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CLASS ACTION
DRAFTKINGS, INC.
Defendant.
______________________/
Table of Contents
Page
I.
II.
Argument ......................................................................................................................2
A.
B.
2.
3.
4.
b)
c)
d)
2.
3.
4.
III.
Conclusion ..................................................................................................................20
IV.
II.
Argument
Absent a valid delegation to an arbitrator, the federal district courts are tasked with
determining (A) whether parties agreed to arbitrate and (B) if so, whether the agreement is
enforceable. Granite Rock Co. v. Intl Bhd. Of Teamsters, 561 U.S. 287, 299 (2010). As the
Terms of Use does not contain a delegation clause, these issues are properly before the Court.
A.
DraftKings spends nearly its entire motion attempting to fortify the arbitration clause
against arguments of unconscionability. The court need not consider this issue to deny
Defendants motion, as the parties never reached an arbitration agreement.
1.
DraftKings notes that the Federal Arbitration Act (FAA) embodies a strong public
policy in favor of arbitration. This presumption, however, is applicable only in determining
whether and how to enforce an arbitration provision to which parties have agreednot in
determining the threshold matter whether an agreement to arbitrate exists. The courts uniformly
hold that while doubts concerning the scope of an arbitration clause should be resolved in favor
1
In stark contrast, of course, with the portion of the agreement mandating that Mr. Aguirre file suit in court, not
arbitrate.
Since, as argued below, there was no meeting of the minds regarding the entire Terms of Use, the Massachusetts
choice-of-law clause was never agreed to. See Note 5, infra. Regardless, given the similarities in Florida and
Massachusetts law, it does not matter which states contract-formation principles govern; the same result would lie.
The Terms of Use Inconsistently Call for (1) Litigation and (2)
Arbitration of Mr. Aguirres Claim
Plaintiff makes note of the venue clause not because it is binding, but because it is completely inconsistent with
arbitration in that it requires the use of a court for dispute resolution. As elaborated upon extensively elsewhere in
this response, because the two dispute-resolution provisionsof which this venue clause is partare irreconcilable,
both are void. Accordingly, Mr. Aguirre filed suit in the Southern District, where venue is proper in lieu of a valid
contractual provision.
A basic tenet of contract law [is] that in order for a promise to be enforceable against the
promisor, the promisee must have given some consideration for the promise. Gibson v.
Neighborhood Health Clinics, Inc., 121 F.3d 1126, 1130 (7th Cir. 1997). Where a promisor
may perform or not, solely on the condition of his whim, his promise will not serve as
consideration. Johnson Enterprises of Jacksonville, Inc. v. FPL Group, Inc., 162 F.3d 1290,
1311 (11th Cir. 1998) (citations omitted). Most pertinent here, [w]here a promisor retains an
unlimited right to decide later the nature or extent of his performance, the promise is too
indefinite for legal enforcement. The unlimited choice in effect destroys the promise and makes
it merely illusory, and the contract fails for lack of consideration. Floss v. Ryan's Steak Houses,
211 F.3d 306, 316 (6th Cir. 2000) (citation omitted).
These axioms apply to arbitration clauses. An arbitration agreement allowing one party
the unfettered right to alter the arbitration agreements existence or its scope is illusory and thus
unenforceable. Dumais v. Am. Golf Corp., 299 F.3d 1216, 1219 (10th Cir. 2002). Here, the
arbitration clause was part of the Terms of Use, which DraftKings could amend any time,
7
DraftKings cites to the choice-of-law provision in the Terms of Use to allege that the document should be
construed pursuant to the substantive law of Massachusetts. Because the entire contract is illusory, there is no
contract and thus no choice-of-law provision. In absence of an agreement, Florida substantive law should be used to
construe the contract. See Grupo Televisa, S.A. v. Telemundo Communications Group, Inc., 485 F.3d 1233, 124041 (11th Cir. 2007). If, arguendo, this Court finds the Terms of Use enforceable generally, Massachusetts law
would, by contract, be used to determine whether the arbitration and litigation clauses conflict, as alleged in Section
II.A.3, supra, of this response, and whether the arbitration clause is unconscionable, as alleged in Section II.B.,
infra. The same resultdenial of forced arbitrationwould result whether Florida or Massachusetts principles
applied, as the laws are substantially similar.
The termination clause above is part of the Termination and Effect of Termination
section of the Terms of Use, which more fully provides:
In addition to any other legal or equitable remedy, DraftKings may, without prior
notice, immediately revoke any or all of your rights granted hereunder. In such
event, you will immediately cease all access to and use of the DraftKings
Website. DraftKings may revoke any password(s) and/or account identification
issued to you and deny you access to and use of the Website. Any such action
shall not affect any rights and obligations arising prior thereto. All provisions of
the Terms of Use which by their nature should survive termination shall survive
termination, including, without limitation, ownership provisions, warranty
disclaimers, indemnity and limitations of liability.
TOU at 5. The notification that revocation of rights shall not affect any rights and
obligations arising prior, TOU at 5 (the arising-prior clause), does not save this illusory
contract because DraftKings is not bound by the provision. Nor is it bound by the survival
clauses, which allege that the provisions of the Terms of Use which by their nature should
survive termination shall survive termination, TOU at 5, and that the arbitration provision shall
survive termination of this agreement. TOU at 8.
DraftKings omnipotent amendment clause assures those provisions do not bind the
company by reserving for DraftKings the right to amend these Terms of Use at any time and
without notice TOU at 9. Wielding this power, DraftKings can obliterate any customers
rights at any time, without notice, in two steps: (1) utilize the amendment clause to remove the
arising-prior and survival clauses so that the consumers rights can no longer be grandfathered
11
at
5-6.
Elsewhere,
DraftKings
provides
that
it
is
not
responsible
foranyinability to access the Website, or web pages that are part of or related to the
Website[or] typographicalor other errors. TOU at 3.
The Terms of Use are part of the website and certainly qualify as site content. In
disclaiming the accuracy of any content appearing on the site, DraftKings necessarily disclaims
the accuracy of the Terms of Use, telling customers it is not to be relied upon.6 By design, then,
DraftKings shields itself from consumers wishing to pursue their rights thereunder. This creation
of a self-serving escape hatch deprives the contract of consideration. See Hirschi v. Newcastle
Properties, Inc., 2006 WL 2927493, at *1 (D. Colo. 2006) (putative arbitration agreement
deemed unenforceable and illusory where companys handbook containing arbitration clause
This is sound advice, as the Terms of Use is riddled with verifiably false statements. The document proclaims, for
example, that [n]o professional or amateur sports league or any team associated with any professional or amateur
sports league is associated with DraftKings or in any way affiliated or associated with the Contests. TOU at 9. In
fact, DraftKings isto give merely a partial listthe official fantasy sports website of Major League Baseball and
the National Hockey League and has signed exclusive deals with the New England Patriots and Denver Broncos.
12
DraftKings promises to submit to an arbitral process whereby its customers can obtain all
legal and equitable relief available in the courts of the Commonwealth of Massachusetts. TOU
at 8. But it then tells the consumer:
UNDER NO CIRCUMSTANCES SHALL THE COMPANYBE LIABLE TO
YOU FOR DAMAGES OF ANY KIND (INCLUDING, WITHOUT
LIMITATION, FOR ANY SPECIAL, DIRECT, INDIRECT, INCIDENTAL,
EXEMPLARY,
ECONOMIC,
PUNITIVE,
OR
CONSEQUENTIAL
DAMAGES) THAT ARE DIRECTLY OR INDIRECTLY RELATED TO (1) THE
WEBSITE, THE CONTENT(2) THE USE OF, INABILITY TO USE, OR
PERFORMANCE OF THE WEBSITE[OR] (5) ANY ERRORS OR
OMISSIONS IN THE WEBSITES TECHNICAL OPERATION, EVEN IF
FORESEEABLE OR EVEN IF THE COMPANYHAS BEEN ADVISED OF
THE POSSIBILITY OF SUCH DAMAGES WHETHER IN AN ACTION OF
CONTRACT, NEGLIGENCE, STRICT LIABILITY [, OR] TORT[AND] IN
NO EVENT WILL THE COMPANY ENTITIES AND INDIVIDUALS BE
LIABLE TO YOU OR ANYONE ELSE FOR LOSS OR INJURYBY
ACCESSING THE WEBSITE, YOU UNDERSTAND THAT YOU MAY BE
WAIVING RIGHTS WITH RESPECT TO CLAIMS THAT ARE AT THIS
TIME UNKNOWN OR UNSUSPECTED. ACCORDINGLY, YOU AGREE TO
WAIVE THE BENEFIT OF ANY LAWTHAT OTHERWISE MIGHT LIMIT
YOUR WAIVER OF SUCH CLAIMS.
TOU at 6 (emphasis added). In other words, DraftKings submits to arbitration, but
UNDER NO CIRCUMSTANCES SHALL THE COMPANYBE LIABLE TO YOU FOR
DAMAGES OF ANY KIND that are awarded in that arbitration. TOU at 6. A promise could
not be more illusory. See Johnson Enterprises of Jacksonville, Inc. v. FPL Group, Inc., 162 F.3d
13
Because the parties never agreed to arbitrate, this Courts inquiry should end here.
However, assuming that Mr. Aguirre agreed to arbitrate, the agreement cannot be enforced
because it epitomizes unconscionability. Lying amid a nine-page, nearly 6,000-word document
consisting of single-spaced, size-9 font, the adhesive, form arbitration agreement cobbles
together nearly every draconian contract provision existent in American and English law,
notwithstanding that many of these terms contradict others in the same document. It strips the
consumer of all reasonable, legal remedies while illegally insulating DraftKings from all
liability. The provision so shocks the conscience that it cannot be enforced.
1.
In Florida, an arbitration agreement cannot validly waive ones right to punitive damages
for fraud. Before Basulto v. Hialeah Automotive reached the Florida Supreme Court, the Third
District Court of Appeal considered this precise issue. 22 So. 3d 586, 590 (Fla. 3d DCA 2009),
14
DraftKings arbitration clause reserves for itself the right to all legal and equitable relief
available in the courts of the Commonwealth of Massachusetts, TOU at 8, including,
necessarily, an injunction. But the corporation tells consumers, IN THE EVENT YOU INCUR
ANY DAMAGES, LOSSES, OR INJURIES THAT ARISE OUT OF THE COMPANYS ACTS
OR OMISSIONS, THE DAMAGES, IF ANY, CAUSED TO YOU ARE NOT IRREPARABLE
OR SUFFICIENT TO ENTITLE YOU TO AN INJUNCTION PREVENTING ANY
EXPLOITATION OF ANY WEBSITE OR OTHER PROPERTY OWNED OR CONTROLLED
BY THE COMPANY TOU at 6 (emphasis added). Aside from affording DraftKings the
power to defraud broad swaths of Floridians with impunity, the clause would abrogate the
injunctive relief that the Florida Deceptive and Unfair Trade Practices Act (FDUTPA)
explicitly allows. Fla. Stat. 501.211(1). Such is repugnant to Florida law. See Powertel, Inc. v.
15
An unconscionable contract is [a]n agreement that no promisor with any sense, and
not under a delusion, would make, and that no honest and fair promisee would accept. Hollins v.
Debt Relief of Am., 479 F. Supp. 2d 1099, 1106 (D. Neb. 2007) (citing Black's Law Dictionary,
p. 75 (8th ed. 2004)). To establish unconscionability, a plaintiff must demonstrate both
procedural unconscionabilitya lack of meaningful choice about whether to accept the
provision in questionand substantive unconscionability, wherein the disputed provisions
[are] so one-sided as to be oppressive. Skirchak v. Dynamics Research Corp., Inc., 432
F.Supp.2d 175, 179 (D. Mass. 2006).
Here, the issue of procedural unconscionability can be dispatched with ease. Procedural
unconscionability generally takes the form of an adhesion contract, which, imposed and drafted
by the party of superior bargaining strength, relegates to the subscribing party only the
opportunity to adhere to the contract or reject it. Heflebower v. JPMorgan Chase Bank, NA,
2013 WL 5476806, at *12 (E.D. Cal. 2013) (citations omitted). The arbitration clause was
written by DraftKings and, as indicated in the explanation in Defendants own motion of how
DraftKings users register, Mr. Aguirre had no bargaining power and only the opportunity to
adhere to the contract or reject it. Id.
16
The Terms of Use do provide that customers can litigate in small-claims court in Suffolk County, Massachusetts,
TOU at 8, but this is of no practical value to Florida consumers. Assuming the small-claims court would award costs
and fees, the total of any judgment, including costs and fees, still could, per the Terms of Use, not exceed $100 (or
$0, see infra). To even step foot in a Boston small-claims court, Mr. Aguirre would have to purchase a round-trip
flight from Miami to Boston and a hotel room, which would probably exceed $500 total. If he won, Mr. Aguirre
17
would be awarded his $25 back, plus costs and fees. However, because [i]n no event shall [DraftKings and its
officers] total liability to [the consumer] for all damages, losses, or causes of action exceed one hundred dollars
($100), the costs and fees would be capped at $75, making the total recovery $100. Even assuming Mr. Aguirre
proceeded pro se and had no attorneys fees, he would, by winning, actually lose $400. Accordingly, it makes no
economic sense for him to attempt to recoup the $25 out of which DraftKings defrauded him in small-claims court.
This is exactly what the corporation wants, and exactly why its scheme is unconscionable.
18
If illegality pervades the arbitration agreement such that only a disintegrated fragment
would remain after hacking away the unenforceable parts, the judicial effort begins to look more
like rewriting the contract than fulfilling the intent of the parties. Booker v. Robert Half Intern.,
Inc., 413 F.3d 77, 84-85 (D.C. Cir. 2005). The more a party overreaches, the less likely a court
will be able to sever the provisions and enforce the clause. Id. at 85. Given the infirmities in the
arbitration agreement, which permeate nearly every one of the nine Terms of Use pages,
severance would essentially place this Court in the position of re-drafting from scratch.
Among other fatal shortcomings, the arbitration agreement: (1) is devoid of consideration
from DraftKings, which expressly provides it is not bound, TOU at 3, 6, 9; (2) hopelessly
conflicts with a litigation clause in the same contract, TOU at 8; (3) precludes Mr. Aguirre
from filing suit in a court of general jurisdiction, while explicitly affording DraftKings that right,
TOU at 2, 3; (4) preserves DraftKings right to obtain injunctive relief, while usurping
Plaintiffs, TOU at 6, 8; (5) waives consumers right to punitive damages in violation of Florida
law, TOU at 8; and (6) limits Mr. Aguirres recovery to, depending on the clause, either $100 or
$0, while allowing DraftKings to recover ad infinitum, TOU at 2, 6. These provisions go to the
heart of the contract and, if removed, would render the document an empty shell. The entire
arbitration agreement should be declared void and defendants motion denied.
19
Conclusion
As demonstrated above, the parties never agreed to the Terms of Use, and thus never
agreed to arbitrate. The Courts inquiry can end there. However, assuming the parties did agree,
that agreement cannot be enforced because it is unconscionable. Accordingly, Plaintiff
respectfully requests that this court deny Defendants attempt to compel arbitration, deny
Defendants attempt to dismiss this class action, and deny Defendants attempt to obtain
attorneys fees from Mr. Aguirre.
IV.
Plaintiff, pursuant to Local Rule 7.1(b), respectfully requests that this Court hold a
hearing on DraftKings motion. Plaintiff submits that entertaining oral argument would help the
court obtain clarity on any issue that, due to page limits and the complexity of the issues, could
not be exhaustively briefed. Plaintiff anticipates that a 30-minute hearing would suffice. Plaintiff
has, pursuant to Local Rule 7.1(a)(3), conferred with Defendant and confirmed that Defendant is
not opposed to a hearing on this matter.
20
Respectfully submitted,
MASE LARA, P.A.
Attorneys for Plaintiff
2601 South Bayshore Drive, Suite 800
Miami, Florida 33133
Telephone: (305) 377-3770
Facsimile: (305) 377-0080
By:
21
CERTIFICATE OF SERVICE
I hereby certify that on June 19, 2015, I served the foregoing document with the Clerk to
the Court using CM/ECF. I also certify that the foregoing document is being served this day on
all counsel of record identified on the attached Service List via transmission of Notices of
Electronic Filing generated by CM/ECF.
/s/ Mason Kerns
MASON KERNS
22
SERVICE LIST
JORGE A. MESTRE, ESQUIRE
KADIAN BLANSON, ESQUIRE
CHARLIE WHARTON, ESQUIRE
RIVERO MESTRE, LLP
Attorneys for DraftKings, Inc.
2525 Ponce de Leon Boulevard, Suite 1000
Miami, Florida 33134
Telephone: (305) 445-2500
Fax: (305) 445-2505
jmestre@riveromestre.com
kblanson@riveromestre.com
cwhorton@riveromestre.com
npuentes@riveromestre.com
evonderosten@riveromestre.com
receptionist@riveromestre.com
TIMOTHY W. LOOSE, ESQUIRE
JAMES P. FOGELMAN, ESQUIRE
AUSTIN SCHWING, ESQUIRE
GIBSON, DUNN & CRUTCHER, LLP
Of Counsel for DraftKings, Inc.
333 South Grand Avenue, Suite 5400
Los Angeles, California, 90071
Telephone: (213) 229-7000
Fax: (213) 229-6234
tloose@gibsondunn.com
jfogelman@gibsondunn.com
aschwing@gibsondunn.com
18776//42v3
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