In re Google Digital Advertising Antitrust Litigation

Background

Google LLC and Alphabet Inc. moved to compel arbitration of the claims brought by Cliffy Care Landscaping LLC and Michael Stellman and to stay those claims while arbitration proceeds. Google relied on arbitration provisions in its Advertising Terms of Service. The parties agreed that California law governed whether they entered into arbitration agreements.

Google’s terms required advertisers to accept them before using Google’s advertising products. Google added an arbitration provision in September 2017. The terms prominently stated that disputes would be resolved through binding individual arbitration rather than jury trials or class actions, and that advertisers could opt out within 30 days. The terms provided a webform for opting out.

Google’s records showed that Stellman accepted the terms on September 14, 2017, and that Cliffy Care accepted the terms on November 20, 2019. The records also showed that neither opted out. The court noted that, unlike Google’s earlier motion at the pleading stage, the renewed motion included records of the plaintiffs’ acceptance. Fact discovery had closed, and the plaintiffs submitted no evidence of their own in opposition.

The arbitration agreements

Under the Federal Arbitration Act, an arbitration agreement is generally enforceable unless a generally applicable contract defense makes it invalid. The party seeking arbitration must prove that an agreement exists; the party opposing arbitration must prove a defense such as unconscionability, meaning that the agreement is so procedurally unfair or substantively one-sided that it cannot be enforced.

The court concluded that Google established a valid agreement with Stellman. Stellman did not dispute the accuracy of Google’s records showing that he accepted the terms, did not claim that he was misled, and did not claim that he failed to understand that the terms contained an arbitration provision. The court found the arbitration notice conspicuous and rejected his speculation about the contents of the earlier notices or the opt-out page.

The court also concluded that Google established a valid agreement with Cliffy Care. Cliffy Care did not dispute that it accepted terms containing an arbitration provision, that it had been required to accept terms when opening its Google Ads account, or that it had not opted out. The court found its argument that the records might refer to a different version of the terms speculative and unsupported by evidence.

Unconscionability

The court rejected the plaintiffs’ unconscionability defense. Under California law, procedural unconscionability concerns unfairness in how an agreement was presented, while substantive unconscionability concerns terms that are excessively harsh or one-sided.

The court found no sufficient procedural unfairness. Both plaintiffs affirmatively accepted terms that prominently disclosed the arbitration clause and the ability to opt out. The terms included an apparent link to a straightforward opt-out form. Neither plaintiff submitted evidence that they were confused, pressured, coerced, or unable to opt out.

The court also found no sufficient substantive unfairness. It rejected challenges based on the terms’ modification provision, class-action waiver, and pre-arbitration notice requirement. The court observed that the terms allowed an advertiser to reject amendments within 30 days and imposed the pre-arbitration notice requirement on all parties rather than imposing one-sided duties.

Public-injunction argument

The plaintiffs argued that their claims could not be compelled to arbitration because they sought public injunctive relief under California’s Unfair Competition Law. California law, under the decision in McGill v. Citibank, does not permit arbitration agreements to bar claims seeking forward-looking injunctions whose primary purpose is to protect the general public. Relief aimed mainly at correcting injuries suffered by an individual or a defined group is private injunctive relief.

The court determined that an earlier order by Judge Beth Labson Freeman involving different plaintiffs in the multidistrict litigation was not binding law of the case. The earlier order addressed other plaintiffs’ claims at an earlier stage and did not resolve the claims of Cliffy Care or Stellman.

As to Stellman, the court found that his Unfair Competition Law claim focused on alleged economic losses suffered by advertisers from Google’s Reserve Price Optimization and alleged misrepresentations about second-price auctions. The requested injunction would require greater disclosure about Google’s advertising exchange. The court concluded that this relief was directed primarily to Stellman and similarly situated advertisers, not to the general public.

As to Cliffy Care, the court found that its claims under the Cartwright Act and the Unfair Competition Law likewise focused on alleged harm to advertisers, including increased advertising costs and reduced effectiveness of advertising expenditures. The complaints’ references to lower prices, greater innovation, and benefits to consumers were too general to show that the requested injunction primarily benefited the public while benefiting the plaintiffs only incidentally. The court therefore concluded that neither claim sought public injunctive relief protected from arbitration under McGill.

Disposition

Judge P. Castel granted Google’s motion to compel Cliffy Care and Stellman to arbitration. The court directed the Clerk to stay Stellman’s member case and to update the multidistrict litigation docket to reflect that the claims of Michael Stellman and Cliffy Care Landscaping LLC were stayed. The court also directed the Clerk to terminate the motion.