Today’s post, just by chance, pairs nicely with yesterday’s post. Both address an anomaly at the heart of arbitration law. To her credit, Justice Sotomayor acknowledged the anomaly in the case we posted about yesterday. Today’s decision seems not to recognize the anomaly.

The facts of this case are just sad. The plaintiff, Rochelle Tomlin, is the mother of a child, M.B., who has been playing video games since he was four. He is now twelve, and Ms. Tomlin alleges that he has become addicted to playing Fortnite and Roblox, both on his Xbox. As a result, she alleges, M.B. needs specialized accommodations and an individualized educational plan in order to stay at grade level. Ms. Tomlin brought suit against the three companies she holds responsible for her son’s addiction, Roblox Corporation (Roblox), Epic Games, Inc. (Epic) and Microsoft Corporation (Microsoft), alleging strict product liability based on Defendants’ unreasonably dangerous products and their failure to warn of the dangers of video game addiction, negligence, intentional and negligent misrepresentation, and fraud.”

That seems straightforward enough, but in our world, there are always clickwrap agreements involved, and most of the time, those clickwrap agreements involve arbitration provisions. And so, when M.B. created two accounts with Epic to play Fortnite, he agreed to an End User License Agreement (EULA). The EULA calls for arbitration under the Federal Arbitration Act (FAA). In order to pay Roblox, M.B. had to agree to Roblox Terms of Use (RToU), which also provides for arbitration governed by the FAA. He did so through plaintiff, his “responsible adult.” You also need a Microsoft account to play both games. M.B. had one, and in order to create the account, he had to sign on to the Microsoft Service Agreement (MSA), which also contains an arbitration provision governed by the FAA. The EULA, RToU, and MSA were all updated periodically, and whenever they were, notice was sent to M.B. who appears to have agreed to the updates by continuing to use the device and the games. In Tomlin v. Roblox Corporation, the District Court for the Eastern District of Pennsylvania ruled on defendants’ motions to compel arbitration.

In response, Ms. Tomlin doesn’t have much. She claims not to know whether M.B. was actually the one who agreed to Epic’s EULA, but all indications are that it was M.B., and the Court noted that “metaphysical doubts” are not enough to create a material dispute of fact. With respect to Roblox, Ms. Tomlin also raises such metaphysical doubts, but things are more complicated because Ms. Tomlin, rather than M.B. agreed to the RToU. Still, he is bound as a third-party beneficiary, but there remains a question of whether Pennsylvania law permits parents to bind their minor children to arbitration clauses. That’s where the case gets interesting (see below).

Ms. Tomlin next claims that the EULA and RToU cannot be enforced against M.B., either because he disaffirmed them, because he, as a minor, cannot be bound, or because the agreements are unconscionable. All such arguments for why the arbitration provisions cannot be enforced are delegated to the arbiter in both agreements.

Ms. Tomlin’s arguments with respect to Microsoft and the MSA fare no better. She cannot persuade the court that she and M.B. did not both agree to the MSA, and M.B. did not effectively disaffirm the MSA, as he continued to use his Xbox. Any unconscionability argument as to the MSA was waived.

At this point, we return to the anomaly at the heart of federal arbitration law, which we touched on briefly in yesterdays’ post. In Santiago v. Philly Trampoline Park, LLC, which we discussed here, the Pennsylvania Supreme Court held that parents cannot bind their minor children to arbitration agreements. The Tomlin Court notes that Santiago conflicts with Supreme Court precedent and the FAA. It characterizes arbitration agreements as waiving a minor’s substantive rights. Not so, says the Court, as the arbitration agreement does “not alter or abridge substantive rights” but “merely changes how those rights will be processed.” There is no change to substantive rights; they are merely to be decided in a different forum. Moreover, Santiago treats arbitration agreements differently from other contracts, violating the principle of equal treatment at the heart of the FAA. Accordingly, the Court refused to follow Santiago, stayed the proceedings, and granted the defendants motions to compel arbitration.

Okay, just yesterday, we noted that in the post-Erie world, SCOTUS has interpreted the FAA to be substantive, not procedural. In so doing, it emphasized the substantive effects of mandatory arbitration:

For the remedy by arbitration, whatever its merits or shortcomings, substantially affects the cause of action created by the State. The nature of the tribunal where suits are tried is an important part of the parcel of rights behind a cause of action. The change from a court of law to an arbitration panel may make a radical difference in ultimate result. Arbitration carries no right to trial by jury that is guaranteed both by the Seventh Amendment . . . . Arbitrators do not have the benefit of judicial instruction on the law; they need not give their reasons for their results; the record of their proceedings is not as complete as it is in a court trial; and judicial review of an award is more limited than judicial review of a trial. . . .

Bernhardt v. Polygraphic Co. of America, 350 U.S. 198, 204 (1956)

All of this is very true. In fact, if there were no substantive difference between arbitration and litigation, one wonders why courts should give preemptive effect to the FAA over the Pennsylvania’s Supreme Court’s understanding of Pennsylvania law? If the FAA were merely a procedural statute, under what authority would Congress have passed a statute that controlled the proceedings not only in federal courts but in state courts? I don’t think the District Court reached the wrong conclusion. It followed clear law and had three handy SCOTUS decisions (Kindred Nursing Ctrs. Ltd. P’ship v. Clark, Marmet Health Care Ctr., Inc. v. Brown, and AT & T Mobility LLC v. Concepcion) to rely on in doing so. I just think that law is incoherent because SCOTUS arbitrarily treats the FAA as substantive law for some purposes and as procedural law for others, always to the benefit of the enforcement of arbitration agreements, which is not actually consistent with the equal treatment rule that is supposed to govern federal arbitration law.