Supercookie Claims Won’t Be Arbitrated

Is it ever okay to use persistent tracking for advertising purposes?

Henson v. Turn
Vacated – Turn allegedly surreptitiously tracked and profiled plaintiffs by using the undetectable and undeletable Verizon ‘supercookie’ (a unique header ID [X-UIDH] Verizon embedded into all web requests sent from Verizon customer devices). Plaintiffs claimed that if they deleted any Turn cookies, Turn would use the Verizon X-UIDH to restore Turn cookies to their previous states. In so doing, plaintiffs alleged, Turn would continue to track, profile, and target them, irrespective of any cookie deletions, Do Not Track, or other privacy settings. Claims were filed under N.Y. Gen. Bus. Law §349 (deceptive acts and practices) as well as Trespass to Chattels claims.

Turn contended that claims should be arbitrated since Verizon subscription contracts – contracts that specifically called out tailored advertising programs – mandated all disputes related to a Verizon subscription be resolved by arbitration. Plaintiffs countered that Turn was not a signatory to their Verizon agreements, therefore they did not agree to arbitrate claims against Turn. The district court agreed with Turn, finding the behavior of non-signatory Turn directly arose from expressly incorporated provisions in the subscriber contracts with Verizon, contracts that “clearly anticipate(d) the introduction of third parties“. The district court also accused plaintiffs of attempting to “avoid arbitration by artful pleading” by dropping claims against Verizon from an earlier complaint.

The appellate court disagreed, finding that bypassing consumer privacy controls for Turn’s own commercial gain was not an activity contemplated in the Verizon subscription contract. Additionally, Turn was not a third-party beneficiary to the Verizon subscription contracts, since agreements between Turn and Verizon clearly stated:
• “(the parties) are independent of each other
• “nothing in th[e] Agreement creates any partnership, joint venture, … or other similar relationship
• “neither party shall have the authority to bind the other in any way
In fact, Verizon publicly rebuked Turn’s alleged practices upon discovering them. Thus, the district court erred in enforcing the arbitration provisions of a contract to which Turn was not intended to be a party, and the order compelling arbitration was vacated.
[9th Circ.; 16-71818 (orig: N.D. CA; 4:15-cv-01497]
jbho: looks like this supercookie issue continues to haunt Turn. You may remember the FTC went after Turn for the same issue. No fines were assessed, but Turn signed up for 20 years of FTC oversight.

Also interesting here are the choice of law arguments. The district court applied New York’s Equitable Estoppel laws*, rather than California’s. Although, in the final analysis, both courts and the parties appeared to agree there was no material difference between the two. So it would appear the lack of relationship between Turn & Verizon ultimately proved fatal to Turn’s attempt to compel arbitration, not the choice of law? Was this analysis just to add on to the beat down being given to the district court?

Of course, my main interest here is the marketing enforcement. It will be interesting to see how the court rules on the collection and (mis)use of (personal) information. Stay tuned…

* Equitable estoppel is a doctrine that precludes a party from claiming the benefits of a contract while simultaneously attempting to avoid the burden that contract imposes.

 

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