Beckford v. The Children's Group, Inc.

Background

The Children’s Group, Inc., known as TCP, asked the court to reconsider its earlier order denying TCP’s motion to dismiss. TCP argued that the Ninth Circuit’s recent decision in Jones v. Starz Entertainment, LLC, called the court’s earlier analysis into question.

The court explained that reconsideration may be appropriate when new material facts arise, the law changes, or the court failed to consider material facts or dispositive legal arguments. Because the Ninth Circuit issued Jones on the same day as the court’s earlier order and the court had not considered Jones, the court concluded that reconsideration was appropriate to address the decision.

Analysis

The court nevertheless concluded that Jones did not conflict with its earlier reasoning. In Jones, the plaintiff sought to compel arbitration under the Federal Arbitration Act and argued that an arbitration agreement’s consolidation provision was unconscionable. The Ninth Circuit rejected those arguments, including the request to use unconscionability doctrine to modify the arbitration agreement and compel a form of arbitration that the other party had not agreed to provide.

The court distinguished that situation from this case. The plaintiffs here do not seek to compel arbitration or enforce a version of the arbitration agreement. They seek damages under California’s Consumer Legal Remedies Act (CLRA). The court said that distinction made Jones inapplicable to TCP’s motion for reconsideration.

The court rejected TCP’s argument that Jones barred the plaintiffs from alleging that provisions of an arbitration agreement were unconscionable. It also rejected TCP’s argument that the plaintiffs suffered no legally recognizable harm and therefore lacked statutory standing under the CLRA. The court reiterated that the plaintiffs had adequately alleged harm, including transaction costs related to challenging an allegedly unconscionable venue provision and the loss of an allegedly promised arbitration process.

Finally, the court addressed TCP’s argument that a provision in the 2022 Terms allowed TCP to modify the terms and conditions unilaterally. The court stated that such provisions remain subject to the implied promise of good faith and fair dealing and cannot be exercised in an unconscionable manner. It further stated that harm caused by adding an unconscionable provision may be compensable under the CLRA, even if the added provision is ultimately enforceable.

Disposition

The court DENIED TCP’s motion for reconsideration. The opinion did not change the earlier order denying TCP’s motion to dismiss.