Knutson v. Sirius XM Radio

An individual cannot assent to an arbitration provision in a contract when he or she is unaware that he or she is entering a contract at all.

In 2011, Erik Knutson (“Knutson”) bought a new car that came with a 90-day free trial subscription to Sirius XM Satellite radio (“Sirius”). About a month later, he received a “Welcome Kit” from Sirius that contained a customer agreement. Knutson claims that during his trial period he received several phone calls on his cell phone from Sirius. Knutson claims that the calls were “unauthorized and unsolicited”, and were therefore in violation of the Federal Telephone Consumer Protection Act. Knutson brought a class action suit against Sirius. Sirius responded by attempting to compel arbitration as per the Customer Agreement’s arbitration clause. Knutson claimed that the Customer Agreement was not binding due to a lack of mutual assent of the terms and because it was an unconscionable contract of adhesion. The district court found that the arbitration clause was enforceable and granted the motion to compel arbitration. The Ninth Circuit began its analysis by explaining that an offeree is not bound by contractual provisions when he or she was unaware of their meaning. The panel determined that a reasonable person in a similar situation would not be expected to understand that purchasing a vehicle could also bind him or her to a separate radio contract. The panel concludes that Knutson could not have assented to the arbitration provisions because he was unaware that he was entering into a contract with Sirius at all. The panel looked to many factors to make their decision, including; the fact that Knutson did not enroll as a radio subscriber; Knutson did not provide any personal information to Sirius; Knutson never indicated that he had read the terms of the Customer Agreement; and Knutson never pay Sirius at any time. REVERSED AND REMANDED.