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Joel Broida, An Individual On Behalf of Himself, and On Behalf of All Persons Similarly Situated v. Sirius Xm Radio

November 30, 2011


The opinion of the court was delivered by: Honorablelarryalanburns United States District Judge


I. Introduction

Joel Broida claims that he signed up for a two-year Sirius XM plan expecting to pay $227.05 and was instead billed $249.99. His expectation was rooted in an advertisement, which Broida has yet to produce, that customers would receive "5 months free" if they signed up for twenty-four months.*fn1 He alleges just one cause of action-a violation of New York General Business Law § 349(a), which provides that "[d]eceptive acts or practices in the conduct of any business, trade, or commerce or in the furnishing of any service in this state are . . . unlawful." He brings this case as a putative class action.

Now pending is Sirius XM's motion to dismiss. Front and center is the question whether Broida, who is a Colorado resident, can even avail himself of New York's consumer protection laws on the facts of this case. The Court finds he cannot, and DISMISSES this case WITH PREJUDICE.

II. Legal Standard

A rule 12(b)(6) motion to dismiss for failure to state a claim challenges the legal sufficiency of a complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). In considering such a motion, the Court accepts all allegations of material fact as true and construes them in the light most favorable to Broida. Cedars-Sinai Med. Ctr. v. Nat'l League of Postmasters of U.S., 497 F.3d 972, 975 (9th Cir. 2007). To defeat a 12(b)(6) motion, a complaint's factual allegations needn't be detailed, but they must be sufficient to "raise a right to relief above the speculative level . . . ." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). However, "some threshold of plausibility must be crossed at the outset" before a case can go forward. Id. at 558 (internal quotations omitted). 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." Ashcroft v. Iqbal, 556 U.S. -, 129 S.Ct. 1937, 1949 (2009). "The plausibility standard is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id.

While the Court must draw all reasonable inferences in Broida's favor, it need not "necessarily assume the truth of legal conclusions merely because they are cast in the form of factual allegations." Warren v. Fox Family Worldwide, Inc., 328 F.3d 1136, 1139 (9th Cir. 2003) (internal quotations omitted). In fact, the Court does not need to accept any legal conclusions as true. Iqbal, 129 S.Ct. at 1949. A complaint does not suffice "if it tenders naked assertions devoid of further factual enhancement" (Id. (internal quotations omitted)), nor if it contains a merely formulaic recitation of the elements of a cause of action. Bell Atl. Corp., 550 U.S. at 555.

III. Discussion

In Goshen v. Mut. Life Ins. of N.Y. the Court of Appeals of New York addressed the "territorial reach" of § 349 and concluded that "the transaction in which the consumer is deceived must occur in New York." 98 N.Y.2d 314, 324 (N.Y. 2002). Sirius XM cites Goshen and runs with it: Broida does not allege, and probably cannot allege, that he was deceived in New York, and so his claim under § 349 must be dismissed.

Broida's argument in response is that he was deceived by an advertisement, and that advertisement-the deceptive transaction-originated at Sirius XM's New York headquarters. It's irrelevant that Broida is a Colorado resident himself and wasn't actually in New York when he was deceived. This argument can't be squared with the holding in Goshen or, for that matter, the holdings in subsequent cases interpreting Goshen.

The plaintiff in Goshen was a Florida resident who purchased an insurance policy in Florida from the representative of a New York-based insurance company. He alleged that the representative's sales presentation was deceptive and brought a claim (in New York) under § 349. "Plainly," the Court of Appeals held, "for purposes of section 349, any deception took place in Florida, not New York." Id. at 326. The phrase "deceptive acts or practices" in § 349 "is not the mere invention of a scheme or marketing strategy, but the actual misrepresentation or omission to a consumer." Id. at 325. Broida is simply wrong to insist that it is the locus of the "transaction" rather than the actual deception that matters. "Thus, to qualify as a prohibited act under the statute, the deception of a consumer must occur in New York." Id. This is not to say, however, that the consumer must be a New York resident. The Court of Appeals noted expressly that its analysis did not turn on the residency of the parties. Id.

This Court applied Goshen in two cases, Makaeff v. Trump University, LLC, 2011 WL 1872886 (S.D. Cal. May 16, 2011) and In re Hydroxycut Mktg. and Sales Practices Litig., 2010 WL 1734948 (S.D. Cal. Apr. 26, 2010). The plaintiffs in Makaeff-a putative class action like this one-alleged that they were duped into purchasing real estate seminars by Trump University, a New York company, and they brought a claim under § 349. This Court dismissed it. The plaintiffs took courses in Florida and Pennsylvania, which the Court found to be an out-of-state transaction that could not support a claim under § 349. Makaeff at *2. It didn't matter, either, that Trump University "used its New York address to send correspondence to Plaintiffs and putative class members nationwide." Id. The Hydroxycut case is legally similar. The plaintiff alleged that he was injured by a dietary supplement due to deceptive information on the supplement's packaging. This Court dismissed his claim under § 349 because he purchased the supplement in Michigan and was allegedly deceived on the spot. Relying on Goshen, it explained that "[t]he fact that defendants may have developed the products or hatched the marketing plans in New York is not determinative." Id. at *4. See also Kaufman v. Sirius XM Radio, Inc., 751 F.Supp.2d 681, 688 (S.D.N.Y. 2010) ("In short, Plaintiffs have alleged many signals emanating from New York, but have failed to plead the essential act that must have transpired within the boundaries of the state to maintain a viable suit under GBL § 349: that the deception they allege having experienced occurred in New York.").

In light of Goshen, Makaeff, Hydroxycut, and Kaufman, it is hard to see how Broida can plead a successful § 349 claim here. He does not allege that he viewed the mysterious advertisement in New York and was actually deceived there, and it's far more likely that he was deceived in Colorado, where he lives. Broida's best argument is that the allegedly deceptive advertisement originated in New York and his subscription payment was processed there, but each of the above cases firmly rejects hitching a claim under § 349 to the location of a defendant's corporate operations where the allegedly deceptive conduct originated. Broida's claim under § 349 therefore fails, and it is DISMISSED WITH PREJUDICE. Broida has already amended his complaint once, and it appears that any further amendments would be futile in curing the defect with respect to stating a claim under § 349.*fn2

The Court should also address Broida's argument that the New York choice-of-law clause in his Customer Agreement entitles him to bring a claim under ยง 349. That clause reads: "The interpretation and enforcement of these Terms shall be governed by the rules and regulations of the State of New York and other applicable federal laws." (Dkt. No. 14-2 at Ex. A, J.5.) Broida's argument is that Sirius XM will pull a kind of legal bait-and-switch. If it is sued for deceptive practices by an out-of-New York customer, it will insist that the suit be brought under New York law, and then it will argue that New York law offers no protection. Sirius has the better argument here. The choice-of-law clause relates to the interpretation and enforcement of the terms ...

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