Kater v. Churchill Downs Inc.

423 F.Supp.3d 1055

Cheryl KATER and Suzie Kelly, individually and on behalf of all others similarly situated, Plaintiffs,

v.CHURCHILL DOWNS INCORPORATED, a Kentucky corporation, and Big Fish Games, Inc., a Washington corporation, Defendants.

Manasa Thimmegowda, individually and on behalf of all others similarly situated, Plaintiff,

v.Big Fish Games, Inc., a Washington corporation; Aristocrat Technologies Inc., a Nevada corporation; Aristocrat Leisure Limited, an Australian corporation; and Churchill Downs Incorporated, a Kentucky corporation, Defendants.

CASE NO. C15-0612-RBL

CASE NO. C19-0199-RBL

United States District Court, W.D. Washington, at Tacoma.

Signed November 19, 2019

Alexander G. Tievsky, Pro Hac Vice, Benjamin H. Richman, Pro Hac Vice, Edelson PC, Chicago, IL, Brandt Silver-Korn, Pro Hac Vice, Eve-Lynn Rapp, Pro Hac Vice, Rafey S. Balabanian, Pro Hac Vice, Todd Logan, Pro Hac Vice, Edelson PC, San Francisco, CA, Cecily C. Shiel, Janissa Ann Strabuk, Tousley Brain Stephens, Seattle, WA, Clifford A. Cantor, Sammamish, WA, for Plaintiff Cheryl Kater.

Alexander G. Tievsky, Pro Hac Vice, Benjamin H. Richman, Pro Hac Vice, Edelson PC, Chicago, IL, Brandt Silver-Korn, Pro Hac Vice, Eve-Lynn Rapp, Pro Hac Vice, Rafey S. Balabanian, Pro Hac Vice, Todd Logan, Edelson PC, San Francisco, CA, Cecily C. Shiel, Janissa Ann Strabuk, Tousley Brain Stephens, Seattle, WA, Clifford A. Cantor, Sammamish, WA, for Plaintiff Suzie Kelly.

Robert Rivera, Pro Hac Vice, Matthew R. Berry, Steven M. Seigel, Susman Godfrey, Mark Steven Parris, Paul Francis Rugani, Orrick Herrington & Sutcliffe LLP, Seattle, WA, for Defendant Churchill Downs Incorporated.

David Watnick, Pro Hac Vice, Matthew Q. Verdin, Pro Hac Vice, Covington & Burling LLP, San Francisco, CA, Emily Johnson Henn, Pro Hac Vice, Lindsey Barnhart, Pro Hac Vice, Covington & Burling LLP, Palo Alto, CA, Gary Rubman, Pro Hac Vice, Covington & Burling LLP, Washington, DC, Mark Steven Parris, Paul Francis Rugani, Orrick Herrington & Sutcliffe LLP, Seattle, WA, for Defendant Big Fish Games Inc.

ORDER ON TEMPORARY RESTRAINING ORDER AND LIMITED RELIEF FROM LITIGATION STAY

Ronald B. Leighton, United States District Judge

I. INTRODUCTION

THIS MATTER is before the Court on Plaintiffs' Motions for Temporary Restraining Order and Limited Relief from Litigation Stay [Dkt. #s 73 (in Thimmegowda ) and 122 (in Kater ) ]. The facts underlying these two class action lawsuits were summarized by the Ninth Circuit in Kater v. Churchill Downs Inc. , 886 F.3d 784, 785-86 (9th Cir. 2018) :

Big Fish Casino is a game platform that functions as a virtual casino, within which users can play various electronic casino games, such as blackjack, poker, and slots. Users can download the Big Fish Casino app free of charge, and first-time users receive a set of free chips. They then can play the games for free using the chips that come with the app, and may purchase additional chips to extend gameplay. Users also earn more chips as a reward for winning the games. If a user runs out of chips, he or she must purchase more chips to continue playing. A user can purchase more virtual chips for prices ranging from $1.99 to nearly $250.

The only material differences between the cases are the addition of Big Fish's new owner as a defendant in Thimmegowda , and class definitions that cover different time periods. The proposed Kater class covers persons who lost purchased chips at Defendants' games before March 23, 2015, and the proposed Thimmegowda class covers persons who lost chips after that date. The pending motions are identical, and the Court will use the singular "motion" for clarity.

The Motion to Lift the Stay for the purpose of resolving the underlying TRO motion is GRANTED. Plaintiffs' Motion for Temporary Restraining Order is GRANTED in the form of a Preliminarily Injunction limiting Defendants' dissemination of the pop-up notification regarding the Big Fish Terms of Use dated August 18, 2019 (and displayed since October 14, 2019), as described below.

II. BACKGROUND

On August 28, 2019, Big Fish changed the Terms of Use on its Big Fish Casino website. Before then, the game's Terms contained a generic arbitration agreement, which is the subject of pending motions in both cases. The updated Terms, however, are expressly directed at this lawsuit:

These Terms of Use dated August 28, 2019 do not apply to Cheryl Kater, Suzie Kelly, and Manasa Thimmegowda, who are named plaintiffs in class action lawsuits pending in the Western District of Washington: Kater v. Churchill Downs Inc. , Case No. 15-cv-00612-RBL, and Thimmegowda v. Big Fish Games, Inc. , Case No. 2:19-cv-00199-RBL. The lawsuits allege claims relating to Big Fish Casino under the Washington Recovery of Money Lost at Gambling statute, the Washington Consumer Protection Act, and Washington common law. The mandatory arbitration provision in these Terms of Use prevents you from participating in these class action lawsuits, even if a class is certified.

(https://www.bigfishgames.com/company/terms.html). The Terms do not provide information about the current status of these cases, the type of relief being sought, the Court's previous decisions about arbitration in Kater , or how to contact Plaintiffs' counsel. They do not advise players to seek their own counsel if they have questions about the Terms. The Terms include an opt-out provision, which purports to permit players to opt out of the arbitration agreement within 30 days of clicking the "I Agree" button.

More than 30 days after changing the Terms (about October 14, 2019), Big Fish's games began displaying a new pop-up window. The pop-up expressly references this litigation and tells players that clicking the "I Agree" button means that they will not be permitted to participate in these lawsuits. Players cannot continue to play the game unless they click the "I Agree" button, even if they have already purchased chips. The pop-up window is depicted above.

Defendants did not tell Plaintiffs, Plaintiffs' counsel, or the Court about the changes to the Terms of Use or the addition of the pop-up window. Nor has the Court authorized any form of class notice. In fact, both cases have been stayed, with limited exceptions, pending the Ninth Circuit's resolution of the appeal in Wilson v. Huuuge, Inc. (Kater Dkt. # 121; Thimmegowda Dkt. # 70).

III. DISCUSSION

The purpose of a TRO is "preserving the status quo and preventing irreparable harm just so long as is necessary to hold a hearing [on the preliminary injunction application], and no longer."

Granny Goose Foods, Inc. v. Brotherhood of Teamsters & Auto Truck Drivers , 415 U.S. 423, 94 S.Ct. 1113, 39 L.Ed.2d 435 (1974) ; see also Reno Air Racing Ass'n v. McCord , 452 F.3d 1126, 1130–31 (9th Cir. 2006). For a court to grant a preliminary injunction, the plaintiff "must establish that he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public interest." Winter v. Nat. Res. Def. Council , Inc. , 555 U.S. 7, 20, 129 S.Ct. 365, 172 L.Ed.2d 249 (2008). The last two factors merge if the government is a party. Drakes Bay Oyster Co. v. Jewell , 747 F.3d 1073, 1092 (9th Cir. 2014). When considering whether to grant this "extraordinary remedy, ... courts must balance the competing claims of injury and consider the effect of granting or withholding the requested relief, paying particular regard to the public consequences." Winter , 555 U.S. at 24, 129 S.Ct. 365.

The Ninth Circuit continues to apply one manifestation of the "sliding scale" approach to injunctions in which "a stronger showing of irreparable harm to plaintiff might offset a lesser showing of likelihood of success on the merits." All. for the Wild Rockies v. Cottrell , 632 F.3d 1127, 1131 (9th Cir. 2011). "In other words, ‘serious questions going to the merits’ and a hardship balance that tips sharply toward the plaintiff can support issuance of an injunction, assuming the other two elements of the Winter test are also met." Id. at 1131-32. However, an injunction cannot issue even when there is a strong likelihood of success on the merits if there is just a mere possibility of irreparable harm. Id. at 1131 (explaining the holding in Winter , 555 U.S. at 22, 129 S.Ct. 365 ).

1. Likelihood of Success on the Merits.

To obtain injunctive relief, Plaintiffs must demonstrate a likelihood of success on the merits. Here, the relevant merits question is whether, pursuant to Federal Rule of Civil Procedure 23(d), the Court should limit defendants' communications with putative class members and issue appropriate corrective notice (among other potentially appropriate remedies).

Plaintiffs argue that Big Fish's pop-up window is coercive because it forces addicted gamblers to choose between preserving their class action rights and continuing to play games they have already invested money in. Plaintiffs further contend that the pop-up and revised Terms of Use mislead users by omitting important information about the lawsuits, mischaracterizing the effect of accepting the Terms, and obscuring the procedure for opting out of the Terms. Plaintiffs request that the Court invalidate any purported arbitration agreements, issue corrective notice, and prevent Big Fish from communicating with putative class members regarding arbitration.

Big Fish argues that its new pop-up and Terms are not misleading and in fact clarify the effects of Big Fish's arbitration clause by informing users that accepting the Terms will prohibit them from participating in these suits. Big Fish also rejects the notion that players' addiction to their games is relevant to coercion and emphasizes that the Terms provide an opt-out procedure that allows users to avoid any coercive effects. In any case, Big Fish asserts that Plaintiffs' suggested remedy would amount to a total moratorium on customer communication. This would...