Castillo v. Costco Wholesale Corp.

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JESUS CASTILLO, MARK KNOWLES, ALEX RODRIGUEZ, NICHOLAS JAMES THROLSON, R.S., KIMBERLY SCOTT, ROBIN WARBEY, DANIEL SMITH, MATT GROVES, VERN DEOCHOA, TYRONE WASHINGTON, individually, and on behalf of those similarly situated, Plaintiffs, v. COSTCO WHOLESALE CORPORATION, a Washington corporation, Defendant.

No. 2:23-cv-01548-JHC

United States District Court, W.D. Washington, Seattle

November 14, 2024

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO DISMISS

John H.Chun United States District Judge

I Introduction

This matter comes before the Court on Defendant Costco Wholesale Corporation's Motion to Dismiss Under Rule 12(b)(6). Dkt. # 45. Plaintiffs Jesus Castillo, Mark Knowles, Alex Rodriguez, Nicholas James Throlson, R.S., Kimberly Scott Robin Warbey, Daniel Smith, Matt Groves, Vern DeOchoa, and Tyrone Washington, individually and on behalf of all others similarly situated, filed a consolidated complaint alleging that Costco installed third-party tracking technologies such as the Meta Pixel (Pixel) to use and disclose personal health data collected from Plaintiffs' interactions with Costco's pharmacy website. Dkt. # 29 (redacted) at 1-4, ¶¶ 1-8. Costco seeks dismissal under Federal Rule of Civil Procedure 12(b)(6), contending that Plaintiffs fail to state a claim upon which relief can be granted. Dkt. # 45. The Court has reviewed the materials filed in support of and in opposition to the motion, the rest of the case file, and the governing law. Being fully advised, the Court GRANTS in part and DENIES in part the motion. And the Court GRANTS Plaintiffs leave to file an amended complaint.

II Background

The Court takes as true the facts alleged in the consolidated complaint. See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Dkt. # 29. Costco is a multinational company that operates, among other services, a pharmacy. Id. at 2-3, ¶ 2. Costco encourages customers to use its pharmacy website to search for prescriptions and immunizations, order prescriptions, request refills of prescriptions, and search for health insurance. Id. Costco ensures customers that their interactions with its pharmacy website are secure and that it safeguards customers' personal health data. Id. But Plaintiffs allege that Costco does not disclose that it uses third-party tracking technologies to record and share customers' personal health data. Id. Costco installed the Pixel, among other tracking technologies, on its pharmacy website. Id. at 3, ¶ 3.

The Pixel tracks customers' interactions with Costco's pharmacy website. Id. at 3-4, ¶¶ 3-4. The Pixel can, for example, track what search terms a customer inputs or what options a customer selects by recording detailed URLs that are triggered each time a customer enters information. Id. at 26-34, ¶¶ 89-103. The data collected by the Pixel can be linked to a customer's identity through their personal Facebook account. Id. at 23-24, ¶¶ 78-81. If the customer does not have a personal Facebook account, their data can be stored and connected with the customer if they later decide to create an account. Id. The data of customers' interactions with Costco's pharmacy website are then transmitted to Meta Platforms Inc. (Meta), which aggregates the data and synthesizes it for advertising purposes. Id. at 26 ¶¶ 88-90. Costco installed the Pixel to increase profitability by leveraging Meta's targeted advertising services. Id. at 18, ¶¶ 57-59.

Plaintiffs searched for, ordered, or refilled prescriptions on Costco's website and, while doing so, generally remained logged into their personal Facebook accounts. Id. at 6-10, ¶¶ 1525. Some Plaintiffs later received targeted advertisements for specific prescriptions. Id. at 9-10, ¶ 25. Because Plaintiffs never consented to Costco's use of third-party tracking technologies to use or disclose their personal health data, id. at 5, ¶ 11, they claim, individually and on behalf of a putative nationwide class and California and Florida subclasses, that Costco violated these federal and state statutes: (1) the federal Wiretap Act, 18 U.S.C. § 2511(1); (2) the Washington Privacy Act (WPA), RCW Chapter 9.73.030 et seq.; (3) the Washington Consumer Protection Act (WCPA), RCW Chapter 19.86 et seq.; (4) the Washington Uniform Health Care Information Act (WUHCIA), RCW Chapter 70.02 et seq.; (5) the California Invasion of Privacy Act (CIPA), Cal. Pen. Code § 630, et seq. (on behalf of California subclass); (6) the California Confidentiality of Medical Information Act (CMIA), Cal. Civ. Code § 56, et seq. (on behalf of California subclass); and (7) the Florida Security of Communications Act (FSCA), Fla. Stat. Ann. § 934.10, et seq. (on behalf of Florida subclass). Plaintiffs also bring four common law claims individually and on behalf of the putative nationwide class: (1) invasion of privacy; (2) breach of implied contract; (3) conversion; and (4) unjust enrichment. Dkt. # 29 at 49-72, ¶¶ 153-287.

III Discussion

In reviewing a motion to dismiss under Rule 12(b)(6), the Court takes all well-pleaded factual allegations as true and determines whether the complaint “state[s] a claim to relief that is plausible on its face.” Iqbal 556 U.S. at 678 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. at 678. Although the Court draws all reasonable inferences in favor of Plaintiffs, the Court is not “required to accept as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences.” Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). The Court may grant leave to amend a dismissed claim when it is possible that the claim can be cured with additional factual allegations. Ebner v. Fresh, Inc., 838 F.3d 958, 963 (9th Cir. 2016).

A. Choice of Law

Costco contends that the CIPA, CMIA, and FSCA claims should be dismissed because Washington law governs under a choice-of-law provision and Washington's choice-of-law rules. Because Plaintiffs do not explain how discovery would yield specific facts that would meaningfully aid the choice-of-law analysis, the Court declines to defer the choice-of-law analysis of the state statutory claims to the class-certification stage. Dkt. # 49 at 11-12; see Heinz v. Amazon.com Inc., 2024 WL 2091108, at *3 (W.D. Wash. May 8, 2024). For the reasons below, the Court concludes that Washington law does not exclusively govern Plaintiffs' state statutory claims. The Court does not engage with choice of law as to Plaintiffs' common law claims because the parties agree to defer such analysis. See Dkt. ## 45 at 29-30 n.2; 49 at 11 (“[T]he only claims Plaintiffs bring based on non-Washington law are statutory claims.”).

1. Choice-of-Law Provision

Costco says that a choice-of-law provision in Section Q of Costco's website's terms and conditions subjects all claims arising out of use of Costco's website to Washington law. Dkt. ## 45 at 15-17; 46-2 at 8. But Costco conflates a choice-of-law provision with a forumselection clause. Section Q, titled “Applicable Law, Venue and Limitation of Actions,” first provides a choice-of-law provision stating, “These Site Terms shall be governed by and construed in accordance with the laws of the State of Washington applicable to agreements made and entirely to be performed within Washington, without resort to its conflict of law provisions.” Dkt. # 46-2 at 8 (emphasis added). This choice-of-law provision provides only that Washington law governs interpretation of the terms and conditions; it does not provide that Washington law governs all disputes arising out of use of Costco's website. Cf. Garner v. Amazon.com, Inc., 603 F.Supp.3d 985, 994 (W.D. Wash. 2022) (holding that Washington law governed a dispute in which a choice-of-law provision stated that Washington law “will govern these Conditions of Use and any dispute of any sort that might arise between you and Amazon”) (emphasis added). The “arising out of” language in the second part of Section Q pertains to a forum-selection clause that does not bear on what law applies to Plaintiffs' state statutory claims.^[1]

2. Washington's Choice-of-Law Rules

Plaintiffs' CIPA, CMIA, and FSCA claims cannot be dismissed under Washington's choice-of-law rules. Knapke v. PeopleConnect, Inc., 38 F.4th 824, 832 (9th Cir. 2022) (“District courts sitting in diversity apply the choice-of-law rules of the forum state.”). Washington applies the “most significant relationship” test under Restatement (Second) of Conflict of Laws (Restatement) § 145 (1971). FutureSelect Portfolio Mgmt., Inc. v. Tremont Grp. Holdings, Inc., 331 P.3d 29, 36 (Wash. 2014). If there is no actual conflict between the law of Washington and the law of another state, then Washington law applies. See id. If there is an actual conflict, Restatement § 145 requires examining contacts to determine the state that has the “most significant relationship” to the disputed issue.

There is an actual conflict between the WPA and the CIPA, CMIA, and FSCA. In contending that there is no conflict, Costco relies solely on Garner, in which the plaintiffs brought claims under various states' wiretap statutes alleging that Amazon's Alexa devices surreptitiously recorded stored, and transmitted their communications. 603 F.Supp.3d at 991; dkt. ## 45 at 15-17, 50 at 12-13. There, the parties agreed that there is no conflict between the WPA, CIPA, and FSCA. 603 F.Supp.3d at 995. But courts have recognized that there are “material differences” between the wiretap statutes of each state. Doe v. Kaiser Found. Health Plan, Inc., 2024 WL 1589982, at *12-13 (N.D. Cal. Apr. 11, 2024)...