Antitrust Law Daily Wrap Up, ANTITRUST—S.D.N.Y.: NFL Licensed Product online shoppers must arbitrate, (Jul 19, 2023)

By Justin Marcus Smith, J.D.

The consumers contested the conspicuousness of online disclosures, but they failed to convince the court that the online Terms of Use did not charge them with notice of arbitration, including with nonsignatories.

Consumers asserting Sherman Act violations in connection with their online purchases of NFL Licensed Products agreed to arbitration of “any and all disputes” as they completed their purchases, held the federal district court in New York City. The court described exactly how the NFL merchandise websites conspicuously displayed the point-of-sale Terms of Use (TOU), whether on a desktop PC or mobile screen. Various courts had already rejected the assertion that pop-up virtual keyboards create notice problems on mobile devices. The arbitration agreement included in the TOU applied to affiliates. Even if it did not, the relevant nonsignatories could compel mandatory arbitration by equitable estoppel. The court held the TOU further delegated questions of arbitrability to an arbitrator, not the court, under the explicitly incorporated American Arbitration Association (AAA) rules. The court granted the defendants’ motion to compel arbitration accordingly (Maldonado v. National Football League, July 18, 2023, Carter, A.).

A group of consumers filed a putative nationwide class action alleging Fanatics, Inc.; the National Football League; NFL Properties; NFL Enterprises; and each of the 32 NFL teams (collectively, NFL defendants), caused injuries and violated the Sherman Act in connection with the consumers’ online purchases of NFL licensed merchandise. The consumers alleged they paid overly high prices for the merchandise due to an alleged conspiracy by the NFL defendants to “dominate the retail market for online sales of NFL Licensed Products.” The NFL defendants moved to compel arbitration on the ground that the consumers agreed to the Fanatics and NFLShop terms of use (TOU) and its arbitration provision when the consumers created their accounts or completed purchases on the shopping websites.

The complaint was broadly similar to Santos v. National Football League, Inc., filed in February 2022, claiming Sherman Act violations about logo licensing in connection with online sales of NFL Licensed Products.

The consumers opposed the motion to compel arbitration. The consumers said they were not on notice of the TOU; therefore, it did not bind them. The consumers argued further, that, even if they agreed to arbitrate, certain defendants could not enforce the agreement because it did not name them and did not cover them under more general language. The defendants replied countering that notice of the agreement was reasonably conspicuous and the consumers agreed to it.

The court granted the defendants’ motion to compel arbitration. The court found the consumers agreed to arbitrate; the agreement covered all of the defendants; and, it was for the arbitrator to decide arbitrability, i.e., whether the agreement covered the consumers’ claims.

The court reasoned that the defendants’ TOU complied with “multiple factors” in satisfaction of the Second Circuit “reasonably conspicuous” standard charging the consumers with notice of the TOU. The court disagreed with the consumers’ contention that the appearance and placement of the TOU, on a desktop computer screen, were insufficient to put them on notice of it as required in a “clear and conspicuous manner.” They urged that the desktop hyperlinks were smaller and in lower contrast to the shipping and payment fields, the “Place Order” button, and logos.

The court found, to the contrary, that the defendants placed the TOU disclaimer on an uncluttered screen. The defendants also underlined the hyperlink to the TOU in a way that contrasted with the background. The hyperlink appeared right below the “Create and Account” and “Complete Order” assent buttons. The circumstances further informed the consumers that “[b]y placing an order” or “[b]y signing up” they were agreeing to the TOU. The court found further that the consumers had the opportunity to read the entire terms by clicking on the corresponding hyperlink. Last, they could not have completed their purchases without agreeing. The court concluded, accordingly, that each consumer accepted the contract terms and entered into the agreement with the defendants.

As to mobile device display, the consumers claimed the popup virtual keyboard on mobile devices obscured the hyperlinks to the TOU. Here, the court reached essentially the same detailed findings about the conspicuous appearance of the TOU hyperlink as it had with desktop display. The court, citing to Meyer v. Kalanick, 291 F. Supp. 3d 526, 534 (S.D.N.Y. 2018), added that “courts have rejected the argument that the popup virtual keyboard obscures the TOU.”

Nonsignatories. The court held that the TOU arbitration terms applied to “affiliated defendants” even if not explicitly identified by name. The court found the NFLShop and Fanatics arbitration agreements stated that all disputes “shall” be subject to arbitration. The court read the word “we” as including the entities “affiliated” with the Fanatic entities as “Partner Entities.” The term “Partner Entities,” in turn, included “NFL Properties LLC and/or its affiliated entities.”

The consumers cited to Section 203(c)(1) of the Delaware Corporate Code to argue that the 32 NFL teams were not “affiliates” of NFLP because the teams do not exert control over NFLP. The court disagreed because courts construe the word “affiliate” by its “plain meaning.” Black’s Law Dictionary, for example, defines “affiliate” as a corporation that has some relationship with another through shareholding or other control. The court concluded that the 32 NFL teams were associated with NFLP and thus “affiliates” under the NFLShop TOU, while Fanatics and the NFL defendants were direct parties to the NFLShop arbitration agreement. In response to the ownership or control question the consumers raised, the court found the defendants agreed that the NFL and Fanatics were affiliated because the NFL partially owns Fanatics. Moreover, the court said the consumers alleged am intellectual property licensing “partnership” between Fanatics and NFLP. The court concluded here that the Fanatics arbitration agreement covered each of the NFL defendants.

The court continued, even if it had found the agreement did not cover each defendant, “affiliated” defendants could still compel arbitration by equitable estoppel. The court explained, quoting case law, that the equitable estoppel doctrine allows nonsignatories to a written arbitration agreement to compel arbitration where a signatory “must” rely on that agreement to assert claims against the nonsignatories. The court held that was so under the controlling Delaware law where, as here, signatories and nonsignatories allegedly engage in “coordinated behavior” on the same facts. The affiliated defendants in this matter could compel arbitration because the consumers brought identical antitrust claims against them.

Arbitrator delegation. The court held that incorporation of the AAA rules required an arbitrator, not the court, to decide disputes over whether the consumers’ claims were arbitrable. The consumers countered that the agreement called for arbitration of disputes arising out of use of the websites and it did not cover the TOU agreements themselves. The court rejected that argument on the basis that both TOUs were part of the websites and properties; therefore, disputes about the TOU were subject to arbitration. Furthermore, the arbitration agreements sought to encompass “any and all disputes” related to the agreements. That made the arbitration terms sufficiently broad. The terms also specifically incorporated AAA procedures.

The Case is No. 1:22-cv-02289-ALC.

Attorneys: Adam E. Polk (Girard Sharp LLP) for Saul Maldonado. Bradley I. Ruskin (Proskauer Rose LLP) for National Football League, Inc.

Companies: National Football League, Inc.

Cases: Antitrust NewYorkNews