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Lyons v. Coxcom

February 6, 2009


The opinion of the court was delivered by: Marilyn L. Huff, District Judge United States District Court


On November 4, 2008, Plaintiff Lynn Lyons ("Lyons") filed a class action complaint against Defendant Coxcom, Inc., doing business as Cox Communications, Inc. ("Cox"). (Doc. No. 1, Compl.) Defendant filed a motion to dismiss the complaint and a request for judicial notice on December 15, 2008. (Doc. Nos. 13--15.) On January 20, 2009, Plaintiff filed her response in opposition and a request for judicial notice. (Doc. Nos. 22--23.) On February 2, 2009, Defendant filed its reply. (Doc. No. 30.) The Court determines this matter is appropriate for resolution without oral argument and submits it on the papers pursuant to Local Rule 7.1(d)(1).


Plaintiff instituted this class action against Cox, an internet service provider in California, 21 other states, and the District of Columbia. (Compl. ¶6.) Plaintiff upgraded her internet service to Cox's high speed internet premier with PowerBoost package in order to gain faster uploads and downloads to and from the internet. (Id. ¶28.) Plaintiff alleges that Cox advertises "blazing fast" internet with PowerBoost speeds up to 20 Mbps for Premier Tier and 12 Mbps for Preferred Tier customers. (Id. ¶¶1, 27.) She alleges Cox also advertises that with PowerBoost "you can now enjoy doubled upload speeds and up to 33% faster downloads." (Id. ¶27.) Plaintiff alleges that Cox breaches its promise to provide "blazing fast" speeds by severely limiting the speed of and/or stopping altogether certain peer-to-peer ("P2P") file sharing internet applications by transmitting unauthorized hidden messages known as "reset packets" to the computers of customers who utilize such applications. (Id. ¶¶2--3.) These reset packets tell the computers to stop communicating via such applications, resulting in blocked or severely impeded file sharing. (Id. ¶¶3, 33.) Plaintiff alleges that she has performed her obligations under the terms of the agreement by paying her monthly charges and that she did not authorize Cox to send hidden messages in order to block or impede her use of P2P applications. (Id. ¶¶31, 34.)

As a result of this alleged conduct by Cox, Plaintiff brings this suit for: (1) breach of contract; (2) violation of the Computer Fraud and Abuse Act ("CFAA"), 18 U.S.C. §§1030, et seq.; (3) violation of the Consumer Protection Statutes of Certain States; (4) breach of the implied covenant of good faith and fair dealing; (5) violation of the Consumer Legal Remedies Act ("CLRA"), California Civil Code §§1750, et seq.; (6) violation of California Business and Professions Code §§17200, et seq., based on fraudulent acts and practices; (7) violations of California Business and Professions Code §§17500, et seq., based on false and misleading advertising; (8) violation of California Business and Professions Code §§17200, et seq., based on unlawful acts; and (9) violation of California Business and Professions Code §§17200, et seq., based on unfair acts and practices.

Defendant Cox seeks to dismiss the complaint under Federal Rules of Civil Procedure 9, 12(b)(1) and 12(b)(6). In support of its position, Cox points to the terms of the subscriber contract referenced by Plaintiff in the complaint. In order for a subscriber to purchase Cox's service, the subscriber is required to check two "Customer Authorization" boxes confirming that he or she has read and accepted the Cox Terms and Conditions of Service, Subscriber Agreement ("SA"), and Acceptable Use Policy ("AUP"). (Compl. ¶29; Doc. No. 15 Exs. A--C.) Cox contends that it is permitted to manage the network under the terms of the subscriber agreement and never promised in its advertising unlimited uploading and downloading ability at the maximum speeds offered. (Doc. No. 14 at 6.) The SA sets forth the terms and conditions of the internet service and as part of the contract the subscriber agrees that Cox provides "Network Management" for the "greatest benefit of the greatest number of subscribers including, specifically, traffic prioritization, and protocol filtering." (Compl. ¶30; Ex. B ¶¶6, 15.) The AUP, which subscribers also agree to be bound by, states that: you must ensure that your activities do not improperly restrict, inhibit, or degrade any other user's use of the Service, nor represent (in Cox's sole judgment) an unusually great burden on the network itself. In addition, you must ensure that your use does not improperly restrict, inhibit, disrupt, degrade or impede Cox's ability to deliver the Service and monitor the Service, backbone, network nodes, and/or other network services. If you use excessive bandwith as determined by Cox, Cox may terminate, suspend, or require you to upgrade the Service and/or pay additional fees. (Doc. No. 15, Ex. A ¶13.) Based on these contractual clauses, Cox argues it was fully in its right to manage the network and made no false promises as its advertising never promised unlimited bandwith consumption or that P2P applications would never be blocked or interrupted. (Doc. No. 14 at 5.) Cox alternatively argues that this action should be stayed because it concerns the management of internet networks by service providers, which is a subject area falling squarely within the primary jurisdiction of the Federal Communications Commission ("FCC"). (Id. at 7.) Cox contends that this Court should stay this proceeding until the final resolution of FCC proceedings concerning Comcast, a similar internet service provider, and until the FCC has specifically evaluated Cox's internet management practices. (Id. at 7--9.)


I. Defendant's Motion to Dismiss Pursuant to 12(b)(1)

Defendant moves to dismiss Plaintiff's third, fifth, sixth, and seventh causes of action under Federal Rule of Civil Procedure 12(b)(1), for lack of subject matter jurisdiction. Defendant assert that Plaintiff lacks standing to bring these claims. (Doc. No. 14.) According to Defendant, Plaintiff cannot sustain her claims based on false advertising because she fails to allege that she purchased Cox's internet service as a result of any advertisement. (Id. at 19--20; Doc. No. 30 at 2.) Cox contends that Plaintiff also lacks standing to bring her fifth cause of action under the CLRA because she has not alleged she is a consumer. (Doc. No. 14 at 18; Doc. No. 30 at 3.) Additionally, Defendant argues Plaintiff lacks standing to bring her third cause of action for violation of various states' consumer protection statutes, as she fails to allege that the state statutes at issue confer upon her, a California citizen, any rights. (Doc. No. 14 at 23; Doc. No. 30 at 4.)

"For purposes of ruling on a motion to dismiss for want of standing, both the trial and reviewing courts must accept as true all material allegations of the complaint, and must construe the complaint in favor of the complaining party." Warth v. Seldin, 422 U.S. 490, 501 (1975); see also Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992). The court does not "speculate as to the plausibility of the plaintiff's allegations." Western Center for Journalism v. Cederquist, 235 F.3d 1153, 1154 (9th Cir.2000).

Article III, §2 of the Constitution places the case or controversy limit on the federal judiciary. "[T]o satisfy Article III's standing requirements, a plaintiff must show (1) it has suffered an 'injury in fact' that is (a) concrete and particularized and (b) actual or imminent, not conjectural or hypothetical; (2) the injury is fairly traceable to the challenged action of the defendant; and (3) it is likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision." Friends of the Earth, Inc. v. Laidlaw Environmental Servs. (TOC) Inc., 704, 528 U.S. 167, 179 (2000).A plaintiff attempting to state a claim for violation of a statute must allege facts showing not only her Article III standing, but that the statute in question grants her the right to sue. Cetacean Cmty. v. Bush, 386 F.3d 1169, 1175 (9th Cir. 2004).

A. False Advertising Causes of Action

Plaintiff brings causes of action for violation of the CLRA, violation of California's unfair competition law ("UCL"), and violation of California's false advertising law ("FAL") based on Cox's alleged misrepresentations concerning internet service speed and omissions regarding Cox's interference with P2P applications. Defendant asserts that Plaintiff lacks standing to sue under these three statutory provisions because she does not allege that her purchase decision was the result of false advertising. (Doc. No. 14 at 19--20; Doc. No. 30 at 2.)

Under the CLRA, actions may be bought only by a consumer "who suffers any damage as a result of the use or employment " of a proscribed method, act, or practice. CAL. CIV. CODE §1780(a). Plaintiff alleges that Cox violated the CLRA by making representations that the service has characteristics, uses and/or benefits which it does not; that the service is of a particular quality which it is not; and by advertising goods without the intent to sell them as advertised. (Compl. ¶59.) Plaintiff alleges these acts and practices of Cox were intended to deceive Plaintiff and the California subclass. (Id.) "[P]laintiffs asserting CLRA claims sounding in fraud must establish that they actually relied on the relevant representations or omissions." Buckland v. Threshold Enter., Ltd, 155 Cal.App.4th 798, 810 (2007). Plaintiff fails to allege that she viewed any of Cox's advertisements or representations prior to subscribing to the service or that she relied upon the relevant representations or omissions in deciding to purchase Cox's service. Plaintiff alleges she "upgraded her Internet service to Defendant's High Speed Internet Premier with PowerBoost Package in order to gain faster uploads and downloads to and from the internet." (Comp. ¶28.) Plaintiff also alleges certain advertising statements made by Cox. (Id. ¶27.) However, Plaintiff does not allege that she upgraded because of the allegedly false advertisements or omissions. Therefore, Plaintiff fails to allege standing to sue under the CLRA as she has not alleged that she suffered any damage as a result of Cox's use of a proscribed act or practice.

While there is a split of authority over whether the UCL and the FAL post-proposition 64 similarly require that a plaintiff have actually relied on false advertisements or omissions in order to have standing to sue under those statutory provisions, the Court concludes that reliance is required to have standing to sue under the UCL and FAL for false advertising claims. See Cattie v. Wal-Mart Stores, Inc., 504 F.Supp.2d 939, 947--49 (S.D. Cal. 2007) (holding reliance is required); Laster v. T-Mobile USA, Inc., 407 F.Supp.2d 1181,1194 (S.D.Cal. 2005) (same); Stickrath v. Globalstar, Inc., 527 F.Supp.2d 992, 996 (N.D.Cal.,2007) (same); c.f. Anunziato v. eMachines, Inc., 402 F.Supp.2d 1133, 1137 (C.D.Cal.2005) (holding plaintiffs need not plead reliance). These statutory provisions permits individuals to assert a claim under the UCL or FAL only if he or she "has suffered injury in fact and has lost money or property as a result of such unfair competition." CAL. BUS. & PROF. CODE §§17204 & 17535. Thus, post- proposition 64, the UCL and FAL contain the same causation requirement as the CLRA in that the damage from the wrongful conduct, in this case the false advertising, be a "result of" the wrongful conduct. Because Plaintiff fails to plead that she actually read or saw any of the alleged misleading advertisements and decided to purchase the service based thereon, Plaintiff fails to have standing under the UCL and FAL.

The Court grants Defendant's motion to dismiss for lack of standing Plaintiff's fifth, sixth, and seventh causes of action with leave to amend.

B. CLRA Cause of Action

Cox also contends that Plaintiff lacks standing to bring her CLRA claim because she has not alleged that she is a consumer within the meaning of the act. (Doc. No. 14 at 18; Doc. No. 30 at 3.) To bring suit under the CLRA, a plaintiff must be a "consumer." CAL. CIV. CODE §1780(a). "Consumer" under the CLRA, "means an individual who seeks or acquires, by purchase or lease, any goods or services for personal, family, or household purposes." CAL. CIV. CODE §1761(d). "Services" is defined as "work, labor, and services for other than a commercial or business use." Id. Plaintiff does not allege in her complaint that she used Cox's internet service for personal, family, or household purposes and not for commercial or business use. Plaintiff argues that because the service she purchased was for residential customers she has alleged that she is a consumer. (Doc. No. 22 at 7.) Given the nature of the internet, it does not go without saying that one purchasing internet service to use at home uses it only for personal, family, or household purposes. Thus, Plaintiff fails to plead standing under the CLRA on this ground as well.

C. Other States' Consumer Protection Statutes Cause of Action

Plaintiff's third cause of action is for violation of the consumer protection statutes of certain states on behalf of Plaintiff and the Class. (Compl. ¶¶44--48.) This cause of action asserts violations under consumer protection laws of each of the states in which Cox sells its high speed internet service, a total of 27 states and the District of Columbia.*fn1 (Id. ¶48.) Plaintiff includes in her list of state consumer protection statutes the CLRA and the UCL. (Id. ¶48.) Defendant argues that Plaintiff lacks standing to sue under the California statutes based on the reasons set forth above, and under the other state statutes as she does not allege that they confer on her any rights. (Doc. No. 14 at 23; Doc. No. 30 at 4.) Plaintiff in response argues that the standing issue under the other states' consumer protection laws is not ripe yet and should be reserved for after the class certification stage. (Doc. No. 22 at 12.)

Plaintiff relies on Ortiz v. Fibreboard Corp., 527 U.S. 815 (1999), which examined class certification issues before the question of Article III standing. However, the Ninth Circuit has held that it is proper for district courts to consider standing before class certification as Fibreboard arose in a very specific situation of a mandatory global settlement class. Easter v. Am. West Fin., 381 F.3d 948, 962 (9th Cir. 2004). "[I]f none of the named plaintiffs purporting to represent a class establishes the requisite of a case or controversy with the defendants, none may seek relief on behalf of himself or any other member of the class." Lierboe v. State Farm Mut. Auto Ins. Co., 350 F.3d 1018, 1022-23 (9th Cir. 2003) (quotation omitted). Because Plaintiff does not sufficiently allege standing to sue under California consumer protection statutes, she cannot seek relief on behalf of a class under other states' consumer protection statutes. Accordingly, the Court grants Cox's motion to dismiss the third cause of action for lack of standing with leave to amend.

II. Defendant's Motion to Dismiss Pursuant to 12(b)(6)

A motion to dismiss a complaint under Federal Rule of Civil Procedure 12(b)(6) tests the legal sufficiency of the claims asserted in the complaint. Navarro v. Black, 250 F.3d 729, 731 (9th Cir. 2001). A complaint generally must satisfy only the minimal notice pleading requirements of Federal Rule of Civil Procedure 8(a)(2) to evade dismissal under a Rule 12(b)(6) motion. Porter v. Jones, 319 F.3d 483, 494 (9th Cir. 2003). Rule 8(a)(2) requires that a pleading stating a claim for relief contain "a short and plain statement of the claim showing that the pleader is entitled to relief." The function of this pleading requirement is to "give the defendant fair notice of what the . . . claim is and the grounds upon which it rests." Conley v. Gibson, 355 U.S. 41, 47 (1957). "While 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, 127 S.Ct. 1955, 1964--65 (2007). "Factual allegations must be enough to raise a right to relief above the speculative level." Id. at 1965 (citing 5 C. Wright & A. Miller, Federal Practice and Procedure § 1216, pp. 235--36 (3d ed. 2004)). "All allegations of material fact are taken as true and construed in the light most favorable to plaintiff. However, conclusory allegations of law and unwarranted inferences are insufficient to defeat a motion to dismiss for failure to state a claim." Epstein v. Wash. Energy Co., 83 F.3d 1136, 1140 (9th Cir.1996); see also Twombly, 127 S.Ct. at 1964--65. "Generally, a district court may not consider any material beyond the pleadings in ruling on a Rule 12(b)(6) motion." Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542, 1555 n .19 (9th Cir.1990). The court may, however, consider the contents of documents specifically referred to and incorporated into the complaint. Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir.1994). In evaluating a motion to dismiss, a court may consider evidence on which the complaint "necessarily relies" as long as: (1) the complaint refers to the document; (2) the document is central to the plaintiff's claim; and (3) no party questions the authenticity of the copy attached to the 12(b)(6) motion. Marder v. Lopez, 450 F.3d 445, 448 (9th Cir. 2006). In addition, a court ruling on a motion to dismiss may consider facts that are subject to judicial notice under Federal Rule of Evidence 201. A district court may take judicial notice of matters of public record, but cannot use this rule to take judicial notice of a fact that is subject to "reasonable dispute" simply because it is contained within a pleading that has been filed as a public record. Lee v. City of Los Angeles, 250 F.3d 668, 689--90 (9th Cir.2001).

In this case, the complaint specifically refers to the SA, AUP, Terms and Conditions, and Limitations of Service that a subscriber agrees to accept with the purchase of internet service. (Compl. ΒΆ29.) These documents are central to Plaintiff's claim and no party questions the authenticity of the copy of the documents attached to Cox's 12(b)(6) motion. (Doc. No. 15 Exs. A--D.) In addition, Cox requests the Court take judicial notice of the FCC's Internet Policy Statement, 20 F.C.C.R. 14986 (2005); excerpts from the FCC's opinion and order, In The Matter of Formal Complaint of Free Press and Public Knowledge Against Comcast Corporation for Secretly Degrading Peer-to-Peer Applications, 23 F.C.C.R. 13028 (Aug. 20, 2008); the first amended complaint in Hart v. Comcast of Alameda, Civ. No. 07-6350 (N.D. Cal.); and a Wikepedia page defining "uploading" and "downloading." (Doc. No. 15.) Plaintiff requests the Court take judicial notice of the complaint filed in Hart v. Comcast Corp., Case no. RG 07-355993; an order granting a request to stay in Hart v. Comcast, filed June 25, 2008; a transcript from Hart v. Comcast, dated June 18, 2008; a transfer order from the United States Judicial Panel on Multidistrict Litigation, In re: Comcast Corp. Peer-to-Peer Transmission Contract Litigation, filed December 5, 2008; a consolidation order, In re: Federal ...

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