Heskiaoff v. Sling Media, Inc. ( 2017 )

17-1094-cv
Heskiaoff v. Sling Media, Inc.
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY
ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF
APPELLATE PROCEDURE 32.1 AND THIS COURT=S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER
IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN
ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING TO A SUMMARY
ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second Circuit, held at the
Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the
22nd day of November, two thousand seventeen.
PRESENT:
DEBRA ANN LIVINGSTON,
DENNY CHIN,
Circuit Judges,
JOHN G. KOELTL,
District Judge.*
_____________________________________
MICHAEL HESKIAOFF, Individually & on behalf of all
others similarly situated, MARC LANGENOHL,
Individually & on behalf of all others similarly
situated,
Plaintiffs-Appellants,
RAFAEL MANN, on behalf of himself and all others
similarly situated,
Consolidated Plaintiff-Appellant,
v. 17-1094-cv
SLING MEDIA, INC.,
Defendant-Appellee.
____________________________________
* Judge John G. Koeltl, of the United States District Court for the Southern District of New York,
sitting by designation.
For Plaintiffs-Appellants and
Consolidated Plaintiff-Appellant: ROBERT I. LAX, Lax LLP, New York, New York (Adam
Gonnelli, The Sultzer Law Group, P.C., Red Bank,
New Jersey; Innessa Melamed Huot, Faruqi & Faruqi,
LLP, New York, New York, on the brief).
For Defendant-Appellee: RICHARD R. PATCH (Susan K. Jamison, Katharine T.
Van Dusen, Mark L. Hejinian, Coblentz Patch Duffy &
Bass LLP, San Francisco, California; Leigh R. Lasky,
Lasky, LLC, Chicago, Illinois, on the brief).
Appeal from a judgment of the United States District Court for the Southern District of
New York (Daniels, J.).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND
DECREED that the judgment of the district court is AFFIRMED.
Plaintiffs-Appellants Michael Heskiaoff, Marc Langenohl, and Consolidated Plaintiff
Appellant Rafael Mann (“Plaintiffs”), appeal from a March 22, 2017 judgment of the United States
District Court for the Southern District of New York granting Defendant-Appellee Sling Media,
Inc.’s (“Sling”) motion to dismiss Plaintiffs’ Consolidated Class Action Complaint (“CAC”) and
denying as futile Plaintiffs’ motion for leave to file a proposed Second Consolidated Amended
Class Action Complaint (“SCAC”). Plaintiffs are purchasers of Slingbox Media Players (the
“Slingboxes”) and licensees of related software, which allow users to view television
programming from one device (e.g., their primary television at home) on additional devices in
other locations (e.g., cell phones or computers). Plaintiffs allege that Sling violated their statutory
and contractual rights by disseminating – without advance warning – various advertisements. We
assume the parties’ familiarity with the underlying facts, the procedural history of the case, and the
issues on appeal.
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We begin by determining whether Plaintiffs’ non-contractual statutory claims are governed
by New York or California substantive law. We agree with the district court that these
non-contractual statutory claims are governed by New York law. Plaintiffs bought their
Slingboxes in New York and were New York residents at the time of their purchases, indicating
that New York substantive law governs under New York’s choice-of-law principles. See Krock v.
Lipsay, 97 F.3d 640, 645–46 (2d Cir. 1996); In re Grand Theft Auto Video Game Consumer Litig.,
251 F.R.D. 139, 149–50 (S.D.N.Y. 2008). For their part, Plaintiffs assert that California law
applies, pointing to Sling’s end user license agreement (“EULA”),1 which provides that “this
Agreement will be governed by and construed in accordance with the laws of the State of
California, without regard to or application of conflicts of law rules or principles.” J.A. 197
(emphasis added). “New York courts decide the scope of such clauses under New York law, not
under the law selected by the clause . . . .” Fin. One Pub. Co. v. Lehman Bros. Special Fin., 414
F.3d 325, 333 (2d Cir. 2005). However, the scope of this EULA provision is expressly limited to
“this Agreement.” J.A. 197. We have long held that limited choice-of-law clauses, such as the
one in the EULA, merely specify the law that applies to claims arising from the contract but not to
non-contractual claims (e.g., consumer protection statutes sounding in fraud). See Fin. One Pub.
Co, 414 F.3d at 332–34; Krock, 97 F.3d at 645. Accordingly, the district court properly
determined that New York law applied to Plaintiffs’ non-contractual statutory claims under New
1
The district court did not err in considering the EULA in ruling on Sling’s motion to dismiss
because the parties do not dispute the authenticity or accuracy of the EULA and the EULA was
“integral” to the CAC insofar as Plaintiffs quoted the EULA in the CAC, relied on the EULA in
framing the CAC, and submitted the EULA to the district court with their opposition to Sling’s
motion to dismiss. See Chambers v. Time Warner, Inc., 282 F.3d 147, 152–53 (2d Cir. 2002);
Rothman v. Gregor, 220 F.3d 81, 88–89 (2d Cir. 2000).
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York’s choice-of-law principles.2
Moving on to the decision below granting Sling’s motion to dismiss the CAC, we review
de novo a district court’s grant of a motion to dismiss under Federal Rule of Civil Procedure
12(b)(6), accepting all factual allegations in the complaint as true and drawing all reasonable
inferences in favor of the plaintiff. See Caro v. Weintraub, 618 F.3d 94, 97 (2d Cir. 2010). For
motion to dismiss purposes, “we have deemed a complaint to include . . . any statements or
documents incorporated in it by reference, . . . and documents that the plaintiffs either possessed
or knew about and upon which they relied in bringing the suit.” Rothman v. Gregor, 220 F.3d 81,
88–89 (2d Cir. 2000) (citations omitted). “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.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S.
544, 570 (2007)). Although a court must accept as true all the factual allegations in the complaint,
that requirement is “inapplicable to legal conclusions.” Id.
We conclude that Plaintiffs failed plausibly to allege a violation of New York General
Business Law Section 349. “To maintain a cause of action under [Section] 349, a plaintiff must
show: (1) that the defendant’s conduct is ‘consumer-oriented’; (2) that the defendant is engaged in
a ‘deceptive act or practice’; and (3) that the plaintiff was injured by this practice.” Wilson v. Nw.
Mut. Ins. Co., 625 F.3d 54, 64 (2d Cir. 2010) (citations omitted). As to the second element,
“[w]hether a representation or an omission, the deceptive practice must be likely to mislead a
reasonable consumer acting reasonably under the circumstances.” Nick’s Garage, Inc. v.
2
Likewise, in its order denying as futile Plaintiffs’ motion for leave to file a proposed SCAC, the
district court was correct to evaluate Plaintiffs’ proposed breach of contract/implied covenant
claim under California law, in light of the EULA’s limited choice-of-law clause.
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Progressive Cas. Ins. Co., --- F.3d ----, No. 15-1426-cv, 2017 WL 5162690, at *11 (2d Cir. Nov. 8,
2017) (citations and internal quotation marks omitted). As we recently explained, “[t]he New
York Court of Appeals’ adoption of an ‘objective definition of deceptive acts and
practices . . . which may be determined as a matter of law or fact (as individual cases require),’ was
intended to avoid ‘a tidal wave of litigation against businesses that was not intended by the
Legislature.’” Id. (quoting Oswego Laborers’ Local 214 Pension Fund v. Marine Midland
Bank, N.A., 85 N.Y.2d 20, 26 (1995)). The CAC does not plausibly allege a deceptive act or
practice. Indeed, Plaintiffs point to no affirmative statement made by Sling pertaining to
advertising, much less a deceptive statement. And Plaintiffs did not plead an actionable omission
because nothing in the CAC alleges why a reasonable consumer would have been led to believe
that Slingbox would always be an ad-free product. See Oswego, 85 N.Y.2d at 26. Accordingly,
Plaintiffs fail to allege a violation of Section 349.
Turning to the district court’s order denying as futile Plaintiffs’ motion for leave to amend,
we ordinarily review a district court’s denial of leave to amend for abuse of discretion but where,
as here, the denial is based on a conclusion of law, we review the legal conclusion de novo.
Kassner v. 2nd Ave. Delicatessen Inc., 496 F.3d 229, 242 (2d Cir. 2007). Upon de novo review,
we discern no error in the district court’s conclusion that the proposed amendments – adding
further detail to the previously asserted Section 349 claim and bringing a new claim based on an
alleged breach of the covenant of good faith and fair dealing implied in the EULA – would be
futile.
Having reviewed the proposed amendments, we conclude that the additional information
included in the proposed SCAC still fails to allege a deceptive act or practice under Section 349.
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In particular, Sling’s purported misrepresentations or omissions – such as not explicitly warning
consumers in advance of the advertising – were not deceptive acts or practices under Section 349
because they would not have caused a reasonable consumer acting reasonably under the
circumstances to believe that the Slingbox was, and always would be, an ad-free product. Our
determination that Sling never held the Slingbox out to be a perpetually ad-free product is fatal to
Plaintiffs’ amended Section 349 claim.
Similarly, the district court did not err in rejecting as futile Plaintiffs’ proposed claim based
on an alleged breach of the covenant of good faith and fair dealing implied in the EULA. Under
California law, the implied covenant “requires each contracting party to refrain from doing
anything to injure the right of the other to receive the agreement’s benefits,” Frommoethelydo v.
Fire Ins. Exch., 721 P.2d 41, 44 (Cal. 1986) (en banc), and “cannot impose substantive duties or
limits on the contracting parties beyond those incorporated in the specific terms of their
agreement,” Guz v. Bechtel Nat. Inc., 8 P.3d 1089, 1110 (Cal. 2000). Plaintiffs do not and cannot
pinpoint anything in the EULA related to advertising, and nothing in the EULA suggests that
barring Sling from disseminating advertisements is necessary so that Plaintiffs can receive the
benefit of their bargain. Significantly, the EULA’s several disclaimers reinforce Plaintiffs’ lack
of contractual protections because the EULA expressly stipulates that “Sling Media reserves all
rights in the Software not expressly granted to you in this Agreement.” J.A. 194. The EULA
continues, “[i]f Sling Media provides you with any update to the Software (‘Update’), your use of
such Update will be governed by the terms and conditions of this Agreement or other terms and
conditions that relate to such Update.” Id. The EULA also notes that “[o]ther than those set out
in Section 7, Sling Media does not give any other promises, guarantees, or warranties about the
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Software.” Id. at 196. Accordingly, the district court properly denied as futile Plaintiffs’ motion
for leave to amend.
We have considered all of Plaintiffs’ remaining arguments and find them to be without
merit. Accordingly, we AFFIRM the judgment of the district court.
FOR THE COURT:
Catherine O=Hagan Wolfe, Clerk
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