A plaintiff recently lost her battle with Shutterfly in the Northern District of Illinois when the Court ruled that Shutterfly’s arbitration clause was binding, notwithstanding Shutterfly’s unilateral amendments to its Terms of Use, including adding an arbitration provision after plaintiff clicked “Accept.”  The case is now stayed pending the outcome of arbitration.

The plaintiff was a Shutterfly user who had clicked “Accept” upon registering in 2014, thereby agreeing to Shutterfly’s then-existent Terms of Use (which did not include an arbitration provision).

Since 2014, Shutterfly has updated its Terms of Use numerous times.  In 2015, Shutterfly added an arbitration provision to its Terms of Use.  Since then, all of Shutterfly’s Terms of Use have had an arbitration provision, stating, inter alia, “you and Shutterfly agree that any dispute, claim, or controversy arising out of or relating in any way to the Shutterfly service, these Terms of Use and this Arbitration Agreement, shall be determined by binding arbitration.”

The plaintiff brought sued in 2019 alleging that Shutterfly violated the Biometric Information Privacy Act (BIPA), by using facial recognition technology to “tag” individuals and by “selling, leasing, trading, or otherwise profiting from Plaintiffs’ and Class Members’ biometric identifiers and/or biometric information.”

In September 2019, after plaintiff’s suit was filed, Shutterfly sent an email notice to users informing them that Shutterfly’s Terms of Use had again been updated.  The email included numerous policies unrelated to arbitration, and then stated: “We also updated our Terms of Use to clarify your legal rights in the event of a dispute and how disputes will be resolved in arbitration.”  It further stated: “If you do not contact us to close your account by October 1, 2019, or otherwise continue to use our websites and/or mobile applications, you accept these updated terms.”

In the lawsuit, Shutterfly moved to compel arbitration, pursuant to the agreement it had entered into with the plaintiff, and which Shutterfly unilaterally agreed, and the Court agreed with Shutterfly on the following grounds:

  • Illinois Courts allow parties to agree to authorize one party to modify a contract unilaterally, and have repeatedly recognized the enforceability of arbitration provisions added via a unilateral change-in-terms clause (notwithstanding the lack of a notice provision).
  • The Terms of Use plaintiff agreed to in 2014 included a change-in-terms provision (i.e., “YOUR CONTINUED USE OF ANY OF THE SITES AND APPS AFTER WE POST ANY CHANGES WILL CONSTITUTE YOUR ACCEPTANCE OF SUCH CHANGES …”)
  • After Shutterfly added an arbitration provision in 2015, plaintiff placed four orders for products (between 2015 and 2018).

The Court was further unbothered by Shutterfly’s post-Complaint email on grounds that plaintiff agreed to arbitrate her claims in 2015 – well before her lawsuit was filed.

Notably this same case may have had  a different outcome if it concerned a California privacy statute (or non-privacy statute), instead of BIPA.  One of plaintiff’s defenses – the McGill Rule – provides that plaintiffs cannot waive their right to public injunctive relief in any forum, including in arbitration.  McGill v. Citibank, 2 Cal. 5th 945, 215 Cal. Rptr. 627, 393 P.3d 85 (2017) (note: whether the McGill Rule is preempted by the Federal Arbitration Act is the subject of a currently pending petition for certiorari before the Supreme Court, which is fully briefed and scheduled for consideration at the Court’s May 28, 2020 conference, see Blair v. Rent-A-Center).  In response to this argument, Shutterfly argued that the McGill rule only applies to claims arising under California’s consumer protection laws, and the plaintiffs in the case were seeking a private injunction, not a public one.  The Court did not address the private vs. public injunction argument, but agreed with Shutterfly that because the plaintiff’s claim arose under BIPA, and not a California consumer protection law, the McGill Rule was inapplicable.