Plaintiffs sometimes try to sidestep an arbitration agreement with one company by suing only a second company for interrelated conduct. Last month, a California federal court applied principles of fairness under the doctrine of “equitable estoppel” to reject this tactic, holding that a software vendor (Twilio) could enforce a plaintiff’s arbitration agreement with a website operator (Keeps) that was not named as a defendant. Perry-Hudson v. Twilio, Inc., 2024 WL 493333 (N.D. Cal. Dec. 2, 2024).
The lawsuit arose from an online retailer’s (Keeps) alleged use of Twilio’s software-based service on its website purportedly to collect information about users for purposes of later sending targeted advertisements. As a result of Keeps’ use of this service, Plaintiff Jonathon Perry-Hudson claimed that health information he gave to Keeps was shared with Twilio without his consent. However, rather than asserting claims against Keeps, the plaintiff sued Twilio for its role in the alleged “wiretapping” of his website communications under various laws, including the California Invasion of Privacy Act. Twilio then moved to compel arbitration of plaintiff’s claims based on the arbitration clause in Keeps’ Terms & Conditions to which plaintiff agreed during his use of Keeps’ website.
Judge Vince Chhabria granted Twilio’s motion to compel arbitration, reasoning that the plaintiff could not “skirt its agreement with Keeps by suing only Twilio.” According to the Court, two equitable estoppel principles allowed Twilio to enforce the arbitration agreement. First, plaintiff’s claims are “intimately founded in and intertwined with his agreement with Keeps” containing the arbitration clause. “[C]onsent is an element to each claim,” and the agreement “seems to speak directly to Keeps’s obligations with respect to [plaintiff]’s data and his consent to sharing that data.” Second, plaintiff asserted “interdependent and concerted misconduct by Twilio and Keeps” that is “intimately connected” with the agreement, contending the agreement was, in fact, “an agreement to wiretap his communication.”
The Court’s decision reinforces that equitable estoppel principles may provide avenues of relief against plaintiffs seeking to avoid arbitration clauses covering the claims at issue.