Products Liability Law Reporter

A federal district court held that products liability claims against the Lime electric scooter company were subject to the valid arbitration agreement the company had established with the plaintiffs’ decedent, who was injured while using a Lime scooter.

Jacoby Stoneking created a user account with Lime by entering his phone number and clicking the “NEXT” button on the company’s interface. Stoneking later fell while riding a Lime electric scooter, suffering fatal injuries. His estate and family members sued Lime’s parent company, Neutron Holdings, Inc., alleging design defect, manufacturing defect, marketing defect, breach of warranty of fitness for a particular purpose, and gross negligence. The defendant moved to compel arbitration based on the provisions of its user agreement.

Granting the motion, the district court first considered whether the defendant and Stoneking had entered into a valid arbitration agreement. Under Texas law, the court found, a binding contract requires an offer, an acceptance, a meeting of the minds, each party’s consent to the terms, and execution and delivery of the contract with the intent that it be mutual and binding. In this case, Lime’s user agreement requires users to click either the “NEXT” or “Continue with Facebook” button after being presented with a link to the company’s user agreement. Such an agreement, known as a sign-in wrap, is typically enforceable where the user had reasonable notice of the existence of the agreement’s terms, the court found.

In Stoneking’s case, the hyperlink to the defendant’s user agreement was reasonably conspicuous and placed him on notice of the existence and content of the agreement. For instance, the court found, the notice is legible and the terms “User Agreement & Terms of Service” are in dark, bold font against a white screen. Thus, the court concluded, a reasonably prudent smartphone user would comprehend that by signing up with Lime and clicking the “NEXT” button, this constituted an assent to its user agreement. Thus, the court held that a valid arbitration agreement existed between Lime and Stoneking.

Turning to the scope of the arbitration, the court noted that the Lime user agreement incorporates the rules promulgated by the JAMS alternative dispute resolution service, including its streamlined arbitration rules and procedures. This is clear and unmistakable evidence of the parties’ intent to delegate questions of arbitrability and scope to an arbitrator, the court said.

Consequently, the court dismissed the plaintiffs’ action in favor of arbitration.

Citation: Phillips v. Neutron Holdings, Inc., 2019 WL 4861435 (N.D. Tex. Oct. 2, 2019).