Vivint v. Alarm Protection et al
Filing
17
MEMORANDUM DECISION and Order Granting Defendants' Motion to Dismiss-granting 4 Motion to Dismiss for Failure to State a Claim-The Court GRANTS Alarm Protection's motion to dismiss Vivint's third and seventh causes of action. See Order for details. Signed by Judge Clark Waddoups on 1/12/16. (jmr)
IN THE UNITED STATES DISTRICT COURT
DISTRICT OF UTAH, CENTRAL DIVISION
VIVINT, INC.,
MEMORANDUM DECISION AND
ORDER GRANTING DEFENDANTS’
MOTION TO DISMISS
Plaintiff,
v.
Case No. 2:14-cv-441-CW
ALARM PROTECTION, LLC, et al.,
Judge Clark Waddoups
Defendants.
INTRODUCTION
Before the court is Alarm Protection’s Motion to Dismiss Vivint’s third and seventh
causes of action. Mot. to Dismiss (Dkt. No. 4).1 The court heard oral arguments on the motion on
January 14, 2015, during which Vivint conceded to the dismissal of its seventh cause of action.
Additionally, the court raised sua sponte a concern regarding the applicability of the Commerce
Clause to Vivint’s third cause of action and allowed the parties to submit supplemental briefing
on this issue. However, based upon the parties’ briefing and the Tenth Circuit’s recent decision
in Energy & Environment Legal Institute v. Epel, 793 F.3d 1169 (10th Cir. 2015), the court now
determines the interstate commerce inquiry is inapplicable. Therefore, the court only considers
the sufficiency of Vivint’s complaint as to its third cause of action. After carefully considering
the parties’ briefs and oral arguments, the court now GRANTS Alarm Protection’s motion.
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The case was originally filed in the Fourth Judicial District Court, Utah County, State of Utah, but was
removed to this court by Alarm Protection pursuant to 28 U.S.C. § 1441(a). Removal was based upon Vivint’s
fourth cause of action which alleges a violation of the federal Lanham Act, 15 U.S.C. § 1124(a).
BACKGROUND
Plaintiff, Vivint, Inc., is a Utah corporation that provides electronic security and home
automation products and services to customers throughout the United States, Canada, and New
Zealand. Complaint, at 4 (Dkt. No. 2-1). Defendants are numerous Utah limited liability
companies under the control of Adam Schanz, Mr. Schanz personally, and Does 1-10
(collectively “Alarm Protection”). Alarm Protection is in the business of selling and installing
electronic security services and equipment throughout the United States and is a direct
competitor of Vivint. Id. Much of Vivint’s and Alarm Protection’s sales are generated through
the efforts of door-to-door sales representatives. Id. at 6.
Vivint’s third cause of action alleges Alarm Protection violated Utah’s Truth in
Advertising Act, Utah Code Ann. § 13-11a-1 et seq., (the “Act”) by utilizing “false and
deceptive sales practices in order to cause Vivint’s customers to switch to Alarm Protection
under false pretenses.” Id. at 9. The alleged conduct consists of Alarm Protection sales
representatives approaching known Vivint customers and making statements such as “Vivint [is]
going out of business,” “Vivint went bankrupt or had filed for bankruptcy,” “Vivint is a scam
and/or a fraud,” and other similar statements, all of which Vivint claims are misrepresentations
designed to mislead Vivint customers. Id.
Vivint alleges at least 43 incidents wherein Alarm Protection sales representatives made
false representations to Vivint customers. According to the complaint, each of these alleged
misrepresentations occurred in the customers’ homes, which were located in Alabama,
Mississippi, Tennessee, Alaska, Florida, and Kentucky. Importantly, Vivint does not allege any
of the misrepresentations were made to customers in Utah.
2
ANALYSIS
I. Legal Standard
“To survive a motion to dismiss, a complaint must contain sufficient factual matter,
accepted as true, to state a claim to relief that is plausible on its face.” Burnett v. Mortg. Elec.
Registration Sys., Inc., 706 F.3d 1231, 1235 (10th Cir. 2013). “A claim has facial plausibility
when the plaintiff pleads factual content that allows the court to draw the reasonable inference
that the defendant is liable for the misconduct alleged.” Id. The court must “accept all wellpleaded allegations of the complaint as true and must construe them in the light most favorable to
the plaintiff.” Albers v. Bd. of Cty. Comm’rs of Jefferson Cty., Colo., 771 F.3d 697, 700 (10th
Cir. 2014).
II.
Truth in Advertising Act
Alarm Protection filed this motion to dismiss under Rule 12(b)(6), arguing Vivint has
failed to state a claim for relief under the Act because it does not allege any of the
misrepresentations occurred within Utah and, therefore, the Act does not apply to Alarm
Protection’s alleged wrongful conduct. Mot. to Dismiss, at 5 (Dkt. No. 4). In response, Vivint
argues the Act applies because the plain language of section 13-11a-4(1) creates a cause of
action in Utah for any deceptive trade practice, regardless of location. Opp’n Mem., at 4 (Dkt.
No. 6). Alternatively, Vivint contends the Act applies because Alarm Protection is a Utah
company and it trains its sales representatives in Utah to engage in deceptive trade practices. Id.
at 5.
The primary issue in this motion concerns the geographical limitations of the Act and is a
matter of statutory interpretation. When interpreting a state statute, a federal court must apply
“state rules of statutory construction.” Ward v. Utah, 398 F.3d 1239, 1248 (10th Cir. 2005). In
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Utah, the primary goal of statutory construction “is to evince the true intent and purpose of the
Legislature” and “[t]he best available evidence of the Legislature’s intent is the statute’s plain
language.” Heaps v. Nuriche, LLC, 345 P.3d 655, 659 (Utah 2015). The court must “presume
that the Legislature used each word advisedly and give effect to each term according to its
ordinary and accepted meaning.” LeBeau v. State, 337 P.3d 254, 260 (Utah 2014) (alterations
omitted).
Turning to the language of the Act, Vivint points to section 13-11a-4(1), which reads,
“The district courts of this state have jurisdiction over any supplier as to any act or practice in
this state governed by this chapter or as to any claim arising from a deceptive trade practice as
defined in this chapter.” Utah Code Ann. § 13-11a-4(1). Vivint argues the language of this
section creates a cause of action under the Act whenever “a deceptive trade practice is
committed, regardless of location.” Opp’n Mem., at 4 (Dkt. No. 6). However, section 13-11a4(1) only addresses the jurisdictional reach of the Utah courts. The first clause grants Utah courts
personal jurisdiction over any supplier who violates the Act “in this state” regardless of the
supplier’s citizenship. The second clause grants subject-matter jurisdiction to Utah courts for
claims arising from a violation of the Act. Contrary to Vivint’s argument, section 13-11a-4(1) is
silent as to the geographical scope of the Act and therefore does not answer the question before
the court. From reading the Act as a whole, it is evident the language Vivint relies upon is not
intended to define deceptive trade practices, which are defined in detail in other provisions of the
Act, or to express the intent of the legislature to regulate conduct within the jurisdiction of other
states or the federal government. It is a generalized statement that the Utah courts have
jurisdiction to enforce the provisions of the Act.
Indeed, when viewed in its entirety, the only language in the Act relevant to the court’s
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analysis here is found in the Act’s statement of purpose in section 13-11a-1. Although a
statement of purpose is generally “not a substantive part of the statute,” it may be referred to in
order to clarify ambiguities. Price Dev. Co., L.P. v. Orem City, 995 P.2d 1237, 1246 (Utah
2000); see also Dorsey v. Dep’t. of Workforce Servs., 330 P.3d 91, 96 (Utah 2014) (recognizing
that a purpose statement might inform the court’s “resolution of ambiguities in statutory text,”
but that it “cannot override the clear terms of the law”). The statement of purpose serves that
very function in this case. The language Vivint relies upon is at best ambiguous as to the
intended geographical reach of the Act. Section 13-11a-1 clarifies that the purpose was only to
regulate conduct in Utah. It states, “The purpose of this chapter is to prevent deceptive,
misleading, and false advertising practices and forms in Utah. This chapter is to be construed to
accomplish that purpose and not to prohibit any particular form of advertising so long as it is
truthful and not otherwise misleading or deceptive.” Utah Code Ann. § 13-11a-1 (emphasis
added). The court finds the phrase “in Utah” clearly illustrates the Legislature’s intent for the Act
to be construed to apply to advertisements that originate in Utah and target consumers in Utah,
and to advertisements that originate outside of Utah, but that target consumers in Utah.2
Furthermore, limiting the geographical scope of the Act to only reach wrongful conduct
that occurs in Utah is consistent with the “deeply rooted and longstanding canon of construction”
which states that Utah “statutes are presumed not to have extraterritorial effect.” Nevares v.
M.L.S., 345 P.3d 719, 727 (Utah 2015). “This presumption is a gap-filler, operating under a clear
statement rule [which] provides that unless a statute gives a clear indication of an extraterritorial
2
The court need not decide whether the Act applies to advertisements that originate in Utah, but are only
disseminated to consumers outside of Utah (e.g. a commercial that is broadcast from within Utah, but that is only
shown to consumers in Alabama) as such issue is not before the court. Vivint’s claim that Alarm Protection trained
its employees in Utah to make false statements to consumers in other states is distinguishable from this issue
because Alarm Protection’s training of its employees is not covered by the Act. Training alone is not a deceptive
trade practice as defined by the Act.
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application, it has none.” Id (internal quotation marks omitted). There is no language in the Act
which provides any indication, let alone a clear indication, of the Legislature’s intent to apply it
extraterritorially. The presumption, therefore, mandates that the court reject Vivint’s
interpretation and hold that the Act only applies when the alleged wrongful conduct occurs in
Utah as stated above.3
Alternatively, Vivint argues the Act applies because Alarm Protection is a Utah company
that trains its sales representatives in Utah to engage in deceptive trade practices. Opp’n Mem., at
5 (Dkt. No. 6). This argument also fails. Vivint’s complaint does not allege Alarm Protection
performed any such training in Utah. At the motion to dismiss stage, the court’s analysis is
“limited to assessing the legal sufficiency of the allegations contained within the four corners of
the complaint.” Rosenfield v. HSBC Bank, USA, 681 F.3d 1172, 1189 (10th Cir. 2012). Although
Vivint points to language in its complaint which alleges that Adam Schanz, a Utah resident and
the owner of Alarm Protection, directed the wrongful actions and that Alarm Protection
encourages and trains its sales representatives in such practices, Opp’n Mem., at 5 (Dkt. No. 6),
nowhere in the complaint does Vivint allege these actions occurred in Utah. It is only in response
to this motion that Vivint raises such an allegation. Moreover, even if Vivint’s complaint had
alleged such conduct occurred in Utah, nothing in the Act is directed at encouraging and training,
but rather at deceptive conduct. Therefore, Vivint has not alleged any wrongful conduct that is
covered under the Act occurred within Utah. As such, Vivint has failed to state a claim under the
Act.4
3
This holding is consistent with the geographical limitations that have been placed upon similar false
advertising statutes in other states. See e.g. Goshen v. Mutual Life Ins. Co. of N.Y., 774 N.E.2d 1190, 1195 (N.Y.
2012) (holding New York law governing deceptive practices and false advertising only applies when “the
transaction in which the consumer is deceived” occurs in New York).
4
Vivint also argues Alarm Protection’s transactions with customers are “predominately Utah transactions.”
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Conclusion
For the reasons stated above, the Court GRANTS Alarm Protection’s motion to dismiss
Vivint’s third and seventh causes of action.
SO ORDERED this 12th day of January, 2016.
BY THE COURT:
______________________________
Clark Waddoups
United States District Court Judge
Supp. Opp’n Mem., at 5 (Dkt. No. 13). However, Vivint first presented this argument in its supplemental briefing in
response to the court’s Commerce Clause inquiry. Therefore these allegations are outside of the complaint.
Moreover, Vivint has not alleged how any of Alarm Protection’s “predominately Utah transactions” involve conduct
that is covered by the Act.
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