Judge: Holly J. Fujie, Case: 24STCP02215, Date: 2024-11-21 Tentative Ruling

Case Number: 24STCP02215    Hearing Date: November 21, 2024    Dept: 56

SUPERIOR COURT OF THE STATE OF CALIFORNIA

FOR THE COUNTY OF LOS ANGELES - CENTRAL DISTRICT

MOVING PARTY: Petitioners Dustin Hensley, et al.

RESPONDING PARTY: Respondent Sega of America, Inc.

            The Court has considered the moving, opposition and reply papers.

            The motion to compel arbitration is GRANTED.

BACKGROUND

             On July 10, 2024, Petitioner Dustin Hensley—along with 19,516 other petitioners (collectively, “Petitioners”)—filed a petition (the “Petition”) to compel their claims against Respondent Sega of America, Inc. (“Respondent”) be sent to arbitration. Petitioners allege that Respondent is a video game development company and Petitioners are individuals who played Respondent’s games and were illegally targeted with ads based on their gender and ages in violation of the Unruh Civil Rights Act. Petitioners contend that their claims are covered by Respondent’s user agreement which requires the arbitration of disputes over game services. On August 20, 2024, Petitioners filed the instant motion for an order compelling arbitration (the “Motion”), by which they seek to enforce the arbitration agreement. Respondent opposes the Motion and Petitioners filed responsive papers thereto.

DISCUSSION

            Under Code of Civil Procedure section 1281.2, a court may order arbitration of a controversy if it finds that the parties have agreed to arbitrate that dispute. Because the obligation to arbitrate arises from contract, the court may compel arbitration only if the dispute in question is one in which the parties have agreed to arbitrate. (Weeks v. Crow (1980) 113 Cal.App.3d 350, 352.) Since arbitration is a favored method of dispute resolution, arbitration agreements should be liberally interpreted, and arbitration should be ordered unless the agreement clearly does not apply to the dispute in question. (Id. at p. 353; Segal v. Silberstein (2007) 156 Cal.App.4th 627, 633.)

Prima Facie Evidence of the Existence of a Valid Agreement to Arbitrate

In ruling on a petition to compel arbitration, a court must determine two threshold matters: first, whether a valid agreement to arbitrate exists; and second, whether that agreement encompasses the dispute at issue. (See Code Civ. Proc. § 1281.2.)  

            The moving party seeking arbitration bears the initial burden “of producing prima facie evidence of a written agreement to arbitrate the controversy.” (Gamboa v. Northeast Community Clinic (2021) 72 Cal.App.5th 158, 165-66 (Gamboa).) The moving party must establish “the existence of a valid arbitration agreement by the preponderance of the evidence.” (Engalla v. Permanente Med. Grp., Inc. (1997) 15 Cal.4th 951, 972.) The moving party can meet this burden “by attaching to the motion or petition a copy of the arbitration agreement purporting to bear the opposing party’s signature.” (Gamboa, supra, 72 Cal.App.5th at pp. 165-66.) “If the moving party meets its initial prima facie burden and the opposing party does not dispute the existence of the arbitration agreement, then nothing more is required for the moving party to meet its burden of persuasion.” (Ibid.)

            Here, there are 19,513[1] Petitioners. In support of the petition, Petitioners’ counsel David Rosenthal, attaches the declaration of Petitioner Dusten Hensley (the “Hensley Decl.”) and declares that “[a]ll Petitioners executed substantially similar declarations.” (Declaration of David Rosenthal [“Rosenthal I Decl.”], ¶4 and Ex. D.) Petitioners also manually filed with the Court the declarations of the other 19,513 Petitioners.

The Court has reviewed the manually filed declarations and confirmed they are nearly identical to the Hensley declaration. Given the parallel language, the court refers to Hensley’s declaration hereinafter. Hensley declares that he “played [Respondent’s] mobile games in California, including Sonic the Hedgehog, within the last ten months.” (Hensley Decl., ¶3.) The Hensley Declaration is dated February 29, 2024.

            Petitioners’ counsel, Bryan Weir, attaches to his declaration Respondent’s End User License Agreement dated September 6, 2021, which was operative[2] during Petitioners’ play. (Declaration of Bryan Weir [“Weir Decl.”], ¶3, Ex. A. [“2021 Agreement”].) The 2021 Agreement provides that “BY PURCHASING, INSTALLING, OPENING, COPYING, AND/OR OTHERWISE USING THIS PRODUCT YOU HEREBY ACKNOWLEDGE, ACCEPT AND AGREE TO BE BOUND BY THE TERMS OF THIS AGREEMENT.” (2021 Agreement, ¶Introduction [emphasis in original.) It further states that:

You and [Respondent] (each a “party” for purposes of this Section, and collectively “the parties”) agree that all claims arising out of or relating to this Agreement (including its interpretation, formation, performance and breach), our relationship with each other, or your use of the Product shall be finally settled solely by binding arbitration unless the claim is within the exceptions described below. THIS AGREEMENT MEANS THAT YOU AND [RESPONDENT] AGREE NOT HAVE SUCH CLAIMS RESOLVED IN A TRIAL BY A JUDGE OR JURY. This agreement applies to all kinds of claims, including legal, equitable, or statutory claims, under any legal theory. It also applies even after you stop using or delete, destroy, or otherwise no longer possess the Product. If you or [Respondent] brings a claim in court that is subject to arbitration under this section, either party can ask the court to order the parties to resolve the claim by arbitration. The arbitrator, and not a court, shall have the exclusive authority to decided whether any portion of this section is valid or enforcement [sic], or whether it applies to a claim.

(2021 Agreement, ¶19.)

Petitioners’ declarations confirm that each of them played the game in the past 10 months and viewed at least ten advertisements while playing. As referenced above, the 2021 Agreement states that by using the product, the parties have consented to be bound by the 2021 Agreement. The declarations coupled with the 2021 Agreement are sufficient to meet Petitioners’  initial burden “of producing prima facie evidence of a written agreement to arbitrate the controversy.” [3] (Gamboa, supra, 72 Cal.App.5th at 165-66; see also B.D. v. Blizzard Entertainment Inc. (2022) 76 Cal.App.5th 931,949-950 [finding evidence that a user license agreement was a “sign-in wrap” agreement that the user had signed was sufficient to enforce a motion to compel arbitration against a user].)

Mr. Hensley declares that he does “not want [Respondent’s] advertising partners to discriminate against [him] by using [his] age or gender to determine or influence which advertisements [he] see[s] or cannot see.” (Hensley Decl., ¶4.) The 2021 Agreement applies to “your use of the Product.” (2021 Agreement, ¶19.) A plain reading of the claims supports a finding that they fall within the parameters of the 2021 Agreement.

            Contrary to Respondent’s position, the court finds the declarations sufficient for a prima facie case. Respondent’s critique that the declarations are unnotarized, electronically signed and identical is unpersuasive. First, there are no requirements that a declaration must be notarized; it is adequate that they are made under penalty of perjury. (Code Civ. Proc., §2015.5; see also 28 U.S. Code, § 1746.) Second, electronic signatures are an accepted signature. (See Civ. Code, § 1633.7, subd. (a) [“a record or signature may not be denied legal effect or enforceability solely because it is in electronic form”].) Finally, the similar language makes sense in the context of this case, where the Petitioners are all making similar claims.

            Respondent also makes much of the fact that the declarations include the statement that Petitioners played “Sonic the Hedgehog, within the last ten months.” (Hensley Decl., ¶3.) Mike Evans, Respondent’s Senior Vice President, declares that there is “no game called ‘Sonic the Hedgehog’ on the Apple App or Google Play Stores available in the United States.” (Declaration of Mike Evans [“Evans Decl.”], ¶5.) However, Evans notes there is Sonic Dash, Sonic Boom, Sonic Force, and Sonic the Hedgehog Classic. (Evans Decl., ¶5.) The use of an umbrella term “Sonic the Hedgehog” does not demonstrate that the declarations are so unreliable that they should be disregarded.

Accordingly, Petitioners have met their prima facie case.

Evidence Challenging the Prima Facie Case of an Agreement to Arbitrate

Once a party makes a prima facie case, and if “the opposing party disputes the agreement, then in the second step, the opposing party bears the burden of producing evidence to challenge the authenticity of the agreement.” (Gamboa, supra, 72 Cal.App.5th at pp. 165-66.) The opposing party can produce evidence via “testify[ing] under oath or declar[ing] under penalty of perjury that the party never saw or does not remember seeing the agreement, or that the party never signed or does not remember signing the agreement.” (Gamboa, supra, 72 Cal.App.5th at pp. 165-66.)  Should the opposing party meet this burden, then “the moving party must establish with admissible evidence a valid arbitration agreement between the parties” by a preponderance of the evidence. (Id. at 166.) “In these summary proceedings, the trial court sits as a trier of fact, weighing all the affidavits, declarations, and other documentary evidence, as well as oral testimony received at the court’s discretion, to reach a final determination.” (Engalla, supra, 15 Cal.4th at p. 972.)

            In opposition, Respondent argues that numerous Petitioners are either non-existent or not bona fide players of Respondent’s games and, thus, should not be permitted to compel arbitration. As to the issue of whether any specific petitioner has standing to bring the claim as an injured party, that is a question for the arbitrator. The court’s role is limited on a motion to compel arbitration to the question of whether a valid arbitration agreement exists.

However, the Court takes Respondent’s secondary argument—that there are non-existent Petitioners—as an argument that a valid agreement does not exist with some of Petitioners. Thus, the question is whether Respondent’s showing is sufficient to shift the burden back to Petitioners to establish the existence of a valid agreement to arbitrate. It is not.

Here, Respondent relies on the declarations of Robert Crandall, William Johnson, and Mike Evans. The Court addresses each declaration separately.

The first Crandall Declaration Regarding Duplicative Petitioners

In his first declaration (the “Crandall I Decl.”), Mr. Crandall declares that he is Respondent’s retained expert. He is a Partner at Resolution Economics LLC; a firm whose activities include conducting labor studies and performing economic and statistical analyses in connection with litigation. He has previously performed large-scale forensic data studies.

Mr. Crandall declares that he performed a series of data verifications based on the excel file he was given which included the name, phone number, address, and email for all Petitioners. (Declaration of Robert Crandall [“Crandall I Decl.”], ¶1.) He makes three broad points: (1) that a group of Petitioners may be duplicative of one another based on the fact that these Petitioners had the same name and address but slightly different emails and phone numbers,  (2) that a group of Petitioners may be duplicative of one another because they had the same address, and (3) based on a random sample of 377 claimants, the information of approximately one to two thousand of the Petitioners would likely not match publicly available information.

The Court finds that the Crandall I Declaration is insufficient to rebut Petitioners’ showing for several reasons.

First, with respect to potentially duplicative names, Mr. Crandall does not conclude there are non-existent Petitioners. His analysis concludes there are a potential subset of duplicative Petitioners. (Crandell I Decl., ¶10.) Within that subset, he has no information regarding whether any individual person submitted a false claim. In fact, Mr. Crandall identified only twenty-one incidents of potential duplicative claims, based on similar names, among the approximately nineteen thousand Petitioners. (Crandell I Decl., ¶10.) No further information is provided about these twenty-one persons to support the possibility that they are false Petitioners. This showing is insufficient to rebut Petitioners’ declarations. Moreover, the arbitrator can address any issues as to duplicative claims by valid Petitioners.

Second, with respect to duplicative addresses, Mr. Crandall concedes that multiple conclusions can be drawn. He declares “[w]hile it is possible there are multiple valid claims from people living at the same address, it is also possible for the same person to submit multiple claims from the same street address or make a claim on behalf of other residents who have not downloaded a Sega game.” (Crandall I Decl., ¶12.) Again, Crandall’s conclusions, which are drawn from a limited set of data, only introduces the possibility of duplicative claims.  He does not rebut the existence of any specific agreement with proof duplicative claims from any specific Petitioners.

Finally, Mr. Crandall’s sample showing that publicly available information can only confirm a percentage of Petitioners is unhelpful to the Court. In fact, he does not provide information about what it means that a person cannot be confirmed by publicly available information. For example, Mr. Crandall does not conclude that this issue proves that a particular identity has a high probability of being false. Respondent argues only that this information means a risk exists that “1,000 to 2,000 claimants either do not exist, have had their identities stolen for purposes of filing a fraudulent demand, or have fabricated their contact information.” (Opp. at p. 7:09-12.) Mr. Crandall’s report does not support any of these conclusions.

The Court therefore finds that the Crandall I Declaration is insufficient to rebut Petitioners’ evidence.  

Crandall I Declaration Regarding Anticipated Annual Earnings

            Mr. Crandall also submitted a second declaration (the “Crandall II Decl.”), in which he seeks to provide “additional information regarding research into the occupations of some claimants and whether their anticipated annual earnings likely exceed $45,180, which is 300% of the 2024 federal poverty limit of $15,050.” (Declaration of Robert Crandall, ¶1.) The Crandall II Declaration is irrelevant to the issue at hand. Whether any of the Petitioner qualified for fee waivers when they submitted their arbitration demand is not an issue for Respondent to attack in connection with the Motion, as it has no impact on whether a valid arbitration agreement exists between said petitioner and Respondent. The Court therefore does not rely on this declaration.

Johnston Declaration Regarding Petitioners’ Recruit Forms

            Mr. Johnston declares that he is an attorney for Respondent. In his declaration (the “Johnson Decl.”), Mr. Johnston declares that in 2023, his colleague—Alec Cronin— (and not Mr. Johnston himself) clicked on a link for Sega’s recruitment campaign for petitioners. (Johnson Decl., ¶3.) Johnston then conveys Cronin’s alleged observation of what the form contained; however, these statements are hearsay with no valid exception and, thus, are inadmissible. (Cal. Evid. Code, §1200, et seq.) Even if those statements were admissible, however, Cronin’s alleged observations about a single promotional form would not demonstrate that Petitioners used that form exclusively as the basis of developing their petitioner pool or that the declarations are fraudulent.  The Court therefore does not rely on the Johnston Declaration.

            Evans Declaration Regarding Petitioners’ Emails

            Mr. Evans declares that Respondent maintains a database which collects email addresses. (Declaration of Mike Evans (the “Evans Decl.”) He states that players of Respondent’s games have the option to share their email addresses in exchange for in-game promotions. Mr. Evans then compares the opt-in rate for email promotions for U.S. based players (a rate of approximately 6.82%) to the opt-in rate for emails promotions among Petitioners (approximately 1.47%) and concludes this “strongly suggests that the claimant pool is not representative of the actual pool of bona fide [Respondent] mobile users.” (Evans Decl., ¶9.)

The Evans Declaration is not, however, admissible as evidence on the Motion because it is neither a lay opinion nor an admissible expert opinion.  Lay opinion is limited to an opinion that is rationally based on the perception of the witness and helpful to a clear understanding of the witness’ testimony. (Evid. Code, §800.) The Evans Decl. does not serve this purpose for the Court, and it is therefore not admissible as lay opinion.  Expert testimony, on the other hand, is opinion which relates to a subject that is sufficiently beyond common experience that the opinion would assist the trier of fact. (Evid. Code, §801.) Here, Mr. Evans is drawing conclusions from statistical information and relaying to the Court that the information has a 95% confidence interval. This is expert, not lay opinion. Evans is not a designated expert. The Court has no information regarding his background, if any, in large scale statistical analysis. Therefore, it cannot rely on his opinions.

            Having reviewed all of the evidence submitted to the Court by Respondent, the Court finds that Respondent has not met its burden “of producing evidence to challenge the authenticity of the agreement.” (Gamboa, supra, 72 Cal.App.5th at pp. 165-66.)

Evidence Rebutting the Opposition to the Prima Facie Case

            Although Respondent did not meet its burden to rebut Petitioners’ showing, the Court nevertheless addresses the rebuttal evidence to the opposition. Based on the rebuttal evidence the court concludes that, even if Respondent’s showing had shifted the burden to Petitioners, Petitioners submitted sufficient rebuttal evidence to demonstrate by a preponderance po the evidence that an agreement to arbitrate exists.

            Specifically, Petitioners presented a second declaration from its counsel, David Rosenthal (the “Rosenfeld II Decl.”). The Rosenthal II Declaration states that with respect to the individuals who were not found in Mr. Crandall’s search, Petitioners were able to contact sixteen of them to obtain supplemental declarations from them, and confirms that three were presently in police custody. (Rosenthal II Decl., ¶¶12-14 and 20, Exhibit U.) As to the other twelve Petitioners, Rosenthal declares that he believes they are bona fide clients based on information available, i.e. they completed the intake process and signed declarations authorizing counsel to represent them. (Rosenthal II Decl., ¶16.) Rosenthal also declares that since October 11, 2024—when Respondent filed the opposition—the firm has ben able to obtain additional declarations from approximately half the Petitioners confirming the games they played. (Rosenthal II Decl., ¶20.)

Petitioners manually filed these additional declarations with the Court, which has reviewed them. In the declarations, the declarants confirm their prior declarations and specify which Sonic the Hedgehog games they played. For example, Aaron Zepeda declares that “[i]n the ten months prior to 3/22/2024 I played at least the following Sonic the Hedgehog mobile games on my mobile device: Sonic Dash.” (Declaration of Aaron Zepeda, ¶5.) Kareem Ahmed declares that “[i]n the 10 months prior to 3/7/2024 I played at least the following Sonic the Hedgehog mobile games on my mobile device: Sonic Dash, Sonic Forces, Sonic Boom, Sonic 1, Sonic 2, Sonic CD.” (Declaration of Kareem Ahmed, ¶5.)

Therefore, even if Respondent had shifted the burden to Petitioners to demonstrate the existence of an arbitration agreement based on its generalized argument of fraud, which the Court finds it did not, Petitioners have met that additional burden. Petitioners have submitted declarations from 10,468 Petitioners confirming their existence and their standing to assert the claims. Given the scope of the group and the limited time frame, the ability to obtain secondary declarations from ten thousand Petitioners assuages any concern the Court may have had about fraud.

By reason of the foregoing, the motion is GRANTED.

Moving Party is ordered to give notice of this ruling.           

Parties who intend to submit on this tentative must send an email to the Court at SMC_DEPT56@lacourt.org as directed by the instructions provided on the court website at www.lacourt.org.  If the department does not receive an email and there are no appearances at the hearing, the motion will be placed off calendar.

Dated this 21st day of November, 2024