As readers of this blog know, the commonplace use of third-party tracking technology on consumer-facing websites has led to an influx of California Invasion of Privacy Act (“CIPA”) claims. While some of these claims are asserted in formal lawsuits, most CIPA claims are brought in arbitration proceedings. Below, we briefly discuss the CIPA arbitration process and how companies should respond if they receive a CIPA arbitration demand.
A Brief Discussion of CIPA Arbitration Demands
The widespread use of third-party tracking technologies (e.g., Meta Pixel, Google Analytics, TikTok) to collect data regarding consumer interactions on company websites has sparked an uptick in CIPA litigation. Aggrieved consumers claim that the use of these tracking tools without their consent constitutes, among other things, illegal wiretapping and/or use of a pen register or trap and trace device in violation of CIPA.
Because most companies use some form of third-party tracking software on their websites (including, but not limited to, web beacons, site visit recordation technology, and chat bots), receipt of a CIPA arbitration demand letter has become fairly common. Arbitrations differ from court proceedings in several material respects, including reduced costs and quicker dispute resolution. Unlike litigating in court, which is expensive and time-consuming, arbitrations also offer a critical benefit that should not be overlooked: the proceedings are confidential and documents submitted during the arbitration are not publicly available. For companies faced with CIPA arbitration demands, the confidentiality that arbitration offers is important because enterprising consumers and plaintiffs’ attorneys are unable to: (1) view the allegations asserted against companies; and (2) determine how disputes are resolved. On the other hand, arbitration awards are typically binding, and courts only vacate arbitration awards in limited circumstances.
What Should You Do If You Receive a CIPA Arbitration Demand?
California courts remain divided on whether CIPA applies to internet communications. Until a consensus is reached or legislation ultimately is passed which resolves the issue, website operators will continue receiving CIPA arbitration demands. If your company receives a CIPA arbitration demand letter, you should, among other things, immediately review your website’s registration flow, Terms and Conditions, and Privacy Policy to determine what defenses you may have.
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