Bruce McMahon v. Take-Two Interactive Software ( 2016 )

FILED
NOT FOR PUBLICATION
FEB 19 2016
UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
BRUCE MCMAHON, on behalf of No. 14-55296
himself; CHRISTOPHER BENGSTON,
on behalf of himself; and all others D.C. No. 5:13-cv-02032-VAP-SP
similarly situated,
Plaintiffs - Appellants, MEMORANDUM*
v.
TAKE-TWO INTERACTIVE
SOFTWARE, INC., and TAKE-TWO
INTERACTIVE SOFTWARE, INC., DBA
Rockstar, Erroneously Sued As Rockstar
Games, Inc.,
Defendants - Appellees.
Appeal from the United States District Court
for the Central District of California
Virginia A. Phillips, District Judge, Presiding
Argued and Submitted February 4, 2016
Pasadena, California
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
Before: WARDLAW and HURWITZ, Circuit Judges and RICE,** Chief District
Judge.
Bruce McMahon and Christopher Bengston, two video game enthusiasts,
appeal the Rule 12(b)(6) dismissal with prejudice of their putative class action
against Take-Two Interactive Software, Inc. and Rockstar Games, Inc., companies
that produce and distribute video games. We have jurisdiction under 28 U.S.C.
§ 1291. We reverse and remand to the district court to grant leave to McMahon
and Bengston to file an amended complaint.
1. The district court correctly ruled that plaintiffs’ allegations concerning
their purchase of the video game Grand Theft Auto V (GTA V) sufficed to
establish standing under California’s unfair competition law (UCL), Cal. Bus. &
Prof. Code § 17200 et seq., and false advertising law (FAL), Cal. Bus. & Prof.
Code §17500. Plaintiffs have standing under the UCL and FAL because they have
sufficiently alleged economic injury caused by defendants’ alleged
misrepresentations. See Kwikset Corp. v. Superior Court, 246 P.3d 877, 885 (Cal.
2011) (explaining that economic injury occurs when a plaintiff “surrender[s] in a
transaction more, or acquire[s] in a transaction less, than he or she otherwise would
have,” absent the defendant’s unfair practice). Specifically, plaintiffs allege that
**
The Honorable Thomas O. Rice, Chief United States District Judge
for the Eastern District of Washington, sitting by designation.
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they would not have purchased GTA V at a “premium price” if defendants had not
misrepresented the availability of Grand Theft Auto Online (GTA Online) on GTA
V’s packaging.
2. The district court also correctly determined that plaintiffs stated a claim
for restitution under the UCL and the FAL. “A restitution order against a
defendant [] requires both that money or property have been lost by a plaintiff, on
the one hand, and that it have been acquired by a defendant, on the other.” Id. at
895. Plaintiffs’ allegation that they were induced to pay a premium price for a
video game that did not perform as represented, coupled with their prayer for a
refund of the “monies paid” for that video game, suffices to state a claim for
restitution. See id.
3. The district court erred in concluding as a matter of law that the alleged
misrepresentations on GTA V’s packaging were not actionable under the UCL or
the FAL. The UCL proscribes “unlawful, unfair or fraudulent” business practices,
Cal. Bus. & Prof. Code § 17200, and the FAL prohibits the dissemination of any
advertising “which is untrue or misleading,” id. § 17500. To state a claim under
either statute, plaintiffs must allege that “members of the public are likely to be
deceived” by defendants’ statements, In re Tobacco II Cases, 207 P.3d 20, 29 (Cal.
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2009) (quotations marks and citation omitted), and that plaintiffs actually relied on
those statements, see id. at 39.
On a motion to dismiss for failure to state a claim, a court must construe a
complaint’s allegations in the light most favorable to plaintiffs. See Davis v. HSBC
Bank Nev., N.A., 691 F.3d 1152, 1159 (9th Cir. 2012). Here, plaintiffs alleged that
they read all the disclosures and statements on GTA V’s packaging, and that these
representations led them to believe that GTA Online would be available to play
immediately upon purchase of GTA V. Contrary to these representations, GTA
Online was not available immediately to any purchasers. The district court erred
by failing to construe plaintiffs’ allegations that these representations were
misleading in the light most favorable to plaintiffs, and by making the finding that
the representations were not misleading. See Lilly v. ConAgra Foods, Inc., 743
F.3d 662, 665 (9th Cir. 2014) (“Whether a business practice is deceptive will
usually be a question of fact not appropriate for decision on [a motion to dismiss].”
(quotation marks and citation omitted)).
The district court did not address whether the complaint adequately alleged
reliance on the alleged misrepresentations. We decline to reach this issue for the
first time on appeal.
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4. The district court abused its discretion by denying plaintiffs leave to
amend their complaint. Leave to amend at least once is freely granted unless
amendment would be futile. United States v. Corinthian Colleges, 655 F.3d 984,
995–96 (9th Cir. 2011).
We REVERSE and REMAND with instructions that the district court grant
leave to plaintiffs to file an amended complaint.1
1
Plaintiffs’ request for judicial notice on appeal is DENIED.
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