Video Game Disputes: California Court Refuses To Enforce Arbitration Provision

• Jurisdiction: California,United States
• Law Firm: Frankfurt Kurnit Klein & Selz
• Subject Matter: Litigation, Mediation & Arbitration, Media, Telecoms, IT, Entertainment, Arbitration & Dispute Resolution, Gaming
• Author: Mr Michael Ling
• Published date: 20 March 2023

For many interactive entertainment companies, one of the most important terms of service is the clause requiring parties to submit their disputes to arbitration. A California appeals court recently refused to enforce a mobile gaming platform's arbitration clause. The decision, which was highly critical of the clause, provides a roadmap for proper drafting of these important provisions. Below, we break down the court's analysis and provide some guidance for anyone drafting terms of service for California users of their platform.

Background

In Gostev v. Skillz Platform, Inc., No. A164407 (Cal. Ct. App. Feb. 28, 2023), a player sued the game platform ("Skillz") alleging the game Solitaire Cube constituted illegal gambling under California and federal law. Skillz asked the court to move the parties to arbitration pursuant to the arbitration provision in the terms of service. The plaintiff objected, arguing the provision was both procedurally and substantively unfair.

Who decides the threshold issue of enforceability'the court, or an arbitrator?

Skillz first argued that the question whether the dispute was arbitrable was a question for the arbitrator' not a court. The court disagreed. While the default presumption is that a court, and not an arbitrator, decides whether a dispute is arbitrable (Gostev, slip op. at 7), Skillz argued that Section 14 of the Terms of Service to its game ("TOS"), which Gostev agreed to as part of a standard click-through agreement and defines the term "Dispute" to mean "any dispute . . . concerning [the TOS]", as indication that Gostev agreed to determine the enforceability of the mandatory arbitration provision in arbitration. The court rejected this argument, pointing to past precedents, that such language only refers to substantive disputes (i.e., disputes about the fairness of the actual terms), and that if the parties want to have an arbitrator decide the threshold issue of the arbitrability of a dispute, that would need to be expressly set out in the agreement. "Indeed, because the issue is arcane and not likely contemplated by the parties, silence or ambiguity as to who would decide the enforceability of the arbitration provision suggests it was not a matter on which the parties mutually agreed . . . ." Id. at 10.

Skillz argued that because the TOS referred to the AAA Commercial Arbitration Rules, which provide that the arbitrator shall have the power to rule on his or her own jurisdiction, there was express language stating...