Roblox will need to defend itself from allegations of collusion with third-party casinos after a California judge ordered only a partial dismissal of a proposed class action. The company had sought to escape the suit, claiming it isn’t liable for the activities of third parties misusing its platform.
On Tuesday, United States District Judge Vince Chhabria issued an order allowing the case to proceed on multiple counts while dismissing several others. Specifically, Judge Chhabria dismissed the claims related to:
- The Racketeer Influenced and Corrupt Organizations Act (RICO),
- Consumers Legal Remedies Act (CLRA), and
- New York General Business Law (GBL)
Conversely, the lawsuits’ negligence claims and those related to California’s Unfair Competition Law (UCL) can “move forward immediately” to discovery.
Notably, Judge Chhabria’s dismissal “with leave to amend” also allows the plaintiffs 14 days to “cure the defects in the claims” with an amended filing. Further, the plaintiffs can amend the complaint later if discovery reveals a “good-faith basis” to reassert the dismissed allegations.
Attempts by Bonus to reach Roblox and the plaintiffs’ legal representatives for comment have yet to receive a response.
A spokesperson for US District Courts told Bonus via email that Judge Chhabria will release a supplemental order addressing the suit’s final two counts (VII, VIII) later today.
Section 230 Not Applicable
Initially filed in August, the class action targeted Roblox and a trio of third-party online casinos (Bloxflip, RBXFlip, and RBLXWild) over alleged collusion. As the original brief details, the plaintiffs allege the defendants knowingly and intentionally preyed on the popular immersive gaming platform’s predominantly underage users.
In October, Roblox filed a motion to dismiss the case. The brief argued that under Section 230 of the Communications Decency Act (CDA), it’s a neutral participant not responsible for the actions of third parties.
Specifically, Roblox argued Section 230 precludes the entirety of the lawsuit’s nine counts and provides cover of “broad federal immunity.”
Plaintiffs’ claims — all premised on the theory that Roblox failed to ban the VC Developers from using the platform due to their publication of “gambling games” and virtual “chips” — are precluded by Section 230, which bars claims against “(1) a provider or user of an interactive computer service (2) whom a plaintiff seeks to treat … as a publisher or speaker (3) of information provided by another information content provider.
However, Judge Chhabria disagreed and explained that the plaintiffs’ claims were not barred by Section 230 because they did not treat Roblox as a publisher.
As Chhabria wrote:
Roblox is not facing liability for the content posted on its platform. It is facing liability for allegedly facilitating transactions between minors and online casinos that enable illegal gambling, and for allegedly failing to take sufficient steps to warn minors and their parents about those casinos.
Roblox Had Duty to Care
While Judge Chhabria agreed to dismiss the claims covering RICO, CLRA, and GBL violations, he declined to dismiss the suit’s accusations of negligence and UCL violations.
Regarding the latter, Chhabria said while some statutes seem inapplicable due to the complaint’s problems with clarity, other laws “clearly” apply to Roblox’s role.
If these laws are inapplicable for some reason, then Roblox has not explained how.
Addressing the negligence claims, Judge Chhabria noted that under California law, there’s a “baseline duty” to prevent reasonably anticipated harm.
Further, he said Roblox’s assertion that the negligence claims fail “because it is not subject to a duty under California tort law” is incorrect. He used a recent California case to back his argument.
In that case, the court found social media companies must “exercise due care in managing their platforms.” The same rules, he said, apply here.
The baseline rule is that Roblox had a duty to use reasonable care in its conduct, the creation, and management of its platform, to avoid creating an unreasonable risk of harm to others. The plaintiffs argue that Roblox violated that duty to use reasonable care by allegedly engaging in these currency exchanges with online casinos and by failing to warn parents about the online casinos.
Roblox does not argue that it did, in fact, use reasonable care. Instead, Roblox contests only the existence of a duty. But since Roblox has not shown that it would be appropriate to create a carve-out to the general duty rule, the motion to dismiss the negligence claims is denied.
Judge Rejects ‘Kids Got What They Bargained For’
Roblox’s motion also argued the plaintiffs had not suffered sufficient economic injury to establish statutory standing under UCL, CLRA, or GBL. However, at least in part, Judge Chhabria again disagreed.
Roblox is right that purchasing virtual currency online is “akin to purchasing cinema or amusement park tickets,” he said. However, unlike digital currency, movie or amusement park tickets do not lose their value once purchased.
Additionally, Roblox argued that even if Robux is “of economic value,” there was no economic loss, as the children “got what they bargained for.” Again, Chhabria rejected the argument.
These are children we’re talking about. There is a reason that children are not allowed to gamble, even if they think it will be entertaining: they cannot meaningfully consent to such games, or to the losses that occur as a result. Thus, in the context of this case, it misses the point to say that the children got what they bargained for.
Moreover, he said the online casinos are not what users purchase the Robux for.
This is less like a parent buying their child tickets for an amusement park, knowing that there are games of chance available, and letting their child run free to play those games because of their entertainment value. It is more like a casino setting up shop outside an amusement park and luring a child away to wager and lose the tickets to an illegal gambling operation—tickets that the casino can then exchange for cash. The parents did not consent to this deprivation of their child’s ability to play in the amusement park, and the child was not legally capable of doing so.
Another Lawsuit on Horizon
As yet, Roblox has not commented on Judge Chhabria’s order. But, whether a statement follows the supplemental order or Roblox remains silent, the court’s decision has to be worrisome. Despite Roblox’s partial victory.
Two weeks ago, another group of plaintiffs filed a near-identical suit against the same defendants in the same Nothern California District Court. With Chhabria’s decision, chances are the Gentry V. Roblox case will follow a similar path.
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