{"id":609,"date":"2023-06-29T17:54:40","date_gmt":"2023-06-29T21:54:40","guid":{"rendered":"https:\/\/blogs.duanemorris.com\/classactiondefense\/?p=609"},"modified":"2023-06-29T17:54:40","modified_gmt":"2023-06-29T21:54:40","slug":"illinois-federal-court-grants-motion-to-compel-arbitration-in-close-call-for-illinois-biometric-privacy-act-claim","status":"publish","type":"post","link":"https:\/\/blogs.duanemorris.com\/classactiondefense\/2023\/06\/29\/illinois-federal-court-grants-motion-to-compel-arbitration-in-close-call-for-illinois-biometric-privacy-act-claim\/","title":{"rendered":"Illinois Federal Court Grants Motion To Compel Arbitration In \u201cClose Call\u201d For Illinois Biometric Privacy Act Claim"},"content":{"rendered":"

\"\"<\/a>By Gerald L. Maatman, Jr., Tyler Z. Zmick, and George J. Schaller<\/strong><\/p>\n

Duane Morris Takeaways<\/em><\/strong>: <\/strong>In Kashkeesh v. Microsoft Corp.,<\/em> No. 1:21-CV-03229, 2023 U.S. Dist. LEXIS 109559 (N.D. Ill. Jun. 26, 2023), Judge Manish Shah of the U.S. District Court for the Northern District of Illinois granted<\/a> Microsoft\u2019s motion to compel arbitration regarding the claims of two Uber rideshare drivers asserting a class action under the Illinois Biometric Information Privacy Act. The Court held that Microsoft could enforce the rideshare contracts as a third-party beneficiary and that Microsoft did not expressly waive its right to arbitrate. <\/em><\/p>\n

For employers seeking\u00a0 to compel arbitration, especially in lawsuits involving third-party beneficiary situations, this decision is instructive in terms of how courts determine waiver of the right to arbitrate and third-party beneficiaries in agreements with arbitration clauses, particularly where the agreement provides a description of a class to which a party belongs and does not identify the beneficiary by name.<\/em><\/p>\n

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

Plaintiffs Emad Kashkeesh and Michael Kormorksi (collectively \u201cPlaintiffs\u201d) were drivers for the ridesharing and food delivery company Uber. Id. <\/em>at 2. In addition to providing other identifying information for Uber as part of their work, Plaintiffs were required to take pictures of their faces through Ubers \u201cReal Time ID Check\u201d software. Id.<\/em>\u00a0 Uber\u2019s software utilized Microsoft\u2019s Face Application Programming Interface to identify drivers. Id.<\/em> After Uber drivers, like Plaintiffs, submitted their photographs to Uber\u2019s software program, Microsoft\u2019s software extracted facial biometrics to create geometric templates, and compared these templates with information corresponding to the employees, for identification. Id<\/em> at 2-3.<\/p>\n

Plaintiffs claimed that they never agreed that Microsoft could capture, store, or disseminate their facial biometrics, were never told that Microsoft was gathering their information, and Microsoft never published a policy about the company\u2019s retention and deletion of biometric information. Id<\/em>. at 3.\u00a0 However, Plaintiffs contracted with Uber to work as rideshare drivers and signed the Company\u2019s 2020 Platform Access Agreement (\u201cUber Agreement\u201d). Id<\/em>.\u00a0 Within the Uber Agreement, an arbitration clause required Plaintiffs to arbitrate any dispute between Plaintiffs and Uber, and \u201cany other entity [other than Uber] .. arising out of or related to our application for use of an account to use [Uber\u2019s] Platform and Driver App as a driver.\u201d Id.<\/em><\/p>\n

In May 2021, Plaintiffs filed a lawsuit alleging Microsoft violated the Illinois Biometric Privacy Act. Id.<\/em>\u00a0 Microsoft removed the case on June 16, 2021, and filed its own motion to dismiss for lack of personal jurisdiction. Id<\/em>. Plaintiffs filed a motion to remand two of their claims. Id.<\/em> Microsoft opposed Plaintiffs motion, but Plaintiffs\u2019 motion was granted, and some of Plaintiffs\u2019 claims remained in federal court with limited jurisdictional discovery conducted. Id.<\/em>\u00a0 Subsequently, Microsoft\u2019s motion to dismiss was denied on December 13, 2022. Id<\/em>. at 3-4. On that same day, Uber informed Microsoft for the first time that Plaintiffs agreed to the 2020 Uber Agreement. Id.<\/em> at *4.\u00a0 In answering Plaintiffs\u2019 complaint, Microsoft asserted that Plaintiffs claims had to be arbitrated. In February 2023, Microsoft filed its motion to compel arbitration. Id.<\/em><\/p>\n

The Court\u2019s Decision<\/strong><\/p>\n

The Court granted Microsoft\u2019s motion to compel arbitration. In doing so, the Court provided standards on compelling arbitration such that Microsoft was required to show \u201c(1) an agreement to arbitrate, (2) a dispute within the scope of the arbitration agreement, and (3) a refusal by the opposing party to proceed to arbitration.\u201d Id.<\/em> at 1. Declaring that there was no dispute that the arbitration agreements are valid and enforceable, the Court turned to the following issues: (i) whether Microsoft (a non-signatory) can enforce the contracts as a third-party beneficiary, and (ii) whether Microsoft waived its right to compel arbitration. Id. <\/em><\/p>\n

On the third party beneficiary status, the Court noted the strong presumption against \u201cconferring contractual benefits on non-contracting third parties.\u201d It reasoned that this presumption could be defeated if \u201cthe contract strongly suggest[s] that it applies to third parties \u2013 so strongly as to be practically an express declaration.\u201d Id.<\/em> at 5. Further, the Court opined that \u201cto create a third-party beneficiary, the contract must have been made for the direct benefit of the third party, an intention which \u2018must be shown by express provision in the contract identifying the third party beneficiary by name or by description of a class to which the party belongs.\u2019\u201d Id. <\/em>Additionally, the third party bears the burden of showing the parties to the contract intended to confer a direct benefit. Id<\/em>.<\/p>\n

The Court determined that Microsoft was identifiable as a third party beneficiary \u201cby description of a class to which the party belongs,\u201d because Microsoft was \u201can entity,\u201d and engaged in a dispute with Plaintiffs \u201carising out of or related to Plaintiffs use of an account to use [Uber\u2019s] Platform and Driver App as a driver.\u201d Id. <\/em>The Court disagreed with Plaintiffs\u2019 argument that this \u201centity\u201d class was not defined specifically enough. Id.<\/em> at *6. The Court also rejected Plaintiffs\u2019 contention that the Uber Agreement limited any arbitration claims to Uber, its agents, and employees because the agreement included an address for Uber where plaintiffs could demand arbitration in writing. Id.<\/em> The Court held \u201cthe agreement in this case also expressly identifies third parties for whom no contact information was provided, so including contact information for an entity is not a conclusive sign of the parties intent to confer third-party beneficiary status.\u201d Id<\/em>. at 7.\u00a0 Therefore, the description of the class at issue showed the agreement applied to third parties, including Microsoft, and the parties intended to confer a direct benefit on Microsoft, so Microsoft could enforce the Uber Agreement. Id.<\/em><\/p>\n

As to waiver, the Court reasoned the right to arbitrate a dispute can be expressly or implicitly waived. Id.<\/em> However, based on the circumstance here, the Court ruled that there was no evidence that Microsoft expressly gave up its right to arbitrate with these Plaintiffs. Id. <\/em>Instead, the Court analyzed whether Microsoft implicitly waived its right to arbitrate by considering the totality of the circumstances and whether Microsoft acted inconsistently with arbitration. Id.<\/em> at 8.\u00a0 The Court considered Microsoft\u2019s diligence in seeking arbitration and whether Microsoft participated in litigation, substantially delayed its request for arbitration, participated in discovery, and whether Plaintiffs were prejudiced by the delay in seeking arbitration. Id.<\/em><\/p>\n

Microsoft argued that \u201ca party can only be found to have given up its right to arbitrate if it had actual knowledge of that right. Id.<\/em> at 9. The Court disagreed based on the notion that a party could implicitly waive or forfeit the right to arbitrate by failing to adequately investigate the possibility of arbitration. Id.<\/em>\u00a0 Indeed, the Court stated \u201ca reckless indifference to a right to arbitrate and the use of judicial dispute resolution instead is a strong sign that a party wasted time, and should not be allowed to invoke the right that it could have asserted sooner.\u201d Id.<\/em> at 9. Looking to the chronology of the case, the Court reasoned that Microsoft demonstrated a lengthy delay in waiting to mention arbitration until January 2023 when its initial removal of the case to federal court occurred in June 2021. Id.<\/em>.<\/p>\n

 <\/p>\n

The Court also did not find Microsoft\u2019s arguments persuasive that it could not have done more to figure out whether Plaintiffs agreed to arbitrate. Id.<\/em> at 10.\u00a0 In part, the Court looked to the sophistication of both Microsoft and Uber, as well as, the diligence in communications between the two companies. Id.\u00a0 <\/em>The Court determined that \u201cMicrosoft\u2019s lack of diligence, removal, and (limited) participation in litigation [were] all inconsistent with arbitration.\u201d Id. <\/em>at 11.\u00a0 Additionally, the ruling on Microsoft\u2019s motion to dismiss made factual findings that may be relevant to Microsoft\u2019s defenses and Microsoft\u2019s delay in seeking arbitration had led to some \u201climited prejudice to [P]laintiffs.\u201d Id.<\/em>\u00a0 Even still, the Court recognized \u201cwhile invoking judicial process presumptively waives a right to arbitration, that presumption can be rebutted in abnormal cases\u201d and it considered this case to be \u201cone of them.\u201d Id<\/em>.<\/p>\n

In sum, the Court noted that Microsoft could have been more diligent in identifying its right to arbitrate this dispute and Microsoft\u2019s participation in litigation was not merit-based, so while the case was \u201ca close call,\u201d the Court held that \u201cthe context here does not demonstrate an untimely assertion of a right amounting to forfeiture.\u201d Id.<\/em> at 14. Therefore, the Court granted Microsoft\u2019s motion to compel arbitration.<\/p>\n

Implications For Employers<\/strong><\/p>\n

Employers that are confronted with litigation involving arbitration claims and beneficiary classifications should take note that the Court in Kashkeesh <\/em>relied heavily on the description conferring benefits to Microsoft and that Microsoft\u2019s actions demonstrating it waived its right to arbitrate was a \u201cclose call\u201d for the Court. Further, from a practical standpoint, employers should carefully evaluate any entered agreements with other parties that contain arbitration clauses to ensure it is properly conferred a benefit to arbitrate.<\/p>\n

 <\/p>\n

 <\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

By Gerald L. Maatman, Jr., Tyler Z. Zmick, and George J. Schaller Duane Morris Takeaways: In Kashkeesh v. Microsoft Corp., No. 1:21-CV-03229, 2023 U.S. Dist. LEXIS 109559 (N.D. Ill. Jun. 26, 2023), Judge Manish Shah of the U.S. District Court for the Northern District of Illinois granted Microsoft\u2019s motion to compel arbitration regarding the claims … <\/p>\n

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