Avis Budget Group Cannot Force Customers to Arbitrate

Bacon v. Avis Budget Group, Inc., 959 F.3d 590 (3d Cir. 2020). Plaintiffs rented vehicles from defendant Payless Car Rental, Inc., a subsidiary of defendant Avis Budget Group, Inc. (together, “Payless”), in the United States and in Costa Rica. In each transaction, renters signed a rental agreement. By signing, the renters agreed to “all notices and terms here and in the rental jacket.”

A Payless counter representative then placed the signed agreement into a folder kept behind the rental counter and labeled “Rental Terms and Conditions,” and handed it back to the renter. Despite the title on the folder, that was what Payless called a “rental jacket.” The jacket contained 31 paragraphs of rental terms. The 28th paragraph contained a provision that purported to require that all disputes arising out of, relating to, or in connection with a rental from Payless “shall be exclusively settled through binding arbitration.” Payless counter representatives were not trained to direct renters’ attention to the fact that the rental jacket contained terms beyond those that appeared in the document that the renters signed.

Believing that Payless had charged them for products they had not authorized or had declined, plaintiffs filed a putative class action under the New Jersey Consumer Fraud Act, N.J.S.A. 56:8-1, and consumer protection statutes of Florida and Nevada. Payless moved to compel arbitration (an application that ultimately resolved itself into a motion for summary judgment), but the District Court denied that motion. Payless appealed, but the Third Circuit affirmed in an opinion by Judge Shwartz.

After determining that the Third Circuit had jurisdiction over the issues raised, Judge Shwartz turned to the merits. New Jersey law governed the transactions of some of the plaintiffs, while Florida law controlled the rest. Both states’ laws favored plaintiffs.

New Jersey law allows terms to be incorporated into a document by reference to another document. But for that to be enforceable, “(1) the separate document must be described in such terms that its identity may be ascertained beyond doubt and (2) the party to be bound by the terms must have had knowledge of and assented to the incorporated terms.” Neither of those conditions was satisfied here.

The “rental jacket” was not defined or sufficiently described in the agreement that plaintiffs signed. Since it was labeled “Rental Terms and Conditions” rather than “Rental Jacket,” renters could not have “ascertained beyond doubt” that the jacket was the document purportedly incorporated by reference into the signed agreement. Nor did renters have knowledge of or assent to the arbitration clause buried in the rental jacket. Judge Shwartz observed that the jackets were kept behind the counter where renters would not see their terms, and “the rental associates did not discuss any terms contained in the rental jacket at any time.” Thus, plaintiffs covered by New Jersey law could not be forced into arbitration.

Florida law, Judge Shwartz held, compelled the same result, even though “Florida law applies a more lenient test for incorporation than New Jersey law.” The rental jacket was not “sufficiently described” in the document signed by plaintiffs, and plaintiffs were not made aware of the arbitration clause contained in the rental jacket.

The Costa Rican transaction was a little different. There, the rental agreement was two-sided and no rental jacket was used. Plaintiff Lee was asked to review and sign only the front side of her agreement. But the arbitration clause appeared on the reverse side. The language on the front side did not direct renters to the reverse side, and a video of the transaction did not clearly portray the rental agent showing Lee the reverse side. The District Court held, and the Third Circuit agreed, that whether Lee saw the reverse side was a disputed factual issue that precluded a ruling compelling arbitration.

Finally, since some plaintiffs had reserved vehicles through third party websites such as Expedia, Hotwire, and Priceline, Payless sought to present screenshots of how the rental process looked on those sites. But the screenshots depicted those websites as they appeared in December 2017, though plaintiffs all rented in the spring or summer of 2016. The affiant who sought to introduce the screenshots was an Avis employee, not an employee of any of the third party sites, and he lacked personal knowledge of whether those sites looked in 2016 as portrayed in the 2017 screenshots.

The District Court had excluded the screenshots due to the affiant’s lack of personal knowledge about them. Applying the abuse of discretion standard that governs decisions regarding the admissibility of evidence, Judge Shwartz upheld the District Court. Payless’s argument based on the screenshots thus did not get out of the starting gate.