Cullen v. Netflix, Inc.

880 F.Supp.2d 1017

Donald CULLEN, Plaintiff,

v.NETFLIX, INC., Defendant.

Case No. 5:11–cv–01199–EJD.

United States District Court,

N.D. California,

San Jose Division.

July 13, 2012.

Melanie Rae Persinger, Gregory Steven Weston, The Weston Firm, San Diego, CA, John Joseph Fitzgerald, IV, Santa Clara, CA, for Plaintiff.

Jacob Michael Harper, David Frank McDowell, Morrison & Foerster LLP, Los Angeles, CA, for Defendant.

ORDER GRANTING DEFENDANT'S MOTION TO DISMISS SECOND AMENDED COMPLAINT WITH LEAVE TO AMEND

EDWARD J. DAVILA, District Judge.

Presently before the court is Defendant Netflix, Inc.'s (“Netflix”) Motion to Dismiss the Second Amended Complaint (“SAC”) filed by Plaintiff Donald Cullen (“Cullen”), on behalf of himself and all others similarly situated. See Docket No. 31. Having fully reviewed the moving and responding papers, and the oral arguments of counsel presented at the hearing on January 6, 2012, Netflix's motion is GRANTED with leave to amend for the reasons described below.

I. FACTUAL AND PROCEDURAL BACKGROUND

The allegations contained in this section are taken largely from the SAC. Being a deaf individual, Cullen, like millions of hearing-impaired Americans, relies on closed captioning (or subtitles) to view video programs.¹ SAC, Docket No. 26, ¶¶ 4–5, 9. To ensure access to closed captioning programs, Congress enacted laws requiring video programming distributors and providers to caption their video programming. Id. ¶ 5.

Netflix is a provider of both on-demand streaming video programming over the internet and flat-rate online DVD–Video and Blu-ray Disc rental-by-mail. Id. ¶ 6. Customers of Netflix pay a monthly subscription fee, which differs based on options selected. Id. Netflix began providing streaming video programming in or about January 2008. Id. ¶ 16. Although Netflix has offered streaming video programming since 2008, currently, only a small portion of its library is subtitled. Id. ¶ 7. Cullen became a Netflix member in May 2009, initially subscribing to an “unlimited 3 DVD” plan because of the streaming library's lack of captioned content. Id. ¶¶ 33, 51.

In a June 12, 2009 blog entry posted on Netflix's website, Neil Hunt (“Hunt”), Netflix's Chief Product Officer, announced that “[c]aptioning is in our development plans,” and that Netflix would “expect to deliver subtitles or captions ... and roll the same technology out to each CE device as we are able to migrate the technology....” Id. ¶ 17, Ex. A. Four months later, on October 5, 2009, Netflix's Director of Communications, Catherine Fisher, reiterated Hunt's statement in a public communication with the advocacy group, the National Association of the Deaf, stating that Netflix “developers continue to work on closed captioning.” Id. ¶ 20, Ex. B. Over the next year, Netflix made similar statements, announcing in an April 15, 2010 blog entry that 100 titles had been captioned, that there was “much more to come,” ( id. ¶ 22, Ex. C), and in a November 22, 2010 “tweet” that Netflix “offers [closed captioning] on a growing [number] of titles,” that could be accessed from a number of devices. Id. ¶ 25, Ex. D. On February 24, 2011, Hunt represented that there were “more than 3,500 TV episodes and movies” with subtitles in Netflix's streaming library “representing about 30% of viewing.” Id. ¶ 27. Hunt also stated that “[m]ore subtitles are being added every week, and [Netflix] expect[s] to get to 80% viewing coverage by the end of 2011.” Id. ¶ 28, Ex. E.

Cullen alleges Netflix's statements “were designed to and did have the effect of conveying to Netflix's deaf and hard of hearing members that Netflix would meaningfully subtitle its streaming library within a reasonable period of time.” Id. ¶ 31. Cullen and the class members relied on these statements in purchasing or maintaining monthly Netflix subscriptions. Id. ¶ 32. In addition, the SAC further alleges that Netflix's failure to caption imposed on Cullen and putative class members a veritable “deaf tax” because the DVD-by-mail plans that gave them sufficient access to video programming were sold at a significant premium (up to $11.99) to Netflix's streaming subscription. Id. ¶¶ 41–49.

On March 11, 2011, Cullen filed a class action lawsuit in this court. See Docket No. 1.² Cullen filed his SAC on September 9, 2011. Plaintiff brings discrimination based claims on behalf of himself and similarly situated consumers under California's Unruh Civil Rights Act, Cal. Civ. Code §§ 51, et seq., (“Unruh Act”) and California's Disabled Persons Act, Cal. Civ. Code §§ 54, et seq., (“DPA”) for Netflix's failure to provide full and equal access to its services. SAC ¶¶ 103–112. In addition, Plaintiff brings consumer protection based claims under California's Unfair Competition Law, Cal. Bus. & Prof.Code §§ 17200, et seq., (“UCL”), False Advertising Law, Cal. Bus. & Prof.Code §§ 17500, et seq., (“FAL”), and Consumer Legal Remedies Act, Cal. Civ. Code §§ 1750, et seq., (“CLRA”) for Netflix's false promises, misrepresentations, and material omissions concerning the amount of subtitled content, the rate at which Netflix was adding subtitled content, and the date by which a substantial portion of its streaming library would be subtitled. Id. ¶¶ 72–102.

On October 5, 2011, Netflix filed this motion to dismiss. See Docket No. 31. On November 4, 2011, Cullen filed written opposition to the motion. See Docket No. 32. On November 18, 2011, Netflix filed its reply brief. See Docket No. 33. On January 5, 2012, with leave of court, Cullen filed his sur-reply brief. See Docket No. 40. On January 6, 2012, oral argument on the motion to dismiss was heard. On March 23, 2012, Cullen and Netflix filed a joint status report regarding the impact of the FCC regulations governing closed captioning of streaming video programming. See Docket No. 47. On June 19, 2012, Cullen filed a statement of recent decision. See Docket No. 48. On July 9, 2012, Netflix filed a statement of recent decision as well. See Docket No. 49.

II. LEGAL STANDARD

A complaint may be dismissed for failure to state a claim upon which relief may be granted if a plaintiff fails to proffer “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Allegations of material fact must be taken as true and construed in the light most favorable to the nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337–38 (9th Cir.1996). However, the court need not accept as true allegations that are conclusory, unwarranted deductions of fact, or unreasonable inferences. See Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir.2001); see also Twombly, 550 U.S. at 561, 127 S.Ct. 1955 (“a wholly conclusory statement of [a] claim” will not survive a motion to dismiss).

On a motion to dismiss, the court's review is limited to the face of the complaint and matters judicially noticeable. MGIC Indem. Corp. v. Weisman, 803 F.2d 500, 504 (9th Cir.1986); N. Star Int'l v. Ariz. Corp. Comm'n, 720 F.2d 578, 581 (9th Cir.1983). However, under the “incorporation by reference” doctrine, the court also may consider documents which are referenced extensively in the complaint and which are accepted by all parties as authentic. In re Silicon Graphics, Inc. Sec. Litig., 183 F.3d 970, 986 (9th Cir.1999).

Finally, although their claims arise under state law, Plaintiffs' allegations are subject to the Federal Rules of Civil Procedure. Kearns v. Ford Motor Co., 567 F.3d 1120, 1125 (9th Cir.2009) (quoting Vess v. Ciba—Geigy Corp. USA, 317 F.3d 1097, 1102 (9th Cir.2003)) (“[T]he Federal Rules of Civil Procedure apply in federal court, ‘irrespective of the source of the subject matter jurisdiction, and irrespective of whether the substantive law at issue is state or federal.’ ”). Specifically, allegations sounding in fraud are subject to the heightened pleading requirements of Fed.R.Civ.P. 9(b). See Vess, 317 F.3d at 1103–04 (if “the claim is said to be ‘grounded in fraud’ or to ‘sound in fraud,’ [then] the pleading of that claim as a whole must satisfy the particularity requirement of Rule 9(b).”); Kaplan v. Rose, 49 F.3d 1363, 1370 (9th Cir.1994) (claims based in fraud “must state precisely the time, place, and nature of the misleading statements, misrepresentations, and specific acts of fraud.”).

III. DISCUSSION

A. Discrimination Based Claims

Netflix argues that Cullen's discrimination based claims must be dismissed because (1) the FCC has primary jurisdiction over the critical issues; (2) the Unruh Act and DPA are preempted by the 21st CenturyAct; and (3) Cullen fails to plead facts sufficient to state a claim under the Unruh Act and the DPA. Because the court finds that Cullen's failure to state a claim is sufficient to dismiss these claims, it need not address Netflix's primary jurisdiction and preemption arguments at this time.

1. Violation of the Unruh Act and the DPA Based on the ADA

Netflix argues that Cullen's DPA claim and Unruh Act claim both fail because they rely on a violation of the Americans with Disabilities Act of 1990 (“ADA”), and Cullen cannot state a violation of the ADA because Netflix's streaming library is not a place of public accommodation. See Def. Netflix, Inc.'s Reply Supp. Mot. To Dismiss SAC at 9:3–4. Cullen argues that because Netflix's conduct of denying hearing-impaired individuals “full and equal access” to its streaming video library is a violation of the ADA, it is also a violation of the Unruh Act and the DPA. See Opp'n at 5:18–19.

A violation of the ADA is, by statutory definition, a violation of both the Unruh Act and the DPA. Cal. Civ. Code §§ 51(f), 54.1(d). Title III of the ADA prohibits discrimination in public accommodations. In order to prevail on a discrimination claim under Title III, a plaintiff must show that: “(1) he is disabled within the meaning of the ADA; (2) the defendant is a private entity that owns, leases, or...