Boelter v. Hearst Commc'ns, Inc.

• Decision Date: 17 June 2016
• Docket Number: 15 Civ. 3934 (AT), 15 Civ. 9279 (AT)
• Citation: 192 F.Supp.3d 427
• Parties: Suzanne BOELTER, individually and on behalf of others similarly situated, Plaintiff, v. HEARST COMMUNICATIONS, INC., Defendant. Josephine James Edwards, individually and on behalf of others similarly situated, Plaintiff, v. Hearst Communications, Inc., Defendant.
• Court: U.S. District Court — Southern District of New York

192 F.Supp.3d 427

Suzanne BOELTER, individually and on behalf of others similarly situated, Plaintiff,

v.HEARST COMMUNICATIONS, INC., Defendant.

Josephine James Edwards, individually and on behalf of others similarly situated, Plaintiff,

v.Hearst Communications, Inc., Defendant.

15 Civ. 3934 (AT), 15 Civ. 9279 (AT)

United States District Court, S.D. New York.

Signed June 17, 2016

Joseph Ignatius Marchese, Philip Lawrence Fraietta, Scott A. Bursor, Bursor & Fisher, P.A., New York, NY, John Christopher Carey, Carey, Rodriguez, Greenberg & Paul, LLP, Miami, FL, for Plaintiffs.

Jonathan R. Donnellan, Kristina E. Findikyan, The Hearst Corporation, New York, NY, for Defendant.

MEMORANDUM AND ORDER

ANALISA TORRES, United States District Judge

On May 21, 2015, Plaintiff Suzanne Boelter filed a class action complaint against Defendant Hearst Communications, Inc., alleging violation of the Michigan Video Rental Privacy Act, H.B. 5331, 84th Leg., Reg. Sess., P.A. No. 378, § 2 (Mich. 1988) (amended 2016) ("VRPA") and unjust enrichment. Boelter v. Hearst Commc'ns, Inc. , No. 15 Civ. 3934, Dkt. No. 1 (S.D.N.Y.). On November 24, 2015, Plaintiff Josephine James Edwards filed a class action complaint asserting similar claims. Edwards v. Hearst Commc'ns, Inc. , No. 15 Civ. 9279, Dkt. No. 1 (S.D.N.Y.). The complaints were consolidated, and on February 26, 2016, Plaintiffs filed an amended complaint. ECF No. 67. Defendant seeks to dismiss the amended complaint for lack of jurisdiction and for failure to state a claim pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6), respectively. Alternatively, Defendant moves to strike Plaintiffs' request for injunctive relief. For the reasons stated below, the motions are DENIED.

BACKGROUND¹

In 1988, Michigan enacted the VRPA "to preserve personal privacy with respect to the purchase, rental, or borrowing of" certain goods.² Am. Compl. ("Compl.") ¶ 14, ECF No. 67; H.B. No. 5331, 1988 Mich. Legis. Serv. 378 (West). The law's enactment followed the passage of the federal Video and Library Privacy Protection Act, 18 U.S.C. § 2710, and paralleled the enactment of similar consumer privacy laws in eleven other states.³ See Compl. ¶¶ 13-17. The Michigan statute prohibits individuals "engaged in the business of selling at retail, renting, or lending books or other written materials, sound recordings, or video recordings" from "disclos[ing] to any person, other than the customer," information about the customer that "indicates [her] identity." VRPA § 2. This prohibition is subject to exceptions: disclosure is allowed "[w]ith the written permission of the customer"; "[p]ursuant to a court order" or a "search warrant"; to "collect payment" from the customer so long as the customer "has received written notice that the payment is due and has failed to pay ... within a reasonable time after notice"; and if "the disclosure is for the exclusive purpose of marketing goods and services directly to the consumer," so long as the consumer receives written notice and opportunity to opt out. Id. § 3. Violation of the law constitutes a misdemeanor, id. § 4, and customers who are "identified in ... information that is disclosed in violation of [the] act" may bring a civil action to recover "actual damages, including damages for emotional distress, or $5,000.00, whichever is greater," as well as costs and attorneys' fees, id. § 5.

Defendant, a Delaware corporation with its principal place of business in New York, is an international media company that publishes over three hundred magazines and sells them throughout the world. Compl. ¶¶ 1, 9. In addition to revenues from magazine sales, Defendant profits from selling demographic information about its consumers to "data miners and other third parties," which allows for targeted marketing, advocacy, and solicitations from businesses, political groups, or non-profit organizations. Id. ¶¶ 2, 3, 40-42; see also Boelter v. Hearst Commc'ns, Inc. , No. 15 Civ. 3934, Dkt. No. 1 (S.D.N.Y. May 21, 2015) ("Boelter Compl."), Exs. B–D. Defendant does not obtain its consumers' written consent or notify them prior to selling their data. See Compl. ¶¶ 4, 7, 8.

Plaintiffs Boelter and Edwards are Michigan citizens who subscribe to Country Living and Good Housekeeping , respectively, two magazines published by Defendant. Id. ¶¶ 7, 8. Plaintiffs allege that Defendant discloses information about Plaintiffs to third parties either for the third parties' use or so the third parties can supplement the data with additional information "from [the third parties'] own databases" to enhance the value of the information for Defendant. Id. ¶¶ 7, 8, 58-60. Neither plaintiff has consented to or been notified of Defendant's disclosure of her identifying information. Id. ¶¶ 7, 8. As a result of the disclosures, Plaintiffs receive "harassing junk mail offerings and telephone solicitations" that "waste [their] time, money, and resources," id. , and they face "risk of serious harm from scammers," id. ¶ 42. Additionally, the disclosure of Plaintiffs' information reduces the value of their magazine subscriptions, and had Plaintiffs known that their information would not be kept private, they would "not have been willing to pay as much, if at all," for their subscriptions. Id. ¶¶ 7, 8. Plaintiffs bring two claims against Defendant: First, the disclosures of Plaintiffs' identifying information constitute a violation of the VRPA. Id. ¶¶ 53-74. Second, as a result of the disclosures, Defendant was unjustly enriched by the benefit it derived from selling consumer data, a benefit which was not reflected in the purchase price of Plaintiffs' subscriptions. See id. ¶¶ 75-85.

Defendant moves to dismiss the amended complaint on several grounds. First, it argues that the Court lacks jurisdiction: Plaintiffs do not have standing because they have not suffered an injury-in-fact; and additionally, the Court does not have jurisdiction under the Class Action Fairness Act of 2005 ("CAFA"), Pub. L. No. 109–2, 119 Stat. 4 (codified in scattered sections of 28 U.S.C.), and Federal Rule of Civil Procedure 23 is rendered inoperative, because of a Michigan court rule that precludes class actions under the VRPA.

Second, Defendant argues that the VRPA is unconstitutional, violating the First Amendment as an impermissible restriction on speech both as applied and on its face.

Third, Defendant contends that the amended complaint fails to state a plausible claim for relief. Defendant is not a "retailer" of written material, as is required to fall within the statute's scope, and otherwise did not violate the law because its disclosures are only for direct marketing purposes and it provided to Plaintiffs sufficient notice of its information disclosure policies. Defendant also argues that the allegations do not support an unjust enrichment claim, and in any event such a claim is barred by the VRPA, which provides the exclusive remedy for a violation of its terms. The Court will address each argument in turn.

DISCUSSION

I. Legal Standards

A. Rule 12(b)(1)

"A case is properly dismissed for lack of subject matter jurisdiction under Rule 12(b)(1) when the district court lacks the statutory or constitutional power to adjudicate it." Makarova v. United States , 201 F.3d 110, 113 (2d Cir.2000). To survive a Rule 12(b)(1) motion to dismiss, the party asserting jurisdiction "has the burden of proving by a preponderance of the evidence that [subject matter jurisdiction] exists." Id. On such a motion, "the district court must take all uncontroverted facts in the complaint ... as true, and draw all reasonable inferences in favor of the party asserting jurisdiction." Tandon v. Captain's Cove Marina of Bridgeport, Inc. , 752 F.3d 239, 243 (2d Cir.2014). However, "[w]here jurisdictional facts are placed in dispute, the court has the power and obligation to decide issues of fact by reference to evidence outside the pleadings, such as affidavits." Id. (alteration in original).

B. Rule 12(b)(6)

To survive a Rule 12(b)(6) motion to dismiss, "a complaint must contain sufficient factual matter ... to ‘state a claim to relief that is plausible on its face.’ " Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). A plaintiff is not required to provide "detailed factual allegations" in the complaint, but must assert "more than labels and conclusions." Twombly , 550 U.S. at 555, 127 S.Ct. 1955. Ultimately, the "[f]actual allegations must be enough to raise a right to relief above the speculative level." Id. On a Rule 12(b)(6) motion, the Court may consider only the complaint, documents attached to the complaint, matters of which a court can take judicial notice, or documents that the plaintiff knew about and relied upon. See Chambers v. Time Warner, Inc. , 282 F.3d 147, 153 (2d Cir.2002). The court must accept the allegations in the complaint as true and draw all reasonable inferences in the non-movant's favor. ATSI Commc'ns, Inc. v. Shaar Fund, Ltd. , 493 F.3d 87, 98 (2d Cir.2007). That said, a court should reject "threadbare recitals" of the elements of a cause of action "supported by mere conclusory statements," Chavis v. Chappius , 618 F.3d 162, 170 (2d Cir.2010), and "bald assertions ... unsupported" by details which are insufficient to meet the minimum pleading requirements for a cause of action, Lawtone – Bowles v. N.Y.C. Hous. Auth. , No. 13 Civ. 1434, 2014 WL 705272, at *2–3 (S.D.N.Y. Feb. 20, 2014).

II. Standing

Defendant argues that Plaintiffs lack standing because they have not suffered an "injury-in-fact"—that is, that violation of the VRPA, as well as the other harms alleged in the amended complaint, do not constitute a particularized, concrete injury sufficient to confer standing.

Standing is a constitutional requirement, grounded in Article III, which requires litigants to have suffered an injury that is traceable to the defendant...