ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS SECOND CONSOLIDATED AMENDED COMPLAINT
(Docket No. 304)
I. INTRODUCTION
Plaintiffs in this multidistrict litigation— eighteen (18) individuals from thirteen different states — have filed a second consolidated amended complaint (“SCAC” or “Complaint”) against Defendant Carrier IQ, Inc. and a number of manufacturers of mobile devices. The Complaint alleges that Defendants have violated the Federal Wiretap Act as well as a number of state’s privacy and consumer protection statutes through the creation and use of Carrier IQ’s software on Plaintiffs’ mobile devices. Plaintiffs allege that Carrier IQ designed, and the Device Manufacturers Defendants embedded, the Carrier IQ Software on their mobile devices and, once embedded, this software surreptitiously intercepted personal data and communications and transmitted this data to Carrier IQ and its customers. Pending before the Court is Defendants’
II. FACTUAL & PROCEDURAL BACKGROUND
A. Plaintiffs
There are 18 plaintiffs in this action, from 13 different states. Below is a chart that identifies the Plaintiff, the state in which each resided during the relevant period, and which mobile device each Plaintiff had with the Carrier IQ Software installed:
In describing each Plaintiff, the SCAC provides that “[u]pon information and belief, [the Plaintiffs] mobile device came with the Carrier IQ Software and implementing or porting software pre-installed. In addition to using his devices to make phone calls, [the Plaintiff] has used it for web browsing and text messaging, including accessing, inputting, and transmitting personal, private, confidential, and sensitive information. [The Plaintiff] would not have purchased his mobile device had he known that the Carrier IQ Software and related implementing or porting software was installed and operating on his device, and taxing his device’s battery, processor, and memory, as alleged herein.” See SCAC ¶¶ 8-25.
B. Defendants
The remaining defendants in this action are a number of mobile device manufacturers. Plaintiffs allege that Carrier IQ is the “designer, author, programmer, and vendor” of the IQ Agent software and provided the mobile device manufacturers the “guide or template” needed for the “related implementing or porting software
The remaining Defendants are: (1) HTC America, Inc. and HTC Corporation (collectively “HTC”); (2) Huawei Device USA, Inc. (“Huawei”); (3) LG Electronics Mobi-leComm U.S.A., Inc. and LG Electronics, Inc. (collectively “LG”); (4) Motorola Mobility LLC (“Motorola”); (5) Pantech Wireless, Inc. (“Pantech”); (6) Samsung Telecommunications America, Inc. and Samsung Electronics Co., Ltd. (collectively “Samsung”). Each Defendant is alleged to have installed the Carrier IQ Software and CIQ Interface software on at least some of their mobile device models.
C. Asserted Causes of Action
The SCAC alleges five causes of action:
• Count 1: Violation of the Federal Wiretap Act (18 U.S.C. § 2551)
• Count 2: Violation of State Privacy Laws: Plaintiffs assert their claims on behalf of all residents of the United States under CaLPenal Code § 502 and on behalf of citizens of the following 35 states under those states’ respective privacy laws: Arizona, California, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Iowa, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, North Carolina, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Utah, Virginia, Washington, West Virginia, Wisconsin, and Wyoming.
• Count 3: Violation of State Consumer Protection Acts: Asserted on behalf of residents of the following 21 states under those states’ respective consumer protection statutes: Arkansas, California, Connecticut, Delaware, Florida, Hawaii, Kansas, Maryland, Michigan, Missouri, Nevada, New Hampshire, New Jersey, Oklahoma, Rhode Island, South Carolina, South Dakota, Texas, Vermont, Washington, and West Virginia.
• Count 4: Violation of the Magnu-son-Moss Warranty Act (15 U.S.C. § 2301-2312): Asserted on behalf of the residents of the following 34 states (and the District of Columbia): Alaska, Arkansas, California, Colorado, Delaware, District of Columbia, Hawaii, Indiana, Kansas, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, North Dakota, Oklahoma, Pennsylvania, Rhode Island, South Carolina, South Dakota, Texas, Utah, Virginia, Washington, West Virginia, and Wyoming.
• Count 5: Violation of the Implied Warranty of Merchantability: asserted on behalf of residents of the states enumerated under Count 4.
D. Carrier IQ Software Background
Carrier IQ “designed, authored, programmed, and caused the installation and activation of the Carrier IQ Software, including the so-called IQ Agent, on the devices at issue in this case.” Id. ¶ 62. It also “designed, authored, and provided guides to the Device Manufacturers for designing, authoring, programming, installing, and activating the' CIQ Interface in deployments” through the “embedded” method of installation. Id.
Carrier IQ represents that its software is a “network diagnostics tool” for cell phone service providers. Id. ¶ 40. It is alleged that in reality, the software collects, and transfers, sensitive personal data off of a user’s mobile device. See id. ¶¶ 1-2. Specifically, the CIQ Interface software
Plaintiffs allege that the data intercepted by the Carrier IQ Software includes the following: (1) URLs (including those which contain query strings with embedded information such as search terms, user names, passwords, and GPS-based geo-lo-cation information); (2) GPS-location information; (3) SMS text messages; (4) telephone numbers dialed and received; (5) the user’s keypad presses/keystrokes; and (6) application purchases and uses. Id. ¶ 65. This information is intercepted as part of the Carrier IQ Software’s “calls” on the device operating system for “metrics.” Id. It then stores the information in the mobile device’s RAM memory on a rolling basis. Id.
The Carrier IQ Software also has a feature referred to as “Profiles.” Via Profiles, Carrier IQ customers (who are typically wireless carriers, but can also include device manufacturers) will specify which data they want from the above described “metrics.” Id. ¶ 68. At designated times (or as requested), the Profile-specified data would then be transmitted from the mobile device to the requesting customer (the wireless carriers or device manufacturers). Id.
The SCAC quotes from a number of letters which the various Device Manufacturers sent to Senator Al Franken in response to his inquiries regarding the Carrier IQ Software. These letters provide a glimpse into the potential scope of the Carrier IQ Software deployment. AT & T stated that Carrier IQ’s Software was installed on approximately “900,000 devices, with about 575,000 of those collecting and reporting wireless and service performance information to AT & T.” Id. ¶ 53. Sprint indicated that there were “26 million active Sprint devices that have Carrier IQ Software Installed” and stated that Sprint queried information from a fraction of those (c. 1.3 million) at any given time for diagnostic needs and that a 30,000 device subset of this 1.3 million were used for “research specific problems.” Id. ¶ 54. T-Mobile stated that there were “approximately 450,000 T-Mobile customers [that] use devices that contain Carrier IQ’s diagnostic software.” Id. ¶ 56.
The SCAC recounts two ways where deployment of the Carrier IQ Software has resulted in “grave breaches of privacy.” Id. ¶ 69. First, due to a “programming error,” the SCAC alleges that AT & T has admitted that the “Carrier IQ Software transmitted text message content to it.” Id. Plaintiffs use this as evidence that the Carrier IQ Software does, in fact, intercept and capture text message content. Id. Second, Plaintiffs state that “with
Plaintiffs allege that the Carrier IQ Software continues to operate even if the consumer is using the device solely on a Wi-Fi network (as opposed to a cellular network). Id. ¶ 74.
E. FTC Investigation of and Action Against HTC Re: Carrier IQ Software
Since the filing of the First Consolidated Amended Complaint in this action, the FTC commenced an investigation into HTC regarding the Carrier IQ Software and a “related privacy and security flaw” in HTC mobile devices. Id. ¶ 75. This investigation culminated in a Consent Order agreement in February 2013. Id. ¶ 76.
The FTC found that HTC had “failed to take reasonable steps to secure the software it developed for its smartphones and tablet computers, introducing security flaws that placed sensitive information about millions of consumers at risk.” Id. One of the failures cited, was HTC’s failure to use “documented secure communications mechanisms in implementing logging applications,” thus placing sensitive information at risk. Id. ¶ 77. Because of HTC’s failure to implement security measures, “any third-party application that could connect to the internet could communicate with the logging applications on HTC devices and access a variety of sensitive information.” Id. One of the “logging” applications noted by the FTC was the Carrier IQ Software. Relevant to this case, the Consent Order noted: The information collected by the Carrier IQ software was supposed to have been accessible only by network operators, but because HTC used an insecure communications mechanism, any third-party application on the user’s device that could connect to the internet could exploit the vulnerability to communicate with the CIQ Interface.” Id. This permitted interception of “the sensitive information being collected by the Carrier IQ software” and potentially allowed individuals to perform “malicious actions” such as “sending text messages without permission.” Id.
The FTC Consent Order explained how this security flaw occurred. During the development of its CIQ Interface, HTC activated “debug code” in the operating system to test whether the CIQ Interface was operating properly. “The debug code accomplished this by writing the information to a particular device log known as the Android system log, which could then be reviewed. However, HTC failed to deactivate the debug code before its devices shipped for sale to consumers.” Id. Thus, “all information that the CIQ Interface sent to the Carrier IQ software ... was also written to the Android system log on the device.” Id. Once in the system log, the sensitive information was then
III. DISCUSSION
A. Legal Standard
Under Federal Rule of Civil Procedure 12(b)(6), a party may move to dismiss based on the failure to state a claim upon which relief may be granted. See Fed. R. Civ. P. 12(b)(6). A motion to dismiss based on Rule 12(b)(6) challenges the legal sufficiency of the claims alleged. See Parks Sch. of Bus. v. Symington,
To the extent Plaintiffs’ claims sound in fraud, the SCAC must meet the heightened pleading standard of Federal Rule of Civil Procedure 9(b). See Kearns v. Ford Motor Co.,
B. Plaintiffs’ Standing to Assert Their Claims
In order to have Article III standing to assert a claim, a plaintiff must have suffered an injury-in-fact that is fairly traceable to the actions of the defendant, and that his injury is likely to be redressed by a favorable decision. See, e.g., Ass’n of Public Agency Customers v. Bonneville Power Admin.,
The Device Manufacturers raise a number of challenges to Plaintiffs’ standing to bring the various claims in the SCAC. Specifically, Defendants argue that: (1) Plaintiffs lack Article III standing to assert their claims under California Penal Code § 502 (and related state consumer protection statutes) as they have not alleged a sufficient injury-in-fact; (2) that Plaintiffs Cribbs and Pipkin have failed to allege any injury; and (3) that Plaintiffs lack standing to assert claims under state laws in which they do not reside and against Device Manufacturers who did not produce their mobile devices. The Court addresses each argument in turn.
1. Plaintiffs Have Adequately Alleged Standing Under Cal. Penal Code § 502 and State Consumer Protection Statutes
Defendants argue that Plaintiffs lack standing to assert a claim under the California Consumer Data Access and Fraud Act (“CCDAFA”), Cal. Penal Code § 502, or any state consumer protection statute because these statutory claims require proof that the Plaintiffs “suffer[ed] damage or loss by reason of a violation.” Cal. Penal Code § 502(e). Plaintiffs respond, however, that they have suffered damage in three ways: (1) diminished battery power and life in their mobile devices as a result of the Carrier IQ Software; (2) alleged collection and disclosure of personal information; and (3) they would not have purchased their mobile devices had they known the Carrier IQ Software was installed. Plaintiffs have sufficiently alleged “damage” for purposes of the pleading stage by alleging that the Carrier IQ Software diminished their mobile devices’ battery life and resources. Accordingly, the Court need not address Plaintiffs’ alternative theories of damage and Defendants’ motion to dismiss on this ground is DENIED.
As detailed above, the SCAC has alleged, for each Plaintiff, that the Carrier IQ Software “was installed and operating on his device, and taxing his device’s battery, processor, and memory, as alleged herein.” See SCAC ¶¶ 8-25. Defendants contend that these “generalized” allegations are “too vague and speculative” to establish Article III standing.
Defendants rely primarily on Opperman v. Path, Inc., No. C13-0453-JST,
It is evident that where plaintiffs have alleged more than a “de minimis” injury to their device’s mobile resources as a result of “systemic rather than episodic” use of those resources, standing will be found. In re Google, Inc Privacy Litig.,
The Plaintiffs’ bare assertion that Carrier IQ “taxed” each Plaintiffs “battery, processor, and memory” would likely be insufficient to state a sufficient injury-in-fact for standing purposes. However, the SCAC provides further factual enhancement that makes Plaintiffs’ allegations plausible for purposes of the pleading stage. Specifically, the SCAC alleges that
Android developer Tim Schofield researched the presence of the Carrier IQ Software on multiple Android smart-phone platforms. He has noted that in addition to the privacy issues, the embedded Carrier IQ Software necessarily degrades the performance of any device on which it is installed. The Carrier IQ Software is always operating and cannot be turned off. It necessarily uses system resources, thus slowing performance and decreasing battery life. As a result, because of the Carrier IQ Software, in addition to having their private communications intercepted, plaintiffs and prospective class members are not getting the optimal performance of the mobile devices they purchased, and which are marketed, in part, based on their speed, performance, and battery life.
Defendants argue that Plaintiffs have failed to allege that the specific functions-of the Carrier IQ Software that at issue had incremental effect on battery life or performance above and beyond the Software’s legitimate uses. However, such an effect may clearly be inferred from the SCAC. As Plaintiffs have alleged that the Carrier IQ Software is always on, the continual operation of the Software in obtaining this information plausibly alleges and implies the Software has more than a de minimis impact on the battery life and performance of Plaintiffs’ mobile devices. See In re Google Android Consumer Privacy Litig.,
Defendants motion to dismiss Plaintiffs’ CCDAFA and other state consumer protection statute claims for lack of standing is accordingly DENIED.
2. Plaintiffs Cribbs and Pipkin’s Standing
Defendants argue that Plaintiffs Cribbs and Pipkin do not have standing because the allegations in the SCAC affirmatively establish that they have not suffered any injury. They point to the allegations in Paragraph 53 of the SCAC which, quoting an AT & T letter to Senator A1 Franken, states: “AT & T indicated further that the software ‘also is embedded on the HTC Vivid, LG Nitro and Samsung Skyrocket devices, but has not been activated due to the potential for the software agent to interfere with the performance of those devices.’ ” SCAC ¶ 53. This is significant because Plaintiffs Cribbs and Pipkin are both alleged to have Samsung Skyrocket devices. See SCAC ¶¶ 9, 17. Defendants therefore contend that the Carrier IQ Software could not have caused Plaintiffs Cribbs and Pipkin any injury.
Plaintiffs respond that they have properly alleged that “Carrier IQ Software and related implementing or porting software was installed and operating on [their] device[s], and taxing [their] device[s’] battery, processor, and memory.” Id. ¶¶ 9 17. They further argue that the quote Defendants rely upon was a “from AT & T’s December 14, 2011 letter to Sen. Franken, and not a factual allegation from plaintiffs’ experience or their counsel’s investigation, which is ongoing.” Docket No. 309, at 29.
Defendants are correct that the Plaintiffs’ various allegations on this point appear to be in tension with each other. However, this tension is not fatal to Plaintiffs’ standing at this stage of the proceedings. The allegations in the SCAC at Paragraph 53 quote a letter from AT & T. Taking all inferences in Plaintiffs’ favor, this letter suggests that AT & T chose not to activate the Carrier IQ Software on Samsung Skyrocket devices out of concerns for performance on those devices. There are no allegations in the SCAC, however, that Plaintiffs Cribbs or Pipkin used AT & T as their carrier. Given that the SCAC alleges that mobile carriers have the power to deactivate or remove the Carrier IQ Software, see SCAC ¶ 55 (Sprint indicating that it “began removing the Carrier IQ Software from mobile devices”), it is possible that the Carrier IQ Software was activated on Samsung Skyrocket devices used on mobile carriers oth
Defendants’ motion to dismiss Plaintiff Cribbs’ and Plaintiff Pipkin’s claims for lack of standing is DENIED.
3. A Plaintiff’s Standing to Assert Claims Under State Laws from States in Which He Does Not Reside and Against Defendants Who Did Not Manufacture His Device
Defendants’ final argument is that this Court should dismiss for lack of standing any state law claims arising under the laws of a state in which no Plaintiff resides and as to devices not purchased by any named Plaintiff in states in which no Plaintiff resides. Defendants also argue that each individually named Plaintiff only has standing to assert claims against the Device Manufacturer who made his or her mobile device, and not those who manufactured phones purchased by others.
Plaintiffs have adequately alleged an injury-in-fact as to their individual state law claims for the reasons discussed above. As the Device Manufacturers have correctly pointed out, however, there is currently no named plaintiff who can assert an injury-in-fact arising under many of the state laws asserted; nor is there a named plaintiff who can assert certain state law claims against specific Device Manufacturers.
Given the prevalence of nationwide class actions, it is perhaps surprising that there is no Ninth Circuit precedent specifically deciding this question. See Los Gatos Mercantile, Inc. v. E.I. DuPont De Nemours & Co., No. 13-cv-01180-BLF,
The case at bar is distinguishable. Unlike in Easter, here there is a named plaintiff in this suit who has Article III standing to assert a claim against each of the Device Manufacturers. This is what was missing in Easter: the threshold standing that might permit the case to proceed beyond the initial pleading state to class certification did not exist in Easter as it does here. Easter did not address the question: Whether, once threshold standing is established, the Court has the power to certify the class before addressing the standing of unnamed class members. Easter did not broadly hold that district courts must always address standing issues before class certification.
Any doubt as to the limited scope of Easter holding was resolved in Perez v. Nidek Co., Ltd.,
It is not surprising, therefore, that district courts across the country have split on whether standing questions in the class action context can be deferred until after class certification. See, e.g., Los Gatos Mercantile,
Many courts — including a number of courts in this District — have refused to defer consideration of these issues, treating it as a threshold matter that should be addressed at the pleading stage. See, e.g., Los Gatos Mercantile,
The courts in these case have attempted to generalize Article III principles. In Los Gatos Mercantile, for instance, the court noted that where a complaint includes multiple claims “at least one named class representative must have Article III standing to raise each claim” and that in a class action “ ‘each claim must be analyzed separately, and a claim cannot be asserted on behalf of a class unless at least one named plaintiff has suffered the injury that gives rise to that claim.’ ” Los Gatos Mercantile,
In addition, some courts have articulated prudential reasons for adjudicating these class-oriented standing questions at the pleading stage. For example, in In re Wellbutrin XL Antitrust Litig.,
The alternative proposed by the plaintiffs [deferring consideration until class certification] would allow named plaintiffs in a proposed class action, with no injuries in relation to the laws of certain states referenced in their complaint to embark on lengthy class discovery with respect to injuries in potentially every state in the Union. At the conclusion of that discovery, the plaintiffs would apply for class certification, proposing to represent the claims of parties whose injuries and modes of redress would not share. That would present the precise problem that the limitations of standing seek to avoid.
Id. at 155. The court declined to “indulge in the prolonged and expensive implications of the plaintiffs’ position only to be faced with the same problem months down the road.” Id.
While the above cases are not without logical force, the Court concludes that a strict categorical requirement that the standing analysis must precede class certification is unwarranted. First, for the reasons stated above, Easter cannot be read so broadly. Its facts are narrow, and the Supreme Court in Gratz and the Ninth Circuit in Perez have confirmed this is an open question.
To be sure, the precise contours of the “logically antecedent” doctrine coined in Ortiz and Amchem are subject to dispute, with at least one commentator noting that the concept has “caused a great deal of mischief.” See Linda S. Mullenix, Standing and Other Dispositive Motions After Amchem and Ortiz: The Problem of “Logically Antecedent Inquiries, 2004 Mich. St. L.Rev. 703, 707. The Northern District of Illinois has concisely summarized the three dominant approaches to Ortiz and Am-chem’s “logically antecedent” language as follows:
Some courts have taken an almost categorical approach, routinely resolving class certification questions prior to conducting a standing inquiry. Others have taken a “nuanced” approach, attempting to fashion a governing principle to determine when class certification is considered “logically antecedent.” Finally, some courts limit Ortiz and Amchem to the “very specific situation of a mandatory global settlement class,” and do not interpret those cases to require courts to consider class certification before standing.
In re Plasma-Derivative Proten Therapies Antitrust Litig., No. MDL 2109,
A leading commentator has noted that “[m]ost courts have interpreted Amchem and Ortiz narrowly, holding that those cases stand for a limited exception that class certification can be considered before standing in global settlement-only mass tort class actions.” Rubenstein, supra, § 2:2 (5th ed.); see also Hoffman v. UBS-AG,
once a class is properly certified, statutory and Article III standing requirements must be assessed with reference to the class as a whole, not simply with reference to the individual named plaintiffs. The certification of a class changes the standing aspects of a suit, because “[a] properly certified class has a legal status separate from and independent of the interest asserted by the named plaintiff.”
Payton v. County of Kane,
Indeed, a number of cases in this “growing consensus” have addressed this issue in the precise “sister state” law scenario raised in this case and found class certification to be logically antecedent to class considerations. For example, in Having v. Transnation Title Ins. Co.,
For example, with the facts presented in the complaint, the plaintiff certainly could not file an individual suit only seeking relief under Arizona law; however, a member of his proposed class from that state likely would have suffered an injury that could be redressed under Arizona law. The defendant has not seriously challenged the plaintiffs standing to assert his claims arising from the alleged overcharge on his own refinancing transaction. The question whether he has standing to proceed as a class representative will be subsumed in the class certification decision, but it the argument does not support the defendant’s requested dismissal presently.
Id. at 668. Similarly, in Jepson v. Ticor Title Insurance Company, No. C06-1723-JCC,
Because of the nature of class certification — a process wherein members of the class acquire legal status once a class is certified — standing may be established by looking to the rights and interests of the members of the certified class; see Sosna v. Iowa,
The conclusion that it is permissible to decide class certification before determining standing to pursue claims of unnamed class members is consistent with Article III. Provided there is threshold standing for each named plaintiff, ordering the adjudication process so as to address who cognizable parties are in the case (ie., whether unnamed class members have legal status) before addressing standing does no violence to Article III. A case or controversy may still be assured once the class is certified.
This conclusion is also consistent with a body of cases that have examined the question whether a named plaintiff in consumer class action can bring suit on behalf of individuals who purchased products different from, but similar to, those purchased by the named plaintiff. In these cases, it could be argued that the named plaintiff would not have Article III standing to assert directly such claims against the defendant — having never purchased the “similar” product, he or she can not claim to have suffered an injury-in-fact from that product. Despite this fact, a growing number of courts in this District allow these putative class actions to proceed as to the “similar” product claims and leave for class certification the question of whether the named plaintiff can adequately represent a class of individuals who purchased the “similar” products. See, e.g., Rojas v. General Mills, Inc., No. 12-cv-05099-WHO,
Deciding at the pleading stage that a plaintiff cannot represent a class who purchased any different products than the plaintiff seems unwarranted, at least on the facts of this case. A plaintiff has sufficiently “typical” claims to represent a class if his claims “are reasonably coextensive with those of absent class members; they need not be substantially identical.” Whether products are “sufficiently similar” is an appropriate inquiry, but it does not relate to standing: a plaintiff has no more standing to assert claims relating to a “similar” product he did not buy than he does to assert claims relating to a “dissimilar” product he did not buy. Seen this way, analyzing the “sufficient similarity” of the products is not a standing inquiry, but rather an early analysis of the typicality, adequacy, and commonality requirements of Rule 23.
Id.; see also Rubenstein, supra, § 2.6 (recognizing that addressing these questions at class certification is preferable insofar as Rule 23’s requirements “are designed precisely to address concerns about the relationship between the class representative and the class” and “focuses a court on pragmatic factors in a familiar and accessible manner”). These cases fur
Accordingly, for the reasons discussed, the Court finds that it has the discretion to defer questions of standing until after class certification. Indeed, a number of courts, regardless of which analysis they have undertaken first, have couched their decision as one of discretion. For example, in United Food & Commercial Workers Local 1776,
The Ninth Circuit has confirmed that district courts can address ‘the issue of standing before it addresse[s] the issue of class certification.’ I find that the weight of the persuasive authority allows me to determine standing at this juncture, and that efficiency considerations militate against waiting until class certification to determine the scope of this case.
Id. at *19 (emphases added); see also In re Lithium, No. 13-MD-2420 YGR,
On the facts of this ease, however, as to claims brought under 35 state laws, the Court declines to exercise this discretion and opts, as a matter of case management, to require the Plaintiffs to present a named class member who possesses individual standing to assert each state law’s claims against Defendants. It does so for several reasons. First, the Court notes that the named Plaintiffs in this action come from 13 different states. The number of consumers from 35 other states in which state law claims are asserted is vast relative to the claims to which the named Plaintiffs have standing. Compare In re Target Corp. Data Sec. Breach Litig.,
In sum, although the Court believes Article III allows the district court to exercise discretion in ordering the determinations of class certification and standing, the Court finds it appropriate in this case to address standing in advance of class certification. In so doing, the Court finds the named Plaintiffs do not have standing to assert claims from states in which they do not reside or did not purchase their mobile device.
However, as to the named Plaintiffs’ ability to sue under their own laws Device Manufacturers from whom other named Plaintiffs bought devices, the Court will exercise its discretion to defer determination of standing until after class certification. In contrast to Easter, these Defendants are properly in the case (having allegedly sold a device to at least one named Plaintiff); the potential burden of adjudicating class certification will not impose the kind of expansive burden entailed in permitting plaintiffs to sue each defendant under the laws of 35 other states.
Accordingly, the motion to dismiss claims brought under the laws of Alaska, Arkansas, Colorado, Delaware, District of Columbia, Hawaii, Idaho, Indiana, Kansas, Louisiana, Maine, Massachusetts, Minnesota, Missouri, Montana, Nebraska, Nevada, New Jersey, New Mexico, North Carolina, New Hampshire, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Utah, Vermont, Virginia, West Virginia, and Wyoming is granted for lack of standing by the named Plaintiffs. The motion to dismiss named Plaintiffs’ claim against each of the Defendant Device Manufacturers is denied without prejudice to renewal after the Court addresses class certification.
C. Plaintiffs’ Federal Wiretap Act Claim
The Federal Wiretap Act (“Wiretap Act”), 18 U.S.C. § 2510-2520, “is designed to prohibit ‘all wiretapping and electronic surveillance by persons other than duly authorized law enforcement officials engaged in investigation of specified types of major crimes.’” Greenfield v. Kootenai County,
“intentionally intercept ], endeavor[ ] to intercept, or procure[ ] any other person to intercept or endeavor to intercept, any wire,, oral, or electronic communication.”
Id. § 2511(l)(a). The Act defines the term “intercept” as the “aural or other acquisition of the contents of any wire, electronic, or oral communication through the use of any electronic, mechanical, or other device.” Id. § 2510(4). Under 18 U.S.C. § 2520, anyone who has been damaged by the interception or disclosure of their communications in violation of the Wiretap Act are entitled to: (1) any preliminary, equitable, or declaratory relief that may be appropriate; (2) statutory and punitive damages; and (3) reasonable attorney’s fees. See 18 U.S.C. § 2520(b).
Defendants argue that Plaintiffs’ Wiretap Act claims fail because (1) Plaintiffs fail to allege Defendants “intercepted” any communications, as that term has been defined and applied by the Ninth Circuit; (2) the Carrier IQ Software is not a “device” as required by the Wiretap Act; (3) many of Plaintiffs’ allegations do not involve “contents” of communications; and (4) Plaintiffs have not alleged that any of
1. Plaintiffs Have Adequately Alleged an “Interception” for Purposes of the Wiretap Act
As discussed above, “intercept” is defined as the “aural or other acquisition of the contents” of a communication. 18 U.S.C. § 2510(4) (emphasis added). The term “acquisition” is not defined in the statute, but the Ninth Circuit, looking at the term’s “ordinary meaning” has defined it as the “act of acquiring, or coming into possession of.” United States v. Smith,
Central to Defendants’ arguments in this case, the Ninth Circuit has construed the Wiretap Act’s interception element as requiring that the defendant intercept the communication in questions contemporaneously with transmission. In Konop v. Hawaiian Airlines, Inc.,
In Konop, the Ninth Circuit found that a narrow definition of “intercept” which required acquisition contemporaneous with transmission was most “consistent with the ordinary meaning of ‘intercept,’ which is ‘to stop, seize, or interrupt in progress or course before arrival.’ ” Konop,
any aural transfer made in whole or in part through the use of facilities for the transmissions of communications by the aid of wire, cable, or other like connection ... and such tern includes any electronic storage of such communication.
18 U.S.C. § 2510(1) (1998) (emphasis added). The definition of “electronic communications,” by contrast, did not include “storage” of electronic communications, but was (as it is now) limited to the “transfer” of data, signs, signals, writings, etc. See Konop,
Of course, the prime benefit of modern electronic communications is the tremendous, almost instantaneous, speed in which they can be transmitted. Further, transmission of these communications necessarily depend on electronic storage in a way that more “traditional” forms of communications (letters, telephone calls, and the like) did not. Given these aspects of electronic communications, some courts have suggested that the Wiretap Act’s applicability to modern forms of communications may be limited. See, e.g., Fraser v. Nationwide Mut. Ins. Co.,
Case law in this circuit applying Konop's “contemporaneous with transmission” requirement has revolved around e-mail and related communications. These cases have held that unauthorized access to emails stored on a server (such as an e-mail server) does not constitute an “interception” for purpose of the Wiretap Act. See, e.g., Konop,
The common thread in these cases is that the challenged acquisition occurred after the transmission was completed — the e-mail messages at issue were received by the destination server and no further “movement” of the message was necessary. In contrast, the Carrier IQ Software at issue in this case is alleged to operate on sent and received communications during the transmission process. For example, the SCAC alleges that Mr. Eckhart (the individual who “broke” the story regarding Carrier IQ’s software) uploaded a video on YouTube in which he showed that the Carrier IQ Software was “intercepting incoming SMS text messages” and “intercepting outgoing web queries and search terms.” SCAC ¶ 46. The “incoming” and “outgoing” qualifiers imply interception during transmission (as opposed, for example, to an allegation that already “sent” or “received” text messages were intercepted). Similarly, in describing how the CIQ Interface operates, the SCAC alleges that it is a “layer of code” “designed to see, recognize and intercept a host of data and content” and then “send that material down to the IQ Agent for further processing and possible transmit-tals.” SCAC ¶ 63. The allegation that the CIQ Interface “sees” and “recognizes” certain activity and then sends it down to the IQ Agent suggests a continual process by which communications to and from the phone are being contemporaneously analyzed during the transmission process.
Further, reviewing the YouTube video cited in the SCAC contains additional support for the inference that the Carrier IQ Software operates contemporaneously with transmission.
Finally, the SCAC references and quotes from a media interview with a Carrier IQ executive. See SCAC ¶ 65. Included in this interview was the following exchange:
It seems there must be some sort of buffer of received text messages, or a cache. Am I right?
We receive this information in real time, so a text message comes in, we’ll look at it. Is it for us? No, discard. So within the software itself there’s this kind of fast process. We shouldn’t need to buffer this information.
You shouldn’t need to? Does that mean you categorically don’t do it? I haven’t had that question before. I can’t think of a reason why we’d need to buffer it. Because we’re operating in real time, we’ll see the SMS come in. Is it for us? Yes, OK, let’s deal with it. If not, discard. Just like letting the small fish go through the net, the same analogy applies.
http://www.theregister.co.uk/2011/12/02/ carrier_iq_interview/?page=2 (last visited October 22, 2014) (emphases added). This description of “real time” processing by the Carrier IQ Software and analogizing the process to a fishnet through which the transmission passes further suggest that the Carrier IQ software operates contemporaneously with transmissions.
Nonetheless, Defendants argue that because it is undisputed that the Carrier IQ Software operated on communications that either had been received by a mobile device (in the case of received communications) or had not yet left the mobile device (in the case of sent communications), the communications at issue are, as a matter of law, in “storage” and thus outside of the Wiretap Act’s provisions. At the hearing, Defendants repeatedly cited the fact that the ECPA defines “electronic storage” as:
(A) ány temporary, intermediate storage of a wire or electronic communication incidental to the electronic transmission thereof; and
(B) any storage of such communication by an electronic communication service for purposes of backup protection of such communication;
18 U.S.C. § 2510(17). Defendants argue that because the communications were on the mobile device when the Carrier IQ Software operated, they were in “temporary, intermediate storage” as defined by the ECPA. In essence, Defendants’ argument is premised on the contention that because the Carrier IQ Software operated on information located on a mobile device, it was, by default, in some form of temporary storage. Accordingly, Defendants conclude that the communications were, at the time the Carrier IQ Software operated on them, stored communications that could not, under Konop and Theofel be intercepted.
As an initial matter, the Court has serious reservations as to whether the underlying legal premise to Defendant’s argument — that a communication in temporary, transient storage as part of the transmission process is a “stored communication” that cannot be intercepted — is correct. In United States v. Councilman,
directed Interloc employees to intercept and copy all incoming communications to subscriber dealers from Amazon.com .... Interloe’s systems administrator modified the server’s procmail recipe so that, before delivering any message from Amazon.com to the recipient’s mailbox, procmail would copy the message and place the copy in a separate mailbox that Councilman could access. Thus, procmail would intercept and copy all incoming messages from Amazon.com before they were delivered to the recipient’s mailbox, and therefore, before the intended recipient could read the message.
Id. at 70. Defendant moved to dismiss the indictment, arguing that because, at the time the “procmail recipe” operated on the e-mail messages, the “messages existed ‘in the random access memory (RAM) or in
The First Circuit sitting en banc began by noting that the plain text of the ECPA did “not clearly state whether a communication is still an ‘electronic communication’ within the scope of the Wiretap Act when it is in electronic storage during transmission” Id. at 76 (emphasis added). Then, after looking at the legislative history behind the definition of “electronic storage” (on which Defendants in this case rely), the court found that the “purpose of the broad definition of electronic storage was to enlarge privacy protections for stored data under the Wiretap Act, not to exclude email messages stored during transmission from those strong protections.” Id. Specifically, the court determined that Congress intended the definition of “electronic storage” to protect, under the Stored Communications Act, “messages and by-product files that are left behind after transmission, as well as messages stored in a user’s mailbox” from unauthorized access. Id. at 77. Finally, the court concluded that the fact that Congress had, prior to the PATRIOT Act, chosen to define “wire communications,” but not “electronic communications,” as including communications in “electronic storage” to be insignificant:
If the addition of the electronic storage clause to the definition of “wire communication” was intended to remove electronic communications from the scope of the Wiretap Act for the brief instants during which they are in temporary storage en route to their destinations— which, as it turns out, are often the points where it is technologically easiest to intercept those communications — neither of the Senate co-sponsors saw fit to mention this to their colleagues, and no one, evidently, remarked upon it. No document or legislator ever suggested that the addition of the electronic storage clause to the definition of “wire communication” would take messages in electronic storage out of the definition of “electronic communication.” Indeed, we doubt that Congress contemplated the existential oddity that Councilman’s interpretation creates: messages briefly cease to be electronic communications for very short intervals, and then suddenly become electronic communications again.
Id. at 78. Rather, the court concluded that the addition of the “electronic storage” element to the definition of “wire communication” was merely meant to protect voicemail messages under the Wiretap Act (as opposed to the Stored Communications Act).
Based on its exhaustive analysis of the legislative history, the First Circuit rejected a “rigid ‘storage-transit dichotomy ” and found that a communication in “transient electronic storage that is intrinsic to the communication process for such communications” was not a stored communication for purposes of the ECPA. Id. at 79. Other courts have distinguished between “transitory” storage and later storage of a communication. See, e.g., Fredrick v. Oldham County Fiscal Court, No. 3:08-CV-401-H,
Moreover, Councilman is consistent with the Ninth Circuit’s “contemporaneous” requirement articulated in Konop. The Ninth Circuit in Konop merely held that an interception under the Wiretap Act required acquisition “during transmission, not while it is in electronic storage.” Konop,
To be sure, in footnote 6 of Konop, the Ninth Circuit addressed an argument raised by “dissent, amici, and several law review articles” that “the term ‘intercept’ must apply to electronic communications in storage because storage is a necessary incident to the transmission of electronic communications.” Konop,
While this argument is not without appeal, the language and structure of the ECPA demonstrate that Congress considered and rejected this argument. Congress defined “electronic storage” as “any temporary, intermediate storage of a wire or electronic communication incidental to the electronic transmission thereof,” indicating that Congress understood that electronic storage was an inherent part of electronic communication.
Id. (quoting 18 U.S.C. § 2510(17)(A)). This statement in Konop, however, is dicta. The question of whether the term “interception” should apply to in transient “en route” storage stage of communication was not directly presented by the parties to the action, but was rather used by ami-ci as support for the broader argument that because such temporary storage was inherent in all electronic communications, the “interception” requirement should apply to electronic communication in storage more generally. But, the communications at issue in Konop did not raise the issue of transitory “en route” storage. Rather, it examined only communications in permanent storage on a server after transmission — a factual scenario far afield from that presented by communications in transitory, temporary storage. Hence, the language quoted above was not a holding of the court. See, e.g., United States v. Pedregon,
Accordingly, even if the Defendants are factually correct that the communications at issue in this case were in transitory storage on Plaintiffs’ mobile devices (such as the devices’ random access memory, cache memory, etc.) when the Carrier IQ Software operated on them, it is not at all apparent why there was no “eaptur[ing] or redirect[ing]” of these communications contemporaneous with their transmission. Noel,
Ultimately, however, the Court need not conclusively decide this issue for the simple fact that there are no allegations in the SCAC from which it can be established that the Carrier IQ Software operated on communications while they resided in such “storage.” See, e.g., In re Yahoo Mail Litig.,
For the foregoing reasons, Defendants’ motion to dismiss Plaintiffs’ Wiretap Act claim on the grounds that Plaintiffs had failed to allege an interception contemporaneous with transmission is DENIED.
2. Plaintiffs May Only Rely on Alleged Interception of Text Messages and Internet Search Terms for Its Wiretap Act Claim
The definition of “intercept” under the Wiretap Act only applies to the interception of the “contents” of a communication. See 18 U.S.C. § 2510(4). “Contents,” in turn, is defined as “includfing] any information concerning the substance, purport, or meaning of that communication.” Id. § 2510(8). In In re Zynga Privacy Litig.,
Courts have excluded various types of information from the Wiretap Act’s definition of “content.” For instance, information about a telephone call’s “origination, length and time” have been found to be non-content “record” information. See United States v. Reed,
The parties agree that Plaintiffs’ allegations that the Carrier IQ Software intercepted text messages and URLs (to the extent the URLs contain a user’s search terms) implicate “content” under the Wiretap Act. See Docket No. 311; see also Zynga,
User names as indicators of the identity of a user do not disclose the “substance, purport, or meaning” of any communication. Courts have, therefore, found comparable data to not be “content” information. For example, in Zynga the Ninth Circuit found that a user’s Facebook ID was mere record information, insofar as it simply functioned as a “ ‘name’ or a ‘subscriber number or identity.’ ” Zynga, 750 F.3d at 1107. Similarly, in Svenson v. Google Inc.,
At the hearing on Defendants’ motion to dismiss, Plaintiffs attempted to distinguish these cases by arguing that when a user transmits both a user name and password together, a substantive communication with the destination server is created. The “substance, purport, or meaning” of this communication, Plaintiffs’ contend, is the establishment of the user’s identity and a request for access, and that the interception of the user name and password results in the interception of the entire substance of the communication.
The Court is not persuaded. In Zynga, the Ninth Circuit cited with approval the First Circuit case, Gilday v. Dubois. There, plaintiff — an inmate in a Massachusetts prison — alleged that the prison’s system telephone monitoring and detailing regime violated the federal and Massachusetts wiretap act. Under the “detailing” system, the prison system recorded information such as the number called, the duration of the call, and the inmate’s PIN number (the number assigned to that inmate that the inmate had to enter in order for the operator to complete the call). Gilday,
Just as interception of the PIN number in that case was found to not implicate “content” information, neither does interception of a user name or password. While such credentials may be a prerequisite to engaging in communications (i.e., entering a user name and password in order to access one’s email), the credentials themselves do not reveal the substance, purport, or meaning of any communication. Accordingly, the Court concludes that Plaintiffs cannot state a claim under the Wiretap Act for alleged interception of their user names or passwords by the Carrier IQ Software.
3. Plaintiffs Have Adequately Alleged that the Carrier IQ Software is a “Device” for Purposes of the Wiretap Act
As quoted above, the Wiretap Act defines interception as acquiring the contents of a communication “through the use of any electronic, mechanical, or other device.” 18 U.S.C. § 2510(4). “Electronic, mechanical, or other device” is, in turn, defined as “any device or apparatus which can be used to intercept a wire, oral, or electronic communication” except:
(a) any telephone or telegraph instrument, equipment or facility, or any component thereof (i) furnished to the subscriber or user by a provider of wire or electronic communication service in the ordinary course of its business and being used by the subscriber or user for connection to the facilities of such service and used in the ordinary course of its business; or (ii) being used by a provider of wire or electronic communication service in the ordinary course of its business ....
Id. § 2510(5)(a) (emphases added). Defendants contend that the SCAC fails to properly allege that the Carrier IQ Software was a “device” for two reasons. First, Defendants argue that the SCAC alleges that the Carrier IQ Software is a “component’ of the mobile devices and, second, that the Carrier IQ Software was used by the mobile carriers in their ordinary course of business. Accordingly, the Defendants’ argue that, under § 2510(5)(a), the Carrier IQ Software is not an “electronic, mechanical, or other device.”
As to the first argument, § 2510(5) does not exclude all “components” of a telephone or telegraph instrument from the definition of “device.” Rather, relevant to this action, only “components” that are used by a provider of electronic communications in the ordinary course of their business are excluded. As discussed below, whether the Carrier IQ Software, as alleged, was used by the mobile carriers in their “ordinary course of business” cannot be resolved at this stage. Accordingly, Plaintiffs have sufficiently alleged that the Carrier IQ Software is a “device” for purposes of the Wiretap Act.
In addressing the scope of the “ordinary course of business” exemption contained in § 2510(5)(a), courts have noted that the modifier “ordinary” in the exemption means “not everything [the provider] does in the course of its business would fall within the exception.” In re Google Inc. Gmail Litig., No. 13-MD-2430-LHK,
Courts in this district have disagreed as to the precise contours of this exemption.
The legislative history of the ECPA provides some support for this narrow reading. Section 2511(2)(a)(i) protects from Wiretap Act liability any employee, officer, or agent of an electronic communication service who intercepts, discloses, or uses that communication in the “normal course of his employment while engaged in any activity which is a necessary incident to the rendition of his service.” 18 U.S.C. § 2511(2)(a)(i). In addressing this (at the time) proposed liability exception, the Senate Judiciary Committee stated:
[TJhis provision reflects an important technical distinction between electronic communications and traditional voice telephone service. The provider of electronic communications services may have to monitor a stream of transmissions in order to properly route, terminate, and otherwise manage the individual messages they contain. These monitoring functions, which may be necessary to the provision of an electronic communication service, do not involve human listening in on voice conversations. Accordingly they are not prohibited.
S. Rep. No. 541, 99th Cong., 2d Sess., reprinted at 1986 U.S.C.C.A.N. 3555, 3575. To be sure, this report was addressing a distinct liability exception and used different language than that used in § 2510(5)(a)(ii) — “necessary incident to the rendition of’ services as opposed to “ordinary course of business.” Nonetheless, the report can be read as suggesting that “Congress intended to protect electronic communication service providers from liability when the providers were monitoring communications for the purposes of ensuring that the providers could appropriately route, terminate, and manage messages.” In re Google Inc. Gmail Litig.,
By contrast, the court in In re Google, Inc. Privacy Policy Litigation, No. C-12-01382-PSG,
Defendants cite to the letters sent by the various carriers to Senator A1 Franken in response to his questions regarding the use of the Carrier IQ Software. For example, they cite AT & T’s letter, which stated:
We do not use [the Carrier IQ Software] to obtain the contents of customers’ communications, to track where our customers go on the Internet, or to track customer location .... AT & T must collect operational data that can point to possible network upgrades, including improved call completion rates.”
Docket No. 304-4, at 2 (cited at SCAC ¶ 53). Similarly, Sprint wrote to Senator Franken that
Sprint has not used Carrier IQ diagnostics to profile customer behavior, serve targeted advertising, or for any purpose not specifically related to certifying that a device is able to operate on Sprint’s network or otherwise to improve network operations and customer experiences.
Docket No. 304-5, at 3 (cited at SCAC ¶ 54). Defendants thus argue that it is undisputed on the face of the SCAC that the Carrier IQ Software was used by the carriers as a diagnostic and troubleshooting tool in the ordinary course of their business.
The problem with Defendants’ argument, however, is that even if the Carrier IQ Software was used by the mobile service providers for legitimate business purposes (network diagnostics and troubleshooting), Plaintiffs have alleged that the Carrier IQ Software has functionality (text message and internet search term retrieval) that the phone carriers have expressly disclaimed. For instance, in the same AT & T letter quoted above, AT & T stated that it did “not use CIQ to obtain the contents of customers’ communications, to track where our customers go on the Internet, or to track customer location.” Docket No. 304-2, at 2. Similarly, Sprint in its letter stated it did not receive the “contents of the text messages” users received or sent or the “contents of users’ online search queries from the Carrier IQ Software.” Id. at 4.
Plaintiffs have alleged, however, that the Carrier IQ Software intercepted both text messages and online search queries and Defendants have not explained how this functionality of the software either (1) “facilitates” or is “incidental” to the transmission of electronic communications to or from a mobile device (under the narrow reading of the exception) or (2) furthers the mobile carriers “legitimate” and ordinary business purposes (under the more broad reading of the exception). Given the allegations of the scope and inferences that must reasonably be drawn in Plaintiffs favor regarding the functionality and use of the Carrier IQ Software, the Court cannot conclude on a motion to dismiss that the software qualifies as a component of a telephone system that is “being used as a provider of wire or electronic communication service in the ordinary course of its business,” even if that exception is broadly construed. See, e.g., In re Google Gmail Litig., No. 5:13-MD-2430-LHK,
Finally, the Court has doubts as to whether the Device Manufacturers may even invoke the “ordinary course of business” exception codified at § 2510(5)(a)(ii). At least two courts have held that the exception only applies to the actual providers of communication services. See, e.g., In re Google Gmail Litig.,
For the foregoing reasons, the Court concludes that Plaintiffs have alleged sufficient facts from which it may be inferred that the Carrier IQ Software is not used by electronic communication service providers in the ordinary course of their business. As a result, the Court concludes that the SCAC properly alleges that the Carrier IQ Software is an “[electronic, mechanical, or other device” which “can be used to intercept a wire, oral, or electronic communication” 18 U.S.C. § 2510(5). Accordingly, Defendants’ motion to dismiss on this ground is DENIED.
4. Plaintiffs Have Failed to State a Claim for Violation of the Wiretap Act Against the Device Manufacturers
Defendants’ final argument against Plaintiffs’ Wiretap Act claim is that Plaintiffs have failed to allege any “unlawful acquisition” of Plaintiffs’ communications by the Device Manufacturers. As detailed above, the definition of “interception” requires “aural or other acquisition of the contents” of a communication. 18 U.S.C. § 2510(4). Defendants contend that Plaintiffs have not alleged that any Device Manufacturer “acquired” communications. The Court agrees.
The SCAC alleges that the Carrier IQ’s customers — the individuals who would receive the information allegedly intercepted by the Carrier IQ Software — are “typically wireless carriers but sometimes device manufacturers.” SCAC ¶ 68. There are simply no allegations — with the exception of HTC, discussed infra — that any Device Manufacturer actually received copies of Plaintiffs’ text messages or internet search inquiries. In their opposition, Plaintiffs point to the fact that they “allege interception by the manufacturers throughout the SCAC” and that “acquisition” is a constituent element of the definition of “interception.” Docket No. 309, at 37, 38. However, these conclusory allegations are insufficient to state a claim. See, e.g., Cousins,
It is true the SCAC contains a myriad of allegations regarding HTC’s acquisition of Plaintiffs’ communications (including text messages) via the “Tell HTC” error reporting tool. See, e.g., SCAC ¶ 72. However, the allegations in the SCAC do not support an inference that HTC’s acquisition was intentional — rather, it appears that HTC obtained the communications in question through its error reporting tool as a result of it erroneously failing to deactivate “debug” mode in the Android operating system, resulting in the communications being recorded in the system logs. At the hearing on Defendants’ motion to dismiss, Plaintiffs indicated that it had received information suggesting that Samsung committed a similar error and therefore received communications through its error reporting tools.
While these allegations support a finding that two Device Manufacturers actually received the contents of user’s communications, they nonetheless fail to establish liability under the Wiretap Act. Liability under § 2511(l)(a) makes unlawful to “intentionally intercept ... any wire, oral, or electronic communication.” 18 U.S.C. § 2511(l)(a); see also id. § 2520(a) (creating civil liability against a defendant who intercepts an electronic communication “in violation of this chapter”). Because there are no factual allegations suggesting that HTC (or Samsung’s) acquisition of communications was intentional, Plaintiffs have failed to plead a basis for Wiretap Act liability against these Device Manufacturers. See, e.g., Sunbelt Rentals, Inc. v. Victor,
Plaintiffs additionally argue that the Device Manufacturers — as the entities that implemented the Carrier IQ Software through their development of the CIQ Interface software — were instrumental in the interception of Plaintiffs’ communications. Specifically, Plaintiffs contend that the Device Manufacturers, by installing the Carrier IQ Software on its mobile devices, “caused” the resulting acquisition — “[t ]hey intercepted the plaintiffs’ text messages and Internet search terms ... by way of the software they wrote and placed on phones directed to consumers.” Docket No. 309, at 38. It is true that the SCAC contains sufficient factual allegations from which it can be inferred that the Device Manufacturers were involved in the installation of the Carrier IQ Software on their mobile devices. Again, however, there are no factual allegations that the Device Manufacturers themselves “seized” or “redirected” any communications themselves. Rather, the SCAC alleges that the Device Manufacturers provided a framework through which other parties — Carrier IQ and its customers (typically wireless carriers) — were able to intercept communications.
Plaintiffs have failed to cite any case that would support the imposition of Wiretap Act liability on a party who merely provided a means through which a third party subsequently intercepts communications. To the contrary, authority has consistently rejected such a theory of liability. For example, in In re Toys R Us, Inc. Privacy Litigation, No. 00-CV-2746, 2001
Similarly, in Kirch v. Embarq Management Co., customers of an ISP sued the ISP alleging that it had hired a third party advertising company, NebuAd, Inc., to install NebuAd’s “Ultra-Transparent Appliance” software (“UTA”) on the ISP’s networks. Kirch,
Like the defendants in the above cases, there are no allegations that the Device Manufacturers in this case themselves acquired the contents of any of Plaintiffs’ communications. The closest the SCAC comes to tying the Device Manufacturers to the actual acquisition of communications is the assertion that “sometimes” unnamed Device Manufacturers were customers of Carrier IQ. See SCAC ¶ 68. This highly general, unsupported assertion is insufficient under Twombly and Iqbal to establish that the Device Manufacturers themselves acquired the contents of any communication, as opposed to merely providing an avenue through which Carrier IQ and the mobile carriers were able to effectuate such an interception. Such a conclusion is bolstered by the fact that the SCAC effectively alleges that the mobile carriers (not the device manufacturers) could choose what, if any, information they received from the Carrier IQ Software and could, if they wanted, remove the Carrier IQ Software from devices on their networks through system updates. SCAC ¶ 55 (Sprint indicating that it “began removing the Carrier IQ Software from mobile devices”).
Plaintiffs’ failure is significant because as there is simply no secondary liability (such as aiding and abetting) under the ECPA. See, e.g., Byrd v. Aaron’s, Inc.,
Accordingly, Plaintiffs’ failure to allege sufficiently specific facts supporting a conclusion that the Device Manufacturers themselves intentionally intercepted Plaintiffs’ communications is fatal to their Wiretap Act claim against these defendants. However, the Court will afford Plaintiffs an opportunity to amend their complaint to cure this deficiency.
D. Plaintiffs’ State Privacy Law Claims
Defendants generally contend that Plaintiffs’ claims for violations of various states’ wiretap and/or privacy laws should be dismissed on the same grounds Defendants argued for dismissal of the Wiretap ,Act claim. See Docket No. 304, at 49. Accordingly, to the extent the Court has rejected Defendants’ arguments, supra, these arguments are likewise unavailing against the various state law claims which Defendants contend track the Wiretap Act.
1. Plaintiff Sandstrom’s Claim under the Washington Privacy Act
Plaintiffs assert a claim under Washington’s Privacy Act, Wash. Rev.Code § 9.73.060. SCAC ¶ 113(ee). Defendants argue that this claim fails because the Washington Supreme Court has interpret
a. Defendants Misread Washington Law Regarding the Requirements for an “Interception”
Washington Revised Code 9.73.30 makes it unlawful for any individual to “intercept, or record” any “[pjrivate communication transmitted by telephone, telegraph, radio, or other device between two or more individuals between points within or without the state by any device electronic or otherwise designed to record and/or transmit said communication.” Wash. Rev. Code 9.73.030(l)(a). To state a claim under this provision, a plaintiff must establish: (1) that a private communication was transmitted by a device; (2) this communication was intercepted or recorded; (3) by use of a device designed to record and/or transmit; (4) without the consent of all parties to the private communication. State v. Roden,
In Roden, a police'officer seized a criminal suspect’s iPhone, looked through the text messages on the phone, and, posing as the suspect, sent and received a number of text messages with a third party in an attempt to set up a drug deal. Id. at 897,
Relying on Roden, Defendants seek to import a limitation into Washington law that in order for a communication to be intercepted, the intercepting party must completely prevent the intended recipient of the communication from ever receiving it. See Docket No. 304, at 51 (“Plaintiff Sandstrom, by contrast, does not, and cannot allege that the Carrier IQ software interrupted any communications or stopped them from reaching him or the recipient to whom he directed them.”). Defendants misread Roden and Washington law. While Roden involved a factual scenario where the intended recipient never received the communications at issue, there is nothing in the decision to suggest that the Washington Supreme Court was narrowly reading “intercept” as requiring such a deprivation.
First, the “ordinary definition” adopted in Roden only speaks of stopping or interrupting the progress of a communication— there is no modifier or limitation in this definition requiring that the stoppage or interruption be permanent.
Second, adopting the reading of “intercept” advanced by Defendants would lead to the absurd result that Washington’s pri
Third, even if Defendants were correct that their alleged actions could not constitute an “intercept,” Washington Revised Code 9.73.030 prohibits both the interception or recording of private communications. There are sufficient allegations in the SCAC from which it can be inferred that the Carrier IQ Software effectively recorded (e.g., the Carrier IQ Software code was observed processing a text message and displaying the text message in plain text) the challenged communications and transmitted the substance of those communications to either Carrier IQ and/or its customers. Such a recording and transmission would constitute a violation under 9.73.030.
Accordingly, the Court declines to dismiss Plaintiffs’ Washington Privacy Act claim based on Defendants’ proposed construction of Washington’s “interception” requirement.
b. Plaintiff Sandstrom’s Washington Privacy Act Claim May Only Extend to Alleged Interception of Text Messages and Phone Numbers Dialed and Received
Defendants second argument against Plaintiff Sandstrom’s Washington Privacy Act claim is that this claim cannot extend to the alleged interception of any data other than text messages because the statute only applies to communications between two or more individuals. Docket No. 304, at 51. Defendants are correct, in part.
As quoted above, Washington’s Privacy Act makes unlawful the interception or recording of private communications “transmitted by telephone, telegraph, radio, or other device between two or more individuals.” Wash. Rev. Code § 9.73.030(l)(a). In Cousineau v. Microsoft Corp.,
The pen register is comparable in impact to electronic eavesdropping devices in that it is continuing in nature, may-affect other persons and can involve multiple invasions of privacy as distinguished from obtaining documents in a single routine search warrant.
Id. at 816.
In light of Cousineau and Gun-wall, the Court finds that Plaintiffs may base their Washington Privacy Act claim on the alleged interception of text messages and phone numbers dialed and received. Such information reflects communications “between two or more individuals” and therefore fits within Washington’s definition of interception. The alleged interception of other data— such as user’s geographical location, URLs, search terms, etc. — may not form the basis for liability under Washington’s Privacy Act as this data was not transmitted as part of a communication between individuals but instead directed to an automated system. Absent an interpretation from a Washington court to the contrary, such communication does not appear to be covered by the plain language of the Act.
2. Plaintiff Cline’s Claims Under Michigan’s Law
Plaintiffs assert a claim under Michigan’s eavesdropping statute, Mich. Stat. § 750.589c. SCAC ¶ 113(n). This provision states, in relevant part:
Any person who is present or who is not present during a private conversation and who wilfully uses any device to eavesdrop upon the conversation without the consent of all parties thereto, or who knowingly aids, employs or procures another person to do the same in violation of this section, is guilty of a felony....
Mich. Stat. § 750.539c; see also id. § 750.539h (creating a private cause of action). “Eavesdropping” is defined as “to overhear, record, amplify or transmit any part of the private discourse of others without permission of all persons engaged in the discourse.” Id. § 750.539a.
Defendants argue that this statute only covers the recording of “audible” communications and therefore does not apply to the type of electronic communications at issue in this case. Defendants rely on the district court case of Bailey v. Bailey, No. 07-11672,
the Michigan legislature felt the need to add a statute that deals specifically with the reading or copying of any message from a computer without authorization. Section 750.540 [discussed below] would be redundant if § 750.539c already prohibited the same.
Id. Accordingly, the court granted defendant summary judgment as to this claim.
Consistent with Bailey, Defendants’ argue their narrow interpretation of § 750.539c is supported by the fact that another provision covers “tapping” electronic communications. Specifically, Mich. Stat. § 750.540(a) makes it a crime to “willfully and maliciously cut, break, disconnect, interrupt, tap, or make any unauthorized connection with any electronic medium of connection, including the internet or a computer, computer program, computer system, or computer network, or telephone.” Section 750.540(b), in turn, bars an individual from “willfully and maliciously reading] or copying] any message from any telegraph, telephone line, wire, cable, computer network, computer program, or computer system, or telephone or other electronic medium of communication that the person accessed without authorization.” Unlike the eavesdropping statute at § 750.539c, there is no private cause of action or civil liability for a violation of § 750.540. See Bailey,
There are, however, Michigan state court cases that are in tension with the federal district court’s narrow interpretation of § 750.539c. In Lewis v. LeGrow,
Further, in the unpublished case of Vollmar v. Laura, No. 262658,
The Bailey court’s narrow interpretation of § 750.539c as only extending to eavesdropping on oral communications seems reasonable, given the substantial overlap that would exist between § 750.539c and § 750.540 if the former is construed as encompassing electronic communications. However, the court in Bailey cited no state court authority for its reading of the statute and did not address the Michigan Court of Appeal’s statement in Lewis that the eavesdropping statute covered written communications. Given the apparent absence of state court authority supporting Bailey’s narrow construction of § 750.534c, and the indication from the Michigan Court of Appeals that such a construction would be unwarranted, the Court declines at this time to dismiss Plaintiffs’ claims under Michigan’s eavesdropping statute.
3. Plaintiff Szulezewski’s Claim Under the Illinois Eavesdropping Law Fails
Plaintiffs assert a claim under Illinois’ eavesdropping law, 720 Ill. Comp. Stat. § 5/14 — 2(a)(1). SCAC ¶ 113(g). Section 5/14-2 provides, in relevant part:
(a) A person commits eavesdropping when he:
(1) Knowingly and intentionally uses an eavesdropping device for the purpose of hearing or recording all or any part of any conversation or intercepts, retains, or transcribes electronic communication ....
(2) Manufacturers, assembles, distributes, or possesses any electronic, mechanical, eavesdropping, or other device knowing or having reason to know that the design of the device renders it primarily useful for the purpose of the surreptitious hearing or recording of oral conversations or the interception, retention, or transcription of electronic communications and the intended or actual use of the device is contrary to the provisions of this Article; or
(3)Uses or divulges ... any information which he knows or reasonably should know was obtained through the use of an eavesdropping device.
720 Ill. Comp. Stat. § 5/14-2(a). Subsections (a)(1) and (a)(3), however, have been struck down as facially overbroad under the First Amendment by the Illinois Supreme Court in People v. Melongo,
In Melongo, the defendant had a dispute with a court reporter regarding the accuracy of the court report’s transcript. Eventually the court reporter referred the defendant to her supervisor, the Assistant Administrator of the Cook County Court Reporter’s Office. Defendant had a number of phone conversations with the administrator about his underlying dispute with the court reporter and surreptitiously recorded these conversations and then posted the recordings on her website. See id. at 122-23. Defendant was charged with violations of both § 5/14(a)(l) (for recording the conversations through an eavesdropping device) and § 5/14(a)(3) (for divulging the contents of the communications obtained through the use of an eavesdropping device). The Illinois Supreme Court affirmed the lower courts’ finding that these two provisions were unconstitutional both on their face and as applied.
The court found that the statutes unconstitutional for several reasons. First, the court found that § 5/14(a)(l) (the “recording provision”) criminalized a “wide range of innocent conduct” as it “criminalizes the recording of conversations that cannot be deemed private: a loud argument on the street, a political debate on a college quad, yelling fans at an athletic event, or any conversation loud enough that the speakers should expect to be heard by others.”
In the SCAC, it appears that Plaintiffs intended to allege only a violation of § 5/14-2(a)(l). See SCAC ¶ 113(g) (“Ill. Comp. Stat. Ch. 720 § 5/14-6 provides the for the recovery in a civil action for relief for violations of Ill. Comp. Stat. Ch. 720 § 5/14-2(a)(l) .... ”). In light of the supervening Melongo decision, however, Plaintiffs no longer attempt to assert a claim under § 5/14-2(a)(l); instead, they contend that they can state a cause of action under § 5/14r-2(a)(2) — the only substantive provision of § 5/14-2 not addressed by the court in Melongo. Plaintiffs assert that the Carrier IQ Software fits within this provision as it was “designed for the primary purpose of the surreptitious interception, retention, and transcription of electronic communication in contravention of the provisions of Article 14 of the Illinois Statutes.” Docket No. 309, at 44.
Even if the Court were to conclude that Plaintiffs had properly alleged a violation of § 5/142(a)(2) in the SCAC, Plaintiffs claim would still fail. As detailed above, a violation of § 5/142(a)(2) has three elements, the last of which is that the “intended or actual” use of the eavesdropping device manufactured or distributed by the defendant be “contrary to the provisions of this Article.” Complimenting this requirement is § 5/14-2(c), which expressly provides that
It is not unlawful for a manufacturer or a supplier of eavesdropping devices ... to manufacture, assemble, sell, or possess an eavesdropping device within the normal course of their business for purposes not contrary to this Article ....
720 Ill. Comp. Stat. § 5/14-2(c) (emphasis added). After Melongo, however, it is no longer unlawful to “[kjnowingly and intentionally us[ing] an eavesdropping device” to “hear[] or record[] any conversation” or to “intercepte ], retain[ ], or transcribed electronic communication” — those provisions of § 5/14-2(c) have been struck as unconstitutional. 720 Ill. Comp. Stat. § 5/14-2(a)(l). Accordingly, even if
Accordingly, the Court grants, with prejudice, Defendants’ motion to dismiss Plaintiffs’ claim under Illinois’ eavesdropping statute.
4. Plaintiffs’ California Comprehensive Data and Fraud Act Claim Will Be Dismissed With Leave to Amend
Plaintiff raises two distinct arguments as to why Plaintiffs’ claims under the California Comprehensive Data and Fraud Act (“CCDFA”), Cal. Pen. Code § 502, should dismissed. First, they contend that Plaintiffs have failed to identify the precise provisions under which they are suing. Second, they argue Plaintiffs have failed to allege that Defendants, through the Carrier IQ Software, acquired communications by overcoming “technical or code based” measures. While, as explained below, the Court concludes that Plaintiffs should be required to affirmatively state which provisions of the CCDFA they allege Defendants have violated, the Court finds that Plaintiffs have adequately alleged that the Carrier IQ Software operates by circumventing technical or code based measures. Accordingly, while the Court will grant Defendants’ motion to dismiss the CCDFA claim, it will afford Plaintiffs leave to amend.
a. Plaintiffs Have Failed to Identify Which Provisions of § 502(c) They Allege Defendants Have Violated
California Penal Code § 502 enumerates nine different offenses relating to unauthorized computer access. Specifically, the act defines the following as a criminal offense:
(1) Knowingly accesses and without permission alters, damages, deletes, destroys, or otherwise uses any data, computer, computer system, or computer network in order to either (A) devise or execute any scheme or artifice to defraud, deceive, or extort, or (B) wrongfully control or obtain money, property, or data.
(2) Knowingly accesses and without permission takes, copies, or makes use of any data from a computer, computer system, or computer network, or takes or copies any supporting documentation, whether existing or residing internal or external to a computer, computer system, or computer network.
(3) Knowingly and without permission uses or causes to be used computer services.
(4) Knowingly accesses and without permission adds, alters, damages, deletes, or destroys any data, computer software, or computer programs which reside or exist internal or external to a computer, computer system, or computer network.
(5) Knowingly and without permission disrupts or causes the disruption of computer services or denies or causes the denial of computer services to an authorized user of a computer, computer system, or computer network.
(6) Knowingly and without permission provides or assists in providing a means of accessing a computer, computer system, or computer network in violation of this section.
(7) Knowingly and without permission accesses or causes to be accessed any computer, computer system, or computer network.
(8) Knowingly introduces any computer contaminant into any computer, computer system, or computer network.
(9) Knowingly and without permission uses the Internet domain name of another individual, corporation, or entity in connection with the sending of one or more electronic mail messages, and thereby damages or causes damage to a computer, computer system, or computer network.
Cal. Penal Code § 502(c). Subsection 502(e) provides a private cause of action for any individual who suffers damage or loss as a result of a violation of one of these provisions. See id. § 502(e).
A review of § 502(c) reveals that at least some of these provisions clearly do not apply to the facts alleged in the SCAC. For example, there are no allegations in the SCAC that Defendants introduced a “contaminant” into a computer, computer system, or network. Id. § 502(c)(8). Similarly, Plaintiffs have not alleged that Defendants “disrupte[d] or cause[d] the disruption of computer services.” Id. § 502(c)(5). However, Plaintiffs never specify which provisions of § 502 they allege Defendants did violate. Rather, they generally allege:
Defendants have violated California Penal Code § 502 by knowingly accessing, copying, using, making use of, interfering, and/or altering plaintiffs’ and prospective class members’ data such as URL containing HTTP and HTTPS query strings embedded with information including search terms, user names, passwords, and granular geo-location information; granular geo-location information apart form that transmitted in URLs; text messages; telephone numbers dialed and received; other keystrokes; and application purchases and uses. Defendants acted on a systematic and continuous basis.
SCAC ¶ 105. In their opposition, Plaintiffs state that their allegations “borrow from the statutory language found in Cal. Penal Code § 502(c)(1) — (9)” and are supported by all the facts alleged in the SCAC. Docket No. 309, at 46.
Plaintiffs’ failure to specify the specific statutory basis for their § 502 action requires dismissal. See, e.g., LB. v. Facebook, Inc.,
b. Plaintiffs Have Sufficiently Alleged that Defendants Acted “Without Permission”
With the exception of § 502(c)(8), all of the prohibited conduct articulated , in § 502(c) requires that the defendant act “without permission”
The Court finds that interpreting the statutory phrase “without permission” in a manner that imposes liability for a violation of a term of use or receipt of a cease and desist letter would create a constitutionally untenable situation in which criminal penalties could be meted out on the basis of violating vague or ambiguous terms of use.... Thus, in order to avoid rendering the statute constitutionally infirm, the Court finds that a user of internet services does not access or use a computer, computer network, or website without permission simply because that user violated a contractual term of use.
If a violation of a term of use is by itself insufficient to support a finding that the user’s access was “without permission” in violation of Section 502, the issue becomes what type of action would be sufficient to support such a finding. The Court finds that a distinction can be made between access that violates a term of use and access that circumvents technical or code-based barriers that a computer network or website administrator erects to restrict the user’s privileges within the system, or to bar the user from the system altogether.
Facebook, Inc. v. Power Ventures, Inc., No. C08-05780 JW,
Nothing in the Power Ventures decision held that overcoming “technical or code-based barriers” designed to prevent access was the only way to establish that the Defendant acted without permission. It merely held that access of a computer network that violated a provider’s “terms of service” was insufficient to establish lack of permission, while overcoming barriers erected specifically to prevent such access was sufficient to make this showing. Nonetheless, courts in this District have largely adopted this “overcoming technical or code based barriers” test as the operative test to determine if Defendant acted without permission even outside the context of an alleged violation of a term of service. See, e.g., Sunbelt Rentals, Inc. v. Victor, No. C13-4240 SBA,
The cases upon which Defendants primarily rely demonstrate the seemingly perverse result of such a construction. First, in In re iPhone Application Litig., plaintiffs had downloaded defendant’s app and alleged that the application used code to access plaintiffs’ “personal information on the iDevices without the user’s permission or knowledge.” In re iPhone,
In neither of these cases can it truly be said, in an ordinary sense of the word permission, that the plaintiff gave “permission” to the app developer defendant to access their information in question. In fact, in both cases the offending app was alleged to have acted surreptitiously and, in the case of Opperman, the court acknowledged that plaintiffs had affirmatively alleged that they had never given the app permission to access the information in their devices’ address books. That the plaintiffs had unquestionably downloaded the offending apps in question does not answer the question of whether the plaintiffs gave “permission” to the defendants to access and transmit their personal data. Yet In re iPhone and Opperman essentially held that a defendant who acts in the absence of permission does not act “without permission” — an anomalous and linguistically strained result. Instead, relying on Power Ventures, these cases required plaintiffs to show not only (1) that they did not give defendants permission to access and transmit to third parties their personal data, but also (2) that they had erected some form of technical or code based barrier to prevent such access. The Court does not believe such a reading of the phrase “without permission” should be so broadly construed so as to defeat Plaintiffs; claims in this ease. See Weingand v. Harland Financial Solutions, Inc., No. C11-3109 EMC,
Plaintiffs have alleged that the Carrier IQ Software, and its operation, was “deeply hidden;” that they had no notice was operating, and they had no way to remove the software or to opt-out of its functionality. See, e.g., SCAC ¶ 40. Even under the Power Ventures test, the Power Ventures court itself found “no reason to distinguish between methods of circumvention built into a software system to render barriers ineffective and those which respond to barriers after they have been imposed.” Facebook, Inc. v. Power Ventures, Inc.,
For the foregoing reasons, Defendants’ motion to dismiss Plaintiffs’ CCDFA claim for failure to allege that Defendants circumvented a “technical or code based barrier” is DENIED. Plaintiffs have adequately alleged that Defendants’ use of the Carrier IQ Software was “without permission.”
Plaintiffs’ fifth cause of action alleges a breach of the implied warranty of merchantability under the laws of over thirty states and the District of Columbia against the Device Manufacturers. The Device Manufacturers have moved to dismiss these claims on a variety of grounds. First, Defendants argue that the implied warranty claims undér California, Maryland, Michigan, New Hampshire,
1. Effect of Plaintiffs’ Alleged Failure to Provide Notice to Device Manufacturers
Defendants argue that Plaintiffs have failed to allege that they provided the Device Manufacturers pre-suit notice of their implied warranty of merchantability claims as required by California, Maryland, Michigan, New Hampshire, Texas, and Washington law.
Each of these states require a plaintiff seeking to assert a breach of implied warranty claim to provide the defendant with reasonable notice of the alleged breach. See, e.g., Charter Oak Fire Ins. Co. v. JP & WJ, Inc.,
652 (9th Cir.2007) (Washington law); Tasion Communications, Inc. v. Ubiquiti Networks, Inc., No. C13-1803 EMC,
Plaintiffs’ SCAC contains no allegations that Plaintiffs provided the Device Manufacturers notice of the alleged breach of the implied warranty of merchantability. Rather, the SCAC alleges that the Device Manufacturers had notice of Plaintiffs’ claims “by way of the individual suits that preceded filing of either consolidated amended complaint” or by way of “numerous reports of these breaches likely made
a. California Law Does Not Require Consumers to Provide Notice to Remote Manufacturers
The parties have cited conflicting case law on the question of whether California law requires a consumer to provide notice to a remote manufacturer with whom he has not dealt before filing a breach of warranty action. On one hand, Plaintiffs cite Keegan v. American Honda Motor Co., Inc.,
This Court has recently addressed this precise issue and concluded that California law required a business entity to provide notice to a remote manufacturer. See fusion,
Defendants have provided no authority to cause this Court to reconsider its earlier ruling on this issue in Tasion. Accordingly, insofar as the SCAC contains no allegations that the California Plaintiffs are either sophisticated business entities or dealt with the Device Manufacturers directly, the Court will not dismiss the California implied warranty claims on this basis.
b. Plaintiffs’ Maryland, Michigan and Texas Implied Warranty Claims Will Be Dismissed for Lack of Notice
In their opposition, Plaintiffs contend that neither Maryland or Texas law requires that notice be given to a remote manufacturer. With respect to Texas law, Plaintiffs are mistaken. In U.S. Tire-Tech, the Texas Court of Appeals held that “a buyer is required to give notice of an alleged breach of warranty to a remote manufacturer.” U.S. Tire-Tech,
Plaintiff Cribbs is correct that Maryland law generally permits a buyer of goods to file a breach of warranty claim against a remote manufacturer without providing that party notice. See Firestone Tire & Rubber Co. v. Cannon,
Accordingly, Maryland, Michigan, and Texas either require notice to a remote manufacturer, or permit a remote manufacturer to assert the failure of Plaintiffs to afford notice to the immediate seller. Accordingly, the Court must examine whether Plaintiffs have adequately alleged that they provided reasonable notice either to the Device Manufacturers (Michigan and Texas) or to their immediate seller (Maryland). The Court finds that they have not.
Courts applying the laws of these states have required pre-suit notice- — -accordingly, the filing of a civil complaint cannot constitute “reasonable notice.” See Lynx, Inc. v. Ordnance Prods., Inc.,
Accordingly, Plaintiffs’ reliance in their SCAC on the filing of complaints and Defendants’ generalized knowledge of complaints regarding the Carrier IQ Software as constituting notice of their breach of warranty claim fails as a matter of law under the laws of Maryland, Michigan and Texas. Accordingly, the Court will dismiss Plaintiffs’ implied warranty claims arising under the laws of these states,
c. The Court Will Not Dismiss Plaintiff Sandstrom’s Washington Implied Warranty Claim
Defendants have cited no Washington authority for either the proposition: (1) that an injured consumer must provide notice to a remote manufacturer, or (2) that Washington requires any notice to be provided prior to filing suit. Instead, the
Accordingly, the state of Washington law on the relevant questions is unclear. Further, Defendants have failed to brief why, in the absence of this authority, the Court should nonetheless construe Washington law as it suggests. For these reasons, the Court declines to dismiss Plaintiff Sandstrom’s implied warranty claim on this ground.
2. Plaintiffs’ California Implied Warranty of Merchantability Claim Will Be Dismissed for Lack of Privity, with Leave to Amend
Under California law, a plaintiff asserting a breach of implied warranty cause of action under the commercial code must be in vertical privity with the defendant. See, e.g., Clemens v. Daimler-Chrysler Corp.,
Plaintiffs argue that they have met the privity requirement in three ways: First, they argue they purchased their mobile devices from actual or apparent agents of the manufacturers. See SCAC ¶336 (“[Plaintiffs and the class were in privity with the Device Manufacturers in that they purchased their mobile devices from actual or apparent agents of the Device
The SCAC, however, contains no factual allegations to support any of these theories. For instance, short of the conclusory allegation that Plaintiffs purchased mobile devices “from actual or apparent agents of the Device Manufacturers,” there are no factual allegations that any of the California residents in this action purchased their phones from such an agent. Nor are the factual elements of agency alleged. Similarly, Plaintiffs have failed to allege the facts of the underlying putative contracts for which they contend they are intended third-party beneficiaries. Compare In re Toyota Motor Corp. Unintended Acceleration Marketing, Sales Practices & Products Liability Litig.,
Finally, Plaintiffs’ attempt to invoke the “direct dealings” exception fails. Plaintiffs point to one fact in support of their argument that the direct dealings exception applies: “[Pjlaintiffs allege that the manufacturer provided written warranties in conjunction with the purchase of their mobile devices, and the written warranties are enforceable by plaintiffs and the class against the manufacturers.... ” Docket No. 309, at 68 (quoting SCAC ¶ 337). However, the act of providing an express warranty to a consumer does not establish that the manufacturer has “numerous direct dealings” with that consumer. See Cardinal Health,
Accordingly, Defendants’ motion to dismiss Plaintiffs’ implied warranty claim under Cal. Comm. Code § 2314 is GRANTED. Plaintiffs will be afforded leave to amend to plead sufficient facts, as opposed to legal conclusions, establishing that an exception to the vertical privity requirement exists.
3. Plaintiffs’ California Implied Warranty Claim Under the Song-Beverly Act Will Be Dismissed with Leave to Amend
In addition to asserting a claim for breach of the implied warranty of merchantability under the California Commer
Accordingly, Defendant’s motion to dismiss Plaintiffs’ Song-Beverly Act claims will be GRANTED but Plaintiffs will be afforded leave to amend to allege where the California Plaintiffs purchased their mobile devices.
4. Plaintiffs Have Sufficiently Alleged that Their Mobile Devices Were Un-merchantable for Purposes of Their Implied Warranty Claims
Defendants substantively attack Plaintiffs’ implied warranty of merchantability claims alleging that Plaintiffs have not— and cannot — allege that the presence and operation of the Carrier IQ Software rendered their mobile devices unmerchanta-ble. Docket No. 304, at 72. Defendants accordingly seek dismissal of Plaintiffs’ implied warranty claims arising under the laws of California, Maryland, Michigan, Mississippi, New Hampshire, Texas, and Washington.
Under the laws of each of these states, the implied warranty of merchantability warrants that a purchased good is “fit for the ordinary purposes for which such goods are used.” See, e.g., Cal. Comm. Code § 2314(2)(e); Md. Code, Comm. Law § 2 — 314(2)(c); Miss.Code Ann. § 75-2-314(2)(c); N.H.Rev.Stat. § 382-A:2-314(2)(c); Tex. Bus. & Com. Code § 2.314(b)(3); Wash. Rev. Code § 62A.2-314(2)(c). Courts across various jurisdictions have recognized that the concept of whether a product is “fit for ordinary purposes” necessarily “incorporates ... the consumer’s reasonable expectations into the concept of merchantability.” Robinson v. American Honda Motor Co., Inc.,
At the same time, the implied warranty of merchantability merely guarantees that the product will perform at a “minimum level of quality.” Birdsong v. Apple, Inc.,
Defendants contend that the “ordinary purpose” of mobile devices is communication — making and receiving phone calls, text messages, facilitating internet usage, and allowing usage of apps. Because of this, Defendants argue, Plaintiffs cannot establish that the Carrier IQ Software renders their mobile devices unfit for this ordinary purpose because there are no allegations that the software rendered the devices unable to make and receive phone calls, text messages, and the like. See Docket No. 304, at 73.
Defendants’ definition of mobile devices’ “ordinary purpose” finds some support in case law from courts in this District. Specifically, in In re iPhone 4S Consumer Litig., No. C12-1227 CW,
Nonetheless, these courts have found that alleged defects which did not affect this core functionality did not render the mobile devices unfit for their ordinary purposes. For example, in In re iPhone, plaintiffs alleged that the iPhone was rendered unfit because Apple’s “Siri” feature did not perform as advertised.
This Court finds that Defendants’ argument that the Carrier IQ Software does not render Plaintiffs’ mobile devices unfit for the devices’ ordinary purpose simply because the devices could make and receive phone calls, text messages, use mobile apps, and access the internet is overly simplistic and underinclusive. While a defect must be “fundamental” to implicate the implied warranty, “this does not mean the alleged defect must preclude any use of the product at all.” Steams v. Select Comfort Retail Corp., No. 08-2746 JF,
Thus, in Steams, plaintiffs alleged an implied warranty claim against a bed manufacturer on the basis of mold growing on its beds. The court determined that the plaintiffs had adequately alleged that the beds at issue “did not conform to expectations regarding ordinary use,” and simply because “a person still may sleep on a moldy bed does not bar as a matter of law a claim for breach of the implied warranty of merchantability.” Id. at *8. Similarly, in Long v. Graco Children’s Products Inc., No. 13-ev-01257-WHO,
straint” for the child, the court found plaintiffs adequately alleged the car seat was unfit. Id. at *12. It held that “[c]on-sumers do not merely expect a car seat to serve its bare-minimum purpose” but rather would expect that they “would be able to quickly unlatch the harness or buckle in case of an emergency.” Id. Finally, in Isip v. Mercedes-Benz USA,
The Court concludes that in determining if a defect rises to the level of rendering a product unfit for its ordinary purpose, the Court must ask two questions. First, the defect in question must be “fundamental” in that it affects the core functionality of the product. See, e.g., Steams,
On this basis, the Court finds, for purposes of the motion to dismiss, that Plaintiffs have adequately alleged that the Carrier IQ Software rendered their mobile devices unmerchantable. While there is no dispute that the Carrier IQ Software did not make it impossible for Plaintiffs to make and receive phone calls, text messages, and the like on their devices, that alone is not dispositive. Consumers have a reasonable expectatidn that mobile devices, in general, will allow them to communicate with others without having a third party surreptitiously intercept and transmit those communications to third parties. Stated another way, it is beyond controversy that individuals have a reasonable expectation of privacy as to the contents of communications made with their mobile devices. Cf. Riley v. California, -U.S.-,
Plaintiffs have, in the SCAC, provided sufficient factual allegations for the Court to conclude, at this stage, that the Carrier IQ Software intercepts and/or transmits personal communication data to third parties. See, e.g., SCAC ¶ 65, 68 (alleging that the Carrier IQ Software intercepts and transmits to Carrier IQ and its customers data that can include URLs which contain internet search terms, user names and passwords; text messages; app purchases and uses; a user’s keystrokes; numbers dialed and received; etc.). Taking all inferences in favor of the Plaintiffs, these allegations are sufficient for the Court to conclude that the Carrier IQ Software undermines consumers’ reasonable expectations in privacy to such a degree so as to render their mobile devices unfit to perform their core functions. During discovery, the parties will have the opportunity to flesh out the precise way the Carrier IQ Software operates, including the degree to which Plaintiffs’ personal data or communications were in fact compromised by the Carrier IQ Software. Based on development of a factual record, Carrier IQ Software may renew their argument via motion for summary judgment.
F. Plaintiffs’ Magnuson-Moss Warranty Act Claims Necessarily Depend on the State Law Implied Warranty Claims
The Magnuson-Moss Warranty Act “does not create implied warranties, but instead confers federal court jurisdiction for state law breach of implied warranty claims.” IWOI, LLC v. Monaco Coach Corp.,
G. State Consumer Protection Statutes
Defendants have moved to dismiss Plaintiffs’ state consumer protection statute-based claims. The bulk of Defendants’ arguments are directed to the California UCL claim, with similar arguments being made as to the various other states’ laws.
1. California Unfair Competition Law Claims, Cal. Bus. & Prof. Code § 17200
Plaintiffs allege that Defendants’ conduct regarding the Carrier IQ Software constitutes unfair, unlawful, and fraudulent conduct in violation of the California UCL. Defendants move to dismiss Plaintiffs’ prong under all three of the prongs,
a. Plaintiffs’ Have Stated a Claim for Violation of the UCL Fraud-Prmg Based on Defendants’ Alleged Omissions
To state a claim under he “fraudulent” prong of the UCL, “it is necessary only to show that members of the public are likely to be deceived” by the business practice. In re Tobacco II Cases,
Claims under the UCL fraudulent prong must meet the heightened pleading standard of Federal Rule of Civil Procedure 9(b). See, e.g., Grant v. Pensco Trust Co., LLC, No. 12-cv-06084-WHO,
In the SCAC, Plaintiffs contend that the Defendants engaged in fraudulent conduct by failing to disclose the existence and functionality of the Carrier IQ Software. Specifically, they allege:
Defendants secretly installed the Carrier IQ Software on plaintiffs’ . . mobile devices; failed to disclose that the Carrier IQ Software was always operating on such devices; failed to disclose that the carrier IQ Software was capable of intercepting private communications, and that it in fact did intercept such communications; and failed to disclose that the Carrier IQ Software degraded the performance of their devices by overtaxing processor power and device memory, and by depleting battery power and life.
SCAC ¶ 120. Plaintiffs allege that Defendants had a duty to “disclose the presence and functionality of the Carrier IQ Software” because “only defendants knew of the installation and functionality of the Carrier IQ Software” and “knew that the existence of the Carrier IQ Software was not known or reasonably discoverable by plaintiffs and the class.” Id. ¶ 122.
Omissions can form the basis of a fraudulent prong UCL claim. “For an omission to be actionable under the UCL, ‘the omission must be contrary to a representation actually made by the defendant, or an omission of a fact the defendant was obliged to disclose.’ ” In re Adobe Systems, Inc. Privacy Litig.,
describe the content of the omission and where the omitted information should or could have been revealed, as well as provide representative samples of advertisements, offers, or other representations that plaintiff[s] relied on to make [their] purchased] and that failed to include the allegedly omitted information.
Id. at 1002. “Subsequent cases have, however, called into question these specific requirements spawned by the Marolda court” and the “requirements are not necessarily appropriate for all cases alleging a fraudulent omission.” Overton v. Bird Brain, Inc., No. SACV 11-1054 DOC (ANx),
For example, in MacDonald v. Ford Motor Co.,
Typically, “[a]verments of fraud must be accompanied by the who what when where, and how of the misconduct charged,” but claims based on an omission “can succeed without the same level of specificity required by a normal fraud claim.” This is because a plaintiff alleging an omission-based fraud will “not be able to specify the time, place, and specific content of an omission as would a plaintiff in a false representation claim.” Because the plaintiffs “[are] alleging a failure to act instead of an affirmative act, the [Plaintiffs] cannot point out the specific moment when the Defendant failed to act.”
Id. at 1096,
Here, Plaintiffs have clearly alleged the content of the alleged omission — the installation and functionality of the Carrier IQ Software. SCAC ¶ 120. Further, it appears they have alleged materiality by alleging that had they been aware of the installation and functionality of the Carrier IQ Software, they would not have purchased their mobile devices. Id. ¶ 3 (“[Plaintiffs and members of the proposed class have suffered economic harm; they would not have purchased their mobile devices had they known that these devices bore hidden battery-, processor- and memory-taxing software that intercepts private and confidential communications that enables them to be sent to unintended recipients.”); id. ¶ 74 (“Mobile device owners were unaware of this functionality of their Carrier IQ Software-bearing devices, and it is one more reason why they would not have purchased these devices had they known they were bearing the Carrier IQ Software that operated in the manners alleged). Finally, Plaintiffs have alleged that the information regarding the Carrier IQ Software was in the exclusive knowledge of Defendants. Id. ¶ 122. These allegations are sufficient to plausibly allege that Defendants had exclusive knowledge
Nonetheless, Defendants contend that courts in omission cases have required plaintiffs to allege that had a material fact been disclosed, the plaintiffs would have been aware of the disclosure. Defendants contend this is part of the “actual reliance” requirement under the UCL. In Hoffman v. 162 North Wolfe LLC,
Given the importance of the cracking defect, had BMW chosen to disclose it to prospective buyers, presumably Plaintiff, as a member of the buying public, would have become aware of the defect in the course of making his purchasing decision. Nevertheless, the Court agrees with BMW that the FAC is devoid of allegations that Plaintiff would have plausibly been aware of the cracking defect before he purchased his MINI and BMW publicized this information.
Ehrlich,
While a close issue, the Court finds that the SCAC contains sufficient allegations from which it can be inferred that had Defendants reasonably disclosed the existence and functionality of the Carrier IQ Software — a material fact exclusively in Defendants’ knowledge — Plaintiffs would have been aware of it. First, as detailed above, Plaintiffs have alleged that had they been aware of the Carrier IQ Software, they would not have purchased affected mobile devices. See, e.g., In re Sony Gaming Networks & Customer Data Sec. Breach Litig., 996 F.Supp.2d-942, 988 (S.D.Cal.2014) (“[Because Plaintiffs have alleged that Sony omitted material information regarding the security of Sony Online Services, and that this information should have been disclosed to consumers at the time consumers purchased their Consoles, the Court finds Plaintiffs have sufficiently alleged a loss of money or property ‘as a result’ of Sony’s alleged unfair business practices.”); Elias,
In light of the SCAC’s allegations, the Court finds there is a sufficient basis to plausibly conclude that had Defendants disclosed the existence and functionality of the Carrier IQ Software, Plaintiffs would
b. Plaintiffs Have Adequately Plead a Violation of the Unfairness Prong of the UCL
Under the unfairness prong of the UCL, “ ‘a practice may be deemed unfair even if not specifically proscribed by some other law.’ ” Korea Supply Co. v. Lockheed Martin Corp.,
Plaintiffs’ SCAC contains allegations relating to both the “tethering” and “balancing” tests. It alleges:
Defendants’ conduct lacks reasonable and legitimate justification in that defendants have benefitted from such conduct and practices while plaintiffs and prospective class members have been misled as to the nature and integrity of defendants’ goods and services and have, in fact, suffered injury regarding the privacy and confidentiality of their personal information and the use of their device resources. Further, defendants’ conduct is unfair because it offends California public policy as reflected in the right to privacy enshrined in the state constitution; California Penal Code §§ 502, 631, and 632.7; and California statutes recognizing the need for consumers to safeguard their privacy interests, including California Civil Code § 1798.80.
SCAC ¶ 119.
As to the “tethering” test, Defendants argue that Plaintiffs’ allegations that their conduct has offended California public policy fail because Plaintiffs have not plead sufficient facts that Defendants’ conduct violated to California Penal Code §§ 502, 631, 632.7, Cal. Civil Code § 1798.80, or the California Constitution. See also In re Google, Inc. Privacy Policy Litigation,
The Court concludes, however, that these cases have read the “tethering test” too narrowly and essentially conflates the “unfair” and “unlawful” prongs under the UCL. As already stated, an act can be “unfair” even if not unlawful. See In re Adobe Systems,
Turning to the “tethering test,” the Court notes that contrary to Adobe’s assertion, Plaintiffs do not need to plead any direct violations of a statute to bring a claim under the UCL’s unfair prong. Instead, Plaintiffs need merely to show that the effects of Adobe’s conduct “are comparable to or the same as a violation of the law, or otherwise significantly threaten[ ] or harm [ ] competition.”
Id. at 1227,
Likewise, in Boris v. Wal-Mart Stores, Inc.
Plaintiffs have sufficiently identified a California public policy in ensuring that private communications or data are not intercepted, see, e.g., Cal. Penal Code §§ 502 (making illegal unauthorized access to computers, computer systems, or computer data), 631 (making illegal for an individual to, without consent, “read[], attempt[] to read, or to learn the contents or meaning of any message, report, or communication while the same is in transit”), or privacy in general, see Cal. Const, art. 1, § 1 (“All people are by nature free and independent and have inalienable rights. Among these are enjoying and defending life and liberty, acquiring, possession, and protecting property, and pursuing and obtaining safety, happiness, and privacy.”); see also Pioneer Electronics (USA), Inc. v. Superior Court,
Further, Plaintiffs have stated a claim under the UCL-unfairness “balancing” test. Plaintiffs have adequately alleged conduct (interception and transmission of private and confidential communications and data) that plausibly could outweigh the utility of such conduct to Defendants. The cost-benefit analysis this test calls for is not properly suited for resolution at the pleading stage. For example, in In re iPhone Application Litigation,
Plaintiffs have alleged.... Apple makes affirmative representations regarding its protection of user’s personal information. In contrast, according to Plaintiffs, Apple allowed third parties to collect consumers’ information without their knowledge. While the benefits of Apple’s conduct may ultimately outweigh the harm to consumers, this is a factual determination that cannot be made at this stage of proceedings. Nor can the Court conclude at this stage that Apple’s practices are not injurious to consumers as a matter of law.
Id. at 1073.
Accordingly, for the foregoing reasons, Defendants’ motion to dismiss Plaintiffs California UCL-unfairness prong claim is
DENIED.
c. Plaintiffs’ Unlawful Prong Claim Will Be Dismissed With Leave to Amend
Plaintiffs base their UCL “unlawful” prong claims on alleged violations of the Federal Wiretap Act, Cal. Penal Code §§ 502, 631, and 632.7, and the fact that HTC violated the Federal Trade Commission Act. SCAC ¶ 118. The Court has previously dismissed Plaintiff’s Cal. Penal Code § 502 and Wiretap Act causes of
2. Connecticut Unlawful Trade Practices Act, Conn. Gen.Stat. § f2-110a
The Connecticut Unlawful Trade Practices Act (“CUTPA”) generally prohibits individuals from “engag[ing] in unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce.” Conn. Gen. Stat. § 42-110b(a). “ ‘A claim under CUT-PA requires that [the] plaintiff allege that [the] defendant engaged in unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce.’ ” Star Child II, LLC v. Lanmar Aviation, Inc., No. 3:11-CV-01842(AWT),
(1) Whether the practice, without necessarily having been considered unlawful, offends public policy as it has been es- . tablished by statutes, the common law, or otherwise — whether, it other words, it is within at least a penumbra of some common law, statutory, or other established concept of unfairness; (2) whether it is immoral, unethical, oppressive, or unscrupulous; and (3) whether it causes substantial injury to consumers, competitors, or other businessmen.
Harris v. Bradley Memorial Hosp. & Health Center, Inc.,
Defendants contend that Plaintiffs’ CUTPA claim should be dismissed because Defendants did not have “any duty in the first instance to disclose the presence or functionality of the Carrier IQ software” and therefore have not alleged any “unfair or deceptive acts or practices” for purposes of CUTPA. Docket No. 304, at 60.
The Connecticut courts have held that when a plaintiff “alleges that a defendant’s passive conduct violates CUT-PA ... common sense dictates that a court should inquire whether the defendant was under any obligation to do what it refrained from doing.” DiTeresi v. Stamford Health Sys., Inc.,
Defendants rely primarily on Putnam Bank v. Ikon Office Solutions, Inc., No. 3:10-cv-1067,
the essence of the transactions between Putnam and Ikon was the lease of office equipment, not the protection of data that would be saved on the equipment. Putnam does not allege that Ikon knew about Putnam’s apparent lack of familiarity with digital storage devices or that Ikon knew there was a custom or other objective circumstance that would cause Putnam to believe that data security would be covered by the leases. Ikon therefore could not have known that Putnam may have entered into the leases on the incorrect assumption that data security did not need to be mentioned explicitly in the leases.
Id. at *3. Defendants here argue that the essence of the transaction between Plaintiff McKeen and Defendants was the sale of a phone, not the handling of the data that would be saved on that phone. Docket No. 304, at 61.
The Court has located no Connecticut case that imposes a broad duty to disclose on defendants (or one commensurate with California’s UCL). Cf Glazer v. Dress Barn, Inc.,
3. Florida Deceptive & Unfair Trade Practices Act, Fla. Stat. § 501.201
A claim for damages under the Florida Deceptive & Unfair Trade Practices Act (“FDUTPA”) has three elements: (1) a deceptive act or unfair practice; (2) causation; and (3) actual damages. See Garcia v. Kashi Co.,
Defendants argue that where an alleged deceptive act is a failure to disclose information, the plaintiff must establish that a duty to disclose actually exists. They cite Virgilio v. Ryland Grp., Inc.,
Defendants further argue that Plaintiffs have failed to demonstrate “actual damages” as the result of the Carrier IQ Software. “Actual damages” are defined by the FDUTPA ás “the difference in the market value of the product or service in the condition in which it was delivered- and the market value in the condition in which it should have been delivered according to the contract of the parties.” Rollins, Inc. v. Heller,
Under this “market value” theory, Plaintiffs have sufficiently alleged actual damages. Plaintiffs have alleged that they suffered ascertainable loss as a result of them overpaying for their mobile devices (or their mobile devices losing value) because their resources were being taxed by the constantly running Carrier IQ Software (as well as the privacy issues inherent in having the software on the mobile devices). SCAC ¶ 147. Plaintiffs allege that they and the class overpaid for the mobile devices and did not receive the benefit of the bargain. The value of their mobile device have diminished now that the privacy issues have come to light, and plaintiffs and the class purchased mobile devices that are not secure and private. See, e.g., SCAC ¶¶ 147, 156, 164, 182, 201, 207, 218. These allegations are plausible — if, as is alleged, the Carrier IQ Software intercepts and transmits personal information and has a noticeable impact on the mobile device’s resources, the device plausibly is not as valuable on the market as one that does not have the software. Accordingly, for purposes of the pleading stage, the Court finds damages adequately alleged under FDUTPA.
For the foregoing reasons, Defendants’ motion to dismiss Plaintiffs’ FDUTPA claim is DENIED.
4. Maryland Consumer Protection Act, Md. Code. Com. L. § 13-101
Maryland’s Consumer Protection Act (“MCPA”) is materially similar to the statutes discussed above. The MCPA expressly provides that the “[fjailure to state a material fact” is an unfair or deceptive trade practice “if the failure deceives or intends to deceive.” Md. Code Com. Law § 13-301(3). “Omissions are material under the MCPA ‘if a significant number of unsophisticated consumers would find that information important in determining a course of action.’ ” Castle v. Capital One, N.A., No. WMN-13-1830,
Defendants have moved to dismiss Plaintiffs’ MCPA claim on similar grounds discussed above, namely that Plaintiffs have failed to demonstrate that Defendants had a duty to disclose, have failed to show actual damages, and have failed to allege that they relied on any omission. The Court rejects the latter two arguments for the same reasons these argu-
For the foregoing reasons, Defendants’ motion to dismiss Plaintiffs’ MCPA claim is DENIED.
5. Michigan Consumer Protection Act, Mich. Comp. Laws § kk5.901
Defendants argue that Plaintiffs have failed to allege any basis for imposing a duty to disclose under the Michigan Consumer Protection Act. The Michigan Consumer Protection Act includes a proscription on “[flailing to reveal a material fact, the omission of which tends to mislead or deceive the consumer, and which fact could not reasonably be known by the consumer.” Mich. Comp. Law § 445.901(l)(s). This language imposes an affirmative duty on defendants to disclose a material fact when that fact is in the exclusive knowledge of the defendant. This test is materially similar to California law which, as discussed supra, imposes a duty to disclose material facts in similar circumstances. See In re Porsche Cars North America, Inc.,
For the foregoing reasons Defendants’ motion to dismiss Plaintiffs’ Michigan Consumer Protection Act claim is DENIED.
6. Texas Deceptive Trade Practices Act, Tex. Bus. & Prof. Code § 17.11
To state a claim under the Texas Deceptive Trade Practices Act (“DTPA”), plaintiffs must allege that (1) they were consumers of Defendants’ goods or services; (2) Defendants violated a specific provision of the DTPA, and that Defendants acts were a “producing cause” of actual damages. Amstadt v. U.S. Brass Corp.,
a. Plaintiffs Have Adequately Alleged that Defendants Violated Specific Provisions of the DTPA
Defendants contend that Plaintiffs have failed to adequately allege that Defendants violated a specific provision of the DPTA. The DTPA defines “false, misleading, or deceptive acts or practices” to include “failing to disclose information concerning goods or services which was known at the time of the transaction if such failure to disclose such information was intended to induce the consumer into a transaction into which the consumer would not have entered had the information been disclosed.” Tex. Bus. & Prof. Code § 17.46(b)(24). Defendants simply incorporate the argu
Because Plaintiffs have adequately alleged at least one predicate violation of the DTPA, the Court need not address whether Plaintiffs have adequately stated a violation of any other DTPA provision.
b. Plaintiffs Have Failed to Allege that Defendants’ Conduct Was a “Producing Cause” of Their Damages
Defendants first argue that any omission by them regarding the presence or functionality of the Carrier IQ Software was not a “producing cause” of any actual damages because the mobile carriers were capable of “assessing the suitability of the software’s functionality for use in the mobile devices” they subsequently sold to Plaintiffs. Docket No. 304, at 67.
In Ford Motor Co. v. Ledesma,
Defining producing cause as being a substantial factor in bringing about an injury, and without which the injury would not have occurred, is easily understood and conveys the essential components of producing cause that (1) the cause must be a substantial cause of the event' in issue and (2) it must be a but-for cause, namely one without which the event would not have occurred.
Id. at 46.
In arguing that any omission by Defendants could not be the “producing cause” of Plaintiffs’ injuries, Defendants rely on Amstadt v. U.S. Brass Corp.,
The court found that the Texas Legislature had not “intended the DTPA to reach upstream manufacturers and suppliers when their misrepresentations are not communicated to the consumer.” Id. at 649. Accordingly, it held that the “defendant’s deceptive conduct must occur in connection with a consumer transaction.” Id. As to defendant Celanese (the manufacturer of the compound that allegedly failed), the court stated:
Celanese promoted the use of Celcon in plumbing applications to U.S. Brass and other manufacturers, and knew that U.S. Brass used Celcon to make fittings for its plumbing systems. Celanese did not control U.S. Brass’ selection of raw materials, did not design the parts or tools, and did not instruct or train the homebuilders’ plumbers.... Celanese’s marketing efforts were limited to promoting its material to the manufacturers of the plumbing systems. It did not market the systems to homebuilders or building code officials, or market thefinished homes to the consumers. The manufacturers of the plumbing systems and the building code officials, and to a lesser degree the homebuilders, were intermediaries capable of assessing the suitability of Celcon for use in the systems.
Id. at 650-51. Similarly, as to U.S. Brass, the actual manufacturer of the entire plumbing system, the court stated:
Although the conduct of U.S. Brass comes closer to being in connection with the plaintiffs’ purchase of their homes than the conduct of Shell or Celanese, it also falls short of meeting the nexus required for DTPA liability. U.S. Brass exercised significant control over the design and installation of the plumbing systems, but as with Shell and Celanese, U.S. Brass had no role in the sale of the homes to the plaintiffs. As with Shell, U.S. Brass’ marketing efforts were not intended to, nor were they, incorporated into the marketing of the homes to the plaintiffs. Finally, U.S. Brass’ products were subject to independent evaluation by building code officials, homebuilders, and the plumbing contractors who installed the materials.
Id. at 652. Accordingly, because both defendants were removed from the actual consumer transaction at issue, and their alleged misrepresentations had not reached the consumer, the plaintiffs did not have a DTPA cause of action against those defendants. The court noted, “While our words have varied, the concept has been consistent: the defendant’s deceptive trade act or practice is not actionable under the DTPA unless it was committed in connection with the plaintiffs transaction in goods or services.” Id. at 650.
As currently plead, Plaintiffs have failed to adequately allege that Defendants’ were a “producing cause” of their actual damages. Plaintiffs have failed to allege either that they purchased their mobile devices directly from a Defendant (in which case the Defendant is not an “upstream manufacturer or supplier”) or that Defendants’ marketing efforts reached them as consumers. See, e.g., PPG Indus., Inc. v. JMB/Houston Centers Partners Ltd. Ptnshp.,
7. Washington Consumer Protection Act, Wash. Rev.Code § 19.86.010
The Washington Consumer Protection Act (“WCPA”) provides a private cause of action for “[a]ny person who is injured in his or her business or property” by “[u]nfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce.” Wash. Rev. Code 19.86.020; 19.86.090. The elements of a claim under the WCPA are “(1) an unfair or deceptive act or practice, (2) occurring in trade or commerce, (3) impacting the public interest, (4) causing injury to the plaintiffs’s business or property and (5) the injury is causally linked to the unfair or deceptive act.” Frias v. Asset Foreclosures Services, Inc.,
Defendants contend that Plaintiffs have failed to adequately allege “injury to the plaintiffs business or property” as required. They rely on the case of Cousineau v. Microsoft Corp.,
Defendants’ argument on this point echoes their arguments made in challenging Plaintiffs’ Article III standing — arguments the Court has addressed supra. While Defendants’ arguments are not without force, the Court concludes they are premature at this stage. The Court determines it is plausible that, as currently alleged, the Carrier IQ Software would have a noticeable, not-insignifieant impact on the market value of Plaintiffs’ mobile devices. This is entirely consistent with the Cousineau decision. It is one thing to have a mobile device that allegedly collects geolocation data. It is something quite different to have a device that compromises the user’s text messages, passwords, internet search terms, and the like by making them available for transmission to third parties. Further, to the extent the Carrier IQ Software operated continually in the background, it is plausible that its operating taxed the mobile devices resources and battery such that it had a noticeable impact on the performance (and thus the value) of the mobile phones. For purposes of the pleading stage, these allegations are sufficient to allege actionable damages. Defendants remain free to challenge the factual and legal basis for these alleged damages after discovery at the summary judgment stage.
Defendants also argue that to the extent that Plaintiff Sandstrom’s WCPA claim is based on HTC’s failure to disclose the “deactivate debug code” error that permitted text messages from being copied into the system log and then transmitted to HTC, the claim should be dismissed because Plaintiffs do not allege that HTC was aware of this issue at the time of the transaction. The WCPA imposes a broad duty of disclosure on defendants — they have a “general duty ... to disclose facts material to a transaction when the facts are known to the seller but not easily discoverable by the buyer.” Griffith v. Centex Real Estate Corp.,
Plaintiffs do not respond to this latter argument by Defendants. Given the nature of the “debug deactivation” error as alleged in the SCAC and Plaintiffs’ failure to respond, the Court concludes that Plaintiff Sandstrom’s WCPA claim should be dismissed with prejudice to the extent it relies on HTC’s alleged failure to disclose the “debug” error.
For the foregoing reasons, the Court GRANTS in part and DENIES in part Defendants’ motion to dismiss. Specifically, the Court dismisses the following claims with leave to amend:
• Plaintiffs’ Wiretap Act claim is dismissed for failure to allege that the Device Manufacturers intentionally intercepted any communication as defined by the Wiretap Act.
• Plaintiffs’ Cal. Penal Code § 502 claim is dismissed for failure to specify which specific provisions of this section Defendants are alleged to have violated.
• Plaintiffs’ implied warranty claim arising under California law is dismissed for failure to allege facts in support of an exception to California’s privity requirement. Further, Plaintiff’s Song-Beverly Act claim is dismissed for failure to allege that any Plaintiff purchased a mobile device in California.
• Plaintiffs’ Unfair Competition Law claim is dismissed to the extent it relies on allegedly “unlawful”' conduct pending Plaintiffs adequately alleging a violation of the Wiretap Act or a California law or regulation.
• Plaintiffs’ claim under the Connecticut Unlawful Trade Practices Act is dismissed for failure to allege that Defendants’ had a duty to disclose the existence and operation of the Carrier IQ Software under Connecticut law.
• Plaintiffs’ claim under the Texas Deceptive Trade Practices Act is dismissed for Plaintiffs’ failure to allege Defendants’ marketing efforts reached consumers or that their conduct was otherwise a “producing cause” of their injury as that phrase is interpreted by Texas courts.
• Plaintiffs’ claim under the Washington Consumer Protection Act against HTC is dismissed to the extent it relies on HTC’s failure to disclose the “debug” error.
• Plaintiffs’ implied warranty claims under the laws of Maryland, Michigan, and Texas are dismissed without prejudice for failure to provide pre-suit notice to the Defendants.
The Court dismisses, with prejudice, Plaintiffs’ claim under the Illinois Eavesdropping Law, 720 Ill. Comp. Stat. § 5/14— 2(a)(1).
Finally, the Court dismisses, without prejudice, those state law claims arising under the laws of states in which no named Plaintiff resides. Plaintiffs may seek to add named Plaintiffs from these respective states so as to continue to assert these claims in a third consolidated amended complaint.
Defendants’ motion to dismiss is denied in all other respects as provided herein. Plaintiffs’ third consolidated amended complaint shall be filed by March 23, 2015.
This order disposes of Docket No. 304.
IT IS SO ORDERED.
Notes
. Originally, all the Defendants moved to dismiss the SCAC. After the hearing on the motions to dismiss, Carrier IQ, Inc. reached a settlement with Plaintiffs and subsequently withdrew their motion to dismiss. See Docket Nos. 322, 334. The remaining Defendants are referred to either as "Defendants” or as "Device Manufacturers” throughout this order.
. Mr. Cline resides in New Hampshire, but the SCAC alleges that “at pertinent times to this matter, he resided in Oakland County, Michigan.” SCAC ¶ 19. Accordingly, for purposes of this order, Mr. Cline will be treated as a resident of Michigan.
. Mr. Sandstrom is a resident of California, but the SCAC alleges that "at pertinent times to this matter, he resided in Seattle, Washington.” SCAC ¶ 24.
. It is alleged that even users with advanced technical skills can only remove the Carrier IQ Software by “rooting” their devices and voiding the warranties of their devices. Id. ¶ 64.
. For example, there is one named Plaintiff from Illinois and it is alleged that he purchased an HTC EVO 4G — Luke Szulczewski. There are no named Plaintiffs from Illinois who are alleged to have purchased mobile devices from the other Device Manufacturers. Similarly, there is no named Plaintiff from, inter alia, Nevada.
. The Court may properly consider the contents of the referenced YouTube video at the pleading stage. Cf. United States v. Ritchie,
. Even if the Court had found Plaintiffs' Wiretap Act claim defective as to warrant dismissal with prejudice, the Court would not have been inclined to summarily dismiss Plaintiffs’ state law wiretap claims simply on this basis. Defendants’ argument on this ground consisted of a single paragraph with a string cite of cases from the applicable states’ courts suggesting that some of these states’ wiretap acts are modeled after the Federal Wiretap Act and/or that state courts will look to Federal Wiretap Act claims as guidance. See, e.g., State v. House,
As a result, the Court only addresses those arguments Defendants specifically raised as to the various state law claims and declines to simply import any part of its above analysis of Plaintiffs’ Federal Wiretap Act claims into its holding regarding Plaintiffs’ state law claims.
. Prior to Melongo, the Seventh Circuit in ACLU of Ill. v. Alvarez,
Unlike the federal wiretapping statute and the eavesdropping laws of most other states, the gravamen of the Illinois eavesdropping offense is not the secret interception or surreptitious recording of a private communication. Instead, the statute sweeps much more broadly, banning all audio recording of any oral communication absent consent of the parties regardless of whether the communication is or was intended to be private. The expansive reach of this statute is hard to reconcile with basic speech and press freedoms.
Alvarez,
. As referenced above, it appears that § 502(c)(8) is inapplicable to' this case as there are no allegations that the Defendants have introduced a "contaminant” to a computer network. Further, the definition of "contaminant” in the statute incorporates a permission requirement, so, in reality, all of the conduct prohibited by § 502(c) requires a showing that the defendant acted "without permission.” See In re iPhone Application
. By way of example, § 502(c)(2), makes it illegal, inter alia, for a defendant to “[k]now-ingly access and without permission take[], cop[y], or make[] use of any data from a computer.” Cal.Penal Code § 502(c)(2). Under this provision, a defendant who acquires, copies, or utilizes data from a computer without having obtained permission for the acquisition, copying, or utilization of the data has violated the statute. Even if the defendant’s general "access” into the computer system was with permission (as it was in In re iPhone and Opperman), the "without permission” qualifier modifies the "takfing], cop[ying] or makfing] use of any data” action and must be given force.
. The Court need not address arguments arising under New Hampshire law in light of the fact the only New Hampshire Plaintiff in this action is alleged to have been a resident of Michigan “at all pertinent times.’’ See supra note 1. To the extent Plaintiffs seek to have Plaintiff Cline assert claims under the laws of both Michigan and New Hampshire, they shall, in the Third Consolidated Amended Complaint, allege facts establishing Plaintiff Cline’s ability to assert such claims.
. Courts may address affirmative defenses at the motion to dismiss stage where an affirmative defense "obvious on the face of a complaint," Rivera v. Peri & Sons Farms, Inc.,
. Plaintiffs argue that the Carrier IQ Software also renders their mobile devices un-merchantable because it depletes battery power and life, thus reducing the lifespan of their mobile device battery. The Court rejects this argument. There are no allegations that would permit the inference that the Carrier IQ Software’s impact on a mobile device’s battery is so significant as to render the device unfit for its ordinary purpose. See Tomek v. Apple, Inc., 2:11-cv-02700-MCE-DAD,