Cain et al v. Redbox Automated Retail, LLC

Filing 27

OPINION and ORDER denying Defendant's 10 Motion to Dismiss. Signed by District Judge Gerald E. Rosen. (JOwe)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION

MICHELLE CAIN and RADHA SAMPAT,
individually, and on behalf of all others
similarly situated,
Plaintiffs,
No. 2:12-cv-15014
Hon. Gerald E. Rosen

vs.
REDBOX AUTOMATED RETAIL, LLC, a
Delaware Limited Liability Company,
Defendant.
___________________________________/

OPINION AND ORDER DENYING DEFENDANT’S
MOTION TO DISMISS
I. INTRODUCTION
Plaintiffs Michelle Cain and Radha Sampat (Plaintiffs) bring this putative
class action against Defendant Redbox (Defendant), a video rental company, based
upon Defendant’s alleged disclosure to third parties of certain personal information
obtained during Defendant’s rental process. They assert three causes of action: (1)
a violation of Michigan’s Video Rental Privacy Act, M.C.L. § 445.1711 et seq; (2)
breach of contract; and (3) unjust enrichment. Defendant has now moved to
dismiss Plaintiffs’ Complaint pursuant to Federal Rules of Civil Procedure

1

12(b)(1) and 12(b)(6), which the parties have fully briefed. Both parties have also
filed supplemental material with this Court.1 Having reviewed and considered the
parties’ briefs, supplemental authorities, supporting documents and the entire
record of this matter, the Court has determined that the pertinent allegations and
legal arguments are sufficiently addressed in these materials and that oral argument
would not assist in the resolution of this motion. Accordingly, the Court will
decide Defendant’s motion “on the briefs.” See Local Rule 7.1(e)(2), U.S. District
Court, Eastern District of Michigan. This Opinion and Order sets forth the Court’s
ruling.
II. PERTIENT FACTS
A.

The Michigan Video Rental Privacy Act
This case involves interpreting several provisions of Michigan’s Video

Rental Privacy Act (VRPA), which, as another Eastern District of Michigan Court
recently noted, “is a state statute that lacks any significant litigation history.”
Halaburda v. Bauer Pub. Co., LP, 2013 WL 4012827, at *2 (E.D. Mich. Aug. 6,
2013) (Steeh, J.). The VRPA has its origins in Judge Robert H. Bork’s nomination
to the United States Supreme Court, during which a Washington weekly
1

On August 8, 2013, Plaintiffs filed a Motion for Leave to Submit Supplemental
Authority. (Dkt. # 22). Defendant timely responded. (Dkt. # 23). On August 22,
2013, Defendant filed a Notice of Supplemental Authority and Plaintiffs filed a
timely response. (Dkt. ## 24, 25). The Court hereby grants Plaintiffs’ Motion for
Leave to Submit Supplemental Authority and takes notice of Defendant’s
supplemental authority.
2

newspaper obtained and published “a profile” of Judge Bork based on the titles of
146 films Judge Bork’s family rented from a video store. S. Rep. No. 100-599, at
5 (1988), reprinted in 1988 U.S.C.C.A.N. 4342. Congress and several states
responded, passing laws regulating the disclosure of video rental and purchase
records.
The relevant provisions of the federal legislation, the Video Privacy
Protection Act of 1988 (VPPA),2 are as follows:
(1) A video tape service provider who knowingly discloses, to any
person, personally identifiable information concerning any consumer
of such provider shall be liable to the aggrieved person for the relief
provided in subsection (d).
(2) A video tape service provider may disclose personally identifiable
information concerning any consumer-***
(B) to any person with the informed, written consent of the
consumer given at the time the disclosure is sought;3
***
(E) to any person if the disclosure is incident to the ordinary
course of business4 of the video tape service provider;

2

Plaintiffs do not assert a violation of the VPPA. The Court sets forth its relevant
provisions because as discussed further in text, the parties disagree over the extent
to which the VPPA shapes the VRPA.
3
After the events at issue in this lawsuit, Congress passed the Video Privacy
Protection Act Amendments Act of 2012, amending this “written consent”
exception. 18 U.S.C. § 2710(b)(2) (effective Jan. 10, 2013).
3

***
18 U.S.C. § 2710(b).
A year later, Michigan enacted the VRPA. The VRPA differs from the
federal VPPA in several ways. It, in certain aspects, contains broader consumer
protections. The VRPA, for example, also applies to “books or other written
materials” and “sound recordings.” M.C.L. § 445.1712. Moreover, though the
VRPA’s disclosure exceptions generally track the VPPA’s disclosure exceptions, it
does not include the VPPA’s “ordinary course of business” exception.

The

VRPA’s relevant provisions are as follows:
Section 2: Except as provided in section 3 or as otherwise provided
by law, a person, or an employee5 or agent of the person, engaged in
the business of selling at retail, renting, or lending books or other
written materials, sound recordings, or video recordings shall not
disclose to any person, other than the customer,6 a record or
information concerning the purchase, lease, rental, or borrowing of
those materials by a customer that indicates the identity of the
customer.
Section 3: A record or information described in section 2 may be
disclosed only in 1 or more of the following circumstances:
4

“[T]he term ‘ordinary course of business’ means only debt collection activities,
order fulfillment, request processing, and the transfer of ownership.” 18 U.S.C. §
2710(a)(2).
5
“‘Employee’ means a person who works for an employer in exchange for wages
or other remuneration.” M.C.L. § 445.1711(b). An “‘[e]mployer’ means a person
who has 1 or more employees.” § 445.1711(c).
6
“‘Customer’ means a person who purchases, rents, or borrows a book or other
written material, or a sound recording, or a video recording.” M.C.L. §
445.1711(a).
4

(a) With the written permission of the customer.
***
(d) If the disclosure is for the exclusive purpose of marketing
goods and services directly to the consumer. The person
disclosing the information shall inform the customer by written
notice that the customer may remove his or her name at any
time by written notice to the person disclosing the information.
***
Section 5: Regardless of any criminal prosecution for a violation of
this act, a person who violates this act shall be liable in a civil action
for damages to the customer identified in a record or other
information that is disclosed in violation of this act. The customer
may bring a civil action against the person and may recover both of
the following:
(a) Actual damages, including damages for emotional distress,
or $5,000.00, whichever is greater.
(b) Costs and reasonable attorney fees.
M.C.L. §§ 445.1712, 1713, 1715.
B.

Redbox’s Business Model and Plaintiffs’ Allegations
Defendant rents (and sells) videos -- including those on DVDs and Blu-ray

discs -- through a nationwide network of self-service kiosks. (Plfs’ Compl., Dkt. #
1, at ¶ 17). When renting (or purchasing) a video at a kiosk, a customer must, at a
minimum: (1) select a movie title; (2) pay with a credit/debit card; (3) enter an
email address; and (4) enter a billing zip code. (Id. at ¶ 18). Defendant charges
between $1.00 and $2.00 per day for each movie rental. (Id. at ¶ 19). Plaintiff
5

Cain rented movies from Michigan kiosks “on or around February 2, 2011 and
February 5, 2011.” (Id. at ¶ 27). Similarly, Plaintiff Sampat rented movies from
Michigan kiosks “beginning in November 2010.” (Id. at ¶ 35).
This lawsuit deals not with the rental process, but rather with what
Defendant allegedly does with information collected during that process. In no
uncertain terms, Plaintiffs assert that Defendant discloses customers’ first and last
names, email addresses, movie rental and purchase history, and debit/credit card
information (characterized by Plaintiffs as “Personal Viewing Information”) to
third parties “each and every time a customer rents or purchases a movie or video
from a Redbox kiosk.” (Id. at ¶ 2). According to Plaintiffs, Defendant discloses
this Personal Viewing Information to “an unrelated third party for something it
calls ‘service support’ . . . [and] for analytics and promotions purposes.” (Id. at ¶¶
22, 25, 34, 42). Defendant disclosed this practice during the course of litigation
involving a similar VPPA claim in the Northern District of Illinois. (Id. at ¶ 22;
see Sterk v. Redbox Automated Retail, LLC, 11-cv-01729 (N.D. Ill. June 8, 2012)).
Plaintiffs claim that Defendant does not “seek or obtain the consent of a
customer to share or otherwise disclose his or her Personal Viewing Information to
third parties for any purpose.” (Id. at ¶ 20). Plaintiffs did not give consent to
Defendant to disclose their Personal Viewing Information to any third party and
Defendant did not inform Plaintiffs in writing or otherwise that they could remove

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their names at any time from third party disclosures. (Id. at ¶¶ 30, 31, 33, 38, 39,
41). As a result, Plaintiffs assert that Defendants caused “privacy and economic
injuries,” and additionally “deprived them of the full value of their paid-for rentals
. . . [b]ecause Plaintiffs ascribe monetary value to the privacy of their Personal
Viewing Information (including . . . Redbox’s obligation to not disclose such
information to third parties).” (Id. ¶¶ 62-64). They also “would not have rented or
purchased any movie or video material from Redbox had they known that Redbox
would disclose their Personal Viewing Information to third parties in violation of
the VRPA.” (Id. at ¶ 71).
Based upon this alleged practice, Plaintiffs bring three causes of action: a
violation of the VRPA, breach of contract, and unjust enrichment. First, Plaintiffs
assert that Defendant’s disclosure of Personal Viewing Information for the purpose
of “service support” and for “analytics and promotions purposes” violates the
VRPA. Second, Plaintiffs claim that they entered into a binding contract with
Defendant for video material rentals, that they would not have done so had they
known Defendant was going to disclose their Personal Viewing Information to
third parties, that the VRPA imposed non-disclosure terms on the contract, and that
Defendant breached this contract by disclosing their Personal Viewing Information
to third parties. Third and finally, Plaintiffs assert a claim of unjust enrichment in
the alternative to their breach of contract claim.

7

Defendant has now moved to dismiss Plaintiffs’ Complaint, raising issues
concerning Plaintiffs’ standing, timeliness, and statutory interpretation. For the
reasons set forth below, this Court denies Defendant’s Motion.
III. DISCUSSION
A.

Rule 12 Standard
1.

Rule 12(b)(1)

“When subject matter jurisdiction is challenged under Rule 12(b)(1), the
plaintiff has the burden of proving jurisdiction in order to survive the motion.”
Madison–Hughes v. Shalala, 80 F.3d 1121, 1130 (6th Cir. 1996). A district court
may “resolve factual disputes when necessary to resolve challenges to subject
matter jurisdiction.” Id. Motions to dismiss for lack of subject matter jurisdiction
fall into two general categories: facial attacks and factual attacks. United States v.
Ritchie, 15 F.3d 592, 598 (6th Cir. 1994). A facial attack on subject matter
jurisdiction goes to whether the plaintiff has properly alleged a basis for subject
matter jurisdiction, and the trial court takes the allegations of the complaint as true.
Ohio Nat’l Life Ins. Co. v. United States, 922 F.2d 320, 325 (6th Cir. 1990). A
factual attack is a challenge to the factual existence of subject matter jurisdiction.
No presumptive truthfulness applies to the factual allegations, and the court is free
to weigh the evidence and satisfy itself as to the existence of its power to hear the
case. Ritchie, 15 F.3d at 598. In matters regarding subject matter jurisdiction, the

8

court may look to evidence outside the pleadings. Nichols v. Muskingum Coll.,
318 F.3d 674, 677 (6th Cir. 2003).
2.

Rule 12(b)(6)

In deciding a motion brought under Rule 12(b)(6), the Court must construe
the complaint in the light most favorable to Plaintiffs and accept all well-pled
factual allegations as true. League of United Latin Am. Citizens v. Bredesen, 500
F.3d 523, 527 (6th Cir. 2007). To withstand a motion to dismiss, however, a
complaint “requires more than labels and conclusions, and a formulaic recitation of
the elements of a cause of action will not do.” Bell Atl. Corp. v. Twombly, 550
U.S. 544, 555 (2007). The factual allegations in the complaint, accepted as true,
“must be enough to raise a right to relief above the speculative level,” and must
“state a claim to relief that is plausible on its face.” Id. at 570. “A claim has facial
plausibility when the plaintiff pleads factual content that allows the court to draw
the reasonable inference that the defendant is liable for the misconduct alleged.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). “The plausibility of an inference
depends on a host of considerations, including common sense and the strength of
competing explanations for defendant’s conduct.” 16630 Southfield Ltd. P’ship v.
Flagstar Bank, F.S.B., 727 F.3d 502, 504 (6th Cir. 2013).
The Sixth Circuit has emphasized that the “combined effect of Twombly and
Iqbal [is to] require [a] plaintiff to have a greater knowledge . . . of factual details

9

in order to draft a ‘plausible complaint.’” New Albany Tractor, Inc. v. Louisville
Tractor, Inc., 650 F.3d 1046, 1051 (6th Cir. 2011) (citation omitted). Put another
way, complaints must contain “plausible statements as to when, where, in what or
by whom,” Center for Bio-Ethical Reform, Inc. v. Napolitano, 648 F.3d 365, 373
(6th Cir. 2011), in order to avoid merely pleading an “unadorned, the-defendantunlawfully-harmed-me accusation.” Iqbal, 556 U.S. at 678.
B.

Standing
Defendant claims that Plaintiffs satisfy neither Article III nor statutory

standing. When faced with a question of subject matter jurisdiction, a court must
address that issue before all others. Gross v. Hougland, 712 F.2d 1034, 1036 (6th
Cir. 1983); Moir v. Greater Cleveland Reg’l Transit Auth., 895 F.2d 266, 269 (6th
Cir. 1990) (citing Bell v. Hood, 327 U.S. 678, 682 (1946) (“The Court will
consider the 12(b)(1) motion first, as the 12(b)(6) challenge becomes moot if
subject matter jurisdiction is lacking.”).

“[A] plaintiff must possess both

constitutional and statutory standing in order for a federal court to have
jurisdiction.” Loren v. Blue Cross & Blue Shield of Mich., 505 F.3d 598, 606 (6th
Cir. 2007).
Judge Steeh of this District recently, and comprehensively, addressed Article
III and statutory standing in the context of a VRPA claim. In Halaburda, the
plaintiffs asserted a VRPA claim against magazine publishers for allegedly selling

10

their information to third-parties without permission. 2013 WL 4012827, at *1.
The Halaburda plaintiffs sought, just as Plaintiffs do here, injunctive relief, the
greater sum of actual damages or $5,000, and costs and reasonable attorneys’ fees.
Id. at *2. The publishers then moved to dismiss the plaintiffs’ complaint, arguing
that “because plaintiffs have not pleaded any ‘damages’ under the act, they do not
have standing to bring suit under it.” Id.
In finding that the Halaburda plaintiffs met Article III’s injury-in-fact
requirement, Judge Steeh found that “[u]nlike the VPPA, a close reading of the
VRPA reveals that it contains absolutely no language to require that a claimant
suffer any actual injury apart from a violation of the statute.” Id. at *4. Judge
Steeh “ha[d] some hesitation in finding that these allegations meet the definition of
an injury in fact, which the Supreme Court has described as ‘an invasion of a
legally protected interest which is . . . concrete and particularized,’ and an
‘irreducible constitutional minimum of standing.” Id. at *5 (quoting Lujan v.
Defenders of Wildlife, 504 U.S. 555, 560 (1992)). Hesitation aside, Judge Steeh
could not “sufficiently distinguish [Halaburda] from that of Beaudry v. TeleCheck
Servs., Inc. 579 F.3d 702 (6th Cir. 2009), a case where the Sixth Circuit
determined that the Fair Credit Reporting Act included ‘actual damages’ as a form
of relief in the alternative to statutory damages, and thus found the statute did not

11

require a showing of actual damages.” Id. Judge Steeh then quoted extensively
from Beaudry:
No Article III (or prudential) standing problem arises, it bears adding,
if Beaudry is permitted to file this claim. Congress “has the power to
create new legal rights, [including] right[s] of action whose only
injury-in-fact involves the violation of that statutory right,” In re
Carter, 553 F.3d 979, 988 (6th Cir.2009), and the two constitutional
limitations on that power do not apply here. First, Beaudry must be
“among the injured,” in the sense that she alleges the defendants
violated her statutory rights. Id.; see Sierra Club v. Morton, 405 U.S.
727, 734–35, 92 S.Ct. 1361, 31 L.Ed.2d 636 (1972) (string citation
omitted). Yet that limit poses no obstacle here: Beaudry alleged that
she was one of the consumers about whom the defendants were
generating credit reports based on inaccurate information due to their
failure to update their databases to accommodate the new Tennessee
driver’s license numbering system. She thus has alleged that the
defendants’ failure to follow “reasonable procedures to assure
maximum possible accuracy” of credit reporting information occurred
“with respect to” her, as the statute requires. 15 U.S.C. §§ 1681 e(b),
1681 n(a). Second, although a right created by Congress “need not be
economic in nature, it still must cause individual, rather than
collective, harm.” Carter, 553 F.3d at 989. The Act’s statutory
damages claim clears this hurdle as well: It does not “authorize suits
by members of the public at large,” id.; it creates an individual right
not to have unlawful practices occur “with respect to” one's own
credit information, 15 U.S.C. § 1681 n. This nexus between the
individual plaintiff and the legal violation thus suffices to sustain this
statutorily created right. See Havens Realty Corp. v. Coleman, 455
U.S. 363, 373, 102 S.Ct. 1114, 71 L.Ed.2d 214 (1982) (string citation
omitted) (sustaining the right of Fair Housing Act market testers to
receive “truthful information concerning the availability of housing”
from sellers, even in the absence of any further harm).
Id.

(quoting Beaudry, 579 F.3d at 707).

Judge Steeh further reconciled the

Beaudry case with the Supreme Court’s statement in Raines v. Byrd, 521 U.S. 811,
820 n.3 (1997), that “[i]t is settled that Congress cannot erase Article III’s standing
12

requirements by statutorily granting the right to sue to a plaintiff who would not
otherwise have standing:”
[T]he issue in Raines was altogether different than that in this case.
There, six members of the U.S. Congress whose votes on a particular
law were in the minority, sought to invalidate a federal law as
unconstitutional. Plaintiffs in Raines were found to lack Article III
standing for the reason that they had alleged only a “wholly abstract
and widely dispersed” institutional injury, and no individual injury.
This case falls in line with Beaudry, but not with Raines. Here, a
statute was created by a state legislature to protect individual
consumers from certain disclosures of their personal information.
Halaburda, 2013 WL 4012827, at * 5-6 (internal citation omitted). Accordingly,
the Halaburda plaintiffs, “as those in the Beaudry case, . . . satisfied Article III
standing requirements.” Id. at *6.
Judge Steeh also succinctly addressed whether the Halaburda plaintiffs had
statutory standing given that they did not allege injuries other than statutory
violations:
Concerning the issue of statutory standing, defendants contend that
the VRPA “does not allow a cause of action based on a mere statutory
violation.” (Doc. # 29 at 6.) Defendants concede that the Michigan
courts have not made this determination, but cite to a federal case
from the Western District of Michigan, Vinton v. CG's Prep Kitchen
and Café, 2010 WL 748221 at *1, to support this assertion. The
Vinton plaintiff’s claim was brought under the Michigan Consumer
Protection Act (“MCPA”), asserting a violation based on the
defendant’s issuance of a credit card receipt containing the entirety of
his credit card number. Because the court found the MCPA did not
confer standing to a person alleging only a technical violation of the
statute, but required the demonstration of “a loss as a result of a

13

violation of this Act,” it found no claim had been stated under the
MCPA.
As plaintiffs argue, unlike the MCPA, which limits recovery to
individuals suffering “a loss as a result of violation of this Act,” Mich.
Comp. Laws Ann. § 445.911(2), there is no such requirement in the
VRPA. In fact, the VRPA explicitly provides for statutory damages
of $5,000 as an alternative to actual damages. The court questions
how liability under the statute could possibly be construed to require a
showing of actual damages when the state legislature has explicitly
allowed for statutory damages.
In contrast, defendants contend that the language of the VRPA itself
supports their position. Defendants quote from the section of the
statute that states “a person who violates this act shall be liable in a
civil action for damages to the customer identified in a record or other
information that is disclosed in violation of this act.” Mich. Comp.
Laws Ann. § 445.1715. Defendants highlight the four words
“damages to the customer” and assert that where a customer has
shown no damages he or she can have no viable claim under the
statute. However, the court notes that the four words “damages to the
customer” have been taken out of the context of the rest of that
sentence by defendants. In fact, the word damages is part of the
phrase “for damages,” and the word customer is a part of the phrase
“to the customer (identified in a record or other information . . . ).”
The court reads these words simply as meaning that the entity
violating the statute will face liability for damages, payable to
individuals improperly identified as prohibited by the act. Moreover,
this reading is in harmony with the fact that the legislature included a
statutory damages provision, discussed above. Dismissal of the
VRPA claims will not be granted for a lack of statutory standing.
Id. at *6.
Judge Steeh’s discussion on Article III and statutory standing in Halaburda
is well-reasoned and persuasive. This Court also echos Judge Steeh’s “hesitation”
with regards to whether Plaintiffs meet the “injury-in-fact” definition, but like

14

Judge Steeh, cannot distinguish this matter from Beaudry. Defendant attempts to
distinguish Halaburda by noting that unlike in that case, Plaintiffs here do not
allege that Defendant sold customer information. (Def’s Resp., Dkt. # 23, at 1).
How Defendant allegedly violated the VRPA makes no difference for the purpose
of Article III standing. Here, as with in Halaburda and Beaudry, Plaintiffs have
sufficiently alleged a violation of their statutory rights under the VRPA to trigger
Article III standing.
As to statutory standing, Defendant repeats the same argument put forth by
the magazine publishers in Halaburda, stating “[t]he VRPA expressly requires a
plaintiff asserting a civil claim to have been ‘damage[d],’ and although the statute
provides a minimum quantification of such damages, $5,000, it does not provide
for any award without actual damages having occurred.” (Def’s Br., Dkt. # 10, at
23) (alteration in original). As Judge Steeh pointed out, such an interpretation lifts
words out of context. Halaburda, 2013 WL 4012827, at *6. The entire provision - “a person who violates this act shall be liable in a civil action for damages to the
customer identified in a record or other information that is disclosed in violation of
this act” -- simply “mean[s] that the entity violating the statute will face liability
for damages, payable to individuals improperly identified as prohibited by the act.
Moreover, this reading is in harmony with the fact that the legislature included a
statutory damages provision.” Id. (citing M.C.L. § 445.1712).

15

Accordingly, the Court declines to dismiss Plaintiffs’ Complaint for want of
standing. See also Sterk v. Redbox Automated Retail, LLC, 2013 WL 4451223, at
*3-4 (N.D. Ill. Aug. 16, 2013) (allegation that Redbox violated the plaintiffs’
“privacy rights, recognized and protected by the VPPA” by disclosing customer
information to third-party vendors was “sufficient to confer standing”).
C.

Plaintiff’s Count I – Violation of the VRPA
Having found that Plaintiffs have standing, the Court next addresses

Defendant’s remaining arguments concerning Plaintiffs’ VRPA claim: (1) the
VRPA only prohibits the public disclosure of information; (2) the VRPA’s
“otherwise provided by law exception” reads in the VPPA’s “ordinary course of
business exception;” and (3) Plaintiffs agreed to certain terms governing their
rental of DVDs, including consenting to the disclosure of their information and a
one-year statute of limitations. Each of these arguments, at this stage in the
litigation, are without merit.
1.

Public disclosure of information

Defendant asserts that Plaintiffs have failed to state a claim under the VRPA
because they have not alleged that it “disclosed their ‘Personal Viewing
Information’ publicly; rather, Plaintiffs’ allegations refer only to disclosures among
and between Redbox and service providers with whom it contracts to provide
services for its own customers.” (Def’s Br., Dkt. # 10, at 17). In support of this

16

position, Defendant focuses on Section 2 of the VRPA, which prohibits disclosure
by “a person, or an employee or agent of the person, engaged in the business of . . .
renting . . . video recordings.” M.C.L. § 445.1712. It argues that “by definition,
any disclosure among and between Redbox and any of its contractors specifically
retained to provide customer-service related responsibilities cannot properly be
viewed as a violation of this provision.” (Def’s Br., Dkt. # 10, at 18). Plaintiff
counters, asserting that Section 2 requires agents to also be “engaged in the
business of . . . renting . . . video recordings” and that the Complaint affirmatively
identifies the third-party vendors as “unrelated” entities engaged in providing
“service support,” “analytics,” and “promotions.” (Plfs’ Resp., Dkt. # 16, at 16).
The Court need not decide, however, whether the VRPA only prohibits
“public” disclosures. The nature and scope of an agency relationship is generally a
question of fact. Cent. States Se. and Sw. Areas Pension Fund v. Kraftco, Inc., 799
F.2d 1098, 1112-13 (6th Cir. 1986); Innotext, Inc. v. Petra’Lex USA Inc., 694 F.3d
581, 589-90 (6th Cir. 2012); Friedman v. Freidberg Law Corp., 44 F. Supp. 2d
902, 908 (E.D. Mich. 1999) (collecting cases); Lincoln v. Fairfield-Nobel Co., 76
Mich. App. 514, 519 (1977). If a written agreement defines the scope of an agentprincipal relationship, however, a Court must determine the nature of the
relationship. See, e.g., Birou v. Thompson-Brown Co., 67 Mich. App. 502, 506-07
(1976). Even assuming that the VRPA only prohibits “public disclosures,” this

17

Court must take Plaintiffs’ allegations regarding the relationship between
Defendant and its “unrelated” vendors as true. Whether these third-party vendors
are agents within the VRPA’s statutory definition, therefore, is best left for
discovery.
2.

Otherwise provided by law exception

Next, Defendant posits another interesting statutory interpretation argument.
The VRPA essentially provides two general categories of exceptions to its nondisclosure mandate: (1) those exceptions contained in Section 3, like upon consent
or “[i]f the disclosure is for the exclusive purpose of marketing goods and services
directly to the consumer;” and (2) those that are “otherwise provided by law.”
M.C.L. § 445.1712; 445.1713. Focusing on this latter category, Defendant asserts
that the “otherwise provided by law” language “can only be interpreted to include
the federal VPPA,” and more specifically, its “ordinary course of business”
exception. (Def’s Br., Dkt. # 10, at 21). “The term ‘ordinary course of business’ is
‘narrowly defined’ in the [VPPA] to mean ‘only debt collection activities, order
fulfillment, request processing, and the transfer of ownership.’”

Daniel v.

Cantrell, 375 F.3d 377, 382 (6th Cir. 2004) (citation omitted). Plaintiffs’ claim
fails, asserts Defendant, because “[t]he use of a vendor to provide customer service
. . . falls within th[e] definition as a core ordinary course of business activity and is
therefore expressly permitted.” (Def’s Br., Dkt. # 10, at 21).

18

Plaintiffs naturally disagree with this interpretation. They note that the
VPPA “preempt[s] only the provisions of State or local law that require disclosure
prohibited by [the VPPA].”

18 U.S.C. § 2710(f).

Accordingly, because

“Michigan’s VRPA is one state law that provides protections that go beyond those
afforded by the federal VRPA” -- it covers more than just videos and does not
provide for an “ordinary course of business” exception -- Plaintiffs argue
Defendant’s interpretation would essentially render the VRPA meaningless. (Plfs’
Br., Dkt. # 16, at 13-15).
As with the public disclosure issue, this Court need not make a
determination as to whether the VRPA’s “otherwise provided by law” exception
incorporates those disclosures permitted by the VPPA. Here, Plaintiffs’ assertions
that Defendant shared information for the purpose of service support, promotions,
and analytics do not appear to fall into the narrow categories of “debt collection
activities, order fulfillment, request processing, and transfer of ownership.” 18
U.S.C. § 2710(a)(2). Their factual allegations do not -- on their face -- fit into the
definition of “ordinary course of business” exception. This is a question that is
best answered during discovery, not upon a motion to dismiss. In re Hulu Privacy
Litig., 2012 WL 3282960, at *7 (N.D. Cal. Aug. 10, 2012) (whether defendant’s
disclosures to third-parties were in the “ordinary course of business . . . are factual
questions that cannot be resolved in a motion to dismiss”).

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3.

Consent and Timeliness

Defendant’s remaining arguments regarding Plaintiffs’ VRPA claim center
around two provisions contained within Defendant’s “Terms of Use” (Terms) and
its “Privacy Policy” (which is incorporated into the Terms) that it asserts sets the
conditions of Plaintiffs’ DVD rentals. Specifically, Defendant argues that the
Terms: (1) show that Plaintiffs provided Defendant with permission to disclose
their information to third-parties that “perform a variety of functions [for
Defendant], such as fulfilling orders, assisting with promotions, providing
technical services for our web site, etc.;” and (2) required Plaintiffs to file this
action “within one (1) year after such claim or cause of action arose.” (Ex. A to
Def’s Mtn., Dkt. # 10-2, at ¶¶ 3-4 and Exs. 1 & 2 thereto). In support, Defendant
attaches copies of the applicable Terms, screenshots of the kiosk screens where
consumers “agree” to the Terms, its Privacy Policy, and an affidavit attesting that
“it is impossible for a customer to complete a rental or purchase transaction
without clicking a button accepting the Terms of Use.”

(Id. at Exs. 1-4).

Consideration of these arguments and materials are, however, inappropriate at this
stage in the litigation.
Rule 12(d) provides that “[i]f, on a motion under Rule 12(b)(6) or 12(c),
matters outside the pleadings are presented to and not excluded by the court, the
motion must be treated as one for summary judgment under Rule 56.” Fed. R. Civ.

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P. 12(d). It is well-settled that a court “may consider the complaint and any
exhibits attached thereto, public records, items appearing in the record of the case
and exhibits attached to the motion to dismiss so long as they are referred to in the
Complaint and central to the claims contained therein.” Bassett v. Nat’l Collegiate
Ass’n, 528 F.3d 426, 430 (6th Cir. 2008); Weiner v. Klais and Co., Inc., 108 F.3d
86, 89 (6th Cir. 1997) (“[A] defendant may introduce certain pertinent documents
if the plaintiff fails to do so. Otherwise, a plaintiff with a legally deficient claim
could survive a motion to dismiss simply by failing to attach a dispositive
document upon which it relied.”) (internal citations omitted). A court may not,
however, consider materials outside the pleading that “rebut, challenge, or
contradict anything in the plaintiffs’ complaint” without converting the motion to a
Rule 56 motion for summary judgment. Song v. City of Elyria, 958 F.2d 840, 842
(6th Cir. 1993); Mediacom Se. LLC v. BellSouth Telecomm., Inc., 672 F.3d 396,
399-400 (6th Cir. 2012) (reversing district court’s dismissal when it relied upon
material that “directly conflict[ed]” with the facts set forth in the plaintiff’s
complaint); Ouwinga v. Benistar 419 Plan Servs., Inc., 694 F.3d 783, 797 (6th Cir.
2012) (similar). In short, while “documents integral to the complaint may be relied
upon, even if they are not attached or incorporated by reference, it must also be
clear that there exist no material disputed issues of fact regarding the relevance of

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the document.” Mediacom, 672 F.3d at 400 (internal citations, quotations, and
alterations omitted).
In addition to these general principles governing motions to dismiss under
Fed. R. Civ. P. 12(b)(6), the Sixth Circuit has emphasized that because the statute
of limitations is an affirmative defense, a motion under 12(b)(6) “is generally an
inappropriate vehicle for dismissing a claim based upon the statute of limitations.”
Cataldo v. U.S. Steel Corp., 676 F.3d 542, 547 (6th Cir. 2012).

There are

exceptions to this general rule, including if “the allegations in the complaint
affirmatively show that the claim is time-barred.” Id. (citing Jones v. Bock, 549
U.S. 199, 215 (2007)).
Plaintiffs’ factual averments render consideration of Defendants’ materials
inappropriate at this time. It is true that Plaintiffs referred to the Terms in their
Complaint. That said, Plaintiffs, in no uncertain terms, only alleged that the Terms
“were never displayed, or even referred to, during their [rental] transactions” and
that the kiosks did not “direct Plaintiffs to Redbox’s website or condition their
rentals upon acceptance of such Terms.” (Plfs’ Compl., Dkt. # 1, at ¶ 60). They
also affirmatively state that they “never consented, in any way, to Redbox’s
disclosure of their Personal Viewing Information to third parties.” (Id.). Plaintiffs’
factual assertions necessitate a finding that Defendant’s materials are not central to
Plaintiffs’ claims, and even if they were, they improperly contradict Plaintiffs’

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assertions that they did not agree to the Terms. The Court, therefore, excludes
these materials from consideration. See also Sterk v. Redbox Automated Retail,
LLC, 806 F. Supp. 2d 1059, 1070 (N.D. Ill. 2011), rev’d on other grounds, 672
F.3d 535 (7th Cir. 2012) (rejecting Redbox’s similar argument in VPPA litigation
because the plaintiff’s complaint alleged that “Redbox’s policy was not identified
or made available to him and thus that he was not given an opportunity, in a clear
and conspicuous manner, to prohibit disclosure”).
After excluding these materials, Defendant’s waiver and statute of
limitations arguments do not hold water at this juncture.
D.

Plaintiff’s Remaining Claims -- Breach of Contract and Unjust
Enrichment
Defendant asserts that Plaintiffs’ contract and quasi-contract claims fail,

resting mainly on the argument that these claims are “contingent upon a violation
of the VRPA.”

(Def’s Br., Dkt. # 10, at 18).

Given the discussion above

concerning Plaintiffs’ VRPA claim, the Court now turns to Defendant’s alternative
arguments.
As to the breach of contract claim, Defendant essentially repeats its standing
argument -- “Plaintiffs’ breach of contract claim . . . fails without an allegation of
actual damage.” (Id.). Plaintiffs respond by asserting that “they didn’t receive the
full benefit of their bargain with Redbox (which included protecting their Personal
Viewing Information in accordance with the VRPA).” (Plfs’ Br., Dkt. # 16, at 35).
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In other words, Plaintiffs allege that “they incurred actual monetary damages”
because “a portion of the price of each Redbox rental paid for by Plaintiffs . . . was
intended to ensure the confidentiality of Plaintiffs’ . . . Personal Viewing
Information.” (Plfs’ Compl., Dkt. # 1, at ¶ 74.). Though the Court expresses some
skepticism regarding this overpayment theory, taking this allegation as true,
Plaintiffs have adequately alleged some actual damage. Moreover, the Court notes
that Michigan “law infers some damage -- at least nominal damage -- from the
breach of a contract.” 4041-49 W. Maple Condominium Ass’n v. Countrywide
Home Loans, Inc., 282 Mich. App. 452, 460 (2009) (citation omitted).
Defendant similarly attacks Plaintiffs’ unjust enrichment claim on the
grounds that Plaintiffs received the benefit of the bargain -- the movies they rented.
(Def’s Br., Dkt. # 10, at 27-28) (citing, inter alia, Cloverdale Equip. Co. v. Simon
Aerials, Inc., 869 F.2d 934 (6th Cir. 1989)).

As set forth above, however,

Plaintiffs assert part of the bargain was not just to rent movies. Though the Court
again expresses skepticism as to the ability of Plaintiffs to prove this is the case
during discovery, this Court must take Plaintiffs’ Complaint at its word. Finally,
Defendant is absolutely correct that parties cannot recover under the theory of
unjust enrichment when an express contract exists. Terry Barr Sales Agency, Inc.
v. All-Lock Co., Inc., 96 F.3d 174, 181 (6th Cir. 1996) (“Where the parties have an
enforceable contract and merely dispute its terms, scope, or effect, one party

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cannot recover for promissory estoppel and unjust enrichment.”). The problem,
however, is that Defendant cannot rely upon the Terms to “preclude any unjust
enrichment claim as a matter of law” as it suggests (Def’s Br., Dkt. # 10, at 27)
because Plaintiffs expressly allege that they never agreed to the Terms. And, to the
extent Defendant argues that the Plaintiffs’ breach of contract claim -- which is not
predicated upon the Terms -- also defeats their unjust enrichment claim, they have
pled this quasi-contract claim in the alternative. Plaintiffs have, in so many words,
“kept [their] options open [for the possibility that Defendant] . . . may deny the
existence of a contract.” Terry Barr Sales Agency, 96 F.3d at 182 (reinstating
dismissal of quasi-contract claims and noting that if the defendant admits the
existence of a valid contract, “it will be appropriate for the district court to dismiss
[plaintiffs]’ claims for unjust enrichment and promissory estoppel at that time.”).
IV. CONCLUSION
For all of the foregoing reasons,
IT IS HEREBY ORDERED that Defendant’s Motion to Dismiss [Dkt. # 10]
is DENIED.

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IT IS FURTHER ORDERED that Plaintiffs’ Motion for Leave to Submit
Supplemental Authority in Support of Their Response to Defendant’s Motion to
Dismiss [Dkt. # 22] is GRANTED.
IT IS SO ORDERED.
Dated: November 12, 2013

s/Gerald E. Rosen
GERALD E. ROSEN
CHIEF, U.S. DISTRICT COURT

I hereby certify that a copy of the foregoing document was mailed to the attorneys
of record on this date, November 12, 2013, by electronic and/or ordinary mail.
s/Julie Owens
Case Manager, 313-234-5135

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