A Chicago appeals court will not let digital identity verification service Mitek Systems sidestep a biometrics privacy class action lawsuit to an arbitrator, saying the arbitration agreement in question was between the plaintiff and one of Mitek's customers, not Mitek.
The ruling was laid down Dec. 21 by Circuit Judge Frank Easterbrook, with agreement from Circuit Judges Michael Scudder and John Z. Lee, of the U.S. Seventh Circuit Court of Appeals.
The ruling favored Illinois man Joshua Johnson in his putative class action against Mitek Systems, of San Diego. Mitek provides mobile and online identity verification to clients.
In December 2021, Johnson sued Mitek in Cook County Circuit Court. Johnson said he applied to be a driver with HyreCar, an online car rental company. As part of the hiring process, HyerCar sent Johnson's selfie photograph and a copy of his drivers license to Mitek to confirm Johnson's identity. However, Johnson alleged Mitek scanned his photos to create a template of his facial geometry, but never obtained his consent or furnished certain notifications as required by the Illinois Biometric Information Privacy Act (BIPA).
In January 2022, Mitek moved the case to U.S. District Court for the Northern District of Illinois, citing the U.S. Class Action Fairness Act. Mitek then asked U.S. District Judge Ronald Guzman to send the matter to arbitration. Mitek claimed Johnson had agreed, in his contract with HyreCar, to arbitrate disputes with the company and any “beneficiary of services or goods provided under the Agreement.”
Mitek contended it was included in this arbitration agreement as a "beneficiary of services or goods," because HyreCar paid for Mitek's services.
Judge Guzman did not see it that way.
On appeal, the Seventh Circuit judges sided with Guzman.
"Mitek has its own contract with HyreCar, but it does not have a contract with any of HyreCar’s drivers. It would stretch contractual language past the breaking point to conclude that Johnson or any other driver has agreed to arbitrate with Mitek or any of HyreCar’s dozens, if not hundreds of other suppliers," Easterbrook wrote.
Easterbrook continued, saying the term "'users or beneficiaries of services or goods provided under the Agreement' is best understood as a reference to drivers and people aligned with them in interest. Mitek is not in that set."
In Easterbrook's view, Mitek is not a "beneficiary" of HyerCar, because it does not receive services or goods from HyerCar as a customer, but instead receives payment as a supplier.
Easterbrook ordered the case returned to district court to decide whether the suit may proceed as a class action.
Johnson wants the suit to include what he believes could be at least hundreds of people who similarly uploaded facial images to companies that used Mitek. Based on damages allowed under BIPA, class action members could each try to collect $1,000 to $5,000 for each time their face was scanned by Mitek.
When multiplied across hundreds or perhaps even thousands of users, Mitek could easily face a payout of many millions of dollars, should a jury enter a verdict against Mitek.
Johnson is represented by attorneys Timothy P. Kingsbury and Andrzej Tarnasiewicz-Heldut, of McGuire Law P.C., of Chicago.
Mitek is defended by attorneys Scott T. Schutte and Stephanie Schuster, of the Chicago and Washington, D.C. offices of the Philadelphia-based firm of Morgan, Lewis & Bockius.
Since 2015 in Illinois, thousands of suits have been lodged against employers and other companies under the BIPA law. Settlements in some of these suits have ranged from the hundreds of thousands of dollars to as much as $650 million.
In the first BIPA class action to proceed to trial, jury ordered freight rail operator BNSF to pay $238 million to a class of plaintiffs that included about 45,000 truck drivers. The truckers accused BNSF of improperly requiring them to scan their fingerprints to verify their identities when entering BNSF railyards in Illinois.
Lawyers from the McGuire Law firm, which also represented plaintiffs in that case, are seeking far more, however, as they have asserted the jury verdict was too little, and the court should award them $800 million or more.
Jonathan Bilyk contributed to this report.