Kleiner v. Earthlink, Inc.

Filing 31

ORDER signed by William H. Orrick, III on 1/20/2017 DENYING 9 Motion to Dismiss filed by Earthlink, Inc. (Zignago, K.)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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LINDA KLEINER, et al.,
Plaintiffs,

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United States District Court
Eastern District of California

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Case No. 2:16-cv-1609-WHO

ORDER DENYING MOTION TO
DISMISS

v.
EARTHLINK, INC.,

Re: Dkt. No. 9

Defendant.
INTRODUCTION

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Plaintiff Linda Kleiner alleges that defendant EarthLink, Inc., debited her account on a

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recurring basis for internet services without obtaining her authorization or providing her with a

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copy of such authorization as required by the Electronic Funds Transfer Act (“EFTA”), 15 U.S.C.

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§ 1693 et seq., and its applicable regulations. EarthLink brings a factual challenge to subject

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matter jurisdiction, arguing that she lacks standing because the statutory rights at issue belong to

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her son, Dennis Kleiner. However, Linda Kleiner has produced a bank statement showing a debit

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by EarthLink. She declares that she is the sole owner of that bank account. She has met her

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burden under the EFTA to plausibly allege that she is the relevant consumer whose authorization

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was required before EarthLink transferred money from her personal bank account. The motion to

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dismiss for lack of standing is DENIED.

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BACKGROUND
I. PLAINTIFF’S ALLEGATIONS & DECLARATION
Around December 2015, Linda Kleiner called EarthLink to purchase internet services.

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Complaint (“Compl.”) (Dkt. No. 1) ¶ 9. During this call, she learned that EarthLink’s “services

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were a ‘dial-up’ type internet” and told EarthLink that she “had no interest in their services.”

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Declaration of Linda Kleiner (Dkt. No. 29-1) ¶ 5.

Thereafter, she began noticing recurring charges automatically deducted from her personal

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bank account by EarthLink. Compl. ¶ 11. EarthLink charged her bank account $14.95 a total of

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three times. Kleiner Decl. ¶ 6; Ex. A (copy of bank statement). This bank account is Linda

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Kleiner’s alone. Kleiner Decl. ¶ 7. She alleges that she never authorized EarthLink to deduct

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money from her bank account on a recurring basis. Compl. ¶ 13. EarthLink did not provide and

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she did not execute “any written or electronic writing memorializing or authorizing the recurring

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or automatic payments.” Id. ¶ 14. She did not provide EarthLink with “a written or an electronic

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signature authorizing the recurring or automatic payments.” Id. ¶ 15.
Linda Kleiner brings this suit on behalf of herself and all others similarly situated against

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EarthLink for violation of the EFTA, 15 U.S.C. § 1693e(a), and section 205.10(b) of Regulation

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United States District Court
Eastern District of California

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E, 12 C.F.R. § 205.210(b). Id. ¶¶ 16, 45. The complaint requests statutory damages of $1,000 for

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each class member and an injunction to stop EarthLink’s conduct in violation of the EFTA. Id. ¶¶

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27, 48.

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II. EARTHLINK’S FACTUAL CHALLENGE

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EarthLink submitted a declaration by Jennifer Spindel, the Senior Vice President and

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Managing Director of Consumer Products at EarthLink, who described that when a person

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purchases an EarthLink product or service by contacting its call center, the call center

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representative enters the person’s name, contact information, address, and payment information

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into a database. Declaration of Jennifer Spindel (Dkt. No. 9-2) ¶ 1, 4. The database then creates a

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customer account in MIDAS, EarthLink’s billing system. Id. Call center representatives have the

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ability to enter notes about customer interactions in Vantive, an interactive database. Id. They can

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also pull and reference customers’ accounts in MIDAS and Vantive, as well as update the account

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information to reflect additional communications. Id.

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EarthLink’s records in Vantive and MIDAS show that Dennis Kleiner called EarthLink on

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November 10, 2015, to purchase internet service. Id. ¶ 5. Dennis Kleiner provided a home

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address in Rocklin, California, home and work phone numbers, an email address, and Visa card

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payment information. Id. ¶ 6; see also Spindel Decl., Exs. A & B (copies of records). That day,

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EarthLink opened an account for Dennis Kleiner and provided him with an EarthLink email
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address. Spindel Decl. ¶ 7. The account details that the service cost $14.95 per month. Spindel

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Decl., Ex. A. EarthLink sent information about Dennis Kleiner’s account to both his personal and

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EarthLink email addresses, and by mail to his street address. Spindel Decl. ¶ 7. EarthLink’s

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records reflect that Dennis Kleiner was the owner of this account at all times. Id.
On December 22, 2015, the Vantive records indicate that Linda Kleiner called EarthLink

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“to complain that she was not aware of having an account with EarthLink.” Id. ¶ 8. Although no

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account was associated with Linda Kleiner’s name, she provided information that matched Dennis

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Kleiner’s account information. 1 Id. The call center representative then canceled Dennis Kleiner’s

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account. Id.
On July 21, 2016, as reflected in the Vantive records, Linda Kleiner called EarthLink

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United States District Court
Eastern District of California

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again. Id. ¶ 9. She asserted that EarthLink set up an account in December 2015 without her

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permission and provided the case number for this lawsuit. Id. The call center representative could

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not locate an account under Linda Kleiner’s name during the call, and Linda Kleiner hung up

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before the call center representative could locate any relevant accounts. Id. After the

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conversation, the call center representative conducted an Internet search for “Linda Kleiner” and

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found an individual who resided in Roseville, California. Id. ¶ 10. Based on that information, the

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call center representative searched EarthLink’s records for customers named “Kleiner” with

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addresses near Roseville and found Dennis Kleiner’s account. Id.
EarthLink has no record of an account opened by Linda Kleiner or of any other

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communications with her. Id. ¶ 11.

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III.

PROCEDURAL HISTORY

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Although EarthLink filed its motion with Spindel’s declaration, Kleiner’s opposition did
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not include any evidence. At oral argument, plaintiff’s counsel indicated that Kleiner had
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evidence to rebut EarthLink’s motion. Rather than dismiss the case and allow Kleiner the ability
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to amend, I directed that she submit that evidence after the hearing, which she did. Declaration of
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Neither party has provided evidence of whether there is any relation between Linda Kleiner and
Dennis Kleiner. However, plaintiff’s counsel indicated during oral argument that Dennis Kleiner
is plaintiff’s son.
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Linda Kleiner (Dkt. No. 29-1). EarthLink responded. Response to Plaintiff’s Supplemental

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Opposition (“Supp. Reply”) (Dkt. No. 30).

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LEGAL STANDARD

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A motion to dismiss filed pursuant to Federal Rule of Civil Procedure 12(b)(1) is a
challenge to the court’s subject matter jurisdiction. “Federal courts are courts of limited

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jurisdiction,” and it is “presumed that a cause lies outside this limited jurisdiction.” Kokkonen v.

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Guardian Life Ins. of Am., 511 U.S. 375, 377 (1994). The party invoking the jurisdiction of the

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federal court bears the burden of establishing that the court has the requisite subject matter

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jurisdiction to grant the relief requested. Id. “A suit brought by a plaintiff without Article III

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standing is not a ‘case or controversy,’ and an Article III federal court therefore lacks subject

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United States District Court
Eastern District of California

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matter jurisdiction over the suit.” Cetacean Cmty. v. Bush, 386 F.3d 1169, 1174 (9th Cir. 2004).

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A challenge pursuant to Rule 12(b)(1) may be facial or factual. White v. Lee, 227 F.3d

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1214, 1242 (9th Cir. 2000). In a facial attack, the jurisdictional challenge is confined to the

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allegations pled in the complaint. Wolfe v. Strankman, 392 F.3d 358, 362 (9th Cir. 2004). “[T]he

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challenger asserts that the allegations in the complaint are insufficient on their face to invoke

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federal jurisdiction.” Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004). To

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resolve this challenge, the court assumes that the allegations in the complaint are true and draws

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all reasonable inference in favor of the party opposing dismissal. Wolfe, 392 F.3d at 362.

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“By contrast, in a factual attack, the challenger disputes the truth of the allegations that, by

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themselves, would otherwise invoke federal jurisdiction.” Safe Air, 373 F.3d at 1039. To resolve

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this challenge, the court “need not presume the truthfulness of the plaintiff’s allegations.” Id.

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(citation omitted). Instead, the court “may review evidence beyond the complaint without

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converting the motion to dismiss into a motion for summary judgment.” Id. (citations omitted).

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“In response to a factual attack, Plaintiffs must present affidavits or any other evidence necessary

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to satisfy their burden of establishing that the court, in fact, possesses subject matter jurisdiction.”

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Edison v. United States, 822 F.3d 510, 517 (9th Cir. 2016) (internal citation and quotation marks

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omitted).

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DISCUSSION

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“Standing doctrine assures that the litigant is entitled to have the court decide the merits of

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the dispute or of particular issues by demanding that he or she possess a direct stake in the

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outcome of the case.” Tourgeman v. Collins Fin. Servs., Inc., 755 F.3d 1109, 1114 (9th Cir. 2014)

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(internal citations and quotation marks omitted). To demonstrate Article III standing, “a plaintiff

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must show: (1) [she] has suffered an ‘injury in fact’ that is (a) concrete and particularized and (b)

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actual or imminent, not conjectural or hypothetical; (2) the injury is fairly traceable to the

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challenged action of the defendant; and (3) it is likely, as opposed to merely speculative, that the

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injury will be redressed by a favorable decision.” Friends of the Earth, Inc., v. Laidlaw Envtl.

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United States District Court
Eastern District of California

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Servs., Inc., 528 U.S. 167, 180–81 (2000).
Under the EFTA, “[a] preauthorized electronic fund transfer from a consumer’s account

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may be authorized by the consumer only in writing, and a copy of such authorization shall be

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provided to the consumer when made.” 15 USC § 1693e. EarthLink argues that any violation of

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statutory rights under the EFTA belong to Dennis Kleiner, not his mother, and therefore, plaintiff

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cannot establish any of the three standing requirements. See Valley Forge Christian Coll. v.

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Americans United for Separation of Church & State, Inc., 454 U.S. 464, 474 (1982) (A “plaintiff

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generally must assert his own legal rights and interests, and cannot rest his claim to relief on the

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legal rights or interests of third parties.”).

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EarthLink’s evidence showed that Dennis Kleiner opened an EarthLink account and

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provided Visa card information for payment. Spindel Decl. ¶¶ 5-7. When Linda Kleiner called

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EarthLink to stop charges, she provided information matching Dennis Kleiner’s account. Id. ¶ 8.

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In her initial opposition, Linda Kleiner stated that she disputes EarthLink’s assertions and

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declarations “in their entirety,” but she failed to produce any evidence that it was her bank account

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that EarthLink debited such that her authorization—not Dennis Kleiner’s—was required. Oppo.

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at 2. There was no evidence regarding her relation, if any, to Dennis Kleiner, or whether he had

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the authority to authorize the relevant transfer.

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But on her second try, Linda Kleiner succeeds in establishing Article III standing. She
produced a bank statement showing a debit by EarthLink for $14.95 on December 7, 2015.
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Kleiner Decl., Ex. A. She declares that EarthLink made a total of three charges. Kleiner Decl. ¶

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6. And the debited bank account belonged to her alone. Id. ¶ 7. Because she has shown a transfer

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from her bank account, it was her authorization that was required under the EFTA. The statutory

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rights at issue belong to Linda Kleiner.

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EarthLink’s argument to the contrary is unconvincing. EarthLink says that, even though

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plaintiff owns the debited bank account, the statutory rights at issue belong to Dennis Kleiner

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because he apparently initiated the transaction. Supp. Reply at 3. In support of this argument,

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EarthLink points to the Official Staff Interpretation of Section 205.3(a) of Regulation E, which

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provides:

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United States District Court
Eastern District of California

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The requirements of the regulation apply only to an account for
which an agreement for EFT services to or from the account has
been entered into between:

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[. . .]

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The consumer and a third party (for preauthorized debits or credits,
for example), when the account-holding institution has received
notice of the agreement and the fund transfers have begun.

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12 C.F.R. § Pt. 205, Supp. I. EarthLink also notes that Congress provided that the EFTA “sets

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minimum safeguards for consumers who arrange for regular payments . . . to be deducted

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automatically from their bank accounts.” S. REP. NO. 95-915, at 13 (1978) reprinted in

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U.S.C.C.A.N. 9403, 9415.

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EarthLink’s arguments ignore the central issue that the statutory rights under the EFTA’s

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section regulating preauthorized transfers belong to the consumer whose bank account is debited.

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See 15 U.S.C. §§ 1693e, 1693m. Here, that person is Linda Kleiner. Initiation of the transaction

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by a third party may give rise to an affirmative defense for EarthLink. But for purposes of

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establishing standing to bring this lawsuit, EarthLink debited a bank account belonging solely to

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Linda Kleiner. It is, therefore, her statutory rights at issue.

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Linda Kleiner adequately established all three elements of standing. First, I need not

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decide whether a statutory violation is sufficient to establish an injury because plaintiff states an

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economic injury of $14.95 transferred three times from her bank account. Kleiner Decl., Ex. A.

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Second, she alleges that EarthLink caused this harm by debiting her account without her
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authorization. Plaintiff’s bank statement shows her injury is traceable to EarthLink. Finally, as

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she requests statutory damages and injunctive relief, her injury will be redressed through a

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favorable determination in this suit.

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CONCLUSION

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Kleiner’s supplemental opposition and declaration establish that she is the relevant

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consumer for this EFTA claim. EarthLink’s motion to dismiss under Rule 12(b)(1) for lack of

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standing is DENIED. 2
IT IS SO ORDERED.

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Dated: January 20, 2017
______________________________________
WILLIAM H. ORRICK
United States District Judge

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United States District Court
Eastern District of California

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This Order, obviously, makes no determination regarding the merits of plaintiff’s claim.
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