401 F.Supp.3d 928
N.D. Cal.2019Background
- Plaintiffs (six named initially; later sought to add a seventh, Buckley) sued MoviePass and its parent Helios alleging breaches of subscription contracts, deceptive consumer practices, and RICO/UCL claims based on MoviePass’s changes to service and Terms of Use (TOU).
- MoviePass’s TOUs (accepted online by named plaintiffs) were updated multiple times after October 30, 2017; each relevant TOU contained an arbitration clause and a jurisdiction/venue clause pointing to New York courts for injunctive/equitable relief.
- Defendants moved to compel arbitration and to stay the case as to the named plaintiffs who accepted TOUs containing arbitration provisions. Plaintiffs opposed, arguing no valid agreement, illusory/unconscionable terms, ambiguity about equitable claims, and that arbitration was optional.
- Plaintiffs moved to amend to add Amy Buckley, who subscribed before MoviePass added an arbitration provision to its TOU; defendants opposed as untimely. The court considered both motions together.
- The court held that each named plaintiff who accepted a TOU containing an arbitration clause manifested consent and that the arbitration clauses cover the disputes (including equitable claims), leaving enforceability defenses to the arbitrator under the parties’ delegation. Defendants’ motion to compel arbitration was granted as to six named plaintiffs; the request to stay the entire action was denied because Buckley’s claims (pre-arbitration-TOU subscriber) will proceed in court.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Formation: Did plaintiffs consent to arbitration? | Plaintiffs: no meeting of the minds; MoviePass’s unilateral modification clause prevented assent. | Defendants: each named plaintiff clicked/checked acceptance of TOU containing arbitration; contract formed. | Court: Named plaintiffs manifested consent when they accepted the TOU; no limited trial on formation. |
| Scope: Do arbitration clauses cover equitable claims? | Plaintiffs: TOU carves out injunctive/equitable relief for courts, so equitable claims are exempt. | Defendants: jurisdictional language reserves court authority for injunctive relief in aid of arbitration; clauses require arbitration. | Court: Resolved ambiguity in favor of arbitration (following Comedy Club); equitable claims not categorically exempt. |
| Enforceability/delegation: Are defenses (illusory/unconscionable) for the court? | Plaintiffs: arbitration remedy is illusory/unconscionable, so clause unenforceable. | Defendants: parties delegated arbitrability/enforceability questions to arbitrator. | Court: Parties clearly delegated arbitrability to an arbitrator; arbitrator decides enforceability defenses. |
| Amendment & Stay: Should plaintiff be allowed to add Buckley and should the whole case be stayed? | Plaintiffs: amendment relevant because Buckley subscribed before arbitration clause; case should proceed for her and class claims. | Defendants: amendment is unduly delayed and would frustrate arbitration/stay. | Court: Grant leave to add Buckley (no undue prejudice); deny stay of entire action — only claims of plaintiffs bound to arbitration stayed. |
Key Cases Cited
- Circuit City Stores, Inc. v. Adams, 532 U.S. 105 (arbitration governed by FAA)
- Stolt–Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662 (give effect to contractual rights and expectations in arbitration)
- Volt Info. Sciences, Inc. v. Board of Trustees of Leland Stanford Junior Univ., 489 U.S. 468 (arbitration is a matter of consent)
- Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126 (court must decide existence and scope of arbitration agreement)
- Norcia v. Samsung Telecomms. Am., LLC, 845 F.3d 1279 (burden to prove existence of arbitration agreement)
- Three Valleys Mun. Water Dist. v. E.F. Hutton & Co., 925 F.2d 1136 (opponent to arbitration receives benefit of all reasonable doubts on formation)
- Comedy Club, Inc. v. Improv West Associates, 553 F.3d 1277 (ambiguity regarding equitable claims resolved in favor of arbitration)
- Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (gateway arbitrability issues generally for courts unless clearly delegated)
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (apply ordinary state-law principles to questions of contract formation)
- Rent‑A‑Center, West, Inc. v. Jackson, 561 U.S. 63 (arbitration agreements may be invalidated by general contract defenses)