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Sterk v. Redbox Automated Retail, LLC

United States Court of Appeals, Seventh Circuit

October 23, 2014

KEVIN STERK and JIAH CHUNG, Plaintiffs-Appellants,

Argued September 26, 2014.

Page 619

Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 11-cv-01729 -- Matthew F. Kennelly, Judge.

For Kevin Sterk, Jiah Chung, Plaintiffs - Appellants: Roger Perlstadt, Attorney, Edelson P.C., Chicago, IL.

For Redbox Automated Retail, LLC, Defendant - Appellee: Natalie Spears, Attorney, Dentons U.S. LLP, Chicago, IL.

Before FLAUM, MANION, and KANNE, Circuit Judges.


Page 620

Flaum, Circuit Judge.

Redbox Automated Retail, LLC out-sources its customer service operations to Stream Global Services, which fields Redbox customer inquiries through a customer service call center. To enable Stream to perform this function, Redbox provides Stream with access to its customer database, the disclosure of which Kevin Sterk and Jiah Chung allege violates the Video Privacy Protection Act, 18 U.S.C. § 2710. The district court granted summary judgment in Redbox's favor, concluding that Redbox's actions fall within the statutory exception for disclosures in the ordinary course of business--more precisely, disclosures incident to " request processing." We agree, and therefore affirm the district court's decision.

I. Background

Redbox operates automated self-service kiosks--typically located at grocery stores,

Page 621

convenience stores, or drug stores--at which customers rent DVDs and Blu-ray discs with a debit or credit card for a daily rental fee. Although Redbox owns and operates the machines, the company out-sources certain " back office" functions to various service providers, including Stream. Stream provides customer service to Redbox users when, for example, a customer encounters technical problems at a kiosk and requires help from a live person. In such an event, the Redbox customer can call the phone number listed on the machine to speak to a customer service representative to troubleshoot the issue. If resolution of the customer's issue requires accessing that customer's video rental history--for instance, if a Redbox kiosk charges the customer's credit card, but fails to dispense the selected movie--that call center representative (a Stream employee) will do so.

So that Stream can perform Redbox's customer service functions, Redbox has granted Stream access to the database in which Redbox stores relevant customer information. To enable customer service representatives to perform their jobs capably, Stream trains its employees on how to use the database to access the information necessary to respond to customer inquiries. Plaintiffs object both to Stream's ability to access customer rental histories when prompted by a customer call and Stream's use of customer records during the course of employee training exercises. In plaintiffs' view, Redbox's disclosure of customer information to Stream for these purposes violates the Video Privacy Protection Act (" VPPA" ).

Enacted in 1988 in response to the Washington City Paper 's publication of then-Supreme Court nominee Robert Bork's video rental history (a DC-area video store provided it to a reporter), S. Rep. No. 100-599, at 5 (1988), reprinted in 1988 U.S.C.C.A.N. 4342, the VPPA prohibits " video tape service provider[s]" like Redbox from " disclos[ing], to any person, personally identifiable information concerning any consumer of such provider." 18 U.S.C. § 2710(b)(1). Personally identifiable information (" PII" ) " includes information which identifies a person as having requested or obtained specific video materials or services from a video tape service provider." Id. § 2710(a)(3). But the VPPA provides several exceptions to the disclosure prohibition, allowing disclosure of a consumer's video rental history when the consumer has provided written consent, when the party seeking disclosure has obtained a warrant or court order, or (relevant to this case) when the disclosure is incident to the video tape service provider's ordinary course of business. Id. § 2710(b)(2). The statute instructs that " 'ordinary course of business' means only debt collection activities, order fulfillment, request processing, and the transfer of ownership." Id. § 2710(a)(2).

Plaintiffs Kevin Sterk and Jiah Chung are Redbox users who contend that Redbox's disclosure of their PII to Stream is not incident to Redbox's ordinary course of business. Initially, Sterk filed this lawsuit without Chung, alleging in his original complaint only that Redbox violated the VPPA's " destruction of old records" provision, which requires video tape service providers to destroy PII " as soon as practicable, but no later than one year from the date the information is no longer necessary for the purpose for which it was collected and there are no pending requests or orders for access to such information." 18 U.S.C. ยง 2710(e). After Sterk's case was consolidated with a similar suit, Redbox moved to dismiss Sterk's ...

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