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In re Yahoo Mail Litig.

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

August 12, 2014

IN RE YAHOO MAIL LITIGATION

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For Eric Holland, Plaintiff: Matthew Brian George, LEAD ATTORNEY, Daniel C. Girard, Heidi Marie Hansen Kalscheur, Girard Gibbs LLP, San Francisco, CA.

For Cody Baker, on behalf of themselves and all others similarly situated, Plaintiff: Matthew Brian George, LEAD ATTORNEY, Daniel C. Girard, Heidi Marie Hansen Kalscheur, Girard Gibbs LLP, San Francisco, CA; Laurence D. King, Kaplan Fox & Kilsheimer LLP, San Francisco, CA.

For Brian Pincus, Plaintiff: David A. Straite, LEAD ATTORNEY, Kaplan Fox & Kilsheimer LLP, New York, NY; Frederic S. Fox, LEAD ATTORNEY, Kaplan Fox & Kilsheimer, New York, NY; Laurence D. King, LEAD ATTORNEY, Kaplan Fox & Kilsheimer LLP, San Francisco, CA.

For Rebecca Abrams, Plaintiff: Marc Lawrence Godino, Glancy Binkow & Goldberg LLP, Los Angeles, CA; Laurence D. King, Kaplan Fox & Kilsheimer LLP, San Francisco, CA.

For Halima Nobles, Plaintiff: Laurence D. King, Kaplan Fox & Kilsheimer LLP, San Francisco, CA.

For Yahoo! Inc., Defendant: Rebekah E. Kaufman, LEAD ATTORNEY, Morrison & Foerster LLP, San Francisco, CA; Jacob Alan Sommer, Marc J. Zwillinger, PRO HAC VICE, ZwillGen PLLC, Washington, DC; Robert Travis Petraglia, Morrison and Foerster, San Francisco, CA.

OPINION

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LUCY H. KOH, United States District Judge.

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO DISMISS

This case involves putative class action claims regarding Defendant Yahoo!, Inc.'s (" Yahoo" ) practice of scanning and analyzing emails of non-Yahoo Mail users in purported violation of federal and California anti-wiretapping laws. Plaintiffs Cody Baker, Brian Pincus, Halima Nobles, and Rebecca Abrams, individually and on behalf of those similarly situated (" Plaintiffs" ), allege that Yahoo's operation of its Yahoo Mail service violates their expectation of privacy under the Electronic Communications Privacy Act (ECPA), California's Invasion of Privacy Act (CIPA), and the California Constitution. Plaintiffs filed a Consolidated Class Action Complaint on February 12, 2014. ECF No. 35 (" Compl." ). Before the Court is Yahoo's Motion to Dismiss. ECF No. 37 (" Mot." ). Pursuant to Civil Local Rule 7-1(b), the Court finds this matter appropriate for resolution without a hearing and hereby VACATES the hearing set for August 29, 2014. The Case Management Conference set for August 29, 2014 at 10 a.m. remains as set. For the reasons stated below, the Court DENIES in part and GRANTS in part Yahoo's Motion to Dismiss.

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I. BACKGROUND

A. Factual Allegations

Plaintiffs are four individuals representing a class of individuals who do not use Yahoo's email service (" Yahoo Mail" ) but have sent emails to Yahoo Mail users from non-Yahoo email addresses. Compl. ¶ ¶ 15-18. Plaintiffs allege Yahoo's practices while operating Yahoo Mail violate state and federal anti-wiretapping laws and invade their protected privacy interests under the California Constitution. Id. ¶ ¶ 5-7. Plaintiffs seek injunctive and declaratory relief and statutory damages on behalf of a class of non-Yahoo Mail users. Id. ¶ 7. Plaintiffs' proposed class consists of all persons in the United States who are not Yahoo Mail users and who sent emails to or received emails from a Yahoo Mail user between October 2, 2011 and the present. Id. ¶ 97.

1. Yahoo Mail and Yahoo's Use of Scanned Emails

Yahoo operates Yahoo Mail as a free web-based email service. Id. ¶ ¶ 20-23. More than 275 million users have registered for Yahoo Mail to create @yahoo.com, @ymail.com, or @rocketmail.com email addresses. Id. ¶ ¶ 20-21. Before signing up for a Yahoo Mail account, potential users must provide Yahoo with personal information such as their name, birthday, telephone number, and account information. Id. ¶ 31.

In order to provide Yahoo Mail as a free email service to users, Yahoo charges advertisers to display advertisements on Yahoo Mail webpages. Id. ¶ 23. Roughly 75% of Yahoo's revenue in 2013 came from advertising. Id. ¶ 28. Plaintiffs allege Yahoo can increase its revenues by charging advertisers higher rates to display targeted advertisements to Yahoo Mail users. Id. Thus, Yahoo has a financial incentive to scan and store email content to allow advertisers to target individuals based on certain personal characteristics. Id.

The instant dispute concerns Yahoo's interception, scanning, and storage of Yahoo Mail users' incoming and outgoing emails for content, specifically the content of emails to and from non-Yahoo Mail users with whom Yahoo Mail users communicate. Plaintiffs allege Yahoo intercepts and scans Yahoo Mail users' emails " during transit and before placing the emails into storage." Id. ¶ 24. Plaintiffs allege Yahoo scans, analyzes, collects, and stores user information without their consent. Id. ¶ ¶ 1, 3, 5, 26.

2. Yahoo Terms and Privacy Policy

Three relevant agreements exist between Yahoo and Yahoo Mail users: Yahoo Terms of Service (ECF No. 35-1, " TOS" ), Yahoo Global Communications Additional Terms of Service for Yahoo Mail and Yahoo Messenger (ECF No. 35-4, " ATOS" ), and Yahoo Privacy Policy (ECF No. 35-2). When creating a Yahoo Mail account, Yahoo directs users to view the ATOS and Privacy Policy via hyperlinks. Compl. ¶ 31. The sentence " I agree to the Yahoo Terms and Privacy" appears above the " Create Account" Button. " Id.; see also Mot. at 7. The phrase " Yahoo Terms" links to the ATOS. Compl. ¶ 31. The word " Privacy" is an individual hyperlink to Yahoo's Privacy Policy. Id. The Complaint does not allege whether " Yahoo Terms" links to the TOS. However, Plaintiff's Opposition concedes that the TOS, ATOS, and Privacy Policy comprise the agreements between Yahoo and its users. ECF No. 39 (" Opp'n" ) at 11.

Section 1(c) of the ATOS references Yahoo's practice of scanning and analyzing users' email content. Additionally, the ATOS places responsibility on Yahoo Mail users to notify about these scanning policies non-users with whom they communicate. The ATOS in relevant part provides:

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Please note that your Yahoo Messenger account is tied to your Yahoo Mail account. Therefore, your use of Yahoo Messenger and all Yahoo Messenger services will be subject to the TOS and laws applicable to the Applicable Yahoo Company in Section 10. Yahoo's automated systems scan and analyze all incoming and outgoing communications content sent and received from your account (such as Mail and Messenger content including instant messages and SMS messages) including those stored in your account to, without limitation, provide personally relevant product features and content, to match and serve targeted advertising and for spam and malware detection and abuse protection. By scanning and analyzing such communications content, Yahoo collects and stores the data. Unless expressly stated otherwise, you will not be allowed to opt out of this feature. If you consent to this ATOS and communicate with non-Yahoo users using the Services, you are responsible for notifying those users about this feature.

ATOS § 1 (c) (emphasis in original). Plaintiffs allege that Yahoo added the line " By scanning and analyzing such communications content, Yahoo collects and stores the data" " at some time during" the proposed class period. Compl. ¶ 42. The phrase " collects and stores" is a hyperlink that leads the user to a page titled " Yahoo Mail FAQ." ECF No. 35-7. The FAQ page explains that Yahoo's scanning technology " looks for patterns, keywords, and files" in users' emails. Compl. ¶ 47. Yahoo further discloses that it " may anonymously share specific objects from a message with a 3rd party to provide a more relevant experience." ECF No. 35-7; Compl. ¶ 47.

Yahoo's TOS and Privacy Policy do not explicitly reference the content of email sent between users and non-users. Instead, the TOS provides:

Registration Data and certain other information about you are subject to our applicable privacy policy. For more information, see the full Yahoo Privacy Policy at http://info.yahoo.com/privacy/us/yahoo/ ... You understand that through your use of the Yahoo Services you consent to the collection and use (as set forth in the applicable privacy policy) of this information, including the transfer of this information to the United States and/or other countries for storage, processing and use by Yahoo and its affiliates.

TOS § 4. Yahoo's Privacy Policy also does not explicitly mention email content. The policy states: " Yahoo collects personal information when you register with Yahoo, when you use Yahoo products or services, when you visit Yahoo pages or the pages of certain Yahoo partners, and when you enter promotions or sweepstakes." ECF No. 35-2 at 1. Furthermore, the Privacy Policy suggests it covers only " how Yahoo treats personal information that Yahoo collects and receives, including information related to your past use of Yahoo products and services." Id. Yahoo goes on to define personal information as " personally identifiable" information such as " your name address, email address, or phone number, and that is not otherwise publicly available." Id. The Privacy Policy also discloses that Yahoo provides users' personal information to " trusted partners who work on behalf of or with Yahoo under confidentiality agreements." Id. at 2; Compl. ¶ 37.

Yahoo also has a number of other terms and privacy documents in its Terms Center and Privacy Center online. Compl. ¶ ¶ 43-46. Plaintiffs' Complaint references one privacy document that applies to Yahoo Mail. ECF No. 35-6. The document has a section titled " Personally Relevant

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Experiences" that speaks to the scanning and analysis of email content:

Yahoo provides personally relevant product features, content, and advertising, and spam and malware detection by scanning and analyzing Mail, Messenger, and other communications content. Some of these features and advertising will be based on our understanding of the content and meaning of your communications. For instance, we scan and analyze email messages to identify key elements of meaning and then categorize this information for immediate and future use.

ECF No. 35-6.

3. Class Allegations and Relief Sought

Plaintiffs allege that Yahoo's operation of Yahoo Mail violates the Electronic Communications Privacy Act (ECPA), California's Invasion of Privacy Act (CIPA), and Article I Section I of the California Constitution. Compl. ¶ ¶ 5-6. Plaintiffs seek relief on behalf of a class of persons who are not Yahoo Mail users who have either sent emails to or received emails from a Yahoo Mail user. Id. ¶ 97. The proposed class period begins October 2, 2011 and extends to the present. Id. Plaintiffs seek certification of a class of non-Yahoo Mail users, injunctive relief, declaratory relief, statutory damages, and disgorgement of Yahoo's revenues from unjust enrichment related to Yahoo's interception, scanning, and storage of emails from and to non-Yahoo Mail users. Id. at p.18.

B. Procedural History

Beginning on October 2, 2013, Plaintiffs filed six separate class action complaints against Yahoo in the Northern District of California, alleging that Yahoo scans and analyzes emails in violation of privacy laws. On December 18, 2013, this Court related all six pending actions because they involve the same defendant, Yahoo, and " substantially the same basic allegations" that Yahoo's " interception, storage, reading and scanning of email violates Plaintiffs' and other consumers' rights of privacy." ECF No. 14 at 2. On January 8, 2014, two of the Plaintiffs filed stipulations to dismiss their actions, which the Court granted. See Kevranian v. Yahoo!, 13-cv-04547-LHK, ECF No. 36. On January 22, 2014, this Court consolidated the remaining four cases for pretrial purposes, ECF No. 27, and appointed interim class counsel, ECF No. 29. Plaintiffs filed a consolidated class action complaint on February 12, 2014. ECF No. 35.

On March 5, 2014, Yahoo filed a Motion to Dismiss Plaintiffs' claims. ECF No. 37. On March 26, 2014, Plaintiffs filed an Opposition to Yahoo's Motion to Dismiss. ECF No. 39. On April 7, 2014, Yahoo filed a Reply. ECF No. 41 (" Reply" ).

II. LEGAL STANDARDS

A. Request for Judicial Notice

The Court generally may not look beyond the four corners of a complaint in ruling on a Rule 12(b)(6) motion, with the exception of documents incorporated into the complaint by reference, and any relevant matters subject to judicial notice. See Swartz v. KPMG LLP, 476 F.3d 756, 763 (9th Cir. 2007); Lee v. City of L.A., 250 F.3d 668, 688-89 (9th Cir. 2001). Under the doctrine of incorporation by reference, the Court may consider on a Rule 12(b)(6) motion not only documents attached to the complaint, but also documents whose contents are alleged in the complaint, provided the complaint " necessarily relies" on the documents or contents thereof, the document's authenticity is uncontested, and the document's relevance is uncontested. Coto Settlement v. Eisenberg, 593 F.3d 1031, 1038 (9th Cir. 2010); see Lee, 250 F.3d at 688-89. The purpose

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of this rule is to " prevent plaintiffs from surviving a Rule 12(b)(6) motion by deliberately omitting documents upon which their claims are ...


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