Mollett v. Netflix, Inc.

• Decision Date: 31 July 2015
• Docket Number: No. 12–17045.,12–17045.
• Parties: Meghan MOLLETT and Tracy Hellwig, individually on behalf of themselves and all others similarly situated, Plaintiffs–Appellants, v. NETFLIX, INC., a Delaware Corporation, Defendant–Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

795 F.3d 1062

Meghan MOLLETT and Tracy Hellwig, individually on behalf of themselves and all others similarly situated, Plaintiffs–Appellants

v.NETFLIX, INC., a Delaware Corporation, Defendant–Appellee.

No. 12–17045.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Feb. 6, 2015.

Filed July 31, 2015.

Rachele R. Rickert (argued), Francis M. Gregorek, Betsy C. Manifold, and Marisa C. Livesay, Wolf Haldenstein Adler Freeman & Herz LLC, San Diego, CA; Mary Jane Fait and Theodore B. Bell, Wolf Haldenstein Adler Freeman & Herz LLC, Chicago, IL, for Plaintiffs–Appellants.

Keith E. Eggleton (argued), Rodney G. Strickland, Jr., Brian M. Willen, and Jessica L. Snorgrass, Wilson Sonsini Goodrich & Rosati, Palo Alto, CA, for Defendant–Appellee.

Appeal from the United States District Court for the Northern District of California, Edward J. Davila, District Judge, Presiding. D.C. No. 11–cv–01629–EJD–PSG.

Before: RICHARD C. TALLMAN and JOHNNIE B. RAWLINSON, Circuit Judges, and RAYMOND J. DEARIE, Senior District Judge.^*

OPINION

DEARIE, Senior District Judge:

Plaintiffs–Appellants Meghan Mollett and Tracy Hellwig appeal the district court's dismissal of their claims against Defendant–Appellee Netflix, Inc. (“Netflix”), a subscription video streaming service, for violations of the Video Privacy Protection Act (“VPPA”), 18 U.S.C. § 2710, and California Civil Code § 1799.3. On behalf of themselves and other similarly-situated Netflix subscribers, Plaintiffs allege that Netflix violated these statutes by permitting certain disclosures about their viewing history to third parties—specifically, subscribers' family, friends, and guests. We conclude, however, that the complained-of disclosures were lawfully made to Netflix's own subscribers and, therefore, are not actionable under the VPPA or the California Civil Code. We affirm the decision of the district court.

I.

Netflix is the world's largest subscription service for viewing movies, television programs, and other video content. The company launched in 1999 as an online DVD rental service that delivers DVDs to subscribers through the mail, and expanded in 2007 to allow subscribers to stream videos instantly online. As of the filing of Plaintiffs' complaint, Netflix had more than 20 million subscribers; approximately 48 percent use the service's instant streaming feature.

To become a Netflix subscriber, a consumer must create an account on Netflix's website. As part of the account setup, a consumer must create a password, which she must enter whenever logging into the account. Once a subscriber has an account, she can begin ordering videos. Depending on the type of account the subscriber purchased, she can either order DVDs for home delivery or stream videos instantly over the Internet, or both. To ease the ordering of DVDs for home delivery, a subscriber can create a list of DVDs that she wishes to view. That list is known as the “queue.” Depending on the terms of subscription, Netflix mails one or more of the DVDs listed in the queue to the subscriber. Once a subscriber returns a DVD to Netflix, Netflix mails out the next available DVD in the subscriber's queue.

Many of the videos in a subscriber's queue can also be viewed instantly by streaming them over the Internet onto a subscriber's computer or portable computing device, including televisions or video game systems. To stream a video instantly, a subscriber simply logs into her password-protected account, selects a video, and presses play. Videos that are available for instant streaming can be displayed on a subscriber's television through use of a Netflix-ready device, such as a video game console, an Internet-connected television, or a specially-designed DVD player. In order to stream a video on a television through a Netflix-ready device, a subscriber must first register the device in the subscriber's password-protected online account. After the device is activated and connected to a television, the subscriber can play videos by turning on the television and selecting a video available through Netflix. A password is not required to watch a video once the Netflix-ready device is activated.

To assist its subscribers in adding videos to their queues or selecting videos to watch instantly, Netflix provides its customers with lists of recommended videos. These recommendations are generated through the use of predictive software that analyzes, among other things, a subscriber's rental history. Recommendations are displayed to subscribers through category-based lists. For instance, when Netflix recommends movies based on a subscriber's recently-watched video, suggested movies are placed in a list titled “Like [Name of Recently–Watched Film]” or “Because You Liked [Name of Recently–Watched Film].” These lists of recommended films include each video's title, an image of its DVD cover art, a written description of the video's content, and its Motion Picture Association of America rating.

Netflix displays a subscriber's queue and recommendation lists automatically on a subscriber's account home page. Once a subscriber has connected her account to a Netflix-ready device, these lists are also automatically displayed on the subscriber's television when the television is turned on and Netflix is activated. Specifically, Netflix displays a list of “recently watched” video titles, the subscriber's queue, and lists of video titles recommended by Netflix. While a subscriber can edit and delete titles from her queue, she cannot hide or remove the queue or the other lists displayed by Netflix. The contents of these lists, as a result, are visible to family members, friends, or guests of Netflix subscribers who use a subscriber's account to stream videos, or are in the presence of a subscriber when she is accessing her account through a Netflix-ready device. Plaintiffs alleged in their April 4, 2011, complaint that these disclosures violate the VPPA and California Civil Code § 1799.3.

In its motion to dismiss for failure to state a claim, Netflix asserts that (1) its disclosures of personal information are made to subscribers themselves and therefore permissible, and (2) any disclosures to third parties are not made knowingly, as required by the VPPA, or in willful violation of the law, as required by California Civil Code § 1799.3. The district court granted Netflix's motion on both of these grounds and dismissed Plaintiffs' complaint with prejudice. Plaintiffs timely appealed the district court's order.

II.

“We review de novo the district court's grant of a motion to dismiss under Rule 12(b)(6), accepting all factual allegations in the complaint as true and construing them in the light most favorable to the nonmoving party.” Skilstaf, Inc. v. CVS Caremark Corp., 669 F.3d 1005, 1014 (9th Cir.2012). “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, 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) ). We will uphold a district court's decision to dismiss “where there is either a lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal claim.” Hinds Invs., L.P. v. Angioli, 654 F.3d 846, 850 (9th Cir.2011).

III.

A.

The interpretation of this section of the VPPA is an issue of first impression for this Circuit. The VPPA was enacted in 1988 in response to the Washington City Paper 's publication of then-Supreme Court nominee Robert Bork's video rental history. See S. Rep. 100–599, at 5 (1988), reprinted in 1988 U.S.C.C.A.N. 4342–1. The paper had obtained (without Judge Bork's knowledge or consent) a list of the 146 films that the Bork family had rented from a Washington, D.C.-area video store. Id. Members of the Judiciary Committee “denounced the disclosure” and Congress acted swiftly to enact the VPPA. Id. According to the Senate Report on the VPPA, Congress's purpose when enacting the statute was “[t]o preserve personal privacy with respect to the rental, purchase or delivery of video tapes or similar audio visual materials.” Id. at 1.

“The Act allows consumers to maintain control over personal information divulged and generated in exchange for receiving services from video tape service providers. The Act reflects the central principle of the Privacy Act of 1974: that information collected for one purpose may not be used for a different purpose without the individual's consent.” Id. at 8. Congress's intent in passing the VPPA therefore evinces the principle that protection is merited when the consumer lacks control over the dissemination of the information at issue.

Consistent with Congress's purpose, the statute's language is broad. The VPPA prohibits a “video tape service provider” from knowingly disclosing “personally identifiable information” about one of its consumers “to any person, ” and provides for liquidated damages in the amount of $2,500 for violation of its provisions. 18 U.S.C. §§ 2710(b) and 2710(c)(2) (emphasis added). The VPPA, however, does not prohibit all disclosures. The Act provides several exceptions to the disclosure prohibition, allowing disclosure of a consumer's video rental history to the consumer himself, or to third parties when the consumer has provided written consent or the third party has obtained a warrant or court order. Id. § 2710(b)(2). Relevant here is section 2710(b)(2)(A), which permits video tape service providers to “disclose personally identifiable information concerning any consumer ... to the consumer.” Id. § 2710(b)(2)(A)....