Antitrust Law Daily Wrap Up, ADVERTISING—N.D. Cal.: PayByPhone beats consumer class claims over allegedly shortchanged parking time, (Sep 9, 2026)

By Martin A. Steinberg, J.D.

The court denied PayByPhone’s motion to compel arbitration because the account-creation process did not establish the user’s unambiguous assent to the terms of service.

A federal district court in San Francisco dismissed with leave to amend a putative multistate class action alleging that PayByPhone US Inc. and PayByPhone Technologies Inc. (together “PayByPhone”) misled consumers by starting paid parking time before users completed their transactions. The court found the app was not plausibly deceptive because it displayed the exact expiration time before payment, and plaintiff Justin Alicea failed to adequately allege that he suffered an economic injury from receiving less parking time than he purchased. The court also rejected Alicea’s UCL theories and his claims for unjust enrichment, conversion, and money had and received. However, the court denied PayByPhone’s motion to compel arbitration, finding that although its terms of service were reasonably conspicuous during Alicea’s Facebook-based account creation, the sign-up process did not explicitly advise users that clicking “continue” constituted assent to those terms and therefore did not establish an enforceable arbitration agreement. The court granted Alicea leave to amend his complaint by October 1, 2026 (Alicea v. PayByPhone US Inc., No. 3:26-cv-01266-WHO (N.D. Cal. Sep. 8, 2026)).

Factual background. PayByPhone Technologies Inc. provides mobile street-parking payment services worldwide, while its subsidiary, PayByPhone US Inc., serves U.S. consumers. San Francisco resident Justin Alicea alleged that he had regularly used the app since at least 2020. PayByPhone presented evidence that he created an account in December 2019 through Facebook. Its terms of service included an informal dispute process and an arbitration provision, but users registering through Facebook were not required to review the terms before creating an account.

To pay for parking, users select a location and parking duration, then proceed to a payment screen showing the selected duration and expiration time. Alicea alleged that the parking clock begins when the duration is selected rather than when payment is completed, potentially reducing the actual parking time received. He claimed that this practice misled consumers and that he was shortchanged by at least one minute on one occasion.

Procedural history. Alicea filed the putative class action on February 11, 2026, on behalf of consumers who used PayByPhone to pay for parking in California, Florida, Massachusetts, Washington, New Hampshire, and Pennsylvania during specified limitations periods. The complaint asserted 12 causes of action, including claims under the consumer-protection statutes of each of those states, common-law fraud by omission, unjust enrichment, conversion, and money had and received. Alicea sought class certification, equitable relief, damages, attorneys’ fees, and costs. PayByPhone moved to compel arbitration and separately moved to dismiss the complaint under Rules 9(b), 12(b)(1), and 12(b)(6).

Motion to compel arbitration. The court denied PayByPhone’s motion to compel arbitration because it failed to establish Alicea’s assent to the terms of service. Although Alicea also challenged the adequacy of notice and argued unconscionability, the court found the lack of assent dispositive. It considered evidence PayByPhone improperly introduced with its reply and granted Alicea leave to file a sur-reply.

Condition precedent. The court rejected PayByPhone’s argument that Section 13 required users to complete an informal dispute-resolution process before proceeding to arbitration. Read with Section 14, the terms did not clearly make the procedure a mandatory prerequisite; at minimum, the language was ambiguous.

Notice and consent. Treating the agreement as a sign-in wrap, the court found notice reasonably conspicuous. Although the terms-of-service link was less prominent than the notice the court had upheld in Blackburn v. ClassPass USA LLC, No. 25-CV-06109-WHO, 2026 WL 962734, at *2 (N.D. Cal. Apr. 9, 2026), the context of the transaction supported a finding of reasonably conspicuous notice.

Manifestation of assent. PayByPhone nevertheless failed to show unambiguous assent. The authentication screen did not tell users that clicking “continue” constituted agreement to the terms. Merely displaying links to the terms of service and privacy policy was insufficient. Because no enforceable arbitration agreement was established, the court denied arbitration without reaching unconscionability.

Motion to dismiss. The court granted PayByPhone’s motion to dismiss with leave to amend. It concluded that Alicea’s claims were based primarily on an alleged fraudulent omission: PayByPhone’s failure to disclose that parking time begins running before payment is completed. Under California’s UCL, FAL, and CLRA, an omission is actionable only if it contradicts an affirmative representation or involves a fact the defendant had a duty to disclose.

Alicea argued that the timing mechanism was material and that PayByPhone concealed it through the app’s design and partial representations about parking duration and cost. The court disagreed. His theory depended on the assumption that reasonable consumers would expect the app to function like a traditional parking meter, but the app displayed the exact expiration time before payment, which the court viewed as a corrective disclosure.

The court also rejected Alicea’s argument that consumers might treat the displayed expiration time as merely illustrative and that a live countdown was required. Although consumer deception is generally a factual question, Alicea alleged no facts showing that reasonable users would understand the displayed expiration time as anything other than the actual expiration time. He therefore failed to plausibly allege a deceptive omission.

No cognizable injury. The court alternatively held that Alicea failed to adequately plead injury. The UCL and FAL require economic injury, while the CLRA requires some resulting damage beyond merely being subjected to an unlawful practice. Alicea’s theory, that users paid for parking time they did not receive, could constitute cognizable economic injury in principle. But his allegations concerning his own injury were conclusory.

Alicea alleged only that, on at least one occasion, he had been shortchanged by at least one minute and therefore received less parking time than he purchased. He did not identify the transaction or explain how the alleged loss occurred. Although his briefing described hypothetical circumstances in which a user might begin the transaction before actually parking, the complaint did not allege that Alicea personally encountered any of those circumstances. The court therefore found that he had not plausibly alleged that he actually received less parking time than he paid for.

UCL. Alicea’s claims under the UCL’s “unfair” and “unlawful” prongs also failed. An unfair practice may be evaluated under either a balancing test, which weighs the practice’s harm against its utility, or a tethering test, which asks whether the challenged conduct is comparable to a violation of law or significantly threatens competition.

Alicea argued that silently starting the parking clock before payment while displaying a static parking duration violated California policies favoring transparent consumer pricing and that the resulting consumer harm was not outweighed by any countervailing benefit. The court found, however, that the unfair-prong claim relied on the same allegations of deception and injury that were insufficient to support his fraud theory. Likewise, Alicea’s unlawful-prong claim depended on his CLRA, FAL, and common-law fraud claims. Because the underlying allegations were deficient, the unfair and unlawful UCL theories also failed.

Standing for injunctive relief. The court also found that Alicea had not adequately alleged standing to seek injunctive relief because the complaint did not establish a likelihood of future harm. Alicea relied on Davidson v. Kimberly-Clark Corp., 889 F.3d 956 (9th Cir. 2018), in which the Ninth Circuit recognized that a previously deceived consumer may have standing if the consumer wants to purchase the product again but cannot determine whether the deception has been corrected, or might purchase it believing that it has been corrected.

Alicea’s allegations did not fit either theory. The complaint did not establish whether he continued to use PayByPhone, intended to use it in the future but was unable to determine whether the alleged deception had been corrected, or might use it again under the mistaken assumption that the practice had changed. General allegations that PayByPhone’s conduct was ongoing and likely to continue were insufficient to establish an actual or imminent threat of future harm.

Contract and quasi-contract claims. PayByPhone argued that Alicea’s unjust enrichment, conversion, and money-had-and-received claims were barred because the parties’ relationship was governed by contract. It also contended that California law does not recognize unjust enrichment as an independent cause of action. The court declined to dismiss on the contractual ground because, as its arbitration analysis demonstrated, it was unclear whether Alicea had entered into a binding agreement with PayByPhone. Neither the website nor app materials identified by the parties established that Alicea had agreed to the terms of service.

The three claims nevertheless failed because Alicea did not adequately allege injury. Each required him to show, in substance, that PayByPhone obtained a benefit or property at his expense. Because Alicea had not plausibly alleged that he received less parking time than he paid for, he could not establish the necessary loss or corresponding benefit to PayByPhone. His claims for unjust enrichment, conversion, and money had and received were therefore deficient.

Leave to amend. Because the court dismissed the complaint, it did not reach the parties’ dispute over the sufficiency of Alicea’s class allegations. Alicea was given until October 1, 2026, to file an amended complaint.

The Case is No. 3:26-cv-01266-WHO.

Judge: Orrick, W.

Attorneys: Yaman Salahi (Salahi PC) for Justin Alicea. Indra Neel Chatterjee (King & Spalding LLP) for PayByPhone US Inc.

Companies: PayByPhone US Inc.

Cases: Advertising StateUnfairTradePractices CaliforniaNews