Blue Apron and Others Face Spate of Suits under CA Auto-Renewal Law

A purported class action lawsuit was recently filed against meal-delivery service Blue Apron based on its alleged failure to satisfy the requirements of California’s law regulating automatic-renewal provisions in consumer contracts (Cal. Bus. & Prof. Code § 17600 et seq.). The case, C.D. Cal. No. 2:15-cv-05521, was filed in June 2015 and removed to federal court last month. California's law, which went into effect in December 2010, has in recent months been the basis for a spate of similar lawsuits – Blue Apron being the latest entry in a trend that we anticipate will continue.

California's Automatic-Renewal Law

Under California’s law, any business that offers products or services to consumers pursuant to an agreement that automatically renews, must do all of the following:

  • Present the terms of automatic renewal offer clearly and conspicuously, in proximity to the request for consent to the offer, prior to the consumer agreeing. Under California’s law, “‘clearly and conspicuously’ means in larger type than the surrounding text, or in contrasting type, font, or color to the surrounding text of the same size, or set off from the surrounding text of the same size by symbols or other marks, in a manner that clearly calls attention to the language.”
  • Get the consumer’s affirmative consent to the offer terms prior to charging him or her; and
  • Provide the consumer with an acknowledgement - in a retainable form - that includes the offer terms, the cancelation policy, and information on how to cancel. (For offers that involve a free trial, the business must also allow the consumer to cancel before any payment obligation is incurred and explain how to do so in the acknowledgement.)

The business must maintain a toll-free phone number, email address, or another “cost-effective, timely, easy-to-use mechanism” that consumers can use to cancel. (A mail-in cancellation method is only acceptable where the seller directly bills the consumer for the goods/services being provided under the auto-renewal agreement.) For any material change to the terms that is accepted by the consumer during the course of the agreement, the seller must provide to the consumer (in a retainable form) conspicuous notice of the change and information on how to cancel his or her agreement.

California’s law provides for a private right of action under which a party can seek injunctive relief and restitution for any money or property received by the defendant in violation of the auto-renewal law.  It also stipulates that any “goods, wares, merchandise, or products” sent to a consumer under an auto-renewal agreement without the business having first obtained the consumer’s affirmative consent are deemed an unconditional gift to the consumer.

Blue Apron & Similar Cases

Blue Apron offers a service through which it delivers to subscribers each week all the ingredients necessary to cook a specified recipe. A subscription with Blue Apron continues until cancelled. Plaintiff in the case has alleged that Blue Apron failed to present the terms of its automatic renewal offer before purchase, failed to obtain affirmative consent to the agreement before charging subscribers, and failed to provide subscribers with an acknowledgement that contained the offer terms, cancellation policy, and information on how to cancel. Plaintiff purports to represent a class consisting of all California-based Blue Apron subscribers dating back to June 2011, and is seeking full restitution of all subscription payments made by class members during the applicable time period.

In addition to Blue Apron, recent cases based (at least in part) on the automatic-renewal law have been brought in California against the beauty-product delivery service Birchbox (S.D. Cal. Case No. 3:15-cv-00498; stayed pending mediation until 10/1/15), the dating app Tinder (C. D. Cal. Case No. 2:15-cv-03175; voluntarily dismissed 7/21/15), the American Automobile Association (S.D. Cal. Case No. 3:15-cv-00246; voluntarily dismissed on 3/23/15), the identify-theft protection company LifeLock (S.D. Cal. Case No. 3:15-cv-00220; voluntarily dismissed 5/11/15), and Blizzard Entertainment, maker of the game World of Warcraft (S.D. Cal. Case No. 3:15-cv-00230; dismissed following settlement 8/7/15).

Other Laws on Automatic Renewal 

While this recent spate of litigation centers on California, California is hardly the only source of law on this issue. At least seventeen states have laws regulating automatic-renewal provisions in contracts, though some regulate only very particular instances (e.g., Maryland’s law is specific to health clubs and South Carolina’s to physical fitness services; Tennessee has two statutes on automatic renewal provisions: one specific to alarm systems and the other to buyer’s clubs). As we have previously written about, automatic-renewal provisions are also regulated at the federal level under the Restore Online Shoppers' Confidence Act or “ROSCA”. (Enforcement of ROSCA, however, is limited to the FTC and the various State Attorneys General.) In addition, any party that accepts debit cards or otherwise periodically debits a consumer's bank account under an auto-renewal arrangement must abide the Electronic Funds Transfer Act, which regulates “preauthorized electronic fund transfers” (15 U.S.C. § 1693 et seq., as implemented by Regulation E, 12 C.F.R. § 205.1 et seq.).

Given the current prevalence of subscription-based product and service providers, we anticipate that suits based on these auto-renewal laws will continue, particularly in California where the law is more broadly applicable than in other states and where the potential class size is often very large. If you are a business that offers a subscription-based product/service or otherwise utilizes an automatic-renewal structure in your consumer agreements, now is a good time to evaluate your practices to confirm that you are in compliance.