Davenport v. NVIDIA Corporation

Background

This putative consumer class action concerns NVIDIA’s Shield devices. According to the complaint, NVIDIA advertised, marketed, and sold the devices as including a feature that allowed users to stream games from a computer to a television at 60 frames per second in 4K resolution. The plaintiffs alleged that NVIDIA later disabled access to that feature, depriving them of a feature they had paid for and reducing the value of their devices.

The plaintiffs asserted five claims, including trespass to chattels, breach of an implied warranty of fitness for a particular purpose, violations of state consumer-protection laws, and violations of California’s Unfair Competition Law and Consumers Legal Remedies Act. NVIDIA moved under the Federal Arbitration Act to compel arbitration, arguing that the plaintiffs agreed to arbitrate their claims.

The Shield Agreement

During device setup, users were told that continuing meant agreeing to NVIDIA’s Software Terms of Use. Users could select “Agree and Continue,” view the terms, or view the privacy policy. The terms included a Shield Agreement providing that complaints about the license or software would be resolved through binding arbitration before an arbitrator from Judicial Mediation and Arbitration Services in Santa Clara County, California. The agreement also stated that claims must be brought individually and waived participation in a class or representative proceeding.

Delegation of arbitrability questions

The court first considered whether the agreement delegated threshold questions of arbitrability to the arbitrator. These questions include whether an arbitration agreement was formed, whether it is enforceable, and whether it covers the dispute. The court concluded that the Shield Agreement did not contain an express delegation provision. It also found no clear and unequivocal incorporation of a delegation provision from JAMS rules because the agreement did not identify a particular set of JAMS rules. The agreement referred to JAMS’s Optional Expedited Arbitration Procedures, but those procedures did not contain a delegation provision, and NVIDIA itself cited a different set of JAMS rules as the source of the alleged delegation clause.

Because the agreement did not delegate these questions, the court—not the arbitrator—decided whether the arbitration provision was enforceable and covered the plaintiffs’ claims.

Unconscionability

The plaintiffs argued that the arbitration provision was unconscionable, meaning so procedurally or substantively unfair that it could not be enforced under California law.

The court found procedural unconscionability. The agreement was adhesive because users had to accept it to use their devices and had no opt-out mechanism. The court also found it significant that users could not review the agreement until after they had purchased, opened, turned on, and begun setting up their devices. That timing prevented them from considering alternatives before making a purchase that required acceptance of the arbitration provision. The court found, however, that the provision itself was written clearly and was not surprising merely because it appeared near the end of the agreement.

The court rejected the plaintiffs’ arguments that the provision was substantively unconscionable. It concluded that the lack of mutuality, the requirement that users first contact NVIDIA by mail, the arbitration-fee provision, and the Santa Clara County location requirement did not make the agreement so one-sided as to be unenforceable. The court noted that the JAMS fee schedule required consumers to pay no more than $250, which was less than the federal court’s $405 civil filing fee. Because California law requires both procedural and substantive unconscionability, the court held that the plaintiffs had not shown the agreement was unenforceable.

Whether the claims were covered

The court held that the arbitration provision covered all five claims. The provision broadly applied to any complaint about the license or software. The court found that the plaintiffs’ claims did not fall within the agreement’s exception for requests for injunctive or equitable relief involving data security, intellectual property rights, or other proprietary rights. The plaintiffs did not dispute that their claims were covered if the arbitration provision was enforceable.

Disposition

Judge P. Casey Pitts granted NVIDIA’s motion to compel arbitration. The court stayed the action until July 1, 2024. It stated that the circumstances would justify dismissing the complaint under then-existing Ninth Circuit authority, but it chose a stay because the Supreme Court was considering whether dismissal was permissible when all claims were subject to arbitration. The court stated that, absent new authority precluding dismissal, the case would be dismissed on July 1, 2024; if dismissal was not permitted, the stay would remain until arbitration was complete.