District Court (Cal.) Applies Arbitration Clause Only to Product Purchasers in Data Sharing Case; Non-Purchasers Whose Data Was Gathered or Shared Need Not Arbitrate

In In re Ring LLC Privacy Litig., No. CV 19-10899-MWF (RAOx), 2021 U.S. Dist. LEXIS 118461, at *8 (C.D. Cal. June 24, 2021), Judge Fitzgerald ordered the purchasers’ claims to arbitration, but not so for the non-purchasers whose data allegedly was improperly gathered and/or shared.  The allegations were that

The FAC alleges that Ring’s security systems were defectively designed without sufficient security protocols, leaving Plaintiffs who used the systems vulnerable to cyberattack, identity theft, and physical harm. (FAC ¶¶ 3-8). The FAC also alleges that Ring actively shared users’ sensitive personal identifying information with third parties without first obtaining users’ authorization or consent, which allowed third parties to track and surveil Plaintiffs. (Id. ¶ 9).

Judge Fitzgerald ordered only some Plaintiffs’ claim to arbitration, keeping jurisdiction over the non-purchaser plaintiff’s

Ring makes three arguments as to why the Non-Purchaser Plaintiffs — the twelve minor children and one elderly woman — are also bound by the arbitration clause: (1) the Purchaser Plaintiffs agreed to the arbitration clause on behalf of the Non-Purchaser Plaintiffs; (2) the Non-Purchaser Plaintiffs’ preexisting relationship with a Purchaser Plaintiff makes it equitable to enforce the Terms; and (3) the Non-Purchaser Plaintiffs are equitably estopped from accepting the benefits while avoiding the burdens of the Terms. (See Motion at 15-22).  Ring asserts that the Non-Purchaser Plaintiffs are bound by the Terms as “Authorized Users.” (See Motion at 16). The Terms define an Authorized User as “any person or entity authorized to access or use the Owner’s Products and Services.” (Modestine Decl., Ex. G at 2). While the Non-Purchaser Plaintiffs allege that they were passively exposed to the Devices that their guardians purchased and used, Ring puts forth no evidence showing that the Non-Purchaser Plaintiffs were ever authorized by their guardians to “access or use” the Devices. The Court agrees with Plaintiffs that extending Ring’s definition of Authorized User to anyone who is knowingly or unknowingly surveilled by a Ring device — which is essentially what Ring proposes — would lead to absurd and unjust results. (See Opposition at 5 n.3).  Ring also argues that it is equitable to compel the Non-Purchaser Plaintiffs to be bound by the Terms because of their preexisting relationship with the Purchaser Plaintiffs, who had the implied authority to contract on their behalf. (Motion at 15-18).   Ring points to case law upholding agreements to arbitrate made by a parent on behalf of a child who is to receive services under the contract, reasoning that parents have the implied authority to contract on behalf of their children. (See Motion at 16-17). These cases are inapposite because they involve a parent or spouse’s ability to enter into a contract on behalf of her child or spouse for medical care or school activities. See Doyle v. Giuliucci, 62 Cal. 2d 606, 610, 43 Cal. Rptr. 697, 401 P.2d 1 (1965) (holding that a parent’s “power to enter into a contract for medical care that binds the child to arbitrate any dispute arising thereunder is implicit in a parent’s right and duty to provide for the care of his child”); Hawkins v. Superior Court, 89 Cal. App. 3d 413, 419, 152 Cal. Rptr. 491 (1979) (holding that because spouses have a mutual obligation to care for and support the other, one spouse had the power to contract for medical care on behalf of the other spouse, and “implicit in that power is the implied authority to agree for himself and his wife to arbitrate claims arising out of medical malpractice”); Hohe v. San Diego Unified School District, 224 Cal. App. 3d 1559, 1564-65, 274 Cal. Rptr. 647 (1990) (holding that liability waiver for school activity could be enforced against student because the waiver was signed by the parent on student’s behalf); County of Contra Costa v. Kaiser Foundation Health Plan, Inc., 47 Cal. App. 4th 237, 242-43, 54 Cal. Rptr. 2d 628 (1996) (listing cases in support of rule that “a person who has authority [*29]  to contract for medical services on behalf of another may, in the exercise of that authority, bind that person to an agreement to arbitrate his or her medical malpractice claims” and recognizing that “a preexisting relationship between the nonsignatory and one of the parties to the arbitration agreement is a common factor in these cases”).  The Court is unconvinced that the authority to contract for goods beyond necessities like education or medical care is implicit in a parent or guardian’s duty to provide for the care of her child or dependent. Although Ring cites to two district court opinions binding non-signatory family members to adhesion contracts for consumer goods, these decisions are not binding on this Court. (See Motion at 18; Reply at 16) (citing Chan v. Charter Communications Holding Co., EDCV 15-886-JGB (KKx), 2015 WL 12655701, at *5 (C.D. Cal. Aug. 6, 2015), Tice v. Amazon.com, Inc., EDCV 19-1311-SVW (KKx), 2020 U.S. Dist. LEXIS 60597, 2020 WL 1625782, at *3 (C.D. Cal. Mar. 25, 2020), rev’d and remanded on other grounds, 845 F. App’x 535 (9th Cir. 2021)). Further, both courts relied upon California authorities such as County of Contra Costa without addressing the distinction between contracts for medical services and adhesion contracts for consumer goods.  The doctrine of equitable estoppel may also apply where a nonsignatory to a contract “knowingly exploits the agreement containing the arbitration clause despite having never signed the agreement.” Comer v. Micor, Inc., 436 F.3d 1098, 1101 (9th Cir. 2006) (citation and internal quotation marks omitted); see also Mundi v. Union Sec. Life Ins. Co., 555 F.3d 1042, 1046 (9th Cir. 2009) (explaining that there are two types of equitable estoppel in the arbitration context, one based on the “close relationship between the entities involved,” and the other “where the nonsignatory ‘knowingly exploits the agreement containing the arbitration clause despite having never signed the agreement'”). However, here, there is no evidence that any of the Non-Purchaser Plaintiffs knowingly exploited Ring’s Terms here.  Accordingly, Ring has failed to meet its burden of proving by a preponderance of the evidence that the Non-Purchaser Plaintiffs agreed to arbitrate their claims. See Norcia, 845 F.3d at 1283.  The Motion with respect to the Non-Purchaser Plaintiffs is DENIED.