Kyle Johnson v. Pluralsight, LLC

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS MAR 29 2018 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

KYLE JOHNSON, No. 17-15374

Plaintiff-Appellant, D.C. No. 2:16-cv-01148-MCE-CKD v.

PLURALSIGHT, LLC, a Nevada limited MEMORANDUM* liability company,

Defendant-Appellee.

Appeal from the United States District Court for the Eastern District of California Morrison C. England, Jr., District Judge, Presiding

Argued and Submitted March 15, 2018 San Francisco, California

Before: PAEZ and IKUTA, Circuit Judges, and ADELMAN,** District Judge.

Kyle Johnson (“Johnson”) appeals the district court’s dismissal of his suit

against Pluralsight, LLC (“Pluralsight”) under California’s Automatic Renewal

Law (“ARL”) and Unfair Competition Law (“UCL”). We have jurisdiction

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The Honorable Lynn S. Adelman, United States District Judge for the Eastern District of Wisconsin, sitting by designation. pursuant to 28 U.S.C. § 1291 and review de novo the district court’s interpretation

of state law and its decision to dismiss a suit for failure to state a claim. See

Zamani v. Carnes, 491 F.3d 990, 994 (9th Cir. 2007). We affirm in part and

reverse in part.

1. As the parties have raised the issue of whether Johnson has alleged an injury

in fact and therefore lacks Article III standing, we address this jurisdictional

question first before turning to the merits of this appeal. See Laub v. U.S. Dep’t of

Interior, 342 F.3d 1080, 1085 (9th Cir. 2003). We agree with Johnson that he has

sufficiently alleged an injury in fact.

“To establish injury in fact, a plaintiff must show that he or she suffered an

invasion of a legally protected interest that is concrete and particularized and actual

or imminent, not conjectural or hypothetical.” Spokeo, Inc. v. Robins, 136 S. Ct.

1540, 1548 (2016) (internal quotation marks omitted). Although a “bare

procedural violation, divorced from any concrete harm” does not satisfy Article

III’s injury-in-fact requirement, a procedural violation accompanied by “the risk of

real harm” does. Id. at 1549. Here, Johnson has alleged monetary harm in the

form of unlawfully retained subscriptions payments by Pluralsight. He claims that

by violating Cal. Bus. & Prof. Code § 17602’s1 requirements, including failing to

1 The complaint, although inartful, specifically asks the court to “find and declare that [Pluralsight] has violated the UCL and committed unfair and unlawful business practices by violating Cal. Bus. & Prof. Code § 17602” and that the court

2 provide information on cancellation policies prior to charging his credit card,

Pluralsight transformed its subscriptions into unconditional gifts pursuant to

section 17603. Accordingly, Pluralsight was not entitled to charge customers such

as Johnson for the service. Johnson has thus alleged a concrete economic injury—

as opposed to a bare procedural violation—that is both particularized and actual in

nature.2 See Czyzewski v. Jevic Holding Corp., 137 S. Ct. 973, 983 (2017) (“For

standing purposes, a loss of even a small amount of money is ordinarily an

‘injury’”). This is sufficient to satisfy Article III’s injury-in-fact requirements.

2. We next conclude that the district court correctly dismissed Johnson’s ARL

cause of action. A party’s right to sue depends on “whether the Legislature has

manifested an intent to create such a private cause of action under the statute.” Lu

v. Hawaiian Gardens Casino, Inc., 236 P.3d 346, 348 (Cal. 2010) (internal

quotation marks omitted). “Such legislative intent, if any, is revealed through the

“award to Plaintiff and Class Members damages and full restitution in the amount of the subscription payments made by them pursuant to Cal. Bus. & Prof. Code § 17603.” These statements, coupled with allegations that Pluralsight “failed to . . . allow Plaintiff and Class Members to cancel before payment,” are sufficient to support an inference that Pluralsight’s products were allegedly unconditional gifts because the company failed to procure Johnson’s “affirmative consent as described in Section 17602,” Cal. Bus. & Prof. Code § 17603, prior to activating the subscription. See Ibrahim v. Dep’t of Homeland Sec., 669 F.3d 983, 992 (9th Cir. 2012) (“The facts in the complaint are liberally construed in the plaintiff’s favor and are generally accepted as true.”). 2 We agree with Pluralsight that Johnson satisfies the other requirements necessary to establish Article III standing.

3 language of the statute and its legislative history.” Id. Contrary to Johnson’s

arguments, California Business and Professions Code § 17604(a) does not contain

“clear, understandable, unmistakable terms” that “strongly and directly indicate”

an intent to create a private cause of action. Id. at 348 (internal quotation marks

omitted). Section 17604(a) neither states that a person may “bring an action,” id.

at 348–49, to obtain civil remedies nor contains language commonly understood in

California to create a “right to bring an action.” Id. at 349. There is nothing in the

legislative history that suggests a contrary conclusion.3 The district court correctly

concluded that section 17604’s reference to section 17535 evidences the

legislature’s intent to permit plaintiffs to pursue an injunction under section 17535

for violations of the ARL as opposed to creating a private cause of action under the

ARL.

Johnson’s remaining arguments are not persuasive. See Crusader Ins. v.

Scottsdale Ins., 54 Cal. App. 4th 121, 133 (Ct. App. 1997). The legislature’s intent

in enacting the ARL was to “end the practice of ongoing charging of consumer

credit or debit cards . . . without the consumers’ explicit consent for ongoing

shipments of a product or ongoing deliveries of service.” Cal. Bus. & Prof. Code §

3 We grant Johnson’s motion to take judicial notice of his five exhibits, each of which pertains to the legislative history of the ARL. See Anderson v. Holder, 673 F.3d 1089, 1094 n.1 (9th Cir. 2012) (“Legislative history is properly a subject of judicial notice.”).

4 17600. Permitting consumers to sue under the UCL for ARL violations fulfills this

objective. Because there is no private cause of action under the ARL, the district

court properly dismissed Johnson’s ARL claim.

3. We agree with Johnson that, for the same reasons he has satisfied Article

III’s injury-in-fact requirement, he has alleged an injury in fact sufficient to

support statutory standing under the UCL. See Reid v. Johnson & Johnson, 780

F.3d 952, 958 (9th Cir. 2015) (explaining that the UCL’s “economic injury-in-fact

requirement . . . demands no more than the corresponding requirement under

Article III of the U.S. Constitution”). The district court erroneously treated

Pluralsight’s subscriptions as “intangible services.” To the contrary, Pluralsight’s

subscriptions grant users a license to download materials such as exercise files,

course slides, and sample codes—all of which may ostensibly be printed and used

as part of the users’ educational training—in addition to access to online videos.

Assuming arguendo that section 17603 is limited to tangible products,

Pluralsight’s course slides and sample codes amply qualify as tangible products.

Cf. Ladore v. Sony Comput. Entm’t Am., LLC, 75 F. Supp. 3d 1065, 1073 (N.D.

Cal. 2014) (Chen, J.) (explaining that the downloadable version of something

offered in physical form is a “good”). Accordingly, Johnson has sufficiently

alleged that Pluralsight unlawfully charged him for a subscription that should have

been treated as an unconditional gift pursuant to section 17603.

5 4. Johnson has also sufficiently alleged unlawful conduct to pursue a claim

under the UCL. See Lozano v. AT & T Wireless Servs., Inc., 504 F.3d 718, 731

(9th Cir. 2007). His complaint alleges that Pluralsight violated the ARL by

charging him without first providing information on how to cancel the

subscription. The record also indicates that consumers signing up for trial

subscriptions were not specifically given instructions on how to cancel before

payment. This amply satisfies the UCL requirement that an unlawful business

practice be any violation of “other laws.”4 Cel-Tech Commc’ns, Inc. v. Los

Angeles Cellular Tel. Co., 20 Cal. 4th 163, 180 (Cal. 1999).

AFFIRMED IN PART, REVERSED IN PART AND REMANDED.

4 Pluralsight has provided no case law in support of its argument that its actions complied in good faith with the requirements of the ARL, as laid out in section 17604(b). Because Johnson has alleged an unlawful business practice sufficient to sustain his UCL cause of action, we need not address whether he has also alleged an unfair business practice.

6 FILED Johnson v. Pluralsight, LLC, No. 17-15374 MAR 29 2018 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS I dissent. Johnson has alleged only “a bare procedural violation, divorced

from any concrete harm,” and therefore lacks standing under Article III of the U.S.

Constitution. Spokeo, Inc. v. Robins (Spokeo I), 136 S. Ct. 1540, 1549 (2016).

In determining whether Johnson has alleged a concrete harm, we first

determine “whether the statutory provisions at issue were established to protect his

concrete interests (as opposed to purely procedural rights).” Robins v. Spokeo, Inc.

(Spokeo II), 867 F.3d 1108, 1113 (9th Cir. 2017). California’s Automatic Renewal

Law (ARL), Cal. Bus. & Prof. Code §§ 17600–17606, was enacted to “end the

practice of ongoing charging of consumer credit or debit cards or third party

payment accounts without the consumers’ explicit consent for ongoing shipments

of a product or ongoing deliveries of service.” Id. § 17600. The ARL thus protects

consumers’ concrete interests in avoiding charges resulting from misleading

automatic renewal agreements, which has a “close relationship” to traditional

common-law actions for theft and fraud. Spokeo I, 136 S. Ct. at 1549.

Second, we must determine whether the “specific procedural violations

alleged in this case actually harm, or present a material risk of harm to,” Johnson’s

concrete interest in avoiding these types of fraudulent charges. Spokeo II, 867 F.3d

at 1113. Here Johnson’s claims falter. Johnson alleges that Pluralsight failed to “provide an acknowledgment that includes the automatic renewal or continuous

service offer terms, cancellation policy, and information on how to cancel in

manner that is capable of being retained by the consumer,” Cal. Bus. & Prof. Code

§ 17602(a)(3), including additional information on how to cancel required by

section 17602(b). But his complaint does not allege that this procedural violation

led to the incurrence of unwanted charges; Johnson does not claim that he did not

want to continue the subscription service or would have cancelled his subscription

had Pluralsight not violated the statute’s information requirements.

Instead, Johnson alleges only that Pluralsight’s failure to comply with the

ARL’s procedural requirements converted Pluralsight’s products into

unconditional gifts to Johnson under section 17603 of California’s Business and

Professions Code, and therefore Johnson is entitled to the return of his subscription

payments, regardless whether he would have continued to subscribe. Even if the

availability of such statutory penalties (unrelated to any actual harm) could give

rise to standing, cf. Spokeo I, 136 S. Ct. at 1545, 1549, Johnson is not entitled to

such penalties because the ARL’s “unconditional gifts” provision in section 17603

is not applicable to him. By its terms, section 17603 applies only where the

business sends “goods, wares, merchandise, or products to a consumer . . . without

first obtaining the consumer’s affirmative consent as described in Section 17602.”

2 Johnson does not allege that Pluralsight charged him for his subscription “without

first obtaining [his] affirmative consent” in violation of section 17602(a)(2).

Indeed, he alleges no violation of section 17602(a)(2) at all. His complaint claims

violations only of sections 17602(a)(3) and (b), which merely require a business to

provide specified information to the consumer.

Because the ARL’s unconditional gifts provision does not apply and

Johnson has not alleged that Pluralsight’s failure to provide required information

caused him any harm (i.e., by causing him to pay for unwanted services), his

complaint presents only “a bare procedural violation,” and he lacks an Article III

injury-in-fact. Spokeo I, 136 S. Ct. at 1549. For the same reason, he also lacks

statutory standing under California’s Unfair Competition Law. Cal. Bus. & Prof.

Code § 17204.

I would therefore affirm the district court’s dismissal.