The Arbitration Turn in the Activision Blizzard Call of Duty League Monopoly Dispute

The Shift to Arbitration: A New Path for Resolution

In a notable pivot from the courtroom to the arbitration table, the lawsuit filed by H3CZ and Scump seeking substantial damages from Activision Blizzard has been dismissed, with the parties agreeing to arbitration and thereby ending the litigation. This move underscores a reevaluation of legal tactics, likely influenced by the arbitration clause embedded within the CDL agreements, demonstrating the power such clauses hold in determining the forum and nature of dispute resolution.

The Essence of Arbitration

Arbitration is a procedure in which a dispute is submitted, by agreement of the parties, to one or more arbitrators who make a binding decision on the dispute. In choosing arbitration, the parties opt for a private dispute resolution procedure instead of going to court.

Its principal characteristics are:

Arbitration is consensual

Arbitration can only take place if both parties have agreed to it. In the case of future disputes arising under a contract, the parties insert an arbitration clause in the relevant contract. An existing dispute can be referred to arbitration by means of a submission agreement between the parties. In contrast to mediation, a party cannot unilaterally withdraw from arbitration.

The parties choose the arbitrator(s)

Under e.g. the JAMS Comprehensive Arbitration Rules, the parties can select a sole arbitrator or a tribunal of three arbitrators together. If they choose to have a three-member arbitral tribunal, each party appoints one of the arbitrators; those two persons then agree on the presiding arbitrator. Alternatively, potential arbitrators with relevant expertise can be suggested or directly appointed by the arbitral institutions. For example, the WIPO maintains an extensive roster of arbitrators ranging from seasoned dispute-resolution generalists to highly specialized practitioners and experts covering the entire legal and technical spectrum of intellectual property.

Arbitration is neutral

In addition to their selection of neutrals of appropriate nationality, parties are able to choose such important elements as the applicable law, language and venue of the arbitration. This allows them to ensure that no party enjoys a home court advantage.

Arbitration is a confidential procedure

The chosen arbitration rules usually ensure the secrecy of the arbitration’s existence, any information revealed during the process, and the final decision. In specific scenarios, the JAMS Rules permit a party to limit the exposure of trade secrets or confidential data shared with the arbitration panel or a confidentiality consultant to the panel.

The decision of the arbitral tribunal is final and easy to enforce

According to the WIPO Rules, the involved parties commit to executing the panel’s verdict promptly. Global judgments are recognized and enforced by domestic courts under the New York Convention, which only allows for their annulment in exceptionally rare situations. Over 165 countries are signatories to this Convention.

The Arbitration Clause in Depth

The arbitration clause at the heart of this dispute lays out a detailed process for resolving disputes, beginning with an attempt at informal resolution through negotiation and consultation. It states:

. BINDING ARBITRATION AND CLASS ACTION WAIVER:

READ THIS SECTION CAREFULLY. IT MAY SIGNIFICANTLY AFFECT YOUR LEGAL RIGHTS, INCLUDING YOUR RIGHT TO FILE A LAWSUIT IN COURT.

These BINDING ARBITRATION AND CLASS ACTION WAIVER provisions apply to you if you are domiciled in and/or use the CDL Service in the United States. These provisions may also apply to you if you are domiciled in and/or use the CDL Service from outside the United States. See JURISDICTION AND APPLICABLE LAW below for details.

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Initial Dispute Resolution: CDL’s Customer Support department is available to address any concerns you may have regarding the CDL Service. Most concerns are quickly resolved in this manner to our customers’ satisfaction. The parties shall use their best efforts to settle any dispute, claim, question, or disagreement directly through consultation and good faith negotiations which shall be a precondition to either party initiating a lawsuit or arbitration.

Binding Arbitration: If the parties do not reach an agreed upon solution within a period of 30 days from the time informal dispute resolution is pursued pursuant to the paragraph above, then either party may initiate binding arbitration as the sole means to formally resolve claims, subject to the terms set forth below. Specifically, all claims arising out of or relating to this Agreement (including its interpretation, formation, performance and breach), the parties’ relationship with each other and/or your use of the CDL Service shall be finally settled by binding arbitration administered by JAMS in accordance with the provisions of its Comprehensive Arbitration Rules or Streamlined Arbitrations Rules, as appropriate, excluding any rules or procedures governing or permitting class actions. This arbitration provision is made pursuant to a transaction involving interstate commerce, and the Federal Arbitration Act (the “FAA“) shall apply to the interpretation, applicability, enforceability and formation of this Agreement notwithstanding any other choice of law provision contained in this Agreement. The arbitrator, and not any federal, state, or local court or agency, shall have exclusive authority to resolve all disputes arising out of or relating to the interpretation, applicability, enforceability, or formation of this Agreement, including without limitation any claim that all or any part of this Agreement is void or voidable, or whether a claim is subject to arbitration. The arbitrator shall be empowered to grant whatever relief would be available in a court under law or in equity. The arbitrator’s award shall be binding on the parties and may be entered as a judgment in any court of competent jurisdiction.

The JAMS Rules governing the arbitration may be accessed at http://www.jamsadr.com/ or by calling JAMS at (800) 352-5267. Your arbitration fees and your share of arbitrator compensation shall be governed by the JAMS Comprehensive Arbitration Rules and, to the extent applicable, the Consumer Minimum Standards, including the then-current limit on arbitration filing fees. To the extent the filing fee for the arbitration exceeds the cost of filing a lawsuit, CDL will pay the additional cost. The parties understand that, absent this mandatory provision, they would have the right to sue in court and have a jury trial. They further understand that, in some instances, the costs of arbitration could exceed the costs of litigation and the right to discovery may be more limited in arbitration than in court.

Location: If you are a resident of the United States, arbitration will take place at any reasonable location within the United States convenient for you. For residents outside the United States, arbitration shall be initiated in Los Angeles County, California, and you and CDL agree to submit to the personal jurisdiction of any federal or state court in Los Angeles County, California, in order to compel arbitration, to stay proceedings pending arbitration, or to confirm, modify, vacate, or enter judgment on the award entered by the arbitrator.

Class Action Waiver: The parties further agree that any arbitration shall be conducted in their individual capacities only and not as a class action or other representative action, and the parties expressly waive their right to file a class action or seek relief on a class basis. YOU AND CDL AGREE THAT EACH MAY BRING CLAIMS AGAINST THE OTHER ONLY IN YOUR OR ITS INDIVIDUAL CAPACITY, AND NOT AS A PLAINTIFF OR CLASS MEMBER IN ANY PURPORTED CLASS OR REPRESENTATIVE PROCEEDING. If any court or arbitrator determines that the class action waiver set forth in this paragraph is void or unenforceable for any reason or that an arbitration can proceed on a class basis, then the arbitration provision set forth above shall be deemed null and void in its entirety and the parties shall be deemed to have not agreed to arbitrate disputes.

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Exception – Litigation of Intellectual Property and Small Claims Court Claims: Notwithstanding the parties’ decision to resolve all disputes through arbitration, either party may bring an action in state or federal court that only asserts claims for patent infringement or invalidity, copyright infringement, moral rights violations, trademark infringement, and/or trade secret misappropriation, but not, for clarity, claims related to the license granted to you for the CDL Service under this Agreement. Either party may also seek relief in a small claims court for disputes or claims within the scope of that court’s jurisdiction.

30 Day Right to Opt Out: You have the right to opt-out and not be bound by the arbitration and class action waiver provisions set forth in the “Binding Arbitration,” “Location,” and “Class Action Waiver” paragraphs above by sending written notice of your decision to opt-out to the following address: The Call of Duty League, LLC, Attention: Legal, 3100 Ocean Park Blvd., Santa Monica, CA 90405. The notice must be sent within 30 days of purchasing the CDL Service (or if no purchase was made, then within 30 days of the date on which you first access or use the CDL Service and agree to these terms); otherwise you shall be bound to arbitrate disputes in accordance with the terms of those paragraphs. If you opt-out of these arbitration provisions, CDL also will not be bound by them.

Changes to this Section: CDL will provide 60-days’ notice of any changes to this Section. Changes will become effective on the 60th day and will apply prospectively only to any claims arising after the 60th day.”

The Arbitration Clause: A Closer Look

The arbitration clause involved in this lawsuit outlines a detailed process beginning with an initial attempt at dispute resolution through negotiation. Failing this, the parties are bound to engage in binding arbitration, governed by the JAMS Comprehensive Arbitration Rules. This clause clearly specifies arbitration as the sole means for formal dispute resolution, highlighting its mandatory nature and the intention to avoid litigation costs.

Additionally, the clause contains a class action waiver, significantly limiting the ability to pursue collective legal action. This aspect of the arbitration agreement underscores the individual nature of arbitration and the parties’ agreement to resolve disputes outside of a class or representative action.

Implications of the Legal Strategy Shift

The movement towards arbitration after initiating a lawsuit indicates a reconsideration of legal tactics, possibly recognizing the enforceability of the arbitration clause or aiming for a resolution that balances privacy, speed, and cost-effectiveness. This strategic shift also reflects the broader legal landscape in esports, where arbitration clauses are increasingly common, guiding how disputes are resolved within the industry.

The Role of Arbitration in Esports Disputes

The case of H3CZ and Scump versus Activision Blizzard serves as great example of the legal intricacies and strategic decisions underlying disputes in the esports arena, and the necessity to read the Terms & Conditions. The move from court to arbitration demonstrates that the Claimants might have chosen the wrong forum and also highlights the broader trend towards using arbitration to resolve disputes in the esports industry. As the sector continues to grow, understanding and navigating these legal frameworks will be crucial for stakeholders at all levels.

Case Information for Rodriguez v. Activision Blizzard Inc.

Court: U.S. District Court for the Central District of California

Case Number: Rodriguez v. Activision Blizzard Inc., No. 2:24-cv-01287

Filing Date: 15 February 2024

Counsel Information:

For Plaintiffs (Hector Rodriguez, Seth Abner, HECZ LLC):

• Firm: Dynamis LLP and Aaron Katz Law LLC
• Eric Rosen, Constantine P. Economides, Brianna K. Pierce
• Aaron M. Katz
• Locations: Not specified in the provided information

For Defendant (Activision Blizzard Inc.):

• Counsel information not provided in the available documentation.

Image source: Drift0r on Youtube

With material from WIPO