Mendoza et al v. Microsoft, Inc., No. 2:2014cv00316 - Document 58 (W.D. Wash. 2014)

Court Description: ORDER granting 50 Defendant's Motion to Dismiss for Failure to State a Claim. Plaintiffs have not pled any facts to establish a concrete injury-in-fact under Article III and as required by the specific statutes, the Court DISMISSES Plaintiffs UCL and DTPA claims, by Judge Marsha J. Pechman.(MD)

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Mendoza et al v. Microsoft, Inc. Doc. 58 1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT SEATTLE 8 9 10 MANUEL MENDOZA, et al., 11 12 13 14 CASE NO. C14-316-MJP Plaintiffs, ORDER GRANTING MOTION TO DISMISS v. MICROSOFT INC, Defendant. 15 16 This matter comes before the Court on Defendant Microsoft Inc.‘s motion to dismiss. 17 (Dkt. No. 50.) Having reviewed the motion, response (Dkt. No. 54), reply (Dkt. No. 56), and all 18 related papers, the Court GRANTS the motion. Background 19 20 Defendant Microsoft owns and operates a well-known gaming portal called Xbox LIVE, 21 which provides streaming video via internet access, online gaming services, online video rental 22 services, and online video services. (Dkt. No. 1 at 1.) Plaintiffs are former subscribers to X-Box 23 LIVE. (Id. at 14-15.) They allege Microsoft retained and disclosed their names, addresses, 24 ORDER GRANTING MOTION TO DISMISS- 1 Dockets.Justia.com 1 credit information, billing addresses, and video programming viewing histories after cancellation 2 of their membership services with Microsoft‘s X-Box LIVE Gaming System. (Id. at 2.) The 3 Complaint further claims: 4 5 6 This information [personally identifiable information] is sold by Microsoft for profit, shared with other vendors, sold to data mining companies, and used to populate Microsoft‘s new Search engine known as Bing with data, data markers, metrics, demographic information, and custom-tailored search results and advertising. 7 (Id. at 3.) Plaintiffs also contend that Microsoft‘s privacy policy is unclear and located 8 piecemeal in various sections of its corporate website and hidden in a third-level webpage not 9 usually seen by consumers. (Id. at 6-10.) Plaintiffs do not identify when these alleged events 10 occurred, how the disclosures happened, to whom the information was disclosed/sold, or even 11 that Plaintiffs‘ own information was disclosed and personal knowledge of such disclosure and 12 retention. (Id. at 1-15.) 13 Plaintiffs claim Microsoft‘s practices violated the Video Privacy Protection Act 14 ( VPPA ), California Customer Records Act ( CCRA ), California Unfair Competition Law 15 ( UCL ), and Texas Deceptive Trade Practices Act ( DTPA ). They seek to certify a national 16 class action comprised of all individuals and entities in the United States and its territories that 17 have cancelled their subscriptions to Microsoft‘s services. (Id. at 15.) 18 B. Procedural Posture 19 Plaintiffs filed this lawsuit in the United States District Court for the Western District of 20 Texas. (Dkt. No. 1.) Microsoft initially moved for dismissal under 28 U.S.C. § 1406(a) or to 21 transfer to this District. (Dkt. No. 23 at 10.) Microsoft withdrew its motion to dismiss before the 22 Texas District Court reached the merits. The Court granted the motion to transfer. (Id.) 23 24 ORDER GRANTING MOTION TO DISMISS- 2 1 Microsoft now moves to dismiss on two theories: (1) the Court lacks jurisdiction where 2 Plaintiffs fail to satisfy Article III‘s standing requirements and should be dismissed under Fed. R. 3 Civ. P. 12(b)(1); and (2) the complaint fails to state a claim. (Dkt. No. 50.) Plaintiffs counter 4 that the complaint is sufficient to establish standing. (Dkt. No. 54.) The Court does not reach 5 Plaintiffs‘ other argument—that the Fed. R. Civ. P. 12(b)(6) motion is procedurally improper— 6 because the Court dismisses the Complaint under Fed. R. Civ. P. 12(b)(1). 7 8 9 Discussion I. Legal Standard Motion to Dismiss Under 12(b)(1) Federal courts are courts of limited jurisdiction. Gunn v. Minton, –––U.S. ––––, 133 10 S.Ct. 1059, 1064 (2013) (citation omitted). As such, this Court is to presume that a cause lies 11 outside this limited jurisdiction, and the burden of establishing the contrary rests upon the party 12 asserting jurisdiction. Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994) 13 (citations omitted). A Rule 12(b)(1) motion to dismiss for lack of subject matter jurisdiction may 14 be either facial or factual. Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1038 (9th Cir. 15 2004). A facial attack on subject matter jurisdiction is based on the assertion that the allegations 16 contained in the complaint are insufficient to invoke federal jurisdiction. Id. A jurisdictional 17 challenge is factual where the challenger disputes the truth of the allegations that, by 18 themselves, would otherwise invoke federal jurisdiction.‘ Pride v. Correa, 719 F.3d 1130, 1133 19 n. 6 (9th Cir. 2013) (quoting Safe Air for Everyone, 373 F.3d at 1039)). 20 Microsoft‘s jurisdictional challenge is to Plaintiffs‘ standing under Article III. To 21 establish Article III standing, a plaintiff must show (1) a concrete injury that is actual or 22 imminent and not hypothetical; (2) fairly traceable to the defendant's allegedly wrongful 23 conduct; (3) that is likely to be redressed by a favorable decision. Lujan v. Defenders of 24 ORDER GRANTING MOTION TO DISMISS- 3 1 Wildlife, 504 U.S. 555, 560–61 (1992). A plaintiff must demonstrate standing for each claim 2 and for each form of relief sought. DaimlerChrysler Corp. v. Cuno, 547 U.S. 332, 352, 126 3 S.Ct. 1854, 164 L.Ed.2d 589 (2006). 4 Defendant makes two challenges to Plaintiffs‘ standing. First, it makes a factual 5 challenged to the Court‘s jurisdiction over the claims of Plaintiffs Manuel Mendoza and Frank 6 Ortega, who Microsoft argues never had X-Box LIVE accounts. (Dkt. No. 50 at 14.) Second, 7 Microsoft makes a facial challenge to the insufficiency of the pleadings. It argues Plaintiffs have 8 not alleged a particularized injury. (Id. at 15-17.) 9 10 B. Standing of Mendoza and Ortega Microsoft‘s challenge to Plaintiff Manuel Mendoza and Frank Ortega‘s standing is based 11 on the company‘s own records, which lack any record of Mendoza or Ortega subscribing to 12 Xbox LIVE. (Dkt. No. 50 at 14.) Microsoft argues Mendoza or Ortega cannot assert claims 13 when they never purchased the X-Box LIVE services. (Id.) 14 Plaintiffs Mendoza and Ortega have the burden of proving that the Court has subject 15 matter jurisdiction, including the standing requirements of Article III. Tosco Corp. v. 16 Communities for a Better Environment, 236 F.3d 495, 499 (9th Cir 2001). When a defendant 17 factually challenges the plaintiff‘s assertion of jurisdiction, a court does not presume the 18 truthfulness of the plaintiff‘s allegations and may consider evidence extrinsic to the complaint. 19 See Terenkian v. Republic of Iraq, 694 F.3d 1122, 1131 (9th Cir. 2012). Once the moving party 20 has converted the motion to dismiss into a factual motion by presenting affidavits or other 21 evidence properly brought before the court, the party opposing the motion must furnish affidavits 22 or other evidence necessary to satisfy its burden of establishing subject matter jurisdiction. 23 Savage v. Glendale Union High Sch., 343 F.3d 1036, 1040 fn. 2 (9th Cir. 2003). 24 ORDER GRANTING MOTION TO DISMISS- 4 1 Both Mendoza and Ortega offer declarations to establish they had X-Box LIVE accounts. 2 Ortega represents I subscribed to Microsoft‘s X-Box Live service. My screen name was 3 Sebian09. (Dkt. No. 54-8 at 2.) Likewise, Mendoza states, I subscribed to Microsoft‘s X-Box 4 Live service. I do not remember my screen name. (Id. at 3.) Plaintiffs also claim to have other 5 evidence regarding their accounts, which they will provide these records to Microsoft in 6 discovery. (Dkt. No. 54 at 25.) I n response, Microsoft presents additional evidence that the 7 screen name Sebian09 never existed. (Dkt. No. 57.) 8 This case is in the early stages and the Court finds Mendoza and Ortega have sufficiently 9 established that they subscribed to X-Box Live. Lujan, 504 U.S. at 561 (Plaintiffs‘ burden of 10 proof is commiserate with the level of proof required at each stage of the proceedings). Both 11 state under penalty of perjury they subscribed to the Microsoft service, which for purposes of a 12 motion to dismiss is sufficient. (Dkt. No. 54-8 at 2-3.) The Court therefore DENIES the motion 13 on this ground without prejudice. Nonetheless, as discussed below, their claims still fail to 14 establish standing under Article III‘s injury-in –fact requirement and are dismissed. 15 C. Plaintiffs Fail to Allege Particularized Injury The first prong of Article III‘s standing requirement—an injury-in-fact—demands a 16 17 Plaintiff establish (1) an invasion of a legally protected interest which is (a) concrete and 18 particularized, and (b) actual or imminent, not conjectural or hypothetical. Lujan, 504 U.S. at 19 560. 20 Turning to the CCRA and UCL claims, the Parties agree that under the Ninth Circuit‘s 21 decision in Edwards v. First Am. Corp., 610 F.3d 514, 517 (9th Cir. 2010), a plaintiff may 22 establish injury-in-fact based on violations of these statutes. (Dkt. Nos. 50 at 15, 54 at 16.) In 23 applying Edwards, however, courts within the Circuit require a plaintiff to allege facts to show 24 ORDER GRANTING MOTION TO DISMISS- 5 1 the claimed statutory injury is particularized as to them. Jewel v. National Security Agency, 673 2 F.3d 902, 908 (9th Cir. 2011); Burton v. Time Warner Cable Inc., 2013 WL 3337784, *7 (C.D. 3 Cal. 2013)(addressing CCRA claim), In re Hulu Privacy Litigation, 2012 WL 2119193, *8 4 (N.D.Cal., 2012)(addressing VPPA claim). Consequently, courts will find a plaintiff has met 5 Article III‘s requirement for particularized injury when the facts alleged in the Complaint 6 establish that the violations occurred as to the individual plaintiff. See Jewel, 673 F.3d at 908. 7 The Court finds that the Complaint fails to identify an injury that is actual or imminent 8 and particularized. Plaintiffs offer broad conclusory statements and formulaic recitations of the 9 VPPA and CRRA statues. Plaintiffs do not allege a single fact to support their allegation that 10 Microsoft allegedly retained and disclosed personally identifiable information. Absent is any 11 allegation as to who Microsoft disclosed this information to, when the disclosures occurred, and 12 how they occurred, let alone that these acts particularly injured the named Plaintiffs. (Dkt. No. 13 1.) Indeed, a vast majority of Plaintiffs‘ allegations appear to derive from information or 14 belief or conjecture based on Microsoft‘s privacy policies. For example, the Complaint alleges: 15 16 17 18 19 20 40. Indeed, Microsoft‘s privacy policy goes on to state that: Microsoft may retain your personal information for a variety of reasons, such as to comply with our legal obligations, resolve disputes, enforce our agreements, and as long as necessary and to provide services. The Privacy Policy also states, Please keep in mind that this information is not a complete description of our practices. Armed with this knowledge that Microsoft indefinitely retains X-Box Live subscribers‘ data, inherent in and the logical inference of this statement is that Microsoft continues to profit from the use of its former subscribers‘ personal information, including their video programming viewing histories, even though these individuals have closed their accounts and cancelled their subscriptions with X-Box Live and Microsoft. 21 (Dkt. No. 1 at 11)(emphasis added). This and other of Plaintiffs‘ broad allegations fail to allege 22 with particularity how Microsoft violated the VPPA and CCRA as to each Plaintiff. See Burton, 23 2013 WL 3337784 at *7; contra Low v. Linkedin Corp., 900 F.Supp.2d 1010, 1021 (N.D. Cal. 24 ORDER GRANTING MOTION TO DISMISS- 6 1 2012)(Plaintiff alleged concrete injury when complaint contained specific examples of 2 information transmitted to third-parties and how Defendant used this information). 3 Plaintiffs attempt to save their claims by attaching news articles and authenticated 4 printouts from websites and referring to their motion for class certification. (Dkt. Nos. 54-1-545 9.) A facial Rule 12(b)(1) motion like the one at issue here confine[s] the inquiry to allegations 6 in the complaint. Savage, 343 F.3d at 1039 n.2. Consequently, the Court does not look 7 beyond the complaint to a plaintiff‘s moving papers, such as a memorandum in opposition to a 8 defendant‘s motion to dismiss or the Motion for Class Certification. Schneider v. Cal. Dep‘t of 9 Corr., 151 F.3d 1194, 1197 n.1 (9th Cir. 1998). The documents Plaintiffs offer in response to 10 this motion are not incorporated into the Complaint and the Court does not consider them. (See 11 e.g. Dkt. No. 1 makes no reference to comScore or a Beacon program.) In sum, the Court finds 12 Plaintiffs failed to allege sufficient facts to establish a particularized injury under Article III for 13 the VPPA and CRRA claims. 14 The Court also finds that Plaintiffs lack standing to bring their UCL and DTPA claims. 15 To establish standing under the UCL, a plaintiff must allege that she suffered injury in fact and 16 [] lost money or property as a result of the unfair competition. Cal. Bus. & Prof.Code § 17204; 17 see also In re iPhone Application Litigation, 2013 WL 6212591, * 6 (N.D.Cal .2013); Birdsong 18 v. Apple, Inc., 590 F.3d 955, 959–60 (9th Cir. 2009). Likewise, Texas law requires a plaintiff to 19 allege specific injury to have standing under DTPA. See Martin v. Home Depot U.S.A., Inc., 20 369 F. Supp. 2d 887 (W.D. Tex. 2005) (citing Martin v. Ford Motor Co., 914 F.Supp. 1449 21 (S.D.Tex. 1996) (Texas law precludes a claim where there is no injury). Yet, Plaintiffs allege no 22 particularized injury caused by Microsoft allegedly violating these consumer laws. Plaintiffs 23 instead cursorily state they have suffered injuries. (Dkt. No. 1 at 19.) This is insufficient to 24 ORDER GRANTING MOTION TO DISMISS- 7 1 establish injuries for UCL and DTPA claims. Because Plaintiffs have not pled any facts to 2 establish a concrete injury-in-fact under Article III and as required by the specific statutes, the 3 Court DISMISSES Plaintiffs‘ UCL and DTPA claims. 4 5 Conclusion The Court GRANTS the motion and DISMISSES Plaintiffs‘ claims on the grounds they 6 fail to allege sufficient facts to establish Article III standing. The clerk is ordered to provide 7 copies of this order to all counsel. 8 Dated this 11th day of September, 2014. 9 A 10 11 Marsha J. Pechman Chief United States District Judge 12 13 14 15 16 17 18 19 20 21 22 23 24 ORDER GRANTING MOTION TO DISMISS- 8

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