[00:00:00] Speaker 02:
If it please the court, Arvin Swaminathan on behalf of defendant IXL.

[00:00:05] Speaker 02:
Your honor, if it would be okay, I'd like to preserve three minutes time permitting for my rebuttal.

[00:00:09] Speaker 03:
All right.

[00:00:13] Speaker 02:
There's two basic grounds here, your honor, to reverse.

[00:00:16] Speaker 02:
And there's two basic themes that are underlying this.

[00:00:19] Speaker 02:
The ultimate issue here is whether the plaintiffs agreed to the terms of service.

[00:00:24] Speaker 02:
There's two ways to get at that.

[00:00:27] Speaker 02:
The first is, did they actually agree to the terms of service?

[00:00:31] Speaker 02:
That's the easy decision here.

[00:00:33] Speaker 02:
That's the easy call to determine that the district court erred because it shifted the burden incorrectly in evaluating whether or not we'd satisfied 1589.

[00:00:43] Speaker 02:
The second is on the agency issues and whether or not the schools can act or did act as an agent of the plaintiffs in agreeing to the terms of service.

[00:00:54] Speaker 01:
So, counsel, let me interrupt you.

[00:00:57] Speaker 01:
to ask a question that isn't addressed in any of the briefs and maybe a non sequitur and I would not be insulted at all if you told me that's a non sequitur judge.

[00:01:09] Speaker 01:
So here's my question.

[00:01:10] Speaker 01:
When I look at the arbitration provision which I think is number 22, it says read this section carefully because it requires the parties to arbitrate their disputes.

[00:01:24] Speaker 01:
And in the beginning of the terms of service, it says the agreement applies to all visitors, users, and others who access or otherwise use the service, you or users.

[00:01:39] Speaker 01:
As far as I can tell, there's nothing that defines here who the parties are that are required to arbitrate their disputes, and you is defined.

[00:01:50] Speaker 01:
So part one, who are the parties to this agreement?

[00:01:56] Speaker 01:
And part two, does that make a difference?

[00:02:01] Speaker 01:
Because it doesn't seem to me that even if you were hypothetically right on your other arguments,

[00:02:07] Speaker 01:
that accessing the service would transform someone into a party to the agreement.

[00:02:14] Speaker 01:
But go ahead.

[00:02:15] Speaker 02:
Well, I think that is part of the thrust of the question, Your Honor, which is who actually entered into the agreement, right?

[00:02:21] Speaker 01:
Who's a party to the agreement as opposed to who is you.

[00:02:24] Speaker 02:
Well, I think they ultimately end up being the same thing.

[00:02:29] Speaker 02:
And here's the reason why.

[00:02:31] Speaker 02:
Just for context, this is a service that's provided over the internet.

[00:02:35] Speaker 02:
So the user,

[00:02:36] Speaker 02:
whoever it might be, goes onto the internet, logs into their IXL account, and they can access those services.

[00:02:42] Speaker 02:
So it is not as if their services are being passed through.

[00:02:44] Speaker 02:
The individual who's using it uses them online, right?

[00:02:49] Speaker 02:
So the students use them online.

[00:02:51] Speaker 02:
In fact, parents can be provisioned accounts to also go online and access and see what their students see.

[00:02:57] Speaker 01:
But your clients are the one who drafted this, right?

[00:03:00] Speaker 01:
Correct.

[00:03:01] Speaker 01:
And it doesn't say you agree to arbitrate.

[00:03:04] Speaker 01:
It says the parties.

[00:03:06] Speaker 01:
Right.

[00:03:07] Speaker 02:
And what I would say, Your Honor, is in this situation, whether the school's acting as an agent of the parent or the parents and the plaintiffs agreeing to them explicitly, they are both parties to the agreement.

[00:03:22] Speaker 02:
Regardless of which avenue you adopt, they're both parties to the agreement.

[00:03:27] Speaker 02:
They're parties to the agreement because if you go to the first issue in terms of whether or not they agree to the agreement,

[00:03:35] Speaker 02:
1589 is what controls.

[00:03:37] Speaker 02:
1589 essentially says you have to have assent, you have to have voluntary assent, and that can be demonstrated by accepting the benefit.

[00:03:46] Speaker 02:
So when the plaintiffs and their students go in and log on, they accept a benefit.

[00:03:50] Speaker 02:
So the district court was right, 1589 applies, and we have assent.

[00:03:55] Speaker 02:
The only question then is whether that assent was voluntary or not.

[00:04:00] Speaker 02:
And where the district court erred is it said that voluntariness showing hasn't been satisfied by IXL.

[00:04:08] Speaker 02:
It's not IXL's burden to show voluntariness.

[00:04:11] Speaker 02:
The case law in California is clear that the burden on showing voluntariness shifts to the plaintiff as being the folks in the best position to make that decision.

[00:04:21] Speaker 01:
Let's assume, hypothetically, that my first question we decided was irrelevant.

[00:04:29] Speaker 01:
and we agreed with you on the burden of proof.

[00:04:33] Speaker 01:
Wouldn't we need to remand?

[00:04:35] Speaker 02:
So you can reverse your honor and compel arbitration if you conclude that the plaintiffs offered no evidence whatsoever.

[00:04:45] Speaker 02:
They don't.

[00:04:46] Speaker 02:
There's no evidence in there in the

[00:04:49] Speaker 02:
in the pleadings below the district court as to whether or not their use or assent was anything but voluntary.

[00:04:56] Speaker 01:
Would that really be fair in the context here where if you're right that the district court got a legal issue incorrectly?

[00:05:06] Speaker 01:
There wasn't much discovery here.

[00:05:08] Speaker 01:
Would it be really fair for us to do that, even if we agreed with you, as opposed to sending it back and saying to the district court, allow discovery and make a factual finding?

[00:05:18] Speaker 02:
So, Your Honor, I agree.

[00:05:19] Speaker 02:
I think it is technically correct, right?

[00:05:23] Speaker 02:
Technically, they didn't submit any evidence.

[00:05:25] Speaker 02:
It's their burden.

[00:05:27] Speaker 02:
That is, the law is clear on that point.

[00:05:28] Speaker 02:
So I think you technically can reverse and compel arbitration.

[00:05:32] Speaker 02:
I don't disagree with you, Your Honor.

[00:05:34] Speaker 02:
Fair thing to do is to order discovery.

[00:05:36] Speaker 02:
There's a whole host of issues that I think if the court vacated the order and remanded, there's a whole host of issues where discovery is appropriate, right?

[00:05:46] Speaker 02:
One is on this issue of voluntariness.

[00:05:48] Speaker 02:
There are two issues on the agency piece of the argument that are also where discovery is fair, right?

[00:05:54] Speaker 02:
whether an agency relationship was actually formed between the school and the plaintiff, number one, and then whether it's necessary and proper, right, an extension of California law.

[00:06:03] Speaker 01:
Although what is your, on that point, what is the evidence that you offered beside this, the terms of service and the FTC issue that even if there was some sort of agency,

[00:06:22] Speaker 01:
that it was agency which had within its terms the ability to or that they had the ability to sign these parents up for arbitration.

[00:06:36] Speaker 01:
I agree that's separate from voluntary use after knowledge of the terms, but I have a lot of trouble seeing how even if there were some sort of agency here, it could incorporate requiring the users to arbitrate.

[00:06:56] Speaker 02:
So I think there's a couple things, Your Honor.

[00:06:58] Speaker 02:
The first thing is that the

[00:07:02] Speaker 02:
Our position is that the COPPA rule creates the agency relationship in and of itself, right?

[00:07:08] Speaker 01:
How can that be?

[00:07:09] Speaker 01:
I mean how can guidance from the FTC that is in my view very general which the FTC has disclaimed but putting that aside, how can that kind of guidance create an agency under which the parents

[00:07:31] Speaker 01:
are bound to arbitrate.

[00:07:32] Speaker 02:
So I think there's a two-step process.

[00:07:35] Speaker 02:
The first step is, is there an agency relationship to begin with?

[00:07:39] Speaker 02:
And our view is what COPPA says essentially is, look, there can be an agency relationship.

[00:07:45] Speaker 02:
And so we think that that's evidence that there was an agency relationship because in this instance, IXL followed how the FTC had laid out that agency relationship might be created.

[00:07:56] Speaker 02:
So that's the first question.

[00:07:58] Speaker 02:
The second question then is what is the extent of that agency relationship?

[00:08:02] Speaker 02:
That's the question you're asking about arbitrability, right?

[00:08:05] Speaker 02:
And that is the second part.

[00:08:06] Speaker 02:
That is a question of whether it's necessary and proper.

[00:08:08] Speaker 01:
Well, but you're relying on what the FTC said.

[00:08:12] Speaker 01:
And I mean, even if one could look at it as some sort of binding type of statement that could somehow bind these parents, which I think is a big leap,

[00:08:23] Speaker 01:
I just don't see anything in what you're relying on that has anything to do with binding parents to arbitrate, that the schools have the right to bind the parents to arbitrate.

[00:08:37] Speaker 02:
Well, so I think that's the entire point of whether and why discovery is necessary.

[00:08:41] Speaker 02:
But let me walk back into this.

[00:08:44] Speaker 02:
In the terms, Your Honor, if you look at ER 134 in the second paragraph, or the second section of when it talks about eligibility and authority,

[00:08:52] Speaker 02:
there's two different representations that the school is making.

[00:08:57] Speaker 02:
One, you represent and warrant that you have all necessary authority to request such actions from you or on behalf of the account holder, the school or a parent, number one.

[00:09:07] Speaker 02:
And number two, it also goes on to say, if you're a school providing service to children under 13, you represent and warrant that you have authority to provide consent on behalf of the parents for IXL to collect information.

[00:09:18] Speaker 03:
Right, but that language that you referenced assumed that that's enough

[00:09:21] Speaker 03:
for an agency relationship, setting aside the COPAA guidance, that that's enough to create an agency relationship, right?

[00:09:28] Speaker 03:
Is that the only evidence in the record?

[00:09:29] Speaker 03:
Is that the school basically made that representation when it agreed to the terms?

[00:09:34] Speaker 02:
So, again, I think, Your Honor, that's evidence that an agency relationship could have existed.

[00:09:39] Speaker 02:
And the first question that discovery should be allowed to proceed on at the district court is,

[00:09:44] Speaker 02:
Was that actually an agency relationship?

[00:09:46] Speaker 02:
It might not be.

[00:09:46] Speaker 01:
But Council, here's where I have a problem, even if we just looked at this language.

[00:09:53] Speaker 01:
If you're a school, et cetera, you represent and warrant that you have the authority to provide consent on behalf of parents for IXL to collect information.

[00:10:05] Speaker 01:
How could that possibly be read to provide authority to bind you to arbitration when you specifically mentioned that the authority provides consent to collect information?

[00:10:22] Speaker 01:
Why would anybody think that that language would also provide authority to bind you to arbitration?

[00:10:29] Speaker 02:
I think you can go and look at the way the district court looked at it in the crypto asset fund case.

[00:10:34] Speaker 02:
In that case, it was about the buying and selling of crypto assets, but the arbitration provision was part of those terms.

[00:10:40] Speaker 02:
And in that case, the court said it's necessary and proper that those terms of arbitration would be normal to be attenuated to that purchase and sale.

[00:10:49] Speaker 02:
And so all I'm saying, Your Honor, is this.

[00:10:51] Speaker 02:
I don't think there's a case on point that says it is automatically necessary and proper.

[00:10:56] Speaker 01:
I totally agree with you.

[00:11:03] Speaker 01:
basic principle of exclusio unius, wouldn't the fact that you mention collect information be a reason to exclude the reading of you have the authority to collect information and bind the parents to arbitration?

[00:11:18] Speaker 02:
I don't think that's necessary, Your Honor.

[00:11:20] Speaker 02:
I think what California law says is anything that is attended to that is necessary and proper to effectuate the agency relationship is part of the scope of agency.

[00:11:30] Speaker 02:
And so the question is, is what's necessary and proper?

[00:11:33] Speaker 02:
And what we said here is that issue is something that discovery should be allowed into.

[00:11:38] Speaker 02:
I don't know what the answer is to that, Your Honor.

[00:11:40] Speaker 02:
The district court may determine it's not necessary and proper and agree with Your Honor on that point.

[00:11:45] Speaker 02:
The district court might say, oh, look, it is necessary and proper, and here's the evidence that was deduced.

[00:11:50] Speaker 02:
I'm going to conclude that it was part and parcel of it.

[00:11:51] Speaker 02:
But the district court hasn't made that finding yet.

[00:11:54] Speaker 02:
And so what I would suggest, you don't have to make a determination of law that the language in here automatically binds them to arbitration.

[00:12:02] Speaker 02:
That's not what we're asking the court to do.

[00:12:03] Speaker 02:
What we're asking the court to do is remand it so that we can go back and have discovery on that issue and determine whether it's necessary or proper.

[00:12:11] Speaker 02:
I would fully admit to you, Your Honor, it might not be.

[00:12:14] Speaker 02:
It very well might not be.

[00:12:16] Speaker 02:
But the problem here is that the parties haven't had a chance to explore that issue

[00:12:21] Speaker 02:
identify evidence that supports or negates that condition, both parties, and then get that in front of the district court to allow Judge Lynn to make that decision.

[00:12:30] Speaker 02:
And that's what I would submit that the court should do here, is remand and say essentially this, there is evidence in the record from which IXL could have concluded that an agency relationship might exist.

[00:12:43] Speaker 02:
We don't know whether there's ones against, there's not enough evidence in the record to make that finding.

[00:12:47] Speaker 02:
So we're going to remand back to the district court to answer two questions with discovery.

[00:12:53] Speaker 02:
One, was there an agency relationship created?

[00:12:56] Speaker 02:
And two, what's the scope of that agency?

[00:12:58] Speaker 02:
If the scope of that agency, right,

[00:13:01] Speaker 02:
should be informed and the existence of that agency should be informed by discovery.

[00:13:06] Speaker 02:
So all we're asking on that point, Your Honor, is to say there's sufficient evidence in the record from which IXL could believe that an agency relationship existed between the school and the plaintiff.

[00:13:19] Speaker 02:
And if that's the case, then we have met that burden.

[00:13:22] Speaker 02:
And as Your Honor explained in Kenapki, that's exactly the province for discovery, right?

[00:13:28] Speaker 03:
We've demonstrated that there's... And Council, I just wanted to make sure I understand your argument.

[00:13:32] Speaker 03:
The basis on which we can conclude that there's sufficient evidence in the record for IXL to believe that an agency relationship may exist comes from the school district's representation

[00:13:47] Speaker 03:
that it has the authority on behalf of the act, on behalf of the parents, in terms of collection of information?

[00:13:54] Speaker 02:
It is that, Your Honor, plus in the statement of basis and purpose.

[00:13:59] Speaker 02:
Oh, yes.

[00:14:00] Speaker 02:
Setting that aside.

[00:14:00] Speaker 02:
Right.

[00:14:01] Speaker 02:
But they dovetail, Your Honor, right?

[00:14:03] Speaker 02:
Because the FTC in the statement of basis and purpose indicates how an agency relationship might be formed.

[00:14:09] Speaker 02:
They say this could be it, right?

[00:14:11] Speaker 02:
And that's in the statement of basis of purpose.

[00:14:12] Speaker 02:
That's exactly what's in the terms.

[00:14:14] Speaker 02:
So they dovetail together.

[00:14:16] Speaker 02:
And so all I'm saying is that the terms which follow the FTC statement of basis of purpose are sufficient indication to IXL that an agency relationship could exist, right?

[00:14:27] Speaker 02:
And then the question is, what's the extent of that relationship?

[00:14:29] Speaker 03:
And in the discovery that you're expecting to see, you don't know.

[00:14:33] Speaker 03:
You're looking for some type of consent form signed by parents,

[00:14:38] Speaker 03:
Exactly.

[00:14:40] Speaker 02:
For example, and this is in the terms.

[00:14:43] Speaker 02:
In the terms, IXL encourages schools to let parents know that their students will be using IXL learning services.

[00:14:52] Speaker 02:
If that's the case, Your Honor, and that actually was there, then there could be more basis as to what the school did, what it told parents.

[00:14:59] Speaker 02:
Would it agree to parent-specific conversations?

[00:15:01] Speaker 03:
But at this point, you don't have any expectation of any type of discovery.

[00:15:04] Speaker 03:
You're just basically wanting to get to the next step to see what's there.

[00:15:07] Speaker 01:
That's exactly right, Your Honor.

[00:15:09] Speaker 01:
But I mean, I suppose that this cuts on multiple issues.

[00:15:15] Speaker 01:
You could have, but you didn't request discovery, right?

[00:15:18] Speaker 01:
We did request discovery, Your Honor.

[00:15:20] Speaker 01:
In what?

[00:15:21] Speaker 01:
Other than during oral argument, did you ever request discovery?

[00:15:25] Speaker 02:
No, in the reply brief, Your Honor, and I think it's that page

[00:15:30] Speaker 02:
It's at ER 75.

[00:15:33] Speaker 02:
We note specifically that your, and this was your honor's opinion in Knappke, right, that discovery is appropriate here, that there are issues of fact here that should be resolved by discovery.

[00:15:44] Speaker 01:
But you could have, prior to that, filed a request for production of documents, interrogatories or admissions, right?

[00:15:54] Speaker 01:
Was that somehow prohibited?

[00:15:56] Speaker 02:
No, it was not prohibited, your honor.

[00:15:57] Speaker 02:
But again, under your honor's opinion in Knappke,

[00:16:00] Speaker 02:
nothing required in that case the people connected with the defendant to seek discovery first and the district court never found or could it have that it was wave taking of discovery.

[00:16:10] Speaker 02:
We're on all fours with that issue here, right?

[00:16:13] Speaker 02:
Where the issues arose where discovery would be, we've looked at those and what the district court essentially said is those are issues that are not

[00:16:19] Speaker 02:
there's not enough facts to make those determinations on.

[00:16:21] Speaker 02:
So we're in the same posture as Knappke, where we filed a motion to compel arbitration, it was denied.

[00:16:27] Speaker 02:
And as the court said in that case, a motion to compel arbitration is akin to a motion to dismiss, followed by optional discovery before summary judgment if the motion's denied.

[00:16:36] Speaker 03:
So let me make sure I understand.

[00:16:37] Speaker 03:
Procedurally, they'd filed a complaint, and then you filed a motion to compel.

[00:16:41] Speaker 03:
And in the reply brief, there was a suggestion of discovery.

[00:16:44] Speaker 03:
Had the court set any type of scheduling order at that point?

[00:16:48] Speaker 02:
No.

[00:16:49] Speaker 02:
Not on discovery art.

[00:16:50] Speaker 02:
But I want to just pivot you back, Your Honor, to the very basic premise that there's an easy way to, those issues are complicated and I understand how they can be complicated and a little tough to wrap your head around.

[00:17:01] Speaker 02:
The easy question here is this.

[00:17:03] Speaker 02:
The plaintiffs incorporated the terms of service themselves into their complaint.

[00:17:08] Speaker 02:
You might ask yourself why.

[00:17:09] Speaker 02:
And I will tell you exactly why.

[00:17:11] Speaker 02:
Because the plaintiffs, all Kansas residents, are bringing claims under California law.

[00:17:17] Speaker 02:
They didn't incorporate the terms because they thought it was fun.

[00:17:20] Speaker 02:
They incorporated the terms because they are relying on the choice of law provision to bring claims under California law which have statutory damages.

[00:17:28] Speaker 02:
That's the purpose.

[00:17:29] Speaker 02:
It wasn't accidental.

[00:17:30] Speaker 02:
It was intentional.

[00:17:32] Speaker 02:
And it's very clear from the complaint that the terms of service are part of the basis for why California law even applies to this case at all.

[00:17:41] Speaker 02:
And so this was a situation where

[00:17:43] Speaker 02:
They incorporated the terms of service.

[00:17:45] Speaker 02:
They knew they existed.

[00:17:47] Speaker 02:
And so the only question then under 1589 is whether or not it was voluntary.

[00:17:52] Speaker 02:
And there's where the district court made an error.

[00:17:54] Speaker 02:
The district court flipped it.

[00:17:56] Speaker 02:
They flipped the burden and put it on IXL to come forward with evidence that it's a voluntariness.

[00:18:02] Speaker 02:
That was the wrong standard.

[00:18:03] Speaker 02:
And so what I'd submit to you, Your Honors, is the easy way to determine this case is to say, yes, under 1589, they knew or should have known of the terms of service.

[00:18:13] Speaker 02:
They assented by demonstration of conduct.

[00:18:15] Speaker 02:
They accepted a benefit.

[00:18:17] Speaker 02:
None of those are in dispute.

[00:18:19] Speaker 02:
The only dispute is as to voluntariness.

[00:18:20] Speaker 02:
And so, Judge Bennett, as you suggested, an entirely fair result would be to send this back to the district court on that issue and vacate the opinion and say, we're going to remand with instructions to the district court to entertain discovery on the issue of voluntariness.

[00:18:35] Speaker 01:
Am I correct?

[00:18:36] Speaker 01:
that on the voluntariness issue there is no definitive statement by the California Supreme Court and neither party in their briefing has asked for certification.

[00:18:45] Speaker 01:
Correct John.

[00:18:46] Speaker 01:
Thank you.

[00:18:47] Speaker 03:
All right I know you wanted to save a little bit of time.

[00:18:49] Speaker 02:
I will.

[00:18:50] Speaker 02:
Thank you Your Honors.

[00:19:13] Speaker 00:
Good morning, Your Honors.

[00:19:14] Speaker 00:
May it please the Court, I'm Julie Liddell here on behalf of the plaintiffs.

[00:19:19] Speaker 00:
Before I address the arguments raised both today and in the briefing, I'd like to address briefly two preliminary issues that are dispositive of this appeal.

[00:19:32] Speaker 00:
First, there is no evidence in the record of the terms of service that my clients purportedly saw.

[00:19:38] Speaker 00:
Ixl produced only a copy

[00:19:41] Speaker 00:
of its 2018 terms of service, but it admits that those were not the terms in effect at the time my clients filed their complaint.

[00:19:50] Speaker 00:
We therefore have no evidence of what those terms were, and as Judge Bennett has pointed out, the law is well established in California and in this court that

[00:20:00] Speaker 00:
courts must interpret the meaning of arbitration clauses in connection with the rest of the agreement and not detached portions thereof.

[00:20:07] Speaker 00:
Here, there's no agreement to interpret because IXL failed to produce it.

[00:20:12] Speaker 00:
Second, even assuming, as I think we have,

[00:20:16] Speaker 00:
that the 2018 terms are sufficient evidence of the terms that my clients purportedly saw.

[00:20:21] Speaker 00:
When read as a whole, as they must be, it's clear that they do not contemplate a contract between IXL and parents of students who use IXL for school.

[00:20:32] Speaker 00:
Instead, for school accounts, the terms plainly state that IXL's contract is with schools, not parents.

[00:20:40] Speaker 00:
So in other words, IXL did not even offer terms that my clients could have theoretically accepted under 1589 or otherwise.

[00:20:51] Speaker 00:
And these two issues alone obviate the need for additional analysis.

[00:20:57] Speaker 01:
Where do the terms of service clearly spell out who the parties are?

[00:21:03] Speaker 00:
Sure, Your Honor.

[00:21:04] Speaker 00:
So you made the point of making this distinction between you and the parties.

[00:21:10] Speaker 00:
And I think the answer is that actually they can be the same.

[00:21:14] Speaker 00:
But the key point is that who that person is, is determined at the time that the account is created, not at some later time.

[00:21:24] Speaker 00:
And if you look at the, it's the appellate record terms of service at page 135, section four, IXL lays out the different types of accounts that they offer.

[00:21:36] Speaker 00:
One is a family account.

[00:21:39] Speaker 00:
that is opened by parents for use by their children.

[00:21:42] Speaker 00:
The other, and they break them out into two different types, classroom and site, those are both school accounts that are opened by teachers, principals, school personnel for use by students.

[00:21:57] Speaker 00:
And the agreement makes very clear that they contain two separate non-overlapping sets of terms

[00:22:05] Speaker 00:
one that governs school accounts and one that governs family accounts.

[00:22:10] Speaker 00:
Nothing in these terms contemplate some sort of conversion from a contract with schools of students using school accounts to a contract with parents

[00:22:22] Speaker 00:
just because they happen to see the terms of service.

[00:22:25] Speaker 00:
That is an unworkable interpretation of their own terms of service.

[00:22:30] Speaker 01:
Why would it, let's assume hypothetically, assume hypothetically that on involuntariness you had the burden of proof and the district court was wrong, just hypothetically.

[00:22:41] Speaker 01:
and assume hypothetically that there is evidence that the plaintiffs used the services after they had received the terms of service.

[00:22:58] Speaker 01:
Why would it be at that point in some way improper to find that the parents are bound by the arbitration provision if you have the burden of showing involuntariness and you can't show it?

[00:23:19] Speaker 00:
Sure.

[00:23:21] Speaker 00:
So I would start just in answer to your question.

[00:23:24] Speaker 00:
I think 1589, again, reading as we must, the statute as it's written, giving effect to every word, the second word in this 37-word statute is voluntary.

[00:23:38] Speaker 00:
And it is a basic canon of construction that's codified in California law and has been observed many times by this court that we have to give effect to those words.

[00:23:49] Speaker 00:
And so there is nothing in the statute, no canon of construction, no case law that would suggest that you can just ignore that word.

[00:23:59] Speaker 00:
And essentially what they ask you to do is ignore that word and instead conflate it with statutory defenses to contractual enforcement that are set out in other places in the California code.

[00:24:12] Speaker 00:
But in the cases that they cite, in fact, all deal with those other types of statutory defenses as enumerated in 1567, whether it's duress, mistake, fraud, rescission.

[00:24:25] Speaker 00:
Those cases all, there was no dispute that a contract existed.

[00:24:30] Speaker 00:
The question was, was there a statutory defense that

[00:24:35] Speaker 00:
precluded enforcement of which the party resisting the contract bore the burden of proof.

[00:24:43] Speaker 01:
But doesn't that part of your argument go to they had the burden?

[00:24:49] Speaker 00:
Right.

[00:24:49] Speaker 01:
Okay.

[00:24:50] Speaker 01:
But my hypothetical, which may not be in any way the direction the panel's going on, is... Assuming we have the burden.

[00:24:58] Speaker 01:
Assuming you have the burden, why shouldn't we send it back for discovery?

[00:25:04] Speaker 00:
So there are, and earlier this court was talking about things in terms of waterfalls and I actually think that's kind of a helpful metaphor here, which is before we can even decide the issue of voluntariness in terms that would render it dispositive of this appeal, there are several other grounds on which the district court could affirm this, this court could affirm the district court's order.

[00:25:31] Speaker 00:
Number one is the fact that

[00:25:33] Speaker 00:
As I've said, there's no evidence of the terms that my clients actually saw.

[00:25:37] Speaker 00:
Number two, we have the fact that assuming that the 2018 terms of service were an accurate depiction of whatever terms of service my clients saw, that they do not contemplate a contract with parents such that it would be impossible for any parent to unilaterally impose upon IXL a contract with IXL

[00:26:00] Speaker 00:
just because their child used a school account for school.

[00:26:05] Speaker 00:
Number three is that even assuming that the 2018 terms govern, we have no evidence on the record of actual or constructive notice.

[00:26:18] Speaker 00:
The argument that they make is essentially one of constructive notice, that plaintiffs are held to know

[00:26:25] Speaker 00:
It's imputed knowledge, all of the allegations in the complaint.

[00:26:28] Speaker 03:
I think we're aware of the different levels.

[00:26:31] Speaker 03:
Getting down to the level of voluntariness, there is a suggestion of a remand if we need to get to that level for discovery, either on the voluntariness question or council suggested, maybe even on the

[00:26:44] Speaker 03:
the agency relationship question.

[00:26:47] Speaker 03:
So what do you think of the suggestion to remand for discovery?

[00:26:50] Speaker 00:
Remand is not permitted in this case.

[00:26:53] Speaker 00:
Remand, especially for purposes of reopening the evidence, are highly disfavored.

[00:26:58] Speaker 00:
And it's only permitted under, I think, as the case law says, extraordinary circumstances that are not presented in this case.

[00:27:07] Speaker 00:
Here, what we have is a, ISL's wholly, their fatal failure

[00:27:13] Speaker 00:
to produce evidence that they were provided, they were required to produce in support of their motion.

[00:27:20] Speaker 00:
IXL did not even adduce evidence that was in its possession, the contracts, their own terms of service that either the school or my clients purportedly saw, or in the customer's possession.

[00:27:34] Speaker 00:
They produced no evidence from the school that might show that the school could, was authorized to serve as my client's agent.

[00:27:42] Speaker 00:
nor did it even seek discovery.

[00:27:45] Speaker 00:
on the elements of 1589 or on the existence of an agency relationship itself.

[00:27:52] Speaker 00:
They only requested discovery on the scope of an agency relationship that the district court found did not exist.

[00:28:03] Speaker 00:
And so it was their choice to rely only on the 2018 terms of service and to adduce no evidence as was their burden to prove a contract under 1589

[00:28:15] Speaker 00:
besides simply relying on the complaint.

[00:28:20] Speaker 00:
And under, I mean, as I believe Judge Nguyen said, there is certainly no remand that is permitted to allow ISL to produce not any specific evidence that they have cited or evidence that's newly available, but rather just to see what's there.

[00:28:35] Speaker 00:
The law does not permit reopening of evidence after a total failure of proof without even

[00:28:43] Speaker 00:
a baseline level of diligence exercised to permit a phishing expedition to see if possibly there is evidence that supports their motion.

[00:29:03] Speaker 00:
So as to my friend's consent by use argument, again, assuming that the 2018 terms are an accurate depiction of the terms

[00:29:13] Speaker 00:
that were in effect at the time the suit was filed, there is no evidence in the record that my client had notice.

[00:29:20] Speaker 00:
And so again, even assuming that the law that imputes knowledge of allegations to a plaintiff in the complaint, that law, there is no law that extends that principle, that constructive notice principle to all

[00:29:37] Speaker 00:
of websites that are hyperlinked in complaints, but even assuming it does extend to hyperlinks, that at best proves constructive notice.

[00:29:48] Speaker 00:
And I think this is actually where the Berman line of cases are helpful.

[00:29:53] Speaker 00:
Even though Berman does not expressly, Berman and its progeny do not discuss 1589, what I read those cases as is an application

[00:30:05] Speaker 00:
and expansion of 1589 specific to this context when you're talking about arbitration clauses set out in online terms of service that essentially the Berman cases supply the analytical and evidentiary framework for deciding whether a party both has notice and has manifested assent.

[00:30:26] Speaker 01:
Your complaint repeatedly mentions the terms of service, yes?

[00:30:32] Speaker 00:
Correct.

[00:30:35] Speaker 00:
But they only mention terms of service insofar as to say that my clients reject those terms of service, that my clients haven't consented to those terms of service.

[00:30:46] Speaker 00:
So we even, again, before we get to 1589, we have to grapple with the, I think what the case is called, Horn Book Law, that an express rejection of proposed terms terminates the offer that can't be unilaterally revived later.

[00:31:02] Speaker 00:
And here, the filing of the complaint

[00:31:04] Speaker 00:
can only be construed as an unequivocal express rejection of IXL's terms, both in content and in the fact that they filed the complaint rather than initiating arbitration.

[00:31:16] Speaker 00:
And so before we look at 1589 and whether they could have accepted a benefit and created a contract, we have to deal with the fact that the law is very clear.

[00:31:26] Speaker 00:
This is going back to the restatement common law codified in California law that a rejection of the terms terminates the offer.

[00:31:40] Speaker 00:
So assuming that my client's unequivocal rejection of the terms didn't terminate the offer, and that my clients could have unilaterally revived them sometime thereafter, ISL has failed to prove that my clients agreed to those terms under 1589.

[00:31:54] Speaker 00:
And as I said, I do believe that the burden of proving voluntariness, when a party seeks to prove the existence of a contract in the first instance, voluntariness is their burden.

[00:32:08] Speaker 00:
But beyond that, there is no evidence.

[00:32:10] Speaker 00:
IXL has failed to prove other elements that my clients accepted a benefit.

[00:32:15] Speaker 03:
Even if we reject your argument and find that that voluntariness is your burden, you would still take the position that you don't want any further discovery on that?

[00:32:23] Speaker 00:
That's correct.

[00:32:24] Speaker 00:
I would say that even if they had proven or if it wasn't their burden to prove voluntariness in the first instance, they still failed to show that by failing

[00:32:35] Speaker 00:
to prevent their children from using IXL, their school accounts at school, that the parents have ascended to, in the parlance of 1589, accepted a benefit of the transaction, that the idea that 1589

[00:32:55] Speaker 00:
when it uses the word transaction contemplates children going to school, I don't think that's what the legislature had in mind.

[00:33:03] Speaker 01:
But the whole basis of your complaint or a large part of the basis of your complaint is the use of these services by your clients and the class, right?

[00:33:13] Speaker 00:
Correct.

[00:33:15] Speaker 00:
And so we don't dispute that our clients use IXL school accounts, but whether that constitutes

[00:33:24] Speaker 00:
a benefit that in using, whether the children using it or the parents preventing them from using their school accounts, constitutes specifically a voluntary acceptance of benefits of the transaction.

[00:33:38] Speaker 00:
Those words are very specific.

[00:33:41] Speaker 00:
use of a product and a vacuum, its acceptance of benefits in a transaction.

[00:33:45] Speaker 01:
Part of your argument to the district court was our kids have to go to school.

[00:33:50] Speaker 01:
Correct.

[00:33:50] Speaker 01:
And so how could our use of this be voluntary?

[00:33:55] Speaker 00:
That's correct, your honor.

[00:33:56] Speaker 01:
And that was basically your argument.

[00:34:00] Speaker 00:
That's right.

[00:34:01] Speaker 00:
And to the extent that IXL relies exclusively on the complaint.

[00:34:04] Speaker 00:
Going to school necessarily involves the use

[00:34:07] Speaker 00:
of IXL service?

[00:34:09] Speaker 00:
On these facts, that's right, Your Honor, that in the context of compulsory education, that whether there was something my clients could have done to prevent their children from using their school accounts is really beside the point.

[00:34:25] Speaker 00:
The point is that, certainly, if IXL wanted to produce evidence of voluntariness, it was free to do so.

[00:34:33] Speaker 00:
For example, it could have

[00:34:35] Speaker 00:
contacted its customer and said, would you please provide an affidavit about your school's use of IXL?

[00:34:40] Speaker 01:
And if the district court is right that they had the burden, then that's a compelling argument.

[00:34:46] Speaker 00:
Correct.

[00:34:51] Speaker 00:
I believe one other point that I did want to make just on the COPPA arguments

[00:34:57] Speaker 00:
While there's much to say on that argument, I do believe that the FTC has soundly refuted any, to the extent that its guidance could be interpreted, the FTC has refuted their interpretation.

[00:35:10] Speaker 00:
But I do want to highlight the fact that COPPA, unlike section 1589, COPPA is not a contract formation statute.

[00:35:19] Speaker 00:
Nothing in COPPA contemplates contracts.

[00:35:22] Speaker 00:
It is a consent in tort, not in contract.

[00:35:26] Speaker 00:
And so in that sense, before we even get to whether it applies to schools or contemplates agency, there's nothing in COPPA that suggests that even as to parents, if a internet provider meets all of the elements, that they have a contract with parents.

[00:35:43] Speaker 00:
Instead, what it does is sets out the elements of consent to otherwise torsious conduct and consent that is, by the terms of COPPA, always revocable.

[00:35:56] Speaker 00:
And with that, I will cede my time unless the court has additional questions.

[00:36:03] Speaker 00:
Thank you, counsel.

[00:36:03] Speaker 03:
Thank you.

[00:36:22] Speaker 02:
I just have a couple points, your honor.

[00:36:24] Speaker 02:
Your Honour is right.

[00:36:26] Speaker 02:
The issue of voluntariness is the plaintiff's burden, and we cited cases, both Mashpee, Saheli, Dovey Steel, all make clear that the party who is trying to repudiate the existence of a contract for undue burden, duress, those all fall on the plaintiff.

[00:36:45] Speaker 02:
So if there's no more discovery to be had, and I

[00:36:49] Speaker 02:
then the issue is pretty clear.

[00:36:51] Speaker 02:
If the plaintiffs don't want any more discovery and the burden falls to the plaintiffs, they've provided no discovery.

[00:36:56] Speaker 02:
It dissolves.

[00:36:58] Speaker 02:
And we have to follow California contract law principles on this one, because as Your Honors know, you can't insert any additional terms that impede the ability to go forward on arbitration.

[00:37:07] Speaker 02:
So it has nothing to do with anything other than what does California law say as to where the burden is.

[00:37:14] Speaker 02:
If the burden is properly on the plaintiffs, they have to come forth with evidence.

[00:37:18] Speaker 02:
The evidence in this case of the terms of service are what IXL supplied.

[00:37:23] Speaker 02:
They supplied terms of service and said that the 2018 terms of service, part and partial, are the same ones that have existed since that period of time.

[00:37:31] Speaker 02:
This case doesn't go back before 2018.

[00:37:33] Speaker 02:
There's no allegations that they accessed it before 2018.

[00:37:36] Speaker 02:
So those are the terms.

[00:37:38] Speaker 02:
The issue is not what the terms are.

[00:37:42] Speaker 02:
There's no dispute at the district court level that those were the applicable terms for this court's consideration.

[00:37:48] Speaker 02:
If that's an issue that they want to dispute that should have been taken up at the district court, it wasn't.

[00:37:53] Speaker 02:
And all they have to do is provide some evidence, anything saying, we didn't agree to those terms of service.

[00:38:00] Speaker 02:
We didn't see those.

[00:38:01] Speaker 02:
The plaintiffs offered nothing.

[00:38:03] Speaker 02:
It's because of the posture of the case, that's why we're saying, Your Honor, send the case back for discovery.

[00:38:09] Speaker 02:
Let there be further fact development before Judge Lin to determine whether or not what the facts actually are.

[00:38:15] Speaker 02:
And this notion that you can't remand and order more discovery is just not true.

[00:38:20] Speaker 02:
Court after court after court in this circuit has repeatedly remanded cases where there are questions of fact around arbitration and whether the ad agreement exists, remanded them to the district court for further findings.

[00:38:33] Speaker 02:
In fact, that's exactly what you said, Your Honor, that the courts can do in Kenapki, where you said going back for discovery after the motion is denied is entirely appropriate.

[00:38:44] Speaker 02:
Because at that point, you can ask for discovery and go to summary judgment.

[00:38:48] Speaker 02:
And if that can't be resolved in summary judging, you can have a hearing before the district court, so-called mini trial, to resolve those factual disputes and find out if an agreement actually exists.

[00:38:58] Speaker 02:
And then the questions for arbitrability can be decided.

[00:39:01] Speaker 02:
That's the path the court should go forward here, is the terms of the agreement are expressly in the complaint over and over again.

[00:39:09] Speaker 02:
They agreed to accept that benefit.

[00:39:11] Speaker 02:
There's no question of that.

[00:39:12] Speaker 02:
That is the basis of their complaint.

[00:39:14] Speaker 02:
The only question is voluntariness.

[00:39:16] Speaker 02:
And Your Honor, I submit,

[00:39:17] Speaker 02:
If the plaintiffs don't want any more discovery on that, then reversal is the only option here.

[00:39:22] Speaker 02:
If the plaintiffs want more discovery or willing to have more discovery, then the option here is send us back for discovery and the question of voluntariness.

[00:39:29] Speaker 03:
All right.

[00:39:30] Speaker 03:
Thank you very much, counsel, for both sides for your argument this morning.

[00:39:33] Speaker 03:
The matter is submitted and we'll issue a decision in due course.

[00:39:36] Speaker 03:
And that concludes this morning's argument calendar.

[00:39:39] Speaker 03:
We're in recess until tomorrow.