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Ferrington v. McAfee, Inc. (N.D. Cal. Oct. 5, 2010)

Ferrington v. McAfee, Inc. (N.D. Cal. Oct. 5, 2010)

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Class action lawsuit against McAfee alleging improper online sales practices (including referral of customers to third party vendor) survives second motion to dismiss.

Among other things, court concludes that software is not a service (or good) for purposes of the California Consumer Legal Remedies Act.
Class action lawsuit against McAfee alleging improper online sales practices (including referral of customers to third party vendor) survives second motion to dismiss.

Among other things, court concludes that software is not a service (or good) for purposes of the California Consumer Legal Remedies Act.

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Published by: Venkat Balasubramani on Oct 08, 2010
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Case No.: 10-CV-01455-LHKORDER GRANTING IN PART AND DENYING IN PART DEFENDANT’S MOTION TO DISMISS
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 UNITED STATES DISTRICT COURTNORTHERN DISTRICT OF CALIFORNIASAN JOSE DIVISIONMELISSA FERRINGTON and CHERYLSCHMIDT,Plaintiffs,v.McAFEE, INC.,Defendant.))))))))))CaseNo.:10-CV-01455-LHK ORDER GRANTING IN PART ANDDENYING IN PART DEFENDANT’SMOTION TO DISMISSDefendant McAfee moves to dismiss Plaintiffs’ First Amended Complaint (FAC) pursuantto Federal Rules of Civil Procedure 9(b) and 12(b)(6). Having considered the parties’ submissionsand arguments, the Court grants Defendant’s motion in part and denies it in part.
 I.
 
Background
 On April 6, 2010, Plaintiffs Melissa Ferrington and Cheryl Schmidt brought this action,individually and on behalf of a nationwide class of consumers, against Defendant McAfee, Inc.McAfee is a leading provider of computer security software whose products may be purchased anddownloaded from the McAfee website. FAC ¶¶ 9, 13. Arpu, Inc., is a company that places onlineadvertisements that enable consumers to purchase products “with a single click, using credit cardinformation already on file.” FAC ¶ 11. In 2007, Arpu partnered with McAfee to place ads onMcAfee’s website that would appear after a customer completed a purchase of a McAfee product.FAC ¶ 12. If a customer chooses to subscribe to the product or service offered in the Arpu ad,
Case5:10-cv-01455-LHK Document57 Filed10/05/10 Page1 of 28
 
 
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Case No.: 10-CV-01455-LHKORDER GRANTING IN PART AND DENYING IN PART DEFENDANT’S MOTION TO DISMISS
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McAfee transmits their billing information to Arpu for use in the purchase of the Arpu product.FAC ¶ 12. Plaintiffs allege, on information and belief, that McAfee receives an undisclosed fee foreach customer who subscribes to Arpu’s services through the ad on McAfee’s site. FAC ¶ 2.Plaintiffs Ferrington and Schmidt purchased McAfee’s anti-virus program from the McAfeewebsite on August 18, 2009, and November 30, 2009, respectively. FAC ¶¶ 18-19. After theycompleted their transactions, but before they downloaded the McAfee product, an Arpu pop-up adappeared on their computer screens with a button reading “Try It Now.”
 Id.
Believing thatclicking on “Try It Now” would download the McAfee software they had just purchased, Plaintiffsclicked on the button.
 Id.
They later learned that clicking on “Try It Now” authorized McAfee totransfer their billing info to Arpu, enrolled them in a 30-day free trial of a non-McAfee productcalled PerfectSpeed, and authorized Arpu to charge them a $4.95 monthly subscription fee after theexpiration of the free trial period.
 Id.
Plaintiffs were not aware of this transaction until theynoticed charges listed as “TB *PERFECTSPD ON MCAF 202-4461821” on their credit or debitcard statements.
 Id.
 Plaintiffs claim that their experience is representative of the experiences of thousands of people whom Defendant deceived into inadvertently purchasing PerfectSpeed software and otherproducts from third parties after purchasing McAfee software online. FAC ¶ 29. They allege thatMcAfee transfers the confidential billing information of its customers without adequatelydisclosing 1) the nature of the services to which customers are subscribing, 2) the consumer’scommitment to pay recurring monthly fees for the service, 3) the terms and conditions of thesubscription service, 4) the identity of the billing party, and 5) the manner by which the customermay cancel the service. FAC ¶ 2. They allege further that McAfee employs “numerous artifices”and “artful conceal[ment]” to “trick McAfee site users into believing that clicking on the popupwill simply permit them to download the McAfee software they purchased rather than actuallypurchasing software from Arpu.” FAC ¶¶ 33.Plaintiffs assert causes of action under the California Unfair Competition Law, Cal. Bus. &Profs. Code § 17200 et seq., the California Consumers Legal Remedies Act, Cal. Civ. Code § 1750
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Case No.: 10-CV-01455-LHKORDER GRANTING IN PART AND DENYING IN PART DEFENDANT’S MOTION TO DISMISS
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et seq., and the Declaratory Judgment Act, 28 U.S.C. § 2201, as well as a number of New York state laws. Defendant McAfee moves to dismiss the entire FAC.
II.
 
Legal Standard
 A motion to dismiss for failure to state a claim under Rule 12(b)(6) tests the legalsufficiency of a complaint.
 Navarro v. Block 
, 250 F.3d 729, 732 (9th Cir. 2001). In consideringwhether the complaint is sufficient to state a claim, the court must accept as true all of the factualallegations contained in the complaint.
 Ashcroft v. Iqbal
, 129 S.Ct. 1937, 1949 (2009). However,the court need not accept as true “allegations that contradict matters properly subject to judicialnotice or by exhibit” or “allegations that are merely conclusory, unwarranted deductions of fact, orunreasonable inferences.”
St. Clare v. Gilead Scis., Inc.
(
 In re Gilead Scis. Sec. Litig.
), 536 F.3d1049, 1055 (9th Cir. 2008). While a complaint need not allege detailed factual allegations, it “mustcontain sufficient factual matter, accepted as true, to “‘state a claim to relief that is plausible on itsface.’”
 Iqbal
, 129 S.Ct. at 1949 (quoting
 Bell Atlantic Corp. v. Twombly
, 550 U.S. 544, 570(2007)). A claim is facially plausible when it “allows the court to draw the reasonable inferencethat the defendant is liable for the misconduct alleged.”
 Iqbal
, 129 S.Ct. at 1949.Additionally, claims sounding in fraud are subject to the heightened pleading requirementsof Federal Rule of Civil Procedure 9(b). Under the federal rules, a plaintiff alleging fraud “muststate with particularity the circumstances constituting fraud.” Fed. R. Civ. Pro. 9(b). To satisfy thisstandard, the allegations must be “specific enough to give defendants notice of the particularmisconduct which is alleged to constitute the fraud charged so that they can defend against thecharge and not just deny that they have done anything wrong.”
Semegen v. Weidner 
, 780 F.2d 727,731 (9th Cir. 1985). Thus, claims sounding in fraud must allege “an account of the time, place, andspecific content of the false representations as well as the identities of the parties to themisrepresentations.”
Swartz v. KPMG LLP
, 476 F.3d 756, 764 (9th Cir. 2007).If a court grants a motion to dismiss, leave to amend should be granted unless the pleadingcould not possibly be cured by the allegation of other facts.
 Lopez v. Smith
, 203 F.3d 1122, 1130(9th Cir. 2000).
Case5:10-cv-01455-LHK Document57 Filed10/05/10 Page3 of 28

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