VALENTINE v. NEBUAD INC.
| Decision Date | 04 April 2011 |
| Docket Number | NO. C08-05113 TEH,C08-05113 TEH |
| Court | U.S. District Court — Northern District of California |
| Parties | DAN VALENTINE, et al., Plaintiffs, v. NEBUAD, INC., et al., Defendants. |
OPINION TEXT STARTS HERE
ORDER DENYING MOTION TO DISMISS
This matter came before the Court on Defendant NebuAd's motion to dismiss. After carefully considering the parties' written arguments, the Court finds oral argument to be unnecessary. For the reasons set forth below, the motion is DENIED.
BACKGROUND
This lawsuit arises out of a practice of tracking individuals' internet habits and harnessing that data to sell and deliver targeted advertisements based on their web browsing history. NebuAd contracted with internet service providers ("ISPs") to install devices on their networks that monitored ISP subscribers' internet activity and transmitted that data to NebuAd's California headquarters for analysis. That data was used to sell advertising tailored to subscribers' interests, which appeared in place of more generic advertisements on web pages visited by subscribers. The advertising profits were split by NebuAd and its ISP partners.
Plaintiffs are ISP customers who allege their online activities were monitored during trials of this technology by NebuAd and the six ISPs to which they subscribed ("ISP Defendants"). Plaintiffs filed a complaint on November 10, 2008, against NebuAd and the ISP Defendants, asserting that this practice violated federal and state statutes governing the privacy of communications and computer usage. NebuAd filed a motion to dismiss on December 22, 2008; the ISP Defendants moved to dismiss on January 30, 2009. The Court, after allowing time for Plaintiffs to conduct jurisdictional discovery, heard the ISP Defendants' motions on July 27, 2009; they were dismissed for lack of personal jurisdiction on October 6, 2009, leaving NebuAd as the only defendant in the case.
In the meantime, on May 13, 2009, NebuAd's board of directors executed an assignment for the benefit of creditors ("ABC"), a business liquidation device under California law that is an alternative to bankruptcy proceedings. NebuAd's counsel moved to withdraw and to stay proceedings on May 18, arguing that they could not continue to represent NebuAd because there was effectively - due to the ABC - no client left to represent. The Court enlarged the time for NebuAd to file a reply in support of its Motion to Dismiss until after its counsel's motions were resolved. The Court allowed counsel to withdraw, but denied the stay, on October 6, 2009. New counsel for NebuAd entered their appearance days later. A reply in support of NebuAd's Motion to Dismiss was filed on November 30, 2009, with a hearing re-noticed for December 14, 2009. Since then, the Court has granted several continuances of this hearing date in light of the parties' settlement efforts. On August 3, 2010, the Court ordered the parties, pursuant to their stipulation, to request a date for further case management conference and a date to calendar Defendant NebuAd, Inc.'s pending motion to dismiss within 30 days of the close of settlement efforts. The parties last settlement conference took place on December 13, 2010. Hearing nothing from the parties by January 14, 2011, the Court set a case management conference for January 31, 2011. At the case management conference, the Court gave the parties yet more time to reach a settlement. If they did not settle by March 14, 2011, the Court held, it would hear the pending motion to dismiss on April 4, 2011. The Court invited the parties to submit short supplemental briefs by 4 p.m. on Friday, March 25, 2011. NebuAd submitted nothing; Plaintiffs submitted a declaration containing supplemental materials.
Plaintiffs bring claims for violation of the federal Electronic Communications Privacy Act of 1986 ("ECPA"), 18 U.S.C. § 2510 et seq. (Count I); California's Computer Crime Law ("CCCL"), Cal. Pen. Code § 502 (Count II); the federal Computer Fraud and Abuse Act, 18 U.S.C. § 1030 (Count III); and California's Invasion of Privacy Act ("CIPA"), Cal. Pen. Code § 630 et seq. (Count IV). Plaintiffs also assert a claim for unjust enrichment (Count VII).1 NebuAd moves to dismiss the two state claims, Counts II and IV, for violation of the CCCL and the CIPA. NebuAd asserts that the state claims are preempted by the federal ECPA, and that Plaintiffs lack standing to assert claims under the CCCL and the CIPA because they are not (and do not allege to be) California residents.
LEGAL STANDARD
Dismissal is appropriate under Federal Rule of Civil Procedure 12(b)(6) when a plaintiffs allegations fail "to state a claim upon which relief can be granted." In ruling on a motion to dismiss, the Court must "accept all material allegations of fact as true and construe the complaint in a light most favorable to the non-moving party." Vasquez v. L.A. County, 487 F.3d 1246, 1249 (9th Cir. 2007). Courts are not, however, "bound to accept as true a legal conclusion couched as a factual allegation." Ashcroft v. Iqbal, — U.S. —, 129 S. Ct. 1937, 1949-50, 173 L.Ed.2d 868 (2009).
A Rule 12(b)(6) dismissal "can be based on the lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory." Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990). To survive a motion to dismiss, a plaintiff must plead "enough facts to state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Plausibility does not equate to probability, but it requires "more than a sheer possibility that a defendant has acted unlawfully." Iqbal, 129 S. Ct. at 1949. "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. Dismissal of claims that fail to meet this standard should be with leave to amend unless it is clear that amendment could not possibly cure the complaint's deficiencies. Steckman v. Hart Brewing, Inc., 143 F.3d 1293, 1296 (9th Cir. 1998).
DISCUSSION
NebuAd argues that Plaintiffs do not have standing to assert CIPA and CCCL claims, and that these claims are preempted by the federal ECPA.2
NebuAd asserts that Plaintiffs cannot pursue an action under the CIPA and the CCCL because they are not residents of California, and therefore lack standing under the statutes. Plaintiffs counter that they should be permitted to maintain their California statutory claims "because the relevant conduct occurred in California" and because doing so will further California's interest in promoting a fraud-free business climate. Pls.' Response at 5.
Both statutes, by their own language, were enacted to protect "the people of this state" (CIPA) or individuals and entities "within this state" (CCCL). NebuAd relies on this language to argue that Plaintiffs do not have standing under either statute. The "declaration of policy" for the CIPA provides that the "Legislature by this chapter intends to protect the right of privacy of the people of this state." Cal. Pen. Code § 630 (emphasis added). The Legislature articulated the intent of the CCCL as follows:
The Legislature further finds and declares that protection of the integrity of all types and forms of lawfully created computers, computer systems, and computer data is vital to the protection of the privacy of individuals as well as to the well-being of financial institutions, business concerns, governmental agencies, and others within this state that lawfully utilize those computers, computer systems, and data.
Cal. Pen. Code § 502 (emphasis added). NebuAd argues that the Legislature's expressed intention is to protect only "the people of - and those "within" - California, and thus Plaintiffs have no standing to sue under either statute.
Standing is only conferred on a plaintiff who alleges "'injury in fact,' that is, a sufficiently concrete interest in the outcome of their suit to make it a case or controversy subject to a federal court's Art. III jurisdiction." Singleton v. Wulff, 428 U.S. 106, 112, 96 S.Ct. 2868, 49 L.Ed.2d 826 (1976). NebuAd does not premise its argument on constitutional principles, however, and casts no doubt on Plaintiffs' standing as a constitutional matter. Rather, NebuAd asserts that Plaintiffs lack standing as a matter of statutory construction. "Standing rules for actions based upon statute may vary according to the intent of the Legislature and the purpose of the enactment." Angelucci v. Century Supper Club, 41 Cal. 4th 160, 175, 59 Cal. Rptr. 3d 142, 158 P.3d 718 (2007). The Court is "bound by statutory limitations on standing where they plainly apply." Midpeninsula Citizens for Fair Housing v. Westwood Investors, 221 Cal. App. 3d 1377, 1389, 271 Cal. Rptr. 99 (1990).
The question before the Court is exclusively one of statutory interpretation: did the California Legislature intend to limit the right of action under the CIPA and the CCCL to instate plaintiffs?3 Such a reading would allow California residents to violate the statutes with impunity so long as their actions targeted non-residents. As the intention of the Legislature controls, this Court must decide whether that body meant to preclude actions from out-of-state plaintiffs against in-state defendants. Neither the parties nor the Court have identified any cases that resolve this issue.
Kearney v. Salomon Smith Barney, on which NebuAd relies to show that the CIPA protects only California residents, is of limited value because its facts are opposite those here: the Kearney plaintiffs were California residents suing an out-of-state defendant, whereas Plaintiffs here are out-of-state residents suing a California defendant. 39 Cal. 4th 95, 45 Cal. Rptr. 3d 730, 137 P.3d 914 (2006). In Kearney, the defendant brokerage firm's Georgia employees recorded telephone conversations with...
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