United States v. MyLife.com, Inc.

Citation499 F.Supp.3d 757
Decision Date06 November 2020
Docket NumberCase No. 2:20-cv-6692-JFW (PDx)
CourtUnited States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Central District of California
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.

499 F.Supp.3d 757

UNITED STATES of America, Plaintiff,
v.
MYLIFE.COM, INC., a corporation, and Jeffrey Tinsley, individually and as an officer of MyLife.com, Inc., Defendants.

Case No. 2:20-cv-6692-JFW (PDx)

United States District Court, C.D. California, Western Division.

Signed November 6, 2020


499 F.Supp.3d 759

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 US, Los Angeles, CA, for Defendant MyLife.com, Inc.

Jeffrey E. Tsai, Hector Emilio Corea, Mandy Chan, Tamany Vinson Bentz, DLA Piper LLP US, Los Angeles, CA, for Defendant Jeffrey Tinsley.

STATEMENT OF DECISION DENYING MYLIFE.COM, INC.'S MOTION TO DISMISS

John F. Walter, United States District Court Judge

499 F.Supp.3d 760

Before the Court is Defendant MyLife.com, Inc.'s ("MyLife") motion to dismiss the Complaint (Dkt. 29). For the reasons that follow, the motion is DENIED in its entirety.

I. RELEVANT FACTS

The United States' Complaint (Dkt. 1) ("Compl.") includes five counts alleging that Defendants MyLife and Jeffrey Tinsley violated Section 5 of the FTC Act, 15 U.S.C. § 45(a) ; the Restore Online Shoppers' Confidence Act ("ROSCA"), 15 U.S.C. § 8403, the Telemarketing Sales Rule ("TSR"), 16 C.F.R. § 310; and the Fair Credit Reporting Act ("FCRA"), 15 U.S.C. §§ 1681 – 1681x.

The Complaint alleges the following facts. Defendants sell consumer background reports on their website, www.MyLife.com. Their business model encourages consumers to run free searches on that website for a person's name. The search results display screens that suggest the searched-for person has criminal or sexual offense records, bankruptcies, liens, or legal judgments against the person—whether or not that is true—generate a "reputation score" for that person, and then encourage the searcher to buy a MyLife subscription to see a background report on the searched-for person that includes those records. Compl. ¶¶ 7, 25–29.

Defendants market their background reports for use in establishing an individual's eligibility for employment, loans, and housing, displaying testimonials praising the reports as suitable for those purposes. Id. at ¶ 25. Defendants do not, however, try to determine whether the information in those background reports is accurate, who is obtaining the reports, or why. Id. at ¶¶ 9, 38. Defendants' marketing has also included telemarketing calls in which sales agents encourage consumers to upgrade to paid subscriptions or try to persuade them not to cancel their subscriptions or the automatic renewal thereof, or refuse consumers' requests for refunds, without disclosing key aspects of MyLife's payment, cancellation, subscription management, and refund policies. Id. at ¶¶ 8, 34–36. Since 2009, millions of American consumers have paid for MyLife premium subscriptions. Id. at ¶¶ 7–8.

The Complaint alleges that Defendants fail to inform consumers of their policies that charge subscribers a lump sum upfront for the total cost of a subscription (e.g. , charging $83.40 upfront for a 12-month subscription, instead of $6.95 each month), that paid subscriptions will automatically renew upon cancellation unless the subscriber takes affirmative steps to cancel, that frustrate subscribers' efforts to cancel or change the automatic renewal feature of a subscription, and that refuse refund requests in most cases. Id. at ¶¶ 32–36. Defendants have allegedly engaged in such practices off-and-on for years, despite having settled lawsuits regarding those practices and promising to stop the offending behavior. Id. at ¶¶ 6, 37.

II. DISCUSSION

A. The Complaint Satisfies Federal Rule of Civil Procedure 8(a) or 9(b).

MyLife contends that Federal Rule of Civil Procedure 9(b) applies to the entire Complaint, and that the Complaint fails to comply with the rule and should thus be dismissed. See MyLife.com, Inc.'s

499 F.Supp.3d 761

Memorandum of Points and Authority in Support of Motion to Dismiss the Complaint (Dkt. 29) ("Memo.") at 5–6, 9–10, 15–18. Plaintiff contends that Rule 8(a)'s general notice pleading standard should apply, noting that the Ninth Circuit has never held that FTC Act claims necessarily "sound in fraud" and require application of Rule 9(b), and that the Complaint's FCRA claims in particular do not allege even quasi-fraudulent or misleading conduct. See United States' Opposition to MyLife's Motion to Dismiss (Dkt. 33) ("Opp.") at 3–6. Plaintiff additionally contends that even if Rule 9(b) were to apply, the Complaint satisfies it. Id.

"[W]hether or not the heightened pleading standard set forth in Rule 9(b) applies to deceptive practices claims under Sections 5 and 12 of the FTC Act is a question that has not been resolved in the Ninth Circuit." FTC v. Lunada Biomedical, Inc. , No. CV-15-3380-MWF (PLA), 2016 WL 4698938, at *3 (C.D. Cal. Feb. 23, 2016) (quoting FTC v. Wellness Support Network, Inc. , No. C-10-04879 JCS, 2011 WL 1303419, at *8 (N.D. Cal. Apr. 4, 2011) (collecting cases)). The Court need not attempt to resolve that open legal question here, because the Complaint's five counts are pled with sufficient particularity to satisfy Rule 9(b).

Despite MyLife's suggestion to the contrary, Rule 9(b) "does not require absolute particularity or a recital of the evidence. [A] complaint need not allege ‘a precise time frame,’ ‘describe in detail a single specific transaction’ or identify the ‘precise method’ used to carry out the fraud." United States v. United Healthcare Ins. Co. , 848 F.3d 1161, 1180 (9th Cir. 2016). Moreover, Rule 9(b) "may be relaxed as to matters within the opposing party's knowledge." Moore v. Kayport Package Exp., Inc. , 885 F.2d 531, 540 (9th Cir. 1989). A "pleading is sufficient under Rule 9(b) if it identifies the circumstances constituting fraud so that a defendant can prepare an adequate answer from the allegations." Id.

The Complaint here far exceeds the general allegations of a bare notice pleading. It specifies a timeframe, facts that describe the particular conduct that violates the laws cited, and why that conduct violates those laws. Rule 9(b) requires no more. MyLife suggests that the Complaint should be dismissed because it does not allege granular details of specific transactions, but does not articulate why it contends the Complaint is not pled with sufficient particularity such that Defendants cannot answer the allegations against them. Rule 9(b) does not require such a level of detail.

B. The Complaint States a Claim That Defendants' Automatic Renewal Practice is a Negative Option Feature That Violates ROSCA

MyLife contends that Count 3 of the Complaint must be dismissed for failure to plead a "negative option feature" subject to ROSCA. Memo. at 6–9.

A "negative option feature" is defined as "an offer or agreement to sell or provide any goods or services, a provision under which the customer's silence or failure to take an affirmative action to reject goods or services or to cancel the agreement is interpreted by the seller as acceptance of the offer." 16 C.F.R. § 310.2(w). The Complaint adequately pleads the existence of a negative option feature. A subscription plan in which subscribers pay MyLife to provide one background report per month for the duration of the subscription, for example, is "an offer or agreement to sell or provide any goods or services." Id. MyLife's automatic renewal policy, in which a subscription automatically renews when its period was set to end—and the subscriber's credit card is subject to recurring charges—unless the subscriber affirmatively

499 F.Supp.3d 762

cancels, is "a provision under which the customer's silence or failure to take an affirmative action to reject goods or services or to cancel the agreement is interpreted by the seller as acceptance of the offer." Id. My Life's automatic renewal default for its subscriptions is a textbook example of a negative option feature. Indeed, ROSCA's text itself mentions "recurring charges"—a clear reference to a subscription or program that renews automatically unless the consumer takes action to prevent it.1

Courts in the Ninth Circuit have also found automatic renewal programs to be negative option features subject to ROSCA. The court in FTC v. Health Formulas, LLC , for example, found that the FTC provided evidence "that Defendants' recurring payment plans, in which customers are automatically enrolled and through which they are charged if they do nothing, constitute negative option features within the meaning of 16 C.F.R. § 310.2 and that they violate the ROSCA in several ways." No. 2:14-cv-01649, 2015 WL 2130504, *16–17 (D. Nev. May 6, 2015). That case, like this one, concerned allegations that consumers agreed to receive particular products or services but were not provided with clear disclosures explaining that they would be subject to recurring billing beyond the advertised time period unless they took affirmative steps to cancel their...

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