Carovillano v. Sirius XM Radio, Inc.

Background

Christopher Carovillano and Steven Brandt brought a proposed class action against Sirius XM Radio Inc. They alleged that Sirius XM advertised or quoted monthly subscription prices but charged an additional 21.4% U.S. Music Royalty Fee. According to the complaint, telephone customer-service agents did not disclose the fee before or during sign-up, while Sirius XM’s written materials generally stated only that “fees and taxes apply” and directed consumers to a customer agreement or website.

The plaintiffs asserted claims under New York General Business Law §§ 349 and 350, which prohibit deceptive business practices and false advertising. They also alleged breach of the implied covenant of good faith and fair dealing and unjust enrichment. They sought money damages and injunctive relief for themselves and proposed classes of current and former Sirius XM subscribers who signed up for music plans by telephone.

Sirius XM moved to dismiss all claims for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). It separately sought dismissal of the requests for injunctive relief for lack of federal subject-matter jurisdiction under Rule 12(b)(1).

Consumer-protection claims

The court denied Sirius XM’s Rule 12(b)(6) motion as to the claims under New York General Business Law §§ 349 and 350. At the motion-to-dismiss stage, the court had to accept the complaint’s well-pleaded factual allegations as true and draw reasonable inferences for the plaintiffs.

The court held that the plaintiffs plausibly alleged that Sirius XM’s disclosures could mislead a reasonable consumer. The prominent advertised prices did not include the 21.4% fee. The materials’ general statements that “fees and taxes apply” did not specifically identify the fee or its amount, and the customer agreement and linked webpage required consumers to look elsewhere for the information. The court explained that whether Sirius XM gave sufficient notice, including during telephone conversations with customer-service agents, could not be resolved from the pleadings alone.

The court also found the alleged injury sufficient. Carovillano alleged that he canceled his subscription after learning about the fee and sought a refund. Brandt alleged that he would not have paid as much had he known about the fee. The court held that paying more than a consumer would have paid if the advertised price had been accurate could qualify as an injury.

The court rejected, as inadequately pleaded, an alternative theory that the words “U.S. Music Royalty Fee” falsely suggested that the fee was government-required. The court’s ruling instead focused on the alleged failure to disclose the fee’s existence and amount before purchase.

Injunctive relief

The court dismissed the claims for injunctive relief under Rule 12(b)(1) for lack of Article III standing. Federal standing requires a plaintiff seeking an injunction to show a real and immediate threat of future injury, not merely past harm.

The court held that neither plaintiff made that showing. Having learned about the fee, the plaintiffs could not credibly claim that a future Sirius XM subscription would deceive them in the same way. The court stated that pursuing a class action did not eliminate the requirement that the named plaintiffs have standing to seek an injunction. This dismissal was without prejudice to the plaintiffs’ right to pursue the same or similar relief in state court.

Implied covenant claim

The court denied Sirius XM’s motion to dismiss the claim for breach of the implied covenant of good faith and fair dealing. Sirius XM argued that its customer agreement authorized the fee and therefore imposed no duty to disclose it differently. The court found that argument premature because the plaintiffs plausibly alleged that they were not given adequate notice of, or bound by, the fee provision. The court denied dismissal without prejudice to Sirius XM’s ability to challenge the claim later in the litigation.

Unjust-enrichment claim

The court dismissed the unjust-enrichment claim with prejudice. It held that the claim was based on the same facts and sought the same damages as the General Business Law claims. Because the plaintiffs did not explain how the unjust-enrichment claim was distinct, the court found it duplicative.

Disposition

The court granted in part and denied in part Sirius XM’s motion to dismiss. It dismissed the claims for injunctive relief without prejudice, dismissed the unjust-enrichment claims with prejudice, and otherwise denied the motion. Sirius XM was required to answer the complaint by February 20, 2024. The court also stated that it would schedule an initial pretrial conference by separate order.