Court: District Court, W.D. Washington; November 19, 2018; Federal District Court
Ronald B. Leighton, United States District Judge, is presiding over a class action lawsuit involving Defendants Playtika, Ltd., Playtika Holding Corp., and Caesars Interactive Entertainment, LLC (collectively "Playtika"). The lawsuit seeks compensation for money lost while playing electronic gambling games on various platforms, including Facebook and mobile applications. Playtika's motion to dismiss argues lack of personal jurisdiction, forum non conveniens, and failure to state a claim. Additionally, Playtika seeks to strike allegations concerning the game Vegas Downtown Slots, asserting that the plaintiff, Wilson, did not claim to have played it.
Playtika, an Israeli company, offers several gambling game apps, including Slotomania, House of Fun, Caesars Slots, and Vegas Downtown Slots. Wilson has played the first three and contends that these apps, which utilize virtual "coins" purchasable after an initial free supply, amount to gambling under Washington state law, despite the coins being non-redeemable for cash. He alleges violations of RCW 9.46.0285 and RCW 4.24.070, along with claims under the Washington Consumer Protection Act and for unjust enrichment.
In addressing personal jurisdiction, the plaintiff bears the burden to establish that it is appropriate. A prima facie showing is required, meaning the plaintiff must present sufficient evidence to support jurisdiction. Playtika contends there is no personal jurisdiction in Washington as it is neither headquartered nor incorporated there and merely placed its app in the market without targeting Washington consumers. Wilson concedes the absence of general jurisdiction but argues for specific jurisdiction based on contracts with Washington consumers. The determination of personal jurisdiction begins with Washington's long-arm statute, which allows jurisdiction to the extent permitted by the U.S. Constitution, thus aligning state law with federal due process. Personal jurisdiction can be either general or specific.
For specific jurisdiction in the Ninth Circuit, a three-prong test is utilized. First, the non-resident defendant must either purposefully direct activities or consummate transactions with the forum, or engage in acts that avail themselves of the forum's privileges and protections. Second, the claim must arise out of or relate to these forum-related activities. Finally, exercising jurisdiction must be reasonable and consistent with fair play and substantial justice. The "purposeful direction" analysis is typically applied in tort cases, focusing on the defendant's actions directed at the forum, such as distributing goods there, while the "purposeful availment" analysis is used in contract cases, requiring evidence of actions performed within the forum, like executing a contract. Courts determine which analysis to apply based on the nature of the underlying dispute. For instance, in Boschetto v. Hansing, the court applied the purposeful availment analysis because the claims were based on a contract. Additionally, in Mavrix Photo, Inc. v. Brand Technologies, Inc., the purposeful direction analysis was used in a copyright infringement case involving a website aimed at a specific state. The court noted that a website appealing to a state's audience could demonstrate purposeful direction. The distinction between the two analyses is often reflected in the nature of online transactions; purposeful availment relates to specific online transaction activities, while purposeful direction focuses more on website interactions. In Boschetto, a singular transaction via eBay was insufficient for purposeful availment, but regular business conducted through an online platform may suffice. Other cases have affirmed that conducting substantial online sales can establish purposeful availment.
Purposeful availment has been established in cases where defendants engage in selling inventory and providing follow-up services from their own locations, as seen in *Helicopter Transport Services LLC v. Sikorsky Aircraft Corp.*. This case navigates the complexities between contract and tort law, with Wilson's claims primarily rooted in contract, as he seeks recovery for transactions he alleges were illegal. However, his claims also hinge on whether Playtika’s app constitutes "gambling" under Washington law, likening his suit to a product liability claim regarding an allegedly dangerous product facilitating online gambling.
Wilson's argument is that the legality of Playtika's apps is contingent on their facilitation of illegal gambling, which is inherently transactional. The common law principle of *in pari delicto* complicates rescinding wagering contracts, but statutes like RCW 4.24.070 exist to restore parties to their original positions. Playtika contests the characterization of gambling as transactional versus contractual, yet this distinction is relevant for assessing purposeful availment.
The analysis indicates that Playtika has purposefully engaged in business within Washington by selling numerous virtual coins to local users, establishing ongoing relationships akin to those discussed in *Helicopter Transport Services*. Playtika's business model relies on repeat purchases, fulfilling the purposeful availment criteria. Even under a purposeful direction analysis, Playtika maintains personal jurisdiction, as it benefits financially from users in Washington purchasing its services, akin to the precedent set in *Mavrix Photo*, where defendants were held accountable for attracting a specific state audience through their business practices. Thus, Playtika is considered to have purposefully availed itself of doing business in Washington, satisfying jurisdictional requirements.
In the case at hand, the court draws parallels to *Alitalia-Linee Aeree Italiane S.p.A. v. Casinoalitalia.Com*, where a gambling website's minimal interaction with Virginia consumers established personal jurisdiction due to purposeful direction of activities toward the state. Playtika, with a larger user base in Washington than JPR in Virginia, similarly directs its activities toward Washington residents. The claims from Wilson stem from his purchase and use of Playtika's apps in Washington, fulfilling the second prong of the personal jurisdiction analysis. The third prong is satisfied as exercising jurisdiction is deemed reasonable and fair, given Playtika's substantial profits from Washington consumers.
Regarding the forum selection clause in Playtika's Terms of Service, which states Israel as the dispute resolution forum, Wilson contends he never agreed to these terms as he lacked notice of them, which are presented in a "browsewrap" format. Unlike clickwrap agreements requiring explicit consent, browsewrap agreements depend on whether users have actual or constructive knowledge of the terms. The Ninth Circuit ruling indicates that the validity of browsewrap contracts hinges on user awareness of the terms, which is assessed based on the website's design and content. Courts enforce browsewrap agreements when users have actual notice but evaluate the presence of inquiry notice based on how conspicuously the terms are displayed.
The conspicuousness and placement of the 'Terms of Use' hyperlink, along with additional user notifications and website design, are critical in determining whether a user has inquiry notice of a browsewrap agreement. In Nguyen, the Ninth Circuit ruled that a browsewrap agreement was not established despite visible hyperlinks near the "checkout" button, distinguishing it from PDC Labs, where users were prompted to "review terms" before finalizing their order. The court emphasized that mere conspicuous hyperlinks without prompting user action do not provide inquiry notice. Similarly, in McKee v. Audible, the court found no inquiry notice when a notification about binding terms was ambiguous regarding the consequences of initiating a free trial. Conversely, the Second Circuit in Meyer v. Uber Technologies, Inc. upheld a browsewrap agreement, noting that the layout effectively linked terms of service to the user’s action of creating an account. Courts recognize that valid clickwrap agreements require explicit acceptance of terms, while agreements with hyperlinks may still be valid if users are compelled to show assent. The critical issue is whether users are adequately informed that their actions signify agreement to the terms. In the case of Playtika's games on Facebook, the lack of clear notification when clicking the "Continue" button undermines the argument for user assent to the terms, as users only see a link to "App Terms" in small text at the bottom of the screen.
The link's distance from the "Continue" button and absence of notification fails to provide sufficient inquiry notice for a browsewrap agreement, as established in Nguyen v. Barnes & Noble, Inc., 763 F.3d 1179. Playtika does not identify a point in its mobile apps prior to download where users can access the Terms of Service, and the small link at the bottom of the gameplay screen lacks visibility and notification regarding the binding nature of the Terms. This inadequacy does not satisfy inquiry notice requirements under Nguyen. Playtika's assertion that Wilson, as a seasoned app user, should be aware of the Terms is unconvincing, as experience with other apps does not ensure knowledge of inconspicuous terms. Cited cases, such as Domain Name Commission Ltd. v. DomainTools, LLC and Fteja v. Facebook, Inc., illustrate that effective notification was present in those situations, which is not the case for Playtika's apps. Playtika misinterprets Wilson's claims regarding a gambling contract and the Terms of Service; the two agreements are distinct.
On the issue of forum non conveniens, Playtika argues for dismissal, asserting that an adequate alternative forum exists, specifically Israel, where it has consented to jurisdiction and where Wilson can seek redress under local law. Wilson does not contest this. The analysis for forum non conveniens involves evaluating private and public factors, with a plaintiff’s choice of forum typically upheld unless compelling reasons favor a foreign trial, particularly when the plaintiff is in their home jurisdiction.
Private factors influencing the choice of forum include the residences of parties and witnesses, the convenience of the forum, access to evidence, the ability to compel witness testimony, costs of bringing witnesses to trial, enforceability of judgments, and overall practical considerations for trial efficiency. Public interest factors include local interest in the lawsuit, court familiarity with applicable law, the burden on local courts and juries, court congestion, and costs associated with resolving unrelated disputes.
In the current case, private interests are mixed but slightly favor Israel due to the location of relevant evidence with Playtika. However, much evidence can be electronically transmitted to the U.S., and critical evidence, like Playtika's apps, is accessible in Washington where the plaintiff, Wilson, downloaded them. Unlike prior cases, this matter focuses on legal questions regarding the legality of Playtika's apps under Washington law, suggesting that the private factors do not strongly favor dismissal.
Conversely, public factors strongly support Wilson's ability to sue in Washington, as the state has a vested interest in enforcing its gambling laws and protecting residents from potentially harmful apps. The balance of private and public factors does not overcome the presumption favoring the plaintiff's chosen forum.
Regarding the failure to state a claim, dismissal under Rule 12(b)(6) can occur either when there is no valid legal theory or insufficient factual allegations to support a claim. A complaint must present facts that support a plausible claim for relief. While the court accepts well-pleaded facts as true, it will not consider conclusory legal assertions or baseless inferences in evaluating a motion to dismiss.
A plaintiff must provide specific factual allegations to support their entitlement to relief, avoiding mere labels or conclusions, as established in Bell Atl. Corp. v. Twombly and Iqbal. On a 12(b)(6) motion, a court should grant leave to amend unless it finds the pleading irreparable. However, if the facts are undisputed and the issue is solely about liability, leave to amend may be denied. In Kater v. Churchill Downs, the Ninth Circuit ruled that virtual chips from a gaming app are a "thing of value" under Washington law, as they enable players to engage with the game without charge. The court did not address the defendant's argument regarding the availability of free chips throughout gameplay, which was not included in the complaint. Playtika's defense attempts to differentiate its case by highlighting that Wilson's complaint alleges the provision of free coins, similar to Kater, and presents screenshots showing opportunities for players to acquire additional free coins. While these screenshots suggest that some additional coins can be obtained post-initial allotment, the court notes that they do not clarify the frequency or quantity of these free coins. Ultimately, the court must determine if these additional allotments affect the classification of Playtika's virtual coins as a "thing of value," concluding they do not.
The Ninth Circuit determined that virtual coins have value because they allow players to continue playing after depleting their free coins. The court emphasized that the loss of the privilege to play occurs when players must purchase additional chips, regardless of potential future free coin allotments. This perspective is supported by the Bullseye Distributing LLC v. State Gambling Commission case, where credits earned from play were classified as a "thing of value" that enabled continued gameplay. Both cases illustrate that credits or coins extend play privileges, even if players can eventually obtain more for free.
Playtika submitted various documents, including Terms of Use, to support its Motion to Dismiss, but these can only be considered under specific exceptions to the rule that prohibits material beyond the pleadings in such motions. A court may include documents that are part of the complaint if their authenticity is uncontested or if they can be judicially noticed as public records. Playtika's Terms state that no purchase is required to use the service, but the court can only acknowledge this statement exists, not validate its truth, as the dispute centers on this assertion. Additionally, Playtika pointed to a 2016 SEC filing indicating that only 4.6% of its players made purchases, which may imply limited reliance on paid coins among users.
The Court acknowledges that it cannot normally take judicial notice of the truth of a disputed figure, but since Wilson does not contest it, this does not affect the classification of virtual coins as a "thing of value" under Ninth Circuit precedent. The fact that many players do not purchase coins does not negate their necessity for extending gameplay. Playtika's CFO asserts that purchasing coins enables players to access higher game levels and enhance their experience, but the Court cannot consider this declaration at this stage, as Wilson's complaint does not rely on the defendants' characterization of the games. The Court emphasizes that if the utility of the coins were limited to what Playtika describes, they might not qualify as a "thing of value."
Playtika also contends that the Court should disregard the Ninth Circuit's Kater ruling, citing the Washington Gambling Commission's guidance on social gaming. However, the Court finds that this guidance does not support Playtika's arguments, as the pamphlet only provides general advice and the Commissioner's statement lacks specific relevance to the legal issues at hand. Furthermore, Playtika's reliance on out-of-circuit cases is rejected in light of Kater's binding authority, as those cases involve different legal frameworks.
On the issue of whether players "lose" something of value, Playtika argues that Wilson cannot recover under RCW 4.24.070 because he did not experience a loss. However, this argument hinges on the assertion that the coins lack value since they are given for free, a point that has been unsuccessful. Consequently, the Court concludes that Wilson has indeed lost something of value and is entitled to recovery based on the Kater ruling.
Playtika asserts that its games qualify as "bona fide business transactions" under RCW 9.46.0237, arguing that players pay for entertainment, similar to purchasing tickets for a baseball game, regardless of the uncertain amount of entertainment received. Wilson counters that the statute's non-exhaustive list, which includes securities and insurance, suggests that the exception should be restricted to transactions akin to those. Washington courts interpret statutes that use "including but not limited to" as creating illustrative, not exhaustive lists, implying that the general term must incorporate items similar to the specified examples. Consequently, Wilson argues that buying virtual coins does not resemble securities or insurance, as it does not involve risk protection or investment stakes. Playtika maintains that "bona fide business transactions" encompasses the sale of game credits, citing RCW 9.46.010's intent to encourage participation in social pastimes. However, the statute specifies that these activities must not profit at the expense of public welfare, which Wilson argues is contradicted by Playtika's profit motive. The crux of Wilson's argument is that Playtika's model involves two transactions: purchasing virtual coins and subsequently exchanging them for chances to win more coins, which constitutes gambling as defined by the statute.
Purchasing coins from Playtika is distinguished from engaging in a legitimate business transaction when using those coins in Playtika's games. Playtika seeks to dismiss Playtika Holding Company (PHC) from the case, asserting that PHC does not own or operate any games, supported by a declaration from PHC's CFO. However, the court cannot consider this declaration at the dismissal stage, as the complaint alleges PHC owns and operates the relevant games, warranting its inclusion until further proceedings.
Playtika also requests the court to strike claims related to the Vegas Downtown Slots game, arguing that the plaintiff, Wilson, does not allege participation in that game. Wilson counters that the complaint encompasses all Playtika games, and differences among them can be resolved at class certification. Motions to strike are generally disfavored unless the material clearly lacks relevance. The court emphasizes the need to interpret pleadings favorably for the submitting party.
Wilson's ability to claim on behalf of a class necessitates demonstrating that the harms suffered are sufficiently similar, regardless of whether he directly experienced them. He asserts that all Playtika games operate similarly, allowing players to buy and spend virtual coins. The case primarily focuses on contractual issues, and the comparison of Wilson's transactions to those of the class will be key, rather than the specific games he played. This determination should occur at the class certification stage, as it is not evident that the Vegas Downtown Slots claims are irrelevant. Additionally, Playtika argues that claims concerning the House of Fun game should be struck, citing a lack of ownership or operation by any defendant.
Playtika's Motion to Dismiss and Strike is denied, while its Request for Judicial Notice is granted. The Court must accept Wilson's allegations that House of Fun is operated by the Defendants, as Playtika's declarations are not admissible at this stage. The Ninth Circuit differentiates between tort and contract claims but does not mandate a specific analysis for hybrid cases. Many courts choose to apply a singular analysis in such instances. A court may employ both standards to ensure jurisdictional propriety. Additionally, the excerpt notes that even a brief gaming period can be costly for users, as free coins provided by Playtika's apps may only allow for minimal gameplay, leading to high expenses during downtime. Unlike cases where both parties rely on the same evidence, Wilson disputes the authenticity of Playtika's documentation, which is critical to the complaints regarding revenue generation targeting vulnerable populations.
