Plaintiffs Jim Rose and Anita Gian purchased Mercedes-Benz vehicles equipped with 'mbrace,' a subscription-based wireless communication system. When 3G technology became obsolete, the plaintiffs sought free replacements from the dealership but were denied. They subsequently filed a class action lawsuit alleging breach of warranty under federal and state law. In response, Mercedes-Benz moved to compel arbitration under the Federal Arbitration Act, citing the mbrace Terms of Service which contained a mandatory arbitration provision. The district court granted the motion and dismissed the case without prejudice. The plaintiffs appealed, arguing they never agreed to arbitrate their claims.
The Seventh Circuit reviewed the case under Illinois law, which uses an objective approach to determine contract formation. The court asked whether a reasonable person would have realized they were assenting to the terms. The mbrace Terms of Service explicitly stated that a subscriber agrees to the terms by speaking with a customer service representative and confirming the subscription. The company's supervisor testified that representatives inform callers of the terms and direct them to the Agreement before activation. The court distinguished this case from prior decisions where notice was deemed insufficient, noting that here, the plaintiffs received notice prior to commencing their subscriptions. The plaintiffs argued they did not recall being informed of the Agreement. However, the court held that a general denial of recollection is insufficient to rebut the presumption of notice created by the company's detailed protocol. The court emphasized that a party cannot avoid arbitration by generally denying facts; they must identify specific evidence demonstrating a material factual dispute. Since the plaintiffs failed to provide such evidence, the court found that their conduct of subscribing and paying for the service constituted acceptance of the arbitration agreement.
The plaintiffs' class action lawsuit is dismissed without prejudice, meaning they must resolve their dispute through independent arbitration rather than in court. The decision reinforces that in consumer contracts, active participation in a service after being informed of terms can constitute binding assent to arbitration, even if the consumer does not explicitly recall the specific moment of notification. The ruling leaves open the question of what specific evidence is required to rebut the presumption of notice in similar contexts.
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