Court Orders Nintendo Product Liability Suit to Arbitration

Judge Gary Feinerman of the Northern District of Illinois issued a memorandum opinion and order mandating arbitration in a products liability suit brought against Nintendo. The suit concerns alleged defects in the controllers provided with the Nintendo Switch video game console.

The case was originally brought in state court but was removed to the federal level under the Class Action Fairness Act. Nintendo then moved to compel arbitration,. The court has granted Nintendo’s motion to compel arbitration, with the understanding that the plaintiff Zachary Vergara may pursue his claims in this court if the arbitrator finds that this is not arbitrable.

Vergara bought a Nintendo Switch video game console and alleged that the included Joy-Con controllers were defective. Through the purchase, the plaintiff and Nintendo entered into an End-User License Agreement (EULA). The court noted two important provisions in the agreement. Section 7(A) which states “Any matter we are unable to resolve and all disputes or claims arising out of or relating to this Agreement, including its formation, enforceability, performance, or breach (each, a ‘Claim’), with the exception of the matters described in section 7(C) below, shall be finally settled by binding arbitration administered by the American Arbitration Association [(“AAA”)] in accordance with the provisions of its Commercial Arbitration Rules and the supplementary procedures for consumer-related disputes.” 

Another provision, Section 7(C)’s relevant portion provides that “Section 7(A) does not apply to any Claim … that may be brought in small-claims court.” Arbitration requires entering an arbitration agreement and since the EULA discusses arbitration in these relevant provisions, the court argues that Vergara and Nintendo entered into an arbitration agreement.

The court stated that “Vergara does not dispute that Section 7(A) of the EULA is a valid, written arbitration provision. Vergara instead maintains that Section 7(A) does not extend to this suit because his claims fall within the Section 7(C) carve-out for claims that could have been brought in small claims court…Nintendo responds that it is up to the arbitrator, not the court, to interpret Sections 7(A) and 7(C) and to determine whether Vergara’s claims must be arbitrated.”

The court noted that “[a]s a general rule, courts rather than arbitrators decide ‘[t]he question whether the parties have submitted a particular dispute to arbitration, i.e., the ‘question of arbitrability.’” An exception to the rule is when both parties clearly agree that the “arbitrator will resolve disputes of arbitrability.” Nintendo claims that the agreement’s arbitration clause “by incorporating the AAA’s Commercial Arbitration Rules, expressly delegates to the arbitrator the parties’ disputes concerning the arbitrability of particular claims.” Vergara “does not respond to the argument. As a result, the court states that this argument is forfeited because both sides do not “clear[ly] and unmistakab[ly]” agree to this point.

The court added that “Vergara correctly observes that a party cannot be required to arbitrate a dispute that he has not agreed to submit to arbitration.” However, he did not acknowledge that he has agreed to arbitrate as a result of the EULA and that his “principle…does not mandate that the court, rather than the arbitrator, decide whether his claims must be arbitrated.” There are two questions at hand: “(1) whether the EULA’s arbitration provision covers his claims; and (2) whether that arbitrability question must be decided by the court or the arbitrator.” The court noted that “[t]he answer to the second question is that the arbitrator decides.”

Consequently, the court grants Nintendo’s motion to compel arbitration and the parties must submit the plaintiff’s claims to an AAA administered arbitration. The case was stayed pending the arbitration resolution.