SAUNDRA BROWN ARMSTRONG, District Judge.
Plaintiff Peter Deacon ("Plaintiff) brings the instant putative action on behalf of himself and other residents of Michigan who use the internet radio services of Defendant Pandora Media, Inc. ("Pandora"). He alleges that Pandora improperly disclosed his "private" music preferences and other information to the public and his Facebook "friends" in violation of Michigan's Video Rental Privacy Act ("VRPA"), Michigan Compiled Laws ("MCL") § 445.1712, and the Michigan Consumer Protection Act ("MCPA"), MCL § 445.903. Plaintiff alleges subject matter jurisdiction based on diversity. See 28 U.S.C. § 1332. Venue is proper, as Pandora resides in this District. See id. § 1391(b)(1).
The parties are presently before the Court on Defendant Pandora's Motion to Dismiss, pursuant to Federal Rule of Civil Procedure 12(b)(6). Dkt. 20. Having read and considered the papers filed in connection with this matter and being fully informed, the Court hereby GRANTS the motion to dismiss with leave to amend, for the reasons set forth below. The Court, in its discretion, finds this matter suitable for resolution without oral argument. See Fed.R.Civ.P. 78(b); N.D. Cal. Civ. L.R. 7-1(b).
Pandora operates an internet radio service through its website located at www.pandora.com. Compl. ¶¶ 2-4, Dkt. 1. Pandora's service allows its subscribers to create their own, customized "radio stations" based on the subscriber's selected preferences. Id. ¶ 3. For instance, a subscriber may enter the name of a particular artist
To facilitate the streaming process, Pandora "temporarily store[s] a digital copy of the song" on the subscriber's computer. Id. ¶ 20. The file remains on the subscriber's computer until the song has finished playing, at which time it is automatically deleted by Pandora. Id. Pandora's Terms of Use, with which all subscribers must abide as a condition to use Pandora's service, make clear that subscribers do not have any ownership rights to the music Pandora streams for playback and that they cannot download any of the songs. Id. ¶¶ 24, 31. In particular, section 3.2 of Pandora's Terms of Service specifies that subscribers shall not "copy, store, edit, change, prepare any derivative work of or alter in any way any of the tracks streamed through the Pandora Services," while section 3.1 prohibits subscribers from "reproduc[ing] copyrighted materials." Sterry Decl. Exs. A-I ("Terms of Service"), Dkt. 20-1. In addition, songs cannot be purchased from Pandora, though Pandora provides links to Apple's iTunes service and/or Amazon.com where subscribers may purchase the song being played from those vendors. Compl. ¶ 21.
When subscribers sign up for a Pandora account, a "Personal Page" is automatically created for them. Id. ¶ 23. The page contains the subscriber's full name, profile information, recent "station," recent activity, listening history, bookmarked tracks and bookmarked artists (collectively "Protected Information"). Id. Although Pandora claims that Protected Information is available only to other registered Pandora subscribers with knowledge of the particular subscriber's unique email address, such information allegedly is "publically available and searchable on the World Wide Web for anyone to view." Id. ¶ 6. In addition, on April 21, 2010, Pandora unilaterally integrated its subscribers' profile pages with their Facebook accounts. Id. ¶ 7. As a result, a Pandora subscriber's Facebook "friends" allegedly are now able to access "sensitive listening records" and "musical preferences" from the Pandora subscriber's profile. Id.
Plaintiff commenced the instant putative class action in this Court on September 20, 2011. The Complaint asserts two causes of action. First Plaintiff alleges that the disclosure of subscribers' Protected Information to other Pandora and non-Pandora subscribers violates the VRPA. See Compl. ¶¶ 44-46. Second, Plaintiff contends that Pandora has violated the MCPA by disclosing his Protected Information to his Facebook contacts. See id. ¶ 52-54.
Id. ¶ 35. As relief, Plaintiff seeks statutory damages under the VRPA in the amount of $5,000 per class member. Id. ¶¶ 9, 48. With respect to his claim under the MCPA, Plaintiff seeks "an injunction requiring Pandora to cease its unlawful conduct." Id. ¶ 55.
In response to the Complaint, Pandora now moves to dismiss Plaintiffs claims under Rule 12(b)(6). Dkt. 20. Pandora first contends that Plaintiff has failed to allege facts showing that he suffered an injury-in-fact, and hence, subject matter jurisdiction is lacking.
Under Federal Rule of Civil Procedure 12(b)(1), a complaint may be dismissed for lack of subject matter jurisdiction. "A jurisdictional challenge under Rule 12(b)(1) may be made either on the face of the pleadings or by presenting extrinsic evidence." Warren v. Fox Family Worldwide, Inc., 328 F.3d 1136, 1139 (9th Cir. 2003). In a "facial" challenge, the court assumes the truth of plaintiffs factual allegations and draws all reasonable inferences in its favor. Doe v. Holy See, 557 F.3d 1066, 1073 (9th Cir.2009). In the case of a "speaking" motion, the court is not restricted to the face of the pleadings and "may review any evidence, such as affidavits and testimony, to resolve factual disputes concerning the existence of jurisdiction." McCarthy v. United States, 850 F.2d 558, 560 (9th Cir.1988). "Once challenged, the party asserting subject matter jurisdiction has the burden of proving its existence." Rattlesnake Coalition v. United States Envtl. Protection Agency, 509 F.3d 1095, 1102 n. 1 (9th Cir.2007).
A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) "tests the legal
To survive a motion to dismiss for failure to state a claim, the plaintiff must allege "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). The allegations made in a complaint must be both "sufficiently detailed to give fair notice to the opposing party of the nature of the claim so that the party may effectively defend against it" and "sufficiently plausible" such that "it is not unfair to require the opposing party to be subjected to the expense of discovery." Starr v. Baca, 633 F.3d 1191, 1204 (9th Cir.2011). "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). Where a complaint or claim is dismissed, leave to amend generally is granted, unless further amendment would be futile. Chaset v. Fleer/Skybox Int'l, 300 F.3d 1083, 1087-88 (9th Cir.2002).
It is axiomatic that standing under Article III of the United States Constitution is a threshold requirement in every civil action filed in federal court. U.S. Const., art. III, § 2, cl. 1; Elk Grove Unified Sch. Dist. v. Newdow, 542 U.S. 1, 11, 124 S.Ct. 2301, 159 L.Ed.2d 98 (2004). To satisfy the requirements of Article III, there must be the "irreducible constitutional minimum" of an injury-in-fact. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992). An injury-in-fact is "an invasion of a legally protected interest which is (a) concrete and particularized ... and (b) actual or imminent, not conjectural or hypothetical." Id. (internal citations and quotation marks omitted). "The injury required by Article III can exist solely by virtue of statutes creating legal rights, the invasion of which creates standing." Edwards v. First Am. Corp., 610 F.3d 514, 517 (9th Cir.2010) (internal quotations and citations omitted). In such cases, the "standing question ... is whether the constitutional or statutory provision on which the claim rests properly can be understood as granting persons in the plaintiff's position a right to judicial relief." Id. (quoting Warth v. Seldin, 422 U.S. 490, 500, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975)). As a result, a court must look to the text of the statute at issue to determine whether it prohibits the defendant's conduct; if so, "then Plaintiff has demonstrated an injury sufficient to satisfy Article III." Id.
The VRPA provides that "a person, or an employee or agent of the person, engaged in the business of selling at retail, renting, or lending ... sound recordings... shall not disclose to any person, other than the customer, a record or information
Pandora contends that Plaintiff has failed to allege an "actual injury" traceable to its conduct. Def.'s Mot. at 13. As an initial matter, the VRPA does not explicitly impose an actual injury requirement. Rather, the statute's civil remedy provision allows for recovery based on a showing of actual damages or statutory damages. MCL § 445.1715. Though there is no decisional authority interpreting the VRPA, the Ninth Circuit has recognized that, in order to deter the prohibited conduct, a statute may allow for the imposition of statutory damages without a showing of actual damages. See Bateman v. American Multi-Cinema, Inc., 623 F.3d 708, 718 (9th Cir.2010) (discussing the Fair and Accurate Credit Transactions Act, which limits the disclosure of a consumer's credit card number). That aside, Plaintiff has sufficiently alleged the disclosure of information governed by the VRPA. Plaintiff alleges that Pandora disclosed his name and "listening history," i.e., a list of the songs he listened to on Pandora's radio service, to the general public. Compl. ¶¶ 6, 23, 43, 45. Assuming arguendo that those songs are deemed to have been sold, rented or lent to the subscriber (which is discussed below), the disclosure of this information is sufficient to constitute an injury for purposes of Article III standing. See Jewel v. National Sec. Agency, 673 F.3d 902, 908-911 (9th Cir.2011) (finding defendant's violation of the Electronic Communications Privacy Act and Stored Communications Act to be a concrete and particularized injury).
More problematic for Plaintiff is whether he has alleged facts sufficient to state a claim under the VRPA. By its own terms, the VRPA only applies to "the business of selling at retail, renting, or lending... sound recordings...." MCL § 445.1712. Plaintiffs allegations of "renting" and "lending" are set forth in paragraph 20 of the Complaint, which alleges as follows:
Compl. ¶ 20. Pandora argues that it merely streamed music to Plaintiffs computer, and therefore, could not have violated the VRPA because it never rented, lent or sold sound recordings to him. The Court agrees.
Turning first to the issue of "renting," the Court notes such term is not defined by the statute. In the absence of a statutory definition, courts "look to the plain meaning" of the disputed terms. Friends of Yosemite Valley v. Norton, 348 F.3d 789, 796 (9th Cir.2003). "[C]ourts routinely rely on dictionary definitions" to ascertain a term's plain meaning. United States v. Havelock, 664 F.3d 1284, 1293 (9th Cir.2012). Black's Law Dictionary defines "rent" as "consideration paid [usually] periodically for use ... of property."
The Court finds that Plaintiff's allegations are insufficient to establish that Pandora "rents" sound recordings to its subscribers. As an initial matter, no facts are alleged showing that Plaintiff paid any consideration to Pandora in exchange for use of its service.
In his opposition, Plaintiff claims that his allegation that "Pandora allows users to borrow digital sound recordings for the duration of the song(s)," Compl. ¶ 2, is sufficient to show that subscribers "rent" songs from Pandora. See Pl.'s Opp'n at 7. However, "borrow" means "to receive with the implied or expressed intention of returning the same or an equivalent." Merriam-Webster's Collegiate Dictionary 144 (11th ed.2005) (emphasis added). Here, the song file is never returned because, according to Plaintiff, Pandora deletes the file upon completion of the song. See Compl. ¶ 20. Moreover, merely alleging that subscribers "borrow" sound recordings does not suffice to identify the particular conduct the subscriber undertakes to use the file. See Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 ("[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.").
Plaintiff also fails to confront the fact that Pandora's Terms of Use, which govern a subscriber's use of the Pandora internet radio service,
Plaintiffs only response is that Pandora's Terms of Service shows that "Pandora is aware that its application makes copying possible." Pl.'s Opp'n at 8 n. 2. This argument misses the mark. The salient question is whether Pandora rents sounds recordings to its subscribers. This requires Plaintiff to allege facts showing that, in exchange for consideration, Pandora provides sound recordings for a subscriber to use. However, the Terms of Service make it clear that subscribers are not permitted to engage in any manipulation of the temporary file. Thus, whether or not a subscriber theoretically could copy the file is inapposite because Pandora is not supplying the temporary file for that purpose; that is, for the subscriber to "use." Rather, the file is used to facilitate Pandora's streaming or "public performance" of the recorded work so that the subscriber can listen to the song.
Like "rent," the term "lend" is not defined in the VRPA. The dictionary definition of "lend" is "[t]o allow the temporary use of (something) sometimes in exchange for compensation, on the condition that the thing or its equivalent be returned." Black's Law Dictionary 985 (9th ed. 2004) (emphasis added). As set forth above, "use" requires a volitional act, which is not alleged in the pleadings and is otherwise foreclosed in the Terms of Use. The only reason the song is placed temporarily on the subscriber's hard drive is to facilitate Pandora's ability to stream the song to the computer. See ASCAP, 627 F.3d at 74. But even if Plaintiff could show "use," he has failed to allege facts demonstrating that such use is on the condition that the file or its equivalent is "returned" to Pandora. Rather, the pleadings allege that the song file is placed on the subscriber's hard drive for only as long as the song is being played; once the song is over, the song file is deleted from the subscriber's computer by Pandora. Compl. ¶ 20. Since the song file is deleted by Pandora, there by definition can be no ability by the subscriber to "return" the file to Pandora.
Plaintiff's allegations that Pandora "sells" sound recordings fare no better. The plain meaning of "sell," which is not defined by the VRPA, is "to give up (property) to another for something of value (as money)." See Merriam-Webster's Collegiate Dictionary 1129 (11th ed. 2005). However, the Complaint does not allege any facts to support the conclusion that Pandora "give[s] up" any property to its subscribers in exchange for money or anything of value. Rather, Pandora's website merely provides a link allowing subscribers to click through to iTunes or Amazon.com where the subscriber can purchase digital copies of the song from either of those companies. Compl. ¶ 21. As Pandora points out — and Plaintiff does not dispute — the sale is between the third party and Pandora subscriber, not Pandora and the subscriber. The possibility that Pandora and the third party vendors may have a profit sharing agreement is not, standing alone, is not dispositive of whether Pandora is selling the song to the subscriber.
But even if the presence of a purchase link were sufficient to establish Pandora as a "seller," the Complaint fails to allege that Pandora ever disclosed information regarding the purchase. As stated above, the VRPA requires a showing that Pandora both sold sound recordings and that it disclosed records of subscriber purchases along with the identity of the subscriber to
Plaintiff's contention that Pandora rents, lends and sells sound recordings to its subscribers also is inconsistent with federal copyright law. Under the Copyright Act, the copyright holder has the exclusive right "to distribute copies ... of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending" and " to perform the copyrighted work publicly[.]" 17 U.S.C. § 106(3), (4) (emphasis added). Where the copyrighted work is a sound recording, the public performance right includes a performance "by means of a digital audio transmission," i.e., streaming over the internet. Id. § 106(6). Thus, for a webcaster such as Pandora to stream sound recordings, it must obtain a statutory license under 17 U.S.C. § 114. In addition, a second license is required under 17 U.S.C. § 112, which "grants the webcaster a legal right to make ephemeral (non-permanent) copies of copyright sound recordings for the sole purpose of facilitating the transmissions of those sound recordings for a fee." Intercollegiate Broadcasting Sys., Inc. v. Copyright Royalty Bd., 684 F.3d 1332, 1334 (D.C.Cir.2012).
The right to publicly perform or stream a copyrighted sound recording is different from copyright holder's right to distribute copies of the copyrighted work to the public "by sale or ... by rental, lease, or lending[.]" 17 U.S.C. § 106(1), (3). The right of distribution under section 106(3) is expressly subject to section 115, which allows a person who obtains a compulsory license to "make and distribute phonorecords of the work." 17 U.S.C. § 115(a)(1). Here, Pandora contends, and Plaintiff does not dispute, that it operates solely under public performance licenses, which only gives Pandora the right to broadcast copyrighted sound recordings. See Def.'s Mot. at 10; Pl.'s Opp'n at 5-8; S-1 Reg. Stmt. at 16-17. There is no allegation by Plaintiff that Pandora possesses the requisite licenses from copyright holders to distribute copies of copyrighted sounds recording by sale, rental, lease or lending to the public. See 17 U.S.C. § 106(3). It is axiomatic that Pandora cannot, without running afoul of federal copyright law, grant its subscribers the right to "use" streamed sound recordings in a manner that Pandora itself does not possess. Indeed, the only license granted by Pandora to its subscribers is a "limited, non-exclusive, non-transferable license to access and use Pandora Services" to listen to music streamed through its service. TOU at 1 & § 2.1. Any other unauthorized use of Pandora's service is strictly prohibited.
Plaintiff argues that Pandora's arguments regarding the interplay between his claims and federal copyright law is tantamount to an claim that the Copyright Act preempts the VRPA. Pl.'s Opp'n at 9. According to Plaintiff, such an argument fails on the grounds that the Copyright Act "expressly carves out state privacy laws like the VRPA from its preemptive force." Id. This contention is misplaced. "Pursuant to the Supremacy Clause of the United States Constitution, federal law can preempt and displace state law through: (1) express preemption; (2) field preemption (sometimes referred to as complete preemption); and (3) conflict preemption."
When a claim is dismissed under Rule 12(b)(6), "leave to amend should be granted unless the court determines that the allegation of other facts consistent with the challenged pleading could not possibly cure the deficiency." Schreiber Distrib. Co. v. Serv-Well Furniture Co., 806 F.2d 1393, 1401 (9th Cir.1986). As set forth above, Plaintiff has not alleged facts showing that Pandora rented, lent and/or sold music to him. Though it is questionable whether Plaintiff will be able to allege the requisite facts to establish a claim under the VRPA consistent with Federal Rule of Civil Procedure 11, the Court, out of an abundance of caution, will permit him an opportunity to attempt to do so. Accordingly, the Court dismisses Plaintiffs claim under the VRPA claim with leave to amend.
Plaintiffs remaining claim alleges a violation of the MCPA, which provides that "unfair, unconscionable, or deceptive methods, acts or practices in the conduct of trade or commerce are unlawful ...." MCL § 445.903. Plaintiff alleges that Pandora engaged in deceptive methods by failing to disclose that its subscribers' Protected Information could be revealed to their Facebook friends as well as to the general public, and by falsely representing that such information would only be available to other registered Pandora subscribers. Id. ¶¶ 52-54. Pandora argues that Plaintiffs MCPA claim should be dismissed on the grounds that Pandora is exempt from liability under the MCPA's safe harbor provision, and that Plaintiff cannot maintain a class action under the MCPA absent a showing of actual damages. The Court discusses each contention in turn.
Section 445.904 of the MCPA provides that "this act does not apply to... a transaction or conduct specifically authorized under laws administered by a regulatory board or officer acting under statutory authority of this state or the United States." MCL § 445.904 (emphasis added). The focus of this exemption is on the "general transaction at issue," as opposed to the specific misconduct alleged. See Molosky v. Wash. Mut., Inc., 664 F.3d 109, 117-118 (6th Cir.2011) (holding that general authorization to service real estate loans included claims regarding fees for prepayment of mortgage loans) (citing Liss v. Lewiston-Richards, Inc., 478 Mich. 203, 732 N.W.2d 514 (2007)). The burden of proving an exemption from the MCPA is on the party claiming the exemption. MCL § 445.904(4).
Pandora argues that it is a music streaming business which is specifically authorized by the Digital Performance Right in Sound Recordings Act of 1995, Pub.L. No. 104-39, 109 Stat. 336 ("DPRA"), and therefore, any conduct related to the streaming of music is outside the purview of the MCPA. Def.'s Mot. at 18.
Next, Pandora argues Plaintiff has not alleged any actual loss resulting from the purported disclosure of his Protected Information, and therefore, he cannot pursue a class action under the MCPA. Def.'s Mot. at 17-18. Plaintiff does not dispute his failure to allege that he suffered actual damages, but instead claims that he is not required by the MCPA to plead such damages where only injunctive relief is being sought. Pl.'s Opp'n at 22. As will be set forth below, a plaintiff bringing a claim under the MCPA is not required to show actual damages if he or she is seeking injunctive relief only. However, the MCPA only permits a class action to be brought where the plaintiff "suffers loss." MCL § 445.911(3)
As noted, the MCPA makes it unlawful to engage in any "unfair, unconscionable, or deceptive" practice in the "conduct of trade or commerce ...." MCL § 445.903. The Act provides for several types of civil remedies and actions, depending on the nature of the relief being sought. First, "[w]hether or not [a person] seeks damages or has an adequate remedy at law," he or she may bring an action under the MCPA to obtain a declaratory judgment or secure an injunction, or both. Id. § 445.911(1). Second, "[e]xcept in a class action, a person who suffers loss as a result of a violation of this act may bring an action to recover actual damages or $250.00, whichever is greater, together with reasonable attorneys' fees." Id. § 445.911(2). Finally, the MCPA includes a provision to bring a class action: "A person who suffers loss as a result of a violation of [the MCPA] may bring a class action on behalf of persons residing or injured in [Michigan] for the actual damages" caused by any method, act, or practice defined as unlawful by the MCPA. Id. § 445.911(3) (emphasis added); see also id. § 445.910(1)(a) (authorizing the state attorney general to bring a class action on behalf of persons residing in or injured in Michigan for actual damages).
Plaintiff does not dispute Pandora's contention that he has not alleged any actual injury as a result of Pandora's alleged violation of the MCPA. Instead, citing MCL § 445.911(1), Plaintiff contends that he is not required to allege actual injury where, as here, he is only seeking injunctive relief. Pl.'s Opp'n at 22. Plaintiff is partially correct. Under MCL § 445.911(1), an individual may pursue an individual claim under the MCPA for injunctive and/or declaratory relief. However,
In sum, Plaintiff cannot maintain a class action against Pandora under the MCPA solely for injunctive relief; nonetheless, he may pursue an individual claim. Plaintiff also may be able to present a class action claim for damages under MCL § 445.911(3) upon a showing that he suffered an actual loss resulting from Pandora's alleged violations of the MCPA. Therefore, Plaintiffs claim under the MCPA is dismissed with leave to amend.
For the reasons stated above,
IT IS HEREBY ORDERED THAT:
1. Defendant's motion to dismiss is GRANTED. Plaintiff is granted leave to amend, as set forth above. Plaintiff is advised that any additional factual allegations set forth in the amended complaint must be made in good faith and consistent with Federal Rule of Civil Procedure 11. Plaintiff shall file his amended pleading within fourteen (14) days of the date this Order is filed, and the failure to file do so may result in the dismissal of the action under Federal Rule of Civil Procedure 41(b).
2. The parties shall appear for a telephonic Case Management Conference on
3. This Order terminates Docket No. 20, 25 and 27.
IT IS SO ORDERED.
