The Northern District of California recently held that a proposed class action has sufficiently stated a claim under the Video Privacy Protection Act (VPPA), 18 U.S.C. § 2710(b)(1), against defendant Hulu. The Video Privacy Protection Act was established to punish "video tape service providers" (defined below) who knowingly disclose to any person, personally identifiable information concerning any "consumer" (defined below). 18 U.S.C. 2710 (b)(1). Any person aggrieved by any act of a person in violation of the VPPA may be awarded actual damages, not less than liquidated damages in an amount of $2,500, punitive damages, reasonable attorneys' fees and costs, and "such other preliminary and equitable relief as the court determines to be appropriate." 18 U.S.C. 2710 (c). While this language may lead one to believe that the VPPA applies only to the video store down the street, think again.
In In Re Hulu Privacy Litigation, Case No. C 11-03764 LB (N.D. Ca. August 10, 2012), the putative class action, consisting of visitors and viewers of Hulu's online video content, allege that Hulu — an Internet website that supports on-demand streaming video of TV shows, movies, etc. — wrongfully disclosed their video viewing selections and personal identification information to third parties in violation of the Video Privacy Protection Act. In particular, Hulu allegedly allowed a metrics company to place code containing tracking identifiers on plaintiffs' computers. This enabled Hulu to transmit their video viewing choices and personally identifiable information to third parties without obtaining their written consent prior to disclosure. These third parties included online ad networks, metrics companies, and social networks such as Facebook, Scorecard Research, Doubleclick, Google Analytics, and QuantCast. The information distributed to these third parties identified the plaintiffs and class members personally. For example, with respect to Facebook, Hulu included its viewers' Facebook IDs, "connecting the video content information to Facebook's personally identifiable user registration information."
Hulu moved to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim, arguing that "(1) Hulu is not a "Video Tape Service Provider" and thus is not liable under the Act, (2) any disclosures were incident to the ordinary course of Hulu's business and not covered by the Act, and (3) plaintiffs are not 'consumers' within the meaning of the Act." Following a hearing on these issues, the court denied defendant's motion.
In denying the motion, the court first held that Hulu fell within the VPPA's definition of "video tape service provider," defined as "any person, engaged in the business, in or affecting interstate or foreign commerce, of rental, sale or delivery of prerecorded video cassette tapes or similar audio visuals." 18 U.S.C. § 2710(a)(4). Hulu, relying on dictionary definitions, argued that the word "materials" are things "composed of physical matter," and further argued that the legislative history confirms a focus on "physical stores selling goods." The court disagreed. It held that "a plain reading of a statute that covers videotapes and 'similar audio visual materials' is about the video content, not about how that content was delivered (e.g., via the Internet or a bricksand- mortar store)." The court concluded that the use of the phrase "similar audio video materials" was to ensure that the VPPA would remain relevant as technologies evolve.
Hulu's second ground for dismissal was that the alleged disclosures did not violate the VPPA because they were "incident to the ordinary course of [Hulu's] business." 18 U.S.C. § 2710(b)(2)(E). The VPPA defines the phrase "ordinary course of business" as "debt collection activities, order fulfillment, request processing, and the transfer of ownership." 18 U.S.C. § 2710(a)(4). Hulu argued that the services that the third-party vendors provide, such as internal research and advertising, Hulu can do on its own. Therefore, Hulu argued, it permissibly can outsource such services in the "ordinary course of business." The court held that whether the third-party services were used for a different purpose than what was alleged in plaintiff's complaint was a factual issue that cannot be resolved in a motion to dismiss.
Hulu's final contention in support of dismissal was that the plaintiffs were not "consumers" under the VPPA. The VPPA defines "consumers" as "any renter, purchaser, or subscriber of goods or services from a video tape service provider." 28 U.S.C. § 2710(a)(1). The focus was on the term "subscriber" as the plaintiffs did not allege that they rented or purchased any content from Hulu. Hulu argued that the term implied payment of money. Plaintiffs, on the other hand, argued that they "signed up for a Hulu account, became registered users, received a Hulu ID, established Hulu profiles, and used Hulu's video streaming services." The court agreed with plaintiffs, holding that they were subscribers of Hulu's goods and services. If this was not clear enough, the court stated that "[i]f Congress wanted to limit the word 'subscriber' to 'paid subscriber,' it would have said so."
While many of the conclusions of this court's opinion rely on the plain meaning of the words used in the VPPA, it demonstrates the court's willingness to apply dated statutory language in such a way to make it relevant in today's society. Perhaps more importantly for insurers, policyholders and brokers, it highlights yet another statutory scheme — the VPPA — that must be taken into consideration when evaluating risk and possible liability exposures.www.cozen.com
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