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Class-Action Loot Box Suit Against Supercell Dismissed With Prejudice
Plaintiff: Peter Mai, et al.
Plaintiff’s Firm: Blood Hurst & O'Reardon, LLP
Defendant’s Firm: Tyz Law
The Amended Complaint
Plaintiffs (on their second go-around after their first complaint was dismissed) alleged that Supercell’s Brawl Stars and Clash Royale games contained loot boxes which should be considered illegal gambling games under California law. The plaintiffs alleged to have spent in excess of $150 and $1,100 purchasing loot boxes in Supercell’s games (image from the first amended complaint below).
Plaintiffs’ claims all rely on the underlying assumption that loot boxes are illegal gambling, they were based on:
California’s Unfair Competition Law (UCL) (Cal. Bus. & Prof. Code §§ 17200, et seq.);
California’s Consumer Legal Remedies Act (CLRA) (Cal. Civ. Code §§ 1750, et seq.); and
Order Granting Motion to Dismiss
The court analyzed whether Supercell’s loot boxes constituted illegal gambling under the California Penal Code, which requires a game where a “thing of value” may be won or lost based on chance. Plaintiffs alleged that the loot box prizes had subjective non-monetary value to users, including aesthetic and entertainment value. However, the court held that this is not enough stating that under California precedent such subjective value cannot satisfy the “thing of value” requirement for a game to be considered gambling. Plaintiffs also alleged that the prizes have monetary value because external exchanges allowed for the sale of accounts and items. The court found that this too was not enough under California law because Supercell’s terms of service prohibit the sale or purchase of virtual goods.
The court found that plaintiffs lacked standing on the claims related to California’s UCL and CLRA.
The UCL prohibits any “unlawful, unfair or fraudulent business practice.” To have standing under the UCL, plaintiffs had to show that they suffered some form of economic injury. The court found that plaintiffs failed to show economic injury because the plaintiffs had received exactly what they had paid for (i.e., they had received the benefit of the bargain). Plaintiffs argued that the benefit of the bargain analysis did not apply because there are exceptions for material misrepresentations (i.e. Supercell not disclosing that the sale of loot boxes was unlawful gambling transactions) and because purchasing illegal or unapproved products may constitute economic injury. Both of these arguments failed because the court found that the loot boxes were not illegal gambling.
To have standing under the CLRA, plaintiffs had to show that they were exposed to an unlawful practice related to the sale of goods or services and that they suffered some form of damages. As an initial matter, the court found that the sale of virtual currency is not a good or service under the CLRA. The court also found that there were no damages and that the sale of loot boxes is not unlawful.
Finally, because loot boxes are not unlawful gambling, the court also dismissed plaintiffs’ unjust enrichment claim stating “courts may not use the unfair competition law to condemn actions the Legislature permits.”
This is one of several cases (e.g. this case) over the past year where courts have determined that loot boxes are not gambling under California law. As discussed in our last loot box litigation snapshot in March 2021, there had been a flurry of class-action lawsuit activity in the loot box space. Some of these cases are now being resolved. While the Ninth Circuit hasn’t yet weighed in on the issue, it would look like these cases are doomed for failure in California, at least for now.