Pokémon Go Catches A Win In Enforcing Arbitration Clause

• Published date: 18 August 2022
• Subject Matter: Litigation, Mediation & Arbitration, Arbitration & Dispute Resolution
• Law Firm: McCarthy Tétrault LLP
• Author: The International Arbitration Blog, Carley Frazer and Ahmed Khalifa

Overview

In Petty v Niantic Inc., 2022 BCSC 1077, the British Columbia Supreme Court addressed the enforceability of arbitration clauses in consumer transactions, providing guidance on drafting measures to ensure an arbitration agreement survives challenges on grounds of unconscionability and public policy.

In this case, the Defendants, namely: Niantic Inc. (developer of interactive smart phone games) and Warner Bros Entertainment Inc. (producer of game content), sought a stay of the class proceeding on the basis that the Plaintiffs agreed to be bound by the applicable terms of service (the "Terms"), which require disputes regarding services provided be resolved by binding arbitration (the "Arbitration Agreement"). The Terms provided that "if you live in the US or another jurisdiction which allows you to agree to arbitration, you and Niantic agree that any disputes will be settled by binding arbitration."¹

In the result, the Court granted a partial stay, finding Niantic had carefully drafted their Arbitration Agreement to include a 30 day opt-out period, consumer cost mitigation provisions, and allowed consumers the choice of proceeding in small claims court or arbitration for their disputes. The Court noted the Terms were expressly clear and thorough, and were crafted in a manner that did not perpetuate an unfair informational imbalance in favour of the Defendants. This provided a basis through which the Court distinguished this case from UberTechnologies Inc. v. Heller, 2020 SCC 16. In Uber, a majority of the Supreme Court of Canada held that the employee could not have been expected to appreciate the financial and legal implications of agreeing to the terms even if he read and reviewed the contract. ²

Facts and Background

Justice Mayer of the British Columbia Supreme Court granted a partial stay to a class proceeding brought forth by Sharise Petty and David Stasch, representative Plaintiffs on behalf of a class of residents of British Columbia and Alberta who were players and consumers of the video games "Pokémon Go" and "Harry Potter: Wizards Unite" (the "Games").

Mr. Stasch alleged he had paid upwards of $2,000 to purchase "loot boxes" on the Defendants' game Pokémon Go. Ms. Petty alleged that she had paid $450 for the same purpose. Loot boxes are described by the Plaintiffs "as a game of chance inside a video game in which a player pays for the chance to win virtual awards, which in some cases can be sold."³ The Plaintiffs alleged the loot boxes within the games were an unlicensed, illegal gaming system under Canadian law.

Enforceability of Arbitration Agreement

The burden on an application for a stay of proceedings in favour of arbitration is low – only an arguable case that the arbitration agreement applies is required.

In this case, the prerequisites for a stay of proceedings in favour of...