AviaGames players seeking compensation for the money they allegedly lost to house-operated “bot” accounts may not get their day in court unless the judge finds the company’s terms of service unconscionable. Avia is seeking to escape the class action suit by enforcing a compelled arbitration clause similar to the one that recently put an end to the suit against social sports predictions site Fliff.
AviaGames operates Pocket7Games, a platform for real-money skill gaming contests. The accusations of botting first came to light during the discovery phase of a patent lawsuit against Avia by its rival Skillz. The jury hearing that case ultimately awarded Skillz $43 million in compensation for violations of its intellectual property by Avia.
Aside from violating its patents, Skillz accused Avia of covertly pitting human players against virtual opponents rather than one another. That provoked suits by the players and a federal investigation into potential criminal charges against Skillz. It’s unclear whether that investigation is still underway.
Plaintiffs Andrew Pandolfi and Mandi Shawcroft have sued on behalf of themselves and other players, arguing that AviaGames’ use of bots violates California law and the federal Racketeer Influenced and Corrupt Organizations Act.
In 2023, however, the players had agreed—by clicking a pop-up—to changes in the terms of use for Pocket7Games and Bingo Clash, another AviaGames product. These new terms included a compelled arbitration clause—an agreement to resolve potential disputes through an arbitrator, not the court system.
Compelled Arbitration Becoming Standard
Compelled arbitration clauses and class-action waivers have become standard inclusions for “gambling-adjacent” products—that is, games and contests that resemble gambling in some ways but skirt the legal definition of gambling and the need for regulation.
Companies operating in that niche make popular targets for class actions. Social and sweepstakes casinos faced a string of such cases until they began adopting class action waivers.
US courts have usually held such agreements to be valid, but exceptions exist. For instance, they can be deemed invalid if the contract is fraudulent, signed under duress, or otherwise “unconscionable.”
In California, the court would need to find the contract simultaneously:
- Procedurally unconscionable—Obtaining consent through surprise or unequal bargaining power.
- Substantively unconscionable—Unreasonable and ethically shocking in its impact.
In the case of Fliff, Judge Sunshine Sykes found a “minor amount of unconscionability,” but not enough to void the contract. As a result, it ruled that Fliff’s customers would need to settle their dispute with the company through arbitration.
Deferred Ruling Leaves Hope Alive for Plaintiffs
Unlike Judge Sykes, however, Judge Edward M. Chen hasn’t immediately reached a ruling in favor of AviaGames. Instead, on May 21, he deferred ruling on the compelled arbitration issue, asking both parties to supply additional arguments.
His rationale hinges on a previous case, MacClelland v. Cellco Partnership. The judge in that case found that it was unconscionable due to a provision breaking mass complaints into blocks of 25 complainants, each of which would have to wait its turn to be heard by the arbitrator. Compared to compelled arbitration itself, these “bellwether” clauses have proven more likely to be invalidated in court.
However, the MacClelland case involved 2,700 customers and would have taken “approximately 156 years to resolve” by the terms of the contract. The AviaGames terms of service have a bellwether clause stipulating blocks of 20 complainants, but Pandolfi and Shawcroft only represent a class of 27 plaintiffs at the moment.
Judge Chen questioned whether unconscionability is purely abstract and determined when the contract is formed or whether it involves an element of context. That is, are Avia’s terms unconscionable because they could lead to unreasonable delays if more plaintiffs got involved? Or are they acceptable because the actual number of plaintiffs is small?
In their response, the plaintiffs argue that it’s the former:
There is no way to predict the final number of claimants that will engage each firm or the number of claimants who—unbeknownst to Plaintiffs here or the Court—have or will initiate additional cases or claims. Analyzing unconscionability at any time other than when made would risk the Court ruling differently at [different points in time]. The clause cannot be enforceable against Mr. Pandolfi or Ms. Shawcroft simply because they were first, but unconscionable for the 100th or 1,000th claimant who signed up later.
The First of Many Hurdles
Unfortunately for the plaintiffs, even if Judge Chen agrees, this delay applies only to the notion of “arbitration of arbitrability.” That is, whether the court or an arbitrator should decide on the contract’s validity.
In the Fliff case, Judge Sykes sided with the plaintiffs on that issue. She ruled that it was valid for her court to decide the issue of arbitrability. However, she went on to determine that the contract was, in fact, valid. That could easily be how this case ends as well.
To prevail in their suit, the plaintiffs will need to clear at least three hurdles—probably four—of which this is only the first:
- The issue of “arbitration of arbitrability” that Judge Chen is currently considering.
- The issue of compelled arbitration itself.
- A probable motion for dismissal by AviaGames.
- Finally, a trial on the actual merits of the case if it survives those other three challenges.
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