Grimmett v. DMM Solutions, Inc.

Background

DMM Solutions, Inc. operates dating websites, including Dating.com, which Michelle Grimmett used. According to Grimmett’s complaint, users generally had to purchase credits to send messages, receive images, participate in video chats, and use other site functions. She alleged that DMM created or used false “Popular Member” profiles to obtain money from users. She brought claims under the Racketeer Influenced and Corrupt Organizations Act, state false-advertising laws, and a common-law unjust-enrichment theory, on behalf of herself and a proposed class.

DMM moved to compel arbitration based on an arbitration agreement in its contract with Grimmett. The Court had permitted the parties to take discovery targeted to the issues raised by that motion. Grimmett served requests seeking information about herself, the fake profile with which she interacted, contracts and policies involving people operating such profiles, complaints and government investigations about the alleged conduct, and a deposition of DMM’s chief executive officer. The parties asked the Court to clarify whether this type of discovery fell within the earlier order; they did not ask the Court to rule on the propriety of each specific request.

Legal standard

Under the Federal Arbitration Act, a court may decide a challenge directed specifically at whether the arbitration agreement was made or is enforceable. A challenge to the contract as a whole, however, generally does not prevent enforcement of the arbitration clause; that type of challenge is ordinarily for the arbitrator. Fraudulent inducement matters at this stage only if the alleged fraud specifically affected the arbitration agreement, rather than the contract generally.

The Court also distinguished challenges to the existence of a contract. That principle may permit discovery when the very existence of a contract is in doubt, but Grimmett challenged the contract’s enforceability and did not claim that no contract existed. The Court further explained that detailed allegations do not make discovery relevant when the legal theory concerns only the contract as a whole.

Ruling

Judge Valerie Caproni rejected Grimmett’s argument that the targeted-discovery order allowed discovery into her theory that the entire contract was fraudulently induced. The Court held that the theory that DMM was an all-encompassing fraudulent enterprise would not allow Grimmett to avoid arbitration, even if proven. Discovery related to fraudulent inducement must instead be reasonably calculated to uncover information likely to show that the arbitration clause specifically, rather than the contract generally, resulted from fraud.

The opinion clarified the scope of the discovery order; it did not state that the Court granted or denied DMM’s underlying motion to compel arbitration.