Dior fashion house rebuffed in novel fee bid after win in biometric privacy case

(Reuters) – It’s no secret that businesses large and small are terrified of Illinois’ biometric privacy law, which exposes them to potentially catastrophic damages for the unauthorized collection of fingerprints, retinal scans or similar data from employees or consumers.

The fashion house Christian Dior (DIOR.PA) came up with a novel plan to quell the proliferation of class actions citing the law. As I told you earlier this month, Dior asked a federal judge in Chicago to order the plaintiffs in a dismissed Biometric Information Privacy Act, or BIPA, case to pay its lawyers’ fees and costs. Such fee-shifting, Dior said, would deter “abuses” by plaintiffs’ lawyers who are overloading Illinois state and federal dockets with privacy class actions.

So much for that idea.

A Chicago federal judge rejected Dior’s motion last week – and though she did not answer an overarching question about whether the Illinois privacy law allows successful defendants to seek fees, she concluded that if BIPA defendants are entitled to recoup their costs, they must show that plaintiffs acted in bad faith when they asserted claims.

Dior’s lawyers at Barack Ferrazzano Kirschbaum & Nagelberg had argued that their client was entitled to recover defense costs under Illinois Supreme Court precedent from 2006’s Krautsack v. Anderson. In that case, the state high court ruled that companies can seek fees and costs if they prevail in lawsuits alleging violations of the Illinois consumer fraud statute.

U.S. District Judge Elaine Bucklo of Chicago, as I mentioned, did not rule on Dior’s overarching theory. But even if the company was right about the availability of fee shifting under BIPA, the judge said, Illinois Supreme Court precedent in Krautsack gives leeway to trial courts to decide whether a fee award would undermine the legislature’s intentions. Courts, she said, have construed that holding to require defendants to show that plaintiffs acted in bad faith when they filed consumer fraud lawsuits.

Bucklo said the same standard should apply in biometric privacy cases. “Exposing plaintiffs bringing BIPA suits in good faith, even if ultimately unsuccessful, to attorneys’ fees would unduly chill the sole enforcement mechanism for a law the legislature clearly intended to protect critical privacy interests and would defy BIPA’s remedial purpose,” the judge wrote.

In the Dior case, Bucklo said, plaintiffs’ lawyers from Hausfeld and DiCello Levitt were not acting in bad faith when they brought a class action alleging that Dior illegally collected biometric data from online shoppers who used a virtual try-on tool to see how Dior’s non-prescription sunglasses would look on their faces.

The judge acknowledged that before plaintiffs filed the Dior suit, a similar case involving a try-on tool for prescription and non-prescription eyewear had been dismissed under an exemption in the statute for data collected in a healthcare setting. A second case was tossed soon after the Dior filing. But no appellate court has weighed in on the scope of the healthcare exemption, Bucklo said, so it was “not unreasonable” for DiCello Levitt and Hausfeld to test their theory that the exemption did not apply to a website selling only non-prescription sunglasses.

Neither a Dior spokesperson nor Dior’s lawyers responded to my email query on the ruling. Plaintiffs’ lawyer Nada Djordjevic of DiCello said by email that Bucklo “rightly decided” not to award fees to the fashion house. “Requiring a showing of bad faith when a defendant seeks attorneys’ fees under BIPA furthers the statute’s intended purpose,” she said.

Bucklo’s ruling is another setback for BIPA defendants, which failed earlier this month to persuade the Illinois Supreme Court to reconsider its recent ruling that plaintiffs are entitled to seek statutory damages for every violation of the law. The state justices’ ruling last February in Cothrun v. White Castle System Inc exposed the fast food chain to more than $17 billion in damages for allegedly scanning fingerprints of about 9,500 employees without their consent.

A dissent from the court’s decision not to reconsider makes clear just how desperate companies are to curtail BIPA cases. Illinois Justice David Overstreet, joined by two other justices, reeled off the names of nearly 20 state and national business groups that backed White Castle’s motion for reconsideration of a ruling that, according to Overstreet, leaves companies vulnerable to “cataclysmic, jobs-killing damages” that vastly exceed the perceived harms the statute is intended to avert.

“The potential ramifications for businesses operating in Illinois may be catastrophic,” Overstreet wrote. “Considering that the damage awards will now be arbitrary, unclear and potentially exorbitant, is the statute reasonably designed to remedy the evils that the legislature determined to be a threat to the public health, safety and general welfare?”

The state Supreme Court’s White Castle precedent did leave room for trial courts to exercise discretion over damages. Last month, U.S. District Judge Matthew Kennelly cited that ruling when he vacated a $228 million damages judgment against BNSF Railway in a BIPA class action by truck drivers who accused the company of illegally collecting their fingerprints.

The vacated award was based on statutory language permitting $5,000 in damages for willful or reckless BIPA violations, but Kennelly said that because damages are discretionary, a new jury must determine an appropriate award against the railway.

That discretion is nevertheless “cold comfort” for defendants, wrote Overstreet in his opinion criticizing the Supreme Court majority for refusing to consider the White Castle ruling. At best, he said, companies face “a staggering degree of uncertainty” in the face of “draconian exposure.”

Dior told Bucklo in its bid for fee-shifting that the mere threat of astronomical damages gives plaintiffs leverage in frivolous cases – and that she could use her discretion to discourage those suits. Unfortunately for the fashion house, the judge did not share its notion of frivolity.

Read more:

Could fee awards for winning defendants chill biometric privacy litigation?

BNSF Railway wins new trial over $228 million jury award in biometric data case

White Castle could face multibillion-dollar judgment in Illinois privacy lawsuit

Reporting By Alison Frankel; editing by Leigh Jones

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