Lundy v. Facebook Inc.

Background

Users sued Facebook over its collection of personal location data. Facebook moved to dismiss the second amended complaint and asked the court to strike the users’ nationwide class allegations.

Timeliness and standing

The court denied dismissal on timeliness grounds. It held that the claims of four new plaintiffs related back to the original complaint under Federal Rule of Civil Procedure 15(c). The new plaintiffs were members of the proposed class in the original complaint, their claims arose from the same conduct, and Facebook would not be unfairly prejudiced.

The court also denied dismissal of all unjust-enrichment claims as untimely. It said that factual questions about when the users discovered the alleged wrongdoing were not suitable for resolution on a motion to dismiss, and Facebook had not shown that the issue could be decided as a matter of law.

The court declined to reconsider its earlier decision that the plaintiffs had standing under Article III of the Constitution. It said Facebook had not presented a good reason to revisit that ruling.

Fraud claims

The court denied dismissal of the fraud claims. It had previously found that the users adequately alleged a misrepresentation or omission. The users plausibly alleged that Facebook’s language could have led a user to believe Facebook would not collect device locations or Internet Protocol addresses without consent. They also plausibly alleged that Facebook failed to disclose its use of enhanced methods to determine location and that Facebook’s partial statements became misleading because of that omission.

The court found that the new plaintiffs plausibly alleged reliance, an element requiring a plaintiff to show that the alleged misrepresentation or omission affected the plaintiff’s conduct. The allegations included reading Facebook’s privacy policy, changing device location settings, turning off Location History, using Facebook with the understanding that Facebook would not collect location information, and deciding not to use the application—or removing it—after learning about the alleged tracking.

Contract and quasi-contract claims

The court held that the plaintiffs adequately pleaded claims for disgorgement and nominal damages. Disgorgement seeks profits allegedly obtained through unjust enrichment; nominal damages are a small monetary award recognizing a legal violation even without proven financial loss. The court said these remedies were not barred by the limitation-of-liability provision identified by Facebook.

The court also rejected Facebook’s argument that the plaintiffs had not alleged a breach of contract. It said Facebook’s position raised a factual dispute outside the proper scope of a motion addressing the sufficiency of the pleadings. The court understood the complaint to allege that Facebook breached contractual obligations concerning the users’ privacy settings and the collection, storage, use, and monetization of location data derived from Internet Protocol addresses in connection with targeted advertising.

The court dismissed the claim for breach of the implied covenant of good faith and fair dealing without prejudice. It explained that when a plaintiff alleges breach of an actual contract term, a separate implied-covenant claim based on the same breach is unnecessary. The court stated that the claim could potentially be renewed later if developments in the case warranted it.

The court declined to dismiss the unjust-enrichment claim at this stage. It noted that California law is unclear about whether unjust enrichment is an independent cause of action, but the plaintiffs presented unjust enrichment both as a claim and as a remedy. The court said Facebook was not prejudiced by allowing the alternative claim to remain.

Class allegations and disposition

The court denied Facebook’s request under Federal Rule of Civil Procedure 12(f) to strike the nationwide class allegations. It said any challenge to those allegations would be better addressed at the later stage when the court considers whether to certify a class under Rule 23.

The order therefore denied Facebook’s timeliness-based dismissal request, denied dismissal of the fraud and unjust-enrichment claims, declined to revisit standing, denied the request to strike the nationwide class allegations, and dismissed the implied-covenant claim without prejudice. Judge James Donato issued the order on September 30, 2021.