Hines v. Overstock.com, Inc., 09 CV 991 (SJ)

Decision Date19 August 2013
Docket Number09 CV 991 (SJ)
PartiesCYNTHIA HINES, on behalf of herself and others similarly situated, Plaintiffs, v. OVERSTOCK.COM, INC., Defendant.
CourtU.S. District Court — Eastern District of New York



By: Harry I. Katz

Victoria L. Weinman


By: Peta Gordon

Myron Kirschbaum

Angela R. Vicari

Attorneys for Plaintiff

By: Jonathan D. Their

Krista Friedrich

Jason M. Hall

Guillaume Buell

Attorneys for Defendant

JOHNSON, Senior District Judge:

Plaintiff Cynthia Hines ("Plaintiff" or "Hines") initiated this putative class action pursuant to the Court's diversity jurisdiction, alleging that defendant Overstock.com, Inc.'s ("Defendant" or "Overstock") decision to impose a "restocking fee" amounted to consumer fraud, unjust enrichment and a violation of various state consumer protection statutes. (See generally Am. Compl.) Presently before the Court is Defendant's motion to dismiss (the "Motion"). For the reasons set forth below, the Motion is GRANTED.


Overstock is an online, "closeout" retailer. (Am. Compl. ¶ 1.) On or about January 8, 2009, Plaintiff purchased an Electrolux Oxygen 3 Ultra Canister vacuum from Overstock's website. (Id. at ¶ 9.) After receiving the vacuum, Plaintiff returned it to Defendant and was reimbursed the full amount she had paid for it, minus a $30.00 restocking fee. (Id. at ¶¶ 13-14.) Plaintiff claims that she had been advised that she could return the vacuum without incurring any costs and that Defendant never disclosed that a restocking fee would be charged. (Id. at ¶ 15.)

The Defendant has moved to dismiss the Amended Complaint (the "Complaint") arguing that the Plaintiff lacks class standing and that the Complaint fails to state a claim on the merits. Specifically, Defendant argues that: (1) theCourt lacks subject matter jurisdiction over this action because the total amount in controversy is far below the $5 million jurisdictional minimum specified in the Class Action Fairness Act of 2005 ("CAFA"); (2) Plaintiff fails to adequately plead "intentional deception" under the Utah Consumer Sales Practices Act (the "Utah Act") and it is otherwise time barred; (3) Plaintiff fails to plead its state consumer fraud claims with requisite specificity; and (4) Plaintiff fails to plead her unjust enrichment claim. (Mot. to Dismiss at 1-3.)

Plaintiff argues, however, that she has adequately pled each of her claims and that the Court should adjudicate class certification prior to standing. (Opp'n to Mot. to Dismiss at 9.) In addition, Plaintiff avers that Defendant cites to facts not alleged in the Amended Complaint in support of its jurisdictional argument, which is improper when determining a motion a dismiss. (Id.) Plaintiff also argues that by seeking dismissal of its claim under state consumer protection statutes, Defendant attempts to conflate standing with the class action requirements under Rule 23 of the Federal Rules of Civil Procedure. Plaintiff argues that this is improper and prevailing law supports its position. Finally, Plaintiff argues that at this stage of this case she is not required to plead with particularity under the Utah Act. (Id. at 9-10.)

For the reasons explained below, the Motion is GRANTED.

I. Standard
a. Rule 12(b)(6)

In deciding a motion to dismiss pursuant to Rule 12(b)(6), the Court accepts the allegations in the Complaint as true, and draws all reasonable inferences in the plaintiff's favor. McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 191 (2d Cir. 2007). The Court's function on a motion to dismiss is "not to weigh the evidence that might be presented at a trial but merely to determine whether the complaint itself is legally sufficient." Goldman v. Belden, 754 F.2d 1059, 1067 (2d Cir. 1985). The Court should not dismiss a complaint if the plaintiff has stated "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).

"A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 566 U.S. 662, 678 (2009). While the Court should construe the factual allegations in the light most favorable to the plaintiff, "the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions." Id.

When presented with a motion to dismiss pursuant to Rule 12(b)(6), the Court may consider documents that are referenced in the Complaint, documentsthat the plaintiff relied on in bringing suit and that are either in the plaintiff's possession or that the plaintiff knew of when bringing suit, or matters of which judicial notice may be taken. See Chambers v. Time Warner, Inc., 282 F.3d 147, 153 (2d Cir. 2002).

b. Rule 12(b)(1)

Under Rule 12(b)(1), a complaint must be dismissed if a court lacks subject matter jurisdiction. Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000) (citing Fed. R. Civ. P. 12(b)(1)). In considering a Rule 12(b)(1) motion to dismiss for lack of subject matter jurisdiction, the Court must assume that all of the factual allegations in the complaint are true. Shipping Fin. Serv. Corp. v. Drakos, 140 F.3d 129, 131 (2d Cir. 1998), at 5 (citing Scheuer v. Rhodes, 416 U.S. 232, 236, (1974)). Unlike a Rule 12(b)(6) motion, in deciding a Rule 12(b)(1) motion, the Court is not limited to the face of the complaint and may consider evidence outside the pleadings to resolve disputed factual issues. State Emp. Bargaining Agent Coal. v. Rowland, 494 F.3d 71, 77, n. 4 (2d Cir. 2007); (Phifer v. City of N.Y., 289 F.3d 49, 55 (2d Cir. 2002).

c. Rule 9(b)

"While the rules of pleading in federal court usually require only 'a short and plain statement' of the plaintiff's claim for relief, averments of fraud must be'stated[d] with particularity.'" ATSI Commc'ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98-99 (2d Cir. 2007). The language of Rule 9(b) "is cast in terms of the conduct alleged, and is not limited to allegations styled or denominated as fraud or expressed in terms of the constituent elements of a fraud cause of action." Rombach v. Chang, 355 F.3d 164, 171 (2d Cir. 2004). "This pleading constraint serves to provide a defendant with fair notice of a plaintiff's claim, safeguard his reputation from improvident charges of wrongdoing, and protect him against strike suits." ATSI Commc'ns, 493 F.3d at 99 (citing Rombach, 355 F.3d at 171).

In order to satisfy Rule 9(b), the plaintiff must: "'(1) specify the statement that the plaintiff contends were fraudulent, (2) identify the speaker, (3) state where and when the statements were made, and (4) explain why the statements were fraudulent.'" Rombach, 355 F.3d at 170 (quoting Mills v. Polar Molecular Corp., 12 F.3d 1170, 1175 (2d Cir. 1993)); see also ATSI Commc'ns, 493 F.3d at 99. "Allegations that are conclusory or unsupported by factual assertions are insufficient." ATSI Commc'ns, 493 F.3d at 99.

This case involves "classic fraud allegations, that is, allegations of misrepresentations and omissions made with intent to defraud . . . ." In re Ultrafem Inc. Sec. Litig., 91 F. Supp. 2d 678, 691 (S.D.N.Y. 2000). The gravamen of the Complaint is that

the $30.00 fee that Overstock charged Plaintiff does not bear any relationship to the cost, if any, incurred by Overstock as a result of the return of the Vacuum, which cost, if any, was significantly less than the $30.00 chargedto Plaintiff. Thus, the fee charged by Overstock was an undisclosed penalty imposed upon Plaintiff and Overstock's other similarly situated consumers, which creates significant additional revenue for Defendant.

(Compl. ¶ 16.) Specifically in support of her claims based on fraud, Plaintiff alleges that

Overstock engaged in deceptive acts or practices . . . by failing to provide its customers with full refunds and failing to clearly indicate its Return Fee Policies by adequate disclosure . . . .

(Id. ¶ 23.) Elaborating on this theory, Plaintiff further alleges that Defendant "engaged in deception, fraud, false pretense, false promise and misrepresentation, and knowingly concealed, suppressed, or omitted material facts, i.e., its Return Policies", with the intent that its customers rely upon its concealment in connection with the return of a purchased item. (Id. ¶ 27.) In addition, Plaintiff alleges that the Return Fees are "deceptively imposed" upon Overstock's customers, which create significant revenue for Defendant and that allowing this to continue would be "unjust and inequitable." (Id. ¶¶ 29-30.)

II. Standing

The first issue is whether the Plaintiff has standing to assert the claims alleged in the Complaint. Defendant contends that Plaintiff lacks standing to sue because during the proposed class period there were two different return policies allegedly in place at Overstock and accordingly Plaintiff purports to represent classmembers that were allegedly injured by different policies. Specifically, Defendant argues that two years prior to Plaintiff being charged the restocking fee, Overstock revised its return policy from one that required mandatory "flat" restocking fees to a policy that involves case-by-case assessments to determine whether a full refund is warranted. Defendant argues that since Plaintiff is attempting to represent the interests of class members who were allegedly injured by different return policies, Plaintiff lacks standing to sue on behalf of at least some of the proposed class members.

Plaintiff argues that Defendant's standing argument is essentially a class certification argument and it is therefore premature. In any event, Plaintiff avers, Defendant cites to inapposite law in support of its contention that the standing issue should be adjudicated prior to class certification. Last, Plaintiff asserts that since the alleged impact of any change in Overstock's...

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