Callahan v. PeopleConnect Inc.

Background

Meredith Callahan and Lawrence Geoffrey Abraham brought a class action against PeopleConnect, Inc. They alleged that PeopleConnect collected and digitized yearbook information, including names and photographs, and used that information commercially on Classmates.com. The alleged uses included displaying a person’s name and photograph next to a link to buy a reprinted yearbook and next to an advertisement for a subscription membership.

The complaint asserted claims under California Civil Code section 3344, a statutory right-of-publicity law; California Business and Professions Code section 17200, concerning unlawful and unfair business practices; intrusion upon seclusion; and unjust enrichment.

Motion to Stay Pending Appeal

PeopleConnect had appealed the court’s earlier denial of its request to compel arbitration and sought to pause the case while that appeal was pending. The court denied the request. It found that PeopleConnect had not shown a likelihood of success on the appeal or that it would suffer the necessary irreparable harm without a stay. The court also stated that ruling on the dismissal motion would not eliminate PeopleConnect’s opportunity to arbitrate if the appeal later required arbitration.

Motion to Dismiss and Strike

The court granted in part and denied in part PeopleConnect’s motion to dismiss and strike.

Communications Decency Act. The court rejected PeopleConnect’s argument that the Communications Decency Act shielded all of the claims. The court held that there was at least a factual question about whether the yearbook authors or publishers intended the yearbooks to be published on the Internet. That question could not be resolved on a motion to dismiss. The court also declined to give preclusive effect to decisions in a prior related proceeding because the earlier decisions were under appeal and because differing decisions in similar cases raised fairness concerns.

Copyright preemption. Copyright preemption means that federal copyright law displaces a state-law claim when the claim concerns rights equivalent to copyright rights in a copyrightable work. The court held that the section 3344, section 17200, and unjust-enrichment claims were preempted in part. They were preempted to the extent they were based on using names and likenesses taken from yearbooks to advertise the reprinted yearbooks. They were not preempted to the extent they were based on using the names and likenesses to advertise the subscription membership.

Section 3344 claim. The court held that the plaintiffs adequately alleged an economic injury because PeopleConnect’s use of their names and likenesses in advertising supported a reasonable inference that those identities had some economic value. The court held that the plaintiffs did not need to allege that the advertising suggested they endorsed PeopleConnect’s products. Whether the names and likenesses were sufficiently part of the advertisements, rather than merely displayed next to separate advertisements, presented a factual question. The court also held that the statutory public-affairs exception did not apply to advertising the subscription membership.

Section 17200 claim. The plaintiffs did not respond to PeopleConnect’s challenge to the unfairness theory, so the court treated that theory as waived. The court considered only the unlawfulness theory, which was based on the section 3344 claim. It held that the plaintiffs adequately alleged the economic injury required for that claim because they alleged they were not paid for the use of their names and likenesses.

Intrusion upon seclusion. The court dismissed this claim without prejudice but, at that juncture, without leave to amend. The court found that the complaint did not sufficiently allege that the alleged intrusion was highly offensive to a reasonable person. The court noted that discovery could reveal additional facts supporting a good-faith motion for leave to amend.

Unjust enrichment. The court allowed the plaintiffs to proceed on a theory that PeopleConnect unjustly received a benefit through the alleged misappropriation. The court treated the claim as potentially viable either as an independent claim or as a contract-like claim seeking repayment of an improperly retained benefit.

The court did not separately reach PeopleConnect’s First Amendment and California anti-SLAPP arguments because the relevant claims were already preempted to the extent they concerned reprinted yearbooks, and PeopleConnect had not made those arguments concerning subscription-membership advertising.

Motion to Stay Discovery and Disposition

PeopleConnect also sought to pause discovery while the dismissal and striking motion was pending. The court stated that this request was moot because the order had issued and a significant part of the case survived. In the conclusion, the court denied the motion to stay discovery.

The court denied the motion to stay pending appeal, granted in part and denied in part the motion to dismiss and strike, and denied the motion to stay discovery. The section 3344, section 17200, and unjust-enrichment claims were preempted in part. The intrusion-upon-seclusion claim was dismissed without prejudice but, at that juncture, without leave to amend. The case could otherwise proceed, and PeopleConnect was ordered to respond to the complaint within thirty days.