The opinion of the court was delivered by: Hon. Michael M. Anello United States District Judge
ORDER: GRANTING IN PART AND DENYING IN PART DEFENDANT PROVIDE COMMERCE'S MOTION TO DISMISS [Doc. No. 34] DENYING DEFENDANT ENCORE MARKETING INTERNATIONAL'S MOTION TO DISMISS [Doc. No. 38] GRANTING PLAINTIFFS' MOTION TO STRIKE [Doc. No. 48]
Before the Court are separate motions to dismiss by the two Defendants in this class action consumer rights case. The Court submitted the motions on the written briefs. Local Civ. R. 7.1(d)(1). For the reasons stated below, the Court DENIES the motion to dismiss by Defendant EMI, and GRANTS IN PART and DENIES IN PART the motion by Defendant Provide.
I. FACTUAL ALLEGATIONS IN CONSOLIDATED COMPLAINT
The Consolidated Complaint alleges that Defendant Provide-Commerce, Inc. (hereinafter "Provide" or "Provide-Commerce") operates several internet businesses, including ProFlowers.com. Customers order fresh flowers, bouquets, and plants on the ProFlowers' website and pay for the purchase with a credit or debit card.*fn1 The four named Plaintiffs are Josue Romero, Deanna Hunt, Kimberly Kenyon, and Gina Bailey. Each consumer purchased flowers on Provide's website between February and September 2009 with a credit or debit card.
Plaintiffs allege that Provide, as a part of its "revenue generating efforts . . . routinely and fraudulently transmits its consumers' credit card, debit card and/or Paypal information ("Private Payment Information") to its third party marketing partners." Compl. ¶ 1. Plaintiffs name Defendant Regent Group, Inc. doing business as Encore Marketing International (hereinafter "EMI" or "Encore") as Provide's marketing partner. Plaintiffs allege EMI "fraudulently charge[s] the cards or accounts without permission under the guise that" Provide's customers have "supposedly joined a savings program known as EASYSAVER Rewards, which Encore manages on Provide-Commerce's behalf." Id. "[T]he EASYSAVER Rewards program does not provide the promised savings, benefits products or services and is nothing more than a sham." Id.
Plaintiffs allege that Provide leads customers to believe they will receive a complimentary $15.00 gift code to use on their next flower order as a thank you gift. After Plaintiffs completed the purchase of flowers on Provide's website by providing their personal and payment information, "a window popped up that thanked Plaintiffs and Class Members for their order and offered a gift code for $15.00 off their next purchase at ProFlowers. The window also contained a link for Plaintiffs and Class Members to click on to claim the gift code." Id. ¶ 19. Plaintiffs contend the pop-up window is part of an intentionally misleading and deceptive scheme, jointly orchestrated by Provide and EMI.
"When customers try to obtain their 'gifts,' they are directed to a webpage operated by Encore." Id. ¶ 2. Plaintiffs quote the webpage, in all capital letters, as stating: "CLAIM YOUR GIFT CODE BELOW! JUST ENTER YOUR E-MAIL ADDRESS AND ZIP CODE AS YOUR ELECTRONIC SIGNATURE AND CLICK THE GREEN ACCEPTANCE BUTTON BELOW TO ACTIVATE YOUR EASYSAVER REWARDS MEMBERSHIP AS DESCRIBED IN THE OFFER DETAILS ON THIS PAGE." Id.
Each named Plaintiff had a slightly different experience.*fn2 Plaintiffs Romero and Kenyon allege that they closed the pop-up window by clicking the "X" on the top right corner without entering their e-mail address and without clicking the acceptance button. Id. ¶ 20 & 23. Plaintiff Bailey does not remember the pop-up window, but alleges that "it is her general practice to always close pop-ups." Id. ¶ 25. By contrast, Plaintiff Hunt responded to the pop-up window by entering her e-mail address and clicking the acceptance button. Hunt, however, "did not even realize that she had been redirected away from ProFlowers' website to Encore's website due to the deceptive nature of EASYSAVER Rewards marketing scheme." Id. ¶¶ 28, 31. Rather, she believed the information was necessary to complete her ProFlowers transaction. All Plaintiffs state they did not want to join EASYSAVER Rewards, yet they were immediately charged an activation fee, and thirty days later, they were charged a monthly membership fee. Id. ¶¶ 20-30. These complaints are mirrored by numerous unidentified consumers who posted comments on the internet. Id. ¶ 36.
All Plaintiffs state they never received any correspondence from the EasySaver program let alone any benefits, savings, or rewards. Id. ¶¶ 21, 24, 26, 29.
Efforts to have the charges reversed were unsuccessful. For example, when Plaintiff Romero contacted ProFlowers, the representative "indicated she had been receiving numerous calls about unauthorized charges by Encore via the EASYSAVER Rewards Program." Id. ¶ 22. Plaintiff Bailey closed her bank account to stop the unauthorized charges. Id. ¶ 27.
Plaintiffs allege the marketing practice is deceptive because it "unwittingly" enrolls customers. The EasySaver Rewards offer does not refer to charges for membership, does not disclose that Provide will share the customer's financial information with EMI, and does not require the re-entry of that financial information. Id. ¶¶ 31-32.
The Complaint recites that a Senate Committee investigated similar marketing practices that abuse a consumer's trust in "familiar" websites. Id. ¶ 38. While the pop-up offer appears to be related to the online purchase, consumers unwittingly enter an ongoing financial relationship with an unfamiliar company. Id. The "misleading and confusing" tactic allows the retailer to automatically transfer the consumer's credit and debit card information without requiring the customer to re-enter that financial data on the unfamiliar website. Id.
Plaintiffs further allege that the "unconscionable terms" of the Offer Details include the consumers' consent to allow Provide to transmit their personal and payment information to EMI and to permit EMI to immediately bill a $1.95 activation charge and thereafter a monthly membership fee of $14.95. Id. ¶ 19. The Consolidated Complaint quotes the Offer Details as follows:
Activate your membership in EASYSAVER Rewards to claim your $15 Gift Code good for your next purchase and start saving and enjoying all the benefits and access for the next 30 days for just a $1.95 activation fee billed by EASYSAVER Rewards to the credit card or PayPal account you just entered during your ProFlowers purchase. Please note, by entering your e-mail address and zip code ("Enrollment Details") and clicking the Green Acceptance Button, your enrollment Details as well as the following information from your most recent ProFlowers order will be transmitted securely through PGP and SSI encryption to EMI, the EASYSAVER Rewards Administrator, to be stored and to secure and administer your membership: your name, credit card information or PayPal billing ID number, billing address, billing telephone number and order ID number. To continue after the introductory trial period, do nothing and all the great benefits and savings will automatically continue for just $14.95 per month, billed by EASYSAVER Rewards to the same credit card or PayPal account where applicable. You may cancel at anytime, with no further obligation, just by calling the toll-free number contained in the membership information provided to you. And, you keep the $15 Gift Code just for trying EASYSAVER Rewards for 30 days.
The Consolidated Complaint contains fourteen causes of action on theories of contract, tort, and statutory liability. Provide is named in twelve claims and EMI is named in five.
Plaintiffs allege that Provide and EMI engage in the unlawful conduct together (either by aiding and abetting, agency, joint venture, or conspiracy). Id. ¶¶ 14-16.
II. STANDARD OF REVIEW AND EXTRINSIC EVIDENCE
A. Pleading Standards on Motion to Dismiss
"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. 1988). The pleading must contain "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).
"All allegations of material fact are taken as true and construed in the light most favorable to the nonmoving party." Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 338 (9th Cir. 1996). The Court is not obligated to accept every conclusory allegation as true; rather, it "will examine whether conclusory allegations follow from the description of facts as alleged." Holden v. Hagopian, 978 F.2d 1115, 1121 (9th Cir. 1992) (citation omitted).
When a complaint contains allegations of fraud, Rule 9(b) requires that the circumstances be stated with particularity. Fed. R. Civ. P. 9(b). Generally, this requires plaintiff to state the time, place, and specific content of the representations and to identify the parties. Odom v. Microsoft Corp., 486 F.3d 541, 553 (9th Cir. 2007).
B. Motion to Strike Documents Outside the Complaint
In ruling on a Rule 12(b)(6) motion, the Court is limited to the facts alleged in the complaint and may not consider extrinsic evidence. Two exceptions exist.
First, the Court may consider authenticated documents attached to or incorporated by reference into the complaint. United States v. Ritchie, 342 F.3d 903, 907-08 (9th Cir. 2003); In re Silicon Graphics Inc. Sec. Litig., 183 F.3d 970, 986 (9th Cir. 1999), superceded by statute on other grounds; Townsend v. Columbia Operations, 667 F.2d 844, 848 (9th Cir. 1982). The rule applies to documents that form the basis of a plaintiff's case or documents that are quoted extensively on the theory that such documents are not truly "outside" the complaint. Branch v. Tunnell, 14 F.3d 449, 453 (9th Cir. 1994). One purpose of the rule is to prevent a plaintiff from quoting "an isolated statement from a document" in the complaint, when the complete document refutes the allegations. In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997) (consideration of entire document made clear that isolated statement was not fraudulent); accord Parrino v. FHP, Inc., 146 F.3d 699, 705-06 (9th Cir. 1998) (applying rule to documents "critical to plaintiff's claims" to prevent "plaintiffs from surviving a Rule 12(b)(6) motion by deliberately omitting references to documents upon which their claims are based."). However, the rule is limited to a document "whose authenticity no party questions." Branch, 14 F.3d at 453.
Second, a Court may consider adjudicative facts that are subject to judicial notice. Lee v. City of Los Angeles, 250 F.3d 668, 688-89 (9th Cir. 2001); Fed. R. Evid. 201 ("A judicially noticed fact must be one not subject to reasonable dispute in that it is . . . capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned."). Judicial notice is proper only when the matter is "'beyond reasonable controversy.'" Rivera v. Philip Morris, Inc., 395 F.3d 1142, 1151 (9th Cir. 2005) (quoting Fed. R. Evid. 201 advisory committee's note). A district court cannot take judicial notice of a fact that is subject to "reasonable dispute" simply because it is contained within the public record. Lee, 250 F.3d at 689-90 (for example, court may take judicial notice of existence of court opinion, but not "'the truth of the facts recited therein.'") (citation omitted).
1. Notice of Violation Letter
Defendant Provide attached a copy of a letter, dated September 24, 2009, in which Plaintiffs notified the Defendants of the alleged violation of California's Consumer Legal Remedies Act. Norton Decl. Ex. A. Plaintiffs do not oppose the use of the letter.
Provide titled its request as one for judicial notice, but the body of its brief argues that the notice letter can be considered because Plaintiffs rely on it in their Complaint. Provide Br. at 23. The Court construes Provide's request as seeking to introduce the letter in this motion to dismiss by the incorporation by reference doctrine. The Complaint refers to this notice. Compl. ¶ 140. In addition, Plaintiffs attached the letter as a Exhibit B to their original complaint. Accordingly, the Court will consider the letter as being incorporated into the pleading. Silicon Graphics, 183 F.3d at 986.
2. Screen Shots of Web Pages*fn3
Similarly, Defendant EMI submitted five versions of EMI's enrollment screen.*fn4 Carson Decl. Ex. 1. Plaintiffs move to strike these exhibits. Fed. R. Civ. P. 12(f). EMI argues the Court can consider the documents under the incorporation by reference doctrine because the Complaint quotes language from the offer details and the "claim your gift code below" screen of the EASYSAVER Rewards sign up screen. Compl. ¶ 19. EMI's exhibits are supported by the declaration of EMI's Internet Marketing Director, Lee Carson, who states that the screen was in effect at the time Plaintiff Hunt enrolled in the EASYSAVER Rewards program in May 2009. Carson Decl. ¶ 2. He provided five versions of this screen because "the picture at the top of the screen automatically rotates through different images which generally set forth some of the membership benefits offered through the EASYSAVER Rewards program." Id. ¶ 3.
The Court DENIES the request to take judicial notice of the eleven screenshots submitted by Provide. In re Poirier, 346 B.R. 585, 588 (D. Mass. 2006) (taking judicial notice of fact that party maintained website, but not of changing content on webpage); see generally Rivera, 395 F.3d at 1151 ("Because the effect of judicial notice is to deprive a party of an opportunity to use rebuttal evidence, cross-examination, and argument to attack contrary evidence, caution must be used in determining that a fact is beyond controversy under Rule 201(b).") (quotation and citation omitted). The Court finds that whether these are the webpages Plaintiffs would have viewed during their online transactions is subject to "reasonable dispute," Fed. R. Evid. 201, as Rabinovitz states that the pages were changed, modified, and revised over time.*fn5 Decl. Rabinovitz ¶¶ 2-3. It would be inappropriate for the Court to compare and contrast the several versions of the webpages to determine if there are any material differences in the language. That exercise is best left to the parties in the context of a summary judgment motion.
Although judicial notice is not the appropriate avenue to introduce Provide's exhibits, the Court construes Provide's request as one to incorporate documents into the complaint by reference because Provide makes this argument in the body of its brief. EMI also expressly relies on this doctrine for the five pages it submitted with the Carson declaration. The incorporation by reference doctrine may apply here, because Plaintiffs quote extensively from Provide's and EMI's webpages in their Complaint, e.g., Compl. ¶¶ 19, 32, 50-59, 92-101, and the language is critical to most, if not all, of Plaintiffs' claims. Branch, 14 F.3d at 453.
Plaintiffs argue the Court should not consider the various screenshots based on the law and the facts. Plaintiffs object on the ground that the screenshots are not properly authenticated. Information from the internet does not necessarily bear an indicia of reliability and therefore must be properly authenticated by affidavit. Victaulic Co. v. Tieman, 499 F.3d 227, 236 (3d. Cir. 2007); see In re Homestore.com, Inc. Sec. Litig., 347 F. Supp. 2d 769, 782-83 (C.D. Cal. 2004) (in summary judgment motion, requiring a declaration from someone with personal knowledge to authenticate printouts from website). Plaintiffs state they are not in the position to determine whether the exhibits are authentic representations of the webpages. Plaintiffs assert their right to conduct discovery into the circumstances of their production and completeness.
Defendant Provide argues that Rabinovitz's sworn declaration is sufficient to authenticate the webpages, and EMI argues that Carson's declaration serves that purpose for its webpages. Fed. R. Evid. 901(b)(1). Defendants ask the Court to reject Plaintiffs' objection to the authentication of the exhibits as specious.
The law allows a court to consider extrinsic evidence in a motion to dismiss when it is incorporated into the complaint, however, the rule expressly states that the material must be beyond dispute. Knievel v. ESPN, 393 F.3d 1068, 1076 (9th Cir. 2005) (incorporation by reference doctrine applies to internet pages if "the parties do not dispute the authenticity of the document"); Parrino, 146 F.3d at 705-06 & n.4 (court may consider "a document the authenticity of which is not contested" when it is integral to plaintiffs' claims). In this instance, the requirements of the rule have not been met because Plaintiffs challenge the authenticity of the screenshots. Hotel Employees & Restaurant Employees Local 2 v. Vista Inn, 393 F. Supp. 2d 972, 979 (N.D. Cal. 2005) (declining to incorporate an extrinsic document when plaintiff raised evidentiary objection). Plaintiffs' objection is not frivolous. Plaintiffs should have an opportunity to question Carson and Rabinowitz on the thoroughness of the process they used to capture changes to the webpage (especially since it is not clear if they were the employees who actually input those changes) as well as how they determined that the exhibits reflect the webpage on the dates that the named Plaintiffs visited the website. See supra footnote 5.
Plaintiffs' factual argument relates to the dynamic nature of internet shopping. Defendants' exhibits present single pages whereas consumers who accessed the site were exposed to a variety of pages with links and scroll bars. See Flentye v. Kathrein, 485 F. Supp. 2d 903, 917 (N.D. Ill. 2007) (declining to consider defendant's offer of webpages with disclaimers that contradicted allegations in complaint because there was no indication the printouts were the entirety of site, and discovery required to authenticate documents and eliminate any ambiguity). Plaintiffs also state that the website had an audio component that gave verbal instructions on how to obtain a discount on their next purchase from ProFlowers. The Court agrees, and GRANTS Plaintiffs' motion to strike the screenshots as extrinsic evidence to the motion to dismiss.
The Court appreciates Defendants' concern that Plaintiffs should not be allowed to artfully plead facts that directly contradict the content of the webpages. Parrino, 146 F.3d at 705-06; Burlington Coat Factory, 114 F.3d at 1426. The Court is, however, confident that that problem does not exist in this case. Defendants have not cited any language from their proposed exhibits that contradicts a quotation from the Complaint. EMI, in fact, states that its exhibits contain the exact language that Plaintiffs' include in paragraph 19 of the Complaint. EMI's Opp. to Mot. to Strike at 2-3 (stating that Complaint quotes webpage "verbatim," including same bold face emphasis and uppercase letters). Importantly, Plaintiffs have not hidden the weakness in their case. The Complaint reveals that the "offer details" disclosed that clicking a green "accept" button would result in an activation fee charged to the financial account the customer used to purchase flowers. Compl. ¶ 19. The parties dispute the adjectives that describe the visual appearance of this language -- Plaintiffs describe the offer details as being "in small print, in an obscure location," but Defendants describe them as being "prominently displayed" "to the immediate left" of the webpage -- but these descriptions amount to attorney argument, and they have not impacted the Court's decision on the motions to dismiss.
As discussed below, the Court was able to decide the motions to dismiss without reliance on these passages; had Plaintiffs included this information in their Complaint, the ruling would remain the same. The Court must accept the truth of Plaintiffs' allegations that they were ...