U.S. Appeals Court Overturns BIPA Arbitration Demand Against Samsung

In a ruling that marks a significant development in the realm of consumer mass arbitration, the U.S. 7th Circuit Court of Appeals has reversed an earlier ruling that required Samsung Electronics to pay millions in arbitration fees in response to thousands of consumer privacy claims under Illinois’ biometric data protection law.

The Chicago-based appeals court has overturned a lower court’s decision, which had mandated that Samsung arbitrate the claims and cover administrative fees. The unanimous decision by the three-judge panel concluded that the plaintiffs failed to demonstrate that they had valid arbitration agreements with Samsung.

Additionally, the panel determined that the lower court’s order for Samsung to pay administrative fees exceeded the trial judge’s authority.

Samsung was sued under Illinois’ Biometrics Information Privacy Act (BIPA) because its Gallery app allegedly collected, stored, and used facial scans of Illinois residents without their consent, violating BIPA’s core requirements for transparency and appropriate permission.

This ruling represents a setback for the tens of thousands of Illinois consumers who had sought to pursue their privacy claims through arbitration instead of through the court system. The original lawsuit, filed in U.S. federal court in 2022, aimed to compel Samsung to arbitrate claims related to alleged violations of BIPA. Samsung has denied these allegations, labeling them as frivolous.

Samsung’s appeal questioned the validity of the arbitration agreements claimed by the consumers and denied any refusal to arbitrate. The appeals court pointed out that the consumers did not provide enough evidence to confirm they were Samsung product purchasers. The panel emphasized that a mere spreadsheet of names and addresses was insufficient to establish an arbitration agreement, and instead consumer information such as receipts and order numbers was necessary to prove these agreements existed.

Furthermore, the consumers argued that the court lacked jurisdiction to hear the appeal since the trial judge had already directed the dispute into arbitration. They also contended they should be given an opportunity to prove the validity of the arbitration agreements for the 35,651 Illinois consumers who filed demands. However, the appeals court held that the consumers had their chance to present evidence and failed to do so, denying any opportunity for a second attempt.

Source: Reuters

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July 5, 2024 — by Tony Bitzionis