White v. Playphone, Inc. et al

Filing 31

ORDER denying 8 Motion to Remand to State Court and request for attorneys fees. Signed by Chief Judge Barbara B Crabb on 2/27/09. (vob)

IN THE UNITED STATES DISTRICT COURT FO R THE WESTERN DISTRICT OF WISCONSIN ---------------------------------------------PAM ELA WHITE, individually and on behalf of all others similarly situated, O P IN IO N AND ORDER P l a i n t i ff , 0 8 - cv -6 8 3 - b b c v. PL AY PH O N E, INC., MOBILEFUNSTER, INC . d/b/a FUNMOBILE and DOE DEFENDANTS 1-20, D efendan ts. ---------------------------------------------T his is a proposed class action for monetary and injunctive relief in which plaintiff Pam ela White, on behalf of herself and similarly situated individuals in Wisconsin, alleges th at defendants PlayPhone, Inc. and Mobilefunster, Inc. included unauthorized charges on m ob ile telephone bills in violation of Wisconsin fair marketing and trade practice laws, Wis. Stat. §§ 100.18, 100.20 and 100.207. On October 31, 2008, plaintiff brought suit in the C ircu it Court for Dane County, Wisconsin (Case No. 08-CV-4986). On November 26, 2008 , defendant Mobilefunster, Inc. removed this case to federal court, arguing that diversity jurisdiction exists under the Class Action Fairness Act, codified at 28 U.S.C. § 13 32 (d).

B efore the court is plaintiff's motion to remand this case to Dane County and to aw ard her attorney fees and costs. Defendant PlayPhone joins defendant Mobilefunster in op po sing the motion. Because minimal diversity exists between the parties, the amount in con troversy exceeds $5,000,000 and the number of members in all of the proposed classes is more than 100, this case falls under the jurisdictional grant of the Class Action Fairness A ct and was properly removed to federal court. Accordingly, I am denying plaintiff's motion for remand. From the complaint and the documents submitted by the parties, and solely for the purp ose of deciding this motion for remand, I draw the following facts:

A LL EG A T IO N S OF FACT Plaintiff Pamela White is a citizen of the state of Wisconsin. Both defendants M obilefunster and PlayPhone have their principal place of business in the state of California. D oe defendants 1-20 are yet to be named officers, employees and agents of defendants M ob ilefunster and PlayPhone. Defendants are in the business of charging mobile phone subscriber accounts for a litany of add-on content and services (or add-ons), including informational services such as ho rosco pes. Plaintiff has maintained and incurred charges from a mobile phone subscriber ac c o u n t . Defendants charge for the add-ons and market, sign up, provide the content for

2

a n d distribute the add-ons. Add-ons are not included as part of the purchase of a mobile phone or a mobile phone carrier subscription. Instead, they purport to be legitimate thirdparty charges and appear on mobile phone bills as premium text messages. Add-ons are delivered through mobile phone devices via SMS technology or downloads. In July 2007, defendants placed multiple add-on or premium text message charges on p lain tiff's mobile phone account without her consent. Plaintiff could not use the add-ons th at defendants provided because they were not compatible with her mobile phone and m ob ile phone carrier. On October 31, 2008, plaintiff sued defendants in the Circuit Court for Dane County on behalf of herself and those similarly situated. The complaint defined two proposed c la s s e s : PLAY PH O N E CLASS: All persons in the State of Wisconsin who received a ch arge on their mobile telephone bill from Playphone, Inc. that they did not autho rize. FUN M O BILE CLASS: All persons in the State of Wisconsin who received a charge on their mobile telephone bill from MobileFunster, Inc. that they did no t authorize. D kt. #1, exh. A at 5. With respect to defendants' practices, plaintiff's complaint states the f o l lo w i n g : C on trary to Federal Trade Commission Guidance and Industry Stand ards, Defendants Are Profiteering From The Rapidly Growing, Bu t Illegal Practice of Unauthorized Mobile Phone Charges

3

14 . The growth of unauthorized premium text message charges has in recent years accelerated at a rampant pace. Juniper Research has reported that as many as 10 percent of all U.S.-based mobile-phone subscribers having already received and been annoyed by SMS spam. . . . 15. The Federal Trade Commission (FTC) has specifically targeted the p ractice of "cramming" charges for so-called optional services on telephone bills as a popular, but illegal practice in violation of Section 5 of the Trade C om m ission Act. **** 17. In an apparent attempt to address such issues, the Mobile M arketing Association ("MMA"), which is the industry trade group for mobile pho ne content providers, has developed an industry standard code of conduct fo r providing and charging for mobile phone content, such as content for w hich Defendants billed Plaintiff and the Class, aimed at consumer p ro te c ti o n . **** 2 0 . Defendants each failed to institute business practices consistent w ith the MMA code of conduct, counter to industry standards and their duties o f care to consumers upon whom they levy add-on charges. As a result Plaintiff and the Class incurred the add-on charges at issue. 2 1 . Defendants chose to repeatedly charge Plaintiff and the Class for ad d-o n s that were not properly authorized, marketed or approved consistent w ith MMA industry standards, because doing so inured to Defendants' revenue stream in the ballooning premium text message industry. Id. at 3-5. In her complaint, plaintiff asks the court to declare that defendants are in violation o f Wis. Stat. §§ 100.18, 100.207 and 100.20(5) and Wis. Admin. Code §§ ATCP 123.02

4

an d 123.06; award compensatory damages and restitution for all unauthorized charges and ord er defendants to establish a constructive trust consisting of money received for the benefit of the class; award double damages under § 100.20(5); "cease and desist collection of the subject charges;" and award reasonable attorney fees and costs. Id. at 7-14. Plaintiff "disclaim s any recovery and relief on behalf of herself and all other members of the Class in excess of $75,000 per individual." Id. at 2, ¶ 7.

D I S C U S S IO N T h e proponent of federal jurisdiction, in this case defendants, bears the burden of pro ving contested jurisdictional facts by a preponderance of the evidence. Meridian Security Insura nce Co. v. Sadowski, 441 F.3d 536, 543 (7th Cir. 2006); Tylka v. Gerber Products C o., 211 F.3d 445, 448 (7th Cir. 2000). In determining whether removal was proper under 28 U.S.C. § 1441, a district court must construe the removal statute narrowly and resolve any doubts regarding subject matter jurisdiction in favor of remand. Doe v. Allied-Signal, Inc., 985 F.2d 908, 911 (7th Cir. 1993); People of the State of Illinois v. Kerr-McGee Chem ical Corp., 677 F.2d 571, 576 (7th Cir. 1982). In this case, defendants argue that p lain tif f 's claims are properly removed under the jurisdictional grant of the Class Action Fairn ess Act (CAFA), 28 U.S.C. § 1332(d).

5

"T he Class Action Fairness Act creates federal jurisdiction over (and thus allows rem oval of) multi-state class actions with substantial stakes." Bullard v. Burlington Northern S an ta Fe Railway Co., 535 F.3d 759, 761 (7th Cir. 2008). The Act allows federal courts to exercise jurisdiction over class actions in which only minimal diversity exists between the p arties, the amount in controversy exceeds $5,000,000 in the aggregate and the number of m em bers of all proposed classes is 100 or more. 28 U.S.C. §§ 1332(d)(2) and (d)(5)(B); 5 M oo re Federal Practice, § 23.63[2][a], at 23-309 (2008). Therefore, to establish

ju risd ictio n , defendants must prove that it is more likely than not that, within the limits of the claims actually made by plaintiffs regarding the proposed classes, the jurisdictional req uirem en ts of § 1332(d) will be met. Brill v. Countrywide Home Loans, Inc., 427 F.3d 446, 448-49 (7th Cir. 2005) (court must look to complaint to determine plaintiff's actual dem an ds); see also In Re Shell Oil Co., 970 F.2d 355, 356 (7th Cir. 1992) ("Jurisdiction is determ ined as of the instant of removal."). "[O]nce these facts have been established the proponent's estimate of the claim's value must be accepted unless there is `legal certainty' that the controversy's value is below the threshold." Meridian, 441 F.3d at 541. When equ itable relief is sought, such as an injunction or declaratory judgment, "the amount in con troversy is measured by the value of the object of the litigation." Macken ex rel. Macken v. Jensen, 333 F.3d 797, 799 (7th Cir. 2003) (quoting Hunt v. Washington State Apple A dvertising Commission, 432 U.S. 333, 347 (1977)). Additionally, the Court of Appeals

6

fo r the Seventh Circuit has ruled that "the object [of the litigation] may be valued from either perspective­what the plaintiff stands to gain, or what it would cost the defendant to m eet the plaintiff's demand." Id. at 799-800 (citations omitted). In this case, the only disputed issues are whether the proposed class exceeds 100 m em bers and whether plaintiff's monetary claims exceed the amount in controversy. In supp ort of removal, defendant Mobilefunster has submitted two affidavits from its Business D evelopm ent Manager, Ed Yip. Yip averred that through October 31, 2008, Funmobile has had approximately 52,000 subscribers with Wisconsin area codes from whom it has earned a revenue of $1.5 million in subscription plan memberships. Dkt. #1, Exh. D. In a

supplem en tal affidavit, Yip declared that through December 31, 2008, Mobilefunster has ha d approximately 57,000 subscribers with Wisconsin area codes and earned $88,000 in N ov em ber and December 2008 from selling mobile content to customers with Wisconsin area codes. Dkt. #11. Andrew Page, Chief Financial Officer and Senior Vice President of O perations for PlayPhone, Inc., averred that between 2006 and 2008, PlayPhone had ap pro xim ately 19,000 subscribers with Wisconsin area codes from whom it earned $689,737 in authorized revenue. Dkt. #12. Plaintiff does not dispute the accuracy of defendants' numbers. Instead, she contends that defendants have not based their estimates on her actual demands. She contends that d efen dan ts have read the complaint too broadly and "improperly enlarge the universe of

7

w hat is actually alleged" to include relief for all of defendants' charges to every Wisconsin p ho n e number. Dkt. #9. Plaintiff points out that Yip failed to identify how many

custom e r s were subject to or how much revenue was earned from unauthorized charges. H ow ever, the Court of Appeals for the Seventh Circuit has made it clear that federal ju risd ictio n does not depend on how much the plaintiff is sure to recover or likely to win. S p i v ey v. Vertrue, Inc., 528 F.3d 982, 985 (7th Cir. 2008) (citing Brill, 427 F.3d 446). D efendants do not have to confess liability in order to show that they exceed the threshold req uirem en ts. Brill, 427 F.3d at 449. They must demonstrate only what plaintiff is claiming b ecau se the relevant questions are "what amount is `in controversy'" and the number of po tential class members. Spivey, 528 F.3d at 985-86. Plaintiff alleges in the complaint that defendants made unauthorized mobile phone charges on her mobile phone bill and the mobile phone bills of other Wisconsin residents. G iven that defendants have had a total of 71,000 Wisconsin subscribers, they have no pro blem meeting the numerosity requirement. 28 U.S.C. § 1332(d)(1)(D) ("class members" i n clude those who fall within definition of proposed class); § 1332(d)(5)(B) (must count m em b ers of all proposed classes in aggregate). Plaintiff points out that defendant

M o bilefu nster fails to identify whether the 52,000 subscribers that it had as of October 31, 2 0 0 8 even incurred charges within the statute of limitations period. Plaintiff raises a good p o i n t. However, Yip's supplemental affidavit makes clear that Mobilefunster had an

8

ad ditio n al 5,000 Wisconsin subscribers after October 31, 2008.

Further, defendant

PlayPho ne clearly alleges that it had 19,000 customers meeting the class definition between 2006 and 2008. Thus, plaintiff has not shown that it will be legally impossible to have more than 100 members in the proposed classes. Cunningham Charter Corporation v. Learjet, In c., 2008 WL 3823710, at *4 n. 3 (S.D. Ill. Aug. 13, 2008) (exact class size need not be determ ined until later; defendant simply must show at least 100 potential class members). S im ilarly, plaintiff has not shown that it is legally impossible for her and the proposed class to collect more than $5 million. In the complaint, plaintiff seeks declaratory relief, com pen satory damages for the unauthorized charges, double damages pursuant to Wis. Stat. § 100.20(5), an order that defendants cease and desist collection of the subject charges and attorney fees and costs. As plaintiff notes, the complaint does not indicate how often unauthorized charges occurred or how many Wisconsin residents have been affected. H ow ever, plaintiff alleges that defendants "repeatedly" made unauthorized charges and have b u s i n e s s practices that are counter to industry standards and part of a "rapidly growing," na tionw ide practice that has "accelerated at a rampant pace." Therefore, the complaint puts into controversy the propriety of all of defendants' charges. Spivey, 528 F.3d at 985-86. Spivey is analogous to the instant case. In Spivey, the plaintiff proposed to represent a class of persons whose credit cards had been charged without authorization, alleging that d efen dan t "systematically" submitted unauthorized charges. Id. at 983. Relying on

9

a ffidavits submitted by defendant that its billings for four of the contested 22 programs totaled $7 million in the state of Illinois, the court of appeals found that recovery of more than $5 million was not impossible. Id. at 986. Although the district court found that the defendant's failure to admit what portion of all charges was unauthorized made the ju dgm en t amount uncertain, the court of appeals held that "uncertainty differs from i m p o ssibility." Id. (citing St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283 (19 38 )). Contrary to plaintiff's assertion, her complaint makes clear that it is defendants' business practice to bill Wisconsin subscribers for unauthorized charges. Because the com plaint leaves open the possibility that all of defendants' charges to Wisconsin customers m ay be unauthorized, all of defendants' Wisconsin revenues are in question. D e fen d a n t s admit that they collected almost $2.2 million in add-on charges from W iscon sin residents. It is not clear from Yip's affidavits during which years Mobilefunster collected the $1.5 million in revenue in Wisconsin. However, Yip avers that as of November 2 0 0 8, the average subscription cost was $9.32 a month and that between November and D ecem ber 2008, Wisconsin revenue totaled $88,000. Therefore, it is reasonable to infer th at at a minimum, Mobilefunster earns $528,000 annually (or $44,000 a month) from W isco n sin subscribers. Using these figures, defendants would have earned a total of $1.74 m illio n between 2006 and 2008, resulting in a possible double damages award of $3.49 m illion and injunctive relief worth $1.74 million annually. Citing punitive damage awards

10

in several Wisconsin cases, defendants estimate that plaintiff could be awarded punitive dam ages in an amount at least three times the compensatory award, or $5.2 million. Neither party has provided an estimate for the pre-removal attorney fees and costs. In a belated attempt to avoid federal jurisdiction, plaintiff submitted an affidavit with h e r reply brief in which she avers that she does not seek punitive damages and forever disclaim s injunctive relief that would require defendants to stop earning revenues in W iscon sin. Plaintiffs can prevent removal by filing a binding affidavit or stipulation with their complaints limiting their recovery to less than the jurisdictional amount. Oshana v. C o ca-C o la Co., 472 F.3d 506, 512 (7th Cir. 2006). However, plaintiff's affidavit is not b in din g because she filed it long after she filed her complaint. Matter of Shell Oil Co., 970 F.2d 355, 356 (7th Cir. 1992) (post-removal amendment to complaint does not authorize rem an d because jurisdiction is determined at instant of removal). The complaint does not lim it the value of the injunctive relief sought by the proposed class. I also agree with defendan ts that even though the complaint does not specifically seek punitive damages, it leaves open the possibility for them. In any event, whether plaintiff can recover punitive dam ages is not dispositive because the potential double damage award and injunctive relief are sufficient in themselves to meet the amount in controversy requirement.

11

B ecause I am satisfied that defendants have met their burden for removal and it is legally possible that this case meets the jurisdictional requirements of the Class Action Fairness Act, I will deny plaintiff's motion for remand.

OR DER IT IS ORDERED that plaintiff Pamela White's motion for remand, dkt. #8, and request for attorney fees is DENIED. E n tered this 27t h day of February, 2009. B Y THE COURT: /s/ _ _ _ __ _ _ __ _ _ __ _ _ __ _ _ __ _ _ __ _ _ __ _ _ B AR B AR A B. CRABB D istrict Judge

12