United States v. MyLife.com, Inc., Case No. 2:20-cv-6692-JFW (PDx)
| Decision Date | 06 November 2020 |
| Docket Number | Case No. 2:20-cv-6692-JFW (PDx) |
| Citation | 499 F.Supp.3d 751 |
| Parties | UNITED STATES of America, Plaintiff, v. MYLIFE.COM, INC., a corporation, and Jeffrey Tinsley, individually and as an officer of MyLife.com, Inc., Defendants. |
| Court | U.S. District Court — Central District of California |
Lisa K. Hsiao, Rachel Baron, Zachary Alan Dietert, Patrick Raymond Runkle, US Department of Justice, Washington, DC, for Plaintiff.
Jeffrey E. Tsai, Andrew B. Serwin, Hector Emilio Corea, Mandy Chan, Tamany Vinson Bentz, DLA Piper LLP, Los Angeles, CA, for Defendant MyLife.com, Inc.
Jeffrey E. Tsai, Hector Emilio Corea, Mandy Chan, Tamany Vinson Bentz, DLA Piper LLP, Los Angeles, CA, for Defendant Jeffrey Tinsley.
STATEMENT OF DECISION DENYING JEFFREY TINSLEY'S MOTION TO DISMISS
Before the Court is Defendant Jeffrey Tinsley's ("Tinsley") motion to dismiss the Complaint (Dkt. 30). The Court has already denied Defendant MyLife's motion to dismiss the Complaint (Dkt. 29). For the reasons explained in that separate opinion, the Complaint alleges sufficient facts to allow the Court to reasonably infer MyLife's corporate liability. Tinsley now moves to dismiss on the ground that the Complaint fails to establish his individual liability. For the reasons that follow, Tinsley's motion to dismiss is DENIED.
The factual allegations relevant to MyLife's corporate liability are summarized in the Court's opinion denying MyLife's motion to dismiss. The Complaint alleges the following additional facts of particular relevance to Tinsley. Tinsley is the founder, CEO, and Chairman of MyLife, a privately held company in which he has a major ownership interest. Compl. (Dkt. 1) ¶¶ 5, 6. As the company's creator and principal director, he has been responsible for MyLife's overall direction and business strategies since its inception. Id. ¶ 6. Among other things, Tinsley has directed MyLife's billing, marketing, advertising, and subscription practices, and he personally markets MyLife's products. Id. He also created and developed the "Reputation Score" displayed on each consumer's profile on MyLife's website. Id. Tinsley maintains a personal blog attesting to his personal knowledge of MyLife's business practices, user agreements, and the purported benefits of a subscription. Id.
Over the years, hundreds of consumers have complained about MyLife's business practices, including policies that have resulted in lawsuits brought by consumers and regulators. Id. ¶ 37. For example, MyLife settled lawsuits in 2012 and 2015 with terms that bound Tinsley and other company principals. Tinsley has submitted declarations in such litigation, and he has personal knowledge that MyLife continues to use certain business practices that MyLife agreed to cease in order to settle such lawsuits, id. ¶ 6.
A motion to dismiss brought pursuant to Federal Rule of Civil Procedure 12(b)(6) tests the legal sufficiency of the claims asserted in the complaint. "A Rule 12(b)(6) dismissal is proper only where there is either a ‘lack of a cognizable legal theory’ or ‘the absence of sufficient facts alleged under a cognizable legal theory.’ "
Summit Technology, Inc. v. High-Line Medical Instruments Co., Inc. , 922 F. Supp. 299, 304 (C.D. Cal. 1996) (quoting Balistreri v. Pacifica Police Dept. , 901 F.2d 696, 699 (9th Cir. 1988) ). However, "[w]hile a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the ‘grounds’ of his ‘entitlement to relief’ requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atlantic Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (internal citations and alterations omitted). "[F]actual allegations must be enough to raise a right to relief above the speculative level." Id.
In deciding whether a complaint states a claim, courts must accept as true all factual allegations in the complaint, Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009), and must construe those allegations in the light most favorable to the nonmoving party, Wyler Summit Partnership v. Turner Broadcasting System, Inc. , 135 F.3d 658, 661 (9th Cir. 1998). To survive a motion to dismiss, a complaint must allege "facts that are suggestive enough to render [liability] plausible." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 556, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007).
To state a claim, a complaint must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). A complaint need not plead specific facts; it must only "give the defendant fair notice of what the ... claim is and the grounds upon which it rests." Erickson v. Pardus , 551 U.S. 89, 93, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007) (per curiam) ().
Defendants contend that the claims in this case are subject to the heightened pleading standard in Fed. R. Civ. P. 9(b). For the reasons explained in the Court's opinion denying MyLife's motion to dismiss, the Court concludes that the Complaint would satisfy the pleading standard under either Rule 8(a) or 9(b). In any event, moreover, as set forth in greater detail below, application of Rule 9(b) here would have no effect on the issue of Tinsley's individual liability.
MyLife argues that the Complaint fails to allege facts supporting Tinsley's individual liability under the FTC Act. To state a claim for individual liability under the FTC Act, the United States must first allege corporate liability, as it has here. Once corporate liability is established, an individual is liable for injunctive relief if he "participated directly in" the practices in question or "had the authority to control them." FTC v. Garvey , 383 F.3d 891, 900 (9th Cir. 2004). An individual is also liable for restitution if he had actual or constructive knowledge of the practices. Id. Actual knowledge, reckless indifference, or awareness of a high probability of deceptive acts or practices all satisfy this knowledge requirement. See FTC v. Network Services Depot, Inc. , 617 F.3d 1127, 1138–39 (9th Cir. 2010).
Here, the Complaint pleads facts that plausibly render Tinsley liable for injunctive relief and restitution. "An individual's status as a corporate officer and/or the authority of that individual to sign documents on behalf of a corporate defendant is sufficient to show the requisite control." FTC v. Dinamica Financiera LLC , No. CV 09–03554 MMM (PJWx), 2010 WL 9488821, at *10 (C.D. Cal. Aug. 19, 2010) (citing FTC v. Publishing Clearing House, Inc. , 104 F.3d 1168, 1170 (9th Cir. 1997) ); see also FTC v. Lights of Am. Inc. , No. SACV 10–1333 JVS (MLGx), 2011 WL 1515158, at *2–4 (C.D. Cal. Mar. 31, 2011) ; FTC v. Commerce Planet, Inc. , Case No. SACV 09-01324CJC (RNBx), 2010 WL 11673796, at *2 (C.D. Cal. Feb. 12, 2010). As a court in the Central District of California has observed, "the most important fact for individual liability under the Section 5 of the FTC Act" is that the individual is "the ... director of the company" that engaged in the allegedly unlawful practices. Commerce Planet , 2010 WL 11673796, at *2. That is because, "[b]ased on judicial experience and common sense, it is certainly plausible for a president of a company to know about and have authority to control" the company's deceptive business practices. Id.
Here, the United States’ allegations are sufficient to permit the Court to infer Tinsley's ability to control the relevant business practices. The Complaint alleges that Tinsley is the "founder, Chief Executive Officer, and Chairman of MyLife, in which he has a major ownership interest," that Tinsley has been "responsible for MyLife's overall direction and strategies" since its inception, and that Tinsley has "directed MyLife's billing, marketing, advertising, and subscription practices." Compl. ¶ 6. Although Tinsley attempts to dismiss these factual allegations as "conclusory," they are not; they do more than state legal conclusions, and they plausibly demonstrate the requisite control under the case law cited above.
The Complaint also permits a plausible inference of Tinsley's knowledge of, or at least reckless indifference to, the alleged misconduct. As described in the Complaint, the alleged practices include prominent features of MyLife's public website, have prompted hundreds of consumer complaints, and have resulted in prior litigation, in which Tinsley has submitted declarations. Compl. ¶¶ 25–38. Knowledge can also be inferred from a defendant's supervision of and active involvement in a company's business affairs. Lights of Am. Inc. , 2011 WL 1515158, at *2–4 (); see also FTC v. Publishers Bus. Servs., Inc. , 540 F. App'x 555, 558 (9th Cir. 2013) ; FTC v. Am. Fin. Benefits Ctr. , 324 F. Supp. 3d 1067, 1080–81 (N.D. Cal. 2018) ; FTC v. Wellness Support Network, Inc. , No. C-10-04879 JCS, 2011 WL 1303419, at *10 (N.D. Cal. Apr. 4, 2011) ; FTC v. Sharp , 782 F. Supp. 1445, 1450 (D. Nev. 1991).
Contrary to Tinsley's suggestion, this is not a case in which the United States is attempting to infer knowledge from "mere title." See Tinsley's Memorandum of Points and Authorities in Support of Motion to Dismiss the Complaint ("Memo.") at 4 (Dkt. 30). The Complaint alleges not only that Tinsley is the founder, chairman, CEO, and a major owner of MyLife, but that he directed MyLife's marketing, billing, and subscription practices, Compl. ¶ 6, that he "personally markets MyLife's products," id. , that he has "personal knowledge that MyLife continues to use...
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