User Ordered to Arbitrate BIPA Claims Despite Shutterfly’s Unilateral Change to Terms of Use

The Northern District of Illinois has ordered a consumer’s Illinois Biometric Information Privacy Act (“BIPA”) lawsuit filed against online photography company Shutterfly to arbitration, despite that Shutterfly unilaterally amended its Terms of Use (“Terms”) after the consumer agreed to them.  In Miracle-Pond, et al. v. Shutterfly, Inc., No. 19-CV-04722 (N. D. Ill., May 15, 2020), a woman, Miracle-Pond, created a Shutterfly user account in August 2014.  As part of this process, Miracle-Pond accepted the company’s Terms.  The Terms included a provision allowing Shutterfly to unilaterally amend its Terms at any time by publishing new Terms on the company’s website.  The Terms also provided that a user accepts any newly published Terms by continuing to use Shutterfly’s services.  In May 2015, Shutterfly added an arbitration provision to the company’s Terms.

Between August 2014 and April 2019, Miracle-Pond uploaded hundreds of photographs to her Shutterfly account.  In June 2019, Miracle-Pond filed a putative class action lawsuit against Shutterfly in Cook County, Illinois.  In her complaint, Miracle-Pond accused Shutterfly of violating BIPA, 740 ILCS 14/1, et seq., by extracting facial recognition information from photographs that were uploaded by users and then “selling, leasing, trading, or otherwise profiting from” doing so.  In response, Shutterfly removed the case to federal court and filed a motion to compel the dispute to arbitration based on the company’s Terms.

The federal court first addressed Miracle-Pond’s assertion that Shutterfly’s Terms should not apply to her because they constituted a browsewrap agreement:

The parties dispute whether the alleged agreement before the Court is a “clickwrap” or “browsewrap” agreement. A “clickwrap” agreement is formed when a website user clicks a button or checks a box that explicitly affirms that the user has accepted the terms after having the opportunity to scroll through the terms posted on the website, and this type of agreement is generally enforced. Topstep Trader, 2018 WL 1859040, at *2; Sgouros v. TransUnion Corp., No. 14 C 1850, 2015 WL 507584, at *4 (N.D. Ill. Feb. 5, 2015), aff’d, 817 F.2d 1029 (7th Cir. 2016) (citing Nguyen v. Barnes & Noble, 763 F.3d 1171, 1175-76 (9th Cir. 2014)); see also, Van Tassell v. United Mktg. Grp., LLC, 795 F.Supp.2d 770, 790 (N.D. Ill. 2011) (courts “regularly uphold” clickwrap agreements when structured properly). A “browsewrap” agreement, on the other hand, is an agreement where users are bound by the website’s terms by merely navigating or using the website; the user is not required to sign an electronic document or explicitly click an “accept” or “I agree” button. Sgouros, 2015 WL 507584, at *6. “Courts enforce browsewrap agreements only when there is actual or constructive knowledge of terms.” Id.

According to Ms. Miracle-Pond, Shutterfly presented users with a browsewrap agreement because the text above the “Accept” button stated: “By tapping ‘Accept’, you agree to use the Shutterfly for Android software and the associated Shutterfly services in accordance with Shutterfly’s Terms of Use.” Because the page did not say: “by tapping ‘Accept’, you agree to the Terms of Use,” Ms. Miracle-Pond argues that she only agreed to use Shutterfly services in accordance with the Terms of Use; she did not assent to be bound by the Terms of Use. (Dkt. 37, 6). Yet this distinction is largely irrelevant given the nature of the agreement. The crucial difference between a clickwrap and browsewrap agreement is that the former requires affirmative assent and affirmative action, while the latter does not. Sgouros, 2015 WL 507584, at *6 (browsewrap agreements “do not require users to ‘sign a document or click an ‘accept’ or ‘I agree’ button”) (citing Nguyen, 763 F.3d at 1176). Here, Shutterfly’s page presented the Terms of Use for viewing, stated that clicking “Accept” would be considered acceptance of the Terms of Use, and provide 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, a reasonable user who completes that process would understand that she was manifesting assent to the Terms. Johnson v. Uber Techs., Inc., No. 16 C 5468, 2019 WL 4503989, at *4-5 (N.D. Ill. Sep. 20, 2018) (finding a valid clickwrap agreement). Ms. Miracle-Pond has failed to raise a genuine dispute as to whether she entered into an enforceable agreement with Shutterfly. Shutterfly’s agreement is clearly a valid clickwrap agreement and Ms. Miracle-Pond agreed to be bound by Shutterfly’s Terms of Use.

After determining Shutterfly’s terms constituted an enforceable clickwrap agreement, the Northern District of Illinois turned to Miracle-Pond’s claim the arbitration agreement included in Shutterfly’s Terms did not apply to her case because the change to her agreement with Shutterfly was unilateral, the company failed to inform her of the changes to its Terms, and retroactive arbitration provisions are invalid.  The Northern District of Illinois noted the Shutterfly Terms in effect when Miracle-Pond accepted them explicitly stated the company may update its Terms at any time by simply posting new Terms on Shutterfly’s website:

Ms. Miracle-Pond counters that Illinois courts only uphold change-in-term provisions when the plaintiff is given notice of the change. She further argues that she could not assent to an arbitration provision of which she had no notice. However, the Illinois Supreme Court has explained that when a “service agreement…expressly reserve[s] the right” of the drafter “to unilaterally modify the terms and conditions of the agreement, at any time, without notice,” and the customer “accepted this condition” by signing the service agreement, the drafter’s right to subsequently modif[y] the arbitration provision in that agreement ends only when the service agreement is “terminated” and “no longer in effect.” Kinkel v. Cingular Wireless LLC, 223 Ill.3d 1, 14 (Ill. 2006) (emphasis added). Illinois courts have additionally rejected the argument that notice of an amendment is necessary to create “mutual assent” to the amended contract. 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 other party later “accepts” the change. Southport Bank v. Miles, No. 10 C 8321, 2014 WL 1292452, at *2-3 (N.D. Ill. Mar. 27, 2014) (rejecting the argument that “unilateral contract modifications are not valid” and holding that, where the parties to an agreement “expressly reserved the right” of one party “to unilaterally modify the loan agreement,” such modifications were valid and enforceable even if they were “never assented to” by the counterparty) (citing Kinkel, 223 Ill.3d at 14).

Such is the case here. In 2014, Ms. Miracle-Pond entered into a service contract that explicitly gave Shutterfly’s the right to unilaterally modify the agreement at any time and without notice, other than posting the modified terms on their website. It is undisputed that Shutterfly posted the modified Term of Use on its website in May 2015. Ms. Miracle-Pond indicated her acceptance to the modified Terms of Use by continuing to use Shutterfly products. Her arguments regarding lack of notice are thus unavailing. Ms. Miracle-Pond is accordingly bound by the 2015 modifications to the Terms of Use.

The federal court then dismissed Miracle-Pond’s claim that an email sent to Shutterfly users regarding the company’s newly updated Terms several months after she filed her putative class-action lawsuit constituted a surreptitious attempt to bind all potential class members to arbitration.

First, Plaintiffs’ characterization of the email is largely incorrect. Plaintiffs argue that this email was an attempt to bind unwitting class members to an arbitration agreement after this lawsuit was filed. Yet Shutterfly had an arbitration agreement in its Terms of Use since May 2015. As the Court already determined above, individuals who created Shutterfly accounts before the May 2015 modification, and continued to use Shutterfly’s services, are bound by the 2015 agreement to arbitrate. Individuals who signed up for a Shutterfly account after May 2015 are also bound by that arbitration agreement. Importantly, the Court did not rely on September 2019 email to reach that conclusion. The September 2019 email did not impose a new arbitration provision on putative class members. Rather, Shutterfly users and accountholders were already bound by the 2015 arbitration agreement.

Additionally, the cases cited by Plaintiffs in support of their motion are distinguishable. Those cases involved defendants who, during the litigation, sought to impose arbitration agreements for the first time on class members for the purpose of thwarting the class action. See, for example, DeGidio v. Crazy House Saloon & Rest., 880 F.3d 135, 138 (4th Cir. 2018) (“at the very end of the discovery period […], Crazy Horse began entering [into] arbitration agreements with entertainers who had worked at the club”); Billingsley v. Citi Trends, Inc., 560 F. App’x 914, 919 (11th Cir. 2014) (defendant “did not conceive or begin to institute its ADR policy” until briefing schedule set on motion for conditional certification of collective action); Brodsky, 2016 WL 5476233, at *12 (new arbitration agreements sent to class members “long after this case was filed” and shortly before class-certification briefing). Other cases cited by Plaintiffs either do not involve arbitration agreements but rather outright releases, or include attempts to intimidate class members. See, for example, Marino v. CACafe, Inc., No. 16 C 6291, 2017 WL 1540717, at *1 (N.D. Cal. Apr. 28, 2017) (defendants emailed a release to employees that “did not state that a lawsuit had been filed”); Sloan v. Ameristar Casinos, Inc., No. 12 C 01126, 2013 WL 5548316, at *1-2 (D. Colo. Oct. 3, 2013) (employer sent letters and conducted one-on-one interviews “intentionally intended to frighten and dissuade” employees from “joining the class”). Unlike Plaintiffs’ cited cases, Shutterfly did not add a new arbitration agreement while this lawsuit was pending in an attempt to thwart the class action. Rather, Shutterfly’s users were already bound by an arbitration agreement that had been in existence for several years before this lawsuit began. There is also no indication that Shutterfly’s email was an attempt to secure a release or intimidate class members.

Because Shutterfly reserved the right to unilaterally amend its Terms of Use and the company added an arbitration provision to its Terms in 2015, the Northern District of Illinois granted Shutterfly’s motion to compel Miracle-Pond’s case to arbitration.

Photo by: Marco Xu on Unsplash