MEMORANDUM OF DECISION GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS PLAINTIFFS’ CONSOLIDATED AMENDED CLASS ACTION COMPLAINT OR, IN THE ALTERNATIVE, TO STRIKE PORTIONS OF THE COMPLAINT [DKT. 189]
I. Introduction
Thе Plaintiffs, Debra Miller (“Miller”), Brittany DiCarolis (“DiCarolis”), Hope Kelm (“Kelm”), Jennie H. Pham (“Pham”), Brett Reilly (“Reilly”), Juan M. Restrepo (“Restrepo”), Brian Schnabel, Edward Schnabel, Lucy Schnabel, Annette Sumlin (“Sumlin”), Regina Warfel (“Warfel”), and Debbie Williams (“Williams”), bring this proposed class action against three groups of Defendants, the Trilegiant Defendants, which includes Affinion Group, LLC (“Af-finion”), Trilegiant Corporation, Inc. (“Trilegiant”), and Apollo Global Management, LLC (“Apollo”), the Credit Card Defendants, which includes Bank of America, N.A. (“Bank of America”), Capital One Financial Corporation (“Capital One”), Chase Bank USA, N.A. (“Chase”), Citibank, N.A. (“Citibank”), Citigroup, Inc. (“Citigroup”), Chase Paymentech Solutions, LLC (“Paymentech”), and Wells Fargo Bank, N.A. (‘Wells Fargo”), and the E-Merchant Defendants, which includes 1-800-Flowers.com, Inc. (“1-800 Flowers”), Beckett Media LLC (“Beckett”), Buy.com, Inc. (“Buy.com”), Classmates International, Inc. (“Classmates”), Days Inns Worldwide, Inc. (“Days Inns”), Wyndham Worldwide Corporation (“Wyndham”), FTD Group, Inc. (“FTD”), Hotwire, Inc. (“Hotwire”), IAC/InterActiveCorp (“IAC”), Shoebuy.com, Inc. (“Shoebuy”), PeopleFin-dersPro, Inc. (“PeopleFinder”), Price-line.com, Inc. “Priceline”), and United Online, Inc. (“United Online”).
The Plaintiffs allege several causes of action against the Defendants, including violations of the Racketeer Influenced Corrupt Organizations Act, 18 U.S.C. § 1962(c) (RICO), against all Defendants; conspiring to violate RICO, 18 U.S.C. § 1962(d), against all Defendants; aiding and abetting RICO, 18 U.S.C. §§ 1961-1968, against the Credit Card Defendants; aiding and abetting commissions of mail fraud, 18 U.S.C. § 1341, wire fraud, 18 U.S.C. § 1343, and bank fraud, 18 U.S.C.
Before the Court is the Defendants’ Consolidated Motion to Dismiss or, in the Alternative, to Strike Various Portions of the Complaint. [Dkt. 189]. Several of the Defendants have also filed separate motions to dismiss, strike, or stay the proceedings on various other grounds. Those motions will be decided in other subsequent orders. For the reasons that follow, Defendants’ motion to dismiss or in the alternative to strike is GRANTED in part and DENIED in part as set forth herein.
II. Factual Background
The following facts and allegations are taken from the Plaintiffs’ Consolidated Amended Class Action Complaint (the “Complaint”). [Dkt. 141, hereinafter “CAC at ¶ ”]. The Plaintiffs allege that through the Defendants’ deceptive, unfair, and fraudulent business practices, the Plaintiffs were enrolled in Trilegiant membership programs without their knowledge or explicit consent and that their program memberships remained extant for months and in some cases years. CAC at ¶ 1. The alleged scheme was initiated and orchestrated by Trilegiant with the help of its parent companies, Apollo and Affinion, but was only successful because of a series of quid pro quo agreements executed with several of the E-Merchant Defendants and the willing participation of the Credit Card Defendants. CAC at ¶ 3.
The Complaint asserts that Trilegiant sold memberships in its discount membership clubs, which the Plaintiffs conclude have “no real value.” CAC at ¶ 4. Trilegi-ant marketed its memberships in collaboration with and to the customers of various E-Merchant Defendants. CAC at ¶ 72. The E-Merchant Defendants received signing bonuses and/or substantial “bounties,” equal to a percentage of “every dollar” Trilegiant earned from the E-Merchant customers that purchased Trilegiant products and services. CAC at ¶¶ 6, 7. The Plaintiffs also allege that several of the Credit Card Defendants formed partnerships with Trilegiant to allow Trilegiant to advertise and sell “credit guard type” programs to their customers, and others had marketing contracts requiring the Credit Card Defendants to send Trilegi-ant’s hard copy mail advertisements to its customers with the customer’s credit card or bank account statements. CAC at ¶¶ 11(b), 49. The Complaint does not allege, and the Court does not construe it to allege, that the Credit Card Defendants are included as E-Merchants.
The Plaintiffs further allege that the written agreements with the E-Merchant Defendants detailed at least four of the insidious business practices that were used to further the scheme’s illegitimate ends.
Second, the Plaintiffs allege that the E-Merchant Defendants engaged in “data-pass” with Trilegiant, meaning that each individual E-Merchant Defendant passed its customers’ confidential billing information to Trilegiant without the customers’ explicit consent or knowledge; according to the Plaintiffs, this process is meant to facilitate further online purchases because the customers are not required to reenter their credit card or debit account information to complete a secondary transaction with Trilegiant. CAC at ¶¶ 7(a), 75-80. While it is unclear from the pleadings how and when this process exactly occurs, the Plaintiffs allege that there is an interface token that stores each customer’s confidential billing information entered while making the primary purchase on the E-Merchant’s website. CAC at ¶ 117(c). When the customer clicks on a link, a banner, or a pop-up window that leads to Trilegiant’s disguised offer page, the token transfers the customer’s confidential billing information directly to Trilegiant, presumably before the customer accepts the offer. Id. The Plaintiffs then allege that after the customers unknowingly agree to purchase Trilegiant’s product, they are returned to their original purchase and only then receive confirmation of the original E-Merchant transaction. CAC at ¶¶ 7(a), 117(c). The customer is not aware, however, that on the backend, the token has transferred its personal billing information to Trilegiant, which Trilegiant uses to begin automatically charging the customer a monthly membership fee. CAC at ¶ 117. The Plaintiffs conclude that “[b]ecause the consumer never has to enter any credit card information during a transaction with Trilegiant, they reasonably believe that they did not make any additional purchases apart from their original transaction with an E-Merchant Defendant.” CAC at ¶ 80.
Third, Trilegiant practices negative option billing, meaning that consumers are automatically charged a monthly membership fee “unless the consumers take affirmative steps to cancel the membership.” CAC at ¶ 81. The consumers are only made aware of this billing practice by a disclosure in “exceedingly fine print” on Trilegiant’s “offer” page. CAC at ¶ 81. This is the only detail the Plaintiffs provide regarding the content or presentation of Trilegiant’s actual offer page.
Finally, the Plaintiffs allege that months or years after the consumer realizes that he or she has been charged an illegitimate
Once the customers were enrolled in a Trilegiant membership program, the Plaintiffs allege that the E-Merchant and Trile-giant Defendants could only have executed their scheme with the willing participation of the various Credit Card Defendants because the Credit Card Defendants were ultimately responsible for processing the charges. CAC at ¶¶3, 8, 11, 73. The Plaintiffs concluded that the Credit Card Defendants were knowing-participants in the scheme by, either intentionally or recklessly, ignoring their own policies and their own sophisticated anti-fraud software when reviewing and processing the membership charges. CAC at ¶¶ 88-95. As proof for this conclusion, the Plaintiffs generally refer to the “thousands” of complaints that the Credit Card Defendants received over the years the scheme was perpetrated. CAC at ¶¶ 14, 88-103. The Plaintiffs further assert that
[d]espite [the] abundant evidence that Trilegiant’s business practices did not meet the Defendant Credit Card Companies’ merchant rules, and despite their knowledge that Trilegiant’s membership “club” charges are among the highest sources of complaints brought to the attention of their fraud monitoring groups, the Defendant Credit Card Companies continued to process millions of questionable credit and debit charges every month without first verifying the charges with the account holder, as they do with other questionable credit card charges.
CAC at ¶ 93. The Plaintiffs posit that the only explanation for the Credit Card De
The Plaintiffs also allege that to further the fraudulent scheme, the Defendants “repeatedly used interstate wire and mail communications” including sending “thousands” of messages to the other Defendants discussing various aspects of the scheme. CAC at If 160. The Plaintiffs do not allege, however, the actual contents of any such messages aside from the information contained in the credit card and bank account statements that were sent to the Plaintiffs highlighting the membership fee charges. CAC at If 160(h). Furthermore, the Plaintiffs do not allege the details of any one fraudulent statement that was made by any Defendant to the Plaintiffs.
Plaintiff DiCarolis alleges that she was a citizen of Oregon who made a purchase on TigerDirect’s website prior to July 2010 using a Chase credit card; shortly thereafter, the Plaintiff was enrolled in a Trilegi-ant membership program, but only noticed the recurring charges around January 2012. CAC at If 24.
Plaintiff Kelm alleges that she was a citizen of Texas who made an online purсhase on Days Inns’ website in June 2009 using a credit card; shortly thereafter, she was enrolled in a Trilegiant membership program, but only noticed the recurring monthly charges on her credit card statements more than two years later, around November 2011. CAC at ¶ 25.
Plaintiff Pham alleges that she was a citizen of California who made an online purchase on Shoebuy’s website on December 3, 2009 using her Chase credit card; shortly thereafter, she was enrolled in a Trilegiant membership program, but only noticed the recurring monthly credit card charges nearly two years later, around September 2011. CAC at ¶ 26.
Plaintiff Reilly alleges that he was a citizen of California who made an online purchase on Buy.com’s website with his Chase credit card; shortly thereafter, he was enrolled in a Trilegiant membership program, but only noticed the recurring monthly credit card charges approximately two years later, around January 2012. CAC at ¶ 27.
Plaintiff Restrepo alleges that he was a citizen of Arizona and claims that his Chase credit card was charged for a Trile-giant membership program starting on May 9, 2007, but he only noticed the recurring monthly credit card charges nearly four years later in April 2011. CAC at ¶ 28. He does not allege that he made any online purchases from an E-Merchant Defendant. Id.
Plaintiff Brian Schnabel alleges that he was a citizen of California and claims that he was told he enrolled in a Trilegiant
Plaintiffs Edward and Lucy Schnabel allege that they were citizens of California and claim that they were told they enrolled in a Trilegiant membership program through a rebate. CAC at ¶ 30. The monthly membership fees were charged to their United Mileage Plus credit card beginning on September 21, 2009, but they only noticed the recurring monthly credit card charges six months later on March 9, 2010. Id.
Plaintiff Sumlin alleges that she was a citizen of Alabama and claims that her Wells Fargo checking account was charged in April 2012 for a Trilegiant membership. CAC at ¶ 31. She further alleges that her checking account was charged for at least the three or four months prior to April 2012. She does not claim to have been on an E-Merchant Defendant website or that she was charged for her Trilegiant membership by a Credit Card Defendant. Id.
Plaintiff Timmcke alleges that she was a citizen of New Mexico who made an online purchase through PeopleFinder’s website around August 2011 using a debit card; shortly thereafter, she was enrolled in a Trilegiant membership program, but only noticed the recurring debits two months later, around October 2011. CAC at ¶ 32.
Plaintiff Wаrfel alleges that she was a citizen of Ohio who had a phone call with Chase’s automated services in December 2004; shortly thereafter, her Chase credit card was charged for a Trilegiant membership, but she only noticed the recurring monthly credit card charges more than six years later, around January 2011. CAC at ¶ 33. She does not allege that she was on an E-Merchant website.
Plaintiff Williams alleges that she was a citizen of North Carolina who made an online hotel reservation through Priceline using her Wachovia debit card on or around May 26, 2009; shortly thereafter, she was enrolled in a Trilegiant membership program, but only noticed the recurring charges around October 2011. CAC at ¶ 34.
All of the Plaintiffs allege that they did not know of or consent to purchasing a Trilegiant membership and did not use any Trilegiant memberships’ services. CAC at ¶ 35. Each further alleges that he or she did not receive a full refund. CAC at ¶¶ 24-34. Only Plaintiff DiCarolis, however, alleges that Trilegiant continued to charge her account even after she canceled or attempted to cancel her membership. CAC at ¶ 24.
Based on these allegations, the Plaintiffs have requested individual and class-based relief under several federal and state statutes. The Defendants’ have moved to dismiss the Complaint for failure to state a claim for relief and, in the alternative, to strike portions of the Complaint.
III. Standard of Review
“A pleading that states a claim for relief must contain: ... (2) a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). “ ‘To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.’” Sarmiento v. United States,
In considering a motion to dismiss for failure to state a claim, the Court should follow a “two-pronged approach” to evaluate the sufficiency of the complaint. Hayden v. Paterson,
In general, the Court’s review on a motion to dismiss pursuant to Rule 12(b)(6) “is limited to the facts as asserted within the four corners of the complaint, the documents attached to the complaint as exhibits, and any documents incorporated by reference.” McCarthy v. Dun & Bradstreet Corp.,
IV. Discussion
The Court will separately address each of the causes of action that the Defendants’ argue should be dismissed.
a. Violations of RICO, 18 U.S.C. § 1962(c)
The Defendants have moved to dismiss the Plaintiffs’ substantive RICO claims on several grounds: (1) the Plaintiffs failed to sufficiently plead a RICO enterprise; (2) the Plaintiffs failed to sufficiently plead a pattern of racketeering activity; and (3) some of the Plaintiffs’ claims are barred by the relevant statute of limitations. [Dkt. 189-1, Memorandum of Law in Support of Defendants’ Motion to Dismiss Plaintiffs’ Consolidated Class Action Complaint or, in the Alternative, to Strike Portions of the Complaint, p. 10-25, hereinafter “MTD”]. The Plaintiffs respond by arguing that they have sufficiently pled an enterprise among all of the Defendants, they have sufficiently alleged with appropriate particularity the pattern of racketeering activity, and none of the Plaintiffs’ claims are barred by the statute of limitations. [Dkt. 219, Plaintiffs’ Consolidated Memorandum of Law in Opposition to Defendants’ Motion to Dismiss, p. 5-37, hereinafter “Opp.”]. The Court finds that the Plaintiffs have not sufficiently pled a substantive RICO violation to sustain the Defendants’ motion to dismiss.
i. RICO Enterprise
The Defendants argue that the Plaintiffs have not adequately pled a RICO enterprise because the Plaintiffs do not allege one enterprise “with an ascertainable structure that works together for a common purpose.” MTD p. 13. They claim that at best the Plaintiffs’ allegations show that there were several individual agreements between Trilegiant and each individual E-Merchant, demonstrating parallel conduct, not a unified or concerted scheme. Id. at 14. The Plaintiffs contend that the facts laid out in the Complaint allege with sufficient particularity one unified enterprise comprised of all the Defendants. Opp. p. 5. For the reasons below, the Court finds that the Plaintiffs have not sufficiently alleged one enterprise for purposes of a RICO violation.
An “enterprise” is defined as “a group of persons associated together for a common purpose of engaging in a course of conduct.” United States v. Turkette,
The Plaintiffs allege a classic “hub-and-spoke” type enterprise which occurs when there are separate, but bilateral, parallel, or vertical relationships between one central actor, the hub, and several independent actors at least one level removed from the hub, the spokes. Here, the Plaintiffs have alleged that Trilegiant acted as the hub and formed separate contracts with each E-Marketing Defendant, and they, in turn, relied on the help of each Credit Card Defendant to complete the chain. The Defendants argue that a hub and spoke type enterprise is not sufficient for a cause of action under RICO because the purported spokes are sepa
Hub-and-spoke enterprises have long been held by courts in this circuit to be insufficient as a matter of law to constitute the requisite enterprise for a RICO violation. See City of N.Y. v. Chavez,
In the wake of Boyle, there has been no authoritative decision by the Second Circuit offering guidance as to how to interpret the enterprise requirement. The Third Circuit has, however, found that classic “hub and spoke” enterprises without allegations of a “rim” or “wheel” still do not sufficiently allege a RICO enterprise even post-Boyle because they do not, by definition, demonstrate that the “components function as a continuing unit.” In re Ins. Brokerage Antitrust Litig.,
In In re Insurance Brokerage Antitrust Litig., the court dismissed a RICO claim by several insured plaintiffs who alleged several broker-centered enterprises. Id. at 312. For each alleged enterprise, the plaintiffs accused one insurance broker of forming an agreement with one of several insurance providers to receive hidden brokerage fees for directing certain plaintiff purchasers to those providers. Id. The court found that because the plaintiffs failed to allege any cooperation between the insurance providers, the plaintiffs only described a pattern of uncoordinated parallel conduct by the providers, not a unified enterprise. Id. at 374-75. That court did acknowledge, however, that if a plaintiff pled agreement or organized cooperation between the spokes of the enterprise, it could allege a sufficient enterprise under RICO. Id. at 375-76. This analysis is consistent with the Supreme Court’s ruling in Boyle, especially since in that case the loosely knit, non-hierarchical core group of individuals, supplemented by recruits on occasion, met before each bank robbery to plan, gather tools to commit, and assign roles for the commission of each crime. Therefore, even though no strict organization need be found, some structure showing agreement by the parties must be pled for a RICO claim to survive a motion to dismiss.
The Court also finds Judge Forrest’s analysis of the “hub and spoke” enterprise in City of N.Y. v. Chavez, particularly convincing and thorough. See Chavez,
Here, the Plaintiffs have alleged a series of commercial relationships between the E-Merchant Defendants, the Credit Card Defendants, and the Trilegiant Defendants with the Trilegiant Defendants acting as the hub. CAC at ¶¶ 4-5, 8, 10-1, 72-87. There are no allegations that the spokes, comprised of the various E-Merchant Defendants and arguably the Credit Card Defendants, have any agreements or mutual expectations of reciprocal behavior. At best, the Plaintiffs have alleged a series of bilateral or possibly trilateral agreements between Trilegiant, one E-Merchant Defendant, and possibly one Credit Card Defendant for each alleged fraudulent transaction. Furthermore, there are no allegations that the various E-Merchant Defendants even knew the identity of the other E-Merchants. Similarly, there are no allegations that the Credit Card Defendants worked together to ensure a concerted effort to process membership fees for Trilegiant programs. Without allegations showing that these spokes worked in a concerted manner, the Plaintiffs have not sufficiently alleged an assoei-ation-in-fact enterprise.
ii. Pattern of Racketeering Activity
The Defendants also move to dismiss the Plaintiffs’ RICO conspiracy claim, arguing that the Plaintiffs have not sufficiently alleged a pattern of racketeering activity. MTD p. 17-22.
To plead sufficiently a pattern of racketeering activity, the Plaintiffs must allege a pattern of “two or more predicate acts of racketeering” generally within a period of ten years. Lundy,
The Plaintiffs allege that the Defendants engaged in “predicate acts that constitute violations of the following statutes: (1) 18 U.S.C. § 1343 (wire fraud); 18 U.S.C. § 1341 (mail fraud); and 18 U.S.C. § 1344 (bank fraud),” and by “breaching (1) the settlement agreement they reached with 16 state attorneys general in December 2006, and (2) the settlement agreement they reached with former New York Attorney General Andrew M. Cuomo ...” CAC at ¶¶ 157, 158. However, only Chase and Trilegiant are alleged to have been parties to the settlement agreements with the attorneys general.
1. Mail and Wire Fraud
The Defendants argue that the Plaintiffs fail to allege with sufficient particularity how the Plaintiffs were defrauded by the Defendants’ scheme, and without describing the alleged fraudulent activity in more detail, the Plaintiffs’ conclusory pleadings must be dismissed. MTD p. 18-21. In fact, they continue, the Plaintiffs do not sufficiently allege how any one mail or wire communication was fraudulent. Id. The Plaintiffs respond by arguing that they have sufficiently alleged а fraudulent scheme and that the Defendants used the mail and wires to further that scheme.
Where, as here, a RICO claim’s predicate acts include allegations based on fraud, the circumstances constituting the alleged fraud must be pled with the particularity required by Rule 9(b). Fed. R. Civ. Proe. 9(b); see also First Capital Asset Mgmt., Inc. v. Satinwood, Inc.,
Since the Plaintiffs allege that the Defendants used interstate “wire and mail communications for the purpose of executing and furthering [their] scheme to defraud Plaintiffs and other Class members,” they must plead with the requisite particularity detailed in Rule 9(b). CAC at ¶ 160. When discussing the use of interstate mail and wire communications, the Plaintiffs allege that the Defendants sent “thousands of electronic, mail and/or telephone communications” regarding various aspects of the scheme. Id. at 160(a)-(h). For the most part, however, they do not provide the contents of any of those communications, allege the dates and times of any of those communications, or allege the actual author of any of those specific communications. The only communications that have some detail are the credit card and debit account charges that the Credit Card Defendants sent to the Plaintiffs. Id. 160(h)(i)(h)(xiv).
In DeSilva v. N. Shore-Long Island Jewish Health Sys. Inc., the court dismissed a RICO claim in which it was alleged that the defendants defrauded plaintiffs by systematically withholding “from plaintiffs their regular or statutorily required rate of pay for all hours worked.” DeSilva v. N. Shore-Long Island Jewish Health Sys. Inc.,
Similarly here, the Plaintiffs assert generalities, but fail to describe specifically how any mail or wire communication was used to enroll them in the Trilegiant membership programs. The Complaint asserts that “thousands” of communications were sent between the various Defendants without describing the contents or details of any one mail or wire communication that was fraudulent. The Plaintiffs instead rely on the hyperbolic conclusory allegation devoid of factual content asserting that the Defendants must have defrauded the Plaintiffs because they were engaged in various aggressive marketing and business tactics that resulted in the Plaintiffs’ unknowing enrollment into a membership program. In their roughly ninety page Complaint, the Plaintiffs do not specifically identify one false statement that a Defendant made to any Plaintiff related to enrolling in a Trilegiant membership program. On the other hand, the Plaintiffs admit that the Trilegiant offer page disclosed that Trilegiant practices negative option billing, but that this disclosure was in “exceedingly fine print.” CAC at ¶ 81. Even though they admit that there was a product offer page, they fail to describe any of the other conditions or omissions on that page. Without at least alleging how any mail or wire communication was used to further the fraudulent scheme, let alone when the communication was made and by whom, the Plaintiffs have only provided the type of conclusory statements that Rule 9(b) is meant to preclude. See also In re GlenFed Sec. Litig.,
To satisfy the particularity requirement of Rule 9(b), the Plaintiffs claim that they only need to detail the general contours of the RICO scheme and how the use of the mail and wires furthered that fraudulent scheme. Opp. p. 26. In In re U.S. Foodservice Inc. Pricing Litig., the court agreed and held that in complex fraud cases, the complaint does not need to allege the geographical and temporal details of every mail and wire transmission alleged to be a predicate act as long as the “defendant is on notice of the circumstances of the alleged fraud.” In re U.S. Foodservice Inc. Pricing Litig.,
In In re U.S. Foodservice, Inc., the plaintiffs alleged that the defendant enterprise “participated in a scheme to falsely inflate the cost component of the price charged to” the enterprise’s customers for certain goods. Id. at *17. As part of this scheme, the defendants agreed to artificially inflate the cost of the goods through a series of purchases and sales among themselves. Id. The plaintiffs then relied on the defendants’ misrepresentations about their purchase price for the goods in agreeing to purchase the goods from the defendants for an inflated amount. Id. The plaintiffs alleged that the invoices and contracts that the resaler defendant sent them constituted the predicate acts of mail fraud under RICO because the invoices and contracts listed a fraudulent value for the goods. Id. In this instance, the court found that it did not need the plaintiffs to plead the specific dates and details of every invoice or contract because the “thousands of separate fraudulent transactions” only furthered the fraudulent scheme that the plaintiffs sufficiently pled. Id. at *18.
Finally, it is unclear to the Court based on the arguments and pleadings whether the Plaintiffs are alleging that datapass is inherently fraudulent or whether it was an aspect of the mail and wire fraud discussed above. If the marketing scheme was meant to be included as an aspect of mail and wire fraud, it does not change the outcome of the Court’s conclusion because the Plaintiffs have not alleged the Defendants’ statements or omissions that defrauded them.
To the extent that the Plaintiffs allege that datapass is inherently fraudulent, their claims also fail because they have not told this Court why datapass is always fraudulent, despite the fact that a particular point in time some members of Congress concluded that certain unspecified practices labeled “datapass” were improper. For example, there are no allegations that datapass ineluctably results in automatic charges without the consumer’s knowledge and consent. Retailers constantly adapt to evolving legal mandates and market demands, and it is not alleged that datapass does not serve some potentially valid underlying sales purpose in helping willing consumers efficiently make online purchases. Without allеging with any particularity how the Plaintiffs were allegedly defrauded into purchasing the Trilegiant memberships, the Court cannot find that datapass is inherently fraudulent in this case.
2. Bank Fraud
The Defendants also argue that the Plaintiffs have no standing to allege predicate acts of bank fraud. MTD p. 23. The Plaintiffs failed to respond to the Defendants’ argument on this point. Given the law on this issue, it would appear that the Plaintiffs concede this point, as they do not expressly contest it, but the Court will address the merits regardless. To the extent that this claim still remains, the Plaintiffs cannot allege bank fraud as a predicate act under RICO. See Chanoff v. U.S. Surgical Corp.,
Bank fraud provides criminal liability for anyone who “knowingly executed, or attempts to execute, a scheme or artifice— (1) to defraud a financial institution; or (2) to obtain any of the moneys, funds, credits, assets, securities, or other property owned by, or under the custody or control of, a financial institution, by means of false or fraudulent pretenses, representations, or promises.” 18 U.S.C. § 1344. As the statute’s language makes patently clear, the bank fraud statute protects financial institutions from being the victims of fraudulent activity. See United States v. Chandler,
Here, the Plaintiffs do not allege that any financial institution was harmed. Conversely, the Plaintiffs allege that several financial institutions, or Credit Card Defendants, are part of the RICO enterprise engaged in defrauding the Plaintiffs. The Plaintiffs, therefore, may not rely on bank fraud as a predicate act.
3. Breach of the Settlement Agreement
The Defendants argue that the Plaintiffs cannot assert breaches of settlement agreements as predicate acts under RICO because breach of contract is not an enumerated predicate act. MTD p. 22-23. In response, the Plaintiffs implicitly concede this point, but assert that “[w]hile breaching the settlement agreement is not one of the enumerated predicate acts that constitute racketeering activity as set forth in [the statute], it is one of the bases Plaintiffs have alleged to establish the Defendants’ fraudulent intent and a pattern of racketeering.” Opp. p. 32, n. 23. From the Complaint and the Plaintiffs’ response, it is apparent that the alleged breaches are potentially used for two purposes: (1) as a substantive predicate act under the statute; and (2) to help prove the requisite fraudulent intent.
The list of predicate acts in 18 U.S.C. § 1961 is exhaustive. See O’Malley v.
iii. RICO Statute of Limitations
The Defendants also argue that any RICO claim brought by Plaintiffs Warfel, Reilly, and Restrepo are barred by the relevant statute of limitations. MTD p. 23-25. In response, the Plaintiffs argue that the statute of limitations was tolled because the Plaintiffs “suffered new and independent injuries with each imposition of a Trilegiant credit card charge on a class member, as the factual allegations of the CAC show that post-transaction marketing, data pass fraud, negative option billing and industrial scale ‘refund mitigation’ continued unabated for years until after these actions were filed.” Opp. p. 87.
Even though the RICO statute does not provide for a specific statute of limitations, the Supreme Court announced a uniform four-year limitations period for civil RICO actions. See Agency Holding Corp. v. Malley-Duff & Assocs., Inc.,
The Second Circuit also “recognizes а ‘separate accrual’ rule under which a new claim accrued and the four-year limitation period begins anew [for a civil RICO claim] each time a plaintiff discovers or should have discovered a new and independent injury.” Id. at 58. As other courts in this circuit have noted, the case law “leaves some ambiguity as to precisely what constitutes a ‘new and independent injury.’ ” Republic of Colombia v. Diageo N. Am. Inc.,
1. Date of the Injury
First, the Court must determine when the alleged injury occurred. According to the Complaint, Plaintiff Warfel was enrolled in one of Trilegiant’s monthly membership programs in or around December 2004; Plaintiff Reilly was enrolled in one of Trilegiant’s monthly membership
The facts of this case are substantially similar to those in In re Merrill Lynch Partnerships Litig., and warrant a finding that no new and independent injury occurred after the initial membership enrollment. In that case, the plaintiffs alleged that the defendant scammed real estate investors into purchasing ownership interests in a series of limited partnerships even though the defendant knew that the partnerships could not make the advertised gains. In re Merrill Lynch Partnerships Litig.,
The Plaintiffs unavailingly rely on AMA v. United Healthcare Corp. In that case, the defendant healthcare company was accused of continually manipulating the databases responsible for establishing reimbursement rates for out-of-network reimbursement claims. AMA v. United Healthcare Corp., No. 00 Civ. 2800(LMM),
Here, the facts are more akin to In re Merrill Lynch Partnerships Litig. The Plaintiffs allege that they were fraudulently induced to enroll in Trilegiant’s membership programs through a complex scheme involving several questionable business practices. CAC at ¶¶ 74-87. The scheme resulted in the Plaintiffs’ enrollment in one of the membership programs without their explicit authorization or consent. Each Trilegiant membership charge later collected was simply one in a
As the Plaintiffs concede, negative option billing is used to make “[a]ffirmative consumer action ... impossible” until consumers become aware that they have been enrolled in the membership program, which “does not occur until months, if not years, after Trilegiant first begins to charge recurring membership fees.” CAC at ¶ 82. Refund mitigation, furthermore, is used only to “minimize the amount of improper charges [Trilegiant] would have to refund to ... consumers who eventually discover that they have been unknowingly enrolled in the Membership Programs and charged unauthorized monthly fees.” CAC at ¶ 83. This post-enrollment conduct was not used to create new and independent RCO-related injury, but was meant to conceal and further the initial fraud.
2. Knowledge or Constructive Knowledge
Second, the Court now must determine when the Plaintiffs discovered or should have discovered the injury. In the Second Circuit, actual knowledge of the fraudulent scheme is not necessary; an objective standard is used to impute knowledge to the victim when sufficient “storm clouds” are raised to create a duty to inquire. See Dodds v. Cigna Secs., Inc.,
In this case, the Plaintiffs admit that after they were enrolled in Trilegi-ant’s membership programs, they received “credit or debit card statements ... containing the fraudulent charges.” CAC at ¶ 160(h). However, they allege that they only “noticed the recurring charges” years after the initial enrollment. CAC at ¶¶ 27-29, 33. The Plaintiffs claim, therefore, that they had no actual or constructive knowledge of the fraudulent activity. The Court, drawing all inferences in favor of the Plaintiffs, finds that the Plaintiffs did not have actual knowledge of the injury at the time of enrollment. The question before this Court, then, is when the Plaintiffs were on sufficient inquiry notice of the scheme to start running the statute of limitations.
Since the Plaintiffs admit that they received credit card or debit account statements accurately reflecting the amounts charged for the membership programs shortly after enrolling in the programs, the Court must determine if this placed them on sufficient inquiry notice of the alleged scheme. In a case brought under the Truth in Lending Act, in which a president of a company sought reimbursement for what he alleged were unauthorized
In Dodds, the court found that the inexperienced-investor plaintiff was on inquiry notice that she may have been defrauded by her investment manager because she had access to the prospectuses of the companies in which he proposed to invest. Dodds,
Accordingly, this Court follows the general consensus in this circuit and finds that receiving credit card statements, far less impenetrable than corporate securities filings, should have given the Plaintiffs sufficient inquiry notice of the fraudulent scheme. Indeed, the Plaintiffs own allegations prove this to be true because the Plaintiffs only discovered the charges after eventually reviewing their credit card or debit card statements. CAC at ¶¶ 24-34. Had the Plaintiffs reviewed their credit card statements earlier than when they finally did, they would have been aware of the charges.
In the Complaint, Plaintiff Warfel admitted that around December 2004, she was enrolled in a Trilegiant membership program and the monthly charges commenced “[s]oon thereafter.” CAC at ¶¶ 33. Warfel’s initial complaint was filed in the Southern District of Ohio on August 4, 2011, more than six years after she should have known of the injury. Opp. p. 83. Her RICO claims, therefore, would be barred by the statute of limitations.
Plaintiff Reilly was enrolled in a Trilegi-ant membership program around May 2007. CAC at ¶¶27. Reilly filed a complaint on March 7, 2012, more than four years after he should have known of the injury. His RICO claims, therefore, would be barred by the statute of limitations.
Finally, Plaintiff Restrepo claimed that on “May 9, 2007, Trilegiant Charged” his Chase MasterCard. CAC at ¶¶ 28. Res-trepo’s initial claim was filed on July 13, 2011 in the District of Arizona, just over four years after the initial charge. Even assuming that the charges did not appear until his June statement, his RICO claims would still be barred by the statute of limitations.
For the foregoing reasons, the Court finds that the Defendants’ motion to dismiss the Plaintiffs’ substantive RICO claims is GRANTED, and it is so ordered,
b. Conspiracy to Violate RICO, 18 U.S.C. § 1962(d)
The Defendants also move to dismiss the Plaintiffs’ claim for a conspiracy to violate RICO because (1) the Plaintiffs have failed
The RICO statute makes it unlawful for “any person to conspire” to violate RICO. 18 U.S.C. § 1962(d). To establish a conspiracy claim pursuant to this statute, a “plaintiff must establish ‘as to each alleged co-conspirator: (1) an agreement to join the conspiracy; (2) the acts of each co-conspirator in furtherance of the conspiracy; [and] (3) that the co-conspirator knowingly participated in the same.’ ” Valenti v. Penn. Mut. Life Ins. Co.,
In this circuit, analysis of any RICO conspiracy claim begins with the premise that it necessarily fails where the underlying substantive claim is insufficiently pled. See First Capital Asset Mgmt., Inc.
The Plaintiffs do not directly respond to the Defendants’ argument on this point. Accordingly, the Plaintiffs claim for a RICO conspiracy must be dismissed because they have failed to allege sufficiently a substantive RICO violation as discussed supra.
Even so, the Plaintiffs’ RICO conspiracy claim fails for independent reasons. If the Plaintiffs do not need to allege an actual enterprise to fulfill the requirements for a RICO conspiracy claim, they must at the very least allege
The Plaintiffs argue that at the pleading stage, they must only allege that the co-conspirators knew the general nature and contours of the conspiracy, not that they actually had any agreement to commit RICO violations. Opp. p. 46. The cases the Plaintiffs cite, however, do not stand for the proposition that the only requirement to allege sufficiently a RICO conspiracy is knowledge of it. For example, in United States v. Zichettello, the court addressed whether coconspirators needed to know and agree to the racketeering activity of the enterprise for the government to sustain a RICO conspiracy conviction. United States v. Zichettello,
When a plaintiff sufficiently alleges an enterprise, they allege by definition an explicit or implicit agreement among the defendants. Here, however, the Plaintiffs have not sufficiently alleged an enterprise. Moreover, the Plaintiffs are attempting to allege, it seems, that mere knowledge of a conspiracy’s actions makes the person with that knowledge liable as a co-conspirator. Knowledge alone cannot be enough to subject a person to criminal and civil liability for conspiracy. Without alleging an agreement, the Plaintiffs cannot show that the Defendants have in fact agreed to conspire together to violate RICO.
Finally, the Plaintiffs’ RICO conspiracy claim also fails because the allegations therein “contain no more specificity than the other allegations in the complaint.” Ozbakir,
For the foregoing reasons, the Defendants’ motion to dismiss the RICO conspiracy claims is GRANTED.
c. Claim for Violations of ECPA, 18 U.S.C. § 2510 et seq.
The Trilegiant and E-Merchant Defendants move to dismiss the Plaintiffs’ ECPA claims because the Plaintiffs have failed to allege that the interception occurred contemporaneously to the communications’ transmissions, and, in the alternative, that several of the Plaintiffs’ claims are barred by the relevant statute of limitations. MTD p. 27-29. The Plaintiffs argue that they are not barred by the statute of limitations because they were not put on notice of the violation, and they have sufficiently alleged interceptions for purposes of the statute. Opp. 89-96. For the reasons set forth below, the Court finds that some of the Plaintiffs’ claims are not barred by the statute of limitations and that the Complaint adequately asserts a violation of ECPA.
i. ECPA “Interception”
ECPA provides a civil cause of action against persons who intentionally intercept, endeavor to intercept, or procure others to intercept electronic communications. 18 U.S.C. § 2511. Courts addressing the term “intercept” have narrowly defined it to encompass only “ ‘acquisitions of communications contemporaneous with transmission, not storage.’ ” Snyder v. Fantasy Interactive, Inc., No. 11-cv-3593(WHP),
For purposes of this motion to dismiss, however, the Court does not need to decide whether an interception must be contemporaneous to the communication’s transit because even assuming the Defendants’ standard is correct, the Plaintiffs have sufficiently alleged the temporal requirement. Several Plaintiffs have claimed that while making purchases on the E-Merchant Defendants’ websites, they entered their confidential billing information which was then stored in an online token to be transferred to Trilegiant at some point in the transaction. CAC at ¶ 117. After entering their account information, the Plaintiffs were taken to Trile-giant’s offer page to complete a secondary purchase without receiving confirmation that the first transaction was completed. CAC at ¶¶ 74, 117. They would only receive confirmation of their initial purchase after reviewing Trilegiant’s offer page. CAC at ¶¶ 74, 117. Based on the allegations, and drawing all inferences in favor of those allegations, the Plaintiffs have alleged two alternative “interceptions.” The first could have occurred when the token stored the Plaintiffs’ confidential billing information. See 18 U.S.C. § 2511(2)(d); Caro v. Weintraub,
ii. ECPA Statute of Limitations
The Defendants also argue that several of the Plaintiffs’ ECPA claims are barred by the relevant statute of limitations. Neither party contests that the applicable statute of limitations for an ECPA claim is “two years after the date upon which the claimant first had a reasonable opportunity to discover the violation.” 18 U.S.C. § 2520(e); see also In re State Police Litig.,
Even though the “violation” that is referenced in the statute is the interception of the communication, not the injury caused by the interception, the Plaintiffs only need to be on inquiry notice of the violation to commence the statute of limitations period. Contrary to the Plaintiffs’ contentions, they did not need to be on notice of the actual violation, just on notice to inquire about the injury they had received. The credit card and debit account statements should have alerted the Plaintiffs that “something was afoot.” See Davis v. Zirkelbach,
Plaintiff Kelm alleges that shortly after June 2009, her credit card was charged for a membership fee. CAC at ¶ 25. Plaintiff Pham alleges that from January 11, 2010 to August 11, 2011, her credit card was charged for monthly membership fees. CAC at ¶ 26. Plaintiff Reilly alleges that shortly after May 2007, his credit card was charged for a membership fee. CAC at ¶27. Plaintiff Restrepo alleges that on May 9, 2007, his credit card was charged for a membership fee. CAC at ¶ 28. Plaintiff Brian Schnabel alleges that on or about December 20, 2007, his credit card was charged a membership fee. CAC at ¶ 29. Plaintiff Warfel alleges that shortly after December 2004, her credit card was charged a membership fee. CAC at ¶ 33. Finally, Plaintiff Williams alleges that in August 2009, her debit card was charged a membership fee. CAC at ¶ 34. All of
The Defendants’ motion to dismiss the ECPA claims asserted by Plaintiffs Kelm, Pham, Reüly, Restrepo, Brian Schnabel, Warfel, and Williams against the Trilegi-ant and E-Merchant Defendants is GRANTED as barred by the statute of limitations; while the motion to dismiss those claims asserted by the Plaintiffs DiCarolis, Edward and Lucy Schnabel, Sum-lin, and Timmcke is DENIED.
d. Claims for Violations of CUTPA, Conn. Gen.Stat. § 42-110a et seq.
The Defendants first move to strike the pleadings as related to the CUTPA class action claim on the ground that CUTPA does not allow for a class action when a Connecticut resident is not a named plaintiff. MTD p. 32-33. The Defendants also move to dismiss the CUTPA claim arguing that the Plaintiffs have not sufficiently alleged a substantive CUTPA violation and that several claims are barred by the relevant statute of limitations. MTD p. 33-36. The Plaintiffs argue that (1) the motion to strike is untimely and procedurally improper; (2) Rule 23 supersedes the class restrictions in CUTPA; and (3) the Plaintiffs have sufficiently alleged CUTPA claims that are not barred by the statute of limitations. Opp. p. 96-114.
i. Defendant’s Motion to Strike
This Court finds that: (1) the motion to strike is procedurally proper; (2) CUTPA does not allow for national class actions; and (3) Rule 23 does not supersede the class restrictions in CUTPA.
1. Procedural Posture
Rule 12(f) provides that a “court may strike from a pleading any insufficient defense or any redundant, immaterial, impertinent or scandalous matter.” Fed.R.Civ.P. 12(f). Motions to strike “are not favored and will not be granted unless it is clear that the allegations in question can have no possible bearing on the subject matter of the litigation.” Schramm v. Kirschell,
Rules 23(a) and 23(b) provide the procedural bases for determining the appropriateness of class certification. See Fed. R.Civ.P. 23(a)-(b). Rule 23(a) lists the prerequisites of numerosity, commonality, typicality, and adequacy of representation. Fed.R.Civ.P. 23(a). Rule 23(b) indicates that a “class action may be maintained if Rule 23(a) is satisfied and if’ either: (1) separate actions would create a risk of inconsistent adjudications or adjudications that would impair the interests of other nonparty class members; (2) “the party opposing the class has acted or refused to act on grounds that apply generally to the class;” or (3) “the court finds that the questions of law or fact common to class members predominate over any questions affecting only individual members, and
In Rogers v. Capital One Servs., LLC, this Court articulated the standard for striking class allegations prior to a motion for certification.
A court may grant a motion to strike and order deletion of portions of a complaint’s class claims where the basis for the motion to strike is distinct from the issues that would be decided in connection with determining the appropriateness of class certification under Rules 23(a) and 23(b) of the Federal Rules of Civil Procedure and it is clear that plaintiffs cannot possibly prove the deleted portions of those claims.
Rogers v. Capital One Servs., LLC, No. 10-CV-398(VLB),
In Rogers, this Court denied a motion to strike class allegations where the defendants argued that “the proposed class could not be certified” because individual questions would predominate over common issues of law, and “the predominance criterion is a Rule 23(b) requirement, and therefore is not a proper basis for a motion to strike class allegations.” Rogers,
In Rahman, on the other hand, the court granted a motion to strike class allegations because the issue of “the extent to which the claims of absent members of the putative class have been exhausted” was “separate and apart from the issues that [would] be decided on a class certification motion.” Rahman,
In this case, the Defendants’ main challenge to the class allegations in the Complaint is that “CUTPA explicitly precludes individuals who do not reside in Connecticut from bringing claims on behalf of a class.” MTD p. 32. This alleged bar to the class proceeding, therefore, is a statutory restriction unrelated to the issues to be addressed at the class certification stage, i.e. those listed in Rules 23(a) and 23(b). Furthermore, the availability for a foreign named plaintiff to represent a class under CUTPA is a matter of law and can be determined on the facts of the Complaint. Therefore, this Court need not wait until a motion for class certification to strike class allegations on this basis.
In support of their argument that striking class allegations is procedurally improper at this stage, the plaintiffs cite Chenensky v. N.Y. Life Ins. Co., in which the court stated that a “motion to strike class allegations ... is even more disfavored because it requires a reviewing court to preemptively terminate the class aspects ... before plaintiffs are permitted to complete [ ] discovery ... on questions relevant to class certification.” Chenensky v. N.Y. Life Ins. Co., No. 07 CIV. U504(WHP),
For those reasons, the Court views the motion to strike as procedurally proper at this stage of the litigation.
2. CUTPA’s Class Action Restriction
CUTPA creates both individual and class causes of action. The statute provides:
(a) Any person who suffers any ascertainable loss of money or property, real or personal, as a result of the use or employment of a method, act or practice prohibited by section 42-110b, may bring an action in the judicial district in which the plaintiff or defendant resides or has his principal place of business or is doing business, to recover actual damages. Proof of public interest or public injury shall not be required in any action brought under this section. The court may, in its discretion, award punitive damages and may provide such equitable relief as it deems necessary or proper.
Conn. GemStat. § 42-110g(a). That section confers a right of action to an individual plaintiff harmed by unfair or deceptive trade practices to bring an action in Connecticut. Subsection (b) of that section limits that right of a person to bring a class action by stating that:
Persons entitled to bring an action under subsection (a) of this section may, pursuant to rules established by the judges of the Superior Court, bring a class action on behalf of themselves and other persons similarly situated who are residents of this state or injured in this state to recover damages.
Conn. GemStat. § 42-110g(b). The statute permits any person authorized to bring a CUTPA action on their own behalf to bring a class action only on behalf of similarly situated residents of Connecticut or those that were injured in Connecticut.
The Defendants argue that the Court should strike the Plaintiffs national class action claims under CUTPA because the Plaintiffs “who do not reside in Connecticut and were not injured in Connecticut” are explicitly precluded from “bringing claims on behalf of a class.” MTD p. 32. The Plaintiffs urge the Court to read the statute to permit a class action to be brought on behalf of persons who do not reside in Connecticut and who were not injured in Connecticut. The Plaintiffs do not argue that the language is ambiguous, but rather argue on public policy grounds that, although they are not residents and were not injured in Connecticut, they should be allowed to bring a class action suit under CUTPA because there is a sufficient nexus to Connecticut: (1) the Plaintiffs allege that the headquarters of both Trilegiant and Affinion are located in Nor-walk, Connecticut;” and (2) “from this headquarters, Trilegiant and Affinion designed and implemented their data pass scheme, intercepted consumers’ billing information, and initiated unauthоrized charges against consumers’ accounts.” Opp. p. 99.
“The meaning of a statute shall, in the first instance, be ascertained from the text of the statute itself and its relationship to other statutes. If, after examining such text and considering such relationship, the meaning of such text is plain and unambiguous and does not yield absurd or unworkable results, extratextual evidence of the meaning of the statute shall not be considered.” Conn. GemStat. § l-2z. Furthermore, it is incumbent upon a party seeking an interpretation of a statute in variance with its apparently plain meaning to identify some ambiguity in the language itself, some ambiguity in the statute’s context, or something in the legislative history
The Plaintiffs offer no alternative interpretation of the language of the statute, and no other legislative history or contextual support for the interpretation they advocate. Instead, they challenge the wisdom of the language and assert that because there is a nexus to the state the legislature should have allowed Connecticut residents to bring class actions on behalf of nonresidents. In essence, the Plaintiffs ask this Court to supplant its judgment for that of the legislature rather than to interpret the legislature’s intent. That is not the role of a Court. Were the Court to conduct the standard statutory analysis, it would find that the language clearly and unambiguously does not permit a class action to be brought on behalf of non-residents or on behalf of those not injured in Connecticut, and that the language expresses the deliberate legislative intent that such suits not be permitted, as reflected in the legislative history discussed infra.
Further, a court in this district has held that a “foreign person suffering ascertainable loss outside of Connecticut from unlawful conduct occurring inside the state may initiate an individual action in Connecticut, but may not bring a class action because such plaintiff could not be representative of class members with the statutorily required in-state residency or injury characteristics.” Metro. Enter. Corp. v. United Techs. Int’l, Corp., Pratt & Whitney Large Commercial Engines Div., No. 3:03CV1685(JBA),
In this case, none of the named Plaintiffs are Connecticut residents, and none of the Plaintiffs were injured in Connecticut. Therefore, the terms of CUTPA and the state’s jurisprudence prohibit the Plaintiffs from bringing a class action on behalf of a nаtional class.
3. CUTPA and Rule 23
The Plaintiffs next argue that even if the terms of CUTPA would bar their national class, Rule 23 supersedes CUTPA’s class action restriction. Opp. p. 100-102. This Court disagrees.
a. Rule 23 Trumps Rules of Procedure
The Rules Enabling Act, which grants the Supreme Court the power to promulgate the Federal Rules of Civil Procedure, stipulates that “[s]uch rules shall not abridge, enlarge or modify any substantive right.” 28 U.S.C. § 2072(b).
As described above, Rule 23(a) and 23(b) list criteria for maintaining a class action suit in federal court. In Shady Grove Orthopedic Assocs., P.A. v. Allstate Ins. Co., the Supreme Court addressed a conflict between Rule 23 and a procedural New York State statute that precluded any claim with the ability to recover a
Justice Stevens clarified the meaning of the plurality opinion in a concurring opinion in which he explained that Rule 23 controlled only if the conflicting state law was also procedural, and he concluded that the New York statute in question was procedural. Id. at 436,
Even though the Second Circuit has yet to directly address which opinion is controlling, several other courts have concluded that Justice Stevens’s concurring opinion is controlling when analyzing class action restrictions because it was decided on the narrowest grounds. Leonard v. Abbott Labs., Inc., No. 10-CV-4676(ADS)(WDW),
To help make sense of the fractured decision, it appears that several courts, either implicitly or explicitly, bifurcate the Shady Grove analysis into two steps. The first step is governed by Justice Scalia’s plurality opinion and requires a determination of whether the rule in question is procedural. If it is found to be procedural, then courts use Justice Stevens’s concurrence to analyze whether the Rule trumps the state statute at issue by determining whether the state statute is procedural or substantive. This method takes into account that five Justices, Justice Stevens and the four dissenting Justices, agreed that a Federal Rule cannot alter substantive rights under state law and disagreed with Justice Scalia’s broader holding that the Rules superseded both substantive and procedural state laws. The Court is persuaded by this synthesis.
Accordingly, the first step is to “determine whether Rule 23 answers the question in dispute,” and is, therefore, procedural. Shady Grove Orthopedic Assocs., P.A.,
b. CUTPA is Substantive
While the Second Circuit has yet to provide authority as to whether the restrictions in CUTPA are substantive or procedural, other courts have determined similar statutes to be substantive. For example, in In re Wellbutrin XL Antitrust Litig., the court found that a restriction in the Illinois Antitrust Act (“IAA”) on actions by indirect purchasers was “intertwined with Illinois substantive rights and remedies because (1) the restrictions apply only to the IAA, (2) they are incorporated in the same statutory provision as the underlying right, not a separate procedural rule, and (3) the restrictions appear to reflect a policy judgment about managing the danger of duplicative recoveries.” In re Wellbutrin XL Antitrust Litig.,
In the case of CUTPA, the class action restriction satisfies the three Wellbutrin factors: (1) the class action restriction only applies to CUTPA, and nationwide class actions are still possible under other causes of action (including unjust enrichment discussed infra)’, (2) the restriction is incorporated in the same provision&emdash;and in fact in the same sentence&emdash;as that which grants the right for residents and those injured in Connecticut to bring a class action; and (3) there is at least some evidence to suggest that the decision to restrict class actions to Connecticut residents was a purposeful policy decision.
While the first and second elements are evident from the statute itself, the third requires some examination of the statute’s legislative history. CUTPA’s prohibition states that “[p]ersons entitled to bring an action under subsection (a) of this section may ... bring a class action on behalf of themselves and other persons similarly situated who are residents of this state or injured in this state to recover damages.” Conn. Gen.Stat. § 42-110g(b) (emphasis added). An earlier draft of CUTPA simply read: “Persons entitled to bring an action under subsection (a) of this statute may ... bring an action on behalf of themselves and other similarly situated persons to recover damages.” H.B.1965,1973 Gen. Assemb., Jan. Sess. § 7(b) (Conn.1973) (LCO No. 6719).
While debating CUTPA, The Connecticut General Assembly’s Joint Legislative Committee on General Law heard testimony from a representative of the Connecticut Retail Merchants Association. The Association recommended that “the bill should be limited to activities within the State,” and that the bill should not permit class actions, which the Association’s representative described as “magnifying] virtually every alleged grievance a thousand fold and perhaps a million fold, depending upon how broadly [a plaintiff] construes his own class.” An Act Concerning Unfair Trade Practices: Hearing on H.B. 1965 Before the J. Legis. Comm. On Gen. Law, 1973 Gen. Assemb., Jan. Sess., at 716-17 (Conn.1973) (Statement of Nancy Buck, Counsel, Conn. Retail Merch. Ass’n) (the committee members did not comment
On the whole, this Court finds that the class action restriction in CUTPA reflects a substantive policy judgment by the Connecticut legislature. Because the restriction is substantive rather than procedural, Rule 23 cannot supersede it. Therefore, the motion to strike the CUTPA nationwide class action allegations is GRANTED.
ii. Substantive CUTPA Claim
The Trilegiant and E-Merchant Defendants also argue that (1) the Plaintiffs have not maintained a claim for a substantive CUTPA violation because they failed to plead with sufficient particularity allegations of fraud as required by Rule 9(b); and (2) that several of the CUTPA claims are barred by the relevant statute of limitations. MTD p. 33-34.
1. Pleading Sufficient Particularity
In response to the Defendant’s argument that the Plaintiffs have not pled sufficient particularity to maintain a CUT-PA claim, the Plaintiffs state that they need not comply with Rule 9(b)’s heightened pleading requirements because they allege violations of CUTPA based on unfair and deceptive acts and practices in addition to their general fraud claims. Opp. 105-107. In the alternative, the Plaintiffs claim that their fraud-based allegations have the requisite particularity so as to comply with Rule 9(b). Opp. 107-109.
CUTPA provides that “[n]o person shall engage 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). “[T]o prevail on a CUTPA claim, the plaintiffs must prove that (1) the defendant engaged in unfair or dеceptive acts or practices in the conduct of any trade or commerce ... and [the plaintiff suffered] ascertainable loss of money or property as a result of the defendant’s acts or practices.” Neighborhood Builders, Inc. v. Town of Madison,
It is well settled that in determining whether a practice violates CUTPA we have adopted the criteria set out in the cigarette rule by the federal trade commission for determining when a practice is unfair: (1) [W]hether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise-whether, in other words, it is within at least the penumbra of some common law, statutory, or other established concept of unfairness; (2) whether it is immoral, unethical, oppressive, or unscrupulous; (3) whether it causes substantial injury to consumers [competitors or other businessmen],
ZeeBaaS, LLC v. Koelewyn, No. 3:11cv11(VLB),
It is also “well established that CUTPA claims need not contain the elements of fraud.” Tatum v. Oberg,
The Court holds that to the extent the Plaintiffs have alleged a CUTPA action based on fraud, they have failed to sufficiently plead with the particularity required in Rule 9(b) for the same reasons discussed supra. To the extent that their claims are not based on fraud, the Court must examine those claims under the standard of Rule 8. Fed.R.Civ.P. 8(a); see CAC at ¶¶ 22, 71, 205, 206, 209, 210, 216.
The Plaintiffs allege that the Defendants violated CUTPA by engaging in “unfair and deceptive act[s] and practiee[s].” CAC at ¶ 205. In supporting these claims, the Plaintiffs allege that the Trilegiant Defendants employed several business and marketing tactics in a deceptive or unfair manner with the aid of the E-Merchant Defendants and the Credit Card Defendants. CAC at ¶¶ 4-6, 8-14, 74, 117. These practices include sharing confidential billing information through datapass, employing negative option billing, and making it difficult for consumers to get refunds through the refund mitigation policy. CAC at ¶¶ 7, 81-87.
The Plaintiffs describe datapass as the transaction that occurs when confidential billing information is sent to Trile-giant tо facilitate further purchases because the customer is not required to reenter credit card or debit account information. CAC at ¶¶ 7(a), 75-80. Negative option billing is the billing practice in which members are automatically charged a monthly membership fee until they affirmatively cancel their membership. CAC at ¶ 81. The Complaint fails to explain how either of these business practices are unfair or deceptive. In fact, it concedes that the negative option billing practice was disclosed in fine print on Trilegiant’s offer page. Id. Datapass, moreover, is not in and of itself an unfair practice, but like all marketing tactics can be used unfairly. Datapass can be used in a fair manner to help consumers efficiently complete several online purchases. Conversely, the Plaintiffs here have not alleged how data-pass was used in an unfair or deceptive manner towards them. For example, had the Plaintiffs alleged that datapass was used to transfer private billing information to Trilegiant who then charged for products never advertised, it may have been an unfair or deceptive use of the tool, but the Plaintiffs fail to make such allegations. By pleading only nebulous facts and inferences, the Plaintiffs have only provided conclusory allegations and have not sustained their burden on a motion to dismiss. See ZeeBaaS, LLC,
The Plaintiffs have, however, made allegations sufficient to show that the refund mitigation strategy adopted by Trilegiant could have violated CUTPA. The Plaintiffs claim that call-center employees were “specifically instructed to tell customers that they somehow signed up for the Membership Programs through their credit card company,” instead of telling them the truth about their membership enrollment. CAC at ¶ 86. The Plaintiffs prove that this strategy was implemented by referencing an email in which a representative from 1-800 Flowers told a representative from Trilegiant that “we have had increasingly more frequent feedback from our own teams that your agents are telling our customers to call us” when the customer calls Trilegiant to cancel their membership. CAC at ¶ 133. Assuming these allegations to be true, call-center employees were directed to and did deceive customers calling to cancel their memberships. This misdirection would undoubtedly permit Trilegiant to charge more monthly fees while the customer attempted to discover how to cancel its membership. This claim, therefore, is actionable under CUTPA.
Accordingly, the Defendants’ motion to dismiss the individual substantive CUTPA claims is DENIED as to the refund mitigation strategy, but for all other substantive CUTPA claims it is GRANTED.
2. CUTPA Statute of Limitations
The Defendants argue that several of the Plaintiffs’ CUTPA claims are time-barred because some of the Plaintiffs enrolled in “membеrship programs more than three years before filing their complaints.” MTD p. 35. The Plaintiffs respond by stating that they suffered recurring injuries in the form of unauthorized monthly charges, thereby tolling the statute of limitations. Opp. p. 109. At the very least, the Plaintiffs argue that they should be able to recover for the charges that occurred within the limitations period. Id. p. 110. In the alternative, the Plaintiffs claim that the Defendants engaged in fraudulent concealment and a continuing course of conduct, both of which would toll CUTPA’s statute of limitations. Id. p. 110-14.
CUTPA is governed by a three-year statute of limitations. Conn. GemStat. § 42-110g(f). It also is an occurrence statute, “meaning that the time period within which a plaintiff must commence an action begins to run at the moment the act or omission complained of occurs.” Breiner v. Stone,
The Plaintiffs have alleged that several of the Defendants’ business practices were unfair, deceptive, or fraudulent, and, therefore, violated CUTPA. These practices can be sorted into two groups: (1) those practices related to the alleged fraudulent enrollment into a membership program; and (2) those practices that occurred after the Plaintiffs discovered their enrollment. The first group is comprised of the sharing of confidential billing information via datapass and through the nondisclosure of the negative option billing practice. The second group is composed of the marketing or sales tactics alleged to be used in the refund mitigation strategy. The Court must determine the latest possible date of the deceptive practices and start calculating the limitation period from those points. Assuming that the first group was not already dismissed for insufficient pleading, the first group of alleged unfair or fraudulent business practices was completed, at the latest, by the time the first or second membership fee was posted. Plaintiff Reilly alleged that the membership fee charges began shortly after May 2007; Plaintiff Restrepo alleged that the membership fee charges began on May 9, 2007; Plaintiff Warfel alleged that the membership fee charges began shortly after December 2004; and Plaintiff Williams alleged that the membership fee charges began shortly after May 26, 2009. CAC ¶¶ 27, 28, 33, 34. The first complaint for Plaintiff Reilly was dated March 2012, for Plaintiff Restrepo it was dated July 13, 2011, for Plaintiff Warfel it was dated August 4, 2011, and for Plaintiff Williams it was dated September 2012. [Dkt. 250, Defendants’ Reply Memorandum in Support of their Motion to Dismiss Plaintiffs’ Consolidated Amended Complaint or, in the Alternative, to Strike Portions of the Complaint, p. 26-27, hereinafter “Reply”]. All of these complaints were filed more than three years after the alleged violations of CUTPA from the first group of practices. Therefore, these claims would be untimely.
However, it is undisputed that the refund mitigation strategy began only after the Plaintiffs discovered the charges and called Trilegiant either to cancel their membership or to request a refund. The Plaintiffs allege that they only discovered the charges and contacted Trilegiant within three years of filing their CUTPA claims. Those claims, therefore, are timely.
The Plaintiffs ask this Court to find that the continued injury of monthly membership fees tolls the statute of limitations, or, in the alternative, that they can recover for damages that occurred within the three year statute of limitations period. The Plaintiffs have failed, however, to allege sufficiently how charging a recurring monthly membership fee that is clearly listed on credit card statements or other banking information violates CUTPA. Moreover, these actions only constitute, at most, a repeating injury, not a recurring violation. The Plaintiffs rely on Broadway Theatre Corp. v. Buena Vista Pictures Distrib., to argue that their recurring injury should toll the statute of limitations. In Broadway Theatre Corp., the court found that the repeated issuances of exclusive distribution licenses tó a movie theater created new and independent injuries because each license was a violation of CUT-PA. Broadway Theatre Corp. v. Buena Vista Pictures Distrib., No. 3:00cv706(SR.),
The Plaintiffs next argue that the Defendants have engaged in fraudulent concealment, thus tolling the statute of limitations. Under the doctrine of fraudulent concealment “equitable tolling of the statute of limitations is permitted until the fraud or concealment is, or should have been, discovered by a reasonable person in the situation.” Thompson v. Accent Capital, No. 3:11 CV00069(AWT),
Finally, the Plaintiffs assert that the statute of limitations should be tolled under the continuing course of conduct doctrine. Even though the Connecticut Supreme Court has yet to provide clear guidance on this issue, the Court need not decide in these circumstances if the doctrine would toll the statute of limitations. Flannery v. Singer Asset Finance Co., LLC,
In Phelan ex rel. Estate of Phelan v. Daimler Chrysler Corp., the court held that the continuing course of conduct doctrine does not apply in a vendor-vendee relationship if the plaintiff does not allege a continued pattern of deceitful conduct after the initial fraud because a vendor is under no legal obligation to disclose his initial deceitful conduct. Phelan ex rel. Estate of Phelan,
The Plaintiffs do allege, however, that when contacting Trilegiant, they experienced refund mitigation tactics, which may have resulted in a new CUTPA violation. This later fraudulent or unfair act or acts is not sufficiently tied to concealment of the initial fraud to constitute a continuing course of conduct or serve as a basis for fraudulent concealment, given that the recurring charges were repeatedly disclosed to the Plaintiffs in the form of their bank statements. Since this Court has not characterized the refund mitigation strategy as being part of the same fraudulent or unfair scheme that resulted in the membership enrollment, but rather a second potential set of CUTPA violations, the Court separates these claims for statute of limitations purposes. For that reason, damages related to the initial fraudulent inducement which occurred more than three years before the Complaint was filed would be time-barred, but those claims stemming from the potentially unfair or deceptive refund mitigation strategy tactics are timely.
For the foregoing reasons, Defendants’ motion to dismiss the CUTPA claims as to plaintiffs Reilly, Restrepo, Warfel and Williams is DENIED as to claims stemming from the refund mitigation practices, but GRANTED as to all other claims.
e. Other States’ Consumer Protection Statutes
The Defendants also move to dismiss or strike footnote 18 of the Complaint because it merely lists several other states’ consumer protection statutes without explaining how those statutes relate to the Defendants’ alleged conduct in this case. MTD p. 33, n. 13. In response, the Plaintiffs only allege that they are able to maintain causes of action under the various statutes in a class action proceeding, but they do not contest that they have only listed the statutes without explaining how they relate to the Defendants’ conduct. Opp. p. 104.
“Plaintiffs cannot use class actions to escape pleading requirements.” In re Bayer Corp. Combination Aspirin Prods. Mktg. & Sales Practices Litig.,
Here, the Plaintiffs have not incorporated any of the other state consumer pro
f. Claims for Violations of the Automatic Renewal Statute, California Business and Professional Code § 17602
The Trilegiant and E-Merehant Defendants allege that the Plaintiffs’ cause of action under the Automatic Renewal Statute must be dismissed for several reasons: (1) the Plaintiffs do not allege any facts as to how the Defendants violated the automatic renewal provision; (2) the statute only applies to offers made to consumers in California; and (3) the claims of the Plaintiffs who do reside in California are not timely because the law at issue only went into effect on December 1, 2010. MTD p. 36-37. The Plaintiffs respond that (1) they have alleged sufficient facts to show that automatic renewals were made in violation of the statute; (2) that the statute covers all consumers regardless of location; and (3) that no initial orders prior to the statute’s enactment were completed because the Plaintiffs never knowingly formed a contract with any of the Defendants related to the membership programs. The Plaintiffs have sufficiently pled a violation of the statute, but the statute only prohibited conduct which occurred after December 1, 2010 directed towards customers in California.
The Automatic Renewal Statute makes it
unlawful for any business making an automatic renewal or continuous service offer to a consumer in this state to do any of the following: (1) Fail to present the automatic renewal offer terms or continuous service offer terms in a clear and conspicuous manner ... (2) Charge the consumer’s credit or debit card or the consumer’s account with a third party for an automatic renewal or continuous service without first obtaining the consumer’s affirmative consent to the agreement ... or (3) Fail to provide an acknowledgement that includes the automatic renewal or continuous service offer terms, cancellation policy, and information regarding how to cancel....
Cal. Bus. & Prof.Code § 17602(a) (emphasis added). The requirements of this statute “apply only prior to the completion of the initial order for the automatic renewal or continuous service,” with limited exceptions. Id. At § 17602(d). In short, the section “prohibits a business from” “(a) failing to present the terms of the offer in a clear and conspicuous manner, (b) charging the consumer’s account without first obtaining affirmative consent, and (c) failing to provide an acknowledgment of the consumer’s enrollment in the offer.” Fields v. Wise Media, LLC, 12-cv-05160(WHA),
i. Sufficiency of Pleadings
The Plaintiffs have alleged that the Defendants were involved in enrolling and charging the Plaintiffs for membership
ii. Location of Injured Party
The Defendants next claim that the statute only protects individuals who were injured in California. Inexplicitly the Plaintiffs disagree. Section 17602(a) states that it “shall be unlawful for any business making an automatic renewal or continuous service offer to a consumer in this state,” meaning California. The only other court to have had occasion to address this issue found that the text of the statute clearly creates a cause of action only for consumers that are residents of or were harmed in California. See Noll v. eBay Inc., 11-cv-0485(EJD),
We agree that the Automatic Renewal Statute only provides a private cause of action for customers who are harmed in California. Any holding to the contrary would clearly abrogate the statute’s plain text and could have serious constitutional implications. See Reply, p. 21, n. 17. Therefore, the claims arising under the Automatic Renewal Statute from the Plaintiffs who were harmed outside of California are DISMISSED.
iii. Date of Injury
The Defendants claim that the statute only protects consumers who were harmed after December 1, 2010. MTD p. 36. The Plaintiffs argue that they were harmed after December 1, 2010 because they did not consent to an “initial order” prior to that date. Opp. p. 128-30. Furthermore, they assert that the recurring credit card or debit account charges after December 1, 2010 cause the claims to be actionable. Id.
The California legislature stated that “[t]his article shall become operative on December 1, 2010.” 2009 Cal. Leg Serv. Ch. 350 (S.B.340) (WEST) § 1; Cal. Bus. & Prof.Code § 17606. The default rule of statutory construction is that statutes apply prospectively unless the legislature has manifested a clear intent to the contrary. See Landgraf v. USI Film Prods.,
Contrary to both the Plaintiffs’ and Defendants’ arguments, section 17602(d) has no bearing on when the statute became effective; it only dictates when the companies offering the automatic renewal must comply with the statute’s requirements. After the initial order is complete, the company is not required to continue making the necessary disclosures except as provided by the statute. Considering the statute’s affirmative obligations, to state a cause of action under this statute, a plaintiff must allege that he or she was enrolled in a membership program without being adequately notified of the automatic renewal provision after December 1, 2010. Since all of the Plaintiffs allege becoming Trilegiant members before that date, the claims under this statute are not cognizable. CAC at ¶¶ 24-84.
The Plaintiffs’ argument that their continued injury in the form of monthly membership dues tolled the statute of limitations for this action is inapplicable. Because the statute was not in effect at the time the alleged violation occurred, there was no cause of action to toll. Further, because the Court views the Plaintiffs as having no cause of action under the Automatic Renewal Statute, it does not decide whether continued injury tolls the relevant statute of limitations.
Defendants’ motion to dismiss the Automatic Renewal Statute claims is GRANTED.
g. Claims for Unjust Enrichment
The Defendants move to dismiss the Plaintiffs’ unjust enrichment claim because the Plaintiffs have not “plausibly pleaded any conduct that is ‘fraudulent, deceptive [or] wrongful,’” and because “the CAC does not allege that Plaintiffs conferred any benefit on any Defendant except the Trilegiant Defendants.” MTD p. 37-38. The Plaintiffs reply that they have pled with sufficient detail the unjust nature of the Defendants’ actions and have alleged how each group of Defendants has received some benefit from the unjust, fraudulent, or otherwise wrongful conduct. Opp. p. 130-132.
Under Connecticut law, unjust enrichment is a “broad and flexible remedy,” and plaintiffs seeking recovery under this theory “must prove (1) that the defendants were benefited, (2) that the defendants unjustly did not pay the plaintiffs for the benefits, and (3) that the failure of payment was to the plaintiffs’ detriment.” Vertex, Inc. v. City of Waterbury,
Under the liberal construction of the pleadings doctrine at the motion to dismiss stage, the Court finds that the Plaintiffs have sufficiently pled their unjust enrichment claim as to the Trilegiant and E-Merchant Defendants.
The alleged fraudulent, deceptive, or unfair business practices of the Defеndants have been discussed at length, and do not require much repetition here. In short, the Plaintiffs have alleged that the Defendants tricked them into enrolling into a membership program, and then would automatically charge them recurring membership fees; when the Plaintiffs finally discovered that they were being charged, the Defendants would make it incredibly difficult for them to obtain a refund. CAC at ¶¶ 24-35, 71-82. As part of the refund mitigation strategy, the E-Merchant Defendants were heavily involved in organizing and implementing the tactics. CAC at ¶¶8, 133. The Plaintiffs further allege that as part of this process, Trilegiant paid the E-Merchant Defendants signing bonuses and “sizeable percentage[s]” of each dollar collected from the E-Merchant’s customers. CAC at ¶¶ 5, 6, 104, 119-133. These allegations are sufficient under Rule 8(a) to sustain a claim for unjust enrichment against the Trilegiant and E-Merchant Defendants. See Keaney v. Eastern Computer Exch., Inc., No. 03-cv1893(RNC),
However, the Plaintiffs have failed to allege sufficiently how the Credit Card Defendants were involved in the scheme or were unjustly enriched. Indeed, the Plaintiffs admitted that “Trilegiant and Affinion conduct legitimate business of selling the Membership Programs through lawful means.” CAC at ¶ 154. They then accuse the Credit Card Defendants of furthering the scheme by not refusing to process Trilegiant membership charges. The Plaintiffs fail to allege, however, how the Credit Card Defendants could have known what members were willing participants in Trilegiant’s membership programs and which members felt that they were fraudulently enrolled. The Plaintiffs’ conclusory allegations that the numerous Credit Card Defendants knew that the charges were fraudulent because they had some type of unidentified anti-fraud program and they collectively received thousands of complaints by Trilegiant customers, without any indication of the order of magnitude of the complaints, are not sufficient.
Moreover, the Plaintiffs’ conclusion that the Credit Card Defendants reviewed Trilegiant call-center scripts and participated in calls with customers seeking a refund does nothing more than explain that the Credit Card Defendants were taking their customer complaints seriously. CAC at ¶ 11(b). Furthermore, unlike the E-Merchant Defendants who received substantial bounties directly tied to every dollar that Trilegiant made, the Plaintiffs only allege that the Credit Card Defendants engaged in the ordinary course of business by pro
For the foregoing reasons, the Defendants’ motion to dismiss the Plaintiffs’ unjust enrichment claims is DENIED as to the Trilegiant and E-Merchant Defendants and GRANTED as to the Credit Card Defendants.
h. The Pederson Class Action Settlement
The Defendants argue that Plaintiffs Reilly, Restrepo, Brian Schnabel, and Warfel should be barred from bringing claims against the Defendants because they were included in a prior class action settlement in which they specifically released all claims against the Defendants for the activity alleged in this Complaint. MTD p. 38-42. The Plaintiffs respond by stating that they were not included in the prior class because their injuries extended outside of the prior class’s temporal definition. Opp. 134. The Court disagrees with the Plaintiffs and finds that the Plaintiffs are barred from bringing their current claims because of the prior class action settlement.
At the outset, a court may “judicially notice prior pleadings, orders, judgments, and other items appearing in the court records of prior litigation that are related to the case before the Court.” Patrowicz v. Transamerica HomeFirst, Inc.,
The definition of the Settlement Class in the Pederson litigation is incredibly broad, and includes “[a]ll persons and entities who had unsolicited or unauthorized charges for Trilegiant products posted to their credit card, debit card, phone, bank, mortgage, or other billing accounts by Trilegiant or a Marketing Partner and who paid Trilegiant for those products at any time from July 10,1998, until February 15, 2008.” See Exhibit 4 to MTD, Pederson v. Trilegiant, No. 01-L-1126,
The Class members agreed to release all claims against Trilegiant and other “released persons,” which includes the E-Marketing Defendants and the Credit Card Defendants here, arising from “the marketing, sale and/or purchase of a Product or the provision of a Product by the released Persons, whether known or un
The Plaintiffs do not allege, nor could they, that the matters at issue in this Complaint are not barred by the prior settlement. Since the Plaintiffs named above are members of that former class, their claims must be dismissed.
The Plaintiffs hint at, but fail to argue, a possibly compelling due process argument related to the notice that the Pederson class members received or, more appropriately, failed to receive. See Hecht v. United Collection Bureau, Inc.,
The Defendants’ motion to dismiss the claims of Plaintiffs Reilly, Restrepo, Brian Schnabel, and Warfel as being barred by the prior settlement agreement is GRANTED.
i. Motion to Strike the Allegations Regarding Previous Investigations and Attorneys General Settlements
The Defendants move to strike the Plaintiffs’ allegations regarding the Senate Report and settlements between the Trilegiant Defendants and state attorneys general because these allegations are immaterial to the case at hand. MTD, p. 42, 43. The Defendants argue that since the Plaintiffs are only using these past reports and agreements to prove further the Defendants’ liability in the present matter or to show liability in prior proceedings, the allegations violate the federal rules of evidence, and, therefore, will be inadmissible at trial. Id. The Plaintiffs respond by stating that they are not using the Senate Report or the settlement agreements to prove liability in the present matter, but for other purposes permitted under the federal rules of evidence, such as to prove the Defendants’ knowledge, motive, or notice. Opp. p. 136. These allegations are immaterial to the present proceeding and have no purpose remaining in the Complaint.
In “deciding whether to strike a Rule 12(f) motion on the ground that the matter is impertinent and immaterial, it is settled that the motion will be denied, unless it can be shown that no evidence in support of the allegation would be admissible.” Lipsky v. Commonwealth United Corp.,
Initially, it is unclear to the Court how the prior settlement with the attorneys general is relevant to the present matter. In that case, the resolution, as the Plaintiffs describe it, was that “Trilegiant was enjoined from directly marketing its Membership Programs through mail solicitations without making certain changes to its practice.” CAC at ¶ 6 (emphasis added). The Plaintiffs also admitted that after that settlement, Trilegiant “mutated its business practices into their current form.” CAC at ¶ 17 (emphasis added). Furthermore, only Trilegiant and Chase were parties to those prior settlements. Clearly, the Plaintiffs are not attempting to show that the past conduct is the same conduct at issue in this case. Therefore, this Court does not find the discussion of those prior settlements as material to the present Complaint.
On the other hand, the Senate Report seems to discuss nearly identical commercial behavior that the Plaintiffs allege gives rise to their causes of action here. The Report concluded “that the E-Merchant Defendants engaged in deceptive conduct and violated credit card company rules by automatically transferring customer’s credit card information to Trilegiant.” CAC at ¶ 16. However, the Plaintiffs do not provide much detail explaining why the Senate reached this conclusion. Even so, it appears that the investigation’s conclusions were not derived from the adversarial process, but from a one-sided factual inquiry. While these reports are important for future legislation, they should have no bearing on a Defendant’s liability before a Court of law. Moreover, the excerpts that the Plaintiffs provide in the pleadings do not define Trilegiant’s marketing or banking partners. So, it does not appear that the Plaintiffs intend to use the report to show knowledge or notice. The only purpose that the Court can draw from the inclusion of these allegations in the Complaint is to show proof of the Defendants’ liability either for past activities of prior bad acts or for activities identical to the claims alleged here.
Since the purpose of the pleadings is to put the Defendants on notice as to how they violated the necessary elements of the causes of action stated by the Plaintiffs and because facts related to unadjudicated investigations or settlements are not permitted to prove liability, the Senate Report and the séttlement by the states’ attorneys general are immaterial and impertinent to the present action. If they are to be used at trial, the Plaintiffs may present the evidence later and the Defendants will have an opportunity to object to their admissibility. However, as a matter of pleading, the allegations do not further the Plaintiffs’ stated causes of action, and should be stricken from the pleadings.
For the foregoing reasons, the Defendants’ motion to strike is GRANTED.
•V. Conclusion
For the foregoing reasons, the Defendants’ [Dkt. 189] Motion to Dismiss Plain
• The Plaintiffs’ substantive RICO claims against all Defendants are DISMISSED;
• The Plaintiffs conspiracy to violate RICO claims against all Defendants are DISMISSED;
• The Plaintiffs’ claims for violations of the California Automatic Renewal Statute against the Trilegiant and E-Merchant Defendants are DISMISSED;
• The claims by Plaintiffs Reilly, Res-trepo, Brian Schnabel, and Warfel against all Defendants are DISMISSED;
• The Defendants’ motion to strike the Plaintiffs’ CUTPA class action allegations is GRANTED;
• The Defendants’ motion to Dismiss footnote 18 of the Complaint is GRANTED;
• The Defendants’ motion to strike references to the Senate Report and prior settlement with the states’ attorneys general is GRANTED.
However, a few claims remain extant:
• The Defendants’ motion to dismiss the Plaintiffs’ claims for CUTPA violations stemming from the refund mitigation strategy against the Trile-giant and E-Merchant Defendants is DENIED, but as to all other alleged CUTPA violations it is GRANTED;
• The Defendants’ motion to dismiss the Plaintiffs’ claims for unjust enrichment against the Trilegiant and E-Merchant Defendants is DENIED, but the motion to dismiss claims for unjust enrichment against the Credit Card Defendants is GRANTED;
• The Defendants’ motion to dismiss the Plaintiffs’ ECPA claims against Trilegiant, Affinion, and the E-Merchant Defendants brought by Plaintiffs Kelm, Pham, Reilly, Restrepo, Brian Schnabel, Warfel, and Williams is GRANTED, but the Defendants’ motion to dismiss the ECPA claims against Trilegiant, Af-finion, and the E-Merchant Defendants brought by Plaintiffs DiCarol-is, Edward and Lucy Schnabel, Sumlin, and Timmcke is DENIED.
IT IS SO ORDERED.
Notes
. The Plaintiffs do not make similar allegations for the agreements between Trilegiant and the Credit Card Defendants.
. The Plaintiffs are correct that they do not need to allege a formal agrеement to allege sufficiently an enterprise under RICO, but they must allege some type of informal cooperation or expectations of reciprocity to show that one enterprise exists. Opp. p. 13-14.
. The Plaintiffs also allege that as part of the fraudulent RICO scheme, the Credit Card Defendants sent "[thousands of electronic or mail transmissions of credit or debit card statements to Plaintiffs and Class Members [that] contain the fraudulent charges.” CAC at ¶ 160(h). The Court is puzzled as to how these communications furthered the fraudulent scheme because they would have revealed, as they eventually did, not concealed the charges. See Lundy,
. The Plaintiffs rely on United States v. Wars-hak to support their claim that they have sufficiently pled the requisite particularity for a RICO claim. Opp. p. 33. In Warshak, the court confirmed a RICO criminal conviction for mail fraud when the defendants charged the plaintiffs for online purchases without informing the plaintiffs "during the ordering process that they would be charged for anything beyond the shipping-and-handling costs associated with the trial offer.” United States v. Warshak,
. Even though the Plaintiffs may have sufficiently pled the Defendants’ fraudulent intent to commit two predicate acts, the Court does not need to engage in this inquiry because the Plaintiffs have failed to allege sufficiently a pattern of racketeering activity to sustain a motion to dismiss.
. Even if the Plaintiffs are not required to allege an enterprise for a RICO conspiracy claim, they have not sufficiently alleged a pattern of racketeering activity or even an agreement to commit such acts. For those independent reasons, the Complaint is insufficient. See United States v. Applins,
. Since the Defendants’ motion to dismiss was granted, the motion to strike is moot, and the Court need not decide if it is appropriate to strike that portion of the Complaint.