The online advertising company at the center of Verizon’s “zombie” cookie controversy cannot avoid a proposed class action lawsuit filed by Verizon Wireless customers, a federal appeals court ruled this week.
Turn, Inc. is an online ad clearinghouse that allegedly attached non-deletable tracking cookies to Verizon customer identifiers to collect and send their Internet browsing and usage data to Turn’s servers. Verizon customers Anthony Henson and William Cintron filed a proposed class action lawsuit against Tan on behalf of all Verizon customers in New York, but the company argued that customers should be forced into court.
Earlier, the US District Court in Northern California granted Turn’s motion to compel the judgment. But a three-judge panel of the U.S. Court of Appeals for the Ninth Circuit unanimously overturned that ruling on Tuesday.
“This attempts to invoke the arbitration agreement between Henson and Verizon to enforce arbitration, but Henson and Turn do not have an arbitration agreement with each other,” the judges wrote this week.
Verizon’s contract with customers requires them to arbitrate disputes, but “Tan was not a signatory to the Customer Agreement and otherwise had no arbitration agreement with Henson,” the ruling said. The judges vacated the district court’s order granting Turn’s motion to stay the case and compel judgment, and ordered Turn to “bear all costs of the appeal.”
Tracking cookies are restored after deletion
ProPublica reported in January 2015 that Turn “is taking advantage of a hidden undeletable number that Verizon uses to track customers’ behaviors on smartphones and tablets. Tan uses the Verizon number to reset users’ deleted tracking cookies.”
Shortly after that, Verizon said it would give customers a way to opt out of having their devices tracked by hidden identities, and turned tell will stop using tracking cookies that cannot be deleted. In March 2016, Verizon agreed to pay a $1.35 fine and give users more control over “cookies” in a settlement with the Federal Communications Commission. Verizon’s use of zombie cookies violates a net neutrality rule that requires Internet providers to disclose accurate information about network management practices to customers, the FCC said.
But the class action is all about turning actions rather than Verizon’s. This played a role in the judges’ decision this week. Aside from the fact that the arbitration clause does not apply to Turn, the lawsuit claims against Turn are not based on the customer’s contract with Verizon, the judges wrote:
Henson’s complaint is filled with allegations of wrongdoing against Turn that have nothing to do with the Customer Agreement. Among other allegations, Henson said Turn violated Verizon users’ “reasonable expectations of privacy by creating zombie cookies that users cannot see or delete, and which monitor user behavior better than web browsing”; changed works “to enable normal privacy controls of individuals (such as deleting or blocking cookies)”; changed “used Class members’ personal, private, and confidential data for commercial gaming without their knowledge or consent”; and that Switch users’ mobile devices are often switched by “circumventing privacy controls in said devices and causing said devices to transmit information to Switch that is unauthorized” None in these cases you rely on the Customer Agreement or try to find any benefit from its terms.
Henson also did not allege that Verizon partnered with Turn. “To the contrary, Henson alleged that ‘Tan conducted his actions in private’ and did so without Verizon’s knowledge, consent, or approval,” the judges wrote. “Indeed, Henson claims that Verizon publicly criticized Turn’s alleged actions upon their discovery.”
A separate business agreement between Turn and Verizon states that the two companies are “independent of each other” and are not engaged in any kind of partnership or joint venture. The arbitration clause is Verizon’s contract with customers so it does not apply to disputes between Verizon customers and Tan, the appeals court ruled.
There is also controversy over whether California or New York law should apply to the jurisdictional question. Tan argued that New York law only binds the parties to the choice-of-law provision in the consumer contract. But the choice-of-law clause is “a contractual right and generally may not be invoked by a person who is not a party to the express contract,” the judges wrote. That means Verizon can benefit from the opt-out clause, but Tan can’t.
Turn works its money in California. “Because Henson sued Tan in the Northern District of California, we apply California’s alternative law principles,” the judges wrote.
Forced judicial sentences do not go away
Them complaint against Tan was filed in April 2015 and asked the court to require Switch to delete all of its user data, change its data collection and practices, and return all “unclaimed benefits” to members class. The plaintiffs allege that Tan “engaged in deceptive business practices” in violation of New York law and “contracted.” trespass to chattels by intentionally interfering with the use and enjoyment of Verizon subscribers’ mobile devices.”
Mandatory arbitration clauses deprive consumers of their rights and help ISPs avoid heavy penalties for actions that harm consumers, FCC Commissioner Mignon Clyburn and US Sen. Al Franken (D-Minn.) argued. Franken has rejected Senate legislation that would have banned mandatory sentencing, but those sentences remain legal.