Rebecca Swift v. Adknowledge, Inc., et al
Filing
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Submitted (ECF) Reply brief for review. Submitted by Appellants Adknowledge, Inc. and KITN Media USA, Inc.. Date of service: 04/09/2012. [8133212] (DL)
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 COURT FOR THE
NORTHERN DISTRICT OF CALIFORNIA
(Hon. Elizabeth D. Laporte, United States Magistrate Judge)
No. 4:09-CV-05443 EDL
REPLY BRIEF OF APPELLANTS
ADKNOWLEDGE, INC. AND KITN MEDIA USA, INC.
Derek A. Newman
1201 Third Avenue, Suite 1600
Seattle, Washington 98101
(206) 274-2800
Counsel for Appellants
TABLE OF CONTENTS
I.
INTRODUCTION ........................................................................................ 4
II.
ARGUMENT................................................................................................. 5
A.
The weight of authority favors adoption of the “substantially
interdependent and concerted misconduct” standard......................... 5
1.
Courts adopting the “intertwined claims” test still
compel arbitration when there is “substantially
interdependent and concerted misconduct”. ............................ 5
2.
Since Swift’s case is built on allegations of collusion
between Adknowledge and Zynga, she is estopped
from asserting otherwise on this appeal. .................................. 10
B.
Delaware law applies in this case and mandates arbitration. .............. 13
C.
California law, if applicable, also supports arbitration because
Swift’s claims against Adknowledge are intertwined with the
YoVille Agreement. ........................................................................... 15
D.
Adknowledge is a third-party beneficiary because the YoVille
Agreement indicates an intent to benefit Adknowledge..................... 19
E.
Adknowledge did not waive its arbitration right because it did
not have the right until the Court decided Concepcion. ...................... 21
III.
CONCLUSION ........................................................................................... 24
1
TABLE OF AUTHORITIES
Cases
Amisil Holdings, Ltd. v. Clarium Capital Mgmt.,
622 F.Supp.2d 825 (N.D. Cal. 2007) .......................................................20
Arthur Andersen v. Carlisle,
556 U.S. 624, 129 S.Ct. 1896, 173 L. Ed. 2d 832 (2009) ........................... 14
AT&T Mobility LLC v. Concepcion,
131 S.Ct. 1740, 179 L. Ed. 2d 742 (2011) ..................................................... 5
Brantley v. Republic Mortgage Insurance Co.,
424 F.3d 392 (4th Cir. 2005) .................................................................. 6, 8
Carder v. Carl M. Freeman Cmtys., LLC,
2009 Del. Ch. LEXIS 2 (Del. Ch. Jan. 5, 2009)........................................ 19
Chastain v. Union Security Life Ins. Co.,
502 F.Supp.2d 1072 (C.D. Cal. 2007) ........................................................ 9
Estrella v. Freedom Fin. Network, LLC,
2012 U.S. Dist. LEXIS 7947 (N.D. Cal. Jan. 24, 2012) ............................ 23
Hawkins v. KPMG LLP,
423 F.Supp.2d 1038 (N.D. Cal. 2006) ........................................................ 8
HCC Life Ins. Co. v. Managed Benefit Adm’rs LLC,
2008 U.S. Dist. LEXIS 46443 (E.D. Cal. June 11, 2008) ......................... 11
Hoffman Const. Co. of Oregon v. Active Erectors and Installers, Inc.,
969 F.2d 796 (9th Cir. 1992)..................................................................... 22
In re Toyota Motor Corp. Hybrid Brake Mktg., Sales, Practices and Products
Liab. Litig.,
2011 U.S. Dist. LEXIS 143490 (C.D. Cal. Dec. 13, 2011) ....................... 6, 8
Just Film, Inc. v. Merch. Servs.,
2011 U.S. Dist. LEXIS 96613 (N.D. Cal. Aug. 29, 2011) .......................... 12
Molecular Analytical Systems v. Ciphergen Biosystems, Inc.,
186 Cal. App. 4th 696 (Cal. Ct. App. 2010).............................................. 17
Mundi v. Union Sec. Life Ins. Co.,
555 F.3d 1041 (9th Cir. 2009) ................................................................. 6, 7
2
Provencher v. Dell, Inc.,
409 F.Supp.2d 1196 (C.D. Cal. 2006) ...................................................... 13
Stolt-Nielsen S. A. v. AnimalFeeds Int’l Corp.,
130 S. Ct. 1758, 176 L. Ed. 2d 605 (2010) ................................................. 23
Swift v. Zynga Game Network, Inc.,
805 F. Supp. 2d 904 (N.D. Cal. 2011) ...................................................... 21
Ticknor v. Choice Hotels, Int’l, Inc.,
265 F.3d 931 (9th Cir. 2001) ..................................................................... 13
Volt Information Sciences, Inc. v. Board of Trustees of Leland Stanford Junior
Univ.,
489 U.S. 468, 109 S. Ct. 1248, 103 L. Ed. 2d 488 (1989) .......................... 23
Wilcox & Fetzer, Ltd. v. Corbett & Wilcox,
2006 Del. Ch. LEXIS 155 (Del. Ch. 2006) ............................................... 14
3
I.
INTRODUCTION
Citing lower-court opinions, Rebecca Swift’s brief (“Opposition”)
focuses on whether her dispute with Adknowledge is “intertwined” with the
YoVille Agreement containing the mandatory arbitration clause. But even
when there is no intertwinement under Swift’s definition, courts
consistently enforce an arbitration clause on a nonsignatory’s behalf when
the plaintiff alleges substantially interdependent and concerted misconduct.
Swift’s case is built entirely on her claim that Adknowledge acted in concert
with Zynga, and so this Court should likewise enforce the arbitration clause.
Under either Delaware or California law, Swift’s allegations are
intertwined with the Agreement. Swift bases her claims entirely on her
transactions for virtual currency—transactions that the YoVille Agreement
governs. Swift alleges that Zynga and Adknowledge together misled her in
connection with these transactions. So without the Agreement, there would
be no virtual currency transactions. And without the transactions there
would be no claim.
The Court should also reverse because Adknowledge is a third-party
beneficiary. Swift’s Opposition does not respond to Adknowledge’s
argument that the YoVille Agreement indicates a clear intent to benefit
Adknowledge.
4
On waiver, Swift claims that Adknowledge knew a long time ago that it
had a right to compel arbitration and waived by litigating this case.
Adknowledge could not have insisted upon arbitration until after the
Supreme Court decided AT&T Mobility LLC v. Concepcion, , 131 S. Ct. 1740,
179 L. Ed. 2d 742 (2011), and then Adknowledge immediately joined in a
motion to compel arbitration.
Adknowledge respectfully requests that this Court reverse the district
court’s Order and compel arbitration of Swift’s claims against it.
II.
A.
ARGUMENT
The weight of authority favors adoption of the “substantially
interdependent and concerted misconduct” standard.
1.
Courts adopting the “intertwined claims” test still compel
arbitration when there is “substantially interdependent and
concerted misconduct”.
Swift admits that she “was required to accept the terms of the
Arbitration Agreement when signing up to play Zynga games.” Opposition
at 13. Swift claims that in order to enforce the arbitration clause in the
Agreement, Adknowledge must show both (a) that “the issues
[Adknowledge] is seeking to resolve in arbitration are intertwined with the
agreement”, and (b) a “close relationship between the entities involved.”
Opposition at 12 (citing In re Toyota Motor Corp. Hybrid Brake Mktg., Sales,
Practices and Products Liab. Litig., 2011 U.S. Dist. LEXIS 143490 at *27-28
5
(C.D. Cal. Dec. 13, 2011). But courts find “intertwinement” when the
plaintiff alleges “substantially interdependent and concerted misconduct” as
Swift does in her complaint.
Arguing that this Court should not expressly adopt the “substantially
interdependent and concerted misconduct” standard, Swift cites just one
Ninth Circuit authority: Mundi v. Union Sec. Life Ins. Co., 555 F.3d 1042,
1047 (9th Cir. 2009). Mundi followed and cited favorably the Fourth Circuit
case, Brantley v. Republic Mortg. Ins. Co., 424 F.3d 392 (4th Cir. 2005). But in
Brantley, the court explained that with “the intertwined claims test” a
signatory is estopped from avoiding arbitration in two alternative
circumstances. Brantley, 424 F.3d at 395-96. The first is when the signatory
must “rely on the terms of the written agreement” to assert its claims
against the nonsignatory. Id. The second is when the signatory “raises
allegations of … substantially interdependent and concerted misconduct by
both the non-signatory and one or more of the signatories to the contract.”
Id. at 396. That second scenario applies here.
Brantley presents an either–or test: estoppel applies when the
nonsignatory shows either of “two different circumstances.” Brantley, 424
F.3d at 396, citing MS Dealer Serv. Corp. v. Franklin, 177 F.3d 942, 947 (11th
6
Cir. 1999). Brantley analyzed both circumstances and found against estoppel
for a reason that does not apply here. In Brantley, the plaintiff’s claim did
“not raise allegations of collusion or misconduct … necessary to satisfy the
second means of obtaining equitable estoppel.” Id. at 396. This case is
distinguished. Swift’s complaint is loaded with allegations of collusion and
misconduct. See, e.g., ER 128 (Dkt. No. 13 at ¶ 14) (“Defendants have acted
in concert . . . to deceive [consumers]”), ER 131 (Dkt. No. 13 at ¶ 30)
(“Defendants . . . conspired . . . to commit the acts complained of herein”).
The finding in this Court’s Mundi decision is similar. The Mundi
court observed that “[a]s in Brantley, Mundi’s claim is based solely on [the
nonsignatory]’s actions, and there are no allegations of collusion or of
misconduct by Wells Fargo, the signatory to the arbitration agreement.”
Mundi, 555 F.3d at 1047. In contrast, Swift’s complaint repeatedly alleges
that Adknowledge acted in collusion with Zynga to create deceptive
advertising campaigns that defrauded Swift and others. See, e.g., ER 140
(Dkt. No. 13 at ¶ 66) (“Defendants engaged in these unfair and/or deceptive
acts and practices with the intent that they result, and which did result, in
completed, false, and misleading integrated special offer transactions alleged
herein.”)
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And the district court cases in this circuit following Mundi suggest
that, as in Brantley, the test presents an either–or question. The nonsignatory
is entitled to arbitration when the plaintiff alleges substantial and concerted
misconduct between a signatory and the nonsignatory. For example, Swift
relies on Toyota, a district court case that cites Mundi. Toyota, 2011 U.S. Dist.
LEXIS 143490 at *23. Swift argues that Toyota “cit[es] and explain[s]
Mundi”. Opposition at 12. But Toyota applies the “either–or” analysis just
like the Brantley court did.
While explaining Mundi, the Toyota court noted that there are “two
types of contexts” in which a nonsignatory could “compel arbitration of
claims asserted by a party to an arbitration agreement.” Toyota, 2011 U.S.
Dist. LEXIS at *23. The second context occurs 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.’” Id. (citing Mundi and Hawkins v. KPMG LLP,
423 F.Supp.2d 1038, 1050 (N.D. Cal. 2006).
The Toyota court applied two tests separately and without overlap.
Toyota, 2011 U.S. Dist. LEXIS at *27-35. Indeed, the court focused on the
plaintiff’s allegations in the complaint, noting that “[n]one of the cited
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portions … concern substantially interdependent and concerted misconduct
or collusion between Toyota and its dealerships.” Id. at *34. The Toyota
court’s analysis—which Swift concedes is an explanation of this Court’s
holding in Mundi—supports arbitration when a signatory plaintiff alleges
“substantially interdependent and concerted misconduct” on the part of the
nonsignatory defendant and another signatory.
Swift also cites Chastain v. Union Sec. Life Ins. Co., 502 F.Supp. 2d
1072, (C.D. Cal. 2007), which likewise applied the either–or test and
followed Brantley. Id. at 1080. Chastain distinguished between “the
intertwined-claims theory” and “Brantley’s second circumstance, that
Plaintiff has alleged ‘substantially interdependent and concerted misconduct
by both the nonsignatory and one or more of the signatories to the
contract.’” Id. at 1080-81. Chastain did not find substantially interdependent
misconduct because the plaintiff made only one allegation regarding joint
conduct, and did “not assert that the joint marketing was fraudulent.” Id. at
1081.
But Swift’s complaint is chock full of allegations that Zynga and
Adknowledge worked together in a conspiracy to defraud Swift and others:
• “Defendants have acted in concert to create and develop ISOTs
reasonably calculated to deceive persons of ordinary prudence and
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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 [defined as Zynga and Adknowledge] and other
unnamed third parties conspired and combined among themselves
to commit the acts complained of herein ...” ER 131 (Dkt. No. 13 at
¶ 30).
Swift claims Zynga and Adknowledge jointly presented a “false” and
“misleading” offer to her. ER 140 (Dkt. No. 13 at ¶ 66). All of Swift’s
authority supports enforcement of the mandatory arbitration clause in the
Agreement because she alleges collusion among Zynga and Adknowledge.
2.
Since Swift’s case is built on allegations of collusion
between Adknowledge and Zynga, she is estopped from
asserting otherwise on this appeal.
Swift’s case is based entirely on her claim that Zynga and
Adknowledge worked together. Without using Zynga’s YoVille game—in
which she accepted the arbitration provision in the YoVille Agreement—
10
Swift could not have made any allegations against Adknowledge. ER 132-134.
Her claims are all based on offers that Adknowledge allegedly created
together with Zynga, and Swift accessed through YoVille under the
Agreement at issue. Id. Swift alleges that Zynga and Adknowledge acted in
concert (ER 128 (Dkt. No. 13 at ¶ 14)), worked together to create misleading
offers (ER 127 (Dkt. No. 13 at ¶ 10)), and engaged in a conspiracy (ER 131
(Dkt. No. 13 at ¶ 30)).
Swift cannot escape her own pleading—and her complaint rests
entirely on her allegations that Adknowledge and Zynga engaged in joint
activities that harmed her. So she relies on the district court’s conclusion
that in discovery Adknowledge revealed that it is Zynga’s “independent
contractor” and not “Zynga’s agent.” Opposition at 11. Relying on this fact,
Swift cites HCC Life Ins. Co. v. Managed Benefit Adm’rs LLC, 2008 U.S.
Dist. LEXIS 46443 (E.D. Cal. June 11, 2008) to argue that arbitration is not
appropriate here. But HCC dealt with a narrow issue—whether a
nonsignatory had a “preexisting agency relationship” with a signatory that
permitted it to compel arbitration. Id. at *7. HCC did not address a fact
pattern involving allegations of substantially interdependent and concerted
misconduct, and thus does not apply.
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Nor is the issue, as Swift argues, whether Adknowledge can prove that
it had a close relationship with Zynga. Opposition at 16-17. The issue is
whether Swift alleges substantially interdependent and concerted
misconduct. Since she made the allegation, never amended it, and the
district court relied on it in denying Adknowledge’s motion to dismiss, Swift
must live with her allegation and proceed to arbitration.
Swift also cites Just Film, Inc. v. Merch. Servs., 2011 U.S. Dist. LEXIS
96613 (N.D. Cal. Aug. 29, 2011). In that case, several nonsignatories sought
to compel arbitration based on equitable estoppel. Just Film, 2011 U.S. Dist.
LEXIS 96613 at *19-20. The court relied on amended allegations in the most
recent version of the complaint to deny the nonsignatories’ request. Id. at
*23-24. But Just Film is distinguished from this case for two reasons. First,
unlike Just Film, the lower court in this case relied on Swift’s conspiracy
allegations when it denied Adknowledge’s motion to dismiss for failure to
state a claim. Having posited those facts and convinced the court to rely on
them, Swift is now estopped from reversing course. Second, unlike the
plaintiff in Just Film, Swift has not amended her complaint to strike the
conspiracy allegations. So this Court should rely on her most recent
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complaint—like the court did in Just Film—and hold Swift to her claims of
substantially interdependent and concerted misconduct.
B.
Delaware law applies in this case and mandates arbitration.
Swift acknowledges that “the [YoVille Agreement] contains a
Delaware choice-of-law provision, and a court must typically abide by the law
of the forum chosen.” Opposition at 20 (citing Provencher v. Dell, Inc., 409 F.
Supp. 2d 1196, 1201 (C.D. Cal. 2006) (citing Ticknor v. Choice Hotels, Int’l,
Inc., 265 F.3d 931, 937 (9th Cir. 2001)). But Swift argues that “assuming that
Delaware law applies in the present case is putting the cart before the
horse.” Swift also suggests that California law should apply because Zynga
amended the Agreement—albeit after Swift accepted it—to provide for
California law.
But this Court’s recent decision in Allianz Global Risk U.S. Ins. Co. v.
GE, 2012 U.S. App. LEXIS 4496, (9th Cir. Mar. 5, 2012) suggests that the
contract’s governing-law provision applies. In Allianz, this Court reviewed a
district court’s order granting Allianz’s motion to compel arbitration. Allianz
sued to recover the amount it paid for repairs of a turbine that General
Electric Co. sold to Allianz’s insured. Id. at *1-2. GE appealed, arguing that
Allianz, as a nonsignatory, could not enforce the contract between GE and
13
the insured that contained an arbitration clause. Id. at *2. The Allianz court
held that “under the Supreme Court’s decision in Arthur Andersen v.
Carlisle, 556 U.S. 624, 129 S.Ct. 1896, 1902, 173 L. Ed. 2d 832 (2009), the
district court should have applied state law, not federal common law”. Id. at
*2. In Arthur Andersen, the Supreme Court held that state-law principles
allow an arbitration clause to be enforced by nonparties through estoppel and
third-party beneficiary theories. Arthur Andersen, 129 S. Ct. at 1902 (2009).
In this case, Delaware law applies because Swift’s allegations are
based on events occurring between April and July 2009. During that period,
Swift’s use of Zynga games was governed by the first two versions of the
YoVille Agreement. ER 38-56, 57-77. Both versions provide for Delaware
governing law. ER 54-55, 74. The contract with California governing law was
not in force when the alleged events occurred. Accordingly, the California
choice-of-law provision in the third YoVille Agreement, which did not come
into force until August 2009 (ER 78-85), does not apply to this case.
Delaware law mandates arbitration. In Wilcox & Fetzer, Ltd. v. Corbett
& Wilcox, 2006 Del. Ch. LEXIS 155 (Del. Ch. Aug. 22, 2006), the Delaware
court granted a nonsignatory’s motion to compel arbitration because the
complaint alleged “concerted wrongdoing” by a signatory and a
14
nonsignatory. Id. at *18. The court held that equitable estoppel applied
because the plaintiff’s common-law trade name claim was “intertwined with
or touche[d] on” an agreement containing an arbitration provision. Id. at
*19. The court held this was true even though the plaintiff’s common law
claim was not based on the agreement. Id. at *13-14. So while Swift argues
that she is not suing Adknowledge for breach of the Agreement, her claims
are nonetheless intertwined with or touch on the Agreement. Accordingly,
this Court should reach the same result as Delaware’s Wilcox and reverse.
C.
California law, if applicable, also supports arbitration because
Swift’s claims against Adknowledge are intertwined with the
YoVille Agreement.
Even if this Court were to apply California law, it should reach the
same conclusion the Wilcox court reached and require that this case proceed
to arbitration. Like federal law, California law favors the arbitration of
disputes. Rowe v. Exline, 153 Cal. App. 4th 1276, 1282 (2007). And
California’s public policy is to resolve any doubts in favor of deferring to
arbitration proceedings. Id. (citing Armendariz v. Foundation Health Psychcare
Servs., 24 Cal. 4th 83, 97 (2000)). “Furthermore, the notion of estoppel is
familiar to California law, and California’s concern for equity is just as strong
as that of federal law.” Rowe, 153 Cal. App. 4th at 1288; see also, e.g., Long
15
Beach v. Mansell, 3 Cal. 3d 462, 488 (1970) (discussing the “venerable
doctrine of equitable estoppel”).
In Rowe, the plaintiff sued Initiatek, Inc. and two of its shareholders.
153 Cal. App. 4th at 1279. Rowe’s claim arose out of an agreement that he
signed with Initiatek including an arbitration clause governed by California
law. Id. at 1280. Rowe brought four causes of action against all three
defendants. One claim was for breach of contract asserting that the
nonsignatory shareholders were alter egos of Initiatek. Id. The others were
violations of the California Corporations Code. Id. at 1280-81.
All three defendants moved to compel arbitration and to stay the
litigation. Id. at 1281. Rowe argued that only Initiatek, the signatory, could
enforce the agreement. Id. The trial court sided with him, finding that
“Rowe was obligated under the Agreement to arbitrate his claims against
Initiatek, but he never signed a contract requiring him to arbitrate his claims
against [the shareholders].” Id. at 1281-82.
But the California Court of Appeal reversed, reasoning that “‘[T]he
equitable estoppel doctrine applies when a party has signed an agreement to
arbitrate but attempts to avoid arbitration by suing nonsignatory defendants
“for claims that are ‘based on the same facts and are inherently inseparable’
16
from arbitrable claims against signatory defendants.’” Rowe at 1287 (citing
Turtle Ridge Media Group, Inc. v. Pacific Bell Directory, 140 Cal. App. 4th 828,
832-833 (2006)). The Court of Appeals noted that Rowe sued the
nonsignatory shareholders “under the alter ego theory, as though they were
one and the same with the corporation that signed the Agreement.” Id.
This case is similar to Rowe. Swift sues Adknowledge for claims that
are based on the same facts and are inherently inseparable from arbitrable
claims against Zynga. The district court confirmed this by compelling
arbitration on the same claims against Zynga that Adknowledge seeks to
compel here. And like Rowe, Swift sued Zynga and Adknowledge under a
joint-liability theory—as though Adknowledge was one and the same with
Zynga, the corporation that signed the Agreement. If this Court decides to
follow California law, then it should compel arbitration for the same reason
that the California court did in Rowe.
Similarly, in Molecular Analytical Systems v. Ciphergen Biosystems, Inc.,
186 Cal. App. 4th 696, 715 (2010), the court held that equitable estoppel
applied when “the claims the plaintiff assert[ed] against the nonsignatory
[were] dependent upon, or founded in and inextricably intertwined with, the
underlying contractual obligations of the agreement containing the
17
arbitration clause.” Id. Swift’s allegations regarding her transactions with
YoCash, that Adknowledge allegedly participated in, cannot be separated
from the YoVille Agreement that governs those transactions. Swift’s claims
are linked to the YoVille Agreement, and she is equitably estopped from
denying arbitration of her claims against Adknowledge.
Swift argues that because she did not allege breach of contract,
Adknowledge cannot enforce the arbitration clause. Opposition at 13-15. But
Swift’s claims against Adknowledge and Zynga are identical—and the trial
court found sufficient intertwinement between those claims and the YoVille
Agreement to compel arbitration on Zynga’s behalf. See ER 8, lines 12-22
(finding Swift agreed to the terms of service including the agreement to
arbitrate). The trial court implicitly rejected Swift’s argument that her
claims against Zynga were exempted from the arbitration clause even though
she was not suing Zynga under the contract. Id. That finding is consistent
with California law, and equally applies to Adknowledge. See Dryer v. Los
Angeles Rams, 40 Cal. 3d 406, 418 n. 12 (1985)(“claims framed in tort are
subject to contractual arbitration provisions when they arise out of the
contractual relationship between the parties”); Boucher v. Alliance Title Co.,
Inc., 127 Cal. App. 4th 262 (2005) (granting nonsignatory’s motion to
18
compel arbitration and noting “that the claims are cast in tort rather than
contract does not avoid the arbitration clause.”)
As the district court held, Swift’s claims against Zynga are governed
by the arbitration clause in the YoVille Agreement. Her claims against
Adknowledge are identical, and inherently inseparable from Swift’s
arbitrable claims against the signatory defendant, Zynga. Under the law of
either Delaware or California, Swift’s claims are linked to the YoVille
Agreement, and she is equitably estopped from denying arbitration of her
claims against Adknowledge.
D.
Adknowledge is a third-party beneficiary because the YoVille
Agreement indicates an intent to benefit Adknowledge.
In its opening brief, Adknowledge provided a four-page discussion of
Carder v. Carl M. Freeman Cmtys., LLC, 2009 Del. Ch. LEXIS 2, *21 (Del.
Ch. Jan. 5, 2009). Opening Brief at 27-31. Carder applied Delaware law—
which governs the YoVille Agreement—and concluded that
“[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
19
entering into the contract.” Id. Adknowledge provided a detailed analysis of
why each of those three elements has been met in this case.
Swift’s Opposition ignores Carder. Instead, Swift cites the nonDelaware case Amisil Holdings, Ltd. v. Clarium Capital Mgmt., 622 F. Supp.
2d 825, 837 (N.D. Cal. 2007) as the sole support for her conclusion that
Adknowledge is not a third-party beneficiary. Swift notes that Amisil held
that an arbitration provision must be interpreted to determine whether a
claim should be arbitrated. Opposition at 18. Swift argues that the YoVille
“Arbitration Agreement is noticeably silent concerning its applicability to
third parties and shows no intention to benefit third parties”. Id. at 19.
But the Amisil court compelled arbitration not because the arbitration
clause mentioned third parties, but because the arbitration clause was broad.
Amisil, 622 F.Supp.2d at 838. The clause in Amisil required arbitration with
respect to “any controversy or claim arising out of or relating to” the
Agreement. Id. (emphasis original). The Amisil court found that all of the
claims against the nonsignatory individuals fell within the broad scope of the
arbitration clause. Id. The court concluded that “under agency principles,
the claims against the individual defendants should be arbitrated.” Id. at 839.
20
The analysis in this case leads to an identical result. Swift agreed to a
broad clause in the Agreement requiring “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 (emphasis added).
Swift executed a contract with a broad arbitration provision. She
claims she believed that Adknowledge was Zynga’s agent, and the district
court relied on that allegation in denying a motion to dismiss. Under Amisil,
Swift’s claims against Adknowledge should be sent to an arbitrator.
E.
Adknowledge did not waive its arbitration right because it did not
have the right until the Court decided Concepcion.
Swift argues Adknowledge waived its right to arbitration by litigating
this case until “nearly eighteen months after Swift filed her suit”.
Opposition at 24 (emphasis omitted). But the district court held that “Zynga
did not waive its right to compel arbitration by waiting until the Supreme
Court’s decision in Concepcion.” Swift v. Zynga Game Network, Inc., 805 F.
Supp. 2d 904, 914 (N.D. Cal. 2011). This Court should similarly reject
Swift’s reiteration of that argument against Adknowledge.
“A party seeking to prove waiver of a right to arbitration must
demonstrate: (1) knowledge of an existing right to compel arbitration; (2)
21
acts inconsistent with that existing right; and (3) prejudice to the party
opposing arbitration resulting from such inconsistent acts.” Hoffman Const.
Co. of Oregon v. Active Erectors & Installers, Inc., 969 F.2d 796, 798 (9th Cir.
1992) (quoting Fisher v. A.G. Becker Paribas Inc., 791 F.2d 691, 694 (9th Cir.
1986)). None of these factors are present here.
The first Hoffman factor involves knowledge of an existing right to
compel arbitration. Adknowledge had no knowledge of an existing right to
compel arbitration until after the Supreme Court’s decision in AT&T
Mobility LLC v. Concepcion, 131 S. Ct. 1740, 179 L. Ed. 2d 742 (2011) . Swift
makes conclusory statements about Adknowledge’s alleged belief: she claims
that “Adknowledge certainly thought it had a right to compel [arbitration]”,
that it litigated “[i]nstead of asserting the right that it believed it had”, and
that it was aware of a “perceived right” to arbitrate. Opposition at 23-24.
But there is no evidence that Adknowledge had any such knowledge before
Concepcion.
Since Adknowledge was unaware of any existing pre-Concepcion right
to arbitration, it could not have acted inconsistently with regard to that right
(the second Hoffman factor) or caused prejudice resulting from acting
inconsistently (the third factor). Post-Concepcion courts analyzing waiver
22
based on Swift’s argument agree. See, e.g., Estrella v. Freedom Fin. Network,
LLC), 2012 U.S. Dist. LEXIS 7947 at *10-11 (N.D. Cal. Jan. 24, 2012) (“In
its Arbitration Order, the Court rejected plaintiffs’ waiver argument …
because it found that the Supreme Court’s ruling in Concepcion had changed
the legal landscape such that the Freedom Defendants had not acted
inconsistently with a known right to compel arbitration … when they failed
to so move [to compel] throughout the prior two years of litigation.”)
Swift also argues that Concepcion does not apply because “in this case,
there is no class action waiver in the first Arbitration Agreement.”
Opposition at 26 (emphasis omitted). But an arbitration agreement is, by
definition, a class action waiver. In Concepcion, the Court held that an
arbitration clause will always be enforced according to its terms. Concepcion,
131 S. Ct. at 1748 (citing Volt Information Sciences, Inc. v. Board of Trustees of
Leland Stanford Junior Univ. , 489 U.S. 468, 478, 109 S. Ct. 1248, 103 L. Ed.
2d 488 (1989)). And “classwide arbitration interferes with fundamental
attributes of arbitration and thus creates a scheme inconsistent with” federal
law. Id. “[P]arties cannot be compelled to submit their dispute to class
arbitration.” Stolt-Nielsen S. A. v. AnimalFeeds Int’l Corp. , 130 S. Ct. 1758,
1776, 176 L. Ed. 2d 605 (2010). Since an arbitration clause will always be
23
enforced, and class arbitration cannot be compelled, it necessarily follows
that an arbitration clause is the same as a class-action waiver. Thus, the fact
that there was no express class-action waiver in the YoVille Agreement is not
germane to the analysis in this case because the arbitration clause itself
operated as the waiver.
III.
CONCLUSION
Swift’s claims are based completely on her allegations that
Adknowledge and Zynga acted in concert. Because she alleges substantially
interdependent and concerted misconduct by Adknowledge and Zynga,
equitable estoppel requires arbitration of her claims. This Court should apply
Delaware law, which leaves no doubt that arbitration is appropriate. But even
California requires arbitration when the plaintiff alleges substantially
interdependent and concerted misconduct. Swift fails to address
Adknowledge’s third-party beneficiary argument, essentially conceding it.
Finally, Adknowledge could not have waived its arbitration right before
Concepcion. The arbitration right did not exist until after the Supreme Court
changed the law, and Adknowledge joined a motion to compel immediately
after the decision.
24
Adknowledge respectfully requests that this Court reverse the
decision below and order that Swift’s case against Adknowledge proceed to
arbitration.
DATED this 9th day of April, 2012.
NEWMAN DU WORS LLP
By:
s/ Derek Linke
Derek A. Newman
Derek Linke
1201 Third Avenue, Suite 1600
Seattle, Washington 98101
Telephone: (206) 274-2800
Facsimile: (206) 274-2801
Attorneys for Appellants Adknowledge, Inc.
and KITN Media USA, Inc.
25
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 4,410 words.
DATED this 9th day of April, 2012.
NEWMAN DU WORS LLP
By:
s/ Derek Linke
Derek A. Newman
Derek Linke
1201 Third Avenue, Suite 1600
Seattle, Washington 98101
Telephone: (206) 274-2800
Facsimile: (206) 274-2801
Attorneys for Appellants Adknowledge, Inc.
and KITN Media USA, Inc.
26
CERTIFICATE OF SERVICE
Pursuant to Circuit Rule 25-5(f)
for Case No. 11-16933
I hereby certify that I electronically filed the foregoing with the Clerk
of the Court for the United States Court of Appeals for the Ninth Circuit by
using the appellate CM/ECF system on April 9, 2012.
I certify that all participants in the case are registered CM/ECF users
and that service will be accomplished by the appellate CM/ECF system.
DATED this 9th day of April, 2012.
NEWMAN DU WORS LLP
By:
s/ Derek Linke
Derek A. Newman
Derek Linke
1201 Third Avenue, Suite 1600
Seattle, Washington 98101
Telephone: (206) 274-2800
Facsimile: (206) 274-2801
Attorneys for Appellants Adknowledge, Inc.
and KITN Media USA, Inc.
27
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