Tile, Stalking Victims Asked To Weigh In On Appellate Ruling

By Bonnie Eslinger

Law360 (August 27, 2024, 10:40 PM EDT) --  A San Francisco federal judge mulling tracking device manufacturer Tile Inc.'s bid to arbitrate some claims that its Bluetooth trackers are dangerous because they empower stalkers asked the parties at a hearing Tuesday to brief her on the effect of a recent California appellate court decision regarding arbitrability.

U.S. District Judge Rita F. Lin made the request at the end of a hearing in San Francisco over Tile's motion to send to arbitration claims from two of the putative class action's four plaintiffs, arguing the women signed terms of service agreements that dictate that's how disputes related to the product would be handled, with even questions about arbitrability sent to the arbitrator. The suit claims that Tile and its partnership with Amazon has resulted in a "dangerous" product, with the companies failing to enact safeguards to prevent stalkers from using the quarter-size tracker to prey on victims.

Tile's lawyer, Jeffrey M. Gutkin of Cooley LLP, argued that there was a "clear and unmistakable" delegation of arbitrability in the agreements presented to the two plaintiffs. Judge Lin asked how that fit with the U.S. Supreme Court's directive in its 2010 decision in Rent-A-Center v. Jackson that the "clear and unmistakable" requirement is to be interpreted based on the party's expectations. That "would seem to incorporate a component of looking at the party's sophistication," the judge said, seemingly referring to the plaintiffs' assertion that the agreement to arbitrate is unconscionably broad and confusing.

Gutkin said that shouldn't be a concern in the case before Judge Lin. "It doesn't matter if the parties have a different expectation, if the contract makes a clear and unmistakable delegation," Gutkin said. The contract also incorporated American Arbitration Association rules, which also delegate questions of arbitrability to the arbitrator, he added. Gutkin also underscored that in 2017 a different California federal judge overseeing McLellan v. Fitbit sent that dispute to arbitration after finding the consumers couldn't claim they lacked the sophistication to understand the contract.

Judge Lin agreed that the McLellan case articulates why "the clear and unmistakable analysis shouldn't depend on the sophistication of the parties," but said she was struggling with whether the plaintiffs understood that arbitrability would be delegated to the arbitrator. The judge also asked whether she needed to consider California contract law principles in determining arbitrability. Gutkin said the same conclusion would be reached under state law principles.

Judge Lin also asked the lawyer about a 2023 California Court of Appeal decision in Gostev v. Skillz Platform, a consumer case finding questions of arbitrability shouldn't have gone to an arbitrator. In that case, a consumer dispute against a mobile app company, the court looked at whether the incorporation of AAA rules can be seen as evidence of the party's intent to arbitrate, she said.

"It seems like they're the first ones to confront this issue in the consumer context," Judge Lin said. Gutkin said he was unfamiliar with the case, but the weight of case law says the arbitration agreement would be binding. A lawyer for the plaintiffs, Lucy Holifield of Wade Kilpela Slade, said the agreements also leave open the door for a court to determine the validity of the arbitration provision.

The agreement "says that the exclusive jurisdiction for all disputes relating to terms is with the state and federal courts in this district," Holifield said. Further, the incorporation "by reference" of the AAA rules is problematic, she said. "Under California law, an extrinsic document may only be incorporated by reference if the reference itself is clear and unequivocal and if the terms are known and easily available," Holifield said.

At the end of Tuesday's hearing, Judge Lin didn't reach a decision but asked the parties for supplemental briefing on Gostev, specifically whether state law applies in terms of evaluating whether a contract meets the "clear and unmistakable" bar.

Tile's motion to compel arbitration applies to two plaintiffs, Melissa Broad and a woman identified only as "Jane Doe." The company also seeks to stay claims against two other women, Stephanie Ireland-Gordy and Shannon Ireland-Gordy. In their written filing of opposition, the plaintiffs also argue that Broad and Doe's claims are outside the scope of any arbitration clause because they relate to third-party use of the Tile products.

Tile's trackers have been around since 2013 and the company joined forces with Amazon in 2021. Under the partnership, Tile has taken advantage of Amazon's nationwide location-tracking program, Sidewalk, by tapping into Bluetooth networks created by Amazon's home device, Echo. First filed in August 2023, the complaint asserts claims of negligence, design defects, unjust enrichment, intrusion, and violations of California's constitutional right to privacy and Invasion of Privacy Act.

Tile allows its customers to sync the tracker to a smartphone app where they can easily locate its whereabouts. While Tile introduced an anti-stalking feature in 2022, victims are still exposed, the suit said.

For example, the plaintiffs claim that only users with the Tile app installed on their phones can scan for trackers, and the user must manually trigger the detection feature. And then, in February 2023, Tile started allowing users to turn off the anti-stalking feature if they provided a government ID, the plaintiffs said.

The plaintiffs are represented by Gillian L. Wade, Sara D. Avila and Marc A. Castaneda of Milstein Jackson Fairchild & Wade LLP, Brandon Haubert and Jessica Hall of WHLaw and David Slade and Lucy L. Holifield of Wade Kilpela Slade. Tile is represented by Travis LeBlanc, Jeffrey M. Gutkin, Max A. Bernstein and Amanda A. Main of Cooley LLP. Amazon.com is represented by Charles Christian Sipos of Perkins Coie LLP.

The case is Shannon Ireland-Gordy et al. v. Tile Inc. et al., case number 3:23-cv-04119, in the U.S. District Court for the Northern District of California.

--Editing by Jay Jackson Jr.

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