Case: 1:19-cv-06374 Document #: 45 Filed: 05/21/20 Page 1 of 7 PageID #:341
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`UNITED STATES DISTRICT COURT
`FOR THE NORTHERN DISTRICT OF ILLINOIS
`EASTERN DIVISION
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`ZACHARY VERGARA, individually and on behalf of a
`class of similarly situated individuals,
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`Plaintiff,
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`19 C 6374
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`Judge Gary Feinerman
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`vs.
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`NINTENDO OF AMERICA INC.,
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`Defendant.
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`MEMORANDUM OPINION AND ORDER
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`Zachary Vergara brought this putative class action in the Circuit Court of Cook County,
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`Illinois, against Nintendo of America Inc., alleging various state law torts. Doc. 1-2 at 2-17.
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`After removing the suit under the Class Action Fairness Act, 28 U.S.C. § 1332(d), Doc. 1,
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`Nintendo moved under the Federal Arbitration Act (“FAA”), 9 U.S.C. § 1 et seq., to compel
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`arbitration, Doc. 16. After briefing closed on that motion, Vergara moved for leave to file an
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`amended complaint. Doc. 34. Nintendo’s motion to compel arbitration is granted, with the
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`understanding that Vergara may pursue his claims in this court if the arbitrator finds that they are
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`not arbitrable, and Vergara’s motion for leave to amend is denied without prejudice as moot.
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`Background
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`On a motion to compel arbitration, “the evidence of the non-movant is to be believed and
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`all justifiable inferences are to be drawn in his favor.” Tinder v. Pinkerton Sec., 305 F.3d 728,
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`735 (7th Cir. 2002) (internal quotation marks omitted).
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`On behalf of himself and a putative class, Vergara alleges that he bought Nintendo’s
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`“Switch” videogame console and that the “Joy-Con” controllers included with his purchase are
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`defective. Doc. 1-2 at p. 1, ¶ 1. In conjunction with the purchase, Vergara and Nintendo entered
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`1
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`Case: 1:19-cv-06374 Document #: 45 Filed: 05/21/20 Page 2 of 7 PageID #:342
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`into an End-User License Agreement (“EULA”). Doc. 17 at 7-10, 13-16. Two provisions are
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`pertinent here. Section 7(A) provides: “Any matter we are unable to resolve and all disputes or
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`claims arising out of or relating to this Agreement, including its formation, enforceability,
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`performance, or breach (each, a ‘Claim’), with the exception of the matters described in section
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`7(C) below, shall be finally settled by binding arbitration administered by the American
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`Arbitration Association [(“AAA”)] in accordance with the provisions of its Commercial
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`Arbitration Rules and the supplementary procedures for consumer-related disputes … .” Doc. 18
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`at 7. Section 7(C), in turn, provides in relevant part that “Section 7(A) does not apply to any
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`Claim … that may be brought in small-claims court.” Id. at 8.
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`Section 2 of the FAA states, in relevant part:
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`Discussion
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`A written provision in any … contract evidencing a transaction involving
`commerce to settle by arbitration a controversy thereafter arising out of such
`contract or transaction … shall be valid, irrevocable, and enforceable, save
`upon such grounds as exist at law or in equity for the revocation of any
`contract.
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`9 U.S.C. § 2. Section 2 “mandates enforcement of valid, written arbitration agreements,” Tinder,
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`305 F.3d at 733, and “embodies both a liberal federal policy favoring arbitration and the
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`fundamental principle that arbitration is a matter of contract,” Gore v. Alltel Commc’ns, LLC,
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`666 F.3d 1027, 1032 (7th Cir. 2012) (internal quotation marks omitted). “[B]ecause arbitration
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`is a matter of contract, a party cannot be required to submit to arbitration any dispute which he
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`has not agreed so to submit.” Ibid. (internal quotation marks omitted). “Under the FAA,
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`arbitration should be compelled if three elements are present: (1) an enforceable written
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`agreement to arbitrate, (2) a dispute within the scope of the arbitration agreement, and (3) a
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`refusal to arbitrate.” Scheurer v. Fromm Family Foods LLC, 863 F.3d 748, 752 (7th Cir. 2017).
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`“To give effect to the federal policy favoring private arbitration, the FAA provides for stays of
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`2
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`Case: 1:19-cv-06374 Document #: 45 Filed: 05/21/20 Page 3 of 7 PageID #:343
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`litigation when an issue presented in the case is referable to arbitration.” Tinder, 305 F.3d at 733
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`(citing 9 U.S.C. § 3).
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`Courts “evaluate agreements to arbitrate under the same standards as any other contract,”
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`ibid., which include “all general principles of state law,” Green v. U.S. Cash Advance Ill., LLC,
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`724 F.3d 787, 791 (7th Cir. 2013). See Gore, 666 F.3d at 1032 (“‘[C]ourts must place arbitration
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`agreements on equal footing with other contracts, and enforce them according to their terms.’”)
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`(quoting AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011)). When “determin[ing]
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`whether a contract’s arbitration clause applies to a given dispute, federal courts apply state-law
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`principles of contract formation,” but “[o]nce it is clear … that the parties have a contract that
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`provides for arbitration of some issues between them, any doubt concerning the scope of the
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`arbitration clause is resolved in favor of arbitration as a matter of federal law.” Ibid.
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`Accordingly, “a court may not deny a party’s request to arbitrate an issue unless it may be said
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`with positive assurance that the arbitration clause is not susceptible of an interpretation that
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`covers the asserted dispute.” Ibid. (internal quotation marks omitted). “[J]ust as in summary
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`judgment proceedings, a party cannot avoid compelled arbitration by generally denying the facts
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`upon which the right to arbitration rests; the party must identify specific evidence in the record
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`demonstrating a material factual dispute for trial.” Tinder, 305 F.3d at 735; see also Am. Int’l
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`Specialty Lines Ins. Co. v. Elec. Data Sys. Corp., 347 F.3d 665, 671 (7th Cir. 2003) (“A trial to
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`determine arbitrability is required … only if the issue that an evidentiary hearing would resolve
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`is fairly contestable.”).
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`Vergara does not dispute that Section 7(A) of the EULA is a valid, written arbitration
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`provision. Vergara instead maintains that Section 7(A) does not extend to this suit because his
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`claims fall within the Section 7(C) carve-out for claims that could have been brought in small
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`3
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`Case: 1:19-cv-06374 Document #: 45 Filed: 05/21/20 Page 4 of 7 PageID #:344
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`claims court. Doc. 24. Nintendo responds that it is up to the arbitrator, not the court, to interpret
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`Sections 7(A) and 7(C) and to determine whether Vergara’s claims must be arbitrated. Doc. 17
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`at 16-20; Doc. 25 at 7-9.
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`As a general rule, courts rather than arbitrators decide “[t]he question whether the parties
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`have submitted a particular dispute to arbitration, i.e., the ‘question of arbitrability.’” Howsam v.
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`Dean Witter Reynolds, Inc., 537 U.S. 79, 83 (2002) (quoting AT&T Techs., Inc. v. Commc’ns
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`Workers of Am., 475 U.S. 643, 649 (1986)); see also BG Grp. PLC v. Republic of Argentina, 572
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`U.S. 25, 34 (2014) (“[C]ourts presume that the parties intend courts, not arbitrators, to decide
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`what we have called disputes about ‘arbitrability.’”); Duthie v. Matria Healthcare, Inc., 540 F.3d
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`533, 536 (7th Cir. 2008) (“Whether a particular dispute must be arbitrated is generally a question
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`for judicial determination … .”). An exception to the general rule applies where there is a
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`“clear[] and unmistakabl[e]” agreement between the parties that the arbitrator will resolve
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`disputes about arbitrability. Howsam, 537 U.S. at 83; see also Rent-A-Center, W., Inc. v.
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`Jackson, 561 U.S. 63, 70 (2010) (“An agreement to arbitrate a gateway issue is simply an
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`additional, antecedent agreement the party seeking arbitration asks the federal court to enforce,
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`and the FAA operates on this additional arbitration agreement just as it does on any other.”).
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`Nintendo argues that the EULA’s arbitration clause, by incorporating the AAA’s
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`Commercial Arbitration Rules, expressly delegates to the arbitrator the parties’ disputes
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`concerning the arbitrability of particular claims. Doc. 17 at 17-18. Vergara does not respond to
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`the argument, thereby forfeiting the point. See G & S Holdings LLC v. Cont’l Cas. Co., 697 F.3d
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`534, 538 (7th Cir. 2012) (“We have repeatedly held that a party waives an argument by failing to
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`make it before the district court. That is true whether it is an affirmative argument in support of
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`a motion to dismiss or an argument establishing that dismissal is inappropriate.”) (citations
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`4
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`Case: 1:19-cv-06374 Document #: 45 Filed: 05/21/20 Page 5 of 7 PageID #:345
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`omitted); Alioto v. Town of Lisbon, 651 F.3d 715, 721 (7th Cir. 2011) (“Our system of justice is
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`adversarial, and our judges are busy people. If they are given plausible reasons for dismissing a
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`complaint, they are not going to do the plaintiff’s research and try to discover whether there
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`might be something to say against the defendants’ reasoning.”) (internal quotation marks
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`omitted).
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`Nintendo is correct on the merits in any event. As noted, Section 7(A) of the EULA
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`states that claims within its scope “shall be finally settled by binding arbitration administered by
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`the [AAA] in accordance with the provisions of its Commercial Arbitration Rules and the
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`supplementary procedures for consumer-related disputes.” Doc. 18 at 7. AAA Rule 7(a), in
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`turn, expressly delegates to the arbitrator questions of arbitrability: “The arbitrator shall have the
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`power to rule on his or her own jurisdiction, including any objections with respect to the
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`existence, scope, or validity of the arbitration agreement or to the arbitrability of any claim or
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`counterclaim.” American Arbitration Association, AAA Commercial Rule 7(a),
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`http://www.adr.org/sites/default/files/CommercialRules_Web.pdf (last visited May 20, 2020)
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`(emphasis added).
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`The Seventh Circuit has not decided whether an arbitration agreement’s incorporation of
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`the AAA Rules qualifies as a “clear and unmistakable” agreement to arbitrate arbitrability. The
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`eight circuits to have directly addressed the question, though, all answered that question in the
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`affirmative. See Dish Network L.L.C. v. Ray, 900 F.3d 1240, 1246 (10th Cir. 2018); Brennan v.
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`Opus Bank, 796 F.3d 1125, 1130 (9th Cir. 2015); Petrofac, Inc. v. DynMcDermott Petrol. Ops.
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`Co., 687 F.3d 671, 675 (5th Cir. 2012); Fallo v. High-Tech Inst., 559 F.3d 874, 878 (8th Cir.
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`2009); Awuah v. Coverall N. Am., Inc., 554 F.3d 7, 11-12 (1st Cir. 2009); Qualcomm Inc. v.
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`Nokia Corp., 466 F.3d 1366, 1373 (Fed. Cir. 2006), abrogated on other grounds by Henry
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`5
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`Case: 1:19-cv-06374 Document #: 45 Filed: 05/21/20 Page 6 of 7 PageID #:346
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`Schein, Inc. v. Archer & White Sales, Inc., 139 S. Ct. 524 (2019); Terminix Int’l Co. v. Palmer
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`Ranch Ltd. P’ship, 432 F.3d 1327, 1332 (11th Cir. 2005); Contec Corp. v. Remote Sol. Co., 398
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`F.3d 205, 211 (2d Cir. 2005). This court agrees with the consensus. See Allscripts Healthcare,
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`LLC v. Etransmedia Tech., Inc., 188 F. Supp. 3d 696, 701-02 (N.D. Ill. 2016). Accordingly, by
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`entering into an arbitration agreement that incorporates the AAA Rules, the parties delegated to
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`the arbitrator the question whether Vergara’s claims must be arbitrated.
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`Vergara correctly observes that a party cannot be required to arbitrate a dispute that he
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`has not agreed to submit to arbitration. Doc. 24 at 3 (citing AT&T Techs., 475 U.S. at 648). That
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`principle, however, does not mandate that the court, rather than the arbitrator, decide whether his
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`claims must be arbitrated. Vergara’s observation elides the distinction between two separate
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`questions: (1) whether the EULA’s arbitration provision covers his claims; and (2) whether that
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`arbitrability question must be decided by the court or the arbitrator. The answer to the second
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`question is that the arbitrator decides—that is, Vergara agreed to arbitrate the scope of the
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`arbitration provision—which means that it is up to the arbitrator to answer the first question. See
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`Local 744, Int’l Bhd. of Teamsters v. Hinckley & Schmitt, Inc., 76 F.3d 162, 165 (7th Cir. 1996)
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`(“We do not mean to say that situations do not exist where it is proper for an arbitrator, and not a
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`court, to decide whether a dispute is arbitrable. The Supreme Court has expressly recognized
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`that parties may agree to ‘arbitrate the arbitrability issue.’”) (quoting AT&T Techs., 475 U.S. at
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`648).
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`Conclusion
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`Nintendo’s motion to compel arbitration is granted. The parties must submit Vergara’s
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`claims to arbitration administered by the AAA. This suit is stayed pending resolution of the
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`arbitration. If the arbitrator decides that Vergara’s claims are not arbitrable, the court will reopen
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`6
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`Case: 1:19-cv-06374 Document #: 45 Filed: 05/21/20 Page 7 of 7 PageID #:347
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`these judicial proceedings on Vergara’s motion. Because the amendments Vergara proposes to
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`make to his complaint would not alter this result, his motion for leave to file an amended
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`complaint is denied without prejudice as moot.
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`May 21, 2020
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`___________________________________
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`United States District Judge
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`7
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