Bishoy Nessim, the plaintiff in the proposed class action against online sweepstakes sportsbook Fliff, is challenging the legality of the site’s terms and conditions, which require binding arbitration in all disputes.
The move is a response to a motion filed by Fliff last month, requesting the matter be moved to arbitration. Those documents argued Nessim’s case against Fliff cannot be tried in California because he agreed to the terms and conditions of the self-proclaimed “social sportsbook.”
Nessim is seeking class action for California Fliff players who lost money on the app marketed as free-to-play in California and other states without legal sports betting.
Nessim’s lawyers, however, reject Fliff’s position.
Fliff’s contractual terms, they said, are not enforceable under California law.
Arbitration Would Bar “Hundreds” From Class Action
In its response, Nessim’s legal team argued why the courts should hear the case.
The motion reads:
Simply put, Defendant Fliff, Inc. (“Fliff”) seeks to avoid having the merits of this case heard by this Court. Instead, it seeks to enforce arbitration terms that are invalid and, hence, unenforceable under California law. This case, which challenges an illegal sports betting operation under California law, is brought by a California Plaintiff on behalf of a proposed class of California residents.
Fliff now asks this Court to force Plaintiff to arbitrate his claims under Pennsylvania law. This Court should reject Fliff’s request. Under binding choice-of-law principles, California law governs this dispute.
The court will hold a hearing to decide on Fliff’s request on Sept. 29.
San Diego-based lawyer Dennis Stewart of Gustafson Gluek PLLC is the chief attorney for the plaintiff.
According to Nessim’s team, if the court decides in Fliff’s favor, it would bar “hundreds if not thousands” of Californians from the proposed class action.
McGill Rule Protects Californians From Waiving Rights
Fliff, for its part, argued that when agreeing to the terms and conditions of the website, customers also agree to third-party arbitration.
However, that, said Nessim’s lawyers, violates California’s Unfair Competition Law (UCL), which projects Californians from waiving rights to public injunctive relief.
From the motion:
In sum, because Plaintiff alleges a cause of action under the UCL and seeks highly important public injunctive relief vindicating the state’s fundamental policy against gambling, Fliff’s arbitration terms violate the McGill Rule.
The McGill Rule, established in a 2017 case against Citibank, found arbitration provisions that waive all rights to public injunctive relief are unenforceable in California.
Those terms and conditions, they added, are likely only be legally enforceable in Pennsylvania, where Fliff is headquartered.
However, Nessim’s filing goes further, casting doubt on Fliff’s Pennsylvania connection.
Although paperwork on file with the Securities and Exchange Commission (SEC) states Fliff headquarters are in Pennsylvania, the company was first incorporated in Delaware.
Nassim further suggested that Fliff’s headquarters are in Austin, Texas, where CEO Matt Ricci lives, and the company is currently hiring.
Still, his lawyers argued that local state laws directly conflict with California law even if the company headquarters are in Pennsylvania.
Pennsylvania online sports betting is legal and regulated, unlike in California. Yet, Pennsylvania still does not regulate Fliff as a real-money sportsbook.
Judge Sunshine Suzanne Sykesto must now decide whether to move the case to arbitration or let the proposed class action move forward.
Decision Could Affect California DFS Operators
A finding against Fliff could impact other sweepstakes-style companies operating in California.
Nessim’s suit is one of several filed recently as US scrutiny of companies offering sports betting-like products as Daily Fantasy Sports (DFS) surges.
Though California online gambling expansion faces an uphill battle, it’s a massive market for DFS operators, including Prize Picks and Underdog Fantasy.
While the state has yet to take a stand on the sports betting-esque products, California voters returned a resounding no to legal sports betting in 2022.