Gucci's alleged arbitration misstep opens door to court battle

Fashion brand Gucci may have inadvertently opened itself up to a class action around the use of cookies on its website, according to a lawsuit's claims that it failed to timely pay arbitration costs.

Gucci's website's terms of use require users to arbitrate all disputes, but a complaint filed Friday by Seth A. Safier of Gutride Safier LLP claims that when his client attempted to do so, Gucci did not pay its fees in time, leading the plaintiff to request to withdraw from the arbitration.

Now the plaintiff wants to pursue the case in the San Francisco Superior Court and has asked the court to sanction Gucci, allow for a possible class action and award attorney fees related to the failed arbitration.

Safier wrote in the complaint, "Plaintiff additionally requests ... an order precluding defendant from (1) moving to compel arbitration against plaintiff; and (2) arguing that absent class member claims are subject to arbitration."

Safier said Monday the firm had no comment.

Gucci and its current attorney, Stephanie Anne Sheridan of Benesch Friedlander Coplan & Aronoff LLP, did not want to comment. A different firm handled the case when the arbitration fee issue arose.

The plaintiff claimed in the arbitration proceedings Gucci breached California privacy laws by misrepresenting its cookie settings and continuing to allow the collection of user data by third parties, even after users opted out. This allowed third parties to intercept private communications without consent and essentially employ "wiretap devices" on Gucci's website, the arbitration complaint said.

Safier wrote in the arbitration complaint, "When users clicked the 'Cookie Settings" button and subsequently opted out of chat, functional, and targeting cookies, respondent nonetheless continued to cause third-party cookie data to be transmitted to and from consumers' devices."

Under California law, if the drafter of a mandatory arbitration clause fails to adhere to the terms of that clause, the consumer may reject the arbitration demand and file a complaint in court for recovery of arbitration fees and proceed with a court case.

According to the newest complaint, the plaintiff had filed a demand for arbitration with the American Arbitration Association (AAA) in San Francisco on Dec. 15, 2023.

The plaintiff then filed a motion to deem the arbitration agreement unenforceable before a dispute arose regarding the payment of the arbitrator's fees, the complaint said.

The AAA invoiced the defendant on Nov. 21, 2024, with payment due upon receipt, and the deadline was 30 days later, the plaintiff's complaint said. When Gucci failed to make timely payment, the plaintiff asked the AAA to administratively close the arbitration, the complaint said. Although Gucci later made a late payment, the plaintiff did not agree to extend the deadline and withdrew the matter from arbitration, the complaint said.

Anita Taff-Rice, founder of technology law firm iCommLaw, commented in an email Monday that Gucci's late payment may allow the plaintiff to effectively sidestep Gucci's arbitration clauses.

"The failure to adhere to the very terms it imposed on consumers is a serious blow to Gucci because, but for the failure to timely pay arbitration fees, it likely would have been able to require the plaintiff to use the arbitration process," said Taff-Rice, who is not involved in the litigation.

Taff-Rice explained that arbitration clauses are enforceable under the Federal Arbitration Act and the California Arbitration Act. But courts have emphasized that mandatory arbitration clauses must meet the requirements of "contract formation," because public policy does not favor forcing arbitration on parties who have not agreed to it.

"In particular, courts have emphasized the importance of providing users with conspicuous notice of arbitration terms, and that the consumer take affirmative action, such as clicking a button, to indicate his or her agreement to mandatory arbitration terms," said Taff-Rice.

The courts will also reject mandatory arbitration clauses if they are deemed "unconscionable," as when the consumer is not given a meaningful choice whether to accept the terms, Taff-Rice added.