Flores-Mendez v. Zoosk, Inc.

Background

Juan Flores-Mendez and Amber Collins brought a proposed class action against Zoosk, Inc. after an alleged large data breach. Both used Zoosk’s free dating platform; Flores-Mendez allegedly paid for a premium subscription before Zoosk announced the breach, while Collins and other proposed class members did not pay for Zoosk services.

The plaintiffs sought permission to file a second amended complaint. The proposed amendment added allegations concerning Flores-Mendez and a subclass of subscription customers, attempted to correct deficiencies in a claim under California’s Unfair Competition Law, and proposed deleting former defendant Spark Networks, SE, from the action without prejudice. Zoosk opposed amendment as to the unfair-competition claim and moved to dismiss that claim.

Court’s analysis

California’s Unfair Competition Law, California Business and Professions Code section 17200, requires a plaintiff seeking relief to show a loss of money or property caused by unfair competition. The court’s earlier order had found that allegations of lost privacy, an increased risk of identity theft, lost time, and anxiety were not enough. The earlier complaint also did not allege that plaintiffs had purchased credit-monitoring services or adequately explain the economic value of their time.

For non-subscription class members, the court again found no adequately alleged loss of money or property. The plaintiffs had assigned a market value to their personal information but had not specifically alleged how the breach impaired their ability to participate in a market for that information. The court also rejected a restitution theory because plaintiffs had not explained why they lacked an adequate legal remedy, as required in this diversity action.

For subscription subclass members, the court treated the issue as a close question but found the allegations insufficient. The subscribers alleged that Zoosk’s privacy policy assured customers that their personal information was secure and that, had they known it would not be adequately protected, they would not have used Zoosk’s services. But the court held that they had not alleged that they knew of and considered those representations when purchasing the service. The complaint did not say that the subscribers read the statements or encountered them in terms of service, advertisements, or other materials connected to their purchases.

The court rejected Zoosk’s separate argument that subscribers could not have overpaid because the privacy policy applied to free users as well as paying users. The court stated that paying users could value privacy representations when deciding to purchase additional services, and it found that the complaint could support an inference that subscribers believed Zoosk would use some subscription revenue for data security. That reasoning did not overcome the failure to allege awareness and consideration of the representations at the time of purchase.

Disposition

The court granted the plaintiffs’ motion for leave to amend. It also granted Zoosk’s motion to dismiss to the extent stated above, addressing both the non-subscription and subscription theories under section 17200. The court invited the plaintiffs to move for leave to amend the section 17200 claim again and set a deadline of October 28 at noon for such a motion. The opinion did not state that the dismissal was with or without prejudice. The court’s order was signed by Judge William Alsup.