Unjust enrichment/misappropriation is Article III harm, court rules in ROP suit against Spokeo

Kellman v. Spokeo, Inc., 2022 WL 1157500, No. 3:21-cv-08976-WHO (N.D. Cal. Apr. 19, 2022)

Spokeo’s website “provides information about particular individuals aggregated from various sources. To advertise paid subscriptions, Spokeo uses “teasers”—profiles of real people with some information redacted. The plaintiffs in this putative class action alleged that this violated their rights of publicity and appropriated their names and likenesses in violation of California, Ohio, and Indiana law. The court denied Spokeo’s motion to dismiss, finding Article III standing and that a right of publicity violation was sufficiently pled; nor was Spokeo immune under §230; nor was there a dormant Commerce Clause problem or a First Amendment violation in holding Spokeo liable on plaintiffs’ theory.

Spokeo advertises by displaying “teaser profiles” of individuals that can include “names; ages; current and past cities of residence; partially redacted addresses, emails, and phone numbers; and other personal information” and sometimes photographs. The “teaser” then states that Spokeo “possesses additional information” including “ ‘Criminal Records’; ‘Sex Offenses’; ‘DUIs’; ‘details about birth, marriage, and divorce’; ‘Relationship Status’; ‘Location History’; ‘Estimated Salary’; ‘Family Members’; and redacted ‘Full Address[es]’; ‘Email Address[es],’ and ‘Phone Number[s].’ ” Plaintiffs claim never to have consented to this use of their data, however Spokeo got it. “If a user wishes to sign up for a paid membership, the webpages that they use to do so likewise include [the teaser’s] name and information.”

Here’s how an ad looks, with blurring as in the original:

 

Article III standing: Spokeo argued that plaintiffs’ alleged injuries didn’t qualify. The injuries: (1) misappropriation of their intellectual property (in the form of likenesses, names, and other information); (2) that Spokeo unjustly profited from their likenesses; (3) denial of the right to control commercial use of their identifies; and (4) mental and emotional injury.

In determining whether an injury under causes of action like these is sufficiently “concrete” to confer Article III standing, the Supreme Court has instructed that “courts should assess whether the alleged injury to the plaintiff has a ‘close relationship’ to a harm ‘traditionally’ recognized as providing a basis for a lawsuit in American courts.” Harms traditionally recognized as cognizable include “reputational harms, disclosure of private information, and intrusion upon seclusion.” And courts can respect a legislature’s declaration that an injury is legally redressable, though a legislature cannot “us[e] its lawmaking power to transform something that is not remotely harmful into something that is.”

Under California law, the right of privacy protects against injury to the feelings/peace of mind, and Indiana and Ohio courts have indicated that their statutory rights also stem from the common-law right of privacy. This “disclosure of private information” is a traditionally recognized type of intangible harm, and “encompasses the individual’s control of information concerning his or her person.” These harms are sufficiently concrete for judicial redress. Misappropriation of name/likeness and unjust enrichment are also “harm recognized at common law.” [Well, they don’t require harm to the plaintiff; they’re about benefit to the defendant—but before TransUnion, courts were happy to conflate the two; I’m not convinced they can do so now if—and it’s a big if—TransUnion means what it says about harm.] Infringement on their right to control commercial use of their names and identities is also a harm recognized at common law, as is the emotional and mental harm allegedly caused by Spokeo’s actions. The court noted that “the claim here is that individuals’ names and information appear alongside implications that they committed crimes and other negative information, so the allegations of mental anguish are plausible.” Even if the plaintiffs’ identities had no commercial value, “the injury for Article III purposes [with respect to the commercial value ROP theory] is simply loss of commercial use.” [Again, that’s benefit to defendant, not harm to plaintiff in the Court’s new baseline.]

Ohio ROP: Exempts “use of an aspect of an individual’s persona in connection with any news, public affairs, sports broadcast, or account.” “Persona” is defined as “an individual’s name, voice, signature, photograph, image, likeness, or distinctive appearance, if any of these aspects have commercial value.”

Did the Ohio plaintiff’s persona have commercial value? Yes. Under Ohio law, “[c]ommercial value may be established by proof of (1) the distinctiveness of the identity and by (2) the degree of recognition of the person among those receiving the publicity.” The plaintiff pled commercial value, first, by pleading that individuals can use Spokeo’s service to find specific names; if they type his name, his “teaser” is one result. Thus, he pled that the pertinent audience would sufficiently recognize his distinct identity. “Second, because Spokeo uses Newell’s persona for commercial gain—that is, to incentivize people to subscribe—it reasonably implies that his persona does have at least some commercial value.”

The news/public affars exception didn’t apply, because Spokeo’s use of his persona was not connected to news or public affairs and had no “newsworthy value.” Use of his name in teasers was solely for “promotion, advertising, or marketing a product,” not for informing the public about a matter of genuine public interest. Likewise, Spokeo had a commercial purpose: to sell its services.

Indiana: Different language, same results.

California: Yep; whether there could be a nationwide California class could be addressed later.

Spokeo argued that its use was “incidental” because there was nothing special about these users; they were just randomly plucked when someone searched for a name. Courts have assessed “(1) whether the use has a unique quality or value that would result in commercial profit to the defendant; (2) whether the use contributes something of significance; (3) the relationship between the reference to the plaintiff and the purpose and subject of the work; and (4) the duration, prominence or repetition of the name or likeness relative to the rest of the publication.” It was at least plausible that the use wasn’t incidental at this stage, especially since “an implication of endorsement is not the only alleged violation that is actionable under the relevant statutes; appropriation for commercial use more broadly can be too.”

Plaintiffs also had statutory standing under the UCL because they alleged that they lost money or property by alleging that Spokeo was unjustly enriched and that they weren’t compensated for use of their likenesses.

And they sufficiently alleged “unfairness” under the UCL, because Spokeo takes names, likenesses, and information that consumers never consented to give to Spokeo and publicly displays it next to potentially inaccurate statements about “felonies,” “arrests,” and other behavior. The plaintiffs’ claims, consequently, are “tethered to [the] legislatively declared policy” of allowing people to control uses their names and likenesses for commercial gain, “especially if it casts them in an unjustifiably bad light.”

The CCPA didn’t immunize Spokeo just because it exempted the use of publicly available data from its own coverage.

Bucking a trend, the court also rejected Spokeo’s argument that plaintiffs couldn’t seek UCL equitable remedies and legal remedies at the same time.

§230 didn’t protect Spokeo because “this grant of immunity applies only if the interactive computer service provider is not also an ‘information content provider,’ which is defined as someone who is ‘responsible, in whole or in part, for the creation or development of’ the offending content.”  “Spokeo is not alleged to merely host user-generated content, it is alleged to actively take content from other sources, curate it, and upload it to its site in a novel configuration for repurposed uses. That makes it at least ‘in part’ responsible for the ‘creation and development’ of this material. Indeed, the allegations are that there are no users of Spokeo who generate content at all.”

Dormant Commerce Clause: There was no argument that the relevant laws privilege in-state commerce or discriminate against out-of-state commerce. Thus, they’d “be upheld unless the burden imposed on [interstate] commerce is clearly excessive in relation to the putative local benefits.” Spokeo didn’t show that. Having to follow different states’ laws about what it can and cannot show to users was an incidental burden “similar to countless similar burdens on any company operating in multiple states.”

First Amendment: The speech at issue was commercial. The teasers were ads referencing a specific product, and Spokeo had an economic motivation for publishing them; they were also not matters of public interest or newsworthy.

Thus, Central Hudson applied. Initially, plaintiffs “make a strong case that the teasers are likely to deceive” by putting individuals’ names next to large lettering indicating that they “may” have felonies, arrests, and similar records even when that is not true. This was clearly done for commercial benefit. “And it seems likely that reasonable people may be deceived into believing that individuals have committed bad or criminal acts when they have not.” [Would a court in an ordinary false advertising case be so willing to find potential deception? One benefit of the traditional common law torts for plaintiffs is that they lack the empiricist framework of the modern Lanham Act and its search for likely deception through surveys.]

Even if the teasers weren’t misleading, the First Amendment didn’t bar the claims because the protection of privacy interests was important, and the laws at issue directly advanced this interest through reasonably well-tailored means. Those laws have “broad exemptions for matters that are newsworthy, of public interest, or matters of public affairs—that is, the core First Amendment purposes. And, indeed, the Supreme Court has expressly held that imposing liability for violating the traditional publicity right does not necessarily offend the First Amendment. Zacchini v. Scripps-Howard Broad. Co., 433 U.S. 562, 575–77 (1977).” [Pause to note that Zacchini, involving the appropriation of a performer’s entire act in a way that mimicked common-law copyright, is not the same as a modern ROP claim like this one, but ok.]