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.

Photo of Jess Davis Jess Davis

Jess Davis is an associate in the firm’s Washington, DC office, where her practice focuses on defending complex class actions. She has experience defending clients in the technology and consumer brand industries against litigation involving privacy and consumer protection claims in courts across…

Jess Davis is an associate in the firm’s Washington, DC office, where her practice focuses on defending complex class actions. She has experience defending clients in the technology and consumer brand industries against litigation involving privacy and consumer protection claims in courts across the country.

Photo of Matthew Verdin Matthew Verdin

Matthew Verdin focuses on defending clients in the technology and financial services sectors. He has a strong record of delivering wins on behalf of clients in class actions and complex litigation, particularly in privacy and consumer protection lawsuits. Matthew is particularly successful in…

Matthew Verdin focuses on defending clients in the technology and financial services sectors. He has a strong record of delivering wins on behalf of clients in class actions and complex litigation, particularly in privacy and consumer protection lawsuits. Matthew is particularly successful in securing dismissals at the pleadings stage. For example, he won dismissal at the pleadings stage of over a dozen wiretapping class actions involving the alleged use of website analytics tools to collect data about users’ website visits. He also advises companies on managing litigation risk under federal and state wiretapping laws.

Matthew is also dedicated to pro bono legal services. Recently, he helped a domestic violence survivor win a case in the California Court of Appeal. Matthew’s oral argument led to the court ordering renewal of his client’s restraining order just one day later.

Photo of Kathryn Cahoy Kathryn Cahoy

Kate Cahoy co-chairs the firm’s Class Actions Litigation Practice Group and serves on the leadership committee for the firm’s Technology Industry Group. She defends clients in complex, high-stakes class action disputes and has achieved significant victories across various industries, including technology, entertainment, consumer…

Kate Cahoy co-chairs the firm’s Class Actions Litigation Practice Group and serves on the leadership committee for the firm’s Technology Industry Group. She defends clients in complex, high-stakes class action disputes and has achieved significant victories across various industries, including technology, entertainment, consumer products, and financial services. Kate has also played a key role in developing the firm’s mass arbitration defense practice. She regularly advises companies on the risks associated with mass arbitration and has a proven track record of successfully defending clients against these challenges.

Leveraging her success in class action litigation and arbitration, Kate helps clients develop strategic and innovative solutions to their most challenging legal issues. She has extensive experience litigating cases brought under California’s Section 17200 and other consumer protection, competition, and privacy laws, including the Sherman Act, California Consumer Privacy Act (CCPA), California Invasion of Privacy Act (CIPA), Wiretap Act, Stored Communications Act, Children’s Online Privacy Protection Act (COPPA), Video Privacy Protection Act (VPPA), along with common law and constitutional rights of privacy, among others.

Recent Successes:

  • Represented Meta (formerly Facebook) in a putative nationwide advertiser class action alleging violations under the California Unfair Competition Law (UCL) related to charges from allegedly “fake” accounts. Successfully narrowed claims at the pleadings stage, defeated class certification, opposed a Rule 23(f) petition, won summary judgment, and defended the victory on appeal to the Ninth Circuit. The Daily Journal selected Covington’s defense of Meta as one of its 2021 Top Verdicts, and Law.com recognized Kate as a Litigator of the Week Shoutout.
  • Defeated a landmark class action lawsuit against Microsoft and OpenAI contending that the defendants scraped data from the internet for training generative AI services and incorporated data from users’ prompts, allegedly in violation of CIPA, the Computer Fraud and Abuse Act (CFAA), and other privacy and consumer protection laws.

Kate regularly contributes to the firm’s blog, Inside Class Actions, and was recently featured in a Litigation Daily interview titled “Where Privacy Laws and Litigation Trends Collide.” In recognition of her achievements in privacy and antitrust class action litigation, the Daily Journal named her as one of their Top Antitrust Lawyers (2024), Top Cyber Lawyers (2022), and Top Women Lawyers in California (2023). Additionally, she received the Women of Influence award from the Silicon Valley Business Journal and was recognized by Daily Journal as a Top Attorney Under 40.