Safeway Breached Contract by Adding Online-Only Markup, Says Federal Court
A California federal court has granted plaintiffs’ motion for summary judgment in a case alleging that Safeway charged a class of consumers more than the prices permitted under the terms of its online service contract when the consumers purchased groceries from the grocer’s website. Rodman v. Safeway, No. 11-3003 (order entered December 10, 2014).
Safeway sells groceries via its Safeway.com site, where it requires users to accept its Terms and Conditions upon registration. That agreement includes a provision about prices varying from order to order: “The prices quoted on our web site at the time of your order are estimated prices only. You will be charged the prices quoted for Products you have selected for purchase at the time your order is processed at checkout. The actual order value cannot be determined until the day of delivery because the prices quoted on the Web site are likely to vary either above or below the prices in the store on the date your order is filled and delivered.” At the site’s inception, Safeway charged the prices available at the brick-and-mortar location, but after April 2010, the supermarket chain began adding a markup of approximately 10 cents per dollar.
The plaintiff argued that the language in the contract provision promised that the customer would be charged the same prices as those in the physical grocery store where the products were gathered for the order, while the defendant asserted that “the prices in the store” meant “the prices in the online store” that appeared on the site the day the order was actually compiled. The court found that the language was “reasonably susceptible” to both interpretations, which allowed it to consider extrinsic evidence. It criticized Safeway’s interpretation for arguing that “very different words in the same sentence mean the same thing” because the store asserted that “’on the Web site’ means ‘on the Web Site’ and that ‘in the store’ also means ‘on the Web site.’ This is not a very compelling explanation of the objective meaning of these words.” The plaintiff’s interpretation, the court found, “does some (lesser) violence to the language as well” because he interpreted “prices quoted” as “prices charged in the physical store,” despite that “[i]t is not all that common to think of grocery store tags as ‘quoting’ prices.”
The court then considered the extrinsic evidence offered by each party and found that the plaintiff’s evidence was unneeded because Safeway’s evidence supported the plaintiff’s interpretation. “The Special Terms promise that, with the exception of the actually disclosed special charges and delivery fees, the prices charged for safeway.com products will be those charged in the physical store where the groceries are delivered. Since Safeway actually marked up the charges for the in-store prices beyond the disclosed delivery and special charges, the Court grants summary judgment that Safeway breached its contract with its customers.” The court also dismissed Safeway’s argument that its November 2011 revision to its contract limited its liability to orders occurring before the revisions, citing the Ninth Circuit’s “skeptical view of contracts in which online retailers have sought to alter the offer and acceptance structure by contending that assent can be inferred by a customer’s continued use of a service even in the absence of notice of the terms in question.” Finding otherwise would be “particularly lopsided,” the court said, because “beyond the impracticality of expecting consumers to spend time inspecting a contract they have no reason to believe has been changed,” Safeway would unfairly know about changes to the contract that governs its actions because it did not notify its users of the updated terms.