Arbitration Provisions and Class Action Lawsuits in California

Ring LLC Denied Motion to Compel Arbitration in Class Action Lawsuit

• Ring LLC sells home security and smart home devices, including video doorbells, security cameras, and alarms.

• Brandon Jack and Jean Alda filed a class action complaint against Ring, alleging that Ring did not inform them of the necessity of purchasing a Protect Plan to access certain features of their products.

• Plaintiffs sought a public injunction requiring Ring to disclose this information to consumers.

• Ring moved to compel arbitration based on an arbitration provision in its terms of service.

• Plaintiffs did not dispute that they agreed to Ring’s terms of service but argued that the arbitration provision violates California law.

• Ring cited two versions of its terms of service that included a delegation clause delegating issues of arbitrability to the arbitrator.

• Plaintiffs argued that a court must decide whether the arbitration provision was enforceable under California law.

• Ring argued for the first time in its reply that a newer version of its terms of service (Exhibit K) embodied the applicable terms.

• Plaintiffs filed an ex parte application for leave to file a sur-response, and Ring filed a request to supplement the record and for leave to respond to plaintiffs’ ex parte application.

• The trial court denied Ring’s motion to compel arbitration and both parties’ requests for leave to supplement the record and file additional briefing.

• Ring filed a motion for reconsideration, which the trial court denied, and subsequently filed two notices of appeal.

• The court reviewed the case based on standards of review, including the burden of proof for arbitration agreements and the trial court’s discretion in granting requests for leave to supplement the record and file additional briefing.California Appeals Court Rules on Delegation of Authority to Arbitrator in McGill Claims

• A California appeals court ruled on whether a trial court or arbitrator has authority to decide the enforceability of an arbitration provision in a McGill claim.

• Parties may delegate authority to the arbitrator to decide threshold issues, but evidence that the parties intended such a delegation must be “clear and unmistakable” before a court will enforce a delegation provision.

• Challenges to the validity of the arbitration clause itself are generally resolved by the court in the first instance.

• The usual presumption is that a court, not an arbitrator, decides threshold issues of arbitrability such as whether the arbitration agreement itself is valid and enforceable.

• The arbitration provision may contain a delegation clause, but another provision may recognize a court may decide the same issue, leading to ambiguity and uncertainty.

• The “poison pill” provision in the arbitration provision contemplates that “a court” may decide the enforceability of the subsection of the arbitration provision that requires arbitration to “be conducted only on an individual basis and not in a class, representative or private attorney general action.”

• The arbitration provision points in two directions on the question whether a court or an arbitrator is to decide the enforceability of the agreement to arbitrate, at least with respect to challenges to the “subsection’s limitations as to a particular claim for relief” such as plaintiffs’ claim here that the limitations are unenforceable under McGill.

• The parties may agree to delegate authority to the arbitrator to decide threshold issues, but given the contrary presumption, evidence that the parties intended such a delegation must be “clear and unmistakable” before a court will enforce a delegation provision.

• Even broad arbitration clauses that expressly delegate the enforceability decision to arbitrators may not meet the clear and unmistakable test, where other language in the agreement creates an uncertainty in that regard.

• The heightened standard for clear and unmistakable evidence of delegation is higher than the evidentiary standard applicable to other matters of interpreting an arbitration agreement.

• The arbitration provision in this case does not clearly and unmistakably reserve to the arbitrator the issue of whether the arbitration agreement is enforceable under McGill.

• The trial court properly considered the plaintiffs’ McGill claim because challenges to the validity of the arbitration clause itself are generally resolved by the court in the first instance.