Duane Morris Takeaways: On October 15, 2024, in Salazar v. NBA, 2024 WL 4487971 (2d Cir. Oct. 15, 2024), a unanimous panel of the U.S. Court of Appeals for the Second Circuit reversed the dismissal of a privacy class action against the National Basketball Association ("NBA") and held that a web user who casually watched videos on the NBA's website after signing up for a free email newsletter plausibly alleged that he was a "subscriber of goods and services" under the Video Privacy Protection Act ("VPPA"). The Second Circuit was unpersuaded by the NBA's arguments that the VPPA applies only to subscribers of audiovisual content. Instead, it found, as a matter of first impression, that an email newsletter qualifies as "goods or services" under the VPPA, reversed the dismissal order, and remanded for the district court to address the NBA's other arguments, including whether the plaintiff failed to plausibly allege his lack of consent and the NBA's knowing disclosure.
Background
This case is one of a hundred or so VPPA class actions that plaintiffs have filed nationwide alleging that Meta Pixel, Google Analytics, and other similar software embedded in defendants' websites secretly captured plaintiffs' online video watching histories and sent it to Meta, Google, and other online advertising agencies. This software, often called website advertising technologies or "adtech" is a common feature on millions of corporate, governmental, and other websites in operation today. Plaintiffs' typical theory in these cases is that they were "subscriber[s] of goods or services from a video tape service provider" under the VPPA, 18 U.S.C. § 2710, such that the defendants therefore violated that statute by knowingly disclosing their video watching histories without their consent via the use of adtech.
The VPPA was enacted in 1988, after a newspaper published a profile on Supreme Court nominee Judge Robert Bork's video rental history that identified 146 films he and his family had rented from a video store. Id. at *9. Although Congress later amended the VPPA in 2012, "to clarify that a video tape service provider may obtain a consumer's informed, written consent on an ongoing basis and that consent may be obtained through the Internet ... much of the 1988 VPPA's text remains unchanged." Id. at **9-10. Thus, in VPPA cases, courts are often left to "grapple with how the language of this statute applies in today's increasingly online world." Id. at *1.
In Salazar, the plaintiff brought suit against the NBA. According to the plaintiff, he signed up for an online email newsletter offered by the NBA and, thereafter, visited the NBA's website, where he watched videos. Id. The plaintiff further alleged that, after he watched those videos, his video-watching history was sent to Meta without his permission via the NBA's undisclosed use of the Meta Pixel on its website. Id. Based on these allegations, the plaintiff alleged a violation of the VPPA. The NBA moved to dismiss under Rule 12(b)(6), arguing that the plaintiff failed to plausibly allege a violation of the VPPA because, among other things, (1) the plaintiff did not sign up for any "audiovisual 'good or service,'" id. (emphasis in original); (2) the NBA did not knowingly disclose the video-watching history to Meta, as Plaintiff was the one who did that via his own browser and Facebook settings, id. at *4; and (3) the plaintiff consented to disclosure to Meta by consenting to the NBA's privacy policy. Id. at *4 n.4. The district court accepted the NBA's first argument and dismissed on that basis, without reaching the other two arguments. The Plaintiff appealed.
The Second Circuit's Decision
The Second Circuit agreed with the plaintiff and reversed. It rejected the district court's conclusion that the VPPA applies to subscribers only of audiovisual services.
First, the Second Circuit found that the VPPA's language saying it applies to "any renter, purchaser, or subscriber of goods or services from a video tape service provider," id. § 2710(a)(1), "makes no mention of audiovisual materials" in reference to the "goods or services." Id. at *11. This omission was meaningful, according to the court, because Congress knew how to include the word "audiovisual" in other portions of the VPPA, namely, its definition of a "video tape service provider" as including a business engaged in renting, selling, or delivering prerecorded video cassette tapes "or similar audio visual materials." Id. (quoting 18 U.S.C. § 2710(a)(4)). As the Second Circuit explained, "Congress's decision to use different words in different definitions strongly signals its intent to convey different meanings." Id.
Moreover, the Second Circuit held that under the NBA's interpretation of "goods and services" as audiovisual materials, "Congress's express restriction in the definition of 'personally identifiable information' to information about 'video materials or services' would be superfluous." Id.
Further, the Second Circuit found that although the First and Eleventh Circuits are split on whether a person who merely downloads an app to view content counts as a "subscriber," that circuit split was not implicated here because the plaintiff alleged that he signed up for the newsletter and, in doing so, provided his email address, IP address, and cookies associated with his device. Id. at *15. These allegations were sufficient, the Second Circuit held, to allege he was a "subscriber." As the Second Circuit explained, the NBA's relationship with the plaintiff was "distinct from its relationship with casual NBA.com video-watchers who had not signed up for the newsletter." Id. at *15 (emphasis added).
In short, the Second Circuit concluded that a web user who casually watched videos on the NBA's website after signing up for a free email newsletter plausibly alleged that he was a "subscriber of goods and services" under the VPPA. The Second Circuit therefore reversed and remanded for the district court to address the NBA's remaining arguments in the first instance. Id. at *4 n.4, 16.
Implications For Companies
The Second Circuit's opinion serves as a cautionary tale for companies using adtech on webpages containing video content. As the ruling shows, VPPA litigation risk for such companies is not limited to users who sign up to receive the video content. In addition, companies using adtech on webpages containing video content face the risk of VPPA class actions by allowing users to sign up for other, non-audiovisual goods or services. Further, companies using adtech also face the risk of VPPA class actions merely by making an app available to view the video content, at least in some circuits, as the Second Circuit noted.
As adtech and online videos continue to proliferate, organizations should consider in light of Salazar whether to modify their website terms of use, data privacy policies, and all other notices to the organizations' website visitors and customers to describe the organization's use of adtech in additional detail. Doing so could deter or help defend a future class action lawsuit similar to the many that are being filed today, alleging omission of such additional details, and raising high-dollar claims for statutory damages brought under not only the VPPA ($2,500 per alleged class member), as in this case, but also federal and state wiretap acts and consumer fraud acts, as in other cases we blogged about here, here, and here.
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