B.D. v. Blizzard Entm't, Inc.

• Decision Date: 29 March 2022
• Docket Number: D078506
• Parties: B.D., a Minor, etc., et al., Plaintiffs and Respondents, v. BLIZZARD ENTERTAINMENT, INC., Defendant and Appellant.
• Court: California Court of Appeals Court of Appeals

76 Cal.App.5th 931

292 Cal.Rptr.3d 47

B.D., a Minor, etc., et al., Plaintiffs and Respondents,

v.BLIZZARD ENTERTAINMENT, INC., Defendant and Appellant.

D078506

Court of Appeal, Fourth District, Division 1, California.

Filed March 29, 2022

Greenberg Traurig, Jeff E. Scott, Robert J. Herrington Los Angeles, and Dominic E. Draye for Defendant and Appellant.

Blood Hurst & O'Reardon, Timothy G. Blood, Leslie E. Hurst, Thomas J. O'Reardon II, San Diego; Law Offices of Andrew J. Brown and Andrew J. Brown for Plaintiffs and Respondents.

HALLER, J.

Blizzard Entertainment, Inc. (Blizzard) appeals from an order denying its motion to compel arbitration. B.D., a minor, played Blizzard's online videogame "Overwatch," and used "real money" to make in-game purchases of "Loot Boxes"—items that offer "randomized chances ... to obtain desirable or helpful ‘loot’ in the game." B.D. and his father (together, Plaintiffs) sued Blizzard, alleging the sale of loot boxes with randomized values constitutes unlawful gambling, and, thus, violates the Unfair Competition Law (UCL) ( Bus. & Prof. Code, § 17200 ). Plaintiffs seek only prospective injunctive relief, plus attorney fees and costs.

Blizzard moved to compel arbitration based on the dispute resolution policy incorporated into various iterations of the online license agreement that Blizzard presented to users when they signed up for, downloaded, and used Blizzard's service. The trial court denied the motion, finding a "reasonably prudent user would not have inquiry notice of the agreement" to arbitrate because "there was no conspicuous notice of an arbitration" provision in any of the license agreements. We disagree.

As we will explain, the operative version of Blizzard's license agreement—the most recent version presented in 2018 before Plaintiffs filed suit—was presented to users in an online pop-up window that contained the entire agreement within a scrollable text box. We present a screenshot here and as an appendix to this opinion:¹

As the screenshot shows, the portion of the license agreement immediately visible in the text box displayed two significant notices. First, that users may not use Blizzard's service if they do not agree to all of the terms in the license agreement. And second, that users should read the section of the license agreement "below" titled "dispute resolution" because it contains an arbitration agreement and class action waiver that affect users' legal rights. That section stated that disputes under the license agreement would be resolved in accordance with Blizzard's dispute resolution policy, to which the section connected via hyperlink. The dispute resolution policy contained a comprehensive arbitration agreement. The pop-up window admonished users that by clicking the "Continue" button (immediately below the admonishment) the user "acknowledge[d] that [he or she has] read and understood the [license agreement]." B.D. could not have continued to use Blizzard's service if he did not click the "Continue" button, and Blizzard's records indicate B.D. did, in fact, continue to use the service. In the context of the transaction at issue, we conclude Blizzard's pop-up notice provided sufficiently conspicuous notice of the arbitration agreement such that Plaintiffs are bound by it.

Alternatively, Plaintiffs contend that if we conclude the parties formed an arbitration agreement, it is unenforceable because the agreement, together with its class and collective action waiver provision, run afoul of the rule announced in McGill v. Citibank, N.A. (2017) 2 Cal.5th 945, 216 Cal.Rptr.3d 627, 393 P.3d 85 ( McGill ) that "a provision in any contract ... that purports to waive, in all fora, the statutory right to seek public injunctive relief ... is invalid and unenforceable." ( Id. at p. 962, 216 Cal.Rptr.3d 627, 393 P.3d 85.) For reasons we will explain, we conclude the arbitration agreement clearly and unmistakably delegated the resolution of this type of gateway issue to the arbitrator, not the courts.

Accordingly, we reverse the trial court's order denying Blizzard's motion to compel arbitration and direct the court to enter a new order granting the motion.

FACTUAL AND PROCEDURAL BACKGROUND

The Complaint

In March 2020, Plaintiffs sued Blizzard for allegedly violating the UCL. They allege B.D. purchased Blizzard's online game, Overwatch, for about $40, and thereafter made additional purchases of Loot Boxes totaling about $10. Loot Boxes are caches of virtual items (e.g., better costumes, character-specific actions, or speech lines) that enhance the gameplay experience. The loot in Loot Boxes varies in rarity and perceived value. A player can earn Loot Boxes through gameplay, or purchase them online from Blizzard. Plaintiffs allege B.D. spent about 50 hours playing Overwatch over the course of about two years.

Plaintiffs allege Blizzard's sale of Loot Boxes constitutes unlawful gambling because the player does not know what loot will be awarded until after the purchase is complete. The complaint asserts a single cause of action for violation of the UCL, and prays for injunctive relief, attorney fees, and costs.

Blizzard's Motion to Compel Arbitration

Blizzard moved to compel arbitration of Plaintiffs' claim on the basis it falls within the scope of an arbitration agreement incorporated into various iterations of the license agreement Blizzard presented to users when they create an online account, install Blizzard's software, and access the online game.

Blizzard explained that to play any of its online games, make in-game purchases, or interact with other online players, B.D. needed an account on Blizzard's online platform, "Battle.net." To create an account, a user was required to enter certain information (e.g., name, age, email address) and click a button titled "Create a Free Account." Below this button was a notice stating: "By clicking on ‘Create a Free Account,’ I agree to the Battle.net End User License Agreement and Privacy Policy." The text "Battle.net End User License Agreement" and "Privacy Policy" were hyperlinks that took users to another webpage containing the entire referenced documents. Blizzard's records showed that a Battle.net account under B.D.'s name was created on June 20, 2016.²

When B.D.'s Battle.net account was created, the 2015 version of Blizzard's End User License Agreement was in effect.³ The top of the first page of the 2015 License Agreement contained the following notice:

"YOU SHOULD CAREFULLY READ THE FOLLOWING AGREEMENT (THE ‘AGREEMENT’) BEFORE INSTALLING THE BATTLE.NET CLIENT OR US[ING] THE BATTLE.NET SERVICE. IF YOU DO NOT AGREE WITH ALL OF THE TERMS OF THIS AGREEMENT, YOU MAY NOT INSTALL THIS SOFTWARE PROGRAM."

The first page also advised:

"IF YOU DO NOT AGREE TO THE TERMS OF THIS AGREEMENT, YOU ARE NOT PERMITTED TO INSTALL, COPY OR USE THE BATTLE.NET CLIENT OR ANY OF THE GAMES."

The License Agreement explained how a user could reject the terms of the agreement and seek a refund.

Paragraph 11 of the 2015 License Agreement, titled "Dispute Resolution," stated as follows:

"Any and all disputes between you and Blizzard which arose out of this Agreement will be resolved in accordance with the Blizzard Entertainment Dispute Resolution Policy, which is available for your review here: http://us.blizzard.com/enus/company/legal/dispute-resolution-policy.html."

The web address (or URL) for the Blizzard Entertainment Dispute Resolution Policy (Dispute Resolution Policy) was not a hyperlink. Instead, a user would have to type or copy-and-paste the address into a web browser.

The Dispute Resolution Policy in effect at all relevant times is about three pages long and includes sections titled "BINDING ARBITRATION" and "CLASS AND COLLECTIVE ACTION WAIVER." As we explain in greater detail in Discussion Part II.A.1., post , these provisions generally require that users arbitrate "Disputes" on an individual basis.⁴

The first substantive paragraph of the Dispute Resolution Policy advises users that "[b]y agreeing to the [License Agreement], [they] [t]hereby consent to th[e] [Dispute Resolution Policy]." The last substantive paragraph advises users that if they "desire to reject" the Dispute Resolution Policy, they should "not complete installation and return [their] product to its place of purchase for a full refund. Completion of the installation process shall indicate ... acceptance of th[e] [Dispute Resolution Policy]."

To complete the account-creation process, B.D. had to click the "Create a Free Account" button. It was possible to click this button without clicking the hyperlink to the License Agreement.

After B.D.'s account was created, he still had to download the Battle.net software application (App) to his computer to be able to launch and play Overwatch. Before completing the App installation process, B.D. would have been presented with a scrollable text box containing the entire 2015 License Agreement, followed by buttons labeled "Accept" and "Decline." To complete the installation process, B.D. would have had to click "Accept."

In 2017, Blizzard updated its License Agreement. The first page of the updated agreement included substantially similar notices as the 2015 License Agreement regarding the requirement that users agree to its terms as a condition of accessing Blizzard's online service.⁵ The 2017 License Agreement also included the same "Dispute Resolution" section as the prior agreement, except now the provision included a hyperlink to the Dispute Resolution Policy instead of a mere URL to type or copy-and-paste.⁶

The 2017 License Agreement was presented to users via a pop-up window that appeared when a user logged into his or her Battle.net account. The pop-up contained a scrollable text box containing the entire 2017 License Agreement. Immediately below the text box was a notice stating, " ‘By clicking "Agree", I accept the [2017 License Agreement] applicable to my country of residence and if under 18 years old, agree and acknowledge that my...