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In re Sony Gaming Networks & Customer Data Sec. Breach Litig.

United States District Court, S.D. California

January 21, 2014

In re: SONY GAMING NETWORKS AND CUSTOMER DATA SECURITY BREACH LITIGATION

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For Arthur Howe, on behalf of themselves and all others similarly situated, Fernando Lizarraga, Jr., on behalf of themselves and all others similarly situated, Plaintiffs: Brian Russell Strange, LEAD ATTORNEY, Strange & Carpenter, Los Angeles, CA.

For Sony Computer Entertainment America LLC, a Delaware Limited Liability Company, Sony Network Entertainment America, Inc., a Delaware corporation, Sony Network Entertainment International LLC, a Delaware limited liability company, Sony Online Entertainment LLC, a Delaware limited liability company, Sony Corporation of America, a Delaware corporation, Defendants: Harvey J. Wolkoff, LEAD ATTORNEY, PRO HAC VICE, Ropes & Gray, LLP, Boston, MA; Rocky C. Tsai, LEAD ATTORNEY, Ropes & Gray LLP, San Francisco, CA.

OPINION

Hon. Anthony J. Battaglia, U.S. District Judge.

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ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS PLAINTIFFS' FIRST AMENDED CONSOLIDATED CLASS ACTION COMPLAINT (Doc. No. 135)

This action arises out of a criminal intrusion into a computer network system used to provide online gaming and Internet connectivity via an individual's gaming console or personal computer. Plaintiffs, a nationwide putative consumer class, allege that Sony Computer Entertainment America, LLC (" SCEA" ), Sony Online Entertainment, LLC (" SOE" ), and Sony Network Entertainment America, Inc. (" SNE" ) (collectively, " Sony" or " Defendants" ), failed to provide reasonable network security, including utilizing industry-standard encryption, to safeguard Plaintiffs' personal and financial information stored on Sony's network.[1]

Presently before the Court is Sony's motion to dismiss Plaintiffs' First Amended Consolidated Class Action Complaint (" FACC" ). (Doc. No. 135.) Sony also submitted a request for judicial notice, (Doc. No. 135, Ex. 2), a notice of lodgment of foreign authorities, (Doc. No. 135, Ex. 2), and a notice of supplemental authorities, (Doc. No. 137).[2] Plaintiffs filed an opposition to Sony's motion to dismiss on

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May 6, 2013, (Doc. No. 146), and Sony filed a reply on June 20, 2013, (Doc. No. 150). The Court issued a tentative ruling on October 10, 2013, (Doc. No. 157), and held a hearing on the motion on October 18, 2013, (Doc. No. 158). On October 24, 2013, the Court ordered supplemental briefing on seven of Plaintiffs' consumer protection claims. (Doc. No. 159.) Sony filed its supplemental brief on November 15, 2013, (Doc. No. 163), Plaintiffs filed their opposition on December 6, 2013, (Doc. No. 164), and Sony filed its reply on December 20, 2013, (Doc. No. 165). On January 7, 2014, Plaintiffs filed a notice of supplemental authority informing the Court of a recent memorandum decision issued by the Ninth Circuit.[3] (Doc. No. 166.) For the reasons set forth below, the Court GRANTS IN PART and DENIES IN PART Sony's motion to dismiss.

BACKGROUND

I. Factual Background

Sony develops and markets the PlayStation Portable hand-held device (" PSP" ) and the PlayStation 3 console (" PS3" ) (collectively, " Console" or " Consoles" ). (FACC ¶ ¶ 38, 39.) Both Consoles allow users to play games, connect to the Internet, and access Qriocity, Sony Online Entertainment Services, and the Play Station Network (" PSN" ) (collectively, " Sony Online Services" ).[4] ( Id. at ¶ ¶ 40-43.) Through the PSN, which is offered to consumers free of charge, users can engage in multi-player online games, ( Id. at ¶ 27), and for additional one-time fees, the PSN allows users to purchase video games, add-on content (" map packs" ), demos, themes, movie trailers, TV shows, and movies (collectively, " Downloads" ). Users can also access various prepaid third party services by connecting to Sony Online Services via their Consoles or computers, including Netflix, MLB.TV, and NHL Gamecenter LIVE (collectively, " Third Party Services" ). ( Id. at ¶ 45).

Before establishing a PSN, Qriocity, and/or SOE account, Plaintiffs and other consumers were required to enter into a Terms of Service User Agreement with Sony and agree to Sony's Privacy Policy. ( Id. at ¶ ¶ 55-60.) As part of this registration process, Plaintiffs and other consumers were required to provide Sony with personal identifying information, including their names, mailing addresses, email addresses, birth dates, credit and debit card information (card numbers, expiration dates, and security codes), and login credentials (collectively, " Personal Information" ).[5] ( Id. at ¶ 35.) On April 1, 2011,

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SCEA transferred its online PSN and Qriocity service operations to SNEA, including transferring Plaintiffs' and other Class members' Personal Information to SNEA for handling. ( Id. at ¶ 54.) As a result of the transfer, SNEA required all PSN and Qriocity users to enter into a new Terms of Service User Agreement (" PSN User Agreement" ) and Privacy Policy (" PSN Privacy Policy" ). ( Id. at ¶ ¶ 55, 56.) Plaintiffs who established accounts with SOE had to agree to SOE's User Agreement (" SOE User Agreement" ) and SOE's Privacy Policy (" SOE Privacy Policy" ). ( Id. at ¶ 60.)

On April 16, 2011 or April 17, 2011, Plaintiffs allege that hackers accessed Sony's Network (computer systems, servers, and databases), thereby stealing the Personal Information of millions of Sony's customers, including Plaintiffs. ( Id. at ¶ 65.) Plaintiffs further allege that even though Sony discovered that PSN and Qriocity user data had been stolen as early as April 17, 2011, Sony did not notify Plaintiffs and other affected consumers at that time. ( Id. at ¶ 70.) Instead, on April 20, 2011, Sony simply took the PSN and Qriocity systems offline, stating that " [w]e're aware certain functions of PlayStation Network are down. We will report back here as soon as we can with more information." ( Id. at ¶ 71.) Thereafter, the PSN and Qriocity systems remained offline for almost a month while Sony conducted a system audit to determine the cause of the breach. ( Id. at ¶ 124.) During this time, Plaintiffs and the other Class members were unable to use Sony Online Services, and many were unable to access Third Party Services via their Consoles. ( Id. )

Between April 21, 2011 and April 25, 2011, while Qriocity and the PSN remained offline, Plaintiffs allege that Sony continued to misrepresent the circumstances of the breach. ( Id. at ¶ ¶ 73-77.) Specifically, Plaintiffs allege that Sony did not inform the public of the breach until April 26, 2011, when Sony made a public statement that user Personal Information had been compromised, and encouraged those affected to " remain vigilant, to review [their] account statements[,] and to monitor [their] credit reports." ( Id. at ¶ 78.) Shortly thereafter, Plaintiffs contend Sony admitted that its failures " may have had a financial impact on our loyal customers. We are currently reviewing options and will update you when the service is restored." ( Id. at ¶ 79.) Plaintiffs further allege that Sony conceded that " [s]ome games may require access to PSN for trophy sync, security checks[,] or other network functionality[,] and therefore cannot be played offline." ( Id. ) On May 2, 2011, Sony also took SOE offline, ( Id. at ¶ 82), and announced that SOE user Personal Information may have been compromised in the breach, ( Id. at ¶ 83). This was the first time SOE users were informed that their Personal Information may have been compromised as a result of the intrusion. ( Id. at ¶ 83.)

On April 30, 2011, ten days after Sony took the PSN and Qriocity systems offline, Sony announced that it would compensate PSN and Qriocity users in the United States with free identity theft protection services, certain free downloads and online services, and would consider helping customers who had to apply for new credit cards. ( Id. at ¶ 85.) Likewise, on May 12, 2011, ten days after Sony took the SOE network offline, Sony announced that it would compensate SOE users in the United States by offering free identity theft protection services, one month of free service, and certain free in-game bonuses and currency. ( Id. at ¶ 86.)

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II. Procedural History

On August 16, 2011, the Judicial Panel on Multidistrict Litigation transferred certain civil actions from various district courts across the country into one consolidated action before this Court. (Doc. No. 1.) On November 11, 2011, the Court appointed a Liaison Counsel and a Plaintiffs' Steering Committee (" PSC" ) to streamline the process. (Doc. No. 61.) On January 31, 2012, the PSC filed a Consolidated Class Action Complaint (" Consolidated Complaint" ), (Doc. No. 78), and on March 16, 2012, Sony moved to dismiss the Consolidated Complaint, (Doc. No. 94). The Court heard oral argument on the motion on September 27, 2012, and granted in part and denied in part Sony's motion to dismiss the Consolidated Complaint on October 11, 2012. (Doc. No. 120.) Plaintiffs filed the operative FACC on December 10, 2012. (Doc. No. 128.) The FACC contains eleven named Plaintiffs from nine different states and alleges fifty-one independent causes of action.[6] ( Id. )

III. Named Plaintiffs

Robert M. Bova (" Bova" ) resides in Tewksbury, Massachusetts and alleges that he acquired his PS3 in 2008. (FACC ¶ 18.) In or around 2009, Bova created a PSN account and provided his Personal Information to Sony, including information possibly regarding his Bank of America Visa and TD Bank debit card accounts. ( Id. ) Bova used the PSN through his PS3 to play games and to download additional game content such as " map packs." ( Id. ) As a result of the intrusion, Bova's Personal Information was stolen, he was unable to access the PSN during the brief interruption in service, and he purchased credit monitoring services at a cost of approximately $10.00 per month. ( Id. ) Bova does not allege when he purchased credit monitoring services or that he experienced any unauthorized charges as a result of the intrusion. ( Id. )

Christian Pierce Kalled (" Kalled" ) resides in Wolfeboro, New Hampshire and alleges that he acquired his PS3 in 2009. ( Id. at ¶ 19.) On or about October 21, 2009, Kalled created a PSN account and provided his Personal Information to Sony, including information possibly regarding his American Express credit card. ( Id ). Kalled used the PSN through his PS3 to play games, to download game updates, to browse the Internet, and to stream prepaid media content from Netflix. ( Id. ) As a result of the intrusion, Kalled's Personal Information was stolen, he was unable to access the PSN during the brief interruption in service, and he was unable to access his Netflix account through his PS3. ( Id. ) Kalled does not allege that he experienced any unauthorized charges on any of his accounts as a result of the intrusion. ( Id. )

Scott Lieberman (" Lieberman" ) resides in Plantation, Florida and alleges that he acquired his PS3 in early 2007. ( Id. at ¶ 20.) In or around 2007, Lieberman created a PSN account and provided his Personal Information to Sony, including information regarding his American Express credit card. ( Id. ) Lieberman used the PSN through his PS3 to play games, to download games, and to stream prepaid media content from Netflix. ( Id. ) As a result of the intrusion, Lieberman's Personal Information was stolen, he was unable to access the PSN during the brief interruption in service, and he was unable to access his Netflix account through his PS3. ( Id. ) Lieberman does not allege that he experienced any unauthorized charges

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on any of his accounts as a result of the intrusion. ( Id. )

Kyle Johnson (" Johnson" ) resides in San Diego, California and alleges that he acquired his PS3 in 2007. ( Id. at ¶ 21.) In or around 2007, Johnson created a PSN account and provided his Personal Information to Sony, including information regarding his Discover, American Express, and Visa credit card accounts. ( Id. ) Johnson used the PSN through his PS3 to play games, purchase and download games, and stream prepaid media content from Netflix. ( Id. ) As a result of the intrusion, Johnson's Personal Information was stolen, he was unable to access the PSN during the brief interruption in service, and he was unable to access his Netflix account through his PS3. ( Id. ) In or around October 2011, Johnson alleges two unauthorized charges appeared on his Visa card. ( Id. ) Johnson does not allege whether these charges were later reimbursed. ( Id. )

Arthur Howe (" Howe" ) resides in San Diego, California and alleges that he acquired his PS3 in 2008. ( Id. at ¶ 22.) Howe alleges he created two PSN accounts, one for him and one for his minor son. ( Id. ) In order to register for both accounts, Howe alleges he provided his Personal Information to Sony, including his Union Bank debit/credit card account and a U.S. Bank account. ( Id. ) Howe used the PSN through his PS3 to play games, purchase and download games such as " map packs," and stream prepaid media content from Netflix. ( Id. ) As a result of the intrusion, Howe's Personal Information was stolen, he was unable to access the PSN during the brief interruption in service, and he was unable to access his Netflix account through his PS3. ( Id. ) Howe also alleges that he was forced to close two bank accounts and purchased credit monitoring services at a charge of approximately $9.00 per month. ( Id. ) Howe does not allege that he experienced any unauthorized charges on any of his accounts as a result of the intrusion, nor does Howe allege that he was forced to close his banks accounts due to unauthorized charges. ( Id. )

Christopher Munsterman (" Munsterman" ) resides in Kansas City, Missouri and alleges that he acquired his PS3 in 2008. ( Id. at ¶ 23.) In or around 2008, Munsterman created a PSN account and provided his Personal Information to Sony, including information possibly regarding his Commerce Visa Debit card. ( Id. ) Munsterman used the PSN through his PS3 to play games, download games and movies, browse the internet, and stream prepaid media content from Netflix. ( Id. ) As a result of the intrusion, Munsterman's Personal Information was stolen, he was unable to access the PSN during the brief interruption in service, and he was unable to access his Netflix account through his PS3. ( Id. ) Munsterman does not allege that he experienced any unauthorized charges on any of his accounts as a result of the intrusion. ( Id. )

Adam Schucher (" Schucher" ) resides in Surfside, Florida and alleges that he acquired his PS3 in mid-2008. ( Id. at ¶ 24.) In or around 2008, Schucher created a PSN account and provided his Personal Information to Sony, including information regarding his Citibank Visa credit card. ( Id. ) Schucher used the PSN through his PS3 to purchase and download karaoke songs for Karaoke Revolution Presents: American Idol. ( Id. ) As a result of the intrusion, Schucher's Personal Information was stolen and he was unable to access the PSN during the brief interruption in service. ( Id. ) Schucher does not allege that he experienced any unauthorized charges on any of his accounts as a result of the intrusion. ( Id. )

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Rebecca Mitchell (" Mitchell" ) resides in East Lansing, Michigan and alleges that she acquired her PS3 in 2009. ( Id. at ¶ 25.) In or around 2009, Mitchell created a PSN account and provided her Personal Information to Sony, including information regarding her mother's credit card and her own Visa debit card. ( Id. ) Mitchell used the PSN to play games and download karaoke songs for the PlayStation game Sing Star. ( Id. ) As a result of the intrusion, Mitchell's Personal Information was stolen and she was unable to access the PSN during the brief interruption in service. ( Id. ) Mitchell does not allege that she experienced any unauthorized charges on any of her accounts or her mother's accounts as a result of the intrusion. ( Id. )

Christopher Wilson (" Wilson" ) resides in Dallas, Texas and alleges that he acquired his PS3 in January 2007. ( Id. at ¶ 26.) In or around 2007, Wilson created a PSN account and provided his Personal Information to Sony, including information regarding his Chase Bank Visa debit card. ( Id. ) Wilson used the PSN to play games and stream prepaid media content from Netflix. ( Id. ) As a result of the intrusion, Wilson's Personal Information was stolen, and he was unable to access the PSN during the brief interruption in service. ( Id. ) Wilson does not allege that he experienced any unauthorized charges on any of his accounts as a result of the intrusion. ( Id. )

James Wright (" Wright" ) resides in Columbus, Ohio and alleges that he acquired his PS3 in 2008. ( Id. at ¶ 27.) In or around 2008 or 2009, Wright created a SOE account, a Qriocity account, and PSN account, and provided his Personal Information to Sony, including information regarding his Visa U.S. Bank debit/credit card ( Id. ) Wright used his SOE account to play DC Universe Online, his Qriocity account to play music, and his PSN account to play games and stream prepaid media content from Netflix. ( Id. ) As a result of the intrusion, Wright's Personal Information was stolen and he was unable to access his SOE, Qriocity, and PSN accounts during the brief interruption in service. ( Id. ) Wright does not allege that he experienced any unauthorized charges on any of his accounts as a result of the intrusion. ( Id. )

Timothy B. Whyland (" Whyland" ) resides in Baldwinsville, New York and alleges that he acquired his PS3 in 2009. ( Id. at 28.) In or around 2009, Whyland created a PSN account and provided his Personal Information to Sony, including information regarding his debit card. ( Id. ) Whyland used the PSN to play games and download additional golf courses for Tiger Woods Golf Masters PGA Tour 2012 and maps for Battlefield Bad Company 2. ( Id. ) As a result of the intrusion, Whyland's Personal Information was stolen and he was unable to access his PSN for approximately twenty-one (21) days. ( Id. ) Whyland does not allege that he experienced any unauthorized charges on any of his accounts as a result of the intrusion. ( Id. )

LEGAL STANDARDS

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). A motion to dismiss pursuant to Rule 12(b)(6) tests the legal sufficiency of the claims asserted in the complaint. Fed.R.Civ.P. 12(b)(6); Navarro v. Block, 250 F.3d 729, 731 (9th Cir. 2001). When ruling on a motion to dismiss under Rule 12(b)(6), the court must accept all factual allegations pleaded in the complaint as true, and must construe them and draw all reasonable inferences from them in favor of the nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir.1996). In doing so however, the court is not bound to accept " legal conclusions"

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as true. Ashcroft v. Iqbal, 556 U.S. 662, 664, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).

To avoid a Rule 12(b)(6) dismissal, a complaint need not contain detailed factual allegations; rather, the complaint must plead " enough facts to state a claim to relief that is plausible on its face." Bell A. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). 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." Iqbal, 556 U.S. at 678. " 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. " Where a complaint pleads facts that are 'merely consistent with' a defendant's liability, it 'stops short of the line between possibility and plausibility of entitlement to relief.' " Id. (quoting Twombly, 550 U.S. at 557). As a result, it is not proper for the court to assume that " the [plaintiff] can prove facts that [he or she] has not alleged or that defendants have violated . . . laws in ways that have not been alleged." Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 526, 103 S.Ct. 897, 74 L.Ed.2d 723 (1983).

Complaints alleging fraud must satisfy the heightened pleading requirements of Rule 9(b). Rule 9(b) requires that in all averments of fraud or mistake, the circumstances constituting that fraud or mistake should be stated with particularity. Malice, intent, knowledge, and other conditions of a person's mind may be alleged generally. A pleading is sufficient under Rule 9(b) if it " state[s] the time, place[,] and specific content of the false representations as well as the identities of the parties to the misrepresentation." Misc. Serv. Workers, Drivers & Helpers v. Philco-Ford Corp., 661 F.2d 776, 782 (9th Cir. 1981) (citations omitted); see also Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003) (quoting Cooper v. Pickett, 137 F.3d 616, 627 (9th Cir. 1997)). Regardless of the title given to a particular claim, allegations grounded in fraud are subject to Rule 9(b)'s pleading requirements. Vess, 317 F.3d at 1103-04; Kearns v. Ford Motor Co., 567 F.3d 1120, 1125 (9th Cir. 2009); Bros. v. Hewlett-Packard Co., No. C-06-02254 RMW, 2006 WL 3093685, at *7 (N.D. Cal. 2006).

In interpreting federal law, a transferee court in a multidistrict case should look to the law of its own circuit rather than the law of the transferor courts' circuits. In re Nat'l Century Fin. Enters., Inc., Inv. Litig., 323 F.Supp.2d 861, 876-77 (S.D. Ohio 2004) (citing In re Korean Air Lines Disaster of Sept. 1, 1983, 829 F.2d 1171, 1176, 265 U.S.App. D.C. 39 (D.C. Cir. 1987)); In re Methyl Tertiary Butyl Ether (" MTBE" ) Prods. Liab. Litig., No. 00-1898, 2005 WL 106936, at *5 (S.D.N.Y. Jan. 18, 2005). Thus, although the parties have cited cases from various circuits discussing Rule 9(b)'s heightened pleading requirements, the Court will analyze federal procedural law in accordance with Ninth Circuit precedent.

DISCUSSION

The fifty-one claims alleged in the FACC can be categorized into nine sub-groups: (1) negligence; (2) negligent misrepresentation; (3) breach of express warranty; (4) breach of implied warranty; (5) unjust enrichment; (6) violation of state consumer protection statutes; (7) violation of the California Database Breach Act; (8) violation of the federal Fair Credit Reporting Act; and (9) partial performance/breach of the covenant of good faith and fair dealing. Sony moves to dismiss the FACC on the basis that Plaintiffs lack

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standing and that each cause of action fails to state a claim upon which relief can be granted. Each is discussed in turn.

I. Standing

Sony's standing argument is two-fold. First, Sony contends SOE should be dismissed as a named Defendant because Plaintiffs do not have standing to pursue non-Ohio state law claims against SOE on behalf of non-Ohio residents. And second, Sony contends Plaintiffs' amended allegations fail to establish Article III standing in light of the Supreme Court's recent decision in Clapper v. Amnesty Int'l USA, 133 S.Ct. 1138, 185 L.Ed.2d 264 (2013).

A. Standing to Assert Claims Against SOE

First, Sony contends Plaintiffs lack standing to pursue non-Ohio state-law claims on behalf of non-Ohio residents because Plaintiff Wright, an Ohio resident, is the only named Plaintiff that is an SOE network subscriber. Plaintiffs do not rebut that Wright is the only SOE network subscriber, but contend that Wright has standing to pursue claims: (1) on behalf of SOE network subscribers alleging violations of Ohio law; and (2) on behalf of all SOE network subscribers, regardless of their state of residence, for enforcement of the settlement agreement and alleged violations of the FCRA. The Court agrees. As stated below, although each of Plaintiffs' claims under Ohio law and the FCRA are dismissed without leave to amend, Plaintiffs have standing to assert claims against SOE for enforcement of the settlement agreement and/or breach of the covenant of good faith and fair dealing. Accordingly, Sony's motion to dismiss SOE as a named Defendant is DENIED.

B. Article III Standing

Second, in an argument relegated to a footnote, Sony contends the FACC should be dismissed for lack of Article III standing because Plaintiffs' amended allegations have once again failed to allege an " injury-in-fact" as a result of the intrusion. (Doc. No. 135 at 9 n.12.) The Court's prior order denied this exact argument, finding that under Krottner v. Starbucks, 628 F.3d 1139, 1142 (9th Cir. 2010), Plaintiffs had sufficiently alleged that their " sensitive Personal Information [was] wrongfully disseminated, thereby increasing the risk of future harm," regardless of whether actual " harm [had] yet occurred." (Doc. No. 120 at 13:17-19.) Sony now urges the Court to reconsider this ruling based on the Supreme Court's recent decision in Clapper v. Amnesty Int'l USA, 133 S.Ct. 1138, 185 L.Ed.2d 264 (2013). Because Article III standing is an " indispensable part of a plaintiff's case," and not merely a pleading requirement, the Court reconsiders its prior ruling. Lujan v. Defenders of Wildlife, 504 U.S. 555, 561, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992).

To establish Article III standing, a plaintiff must plead: (1) injury-in-fact; (2) causation; and (3) redressability. Lujan, 504 U.S. at 560-61. The " injury-in-fact" element requires a plaintiff to plead the " invasion of a legally protected interest which is (a) concrete and particularized, and (b) actual or imminent, not conjectural or hypothetical." Id. (citations omitted). Analyzing the " injury-in-fact" requirement, the Supreme Court in Clapper considered whether the respondents, who alleged that their work required them to engage in sensitive international communications with individuals potentially targeted under the Foreign Intelligence Surveillance Act (the " Act" ), had Article III standing to declare the Act unconstitutional and/or to obtain an injunction against surveillance authorized under the Act. 133 S.Ct. at 1142-43. Respondents argued that they had sufficiently

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alleged an " injury-in-fact" based on: (1) the objectively reasonable likelihood that their communications would at some point be targeted under the Act; and (2) the fact that they had already taken costly and burdensome measures to protect the confidentiality of their international sources. Id. at 1147-54.

The Supreme Court rejected both arguments. Id. With regard to the first argument, the Supreme Court stated that although it may be " objectively reasonable" that respondents' communications may at some point be intercepted under the Act, respondents had failed to show that the " threatened injury" was " certainly impending." Id. at 1147. The Supreme Court noted that a " speculative chain of possibilities . . . based on potential future surveillance" was not enough. Id. at 1150. With regard to respondents' second argument, the Supreme Court stated that if parties could base Article III standing on reasonably incurred costs to avoid the risk of future harm, it would " water[] down the fundamental requirements of Article III." Id. at 1151. " If the law were otherwise, an enterprising plaintiff would be able to secure a lower standard for Article III standing simply by making an expenditure based on a nonparanoid fear." Id. Therefore, the Supreme Court held that even though respondents' measures to avoid surveillance authorized under the Act was not " fanciful, paranoid, or otherwise unreasonable," respondents could not " manufacture standing merely by inflicting harm on themselves based on fears of hypothetical harm that was not " certainly impending." Id. at 1151.

Based on the above, Sony argues Clapper tightened the " injury-in-fact" analysis set forth by the Ninth Circuit in Krottner v. Starbucks and previously relied upon by the Court in its prior order. The Court does not agree. The Ninth Circuit in Krottner found Article III standing based on a " credible threat of harm" that was " both real and immediate, not conjectural or hypothetical," 628 F.3d at 1143. In contrast, the Supreme Court in Clapper found that respondents failed to sufficiently allege Article III standing because a speculative chain of possibilities based on potential future surveillance was not enough to plausibly allege a " certainly impending" injury. 133 S.Ct. at 1150. Therefore, although the Supreme Court's word choice in Clapper differed from the Ninth Circuit's word choice in Krottner, stating that the harm must be " certainly impending," rather than " real and immediate," the Supreme Court's decision in Clapper did not set forth a new Article III framework, nor did the Supreme Court's decision overrule previous precedent requiring that the harm be " real and immediate." To the contrary, the Supreme Court's decision in Clapper simply reiterated an already well-established framework for assessing whether a plaintiff had sufficiently alleged an " injury-in-fact" for purposes of establishing Article III standing. Id. at 1147 (" Thus, we have repeatedly reiterated that 'threatened injury must be certainly impending to constitute injury in fact,' and that '[a]llegations of possible future injury' are not sufficient." ) (quoting Whitmore v. Ark., 495 U.S. 149, 158, 110 S.Ct. 1717, 109 L.Ed.2d 135 (1990)).

Therefore, the Court finds both Clapper and Krottner controlling, and case law in this circuit analyzing the " injury-in-fact" requirement following Krottner highly persuasive.[7] For example, courts in this circuit have routinely denied motions to dismiss

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based on Article III standing where a plaintiff alleges that his personal information was collected and then wrongfully disclosed, as opposed to alleging that his personal information was collected without his consent.[8] Compare In re Facebook Privacy Litig., 791 F.Supp.2d 705, 711-12 (N.D. Cal. 2011) (finding plaintiffs' allegations that their personal information was disclosed as opposed to just collected and retained by defendants sufficient for purposes of establishing Article III standing), Doe 1 v. AOL, LLC, 719 F.Supp.2d 1102, 1108-09 (N.D. Cal. 2010) (finding plaintiffs' allegations that their personal information was collected and then disclosed sufficient for purposes of establishing Article III standing), and San Luis & Delta-Mendota Water Auth. v. U.S. Dep't of the Interior, 905 F.Supp.2d 1158, 1171 (E.D. Cal. 2012) (" Although it was not guaranteed that reduced allocations would come to pass, the threat of harm was certainly real, not conjectural or hypothetical." ), with Yunker v. Pandora Media, Inc., No. 11-CV-03113 JSW, 2013 WL 1282980, at *3 (N.D. Cal. Mar. 26, 2013) (" Yunker does not allege that he disclosed sensitive financial information, such as a social security number or a credit card number, to Pandora. Further, he has not alleged that anyone has breached Pandora's servers." ), Low v. LinkedIn Corp., No. 11-cv-01468-LHK, 2011 WL 5509848, at *6 (N.D. Cal. Nov. 11, 2011) (distinguishing Krottner in that the plaintiff had not alleged that his highly personal information had been stolen and then exposed to the public), and In re Google, Inc. Privacy Policy Litig., No. C 12-01382 PSG, 2012 WL 6738343, at *6 (N.D. Cal. Dec. 28, 2012) (dismissing plaintiffs' claims based on Google's policy of retaining personal information for lack of Article III standing because there were no allegations plaintiffs' personal information had been disseminated).

Therefore, the Court finds Plaintiffs' allegations that their Personal Information was collected by Sony and then wrongfully disclosed as a result of the intrusion sufficient to establish Article III standing at this stage in the proceedings. (FACC ¶ ¶ 18-29, 119-123, 124-127.) Although Sony argues that Plaintiffs' allegations are insufficient because none of the named Plaintiffs have alleged that their Personal Information was actually accessed by a third party, neither Krottner nor Clapper require such allegations. Instead, Plaintiffs have plausibly alleged a " credible threat" of impending harm based on the disclosure of their Personal Information following the intrusion.[9]

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See Cherri v. Mueller, No. 12-11656, 951 F.Supp.2d 918, 2013 WL 2558207, at *9 (E.D. Mich. June 11, 2013) (stating that after Clapper, a plaintiff need only allege a " certainly impending injury that is fairly traceable to" the defendant's purported conduct to withstand a motion to dismiss). Accordingly, the Court DENIES Sony's motion to dismiss based on Article III standing.[10]

II. Failure to State a Claim Under Rule 12(b)(6)

A. Negligence Claims

Plaintiffs assert negligence claims under California law (Count 5), Florida law (Count 11), Massachusetts law (Count 14), Missouri law (Count 27), and Ohio law (Count 43). (FACC ¶ ¶ 196-211, 244-249, 262-270, 355-360, 451-456.) Each claim requires a plaintiff to allege the following four elements: (1) the existence of a legal duty; (2) breach of that duty; (3) causation; and (4) cognizable injury.[11] Sony moves to dismiss each claim on the basis that Plaintiffs have failed to allege a cognizable injury, and even if they had, Plaintiffs have failed to allege that Sony had a legal duty to guarantee the security of Plaintiffs' Personal Information. The Court first addresses the Florida, Missouri, and Ohio negligence claims, and then addresses the California and Massachusetts negligence claims.[12]

1. Florida, Missouri, and Ohio Negligence Claims

The Florida, Missouri, and Ohio negligence claims contain identical factual allegations. (FACC ¶ ¶ 244-249, 355-360, 451-456.) Each claim alleges that because Sony requested, gathered, and promised to secure Plaintiffs' Personal Information, Sony had a duty to provide reasonable security consistent with industry standards, to ensure Sony Online Services were secure, and to protect Plaintiffs' Personal Information from theft or misuse. Plaintiffs allege Sony breached this duty by failing to adequately secure its network, and that Plaintiffs suffered " economic injury and property damage" as a result of the intrusion. ( Id. at ¶ ¶ 249, 360, 456.) The FACC does not explicitly allege what economic injury and/or property damage Plaintiffs allegedly suffered as a result of the intrusion.

Although Plaintiffs are not required to put forth evidence of their alleged injury at this stage in the proceeding, Plaintiffs' allegations of causation and harm are wholly conclusory, and therefore fail to put the Court or Sony on notice of the specific relief requested. Iqbal, 556 U.S. at 663 ( " A claim has facial plausibility [under Rule 8] when the pleaded factual content allows the court to draw the reasonable inference that the defendant

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is liable for the misconduct alleged." ); In re Polyurethane Foam Antitrust Litig., 799 F.Supp.2d 777, 792 (N.D. Ohio 2011), reconsideration denied (Sept. 15, 2011) (stating that conclusory allegations fail to put the defendant on notice of the claims alleged against it). For example, Plaintiffs do not specifically allege what economic injury they allegedly suffered as a result of Sony's negligence, what property was allegedly damaged, or how the alleged property damage was proximately caused by Sony's breach. Merely appending a clause incorporating by reference all prior allegations is insufficient, especially when Plaintiffs have alleged fifty-one independent causes of action in a complaint spanning over a hundred pages. See, e.g., Brandon v. City of N.Y., 705 F.Supp.2d 261, 268-69 (S.D.N.Y. 2010) (" Such general allegations, without supporting facts other than a clause incorporating an entire complaint by reference, are insufficient to withstand even a motion to dismiss . . ." ); Noel v. Bank of Am., No. 12-4019-SC, 2012 WL 5464608, at * 3 (N.D. Cal. Nov. 8, 2012) (stating that incorporation by reference language failed to meet Rule 8's pleading requirements because the plaintiff failed to connect specific allegations to the elements of her claims.) It is the Plaintiffs' burden--not the Court's--to identify the specific relief sought for each individual cause of action.

Therefore, although the Florida, Missouri, and Ohio negligence claims were not previously dismissed for lack of specificity in the Consolidated Complaint, because these claims appeared for the first time in the FACC, the Court finds its previous order dismissing the California negligence claim sufficiently put Plaintiffs' counsel on notice that conclusory allegations of causation and harm would not suffice. (Doc. No. 120 at 18-20.) This is especially true in light of Plaintiffs' factual allegations with respect to the Massachusetts negligence claim, which also appeared for the first time in the FACC, as this claim includes specific allegations of causation and harm. As a result, the Court finds Plaintiffs' counsel, who are sophisticated attorneys well versed in high-profile class-action litigation, were well aware of what was required to state a claim for negligence, and further amendment of these claims would prejudice Defendants. See Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003) (" As this circuit and others have held, it is the consideration of prejudice to the opposing party that carries the greatest weight." ). Accordingly, the Court GRANTS Sony's motion to dismiss the Florida, Missouri, and Ohio negligence claims without leave to amend.

2. California and Massachusetts Negligence Claims

Similar to the Florida, Missouri, and Ohio negligence claims, the California and Massachusetts negligence claims contain identical factual allegations.[13] (FACC ¶ ¶ 196-211, 262-270.) Each claim alleges that Sony owed two independent legal duties that were separately breached: (1) the duty to timely disclose the nature of the intrusion, which was breached when Sony delayed in informing Plaintiffs that their Personal Information may have been disclosed to third parties; and (2) the duty to exercise reasonable care in safeguarding Plaintiffs' Personal Information, which was breached when Sony failed to adopt, implement, and maintain adequate security measures to protect Plaintiffs' Personal Information. ( Id. at ¶ ¶ 197-200, 263-266.) As a result of Sony's negligence, and with respect to the breach of both duties, Plaintiffs

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allege they incurred economic damages, including the cost to purchase credit monitoring services, loss of use and value of Sony Online Services, loss of use and value of Third Party Services, and a diminution in value of their Consoles. ( Id. at ¶ ¶ 211, 270.) The Court separately addresses Plaintiffs' allegations of duty and breach.

a. Cognizable Injuries Resulting From Sony's Duty to Timely Disclose the Intrusion

Assuming without deciding that Sony owed Plaintiffs a legal duty to timely disclose the intrusion and the possibility that Plaintiffs' Personal Information may have been disclosed, the Court finds Plaintiffs have failed to allege a single cognizable injury proximately caused by Sony's resulting breach. See Held v. Bail, 28 Mass.App.Ct. 919, 547 N.E.2d 336, 337 (Mass. 1989); Dalkilic v. Titan Corp., 516 F.Supp.2d 1177, 1190 (S.D. Cal. 2007). Although Plaintiffs allege that Plaintiff Johnson received notification of the intrusion on April 27, 2013, approximately ten days after the intrusion, and that Plaintiff Howe received notification of the intrusion on April 28, 2013, approximately eleven days after the intrusion, neither of these allegations set forth a plausible claim that the alleged untimely disclosure, and not the intrusion itself, resulted in Johnson or Howe's alleged injuries. (FACC ¶ ¶ 21, 22.) See Berardi v. Menicks, 340 Mass. 396, 164 N.E.2d 544, 546-47 (Mass. 1960) (" [I]t is not enough to show the mere possibility of a causal connection; the probability of such a connection must be shown" ). The same is true with respect to Plaintiff Bova. Although Plaintiffs did not specify when Bova was notified of the intrusion, the Court infers that Bova had constructive notice of the PSN intrusion on April 26, 2011 (when Sony issued a public statement), and that Bova had constructive notice of the SOE intrusion on May 2, 2011 (when Sony posted a Customer Service Notification on SOE's website). However, as with Johnson and Howe, Plaintiffs allegations do not set forth a plausible claim for relief on the basis that the delay, and not just the intrusion, caused Bova's alleged injuries. ( Id. at ¶ ¶ 78, 83.) This cannot be left to conjecture or speculation. See Twombly, 550 U.S. at 561.

Therefore, even though the Court finds Plaintiffs may have alleged a brief delay in the time period between the intrusion and when Sony notified consumers of the intrusion, the Court finds Plaintiffs have failed to allege that their injuries--credit monitoring services, loss of use and value of the PSN, loss of use and value of Third Party Services, and/or a diminution in value of their Consoles--were proximately caused by Sony's alleged untimely delay.[14] See Stollenwerk v. Tri-W. Health Care Alliance, 254 F.Appx. 664, 668 (9th Cir. 2007) (" Here, however, proximate cause is supported not only by the temporal, but also by the logical, relationship between the two events." ); Jorgensen v. Mass. Port Auth., 905 F.2d 515, 524 (1st Cir. 1990) (stating that Massachusetts law requires that the defendant's conduct be the " but-for cause" of the plaintiff's injury). Accordingly, the Court GRANTS Sony's motion to dismiss the California and Massachusetts negligence claims based on Sony's alleged breach of the duty to timely disclose the nature of the intrusion. Because the Court finds further amendment of this claim would be futile, the Court grants Sony's motion without leave to amend.

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b. Cognizable Injuries Flowing From Sony's Duty to Provide Reasonable Network Security

As set forth above, the FACC also alleges that Sony owed Plaintiffs Johnson, Howe, and Bova a duty to exercise reasonable care in safeguarding and protecting their Personal Information. (FACC ¶ ¶ 197, 263.) Plaintiffs allege this duty included, among other things, the duty to design, implement, maintain, and test Sony's security system in order to ensure Plaintiffs' Personal Information was adequately secured and protected. ( Id. ) Plaintiffs allege Sony breached this duty by failing to implement proper procedures to protect Plaintiffs' Personal Information, and as a result, Plaintiffs incurred economic damages, including the cost to purchase credit monitoring services, loss of use and value of Sony Online Services, loss of use and value of Third Party Services, and/or a diminution in value of their Consoles. Sony moves to dismiss these claims on the basis that Plaintiffs have failed to allege: (1) a legal duty to provide reasonable security; and (2) cognizable injuries not barred by the economic loss doctrine. The Court discusses each in turn.

i. Legal Duty to Provide Reasonable Security

Although neither party provided the Court with case law to support or reject the existence of a legal duty to safeguard a consumer's confidential information entrusted to a commercial entity, the Court finds the legal duty well supported by both common sense and California and Massachusetts law. See, e.g., Witriol v. LexisNexis Grp., No. C05-02392 MJJ, 2006 WL 4725713, at *8 (N.D. Cal. Feb. 10, 2006); CUMIS Ins. Soc'y., Inc. v. BJ's Wholesale Club, Inc., No. 051158, 2005 WL 6075375, at *4 (Mass. Super. Dec. 7, 2005) aff'd, 455 Mass. 458, 918 N.E.2d 36 (Mass. 2009); Yakubowicz v. Paramount Pictures Corp., 404 Mass. 624, 536 N.E.2d 1067, 1070 (Mass. 1989) (" A basic principle of negligence law is that ordinarily everyone has a duty to refrain from affirmative acts that unreasonably expose others to a risk of harm." ). As a result, because Plaintiffs allege that they provided their Personal Information to Sony as part of a commercial transaction, and that Sony failed to employ reasonable security measures to protect their Personal Information, including the utilization of industry-standard encryption, the Court finds Plaintiffs have sufficiently alleged a legal duty and a corresponding breach.

ii. Economic Loss Doctrine

However, the existence of a legal duty and a corresponding breach are not the only elements required to state a claim for negligence--Plaintiffs must also allege appreciable, non-speculative harm proximately caused by Sony's breach. See, e.g., Vinci v. Byers, 65 Mass.App.Ct. 135, 837 N.E.2d 1140, 1145 (Mass.App.Ct. 2005) (stating that appreciable harm is " injury, loss, or detriment that is capable of being measures or perceived" ) (internal citations and quotations omitted); Int'l Engine Parts, Inc. v. Feddersen & Co., 9 Cal.4th 606, 614, 38 Cal.Rptr.2d 150, 888 P.2d 1279 (Cal. 1995) (stating that a negligence claim requires appreciable, non-speculative, present injury). Here, Plaintiffs allege the following cognizable injuries resulted from Sony's alleged breach: (1) expenses incurred to purchase credit monitoring services (Howe and Bova); (2) loss of use and value of Sony Online Services (Howe, Johnson, Bova); (3) loss of use and value of Third Party Services (Johnson and Howe); and (4) a diminution in value of Plaintiffs' Consoles (Johnson, Howe, Bova).[15] (FACC

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¶ ¶ 207, 211, 270.) Sony contends each of these injuries are barred by the economic loss doctrine as articulated under Massachusetts and California law.

Massachusetts generally prohibits the recovery of purely economic losses in tort absent personal injury or property damage. Aldrich v. ADD Inc., 437 Mass. 213, 770 N.E.2d 447, 454-55 (Mass. 2002).[16] Although there are exceptions to this general rule, which allow a plaintiff to recover economic losses premised on negligent misrepresentations, Plaintiff Bova alleges an independent negligent misrepresentation cause of action, and his negligence claim is not premised on Sony's alleged misrepresentations. Therefore, the Court finds the exception inapplicable. (FACC ¶ ¶ 270, 274.) See Nota Constr. Corp. v. Keyes Assocs., Inc., 45 Mass.App.Ct. 15, 20, 694 N.E.2d 401 (Mass.App.Ct. 1998) (" An exception to the doctrine permits recovery for economic losses resulting from negligent misrepresentation." ); 695 A. Ave. Co., LLC v. Commercial Constr. Consulting, Inc. ,64 Mass.App.Ct. 1109, 834 N.E.2d 322 (Mass. Ct. App. 2005) (affirming the trial court's dismissal of the negligence claim based on the economic loss rule but noting the negligent misrepresentation claim could proceed because it is an exception to the economic loss doctrine). Accordingly, the Court GRANTS Sony's motion to dismiss the Massachusetts negligence claim based on the economic loss doctrine without leave to amend. See Hatch v. Dep't for Children, Youth & Their Families, 274 F.3d 12, 26 (1st Cir. 2001).

Similarly, under California law, " [i]n the absence of (1) personal injury, (2) physical damage to property, (3) a 'special relationship' existing between the parties, or (4) some other common law exception to the rule, recovery of purely economic loss is foreclosed." Kalitta Air, LLC v. Cent. Tex. Airborne Sys., Inc., 315 F.Appx. 603, 605 (9th Cir. 2008) (quoting J'Aire Corp. v. Gregory, 24 Cal.3d 799, 157 Cal.Rptr. 407, 598 P.2d 60, 62-63 (Cal. 1979) (setting forth the factors a court must consider when determining whether a special relationship exists between the parties). Put simply, the economic loss doctrine was created to prevent " the law of contract and the law of tort from dissolving one into the other." Robinson Helicopter Co. v. Dana Corp., 34 Cal.4th 979, 988, 22 Cal.Rptr.3d 352, 102 P.3d 268 (Cal. 2004) (internal quotations omitted).

Based on the above, Sony moves to dismiss the California negligence claim on the basis that neither Howe nor Johnson have alleged personal injury or property damage as a result of the intrusion, nor have Howe or Johnson alleged a " special relationship" with Sony based on the factors articulated by the California Supreme Court in J'Aire Corp. v. Gregory, 24 Cal.3d 799, 157 Cal.Rptr. 407, 598 P.2d 60 (Cal. 1979). Moreover, even if Plaintiffs could satisfy the J'Aire special relationship test, Sony contends the J'Aire factors are inapplicable because the duty Sony allegedly violated was specifically referenced in the PSN User Agreement, and therefore, can only form the basis of a contract claim. As a result, Sony contends Plaintiffs' California negligence claim is nothing more than an attempt to plead around their contract with Sony, which clearly disclaims

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the economic losses Plaintiffs now seek to recover. Although Plaintiffs Johnson and Howe seemingly concede that the California negligence claim seeks to recover purely economic losses--credit monitoring fees, loss of use and value of the PSN, loss of use and value of Third Party Services, and a diminution in value of their Consoles--they nonetheless argue that they can recover these losses based on the J'Aire " special relationship" exception.

Before turning to the application of the J'Aire factors, the Court dispels Sony's contention that their contract with Plaintiffs forecloses tort liability. As stated by the California Supreme Court in Aas v. Superior Court, " [a] person may not ordinarily recover in tort for the breach of duties that merely restate contractual obligations." 24 Cal.4th 627, 643, 101 Cal.Rptr.2d 718, 12 P.3d 1125 (Cal. 2004) (superseded by statute on other grounds) (quoting Freeman & Mills, Inc. v. Belcher Oil Co., 11 Cal.4th 85, 107, 44 Cal.Rptr.2d 420, 900 P.2d 669 (Cal. 1995)). Based on this general rule, " courts will generally enforce the breach of a contractual promise through contract law, except when the actions that constitute the breach violate a social policy that merits the imposition of tort remedies." Id. As a result, although a plaintiff will not be able to recover in tort based solely on allegations that a contract was negligently performed, a plaintiff may be able to pursue both contract and tort remedies if the plaintiff alleges that the contractual breach also violated " a duty independent of the contract arising from principles of tort law." Aas, 24 Cal.4th at 643; see also Erlich v. Menezes, 21 Cal.4th 543, 550, 87 Cal.Rptr.2d 886, 981 P.2d 978 (Cal. 1999). Accordingly, because Sony owed Plaintiffs a legal duty to provide reasonable network security (as articulated by the Court above), which was separate and independent from the PSN User Agreement, the Court finds Plaintiffs may pursue both contract and tort remedies, to the extent Plaintiffs' tort claims are not barred by the economic loss doctrine.[17]

Under J'Aire special relationship exception to the economic loss doctrine, the existence of a " special relationship" is based on a determination of the following six factors:

(1) the extent to which the transaction was intended to affect the plaintiff, (2) the foreseeability of harm to the plaintiff, (3) the degree of certainty that the plaintiff suffered injury, (4) the closeness of the connection between the defendant's conduct and the injury suffered, (5) the moral blame attached to the defendant's conduct and (6) the policy of preventing future harm.

J'Aire, 598 P.2d at 63. All six factors must be considered by the court and the presence or absence of one factor is not decisive. Kalitta Air, 315 F.Appx. at 605-06.

Here, Plaintiffs Johnson and Howe allege a " special relationship" between the parties because: (1) Sony developed Sony Online Services for use with PSPs and PS3s and intended its contract with consumers, which required consumers to provide their Personal Information before registering for such services, to effect Plaintiffs and other class members; (2) if Sony did not reasonably perform its contractual obligations, in light of previous instances of admitted security vulnerabilities, Plaintiffs' Personal Information could be disclosed; (3) Plaintiffs suffered injury as a result of the intrusion, including expenses incurred to purchase credit monitoring services, loss of use and value of

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Sony Online Services, loss of use of Third Party Services, and a diminution in value of their Consoles; (4) the injuries were a direct result of Sony's lack of adequate, reasonable, and industry-standard security measures; (5) Sony's conduct warrants moral blame because Sony promised to secure Plaintiffs' Personal Information; and (6) holding Sony accountable will require Sony and other companies to provide reasonable, adequate, and industry-standard security measures. (FACC ¶ ¶ 204-211.)

After considering the six J'Aire factors in light of Plaintiffs' factual allegations, the Court finds Plaintiffs have failed to allege a " special relationship" with Sony beyond those envisioned in everyday consumer transactions, and therefore, negligence is the wrong legal theory on which to pursue recovery for Plaintiffs' economic losses. See Greystone Homes, Inc. v. Midtec, Inc., 168 Cal.App.4th 1194, 1231, 86 Cal.Rptr.3d 196 (Cal. Ct. App. 2008) (" [W]e conclude, as a matter of law, that Midtec did not have a special relationship with Greystone sufficient to support a negligence cause of action for economic losses pursuant to J'Aire. " ). The Court first addresses the degree of certainty that Sony's conduct proximately caused: (1) a loss of use and value of Sony Online Services and a loss of use and value of Third Party Services; (2) costs incurred to purchase credit monitoring services; and (3) a diminution in value of Plaintiffs' Consoles. See Aas, 24 Cal.4th at 646 (" Lacking that fundamental prerequisite to a tort claim, it is difficult to imagine what other factors, singly or in combination, might justify the court in finding liability." ).

First, with respect to the alleged loss of use and value of Sony Online Services and the alleged loss of use and value of Third Party Services, neither are recoverable in negligence because they were not proximately caused by Sony's alleged failure to provide reasonable network security and/or did not result in a measurable loss. Although the amount of recoverable damages is usually a question of fact, which is a determination not properly before the court on a motion to dismiss, the measure of damages, existence of damages, and whether a plaintiff has sufficiently pled a causal connection between the damage and the alleged harm is a question of law. See, e.g., Hendricks v. DSW Shoe Warehouse Inc., 444 F.Supp.2d 775, 779 (D. Mich. 2006) (citing Wolff & Munier, Inc. v. Whiting-Turner Contracting Co., 946 F.2d 1003, 1009 (2d Cir. 1991); Phillips v. TLC Plumbing, Inc., 172 Cal.App.4th 1133, 1139, 91 Cal.Rptr.3d 864 (Cal. Ct. App. 2009); Berardi v. Menicks, 340 Mass. 396, 164 N.E.2d 544, 546-47 (Mass. 1960) (stating that " it is not enough to show the mere possibility of a causal connection; the probability of such a connection must be shown" ). Therefore, because Plaintiffs acknowledge that Sony did not owe Plaintiffs a legal duty to provide uninterrupted PSN service, it is nonsensical, and defies the bounds of common sense for Plaintiffs to simultaneously seek damages for an interruption in PSN service. (Doc. No. 146 at 33-34.) This disconnect in Plaintiffs' factual allegations is additionally supported by Plaintiffs' concession that access to the PSN is free, that Plaintiffs did not purchase premium PSN services, that Plaintiffs could access Third Party Services through other mediums, and that Sony's disclaimed any right to uninterrupted PSN access. See Grawitch v. Charter Commc'ns, Inc., No. 4:12CV01990 AGF, 2013 WL 253534, at *3 (E.D. Mo. Jan. 23, 2013) (finding the plaintiff had failed to state a pecuniary loss because " the upgraded service was provided for free and not at an increased cost" ). Therefore, the Court finds neither of these damages were a foreseeable result of Sony's alleged breach.

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Second, with respect to Howe's ability to recover costs incurred to purchase credit monitoring services, the Court finds Howe has failed to allege why these prophylactic costs were reasonably necessary, and therefore proximately caused by Sony's alleged breach.[18] In assessing whether credit monitoring services in the context of data breach cases are recoverable in negligence, courts have generally analogized to medical monitoring cases, which require a plaintiff to plead that the monitoring costs were both reasonable and necessary.[19] See Stollenwerk, 254 F.Appx. at 666; Pisciotta v. Old Nat. Bancorp, 499 F.3d 629, 639 (7th Cir. 2007). As a result, courts assessing data breach cases have found that where a state allows recovery for medical monitoring damages (as does California), and a plaintiff has sufficiently alleged a threat of identity theft (i.e., the opening of unauthorized accounts), a plaintiff may seek to recover expenses to purchase credit monitoring services. However, as with the recovery of medical monitoring costs, this is a high burden and requires a plaintiff to plead both a logical and temporal connection between the decision to purchase credit monitoring services and the defendant's alleged breach. See Stollenwerk, 254 F.Appx. 664 at 668; Ruiz v. Gap, Inc., 622 F.Supp.2d 908, 915 (N.D. Cal. 2009) aff'd, 380 F.Appx. 689 (9th Cir. 2010) (" Ruiz cannot meet California's standard for recovery of monitoring costs because he has presented no evidence that there was a significant exposure of his personal information, and he has presented no evidence that he has become a victim of identity theft." ).

Here, Plaintiff Howe has not met this high burden because has not alleged any instances of identity theft resulting from the intrusion. See Kahle v. Litton Loan Servicing, LP, 486 F.Supp.2d 705, 709 (S.D. Oh. 2007) (stating that the recovery of credit monitoring services as a measure of cognizable damages is a question of law to be decided by the court). Although Howe alleges that he was forced to close two bank accounts, Howe does not allege when he closed these accounts, why he closed these accounts, or whether he has ever been a victim of identity theft in the past. (FACC ¶ 22.) These allegations remain unchanged even though Plaintiffs were permitted leave to amend the Consolidated Complaint after Sony's initial motion to dismiss. Therefore, in accordance with analogous medical monitoring cases and data breach cases from other districts, the Court finds Howe has failed to allege that his prophylactic credit monitoring costs were a reasonable foreseeable result of Sony's alleged breach.[20]

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Third, with respect to damages relating to an alleged diminution in value of Plaintiffs' Consoles, Plaintiffs have once again failed to allege enough facts for the Court to adequately access the plausibility of the claim. See Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1988) (stating that dismissal can be based on the lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory). As stated in the Court's prior order, without allegations that Plaintiffs are using their Consoles less as a result of the intrusion, or have reported problems with their Consoles after the intrusion, Plaintiffs' allegations of diminution in value fail to allege how Plaintiffs have suffered an appreciable, non-speculative harm. See Aguilera v. Pirelli Armstrong Tire Corp., 223 F.3d 1010, 1015 (9th Cir. 2000). Although the FACC attempts to bolster the allegations in the Consolidated Complaint by alleging that Plaintiffs' Consoles diminished in value as a result of Sony's failure to secure their Personal Information and/or the brief interruption in PSN access, none of these additional allegations support a claim that is " plausible on its face." Bell A. Corp. v. Twombly, 550 U.S. 544, 547, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). As stated by countless courts considering this issue, subjective allegations that a product has diminished in value are insufficient. See, e.g, Arcand v. Brother Int'l Corp., 673 F.Supp.2d 282, 301 (D.N.J. 2009) (" In evaluating whether a plaintiff has suffered an ascertainable loss, the Court need not countenance 'hypothetical or illusory' losses or the wholly subjective expectations of a consumer." ); See In re iPhone Application Litig., 844 F.Supp.2d 1040, 1064 (N.D. Cal. 2012) ( " Purely economic damages to a plaintiff which stem from disappointed expectations from a commercial transaction must be addressed through contract law; negligence is not a viable cause of action for such claims." ).

Therefore, at this stage in the proceedings, although Plaintiffs are not required to come forward with evidence to support their allegations, Plaintiffs must set forth a plausible claim for relief. Plaintiffs have not done that here. See In re iPhone Application Litig., 844 F.Supp.2d at 1064 (" All of the allegations of harm identified in the Amended Consolidated Complaint are either too speculative to support a

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claim for negligence under California law, or they stem from disappointed expectations from a commercial transaction and thus do not form the basis of a negligence claim." ). Instead, after over two years of motion practice conducted by highly sophisticated counsel, Plaintiffs have alleged nothing more than economic damages relating to " disappointed expectations from a commercial transaction," all of which " must be addressed through contract law." Id. " [N]egligence is not a viable cause of action for such claims," and the Court will not allow expensive, potentially burdensome class action discovery to ensue in the absence of a viable cause of action. See Twombly, 550 U.S. at 558 (deficiencies in the complaint " should be exposed at the point of minimum expenditure of time and money by the parties and the court" given the prospect of costly discovery); Grigsby v. Valve Corp., No. C12-0553JLR, 2012 WL 5993755, at *4-6 (W.D. Wash. Nov. 14, 2012) (stating that the Twombly pleading standard is particularly demanding in " complex, large-scale" data breach class action litigation). Accordingly, the Court finds the third J'Aire factor weighs against finding a special relationship between the parties.

Plaintiffs' allegations with respect to the remaining J'Aire factors fare no better. With regard to the first factor, the extent to which the transaction was intended to affect the plaintiff, the Court finds Plaintiffs have failed to allege why the transactions at issue were intended to affect Plaintiffs " in a way particular to [them], as opposed to all potential" consumers. Greystone Homes, 168 Cal.App.4th at 1231 (stating that the " J'Aire test was not met because the sink sales at issue were like any other sink sale made by the product manufacturer--i.e., the product manufacturer had not specially made the sink for the benefit of the [plaintiffs]" ). Therefore, as noted by countless California courts applying J'Aire, " [i]f a duty of care to avoid economic injury existed [in every contract], every manufacturer would become an insurer, potentially forever, against economic loss from negligent defects in a product used for its intended purpose." Fieldstone Co. v. Briggs Plumbing Prods., Inc., 54 Cal.App.4th 357, 368-69, 62 Cal.Rptr.2d 701 (Cal. Ct. App. 1997); see also Ott v. Alfa-Laval Agri, Inc., 31 Cal.App.4th 1439, 1455, 37 Cal.Rptr.2d 790 (Cal. Ct. App. 1995) (" First, neither the pleadings nor the evidence suggests the 1970 milking system was 'intended to affect' the plaintiffs in any way particular to the plaintiffs, as opposed to all potential purchasers of the equipment." ); Greystone, 168 Cal.App.4th at 1230-31. Therefore, because Plaintiffs have failed to allege that Sony developed the goods and services at issue for Plaintiffs' specific benefit, above and beyond what was offered to all consumers, the Court finds this factor weighs against imposing a special relationship between the parties.

With regard to the second factor, the foreseeability of harm, the Court finds, as it did above, that Plaintiffs' injuries were not a foreseeable result of Sony's alleged negligence. As to the fourth factor, the closeness of the connection between the defendant's conduct and the injury suffered, the Court finds Plaintiffs have sufficiently alleged a connection between Sony's conduct and the brief interruption in PSN access. Finally, with regard to fifth and sixth factors, the moral blame attached to Sony's conduct and the policy of preventing future harm, the Court finds Plaintiffs have alleged that Sony knew of its security ...


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