• by Wendy Davis  @wendyndavis, May 15, 2024

In a setback for Shopify, a federal appellate court said Tuesday it will reconsider whether the e-commerce platform can be sued in California over alleged privacy violations.

Last November, a three-judge panel of the 9th Circuit Court of Appeals said courts in California lacked jurisdiction over the privacy claims against Shopify -- which is headquartered in Canada and has two U.S. divisions based in Delaware.

On Tuesday, the 9th Circuit withdrew that decision and said it will hold a new hearing in the case.

The dispute dates to August 2021, when California resident Brandon Briskin alleged in a class-action complaint that Shopify surreptitiously collected his personal data when he made a purchase from the online retailer IABMFG (iambecoming.com).

He alleged that the checkout page linked to Shopify code that enabled it to “intercept” his data. He also said Shopify analyzed and processed his data, and transmitted the information to the payment processor Stripe, which also analyzed and processed the information. Additionally, he alleged that Shopify used his data to create a profile of him that was then provided to other merchants.

The complaint included claims that Shopify violated a California wiretap law that prohibits the interception of electronic communications without both parties' consent.

U.S. District Court Judge Phyllis Hamilton in the Northern District of California dismissed the claims in May 2022, ruling that the allegations, even if proven true, wouldn't show that Shopify was subject to the jurisdiction of California courts. Instead, she said, the allegations could establish only that Shopify was a vendor for the retailer IABMFG.

A three-judge panel of the 9th Circuit upheld that ruling in November, writing that Shopify didn't specifically direct its activity toward California residents.

“Shopify’s platform is accessible across the United States, and the platform is indifferent to the location of either the merchant or the end consumer,” the panel wrote. “No one has alleged that Shopify alters its data collection activities based on the location of a given online purchaser. It did not prioritize consumers in California or specifically cultivate them.”

Briskin's lawyers then sought a rehearing in front of at least 11 of the Circuit's 29 judges.

Among other arguments, counsel said the panel decision would make it difficult for states to enforce their privacy laws.

“If California cannot hold Shopify accountable for the sale of personal financial data that it has taken from Californians located in California, California could also be constitutionally barred from holding a defendant accountable for collecting Californians’ photographs or voice recordings off the internet as part of a nationwide course of conduct and selling them to third parties without consent,” Briskin's attorneys wrote.

“With ever more commercial and social activities taking place over the internet, states have an increasingly strong sovereign interest in protecting their citizens against unlawful online conduct that reaches into the state’s borders,” counsel added.

The new hearing is expected to take place the week of June 24 in Seattle.