In Oberstein v. Live Nation Ent. Inc. No. 21-56200 (9th Cir. Feb. 13, 2023), the Ninth Circuit addressed the question of whether the arbitration and class action waiver clauses on Ticketmaster’s and Live Nation’s websites effectively prevented plaintiffs from bringing suit. Plaintiffs in the case sought to bring a class action lawsuit against Ticketmaster and Live Nation alleging as the basis for antitrust claims that the companies used their market power to charge above-market prices for concert tickets. Ticketmaster and Live Nation sought to compel the named plaintiffs to individual arbitration under the binding arbitration and class action waiver clauses in the terms of use on Ticketmaster’s and Live Nation’s websites.
Class Action Waivers Redux: Ninth Circuit Upholds Arbitration Provision Delegating Enforceability Determination to Arbitrator
In Brice v. Haynes Investments LLC, No. 19-15707 (9th Cir. Sept. 16, 2021), the Ninth Circuit considered an appeal by shareholders in Native American tribe-linked online lenders of a district court order denying the shareholders’ motion to compel arbitration. The Ninth Circuit reversed the order because, under the terms of the parties’ agreement, the enforceability of the arbitration agreement was a question for the arbitrator, not the judge, to decide.
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More on McGill: Ninth Circuit Affirms Order Enforcing Arbitration of Public Injunctive Relief Claims
Arbitration clauses with class action waivers remain one of the most effective lines of defense against consumer class actions. They are also one of the most challenged. As we have discussed in prior posts, including here, here, and here, consumer arbitration clauses have come under fire in California if they prohibit plaintiffs from obtaining “public injunctive relief” in any forum. This is the so-called McGill rule, which comes from the California Supreme Court’s decision in McGill v. CitiBank, N.A., 2 Cal.5th 945 (2017).
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Avoiding Formation Challenges To Your Arbitration Clause With Consumers
In prior posts (here and here), we raised questions that companies may want to ask when evaluating their arbitration clauses and making changes to them. In this third installment, we look at what companies should be doing to ensure that they can present proof of their arbitration agreements if ever required to do so in court. Your company may have a perfect arbitration clause, but if a customer claims never to have signed the arbitration agreement or not to have seen the website providing notice of the terms and conditions, you will have to present evidence that the customer is wrong.
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Questions To Ask When Changing Your Arbitration Clause
In a prior post (here), we highlighted some questions that companies may want to ask when evaluating whether their arbitration clauses are enforceable. If changes need to be made to those clauses, then companies should consider how to implement those changes so as to ensure those are enforceable too. The following is what you should be thinking about and asking.
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An Arbitration Clause Health Check
Arbitration clauses with class action waivers remain one of the most effective tools that consumer-facing companies can employ to fend off consumer class action litigation. Yet many companies stumble both in getting their customers to agree to the arbitration clause and in drafting a clause that captures all claims that they might face. As we continue to work, shop, and engage with the world from home, companies should perform a quick “health-check” of their arbitration clause, asking themselves at least the following questions:
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Is Hate Too Strong A Word (When It Comes To Compelling Arbitration In California)?
When it comes to compelling arbitration in California, courts often put the moving party to the test. The most recent example is the Fourth Appellate District’s decision in Fabian v. Renovate America. Affirming a lower court’s decision, the Court of Appeal held that the defendant failed to meet its burden of proof that an electronically signed contract – one containing a 15-digit alphanumeric verification from DocuSign and the words “Identify Verification Code: ID Verification Complete” – was in fact signed by the plaintiff. Stating that the “burden of authenticating an electronic signature is not great,” the Court of Appeal went on to hold that the defendant had not met its burden as it had failed to submit evidence explaining the DocuSign verification process. The court of appeal acknowledged the acceptance of a DocuSign verified signature in Newton v. Am. Debt Servs (N.D. Cal. 2012) 854 F.Supp.2d 712, but distinguished that case finding that Renovate had not submitted “evidence about the process used to verify Fabian’s electronic signature via DocuSign, including who sent Fabian the Contract, how the Contract was sent to her, how Fabian’s electronic signature was placed on the Contract, who received the signed the [sic] Contract, how the signed Contract was returned to Renovate, and how Fabian’s identification was verified as the person who actually signed the Contract.”
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Choose Your Forum Wisely: Save Your Arbitration Clause From California’s Prohibition on Pre-Dispute Waivers of a Plaintiff’s Right to Seek Public Injunctive Relief
The U.S. Supreme Court’s ruling in AT&T Mobility v. Concepcion, 563 U.S. 333 (2011) caused a shockwave in California’s class action bar when it held that the Federal Arbitration Act (“FAA”) preempted California’s former Discover Bank rule prohibiting arbitration clauses in consumer contracts from including a pre-dispute waiver of a plaintiff’s right to seek class action relief. After the decision in Concepcion, mandatory arbitration and corresponding class action waivers became the norm in consumer contracts. Many of the arbitration clauses in these consumer agreements, however, also included language prohibiting the plaintiff from obtaining relief for anyone other than the plaintiff. Courts interpreted this language as a pre-dispute waiver of a plaintiff’s right to seek “public injunctive relief” (i.e. injunctive relief that has the primary purpose and effect of prohibiting acts that threaten future injury to the general public) under California’s consumer protection statutes. Recent decisions by the California Supreme Court and the Ninth Circuit, however, confirm that a plaintiff cannot waive his or her right to seek public injunctive relief under California’s consumer statutes. Consumer-focused businesses that include arbitration clauses in their account agreements should reevaluate their arbitration clauses in light of California’s prohibition on the waiver of a plaintiff’s right to seek public injunctive relief.
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U.S. Supreme Court Upholds Enforceability of Mandatory Employment Class Action Waivers
On May 21, 2018, the United States Supreme Court upheld the legality of arbitration agreements containing class action waivers. In a 5-4 decision written by Justice Gorsuch, the Court held that arbitration agreements providing for individualized proceedings were valid, and neither the Federal Arbitration Act’s (“FAA”) savings clause, nor the National Labor Relations Act (“NLRA”) suggest otherwise.
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Behavioral Advertising Company That Dropped “Zombie” Cookies Can’t Use Verizon’s Arbitration Clause To Avoid Class Action Lawsuit
The 9th Circuit Court of Appeals ruled that a non-party online behavioral advertising firm could not benefit from the arbitration clause in the agreement between Verizon and its customers because it was not a party to that agreement.
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The Consumer Financial Protection Bureau Adopts New Rule Barring Class Action Waivers in Arbitration Agreements
As expected, and with few changes, the Consumer Financial Protection Bureau adopted its proposed rule barring financial companies regulated by the agency from including class action waivers in arbitration agreements. Arbitration clauses in new contracts offering a consumer financial product or service will need to include specified language indicating that arbitration cannot be used to stop the consumer from pursuing a class action.
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