The U.S. Court of Appeals for the Ninth Circuit en banc grilled Shopify on Thursday over its argument that a privacy class action lawsuit against the Canadian e-commerce company was improperly filed in California federal court.
The complaint was filed by Brandon Briskin, who ordered clothing from a third-party retailer while in California using payment processing operated by Shopify. Briskin alleges that Shopify violated California privacy laws by transmitting software to your phone to track and create a consumer profile based on your internet activity and selling that data to merchants.
During oral arguments, the entire Ninth Circuit pressed Shopify’s lawyer on whether the alleged illegal activity occurred in California and therefore belongs in federal court there, as Briskin claims.
“An electronic signal is sent [and] something is implanted in a device that is in California,” said Judge Daniel Collins. “It takes data in California from a device in California and sends it outside of California. The allegation is that the collection and transmission of the data violates California statutes. How does this conduct not occur in California?”
Moez Kaba of Hueston Hennigan responded that Briskin’s claims could only have been filed in New York or Delaware, where Shopify USA and Shopify Payments are headquartered and incorporated.
Kaba said Shopify does not have a strong enough connection to California to create jurisdiction in that state, in part because the company offers its web payment services to third-party retailers wherever they are located and not specifically in California.
A recent First Circuit decision supports that position, Kaba argued. The Boston-based appeals court filed a lawsuit accusing Ohio-based Bloomingdales.com of illegally tracking the personal information of users of its Massachusetts site, finding there was no evidence the retailer purposely and knowingly targeted users in that state.
“Shopify provides these services to any merchant who chooses to do so in any state in the country,” Kaba said. “If the appellant were in Nevada, they would say, ‘I suffered my wrong in Nevada and you did this bad deed to me in Nevada.’”
Shopify says siding with Briskin would mean plaintiffs could take Internet-based companies to court in any state across the country. Plaintiffs must show “something more than their website’s functions in the jurisdiction,” Kaba said.
Judge Mark Bennett said there is “a red line” in Briskin’s theory: Online retailers can choose not to do business in certain states if they fear subsequent privacy lawsuits.
“There is a choice, in my view, not to do business in specific jurisdictions,” Bennett added.
But Kaba said requiring e-commerce platforms to avoid certain states would trigger “a host of other problems” and create a circuit divide.
“[T]This closely expands specific jurisdiction in a way that has never been considered appropriate under this court’s panel precedent or Supreme Court precedent,” Kaba said.
Public citizen attorney Nicolas Sansone, representing Briskin, argued that the case belongs in California because Shopify exploited California by deliberately and specifically tracking and profiling users in the state. The scale of a company’s operations in other states is not relevant, Sansone added.
Chief Judge Mary Murguia asked what it means for a defendant to deliberately exploit a particular market.
“When a defendant makes money from individuals in the forum state – whether by selling them products, obtaining information from them, or taking valuable intangible property from them – and then uses that intangible property to make a profit… we think it is deliberate and system of a state market”, said Sansone.
The Ninth Circuit heard arguments in Briskin x ShopifyNo. 22-15815.
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