November 10, 2014 / 7:00 PM / 5 years ago

Sirius XM cannot force vehicle owners to arbitrate: U.S. court

(Reuters) - Sirius XM Holdings Inc cannot force owners of vehicles sold with trial subscriptions to its satellite radio service to arbitrate disputes, a federal appeals court decided on Monday, in a case involving alleged unsolicited sales calls.

In reversing a lower court ruling, a three-judge panel of the 9th U.S. Circuit Court of Appeals in Pasadena, California said owners may try to pursue their claims as a group rather than in individual arbitrations, which can be costly and time-consuming.

The panel found no showing that plaintiff Erik Knutson, a San Diego-area real estate broker, agreed to arbitrate disputes with Sirius when he bought his Toyota Tacoma truck in Nov. 2011.

“A reasonable person in Knutson’s position could not be expected to understand that purchasing a vehicle from Toyota would simultaneously bind him to any contract with Sirius XM, let alone one that contained an arbitration provision without any notice of such terms,” Circuit Judge Harry Pregerson wrote for the panel.

A 2011 U.S. Supreme Court decision involving AT&T Inc made it easier for companies to require consumers to arbitrate disputes, but called arbitration “a matter of contract.”

Patrick Reilly, a Sirius spokesman, did not immediately respond to requests for comment.

Sirius has contracts with Toyota and several other automakers to install satellite radio receivers in new vehicles.

Knutson accused New York-based Sirius of violating the Telephone Consumer Protection Act by making three unauthorized calls to his cell phone in the 90-day trial subscription period after he bought his truck.

Sirius countered that Knutson was bound by a “customer agreement” containing the arbitration clause, and included in a “Welcome Kit” sent a month after he bought his truck. Knutson said he never read or assented to the customer agreement.

“The 9th Circuit, 100 percent got it right,” said Abbas Kazerounian, a lawyer for Knutson, in a phone interview. “There was no meeting of the minds in the contract.”

The 9th Circuit returned the case to U.S. District Judge Anthony Battaglia in San Diego for further proceedings.

The case is Knutson et al v. Sirius XM Radio Inc, 9th U.S. Circuit Court of Appeals, No. 12-00418.

Reporting by Jonathan Stempel in New York; Editing by Alan Crosby

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