A newly proposed class-action lawsuit against Patagonia in California shows the rush to use artificial intelligence and personalize the customer experience may cause companies to enter uncharted legal territory.
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Michelle Gills filed the lawsuit against the outdoor apparel maker on July 11, taking specific issue with the company’s partnership with third-party technology provider Talkdesk . Gills alleges that, upon making a call to Patagonia’s customer service line in January, her call was “intercepted, listened to, recorded and used by an undisclosed third party, Talkdesk Inc.”
The San Francisco-based company uses AI, among other technologies, to support clients in personalizing conversations with customers, which include On and Farfetch . According to the lawsuit, Patagonia is a Talkdesk client.
The lawsuit notes that Patagonia uses at least two of Talkdesk’s core tools: one called Experience Analytics and another called Quality Management.
Experience Analytics uses transcripts of conversations between customers and support agents to process patterns in the text, identify consumer sentiment, find the recurring problems customers contact the company about and more. It uses automation to create insights from that data, which can later help train new agents and automate some steps in the customer service process.
Quality Management, meanwhile, uses transcripts and sentiment to provide feedback on how customer care calls have gone.
Gills’ counsel said, had she known Patagonia used Talkdesk’s tools, she would not have called customer service for help, noting that she expected the call would remain confidential when she spoke to Patagonia, particularly given that sometimes, calls like those require the disclosure of sensitive personal or financial information.
According to the lawsuit, “neither Talkdesk nor Patagonia disclose to individuals that their conversations are being intercepted, listened to, recorded and used by Talkdesk.”
Gills’ counsel says “at no time do customers consent to the privacy notice” because Patagonia allegedly uses a non-binding browser wrap, which means that consumers aren’t forced to select privacy options manually and instead imply their agreement by using the website in question.
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Even if consumers did alter their privacy settings on Patagonia’s website, the complaint says, “The privacy notice does not say that vendors (or other third parties) may be collecting audio, visual or other communications. This exclusion leads a reasonable consumer to believe that no third party is collecting communications between the individual and Patagonia.”
Gills’ proposed class includes all residents of California who made a call to or received a call from Patagonia inside the statute of limitations for the state’s privacy law. Gills’ legal team expects there are thousands of people who would make up the class, if the judge certifies it.
Because of the purported lack of consent, Gills’ lawyers argue, Patagonia’s use of the technology violates the California Invasion of Privacy Act and the California Constitution. Because she feels Patagonia violated her privacy illegally, Gills seeks an injunction which would prevent Patagonia from continuing the conduct in question, as well as monetary damages.
A number of AI-related lawsuits—primarily alleging copyright infringement for companies using copyrighted information to train foundation models and large language models—have begun to surface in courts nationwide.
Shein , for instance, had its use of AI, machine learning and algorithms called into question in a copyright class action proposed earlier this year , which the fast-fashion giant has since moved to dismiss.
The lack of federal laws around the technology can make it difficult to regulate what it can or cannot be used for. Some state legislatures have started floating—and in a few cases, passing—laws around AI. California currently lacks formalized AI regulations, though some have been proposed.
Neither Patagonia nor Talkdesk returned Sourcing Journal’s requests for comment on Gills’ accusations.
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