Justia Arbitration & Mediation Opinion Summaries

In September 2021, cybercriminals targeted a chain of pawnshops, a payday lender, and a prepaid-card company, exposing customers' personal information. The companies informed customers of the breach weeks later, leading to three nationwide class-action lawsuits in the District of Minnesota. The companies moved to dismiss the cases, arguing lack of standing and failure to state a claim, but did not mention arbitration. They continued to engage in litigation activities, including briefing issues, preparing a discovery plan, and requesting a pretrial conference. There is a dispute about whether the companies mentioned arbitration during the pretrial conference, but no formal motion to compel arbitration was filed until months later.The United States District Court for the District of Minnesota found that the companies had waived their right to arbitration by substantially engaging in litigation. The court noted that the companies had no credible explanation for their delay in filing the motion to compel arbitration, despite allegedly deciding to do so during the pretrial conference.The United States Court of Appeals for the Eighth Circuit reviewed the case and affirmed the district court's decision. The appellate court applied a two-part test to determine waiver of the right to arbitration, focusing on whether the party knew of the right and acted inconsistently with it. The court concluded that the companies had knowledge of their right to arbitration and acted inconsistently by engaging in extensive litigation activities. The companies' actions, including participating in a motion-to-dismiss hearing and scheduling mediation, were deemed to have substantially invoked the litigation machinery, thus waiving their right to arbitration. The court emphasized that the companies' delay and litigation conduct were inconsistent with promptly seeking arbitration. View "Thomas v. Pawn America Minnesota, LLC" on Justia Law

The case involves a group of consumers who filed arbitration claims against Samsung Electronics Co., Ltd. and Samsung Electronics America, Inc., alleging that Samsung unlawfully collected and stored sensitive biometric data through their electronic devices, in violation of Illinois law. Samsung denied the allegations and refused to pay the administrative filing fees required by the American Arbitration Association (AAA). The AAA terminated the arbitration proceedings, and the consumers filed a petition to compel arbitration in district court. The district court ordered Samsung to arbitrate and to pay the associated AAA filing fees. Samsung appealed, disputing the existence of an arbitration agreement with the consumers and challenging the district court’s authority to require it to pay the AAA’s fees.The United States Court of Appeals for the Seventh Circuit reversed the district court's decision. The court found that the consumers failed to meet their evidentiary burden in proving the existence of an arbitration agreement with Samsung. Furthermore, the court held that the district court exceeded its authority by ordering Samsung to pay the AAA's filing fees. The court reasoned that the parties' alleged agreement incorporated the AAA's rules and procedures, which granted the AAA substantial discretion over resolving fee disputes. Therefore, the court concluded that the arbitration had been conducted according to the terms of the alleged agreement, and the district court did not have the authority to order Samsung to pay the AAA's fees. View "Wallrich v. Samsung Electronics America, Inc." on Justia Law

A group of individuals, including a minor, filed a class action lawsuit against Warner Bros. Entertainment, Inc. for alleged misrepresentations related to the mobile application Game of Thrones: Conquest (GOTC). The plaintiffs claimed that Warner Bros. engaged in false and misleading advertising within the game. In response, Warner Bros. moved to compel arbitration of all claims based on the GOTC Terms of Service, which users agree to by tapping a “Play” button located on the app’s sign-in screen. The district court denied Warner Bros.' motion, finding that the notice of the Terms of Service was insufficiently conspicuous to bind users to them.The case was appealed to the United States Court of Appeals for the Ninth Circuit. The lower court had found that Warner Bros. failed to provide reasonably conspicuous notice of its Terms of Service, thus denying the motion to compel arbitration. The district court focused on whether the context of the transaction put the plaintiffs on notice that they were agreeing to the Terms of Service, concluding that the app did not involve a continuing relationship that would require some terms and conditions.The Ninth Circuit Court of Appeals reversed the district court's decision. The appellate court held that the district court erred in finding that Warner Bros. failed to provide reasonably conspicuous notice. The court found that the context of the transaction and the placement of the notice were both sufficient to provide reasonably conspicuous notice. The court also rejected the plaintiffs' argument that the arbitration agreement was unconscionable due to its ban on public injunctive relief. The court concluded that the unenforceability of the waiver of one’s right to seek public injunctive relief did not make either this provision or the arbitration agreement unconscionable or otherwise unenforceable. The case was remanded for further proceedings. View "KEEBAUGH V. WARNER BROS. ENTERTAINMENT INC." on Justia Law

Yasmin Varela filed a class action lawsuit against State Farm Mutual Automobile Insurance Company (State Farm) after a car accident. Varela's insurance policy with State Farm entitled her to the "actual cash value" of her totaled car. However, she alleged that State Farm improperly adjusted the value of her car based on a "typical negotiation" deduction, which was not defined or mentioned in the policy. Varela claimed this deduction was arbitrary, did not reflect market realities, and was not authorized by Minnesota law. She sued State Farm for breach of contract, breach of the covenant of good faith and fair dealing, unjust enrichment, and violation of the Minnesota Consumer Fraud Act (MCFA).State Farm moved to dismiss the complaint, arguing that Varela's claims were subject to mandatory, binding arbitration under the Minnesota No-Fault Automobile Insurance Act (No-Fault Act). The district court granted State Farm's motion in part, agreeing that Varela's claims for breach of contract, breach of the covenant of good faith and fair dealing, and unjust enrichment fell within the No-Fault Act's mandatory arbitration provision. However, the court found that Varela's MCFA claim did not seek the type of relief addressed by the No-Fault Act and was neither time-barred nor improperly pleaded, and thus denied State Farm's motion to dismiss this claim.State Farm appealed, arguing that Varela's MCFA claim was subject to mandatory arbitration and should have been dismissed. However, the United States Court of Appeals for the Eighth Circuit dismissed the appeal for lack of jurisdiction. The court found that State Farm did not invoke the Federal Arbitration Act (FAA) in its motion to dismiss and did not file a motion to compel arbitration. The court concluded that the district court's order turned entirely on a question of state law, and the policy contained no arbitration provision for the district court to "compel." Therefore, State Farm failed to establish the court's jurisdiction over the interlocutory appeal. View "Varela v. State Farm Mutual Automobile Insurance Co." on Justia Law

An online business, Interactive Life Forms, LLC, was sued by a customer, Brinan Weeks, who alleged that the company falsely advertised a product he purchased. In response, the company invoked an arbitration clause found in the terms of use on its website, claiming that these terms bound customers irrespective of whether they clicked on the link or provided any affirmative assent. The company argued that by using the website and making a purchase, Weeks had agreed to the terms of use, which included a provision mandating arbitration for any disputes.The trial court denied the motion to compel arbitration, finding that the company failed to show the parties agreed to arbitrate their dispute. The court held that the link to the terms of use was insufficient to put a reasonable user on notice of the terms of use and the arbitration agreement.On appeal, the Appellate Court of the State of California, Second Appellate District Division One, affirmed the trial court’s decision. It held that the company failed to establish that a reasonably prudent user would be on notice of the terms of use. The court rejected the company's argument that it should depart from precedent, which generally considers browsewrap provisions unenforceable, and also dismissed the company's claim that Federal Arbitration Act preempts California law adverse to browsewrap provisions. The court concluded there were no grounds to deviate from this precedent, and that the Federal Arbitration Act did not preempt California law concerning browsewrap agreements. The court emphasized that the company had the onus to put users on notice of the terms to which it wished to bind consumers. View "Weeks v. Interactive Life Forms, LLC" on Justia Law

In this case, Damien T. Davis and Johnetta H. Lane ("the plaintiffs") filed suit against Nissan North America, Inc. and Nissan of San Bernardino ("Nissan") after they allegedly bought a faulty Nissan vehicle with a defective transmission. Nissan attempted to compel arbitration as per the arbitration clause in the sale contract between plaintiffs and the dealership. However, the trial court denied the motion, ruling that Nissan, not being a party to the contract, could not invoke the clause based on the doctrine of equitable estoppel.Nissan appealed the decision, arguing that the trial court erred by refusing to compel arbitration based on equitable estoppel. However, the Court of Appeal, Fourth Appellate District Division One, State of California, agreed with the trial court's ruling reasoning that Nissan's reliance on the doctrine of equitable estoppel was misplaced. It explained that equitable estoppel applies when a party's claims against a non-signatory are dependent upon the underlying contractual obligations. Here, the plaintiffs' claims were not founded on the sale contract's terms, but rather on Nissan's statutory obligations under the Song-Beverly Act relating to manufacturer warranties. The court concluded that the plaintiffs are pursuing their statutory and tort claims in court, and there was no inequity in allowing them to do so.Therefore, Nissan's motion to compel arbitration was denied, and the trial court's order was affirmed. View "Davis v. Nissan North America, Inc." on Justia Law

The case at hand involves a putative class action brought against RAC Acceptance East, LLC, by Shannon McBurnie and April Spruell. The plaintiffs argue that two fees imposed by RAC, operators of retail stores that lease household and electronic items through rent-to-own contracts, violated California consumer protection laws. RAC sought to compel arbitration, citing an arbitration agreement with the plaintiffs. The district court denied RAC's motion, and RAC appealed the decision.RAC argued that a recent Supreme Court decision, Viking River Cruises, Inc. v. Moriana, implicitly abrogated a prior Ninth Circuit decision, Blair v. Rent-A-Center, Inc., which held that RAC's arbitration agreement was unenforceable under California law. The Ninth Circuit disagreed, stating that Viking River was not irreconcilable with Blair, and that Viking River dealt with different claims from those at issue in this case. Therefore, Blair remained binding.RAC also argued that the plaintiffs' claim for public injunctive relief was mooted by a Consent Decree it entered into with the California Attorney General. The court disagreed, stating that the Consent Decree did not address whether the $45 processing fee in this case violates the law, and therefore, the challenge to the fee was not moot.However, RAC contended that the plaintiffs lacked standing to challenge a $1.99 expedited payment fee because Spruell did not actually pay the fee. The court remanded this issue to the district court for further consideration. As a result, the Ninth Circuit affirmed the district court's denial of RAC's motion to compel arbitration in part and remanded the case for further proceedings on the issue of the standing of the plaintiffs to challenge the $1.99 expedited payment fee. View "McBurnie v. RAC Acceptance East, LLC" on Justia Law

In the case of Maryann Jones v. Solgen Construction, LLC and GoodLeap, LLC, the Court of Appeal of the State of California Fifth Appellate District affirmed the trial court's decision not to compel arbitration. The case concerned a business relationship involving the installation of home solar panels. The appellants, Solgen Construction and GoodLeap, had appealed the trial court's denial of their separate motions to compel arbitration, arguing that the court had erred in several ways, including by concluding that no valid agreement to arbitrate existed.Jones, the respondent, had filed a lawsuit alleging fraudulent misrepresentation, fraudulent concealment, negligence, and violations of various consumer protection laws. She contended that she had been misled into believing she was signing up for a free government program to lower her energy costs, not entering into a 25-year loan agreement for solar panels. The appellants argued that Jones had signed contracts containing arbitration clauses, but the court found that the appellants had failed to meet their burden of demonstrating the existence of a valid arbitration agreement. The court also held that the contract was unenforceable due to being unconscionable.The appellate court affirmed the trial court's decision, rejecting the appellants' arguments that an evidentiary hearing should have been held and that the court had erred in its interpretation of the evidence and the law. It found that the trial court had not abused its discretion and that its finding that the appellants failed to meet their burden of proof was not erroneous as a matter of law. View "Jones v. Solgen Construction" on Justia Law

The United States Court of Appeals for the Ninth Circuit affirmed the lower court's order to compel arbitration and dismiss without prejudice a series of lawsuits against several sports goods e-commerce companies (the defendants). The lawsuits were brought by several plaintiffs, who were consumers that purchased goods online from the defendants and had their personal information stolen during a data breach on the defendants' websites. The defendants moved to compel arbitration based on the arbitration provision in their terms of use. The appellate court held that the plaintiffs had sufficient notice of the arbitration provision and that the arbitration clause was not invalid under California law, was not unconscionable, and did not prohibit public injunctive relief. Furthermore, the parties agreed to delegate the question of arbitrability to an arbitrator according to the commercial rules and procedures of JAMS, a private alternative dispute resolution provider. View "PATRICK V. RUNNING WAREHOUSE, LLC" on Justia Law

Charles Ramsey, a subscriber to Comcast Cable Communications, LLC’s Xfinity services, filed a lawsuit against Comcast for violations of California’s consumer protection statutes. He alleged that Comcast engaged in unfair, unlawful, and deceptive business practices under the Consumers Legal Remedies Act (CLRA) and the unfair competition law (UCL). Ramsey’s complaint sought injunctive relief, not monetary damages. Comcast filed a petition to compel arbitration pursuant to the arbitration provision in the parties’ subscriber agreement which required the parties to arbitrate all disputes and permitted the arbitrator to grant only individual relief. The trial court denied the petition based on the Supreme Court’s decision in McGill v. Citibank, which held that a predispute arbitration provision that waives a plaintiff’s right to seek public injunctive relief in any forum is unenforceable under California law. On appeal, Comcast argued that the trial court erred in concluding that Ramsey was seeking public injunctive relief. Comcast further argued that the Federal Arbitration Act (FAA) preempts McGill. The Court of Appeal of the State of California Sixth Appellate District held that Ramsey’s complaint seeks public injunctive relief, and that McGill is not preempted, thus affirming the trial court’s order. View "Ramsey v. Comcast Cable Communications, LLC" on Justia Law