June 08, 2021

Ninth Circuit Addresses Key Provisions of California’s Automatic Renewal Law in Hall v. Time Inc.

In a significant decision interpreting California’s automatic renewal law, Cal. Bus. & Prof. Code §§ 17600 et seq. (“ARL”), the Ninth Circuit Court of Appeals affirmed a lower court’s dismissal of a class action complaint alleging that defendants Time Inc. and Meredith Corp. (collectively, “Time”) had violated the ARL in their automatic renewal of plaintiff Linda Hall’s People magazine subscription. Hall v. Time, Inc., 2021 WL 2071991 (9th Cir. May 24, 2021). Most notably, the Ninth Circuit held that a consumer does not have to separately consent to the automatic renewal terms to satisfy the ARL’s affirmative consent requirement. Under Hall, provided the automatic renewal terms are displayed close by, an indication of agreement to those terms — in the form of a “sign up” or “buy now” button, or a checkbox confirming agreement to hyperlinked terms and conditions that include the automatic renewal terms — satisfies the ARL’s affirmative consent requirement.

Proceedings in the District Court

In her original complaint, Hall had alleged that the process by which she had signed up for a People magazine recurring subscription violated multiple provisions of the ARL, including that the disclosures of the terms were not clear and conspicuous (section 17602(a)(1)); that Time had not obtained her affirmative consent (section 17602(a)(2)); that she had not been provided with a compliant post-order acknowledgment (section 17602(a)(3)); and that Time did not provide an online cancellation option (section 17602(c)). Because it is well-established that the ARL does not provide a private right of action (see Johnson v. Pluralsight, LLC, 728 F. App’x 674, 676 (9th Cir. 2018)), Hall asserted these violations under California’s Unfair Competition Law, Cal. Bus. & Prof. Code §§ 17200 et seq. (“UCL”), and as common-law theft and conversion claims.

In 2019, Judge Andrew J. Guilford dismissed the complaint with leave to amend. Hall v. Time, Inc., 2019 WL 8107879 (C.D. Cal. Sept. 24, 2019). The following year, Judge Cormac J. Carney, to whom the case was reassigned following Judge Guilford’s retirement, dismissed Hall’s amended complaint with prejudice. Hall v. Time, Inc., 2020 WL 2303088 (C.D. Cal. Mar. 13, 2020). Based on the detailed information regarding the sign-up process and subsequent postcard described in the complaints, both judges determined that Time’s disclosures were clear and conspicuous; that Time had adequately obtained Hall’s consent; that Time’s post-order acknowledgment was adequate; and that Hall had consequently failed to state a claim.1

The Ninth Circuit’s Affirmance

In an unpublished decision, the Ninth Circuit affirmed Judge Carney’s ruling. Hall, 2021 WL 2071991, at *2. Before turning to the merits, the court observed that there was no California Supreme Court decision interpreting the relevant provisions of the ARL, so it was obligated to “predict how that court would decide” the issues presented. Id. at *1.

The court first examined Time’s disclosures for compliance with section 17602(a)(1)’s “clear and conspicuous” and “visual proximity” requirements. Id. It noted that the automatic renewal terms on the checkout page were in a text box highlighted in yellow and had a bolded title “Automatic Renewal Notice” at the top, and the only image nearby was predominantly navy blue. Id. These distinctions satisfied the ARL because they were in “contrasting color” and “set off from the surrounding text,” “in a manner that clearly calls attention to the language.” Id., quoting section 17601(c) (defining “clear and conspicuous”). The court also rejected Hall’s argument that the “Submit Order” button on the checkout page was not sufficiently close to the terms themselves, stating that the ARL “requires ‘visual proximity,’” not immediate adjacency.” Id. (emphasis in original). The fact that some unrelated text and an image appeared between the automatic renewal terms and the consent did not affect that proximity. Id.

Second, the Ninth Circuit addressed the interpretation of the ARL’s affirmative consent requirement in section 17602(a)(2), assessing whether it permitted consent to the agreement containing the automatic renewal terms, or whether separate consent to the terms themselves was required, as Hall had urged. The court came down firmly in the former camp, finding that Hall’s interpretation requiring separate consent was “extra-textual” and contravened California’s principles of statutory interpretation. Id. at *2. In essence, the court held that clicking “Submit Order” at the end of a sign-up process that contained all of the ARL’s required disclosures constituted “affirmative consent to the agreement containing the automatic renewal offer terms.” Id., quoting § 17602(a)(2).

Third, the court held that Time had complied with the “post-order acknowledgment” requirements of section 17602(a)(3). Id. Hall contended that Time had violated this requirement based on inadequate disclosures during the checkout process and because the follow-up postcard did not provide online cancellation information. The court rejected these arguments, concluding that a post-order notice of an upcoming automatic renewal, which Hall received months after her initial order, can satisfy section 17602(a)(3)’s requirement of an “acknowledgment… that is capable of being retained by the consumer” provided that it contains the necessary disclosures.2 Id. at *2. Finally, the court examined the renewal postcard itself and determined that it provided the renewal date, the new rate, and how to cancel, as required by section 17602(a)(3), and was sufficiently “clear and conspicuous” based on the font size and bolding of the text. Id.

Takeaways

Hall provides businesses with important guidance on three key points. The decision is unpublished, however, so it is only persuasive, not binding, authority. Businesses should therefore be aware that subsequent state or federal courts may decide these issues differently.

  • Separate, explicit consent to automatic renewal terms not required. Perhaps because no appellate court had yet addressed the issue, some businesses with automatic renewal programs have considered or implemented either two separate checkboxes in their sign-up process — one for the automatic renewal terms and one for (hyperlinked) terms and conditions — or one checkbox explicitly referencing both the automatic renewal terms and the (hyperlinked) terms and conditions. Hall concludes that even the latter format is not necessary, holding that simply clicking a “Submit Order” button that follows and is proximate to the required automatic renewal terms is sufficient affirmative consent under the ARL.3
  • Terms and consent need to be proximate, not adjacent. Hall makes clear that the visual proximity requirement can be satisfied even if there is some unrelated text, images and/or space between the automatic renewal terms and the affirmative consent, provided that the consent comes after (below) the terms and remains in close proximity. (By way of illustration, Judge Carney explained that “less than 40 words and one small image” separated the terms and the consent on Time’s page.)
  • Post-order acknowledgment can come later. The Ninth Circuit held that the post-order acknowledgment that must be provided in a manner that is capable of being retained by the consumer may be sent months after the initial order. This acknowledgment is often provided in the form of an immediate post-order confirmation email, but the Ninth Circuit found that a notice of automatic renewal postcard sent months later sufficed.

One final point: broadly applicable automatic renewal laws like California’s continue to spread. Businesses that provide automatic renewal offerings nationally should continue to monitor developments in all jurisdictions in which they operate, as new laws, and amendments to existing laws, appear regularly.

For More Information

Questions about complying with automatic renewal laws can be directed to the authors listed below or to your usual Faegre Drinker contact. Further information from Faegre Drinker about automatic renewal laws and compliance issues can be found in Automatic Renewal State Laws: Updated 2020 Edition and the alert “Automatic Renewal Laws Legislation to Watch in 2021.”

  1. Each decision also addressed certain claims unique to each complaint. Hall argued in each complaint for the application of changes to the ARL that went into effect in July 2018, but the judges rejected those claims as inapplicable because Hall had signed up in 2017. See Hall, 2019 WL 8107879, at *4 (option to cancel online) and Hall, 2020 WL 2303088, at *5 (additional disclosures required when a free gift is involved). In addition, in her amended complaint, Hall alleged that Time’s disclosures did not state precisely how her monthly charge would change after her promotional period ended. Hall, 2020 WL 2303088, at *4. The court determined that the ARL contemplates such a lack of specificity, because section 17601(b)(3) only requires a business to state whether “the amount of the charge may change” and “the amount to which the charge will change, if known.” Id. (emphasis in original).
  2. The court’s holding is consistent with the ARL’s lack of any specific timing requirement for the post-order acknowledgment. See sections 17602(a)(3) and 17602(e)(1). A later notice closer in time to the actual renewal can also be helpful to the consumer, as that is when the consumer will be deciding whether to renew or not. At the same time, Hall should not be read to mean that the post-order acknowledgment can “cure” deficiencies in the required pre-order disclosures, as that would be contrary to sections 17602(a)(1) and 17601(b)(1)-(5).
  3. Given Hall’s unpublished status, however, and the fact that other states (such as Vermont) have automatic renewal affirmative consent requirements that differ from California’s, businesses operating beyond California should ensure that their practices are compliant across all states regulating their types of automatic renewal contracts.
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