In re Litig..

737 F.Supp.2d 1159

In re EASYSAVER REWARDS LITIGATION.

Case No. 09-CV-2094-MMA (BLM).

United States District Court, S.D. California.

Aug. 13, 2010.

Jennie Lee Anderson, Lori Erin Andrus, Jennie Lee Anderson, Andrus Anderson LLP, San Francisco, CA, Bruce W. Steckler, Mazin A. Sbaiti, Melissa K. Hutts, Baron & Budd PC, Dallas, TX, J. Burton Leblanc, IV, Baron & Budd PC, Baton Rouge, LA, James R. Patterson, Alisa Ann Martin, Harrison Patterson O'Connor & Kinkead LLP, Isam C. Khoury, Kimberly Dawn Neilson, Michael D. Singer, Cohelan Khoury & Singer, San Diego, CA, Gene J. Stonebarger, Stonebarger Law, APC, Folsom, CA, for Plaintiffs.

Michael G. Rhodes, Michelle C. Doolin, Leo P. Norton, Cooley Godward Kronish, Ethan Thomas Boyer, Michael L. Kirby, Kirby Noonan Lance and Hoge, San Diego, CA, Myron M. Cherry, Jacie C. Zolna, Myron M. Cheery & Associates, LLC, Chicago, IL, for Defendants.

ORDER:

GRANTING IN PART AND DENYING IN PART DEFENDANT PROVIDE COMMERCE'S MOTION TO DISMISS

DENYING DEFENDANT ENCORE MARKETING INTERNATIONAL'S MOTION TO DISMISS

GRANTING PLAINTIFFS' MOTION TO STRIKE

MICHAEL M. ANELLO, District Judge.

Before the Court are separate motions to dismiss by the two Defendants in this class action consumer rights case. The Court submitted the motions on the written briefs. Local Civ. R. 7.1(d)(1). For the reasons stated below, the Court DENIES the motion to dismiss by Defendant EMI, and GRANTS IN PART hand DENIES IN PART the motion by Defendant Provide.

I. Factual Allegations in Consolidated Complaint

The Consolidated Complaint alleges that Defendant Provide-Commerce, Inc. (hereinafter "Provide" or "Provide-Commerce") operates several internet businesses, including ProFlowers.com. Customers order fresh flowers, bouquets, and plants on the ProFlowers' website and pay for the purchase with a credit or debit card.¹ The four named Plaintiffs are Josue Romero, Deanna Hunt, Kimberly Kenyon, and Gina Bailey. Each consumer purchased flowers on Provide's website between February and September 2009 with a credit or debit card.

Plaintiffs allege that Provide, as a part of its "revenue generating efforts ... routinely and fraudulently transmits its consumers' credit card, debit card and/or PayPal information ("Private Payment Information") to its third party marketing partners." Compl. ¶ 1. Plaintiffs name Defendant Regent Group, Inc. doing business as Encore Marketing International (hereinafter "EMI" or "Encore") as Provide's marketing partner. Plaintiffs allege EMI "fraudulently charge[s] the cards or accounts without permission under the guise that" Provide's customers have "supposedly joined a savings program known as EASYSAVER Rewards, which Encoremanages on Provide-Commerce's behalf." Id. "[T]he EASYSAVER Rewards program does not provide the promised savings, benefits products or services and is nothing more than a sham." Id.

Plaintiffs allege that Provide leads customers to believe they will receive a complimentary $15.00 gift code to use on their next flower order as a thank you gift. After Plaintiffs completed the purchase of flowers on Provide's website by providing their personal and payment information, "a window popped up that thanked Plaintiffs and Class Members for their order and offered a gift code for $15.00 off their next purchase at ProFlowers. The window also contained a link for Plaintiffs and Class Members to click on to claim the gift code." Id. ¶ 19. Plaintiffs contend the pop-up window is part of an intentionally misleading and deceptive scheme, jointly orchestrated by Provide and EMI.

"When customers try to obtain their 'gifts,' they are directed to a webpage operated by Encore." Id. ¶ 2. Plaintiffs quote the webpage, in all capital letters, as stating: "CLAIM YOUR GIFT CODE BELOW! JUST ENTER YOUR E-MAIL ADDRESS AND ZIP CODE AS YOUR ELECTRONIC SIGNATURE AND CLICK THE GREEN ACCEPTANCE BUTTON BELOW TO ACTIVATE YOUR EASYSAVER REWARDS MEMBERSHIP AS DESCRIBED IN THE OFFER DETAILS ON THIS PAGE." Id.

Each named Plaintiff had a slightly different experience.² Plaintiffs Romero and Kenyon allege that they closed the pop-up window by clicking the "X" on the top right corner without entering their e-mail address and without clicking the acceptance button. Id. ¶ 20 & 23. Plaintiff Bailey does not remember the pop-up window, but alleges that "it is her general practice to always close pop-ups." Id. ¶ 25. By contrast, Plaintiff Hunt responded to the pop-up window by entering her e-mail address and clicking the acceptance button. Hunt, however, "did not even realize that she had been redirected away from ProFlowers' website to Encore's website due to the deceptive nature of EASYSAVER Rewards marketing scheme." Id. ¶¶ 28, 31. Rather, she believed the information was necessary to complete her ProFlowers transaction. All Plaintiffs state they did not want to join EASYSAVER Rewards, yet they were immediately charged an activation fee, and thirty days later, they were charged a monthly membership fee. Id. ¶¶ 20-30. These complaints are mirrored by numerous unidentified consumers who posted comments on the internet. Id. ¶ 36.

All Plaintiffs state they never received any correspondence from the EasySaver program let alone any benefits, savings, or rewards. Id. ¶¶ 21, 24, 26, 29.

Efforts to have the charges reversed were unsuccessful. For example, when Plaintiff Romero contacted ProFlowers, the representative "indicated she had been receiving numerous calls about unauthorized charges by Encore via the EASYSAVER Rewards Program." Id. ¶ 22. Plaintiff Bailey closed her bank account to stop the unauthorized charges. Id. ¶ 27.

Plaintiffs allege the marketing practice is deceptive because it "unwittingly" enrolls customers. The EasySaver Rewards offer does not refer to charges for membership,does not disclose that Provide will share the customer's financial information with EMI, and does not require the re-entry of that financial information. Id. ¶¶ 31-32.

The Complaint recites that a Senate Committee investigated similar marketing practices that abuse a consumer's trust in "familiar" websites. Id. ¶ 38. While the pop-up offer appears to be related to the online purchase, consumers unwittingly enter an ongoing financial relationship with an unfamiliar company. Id. The "misleading and confusing" tactic allows the retailer to automatically transfer the consumer's credit and debit card information without requiring the customer to re-enter that financial data on the unfamiliar website. Id.

Plaintiffs further allege that the "unconscionable terms" of the Offer Details include the consumers' consent to allow Provide to transmit their personal and payment information to EMI and to permit EMI to immediately bill a $1.95 activation charge and thereafter a monthly membership fee of $14.95. Id. ¶ 19. The Consolidated Complaint quotes the Offer Details as follows:

Activate your membership in EASYSAVER Rewards to claim your $15 Gift Code good for your next purchase and start saving and enjoying all the benefits and access for the next 30 days for just a $1.95 activation fee billed by EASYSAVER Rewards to the credit card or PayPal account you just entered during your ProFlowers purchase. Please note, by entering your e-mail address and zip code ("Enrollment Details") and clicking the Green Acceptance Button, your enrollment Details as well as the following information from your most recent ProFlowers order will be transmitted securely through PGP and SSI encryption to EMI, the EASYSAVER Rewards Administrator, to be stored and to secure and administer your membership: your name, credit card information or PayPal billing ID number, billing address, billing telephone number and order ID number. To continue after the introductory trial period, do nothing and all the great benefits and savings will automatically continue for just $14.95 per month, billed by EASYSAVER Rewards to the same credit card or PayPal account where applicable. You may cancel at anytime, with no further obligation, just by calling the toll-free number contained in the membership information provided to you. And, you keep the $15 Gift Code just for trying EASYSAVER Rewards for 30 days.

Id.

Plaintiffs allege that Provide's Privacy Policy claims it will not disclose customers' personal and payment information with EMI "absent customers completing Encore's signup page and affirmatively and knowingly agreeing to join the EASYSAVER Rewards program." Id. ¶ 34. "Provide-Commerce intentionally transferred Plaintiffs' Private Payment Information to Encore and/or permitted Encore to intercept the information without authorization." Id. ¶ 32.

The Consolidated Complaint contains fourteen causes of action on theories of contract, tort, and statutory liability. Provide is named in twelve claims and EMI is named in five. Plaintiffs allege that Provide and EMI engage in the unlawful conduct together (either by aiding and abetting, agency, joint venture, or conspiracy). Id. ¶¶ 14-16.

II. Standard of Review and Extrinsic Evidence

A. Pleading Standards on Motion to Dismiss

"Dismissal can be based on the lack of a cognizable legal theory or the absence ofsufficient facts alleged under a cognizable legal theory." Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir.1988). The pleading must contain "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).

"All allegations of material fact are taken as true and construed in the light most favorable to the nonmoving party." Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 338 (9th Cir.1996). The Court is not obligated to accept every conclusory allegation as true; rather, it "will examine whether conclusory allegations follow from the description of facts as alleged." Holden v. Hagopian, 978 F.2d 1115, 1121 (9th Cir.1992) (citation omitted).

When a complaint contains allegations of fraud, Rule 9(b) requires that the circumstances be...