Price et al v. Synapse Group, Inc. et al

Filing 21

ORDER Granting in Part and Denying in Part #17 Defendants' Motion to Dismiss. Plaintiffs' claims under the FAL, UCL, and CLRA (Cal. Civ. Code 1770(a)(5) and (a)(9)), and for conversion and unjust enrichment, will proceed. Plaintiffs' claims under Cal. Civ. Code 1770(a)(13) and (a)(17), against Defendant Time under an alter ego or agency theory, and for injunctive relief under the FAL, UCL, and CLRA, are dismissed without leave to amend. Defendant Time is dismissed from this action with prejudice. Defendants Synapse and SynapseConnect must file an answer to the Second Amended Complaintno later than August 4, 2017. Signed by Judge Cynthia Bashant on 7/24/2017. (lrf)

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UNITED STATES DISTRICT COURT

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SOUTHERN DISTRICT OF CALIFORNIA

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SHANNON DALE PRICE and
CHERYL EDGEMON, individually
and on behalf of all others similarly
situated,

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Case No. 16-cv-01524-BAS-BLM
ORDER GRANTING IN PART
AND DENYING IN PART
DEFENDANTS’ MOTION TO
DISMISS

Plaintiffs,
v.
SYNAPSE GROUP, INC., a
Delaware corporation;
SYNAPSECONNECT, INC., a
Delaware corporation; TIME INC., a
Delaware corporation; and DOES 1–
50, inclusive,
Defendants.

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Plaintiffs Shannon Price and Cheryl Edgemon bring this putative class action

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against Defendants Synapse Group, Inc., SynapseConnect, Inc., and Time, Inc.,

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alleging that Defendants’ enrollment of consumers in automatic subscription renewal

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programs violates various California consumer protection laws. Defendants now

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move to dismiss the operative Second Amended Complaint for failure to state a claim.

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For the following reasons, the Court GRANTS IN PART and DENIES IN PART

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Defendants’ motion to dismiss. (ECF No. 17.)
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BACKGROUND

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This case involves the sometimes fine line between a company’s legitimate

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efforts to incentivize consumer behavior and the use of deceptive tactics to defraud

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the buying public. Plaintiffs Price and Edgemon are individual consumers who

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purchased magazine subscriptions from Defendants Synapse Group, Inc. (“Synapse”)

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and SynapseConnect, Inc. (“SynapseConnect”)—corporations whose primary

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business is marketing magazine subscriptions. (ECF No. 13, Second Amended

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Complaint (“SAC”) ¶¶ 2, 3.) Plaintiffs also name as a defendant the prominent mass

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media company Time, Inc., who is Synapse’s parent corporation. (Id. ¶¶ 4, 5.)

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Plaintiffs allege that after they completed an online retail purchase and follow-

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up survey, Defendants presented them with an online “reward” offer to receive annual

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magazine subscriptions at a discounted rate of $2.00 per subscription. (Id. ¶ 28.)

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Under the terms of the offer, Plaintiffs could select up to five magazine titles. Plaintiff

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Price selected two magazine titles and paid $4.00 with his credit card; Plaintiff

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Edgemon selected four magazine titles and paid $8.00 with her credit card. (Id.)

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Plaintiffs allege that when they selected and paid for the discounted magazine

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subscriptions, they were unaware that Defendants enrolled them in an “automatic

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renewal” program under which the subscriptions would renew each year at much

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higher rates unless Plaintiffs chose to cancel. (Id. ¶¶ 29, 35.) Although the order page

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from which Plaintiffs made their purchases included information regarding automatic

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renewal, Plaintiffs assert that the manner in which this information was presented was

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insufficient to put them on notice. (Id. ¶¶ 30–33.) As a result, Plaintiffs allege that

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Defendants charged their credit cards for renewed subscriptions—approximately

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$71.00 in the case of Plaintiff Price and $190.00 in the case of Plaintiff Edgemon—

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without their knowing consent. Plaintiffs state that if they had known Defendants

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were going to enroll them in automatic renewal programs, they would not have

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ordered the magazines in the first place. (Id. ¶¶ 34, 36.)

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According to Plaintiffs, the terms of the automatic renewal offer are contained
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in the middle of a ten-sentence paragraph located at the end of the order page. (Id. ¶¶

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30–32.) This “disclosure” paragraph appears below sections of the order page where

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consumers select magazine titles and enter their credit card information, and

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immediately above a red “Complete” button consumers must click to complete their

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order. The paragraph reads as follows:1

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Important Reward Details

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Automatic Renewal Authorization: Enjoy your favorites with the first year already
paid for by TownWizard. The credit/debit card you provide will be charged just $2
each for processing. This title is just $2 for the entire first year except where indicated
and no processing applies. After the first term, all selections will continue. Each year,
you’ll receive a reminder notice specifying price plus processing (and any applicable
sales tax) and billing terms for the next term of issues and you authorize the account
you provide to be charged the rate on the notice for the next term of issues unless
you choose to cancel: 1-800-429-2550. If a magazine becomes unavailable it may be
replaced by another with the same renewal features. Allow 4-10 weeks for delivery.
The name, address, and account information you provide will be used by
MagazineOutlet to process and fulfill your selections. Please print a copy of this page
for your records. For individual use only, not for resale. Enjoy!

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(SAC, Exh. 17 (ECF No. 13-17 at 11)).

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Plaintiffs allege that the format, content, placement, and text size of this

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disclosure violate California’s Automatic Purchase Renewals Statute (“Automatic

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Renewal Law” or “ARL”), Cal. Bus. & Prof. Code §§ 17600–17606. The ARL

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requires businesses to satisfy three main conditions when making automatic renewal

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offers to consumers in California: (1) present the terms of the automatic renewal offer

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in a clear and conspicuous manner, (2) obtain consumers’ affirmative consent to the

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renewal offer before charging them, and (3) provide to consumers an

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acknowledgement that includes the terms of the renewal program and information on

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how to cancel, and that is capable of being retained. See Cal. Bus. & Prof. Code §§

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17601(a)(1)-(3). Plaintiffs allege that Defendants violated each of these provisions of

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In presenting the “disclosure” paragraph here, the Court uses a larger size text than the size used
on the online order page on which the paragraph allegedly appears. A copy of that order page is
attached to this Order as Appendix 1. Plaintiffs submitted the order page as part of Exhibit 17 to
their SAC. (See ECF No. 13-17 at 11.)
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the ARL in the course of offering discounted magazine subscriptions to Plaintiffs.

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(SAC ¶ 33.)

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Plaintiffs do not, however, bring a standalone cause of action under the ARL.

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Instead, they cite Defendants’ alleged violations of the ARL as a predicate for other

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claims. Specifically, Plaintiffs assert claims under (1) California’s False Advertising

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Law (“FAL”), Cal. Bus. & Prof. Code §§ 17500–17509, (2) California’s Unfair

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Competition Law (“UCL”), Cal. Bus. & Prof. Code §§ 17200–17210, (3) California’s

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Consumer Legal Remedies Act (“CLRA”), Cal. Civ. Code § 1770, and for (4)

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conversion and (5) unjust enrichment. Plaintiffs bring the suit on behalf of a class of

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California consumers who were enrolled in an automatic renewal program by

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Defendants in connection with a magazine subscription selection offered by

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Defendants. (Id. ¶ 39.) Plaintiffs seek restitution, injunctive relief, damages, and fees

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and costs.

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Plaintiffs originally filed suit in the Superior Court of California, County of

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San Diego. Defendants removed the case to this Court under the Class Action

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Fairness Act of 2005, 28 U.S.C. § 1332(d)(2), and the general removal statute, 28

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U.S.C. § 1441(b), after which Plaintiffs filed a First Amended Complaint (“FAC”).

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(ECF Nos. 1, 11.) Defendants responded to the FAC by bringing a motion to dismiss

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for failure to state a claim. (ECF No. 12.) Thereafter, Plaintiffs filed the operative

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Second Amended Complaint. (ECF No. 13.) Defendants now move to dismiss the

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SAC under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim. (ECF

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No. 17.) Plaintiffs oppose. (ECF No. 18.)

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LEGAL STANDARD

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A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) tests the

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legal sufficiency of the claims stated in the complaint. See Conservation Force v.

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Salazar, 646 F.3d 1240, 1241–42 (9th Cir. 2011). A complaint may be dismissed

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under Rule 12(b)(6) “only when it fails to state a cognizable legal theory or fails to

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allege sufficient factual support for its legal theories.” Caltex Plastics, Inc. v.
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Lockheed Martin Corp., 824 F.3d 1156, 1159 (9th Cir. 2016).

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To survive a motion to dismiss, a complaint must contain facts sufficient to

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“state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550

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U.S. 544, 570 (2007). “A claim has facial plausibility when the plaintiff pleads factual

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content that allows the court to draw the reasonable inference that the defendant is

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liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing

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Twombly, 550 U.S. at 556). The plausibility standard does not require a showing of

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“probability,” “but it asks for more than a sheer possibility that a defendant has acted

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unlawfully.” Id. Where a complaint contains allegations that are “merely consistent

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with” a defendant’s liability, it stops short of the line between possible liability and

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plausible entitlement to relief. Id. (citing Twombly, 550 U.S. at 557).

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In deciding a motion to dismiss, the court must accept as true all factual

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allegations in the complaint and draw reasonable inferences from those allegations in

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the light most favorable to the plaintiff. See Skilstaf, Inc. v. CVS Caremark Corp.,

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669 F.3d 1005, 1014 (9th Cir. 2012). However, the court need not assume the truth

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of legal conclusions, unwarranted deductions of fact, or inferences that are

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unreasonable in light of the facts alleged. See Fayer v. Vaughn, 649 F.3d 1061, 1064

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(9th Cir. 2011) (per curiam) (citations omitted); In re Gilead Scis. Sec. Litig., 536

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F.3d 1049, 1055 (9th Cir. 2008) (citation omitted). Ruling on a Rule 12(b)(6) motion

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is “a context-specific task” that requires the court “to draw on its judicial experience

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and common sense.” Iqbal, 556 U.S. at 682.2

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DISCUSSION
Defendants move to dismiss Plaintiffs’ claims on grounds that: (1) Plaintiffs

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Defendants assert in a footnote that Plaintiffs’ claims sound in fraud and are thus subject to the
heightened pleading standard of Federal Rule of Civil Procedure 9(b). Rule 9(b) requires a plaintiff
to “state with particularity” the circumstances constituting the fraud. Fed. R. Civ. P. 9(b).
Defendants, however, do not move for dismissal on grounds that Plaintiffs fail to satisfy Rule 9(b),
or suggest that the outcome of the motion to dismiss would be different if the “particularity”
requirement is applied. Accordingly, the Court does not consider whether Rule 9(b) presents a
separate ground for dismissal.
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lack statutory standing to assert claims under the FAL, UCL, and CLRA; (2) Plaintiffs

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fail to sufficiently allege any violation of the ARL on which to base the asserted

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statutory and common law claims; (3) Plaintiffs’ CLRA, conversion, and unjust

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enrichment claims are premised on invalid legal theories or insufficient facts; (4)

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Plaintiffs fail to state a claim against Defendant Time, Inc. under an agency or alter

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ego theory; and (5) Plaintiffs lack Article III standing for injunctive relief. Before

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addressing each of these arguments in turn, the Court first resolves Defendants’

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request for judicial notice.

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A.

Request for Judicial Notice

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Defendants request the Court take judicial notice of three postcard mailers,

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purportedly mailed to Plaintiffs, that contain information regarding Plaintiffs’

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enrollment in automatic renewal programs. (ECF No. 17-3 (Peacock Decl.), Exhs. A-

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C.) The mailers include, among other things, price information for the renewed

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subscriptions and instructions on how to cancel the subscriptions. Defendants assert

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these mailers are the “reminder notices” mentioned in paragraph 32 of the SAC, and

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thus are properly considered by the Court under the incorporation by reference

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doctrine. (ECF No. 17-2.)

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On a motion to dismiss, a court’s review is generally limited to facts alleged

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on the face of the complaint and to exhibits attached to the complaint. Swartz v.

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KPMG LLP, 476 F.3d 756, 763 (9th Cir. 2007); Tyler v. Cuomo, 236 F.3d 1124, 1131

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(9th Cir. 2000). Under the “incorporation by reference” doctrine, however, a court

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may take into account documents that are not attached to the complaint, and whose

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authenticity no party questions, so long as the complaint refers extensively to the

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documents, or the documents are “central” to the complaint. Ecological Rights

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Foundation v. Pacific Gas & Elec. Co., 713 F.3d 502, 511 (9th Cir. 2013); United

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States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003). “Whether a document is ‘central’

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to a complaint turns on whether the complaint ‘necessarily relies’ on that document.”

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Ecological Rights, 713 F.3d at 511 (citing Daniels–Hall v. Nat’l Educ. Ass’n, 629
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F.3d 992, 998 (9th Cir. 2010)).

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Defendants argue that Plaintiffs’ reference to a “reminder notice” in paragraph

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32 of the SAC is sufficient to allow the Court to take the postcard mailers into account

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under the incorporation by reference doctrine. The Court disagrees. Plaintiffs’ single

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mention of the reminder notice—which occurs in the context of allegations that do

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not otherwise concern the reminder notice—is far from the “extensive” reference

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contemplated by the incorporation by reference doctrine. As the Ninth Circuit has

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explained, “the mere mention of the existence of a document is insufficient to

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incorporate the contents of a document.” Coto Settlement v. Eisenberg, 593 F.3d

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1031, 1038 (9th Cir. 2010). Furthermore, although the postcard mailers are

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potentially relevant to the case, Defendants fall far short of demonstrating that the

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mailers are “central” to Plaintiffs’ claims. For example, there is no indication that

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Plaintiffs’ ability to state a claim “necessarily relies” on the existence or contents of

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the postcard mailers. See Ecological Rights, 713 F.3d at 511 (citing Daniels–Hall,

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629 F.3d at 998); see also Faulkner v. Beer, 463 F.3d 130, 134 (2d Cir. 2006)

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(explaining that even if a document not attached to the complaint is integral to the

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complaint, it “must also be clear that there exist no material disputed issues of fact

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regarding the relevance of the document” before the document is used as a basis for

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dismissal). For these reasons, the Court finds that incorporating the postcard mailers

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by reference is inappropriate. Accordingly, Defendants’ request for judicial notice is

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denied, and the Court will not consider the mailers for purposes of ruling on the

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motion to dismiss.

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B.

Statutory Standing under the FAL, UCL, and CLRA

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Defendants argue that Plaintiffs lack standing to bring claims under

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California’s FAL, UCL, and CLRA because Plaintiffs fail to sufficiently allege injury

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and reliance under those statutes. (ECF No. 17, Motion to Dismiss (“MTD”), 9:12–

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13:4.)

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The FAL, UCL, and CLRA are the core of California’s consumer protection
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regime. The FAL prohibits businesses from disseminating advertising “which is

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untrue or misleading, and which is known, or which by the exercise of reasonable

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care should be known, to be untrue or misleading.” Cal. Bus. & Prof. Code § 17500.

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The UCL protects consumers and competitors against “any unlawful, unfair or

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fraudulent business act or practice.” Cal. Bus. & Prof. Code § 17200. The CLRA

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outlaws “unfair methods of competition and unfair or deceptive acts or practices”

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undertaken in the course of consumer transactions. Cal. Civ. Code § 1770.

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Standing under these statutes requires a plaintiff to demonstrate both injury and

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reliance. Under the FAL and UCL, the injury complained of must be an “economic

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injury”—i.e., injury in the form of “lost money or property.” Hinojos v. Kohl’s Corp.,

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718 F.3d 1098, 1104 (9th Cir. 2013) (quoting Kwikset Corp. v. Superior Court, 246

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P.3d 877, 885 (Cal. 2011)). Under the CLRA, the injury may be based on “any

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damage” resulting from an unlawful or deceptive business practice. Cal. Civ. Code §

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1770. To plead reliance under these statutes, a consumer must allege she would not

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have purchased the product, or paid as much for the product, absent the defendant’s

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misrepresentations or omissions. Reid v. Johnson & Johnson, 780 F.3d 952, 958 (9th

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Cir. 2015).

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Here, the Court finds Plaintiffs have alleged both injury and reliance sufficient

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to establish standing under the FAL, UCL, and CLRA. With respect to injury,

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Plaintiffs Price and Edgemon allege that Defendants’ fraudulent conduct resulted in

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charges of $71 and $190 to their credit cards, respectively. These allegations state a

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loss of money or property sufficient to satisfy economic injury under the FAL and

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UCL, and by extension the “any damage” requirement of the CLRA. Defendants

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contend that a credit card charge cannot constitute economic injury absent allegations

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that Plaintiffs actually paid the charge, but that argument is unconvincing. Economic

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injury under the FAL and UCL may be shown in “innumerable ways,” Kwikset, 246

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P.3d at 885, and in a modern economy in which credit card transactions are a

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ubiquitous feature, deprivation of a consumer’s credit line is surely among the most
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common. Defendants cite no authority for their “cash only” theory of economic

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injury.

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Defendants also argue that Plaintiffs fail to plead economic injury because

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Plaintiffs authorized the charges they now cite as the source of injury. As evidence

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of Plaintiffs’ authorization, Defendants point to the fact that the automatic renewal

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terms were disclosed on the order page on which Plaintiffs entered their credit card

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information and completed their order.

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This argument is unavailing and overlooks the very gravamen of Plaintiffs’

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claims. Plaintiffs do not argue the charges were unauthorized in the sense of being

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carried out without Plaintiffs having entered their credit card information. Rather,

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Plaintiffs argue the charges were unauthorized in the sense that Defendants charged

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their credit cards without presenting the automatic renewal terms in a clear and

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conspicuous manner beforehand. Thus, because Plaintiffs allege that the credit card

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charges stem from Defendants’ deceptive conduct, those charges constitute economic

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injury cognizable under the FAL, UCL, and CLRA.

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Plaintiffs’ allegations of reliance are also sufficient. To establish reliance under

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the FAL, UCL, and CLRA, a plaintiff must show that the misrepresentation or

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omission was “an immediate cause of the injury-producing conduct.” Daniel v. Ford

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Motor Co., 806 F.3d 1217, 1225 (9th Cir. 2015); see also Kwikset, 246 P.3d at 887–

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88. A plaintiff can satisfy this requirement by alleging she would not have purchased

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the product, or paid as much for the product, absent the misrepresentation or

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omission. Hinojos, 718 F.3d at 1104–05.

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Plaintiffs meet the reliance requirement here. The SAC alleges that because

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Defendants failed to present automatic renewal terms in a clear and conspicuous

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manner, Plaintiffs did not know they were enrolling in automatic renewal programs

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when they made their initial purchases. (SAC ¶¶ 29–33, 35.) Plaintiffs further allege

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that if they had known that Defendants were going to enroll them in automatic

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subscription programs, they would not have ordered magazines in the first place. (Id.
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¶¶ 34, 36.) These allegations—which emphasize the role of Defendants’ alleged

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misconduct in causing Plaintiffs’ injury—suffice to plead reliance. See Reid, 780 F.3d

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at 958 (finding that plaintiff satisfied the reliance requirement under the FAL, UCL,

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and CLRA where he alleged he would not have paid as much for the product at issue,

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if anything, if he had not been misled by defendant’s misrepresentations); see also

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Daniel, 806 F.3d at 1225 (“To prove reliance on an omission, a plaintiff must show

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that the defendant’s nondisclosure was an immediate cause of the plaintiff’s injury-

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producing conduct. A plaintiff need not prove that the omission was the only cause

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or even the predominant cause, only that is was a substantial factor in his decision.”).

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C.

Sufficiency of Plaintiffs’ ARL Allegations

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Plaintiffs’ claims under the FAL, UCL, CLRA, and for unjust enrichment and

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conversion are all premised on Defendants’ alleged violations of the Automatic

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Renewal Law. Defendants argue that Plaintiffs do not sufficiently allege a violation

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of the ARL, and therefore, all of the claims to which the alleged ARL violations give

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rise must be dismissed.

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1.

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The purpose of the ARL is to protect consumers from unwittingly consenting

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to automatic renewals of subscription orders. See Cal. Bus. & Prof. Code § 17600.

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To advance this purpose, the statute makes it unlawful for any business making an

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automatic renewal offer to consumers in California to do any of the following:

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Allegations under Cal. Bus. & Prof. Code § 17602(a)

(1) Fail to present automatic renewal offer terms in a clear and
conspicuous manner before the subscription agreement is fulfilled,
and in visual proximity to the request for consent to the offer. Cal.
Bus. & Prof. Code § 17602(a)(1).

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(2) Charge the consumer’s credit, debit, or third-party payment account
without first obtaining the consumer’s affirmative consent to the
agreement containing the automatic renewal offer terms. Cal. Bus. &
Prof. Code § 17602(a)(2).
(3) Fail to provide an acknowledgement that includes the automatic
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renewal offer terms, cancellation policy, and information regarding
how to cancel in a manner that is capable of being retained by the
consumer. Cal. Bus. & Prof. Code § 17602(a)(3).

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Under the ARL, the “automatic renewal offer terms” that must be disclosed in

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a clear and conspicuous manner include “[t]he recurring charges that will be charged

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to the consumer’s credit or debit card or payment account with a third party as part

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of the automatic renewal plan.” Cal. Bus. & Prof. Code § 17601(b)(3). “Clear and

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conspicuous” means “in larger type than the surrounding text, or in contrasting type,

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font, or color to the surrounding text of the same size, or set off from the surrounding

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text of the same size by symbols or other marks, in a manner that clearly calls

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attention to the language.” Cal. Bus. & Prof. Code § 17601(c).

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Here, Defendants argue that Plaintiffs (1) fail to allege facts suggesting the

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automatic renewal offer terms were not presented in a clear and conspicuous manner;

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(2) fail to sufficiently allege they did not receive the required acknowledgement; and

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(3) fail to allege that Defendants’ purported violation of the ARL was intentional.

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(MTD, 13:10–18:13.) Defendants also argue that even if Plaintiff Price’s allegations

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are sufficient, Plaintiff Edgemon fails to allege sufficient facts to state a claim and

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must be dismissed. (Id., 13:16–25.) Finally, Defendants argue that Plaintiffs fail to

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allege facts to support their alternative theory of liability that Defendants violated the

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ARL by failing to notify Plaintiffs of a material change to the renewal offer. (Id.,

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16:7–23.) With the exception of Defendants’ motion to dismiss Plaintiffs’ alternative

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theory, the Court finds Defendants’ arguments unpersuasive.

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Defendants’ first argument—that Plaintiffs do not sufficiently allege a failure

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to present the automatic renewal terms in a clear and conspicuous manner—does not

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withstand the Court’s obligation to accept well-pleaded factual allegations as true and

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draw all reasonable inferences in Plaintiffs’ favor. Plaintiffs attach to the SAC a copy

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of the order page containing the automatic renewal offer terms, and allege that the

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font size, format, and placement of the terms violate the ARL’s clear and conspicuous

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requirement. (SAC, Exh. 17.)3 Specifically, Plaintiffs point out that the renewal terms

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are in “small font” located below the space where consumers enter their credit card

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information (SAC ¶ 32); that the terms themselves are in the middle of a paragraph

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in “tiny print” that contains other information unrelated to automatic renewal (Id. ¶¶

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30, 32); and that the small text of the terms are placed near a “large red button” labeled

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“Complete” (Id. ¶ 32). Additionally, the renewal offer terms do not specify the

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amount of recurring charges to be charged, or that the renewal rate may change. These

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allegations are sufficient to state a violation of the ARL’s clear and conspicuous

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requirement. Read in the light most favorable to Plaintiffs, the SAC plausibly alleges

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that Defendants failed to present the text “in larger type than the surrounding text, or

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in contrasting type, font, or color to the surrounding text of the same size, or set off

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from the surrounding text . . . in a manner that clearly calls attention to the language.”

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Cal. Bus. & Prof. Code § 17601(c). Thus, the motion to dismiss the SAC on this

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ground is denied.

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Defendants next argue that Plaintiffs fail to plead facts plausibly suggesting

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they did not receive an ARL-compliant acknowledgement because the order page that

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contains the automatic renewal terms could have been printed and retained by

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Plaintiffs. This argument is unavailing. To comply with the ARL, an

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acknowledgment must clearly and conspicuously disclose the automatic renewal

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offer terms, including the recurring charges to be charged to the consumer, and must

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be presented in a manner that is capable of being retained by the consumer. Cal. Bus.

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& Prof. Code § 17602(a)(3); see also id. § 17601(b). The order page may have been

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On a motion to dismiss for failure to state a claim, the court “may consider facts contained in
documents attached to the complaint.” Nat’l Ass’n for Advancement of Psychoanalysis v. California
Bd. of Psychology, 228 F.3d 1043, 1049 (9th Cir. 2000) (citing Roth v. Garcia Marquez, 942 F.2d
617, 625 n.1 (9th Cir. 1991) (“If a complaint is accompanied by attached documents, the court is
not limited by the allegations contained in the complaint. These documents are part of the complaint
and may be considered in determining whether the plaintiff can prove any set of facts in support of
the claim.”). Accordingly, the Court properly considers the online order page attached as Exhibit
17 to the SAC.
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capable of being retained, but the crux of Plaintiffs’ allegations is that the

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acknowledgement was otherwise insufficient in both form and substance. Plaintiffs

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allege that the disclosure paragraph on the order page is not presented in a clear and

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conspicuous manner, and they present a copy of the page showing that the renewal

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terms do not specify the recurring charges as required. (ECF No. 13-17 at 11.) Thus,

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even if Plaintiffs had printed and retained the order page, doing so would not negate

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allegations that Defendants failed to present the renewal terms clearly and

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conspicuously, nor cure the alleged defects in the content of the terms themselves,

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such as failure to include the amount of recurring charges. Plaintiffs’ claim that

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Defendants failed to provide an ARL-compliant acknowledgment cannot be defeated

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by reference to the very disclosures Plaintiffs allege violate the ARL. The motion to

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dismiss this portion of the SAC is denied.

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Defendants next argue that Plaintiffs’ claims fail because they do not allege an

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intentional violation of the ARL. However, there is no intent requirement to state a

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claim under the ARL. Defendants’ only citation to support this assertion is Cal. Bus.

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& Prof. Code § 17604(b), which provides a good faith defense to liability. Cal. Bus.

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& Prof. Code § 17604(b) (“If a business complies with the provisions of this article

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in good faith, it shall not be subject to civil remedies.”). But the availability of a good

19

faith defense does not create a scienter requirement to state a claim. On a motion to

20

dismiss, Defendants cannot defeat a claim by referencing an affirmative defense not

21

clearly established by the complaint, and on which Defendants bear the burden to

22

demonstrate. See Brownmark Films, LLC v. Comedy Partners, 682 F.3d 687, 690 (7th

23

Cir. 2012) (“[A] plaintiff may state a claim even though there is a defense to that

24

claim. The mere presence of a potential affirmative defense does not render the claim

25

for relief invalid.”). Thus, Defendants’ motion to dismiss the SAC on this ground

26

fails.

27

Finally, Defendants move to dismiss Plaintiff Edgemon from the suit, arguing

28

that even if Plaintiff Price’s allegations are sufficient, Edgemon’s are too conclusory
– 13 –

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1

to state a claim. The Court disagrees. Edgemon’s allegations are virtually identical to

2

Price’s—she alleges the automatic renewal terms were not presented in a clear and

3

conspicuous manner; she alleges the form and content of the renewal terms with

4

reference to the same order page; she alleges she would not have ordered the

5

magazine subscriptions if the renewal terms had been presented in a clear and

6

conspicuous manner; and she alleges economic injury in the form of charges to her

7

credit card. (SAC ¶¶ 30–32, 35, 36, 46, 56.) The only differences in the allegations

8

are the number of magazine subscriptions initially ordered and the amount

9

Defendants charged Plaintiffs’ credit cards upon renewing the subscriptions.

10

Variations in these facts do not undermine the sufficiency of Edgemon’s allegations.

11

Therefore, the Court finds that Edgemon’s allegations are sufficient to state a

12

plausible claim for relief. The motion to dismiss Edgemon’s claims is denied.

13

2.

14

Plaintiffs’ Alternative Theory under Cal. Bus. & Prof. Code
§ 17602(c)

15

Defendants also move to dismiss Plaintiffs’ alternative theory that Defendants

16

violated § 17602(c) of the ARL, which requires businesses to provide consumers a

17

clear and conspicuous notice of a “material change” in the terms of an automatic

18

renewal offer previously accepted by the consumer. The Court agrees this claim

19

should be dismissed. The allegations Plaintiffs proffer to support this theory of

20

liability amount to little more than a recitation of the elements of the relevant claim,

21

rather than factual content to support the claim. For example, the SAC does not allege

22

the terms of the automatic renewal offer originally accepted by Plaintiffs, nor how

23

the rate charged for the renewed subscriptions reflects a “material change” from the

24

original terms. Absent such allegations, Plaintiffs cannot state a claim for relief based

25

on § 17602(c). See Twombly, 550 U.S. at 555 (noting that stating a plausible claim

26

for relief sufficient to survive dismissal under Rule 12(b)(6) requires more than a

27

“formulaic recitation” of the elements of a claim).

28

D.

CLRA Claims
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1

Defendants next argue that even if Plaintiffs sufficiently allege a violation of

2

the ARL, Plaintiffs’ CLRA claims must nonetheless be dismissed because Plaintiffs

3

fail to allege facts sufficient to state a violation of any of the four provisions on which

4

those claims rest. (MTD, 18:18–20:16.) The Court agrees in part.

5

1.

6

Section 1770(a)(5) of the CLRA makes it unlawful to represent that goods or

7

services have sponsorship, characteristics, or benefits that they do not have. Cal. Civ.

8

Code § 1770(a)(5). The provision proscribes both fraudulent omissions and

9

fraudulent affirmative misrepresentations. Herron v. Best Buy Co. Inc., 924 F. Supp.

10

2d 1161, 1169 (E.D. Cal. 2013). Defendants argue that Plaintiffs fail to allege any

11

relevant facts to state a claim under this provision.

Claim under Cal. Civ. Code § 1770(a)(5)

12

The Court disagrees. Here, Plaintiffs allege that Defendants advertised

13

discounted magazine subscriptions without adequately disclosing the terms of the

14

automatic renewal features attached to those subscriptions. Put another way,

15

Plaintiffs allege that by not adequately disclosing the automatic renewal features tied

16

to the subscriptions, Defendants represented that the subscriptions had a characteristic

17

they did not have—namely, the absence of an automatic renewal feature. The Court

18

finds these allegations sufficient to state a claim under § 1770(a)(5). Thus,

19

Defendants motion to dismiss Plaintiffs’ claim under § 1770(a)(5) is denied.

20

2.

21

Section 1770(a)(9) of the CLRA prohibits a business from “[a]dvertising goods

22

or services with intent not to sell them as advertised.” Cal. Civ. Code § 1770(a)(9).

23

Defendants argue that Plaintiffs fail to state a claim under § 1770(a)(9) because there

24

is no allegation that Defendants failed to provide the magazines Plaintiffs selected,

25

or failed to honor a previously-advertised price for the renewed subscriptions.

Claim under Cal. Civ. Code § 1770(a)(9)

26

Defendants’ arguments are unavailing. Here, Plaintiffs allege that Defendants

27

advertised magazine subscriptions at discounted rates with intent to sell subscriptions

28

that automatically renewed at much higher rates. In other words, Defendants
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1

advertised one type of magazine subscription with intent to sell a different type. These

2

allegations are sufficient to state a claim under § 1770(a)(9). The fact that Defendants

3

may have disclosed, on the order page, that the subscriptions came with automatic

4

renewal features does not change the representation in the advertisement, which

5

makes no mention of a price increase for automatic renewals. The advertisement itself

6

simply invites consumers to take advantage of discounted magazine subscriptions.

7

On these allegations, the Court finds Plaintiffs state a plausible claim that Defendants

8

advertised the magazines “with intent not to sell them as advertised.” Cal. Civ. Code

9

§ 1770(a)(9). Accordingly, Defendants’ motion to dismiss Plaintiffs’ claim under §

10

1770(a)(9) is denied.

11

3.

12

Section 1770(a)(13) of the CLRA prohibits “[m]aking false or misleading

13

statements of fact concerning reasons for, existence of, or amounts of, price

14

reductions.” Cal. Civ. Code § 1770(a)(13). Defendants argue that Plaintiffs fail to

15

state a claim under this provision because Plaintiffs allege no facts regarding a price

16

reduction, or any false or misleading statements concerning a price reduction.

Claim under Cal. Civ. Code § 1770(a)(13)

17

The Court agrees with Defendants. Defendants advertised the discounted rate

18

of $2.00 per subscription as a “reward” for filling out an online survey. This statement

19

was not false or misleading. Plaintiffs completed the survey and, as they acknowledge

20

in the SAC, they were thereafter able to purchase initial subscriptions at the $2.00

21

rate. (SAC ¶ 28.) Plaintiffs argue that Defendants’ representation of the $2.00 rate as

22

a “reward” was misleading because the discount was intended to trick them into

23

enrolling in automatic subscription programs. But such allegations go to the

24

sufficiency of Defendants’ disclosure of the renewal terms, rather than to the truth of

25

the basis for the discount itself. Businesses routinely offer discounts as “rewards” for

26

various actions taken by consumers, and the fact that such discounts are intended to

27

entice future purchases does not render the premise of the discount false or

28

misleading. To adopt the contrary view would render every “holiday sale” or “podcast
– 16 –

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1

listener discount” susceptible to attack as a false or misleading statement concerning

2

a price reduction. The CLRA does not prohibit such routine promotional efforts.

3

Here, the Court finds Plaintiffs have not alleged facts suggesting Defendants’

4

portrayal of the discount as a “reward” was false or misleading. Accordingly,

5

Defendants’ motion to dismiss Plaintiffs’ claim under § 1770(a)(13) is granted.

6

4.

7

Section 1770(a)(17) of the CLRA makes it unlawful to represent that a

8

consumer “will receive a rebate, discount, or other economic benefit, if the earning

9

of the benefit is contingent on an event to occur subsequent to the consummation of

10

the transaction.” Cal. Civ. Code § 1770(a)(17). Defendants argue that Plaintiffs fail

11

to state a claim under this provision because they have not alleged a future event on

12

which the discounted rate was contingent. The Court agrees.

Claim under Cal. Civ. Code § 1770(a)(17)

13

Plaintiffs’ claim under § 1770(a)(17) rests on allegations that the discounted

14

rate of $2.00 was contingent on Plaintiffs’ enrollment in an automatic renewal

15

program. These allegations, however, do not suggest that enrollment was an event

16

that occurred “subsequent to the consummation of the transaction.” Cal. Civ. Code §

17

1770(a)(17). In fact, enrollment in an automatic renewal program was part of the

18

transaction itself—it occurred concurrent with Plaintiffs’ initial purchases. Although

19

Plaintiffs allege that Defendants’ deceptive practices resulted in an unexpected

20

charge upon renewal of their subscriptions, Plaintiffs cannot allege that the initial

21

discount was contingent on them being charged at the higher renewal rate the

22

following year. Plaintiffs paid the $2.00 rate for their initial subscriptions, and they

23

would have enjoyed that rate even if they cancelled the automatic renewal feature

24

after their initial purchases. Thus, Plaintiffs have not alleged a subsequent event on

25

which the initial discount was contingent. Accordingly, Defendants’ motion to

26

dismiss Plaintiffs’ claim under § 1770(a)(17) is granted.

27

E.

28

Conversion
The Court turns now to Defendants’ motion to dismiss Plaintiffs’ claim for
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conversion. Defendants argue the conversion claim must be dismissed because

2

Plaintiffs fail to allege a special relationship between the parties. (MTD, 20:17–

3

21:11.) Plaintiffs respond that allegations of a special relationship are not required to

4

state a conversion claim, and that the SAC contains sufficient facts to state a plausible

5

claim for relief. (Opp’n, 14.)

6

“Conversion is the wrongful exercise of dominion over the property of

7

another.” Lee v. Hanley, 354 P.3d 334, 344 (Cal. 2015) (quoting Welco Elecs., Inc. v.

8

Mora, 166 Cal. Rptr. 3d 877, 881 (Ct. App. 2014)). To state a claim for conversion,

9

a plaintiff must allege: (1) ownership or right to possession of the property, (2)

10

wrongful disposition of the property right, and (3) damages. Welco, 166 Cal. Rptr. 3d

11

at 881 (citation omitted). Money may constitute property for purposes of a conversion

12

claim if the claim involves a specific, identifiable sum. Id. at 882. Credit card, debit

13

card, and third-party payment account information may also be the subject of

14

conversion. Id. at 885.

15

Here, Plaintiffs allege a property right in their credit card accounts, wrongful

16

disposition of money from the available credit lines on those accounts, and damages

17

in the form of charges to their credit cards. (SAC ¶¶ 29, 33–36, 69.) Plaintiffs further

18

allege that the amount of money wrongfully taken is capable of identification. (Id. ¶

19

70.) These allegations are sufficient to state a conversion claim. See In re Easysaver

20

Rewards Litig., 737 F. Supp. 2d 1159, 1180 (S.D. Cal. 2010) (finding plaintiffs stated

21

a conversion claim based on the misuse of their credit card, debit card, and PayPal

22

account information and the resulting charges); Welco, 166 Cal. Rptr. 3d at 882–87

23

(determining that plaintiff sufficiently pleaded conversion where defendant

24

misappropriated plaintiff’s credit card and wrongfully transferred money from the

25

plaintiff’s available credit line).

26

Defendants’ sole argument for dismissing the conversion claim is that

27

Plaintiffs were required to plead facts demonstrating a special relationship between

28

the parties and failed to do so. Citing Williamson v. Reinalt-Thomas Corp., No. 5:11–
– 18 –

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1

CV–03548–LHK, 2012 WL 1438812 (N.D. Cal. Apr. 25, 2012), Defendants maintain

2

that whenever money is the subject of a conversion claim, the complaint must include

3

allegations of a special relationship. The Court finds Defendants’ reading of

4

Williamson unpersuasive.

5

In Williamson, the plaintiff brought a conversion claim based on allegations

6

that defendants charged his credit card a $5.00 fee without his knowledge. The

7

plaintiff had agreed to pay a previously quoted amount for tires and tire installation,

8

but alleged he was not told, and did not realize until months later, that the quoted

9

amount included a tire disposal fee. Id. at *1–2. Judge Lucy Koh dismissed the

10

conversion claim, noting that California cases involving conversion of money

11

“typically” involve the misappropriation of funds held for the benefit of others, and

12

finding that plaintiff had not alleged “a special relationship between the parties” such

13

that defendants violated a duty with regard to plaintiff’s funds. Id. at *4–5.

14

Judge Koh’s holding, however, was not as far-reaching as Plaintiffs suggest.

15

Although Judge Koh found it relevant the plaintiff had not alleged a special

16

relationship between the parties, she did not explicitly elevate the existence of such a

17

relationship to a required element of a conversion claim. Instead, Judge Koh noted

18

the general rule, and found that on the facts before her the plaintiff failed to state a

19

claim. This Court declines to extend the Williamson court’s description of a “typical”

20

case for conversion of money into a required element of what every such claim must

21

allege. And even if Williamson stood for the proposition Defendants advance here,

22

this Court would find that decision unpersuasive and, in any event, would not be

23

bound by it. See Camreta v. Greene, 563 U.S. 692, 709 n.7 (2011) (“A decision of a

24

federal district court judge is not binding precedent in either a different judicial

25

district, the same judicial district, or even upon the same judge in a different case.”)

26

(citation omitted). Defendants’ motion to dismiss the conversion claim is denied.

27

F.

28

Unjust Enrichment
Defendants move to dismiss Plaintiffs’ unjust enrichment claim on grounds
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1

that California does not recognize unjust enrichment as an independent cause of

2

action. (MTD, 21:12–22.) Working from the assumption that Plaintiffs fail to state a

3

claim under the FAL, UCL, and CLRA, Defendants argue there is no predicate claim

4

on which to base the unjust enrichment claim, and therefore, the unjust enrichment

5

claim must be dismissed.

6

As an initial matter, Defendants are correct that there is no independent cause

7

of action in California for unjust enrichment. Durell v. Sharp Healthcare, 108 Cal.

8

Rptr. 3d 682, 699 (Ct. App. 2010) (citations omitted). But “unjust enrichment is

9

synonymous with restitution,” Id., and “[c]ommon law principles of restitution

10

require a party to return a benefit when the retention of such benefit would unjustly

11

enrich the recipient,” Munoz v. MacMillan, 124 Cal. Rptr. 3d 664, 675 (Ct. App.

12

2011). On this basis, the Ninth Circuit has explained that “[w]hen a plaintiff alleges

13

a claim of unjust enrichment, a court ‘may construe the cause of action as a quasi-

14

contract claim seeking restitution.’” Astiana v. Hain Celestial Grp., Inc., 783 F.3d

15

753, 762 (9th Cir. 2015) (quoting Rutherford Holdings, LLC v. Plaza Del Rey, 166

16

Cal. Rptr. 3d 864, 872 (Ct. App. 2014)). A plaintiff may seek restitution on a quasi-

17

contract theory “where the defendant obtained a benefit from the plaintiff by fraud,

18

duress, conversion, or similar conduct.” Durell, 108 Cal. Rptr. 3d at 699.

19

Here, Plaintiffs allege that Defendants misled them by failing to adequately

20

disclose the automatic renewal terms of the magazine subscriptions ordered by

21

Plaintiffs, and that Plaintiffs would not have purchased the subscriptions if

22

Defendants had disclosed the terms in a clear and conspicuous manner. Plaintiffs also

23

allege that because Defendants obtained funds from Plaintiffs based on an unlawful

24

marketing scheme, Defendants’ retention of those funds has resulted in their unjust

25

enrichment. These allegations are sufficient to state a quasi-contract claim for

26

restitution. See ESG Capital Partners, LP v. Stratos, 828 F.3d 1023, 1039 (9th Cir.

27

2016) (explaining that allegations of fraud resulting in the defendants’ unjust

28

enrichment sufficiently state a claim under quasi-contract); Azimpour v. Sears,
– 20 –

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1

Roebuck & Co., No. 15-CV-2798 JLS (WVG), 2017 WL 1496255, at *10 (S.D. Cal.

2

Apr. 26, 2017) (construing unjust enrichment claim as quasi-contract claim for

3

restitution where plaintiff alleged that defendant’s deceptive pricing and advertising

4

practices induced plaintiff to purchase merchandise he otherwise would not have

5

purchased). Accordingly, Defendants’ motion to dismiss Plaintiffs’ unjust

6

enrichment claim is denied. The Court will construe Plaintiffs’ unjust enrichment

7

claim as a quasi-contract claim for restitution.

8

G.

Whether Time is a Proper Defendant

9

The Court turns now to Defendants’ argument that Time—the parent

10

corporation of Synapse—is not a proper defendant and must be dismissed from the

11

case. Specifically, Defendants contend that Plaintiffs have not sufficiently alleged

12

that Time is liable under either an alter ego or agency theory. (MTD, 22:16–25:8.)

13

1.

14

It is a fundamental principle of corporate law that a parent and its subsidiary

15

are separate legal entities. See United States v. Bestfoods, 524 U.S. 51, 61 (1998).

16

This principle of corporate separateness generally “insulates a parent corporation

17

from liability created by its subsidiary, notwithstanding the parent’s ownership of the

18

subsidiary.” Ranza v. Nike, Inc., 793 F.3d 1059, 1070 (9th Cir. 2015). However, when

19

the corporate form is used to perpetrate a fraud or accomplish some other inequitable

20

purpose, a court may disregard the corporate form, and impute the acts of a subsidiary

21

to the parent, under the theory that the subsidiary is an “alter ego” of the parent.

22

Sonora Diamond Corp. v. Superior Court, 99 Cal. Rptr. 2d 824, 836 (Ct. App. 2000).

23

The alter ego doctrine prevents a parent corporation from escaping liability for

24

wrongful acts committed by a subsidiary that is, in effect, a sham corporation. Id.; see

25

also Hennessey’s Tavern, Inc. v. Am. Air Filter Co., 251 Cal. Rptr. 859, 862 (Ct. App.

26

1988) (“The purpose behind the alter ego doctrine is to prevent defendants who are

27

the alter egos of a sham corporation from escaping personal liability for its debts.”)

28

(citation omitted).

Alter Ego Liability

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1

A plaintiff seeking to invoke the alter ego doctrine must allege: (1) that there

2

is such a unity of interest and ownership between a subsidiary and its parent

3

corporation that the separate personalities of the two do not exist; and (2) that failure

4

to disregard the corporate form would lead to an unjust result. See Sonora, 99 Cal.

5

Rptr. 2d at 836. Conclusory allegations of alter ego status are insufficient. “Rather, a

6

plaintiff must allege specific facts supporting both of the necessary elements.”

7

Gerritsen v. Warner Bros. Entm’t Inc., 116 F. Supp. 3d 1104, 1136 (C.D. Cal. 2015);

8

see also Johnson v. Serenity Transp., Inc., 141 F. Supp. 3d 974, 984 (N.D. Cal. 2015).

9

Because it involves an exception to basic principles of corporate law, “[a]lter ego is

10

an extreme remedy, sparingly used.” Highland Springs Conference & Training Ctr.

11

v. City of Banning, 199 Cal. Rptr. 3d 226, 236 (Ct. App. 2016) (quoting Sonora, 99

12

Cal. Rptr. 2d at 836).

13

Under the first prong of the alter ego test, California courts consider several

14

factors to determine whether there is a unity of interest and ownership between a

15

parent and its subsidiary. These include: (1) the commingling of funds and other

16

assets, (2) identical equitable ownership of the two entities, (3) use of the same offices

17

and employees, (4) use of the subsidiary as a mere shell for the affairs of the parent,

18

(5) failure to maintain adequate corporate records, (6) failure to adequately capitalize

19

the subsidiary, and (7) the holding out by the parent that it is liable for the debts of

20

the subsidiary. See Gerritsen, 116 F. Supp. 3d at 1137; see also Perfect 10, Inc. v.

21

Giganews, Inc., No. CV 11-07098-AB (SHx), 2015 WL 12710753, at *2 (C.D. Cal.

22

June 3, 2015). This list is not exhaustive, and no single factor controls. A court must

23

examine all the circumstances to determine whether the complaint states a plausible

24

claim for liability under an alter ego theory. VirtualMagic Asia, Inc. v. Fil-Cartoons,

25

Inc., 121 Cal. Rptr. 2d 1, 13 (Ct. App. 2002).

26

Here, Plaintiffs make five allegations they believe indicate a unity of interest

27
28
– 22 –

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1

and ownership between Time and Synapse:4 (1) Synapse is a wholly-owned

2

subsidiary of Time; (2) there is such a unity of interest between Time and Synapse

3

that their corporate separateness has ceased; (3) Time so controls and conducts the

4

affairs of Synapse as to render Synapse a mere instrumentality of Time; (4) Synapse

5

plays an important role in generating revenue for Time; and (5) disregard of

6

Synapse’s corporate form is necessary to avoid an unjust result. (SAC ¶¶ 5, 15, 18,

7

38.) The Court finds these allegations do not plead a plausible claim for alter ego

8

liability.

9

First, the fact that Synapse is a wholly-owned subsidiary of Time does not, in

10

itself, indicate a unity of interest sufficient to state a claim under an alter ego theory.

11

Gerritsen, 116 F. Supp. 3d at 1137 (finding that sole ownership by parent corporation

12

of subsidiaries, standing alone, is insufficient to demonstrate alter ego relationship);

13

NetApp, Inc. v. Nimble Storage, Inc., No. 5:13-CV-05058-LHK (HRL), 2015 WL

14

400251, at *6 (finding that a parent corporation’s 100% control of a subsidiary

15

through stock ownership “does not by itself make a subsidiary the alter ego of the

16

parent”) (quoting Harris Rusky & Co. Ins. Servs. v. Bell & Clements Ltd., 328 F.3d

17

1122, 1135 (9th Cir. 2003)). Synapse’s status as a wholly-owned subsidiary of Time

18

may raise the possibility of a unity of interest between the two, but it does not, of its

19

own force, suffice to state an alter ego claim against Time.

20

Second, Plaintiffs’ allegations regarding Synapse’s important role in

21

generating revenue for Time is bereft of factual content suggesting something beyond

22

a typical parent-subsidiary relationship. That a parent corporation benefits financially

23

from the operations of its subsidiary is a normal feature of corporate operations; it

24
25
26
27
28

For ease of presentation, the Court uses “Synapse” in this section to refer collectively to both
Synapse Group, Inc. and SynapseConnect, Inc. However, to be clear, the Court notes here that
Plaintiffs allege there is a unity of interest and ownership between Time and both Synapse entities
such that Time is liable under an alter ego theory. (The SAC alleges that SynapseConnect is a
wholly-owned subsidiary of Synapse Group, and that Synapse Group is a wholly-owned subsidiary
of Time.) The Court’s use of the single label “Synapse” to refer collectively to both entities does
not impact the analysis.
4

– 23 –

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1

does not, without more, suggests abuse of the corporate form. See Sonora, 99 Cal.

2

Rptr. 2d at 838 (recognizing that the relationship of a parent and subsidiary

3

“contemplates a close financial connection” between the two “and a certain degree of

4

direction and management exercised by the former over the latter”).

5

Finally, Plaintiffs’ remaining allegations are legal conclusions couched as

6

factual allegations. For example, Plaintiffs allege “such a unity of interest” between

7

Time and Synapse that corporate separateness has ceased, and that Time’s control of

8

Synapse has rendered the latter a “mere instrumentality” of the former. (SAC ¶ 5.)

9

Such allegations, presented as they are without factual content, merely restate the

10

elements of alter ego liability. This is insufficient to state a claim. Gerritsen, 116 F.

11

Supp. 3d at 1136 (“Conclusory allegations of alter ego status are insufficient to state

12

a claim. Rather, a plaintiff must allege specific facts supporting both of the necessary

13

elements.”); see also Twombly, 550 U.S. at 555 (explaining that stating a plausible

14

claim for relief requires more than “labels and conclusions” or “a formulaic recitation

15

of the elements of a cause of action”).

16

In their opposition, Plaintiffs emphasize they do not have the “range of

17

evidentiary proof” at this stage of the litigation to establish Time’s liability under an

18

alter ego theory, and they urge the Court to allow them to proceed to discovery on the

19

issue. (Opp’n, 16.) Plaintiffs’ premise is misplaced. The deficiency in Plaintiffs’ SAC

20

is not a lack of proof, but rather a lack of factual allegations to state a claim. Where,

21

as here, Plaintiffs have not alleged sufficient factual matter to state a plausible claim

22

for relief, they are “not entitled to discovery, cabined or otherwise.” Iqbal, 556 U.S.

23

at 686. Accordingly, Plaintiffs’ claim against Time under an alter ego theory is

24

dismissed.5

25
26
5

27
28

Because Plaintiffs have not sufficiently alleged a unity of interest between Time and Synapse
under the first prong of the alter ego test, the Court does not address whether Plaintiffs satisfy the
second, “inequitable result” prong of the test.
– 24 –

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1

2.

2

Plaintiffs also allege Time is liable under an agency theory. Under an agency

3

theory, a parent corporation may be held liable for the acts of a subsidiary when the

4

parent’s control is so “pervasive and continual” as to render the subsidiary nothing

5

more than an “instrumentality of the parent.” Sonora, 99 Cal. Rptr. 2d at 838; see

6

also Pantoja v. Countrywide Home Loans, Inc., 640 F. Supp. 2d 1177, 1192 (N.D.

7

Cal. 2009). The parent’s general executive control over the subsidiary is not enough;

8

rather, there must be a degree of oversight and policy control well beyond that found

9

in the typical parent-subsidiary relationship. Sonora, 99 Cal. Rptr. 2d at 838–39; see

10

also Van Maanen v. Youth With a Mission–Bishop, 852 F. Supp. 2d 1232, 1249 (E.D.

11

Cal. 2012) (“The control exercised in a typical parent-subsidiary relationship is

12

insufficient to create an agency relationship.”). “As a practical matter, the parent must

13

be shown to have moved beyond the establishment of general policy and direction

14

for the subsidiary and in effect taken over performance of the subsidiary’s day-to-day

15

operations in carrying out that policy.” Sonora, 99 Cal. Rptr. 2d at 839; see also

16

whiteCryption Corp. v. Arxan Techs., Inc., No. 15–cv–00754–WHO, 2015 WL

17

3799585, at *2 (N.D. Cal. June 18, 2015).

Agency Liability

18

In support of their agency theory, Plaintiffs allege the same facts presented to

19

support their alter ego argument, namely, that Synapse is a wholly-owned subsidiary

20

of Time; that Synapse plays an important role in generating revenue for Time; and

21

that Time so controls and conducts the affairs of Synapse as to render Synapse a mere

22

instrumentality of Time. As was the case with respect to Plaintiffs’ alter ego theory,

23

the Court finds these allegations insufficient to state a claim for agency liability.

24

First, allegations that Synapse is a wholly-owned subsidiary of Time, and plays

25

an important role in generating revenue for Time, suggest nothing more than a normal

26

parent-subsidiary relationship. These allegations do not speak to a level of pervasive

27

and continual control that suggests Synapse is nothing more than an instrumentality

28

of Time. See Higley v. Cessna Aircraft Co., No. CV 10–3345–GHK (FMOx), 2010
– 25 –

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1

WL 3184516, at *3 (C.D. Cal. July 21, 2010) (finding allegations that a parent

2

corporation exercised general supervisory control over its wholly-owned subsidiary

3

to be “entirely consistent with a legitimate relationship expected between a parent

4

and a wholly-owned subsidiary”).

5

In addition, the allegation that Synapse “so controls and conducts the affairs of

6

Synapse as to render Synapse a mere instrumentality” of Time is a mere recitation of

7

the relevant legal standard. Plaintiffs have not pleaded factual allegations supporting

8

the level of operational control they assert—for example, they do not allege that Time

9

controls Synapse’s day-to-day marketing efforts or directs the policy governing

10

Synapse’s automatic renewal strategy. See Sonora, 99 Cal. Rptr. 2d at 839. Thus,

11

Plaintiffs have not pleaded sufficient factual content to support their claim against

12

Time under an agency theory, and cannot survive a motion to dismiss that claim. See

13

Iqbal, 556 U.S. at 679 (“While legal conclusions can provide the framework of a

14

complaint, they must be supported by factual allegations.”); Starr v. Baca, 652 F.3d

15

1202, 1216 (9th Cir. 2011) (explaining that to survive a motion to dismiss, “the

16

factual allegations that are taken as true must plausibly suggest an entitlement to

17

relief”) (emphasis added). Accordingly, Plaintiffs’ claim against Time under an

18

agency theory is dismissed.

19

H.

Article III Standing for Injunctive Relief

20

Plaintiffs seek injunctive relief under the FAL, UCL, and CLRA to enjoin

21

Defendants from making magazine subscription offers that do not comply with

22

California law. Defendants move to dismiss the claim for injunctive relief on grounds

23

that Plaintiffs lack Article III standing to seek such relief. (MTD, 25:9–20.) The Court

24

agrees with Defendants.

25

Article III, Section 2 of the United States Constitution limits the jurisdiction of

26

the federal courts to certain “Cases” and “Controversies.” Clapper v. Amnesty Int’l

27

USA, 568 U.S. 398, 408 (2013). An essential element of the case-or-controversy

28

requirement is that the party invoking federal jurisdiction have standing to bring his
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1

claim. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992). To establish

2

standing, the injury upon which the lawsuit is based must be “concrete, particularized,

3

and actual or imminent; fairly traceable to the challenged action; and redressable by

4

a favorable ruling.” Clapper, 568 U.S. at 409 (quoting Monsanto Co. v. Geertson

5

Seed Farms, 561 U.S. 139, 149 (2010)).

6

“A plaintiff must demonstrate standing separately for each form of relief

7

sought.” Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S. 167,

8

185 (2000). Where a plaintiff seeks injunctive relief to prevent future injury, the threat

9

of future injury must be “certainly impending” to satisfy Article III. Clapper, 568

10

U.S. at 409 (quoting Whitmore v. Arkansas, 495 U.S. 149, 158 (1990)). Allegations

11

of “possible” future injury, or an “objectively reasonable likelihood” of future injury,

12

are insufficient. Clapper, 568 U.S. at 409–10.

13

Here, Plaintiffs effectively concede they cannot allege future injury that is

14

certainly impending.6 Instead, Plaintiffs argue that because they have standing for

15

injunctive relief under California’s FAL, UCL, and CLRA, they necessarily satisfy

16

the Article III threshold. (Opp’n, 17:8–25.)

17

As an initial matter, the Court acknowledges the line of cases that support the

18

argument Plaintiffs advance here. In Chester v. TJX Cos., Inc., No. 5:15-cv-01437-

19

ODW (DTB), 2016 WL 4414768 (C.D. Cal. Aug. 18, 2016), the case on which

20

Plaintiffs principally rely, the district court held that consumers who sought

21

injunctive relief in federal court to enjoin violations of California’s FAL had standing

22

to do so even though they had not alleged a threat of future injury. The Chester court

23

reasoned that to prohibit consumers from seeking injunctive relief under the FAL in

24
25
26
27
28

6

In opposition, Plaintiffs do not support their claim for injunctive relief with allegations that future
injury is certainly impending, even after Defendants argued this point as the basis for dismissal of
the claim. Thus, the Court treats this argument as conceded. See Hopkins v. Women’s Div., General
Bd. of Global Ministries, 238 F. Supp. 2d 174, 178 (D.D.C. 2002) (“[W]hen a plaintiff files an
opposition to a motion to dismiss addressing only certain arguments raised by the defendant, a court
may treat those arguments that the plaintiff failed to address as conceded.”).
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1

federal court because of failure to allege a threat of future injury would deny the

2

California Legislature a critical tool for protecting consumers against deceptive

3

business practices. Id. at *8.

4

The view of the Chester court is not unanimous, and in the absence of

5

controlling authority, district courts have split over whether the constitutional

6

threshold for standing should be read more flexibly when a plaintiff alleging violation

7

of California’s consumer protection laws does not allege threat of future injury.

8

Compare Henderson v. Gruma Corp., No. CV 10–04173 AHM (AJWx), 2011 WL

9

1362188, at *7–8 (C.D. Cal. Apr. 11, 2011) (finding that plaintiffs satisfied the

10

requirements for Article III standing by satisfying the requirements for standing under

11

the FAL, UCL, and CLRA, even though they did not allege a threat of future injury),

12

with Delarosa v. Boiron, Inc., No. SACV 10–1569–JST (CWx), 2012 WL 8716658,

13

at *3 (C.D. Cal. Dec. 28, 2012) (stating that “Article III trumps both California law

14

and the Erie doctrine,” and concluding that a plaintiff seeking injunctive relief under

15

California’s CLRA and UCL did not have standing for such relief in federal court

16

where she could not allege a threat of future injury). This Court has noted in the past

17

its view that the policy concerns animating California’s consumer protection regime

18

do not justify a looser reading of Article III’s standing requirements. Lucas v. Breg,

19

Inc., 212 F. Supp. 3d 950, 963–64 (S.D. Cal. 2016). The Court reaffirms that view

20

today. Federal jurisdiction is the province of the Constitution and the Congress, not

21

of the legislatures of the various states. Given a conflict between what California law

22

permits and what Article III requires, it is Article III that must prevail. See Machlan

23

v. Procter & Gamble Co., 77 F. Supp. 3d 954, 960 (N.D. Cal. 2015) (“[T]he scope of

24

the Court’s jurisdiction begins and ends with Article III, and it cannot hear a case that

25

falls outside that scope just because that would better serve public policy.”). Thus,

26

because Plaintiffs do not allege a threat of future injury that is certainly impending,

27

they cannot maintain the injunctive relief portion of their claims in federal court.

28

Plaintiffs argue that if the Court finds that Plaintiffs lack Article III standing to
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1

seek injunctive relief, then the Court should remand the entire case to state court.

2

(Opp’n, 17:26–18:10.) In support of this argument, Plaintiffs cite the remand statute,

3

28 U.S.C. § 1447(c), which provides “[i]f at any time before final judgment it appears

4

that the district court lacks subject matter jurisdiction, the case shall be remanded.”

5

The Court finds Plaintiffs’ argument unpersuasive. The United States Supreme

6

Court has construed 28 U.S.C. § 1447(c) to require remand of a case “only if subject

7

matter-jurisdiction is lacking over the entire case, and not over just some of the

8

plaintiff’s claims.” Lee v. Am. Nat. Ins. Co., 260 F.3d 997, 1006 (9th Cir. 2001)

9

(emphasis added) (citing Schacht, 524 U.S. 381, 392 (1998)). Here, the Court has

10

determined only that Plaintiffs lack standing to seek the injunctive relief portion of

11

their FAL, UCL, and CLRA claims, not that Plaintiffs lack standing to bring the

12

remainder of those claims. Thus, Plaintiffs are incorrect that the remand statute

13

requires remand of this entire action to state court; original jurisdiction remains over

14

the remainder of the statutory claims. Accordingly, the Court dismisses the portion

15

of Plaintiffs’ claims seeking injunctive relief and retains jurisdiction over Plaintiffs’

16

claims for other forms of relief.7 See Cabral v. Supple, LLC, No. EDCV-12-00085-

17

MWF-OP, 2016 WL 1180143, at *3 (C.D. Cal. Mar. 24, 2016) (denying plaintiff’s

18

request for partial remand of the injunctive relief portions of her FAL, UCL, and

19

CLRA claims where there was no doubt the district court had original jurisdiction

20
21
22
23
24
25
26
27
28

In a “Notice of Recent Authority” filed well after briefing closed on Defendants’ motion to
dismiss, Plaintiffs raise a new argument that the Court should grant a partial remand of the
injunctive relief portion of the case, while maintaining jurisdiction over the rest of the case. This
argument is not properly before the Court. See, e.g., Sater v. Chrysler Grp. LLC, No. EDCV 1400700-VAP (DTBx), 2016 WL 3136196, at *2 n.1 (C.D. Cal. Mar. 4, 2016) (declining to consider
argument raised for the first time in defendant’s supplemental brief). And even if it was, the Court
disagrees that the claim-splitting proposed by Plaintiffs is appropriate or permissible where, as here,
the Court has original jurisdiction over the underlying claims. See United Steel, Paper & Forestry,
Rubber, Mfg., Energy, Allied Indus. & Serv. Workers Int’l Union v. Shell Oil Co., 602 F.3d 1087,
1091 (9th Cir. 2010) (noting the general principle that a putative class action once properly removed
to federal court, stays removed); Cabral v. Supple, LLC, No. EDCV-12-00085-MWF-OP, 2016 WL
1180143, at *3 (C.D. Cal. Mar. 24, 2016) (denying plaintiff’s request for partial remand of the
injunctive relief portions of her FAL, UCL, and CLRA claims where there was no doubt the district
court had original jurisdiction over the remainder of those claims).
7

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1

over the remainder of those claims).

2

I.

Leave to Amend

3

When a district court determines that the complaint, or portions of the

4

complaint, should be dismissed, it must then decide whether to grant leave to amend.

5

Under Federal Rule of Civil Procedure 15(a), leave to amend should be freely given

6

“when justice so requires,” bearing in mind “the underlying purpose of Rule 15 to

7

facilitate decisions on the merits, rather than on the pleadings or technicalities.” Lopez

8

v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000) (en banc) (alterations omitted). Under

9

this generous standard, a district court dismissing a complaint for failure to state a

10

claim should grant leave to amend “even if no request to amend the pleading was

11

made.” Id. at 1130. However, leave to amend may be denied where a plaintiff has

12

failed to cure deficiencies in the pleading after previous amendment, or where

13

allowing amendment would prejudice the opposing party, cause undue delay, or be

14

futile. Leadsinger, Inc. v. BMG Music Publ’g, 512 F.3d 522, 532 (9th Cir. 2008).

15

Here, the Court will deny leave to amend the dismissed claims. Plaintiffs’

16

claims for violation of §§ 1770(a)(13) and (a)(17) of the CLRA cannot be cured by

17

amendment because the facts alleged effectively defeat those claims. According to

18

the SAC, Plaintiffs received the $2.00 discounted rate after completing the online

19

survey, as advertised. This precludes a claim under Cal. Civ. Code § 1770(a)(13),

20

which requires a false statement concerning the reason for a price reduction. Plaintiffs

21

also received the discount at the time the transaction was completed, rather than the

22

discount being contingent on a subsequent event. This precludes a claim under Cal.

23

Civ. Code § 1770(a)(17), which requires the “rebate, discount, or other economic

24

benefit” to be contingent on “an event to occur subsequent to the consummation of

25

the transaction.” Thus, the facts alleged foreclose Plaintiffs’ claims under §§

26

1770(a)(13) and (a)(17). Accordingly, the Court dismisses these claims without leave

27

to amend. See Thomas v. Farley, 31 F.3d 557, 558–59 (7th Cir. 1994) (“[I]f a

28

plaintiff[’s] [allegations] show that he has no claim, then he is out of luck—he has
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1

pleaded himself out of court.”).

2

With respect to Plaintiffs’ alter ego and agency claims, and claims for

3

injunctive relief, those claims remain deficient despite Plaintiffs’ previous

4

opportunity to cure deficiencies in the pleading. Plaintiffs previously amended their

5

complaint in response to Defendants’ motion to dismiss the First Amended

6

Complaint, yet still failed to allege facts in the SAC sufficient to state a claim against

7

Time, and for injunctive relief. This failure to address deficiencies in the pleading

8

despite clear notice of Defendants’ grounds for dismissal justifies denial of leave to

9

amend. See Ascon Props., Inc. v. Mobil Oil Co., 866 F.2d 1149, 1160 (9th Cir. 1989)

10

(“The district court’s discretion to deny leave to amend is particularly broad where

11

plaintiff has previously amended the complaint.”). Accordingly, Plaintiffs’ claims

12

against Time under an alter ego or agency theory, and for injunctive relief under the

13

FAL, UCL, and CLRA, are dismissed without leave to amend.

14

CONCLUSION

15

For the foregoing reasons, the Court GRANTS IN PART and DENIES IN

16

PART Defendants’ motion to dismiss. Plaintiffs’ claims under the FAL, UCL, and

17

CLRA (Cal. Civ. Code §§ 1770(a)(5) and (a)(9)), and for conversion and unjust

18

enrichment, will proceed. Plaintiffs’ claims under Cal. Civ. Code §§ 1770(a)(13) and

19

(a)(17), against Defendant Time under an alter ego or agency theory, and for

20

injunctive relief under the FAL, UCL, and CLRA, are dismissed without leave to

21

amend.

22

Defendant Time is dismissed from this action with prejudice. Defendants

23

Synapse and SynapseConnect must file an answer to the Second Amended Complaint

24

no later than August 4, 2017.

25

IT IS SO ORDERED.

26

DATED: July 24, 2017

27
28
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16cv1524

APPENDIX 1

16-cv-1524-BAS-BLM

Appendix 1

16-cv-1524-BAS-BLM