In re Vizio, Inc., Consumer Privacy Litig.

• Decision Date: 02 March 2017
• Docket Number: CASE NO. 8:16–ml–02693–JLS–KES
• Citation: 238 F.Supp.3d 1204
• Court: U.S. District Court — Central District of California
• Parties: IN RE: VIZIO, INC., CONSUMER PRIVACY LITIGATION

238 F.Supp.3d 1204

IN RE: VIZIO, INC., CONSUMER PRIVACY LITIGATION

CASE NO. 8:16–ml–02693–JLS–KES

United States District Court, C.D. California.

Signed March 2, 2017

238 F.Supp.3d 1211

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS (Doc. 116)

JOSEPHINE L. STATON, UNITED STATES DISTRICT JUDGE

I. INTRODUCTION

Before the Court is a Motion to Dismiss filed by Defendants VIZIO Inc., VIZIO Holdings, Inc., VIZIO Inscape Technologies, LLC, and VIZIO Inscape Services, LLC (collectively, "Vizio"). (Mot., Doc. 116.) Plaintiffs Dieisha Hodges, Rory Zufolo, William DeLaurentis, John Walsh, Chris Rizzitello, and Linda Thomson filed an Opposition, and Defendants replied. (Opp'n, Doc. 121; Reply, Doc. 123.) For the following reasons, the Court GRANTS IN PART and DENIES IN PART Defendants' Motion to Dismiss.

II. BACKGROUND

Vizio is the second-largest manufacturer of "Smart TVs," cutting-edge televisions equipped with integrated software that enables consumers to access the Internet and

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on-demand services such as Netflix, Hulu, and Pandora. (Compl. ¶¶ 33, 35, 45, Doc. 108.) Known as the "Vizio Internet Apps," "Internet Apps Plus," and "SmartCast," Vizio's content delivery software comes either preinstalled on its Smart TVs or is installed through software updates. (Id. ¶ 45.) Vizio markets its Smart TVs as a "passport to a world of entertainment, movies, TV shows and more" and charges a premium for them because they are designed to seamlessly deliver on-demand video content to consumers. (Id. ¶¶ 34, 81.)

Plaintiffs allege that, unbeknownst to them, Vizio's Smart TVs use automatic content recognition software to collect and report consumers' content viewing histories. (Id. ¶¶ 39, 50, 127.) This software, called "Smart Interactivity," collects up to 100 billion content "viewing data points" along with detailed information about a consumer's digital identity, such as consumers' IP addresses, zip codes, MAC addresses, product model numbers, hardware and software versions, chipset IDs, region and language settings, as well as similar information about other devices connected to the same network. (Id. ¶¶ 39, 42, 54, 62.) The Smart Interactivity software transmits this information to Vizio's Inscape data services platform, which identifies the content a consumer has been watching by comparing the "viewing data points" to a database of existing content. (Id. ¶¶ 50, 62.) Vizio then sells all of this information to advertisers and media content providers so that they can deliver highly targeted advertisements to Vizio Smart TVs and any smartphones, tablets, or computers connected to the same network. (Id. ¶¶ 2, 5, 35, 41–42.)

Plaintiffs contend that the constellation of information Vizio shares about consumers' digital identities "provides a ‘game plan’ to associate individuals with their viewing habits." (Id. ¶ 72.) One digital identifier that Vizio discloses, a MAC address, is a unique 12–digit identifier assigned to every mobile device, computer, Smart TV, or other electronic device. (Id. ¶ 69.) Because a MAC address is tied to a device's embedded chipsets, the identifier remains unchanged throughout the life of the electronic device. (Id. ) MAC addresses, Plaintiffs allege, are frequently linked to an individual's name and can be used to acquire highly specific geolocation data. (Id. ¶¶ 70–71.) And, even if a MAC address alone is insufficient to identify a person, the information can readily identify a person when combined with the other information that Vizio discloses, such as IP addresses, zip codes, product model numbers, hardware and software versions, chipset IDs, and region and language settings. (Id. ¶¶ 72–79.) To support their argument, Plaintiffs provide two case studies where researchers were able to identify a significant percentage of individuals by analyzing several details about them. (Id. ¶¶ 74–78.) Plaintiffs also point to a Vizio prospectus, which highlights how the Inscape data services platform is able to "provide[ ] highly specific viewing behavior data on a massive scale with great accuracy." (Id. ¶ 62.)

Vizio's data collection and dissemination practices, Plaintiffs contend, are not adequately disclosed in its marketing or privacy policies. (Id. ¶¶ 22, 81–94, 105.) The packaging for its Smart TVs highlights Vizio's Internet Apps and Internet Apps Plus without mentioning that, if consumers use these features, Vizio's Smart Interactivity software will collect and disseminate information about their viewing history and digital identity. (Id. ¶¶ 81–85.) Nowhere during the setup process for a Vizio Smart TV does Vizio reference its Smart Interactivity software. (Id. ¶ 85.) Vizio's Privacy Policy, which consumers can view in very small font under the "Reset & Admin" submenu, assuages consumers that it collects only "non-personal" and "anonymous" information and does not reveal

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that Vizio sells the information it collects to third parties. (Id. ¶¶ 86, 89–91.)

Contrary to the industry's standard practice, Vizio's Smart TVs come with Smart Interactivity automatically enabled. (Id. ¶¶ 6, 61.) To turn off Smart Interactivity, consumers must navigate through the Smart TV's menu to an obscure settings option that does not describe what Smart Interactivity does. (Id. ¶¶ 7, 85.) If a Smart TV is reset to its factory default settings—either intentionally or inadvertently—the Smart Interactivity software reactivates without consumers receiving any notice. (Id. ¶ 66.) A 2015 report by the security software company Avast found that the "off" capability for Smart Interactivity was not functional "for months, if not years." (Id. ¶¶ 7, 65.) So, even if consumers believed they had disabled Smart Interactivity (and the feature appeared to be "off"), their Smart TVs were still transmitting their digital information without their knowledge. (Id. )

Vizio allegedly has a strong incentive to ensure that consumers do not disable its Smart Interactivity software. (Id. ¶ 44.) Vizio's business model relies on the profits from its sales of consumer data to compensate for its relatively slim margins on Smart TVs. (Id. ¶¶ 43–44.) Vizio distinguishes its Inscape data services platform from competitors such as A.C. Nielson and Rentrak based on its ability to provide highly detailed information about 8 million American consumers in "real time." (Id. ¶¶ 40, 42.) As Vizio noted in an SEC filing, if consumers objected to or opted out of its Smart Interactivity software, Vizio's growth strategy would be jeopardized. (Id. ¶¶ 43–44.)

Plaintiffs assert they purchased Vizio Smart TVs unaware of Vizio's data collection and dissemination practices. (Id. ¶¶ 16–21.) They provide details about their Vizio Smart TVs, such as the model numbers and cities where they purchased them, and describe how they used their Vizio Smart TVs to watch on-demand video content. (Id. ) After learning about Vizio's Smart Interactivity software, Plaintiffs disconnected their Smart TVs from the Internet or ceased watching certain on-demand video content on them. (Id. ) Plaintiffs allege that, had they known about Vizio's data collection and disclosure practices, they would not have purchased their Vizio Smart TVs or would have paid less for them. (Id. ¶ 22.)

Based on these allegations, Plaintiffs bring various privacy and misrepresentation-based claims under both federal and state law. Plaintiffs allege federal claims under the Video Privacy Protection Act (VPPA) and the Wiretap Act. (Id. ¶¶ 111–32.) Under state law, Plaintiffs bring common law fraud and negligent misrepresentation claims as well as consumer protection claims under California's Consumers Legal Remedies Act, California's Unfair Competition Law ("UCL"), California's False Advertising Law, Florida's Deceptive and Unfair Trade Practices Act, New York's General Business Law sections 349 and 350, Massachusetts's Chapter 93A, and Washington's Consumer Protection Act. (Id. ¶¶ 150–241, 250–53, 263–87, 301–17.) As for their state law privacy claims, Plaintiffs allege intrusion upon seclusion claims as well as causes of action under the California Constitution,¹ California's Invasion of Privacy Act, the Massachusetts Privacy Act, and state video privacy statutes.

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(Id. ¶¶ 133–49, 242–49, 254–62, 294–300.) Finally, Plaintiffs allege common law claims for unjust enrichment. (Id. ¶¶ 288–93.)

III. LEGAL STANDARD

A defendant may move to dismiss an action for lack of subject matter jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(1). Fed. R. Civ. P. 12(b)(1). "Dismissal for lack of subject matter jurisdiction is appropriate if the complaint, considered in its entirety, on its face fails to allege facts sufficient to establish subject matter jurisdiction." In re Dynamic Random Access Memory (DRAM) Antitrust Litig. , 546 F.3d 981, 984–85 (9th Cir. 2008). When considering a Rule 12(b)(1) motion, the Court "is not restricted to the face of the pleadings, but may review any evidence, such as affidavits and testimony, to resolve factual disputes concerning the existence of jurisdiction." McCarthy v. United States , 850 F.2d 558, 560 (9th...