Correll v. Amazon.com, Inc.

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 JONATHAN CORRELL, on behalf Case No.: 3:21-cv-01833 BTM of himself and all others similarly 12 situated, ORDER GRANTING MOTION TO 13 DISMISS PLANTIFFS’ Plaintiffs, COMPLAINT UNDER FED. R. 14 v. CIV. P. 12(b)(1) WITH LEAVE TO 15 AMEND AMAZON.COM, INC., and DOES 16 I-10, [ECF No. 13] 17 Defendant. 18 19 Before the court is Defendant Amazon.com., Inc’s (“Amazon”) Motion to 20 Dismiss under the Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). Plaintiff 21 Jonathan Correll (“Correll”) opposes the motion. For the reasons discussed below, 22 the Court GRANTS Defendant’s motion to dismiss under Fed. R. Civ. P. 12(b)(1) 23 with leave to amend. 24 25 I. BACKGROUND 26 Correll, on behalf of himself and a potential class, filed suit against Amazon 27 alleging unequal treatment and discrimination in Amazon’s Seller Certification 28 program, Guided Buying policy, and other orientation-based incentive programs 1 for retailers. (ECF No. 1 (“Complaint”).) Plaintiffs’ Complaint asks for injunctive 2 relief and damages under California Civil Code §§ 51 and 51.5 (“Unruh Civil Rights 3 Act”). (Id.) 4 The parties agree that Amazon currently has policies in place to promote, 5 encourage, and incentivize minority certified sellers. (ECF No. 1, 13-15.) 6 Amazon asserts it created these initiatives “to increase the diversity of its seller 7 population so that customers have the greatest possible choice.” (ECF No. 8 13, 12.) The specific incentive programs challenged by the complaint 9 include: 1) Amazon’s “Seller Certification” program, which allows sellers to list 10 certifications on their site based on their businesses ownership, including 11 women, veteran, LGBT or minority-owned business certificates; 2) Amazon’s 12 “Guided Buyer policy,” which allows Amazon Business customers to “prioritize 13 products sold by sellers with particular certifications”; 3) Amazon’s spotlight 14 pages, which highlight selected business and their products on curated 15 ‘themed’ sites, including “Discover Women-Owned Businesses”, “Buy Black” 16 for Black History Month, “Shop Hispanic & Latino Goods” for Hispanic Heritage 17 Month; and 4) the “Black Business Accelerator Program” which offers limited 18 free advertising, image services, credit assistance, and eligibility for potential 19 cash grants to select certified sellers. (ECF No. 13, 4-5; ECF No. 1, 3.) The 20 complaint alleges that through these programs Amazon “direct[s] consumers 21 away from Amazon’s disfavored sellers…and towards Amazon’s preferred 22 and privileged sellers” based on the sellers’ identity. (ECF No. 1, 2-3.) Plaintiff 23 pleads that he visited Amazon’s website in the summer and fall of 2021 with 24 the intent to use Amazon’s sales services. (ECF No. 1 at 17.) There, Plaintiff 25 encountered Amazon’s programs which Plaintiff asserts “denied and deprived 26 heterosexual White males” among other groups “the full and equal 27 accommodations, advantages, facilities, privileges, or services based on their 28 sexual orientation, race, and sex.” (Id. at 17.) After viewing these programs, 1 through the website. (Id.) Plaintiff’s Complaint does not plead facts sufficient to 2 identify Plaintiff's products, seller history, or that he was “able and ready” to sell 3 products on Amazon’s website prior to viewing the incentive programs. (Id.) 4 5 II. DISCUSSION 6 Amazon moves to dismiss under Fed. R. Civ. P. 12(b)(1) for lack of Article 7 III standing and 12(b)(6) for failure to state a claim. (ECF No. 13. (“Def.’s 8 MTD”).) The court addresses both motions in turn. 9 10 A. Motion to Dismiss for lack of subject-matter jurisdiction under Fed. R. 11 Civ. P. 12(b)(1) 12 13 I. Legal Standard 14 Amazon challenges the Complaint, in part, on the ground that Plaintiff lacks 15 Article III standing. (Id.) Standing is an element of subject matter jurisdiction. 16 Therefore, Amazon moves to dismiss Plaintiffs’ Complaint for lack of subject 17 matter jurisdiction pursuant to Fed. R. Civ. P. 12(b)(1). 18 A Rule 12(b)(1) jurisdictional attack may be facial or factual. In a facial 19 attack, the challenger asserts that the allegations contained in a complaint are 20 insufficient on their face to invoke federal jurisdiction. Safe Air for Everyone v. 21 Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004). Generally, on a 12(b)(1) motion 22 regarding subject matter jurisdiction, unlike a 12(b)(6) motion, a court need not 23 defer to a plaintiff's factual allegations. Id. But the Supreme Court has held that 24 where a 12(b)(1) motion to dismiss is based on lack of standing, the Court must 25 defer to the plaintiff's factual allegations and must "presume that general 26 allegations embrace those specific facts that are necessary to support the claim." 27 Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992) (internal quotation 28 marks omitted). "At the pleading stage, general factual allegations of injury 1 resulting from the defendant's conduct may suffice." Id. at 560. In short, a 2 12(b)(1) motion to dismiss for lack of standing can only succeed if the plaintiff 3 has failed to make "general factual allegations of injury resulting from the 4 defendant's conduct." Id. 5 6 II. Article III Standing 7 Standing is a necessary element of federal court jurisdiction under Article III 8 of the U.S. Constitution. Warth v. Seldin, 422 U.S. 490, 498 (1975). Article III of 9 the U.S. Constitution authorizes federal courts to exercise jurisdiction over “Cases” 10 and “Controversies.” U.S. Const. art. III, § 2. A litigant must have standing in order 11 for their suit to meet the case-or-controversy requirement for federal jurisdiction. 12 Lujan v. Defs. of Wildlife, 504 U.S. 555, 560 (1992). “Standing is a necessary 13 element of federal-court jurisdiction” and accordingly a “threshold question in every 14 federal case.” Thomas v. Mundell, 572 F.3d 756, 760 (9th Cir. 2009) (Citing Warth, 15 422 U.S. at 498.). “The party invoking federal jurisdiction, not the district court, 16 bears the burden of establishing Article III standing.” Carroll v. Nakatani, 342 F.3d 17 934, 945 (9th Cir. 2003). As discussed below, a complaint can not proceed in 18 federal court without Article III standing, even if a similarly situated complaint could 19 proceed in state court. 20 Standing requires that the plaintiff (1) suffered an injury in fact; (2) show the 21 defendant’s causal connection to the injury; and (3) demonstrate that the injury 22 would be redressed by a favorable decision. Spokeo, Inc. v. Robins, 578 U.S. 330, 23 337 (2016). That is, a plaintiff must allege "'such a personal stake in the outcome 24 of the controversy as to warrant his invocation of federal court jurisdiction and to 25 justify exercise of the court's remedial powers on his behalf." Warth, 422 U.S. at 26 498-99. A plaintiff must have suffered an ‘injury in fact’— “‘an invasion of a legally 27 protected interest’ that is ‘concrete and particularized’ and ‘actual or imminent, not 28 conjectural or hypothetical.’” Spokeo, 578 U.S. at 339 (quoting Lujan, 504 U.S. at 1 560). A "particularized" injury is one that "affect[s] the plaintiff in a personal and 2 individual way." Id. The Article III requirement that an injury is “actual or imminent” 3 “ensure[s] that the alleged injury is not too speculative for Article III purposes---that 4 the injury is certainly impending.” Clapper v. Amnesty Int’l USA, 568 U.S. 398, 409 5 (2013). 6 Plaintiff contends that because he viewed identity-based incentive programs 7 on the Amazon Seller site that he could not qualify for, he was subject to 8 discrimination, and accordingly suffered an injury in fact. (ECF No. 1 at 17.) 9 However, while Plaintiff contends he visited the Amazon seller site, he pleads no 10 facts to show he was ‘able and ready’ to sell. (Id.) Accordingly, Plaintiff does not 11 plead a particularized injury sufficient to support an inference of injury-in-fact. 12 Generalized grievances have long been considered insufficient to confer 13 standing under Article III. Carroll, 342 F. 3d at 940 (stating “The Supreme Court 14 has repeatedly refused to recognize a generalized grievance against allegedly 15 illegal government conduct as sufficient to confer standing” (citing United States 16 v. Hays, 515 U.S. 737, 743 (1995))). In Allen v. Wright, 468 U.S. 737, 755 17 (1984), plaintiffs challenged the Internal Revenue Service for its failure to deny 18 tax-exempt status to racially discriminatory private schools. The Supreme Court 19 held the parties lacked standing, stating the "asserted right to have the 20 Government act in accordance with law is not sufficient, standing alone, to confer 21 jurisdiction on a federal court." Id.; see also Valley Forge College v. Americans 22 United, 454 U.S. 464, 482-83 (1982) ("[t]his Court repeatedly has rejected claims 23 of standing predicated on the right, possessed by every citizen, to require that 24 the Government be administered according to law." (internal quotation marks and 25 citation omitted))” 26 In Carroll v. Nakatani, 342 F.3d at 947, the Ninth Circuit held that a plaintiff 27 raising an equal protection challenge of the Hawaii Constitution lacked Article III 28 standing because “the existence of [a] classification…is not sufficient to recognize 1 standing.” There, plaintiff's claim challenged a provision that created agencies 2 providing specialized benefits to Native Hawaiians, but the plaintiff’s claim failed 3 because he did not “provide any evidence of an injury from the...programs other 4 than the classification itself. He offers no evidence that he is ‘able and ready’ to 5 compete for, or receive” the challenged benefit. Id. This differs from White v. 6 Square, 891 F.3d 1174, 1175-77 (9th Cir. 2018), where an ‘able and ready’ plaintiff 7 “sought to use Square’s services, but was unable to do so because of its 8 discriminatory policy against bankruptcy attorneys”. 9 Here, while Correll identifies his interest in selling with Amazon and offers 10 the two dates he visited the site to set up an account, he does not allege that he 11 was able and ready to sell a product, or that he even had a product to offer. (ECF 12 No. 1.) As the party invoking federal jurisdiction, Plaintiff bears the burden of 13 clearly alleging facts which demonstrate injury, that is, but for the discrimination, 14 he had a product ready to sell. Baker v. United States, 722 F.2d 517, 518 (9th Cir. 15 1983). Correll has not met his burden. 16 Finally, Correll argues standing exists under a recent California Supreme 17 Court Case, White v. Square Inc, which found standing to bring a California state 18 law claim for discrimination under the Unruh Act. 891 F.3d at 1175-77. Correll 19 contends this case establishes standing for discrimination claims against 20 websites, like Amazon, and that it must be followed here. (ECF No. 14 at 8-10.) 21 As state and federal courts have long had different standing requirements, this 22 argument is unpersuasive. Weatherford v. City of San Rafael, 2 Cal. 5th 1241, 23 1247-48 (2017) (holding “[u]nlike the federal Constitution, our state Constitution 24 has no case or controversy requirement imposing an independent jurisdictional 25 limitation on our standing doctrine.”). The Supreme Court, in Spokeo v. Robins, 26 578 U.S. at 341, underscored the distinction between federal and state court 27 standing requirements. Spokeo noted that an allegation of a “procedural” 28 statutory violation, “divorced from any concrete harm,” cannot alone satisfy the 1 injury-in-fact requirement of Article III. See Opiotennione v. Facebook, Inc., No. 2 19-CV-07185-JSC, 2020 WL 5877667 (N.D. Cal. Oct. 2, 2020) (holding 3 “[p]laintiff’s allegations fail to support a plausible inference that she suffered an 4 injury-in-fact as a result of Facebook’s advertising tools” and that while “the 5 Unruh Act ‘renders ‘arbitrary sex discrimination by businesses … per se 6 injurious,’ it still requires allegations of injury.” (citing Angelucci v. Century Supper 7 Club, 41 Cal. 4th 160 (2007) and Koire v. Metro Car Wash, 40 Cal. 3d 24 (1985)). 8 Since Plaintiff failed to allege that he had an actual product to offer for 9 immediate sale on Amazon, he has failed to plead injury-in-fact sufficient to 10 confer Article III standing. 11 12 B. Motion to Dismiss for failure to state a claim under Fed. R. Civ. P. 12(b)(6) 13 14 I. Legal Standard 15 Next, the court addresses Defendant’s motion to dismiss under Federal 16 Rule of Civil Procedure 12(b)(6). A motion to dismiss under Fed. R. Civ. P. 17 12(b)(6) should be granted only where a plaintiff's complaint lacks a "cognizable 18 legal theory" or sufficient facts to support a cognizable legal theory. Balistreri v. 19 Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir. 1988). When reviewing a 20 motion to dismiss, the allegations of material fact in plaintiff’s complaint are taken 21 as true and construed in the light most favorable to the plaintiff. See Parks Sch. 22 of Bus., Inc. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995). Although detailed 23 factual allegations are not required, factual allegations “must be enough to raise 24 a right to relief above the speculative level.” Bell Atlantic v. Twombly, 550 U.S. 25 544, 555 (2007). “A plaintiff’s obligation to prove the ‘grounds’ of his 26 ‘entitle[ment] to relief’ requires more than labels and conclusions, and a formulaic 27 recitation of the elements of a cause of action will not do.” Id. Only a complaint 28 that states a plausible claim for relief will survive a motion to dismiss. Id. 1 II. Sufficiency of Claims under California Civil Code Sections 51 and 2 51.5 (“Unruh Civil Rights Act”) 3 Amazon’s Fed. R. Civ. P. 12(b)(6) motion to dismiss argues that Plaintiff 4 failed to state a claim under California’s Unruh Civil Rights Act as required by 5 Fed. R. Civ. P 12(b)(6). (ECF No. 13.) The Unruh Civil Rights Act provides in 6 relevant part: 7 All persons within the jurisdiction of this state are free and equal, and no 8 matter what their ... race ... are entitled to the full and equal 9 accommodations, advantages, facilities, privileges, or services in all 10 business establishments of every kind whatsoever. 11 12 Cal. Civ. Code § 51(b). Section 51.5 provides that "[n]o business establishment 13 of any kind whatsoever shall discriminate against, boycott or blacklist, or refuse 14 to buy from, contract with, sell to, or trade with any person in this state on 15 account of any characteristic listed or defined in subdivision (b) or (e) of Section 16 51[.]" Cal. Civ. Code § 51.5(a). The analysis for Section 51.5 is the same as the 17 analysis for purposes of the Act. See Semler v. General Electric Capital Corp., 18 196 Cal.App.4th 1380, 1404 (2011); see also Strother v. Southern California 19 Permanente Medical Group, 79 F.3d 859 (9th Cir. 1996) (interpreting § 51.5 as a 20 mere extension of the Unruh Act, with the same showings and requirements). 21 To state a claim for discrimination under the Unruh Act, a plaintiff must 22 allege that: 1) he or she was denied full and equal accommodations, advantages, 23 facilities, privileges, or services in a business establishment; 2) that his or her 24 protected characteristic was a motivating factor for this denial; 3) that defendant's 25 denial was the result of its intentional discrimination against plaintiff; and 4) that 26 the defendant's wrongful conduct caused him to suffer injury. See Jud. Council of 27 Cal. Civil Jury Instructions, CACI No. 3060 (Unruh Civil Rights Act—Essential 28 Factual Elements) (2021); see also Cal. Civ. Code § 51(b). “In general, a person 1 suffers discrimination under the Act when the person presents himself or herself 2 to a business with an intent to use its services but encounters an exclusionary 3 policy or practice that prevents him or her from using those services.” White v. 4 Square, 891 F.3d 1174, 1175-77 (9th Cir. 2018). 5 Here, Amazon asserts that Correll’s complaint fails on the merits because 6 Amazon’s initiatives are facially valid and reasonably related to state and federal 7 diversity policies, falling under the Unruh Act exception. California courts have 8 consistently held that the Act has an “objective of prohibiting ‘unreasonable, 9 arbitrary or invidious discrimination’”. Jud. Council of Cal. Civil Jury Instructions, 10 CACI No. 3060 (Unruh Civil Rights Act—Essential Factual Elements) (2021); 11 Javorsky v. Western Athletic Clubs, Inc., 242 Cal.App.4th 1386, 1399 (2015). 12 “Although the Unruh Act proscribes ‘any form of arbitrary discrimination,’ certain 13 types of discrimination have been denominated ‘reasonable” and, therefore, not 14 arbitrary.” Hankins v. El Torito Restaurants, Inc., 63 Cal.App.4th 510, 520 (1998) 15 (internal citations omitted.) For example, “it is permissible to exclude children 16 from bars or adult bookstores because it is illegal to serve alcoholic beverages or 17 to distribute ‘harmful matter’ to minors.” Koire v. Metro Car Wash, 40 Cal. 3d 24, 18 31 (1985). “Discrimination may be reasonable, and not arbitrary, in light of the 19 nature of the enterprise … and public policy supporting the disparate treatment.” 20 Javorsky, 242 Cal.App.4th at 1395. To fall under the exception of the Unruh Act, 21 a "compelling societal interest" may be relied on to justify differential treatment. 22 See Marina Point, Ltd. v. Wolfson, 30 Cal.3d 721, 743 (1982). 23 Correll asserts that “Amazon’s purported desire to foster diversity…does 24 not rise to the level of an ‘exceedingly persuasive justification’ required by the 25 Act. (ECF No. 14). Correll argues that “California courts uniformly reject unequal 26 treatment based on race or gender as violative of public policy[.]” (Id.) Yet 27 Amazon points to nearly 30 existing California and federal statutes which 28 promote similar diversity goals and initiatives. (ECF No. 13). As the California 1 Supreme Court has explained, “’[p]ublic policy,’ for the purposes of ‘reasonable’ 2 discrimination under the Unruh Act, may be gleaned by reviewing other statutory 3 enactments.” Koire, 40 Cal. 3d at 31. Moreover, this interest need not be 4 "extraordinarily high or laudable," but "merely one that is sufficient given the 5 nature of the particular disparate treatment at issue and other attendant 6 circumstances," that is to say, "of sufficient societal benefit to render the 7 disparate treatment reasonable and not arbitrary." Javorsky, 242 Cal.App.4th at 8 p. 1397; Pizarro v. Lamb’s Players Theatre, 135 Cal.App.4th 1171,1174, 1176- 9 1177 (2006). At its core, the “fundamental purpose of the Unruh Civil Rights Act 10 is the elimination of antisocial discriminatory practices—not the elimination of 11 socially beneficial ones." Javorsky, 242 Cal.App.4th at 1394-1395. 12 Amazon asserts it created these initiatives “to increase the diversity of its 13 seller population so that customers have the greatest possible choice.” (ECF No. 14 13, 12). The existence of similar state and federal statutes promoting diversity in 15 small business ownership supports Amazon’s contention. (Id.) This is 16 distinguishable from Plaintiff’s lead case, Candelore v. Tinder, Inc., 228 Cal. Rptr. 17 3d 336 (2018), where the court found no strong public policy justification for 18 charging users over 30 more to be on a dating application. There, defendants 19 were unable to “identify any legislative pronouncements that would justify such a 20 departure from the Act’s language” and could not demonstrate socially beneficial 21 goals outside of increasing their own profits. Id. at 348. Here, this is not the 22 case. Amazon’s policies do not exclude other sellers from joining the website, as 23 was seen in White, nor do they lack public policy justifications as was seen in 24 Candelore. The initiatives echo existing statutes that promote diversity and serve 25 public policy goals. However, the circumstances concerning how the programs 26 function are relevant to the exception. For this reason, judgement on this record 27 would be inappropriate. Furthermore, the court should not decide this issue 28 when standing is questionable. If Plaintiff amends his complaint to establish 1 || Article Ill standing, the Court will determine this issue on a motion for summary 2 ||judgement. Accordingly, the Court DENIES Defendants Fed. R. Civ. P. 12(b)(6) 3 motion to dismiss without prejudice. 4 5 ||C. Leave to Amend 6 Plaintiff requested leave to amend if Defendants Motion to Dismiss was 7 ||granted. (ECF No. 15 at. 25.) Under Federal Rule of Civil Procedure 15(a)(2), 8 || district courts “should freely give leave [to amend] when justice so requires.” A 9 district court should deny leave to amend in the presence of “undue delay, bad 10 |/faith or dilatory motive on the part of the movant, repeated failure to cure 11 ||deficiencies by amendments allowed, undue prejudice to the opposing party by 12 || virtue of allowance of the amendment, [or] futility of amendment.” Foman v. Davis, 13 U.S. 178, 182 (1962). “Absent prejudice, or a strong showing of any of the 14 ||/remaining Foman factors, there exists a presumption under Rule 15(a) in favor of 15 granting leave to amend.” Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 16 ||1052 (9th Cir. 2003) (per curiam). The Court finds no reason that granting leave 17 ||to amend would prejudice Defendant. Accordingly, this Court GRANTS Plaintiff 18 ||leave to amend. 19 Ill. CONCLUSION 20 For the reasons discussed above, Defendant’s Motion to Dismiss under Fed. 21 ||R. Civ. P. 12(b)(1) is GRANTED. Defendant's motion under Fed. R. Civ. P. 22 ||12(b)(6) is DENIED without prejudice. Plaintiff's amended complaint, if any, 23 ||must be filed on or before October 31, 2022. 24 ||IT IS SO ORDERED. 25 || Dated: October 6, 2022 / 26 con Tid. Mahar 27 Honor ie Barry Ted Moskow United States District Judge