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Gaming the System: Statutory Claims Under New Jersey’s Expansive Consumer Fraud Act Must Be Arbitrated

February 4, 2022

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<p style="text-align: justify;">Last week, the Federal District Court in New Jersey further reinforced the arbitrability of claims involving the statutory rights of plaintiffs.</p>
<p style="text-align: justify;">In <em><a href="https://www.wcmlaw.com/wp-content/uploads/2022/02/Ackies.pdf">Ackies</a> v. Scopely</em>, Inc., 2022 WL 21451 (D.N.J. 2022), a class action complaint was brought against Scopely, Inc., a company that developed an online video game called Star Trek Fleet Command (“STFC”) available for download on Android and Apple devices. The game itself is free to play; however, players may use actual currency to purchase upgrades to enhance their ability to play the game. The plaintiff alleged that Scopely, Inc. fraudulently induced players to purchase these upgrades by stating that the upgrades would improve a player’s ranking, but defendant later decreased the effectiveness of these upgrades to the detriment of the players who purchased them. Plaintiff brought forth a slew of claims, including violation of New Jersey’s Consumer Fraud Act (“CFA”) which allows for treble damages.</p>
<p style="text-align: justify;">Defendant filed a motion to compel individual arbitration, citing an arbitration clause found in the terms of service (“TOS”). The TOS was presented to players on an initial loading screen upon download of the game which contained a notice that stated, “[b]y continuing to play, you agree to our terms of service.” The arbitration clause found in the TOS stated that the agreement precludes bringing any class action and the arbitration agreement applies to all claims under any legal theory except those related to intellectual property or those that are not subject to arbitration as a matter of applicable law.</p>
<p style="text-align: justify;">Plaintiff made a variety of arguments in opposition to defendant’s motion to compel arbitration, including that that his statutory CFA claim does not fall within the scope of the arbitration agreement. The Court rejected this argument.</p>
<p style="text-align: justify;">First, the Court found that defendant’s notice to plaintiff that by playing the game he was consenting to the terms of service was conspicuous enough to place plaintiff on constructive notice. Specifically, the notice appeared in the middle of the screen in legible size, font, and color. Therefore, plaintiff was bound to the arbitration agreement. Next, the Court found that the arbitration agreement was valid and enforceable, as it was unambiguous, was not fraudulently induced, and was not unconscionable. Finally, the Court stated that per the expansive terms of the arbitration agreement, it was for the arbitrator to decide whether claims under the CFA were within the scope of the arbitration agreement. Although the arbitration agreement stated “[N]othing in these Terms will affect the statutory rights of any consumer”, the Court cited to recent Supreme Court precedent stating that “where the parties delegate the arbitrability question to an arbitrator…a court possess no power to decide the arbitrability issue.” Therefore, defendant’s motion to compel arbitration was granted and plaintiff was forced to arbitrate whether his CFA claims fell within the scope of the arbitration agreement.</p>
<p style="text-align: justify;">This decision further highlights the power arbitration agreements have in helping defendants resolve issues outside of court, maintaining confidentiality in dispute resolution, and raising procedural roadblocks for plaintiffs seeking to get in front of juries.</p>
<p style="text-align: justify;">Thanks to Brendan Gilmartin for his contribution to this post. Please contact <a href="mailto:Haquino@wcmlaw.com">Heather Aquino</a> with any questions.</p>

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