Seyfarth Synopsis: After a defendant in a biometric privacy class action lawsuit unilaterally implemented an arbitration clause, a federal court in Illinois granted the company’s motion to compel arbitration, holding that the plaintiff previously agreed to allow unilateral modifications of the agreement without notice, and that she agreed to arbitrate by continuing to use the defendant’s website. In this respect, the ruling in Miracle-Pond, et al. v. Shutterfly, Inc., No. 19-CV-4722, 2020 U.S. Dist. LEXIS 86083 (N.D. Ill. May 15, 2020), is important for workplace arbitration agreements in general and defense of workplace class actions in particular.
For companies defending class action lawsuits, this ruling provides a new angle of attack for these bet the company cases, by taking them into a single-plaintiff arbitration forum.
In June 2019, Plaintiff filed a class action lawsuit in Illinois state court alleging that Shutterfly violated the Illinois Biometric Information Privacy Act (“BIPA”) by using facial-recognition technology to extract biometric identifiers for “tagging” individuals and by “selling, leasing, trading, or otherwise profiting from Plaintiffs’ and Class Members’ biometric identifiers and/or biometric information.” Id. at *5. In July 2019, Shutterfly removed the lawsuit to federal court.
Shutterfly’s records indicated that the plaintiff opened that email on September 8, 2019, and that as of October 2, 2019, her account remained open. Shutterfly moved to compel arbitration. In opposition, Plaintiffs argued the September 2019 email “was an improper ex parte communication with Plaintiff and putative class members because it failed to advise them of the pending litigation while seeking to deprive them of their rights as plaintiffs or class members.” Id.
The Court’s Decision
First, the Court rejected the plaintiff’s argument that arbitration clauses subject to unilateral modification are illusory. It cited several Illinois decisions that allowed parties to agree to authorize one party to modify a contract unilaterally. Id. at *11-12. Second, the Court rejected the plaintiff’s argument that she could not assent to an arbitration provision of which she had no notice. The Court reasoned that when she entered into a service contract with Shutterfly in 2014, she explicitly gave Shutterfly the right to unilaterally modify the agreement at any time and without notice. Third, the Court rejected the plaintiff’s argument that arbitration clauses that apply retroactively are unenforceable. It found that the plaintiff agreed to her arbitrate her claims in the 2015 modification, thus mooting the retroactive arbitration argument.
Implications For Employers
Over the last several years, many businesses have been implementing arbitration clauses in both employment and consumer agreements. Accordingly, it is possible that upon entering into agreements, many employees and consumers may not have initially agreed to arbitrate disputes and waive their rights to initiate class action litigation. When businesses are thus confronted with large scale class action claims, the ruling in Miracle-Pond, et al. v. Shutterfly, Inc. demonstrates that it would be worth their while to closely examine modifications of dispute resolution provisions to determine if there is a potential avenue to attack class action claims. In addition, businesses without arbitration provisions may consider implementing this mechanism to deter potential litigants from filing class action lawsuits.