Walker v. Nautilus, Inc.

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF OHIO

EASTERN DIVISION

ROBERT WALKER,

Plaintiff,

Case No. 2:20-cv-3414

v. Judge Edmund A. Sargus, Jr.

Chief Magistrate Judge Elizabeth P. Deavers

NAUTILUS, INC.,

Defendant.

OPINION AND ORDER

The matter before the Court is Defendant Nautilus, Inc.’s Motion to Compel Arbitration,

or in the Alternative, to Dismiss and/or Strike. (ECF No. 13). At this juncture, this Court addresses

Nautilus’ Motion to Compel Arbitration only. Nautilus’ alternative motions will be addressed in a

separate Opinion and Order. For the reasons stated below, the Court DENIES Nautilus’ Motion

to Compel Arbitration. (ECF No. 13).

I.

When considering a motion to compel arbitration the Court may consider both the

pleadings and additional evidence submitted by the parties. See Anderson v. Delta Funding Corp.,

316 F. Supp. 2d 554, 558 (N.D. Ohio 2004); see also Jones v. U-Haul Co. of Mass. & Ohio, 16

F. Supp. 3d 922, 930 (S.D. Ohio 2014). The facts relevant to this motion as laid out in the pleadings

and the documents submitted by the parties are as follows.

Walker purchased a Bowflex treadmill from Nautilus.1 (See Compl. at ⁋ 19, ECF No. 1).

Walker purchased the treadmill online on March 4, 2019 at a cost of approximately $1,500 and

1 Nautilus’ products are sold under brand names including Nautilus, Bowflex, and Schwinn.

(Compl. at ⁋ 22).

had it shipped to his home in Bellefontaine, Ohio. (See id. at ⁋⁋ 19–20). Allegedly, Walker has not

received the continuous horsepower marketed and advertised by Nautilus. (Id. at ⁋⁋ 1, 29–34).

Walker filed a Complaint against Nautilus on July 7, 2020, on behalf of himself and a

proposed class, alleging breach of express and implied warranties, (Id. at PageID 25–32), violation

of the Ohio Consumer Sales Practices Act (Id. at PageID 33), and Negligent Misrepresentation.

(Id. at PageID 37). Nautilus then filed the instant Motion, seeking primarily to compel arbitration,

and alternatively to dismiss or strike. (ECF No. 13).

At the very bottom of the Bowflex website, in small gray font, read the words “Terms of

Use.” (Pl. Ex. A, ECF No. 14-3, PageID 138). When Walker purchased the Bowflex treadmill he

did not see or click on these “Terms of Use,” (Walker Decl. at ⁋ 4, ECF No. 14-1), but if he had

he would have been taken via hyperlink to a document which, if printed, amounts to thirteen pages

(Pl. Ex. A, ECF No. 14-4). After reaching the eleventh page of that document, a user would come

upon an arbitration provision. (Id. at PageID 150–51). The arbitration provision spans five

paragraphs. (Id.)

The arbitration provision covers virtually all claims that relate in any way to Nautilus’

“Service, your participation in any of the features available through them and/or your purchase of

any products, content or services . . . .” (Id. at PageID 150). The provision continues that the parties

“expressly waive the ability to participate in a class or representative proceeding, including any

class arbitration or representative proceedings.” (Id.) By default, the arbitration would occur in

Clark County, Washington. (Id. at PageID 151). And, both parties would bear their own expenses,

while “shar[ing] equally the costs of the arbitration . . . .” (Id.) The arbitration provision does allow

for opting out, but only by writing to a listed address “no later than 60 days after initial acceptance

of these Terms.” (Id.) Finally, the arbitration provision provides that it “survives” any termination

of the “Terms.” (Id.)

Purchasing the Bowflex treadmill was not Walker’s first interaction with Nautilus; he

previously purchased a Bowflex elliptical in 2017, and in December 2018 Walker installed fitness

apps including the “Max Intelligence” app (“the app”). (Walker Supp. Decl. II at ⁋⁋ 4–6, ECF No.

25-2; Lewis Decl. at ⁋ 5, ECF No. 25-1; Pl. Ex. A & B, ECF No.25-1). Though Walker downloaded

the app, he did not subscribe to, pay for, or use the app, and he later uninstalled it. (Walker Supp.

Decl. II at ⁋⁋ 6, 9, ECF No. 25-2).

The app’s “Terms of Use” include an arbitration provision identical to the arbitration

provision hyperlinked to the Bowflex website. (Citti Decl. at ⁋ 9, ECF No. 15-1; Def. Ex. 2, ECF

No. 15-1). According to Nautilus, before using the app users are required to click “accept”

affirming that they “agree to the Terms of Use and Privacy Policy” hyperlinked thereto. (Citti

Decl. at ⁋⁋ 4–7, ECF No. 15-1). Nautilus’ declarant did not affirmatively state whether the

requirement to click “accept” has always been in place. (See id.)

According to Walker, users of the app may not have been required to accept any terms of

use when Walker downloaded the app. Video from a developer’s website shows that the prototypes

did not include an “accept” button, (Markovits Decl. at ⁋ 3, ECF No. 25-3) (website link omitted),

and Walker does not recall clicking any “accept” button. (Walker Supp. Decl. II at ⁋ 6, ECF No.

25-2). The app is currently on its twenty-first version and is now called the “JRNY” app. (Lewis

Decl. at ⁋ 11, ECF No. 25-1).2

2 Nautilus made no reference to the app or the associated arbitration provision when it first filed its

Motion, instead waiting until filing its reply to first mention the two. Walker moved to strike Nautilus’ new

argument related to the app. (ECF No. 17). Preferring to resolve disputes on the merits, the Court declined

to strike Nautilus’ new argument and instead allowed limited discovery and additional briefing by both

parties. (ECF No. 23).

II.

The Federal Arbitration Act (“FAA”) provides that a party to an arbitration agreement who

is aggrieved by another party’s refusal to submit an arbitrable dispute to arbitration, may petition

any federal district court which would otherwise have jurisdiction over the underlying matter in

order to compel arbitration. 9 U.S.C. § 4. Under the FAA “[a] written provision in any . . . contract

. . . to settle by arbitration a controversy thereafter arising out of such contract . . . shall be valid,

irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation

of any contract.” Id. § 2.

When considering a motion to compel arbitration under the FAA, the Court has four tasks:

(1) “it must determine whether the parties agreed to arbitrate;” (2) “it must determine the scope of

that agreement;” (3) “if federal statutory claims are asserted, it must consider whether Congress

intended those claims to be non-arbitrable; and” (4) “if the court concludes that some, but not all,

of the claims in the action are subject to arbitration, it must determine whether to stay the remainder

of the proceedings pending arbitration.” Stout v. J.D. Byrider, 228 F.3d 709, 714 (6th Cir. 2000).

Congress’ primary concern in passing the FAA “was to enforce private agreements into

which parties had entered . . . .” Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 221 (1985). To

that end, courts are to “rigorously enforce” arbitration agreements. Id. However, before there can

be rigorous enforcement there must have been an enforceable agreement. Arbitration agreements

are on “an equal footing with other contracts” and like any other contract may be unenforceable

based on any of the “generally applicable contract defenses, such as fraud, duress, or

unconscionability . . . .” AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011) (quotation

omitted). Federal courts apply state-law principles governing contract formation when deciding

whether parties agreed to arbitrate a matter. First Options of Chicago, Inc. v. Kaplan, 514 U.S.

938, 944 (1995).

III.

The parties have not agreed whether Ohio or Washington law applies in this case, but they

each refer to Ohio and Washington law in their briefs, and they agree that the choice of law does

not change the outcome. (See Pl. Sur-Reply at 7, ECF No. 25; see also Def. Sur-Sur-Reply at 6,

fn. 6, ECF No. 26). The Court agrees that here the result is the same under both Washington and

Ohio law. The Court will analyze this case under Ohio law, but will refer also to Washington law.

IV.

A. The Website

Defendant Nautilus initially argues that the arbitration provision contained within the

Bowflex website’s “browsewrap”3 terms of use is valid and enforceable, and that the Court should

thus compel arbitration. (Mot. at 7, ECF No. 13, PageID 83). According to Nautilus, the Bowflex

website’s browsewrap terms of use are enforceable because they are, in Nautilus’ view, “easily

accessible” and “prominently displayed” on the website. (Mot. at 8, ECF No. 13). One of the

“[e]ssential elements” of a contract is “mutual assent[.]” Kostelnik v. Helper, 770 N.E.2d 58, 61

(Ohio 2002) (quotation omitted); Keystone Land & Development Co. v. Xerox Corp., 94 P.3d 945,

949 (Wash. 2004). Walker contends that there was no mutual assent to the asserted terms of use,

and no agreement formed. Walker submits that due to the inconspicuous nature of the website’s

browsewrap terms of use, he had neither actual nor constructive knowledge of their existence and

3 Browsewrap refers to terms and conditions attached to a website through a hyperlink that state

they are accepted through one’s use of the website without more. The user is not required to view and

manifest assent to the contract; instead the “terms” are simply made available through the hyperlink.

Nguyen v. Barnes & Noble Inc., 763 F.3d 1171, 1176 (9th Cir. 2014).

thus could not assent to them. The question is whether Walker and Nautilus agreed to arbitrate.

The Court finds that they did not.

In determining the enforceability of browsewrap terms of use, “courts have focused on

whether the website user has actual or constructive knowledge of a site’s terms and conditions

prior to using the site.” Snap-on Business Solutions v. O’Neil & Associates, 708 F.Supp.2d 669,

681 (N.D. Ohio 2010) (quotations omitted). As Nautilus observes, courts have found that a

website’s users have constructive knowledge of browsewrap terms of use where the website host

has placed notice of the terms “prominently” and provided “easy access” to the full terms. (Mot.

at 8, ECF No. 13) (citing Freeplay Music v. Dave Arbogast Buick-GMC, 2019 U.S. Dist. LEXIS

163383 at *30 (S.D. Ohio 2019); Snap-on Business Solutions, 708 F.Supp.2d at 682).

Courts have refused to enforce browsewrap terms of use where the website’s users were

required to scroll down the webpage to discover the terms. Specht v. Netscape Communications

Corp., 306 F.3d 17, 20 (2nd Cir. 2002) (Sotomayor, J.); see also Nguyen v. Barnes & Noble Inc.,

763 F.3d 1171, 1178–79 (9th Cir. 2014); Wilson v. Playtika, Ltd., 349 F. Supp. 3d 1028, 1038

(W.D. Wash. 2018). In Specht, the Second Circuit reasoned that the “reasonably prudent internet

user” would not have learned of the terms before downloading software from the website and was

not provided “reasonable notice” of the terms. Specht, 306 F.3d at 20. There, the plaintiffs’ act of

downloading software thus “did not unambiguously manifest assent to the arbitration provision

contained in the license terms.” Id.

Here, rather than being prominently displayed, the terms of use are inconspicuous. And,

due to their inconspicuous nature, they also are not easily accessible. The “Terms of Use”

hyperlink appears in small, faint gray letters at the bottom of the webpage—barely legible. (Pl. Ex.

A, ECF No. 14-3, PageID 138). The hyperlink is below four columns titled “Purchasing Info,”

“Customer Support,” “Product Info & Support,” and “Connect with Us,” with a total of 22 bolded

hyperlinks in more prominent black under those titles. (Id.) The webpages are long as well, and a

user viewing the treadmill webpage would have to scroll the equivalent of eight pages to reach the

“Terms of Use.” (Id. at PageID 131–38; Markovits Decl. at ⁋ 2, ECF No. 14-2). A reasonably

prudent internet user would not have learned of these terms of use before purchasing fitness

equipment on the Bowflex website.

The Court finds that Walker did not assent to the browsewrap terms of use, including the

arbitration provision, hyperlinked to the Bowflex website. Accordingly, the Court cannot enforce

that arbitration provision in this case. Because the Court has concluded that there was no agreement

to arbitrate, the Court need not address Walker’s alternative arguments.

B. The Max Intelligence App

Nautilus next argues that this Court should compel arbitration in this case through another

arbitration provision, this one found in the terms of use of one of Nautilus’ apps. (Def. Reply at 1,

ECF No. 15). Walker responds that the arbitration clause from the terms of the app cannot be

enforced to compel arbitration in this case because to do so would be unconscionable; the Court

agrees. To require arbitration here under a provision in the Terms of Use from an unrelated app

that was downloaded but not used, given the totality of circumstances, would be unconscionable

under either Washington or Ohio law.

Under Ohio law, a contract or arbitration provision is unenforceable if it is substantively

and procedurally unconscionable.4 See Hayes v. Oakridge Home, 908 N.E.2d 408, 412 (2009).

“The party asserting unconscionability of a contract bears the burden of proving that the agreement

4 Under Washington law, a contract may be invalidated for either procedural unconscionability or

substantive unconscionability. Luna v. Household Fin. Corp. III, 236 F. Supp. 2d 1166, 1174 (W.D. Wash.

2002); see also McKee v. AT&T Corp., 191 P.3d 845, 847 (Wash. 2008).

is both procedurally and substantively unconscionable.” Id. Substantive unconscionability

involves unfair and unreasonable contract terms, while procedural unconscionability involves

individualized circumstances surrounding the parties that make any meeting of the minds

involuntary. See Ahmmad v. Admed, 38 N.E.3d 434, 444 (Ohio Ct. App. 2015). Put another way,

“Unconscionability includes both an absence of meaningful choice on the part of one of the parties

together with contract terms which are unreasonably favorable to the other party.” Hayes, 908

N.E.2d at 412; see also Satomi Owners Ass’n v. Satomi, LLC, 225 P.3d 213, 232 (Wash. 2009)

(“Procedural unconscionability is the lack of meaningful choice”); McKee v. AT&T Corp., 191

P.3d 845, 847 (Wash. 2008) (“Substantive unconscionability involves those cases where a clause

or term in the contract is one-sided or overly harsh.”).

In determining whether an arbitration provision is procedurally unconscionable, courts

may consider the attendant facts and circumstances in the record. See Williams v. Aetna Fin. Co.,

700 N.E.2d 859, 866–67 (Ohio 1998); see also Satomi Owners Ass’n, 225 P.3d at 232 (Procedural

unconscionability takes into account “all the circumstances surrounding the transaction including

. . . whether the important terms were hidden in a maze of fine print.”) (quotations omitted).

Circumstances to consider include, for instance, whether the terms were explained to the weaker

party. Cross v. Carnes, 724 N.E.2d 828, 837 (Ohio Ct. App. 1998). Circumstances also include

the relative bargaining position of the parties, whether the contract is one of adhesion, the

availability of competing goods or services, and who drafted the contract. Hayes, 908 N.E.2d at

413.

The focus of substantive unconscionability is on whether terms are fair and reasonable. See

Collins v. Click Camera & Video, 621 N.E.2d 1294, 1299 (Ohio Ct. App. 1993) (unfair and

unreasonable contract terms are substantively unconscionable). Courts have found substantive

unconscionability where “the costs associated with the arbitration effectively deny a claimant the

right to a hearing or an adequate remedy in an efficient and cost-effective manner[.]” Felix v.

Ganley Chevrolet, Inc., 2006-Ohio-4500 at ⁋ 21 (Ohio Ct. App. 2006); see also Williams, 700

N.E.2d at 866–67 (finding unconscionability after looking unfavorably on an arbitration provision

that was cost-ineffective); Mendez v. Palm Harbor Homes, Inc., 45 P.3d 594, 605 (Wash. Ct. App.

2002).

Given the circumstances of this case, the arbitration provision is procedurally

unconscionable. The Max Intelligence app’s terms of use bear the hallmarks of an adhesion

contract, and the binary “accept” or “reject” options associated with using the app indicate that the

terms set by Nautilus are non-negotiable. Moreover, Nautilus did not explain the arbitration

provision to Walker or require Walker to view the agreement before proceeding. (See Walker Decl.

at ⁋⁋ 12–13, ECF No.25-2). Instead Nautilus buried the provision on pages 11 and 12 of its terms

of use.5 (Def. Ex. 2, ECF No. 15-1 at PageID 190–91). The arbitration provision does contain a

sixty day opt-out window. (Id. at PageID 191). However, because the arbitration provision covered

all future product purchases and not just use of the Max Intelligence app, the sixty-day window

closed before Walker purchased the treadmill at issue in this case. Setting up an opt-out provision

in this manner limits its significance, and here that significance is outweighed.

The arbitration provision is also substantively unconscionable. According to Nautilus,

when Walker downloaded the app, he agreed to arbitrate any issue relating to any of Nautilus’

numerous products and services in perpetuity. Nautilus could discontinue the app and could have

terminated Walker’s use at its discretion, yet according to the terms of use the arbitration provision

5 Though the arbitration provision is listed as page 11 and 12 of Nautilus’ Exhibit 2 (ECF No. 15-

1), the record does not reveal how far users of the Max Intelligence app would have to scroll to reach the

arbitration provision on a smart phone, such as Walker’s iPhone 8+. (See Lewis Decl. at ⁋ 3, ECF No. 25-

1) (“I inspected an iPhone 8+ owned by Robert Walker”).

survives that termination. (Def. Ex. 2, ECF No. 15-1, PageID 181, 191–92). Nautilus contends that

Walker’s later purchase of a treadmill was covered by the arbitration provision in that app. A

reasonably prudent consumer would not expect this. And, this term is unreasonably favorable to

Nautilus. It would require arbitration not just for claims related to the app, but for all claims related

to any of Nautilus’ products and services, apparently including those under the Nautilus, Schwinn,

and Bowflex brand names—all just to use an app.

In addition, Nautilus’ arbitration provision is substantively unconscionable because it

effectively denies Walker “the right to a hearing or an adequate remedy in an efficient and cost-

effective manner[.]” Felix, 2006-Ohio-4500 at ⁋ 21; see also Williams, 700 N.E.2d at 866–67;

Mendez, 45 P.3d at 605. The arbitration provision requires consumers to arbitrate in Clark County,

Washington, it requires consumers to be responsible for their own expenses, and it requires them

to split any costs and fees. The effect, especially combined with the class action waiver, is to

economically preclude individual consumers from vindicating their rights.

In this case, which involves a treadmill costing less than $2,000, it would be economically

irrational for Walker to arbitrate his claim in Clark County, Washington. Assuming an outcome in

favor of Walker, the arbitration fees and costs alone would be liable to exceed any damages award.

(Supp. Walker Decl. II at ⁋ 14, ECF No. 25-2; Markovits Decl. at ⁋ 4, ECF No. 25-3).

Accordingly, the Court finds that the app’s arbitration provision is both procedurally and

substantively unconscionable. The Court need not address Walker’s alternative arguments.

Because the arbitration provision associated with the app is unconscionable it cannot be used to

compel arbitration here.6

6 In a parenthetical within Nautilus’ sur-sur-reply, Nautilus suggests that “[t]o the extent the Court

finds any cost-splitting arrangement a potential bar to arbitration, the proper remedy is to sever that

provision from the arbitration agreement and nevertheless compel arbitration.” (Def. Sur-Sur-Reply at 8,

ECF No. 26). “‘Issues adverted to in a perfunctory manner, unaccompanied by some effort at developed

V.

For the reasons stated above, Defendant Nautilus’ Motion to Compel Arbitration is

DENIED. (ECF No. 13). Nautilus moved alternatively to dismiss or strike, which this Court will

address in a separate Opinion and Order.

IT IS SO ORDERED.

5/28/2021 s/Edmund A. Sargus, Jr.

DATE EDMUND A. SARGUS, JR.

UNITED STATES DISTRICT JUDGE

argumentation, are deemed [forfeited]’ and ‘it is not sufficient for a party to mention a possible argument

in the most skeletal way, leaving the court to put flesh on its bones.’” United States v. Brown, 819 F.3d 800,

829 (6th Cir. 2016) (quoting United States v. Robinson, 390 F.3d 853, 886 (6th Cir. 2004)). Even assuming

Nautilus sufficiently addressed the issue of severance, which it did not, this Court found that the arbitration

provision was unconscionable based on more than just the cost-splitting arrangement.