Coatney v. Ancestry.com DNA, LLC

93 F.4th 1014

Alex COATNEY, individually and on behalf of similarly situated individuals, et al., Plaintiffs-Appellees, v. ANCESTRY.COM DNA, LLC, Defendant-Appellant.

No. 22-2813

United States Court of Appeals, Seventh Circuit

Argued December 6, 2023

Decided February 15, 2024

Appeal from the United States District Court for the Southern District of Illinois. No. 3:21-cv-01368-DWD — David W. Dugan, Judge.

David Gerbie, Joseph Dunklin,Attorney, McGuire Law P.C., Gary M. Klinger, Milberg Coleman Bryson Phillips Grossman, PLLC, Chicago, IL, Jonathan Marc Jagher, Attorney, Freed Kanner London & Millen, LLC, Conshohocken, PA, for Plaintiffs-Appellees.

Daniel R. Lombard, Joseph H. Margolies, Attorney, Quinn Emanuel Urquhart & Sullivan, LLP, Chicago, IL, Shon Morgan, John Wall Baumann, Attorneys, Quinn Emanuel Urquhart & Sullivan, LLP, Los Angeles, CA, Cristina Henriquez, Attorney, Quinn Emanuel Urquhart & Sullivan, LLP, Redwood Shores, CA, Christopher George Michel, Attorney, Quinn Emanuel Urquhart & Sullivan, LLP, Washington, DC, for Defendant-Appellant.

Before Flaum, Easterbrook, and Brennan, Circuit Judges.

Brennan, Circuit Judge.

Ancestry.com sells genealogy tools to aid users in researching their family history. Registered users of its website must first agree to an arbitration clause. In this case, guardians activated DNA test kits through their accounts on behalf of their children. Those children are the plaintiffs here. When another business acquired Ancestry, the plaintiffs contended that Ancestry violated their privacy rights by disclosing confidential genetic information and sued. Ancestry moved to compel arbitration.

Sitting in diversity and applying Illinois law, the district court ruled that the plaintiffs were not bound to arbitrate their claims under an agreement between their guardians and Ancestry. We agree and affirm the decision of the district court.

I. Background

Ancestry.com DNA, LLC is a genealogy and consumer genomics company.¹ Users who create online accounts may purchase a DNA test kit through which Ancestry collects consumer saliva samples. Ancestry then analyzes the genetic information in those samples and returns genealogical and health information to the purchaser through its website.

Individuals who purchase and activate Ancestry DNA test kits must agree to Ancestry's Terms & Conditions. Under the Terms, only adults may purchase or activate a DNA test kit. However, minors thirteen to eighteen years old may still use Ancestry's DNA service. A parent or legal guardian may activate a DNA test kit and send in a minor's saliva sample using an account for the child that the parent or guardian manages.

Between 2016 and 2019, guardians purchased and activated test kits on behalf of plaintiffs, who were all minors at the time. When activating the kits, the guardians took a number of steps. In January 2016, N.S.'s guardian accessed Ancestry's website to enter N.S.'s personal information, confirm she was a parent or guardian providing a minor's DNA, and verify her review and acceptance of the Terms. Coatney's guardian followed a similar process when activating a DNA test kit on Coatney's behalf in December 2017, and also completed additional, separate terms contained in a DNA Processing Consent. H.S.'s and B.H.'s guardian completed these same steps when activating test kits in August and September of 2019.²

The DNA Processing Consent lists several provisions related to Ancestry's use of a minor's DNA and a guardian's agreement. It states, "When you activate your child's DNA test kit, you consent to Ancestry's collection and processing of your child's DNA data." A guardian's consent grants Ancestry permission to, among other things:

• "Convert the physical DNA sample into DNA data and use your child's DNA data to provide reports about your child's ancestral origins;"

• "Identify your child's potential relatives;" and

• "Use your child's DNA data . . . to help you and your child discover other details about your family history."

The Terms, in each iteration, contain a dispute resolution provision, binding the parties to arbitration and waiving any class actions. Language in the Terms notifies Ancestry's users that continued use of Ancestry's services after a change to the Terms constitutes acceptance of that change. The Terms also include specific provisions pertaining to Ancestry's DNA Services:

"DNA Services" refers to the use of our DNA collection kit, processing and handling of your DNA sample, genetic testing of your DNA sample, and our web or mobile app-based tools that provide you with ethnicity and other genetically related results and associated services, offer you the ability to view genetic matches that can identify potential relatives, help you explore your ethnic and family origins, and make new discoveries through your DNA.

As the Terms explain, "[t]he purpose of the DNA Services is to provide genetic and genealogy results and related reports for your informational, recreational, educational, and research use."

The Terms did not require the plaintiffs to read them. Plaintiffs allege they did not, and also that they did not create Ancestry accounts. Nor did plaintiffs ever access their guardians' accounts, receive their DNA test results, or interact with Ancestry's website in any way before filing suit.

In 2020, Blackstone, Inc. acquired Ancestry. Plaintiffs sued Ancestry in federal court, claiming that the acquisition resulted in Ancestry disclosing genetic test results and personal, identifying information to Blackstone without obtaining written authorization, in violation of the Illinois Genetic Information Privacy Act. See 410 ILL. COMP. STAT. 513/1, et seq. Plaintiffs filed a purported class action under the Class Action Fairness Act, and the district court had diversity jurisdiction under 28 U.S.C. § 1332(d).

Under the Terms' dispute resolution provisions, Ancestry moved to compel arbitration under the Federal Arbitration Act, 9 U.S.C. § 4. The district court denied Ancestry's motion. To that court, it was clear that Ancestry and plaintiffs' guardians had agreed to arbitration, but that court still had to decide whether plaintiffs were also bound by the agreement.

First, the district court rejected Ancestry's assertion that plaintiffs assented to the Terms by agreeing to use Ancestry's services and submitting their DNA tests through their guardians' accounts or through their guardians' execution of consent forms on plaintiffs' behalf. The court did not read the Terms' plain, unambiguous language to support that assertion. Plaintiffs neither signed the Terms nor created Ancestry accounts, so the district court declined to find that plaintiffs had consented to those Terms. Further, plaintiffs did not activate their own DNA tests or otherwise independently engage with Ancestry's services.

Second, the district court concluded that equitable principles did not bind plaintiffs to the Terms. Specifically addressing a theory of direct benefits estoppel, the court noted, "it is hard to imagine what benefit . . . Plaintiffs received from the processing of their DNA," where there were no allegations that Plaintiffs accessed their guardians' Ancestry accounts or their DNA test results.

Ancestry timely filed this interlocutory appeal. "Interlocutory appeals from denials of motions to order arbitration are authorized by 9 U.S.C. § 16(a)(1)(B)." Andermann v. Sprint Spectrum L.P., 785 F.3d 1157, 1157 (7th Cir. 2015).

II. Discussion

Ancestry urges us to reverse the district court's denial of its motion to compel arbitration on three grounds:

• Plaintiffs' guardians assented to the Terms on their behalf;

• Plaintiffs are "closely related" parties to their guardians (or even third-party beneficiaries), foreseeably bound by the Terms; or

• As direct beneficiaries of the Terms, plaintiffs are estopped from avoiding them.

We review de novo a district court's denial of a motion to compel arbitration and the "findings of fact underlying that decision for clear error." Sosa v. Onfido, Inc., 8 F.4th 631, 638 (7th Cir. 2021). The district court's application of equitable doctrines is reviewed for an abuse of discretion. Id.

Before addressing Ancestry's arguments, we review some general legal principles surrounding arbitration. The FAA "requires federal and state courts to place written arbitration agreements on the same footing as other contracts." Scheurer v. Fromm Family Foods, LLC, 863 F.3d 748, 752 (7th Cir. 2017) (citing 9 U.S.C. § 2). A court must compel arbitration under the FAA when three elements exist: "(1) an enforceable written agreement to arbitrate, (2) a dispute within the scope of the arbitration agreement, and (3) a refusal to arbitrate." Id. (citing 9 U.S.C. § 4).

Arbitration is contractual, and "[a] party cannot be required to submit to arbitration any dispute which he has not agreed so to submit." Id. (quotations omitted). It is a "bedrock principle" that "an arbitration agreement generally cannot bind a non-signatory." A.D. v. Credit One Bank, N.A., 885 F.3d 1054, 1059 (7th Cir. 2018). Whether an arbitration agreement is enforceable against a non-party is a question governed by "traditional principles of state law." Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 631, 129 S.Ct. 1896, 173 L.Ed.2d 832 (2009); Scheurer, 863 F.3d at 752. State law typically provides only for a handful of limited exceptions to the general prohibition against binding nonsignatories: "(1) assumption, (2) agency, (3) estoppel, (4) veil piercing, and (5) incorporation by reference." A.D., 885 F.3d at 1059-60 (citing Zurich Am. Ins. Co. v. Watts Indus., Inc., 417 F.3d 682, 687 (7th Cir. 2005)).

Illinois law governs, so we turn there for the specific legal rules to resolve this appeal, mindful that we must ascertain those principles as Illinois would understand them, even if faced with a lack of a ready answer. Two "guardrails" keep us on course. Green Plains Trade Grp., LLC v. Archer Daniels Midland Co., 90 F.4th 919, 928 (...