Litigation Byte

Court Refuses to Enjoin Mass Arbitration on Personal Jurisdiction Grounds

March 27, 2025

Companies facing the threat of mass arbitration continue to seek judicial intervention to thwart such tactics. However, most of those attempts have failed. Recently, the District Court in the District of Columbia rejected a company’s attempt to preliminary enjoin more than 1,000 customers from proceeding to arbitrate claims in California.

What was the case about?

The plaintiff operates websites from Ontario, Canada that permit users to play online games. Around 1,000 of its users began filing arbitration claims en masse with the American Arbitration Association (AAA) and sought to arbitrate their disputes in San Diego, California. While some of the claimants were citizens of California, others resided in a multitude of other states. The claimants’ counsel came from both California and Nevada.

Plaintiff sought affirmative relief to thwart these arbitrations. As the court noted:

The thrust of the Plaintiff Companies’ claims in this case is that the arbitration actions should not take place with the AAA in San Diego. Rather, the Plaintiff Companies argue that some of the claimants are bound to arbitrate in a separate tribunal, ADR Chambers, in Ontario, Canada; other claimants may be allowed to arbitrate with the AAA but not in San Diego, California; and yet another set of claimants has no basis to bring arbitration actions against the companies because they are not users of the companies’ platforms. 

Deciding a flurry of motions at once, the District Court ultimately denied the plaintiff’s motion for preliminary injunction.

How did the Court rule?

The Court ultimately denied the plaintiff’s request for preliminary injunction on the basis that it lacked personal jurisdiction over a number of the defendants. Indeed, one of the requirements to be entitled to injunctive relief is a likelihood of success on the merits. Embedded in that is also demonstrating personal jurisdiction over the non-moving parties and here, the court found personal jurisdiction lacking.

Plaintiff attempted to establish the district court’s personal jurisdiction over the defendants by pointing to a forum selection clause in the arbitration agreement. As the court noted, “consent to arbitrate in the District can be construed as consent to suit in the District.” And “[b]ecause arbitration forum selection clauses do not explicitly relate to litigation in federal court, the consent to suit in the forum’s district court is implied from a party entering into an agreement containing an arbitration forum selection clause.” Notwithstanding this, the District Court found that the defendants in the action did not impliedly consent to arbitrate in the District of Columbia because they either did not agree to the terms and conditions containing the forum selection clause or the requested relief falls outside the “narrow” scope of any implied consent to personal jurisdiction in the District of Columbia.

What does it mean?

Forum selection clauses in arbitration agreements are enforceable. However, courts will narrowly construe those clauses with respect to whether a court has personal jurisdiction over a defendant. Simply put, and as the District Court put it: “a party to a contract containing an arbitration forum selection clause impliedly consents to the federal court’s exercise of personal jurisdiction in that forum for actions seeking to enforce the arbitration agreement – specifically, for actions seeking to compel arbitration pursuant to the contract’s arbitration clause.”