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In re Linkedin User Privacy Litigation

United States District Court, N.D. California, San Jose Division

March 28, 2014

IN RE LINKEDIN USER PRIVACY LITIGATION

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO DISMISS [Re: Docket No. 81]

EDWARD J. DAVILA, District Judge.

Plaintiff Khalilah Wright ("Wright" or "Plaintiff") brings this putative class action against Defendant LinkedIn Corporation ("Defendant" or "LinkedIn"). Presently before the Court is LinkedIn's Motion to Dismiss Plaintiff's Second Amended Consolidated Complaint ("SAC"). The Court has fully reviewed the parties' submissions and heard oral arguments of counsel presented at the hearing on November 22, 2013. For the reasons explained below, the Court has determined that LinkedIn's Motion will be GRANTED IN PART and DENIED IN PART.

I. BACKGROUND

The following facts are taken from Plaintiff's SAC. LinkedIn owns and operates the website www.LinkedIn.com, which provides an online community for professional networking.

Prospective members may sign up for a membership by providing a valid email address and registration password, which LinkedIn stores on its database. Once registered, a member may create a free online professional profile containing such information as employment and educational history.

When members register, they are required to confirm that they agree to LinkedIn's User Agreement ("User Agreement") and Privacy Policy ("Privacy Policy"). The Privacy Policy contains a statement that "[a]ll information that you provide will be protected with industry standard protocols and technology."

For a monthly fee, members can upgrade to a paid "premium" subscription which grants them increased networking tools and capabilities. Members who purchase a premium subscription agree to the same terms and services of the User Agreement and Privacy Policy as if they were non-paying members.

Plaintiff alleges that sometime in 2012 hackers infiltrated LinkedIn's computer systems and services. On June 6, 2012, the hackers posted approximately 6.5 million stolen LinkedIn users' passwords on the Internet. On or around June 9, 2012, LinkedIn released a statement on its blog stating that it had recently completed a switch of its password encryption method from a system that stored member passwords in a hashed format to one that used both salted[1] and hashed[2] passwords for increased security.

Plaintiff alleges that she paid for a premium subscription from March 2010 until approximately August 2010. She alleges that her LinkedIn password was retrieved by the hackers and posted on the Internet on June 6, 2012. She alleges that, prior to her purchase of the premium subscription, she read LinkedIn's User Agreement and Privacy Policy and that, had LinkedIn disclosed its lax security practices, she would have viewed the premium subscription as less valuable and would either have attempted to purchase a premium subscription at a lower price or not at all.

II. LEGAL STANDARDS

a. Motion to dismiss under Rule 12(b)(1)

A Rule 12(b)(1) motion to dismiss tests whether a complaint alleges grounds for federal subject matter jurisdiction. If the plaintiff lacks standing under Article III of the U.S. Constitution, then the court lacks subject matter jurisdiction, and the case must be dismissed. See Steel Co. v. Citizens for a Better Env't , 523 U.S. 83, 101-02 (1998).

A jurisdictional challenge may be facial or factual. Safe Air for Everyone v. Meyer , 373 F.3d 1035, 1039 (9th Cir. 2004). Where the attack is facial, the court determines whether the allegations contained in the complaint are sufficient on their face to invoke federal jurisdiction, accepting all material allegations in the complaint as true and construing them in favor of the party asserting jurisdiction. See Warth v. Seldin , 422 U.S. 490, 501 (1975). Where the attack is factual, however, "the court need not presume the truthfulness of the plaintiff's allegations." Safe Air for Everyone , 373 F.3d at 1039. In resolving a factual dispute as to the existence of subject matter jurisdiction, a court may review extrinsic evidence beyond the complaint without converting a motion to dismiss into one for summary judgment. See id.; McCarthy v. United States , 850 F.2d 558, 560 (9th Cir. 1988) (holding that a court "may review any evidence, such as affidavits and testimony, to resolve factual disputes concerning the existence of jurisdiction"). Once a party has moved to dismiss for lack of subject matter jurisdiction under Rule 12(b)(1), the opposing party bears the burden of establishing the Court's jurisdiction. See Kokkonen v. Guardian Life Ins. Co. , 511 U.S. 375, 377 (1994); Chandler v. State Farm Mut. Auto. Ins. Co. , 598 F.3d 1115, 1122 (9th Cir. 2010).

b. Motion to dismiss under Rule 12(b)(6) and Rule 9(b)

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) of the Federal Rules of Civil Procedure 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). 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 Mutual Ins. Co. , 80 F.3d 336, 337-38 (9th Cir. 1996). The Court is not bound, however, to accept "legal conclusions" as true. Ashcroft v. Iqbal , 556 U.S. 662 (2009).

To avoid a Rule 12(b)(6) dismissal, a complaint need not contain detailed factual allegations; rather, it must plead "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570 (2007). However, "a plaintiff's obligation to provide the grounds' of his entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Id. at 555 (citation omitted). "Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact)." Id . (citation omitted). In spite of the deference the court is bound to pay to the plaintiff's allegations, 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 the... 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 (1983).

But "[w]hen there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief." Iqbal , 556 U.S. at 679. 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." Id. at 677 (citing Twombly , 550 U.S. at 556). "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).

Complaints alleging fraud must satisfy the heightened pleading requirements of Federal Rule of Civil Procedure 9(b). Rule 9(b) requires that in all averments of fraud or mistake, the circumstances constituting fraud or mistake shall 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)) ("Averments of fraud must be accompanied by the who, what, when, where, and how' of the misconduct charged.") Additionally, "the plaintiff must plead facts explaining why the statement was false when it was made." Smith v. Allstate Ins. Co. , 160 F.Supp.2d 1150, 1152 (S.D. Cal. 2001) (citation omitted); see In re GlenFed, Inc. Sec. Litig. , 42 F.3d 1541, 1549 (9th Cir. 1994) (en banc) (superseded by statute on other grounds).

Regardless of the title given to a particular claim, allegations grounded in fraud are subject to Rule 9(b)'s pleading requirements. See Vess , 317 F.3d at 1103-04. Even where fraud is not an essential element of a consumer protection claim, Rule 9(b) applies where a complaint "rel[ies] entirely on [a fraudulent course of conduct] as the bases of that claim... the claim is said to be grounded in fraud' or to sound in fraud, ' and the pleading... as a whole must satisfy the particularity requirement of Rule 9(b)." Kearns v. Ford Motor Co. , 567 F.3d 1120, 1125 (9th Cir. 2009) (quoting Vess , 317 F.3d at 1103-04); Bros. v. Hewlett-Packard Co. , 2006 WL 3093685, at *7 (N.D. Cal. Oct. 31, 2006).

III. DISCUSSION

Linkedln moves to dismiss all claims in the SAC for lack of standing pursuant to Rule 12(b)(1) and failure to state a claim pursuant to Rule 12(b)(6).

The SAC contains three claims for: 1) violation of the fraud prong of California's Unfair Competition Law ("UCL"), Cal. Bus. & Prof. Code, ยง 17200 et seq., 2) violation of the unfair prong of the UCL, and 3) breach of contract. Plaintiff concedes that her second and third claims should be dismissed and asks that the Court do so without prejudice. Docket No. 87, Pl.'s Opp. Brief at 3. Linkedln asks that the Court dismiss all three claims with prejudice.

For the reasons explained below, the Court DISMISSES Plaintiff's second and third claims with prejudice. Linkedln's motion is DENIED as to Plaintiff's first claim.

a. Standing under Article III ...


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