In re Zappos.com, Inc., Customer Data Sec. Beach Litig.

• Decision Date: 27 September 2012
• Docket Number: No. 3:12–CV–00337–RCJ–VPC.,No. 3:12–CV–00339–RCJ–VPC.,No. 3:12–CV–00072–RCJ–WGC.,No. 3:12–CV–00341–RCJ–VPC.,MDL No. 2357.,No. 3:12–CV–00338–RCJ–VPC.,No. 3:12–CV–00340–RCJ–VPC.,No. 3:12–CV–00325–RCJ–VPC.,No. 3:12–CV–00355–RCJ–VPC.,No. 2:12–CV–00232–RCJ–VCF.,3:12–CV–00325–RCJ–VPC.,3:12–CV–00337–RCJ–VPC.,3:12–CV–00340–RCJ–VPC.,3:12–CV–00072–RCJ–WGC.,3:12–CV–00338–RCJ–VPC.,3:12–CV–00341–RCJ–VPC.,2:12–CV–00232–RCJ–VCF.,3:12–CV–00339–RCJ–VPC.,3:12–CV–00355–RCJ–VPC.
• Citation: 893 F.Supp.2d 1058
• Parties: In re ZAPPOS.COM, INC., CUSTOMER DATA SECURITY BREACH LITIGATION. This Order applies to all actions.
• Court: U.S. District Court — District of Nevada

893 F.Supp.2d 1058

In re ZAPPOS.COM, INC., CUSTOMER DATA SECURITY BREACH LITIGATION. This Order applies to all actions.

Nos. 3:12–CV–00325–RCJ–VPC, 3:12–CV–00337–RCJ–VPC, 3:12–CV–00340–RCJ–VPC, 3:12–CV–00072–RCJ–WGC, 3:12–CV–00338–RCJ–VPC, 3:12–CV–00341–RCJ–VPC, 2:12–CV–00232–RCJ–VCF, 3:12–CV–00339–RCJ–VPC, 3:12–CV–00355–RCJ–VPC.

MDL No. 2357.

United States District Court, D. Nevada.

Sept. 27, 2012.

Brent A Carson, Robert A Winner, Winner and Carson, Las Vegas, NV, William M. O'Mara, David C. O'Mara, The O'Mara Law Firm, P.C., Reno, NV, Jon A Tostrud, Tostrud Law Group, P.C., Los Angeles, CA, Marc L. Godino, Glancy Binkow & Goldberg LLP, Los Angeles, CA, Peter Mougey, James L Kauffman, Levin, Papantonio, Thomas, Mitchell, Rafferty & Proctor, PA, Pensacola, FL, D. Greg Blankinship, Jeffrey I. Carton, Jeremiah Frei–Pearson, Meiselman, Denlea, Packman, Carton & Eberz P.C., White Plains, NY, Tamra Carsten Givens, Scott Wm. Weinstein, Rachel Soffin, J. Andrew Meyer, Morgan & Morgan, P.A., Tampa, FL, Erich P. Schork, Ben Barnow, Barnow and Associates, P.C., Chicago, IL, Mark K. Gray, Gray & White, Louisville, KY, Richard L. Coffman, The Coffman Law Firm, Beaumont, TX, Charles T. Lester, Jr., Independence, KY, Eric C. Deters, Eric C. Deters & Associates, P.S.C., Independence, KY, Lance A. Harke, Howard M. Bushman, Harke Clasby & Bushman LLP, Miami Shores, FL, Jason R. Alderman, Alderman & Kodsi, Miami Shores, FL, E. Kirk Wood, Jr., Wood Law Firm LLC, Birmingham, AL, Stuart Wade H. Yeoman, Lawrence L. Jones, II, Jones Ward PLC, Louisville, KY, David H. Charlip, Charlip Law Group, LLC, Aventura, FL, Reginald Von Terrell, The Terrell Law Group, Richmond, CA, for Plaintiff.

Irene Oria, Mithoo Robert Malani, Julia B. Strickland, Jeffrey B. Bell, Alisa M. Taormina, Brian C. Frontino, Stroock & Stroock & Lavan LLP, Miami, FL, Christine R. Fitzgerald, Belcher, Starr & Fitzgerald, LLP, Boston, MA, Lisa Catherine DeJaco, Wyatt, Tarrant & Combs LLP, Louisville, KY, Robert R. McCoy, Raleigh C. Thompson, Morris Law Group, Las Vegas, NV, for Defendant.

Order

ROBERT C. JONES, Chief Judge.

This Multidistrict Litigation (“MDL”) proceeding arises out of a security breach of servers belong to Defendants Amazon.com, Inc. (“Amazon”), ¹ doing business as Zappos.com, and Zappos.com, Inc. (“Zappos”) in January 2012. Now pending is Defendant Zappos' Motion to Compel Arbitration and Stay action (# 3).

I. Relevant Factual Background

Zappos is an online retailer of apparel, shoes, handbags, home furnishing, beauty products, and accessories. (Rajan Decl. ¶ 3 (# 3–1).) Plaintiffs are Zappos customers who gave personal information to Zappos in order to purchase goods via Zappos.com and/or 6PM.com. ( Id. ¶¶ 4–7; Rajan Second Supp'l Decl. ¶¶ 3–13 (# 13–1).) In mid-January 2012, a computer hacker attacked Zappos.com and attempted to download files containing customer information such as names and addresses from a Zappos server (the “Security Breach”). (Defs.' Mot. Compel at 1(# 3); Pls.' Opp'n at 4(# 10).) Plaintiffs allege that on January 16, 2012, Zappos notified Plaintiffs via email that their personal customer account information had been compromised by hackers. (Def.'s Mot. Compel at 6 (# 3); Steven Pls.' Opp'n at 1(# 9); Pls.' Opp'n at 4(# 10).) Plaintiffs have filed complains in federal district courts across the country seeking relief pursuant to state and federal statutory and common law for damages resulting from the Security Breach.

II. Procedural Background

On June 14, 2012, the United States Judicial Panel on Multidistrict Litigation (the “MDL Panel”) transferred nine pending actions ² to the District of Nevada for coordinated or consolidated pretrial proceedings. (Transfer Order (# 1).) On July 16, 2012, the MDL Panel transferred an additional case into this action.³

Also on June 14, 2012, Defendants' Motion to Compel Arbitration and Stay Action (# 3) was filed in this Court.⁴ On August 30, 2012, Plaintiffs Theresa D. Stevens, Stacy Penson, Tara J. Elliot, Brooke C. Brown, and Christa Seal (the “Stevens Plaintiffs”) filed their Opposition (# 9). Plaintiffs Stephanie Priera, Patti Hasner, Robert Ree, Shari Simon, and Kathryn Vorhoff (the “Priera Plaintiffs”) also filed their Opposition (# 10) on August 30, 2012. Plaintiffs Dahlia Habashy and Josh Richards each submitted their respective Joinder ( 11, 12) to the Priera Opposition (# 10) on August 30, 2012. Defendants submitted a Joinder of Additional Plaintiffs (# 14) to their Motion to Compel Arbitration and Stay Action (# 3) on August 30, 2012. Defendants filed their Reply (# 16) on September 6, 2012. The Court held a hearing on the motion and heard the parties' oral arguments on September 19, 2012.

III. Legal Standard

The Federal Arbitration Act (“FAA”) provides that contractual arbitration agreements “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. Arbitration agreements are enforced under sections 3 and 4 of the FAA, which provide “two parallel devices for enforcing an arbitration agreement.” Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 22, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). Section 3 gives courts the power to provides “a stay of litigation in any case raising a dispute referable to arbitration,” while section 4 empowers courts to provide “an affirmative order to engage in arbitration.” Id.;9 U.S.C. §§ 3–4.

The FAA “is a congressional declaration of a liberal federal policy favoring arbitration agreements, notwithstanding any state substantive or procedural policies to the contrary.” Moses H. Cone Mem'l Hosp., 460 U.S. at 24, 103 S.Ct. 927;see also Southland Corp. v. Keating, 465 U.S. 1, 2, 104 S.Ct. 852, 79 L.Ed.2d 1 (1984) (finding that the FAA “declared a national policy favoring arbitration”); Perry v. Thomas, 482 U.S. 483, 489, 107 S.Ct. 2520, 96 L.Ed.2d 426 (1987) (stating that the FAA “embodies a clear federal policy requiring arbitration” when there is a written arbitration agreement relating to interstate commerce). Thus, “an order to arbitrate [a] particular grievance should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute.” United Steelworkers of Am. v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582–83, 80 S.Ct. 1347, 4 L.Ed.2d 1409 (1960).

Despite this strong federal policy in favor of arbitration, arbitration is a “matter of contract,” and no party may be required to submit to arbitration “any dispute which he has not agreed so to submit.” Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 79, 123 S.Ct. 588, 154 L.Ed.2d 491 (2002) (quoting United Steelworkers, 363 U.S. at 582, 80 S.Ct. 1347);see also Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Junior Univ., 489 U.S. 468, 478, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989) (“[T]he FAA does not require parties to arbitrate when they have not agreed to do so.”). A court's discretion for compelling arbitration is thus limited to a two-step process of “determining (1) whether a valid agreement to arbitrate exists, and if it does; (2) whether the agreement encompasses the dispute at issue.” Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir.2000). A party cannot be ordered to arbitration unless there is “an express, unequivocal agreement to that effect.” Samson v. NAMA Holdings, LLC, 637 F.3d 915, 923 (9th Cir. 2011) (quoting Par–Knit Mills, Inc. v. Stockbridge Fabrics Co., Ltd., 636 F.2d 51, 54 (3d Cir.1980)).

With regard to the determination of whether there is a valid agreement to arbitrate between the parties, “the liberal federal policy regarding the scope of arbitrable issues is inapposite.” Comer v. Micor, Inc., 436 F.3d 1098, 1104 n. 11 (9th Cir.2006). Instead, federal courts “should apply ordinary state-law principles that govern the formation of contracts.” First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995). Under Nevada law,⁵ “[b]asic contract principles require, for an enforceable contract, an offer and acceptance, meeting of the minds, and consideration.” May v. Anderson, 121 Nev. 668, 119 P.3d 1254, 1257 (2005) (citing Keddie v. Beneficial Ins., Inc. 94 Nev. 418, 580 P.2d 955, 956 (1978) (Baltjer, C.J., concurring)). Put differently, an enforceable contract “requires a manifestation of mutual assent in the form of an offer by one party and acceptance thereof by the other ... [and] agreement or meeting of the minds of the parties as to all essential elements.” ( Keddie, 580 P.2d at 957 (citations omitted)).

IV. Discussion

The arbitration agreement at issue, founds in the Disputes section of the Terms of Use of the Zappos.com website, provides as follows:

Any dispute relating in any way to your visit to the Site or to the products you purchase through the Site shall be submitted to confidential arbitration in Las Vegas, Nevada, except that to the extent you have in any manner violated or threatened to violate our intellectual property rights, we may seek injunctive or other appropriate relief in any state or federal court in the State of Nevada. You hereby consent to, and waive all defense of lack of personal jurisdiction and forum non conveniens with respect to venue and jurisdiction in the state and federal courts of Nevada. Arbitration under these Terms of Use shall be conducted pursuant to the Commercial Arbitration Rules then prevailing at the American Arbitration Association. The arbitrator's award shall be final and binding and may be entered as a judgment in any court of competent jurisdiction. To the fullest extent permitted by applicable law, no arbitration under this Agreement shall be joined to an arbitration involving any other party subject to this Agreement, whether through class action proceedings or otherwise. You agree that regardless of any statute or law to the...