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Kevin Sterk and Jiah Chung, Individually, and On Behalf of A Class of Similarly Situated Individuals v. Redbox Automated Retail

April 24, 2012

KEVIN STERK AND JIAH CHUNG, INDIVIDUALLY, AND ON BEHALF OF A CLASS OF SIMILARLY SITUATED INDIVIDUALS, PLAINTIFFS,
v.
REDBOX AUTOMATED RETAIL, LLC DEFENDANTS.



The opinion of the court was delivered by: Matthew F. Kennelly, District Judge:

MEMORANDUM OPINION AND ORDER

Kevin Sterk and Jiah Chung have sued Redbox Automated Retail, LLC for violations of the Video Privacy Protection Act (VPPA). They seek to represent a class of similarly situated individuals. Plaintiffs have moved the Court for leave to file a second amended complaint and extend the time for discovery related to class certification. On April 18, 2012, the Court entered an order extending the time for discovery and orally ruled that plaintiffs had good cause to seek leave to amend and that Redbox would not suffer undue prejudice from amendment. For the reasons stated below, the Court grants the motion for leave to file a second amended complaint.

Background

"Redbox rents digital video discs (DVDs) directly to consumers through more than 30,000 automated, self-service kiosks located throughout the United States." Sterk v. Redbox Automated Retail, LLC, 806 F. Supp. 2d 1059, 1060 (N.D. Ill. 2011).

Plaintiffs allege that they were customers of Redbox and that it unlawfully retained and disclosed their private information in violation of the VPPA. 18 U.S.C. § 2710(b) & (e).

Redbox previously moved to dismiss plaintiffs' claim under the VPPA for unlawful retention, arguing that the VPPA did not provide a private right of action. The Court concluded that subsection 2710(c) authorized a private right of action for violations of subsection 2710(e). Sterk, 806 F. Supp. 2d at 1069. Subsequently, however, the Court concluded that the existence of a private right of action for violation of section 2710(e) was "a controlling question of law as to which there is substantial ground for difference of opinion" and certified the question to the Seventh Circuit under 28 U.S.C. § 1292(b).

The Seventh Circuit accepted the interlocutory appeal. Sterk v. Redbox Automated Retail, LLC, 672 F.3d 535, 537 (7th Cir. 2012). The court reversed this Court's decision. It held that subsection 2710(c) did not authorize a private right of action for unlawful retention of personal information in violation of section 2710(e). Id. at 538--39.

Discussion

Plaintiffs seek to amend their complaint to add two claims related to their allegation that Redbox unlawfully retained their personal information in violation of the VPPA: a claim under the Stored Communications Act (SCA) and a breach of contract claim. Redbox contends that plaintiffs do not have good cause to amend and that amendment is futile and would be unduly prejudicial. See Fed. R. Civ. P. 16(b)(4). As stated above, the Court previously ruled orally that plaintiffs had good cause to seek leave to amend and that amendment would not unduly prejudice Redbox.

The only remaining question before the Court is whether amendment would be futile. A proposed amendment is futile if "the amended complaint could not survive a motion to dismiss." London v. RBS Citizens, N.A., 600 F.3d 742, 747 n.5 (7th Cir. 2010). "When analyzing the sufficiency of a complaint, [the Court] construe[s] it in the light most favorable to the nonmoving party, accept[s] well-pleaded facts as true, and draw[s] all inferences in the nonmoving party's favor." Fednav Int'l Ltd. v. Cont'l Ins. Co., 624 F.3d 834, 837 (7th Cir. 2010). A plaintiff "has stated a claim only if it has alleged enough facts to render the claim facially plausible, not just conceivable." Id.

A. Stored Communications Act claim

Plaintiffs assert a claim under the SCA against Redbox for its unlawful retention of their private informationin violation of the VPPA. See 18 U.S.C. § 2707. Section 2707 of the SCA allows a plaintiff to bring a civil action for any violations of its chapter of the United States Code, which includes the retention provision of the VPPA. Id. §§ 2707(a), 2710(e).

Redbox does not dispute that the SCA authorizes plaintiffs to bring a civil action, but it argues that plaintiffs' claim fails because they are not entitled to statutory damages. It contends that the SCA does not authorize statutory damages unless a plaintiff can show actual damages. See id. § 2707(c). Redbox states that in their petition requesting that the Seventh Circuit rehear the case, plaintiffs conceded that the SCA required a showing of actual damages. Redbox also cites as support the case of Van Alstyne v. Elec. Scriptorium, Ltd., 560 F.3d 199 (4th Cir. 2009). In that case, the Fourth Circuit concluded that subsection 2707(c) required a plaintiff to show actual damages before he could recover statutory damages. Id. at 206. The court also held, however, that a plaintiff need not show actual damages to recover punitive damages or attorney's fees under the SCA. Id. at 209.

Even if the Court were to adopt the conclusion of the Fourth Circuit in Van Alstyne, plaintiffs' SCA claim would not be futile. Plaintiffs seek punitive damages and attorney's fees, for which the Fourth Circuit concluded they do not need to show actual damages. Proposed 2d Am. Compl. ¶ 82. Furthermore, plaintiffs do allege that they suffered actual damages from the unlawful retention of their personal information. Id. ¶¶ 75--81. Should plaintiffs be able to demonstrate that they suffered actual ...


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