Court Sends Wyze Labs Privacy Suit to Arbitration

Wyze provides home security monitoring and cameras. (They have a range of “smart home” products.) Plaintiffs sued Wyze on behalf of a putative class alleging that Wyze failed to safeguard their personal information. Wyze moved to compel arbitration. The court grants the motion.

The court notes there’s not a wealth of authority in Washington state dealing with online agreements, but the cases “have consistently upheld arbitration provisions contained in clickwrap agreements.”

Plaintiffs took issue with the fact that the arbitration agreement was not presented at the time of purchase, but rather when plaintiffs downloaded the app (which they needed to use the equipment). The court “does not view the time period between purchase and notice as legally significant.” Given that the primary purpose in purchasing the equipment was monitoring, which consumers needed the software (and registration) to accomplish.

The court says the presentation of the link was sufficient to support a valid agreement. The court does talk about some changes by Wyze in the presentation of the link (Wyze tried to highlight the fact that there was an arbitration clause), but this does not appear to be legally significant in the court’s view. The screenshots above illustrate various iterations of Wyze’s sign up process where Wyze presents the terms to users (most recent at left and the oldest at right).

Plaintiffs argued it was improper that Wyze did not present evidence of agreement by each of the plaintiffs. The court says this is not necessary, as long as Wyze can competently testify regarding the processes in place and what would typically occur.

Finally, plaintiffs argued that the court (and not the arbitrator) should consider their unconscionability argument. The court again disagrees, saying it’s the arbitrator’s task in the first instance. (Plaintiffs moved for reconsideration on this issue, but the court declined to reconsider its decision.)

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Arbitration is a tough hurdle in consumer (and privacy) class actions. As devices are increasingly paired with software (and need software to function), companies have a relatively easy means to introduce arbitration into the mix. To the extent they successfully do so, many privacy lawsuits targeting the practices of consumer products will be derailed. This case is a good illustration of that.

We’ve blogged about various products where the user was not presented with an arbitration clause at purchase but at a later point. One case worth revisiting is Tompkins v. 23andMe. 23andMe did not present any arbitration clause (or any terms at all) at the point of purchase, but sought to rely on an arbitration clause presented in terms at the time of registration (which the user needed to do in order to view the 23andMe test results). In his initial post about that case, Eric flags why this type of a practice is problematic from a contract formation standpoint:

This resolution isn’t satisfying because it treats the registration process as a completely new contract, when I see it as an amendment of the existing contract formed when the buyer made the purchase. If it’s an amendment, then the delivery of services can’t provide new consideration because that’s why the buyer bought the services in the first place.

A problem in these cases (where terms are imposed after the fact, such as at the point of registration or software download) is that the consumer cannot see many of the contract terms that deal with the treatment of personal information at the time of purchase. If the user is not getting anything new when they agree to these terms at the time of registration or account creation, should this result in an online contract being formed? In the Tompkins case, on appeal, the Ninth Circuit ignored the contract formation issue entirely. (See this roundup post mentioning the appeal in that case.)

The court’s conclusion on the evidentiary question is worth noting. Eric recently blogged about a case where the company in question didn’t deliver adequate evidence to assure the court there was an agreement. In both cases, courts are looking for evidence of how things are typically done, and I don’t understand them to be asking a defendant to produce evidence of actual assent by the individual in question. Courts appear surprisingly tolerant of defendants’ failure to produce specific evidence of an agreement.

I could see the plaintiffs appealing this one. Among other things, the motion to consider points to one argument they may raise on appeal: whether the court should examine the arbitrability question in a consumer contract. That question doesn’t seem particularly novel or exciting but could still be good fodder for an appellate ruling.

Case citation: In re Wyze Data Incident Litigation, 2:20-cv-00282-JCC (W.D. Wash. Oct. 22, 2020)

Related posts:

• How Zappos’ User Agreement Failed In Court and Left Zappos Legally Naked (Forbes Cross-Post)
• Barnes & Noble’s Online Contract Formation Process Fails –Nguyen v. Barnes & Noble
• Courts Struggling Needlessly With Online Contracting Practices
• The “Browsewrap”/”Clickwrap” Distinction Is Falling Apart
• Judge Can’t Decide if Facebook’s User Agreement is a Browsewrap, But He Enforces It Anyways–Fteja v. Facebook
• Court Disregards Check-the-Box Agreement and Doesn’t Enforce Venue Clause — Dunstan v. comScore
• Forum Selection Clause in “Submerged” Terms of Service Presumptively Unenforceable — Hoffman v. Supplements Togo
• Second Circuit Says Arbitration Clause in Terms Emailed After-the-Fact Not Enforceable – Schnabel v. Trilegiant
• Clickthrough Agreement With Acknowledgement Checkbox Enforced–Scherillo v. Dun & Bradstreet
• Contract Formed Even If Customer Never Received It–Schwartz v. Comcast
• 23andMe’s Browsewrap Fails, But Its Post-Purchase Clickthrough Works Anyway–Tompkins v. 23andMe
• Telephony Provider Didn’t Properly Form a “Telephone-Wrap” Contract–James v. Global Tel*Link