Seyfarth Synopsis: As biometric technology has become more advanced and affordable, more companies and employers have begun implementing procedures and systems that rely on biometric data. Given the serious repercussions of compromised biometric data, a number of states have proposed or passed laws regulating the collection and storage of biometric data, including Illinois through the passage of the Illinois Biometric Privacy Act (“BIPA”) – the only biometric statute which provides a private cause of action.

Plaintiffs’ class action attorneys have taken notice, as the number of class action lawsuits alleging violations of the BIPA in Illinois has surged in recent months. As more and more employers are utilizing biometric technology for various purposes, including timekeeping, employers are at a significant risk of becoming a target of class action litigation under the BIPA if it fails to comply with the requirements of the statute. Cases brought pursuant to the BIPA are akin to other “gotcha” statutory class actions – highly popular with the plaintiffs’ bar due to the inclusion of statutory damages and a provision for attorneys’ fees.

The theories underlying BIPA class actions, and the defenses thereto, remain largely untested. However, the Second Circuit became the first U.S. Court of Appeals to wade into the rising tide of litigation under the BIPA in Santana v. Take Two Interactive Software, 2017 U.S. App. LEXIS 23446 (2d Cir. Nov. 21, 2017), by affirming the district court’s dismissal of the case based upon a lack of Article III standing under the principles announced by the Supreme Court in Spokeo v. Robins, 136 S. Ct. 1540 (2016), but vacating the district court’s finding that plaintiffs were not “aggrieved by” a violation the BIPA (e.g., failed to state a cause of action under the statute due to a failure to plead actual damages).

The decision sheds light on the viability of certain potential employer defenses in BIPA class actions, particularly at the motion to dismiss stage.

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Requirements Of The BIPA

Notice And Consent

The BIPA prohibits companies from collecting employees’ biometric information until the company notifies the employee in writing that the information is being collected. Specifically, the written notice must inform the individual of the “specific purpose and length of term for which a biometric identifier or biometric information is being collected, stored and used.” 740 ILCS § 14/15(b). Likewise, a company must obtain a written release from the individual enabling it to collect and store the information. In the employment context, “written release” is defined as a “a release executed by an employee as a condition of employment.” 740 ILCS § 14/10.

Written Policy

The BIPA also requires companies to develop a written policy establishing a retention schedule and guidelines for permanently destroying biometric information when the initial purpose for collecting them has been satisfied or within three years of the employee’s last interaction with the employer, whichever occurs first. 740 ILCS § 14/15(a). The policy must be made available to the public. Id.

Disclosure To Third-Parties

In addition, a company may not disclose biometric information to a third party unless: it obtains consent for disclosure from the individual; the disclosure completes a financial transaction requested by the individual; the disclosure is required by law; or the disclosure is required by a valid warrant or subpoena. 740 ILCS § 14/15(d).

Standard Of Care

Also, the BIPA requires that a company use “the reasonable standard of care” within its industry for storing, transmitting and protecting biometric information and act “in a manner that is the same as or more protective than the manner in which the [company] stores, transmits and protects other confidential and sensitive information.” Id. § 14/15(e).

Case Background

In Santana, Plaintiffs alleged that Defendant violated the BIPA based on the use of a feature in the NBA 2K15 and NBA 2K16 video games, which contain a feature called “MyPlayer” which allows gamers to create a personalized basketball player that has a realistic 3-D rendition of the gamer’s face. The 3-D mapping process used cameras to capture a scan of the gamer’s facial geometry to disseminate a realistic rendition of the gamer’s face which requires gamers to hold their faces within 6 to 12 inches of the camera and slowly turn their heads during the scanning process. Id. *2-3. To use the feature, gamers must also first agree to terms and conditions acknowledging that the face scan will be visible and may be recorded during gameplay and requires gamers to “agree and consent to such uses.” Id.

Plaintiffs alleged that Defendant: (1) collected their biometric data without their informed consent; (2) disseminated their biometric data to others during game play without their informed consent; (3) failed to inform them in writing of the specific purpose and length of term for which their biometric data would be stored; (4) failed to make publicly available a retention schedule and guidelines for permanently destroying plaintiffs’ biometric data; and (5) failed to store, transmit, or protect from disclosure plaintiffs’ biometric data by using a reasonable standard of care or in a manner that is at least as protective as the manner in which it stores, transmits, and protects other confidential and sensitive information. Id. *4.

Defendant moved to dismiss Plaintiffs’ claims for lack of Article III standing and for failure to state a cause of action under the statute (i.e., lack of “statutory standing”). The district court granted the motion on both grounds and dismissed the action with prejudice, and Plaintiffs appealed.

The Second Circuit’s Decision

In its ruling of November 21, 2017, the Second Circuit entered a summary order affirming the district court’s decision insofar as it held that plaintiffs lacked Article III standing, but vacating the decision in part insofar as it held that plaintiffs lacked a statutory cause of action as “aggrieved” parties.

In regards to Article III standing, the Second Circuit held that “none of the alleged procedural violations [] raise[d] a material risk of harm” to Plaintiffs arising out of the use, collection, or disclosure of an individual’s biometric data. Id. *7. In reaching this conclusion the Second Circuit noted that no reasonable person would believe that the feature of the game at issue was anything other than a facial scan and Plaintiffs did “not plausibly assert (beyond a mere conclusory allegation) that they would have withheld their consent had Take-Two included additional language in its consent disclaimer. Id. *8. Plaintiffs’ alleged violations of the BIPA’s notice provisions similarly failed to raise a material risk of harm because Plaintiffs did not allege that Defendant had not or will not destroy their biometric data within the period specified by the statute nor did Plaintiffs allege that Defendant lacked such protocols or that its policies were inadequate and “there is accordingly no material risk that [Defendant’s procedural violations have resulted in plaintiffs’ biometric data being used or disclosed without their consent. Id. *9. Finally, the Court was not persuaded by Plaintiffs attempts to “manufacture an injury” by alleging that they would be deterred from using biometric technology in the future because “Plaintiffs’ fear, without more, is insufficient to confer Article III injury-in-fact. Id. *11.

Despite this ruling, the Second Circuit remanded to the district court with the instruction that the district court shall enter dismissal without prejudice finding that the district court did not have subject matter jurisdiction to ultimately find that plaintiff did not have “statutory standing,” e.g., that Plaintiffs had not alleged a cause of action under the statute – specifically, that Plaintiffs were not “aggrieved by” a violation of the statute because they did not allege “actual damages.” The Second Circuit held:

Since the statutory standing arguments here are based on differing constructions of the term ‘aggrieved party’ as used in BIPA, the district court’s resolution of the issue was a judgment on the merits that could not be properly addressed absent subject matter jurisdiction. The district court was therefore without power to dismiss the complaint with prejudice for failure to state a cause of action under the statute.

Id. at *13.

Implications For Employers

The Second Circuit’s ruling represents a victory for employers to the extent that it will make it more difficult for plaintiffs to plead and maintain Article III standing to survive a motion to dismiss in federal courts. On the other hand, the Second Circuit opinion did not bring any clarity as to who a “person aggrieved” is for purposes of the statute and whether plaintiffs must plead actual damages in order to state a cause of action under the BIPA.

The practical import of this ruling is that the battleground for defenses based on subject-matter jurisdiction and standing grounds and a lack of statutory standing (e.g. failure to plead a cause of action because plaintiffs were not “aggrieved by” a violation of the statute) will likely shift back to the Illinois state courts, which (despite being similar in many respects) have different and independent standing principles from federal courts.

Courts remain split as whether plaintiffs alleging violations under the BIPA must allege actual damages in order to state a cause of action, with state courts generally finding that actual damages are not necessary to plead a cause of action under the statute. Compare McCollough v. Smarte Carte, Inc., 2016 WL 4077108, at *4 (N.D. Ill. Aug. 1, 2016) (dismissing BIPA action for lack of actual damages) and Rottner v. Palm Beach Tan, Inc., 2015-CH-16695 (BIPA requires showing of actual damages) with Monroy v. Shutterfly, Inc., 2017 WL 4099846, at *9 (N.D. Ill. Sept. 15, 2017) (“[w]hile the matter is not free from doubt, the court declines to hold that a showing of actual damages is necessary in order to state a claim under the BIPA); Rosenbach v. Six Flags Entertainment Corporation et al., 16 CH 13 (Cir. Court, Lake County, IL, June 17, 2016) (finding sufficient statutory standing for the plaintiff to survive a motion to dismiss where the plaintiff had provided fingerprints to Six Flags as part of an annual pass program to the amusement park); Sekura v. Krishna Schaumberg Tan, Inc., 2017 WL 1181420 (Cir. Ct., Cook County, IL, Feb. 9, 2017) (denying motion to dismiss BIPA claim and noting that ”the term ‘aggrieved’ has been used consistently in numerous statutes to provide claims for the infringement of granted legal rights without the need to plead specific or actual damages” and “it is not this court’s role to determine whether BIPA was well intentioned or even well drafted, only to determine, in this case, whether it requires that plaintiffs plead actual damages to state claims thereunder.”)

In sum, while the Second Circuit’s opinion provides employers with strong support for arguments based on a lack of subject-matter jurisdiction and standing (particularly in federal courts), arguments by employers at the motion to dismiss stage that a plaintiff lacks statutory standing (e.g., whether the statute requires a plaintiff to plead actual damages to state a cause of action) will likely have to be resolved by Illinois state courts and any such arguments in federal court may result in remand to state court, or a dismissal without prejudice allowing plaintiffs to re-file in state court.