Justia Internet Law Opinion SummariesArticles Posted in US Court of Appeals for the Seventh Circuit
Federal Trade Commission v. Credit Bureau Center, LLC
Brown’s credit-monitoring business used a “negative option feature” on its websites, offering visitors a free credit report but automatically enrolling them in a $29.94 monthly subscription when they applied for that report. Information about the monthly membership was buried . Brown’s contractors created website traffic by posting Craigslist advertisements for fake rental properties and directing applicants to the websites for a “free” credit score. The FTC sued under Federal Trade Commission Act (FTCA) section 13(b), which authorizes restraining orders and permanent injunctions to enjoin conduct that violates its prohibition of unfair or deceptive trade practices. On its face, section 13(b) authorizes only injunctive relief but the Commission long interpreted it to permit restitution awards—an interpretation adopted by the Seventh Circuit and others.The district court entered a permanent injunction and ordered Brown to pay more than $5 million in restitution. The Seventh Circuit overruled its precedent and held that section 13(b) does not authorize restitution awards.The Supreme Court granted certiorari and held that section 13(b) does not authorize equitable monetary relief. On remand, the Commission argued that the Court’s decision had significantly changed the law and successfully requested the reimposition of the restitution award under the Restore Online Shoppers’ Confidence Act and FTCA section 19. The Seventh Circuit modified the new judgment. Its direction that any funds remaining after providing consumer redress shall be “deposited to the U.S. Treasury as disgorgement” exceeds the remedial scope of section 19, which is limited to redressing consumer injuries. View "Federal Trade Commission v. Credit Bureau Center, LLC" on Justia Law
Baysal v. Midvale Indemnity Co.
Midvale created an “instant quote” feature on their websites. Anyone who supplied basic identifying information could receive a quote for auto insurance. Each site would auto-fill some information, including the number of the applicant’s driver’s license. Anyone could enter a stranger’s name and home address, which caused the form to disclose the number of the stranger’s driver’s license. Midvale discontinued the autofill feature after observing unusual activity suggesting misuse, and notified people whose information had been disclosed improperly. Three people who received Midvale’s notice filed a purported class action under the Driver’s Privacy Protection Act, 18 U.S.C. 2721–25.The district court held that the plaintiffs lacked standing, having failed to show a concrete injury traceable to the disclosure. The Seventh Circuit affirmed, noting that whether the Act applies at all is questionable. Its principal rule is directed to state officials rather than private actors. A driver’s-license number is not potentially embarrassing or an intrusion on seclusion. It is a neutral fact derived from public records, a fact legitimately known to many private actors and freely revealed to banks, insurers, hotels, and others. Plaintiffs have not plausibly alleged that Midvale’s disclosure of their numbers caused them any injury, and the disclosure of a number in common use by both public and private actors does not correspond to any tort. View "Baysal v. Midvale Indemnity Co." on Justia Law
Heath v. Wisconsin Bell, Inc.
The 1996 E-Rate program (Schools and Libraries Universal Service Support program, Telecommunications Act 110 Stat. 56), is intended to keep telecommunications services affordable for schools and libraries in rural and economically disadvantaged areas. The program subsidizes services and requires providers to charge these customers rates less than or equal to the lowest rates they charge to similarly situated customers. Heath brought a qui tam action under the False Claims Act, 31 U.S.C. 3729, alleging that Wisconsin Bell charged schools and libraries more than was allowed under the program, causing the federal government to pay more than it should have. The district court granted Wisconsin Bell summary judgment.The Seventh Circuit reversed. While Heath’s briefing and evidence focused more on which party bore the burden of proving violations than on identifying specific violations in his voluminous exhibits and lengthy expert report, Heath identified enough specific evidence of discriminatory pricing to allow a reasonable jury to find that Wisconsin Bell, acting with the required scienter, charged specific schools and libraries more than it charged similarly situated customers. It is reasonable to infer that government funds were involved and that if the government knew of actual overcharges, it would not approve claims. View "Heath v. Wisconsin Bell, Inc." on Justia Law
Kass v. PayPal Inc.
PayPal users can transfer money to businesses and people; they can donate to charities through the Giving Fund, its 501(c)(3) charitable organization. Kass created a PayPal account and accepted PayPal’s 2004 User Agreement, including a non-mandatory arbitration clause and allowing PayPal to amend the Agreement at any time by posting the amended terms on its website. In 2012 PayPal amended the Agreement, adding a mandatory arbitration provision. Users could opt out until December 2012. In 2016, PayPal sent emails to Kass encouraging her to make year-end donations. Kass donated $3,250 to 13 charities through the Giving Fund website. Kass alleges she later learned that only three of those charities actually received her gifts; none knew that Kass had made the donations. Kass claims that, although Giving Fund created profile pages for these charities, it would transfer donated funds only to charities that created a PayPal “business” account; otherwise PayPal would “redistribute” the funds to similar charities.Kass and a charity to which she had donated filed a purported class action. The district court granted a motion to compel arbitration, then affirmed the arbitrator’s decision in favor of the defendants. The Seventh Circuit vacated. In concluding that Kass had consented to the amended Agreement, the district court erred by deciding a disputed issue of fact that must be decided by a trier of fact: whether Kass received notice of the amended Agreement and implicitly agreed to the new arbitration clause. View "Kass v. PayPal Inc." on Justia Law
NBA Properties, Inc. v. HANWJH
NBA Properties owns the trademarks of the NBA and NBA teams. In 2020, a Properties investigator accessed HANWJH’s online Amazon store and purchased an item, designating an address in Illinois as the delivery destination. The product was delivered to the Illinois address. Properties sued, alleging trademark infringement and counterfeiting, 15 U.S.C. 1114 and false designation of origin, section 1125(a). Properties obtained a TRO and a temporary asset restraint on HANWJH’s bank account, then moved for default; despite having been served, HANWJH had not answered or otherwise defended the suit. HANWJH moved to dismiss, arguing that the court lacked personal jurisdiction over it because it did not expressly aim any conduct at Illinois. HANWJH maintained that it had never sold any other product to any consumer in Illinois nor had it any “offices, employees,” “real or personal property,” “bank accounts,” or any other commercial dealings with Illinois.The Seventh Circuit affirmed the denial of the motion to dismiss and the entry of judgment in favor of Properties. HANWJH shipped a product to Illinois after it structured its sales activity in such a manner as to invite orders from Illinois and developed the capacity to fill them. HANWJH’s listing of its product on Amazon.com and its sale of the product to counsel are related sufficiently to the harm of likelihood of confusion. Illinois has an interest in protecting its consumers from purchasing fraudulent merchandise. HANWJH alleges no unusual burden in defending the suit in Illinois. View "NBA Properties, Inc. v. HANWJH" on Justia Law
Walsh v. Alight Solutions, LLC
Alight provides recordkeeping services for employee healthcare and retirement benefit plans, some of which are governed by ERISA, 29 U.S.C. 1001–1461 The Department of Labor investigated Alight, following a discovery that Alight processed unauthorized distributions of plan benefits due to cybersecurity breaches, and sent Alight an administrative subpoena duces tecum, seeking documents in response to 32 inquiries, including broad demands, such as “[a]ll documents and communications relating to services offered to ERISA plan clients.” Alight produced some documents but objected to several inquiries, citing its duty to keep certain information confidential. The Department petitioned for enforcement of the subpoena. Alight produced additional materials but redacted most of the documents to remove client identifying information, preventing the Department from discerning potential ERISA violations. Alight asked the court to quash or limit the subpoena and permit redactions. Alight’s legal consultant projected full compliance would require “thousands of hours of work.” The Department clarified or narrowed its requests.The Seventh Circuit affirmed an order granting the Department’s petition to enforce the subpoena with some modifications. The court rejected Alight’s arguments that the subpoena is unenforceable because the Department lacks authority to investigate the company because it is not a fiduciary under ERISA, or cybersecurity incidents generally; that the subpoena’s demands are too indefinite and unduly burdensome, and that the district court abused its discretion by denying Alight’s request for a protective order to limit production of certain sensitive information. View "Walsh v. Alight Solutions, LLC" on Justia Law
Law Offices of David Freyd v. Chamara
In 2017, Freydin, a Chicago lawyer, posed a question on Facebook: “Did Trump put Ukraine on the travel ban list?! We just cannot find a cleaning lady!” After receiving online criticism for the comment, Freydin doubled down. People angered by Freydin’s comments went to his law firm’s Facebook, Yelp, and Google pages and left reviews that expressed their negative views of Freydin. Various defendants made comments including: An “embarrassment and a disgrace to the US judicial system,” “unethical and derogatory,” “hypocrite,” “chauvinist,” “racist,” “no right to practice law,” “not professional,” “discriminates [against] other nationalities,” do not “waste your money.,” “Freydin is biased and unprofessional attorney,” “terrible experience,” “awful customer service,” “disrespect,” and “unprofessional[ism].” None of the defendants had previously used Freydin’s legal services.The Seventh Circuit affirmed the dismissal of Freydin’s suit, which alleged libel per se, “false light,” tortious interference with contractual relationships, tortious interference with prospective business relationships, and civil conspiracy. None of the reviews contained statements that are actionable as libel per se under Illinois law; each was an expression of opinion that could not support a libel claim. Freyding did not link the civil conspiracy claims to an independently viable tort claim. View "Law Offices of David Freyd v. Chamara" on Justia Law
Sosa v. Onfido, Inc.
Onfido provides biometric identification software that is incorporated into its customers’ products and mobile apps for verifying users’ identities. Onfido partnered with OfferUp—an online consumer marketplace—to verify users’ identities. Sosa verified his identity with OfferUp using the technology provided by Onfido—the app’s TruYou feature. To complete the verification process, Sosa uploaded a photograph of his driver’s license and a photograph of his face. Sosa alleges that Onfido then used biometric identification technology without his consent to extract his biometric identifiers and compare the two photographs.Sosa brought class action claims against Onfido under the Illinois Biometric Information Privacy Act. Onfido moved to stay the case and to compel individual arbitration based on an arbitration provision in OfferUp’s Terms of Service. The district court rejected each of Onfido’s nonparty contract enforcement theories and denied Onfido’s motion. The Seventh Circuit affirmed. Onfido failed to establish that there was an outcome-determinative difference between Illinois and Washington law, and the district court properly applied Illinois law—the law of the forum state—to determine that Onfido failed to establish that it was a third-party beneficiary of the Terms of Service or that it could otherwise enforce the contract’s arbitration provision either as an agent of OfferUp or on equitable estoppel grounds. View "Sosa v. Onfido, Inc." on Justia Law
United States v. Bebris
Bebris sent child pornography over Facebook’s private user-to-user messaging system. Facebook licenses a “hashing” image recognition technology, PhotoDNA, developed by Microsoft. PhotoDNA provides the capability to scan images uploaded onto a company’s platform and compares the “hash” (or essence) of a photo with a database of known images of child pornography. Three of Bebris’s messages were flagged by PhotoDNA. Facebook employees reviewed the images and reported them to the CyberTipline of the National Center for Missing and Exploited Children, as required by 18 U.S.C. 2258A(a), which then reported the images to Wisconsin law enforcement. Those officials obtained a warrant and searched Bebris’s residence, where they found a computer containing numerous child pornography files.Bebris, charged federally with possessing and distributing child pornography., argued that the evidence should be suppressed, contending that Facebook took on the role of a government agent (subject to Fourth Amendment requirements) by monitoring its platform for child pornography and reporting that content. The district court denied his Federal Rule of Criminal Procedure 17(a) subpoena seeking pre-trial testimony from a Facebook employee with knowledge of Facebook’s use of PhotoDNA.The Seventh Circuit affirmed his conviction. The subpoena sought cumulative testimony. The record included a written declaration from Microsoft and Facebook and live testimony from an executive at NCMEC, which administers the federal reporting system. Facebook did not act as a government agent in this case. View "United States v. Bebris" on Justia Law
Next Technologies, Inc. v. Beyond the Office Door LLC
Next makes office equipment and refers potential customers to reviews that rate its products highly. Next's competitor, Beyond, published reviews critiquing Next’s standing desks. Instead of pursuing a claim under the Lanham Act, 15 U.S.C. 1125, Next sued in federal court under diversity jurisdiction, relying on Wisconsin’s common law of defamation. The district judge treated product reviews and political commentary as equivalent and cited the Constitution, holding that because Next is a “limited-purpose public figure”—made so by its own efforts to sell its wares—all criticism by a competitor is constitutionally protected unless the statements are knowingly false or made with reckless indifference to their truth. The court concluded that the standard was not met. The Seventh Circuit affirmed on other grounds, stating that it was “skeptical” about the trial court’s use of the Constitution. On the district court’s approach, few claims under the Lanham Act ever could succeed, and commercial advertising would be treated just like political campaigning. Next failed to state a claim under Wisconsin law. “Whatever one can say about whether both gray paint and polished metal should be called ‘silver,’ or whether two circuit boards are as good as one, these are not ‘false assertions of specific unfavorable facts.’” View "Next Technologies, Inc. v. Beyond the Office Door LLC" on Justia Law