WL 988992 (ECF No. 163). The class is comprised of: "All persons in the United States who: (1) registered to purchase groceries through Safeway.com at any time prior to November 15, 2011, and (2) purchased groceries at any time through Safeway.com that were subject to the price markup implemented on or about April 12, 2010."
This Court has jurisdiction pursuant to 28 U.S.C. § 1332(d)(2) & (6), the Class Action Fairness Act of 2005 ("CAFA"), since there are 100 or more Proposed Class Members, the amount in controversy exceeds $5,000,000, and at least one plaintiff and defendant are citizens of different states.
C. Legal Standard
Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed R. Civ. Pro. 56(c). In order to prevail, a party moving for summary judgment must show the absence of a genuine issue of material fact with respect to an essential element of the non-moving party's claim.
The parties agree that the Special Terms are fully integrated.
A. Reasonable Susceptibility of the Contractual Language
This contractual dispute turns primarily on the "Product Pricing and Service Charges" section of the Special Terms, which state:
Both parties maintain that the words of the contract alone entitle them to judgment.
Plaintiff interprets this section to promise that, except for otherwise disclosed delivery fees, the customer will be charged the prices charged in the physical store where the groceries are selected, and that the prices quoted on the website are attempts to estimate those in-store prices. Defendant, on the other hand, argues that the phrase "the prices in the store" means the prices in the online store, and that the terms explain to a customer that it if she places an order Monday for delivery Thursday, she will be charged the price that the online store displays for the product on Thursday. Both parties argue that their interpretation is the only plausible interpretation of these words, and that the language is not "reasonably susceptible" to the alternate explanation, making it inappropriate for the Court to even provisionally accept the opposing parties' proffered extrinsic evidence to aid the court in interpreting the language.
The Court does not agree with either party. The language of the contract itself is "reasonably susceptible" to both interpretations, permitting the Court to allow the admission of extrinsic evidence, for the reasons set forth below.
1. Plaintiff's Interpretation
In denying Defendant's motion to dismiss Plaintiff's contractual claims as a matter of law, the Court concluded that "Plaintiff's interpretation of the contract is more likely the accurate construction which gives meaning to the intention of the parties at the time of contracting." 2011 WL 5241113, at *3. More recently, in conducting the limited, but rigorous, inquiry into the merits that was required to ensure that class certification was proper, the Court concluded that the "language is susceptible to the interpretation that groceries will be purchased at a brick-and-mortar store, that the prices charged will be those charged at that brick-and-mortar store, and that the prices displayed online are attempts to estimate those prices." 2014 WL 988992, at *7.
It is true that neither of those determinations have become the law of the case. But the relevant words of the Special Terms remain the same as when those orders issued. It can therefore come as little surprise to Defendant that the Court now concludes that the language of the Special Terms is, at the very least, reasonably susceptible to Plaintiff's interpretation.
Defendant characterizes Plaintiff's interpretation as adding an implied term of price parity, and argues that Plaintiff has not satisfied the very high bar against implying the existence of a term not included expressly within the contract.
The Special Terms, read as a whole, repeatedly make reference to a physical Safeway store as playing a role in the online shopping experience, supporting Plaintiff's interpretation. The "Delivery" section of the Special Terms states that "your groceries are selected" in "your local store." By indicating to customers that they will be charged in accordance with the "prices in the store on the date your order is filled and delivered," the terms can be reasonably interpreted as promising the prices charged in a physical store. But while it is common to refer to an e-commerce website as an "online store," it is less common to use the simple term "store" to mean a website, without additional explanation.
It might be another matter if some other portion of the contract used the word "store" by itself to refer to the safeway.com website. But in every other use of the term "store" in the Special Terms, the word "store" means a physical store.
Plaintiff's interpretation of the contract gives effect to every one of three sentences in the first paragraph of the "Product Pricing and Service Charges" section, is consistent with a reasonable objective reading of the language in light of the contract as a whole, and is a very compelling interpretation of the contract.
2. Safeway's Interpretation
The Special Terms, on the other hand, are somewhat less susceptible to Safeway's interpretation of the term "store."
The main problem with Safeway's interpretation is that it argues that very different words in the same sentence mean the same thing. The terms say that "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." Safeway argues that "on the Web site" means "on the Web Site" and that "in the store" also means "on the Web site." This is not a very compelling explanation of the objective meaning of these words. If Safeway meant "on the Web site" both times, it could have said "on the Web site" both times, or simply said "prices quoted on the Web site on the time of your order are likely to vary either above or below the prices on the date your order is filled and delivered." By adding the phrase "in the store" —a phrase that, everywhere else in the Special Terms, means the physical Safeway store where the groceries are selected— the Special Terms add to the sentence a concept that a reasonable contracting party would interpret to mean a physical store.
It is also difficult to accept Safeway's argument that when it promised "[y]ou will be charged the prices quoted for Products you have selected for purchase at the time your order is processed at checkout," it meant at the time the order is processed at the online checkout process, as opposed to a checkout that occurs in the physical grocery store. A customer would presumably have considered her "online checkout" process to be complete once she had completed her order. In introducing the concept of a later-occurring "checkout," the Special Terms again refer to something a customer would have expected to occur in a physical store.
From the words of the Special Terms alone, the Court finds Safeway's interpretation considerably less compelling that Plaintiff's. However, Plaintiff's interpretation does some (lesser) violence to the language as well. Under Plaintiff's reading of the second sentence — "You will be charged the prices quoted for Products you have selected for purchase at the time your order is processed at checkout" — "prices quoted" means the prices charged in the physical store. It is not all that common to think of grocery store tags as "quoting" prices. This sentence is reasonably susceptible to the interpretation that "prices quoted" means a price quoted on the website. This provides some support for Safeway's argument that the rest of the sentence refers to an online checkout. This potential ambiguity is sufficient to allow the admission of extrinsic evidence that might shed light on what a reasonable contracting party might have understood the words of the contract to mean.
B. Provisional Consideration of Extrinsic Evidence
The Court can only consider extrinsic evidence that sheds light on the objective meaning of the language as it would have been understood by a reasonable contracting party. It is not admissible to alter the term of the contract.
As set forth supra, the Court begins with the conclusion that Plaintiff's interpretation is more compelling, but is open to extrinsic evidence demonstrating that ambiguous language should be interpreted in the manner Safeway suggests. For the most part, Safeway's papers resist the incorporation of any extrinsic evidence. However, it does argue in its motion that two types of extrinsic evidence support its interpretation. Mem. Pts. & Auth. In Support of Safeway's Motion for Summary Judgment, at 20-21 (ECF No. 172-4).
First, Defendant argues that two "Frequently Asked Questions" ("FAQs") documents that appeared on the safeway.com website support its interpretation. The two FAQs state:
Exhs. 12 & 13 to Blackman Decl. (ECF Nos. 177-4 & 177-5). Safeway argues that since it said "[e]xcept for certain items, you'll find most of the same great promotions online as in your local store," it cannot be understood to have represented that safeway.com offers all of the same prices charged in the local store. Therefore, since an accompanying FAQ states that "[y]ou will be charged the prices charged in the store on the day your order is picked and delivered," Safeway must have been using the term "charged in the store" to mean "charged in the online store." But the Special Terms explicitly provide that representations on the website are not part of the parties' agreement, and so the FAQs are only probative of Safeway's understanding of what it was offering in the contract, not what a reasonable consumer would have understood the contract to have been offering. The FAQs therefore do not help the Court understand how a reasonable contracting party would have understood the words in the contract and are of little assistance to the Court's task. In fact, in the first FAQ, Safeway uses the terms "in-store" and "from store to store" to mean a physical store. The FAQ's usage of the term "store" to mean a physical store at least some of the time would actually buttress Plaintiff's interpretation.
Second, Safeway argues that it did not amend its Special Terms when it changed its pricing policy to no longer offer the same prices it offered online as it offered in the physical stores. Defendant argues that this reinforces its argument that Safeway must not have understood the terms of the contract to promise online parity with prices in physical Safeway stores. Again, even assuming that this is the most persuasive explanation of Safeway not updating the Special Terms, this shows, at most, Safeway's subjective understanding of what it thought it was offering rather than the objective meaning of the terms.
Plaintiff has submitted significant extrinsic evidence — including the same FAQs, evidence of Safeway's own course of performance, and customer surveys — which he argues tends to show that Safeway understood the terms to represent price parity, and understood its customers to have believed that as well. Safeway objects to the admissibility of all such evidence. In any event, it is unnecessary for the Court to consider Plaintiff's extrinsic evidence. After considering the language of the Special Terms, and all extrinsic evidence Defendant has submitted to shed light on the meaning of those terms, the Court concludes that Plaintiff's interpretation is the more faithful interpretation of what a reasonable contracting party would have understood the terms to promise. No consideration of Plaintiff's extrinsic evidence is necessary to support this conclusion. The Special Terms promise that, with the exception of the actually disclosed special charges and delivery fees, the prices charged for safeway.com products will be those charged in the physical store where the groceries are delivered. Since Safeway actually marked up the charges for the in-store prices beyond the disclosed delivery and special charges, the Court grants summary judgment that Safeway breached its contract with its customers.
C. November 2011 Amendments to the Special Terms
Next, the Court must address is whether Class Members can recover damages for purchases they made after the Special Terms were amended in November 15, 2011.
On this point, there are some significant differences between Plaintiff's version of the Special Terms and Defendant's. The version submitted by Plaintiff states that the registrants "agree to these Terms and Conditions, and the form in which they appear at the time your online registration is completed," while Defendant's version states that the registrant agrees to the terms "and the form in which they appear at the time your online transaction is processed." ECF No. 187 at 17 (emphases added). Plaintiff's version provides that Safeway "will plan to notify you of any material amendments to these Terms and Conditions."
The Court finds it unnecessary to resolve the factual question of whether Plaintiff or Defendant's version of the Special Terms was operative at any particular moment in time. Regardless of the version of the Special Terms that Class Members viewed when they registered with safeway.com, it is undisputed that Class Members were not provided with conspicuous notice that changes had been made to the Special Terms at the time those changes were made. Therefore, those changes represent an offer to which the class members never expressed assent, and class members were therefore not bound by those changes.
Defendant argues that, at the time of their safeway.com registration, Class Members agreed to give Safeway the authority to change the terms of the contract without notice to them, by indicating that they agreed to the version of the Special Terms that are in effect at the time they make their subsequent orders. Defendant's version of the Special Terms states that customers agree to the terms "and the form in which they appear at the time your online transaction is processed." ECF No. 187 at 16-17 (emphases added). In order to complete their registration, Customers were required to manifest agreement to the Special Terms shown to them by clicking a link. Defendant contends that, as a result of users' agreement to this Special Term at the time of their registration, Safeway was not required to notify customers of future changes to the terms for those changes to become effective. Safeway contends that, because Class Members read the initial registration contract, every time they opted to go forward with an online purchase after registration, they were on notice that they were assenting to a new contractual agreement, governed by the Special Terms operative elsewhere on the website at the time of that purchase.
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 Ninth Circuit has taken a skeptical view of contracts in which online retailers have sought to alter the offer and acceptance structure by contending that assent can be inferred by a customer's continued use of a service even in the absence of notice of the terms in question. In
Earlier this year, in
Safeway's claim that a court could infer a customer's assent to the revised terms from that customer's continued use of the safeway.com website resembles the type of browsewrap agreement the Ninth Circuit rejected in
Although it is true that a customer could, as matter of course, read the entirety of the Special Terms before every grocery purchase they make from safeway.com, generally "[p]arties to a contract have no obligation to check the terms on a periodic basis to learn whether they have been changed by the other side."
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."
Therefore, assent to the revised Special Terms cannot be inferred from Class Members' continued use of safeway.com following November 15, 2011. Instead, Class Members safeway.com use continued to be governed by the Special Terms that were operative at the time of their registration, which promised price parity.
D. August 29, 2012 Email
Finally, Safeway argues that, even if damages are not cut off as of November 15, 2011, when the Special Terms were amended without notice to Class Members, damages should still be cut off as of August 29, 2012, the date Safeway sent an email to "all active, lapsed, and RNO (registered but not ordered) customers, who had opened an email from Safeway.com in the last six months." ECF No. 207 at 14. This email stated, under the heading "Helpful Information on Grocery Delivery Pricing and Promotions" that "Grocery delivery prices, promotions, discounts, and offers may differ from your local store." ECF No. 175-5 at 2. The Court does not agree that this email gave Class Members notice of the change to the Special Terms, as it did not refer to the Special Terms or indicate that Safeway had made any change to them. Moreover, Safeway admits the email was not sent to all Class Members, but instead was only sent to those users who had opened a safeway.com email within the last six months. Finally, the representation contained within the email, which stated that prices "may differ from your local store," was not even factually accurate, as Safeway in fact always added a markup to items sold in the online store as compared to items sold in the physical store. ECF No. 172-6 at ¶¶ 8-12.
Therefore, Class Members' assent to the revised Special Terms can also not be inferred from their continued use of safeway.com following the August 29, 2012 email. Even following that date, Class Members safeway.com use continued to be governed by the Special Terms that were operative at the time of their registration, which promised price parity.
Plaintiff's motion for summary judgment is GRANTED. The Court finds as follows:
1. Safeway breached the contract by charging Plaintiff and the Class more than the prices permitted under the terms of the contract;
2. The Class is entitled to damages even for purchases which occurred after the Special Terms were amended on November 15, 2011; and
3. Therefore, Safeway is liable to Plaintiff and the Class for the aggregate amount of the online mark-up from April 12, 2010, through the present.
The Court hereby SETS a case management conference for January 21, 2015, at 2:00 p.m., at which time it will set the remaining dates in this action. A joint case management statement, including a proposed schedule, is due ten court days before the conference.