A federal court in Illinois held that an arbitration agreement found in the packaging of an American Express gift card was unenforceable because the consumer only agreed to the terms disclosed at point of sale, and because he was not made aware of an opportunity to return the card.
In Kaufman v. American Exp. Travel Related Services Co., Inc., No. 07 C 1707, 2008 WL 687224 (N.D. Ill. Mar. 07, 2008), Saul Kaufman purchased an American Express gift card. A package insert contained additional terms and conditions, including an arbitration agreement at the end of five pages of six-point typeface.
In addressing whether the contract between the parties included the arbitration agreement, the Court agreed with Kaufman that it did not.
First, the Court "question[ed] whether effective notice [of the arbitration agreement] was provided to Kaufman, nothwithstanding American Express's facial compliance with notice requirements."
Second, even though Kaufman had used the card, he did not have a "meaningful opportunity to reject" the purchase of the gift card after he read the insert, distinguishing this case from ProCD and Hill. See ProCD v. Zeidenberg, 86 F.3d 1447 (7th Cir. 1996); Hill v. Gateway 2000, Inc., 105 F.3d 1147 (7th Cir. 1997).
The Court rejected American Express's contention that Kaufman was bound by the agreement because he didn't try to return the gift card.
Kaufman was not made aware of any chance to return the gift card, and the Court refused to require the consumer to "figure out whether he may return a gift card and obtain a refund in the absence of a single sentence in the agreement information him that this was even an option."
Therefore, the Court concluded that a contract was formed at the point of sale and did not include the enclosed arbitration agreement.
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