Shenzen Shileziyou Technologies Co. LTD v. Amazon.com, Inc.

Background

Amazon operates an online marketplace and allows third-party sellers to use its Fulfillment by Amazon program. Sellers must agree to Amazon’s Business Solutions Agreement and incorporated policies. One policy prohibits sellers from offering customers money or other incentives for product reviews. Amazon may terminate selling privileges and withhold funds after detecting a violation.

The seven plaintiffs—Shenzen Shileziyou Technologies Co. Ltd., Shenzhen Aiwoli Technologies Co. Ltd., Shenzhen Shide Yixun E-Commerce Co. Ltd., Shenzhen Chaosheng Network Technologies Co. Ltd., Shenzhen Ruike E-Commerce Co. Ltd., Shenzhen Shimi Yingtong Automobile Service Co. Ltd., and Shenzhen Tudi Technologies Co. Ltd.—owned and operated seller accounts that Amazon terminated for purported violations of the policy. The plaintiffs alleged that Amazon withheld funds owed to them and other terminated sellers for longer than the agreement allowed and without reasonable justification.

The plaintiffs asserted seven state-law causes of action: breach of contract, violations of California’s Unfair Competition Law, violations of the Washington Uniform Money Services Act, accounting, money had and received, unjust enrichment, and declaratory relief. They brought the claims individually and on behalf of a proposed class.

Arbitration Agreement

Amazon moved to compel arbitration and dismiss the action. The Business Solutions Agreement provides that disputes relating to the agreement or use of Amazon’s services will be resolved through binding arbitration rather than in court. It also provides that dispute-resolution proceedings must occur only on an individual basis, not as a class, consolidated, or representative action.

The agreement selects the American Arbitration Association’s rules. Those rules give the arbitrator authority to decide the arbitrator’s own jurisdiction, including objections concerning the existence, scope, or validity of the arbitration agreement and whether a claim is subject to arbitration.

The plaintiffs acknowledged agreeing to the Business Solutions Agreement and did not dispute that it contained the arbitration clause. Instead, they argued that the arbitration clause was procedurally and substantively unconscionable—meaning, in their view, unfair in how it was formed and in its terms—and that it could not cover their Unfair Competition Law claims because a waiver of public injunctive relief is unenforceable under California law.

Court’s Analysis

The court held that the agreement’s incorporation of the American Arbitration Association rules clearly and unmistakably delegated arbitrability questions to the arbitrator. “Arbitrability” means whether an arbitration agreement is valid and whether it covers a particular dispute.

The court further held that the plaintiffs’ challenges were directed at the arbitration agreement as a whole, rather than specifically at the delegation provision assigning those questions to the arbitrator. The court therefore enforced the delegation provision and left the plaintiffs’ unconscionability and public-injunctive-relief challenges for the arbitrator to decide.

Disposition

Judge Maxine M. Chesney granted Amazon’s motion to compel arbitration. The court denied Amazon’s request to dismiss the action and stayed the action pending completion of the arbitration proceedings. The parties were directed to file a joint status report by May 13, 2022, and every six months afterward. The court also vacated the scheduled hearing and case-management conference.