Leventhal v. Streamlabs LLC

Background

Zara Leventhal sued Streamlabs LLC individually and on behalf of a proposed nationwide class. Streamlabs operates software that allows content creators to stream videos and collect donations. Its Streamlabs Pro product lets donors add GIFs and other effects to donation messages and costs $5.99 per month, with automatic monthly renewal.

Leventhal alleged that, in August 2020, she made a $5 donation, added a GIF, and subscribed to Streamlabs Pro through the confirmation process. Streamlabs charged her $5.99 per month. She alleged that she did not discover the recurring charges until May 2021, when PayPal notified her. Streamlabs canceled the subscription and refunded the most recent $5.99 charge but refused to refund the other charges, which totaled $59.90 for ten months.

According to the complaint, the donation page did not explain that adding a GIF or effect would enroll the donor in a subscription or state the subscription’s automatic-renewal terms. The confirmation page displayed a $5.99 charge and stated that the donor would be charged $5.99 per month, but the complaint alleged that the disclosure was smaller and lighter than the donation amount and did not say that the charges would continue automatically until cancellation. Leventhal also alleged that other consumers complained about similar unexpected charges and that Streamlabs later changed its website to provide more information about automatic renewal and cancellation.

Leventhal asserted claims under California’s Consumer Legal Remedies Act, the Unfair Competition Law, California fraud statutes, and the False Advertising Law. She alleged that Streamlabs’s process misrepresented the $5.99 charge as a one-time fee, concealed the recurring nature of the subscription, and constituted fraudulent, unlawful, and unfair conduct. She sought restitution under the Unfair Competition Law.

Streamlabs’s Motion

Streamlabs moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint plausibly states a legal claim. It argued that Leventhal’s allegations relied on California’s Automatic Renewal Law even though she was a New York resident, that the consumer-protection laws did not require the disclosures and consent described in that law, and that the fraud allegations did not meet Federal Rule of Civil Procedure 9(b)’s particularity requirement. Streamlabs also argued that Leventhal had not adequately pleaded unfair conduct or a right to equitable relief under the Unfair Competition Law. It alternatively requested a more definite statement identifying the Automatic Renewal Law provisions on which the claims depended.

Court’s Analysis

The court held that the complaint’s allegations about the disclosure process could support claims based on misrepresentation and deceptive advertising even if they resembled requirements in the Automatic Renewal Law. The court explained that Leventhal was not relying on the Automatic Renewal Law as the legal basis for a private claim. Although a New York resident could not predicate an Unfair Competition Law claim on a violation of that California law, she could use facts about Streamlabs’s failure to fairly disclose the subscription terms to support her other claims.

The court also found that the complaint satisfied Rule 9(b). Under the reasonable-consumer test, a plaintiff must allege facts showing that a significant portion of ordinary consumers could be misled. The court found it plausible that consumers, including technology-savvy consumers, could understand the $5.99-per-month disclosure as a one-time fee because the disclosures did not state that the fee would renew automatically. The complaint described the relevant webpages, the charge, the timing, the alleged lack of disclosure, Leventhal’s confusion, other consumer complaints, and the resulting monthly fees. Those allegations were sufficiently specific to identify the alleged misconduct and allow Streamlabs to respond.

The court separately held that the complaint plausibly alleged unfair conduct under the Unfair Competition Law’s balancing test, which weighs the usefulness of the defendant’s conduct against the seriousness of the harm. The alleged consumer confusion and unexpected subscription charges were enough at this stage to plead that the harm outweighed the subscription’s benefits. The court also declined to dismiss the request for restitution merely because money damages might be available, noting that there was no binding precedent requiring dismissal of an alternative request for equitable restitution.

Disposition

The court denied Streamlabs’s motion to dismiss the amended complaint. It also denied Streamlabs’s request for a more definite statement because the allegations were not so vague or unclear that Streamlabs could not prepare a response. The order resolved ECF No. 32. It did not decide the ultimate merits of the claims or certify the proposed class.