Ninth Circuit Affirms Order Denying Motion to Compel Arbitration, Holds Arbitration Agreement Unconscionable

In Pandolfi v. Aviagames Inc., the Ninth Circuit Court of Appeals considered defendant Aviagames’ appeal of an order denying its motion to compel arbitration of the plaintiffs’ claims. The court’s memorandum opinion did not address the facts or claims of the plaintiffs’ underlying complaint. It instead focused on whether there was “clear error” by the district court in denying the defendants’ motion to compel on the grounds that the arbitration agreement between the parties, and the included delegation clause, are unconscionable.

The court first addressed the two elements of an unconscionability claim — procedural and substantive unconscionability — noting that “[a]lthough both procedural and substantive elements are needed for unconscionability, they need not ‘be present to the same degree.’” The court found that the district court did not err in concluding that the delegation clause was unconscionable, concluding that there was a “modest degree” of procedural unconscionability in the delegation clause because it was hidden in the terms of service section of the agreement and was subject to a “batching provision,” which presumably would have permitted Aviagames to consolidate multiple arbitration demands for resolution. The court then found that the delegation clause with the batching provision was also substantively unconscionable because it could create lengthy delays and “could have a chilling effect on players bringing claims to begin with.” The court held that the district court did not abuse its discretion in declining to sever the unconscionable sections of the arbitration agreement and affirmed the district court’s order denying the defendants’ motion to compel arbitration.

Pandolfi v. Aviagames, Inc., No. 24-5817 (9th Cir. Aug. 27, 2025).