Carusone v. Nintendo of Am., Inc.

• Decision Date: 30 June 2020
• Docket Number: Case No.: 5:19-cv-01183-LCB
• Parties: GILLIAN CARUSONE, on behalf of herself and all others similarly situated, Plaintiff, v. NINTENDO OF AMERICA, INC., Defendant.
• Court: U.S. District Court — Northern District of Alabama

GILLIAN CARUSONE, on behalf of herself and all others similarly situated, Plaintiff, v. NINTENDO OF AMERICA, INC., Defendant.

Case No.: 5:19-cv-01183-LCB

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF ALABAMA NORTHEASTERN DIVISION

June 30, 2020

MEMORANDUM OPINION AND ORDER

Plaintiff Gillian Carusone filed this putative class action against Defendant Nintendo of America, Inc. ("Nintendo") on behalf of herself and all similarly situated individuals—Alabama residents who purchased a Nintendo Switch console or Joy-Con controllers—for an alleged controller defect known as "drifting." (Doc. 1 at 1, 12). Before the Court is Defendant's Motion to Compel Arbitration and Dismiss (Doc. 17). For the reasons stated below, Defendant's motion is GRANTED IN PART AND DENIED IN PART.

I. BACKGROUND

On July 21, 2017, Plaintiff, an Alabama resident, purchased a Nintendo Switch video-game console ("Switch") at a Best Buy in Huntsville, Alabama for $299.99. (Doc. 20 at 1). About twenty-two months after her purchase, Plaintiff noticed a problem that began to interfere with her gameplay. (Doc. 1 at 4). The left joystick of her controllers, known as Joy-Cons, which are used to direct gameplay on the console and come included with her Switch package, began to "drift." (Id.). When a controller "drifts," it registers movement in gameplay without a player's manual control. (Id.). Because the drifting interfered with her use of the Switch, Plaintiff purchased a new set of Joy-Cons for $69.00 on July 4, 2019. (Id.). Other Joy-Con users reported similar problems with drifting Joy-Cons. (Id. at 7-10).

All new Switches, when first powered on, require the purchaser to accept the terms of an "End-User License Agreement" ("EULA"). (Doc. 18 at 2). Through a series of screens, the purchaser is asked to select a language and region, and then to accept the terms of the EULA. (Id.). This latter screen is entitled "End-User License Agreement," and it displays a short message: "By selecting the Accept button, you acknowledge that you have read and agree to be bound by the End-User License Agreement. If you do not agree, stop using this system." (Id.). Beneath the message is a hyperlinked button, rendered in a box of bright and pulsating blue, that reads "View End-User License Agreement" and provides the purchaser with instant access to the full EULA. (Id. at 3). And beneath this button is the word "Accept" and a small white box. (Id.). The purchaser cannot advance to the next screen without clicking "Accept." (Id.). Only by selecting this button and accepting the EULA canthe purchaser proceed, activating a grayed-out "Next" button and transitioning to the next screen. (Id.).

The EULA contains a provision for mandatory individual arbitration and a class-action waiver, a provision that the purchaser may choose to opt out of. (Id. at 7-8). Purchasers are advised of the provision and the opt-out election in the EULA's preamble, which states that the EULA

CONTAINS A BINDING ARBITRATION AND CLASS ACTION WAIVER PROVISION IN SECTION 7 THAT AFFECTS YOUR RIGHTS UNDER THIS AGREEMENT AND WITH RESPECT TO ANY 'CLAIM' . . . BETWEEN YOU AND NINTENDO. YOU HAVE THE RIGHT TO OPT OUT OF THE PROVISION AS DESCRIBED IN SECTION 7.

(Id. at 6). Section 7 contains the arbitration and class-action-waiver provision. (Id. at 7-8). It provides that "[a]ny matter" that Defendant and a customer "are unable to resolve" and "all disputes or claims arising out of or relating to" the EULA, "including its formation, enforceability, performance, or breach . . . shall be finally settled by binding arbitration." (Id. at 7). The same section informs the purchaser that "[t]he parties understand that, absent this mandatory provision, they would have the right to sue in court and have a jury trial." (Id.). It also requires individualized arbitration: "arbitration shall be conducted by the parties in their individual capacities only and not as a class action or other representative action, and the parties waive their right to file a class action or seek relief on a class basis." (Id.).

If a purchaser does not wish to accept the EULA, she can either return the system or "opt out of the arbitration provision by providing written notice to [Defendant] within 30 days of purchase." (Id. at 8). Plaintiff does not dispute that she clicked the "Accept" button on the End-User License Agreement screen to complete the post-purchase account-creation process before using the Switch. (Doc. 19 at 12). Nor does she allege any attempt to exercise either opt-out option.

On July 24, 2019, Plaintiff brought suit against Defendant on behalf of herself and prospective class members who experienced similar drift issues with their controllers. (Doc. 1). She asserts six counts against Defendant, including violations of federal and state law, for the faulty Joy-Cons. (See id. at 11). Defendant contends that Plaintiff has waived her right to file this lawsuit by agreeing to resolve her claim individually through arbitration, and Defendant now moves to dismiss or, in the alternative, stay the action and compel arbitration (Doc. 17 at 2).

II. LEGAL STANDARDS

A. The FAA

"The Federal Arbitration Act, 9 U.S.C. §§ 1 et seq. ("FAA") is 'a congressional declaration of a liberal federal policy favoring arbitration agreements." Scurtu v. Int'l Student Exchange, 523 F. Supp. 2d 1313, 1318 (S.D. Ala. 2007) (citing Davis v. S. Energy Homes, Inc., 305 F.3d 1268, 1273 (11th Cir. 2002)); see also Bazemore v. Jefferson Capital Sys. LLC, 827 F.3d 1325, 1333 (11thCir. 2016) (noting that the Eleventh Circuit recognizes a "presumption of arbitrability" under the FAA). However, this liberal "policy only extends insofar as an agreement actually exists: 'whether parties have agreed to submit a particular dispute to arbitration is typically an issue for judicial determination.'" Williams v. Gen. Elec., 13 F. Supp. 3d 1176, 1180 (N.D. Ala. 2014) (citing Granite Rock Co. v. Int'l Bhd. of Teamsters, 561 U.S. 287, 296 (2010)). Accordingly, courts must not presume parties are bound to arbitration "unless there is 'clea[r] and unmistakabl[e]' evidence that they did so." Id. (citing First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995) (internal citations omitted)).

B. Motion to compel arbitration

When considering a motion to compel arbitration, courts may decide the motion as a matter of law by using a "summary judgment-like standard" where "there is no genuine dispute as to any material fact."¹ Bazemore, 827 F.3d at 1333.A dispute is not genuine if it is not supported by the evidence "or is created by evidence that is 'merely colorable' or not significantly probative." Id.

When evaluating a motion to compel arbitration, courts must "consider: (1) whether there is a valid agreement to arbitrate; and (2) whether the dispute in question falls within the scope of that agreement." Scurtu, 523 F. Supp. 2d at 1318. The validity of an arbitration agreement is a matter of state law. Id. (citing Caley v. Gulfstream Aerospace Corp., 428 F.3d 1359, 1368 (11th Cir. 2005)). In Alabama, the court applies "general state-law contract principles" to determine whether a valid arbitration agreement exists. Ryan's Family Steakhouse, Inc., v. Kilpatric, 966 So. 2d 273, 279 (Ala. Civ. App. 2006) (citing Capitol Chevrolet & Imports, Inc. v. Payne, 876 So. 2d. 1106, 1109 (Ala. 2003). Under Alabama law, a contract is formed when there is acceptance of an offer, consideration, and mutual assent to its essential terms. Freed v. Cobb, 845 So. 2d 807, 809 (Ala. Civ. App. 2002) (citing Hargrove v. Tree of Life Christian Day Care Ctr., 699 So. 2d 1242, 1247 (Ala. 1997)).

Granting a motion stay when a party moves to compel arbitration is the proper remedy in this case. See 9 U.S.C. § 3 ("[T]he court...upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement.") While other courts have held there is discretion to dismiss a case when all claims arearbitrable, dismissal is inappropriate. See Schultz v. Epic Sys. Corp., 376 F. Supp. 3d 927, 939 (W.D. Wis. 2019) (quoting Green v. SuperShuttle Intern., Inc., 653 F.3d 766, 769-70 (8th Cir. 2011)). In light of plain language of 9 U.S.C. § 3, the Court must stay the case and compel the parties to arbitrate. See Lloyd v. HOVENSA, LLC., 369 F.3d 263, 269 (3d Cir. 2004) (holding the district court was bound to stay the case and compel arbitration because of the clear mandate of 9 U.S.C. § 3). However, Defendant can raise its motion to dismiss again in arbitration.

III. DISCUSSION

The only issue to be decided is whether there is a valid arbitration agreement; whether Plaintiff's claims fall within the scope of the agreement is not in dispute. Defendant argues that by signing the EULA and failing to opt out of the EULA's arbitration provision, Plaintiff thereby agreed to arbitration. (Doc. 22 at 6-7). Plaintiff raises four objections to the agreement's validity: (1) that the arbitration agreement is invalid because it lacked mutual assent; (2) that the arbitration agreement is invalid because it lacked consideration; (3) that the Switch could not be returned as described in the EULA; and (4) that internal inconsistencies render the contract unenforceable. The Court will address each of these arguments in turn.

A. Mutual Assent

Mutual assent exists between the parties. Plaintiff offers several reasons why her acceptance of the EULA failed to demonstrate that mutual assent existed, eventhough she accepted the agreement. The arbitration agreement unambiguously shows mutual assent to the essential terms of the EULA. Mutual assent to a contract is typically manifested by signature; but it may also be manifested by ratification. Chambers v. Groome Transp. of Ala., 41 F. Supp. 3d 1327, 1343 (M.D. Ala. 2014) (citing Baptist...