Federal Court Sends Data Privacy Dispute to Arbitration

The Northern District of Illinois has ordered a proposed class action data privacy lawsuit that was filed against a telecommunications company to arbitration.  In O’Neil v. Comcast Corp., No. 18-04249 (N.D. Ill., February 27, 2019), a customer, O’Neil, subscribed to Comcast’s Xfinity wireless internet service for her home.  Prior to securing the service, O’Neil signed a subscriber agreement that contained a binding arbitration clause as well as a prohibition on collective action.  Interestingly, the arbitration provision also allowed customers to opt-out within 30 days of service activation. O’Neil did not opt-out.

Later, Comcast apparently created several unauthorized wireless telephone accounts in O’Neil’s name.  After receiving a bill for the fraudulent accounts, O’Neil reported the matter to both Comcast and the local police.  O’Neil then filed a putative class action lawsuit against the telecommunications company in the Northern District of Illinois.

According to O’Neil’s complaint, Comcast failed to reasonably protect the personal information of its customers, violated the Illinois Consumer Fraud and Deceptive Business Practices Act, and enjoyed unjust enrichment as a result.  Comcast responded to O’Neil’s data privacy lawsuit by filing a motion to compel the case to arbitration based on the terms of the signed subscriber agreement.  O’Neil opposed the company’s motion by arguing the mandatory arbitration provision applied only to the home internet service she had actually subscribed to.  The customer also claimed the arbitration agreement was unconscionable.

The federal district court first determined that a valid agreement to arbitrate existed between the parties.  After that, the court examined whether the parties’ dispute fell within the scope of the mandatory arbitration agreement.  The Northern District of Illinois found that the arbitration provision was “quite broad in scope,” and O’Neil’s claims were “inherently” related to her relationship with Comcast.  Because of this, the court ruled the arbitration provision applied to the case before it.

Next, the court dismissed O’Neil’s claim that the arbitration agreement did not apply to an unforeseeable tort like the theft of O’Neil’s personal information. The court said:

However, the Seventh Circuit has routinely held that a party may not avoid a contractual arbitration clause by casting its complaint in tort. Sweet Dreams Unlimited, Inc. v. Dial-A-Mattress Int’l, Ltd., 1 F.3d 639 , 643(7th Cir. 1993). Furthermore, Plaintiff specifically agreed to arbitrate all tort and fraud claims.

The federal court then ruled the arbitration provision applied to the case before it despite the purported fraud:

Plaintiff also raises a series of arguments centered on the assertion that she never signed a separate agreement pertaining specifically to Xfinity Mobile services. Plaintiff argues that because she never entered into a “mobile services agreement” with Defendants, they cannot now require her to arbitrate claims arising from the unauthorized access of her Xfinity Mobile account. However, Defendants do not claim that such a contract exists. Rather, they argue that the arbitration provision in the 2017 Subscriber Agreement determines the outcome in this case. Therefore, Plaintiff’s reliance on cases in which the plaintiff had no prior relationship with the defendant is misplaced. Plaintiff cites to Maranto v. Citifinancial Retail Services, No. Civ.A. 05-0359, 2005 U.S. Dist. LEXIS 31352 , [2005 BL 73567], 2005 WL 3369948 (D. La. Nov. 18, 2005) and Boran v. Columbia Credit Services, No. 3:06CV806, 2006 U.S. Dist. LEXIS 84659 , 2006 WL 3388400 (D. Conn. Nov. 21, 2006). Both cases involved an identity thief who opened a credit card in the plaintiff’s name—and in the process, signed an arbitration agreement in the plaintiff’s name. This case is distinguishable from Maranto and Boran because here there is a contract between Plaintiff and Defendants that existed prior to the fraud. Plaintiff apparently views her Xfinity Mobile account as requiring a different contract with its own arbitration agreement. However, the Court need not resolve that argument because the Court has already found Plaintiff’s claims to be within the scope of the arbitration provision in the 2017 Subscriber Agreement. Accordingly, Defendants have satisfied the three requirements for a motion to compel arbitration. Zurich, 466 F.3d at 580 .

Finally, the federal court determined the arbitration agreement was neither procedurally nor substantively unconscionable.  The court stated O’Neil’s unconscionability claim failed because the arbitration requirement was made clear to readers of the subscriber agreement, the arbitral provision was not unlimited in scope, and the agreement provided customers with an opportunity to opt-out.

Because the mandatory arbitration provision at issue applied to O’Neil’s case and it was not unconscionable, the Northern District of Illinois granted Comcast’s motion to compel the data privacy case to arbitration.

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