A federal appeals panel on Tuesday rejected a digital advertising firm’s effort to invoke Verizon Wireless’ arbitration agreement to push a subscriber class action over data collection practices out of court.
Verizon customers Anthony Henson and William Cintron in 2015 sued Turn Inc. in U.S. District Court for the Northern District of California over claims the internet advertising firm unlawfully collected browsing histories and other data with “zombie” cookies that consumers could not detect, block or delete. The plaintiffs, suing on behalf of all Verizon customers, accused Turn—which had a contract with Verizon to deliver ads to mobile subscribers—of recreating the cookies after users deleted them and proceeded to collect data without their knowledge.
U.S. District Judge Jeffrey White in Oakland ruled for Turn, saying that consumer contracts with Verizon required the privacy lawsuit to be sent to arbitration.
A three-judge panel of the U.S. Court of Appeals for the Ninth Circuit on Tuesday reversed that ruling. The judges, ruling unanimously, said the agreement between consumers and Verizon “provides that only the subscriber and Verizon ‘agree to resolve disputes only by arbitration.’”
“Turn is not a signatory to the customer agreement,” the panel wrote in its per curiam decision.
Turn, represented by a team from Wilson Sonsini Goodrich & Rosati in San Francisco, argued that Verizon’s arbitration agreement should apply because the company provided a service to the consumers that was closely connected to their wireless service.
The Ninth Circuit panel pointed to language in Turn’s agreement with Verizon that said the companies “are independent of each other” and that “neither party shall have the authority to bind the other in any way.”
The appeals court panel noted that Verizon was not accused of colluding with Turn.
“On the contrary, Henson alleges that ‘Turn conducted its practices in secret’ and acted without Verizon’s knowledge, consent or approval. Indeed, Henson claims that Verizon publicly rebuked Turn’s alleged practices upon discovering them,” the judges wrote.
Still, Verizon took an active interest in the litigation. In a brief filed with the Ninth Circuit, the wireless provider—represented by Kellogg, Hansen, Todd, Figel & Frederick partner Scott H. Angstreich in Washington—wanted the subscribers’ case against Turn sent into arbitration.
“Although petitioners elected to sue only the advertising partner—in a strategic effort to evade the arbitration clause in their contracts with Verizon—if this litigation persists in federal court, Verizon will be forced to participate, and the meaning of its terms of service with petitioners will be squarely at issue,” Angstreich wrote. “Litigation will thus subject Verizon to precisely the burdens that it contracted with petitioners to avoid, including the class procedures petitioners and the unnamed class members agreed to forgo, in favor of individualized arbitration.”
A lawyer for Henson and Cintron—represented by a team from Lieff Cabraser Heimann & Bernstein—were not immediately reached for comment Tuesday.
Turn’s data collection practices have faced regulatory scrutiny. In December, the Redwood City, California, company reached a settlement with the Federal Trade Commission to resolve claims that it continued tracking tens of millions of Verizon customers even after they blocked or deleted cookies from websites. The FTC settlement requires Turn to stop misrepresenting the extent of its online tracking and to provide an effective opt-out for consumers who don’t want their information used for targeted advertising.
“Turn tracked millions of consumers online and through mobile apps even if they had taken steps to block or limit tracking,” Jessica Rich, then the director of the FTC’s consumer protection bureau, said in December. “The FTC’s order will ensure the company honors consumers’ privacy choices.