CHICAGO — A federal judge has denied an identity verification company’s attempt to use an arbitration provision in a customer user agreement to end a class action accusing it of violating Illinois' biometrics privacy law.
The underlying issue involves Fredy Sosa, a member of online resale marketplace OfferUp, who sued Onfido Inc., alleging the company violated the Illinois Biometric Information Privacy Act when verifying the identities of OfferUp users with its TruYou feature.
Sosa said he uploaded a photograph of his face and an image of his driver’s license at Onfido’s instruction. But Sosa alleged he never signed a written release allowing the company to store his personal data, and further that Onfido didn’t provide a policy on the retention and destruction of the images.
Sosa’s class action is one of thousands of similar suits alleging BIPA violations filed in recent years against companies that use personal data, such as fingerprints and facial scans. A common thread in such litigation is allegations of failure to inform people providing the data how long it will be stored and whether it will be disclosed to third parties, as well as failing to collect written consent for the use of the identifying information.
Sosa's lawyers, with the firm of Edelson P.C., of Chicago, are seeking to expand the action to include anyone in Illinois who verified their identity on OfferUp using Onfido's TruYou program.
In an opinion issued Jan. 5, U.S. District Judge Marvin Aspen denied Onfido's attempt to stay Sosa’s complaint and compel individual arbitration. Onfido had cited a clause in OfferUp’s service contract and privacy policy. Sosa argued Onfido isn’t a party to the agreement between OfferUp and its users.
Aspen said Sosa rooted his position in Illinois law, while Onfido invoked a Washington state law. The judge determined Illinois law should prevail.
“Ordinarily, only signatories to an arbitration agreement are entitled to enforce it,” Aspen wrote. “However, courts have recognized exceptions to this rule.”
Onfido said it qualified for those exceptions, citing common-law doctrines of being a third-party beneficiary, equitable estoppel and agency.
Aspen agreed with Sosa’s position Onfido wasn’t intended to be a party to OfferUp’s user agreement. He noted that while the agreement does have an arbitration provision, it includes a notice “requiring a user to provide notice of an arbitrable dispute to the other side," but only provides contact information for OfferUp and no indication of how to contact Onfido or other third parties. Sosa also said the services terms include a provision “expressly disclaiming a private right of action on the part of any third party.”
In rejecting Onfido’s estoppel argument, Aspen wrote “there is good reason to believe” the Illinois Supreme Court would side with the way Sosa framed the issue. Judge Aspen said Onfido didn’t address that standard until its reply brief, effectively waiving its argument. Furthermore, he said, Onfido’s “argument fails for the separate reason that it goes to the merits of the case rather than the arbitration provision’s enforceability.”
Finally, Onfido said it was acting as an agent of Offerup, and should be covered by the arbitration provision in the user agreement. The company said its TruYou feature was discussed in OfferUp’s terms of service, which should establish it was acting as OfferUp’s agent in that context.
Sosa, however, said Onfido failed to meet Illinois law’s specific definition of “agent." Aspen agreed, noting “nothing in the record suggests that there was a formal principal-agent relationship between (Onfido) and OfferUp, such that OfferUp could control (Onfido’s) activities, or (Onfido) could conduct legal transactions in OfferUp’s name.”
Routine business partnerships, Aspen continued, do not automatically establish the type of legal agency Onfido cited in its motion.
Finding no reason to move the dispute to arbitration, Aspen rejected Onfido’s motion to stay the lawsuit.
Onfido is represented in the case by attorneys with the firm of Baker & Hostetler, of Chicago, Orlando and Denver.