By Ellen M. Zavian, Esq.
(Editor’s Note: This interview appeared in the recent issue of My Legal Bookie, a complimentary subscription publication produced by Hackney Publications.)
George Calhoun is the attorney who rolls up his sleeves and gets in the trenches when representing his clients in complex business disputes. As the Chair of Ifrah Law’s Financial Services Practice, he works with international companies as they prepare for litigation while keeping a keen eye on resolving their business disputes during the pre-litigation window. George views it as a WIN, whether the win comes in the courtroom, at the settlement table, or in an arbitration proceeding.
It is his attention to detail, while not losing the big picture, that enables him to bring tremendous value to the emerging issues in the iGaming space. Especially when overlaying his expertise over the current EA Sports case that was filed in August 2020. Specifically, in Kevin Ramirez, et al. v. Electronic Arts Inc., the Defendant was sued for $5M over claims their FIFA Ultimate Team mode constituted gambling and should be regulated under gambling laws. While most attorneys were focused on the gambling allegations, Calhoun was focused on just how players could file a class action when EA’s Player Agreement (wrap agreement) included a ‘class action waiver clause’ as well as a ‘mandatory arbitration’ clause.
We caught up with Calhoun to find out why he was focused on the ‘wrap agreement’ aspect of the case:
Question: EA’s user wrap agreement includes language that informs players that their disputes will be resolved through arbitration (rather than through litigation). Why was this so important to EA (as well as the industry)?
Answer: Arbitrations are confidential and tend to be resolved more quickly and inexpensively than litigation. Arbitrations are also typically conducted on an individual basis. Few claimants in the EA Sports case would be likely to pursue such an arbitration on their own because individual damages are low. Nor would a gaming company want a public spectacle that a high-profile customer dispute my bring.
Q: EA’s user wrap agreement also includes language that gamers waive the right to pursue class actions. Why was this so important to EA (as well as the industry)?
A: As noted above, any individual claimant’s damages are likely to be low and EA can probably settle any claim where the claimant is actually interested in pursuing an individual claim. But in class actions, the plaintiffs’ lawyer drives the ship and purports to speak for all class members collectively. Class actions thus dramatically increase the cost and risk to a consumer-facing company. If the class action waiver provisions are enforceable, EA can avoid the cost and risk involved in high stakes class action litigation. The Supreme Court ruled in Epic Systems Corp. v. Lewis, Nos. 16-285, 16-300, 16-307, 2018 U.S. LEXIS 3086 (May 21, 2018) [25] that such waivers are enforceable in the employment context in 2018 and will likely continue to affirm their enforceability. The issue, in these cases, therefore, is whether the provision is adequately disclosed to the consumer in the terms of service to which they agree when signing up for the game.
Q: Is the mere ‘filing of the suit’ a ‘win’ for the Plaintiffs?
A: Well, here in America, anyone can file a suit. The suit does garner a bit of notoriety and puts EA on the radar of plaintiffs’ lawyers, but I would not go so far as to call it a win. Similar cases have been filed against Apple and Google and likely will be dismissed, albeit on different grounds.
Q: What does this case mean for EA?
A: There are multiple answers to this question. From a game perspective, if EA loses this case, it likely will have to scrap its loot box model. That may lead to increased subscription or other costs if EA looks to recoup that revenue. From a corporate perspective, the enforceability of click through and wrap agreements is critical to companies that operate through the internet. If a company cannot enforce terms of use, it will have no way to protect itself from consumer claims, regardless of their merit.
Q: What should the gaming space be watching for when it comes to class actions and mandatory arbitration language?
A: Class action and arbitration provisions continue to be of vital importance to the industry as it continues its move online. We represent WorldPay in the MDL pending against DraftKings and others; the parties in that case have spent years litigating the enforceability of the terms of use for the fantasy companies. As an industry, we are beginning to reach some consensus on what needs to be done to ensure that a company’s terms are enforceable. Every company in the gaming space should be paying attention to that growing consensus and updating their processes to make certain that their carefully crafted provisions are enforceable.
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[25] Related case: Lamps Plus, Inc. v. Varela, 587 U.S. ___ (2019).
