credit card info passthrough to third party not deceptive

Castagnola v. Hewlett-Packard Co., 2012 WL 2159385 (N.D. Cal.)

HP, through Snapfish.com, sells photography-related goods and services. Castagnola and Maas bought products there, and were allegedly deceived into enrolling in a fee-based membership plan (through a process now pretty much banned, which is interesting given how badly plaintiffs challenging it did in the courts, as we’ll see; there is a mismatch between what consumers perceive as deceptive/pay attention to and what courts think they should reasonably be doing, and Congress went with the former).

Snapfish used a sequence of checkout screens. After entering her billing information, a consumer could click “continue” and review her purchase to cancel or complete it. If the consumer clicked “buy now,” HP charged her credit card and she was taken to the receipt page. At that stage, defendant Regent entered the picture. Plaintiffs alleged that consumers were taken from the receipt page to a new page that looked like a continuation of Snapfish.com, instead operated by Regent. The page said at the top: “Snapfish Valuepass SM” and “Claim your $10 $5 off gift code now! *SEE OFFER DETAILS.” Then it said:

Claim your gift code below!

JUST ENTER YOUR EMAIL ADDRESS AND ZIP CODE AS YOUR ELECTRONIC SIGNATURE AND CLICK THE YES BUTTON BELOW TO ACTIVATE YOUR SNAPFISH VALUEPASS SM MEMBERSHIP AS DESCRIBED IN OFFER DETAILS ON THIS PAGE.

Email Address [Box] Zip [Box]

click “yes” to join Snapfish Valuepass SM and claim your savings!

I want my $10 gift code now! [Yes]

By entering my email address and zip code and clicking the yes button above, I am a[sic] activating my membership in Snapfish Valuepass SM and authorizing Snapfish® to securely send my name, address and credit card information to Snapfish Valuepass SM in accordance with the OFFER DETAILS on this page.

ENCORE MARKETING INTERNATIONAL (EMI) IS THE OFFERER AND ADMINISTRATOR OF SNAPFISH VALUEPASS SM, A BRANDED MEMBERSHIP PROGRAM OFFERED TO SNAPFISH® CUSTOMERS.

HP said it wasn’t doing this any more; the court didn’t mention that among the reasons why was most likely that this method is now illegal because it didn’t require consumers to re-enter their credit card information, making salient that what they were doing was paying to purchase a separate service.  I'd love to see some statistics on how many people now enroll in "rewards" programs of this type.

The offer details were on the left side of the page, and disclosed that the first 30 days of the Valuepass would cost $1.95, reiterated that clicking yes would transfer the consumer’s credit card information, and then disclosed the $14.95/month fee which could be cancelled at any time. The plaintiffs alleged that they believed that there were no payment obligations associated with the program and that they didn’t see the disclosures. One plaintiff spent roughly $135, and the other spent almost $90. (One awful thing about these programs is that if you don’t know you’re paying for them you’re especially unlikely to use them.) They alleged that the fee disclosures were inconspicuous and in much smaller text than used to present the offer, and that a reasonable consumer wouldn’t understand that she’d be charged. They brought UCL and CLRA claims.

Defendants moved to dismiss Maas’s claims because she was a Minnesota resident, and didn’t allege that the misconduct at issue occurred within or emanated from California. HP is a Delaware corporation based in California, while Regent is a Delaware corporation based in Maryland. Maas relied on HP’s headquarters’ location, but didn’t allege any facts showing that the decision to create the Valuepass program or the manner in which it was marketed came from California. Nor did she allege that HP had any input on the language used on the Regency webpage, or that the transfer of her billing information took place in California. There were no allegations, other than a purported conspiracy, that Regent took any action in California that harmed Maas. Thus, the claims brought by Maas were dismissed with leave to amend.

The court then dismissed the UCL claim. First, plaintiffs didn’t allege facts showing standing to seek injunctive relief, since they both knew the truth now. They also didn’t allege facts showing they’d be entitled to restitution from HP, rather than from Regent. Though they argued that HP shared in the revenue, and that could suffice, they needed to include facts in the complaint from which it would be reasonable to infer that HP received those fees or some other benefit from Regent, either directly or indirectly.

More significantly, the court agreed that plaintiffs’ allegations didn’t state a claim for deceptive/unfair conduct because the terms were disclosed to the plaintiffs, and wouldn’t fool a reasonable consumer. It’s not enough that it’s possible that an ad might conceivably be misunderstood. Rather, likely deception means that it’s probable that a significant portion of the general consuming public or targeted consumers, acting reasonably in the circumstances, could be misled.

Deceptiveness is generally an issue of fact, but can be resolved on a motion to dismiss where appropriate. Many district courts have rejected similar claims, and the few that haven’t involved disputes about the accuracy and authenticity of the disclosure webpages submitted by the defendants, leading courts to decline to take judicial notice of the disclosures. Here, by contrast, the plaintiffs incorporated the webpages into their complaint. In another case, the allegedly deceptive tactics occurred before the customer completed his or her transaction and didn’t have meaningful disclosures; the onus was on the customer to remove the service or decline the offer. In addition, the court found that the disclosures were mostly the least conspicuous elements on the page and placed in a way that a reasonable consumer could skim and miss them. Thus, a substantial number of people wouldn’t even be aware that an offer had been made, much less accepted.

Here, the plaintiffs didn’t get the offer until they’d completed their order, so defendants weren’t trying to add it on. Therefore, “it was clear that a new offer was in the making.” Plus, to enroll, plaintiffs had to “proactively” enter their email addresses and zip codes, not just click on a button. There was no “upsell” before plaintiffs were sure they were going to get their products. The Regent page specifically stated that there were “offer details” four times.

It was true that the Regent page shared the overall look and feel of Snapfish.com, and included language thanking consumers for their orders. The Regent page also contained language indicating that by clicking yes they’d authorize Snapfish to send their information to Snapfish Valuepass, which could suggest that they were still dealing with Snapfish. But this wasn’t the only language on the Regent webpage. Below the yes button was a statement that “Encore Marketing International (EMI) is the offerer and administrator of Snapfish Valuepass SM, a branded membership program offered to Snapfish® customers.” The copyright notice was also in EMI’s name. The webpage as a whole dispelled any ambiguity about who offered and administered the program. (Do consumers really make that kind of distinction about administration, when the program has the name Snapfish too? Is that perfectly clear on a motion to dismiss?)

Plaintiffs also alleged that HP transferred their information before they clicked yes, but there was no allegation that they suffered harm from that rather than from being billed for unwanted services.

The court also found that the prices were clearly disclosed, with four references to “offer details” on the page. “[T]he disclosures at issue were on the same page and in close proximity to the box provided to enter the email and zip code.” The font was smaller than the font used to promote the $10 gift code, but not unreadably small, and the amounts to be charged were bolded. Plaintiffs didn’t contend that the actual language used to describe the details was confusing or misleading.

Plaintiffs argued that a reasonable consumer wouldn’t be expected to read the fine print before providing her email address, but the court was unpersuaded. A consumer can’t decline to read “clear and easily understandable terms that are provided on the same webpage in close proximity to the location where the consumer indicates his agreement to those terms and then claim that the webpage, which the consumer has failed to read, is deceptive.”  The CLRA failed to state a claim for the same reasons.   

I find it at least arguable that the subsequently enacted law is evidence of a congressional finding that reasonable consumers could be deceived by promotions like this one.  Reasonability should be a measure of consumers as they are, not as we subsequently wish they’d be.