Joshua Johnson v. Mitek Systems, Inc.

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 22-1830
JOSHUA JOHNSON,
Plaintiff-Appellee,
v.
MITEK SYSTEMS, INC.,
Defendant-Appellant.
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 22 C 349 — Ronald A. Guzmán, Judge.
____________________
ARGUED DECEMBER 2, 2022 — DECIDED DECEMBER 21, 2022
____________________
Before EASTERBROOK, SCUDDER, and LEE, Circuit Judges.
EASTERBROOK, Circuit Judge. HyreCar is an intermediary
between people who own vehicles and other people who
would like to drive for services such as Uber and GrubHub.
Before leasing a car, HyreCar tries to ensure that the potential
driver is who he says he is and has the license and driving
record he claims to have. As part of this check, HyreCar sends
an applicant’s information, including a photograph, to Mitek
Systems, which provides identity-verification services. Joshua

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Johnson, one of HyreCar’s drivers, contends in this putative
class action that Mitek has used that information without the
consent required by §15 of the Illinois Biometric Privacy Act,
740 ILCS 14/15. Mitek removed the suit to federal court under
the Class Action Fairness Act, 28 U.S.C. §1453, and asked the
district court to send it to arbitration. After the court declined,
2022 U.S. Dist. LEXIS 80851 (N.D. Ill. May 4, 2022), Mitek took
an immediate appeal on the authority of 9 U.S.C. §16(a)(1).
Johnson’s contract with HyreCar includes this clause:
This Arbitration Agreement applies to [drivers] and [HyreCar],
and to any subsidiaries, affiliates, agents, employees, predeces-
sors in interest, successors, and assigns, as well as all authorized
or unauthorized users or beneficiaries of services or goods pro-
vided under the Agreement.
Johnson thus agreed to arbitrate with a long list of entities, but
the district court concluded that suppliers such as Mitek are
not on the list. Mitek contends that it is—that it is a “benefi-
ciary of services or goods provided under the Agreement.”
We don’t see how. The “services or goods provided under
the Agreement” are vehicles, plus some ancillary aid that
HyreCar furnishes to drivers. Mitek does not receive “services
or goods … under the Agreement” between Johnson and
HyreCar. Nor can Mitek be classified as a “user” of HyreCar’s
services or goods.
Mitek insists that it must be a “beneficiary” because Hyre-
Car pays for its work. But the contract deals with “services or
goods” that HyreCar provides to its customers, not money
paid to suppliers. Consider a landlord who leases office space
to HyreCar. The landlord is a participant in the market for real
estate, not a recipient (“beneficiary”) of any consumer surplus
that a driver may realize from dealing with HyreCar.

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No. 22-1830 3
Competition in the market for real estate drives prices down
until landlords receive only the competitive rate of return;
there’s no further “benefit” that drivers or HyreCar bestow on
them. What’s true of landlords, and of the firms that sell office
supplies and computers and website management to Hyre-
Car, is equally true of firms that supply HyreCar with identi-
fication services. Mitek has its own contract with HyreCar,
but it does not have a contract with any of HyreCar’s drivers.
It would stretch contractual language past the breaking point
to conclude that Johnson or any other driver has agreed to ar-
bitrate with Mitek or any of HyreCar’s dozens if not hundreds
of other suppliers.
According to Mitek, a court must bend over backward to
deem it a “beneficiary”, because “the Federal Arbitration Act
… requires that arbitration agreements be generously con-
strued and that all doubts be resolved in favor of arbitration.”
That is not, however, what the statute says. The Act requires
arbitration agreements to be treated just like other contracts.
9 U.S.C. §2. Courts cannot disfavor arbitration, compared
with other agreements, but neither may courts jigger the rules
to promote arbitration. See Morgan v. Sundance, Inc., 142 S. Ct.
1708 (2022). We have interpreted this contractual language
just as we would have treated it if its subject were installment
payments or a warranty. The phrase “users or beneficiaries of
services or goods provided under the Agreement” is best un-
derstood as a reference to drivers and people aligned with
them in interest. Mitek is not in that set.
Mitek’s invocation of equitable estoppel is ridiculous.
Johnson has not done anything that would estop himself from
litigating this suit. The fact that he may have consented to the
collection or use of biometric data (a question on the merits,

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4 No. 22-1830
which we do not address) is unrelated to the identity of the
forum that will resolve the parties’ disputes.
One observation before we close. Johnson’s suit rests on
several clauses of §15 of the Illinois Biometric Privacy Act. We
have held that claims resting on §15(c) of this statute cannot
be litigated in federal court unless a person asserting its ben-
efit can show a concrete harm. See Thornley v. Clearview AI,
Inc., 984 F.3d 1241 (7th Cir. 2021). Johnson has not alleged a
concrete harm and, on this claim at least, seeks only statutory
damages. The district court should not aiempt to adjudicate
Johnson’s claim under §15(c) but must remand it to state court
after resolving all claims within the court’s adjudicatory com-
petence.
The decision refusing to refer the suit to arbitration is af-
firmed, and the case is remanded for a decision whether the
suit may proceed as a class action followed by a disposition
on the merits (except for the claim under §15(c)).

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