Heskiaoff v. Sling Media, Inc. ( 2017 )


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  •     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.
    2
    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).
    3
    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.
    4
    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.
    5
    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
    6
    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
    7