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I.B. ex rel. Fife v. Facebook, Inc.

United States District Court, N.D. California

October 25, 2012

I.B., by and through his Guardian ad Litem Bryan FIFE, et al., Plaintiffs,
v.
FACEBOOK, INC., Defendant.

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John R. Parker, Jr., Curtis Brooks Cutter, Kershaw Cutter & Ratinoff, LLP, Sacramento, CA, Benjamin Gordon Edelman, Attorney of the Law, Brookline, MA, for Plaintiffs.

Kristine Anne Van Hamersveld, Whitty Somvichian, Cooley LLP, San Francisco, CA, for Defendant.

ORDER GRANTING IN PART AND DENYING PART MOTION TO DISMISS; DENYING MOTION TO STRIKE

CLAUDIA WILKEN, District Judge.

Defendant Facebook, Inc. moves to dismiss the Second Amended Complaint (2AC). Plaintiffs I.B., by and through his guardian ad litem Bryan Fife, Glynnis Bohannon, J.W., by and through his guardian ad litem Steven Wright, and Julie Wright oppose the motion. The Court held a hearing on Facebook's motions on August 30, 2012. For the reasons discussed below, the Court grants the motion to dismiss the claims brought under California Family Code section 6701(a), the claims by parents Bohannon and Wright to disaffirm the minors' contracts, the CLRA claim, and the UCL claims alleging violations of the CLRA and MTA, without leave to amend; grants the motion to dismiss the EFTA claim and the claims brought under the unlawful and fraudulent prongs of the UCL, with leave to amend; and denies the motion to dismiss the claims brought by the minor Plaintiffs to disaffirm their contracts pursuant to California Family Code sections 6701(c) and 6710, and the claims alleging violation of public policy protecting minors under the unfair prong of the UCL. The Court further denies as premature Facebook's motion to strike the class allegations.

BACKGROUND

The following facts are alleged in the 2AC.

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Facebook operates the largest online social network in the world and provides a payment system, Facebook Credits, for users to make purchases within the Facebook website. 2AC ¶ 2. Facebook permits minors to register on its website and use its service. Id. ¶ 3.

In October 2011, Plaintiff I.B., a minor, asked his mother, Plaintiff Glynnis Bohannon, for permission to spend twenty dollars on his Facebook account using Bohannon's Wells Fargo Master Card, in exchange for twenty dollars in cash. 2AC ¶ 25. I.B. purchased Facebook Credits from Facebook for use in " Ninja Saga." Id. Subsequently, without any notice that his mother's credit card information had been stored by Facebook and the Facebook Credits system, or that his mother's credit card information was being used again after the initial twenty dollar purchase, I.B. made ingame purchases for which he thought he was spending virtual, ingame currency. Id. As a result, Bohannon's credit card was charged repeatedly and without her consent, and the charges totaled several hundred dollars. Id. Upon discovering the transactions, Bohannon tried to obtain a refund from Facebook by leaving a phone message at a phone number listed for Facebook but received no response. 2AC ¶ 27.

In December 2011, Plaintiff J.W., a minor, began to make a series of charges via Facebook Credits using the debit card of his parents, Plaintiff Julie Wright and Steven Wright, which J.W. had taken from his parents without their permission. 2AC ¶ 29. The total charges exceeded one thousand dollars. Id. On or about February 8, 2012, after learning of these charges, Steven Wright submitted a complaint to Facebook as to the " 20 debits directly to my bank account," noting that neither he nor his wife (the only authorized users of the debit card's account) had authorized any such charges, and requesting a refund. Id. ¶ 31. On February 10, 2012, a Facebook " Payment Operations" representative replied to Steven Wright to say he " refunded the charges to your [Wright's] funding instrument." Id. However, on April 13, 2012, Steven Wright noticed that only $59.90 had been refunded and contacted Facebook to request a refund of the full amount at issue. Id. In the course of further correspondence, Facebook responded that " we are not able to process your refund request at this time ... because it has been more than 90 days since you completed the stated transaction(s)." Id. As of the date of filing the 2AC, the Wrights have not been reimbursed $999.30 charged for transactions originating from their minor child's Facebook account. Id.

On February 23, 2012, Plaintiff Bohannon filed this action individually and on behalf of her minor child, I.B., against Facebook in the Superior Court for the County of Santa Clara. Plaintiffs amended the complaint on March 8, 2012, to assert classwide claims against Facebook. Plaintiffs served Facebook on March 19, 2011, and Facebook removed the putative class action on April 17, 2012. Notice of Removal (Docket No. 1) at 1-2.

Plaintiffs filed the 2AC on May 31, 2012, on behalf of the proposed class: " All Facebook users who have purchased Facebook Credits from January 1, 2011 to the date on which a class is certified (‘ the MTA Class')." 2AC ¶ 37. The 2AC identifies three proposed subclasses: (a) the " Minor Subclass" of " [a]ll Facebook users who are or were minor children according to Facebook's own records, and those children's parents and guardians for the four years preceding the date on which the original complaint was filed to the date on which a class is certified; (b) the " Refund Subclass" of " [a]ll Facebook users who are or were minor children according to Facebook's

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own records, and those children's parents and guardians, who attempted to obtain a refund of a Facebook Credit transaction originating from a minor child's account for the four years preceding the date on which the original complaint was filed to the date on which a class is certified; " and (c) the " EFTA Subclass" within the Refund Subclass consisting of " [a]ll members of the Refund Subclass whose payment to Facebook was made from a debit card or PayPal account linked to a U.S.-based bank from May 31, 2011 to the date on which a class is certified." 2AC ¶¶ 39-41. The 2AC asserts the following class claims against Facebook: (1) Declaratory Judgment; (2) violation of the California Consumer Legal Remedies Act, Cal. Civ. Code § 1750 et seq. (CLRA); (3) violation of the Unfair Competition Law, Cal. Bus. & Prof. Code § 17200 et seq. (UCL); and (4) violation of the Electronic Funds Transfer Act, 15 U.S.C. § 1693 et seq. (EFTA).

Facebook moves to dismiss the 2AC for failure to state a claim and to strike the class allegations. Plaintiffs oppose the motions.

LEGAL STANDARD

I. Motion to Dismiss for Failure to State a Claim

A complaint must contain a " short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a). On a motion under Rule 12(b)(6) for failure to state a claim, dismissal is appropriate only when the complaint does not give the defendant fair notice of a legally cognizable claim and the grounds on which it rests. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). In considering whether the complaint is sufficient to state a claim, the court will take all material allegations as true and construe them in the light most favorable to the plaintiff. NL Indus., Inc. v. Kaplan, 792 F.2d 896, 898 (9th Cir.1986). However, this principle is inapplicable to legal conclusions; " threadbare recitals of the elements of a cause of action, supported by mere conclusory statements," are not taken as true. Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citing Twombly, 550 U.S. at 555, 127 S.Ct. 1955).

When granting a motion to dismiss, the court is generally required to grant the plaintiff leave to amend, even if no request to amend the pleading was made, unless amendment would be futile. Cook, Perkiss & Liehe, Inc. v. N. Cal. Collection Serv. Inc., 911 F.2d 242, 246-47 (9th Cir.1990). In determining whether amendment would be futile, the court examines whether the complaint could be amended to cure the defect requiring dismissal " without contradicting any of the allegations of [the] original complaint." Reddy v. Litton Indus., Inc., 912 F.2d 291, 296 (9th Cir.1990).

Although the court is generally confined to consideration of the allegations in the pleadings, when the complaint is accompanied by attached documents, such documents are deemed part of the complaint and may be considered in evaluating the merits of a Rule 12(b)(6) motion. Durning v. First Boston Corp., 815 F.2d 1265, 1267 (9th Cir.1987).

II. Motion to Strike

Under Federal Rule of Civil Procedure 12(f), a court may strike from a pleading " any redundant, immaterial, impertinent or scandalous matter." The purpose of a Rule 12(f) motion is to avoid spending time and money litigating spurious issues. Fantasy, Inc. v. Fogerty, 984 F.2d 1524, 1527 (9th Cir.1993), reversed on other grounds, 510 U.S. 517, 114 S.Ct. 1023, 127 L.Ed.2d 455 (1994). A matter is immaterial if it has no essential or important relationship to the claim for relief

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plead. Id. A matter is impertinent if it does not pertain and is not necessary to the issues in question in the case. Id.

DISCUSSION

I. Request for Judicial Notice

Facebook asks the Court to take judicial notice of screen shots of webpages from Facebook's website on the grounds that they were specifically referred to in the 2AC or illustrate the allegations in the amended complaint. These include Facebook's Statement of Rights and Responsibilities, Payment Terms, Help Center pages and payment screens in the game Ninja Saga. Plaintiffs object to these exhibits. Facebook's manager of Payment Operations, Bill Richardson, provides a supporting declaration concerning the public availability of these webpages. However, Mr. Richardson states that the screen shots were viewed and printed between April 13, 2012 and May 10, 2012, and his declaration does not indicate whether these webpages were in effect or available at the time of the events alleged in the 2AC. Richardson Decl. at 2-4 nn. 1-6. In support of Facebook's reply, Mr. Richardson states that Facebook did not " materially alter" the Ninja Saga payment pages between October 2011 and May 2012. Suppl. Richardson Decl. ¶ 3. However, whether the minor Plaintiffs I.B. and J.W. would have viewed these particular payment pages is subject to reasonable dispute. Facebook's request for judicial notice is therefore denied. See In re Easysaver Rewards Litig., 737 F.Supp.2d 1159, 1168 (S.D.Cal.2010) (denying request for judicial notice where " [t]he Court finds that whether these are the webpages Plaintiffs would have viewed during their online transactions is subject to ‘ reasonable dispute.’ " ) (citing Fed.R.Evid. 201).

Plaintiffs request that the Court take judicial notice of screen shots of webpages from Facebook's website referring to " App Basics," " What Are Facebook Credits?," " Facebook Developer Payment Terms," and " Credits Tutorial." Plaintiffs submit these exhibits as statements made by Facebook in the ordinary course of business. Pls.' RJN at 2. Facebook does not object to these exhibits, and these matters can be " accurately and readily determined from sources whose accuracy cannot reasonably be questioned." Fed.R.Evid. 201(b).

II. Sufficiency of Allegations

A. Disaffirmance of Minors' Contracts

In their first claim for declaratory relief, Plaintiffs seek a determination by the Court that the contracts between Facebook and the members of the proposed Minor Subclass are void or voidable. 2AC ¶ 72. Facebook moves to dismiss this claim on the ground that minors cannot disaffirm contracts when they have already received the expected benefits of the contract. Plaintiffs contend that under the doctrine of infancy in California, the minor Plaintiffs I.B. and J.W. have the right to disaffirm their purchases of Facebook Credits, regardless of whether they return those Credits.

1. Void Contracts Prohibited by Family Code Section 6701

California law defines minors as all persons under eighteen years of age, Cal. Fam. Code § 6500, and restricts minors from entering certain contracts:

A minor cannot do any of the following:

(a) Give a delegation of power.
(b) Make a contract relating to real property or any interest therein.
(c) Make a contract relating to any personal property not in the immediate possession or control of the minor.

Cal. Fam. Code § 6701. The contracts enumerated in section 6701 are void and

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no act of disaffirmance is required to avoid them. E.K.D. ex rel. Dawes v. Facebook, Inc., 885 F.Supp.2d 894, 2012 WL 3242392 (S.D.Ill.) (citing Burnand v. Irigoyen, 30 Cal.2d 861, 186 P.2d 417 (1947)).

a. Delegation of Power

Plaintiffs allege that the minor Plaintiffs purported to delegate to Facebook the power to withdraw funds from their parents' credit cards or bank accounts in connection with their purchases of Facebook Credits. 2AC ¶ 64. Plaintiffs contend that minors are not authorized to delegate such power and that the minors' ...


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