8 F.4th 631
7th Cir.2021Background
- Plaintiff Fredy Sosa used OfferUp’s TruYou identity‑verification feature (powered by Onfido) and alleges Onfido collected biometric identifiers in violation of Illinois BIPA.
- Sosa agreed to OfferUp’s Terms of Service (ToS), which include a mandatory arbitration clause between users and OfferUp and a Washington choice‑of‑law provision; Onfido is not a signatory.
- OfferUp’s ToS references the TruYou feature, allows disclosure of identification to third‑party service providers, limits liability for "OfferUp providers," and disclaims control over third‑party content and third‑party private rights of action.
- Onfido removed the BIPA class action to federal court and moved to compel individual arbitration, claiming it may enforce the ToS arbitration clause as a nonparty under three theories: third‑party beneficiary, agency, and equitable estoppel.
- The district court applied Illinois law (forum law) because Onfido failed to show outcome‑determinative differences with Washington law, and denied Onfido’s motion, rejecting all three nonparty enforcement theories.
- The Seventh Circuit affirmed: Onfido did not show it was an intended third‑party beneficiary, an agent of OfferUp, or entitled to equitable estoppel under Illinois law.
Issues
| Issue | Plaintiff's Argument (Sosa) | Defendant's Argument (Onfido) | Held |
|---|---|---|---|
| Choice of law: which state law governs Onfido’s right to enforce the arbitration clause? | Apply Illinois forum law because Onfido failed to show an outcome‑determinative conflict with Washington. | Washington law governs under the ToS choice‑of‑law clause. | Illinois law governs; Onfido failed to show any outcome‑determinative difference and nonparties cannot unilaterally invoke the clause. |
| Third‑party beneficiary: can Onfido enforce arbitration as an intended beneficiary? | ToS does not name Onfido or show contract was made for Onfido’s direct benefit; any benefit was incidental. | ToS references TruYou and limits liability to "OfferUp providers," implying Onfido is a beneficiary. | No; strong presumption against third‑party beneficiaries, Onfido not named or described as class, not an "affiliate" or licensor. |
| Agency: is Onfido an agent of OfferUp able to bind OfferUp to arbitration? | No evidence OfferUp controlled Onfido or authorized it to alter OfferUp’s legal relations. | Partnership and OfferUp’s encouragement of TruYou users show agency. | No; agency requires control and authority, which Onfido failed to prove. |
| Equitable estoppel: should Sosa be estopped from denying arbitration? | No representations to Onfido, no detrimental reliance by Onfido; estoppel requires clear and convincing proof. | Estoppel applies because Sosa’s claims presume or reference the ToS and the parties acted in concert (invoking Paragon Micro federal standard). | No; Onfido failed to show detrimental reliance under Illinois law and Illinois courts have not adopted the broader federal Paragon Micro test. |
Key Cases Cited
- Arthur Andersen LLP v. Carlisle, 556 U.S. 624 (2009) (state law governs nonsignatory’s right to enforce arbitration provisions)
- Auto‑Owners Ins. Co. v. Websolv Computing, Inc., 580 F.3d 543 (7th Cir. 2009) (choice‑of‑law review de novo in federal diversity cases)
- Heiman v. Bimbo Foods Bakeries Distrib. Co., 902 F.3d 715 (7th Cir. 2018) (federal court follows forum state choice‑of‑law rules)
- Bridgeview Health Care Ctr., Ltd. v. State Farm Fire & Cas. Co., 10 N.E.3d 902 (Ill. 2014) (choice‑of‑law required only when law difference affects outcome)
- Martis v. Grinnell Mut. Reinsurance Co., 905 N.E.2d 920 (Ill. App. Ct. 2009) (third‑party beneficiary requires contract made for direct, not incidental, benefit and identification by name or class)
- Ervin v. Nokia, Inc., 812 N.E.2d 534 (Ill. App. Ct. 2004) (recognizing third‑party beneficiary, agency, and equitable estoppel as exceptions for nonsignatory enforcement)
- Chemtool, Inc. v. Lubrication Techs., Inc., 148 F.3d 742 (7th Cir. 1998) (agency requires principal’s right to control manner/method and agent’s authority to affect principal’s legal relations)
- In re Scarlett Z.‑D., 28 N.E.3d 776 (Ill. 2015) (equitable estoppel requires detrimental reliance proven by clear and convincing evidence)