Case Information
I N THE U NITED S TATES D ISTRICT C OURT FOR THE N ORTHERN D ISTRICT OF I LLINOIS E ASTERN D IVISION
BENNETT WILCOSKY, MICHAEL
GUNDERSON, and MICHAEL
GUNDERSON as next friend of E.G., a
minor, each individually, and on behalf
of all others similarly situated, No. 19-cv-05061
Judge Franklin U. Valderrama Plaintiffs,
v.
AMAZON.COM, INC. and
AMAZON.COM SERVICES, INC.,
Defendants.
M EMORANDUM O PINION AND O RDER
Digital assistants are a part of everyday modern life. Based on voice recognition technology, they tell us the weather forecast, play our favorite song, or assist in the preparation of a meal. Digital assistants listen to and respond to users’ voice commands.
Bennett Wilcosky (Wilcosky), Michael Gunderson (Gunderson), and Michael Gunderson as next friend of E.G., a minor, (E.G.; collectively, Plaintiffs) sued Amazon.com, Inc. and Amazon.com Services, Inc. (collectively, Defendants or Amazon), individually and on behalf of a putative class of similarly situated individuals the Circuit Court of Cook County, Illinois. Amazon removed the case from the Circuit Court of Cook County to this Court pursuant to the Class Action Fairness Act (CAFA), 28 U.S.C. § 1332(d)(2). R. 1, Removal Notice. [1] Plaintiffs assert that Amazon’s Alexa device, a digital assistant, has recorded and stored their voiceprints—a biometric identifier—without their consent, in violation of the Illinois Biometric Information Privacy Act (BIPA), 740 ILCS 14/1 et seq . R. 1-1, Compl.
In response to a Court [2] order, the parties submitted memoranda on whether Plaintiffs have alleged an injury-in-fact sufficient to establish standing under Article III: Plaintiffs argue against standing and request that the Court remand their claims to state court (R. 44, Pls.’ Standing Memo.) whereas Defendants argue Article III is satisfied (R. 45, Defs.’ Standing Memo.). For the reasons described below, the Court agrees with Defendants that it has subject matter jurisdiction over the case.
Defendants have moved the Court to Compel Arbitration and Dismiss Plaintiffs’ Complaint, or in the Alternative, Stay Claims pursuant to Federal Rule of Civil Procedure 12(b)(3). [3] R. 16, Mot. Compel Arb. For the reasons set forth below, the Court grants in part and denies in part Defendants’ Motion to Compel Arbitration.
[1] Citations to the docket are indicated by “R.” followed by the docket number and, where necessary, a page or paragraph citation. [2] This case was previously assigned to Judge Gettleman, who ordered the parties to file briefs addressing Article III standing on February 19, 2020. R. 35. The case was reassigned to Judge Kness on April 27, 2020 (R. 38), who ordered that the parties still file the requested briefs despite the reassignment (R. 43). The case was reassigned to Judge Valderrama on September 28, 2020. R. 54.
[3] Defendants simultaneously moved to dismiss Plaintiffs’ claims for lack of personal jurisdiction and for failure to statue a claim. R. 19, Mot. Dismiss. As discussed below, the Court denies the Motion to Dismiss as moot as to Bennett Wilcosky and Michael Gunderson. The Court terminates the Motion to Dismiss without prejudice as to Michael Gunderson as next friend of E.G., a minor, with leave to refile as described below, see infra Conclusion.
Background
Amazon operates the “Alexa” voice based virtual assistant. [4] Compl. ¶ 1. Alexa listens to users, records users’ voices, and responds to the users’ voice commands using speech and voice recognition technology. Id . ¶ 4. Alexa uses the users’ voice recordings to answer the users’ questions and fulfills the users’ requests. Id . Amazon offers Alexa services through several means, including Amazon’s Echo Smart speakers and Fire tablets, as well as various third-party devices. Id . ¶ 3. Amazon retains every voice recording created by the user and any individual who happens to be speaking near the Alexa device. Id . ¶ 6. The Alexa device transmits all oral communications it records to Amazon’s servers. Id . ¶ 28. Amazon then indefinitely stores copies of all recordings on its own servers for continued use and analysis. Id .
Amazon does not inform Alexa users in writing that Alexa is collecting biometric information or biometric identifiers. Compl. ¶ 29. Nor does Amazon inform bystanders—people who speak in the vicinity of Alexa devices but do not own Alexa devices or have Alexa accounts—in writing that Alexa is collecting biometric information or biometric identifiers. Id . ¶ 30.
Amazon provides its products and services, including Alexa, to users subject to Amazon’s Conditions of Use (COUs). R. 17-1, Buckley Decl. ¶ 3. A user must accept Amazon’s COUs in order to purchase products and services from or through Amazon, including purchasing an Alexa-capable device and/or registering an Alexa account. Id. No individual can be an Amazon user, including using Alexa, without first agreeing to Amazon’s COUs . Id . At the checkout page, a customer is asked to review and confirm their order by clicking a “Place your order button.” Id. ¶ 4. The check-out page states: “By placing your order, you agree to Amazon.com’s privacy notice, conditions of use and all of the terms found here.” [5] Id.
Since August 2011, Amazon’s COUs have included an arbitration agreement with a class action waiver provision. Buckley Decl. ¶ 7. The arbitration provision in effect in 2014 provides, in part: “Any dispute or claim relating in any way to your use of any Amazon Service, or to any products or services sold or distributed by Amazon or through Amazon.com will be resolved by binding arbitration, rather than in court … .” Id.
In addition to Amazon COUs, Amazon has Alexa Terms of Use (TOUs), for users of Alexa. Buckley Decl. ¶ 11. To set up an Alexa device, the user is prompted either to sign into his or her Amazon account or create a new account. Id. When signing in, the user is notified that by continuing in the process of activating Alexa, the user agrees to Alexa’s TOUs, which are hyperlinked.
Section 3.6 of Alexa’s TOUs in effect on June 25, 2015, provided: Disputes/Binding Arbitration . Any dispute or claim arising from or relating to this Agreement or Alexa is subject to the binding arbitration, governing law, disclaimer of warranties, limitation of liability, and all other terms in the Amazon.com Conditions of Use. By using Alexa, you agree to be bound by those terms.
Buckley Decl. ¶ 15 (citing id. , Exh. F, 2018 TOUs § 3.6; id. , Exh. H, 2019 TOUs § 3.6). Wilcosky alleges that as of June 25, 2019, he had not and never had been a purchaser of any Alexa device, nor had he ever set up an Alexa account or downloaded the Alexa application. Compl. ¶ 36. Nevertheless, Wilcosky claims that his voice has been recorded without his consent by Alexa devices in Illinois numerous times. Id. ¶ 37. When Wilcosky spoke in proximity to an Alexa device while the Alexa device was recording, Amazon recorded and stored Wilcosky’s voice in its databases and on its servers. ¶ 38.
Gunderson owns an Amazon Echo equipped with Alexa services. Compl. ¶ 46. Gunderson also claims that his voice has been recorded without his consent by Alexa devices in Illinois numerous times. Id. ¶ 47. Gunderson alleges that when he spoke in proximity to an Alexa device while the Alexa device was recording, Alexa recorded and stored Gunderson’s voice in its databases and on its servers, without his consent. ¶¶ 48, 50.
E.G. is a minor who resides with her father, Gunderson. Compl. ¶ 55. E.G.’s voice has been recorded by Alexa devices on several occasions without her consent. Id. ¶ 56. When E.G. spoke in proximity to an Alexa device while the Alexa device was recording, Amazon recorded and stored E.G.’s voice in its databases and on its servers, without the consent or authorization of E.G.’s legally authorized representative. ¶¶ 57, 60.
Plaintiffs filed suit against Defendants for violating BIPA, 740 ILCS 14/1 et seq. In their first cause of action, Plaintiffs allege that Amazon, through its “Alexa” voice-based virtual assistant, captured, collected, and stored their biometric identifiers (their voiceprints) without their consent and without providing Plaintiffs written disclosures about the collection and storage of their voiceprints, in violation of 740 ILCS 14/15(b). Compl. ¶¶ 70–75. In their second cause of action, Plaintiffs claim that Defendants failed to publicly provide a retention schedule or guidelines for permanently destroying the biometric identifiers or biometric information as required under 740 ILCS 14/15(a). ¶¶ 78–79. Defendants, in turn, have moved to compel arbitration of and to dismiss Plaintiffs’ Complaint or in the alternative, to stay Plaintiffs’ claims, pursuant to Federal Rule of Civil Procedure 12(b)(3). Mot. Compel Arb. at 1.
Legal Standard
I. Standing
The party who invokes jurisdiction bears the burden of establishing that
Article III standing exists.
Bryant v. Compass Grp. USA, Inc.
,
For a party to have “Article III standing, three requirements must be satisfied:
(1) she must have suffered an actual or imminent, concrete and particularized injury-
in-fact; (2) there must be a causal connection between her injury and the conduct
complained of; and (3) there must be a likelihood that this injury will be redressed by
a favorable decision.”
Bryant
,
II. Arbitration
A case may be also dismissed for lack of proper venue. F ED . R. C IV . P. 12(b)(3).
A motion to dismiss “based on a contractual arbitration clause is appropriately
‘conceptualized as an objection to venue, and hence properly raised under Rule
12(b)(3).’”
Faulkenberg v. CB Tax Franchise Sys., LP
, 637 F.3d 801, 807 (7th Cir.
2011) (quoting
Auto. Mechs. Local 701 Welfare & Pension Funds v. Vanguard Car
Rental USA, Inc.
,
The Federal Arbitration Act (FAA) “reflects both a liberal federal policy
favoring arbitration . . . and the fundamental principle that arbitration is a matter of
contract.”
Gupta v. Morgan Stanley Smith Barney, LLC
,
The party seeking to compel arbitration has the burden of establishing an
agreement to arbitrate. 9 U.S.C. § 4;
A.D. v. Credit One Bank, N.A.
,
“[A]rbitration should be compelled if three elements are present: (1) an
enforceable written agreement to arbitrate, (2) a dispute within the scope of the
arbitration agreement, and (3) a refusal to arbitrate.”
Scheurer v. Fromm Family
Foods LLC
,
Analysis
The Illinois legislature passed BIPA in 2008 to regulate “the collection, use,
safeguarding, handling, storage, retention, and destruction of biometric identifiers
and information.” 740 ILCS 14/5(g);
see also Liu v. Four Seasons Hotel, Ltd
., 138
N.E.3d 201, 204 (Ill. App. Ct. 2019). “Biometric identifier” includes, among other
things, a voiceprint. 740 ILCS 14/10. “‘Biometric information’ means any information,
regardless of how it is captured, converted, stored, or shared based on an individual’s
biometric identifier used to identify an individual.” Biometric information is
particularly sensitive because unlike social security numbers, which can be changed
if necessary, biometric identifiers cannot be changed
. Id.
§ 14/5(c). BIPA provides
“robust protections for the biometric information of Illinois residents.”
Thornley v.
Clearview AI, Inc.,
Section 14/15(a) of BIPA requires private entities that possess biometric
information to develop a publicly available written policy that includes a retention
schedule and destruction guidelines
.
Under Section 14/15(b), private entities must (1)
inform the individual whose biometric information is being collected, that it is being
collected or stored; (2) inform the individual “in writing of the specific purpose and
length of term for which [the biometrics are] being collected, stored, and used;” and
3) receive a written release from the person.
Bryant
,
Here, Plaintiffs allege that the Defendants violated (1) Section 15(b) of BIPA by failing to properly inform Plaintiffs in writing that their voiceprints were being collected and stored and by failing to obtain Plaintiffs’ written release prior to any such collection, use, or storage (Compl. ¶¶ 73–74); and (2) Section 15(a) of BIPA by failing to maintain a publicly available “retention schedule or guidelines for permanently destroying” Plaintiffs’ biometrics as required by BIPA. ( Id. ¶ 79).
Plaintiffs argue that this case should be remanded to state court because the Complaint does not allege an injury-in-fact under Section 15(a), and therefore all claims should be remanded for purposes of efficiency and consistency. Pls.’ Standing Memo. at 2. On the other hand, Defendants argue that Plaintiffs have alleged an injury-in-fact sufficient to establish standing under Article III over both their Section 15(b) and Section 15(a) claims. Defs.’ Standing Memo. at 1. The Court agrees with Defendants and finds that both BIPA violations alleged in the complaint rise to the level of a concrete and particularized injury for purposes of Article III standing.
Defendants argue that, even though this Court has subject matter jurisdiction over its claims such that the case should not be remanded to state court, in light of the arbitration provisions in Amazon’s COUs and Alexa’s TOUs, the case belongs in arbitration, not in court. See R. 17, Memo. Compel. The Court agrees that Wilcosky and Gunderson’s claims are subject to arbitration and grants Defendants’ Motion to Compel Arbitration as to those two plaintiffs. However, it denies without prejudice the Motion to Compel Arbitration as to E.G.’s claims and directs the parties to file supplemental briefs addressing the equitable estoppel argument under Illinois law.
The Court addresses the jurisdictional issue of Article III standing before reviewing the merits of Defendants’ Motion to Compel Arbitration.
I. Standing
Only the first element of Article III standing is at issue here: whether
Plaintiffs’ suffered an injury in fact. The injury in fact inquiry “asks whether the
plaintiff has suffered an invasion of a legally protected interest that is concrete and
particularized and actual or imminent, not conjectural or hypothetical.
Fox v.
Dakkota Integrated Sys., LLC
, 980 F.3d 1146, 1151–52 (7th Cir. 2020) (internal
citations and quotations omitted). An injury is “particularized” if it “affect[s] the
plaintiff in a personal and individual way.” (quoting
Lujan
,
A. Section 15(b)
Plaintiffs do not dispute that their Section 15(b) claim—that Amazon failed to
properly inform Plaintiffs in writing that their voiceprints were being collected and
stored and failed to obtain Plaintiffs’ written release prior to any such collection, use,
or storage (Compl. ¶¶ 73–74)—sufficiently alleges an injury in fact. Pls.’ Standing
Memo. at 2 (citing
Bryant
, 958 F.3d at 617). The Court agrees that the law in the
Seventh Circuit regarding BIPA Section 15(b) claims is clear after
Bryant
: “failure to
follow section 15(b) of the law leads to an invasion of personal rights that is both
concrete and particularized” that meets the criteria for Article III standing.
Bryant
,
B. Section 15(a)
The parties dispute whether Plaintiffs have standing for their Section 15(a) claim. The Seventh Circuit recently clarified when an alleged violation under Section 15(a) sufficiently alleges an injury in fact under Article III. In Fox , the Seventh Circuit reversed and remanded the district court’s remand of the plaintiff’s Section 15(a) claim to state court because “[u]nlike in Bryant , [plaintiff’s] Section 15(a) claim does not allege a mere procedural failure to publicly disclose a data-retention policy” but rather alleges:
a concrete and particularized invasion of her privacy interest in her biometric data stemming from [defendant’s] violation of the full panoply of its section 15(a) duties—the duties to develop, publicly disclose, and comply with data retention and destruction policies—resulting in the wrongful retention of her biometric data after her employment ended, beyond the time authorized by law.
Similarly to the plaintiff in
Fox
, here Plaintiffs allege not only that Amazon
fails to publish a retention and destruction schedule, but also that Amazon continues
to retain, use, and analyze their biometrics indefinitely. Compl. ¶¶ 4, 6, 9–10, 28, 35,
44, 49–50, 53, 57–58, 62. As the Seventh Circuit held, “an unlawful
retention
of a
person’s biometric data is as concrete and particularized an injury as an
unlawful
collection
of a person's biometric data.”
Fox
,
Thornley
does not change the analysis either. In that case, the plaintiffs—
seeking to avoid removal—were careful to allege
only
a bare procedural violation,
stating that they “suffered no injury from Defendants’ violation of Section 15(c) of
BIPA other than statutory aggrievement.”
Thornley
,
II. Arbitration
Because this Court has subject matter jurisdiction over Plaintiffs’ claims, it can now proceed to address the merits of the case, including Defendants’ Motion to Compel Arbitration. It begins with the two adult Plaintiffs, Wilcosky and Gunderson.
A. Wilcosky and Gunderson
1. Existence of a Valid Arbitration Agreement
The threshold issue before the Court is whether a valid arbitration agreement
exists between the parties. In determining whether a valid arbitration agreement
exists between parties, federal courts apply the state law principles of contract
formation.
Gupta v. Morgan Stanley Smith Barney, LLC
,
An enforceable contract under Illinois law requires an offer, acceptance,
consideration, and mutual assent.
Nat’l Prod. Workers Union Ins. Trust v. Cigna
Corp.
,
Amazon’s COUs contain an arbitration agreement that is written in English and placed under a bold and capitalized heading “Disputes,” with key provisions in bold font. Buckley Decl. ¶ 7; id. , Exh. A, 2018 COUs; id. , Exh. B, 2012 COUs. [6] The arbitration agreement also provides instructions regarding how to commence arbitration. 2018 COUs. The agreement provides that the arbitration will be conducted by the American Arbitration Association (AAA) under its rules, including the AAA’s Supplementary Procedures for Consumer-Related Disputes (AAA Rules), and provides the AAA’s website and phone number. Id. As noted above, Alexa’s TOUs contain a bolded section titled “Disputes/Binding Arbitration” which states that any dispute or claim arising out of the Agreement is subject to all terms in the COUs and contains a hyperlink to the COUs. Buckley Decl. Exh. H, 2019 TOUs, § 3.6. Plaintiffs do not challenge the existence or validity of the arbitration agreement. Instead, Plaintiffs maintain that they did not consent to the arbitration agreement through either the COUs or the TOUs.
Wilcosky [7] maintains that he never purchased a device containing the Alexa voice assistant, and he never installed the Amazon Alexa application on a smartphone. R. 29-1, Wilcosky Decl. ¶¶ 4–5. Wilcosky asserts that Amazon never presented him with any contract that includes an arbitration agreement, nor has Wilcosky seen any such contract. Wilcosky Dec. ¶¶ 6– 7. Indeed, notes Wilcosky, Amazon concedes that it has no record of Wilcosky installing the Alexa application on any device. Resp. 9–10 (citing R. 29-3, Amazon Resp. RFP Nos. 2–4; R. 29-4, Amazon Prod. 1–8.) Wilcosky argues that as a result, Amazon has not met its burden of showing offer, acceptance, and consideration as to the COUs or the TOUs. Resp. at 10. Although he adopts Wilcosky’s arguments, Gunderson does not submit a declaration in support of his Response, and therefore he does not deny on the record that he was presented with an arbitration agreement via the COUs or TOUs.
a. Conditions of Use
Although Plaintiffs insist that they did not assent to the COUs, the evidence
belies that contention. In support of their Motion, Defendants submit the Declaration
of Brian Buckley, Associate General Counsel at Amazon.com. Buckley attests that
Amazon provides its products and services, including Alexa, to users subject to
Amazon’s COUs. Buckley Decl. ¶ 3. A user must accept Amazon’s COUs in order to
purchase products and services from or through Amazon, including but not limited to
purchasing an Alexa-capable device and/or registering an Alexa account.
[8]
Id.
When
determining whether an individual assented to an online rather than physical
contract, a court must “look more closely at both the law and to the facts to see if a
reasonable person in [the customer’s] shoes would have realized that he was
assenting to the [contract].”
Sgouros v. TransUnion Corp.
,
Amazon.com’s standard check-out page contains a notice that states, “By placing your order, you agree to Amazon.com’s privacy notice and conditions of use.” Wilcosky Decl. Exh. C, Amazon Prod. at 1–3; Buckley Decl. ¶ 4. Depending on whether the purchase is made in a browser or through Amazon’s shopping application, the notice is located directly above or directly below the “Place your order” button, such that it is clearly visible when viewing the page. Amazon Prod. at 1–3; Amazon Resp. RFP No. 5; Buckley Decl. ¶ 4. The text is somewhat smaller than other text on the page, but the hyperlink to the COUs is set off in blue-colored font. Amazon Prod. at 1–3; Buckley Decl. ¶ 4.
As Amazon points out in its Motion, courts in other Districts have enforced
Amazon’s arbitration agreement under Washington law based on customers’
acceptance of the COUs when placing orders. Memo. Compel Arb. at 10–11 (citing,
among other cases,
Fagerstrom v. Amazon.com, Inc.
,
Buckley states that Wilcosky created an Amazon account in January 14, 2014 and made a purchase with his account as recently as August 23, 2019. Buckley Decl. ¶ 5. Similarly, Buckley attests that Gunderson created an Amazon account on November 9, 1998 and made a purchase with his account as recently as August 22, 2019. ¶ 6. Notably, Wilcosky does not challenge Buckley’s assertion that he bought items from Amazon’s website. Nor does Wilcosky deny that he created an Amazon account. Instead, Wilcosky more generally states that “Amazon has never presented [him] with any contract that includes an arbitration agreement” and that he has “never seen a contract of any kind between Amazon and [him] containing an arbitration agreement.” Wilcosky Decl. ¶¶ 6–7. His denials that he has neither “seen” nor been “presented with” an arbitration agreement are insufficiently specific to demonstrate a material factual dispute for trial. See Tinder v. Pinkerton Sec. , 305 F.3d 728, 735 (7th Cir. 2002); Gorny , 2019 WL 2409595, at *6 (rejecting plaintiff’s arguments that he never “saw” the terms of use where evidence showed that he clicked a “Place Your Order” button with a notice of agreement to terms of use immediately below the button). Gunderson presents no evidence to contradict Buckley’s statement about his purchases either. Therefore, the Court finds that as a result of their purchases from Amazon, both Wilcosky and Gunderson agreed to the COUs such that a contract was formed.
b. Terms of Use
In addition to agreeing to the COUs to set up an Alexa device, an Alexa user also must agree to the TOUs. Buckley Decl. ¶ 11. The COUs provide that the user also will be subject to the guidelines, terms, agreements applicable to the specific Amazon Services used (Service Terms). 2018 COUs. For Alexa services, those Service Terms are the publicly available TOUs. See Buckley Decl. ¶ 11.
The Court begins with Gunderson, because he indisputably agreed to the TOUs. He activated his Alexa services on November 23, 2015 and registered approximately twenty-three devices with Alexa. Buckley Decl. ¶¶ 13–14; R. 29-2, Amazon Ans. Interrog. No. 3 (including, among others, in the list of device names belonging to Gunderson, “Michael’s Amazon Alexa on iOS and “Michael’s Echo”); see also Compl. ¶ 46 (“Plaintiff Michael Gunderson owns an Amazon Echo equipped with Alexa services.”). Amazon’s document production includes screenshots of the sign-in screen for the Alexa app on the iOS operating system for iPhones, as well as the welcome screen when signing into an Alexa mobile app for the first time. Amazon Resp. RFP No. 10; Amazon Prod. at 4–5. On the welcome screen, directly above a “Continue” button appears the sentence, “By tapping ‘Continue,’ you agree to Amazon’s Conditions of Use and all the terms found here.” The “all the terms found here” hyperlink (in blue) leads to a webpage that includes a hyperlink to “Alexa Terms of Use” at the top of the page. Amazon Prod. at 7. Like Gunderson’s consent to the COUs when clicking the “Place your order button” when making a purchase on Amazon.com, he also consented to the Alexa TOUs by clicking “Continue” on the Alexa iOS app. See also Miracle-Pond v. Shutterfly, Inc. , 2020 WL 2513099, at *4 (N.D. Ill. May 15, 2020). Gunderson therefore agreed to the TOUs.
On the other hand, Wilcosky insists that he never purchased a device
containing the Alexa voice assistant or installed the Alexa application on a
smartphone (Wilcosky Decl. ¶¶ 4–5)—and Amazon does not present evidence to the
contrary (
see
R. 31, Reply at 6–7; Amazon Ans. Interrog. No. 5 (“Amazon … has no
record of Plaintiff Wilcosky installing the Alexa app on any device.”). However,
Amazon argues that there are other ways to assent to the TOUs. Reply at 6–7;
Amazon Ans. Interrog. No. 2. Given Wilcosky’s uncontroverted denials, the only way
that he could have agreed to the TOUs was by downloading and registering Amazon
apps that are embedded with the Alexa service, such as the Amazon Music or
Shopping apps.
Id.
Amazon argues that its “business records reflect exactly that.”
Reply at 7 (citing Buckely Decl. ¶ 12). But Buckley states only that Wilcosky
“registered four Android devices with Alexa.” Buckley Decl. ¶ 12. Nowhere in his
declaration does he state that Wilcosky downloaded or registered Amazon app.
Amazon’s answer to Wilcosky’s Interrogatory asking Amazon to describe “the process
for viewing and assenting to Amazon’s Alexa TOUs on each of [Wilcosky’s registered]
devices” is similarly vague, describing multiples ways that a customer can view and
assent to the TOUs of an Android device, but failing to identify which way Wilcosky
so assented. Amazon Ans. Interrog. No. 5. Amazon has not provided enough facts for
this Court to determine whether “a reasonable person in [Wilcosky’s] shoes would
have realized that he was assenting to the [TOUs].”
Sgouros
,
Even if the Court found that Amazon had presented evidence that Wilcosky downloaded and registered an Amazon app embedded with the Alexa service, Amazon still fails to establish that Wilcosky had reasonable notice of the terms of the contract. According to Amazon’s Interrogatory answer, within the Amazon Music app, “[i]n the lower right hand corner of the home screen is an icon labeled ‘Alexa.’ When a user clicks that icon, the user is notified that by using the Alexa service on the Amazon Music app, he or she agrees to Amazon’s COUs and all the terms found ‘here,’ both of which are hyperlinked. … The all the terms found ‘here’ language in the disclosure on the welcome screen above is a hyperlink that, when tapped, directs the user to a screen listing all the additional service terms that apply to the Alexa service, including the Alexa TOUs.” Amazon Ans. Interrog. No. 2. This kind of online contract is a “browsewrap agreement,” which typically involves “a situation where notice on a website conditions use of the site upon compliance with certain terms or conditions, which may be included on the same page as the notice or accessible via a hyperlink.” Van Tassell v. United Mktg. Grp., LLC , 795 F. Supp. 2d 770, 790 (N.D. Ill. 2011) (internal citations omitted). Because a browsewrap agreement requires no affirmative action “by the website user to agree to the terms of a contract other than his or her use of the website, the determination of the validity of the browsewrap contract depends on whether the user has actual or constructive knowledge of a website’s terms and conditions.” Amazon has presented no evidence that Wilcosky ever clicked on the Alexa app in the “corner of the home screen.” If not, he never would have seen the hyperlink to the TOUs. Therefore, the Court cannot find that Wilcosky had constructive notice that he was assenting to the TOUs based on the fact that he “registered four Android devices with Alexa.”
However, even though Wilcosky did not agree to the TOUs, the Court agrees with Amazon that “his BIPA claims [are] still [] subject to arbitration because he assented to the Amazon COUs when making purchases using Amazon’s website.” Reply at 5. Therefore, the Court finds that Plaintiffs Wilcosky and Gunderson assented to be bound to the terms of the COUs, which includes the arbitration agreement and class action waiver provision (and Gunderson also assented to be bound to the terms of the TOUs, which includes the same arbitration agreement through reference to the COUs). The Court having found the existence of a valid arbitration agreement, now turns to whether Plaintiffs’ claims are within the scope of the arbitration agreement.
2. Scope of Arbitration Agreement
Once the court finds that there is a valid agreement to arbitrate, the burden
shifts to the party opposing arbitration to show that the dispute is not covered by the
agreement.
Hoenig v. Karl Knauz Motors.,
At the outset, the Court must point out that while Amazon’s initial argument
as to scope is that whether Plaintiffs’ claims fall within the scope of the arbitration
agreement is an issue for the arbitrator to decide, Plaintiffs fail to address this
argument, much less rebut it in their response.
[9]
Defendants argue that the absence
of any response is a concession of the argument. Reply at 3 n.2. The Court agrees.
Plaintiffs’ silence on this point can only be construed as a concession that whether
their claims fall within the scope of the arbitration agreement is an issue for the
arbitrator to decide.
See Bonte v. U.S. Bank, N.A.
,
Nonetheless
,
even if Plaintiffs had addressed this point, the Court finds that
whether Plaintiffs’ claims fall within the scope of the arbitration agreement is an
issue for the arbitrator to decide.
See Ali v. Vehi-Ship
,
Usually it is for courts to decide gateway matters, such as whether the parties have a valid arbitration agreement at all or whether a concededly binding arbitration clause applies to a certain type of controversy. In other words, questions of arbitrability are generally for courts to decide (citations omitted). But the general rule is displaced when there is clear and unmistakable evidence that the parties agreed to arbitrate arbitrability. Gateway arbitrability issues can be committed to an arbitrator through a delegation clause. A delegation clause is simply an additional, antecedent agreement to arbitrate threshold issues. at *3 (internal citations and quotations omitted).
Here, the COUs incorporate the AAA Rules. 2019 COUs. Those rules provide
in part that the arbitrator “shall have the power to rule on his or her own jurisdiction,
including any objections with respect to the existence, scope, or validity of the
arbitration agreement or to the arbitrability of any claim or counterclaim.” Rule 14,
AAA
Rules,
available
at
http://www.adr.org/sites/default/files/Consumer%20Rules.pdf (last accessed Feb. 2,
2021). “Although the Seventh Circuit has not specifically addressed whether a
delegation clause can be incorporated by reference, it long ago held that an
‘agreement of the parties to have any arbitration governed by the rules of the AAA
incorporate[s] those rules into the agreement.’”
Ali
,
B. E.G.
Defendants argue that Plaintiff E.G., a minor, while not a signatory herself to
the arbitration agreement, is bound by her legal representative’s consent to
arbitration and must be compelled to arbitrate for three reasons: First, E.G. must
arbitrate her claims under principles of equitable estoppel. Memo to Compel Arb. at
8. Second, where claims are based on the same set of facts and inherently separable,
the court may order arbitration of claims against the party even if that party is not a
party to the arbitration agreement.
Id.
at 8–9. Third, E.G. is bound to arbitrate under
agency principles.
Id.
at 9–10. Defendants note that arbitration agreements may
encompass non-signatories under equity, and contract and agency principles. at
8–10 (citing
Romney v. Franciscan Med. Grp.
, 349 P.3d 32 (Wash. App. Ct. 2015);
Townsend v. Quadrant Corp.
,
1. Equitable Estoppel
As a threshold matter, the Court addresses the parties’ reliance exclusively on
out-of-state law (and primarily Washington law) in addressing Amazon’s argument
that non-signatory E.G. is bound by the principle of equitable estoppel to arbitrate
her claims.
[11]
As noted above, the parties dispute—without much substantive
argument—whether Washington or Illinois law applies to the validity of the
arbitration agreement.
See supra
Section II.A.1. But Amazon noted, and the Court
agreed, that no difference existed between Washington and Illinois law regarding
contract formation principles, so the Court did not engage in a choice-of-law analysis.
But it is axiomatic that equitable estoppel is evaluated under state law principles
of
equity
, not contract law.
See Ill. Sch. Dist. Agency v. Pac. Ins. Co.
,
The Court has no basis for applying provisions of the COUs and TOUs without
first deciding whether non-signatory E.G. has any rights under those contracts.
Indeed, under an equitable estoppel analysis, Amazon’s rights, if any, to compel
arbitration as to E.G. do not arise under the COUs or TOUs themselves, but, as
Amazon argues, state law principles of equity. As this Court has subject matter
jurisdiction over this action under diversity jurisdiction, it applies state substantive
law regarding enforcement of arbitration agreements by non-signatories.
Erie R. Co.
v. Tompkins,
However, the parties have not identified which state’s law the Court should
use to evaluate Amazon’s equitable estoppel argument and have not engaged in a
substantive choice-of-law analysis for the Court to make such a determination.
See
Elzeftawy v. Pernix Grp., Inc.
,
2. Inherently Inseparable Claims
Next, also citing Washington law, Defendants posit that E.G.’s claims are inherently inseparable from those of her father, her legal representative, and therefore the Court may compel arbitration of E.G.’s claims. Memo. Compel at 8–9 (citing Romney v. Franciscan Med. Grp. , 349 P.3d 32, 42 (Wash. App. Ct. 2015); Townsend , 224 P.3d at 889). A reading of Romney and Townsend indicates that whether a non-signatory’s claim in “inherently inseparable” from those her legal representative may be one of agency law, which is addressed below, see infra Section II.B.3, under Illinois law. Romney , 349 P.3d at 42 (holding that non-signatory employees were bound by the arbitration agreement, as “employees are agents of the employer if the parties intended the agreement to apply to them or if the alleged liability arises out of the same misconduct alleged against the employer”) (citation omitted). As discussed below, E.G. cannot be bound to Amazon’s arbitration agreement under Illinois principles of agency.
Even if the “inherently inseparable argument” is distinct from agency principles, Amazon makes no argument as to why it applies to E.G.’s claims under Illinois law, nor does it engage in a choice-of-law analysis positing why the Court should apply Washington law. Regardless, the other basis under which courts bind non-signatories when their claims are inherently inseparable from those of a signatory are in parent-subsidiary relationships. See Townsend , 224 P.3d at 889 (“When the charges against a parent and subsidiary are based on the same facts, as is the case here, and are inherently inseparable, a court may order arbitration of claims against the parent even though the parent is not a party to the arbitration agreement.”); see also J.J. Ryan & Sons, Inc. v. Rhone Poulenc Textile, S.A. , 863 F.2d 315, 320–21 (4th Cir. 1988) (same). To state the obvious, this case does not involve a parent-subsidiary situation, so E.G. cannot be bound by the arbitration agreement because her claims are inherently inseparable from those of Gunderson.
3. Agency
Last, the parties dispute whether Gunderson was E.G.’s agent, in purchasing and installing the Alexa device in their home, such that E.G. is bound to the arbitration provision. Here, both parties apply Illinois law.
In Illinois, the test to determine whether a principal-agent relationship exists
is whether the alleged principal has the right to control the alleged agent, and
whether the agent can affect the legal relationships of the principal.
Uesco Indus.,
Inc., v. Poohman of Wisc., Inc.
,
In
Chung
, the plaintiff’s daughter purchased tickets to go on a student tour in
Mexico, organized by Student City.
In
Hofer
, the plaintiff’s friend, with the plaintiff’s consent, purchased airline
tickets and booked accommodations for a trip for herself and the plaintiff via the
Expedia website.
In
Adsit
, the defendant placed an order on the plaintiff’s website for some seat
covers.
Chung , Hofer , and Adsit are all distinguishable from this case. In each of those cases, the non-signatory to the arbitration agreement, the liability disclaimer, or forum selection clause, assented to the transaction. Here, Amazon has not adduced any evidence that E.G., a three-year-old at the time the Complaint was filed, assented to the transaction. Indeed, Amazon does not point to any evidence in support of its contention that Gunderson was E.G.’s agent. In short, Amazon has not provided any evidence that a principle-agent relationship existed between Gunderson and E.G., much less that Gunderson was E.G.’s agent. Therefore, agency principles do not support Defendants’ claim that E.G., as an undisputed non-signatory to the COUs or the TOUs, is bound by the arbitration agreement.
Conclusion
For the reasons discussed above, the Court finds that Plaintiffs have adequately alleged injuries in fact for all of their BIPA claims such that there is Article III standing, and this Court has subject matter jurisdiction over the claims and can consider the merits of the case. The Court grants Defendants’ Motion to Compel Arbitration [16] in part and denies it in part. The Court finds that Wilcosky’s and Gunderson’s claims are subject to arbitration. As such, Wilcosky’s and Gunderson’s claims are dismissed without prejudice to those Plaintiffs pursuing those claims in the appropriate forum. The Court denies the Motion to Compel Arbitration as to Plaintiff E.G. without prejudice. As the movant, Amazon is directed to file a supplemental brief (i) containing a proper choice-of-law analysis related to its equitable estoppel argument and (ii) addressing equitable estoppel under the law of the resulting state by February 19, 2021. Plaintiffs are to file a response by March 5, 2021. No reply brief will be allowed absent a request to the Court. The briefs are limited to ten pages each. Additionally, the Court terminates Defendants’ Motion to Dismiss [19] pursuant to Rules 12(b)(2) and 12(b)(6) without prejudice with leave to refile pending the Court’s decision on Defendants’ Motion to Compel Arbitration as to Plaintiff E.G. after review of the parties’ supplemental briefs. Dates: February 5, 2021
United States District Judge Franklin U. Valderrama
Notes
[4] The following recitation of facts is excerpted from Plaintiffs’ Complaint (R. 1-1) and such
facts are deemed to be true for the purposes of this motion.
See Bell v. City of Chi
., 835 F.3d
736, 738 (7th Cir. 2016);
Tamayo v. Blagojevich
,
[5] On Amazon’s website, the underlined text provides a hyperlink to the full COUs. Buckley Decl. ¶ 4.
[6] Defendants attach two versions of Amazon’s COUs to Buckley’s declaration, one updated on May 21, 2018 (2018 COUs) and one updated on December 5, 2012 (2012 COUs). Because the “Disputes” sections in the two COUs are identical, the Court cites only to the 2018 COUs in this Opinion unless otherwise specified. Similarly, six versions of Alexa’s TOUs are attached to Buckley’s declaration, but the Court cites only to the 2019 version. See Buckley Decl. Exhs. C–H.
[7] Gunderson makes the same arguments advanced by Wilcosky. Resp. at 15 (“For the reasons articulated for Wilcosky … above, Amazon has similarly failed to show it presented a contract containing an arbitration clause to Plaintiff Gunderson.”).
[8] Buckley also states that “[n]o individual can be an Amazon customer, including Amazon’s Alexa service, without first agreeing to Amazon’s COUs.” Buckley Decl. ¶ 3. But Amazon fails to produce any evidence—through Buckley’s declaration or otherwise—demonstrating how the COUs are provided to customers at the time they sign up with Amazon or at any time apart from when they make purchases or sign up for Amazon’s Alexa services. So the Court cannot find that all Amazon customers have notice of the COUs such that a contract is formed unless the customer makes a purchase or registers an Alexa device.
[9] Instead, Plaintiffs’ argument centers on the fact that their BIPA claims have no relation to the contract in which the arbitration provision appears, and therefore the provision cannot be enforced. Resp. at 11–14.
[10] In addition to
Ali
, numerous other courts in this Circuit have adopted the incorporation by
reference view of the AAA Rules.
See Crooms v. Southwest Airlines Co
.,
[11] Defendants briefs: Memo. Compel Arb. at 8 (citing
Townsend
,