1 2 3 6 7 ROBLOX CORPORATION, et al., Case No. 22-cv-04476-SI
8 Plaintiffs, ORDER ON MOTION TO DISMISS, TO 9 v. COMPEL ARBITRATION, AND TO STAY PROCEEDINGS PENDING 10 WOWWEE GROUP LIMITED, et al., ARBITRATION 11 Defendants. Re: Dkt. No. 80
12 13 Before the court is plaintiff Roblox Corporation’s motion to dismiss a counterclaim, compel 14 arbitration of another counterclaim, and stay any remaining counterclaims pending the outcome 15 arbitration. Dkt. No. 80. Defendants oppose. Dkt. No. 90. Argument was held on June 9, 2024. 16 For the reasons discussed below, the Court GRANTS the motion to compel arbitration and STAYS 17 proceedings, including the motion to dismiss, with respect to the remaining counterclaims. 18 20 Plaintiff Roblox Corporation owns an online gaming platform known as the Roblox 21 Platform, which it describes as a “digital world where users create virtual games and experiences 22 and connect with other users.” Dkt. No. 36 ¶ 27. While Roblox provides some of the platform’s 23 playable content, the platform also enables its users to “develop games, experiences, and virtual 24 items” that they and other users can then enjoy. Id. Roblox users interact with the platform through 25 customizable virtual characters known as “Avatars.” Id. ¶ 4. Like other content on the platform, 26 avatars can be designed and customized by users. Id. ¶¶ 5–7. Users who develop content on the 27 Roblox Platform are known as “developers.” Id. ¶¶ 6, 32–33. 1 (“TOU”). Id. ¶¶ 34–46. A user must agree to the TOU when creating an account to access the 2 Roblox Platform. Id. ¶¶ 36–38. The TOU includes an agreement that continued use of the Roblox 3 Platform after an update to the TOU constitutes agreement to the new terms. Id. ¶ 39. The TOU 4 include agreements that users will not use Roblox content outside of the Roblox Platform, monetize 5 Roblox content, or imply an association with Roblox for their businesses outside of the Roblox 6 Platform. Id. ¶ 7. The TOU also includes an arbitration agreement, which applies to “any dispute 7 arising under or relating to the Roblox Terms or the Services.” Dkt. No. 36-1, Ex. 1(a) to the 8 Complaint, at ¶ 16(a). Plaintiffs allege that WowWee Group Limited, WowWee Canada, Inc., and 9 WowWee USA, Inc. (collectively, “WowWee”) agreed to Roblox’s TOU, including the arbitration 10 agreement, through their agent Sydney Wiseman. Dkt. No. 36 ¶ 111. 11 The parties agree that defendants created a line of “My Avastars” dolls and partnered with 12 Gamefam to create a “My Avastars: RP” virtual tie-in experience on the Roblox platform. Id. ¶ 2; 13 Dkt. No. 74 at 31–32. Gamefam is a developer which has described itself as “the first and only 14 fully-dedicated, professional game publishing company on Roblox.” Id. ¶ 68. Plaintiffs allege that 15 in partnering with Gamefam for the My Avastars project, defendants violated Roblox’s TOU and 16 plaintiffs’ intellectual property rights. Dkt. No. 36 ¶ 2. 17 Defendants argue that after learning about the planned “My Avastars” project, Roblox 18 improperly changed its TOU to expand its intellectual property rights and prevent My Avastars from 19 going forward. Dkt. No. 74 at 36. When that didn’t work, Roblox threatened WowWee with legal 20 action and pressured Gamefam to pull out of the agreement. Id. at 37–38. Defendants allege that 21 Gamefam initially assured WowWee it would continue to work on the My Avastars project, but 22 changed course after a July 11, 2022 meeting with Roblox. Id. Defendants argue Roblox 23 “successfully induced Gamefam to renege on its partnership agreement” using “the leverage of . . . 24 the Roblox platform [Gamefam] depended on for the bulk of its business.” Id. at 38. On October 25 19, 2022, defendants moved to dismiss several of plaintiffs’ claims and moved to compel arbitration 26 of others. Dkt. No. 45. On March 9, 2023, this Court issued an order granting in part and denying 27 in part defendants’ motion to dismiss and to compel arbitration. Dkt. No. 69. 1 includes two counterclaims against Roblox: one by WowWee Group Limited and WowWee Canada, 2 Inc. (collectively, the “international defendants”) for intentional interference with prospective 3 economic advantage (“IIPEA”), and one by WowWee for intentional interference with contractual 4 relations (“IICR”).1 Id. at 39–41. Roblox moves to dismiss the claim for IIPEA, to compel 5 arbitration of WowWee USA’s counterclaim for IICR, and to stay any remaining counterclaims 6 pending the outcome of arbitration. Dkt. No. 80. 7 9 Under Section 4 of the Federal Arbitration Act (FAA), when a party makes a motion to 10 compel arbitration, “[t]he court shall hear the parties, and upon being satisfied that the making of 11 the agreement for arbitration or the failure to comply therewith is not in issue, the court shall make 12 an order directing the parties to proceed to arbitration in accordance with the terms of the 13 agreement.” 9 U.S.C. § 4. “The court's role under the Act is . . . limited to determining (1) whether 14 a valid agreement to arbitrate exists and, if it does, (2) whether the agreement encompasses the 15 dispute at issue.” Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir. 2000). 16 If the answer to both questions is yes, the Court must enforce the agreement. Id. 17 19 A. Motion to Compel Arbitration 20 The WowWee defendants bring a counterclaim against Roblox for intentional interference 21 with contractual relations based on its alleged breach and disruption of WowWee’s partnership with 22 Gamefam. Dkt. No. 74 at 39–40. Roblox moves to compel arbitration of WowWee USA’s IICR 23 claim pursuant to the arbitration agreement in Roblox’s TOU.2 Dkt. No. 80 at 20. 24 The Court must determine “(1) whether a valid agreement to arbitrate exists and, if it does, 25 1 The amended answer also included a counterclaim by defendant Gramps Goods, Inc., 26 which Roblox also moved to dismiss. Dkt. No. 80 at 10. Gramps Goods has voluntarily dismissed the counterclaim. Dkt. No. 89. 27 1 (2) whether the agreement encompasses the dispute at issue.” Chiron Corp. v. Ortho Diagnostic 2 Sys., Inc., 207 F.3d 1126, 1130 (9th Cir. 2000). For the purposes of this motion, the parties only 3 dispute whether the agreement encompasses the dispute at issue.3 WowWee argues that the 4 arbitration agreement does not encompass the IICR claim because the claim “does not arise under 5 or relate to the defined ‘Roblox Terms’ or ‘Services.’” Dkt. No. 90 at 7. Roblox argues that the 6 arbitration agreement encompasses the IICR counterclaim and, in any event, equitable estoppel 7 requires arbitration because WowWee availed itself of the benefits of the TOU. Dkt. No. 80 at 20– 8 31. 9 The arbitration agreement in the TOU applies to “any dispute arising under or relating to the 10 Roblox Terms or the Services.” Dkt. No. 36-1, Ex. 1(a) to the Complaint, at ¶ 16(a). “Roblox 11 Terms” is defined as “the User Terms, the Creator Terms, the DevEx Terms, the Roblox Community 12 Standards, the DMCA Guidelines and Policies and the Roblox TM Guidelines.” Dkt. No. 36-1, 13 Ex. 1(d) to the Complaint. “Services” is defined as “[c]ollectively, all of the various features and 14 services, like websites, applications, forums and the Platform, which Roblox makes available to 15 Users to allow Users to play, create and connect.” Id. 16 The Ninth Circuit has repeatedly “held that the phrase ‘arising under’ in an arbitration 17 agreement should be interpreted narrowly.” Cape Flattery Ltd. v. Titan Mar., LLC,
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1 2 3 6 7 ROBLOX CORPORATION, et al., Case No. 22-cv-04476-SI
8 Plaintiffs, ORDER ON MOTION TO DISMISS, TO 9 v. COMPEL ARBITRATION, AND TO STAY PROCEEDINGS PENDING 10 WOWWEE GROUP LIMITED, et al., ARBITRATION 11 Defendants. Re: Dkt. No. 80
12 13 Before the court is plaintiff Roblox Corporation’s motion to dismiss a counterclaim, compel 14 arbitration of another counterclaim, and stay any remaining counterclaims pending the outcome 15 arbitration. Dkt. No. 80. Defendants oppose. Dkt. No. 90. Argument was held on June 9, 2024. 16 For the reasons discussed below, the Court GRANTS the motion to compel arbitration and STAYS 17 proceedings, including the motion to dismiss, with respect to the remaining counterclaims. 18 20 Plaintiff Roblox Corporation owns an online gaming platform known as the Roblox 21 Platform, which it describes as a “digital world where users create virtual games and experiences 22 and connect with other users.” Dkt. No. 36 ¶ 27. While Roblox provides some of the platform’s 23 playable content, the platform also enables its users to “develop games, experiences, and virtual 24 items” that they and other users can then enjoy. Id. Roblox users interact with the platform through 25 customizable virtual characters known as “Avatars.” Id. ¶ 4. Like other content on the platform, 26 avatars can be designed and customized by users. Id. ¶¶ 5–7. Users who develop content on the 27 Roblox Platform are known as “developers.” Id. ¶¶ 6, 32–33. 1 (“TOU”). Id. ¶¶ 34–46. A user must agree to the TOU when creating an account to access the 2 Roblox Platform. Id. ¶¶ 36–38. The TOU includes an agreement that continued use of the Roblox 3 Platform after an update to the TOU constitutes agreement to the new terms. Id. ¶ 39. The TOU 4 include agreements that users will not use Roblox content outside of the Roblox Platform, monetize 5 Roblox content, or imply an association with Roblox for their businesses outside of the Roblox 6 Platform. Id. ¶ 7. The TOU also includes an arbitration agreement, which applies to “any dispute 7 arising under or relating to the Roblox Terms or the Services.” Dkt. No. 36-1, Ex. 1(a) to the 8 Complaint, at ¶ 16(a). Plaintiffs allege that WowWee Group Limited, WowWee Canada, Inc., and 9 WowWee USA, Inc. (collectively, “WowWee”) agreed to Roblox’s TOU, including the arbitration 10 agreement, through their agent Sydney Wiseman. Dkt. No. 36 ¶ 111. 11 The parties agree that defendants created a line of “My Avastars” dolls and partnered with 12 Gamefam to create a “My Avastars: RP” virtual tie-in experience on the Roblox platform. Id. ¶ 2; 13 Dkt. No. 74 at 31–32. Gamefam is a developer which has described itself as “the first and only 14 fully-dedicated, professional game publishing company on Roblox.” Id. ¶ 68. Plaintiffs allege that 15 in partnering with Gamefam for the My Avastars project, defendants violated Roblox’s TOU and 16 plaintiffs’ intellectual property rights. Dkt. No. 36 ¶ 2. 17 Defendants argue that after learning about the planned “My Avastars” project, Roblox 18 improperly changed its TOU to expand its intellectual property rights and prevent My Avastars from 19 going forward. Dkt. No. 74 at 36. When that didn’t work, Roblox threatened WowWee with legal 20 action and pressured Gamefam to pull out of the agreement. Id. at 37–38. Defendants allege that 21 Gamefam initially assured WowWee it would continue to work on the My Avastars project, but 22 changed course after a July 11, 2022 meeting with Roblox. Id. Defendants argue Roblox 23 “successfully induced Gamefam to renege on its partnership agreement” using “the leverage of . . . 24 the Roblox platform [Gamefam] depended on for the bulk of its business.” Id. at 38. On October 25 19, 2022, defendants moved to dismiss several of plaintiffs’ claims and moved to compel arbitration 26 of others. Dkt. No. 45. On March 9, 2023, this Court issued an order granting in part and denying 27 in part defendants’ motion to dismiss and to compel arbitration. Dkt. No. 69. 1 includes two counterclaims against Roblox: one by WowWee Group Limited and WowWee Canada, 2 Inc. (collectively, the “international defendants”) for intentional interference with prospective 3 economic advantage (“IIPEA”), and one by WowWee for intentional interference with contractual 4 relations (“IICR”).1 Id. at 39–41. Roblox moves to dismiss the claim for IIPEA, to compel 5 arbitration of WowWee USA’s counterclaim for IICR, and to stay any remaining counterclaims 6 pending the outcome of arbitration. Dkt. No. 80. 7 9 Under Section 4 of the Federal Arbitration Act (FAA), when a party makes a motion to 10 compel arbitration, “[t]he court shall hear the parties, and upon being satisfied that the making of 11 the agreement for arbitration or the failure to comply therewith is not in issue, the court shall make 12 an order directing the parties to proceed to arbitration in accordance with the terms of the 13 agreement.” 9 U.S.C. § 4. “The court's role under the Act is . . . limited to determining (1) whether 14 a valid agreement to arbitrate exists and, if it does, (2) whether the agreement encompasses the 15 dispute at issue.” Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir. 2000). 16 If the answer to both questions is yes, the Court must enforce the agreement. Id. 17 19 A. Motion to Compel Arbitration 20 The WowWee defendants bring a counterclaim against Roblox for intentional interference 21 with contractual relations based on its alleged breach and disruption of WowWee’s partnership with 22 Gamefam. Dkt. No. 74 at 39–40. Roblox moves to compel arbitration of WowWee USA’s IICR 23 claim pursuant to the arbitration agreement in Roblox’s TOU.2 Dkt. No. 80 at 20. 24 The Court must determine “(1) whether a valid agreement to arbitrate exists and, if it does, 25 1 The amended answer also included a counterclaim by defendant Gramps Goods, Inc., 26 which Roblox also moved to dismiss. Dkt. No. 80 at 10. Gramps Goods has voluntarily dismissed the counterclaim. Dkt. No. 89. 27 1 (2) whether the agreement encompasses the dispute at issue.” Chiron Corp. v. Ortho Diagnostic 2 Sys., Inc., 207 F.3d 1126, 1130 (9th Cir. 2000). For the purposes of this motion, the parties only 3 dispute whether the agreement encompasses the dispute at issue.3 WowWee argues that the 4 arbitration agreement does not encompass the IICR claim because the claim “does not arise under 5 or relate to the defined ‘Roblox Terms’ or ‘Services.’” Dkt. No. 90 at 7. Roblox argues that the 6 arbitration agreement encompasses the IICR counterclaim and, in any event, equitable estoppel 7 requires arbitration because WowWee availed itself of the benefits of the TOU. Dkt. No. 80 at 20– 8 31. 9 The arbitration agreement in the TOU applies to “any dispute arising under or relating to the 10 Roblox Terms or the Services.” Dkt. No. 36-1, Ex. 1(a) to the Complaint, at ¶ 16(a). “Roblox 11 Terms” is defined as “the User Terms, the Creator Terms, the DevEx Terms, the Roblox Community 12 Standards, the DMCA Guidelines and Policies and the Roblox TM Guidelines.” Dkt. No. 36-1, 13 Ex. 1(d) to the Complaint. “Services” is defined as “[c]ollectively, all of the various features and 14 services, like websites, applications, forums and the Platform, which Roblox makes available to 15 Users to allow Users to play, create and connect.” Id. 16 The Ninth Circuit has repeatedly “held that the phrase ‘arising under’ in an arbitration 17 agreement should be interpreted narrowly.” Cape Flattery Ltd. v. Titan Mar., LLC, 647 F.3d 914, 18 921 (9th Cir. 2011). Such language “is intended to cover . . . only those [disputes] relating to the 19 interpretation and performance of the contract itself.” Mediterranean Enters., Inc. v. Ssangyong 20 Corp., 708 F.2d 1458, 1464 (9th Cir. 1983). But the phrase “arising out of or relating to” is 21 interpreted more broadly.4 Cape Flattery Ltd., 647 F.3d at 921. Here, the fact that the parties used 22 the broader phrase “arising under or relating to” means the arbitration agreement is not limited to 23
24 3 WowWee states in a footnote that it “does not concede” that Sydney Wiseman “acted as WowWee USA’s agent, let alone that she agreed to Roblox’s [Terms] on behalf of WowWee USA 25 or any other Defendant.” Dkt. No. 90 at 7 n.7. But “[a]rguments raised only in footnotes . . . are generally deemed waived.” Est. of Saunders v. Comm’r, 745 F.3d 953, 962 n.8 (9th Cir. 2014). At 26 the motion hearing on June 9, 2023, WowWee stated that it was not disputing the validity of the agreement for the purposes of this motion. 27 1 disputes relating to the interpretation and performance of the contract itself. See id. The arbitration 2 agreement in this case is even broader because it covers disputes arising under and relating to not 3 only the “Terms,” but also the “Services.” Dkt. No. 36-1, Ex. 1(d) to the Complaint. 4 WowWee contends that because the alleged tortious conduct “could have been accomplished 5 even if the Agreement did not exist,” the agreement does not cover it. Id. at 9 (quoting Aviation All. 6 Ins. Risk Retention Grp., Inc. v. Polaris Enter. Grp., Inc., 2017 WL 2799151, at *4 (D. Mont. June 7 27, 2017)). But the cases WowWee cites for this proposition all involve the narrower “arising 8 under” standard. Aviation All. Ins. Risk Retention Group, 2017 WL 2799151, at *3 (noting that 9 although arbitration clause used broad “arising out of or relating to” language, the termination of 10 the parties’ agreement limited enforcement to “disputes arising under the contract”); Wireless 11 Warehouse, Inc. v. Boost Mobile, LLC, No. SACV 09-1436-MLG, 2010 WL 891329, at *5 (C.D. 12 Cal. Mar. 10, 2010) (interpreting arbitration clause for “All Disputes under this Agreement”). When 13 broader contractual language is used, “to require arbitration, a party’s factual allegations need only 14 ‘touch matters’ covered by the contract containing the arbitration clause.” In re TFT-LCD (Flat 15 Panel) Antitrust Litig., 2011 WL 2650689, at *5 (N.D. Cal. July 6, 2011) ) (internal punctuation 16 omitted) (quoting Simula, Inc. v. Autoliv, Inc., 175 F.3d 716, 721 (9th Cir. 1999)). Nor does 17 WowWee’s argument address the broader reach of an arbitration agreement that covers not only a 18 contract but the “Services” associated with that contract. 19 “[D]oubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, 20 whether the problem at hand is the construction of the contract language itself or an allegation of 21 waiver, delay, or a like defense to arbitrability.” Moses H. Cone Mem’l Hosp. v. Mercury Constr. 22 Corp., 460 U.S. 1, 25 (1983). Here, however, there is little doubt. The arbitration agreement 23 encompasses disputes arising under and relating to the Services, which are defined to include the 24 Roblox platform itself. Dkt. No. 36-1, Ex. 1(d) to the Complaint. WowWee’s IICR claim rests on 25 Roblox’s alleged interference with an agreement between WowWee and Gamefam to create a tie- 26 in experience on the Roblox platform. WowWee’s claim that Roblox interfered with a partnership 27 to create something on the Roblox platform certainly arises under or relates to that platform. The 1 arbitration agreement. 2 The motion to compel arbitration is granted.5 3 4 C. Motion to Stay 5 Roblox moves to stay all counterclaims pending resolution of the arbitration of WowWee 6 USA’s IICR counterclaim. The FAA provides: 7 If any suit or proceeding be brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing for such arbitration, 8 the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall 9 on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement, providing the applicant 10 for the stay is not in default in proceeding with such arbitration. 11 9 U.S.C. § 3. “[I]t may be advisable to stay litigation among the nonarbitrating parties pending the 12 outcome of the arbitration. That decision is one left to the district court . . . as a matter of its discretion 13 to control its docket.” Amisil Holdings Ltd. v. Clarium Cap. Mgmt., 622 F. Supp. 2d 825, 842 (N.D. 14 Cal. 2007) (quoting Moses H. Cone Hosp. v. Mercury Contr. Corp., 460 U.S. 1, 20 n. 23, 103 S.Ct. 15 927, 74 L.Ed.2d 765 (1983)). Here, the Court finds that considerations of economy and efficiency 16 weigh in favor of a stay, and failure to grant a stay would prejudice Roblox’s right to arbitration. 17 See id. There is significant overlap between the facts giving rise to the IICR claims brought by the 18 international defendants and the IICR claim brought by WowWee USA. See Dkt. No. 74 at 39–40. 19 And the IIPEA claims require the same showing as the IICR claims, with an additional element. 20 The Court finds that a stay of the IICR and IIPEA counterclaims is appropriate. 21 22 CONCLUSION 23 The motion to compel arbitration of WowWee USA’s counterclaim for intentional 24 interference with contractual relations is GRANTED. Proceedings are STAYED as to all 25 remaining counterclaims pending the outcome of that arbitration. Accordingly, the Court does not 26
27 5 Because the Court finds that arbitration of the IICR counterclaim is mandated by the 1 yet rule on the motion to dismiss the international defendants’ counterclaim for intentional 2 || interference with prospective economic advantage. 3 5 Dated: June 20, 2023 6 — Sista Late SUSAN ILLSTON 7 United States District Judge 8 9 10 11 12
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