Illinois Federal Court Finds Shutterfly User Must Arbitrate Illinois Biometric Privacy Claim Even Though Shutterfly Unilaterally Amended Its Arbitration Clause

Plaintiffs Vernita Miracle-Pond and Samantha Paraf, each Shutterfly users with a Shutterfly account, sued defendant Shutterfly Inc., on behalf of themselves and similarly situated Shutterfly users, under the Illinois Biometric Information Privacy Act (BIPA) claiming that Shutterfly violated 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." Shutterfly moved to compel arbitration for Miracle-Pond and to stay the litigation pending the outcome of the arbitration.

The court first analyzed whether Miracle-Pond agreed to the terms of use in 2014. Miracle-Pond argued that she did not assent to Shutterfly's terms of use when she formed her Shutterfly account because the terms of use are a "browsewrap" agreement, and thus she merely agreed that her use of Shutterfly's website and services would comply with the terms of use, not that she would be bound by them. The court rejected that argument, finding that Shutterfly's agreement was a valid "clickwrap agreement" as Shutterfly's page presented the terms of use for viewing, stated that clicking "accept" would be considered acceptance of the terms of use, and provided both an "accept" and "decline" button. "Because Shutterfly's 'app contained a clear and conspicuous statement that ... a user agreed to the Terms of Service and Privacy Policy' by clicking a link or pressing a button," the court found that a reasonable user who completes that process would understand that he or she was manifesting assent to the terms. Miracle-Pond, therefore, agreed to be bound by Shutterfly's terms of use.

Notably, the terms of use accepted by Miracle-Pond in 2014 did not contain an explicit arbitration provision. Rather, Shutterfly added an arbitration provision to its terms of use in May 2015. Thus, Miracle-Pond argued that even if a contract was formed between the parties, there was no valid agreement to arbitrate because: (1) arbitration clauses subject to unilateral modification are illusory; (2) Miracle-Pond could not have assented to the arbitration provision because Shutterfly failed to provide notice of the 2015 modification; and (3) arbitration clauses that apply retroactively are unenforceable.

The court found that in 2014, Miracle-Pond entered into a service contract that explicitly gave Shutterfly the right to modify the agreement unilaterally at any time and without notice, other than posting the modified terms on its website. Shutterfly posted the modified terms of use on its website in May 2015, and Miracle-Pond indicated her acceptance to the modified terms of use by continuing to use Shutterfly products. The court rejected Miracle-Pond's arguments regarding lack of notice and held that Miracle-Pond was bound by the 2015 modifications to the terms of use.

In September 2019, about three months after Miracle-Pond filed this lawsuit, Shutterfly sent an email to all of its users nationwide, which notified Shutterfly users that the terms of use had been updated. Miracle-Pond argued that 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" and that a new agreement to arbitrate could not apply retroactively to her claims. The court rejected her argument and found that she was bound by the 2015 modification and therefore agreed to arbitrate her claims in 2015 - well before she filed this lawsuit.

Lastly, Miracle-Pond argued that even if the arbitration clause was valid, plaintiffs cannot waive their right to class arbitration of their claim for an injunction under California's McGill rule, which provides that plaintiffs cannot waive their right to public injunctive relief in any forum, including in arbitration. But the court found that the plaintiffs' substantive claim arose under an Illinois statute - BIPA - not under the consumer protection laws of California, making the McGill rule inapplicable to the arbitration agreement in this case.

Accordingly, the court granted Shutterfly's motion to compel arbitration for Miracle-Pond and stay the proceedings.

Miracle-Pond v. Shutterfly, Inc., No. 1:19-cv-04722 (N.D. Ill. May 15, 2020).