Change in terms provisions are nifty little thing. Add one into a consumer agreement and–in some jurisdictions at least–a business can modify terms to give themselves helpful advantages, even after a consumer has filed suit.
Example: Photo printing app Shutterfly – one of the leading apps for photo storage and prints – just avoided a class action suit by amending its terms and conditions to add an arbitration clause after the lawsuit started. This is a major development and not just because it means companies can slip the class action snare with late-added provisions.
An Illinois Biometric Information Privacy Act (“BIPA”) suit against Shutterfly is potentially existential for all companies that store photos to create prints at user request. These photos will inevitably include faces of non-members who did not consent to storage, as was the case in the immediate lawsuit.
The dispute in Miracle-Pond v. Shutterfly, Inc., No. 19 cv 04722, 2020 U.S. Dist. LEXIS 86083 (N.D. Ill. May 15, 2020) stems from allegations by Plaintiffs Vernita Miracle-Pond (a Shutterfly account holder) and Plaintiff Samantha Paraf (who does not own a Shutterfly account) that Shutterfly (a photo publishing service) unlawfully stored biometric data from its facial-recognition technology.
Plaintiffs, in their June 2019 filing on behalf of themselves and similarly situated Shutterfly users, claim 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’ … biometric identifiers and/or biometric information.’”
On May 15, U.S. District Judge Mary Rowland said that Plaintiff Vernita Miracle-Pond must arbitrate her claims even though Defendant Shutterfly amended its arbitration clause after the lawsuit had begun.
Plaintiff Miracle-Pond argued that she could not agree to a unilateral arbitration provision for which she had not received notice, but Judge Rowland rejected the argument based on Illinois Supreme Court precedent.
Judge Rowland stated, “On the contrary, when parties agree in advance to allow unilateral modifications to the terms of their contract, subsequent modifications are binding regardless of whether the one party later ‘accepts’ the change,” she said.
In particular, the Court here was asked to decide two motions: (1) Shutterfly’s motion to compel arbitration and (2) the Plaintiffs’ motion for curative measures regarding the September 2019 email.
- Whether the web pages presented to the consumer adequately communicate all the terms and conditions of the agreement; and,
- Whether the circumstances support the assumption that the purchaser receives reasonable notice of those terms.
- Arbitration clauses subject to unilateral modification are illusory,
- Miracle-Pond could not have assented to the arbitration provision because Shutterfly failed to provide notice of the 2015 modification, and
- Arbitration clauses that apply retroactively are unenforceable.
In rejecting Plaintiff Miracle-Pond’s second argument, it was noted that Illinois courts have long rejected the argument that notice of an amendment is required to create mutual assent to the amended contract. In fact, Illinois courts have found the opposite to be true.
As for Plaintiff Miracle-Pond’s third argument, the premise of the argument was that Plaintiff “did not agree to arbitration before she filed this lawsuit in June 2019, and that the September 2019 email was an attempt to retroactively force her into arbitration.” Nevertheless, the Court found that Plaintiff is bound by the 2015 modification. In other words, by continuing to use Shutterfly products after the 2015 notice, Plaintiff “agreed that her continued use of Shutterfly’s services would communicate her assent to the most recent version of the Terms and Use posted online at the time of her use.”
Accordingly, the Court granted Shutterfly’s motion to compel arbitration for Plaintiff Miracle-Pond (only Ms. Miracle-Pond had a Shutterfly account subjecting her to Shutterfly’s arbitration agreement) and stayed the litigation for all remaining claims (including Plaintiff Paraf’s claims) pending the outcome of the arbitration.
As for the curative measures claim, Judge Mary Rowland denied the motion due to a lack of persuasive authority on behalf of the Plaintiffs and remarked, “[t]he Court has not and will not rely on the 2019 email to find that any putative class members agreed to arbitrate. Indeed, Shutterfly conceded that the Court need not rely on the 2019 email for that purposes. No remedial measures are necessary.”
So keep it in mind folks–been sued in a class action? If you have a proper change in terms provision you can always just slip in an arbitration clause and avoid the class suit.