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Western District mulls arbitration in Ancestry case.

Byline: Jessica Shumaker

A Missouri appeals court is weighing whether privacy claims made by users of genealogy tech giant's DNA service must be arbitrated out of court.

On May 9, a three-judge panel of the Western District Court of Appeals in Kansas City heard the case brought by in an attempt to undo a lower court's denial of the company's motion to compel arbitration.

The underlying case raises concerns about how DNA companies such as Ancestry handle consumers' most personal information an issue of increasing national interest and significance as the use of testing technology becomes more widespread.

The plaintiffs in the underlying case are Tina Parsley Hughes, of Blue Springs, and Jose Cordada, of Vineyard, Utah. They are seeking to bring a class-action suit against two separate entities Operations Inc. and DNA LLC.

According to briefs, Hughes and Cordada allege that the two defendants, jointly referred to as Ancestry, released their private health information and the private health information of others in the class to unknown persons or entities without their expressed permission. Their complaint does not detail specific instances of the company releasing private health information to third parties.

In addition to their claim that their personal information was released, Hughes and Cordada attack the sufficiency of a privacy agreement and terms and conditions that allow Ancestry to give their information to third parties who agree to commit to the company's confidentiality standards.They say they have not expressly agreed to the release of information to third parties.

Hughes and Cordada sought an injunction against Ancestry and asserted claims for a violation of the Missouri Merchandising Practices Act, a breach of fiduciary duty of confidentiality, a breach of contract and negligence.

After Hughes and Cordada filed their suit in March 2018 in Jackson County Circuit Court, Ancestry moved to compel arbitration, arguing the parties earlier had agreed to resolve claims through arbitration. Judge Sandra C. Midkiff overruled Ancestry's motion in August 2018.

Midkiff found that the arbitration agreement lacked consideration because a portion of the terms and conditions allows the company to unilaterally make changes to the arbitration agreement at any time without limitation.

On appeal, Ancestry is arguing the case should be arbitrated because the parties agreed to delegate the issue of arbitration to the arbitrator, they agreed their claims should be arbitrated and the contract between the parties as a whole supplies consideration even if the arbitration agreement itself is imbalanced.

On the matter of delegation, the company's attorney, John C. Aisenbrey of Stinson, said that when the plaintiffs went online to create their accounts and clicked through a BrowseWrap screen a feature that informs users that their use of a website amounts to accepting the site's terms and conditions they accepted Ancestry's proposed terms and conditions.

"Those terms and conditions included an arbitration agreement, which basically said the [American Arbitration Association] rules apply," he said. "The AAA rules allocate all arbitrability questions, including formation, which they argue later, to the arbitrator. We submit that the circuit court should have compelled it to go to arbitration so they could make their illusory argument to the arbitrator."

Judge Edward R. Ardini Jr. asked if the case was affected by a December 2018 Missouri Supreme Court decision in Soars v. Easter Seals Midwest. In that case, the court compelled arbitration in a discrimination claim.

Aisenbrey said yes, and he added that Soars lines up with Ancestry's case.

"The same argument was made, and the Supreme Court rejected it," he said.

Mark Schmitz of Bell Law in Kansas City argued on behalf of Hughes and Cordada. He acknowledged that Soars is a new case, but he argued that his clients' case is distinct from Soars in that the delegation clause in that case expressly included the word "formation."

He said challenges to the formation of an arbitration agreement are distinct from other types of challenges.

"Respondents are making a formation challenge, questioning only whether there is consideration to the arbitration clause in this case," he said. "It is clear that there is not."

Additionally, Schmitz argued that what Ancestry is calling a delegation clause "isn't actually a delegation clause" in that it simply attaches the AAA arbitration rules rather than expressly identifying a specific set of arbitration rules.

He said in Soars, the delegation clause at issue specifically identified employment arbitration rules, for example.

In addition to Schmitz, Maureen Brady and Lucy McShane of McShane & Brady in Kansas City, who specialize in cases involving unauthorized release of personal information, are representing the plaintiffs in the underlying case.

The case is Hughes et al. v. et al., WD81996.

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Publication:Missouri Lawyers Media
Date:May 10, 2019
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