Kevin Johnson v. Walmart, Inc.

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

KEVIN JOHNSON, individually and

on behalf of all others similarly

situated,

Plaintiff-Appellee,

WALMART INC.,

Defendant-Appellant.

No. 21-16423

D.C. No.

1:20-cv-01360-

DAD-JLT

OPINION

Appeal from the United States District Court

for the Eastern District of California

Dale A. Drozd, District Judge, Presiding

Argued and Submitted November 18, 2022

San Francisco, California

Filed January 10, 2023

Before: A. Wallace Tashima and Richard A. Paez, Circuit

Judges, and William K. Sessions III,

District Judge.

Opinion by Judge Sessions

The Honorable William K. Sessions III, United States District Judge

for the District of Vermont, sitting by designation.

2 JOHNSON V. WALMART, INC.

SUMMARY

Arbitration

The panel affirmed the district court’s denial of Walmart

Inc.’s motion to compel arbitration of the claims asserted

against it by Kevin Johnson, who brought a putative class

action alleging breach of contract and breach of the duty of

good faith and fair dealing arising out of a lifetime tire

balancing and rotation service agreement that Johnson

purchased from a Walmart Auto Care Center.

Johnson purchased a set of tires from Walmart.com,

which included a Terms of Use with an arbitration

provision. Johnson had the tires shipped to and installed at

a Walmart Auto Center, and while waiting for the tires to be

installed, he purchased the lifetime balancing and rotation

Service Agreement. Johnson received tire services once in

2019 but was later denied service on several occasions in

2020 at multiple Walmart Auto Centers. Johnson

commenced this action in September 2020. Walmart sought

to compel individual arbitration of its dispute with Johnson

pursuant to the arbitration provisions of the Terms of

Use. The district court found that the plain meaning of the

provision to in-store purchases.

The panel agreed with the district court that Johnson

contested the existence, not the scope, of an arbitration

agreement that would encompass this dispute. As the party

seeking to compel arbitration, Walmart bore the burden of

This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.

JOHNSON V. WALMART, INC. 3

proving the existence of an agreement to arbitrate by a

preponderance of the evidence. Walmart agreed that

Johnson did not consent to an arbitration agreement at the

time he purchased the Service Agreement at the Walmart

Auto Care Center, but argued that Johnson’s in-store

purchase was subject to the same pre-existing arbitration

agreement that he accepted when he purchased tires from

Walmart.com and agreed to the Terms of Use. The panel

held that Johnson’s claim against Walmart did not arise out

of the contract containing the arbitration agreement, but

rather arose out of an entirely separate transaction at a

Walmart store.

Because the panel concluded that the existence of an

arbitration agreement was at issue and thus the presumption

in favor of arbitrability did not apply, the panel used general

California state-law principles of contract interpretation to

decide whether a contractual obligation to arbitrate

existed. The panel held that the Terms of Use had a clear,

delineated purpose—to regulate use of Walmart’s online

resources and content. No provision of the Terms of Use

addressed any form of in-store engagement with

Walmart. Because the Terms of Use covered a defined

subset of consumer interaction with Walmart—access to and

use of Walmart Sites—the nested arbitration provision of the

store purchase of the Service Agreement.

Walmart argued that Johnson’s two purchases were

“merely interrelated contracts in an ongoing series of

transactions” such that the arbitration agreement of the first

necessarily applied to the second. The panel held that

substantial evidence supported that the two contracts

between Johnson and Walmart were separate, independent

agreements. The two contracts—though they involved the

4 JOHNSON V. WALMART, INC.

same parties and the same tires—were separate and not

interrelated. Therefore, the arbitration agreement in the first

did not encompass disputes arising from the second.

COUNSEL

Aileen M. McGrath (argued), Michael J. Stortz, and Michael

J. Weisbuch, Akin Gump Strauss Hauer & Feld LLP, San

Francisco, California; Pratik A. Shah, Akin Gump Strauss

Hauer & Feld LLP, Washington, D.C.; for Defendant-

Appellant.

Kenneth H. Yoon (argued) and Stephanie E. Yasuda, Yoon

Law APC, Los Angeles, California, for Plaintiff-Appellee.

Brian J. Malloy, The Brandi Law Firm, San Francisco,

California, for Amicus Curiae Consumer Attorneys of

California.

JOHNSON V. WALMART, INC. 5

OPINION

SESSIONS, District Judge:

Walmart, Inc. (“Walmart”) appeals the district court’s

denial of its motion to compel arbitration of the claims

asserted against it by Kevin Johnson (“Johnson”). Johnson

brought this putative class action for breach of contract and

breach of the duty of good faith and fair dealing arising out

of a lifetime tire balancing and rotation service agreement

that Johnson purchased from a Walmart Auto Care Center.

The district court denied Walmart’s motion and we affirm.

In July 2018, Johnson purchased a set of tires from

Walmart.com, Walmart’s online platform. By making an

online purchase, Johnson agreed to the Walmart.com Terms

of Use (“Terms of Use”). The Terms of Use to which

Johnson assented state: “Welcome to the family of websites

and applications provided by Walmart. These Terms of Use

govern your access to and use of all Walmart Sites.” Section

20 of the Terms of Use contains a mandatory arbitration

provision requiring that “. . . all disputes arising out of or

related to these Terms of Use or any aspect of the

relationship between you and Walmart . . . will be resolved

through final and binding arbitration.”

Johnson had the tires shipped to and installed at a

Walmart Auto Care Center in Texas. While waiting for his

tires to be installed, Johnson purchased a lifetime tire

balancing and rotation service agreement (“Service

Agreement”) from a Walmart employee at a separate,

additional cost. Johnson received these tire services once in

2019 but was later denied service on several occasions in

6 JOHNSON V. WALMART, INC.

2020 at multiple Walmart Auto Care Centers across Texas,

Arizona, and California. After Walmart declined to service

Johnson’s tires, Johnson commenced this putative class

action in September 2020.

In December 2020, Walmart moved to compel individual

arbitration of the dispute pursuant to the arbitration provision

of the Terms of Use. The district court denied Walmart’s

motion. It found that the plain meaning of the Terms of Use

precluded applicability of the arbitration provision to in-

store purchases. Walmart appealed challenging the district

court’s ruling. We have jurisdiction pursuant to 9 U.S.C. §

16(a)(1)(C). This court reviews de novo a district court’s

denial of a motion to compel arbitration. Blair v. Rent-A-

Center, Inc., 928 F.3d 819, 824 (9th Cir. 2019).

On appeal, Walmart maintains that because Johnson

agreed to the arbitration provision of the Terms of Use when

he purchased a set of tires from Walmart.com, those Terms

encompass this lawsuit, which concerns his in-store

purchase of a tire servicing agreement. By Walmart’s logic,

the Terms of Use trigger the existence of an independent,

broad arbitration agreement between Walmart and users of

Walmart Sites that applies to any interaction between

Walmart and the customer, regardless of whether the dispute

arises out of an online purchase or any provision of the

arbitration provision, which reaches disputes that “arise out

of or relate to” the Terms of Use or any aspect of the

customer’s relationship with Walmart, and argues that the

introductory provisions, which state that the Terms of Use

govern “access to and use of all Walmart Sites,” are

independent.

JOHNSON V. WALMART, INC. 7

II.

Written agreements to settle commercial disputes by

arbitration are subject to the Federal Arbitration Act

(“FAA”). 9 U.S.C. § 2. Congress enacted the FAA to address

“longstanding judicial hostility to arbitration agreements”

and place them “upon the same footing as other contracts.”

Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 25

(1991). The FAA requires:

A written provision in . . . a contract

evidencing a transaction involving commerce

to settle by arbitration a controversy

thereafter arising out of such

contract . . . 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. It “mandates . . . arbitration on issues to which

an arbitration agreement has been signed.” Dean Witter

Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 (1985).

The FAA limits the role of the judiciary “to determining

(1) whether a valid agreement to arbitrate exists and, if it

does, (2) whether the agreement encompasses the dispute at

issue.” Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d

1126, 1130 (9th Cir. 2000). If the court answers both

questions in the affirmative, it must “enforce the arbitration

agreement in accordance with its terms.” Revitch v.

DIRECTTV, LLC, 977 F.3d 713, 716 (9th Cir. 2020)

(quoting Chiron Corp., 207 F.3d at 1130). And “while

doubts concerning the scope of an arbitration clause should

be resolved in favor of arbitration, the presumption does not

apply to disputes concerning whether an agreement to

8 JOHNSON V. WALMART, INC.

arbitrate has been made.” Goldman, Sachs & Co. v. City of

Reno, 747 F.3d 733, 743 (9th Cir. 2004) (internal quotation

omitted); see also Mundi v. Union Sec. Life Ins. Co., 555

F.3d 1042, 1044–45 (9th Cir. 2009) (“The presumption in

favor of arbitration . . . does not apply if contractual

language is plain that arbitration of a particular controversy

is not within the scope of the arbitration provision.” (internal

quotation marks and citation omitted)).

The “first principle” of a court’s arbitration decision is

that “[a]rbitration is strictly a matter of consent . . . and thus

is a way to resolve those disputes—but only those disputes—

that the parties have agreed to submit to arbitration.” Granite

Rock Co. v. Int’l Bhd of Teamsters, 561 U.S. 287, 299 (2010)

(emphasis in original) (citations and quotation marks

omitted). As “arbitration is a matter of contract[,] . . . a party

cannot be required to submit to arbitration any dispute which

he has not agreed so to submit.” AT&T Techs., Inc. v.

Commc’ns Workers of Am., 475 U.S. 643, 649 (1986)

(internal quotation marks and citations omitted). Though the

FAA “reflects an emphatic federal policy in favor of arbitral

dispute resolution,” Marmet Health Care Ctr., Inc. v. Brown,

565 U.S. 530, 533 (2012) (citations omitted), that requires

courts to “rigorously enforce agreements to arbitrate,” Byrd,

470 U.S. at 221, it “does not require parties to arbitrate when

they have not agreed to do so,” Volt Info. Scis., Inc. v. Bd. of

Trs. of Leland Stanford Junior Univ., 489 U.S. 468, 478

(1989).

We agree with the district court that Johnson contests the

existence, not the scope, of an arbitration agreement that

would encompass this dispute. As the party seeking to

compel arbitration, Walmart bears the burden of proving the

existence of an agreement to arbitrate by a preponderance of

the evidence. See Knutson v. Sirius XM Radio Inc., 771 F.3d

JOHNSON V. WALMART, INC. 9

559, 565 (9th Cir. 2014). Walmart agrees that Johnson did

not consent to an arbitration agreement at the time he

purchased the Service Agreement at the Walmart Auto Care

Center. Nonetheless, Walmart argues that Johnson’s in-store

purchase is subject to the same pre-existing arbitration

agreement that he accepted when he purchased tires from

Walmart.com and agreed to the Terms of Use. Section 2 of

the FAA requires arbitration of controversies that arise out

of a contract containing a valid, enforceable arbitration

provision. See 9 U.S.C. § 2. But Johnson’s claim against

Walmart does not arise out of the contract containing the

arbitration agreement; it arises out of an entirely separate

transaction at a Walmart store. Thus, only if the Service

Agreement itself is subject to the Terms of Use does an

agreement to arbitrate claims arise out of that in-store

purchase.

III.

Because we conclude that the existence of an arbitration

agreement is at issue and thus the presumption in favor of

arbitrability does not apply, “we use general state-law

principles of contract interpretation to decide whether a

contractual obligation to arbitrate exists.”

Goldman, Sachs

& Co., 747 F.3d at 743; see also Suski v. Coinbase, Inc., No.

22-15209, slip op at 8 (9th Cir. Dec. 16, 2022). In California,

“[a] contract must be so interpreted as to give effect to the

mutual intention of the parties as it existed at the time of

contracting.” Cal. Civ. Code. § 1636. “To determine the

While the purchase of the tire servicing agreement took place in Texas,

the parties have agreed that California law governs the contract dispute

as Johnson is a California resident, he was denied the tire services at a

Walmart Auto Care Center in California, and the Terms of Use stipulate

that they will be construed under California law.

10 JOHNSON V. WALMART, INC.

reach of a particular agreement, we must look to its express

terms.” Walsh v. Arizona Logistics, Inc., 998 F.3d 393, 396

(9th Cir. 2021). California courts interpret contracts

containing arbitration provisions by application of the plain

meaning rule—words of a contract are given their usual and

ordinary meaning. Valencia v. Smyth, 185 Cal. App. 4th 153,

176 (2010). And under California law, a contract must be

“interpreted as a whole.” Int'l Bhd. of Teamsters v. NASA

Servs., Inc., 957 F.3d 1038, 1042 (9th Cir. 2020) (reversing

the district court’s order compelling arbitration where the

court failed to interpret an arbitration clause in the context of

the contract as a whole). We must, therefore, interpret the

meaning of individual arbitration clauses “in connection

with the rest of the agreement” and “not detached portions

thereof.” Id. at 1042 (internal quotation omitted).

The Terms of Use have a clear, delineated purpose—to

regulate use of Walmart’s online resources and content. The

introductory text of the Terms of Use provides: “These

Sites.” The agreement’s provisions, therefore, apply only to

a consumer’s use of and access to Walmart Sites. The Terms

of Use define “Walmart Sites” to mean:

www.walmart.com, and the Walmart mobile

site https://mobile.walmart.com, the Walmart

Apps, and all related functionality, services,

and Content offered by or for Walmart on or

through www.walmart.com and the Walmart

Apps or the systems, servers, and networks

used to make the Walmart Sites available.

A Walmart Auto Care Center is not a “Walmart Site” under

this definition. Moreover, the Terms of Use cover subject

matter such as online user accounts, the content of Walmart

JOHNSON V. WALMART, INC. 11

Sites and their use, monitoring of user activity on Walmart

Sites, the placing of online transactions, and the shipping and

delivery of online orders. No provision of the Terms of Use

addresses any form of in-store engagement with Walmart.

Walmart asks the court to treat a customer’s use of a

Walmart Site as an acceptance of a separate arbitration

agreement that touches more than the Terms of Use

themselves. But viewing the contract as a whole, the

introductory clause bounds the subject matter to which the

agreement applies: “access to and use of all Walmart Sites.”

By the plain meaning of the introductory language, no

provision of the Terms of Use can govern Johnson’s in-store

purchase because that purchase did not involve his access to

or use of any Walmart Site. The language and subject matter

of the contract make clear that by agreeing to the Terms of

Use, Johnson did not assent to arbitrate claims that might

arise out of a separate, in-store purchase. As the Terms of

Use cover a defined subset of consumer interaction with

Walmart—access to and use of Walmart Sites—the nested

arbitration provision of the Terms of Use cannot apply to the

controversy over the in-store purchase of the Service

Agreement.

Walmart argues that Johnson’s two purchases are

“merely interrelated contracts in an ongoing series of

transactions” such that the arbitration agreement of the first

necessarily applies to the second. Where two contracts are

“separate,” “the lack of an arbitration clause means disputes

over the agreement are not subject to arbitration.” Int’l

Ambassador Programs, Inc. v. Archexpo, 68 F.3d 337, 340

(9th Cir. 1995). But where two contracts “are merely

interrelated contracts in an ongoing series of transactions,”

an arbitration provision in one contract could apply to

subsequent contracts. Id.

12 JOHNSON V. WALMART, INC.

Substantial evidence supports that the two contracts

between Johnson and Walmart are separate, independent

agreements. The arbitration agreement consented to when

Johnson purchased a set of tires from Walmart.com “does

not control the separate agreement of the parties.” Id. First,

although the receipt Johnson received documenting his

purchase of the Service Agreement notes the tires as

“PREPAID” online, Johnson’s purchase of the Service

Agreement was “negotiated and entered into separately”

from his initial purchase of tires from Walmart.com.

Humetrix, Inc. v. Gemplus, S.C.A., 129 F.3d 125, *2 (9th Cir.

1997) (unpublished table decision). Second, the two

contracts involved separate consideration, as the first

contract was for the purchase of goods while the second was

for the performance of services. See id. (two contracts that

“differ[ed] substantially” in their terms and services were not

interrelated). And third, while Walmart points out that

Johnson references the original cost of the tires to calculate

damages, the proof Johnson requires to establish his

underlying claim for breach of contract involves neither a

breach of his initial tire-purchase agreement nor an

interpretation of the Walmart.com Terms of Use, but rather

depends exclusively on the terms of the Service Agreement.

See Archexpo, 63 F.3d at 340. Johnson would rely on the

original value of his tires before he was denied the rotation

and balancing services regardless of whether he purchased

the tires from Walmart or another retailer.

The two contracts—though they involve the same parties

and the same tires—are separate and not interrelated.

Therefore, the arbitration agreement in the first does not

encompass disputes arising from the second.

AFFIRMED.