Campos v. Helmhold et al

Filing 112

ORDER re Defendants' 96 108 Motions to Compel Arbitration, Dismiss, and Stay Discovery. Defendants' Motion to Compel Arbitration or, in the Alternative, to Dismiss, Dkt. # 96 , is DENIED IN PART and GRANTED IN PART. Defendants' Mot ion to Compel Arbitration is DENIED. Defendants' Motion to Dismiss Plaintiffs' third cause of action is GRANTED without prejudice. Defendants' Motion to Stay Discovery as to Plaintiff Garvey's Claims Pending Ruling on Motion to Compel Arbitration or Dismiss, Dkt. # 108 , is DENIED AS MOOT. Signed by Judge Ricardo S. Martinez. (SB)

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UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT SEATTLE

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NATHAN CAMPOS and JANET GARVEY

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Plaintiffs,

ORDER RE: DEFENDANTS’
MOTIONS TO COMPEL
ARBITRATION, DISMISS, AND
STAY DISCOVERY

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Case No. C22-1806-RSM

v.
BIG FISH GAMES, INC., a Washington
corporation, et al.,
Defendants.

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I.

INTRODUCTION

This matter comes before the Court on Defendants Big Fish Games, Inc. and Product

17 Madness, Inc. (collectively, “Defendants”)’ “Motion to Compel Arbitration or, in the Alternative,
18 to Dismiss.” Dkt. #96. Plaintiffs Nathan Campos and Janet Garvey (collectively, “Plaintiffs”)
19 oppose the Motion. Dkt. #104. Defendants’ request that this Court: (1) compel Plaintiff Garvey
20 to arbitrate her claims; (2) stay Plaintiff Campos’ claims pending resolution of Plaintiff Garvey’s
21 arbitration; or, in the alternative, dismiss with prejudice Plaintiffs’ third cause of action related
22 to Plaintiff Garvey’s claims. Dkt. #96 at 1, 24. Defendants have also filed a “Motion to Stay
23 Discovery as to Plaintiff Garvey’s Claims Pending Ruling on Motion to Compel Arbitration or
24 Dismiss.” Dkt. #108. Plaintiff Garvey opposes the Motion. Dkt. #110. For the reasons set forth
ORDER RE: DEFENDANTS’ MOTIONS
TO COMPEL, DISMISS, AND STAY DISCOVERY - 1

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below, the Court DENIES IN PART and GRANTS IN PART Defendants’ Motion to Compel
Arbitration or, in the Alternative, to Dismiss, and DENIES AS MOOT Defendants’ Motion to
Stay Discovery.
II.

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BACKGROUND

Plaintiffs filed their third Amended Complaint on January 11, 2024. Dkt. #92. Plaintiffs
bring this putative class action alleging damages from being “deceived into making in-game
purchases of deceptively marketed in-game items in the mobile application games Big Fish
Casino and Jackpot Magic slots (collectively, “the Games”) and lost those purchases to the
Games’ unlawful and unfair casino-style games of chance.” Id. at 2. Plaintiffs allege that
Defendants “deceived consumers” by “inundat[ing]” them with false sales promotions and
limited time bonuses for discounted in-games goods through the use of “strikethrough pricing
and statements like ‘SALE!’ and ‘5.5x’ alongside countdown clocks to trick consumers into
believing they were benefiting from limited-time promotions that substantially increased the
value of their in-game purchases.” Id. at 3-4. Plaintiffs allege that these “purported savings were
false” because “the stricken ‘original’ pricing” was not the regular pricing for these goods and
the special offers were not time-limited or true discounts because “these purported sales run

17 almost perpetually and are only unavailable for trivial periods of time.” Id. at 4. Plaintiffs raise
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claims under the Washington Consumer Protection Act (“WCPA”) RCW Chapter 19.86, the
Revised Code of Washington § 4.24.070, California’s Unfair Competition Law (“UCL”),
California’s False Advertising Law (“FAL”), the North Carolina Deceptive Trade Practice Law,
as well as common law claims for fraud, negligent misrepresentation, and unjust enrichment. Id.
at 22-47.
A. The Games
The following facts are taken from Plaintiffs’ third Amended Complaint, Dkt. 92.
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The Games are mobile application casino-style games developed and distributed by
Defendants. Users receive a few free chips or coins upon downloading and periodically when
logging into the Games. Users may purchase chips and coins through virtual stores using real
money as well. Upon logging in, pop-up advertisements for “sales” on chips or coins appear.
Most sales include a countdown timer showing the remaining time for that sale. Many also
include “strikethrough” prices, purportedly showing what a user would normally receive for the
same amount of money as opposed to the sale. An example would be a $1.99 bundle including
20,000 coins stricken through in comparison to a sale amount of 165,000 for the same price for
a limited time. The sales with countdown timers purportedly show a lower price offered for a
limited amount of time. Plaintiffs allege, however, that the chips and coins are “almost always”
offered at higher price points than the strikethrough prices, and the countdown timer sales “exist
almost perpetually and are unavailable for only trivial periods of time, if at all.” Dkt. #92 at 11,
14. In order to use the Games, users must accept the Terms of Use, which include a mandatory
arbitration and class waiver provision, which users “may opt out of the binding arbitration
requirement by sending written notice within thirty (30) days of [their] acceptance of these
Terms.” Dkt. #96 at 8.

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B. Parties

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Plaintiff Campos is a citizen of California who downloaded the Games from the Apple

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App Store in 2022. Dkt. #92 at 5. Plaintiff Campos sent timely written notice to opt out of the
dispute resolution provisions, including mandatory arbitration, choice of law, and venue
provisions. Id. Plaintiff Garvey is a citizen of North Carolina who began playing the Games
prior to 2021. Id. at 6. In 2020, 2021 and 2023, Plaintiff Garvey opted out of the Games’
mandatory arbitration and class waiver provisions. Id. at 7; Dkt. #104 at 10.

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Defendant Big Fish Games, Inc., is a Washington corporation with its principal place of
business in Seattle, Washington. Dkt. #92 at 6. Defendant Product Madness, Inc., is a Delaware
corporation with its principal place of business in London, England. Id. at 8. Defendant Product
Madness also is registered in California, with an agent for service in the state, and its principal
place of business is registered as Defendant Big Fish Games, Inc.’s address in Seattle,
Washington. Id.
C. Kater Settlement
In 2015, the Kater case was filed in this District, alleging that the Games were illegal
gambling games and bringing user claims for violations of WCPA RCW 4.24.070 and other
statutory and common law claims. Dkt. #96 at 7. As part of the approved class action settlement,
class members agreed to release all claims, accrued or not, that arise out of or relate to actions
relating to the Games’ operations or the sale of virtual coins or chips, such as claims that the
Games are illegal gambling games and that the coins or chips are “things of value.” Id. Class
members also stipulated that these virtual coins or chips are not things of value, and members
were estopped from this contention. Id. The settlement also released claims as to Defendant Big
Fish Games and its successors, assigns, and corporate affiliates. Id. Plaintiff Garvey was a class

17 member in the Kater settlement. Id.; Dkt. #92 at 6.
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D. Terms of Service Opt-Out
Upon transfer of the Games’ operation from Defendant Big Fish Games to Defendant
Product Madness, an in-game pop-up presented to all active users which required them to accept
updated Terms of Service to continue play. Dkt. #96 at 7-8. This was a mandatory pop-up screen
with a button titled “AGREE” that users had to click to continue use, as well as hyperlinks to the
Privacy Policy and Terms of Service. Id. at 8. The Terms of Service contained a mandatory
arbitration clause. Id. Users could opt out of the arbitration requirement by sending a written
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notice to Defendant Product Madness at a specified Delaware address within thirty days of
acceptance of the Terms of Service. Id. The Terms of Service also included provisions that
arbitration and litigation would be on an individual basis with no class actions or class
arbitrations. Id. These Terms of Service are governed under Delaware law. Id.
According to Defendants, Plaintiff Garvey clicked “AGREE” to the new Terms of
Service on December 1, 2023, but Defendants claim they never received a written notice of
opting out of any of the terms. Id. at 8-9. Plaintiff Garvey contends that she sent a written optout notice to Defendant Product Madness on December 1, 2023. Dkt. #104 at 4.
III.

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DISCUSSION

A. Legal Standard
a. Arbitration
“The [Federal Arbitration Act (“FAA”)] provides that any arbitration agreement within
its scope ‘shall be valid, irrevocable, and enforceable,’ and permits a party ‘aggrieved by the
alleged refusal of another to arbitrate’ to petition any federal district court for an order compelling
arbitration in the manner provided for in the agreement.” Chiron Corp. v. Ortho Diagnostic Sys.,
Inc., 207 F.3d 1126, 1130 (9th Cir. 2000) (citations and ellipses omitted). “The FAA requires

17 federal district courts to stay judicial proceedings and compel arbitration of claims covered by a
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written and enforceable arbitration agreement.” Nguyen v. Barnes & Noble Inc., 763 F.3d 1171,
1175 (9th Cir. 2014) (internal citation omitted); Chiron, 207 F.3d at 1130 (“[T]he Act ‘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.’”) (citation omitted). “The FAA limits the district court’s role to determining
whether a valid arbitration agreement exists, and whether the agreement encompasses the disputes
at issue.” Nguyen, 763 F.3d at 1175 (citing Chiron, 207 F.3d at 1130). To determine “whether a
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valid arbitration agreement exists, federal courts ‘apply ordinary state-law principles that govern
the formation of contracts.’” Id. (quoting First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 944,
115 S. Ct. 1920, 131 L. Ed. 2d 985 (1995)).
Notwithstanding the language of Section 3 of the FAA, a court “may either stay the action
or dismiss it outright [if] the court determines that all of the claims raised in the action are subject
to arbitration.” Johnmohammadi v. Bloomingdale's, Inc., 755 F.3d 1072, 1074 (9th Cir. 2014).
However, because claims dismissed due to a valid and enforceable arbitration clause are
dismissed for failure to state a claim, dismissal without prejudice is appropriate. See, e.g.,
Chappel v. Lab. Corp. of Am., 232 F.3d 719, 725 (9th Cir. 2000); Gadomski v. Wells Fargo Bank
N.A., 281 F.Supp.3d 1015, 1021 (E.D. Cal. 2018) (“Having decided the Agreement is enforceable
and that all Plaintiff’s claims are subject to arbitration, the Court is within its discretion to dismiss
the complaint under Rule 12(b)(6).”).
b. Dismiss
Rule 12(b)(6) allows for dismissal of a complaint due to a plaintiff’s “failure to state a
claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). Dismissal may “be based on
the lack of cognizable legal theory or the absence of sufficient facts alleged under a cognizable

17 legal theory.” Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1988). The
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complaint must “contain factual matter, accepted as true, to ‘state a claim to relief that is plausible
on its face[,]’ requiring more than “an unadorned, the defendant-unlawfully-harmed-me

20 accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly,
21 550 U.S. 544, 570 (2007)).
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When considering a 12(b)(6) motion, the court takes well-pleaded factual allegations as
true and views them in a light most favorable to the plaintiff. See Wyler Summit P’ship v. Turner
Broad. Sys., Inc., 125 F.3d 658, 661 (9th Cir. 1998). The court does not have to take presented
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legal conclusions as factual allegations or accept as true “allegations that are merely conclusory,
unwarranted deductions of fact, or unreasonable inferences[.]” See Iqbal, 556 U.S. at 678;
Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). “Dismissal without
prejudice and without leave to amend is not appropriate unless it is clear . . . that the complaint
could not be saved by amendment.” Creech v. Tewalt, 84 F.4 777, 789 (9th Cir. 2023) (quoting
Eminence Cap., LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003)).
B. Analysis
Defendants argue that Plaintiff Garvey must arbitrate her claims because she agreed to a
binding arbitration clause and did not opt out of this provision. Dkt. #96 at 11. In the alternative,
Defendant argues that Plaintiff’s Garvey’s third cause of action, seeking recovery of money lost
at gambling in illegal gambling under RCW 4.24.070, should be dismissed because Plaintiff
Garvey is barred by her prior settlement agreement in Kater. Id. at 21. The Court addresses
these arguments in turn below.
a. Compel Arbitration
Defendants argue that the Court should compel Plaintiff Garvey to arbitrate her claims
because she agreed to the Terms of Use on December 1, 2023, including an arbitration agreement,

17 and did not opt out of this provision within thirty days of agreeing to the new terms. Id. at 11.
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Plaintiff Garvey contends that she mailed a letter informing Defendants that she opted out of the
arbitration agreement on December 1, 2023. Dkts. #104 at 7, #105. Defendants state that they

20 did not receive Plaintiff Garvey’s opt-out letter and argue that Plaintiff’s declaration that she sent
21 her opt-out letter “is a self-serving declaration” that “does not suffice to satisfy the mailbox
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rule[,]” and she fails to offer any other corroborating evidence. Dkt. #107 at 102.
“Under the common-law mailbox rule, proof of proper mailing—including by testimonial
or circumstantial evidence—gives rise to a rebuttable presumption that the document was
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physically delivered to the addressee in the time such a mailing would ordinarily take to arrive.”
Baldwin v. United States, 921 F.3d 836, 840 (9th Cir. 2019).
Along with Plaintiff Garvey’s statement and photo documentation of her letter (see Dkt.
#105), Plaintiff Garvey further contends that she opted out of Defendants’ arbitration agreements
several times (April 2020, 2021, and 2023), making the December 2023 letter her fourth opt-out
notice and clear evidence that Plaintiff Garvey consistently exempted herself from any arbitration
agreements. Dkt. #104 at 10. Ms. Garvey also points out that on September 28, 2023, her counsel
informed Defendants that she intended to pursue claims against Defendants regarding in-game
purchases by joining Plaintiff Campos’ case. Id. at 11. Therefore, “Garvey could not have been
more clear and consistent in her intent to not be bound to mandatory arbitration with respect to
her disputes over the Games.” Id.
The Court agrees with Plaintiff Garvey. Defendants are correct that it is Plaintiff
“Garvey’s burden to prove that she opted out of the binding arbitration agreement.” Dkt. #107
at 1 (citing Bennett v. T-Mobile USA, Inc., 2024 WL 229580, at *12 (W.D. Wash. Jan. 22, 2024)).
The Court finds that Plaintiff’s three prior opt-out notices and Plaintiff’s notice from counsel in
September 2023 together provide sufficient evidence to satisfy the mailbox rule and Plaintiff’s

17 burden to show that she opted out of the arbitration agreement. See Olson v. The Bon, Inc., 144
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Wn. App. 627, 634 (2008).
Because the Court does not grant Defendant’s Motion to Compel Plaintiff to arbitrate her

20 claims, the Court also denies Defendant’s request that Plaintiff Campos’ claims should be stayed
21 pending Plaintiff Garvey’s arbitration as moot. Dkt. #104 at 19-20.
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b. Dismiss Third Cause of Action
Defendants move to dismiss Plaintiff Garvey’s third cause of action and argue that this
claim is barred under Plaintiff Garvey’s settlement agreement in Kater. Id. at 21. Plaintiff
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Garvey argues that she is not estopped from pursuing this claim because the injury occurred after
the settlement and because Defendants continue to violate the settlement agreement. Dkt. #107
at 18-20.
The Court finds that, even viewing all reasonable inferences in a favorable light to
Plaintiff Garvey, this claim should be dismissed. Plaintiff Garvey’s claims under Washington’s
RCW 4.24.070 allege that Defendants’ “online gambling games are illegal gambling games
because they are online games at which players wager things of value (the chips/coins) and by
an element of chance . . . are able to obtain additional entertainment and extend gameplay[.]”
Dkt. #92 at 30-32. However, as part of the settlement agreement in Kater, Plaintiff Garvey agreed
to release any claims, known or unknown, claimed or unclaimed, accrued or unaccrued, that the
Games are illegal gambling games and that the virtual chips are “things of value” under
Washington or any other law. Dkt. #104 at 21-22. The settlement specifically included the
stipulation that the virtual chips “are gameplay enhancements, not ‘things of value,’ and “all
Settlement Class members are estopped from contending that virtual chips in the Applications
are ‘things of value[.]’” Dkts. #97, #104 at 21-22. According to Plaintiffs’ third Amended
Complaint, Plaintiff Garvey brings claims asserting the exact issues and facts as those estopped

17 by the Kater settlement. See Dkt. #92 at 30-32. Plaintiff Garvey attempts to argue that
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Defendants do not meet the requirements of the settlement because they continue to prevent users
from playing the Games without needing to wait to purchase additional chips or waiting until

20 they otherwise would receive free additional chips in ordinary due course. Dkts. #94 at 15-16,
21 #107 at 18-20. But Plaintiffs’ Amended Complaint is devoid of sufficient detail for the Court to
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determine how Plaintiff Garvey’s current claim is different from those in the Kater settlement or
how Defendants’ current game mechanics violate the settlement’s terms that users do not have
to wait for free chips in the ordinary course of events or purchase new chips to continue play.
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Viewing all reasonable inferences in Plaintiff’s favor, the Court agrees with Defendants that this
claim should be dismissed. However, Plaintiffs shall have leave to amend their Complaint to
potentially cure these errors.
c. Pending Motion to Stay Discovery
Defendants have also filed a Motion to Stay Discovery as to Plaintiff Garvey’s claims
pending resolution of Defendant’s Motion to Compel Arbitration. Dkt. #108. Because the Court
denies Defendants’ Motion to Compel Arbitration, the Court denies Defendants’ Motion to Stay
Discovery pending arbitration as now moot.
IV.

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CONCLUSION

Having reviewed the relevant briefing and the remainder of the record, the Court hereby
finds and ORDERS that:
(1) Defendants’ Motion to Compel Arbitration or, in the Alternative, to Dismiss, Dkt.
#96, is DENIED IN PART and GRANTED IN PART. Defendants’ Motion to
Compel Arbitration is DENIED. Defendants’ Motion to Dismiss Plaintiffs’ third
cause of action is GRANTED without prejudice.
(2) Defendants’ Motion to Stay Discovery as to Plaintiff Garvey’s Claims Pending

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Ruling on Motion to Compel Arbitration or Dismiss, Dkt. #108, is DENIED AS

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MOOT.

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DATED this 3rd day of June, 2024.

A

RICARDO S. MARTINEZ
UNITED STATES DISTRICT JUDGE

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