Flora v. Prisma Labs, Inc.
- Charles Breyer
- 3:23-cv-00680
- U.S. District Court · Northern District of California
- 13
In Flora v. Prisma Labs, Judge Breyer granted Prisma’s motion to compel arbitration and stayed the case after severing an inconsistent location term.
The named plaintiffs—Jack Flora, Nathan Stoner, Courtney Owens, Eric Matson, and D.J.—and Prisma Labs, Inc. The case was stayed pending arbitration, and the location provision in the arbitration agreement was severed.
What happened
In Flora v. Prisma Labs, Inc., five plaintiffs accused Prisma Labs of collecting and storing facial geometry from photos used with its Lensa app, violating Illinois’s Biometric Information Privacy Act. Prisma argued that the plaintiffs agreed to Lensa’s Terms of Use, which required arbitration.
The court found that the arbitration agreement was not unconscionable because users had a meaningful 30-day opportunity to opt out and the arbitration clause was clearly presented. The court also found that the agreement’s fee provision did not conflict with the arbitration organization’s consumer standards. Although the required arbitration location conflicted with those standards, the court ruled that the location term could be removed without invalidating the rest of the agreement.
Judge Breyer granted Prisma’s motion to compel arbitration and stayed the case while arbitration proceeds. The court did not decide the plaintiffs’ underlying biometric-privacy claims.
The detailed version
- Flora v. Prisma Labs, Inc. · No. 3:23-cv-00680
- Charles Breyer
- Aug. 8, 2023
Background
Jack Flora, Nathan Stoner, Courtney Owens, Eric Matson, and D.J. brought a putative class action against Prisma Labs, Inc. They alleged that Prisma’s Lensa photo-editing app collected and stored users’ facial geometry from uploaded photos, in violation of the Illinois Biometric Information Privacy Act.
The plaintiffs alleged that they downloaded Lensa in December 2022, received the Privacy Policy, and agreed to Lensa’s Terms of Use. The Terms of Use required confidential, binding arbitration of disputes arising from the Terms or Lensa; prohibited class arbitrations and class actions; incorporated the Judicial Arbitration and Mediation Services (JAMS) Streamlined Arbitration Rules; and allowed users to opt out of arbitration by notifying Prisma in writing within 30 days.
Prisma moved to compel arbitration. The court decided the motion without oral argument and vacated the scheduled hearing.
Legal standard
Under the Federal Arbitration Act, arbitration agreements are generally enforceable according to their terms. The court’s role was to determine whether a valid agreement to arbitrate existed and, if so, whether it covered the dispute. If both conditions were met, the court was required to enforce the agreement according to its terms.
Unconscionability
The plaintiffs argued that the arbitration provision was unconscionable. Under California law, a contract is unenforceable as unconscionable when it has both procedural and substantive unconscionability, analyzed on a sliding scale. Procedural unconscionability concerns oppression, meaning a lack of meaningful choice, and surprise, meaning that the terms were hidden.
The plaintiffs argued only that the arbitration provision was part of a nonnegotiable contract of adhesion. The court held that the provision was not adhesive because users had a meaningful opportunity to opt out within 30 days. The court also found no surprise: the Terms of Use were short and legible, and the arbitration section was bolded, clearly labeled, and accompanied by a warning that it required arbitration and limited available relief. Because the court found no procedural unconscionability, it did not decide whether the provision was substantively unconscionable.
Delegation and alleged conflicts with JAMS standards
The plaintiffs argued that the arbitration provision was illusory because some terms allegedly conflicted with JAMS’ Consumer Arbitration Minimum Standards. Prisma argued that incorporating JAMS’ rules delegated questions about whether the dispute could be arbitrated to the arbitrator.
The court declined to find that the parties had clearly and unmistakably agreed to delegate those gateway questions. The court reasoned that the record did not show that the plaintiffs, as ordinary users of a photo-editing app, understood that incorporating the JAMS rules delegated arbitrability questions to the arbitrator. The court therefore decided those questions itself.
The plaintiffs identified two alleged conflicts. First, the Terms of Use required arbitration in Santa Clara County, California, while JAMS’ consumer standards required a consumer to have the right to an in-person hearing in the consumer’s hometown area. The court found that these provisions appeared to conflict. Second, the plaintiffs argued that incorporating the JAMS Streamlined Arbitration Rules made them jointly and severally responsible for arbitration fees. The court rejected that argument because the Terms of Use expressly required the user to pay the filing fee and Prisma to pay the remaining JAMS fees and costs, consistent with the consumer standards.
Severability and ruling
The court held that the conflicting forum-selection provision could be severed, meaning removed from the agreement, while leaving the core arbitration agreement enforceable. The court found no other terms conflicting with JAMS’ consumer standards and concluded that removing the location provision would not affect the agreement’s other provisions.
The court granted Prisma’s motion to compel arbitration. It stayed the case pending arbitration under 9 U.S.C. § 3. The ruling did not decide whether Prisma violated the Illinois Biometric Information Privacy Act.
Read the full 13-page opinion on CourtListener, the free public archive maintained by the Free Law Project.