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Donald Cullen, On Behalf of Himself and All Others Similarly Situated v. Netflix

January 10, 2013

DONALD CULLEN, ON BEHALF OF HIMSELF AND ALL OTHERS SIMILARLY SITUATED, PLAINTIFF,
v.
NETFLIX, INC.,
DEFENDANT.



The opinion of the court was delivered by: Edward J. Davila United States District Judge

ORDER GRANTING DEFENDANT'S MOTION TO DISMISS THIRD AMENDED COMPLAINT [Re: Docket No. 53]

Presently before the Court is Defendant Netflix Inc.'s ("Defendant" or "Netflix") Motion to Dismiss the Third Amended Complaint filed by Plaintiff Donald Cullen ("Plaintiff" or "Cullen"). 19

See Docket Item No. 53. Having fully reviewed the parties' papers and heard oral arguments of 20 counsel, the Court will grant Defendant's motion without leave to amend for the reasons described 21 below. 22

1Background

1.1Factual Background

Defendant is a provider of both on-demand streaming video programming over the Internet 26 and flat-rate online DVD-Video and Blu-ray Disc rental-by-mail. Third Am. Compl. ¶ 6. 27 28 Customers subscribe to Netflix by paying a monthly fee, which differs based on options selected. 2

Id. Netflix began providing online streaming video programming in or around January 2008. Id. 3 Plaintiff Cullen, a deaf individual and resident of California, became a member of Netflix in May 2009. Id. ¶¶ 12, 51. Plaintiff initially subscribed to the "unlimited 3 DVD" plan but later 6 "downgrad[ed] his subscription plan based on his viewing habits." Id. ¶ 51. At the time when he 7 became a member, only a portion of Netflix's online streaming programming contained closed 8 captioning subtitles. Id. ¶ 7. 9 10 a blog entry on Netflix's website (hereinafter the "Feb. 2011 Blog Post") stating that "more than ¶ 16 & Ex. A. Hunt also wrote in the blog post, "More subtitles are being added every week and we 13 expect to get to 80% viewing coverage by the end of 2011 . . . ." Id. Plaintiff has alleged that at the time Hunt posted these statements, Netflix "did not have 30% of its streaming video library 15 captioned." Id. ¶ 31. 16 17 mid December we reached our captioning goal for 2011, when more than 80% of the hours 18 streamed in the US were of content with captions or subtitles available." Id. ¶ 25 & Ex. B. Hunt 19 went on to state the following: 20 should expect the gap on the last 20% to narrow more slowly than in 2011, since it includes a large number of titles that are rarely watched, so each hour of captioning added adds less and less to the overall metric. ¶ 7. 4

On or around February 25, 2011, Netflix's Chief Product Officer Neil Hunt ("Hunt") posted 3,500 TV episodes and movies have subtitles available, representing about 30% of viewing." Id. 12 On or around February 29, 2012, Hunt posted a blog entry on Netflix's website stating, "In Our goal is to provide more and more content with captions; however, viewers Id. Ex. B. 24 25 who Plaintiff states has been "carefully following Netflix's captioning practices for years," Id. 26

¶ 27-engaged in the following exchange in the comments section to Hunt's February 29, 2012 27 blog post: 28 The next day, on March 1, 2012, Hunt and Mike Chapman ("Chapman")-an individual Chapman: NETFLIX LIES! I just re-crunched my Netflix Captioning Stats page and as of today, if you count Number of Movies Number of TV Episodes, the count is only 51.73% of titles with added captions. If you count MINUTES of programming, that number DROPS to 46.37%. BOTH stats are no where near the 80% number. Where is the data that this *0% number comes from? (Their 30% Figure from last February 2011 was not actually reached until JUNE 2011). Stats are based on numbers from Phlixie.com who gets their data from Netflix's own API data. (see my Stats Page here: http://bit.ly/nf-cc-xls) Where are they getting their numbers? Please share this with others!

Hunt: The 80% is based on the content that people actually watch, and my specific language is precise and correct: "more than 80% of the hours streamed in the US were of content with captions or subtitles available" because we have focused our effort on the content that gets a lot of viewing. Chapman: So this is an example of Netflix's "New Math": If a 2 hour movie is watched 10,000 times and it is captioned, they count it as 20,000 hours of VIEWED captioned content. Likewise, if a 2 hour movie is watched 2 times and it is NOT captioned, they count it as 4 hours of VIEWED NON-captioned content. My method would say 50% of the 2 movies are captioned, their method would say 99.98% of the VIEWED MINUTES of the 2 movies are captioned. it took almost TWO YEARS for Netflix to get HALF of its catalog captioned. And you are saying it will take even LONGER to get the second HALF captioned?? How long does the Deaf & Hard of Hearing community have to wait for EQUAL access? another THREE years? FOUR years??

Id. Ex. B. Plaintiff has alleged that as of December 21, 2011, Netflix did not have 80% of 17 its streaming video library captioned. Id. ¶ 31. 18 19

1.2Procedural History

On March 11, 2011, Plaintiff Cullen filed a class action lawsuit in this Court. See Compl., Docket Item No. 1. Plaintiff filed a First Amended Complaint on April 9, 2011. See Docket Item 22 No. 5. On September 5, 2011 Plaintiff then filed a Second Amended Complaint on behalf of 23 himself and members of an alleged class of others similarly situated. See Docket Item No. 26. In 24 the Second Amended Complaint Plaintiff brought discrimination-based claims under California's 25 Unruh Civil Rights Act, Cal. Civ. Code §§ 51, et seq., and California's Disabled Persons Act, Cal. 26 Civ. Code §§ 54, et seq., for Netflix's alleged failure to provide full and equal access to its 27 28 services. Second Am. Compl. ¶¶ 103--12. In addition, Plaintiff brought consumer protection-based 2 claims under California's Unfair Competition Law, Cal. Bus. & Prof. Code §§ 17200, et seq., 3

Consumer Legal Remedies Act, Cal. Civ. Code §§ 1750, et seq., ("CLRA") for Netflix's alleged 5 false promises, misrepresentations, and material omissions concerning the amount of subtitled 6 content, the rate at which Netflix was adding subtitled content, and the date by which a substantial 7 portion of its streaming library would be subtitled. Id. ¶¶ 72--102. On July 13, 2012, the Court 8 granted Defendant's Motion to Dismiss the Second Amended Complaint with Leave to Amend. 9

Docket Item No. 50.

On August 3, 2012 Plaintiff filed a Third Amended Complaint alleging five causes of 12 action. See Docket Item No. 52. Plaintiff brought the First Cause of Action on behalf of the alleged 13 class for violations of the UCL. See Third Am. Compl. ¶¶ 69--71. In support of this claim, Plaintiff ("UCL"), False Advertising Law, Cal. Bus. & Prof. Code §§ 17500, et seq., ("FAL"), and 4 See Cullen v. Netflix, No. 5:11-CV-01199-EJD, 2012 WL 2906245 (N.D. Cal. July 13, 2011), 10 contends that the actions described above along with the alleged lack of adequate support tools for 15 deaf persons and alleged imposition of what Plaintiff characterizes as a "deaf tax" constitute UCL 16 violations. Id. ¶ 70. The remaining four causes of action were brought on behalf of Plaintiff Cullen 17 individually: the Second Cause of Action asserts a claim of fraudulent business practices in 18 violation of the UCL; the Third Cause of Action asserts a claim of unlawful business practices in 19 violation of the UCL; the Fourth Cause of Action asserts a claim of violation of the FAL; and the 20

On August 20, 2012, Netflix filed its Motion to Dismiss the Third Amended Complaint, 22 which is presently before the Court. See Docket Item No. 53. The court heard oral arguments of 23 counsel on this motion on November 9, 2012. See Minute Entry, Docket Item No. 67. 24 25 26 27 28 Fifth Cause of Action asserts a claim of violation of the CLRA. Id. 21 3 if a plaintiff fails to proffer "enough facts to state a claim to relief that is plausible on its face." Bell 4

Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). Allegations of material fact must be taken as 5 true and construed in the light most favorable to the nonmoving party. Cahill v. Liberty Mut. Ins. 6 Co., 80 F.3d 336, 337--38 (9th Cir. 1996). However, the court need not accept as true allegations 7 that are conclusory, unwarranted deductions of fact, or unreasonable inferences. See Sprewell v. 8

2Legal Standards

A complaint may be dismissed for failure to state a claim upon which relief may be granted Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001); see also Twombly, 550 U.S. at 561 ("a 9 wholly conclusory statement of [a] claim" will not survive a motion to dismiss). 10 N. Star Int'l v. Ariz. Corp. Comm'n, 720 F.2d 578, 581 (9th Cir. 1983). However, under the 13 Graphics, Inc. Sec. Litig., 183 F.3d 970, 986 (9th Cir. 1999). 16 (quoting Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1102 (9th Cir. 2003)) ("[T]he Federal 19 Rules of Civil Procedure apply in federal court, 'irrespective of the source of the subject matter 20 jurisdiction, and irrespective of whether the substantive law at issue is state or federal.'"). 21

Fed. R. Civ. P. 9(b). See Vess, 317 F.3d at 1103--04 (if "the claim is said to be 'grounded in fraud' 23 or to 'sound in fraud,' [then] the pleading of that claim as a whole must satisfy the particularity 24 requirement of Rule 9(b)."); Kaplan v. Rose, 49 F.3d 1363, 1370 (9th Cir. 1994) (claims based in 25 fraud "must state precisely the time, place, and nature of the misleading statements, 26 misrepresentations, and specific acts of fraud."). 27 28

On a motion to dismiss, the court's review is limited to the face of the complaint and matters judicially noticeable. MGIC Indem. Corp. v. Weisman, 803 F.2d 500, 504 (9th Cir. 1986); 12 "incorporation by reference" doctrine, the court also may consider documents which are referenced extensively in the complaint and which are accepted by all parties as authentic. In re Silicon 15 Finally, although the claims arise under state law, Plaintiff's allegations are subject to the Federal Rules of Civil Procedure. Kearns v. Ford Motor Co., 567 F.3d 1120, 1125 (9th Cir. 2009) 18 Specifically, allegations sounding in fraud are subject to the heightened pleading requirements of 22

Discussion

Defendant has moved to dismiss the Third Amended Complaint for two general reasons.

First, Defendant asserts that Plaintiff Cullen has not met the standing requirements of the allegedly 4 implicated statutes. And second, in the alternative, Defendant argues that even if Plaintiff Cullen 5 had standing to sue, he fails to state claims upon which relief could be granted. 6 7

9 statutes: the UCL, the FAL, and the CLRA. Each of these statutes has a standing provision. Under 10 the UCL, a plaintiff must allege that he or she "has ...


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