Can EdTech Vendors Force Parents into Arbitration?–Shanahan v. IXL

November 9, 2024 · by · in Licensing/Contracts, Privacy/Security

IXL Learning sells edtech subscription services to schools. The plaintiffs claim that IXL “collected and monetized the data of millions of school-age children who used the IXL platform without parental consent,” in violation of the ECPA and state law. IXL sought to send the case to arbitration.

But how? IXL could impose a mandatory clickthrough on its users, but the primary users are children with limited capacity to agree to TOSes. IXL could require those children to get parental consent before they can use it, but (1) this would require someone to authenticate the parental status, and no one wants to do that work, and (2) the access barrier would reduce children’s usage, making the IXL service less valuable to its school customers.

IXL’s standard TOS says that schools and users must arbitrate any disputes with IXL, but IXL never formed this TOS with parents. The TOS also encourages schools to pass through terms to parents. The contract says:

If you are a School providing the Service to children under 13, you represent and warrant that you have the authority to provide consent on behalf of parents for IXL to collect information from students under 13 before allowing such students to access our Service. We recommend that all Schools provide appropriate disclosures to students and parents regarding their use of service providers such as IXL and that they provide a copy of our Privacy Policy and the IXL Learning Student Data Privacy Pledge to parents.

In light of this rep & warranty, IXL could in theory sue schools if the parents object to the data collection. However, vendors who sue their customers tend not to last very long in the market. IXL could harangue schools to comprehensively implement the pass-through disclosures or otherwise obtain proper consent from parents, but this would be a Sisyphean task. It’s unclear if IXL devoted any resources to the pass-through effort.

IXL unsuccessfully tries to get around these obvious problems.

COPPA. IXL argued that COPPA turned schools into the parents’ agents for TOS consent purposes. If you’re wondering where this argument came from, so was I.

IXL anchors the argument in a comment the FTC issued during rulemaking in 1999, saying that COPPA doesn’t prohibit parents from designating schools as their agents for purposes of giving consent to COPPA-regulated activities. (The FTC reinforced this non-prohibition in a 2020 blog post). Indeed, well-run school districts could add edtech agency designations to the list of consents they require from parents, but many school districts already are overtaxed by the voluminous administrative burdens of getting parental consent to everything. In any case, the court easily rejects this argument.

The court also notes that the plaintiffs aren’t suing IXL for COPPA violations (nor could they–there’s no privacy right of action in COPPA). Undeterred, IXL argued that the COPPA authority carried the bonus payload of authorizing schools to bind parents to arbitration as well. The court responds that even if COPPA had created an implied agency between the schools and parents, schools’ consenting to arbitration for the parents would exceed that authority.

The TOS Pass Throughs. IXL pointed to the schools’ R&W. The court responds:

To bind the parents to the arbitration agreement, IXL must show that the parents’ conduct caused the school districts or IXL to believe that the school districts had authority to bind the parents

Agency. IXL argued that, per the common law, parents authorize schools as their agents. The court doesn’t see how to position the parents as the principals in a principal-agent relationship:

there is no evidence that Plaintiffs directed or controlled the school districts’ decisionmaking as to how to provide educational services, which educational vendors to engage, or what terms should be included in their vendor contracts. Nor is there any evidence that Plaintiffs dictated what the school district should or should not do in its selection of vendors or contracting with those vendors, in specific or general terms…

Even assuming an agency relationship is present, IXL has not shown that signing an arbitration agreement on the students’ and their parents’ behalf is within the scope of the school districts’ agency…it is hard to see why it would be “necessary” for parents and students to surrender their jury trial rights and consent to arbitration in order to obtain educational services from the school district

Policy Arguments. IXL argued that if the court doesn’t give it arbitration, then “IXL would effectively be prevented from applying any of their terms of use.” The court says that IXL can handle this by requiring schools to impose pass-through terms.

Parental Ratification of the TOS. IXL argued that parents ratified the TOS because they let their kids keep using the software. The court responds that the parents had no choice in the matter (schools required students to use IXL), so there’s no voluntary assent.

Implications. Unsurprisingly, the court denies IXL’s arbitration request. By implication, none of its TOS terms are currently binding on parents or students, so IXL is currently freeballing it. IXL has only unattractive options to fix this problem, as do all other edtech vendors.

This raises important and difficult questions about how edtech vendors can handle risk management. The most likely denouement is that vendors will press schools to get even more consents from parents in a blizzard of back-to-school paperwork, a resolution with its own disadvantages. IXL will also need to monitor/audit its school customers to ensure the consents are obtained, another drain on its resources.

A far better solution would be address the edtech consent/passthrough issues statutorily so that individual parental consents aren’t required. There’s no way such a bill could make it through Congress, but it could make it through some state legislatures. Edtech vendors would have to agree to onerous minimum practices as the price of such certainty (after all, we’re talking about the privacy of kids), and I wonder if they would be willing to strike such a deal.

Case Citation: Shanahan v. IXL Learning, Inc., 2024 WL 4658276 (N.D. Cal. Nov. 1, 2024). The CourtListener page. IXL’s attorneys are David Peter Fuad and Thomas King-Sun Fu of Orrick. I’m still mulling whether their arguments were inspired, mockably flawed, or a Pickett’s Charge that IXL always expected to fail.

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