Knight v. Family Energy Inc.: Inquiry Notice of Arbitration Requires Clear, Conspicuous Presentation of the Arbitration Term Itself

I. Introduction

In Knight v Family Energy Inc. (2026 NY Slip Op 01599), the Appellate Division, First Department affirmed an order denying an energy services company’s motion to compel arbitration and to dismiss/stay a putative class action. The dispute arose from a door-to-door sale of energy supply services at plaintiffs’ residence, where plaintiff Caroline O’Hara signed a “Residential Natural Gas & Electricity Supply Agreement.”

The central issue was contract formation: whether plaintiffs consented to an arbitration provision that appeared only in additional “Terms and Conditions” pages the defendant claimed were provided as part of a multi-page packet. Plaintiffs asserted they received only a single double-sided page that contained no arbitration clause and gave no meaningful notice of one.

The decision is noteworthy for clarifying what constitutes “inquiry notice” of an arbitration clause under New York contract law (as applied in a Federal Arbitration Act framework), and for rejecting attempts to bootstrap notice of arbitration from references to unrelated terms.

II. Summary of the Opinion

The First Department held that the Federal Arbitration Act (FAA) governed, but the defendant failed to carry its initial burden to show that an agreement to arbitrate was made. Specifically:

  • No actual notice: Defendant’s proof that the arbitration provision was reviewed or provided to O’Hara was internally inconsistent and procedurally deficient.
  • No inquiry notice: References on the signature page (and the first terms page) to additional provisions about non-dispute topics did not clearly and conspicuously present arbitration, and therefore could not charge plaintiffs with notice of arbitration.
  • Incorporation did not expand the deal: The incorporation language could apply only to the terms actually on the reverse side of the signature page given to O’Hara, because defendant did not prove that additional pages were provided.
  • Class action waiver fell with arbitration: The waiver provision located after the arbitration clause was unenforceable for the same threshold reason—no showing plaintiffs agreed to it.

The court affirmed denial of the motion to compel arbitration, to dismiss the class claims, and to stay the action.

III. Analysis

A. Precedents Cited

1. Federal pro-arbitration policy—limited by formation principles

  • A&T Mobility LLC v Concepcion, 563 US 333 (2011): Cited for the FAA’s “liberal federal policy favoring arbitration agreements.” The court acknowledged this policy, but treated it as operating after a valid arbitration agreement is shown to exist.
  • Henry Schein, Inc. v Archer and White Sales, Inc., 586 US 63 (2019): Used for two points: (i) arbitration agreements are enforceable as written under the FAA, but (ii) courts—not arbitrators—decide the threshold question whether the parties formed an arbitration agreement at all.

2. New York’s contract-formation approach to arbitration assent

  • Wu v Uber Tech., Inc., 43 NY3d 288 (2024): The opinion’s backbone. The court quoted Wu for:
    • the foundational question: “[w]hat have these parties agreed to?”
    • mutual assent must be objectively manifested;
    • assent to terms requires actual or inquiry notice; and
    • inquiry notice requires terms be “clearly and conspicuously presented” and “made available for review.”

    Knight applies Wu to a physical, door-to-door contracting context: even where a consumer signs a page referencing “terms and conditions,” the proponent of arbitration must show that the arbitration term itself was presented in a way that would alert a reasonably prudent consumer.

3. Second Circuit authorities on notice, burden, and presentation

  • Starke v SquareTrade, Inc ., 913 F3d 279 (2d Cir 2019): Cited for the inquiry-notice standard and emphasis on how terms are presented. Knight adopts the “obvious/called-to-attention” framing in assessing whether arbitration was presented clearly and conspicuously.
  • Meyer v Uber Tech., Inc., 868 F3d 66 (2d Cir 2017): Cited for the proposition that state contract rules govern formation so long as they do not discriminate against arbitration.
  • Zachman v Hudson Valley Credit Union, 49 F4th 95 (2d Cir 2022): Cited for multiple key procedural and substantive points:
    • the movant’s initial burden is to demonstrate that an agreement to arbitrate was made;
    • courts evaluating motions to compel arbitration apply standards similar to summary judgment; and
    • notice and presentation govern whether assent occurred.

    Knight uses this burden framework to hold defendant to a disciplined prima facie showing—and not a moving target patched in reply papers.

  • Sudakow v CleanChoice Energy, Inc ., 153 F4th 280 (2d Cir 2025): Cited for the “reasonably prudent offeree” lens and the requirement that the term be obvious and called to the offeree’s attention. Knight leverages Sudakow to emphasize that notice of other terms does not create notice of an arbitration clause.

4. Reply papers cannot cure a defective prima facie showing

  • Kennelly v Mobius Realty Holdings LLC, 33 AD3d 380 (1st Dept 2006): Invoked to reject defendant’s attempt to repair its initial proof by submitting a materially altered business-practice narrative in reply. The procedural holding mattered because “actual notice” depended on a consistent, credible account of what documents were delivered and reviewed.

5. Treatise support

  • 15 Timothy Murray, Corbin on Contracts § 83.5: Cited in support of the court’s role in determining whether an arbitration agreement was formed.

B. Legal Reasoning

1. FAA applies, but formation is still the gatekeeper

The court first held the dispute was governed by the FAA (due to the interstate-commerce nature of services or the clause’s language). It then applied the FAA’s core command: arbitration agreements are treated like other contracts. That moved the analysis to state-law contract formation principles—mutual assent and notice—so long as those rules do not discriminate against arbitration.

2. Actual notice failed due to inconsistent proof and improper reply “fixes”

Defendant’s actual-notice theory depended on Deleon reviewing and leaving a multi-page packet containing the arbitration clause. But defendant’s initial affidavits described one document configuration (two double-sided terms pages), and its reply affidavits described a different configuration (signature page/first terms page, with additional pages following). The court found:

  • Procedural defect: Under Kennelly v Mobius Realty Holdings LLC, reply papers cannot cure a deficient prima facie showing.
  • Substantive defect: The inconsistent narratives created a “void” on what was reviewed and delivered, undermining the claim of actual notice.
  • Evidentiary weakness: The passage of time affected recollection; notably, Deleon did not reaffirm in reply that he reviewed the full terms (including arbitration) with O’Hara.

On this record, the defendant did not establish “direct and explicit” knowledge of arbitration by the consumer.

3. Inquiry notice failed because arbitration was not clearly and conspicuously presented

The opinion’s most consequential reasoning concerns inquiry notice. Defendant argued that because the signature page and first terms page referenced additional terms, plaintiffs were obliged to investigate and were bound even if they did not read the rest. The court rejected this with a critical distinction:

  • The references on the signature page pointed to provisions about a green energy program (6), cancellation (8), a cash-back feature (11), and an LED program (20)—not dispute resolution or arbitration.
  • Inquiry notice is term-specific for material terms: “Clear and conspicuous presentation of material terms unrelated to arbitration cannot equate to inquiry notice of an arbitration provision, a separate material contractual term.”
  • Because arbitration was not called to the consumer’s attention and not shown to have been made available for review, a reasonably prudent consumer would not have been on notice that they were waiving access to court.

The court thus treated arbitration as a material term requiring its own clear presentation; generalized “there are more terms” signals, especially pointing to unrelated topics, do not do the work.

4. Incorporation language did not expand to unseen pages

Defendant also relied on a parenthetical above the signature line: “(By signing below, I . . . understand and agree to the Terms and Conditions of the Agreement(s)).” But because defendant failed to prove additional pages were provided, the court held the incorporation provision “applied only to the terms and conditions on the reverse side of the signature page.”

This is a practical formation holding: incorporation by reference cannot incorporate what the proponent cannot prove was actually tendered (or at least made available) at the time of contracting.

5. Class action waiver fell for the same formation reason

Defendant’s class action waiver argument failed because the waiver appeared in the same purported additional terms following the arbitration clause. Without proof plaintiffs agreed to those pages, there was no basis to enforce the waiver.

C. Impact

  • Higher evidentiary discipline for businesses using field sales: Companies relying on door-to-door (or similarly “offline”) enrollment must be able to prove, consistently and in admissible form, what documents were provided and how key terms—especially arbitration—were presented.
  • Arbitration notice cannot be “derivative”: The decision signals that notice of extra terms about unrelated benefits or programs does not put consumers on inquiry notice of arbitration. Businesses should expect courts to require a clear cue that dispute resolution rights are being altered.
  • Reply affidavits are risky in arbitration motions: Knight reinforces that shifting factual stories in reply can be fatal, particularly where the movant bears the initial burden of showing an agreement was made.
  • Class waivers tied to arbitration clauses face the same formation scrutiny: If the arbitration clause is not proven, companion waivers in the same unseen terms will also fail at the threshold.
  • CPLR 4544 question remains open here: The court expressly avoided deciding FAA preemption of CPLR 4544 because it resolved the case on formation/notice grounds. Future litigants will still contest whether CPLR 4544’s type-size rule can invalidate arbitration-related incorporation language in FAA-governed contracts.

IV. Complex Concepts Simplified

  • FAA (Federal Arbitration Act): A federal statute that generally requires courts to enforce arbitration agreements. It does not force arbitration without a contract—courts must first determine whether an arbitration agreement was formed.
  • Contract formation vs. arbitrability: Formation asks “did we agree to arbitrate at all?” Arbitrability asks “does this dispute fall within the arbitration clause, or is the clause enforceable despite defenses?” Formation is for courts in the first instance.
  • Actual notice: The person actually knew the term—e.g., it was shown to them, they received it, or it was directly reviewed with them.
  • Inquiry notice: Even if the person did not read a term, they can be bound if the term was presented clearly and conspicuously as part of the contract and made available for review, such that a reasonably prudent person would look.
  • Incorporation by reference: A contract can adopt additional terms by referring to them, but typically only if the referenced terms are adequately identified and available at the time of assent. A vague reference cannot incorporate documents the proponent cannot prove were provided or accessible.
  • Prima facie burden on the movant: The party seeking arbitration must first show an agreement to arbitrate was made; only then do questions of enforcement and scope follow.
  • Why “unrelated term references” don’t create notice of arbitration: Arbitration changes the forum and typically waives court adjudication; the court treated it as a distinct, material term that must be brought to the consumer’s attention—not hidden behind references to unrelated program features.

V. Conclusion

Knight v Family Energy Inc. strengthens a formation-focused limit on the FAA’s pro-arbitration policy: arbitration is a matter of consent, and consent requires proof of actual or inquiry notice of the arbitration clause itself. A business cannot establish inquiry notice of arbitration merely by showing that a consumer signed a page referencing other, unrelated additional provisions. The decision also underscores that inconsistent affidavits and attempts to repair foundational proof defects in reply papers can defeat a motion to compel arbitration. In consumer contracting—especially door-to-door enrollments— Knight pushes arbitration proponents toward clearer presentation, better documentation, and steadier evidentiary practice.