Foret v. Adobe Inc.

Background

Dustin Foret brought a proposed nationwide class action against Adobe Inc. He alleged that Adobe used misleading and deceptive practices to sell subscriptions to applications such as Creative Cloud and Lightroom. Adobe offered Annual, Annual Billed Monthly, and Monthly subscriptions. Foret purchased an Annual, Billed Monthly Creative Cloud subscription in April 2022, cancelled it in September 2023, and paid an $84 cancellation fee.

Foret alleged that Adobe’s subscription process made annual commitments appear to be flexible monthly plans and inadequately disclosed cancellation terms, early-termination fees, renewal terms, and refund limits. He asserted claims under California’s Automatic Renewal Law, Consumer Legal Remedies Act, False Advertising Law, and Unfair Competition Law. He sought damages, restitution, declaratory and injunctive relief, fees and costs, and class relief.

Adobe’s Terms of Use required an individual written notice of claim, a 30-day period before legal action, and resolution through small claims court or binding arbitration. The Terms of Use also contained a one-year contractual limitations period and a class-action waiver. Foret alleged that he sent a notice of claim, later filed an arbitration demand, and that Adobe refused to pay the arbitration filing fees and instead argued that the dispute belonged in small claims court.

Adobe’s arguments about another lawsuit and pre-suit requirements

Adobe argued that Foret’s case should be dismissed or stayed under the first-to-file rule, the rule against splitting claims, or the court’s inherent authority because of an earlier related action involving Adobe’s subscription practices. The court denied this request. It found that Foret was not a party to the other action, no class had been certified there, the cases involved different named plaintiffs and not identical causes of action, and no judgment in either case would yet preclude the other.

The court also denied Adobe’s request to dismiss because Foret allegedly failed to satisfy a contractual condition before filing suit. The court concluded that the Terms of Use did not clearly require Foret to contact Adobe Customer Care before sending a written notice of claim and did not clearly prohibit placing multiple individual notices in the same submission. At the motion-to-dismiss stage, the court accepted Foret’s allegation that his notice complied with the Terms of Use.

The court further denied Adobe’s timeliness argument. Although the Terms of Use imposed a one-year limitations period, the court held that Foret plausibly alleged the provision was both procedurally unconscionable and substantively unconscionable. Procedural unconscionability concerns a lack of meaningful choice or surprise in forming a contract; substantive unconscionability concerns terms that are overly harsh, oppressive, or one-sided. The court found allegations that the standard-form Terms of Use were not negotiable and that the limitations provision was lengthy, difficult to find, and applied only to customer claims as defined in the agreement. The provision therefore did not bar Foret’s claims at this stage.

Claims under the consumer-protection laws

Adobe argued that Foret had not adequately alleged reliance. The court denied that part of the motion. Foret alleged that he relied on Adobe’s representations and omissions during the subscription process, including information about contract length, cancellation difficulty, termination fees, and timing limits, and that he suffered economic injury.

The court also denied Adobe’s argument that the label “Annual, Billed Monthly” could not mislead reasonable consumers. Foret plausibly alleged that Adobe’s sign-up process displayed monthly prices for annual commitments, preselected certain plans, and used relatively small or easy-to-miss language about cancellation fees. The court concluded that a reasonable consumer could plausibly be misled about whether the subscription was monthly or annual and about the consequences of cancelling.

The court granted Adobe’s motion to dismiss Foret’s Consumer Legal Remedies Act claim. Foret alleged only that he bought Adobe products for personal, family, or household purposes, which the court found was a formulaic statement of a required element rather than sufficient supporting facts. The dismissal was without prejudice and with leave to amend.

Equitable and declaratory relief

The court granted Adobe’s motion to dismiss Foret’s claims for equitable relief, including injunctive relief. Although Foret alleged that he faced future harm from Adobe’s subscription practices, he had cancelled the Creative Cloud subscription at issue and later bought Lightroom under an annual plan rather than an Annual, Billed Monthly plan. The court concluded that Foret was aware of Adobe’s practices and therefore had not plausibly alleged that he could not determine whether Adobe’s representations were true without an injunction.

The court also granted dismissal of the declaratory-relief claim. It held that Foret had not pleaded an ongoing controversy about the Terms of Use’s claims-resolution provisions. Foret sought to litigate the substantive dispute in federal court, did not seek an order compelling arbitration, and Adobe had not invoked the small-claims provision as a bar to the lawsuit. The court therefore found that any disagreement about those provisions was academic at that time.

Class allegations

Adobe asked the court to strike Foret’s class allegations based on the class-action waiver in the Terms of Use. The court denied that request. It concluded that California’s rule concerning class-action waivers in certain consumer contracts would appear to make the waiver unenforceable under the alleged circumstances. Although federal arbitration law can preempt that rule when applying it would interfere with arbitration, Adobe had not sought to compel arbitration and the claims were proceeding in federal court. The court therefore held that the rule was not preempted in this setting and that the class-action waiver was unenforceable under California law.

Disposition

The court denied Adobe’s motion to stay or dismiss under the first-to-file rule, the rule against splitting claims, and the court’s inherent authority. It denied Adobe’s motions based on the alleged failure to satisfy a condition precedent and untimeliness. It denied Adobe’s motion to dismiss the False Advertising Law and Unfair Competition Law claims and denied the motion to strike the class allegations. It granted Adobe’s motion to dismiss the claims for equitable relief, declaratory relief, and under the Consumer Legal Remedies Act. Those dismissals were without prejudice and with leave to amend, and any amended complaint was due within 28 days of the order.