I. C. v. StockX, LLC (In re Stockx Customer Data Sec. Breach Litig.)

19 F.4th 873

IN RE: STOCKX CUSTOMER DATA SECURITY BREACH LITIGATION.

I. C., a minor by and through his natural parent, Nasim Chaudhri, M. S., a minor by and through his natural parent, Shuli Shakarchi, Adam Foote, Anthony Giampetro, Kwadwo Kissi, Richard Harrington, Johnny Sacasas, and Chad Bolling, individually and on behalf of a Class of similarly situated persons, Plaintiffs-Appellants,

v.StockX, LLC; StockX, Inc., Defendants-Appellees.

No. 21-1089

United States Court of Appeals, Sixth Circuit.

Decided and Filed: December 2, 2021

ON BRIEF: E. Powell Miller, Sharon S. Almonrode, William Kalas, THE MILLER LAW FIRM, P.C., Rochester, Michigan, Daniel J. Buller, FOULSTON SIEFKIN LLP, Overland Park, Kansas, for Appellants. Kari M. Rollins, SHEPPARD MULLIN RICHTER & HAMPTON LLP, New York, New York, David M. Poell, SHEPPARD MULLIN RICHTER & HAMPTON LLP, Chicago, Illinois, Todd E. Lundell, SHEPPARD MULLIN RICHTER & HAMPTON LLP, Costa Mesa, California, for Appellees.

Before: GUY, MOORE, and GIBBONS, Circuit Judges.

GUY, J., delivered the opinion of the court in which GIBBONS, J., joined. MOORE, J. (pp. –––– – ––––), delivered a separate dissenting opinion.

RALPH B. GUY, JR., Circuit Judge.

Eight named plaintiffs, among them two minors, brought this nationwide putative class action against e-commerce provider StockX for allegedly failing to protect millions of StockX user's personal account information obtained through a cyber-attack in May 2019. The district court granted StockX's motion to dismiss the action and compel arbitration. Plaintiffs have appealed, arguing that there is an issue of fact as to whether four of the plaintiffs agreed to the current terms of service and that the defenses of infancy and unconscionability render the terms of service and the arbitration agreement (including the delegation provision) invalid and unenforceable. Because we conclude that a contract exists and that the delegation provision itself is valid, the arbitrator must decide in the first instance whether the defenses of infancy and unconscionability allow plaintiffs to avoid arbitrating the merits of their claims. Accordingly, we AFFIRM.

I.

A.

StockX is an e-commerce website. Users can buy and sell a variety of luxury merchandise, but StockX's emphasis is rare sneakers. Although any person can browse merchandise on StockX, only users with an account can bid on or sell an item. To create a StockX account, a user must agree to StockX's terms of service by affirmatively checking the box next to the message that states: "By signing up, you agree to the Terms of Service and Privacy Policy." The words "Terms of Service" and "Privacy Policy" are blue or green, indicating embedded hyperlinks, and the other words in the sentence are black. By clicking on "Terms of Service," a user can view the full text of the terms. Each time a user logs in with their StockX account information, the user must click the "Log In" button. Below that button, it states: "By logging in, you agree to the Terms of Service and Privacy Policy." Again, a user can click on the colored, hyperlinked words "Terms of Service" to view the current terms.

Since 2015, StockX's terms of service always included an arbitration agreement, a delegation provision, a class action waiver, and instructions for how to opt out of the arbitration agreement. But the terms have changed over time. In relevant part, the terms of service StockX issued in 2015 provided that a court shall decide "issues relating to arbitrability" and "the scope or enforceability of [the] Agreement to Arbitrate."

(R. 30-6, PageID 1268). But the next sentence seemingly conflicted, stating that "[t]he arbitrator, and not any ... court or agency, shall have exclusive authority to resolve any dispute ... relating to the interpretation, applicability, enforceability or formation of ... all or any part of this Agreement to Arbitrate or the User Agreement[.]" Id.

StockX later changed its terms of service on two occasions. First, on October 17, 2017, StockX added the following provision:

StockX may in [its] discretion change these Terms ... without notice to you. Changes take effect when we post them on our sites. YOUR CONTINUED USE OF THE SITE AFTER WE CHANGE THESE TERMS CONSTITUTES YOUR ACCEPTANCE OF THE CHANGES. IF YOU DO NOT AGREE TO ANY CHANGES, YOU MUST CANCEL YOUR ACCOUNT.

(R. 30-7, PageID 1273).

Second, StockX again changed its terms of service on October 9, 2018. Under the section titled "Arbitration Procedures," StockX revised its delegation provision by removing any indication that a court could decide issues of arbitrability. The delegation provision states in unambiguous terms that:

Other than issues related to the CLASS ACTION WAIVER, the arbitrator, and not any federal, state, or local court or agency, shall have exclusive authority to resolve any dispute arising out of or relating to the interpretation, applicability, enforceability or formation of this Agreement to Arbitrate, any part of it, or of the Terms including, but not limited to, any claim that all or any part of this Agreement to Arbitrate or the Terms is void or voidable.

(R. 30-8, PageID 1293-94). The agreement also provides that the "arbitration will be conducted by the American Arbitration Association ("AAA") under its rules and procedures, ... as modified by [the] Agreement to Arbitrate." (Id. , PageID 1294). Similar to the 2017 Terms, StockX's October 2018 Terms state that "[i]f you do not agree to these Terms, do not use any portion of the Services "; "YOUR CONTINUED USE OF THE SITE AND/OR SERVICES AFTER WE CHANGE THESE TERMS CONSTITUTES YOUR ACCEPTANCE OF THE CHANGES"; and "IF YOU DO NOT AGREE TO ANY OF THE CHANGES, YOU MUST CANCEL YOUR ACCOUNT AND NOT USE ANY PORTION OF THE SERVICES." (Id. , PageID 1289 (emphasis in original)).

There are eight named plaintiffs in this putative class action.¹ Four of the plaintiffs—M. S., Giampetro, Kissi, and Bolling—created their StockX accounts between June 2016 and February 2018, before StockX issued its October 2018 Terms containing the revised delegation provision. The other four plaintiffs—I. C., Foote, Harrington, and Sacasas—created their StockX accounts after StockX issued its October 2018 Terms.

Plaintiffs allege that in May 2019, a computer hacker breached StockX's system, stole personal information from 6.8 million StockX user accounts, and listed the data on the "dark web."

B.

The eight named plaintiffs brought this nationwide putative class action against Defendants StockX, LLC, and StockX, Inc., (collectively "StockX"), asserting violations of federal and state consumer protection laws. StockX filed a motion to dismiss and compel arbitration under the Federal Arbitration Act (FAA), 9 U.S.C. § 1 et seq ., or, in the alternative, to dismiss the action for lack of subject matter jurisdiction or failure to state a claim. Plaintiffs opposed the motion. In pertinent part, plaintiffs argued that: there is an issue of fact as to whether four of the plaintiffs accepted the October 2018 Terms; "no enforceable arbitration agreement exists" for the minor plaintiffs due to the state law infancy doctrine; the arbitration agreement is invalid as to all plaintiffs because it is unconscionable; and the delegation provision, specifically, is "invalid" and "unenforceable" as to the minor plaintiffs under the infancy doctrine.

After rejecting plaintiffs’ arguments, the district court granted StockX's motion to compel arbitration, concluded that StockX's other reasons for dismissal are moot, and dismissed the action. In doing so, the district court reasoned that under the delegation provision in the October 2018 Terms, the infancy and unconscionability defenses plaintiffs had asserted must be decided by an arbitrator, not a court. Plaintiffs appealed.

II.

On appeal, plaintiffs assert the same principal arguments that they made before the district court. We are not persuaded that the district court erred.

A.

"[A]rbitration is a matter of contract," meaning "courts must ‘rigorously enforce’ arbitration agreements according to their terms." Am. Express Co. v. Italian Colors Rest. , 570 U.S. 228, 233, 133 S.Ct. 2304, 186 L.Ed.2d 417 (2013) (citation omitted). For instance, "parties may agree to have an arbitrator decide not only the merits of a particular dispute but also ‘gateway’ questions of ‘arbitrability,’ such as whether the parties have agreed to arbitrate or whether their agreement covers a particular controversy." Henry Schein, Inc. v. Archer & White Sales, Inc. , ––– U.S. ––––, 139 S. Ct. 524, 529, 202 L.Ed.2d 480 (2019) (cleaned up) (quoting Rent-A-Center, W., Inc. v. Jackson , 561 U.S. 63, 68-69, 130 S.Ct. 2772, 177 L.Ed.2d 403 (2010) ). And as relevant here, the parties may also specify "the issues subject to arbitration." Lamps Plus, Inc. v. Varela , ––– U.S. ––––, 139 S. Ct. 1407, 1416, 203 L.Ed.2d 636 (2019) ; accord Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp. , 559 U.S. 662, 683, 130 S.Ct. 1758, 176 L.Ed.2d 605 (2010). In this way, the "parties may delegate threshold arbitrability questions to the arbitrator, so long as the parties’ agreement does so by ‘clear and unmistakable’ evidence." Henry Schein , 139 S. Ct. at 530 (quoting First Options of Chi., Inc. v. Kaplan , 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995) ). Such a choice is typically evidenced in a so-called "delegation" clause or provision. See Rent-A-Center , 561 U.S. at 68-69, 130 S.Ct. 2772 ; New Prime Inc. v. Oliveira , ––– U.S. ––––, 139 S. Ct. 532, 538, 202 L.Ed.2d 536 (2019).

There is a delegation provision in this case. It states that "the arbitrator ... shall have exclusive authority to resolve any dispute arising out of or relating to the interpretation, applicability, enforceability or formation of [the] Agreement to Arbitrate, any part of it, or of the Terms including, ... any claim that all or any part of [the] Agreement to Arbitrate or the Terms is void or voidable." (R. 30-8, PageID 1293-94). Such language alone is ...