Sudakow v. CleanChoice Energy, Inc.

24-1988
Sudakow v. CleanChoice Energy, Inc.
United States Court of Appeals
For the Second Circuit
August Term 2024
Argued: March 21, 2025
Decided: August 27, 2025
No. 24-1988-cv
J OANNE S UDAKOW, ON BEHALF OF HERSELF
AND ALL OTHERS SIMILARLY SITUATED,
Plaintiff-Appellee,
ERIC WEINBERG, ON BEHALF OF HIMSELF
AND ALL OTHERS SIMILARLY SITUATED,
Plaintiff,
v.
C LEANC HOICE E NERGY , INC.,
Defendant-Appellant.*
Appeal from the United States District Court
for the Southern District of New York
No. 7:23-cv-9685
Philip M. Halpern, Judge.
* The Clerk of Court is respectfully directed to amend the caption
accordingly.

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Sudakow v. CleanChoice Energy, Inc.
Before: C ARNEY , PARK , and KAHN, Circuit Judges.
Joanne Sudakow contracted to purchase electricity from
CleanChoice Energy, Inc. About three weeks afterwards,
CleanChoice sent a package containing a form with new dispute-
resolution terms, including an arbitration provision, which Sudakow
did not sign. Two years later, Sudakow sued CleanChoice for breach
of contract and deceptive business practices. CleanChoice moved to
compel arbitration based on the subsequent terms. The district court
(Halpern, J.) denied the motion, finding that Sudakow did not have
notice of the arbitration provision. On appeal, CleanChoice argues
that Sudakow had inquiry notice of the subsequent terms and
implicitly assented to those terms by making service payments. We
reject both arguments. Sudakow lacked inquiry notice because
CleanChoice failed to present the arbitration provision in a clear and
conspicuous way, and a reasonable person would not have believed
that submitting payments constituted assent. The judgment of the
district court is AFFIRMED.
D. GREGORY B LANKINSHIP, Finkelstein, Blankinship, Frei-
Pearson & Garber, LLP, White Plains, NY (J. Burkett
McInturff, Jessica Hunter, Daniel J. Brenner, Wittels
McInturff Palikovic, Armonk and New York, NY, on the
brief ), for Plaintiff-Appellee.
MICHAEL D. MATTHEWS, J R . (Diane S. Wizig, Justin R.
Chapa, on the brief ), McDowell Hetherington LLP,
Houston and Arlington, TX, for Defendant-Appellant.

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Sudakow v. CleanChoice Energy, Inc.
PARK, Circuit Judge:
Joanne Sudakow contracted to purchase electricity from
CleanChoice Energy, Inc. About three weeks afterwards,
CleanChoice sent a package containing a form with new dispute-
resolution terms, including an arbitration provision, which Sudakow
did not sign. Two years later, Sudakow sued CleanChoice for breach
of contract and deceptive business practices. CleanChoice moved to
compel arbitration based on the subsequent terms. The district court
(Halpern, J.) denied the motion, finding that Sudakow did not have
notice of the arbitration provision. On appeal, CleanChoice argues
that Sudakow had inquiry notice of the subsequent terms and
implicitly assented to those terms by making service payments. We
reject both arguments. Sudakow lacked inquiry notice because
CleanChoice failed to present the arbitration provision in a clear and
conspicuous way, and a reasonable person would not have believed
that submitting payments constituted assent. The judgment of the
district court is affirmed.
I. BACKGROUND
A. Factual Background
CleanChoice is an energy company that offers customers
variable electricity rates. In September 2021, Joanne Sudakow
received a direct mailer inviting her to enroll in CleanChoice’s
program. The mailer contained two copies of a contract (the
“Enrollment Agreement”) and an enrollment authorization form (the
“Enrollment Form”).

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Sudakow v. CleanChoice Energy, Inc.
Three provisions of the Enrollment Agreement are relevant
here. First, a clause designating New York as the exclusive “[v]enue
for any lawsuit brought to enforce any term of condition of th[e]
Agreement.” App’x at 91. Second, a unilateral-modification clause
giving CleanChoice “the right to modify th[e] Agreement” in the
event of a “Regulatory Change”—defined as “a change in any law,
rule, regulation, tariff, or regulatory structure . . . which impacts any
term, condition or provision of th[e] Agreement”—so long as
CleanChoice provides “30 days’ written notice of such modification.”
Id. And third, an integration clause confirming that the “[d]ocuments
constitute the entire Agreement between Customer and
CleanChoice.” Id. Neither the Enrollment Agreement nor the
Enrollment Form contained an arbitration clause.
In October 2021, Sudakow submitted the signed Enrollment
Form, checking a box to affirm that she had “reviewed and accept[ed]
the enclosed terms and conditions.”1 App’x at 94. According to
CleanChoice’s records, her enrollment became effective on November
9, 2021.
On November 17, 2021, CleanChoice mailed Sudakow a
“Welcome Package.” It arrived in an envelope bearing Sudakow’s
address, a return address, and the words “[i]mportant information
regarding your new clean electricity subscription.” App’x at 266.
Inside the envelope were a two-page cover letter, a five-page form
(the “Subsequent Terms”), and a copy of New York State Public
Service Commission’s “[Energy Services Company] Consumers Bill
1 Although Sudakow did not sign the Enrollment Form herself, she
directed her husband—Robert Sudakow—to sign it on her behalf.

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Sudakow v. CleanChoice Energy, Inc.
of Rights.” Id. at 257-66. The cover letter welcomed Sudakow to the
program but made no mention of the enclosed Subsequent Terms.
And neither the cover letter nor the Subsequent Terms prompted
Sudakow to sign her name, which she did not do. The Subsequent
Terms provided:
[B]y signing this Agreement, You agree to initiate
electricity supply service and to begin enrollment with
CleanChoice Energy.
. . .
Complaint/Dispute Procedures
If You have any questions, concerns or complaints about
Your bill, please contact Us by calling our Customer Care
Representatives.
Dispute Resolution
The services provided by CleanChoice to Customer are
governed by the terms and conditions of this
Agreement . . . . In the event of a billing dispute or a
disagreement involving CleanChoice, contact
Us . . . . For consumer complaints that cannot be resolved
with the company, you may contact the New York
Department of Public Service.
. . .

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Sudakow v. CleanChoice Energy, Inc.
Choice of Laws
This Agreement will be governed by the laws of the state
of New York . . . . Both You and CleanChoice Energy
agree irrevocably and unconditionally to settle any
actions, complaints or disputes . . . under the rules of the
American Arbitration Association (AAA). It is further
agreed that arbitration will only be pursued on an
individual basis . . . . Venue for any arbitration brought
to enforce any term or condition of this Agreement will
lie exclusively in New York.
App’x at 260, 262, 264.
CleanChoice supplied electricity to Sudakow’s home from
December 2021 until August 2022, when Sudakow terminated her
service.
B. Procedural History
In November 2023, Sudakow filed a putative class-action
complaint, seeking injunctive relief and compensatory and statutory
damages. According to Sudakow, CleanChoice breached its contract
by charging “variable rates for electricity that were untethered from
the factors upon which the parties agreed.” App’x at 73. The
complaint alleged that CleanChoice violated New York law by
engaging in false advertising and deceptive business practices. See id.
at 75-88.
CleanChoice moved to compel arbitration. The district court
denied the motion, finding that Sudakow “did not have sufficient
notice of [the] terms and conditions or an opportunity to assent” to
the arbitration clause in the Subsequent Terms. Weinberg v.

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Sudakow v. CleanChoice Energy, Inc.
CleanChoice Energy, Inc., No. 23-CV-09685, 2024 WL 3446515, at *7
(S.D.N.Y. July 17, 2024). CleanChoice timely appealed. See 9 U.S.C.
§ 16(a)(1)(B).2
II. DISCUSSION
CleanChoice argues that the district court erred in denying its
motion to compel arbitration because Sudakow (1) had inquiry notice
of the Subsequent Terms and (2) implicitly assented to the Subsequent
Terms by continuing to pay her electrical bills. Both arguments fail.
A. Legal Standards
“On appeal, a district court’s denial of a motion to compel
arbitration is reviewed de novo. The question of whether the parties
have agreed to arbitrate is also reviewed de novo to the extent that the
district court’s conclusion was based on a legal determination, but
findings of fact, if any, bearing on this question are reviewed under
a clearly erroneous standard.” Schnabel v. Trilegiant Corp., 697 F.3d
110, 118-19 (2d Cir. 2012) (cleaned up). “[W]hen deciding motions to
compel, we . . . draw all reasonable inferences in favor of the non-
2 The district court granted the motion to compel arbitration as to
another plaintiff, Eric Weinberg, who had confirmed on a phone call with a
CleanChoice representative “that he understood that the terms and
conditions would be mailed to him.” Weinberg, 2024 WL 3446515, at *5. The
district court also granted CleanChoice’s motion to dismiss Sudakow’s
husband, who lacked Article III standing because the Enrollment
Agreement “specifically stated ‘there are no third party beneficiaries to this
Agreement’” and, in any event, “Plaintiffs [did not] argue that Mr.
Sudakow is a third-party beneficiary of the agreement.” Id. at *8 (cleaned
up).

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Sudakow v. CleanChoice Energy, Inc.
moving party.” Soliman v. Subway Franchisee Advert. Fund Tr., Ltd.,
999 F.3d 828, 835 (2d Cir. 2021) (cleaned up).
The Federal Arbitration Act of 1925 “does not require parties to
arbitrate when they have not agreed to do so.” Nicosia v. Amazon.com,
Inc., 834 F.3d 220, 229 (2d Cir. 2016) (quotation marks omitted). So “a
court must first decide whether the parties agreed to arbitrate” before
enforcing any such agreement. Zachman v. Hudson Valley Fed. Credit
Union, 49 F.4th 95, 101 (2d Cir. 2022). “Whether or not the parties have
agreed to arbitrate is a question of state contract law.” Schnabel, 697
F.3d at 119. Here, the Enrollment Agreement specifies that it is
governed by the laws of New York.
B. Inquiry Notice of the Subsequent Terms
CleanChoice first argues that Sudakow is bound by the
arbitration provision in the Subsequent Terms because she had
inquiry notice of those terms. We disagree.
“Under New York law, when an offeree does not have actual
notice of certain contract terms, he is nevertheless bound by such
terms if he is on inquiry notice of them and assents to them through
conduct that a reasonable person would understand to constitute
assent.” Davitashvili v. Grubhub Inc., 131 F.4th 109, 115-16 (2d Cir.
2025) (quotation marks omitted). “In determining whether an offeree
is on inquiry notice of contract terms, New York courts look to
whether the term was obvious and whether it was called to the
offeree’s attention.” Zachman, 49 F.4th at 102 (quotation marks
omitted). “Insofar as it turns on the reasonableness of notice, the
enforceability of a[n] . . . agreement is clearly a fact-intensive
inquiry.” Meyer v. Uber Techs., Inc., 868 F.3d 66, 76 (2d Cir. 2017).

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Sudakow v. CleanChoice Energy, Inc.
As an initial matter, the district court correctly concluded that
the Enrollment Agreement was a binding contract, effective
November 9, 2021.3 So the Subsequent Terms can bind Sudakow only
with actual or inquiry notice that they supersede the Enrollment
Agreement. CleanChoice provides no evidence of actual notice. But
“[w]here an offeree does not have actual notice of certain contract
terms, he is nevertheless bound by such terms if he is on inquiry notice
of them and assents to them through conduct that a reasonable person
would understand to constitute assent.” Starke v. SquareTrade, Inc.,
913 F.3d 279, 289 (2d Cir. 2019). We thus turn to the question of
whether Sudakow had inquiry notice of the arbitration provision.
This Court addressed inquiry notice of later-terms contracting
in Schnabel. The plaintiffs in that case enrolled in a discount club that
charged a monthly fee. After enrollment, the discount club emailed
the plaintiffs a document containing “Terms and Conditions.” See
Schnabel, 697 F.3d at 116-17. When the plaintiffs later sued over
allegedly deceptive business practices, the discount club moved to
compel arbitration on the basis that the Terms and Conditions
contained an arbitration provision. The district court denied the
motion.
3 CleanChoice asserts that the Enrollment Agreement was merely a
“marketing disclosure summarizing the proposed terms and conditions of
the electricity supply agreement.” Appellant’s Br. at 6. But that argument
is meritless. The Enrollment Agreement held itself out as an “agreement
between CleanChoice . . . and the undersigned customer.” App’x at 91.
And it contained detailed contractual provisions, including a pricing
scheme, a dispute-resolution clause, and a consumer-privacy policy. See id.
at 91-92.

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Sudakow v. CleanChoice Energy, Inc.
We affirmed. The fact that “someone has received an email,”
we explained, “does not without more establish that he or she should
know that the terms disclosed in the email relate[d] to a service in
which he or she had previously enrolled.” Schnabel, 697 F.3d at 126.
And the emailed arbitration provision at issue was “delivered after
initial enrollment” and in a way that did not “force[]” the plaintiffs
“to confront the terms while enrolling in or using the service or
maintaining their memberships.” Id. at 127. We thus concluded that
“a reasonable person would not be expected to connect an email that
[she] may not actually see until long after enrolling in a service (if
ever) with the contractual relationship . . . she may have with the
service provider.” Id.
Applying Schnabel here, we conclude that Sudakow lacked
inquiry notice of the arbitration provision. First, the later-sent
arbitration provision, like the email in Schnabel, was “temporally and
spatially decoupled” from Sudakow’s enrollment in the service.
Schnabel, 697 F.3d at 127. It arrived unannounced, weeks after
Sudakow executed her contract. And nothing in the Enrollment
Agreement itself called attention to the possibility of any such
forthcoming change. Accordingly, a reasonable person would not
have understood that the Subsequent Terms altered her contract with
CleanChoice.
Second, CleanChoice did not present the arbitration provision
in a “clear and conspicuous way.” Zachman, 49 F.4th at 102 (quotation
marks omitted). The Welcome Package arrived in a nondescript
envelope that did not identify CleanChoice as the sender. See App’x
at 266. It contained a cover letter that described the company’s focus

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Sudakow v. CleanChoice Energy, Inc.
on “reducing your carbon footprint and supporting jobs in the clean
energy industry” and did not mention the enclosed Subsequent
Terms. See id. at 257-58. And it obscured the existence of the
arbitration provision by placing it within the “Choice of Laws”—as
opposed to the “Complaint/Dispute Procedures”—section of the
Subsequent Terms.4 See id. at 262, 264. CleanChoice thus failed to
“raise[] a red flag vivid enough to cause a reasonable person to
anticipate the imposition of a legally significant alteration to the terms
and conditions.” Schnabel, 697 F.3d at 127 (cleaned up).
CleanChoice maintains that Schnabel is inapposite. In its view,
Schnabel is “a factually dissimilar e-commerce case” involving
plaintiffs who “were unaware that they had even contracted . . . until
long after they were sent an arbitration provision via email,” whereas
Sudakow received a “hard-copy contract” and “knowingly enrolled
with CleanChoice and authorized it to use the address to which it
mailed her Contract.” Appellant’s Br. at 20. But even though
Sudakow—unlike the plaintiffs in Schnabel—was aware that she had
contracted, she had no reason to expect that CleanChoice would seek
to amend their contract just weeks after it was signed. Moreover,
Schnabel did not turn on the method of delivery. The “touchstone” of
its inquiry-notice analysis—i.e., “whether reasonable people in the
position of the parties would have known about the terms”—applies
with equal force to emails and hardcopies alike. Schnabel, 697 F.3d at
4 To be sure, the location of an arbitration provision in a document is
not itself a dispositive “barrier to reasonable notice.” Meyer, 868 F.3d at 79
(quotation marks omitted). But in determining reasonable notice, courts
account for whether an arbitration provision is “conspicuous in the
context” of the document in which it appears. Soliman, 999 F.3d at 835.

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Sudakow v. CleanChoice Energy, Inc.
124; see Register.com, Inc. v. Verio, Inc., 356 F.3d 393, 403 (2d Cir. 2004)
(“While new commerce on the Internet has exposed courts to many
new situations, it has not fundamentally changed the principles of
contract.”).
To distinguish Schnabel, CleanChoice invokes “principles from
traditional contract cases.” Appellant’s Br. at 21. But those principles
confirm that CleanChoice failed to put Sudakow on inquiry notice.
The Enrollment Agreement was a complete contract “constitut[ing]
the entire Agreement between [Sudakow] and CleanChoice.” App’x
at 91. And it specified that unilateral modifications required “30 days’
written notice” and a “[r]egulatory [c]hange. . . impact[ing] any term,
condition or provision of th[e] Agreement.” Id. This provision did
not put Sudakow on notice that CleanChoice anticipated providing
different terms in less than a month—and in fact suggested the exact
opposite. So based on the Enrollment Agreement, Sudakow would
have had no reason to expect a mailing from CleanChoice containing
a superseding agreement.
Finally, CleanChoice claims that it established inquiry notice by
providing “affidavits as to its regular office mailing procedures
showing that mail containing the . . . contract was properly addressed
and delivered to the U.S. Postal Service.” Appellant’s Reply Br. at 9
(cleaned up). But New York’s mailbox rule merely creates a
presumption that papers were “received” at a party’s address. Meckel
v. Cont'l Res. Co., 758 F.2d 811, 817 (2d Cir. 1985). And “cases applying
the duty to read principle to terms delivered after a contracting
relationship has been initiated do not nullify the requirement that a
consumer be on notice of the existence of a term before he or she can

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Sudakow v. CleanChoice Energy, Inc.
be legally held to have assented to it.” Schnabel, 697 F.3d at 124
(quotation marks omitted). Here, CleanChoice does not show any
“basis for imputing to [Sudakow] knowledge” of the Subsequent
Terms. Register.com, 356 F.3d at 402.
C. Assent to the Subsequent Terms
CleanChoice next argues that Sudakow “implicitly assented” to
the arbitration provision. Appellant’s Br. at 40. We need not consider
that argument because Sudakow lacked inquiry notice. But even if
Sudakow had inquiry notice, CleanChoice’s implicit-assent theory
fails.
“The manifestation of mutual assent must be sufficiently
definite to assure that the parties are truly in agreement with respect
to all material terms.” Starke, 913 F.3d at 289. “[A]cceptance need not
be express, but where it is not, there must be evidence that the offeree
knew or should have known of the terms and understood that
acceptance of the benefit would be construed by the offeror as an
agreement to be bound.” Schnabel, 697 F.3d at 128.
Here, the Subsequent Terms specified that “by signing this
Agreement, You agree to initiate electricity supply service and to
begin enrollment with CleanChoice Energy.” App’x at 260
(emphasis added). Moreover, the Subsequent Terms referred to “the
undersigned customer.” Id. (emphasis added). Such language would
leave a reasonable consumer to conclude that assent can be
manifested only through a signature.
Still, CleanChoice argues that Sudakow assented to the
Subsequent Terms by making “monthly payments in response to

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Sudakow v. CleanChoice Energy, Inc.
receiving a monthly bill.” Appellant’s Br. at 37. But those payments
cannot be mistaken for assent. In Schnabel, “continued credit-card
payments . . . were too passive for any reasonable fact-finder to
conclude that they manifested a subjective understanding of the
existence of [later-sent] arbitration . . . provisions and an intent to be
bound by them.” 697 F.3d at 128 (emphasis added). And that was
because the plaintiffs did not “know[] or ha[ve] reason to know” that
the discount club would infer assent from such conduct. Id. at 120.
So too here. The Enrollment Agreement contemplated
unilateral modifications only in select circumstances, none of which
applies in this case. CleanChoice makes no argument that the bills
themselves alerted Sudakow to the arbitration provision. And
Sudakow paid her bills as part of her obligations under the
Enrollment Agreement, not to signal an acceptance of new terms. A
reasonable person would not understand the act of mailing scheduled
payments to constitute assent.
“[U]nder New York law, silence constitutes assent only in
particular circumstances, such as where there is a duty to respond or
where there is a contemporaneous oral agreement.” Schnabel, 697
F.3d at 128 (summarizing discussion in Karlin v. Avis, 457 F.2d 57, 61-
62 (2d Cir. 1972)). There was no such duty or oral agreement here.
Sudakow never signed the Subsequent Terms and had no reason to
believe that CleanChoice expected her either to cancel her service or
to agree to arbitrate. So her “failure to act affirmatively” did not
“carry a significance that reasonable people in the parties’ positions
would understand to be assent.” Id.

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Sudakow v. CleanChoice Energy, Inc.
III. CONCLUSION
We affirm the judgment of the district court denying
CleanChoice’s motion to compel arbitration.

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