California Federal Court Finds That Plaintiffs Must Arbitrate Their BIPA Claims

Recently, a court in the Northern District of California compelled arbitration in a putative privacy class action, concluding that the arbitration provision included in a photo-editing app’s terms of use was not unconscionable.  See Flora, et al., v. Prisma Labs, Inc., 2023 WL 5061955 (N.D. Cal. Aug. 8, 2023).

In February 2023, plaintiffs filed suit against Prisma Labs, Inc., developer of the photo-editing app Lensa, alleging that the company violated the Illinois Biometric Information Act (BIPA) by purportedly storing Lensa users’ facial geometries without their consent.  In June, Prisma moved to compel arbitration on the ground that the plaintiffs had agreed to Lensa’s Terms of Use which provided that “all disputes arising out of or relating to these Terms or Lensa will be resolved through confidential binding arbitration.”  In opposing Prisma’s motion, the plaintiffs argued that the arbitration agreement was unconscionable.  The court rejected that argument.

According to the court, the arbitration agreement, which was clearly written and labeled within the Terms of Use and provided users with the opportunity to opt out of binding arbitration, was not procedurally unconscionable.  Therefore, because “both procedural and substantive unconscionability must be present in order for an agreement to be enforceable,” the court did not address the question of whether the arbitration agreement was also substantively unconscionable.

Despite rejecting the plaintiffs’ unconscionability argument, the court did agree with their argument that the arbitration agreement’s forum selection clause conflicted with the Judicial Arbitration and Mediation Services’ (JAMS) Consumer Minimum Standards by not providing users with the right to arbitrate in their home state.  According to the court, this rendered the agreement’s forum selection clause impermissibly illusory because of the possibility that JAMS might refuse to arbitrate the dispute based on the agreement’s failure to meet JAMS’ minimum standards.  Nevertheless, the court found the illusory forum selection clause severable.  Accordingly, the court severed the clause and compelled arbitration.