Bergenstock v. legalzoom.com, Inc.

Bergenstock v. LegalZoom.Com, Inc., 2015 NCBC 63.

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
COUNTY OF WAKE 13 CVS 15686

KELLY BERGENSTOCK; CHARLES )
FRANCIS JONES, JR.; BEACON )
HOUSE USA INC.; WILLIAM )
KENNETH BAKER, as Trustee of the )
Cathryn Matthews Braly Revocable )
Living Trust; NITA BRALY BAKER; )
WARREN KIMBERLY BRALY; )
JOSEPH McDOWELL BRALY, JR.; )
BRIAN DAVID BRALY; CATHRYN )
MICHELLE BRALY; MADISON )
MATTHEWS; JEFFREY MATTHEWS )
BAKER; MARA KATHRYN BAKER; )
and SULLIVAN McDOWELL ELLIS, )
a Minor, All as Beneficiaries of the ) ORDER & OPINION
Last Will and Testament of Cathryn )
Matthews Braly, on Behalf of )
Themselves and on Behalf of All )
Others Similarly Situated, )
)
Plaintiffs, )
)
v. )
)
LEGALZOOM.COM, INC., )
)
Defendant. )
)

{1} THIS MATTER is before the Court on Legalzoom.com, Inc.’s Motion to
Compel Arbitration of Plaintiff Kelly Bergenstock’s Claims and LegalZoom.com,
Inc.’s Motion to Compel Arbitration of Newly-Added Plaintiffs’ Claims (“Baker
Motion”) (collectively, “Motions”). For reasons explained below, the Motions are
GRANTED, and the litigation is stayed pending arbitration.

Spilman Thomas & Battle, PLLC by Nathan B. Atkinson and Margaret C.
Coppley for Plaintiffs.
Carlton Law, PLLC by Alfred P. Carlton, Jr., and Nexsen Pruet, PLLC by R.
Daniel Boyce for Defendant.

Gale, Chief Judge.

I. THE PARTIES

{2} Plaintiff Kelly Bergenstock (“Bergenstock”) is an individual that
resides in Kill Devil Hills, North Carolina.
{3} Plaintiff William Kenneth Baker (“Baker”) is trustee of the Cathryn
Matthews Braly Revocable Living Trust (“Braly Trust”), and a resident of Delaware.
{4} Nita Braly Baker, Warren Kimberly Braly, Joseph McDowell Braly,
Jr., Brian David Braly, Cathryn Michelle Braly, Madison Matthews, Jeffrey
Matthews Baker, Mara Kathryn Baker, and Sullivan McDowell Ellis (“Braly
Beneficiaries”) are beneficiaries of the Last Will and Testament of Cathryn
Matthews Braly (“Braly Will”). All Braly Beneficiaries reside outside of North
Carolina.
{5} Cathyn Matthews Braly (“Braly”) is a nonparty who executed the
Braly Will and Braly Trust, and a Certification of Trust on January 13, 2014. On
January 25, 2014, Braly died a resident of Moore County, North Carolina. The
Braly Will and Braly Trust named Baker, Braly’s son-in-law, as Executor and
substitute trustee upon Braly’s death or incapacity.
{6} Defendant LegalZoom.com, Inc. (“LegalZoom”) is a Delaware
corporation that operates a website, www.legalzoom.com. LegalZoom has offices in
Glendale, California; Mountain View, California; and Austin, Texas.

II. PROCEDURAL BACKGROUND

{7} Bergenstock, Charles Francis Jones, Jr. (“Jones”), and Beacon House
USA, Inc. (“Beacon House”) filed their original Class Action Complaint in Wake
County on December 23, 2013.
{8} On January 31, 2014, the case was designated a mandatory complex
business case and on February 5, 2014, was assigned to the undersigned.
{9} On February 14, 2014, LegalZoom moved to compel arbitration of
claims based on Bergenstock’s two purchases and to abate all claims already settled
within the settlement class of national class action approved by the California
courts, which included one of Bergenstock’s purchases.
{10} On July 9, 2014, Plaintiffs filed their First Amended Class Action
Complaint, adding Baker and the Braly Beneficiaries as plaintiffs. Plaintiffs seek
to represent the following proposed class:
All persons or entities within the State of North Carolina that
LegalZoom charged and/or collected fees for legal services and/or
document preparation. The Class does not include any persons or
entities that have a legally binding arbitration provision in their
contract with LegalZoom.
(First Am. Class Action Compl. ¶ 125.) Plaintiffs bring claims for unauthorized
practice of law (“UPL”), unjust enrichment, and unfair and deceptive trade practices
(“UDTP”).
{11} Plaintiffs seek restitution of all fees paid to LegalZoom class members,
together with treble recovery and reasonable attorneys’ fees.
{12} LegalZoom filed its Motion to Dismiss First Amended Class Action
Complaint on August 22, 2014, and the Baker Motion on September 24, 2014.
{13} By its May 15, 2015, Order & Opinion, the Court dismissed all claims
based on purchases made during the period covered by the national class
settlement, including all claims by Jones and Beacon House and those based on
Bergenstock’s first purchase.
{14} The Motions seeking to arbitrate all remaining claims are ripe for
hearing after full briefing and oral argument.

III. FACTS REGARDING AGREEMENT TO ARBITRATE

{15} The Court considers matters beyond the pleadings and looks to
competent evidence to determine whether an agreement to arbitrate was reached.
Evangelistic Outreach Ctr. v. Gen. Steel Corp., 181 N.C. App. 723, 726, 640 S.E.2d
840, 843 (2007) (requiring competent evidence in support of a valid agreement to
arbitrate); Capps v. Blondeau, 2010 NCBC LEXIS 10, at *3 n.6 (N.C. Super. Ct.
Apr. 13, 2010) (“[I]n determining the threshold issue of whether a mandatory
arbitration agreement exists, the court necessarily must sit as a finder of fact.
Accordingly, for such limited purpose, the court also may consider evidence as to
facts that are in dispute.”) (citing Slaughter v. Swicegood, 162 N.C. App. 457, 461,
591 S.E.2d 577, 580 (2004)). The Court recites the following facts relevant to the
arbitration issue, taken from the pleadings and affidavits.

A. Bergenstock’s Purchases

{16} Through LegalZoom’s website, Bergenstock purchased a “Trademark
Plus Package” on May 11, 2010, and a “Trademark Statement of Use Extension” on
August 6, 2011. (First Am. Class Action Compl. ¶¶ 86–87.)1
{17} At all relevant times, LegalZoom’s Terms of Use and Terms of Service
(collectively, “Terms”) were available on its homepage and were accessible by
hyperlinks throughout the website, and LegalZoom’s software was structured such
that a consumer must have affirmatively indicated assent to the Terms in order to
make a purchase.
{18} The checkout page at the time of Bergenstock’s second purchase
contained language declaring, “By clicking the button, I agree to the Terms of
Service and User Agreement.” (Br. Supp. Mot. Compel Arbitration Pl. Kelly
Bergenstock’s Claims (“Bergenstock Br.”) Ex. 4.) The underlining in the “Terms of
Service” and “User Agreement” indicated hyperlinks leading to the full texts of each
document on a different webpage within the LegalZoom website.
{19} The Terms of Service in effect at the time of Bergenstock’s second
purchase indicated in bold language that disputes must be resolved as described in
the LegalZoom Arbitration Agreement (“Arbitration Agreement”). (Bergenstock Br.
Ex. 2 ¶ 3.) The Arbitration Agreement began in paragraph nine of the Terms of
Service and presented in bold and capital letters: “DISPUTE RESOLUTION BY

1 LegalZoom relies only on Bergenstock’s assent to arbitration as a part of her latest purchase.
BINDING ARBITRATION.” (Bergenstock Br. Ex. 2 ¶ 9.) The Terms of Use
contained the same agreement in paragraph six, and one of the introductory
paragraphs of the Terms of Use instructed the reader to avoid use of the site if any
of the Terms of Use were not agreeable. (Bergenstock Br. Ex. 3 ¶ 6.)
{20} Under the subheading, “Please read this carefully. It affects your
rights,” the Arbitration Agreement details a list of disputes and claims that are
subject to arbitration:
 claims arising out of or relating to any aspect of the relationship
between us, whether based in contract, tort, statute, fraud,
misrepresentation, or any other legal theory;
 claims that arose before these or any prior Terms (including, but
not limited to, claims relating to advertising);
 claims that are currently the subject of purported class action
litigation in which you are not a member of a certified class; and
 claims that may arise after the termination of these Terms.

(Bergenstock Br. Ex. 2 ¶ 9, 3 ¶ 6.)
{21} Bergenstock does not allege that any inadequacy of the documents she
purchased led to losses.

B. Baker’s Purchases

{22} Between June 30, 2013, and January 11, 2014,2 Baker, using the
LegalZoom website, purchased various documents for Braly’s estate planning
including a “living trust, a living will, and a basic power of attorney.” (Mot. Compel
Arb. Newly-Added Pls.’ Claims Ex. 1 (“Hartman Aff. II”) ¶¶ 8–9; First Am. Class
Action Compl. ¶¶ 101–02.)
{23} Although there were some wording variations, LegalZoom’s Terms and
its purchase page, for the purposes of this Order & Opinion, remained substantially
unchanged between Bergenstock’s second purchase and Baker’s purchases.

2 Plaintiffs and LegalZoom disagree on the actual date of purchase, but concede that the date is not

material to the current motions. (See Br. Supp. Mot. Compel Arb. of Newly Added Pls.’ Claims 3 n.1.;
Pls.’ Resp. LegalZoom.com, Inc’s Mot. Compel Arb. Newly Added Pls. 2 n.2.)
{24} Before consummating his purchases, Baker was required to check a
box indicating agreement to LegalZoom’s Terms. The checkout page at the relevant
times contained language—in between an empty checkbox to the left and a green
button to the right—declaring, “By checking this box and clicking submit, I agree to
the Terms of Service, including the arbitration provision, and the User Agreement.”
(Hartman Aff. II, ¶¶ 17, 19, Exs. 1D, 1G.)
{25} The Arbitration Agreement began in paragraph eleven of the Terms of
Service and was captioned in bold and capital letters. (Hartman Aff. II ¶ 14, Exs.
1B, 1E.) The Terms of Use available on LegalZoom’s website contained the same
agreement in paragraph six and instructed the reader to avoid use of the site if any
of the Terms of Use were not agreeable. (Hartman Aff. II ¶ 13, Exs. 1C, 1F.)
{26} Section (a) of the Arbitration Agreement defines parties subject to the
agreement, indicating that references to “you” includes “all authorized or
unauthorized users or beneficiaries of services or products under these Terms or
any prior agreements between us.” (Hartman Aff. II, Exs. 1B, 1E (emphasis
added).)
{27} After Braly died, Baker attempted to probate the Braly Will in Moore
County, North Carolina. The Moore County Clerk of Superior Court refused to
probate the Braly Will, citing inconsistent language in the estate documents that
rendered them invalid.

IV. ANALYSIS

{28} The Court must first determine whether the agreements to arbitrate
are governed by the Federal Arbitration Act (“FAA”). When determining whether a
valid arbitration agreement exists under the terms of the FAA, “courts generally . . .
should apply ordinary state-law principles that govern the formation of contracts.”
Cold Springs Ventures, LLC v. Gilead Sciences, Inc., 2014 NCBC LEXIS 10, at *11
(N.C. Super. Ct. Mar. 26, 2014) (quoting First Options of Chi., Inc. v. Kaplan, 514
U.S. 938, 944 (1995)); see also Brown v. Centex Homes, 171 N.C. App. 741, 744, 615
S.E.2d 86, 88 (2005) (“The law of contracts governs the issue of whether an
agreement to arbitrate exists.”) In North Carolina, “determining whether a dispute
is subject to an arbitration agreement involves ‘a two-part inquiry: (1) whether the
parties had a valid agreement to arbitrate, and also (2) whether the specific dispute
falls within the substantive scope of that agreement.’” Fontana v. Se.
Anesthesiology Consultants, P.A., 221 N.C. App. 582, 588, 729 S.E.2d 80, 86 (2012)
(quoting Hobbs Staffing Servs., Inc. v. Lumbermens Mut. Cas. Co., 168 N.C. App.
223, 225, 606 S.E.2d 708, 710 (2005)). The party seeking to compel arbitration has
the burden of proving that a valid arbitration agreement exists by mutual
agreement of both parties. Slaughter, 162 N.C. App. at 461, 591 S.E.2d at 580.
{29} Thus, if the Court determines that the agreement is governed by the
FAA, the Court first evaluates whether the parties reached an agreement to
arbitrate. If so, it must inquire whether the particular claims fall within the scope
of the agreement to arbitrate.
{30} The present case involves additional issues. First, Plaintiffs assert
that, even if the parties otherwise agreed to arbitrate, as a matter of public policy,
UPL claims should not be arbitrated. As to Bergenstock’s claims, the Court must
determine whether any arbitration agreement reached in connection with her
second purchase is sufficiently broad to extend to claims related to her earlier
purchase. As to the Baker’s purchases, the Court must determine whether any
agreement reached with Baker in his individual capacity also binds Baker in his
capacity as trustee and the Braly Beneficiaries, who were not parties to that
agreement.

A. The Motions Are Governed by the FAA

{31} The FAA applies when “(a) a written arbitration agreement exists that
covers the dispute and (b) the contract containing the arbitration provision
evidences a transaction involving interstate commerce.” Capps, 2010 NCBC LEXIS
10, at *25–26 (citing Am. Home Assur. Co. v. Vecco Concrete Constr. Co. of Va., 629
F.2d 961, 963 (4th Cir. 1980)).
{32} Plaintiffs do not argue that their purchases were not in interstate
commerce, but argue that at least their UPL claims are exclusively matters of state
law falling outside the ambit of the FAA. Plaintiffs argue that the regulation of
lawyers has traditionally fallen to the states and that federal preemption cases
support their position. (See Pls.’ Resp. LegalZoom, Inc.’s Mot. Compel Arb. Newly
Added Pls. 9–10 (citing Ca. Div. of Labor Standards Enforcement v. Dillingham
Constr., N.A., Inc., 519 U.S. 316, 325 (1997); N.Y. State Conference of Blue Cross &
Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 655 (1995); Rice v. Santa Fe
Elevator Corp., 331 U.S. 218, 230 (1947)).)
{33} LegalZoom replies that FAA’s scope cannot be limited in that manner
because its enactment “withdrew the power of the states to require a judicial forum
for the resolution of claims which the contracting parties agreed to resolve by
arbitration.” (Reply Br. Supp. Mot. Compel Arb. Newly-Added Pls.’ Claims 9 (citing
Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 56 (1995)).)
LegalZoom invites the Court to follow the Arkansas Supreme Court, which rejected
a similar argument to that which Plaintiffs advance. See generally LegalZoom v.
McIlwain, 429 S.W.3d 261, 265–66 (Ark. 2013).
{34} The Supremacy Clause of the United State Constitution states that
“the Laws of the United States . . . shall be the supreme law of the land; and the
judges in every state shall be bound thereby, anything in the Constitution or laws of
any State to the contrary notwithstanding.” U.S. Const. art. VI, cl. 2. The United
States Supreme Court has stated a clear policy favoring arbitration of claims and
rejecting state efforts to except claims from arbitration. It has declared that the
FAA evinces a “liberal federal policy favoring arbitration agreements,
notwithstanding any state substantive or procedural policies to the contrary.”
Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983). A
federal statute provides that, for any contract requiring arbitration to settle a
dispute arising out of that contract, the contractual arbitration provision “shall be
valid, irrevocable, and enforceable, save upon such grounds as exist at law or in
equity for the revocation of any contract.” 9 U.S.C. § 2 (2014). The United States
Supreme Court has stated that “nothing in [§ 2] suggests an intent to preserve
state-law rules that stand as an obstacle to the accomplishment of the FAA’s
objectives,” AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740, 1748 (2011), and
has established a clear rule: “When state law prohibits outright the arbitration of a
particular type of claim, the analysis is straightforward: The conflicting rule is
displaced by the FAA.” Id. at 1747.
{35} The North Carolina legislature has authorized a private cause of action
for UPL, supplementing the regulatory authority of the courts and the State Bar.
See N.C. Gen. Stat. § 84-10.1 (2014). The statute does not, however, evidence an
intent that such claims are not subject to arbitration.
{36} In sum, the Court finds that the FAA applies and that there is no
reasoned basis to exclude UPL claims from arbitration.3

B. The Parties Agreed to Arbitrate Their Disputes

{37} The Motions raise the issue of whether the Internet-based transaction
is adequate to represent an agreement to arbitrate despite the absence of an
agreement to which the parties affixed actual written signatures.
{38} In evaluating this issue, the Court has considered a line of federal
decisions, which have analyzed both “clickwrap” or “click-through” agreements and
“browsewrap” agreements. See Nguyen v. Barnes & Noble Inc., 763 F.3d 1171,
1175–76 (9th Cir. 2014); Register.com, Inc. v. Verio, Inc., 356 F.3d 393, 428–29 (2d
Cir. 2004). The critical issue in those cases was whether the Internet-based
purchase was structured so that the purchaser necessarily had actual or
constructive notice of the terms of use which included an agreement to arbitrate.
See, e.g., Van Tassel v. United Mktg. Grp., LLC, 795 F. Supp. 2d 770, 790 (N.D. Ill.
2011) (reasoning that the determination of whether a contract is valid “depends on
whether the user has actual or constructive knowledge of a website’s terms and
conditions”).

3 The Court expresses no opinion on the State Bar’s regulatory authority over LegalZoom.

{39} In general, a clickwrap agreement requires that a user manifest assent
to certain contractual terms by “click[ing] on an ‘I agree’ box after being presented
with a list of terms and conditions of use.” Nguyen, 763 F.3d at 1175–76. Provided
that those terms and conditions are clearly presented, the “clicking through”
subjects the user to the rule that where “a benefit is offered subject to stated
conditions, and the offeree makes a decision to take the benefit with knowledge of
the terms of the offer, the taking constitutes an acceptance of the terms, which
accordingly become binding on the offeree.” Register.com, 356 F.3d at 403 (citing
Restatement (Second) of Contracts § 69(1)(a) (1981)). In contrast, in a browsewrap
agreement, the terms and conditions “are generally posted on the website via a
hyperlink at the bottom of the screen,” Nguyen, 763 F.3d at 1176, raising a question
of whether the purchaser was aware of the terms and conditions when proceeding
with the purchase. Because there is no “click-through” to express agreement to the
terms, the purchaser might proceed without visiting the webpage containing the
specific terms of the agreement or without actual or constructive knowledge of those
terms. See id. (“The defining feature of browsewrap agreements is that the user can
continue to use the website or its services without visiting the page hosting the
browsewrap agreement or even knowing that such a webpage exists.” (quoting Be
In, Inc. v. Google Inc., No. 12-CV-03373-LHK, 2013 U.S. Dist. LEXIS 147047, at *23
(N.D. Cal. Oct. 9, 2013))). In those instances, there must be separate evidence of
the purchaser’s actual or constructive knowledge of the terms regarding arbitration.
Id.
{40} The process to make a purchase using LegalZoom’s website is akin to a
clickwrap agreement, where it is clear that the user has actual or constructive
knowledge that the purchase is subject to an agreement to arbitrate because the
purchase can only proceed after acknowledging those terms. The unrebutted
evidence is that Plaintiffs were required to acknowledge assent to the Terms by
clicking a button that indicated assent next to links that would have called up
either of the Terms in written form. Bergenstock had to click an “Agree and Place
Order” button directly next to a statement that indicated that the clicking of that
button would indicate her consent to the Terms. When Baker made his purchase,
the website had been modified to include placing a checkmark in an empty box to
expressly indicate acceptance of the Terms. Both Bergenstock and Baker were
advised that they should not complete their purchase if they did not agree to the
Terms.
{41} Even so, Plaintiffs argue that LegalZoom still has not met its burden to
produce evidence of the signed agreement in an allowable form under the E-Sign
Act, which provides that, “a signature, contract, or other record relating to such
transaction may not be denied legal effect, validity, or enforceability solely because
it is in electronic form,” and a contract is not to be denied legal effect “solely because
an electronic signature was used in its formation.” 15 U.S.C. § 7001(a)(1), (2)
(2014); cf. N.C. Gen. Stat. § 66-317 (2014). “[N]otwithstanding subsection (a),” the
validity or enforceability of an electronic record or contract “may be denied if . . . not
in a form that is capable of being retained and accurately reproduced for later
reference by all parties or persons who are entitled to retain the contract or other
record.” 15 U.S.C. 7001(e); cf. N.C. Gen. Stat. § 66-318.
{42} However, neither the E-Sign Act nor the FAA require LegalZoom to
produce evidence of Plaintiffs’ actual signatures. While agreements to arbitrate
must be in writing, they do not have to be signed. Howard v. Oakwood Homes
Corp., 134 N.C. App. 116, 120, 516 S.E.2d 879, 882 (1999). The E-Sign Act
mandates that, if any law requires an original record of a transaction or contract
related to a transaction, that requirement is met by retaining an accurate record of
the information in a manner that is accessible and capable of being reproduced. See
15 U.S.C. §§ 7001(d)(1), (3) (2014); cf. N.C. Gen. Stat. § 66-322.
{43} In opposition, Plaintiffs rely heavily on two cases in which the parties
produced no signed agreement, and the courts denied the motions to compel
arbitration. In Slaughter v. Swicegood, the original signor of the agreement was
deceased, and the parties opposing arbitration introduced affidavits indicating their
lack of awareness of the arbitration agreement. 162 N.C. App. at 457, 591 S.E.2d at
577. In affirming the trial court’s refusal to find a binding arbitration agreement,
the North Carolina Court of Appeals noted that no one testified to having witnessed
the signing of the agreement; no one explained why the agreement was scanned into
the system eleven years after it was allegedly signed; and no one presented any
evidence as to “the general business practices surrounding the signing of similar
customer agreements, or whether it was the usual policy of [the opposing parties] to
require prospective clients to sign such agreements.” Id. at 462, 591 S.E.2d at 581.
In Capps v. Blondeau, the Hon. John R. Jolly refused to find a binding agreement
based on unauthenticated, “scanned and electronically stored copies and specimens”
without further evidence of an actual agreement. 2010 NCBC LEXIS 10, at *36.
{44} These two cases are inapposite because, in contrast to Slaughter and
Capps, LegalZoom here has provided unrebutted testimony that the process in place
at the time of Plaintiffs’ purchases required them to make the purchases by
simultaneously acknowledging agreement with the Terms, which included an
agreement to arbitrate. Further, LegalZoom has provided copies of the Terms,
including the agreement to arbitrate, that were in place at the time of Plaintiffs’
purchases. This evidence is the type that the court noted was missing in Slaughter,
and the lack of which prevented the agreement’s authentication in Capps.
{45} In sum, by “clicking through” under these circumstances, Bergenstock
and Baker are deemed to have signed the agreement to arbitrate. See Metro.
Regional Info. Servs., Inc. v. Am. Home Realty Network, Inc., 722 F.3d. 591, 601–
03 (4th Cir. 2013) (finding that one who clicks “yes” has made a written signature
under E-Sign Act). LegalZoom has met its burden under the FAA and E-Sign Act to
demonstrate written evidence of the agreement to arbitrate and Plaintiffs’ actual
agreement to arbitrate, and the Court finds that Bergenstock and Baker agreed to
arbitrate claims within the scope of the arbitration agreement.

C. The Arbitration Agreement Reaches Each of Plaintiffs’ Claims

{46} Plaintiffs argue that only Bergenstock’s last purchase included the
Terms on which LegalZoom relies in seeking to compel arbitration of Bergenstock’s
claims, and there is then no basis on which to require arbitration of her earlier
purchase, which did not include such terms. Plaintiffs also argue that Baker is
suing in his capacity as trustee, whereas his purchase was made in his individual
capacity, and that any agreement he made individually does not bind either Baker
as trustee or the Braly Beneficiaries, who were not signatories to any agreement to
arbitrate.
{47} The general rule in North Carolina is that if “the language of the
arbitration clause is ‘clear and unambiguous,’ [the Court] may apply the plain
meaning rule to interpret its scope.” Fontana, 221 N.C. App. at 588–89, 729 S.E.2d
at 86. However, “a party cannot be forced to submit to arbitration of any dispute
unless he has agreed to do so.” Raspet v. Buck, 147 N.C. App. 133, 136, 554 S.E.2d
676, 678 (2001) (citing AT&T Techs. v. Commc’ns Workers of Am., 475 U.S. 643
(1986)).

1. Claims Based on Bergenstock’s Earlier Purchase Are Subject to the
Agreement to Arbitrate Made as a Part of Her Subsequent Purchase

{48} The Terms of Service governing Berkenstock’s last purchase provided
that the agreement to arbitrate extends to “all disputes and claims,” including
“claims that arose before these or any prior Terms” were in effect. (Bergenstock Br.
Ex. 2 ¶ 9(a).)
{49} The Court has concluded that Bergenstock agreed to this provision.
The language is clear. As a result, the language of the agreement to arbitrate
entered as a part of Bergenstock’s last purchase extends to her claims on any prior
purchase.

2. All Claims of Baker and the Braly Beneficiaries Are Subject to Baker’s
Agreement to Arbitrate

{50} Paragraph 11 of the Terms of Service applicable to Baker’s purchase
states that “references to ‘LegalZoom,’ ‘you,’ and ‘us’ include our respective
subsidiaries, affiliates, agents, employees, predecessors in interest, successors, and
assigns, as well as all authorized or unauthorized users or beneficiaries of services
or products under these Terms or any prior agreements between us.” (Hartman Aff.
II Exs. 1B, 1E.) On its face, this language is sufficiently broad to reach Baker,
whether claiming individually or as trustee, and the Braly Beneficiaries. The
question remains whether the language, although clear, binds only signatories to
the agreement.
{51} “The obligation and entitlement to arbitrate ‘does not attach only to
one who has personally signed the written arbitration provision.’ Rather, ‘well-
established common law principles dictate that in an appropriate case a
nonsignatory can enforce, or be bound by, an arbitration provision within a contract
executed by other parties.’” Ellen v. A.C. Schultes of Md., Inc., 172 N.C. App. 317,
320, 615 S.E.2d 729, 732 (2005) (quoting Wash. Square Sec., Inc. v. Aune, 385 F.3d
432, 435 (4th Cir. 2004)). Stated otherwise, a party is not allowed simultaneously to
claim the benefit of the contract while denying the arbitration agreement contained
in that contract. See Carter v. TD Ameritrade Holding Corp., 218 N.C. App. 222,
231, 721 S.E.2d 256, 263 (2012); see also Ellen, 172 N.C. App. at 320–23, 615 S.E.2d
at 731–33.
{52} In Carter v. TD Ameritrade Holding Corp., the plaintiff investors sued
for losses in their IRA accounts. 218 N.C. App. at 223–24, 721 S.E. 2d at 258–59.
They claimed that their signatures on the IRA agreements containing the
arbitration provisions had been forged and that they had not agreed to those
provisions. Id. In reaching its decision, the court of appeals noted that, in order to
determine whether the plaintiffs were bound to the arbitration clause, its
appropriate inquiry is to “examine whether the plaintiff has asserted claims in the
underlying suit that, either literally or obliquely, assert a breach of a duty created
by the contract containing the arbitration clause.” Id. at 231, 721 S.E.2d at 263
(quoting Am. Bankers Ins. Grp. v. Long, 453 F.3d 623, 629 (4th Cir. 2006)). Having
found that the plaintiffs had clear knowledge of the existence of the IRA contracts,
the court concluded that although the complaint essentially asserted only tort
claims, those claims derived from and were dependent on duties arising from the
contracts establishing the IRAs, and as a result, the plaintiffs were estopped from
denying the arbitration agreements. Id. at 232, 721 S.E.2d. at 264. As to statutory
claims under state securities laws, the court of appeals concluded that, “[a]t the
very least, plaintiffs’ complaint ‘obliquely[] assert[s] a breach of a duty created by
the contract[s] containing the arbitration clause[s].’” Id. at 233, 721 S.E.2d at 264
(first alteration added) (quoting Long, 453 F.3d at 629). The court indicated that a
significant inquiry is whether the plaintiff would have a claim but for the existence
of the contract including the arbitration clause. See id. at 232, 721 S.E.2d at 264.
{53} In Ellen v. A.C. Schultes of Maryland, Inc., the plaintiffs, who were
shareholders of a subcontractor, asserted UDTP and tortious interference claims
arising from a course of conduct by a general contractor that included improper
sexual advances, unethical business practices, slanderous statements to the
subcontractor’s clients, and other acts that ultimately led to the damage to the
plaintiffs’ business and reputation. 172 N.C. App. at 318–19, 615 S.E.2d at 730–31.
The general contractor and subcontractor were parties to a series of contracts
containing an arbitration clause. Id. at 317–18, 615 S.E.2d at 729. The general
contractor sought to compel arbitration against the shareholders. Id. at 320, 615
S.E.2d at 729. The court refused to compel arbitration, finding that
plaintiffs are not seeking any direct benefits from the contracts
containing the relevant arbitration clause, nor are they asserting any
rights arising under the . . . contracts. Neither plaintiffs’ allegations of
unfair and deceptive trade practices nor plaintiffs’ allegations of
tortious interference depend upon the contracts containing the
arbitration clause. Both of the claims are dependent upon legal duties
imposed by North Carolina statutory or common law rather than
contract law.
Id. at 322, 615 S.E.2d at 733.
{54} Baker in his capacity as trustee and the Braly Beneficiaries urge that,
as nonsignatories, they should not be bound to any agreement to arbitrate because
they neither received a direct benefit under Baker’s purchase from LegalZoom nor
assert rights under that purchase contract. However, their harm, if any, arises
directly as a result of Baker’s purchase from LegalZoom. But for that purchase,
Plaintiffs would have no claim. As such, the Court concludes that the holding in
Carter is controlling, because “[a]t the very least, plaintiffs’ complaint ‘obliquely[]
assert[s] a breach of a duty created by the contract[s] containing the arbitration
clause[s].’” 218 N.C. App. at 233, 721 S.E.2d at 264 (first alteration added) (quoting
Long, 453 F.3d at 629).
{55} The Court concludes that the claims of Baker in his capacity as trustee
and of the Braly Beneficiaries are subject to Baker’s valid agreement to arbitrate.

V. CONCLUSION

{56} As such, the Court finds as a fact that Bergenstock and Baker agreed
to arbitrate claims arising from their purchases. The Court finds as a fact that
Bergenstock agreed that she would arbitrate claims arising from any purchase from
LegalZoom. The Court finds as a fact that the arbitration clause involved in Baker’s
purchase includes claims by Baker acting as trustee and by the Braly Beneficiaries.
{57} Based on these facts, the Court concludes that each of the claims in the
litigation are subject to arbitration and the case should be stayed pending
arbitration.
{58} Defendant’s Motions are GRANTED.

This the 23rd day of June, 2015.

/s/ James L. Gale l
James L. Gale
Chief Special Superior Court Judge
for Complex Business Cases