Last week, lawyers for the hacked adultery website Ashley Madison tipped their hand about how they intend to defend the site’s parent company, Avid Life Media, against class actions by users who claim they were injured when their personal information was exposed. In a filing before the Judicial Panel on Multidistrict Litigation, Barnes & Thornburg said the company favors consolidation of the litigation in federal court in St. Louis – but only so Avid Life can resolve the threshold issues of whether name plaintiffs can sue under pseudonyms and whether Ashley Madison users are compelled under user agreements to arbitrate their claims individually.
“Plaintiffs (and all Ashley Madison members) agreed to and are bound by a contractual arbitration provision that compels plaintiffs to bring their claims before the American Arbitration Association,” the filing said. According to Avid Life, federal courts won’t ever get to the merits of the class action claims because users waived the right to sue the site.
As you know, the U.S. Supreme Court’s recent rulings in AT&T Mobility v. Concepcion and American Express v. Italian Colors have made it exceedingly difficult for plaintiffs to bring class actions when they’ve signed arbitration agreements. But two of the lawyers who have brought class actions against Avid Life told me they’re braced to contest the enforceability of the Ashley Madison clause.
“We’ve fought many, many of these over the last few years,” said Julian Hammond of HammondLaw. He said the provision’s enforceability will depend on such factors as whether the contract terms are unconscionable, what disputes the agreement covers and whether Ashley Madison properly obtained users’ consent. Arbitration clauses are not easy to defeat, Hammond said, but he also said he looked hard at the Ashley Madison clause before he filed his case, anticipating that the company would move to compel arbitration.
Plaintiffs’ lawyer William Federman of Federman & Sherwood said Avid Life can’t compel arbitration against hacking victims who never completed the process of signing up as an Ashley Madison user or whose information was exposed because a relative signed up. “If Ashley Madison read the complaints, they’d see there are many plaintiffs who are not under the arbitration clause,” he said.
Those plaintiffs will have a harder time showing they were injured by the data breach than Ashley Madison users who claim the site falsely promised to scrub their profiles from its records if they paid a $19 fee. Federman, however, said he was confident judges will find these plaintiffs have standing to sue. Like Hammond, Federman said Avid Life’s resort to arbitration did not come as a surprise to him.
Obviously, a venue brief at the JPML isn’t Avid Life’s last word on the Ashley Madison arbitration clause. It’s just a hint at what’s to come when the cases are consolidated and transferred – but it’s a sign that this is going to be very interesting litigation.