Another Proposed Class Action Data Breach Lawsuit Ordered to Individual Arbitration

In an unpublished opinion, a California federal district court issued an order compelling a putative class action data breach lawsuit that was filed against the parent company of a popular smartphone app to arbitration. In Rebecca Elizabeth Murray v. Under Armour Inc., et al., No. 18-cv-4032 (C.D. Cal., February 11, 2019), a California woman, Murray, filed a proposed class action lawsuit in a California state court against Under Armour following a massive data breach of the company’s MyFitnessPal app in 2018.  According to Murray, the data breach exposed the sensitive personal information, including names, addresses, and credit cards numbers, of about 150 million app users.

In her complaint, Murray asserted “causes of action for: (1) breach of implied contract; (2) negligence; (3) unfair competition and unfair business and fraudulent/deceptive business practices in violation of Cal. Bus. & Prof. Code §§ 17200, et seq.; (4) invasion of privacy; (5) negligence per se; (6) “breach of the covenant of duty of good faith and fair dealing”; and (7) violation of California’s data breach statutes, Cal. Civ. Code §§ 1798.80 et seq.”

After the case was transferred to the Central District of California, Under Armour responded to the putative collective action case by filing a motion to compel arbitration.  According to Under Armour, Murray agreed to resolve any disputes with the company via individual arbitration as a condition of using the MyFitnessPal app.  Since May 2016, the app Terms of Use (“TOU”) provide:

To the maximum extent permitted by applicable law, you and Under Armour agree that any dispute resolution proceedings will be conducted only on an individual basis and not in a class, consolidated or representative action. Except where prohibited, you and we agree to submit to the personal and exclusive arbitration of disputes relating to your general use of the Services under the rules of the American Arbitration Association.

Although Murray claimed she never assented to the agreement to arbitrate because she began using the MyFitnessPal app long before the updated TOU went into effect, the federal court was satisfied with Under Armour’s evidence demonstrating all users were required to accept the new TOU in order to continue using the app.

Murray also opposed Under Armour’s motion to compel by arguing her claims were “not amenable to arbitration.”  The federal court responded by stating the terms of the arbitration provision specify that the issue of arbitrability is for an arbitrator to decide.   The court said:

Nonetheless, in light of Henry Schein and because the arbitration agreement here relegates “disputes relating to [plaintiff’s] general use of the Services” and provides that plaintiff “[is] giving up [her] right to have a trial by jury” with respect to “any dispute with [defendant] arising out of or relating to [her] use of the Services,” (see Dkt. 12-1, Agreement at 30-31), the court is persuaded that plaintiff clearly and unmistakably delegated the arbitrability issue to the arbitrator. See, e.g., Esquer v. Educ. Mgmt. Corp., 292 F.Supp.3d 1005, 1012-13 (S.D. Cal. 2017) (holding that incorporation of rules which give the arbitrator power to determine arbitrability, combined with agreement language providing that “any dispute or claim between the [parties] . . . must go to arbitration” clearly and unmistakably delegated arbitrability); Nevarez v. Forty Niners Football Co., LLC, 2017 WL 3492110, *11 (N.D. Cal. 2017) (finding delegation where the agreement provided that the arbitrator had authority “to resolve all disputes arising out of or relating to the interpretation, applicability, enforceability or formation for this Agreement[.]”).

The district court next dismissed Murray’s claim the delegation provision was “procedurally unconscionable as an adhesion contract.”  The court said:

The court agrees with plaintiff that the arbitration agreement here is an adhesion contract because it was “drafted unilaterally by the dominant party and then presented on a take-it-or leave-it basis to the weaker party who has no real opportunity to bargain about its terms.” Walther v. Sovereign Bank, 386 Md. 412, 430 (2005) (internal quotation marks omitted). Nonetheless, “[a] contract of adhesion is not automatically deemed per se unconscionable.” Id. Instead, the court “must examine the substance of the particular provision at issue, the arbitration clause, to decide whether it is unconscionable. To that end, [the court] must consider whether the terms in the arbitration clause are so one-sided as to oppress or unfairly surprise an innocent party or whether there exists an egregious imbalance in the obligations and rights imposed by the arbitration clause.” Id. at 431 (emphasis omitted).

Plaintiff fails to come forward with a convincing reason why the delegation provision of the arbitration agreement is substantively unconscionable. (See, generally, Dkt. 16, Opp.). Indeed, her only arguments as to substantive unconscionability go to provisions of the arbitration agreement beyond the delegation clause. (See id. at 12-13). In sum, plaintiff has not shown that the delegation provision is substantively unconscionable, and in light of the fact “that both procedural and substantive unconscionability must be present in order for a court to invalidate a contractual term as unconscionable[,]” the court declines to hold the delegation provision unenforceable. Stewart v. Stewart, 214 Md.App. 458, 478 (2013).

Finally, the United States District Court for the Central District of California granted Under Armour’s motion to compel the dispute to arbitration.

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