State Video Rental Statute Violation Claim Enough for Standing Without Direct Injury

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Allegations that several magazine companies violated Michigan's Video Rental Privacy Act (VRPA) by disclosing subscribers' personal information satisfy Article III standing requirements, even without allegations of how the subscribers were injured, the U.S. District Court for the Eastern District of Michigan held Aug. 5 (Halaburda v. Bauer Publ'g Co., E.D. Mich., No. 2:12-cv-12831-GCS-RSW, dismissed in part 8/5/13; Grenke v. Hearst Commc'ns Inc., E.D. Mich., No. 2:12-cv-14221, dismissed in part 8/5/13; Fox v. Time Inc., E.D. Mich., No. 2:12-cv-14390, dismissed in part 8/5/13).

In putative class action complaints, the plaintiffs alleged that several magazine publishers--Bauer Publishing Co., Hearst Communications Inc., and Time Inc.--sell lists of their subscribers' names, addresses, and magazine subscription choices and fail to inform subscribers of this practice.

The plaintiffs brought claims for violations of Michigan's VRPA, as well as common law breach of contract and unjust enrichment claims.

In all three lawsuits, the defendants moved to dismiss the claims. The court granted the motions in part and denied them in part.

No Allegation of Actual Injury Required

Michigan's VRPA, at Mich. Comp. Laws § 445.1712, prohibits those “engaged in the business of selling at retail, renting, or lending books or other written materials, sound recordings or video recordings” from “disclos[ing] to any person, other than the customer, a record or information concerning the purchase, lease, rental, or borrowing of those materials … .”

Notably, statutory damages in the amount of $5,000 are available as an alternative to actual damages under Section 445.1714 of the VRPA.

Although the plaintiffs attempted to argue that their injuries included the diminution in the value of their personal information and the overpayment for magazine subscriptions, the court said it was “unclear … whether plaintiffs could articulate any injury other than a violation of the statute.”

It looked to Deacon v. Pandora Media Inc., 901 F. Supp. 2d 1166 (N.D. Cal. 2012). In Deacon, the court held that an improper disclosure under Michigan's VPRA alone is enough for an injury in fact to support Article III standing because “the statute's civil remedy provision allows for recovery based on a showing of actual damages or statutory damages” (11 PVLR 1498, 10/8/12).

The court distinguished the present case from Sterk v. Best Buy Stores LP, No. 1:11-cv-01894, 2012 BL 275176 (N.D. Ill. Oct. 17, 2012), which found an allegation of disclosure and retention of personal information under the federal Video Privacy Protection Act (VPPA) insufficient to meet the injury in fact requirement (11 PVLR 1589, 10/29/12). “Unlike the VPPA, a close reading of the VPRA reveals that it contains absolutely no language to require that a claimant suffer any actual injury apart from a violation of the statute, and plaintiffs have not alleged any specific injury apart from the statutory violation[,]” the court here said.

Although the court hesitated in finding that the plaintiffs' allegations under the VRPA constitute an injury in fact, it said it was unable to distinguish some of the facts of the present case from those in Beaudry v. TeleCheck Servs. Inc., 579 F.3d 702 (6th Cir. 2009), in which the U.S. Court of Appeals for the Sixth Circuit concluded that the Fair Credit Reporting Act did not require a showing of actual damages because such damages were an alternative to statutory damages in the act. The VRPA, like FCRA, provides actual damages as an alternative to statutory damages.

“Here, a statute was created by a state legislature to protect individual consumers from certain disclosures of their personal information[,]” the court here said in concluding that the plaintiffs have standing.

Failure to Identify Breached Contract

The plaintiffs have not failed to state a claim under the VRPA, the court additionally concluded. It disagreed with the defendants' argument that the statute does not apply to the plaintiffs' claims. The words “written materials” apply to magazines, and the defendants' business of publishing and selling magazines satisfies the “selling at retail” requirement, the court said.

The plaintiffs “have alleged the unlawful disclosure of personal reading information without notice or consent,” and “nothing more [is] required at this juncture,” it said.

The court, however, dismissed the plaintiffs' breach of contract claims, finding that they did not identify any contract that was allegedly breached.

But the unjust enrichment claims in the Grenke and Fox cases survived. Those “plaintiffs have pleaded that defendants engaged in collection and illegal disclosure of their personal reading information, and that the monetary and other benefits associated with such disclosure represents unjust enrichment of defendants[,]” the court observed.

James D. Larry and Ari J. Scharg of Edelson LLC, in Chicago; and Brian C. Summerfield of Bodman PLC, in Troy, Mich., along with Christine E. Ficks from the firm's Detroit office, represented plaintiffs Cindy Halaburda and David Grenke. Larry, Scharg, and Henry M. Scharg, in Detroit, represented plaintiff Susan Fox. Robert M. Jackson and Arthur T. O'Reilly of Honigman Miller Schwartz and Cohn LLP, in Detroit; and Collin Peng-Sue and Sharon Schneier of Davis Wright Tremaine LLP, in New York City, represented the defendants.


Full text of the court's opinion is available at http://www.bloomberglaw.com/public/document/Kinder_v_Bauer_Publishing_Co_LP_Docket_No_212cv12831_ED_Mich_Jun_.