Khoday v. Symantec Corp., Civil No. 11–0180 (JRT/TNL).

• Decision Date: 12 March 2012
• Docket Number: Civil No. 11–0180 (JRT/TNL).
• Citation: 858 F.Supp.2d 1004
• Parties: Devi KHODAY and Danise Townsend, Plaintiffs, v. SYMANTEC CORP. and Digital River, Inc., Defendants.
• Court: U.S. District Court — District of Minnesota

858 F.Supp.2d 1004

Devi KHODAY and Danise Townsend, Plaintiffs,

v.SYMANTEC CORP. and Digital River, Inc., Defendants.

Civil No. 11–0180 (JRT/TNL).

United States District Court,

D. Minnesota.

March 12, 2012.

Andrew N. Friedman, Cohen Milstein Sellers & Toll PLLC, Washington, DC; Karen Hanson Riebel, Lockridge Grindal Nauen PLLP, Minneapolis, MN; and Lee S. Shalov, McLaughlin & Stern, LLP, New York, NY, for plaintiffs.

Patrick E. Gibbs, Latham & Watkins, LLP, Menlo Park, CA; and Steve W. Gaskins, Gaskins, Bennett, Birrell, Schupp, LLP, Minneapolis, MN, for defendant Symantec Corp.

Amy Van Gelder and Charles Smith, Skadden, Arps, Slate, Meagher & Flom, Chicago, IL, for defendant Digital River, Inc.

MEMORANDUM OPINION AND ORDER ON DEFENDANTS' MOTIONS TO DISMISS

JOHN R. TUNHEIM, District Judge.

Plaintiffs Devi Khoday (“Khoday”) and Danise Townsend (“Townsend”) seek to bring this action on behalf of a class against Symantec Corp. (“Symantec”) and Digital River, Inc. (“Digital River”). Plaintiffs accuse Symantec and Digital River of selling an unnecessary product through the use of false and misleading information. Against Symantec, Plaintiffs allege unjust enrichment and bring Consumer Legal Remedies Act and Unfair Competition Law claims under California law.¹ Against Digital River, Plaintiffs allege unjust enrichment and bring Consumer Fraud Act and False Statement in Advertising Act claims under Minnesota law.² Plaintiffs also seek a declaratory judgment that Symantec and Digital River's practices with respect to the Download Product were unlawful. Symantec and Digital River have separately filed motions to dismiss. The Court will grant Defendants' motions to dismiss Plaintiffs' declaratory judgment claims because Plaintiffs have alleged more appropriate remedies. The Court will deny the motions to dismiss in all other respects because Plaintiffs have sufficiently alleged that Defendants misled consumers by providing deceptive information.

BACKGROUND

I. FACTUAL BACKGROUND³

Symantec is among the world's largest dedicated security technology companies. Symantec owns the Norton franchise; it sells Norton security software products and services (“Norton”) on its websites, www. symantec. com and www. norton. com. (Am. Compl. ¶ 2, April 14, 2011, Docket No. 40.) Symantec sold Norton directly to customers from its own e-commerce internet platform in 2009 and 2010. ( Id. ¶ 6.) Prior to that time, Symantec contracted with Digital River to run its e-commerce internet platform. ( Id. ¶ 6.)

Customers who purchased Norton were granted a license to use the software for a period of a year or more, and they could load or re-load the software onto up to three computers while the license was current. ( Id. ¶ 5.) Neither Symantec nor Digital River contained information about this license on their websites or in any other publications. ( Id. ¶ 5.)

When consumers purchased Norton online, their shopping cart automatically included “Norton Download Insurance,” as it was called on Symantec's website, or “Extended Download Services,” as it was called on Digital River's website (“the Download Product”). ( Id. ¶¶ 4, 20–21.) If the consumer wanted to determine the purpose of the Download Product, the consumer could click on a link labeled “What's this?” ( Id. ¶ 20.) On Digital River's website, consumers saw the following message after clicking this link:

When you purchase downloadable software from Symantec's online store, Digital River, Symantec's authorized online retailer, automatically grants you 60 days from the date of purchase to download your software order.

If you add Extended Download Service to your downloadable software purchase order, Digital River will keep a backup of all the software on your order for ONE YEAR. If you need to re-download your software, or access your Serial Key; it will be available 24 hours a day, 7 days a week for ONE YEAR from the date of purchase by going to www. symantecstore. com/ orderlookup.

( Id. ¶ 21.)

When consumer followed this link on July 1, 2010 on Symantec's website, they saw the following pop-up:

Norton Download Insurance

When you purchase downloadable software from the Norton Store, you automatically receive the ability to download your software for 60 days from the date of purchase. Norton Download Insurance extends the time you can access your downloadable software by providing you the freedom and flexibility to download or re-download your software for one year. If you need to re-download your software it will be available 24 hours a day, 7 days a week for one year from the date of purchase from your Norton Account. Just log into your Norton Account at www. mynorton account. com, look up your order and click on the link provided.

Gain flexibility and peace of mind!

If you decide to replace your PC or if your PC has problems, is damaged or stolen and you need to reinstall your software, with Norton Download Insurance you have the peace of mind of knowing you can re-download your software at anytime for one year. Norton Download Insurance may be refunded within 60 days from your date of purchase. Applicable taxes are refunded on eligible returns.

( Id. ¶ 20.)

Customers were required to affirmatively remove the Download Product from their shopping cart prior to purchase if they did not want it. ( Id. ¶ 5.) The price for the Download Product was between $5.99 and $10.99. ( Id. ¶ 19.) After Plaintiffs filed their Complaint, Symantec stopped promoting and selling the Download Product. ( Id. ¶ 8.)

Plaintiffs seek a class of “all persons in the United States who purchased Extended Download Service or Norton Download Service,” with a few exceptions. ( Id. ¶¶ 10, 31–32.) The two named Plaintiffs, Khoday and Townsend, each purchased the Download Product. ( Id. ¶¶ 11–12, 27–30.)

Khoday is a citizen of California who purchased the Download Product directly from Symantec without the knowledge that she could re-download Norton during her license period without it. ( Id. ¶ 11.) She clicked on the “What's this?” link and read the text that appeared on Symantec's website. ( Id. ¶ 27.) Khoday claims that she would not have purchased the Download Product if she knew that she could download the software for a year without it. ( Id. ¶ 28.)

Townsend is a citizen of Florida who purchased the Download Product from Digital River without the knowledge that she could re-download Norton during her license period without it. ( Id. ¶ 12.) Before purchasing the Download Product, Townsend called the sales support number listed on Digital River's website and spoke to a sales representative. ( Id. ¶ 29.) The sales representative used a script and verbally confirmed the substance of the “What's this?” link on Digital River's website. ( Id. ¶ 30.) The sales representative told Townsend that purchasing the software and the Download Product, unlike purchasing a CD, would allow her to re-download Norton for free. ( Id. ¶ 30.) Townsend was not told that she could re-download the software without purchasing the Download Product. If she had been told this information, she claims that she would not have purchased the Download Product. ( Id. ¶ 30.)

II. PURPOSE OF DOWNLOAD PRODUCT

Symantec claims the Download Product has two main benefits. First, Symantec contends that customers gained the legal and contractual right to download their software more than sixty days after purchase. (Def. Symantec, Corp.'s Mem. Supp. Mot. to Dismiss at 7, 12, May 16, 2011, Docket No. 57.) According to Symantec, this benefit was genuine because Symantec was not otherwise required to allow such downloads, even if they were offered as a matter of course. ( Id. at 12.) Second, Symantec claims that the Download Product made it easier to download Norton. ( Id.) Similarly, Digital River maintains that the Download Product benefited its customers because it allowed them to return to Digital River to re-download Norton, rather than “casting about the Internet and digging through email archives to try to find all the pieces necessary to reinstall Norton.” (Def. Digital River, Inc.'s Mem. Supp. Mot. to Dismiss at 2, May 16, 2011, Docket No. 52.) ⁴

Plaintiffs dispute that the right to download Norton for a year was of value, alleging that Symantec never intended to stop offering its customers free downloads for one year after purchase. (Pl.'s Mem. Opp. Mot. to Dismiss at 1, 3–4, June 6, 2011, Docket No. 60.) Plaintiffs allege that Defendants intentionally led customers to believe that they needed to purchase the Download Product to re-download their software beyond sixty days through pop-up descriptions or advertisements, scripted sales communications, and the auto-population of the “Check Out screen” with the Download Product. (Am. Compl. ¶ 24.) According to Plaintiffs, class members were deceived and would not have purchased the Download Product if they knew that it was optional and provided no benefit. ( Id. ¶¶ 5, 25–26.)

ANALYSIS

I. STANDARD OF REVIEW

Reviewing a complaint under a Rule 12(b)(6) motion to dismiss, the Court considers all facts alleged in the complaint as true, and construes the pleadings in a light most favorable to the non-moving party. See, e.g., Turner v. Holbrook, 278 F.3d 754, 757 (8th Cir.2002). To survive a motion to dismiss, however, a complaint must provide more than “ ‘labels and conclusions' or ‘a formulaic recitation of the elements of a cause of action ...’ ” Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). In short, a plaintiff must state “a claim to relief that is plausible on its face.” Id. (internal quotation marks omitted).

The claims alleged in this case sound in fraud and are thus subject to the heightened pleading standard of Federal Rule of Civil Procedure 9(b). ⁵Rule 9(b) requires that “[i]n alleging fraud or mistake, a partymust state with particularity the circumstances constituting...