555 F.Supp.3d 932
N.D. Cal.2021Background
- Plaintiffs (three Direct Purchasers — Martinez, McGee, Flannery; multiple Indirect Purchasers and Indirect Resellers) allege Juul Labs, Inc. (JLI) and Altria entered an agreement (culminating in Altria's 35% equity investment) that included a non‑compete/related commitments that caused Altria to withdraw its competing MarkTen Elite product, harming competition in the closed‑system e‑vapor market.
- Plaintiffs assert federal (Sherman Act §§1,2; Clayton Act §7) and related state antitrust and consumer protection claims; they seek damages and injunctive/declaratory relief; DPPs brought claims against two JLI directors (Pritzker, Valani).
- JLI moved to compel arbitration and strike class claims based on website Terms and Conditions (T&C) containing an arbitration clause and class‑action waiver presented during account creation (sign‑in wrap with a clickbox inserted after Aug 9, 2018).
- Court found the post‑Aug 9, 2018 sign‑in process produced sufficient constructive assent to compel arbitration for the three named DPPs, enforced the arbitration/class waiver but severed a one‑year limitations provision as substantively unconscionable.
- The court held the arbitration covers claims against JLI and the two director defendants (nonsignatories) and granted leave to the DPPs to amend to substitute a representative not bound by the T&C; it stayed effect for 30 days and required plaintiffs to elect stay vs dismissal of those arbitrable claims.
- On motions to dismiss, the court (a) denied dismissal of most federal antitrust claims (finding plaintiffs plausibly alleged a per se agreement/unlawful restraint and antitrust injury), (b) dismissed certain equitable/injunctive claims for lack of pleaded future injury (leave to amend), (c) dismissed DPP injunctive claims and Section 7 claims against the director defendants with prejudice, and (d) dismissed UCL and some unjust enrichment claims insofar as plaintiffs must plead inadequacy of legal remedies (leave to amend).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability of JLI website arbitration & class‑waiver | DPPs: they did not actually see or read T&C; no assent | JLI: post‑Aug 9, 2018 clickbox + proximate hyperlinked T&C gave constructive assent | Enforceable as to the three named DPPs who created accounts after Aug 9, 2018; arbitration compelled; one‑year SOL severed |
| Procedural/substantive unconscionability of arbitration | DPPs: adhesive, surprise, shortened SOL, forum and discovery limits, JLI retained right to court injunctions | JLI: typical consumer T&C; lack of negotiation alone insufficient; discovery and forum provisions not oppressive | Mostly not unconscionable; one‑year SOL substantively unconscionable and severed; remaining provisions enforced |
| Binding nonsignatory directors to arbitration | DPPs: directors acted for personal enrichment and not as JLI agents; thus not bound | Defs: agency/ordinary contract principles bind agents/officers to signatory arbitration clauses | Directors Pritzker and Valani bound by arbitration because claims arise from acts taken as JLI agents; arbitration covers claims against them |
| Adequacy of antitrust pleadings (per se agreement, antitrust injury) | Plaintiffs: alleged unwritten agreement and writings + conduct show Altria agreed to exit market, causing supracompetitive prices, reduced output/innovation | Defs: written agreements did not expressly force exit; market data (Wells Fargo) shows JLI prices/output fell; alternative benign explanations (regulatory pressure, IP protection) | Plaintiffs plausibly alleged a per se agreement and antitrust injury at pleading stage; dismissal denied on merits; future‑injury allegations for equitable relief must be added |
| Clayton Act §7 claims against Altria, JLI, and directors | Plaintiffs: Altria was an actual (or actual‑potential) competitor; acquisition foreclosed re‑entry and reduced competition; JLI can be defendant as seller/asset acquirer | Defs: Altria had already exited by closing; JLI didn't acquire stock; directors acquired no assets so cannot be §7 defendants | §7 claim against Altria and JLI survived; §7 claims against director defendants dismissed with prejudice |
| State law claims, UCL and unjust enrichment | Plaintiffs: state claims track federal claims and seek restitution; remedies at law may be inadequate | Altria: state claims are derivative, captions improperly ask for damages, unjust enrichment requires Altria to have received benefit; remedies at law available | State claims generally survive with caveats: UCL/unjust enrichment under several states dismissed for lack of allegation that legal remedies are inadequate (leave to amend); some service‑and‑jurisdiction procedural issues cured by leave to serve/amend |
Key Cases Cited
- Nguyen v. Barnes & Noble, 763 F.3d 1171 (9th Cir. 2014) (internet contract formation; constructive/inquiry notice standard for browsewrap/sign‑in wrap agreements)
- Colgate v. JUUL Labs, Inc., 402 F. Supp. 3d 728 (N.D. Cal. 2019) (prior JUUL decision addressing conspicuity of website T&C and enforceability)
- Meyer v. Uber Techs., Inc., 868 F.3d 66 (2d Cir. 2017) (sign‑in wrap enforcement where warning and hyperlinks were conspicuous)
- Armendariz v. Found. Health Psychcare Servs., Inc., 24 Cal.4th 83 (Cal. 2000) (procedural and substantive unconscionability framework; balancing test)
- Baltazar v. Forever 21, Inc., 62 Cal.4th 1237 (Cal. 2016) (challenge to enforcement where rules were not attached does not necessarily render arbitration unconscionable)
- Letizia v. Prudential Bache Sec., Inc., 802 F.2d 1185 (9th Cir. 1986) (nonsignatories may be bound under ordinary contract/agency principles)
- Somers v. Apple, Inc., 729 F.3d 953 (9th Cir. 2013) (pleading defect where market facts contradicted overcharge theory in antitrust complaint)
- Knevelbaard Dairies v. Kraft Foods, Inc., 232 F.3d 979 (9th Cir. 2000) (elements of antitrust injury and test for antitrust standing)
- In re National Football League's Sunday Ticket Antitrust Litig., 933 F.3d 1136 (9th Cir. 2019) (look holistically at interlocking agreements when assessing market effects under rule of reason)
- DiCarlo v. MoneyLion, Inc., 988 F.3d 1148 (9th Cir. 2021) (public injunctive relief is generally available in arbitration)