192 F. Supp. 3d 427
S.D.N.Y.2016Background
- Plaintiffs Boelter and Edwards (Michigan citizens) sued Hearst alleging it sold or disclosed their magazine subscription data without written consent, violating Michigan’s Video Rental Privacy Act (VRPA) and asserting unjust enrichment. The actions were consolidated and amended.
- VRPA (pre-2016 amendment) forbade sellers of books, recordings, and video recordings from disclosing customer-identifying information except in narrow exceptions; it provided criminal penalties and a civil remedy (actual damages or $5,000, costs and fees).
- Plaintiffs allege Hearst sold subscriber demographic data to data miners/third parties, causing unwanted solicitations, risk of scams, and diminished value of subscriptions; they seek class certification, statutory and unjust enrichment damages, and injunctive relief.
- Hearst moved to dismiss for lack of jurisdiction (standing, CAFA/Michigan court-rule issue), on First Amendment grounds (as-applied and facial), and for failure to state claims (not a "retailer," exemptions, unjust enrichment preempted); it also sought to strike injunctive relief.
- While the motion was pending Michigan amended the VRPA (2016); the court held the amendment was substantive and not retroactive, so the pre-amendment VRPA governs Plaintiffs’ claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing (Article III) | Plaintiffs: VRPA violation and economic loss (reduced subscription value, solicitations, privacy invasion) are concrete, particularized injuries. | Hearst: statutory violation and alleged harms are not concrete injuries. | Denied dismissal; pleadings sufficiently allege a concrete, particularized injury for standing. |
| CAFA jurisdiction and Michigan Court Rule 3.501(A)(5) | Plaintiffs: Federal jurisdiction under CAFA; Rule 3.501 is procedural and does not bar federal class actions. | Hearst: CAFA shouldn’t permit class suits barred in state court; MCR 3.501(A)(5) is substantive and displaces Rule 23. | Denied dismissal; CAFA grants jurisdiction and MCR 3.501(A)(5) is procedural and does not preclude Rule 23 class claims in federal court. |
| VRPA applicability & statutory defenses | Plaintiffs: Hearst sells magazines directly (subscriptions) and is a "retailer" under VRPA; disclosures fall outside statutory exceptions. | Hearst: Not a "retailer" for VRPA; disclosures are exempt as "exclusive purpose" direct marketing and proper notice was given. | Denied dismissal; pleadings plausibly allege Hearst is covered and that exceptions/notice are fact questions for later. |
| First Amendment (as-applied & facial) | Plaintiffs: VRPA regulates commercial speech and is a permissible, tailored privacy protection. | Hearst: VRPA is an unconstitutional content-based restriction on speech (both as-applied and facially overbroad). | Denied dismissal; court applies intermediate scrutiny, finds privacy interest substantial, VRPA directly advances interest and is narrowly tailored; not overbroad. |
| Unjust enrichment & exclusivity | Plaintiffs: Statutory remedy does not preempt common-law unjust enrichment; unjust enrichment pleaded. | Hearst: VRPA provides exclusive remedy or pleadings fail to state unjust enrichment. | Denied dismissal; VRPA not a comprehensive exclusivity scheme and Plaintiffs allege sufficient unjust enrichment elements. |
| Motion to strike injunctive relief | Plaintiffs: injunctive relief appropriate if claims proven. | Hearst: injunctive relief improper; move to strike. | Denied; motion to strike premature and not shown to cause prejudice. |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (pleading standard requires plausible factual allegations)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (plausibility pleading standard)
- Lujan v. Defenders of Wildlife, 504 U.S. 555 (Article III standing requirements)
- Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (concreteness requirement for injuries under Article III)
- Landgraf v. USI Film Prods., 511 U.S. 244 (presumption against retroactivity of statutes)
- Shady Grove Orthopedic Assocs., P.A. v. Allstate Ins. Co., 559 U.S. 393 (Rule 23 v. state law limits on class actions; plurality and controlling concurrence discussed)
- Central Hudson Gas & Elec. Corp. v. Public Serv. Comm’n, 447 U.S. 557 (commercial speech intermediate-scrutiny test)
- Sorrell v. IMS Health Inc., 564 U.S. 552 (content-based regulations of data-driven speech and First Amendment analysis)
- Dun & Bradstreet, Inc. v. Greenmoss Builders, Inc., 472 U.S. 749 (commercial speech receives lesser protection)
- United States v. Williams, 553 U.S. 285 (facial challenge and overbreadth principles)
- Trans Union Corp. v. Federal Trade Comm’n, 267 F.3d 1138 (D.C. Cir.) (privacy/consumer report regulation and intermediate scrutiny)