Doe v. Roblox Corp.

• Court: United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Northern District of California
• Citation: 602 F.Supp.3d 1243
• Docket Number: Case No. 3:21-cv-03943-WHO
• Parties: Jane DOE, Plaintiff, v. ROBLOX CORPORATION, Defendant.
• Decision Date: 09 May 2022

602 F.Supp.3d 1243

Jane DOE, Plaintiff,
v.
ROBLOX CORPORATION, Defendant.

Case No. 3:21-cv-03943-WHO

United States District Court, N.D. California.

Signed May 9, 2022

Courtney E. Maccarone, Pro Hac Vice, Mark S. Reich, Pro Hac Vice, Levi & Korsinsky LLP, New York, NY, Lily E. Hough, Rafey Sarkis Balabanian, Yaman Salahi, Edelson PC, San Francisco, CA, for Plaintiff.

Anthony J. Weibell, Wilson Sonsini Goodrich & Rosati a Professional Corporation, Palo Alto, CA, for Defendant.

ORDER ON MOTION TO DISMISS AND STRIKE

Re: Dkt. No. 25

William H. Orrick, United States District Judge

Defendant Roblox Corporation ("Roblox") owns and operates an online "metaverse" in which users control avatars of themselves. Users can purchase an in-game currency and spend it on virtual items for their avatars, some of which are generated by other users. Plaintiff Jane Doe, who is a minor, alleges that Roblox incentivizes its users—who are mostly minors—to purchase these items, and that it takes a cut of the profits. Unbeknownst to users, she claims, Roblox will delete some items without warning to induce users to buy more. Doe alleges that this deletion scheme is an unlawful business practice and is fraudulent, and brings related claims on behalf of herself and a putative class. Roblox moves to dismiss. The motion is largely denied; it is granted with leave to amend on Doe's claim under the "unfair" prong of California's Unfair Competition Law.

602 F.Supp.3d 1251

BACKGROUND

Roblox is incorporated in Delaware with its principal place of business in California. First Amended Complaint ("FAC") [Dkt. No. 22] ¶ 15. In 2004, it created a "metaverse," also called Roblox, in which users generate a three-dimensional virtual world. Id. ¶ 20. In Roblox, approximately seven million users have generated content like avatars of themselves, apparel for the avatars, and other virtual objects. See id. ¶¶ 20, 24–29. Roblox uses "Robux," an in-game currency that can be purchased with real money. Id. ¶ 25. Users can use Robux to purchase virtual items from Roblox. Id. ¶¶ 25–26. Robux can also be used to purchase virtual items created by other users; when that occurs, Roblox also takes a percentage of the sale (currently, 30 percent). Id. ¶ 27.

According to the Complaint, more than half of Roblox's users are under age 13. Id. ¶ 20. When creating a Roblox account, users must enter their birthday. Id. ¶ 21. Roblox allegedly does not warn users whose birthdays show that they are minors that they should obtain parental permission to create an account. Id. ¶ 22. When a user creates an account, Roblox provides a message stating that "[b]y clicking Sign Up, you are agreeing to the Terms of Use including the arbitration clause" above a "Sign Up" button. Id. ¶ 21. "Terms of Use" is written in a different color, underlined, and hyperlinked to the site's terms. Id.

Doe¹ is 12 years old and created a Roblox account when she was 10. Id. ¶¶ 50–51. She purchased hundreds of Robux with gift cards. Id. ¶ 52. She used the Robux to make many in-game purchases, such as clothing for her avatar. Id. ¶ 53. According to her, she believed that she "owned" those virtual items and that they "would remain in her inventory and usable on the platform." Id. ¶ 54.

Three types of provisions in Roblox's Terms of Use are relevant. First, the Terms of Use include policies about content moderation. See generally Dkt. No. 25-2 ("TOU").² They provided that "there may be situations where games, avatar items, or other content may be removed from the Service (due to violations of these Terms or for other reasons). We will have no liability for any losses you may incur as a result, and will not be liable to refund any Robux or other funds you spent in or for that game or content." Id. § 5.A(3). They also provided that Roblox may "at any time and without prior notice, screen, remove, edit, or block any [User Generated

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Content ("UGC")] that in our sole judgment violates these Terms or is otherwise objectionable" and that the user agreed "to waive, and do waive, any legal or equitable right or remedy you have or may have against us with respect to UGC." Id. § 6.B(9).

Second, the Terms of Use contained provisions governing Robux. They provide that users actually acquire a "limited license" to use Robux, which gives users a "non-exclusive, revocable, personal, limited, non-transferable (except as specifically set out in Section 4A(2)(e) below) right and license to use Robux only for your personal, entertainment use exclusively in connection with the Service as permitted by us, subject to these Terms." Id. § 4.A(1). They also provided that Robux were not a "substitute for real currency." Id. § 4.A(3).

Third, the Terms of Use included provisions about legal relief against Roblox. They provided that "YOU AND WE AGREE THAT EACH MAY BRING CLAIMS AGAINST THE OTHER ONLY IN YOUR OR OUR INDIVIDUAL CAPACITY AND NOT AS A PLAINTIFF OR CLASS MEMBER IN ANY PURPORTED CLASS OR REPRESENTATIVE PROCEEDING." Id. § 11.A. They included several more specific provisions to elaborate on this point. See id. They also provided that the user and Roblox agreed to arbitrate all disputes with several specific exceptions (such as intellectual property rights). Id. § 11.C(1). And they required users to submit complaints informally to Roblox to negotiate a resolution for at least 60 days before initiating suit or arbitration. Id. § 11.C(3).

At some point, Roblox deleted several of Doe's virtual items "without warning or explanation." Id. ¶ 55. Doe alleges that this deletion was part of a broader "scheme," id. at 9, that Roblox employed.³ Roblox, says Doe, does everything it can to encourage users to buy virtual items with Robux. Id. ¶ 35. And users expect that they "effectively own the items they purchase" for "as long as they continue to play the game." Id. ¶ 37. When items are uploaded by users to sell, they are only displayed for sale once Roblox approves them. Id. But, Doe alleges, "unbeknownst to users, this pre-approval process ... does not include vetting the uploaded items for compliance" with the Terms of Use. Id. ¶ 38. Instead, Roblox allegedly deletes them after people have purchased them so that it can still make a profit off of them. Id. ¶¶ 38–39. Although Roblox represents that it only does this when an item violates the Terms of Use, Doe claims that it removes content that does not "appear" to violate any policies. Id. ¶ 40. Doe alleges that too is done so that users will purchase the same item again or purchase a similar item. See id. ¶¶ 40–41. Doe asserts that "[t]his is not a design flaw"; Roblox "fails to take steps to prevent previously deleted content from reappearing" so that people—and especially children—will spend more money. Id. ¶ 41. Doe cites several specific examples of this occurring. See id. ¶¶ 41–42. She claims that Roblox carries out this "scheme" on its most popular items, to maximize profit. Id. ¶ 44.

Doe—represented by her father and next friend, John Dennis—brought this suit in May 2021 and filed her FAC in November 2021. Doe alleges that Roblox's alleged content moderation scheme violates California's Unfair Competition Law ("UCL") and Consumers Legal Remedies Act ("CLRA"), and constitutes fraud, conversion, unjust enrichment, and breach of the covenant of good faith and fair dealing.

602 F.Supp.3d 1253

She seeks to represent a class of "[a]ll Roblox users who purchased content on the Roblox platform that was later deleted" and a subclass of minors in that group. See id. ¶ 58.

LEGAL STANDARD

I. MOTION TO DISMISS FOR LACK OF SUBJECT MATTER JURISDICTION

A motion to dismiss filed pursuant to Federal Rule of Civil Procedure ("FRCP") 12(b)(1) is a challenge to the court's subject matter jurisdiction. See Fed. R. Civ. P. 12(b)(1). "Federal courts are courts of limited jurisdiction," and it is "presumed that a cause lies outside this limited jurisdiction." Kokkonen v. Guardian Life Ins. of Am. , 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994). The party invoking the jurisdiction of the federal court bears the burden of establishing that the court has the requisite subject matter jurisdiction to grant the relief requested. Id.

A challenge pursuant to Rule 12(b)(1) may be facial or factual. See White v. Lee , 227 F.3d 1214, 1242 (9th Cir. 2000). In a facial attack, the jurisdictional challenge is confined to the allegations pleaded in the complaint. See Wolfe v. Strankman , 392 F.3d 358, 362 (9th Cir. 2004). The challenger asserts that the allegations in the complaint are insufficient "on their face" to invoke federal jurisdiction. See Safe Air Safe Air for Everyone v. Meyer , 373 F.3d 1035, 1039 (9th Cir. 2004). To resolve this challenge, the court assumes that the allegations in the complaint are true and draws all reasonable inference in favor of the party opposing dismissal. See Wolfe , 392 F.3d at 362.

"By contrast, in a factual attack, the challenger disputes the truth of the allegations that, by themselves, would otherwise invoke federal jurisdiction." Safe Air , 373 F.3d at 1039. To resolve this challenge, the court "need not presume the truthfulness of the plaintiff's allegations."...