Virtual (SuperPoke!) Pet Owners Must Arbitrate Their Claims Against Google and Slide — Abreu v. Slide

[Post by Venkat Balasubramani]

Abreu v. Slide, Inc., 12 0042 WHA (N.D. Cal.; July 12, 2012)

This is a motion to compel arbitration filed by Google and Slide, the developer of SuperPoke! Pets. As mentioned by Eric in this initial post about the case, SuperPoke! is a game developed by Slide, which was later bought by Google. The game allowed you to care for “virtual pets” and earn coins. You could use these coins to customize the environment for your virtual pets. You could also buy virtual currency which you could use to purchase certain premium items. Users apparently bought a bunch ($6MM worth, according to an earlier filing by Google) of virtual currency before Google ultimately shut the game down. Users sued, alleging that termination of SuperPoke! Pets by Google and Slide violated California consumer protection laws and California common law. Defendants moved to dismiss, or in the alternative to force the consumer-plaintiffs to arbitrate their claims.

Judge Alsup lays out the general standards for enforcement of arbitration agreements, noting the federal policy in favor of arbitration where there is a valid contract. He cites to Concepcion, a Supreme Court case which looked with disfavor on a California statute which imposed higher burdens for enforceability specifically on arbitration agreements. The court’s role is to determine whether there’s a valid and enforceable contract and whether the dispute falls within the parameters of the contract. Here, the terms of use contain an arbitration provision and it clearly applies to the dispute. The remaining question is whether defendants can show that the arbitration clause is unenforceable because it’s unconscionable. No luck on this front.

Plaintiffs attacked the arbitration clause in a variety of ways, but Judge Alsup says many of their challenges do not go to the enforceability of the arbitration provision and are aimed at the terms of service. These challenges (90 day limitation on recovery of monetary damages, a one year statute of limitations) are of no help to plaintiffs. The court turns to the four objections which are focused on the arbitration provision:

Waiver of injunctive relief: The court says that a one-way waiver of injunctive relief may be problematic (even though it doesn’t necessarily go the arbitration provision itself and is more directed overall at the terms of service). In any event, the court says that this is severable.

Filing fee: Plaintiffs complained about the filing fee, arguing that that $775 filing fee would be unduly burdensome. The court says that the actual filing fee is $125 (or $375 at the most) and this can’t be considered excessive.

No attorneys’ fees: Plaintiffs also say that the fact that the arbitration clause does not provide prevailing plaintiffs an opportunity to recover fees makes it unconscionable. The court says that there’s no requirement that an arbitration clause must provide for the recovery of fees.

Informal negotiations requirement: Finally, the court rejects plaintiffs’ argument that the requirement that they enter into “informal negotiations” prior to asserting their claim renders the clause unconscionable. This obviously does not get any play.

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Ouch. Judge Alsup’s ruling puts this putative class action on ice. Without the possibility of recovering fees, I can’t see the plaintiffs lawyers pursuing this one (although if plaintiffs spent $6MM, maybe this is enough to maintain the interest of the lawyers).

How arbitration clauses in online terms would fare post-Concepcion was an open question. Although there are not enough data points to be sure, the available rulings indicate that these clauses will enjoy robust success. Companies have taken the Supreme Court’s cue and are adding back arbitration provisions into their user agreements, including sometimes adding class action waivers. (See, e.g., eBay.) At least in one instance, plaintiffs tried to attack this type of a change preemptively, but their claims (which were brought against Sony when Sony changed the terms of its PlayStation 3 terms to require arbitration) did not meet with success. (See “Users Can’t Sue Sony for Changing Online Terms to Require Arbitration – Fineman v. Sony Network Entertainment.”)

Judge Alsup’s decision to reject plaintiffs’ arguments around the limitation clauses was interesting. A ninety day limitation on money damages and a one year statute of limitations is fairly harsh. Given the widely accepted notion that people don’t read online terms, I question whether other courts would enforce these types of draconian provisions as freely. (The court’s distinction between arguments that go to the terms and those that are focused on the arbitration clause was interesting. Even though the limitations/exculpatory provisions do not speak specifically to arbitration, the net effect is to nuke a plaintiff’s claims. I found this distinction somewhat formalistic.)

It may be that the real action is around procedural unconscionability. As the Qwest, Clearwire, Harris v. Blockbuster, and other cases linked below indicate, a surefire way to challenge an arbitration clause is to challenge formation or notice of the change to require arbitration (or on the basis that it can be changed “at any time, with or without notice”). Companies who change online terms to include arbitration provisions would be wise to dot their i’s and cross their t’s in this regard.

Related posts:

Users Can’t Sue Sony for Changing Online Terms to Require Arbitration – Fineman v. Sony Network Entertainment

Second Life Forum Selection Clause Upheld–Evans v. Linden

Zynga Wins Arbitration Ruling on “Special Offer” Class Claims Based on Concepcion — Swift v. Zynga

Another Ruling Challenging “Check the Website for Amendments” Contract Provisions–Roling v. E*Trade

Stop Saying “We Can Amend This Agreement Whenever We Want”!–Harris v. Blockbuster

Clickthrough Agreement With Acknowledgement Checkbox Enforced–Scherillo v. Dun & Bradstreet

Ninth Circuit Strikes Down Contract Amendment Without Notice–Douglas v. Talk America

Qwest Gets Mixed Rulings on Contract Arbitration Issue—Grosvenor v. Qwest & Vernon v. Qwest

Vendor Fails to Form Either an Online or Paper Contract With Customers–Kwan v. Clearwire

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