Rebecca Swift v. Adknowledge, Inc., et al

Filing 10

Submitted (ECF) Opening brief for review. Submitted by Appellants Adknowledge, Inc. and KITN Media USA, Inc.. Date of service: 01/09/2012. [8024867]--[COURT UPDATE: Attached Certificate of Service. Resent NDA. 01/11/2012 by TW] (DAN)

No. 11-16933
IN THE UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

ADKNOWLEDGE, INC., d/b/a Super
Rewards and KITN MEDIA USA, INC.,
d/b/a Super Rewards,
Appellants - Defendants,
v.
REBECCA SWIFT, on behalf of herself &
all others similarly situated,
Respondent - Plaintiff.
APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF CALIFORNIA
(Hon. Elizabeth D. Laporte, United States Magistrate Judge)
No. 4:09-CV-05443 EDL
OPENING BRIEF OF APPELLANTS
ADKNOWLEDGE, INC. AND KITN MEDIA USA, INC.
Derek A. Newman <[e-mail]>
Derek Linke <[e-mail]>
Newman Du Wors LLP
1201 Third Avenue, Suite 1600
Seattle, Washington 98101
[phone]
Counsel for Appellants

REQUEST FOR ORAL ARGUMENT
Appellants Adknowledge, Inc. and KITN Media USA, Inc. request oral
argument in this matter.

i

CORPORATE DISCLOSURE STATEMENT
Adknowledge, Inc. has no parent corporation. No publicly held corporation
owns 10% or more of its stock. KITN Media USA, Inc. is a subsidiary of
Adknowledge, Inc. No publicly held corporation owns 10% or more of its stock.

ii

TABLE OF CONTENTS
I.

JURISDICTIONAL STATEMENT............................................................. 1
A.

Jurisdiction in the district court .......................................................... 1

B.

Jurisdiction in the appellate court ...................................................... 2

II.

STATEMENT OF ISSUES PRESENTED FOR REVIEW ......................... 4

III.

STATEMENT REGARDING ADDENDUM ............................................. 5

IV.

STATEMENT OF THE CASE .................................................................... 5

V.

STATEMENT OF FACTS ......................................................................... 8
A.

Swift’s complaint alleges that Adknowledge and Zynga acted in
concert to injure her by interdependently creating a misleading
offer. .................................................................................................. 8

B.

The district court relied on Swift’s concerted-misconduct
allegations in denying Adknowledge’s motion to dismiss. ................. 10

C.

The YoVille Agreement containing the arbitration clause expressly
applies to Zynga’s agents. ................................................................. 11

D.

Adknowledge joined in Zynga’s motion to compel arbitration but
the district court denied Adknowledge’s motion because Swift
claimed—for the first time—that Adknowledge was not Zynga’s
agent. ................................................................................................ 13

VI.

SUMMARY OF ARGUMENT .................................................................. 15

VII. STANDARD OF REVIEW ......................................................................... 17

iii

VIII. ARGUMENT ............................................................................................. 18
A.

Swift is barred under the doctrine of equitable estoppel from
retracting her allegations that Zynga and Adknowledge acted with
substantially interdependent and concerted misconduct. .................. 18
1.

This Court should adopt the “substantially interdependent
and concerted misconduct allegations” standard that other
circuits apply........................................................................... 18

2.

This Court should apply the “substantially interdependent
and concerted misconduct allegations” standard because it
is the rule under Delaware law. .............................................. 24

B.

Swift must arbitrate her claims because Adknowledge is a thirdparty beneficiary under the YoVille Agreement. ............................... 27

C.

Adknowledge is further entitled to arbitration because, under
Delaware law, the arbitrator decides whether a nonsignatory may
enforce an arbitration clause referring to the AAA. ........................... 31

D.

The Court should require arbitration because any doubts regarding
the scope of the clause must be resolved in favor of arbitration. ........ 35

IX.

CONCLUSION .......................................................................................... 37

X.

STATEMENT OF RELATED CASES ...................................................... 38

iv

TABLE OF AUTHORITIES
Cases
Arthur Andersen LLP v. Carlisle,
556 U.S. 624, 173 L. Ed. 832, 840, 129 S. Ct. 1896, 1902 (2009) ....................... 24
Bechtel Do Brasil Construções Ltda. v. UEG AraucÁria Ltda.,
638 F.3d 150 (9th Cir. 2011) .............................................................................. 35
Boyd v. Homes of Legend,
981 F. Supp. 1423 (M.D. Ala. 1997)................................................................... 19
Brantley v. Republic Mortgage Ins. Co.,
424 F.3d 392 (4th Cir. 2005) ............................................................................. 19
Britton v. Co-Op Banking Group,
4 F.3d 742 (9th Cir. 1993)................................................................. 17, 20, 21, 22
Brown v. General Steel Domestic Sales, LLC,
2008 U.S. Dist. LEXIS 97832 (C.D. Cal. May 19, 2008) ................................... 23
Carder v. Carl M. Freeman Cmtys., LLC,
2009 Del. Ch. LEXIS 2 (Del. Ch. Jan. 5, 2009) ..................................... 27, 29, 30
Comer v. Micor, Inc.,
436 F.3d 1098 (9th Cir. 2006) ........................................................................... 18
Dean Witter v. Reynolds, Inc. v. Byrd,
470 U.S. 213, 84 L. Ed. 2d 158, 105 S. Ct. 1238 (1985) ....................................... 17
Denney v. BDO Seidman, L.L.P.,
412 F.3d 58 (2d Cir. 2005) ................................................................................ 19
Dziubla v. Cargill, Inc,
214 Fed. Appx. 658 (9th Cir. Cal. 2006) ............................................................ 18

v

Grigson v. Creative Artists Agency, L.L.C.,
210 F.3d 524 (5th Cir. 2000) ............................................................................. 19
Hawkins v. KPMG LLP,
423 F. Supp. 2d 1038 (N.D. Cal. 2006) ............................................................. 23
In re Toyota Motor Corp. Hybrid Brake Mktg., Sales, Practices & Prods. Liab. Litig.,
2011 U.S. Dist. LEXIS 143490 (C.D. Cal. Dec. 13, 2011).................................. 22
Ishimaru v. Fung,
2005 Del. Ch. LEXIS 167 (Del. Ch. Oct. 26, 2005) ...........................................26
James & Jackson, LLC v. Willie Gary, LLC,
906 A.2d 76 (Del. 2006) .................................................................................... 31
Lawson v. Life of the South Ins. Co.,
648 F.3d 1166 (11th Cir. 2011) ..................................................................... 19, 24
Lenox Maclaren Surgical Corp. v. Medtronic, Inc.,
2011 U.S. App. LEXIS 22961 (10th Cir. Nov. 15, 2011) ..................................... 19
Letizia v. Prudential Bache Secur., Inc.,
802 F.2d 1185 (9th Cir. 1986) ............................................................................ 34
McLaughlin v. McCann,
942 A.2d 616 (Del. Ch. 2008)...................................................... 31, 32, 33, 34, 36
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc.,
473 U.S. 614, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985) ......................................... 34
Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp.,
460 U.S. 1, 103 S. Ct. 927, 74 L. Ed. 2d 765 (1983) ............................................ 35
MS Dealer Serv. Corp. v. Franklin,
177 F.3d 942 (11th Cir. 1999) ............................................................................. 19

vi

Northwestern Nat’l Ins. Co. v. Esmark, Inc.,
672 A.2d 41 (Del. 1996) ..................................................................................... 36
Orix LF, LP v. InsCap Asset Mgmt., LLC,
2010 Del. Ch. LEXIS 70 (Del. Ch. Apr. 13, 2010) ............................................. 34
Pipe Trades Council, Local 159 v. Underground Contractors Ass'n,
835 F.2d 1275 (9th Cir. 1987) ............................................................................ 17
Preston v. Ferrer,
552 U.S. 346 (2008). .......................................................................................... 4
Robinson v. Isaacs,
2011 U.S. Dist. LEXIS 118070 (S.D. Cal. Oct. 12, 2011) .................................... 23
Simula, Inc. v. Autoliv, Inc.,
175 F.3d 716 (9th Cir. 1999) ............................................................................... 18
U.S. v. Sutcliffe,
505 F.3d 944 (9th Cir. 2007) .............................................................................. 4
Wagner v. Stratton Oakmont, Inc.,
83 F.3d 1046 (9th Cir. 1996) .............................................................................. 18

vii

Statutes
28 U.S.C. § 1332(d)(2)(A) ..................................................................................... 2
28 U.S.C. § 1332(d). .............................................................................................. 2
47 U.S.C. § 230(c) ................................................................................................ 10
9 U.S.C. § 1 et seq. .................................................................................................. 4
9 U.S.C. § 16 (a)(3) ................................................................................................ 4
Cal. Bus. & Prof. Code § 17200 et seq. .................................................................... 1
Consumer’s Legal Remedies Act (Cal. Civil Code § 1761 et seq.) ............................ 1

Other Authorities
FED. R. APP. P. 4(a)(1)(A) ...................................................................................... 4
Fed. R. Civ. P. 12(b)(6) ................................................................................... 10, 20

viii

I.
A.

JURISDICTIONAL STATEMENT

Jurisdiction in the district court
On November 17, 2009, Appellee Rebecca Swift filed her action in the

United States District Court for the Northern District of California against
Zynga Game Network, Inc. and Facebook, Inc. ER 144 (Dkt. No. 1).1 Swift
alleged three causes of action for (1) violation of California’s Unfair
Competition Law (Cal. Bus. & Prof. Code § 17200 et seq.), (2) violation of
the Consumer’s Legal Remedies Act (Cal. Civil Code § 1761 et seq.), and (3)
unjust enrichment. Id.
On February 10, 2010, Swift filed a first amended complaint
(“Complaint”), and added Adknowledge, Inc. and KITN Media USA, Inc.
as defendants. ER 124 (Dkt. No. 13.) She alleged the same three claims
against all defendants. Id.
In the Complaint, Swift indicates that she seeks to certify a nationwide
class consisting of individuals who reside in all 50 states. ER 130 (Dkt. No. 13
at ¶ 22). Swift notes that Zynga, Adknowledge, and KITN are Delaware
corporations with their principal place of business in San Francisco

1

Citations to the record refer to Adknowledge’s Excerpts of Record
pursuant to Circuit Rule 30-1; a parallel citation to the document’s docket
number is also included for the Court’s convenience.
1

(California), Kansas City (Missouri), and Santa Monica (California),
respectively. ER 131 (Dkt. No. 13 at ¶¶ 27-29). Swift alleges that diversity
can be found because, under 28 U.S.C. § 1332(d)(2)(A), a member of the
class of Plaintiffs is a citizen of a state different from one of the Defendants.
Id. She further alleges that no exceptions to jurisdiction under 28 U.S.C. §
1332(d) apply. Id. Accordingly, the District Court had diversity jurisdiction
under 28 U.S.C. § 1332(d). Id.
B.

Jurisdiction in the appellate court
After Swift filed her lawsuit, Zynga moved to compel arbitration. ER 86

(Dkt. No. 54). Zynga argued that Swift’s causes of action related to a
contract that required Swift to agree “that any suit, action or proceeding
arising out of or relating to these Terms of Use or any transactions
contemplated herein . . . shall be resolved solely by binding arbitration before
a sole arbitrator under the rules and regulations of the American Arbitration
Association (‘AAA’).” ER 92 (Dkt. No. 54 at 3:7-12).
Appellants Adknowledge, Inc. and KITN Media USA, Inc. (together,
“Adknowledge”) filed a joinder to Zynga’s motion to compel because
Swift’s claims against them arose out of and were related to the same
contract or transactions that it contemplated. ER 30 (Dkt. No. 57).

2

On August 4, 2011, after Adknowledge joined in Zynga’s motion, the
district court entered its “Order Granting Zynga’s Motion to Compel
Arbitration; Granting in Part and Denying in Part Other Defendants’ Parallel
Motion to Stay …” (“Order”) .2 ER 1 (Dkt. No. 94). The Order granted
Zynga’s request to compel arbitration of Swift’s claims against Zynga based
on the arbitration clause. Id. But the Order denied Adknowledge’s request to
compel arbitration of Swift’s claims against Adknowledge under the same
clause even though Swift alleged the same facts and claims against
Adknowledge that she alleged against Zynga. ER 2 (Dkt. No. 94 at 2:13-19).
The district court reasoned that Adknowledge could not enforce the
arbitration clause in the contract because only Swift and Zynga were its
signatories. ER 16 (Dkt. No. 94 at 16:18-20).
Adknowledge now seeks review of the district court’s Order because
the same arbitration clause that required Swift to arbitrate against Zynga
applies to her claims against Adknowledge. The Ninth Circuit has
jurisdiction under the Federal Arbitration Act (the “Act”), 9 U.S.C. §

2

The Order also “Den[ied] as Moot: (1) Motion to Compel Discovery,
(2) Motion to Hear Cross-Motion to Stay Discovery on Shortened Time, (3)
Motion to Stay Discovery; [and] Grant[ed] Motion to Seal” which are not
issues on appeal.
3

16(a)(3) which provides that “An appeal may be taken from…a final decision
with respect to an arbitration that is subject to this title.” The Act governs
arbitration-agreement enforcement in contracts involving interstate
commerce. 9 U.S.C. § 1 et seq.; Preston v. Ferrer, 552 U.S. 346, 353 (2008). A
transaction occurring over the Internet is by its very nature interstate
commerce. U.S. v. Sutcliffe, 505 F.3d 944, 953 (9th Cir. 2007). So the Act
applies to the question about whether Swift must arbitrate.
On August 10, 2011, Appellants timely filed their Notice of Appeal
under FED. R. APP. P. 4(a)(1)(A). ER 18 (Dkt. No. 102).
II.

STATEMENT OF ISSUES PRESENTED FOR REVIEW

1.

Equitable estoppel allows a nonsignatory to an arbitration clause to

compel arbitration when the plaintiff/signatory alleges substantially
interdependent and concerted misconduct by both the
defendant/nonsignatory and another signatory. Plaintiff Swift, a signatory,
alleges that nonsignatory Adknowledge and signatory Zynga acted in concert
as co-conspirators and partners to cause her harm. Should the Court apply
equitable estoppel and permit Adknowledge to compel arbitration?
2.

A nonsignatory is a third-party beneficiary to a contract when the

contracting parties intend a material benefit to the third party. The

4

Agreement provides limited liability to parties like Adknowledge. It also
required Swift to accept Adknowledge content “as is” and at her “sole risk”
when she entered into the Agreement. Should this Court allow Adknowledge
to enforce the arbitration clause as a third-party beneficiary?
3.

Under Delaware law, when a court finds that signatories to a

contract have agreed to arbitrate but that a nonsignatory’s right to enforce
that clause is questionable, an arbitrator should decide the issue. The lower
court found that Swift agreed to arbitrate her claims against Zynga under the
Agreement. Should the Court send this case to an arbitrator to decide any
question about whether Adknowledge is entitled to enforce the arbitration
clause?
III. STATEMENT REGARDING ADDENDUM
Appellants have provided a separate addendum with relevant statutes.
IV. STATEMENT OF THE CASE
Plaintiff Rebecca Swift alleges that she played a game called “YoVille”
on defendant Zynga’s website.3 In order to play the game, she entered into

3

In the same order that Adknowledge appeals here, the district court
dismissed Zynga on a motion to compel arbitration. ER ____ (Dkt. No. 94
at 2:1-12.)
5

the YoVille Agreement. ER 36-37 (Dkt. No. 55 at ¶¶ 2-4, Ex. A.) She claims
that while playing the game she participated in a “risk-free Green Tea Purity
Trial” that caused her harm. ER 133 (Dkt. No. 13 at ¶ 38). Swift claims that
Zynga induced her to participate by promising her virtual in-game currency
that she could use in the YoVille game. Id.
Swift claims that the Green Tea offer was one of many “Integrated
Special Offer Transactions” or “ISOTs” that Adknowledge and Zynga
“created and developed” together. ER 3 (Dkt. No. 13 at ¶ 6). She alleges
that she suffered damages arising out of her participation in ISOTs that she
accessed through Zynga’s YoVille game. ER 132-133 (Dkt. No. 13 at ¶¶ 3738). Swift claims that Adknowledge is liable for these ads in Zynga’s game as
Zynga’s agent and business partner who acted in concert with Zynga and on
its behalf. Swift alleged three claims against Zynga and Adknowledge for (l)
violation of the California Unfair Competition Law (“UCL”); (2) violation
of the Consumer Legal Remedies Act (“CLRA”); and (3) unjust
enrichment. ER 137-141 (Dkt. No. 13 at ¶¶ 51-74).
On May 5, 2011, Zynga filed a motion to compel arbitration and stay
proceedings in the district court. ER 86 (Dkt. No. 54). Zynga argued that
Swift had executed the YoVille Agreement binding her to arbitration before

6

the American Arbitration Association (“AAA”) for claims relating to the
ISOTs. ER 92 (Dkt. No. 54at 3). Adknowledge filed a joinder in Zynga’s
motion. ER 30 (Dkt. No. 57). Adknowledge argued that Swift’s claims
against Adknowledge must also proceed to arbitration because they arose out
of the same transaction—the ISOTs and YoVille Agreement—that gave rise
to Zynga’s right to arbitrate. ER 33-34 (Dkt. No. 57at 4-5). Adknowledge also
argued that because Swift alleged in her complaint that Adknowledge was
Zynga’s agent, partner, and co-conspirator that Adknowledge has standing
as an agent and third-party beneficiary to enforce the arbitration clause. ER
32-33 (Dkt. No. 57 at 3-4).
Swift responded to Adknowledge’s motion by claiming that
Adknowledge was not Zynga’s agent. ER 23 (Dkt. No. 66). But Swift did not
retract the central argument in her case against Adknowledge — that
Adknowledge conspired with Zynga to defraud consumers and worked
closely with Zynga to create the ISOTs that are the subject of Swift’s
complaint. Compare ER 124-143 with ER 23-29 (Dkts. Nos. 13 and 66).
In its Order dated August 4, 2011 the district court granted Zynga’s,
but denied Adknowledge’s, motion to compel arbitration. ER 1 (Dkt. No.
94). The court held that Adknowledge was not Zynga’s agent or third-party

7

beneficiary. Thus, the court ruled that Adknowledge did not have standing to
enforce the arbitration clause. ER 14-16 (Dkt. No. 94 at 14:6-13; 15:26-16:6).
The district court’s Order was a final decision concerning
Adknowledge’s right to arbitrate . ER 1 (Dkt. No. 94). Adknowledge filed a
notice of appeal under 9 U.S.C. § 16; and this appeal followed.
V.
A.

STATEMENT OF FACTS

Swift’s complaint alleges that Adknowledge and Zynga acted in
concert to injure her by interdependently creating a misleading
offer.
Swift alleges in her amended complaint that she participated in certain

“‘Integrated Special Offer Transactions,’ or ‘ISOTs’” that Adknowledge
and Zynga together created and developed. ER 126 (Dkt. No. 13 at ¶ 6). She
alleges damages that arise from her participation in ISOTs that she accessed
through Zynga’s “YoVille” game on the Internet. ER 132-133 (Dkt. No. 13
at ¶¶ 37-38.) For example, she claims that “[o]n or about June 14, 2009,
Mrs. Swift participated in an ISOT for a ‘risk-free Green Tea Purity Trial’
while playing the game YoVille! that was created and developed by Zynga
and [Adknowledge].” Id. Swift claims the Green Tea ISOT was false and
misleading, and caused her harm. ER 133-134 (Dkt. No. 13 at ¶¶ 37-41).
Swift alleges that Adknowledge and Zynga (who she defines jointly as
“Defendants”) conspired to defraud consumers:
8

· “Defendants have acted in concert to create and develop ISOTs
reasonably calculated to deceive persons of ordinary prudence and
comprehension, and have used the mails and interstate
communication wires in furtherance of their scheme.” ER 128
(Dkt. No. 13 at ¶ 14) .
· “… this somewhat complicated structure was specifically created
in an attempt to shield Defendants from liability as a result of the
deceptive and misleading ISOTs that they developed and
created …” ER 127 (Dkt. No. 13 at ¶ 10).
· “Zynga attempted to induce [Swift] to earn virtual in-game
currency by accepting ISOTs with Zynga and its business partners,
including [Adknowledge]. The Plaintiff was misled by the ISOTs
created, developed, and promulgated by the Defendants …” ER
130 (Dkt. No. 13 at ¶ 25).
· “Defendants and other unnamed third parties conspired and
combined among themselves to commit the acts complained of
herein ...” ER 131 (Dkt. No. 13 at ¶ 30) .
She claims Zynga and Adknowledge jointly presented a “false and
misleading” offer to her. ER 128 (Dkt. No. 13 at ¶ 14). She alleges
Adknowledge and Zynga “acted in concert” in a “scheme” that was
“calculated to deceive” people. Id. She contends Adknowledge and Zynga
together “specifically created” a “complicated structure” to shield
themselves from liability. ER 127 (Dkt. No. 13 at ¶ 10). She avers that Zynga
and Adknowledge are “business partners” who developed misleading
advertisements to Swift and others like her. ER 130 (Dkt. No. 13 at ¶ 25).
Swift, resolute in her allegation that Zynga and Adknowledge were
9

acting in concert, pled that Zynga and Adknowledge were the “agent …
seller … representative, partner, joint venturer, alter ego, and related or
affiliated entity … on behalf of each …other”. ER 131 (Dkt. No. 13 at ¶ 30).
B.

The district court relied on Swift’s concerted-misconduct
allegations in denying Adknowledge’s motion to dismiss.
Adknowledge moved to dismiss Swift’s claims against it under Fed. R.

Civ. P. 12(b)(6) because it is an interactive computer service entitled to
immunity under 47 U.S.C. § 230(c). ER 117-123 (Dkt. No. 23 at 8-14). But
the district court denied the motion because Swift, in her complaint,
adequately pled that Adknowledge was Zynga’s partner and co-conspirator.
ER 100-101, 109, 111 (Dkt. No. 35 at 2:12-14, 3:13-14, 11:7, 13:15-16). The
court noted that Swift pled “Adknowledge and Zynga acted in concert” to
create the ISOTs that Swift blames for injuries. ER 100-101, 111 (Dkt. No. 35
at 2:12, 3:14, 13:22). The court cited Swift’s allegation “that Adknowledge
functioned as a ‘buffer’ to shield Zynga from liability for offers that
Defendants knew were false and misleading.” ER 111 (Dkt. No. 35 at 13:2627). The court only denied Adknowledge’s motion because it relied on the
allegations in Swift’s complaint explaining that, for the purpose of ruling on
a motion to dismiss, Swift “has sufficiently identified, at the pleading stage,
Adknowledge’s role in the alleged fraudulent scheme” as Zynga’s agent,
10

partner, and co-conspirator. ER 112 (Dkt. No. 35 at 14:1-2, 6-7).
C.

The YoVille Agreement containing the arbitration clause expressly
applies to Zynga’s agents.
To play the YoVille game on the Internet, Zynga required Swift to

accept its YoVille Terms of Service (the “Agreement”) effective when she
first played the game in April 2009. ER 36-37, 38-56 (Dkt. No. 55 at ¶¶ 2-4,
Ex. A). Zynga amended the YoVille Agreement in May 2009. ER 37, 57-77
(Dkt. No. 55at ¶ 5, Ex. B.) Both versions provide that Swift’s obligations
under the Agreement extend to not just Zynga, but also to “Zynga Parties”
including Zynga’s agents and third-party content providers:
YOU EXPRESSLY AGREE THAT USE OF THE SERVICES
IS AT YOUR SOLE RISK AND IS PROVIDED ON AN “AS
IS” BASIS . . . . NEITHER ZYNGA NOR ITS AFFILIATES
OR SUBSIDIARIES, OR ANY OF THEIR DIRECTORS,
EMPLOYEES, AGENTS, ATTORNEYS, THIRD-PARTY
CONTENT PROVIDERS, DISTRIBUTORS, LICENSEES
OR LICENSORS (COLLECTIVELY, “ZYNGA PARTIES”)
WARRANT THAT THE SERVICES WILL BE
UNINTERRUPTED OR ERROR-FREE . . . .
ALL COMMUNICATION EXPRESSED OR MADE
AVAILABLE BY THIRD PARTIES WHATSOEVER . . . . IS
SOLELY MADE BY THE RESPECTIVE AUTHOR(S) OR
DISTRIBUTOR(S), AND THE ZYNGA PARTIES DO NOT
GUARANTEE THE ACCURACY, COMPLETENESS OR
USEFULNESS THEREOF . . . . NOR DO THEY MAKE
ANY GUARANTEE, ENDORSEMENT OR WARRANTY
WITH RESPECT THERETO . . . .
11

ER 52-53, 72 (Dkt. No. 55, Ex. A at 14-15; Ex. B at 15(capitalization
original)). Swift’s complaint alleges that Adknowledge is Zynga’s agent,
employee, or distributor, or is otherwise affiliated with Zynga. ER 131 (Dkt.
No. 13 at ¶ 30.) Both versions of the Agreement provide that the “Zynga
Parties …shall not be liable” for damages “arising out of” Swift’s use of the
YoVille game or the accuracy of third-party advertisements—like the Green
Tea offer. ER 52-53, 72 (Dkt. No. 55, Ex. A at 14-15; Ex. B at
15(capitalization original)). Both versions required Swift to agree that she
would not “seek to hold the Zynga Parties liable[] for the conduct of third
parties”—such as the Green Tea advertiser. Id.
Both versions of the Agreement required Swift to agree “that any suit,
action or proceeding arising out of or relating to these Terms of Use . . . shall
be resolved solely by binding arbitration before a sole arbitrator under the
rules and regulations of the AAA.” ER 55, 74 (Dkt. No. 55, Ex. A at 17; Ex. B
at 17). And both versions of the Agreement provide for Delaware governing
law. ER 54, 74 (Dkt. No. 55, Ex. A at 16; Ex. B at 17).4

4

The record contains a third version of the YoVille Agreement—
effective August 2009. ER 79-85 (Dkt. No. 55 at ¶ 6 Ex. C.) But Swift alleges
only activities that occurred between April and July of 2009, before the third
version became effective. ER 1332-134 (Dkt. No. 13 at ¶¶ 37-40).
12

D.

Adknowledge joined in Zynga’s motion to compel arbitration but
the district court denied Adknowledge’s motion because Swift
claimed—for the first time—that Adknowledge was not Zynga’s
agent.
Zynga moved to compel arbitration, and Adknowledge filed a joinder in

that motion. ER 30 (Dkt. No. 57). Adknowledge sought to enforce the
arbitration clause in the Agreement because Swift’s claim is based on the
premise that Adknowledge and Zynga acted in concert, and therefore
Adknowledge has standing to enforce Zynga’s arbitration clause. Id.
Adknowledge also argued that the arbitration clause should apply to all
parties because Swift’s claims are based on the contractual relationship that
she formed with Zynga by the YoVille Agreement. Id.
In response, Swift alleged for the first time that Adknowledge “is not
Zynga’s agent or affiliate”—contradicting her complaint. ER 25 (Dkt. No.
66 at 3:5). But Swift did not retract the central argument in her case against
Adknowledge—that Adknowledge conspired and acted in concert with
Zynga to defraud consumers and create the ISOTs that are the subject of
Swift’s complaint. Compare ER 124-143 with ER 23-29 (Dkts. Nos. 13 and
66).
In its August 4, 2011 Order, the district court granted Zynga’s motion
to compel arbitration but denied Adknowledge’s request. ER 1 (Dkt. No.
13

94). The court found that, despite Swift’s repeated allegations in her
complaint, Adknowledge was not Zynga’s agent. ER 15 (Dkt. No. 94 at 15:1723 (“the allegations of her FAC identifying [Adknowledge] as ‘agents’
turned out to be incorrect as discovery has since revealed that they are
actually ‘independent contractors’”)). But the court acknowledged that
Adknowledge was one of the “Zynga Parties” that the Agreement
referenced. ER 13-14 (Dkt. No. 94 at 13:27-14:13). The court separated the
clauses within the Agreement, however, and decided “that the waiver of
liability provision of the YoVille [Agreement] …which defines
[Adknowledge] as ‘Zynga Parties,’ is separate and distinct from the
arbitration provision”. Id.
The district court stayed the litigation as to all parties pending the
outcome of the arbitration between Zynga and Swift “because an arbitration
decision may affect the outcome of the claims against [Defendants]”. ER 16
(Dkt. No. 94 at 16:21-28). Swift then dismissed Zynga as a defendant, and
the court lifted its stay. ER 20 (Dkt. No. 97). Adknowledge filed a timely
notice of appeal to this Court. ER 18 (Dkt. No. 102).

14

VI. SUMMARY OF ARGUMENT
The district court erred by denying Adknowledge’s motion to compel
arbitration because Adknowledge is entitled to enforce the arbitration clause
in the YoVille Agreement. Although Adknowledge is not a signatory to the
Agreement, a nonsignatory defendant may compel arbitration against a
signatory plaintiff when the plaintiff alleges substantially interdependent and
concerted misconduct by the non-signatory defendant and another signatory to
the contract. In this case, Swift alleged that Zynga and Adknowledge acted in
concert to create deceptive offers in YoVille that caused her harm. Her
complaint claims that Zynga and Adknowledge were co-conspirators who on
behalf of one another created a complicated scheme to shield each other
from liability. Since those claims amount to allegations of substantially
interdependent and concerted misconduct by both Adknowledge, a
nonsignatory defendant—and Zynga, another signatory to the contract—
Adknowledge may compel arbitration against Swift. Accordingly, this Court
should reverse the district court decision and send this case to arbitration.
The district court also erred by finding that Adknowledge is not a thirdparty beneficiary under the Agreement. A nonsignatory to a contract is a
third-party beneficiary when (1) the contracting parties intend a benefit; (2)

15

either party intends a gift or obligation to the third party; and (3) benefiting
the third party is material. The Agreement expressly provides that thirdparty content providers and licensors—such as Adknowledge—are defined
as “Zynga Parties” and cannot be held liable for harm arising from content
placed in the YoVille Game. Swift agreed that she would use YoVille at her
“sole risk” and “on an ‘as is’ basis”. She agreed that “Zynga Parties” like
Adknowledge did not warrant or endorse the offers over which she sues. And
she agreed to arbitrate any dispute arising out of or relating to the
Agreement. Since Swift agreed that Adknowledge is included as one of the
“Zynga Parties” who cannot be liable under the claims that she raises,
Adknowledge is a third-party beneficiary under the Agreement entitled to
insist that this case proceed to arbitration. Consequently, this Court should
reverse the district court decision and require Swift to arbitrate.
The district court also erred by making a final decision denying
arbitration, as opposed to sending the case to an arbitrator to make that
determination. Under Delaware law, when an arbitration clause refers to the
rules of the American Arbitration Association, if a question remains about
whether a third party—like Adknowledge—may enforce the arbitration
clause then that question is for the arbitrator. The YoVille Agreement

16

requires AAA arbitration, and the court below determined that Swift had to
arbitrate under the Agreement. But the court did not allow an arbitrator to
decide whether Adknowledge could enforce the arbitration clause.
Consequently, even if this Court determines Swift does not allege
substantially interdependent and concerted misconduct by Zynga and
Adknowledge—which Swift does throughout her complaint—and even if the
Court determines Adknowledge is not a third-party beneficiary, the Court
should still reverse and allow an arbitrator to decide whether Adknowledge
may enforce the arbitration clause.
VII. STANDARD OF REVIEW
“The denial of a motion to compel arbitration is reviewed de novo.”
Britton v. Co-Op Banking Group, 4 F.3d 742, 744 (9th Cir. 1993) (citing Pipe
Trades Council, Local 159 v. Underground Contractors Ass'n, 835 F.2d 1275,
1278 (9th Cir. 1987); Dean Witter v. Reynolds, Inc. v. Byrd, 470 U.S. 213, 218,
84 L. Ed. 2d 158, 105 S. Ct. 1238 (1985) (the Act, by its terms, leaves no
place for the exercise of discretion by a district court, but instead “mandates
that district courts shall direct the parties to proceed to arbitration on issues
as to which an arbitration agreement has been signed”) (emphasis original).
The Court also applies de novo review to the interpretation and meaning of

17

contract provisions. Simula, Inc. v. Autoliv, Inc., 175 F.3d 716, 719 (9th Cir.
1999).
VIII. ARGUMENT
Arbitration is a matter of contract. Wagner v. Stratton Oakmont, Inc., 83
F.3d 1046, 1048 (9th Cir. 1996). In determining whether parties have agreed
to arbitrate a dispute, the Ninth Circuit applies “general state-law principles
of contract interpretation.” Wagner, 83 F.3d at 1049. This Court gives “due
regard to the federal policy in favor of arbitration by resolving ambiguities as
to the scope of arbitration in favor of arbitration.” Id.
A.

Swift is barred under the doctrine of equitable estoppel from
retracting her allegations that Zynga and Adknowledge acted with
substantially interdependent and concerted misconduct.
1.

This Court should adopt the “substantially interdependent
and concerted misconduct allegations” standard that other
circuits apply.

The Ninth Circuit recognizes that equitable estoppel and agency
principles may permit nonsignatories to an agreement containing an
arbitration provision to compel arbitration. Comer v. Micor, Inc., 436 F.3d
1098, 1101-02 (9th Cir. 2006).5 Although this Court has not articulated a

5

Cited by Dziubla v. Cargill, Inc, for this proposition. 214 Fed. Appx.
658, 659 (9th Cir. Cal. 2006)(unpublished).
18

clear standard for when a nonsignatory may compel arbitration, the federal
appeals courts considering the issue each adopted a similar standard that this
Court should apply. They found that equitable estoppel will permit a
nonsignatory to compel arbitration when the “signatory to the contract
containing the arbitration clause raises allegations of substantially
interdependent and concerted misconduct by both the nonsignatory and one
or more of the signatories to the contract.” MS Dealer Serv. Corp. v.
Franklin, 177 F.3d 942, 947 (11th Cir. 1999) (citing Boyd v. Homes of Legend,
981 F. Supp. 1423, 1433 (M.D. Ala. 1997), internal brackets and ellipses
omitted) (abrogated on other grounds by, Lawson v. Life of the South Ins. Co.,
648 F.3d 1166 (11th Cir. 2011)).6 No federal appeals court has rejected this

6

The 2nd, 4th, 5th, 8th, 10th, and 11th circuits agree. See e.g., Denney v.
BDO Seidman, L.L.P., 412 F.3d 58, 70 (2d Cir. 2005) (citing Fifth Circuit
rule and finding “[h]aving alleged in this RICO action that the Deutsche
Bank and BDO defendants acted in concert to defraud plaintiffs … and that
defendants’ fraud arose in connection with BDO's tax-strategy advice,
plaintiffs cannot now escape the consequences of those allegations by
arguing that the Deutsche Bank and BDO defendants lack the requisite close
relationship”) (citing Grigson v. Creative Artists Agency, L.L.C., 210 F.3d
524, 527 (5th Cir. 2000) ); Brantley v. Republic Mortgage Ins. Co., 424 F.3d
392, 396 (4th Cir. 2005); 592 F.3d 830, 836 (8th Cir. 2010); Lenox Maclaren
Surgical Corp. v. Medtronic, Inc., 2011 U.S. App. LEXIS 22961, *12-13 (10th
Cir. Nov. 15, 2011) (reviewing oft-cited rule but holding that it only applies
when “allegations of collusion between a signatory and nonsignatory were
19

rule.
If the Court applies this standard, no question remains as to whether
Adknowledge is entitled to arbitration. Throughout Swift’s complaint she
alleges substantially interdependent and concerted misconduct by
Adknowledge and Zynga. She claims several times that they acted in concert,
that they are partners, that they are agents of one another, and that they
conspired to cause her harm. She alleges they worked together to create a
complicated scheme that would shield them both from liability. Every
allegation that she makes against Zynga she makes equally against
Adknowledge. So if this Court looks to Swift’s complaint and applies the
standard that allegations of “substantially interdependent and concerted
misconduct” require arbitration, then the Court must reverse the lower
court’s ruling on this matter.
This case is distinguished from the facts in Britton, 4 F.3d 742, in which
this Court found that a nonsignatory was not entitled to enforce a thirdparty’s arbitration clause. In Britton, the nonsignatory defendant Liebling

intimately founded in and intertwined with the contract containing the
arbitration clause.”).

20

purchased a business, GDL, which had entered into an arbitration clause
with the plaintiffs. Liebling argued “that judicial estoppel should bar the
plaintiffs from denying the allegations in their complaint regarding his status
as an agent or successor in interest of GDL.” Id. at 744. This Court rejected
his argument for two primary reasons that do not apply here.
First, judicial estoppel did not apply in Britton because “the court
below [n]ever adopted plaintiffs’ prior position that he was liable as agent or
employee of GDL.” 4 F.3d at 744. But in this case, the court below did adopt
Swift’s prior position that Adknowledge is liable as an agent, co-conspirator,
or partner of Zynga. Indeed, Adknowledge should have been dismissed from
this case on its Fed. R. Civ. P. 12(b)(6) motion but the district court relied on
Swift’s allegations that Adknowledge was Zynga’s partner and coconspirator.
Second, the Britton court found that plaintiffs’ claims alleged
“subsequent, independent acts of fraud, unrelated to any provision or
interpretation of the contract.” 4 F.3d at 748. But here, all of Swift’s claims
relate directly to the YoVille Agreement. Her allegations against
Adknowledge are the same as her allegations against Zynga, and she alleges
that the two Defendants acted in concert at the same time.

21

The lower court only denied Adknowledge’s joinder because Swift
recanted some of the allegations in her complaint that the court earlier relied
on. This Court should not allow Swift to reverse course on material
allegations that form the basis for her claims, and which she used to defeat
Adknowledge’s earlier motion to dismiss. The Britton court focused on the
allegations in the plaintiff’s complaint, and this Court should do the same.
Swift’s complaint alleges that Adknowledge is Zynga’s partner, coconspirator, and agent, and that they acted in concert. As such,
Adknowledge is entitled equally as Zynga to arbitration.
Since Britton¸ several district courts within this circuit have compelled
arbitration in favor of nonsignatories similarly situated to Adknowledge; and
most have applied the standard that Adknowledge urges this Court to adopt.
See, e.g., In re Toyota Motor Corp. Hybrid Brake Mktg., Sales, Practices & Prods.
Liab. Litig., 2011 U.S. Dist. LEXIS 143490, *23-24 (C.D. Cal. Dec. 13, 2011)
(“equitable estoppel applies when the signatory of an arbitration agreement
raises allegations of ‘substantially interdependent and concerted misconduct
by both the nonsignatory and one or more of the signatories to the
contract.’”) (quoting Hawkins v. KPMG LLP, 423 F. Supp. 2d 1038, 1050

22

(N.D. Cal. 2006).7
Swift’s entire case is based on her claim that Zynga and Adknowledge
worked together. Without Swift’s use of Zynga’s YoVille game—in which
she accepted the arbitration provision in the Agreement—she could not have
made any allegations against Adknowledge. Her claims are based on offers
Adknowledge allegedly created together with Zynga, and which Swift
accessed through YoVille. Since Swift’s claims against Zynga and
Adknowledge are interdependent and allege concerted conduct,
Adknowledge is entitled to enforce the arbitration clause to the same extent
as Zynga. The Court should reverse and send this case to arbitration.

7

See also Robinson v. Isaacs, 2011 U.S. Dist. LEXIS 118070 (S.D. Cal.
Oct. 12, 2011) (court compelled arbitration based on the allegation of a
business relationship between plaintiff and nonsignatory because complaint
alleged that defendants acted in concert; Brown v. General Steel Domestic
Sales, LLC, 2008 U.S. Dist. LEXIS 97832, *33 (C.D. Cal. May 19, 2008)
(plaintiffs’ claims against signatory “and their claims against the
nonsignatory defendants are interdependent, and appear to allege concerted
conduct by them. This is precisely the type of situation in which courts apply
equitable estoppel to require the signatory to an arbitration agreement to
arbitrate with nonsignatories”).
23

2.

This Court should apply the “substantially interdependent
and concerted misconduct allegations” standard because it is
the rule under Delaware law.

State law principles allow an arbitration clause to be enforced by
nonparties to the contract through estoppel and third-party beneficiary
theories. Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 173 L. Ed. 832, 840,
129 S. Ct. 1896, 1902 (2009)8. The YoVille Agreement provides that
Delaware law governs, and Delaware recognizes the standard that
Adknowledge urges this court to apply. The Court should review the
complaint for allegations of substantial interdependent and concerted
misconduct. See Wilcox & Fetzer, Ltd. v. Corbett & Wilcox, 2006 Del. Ch.
LEXIS 155, *16 (Del. Ch. 2006).
In Wilcox, Robert Wilcox sold his interest in a business named Wilcox &
Fetzer to his colleague in the firm, Kurt Fetzer. 2006 Del. Ch. LEXIS 155 at
*3. The two of them agreed to arbitrate any disputes. Id. at *3-4. Wilcox later
joined a competing firm that became known as Corbett & Wilcox
(“Corbett”). Id. at *4. Fetzer filed a complaint against Corbett for tradename infringement, and Corbett moved to compel arbitration. Id. at *4-5.

8

See also Lawson v. Life of the South Ins. Co., 648 F.3d 1166, 1170-1171
(11th Cir. 2011) (applicable state law provides the rule of decision for
whether a nonparty can enforce an arbitration clause against a party).
24

The court granted the motion because Fetzer’s complaint alleged
“concerted wrongdoing by a signatory (Wilcox) and a nonsignatory
([Corbett]).” Id. at *18. Accordingly, equitable estoppel applied because
“Fetzer’s common law trade name claim is intertwined with or touches on
the Agreement.” Id. at *19.
This case is similar. Like the plaintiff’s complaint in Wilcox, Swift’s
complaint alleges that Adknowledge and Zynga engaged in concerted
wrongdoing. And like Wilcox’s claims against Corbett, Swift’s claims against
Adknowledge are intertwined with or touch on the Agreement because the
Agreement expressly provides that she used YoVille at her own risk on an
“as is” basis, and that parties such as Adknowledge cannot be held liable for
harm arising out of her YoVille use. The Agreement that Adknowledge relies
on contains an arbitration clause like the one in Wilcox. And as in Wilcox this
Court should send this case to arbitration.
The district court denied Adknowledge’s motion because it rejected the
allegations in Swift’s complaint, finding that “the allegations of her FAC
identifying [Adknowledge] as ‘agents’ turned out to be incorrect as
discovery has since revealed that they are actually ‘independent
contractors’”. But the standard that Delaware and the federal courts have

25

adopted is not narrowly focused on the existence of a formal principal-agent
relationship. Rather, it focuses on the plaintiff’s allegations of substantially
interdependent and concerted misconduct. And notably, to date, Swift has not
amended her complaint to rescind her allegations. Nor should she be allowed
to because doing so would be fundamentally unfair. As a Delaware Court of
Chancery noted:
Although she denies that the reason for the amendment was to
escape the Arbitration Clause, the happy coincidence seems to be
that the amendment makes it easier for her to argue that she is free
from the Arbitration Clause’s reach. Whatever her motives, [she] is
not entitled to blind this court to her prior pleading, and the court
will highlight the ways in which she has altered the claim she seeks to
assert …

Ishimaru v. Fung, 2005 Del. Ch. LEXIS 167, *5-6 (Del. Ch. Oct. 26, 2005). In
Ishimaru, the court did not tolerate the gamesmanship of amending a
complaint to strike facts that might require arbitration. So, on equitable
estoppel grounds, the court granted a nonsignatory’s motion to compel
arbitration. This Court should do the same. As in Delaware and other
circuits, this Court should focus on Swift’s allegations of substantially
interdependent and concerted misconduct, and not allow Swift to “blind this
court to her prior pleading” by suddenly adopting a contrary position.
Swift should live with the allegations in her complaint—especially since

26

Adknowledge is left in this case because the district court relied on those
allegations in an earlier motion. This Court should follow Delaware and the
other federal courts of appeal who have considered the issue and require
Swift to arbitrate because she alleged substantial interdependent and
concerted misconduct on the part of Zynga—a signatory to her arbitration
clause—and Adknowledge.
B.

Swift must arbitrate her claims because Adknowledge is a thirdparty beneficiary under the YoVille Agreement.
Under Delaware law, “[d]emonstrating that a party is a third-party

beneficiary requires proof of three elements: (1) an intent between the
contracting parties to benefit a third party through the contract; (2) an intent
that the benefit serve as a gift or in satisfaction of a preexisting obligation to
the third party; and (3) a showing that benefiting the third party was a
material aspect to the parties in entering into the contract.” Carder v. Carl
M. Freeman Cmtys., LLC, 2009 Del. Ch. LEXIS 2, *21 (Del. Ch. Jan. 5,
2009).
In Carder, the court reviewed a contract with an arbitration clause and
concluded that the party moving for arbitration had “articulated, at least, a
nonfrivolous argument that it [was] an intended third party beneficiary” of
the contract. Carder, 2009 Del. Ch. LEXIS 2 at *22. The Carder court
27

determined there was no dispute that the parties to the contract intended to
benefit First Republic, since the contract specifically identified First
Republic. Id. at *22-23. This met the first prong of the third party beneficiary
test.
Similarly, in this case, the YoVille Agreement was created for the
benefit of Zynga and for third parties—such as Adknowledge—who
provided content to Zynga. The YoVille Agreement advised Swift that
“Zynga may distribute content supplied by third parties[.]” ER 72 (Dkt. No.
55,Ex. B at 15). The YoVille Agreement set forth the terms by which Swift
was entitled to use the content in Zynga’s games, including content
developed by third parties. Id. For example, the YoVille Agreement advised
Swift that she could not “copy, redistribute, publish or otherwise exploit
material . . . without the express prior written permission of Zynga and the
owner.” ER 63 (Dkt. No. 55, Ex. B at 6 (emphasis added).) The YoVille
Agreement expressly includes “third party content providers” within the
scope of liability limitations. ER 62, 72 (Dkt. No. 55, Ex. B at 5, 15).
Even the district court noted “that the waiver of liability provision of
the YoVille [Agreement] … defines [Adknowledge] as ‘Zynga Parties’” and
entitles Adknowledge to some limited liability protection under the

28

Agreement. The Agreement expressly provided that Swift was required to
arbitrate any claim that arose out of or related to the Agreement—and the
clause did not limit any claim to those that arose between just the signatories.
The Carder court noted it was at least plausible that the second prong—
intent that the benefit serve as a gift or in satisfaction of a preexisting
obligation to the third party—could be satisfied. 2009 Del. Ch. LEXIS 2 at
*23. The same is true in this case. Since Zynga was depending upon
Adknowledge to provide advertising and virtual currency to drive its
revenue, it follows that Zynga had a duty to protect Adknowledge against the
type of claims that Swift raises here.
Swift expressly represented that she took the offers that she complains
of on an “as is basis” and assumed the “sole risk” of the type of harm she
alleges in this case against Adknowledge—who the Agreement defined as
“Zynga Parties”. Swift also agreed to arbitrate any claim arising out of or
relating to the Agreement, which she should have understood benefited third
parties like Adknowledge. The facts in this case satisfy the second prong
better than in Carder.
Adknowledge also satisfies the third prong—a showing that the benefit
was a material aspect to the parties in entering into the contract. In Carder,

29

the court held that “because Freeman required the purchaser to make an
application with First Republic, one reasonably could infer that requirement
was material to at least Freeman.” 2009 Del. Ch. LEXIS 2 at *23.
Similarly, Zynga required Swift to adhere to contractual terms
protecting the content of Adknowledge and other third parties. Zynga
required Swift to agree that she took the “sole risk” in responding to the
type of offers that she alleges Zynga and Adknowledge made available on
YoVille. Zynga required Swift to agree that she took these offers “as is”.
Considering that Zynga received these offers from Adknowledge, and that
Adknowledge was within the scope of the limitation-of-liability clause, it
follows that Zynga and Swift intended that protecting Adknowledge under
the contract was a material aspect to their Agreement. This Court may infer,
as the Carder court did, that the conferred benefit was material to at least one
party to the contract.
The Carder court determined the third-party beneficiary, First
Republic, had nonfrivolous grounds to require presentation of the
arbitrability issue to the arbitrator. 2009 Del. Ch. LEXIS 2 at *24. Similarly,
Adknowledge has a reasonable argument that it is a third-party beneficiary
under the YoVille Agreement. Accordingly, this Court should require this

30

case to proceed to arbitration.
C.

Adknowledge is further entitled to arbitration because, under
Delaware law, the arbitrator decides whether a nonsignatory may
enforce an arbitration clause referring to the AAA.
There should be no question that this case belongs in arbitration

because Swift alleged a conspiracy in her complaint. But if there is a question
then an arbitrator should decide whether this case is arbitrable. Under
Delaware law, when contract signatories refer to the American Arbitration
Association’s rules in an arbitration clause, then an arbitrator should decide
any remaining question about whether a nonsignatory may enforce that
clause. McLaughlin v. McCann, 942 A.2d 616, 626-627 (Del. Ch. 2008)
(citing James & Jackson, LLC v. Willie Gary, LLC, 906 A.2d 76 (Del. 2006)).
The only exception to this rule is when the nonparty’s claim to arbitrability
is “wholly groundless.” Id.
In this case, the district court ruled that Swift must litigate her claims
against Zynga because she agreed to the arbitration clause in the YoVille
Agreement. That agreement applies AAA rules in arbitration. And since
Swift’s claims are based on Adknowledge being Zynga’s co-conspirator
concerning unlawful offers in the YoVille game, Adknowledge has grounds
to enforce the arbitration clause. Thus, if a question remains about whether

31

Adknowledge may enforce the arbitration clause, then under Delaware law
an arbitrator should decide the issue. If this Court decides that Swift’s
complaint does not allege substantially interdependent and concerted
misconduct by Adknowledge and Zynga—which it repeatedly does—then
the Court should present the question of arbitrability to an arbitrator.
In McLaughlin v. McCann, three “Purchasers” bought a mortgage
lending business from four “Sellers” under a purchase agreement.
McLaughlin, 942 A.2d at 618-619. It contained an arbitration clause citing
AAA arbitration rules. Id. at 619. Later, some (but not all) of the Sellers
signed a second agreement with Purchasers (the “2006 Agreement”) that
dealt with whether the Sellers had transferred the American Family
Mortgage Corporation (the “Corporation”) to the Purchasers. Id. at 619620.
When a dispute arose, the Sellers demanded arbitration citing the
arbitration clause in the original purchase agreement. 942 A.2d at 620. The
Purchasers argued that they had not agreed to arbitrate any disputes
regarding the Corporation because the Corporation was not mentioned in the
original agreement containing the arbitration clause, and not all Sellers
signed the 2006 Agreement. Id.

32

The McLaughlin court disagreed. 942 A.2d at 626. It noted that “a
reference to the AAA Rules provided evidence of the parties’ clear and
unmistakable intent to arbitrate arbitrability”. Id. at 625. Consequently, the
court granted the Sellers’ motion to compel arbitration, so that the arbitrator
could decide “what sweep the Arbitration Clause has.” Id. at 627-28.
This case is similar to McLaughlin. In that case, the arbitration clause
did not mention the Corporation. Here, the YoVille Agreement did not
specifically mention Adknowledge, and the arbitration clause within the
Agreement did not mention the “Zynga Parties” in particular. But in both
cases, under Delaware law an arbitrator decides the scope of an arbitration
clause.
The arbitration clause in McLaughlin did not specifically refer to the
nonsignatory Sellers—it was generally worded and simply provided that “If
a dispute arises under this agreement, the matter shall be admitted to
arbitration …in accordance with the rules of the American Arbitration
Association …” McLaughlin, 942 A.2d at 619. Similarly, the YoVille
Agreement provides “that any suit, action or proceeding arising out of or
relating to these Terms of Use . . . shall be resolved solely by binding
arbitration before a sole arbitrator under the rules and regulations of the

33

American Arbitration Association (“AAA”).” ER 55, 74 (Dkt. No. 55, Ex. A
at 17; Ex. B at 17).
The arbitration clause in this case is more strongly worded in favor of
arbitration than the McLaughlin clause. “Delaware courts have found the use
of both ‘arising out of’ and ‘relating to’ language in an arbitration provision
to be a broad mandate.” Orix LF, LP v. InsCap Asset Mgmt., LLC, 2010 Del.
Ch. LEXIS 70, *24 (Del. Ch. Apr. 13, 2010). The arbitration clause in the
YoVille Agreement includes the phrase “arising out of or relating to”. And
the YoVille clause also provides that any disputes relating to the Agreement
“shall be resolved solely by binding arbitration”. The italicized words make
the YoVille clause more emphatic than the one at issue in McLaughlin.
This Court, like the McLaughlin court, has recognized the “strong
federal policy favoring arbitration”. Letizia v. Prudential Bache Secur., Inc.,
802 F.2d 1185, 1188 (9th Cir. 1986). And the U.S. Supreme Court has
acknowledged that with respect to arbitration agreements within the Act’s
scope, the parties’ intentions “are generously construed as to issues of
arbitrability,” Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473
U.S. 614, 626, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985).
Under the applicable law of Delaware, the arbitration clause in the

34

YoVille Agreement requires that an arbitrator accept this dispute for
arbitration unless the arbitrator—and not the district court—determines that
the arbitration clause does not apply to Adknowledge. Adknowledge
respectfully requests this Court reverse the district court and require that
Swift’s claims against Adknowledge proceed to arbitration.
D.

The Court should require arbitration because any doubts
regarding the scope of the clause must be resolved in favor of
arbitration.
Following the United States Supreme Court’s lead, this Court noted

that under the Federal Arbitration Act “ any doubts concerning the scope of
arbitrable issues should be resolved in favor of arbitration.” Moses H. Cone
Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25, 103 S. Ct. 927, 74 L.
Ed. 2d 765 (1983); Bechtel Do Brasil Construções Ltda. v. UEG AraucÁria
Ltda., 638 F.3d 150, 154 (9th Cir. 2011) Delaware similarly adopted the rule
that “reference to the AAA rules evidences a clear and unmistakable intent
to submit arbitrability issues to an arbitrator.” McLaughlin, 942 A.2d at 622
The court below did not review the Agreement as a whole, but
separated its parts finding that “the waiver of liability provision of the
YoVille [Agreement] …which defines [Adknowledge] as ‘Zynga Parties,’ is
separate and distinct from the arbitration provision”—as if the arbitration

35

clause is an agreement separate from the rest of the contract. But the district
court should have given the arbitration provision the same meaning that
other clauses in the Agreement have. Under Delaware law, contracts must be
construed as a whole, to give effect to the intentions of the parties.
Northwestern Nat’l Ins. Co. v. Esmark, Inc., 672 A.2d 41, 43 (Del. 1996).
The YoVille Agreement provides that Swift’s obligations extend to not
just Zynga, but also to “Zynga Parties” including Zynga’s agents and thirdparty content providers. ER 52-53, 72 (Dkt. No. 55, Ex. A at 14-15; Ex. B at
15). The agreement requires AAA arbitration of all disputes arising out of or
related to it, and applies Delaware law. ER 53-54, 74 (Dkt. No. 55, Ex. A at
16-17; Ex. B at 17). Accordingly, under the governing law of Delaware, Swift
must arbitrate disputes with Zynga Parties—such as Adknowledge—that
arise out of or are related to the Agreement. Swift’s entire case is based on
her use of Zynga’s YoVille game, so all her disputes with Adknowledge arise
out of and are related to the Agreement. And that the arbitration clause in
the Agreement does not refer specifically to the “Zynga Parties” is
immaterial. See McLaughlin, 942 A.2d at 619.
In any event, whether the parties intended the arbitration clause to
benefit Adknowledge is—if not obvious on the face of the Agreement—a

36

close call. If there is any doubt on that point, that doubt should be resolved in
favor of arbitration. Thus, this Court should reverse the district court’s
Order and direct that Swift’s claims against Adknowledge proceed to
arbitration.
IX. CONCLUSION
Rebecca Swift filed her amended complaint alleging that Adknowledge
and Zynga acted in concert—dependent upon on one another to cause her
harm. Early in the case Adknowledge moved to dismiss for failure to state a
claim, but the court denied the motion because of Swift’s allegations that
Adknowledge participated in a conspiracy and partnership, and engaged in
concerted activity with Zynga. Only in her opposition to Adknowledge’s
motion to compel did she recant these allegations.
She now makes a 180-degree turn and claims that Adknowledge did not
act in concert with Zynga—because the allegations lead her to the arbitration
that she seeks to avoid. This Court should require Swift to stand by the
allegations still in her complaint. Swift’s complaint alleges substantially
interdependent and concerted misconduct between Adknowledge and
Zynga—so equitable estoppel dictates that Swift must arbitrate.
Adknowledge respectfully requests that this Court reverse the decision

37

below and order that Swift’s case against Adknowledge proceed to
arbitration.
X.

STATEMENT OF RELATED CASES

There are no related cases pending in this Court.

DATED this 9th day of January, 2012.

NEWMAN DU WORS LLP

By:

s/ Derek A. Newman
Derek A. Newman
Derek Linke
1201 Third Avenue, Suite 1600
Seattle, Washington 98104
Telephone: [phone]
Facsimile: [phone]
Attorneys for Appellants
Adknowledge, Inc.
and KITN Media USA, Inc.

38

CERTIFICATE OF COMPLIANCE
Pursuant to Fed.R.App. 32(a)(7)(C) and Circuit Rule 32-1
for Case No. 11-16933
I CERTIFY THAT:
The attached brief is proportionately spaced, has a typeface of 14
points or more and contains 8,357 words.

DATED this 9th day of January, 2012.

Newman Du Wors LLP
By:

s/ Derek A. Newman
Derek A. Newman
Derek Linke
1201 Third Avenue, Suite 1600
Seattle, Washington 98101
Telephone: [phone]
Facsimile: [phone]
Attorneys for Appellants
Adknowledge, Inc.
and KITN Media USA, Inc.

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