Ninth Circuit Gives New Life to Grand Theft Auto Class Action

Two plaintiffs filed a putative class action, claiming that the game’s packaging made promises that the company did not keep. In particular, the plaintiffs asserted that the packaging suggested the game included an online, interactive component, when in fact this functionality was not available to users at the time the game was released. While the district court found that the plaintiffs had not properly stated a claim for relief in their complaint, the Ninth Circuit disagreed, stressing the plaintiff-friendly standard for a motion to dismiss for failure to state a claim. The case presents an interesting issue for advertising related to videogame capabilities.

The District Court’s Opinion

In 2013, plaintiffs Bruce McMahon and Christopher Bengston filed a putative class action complaint against Take-Two Interactive Software, Inc., a videogame developer and distributor well-known for its Grand Theft Auto series. Their lawsuit related to Take-Two’s latest installment in the series, Grand Theft Auto V. In particular, the plaintiffs claimed that Take-Two misled consumers to be believe, through representations on the product packaging, that the game permitted purchasers to interact with other players online. According to the plaintiffs, however, when they purchased the game, it was not configured for online play as advertised. Rather, the game could only be played in single-player mode without the ability to interact with any other videogame players. The plaintiffs alleged violations of California false advertising and unfair competition laws.

The US District Court for the Central District of California dismissed both the false advertising and unfair competition claims as unactionable, finding that the Grand Theft Auto V packaging did not include any unlawfully false or misleading statements. Specifically, the court agreed with Take-Two that the packaging never claimed that the game’s online capabilities would be available immediately: “nowhere does the [Grand Theft Auto V] game packaging use the word 'immediate[,]' nor is there any specific language that suggests such gameplay was 'immediately' available…" The court also denied leave to amend the complaint, finding that an amended complaint was unlikely lead to valid claims and, thus, would be futile. The plaintiffs appealed the decision to the Ninth Circuit.

The Ninth Circuit’s Recent Opinion

In a brief opinion, the Ninth Circuit reversed the district court’s dismissal. At the motion dismiss stage, the court explained, the district court is required to review the claims in the light most favorable to the plaintiff. Stating a claim under both California’s false advertising law and unfair competition laws required the plaintiffs to allege that “members of the public [were] likely to be deceived” by the Grand Theft Auto V packaging. Here, the court recounted, plaintiffs alleged that they read all of the game's packaging; that it led them to believe the game’s online capabilities would be available immediately; and that, contrary to those representations, the game was not available online at the time of their purchase. These allegations, viewed in the light most favorable to the plaintiffs, was enough to overcome Take-Two’s motion to dismiss, the court held. In so holding, the Ninth Circuit reminded the district court that “whether a business practice is deceptive will usually be a question of fact not appropriate on [a motion to dismiss].”

The Takeaway

This case is a reminder to companies operating in the videogame space of the need to ensure that advertising and promotional claims are sufficiently substantiated by the game’s actual features and to include any necessary disclosures regarding current and future capabilities. While this is true for all games, developers of new, highly-anticipated games such as Grand Theft Auto V are an especially likely target for disgruntled consumers and class action lawyers. Developers should, thus, be particularly cautious in such cases. Moreover, it is very difficult to clear the motion to dismiss hurdle, meaning that defendants will often find themselves stuck in litigation into discovery and perhaps until summary judgment, unless a settlement is reached. This advice is equally applicable mobile app game developers, who should likewise make sure that they accurately describe their games’ features – including what users are able to win by playing, and whether the game is entirely free or certain aspects are pay-to-play. This also presents a good rationale for including class action waivers and arbitration provisions in applicable consumer terms, as this may provide defendants with additional arguments to avoid lengthy and costly litigation.