Halperin v. Int'l Web Servs., LLC, 13 C 8573

Decision Date30 September 2014
Docket NumberNo. 13 C 8573,13 C 8573
Citation70 F.Supp.3d 893
PartiesDan Halperin, on behalf of himself and others similarly situated, Plaintiff, v. International Web Services, LLC, and Affluent Ads, LLC, Defendants.
CourtU.S. District Court — Northern District of Illinois

Joseph J. Siprut, Gregg Michael Barbakoff, Melanie K. Nelson, Ismael Tariq Salam, Siprut PC, Chicago, IL, for Plaintiff.

Blaine C. Kimrey, Bryan K. Clark, Vedder Price PC, Kyle Alexander Davis, Dykema Gossett PLLC, Chicago, IL, for Defendants.

Memorandum Opinion and Order

FEINERMAN, United States District Judge

According to Dan Halperin, Text Enhance is a malicious software program that, having surreptitiously been installed on his computer, “enhances” text displayed in his web browser by selectively underlining words and generating unwanted pop-up ads when his cursor hovers over the underlined text. Doc. 2 at ¶ 25. Halperin brought this putative class action against Affluent Ads, LLC, and International Web Services, LLC, the creator and distributor of Text Enhance, alleging violations of the Computer Fraud and Abuse Act (“CFAA”), 18 U.S.C. § 1030 ; the Electronic Communications Privacy Act's anti-wiretap provisions (“Wiretap Act), 18 U.S.C. §§ 2510 et seq. ; the Illinois Consumer Fraud and Deceptive Business Practices Act (“ICFA”), 815 ILCS 505/1 et seq. ; and the Illinois Computer Tampering Act (“ICTA”), 720 ILCS 5/17–50 et seq. Doc. 2. Halperin seeks to certify a nationwide class for the federal claims and an Illinois-only class for the state law claims. Id. at ¶¶ 37–38. Defendants moved to dismiss the suit pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). Doc. 19. In an oral ruling, the court denied the motion insofar as it argued that an offer of judgment served by Defendants on Halperin rendered his claims moot. Doc. 45. In this opinion, the court denies Defendants' Rule 12(b)(1) motion to dismiss for lack of Article III standing and grants Defendants' Rule 12(b)(6) motion for failure to state a claim, though Halperin will be given a chance to replead. And because the complaint is dismissed, Defendants' Rule 12(f) motion to strike the complaint's class allegations, Doc. 29, is denied without prejudice as moot.

Background

Defendants' Rule 12(b)(1) motion to dismiss for lack of Article III standing accepts as true the facts alleged in the complaint, Doc. 28 at 7 n.1, so the challenge to Halperin's standing is facial rather than factual. See Apex Digital, Inc. v. Sears, Roebuck & Co., 572 F.3d 440, 443–44 (7th Cir.2009). On a facial challenge to subject matter jurisdiction, as on a Rule 12(b)(6) motion to dismiss, the court must accept the complaint's well-pleaded factual allegations, with all reasonable inferences drawn in the plaintiff's favor, but not the complaint's legal conclusions. See Munson v. Gaetz, 673 F.3d 630, 632 (7th Cir.2012) ; Apex Digital, 572 F.3d at 443–44 ; Patel v. City of Chicago, 383 F.3d 569, 572 (7th Cir.2004). The court must also consider “documents attached to the complaint, documents that are critical to the complaint and referred to in it, and information that is subject to proper judicial notice,” along with additional facts set forth in Halperin's brief opposing dismissal, so long as those facts “are consistent with the pleadings.” Geinosky v. City of Chicago, 675 F.3d 743, 745 n. 1 (7th Cir.2012). The facts are set forth as favorably to Halperin as permitted by these materials. See Gomez v. Randle, 680 F.3d 859, 864 (7th Cir.2012).

Affluent Ads created a software program called “Text Enhance,” which International Web Services then distributed. Doc. 2 at ¶¶ 19–20. Without Halperin's knowledge or consent, Defendants somehow installed Text Enhance on his computer. Id. at ¶ 25. When Halperin visits a website using his computer, “Text Enhance automatically scans the text of the webpage” for certain keywords, and for each keyword found, it “turns the [word] blue and underlines it.” Ibid. If Halperin's cursor hovers over an underlined word, “an advertisement will appear over the website.” Ibid. For example, in the image below (taken from Halperin's complaint), Text Enhance has underlined the word “bet,” and when Halperin's cursor hovers over that word, a pop-up advertisement entitled “Play Free Slots” appears. Id. at ¶ 25 Image 1.

Were Halperin to click on the pop-up ad, his browser would be directed to the website “Youplaytime.net,” which is not affiliated with the website (April Dammann Website”) he had been viewing. Id. at ¶ 25.

Halperin alleges that “Text Enhance causes computers to slow down, takes up bandwidth over an Internet connection, uses up memory, utilizes pixels and screen space on monitors, causes the loss of data, and otherwise frustrates the customary and intended uses of computers.” Id. at ¶ 30. As a result, he must upgrade his computer or internet connection speed, id. at ¶ 31, or “spend valuable time and money to investigate ... how the malware can be removed,” id. at ¶ 33.

Discussion

As noted above, Defendants seek dismissal under Rule 12(b)(1) for lack of Article III standing and under Rule 12(b)(6) for failure to state a claim. Because standing is jurisdictional, the court must consider that issue before reaching the merits. See Ortiz v. Fibreboard Corp., 527 U.S. 815, 831, 119 S.Ct. 2295, 144 L.Ed.2d 715 (1999) ; Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 92, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998) ; Hinrichs v. Speaker of House of Representatives of Ind. Gen. Assembly, 506 F.3d 584, 590 (7th Cir.2007).

I. Rule 12(b)(1) MotionArticle III Standing

Defendants contend that Halperin lacks Article III standing because he has alleged only “abstract injuries to unidentified ‘consumers,’ Doc. 28 at 12, and not a concrete injury to himself. To establish Article III standing, Halperin must allege injury-in-fact, causation, and redressability. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 560–61, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992). As for the injury requirement, “named plaintiffs who represent a class ‘must allege and show that they personally have been injured, not that injury has been suffered by other, unidentified members of the class to which they belong and which they purport to represent.’ Simon v. E. Kentucky Welfare Rights Org., 426 U.S. 26, 40 n. 20, 96 S.Ct. 1917, 48 L.Ed.2d 450 (1976) (quoting Warth v. Seldin, 422 U.S. 490, 502, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975) ); see also Kohen v. Pac. Inv. Mgmt. Co. LLC, 571 F.3d 672, 676 (7th Cir.2009) (Before a class is certified ... the named plaintiff must have standing, because at that stage no one else has a legally protected interest in maintaining the suit.”); 1 William B. Rubenstein, Newberg on Class Actions § 2:4, p. 65 (5th ed. 2011) (“The class representative's Article III standing, like any individual's standing to sue, is measured by the test found in the Supreme Court's decision in Lujan v. Defenders of Wildlife . ”). That said, [t]he standing test can be easily met in most types of class suits so long as the class representative has incurred actual injury.”Rubenstein, supra, at § 2:4, p. 66.

Halperin has alleged a sufficiently personal injury to support his standing to bring this suit. The complaint alleges that Halperin's own computer was “infected” with Text Enhance without his consent, Doc. 2 at ¶¶ 26, 28, and that as a result he could not use his computer “for [its] original intended purposes,” id. at ¶ 29, because “Text Enhance causes computers to slow down, takes up bandwidth over an Internet connection, uses up memory, utilizes pixels and screen space on monitors, causes the loss of data, and otherwise frustrates the customary and intended uses of computers,” id. at ¶ 30. The allegations regarding Text Enhance may or may not be true, but Halperin has alleged enough of an injury to support standing. See Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 1012, 112 S.Ct. 2886, 120 L.Ed.2d 798 (1992) (holding that the plaintiff had properly alleged Article III standing where he complained of “constraints placed on the use of his parcels”); Johnson v. Allsteel, Inc., 259 F.3d 885, 887–88 (7th Cir.2001) (holding that an allegation that the defendant “increased its discretion as [ERISA] plan administrator” was sufficient to confer Article III standing because it “decreased the value of [plaintiff's] bargained-for-entitlements,” namely, “the right to have a plan administered with a limited amount of discretion”); Family & Children's Ctr., Inc. v. Sch. City of Mishawaka, 13 F.3d 1052, 1058 (7th Cir.1994) (“even a minor or non-economic injury will satisfy the strictures of Article III, though purely psychological harm will not”); see generally Lujan, 504 U.S. at 561, 112 S.Ct. 2130 (“At the pleading stage, general factual allegations of injury resulting from the defendant's conduct may suffice, for on a motion dismiss [courts] presume that general allegations embrace those specific facts that are necessary to support the claim.”) (internal quotation marks and alteration omitted).

Defendants retort that any possible injury to Halperin is de minimis . Doc. 28 at 13. But the magnitude of Halperin's injury is a merits question—pertinent to damages and, as shown below, to liability for the CFAA claim—and not one of Article III standing, which requires only an injury, no matter how small. See Sprint Commc'ns Co., L.P. v. APCC Servs., Inc., 554 U.S. 269, 289, 128 S.Ct. 2531, 171 L.Ed.2d 424 (2008) (noting that even an injury worth “only a dollar or two” would be sufficient to support Article III standing); Markadonatos v. Vill. of Woodridge, 760 F.3d 545, 553 (7th Cir.2014) (en banc) (opinion of Posner, J.) (contrasting a lack of injury to support Article III standing with a lack of cognizable injury under the de minimis non curat lex doctrine). Halperin has alleged enough to establish Article III standing.

II. Rule 12(b)(6) —Halperin's Federal Claims
A. CFAA Claim

To bring a civil claim under the CFAA, Halperin...

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