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Perlin v. Time Inc.

United States District Court, E.D. Michigan, Southern Division

February 15, 2017

CAROLYN PERLIN, individually and on behalf of all others similarly situated, Plaintiff,
v.
TIME INC., a Delaware Corporation, Defendant.

          OPINION AND ORDER DENYING DEFENDANT'S MOTION TO DISMISS (DOC. 10)

          GEORGE CARAM STEEH, UNITED STATES DISTRICT JUDGE

         Plaintiff Carolyn Perlin filed a two-count complaint against defendant Time Inc., alleging in Count 1 that Defendant violated Michigan's Video Rental Privacy Act (“VRPA”), Mich. Comp. Laws § 445.1711 et seq., and alleging in Count 2 that Defendant was unjustly enriched through its violation of the VRPA. (See Compl., Doc. 1). Now before the Court is Defendant's Motion to Dismiss. (Doc. 10). Defendant argues that a recent amendment to the VRPA, eliminating the VRPA's statutory-damages remedy, applies retroactively so as to bar Plaintiff's claims. Defendant also argues that based on the Supreme Court's recent decision in Spokeo, Inc. v. Robins, 136 S.Ct. 1540 (2016), Plaintiff lacks Article III standing. Finally, Defendant argues that Plaintiff's unjust-enrichment count fails to state a claim upon which relief can be granted. A hearing on Defendant's motion was held on September 1, 2016. For the reasons explained below, the Court denies Defendant's motion in full.

         I. BACKGROUND

         Plaintiff was a subscriber to People, a magazine published by Defendant. (Compl. ¶ 30). Plaintiff claims that Defendant “has disclosed, and continues to disclose, [Plaintiff's] Personal Reading Information (i.e., information that identifies [Plaintiff] as having purchased a subscription to People)-without obtaining her permission or providing prior notice-to data mining companies . . . .” (Id. ¶ 34). “Data miners, ” according to Plaintiff, are “companies [that] purchase, trade, and otherwise collect massive databases of information about consumers.” (Id. ¶ 19). They “profit by selling this ‘extraordinarily intrusive' information in an open and largely unregulated market.” (Id.). Plaintiff alleges that Defendant “profited from its disclosures” to the data miners, and Plaintiff further alleges that “what [Plaintiff] received (a subscription without privacy protections) was substantially less valuable than what she paid for (a subscription with accompanying privacy protections).” (Id. ¶¶ 37-38).

         Plaintiff claims that Defendant's conduct violates the VRPA. The VRPA-like the federal Video Privacy Protection Act and similar state laws around the country-was enacted in the late 1980s in the wake of the disclosure of Robert Bork's video-rental records during Bork's (ultimately unsuccessful) candidacy for the position of Supreme Court Justice. See generally Neil M. Richards, The Perils of Social Reading, 101 Geo. L.J. 689, 693-97 (2013). Despite its popular name[1] and historical origin, the VRPA applies to more than just video rentals. Its central provision states that

a person, or an employee or agent of the person, engaged in the business of selling at retail, renting, or lending books or other written materials, sound recordings, or video recordings shall not knowingly disclose to any person, other than the customer, a record or information that personally identifies the customer as having purchased, leased, rented, or borrowed those materials from the person engaged in the business.

Mich. Comp. Laws § 445.1712(1). The VRPA provides both a criminal penalty and a civil cause of action to enforce this prohibition. See Id. §§ 445.1714, 445.1715.

         II. LEGAL STANDARDS

         Under Federal Rule of Civil Procedure 12(b)(1), a defendant may challenge a court's subject-matter jurisdiction. Where, as in the instant case, the defendant argues that the allegations in the complaint are insufficient to create subject-matter jurisdiction, the court should “confine its . . . ruling to matters contained within the pleadings and accept all well-pleaded allegations as true.” Tackett v. M & G Polymers, USA, LLC, 561 F.3d 478, 481 (6th Cir. 2009); see also Cartwright v. Garner, 751 F.3d 752, 759 (6th Cir. 2014); Nichols v. Muskingum Coll., 318 F.3d 674, 677 (6th Cir. 2003). If the complaint fails to set forth an adequate basis for subject-matter jurisdiction, the court must dismiss it. See Sweeton v. Brown, 27 F.3d 1162, 1169 (6th Cir.1994).

         Pursuant to Rule 12(b)(6), a defendant may move to have a complaint dismissed for “failure to state a claim upon which relief can be granted.” A court confronted with a Rule 12(b)(6) motion must construe the complaint in favor of the plaintiff, accept the allegations of the complaint as true, and determine whether the plaintiff's factual allegations present plausible claims. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 554-56 (2007). The court must not accept “legal conclusions cloaked as fact.” Haddad v. Randall S. Miller Associates, PC, 587 F.App'x 959, 963 (6th Cir. 2014) (unpublished). Similarly, “naked assertions devoid of further factual enhancement” and “unadorned, the-defendant-unlawfully-harmed-me accusation[s]” are insufficient to “state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). The complaint need not contain “detailed” factual allegations, but its “factual allegations must be enough to raise a right to relief above the speculative level on the assumption that all of the allegations in the complaint are true.” Ass'n of Cleveland Fire Fighters v. City of Cleveland, 502 F.3d 545, 548 (6th Cir. 2007).

         III. DISCUSSION

         A. Plaintiff Has Standing to Sue.

         Defendant's primary argument is that Plaintiff lacks both statutory standing under the VRPA and standing under Article III of the United States Constitution. In a previous case, this Court held that the VRPA confers statutory standing on a person whose information was disclosed in violation of the VRPA, regardless of whether the person suffered actual damages. Halaburda v. Bauer Pub. Co., LP, No. 12-CV-12831, 2013 WL 4012827, at *6 (E.D. Mich. Aug. 6, 2013) (unpublished). This Court also held that a person whose information was disclosed in violation of the VRPA has suffered a cognizable injury in fact and thus has Article III standing. Id. at *3-*5.[2] Defendant argues that two recent developments have undermined the Court's analysis in Halaburda. First, Defendant points out that the Michigan legislature recently amended the VRPA to require a plaintiff asserting a VRPA cause of action to plead actual damages. Although Defendant allegedly began violating the VRPA before the amendment took effect (July 31, 2016), Defendant argues that the amendment is retroactive and therefore applies to the pre-amendment conduct.[3] The second development is the Supreme Court's recent decision in Spokeo, 136 S.Ct. 1540. Defendant contends that under the standard set forth in Spokeo, the type of VRPA violation alleged by Plaintiff is now insufficient to constitute an injury in fact. As explained below, the Court rejects both arguments.

         1. The VRPA Amendment Is Not Retroactive and Therefore Does Not Deprive Plaintiff of Statutory Standing.

         When this Court decided Halaburda, the VRPA allowed a customer whose VRPA rights had been violated to recover “[a]ctual damages . . . or $5, 000.00, whichever is greater.” 1989 Mich. Pub. Act No. 206 (codified at Mich. Comp. Laws § 445.1715(2)(a) until amended by 2016 Mich. Pub. Act. No. 92). However, the Michigan legislature recently enacted Senate Bill 490. See 2016 Mich. Pub. Act. No. 92. As amended by Senate Bill 490, the VRPA no longer contains the $5, 000 statutory damages provision. See Mich. Comp. Laws § 445.1715(2)(a). Moreover, the VRPA now only allows “customers . . . who [have] suffer[ed] actual damages” to bring a civil action. Id. § 445.1715(2). Senate Bill 490 became effective on July 31, 2016. See 2016 Mich. Pub. Act No. 92. The Court must decide whether Senate Bill 490 applies retroactively, so as to preclude Plaintiff from proceeding with her suit against Defendant without alleging actual damages.[4] Other district courts have already held that Senate Bill 490 is not retroactive. Boelter v. Hearst Commc'ns, Inc., No. 15 CIV. 3934 (AT), 2016 WL 3369541, at *4-*6 (S.D.N.Y. June 17, 2016); Boelter v. Advance Magazine Publishers, Inc. d/b/a Condé Nast, No. 15-cv-5671, 2016 WL 5478468, at *12 (S.D.N.Y. Sept. 28, 2016); Moeller, et al. v. American Media, Inc. et al., No. 16-cv-11367, 2017 WL 416430 (E.D. Mich. Jan. 27, 2017).[5]

         Whether Senate Bill 490 applies retroactively depends on Michigan law-and, in particular, on Michigan principles of statutory interpretation. See Kia Motors Am., Inc. v. Glassman Oldsmobile Saab Hyundai, Inc., 706 F.3d 733, 739 (6th Cir. 2013). Under Michigan law, a statute is presumed to operate prospectively, but this presumption can be rebutted by a “clear[] manifest[ation]” of “contrary intent.” Frank W. Lynch & Co. v. Flex Techs., Inc., 463 Mich. 578, 583, 624 N.W.2d 180 (2001) (quoting Franks v. White Pine Copper Div., 422 Mich. 636, 671, 375 N.W.2d 715 (1985)) (internal quotation marks omitted); see also Kia Motors, 706 F.3d at 739; LaFontaine Saline, Inc. v. Chrysler Grp., LLC, 496 Mich. 26, 38, 852 N.W.2d 78 (2014) (“We have . . . required that the Legislature make its intentions clear when it seeks to pass a law with retroactive effect.”); cf. Bowen v. Georgetown Univ. Hosp., 488 U.S. 204, 208 (1988) (“Retroactivity is not favored in the law.”).

         Four principles govern the inquiry into the legislative intent. The first principle is that a court should give effect to “specific language in [a] new [statute] which states that it should be given retrospective or prospective application.” In re Certified Questions from the United States Court of Appeals for the Sixth Circuit, 416 Mich. 558, 570, 331 N.W.2d 456 (1982); accord LaFontaine, 496 Mich. at 38. Second, a statute does not “operat[e] retroactively merely because it relates to an antecedent event.” LaFontaine, 496 Mich. at 39. Third, “retrospective application of a law is improper where the law ‘takes away or impairs vested rights acquired under existing laws.'” Certified Questions, 416 Mich. at 572 (quoting Hughes v. Judges' Ret. Bd., 407 Mich. 75, 85, 282 N.W.2d 160 (1979)); see also LaFontaine, 496 Mich. at 39. And fourth, “a remedial or procedural act not affecting vested rights may be given retroactive effect.” LaFontaine, 496 Mich. at 39; see also Certified Questions, 416 Mich. at 572.

         Only the first, third, and fourth principles are applicable to the instant case. See Certified Questions, 416 Mich. at 571 (“Second rule cases relate to measuring the amount of entitlement provided by a subsequent statute in part by services rendered pursuant to a prior statute . . . .”). Moreover, the third and fourth principles are really two sides of the same coin, and therefore the Court will analyze them together. See Id. at 575 (“[R]ule four [is] the corollary to the general proscription found in rule three.”).

         a. Language of the Amending Act

         The first factor that the Court must consider is whether the language of Senate Bill 490 indicates that it is to have retroactive effect. Senate Bill 490 does not contain any express language indicating that it is to be applied retroactively. Thus, the first factor weighs against retroactive application. See Kia Motors, 706 F.3d at 739 (“[T]he Michigan Legislature ‘knows how to make clear its intention that a statute apply retroactively, ' so the absence of express retroactive language is a strong indication that the Legislature did not intend a statute to apply retroactively.” (quoting Brewer v. A.D. Transp. Exp., Inc., 486 Mich. 50, 56, 782 N.W.2d 475 (2010))); LaFontaine, 496 Mich. at 39-40. This conclusion is confirmed by the fact that Senate Bill 490 contains a provision stating that Senate Bill 490 would take effect ninety days after enactment. See 2016 Mich. Pub. Act. No. 92, enacting § 1 (“This amendatory act takes effect 90 days after the date it is enacted into law.”).[6] As the Michigan Supreme Court has explained, “providing a specific, future effective date and omitting any reference to retroactivity supports a conclusion that a statute should be applied prospectively only.” Johnson v. Pastoriza, 491 Mich. 417, 432, 818 N.W.2d 279 (2012) (quoting Brewer v. A.D. Transp. Exp., Inc., 486 Mich. 50, 56, 783 N.W.2d 475 (2010)) (internal quotation marks omitted).

         Defendant disagrees with the Court's conclusion that there is no retroactivity language in Senate Bill 490.[7] Defendant points to the enacting language of Senate Bill 490, which states that the amendment “is curative and intended to clarify . . . that a civil action for a violation of [the VRPA] may only be brought by a customer who has suffered actual damages as a result of the violation.” 2016 Mich. Pub. Act. No. 92, enacting § 1. According to Defendant, Senate Bill 490 “was passed amid controversy in the courts regarding whether the VRPA requires actual injury.” (Def.'s Mot. Dismiss at 13). Defendant explains that “[f]or 25 years [after its enactment], the VRPA sat dormant, with no one ever charged with a misdemeanor . . . or sued civilly. That changed in 2012 when attorneys started brandishing it against magazine publishers.” (Id. at 18). Many of the plaintiffs in these VRPA actions had not suffered actual damages, and federal courts were allowing their suits to proceed under the statutory-damages provision of the VRPA. According to Defendant, the Michigan legislature regarded this as a negative development and consequently enacted Senate Bill 490 to clarify that a person must suffer actual damages in order to sue.

         As Defendant points out, Michigan courts have held that “[a]n amendment may apply retroactively where the Legislature enacts an amendment to clarify an existing statute and to resolve a controversy regarding its meaning.” Gen. Motors Corp. v. Dep't of Treasury, 290 Mich.App. 355, 371-72, 803 N.W.2d 698 (2010) (quoting Mortgage Elec. Registration Sys., Inc. v. Pickrell, 271 Mich.App. 119, 126, 721 N.W.2d 276 (2006)) (internal quotation marks omitted); see also Workman v. Detroit Auto. Inter-Ins. Exch., 404 Mich. 477, 521, 274 N.W.2d 373 (1979) (“When amendments are passed in the midst of controversy over a provision's meaning, the usual presumption that an amendatory act declares new law is overcome and a legislative intent to clarify rather than to change the law may be inferred.”). In other words, a purported amendment may not be an amendment at all, but rather a “clarif[ication] [of] the original intent of [the] legislation.” Moore v. Detroit Sch. Reform Bd., 293 F.3d 352, 360 (6th Cir. 2002).

         The enacting provision cited by Defendant simply evinces the Michigan legislature's belief that Senate Bill 490 will clarify that future VRPA violations will only be actionable if they cause actual damages. If, as Defendant contends, the legislature had intended to clarify that past VRPA violations-including those that had generated lawsuits pending at the time of Senate Bill 490's enactment-would no longer be actionable absent actual damages, the legislature would have explicitly said so. As Plaintiff points out, several cases cited by Defendant involve just this kind of express retroactivity language. See, e.g., Dep't of Treasury, 290 Mich.App. at 366-67 (amending act not only stated that it was “curative and intended to prevent any misinterpretation, ” but also expressly provided that “[t]his amendatory act is retroactive”); Doe v. Dep't of Corr., 249 Mich.App. 49, 56, 641 N.W.2d 269 (2001) (amending act stated that it was “curative and intended to correct any misinterpretation of legislative intent in the [previous] court of appeals decision in [the Doe case]” (emphasis added));[8]Romein v. Gen. Motors Corp., 168 Mich.App. 444, 450-51, 425 N.W.2d 174 (1988) (amending act specifically identified a Michigan Supreme Court decision that was “erroneously rendered, ” explained that the act was intended to be “remedial and curative, ” and expressly provided that it would apply retroactively); In re Oswalt, 318 B.R. 817, 822 (W.D. Mich. 2004), aff'd, 444 F.3d 524 (6th Cir. 2006) (legislative history of the amending act contained language stating that the act would "reinstate[] the financing practices that existed in Michigan before” [a certain Sixth Circuit opinion interpreting the pre-amendment statute]" (internal quotation marks and citation omitted) (emphasis removed)); see also Boelter, 2016 WL 3369541, at *4 (“The phrases ‘curative' and ‘intended to clarify' do not, as Defendant argues, unequivocally indicate that the amendments apply to pre-existing disputes. Absent additional qualifying language, it is just as likely that the terms denote the amendment's purpose for consideration in future applications of the law.”).

         Defendant cites Allstate Ins. Co. v. Faulhaber, 157 Mich.App. 164, 403 N.W.2d 527 (1987), and People v. Sheeks, 244 Mich.App. 584, 625 N.W.2d 798 (2001), as examples of cases in which a clarifying act was given retroactive effect. These cases are both distinguishable. In Allstate, the Michigan Court of Appeals applied a statute-of-limitations provision retroactively. 157 Mich.App. 164. The trial court, before the amendment, had been presented with several conflicting statute-of-limitations provisions and had applied the shorter statute of limitations, dismissing the action as time-barred. Id. at 163-64. The Michigan Court of Appeals, reversing, applied the newly enacted statute of limitations and allowed the plaintiff to proceed with its suit. Id. at 168. The court explained that “prior to the enactment of this statutory amendment there was no clear statute of limitations governing” the action. Id. at 166 (emphasis added). The instant case is distinguishable from Allstate because the VRPA was quite clear prior to the amendment. The VRPA clearly provided for statutory damages. See Halaburda, 2013 WL 4012827, at *6. Thus, the amendment cannot be seen as merely a clarification. Moreover, the new statute-of-limitations provision in Allstate was, at most, a procedural change in the law; as the Court will explain in the following section, Senate Bill 490's amendments are substantive, not procedural.

         In Sheeks, a defendant was convicted of violating a vehicle-width restriction when he drove his oversize farming equipment on a state highway. 244 Mich.App. 584. The trial court ruled that the defendant's equipment did not fall within a statutory exception for farming equipment “required for normal farming operations.” Id. at 587-88. Subsequent to the defendant's conduct, the legislature amended the statutory exception, replacing the “required for normal farming operations” language with “required, designed, and intended for farming operations.” Id. at 589. The Michigan Court of Appeals retroactively applied the amended statute, noting that in the earlier version of the statute, the term “normal” was not defined. Id. at 590. The court also noted that the legislative record showed that the purpose of the amendment was to clarify the meaning of the statute. Id. at 590-91. Sheeks is distinguishable from the instant case because the amendment in that case can reasonably be viewed as clarifying a prior legislative intent that the farming-equipment exception should apply to a wide, rather than a narrow, range of farming equipment. In contrast, Senate Bill 490 completely excises the VRPA's statutory cause of action. In no way can this reasonably be construed as a clarification rather than a substantive change in the law. See Dep't of Treasury, 290 Mich.App. at 372 (“An amendment that affects substantive rights generally will not [be considered ‘curative legislation merely bringing clarity to existing law'].”).

         Defendant also relies on the fact that the section of Senate Bill 490 amending VRPA's statutory-damages provision lacks language stating that it is to be given prospective effect. Defendant contrasts this section with another section of Senate Bill 490, which amended the VRPA to allow certain disclosures “incident to the ordinary course of business.” Mich. Comp. Laws § 445.1713(d). This latter section “only applies to a record or information that is created or obtained after the effective date of the amendatory act.” Id. Defendant argues that “[i]f the legislature had not intended that [Senate Bill] 490's clarification regarding actual damages be applied retroactively, it would not have expressly limited the ordinary course of business exception to prospective application.” (Def.'s Mot. Dismiss at 25). Defendant's argument fails. It is well established that “words and phrases used in an act should be read in context with the entire act and assigned such meanings as to harmonize with the act as a whole.” People v. Couzens, 480 Mich. 240, 249, 747 N.W.2d 849 (2008); see also Dean v. Byerley, 354 F.3d 540, 547 (6th Cir. 2004) (“When construing a statute, we must look at the whole law and effectuate the legislature's intent.”). In particular, “when language is included in one section of a statute but omitted from another section, it is presumed that the drafters acted intentionally and purposely in their inclusion or exclusion.” People v. Peltola, 489 Mich. 174, 185, 803 N.W.2d 140 (2011); accord Sanders v. Allison Engine Co., 703 F.3d 930, 936 (6th Cir. 2012). Applying these uncontroversial principles of statutory construction, the Court can with some confidence conclude that the after-acquired-information proviso in the ordinary-course-of-business exception does not also apply to the actual-damages requirement. But this does not mean that the actual-damages requirement is to be given retroactive effect. Rather, it simply means that a plaintiff alleging a post-amendment VRPA violation will have to satisfy the actual-damages requirement, even if the defendant acquired the relevant records or information prior to the effective date of Senate Bill 490. See Boelter, 2016 WL 3369541, at *5.

         In fact, Defendant's whole-act argument actually cuts against Defendant's position that Senate Bill 490 should be given retroactive effect. As noted above, the Michigan legislature expressly labeled Senate Bill 490 as a “curative” and “clarif[ying]” act. Since at least one section of Senate Bill 490-the section creating the ordinary-course-of-business exception- is prospective, it appears that the Michigan legislature did not believe that the clarifying or curative nature of Senate Bill 490 was inconsistent with prospective application.

         In sum, Senate Bill 490 lacks an express statement of retroactivity. Although the legislature did characterize Senate Bill 490 as “curative and intended to clarify, ” such language does not, on its own, manifest an intent that the act should be applied retroactively. The whole-act canon likewise ...


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