CATHY BISSOON, District Judge.
This case was referred to United States Magistrate Judge Susan Paradise Baxter for pretrial proceedings in accordance with the Magistrates Act, 28 U.S.C. § 636(b)(1)(A) and (B), and Rules 72.C, 72.D and 72.G of the Local Rules for Magistrates.
On January 27, 2014, the Magistrate Judge issued a Report and Recommendation (Doc. 318), which gave recommendations on several outstanding motions (Docs. 161, 163, 192, 194, 298, 299, and 300). The Court will address these motions in turn.
The Report and Recommendation recommend the following following motions be granted for lack of subject matter jurisdiction based on Plaintiffs' lack of standing:
Service of the Report and Recommendation was made on the parties, and the parties timely filed objections. After a de novo review of the issues raised in the objections, together with the Report and Recommendation, the following Order is entered:
The Motions by the various franchisees for lack of standing (
The Clerk of Courts is kindly directed to terminate the following as parties to this action: AH & H Leasing, LLC, AMG Enterprises Group, LLC, Arona Corporation, Bear Rental Purchase, Ltd., Boxer Enterprise, Inc., Circle City Rentals, CMH Leasing Partners, LLC, CRAM Leasing, Inc., DC Sales & Lease, Inc., Dirigo Leasing, Inc., DPR Alaska, LLC, DPR Colorado, LLC, DW3, LLC, DWC Ventures, LLC, Fairway Leasing, LLC, Five Star Financials, LLC, FT Got Three, LLC, GNS & Associates, Inc., Great American Rent-to-Own, Inc., Green Fiver Corporation, Hanson Holding Company, Honey Harbor Investments, LLC, Howard Rents, LLC, HPH Investments, LLC, J & L Beach Enterprises, Inc., J.R. Rents, Inc., J.M. Darden & Company, Jenfour, LLC, Jenkins Rental, LLC, KFJ Enterprises, LLC, Lifestyle Furniture Leasing, Madison Capital Investments, Inc., MKW Investments, Inc., No Three Putts Enterprises, LLC, NW Freedom Corporation, Pomona Lane Partners, LLC, R & Double K, LLC, Rebco Investments, LLC, Rex Neal, Inc., Royal Rents, Inc., Royal Rocket Retail, LLC, SEI/Aaron's, Inc., Shining Star, Showcase Home Furnishings, Inc., Sultan Financial Corporation, Tanglewood Management, LLC, TDS Foods, Inc., Tur, Inc., Watershed Development Corporation, and WGC, LLC.
The Report and Recommendation recommended that the motion to dismiss filed by Defendant Aaron's, Inc.
The motion to dismiss filed by Defendant Aaron's, Inc.
Plaintiffs' claim of Conspiracy to violate the ECPA (contained in Count III) will be dismissed. The January 27, 2014 Report and Recommendation concluded, without analysis, that Plaintiffs' claim for conspiracy to violate the ECPA still survived.
With regard to the only remaining claim, Count I, for violation of the ECPA, the Court notes that Aaron's has raised persuasive objections about whether there has actually been an "interception" of an "electronic communication," as required under the ECPA. See Doc. 322. However, the Court finds that Judge Baxter's opinion properly addressed Aaron's concerns in the Report and Recommendation, and the Court agrees that in this stage of the litigation, Plaintiffs have sufficiently pled a claim for direct liability under the ECPA. See Phillips v. Cnty. of Allegheny, 515 F.3d 224, 234 (3d Cir.2008) (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). ("[S]tating ... a claim requires a complaint with enough factual matter (taken as true) to suggest the required element. This does not impose a probability requirement at the pleading stage, but instead simply calls for enough facts to raise a reasonable expectation that discovery will reveal evidence of the necessary element."). Whether an actual interception of an electronic communication took place will be born out through discovery, and Aaron's is free to raise these arguments again on a more developed record, as a motion for summary judgment.
The Report and Recommendation recommended that the motion to Dismiss filed by Defendant Aspen Way Enterprises
The motion to Dismiss filed by Defendant Aspen Way Enterprises
As described above, the Court has found that secondary liability cannot exist under the ECPA, and accordingly, has dismissed Plaintiffs' only remaining conspiracy claim. In light of this, the Court is now doubtful
However, the March 20, 2012 Order (Doc. 95), which found the purposeful availment prong lacking, has since been vacated. See Doc. 338. Accordingly, regardless of whether the absent co-conspirator theory of personal jurisdiction can still apply, the Court still has personal jurisdiction over Defendant Aspen Way under a specific jurisdiction theory. Id.
IT IS SO ORDERED.
SUSAN PARADISE BAXTER, United States Magistrate Judge.
It is respectfully recommended that:
It is further recommended that the following motions be granted for lack of subject matter jurisdiction based on Plaintiffs' lack of standing:
The Clerk of Courts should be directed to terminate the following as parties to this action: AH & H Leasing, LLC, AMG Enterprises Group, LLC, Arona Corporation, Bear Rental Purchase, Ltd., Boxer Enterprise, Inc., Circle City Rentals, CMH Leasing Partners, LLC, CRAM Leasing, Inc., DC Sales & Lease, Inc., Dirigo Leasing, Inc., DPR Alaska, LLC, DPR Colorado, LLC, DW3, LLC, DWC
On May 3, 2011, Plaintiffs Crystal and Brian Byrd, filed the instant purported class action. Plaintiffs alleged that Defendants have violated 18 U.S.C. § 2511, referred to as the Electronic Communications Privacy Act, and invaded their privacy.
Since the filing of the Original Complaint, this case has undergone an unusual and lengthy procedural process, most of which is not relevant here. Currently, the operative complaint is the Corrected Third Amended Complaint. ECF No. 296. All Defendants seek dismissal of the Corrected Third Amended Complaint. This Court will begin by briefly reviewing the allegations of that filing.
According to the Corrected Third Amended Complaint, Defendants (Aaron's franchisee stores) have been secretly installing PC Rental Agent on rent-to-own computers since June 2009. ECF No. 296, ¶ 84. PC Rental Agent permits Defendants to "remotely and surreptitiously access, monitor, intercept, and/or transmit personal information as well as electronic communications and images, including, but not limited to, images of monitors or screens ("screen shots"), keystrokes, as well as images captured by the computers' respective cameras ("webcams") of whatever person was sitting in front of the computer, and whatever activity was occurring at the time the webcam was capturing the photographs." Id. at ¶¶ 3, 84.
In July of 2010, Plaintiff Crystal Byrd entered into a lease agreement for a laptop computer with an Aaron's franchisee store located in Casper, Wyoming, operated by Aspen Way Enterprises. Id. at ¶ 118. See also ECF No. 1, Lease Agreement attached to Original Complaint. The lease agreement provided that Crystal Byrd pay three separate installments toward the purchase of the laptop. ECF No. 296, ¶ 118. The lease agreement did not disclose that PC Rental Agent had been installed on the laptop and could be used by others to monitor the computer use. Id. at ¶ 119. Crystal Byrd satisfied the lease in full in October 2010, by paying the outstanding balance in cash. Id. at ¶ 120.
Allegedly, on December 20, 2010, Plaintiff Brian Byrd was using the laptop computer to play poker on the Internet. Id. at ¶ 122. While playing his game, a digital photographic image of him as well as a screenshot of his computer screen were surreptitiously taken. Id. The screen shot revealed the Internet site with which he was communicating and from which he was
The Byrds' laptop computer was secretly accessed by Aspen Way 347 times on eleven different days between November 16, 2010, and December 20, 2010. Id. at ¶ 123. Plaintiffs allege that Aaron's Inc. expressly consented to have its franchisee stores access and use the DesignerWare and PC Rental Agent websites through the Aaron's Inc. corporate intranet and server to spy on unsuspecting customers. Id. at ¶ 137. Aspen Way alone (owner of multiple franchise stores in several states) intercepted its customers' information on more than 50,000 occasions. Id. at ¶ 138; ¶ 15.
Besides Aspen Way, Plaintiffs have named fifty-one franchisee Defendants (as well as 1-45 John Doe Franchisee Defendants) in this action. These Franchisee Defendants will hereinafter referred to as "Franchisee Defendants" as opposed to Aspen Way, which will be referred to by name.
The Corrected Third Amended Complaint raises four separate counts:
ECF No. 296.
Currently pending before this Court are motions to dismiss by all served Defendants. See ECF Nos. 161, 163, 192, 194, 298, 299, and 300. The issues raised therein are fully briefed and are ripe for disposition by this Court.
The Franchisee Defendants (other than Aspen Way Enterprises) move for dismissal under Rule 12(b)(1) for lack of subject matter jurisdiction on the basis of lack of standing.
Federal Rule of Civil Procedure 12(b)(1) permits a defendant to move for dismissal of a complaint if the court lacks subject matter jurisdiction to hear the case. Among other things, a defendant may challenge the court's subject matter jurisdiction based on the plaintiff's lack of standing. ACLU-NJ v. Township of Wall, 246 F.3d 258, 261 (3d Cir.2001). For the purposes of constitutional standing, a plaintiff must show: (1) that he or she has suffered an injury in fact — that is, an invasion of a legally protected interest which is concrete and particularized, and actual or imminent rather than conjectural or hypothetical; (2) that there is a causal connection between the injury and the conduct complained of, such that the injury fairly is traceable to the challenged action of the defendant, rather than the result of an independent action of some third party not before the court; and (3) that it is likely the injury will be redressed by a favorable decision of the court. Lujan v. Defenders
A defendant may challenge a court's subject matter jurisdiction with either a facial or factual attack. Gould Electronics Inc. v. U.S., 220 F.3d 169, 176 (3d Cir.2000). In a facial attack, the defendant contests the sufficiency of the well-pleaded allegations insofar as they provide a basis for the court's exercise of subject matter jurisdiction; as under Rule 12(b)(6), the court the court must treat the complaint's well-pleaded jurisdictional facts as true and view them in the light most favorable to the plaintiff. NE Hub Partners, L.P. v. CNG Transmission Corp., 239 F.3d 333, 341 (3d Cir.2001); Cunningham v. Lenape Regional High Dist. Bd. of Educ., 492 F.Supp.2d 439, 446-47 (D.N.J.2007). Dismissal pursuant to a facial attack "is proper only when the claim clearly appears to be immaterial and made solely for the purpose of obtaining jurisdiction or is wholly insubstantial and frivolous." Kehr Packages v. Fidelcor, Inc., 926 F.2d 1406, 1408-09 (3d Cir.1991) (internal quotation omitted).
In a factual attack, on the other hand, the defendant challenges the factual basis underlying the court's subject matter jurisdiction with extrinsic evidence, essentially making the argument that the allegations supportive of jurisdiction are not true. Cunningham, 492 F.Supp.2d at 447. Because this Court must be satisfied at all times that it has the power to hear the case, it "may consider evidence outside the pleadings" "to resolve factual issues bearing on jurisdiction." Gould Electronics, 220 F.3d at 176: Gotha v. U.S., 115 F.3d 176, 179 (3d Cir.1997); Int'l Ass'n of Machinists, 673 F.2d at 711. Once the defendant presents extrinsic evidence contesting the jurisdictional facts set forth in the complaint, the court must permit the plaintiff to respond. Gould Electronics, 220 F.3d at 177. "The court may then determine jurisdiction by weighing the evidence presented by the parties," "evaluating for itself the merits of the jurisdictional claims." Id.; Mortensen v. First Federal Sav. & Loan Ass'n, 549 F.2d 884, 891 (3d Cir.1977) (emphasis added). In making this evaluation, no presumption of truthfulness attached to the allegations set forth in the complaint. Mortensen, 549 F.2d at 891. Rather, the challenge must be evaluated solely on the merits of the evidence submitted on jurisdiction. Id.
These Defendants argue that because there is no allegation that they have had any dealings with the Byrds, the Byrds lack standing to bring a claim against them. See ECF Nos. 192, 194, 298, 299, and 300.
The question of standing is a threshold inquiry. City of Pittsburgh v. West Pennsylvania Power Co., 147 F.3d 256, 264 (3d Cir.1998). The party invoking federal jurisdiction bears the burden of establishing standing. Lujan, 504 U.S. at 561, 112 S.Ct. 2130. Standing is not merely a "pleading requirement but rather an
The standing inquiry "involves both constitutional limitations on federal court jurisdiction and prudential limitations on its exercise." Warth v. Seldin, 422 U.S. 490, 498, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975). To maintain an action in federal court, a plaintiff must demonstrate constitutional standing by satisfying several requirements imposed by Article III of the Constitution. See Toll Bros., Inc. v. Twp. of Readington, 555 F.3d 131, 137-38 (3d Cir.2009).
Id. (internal citation omitted) (emphasis added).
Plaintiffs must demonstrate that they have standing to bring each and every claim against each and every Defendant. Id. at 139 n. 5 (a plaintiff "must demonstrate standing for each claim it seeks to press" and "must demonstrate standing separately for each form of relief sought") quoting Daimler-Chrysler Corp. v. Cuno, 547 U.S. 332, 352, 126 S.Ct. 1854, 164 L.Ed.2d 589 (2006) and Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. Inc., 528 U.S. 167, 185, 120 S.Ct. 693, 145 L.Ed.2d 610 (2000).
In opposition to the motions to dismiss by the Franchisee Defendants, the Byrds maintain that they have standing because they are seeking to hold accountable the defendant coconspirators at whose hands the class suffered injury. ECF No. 288, page 7. Furthermore, the Byrds argue that they have standing to pursue their claims against all the named Defendants based upon the Franchisee Defendants' alleged involvement in the conspiracy claim and that they are "alleging an injury that is fairly traceable to the other franchisees that will be redressed by the relief requested by virtue of their well-pleaded conspiracy." Id. Despite their arguments, the Byrds do not achieve standing against the Franchisee Defendants either by way of their status as proposed class representatives or by way of the conspiracy claim.
Generally, a plaintiff may only assert his or her "own legal rights and interests, and cannot rest a claim to relief on the legal rights or interests of third parties." Valley Forge Christian Coll. v. Americans United for Separation of Church and State, Inc., 454 U.S. 464, 474-75, 102 S.Ct. 752, 70 L.Ed.2d 700 (1982). See also Powers v. Ohio, 499 U.S. 400, 111 S.Ct. 1364, 113 L.Ed.2d 411 (1991). Class
The law generally holds all conspirators jointly and severally liable for the conduct of each of their co-conspirators. Joint and several liability attaches to all co-conspirators in a conspiracy because the co-conspirators agreed to undertake an act together.
Here, Plaintiffs allege that Aspen Way engaged in a conspiracy with DesignerWare and Aaron's Inc. to violate their rights under the ECPA and to invade their privacy. Furthermore, the conspiracy as alleged here is that each of the Franchisee Defendants conspired with DesignerWare and Aaron's Inc. to spy on that Franchisee Defendant's own customers. In other words, Aaron's Inc. and DesignerWare conspired with each Franchisee Defendant, including Aspen Way, in multiple separate conspiracies. There is no allegation that Aspen Way entered into an arrangement to gather information from or about the
Plaintiffs suggest that Aaron's, DesignerWare and all the Franchisee Defendants (including Aspenway) participated in a "conspiracy wheel." Plaintiffs explain that Aaron's and DesignerWare acted at the hub of the conspiracy, each Franchisee Defendant acted as an individual spoke, and all were bound together by a rim of a shared common profit motive driving their use of PC Rental Agent. ECF No. 306, Plaintiffs' Joint Reply Brief on Motion for Certification of Class, pages 24-26.
Plaintiffs' reliance on a "conspiracy wheel" theory is misplaced. This type of conspiracy has "a long history in anti-trust jurisprudence" and consists of "a hub, generally the dominant purchaser or supplier in the relevant market, and the spokes, made up of the distributors involved in the conspiracy, [while] the rim of the wheel is the connecting agreements among the horizontal competitors (distributors) that form the spokes." Howard Hess Dental Labs. Inc. v. Dentsply Int'l Inc., 602 F.3d 237, 255 (3d Cir.2010) quoting Total Benefits Planning Agency, Inc. v. Anthem Blue Cross & Blue Shield, 552 F.3d 430, 435 n. 3 (6th Cir.2008). See also In re Insurance Brokerage Antitrust Litig., 618 F.3d 300 (3d Cir.2010). There is no "horizontal agreement" here, which is essential to complete the "conspiracy wheel." As alleged in the Corrected Third Amended Complaint, Plaintiffs do not plead an agreement between the Franchisee Defendants to support a single uniform conspiracy amongst them, so as to overcome these standing issues.
In order to overcome the standing problem, Plaintiffs argue that this Court should apply the juridical link doctrine to this case. ECF No. 288, page 9.
This juridical link doctrine was first mentioned in LaMar v. H & B Novelty & Loan Co., 489 F.2d 461 (9th Cir.1973), which held in assessing Rule 23's typicality requirement that "a plaintiff who has no cause of action against the defendant cannot fairly and adequately protect the interests of those who do have such causes of action ... even though the plaintiff may have suffered an identical injury at the hands of a party other than the defendant." Id. at 466. The LaMar Court then suggested, in dicta and without further discussion, that there may be two exceptions to that rule: One exception covers cases in which the named plaintiff's injuries were "the result of a conspiracy or concerted schemes between the defendants" and another exception covers cases in which it would be "expeditious" to combine the defendants into one action because they are "juridically related." Id.
The Third Circuit has not adopted this doctrine and the only Third Circuit case to discuss the juridical link doctrine of LaMar did so in the context of tolling a
Haas, 526 F.2d at 1096, and n. 18. There is no legitimate reason for this Court to adopt the juridical link doctrine in the case at hand, especially based on the language and situation in Haas. Instead, we find the Second Circuit's recent rejection of the doctrine persuasive:
Mahon v. Ticor Title Ins. Co., 683 F.3d 59, 64 (2d Cir.2012) (emphasis added) (internal citation omitted).
The Byrds simply have no standing to bring the claims alleged in the Corrected Third Amended Complaint against the Franchisee Defendants (other than Aspen Way with whom they did business) and accordingly, the motions to dismiss by these Defendants should be granted due to the lack of subject matter jurisdiction.
In a footnote, Plaintiffs state that if this Court finds that the Byrds do not have standing to bring the claims against the Franchisee Defendants with whom they have not conducted business, "Plaintiffs should be permitted an opportunity to intervene nominal plaintiffs that are aligned with each of the TAC Franchisees." ECF No. 288, page 10 n. 9. Plaintiffs have been granted several opportunities to amend the complaint and have been generously and repeatedly granted extensions of time to do so. There has been ample time for them to add new plaintiffs in their own right and as proposed class representatives. This case is well over two years old and allowing further amendment of the complaint (and likely further discovery in order to ascertain the identities of nominal plaintiffs for each of the fifty-one named Franchisee Defendants, all of which should have been done by now) unfairly prejudices all Defendants in this already protracted litigation and should not be permitted.
Defendant Aspen Way moves to dismiss the complaint solely based on the lack of personal jurisdiction.
Aspen Way has repeatedly argued that this Court lacks personal jurisdiction over it. In a Report and Recommendation analyzing Aspen Way's motion to dismiss the First Amended Complaint, the undersigned recommended that the motion to dismiss be denied, concluding that Plaintiffs had sufficiently alleged: 1) that Aspen Way "purposefully availed itself of the privilege of conducting actions within the forum state"; 2) that the present litigation "arises out of or relates to" the contacts between Aspen Way and Pennsylvania; and 3) that the "burden on Aspen Way in traveling to this jurisdiction was not so great as to violate notions of fair play and substantial justice so as to be unconstitutional." ECF No. 84. It was recommended therein that "jurisdictional issues may be revisited in the future," but "at this preliminary stage of the proceedings without the benefit of discovery," the motion to dismiss for lack of personal jurisdiction should be denied. Id.
Following a hearing on the Objections to that Report and Recommendation, former District Judge Sean McLaughlin ruled that the purposeful availment prong was lacking on the record and that it could not be cured by amendment of the complaint. ECF No. 95, page 9, lines 15-16. Judge McLaughlin went on to rule that Plaintiffs' vague allegations of conspiracy were insufficient under Twombly, but that Plaintiffs would be permitted to amend the complaint to raise a conspiracy claim. Id.
The operative complaint now raises conspiracy (for violation of the ECPA, as well as for the invasion of privacy) as a separate cause of action.
"Because federal courts are courts of limited jurisdiction, a presumption arises that they are without jurisdiction until the contrary affirmatively appears." Myers v. Am. Dental Ass'n, 695 F.2d 716, 724 (3d Cir.1982). In ruling on a motion to dismiss under Rule 12(b)(2), the court is required, as with Rule 12(b)(6) motions, to accept as true all allegations contained in the complaint and view all factual disputes in plaintiff's favor. D'Jamoos v. Pilatus Aircraft Ltd., 566 F.3d 94, 102 (3d Cir.2009) citing Miller Yacht Sales, Inc. v. Smith, 384 F.3d 93, 97 (3d Cir.2004). Unlike a Rule 12(b)(6) motion,
If an evidentiary hearing is not held on the 12(b)(2) motion, then the plaintiff need only demonstrate a prima facie case of personal jurisdiction at the preliminary stages of litigation. Id. citing O'Connor v. Sandy Lane Hotel Co., 496 F.3d 312, 316 (3d Cir.2007); D'Jamoos, 566 F.3d at 102, citing Miller Yacht Sales, 384 F.3d at 97. Aspen Way has not submitted any evidence in support of its pending motion to dismiss.
Generally, "those who live or operate primarily outside a State have a due process right not to be subjected to judgment in its courts." J. McIntyre Machinery, Ltd. v. Nicastro, ___ U.S. ___, ___, 131 S.Ct. 2780, 2787, 180 L.Ed.2d 765 (2011). However, a state "may authorize its courts to exercise personal jurisdiction over an out-of-state defendant if the defendant has certain minimum contacts with [the State] such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice." Daimler v. Bauman, ___ U.S. ___, ___, 134 S.Ct. 746, 754, 187 L.Ed.2d 624 (2014) quoting Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. ___, ___, 131 S.Ct. 2846, 2853, 180 L.Ed.2d 796 (2011).
Pennsylvania's long-arm statute permits its state courts to exercise personal jurisdiction over nonresident defendants "to the constitutional limits of the Due Process Clause of the Fourteenth Amendment."
Here, Plaintiffs urge this Court to exercise personal jurisdiction over Aspen Way based upon the "absent co-conspirator" doctrine. "Under Pennsylvania law
In the Corrected Third Amended Complaint, Plaintiffs allege that Aspen Way, in concert with DesignerWare (a Pennsylvania corporation with its principal place of business located within this district) and Aaron's Inc., used PC Rental Agent to violate the ECPA and to invade their privacy, which Plaintiffs plead as the basis of their state law conspiracy claim. Plaintiffs allege that DesignerWare and Aspen Way entered into a business relationship whereby
DesignerWare maintained its computer servers in Pennsylvania and Aspen Way necessarily and repeatedly utilized this computer server in order to operate the PC Rental Agent software. Plaintiffs allege that DesignerWare's server operated as the hub through which the collection of the intercepted information was conducted (ECF No. 296, ¶ 175) and that through PC Rental Agent, DesignerWare records, stores, intercepts, discloses and transmits images secretly taken from the computers (id. at ¶¶ 68-69). After its collection, the information is sent from DesignerWare's server to the Franchisee store that installed the PC Rental Agent on the corresponding laptop. Id. at ¶ 89. The sworn testimony of DesignerWare's Tim Kelly supports these allegations. The PC Rental Agent can only be installed through DesignerWare's website (ECF No. 43, page 133, lines 1-5) and no part of PC Rental Agent can be operated by Aspen Way without the use of DesignerWare's Pennsylvania-based computer server (ECF No. 171-1, pages 3, 6).
Aspen Way's own employees have explained that the first time each Aspen Way rental computer connected to the Internet, Aspen Way received an electronic file directly from DesignerWare's Pennsylvania-based server. ECF No. 77-2, Affidavit of Senior Regional Manager John Pollack, page 5, ¶ 28. In the event Aspen Way sought the coordinates for a particular computer, Aspen Way was required to log on to the DesignerWare website in order to retrieve the desired information. Id. at page 6, ¶ 31.
To activate the Detective Mode function of PC Rental Agent on each computer, the rent-to-own store was required to affirmatively "sign on to the server and activate the build, install and active sequence" through the DesignerWare website. ECF No. 43, Testimony of Kelly, page 184, lines 17-20; ECF No. 72-2, Pollack Affidavit, ¶ 39. Next, after receiving a communication back from the customer's computer, the DesignerWare server would then remotely install Detective Mode, and begin collecting data. ECF No. 171-2, Testimony Kelly, pages 4-8. The PC Rental Agent product required that all collected data route through the DesignerWare servers in Pennsylvania, and the data was tagged and attached to DesignerWare emails from the address support@ designerware.com. Id. at pages 8-10.
The Byrds allege that beginning on November 16, 2010, Aspen Way initiated the Detective Mode function of PC Rental Agent on Crystal Byrd's laptop and kept it running through December 20, 2010. ECF No. 296, ¶ 121. Plaintiffs claim that the Byrd laptop was accessed by Aspen Way in Casper, Wyoming, through the DesignerWare server in Pennsylvania and the Aaron's corporate server in Georgia, approximately 347 times during the 34 day period. Id. at ¶¶ 122-3. The repeated accessing of the Byrds' laptop through the DesignerWare server in Pennsylvania constitutes substantial acts in the furtherance of the conspiracy.
PC Rental Agent's product manual prominently displays DesignerWare's status as a Pennsylvania corporation. ECF No. 171-3. The manual provides usage instructions all of which require accessing the DesignerWare website, and the use of DesignerWare's servers for the PC Rental Agent product to function. Id.
The product manual also contains the End User License Agreement which expressly
Plaintiffs have sufficiently alleged that DesignerWare (a co-conspirator) engaged in substantial acts in furtherance of the conspiracy in Pennsylvania. Furthermore, Plaintiffs have sufficiently alleged that Aspen Way was an active and key participant (indeed, Aspen Way is the initiator of the surreptitious collection of data from the Byrds' computer) and should have been aware of the acts done in Pennsylvania. The absent co-conspirator doctrine is applicable here.
While there is no doubt that there is a burden on Aspen Way in defending this litigation in Pennsylvania, Aspen Way has failed to make a compelling argument that litigation here would be constitutionally unreasonable. See O'Connor, 496 F.3d at 324 (because the existence of minimum contacts makes jurisdiction presumptively constitutional, the defendant "must present a compelling case that the presence of some other specific considerations would render jurisdiction unreasonable."); Pennzoil Products, 149 F.3d at 207 (considerable burden on defendant to show unreasonableness). Bringing suit against Aspen Way in this District does not offend traditional notions of fair play and substantial justice.
Accordingly, Aspen Way's motion to dismiss for lack of personal jurisdiction should be denied.
Finally, Defendant Aaron's Inc. moves to dismiss based on Plaintiffs' failure to state a claim upon which relief can be granted under Rule 12(b)(6).
A motion to dismiss filed pursuant to Federal Rule of Civil Procedure 12(b)(6) must be viewed in the light most favorable to the plaintiff and all the well-pleaded allegations of the complaint must be accepted as true. Erickson v. Pardus, 551 U.S. 89, 93-94, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007). A complaint must be dismissed pursuant to Rule 12(b)(6) if it does not allege "enough facts to state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (rejecting the traditional 12(b)(6) standard set forth in Conley v. Gibson, 355 U.S. 41, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)). See also Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937,
A Court need not accept inferences drawn by a plaintiff if they are unsupported by the facts as set forth in the complaint. See California Pub. Employee Ret. Sys. v. The Chubb Corp., 394 F.3d 126, 143 (3d Cir.2004) citing Morse v. Lower Merion Sch. Dist., 132 F.3d 902, 906 (3d Cir. 1997). Nor must the Court accept legal conclusions set forth as factual allegations. Twombly, 550 U.S. at 555, 127 S.Ct. 1955, citing Papasan v. Allain, 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986). See also McTernan v. City of York, Pennsylvania, 577 F.3d 521, 531 (3d Cir.2009) quoting Iqbal, 556 U.S. at 678, 129 S.Ct. at 1949 ("The tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions."). A plaintiff's factual allegations "must be enough to raise a right to relief above the speculative level." Twombly, 550 U.S. at 556, 127 S.Ct. 1955, citing 5 C. Wright & A. Miller, Federal Practice and Procedure § 1216, pp. 235-236 (3d ed.2004). Although the United States Supreme Court does "not require heightened fact pleading of specifics, [the Court does require] enough facts to state a claim to relief that is plausible on its face." Id. at 570, 127 S.Ct. 1955.
In other words, at the motion to dismiss stage, a plaintiff is "required to make a `showing' rather than a blanket assertion of an entitlement to relief." Smith v. Sullivan, 2008 WL 482469, at *1 (D.Del. Feb. 19, 2008) quoting Phillips v. County of Allegheny, 515 F.3d 224, 231 (3d Cir.2008). "This `does not impose a probability requirement at the pleading stage,' but instead `simply calls for enough facts to raise a reasonable expectation that discovery will reveal evidence of the necessary element.'" Phillips, 515 F.3d at 234, quoting Twombly, 550 U.S. at 556 n. 3, 127 S.Ct. 1955.
The Third Circuit has expounded on the Twombly/Iqbal line of cases:
Burtch v. Milberg Factors, Inc., 662 F.3d 212, 221 (3d Cir.2011) quoting Santiago v. Warminster Twp., 629 F.3d 121, 130 (3d Cir.2010).
Plaintiffs assert claims under three subsection of § 2511 of the ECPA — 18 U.S.C. § 2511(1)(a), (1)(c), and (1)(d). The ECPA imposes civil liability on any person who (1) "intentionally intercepts, endeavors to intercept, or procures any other person to intercept, any ... electronic communication"; or who (2) either "intentionally discloses, or endeavors to disclose to any other person," or "intentionally uses, or endeavors to use the contents of any ... electronic communication, knowing or having reason to know that the information was obtained through the interception of a[n] ... electronic communication." 18 U.S.C. §§ 2511(1), 2520.
Plaintiffs allege that Aaron's reconfigured its own corporate servers opening a portal through which franchisees and Designerware could operate the PC Rental Agent. ECF No. 296, ¶¶ 95-98. Prior to this reconfiguration of the corporate server, the PC Rental Agent could not operate because of a firewall within the Aaron's server which prevented the franchisees from being able to access the website or install Detective Mode. Id. A weekly newsletter published by Aaron's offered technical support information to franchisees concerning the use of PC Rental Agent. Id. at ¶ 99.
Moreover, by September of 2010, top executive officers within Aaron's were made aware that the franchisees were using PC Rental Agent to log customer's key strokes, transmit images of customers screenshots, and take photographs of computer users through the computer's webcams. Id. at ¶ 101. Plaintiffs allege that "Aaron's was intimately and integrally involved with its Franchisees' acts of building Detective Mode and spying upon Aaron's customers," by consenting to its franchisees' use of the PC Rental Agent in allowing access to the DesignerWare website through its own corporate intranet and corporate server as well as requiring that the images and data collected through PC Rental Agent be transmitted to the franchisee stores through the corporate server. Id. at ¶ 102. Aaron's continued to permit the access and use of PC Rental Agent through its corporate intranet and server even after being expressly advised of its intrusive capabilities. Id. at ¶¶ 104-05. Further, Plaintiffs allege that because Aaron's was an "integral link in the process of allowing" the building and use of Detective Mode and the "gather[ing] of the illegally obtained information through the Aaron's corporate server," the Aaron's server retained electronic duplicates of every email containing the gathered data and images. Id. at ¶ 107.
These allegations are sufficient under the statute to state a claim of direct liability on the part of Aaron's.
Next, Defendants argue that Plaintiffs have not sufficiently alleged the interception of an electronic communication.
The statute explains that an "intercept" occurs whenever the contents of any electronic communication are in transmission and are simultaneously acquired by an electronic, mechanical, or other device; while an "electronic communication" includes "any transfer of signs, signals, writing, images, sounds, data, or intelligence of any nature transmitted in whole in part by a wire, radio, electromagnetic, photoelectronic,
Aaron's argues that the allegations regarding their use of PC Rental Agent to remotely obtain information from the laptops of franchisee customers are insufficient to state a cause of action under the ECPA because Plaintiffs do not allege that this material was obtained while it was in transmission. Perhaps, Aaron's is seeking particular words to follow the statute; but, allegations that the Byrds' computer was accessed over three hundred times on eleven separate days is sufficient to plead an "intercept" under the ECPA, such that the federal cause of action survives, regardless of whether Plaintiffs have specifically pled that all the material gathered in the three hundred-plus collections was in transmission. Furthermore, given the sophistication of the technology at issue,
Moreover, this Court is conscious of the fact that some specific information, possibly necessary to more fully state a claim, may be covered by the protective order previously entered herein. Aaron's requested a protective order, asking that certain specific personal information acquired from Aaron's customers (and/or its franchisee's customers, like the Byrds) be kept from public view in order to protect their privacy. Defendant Aaron's cannot have its cake and eat it too. Aaron's requested the protective order, and now faults Plaintiffs for their lack of specificity in the complaint. Indeed, the Corrected Third Amended Complaint references this fact. ECF No. 296, page 16 n. 1.
Thus, the Court will not recommend dismissal of these claims unless and until a more fully-developed record indicates otherwise.
Next, Aaron's argues that this claim should be dismissed because the cause of action is not recognized by the state of Wyoming.
Plaintiffs argue that this Court should hold, based upon a Wyoming Supreme Court case construing an insurance contract (Shoshone First Bank v. Pacific Employers Ins. Co., 2 P.3d 510 (2000)) and a Minnesota Supreme Court case analyzing Minnesota law (Lake v. Wal-Mart Stores, Inc., 582 N.W.2d 231, 234 (Minn.1998)), that the tort of invasion of privacy
Plaintiffs' reliance on these cases is misplaced. In the Shoshone case, the Wyoming Supreme Court held that an insurer had a duty to fully defend under an insurance contract. 2 P.3d 510. The question presented to the Wyoming Supreme Court by a federal district court sitting in Wyoming was:
Id. at 512. While the term "invasion of privacy" is mentioned, that court does not recognize the tort as a cognizable cause of action under state law in that case, nor was it asked to do so. Id.
Meanwhile, in the Lake case, the Minnesota Supreme Court examined the history of invasion of privacy, noting that only three states including Wyoming and Minnesota have not recognized it, and then concludes by "join[ing] the majority of jurisdictions [to] recognize the tort of invasion of privacy" as a cognizable cause of action in
In a footnote to their almost two-page argument on this issue, Plaintiffs urge that "in the event there is any doubt about whether Wyoming recognizes intrusion on seclusion as a private cause of action," that this Court should certify the question to the Wyoming Supreme Court. ECF No. 173, page 10 n. 2. This Court will not do so because, among other things, Plaintiffs have not explained why they believe that certification of such a question is necessary here. Plaintiffs are asking this Court to certify a question the answer to which already is clear. Furthermore, it is not this Court's obligation to litigate this matter.
Both of these counts raise a double-pronged claim. Plaintiffs allege that Defendants conspired: 1) to violate the ECPA and 2) to invade their privacy. Plaintiffs plead similarly with aiding and abetting. Plaintiffs' claims of civil conspiracy and aiding and abetting are derivative of the underlying claims. Because Plaintiffs have failed to state a claim for the invasion of privacy, the civil conspiracy and aiding and abetting claims based on this tort cannot proceed. See Cent. Wyoming Med. Lab., LLC v. Med. Testing Lab, Inc., 43 P.3d 121, 126 (Wyo.2012) (a plaintiff cannot claim civil conspiracy without an underlying cause of action in tort).
Next, Aaron's argues that Wyoming
In summary, the claims remaining in this action are the violation of the ECPA at Count I and the conspiracy to violation the ECPA at Count III. Count II for invasion of privacy and Count IV for aiding and abetting should be dismissed in their entireties and the portion of Count III for conspiracy that is derived from the state law claim for invasion of privacy should be dismissed. All Franchisee Defendants (other than Aspen Way) should be dismissed from this action.
For the foregoing reasons, it is respectfully recommended that:
It is further recommended that the following motions be granted due to lack of subject matter jurisdiction based on Plaintiffs' lack of standing:
The Clerk of Courts should be directed to terminate the following as parties to this action: AH & H Leasing, LLC, AMG Enterprises Group, LLC, Arona Corporation, Bear Rental Purchase, Ltd., Boxer Enterprise, Inc., Circle City Rentals, CMH Leasing Partners, LLC, CRAM Leasing, Inc., DC Sales & Lease, Inc., Dirigo Leasing, Inc., DPR Alaska, LLC, DPR Colorado, LLC, DW3, LLC, DWC Ventures, LLC, Fairway Leasing, LLC, Five Star Financials, LLC, FT Got Three, LLC, GNS & Associates, Inc., Great American Rent-to-Own, Inc., Green Fiver Corporation, Hanson Holding Company, Honey Harbor Investments, LLC, Howard Rents, LLC, HPH Investments, LLC, J & L Beach Enterprises, Inc., J.R. Rents, Inc., J.M. Darden & Company, Jenfour, LLC, Jenkins Rental, LLC, KFJ Enterprises, LLC, Lifestyle Furniture Leasing, Madison Capital Investments, Inc., MKW Investments, Inc., No Three Putts Enterprises, LLC, NW Freedom Corporation, Pomona Lane Partners, LLC, R & Double K, LLC, Rebco Investments, LLC, Rex Neal, Inc., Royal Rents, Inc., Royal Rocket Retail, LLC, SEI/Aaron's, Inc., Shining Star, Showcase Home Furnishings, Inc., Sultan Financial Corporation, Tanglewood Management, LLC, TDS Foods, Inc., Tur, Inc., Watershed Development Corporation, and WGC, LLC.
In accordance with 28 U.S.C. § 636(b)(1) and Fed.R.Civ.P. 72, the parties must seek review by the district court by filing Objections to the Report and Recommendation within fourteen (14) days of the filing of this Report and Recommendation, or by
Dated: January 27, 2014.
In Plaintiffs' reply brief answering the Defendants' oppositions to the motion to certify the class, Plaintiffs expand their argument. ECF No. 306, pages 34-35. First, Plaintiffs maintain that Wyoming's recognition of the invasion of privacy was "previously resolved" in this case and that Aaron's argument in this regard was rejected by this Court. Plaintiffs cite to the May 23, 2013 hearing held by the undersigned in which the motion to amend the complaint was granted. Although this Court determined that amendment of the complaint was not futile, this Court did not resolve the issue of whether the intrusion on seclusion was cognizable under Wyoming law.
Next, Plaintiffs cite Briefing.com v. Jones, 126 P.3d 928 (Wyo.2006), a Wyoming Supreme Court case in support of their position that Wyoming recognizes the tort. There, the court opined that Wyoming was "the only jurisdiction in the United States that has not given specific legislative or judicial recognition to a tort cause of action for misuse of trade secrets." Id. at ¶ 10. The Court then surveyed common law principles and the Wyoming legislature's adoption of common law over 100 years before, and concluded: "... as Wyoming has advanced into the modern commercial world along with the rest of the United States, its people have the same need for trade secret protection as do the rest of the people of the country. Consequently, we have no hesitation in declaring that the tort of misuse or misappropriation of trade secrets is part of the law of this jurisdiction. Furthermore, because it represents the common law cause of action in its modern and most appropriate version, we adopt the cause of action as it appears in Restatement (Third) of Unfair Competition." Id. at ¶ 15. Plaintiffs invite this Court to undertake this same type of analysis and find that invasion of privacy is recognized as a cause of action by the state of Wyoming and look to the Restatement to define the elements of the tort.
Finally, Plaintiffs cite several Wyoming statutes in which privacy is mentioned. However, none of the cited statutes applies to the factual situation presently before this Court.
In first case cited by Plaintiffs, Mountain West Farm Bureau Mutual Ins. Co. v. Hunt, 82 F.Supp.2d 1261 (D.Wyoming, 2000), the federal district court in Wyoming applied