Class-Action Firm Suing Console OEMs Loses More Motions to Compel Arbitration

In this post, we’ll look at three different class-action lawsuits, all filed by the same law firm, against Sony, Microsoft and Nintendo. All three cases involve allegations that the console controllers had some defect. The cases against Sony and Nintendo are breach of warranty cases, while the case against Microsoft alleges violation of Washington State consumer protection law. All three cases involve arbitration questions.

THE CASES

First, let’s take a glance at the cases involved:

McFadden et al v. Microsoft Corporation, 2:20-cv-00640 (W.D. Wash.)

• Complaint filed April 28, 2020

• Plaintiff’s Firm: Chimicles Schwartz Kriner & Donaldson-Smith LLP

• Defendant’s Firm: Davis Wright Tremaine

• Claim: Plaintiff alleges that Microsoft breached Washington State’s consumer protection law by selling defective Xbox controllers.

• Motion: On April 2, 2021, a magistrate judge for the U.S. District Court for the Western District of Washington recommended that the court grant Microsoft’s motion to compel arbitration. The court highlights that “[n]otice of the arbitration clause and class action waiver appears in capitalized and sometimes bold text on the first page of the [agreement] and directs the user to the section containing the full text of the agreement.” Plaintiffs made a myriad of arguments trying to invalidate the arbitration provision, including unconscionability. The court rejected all of these arguments and, among other things, cited favorably to the Ninth Circuit’s decision from last year finding that teenagers could enter into binding arbitration agreements in the video game context under Washington law. G.G. v. Valve Corp., 799 F. App’x 557, 558-59 (9th Cir. Apr. 3, 2020).

• Opt-Out language: Microsoft does not have an “opt-out” provision in its dispute resolution section, but it does allow users to reject “future arbitration changes” by sending a notice by mail within 30 days of the change.

Turner v. Sony Corp., 4:21-cv-02454 (N.D. Cal.)

• Complaint filed February 12, 2021

• Plaintiff’s Firm: Chimicles Schwartz Kriner and Donaldson-Smith LP

• Defendant’s Firm: Paul Weiss

• Claim: Plaintiff alleges that Sony breached consumer warranties by selling defective DualSense controllers.

• Motion: None filed as of yet.

• Opt-Out language: Sony does have an express opt-out right in its PlayStation user agreement. Those rights must be exercised within 30 days of accepting the agreement (usually when you first boot up your PlayStation).

Diaz v. Nintendo of America Inc., 2:19-cv-01116 (W.D. Wash.)

• Complaint filed July 19, 2019

• Plaintiff’s Firm:Chimicles Schwartz Kriner & Donaldson-Smith LLP

• Defendant’s Firm: Perkins Coie

• Claim: Plaintiff alleges that Nintendo breached consumer warranties by selling defective Joy-Con controllers for Nintendo Switch.

• Motion: On March 2, 2020, the court granted Nintendo’s motion to compel arbitration. After that, the plaintiffs initiated individual arbitrations.

• Opt-Out language: Nintendo does have an express opt-out right in its Switch user agreement that must be exercised within 30 days of purchasing the console.

OPT-OUT OBSERVATIONS

Both Nintendo and Sony have express opt-out provisions. Microsoft has a “future changes” opt-out provision, which is even less likely to be utilized by consumers and seems to be a compromise between not having anything at all and a more traditional, express opt-out clause that Sony and Nintendo have. The benefit of having an opt-out clause, in the first place, is that it allows a publisher to argue that the dispute resolution section, in general, is more fair to consumers. However, no court has ever held that having an opt-out provision is required. It’s simply a point in favor of being consumer-friendly when courts look at issues like unconscionability.

Here, the plaintiffs’ class-action firm is actively seeking to get people to opt out of their arbitration agreements with PlayStation. It will be interesting to see whether they can get enough consumers to opt-out, such that a useful and sizeable class might exist to proceed with in court. Equally interesting is the fact that the plaintiffs’ firm has continued to pursue individual arbitrations (e.g., in the Diaz matter) despite the low value, individually, of the claims involved. We’ve seen attempts by class-action firms, in other cases, of proceeding with mass filings of individual arbitrations, as a tactic to try and overwhelm the defendant, but query how effective those actually are. Also, query, based on actions like those of the firm in these cases, whether having an opt-out provision is worth it, particularly with more and more court decisions sitting around as precedent without really needing or even mentioning the opt-out provisions. In other words, the question to ask is: Is it still worth it to have an opt-out provision if you’re inviting this kind of conduct from plaintiffs’ class-action firms?

Needless to say, we’ll be watching these cases to find out how this firm’s tactics — and the opt-out provisions — play out in the end.