Sosa v. Onfido, Inc.

MEMORANDUM by Onfido, Inc. in support of motion to stay 20 and compel individual arbitration

Northern District of Illinois, ilnd-1:2020-cv-04247

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Case: 1:20-cv-04247 Document #: 21 Filed: 10/12/20 Page 1 of 118 PageID #:111 IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION FREDY SOSA, individually, and on behalf of) all others similarly situated,)) Plaintiff,)) Case No. 1:20-cv-04247 v.)) Honorable Marvin E. Aspen ONFIDO, INC., a Delaware corporation,)) Defendant.) DEFENDANT'S MEMORANDUM OF LAW IN SUPPORT OF ITS MOTION TO STAY AND COMPEL INDIVIDUAL ARBITRATION INTRODUCTION Plaintiff, Fredy Sosa ("Plaintiff"), downloaded the OfferUp app, created an OfferUp account, and later chose to use an optional "TruYou" feature that was developed by Defendant Onfido, Inc. ("Onfido") through his OfferUp account. When Plaintiff created his OfferUp account and each time he subsequently logged into his OfferUp account, Plaintiff agreed to arbitrate "any and all Disputes arising from or related to [the OfferUp] Terms [of Service], the OfferUp Service or the Materials." The Terms of Service include the TruYou feature available through the OfferUp app. Because this dispute falls within the scope of a valid and enforceable arbitration agreement, Onfido respectfully requests that this Court enter an order compelling Plaintiff to arbitrate his claims on an individual basis and stay this action pending such arbitration. BACKGROUND A. Plaintiff's BIPA Claim Concerns The TruYou Feature He Accessed Through His OfferUp Account. Plaintiff alleges he "is a member of an online marketplace where consumers buy and sell goods." (Doc. 1-1, Class Action Compl. ("Compl.") ¶ 33.) That "online marketplace" is OfferUp. Case: 1:20-cv-04247 Document #: 21 Filed: 10/12/20 Page 2 of 118 PageID #:112 Plaintiff alleges OfferUp "strongly encouraged [users] to register their identities" and "partnered with Onfido" for this purpose. (Compl. ¶¶ 33-34.) Plaintiff alleges he "established his identity through the online marketplace's mobile application by uploading a photograph of his driver's license and a photograph of his face. Onfido subsequently used biometric identification technology to extract his biometric identifiers and compare the two photographs." (Compl. ¶ 35.) Plaintiff alleges he did not receive certain information or sign a written release before this occurred. (Compl. ¶¶ 36-38.) Based on these allegations, Plaintiff brings a claim, on behalf of himself and a putative class, under the Biometric Information Privacy Act ("BIPA"), 740 ILCS 14/1 et seq. (Compl. ¶¶ 46-58.) B. Plaintiff Agreed to OfferUp's Terms of Service. At the time Plaintiff signed up for his OfferUp account, he was provided with the terms of service governing his use of the app and services. Garnett Decl. (attached hereto as Ex. 1) ¶¶ 5- 12. He took affirmative action to create his OfferUp account by selecting a "Sign up" button immediately below the following sentence prominently displayed in bright text against a plain white background: "By signing up, you agree to the OfferUp Terms of Service and Privacy Policy." Garnett Decl. ¶¶ 10-12. Additionally, each time Plaintiff subsequently logged into his OfferUp account, he clicked a "Log in" button directly below the following sentence: "By logging in, you agree to the OfferUp Terms of Service and Privacy Policy." The "Terms of Service" and the "Privacy Policy" were hyperlinked on each of these pages and available for his viewing. Garnett Decl. ¶¶ 13-14. At the time Plaintiff created his OfferUp account, the Terms of Service advised: BY ACCESSING OR USING OUR WEBSITE, APPLICATIONS OR OTHER PRODUCTS OR SERVICES (TOGETHER, THE "OFFERUP SERVICE"), YOU AGREE TO BE BOUND BY ALL TERMS DESCRIBED HEREIN AND ALL TERMS 2 4813-3230-4589.2 Case: 1:20-cv-04247 Document #: 21 Filed: 10/12/20 Page 3 of 118 PageID #:113 INCORPORATED BY REFERENCE ("TERMS"). IF YOU DO NOT AGREE TO ALL OF THESE TERMS, DO NOT ACCESS OR USE THE OFFERUP SERVICE. Garnett Decl. at Ex. A p.1. C. OfferUp's Terms of Service Govern Plaintiff's Use Of The OfferUp App, Including His Use Of The TruYou Feature At Issue In This Case, And Require Plaintiff To Individually Arbitrate All Disputes. OfferUp's Terms of Service contain an arbitration agreement. Garnett Decl. at Ex. A § 20. From the time Plaintiff signed up for an OfferUp account through the present, the arbitration agreement has provided: A. Binding Arbitration. Except for any disputes, claims, suits, actions, causes of action, demand or proceedings (collectively, "Disputes") arising out of or related to a violation of Section 7 or Disputes in which either party seeks to bring an individual action in small claims court or seeks injunctive or other equitable relief for the alleged unlawful use of intellectual property, including, without limitation, copyrights, trademarks, trade names, logos, trade secrets or patents, you and OfferUp agree (1) to waive your and OfferUp's respective rights to have any and all Disputes arising from or related to these Terms, the OfferUp Service or the Materials, resolved in a court, and (2) to waive your and OfferUp's respective rights to a jury trial. Instead, you and OfferUp agree to arbitrate Disputes through binding arbitration (which is the referral of a Dispute to one or more persons charged with reviewing the Dispute and making a final and binding determination to resolve it instead of having the Dispute decided by a judge or jury in court). Garnett Decl. at Ex. A § 20(A). The arbitration agreement further provides that, if arbitration is necessary, all parties proceed to arbitration on an individual, not class, basis: B. No Class Arbitrations, Class Actions or Representative Actions. You and OfferUp agree that any Dispute arising out of or related to these Terms, the OfferUp Service or the Materials is personal to you and OfferUp and that such Dispute will be resolved solely through individual arbitration and will not be brought as a class arbitration, class action or any other type of representative proceeding. You and OfferUp agree that there will be no class arbitration or arbitration in which an individual attempts to resolve a Dispute as a representative of another individual or group of individuals. Further, you and OfferUp agree that a Dispute cannot be brought as a class or other type of representative action, whether within or outside of arbitration, or on behalf of any other individual or group of individuals. 3 4813-3230-4589.2 Case: 1:20-cv-04247 Document #: 21 Filed: 10/12/20 Page 4 of 118 PageID #:114 Garnett Decl. at Ex. A § 20(B). The Terms of Service explicitly discuss the "TruYou Feature": We may at times offer features enabling you to apply for or request certain badges (each, a "Badge") to be associated with your OfferUp Service account, including through your account profile. We may make available the TruYou feature ("TruYou"), which is a voluntary feature through which we may associate a TruYou Badge with certain users that have provided personal identification documents (e.g., a driver's license) to us…If you choose to use the TruYou feature, you represent and warrant to us that…you have all necessary permissions to provide such personal identification documents to us and your provision of such personal identification documents to us will not violate any law or regulation or cause us to be subject to any investigation, prosecution or legal action. DO NOT USE THIS FEATURE IF THE FOREGOING IS NOT TRUE. We may disclose your photo identification document or certain personal information you provide to our third- party service providers that may help us to detect inaccurate or fraudulent personal identification documents and related information. Garnett Decl. at Ex. A § 4. The Terms of Service specify: "You will not (and will not allow or authorize any third- party to) post, upload to, transmit, distribute, store, create, solicit, disclose, or otherwise, publish through the OfferUp Service…User Content that is, in OfferUp's judgment, disrespectful or may expose OfferUp, Users or others to harm or liability…" Garnett Decl. at Ex. A § 8. The Terms of Service include limitation-of-liability provisions and indemnity provisions covering "OfferUp and the OfferUp Providers," and define "OfferUp Providers" to include OfferUp's "affiliates or licensors." Garnett Decl. at Ex. A §§ 16, 18, 19. ARGUMENT The Federal Arbitration Act "establishes a liberal federal policy favoring arbitration agreements." Epic Sys. Corp. v. Lewis, 138 S. Ct. 1612, 1621 (2018) (internal quotation marks omitted). The FAA's "text reflects the overarching principle that arbitration is a matter of contract. … [C]ourts must [therefore] rigorously enforce arbitration agreements according to their terms." Am. Express Co. v. Italian Colors Rest., 570 U.S. 228, 233 (2013) (citation and 4 4813-3230-4589.2 Case: 1:20-cv-04247 Document #: 21 Filed: 10/12/20 Page 5 of 118 PageID #:115 internal quotation marks omitted). A court should order arbitration, therefore, where "the following three elements are shown: a written agreement to arbitrate, a dispute within the scope of the arbitration agreement, and a refusal to arbitrate." Zurich Am. Ins. Co. v. Watts Indus., Inc., 417 F.3d 682, 687 (7th Cir. 2005). Although "[t]he FAA does not expressly identify the evidentiary standard a party seeking to avoid compelled arbitration must meet," the Seventh Circuit has "analogized the standard to that required of a party opposing summary judgment under Rule 56(e) of the Federal Rules of Civil Procedure." Tinder v. Pinkerton Sec., 305 F.3d 728, 735 (7th Cir. 2002). In considering a motion to compel arbitration and stay proceedings, the Court is therefore not limited to the facts alleged in the complaint. See, e.g., Cont'l Cas. Co. v. Am. Nat'l Ins. Co., 417 F.3d 727, 733 (7th Cir. 2005). Here, each of the elements necessary to compel arbitration are satisfied, and this Court should enforce the parties' arbitration agreement and require Plaintiff to arbitrate his claims. A. The Terms of Service, Including The Arbitration Agreement They Contain, Are An Enforceable Contract To Arbitrate. "Whether an agreement to arbitrate has been formed is governed by state law." Gorny v. Wayfair, No. 18 C 8259, 2019 WL 2409595, at *5 (N.D. Ill. June 7, 2019). OfferUp's Terms of Service include a choice-of-law provision that designates Washington state law as controlling. Garnett Decl. at Ex. A § 21. Regardless, there does not appear to be a substantive difference between the governing standards in Illinois and Washington with regards to contract formation, and application of either state's law yields the same result: there is an enforceable contract to arbitrate. Under Washington law, "[i]n the context of an electronic consumer transaction, the occurrence of mutual assent ordinarily turns on whether the consumer had reasonable notice of the merchant's terms of service agreement." Weimin Chen v. Sierra Trading Post, Inc., No. 2:18-CV- 5 4813-3230-4589.2 Case: 1:20-cv-04247 Document #: 21 Filed: 10/12/20 Page 6 of 118 PageID #:116 1581-RAJ, 2019 WL 3564659, at *2 (W.D. Wash. Aug. 6, 2019). Notice may be either actual or constructive, and "[c]onstructive notice occurs when the consumer has inquiry notice of the terms of service, like a hyperlinked alert, and takes an affirmative action to demonstrate assent to them." Id. Courts have held that users are bound to terms of service where those terms are available via a hyperlink located near a button that the user clicks, and the user is given notice that clicking the button constitutes acceptance of the terms of service. See, e.g., Weimin Chen, 2019 WL 3564659, at *2-3 (holding user had constructive notice of terms where language near "Place my Order" button "explicitly states that the user agrees to the 'Terms' by placing the purchase order," and the word "Terms" included a hyperlink to full text of the terms); Harbers v. Eddie Bauer, LLC, No. C19-1012JLR, 2019 WL 6130822, at *6–7 (W.D. Wash. Nov. 19, 2019) (holding user was bo