Like millions of others from around the world, I tuned in to watch the Tyson-Paul fight last week on Netflix (hoping to see Iron Mike defeat both Father Time and Jake Paul). However, the livestream was plagued with buffering problems, which made the fight unwatchable at times.
A Netflix subscriber has filed a class action against Netflix in state court in Florida, alleging that instead of seeing “the baddest man on the planet,” i.e., Iron Mike, millions of people saw “the baddest streaming on the planet.” The class action lawsuit purports to represent Netflix customers in the US whose access to the fight was either blocked or diminished by the buffering problems, and this class is estimated to include over 50 million people.
I expect Netflix will likely rely on the arbitration clause found in its terms of use governing its subscription service: https://help.netflix.com/en/legal/termsofuse.
The arbitration clause is written in broad terms and would likely cover the buffering claims asserted by the named plaintiff in this lawsuit. Furthermore, the arbitration clause contains a delegation provision, by which the arbitrator is tasked with resolving all issues, including issues regarding the enforceability or scope of the arbitration clause.
However, I see two potential concerns with enforcement of the arbitration clause:
1) The arbitration clause has a special provision regarding judicial review of grants of injunctive relief. If injunctive relief is awarded against a party, the arbitration clause provides that the party can seek judicial review in court, and the court would not be bound by the arbitrator’s “application or conclusions of law.” Note that this judicial review provision is one-sided and does not provide similar review if injunctive relief is denied. One can argue that a consumer or subscriber is likely to seek injunctive relief, and thus this provision regarding judicial review of grants of injunctive relief would tend to favor Netflix. For example, if the consumer seeks injunctive relief, and if injunctive relief is granted, Netflix reserves for itself the right to seek expansive judicial review under the terms of the arbitration clause. But if the consumer seeks injunctive relief, and if this relief is denied, the clause does not provide for a similar, expansive judicial review for the consumer. This provision regarding judicial review of grants of injunctive relief displays a degree of substantive unconscionability. Furthermore, this review appears to involve a de novo judicial review, which is not allowed under the Federal Arbitration Act. Under the Supreme Court’s Mattel decision, an arbitration clause cannot add to the FAA’s narrow grounds for judicial review (although Mattel leaves open whether enhanced review could be possible under state law.) In sum, the arbitration clause involves a degree of unconscionability, which is problematic for Netflix, and the plaintiff in this case appears to be seeking equitable or injunctive relief.
2) I signed up for Netflix several years ago, and I don’t recall whether the original agreement contained arbitration terms. The latest version of the subscription agreement, which contains the arbitration clause described above, is dated January 2024. I am not sure how subscribers encounter these terms. When I logged into the Netflix app on my phone this evening, the governing terms were not immediately visible or apparent, and I had to dig through several links and screens to find these terms on my app on my phone. But my experience may be different than another user’s experience if the other user signed up for Netflix for the first time last week, immediately before the Tyson fight. Also, if someone watches Netflix through a smart tv, or a laptop, I’m not sure if their access to the terms differs. In other words, a company may have a well-drafted arbitration clause, but if the company’s implementation of the clause is weak (for example, if the terms are not reasonably conspicuous), some courts may hesitate to enforce an arbitration clause found in such terms. Out of the alleged class of millions of Netflix users, users may have encountered the Netflix arbitration clause in different ways, and certain ways may be flawed and not give rise to a fully enforceable arbitration clause. More facts will have to be developed to determine whether Netflix’s arbitration clause is fully enforceable across the class.