Sirius Loses Mandatory Arbitration Demand

Just buying a car doesn’t mean a consumer can be bound by the mandatory arbitration clause terms of the car owner’s satellite radio service provider, Sirius XM Radio, a federal appeals court said Monday.

Erik Knudson may press his class action claims against XM Radio, despite a customer agreement that called for mandatory arbitration of any dispute, the 9th U.S. Circuit Court of Appeals ruled.

The appeals court reinstated Knutson’s lawsuit that Sirius XM Radio Inc. violated the Telephone Consumer Protection Act by repeated telephone calls after he purchased a Toyota pickup truck and started a three-month free trial of a Sirius radio subscription.

The welcome kit he received from Sirius a month after he began the trial subscription included a mandatory arbitration clause.

A reasonable consumer in Knutson’s position “could not be expected to understand that purchasing a vehicle from Toyota would simultaneously bind him or her to any contract with Sirius XM, let alone one that contained an arbitration provision without any notice of such terms,” Judge Harry Pregerson wrote.

Nothing in the record indicates that Sirius XM’s offer was clearly communicated to Knutson by mailing him the customer agreement, Pregerson said.  Knutson would only have notice of his ability to cancel the service.

His continued use of Sirius “did not manifest his assent to the provisions in the customer agreement,” the panel held.

Sirius failed to provide evidence of the existence of an agreement to arbitrate, thus the customer agreement is unenforceable for lack of mutual assent.

The case was returned to Judge Anthony Battagllia in San Diego.

Joining Pregerson were Judges Marsha Berzon and visiting Judge Michael Murphy of the 10th Circuit.

Case:  Knutson v. Sirius XM Radio, No. 12-56120



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