Heskiaoff v. Sling Media, Inc.

• Court: Court of Appeals for the Second Circuit
• Decided: November 22, 2017
• Docket: 17-1094-cv
• Status: Unpublished

Opinion

17-1094-cv Heskiaoff v. Sling Media, Inc. UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

SUMMARY ORDER RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT=S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING TO A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.

At a stated term of the United States Court of Appeals for the Second Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 22nd day of November, two thousand seventeen.

PRESENT: DEBRA ANN LIVINGSTON, DENNY CHIN, Circuit Judges, JOHN G. KOELTL, District Judge.* _____________________________________

MICHAEL HESKIAOFF, Individually & on behalf of all others similarly situated, MARC LANGENOHL, Individually & on behalf of all others similarly situated,

Plaintiffs-Appellants,

RAFAEL MANN, on behalf of himself and all others similarly situated,

Consolidated Plaintiff-Appellant,

v. 17-1094-cv

SLING MEDIA, INC.,

Defendant-Appellee. ____________________________________

* Judge John G. Koeltl, of the United States District Court for the Southern District of New York, sitting by designation. For Plaintiffs-Appellants and Consolidated Plaintiff-Appellant: ROBERT I. LAX, Lax LLP, New York, New York (Adam Gonnelli, The Sultzer Law Group, P.C., Red Bank, New Jersey; Innessa Melamed Huot, Faruqi & Faruqi, LLP, New York, New York, on the brief).

For Defendant-Appellee: RICHARD R. PATCH (Susan K. Jamison, Katharine T. Van Dusen, Mark L. Hejinian, Coblentz Patch Duffy & Bass LLP, San Francisco, California; Leigh R. Lasky, Lasky, LLC, Chicago, Illinois, on the brief).

Appeal from a judgment of the United States District Court for the Southern District of

New York (Daniels, J.).

UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND

DECREED that the judgment of the district court is AFFIRMED.

Plaintiffs-Appellants Michael Heskiaoff, Marc Langenohl, and Consolidated Plaintiff

Appellant Rafael Mann (“Plaintiffs”), appeal from a March 22, 2017 judgment of the United States

District Court for the Southern District of New York granting Defendant-Appellee Sling Media,

Inc.’s (“Sling”) motion to dismiss Plaintiffs’ Consolidated Class Action Complaint (“CAC”) and

denying as futile Plaintiffs’ motion for leave to file a proposed Second Consolidated Amended

Class Action Complaint (“SCAC”). Plaintiffs are purchasers of Slingbox Media Players (the

“Slingboxes”) and licensees of related software, which allow users to view television

programming from one device (e.g., their primary television at home) on additional devices in

other locations (e.g., cell phones or computers). Plaintiffs allege that Sling violated their statutory

and contractual rights by disseminating – without advance warning – various advertisements. We

assume the parties’ familiarity with the underlying facts, the procedural history of the case, and the

issues on appeal.

2 We begin by determining whether Plaintiffs’ non-contractual statutory claims are governed

by New York or California substantive law. We agree with the district court that these

non-contractual statutory claims are governed by New York law. Plaintiffs bought their

Slingboxes in New York and were New York residents at the time of their purchases, indicating

that New York substantive law governs under New York’s choice-of-law principles. See Krock v.

Lipsay, 97 F.3d 640, 645–46 (2d Cir. 1996); In re Grand Theft Auto Video Game Consumer Litig.,

251 F.R.D. 139, 149–50 (S.D.N.Y. 2008). For their part, Plaintiffs assert that California law

applies, pointing to Sling’s end user license agreement (“EULA”),1 which provides that “this

Agreement will be governed by and construed in accordance with the laws of the State of

California, without regard to or application of conflicts of law rules or principles.” J.A. 197

(emphasis added). “New York courts decide the scope of such clauses under New York law, not

under the law selected by the clause . . . .” Fin. One Pub. Co. v. Lehman Bros. Special Fin., 414

F.3d 325, 333 (2d Cir. 2005). However, the scope of this EULA provision is expressly limited to

“this Agreement.” J.A. 197. We have long held that limited choice-of-law clauses, such as the

one in the EULA, merely specify the law that applies to claims arising from the contract but not to

non-contractual claims (e.g., consumer protection statutes sounding in fraud). See Fin. One Pub.

Co, 414 F.3d at 332–34; Krock, 97 F.3d at 645. Accordingly, the district court properly

determined that New York law applied to Plaintiffs’ non-contractual statutory claims under New

1 The district court did not err in considering the EULA in ruling on Sling’s motion to dismiss because the parties do not dispute the authenticity or accuracy of the EULA and the EULA was “integral” to the CAC insofar as Plaintiffs quoted the EULA in the CAC, relied on the EULA in framing the CAC, and submitted the EULA to the district court with their opposition to Sling’s motion to dismiss. See Chambers v. Time Warner, Inc., 282 F.3d 147, 152–53 (2d Cir. 2002); Rothman v. Gregor, 220 F.3d 81, 88–89 (2d Cir. 2000). 3 York’s choice-of-law principles.2

Moving on to the decision below granting Sling’s motion to dismiss the CAC, we review

de novo a district court’s grant of a motion to dismiss under Federal Rule of Civil Procedure

12(b)(6), accepting all factual allegations in the complaint as true and drawing all reasonable

inferences in favor of the plaintiff. See Caro v. Weintraub, 618 F.3d 94, 97 (2d Cir. 2010). For

motion to dismiss purposes, “we have deemed a complaint to include . . . any statements or

documents incorporated in it by reference, . . . and documents that the plaintiffs either possessed

or knew about and upon which they relied in bringing the suit.” Rothman v. Gregor, 220 F.3d 81,

88–89 (2d Cir. 2000) (citations omitted). “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.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S.

544, 570 (2007)). Although a court must accept as true all the factual allegations in the complaint,

that requirement is “inapplicable to legal conclusions.” Id.

We conclude that Plaintiffs failed plausibly to allege a violation of New York General

Business Law Section 349. “To maintain a cause of action under [Section] 349, a plaintiff must

show: (1) that the defendant’s conduct is ‘consumer-oriented’; (2) that the defendant is engaged in

a ‘deceptive act or practice’; and (3) that the plaintiff was injured by this practice.” Wilson v. Nw.

Mut. Ins. Co., 625 F.3d 54, 64 (2d Cir. 2010) (citations omitted). As to the second element,

“[w]hether a representation or an omission, the deceptive practice must be likely to mislead a

reasonable consumer acting reasonably under the circumstances.” Nick’s Garage, Inc. v.

2 Likewise, in its order denying as futile Plaintiffs’ motion for leave to file a proposed SCAC, the district court was correct to evaluate Plaintiffs’ proposed breach of contract/implied covenant claim under California law, in light of the EULA’s limited choice-of-law clause. 4 Progressive Cas. Ins. Co., --- F.3d ----, No. 15-1426-cv, 2017 WL 5162690, at *11 (2d Cir. Nov. 8,

2017) (citations and internal quotation marks omitted). As we recently explained, “[t]he New

York Court of Appeals’ adoption of an ‘objective definition of deceptive acts and

practices . . . which may be determined as a matter of law or fact (as individual cases require),’ was

intended to avoid ‘a tidal wave of litigation against businesses that was not intended by the

Legislature.’” Id. (quoting Oswego Laborers’ Local 214 Pension Fund v. Marine Midland

Bank, N.A., 85 N.Y.2d 20, 26 (1995)). The CAC does not plausibly allege a deceptive act or

practice. Indeed, Plaintiffs point to no affirmative statement made by Sling pertaining to

advertising, much less a deceptive statement. And Plaintiffs did not plead an actionable omission

because nothing in the CAC alleges why a reasonable consumer would have been led to believe

that Slingbox would always be an ad-free product. See Oswego, 85 N.Y.2d at 26. Accordingly,

Plaintiffs fail to allege a violation of Section 349.

Turning to the district court’s order denying as futile Plaintiffs’ motion for leave to amend,

we ordinarily review a district court’s denial of leave to amend for abuse of discretion but where,

as here, the denial is based on a conclusion of law, we review the legal conclusion de novo.

Kassner v. 2nd Ave. Delicatessen Inc., 496 F.3d 229, 242 (2d Cir. 2007). Upon de novo review,

we discern no error in the district court’s conclusion that the proposed amendments – adding

further detail to the previously asserted Section 349 claim and bringing a new claim based on an

alleged breach of the covenant of good faith and fair dealing implied in the EULA – would be

futile.

Having reviewed the proposed amendments, we conclude that the additional information

included in the proposed SCAC still fails to allege a deceptive act or practice under Section 349.

5 In particular, Sling’s purported misrepresentations or omissions – such as not explicitly warning

consumers in advance of the advertising – were not deceptive acts or practices under Section 349

because they would not have caused a reasonable consumer acting reasonably under the

circumstances to believe that the Slingbox was, and always would be, an ad-free product. Our

determination that Sling never held the Slingbox out to be a perpetually ad-free product is fatal to

Plaintiffs’ amended Section 349 claim.

Similarly, the district court did not err in rejecting as futile Plaintiffs’ proposed claim based

on an alleged breach of the covenant of good faith and fair dealing implied in the EULA. Under

California law, the implied covenant “requires each contracting party to refrain from doing

anything to injure the right of the other to receive the agreement’s benefits,” Frommoethelydo v.

Fire Ins. Exch., 721 P.2d 41, 44 (Cal. 1986) (en banc), and “cannot impose substantive duties or

limits on the contracting parties beyond those incorporated in the specific terms of their

agreement,” Guz v. Bechtel Nat. Inc., 8 P.3d 1089, 1110 (Cal. 2000). Plaintiffs do not and cannot

pinpoint anything in the EULA related to advertising, and nothing in the EULA suggests that

barring Sling from disseminating advertisements is necessary so that Plaintiffs can receive the

benefit of their bargain. Significantly, the EULA’s several disclaimers reinforce Plaintiffs’ lack

of contractual protections because the EULA expressly stipulates that “Sling Media reserves all

rights in the Software not expressly granted to you in this Agreement.” J.A. 194. The EULA

continues, “[i]f Sling Media provides you with any update to the Software (‘Update’), your use of

such Update will be governed by the terms and conditions of this Agreement or other terms and

conditions that relate to such Update.” Id. The EULA also notes that “[o]ther than those set out

in Section 7, Sling Media does not give any other promises, guarantees, or warranties about the

6 Software.” Id. at 196. Accordingly, the district court properly denied as futile Plaintiffs’ motion

for leave to amend.

We have considered all of Plaintiffs’ remaining arguments and find them to be without

merit. Accordingly, we AFFIRM the judgment of the district court.

FOR THE COURT: Catherine O=Hagan Wolfe, Clerk