Guideone Insurance Company v. Quickbooks Online Payroll, Inc. et al.

LEGAL STANDARD

The Federal Arbitration Act (“FAA”) governs the arbitration agreement. The arbitration agreement in effect in November 2017 states: “The Federal Arbitration Act governs the interpretation and enforcement of this provision; the arbitrator shall apply California law to all other matter.” The current arbitration agreement contains materially identical language: “You agree that the U.S. Federal Arbitration Act governs the interpretation and enforcement of this arbitration provision, and that you and Intuit are each waiving the right to a trial by jury or to participate in a class action.” The agreement therefore expressly provides that the FAA governs interpretation and enforcement of the arbitration provision.

Under the FAA, the court’s role is limited 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 Systems, Inc. (9th Cir. 2000) 207 F.3d 1126, 1130.) To determine “whether a valid contract to arbitrate exists,” courts apply “ordinary state law principles that govern contract formation.” (Davis v. Nordstrom, Inc. (9th Cir. 2014) 755 F.3d 1089, 1093 [citations omitted]; see also Ingle v. Circuit City Stores, Inc. (9th Cir. 2003) 328 F.3d 1165, 1170.)

Under California law, a party seeking to compel arbitration bears the burden of establishing the existence of a valid arbitration agreement. (Code Civ. Proc., § 1281.2; Gamboa v. Northeast Community Clinic (2021) 72 Cal.App.5th 158, 165-166.) Once the moving party establishes the existence of the agreement, the burden shifts to the opposing party to establish a defense to enforcement.

ANALYSIS

Defendant presents evidence of the Terms of Service applicable to QuickBooks users from 2017 through 2026, each containing an arbitration provision. (See Gebbia Decl., Exs. A-N.) Defendant has therefore met its initial burden of establishing the existence of an arbitration provision applicable to QuickBooks users. (Gamboa, supra, 72 Cal.App.5th at pp. 165-166 [moving party may meet its burden by attaching a copy of the arbitration agreement].)

At issue, however, is whether the Insured manifested assent to the “sign-in wrap” agreement and whether Plaintiff, as the subrogee, can be compelled to arbitrate its claims. The Court finds in the affirmative as to both issues.

The “Sign-In Wrap” Agreement is Enforceable

The Insured manifested assent to the QuickBooks Terms of Service, including the arbitration provision, when it accessed QuickBooks’ online services. To access QuickBooks’ online services, a user is directed to a “Sign In” webpage that requires the user to click a “Sign In” button and informs the user that “[b]y selecting Sign In, you agree to Intuit terms[.]” (Gebbia Decl., ¶ 20.) This interface constitutes a “sign-in wrap” agreement.

“‘“Sign-in wrap agreements . . . include a textual notice indicating the user will be bound by the terms, but they do not require the consumer to review those terms or to expressly manifest their assent to those terms by checking a box or clicking an ‘I agree’ button. Instead, the consumer is purportedly bound by clicking some other button that they would otherwise need to click to continue with their transaction or their use of the website—most frequently, a button that allows the consumer to ‘sign in’ or ‘sign up’ for an account.”’” (Cruz v.

Tapestry (2025) 113 Cal.App.5th 943, 955 [internal citations omitted] [emphasis in original].) “Because ‘“‘the consumer’s assent [to this type of agreement] is “largely passive,”’ . . . the existence of a contract turns on whether a reasonably prudent offeree would be on inquiry notice of the terms at issue.’” (Id. at p. 955 [internal citations omitted] [emphasis in original].)

When the transaction does not involve an ongoing contractual relationship, the consumer is less likely to be looking for contractual terms. (Cruz, supra, 113 Cal.App.5th at pp. 955-956.) Unlike Cruz, where the appellants made a one-time purchase of expensive merchandise, the Insured here used QuickBooks as an ongoing service. The Insured created a QuickBooks Online account on November 27, 2017, and later enrolled in the QuickBooks Bill Pay service on May 22, 2024. Thus, given the ongoing nature of the relationship, the Insured was more likely to understand that its use of the service was governed by contractual terms.

Furthermore, the hyperlink to the Terms was conspicuous. The underlined text “Intuit terms” on the website and “Terms” on the mobile application appeared in a different-colored font and was hyperlinked to the applicable Terms. (Gebbia Decl., ¶ 20.) The text was positioned directly below the “Sign In” button. (Ibid.) A user could not use or access QuickBooks’ online services without creating an account and signing in. (Gebbia Decl., ¶ 24.) The placement of the notice immediately below the button the user was required to click, combined with the contrasting font and underlining, provided sufficient inquiry notice of the Terms.

The Insured continued to access QuickBooks after being presented with this notice. By clicking “Sign In” and continuing to use the service in the face of conspicuous notice that doing so constituted agreement to the Intuit Terms, the Insured manifested assent to those Terms. Accordingly, the Court finds that the sign-in wrap agreement, including its arbitration provision, is enforceable.

Plaintiff is Bound by the Arbitration Agreement as the Subrogee

Plaintiff is bound to arbitrate its claims against Defendant because of its status as the Insured’s subrogee. “In the insurance context, equitable subrogation generally involves the substitution of the insurer in the position of its insured in order to seek reimbursement from responsible third parties for the loss paid the insured by the insurer.” (Crowley Maritime Corp. v. Boston Old Colony Ins. (2008) 158 Cal.App.4th 1061, 1067.) “The right of subrogation is purely derivative. An insurer entitled to subrogation is in the same position as an assignee of the insured’s claim, and succeeds only to the rights of the insured.” (Fireman’s Fund Ins. Co. v. Maryland Casualty Co. (1998) 65 Cal.App.4th 1279, 1292.) “Subrogation places the insurer in the shoes of its insured to the extent of its payment.” (Progressive West Ins. Co. v. Superior Court (2005) 135 Cal.App.4th 263, 272.)

Federal courts applying California law have held that a subrogated insurer may be compelled to arbitrate claims that derive from its insured’s contractual rights. In Nationwide Agribusiness Ins. Co. v. Buhler Barth GMBH (E.D. Cal. Oct. 30, 2015) No. 1:15-cv-00582-JAM-EPG, 2015 U.S. Dist. LEXIS 147717, at pp. 12-13, the court held that a subrogated insurer was bound to arbitrate because the insurer “stands in the shoes” of the insured and acquires only those rights possessed by the insured. The court noted that the Ninth Circuit had adopted the majority view that, under ordinary contract and agency principles, nonsignatories may in appropriate circumstances be bound by arbitration agreements. (Id. at p. 12 [quoting Letizia v. Prudential Bache Securities, Inc. (9th Cir. 1986) 802 F.2d 1185, 1187-1188].)

Similarly, in Allianz Global Risk U.S. Ins. Co. v. GE (9th Cir. 2012) 470 Fed.Appx. 652, 654, the Ninth Circuit held that a subrogated insurer could enforce an arbitration provision contained in the agreement between the insured and the defendant. The court explained that a subrogee “stands in the shoes” of the subrogor and that California law did not support treating the subrogee differently with respect to arbitration than with respect to other contractual rights. The Ninth Circuit declined to follow Valley Casework, Inc. v. Comfort Construction, Inc. (1999) 76 Cal.App.4th 1013, to the extent that case held that a nonsignatory subrogee could not be compelled to arbitrate.

Although Allianz is an unpublished federal appellate decision and therefore is not binding precedent, its reasoning is consistent with California’s established rule that an insurer’s subrogation rights are derivative and that the insurer acquires no greater rights than those possessed by its insured. The Court therefore finds its reasoning persuasive.

Valley Casework does not compel a different result. There, the Court of Appeal concluded that a nonsignatory insurer could not be compelled to arbitrate under the circumstances presented. (Valley Casework, supra, 76 Cal.App.4th at pp. 1019-1020.) Here, however, the Court finds the reasoning of Allianz persuasive in light of the derivative nature of equitable subrogation. Plaintiff seeks to recover from Defendant based on the same alleged loss and alleged conduct

giving rise to the Insured’s rights against Defendant. Plaintiff therefore stands in the Insured’s shoes and is subject to the same contractual limitations applicable to those rights, including the arbitration provision.

Accordingly, Plaintiff, as the Insured’s subrogee, may be compelled to arbitrate the claims asserted against Defendant.

The Arbitration Agreement Encompasses Plaintiff’s Claims

The plain language of the arbitration agreement is broad. A “broad” clause includes those using language such as “any claim arising from or related to this agreement” or “arising in connection with the agreement.” It has long been the rule in California that a broadly worded arbitration clause “may extend to tort claims that may arise under or from the contractual relationship . . . At most the requirement is that the dispute must arise out of the contract.” (Howard v. Goldbloom (2018) 30 Cal.App.5th 659, 663-664 [quoting Rice v. Downs (2016) 248 Cal.App.4th 175, 186].) “For a party’s claims to come within the scope of such a clause, the factual allegations of the complaint ‘need only “touch matters” covered by the contract containing the arbitration clause.’” (Ramos v. Superior Court (2018) 28 Cal.App.5th 1042, 1052.)

Here, the arbitration agreement requires QuickBooks customers such as the Insured to arbitrate “any dispute, claim or controversy arising out of or relating in any way to the Platform or this Agreement (a ‘Claim’).” (Gebbia Decl., Exs. A-N.) As noted above, the Terms of Service contain materially identical arbitration provisions. (Ibid.)

Plaintiff’s subrogation claims arise directly from the Insured’s use of the QuickBooks platform and services. The Complaint alleges that Defendant, in providing payment-processing services through the QuickBooks platform, made a deposit error that caused the Insured’s loss. Plaintiff’s fraud and indebtedness claims therefore arise from and relate to the services provided under the QuickBooks Terms. The claims accordingly fall within the broad scope of the arbitration provision.

Plaintiff filed no opposition to the motion. The Court therefore considers Defendant’s showing uncontroverted. Nevertheless, the Court has independently determined that Defendant established the existence of an enforceable arbitration agreement and that the claims asserted by Plaintiff fall within its scope.

Accordingly, the motion to compel arbitration is GRANTED. This action is STAYED in its entirety pending the outcome of arbitration.

DISPOSITION

The motion to compel arbitration is GRANTED. This action is STAYED in its entirety pending the outcome of arbitration.

Pursuant to California Rules of Court, rule 3.650, the party who requested or caused the stay shall serve and file notice of the stay, together with a copy of the order granting the stay, as required by that rule.

The Court will prepare the order.