Khoday et al v. Symantec Corp. et al
Filing
274
MEMORANDUM OPINION AND ORDER granting 180 Plaintiffs' Motion to Certify Class (Written Opinion). Signed by Judge John R. Tunheim on March 31, 2014. (HAZ)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
DEVI KHODAY and DANISE
TOWNSEND, individually and on behalf
of the class they represent,
Plaintiffs,
v.
Civil No. 11-180 (JRT/TNL)
MEMORANDUM OPINION AND
ORDER GRANTING PLAINTIFFS’
MOTION FOR CLASS
CERTIFICATION
SYMANTEC CORP. and
DIGITAL RIVER, INC.,
Defendants.
Douglas J. McNamara and Andrew N. Friedman, COHEN, MILSTEIN,
SELLERS & TOLL PLLC, 1100 New York Avenue N.W., West Tower
Suite 500, Washington, DC 20005; Richard Wentz, THE WENTZ LAW
FIRM, 33 Via Ricardo, Newbury Park, CA 91320; Karen Hanson Riebel
and Kate M. Baxter-Kauf, LOCKRIDGE GRINDAL NAUEN PLLP,
100 Washington Avenue South, Suite 2200, Minneapolis, MN 55401, for
plaintiffs.
Patrick E. Gibbs, LATHAM & WATKINS, LLP, 140 Scott Drive,
Menlo Park, CA 94025; Steve W. Gaskins, GASKINS, BENNETT,
BIRRELL, SCHUPP, LLP, 333 South Seventh Street, Suite 2900,
Minneapolis, MN 55402, for defendant Symantec Corp.
Charles Smith, Amy Van Gelder, and Jessica Frogge, SKADDEN, ARPS,
SLATE, MEAGHER & FLOM, 155 North Wacker Drive, Chicago, IL
60606; and Steve W. Gaskins, GASKINS, BENNETT, BIRRELL,
SCHUPP, LLP, 333 South Seventh Street, Suite 2900, Minneapolis, MN
55402, for defendant Digital River, Inc.
This is a class action lawsuit brought by named Plaintiffs Devi Khoday and Danise
Townsend against Defendants Symantec Corp. (“Symantec”) and Digital River, Inc.
27
(“Digital River”) (collectively, “Defendants”). Plaintiffs allege that Defendants sold
download insurance products to consumers using misrepresentations that those products
were the exclusive means by which customers could redownload software purchased
from Defendants.
Plaintiffs bring claims against Digital River under Minnesota’s
Consumer Fraud Act, and against Symantec under California’s Unfair Competition Law
and Consumers Legal Remedies Act, as well as claims for unjust enrichment against both
Defendants.
Plaintiffs move for class certification of all individuals in the United States that
purchased the two download insurance products at issue during a certain period of time
dictated by the statute of limitations. The Court will certify Plaintiffs’ proposed class
under Federal Rule of Civil Procedure 23(b)(3) because it finds that Plaintiffs have
satisfied the prerequisites for certification, and have also demonstrated that class issues
will predominate and a class action is a superior method for adjudicating the claims
against Defendants.
BACKGROUND
I.
SYMANTEC AND DIGITAL RIVER
Symantec is a California-based company that sells internet security software
products under its Norton brand. (Decl. of Patrick E. Gibbs, Ex. 1, Aug. 23, 2013,
Docket No. 217; 1 Am. Compl. ¶ 2, Apr. 14, 2011, Docket No. 40; Symantec’s Answer
1
With the exception of deposition transcripts and items filed under seal, all citations to
page numbers of exhibits refer to the CMECF pagination.
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¶ 2, Apr. 11, 2012, Docket No. 85.) Digital River is a Minnesota-based company that
builds and manages e-commerce websites for online retailers. (Second Decl. of Amy L.
Van Gelder, Ex. 1 (Decl. of Andrew Carrane (“Carrane Decl.”) ¶ 2), Aug. 23, 2013,
Docket No. 215.)
In 2000, Symantec contracted with Digital River to manage Symantec’s online
storefront, through which it sold its Norton products. (See Second Decl. of Douglas J.
McNamara, Ex. 1 at 12:16-18, 15:3-20, June 26, 2013, Docket No. 183; see also id.,
Ex. 2.) Digital River managed the storefront until October 2009. (Second Van Gelder
Decl., Ex. 2 at 17:20-18:5.) Although Digital River managed the storefront, Symantec
dictated the content and offerings of the website, as well as the disclosures Digital River
made to customers. (Second McNamara Decl., Ex. 2 at DR-0054160-DR-0054172;
Second Van Gelder Decl., Ex. 3 at 78:22-25.) Between October 2009 and June 2010
Symantec began transitioning sale of its Norton products to a new online storefront
managed by Symantec, and at the end of June 2010 Digital River ceased managing the
sale of Norton products. (Gibbs Decl., Ex. 4 at 38:15-39:3; id., Ex. 5 at 21:24-22:7.)
II.
THE DISPUTED PRODUCTS
A.
Purchasing Downloadable Norton Products
During the relevant time period, a Symantec customer who purchased a
downloadable Norton product online would receive access to a hyperlink that the
customer could click to begin the software’s automatic download. (Gibbs Decl., Ex. 7 at
56-57; id., Ex. 8 at 25.) The customer’s click would cause the software to automatically
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be downloaded and installed upon the customer’s computer. (Id., Ex. 8 at 60, 65.)
During installation, the customer’s unique “product key” 2 associated with the purchased
software would be “injected” or added to the software – allowing the software to run on
the customer’s computer. (Id., Ex. 10 at 93:20-94:2; id., Ex. 11 at 21:22-22:5; Second
Van Gelder Decl., Ex. 9 at 86:11-16.) After purchasing the product, a customer would
have sixty days within which to download and install the product. (Gibbs Decl., Ex. 14 at
62:9-12; id., Ex. 15 at 53:11-13.) During this sixty-day window, customers were able to
redownload and reinstall the product an unlimited number of times by accessing their
Norton account and reinitiating the automatic download process. (Id., Ex. 14 at 62:9-12.)
B.
Downloading Extension Products
1.
Electronic Download Service
During the time period that Digital River was managing Symantec’s online
storefront, Symantec authorized Digital River to offer a product called Electronic
Download Service (“EDS”). (Second McNamara Decl., Ex. 2 at DR-0054170; Digital
River’s Answer at 6, Apr. 11, 2012, Docket No. 86.)
EDS allowed customers to
redownload the Norton software they had purchased after the original sixty-day period
had expired. (Second McNamara Decl., Ex. 10; Digital River’s Answer at 3-4.) If, for
example, customers lost their Norton software through a computer crash or purchased a
2
A product or license key is a 25-digit number used by Symantec to combat software
piracy. (Gibbs Decl., Ex. 10 at 93:20-94:2; id., Ex. 11 at 21:22-22:5.) The product key is
“entered into the Norton . . . security product that’s used to validate entitlement to the
subscription to that product.” (Second Van Gelder Decl., Ex. 9 at 86:11-16.)
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new computer, they could redownload their software using EDS for up to a year after
their purchase. (Gibbs Decl., Ex. 18 at 197:10-25.) To activate EDS, customers would
visit Symantec’s online storefront and enter identifying information, which would bring
them to a list of Norton products they had purchased. (Id., Ex. 20 at 86:10-20; id., Ex. 21
at 136:10-137:1; Second Van Gelder Decl., Ex. 3 at 292:24-293:4.) Products for which
EDS had been purchased (as well as products that had been purchased less than sixty
days prior to the site visit) would display download links. (Gibbs Decl., Ex. 20 at 86:1020; id., Ex. 21 at 136:10-137:1.) Clicking the download link would redownload and
install the exact version of the software the customer had originally purchased, and the
customer’s unique product key would be automatically injected into the software. (Id.,
Ex. 19 at 134:12-135:6; Second Van Gelder Decl., Ex. 3 at 292:19-293:9.)
A representative of Digital River testified that the title EDS was carefully chosen
to give customers a particular impression about the product, recognizing that “the title of
EDS was probably more impactful than . . . the fine details.” (Second McNamara Decl.,
Ex. 16 at 94:22-25; see id., Ex. 16 at 95:13-16 (“Again, people are more likely to pay
attention to the title of a product versus all of the details of a product.”).)
2.
Norton Download Insurance
In October 2009, when Symantec began selling its Norton products through its
own online storefront, it offered customers a product similar to EDS called Norton
Download Insurance (“NDI”). (Id., Ex. 8; Gibbs Decl., Ex. 8 at 39.) NDI operated
almost identically to EDS, allowing customers to redownload previously purchased
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software for up to one or two years depending on the license period selected. (Gibbs
Decl., Ex. 22 at 26:10-15; id., Ex. 26 at 281:1-10.) After a customer logged into her
Norton account, she could click a download button that would automatically download
and install a product key injected version of the software. (Id., Ex. 22 at 26:10-15; id.,
Ex. 23 at 34.) In contrast to EDS, which redownloaded the exact version of the product
originally purchased, NDI would download the most recent edition of the product the
consumer had originally purchased. (Id., Ex. 22 at 26:6-15; id., Ex. 23 at 35.) Symantec
stopped selling NDI in the United States on March 10, 2011. (Id., Ex. 25 at 51.)
Because the class claims arising out of the sale of EDS and NDI are almost
identical, the remainder of this Order discusses the facts surrounding the sale of these two
products (collectively, “download insurance”) holistically, unless otherwise noted.
C.
Circumstances Surrounding Purchases of Download Insurance
When a customer purchased any Norton Product, download insurance was
automatically added to the customer’s shopping cart. (See Gibbs Decl., Ex. 8 at 39; id.,
Ex. 29 at 66.) A customer who did not want to purchase the download insurance was
required to “opt out” and remove it from the cart. (Second Van Gelder Decl., Ex. 12 at
50:4-16; Second McNamara Decl., Ex. 2 at DR-0054171.) Information about download
insurance available to customers at the point of sale varied somewhat over time because
Defendants changed the location, display, and content of the information to “improve”
the online shopping experience. (Second Van Gelder Decl., Ex. 4 at 19-20; id., Ex. 7 at
34:1-15.)
For example, Defendants tested different names for download insurance
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including “Download Backup Service,” “Download Insurance,” and “Download
Protection Service.” (Id., Ex. 17.) In the sections that follow, the Court sets forth details
regarding the purchase of download insurance that form the basis of the parties’ dispute
regarding class certification.
1.
Pricing
Defendants charged between $4.99 and $16.99 for the download insurance
products. (Carrane Decl. ¶ 4; Second McNamara Decl., Ex. 25 at 138; id., Ex. 6 at 20.)
Download insurance was essentially “pure profit” for Defendants, as it cost almost
nothing to provide the service. (Second McNamara Decl., Ex. 5 at DR-0918108; id.,
Ex. 6 at 20; Third Decl. of Douglas J. McNamara, Ex. 51 at 5, Oct. 4, 2013, Docket
No. 228 (“NDI generates approximately $20M dollars a year for eCommerce with huge
margins.”).) 3 Defendants did not price download insurance based upon what it cost to
provide the customer with the service, but instead priced it based upon what “the
consumer is willing to pay based on the value they perceive.” (Second McNamara Decl.,
Ex. 1 at 68:17-69:6; see also id., Ex. 7 (“Depending on the incoming product (product the
customer is purchasing) we have noticed that EDS attachment rates actually increase as
the price of EDS increases. . . . By increasing the price of EDS to be more in-line with
3
Plaintiffs filed a corrected set of exhibits to the Third McNamara Declaration that
appear at Docket Number 235. References to exhibits of the Third McNamara Declaration
therefore refer to this corrected set of exhibits.
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that of the product [the customer is] purchasing, the customer’s perceived value of this
product increases and so does the attachment rate.”). 4
2.
The “What’s this” Link
The download insurance displayed in a customer’s shopping cart was typically
accompanied by a “What’s this” or “What is Extended Download Service” link. 5 (Gibbs
Decl., Ex. 8 at 39; id., Ex. 29 at 66; Second Van Gelder Decl., Ex. 2 at 23:14-19.) From
2004 to approximately August 2008, clicking on the “What’s this” link revealed a pop-up
description, (Second Van Gelder Decl., Ex. 7 at 95:17-25), stating, in relevant part:
What is the Extended Download Service?
When you order a downloadable product from the Symantec Store you are
automatically granted a 60 day window in which your purchase can be
redownloaded at any time. After this 60 day window has passed your
download will no longer be available unless the Extended Download
Service is also purchased. When this service is purchased, we will keep a
backup copy of your file on our server for one full year after the date of
purchase, meaning that you can redownload whenever necessary during
that extended period.
(Gibbs Decl., Ex. 29 at 66). In 2008, the description revealed by clicking the “What’s
this” link changed to:
4
The attachment rate refers to the rate at which customers left the download insurance
product in their carts and actually purchased the product.
5
Screenshots in the record suggest that at times, or for some customers, a “What’s this?”
link may not have existed. (See Second Van Gelder Decl., Ex. 14 at 24.) Instead, a description
of EDS was available in the shopping cart itself, which notified customers “When you buy the
Extended Download Service, you may redownload your software for a period of one year after
the date of purchase.” (Id.)
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What is the Extended Download Service?
When you purchase downloadable software from Symantec’s online store,
Digital River, Symantec’s authorized online retailer, automatically grants
you 60 days from the date of purchase to download your software order.
If you add Extended Download Service to your downloadable software
purchase order, Digital River will keep a backup of all the software on your
order for ONE YEAR[.] If you need to re-download your software, or
access your Serial Key, it will be available 24 hours a day, 7 days a week
for ONE YEAR from the date of purchase by going to
www.findmyorder.com.
(Gibbs Decl., Ex. 29 at 67 (formatting omitted).) A Digital River executive testified that
these two descriptions conveyed “fundamentally the same message.”
(Second
McNamara Decl., Ex. 1 at 97:16-101:19.)
The description for NDI stated:
Norton Download Insurance
When you purchase downloadable software from the Norton Store you
automatically receive the ability to download your software for 60 days
from the date of purchase. Norton Download Insurance extends the time
you can access your downloadable software by providing you the freedom
and flexibility to download or re-download your software for one year.
Gain flexibility and peace of mind!
If you decide to replace your PC or if your PC has problems, is damaged or
stolen and you need to reinstall your software, with Norton Download
Insurance you have the peace of mind of knowing you can re-download
your software at anytime for one year. Norton Download Insurance may be
refunded within 60 days from the date of purchase.
(Second McNamara Decl., Ex. 15 at 45.) Digital River employees believed that the
description of EDS was “almost word for word” of the NDI description. (Id., Ex. 15 at
44.)
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During the relevant time period, Defendants contend that some customers may
have seen slightly different variations of the “What’s this” message, as Defendants livetested different versions of language on customers. (See, e.g., Gibbs Decl., Exs. 30-31;
Second Van Gelder Decl., Ex. 4 at 19-20.) For example, a different version of the
description language stated:
The Extended Download Service (also known as Download Warranty
Service) is available for purchase on the payment page when there are
downloadable items present in your shopping cart. Upon payment of the
specified fee, Digital River, Inc., agrees to provide to you a service that
enables you to make multiple downloads of digital computer software
products purchased by you in a single order and downl[oa]ded from
Symantec’s online store for a period of one year after the date of your
purchase.
(Gibbs Decl., Ex. 30 at 70.) Another stated:
Save Time and Safeguard Your Purchase with EDS (Extended Download
Service).
Securely Back Up Your Software Online for One Year.
Now purchasing software online is more convenient than ever. Our
Extended Download Service frees you from the time-consuming – but
critical – chore of backing up your new software.
Simply purchase EDS as part of your order. We’ll automatically store on
our server a back-up copy of the software that you purchased and
downloaded for one full year from the date of purchase. System crash?
Hard disk error? No Worries! You can re-download your files anytime
during your extended protection period.
(Gibbs Decl., Ex. 31.)
Defendants did not track which of its customers clicked on the “What’s this?” link.
Although there is no direct evidence that everyone clicked on the “what’s this” link, in
one product trial group consisting of twenty-two people, every single person clicked on
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the link in the shopping cart because they did not understand why a product had suddenly
appeared in the cart as part of their purchase. (Second Van Gelder Decl., Ex. 11 at 7.)
3.
Information Available Through Customer Service
Customers could also contact customer service for more information about the
download insurance products. Digital River provided customer service for Symantec’s
online store until August 2006. (Gibbs Decl., Ex. 32 at 19:8-13; id., Ex. 33 at 19:1220:25.)
While Digital River was providing Symantec’s customer service, customer
service representatives used a “knowledge base” or “internal data assistant” to help them
answer customers’ questions. (Id., Ex. 34 at 30:16-31:21.) The internal data assistant
was an online resource containing answers to frequently asked questions that had been
drafted by Defendants. (Id., Ex. 34 at 30:4-8, 31:14-32:1.) The customer service center
was not, however “a scripted call center.” (Id., Ex. 35 at 149:8-16.) Each representative
had the same internal data assistant information available, (id., Ex. 35 at 33:10-13), but
“each rep would have their own way of saying it. It wasn’t 100 percent consistent across
the entire call center” (id., Ex. 35 at 149:16-21). Even so, a Digital River executive
testified that with respect to EDS, customer service representatives would have a script
with fundamentally the same information as that provided by the online descriptors.
(Second McNamara Decl., Ex. 1 at 223:22-224:8, id., Ex. 11 at 72:3-17, id., Ex. 17 at
81.) Customer service consistently told customers to purchase EDS if they wished to be
able to download their software more than sixty days after purchase. (Id., Ex. 1 at 224:914.)
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If a customer emailed customer service regarding the purchase of EDS, a customer
service representative would respond with a form e-mail stating:
Thank you for choosing Symantec store. When you order a downloadable
product from the Symantec store, you are automatically granted a 60-day
window in which your purchase can be re-downloaded at any time. After
the 60-day window has passed, your download will no longer be available
unless the Extended Download Service is also purchased.
(Id., Ex. 11 at 116:9-117:10; id., Ex. 18 at 93.)
In August 2006, Symantec switched from having Digital River provide its
customer service and to using third party vendors. (Gibbs Decl., Ex. 32 at 19:8-13; id.,
Ex. 33 at 19:12-20:25.)
Symantec alleges that when it took over customer service
operations, its representatives used an “entirely different” set of materials to answer
questions about EDS and NDI. (Symantec’s Mem. in Opp’n to Mot. for Class Cert. at
10, Aug. 23, 2013, Docket No. 216.) Symantec’s customer service representatives used a
knowledge base system in which a representative would have access to numerous
documents, each providing content with information about a particular topic. (Gibbs
Decl., Ex. 36 at 22:5-16.) The content and instructions to representatives about specific
topics changed over time, as did representatives’ responses to customer questions. For
example, one customer asked whether he was required to purchase EDS in order to
download software outside the sixty-day window, noting that he had always been able to
redownload outside the sixty-day period previously, even though he had not purchased
EDS. (Id., Ex. 43.) The customer service representative responded that “[i]f there is no
extended download service, you will be able to download only within 60 days of the
purchase,” and indicated that this changed the previous policy of allowing for downloads
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outside the sixty-day period through other, non-download insurance, means. (Id., Ex. 43
at 9; see also id., Ex. 80 at 39 (describing customer solution center answers to questions
about redownloading stating that “[t]o redownload the product you need to purchase the
Extended Download Service”).) Some customer service representatives noted that the
purchase of download insurance was optional, but did not alert customers to other
mechanisms they could use to redownload their Norton product outside the sixty-day
window. (See id., Exs. 44-45.) Other representatives told customers that they could
redownload their Norton product using trialware, and explained that the only advantage
of purchasing download insurance was to save some time in redownloading the product.
(Id., Ex. 46.) The record suggests that the general trend in customer service was to
attempt to sell a customer EDS first, and then suggest trialware or another download
alternative if a customer refused to purchase EDS. (Second McNamara Decl., Ex. 11 at
81:24-82:6.)
4.
Information Available Through Other Sources
Defendants contend that information about the download insurance products,
available from various sources, rendered disclosures in the shopping cart not misleading
because consumers could learn that it was not a necessary product through these other
sources.
A “FAQ” page on Symantec’s website available beginning in November 2007
under the heading “I want to re-download my Norton product” provided customers with
instructions on how to redownload their Norton product outside the sixty-day window
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that did not involve using download insurance. (Gibbs Decl., Ex. 47.) Additionally,
Symantec created video tutorials available on YouTube to assist customers in
downloading Norton products without purchasing download insurance. (Id., Ex. 48.)
Symantec also hosted Norton community discussion forums online, and would explain to
customers how to access available alternatives to download insurance. (Id., Ex. 49
(describing online chatroom advice given in 2010 and 2011).)
Information about alternatives to download insurance also existed in public fora
that were not sponsored by Defendants.
(See id., Ex. 50 (describing Defendants’
download insurance products and accompanying descriptions as “[u]nfair business
practice” and advising consumers about their ability to always redownload their
purchased software through other avenues). Affiliate sites that sold Norton products also
allegedly told customers not to purchase EDS, although the record is unclear as to how
frequently or in what manner this information was communicated. (Id., Ex. 51 at 58.)
Additionally, it appears that upon learning of these practices Defendants took steps to
have the domains of those affiliates terminated. (Id., Ex. 51 at 57-58.)
D.
Purchase Rates and Use of Download Insurance
Approximately half of the customers that bought Norton products also purchased
some form of download insurance. (Second Van Gelder Decl., Ex. 4 at 87:4-88:11.)
Defendants’ data about the use of EDS reveals that 97% of download activity occurred
during the first month following purchase of a North product, and 3% occurred in the
second month – within the sixty-day window for download provided by purchase of the
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original product. (Third McNamara Decl., Ex. 57 at 124.) There were “virtually no
downloads for the remainder 10 months of the [EDS] service.” (Id.)
E.
Contracts Potentially Governing Download Insurance
A customer purchasing EDS was bound by the terms and conditions of an
Extended Download Warranty Service Agreement (“the EDS Agreement”), unless they
unchecked a box at the end of the agreement. (Second McNamara Decl., Ex. 10; id.,
Ex. 11 at 53:23-54:15.) The EDS Agreement contained a Minnesota choice of law clause
with respect to claims against Digital River, providing that:
Any and all claims or disputes relating to the Services shall be governed by
the laws of the State of Minnesota. For the purpose of resolving conflicts
relating to the Service, [Digital River] and the End User agree that venue
shall be in the State of Minnesota only, and, in addition, the End User
hereby consents to the jurisdiction of the federal and state courts in the
State of Minnesota.
(Id., Ex. 10.)
Additionally, customers that accessed Symantec’s website agreed to certain terms
and conditions contained in a “Legal Notice” section of the website. (Id., Ex. 12 at 31.)
One of those terms was entitled “governing law and jurisdiction” which stated:
You agree that all matters relating to your access to, or use of, this web site
shall be governed by the laws of the state of California. You agree and
hereby submit to the exclusive personal jurisdiction and venue of the
Supreme Court of Santa Clara County in California and the United States
District Court for the Northern District of California, with respect to such
matters.
(Id., Ex. 12 at 34.)
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Symantec has also identified a Symantec Software Service License Agreement
(“Symantec License Agreement”) that it contends may be relevant to the present dispute.
(Gibbs Decl., Ex. 86.) The Symantec License Agreement subheading says “Norton
AntiVirus or Norton Internet Security,” but states that it “governs any releases, revisions,
updates or enhancements to the Software that Symantec may make available to You.”
(Id., Ex. 86 at 40.) The Symantec License Agreement also contains a California choice
of law provision, stating:
This License Agreement will be governed by the laws of the State of
California, United States of America. . . . Notwithstanding the foregoing,
nothing in this License Agreement will diminish any rights You may have
under existing consumer protection legislation or other applicable laws in
Your jurisdiction that may not be waived by contract.
(Id., Ex. 86 at 43.)
III.
ALTERNATIVES TO DOWNLOAD INSURANCE
The crux of Plaintiffs’ argument is that the sale of download insurance was
misleading, because Defendants represented that EDS and NDI were necessary purchases
if a customer wanted to redownload purchased software more than sixty days after
purchase. Plaintiffs contend that, in fact, there were numerous free methods a customer
could use to redownload the purchased software. A representative of Symantec testified
that in order to download purchased software beyond sixty days, customers “were
required to purchase EDS,” and there was “no other way to download software that
Symantec offered to [its] customers.” (Second Van Gelder Decl., Ex. 3 at 53:7-17.) But
the record reflects that download insurance was not the only means to redownload a
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product at any point during the class period, and in fact several other means were
available, which the Court will discuss below.
A.
Trialware
Trialware was a free version of Norton software that was available on the
Symantec website and storefront. (Second McNamara Decl., Ex. 20 at 15:23-17:8; id.,
Ex. 24 at 132.) Customers could click on the trialware link to download the Norton
product, then enter their unique product key to activate the software. (Id., Ex. 22; id.,
Ex. 4 at 199:1-204:1; id., Ex. 23 at 240:2-241:20.) The functionality of trialware with a
unique product key was the same as if a customer had redownloaded software using a
download insurance product. (Id., Ex. 4 at 199:1-204:1.)
A Symantec representative testified that trialware was designed for prospective
customers to try Symantec’s software, to determine whether they would like to purchase
the product. (Gibbs Decl., Ex. 52 at 51:16-21.)
The Symantec representative also
testified that using trialware in order to redownload previously purchased software
contravened Symantec’s structured business model of allowing a customer to try the
product before purchasing. (Id., Ex. 53 at 295:21-296:1.) However, there is undisputed
evidence in the record that Defendants knew that trialware was a viable alternative to
download insurance. An email from a Digital River employee stated that “Technically
speaking someone who didn’t ever buy [EDS] on retail could just download trialware and
activate with the key they already have, in lieu of ever buying [EDS] . . . Shhhh!”
(Second McNamara Decl., Ex. 25; see also id., Ex. 32 (statement by Symantec employee
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that “The NDI item gives me the creeps since we are now doing it directly. I could sort
of ignore it when DR was selling it.”); id., Ex. 26 at 141 (noting that trialware was an
alternative to redownloading, but hesitating about promoting that method “given the risk
to Download Insurance” which “is an antiquated concept and needs to go. We are just
having a tough time moving away from it.”).)
In October 2007, Symantec redesigned its customer support webpage to include
trialware links for all post-2005 Norton products on a single page titled “I want to redownload my Norton product.” (Id., Ex. 24 at 132; id., Ex. 20 at 35:15-40:24; id., Ex. 27
at 149.)
Digital River employees knew that this option “is usurping eds for sure”
recognizing that “downloading the trialware and manually entering your key” would
provide a customer with the same functionality as download insurance. (Id., Ex. 29.)
There is also evidence in the record that Defendants continued to offer download
insurance for “revenue” reasons, even though “[i]t is cancerous to customer satisfaction”
and “was not really adding a lot of value to customers.” (Id., Exs. 31, 34.)
Defendants allege that redownloading software through trialware was more
inconvenient and riskier from a computer security standpoint, than redownloading using
download insurance. (Second Van Gelder Decl., Ex. 5 at 33:6-19; Gibbs Decl., Ex. 55 at
212:19-213:1.) For example, the customer had to locate the correct (as opposed to
fraudulent versions that were available on the internet through third parties) of
Symantec’s trialware, (Gibbs Decl., Ex. 56 at 33:3-24; id., Ex. 57 at 38:3-11), locate the
appropriate product and/or version, (id., Ex. 52 at 291:2-17; id., Ex. 58 at 34:2-11), and
be able to access her unique product key, (id., Ex. 52 at 290:8-22). Plaintiffs could
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access their product key through purchase confirmation e-mails, the “find your order”
page, their Norton account, or by calling customer service. (Id., Ex. 47 at 8-9; id., Ex. 63
at 87:15-88:18.)
Additionally, Defendants allege that trialware was not necessarily available to
each class member. Sometimes trialware was not available because the customer had
purchased a different version of the software than the trialware version that was currently
being offered.
(Id., Ex. 59 at 81:3-18.)
Defendants also contend that prior to
approximately 2007 a customer’s product key would active only the precise edition of the
Norton product purchased. (Id., Ex. 60 at 202:3-14.) Therefore, a customer that wished
to redownload software in 2008 that was purchased in 2007 would be unable to activate
the latest version of trialware with her existing product key. Only post-November 2007
products allowed a customer to use a unique product key to activate any version of the
purchased software. (Id., Ex. 60 at 291:2-8.)
Although Symantec provided direct links to trialware on its website, during the
relevant time period Defendants did not provide information about trialware as an
alternative to download insurance at the point of sale when the download insurance
product was automatically added to the customer’s cart. (Second McNamara Decl., Ex.
30 at 92:4-12.)
B.
Purchasing Download Insurance Later
EDS could also be purchased by a customer after the original sale of the Norton
product, making purchase at the point of sale unnecessary. EDS could be purchased at
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any time during the duration of the download license. (Id., Ex. 37; id., Ex. 40 at 70:1121.) The option to purchase EDS would appear on the “order look up” page or could be
offered by a customer service representative. (Id., Ex. 11 at 41:12-42:2; id., Ex 38; id.,
Ex. 40 at 72:8-20.) Defendants did not disclose to consumers at the time of sale that they
could purchase EDS later in the event they needed to redownload. (Id., Ex. 1 at 228:19229:11.) NDI, however, was not available post-purchase. (Gibbs Decl., Ex. 73 at 53:1325.)
C.
Redownloading Through Customer Service
Customer service representatives also assisted customers in downloading products
outside the sixty-day period, sometimes using trialware.
(Second McNamara Decl.,
Ex. 24 at 132; id., Ex. 23 at 117:18-118:14; id., Ex. 11 at 77:16-78:19.) Customer service
representatives, however, had discretion in determining whether to allow or disallow free
redownloads without download insurance and outside the sixty-day window. (Gibbs
Decl., Ex. 68 at 86:13-87:20.) Defendants contend that using customer service as an
avenue to redownload software was inconvenient because wait times could be long. (Id.,
Ex. 70 at 294:17-295:3.)
D.
Downloading on Symantec’s Support Website
Customers could also redownload their Norton product after October 2007 by
accessing Symantec’s support website. (Gibbs Decl., Ex 81 at 127:7-23.) Symantec
contends that downloading through this website was not a guarantee, as not all Norton
products may have been available on the site at any given time. (Symantec’s Mem. in
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Opp’n to Mot. for Class Cert. at 16.) Archives of Symantec’s support website indicate
that starting on November 20, 2007, Norton products were available for downloading that
included at least the most recent versions of Norton Antivirus, Norton Internet Security,
Norton Systemworks, Norton 360, Norton Utilities as well as different versions of each
of these products – premier, standard, etc.
(Third McNamara Decl. ¶ 2; Second
McNamara Decl., Ex. 12.)
E.
Value of Download Insurance in Light of Alternatives
In a November 2010 email, a member of Symantec’s Consumer Strategy &
Emerging Business Development group discussed the relationship between sales of NDI
and available alternatives, explaining:
I believe selling NDI is near the border line of being unethical, since the
subscription model we adopted a few years ago includes all new
versions during the term of the subscription. I have felt this way long
before I joined Symantec. I developed this view several years ago when I
purchased some software (non-Symantec) from Digital River, and found
(after the fact) that they had added 9.95 to the cart. I felt screwed.
I feel NDI violates our core Symantec values of Customers and Trust.
I understand the issue of making the number. I agreed with the decision to
continue selling NDI through the December quarter in order to minimize
our risk of a short-fall.
(Third McNamara Decl., Ex. 51 at 2 (emphasis added).) Other Symantec representatives
indicated that NDI did not provide much value to consumers. (See Second McNamara
Decl., Ex. 34 at KHOD0000353 (“He is looking to add more value to [NDI] in order to
not just have the right to re-download the product (in line with DR’s EDS offering, which
I always thought was not really adding a lot of value to customers.)”).)
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Plaintiffs and Defendants both submitted expert reports that opined on the actual
value of download insurance. 6 Plaintiffs’ expert, Steve Gaskin, considered the value of
the convenience provided by download insurance due to the automatic injection of the
product key. (Third McNamara Decl., Ex. 55 at 32.) Specifically Gaskin was asked
to assume that customers who purchased Norton computer security
software had the ability to re-download the software for free, but, if they
did so, they were required to enter their product key during the installation
process. Alternatively, customers could purchase re-download insurance, a
service that automatically injected the product key during the installation
process.
(Id.) Gaskin used a conjoint analysis – which asks respondents in a questionnaire to
choose among products with different features – to perform a quantitative measurement
of customer preferences. (Id., Ex. 55 at 33-34.) During the analysis Gaskin showed
customers sets of product profiles and asked them to select the product they preferred,
assuming that the products displayed were the only ones available. (Id., Ex. 55 at 35.)
The conjoint analysis then used respondents’ decisions about which product profiles they
prefer to estimate the relative value of each described product feature. (Id., Ex. 55 at 34.)
Gaskin used product profiles that combined four different features – the number of
times the software could be redownloaded, the redownload process (whether the product
key was automatically injected), whether a computer security newsletter is provided, and
price. (Id.) The redownload process feature was described to survey respondents as
6
Defendants sought to admit their expert report after the motion for class certification
had been fully briefed. The Court granted their request at the hearing on the motion. (Minute
Entry, Nov. 5, 2013, Docket No. 246.)
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Description: In order to re-download your computer security software, you
may be required to enter your product key, a unique identification number
for your software product such as the example below:
V78HYFT9P8G29FJB3CKVDTG37
Your product key can be found on your software purchase confirmation
email or by logging into your Norton account with your login and password
or by contacting customer support.
The re-download options will vary according to whether you need to enter
the product key. All of the options are available 24 hours a day, 7 days a
week.
(Id., Ex. 55 at 41.) The different levels of redownload process features available for
survey respondents to choose between were:
[1] Enter your Norton account login and password, find your software
purchase in your Norton account, and click the download link
[2] After locating the product key, go to the Norton customer support
website, click the download link for your software, and enter the product
key
[3] Contact a Norton customer service representative by telephone or live
chat to walk you through the re-download process.
(Id.) Based on the results of the surveys Gaskin ultimately concluded that “the fair
market value of automatic product key injection offered in conjunction with the redownload of Norton computer security software products is between $0.05 and $0.16 per
transaction. (Id., Ex. 55 at 33.)
Defendants submitted a rebuttal expert report from Kent Van Liere. (Fourth Decl.
of Amy L. Van Gelder, Ex. A, Nov. 12, 2013, Docket No. 247.) Liere critiques Gaskin’s
findings because Gaskin “d[id] not study the specific products at issue” and his conjoint
study therefore did not “reasonably represent the product’s features and prices as they
appeared in the marketplace.” (Id., Ex. A at 11.) In particular, Liere notes that Gaskin’s
model left out two important features of the download insurance services – the
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availability of a “Download” button upon visiting the customer’s Norton account
webpage, and the convenience of knowing that the software accessed was “the exact
software that the customer purchased, thereby eliminating the need for consumers to
know the precise Norton product or version of the Norton product that they purchased.”
(Id., Ex. A at 11-12.) Liere also critiques, for example, Gaskin’s failure to test how a
consumer’s willingness to buy a download insurance product changed depending on
whether that purchase was at the point of sale with another product or what price the
consumer had paid for the original software product. (Id., Ex. A at 17-18.) Based on
these and other criticism, Liere concludes that “Gaskin’s failure to test consumers’
willingness to pay for either EDS or NDI products with the features and prices as they
appeared in the marketplace makes his survey incapable of answering the question of
how much putative class members valued those products.” (Id., Ex. A at 14.)
IV.
NAMED PLAINTIFFS
Plaintiffs Devi Khoday and Danise Townsend both purchased download insurance
products from Defendants during the class period. Townsend bought EDS from Digital
River on several occasions, including on June 7, 2006. (Second McNamara Decl., Ex. 41
at SYMC-KHOD-000003.) Townsend purchased Norton Antivirus 2006 for $39.99 and
paid $8.99 for EDS, which was automatically added to her shopping cart. (Id.; id., Ex. 42
at 46:2-4.) Townsend testified that she probably clicked on the “What’s this” link, and
purchased EDS because without it she would be required to repurchase the original
software if her computer crashed. (Id., Ex. 42 at 44:18-45:1, 46:2-11.) Townsend further
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testified that had she known she could purchase EDS at a later time or use trialware to
redownload her software in the event of a computer crash, she would not have purchased
EDS on June 7, 2006. (Id., Ex. 42 at 184:4-23.) Townsend was unaware of whether
trialware was available for her purchase. (Gibbs Decl., Ex. 19 at 117:10:14.) Townsend
testified that she understood her duty as class representatives. (Second McNamara Decl.,
Ex. 2 at 92:9-93:8.)
Townsend had previously declined on one occasion to purchase EDS when
purchasing Norton products. (Second Van Gelder, Ex. 19 at 100:6-19.) Townsend was
struggling with the purchase, called customer service, and eventually had the customer
service agent remove EDS. (Id., Ex. 19 at 69:7-71:24.) Townsend also once purchased a
Norton product along with EDS and returned both purchases. (Id., Ex. 23.)
Khoday purchased NDI in February 2010 along with her purchase of Norton 360.
(Second McNamara Decl., Ex. 43 at 60:3-61:18.) Khoday paid $59.99 for Norton 360
and $6.99 for NDI. (Id., Ex. 44 at KHOD000001.) Khoday clicked on the “What’s
this?” link and purchased NDI because she did not want to have to repurchase the Norton
360 software if something happened to her computer outside the sixty-day download
window. (Id., Ex. 43 at 60:8-9, 61:4-18.) During her deposition, Khoday was given a
computer exercise, and successfully redownloaded her Norton product using free
trialware. (Id., Ex. 43 at 17:13-25:3.) Khoday testified that she may or may not have
purchased NDI if she had been fully apprised of all the possible redownload alternatives.
(Id., Ex. 82 at 147:1-149:15.)
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V.
CLASS CLAIMS
On January 24 2011, Plaintiffs, on behalf of themselves and all others similarly
situated, filed a complaint against Defendants. (Compl., Jan. 24, 2011, Docket No. 1.) In
an amended complaint, Plaintiffs bring class action claims against Defendant Symantec
for violations of California’s Unfair Competition Law (“UCL”) and California’s
Consumers Legal Remedies Act (“CLRA”). (Am. Compl., ¶¶ 36-58, Apr. 14, 2011,
Docket No. 40.) Plaintiffs bring class action claims against Defendant Digital River for
violations of Minnesota’s Consumer Fraud Act (“CFA”).
(Id. ¶¶ 59-69.)
Finally,
Plaintiffs bring claims for unjust enrichment against both Defendants. (Id. ¶¶ 74-78.) 7
Plaintiffs’ claims rely generally upon the contention that Defendants - through
material misrepresentations and omissions – induced customers to pay for download
insurance that was represented as a necessary purchase in order to redownload Norton
software outside the sixty-day download window. In fact, Plaintiffs contend, the service
was unnecessary because customers could use multiple alternative avenues to redownload
purchased Norton products.
ANALYSIS
Plaintiffs seek certification of a class under Federal Rule of Civil Procedure
23(b)(3). Plaintiffs define the class as:
7
The Court previously granted Defendants’ motion to dismiss Plaintiffs’ declaratory
judgment claim. See Khoday v. Symantec Corp., 858 F. Supp. 2d 1004, 1019 (D. Minn. 2012).
- 26 -
All persons in the United States who Purchased Extended Download
Service (“EDS”) for Norton products or Norton Download Insurance
(“NDI”) between January 24, 2005 and March 10, 2011.
January 24, 2005 – October 26, 2009 – Claims against Digital River
under the Minnesota Consumer Fraud Act and False Statement in
Advertising Act, or Unjust Enrichment;
January 24, 2007 – March 10, 2011 – Claims against Symantec under
California Unfair Competition Law, or Unjust Enrichment;
January 24, 2008 – March 10, 2011 – Claims against Symantec under
California Consumer Legal Remedies Act.
(Pl.’s Mem. in Supp. of Class Cert. at 14, June 26, 2013, Docket No. 182.) In their reply
brief, Plaintiffs agreed with Defendants that the CLRA only applies to consumer claims,
and accordingly propose limiting the class definition for CLRA claims to those customers
that “purchased EDS or NDI for personal, family, or household purposes.”
(Pl.’s
Corrected Reply at 17 n.7, Oct. 18, 2013, Docket No. 234.)
I.
STANDARD FOR CLASS CERTIFICATION UNDER RULE 23
Under Federal Rule of Civil Procedure 23, “[p]laintiffs requesting class
certification must satisfy both ‘implicit’ and ‘explicit’ legal requirements.”
City of
Farmington Hills Emps. Ret. Sys. v. Wells Fargo Bank, N.A., 281 F.R.D. 347, 351
(D. Minn. 2012). “To be certified as a class, plaintiffs must meet all of the requirements
of Rule 23(a) and must satisfy one of the three subsections of Rule 23(b).” In re St. Jude
Med., Inc., 425 F.3d 1116, 1119 (8th Cir. 2005). “[A] party must not only ‘be prepared to
prove that there are in fact sufficiently numerous parties, common questions of law or
fact,’ typicality of claims or defenses, and adequacy of representation, as required by
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Rule 23(a). The party must also satisfy through evidentiary proof at least one of the
provisions of Rule 23(b).” Comcast Corp. v. Behrend, 133 S. Ct. 1426, 1432 (2013)
(emphasis in original) (quoting Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2551-52
(2011)). Additionally, plaintiffs must “establish that a defined class exists and that the
class representatives fall within that class.” City of Farmington Hills, 281 F.R.D. at 351.
Plaintiffs bear the burden of showing that a class action is appropriate, and that the
requirements of Rule 23 are met.
Wal-Mart Stores, Inc., 131 S. Ct. at 2551-52.
Frequently, a court’s determination of whether to certify a class “will entail some overlap
with the merits of the plaintiff’s underlying claim.” Id. at 2551; Luiken v. Domino’s
Pizza, LLC, 705 F.3d 370, 372 (8th Cir. 2013) (explaining that class certification “may
require the court to resolve disputes going to the factual setting of the case, and such
disputes may overlap the merits of the case”). “Nonetheless, the district court does not
conduct a mini-trial to determine if the class ‘could actually prevail on the merits of their
claims.’” Johns v. Bayer Corp., 280 F.R.D 551, 555 (S.D. Cal. 2012) (quoting Ellis v.
Costco Wholesale Corp., 657 F.3d 970, 983 n.8 (9th Cir. 2011)). “When the court must
determine the merits of an individual claim to determine who is a member of the class,
then class treatment is not appropriate.” Id. Additionally that the amount of damage
suffered by each class member may be an individual inquiry does not defeat class action
treatment. See Stearns v. Ticketmaster Corp., 655 F.3d 1013, 1026 (9th Cir. 2011).
The Court has “broad discretion” to determine whether class certification is
appropriate. See Prof’l Firefighters Ass’n of Omaha, Local 385 v. Zalewski, 678 F.3d
640, 645 (8th Cir. 2012).
“When a question arises as to whether certification is
- 28 -
appropriate, the court should give the benefit of the doubt to approving the class.” City of
Farmington Hills, 281 F.R.D. at 352.
Furthermore, “[c]lass action certifications to
encourage compliance with consumer protection laws are desirable and should be
encouraged.” Johns, 280 F.R.D. at 555 (internal quotation marks omitted).
II.
RULE 23(a) PREREQUISITES
To be certified as a class, plaintiffs must first satisfy the prerequisites in Federal
Rule of Civil Procedure 23(a). Rule 23(a) requires plaintiffs to demonstrate that:
(1) the putative class is so numerous that it makes joinder of all
members impractical; (2) questions of law or fact are common to the
class; (3) the class representatives’ claims or defenses are typical of the
claims or defenses of the class; and (4) the representative parties will
fairly and adequately protect the interests of the class.
In re St. Jude Med., Inc., 425 F.3d at 1119 (citing Fed. R. Civ. P. 23(a)).
Class
certification is appropriate only if the Court is satisfied, “after a rigorous analysis, that the
prerequisites of Rule 23(a) have been satisfied.” Comcast, 133 S. Ct. at 1432 (internal
quotation marks omitted).
A.
Numerosity
Defendants do not dispute that Plaintiffs have satisfied the numerosity
requirement. Defendants sold download insurance more than 15 million times in the
United States during the relevant time period. (Second McNamara Decl., Ex. 45.) This
number makes joinder impractical. See Wiener v. Dannon Co., 255 F.R.D. 658, 664
(C.D. Cal. 2009) (finding the numerosity requirement satisfied in a consumer fraud action
where the class would include “several million plaintiffs”).
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B.
Commonality
Rule 23(a)(2) requires that “‘there are questions of law or fact common to the
class.’” Wal-Mart Stores, Inc., 131 S. Ct. at 2549 (quoting Fed. R. Civ. P. 23(a)(2)). The
claims “must depend upon a common contention” that is “capable of classwide
resolution.”
Id. at 2551.
In the past, courts have found that the threshold for
commonality is low, and requires only that the legal issue “linking the class members is
substantially related to the resolution of the litigation.” DeBoer v. Mellon Mortg. Co.,
64 F.3d 1171, 1174 (8th Cir. 1995) (internal quotation marks omitted). The Supreme
Court’s recent opinion in Wal-Mart heightened the requirement of commonality. See
Haddock v. Nationwide Fin. Servs., Inc., 293 F.R.D. 272, 279 (D. Conn. 2013) (“WalMart upped the ante on ‘commonality’ under Rule 23(a)(2) . . . .”). In Wal-Mart, the
Supreme Court explained that “[c]ommonality requires the plaintiff to demonstrate that
the class members have suffered the same injury[.]” Wal-Mart Stores, Inc., 131 S. Ct. at
2551 (internal quotation marks omitted). In other words, the Supreme Court held that
class
claims must depend upon a common contention – for example, the assertion
of discriminatory bias on the part of the same supervisor. That common
contention, moreover, must be of such a nature that it is capable of
classwide resolution – which means that determination of its truth or falsity
will resolve an issue that is central to the validity of each one of the claims
in one stroke.
Id. Thus, when examining commonality, a court looks to “the capacity of a classwide
proceeding to generate common answers apt to drive the resolution of the litigation.” Id.
(emphasis in original) (internal quotation marks omitted).
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For purposes of the
commonality requirement, the relevant inquiry is not whether those common issues
predominate, but only whether there is at least a single common contention that satisfies
the above criteria. Id. at 2556-57.
Digital River argues there is no commonality here because class proceedings will
not answer common questions given the dissimilarities in customer purchasing
experiences and any attendant injury. The Court finds that Digital River’s argument goes
primarily to whether common issues predominate, not whether there are common issues
in the first instance, and accordingly will address these arguments more fully below. See
Johns, 280 F.R.D. at 556 (addressing overlapping issues of commonality and
predominance in the predominance analysis); Chavez v. Blue Sky Natural Beverage Co.,
268 F.R.D. 365, 377 (N.D. Cal. 2010) (“Defendants contend that individual issues of
motivation and damages defeat the commonality required under Rule 23(a)(2). Those
arguments focus more on the question whether the common issues predominate under
Rule 23(b)(3) . . . .”). Here there is at least one common question of law and fact that
could generate class wide answers: whether Defendants’ representations about the
necessity of download insurance were likely to mislead or deceive class members. See
Mazza v. Am. Honda Motor Co., 666 F.3d 581, 589 (9th Cir. 2012) (finding commonality
where “common questions exist as to whether Honda had a duty to disclose or whether
the allegedly omitted facts were material and misleading to the public” even though
defendants argued that the question of “which buyers saw or heard which
advertisements” was not susceptible to common resolution (emphases omitted)). That all
of Defendants’ representations regarding download insurance were not identical or that
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some consumers may have purchased the product even if they had known it was
unnecessary does not negate Plaintiffs’ showing of commonality. See Ries v. Arizona
Beverages USA LLC, 287 F.R.D. 523, 537 (N.D. Cal. 2012) (“[V]ariation among class
members in their motivation for purchasing the product, the factual circumstances behind
their purchase, or the price that they paid does not defeat the relatively ‘minimal’
showing required to establish commonality.”); Chavez, 268 F.R.D. at 378 (finding
commonality even though plaintiffs’ claims arose “out of the allegedly false statement,
worded in several variations”).
C.
Typicality
Typicality requires that “there are other members of the class who have the same
or similar grievances as the plaintiff.” Sonmore v. CheckRite Recovery Servs., Inc., 206
F.R.D. 257, 262 (D. Minn. 2001) (internal quotation marks omitted). The typicality
requirement seeks to determine “whether the named plaintiff’s claim and the class claims
are so interrelated that the interests of the class members will be fairly and adequately
protected in their absence,” Gen. Tel. Co. of Sw. v. Falcon, 457 U.S. 147, 157 n.13
(1982), “and is satisfied when each class member’s claim arises from the same course of
events, and each class member makes similar legal arguments to prove the defendant’s
liability.” Stearns, 655 F.3d at 1019 (alteration and internal quotation marks omitted).
Factual variations amongst plaintiffs will not normally preclude class certification “if the
claim arises from the same event or course of conduct as the class claims, and gives rise
to the same legal or remedial theory.” Alpern v. UtiliCorp United, Inc., 84 F.3d 1525,
- 32 -
1540 (8th Cir. 1996).
“When a class includes purchasers of a variety of different
products, a named plaintiff that purchases only one type of product satisfies the typicality
requirement if the alleged misrepresentations or omissions apply uniformly across the
different product types.” Marcus v. BMW of N. Am., LLC, 687 F.3d 583, 599 (3d Cir.
2012).
Plaintiffs seek to bring class claims against Symantec for its direct sale of NDI as
well as its role in authorizing and supporting Digital River’s sale of EDS. The class
certification sought by Plaintiffs includes claims against Symantec under the UCL for
consumers purchasing products between January 24, 2007 and March 10, 2011, and
under the CLRA for consumers purchasing download insurance between January 24,
2008 and March 10, 2011. Townsend purchased EDS in June 2006, which is outside of
the statute of limitations for claims against Symantec, and Khoday purchased NDI, not
EDS. Symantec argues that the named Plaintiffs’ claims are not typical because they are
not members of the class that they are purporting to represent. Specifically, Symantec
argues that neither named Plaintiff purchased EDS during the time period for which
Symantec can be held liable based upon the statute of limitations, and therefore no class
action should be certified against Symantec with respect to claims arising out of the
purchase of EDS.
But the Court finds that the failure of either named Plaintiff to specifically
purchase EDS after January 2007 or 2008 does not prevent these Plaintiffs from being
typical of other class members because EDS and NDI are substantially similar for
purposes of Plaintiffs’ class claims. See DeBoer, 64 F.3d at1174-75 (“The burden of
- 33 -
demonstrating typicality is fairly easily met so long as other class members have claims
similar to the named plaintiff. . . . This typicality is not altered by the different mortgage
instruments held by class members. The relief sought in the action is the same regardless
of the amount of overage in any particular account.”). This is not a case “where evidence
needed to prove the named plaintiff’s claims is not probative of other class members’
claims.” See Wiener, 255 F.R.D. at 665-66 (finding that typicality was not satisfied
where the named plaintiff had purchased only one of three kinds of yogurts at issue
where the allegedly false health claims made by Dannon were different – one improved
the immune system and one aided digestion – for the different kinds of yogurt). Instead,
the evidence needed to prove that Symantec’s marketing of NDI was misleading will also
be probative of whether EDS was misleading, because both products used almost
identical descriptive language and were subject to a similar set of alternative
redownloading options during the class period. See Marcus, 687 F.3d at 599 (finding
typicality even though “different tire models and sizes, and different vehicles, have
different performance characteristics, compositions, designs, purposes, and uses” because
the problems alleged with the Bridgestone RFTs that formed the basis of the lawsuit
“that they are highly susceptible to road hazard damage, unrepairable, expensive, difficult
to purchase, and that a vehicle cannot be converted for use of conventional tires – are
uniform and apply to all 2006-2009 BMW vehicles equipped with Bridgestone RFTs”).
For Townsend and Khoday to prevail they will have to establish that download insurance
products were not the only means to redownload Norton software and that Defendants’
- 34 -
representations indicated the opposite. Accordingly, the Court finds that the named
Plaintiffs satisfy the typicality requirement.
D.
Adequacy
Finally, Plaintiffs must establish that the “representative parties will fairly and
adequately protect the interests of the class.” Fed. R. Civ. P. 23(a)(4). To demonstrate
adequacy of representation a plaintiff must show that “(1) the representative and its
attorneys are able and willing to prosecute the action competently and vigorously; and
(2) the representative’s interests are sufficiently similar to those of the class that it is
unlikely that their goals and viewpoints will diverge.” City of Farmington Hills, 281
F.R.D. at 353; see also Johns, 280 F.R.D. at 557. “Challenges to adequacy are not
relevant unless they bear on the existence of conflicts among class members or plaintiffs’
ability to vigorously prosecute their case.” Johnson v. Harley-Davidson Motor Co. Grp.,
LLC, 285 F.R.D. 573, 578 (E.D. Ca. 2012).
Both Plaintiffs have stated that they want to vindicate the rights of those who
purchased download insurance from Defendants and both Plaintiffs have also been
involved in the litigation – reading the complaint, giving depositions, participating in
discovery, and communicating with class counsel. (Second McNamara Decl., Ex. 42 at
92:23-93:8; id., Ex. 43 at 30:13-15.) Additionally, attorneys for the proposed class have
presented substantial evidence that they are competent and capable of prosecuting this
action on behalf of the class. (See Mem. in Supp. of Unopposed Mot. to Appoint Interim
Lead Counsel, May 9, 2011, Docket No. 47; Second McNamara Decl., Exs. 46-47.)
- 35 -
Symantec contends that Khoday is an inadequate representative because she has
relied on counsel to apprise her of the basis of her claims and that although she knew
about settlement mediation, she was not consulted in connection with that mediation.
(See Gibbs Decl., Ex. 92 at 35:19-24.) Specifically, Symantec argues that Khoday is not
an adequate representative, because counsel for the class, not Khoday, is the real driving
force behind the litigation. (See Symantec’s Mem. in Opp’n to Mot. for Class Cert. at 4344 (citing Bodner v. Oreck Direct, LLC, Civ. No. 06-4756, 2007 WL 1223777, at *2-3
(N.D. Cal. Apr. 25, 2007)). In Bodner, the court found the named plaintiff to be an
inadequate representative “[i]n light of plaintiff’s undeniable and overwhelming
ignorance regarding the nature of this action, the facts alleged, and the theories of relief
against defendant,” where the plaintiff became the named plaintiff by responding to an
advertisement by plaintiff’s counsel, met his attorney in person for the first time the day
before his deposition, did not read the complaint before it was filed, and had no
knowledge of the matter that had not come from his attorneys. Bodner, 2007 WL
1223777 at *1-2. Additionally, the court noted that plaintiff’s counsel had previously
tried to bring a similar class action in a different district which was dismissed for failure
to timely move for class certification. Id.
The facts of this case are readily distinguishable from Bodner. Here, Symantec
does not dispute that both named Plaintiffs actively participated in depositions and
discovery, reviewed the complaint, maintain frequent contact with class counsel, and
have demonstrated a “willingness and ability to play an active role in and control the
litigation and to protect the absent class members.” Stanich v. Travelers Indem. Co., 259
- 36 -
F.R.D. 294, 316, 318 (N.D. Ohio 2009) (internal quotation marks omitted) (finding
representation adequate where “[i]t appears that Lonardo’s interaction with his attorneys
to date has been typical of the usual attorney-client relationship – he has participated in
discovery, reviewed the amended complaint, and talked to his counsel about the duties of
a class representative”). Even if Khoday’s deposition could properly be interpreted as an
indication that she was unaware of settlement negotiations, this alone is insufficient to
demonstrate her inadequacy. See Christman v. Brauvin Realty Advisors, Inc., 191 F.R.D.
142, 147 (N.D. Ill. 1999) (finding that concerns about whether class counsel was
adequately consulting the Named Plaintiffs regarding settlement were “insufficient to
find that the Named Plaintiffs and their counsel are inadequate to represent the class”).
Additionally, the Court finds that Khoday’s reliance on counsel to apprise her of the
nature of her legal claims is appropriate, and the record does not demonstrate that any
such reliance will prevent her from vigorously prosecuting the action in the best interest
of absent class members or that a conflict of interest exists. See In re Napster, Inc.
Copyright Litig., MDL No. 00-1369, Civ. No. 04-1671, 2005 WL 1287611, at *6
(N.D. Cal. June 1, 2005) (finding that allegations of the “named plaintiffs’ ignorance of
the details of both the initial round of Napster litigation and the ongoing proceedings” did
not “suggest[] that the degree of deference that the named plaintiffs have conferred upon
counsel falls so far outside the bounds of an ordinary attorney-client relationship that it
would have the effect of depriving the absent class members of adequate
- 37 -
representation”). Therefore, the Court concludes that named Plaintiffs and their attorneys
satisfy the adequacy requirement of Rule 23(a). 8
III.
CERTIFICATION UNDER RULE 23(b)(3)
In addition to satisfying the prerequisites of Rule 23(a), a class may be maintained
under Rule 23(b)(3) only if “the court finds that the questions of law or fact common to
class members predominate over any questions affecting only individual members, and
that a class action is superior to other available methods for fairly and efficiently
adjudicating the controversy.” Fed. R. Civ. P. 23(b)(3).
A.
Predominance
Predominance “tests whether proposed classes are sufficiently cohesive to warrant
adjudication by representation.” AmChem Prods., Inc. v. Windsor, 521 U.S. 591 623
(1997). “Because no precise test can determine whether common issues predominate, the
Court must pragmatically assess the entire action and the issues involved.” In re Nat’l W.
Life Ins. Deferred Annuities Litig., 268 F.R.D. 652, 662-63 (S.D. Cal. 2010) (internal
quotation marks omitted)). The central issue is whether defendant’s liability as to all
plaintiffs can be established by common evidence. Avritt v. Reliastar Life Ins. Co., 615
8
Additionally, Digital River argues that Townsend is an inadequate class representative
because she lacks standing and because the statute of limitations has run on any claims she could
bring under Florida law (her home state). (See Digital River’s Mem. in Opp’n to Mot. for Class
Cert. at 32-33, Aug. 23, 2013, Docket No. 214.) Because the Court concludes, under the
predominance analysis, that each member of the proposed class has standing and that Minnesota
law applies to class claims against Digital River, these arguments do not establish that Townsend
is an inadequate class representative.
- 38 -
F.3d 1023, 1029 (8th Cir. 2010).
Therefore, “[t]he predominance inquiry requires an
analysis of whether a prima facie showing of liability can be proved by common evidence
or whether this showing varies from member to member.” Halvorson v. Auto-Owners
Ins. Co., 718 F.3d 773, 778 (8th Cir. 2013).
“‘Implicit in the satisfaction of the
predominance test is the notion that the adjudication of common issues will help achieve
judicial economy.’” In re Nat’l W. Life Ins. Deferred Annuities Litig., 268 F.R.D. at 663
(quoting Valentino v. Carter-Wallace, Inc., 97 F.3d 1227, 1234 (9th Cir. 1996)).
1.
Choice of Law
Defendants argue that common issues of law will not predominate because each
class member will be governed by the consumer protection laws of his or her state of
residence. In making this argument, Defendants contend that the choice of law clauses
contained in the various agreements related to the purchases of download insurance are
not applicable to the proposed class claims.
“In determining whether a choice of law provision in the parties’ agreement will
be given effect, a federal court sitting in diversity looks to the choice of law principles of
the forum state, in this case Minnesota.” Fla. State Bd. of Admin. v. Law Eng’g & Envtl.
Servs., Inc., 262 F. Supp. 2d 1004, 1012 (D. Minn. 2003); see also Cotton v. Commodore
Express, Inc., 459 F.3d 862, 863 (8th Cir. 2006). Minnesota courts generally enforce
choice of law clauses and apply the substantive law agreed to by the parties.
See
Schwan’s Sales Enters., Inc. v. SIG Pack, Inc., 476 F.3d 594, 596 (8th Cir. 2007); Milliken
& Co. v. Eagle Packaging Co., 295 N.W.2d 377, 380 n.1 (Minn. 1980). “In some
- 39 -
circumstances, choice of law clauses can control which jurisdiction’s law will govern
[statutory or] tort claims in addition to breach of contract claims arising out of the
agreements of which the clauses are a part.” Superior Edge, Inc. v. Monsanto Co.,
Civ. No. 12-2672, 2013 WL 4050790, at *7 (D. Minn. Aug. 9, 2013) (applying
contractual choice of law provision to tort claims as well as statutory claims for deceptive
trade practices and misappropriation of trade secrets). In considering the scope of a
choice of law clause’s application, the Court applies ordinary principles of contract
interpretation. See Inacom Corp. v. Sears, Roebuck & Co., 254 F.3d 683 (8th Cir. 2001)
(construing the language of a choice of law clause to determine whether it was “broad
enough” to govern choice of law for a tort claim); Nw. Airlines, Inc. v. Astraea Aviation
Servs., Inc., 111 F.3d 1386, 1392 (8th Cir. 1997) (applying a choice of law clause to
claims that “f[e]ll within the ambit of the express agreement”). In an unambiguous
contract, the plain and ordinary meaning of the contract controls. Bus. Bank v. Hanson,
769 N.W.2d 285, 288 (Minn. 2009).
a.
Digital River’s Choice of Law Clause
The relevant language with respect to the claims against Digital River arising out
of the purchase of EDS is contained in the EDS Agreement, stating: “Any and all claims
or disputes relating to the Services shall be governed by the laws of the State of
Minnesota.” (Second McNamara Decl., Ex. 10.) Digital River contends that this choice
of law provision does not govern the consumer statutory claims brought here because the
claims will not require the Court to interpret the EDS Agreement in order to adjudicate
- 40 -
Plaintiffs’ claims. But courts have limited the application of a choice of law clause only
when the choice of law clause at issue expressly limits it application to the interpretation
or construction of the contract itself, not any claims based on the services provided
pursuant to the contract, as the clause does here. See, e.g., Nw. Airlines, Inc., 111 F.3d at
1392 (construing a choice of law clause providing that the “Agreement shall be deemed
entered into within and shall be governed by and interpreted in accordance with the laws
of the State of Minnesota” to apply to claims for negligent performance,
misrepresentation, deceptive trade practices, and unjust enrichment only because those
claims were “closely related to the interpretation of the contracts”); Warren E. Johnson
Cos. v. Unified Brand, Inc., 735 F. Supp. 2d 1099, 1104, 1106 (D. Minn. 2010) (finding a
clause stating that the “Agreement will be construed in accord with the laws of
Mississippi” governed only those statutory and tort claims that were “closely related to
the contract’s terms”).
Unlike these clauses, the choice of law provision in the EDS Agreement is broad,
and covers “any and all claims or disputes relating to the Service.” (Second McNamara
Decl., Ex. 10.) The agreement itself does not limit the application of the choice of law
clause to claims that involve interpretation of the agreement. Instead, claims based on
representations made or information omitted regarding the necessity of the EDS service
are certainly related to Digital River’s offered download insurance service, and therefore
fall within the ambit of “any and all claims or disputes relating to the Service.” See
Barton v. RCI, LLC, 2011 WL 3022238, at *3 (D.N.J. July 22, 2011) (finding that a
choice of law clause which governed a “Reservation System” operated by defendant
- 41 -
applied to all statutory and tort claims arising out of misrepresentations regarding aspects
of that system explaining that only “where a choice of law provision is narrowly drafted
to apply only to the construction and enforcement of an agreement” will the provision
“not apply to all claims arising out of the parties’ relationship” (emphasis in original)
(alterations and internal quotation marks omitted)); Saulic v. Symantec Corp., 596
F. Supp. 2d 1323, 1329 (C.D. Cal. 2009) (finding that Digital River’s choice of law
clause at issue here would apply to claims for violation of the Song-Beverly Credit Card
Act based on defendants’ use of a particular credit card form for sales arising out of
purchases of EDS); Cal-State Bus. Prods. & Servs., Inc. v. Ricoh, 16 Cal. Rptr. 2d 417,
423 (Ct. App. 1993) (construing a forum selection clause providing that “any case or
controversy arising under or in connection with the Agreement[s]” as including claims
based on “allegedly false promises made in the course of the negotiations”).
Accordingly, the Court finds that the class claims fall within the scope of Digital River’s
choice of law clause.
Digital River next argues that even if the choice of law clause would call for the
application of Minnesota law, the clause cannot be applied because consumers cannot
waive their rights under the consumer protection laws of their home state.
Courts
typically refuse to apply choice of law provisions to consumer protection claims when
application of the choice of law clause will limit or deprive the consumer of a remedy
provided by his or her home state.
See, e.g., Walter v. Hughes Commc’ns, Inc.,
682 F. Supp. 2d 1031, 1038, 1042 (N.D. Cal. 2010) (refusing to enforce a Maryland
choice of law clause which had “the effect of waiving legal protections that are afforded
- 42 -
by California law,” specifically the ability to recover punitive damages); Millett v.
Truelink, Inc., Civ. No. 05-599, 2006 WL 2583100, at *4 (D. Del. Sept. 7, 2006)
(refusing to enforce a Delaware choice of law clause that would have insulated defendant
“from liability against all statutory consumer fraud claims” arising out of conduct
occurring outside of Delaware, in violation of Kansas public policy). But Digital River
has identified no rights or remedies available under the consumer protection laws of other
states that are not available under Minnesota law. Additionally, courts have refused to
allow a defendant to avoid class certification by “circumvent[ing] the broad choice of law
clause in its own form contract” by “trying to garner protection of a statute intended to
protect its adversaries.” Pro v. Hertz Equipment Rental Corp., Civ. No. 06-3830, 2008
WL 5218267, at *6 (D.N.J. Dec. 11, 2008). Therefore, the Court concludes that, at least
at this stage of the litigation, Digital River’s choice of law clause can be applied to the
class claims.
Finally, Digital River argues that Minnesota law cannot constitutionally be
applied. 9 “‘[F]or a State’s substantive law to be selected in a constitutionally permissible
9
Although the Court considers whether the law chosen by the choice of law clause may
constitutionally be applied, it does not address Digital River’s arguments regarding Minnesota’s
better law choice of law doctrine because where, as here, “the parties[’] express contractual
provisions have designated that the laws of a particular state shall govern disputes arising under
the agreement, Minnesota courts have applied the substantive law of the designated state without
reference to the [better law] factors.” Surgidev Corp. v. Eye Tech., Inc., 648 F. Supp. 661, 679
(citing Medtronic, Inc. v. Gibbons, 684 F.3d 565, 567-68 (8th Cir. 1982)). Because a choice of
law clause governs the class claims, the Court need not undertake its own choice of law analysis.
See Ceres Envtl. Servs., Inc. v. Arch Specialty Ins. Co., 853 F. Supp. 2d 859, 866 (D. Minn.
2012) (applying New York law due to a choice of law clause without undertaking a choice of
law analysis); Fla. State Bd. of Admin. v. Law Eng’g & Envtl. Servs., Inc., 262 F. Supp. 2d 1004,
(Footnote continued on next page.)
- 43 -
manner, that State must have a significant contact or significant aggregation of contacts,
creating state interests, such that choice of its law is neither arbitrary nor fundamentally
unfair.’” In re St. Jude Med., Inc., 425 F.3d at 1120 (alteration in original) (quoting
Allstate Ins. Co. v. Hague, 449 U.S. 302, 312-13 (1981)). “When considering fairness in
this context, an important element is the expectation of the parties.” Phillips Petroleum
Co. v. Shutts, 472 U.S. 797, 822 (1985).
Here, Digital River has its headquarters and principal place of business in
Minnesota.
Additionally, Digital River does not dispute that EDS was developed,
marketed, and sold from Minnesota, and that Digital River kept copies for EDS purchases
on Digital River’s premises. (See Gibbs Decl., Ex. 19 at 148:13-19.) Digital River’s
website also lists contact information for its corporate headquarters in Minnetonka,
Minnesota. This set of facts is sufficient to establish that Minnesota has significant
contacts and a significant state interest such that Minnesota law can constitutionally be
applied to the class claims. See Mooney v. Allianz Life Ins. Co. of N. Am., 244 F.R.D.
531, 535 (D. Minn. 2007) (finding application of Minnesota law to be constitutional
where “Allianz is incorporated and headquartered in Minnesota, Allianz created and
distributed the allegedly fraudulent marketing materials from Minnesota, the policies
were prepared and issued from Minnesota, Allianz received premium payments in
Minnesota, and Allianz’s Consumer Brochures list the address and telephone number of
____________________________________
(Footnote continued.)
1014 (D. Minn. 2003) (applying Florida law due to a choice of law clause without undertaking a
choice of law analysis).
- 44 -
Allianz’s Minnesota home office.”); Schlesigner v. Superior Court, No. B224880, 2010
WL 3398844, at *6 (Cal. Ct. App. Aug. 31, 2010) (finding California law was
constitutionally applied in part because “Ticketmaster has its headquarters and principal
place of business in California”). 10 Furthermore Digital River required each customer
purchasing EDS to explicitly agree that Minnesota law would apply to any and all
disputes related to EDS. Therefore, unlike Phillips Petroleum in which there was “no
indication that when the leases involving land and royalty owners outside of Kansas were
executed, the parties had any idea that Kansas law would control,” 472 U.S. at 822, here
there is no element of unfairness based upon the expectations of the parties. 11
Accordingly, the Court will apply the Minnesota choice of law provision to claims arising
out of the sale of EDS by Digital River.
b.
Symantec’s Choice of Law Clauses
The relevant language with respect to the claims against Symantec comes from
two choice of law provisions. The first is a legal notice on Symantec’s website stating
10
For similar reasons, the Court rejects Digital River’s argument that application of
Minnesota law violates the Commerce Clause by transforming Minnesota’s consumer protection
statutes into a nationwide regulatory scheme. See Mooney, 244 F.R.D. at 535 (rejecting
Commerce Clause argument because “Minnesota has a substantial interest in policing the
conduct of its corporations so as to ‘prevent[] the corporate form from becoming a shield for
unfair business dealings’” (alteration in original) (quoting CTS Corp. v. Dynamics Corp. of Am.,
481 U.S. 69, 93 (1987)).
11
The choice of law clause distinguishes this case from those cited by Digital River in its
brief for the proposition that a defendant’s headquarters and misrepresentations in a particular
state are insufficient to establish significant contacts. (See Digital River’s Mem. in Opp’n to
Mot. for Class Cert. at 40.)
- 45 -
that “You agree that all matters relating to your access to, or use of, this web site shall be
governed by the laws of California.”
(Second McNarama Decl., Ex. 12 at 34.)
Additionally, Symantec’s License Agreement, which governs a customer’s purchase and
use of Norton software as well as “any releases, revisions, updates or enhancements to
the Software that Symantec may make available to You,” contains a California choice of
law clause providing that the agreement “will be governed by the laws of the State of
California.” (Gibbs Decl., Ex. 86 at 40, 43.) Symantec argues that the choice of law
clause on Symantec’s website does not apply to the proposed class claims because the
claims “have nothing to do with access and use of Symantec’s website; they have to do
with the purchase of a specific product.” (Symantec’s Mem. in Opp’n to Mot. for Class
Cert. at 23-24.)
Symantec’s choice of law clause contained in the legal notice on its website, like
Digital River’s, is broad in scope. To purchase Norton products and accompanying
download insurance customers accessed and used Symantec’s website. Additionally,
many of the representations at issue were displayed on Symantec’s website. To access
their Norton accounts that allowed them to actually activate any purchased download
insurance product, customers also visited Symantec’s webpage. Therefore, the Court
finds that the class claims at issue relate to a customer’s access or use of Symantec’s
website, and therefore fall within the scope of the choice of law provision. Cf. Kennedy
v. ITV Direct, Inc., Civ. No. 08-6244, 2009 WL 1272098, at *2 (D. Minn. May 4, 2009)
(explaining in the context of an arbitration clause that “the phrase arising out of or
relating to has been interpreted broadly to encompass all claims, however labeled, which
- 46 -
had their genesis in, arose out of, and related to the contract” (alteration and internal
quotation marks omitted)). 12
Even if the legal notice was not seen by all purchasers of download insurance, the
Licensing Agreement also contains a choice of law provision indicating that California
law “governs” the Agreement, which in turn governs software purchases as well as
“releases, revisions, updates or enhancements,” such as download insurance. Symantec’s
only argument with respect to the Licensing Agreement choice of law clause is that it is
not binding if application of California law would deprive a customer of rights or
remedies under the consumer protection laws of his or her home state. As explained
above, however, like Digital River, Symantec has not shown that California law will
deprive potential class members of rights or remedies. Accordingly, the Court finds that
Symantec’s choice of law clauses requiring the application of California law apply to the
class claims.
2.
Common Issues of Law and Fact
Defendants argue that class certification is inappropriate because individual
inquiries into reliance under the various consumer protection statutes Plaintiffs are suing
12
Symantec also appears to argue that the choice of law clause in the legal notice on
Symantec’s website is not binding because it also contains a venue selection provision which
would require this case to have been filed in California. But venue provisions can be waived by
a party that fails to timely object to improper venue. See Steward v. Up N. Plastics, Inc.,
177 F. Supp. 2d 953, 958 (D. Minn. 2001). Symantec has identified no authority for the
proposition that waiver of a venue provision acts as a waiver of an accompanying choice of law
clause. Accordingly, the Court finds that the Plaintiffs’ filing of the present lawsuit in Minnesota
does not affect the validity and enforceability of the California choice of law clause.
- 47 -
under will predominate over common questions in the litigation.
In particular,
Defendants argue that adjudication of each class member’s claim will require inquiry into
what specific information the customer viewed prior to completing the purchase of
download insurance, what other alternatives for redownloading software were available
to the customer at the time of purchase, and whether the customer would have purchased
the download insurance anyway, even knowing about the availability of alternatives.
a.
California’s Unfair Competition Law
Plaintiffs allege that Symantec violated the UCL by using unlawful, unfair, and
fraudulent business practices in inducing customers to believe that download insurance
was required to redownload Norton products after sixty days, concealing that Norton
products were available for redownload without purchasing download insurance, and
requiring customers to affirmatively remove download insurance from their shopping
carts in order to avoid purchasing the product. (Am. Compl. ¶¶ 39-40.) Plaintiffs further
allege that in making these representations “without further disclosing the fact that
consumers could re-download the software without charge at any time from Symantec’s
website was ‘likely to mislead’ within the meaning of California Civil Code Section
1710, and gave rise to a duty to disclose such fact.” (Id. ¶ 40.)
The UCL prohibits any “unlawful, unfair or fraudulent business act or practice.”
Cal. Bus. & Prof. Code § 17200; see In re Steroid Hormone Prod. Cases, 104
Cal. Rptr. 3d 329, 336 (Ct. App. 2010). “The focus of the UCL is ‘on the defendant’s
conduct, rather than the plaintiff’s damages, in service of the statute’s larger purpose of
- 48 -
protecting the general public against unscrupulous business practices.’” Id. (quoting In re
Tobacco II Cases, 207 P.3d 20, 30 (Cal. 2009)). To be considered unfair competition, a
defendant’s business practice need only be unlawful, unfair, or fraudulent – and is not
required to meet all three criteria. S. Bay Chevrolet v. Gen. Motors Acceptance Corp.,
85 Cal. Rptr. 2d 301, 310 (Ct. App. 1999).
With respect to unlawful business practices “[t]he UCL borrows violations of
other laws . . . and makes those unlawful practices actionable under the UCL.” Rossi v.
Whirlpool Corp., Civ. No. 12-125, 2013 WL 1312105, at *6 (E.D. Cal. Mar. 28, 2013)
(internal quotation marks omitted). A business practice “is unfair if the consumer injury
is substantial, is not outweighed by any countervailing benefits to consumers or to
competition, and is not an injury the consumers themselves could reasonably have
avoided.” Berryman v. Merit Prop. Mgmt., Inc., 62 Cal. Rptr. 3d 177, 186 (Ct. App.
2007) (internal quotation marks omitted). A fraudulent business practice is one which is
likely to deceive the public. Kasky v. Nike, Inc., 45 P.3d 243, 250 (Cal. 2002). A claim
under the UCL for a fraudulent business practice “may be based on representations to the
public which are untrue, and also those which may be accurate on some level, but will
nonetheless tend to mislead or deceive.” McKell v. Wash. Mut., Inc., 49 Cal. Rptr. 3d
227, 239 (Ct. App. 2006) (internal quotation marks omitted). Additionally, failure to
disclose other relevant information where “[a] perfectly true statement [has been]
couched in such a manner that it is likely to mislead or deceive the consumer” is
actionable under the UCL. Id. “The determination as to whether a business practice is
- 49 -
deceptive is based on the likely effect such practice would have on a reasonable
consumer.” Id.
Prior to November 2004, California courts held that liability could be imposed
against a defendant under the UCL without any individualized proof of causation or
injury. See In re Steroid Hormone Prod. Cases, 104 Cal. Rptr. 3d at 336. Instead the
plaintiff was only required “to show that the defendant engaged in a practice that was
unlawful, unfair, or fraudulent and that the defendant may have acquired money or
property by means of that practice.”
Id.
Pursuant to Proposition 64, adopted by
California voters in November 2004, the UCL was amended to provide that a cause of
action for relief may be maintained only if the plaintiff “has suffered injury in fact and
has lost money or property as a result of the unfair competition.” Cal. Bus. & Prof. Code
§ 17204; see Pfizer Inc. v. Superior Court, 105 Cal. Rptr. 3d 795, 798 n.2 (Ct. App.
2010). The new standard, although requiring a class representative to show “injury in
fact and causation,” “decidedly did not change the California rule ‘that relief under the
UCL is available without individualized proof of deception, reliance and injury.’”
Stearns, 655 F.3d at 1020 (quoting In re Tobacco II Cases, 207 P.3d at 35).
In interpreting the new standard, the California Court of Appeals has held that “a
person is entitled to restitution for money or property ‘which may have been acquired’
by means of the unfair or unlawful practice.” Sevidal v. Target Corp., 117 Cal. Rptr. 3d
66, 82 (Ct. App. 2010) (emphasis in original) (quoting Cal. Bus. & Prof. Code § 17203)).
“Although this standard focuses on the defendant’s conduct and is substantially less
stringent than a reliance or ‘but for’ causation test, it is not meaningless. . . . [T]he UCL
- 50 -
. . . still require[s] some connection between the defendant’s alleged improper conduct
and the unnamed class members who seek restitutionary relief.” Id. Thus, in assessing
whether class certification is appropriate under the UCL, California courts examine the
exposure of class members to those representations.
See Mazza, 666 F.3d at 595
(declining to certify a class because “the misrepresentations at issue here do not justify a
presumption of reliance.
This is so primarily because it is likely that many class
members were never exposed to the allegedly misleading advertisements, insofar as
advertising of the challenged system was very limited”); Waller v. Hewlett-Packard Co.,
295 F.R.D. 472, 486 (S.D. Cal. 2013) (noting that class certification under the UCL
requires “that class members at least have been exposed to the misrepresentation”);
Davis-Miller v. Auto. Club of S. Cal., 134 Cal. Rptr. 3d 551, 565 (Ct. App. 2011) (“An
inference of classwide reliance cannot be made where there is no evidence that the
allegedly false representations were uniformly made to all members of the proposed
class.”).
Where alleged misrepresentations differ substantially or there is no evidence that a
majority of class members would have seen the misrepresentations, California courts
have declined to certify classes under the UCL, finding that individual issues will
predominate. In Pfizer Inc. v. Superior Court, for example, the California Court of
Appeals considered a class action regarding allegedly misleading advertising of Listerine.
105 Cal. Rptr. 3d at 798. Named plaintiffs brought claims under the UCL alleging that
Pfizer had marketed Listerine in a misleading manner by representing that use of
Listerine could replace the use of dental floss in reducing plaque and gingivitis. Id. The
- 51 -
court found that the class sought to be certified – all purchasers of Listerine in California
over a six month period – was overbroad “because it presumes there was a class-wide
injury.”
Id. at 804.
Specifically, the court determined that there was insufficient
evidence that all class members were exposed to the alleged misrepresentations:
The record reflects that of 34 different Listerine mouthwash bottles, 19
never included any label that made any statement comparing Listerine
mouthwash to floss. Further, even as to those flavors and sizes of Listerine
mouthwash bottles to which Pfizer did affix the labels that are at issue
herein, not every bottle shipped between June 2004 and January 2005 bore
such a label.
Also, although Pfizer ran four different television
commercials with the “as effective as floss” campaign, the commercials did
not run continuously and there is no evidence that a majority of Listerine
consumers viewed any of those commercials. Thus, perhaps the majority
of class members who purchased Listerine during the pertinent six-month
period did so not because of any exposure to Pfizer’s allegedly deceptive
conduct, but rather, because they were brand-loyal customers or for other
reasons.
Id. at 803.
Similarly, the court denied class certification in Sevidal v. Target Corp., 117
Cal. Rptr. 3d 66, where plaintiffs could not establish that most of the class members had
seen the misrepresentations at issue. The named plaintiff in Sevidal, brought class claims
under the UCL, alleging that Target’s website had incorrectly identified certain items of
clothing as “Made in the USA,” although the products were, in fact, made outside the
country. Id. at 71. The named plaintiff sought to certify a class of all persons who
purchased imported goods from Target’s web site that were incorrectly identified as
having been made in the United States.
Id.
Target argued that individual issues
predominated because the class included people that may never have seen the “Made in
the USA” representation. Id. at 73. Customers could only see the misrepresentation in
- 52 -
question if they clicked on a “View Details” button or an “Additional info” tab in their
shopping cart. Id. As a result, customers could purchase the items from Target.com
without ever seeing whether it had been identified as made in the United States. Id. The
court concluded that the proposed class was overbroad because “most class members
never selected the ‘Additional Info’ icon” and there was no allegation that “Target was
legally required to inform consumers of the product origin information.” Id. at 84; see
also Campion v. Old Republic Home Protection Co., 272 F.R.D. 517, 536 (S.D. Cal.
2011) (finding that individual issues would predominate a class claim where “the
proposed class members may have seen some, all or none of these statements prior to the
purchase of their home warranty plans due to the varying ways in which they acquired
their plans”).
Where exposure to a misrepresentation is uniform amongst class members,
however, California courts have presumed reliance on the part of purchasers who
encounter the misrepresentation, and have certified classes finding that individual issues
of reliance would not predominate. See Konik v. Time Warner Cable, Civ. No. 07-763,
2010 WL 8471923, at *8 (C.D. Cal. Nov. 24, 2010) (finding that reliance could be
presumed based on uniform exposure to misrepresentations where the materials at issue
were sent to all subscribers); In re Steroid Hormone Prod. Cases, 104 Cal. Rptr. 3d at
337-39; Chavez, 268 F.R.D. at 376-77 (applying a presumption of reliance where “the
allegedly false statement, worded in several variations, [was] made on every Blue Sky
container”). “In order to invoke a presumption of reliance . . . a plaintiff must show that
all of the members of the putative class were exposed to the same representation and
- 53 -
were likely to have been deceived by it.” Red v. Kraft Foods, Inc., Civ. No. 10-1028,
2011 WL 4599833 (C.D. Cal. Sept. 29, 2011). For example, in Stearns v. Ticketmaster
Corp., 655 F.3d 1013, the Ninth Circuit found that a presumption of reliance was
appropriate where appellants alleged that various website presentations and practices on
Ticketmaster’s website were “designed to lull and induce people, who really only
intended to purchase tickets from Ticketmaster, into inadvertently becoming committed
to purchasing EPI’s services, which they neither expected, nor wanted, nor used.” Id. at
1017. Additionally, to be entitled to the presumption of reliance, the misrepresentations
identified must be misrepresentative with respect to the entire class. Konik, 2010 WL
8471923 at *9 (finding that class certification was inappropriate because “a large
component of the proposed class did not experience any raises in price or deprivations in
service”).
i.
Here,
Plaintiffs
allege
Uniformity of Misrepresentations
a
combination
of
omissions
and
affirmative
misrepresentations that collectively misled consumers into believing that they were
required to purchase download insurance at the point of sale if they wished to be able to
redownload their Norton software after the original sixty-day download period expired,
when, in fact, numerous alternative routes existed that allowed consumers to redownload
their products for free. The Court concludes that this course of conduct falls within the
line of cases for which a presumption of reliance is appropriate because class members
were uniformly misled. See Cole v. Asurion Corp., 267 F.R.D. 322, 329-30 (C.D. Cal.
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2010) (concluding that a combination of misleading statements and omissions which
concealed from consumers that they would receive replacement phones of lower value
under a phone insurance policy constituted a “centrally orchestrated strategy” that gave
rise to a presumption of reliance under the UCL (internal quotation marks omitted)).
Here, Symantec began by automatically placing the download insurance products
into customers’ carts, which was a uniform practice, and could itself give rise to a duty to
disclose that the product was not actually necessary in order to ensure the ability to later
redownload the purchased Norton products. Plaintiffs also argue that the names of the
download insurance products – which were seen by all class members – were themselves
misleading because they implied that the products were necessary purchases at the point
of sale if the customer wished to be able to redownload software outside the sixty-day
window. See Ebin v. Kangadis Food Inc., Civ. No. 13-2311, 2014 WL 737960, at *7
(S.D.N.Y Feb. 25, 2014) (“[B]ecause 100% Pure Olive Oil is the name of the product
itself . . . , class members necessarily had to rely on it when shopping.”). Therefore, the
automatic placement of the product in the customer’s cart combined with the title of the
products is likely sufficient to establish predominance among class members, regardless
of other representations class members were exposed to. See Johns, 280 F.R.D. at 558
(finding that class issues predominated where “Bayer contends that reliance cannot be
presumed, since the reason for purchasing the Men’s Vitamins is an individual issue, and
exposure to advertising would vary by consumer depending on the mix of television,
radio, or print advertisements each consumer may have viewed. But at a minimum,
everyone who purchased the Men’s Vitamins would have been exposed to the prostate
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claim that appeared on every package from 2002 to 2009. This is the predominant issue,
not whether or not consumers also saw television or print advertisements.” (emphasis in
original)).
Symantec focuses heavily on the fact that not all class members clicked on the
“What’s this?” link, and therefore argues that this case is analogous to the Listerine
bottles in Pfizer or the “made in the USA” disclosure in Sevidal. But these cases are
distinguishable. First, as explained above, because in this case every consumer that
purchased download insurance had the product affirmatively placed in his or her cart, and
was exposed to titles that uniformly gave the impression that these products were
necessary to ensure the ability to later redownload, a common misrepresentation already
exists. Additionally, Plaintiffs are not required to demonstrate that each class member in
fact viewed a particular misrepresentation if there is “evidence that a majority of [class
members]” viewed the misrepresentation, in which case the Court can apply a
presumption of reliance. Pfizer Inc., 105 Cal. Rptr. 3d at 803; see also Mazza, 666 F.3d
at 596 (finding that no presumption of reliance could be applied because “[h]ere the
limited scope of th[e] advertising makes it unreasonable to assume that all class members
viewed it”); Sevidal, 117 Cal. Rptr. 3d at 84 (examining Target’s proffered evidence
“showing that the vast majority of customers do not select the ‘Additional Info’ icon
before making a purchase and thus are never exposed to the product’s country-of-origin
designation” to determine that a presumption of reliance did not apply “because most
class members never selected the ‘Additional Info’ icon” containing the alleged
misrepresentation). But here, there is substantial evidence in the record that makes it
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reasonable for the Court to assume that the majority of class members did view the
information in the “What’s this” link. In a product trial group consisting of twenty-two
people, every single person clicked on the link because they did not understand why the
product had suddenly appeared in the cart as part of their purchase. Therefore, unlike the
additional info tab at issue in Sevidal, where a customer would often have no reason to
click the additional info tab to view the product’s country of origin, here, the evidence
suggests that most, if not all customers, would be curious as to why a product they had
not selected to purchase had populated their carts. Given the prevalence of customers
viewing the link in the trial group and the common sense conclusion that customers
would seek more information about an additional $4.99 to $16.99 charge in their
shopping cart, it is reasonable for the Court to assume that the majority of the class did
view the “What’s this link.”
Symantec next argues that a presumption of reliance cannot be applied – even if
customers uniformly viewed the titles of the download insurance products and the
“What’s this” links – because over time the representations contained in the title and the
links varied. But the evidence in the record shows that representatives of Defendants
consistently viewed the slightly varied representations in the three primary pop-ups
offered during the class period as being materially similar. (See Second McNamara
Decl., Ex. 1 at 97:16-101:19 (testifying that the two “what’s this” link descriptions
conveyed “fundamentally the same message”); id., Ex. 15 (describing the description of
NDI as “almost word for word” of the EDS link message).) Defendants allege generally
that the layout of information may have changed and that some customers may have seen
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slight variations on the “What’s this” message as they live-tested different versions. But
a slight variation in language is insufficient to defeat the presumption of reliance. See
Chavez, 268 F.R.D. at 378 (finding class certification appropriate where the allegedly
false statement was “worded in several variations”); see also In re First Alliance Mortg.
Co., 471 F.3d 977, 992 (9th Cir. 2006) (“The class action mechanism would be impotent
if a defendant could escape much of his potential liability for fraud by simply altering the
wording or format of his misrepresentations across the class of victims.”). Additionally,
Defendants have identified no specific variations that materially altered the “What’s this”
messages that would have corrected the impression that the download insurance products
were the sole means of redownloading software outside of the sixty-day download
period. See Cole, 267 F.R.D. at 329-30 (“Here, Defendants refer vaguely to changes in
the program brochure that dealt with layout and graphics and to certain aspects of the
training program that were modified over the years.
Defendants do not, however,
identify with any specificity the nature of these purported changes, nor do they offer any
argument that the purported changes were material.” (internal alteration, citation, and
quotation marks omitted)).
ii.
Other Information Available to Consumers
Symantec also argues that a presumption of reliance is inappropriate because
information about download insurance alternatives was available to customers through
other avenues, such as Symantec’s website, publicly available blogs and possibly some
customer service representatives. Symantec contends that this information could have
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served to cure any misrepresentations made by Defendants. With respect to customer
service, although Defendants make much of the fact that the call center was not strictly
scripted, they have provided only a few examples of instances when customer service
representatives actually explained to customers that download insurance was not the only
means of redownloading Norton products. Instead, the record reflects that although each
customer service representative might have phrased the information in a unique way,
each representative used a script that conveyed fundamentally the same information as
that provided by the online descriptors of the download insurance products – that EDS
and NDI were required purchases in order to later redownload Norton software. Cf.
Vaccarino v. Midland Nat’l Life Ins. Co., Civ. No. 11-5858, 2013 WL 3200500, at *13
(C.D. Cal. June 17, 2013) (finding that oral disclosures made by agents in addition to
misleading written disclosures did not cure any deception “where a defendant required
agents to adhere to its marketing materials in selling its products”).
Indeed, the record indicates that the general trend in Defendants’ customer service
calls was to first attempt to sell the customer download insurance and then suggest
alternatives only if the customer refused to purchase the products. This is not a case
where purchase of the product in question necessarily entailed talking with a
representative of the defendant before making the purchase. See Berger v. Home Depot
USA, Inc., 741 F.3d 1061, 1069 (9th Cir. 2014) (finding that individual issues
predominated in claims arising out of allegedly misleading practices in tool rentals – for
which a customer would need to talk to a Home Depot employee – because “any oral
notice given by Home Depot employees about the optional nature of the damage waiver
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during a particular rental transaction would necessarily be a unique occurrence”). It
would certainly contravene the purposes of the UCL to require customers to first
affirmatively call the company and badger its customer service representatives into
disclosing the truth about a product before customers could properly state a claim based
on misleading information about the product provided at the point of sale. Therefore, the
possible availability of information through customer representatives is insufficient to
defeat Plaintiffs’ showing of entitlement to a presumption of reliance. See Jordan v. Paul
Fin., LLC, 285 F.R.D. 435, 464-66 (N.D. Cal. 2012) (finding that a presumption of
reliance could be made based on misleading loan documents even though “the substance
of any conversations with a mortgage broker” may have provided some individual class
members with different information).
Additionally, the fact that information about the unnecessary nature of
Defendants’ download insurance products was available in other locations on Symantec’s
website, public blogs, or affiliate websites cannot relieve Defendants of liability for
engaging in unfair or fraudulent business practices. See In re Tobacco II Cases, 207 P.3d
at 40 (“[A]n allegation of reliance is not defeated merely because there was alternative
information available to the consumer-plaintiff . . . .”). Furthermore, Defendants have
presented no evidence regarding how many customers reviewed the FAQ section on
Symantec’s website, accessed public blogs about download insurance, viewed YouTube
videos about trialware, or visited affiliate sites, and therefore its availability does not
defeat commonality. Pub. Emps.’ Ret. Sys. of Miss. v. Merrill Lynch & Co., 277 F.R.D.
97, 118-19 (S.D.N.Y. 2011) (“[Defendants’] sheer conjecture that class members ‘must
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have’ discovered [the omission] is insufficient to defeat Plaintiff’s showing of
predominance when there is no admissible evidence to support Defendants’ assertions.”).
iii.
Different Rationale for Purchasing Download
Insurance Products
Finally, Symantec argues that no presumption of reliance should apply because
individuals may have purchased download insurance, even if they had known the truth –
that the products were not the sole means of redownloading Norton software outside of
the sixty-day download window. But Symantec’s argument misses the mark because it is
contrary to the presumption of reliance applied by California courts where, as here,
uniform misrepresentations have been made to class members. Symantec’s argument is
essentially that Plaintiffs cannot show that each class member made the decision to
purchase download insurance in reliance upon the misrepresentations and omissions. But
this would require proof of class-wide reliance and California courts have held that “of
course, were a plaintiff required to prove that to which a presumption entitles her in order
to qualify for the presumption, it would make little sense to speak of a ‘presumption’ in
the first place.” Cole, 267 F.R.D. at 330. Furthermore, as discussed more fully below in
the context of class-wide damages, even if some class members would have purchased
the download insurance products knowing the truth – that there were other available
means to accomplish the same redownloading task – that does not change the fact that
each class member paid more for the product than it was worth. See Ebin, 2014 WL
737960 at *6-7 (rejecting defendant’s argument that individual issues of reliance would
predominate because each consumer may have purchased olive oil misleadingly labeled
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as 100% olive oil “without looking at the label, because they liked the[] taste, because
they liked the price, or because they liked the shape or color of the tin” because “even if a
class member actively wanted to buy pomace instead of 100% pure olive oil, they
nevertheless paid too much for it”); Waller, 295 F.R.D. at 485 (“If a product is advertised
with a misrepresentation, that is more or less the end of it; it can be presumed at the class
certification stage that the consumer would have paid less for the product, or not
purchased it at all, with more accurate information. This means there is a disparity
between their expected and received value.”).
Therefore, the Court concludes that class issues will predominate with respect to
Plaintiffs’ claims under the UCL because the class was exposed to uniform
misrepresentations and omissions and therefore a presumption of reliance is appropriate.
This conclusion is in keeping with California law’s preference for certifying fraud claims
that stem “from a common course of conduct.” In re First Alliance Mortg. Co., 471 F.3d
at 990 (internal quotation marks omitted); see also Blackie v. Barrack, 524 F.2d 891, 902
(9th Cir. 1975) (“Confronted with a class of purchasers allegedly defrauded over a period
of time by similar misrepresentations, courts have taken the common sense approach that
the class is united by a common interest in determining whether a defendant’s course of
conduct is in its broad outlines actionable, which is not defeated by slight differences in
class members’ positions.”).
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b.
California Consumers Legal Remedies Act
Plaintiffs’ claims against Symantec under the CLRA, Cal. Civ. Code §§ 1750
et seq., are based on allegations that Symantec (1) violated California Civil Code
§ 1770(a)(5) “by leading consumers to believe that Download Insurance is necessary to
download Norton Products after sixty days”; (2) violated California Civil Code
§ 1770(a)(9) “by advertising Download Insurance as necessary to download Norton
Products after sixty days”; and (3) violated California Civil Code § 1770(a)(15) “by
intentionally leading consumers to believe that they would need Download Insurance in
order to download Norton Products after sixty days.” (Am. Compl. ¶¶ 52-54.)
The CLRA provides, in relevant part, that:
The following unfair methods of competition and unfair or deceptive acts
or practices undertaken by any person in a transaction intended to result or
which results in the sale or lease of goods or services to any consumer are
unlawful:
(5) Representing that goods or services have sponsorship, approval,
characteristics, ingredients, uses, benefits, or quantities which they do not
have or that a person has a sponsorship, approval, status, affiliation, or
connection which he or she does not have.
....
(9) Advertising goods or services with intent not to sell them as advertised.
....
(15) Representing that a part, replacement, or repair service is needed when
it is not.
Cal. Civ. Code § 1770(a). “[T]he primary purpose of the [CLRA] is to protect the public
from unscrupulous business practices.” Consumers Union of U.S., Inc. v. Alta-Dena
Certified Dairy, 4 Cal. Rptr. 693, 200 (Ct. App. 1992).
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And the CLRA enables
consumers to bring a class action if the consumer has suffered “any damage” from the
use or employment of a “method, act, or practice” made unlawful by the act. Cal. Civ.
Code § 1781(a). Unlike the UCL “the CLRA requires each class member to have an
actual injury caused by the unlawful practice.”
Stearns, 655 F.3d at 1022.
“But
‘causation, on a classwide basis, may be established by materiality. If the trial court
finds that material misrepresentations have been made to the entire class, an inference of
reliance arises as to the class.’” Id. (alteration omitted) (emphasis in original) (quoting
In re Vioxx Class Cases, 103 Cal. Rptr. 3d 83, 95 (Ct. App. 2009)); see also Occidental
Land, Inc. v. Superior Court, 556 P.2d 750, 754 (Cal. 1976). A representation is material
if it induces a consumer to alter a position to his or her detriment, In re Vioxx Class
Cases, 103 Cal. Rptr. 3d at 95, or if a reasonable person would attach importance to its
existence in making a decision regarding the transaction, In re Steroid Hormone Proc.
Cases, 104 Cal. Rptr. 3d at 338–39. The mere fact that a “defendant may be able to
defeat the showing of causation as to a few individual class members does not transform
the common question into a multitude of individual ones.”
Mass. Mut. Life Ins. Co. v.
Superior Court, 119 Cal. Rptr. 2d 190, 197 (Ct. App. 2002).
Symantec raises many of the same arguments against class certification of the
CLRA claims as it does against the UCL claims – for example, that uniform
misrepresentations were not made to class members and that other information was
available to consumers beyond the title of the product and the information contained in
the “What’s this” link. For the reasons explained above, those arguments do not preclude
an inference of reliance.
Symantec makes the additional argument that the
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misrepresentations and omissions were not material as to all class members because the
availability of alternatives to download insurance varied over the course of the class
period.
Symantec essentially contends that determining whether its conduct was
misleading or deceptive would require a factfinder to know precisely what other
alternatives were available to any given plaintiff. But this argument imposes greater
specificity on Plaintiffs’ misrepresentation claims than they actually allege or seek to
prove. Plaintiffs’ claim is simply that download insurance was not necessary – i.e., it was
not the sole means to accomplish the redownload of Norton products after the sixty-day
window.
Whether redownloading through other sources was more difficult, more
inconvenient, or more unreliable is irrelevant to materiality. It is also irrelevant how
many alternative options were available to any specific class member. Defendants have
never argued that, at any point in time during the class period, there were absolutely no
other alternatives to download insurance. Because the misrepresentations relate to the
necessity of the products, a reasonable jury could find that the fact that download
insurance was not the only means to redownload Norton products would have been
material to a customer making a decision about whether to purchase download insurance
at the point of sale. See Vaccarino, 2013 WL 3200500 at *12 (“A jury could thus find
that any reasonable person would attach significance to the alleged misrepresentations
which concerned the value of the Class Products.”).
Finally, Symantec argues that the CLRA only provides remedies to a consumer,
which is defined as “an individual who seeks or acquires, by purchase or lease, any goods
or services for personal, family, or household purposes.” Cal. Civ. Code § 1761(d); see
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also Cal. Civ. Code § 1770(a) (prohibiting certain unfair or deceptive acts “which results
in the sale or lease of goods or services to any consumer”). Plaintiffs agree with this
interpretation of the statute, but argue that it does not defeat predominance, as class
members can indicate whether they purchased download insurance as a consumer – rather
than, for example, business purposes – during the claims process. The Court agrees that
this minimal inquiry into the nature of each class member’s purchase does not defeat
commonality. See Butto v. Collecto Inc., 290 F.R.D. 372, 382 (E.D.N.Y. 2013) (finding
that it would not be “particularly arduous to ask potential class members the simple
question of whether the individual’s debt at issue qualifies as a consumer debt” and that
“any disputes regarding whether a particular class member’s debt is consumer or
commercial can be remedied through proper drafting of the claim form, and at the
damages phase of this case” (internal quotation marks omitted)); Gradisher v. Check
Enforcement Unit, Inc., 203 F.R.D. 271, 279 (W.D. Mich. 2001) (finding that issues of
whether a debt was a consumer debt did not defeat predominance because “there are a
number of relatively straightforward ways of handling this issue without it
overshadowing the common issues of fact and law” such as “through one simple question
to each class member”). Therefore, the class questions will predominate over individual
issues with respect to Plaintiffs’ CLRA claims.
c.
Minnesota’s Consumer Fraud Act
The CFA prohibits the “act, use, or employment by any person of any fraud, false
pretense, false promise, misrepresentation, misleading statement or deceptive practice,
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with the intent that others rely thereon in connection with the sale of any merchandise,
whether or not any person has in fact been misled.” Minn. Stat. § 325F.69, subd. 1. To
recover damages, the CFA requires that the person be injured by a defendant’s violation.
Minn. Stat. § 8.31, subd. 3a. The Minnesota Supreme Court has interpreted the statute to
require proof of causation as a necessary element to recover damages. Grp. Health Plan,
Inc. v. Phillip Morris Inc., 621 N.W.2d 2, 13-14 (Minn. 2001). Under this causation
requirement “plaintiffs must still ‘prove a causal nexus between the allegedly wrongful
conduct of the defendants and their damages.’” In re St. Jude Med., Inc., 522 F.3d 836,
839 (8th Cir. 2008) (emphasis omitted) (quoting Grp. Health Plan, Inc., 621 N.W.2d at
13). In Group Health, the court explained that
where, as here, the plaintiffs allege that their damages were caused by
deceptive, misleading, or fraudulent statements or conduct in violation of
the misrepresentation in sales laws, as a practical matter it is not possible
that the damages could be caused by a violation without reliance on the
statements or conduct alleged to violate the statutes. Therefore, in a case
such as this, it will be necessary to prove reliance on those statements or
conduct to satisfy the causation requirement.
Grp. Health Plan, Inc., 621 N.W.2d at 13; see Tuttle v. Lorillard Tobacco Co., 377 F.3d
917, 927 (8th Cir. 2004) (concluding that plaintiff must “establish some proof that the
[defendants’ conduct] caused consumers to continue using smokeless tobacco and to
sustain physical injury in reliance on the defendants’ conduct”).
However, the Minnesota Supreme Court went on to conclude that in cases where
damages are alleged to be caused by a lengthy course of prohibited conduct
that affected a large number of consumers, the showing of reliance that
must be made to prove a causal nexus need not include direct evidence of
reliance by individual consumers of defendants’ products. Rather, the
causal nexus and its reliance component may be established by other direct
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or circumstantial evidence that the district court determines is relevant and
probative as to the relationship between the claimed damages and the
alleged prohibited conduct.
Grp. Health Plan, Inc., 621 N.W.2d at 14. Therefore, similar to California, Minnesota
courts have found that class members’ awareness of misrepresentations provides a
sufficient causal nexus between a violation of the consumer protection statutes and
damages in the form of restitution. See City of Farmington Hills, 281 F.R.D. at 356
(finding that where each class member signed a document containing the alleged
misrepresentation “[t]he impact of Wells Fargo’s statement regarding safety of principal
and liquidity requirements was likely the same for all class members – namely, to instill a
belief about the nature of the risk of the investment”); Curtis v. Altria Grp., Inc., 792
N.W.2d 836, 858 (Minn. Ct. App. 2010) (“[N]o matter what individual factors may have
been involved in a class member’s decision to purchase Lights, all consumers of Lights
were led by false advertising to believe that Lights were healthier than regular cigarettes
when they were not, such that purchasers are entitled to reimbursement for all amounts
spent on the misrepresented cigarettes. . . . Therefore, the causal nexus is a question
common to all class members.”), reversed on other grounds by, 813 N.W.2d 891 (Minn.
2012).
Digital River makes essentially the same arguments against certification of the
CFA claims as Symantec does against certification of claims under the UCL and the
CLRA.
For example, Digital River argues that class members were not subject to
uniform representations and may have had access to information that cured Defendants’
deceptive conduct. For all of the reasons explained above, the customers’ awareness here
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of the misrepresentations – automatically placing a product in a consumer’s cart, a
misleading title, and a misleading “What’s this link”– can constitute the causal nexus
required for violation of the CFA. Digital River has not refuted the common sense
inference that its representations may have successfully persuaded class members that
download insurance was a required purchase at the point of sale in order to later
redownload Norton products. See City of Farmington Hills, 281 F.R.D. at 356 (“Wells
Fargo has not, at this point in the litigation, negated the common sense inference in this
case that the statement in the [document] may have successfully persuaded the class
members of the safety of their investments. Because each member of the putative class
signed [the document] containing the alleged misrepresentation and because Plaintiff can
rely upon direct and circumstantial evidence to prove reliance on a class-wide basis,
common questions predominate over questions affecting individual class members.”).
Therefore, the Court concludes that common questions will predominate as to Plaintiffs’
claims under the CFA.
d.
Unjust Enrichment
Plaintiffs also bring class claims for unjust enrichment alleging that “Plaintiffs
purchased unnecessary Download Insurance from Defendants as a direct result of
Defendants’ material misrepresentations and omissions” and therefore “Defendants have
been knowingly and unjustly enriched at the expense of and to the detriment of Plaintiffs
and each member of the Class by collecting money to which it is not entitled.”
(Am. Comp. ¶¶ 75-76.)
Unjust enrichment occurs when the defendant has been
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conferred a benefit that it is inequitable for it to retain. Klass v. Twin City Fed. Sav. &
Loan Ass’n, 190 N.W.2d 493, 494–95 (Minn. 1971); see also Semiconductor Components
Indus., L.L.C. v. I2A Techs., Inc., Civ. No. 10-0603, 2010 WL 3036731, at *3 (N.D. Cal.
July 30, 2010) (citing Peterson v. Cellco P’ship, 80 Cal. Rptr. 3d 316, 323 (Ct. App.
2008)). Unjust enrichment claims often turn on individualized facts. See Daigle v. Ford
Motor Co., Civ. No. 09-3214, 2012 WL 3113854, at *4-5 (D. Minn. July 31, 2012).
However, courts have certified unjust enrichment claims where they are based on the
same claims that were certified under consumer protection statutes. Mooney v. Allianz
Life Ins. Co. of N. Am., Civ. No. 06-545, 2007 WL 128841, at *11 (D. Minn. Jan. 12,
2007); cf. Berger, 741 F.3d at 1070 (analogizing the predominance inquiry with respect
to unjust enrichment and statutory claims, explaining that individual issues would
predominate as to claims under the UCL, CLRA, and unjust enrichment because unjust
enrichment, like the statutory claims “depends on whether Home Depot told its tool rental
customers that the waiver was an optional product”).
Because Plaintiffs’ unjust
enrichment claims arise out of the same conduct as the statutory claims, the Court
concludes that class issues will also predominate regarding whether Defendants were
unjustly enriched at class members’ expense.
3.
Damages
Defendants argue that individualized damages issues will predominate over class
issues, because some customers actually received value from using their download
insurance product or would have purchased it anyway, even had they known of the free
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alternative methods for redownloading. “At class certification, plaintiff must present a
likely method for determining class damages, though it is not necessary to show that his
method will work with certainty at this time.” Chavez, 268 F.R.D. at 379 (internal
quotation marks omitted). “Calculations need not be exact, but at the class-certification
stage . . . any model supporting a plaintiff’s damages case must be consistent with its
liability case . . . .” Comcast Corp., 133 S. Ct. at 1433 (internal citation and quotation
marks omitted).
Plaintiffs have presented two possible measures for damages, both of which the
Court finds are measurable on a class wide basis. First Plaintiffs contend that each class
member should be entitled to recover the full value of the download insurance product.
See Korea Supply Co. v. Lockheed Marin Corp., 29 Cal. 4th 1134, 1149 (Cal. 2003);
Lewis v. Citizens Agency of Madelia, Inc., 235 N.W.2d 831, 835 (Minn. 1975). This
measure of damages would likely be appropriate here, where the products in question
have no intrinsic value other than the advertised use. In other words, unlike a beverage or
an item of clothing, which may have value to a consumer even if the beverage is not
actually “natural” as advertised or the clothing does not eliminate odor as promised, the
download insurance only has potential utility if a consumer is actually required to
redownload a Norton software product after the sixty-day period for downloads has
expired.
See Chavez, 268 F.R.D. at 379 (finding that an appropriate measure of
classwide damages might be “the price differential between the premium paid for the
[falsely advertised] Blue Sky line of beverages and the lower price of Hansen’s
mainstream line of beverages”); Buetow v. A.L.S. Enters., Inc., 259 F.R.D. 187, 192 &
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n.4 (D. Minn. 2009) (finding that individual issues of damages would predominate
because even if the clothing at issue did not have the odor-eliminating properties
advertised “many class members may have wanted this clothing for other reasons in
addition to those pertaining to order-elimination, such as warmth, appearance, and waterproofing”). It is undisputed here that Defendants priced download insurance based solely
upon a customer’s perception of value – not upon any cost of producing the product or
intrinsic value imparted by the product. In fact, Defendants found that by increasing the
price of download insurance more customers purchased the product because their
perception of its value increased along with the increase in price. The record also
indicates that employees of Defendants did not believe that download insurance provided
much value to consumers. Additionally, the record reveals that almost no class members
ever used download insurance, because almost one hundred percent of downloads
occurred within the sixty-day window for download provided by purchase of the original
product.
Therefore, almost all of the class members received no value from their
purchase of download insurance.
Defendants argue that a full refund is an inappropriate measure of damages,
because some consumers may have valued the peace of mind and the convenience that
were associated with download insurance. (See, e.g. Symantec’s Mem. in Opp’n to Mot.
for Class Cert. at 8.) Even if some class members realized some value from their
purchase of download insurance, Plaintiffs have identified an ascertainable measure of
those damages. Plaintiffs have presented the conjoint analysis used by their expert
Gaskin as a means to isolate the value for specific convenience features of the download
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insurance products – such as automatic injection of the product key. Defendants’ expert
takes issue with the precise model prepared by Gaskin – in that it measures only the value
of the automatic injection and not, for example, the possible value of having the
download insurance automatically “remember” what type of software was originally
purchased, and therefore also disputes the estimated value found by Gaskin of between
$0.05 and $0.16 for each purchase of download insurance.
But disputes about the
precision of the particular model developed by Gaskin do not indicate that damages will
not be measurable on a classwide basis. In other words, Plaintiffs have presented a
method that allows for a determination of the actual value to consumers of the download
insurance products. Defendants do not dispute that the conjoint analysis will be capable
of measuring damages on a classwide basis, nor do Defendants contend that any member
of the class received $4.99 to $16.99 worth of value from their purchase of download
insurance. They argue only that Gaskin’s model may need to include several more
variables in order to be a completely accurate measure of damages. Such a dispute does
not prevent the Court from certifying the class at this stage of litigation. See Vaccarino,
2013 WL 3200500 at *14 (“[P]laintiffs must . . . offer a method that tethers their theory
of liability to a methodology for determining the damages suffered by the class.”);
Chavez, 268 F.R.D. at 379 (explaining that plaintiffs need only identify a proposed
method for evaluating class damages).
Finally, Defendants appear to argue that ascertaining the value of download
insurance will require individualized inquiries because for different class members the
available alternatives to download insurance were different. For example, a customer for
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whom only the options of downloading trialware, purchasing EDS later, or calling
customer service were available may have placed a different value on convenience than
those customers who also had the option of redownloading the product from Symantec’s
support website. But Defendants have not shown that the differences in alternatives to
download insurance were so uniquely individualized as to preclude class certification.
For example, at oral argument, counsel for Symantec represented that the class period
could be divided into three distinct periods of time during which different alternatives
were available to class members. Should it later become apparent that damages for class
members in these distinct time periods are materially different, the Court can always
divide the class into sub classes for purposes of ascertaining damages. See Fed. R. Civ.
P. 23(c)(5) (“When appropriate, a class may be divided into subclasses that are each
treated as a class under this rule.”). Furthermore, at most Defendants have identified that
there was uncertainty – as to all class members – about the later availability of trialware
at the time of purchasing download insurance. In other words, at the point in time when
an individual was deciding whether or not to purchase download insurance for all class
members there was some risk that available trialware or support website links would no
longer be available at the point in time when the customer needed to redownload the
purchased Norton product. Because the uncertainty that a particular version of a Norton
product would be available at the moment in time that the customer wished to
redownload the product existed for all class members, this uncertainty can appropriately
be measured in Gaskin’s conjoint analysis by ascertaining the value that consumers
placed upon the certainty of access to download insurance versus trialware. Therefore,
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the Court concludes that damages are measurable on a classwide basis, and individual
damage issues will not predominate.
4.
Standing
Lastly, Defendants argue that the class cannot be certified because some members
of the class lack Article III standing.
In order to have standing a plaintiff must
demonstrate (1) an actual or imminent, concrete injury in fact; (2) a causal relationship
between the injury and the conduct complained of; and (3) that the injury is capable of
being redressed by a decision of the court. Lujan v. Defenders of Wildlife, 504 U.S. 555,
560–61 (1992). “The constitutional requirement of standing is equally applicable to class
actions.”
Avritt v. Reliastar Life Ins. Co., 615 F.3d 1023, 1034 (8th Cir. 2010).
“Although federal courts ‘do not require that each member of a class submit evidence of
personal standing,’ a class cannot be certified if it contains members who lack standing.”
Id. (quoting Denney v. Deutsche Bank AG, 443 F.3d 253, 263-64 (2d Cir. 2006)).
Therefore “a named plaintiff cannot represent a class of persons who lack the ability to
bring a suit themselves.” Id.
Defendants argue that many people in the proposed class lack standing because
they suffered no injury as a result of the alleged misrepresentations. Defendants argue
that this category includes people who used download insurance and people who knew
about the alternatives and still purchased download insurance. 13 As explained above,
13
Defendants also argue that individuals who purchased download insurance when
trialware was unavailable also lack standing. But, as explained above, Defendants have
(Footnote continued on next page.)
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however, Plaintiffs’ contention is that “class members paid more for [download
insurance] than they otherwise would have paid, or bought it when they otherwise would
not have done so, because [Defendants’] made deceptive claims and failed to disclose”
that alternatives to download insurance were available. See Mazza, 666 F.3d at 595.
This type of injury is sufficient for Article III standing. See Stearns, 655 F.3d at 1021
(finding that Article III standing was satisfied where “[e]ach alleged class member was
relieved of money in the transactions,” and “it can hardly be said that the loss is not fairly
traceable to the action of the Appellees within the meaning of California substantive
law”). Therefore, even class members who used download insurance or who would have
purchased download insurance even had they known of the alternatives suffered an injury
in the form of an increased price. See Ebin, 2014 WL 737960 at *7 (“[T]he common
actual injury consisted of the payment of the price of olive oil for a product that was
pomace oil and the associated receipt of an inferior product different from that which the
consumers purchased.”); Negrete v. Allianz Life Ins. Co. of N. Am., 287 F.R.D. 590, 607
(C.D. Cal. 2012) (“So long as at least some class members – and presumably, a large
percentage of class members, although not every single one – were induced into
purchasing Allianz products because of the alleged misrepresentations, the price of these
annuities would be greater for everyone in the class, even those class members who did
not rely on the misrepresentations. . . . In other words, class members who did not rely on
____________________________________
(Footnote continued.)
presented no evidence that at any point in time there were absolutely no alternatives to download
insurance for any class member.
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the misrepresentations would nonetheless suffer an out-of-pocket loss by being
overcharged for Allianz annuities even absent their reliance on the alleged
misrepresentations.” (emphasis in original)). Therefore, the Court concludes that the
class members in Plaintiffs’ proposed class have standing.
B.
Superior Method
“There is no bedrock standard upon which a Court determines that a class action is
superior to other available methods for the fair and efficient adjudication of the
controversy.” Sonmore, 206 F.R.D. at 265 (internal quotation marks omitted). Rather,
courts generally look to the following non-exhaustive list of relevant factors: (1) the
interest of class members in individually controlling the prosecution of their claims;
(2) the extent and nature of any litigation that has already begun; (3) the desirability of
concentrating the litigation in a particular forum; and (4) the likely difficulties of
managing a class action. Fed. R. Civ. P. 23(b)(3)(A)-(D). Class actions are also superior
if the alleged damages are small, and absent a class action most plaintiffs would not
realistically enjoy a day in court. Phillips Petroleum Co. 472 U.S. at 809.
In this case there is no evidence of similar pending litigation, and it is doubtful that
potential class members would rather control separate actions. Most are potentially
unaware that Defendants’ conduct could be unlawful and the alleged damages are small,
making individual actions impracticable.
See Hartley v. Suburban Radiologic
Consultants, Ltd., 295 F.R.D. 357, 379 (D. Minn. 2013) (“Because all class plaintiffs are
unlikely to bring their own claims for FDCPA violations, the Court finds that a class
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action in this case is best suited to address ‘the rights of groups of people who
individually would be without effective strength to bring their opponents into court at
all.’” (quoting Amchem Prods., Inc., 521 U.S. at 617); see also Rainbow Bus. Solutions v.
Merchant Servs., Inc., Civ. No. 10-1993, 2014 WL 1047149, at *3 (Mar. 17, 2014) (“The
risks, small recovery, and relatively high costs of litigation here make it unlikely that
individual merchants will pursue claims against Leasing Defendants independently.”).
Indeed, given the size of the proposed class “individual claims for damages would not
only burden the court system that would be deciding the same legal issues in a number of
small cases, but would also not make economic sense for litigants or lawyers. It is
possible that in many, if not most, individual cases, litigation costs would dwarf potential
recovery.” Jordan, 285 F.R.D. at 467 (internal quotation marks omitted),
Finally, the Court finds that managing this class action will not present undue
difficulty given the similarity of the misrepresentations “and the likely ability of the class
members to prove their claims with generalized evidence.” City of Farmington Hills, 281
F.R.D at 357. Furthermore, given the size of the class, certification will be “more
manageable than . . . any other procedure available for the treatment of factual and legal
issues raised by Plaintiff’s claims.” Sullivan v. Kelly Servs., Inc., 268 F.R.D. 356, 365
(N.D. Cal. 2010). Therefore, the Court concludes that a class action is a superior method
of adjudicating Plaintiffs’ claims.
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ORDER
Based on the foregoing, and all the files, records, and proceedings herein, IT IS
HEREBY ORDERED that Plaintiffs’ Motion for Class Certification [Docket No. 180] is
GRANTED. The Court certifies the following class:
All persons in the United States who Purchased Extended Download
Service (“EDS”) for Norton products or Norton Download Insurance
(“NDI”) between January 24, 2005 and March 10, 2011.
January 24, 2005 – October 26, 2009 – Claims against Digital River
under the Minnesota Consumer Fraud Act and False Statement in
Advertising Act, or Unjust Enrichment;
January 24, 2007 – March 10, 2011 – Claims against Symantec under
California Unfair Competition Law, or Unjust Enrichment;
January 24, 2008 – March 10, 2011 – Claims against Symantec under
California Consumer Legal Remedies Act, for only those class members
defined as “consumers” under the CLRA.
DATED: March 31, 2014
at Minneapolis, Minnesota.
__________
_________
JOHN R. TUNHEIM
United States District Judge
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