{"id":1231,"date":"2024-02-21T18:09:33","date_gmt":"2024-02-21T22:09:33","guid":{"rendered":"https:\/\/blogs.duanemorris.com\/classactiondefense\/?p=1231"},"modified":"2024-11-07T13:14:47","modified_gmt":"2024-11-07T17:14:47","slug":"seventh-circuit-affirms-minors-are-not-parties-bound-to-arbitrate-claims-in-gipa-class-action","status":"publish","type":"post","link":"https:\/\/blogs.duanemorris.com\/classactiondefense\/2024\/02\/21\/seventh-circuit-affirms-minors-are-not-parties-bound-to-arbitrate-claims-in-gipa-class-action\/","title":{"rendered":"Seventh Circuit Affirms Minors Are Not Parties Bound To Arbitrate Claims In GIPA Class Action"},"content":{"rendered":"

\"\"<\/a>By Gerald L. Maatman, Jr., Derek S. Franklin, and George J. Schaller<\/b><\/p>\n

Duane Morris Takeaways<\/i>: <\/b>In<\/i> <\/b>Coatney, et al. v. Ancestry.com DNA, LLC, No. 22-2813, 2024 U.S. App. LEXIS 3584 (7th Cir. Feb. 15, 2024)<\/i>, the Seventh Circuit <\/i>affirmed<\/i><\/a> the district court\u2019s denial of Ancestry\u2019s motion to compel arbitration on the grounds that minors were not parties to arbitration agreements entered by their guardians and the Defendant.\u00a0 Circuit Judge Michael B. Brennan wrote the opinion of the Seventh Circuit panel. <\/i><\/p>\n

For companies facing class actions under the Illinois Genetic Information Privacy Act (\u201cGIPA\u201d) involving alleged disclosure of confidential genetic information, this ruling is instructive on dispute resolution provisions and how drafting those provisions can dictate who is bound to arbitrate claims. <\/i><\/p>\n

Case Background<\/b><\/p>\n

Defendant, Ancestry.com DNA, LLC (\u201cAncestry\u201d) is a genealogy and consumer genomics company that allows users to create accounts to purchase DNA test kits, which Ancestry collects consumer saliva samples.\u00a0 Id. <\/i>at 2.\u00a0 Ancestry takes these samples, analyzes the genetic information, and then returns genealogical and health information to the purchaser through its website.\u00a0 Id.<\/i>\u00a0 In 2020, Blackstone, Inc. acquired Ancestry.<\/p>\n

Only adults may purchase or activate a DNA test kit, and purchasers must agree to Ancestry\u2019s terms and conditions before purchasing and activating a test kit.\u00a0 Id.<\/i>\u00a0 However, minors thirteen to eighteen years old may still use Ancestry\u2019s DNA service as long as a parent or legal guardian purchases and activates the test kit, and sends in the minor\u2019s saliva sample using an account managed by the child\u2019s parent or guardian.\u00a0 Id. <\/i><\/p>\n

Between 2016 and 2019, guardians purchased and activated test kits on behalf of the Plaintiffs, who were all minors at the time.\u00a0 Id. <\/i>at 2-3.\u00a0 Each guardian agreed to consent terms (\u201cTerms\u201d) concerning the use of each minor\u2019s DNA test kit.\u00a0 Id. <\/i>at 3.\u00a0 The terms contained a dispute resolution provision binding the parties to arbitration and waiving any class actions.\u00a0 Id. \u00a0<\/b><\/i>However, <\/i>the Terms did not <\/i><\/b>require Plaintiffs to read them.\u00a0 <\/i><\/b>Plaintiffs alleged that they did not<\/i>, and that they also did not create the Ancestry accounts.\u00a0 Id. <\/i>at 4.<\/p>\n

Plaintiffs, on behalf of themselves and a putative class of similar members, filed suit <\/i><\/b>against Ancestry in Illinois federal court alleging violations of the Illinois GIPA.\u00a0 Id.<\/i>\u00a0 Plaintiffs alleged <\/i><\/b>that, <\/i><\/b>as part of Blackstone\u2019s <\/i><\/b>2020 acquisition of Ancestry, Ancestry disclosed genetic test results and personal identifying information to Blackstone without obtaining written authorization.\u00a0 Id.\u00a0 <\/i><\/p>\n

Ancestry responded by moving to compel arbitration under the Terms dispute resolution provisions.\u00a0 Id. <\/i>at 5.\u00a0 The district court denied Ancestry\u2019s motion.\u00a0 First, the district court found <\/i><\/b>that Plaintiffs did not assent to Ancestry\u2019s Terms through their guardians\u2019 accounts or their guardians\u2019 execution of consent forms on Plaintiffs\u2019 behalf.\u00a0 Id.<\/i>\u00a0 Second, the district court determined equitable principles such as the theory of direct benefits estoppel did not bind Plaintiffs, as there were no allegations that Plaintiffs accessed their guardians\u2019 Ancestry accounts or their DNA test results.\u00a0 Id.\u00a0 <\/i><\/p>\n

As a result, Ancestry filed an interlocutory appeal with the Seventh Circuit for review of the district court\u2019s decision.\u00a0 Id.<\/i><\/p>\n

The Seventh Circuit\u2019s Decision<\/b><\/p>\n

The Seventh Circuit affirmed the district court\u2019s decision.\u00a0 On appeal, Ancestry urged the Seventh Circuit to reverse the district court\u2019s denial of its motion to compel on three grounds, including: (1) Plaintiffs\u2019 guardians assented to the Terms on their behalf; (2) Plaintiffs were \u201cclosely related\u201d parties to their guardians (or even third-party beneficiaries), foreseeably bound by the Terms; or (3) as direct beneficiaries of the Terms, Plaintiffs were estopped from avoiding them.\u00a0 Id. <\/i>at 6.<\/p>\n

At the outset, the Seventh Circuit reasoned that it is a \u201cbedrock principle\u201d that \u201can arbitration agreement generally cannot bind a non-signatory.\u201d\u00a0 Id.<\/i> at 6-7.\u00a0 The Seventh Circuit also explained that \u201cwhether an arbitration agreement is enforceable against a non-party is a question governed by \u2018traditional principles of state law.\u2019\u201d\u00a0 Id. <\/i>at 7.<\/p>\n

First, on Ancestry\u2019s argument that Plaintiffs\u2019 guardians assented to the Terms on Plaintiffs\u2019 behalf, the Seventh Circuit determined that the Terms\u2019 plain and ordinary meaning was unambiguous and found that the only parties to the agreement are the signatory and Ancestry.\u00a0 Id. \u00a0<\/i>Further, the <\/i><\/b>Seventh Circuit noted that Terms stated they \u201care personal\u201d to the signatory, who \u201cmay not \u2026 assign or transfer any \u2026 rights and obligations,\u201d established by them.\u00a0 Id.\u00a0 <\/i>The Seventh Circuit also found that the Terms contained no language that the guardians \u201cagreed to them \u2018on behalf of their children.\u201d\u00a0 Id. <\/i>at 9.<\/p>\n

Second, the Seventh Circuit rejected Ancestry\u2019s argument that <\/i><\/b>Plaintiffs may be contractually bound <\/i><\/b>to the Terms \u201ceither as closely related parties or third-party beneficiaries.\u201d\u00a0 Id. <\/i>at <\/i>11.\u00a0 The Seventh Circuit opined <\/i><\/b>that \u201c[t]he company mounts these arguments from shaky legal ground, as Illinois \u2018recognize[s] a strong presumption against conferring contractual benefits on non-contracting third parties.\u2019\u201d\u00a0 Id.\u00a0 <\/i>With respect to Ancestry\u2019s argument that Plaintiffs were bound by the Terms as \u201cclosely related\u201d parties to their guardians who signed them, the Seventh Circuit determined that a special relationship in fact and in law between the Plaintiffs and their guardians as that relationship \u201cdoes not join their identities, as can be the case with parent and subsidiary corporations.\u201d\u00a0 Id. <\/i>at 12-14.\u00a0 The Seventh Circuit similarly concluded that the Terms did not cover Plaintiffs as third-party beneficiaries since the express provisions of Ancestry\u2019s Terms excluded third-party beneficiaries.\u00a0 Id.<\/i> at 12.\u00a0 While the Seventh Circuit found that the Terms that contemplated consent to Ancestry\u2019s processing and analysis of a child\u2019s DNA, no aspect of that consent established <\/i><\/b>that the Terms were for \u201cplaintiffs direct benefit.\u201d\u00a0 Id. <\/i>at 16.\u00a0 In addition, the Terms\u2019 arbitration provision did \u201cnot contain language capturing the plaintiffs.\u201d\u00a0 Id. <\/i>at 17.\u00a0 Instead, the provisions\u2019 language indicated that the \u201csignatories intended to bind themselves, but not others to arbitration.\u201d\u00a0 Id<\/i>. <\/i><\/p>\n

Finally, the Seventh Circuit rejected Ancestry\u2019s argument that \u201c[a]s direct beneficiaries of their guardians\u2019 agreement to the Terms, Plaintiffs are estopped from avoid its arbitration provision.\u201d\u00a0 Id. <\/i>at 18.\u00a0 Noting the absence of <\/i><\/b>legal authority <\/i><\/b>supporting Ancestry\u2019s argument, the Seventh Circuit concluded \u201cthat Illinois would not embrace direct benefits estoppel to bind plaintiffs here.\u201d\u00a0 Id. <\/i>at 19.\u00a0 The Seventh Circuit also based its conclusion on the absence of any record allegation that \u201cplaintiffs have accessed or used the analyses completed by Ancestry as contemplated by the Terms\u201d coupled with Illinois\u2019 law \u201cdisfavoring the binding of non-signatories to arbitration.\u201d\u00a0 Id. <\/i>at 25.<\/p>\n

Implications For Companies<\/b><\/p>\n

Companies that are confronted with GIPA class action litigation involving dispute resolution provisions should note the Seventh Circuit\u2019s emphasis in Coatney <\/i>on the lack of allegations that Plaintiffs read the contractual terms at issue, along with the absence of contractual language capturing or identifying Plaintiffs.<\/p>\n

Further, from a practical standpoint, companies should carefully evaluate the language expressed in terms and conditions agreements, including those drafted in dispute resolution provisions, as courts are not inclined to assume non-signatories are bound to agreements when not expressly included.<\/p>\n","protected":false},"excerpt":{"rendered":"

By Gerald L. Maatman, Jr., Derek S. Franklin, and George J. Schaller Duane Morris Takeaways: In Coatney, et al. v. Ancestry.com DNA, LLC, No. 22-2813, 2024 U.S. App. LEXIS 3584 (7th Cir. Feb. 15, 2024), the Seventh Circuit affirmed the district court\u2019s denial of Ancestry\u2019s motion to compel arbitration on the grounds that minors were … <\/p>\n

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