Federal District Court in Illinois Requires Plaintiffs to Arbitrate Biometric Privacy Lawsuit

ABSTRACT: Does your company or client use biometric technology? If so, it is important to understand how to avoid the costs, uncertainty, and potentially significant verdicts that could arise from a lawsuit filed under the Illinois Biometric Information Privacy Act.  The District Court for the Northern District of Illinois recently issued a ruling that highlights the importance arbitration agreements can play in avoiding litigation under the Act.

Recently, the District Court for the Northern District of Illinois again addressed an issue related to the Illinois Biometric Information Privacy Act. As previously discussed in this blog post, this court has issued other rulings on issues arising under the Act. In Miracle-Pond v. Shutterfly, Inc., the plaintiff, Vernita Miracle-Pond, registered for a Shutterfly account using the Shutterfly Android mobile app in August 2014.  In order to install the app, the plaintiff was required to accept Shutterfly’s terms of use.  In the version of the terms of use accepted by the plaintiff, Shutterfly reserved the right to revise the terms of service without notice to Shutterfly users. Shutterfly was merely required to post the new terms. In May 2015, Shutterfly revised its terms of use, adding an arbitration provision. Every version of Shutterfly’s terms of use since May 2015, including the most recent version at the time of the court’s ruling, included an arbitration provision. Each version’s arbitration clause stated:

NOTE: THIS TERMS OF USE CONTAINS AN ARBITRATION CLAUSE AND CLASS ACTION WAIVER PROVISION IN THE ‘ARBITRATION’ SECTION BELOW THAT AFFECTS YOUR RIGHTS UNDER THE TERMS OF USE AND WITH RESPECT TO ANY DISPUTE BETWEEN YOU AND US AND OUR AFFILIATES.

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[Y]ou and Shutterfly agree that any dispute, claim or controversy arising out of or relating in any way to the Shutterfly service, these Terms of Use and this Arbitration Agreement, shall be determined by binding arbitration.

In June 2019, Ms. Miracle-Pond and another plaintiff filed suit against Shutterfly, individually and on behalf of proposed class members, alleging that Shutterfly violated the Illinois Biometric Information Privacy Act by using facial-recognition technology to extract biometric identifiers for “tagging” individuals and by selling, leasing, trading, or otherwise profiting from the plaintiffs’ and proposed class members’ biometric identifiers. 

Nearly three months after the plaintiffs filed suit, Shutterfly sent an email to all of its users nationwide, notifying its users that Shutterfly’s terms of use had been updated. The email further stated that Shutterfly had updated its terms of use to clarify users’ legal rights in the event of a dispute and how disputes would be resolved in arbitration. Finally, the email instructed users that if they did not close their accounts by October 1, 2019, or if they otherwise continued to use Shutterfly’s app and/or website, they would be deemed to have accepted Shutterfly’s terms of use.  Shutterfly’s records indicated that Ms. Miracle-Pond opened Shutterfly’s email and that her account remained open as of October 2, 2019.

In response to the lawsuit, Shutterfly filed a motion to compel arbitration. The plaintiffs filed a motion for curative measures related to Shutterfly’s September 2019 email to all users. In ruling on the motion to compel arbitration, the court first examined whether a valid arbitration agreement existed. In addition to Illinois’s general contract principles, the court examined factors specific to Internet agreements to determine if a valid arbitration agreement existed. Specifically, the court analyzed whether the: 1) web pages presented to the plaintiff adequately communicated all the terms and conditions of the agreement, and 2) circumstances supported the assumption that the plaintiff received reasonable notice of those terms.

The plaintiffs argued that Ms. Miracle-Pond merely agreed that her use of Shutterfly’s website and services would comply with Shutterfly’s terms of use, not that she would be bound by the term of use. In other words, she claimed that Shutterfly improperly used what is known as a “browsewrap” agreement, rather than a permissible “clickwrap agreement.” A browsewrap agreement is an agreement where users are bound by a website’s terms by merely navigating or using the website; the user is not required to sign an electronic document or explicitly click an accept or agree button. By contrast, a clickwrap agreement requires users to click a button or check a box that explicitly affirms that the user has accepted the terms of use. In rejecting the plaintiff’s argument, the court explained that Shutterfly presented the terms of use to the plaintiff for viewing and provided an “accept” and “decline” button. Thus, the court concluded that Shutterfly’s terms of use constituted a valid clickwrap agreement, and that Ms. Miracle-Pond agreed to be bound by the terms of use.

The plaintiffs further argued that the terms of Shutterfly’s arbitration agreement were illusory because they were subject to unilateral modification. The court rejected this argument, explaining that Illinois law allows for arbitration provisions that may be changed unilaterally. Shutterfly’s terms of use contained a valid change-in-terms provision that informed users that Shutterfly had the right to unilaterally modify its terms, that modified terms would be posted to its website, and that continued use of Shutterfly products constituted an acceptance of the modified terms. The court explained that Ms. Miracle-Pond’s continued use of Shutterfly after it introduced the arbitration agreement to its terms of use constituted an acceptance of the agreement.

The plaintiffs also claimed that Shutterfly was attempting to improperly apply the arbitration agreement on a retroactive basis, given Shutterfly’s September 2019 email to all of its users regarding arbitration of disputes. The court found that Shutterfly was not attempting retroactive application of the arbitration agreement, finding that the plaintiff accepted the agreement when she continued using Shutterfly after it introduced the arbitration agreement in 2015.

Ultimately, this case illustrates the importance of valid arbitration agreements. As discussed in prior Baker Sterchi blog posts, there has been a significant increase in litigation arising under the Illinois Biometric Information Privacy Act since 2019. This litigation is extremely risky for companies due to the manner in which courts have interpreted the Act’s standing requirement and the penalties imposed by the Act. If used properly, arbitration agreements give companies an opportunity to avoid the costs and uncertainty of litigating these claims in court. Therefore, if your company is named in a biometric lawsuit, it is imperative to determine if there are any grounds to require arbitration of the dispute. Additionally, to the extent companies that utilize biometric technology do not currently have arbitration agreements in place, they should consider implementing such an agreement.    

The complete citation for this case is Miracle-Pond v. Shutterfly, Inc., 2020 U.S. Dist. Lexis 86083 (N.D. Ill. May 15, 2020).