The California Court of Appeal last week issued its decision in Intuit Inc. v. 9,933 Individuals, affirming a lower court ruling that denied Intuit’s request for a preliminary injunction seeking to enjoin approximately 40,000 pending consumer injunctions that “[e]ven if … conducted without hearings,” would cost Intuit $128 million in in arbitration costs. Intuit argued that the American Arbitration Association rules, incorporated into the consumer agreements, provide that either party may elect to take a claim to small claims court.
The court, however, disagreed, holding that “[t]he plain text of the arbitration agreement in the terms of service is ambiguous on the question of who may elect to push an arbitration into small claims court.” As the court explained, “[o]n the one hand, the text provides that ‘you may assert claims in small claims court if your claims qualify.’… Applying plain English, the use of the word ‘you’ refers solely to the consumer—not to Intuit… [O]n the other hand, the terms of service’s text incorporates the AAA rules, and the consumer rules…specify ‘either party may take the claim to’ ‘small claims court.'”
Confronted with this ambiguity, the court held that it “must be resolved in favor of reading the terms of service to permit only the consumer to transfer a claim to small claims court.” As the court explained, “[f]irst, this is the result dictated by the well-settled maxim that ‘ambiguities about the scope of an arbitration agreement must be resolved in favor of arbitration.’… Second, this is also the result counseled by the maxim that an ‘irreconcilable conflict’ between a more general policy (here, the more general AAA consumer rules) and a more specific ‘slip’ or ‘rider’ (here, the more specific terms of service) is to be resolved in favor of the more specific provision.”
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