Hughes v. Ancestry.com

• Decision Date: 28 May 2019
• Docket Number: WD 81996
• Citation: 580 S.W.3d 42
• Parties: T. Parsley HUGHES, et al., Respondents, v. ANCESTRY.COM, et al., Appellants.
• Court: Missouri Court of Appeals

580 S.W.3d 42

T. Parsley HUGHES, et al., Respondents,

v.ANCESTRY.COM, et al., Appellants.

WD 81996

Missouri Court of Appeals, Western District.

Opinion filed: May 28, 2019

Motion for Rehearing and/or Transfer to the Supreme Court Denied June 25, 2019

Application for Transfer Denied September 3, 2019

Mark Schmitz, for Respondents.

John C. Aisenbrey, Kansas City, for Appellants.

Before Division Three: Thomas H. Newton, Presiding Judge, Anthony Rex Gabbert, Judge and Edward R. Ardini, Jr., Judge

EDWARD R. ARDINI, JR., JUDGE

Tina Parsley Hughes and Jose Cordada¹ ("Plaintiffs") filed suit in the Circuit Court of Jackson County against Ancestry.com Inc. and Ancestry.com DNA LLC (collectively, "Ancestry"), alleging that Ancestry released their private health information to third parties without their expressed permission. Ancestry filed a Motion to Compel Arbitration and Stay Litigation, which was denied by the trial court. Ancestry appeals from that denial. We reverse and remand with instructions.

I. Factual and Procedural Background

Ancestry is a Utah company doing business nationwide and internationally. Ancestry sells genealogy and DNA products and services, including through operation of the website Ancestry.com. As part of its services, Ancestry offers its customers the opportunity to have their DNA tested to discover their ethnicity. Plaintiffs purchased DNA-testing kits from Ancestry and created Ancestry.com accounts.²

In order to create their respective accounts, Plaintiffs entered their full names and email addresses and created a password on a webpage. This webpage contained the following message:

By clicking "Continue" below, you agree to the Ancestry Terms and Conditions and Privacy Statement and agree Ancestry may contact you via email about their products and services, such as family tree hints and updates and promotional offers and events [ ] that help you unlock your past to inspire your future. You can unsubscribe or customize your email settings at any time.

Within this paragraph, the Terms and Conditions and Privacy Statement were visibly hyperlinked to send users to those documents. A "Continue" button immediately followed this disclaimer. Plaintiffs clicked "Continue" to create their accounts.

Plaintiffs filed their Class Action Petition, alleging that Ancestry "released [Plaintiffs'] and the members of the Class' private health information to unknown persons or entities without expressed permission to do so from [Plaintiffs] or members of the Class."³ Ancestry filed a Motion to Compel Arbitration and Stay Litigation, arguing that the "Dispute Resolution" section of the Terms and Conditions agreed to by Plaintiffs included an agreement to arbitrate all disputes⁴ subject to three exceptions:

If [the customer’s] dispute is not resolved within 30 days after contacting [Ancestry], then [the customer] and Ancestry agree that we will resolve it through final and binding arbitration, with the following three exceptions:

1. [The customer] may assert [his or her] dispute, if it qualifies, in small claims court.

2. Both [the customer] and Ancestry may bring a suit in court in the state of Utah only for a claim of infringement or other misuse of intellectual property rights. In this case, we both waive any right to a jury trial.

3. If it qualifies, [the customer] may bring a claim to the attention of a relevant federal, state, or local agency that may seek relief against [Ancestry] on [the customer’s] behalf.

The agreement specifically explained that any arbitration proceeding would be conducted according to the American Arbitration Association’s ("AAA") rules, and the reference to the rules was hyperlinked to a downloadable copy of them. AAA Consumer Arbitration Rule R-14(a), states that "[t]he arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope, or validity of the arbitration agreement or to the arbitrability of any claim or counterclaim."

Plaintiffs filed Suggestions in Opposition to Ancestry’s Motion to Compel Arbitration, arguing that the arbitration agreement "lacks consideration and is unconscionable." Specifically, Plaintiffs asserted that the agreement lacked consideration because the Terms and Conditions allowed Ancestry to unilaterally amend the arbitration agreement. Paragraph 7 states:

We have the right to modify these Terms or any additional terms that apply to a Service at any time, including to reflect changes to the law or changes to our Services. We will notify you of any material changes by posting information through the Services or via email. Such material changes will not apply retroactively and will become effective thirty days after they are posted, except that changes addressing new functions in the Services or changes made for legal reasons will be effective immediately. Your continued use of the Services after a change to the Terms will mean you accept the changes. If any changes are unacceptable to you, you may stop using the Services and, if applicable, cancel your subscription as described here.

Plaintiffs also alleged that the agreement was procedurally and substantively unconscionable.⁵

The trial court overruled Ancestry’s Motion to Compel Arbitration and Stay Litigation, finding that the arbitration agreement was invalid because it lacked mutual consideration:

The arbitration agreement at issue in this litigation is illusory, and lacks mutuality of consideration. The arbitration agreement includes the following provision that allows Defendants to unilaterally amend the arbitration agreement: "[W]e have the right to modify these terms or any additional terms that apply to a Service at any time, including to reflect changes to the law or changes to our Services." [ ] The amendment provision does not necessitate the agreement of Plaintiff before the execution and inclusions of additional arbitration provisions. [Ancestry’s] unilateral ability to amend renders the mutual promise to arbitrate as illusory.

Ancestry appeals.⁶

II. Standard of Review

"The denial of a motion to compel arbitration is reviewed de novo. " Soars v. Easter Seals Midwest , 563 S.W.3d 111, 113 (Mo. banc 2018) (citation omitted). "Our review of the trial court’s interpretation of an arbitration provision is also de novo , as arbitration is contractual, and contract interpretation is a question of law." Latenser v. Tarmac Int'l, Inc. , 549 S.W.3d 461, 463 (Mo. App. W.D. 2018) (citation omitted).

III. Discussion

Ancestry raises three points on appeal. In its first point, Ancestry alleges that the trial court erred in overruling its Motion to Compel Arbitration, arguing there was sufficient consideration to support the contract, including the arbitration agreement. In its second point, Ancestry claims that the trial court erred in finding that the consideration supporting the arbitration agreement was illusory because its right to modify the Terms and Conditions of the contract was limited to prospective modifications. Finally, in its third point, Ancestry argues that the trial court erred in overruling the Motion to Compel Arbitration because the parties delegated threshold questions of arbitrability to the arbitrator. Because it is dispositive, we address only Point III.

"Under the Federal Arbitration Act (FAA), arbitration is solely a matter of contract." State ex rel. Pinkerton v. Fahnestock , 531 S.W.3d 36, 49 (Mo. banc 2017) (citing AT & T Techs., Inc. v. Commc'ns Workers of Am. , 475 U.S. 643, 648, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986) ). " ‘[A] party cannot be required to arbitrate a dispute that it has not agreed to arbitrate[,]’ and arbitration will only be compelled where ‘a valid arbitration agreement exists and ... the specific dispute falls within the scope of that agreement.’ " NutraPet Sys., LLC v. Proviera Biotech, LLC , 542 S.W.3d 410, 413-14 (Mo. App. W.D. 2017) (quoting Granger v. Rent-A-Ctr. , 503 S.W.3d 295, 298 (Mo. App. W.D. 2016) ). "Just as the arbitrability of the merits of a dispute depends upon whether the parties agreed to arbitrate that dispute, so the question ‘who has the primary power to decide arbitrability’ turns upon what the parties agreed about that matter." Dotson v. Dillard’s, Inc. , 472 S.W.3d 599, 603 (Mo. App. W.D. 2015) (quoting First Options of Chicago, Inc. v. Kaplan , 514 U.S. 938, 942, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995) ).

A "delegation provision is an agreement to arbitrate threshold issues concerning the arbitration agreement." Soars, 563 S.W.3d at 114 (Mo. banc 2018) (quoting Rent-A-Ctr., West, Inc. v. Jackson , 561 U.S. 63, 68, 130 S.Ct. 2772, 177 L.Ed.2d 403 (2010) ). "Accordingly, it ‘is simply an additional, antecedent agreement the party seeking arbitration asks the ... court to enforce, and the FAA operates on this additional arbitration agreement just as it does on any other.’ " Id. (quoting Rent-A-Ctr. , 561 U.S. at 70, 130 S.Ct. 2772 ). "A delegation provision giving an arbitrator the power to decide threshold issues of arbitrability ‘shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.’ " Id. (quoting 9 U.S.C. § 2 ). "The question of arbitrability – whether an agreement creates a duty for the parties to arbitrate the particular grievance – is undeniably an issue for judicial determination, unless the parties clearly and unmistakably provide otherwise." Caldwell v. UniFirst Corp. , ––– S.W.3d ––––, ––––, 2019 WL 1445220 at *3 (Mo. App. E.D. April 2, 2019) (citing Dotson , 472 S.W.3d at 604 ; Latenser , 549 S.W.3d at 463 ). Therefore, we must first look to the terms of the parties' agreement to determine whether it contains a provision that "clearly and unmistakably" delegates threshold issues of arbitrability to the arbitrator.

"An arbitration agreement ‘need not recite verbatim that the parties agree to arbitrate arbitrability’ in order to manifest [a] ‘clear and unmistakable’ agreement."

Caldwell , –––...