On November 4, 2019, in Wainblat v. Comcast Cable Communications, LLC, et. al., No. 19-cv-10976, the District of Massachusetts ordered that a consumer privacy class action against Comcast must be arbitrated on an individual basis because the claims are subject to a valid and enforceable arbitration provision. Against a backdrop of rapidly expanding consumer class action litigation, especially based on consumer privacy laws with statutory damages, the case is an important reminder that arbitration provisions in customer agreements offer robust and critical protections for businesses.
Wainblat’s Consumer Privacy Class Action Claims against Comcast
In a class action complaint filed on April 25, 2019, plaintiff Wainblat asserted claims on behalf of all Massachusetts Comcast subscribers under the Cable Privacy Act, 47 U.S.C. § 55l(a)(l), and the Massachusetts consumer protection statute, M.G.L. c. 93A § 9 (“Chapter 93A”). The plaintiff alleged that Comcast “systematically violates cable television subscribers’ federal statutory privacy rights and Massachusetts’ consumer protection laws, by gathering, maintaining, and using consumers’ private video viewing data without consent.” Specifically, the complaint claimed that, in addition to “subscribers’ viewing histories,” the personal information that Comcast “collects and uses to target ads includes customers’ incomes, ethnicities, education level, the cars they drive, the products they buy, and where they live.” Because Comcast allegedly did not obtain consent from each subscriber before collecting personal information and provided subscribers with inadequate disclosures, the plaintiff argued that these practices violated the Cable Privacy Act and Chapter 93A.
The complaint sought an award of attorney’s fees and statutory damages for each class member totaling $25 under Chapter 93A plus $100 a day for each day of violation under the Cable Privacy Act. With “at least tens of thousands of subscribers in Massachusetts,” Comcast faced considerable potential damages.
Comcast Moves to Compel Arbitration, the Plaintiff Challenges the Arbitration Provision as Illusory, and the Court Holds that the Agreement to Arbitrate is Enforceable
In response to the complaint, in a motion to compel individual arbitration and stay the class action litigation, Comcast argued that the plaintiff and all other subscribers were required to arbitrate their claims on an individual basis under the Comcast subscriber agreement. That agreement contains an arbitration provision with a class action waiver, requiring all claims related to Comcast to be resolved through individual arbitration proceedings. In return, the plaintiff argued that the arbitration provision was unenforceable because Comcast was empowered to modify the subscriber agreement, rendering its obligations under the agreement illusory.
The court agreed with Comcast, explaining that, although “[a] unilateral right to modify an arbitration provision can render it unenforceable,” the subscriber agreement “does not give Comcast unfettered ability to modify the Arbitration Provision” but provided customers with the right to reject changes during a 30-day notice period. In reaching this conclusion, the court distinguished the facts of this case from National Federation of the Blind v. The Container Store, Inc., 904 F.3d 70 (1st Cir. 2018), in which the First Circuit (applying Texas law) held an arbitration agreement was illusory, and thus unenforceable, because it permitted the company “to change the terms of the agreement to avoid arbitration,” both unilaterally and retroactively. Here, the 30-day opt-out that Comcast provided to its subscribers saved its arbitration provision.
The court’s analysis also relied extensively on the Supreme Court’s decisions in American Express Co. v. Italian Colors Restaurants, 570 U.S. 228 (2013) and AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011). These decisions, which represented major victories for the enforcement of arbitration provisions, explained that the Federal Arbitration Act, 9 U.S.C. § 1 et seq., preempts any state law that “stands as an obstacle” to arbitration and directed federal courts to “rigorously enforce arbitration agreements according to their terms,” consistent with a “liberal federal policy favoring arbitration.” Concepcion, 563 U.S. at 339.
The Comcast Decision Highlights the Importance of Arbitration Agreements and Class Action Waivers
The Comcast decision serves as an important reminder that, amid the growing risk of class action litigation based on consumer data privacy, arbitration provisions with class action waivers provide important protection against the threat of enormous and punitive statutory damages. The Comcast and Container Store decisions also offer a compelling note of caution for the drafters of arbitration provisions that they should take care to ensure that the company’s right to change the customer agreement is not so unilateral as to render the agreement illusory, removing the very protections it is intended to secure. Both recent decisions highlight the need for businesses to regularly assess their customer agreements and seek informed counsel on recent developments in consumer class action and arbitration law.