Hoang To v. Directtou, LLC

Background

The plaintiffs alleged that DirectToU, LLC and Alliance Entertainment, LLC operated websites selling DVDs, Blu-ray videos, and video games. The websites used Meta Pixel, a tracking device that collected information about visitors’ use of the sites and sent that data to Meta and other third parties. The plaintiffs alleged that the defendants disclosed video-purchase information and other personally identifying information without customers’ knowledge or consent, violating the Video Privacy Protection Act, California Civil Code § 1799.3, and California’s Unfair Competition Law.

The third amended complaint named Jonathan Hoang To, Jeffry Heise, and Joseph Mull as plaintiffs. It asserted the federal claim on behalf of all plaintiffs and asserted the two California claims through Hoang To on behalf of himself and a proposed California subclass.

Arbitration agreement

The defendants submitted evidence that, since 2021, customers using the websites to make purchases had to acknowledge that they had read and agreed to the websites’ Terms of Use. The Terms of Use contained an arbitration agreement requiring disputes connected to website use or the agreement to be resolved in small-claims court or binding arbitration rather than in courts of general jurisdiction. It also required claims to be brought only individually, not as part of a class or representative proceeding, and stated that arbitration would decide questions about the agreement’s scope.

Waiver

The plaintiffs argued that the defendants had waived, meaning given up, their right to compel arbitration. The court applied a two-part test: whether the defendants knew of the arbitration right and whether they intentionally acted inconsistently with that right. The plaintiffs and defendants agreed that the first part was satisfied, so the court considered only the second.

The court described the issue as a close call. DirectToU had negotiated a settlement and filed a joint notice of settlement after removing the case to federal court. The defendants had also filed and later withdrawn a motion based on the first-to-file rule. But the court found that the defendants had not litigated the merits of the arbitrable claims or sought a judicial decision on those claims. The court also concluded that the separate Florida case involving different plaintiffs did not establish waiver in this case.

The court further explained that the third amended complaint made significant changes, including adding two plaintiffs, Alliance as a defendant, and new allegations about data brokers and other third parties. It concluded that the defendants had not waived arbitration. Alternatively, the court stated that the amended complaint revived the defendants’ right to seek arbitration.

Validity and scope of the agreement

The plaintiffs challenged the evidence supporting the website Terms of Use, but the court found the declaration and screenshot evidence sufficient. The court also rejected arguments concerning Heise’s alleged mail-order purchases and Mull’s PayPal purchases. The court noted that the third amended complaint did not allege that Heise used a mail-order catalog and that the purchase records showed Mull made four website purchases, with the parties not disputing that the fourth purchase was subject to the Terms of Use.

The court also held that the agreement clearly and unmistakably assigned questions about the scope of arbitrability to the arbitrator. It concluded that the arbitration agreement was legal and binding.

Disposition

The court GRANTED the defendants’ Motion to Stay and Compel Arbitration. It ORDERED the plaintiffs to submit to individual arbitration under the Terms of Use and STAYED the matter pending binding arbitration. Because the motion to compel arbitration was granted, the court DENIED as moot the plaintiffs’ Motion to Appoint Interim Co-Lead Class Counsel.