Lazo v. Redcliffe Medical Devices, Inc., 2:21-cv-10336

Background

Plaintiffs purchased "Leaf Masks" from Redcliffe via Redcliffe's site (Leaf.healthcare) and an Indiegogo crowdfunding campaign; many allege non-delivery or defective, contaminated masks.
Redcliffe marketed the masks aggressively on Indiegogo (raising about $4.4 million) and elsewhere; Indiegogo later removed the campaign.
Indiegogo's website Terms of Use contain an arbitration agreement and class-action waiver applying to "Users" (defined broadly to include Contributors and visitors).
Plaintiffs sued Redcliffe and Indiegogo alleging Lanham Act violations, breach of contract, fraud, and sought a preliminary injunction and a constructive trust.
Indiegogo moved to compel arbitration; Redcliffe also moved to compel arbitration. Shortly before the hearing Redcliffe filed Chapter 7 bankruptcy.
The court compelled arbitration as to Indiegogo (finding the arbitration clause enforceable under California unconscionability law), denied Redcliffe's motion as moot, dismissed Indiegogo from the case, and stayed the case pending Redcliffe's bankruptcy resolution.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Enforceability of Indiegogo arbitration clause (unconscionability)	Arbitration clause is procedurally and substantively unconscionable (adhesive contract, confusing hyperlink to JAMS rules, oppressive terms, unique product marketplace).	Clause is a valid clickwrap with opt-out, hyperlinked JAMS rules are sufficient, terms are clear and mutually binding.	Court: Clause is not unconscionable under California law; enforceable.
Scope: Do Plaintiffs’ claims fall within Indiegogo’s arbitration agreement?	Plaintiffs argued the agreement did not cover their disputes or that it was ambiguous.	Indiegogo argued the Terms broadly cover "any and all disputes between us" and define Users to include Contributors.	Court: Terms clearly cover Plaintiffs’ disputes with Indiegogo; arbitration compelled.
Effect of Redcliffe bankruptcy filing on claims and motions	Plaintiffs sought injunction and relief against Redcliffe; opposed arbitration motion.	Redcliffe filed Chapter 7 petition, invoking automatic stay.	Court: Redcliffe's bankruptcy invokes the automatic stay; motions against Redcliffe denied as moot and case stayed pending bankruptcy.

Key Cases Cited

AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011) (FAA preempts state rules that defeat arbitration agreements)
Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (1983) (liberal federal policy favoring arbitration and resolve doubts in favor of arbitration)
Great Earth Cos., Inc. v. Simons, 288 F.3d 878 (6th Cir. 2002) (party opposing arbitration must show genuine issue of material fact)
Javitch v. First Union Sec., Inc., 315 F.3d 619 (6th Cir. 2003) (limited review to determine existence and scope of arbitration agreement)
Dr.'s Assocs., Inc. v. Distajo, 107 F.3d 126 (2d Cir. 1997) (standard for opposing arbitration)
Doctors' Assocs., Inc. v. Casarotto, 517 U.S. 681 (1996) (state-law defenses to arbitration must be generally applicable)
OTO, L.L.C. v. Kho, 8 Cal.5th 111 (Cal. 2019) (California unconscionability framework: procedural and substantive prongs)
Armendariz v. Found. Health Psychcare Servs., Inc., 24 Cal.4th 83 (2000) (sliding scale for procedural and substantive unconscionability)
Pinnacle Museum Tower Ass'n v. Pinnacle Mkt. Dev. (US), LLC, 55 Cal.4th 223 (2012) (procedural unconscionability focuses on oppression or surprise)
Mohamed v. Uber Techs., Inc., 848 F.3d 1201 (9th Cir. 2016) (opt-out opportunity weighs against finding adhesion)
Tompkins v. 23andMe, Inc., 840 F.3d 1016 (9th Cir. 2016) (unilateral modification clause does not necessarily render arbitration provision unconscionable)
Ingle v. Circuit City Stores, Inc., 328 F.3d 1165 (9th Cir. 2003) (contrasting decision finding some unilateral modification clauses unconscionable)
Hergenreder v. Bickford Senior Living Grp., LLC, 656 F.3d 411 (6th Cir. 2011) (choice-of-law analysis in arbitration contexts)