Licea v. Cinmar, LLC

659 F.Supp.3d 1096

Jose LICEA et al. v. CINMAR, LLC

Case No. CV 22-6454-MWF (JEM)

United States District Court, C.D. California

Filed March 7, 2023

Scott J. Ferrell, Victoria C. Knowles, Pacific Trial Attorneys APC, Newport Beach, CA, for Jose Licea et al.

Hillary A. Hamilton, Jason D. Russell, Skadden Arps Slate Meagher and Flom LLP, Los Angeles, CA, James Young Pak, Skadden Arps Slate Meagher and Flom LLP, Palo Alto, CA, Meredith C. Slawe, Pro Hac Vice, Michael W. McTigue, Jr., Pro Hac Vice, Skadden Arps Slate Meagher and Flom LLP, New York, NY, for Cinmar, LLC.

Gabriela Gonzalez Araiza, Lehotsky Keller LLP, Washington, DC, for Amicus National Retail Federation.

P. Craig Cardon, Sheppard Mullin Richter and Hampton LLP, Los Angeles, CA, Alexandra Mansbach, Pro Hac Vice, Hyland Hunt, Pro Hac Vice, Deutsch Hunt PLLC, Washington, DC, for Amicus The Retail Litigation Center Inc.

Proceedings (In Chambers): ORDER GRANTING MOTION TO DISMISS CASE [26]

MICHAEL W. FITZGERALD, United States District Judge

Before the Court is Defendant Cinmar, LLC's Motion to Dismiss Case ("the Motion"), filed on December 19, 2022. (Docket No. 26). The National Retail Federation filed an Amicus Curiae Brief ("NRF Amicus Brief") in support of the Motion on December 27, 2022. (Docket No. 42). The Retail Litigation Center filed an Amicus Curiae Brief ("RLC Amicus Brief") in support of the Motion on December 27, 2022. (Docket No. 43). Plaintiffs Jose Licea and Sonya Valenzuela filed an Opposition on January 17, 2023. (Docket No. 49). Defendant filed a Reply on January 24, 2023. (Docket No. 50).

The Court read and considered the papers on the Motion and held a hearing on February 13, 2023.

The Court rules as follows:

• The Motion is GRANTED with leave to amend as to Plaintiffs' California Penal Code section 631 claim. Plaintiffs' claim under the first clause of section 631(a) fails because the first clause does not apply to communications made through the computer functions of a smart phone or a Wi-Fi-enabled laptop. Plaintiffs' claim under the second clause of section 631(a) fails because Plaintiffs' allegations suggest that Defendant is entitled to the party exemption and because Plaintiffs do not adequately allege that their conversations were intercepted in transit.

• The Motion is GRANTED without leave to amend as to Plaintiffs' California Penal Code section 632.7 claim. Plaintiffs' alleged communication through Defendant's website is not a communication over telephone technology covered by section 632.7.

• Defendant's Request for Judicial Notice and the RLC's Request for Judicial Notice are DENIED as moot as the Court did not rely on either in reaching its holding.

I. BACKGROUND

On September 9, 2022, Plaintiff Jose Licea filed a class action complaint on behalf of a putative statewide class, alleging violations the California Invasion of Privacy Act ("CIPA"). (Complaint (Docket No. 1) at 2). On November 28, 2022, Plaintiffs filed a First Amended Complaint ("FAC") alleging that Defendant secretly wiretaps the private conversations of everyone who communicates through the chat feature at www.frontgate.com ("the Website") and pays a third party to intercept and eavesdrop on such communications in real time in order to harvest data from those conversations. (FAC (Docket No. 19) at 2).

Plaintiffs allege that Defendant Cinmar, LLC is a Delaware corporation that owns, operates, and/or controls the Website. (FAC ¶ 5).

Plaintiffs are consumer privacy advocates with dual motivations for initiating conversations with Defendant. First, Plaintiffs alleged they are genuinely interested in learning more about the goods and services offered by Defendant. Second, Plaintiffs allege that they are "testers" who work to ensure that companies abide by the privacy obligations imposed by California law. (Id. ¶ 16).

Plaintiffs allege that Defendant "has paid substantial sums to at least one third party company to embed code into Defendant's website chat function that enables the third party to secretly intercept in real time, eavesdrop upon, and store transcripts of Defendant's chat communications with unsuspecting website visitors." (Id. ¶ 11). Plaintiff alleges that Defendant neither informs visitors of this conduct nor obtains their consent. (Id. ¶ 13).

Plaintiffs allege that they visited Defendant's Website using either a smart phone or a Wi-Fi-enabled laptop that uses a combination of cellular and landline telephony. (Id. ¶ 17). Plaintiffs allege that they had brief conversations with Defendant about Defendant's services and policies. (Id.). Plaintiffs allege that Defendant did not inform Plaintiffs, or any of the Class Members, that Defendant was secretly recording their communications or aiding, abetting, and paying third parties to eavesdrop on them. (Id. ¶ 18).

Plaintiffs seek relief on behalf of "All persons within California who within the statute of limitations period: (1) communicated with Defendant via the chat feature on Defendant's Website using cellular or landline telephony, and (2) whose communications were recorded and/or eavesdropped upon without prior consent." (Id. ¶20).

Plaintiffs assert two causes of action for violations of the California Invasion of Privacy Act ("CIPA") under California Penal Code sections 631 and 632.7. (Id. ¶¶ 26-37). Plaintiffs pray for relief in the form of class certification, declaratory relief, injunctive relief, statutory and punitive damages, prejudgment interest, and costs and attorneys' fees. (Id. at 8-9).

II. LEGAL STANDARD

In ruling on a motion under Rule 12(b)(6), the Court follows Bell Atlantic v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009), and their Ninth Circuit progeny.

"Dismissal under Rule 12(b)(6) is proper when the complaint either (1) lacks a cognizable legal theory or (2) fails to allege sufficient facts to support a cognizable legal theory." Somers v. Apple, Inc., 729 F.3d 953, 959 (9th Cir. 2013). "To survive a motion to dismiss, a complaint must contain sufficient factual matter . . . to 'state a claim for relief that is plausible on its face.' " Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (quoting Twombly, 550 U.S. at 570, 127 S.Ct. 1955). The Court must disregard allegations that are legal conclusions, even when disguised as facts. See id. at 681, 129 S.Ct. 1937 ("It is the conclusory nature of respondent's allegations, rather than their extravagantly fanciful nature, that disentitles them to the presumption of truth."); Eclectic Props. E., LLC v. Marcus & Millichap Co., 751 F.3d 990, 996 (9th Cir. 2014). "Although 'a well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof is improbable,' plaintiffs must include sufficient 'factual enhancement' to cross 'the line between possibility and plausibility.' " Eclectic Props., 751 F.3d at 995 (quoting Twombly, 550 U.S. at 556-57, 127 S.Ct. 1955) (internal citations omitted).

The Court must then determine whether, based on the allegations that remain and all reasonable inferences that may be drawn therefrom, the complaint alleges a plausible claim for relief. See Iqbal, 556 U.S. at 679, 129 S.Ct. 1937; Cafasso, U.S. ex rel. v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047, 1054 (9th Cir. 2011). "Determining whether a complaint states a plausible claim for relief is 'a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.' " Ebner v. Fresh, Inc., 838 F.3d 958, 963 (9th Cir. 2016) (quoting Iqbal, 556 U.S. at 679, 129 S.Ct. 1937).

III. DISCUSSION

A. Standing

As an initial matter, a complaint must include "a short and plain statement of the grounds for the court's jurisdiction . . . ." Fed. R. Civ. P. 8(a)(1). "It is to be presumed that a cause lies outside [of federal courts'] limited jurisdiction, and the burden of establishing the contrary rests upon the party asserting jurisdiction." Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994) (citations omitted). Courts have an independent obligation to determine whether subject-matter jurisdiction exists, even in the absence of a challenge from any party. Arbaugh v. Y&H Corp., 546 U.S. 500, 514, 126 S.Ct. 1235, 163 L.Ed.2d 1097 (2006). "If the court determines at any time that it lacks subject-matter jurisdiction, the court must dismiss the action." Fed. R. Civ. P. 12(h)(3).

Article III of the Constitution requires courts to adjudicate only actual cases or controversies. U.S. Const. art. III, § 2, cl. 1. "A suit brought by a plaintiff without Article III standing is not a 'case or controversy,' and an Article III federal court therefore lacks subject matter jurisdiction over the suit." Cetacean Cmty. v. Bush, 386 F.3d 1169, 1174 (9th Cir. 2004). "Standing is determined by the facts that exist at the time the complaint is filed." Clark v. City of Lakewood, 259 F.3d 996, 1006 (9th Cir. 2001). In order to establish Article III standing, "a plaintiff must show (i) that he suffered an injury in fact that is concrete, particularized, and actual or imminent; (ii) that the injury was likely caused by the defendant; and (iii) that the injury would likely be redressed by judicial relief." TransUnion LLC v. Ramirez, — U.S. —, 141 S. Ct. 2190, 2203, 210 L.Ed.2d 568 (2021) (citing Lujan v. Defs. of Wildlife, 504 U.S. 555, 560-61, 112 S.Ct. 2130, 119 L.Ed.2d 351, (1992)). "[A] plaintiff must demonstrate standing separately for each form of relief sought." Friends of the Earth, Inc. v. Laidlaw Environ. Servs. (TOC), Inc., 528 U.S. 167, 185, 120 S.Ct. 693, 145 L.Ed.2d 610 (2000) (internal citations omitted).

1. Injury-in-fact

The National Retail Federation ("NRF") argues that Plaintiffs have failed to allege any injury sufficient to show Article III standing because they make no allegations as to any information exchanged through the website chat, including whether, how, and why that information was sensitive, or...