California Crane School, Inc. v. Google LLC

Background

California Crane School, Inc. alleged that Google LLC and Apple Inc. entered an agreement not to compete in internet search, violating Sections 1 and 2 of the Sherman Act. The school alleged that it bought search advertising from Google and paid prices inflated by the alleged agreement. It brought the same federal antitrust claims against Google and Apple based on the same underlying facts.

The school accepted Google’s advertising terms in 2017 and 2018. Those terms required individual arbitration of disputes arising from or relating to Google’s advertising programs and services. They covered claims under any legal theory and claims against Google, its parent companies, and their officers and directors. The terms also gave advertisers 30 days to opt out. Google’s records did not show that the school opted out.

Google’s Motion to Compel Arbitration

The court applied the Federal Arbitration Act, which generally makes written arbitration agreements enforceable. It considered whether a valid arbitration agreement existed and whether the agreement covered the dispute.

The court found the agreement valid and enforceable. The school did not dispute Google’s contention that the arbitration clause was not procedurally or substantively unconscionable. The court reasoned that the opportunity to opt out meant the clause was not procedurally unconscionable. The court also noted that the school did not argue that the opt-out procedure was inadequate and did not contend that the agreement was substantively unconscionable.

The court also found that the agreement covered the school’s claims. The clause applied broadly to disputes relating in any way to Google’s advertising programs and to claims against Google’s parent companies and the relevant officers and directors. The court concluded that the school’s antitrust claims fell within that language.

The school argued that the California “McGill rule” made the arbitration agreement unenforceable because the amended complaint requested public injunctive relief. The court rejected that argument. It explained that the McGill rule protects requests for a particular type of public injunction authorized by certain California consumer-protection statutes, while the school’s amended complaint asserted federal antitrust claims under the Clayton Act and no California state-law claims. The court also stated that the school’s claims sought recovery for people and entities that had paid for Google advertising, making them representative claims benefiting a specific group rather than the general public as a whole.

The court therefore granted Google’s Motion to Compel Arbitration and stayed the school’s claims against Google pending the outcome of arbitration. The court did not dismiss those claims.

Apple’s Motion to Stay

Apple Inc. and Tim Cook asked the court to stay the entire action while the arbitration between the school and the Google defendants proceeded. The court explained that a stay is required for parties bound by an arbitration agreement, but a stay involving parties not bound by that agreement is discretionary.

Apple argued that a stay would reduce the risk of inconsistent decisions and promote efficiency. The court found that neither side identified concrete prejudice beyond delay. Although the arbitration and the court case could involve similar legal and factual questions, Apple did not contend that the arbitrator’s findings would bind the court or affect the claims against Apple. The court concluded that the claims against Apple would eventually have to be litigated regardless of the arbitration’s result and that staying them would unnecessarily delay resolution.

The court denied Apple’s Motion to Stay Pending Arbitration. It also allowed the school and Apple to file supplemental briefs addressing whether the amended complaint states plausible claims against Apple. The opinion did not decide the pending motion to dismiss those claims.

Other Directions and Disposition

The court directed the school and Google to file a status report every 120 days from the order’s date and to notify the court within 48 hours after arbitration is completed. The court retained jurisdiction to confirm any arbitration award and enter an enforcement judgment, if appropriate. Judge Haywood S. Gilliam, Jr. issued the order on August 12, 2022.