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In re Jamster Marketing Litigation

May 22, 2009

IN RE: JAMSTER MARKETING LITIGATION,


The opinion of the court was delivered by: Hon. Jeffrey T. Miller United States District Judge

This document relates to all cases.

MDL No. 1751

ORDER DENYING MOTIONS TO STRIKE; GRANTING IN PART AND DENYING IN PART MOTIONS TO DISMISS; REQUIRING ANSWER TO COMPLAINT

Defendants VeriSign, Inc. and Jamster LLC (collectively "Content Providers") move to dismiss the RICO cause of action alleged in the First Amended Coordinated Class Action Complaint ("FACC"). Defendant T-Mobile USA, Inc. ("T-Mobile") moves to dismiss the FACC in its entirety. Defendants AT&T Wireless Services Inc., New Cingular Wireless Services Inc., and Cingular Wireless LLC (collectively "AT&T") move to strike or, alternatively, to dismiss the FACC and to strike the class allegations and to compel arbitration.*fn1 Plaintiffs oppose all motions. All Defendants join in each other's motions. For the reasons set forth below, the court denies and defers ruling on the motions to strike until the class certification hearing date; grants Content Provider's motion to dismiss the RICO claim; grants in part and denies in part Wireless Providers' motions to dismiss; and requires all Defendants to file answers within 15 days of entry of this order. All granted motions are granted without leave to amend.

BACKGROUND

The Parties

This MDL action is comprised of seven complaints, individually referred to as the Ford, Cervantes, Herrington, Page, Harmon, Kling, and Steffan complaints. Named Plaintiffs in the operative complaint are Charles Ford, Debra Szalanski, Carol Fox de Steffano, David Haslet, Gerald Shuck, Lloyd "Adam" Page, Eright Johnson, and Diane Cervantes.

Jamster, a business entity organized under the laws of Switzerland, with its principal place of business in Fribourg, Switzerland, is alleged to have been a wholly owned subsidiary of VeriSign, a corporation incorporated in the State of Delaware with its principal place of business in Mountain View, California, until January 3, 2007. (FACC ¶33). Since January 3, 2007 Jamster allegedly became a joint venture partner of VeriSign. Id. The Content Providers' products and services were first marketed in the United Kingdom before Jamster was launched in the Untied States. (FACC ¶30). "Prior to 2004, Content providers were aware of formal complaints to governmental agencies in the United Kingdom that Jamster advertisements did not provide clear information about pricing or that a subscription was being offered." (FACC ¶31). "Despite this knowledge, Content Providers used the same and similar advertisements when it began marketing mobile content under the name of Jamster in the United States." Id.

AT&T and T-Mobile are wireless service providers who, among other things, provide wireless phone service and text messaging. (FACC ¶43). Plaintiffs allege that Wireless Providers and Content Providers had a business relationship wherein Content Providers would provide ring tones and other content to customers of Wireless Providers. (FACC ¶45). In exchange, Wireless Providers would retain a portion of the charges for its services.

The FACC's Substantive Allegations

In its order of September 29, 2008 ("Order") the court clarified the scope of this MDL litigation as encompassing core common factual allegations related to deceptive marketing practices. (Order at 8:25-27). The FACC alleges that the minor children of Plaintiffs saw advertisements on television or the internet that offered a free ringtone by sending a text message. (FACC ¶¶81-95).

The minor children responded to the advertisements promoted by Jamster and VeriSign and thereafter they were charged for mobile content (i.e. ringtones, wallpaper, text messages, etc.) on the telephone bills issued by Wireless Providers.

Plaintiffs seek to represent a class of consumers who were wrongfully charged for mobile content by Content Providers and subsequently billed for those charges by Wireless Providers. (FACC ¶¶ 58-59). Plaintiffs allege that the Jamster and VeriSign advertisements used the word "free" and did not disclose any additional charges, including text messaging charges. A typical transaction involved the minor viewing an advertisement containing pictures of cell phones with flashing lights, rap music, voices, and sparkling effects. (FACC ¶73). The advertisement provided a number in large print that "shined and sparkled for consumers to text message in order to receive a ring tone." Id. The "only dominant and legible text in the advertisement was the number to text to receive the ring tone or wallpaper. Any other text that may have appeared in the advertisement was illegible during the television advertisement and in small print, hidden amongst the lights that were moving and flashing on the screen." (FACC ¶ 74).

The FACC also alleges the steps taken by various Plaintiffs to rectify the alleged wrongful charges received from Content Providers. For example, after Plaintiff Cervantes' 16 year old daughter responded to an advertisement for free ringtones Plaintiff began receiving charges for products and services that "Cervantes did not order or agree to have included on her account." (FACC ¶96). Cervantes called AT&T on March 10, 2005 and requested that all text messages, internet and downloading services be restricted. She was informed by an AT&T representative that the charges could not be blocked, (FACC ¶97), and that she should contact Jamster directly. She called Jamster in April 2005 and, after speaking with three different representatives over 45 minutes, she received a commitment from Jamster to credit her account. The credits never appeared on AT&T's billing statement. (FACC ¶99). On May 13, 2005 she telephonically contacted AT&T to dispute further content charges by m-Qube. (FACC ¶ 100). On June 22, 2005 Plaintiff Cervantes again contacted AT&T and received a further credit for content charges. She again requested that AT&T stop billing for content changes and she was informed that AT&T "did not know how to stop the charges." (FACC ¶101). The next month, July 2005, Plaintiff Cervantes received additional content charges and she again spoke with an AT&T representative. Plaintiff was informed that she would have to call every month to dispute the charges. Id.

Plaintiffs allege that Defendants share revenue from customers "for unauthorized and undisclosed mobile content." (FACC ¶46). AT&T allegedly "knew about the fraudulent and misleading nature of the Jamster advertising because," on January 31, 2005, a consumer wrote to AT&T complaining that he had been wrongfully billed for Jamster charges. (FACC ¶121(a). While this portion of the FACC alleges that Content Providers received numerous complaints from consumers, state consumer protection agencies and Attorneys General regarding the allegedly misleading nature of the advertisements, (FACC ¶¶121), this portion of the FACC does not allege that T-Mobile ever received a consumer complaint.

The FACC's Claims

Based upon the above generally described conduct, Plaintiffs allege 11 claims for fraud and deceit, negligent misrepresentation, violation of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), violations of the Federal Telecommunications Act ("FTA") and Truth-In-Billing Act ("TIBA"), unjust enrichment, breach of contract, violations of California consumers Legal Remedies Act ("CLRA"), violation of Cal. Pub. Util. Code Section 2890, false advertising in violation of Cal. Bus & Prof §17500, unfair competition in violation of Cal. Bus & Prof §17200 et seq., and unfair competition by contracting with minors in violation of Cal. Bus & Prof §17200 et seq.

Procedural History of the Coordinated Complaints

On March 8, 2006, the court stayed the present action pending appeal of this court's order denying Wireless Providers motion to compel arbitration. (Docket No. 137). Plaintiffs filed the CCAC on July 1, 2008 and, on December 9, 2008, the court granted in part and denied in part Defendants' motions to dismiss and to strike the Coordinated Class Action Complaint ("CCAC"). The court also granted leave to amend and Plaintiffs filed the FACC on January 8, 2009. The present motions follow.

DISCUSSION

1. Defendants' Motions to Dismiss the RICO Claim

A. Legal Standards

1. Rule 12(b)(6)

Federal Rule of Civil Procedure 12(b)(6) dismissal is proper only in "extraordinary" cases. United States v. Redwood City, 640 F.2d 963, 966 (9th Cir. 1981). Courts should grant 12(b)(6) relief only where a plaintiff's complaint lacks a "cognizable legal theory" or sufficient facts to support a cognizable legal theory. Balistreri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir. 1990). Courts should dismiss a complaint for failure to state a claim when the factual allegations are insufficient "to raise a right to relief above the speculative level." Bell Atlantic Corp v. Twombly, __550 U.S. __, 127 S.Ct. 1955 (2007) (the complaint's allegations must "plausibly suggest[]" that the pleader is entitled to relief); Ashcroft v. Iqbal, - -S.Ct. - -, 2009 WL 1361536 (May 18, 2009) (under Rule 8(a), well-pleaded facts must do more than permit the court to infer the mere possibility of misconduct). The defect must appear on the face of the complaint itself. Thus, courts may not consider extraneous material in testing its ...


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