Anthony Henson v. Usdc-Caoak ( 2017 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
IN RE ANTHONY HENSON and No. 16-71818
WILLIAM CINTRON,
D.C. No.
4:15-cv-01497-
ANTHONY HENSON; WILLIAM JSW
CINTRON,
Petitioners,
OPINION
v.
UNITED STATES DISTRICT COURT FOR
THE NORTHERN DISTRICT OF
CALIFORNIA, OAKLAND,
Respondent,
TURN, INC.,
Real Party in Interest.
Petition for Writ of Mandamus
Argued and Submitted May 17, 2017
San Francisco, California
Filed September 5, 2017
2 IN RE HENSON
Before: William A. Fletcher and Richard C. Tallman,
Circuit Judges, and Roslyn O. Silver, * District Judge.
Per Curiam Opinion
SUMMARY **
Mandamus
The panel granted a petition for a writ of mandamus, and
vacated the district court’s order granting Turn, Inc.’s
motion to stay the action and compel arbitration, arising
from a putative class action brought by Verizon cellular and
data subscribers against Turn, Inc., a middle-man for
Internet-based advertisements, challenging Turn, Inc.’s
alleged use of “zombie” cookies.
The panel weighed the factors in Bauman v. U. S. Dist.
Court, 557 F.2d 650, 654–55 (9th Cir. 1977), and held that
the majority of the Bauman factors weighed heavily in favor
of granting the writ of mandamus. Specifically, the panel
held that because “contemporaneous ordinary appeal” was
unavailable, the first Bauman factor supported issuance of
the writ. The panel held that the second Bauman factor also
weighed heavily in favor of granting mandamus relief
because the subscribers would be prejudiced in a way not
correctable on appeal. The panel held that the third Bauman
*
The Honorable Roslyn O. Silver, United States District Judge for
the District of Arizona, sitting by designation.
**
This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
IN RE HENSON 3
factor strongly favored granting the writ because the district
court committed clear error by applying New York’s
equitable estoppel doctrine, rather than California’s, and by
failing to apply California law correctly. The panel held that
the fourth and fifth Bauman factors – oft-repeated error and
issue of first impression – weighed against granting
mandamus relief. The panel concluded that because the first
three Bauman factors strongly favored mandamus relief, the
balance of factors favored issuing the writ.
COUNSEL
Nimish R. Desai (argued) and Michael W. Sobol, Lieff
Cabraser Heimann & Bernstein LLP, San Francisco,
California; Nicholas Diamand, Lieff Cabraser Heimann &
Bernstein LLP, New York, New York; Hank Bates, Carney
Bates & Pulliam PLLC, Little Rock, Arkansas; Bradley S.
Clanton, Clanton Legal Group PLLC, Jackson, Mississippi;
for Petitioners.
Michael H. Rubin (argued), Anthony J. Weibell, and Lauren
Gallo White, Wilson Sonsini Goodrich & Rosati, San
Francisco, California, for Real Party in Interest.
Scott H. Angstreich and Amelia I.P. Frenkel, Kellogg Huber
Hansen Todd & Evans PLLC, Washington, D.C., for
Amicus Curiae Cellco Partnership DBA Verizon Wireless.
4 IN RE HENSON
OPINION
PER CURIAM:
We consider whether the defendant, a “middle man” for
Internet-based advertisements, may invoke an arbitration
provision contained in a contract between the plaintiffs and
their wireless service provider.
I. BACKGROUND
Plaintiffs Anthony Henson and William Cintron
(collectively, “Henson”) are Verizon 1 cellular and data
subscribers. Henson and Verizon’s contractual relationship
is governed by the “My Verizon Wireless Customer
Agreement” (“Customer Agreement”), which includes an
agreement to arbitrate disputes between them. Defendant
Turn, Inc. (“Turn”) is a “middle man” for Internet-based
advertisements that separately contracts with Verizon to
deliver advertisements to Verizon subscribers based on
usage data collected from users’ mobile devices. The “Turn
Audience Platform Agreement” (“TAP Agreement”)
governs Verizon and Turn’s contractual relationship, under
which Verizon granted a license to Turn to use its service for
targeted advertising in exchange for a percentage of the
revenue that Turn received from selling targeted advertising
space to its client advertisers.
As a Verizon subscriber, each of Henson’s wireless
transmissions contained a Verizon Unique Identifier Header
1
Cellco Partnership d/b/a Verizon Wireless (“Verizon” or “Verizon
Wireless”) is not a party in this matter.
IN RE HENSON 5
(“UIDH”). Turn attached tracking cookies 2 to Verizon
subscribers’ UIDHs to collect and send their web-browsing
and usage data to Turn’s servers. Subscribers were allegedly
unable to detect, delete, or block these “zombie” cookies
attached to their UIDHs. 3 Henson filed a putative class
action in the United States District Court for the Northern
District of California on behalf of all Verizon subscribers
residing in New York against Turn for its alleged use of
these “zombie” cookies, claiming that Turn (1) engaged in
deceptive business practices in violation of New York
General Business Law § 349, and (2) committed trespass to
chattels by intentionally interfering with the use and
enjoyment of Verizon subscribers’ mobile devices.
Henson alleged that Turn exploited users’ UIDHs to
install its “zombie” cookies, recreated those cookies after
users deleted them, collected data about Verizon users
without their knowledge, used that data to create profiles that
it marked with its own identifier (“Turn ID”), stored those
Turn IDs on users’ mobile web browsers, and auctioned off
users’ collected data so that advertisers could place targeted
advertisements on their mobile phones. Because Turn works
with Google, Facebook, and hundreds of other well-
2
A “cookie” is software code that transmits a user’s web-browsing
history and other usage data back to the entity that attached the cookie.
3
According to Henson, if a subscriber deleted Turn’s cookie, Turn
would attach a new cookie the next time the subscriber visited one of
Turn’s partner websites. Turn could then repopulate the cookie with the
very data the user intentionally deleted, and it could cross-reference the
UIDH attached to the user’s transmission with Turn’s own database of
collected data. This allowed Turn to continue collecting information
about the user after the user believed the cookie was deleted.
6 IN RE HENSON
recognized brands, Henson argued Turn’s practices had a
harmful and wide impact.
Turn moved to dismiss Henson’s claims and sought to
compel arbitration by invoking the arbitration provision in
the Customer Agreement between Henson and Verizon. The
Customer Agreement requires Henson and Verizon to
arbitrate any disputes arising out of their contract. However,
Turn is not a signatory to the Customer Agreement and does
not otherwise have an arbitration agreement with Henson.
The separate TAP Agreement, between Turn and Verizon,
provides that the parties “are independent of each other”;
that “nothing in th[e] Agreement creates any partnership,
joint venture, . . . or other similar relationship”; and that
“neither party shall have the authority to bind the other in
any way.” 4 Nonetheless, Turn asked the district court to
compel arbitration under the doctrine of equitable estoppel
because it provided a service to Henson that was closely
connected to Henson’s Verizon wireless service.
Without conducting a choice-of-law analysis, the district
court granted Turn’s motion to compel arbitration under
New York’s equitable estoppel doctrine and stayed the
action. Henson timely filed this writ of mandamus to vacate
the district court’s order compelling arbitration.
4
Although the TAP Agreement was filed under seal in the district
court, we conclude that Turn waived any claim of confidentiality as to
these portions of the document when it represented on appeal that it acted
jointly and in partnership with Verizon to provide targeted
advertisements to Verizon’s subscribers. The TAP Agreement, the
contents of which are highly probative of the question at hand, makes
clear that the companies agreed that exactly the opposite was true. See
Murphy v. DirecTV, Inc., 724 F.3d 1218, 1233 n.9 (9th Cir. 2013).
IN RE HENSON 7
II. ANALYSIS
We have jurisdiction to issue writs of mandamus
pursuant to the All Writs Act. 28 U.S.C. § 1651. A writ of
mandamus is a “drastic and extraordinary” remedy. Ex parte
Fahey, 332 U.S. 258, 259 (1947). To determine whether a
writ of mandamus is warranted, we weigh the Bauman
factors:
(1) whether the petitioner has other adequate
means, such as a direct appeal, to attain the
relief he or she desires; (2) whether the
petitioner will be damaged or prejudiced in a
way not correctable on appeal; (3) whether
the district court’s order is clearly erroneous
as a matter of law; (4) whether the district
court’s order makes an “oft-repeated error,”
or “manifests a persistent disregard of the
federal rules”; and (5) whether the district
court’s order raises new and important
problems, or legal issues of first impression.
In re Van Dusen, 654 F.3d 838, 841 (9th Cir. 2011) (quoting
Bauman v. U.S. Dist. Court, 557 F.2d 650, 654–55 (9th Cir.
1977)). Although satisfying the third Bauman factor—clear
error—is necessary for granting the writ, a petitioner need
not satisfy all five factors at once. Douglas v. U.S. Dist.
Court for Cent. Dist. of Cal., 495 F.3d 1062, 1066 (9th Cir.
2007) (per curiam). Here, the majority of the Bauman
factors weigh heavily in favor of granting the writ.
A. Direct Appeal is Unavailable
A writ of mandamus “is not available when the same
review may be obtained through contemporaneous ordinary
appeal.” Snodgrass v. Provident Life and Accident Ins. Co.,
8 IN RE HENSON
147 F.3d 1163, 1165 (9th Cir. 1998) (quoting Clorox Co. v.
U.S. Dist. Court for N. Dist. of Cal., 779 F.2d 517, 519 (9th
Cir. 1985)). An order staying proceedings and compelling
arbitration is not a final decision that is subject to ordinary
appeal under 28 U.S.C. § 1291. See 9 U.S.C. § 16(b);
Johnson v. Consumerinfo.com, Inc., 745 F.3d 1019, 1021–
23 (9th Cir. 2014). Because “contemporaneous ordinary
appeal” is unavailable, the first Bauman factor supports
issuance of the writ.
B. Prejudice Not Correctable on Appeal
The second Bauman factor also weighs in favor of
granting mandamus relief. We generally examine the first
and second factors together because the second is closely
related to the first. Douglas, 495 F.3d at 1068 n.3. Here, the
Customer Agreement does not allow Henson to arbitrate his
dispute in a representative capacity or on behalf of a class.
If Henson is forced to arbitrate, he “has no other adequate
means” of ensuring that he can continue as the class
representative, and this would prejudice him “in a way not
correctable on appeal.” See Bauman, 557 F.2d at 654. If
Henson wins the arbitration, then his individual claims in
this action would be rendered moot because they would fully
be satisfied, and Henson would lose his status as class
representative because he would no longer have a concrete
stake in the controversy. See Douglas, 495 F.3d at 1068–69.
It is doubtful that Henson would be able to avoid mootness
by moving to vacate the arbitration award solely because he
wanted to continue as the class representative. See id. And,
it is “doubtful that he could appeal the district court’s order
confirming an award that fully satisfied his individual
claim[s].” Id. at 1069. He thus would “have no opportunity
to challenge the district court’s order compelling the
arbitration in the first place.” Id.IN RE HENSON 9
If Henson loses the arbitration, it is also doubtful that he
would successfully bring an appeal to this court. If he brings
suit in the district court to vacate the arbitration award and
to seek a damage award from the district court, Turn could
make an offer of settlement that would be very hard to
refuse. Until the arbitration award is actually vacated by
order of the district court, Henson could represent only
himself and would thus have no legal or ethical obligation to
refuse the offer.
C. Clear Error
Although clear error is a highly deferential standard of
review in the mandamus context, Van Dusen, 654 F.3d at
841, an “order is clearly erroneous for purposes of a
mandamus petition if we are left with the definite and firm
conviction that a mistake has been committed.” United
States v. Ye, 436 F.3d 1117, 1123 (9th Cir. 2006) (quotation
omitted). Here, the district court committed clear error by
applying New York’s equitable estoppel doctrine, rather
than California’s, and by failing to apply California law
correctly. Because we are left with a definite and firm
conviction that a mistake has been committed, the third
Bauman factor strongly favors granting the writ.
The Federal Arbitration Act (“FAA”) provides that
arbitration agreements “shall be valid, irrevocable, and
enforceable.” 9 U.S.C. § 2. Turn attempts to invoke the
arbitration agreement between Henson and Verizon to
compel arbitration, but Henson and Turn do not have an
arbitration agreement with each other. “[A]rbitration is a
matter of contract and a party cannot be required to submit
to arbitration any dispute which he has not agreed so to
submit.” AT&T Techs., Inc. v. Commc’ns Workers of Am.,
475 U.S. 643, 648 (1986) (quoting United Steelworkers of
Am. v. Warrior & Gulf Nav. Co., 363 U.S. 574, 582 (1960)).
10 IN RE HENSON
“State contract law controls whether parties agreed to
arbitrate.” Knutson v. Sirius XM Radio, Inc., 771 F.3d 559,
565 (9th Cir. 2014).
The Customer Agreement between Henson and Verizon
provides that only the subscriber and Verizon “agree to
resolve disputes only by arbitration.” Turn is not a signatory
to the Customer Agreement. The TAP Agreement between
Turn and Verizon provides that the parties “are independent
of each other”; that “nothing in this Agreement creates any
partnership, joint venture, . . . or other similar relationship”;
and that “neither party shall have the authority to bind the
other in any way.”
Since there is no agreement between Henson and Turn to
arbitrate their disputes, Turn argues that the doctrine of
equitable estoppel allows it to enforce the arbitration
provision in the Verizon Customer Agreement against
Henson. “[A] litigant who is not a party to an arbitration
agreement may invoke arbitration under the FAA if the
relevant state contract law allows the litigant to enforce the
agreement.” Kramer v. Toyota Motor Corp., 705 F.3d 1122,
1128 (9th Cir. 2013) (citing Arthur Andersen LLP v.
Carlisle, 556 U.S. 624, 632 (2009)). Henson asserts that
California law applies to determine whether Turn, as a non-
signatory, can compel arbitration under the doctrine of
equitable estoppel, while Turn argues that the district court
correctly applied New York law because of a choice-of-law
provision in the Customer Agreement.
1. Choice of Law
The district court erred by applying New York law based
on the Customer Agreement’s choice-of-law provision. “A
choice-of-law clause, like an arbitration clause, is a
contractual right and generally may not be invoked by one
IN RE HENSON 11
who is not a party to the contract in which it appears.”
Paracor Fin., Inc. v. Gen. Elec. Capital Corp., 96 F.3d 1151,
1165 (9th Cir. 1996); see also Nguyen v. Barnes & Noble
Inc., 763 F.3d 1171, 1175 (9th Cir. 2014) (explaining that
whether a choice-of-law provision applies depends on
whether the parties agreed to be bound by the contract in
which it appears). Here, Henson and Turn never agreed that
New York law would govern the disputes between them.
And, as discussed below, Henson does not rely on the
Customer Agreement in his suit against Turn.
Instead, we apply the choice-of-law principles of the
forum state. Hoffman v. Citibank (S.D.), N.A., 546 F.3d
1078, 1082 (9th Cir 2008). Because Henson sued Turn in
the Northern District of California, we apply California’s
choice-of-law principles. Under California’s choice-of-law
analysis, we will apply New York law only if Turn shows,
among other things, that New York law “materially differs
from the law of California.” Washington Mut. Bank, FA v.
Superior Court, 15 P.3d 1071, 1080 (Cal. 2001). Otherwise,
we apply California law. Id. Turn concedes, and we agree,
that there is no material difference between New York and
California’s equitable estoppel laws. We therefore look to
California’s equitable estoppel doctrine to determine
whether Turn, as a non-signatory, can compel arbitration.
2. California Law
California law permits non-signatories to invoke
arbitration agreements in limited circumstances under the
doctrine of equitable estoppel. The theory behind equitable
estoppel is that a plaintiff may not, “on the one hand, seek to
hold the non-signatory liable pursuant to duties imposed by
the agreement, which contains an arbitration provision, but,
on the other hand, deny arbitration’s applicability because
the defendant is a non-signatory.” Murphy v. DirecTV, Inc.,
12 IN RE HENSON
724 F.3d 1218, 1229 (9th Cir. 2013) (quoting Goldman v.
KPMG LLP, 92 Cal. Rptr. 3d 534, 543 (Ct. App. 2009)). If
this were permitted, then a signatory to an agreement, such
as Henson, would “have it both ways”—that is, he could sue
the non-signatory, Turn, under the terms of the agreement
containing the arbitration clause, but ignore the arbitration
requirement because Turn is a non-signatory. See Goldman,
92 Cal. Rptr. 3d at 552.
Under California law, Henson will be equitably estopped
from avoiding arbitration in two circumstances:
(1) when [Henson] must rely on the terms of
the [Customer Agreement] in asserting its
claims against [Turn] or the claims are
intimately founded in and intertwined with
the [Customer Agreement], and
(2) when [Henson] alleges substantially
interdependent and concerted misconduct by
[Turn] and [Verizon] and the allegations of
interdependent misconduct are founded in or
intimately connected with the obligations of
the [Customer Agreement].
Murphy, 724 F.3d at 1229 (quoting Kramer, 705 F.3d at
1128–29, which stated the controlling statement concerning
California equitable estoppel law as set forth in Goldman,
173 Cal. App. 4th at 218–19).
a. Reliance on the underlying contract
As to the first circumstance, “merely making reference
to an agreement with an arbitration clause is not enough.”
Goldman, 92 Cal. Rptr. 3d at 541 (alterations and quotations
omitted). Instead, for equitable estoppel to apply, Henson’s
IN RE HENSON 13
claims against Turn must rely on the terms of the Customer
Agreement. Id. In other words, Henson’s claims must be
based on “the obligations imposed by the [Customer
Agreement].” Id. Equitable estoppel is “inapplicable where
a plaintiff’s ‘allegations reveal no claim of any violation of
any duty, obligation, term or condition imposed by the
[Customer Agreement].’” Murphy, 724 F.3d at 1230
(quoting Goldman, 92 Cal. Rptr. 3d at 551). For example,
in Kramer, we held that Toyota could not compel arbitration
of a consumer class action on the basis of arbitration clauses
contained in Purchase Agreements that customers entered
into with their dealerships. See 705 F.3d at 1124–25. We
expressly rejected Toyota’s argument that the plaintiffs’
claims were necessarily based on the Purchase Agreements
merely because the lawsuit was predicated on the bare fact
that a vehicle purchase occurred. Id. at 1130–31.
Similarly, here, Henson’s claims against Turn are not
based on the Customer Agreement. Henson’s complaint is
replete with allegations of wrongdoing against Turn that
have nothing to do with the Customer Agreement. Among
other allegations, Henson claims that Turn violated Verizon
users’ “reasonable expectations of privacy by creating
zombie cookies that users could neither detect nor delete,
and which monitored user behavior well beyond web
browsing”; that Turn acted “to disable the standard privacy
controls employed by individuals (such as deleting or
blocking cookies)”; that Turn “used Class members’
personal, private, and confidential data for commercial gain
without their knowledge or consent”; and that Turn
consistently altered users’ mobile devices by
“circumventing privacy controls in said devices and causing
said devices to transmit information to Turn to which Turn
was not entitled.” None of these allegations rely on the
Customer Agreement or attempt to seek any benefit from its
14 IN RE HENSON
terms. See Murphy, 724 F.3d at 1230. Further, New York’s
consumer protection statute allows Henson to sue Turn for
its allegedly deceptive acts and practices regardless whether
Henson signed a Customer Agreement with Verizon. See id.
at 1231; accord Rajagopalan v. NoteWorld, LLC, 718 F.3d
844, 847 (9th Cir. 2013) (rejecting equitable estoppel theory
under Washington law where the plaintiff’s lawsuit stated
statutory claims that were separate from the contract itself). 5
Thus, the first circumstance for equitable estoppel does not
apply.
b. Substantial interdependence
As to the second circumstance, “the doctrine of equitable
estoppel may apply in certain cases where a signatory to an
arbitration agreement attempts to evade arbitration by suing
nonsignatory defendants for claims that are based on the
same facts and are inherently inseparable from arbitrable
claims against signatory defendants.” Murphy, 724 F.3d at
1231 (quotation omitted). Mere “allegations of substantially
interdependent and concerted misconduct by [Verizon] and
[Turn], standing alone, are not enough: the allegations of
interdependent misconduct must be founded in or intimately
connected with the obligations of the [Customer
Agreement].” Goldman, 92 Cal. Rptr. 3d at 541. “Even
where a plaintiff alleges collusion, ‘the sine qua non for
allowing a nonsignatory to enforce an arbitration clause
based on equitable estoppel is that the claims the plaintiff
asserts against the nonsignatory are dependent on or
inextricably bound up with the contractual obligations of the
5
We also note that many of the California cases permitting non-
signatories to compel arbitration under an equitable estoppel theory
involve contract-based causes of action, such as tortious interference or
breach of contract. See Murphy, 724 F.3d at 1231 n.7 (citing cases).
IN RE HENSON 15
agreement containing the arbitration clause.’” Murphy,
724 F.3d at 1231 (quoting Goldman, 92 Cal. Rptr. 3d at 537).
Here, Henson does not allege Verizon colluded with
Turn. On the contrary, Henson alleges that “Turn conducted
its practices in secret” and acted without Verizon’s
knowledge, consent, or approval. Indeed, Henson claims
that Verizon publicly rebuked Turn’s alleged practices upon
discovering them. We also reject Turn’s argument that
Henson’s claims are based on Turn and Verizon’s
interdependent and concerted conduct because Turn
engaged in the challenged conduct in partnership with
Verizon. The TAP Agreement between Turn and Verizon
explicitly provides that “Turn and Verizon are independent
of each other and nothing in this Agreement creates any
partnership, joint venture, . . . or other similar relationship.”
As such, the second circumstance for equitable estoppel does
not apply here.
The district court committed clear error in holding that
equitable estoppel applied to compel arbitration under the
Customer Agreement. Thus, the third Bauman factor weighs
in favor of granting mandamus relief.
D. Oft-Repeated Error and Issue of First
Impression
The fourth and fifth Bauman factors weigh against
granting mandamus relief. There is nothing before us that
suggests the district court’s error has been made more than
once. Nor is there anything new about the application of
equitable estoppel. See Bauman, 557 F.2d at 655;
McDonnell-Douglas Corp. v. U.S. Dist. Court for Cent. Dist.
of Cal., 523 F.2d 1083, 1087 (9th Cir. 1975). To grant
mandamus relief, however, “all five factors need not be
satisfied at once.” Douglas, 495 F.3d at 1066 (quotation
16 IN RE HENSON
omitted). “In the final analysis, the decision of whether to
issue the writ lies within our discretion.” Van Dusen,
654 F.3d at 841.
Because the first three Bauman factors strongly favor
mandamus relief, we conclude that the balance of factors
favors issuing the writ. The district court’s order granting
Turn’s motion to stay the action and compel arbitration is
vacated.
Turn shall bear all costs of appeal. See Fed. R. App. P.
39(a)(3).
PETITION GRANTED.