Arbitration/Unconscionability/CA Law

August 24, 2016

Tompkins v. 23andMe, Inc.
 

 The panel affirmed the district court’s order enforcing the terms of a Terms of Service agreement, and granting 23andMe, Inc.’s motion to compel arbitration.

 

Plaintiffs are a class of 23andMe customers who purchased a DNA test kit and assented to an online Terms of Service, and they challenged the 23andMe arbitration provision under the California doctrine of unconscionability.

 

The panel held that none of the challenged portions of the arbitration provision, alone or in concert, rendered the arbitration provision unconscionable under current California law.

 

The panel rejected the plaintiffs’ challenges to the arbitration provision. First, concerning the arbitration provision’s prevailing party clause, which provided that the arbitration costs would be borne by the losing party, the panel held that the plaintiffs did not carry their burden of demonstrating unconscionability of the clause where: the bilateral attorneys’ fee shifting clause in the Terms of Service was not unconscionable under California law; and the arbitration fee-shifting provision was not unconscionable under the case-specific standard announced in Sanchez v. Valencia Holding Co., LLC, 61 Cal. 4th 899, 911 (2015). Second, concerning the arbitration provisions’ forum selection clause, which stated that arbitration proceedings would be held in San Francisco, California, the panel held that the plaintiffs had not met their burden of proving that the clause was unreasonable. Third, concerning the clause excluding intellectual property claims from mandatory arbitration, the panel held that plaintiffs had not carried their burden of demonstrating that the exemption was unconscionable under current California law. The panel concluded that the arbitration agreement was valid and enforceable under the Federal Arbitration Act, 9 U.S.C. § 2.

 

The panel also rejected plaintiffs’ challenges to provisions in the Terms of Service not contained within the arbitration clause itself. First, the panel held that the agreement’s one-year statute of limitations did not make the arbitration provision itself unconscionable under California law where California courts afford parties considerable freedom to modify the length of a statute of limitations, and the statute of limitations in the Terms of Service was not unfairly one-sided. Second, the panel held that a provision giving 23andMe a unilateral right to modify the agreement did not make the arbitration provision itself unconscionable. Judge Watford concurred in the judgment. He agreed with the majority that the arbitration provision was valid and enforceable, albeit for different reasons.

 

http://cdn.ca9.uscourts.gov/datastore/opinions/2016/08/23/14-16405.pdf

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