Second Circuit Blocks Video Privacy Suit Brought Against Barnes & Noble

Goldstein declined comment on the appeals court order.

The complaint invoked the little-used but powerful consumer protection statute, the Video Privacy Protection Act, 18 U.S.C. §2710(b)(1) that prohibits “wrongful disclosure of video tape rental or sale records.” Violations come with a hefty penalty: $2,500 a pop, that could add up fast in a class action against Barnes &.

Filed in 2017 by four plaintiffs firms led by Kaplan Fox & Kilsheimer in U.S. District Court for the Southern District of New York, the lawsuit attempted to stretch the video privacy law to fit the digital age. It's certainly no leap to conclude wrongful disclosure of video tape sales also covers DVD sales. But the question of what constitutes digital disclosure is more nebulous.

The issue arose in a case involving Vizio. The electronics maker allegedly captured second-by-second viewing data of customers who bought 11 million of its Internet-connected televisions, tracking everything they watched from network TV broadcasts to Netflix shows to specific DVDs. Vizio then allegedly sold the information (which it claimed did not include any personally identifiers) to third parties, who used it to analyze and target ads.

In October of 2018, Vizio agreed to pay $17 million to settle multidistrict litigation that invoked violations of the Video Privacy Protection Act. The payout followed a $1.9 million settlement with the Federal Trade Commission in February 2017.

Here, Barnes & Noble was accused of falsely assuring its website customers that it “would never 'provide any of your information to social networking sites without your express consent.'” But according to the Bernardino plaintiffs, Barnes & Noble “knowingly causes each customer's personal information, including information that identifies the purchased video media, to be disclosed to the social media partners. With respect to defendant's disclosures to Facebook, defendant also causes the identity of the customer to be disclosed if the customer is a Facebook subscriber.”

Goldstein on behalf of Barnes & Noble argued in court papers that the information allegedly disclosed wasn't personally identifiable as envisioned by the video privacy law. Instead, she said, it was nothing more than a jumble of numbers and letters, as in “0glRJJKaszKOLdKz8.AWXGH1RrxSLM3PHeHxfrORv10H8.BCVchV.Sj.FUJ.0.AWWsuv8a.”

“Of course, no one would read something like that and say, 'Melina Bernardino,'” Goldstein wrote, referring to the named plaintiff. “[T]his Internet case in 2017 looks nothing like the video rental case that was the impetus for passage of the [video privacy law] nearly 30 years ago.” Moreover, Goldstein argued that the plaintiffs hadn't shown Barnes & Noble “knowingly” made the alleged disclosures.

Beyond the merits, Barnes & Noble had a trump card: Its website's terms of use contain an arbitration clause. As described by the plaintiffs, certain customer disputes are required to be arbitrated, unless Barnes & Noble at its sole discretion decides it would rather go to court in New York. “This one-sided term is unfair on its face, but also could be used as a sword against out-of-state plaintiffs who cannot afford to proceed in court in New York,” wrote Kaplan Fox partner David Straite, who did not respond to a request for comment.

In addition, if a case does go to court, Barnes & Noble says there's no jury trial.

If Barnes & Noble elects to arbitrate, the proceedings can only be conducted by “telephone, online or based solely on written submissions” with no right of in-person appearances, Straite continued. “Furthermore, the arbitration purportedly must follow the Commercial Arbitration Rules (including the Supplementary Procedures for Consumer-Related Disputes) which permit far less third-party discovery, if any. In this case, if third-party discovery from Facebook were required for plaintiff to prove her claim, the purported agreement to arbitrate in effect shields defendant from all liability.” And, of course, a case couldn't proceed as a class action in arbitration.

But Goldstein argued Barnes & Nobles prominently informed its customers about its terms of use, and that the arbitration agreement was not procedurally or substantively unconscionable. It's not as if the plaintiff had no choice but to buy a DVD from Barnes & Noble, she noted. Plenty of other websites sell them. Nor was the plaintiff coerced into agreeing to arbitrate.

As for the requirement to conduct proceedings by phone or in writing, “Plaintiff has not explained — and cannot explain — how an in-person appearance could be crucial to her case,” Goldstein claimed.

What about the arbitration discovery limits? Those “further the goals of arbitration and the Federal Arbitration Act (FAA) — namely, the efficient resolution of disputes.”

Federal Magistrate Judge was convinced, ruling in November of 2017 that the arbitration agreement was valid and enforceable-a conclusion adopted by Southern District of New York Judge Lewis Kaplan. Bernardino v. Barnes & Noble Booksellers Inc., 17-CV-04570.

On appeal, Goldstein's greatest coup was heading off the appellate panel from considering the merits of the underlying dispute or even the terms of the arbitration agreement. The Kaplan Fox team argued that because the judge directed the clerk of the court in his order to “close the case,” that meant the matter was ripe for appellate review.

The panel held that what District Judge Kaplan actually meant to do was to stay the case pending arbitration. That's what the magistrate judge said in her recommendation, which was adopted by the judge. “Furthermore, throughout the proceedings leading up to its memorandum and order, the district court repeatedly made clear that it interpreted B&N's motion as a motion to stay all proceedings pending arbitration.”

As a result, the plaintiffs were trying to appeal an interlocutory order rather than a final decision. And an interlocutory order isn't appealable under the FAA.

The plaintiffs can of course proceed with the individual arbitration and try appealing again after it's over. But they're now a long way from getting a shot on the merits before the Second Circuit.

***

Jenna Greene is Editor of The Litigation Daily, an ALM affiliate publication of Cybersecurity Law & Strategy, and author of the “Daily Dicta” column. She is based in the San Francisco Bay Area and can be reached at [email protected].