Debono v. Cerebral Inc.

Background

The plaintiffs filed a first amended class-action complaint against Cerebral Inc. They asserted claims under California’s Automatic Renewal Law (ARL), the Unfair Competition Law (UCL), the False Advertising Law (FAL), and the Consumer Legal Remedies Act (CLRA). They also asserted unjust enrichment and contract claims, including breach of the implied covenant of good faith and fair dealing. Cerebral moved to dismiss the first amended complaint.

Automatic-renewal-law claims

The court explained that the ARL itself does not provide a private right of action, but consumers may seek to enforce it through the UCL, FAL, and CLRA. To do so, they must plausibly allege that an ARL violation injured them. The named plaintiffs identified alleged problems with Cerebral’s subscription sign-up disclosures, including the description of cancellation terms and the presentation of automatic-renewal terms. But they did not explain how those problems harmed them, such as by alleging that they would not have subscribed if Cerebral’s disclosures had been more complete. The court therefore held that the ARL-based claims were inadequately pleaded.

Other UCL, FAL, and CLRA theories

The court separately found that the plaintiffs had not adequately pleaded their non-ARL theories under the UCL, FAL, and CLRA:

- The plaintiffs alleged that Cerebral falsely promised customers that appointments were available, but the named plaintiffs did not allege that they had difficulty scheduling appointments. - The plaintiffs alleged that Cerebral made false or misleading statements about its services and billing practices, but they did not identify particular statements they saw and relied on, when they saw them, or why they were false or misleading. - The plaintiffs alleged that Cerebral’s sign-up and payment pages were fatiguing or visually overwhelming, but none of the named plaintiffs alleged that they personally experienced those conditions. - The plaintiffs alleged that Cerebral omitted material information to induce subscriptions, but they did not identify what information was omitted or allege that they would have acted differently if it had been disclosed. - The plaintiffs alleged that Cerebral made subscription cancellation difficult. The court noted that two named plaintiffs did not allege that they followed Cerebral’s cancellation policy, while the third named plaintiff who did follow the process was able to cancel promptly.

Claims by two out-of-state named plaintiffs

The court also held that Victoria Barber and Jessica Atherton had not established that they could sue under the UCL, FAL, or CLRA. The complaint alleged that they were not California residents and alleged only that Cerebral was headquartered in California and conducted substantial business there. The court found those allegations insufficient to show that the wrongful conduct affecting them occurred in California. A California choice-of-law provision in Cerebral’s Terms of Use did not change that conclusion.

The court added that Barber and Atherton could not base UCL, FAL, or CLRA claims on the ARL because they did not allege that they were consumers in California, while the ARL applies to offers made to consumers in California.

Unjust enrichment and contract claims

Because the UCL, FAL, and CLRA claims were not adequately pleaded, the court held that the unjust-enrichment claim also failed. That claim relied on the same alleged deceptive and unfair practices.

The contract claims also failed. The plaintiffs did not identify a contractual term that Cerebral breached and instead alleged generally that Cerebral did not provide the “promised services.” Their allegations concerning the implied covenant of good faith and fair dealing were likewise too conclusory to plausibly show that Cerebral unfairly interfered with their contractual rights.

Disposition

The court granted Cerebral’s motion to dismiss. It dismissed the plaintiffs’ claims with leave to amend and allowed the plaintiffs to file an amended complaint on or before February 15, 2023. The order was signed by United States Magistrate Judge Alex G. Tse.