Judge Orders Fraud Case Over Candy Crush In-Game Payments to Arbitration

Sorina Montoya’s fraud dispute against Activision Blizzard and King over $3,000 in in-game payments she made competing in a Candy Crush tournament “must be arbitrated,” ruled U.S. District Judge Robert Payne for Eastern Virginia in Richmond in his memorandum opinion Thursday (docket 3:23-cv-00314).

Montoya entered the online tournament in March 2023, playing through April for a chance to win an expenses-paid trip to London. Her class action the following month (see [Ref:2305110011) alleges game developer King and Activision misled contestants about their odds of winning the mobile game tournament to get them to boost their in-app purchases.

The plaintiff asserts the defendants “did what they could to mislead contestants into thinking that they were doing well vis-a-vis their competitors, that there were few other players against whom they were competing, and that they had a good chance of making the Finals in London.” That kept players spending money on in-app purchases, the complaint said.

On Aug. 1, Activision Blizzard filed motions to compel mandatory alternative dispute resolution (ADR), dismiss for lack of personal jurisdiction, dismiss for improper venue, transfer the case and dismiss claims for declaratory and injunctive relief. In a telephone conference with the parties Sept. 19, the court decided to resolve the motions to compel ADR first.

When Montoya checked virtual boxes signifying her agreement to King’s hyperlinked terms of use on her Candy Crush app and when she registered for King’s community forum during the tournament, she entered “clickwrap agreements,” said the memorandum. Courts have routinely found such clickwrap agreements, including arbitration agreements, to be enforceable, and both acceptances of King’s terms of use are “enforceable clickwrap agreements” because the language and layout in both formats gave Montoya “reasonable notice that clicking the button or checking the box manifests assent” to King’s terms of use, Payne said. Even if Montoya didn’t read the terms, her “manifestation of assent still forms a binding contract,” said the memorandum.

The court also found that Montoya agreed to the arbitration agreement’s delegation clause. The plaintiff didn’t make a challenge to the enforceability or validity of the delegation provision, and when a litigant fails to do so specifically, “courts must treat it as valid,’” said the memorandum, citing Rent-A-Center, West, Inc. v. Jackson.

The defendants say the parties “clearly and unmistakably agreed” to arbitrate issues of arbitrability, said the memorandum. They assert the delegation provision grants the arbitrator “exclusive authority” to resolve disputes involving the "interpretation, applicability, enforceability, or formation" of the agreement and “unmistakably vests the arbitrator with the authority to decide any threshold arbitrability questions.”

The terms of use also require arbitration to be administered under JAMS’ rules and procedures, said the memorandum. Those rules provide that arbitrability disputes, including those over the “formation, existence, validity, interpretation or scope of the agreement under which Arbitration is sought,” are to be ruled on by the arbitrator, it said. While the 4th Circuit has held that incorporating JAMS rules into an arbitration agreement is “'clear and unmistakable’ evidence of the parties’ intent to arbitrate arbitrability,” the court “limited its holding to ‘the context of a commercial contract between sophisticated parties.’"

As a consumer who signed a clickwrap agreement “with a large corporation in order to play a mobile game,” the plaintiff, said Payne, “is certainly not a sophisticated party.” With the 4th Circuit’s “limitation in mind, the incorporation of JAMS' rules and procedures into the Terms of Use does not serve as clear and unmistakable evidence of the parties' intent to arbitrate arbitrability in this particular context,” the judge said.

Still, the term's express delegation clause language does “clearly and unmistakably delegate to the arbitrator the exclusive authority to decide certain arbitrability issues,” said the memorandum. Montoya’s argument that the tournament rules supersede King’s terms of use -- and the tournament rules didn't include an arbitration agreement, so she shouldn’t be required to arbitrate her claims -- “is a dispute over applicability that the arbitrator, not the Court, must decide,” Payne said.

Thus, said the memorandum, “the arbitrator shall decide which terms govern Plaintiff's claims, and if the Terms of Use do apply, whether the claims fall within the scope of the arbitration agreement.” The arbitration agreement’s valid delegation clause “clearly and unmistakably gives the arbitrator exclusive authority” to decide whether the terms of use, and its arbitration provision, “apply to a particular dispute,” said the memorandum. “Whether Plaintiff's claims fall under the Terms of Use or the Tournament Rules is a question of applicability Plaintiff has agreed to arbitrate.”