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8U_sA4kBRpLueGJZ6Uw8 | UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT
Civil Action No. 3:17-cv-00403-JBA
CLASS ACTION
GORSS MOTELS, INC., a Connecticut
corporation, individually and as the
representative of a class of similarly-
situated persons,
Plaintiff,
v.
AT&T MOBILITY LLC and AT&T
MOBILITY NATIONAL ACCOUNTS
LLC,
Defendants.
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FIRST AMENDED CLASS ACTION COMPLAINT
Plaintiff, GORSS MOTELS, INC. (“Plaintiff”), brings this action on behalf of itself and
all others similarly situated, through its attorneys, and except as to those allegations pertaining to
Plaintiff or its attorneys, which allegations are based upon personal knowledge, alleges the
following upon information and belief against Defendants, AT&T MOBILITY LLC and AT&T
MOBILITY NATIONAL ACCOUNTS LLC (“Defendants”):
PRELIMINARY STATEMENT
1.
This case challenges Defendants’ practice of sending unsolicited facsimiles.
2.
The federal Telephone Consumer Protection Act of 1991, as amended by the Junk
Fax Prevention Act of 2005, 47 USC § 227 (“JFPA” or the “Act”), and the regulations
promulgated under the Act, prohibit a person or entity from faxing or having an agent fax
advertisements without the recipient’s prior express invitation or permission. The JFPA provides
a private right of action and provides statutory damages of $500 per violation. Upon information
and belief, Defendants have sent facsimile transmissions of unsolicited advertisements to
Plaintiff and the Class in violation of the JFPA, including, but not limited to, the facsimile
transmission of an unsolicited advertisement on or about January 13, 2014 (“the Fax”), a true and
correct copy of which is attached hereto as Exhibit A, and made a part hereof. The Fax describes
the commercial availability or quality of Defendants’ products, goods and services. Plaintiff is
informed and believes, and upon such information and belief avers, that Defendants have sent,
and continue to send, unsolicited advertisements via facsimile transmission in violation of the
JFPA, including but not limited to those advertisements sent to Plaintiff.
3.
Unsolicited faxes damage their recipients. A junk fax recipient loses the use of its
fax machine, paper, and ink toner. An unsolicited fax wastes the recipient’s valuable time that
would have been spent on something else. A junk fax interrupts the recipient’s privacy.
Unsolicited faxes prevent fax machines from receiving authorized faxes, prevent their use for
authorized outgoing faxes, cause undue wear and tear on the recipients’ fax machines, and
require additional labor to attempt to discern the source and purpose of the unsolicited message.
4.
On behalf of itself and all others similarly situated, Plaintiff brings this case as a
class action asserting claims against Defendants under the JFPA. Plaintiff seeks to certify a class
including faxes sent to Plaintiff and other advertisements sent without proper opt-out language or
without prior express invitation or permission, whether sent to Plaintiff or not.
5.
Plaintiff is informed and believes, and upon such information and belief avers,
that this action is based upon a common nucleus of operative facts because the facsimile
transmissions at issue were and are being done in the same or similar manner. This action is
based on the same legal theory, namely liability under the JFPA. This action seeks relief
expressly authorized by the JFPA: (i) injunctive relief enjoining Defendants, their employees,
agents, representatives, contractors, affiliates, and all persons and entities acting in concert with
them, from sending unsolicited advertisements in violation of the JFPA; and (ii) an award of
statutory damages in the minimum amount of $500 for each violation of the JFPA, and to have
such damages trebled, as provided by § 227(b)(3) of the Act.
JURISDICTION AND VENUE
6.
This Court has subject matter jurisdiction under 28 U.S.C. § 1331 and 47 U.S.C. §
7.
This Court has personal jurisdiction over Defendants because Defendants transact
business within this judicial district, have made contacts within this judicial district, and/or have
committed tortious acts within this judicial district.
PARTIES
8.
Plaintiff, GORSS MOTELS, INC., is a Connecticut corporation.
9.
On information and belief, Defendant AT&T MOBILITY LLC is a Delaware
limited liability company with its principal place of business in Atlanta, Georgia, and is a mobile
phone carrier and transacts or has transacted business in this District and throughout the United
10.
On information and belief, Defendant AT&T MOBILITY NATIONAL
ACCOUNTS LLC is a Delaware limited liability company with its principal place of business in
Hanover, Maryland, and is the counterparty to the agreement with Wyndham Worldwide
Corporation pursuant to which Exhibit A was sent.
FACTS
11.
On or about January 13, 2014, the Fax attached hereto as Exhibit A was sent to
Plaintiff’s telephone facsimile machine.
12.
Exhibit A was sent using a telephone facsimile machine, computer, or other
13.
Exhibit A states, “All products and services are manufactured and/or provided by
AT&T and not Wyndham Worldwide Corporation (WWC) or its affiliates.”
14.
Exhibit A states, “Neither WWC nor its affiliates are responsible for the accuracy
or completeness of any statements made in this advertisement, the content of this advertisement
(including the text, representations and illustrations) or any material on a website to which the
advertisement provides a link or a reference.”
15.
Exhibit A was sent “on behalf of” Defendants pursuant to an agreement with
Wyndham Worldwide Corporation or one of its affiliates, making each Defendant a “sender,” as
defined by 47 C.F.R. § 64.1200(f)(10).
16.
Exhibit A advertises Defendants’ property, goods, or services, making each
Defendant a “sender,” as defined by 47 C.F.R. § 64.1200(f)(10).
17.
On information and belief, Defendants receive some or all of the revenues from
the sale of the products, goods and services advertised on Exhibit A, and Defendants profit and
benefit from the sale of the products, goods and services advertised on Exhibit A.
18.
Under the TCPA, “the sender must obtain the prior express invitation or
permission from the consumer before sending the facsimile advertisement.” In re Rules &
Regulations Implementing the Tel. Consumer Prot. Act of 1991; Junk Fax Prevention Act of
2005, 21 FCC Rcd. 3787, 3811 ¶ 45 (rel. Apr. 6, 2006) (emphasis added).
19.
Defendants did not obtain Plaintiff’s “prior express invitation or permission”
before sending Exhibit A.
20.
On information and belief, Defendants faxed the same and other unsolicited
facsimiles with opt-out language identical or substantially similar to the opt-out language of the
fax advertisement attached hereto as Exhibit A to Plaintiff and at least 40 other recipients, or sent
the same and other advertisements by fax with the required opt-out language but without first
receiving the recipients’ express invitation or permission and/or without having an “established
business relationship” as defined by the TCPA and its implementing regulations.
21.
There is no reasonable means for Plaintiff (or any other class member) to avoid
receiving unauthorized faxes. Fax machines are left on and ready to receive the urgent
communications their owners desire to receive.
22.
Exhibit A states in fine print at the bottom of the Fax “To opt out from future
faxes, email [email protected] or call this toll-free number: (877) 764-4212.”
23.
The opt-out notice in Exhibit A does not comply with 47 C.F.R. § 64.1200(a)(4).
(a)
The opt-out notice is not “clear and conspicuous.”
(b)
The opt-out notice does not state that a sender’s failure to comply within
30 days with an opt-out request that complies with the regulations is unlawful.
(c)
The opt-out notice does not state that a recipient’s opt-out request
complies with the regulations only if it identifies the fax number to which the request
relates.
(d)
The opt-out notice does not state that a recipient’s opt-out request
complies with the regulations only if it is made using the instructions in the opt-out
notice.
(e)
The opt-out notice does not state that a recipient’s opt-out request
complies with the regulations only if the recipient does not subsequently give the sender
express permission to send fax advertisements.
(f)
The opt-out notice does not contain a fax number to which the recipient
can send an opt-out request.
CLASS ACTION ALLEGATIONS
24.
In accordance with Fed. R. Civ. P. 23(b)(1), (b)(2) and (b)(3), Plaintiff brings this
class action pursuant to the JFPA, on behalf of the following class of persons:
All persons who (1) on or after four years prior to the filing of this
action, (2) were sent telephone facsimile messages of material
advertising the commercial availability or quality of any property,
goods, or services by or on behalf of Defendants, (3) from whom
Defendants did not obtain “prior express invitation or permission”
to send fax advertisements, and/or (4) with whom Defendants did
not have an established business relationship, and/or (5) which
contained an opt-out notice that is identical to or substantially
similar to the opt-out notice contained in the fax advertisement
Defendant sent to Plaintiff, which is attached hereto as Exhibit A.
Excluded from the Class are the Defendants, their employees, agents and members of the
Judiciary. Plaintiff seeks to certify a class which include but are not limited to the fax
advertisements sent to Plaintiff. Plaintiff reserves the right to amend the class definition upon
completion of class certification discovery.
25.
Class Size (Fed. R. Civ. P. 23(a)(1)): Plaintiff is informed and believes, and upon
such information and belief avers, that the number of persons and entities of the Plaintiff Class is
numerous and joinder of all members is impracticable. Plaintiff is informed and believes, and
upon such information and belief avers, that the number of class members is at least forty.
26.
Commonality (Fed. R. Civ. P. 23 (a) (2)): Common questions of law and fact
apply to the claims of all class members. Common material questions of fact and law include, but
are not limited to, the following:
(a)
Whether the Defendants sent unsolicited fax advertisements;
(b)
Whether Defendants’ faxes sent to other persons, not the Plaintiff,
constitute advertisements;
(c)
Whether the Defendants’ faxes advertised the commercial availability or
quality of property, goods, or services;
(d)
The manner and method the Defendants used to compile or obtain the list
of fax numbers to which they sent Exhibit A, other unsolicited faxed advertisements or
other advertisements without the required opt-out language;
(e)
Whether the Defendants faxed advertisements without first obtaining the
recipient's prior invitation or permission;
(f)
Whether the Defendants sent the faxed advertisements knowingly;
(g)
Whether the Defendants violated the provisions of 47 U.S.C. § 227 and
the regulations promulgated thereunder;
(h)
Whether the faxes contain an “opt-out notice” that complies with the
requirements of § (b)(1)(C)(iii) of the Act, and the regulations promulgated thereunder,
and the effect of the failure to comply with such requirements;
(i)
Whether the Defendants should be enjoined from faxing advertisements in
the future;
(j)
Whether the Plaintiff and the other members of the class are entitled to
statutory damages;
(k)
Whether the Court should award treble damages; and
(l)
Whether each Defendant is a “sender,” as defined by 47 C.F.R.
§ 64.1200(f)(10).
27.
Typicality (Fed. R. Civ. P. 23 (a) (3): The Plaintiff's claims are typical of the
claims of all class members. The Plaintiff received the same or similar faxes as the faxes sent by
or on behalf of the Defendants advertising products, goods and services of the Defendants during
the Class Period. The Plaintiff is making the same claims and seeking the same relief for itself
and all class members based upon the same federal statute. The Defendants have acted in the
same or in a similar manner with respect to the Plaintiff and all the class members by sending
Plaintiff and each member of the class the same or similar faxes or faxes which did not contain
the proper opt-out language or were sent without prior express invitation or permission.
28.
Fair and Adequate Representation (Fed. R. Civ. P. 23 (a) (4)): The Plaintiff will
fairly and adequately represent and protect the interests of the class. It is interested in this matter,
has no conflicts, and has retained experienced class counsel to represent the class.
29.
Need for Consistent Standards and Practical Effect of Adjudication (Fed. R. Civ.
P. 23 (b) (1)): Class certification is appropriate because the prosecution of individual actions by
class members would: (a) create the risk of inconsistent adjudications that could establish
incompatible standards of conduct for the Defendants, and/or (b) as a practical matter,
adjudication of the Plaintiff's claims will be dispositive of the interests of class members who are
not parties.
30.
Common Conduct (Fed. R. Civ. P. 23 (b) (2)): Class certification is also
appropriate because the Defendants have acted and refused to act in the same or similar manner
with respect to all class members thereby making injunctive and declaratory relief appropriate.
The Plaintiff demands such relief as authorized by 47 U.S.C. §227.
31.
Predominance and Superiority (Fed. R. Civ. P. 23 (b) (3)): Common questions of
law and fact predominate over any questions affecting only individual members, and a class
action is superior to other methods for the fair and efficient adjudication of the controversy
because:
(a)
Proof of the claims of the Plaintiff will also prove the claims of the class
without the need for separate or individualized proceedings;
(b)
Evidence regarding defenses or any exceptions to liability that the
Defendants may assert and attempt to prove will come from the Defendants’ records and
will not require individualized or separate inquiries or proceedings;
(c)
The Defendants have acted and are continuing to act pursuant to common
policies or practices in the same or similar manner with respect to all class members;
(d)
The amount likely to be recovered by individual class members does not
support individual litigation. A class action will permit a large number of relatively small
claims involving virtually identical facts and legal issues to be resolved efficiently in one
proceeding based upon common proofs; and
(e)
This case is inherently manageable as a class action in that:
(i)
The Defendants identified persons to receive the fax transmissions
and it is believed that the Defendants’ and/or Defendants’ agents’ computers and
business records will enable the Plaintiff to readily identify class members and
establish liability and damages;
(ii)
Liability and damages can be established for the Plaintiff and the
class with the same common proofs;
(iii)
Statutory damages are provided for in the statute and are the same
for all class members and can be calculated in the same or a similar manner;
(iv)
A class action will result in an orderly and expeditious
administration of claims and it will foster economics of time, effort and expense;
(v)
A class action will contribute to uniformity of decisions
concerning the Defendants’ practices; and
(vi)
As a practical matter, the claims of the class are likely to go
unaddressed absent class certification.
Claim for Relief for Violation of the JFPA, 47 U.S.C. § 227 et seq.
32.
The JFPA makes it unlawful for any person to “use any telephone facsimile
machine, computer or other device to send, to a telephone facsimile machine, an unsolicited
advertisement . . . .” 47 U.S.C. § 227(b)(1)(C).
33.
The JFPA defines “unsolicited advertisement” as “any material advertising the
commercial availability or quality of any property, goods, or services which is transmitted to any
person without that person's prior express invitation or permission, in writing or otherwise.” 47
U.S.C. § 227(a)(5).
34.
Opt-Out Notice Requirements. The JFPA strengthened the prohibitions against
the sending of unsolicited advertisements by requiring, in § (b)(1)(C)(iii) of the Act, that senders
of faxed advertisements place a clear and conspicuous notice on the first page of the transmission
that contains the following among other things (hereinafter collectively the “Opt-Out Notice
Requirements”):
(1)
A statement that the recipient is legally entitled to opt-out of receiving
future faxed advertisements – knowing that he or she has the legal right to request an opt-
out gives impetus for recipients to make such a request, if desired;
(2)
A statement that the sender must honor a recipient’s opt-out request within
30 days and the sender’s failure to do so is unlawful – thereby encouraging recipients to
opt-out, if they did not want future faxes, by advising them that their opt-out requests will
have legal “teeth”;
(3)
A statement advising the recipient that he or she may opt-out with respect
to all of his or her facsimile telephone numbers and not just the ones that receive a faxed
advertisement from the sender – thereby instructing a recipient on how to make a valid
opt-out request for all of his or her fax machines;
(4)
The opt-out language must be conspicuous.
The requirement of (1) above is incorporated from § (b)(D)(ii) of the Act. The
requirement of (2) above is incorporated from § (b)(D)(ii) of the Act and the rules and
regulations of the Federal Communications Commission (the “FCC”) in ¶ 31 of its 2006 Report
and Order (In the Matter of Rules and Regulations Implementing the Telephone Consumer
Protection Act, Junk Prevention Act of 2005, 21 F.C.C.R. 3787, 2006 WL 901720, which rules
and regulations took effect on August 1, 2006). The requirements of (3) above are contained in
§ (b)(2)(E) of the Act and incorporated into the Opt-Out Notice Requirements via § (b)(2)(D)(ii).
Compliance with the Opt-Out Notice Requirements is neither difficult nor costly. The Opt-Out
Notice Requirements are important consumer protections bestowed by Congress upon the
owners of the telephone lines and fax machines giving them the right, and means, to stop
unwanted faxed advertisements.
35.
2006 FCC Report and Order. The JFPA, in § (b)(2) of the Act, directed the
FCC to implement regulations regarding the JFPA, including the JFPA’s Opt-Out Notice
Requirements and the FCC did so in its 2006 Report and Order, which in addition provides
among other things:
A.
The definition of, and the requirements for, an established business
relationship for purposes of the first of the three prongs of an exemption to liability under
§ (b)(1)(C)(i) of the Act and provides that the lack of an “established business
relationship” precludes the ability to invoke the exemption contained in § (b)(1)(C) of the
Act (See 2006 Report and Order ¶¶ 8-12 and 17-20);
B.
The required means by which a recipient’s facsimile telephone number
must be obtained for purposes of the second of the three prongs of the exemption under
§ (b)(1)(C)(ii) of the Act and provides that the failure to comply with these requirements
precludes the ability to invoke the exemption contained in § (b)(1)(C) of the Act (See
2006 Report and Order ¶¶ 13-16);
C.
The things that must be done in order to comply with the Opt-Out Notice
Requirements for the purposes of the third of the three prongs of the exemption under
§ (b)(1)(C)(iii) of the Act and provides that the failure to comply with these requirements
precludes the ability to invoke the exemption contained in § (b)(1)(C) of the Act (See
2006 Report and Order ¶¶ 24-34);
D.
The failure of a sender to comply with the Opt-Out Notice Requirements
precludes the sender from claiming that a recipient gave “prior express invitation or
permission” to receive the sender’s fax (See Report and Order ¶ 48).
As a result thereof, a sender of a faxed advertisement who fails to comply with the Opt-
Out Notice Requirements has, by definition, transmitted an unsolicited advertisement under the
JFPA. This is because such a sender can neither claim that the recipients of the faxed
advertisement gave “prior express invitation or permission” to receive the fax nor can the sender
claim the exemption from liability contained in § (b)(C)(1) of the Act.
36.
The Fax. Defendants sent the advertisement on or about January 13, 2014, via
facsimile transmission from telephone facsimile machines, computers, or other devices to the
telephone lines and facsimile machines of Plaintiff and members of the Plaintiff Class. The Fax
constituted an advertisement under the Act. Defendants failed to comply with the Opt-Out
Requirements in connection with the Fax. The Fax was transmitted to persons or entities without
their prior express invitation or permission and/or Defendants are precluded from asserting any
prior express invitation or permission or that Defendants had an established business relationship
with Plaintiff and other members of the class, because of the failure to comply with the Opt-Out
Notice Requirements. By virtue thereof, Defendants violated the JFPA and the regulations
promulgated thereunder by sending the Fax via facsimile transmission to Plaintiff and members
of the Class. Plaintiff seeks to certify a class which includes this fax and all others sent during
the four years prior to the filing of this case through the present.
37.
Defendants’ Other Violations. Plaintiff is informed and believes, and upon such
information and belief avers, that during the period preceding four years of the filing of this
Complaint and repeatedly thereafter, Defendants have sent via facsimile transmission from
telephone facsimile machines, computers, or other devices to telephone facsimile machines of
members of the Plaintiff Class other faxes that constitute advertisements under the JFPA that
were transmitted to persons or entities without their prior express invitation or permission
(and/or that Defendants are precluded from asserting any prior express invitation or permission
or that Defendants had an established business relationship because of the failure to comply with
the Opt-Out Notice Requirements in connection with such transmissions). By virtue thereof,
Defendants violated the JFPA and the regulations promulgated thereunder. Plaintiff is informed
and believes, and upon such information and belief avers, that Defendants may be continuing to
send unsolicited advertisements via facsimile transmission in violation of the JFPA and the
regulations promulgated thereunder, and absent intervention by this Court, will do so in the
38.
The TCPA/JFPA provides a private right of action to bring this action on behalf
of Plaintiff and the Plaintiff Class to redress Defendants’ violations of the Act or the “regulations
prescribed under” the Act, and provides for statutory damages. 47 U.S.C. § 227(b)(3). The Act
also provides that injunctive relief is appropriate. Id.
39.
The JFPA is a strict liability statute, so the Defendants are liable to the Plaintiff
and the other class members even if their actions were only negligent.
40.
The Defendants knew or should have known that (a) the Plaintiff and the other
class members had not given prior express invitation or permission for the Defendants or
anybody else to fax advertisements about the Defendants’ products, goods or services; (b) the
Plaintiff and the other class members did not have an established business relationship;
(c) Defendants transmitted advertisements; (d) the Faxes did not contain the required Opt-Out
Notice; and (e) Defendants’ transmission of advertisements that did not contain the required opt-
out notice or were sent without prior express invitation or permission was unlawful.
41.
The Defendants’ actions caused concrete injury to the Plaintiff and the other class
members. Receiving the Defendants’ junk faxes caused Plaintiff and the other recipients to lose
paper and toner consumed in the printing of the Defendants’ faxes. Moreover, the Defendants’
faxes used the Plaintiff's and the other class members’ telephone lines and fax machine. The
Defendants’ faxes cost the Plaintiff and the other class members time, as the Plaintiff and the
other class members and their employees wasted their time receiving, reviewing and routing the
Defendants’ unauthorized faxes. That time otherwise would have been spent on the Plaintiff's
and the other class members’ business activities. The Defendants’ faxes unlawfully interrupted
the Plaintiff's and other class members’ privacy interests in being left alone.
42.
Defendant’s non-compliant opt-out notice caused concrete injury to Plaintiff and
the other class members because it (1) is not “clear and conspicuous”; (2) does not disclose that
the recipient has a right to demand that the sender stop sending faxes; (3) does not state that a
sender’s failure to comply within 30 days with a compliant opt-out request is unlawful; (4) does
not contain a fax number to which to send an opt-out request; and (5) does not state the
requirements on the fax recipient in making an opt-out request, including (a) that the recipient
must identify the fax number to which the request relates, (b) that the recipient must follow the
instructions in the opt-out notice, and (c) that the recipient’s opt-out request is revoked by
subsequently giving the sender express permission to send fax advertisements.
WHEREFORE, Plaintiff, GORSS MOTELS, INC., individually and on behalf of all
others similarly situated, demands judgment in its favor and against Defendants, AT&T
MOBILITY LLC and AT&T MOBILITY NATIONAL ACCOUNTS LLC, jointly and severally,
as follows:
A.
That the Court adjudge and decree that the present case may be properly
maintained as a class action, appoint the Plaintiff as the representative of the class, and appoint
the Plaintiff’s counsel as counsel for the class;
B.
That the Court award actual monetary loss from such violations or the sum of five
hundred dollars ($500.00) for each violation, whichever is greater, and that the Court award
treble damages of $1,500.00 if the violations are deemed “willful or knowing”;
C.
That Court enjoin the Defendants from additional violations; and
D.
That the Court award pre-judgment interest, costs, and such further relief as the
Court may deem just and proper.
Respectfully submitted,
GORSS MOTELS, INC., individually and as the
representative of a class of similarly-situated
persons,
By: s/ Ryan M. Kelly
Ryan M. Kelly (ct30230)
Brian J. Wanca (pro hac vice)
ANDERSON + WANCA
3701 Algonquin Road, Suite 500
Rolling Meadows, IL 60008
Telephone: 847-368-1500
[email protected]
[email protected]
and
Aytan Y. Bellin (ct28454)
BELLIN & ASSOCIATES LLC
85 Miles Avenue
White Plains, NY 10606
Telephone: 914-358-5345
[email protected]
| privacy |
Hc_PDocBD5gMZwczEOYI | UNITED STATES DISTRICT COURT
IN THE EASTERN DISTRICT OF MICHIGAN -- SOUTHERN DIVISION
JOHN DOE,
Individually and on behalf of others similarly situated
-vs-
Case No.
Hon.
JURY TRIAL DEMANDED
FIRST ADVANTAGE LNS SCREENING SOLUTIONS, INC.,
Defendant
COMPLAINT & JURY DEMAND
Plaintiff John Doe (“Plaintiff”), by and through his attorneys, and on behalf
of himself, the Putative Classes set forth below, and in the public interest, brings
the following class action Complaint against Defendant First Advantage LNS
Screening Solutions, Inc. pursuant to the federal Fair Credit Reporting Act
(“FCRA”).
INTRODUCTION
1.
This consumer class action is brought under the FCRA against a
consumer reporting agency that systematically violates the basic protections
afforded to consumers under the FCRA.
1
2.
Defendant First Advantage routinely includes information in its
background reports about criminal cases that have been dismissed pursuant to the
Holmes Youthful Trainee Act ("HYTA"), M.C.L. § 762.11. Pursuant to HYTA,
certain juvenile offenses are dismissed after the juvenile has complied with certain
pre-judgment conditions. As a matter of law, cases dismissed pursuant to HYTA
are not convictions because judgment is withheld. In spite of this, Defendant relies
on outdated data purchased in bulk and misleadingly reports those offenses as
though the individual was sentenced, as though the case was finally disposed of,
and as though the individual was convicted of a crime. First Advantage’s failure to
utilize reasonable and strict procedures to avoid reporting of inaccurate and
incomplete information violates 15 U.S.C. §§ 1681e(b) and 1681k.
3.
Defendant’s practices were routine and systematic. Plaintiff therefore
asserts claims for damages on behalf of himself and the proposed classes of
similarly situated individuals.
Jurisdiction
4.
John Doe brings this lawsuit pursuant to 15 U.S.C. § 1681 et seq.
5.
This action presents a federal question and as such, jurisdiction arises
under 28 U.S.C. §1331 and 15 U.S.C. §1681 et seq.
6.
John Doe was concretely harmed by Defendant’s illegal conduct.
2
Specifically, Defendant First Advantage harmed Doe by reporting false and
defamatory information about him, claiming that he was a convicted felon when in
fact he is not. First Advantage’s publication of that false and defamatory
information about him to his prospective employer led him to lose a job. Doe also
suffered emotional distress as a result of Defendant’s illegal actions.
Parties
7.
John Doe resides in Wyandotte and is a citizen of MI.
8.
John Doe is a natural person and is a consumer as defined by the Fair
Credit Reporting Act, 15 U.S.C. §§ 1681 et seq (“FCRA”) at §1681a(c).
9.
Defendant First Advantage Screening LNS Screening Solutions, Inc.
("First Advantage") is a corporation which sells background reports containing,
inter alia, information about consumers’ criminal backgrounds to prospective
employers. First Advantage is a consumer reporting agency as contemplated by
the FCRA, 15 U.S.C. § 1681a.
10.
Venue is proper within the Eastern District of Michigan because the
events described in this complaint transpired in Southeast Michigan within this
district and Defendant does business within this district.
STATUTORY BACKGROUND
3
11.
Enacted in 1970, the FCRA’s passage was driven in part by two
related concerns: first, that consumer reports were playing a central role in people’s
lives at crucial moments, such as when they applied for a job or credit, and when
they applied for housing. Second, despite their importance, consumer reports were
unregulated and had widespread errors and inaccuracies.
12.
While recognizing that consumer reports play an important role in the
economy, Congress wanted consumer reports to be “fair and equitable to the
consumer” and to ensure “the confidentiality, accuracy, relevancy, and proper
utilization” of consumer reports. 15 U.S.C. § 1681.
13.
Congress was particularly concerned about the use of criminal
background reports in the employment context, and therefore defined the term
“consumer reports” to include background reports procured for employment
purposes. See 15 U.S.C. § 1681a(d)(1)(B).
FCRA Requirements That Apply to Consumer Reporting Agencies
14.
Through the FCRA, Congress required consumer reporting agencies
to “follow reasonable procedures to assure maximum possible accuracy of the
information concerning the individual about whom the report relates.” 15 U.S.C.
§ 1681b(b).
4
15.
Congress imposed even more stringent requirements on consumer
reporting agencies who were reporting public record information in reports that
were going to be used for employment purposes. Specifically, Congress required
that either the consumer reporting agency “maintain strict procedures designed to
insure that whenever public record information which is likely to have an adverse
effect on a consumer’s ability to obtain employment is reported it is complete and
up to date” or that the consumer reporting agency send a contemporaneous notice
to the consumer informing the consumer that it was reporting such information and
identifying the recipient. 15 U.S.C. §1681k.
Factual Allegations as to Plaintiff Doe
16.
In April 2014, Mr. Doe sought employment with Sentech.
17.
Sentech is a temporary staffing agency, operating in the Southeast
Michigan area.
18.
Sentech provides employers access to "[P]rescreened, ready-to-work
skilled tradesmen and light industrial workers."1
19.
Sentech offers its clients the ability to relieve themselves of ". . . the
burden of recruiting, screening and vetting candidates while you focus on core
1Sentech web site http://www.sentechservices.com/job-recruiters-detroit/ last visited April 13,
2016.
5
tasks."2
20.
As part of its ordinary and regular business practices, Sentech uses
consumer reports to determine the eligibility of applicants for employment for its
own benefit and those of its customers.
21.
Sentech accepted Mr. Doe's application and placed him for work with
Hazen, one of its customers.
22.
After placing Doe for work with Hazen, and after Doe had already
begun working for Hazen, on April 24, 2014, Sentech procured a background
report on Doe from First Advantage. A redacted copy of that report is attached
hereto as Exhibit 1.
23.
The report delivered by First Advantage contained information about
Mr. Doe having been sentenced to probation for a period of between 28 and 360
days for the committing the crime of Larceny from a Motor Vehicle.
24.
At the time First Advantage sent its report to Sentech, it did not notify
Doe of the fact that public record information was being reported by it, nor did it
provide Doe with the name and address of the person to whom such information
was being reported.
6
25.
Upon receiving this report, Sentech terminated Mr. Doe’s placement
with Hazen Trucking, causing Mr. Doe to suffer lost wages, lost employment
opportunity, emotional distress, mental anguish, frustration, humiliation, and
embarrassment.
First Advantage’s Willful Failure to Maintain Reasonable and Strict
Procedures
26.
The First Advantage report was erroneous. Specifically, the
First Advantage report included the following information about Mr. Doe:
See Exhibit 1.
27.
This information was false and incomplete.
28.
Doe was charged with larceny from a motor vehicle and pled guilty
under the provisions of the Holmes Youthful Trainee Act ("HYTA"), M.C.L. §
7
762.11.
29.
Under the provisions of HYTA, upon entry of a guilty plea, the court,
“without entering a conviction” places the youthful offender into the status of a
“youthful trainee” for a defined period of time. M.C.L. § 762.11(1) (emphasis
added). The court may impose certain requirements on the youth during the period
when he is designated as a “youthful trainee” such as maintaining certain
educational or employment standards, or abiding by conditions of probation.
30.
If the individual abides by the court’s conditions during the period of
time when the individual is assigned youthful trainee status, then at the end of the
period established by the court, the charges are dismissed and no conviction is ever
entered.
31.
The purpose of HYTA is to ensure that youthful offenders do not have
criminal conviction records which could permanently damage their ability to
secure employment.
32.
Mr. Doe qualified for and received HYTA status from the court where
his criminal case was pending.
33.
Mr. Doe completed his period as a “youthful trainee” without
violation of the court’s imposed conditions, and all criminal charges were
dismissed pursuant to a Court order that was entered on April 15, 2010.
8
34.
The First Advantage report inaccurately and incompletely portrayed
Mr. Doe’s case.
35.
First, the report inaccurately stated that Mr. Doe was “sentenced” to
“probation” on July 7, 2009. This is incorrect. Mr. Doe was never convicted, and
was therefore never sentenced. Instead, he was placed on youthful trainee status.
36.
Second, the report inaccurately stated that Mr. Doe’s case was
“disposed” on June 4, 2009. This is also incorrect. Mr. Doe’s case was not
disposed until April 15, 2010, when it was dismissed.
37.
Third, the report is inaccurate incomplete and not up to date because it
fails to mention that the charges mentioned therein were dismissed in their entirety
under HYTA on April 15, 2010.
38.
Finally, the report is inaccurate incomplete and not up to date because
it states that the record it reported was “current” as of February 9, 2014. This is
inaccurate because, as of February 9, 2014, Mr. Doe’s case had been dismissed, in
its entirety. As of April 15, 2010, all records relating to Mr. Doe’s arrest, and to his
discharge or dismissal were deemed non-public. Under Michigan law, this means
that the current public record status of Mr. Doe’s case was that it was nonexistent.
39.
First Advantage knew the records it included on its reports regarding
Mr. Doe were inaccurate. Mr. Doe disputed the accuracy of the report, and First
9
Advantage produced an amended report, which omitted the HYTA case. This
amended report, however, came too late to save Mr. Doe’s job.
40.
First Advantage had also omitted the HYTA case from a prior report it
produced on Mr. Doe to another potential employer, Dollar General.
41.
This inconsistency demonstrates that (1) First Advantage knew that
the HYTA case should not have been reported but that (2) it did not have sufficient
procedures in place to ensure that the information was actually kept of its reports.
42.
First Advantage has faced repeated suits for failing to comply with 15
U.S.C. §§ 1681e(b) and 1681k, but has failed to bring itself into compliance with
the FCRA. See, e.g., Staples v. First Advantage LNS Screening Solutions, Inc.,
1:14-cv-05735 (S.D.N.Y); Dedering v. First Advantage LNS Screening Solutions,
Inc., 2:15-cv-01538 (W.D. Wis.); Brown v. Lowe’s Companies, Inc., et al, 5:13-cv-
79 (W.D.N.C.); Alfaro v. First Advantage Lns Screening Solutions, Inc., 3:15-cv-
5813 (D.N.J.); Lang v. First Advantage Background Services Corp., 1:15-cv-2436
(N.D. Ohio).
Class Action Allegations
43.
Plaintiff seeks certification of the following proposed classes (“the
Classes”) in this matter.
a. HYTA Class: All natural persons who were the subject of a report
10
sold by First Advantage within the preceding five years and whose
report contains information concerning a criminal charge that was
dismissed pursuant to HYTA prior to the date on which the report was
issued but as to whom the report does not indicate that the charges
were dismissed.
b. HYTA Sub-Class. All members of the HYTA Class whose reports
were sold to a user who certified to Defendant First Advantage that
the reports would be used for employment purposes.
44.
Excluded from the each of the Classes are officers and directors of
Defendant; members of the immediate families of the officers and directors of
Defendant; their legal representatives, heirs, successors, or assigns; and any entity
in which they have or have had a controlling interest. Also excluded are the judge
to whom this case is assigned and any member of the judge’s immediate family.
45.
This action is brought, and may properly be maintained, as a class
action under Civil Rule 23.
46.
Numerosity: membership in The Classes is so numerous that joinder
of all class members is impractical. Each of the Classes exceeds 100 members.
47.
Typicality: Plaintiff’s claims are typical of the class members’
claims. The FCRA violations committed by Defendants were committed pursuant
11
to uniform policies and procedures, and Defendants treated Plaintiff in the same
manner as other class members in accordance with their standard policies and
practices.
48.
Adequacy: Plaintiff will fairly and adequately protect the interests of
the Class, has retained counsel experienced in complex class action litigation, and
has no conflicts with the members of the class.
49.
Commonality: Common questions of law and fact exist as to all
members of the Class and predominate over any questions solely affecting
individual members of the Class, including without limitation:
(a)
Whether First Advantage utilized reasonable procedures to
insure maximum possible accuracy;
(b)
Whether First Advantage utilized strict procedures to ensure
that information it reported from public records was complete and up to date;
(c)
Whether Defendant’s conduct was willful under FCRA; and
(d)
The proper measure of damages for Defendant’s violations.
50.
The Classes all meet the requirements for certification to seek
monetary relief under Rule of Civil Procedure 23(b)(3), as the questions of law or
fact common to Class members predominate over questions affecting only
individual members, and a class action is superior to other available methods for
12
fairly and efficiently adjudicating the controversy. The prosecution of separate
actions by members of the Classes would create a risk of establishing inconsistent
rulings and/or incompatible standards of conduct for Defendant. For example, one
court might enjoin Defendant from performing the challenged acts, whereas
another might not. Additionally, individual actions may be dispositive of the
interests of the Classes even though certain members of the Classes are not parties
to such actions. Further, a class action is superior to other available methods for
the fair and efficient adjudication of the controversy, for at least the following
reasons:
a.
Absent a class action, Class members as a practical matter will
be unable to obtain redress; Defendant’s violations will continue without remedy;
and additional consumers will be harmed.
b.
It would be a substantial hardship for most individual members
of the Classes if they were forced to prosecute individual actions.
c.
When the liability of Defendant has been adjudicated, the Court
will be able to determine the claims of all members of the Classes.
d.
A class action will permit an orderly and expeditious
administration of Class claims and foster economies of time, effort, and expense.
13
e.
The lawsuit presents no difficulties that would impede its
management by the Court as a class action.
f.
Defendant has acted on grounds generally applicable to Class
members, making Class-wide monetary and injunctive relief appropriate.
CLAIMS FOR RELIEF
COUNT I
15 U.S.C. § 1681e(b)
Failure to Maintain Reasonable Procedures to Insure Maximum Possible
Accuracy
(On Behalf of Plaintiff and the HYTA Class, Asserted Against Defendant First
Advantage)
51.
Section 1681e(b) of the FCRA provides:
Whenever a consumer reporting agency prepares a
consumer report it shall follow reasonable procedures to
assure maximum possible accuracy of the information
concerning the individual about whom the report relates.
52.
Under FCRA Section 1681e(b), First Advantage has a duty to “follow
reasonable procedures to assure maximum possible accuracy of the information” in
its Criminal History Reports. Id. § 1681e(b).
53.
As set forth herein, when preparing the Criminal History Reports,
which are consumer reports, Defendant has lacked, and continues to lack,
reasonable procedures to assure the maximum possible accuracy of the information
14
contained in the Criminal History Reports. Defendant fails to follow such
reasonable procedures because it knowingly, recklessly, and negligently fails to
obtain up to date records from the courthouse, or to take other appropriate steps
ensure that the records it reports contain complete information.
54.
Instead, Defendant includes information about criminal charges that it
learned about from its vendors or had in its databases, even when those criminal
charges were not included in Defendant’s own previous reports, and even when
those criminal charges are inaccurate, out of date, and unreportable.
55.
Defendant’s liability to Plaintiff and the FCRA Class members arose
from the same unlawful policies, practices, or procedures. In particular, Defendant
failed to employ reasonable procedures to ensure maximum possible accuracy of
the information in the consumer reports in question.
56.
Defendant’s violations of Section 1681e(b) were also willful in that (i)
it knew, or reasonably should have known, that it was failing to comply with the
FCRA and/or (ii) it was acting in reckless disregard of its responsibilities under the
FCRA.
57.
As a result of Defendant’s unlawful actions and pursuant to Section
1681n and 1681o, Plaintiff and each Class member are entitled to any actual
damages they sustained or damages of not less than $100 and not more than
15
$1,000; such amount of punitive damages as the court may allow; and the costs of
the action together with reasonable attorney’s fees as determined by the court. See
Section 1681n(a)(1)(A), (2), and (3); and Section 1681o(a)(1), (2).
58.
Given Defendant’s market power, the fact that class members are in
the job market, and the fact that reporting a criminal charge can have devastating
effects on an employment application, above-described willful and negligent
violations present an ongoing threat to the HYTA Class.
COUNT II
15 U.S.C. § 1681k
Failure to Maintain Strict Procedures to Insure Records are Complete and
Up to Date
(On Behalf of Plaintiff and the HYTA Sub-Class, Asserted Against Defendant
First Advantage)
59.
Defendant First Advantage violated the FCRA by failing to maintain
strict procedures to assure that public record information being reported which was
likely to have an adverse effect on the consumer was complete and up to date. See
15 U.S.C. § 1681k(a).
60.
Defendant First Advantage further failed to provide consumers with
contemporaneous notice that it was including public records information in reports
about them, and to identify the entity to which such information was being
reported. See 15 U.S.C. § 1681k(b).
16
61.
The foregoing violations were negligent and/or willful. First
Advantage acted in knowing or reckless disregard of its obligations and the rights
of Plaintiff and other class members under 15 U.S.C. § 1681k(a). In addition to the
conduct set forth above, First Advantage’s willful conduct is reflected by, inter
alia, the following:
a.
The FCRA was enacted in 1970; First Advantage, which was
founded in 1991, has nearly 25 years to become compliant;
b.
First Advantage is a corporation with access to legal advice
through its own general counsel’s office and outside employment
counsel. Yet, there is no contemporaneous evidence that it
determined that its conduct was lawful;
c.
First Advantage knew or had reason to know that its conduct
was inconsistent with FTC guidance, case law, and the plain
language of the Act;
d.
First Advantage voluntarily ran a risk of violating the law
substantially greater than the risk associated with a reading that
was merely careless; and
e.
First Advantage’s violations of the FCRA were repeated and
systematic.
17
62.
Plaintiff and the Strict Procedure Class are entitled to actual damages
or statutory damages of not less than $100 and not more than $1,000 for each and
every one of these violations, pursuant to 15 U.S.C. § 1681n(a)(1)(A).
63.
Plaintiff and the Strict Procedures Class are further entitled to recover
their costs and attorneys’ fees, pursuant to 15 U.S.C. § 1681n(a)(3).
Jury Demand
64.
Mr. Doe demands trial by jury.
Request For Relief
65.
For the reasons set forth above, Mr. Doe requests that the Court
Grant the following relief:
a.
Actual damages for items including lost wages, lost
employment opportunity, emotional distress, mental anguish,
frustration, humiliation, and embarrassment.
b.
Statutory damages in an amount to be determined at trial.
c.
Punitive damages in an amount to be determined at trial.
d.
Costs and attorney fees provided by statute.
e.
Any other relief the Court deems just.
Respectfully Submitted,
18
By: s/ Ian B. Lyngklip
Ian B. Lyngklip P47173
LYNGKLIP & ASSOCIATES
CONSUMER LAW CENTER, PLC
Attorney for John Doe
24500 Northwestern Highway, Ste. 206
Southfield, MI 48075
PHONE: (248) 208-8864
[email protected]
BERGER & MONTAGUE, P.C.
E. Michelle Drake, MN Bar No. 387366
Joseph C. Hashmall, MN Bar No. 392610
43 SE Main Street, Suite 505
Minneapolis, MN 55414
PHONE: (612) 594-5999
Fax: (215) 875-3000
[email protected]
[email protected]
Dated: April 14, 2016
19
| consumer fraud |
U0_rA4kBRpLueGJZXj9S | UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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JOSEPH GUGLIELMO, on behalf of himself and
all others similarly situated,
CLASS ACTION COMPLAINT
AND
Plaintiffs,
v.
DEMAND FOR JURY TRIAL
BENCHMADE KNIFE CO., INC.,
Defendant.
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INTRODUCTION
1.
Plaintiff JOSEPH GUGLIELMO, on behalf of himself and others similarly
situated, asserts the following claims against Defendant BENCHMADE KNIFE
CO., INC. as follows.
2.
Plaintiff is a visually-impaired and legally blind person who requires screen-
reading software to read website content using his computer. Plaintiff uses the
terms “blind” or “visually-impaired” to refer to all people with visual impairments
who meet the legal definition of blindness in that they have a visual acuity with
correction of less than or equal to 20 x 200. Some blind people who meet this
definition have limited vision. Others have no vision.
3.
Based on a 2010 U.S. Census Bureau report, approximately 8.1 million people in
the United States are visually impaired, including 2.0 million who are blind, and
according to the American Foundation for the Blind’s 2015 report, approximately
400,000 visually impaired persons live in the State of New York.
4.
Plaintiff brings this civil rights action against Defendant for its failure to design,
construct, maintain, and operate its website to be fully accessible to and
independently usable by Plaintiff and other blind or visually-impaired people.
Defendant’s denial of full and equal access to its website, and therefore denial of
its goods and services offered thereby, is a violation of Plaintiff’s rights under the
Americans with Disabilities Act (“ADA”).
5.
Because Defendant’s website, www.benchmade.com (the “Website”), is not
equally accessible to blind and visually impaired consumers, it violates the ADA.
Plaintiff seeks a permanent injunction to cause a change in Defendant’s corporate
policies, practices, and procedures so that Defendant’s website will become and
remain accessible to blind and visually-impaired consumers.
JURISDICTION AND VENUE
6.
This Court has subject-matter jurisdiction over this action under 28 U.S.C. § 1331
and 42 U.S.C. § 12181, as Plaintiff’s claims arise under Title III of the ADA, 42
U.S.C. § 12181, et seq., and 28 U.S.C. § 1332.
7.
This Court has supplemental jurisdiction under 28 U.S.C. § 1367 over Plaintiff’s
New York City Human Rights Law, N.Y.C. Admin. Code § 8-101 et seq.,
(“NYCHRL”) claims.
8.
Venue is proper in this district under 28 U.S.C. §1391(b)(1) and (2) because
Defendant conducts and continues to conduct a substantial and significant amount
of business in this District, and a substantial portion of the conduct complained of
herein occurred in this District because Plaintiff attempted to utilize, on a number
of occasions, the subject Website within this Judicial District.
9.
Defendant is subject to personal jurisdiction in this District. Defendant has been
and is committing the acts or omissions alleged herein in the Southern District of
New York that caused injury and violated rights the ADA prescribes to Plaintiff
and to other blind and other visually impaired-consumers. A substantial part of
the acts and omissions giving rise to Plaintiff’s claims occurred in this District: on
several separate occasions, Plaintiff has been denied the full use and enjoyment of
the facilities, goods and services offered to the general public, on Defendant’s
Website in New York County. These access barriers that Plaintiff encountered
have caused a denial of Plaintiff’s full and equal access multiple times in the past,
and now deter Plaintiff on a regular basis from accessing the Defendant’s Website
in the future.
10.
This Court is empowered to issue a declaratory judgment under 28 U.S.C. §§
2201 and 2202.
THE PARTIES
11.
Plaintiff JOSEPH GUGLIELMO, at all relevant times, is and was a resident of
Suffolk County, New York.
12.
Plaintiff is a blind, visually-impaired handicapped person and a member of a
protected class of individuals under the ADA, under 42 U.S.C. § 12102(1)-(2),
and the regulations implementing the ADA set forth at 28 CFR §§ 36.101 et seq.,
and NYCHRL.
13.
Defendant is and was at all relevant times an Oregon Company doing business in
New York.
14.
Defendant’s Website, and its goods, and services offered thereupon, is a public
accommodation within the definition of Title III of the ADA, 42 U.S.C. §
12181(7).
NATURE OF ACTION
15.
The Internet has become a significant source of information, a portal, and a tool
for conducting business, doing everyday activities such as shopping, learning,
banking, researching, as well as many other activities for sighted, blind and
visually-impaired persons alike.
16.
In today’s tech-savvy world, blind and visually impaired people have the ability
to access websites using keyboards in conjunction with screen access software
that vocalizes the visual information found on a computer screen or displays the
content on a refreshable Braille display. This technology is known as screen-
reading software. Screen-reading software is currently the only method a blind or
visually-impaired person may use to independently access the internet. Unless
websites are designed to be read by screen-reading software, blind and visually-
impaired persons are unable to fully access websites, and the information,
products, goods and contained thereon.
17.
Blind and visually-impaired users of Windows operating system-enabled
computers and devices have several screen reading software programs available to
them. Some of these programs are available for purchase and other programs are
available without the user having to purchase the program separately. Job Access
With Speech, otherwise known as “JAWS” is currently the most popular,
separately purchased and downloaded screen-reading software program available
for a Windows computer. Another popular screen-reading software program
available for a Windows computer is NonVisual Desktop Access “NVDA”.
18.
For screen-reading software to function, the information on a website must be
capable of being rendered into text. If the website content is not capable of being
rendered into text, the blind or visually-impaired user is unable to access the same
content available to sighted users.
19.
The international website standards organization, the World Wide Web
Consortium, known throughout the world as W3C, has published version 2.1 of
the Web Content Accessibility Guidelines (“WCAG 2.1”). WCAG 2.1 are well-
established guidelines for making websites accessible to blind and visually-
impaired people. These guidelines are universally followed by most large
business entities and government agencies to ensure their websites are accessible.
20.
Non-compliant websites pose common access barriers to blind and visually-
impaired persons. Common barriers encountered by blind and visually impaired
persons include, but are not limited to, the following:
a.
A text equivalent for every non-text element is not provided;
b.
Title frames with text are not provided for identification and
navigation;
c.
Equivalent text is not provided when using scripts;
d.
Forms with the same information and functionality as for sighted
persons are not provided;
e.
Information about the meaning and structure of content is not
conveyed by more than the visual presentation of content;
f.
Text cannot be resized without assistive technology up to 200%
without losing content or functionality;
g.
If the content enforces a time limit, the user is not able to extend,
adjust or disable it;
h.
Web pages do not have titles that describe the topic or purpose;
i.
The purpose of each link cannot be determined from the link text
alone or from the link text and its programmatically determined link
context;
j.
One or more keyboard operable user interface lacks a mode of
operation where the keyboard focus indicator is discernible;
k.
The default human language of each web page cannot be
programmatically determined;
l.
When a component receives focus, it may initiate a change in
context;
m.
Changing the setting of a user interface component may
automatically cause a change of context where the user has not been
advised before using the component;
n.
Labels or instructions are not provided when content requires user
input, which include captcha prompts that require the user to verify that he
or she is not a robot;
o.
In content which is implemented by using markup languages,
elements do not have complete start and end tags, elements are not nested
according to their specifications, elements may contain duplicate
attributes, and/or any IDs are not unique;
p.
Inaccessible Portable Document Format (PDFs); and,
q.
The name and role of all User Interface elements cannot be
programmatically determined; items that can be set by the user cannot be
programmatically set; and/or notification of changes to these items is not
available to user agents, including assistive technology.
STATEMENT OF FACTS
21.
Defendant is a knife manufacturer that owns and operates www.benchmade.com
(its “Website”), offering features which should allow all consumers to access the
goods and services and which Defendant ensures the delivery of such goods
throughout the United States, including New York State.
22.
Defendant’s Website offers products and services for online sale and general
delivery to the public. The Website offers features which ought to allow users to
browse for items, access navigation bar descriptions and prices, and avail
consumers of the ability to peruse the numerous items offered for sale.
23.
Plaintiff is a visually-impaired and legally blind person, who cannot use a
computer without the assistance of screen-reading software. Plaintiff is, however,
a proficient NVDA screen-reader user and uses it to access the Internet. Plaintiff
has visited the Website on separate occasions using a screen-reader.
24.
On multiple occasions, the last occurring in December of 2019, Plaintiff visited
Defendant’s website, www.benchmade.com, to make a purchase. Despite his
efforts, however, Plaintiff was denied a shopping experience similar to that of a
sighted individual due to the website’s lack of a variety of features and
accommodations, which effectively barred Plaintiff from being able to determine
what specific products were offered for sale.
25.
Many features on the Website lacks alt. text, which is the invisible code
embedded beneath a graphical image. As a result, Plaintiff was unable to
differentiate what products were on the screen due to the failure of the Website to
adequately describe its content. Such issues were predominant in the section
where Plaintiff was attempting, but was unsuccessful, in making a purchase.
26.
Many features on the Website also fail to add a label element or title attribute for
each field. This is a problem for the visually impaired because the screen reader
fails to communicate the purpose of the page element. It also leads to the user not
being able to understand what he or she is expected to insert into the subject field.
As a result, Plaintiff and similarly situated visually impaired users of Defendant’s
Website are unable to enjoy the privileges and benefits of the Website equally to
sighted users.
27.
Many pages on the Website also contain the same title elements. This is a
problem for the visually impaired because the screen reader fails to distinguish
one page from another. In order to fix this problem, Defendant must change the
title elements for each page.
28.
The Website also contained a host of broken links, which is a hyperlink to a non-
existent or empty webpage. For the visually impaired this is especially paralyzing
due to the inability to navigate or otherwise determine where one is on the website
once a broken link is encountered. For example, upon coming across a link of
interest, Plaintiff was redirected to an error page. However, the screen-reader
failed to communicate that the link was broken. As a result, Plaintiff could not get
back to his original search.
29.
These access barriers effectively denied Plaintiff the ability to use and enjoy
Defendant’s website the same way sighted individuals do.
30.
It is, upon information and belief, Defendant’s policy and practice to deny
Plaintiff, along with other blind or visually-impaired users, access to Defendant’s
website, and to therefore specifically deny the goods and services that are offered
to the general public. Due to Defendant’s failure and refusal to remove access
barriers to its website, Plaintiff and visually-impaired persons have been and are
still being denied equal access to Defendant’s Website, and the numerous goods
and services and benefits offered to the public through the Website.
31.
Due to the inaccessibility of Defendant’s Website, blind and visually-impaired
customers such as Plaintiff, who need screen-readers, cannot fully and equally use
or enjoy the facilities, products, and services Defendant offers to the public on its
Website. The access barriers Plaintiff encountered have caused a denial of
Plaintiff’s full and equal access in the past, and now deter Plaintiff on a regular
basis from equal access to the Website.
32.
If the Website were equally accessible to all, Plaintiff could independently
navigate the Website and complete a desired transaction as sighted individuals do.
33.
Through his attempts to use the Website, Plaintiff has actual knowledge of the
access barriers that make these services inaccessible and independently unusable
by blind and visually-impaired people.
34.
Because simple compliance with the WCAG 2.1 Guidelines would provide
Plaintiff and other visually-impaired consumers with equal access to the Website,
Plaintiff alleges that Defendant has engaged in acts of intentional discrimination,
including but not limited to the following policies or practices:
a.
Constructing and maintaining a website that is inaccessible to
visually-impaired individuals, including Plaintiff;
b.
Failure to construct and maintain a website that is sufficiently
intuitive so as to be equally accessible to visually impaired individuals,
including Plaintiff; and,
c.
Failing to take actions to correct these access barriers in the face of
substantial harm and discrimination to blind and visually-impaired
consumers, such as Plaintiff, as a member of a protected class.
35.
Defendant therefore uses standards, criteria or methods of administration that have
the effect of discriminating or perpetuating the discrimination of others, as alleged
herein.
36.
The ADA expressly contemplates the injunctive relief that Plaintiff seeks in this
action. In relevant part, the ADA requires:
In the case of violations of . . . this title, injunctive relief shall include an order to
alter facilities to make such facilities readily accessible to and usable by
individuals with disabilities . . . Where appropriate, injunctive relief shall also
include requiring the . . . modification of a policy . . .
42 U.S.C. § 12188(a)(2).
37.
Because Defendant’s Website has never been equally accessible, and because
Defendant lacks a corporate policy that is reasonably calculated to cause its
Website to become and remain accessible, Plaintiff invokes 42 U.S.C. §
12188(a)(2) and seeks a permanent injunction requiring Defendant to retain a
qualified consultant acceptable to Plaintiff (“Agreed Upon Consultant”) to assist
Defendant to comply with WCAG 2.1 guidelines for Defendant’s Website.
Plaintiff seeks that this permanent injunction requires Defendant to cooperate with
the Agreed Upon Consultant to:
a.
Train Defendant’s employees and agents who develop the Website
on accessibility compliance under the WCAG 2.1 guidelines;
b.
Regularly check the accessibility of the Website under the WCAG
2.1 guidelines;
c.
Regularly test user accessibility by blind or vision-impaired
persons to ensure that Defendant’s Website complies under the WCAG
2.1 guidelines; and,
d.
Develop an accessibility policy that is clearly disclosed on
Defendant’s Websites, with contact information for users to report
accessibility-related problems.
38.
Although Defendant may currently have centralized policies regarding
maintaining and operating its Website, Defendant lacks a plan and policy
reasonably calculated to make them fully and equally accessible to, and
independently usable by, blind and other visually-impaired consumers.
39.
Defendant has, upon information and belief, invested substantial sums in
developing and maintaining their Website and has generated significant revenue
from the Website. These amounts are far greater than the associated cost of
making their Website equally accessible to visually impaired customers.
40.
Without injunctive relief, Plaintiff and other visually-impaired consumers will
continue to be unable to independently use the Website, violating their rights.
CLASS ACTION ALLEGATIONS
41.
Plaintiff, on behalf of himself and all others similarly situated, seeks to certify a
nationwide class under Fed. R. Civ. P. 23(a) and 23(b)(2): all legally blind
individuals in the United States who have attempted to access Defendant’s Website
and as a result have been denied access to the equal enjoyment of goods and
services, during the relevant statutory period.
42.
Plaintiff, on behalf of himself and all others similarly situated, seeks to certify a New
York City subclass under Fed. R. Civ. P. 23(a) and 23(b)(2): all legally blind
individuals in the City of New York who have attempted to access Defendant’s
Website and as a result have been denied access to the equal enjoyment of goods and
services offered, during the relevant statutory period.
43.
Common questions of law and fact exist amongst the Class, including:
a.
Whether Defendant’s Website is a “public accommodation” under
the ADA;
b.
Whether Defendant’s Website is a “place or provider of public
accommodation” under the NYCHRL;
c.
Whether Defendant’s Website denies the full and equal enjoyment
of
its
products,
services,
facilities,
privileges,
advantages,
or
accommodations to people with visual disabilities, violating the ADA; and
d.
Whether Defendant’s Website denies the full and equal enjoyment
of
its
products,
services,
facilities,
privileges,
advantages,
or
accommodations to people with visual disabilities, violating the
NYCHRL.
44.
Plaintiff’s claims are typical of the Class. The Class, similarly to the Plaintiff, are
severely visually impaired or otherwise blind, and claim that Defendant has
violated the ADA or NYCHRL by failing to update or remove access barriers on
its Website so either can be independently accessible to the Class.
45.
Plaintiff will fairly and adequately represent and protect the interests of the Class
Members because Plaintiff has retained and is represented by counsel competent
and experienced in complex class action litigation, and because Plaintiff has no
interests antagonistic to the Class Members. Class certification of the claims is
appropriate under Fed. R. Civ. P. 23(b)(2) because Defendant has acted or refused
to act on grounds generally applicable to the Class, making appropriate both
declaratory and injunctive relief with respect to Plaintiff and the Class as a whole.
46.
Alternatively, class certification is appropriate under Fed. R. Civ. P. 23(b)(3)
because fact and legal questions common to Class Members predominate over
questions affecting only individual Class Members, and because a class action is
superior to other available methods for the fair and efficient adjudication of this
litigation.
47.
Judicial economy will be served by maintaining this lawsuit as a class action in
that it is likely to avoid the burden that would be otherwise placed upon the
judicial system by the filing of numerous similar suits by people with visual
disabilities throughout the United States.
FIRST CAUSE OF ACTION
VIOLATIONS OF THE ADA, 42 U.S.C. § 12181 et seq.
48.
Plaintiff, on behalf of himself and the Class Members, repeats and realleges
every allegation of the preceding paragraphs as if fully set forth herein.
49.
Section 302(a) of Title III of the ADA, 42 U.S.C. § 12101 et seq., provides:
No individual shall be discriminated against on the basis of disability in the full
and equal enjoyment of the goods, services, facilities, privileges, advantages, or
accommodations of any place of public accommodation by any person who owns,
leases (or leases to), or operates a place of public accommodation.
42 U.S.C. § 12182(a).
50.
Defendant’s Website is a public accommodations within the definition of Title III
of the ADA, 42 U.S.C. § 12181(7). The Website is a service that is offered to the
general public, and as such, must be equally accessible to all potential consumers.
51.
Under Section 302(b)(1) of Title III of the ADA, it is unlawful discrimination to
deny individuals with disabilities the opportunity to participate in or benefit from
the products, services, facilities, privileges, advantages, or accommodations of an
entity. 42 U.S.C. § 12182(b)(1)(A)(i).
52.
Under Section 302(b)(1) of Title III of the ADA, it is unlawful discrimination to
deny individuals with disabilities an opportunity to participate in or benefit from
the products, services, facilities, privileges, advantages, or accommodation, which
is equal to the opportunities afforded to other individuals. 42 U.S.C. §
12182(b)(1)(A)(ii).
53.
Under Section 302(b)(2) of Title III of the ADA, unlawful discrimination also
includes, among other things:
[A] failure to make reasonable modifications in policies, practices, or procedures,
when such modifications are necessary to afford such goods, services, facilities,
privileges, advantages, or accommodations to individuals with disabilities, unless
the entity can demonstrate that making such modifications would fundamentally
alter the nature of such goods, services, facilities, privileges, advantages or
accommodations; and a failure to take such steps as may be necessary to ensure
that no individual with a disability is excluded, denied services, segregated or
otherwise treated differently than other individuals because of the absence of
auxiliary aids and services, unless the entity can demonstrate that taking such
steps would fundamentally alter the nature of the good, service, facility, privilege,
advantage, or accommodation being offered or would result in an undue burden.
42 U.S.C. § 12182(b)(2)(A)(ii)-(iii).
54.
The acts alleged herein constitute violations of Title III of the ADA, and the
regulations promulgated thereunder. Plaintiff, who is a member of a protected
class of persons under the ADA, has a physical disability that substantially limits
the major life activity of sight within the meaning of 42 U.S.C. §§ 12102(1)(A)-
(2)(A). Furthermore, Plaintiff has been denied full and equal access to the
Website, has not been provided services that are provided to other patrons who
are not disabled, and has been provided services that are inferior to the services
provided to non-disabled persons. Defendant has failed to take any prompt and
equitable steps to remedy its discriminatory conduct. These violations are
ongoing.
55.
Under 42 U.S.C. § 12188 and the remedies, procedures, and rights set forth and
incorporated therein, Plaintiff, requests relief as set forth below.
SECOND CAUSE OF ACTION
VIOLATIONS OF THE NYCHRL
56.
Plaintiff, on behalf of himself and the New York City Sub-Class Members, repeats
and realleges every allegation of the preceding paragraphs as if fully set forth
herein.
57.
N.Y.C. Administrative Code § 8-107(4)(a) provides that “It shall be an unlawful
discriminatory practice for any person, being the owner, lessee, proprietor,
manager, superintendent, agent or employee of any place or provider of public
accommodation, because of . . . disability . . . directly or indirectly, to refuse,
withhold from or deny to such person, any of the accommodations, advantages,
facilities or privileges thereof.”
58.
Defendant’s Website is a sales establishment and public accommodations within
the definition of N.Y.C. Admin. Code § 8-102(9).
59.
Defendant is subject to NYCHRL because it owns and operates its Website,
making it a person within the meaning of N.Y.C. Admin. Code § 8-102(1).
60.
Defendant is violating N.Y.C. Administrative Code § 8-107(4)(a) in refusing to
update or remove access barriers to Website, causing its Website and the services
integrated with such Website to be completely inaccessible to the blind. This
inaccessibility denies blind patrons full and equal access to the facilities, products,
and services that Defendant makes available to the non-disabled public.
61.
Defendant is required to “make reasonable accommodation to the needs of
persons with disabilities . . . any person prohibited by the provisions of [§ 8-107 et
seq.] from discriminating on the basis of disability shall make reasonable
accommodation to enable a person with a disability to . . . enjoy the right or rights
in question provided that the disability is known or should have been known by
the covered entity.” N.Y.C. Admin. Code § 8-107(15)(a).
62.
Defendant’s actions constitute willful intentional discrimination against the Sub-
Class on the basis of a disability in violation of the N.Y.C. Administrative Code §
8-107(4)(a) and § 8-107(15)(a) in that Defendant has:
a.
constructed and maintained a website that is inaccessible to blind
class members with knowledge of the discrimination; and/or
b.
constructed and maintained a website that is sufficiently intuitive
and/or obvious that is inaccessible to blind class members; and/or
c.
failed to take actions to correct these access barriers in the face of
substantial harm and discrimination to blind class members.
63.
Defendant has failed to take any prompt and equitable steps to remedy their
discriminatory conduct. These violations are ongoing.
64.
As such, Defendant discriminates, and will continue in the future to discriminate
against Plaintiff and members of the proposed class and subclass on the basis of
disability in the full and equal enjoyment of the products, services, facilities,
privileges, advantages, accommodations and/or opportunities of its Website under
§ 8-107(4)(a) and/or its implementing regulations. Unless the Court enjoins
Defendant from continuing to engage in these unlawful practices, Plaintiff and
members of the class will continue to suffer irreparable harm.
65.
Defendant’s actions were and are in violation of the NYCHRL and therefore
Plaintiff invokes his right to injunctive relief to remedy the discrimination.
66.
Plaintiff is also entitled to compensatory damages, as well as civil penalties and
fines under N.Y.C. Administrative Code § 8-120(8) and § 8-126(a) for each
offense as well as punitive damages pursuant to § 8-502.
67.
Plaintiff is also entitled to reasonable attorneys’ fees and costs.
68.
Under N.Y.C. Administrative Code § 8-120 and § 8-126 and the remedies,
procedures, and rights set forth and incorporated therein Plaintiff prays for
judgment as set forth below.
THIRD CAUSE OF ACTION
DECLARATORY RELIEF
69.
Plaintiff, on behalf of himself and the Class and New York City Sub-Classes
Members, repeats and realleges every allegation of the preceding paragraphs as if
fully set forth herein.
70.
An actual controversy has arisen and now exists between the parties in that
Plaintiff contends, and is informed and believes that Defendant denies, that its
Website contains access barriers denying blind customers the full and equal
access to the products, services and facilities of its Website, which Defendant
owns, operates and controls, fails to comply with applicable laws including, but
not limited to, Title III of the Americans with Disabilities Act, 42 U.S.C. §§
12182, et seq., and N.Y.C. Admin. Code § 8-107, et seq. prohibiting
discrimination against the blind.
71.
A judicial declaration is necessary and appropriate at this time in order that each
of the parties may know their respective rights and duties and act accordingly.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff respectfully requests this Court grant the following
relief:
a.
A preliminary and permanent injunction to prohibit Defendant
from violating the Americans with Disabilities Act, 42 U.S.C. §§ 12182, et
seq., N.Y.C. Administrative Code § 8-107, et seq., and the laws of New
York;
b.
A preliminary and permanent injunction requiring Defendant to
take all the steps necessary to make its Website into full compliance with
the requirements set forth in the ADA, and its implementing regulations,
so that the Website is readily accessible to and usable by blind individuals;
c.
A declaration that Defendant owns, maintains and/or operates its
Website in a manner that discriminates against the blind and which fails to
provide access for persons with disabilities as required by Americans with
Disabilities Act, 42 U.S.C. §§ 12182, et seq., N.Y.C. Administrative Code
§ 8-107, et seq., and the laws of New York
d.
An order certifying the Class and Sub-Classes under Fed. R. Civ.
P. 23(a) & (b)(2) and/or (b)(3), appointing Plaintiff as Class
Representative, and his attorneys as Class Counsel;
e.
Compensatory damages in an amount to be determined by proof,
including all applicable statutory and punitive damages and fines, to
Plaintiff and the proposed class and subclasses for violations of their civil
rights under New York City Human Rights Law and City Law;
f.
Pre- and post-judgment interest;
g.
An award of costs and expenses of this action together with
reasonable attorneys’ and expert fees; and
h.
Such other and further relief as this Court deems just and proper.
DEMAND FOR TRIAL BY JURY
Pursuant to Fed. R. Civ. P. 38(b), Plaintiff demands a trial by jury on all questions
of fact the Complaint raises.
Dated: Hackensack, New Jersey
December 19, 2019
STEIN SAKS, PLLC
By: /s/ David P. Force
David P. Force, Esq.
[email protected]
285 Passaic Street
Hackensack, NJ 07601
Tel: (201) 282-6500
Fax: (201) 282-6501
ATTORNEYS FOR PLAINTIFF
| civil rights, immigration, family |
XwYlM4cBD5gMZwcznduC | Bonny E. Sweeney (SBN 176174)
Seth R. Gassman (SBN 311702)
HAUSFELD LLP
600 Montgomery Street, Suite 3200
San Francisco, CA 94111
Tel.: 415-633-1908
Fax: 415-358-4980
[email protected]
[email protected]
[Additional Counsel Listed on Signature Page]
THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF CALIFORNIA
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
:
KALEIDA HEALTH, on
:
behalf of itself and all others similarly
:
3:21-cv-05266
situated
:
:
Civil Action No._____________
Plaintiff,
:
:
v.
:
COMPLAINT AND JURY DEMAND
:
INTUITIVE SURGICAL, INC.
:
:
Defendant.
:
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Plaintiff Kaleida Health, on behalf of itself and all others similarly situated, upon
knowledge with respect to its own actions and upon information and belief with respect to all
other matters, alleges by way of Complaint against Defendant Intuitive Surgical, Inc.
(“Intuitive”):
INTRODUCTION
1.
This antitrust action, brought under Sections 1 and 2 of the Sherman Act, involves
abuse of monopoly power claims, including a tying and monopoly leveraging scheme
implemented by Intuitive in the sale of its da Vinci Surgical Robot System (“da Vinci”). Intuitive
has obtained patents giving it monopoly power in the U.S. surgical robot market, but unlawfully
leveraged that power to restrict competition in the separate (a) da Vinci surgical robot service
aftermarket, and (b) da Vinci surgical robot instrument service aftermarket, by, among other
things as alleged herein, tying the sale of the da Vinci to the service of the robot and the
necessary robot instruments.
2.
Intuitive conditions the sale or lease of the da Vinci on the purchaser’s acceptance
of Intuitive’s mandatory service contract. The service contract requires the purchaser to use
Intuitive as the sole service provider for all da Vinci systems, and prohibits the purchaser from
either servicing the robot itself or hiring an independent robot repair company (“IRRC”) to
service the da Vinci.
3.
Intuitive also ties the service, including repair and replacement, of da Vinci
surgical instruments, sold under the brand name “EndoWrist,” to the sale or lease of its robot
system. Intuitive restricts the number of times a purchaser may use the EndoWrist instruments, in
most cases to a mere ten uses. This forces Plaintiff and proposed Class members to purchase
substantially more EndoWrists than necessary, rather than allowing the EndoWrists to be
serviced and repaired for longer use, more in keeping with their useful lives. Intuitive’s service
of an EndoWrist instrument typically involves the sale and installation of a new replacement
EndoWrist. According to the terms of the da Vinci sales agreements and service contracts,
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hospitals cannot hire IRRCs to service or repair their EndoWrist instruments (i.e., clean or
sharpen them for longer use).
4.
There are relevant primary markets for (a) surgical robots, (b) surgical robot
instruments, and (c) the repair and/or replacement of surgical robots and surgical robot
instruments. Additionally, there are relevant aftermarkets for service of (a) da Vinci robots; and
(b) EndoWrist instruments (which includes their repair and replacement), which are separate
from the primary markets. Intuitive has monopoly power in every relevant market and
aftermarket. Intuitive’s abuse of monopoly power scheme illegally exploits its market power in
the surgical robot market to foreclose competition in the da Vinci Service and EndoWrist Service
Aftermarkets. The scheme is successful and has almost completely inhibited competition in the
service aftermarkets for either the da Vinci or EndoWrists, thus precluding customers from using
the IRRCs, which deliver the same quality service at lower prices. Intuitive’s conduct has
thereby significantly increased costs to Plaintiff and the proposed Class. For example, IRRCs
Restore Robotics LLC (“Restore”), Surgical Instrument Service Company, Inc. (“SIS”), Revanix
Biomedical (“Revanix”), and Rebotix Repair LLC (“Rebotix”) offer repair services for the da
Vinci and EndoWrists by skilled and experienced technicians.
5.
Defendant’s anticompetitive scheme has had the effect of driving the majority of
Intuitive’s annual revenues: in 2019, Intuitive reported product revenue of $2.621 billion in the
U.S. out of a total $3.1 billion in U.S. revenue. Product revenues comprise revenues from the
sales of da Vincis, accompanying accessories, EndoWrists and replacement EndoWrists. Most of
Intuitive’s U.S. revenue (57%) was attributable to instrument and accessory sales and
replacement, and 16% was attributable to service contracts. While the coronavirus pandemic
reduced the overall da Vinci-related revenues in 2020, Intuitive’s revenues from its related
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service and repair offerings still exceeded $2 billion in 2020 and represented approximately 77%
of its total revenue in the U.S.
6.
But for Intuitive’s unlawful abuse of monopoly power, IRRCs could service the
da Vinci and EndoWrists, which would allow for competitive pricing in the da Vinci and
EndoWrist Service Aftermarkets. For example, SIS states it charges its customers approximately
30-45% less to clean or repair an EndoWrist than Intuitive charges to replace the same
EndoWrist. Restore also estimates that Intuitive charges approximately 30% higher prices on
average for EndoWrist replacement as compared to EndoWrist repairs performed by IRRCs.
Denying IRRCs the ability to service da Vincis forces Plaintiff and proposed Class members
such as hospitals and clinics to pay supracompetitive prices for these services. Likewise, denying
IRRCs the ability to service EndoWrists forces Plaintiff and proposed class members to spend
thousands of dollars replacing instruments that could be repaired and safely reused throughout
those instruments’ useful lives.
7.
For these reasons and to remedy the injuries that have been caused by Intuitive’s
anticompetitive conduct, Plaintiff and the proposed Class seek treble damages.
PARTIES
8.
Plaintiff Kaleida Health is a New York not-for-profit corporation with its
principal place of business in Buffalo, New York. During the proposed Class Period (defined in
paragraph 104, infra), Plaintiff Kaleida leased da Vinci Xi models directly from Defendant
Intuitive, pursuant to written lease agreements, and it paid Defendant Intuitive for service to its
da Vincis and EndoWrists. As a result of Intuitive’s antitrust violations, Plaintiff and members of
the proposed Class (defined in paragraph 104, infra) have been injured in their business or
property.
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9.
Defendant Intuitive Surgical, Inc. is a Delaware corporation with its principal
place of business at 1020 Kifer Road, Sunnyvale, CA. Intuitive is the creator and manufacturer
of the da Vinci, along with its accessories and instruments, including the EndoWrist line of
surgical instruments. Intuitive directly sells da Vincis and EndoWrists, along with associated
parts and services, to hospitals, clinics and surgical centers throughout the United States,
including in the Northern District of California.
VENUE AND JURISDICTION
10.
This complaint is filed under Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1
and 2. This Court has jurisdiction over the federal antitrust law claims alleged herein under 28
U.S.C. §§ 1331, 1337, 2201 and 2202, and 15 U.S.C. §§ 15 and 26.
11.
Defendant transacts business and is found in this district. Substantial interstate
trade and commerce involved and affected by the alleged violations of antitrust law occurs
within this district. The acts complained of have had substantial anticompetitive effects in this
district. Venue is proper in this district under 28 U.S.C. § 1391 and 15 U.S.C. §§ 15, 22 and 26.
12.
Intradistrict Assignment. Although antitrust class actions are excluded from Local
Rule 3-2(c), Intuitive is headquartered in Sunnyvale, California.
GENERAL ALLEGATIONS
A. Relevant Markets
1.
The Robotic Surgical Systems Market and Intuitive’s Monopoly Power in
That Market
a. The Robotic Surgical Systems Product Market
13.
Robotic surgical systems are used for minimally invasive soft tissue surgeries
performed between the pelvis and the head. Robotic surgery, like laparoscopic surgery done by
hand, makes several incisions in soft tissue for the insertion of small surgical instruments to
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perform a surgical procedure. The surgeon, sitting at a computer, uses hand-controls to
manipulate the instruments that are attached to the system by robotic arms with joints.
14.
Robotic surgeries greatly mirror laparoscopic surgeries that have been performed
by hand for decades. However, robotic surgeries have a variety of practical advantages over
traditional laparoscopic surgeries, including:
i.
Stereoscopic high-definition cameras for 3-D visibility;
ii.
An additional robotic arm that allows the simultaneous use of three
instruments;
iii.
Wrist joints that allow for an expanded range of motion compared to
human mobility;
iv.
The ability to precisely perform small discrete movements with the robotic
arms and instruments;
v.
Minimizing surgeon fatigue; and
vi.
Decreasing complication rates and reducing the lengths of patient stays.
15.
There is a relevant product market for robotic surgical systems. Surgical robots
have no practical substitute, because although robotic surgery is significantly more expensive
and less profitable than traditional laparoscopic surgical procedures, hospitals are expected to
offer robotic surgeries.
16.
In fact, the very characteristics that make surgical robots unique and more
expensive – enhanced visualization using high-definition cameras, precise and tremor-free
instrument controls, advanced instrumentality, and improved surgeon ergonomics – make robotic
surgeries preferable to traditional laparoscopic procedures for surgeons. Notwithstanding the fact
that robotic surgery is itself more expensive than traditional laparoscopic surgery, hospitals
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believe that robotic surgery can lower the overall cost to treat per episode by reducing
complications, shortening recovery times and hospital stays, and resulting in better long-term
health outcomes and higher patient satisfaction than with traditional laparoscopic surgery. Many
patients find that robotic surgery reduces pain, scarring, and is safer and more effective than
traditional laparoscopic surgeries. Thus, robotic surgery is generally preferable for hospitals and
their surgeons and patients.
17.
There is a very low cross-elasticity of demand between surgical robots and
laparoscopic surgery equipment, instruments, and service. A 2017 study estimated that hospitals
spent $1,701 on average per surgical robot procedure, which includes purchasing and
maintaining the system, an expense that is novel to robotic surgery.1 It also found that the robotic
surgical system’s instruments and accessories cost on average $1,866 per procedure.2 By
comparison, the study estimated that instruments in traditional laparoscopic surgeries cost less
than $1,000 per procedure.3 Further, most insurance plans pay the same amount for minimally
invasive robotic surgery and laparoscopic surgery, such that patients pay much more out of
pocket for minimally invasive robotic surgery and hospitals have lower (and sometimes
negative) margins on minimally invasive robotic surgery. Nevertheless, the estimated procedure
volume for robotic surgery increased from 136,000 in 2008 to 877,000 in 2017 for a
compounded annual growth rate of 23%.4 Thus, it is apparent that an increase in the cost of a
minimally invasive surgical robot, instruments, and service does not lead doctors or patients to
choose laparoscopic or traditional surgery equipment instead, nor would a change in the cost of
1 Christopher P. Childers and Melinda Maggard-Gibbons, Research Letter: Estimation of the Acquisition and
Operating Costs for Robotic Surgery, 320 Journal of American Medical Association 835, 836 (August 28, 2018).
2 Id.
3 Id.
4 Id.
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traditional or laparoscopic equipment affect the market for minimally invasive surgical robots,
instruments, and service.
18.
Likewise, instead of using cheaper laparoscopic equipment for surgeries, hospitals
are investing millions in replacing their laparoscopic equipment with robotic surgical systems,
even at much higher prices. Accordingly, neither laparoscopic surgery nor any other procedure is
substitutable with a robotic surgical system, as hospitals will not switch to those procedures even
if the price of the robotic surgical system is raised above competitive levels.
19.
Robotic surgical systems and traditional laparoscopic surgical equipment occupy
separate economic markets. The financial and healthcare press refer specifically to the market for
surgical robots and competition in surgical robots. Surgeons can specialize in robotic surgery,
and there are several professional and trade associations focused on robotic surgery such as the
Society for Robotic Surgery and the Clinical Robotic Surgery Association. Surgical robots have
very distinct prices.
20.
Intuitive, founded in 1995, designs, manufactures, and markets the da Vinci
directly to its customers in the U.S. The Food and Drug Administration (“FDA”) approved the da
Vinci for general laparoscopic surgery in 2000.5 It was the only surgical robot system approved
by the FDA for sale in the U.S. market until 2015. It is approved for both adult and pediatric use.
21.
The da Vinci, pictured below in Figure 1, consists of three main components: the
surgeon’s console where the surgeon sits to perform the operation; the patient-side cart which
holds the camera and surgical instruments controlled by the surgeon; and the vision system
which manages communication between all the system’s component parts and has a view screen
that allows the care team to view the surgery in real time.6
5 Intuitive (Form 10-K), at 5 (Feb. 10, 2021).
6 Id. at 6.
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Figure 1: The Da Vinci Surgical System
22.
There are four generations of Intuitive da Vincis: the latest generation includes the
Xi, X, and SP models. The third generation includes the Si model; the second is the S model; and
the first-generation system is the ‘standard’ surgical system. The da Vinci SP is the latest system
to be launched, in 2018.7 The da Vinci X and Xi systems utilize different surgical instruments
than earlier generation systems.
23.
Intuitive sells the da Vinci directly to hospitals and surgical centers, and also
enters lease arrangements directly with certain qualified customers, a practice it started in 2013.8
7 Id. at 63.
8 Intuitive (Form 10-K), at 56 (Feb. 10, 2021). Intuitive also sells the da Vinci directly to leasing companies. When
hospitals acquire da Vincis through leasing companies, hospitals enter an independent arrangement with the leasing
company. Id.
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It has also entered usage-based arrangements with larger customers. Under such arrangements,
hospitals are charged for the system and service as the systems are utilized.
24.
As of December 31, 2020, Intuitive had an installed base of 3,720 da Vincis in the
U.S.9 The U.S. installed base has increased by over 45% in the past four years alone: as of
December 31, 2016, Intuitive had an installed base of 2,563 da Vincis in the U.S.10 Moreover,
despite the coronavirus pandemic, the U.S. installed base grew by over 5% in 2020.11
25.
The da Vinci is a minimally invasive soft tissue surgical robot and may be used to
perform a variety of surgical procedures including general, gynecologic, urologic, cardiothoracic,
and head and neck surgeries. While other companies have introduced products in the field of
robotic-assisted surgery, most of those machines cannot be used for minimally invasive soft
tissue surgeries and none is a significant competitor in the surgical robot market. For example, a
natural orifice surgical robot allows a surgeon to insert a flexible scope with a camera into the
abdominal cavity via one of the body’s natural orifices. The surgeon may then perform throat,
neck, or colorectal surgical procedures. However, the robot can only operate instruments
introduced through the tube inserted into the natural orifice. It is also not indicated for pediatric
use. The constraints imposed by both the mode of access and the limited availability of tools for
use with natural orifice surgical robots pose several challenges for surgeons and preclude it from
competing in the surgical robot market. Likewise, orthopedic robots, which are designed for
assisting in the removal of bone and aligning prosthetics for knee and hip replacement, are not
indicated for use in minimally invasive soft tissue surgery and are not a practical substitute for
surgical robots.
9 Id. at 10 (Feb. 10, 2021).
10 Intuitive (Form 10-K), at 9 (Feb. 6, 2017).
11 Intuitive (Form 10-K), at 10 (Feb. 7, 2020) (3,531 systems in the U.S. as of December 31, 2019).
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26.
In 2020, approximately 876,000 procedures were performed using the da Vinci in
the U.S.12
27.
The da Vinci ranges in price from $500,000 to $2.5 million. Intuitive reported
$830.7 million in revenue from da Vinci sales in the U.S. in 2019, accounting for 61.7% of
systems sales worldwide.13
28.
Intuitive sells all necessary robot service, and over 80 different types of surgical
instruments for use with the da Vinci under the EndoWrist brand. As shown in Figure 2, below,
EndoWrist instruments are modeled after the human wrist and offer a greater range of motion
than the human hand. Figure 3, below, demonstrates the variety of EndoWrists available to
hospitals.
Figure 2: EndoWrist modeled after human hand14
12 Intuitive (Form 10-K), at 60 (Feb. 10, 2021).
13 Intuitive (Form 10-K), at 87 (Feb. 7, 2020).
14 Palep J. H. (2009). Robotic assisted minimally invasive surgery. Journal of minimal access surgery, 5(1),
1–7. https://doi.org/10.4103/0972-9941.51313; Intuitive; and Longmore, S. K., Naik, G., & Gargiulo, G. D. (2020).
Laparoscopic Robotic Surgery: Current Perspective and Future Directions. Robotics, 9(2), 42.
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Figure 3: Variety of EndoWrists available for use with the da Vinci
29.
Intuitive sells a variety of EndoWrist instruments with customizable tips for
various surgical procedures including forceps, scissors, scalpels, and clamps. The da Vinci was
designed to work exclusively with instruments manufactured and sold by Intuitive. Thus,
EndoWrists are the only instruments compatible with the da Vinci and the only instruments
approved by the FDA for use with the da Vinci.
30.
As derivative markets of the da Vinci system, the demand for da Vinci and
EndoWrist service is directly linked to the installed base of da Vincis and how often those
systems are used.
31.
Intuitive installs a programmable memory chip inside each instrument that limits
the number of times the instrument may be used. A majority of EndoWrists have a maximum
usage limit of 10.
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b. The Geographic Market for Surgical Robot Systems
32.
There is a national geographic market for surgical robot systems in the U.S. The
FDA regulates the approval of all medical equipment in the U.S., including surgical robot
systems. Manufacturers who wish to sell surgical robot systems in the U.S. must obtain FDA
approval before doing so.
33.
The surgical robot systems approved for use in the U.S. are not substitutable;
hospitals cannot import or operate non-approved surgical robot systems.
34.
U.S. hospitals are thus unable to buy surgical robot systems from suppliers in
other countries, even if Intuitive raises its surgical robot system prices above competitive levels.
c. Intuitive Has a Monopoly in the U.S. Market for Surgical Robots.
35.
Intuitive has monopoly power in the U.S. market for the sale of minimally
invasive soft tissue surgical robots and, as a result, can and does exclude competition and
maintain supracompetitive prices for the da Vinci.
36.
The number of procedures performed using the da Vinci has typically increased at
least 14% year-over-year since 2017, with a 1% decrease in procedures performed in 2020 due to
the ongoing Coronavirus pandemic.15
37.
In its most recent Annual Report, Intuitive states that it faces competition in the
fields of “existing open surgery, conventional MIS [minimally invasive surgery], drug therapies,
radiation treatment, and emerging interventional surgical approaches” and robotic-assisted
surgery.16 Intuitive does not cite any competition in the robotic surgical system market. A
company called Asensus (formerly known as TransEnterix) received FDA approval for
15 Intuitive (Form 10-K), at 60 (Feb. 10, 2021).
16 Id. at 12.
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commercial sale of its surgical robot in the U.S. in 2017,17 shown below in Figure 4. Sold under
the Senhance brand name, the robot is approved to perform gynecological, colorectal, and
cholecystectomy surgeries, and inguinal hernia repair. It cannot perform certain surgeries, such
as cardiothoracic or urological surgeries, making it less functional than the da Vinci. Nor is it
approved for pediatric use. Asensus reported just $90,000 in revenues from system sales in 2019
in the U.S. and has had “limited commercial success to date” in the U.S.18
Figure 4: Senhance Surgical Robot19
38.
Asensus’ de minimis market share in the surgical robot market is due to Intuitive’s
long established presence in U.S. hospitals, the amount of experience U.S. surgeons have with
the da Vinci, and the number of da Vincis installed in the U.S. versus Senhance robots. Thus,
17 Asensus (f.k.a. TransEnterix) (Form 10-K), at 4 (March 16, 2020).
18 Id. at 13.
19 TransEnterix, Inc. Unveils New Brand Identity for Robotic Surgical System: Establishes Senhance™ to
Communicate New Era in Robotic Surgery, BusinessWire (Sept. 7, 2016),
https://www.businesswire.com/news/home/20160907005187/en/TransEnterix-Inc.-Unveils-New-Brand-Identity-for-
Robotic-Surgical-System.
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neither Senhance, nor any other company, is a significant competitor in the surgical robot
market.
39.
While other companies have introduced products in the field of robotic-assisted
surgery, these machines are not part of the surgical robot market and thus are not competitors of
Intuitive’s da Vinci. For example, a company called Medrobotics received clearance for a natural
orifice surgical robot on July 23, 2015. However, the robot, sold under the Flex system brand
name, can only operate instruments introduced through the tube inserted into the natural body
orifice. Thus, due to its design limitations, it is only indicated for a limited range of procedures
and is not a direct competitor to the da Vinci. And Asensus’ Senhance system is not intended for
most other procedures that the da Vinci may perform.
40.
Prior to FDA approval of the Senhance system for minimally invasive robotic
surgeries, Intuitive maintained a 100% market share for surgical robots. Even after Senhance and
Medrobotics entered the robotic surgery market, Intuitive still maintains at least a 98% market
share in the market for surgical robots because neither company has been able to gain sufficient
U.S. market share to pose a meaningful threat to Intuitive’s market dominance. While Intuitive
shipped 728 da Vincis throughout the U.S. in 2019, Asensus did not ship any Senhance systems
domestically and Medrobotics shipped fewer than 10 Flex robot systems worldwide.
41.
External literature characterizes Intuitive as possessing monopoly power in the
robotic surgical system market. For example, one 2017 study in the Journal of Minimal Access
Surgery noted that Intuitive’s da Vinci was “the only commercially available robotic equipment”
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at the time.20 Similarly, a 2019 study on robotic surgery noted that Intuitive “[e]ffectively
[possessed] a monopoly” in the robotic surgery industry.21
42.
Switching surgical robot systems is not feasible. First, surgical robot systems
require significant capital investment in not only the system itself, but also the necessary surgical
instruments and, in many cases regarding the da Vinci, an agreement by Intuitive’s customers not
to purchase competing robots. Further, operating a robotic surgical system requires many hours
of training. Switching surgical robot systems would not only be costly, as surgical robots have an
average sales price of $1.5 million and many of Intuitive’s U.S. customers have at least 2
systems representing significant capital investment, but would also require substantial time to
retrain surgeons and supporting staff to operate the new system, during which time a hospital
may not be able to offer robotic surgical services.
43.
In addition, Intuitive incentivizes hospitals to upgrade their existing da Vincis by
offering them the opportunity to trade in their older da Vincis for a credit towards the purchase
of a newer generation system.22
44.
There are significantly high barriers to entry into the surgical robot market. The
cost to develop a surgical robot is substantial, especially because Intuitive maintains an extensive
portfolio of patents that block the development of competing surgical robot systems.
Furthermore, clearance by regulatory agencies, such as the FDA, is an extensive and uncertain
process. Penetrating the market is also challenging; surgeons already have significant training
and experience with the da Vinci, not to mention the already sizeable installed base of da Vincis
20 Gkegkes, I. D., Mamais, I. A., & Iavazzo, C. (2017). Robotics in General Surgery: A Systematic Cost
Assessment. Journal of Minimal Access Surgery, 13(4), 243–255. Https://Doi.Org/10.4103/0972-9941.195565
21 Perez, R. E. & Schwaitzberg, S. D., Robotic Surgery: Finding Value in 2019 and Beyond, Ann. Laparosc. Endosc.
Surg. 2019; 4:51.
22 Intuitive (Form 10-K), at 89 (Feb. 10, 2021).
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throughout the U.S. Furthermore, according to ¶ 23 of a complaint IRRC Restore filed against
Intuitive on March 29, 2021, Intuitive has agreements with its customers that they will not
purchase robotic surgery systems from competing manufacturers.
45.
Further, Intuitive enjoys a first mover advantage in the market because the da
Vinci was the first robotic surgery system approved by the FDA in 2000. Consequently, many
surgeons received extensive training to use the da Vinci during their residency, so hospitals
wishing to attract surgeons who can perform robotic surgeries (and consequently the patients
who wish to receive robotic surgery) are disincentivized from installing other robotic surgery
systems. This also limits the extent to which other robotic systems can compete effectively in the
market.
2.
The da Vinci Service Aftermarket and Intuitive’s Monopoly Power in That
Aftermarket
a. The Da Vinci Service Aftermarket
46.
There is a relevant aftermarket in the U.S. for the service of da Vincis (the “da
Vinci Service Aftermarket”). The robotic surgery equipment manufacturing industry generates
about $3.8 billion in revenues per year in the U.S. and is expected to grow by 4.9% per year
between 2020 and 2025.23 In addition, the medical equipment repair and maintenance services
industry is a $3.3 billion market in the U.S. and is expected to grow by 1.5% per year between
2020 and 2025.24
47.
After the da Vinci is installed, it requires regular maintenance and service. The
primary aspects of the da Vinci Service Aftermarket are the routine maintenance of the da Vinci
and the repair of the da Vinci when necessary.
23 Thomas Crompton, “Robotic Surgery Equipment Manufacturing”, IBIS World, Dec 2020, at 7.
24 Jack Curran, “Medical Equipment Repair & Maintenance Services,” IBIS World, June 2020, at 7.
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48.
Recognizing this need for regular repair and maintenance, Intuitive enters into a
service contract with their customers at the time the da Vinci is sold or leased.25 The initial
service contract is typically 5 years, with the first year of service being free and the remaining 4
years ranging in price from $80,000 to $190,000 per year.26 At present, Intuitive requires its
customers to purchase one of two types of service plans for its da Vincis, either:
i.
the Complete Care Service Plan, which includes advance exchange program,
remote software update, sterile reprocessing support, technical support, onsite
access and monitoring and da Vinci surgery customer portal; or
ii.
the Premium Care Service Plan, which includes everything in the Complete
Care service plan and provides extended service hours, faster response time,
expedited replacement parts and a 5% discount on technology upgrade, among
other things.27
49.
At the end of each contract term, Intuitive offers an additional service contract.
Customers are forced to renew these contracts because, as long as they use the da Vinci,
purchasers are required to obtain service and repairs from Intuitive.
50.
The terms of the service contracts exempt Intuitive from its obligation to perform
any service or repair if the customer or a third-party services the da Vinci, even if Intuitive’s
service contract did not cover the service.
51.
Customers have little or no information for projecting the costs of surgical robot
parts or service, even with flat-rate service agreements. In order to forecast the cost per use, the
customer must know how often the robot will be used. However, customers typically cannot
25 Intuitive (Form 10-Q), at 29 (June 2020).
26 Intuitive (Form 10-K), at 55 (Feb. 10, 2021).
27 da Vinci service plan brochures are available at https://www.intuitive.com/en-us/products-and-services/da-
vinci/services##.
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forecast demand for a surgical robot: surgeons may have varying degrees of adaptation to a
surgical robot at a new location or for a new procedure; competing hospitals may or may not
acquire their own robots; and the FDA may or may not add new indications for use of the robot
system. These and other unknown factors will impact how often a da Vinci is used, and thus
bears on part replacement and service costs.
52.
There are high barriers to entry in the da Vinci Service Aftermarket. First, the
terms of the da Vinci sales agreement and the tied da Vinci service contracts prohibit customers
from servicing their da Vinci either themselves or through an IRRC. Lessees of the da Vinci
must enter the same service contract for the term of the lease. This discourages customers from
seeking da Vinci repair or maintenance services from IRRCs. The technical skill, experience, and
certifications required to properly service the da Vinci also serve as prohibitive barriers to entry
into the da Vinci Service Aftermarket.
53.
Quality control is not a valid business justification for excluding third parties from
servicing and repairing da Vincis.
54.
Several robot repair companies have the skill and capacity to service da Vincis.
For example, Restore, a surgical robotic repair company based in Florida, specializes in the da
Vinci and hires da Vinci certified field service engineers with prior training and experience
working at Intuitive. Restore began offering service contracts for the da Vinci in 2018 and
typically offers service at rates of less than 50% of the effective rates offered by Intuitive.
Restore states that it can service da Vincis worldwide. SIS, with 50 years of experience servicing
surgical equipment, also claims it is capable of servicing da Vincis. Great Lakes Robotics
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(“Great Lakes”) is another robot repair company that claims to be an “authorized” provider of da
Vinci services through its partnership with Restore.28
b. The Da Vinci Service Geographic Aftermarket
55.
Da Vinci robots are installed throughout the U.S., so IRRCs have the capability to
service da Vincis throughout the U.S.
56.
Intuitive sells and services da Vincis through third-party distributors in
unspecified countries outside the U.S. and provides them with a toolkit with all the
documentation, software, and passwords necessary to service the da Vinci. Distributors may only
use their toolkits to service da Vincis in their territory. No one else has access to the toolkit, not
even customers.
57.
U.S. hospitals are thus unable to hire service providers from other countries, even
if Intuitive raises its da Vinci servicing prices above competitive levels.
c. Intuitive Has a Monopoly in the Da Vinci Service Aftermarket
58.
Intuitive exploits its monopoly power in the primary market for surgical robots to
acquire and maintain monopoly power in the aftermarket for the service of the da Vinci. Thus, it
can and does exclude competition and maintain supracompetitive prices for da Vinci service.
59.
First, Intuitive ties the sale of the da Vinci to da Vinci service contracts. The
terms of the sales and service agreements forbid purchasers from using third party repair or
maintenance services of any kind. Intuitive even reserves the right to void their entire service
contract if customers seek any kind of service, maintenance, or repair for their da Vinci through
an IRRC. This effectively forecloses competition in the da Vinci Service Aftermarket.
28 https://www.greatlakesrobotics.net/
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60.
All these measures discourage customers from attempting to service their da
Vinci through an IRRC, further solidifying Intuitive’s monopoly in the da Vinci Service
Aftermarket.
61.
As a result of this exclusionary conduct, Intuitive has directly maintained a
market share in the da Vinci Service Aftermarket of more than 99% for nearly 20 years. In 2019,
Intuitive reported $508.4 million in revenues for service to its customers in the U.S.
3.
The EndoWrist Service Aftermarket and Intuitive’s Abuse of Monopoly
Power in that Aftermarket
a. Relevant EndoWrist Service Aftermarket
62.
There is a relevant aftermarket for the service, including repair and replacement,
of EndoWrists that is separate from the surgical robot market and the da Vinci Service
Aftermarket. EndoWrists are the only surgical instruments that are compatible with and FDA-
approved for use with the da Vinci. Because of these constraints, hospitals must have them
serviced in order to use the da Vinci.
63.
The EndoWrist Service Aftermarket is vertically integrated, meaning Intuitive
exercises complete control over the design, manufacture, sale, and replacement of EndoWrists.
Although Intuitive maintains a significant patent portfolio in its surgical robots, any blocking
patents for its EndoWrist instruments are long expired. Intuitive maintains a “Patent Notice” web
page for its products. Virtually all the patents covering core structure and operations for the
“EndoWrist” and “Accessories” are expired.
64.
The EndoWrist Service Aftermarket is significantly larger than either the
upstream da Vinci system market or the da Vinci Service Aftermarket. EndoWrists range in price
from $700 to $3,500 per procedure. Intuitive’s revenues from the sale of instruments and
accessories in the U.S. totaled $1.79 billion in 2019, and despite the Coronavirus pandemic, 2020
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instrument and accessory revenues were an estimated $1.785 billion.29 By comparison, Intuitive
reported revenues of $830 million from system sales and $508 million from service contracts in
2019.30
65.
Indeed, the vast majority of Intuitive’s EndoWrist revenue and profit, and thus its
overall revenue and profit, comes from the replacement of EndoWrists. This is because while a
da Vinci represents a large initial investment for Intuitive’s customers, they are typically in
service for 5 years, if not a decade, while EndoWrists provide a recurring revenue stream.
Indeed, the bulk of Intuitive’s revenue and profit growth over the last decade in the U.S. comes
from its sale of EndoWrist instruments, not robotic systems, as demonstrated by data from
Intuitive’s 10-Ks from 2001 to 2019 below:31
Year
2001
2002
2003
2004
2005
2006
2007
2008
2009
Instruments
$5.0
$10.1
$18.8
$37.5
$67.8
$111.7 $191.6 $293.0 $389.4
Systems ($M)
$44.2
$56.3
$61.8
$78.8
$124.6 $205.9 $324.4 $455.3 $490.5
Year
2010
2011
2012
2013
2014
2015
2016
2017
2018
Instruments
$528.8 $701.1 $903.3 $1,033 $1,070 $1,198 $1,396 $1,637 $1,962
Systems
$660.3 $777.8 $932.9 $834.9 $632.5 $721.9 $800
$928.4 $1,127
29 Intuitive (Form 10-K), at 98 (Feb. 10, 2021).
30 Intuitive (Form 10-K), at 87 (Feb. 7, 2020).
31 These charts reflect Intuitive’s worldwide revenues; revenues by region are unavailable prior to 2017.
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Year
2019
2020
Instruments
$2,408
$2,455
Systems ($M)
$1,346
$1,178
66.
Because of Intuitive’s exclusionary service agreements, the EndoWrist Service
Aftermarket typically involves replacing EndoWrist instruments rather than servicing them (i.e.,
cleaning, sharpening, or repairing them). The services provided by Intuitive and those provided
(or that could be provided) by IRRCs are substitutable. For instance, hospitals hire Rebotix to
inspect and repair EndoWrist instruments, for example, by tightening the graspers or sharpening
the scissors. And SIS entered into contracts with several hospitals and health care systems to
provide EndoWrist repair services. More hospitals would substitute EndoWrist instrument
replacement from Intuitive with these services in the absence of Intuitive’s exclusionary
contractual terms.
67.
Intuitive’s sales agreements require hospitals to replace their EndoWrists
exclusively with Intuitive. Per these contracts, Intuitive has the right to void warranties
associated with the da Vinci if unauthorized or unapproved instruments are used with the da
Vinci. This forces hospitals to continuously purchase replacement EndoWrists from Intuitive or
risk voiding their service agreements for the entire system.
68.
Intuitive’s standard sales agreement ties the purchase of a da Vinci to its
“maximum number of uses” requirement for EndoWrist instruments. The usage requirement
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applies to every single EndoWrist instrument, regardless of its condition or whether it could be
used on additional procedures.
69.
Before releasing its EndoWrists to market, Intuitive told the FDA that the
EndoWrists and traditional instruments “are essentially identical … in terms of shape, size,
function, and tissue effect;” “are substantially equivalent in intended use and/or method of
operation;” and “demonstrate substantial equivalence … in terms of safety and effectiveness.”
The FDA agreed and “determined the [EndoWrist] device” is “substantially equivalent” to the
traditional devices. Instruments used in traditional laparoscopic surgeries are cleaned and
inspected before and after each surgery and may be repaired between procedures, making them
usable for hundreds of surgeries.
70.
As shown below in Figure 5, EndoWrist instruments are nearly indistinguishable
from manually operated surgical instruments. Both are made from medical grade materials that
typically last through hundreds of surgeries.32 Figure 5 includes an EndoWrist instrument on the
left and a traditional, manually manipulated instrument on the right, and illustrates that the
instruments are nearly identical.
32 Rebotix Complaint, ¶39.
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Figure 5: EndoWrist forceps vs. Traditional manual forceps
71.
However, despite being “substantially equivalent” to traditional laparoscopic
instruments, Intuitive limits most EndoWrists to just 10 uses, far fewer in orders of magnitude
than their manually operated counterparts.
72.
To enforce this arbitrary restriction, Intuitive installs memory chips in its
EndoWrist instruments that count the number of uses. Intuitive has exclusive control over the
usage counter, and once the counter hits its limit, the chip renders the EndoWrist non-functional
by wiping its memory so that the EndoWrist can no longer communicate with the da Vinci.
Intuitive has designed the EndoWrists to prevent the maximum usage counter from being
tampered with or reset.
73.
According to surgical instrument service companies, with proper care, inspection,
and repair, EndoWrists can be used more than fifty times, just like the useful life of traditional,
manually manipulated laparoscopic instruments.33
74.
The maximum usage requirement for EndoWrists is not based on safety or
effectiveness considerations. First, Intuitive has never provided its customers any clinical or
scientific data to support its usage limits; Intuitive’s own instrument catalogs demonstrate that
33 Restore Second Amended Complaint, ¶80.
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the useful lives of the instruments are much longer than their usage limits. Yet irrespective of the
actual condition of the EndoWrist once it hits 10 uses, it must be replaced without exception.
Second, Intuitive described the EndoWrist to the FDA as possessing substantial equivalence in
terms of safety and effectiveness to its manually manipulated counterparts, which have no
specific usage limits. Third, when Intuitive sells EndoWrists for training purposes, the usage
limits are much higher than the exact same instruments sold for surgical use, with no
demonstrable or practical difference between the two. Nor does the surgical equipment industry
distinguish between an instrument sold for clinical use and the same instrument sold for training
use. Training instruments, like instruments for clinical use, must retain their functionality for the
surgeon during use. The only difference is the generation of revenue for the hospital on a
surgical procedure for an instrument in clinical use. Intuitive has stated that the maximum usage
requirement allows Intuitive to “sell the instrument for a fixed number of uses or hours and
effectively price our EndoWrist instruments on a per-procedure or per-hour basis,” but there are
no medical necessity or patient welfare concerns motivating Intuitive’s usage caps; rather, this
reflects Intuitive’s desire and ability to charge supracompetitive prices.34
75.
And in July 2020, Intuitive introduced its "Extended Use Program" for EndoWrist
instruments used with da Vinci X/Xi systems, where select instruments possess 12 to 18 uses
instead of Intuitive’s standard 10-use limitation.35 Intuitive vaguely stated that “continuous
improvement in instrument design” enabled it to slightly increase some usage limits, but did not
and has not explained why certain instruments were chosen for this program, nor why the usage
limits can be upped to 12 or 15 or 18.
34 Intuitive (Form 10-K), at 6 (March 30, 2001).
35 Intuitive (Form 10-Q), at 29 (July 23, 2020).
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76.
Usage limits are not based on any FDA regulations. The surgical instruments used
with Asensus’ Senhance surgical robot system do not have usage limits. Traditional laparoscopic
instruments do not have usage limits.
77.
As recently as November 12, 2020, Intuitive submitted a 510(k) premarket
notification summary to the FDA for several EndoWrist instruments. The summary does not
reference any clinical or scientific data showing that the EndoWrists lose their functionality after
reaching the 10-use limit. Nor did Intuitive indicate that EndoWrists could not be serviced to
make them safe and effective after reaching the 10-use limit.
78.
Customers cannot predict the costs for EndoWrists. Intuitive has complete control
over EndoWrist usage limits and can (and has) changed the usage limits and instructions for use
unilaterally and without notice. For example, Intuitive issued instructions for use for EndoWrist
instruments, setting a maximum number of autoclave cycles, which sterilize the instruments
using steam pressure. Because of the way that da Vinci surgeries are prepped and performed,
EndoWrist instruments often have to undergo an autoclave cycle even if not actually attached to
a robot during surgery. The specified limit on autoclave cycles is extremely low compared to
comparable devices made of similar medical grade materials. These unilateral changes can force
early replacement, even if the counter has not hit its maximum use limit. They also substantially
increase (a) the per-surgery cost of EndoWrist instruments to hospitals, and (b) Intuitive’s supra-
competitive EndoWrist profits, without prior notice to hospitals. Intuitive, as the sole
manufacturer of EndoWrists, exercises complete control over the prices for replacement
EndoWrists. Thus, customers cannot reasonably predict the timing or pricing for replacing
EndoWrists.
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79.
There exist technological barriers to entry that prevent IRRCs from entering
and/or competing effectively in the EndoWrist Service Aftermarket. For instance, for the
EndoWrist instruments to work with the da Vinci, they must have a serial number from Intuitive.
Thus, IRRCs may only repair the instruments and, to do so, they must be able to reset the
instrument’s usage counter after the repair.
80.
IRRCs can service EndoWrists to prolong their use, rather than forcing hospitals
to purchase replacement instruments based on artificially low usage limitations. For example,
Rebotix has developed the Rebotix Interceptor, which resets the counter in at least some
EndoWrists. The Interceptor does not interfere with the safety or functionality of the EndoWrist
or communication between the EndoWrist and the da Vinci. However, the Interceptor has limited
applicability as it works with just one da Vinci model. Restore specializes in the da Vinci and
hires da Vinci certified field service engineers with prior training and experience at Intuitive.
81.
And while Restore can reset the usage counter on EndoWrists for the Si robot
system, it pays a large licensing fee to develop the technology to do so. Restore passes these
costs on to its customers in the form of at least 20% higher service fees. Restore cannot reset the
usage counter for other da Vinci systems, including the X and Xi robot systems.
82.
SIS states that it has the personnel, facilities, equipment and experience to service
at least 1,500 EndoWrists per month to prolong their use. In fact, SIS states it has already
serviced and repaired EndoWrists that have since been used successfully and without incident in
da Vinci surgeries. SIS also claims that independent testing shows that instruments serviced by
SIS are suitable for at least 50 uses. SIS has developed detailed procedures for restoring
EndoWrists to their original specifications and returning them to service. These procedures
include disassembly of the EndoWrist, inspection of all components, adjustment of components
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as necessary, confirming all movements, and re-setting the EndoWrist counter to Intuitive’s
original counter value.
83.
Intuitive has maintained a market share in the EndoWrist Service Aftermarket of
more than 90% for nearly 20 years.
b. The Geographic Market for the EndoWrist Service Aftermarket
84.
Intuitive is the sole manufacturer of EndoWrists worldwide and is the only seller
of EndoWrists in the U.S.
85.
EndoWrists are the only surgical instruments that are compatible with and FDA-
approved for use with the da Vinci, making them the only surgical instruments available for use
with the da Vinci in the U.S.
86.
U.S. hospitals are thus unable to buy EndoWrists, or potentially substitutable
instruments, from suppliers in other countries, even if Intuitive raises its EndoWrist prices above
competitive levels.
c. Intuitive Has Abused Its Monopoly Power in the EndoWrist Service
Aftermarket
87.
Intuitive leverages its monopoly in the surgical robot market to maintain and
abuse its monopoly in the EndoWrist Service Aftermarket. Intuitive’s standard sales and lease
agreements tie the purchase of a da Vinci to its “maximum number of uses” requirement for
EndoWrist instruments. The usage requirement applies to every single EndoWrist instrument,
regardless of its condition or whether it could be used on additional procedures.
88.
Intuitive has acted with the clear intent to limit competition in the EndoWrist
Service Aftermarket by designing the usage counter to prevent IRRCs from resetting it. It is
essential to competition in the EndoWrist Service Aftermarket that IRRCs are able to reset the
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usage counter after servicing the instrument. Otherwise, Intuitive’s customers are forced to pay
exorbitant sums to Intuitive for brand new EndoWrists they do not yet need.
89.
Intuitive actively monitors the EndoWrist Service Aftermarket to ensure its
monopoly remains uninterrupted and its customers continue to buy EndoWrists they do not yet
need. If a customer or IRRC services an EndoWrist so that it can be used beyond Intuitive’s
arbitrarily set maximum usage limit, Intuitive sends a letter demanding that they cease and desist
from resetting the memory chip to allow the da Vinci to continue communicating with the
EndoWrist instrument. Intuitive has also attempted to scare potential competitors out of the
EndoWrist Service Aftermarket. On or about February 12, 2019, Intuitive sent a cease-and-desist
letter to Restore, demanding that it “immediately cease and desist” from “contacting Intuitive’s
customers to offer service related to Intuitive’s products” and resetting the usage counters.
Intuitive has also sent letters to Rebotix’s customers, threatening to withhold necessary
contractual maintenance if the hospital uses Rebotix’s EndoWrist repair services. This would
render the da Vinci useless. Further, after learning that its customers had entered into service
contracts with SIS, Intuitive sent letters threatening to render the surgical robot inoperable and
falsely claiming that using repaired EndoWrists would violate FDA requirements and intellectual
property rights. SIS alleges that as a result of Intuitive’s threats, all of its customers backed out
of their service agreements with SIS.
90.
Intuitive’s anticompetitive conduct enables it to charge its customers
supracompetitive prices that are independent of and far exceed the cost of EndoWrist
instruments. An internal review by the healthcare system Kaleida Health revealed an average
instrument cost of $3,400 per da Vinci procedure.36 Restore Robotics claims that Intuitive
36 Perez, R. E. & Schwaitzberg, S. D., Robotic Surgery: Finding Value in 2019 and Beyond, Ann. Laparosc. Endosc.
Surg. 2019; 4:51.
559718.1
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charges approximately 30% higher prices on average for EndoWrist instrument replacement
compared with EndoWrist instrument repairs by IRRCs.
91.
To protect its EndoWrist monopoly pricing, Intuitive has announced that as of
2023, it intends to stop selling S and Si EndoWrist instruments, for which IRRCs can reset the
usage counter. This will force its customers to upgrade their da Vincis to those using EndoWrists
for which IRRCs cannot reset the usage counter.
92.
As a result of their exclusionary schemes, Intuitive can and does charge
supracompetitive prices to replace EndoWrists at significantly higher costs than offered by
IRRCs to service EndoWrists for prolonged use.
93.
As a result of this exclusionary conduct, Intuitive has maintained a market share
in the EndoWrist Service Aftermarket of more than 90% for nearly 20 years.
B. Intuitive’s Anticompetitive Conduct Injured Plaintiff and the Proposed Class
94.
The services provided by Intuitive and those provided (or that could be provided)
by IRRCs are substitutable, such that being able to use IRRCs could save hospitals a significant
amount of money. However, due to the exclusionary service agreements Intuitive ties to the sale
or lease of the da Vinci, these substitute services are typically not a viable option for hospitals.
Hospitals, therefore, have little choice but to pay higher prices to obtain da Vinci service and
(more frequent) EndoWrist instrument replacement from Intuitive.
95.
EndoWrists are the only instruments that are FDA-approved to work with the da
Vinci. Within its sales contracts for the da Vinci, Intuitive ties the sale of the system to
renewable service contracts for EndoWrists. Thus, customers have no choice but to accept
Intuitive’s restrictive terms and supracompetitive pricing scheme for the service of the da Vinci
and EndoWrists.
559718.1
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Complaint and Jury Demand
96.
Intuitive’s tying scheme ensures high recurring revenues because it forces
Intuitive’s customers to constantly purchase EndoWrist instruments after as few as ten uses at a
significant and unnecessary cost, instead of having them serviced for prolonged use.
97.
Even where an IRRC may disrupt or neutralize the EndoWrist counter, the
instrument must be repaired before exercising the last available use, lest the system automatically
disable the EndoWrist. This, in turn, robs the customer of one use every time the EndoWrist is
serviced.
98.
Restore claims to (a) offer service of the da Vinci at effective rates of less than
50% of the effective rates offered by Intuitive, and (b) repair EndoWrist instruments at least 25%
on average below replacement rates offered by Intuitive. SIS claims that a hospital would save
55-70% by having their EndoWrists serviced by SIS rather than purchasing replacement
EndoWrists. Similarly, Rebotix claims to provide significant savings to hospitals on EndoWrist
instrument expenses, while providing as much safety and efficacy as Intuitive. And according to
Great Lakes, repairing EndoWrist instruments could save hospitals more than $100,000 per
robot, per year.37 With a current installed base of approximately 3,720 da Vinci systems in the
U.S., this suggests a total savings of $372 million per year if EndoWrists were repaired by
IRRCs instead of being replaced by Intuitive. In the but-for world, absent Intuitive’s unlawful
restraints of trade, Intuitive would need to compete on price to protect an erosion of its market
share in response to IRRC’s lower prices, whether by reducing Intuitive’s own prices for service,
increasing the number of times an EndoWrist can be used, or both. The downward pressure on
price that would result from unfettered competition between Intuitive and its IRRC rivals would
37 https://www.greatlakesrobotics.net/sales
559718.1
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Complaint and Jury Demand
inure to the benefit of all direct purchasers in the market, whether they would have purchased
from Intuitive or an IRRC rival.
99.
It is no secret that hospitals pay above and beyond what is necessary to maintain a
da Vinci. For instance, according to a systematic cost assessment made on robotics in general
surgery: “Nowadays, the only commercially available robotic equipment (da Vinci®, Intuitive
Surgical Inc.; CA, USA) is characterized by elevated cost, including the cost of acquisition,
training, and equipment-instrument cost, as well as that of maintenance of the robotic system
(with an annual service contract, over 100,000 US dollars).”38
100.
By tying the service of the da Vinci, and the repair and replacement of its
EndoWrists, to the sale of the da Vinci, Intuitive captures nearly 100% of the U.S. market for the
da Vinci Service and EndoWrist Service Aftermarkets. And in its annual reports, Intuitive
repeatedly notes how IRRCs may emerge and compete with Intuitive on price or offerings, and
Intuitive’s failure to compete successfully with these IRRCs may cause its revenues to suffer.
This acknowledgement from Intuitive demonstrates that absent Intuitive’s anticompetitive
conduct, not only would the hospitals that purchased or leased da Vincis from Intuitive have
cheaper alternatives from IRRCs in terms of servicing the da Vinci and/or EndoWrist
instruments, but that Intuitive would also charge lower prices in order to better compete with
these IRRCs.
101.
The exclusionary scheme has the effect of driving the majority of Intuitive’s
annual revenues. First, demand for da Vinci service and EndoWrist service is largely derived
from demand for da Vinci systems. So, by purchasing a da Vinci to attract more patients and
38 Gkegkes, I. D., Mamais, I. A., & Iavazzo, C. (2017). Robotics in General Surgery: A Systematic Cost
Assessment. Journal of Minimal Access Surgery, 13(4), 243–255. Https://Doi.Org/10.4103/0972-9941.195565
559718.1
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Complaint and Jury Demand
skilled surgeons to their facilities, hospitals are automatically locked into the Intuitive-controlled
aftermarkets for da Vinci service and EndoWrist replacement/service.
102.
In fact, in their 2019 10-K, Intuitive reported product revenue of $2.621 billion in
the U.S., of which 57% was attributable to instruments and accessories, and 16% was attributable
to service contracts.39 In the U.S., Intuitive reported (a) $508 million in revenue from service
contracts, and (b) $1.79 billion in revenue from instruments and accessories.40 Furthermore,
globally, in 2019, Intuitive’s gross profit was 70.2% for products and 65.6% for service.41
Intuitive’s net income for 2019 in the U.S. was 31% of total revenue.42 This greatly exceeds the
average profit margin of 8.5% in the medical equipment repair & maintenance industry.43 This
level of supracompetitive profit margin is commonly observed in industries characterized by
substantial barriers to entry and a single participant possessing a dominant market share, as is the
case for Intuitive in the da Vinci Service and EndoWrist Service Aftermarkets.
103.
There is no legitimate business, safety, or efficiency justification for Intuitive’s
anticompetitive scheme, which was employed for the sole purpose of eliminating competition in
the da Vinci Service and EndoWrist Service Aftermarkets, thereby causing Plaintiff and the
proposed Class to pay significantly more than they would have in a competitive market for these
services.
CLASS ALLEGATIONS
104.
Plaintiff brings this action on behalf of itself and on behalf of a class (the “Class”)
consisting of all entities that paid Intuitive directly for da Vinci service and/or the service,
39 Intuitive (Form 10-K), at 56 (Feb. 7, 2020).
40 Id. at 87.
41 Id. at 57.
42 Id. at 45.
43 Jack Curran, “Medical Equipment Repair & Maintenance Services,” IBIS World, June 2020, at 7.
559718.1
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Complaint and Jury Demand
including repair and replacement, of EndoWrists in the United States at any time from May 21,
2017 to the present (the “Class Period”). Excluded from the Class are Defendant, its officers,
subsidiaries and affiliates, and all government entities.
105.
Plaintiff seeks class certification pursuant to Rule 23(b)(3) of the Federal Rules of
Civil Procedure.
106.
Numerosity. Hundreds of hospitals, trauma centers and/or clinics have purchased
da Vinci service and EndoWrist instruments during the Class Period pursuant to Intuitive
contracts that tied sales of da Vincis to aftermarket sales of service. Thus, there are numerous
Class members and joinder is impracticable. The Class members are identifiable from
information and records that are required by law to be maintained by Defendant.
107.
Typicality. Plaintiff’s claims are typical of the claims of the other members of the
proposed Class. Plaintiff and members of the proposed Class purchased da Vinci service and/or
EndoWrist surgical instrument service directly from Defendant during the Class Period at
supracompetitive prices resulting from Defendant’s unlawful actions. Plaintiff and members of
the proposed Class have sustained damages in that they paid inflated prices for the service and
repair of da Vinci systems and repair/replacement of EndoWrist instruments during the Class
Period due to Defendant’s conduct in violation of federal law.
108.
Adequacy of Representation. Plaintiff will fairly and adequately protect and
represent the interests of the proposed Class. The interests of the Plaintiff are not antagonistic to
those of the proposed Class. In addition, Plaintiff is represented by counsel, who are experienced
and competent in the prosecution of complex class action, antitrust and consumer protection
litigation.
559718.1
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Complaint and Jury Demand
109.
Ascertainability. Plaintiff has defined the Class so that Class members can be
identified using objective criteria, i.e., entities that purchased da Vinci service and EndoWrist
instruments directly from Intuitive during the Class Period. Defendant’s data can identify all
Class members.
110.
Commonality and Predominance. Questions of law and fact common to the
members of the class predominate over questions, if any, that may affect only individual
members.
111.
Questions of law and fact common to the Class include without limitation:
i.
Whether Defendant’s conduct constitutes an illegal tying scheme under
Section 1 of the Sherman Act;
ii.
Whether Defendant’s conduct constitutes illegal monopolization under
Section 2 of the Sherman Act;
iii.
Whether Defendant abused its monopoly power in the U.S. surgical robot
market in order to gain a competitive advantage in the markets to service
and repair da Vinci systems and EndoWrist instruments in violation of
Sections 1 and 2 of the Sherman Act;
iv.
Whether Defendant’s conduct had the effect of substantially lessening
competition in the (1) da Vinci Service; and (2) EndoWrist Service
Aftermarkets;
v.
Whether Defendant’s unlawful conduct caused Plaintiff and the proposed
Class to pay more for da Vinci service, and to service, repair and/or
replace EndoWrists than they otherwise would have paid; and
vi.
The appropriate measure of damages incurred by Plaintiff and the
proposed Class.
112.
Superiority. A class action is superior to other available methods for the fair and
efficient adjudication of this controversy because joinder of all Class members is impracticable.
The prosecution of separate actions by individual members of the Class would impose heavy
burdens upon the courts and Defendant, and would create a risk of inconsistent or varying
adjudications of the questions of law and fact common to the Class. A class action, on the other
559718.1
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Complaint and Jury Demand
hand, would achieve substantial economies of time, effort and expense, and would assure
uniformity of decision as to persons similarly situated without sacrificing procedural fairness or
bringing about other undesirable results.
113.
The interest of members of the Class in individually controlling the prosecution of
separate actions is theoretical rather than practical. The Class has a high degree of cohesion, and
prosecution of the action through a representative would be unobjectionable. The amounts at
stake for Class members, while substantial in the aggregate, are not great enough individually to
enable them to maintain separate suits against Defendant. Plaintiff does not anticipate any
difficulty in the management of this action as a class action.
CAUSES OF ACTION
COUNT I – MONOPOLIZATION OF THE
DA VINCI SERVICE AFTERMARKET
114.
Plaintiff and the proposed Class repeat and allege the foregoing allegations with
the same force and effect as if here set forth in full.
115.
Intuitive has willfully acquired and maintained monopoly power in the da Vinci
Service Aftermarket in violation of Section 2 of the Sherman Act, 15 U.S.C. § 2.
116.
As a direct and proximate result of the foregoing conduct, Plaintiff and the Class
have been injured in their business and property in an amount not presently known.
COUNT II – ATTEMPTED MONOPOLIZATION
OF THE DA VINCI SERVICE AFTERMARKET
117.
Plaintiff and the proposed class repeat and allege the foregoing allegations with
the same force and effect as if here set forth in full.
118.
Intuitive has attempted to monopolize the da Vinci Service Aftermarket in
violation of Section 2 of the Sherman Act, 15 U.S.C. § 2. Intuitive has the specific intent to
559718.1
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Complaint and Jury Demand
monopolize the da Vinci Service Aftermarket by engaging in exclusionary conduct, has engaged
in such conduct, and has a dangerous probability of success in achieving monopoly power.
119.
As a direct and proximate result of the foregoing conduct, Plaintiff and the Class
have been injured in their business and property in an amount not presently known.
559718.1
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Complaint and Jury Demand
COUNT III – TYING OF THE DA VINCI
SERVICE AFTERMARKET
120.
Plaintiff and the proposed Class repeat and allege the foregoing allegations with
the same force and effect as if here set forth in full.
121.
Intuitive has engaged in an unlawful tying arrangement in unreasonable restraint
of trade and commerce, in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1. This illegal
scheme tied da Vinci service to the sale of the da Vinci system.
122.
Surgical robots and da Vinci service are separate products that are sold or leased
in separate markets from one another.
123.
At all times relevant to this action, Intuitive has maintained substantial economic
power in the surgical robot market. Intuitive’s tying arrangement has had anticompetitive effects
in the domestic da Vinci Service Aftermarket.
124.
Intuitive’s tying scheme had no legitimate safety, efficiency, or business purpose.
It achieved no legitimate efficiency benefits and had the anticompetitive effect of foreclosing
competition in the market to service the da Vinci, such that Plaintiff and the proposed Class
could only obtain these services from Intuitive.
125.
A substantial amount of interstate commerce was affected by Intuitive’s tying
scheme. Intuitive reported $508.4 million revenues from service contracts and $1.790 billion
revenues from parts and accessories in 2019 alone.
126. As a result of Intuitive’s violations of Section 1 of the Sherman Act, Plaintiff and
the Class have been injured in their business and property in an amount not presently known.
559718.1
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Complaint and Jury Demand
COUNT IV – MONOPOLIZATION
OF THE ENDOWRIST SERVICE AFTERMARKET
127.
Plaintiff and the proposed class repeat and allege the foregoing allegations with
the same force and effect as if here set forth in full.
128.
Intuitive has willfully acquired and maintained monopoly power in the EndoWrist
Service Aftermarket in violation of Section 2 of the Sherman Act, 15 U.S.C. § 2.
129.
As a direct and proximate result of the foregoing conduct, Plaintiff and the Class
have been injured in their business and property in an amount not presently known.
COUNT V – ATTEMPTED MONOPOLIZATION
OF THE ENDOWRIST SERVICE AFTERMARKET
130.
Plaintiff and the proposed Class repeat and allege the foregoing allegations with
the same force and effect as if here set forth in full.
131.
Intuitive has attempted to monopolize the EndoWrist Service Aftermarket in
violation of Section 2 of the Sherman Act, 15 U.S.C. § 2. Intuitive has the specific intent to
monopolize the EndoWrist Service Aftermarket by engaging in exclusionary conduct, has
engaged in such conduct, and has a dangerous probability of success in achieving monopoly
132.
As a direct and proximate result of the foregoing conduct, Plaintiff and the Class
have been injured in their business and property in an amount not presently known.
559718.1
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Complaint and Jury Demand
COUNT VI – TYING
OF THE ENDOWRIST SERVICE AFTERMARKET
133.
Plaintiff and the proposed class repeat and allege the foregoing allegations with
the same force and effect as if here set forth in full.
134.
Intuitive has near-absolute monopoly power in the domestic market for minimally
invasive surgical robots. Intuitive has conditioned the sale and servicing of the da Vinci on
customers buying replacement EndoWrists from Intuitive instead of repairing the EndoWrists
that the customers already have, in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1.
135.
Surgical robots and the service, repair, and replacement of EndoWrists are
separate products that are sold or leased in separate markets from one another.
136.
Intuitive’s tying scheme had no legitimate safety, efficiency, or business purpose.
It achieved no legitimate efficiency benefits and had the anticompetitive effect of foreclosing
competition in the market to service, repair and replace EndoWrists such that Plaintiff and the
proposed Class could only obtain these services from Intuitive.
137.
A substantial amount of interstate commerce was affected by Intuitive's tying
scheme. Just in 2019, Intuitive’s total revenues from parts (primarily EndoWrists) exceeded
$1.790 billion, and Intuitive reported $508 million revenues from service contracts. These
amounts account for 73% of Intuitive’s revenues in 2019.
138.
As a result of Intuitive’s violations of Section 1 of the Sherman Act, Plaintiff and
the Class were injured in their business and property in an amount not presently known.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff and the proposed Class respectfully request the following relief:
A.
Certify the Class pursuant to Rule 23 of the Federal Rules of Civil Procedure,
certify Plaintiff as a Class representative and designate its counsel as counsel for the Class;
559718.1
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Complaint and Jury Demand
B.
Declare that Defendant’s conduct constitutes a violation of Sections 1 and 2 of the
Sherman Act;
C.
Award Plaintiff and the members of the proposed Class damages determined to
have been sustained by each of them, trebled as provided by law;
D.
Award Plaintiff and the proposed Class their costs of the suit, including attorneys’
fees, as provided by law; and
E.
Grant such other relief as this Court may deem just and proper.
JURY DEMAND
Plaintiff and the Class hereby demand trial by jury of all issues properly triable thereby.
Dated: July 8, 2021
Respectfully Submitted,
By: /s/ Bonny E. Sweeney
Bonny E. Sweeney (SBN 176174)
Seth R. Gassman (SBN 311702)
HAUSFELD LLP
600 Montgomery Street, Suite 3200
San Francisco, CA 94111
Tel.: 415-633-1908
Fax: 415-358-4980
[email protected]
[email protected]
559718.1
42
Complaint and Jury Demand
Jeffrey J. Corrigan (pro hac vice)
Jeffrey L. Spector (pro hac vice)
Icee N. Etheridge (pro hac vice)
SPECTOR ROSEMAN & KODROFF, P.C.
2001 Market Street, Suite 3420
Philadelphia, PA 19103
Tel: 215-496-0300
Fax: 215-496-6611
Email: [email protected]
[email protected]
[email protected]
Michael J. Boni (pro hac vice application
forthcoming)
Joshua D. Snyder (pro hac vice application
forthcoming)
John E. Sindoni (pro hac vice application
forthcoming)
BONI, ZACK & SNYDER LLC
15 St. Asaphs Road
Bala Cynwyd, PA 19004
Tel: 610-822-0200
Fax: 610-822-0206
Email: [email protected]
[email protected]
[email protected]
W. Joseph Bruckner (pro hac vice pending)
Brian D. Clark (pro hac vice pending)
LOCKRIDGE GRINDAL NAUEN P.L.L.P.
100 Washington Avenue South, Suite 2200
Minneapolis, MN 55401
Tel: 612-339-6900
Fax: 612-339-0981
Email: [email protected]
[email protected]
559718.1
43
Complaint and Jury Demand
Howard Langer (pro hac vice pending)
Edward Diver (pro hac vice pending)
Peter Leckman (CA Bar No. 235721)
LANGER, GROGAN & Diver, P.C.
1717 Arch Street, Suite 4020
Philadelphia, PA 19103
Tel.: 215-320-0876
Fax: 215-320-5703
[email protected]
[email protected]
[email protected]
Eric L. Cramer(pro hac vice pending)
BERGER MONTAGUE
1818 Market Street, Suite 3600
Philadelphia, PA 19103
Tel.: 215-875-3009
[email protected]
William J. Leonard (pro hac vice pending)
OBERMAYER REBMANN MAXWELL &
HIPPEL LLP
Centre Square West, Suite 3400
1500 Market Street
Philadelphia, PA 19102-2101
Tel.: 215-665-3000
Fax: 215-665-3165
[email protected]
559718.1
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Complaint and Jury Demand
Counsel for Plaintiff Kaleida Health and the
Proposed Class
559718.1
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Complaint and Jury Demand
KALEIDA HEALTH, on behalf of itself and all others similarly
situated
INTUITIVE SURGICAL, INC.
Santa Clara
County of Residence of First Listed Defendant
(IN U.S. PLAINTIFF CASES ONLY)
(b) County of Residence of First Listed Plaintiff
(EXCEPT IN U.S. PLAINTIFF CASES)
NOTE: IN LAND CONDEMNATION CASES, USE THE LOCATION OF
THE TRACT OF LAND INVOLVED.
Attorneys (If Known)
(c) Attorneys (Firm Name, Address, and Telephone Number)
HAUSFELD LLP, 600 Montgomery St., Suite 3200, San Francisco,
CA 94111; 415-633-1908
II.
BASIS OF JURISDICTION (Place an “X” in One Box Only)
1
U.S. Government Plaintiff
3
Federal Question
(U.S. Government Not a Party)
2
U.S. Government Defendant
4
Diversity
(Indicate Citizenship of Parties in Item III)
III. CITIZENSHIP OF PRINCIPAL PARTIES (Place an “X” in One Box for Plaintiff
(For Diversity Cases Only)
and One Box for Defendant)
PTF
DEF
PTF
DEF
Citizen of This State
1
1
Incorporated or Principal Place
4
4
of Business In This State
Citizen of Another State
2
2
Incorporated and Principal Place
5
5
of Business In Another State
Citizen or Subject of a
3
3
Foreign Nation
6
6
Foreign Country
IV.
NATURE OF SUIT (Place an “X” in One Box Only)
625 Drug Related Seizure of
Property 21 USC § 881
690 Other
422 Appeal 28 USC § 158
423 Withdrawal 28 USC
§ 157
LABOR
PROPERTY RIGHTS
PERSONAL INJURY
365 Personal Injury – Product
Liability
367 Health Care/
Pharmaceutical Personal
Injury Product Liability
368 Asbestos Personal Injury
Product Liability
820 Copyrights
830 Patent
835 Patent─Abbreviated New
Drug Application
840 Trademark
880 Defend Trade Secrets
Act of 2016
SOCIAL SECURITY
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Relations
740 Railway Labor Act
751 Family and Medical
Leave Act
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Income Security Act
PERSONAL INJURY
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330 Federal Employers’
Liability
340 Marine
345 Marine Product Liability
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355 Motor Vehicle Product
Liability
360 Other Personal Injury
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Malpractice
IMMIGRATION
PERSONAL PROPERTY
370 Other Fraud
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Damage
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Liability
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PRISONER PETITIONS
CONTRACT
TORTS
FORFEITURE/PENALTY
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OTHER STATUTES
110 Insurance
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Overpayment Of
Veteran’s Benefits
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Student Loans (Excludes
Veterans)
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Overpayment
of Veteran’s Benefits
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861 HIA (1395ff)
862 Black Lung (923)
863 DIWC/DIWW (405(g))
864 SSID Title XVI
865 RSI (405(g))
462 Naturalization
Application
465 Other Immigration
Actions
REAL PROPERTY
FEDERAL TAX SUITS
870 Taxes (U.S. Plaintiff or
Defendant)
HABEAS CORPUS
463 Alien Detainee
510 Motions to Vacate
Sentence
530 General
535 Death Penalty
871 IRS–Third Party 26 USC
§ 7609
440 Other Civil Rights
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Accommodations
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§ 3729(a))
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460 Deportation
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Corrupt Organizations
480 Consumer Credit
485 Telephone Consumer
Protection Act
490 Cable/Sat TV
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Exchange
890 Other Statutory Actions
891 Agricultural Acts
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Act
896 Arbitration
899 Administrative Procedure
Act/Review or Appeal of
Agency Decision
950 Constitutionality of State
Statutes
OTHER
540 Mandamus & Other
550 Civil Rights
555 Prison Condition
560 Civil Detainee–
Conditions of
Confinement
V.
ORIGIN (Place an “X” in One Box Only)
1
Original
2
Removed from
3
Remanded from
4
Reinstated or
5 Transferred from
6
Multidistrict
8 Multidistrict
Proceeding
State Court
Appellate Court
Reopened
Another District (specify)
Litigation–Transfer
Litigation–Direct File
Sherman Antitrust Act, 15 USC §§ 1, 2.
Cite the U.S. Civil Statute under which you are filing (Do not cite jurisdictional statutes unless diversity):
VI.
CAUSE OF
ACTION
Brief description of cause:
Hospital suing medical equipment manufacturer of surgical robots for monopolization and attempted monopolization in violation of Sections 1 and 2 of the Sherman Antitrust Act.
CHECK IF THIS IS A CLASS ACTION
DEMAND $
CHECK YES only if demanded in complaint:
UNDER RULE 23, Fed. R. Civ. P.
JURY DEMAND:
VII. REQUESTED IN
Yes
No
COMPLAINT:
Vince Chhabria
21-cv-03825-VC; 21-cv-03496-VC
VIII. RELATED CASE(S),
JUDGE
DOCKET NUMBER
IF ANY (See instructions):
IX.
DIVISIONAL ASSIGNMENT (Civil Local Rule 3-2)
(Place an “X” in One Box Only)
SAN FRANCISCO/OAKLAND
SAN JOSE
EUREKA-MCKINLEYVILLE
Authority For Civil Cover Sheet. The JS-CAND 44 civil cover sheet and the information contained herein neither replaces nor supplements the filings and
service of pleading or other papers as required by law, except as provided by local rules of court. This form, approved in its original form by the Judicial
Conference of the United States in September 1974, is required for the Clerk of Court to initiate the civil docket sheet. Consequently, a civil cover sheet is
submitted to the Clerk of Court for each civil complaint filed. The attorney filing a case should complete the form as follows:
I. a) Plaintiffs-Defendants. Enter names (last, first, middle initial) of plaintiff and defendant. If the plaintiff or defendant is a government agency, use
only the full name or standard abbreviations. If the plaintiff or defendant is an official within a government agency, identify first the agency and
then the official, giving both name and title.
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| antitrust |
3qarCYcBD5gMZwczKHk0 |
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF INDIANA
TAMMY JOHNSON, individually and on
behalf of others similarly situated,
Plaintiff,
Case No.: 3:21-cv-00009
CLASS ACTION
v.
COMPLAINT AND JURY DEMAND
MIDWESTERN PET FOODS, INC., an
Indiana Corporation.
Defendant.
Plaintiff Tammy Johnson (“Plaintiff” or “Plaintiff Johnson”) hereby files
this Complaint on behalf of herself and all others similarly situated, by and through
the undersigned attorneys, against Midwestern Pet Foods, Inc., (hereinafter,
“Midwestern” or “Defendant”) and alleges as follows based upon personal
knowledge as to herself and her own acts and experiences; and, as to all other
matters, upon information and belief based upon, inter alia, investigations
conducted by her attorneys.
INTRODUCTION
1.
This is a class action lawsuit brought by Plaintiff on behalf of herself
and a class of purchasers of dog and cat food manufactured by Midwestern Pet
Foods, Inc. (hereinafter, “Midwestern Pet Food” or “Products”), marketed and
distributed by the Defendant, which contain Aflatoxin, a toxin produced by the
mold variety Aspergillus flavus.
2.
The Midwestern Pet Food includes Products branded as Pro Pac,
Splash Fat Cat, Nunn Better, Sportstrail 50, and Sportmix.
3.
Defendant touts that it has been “making high-quality pet food &
treats” for generations.1
4.
Despite Defendant’s claim that its Products are high quality, when
pets ingest the Pet Food that is contaminated with Aflatoxin, it can result in serious
medical peril, including vomiting, loss of appetite, jaundice, diarrhea, colitis, liver
damage, and death.2
5.
According to the FDA, “As of January 11, 2021, FDA is aware of
more than 70 pets that have died and more than 80 pets that are sick after eating
Sportmix pet food.”3
6.
Based on Midwestern’s own pre-sale representations about health
testing and quality control measures, infra, it knew or should have known about the
1 https://midwesternpetfoods.com/.
2 FDA ALERT: CERTAIN LOTS OF SPORTMIX PET FOOD RECALLED FOR POTENTIALLY FATAL
LEVELS OF AFLATOXIN, https://www.fda.gov/animal-veterinary/outbreaks-and-advisories/fda-
alert-certain-lots-sportmix-pet-food-recalled-potentially-fatal-levels-aflatoxin (last visited Jan.
14, 2021).
3 FDA ALERT: CERTAIN LOTS OF SPORTMIX PET FOOD RECALLED FOR POTENTIALLY FATAL
LEVELS OF AFLATOXIN, https://www.fda.gov/animal-veterinary/outbreaks-and-advisories/fda-
alert-certain-lots-sportmix-pet-food-recalled-potentially-fatal-levels-aflatoxin
(last visited Jan. 14, 2021). Not all of these cases have been officially confirmed as aflatoxin
poisoning through laboratory testing or veterinary record review. This count is approximate and
may not reflect the total number of pets affected.
Aflatoxin contamination in the Midwestern Pet Food.
7.
Upon information and belief, Defendant failed to disclose and/or
actively concealed the known Aflatoxin contamination in the Midwestern Pet Food
and its health risk to consumers’ pets.
8.
As a result of Defendant’s business practices, Plaintiff’s and Class
members’ purchases of Midwestern Pet Food have caused them to suffer an
ascertainable loss of money and/or property.
9.
Had Plaintiff and other Class members known about the Aflatoxin
contamination of Midwestern Pet Food at the time of purchase, they would not
have purchased the Midwestern Pet Food, or would have paid substantially less for
it, and would have avoided the significant out-of-pocket expenses of providing
veterinary care to their pets as a result of their purchase of Midwestern Pet Food.
10.
As a result of the Midwestern Pet Food contamination and the
considerable monetary costs associated with attempting to treat related symptoms
in their pets, Plaintiff and Class members have suffered injury in fact, incurred
damages and have otherwise been harmed by Defendant’s conduct.
11.
Accordingly, Plaintiff brings this action to redress Defendant’s
violations of various state and federal consumer protection statutes, and to recover
for Defendant’s breach of express and implied warranties, common law fraud and
unjust enrichment.
JURISDICTION AND VENUE
12.
This Court has subject matter jurisdiction over this action pursuant to
28 U.S.C. §1332 of the Class Action Fairness Act of 2005 because: (i) there are
100 or more class members, (ii) there is an aggregate amount in controversy
exceeding $5,000,000, exclusive of interest and costs, and (iii) there is minimal
diversity because Plaintiff and Defendant are citizens of different states. This Court
has supplemental jurisdiction over the state law claims pursuant to 28 U.S.C. §
1367.
13.
Venue is proper in this judicial district pursuant to 28 U.S.C. § 1391
because Defendant transacts business in this District, maintains its corporate
headquarters in this District, is subject to personal jurisdiction in this District, and
therefore is deemed to be a citizen of this District. Additionally, Defendant has
advertised in this District and has received substantial revenue and profits from its
sales of Midwestern Pet Food in this District; therefore, a substantial part of the
events and/or omissions giving rise to the claims occurred, in part, within this
District.
14.
This Court has personal jurisdiction over Defendant because:
Defendant’s corporate headquarters is located in this District; Defendant is
registered with the Indiana Secretary of State as a for-profit corporation permitted
to operate in Indiana; Defendant conducts substantial business in the District; a
substantial part of the acts and omissions complained of occurred in this District;
and Defendant has intentionally and purposefully placed Midwestern Pet Food into
the stream of commerce within Indiana and throughout the United States.
THE PARTIES
Plaintiff Tammy Johnson
15.
Plaintiff Tammy Johnson (“Plaintiff” or “Johnson”) is a citizen of the
State of Georgia, and currently resides in Eastman, Georgia.
16.
Plaintiff owns seven dogs, of which six are adult dogs, and one is a
six-month old puppy.
17.
For approximately two years, Johnson has purchased two types of
Midwestern Pet Foods for her animals – SPORTMiX for her adult dogs, and
SPORTMiX Puppy Small for her puppy. She has generally purchased the Products
from Tractor Supply in Eastman, Georgia.
18.
Prior to purchasing Midwestern Pet Food products, Plaintiff reviewed
and relied upon information furnished by Defendant, which did not disclose or
mention the health risks resulting from the Aflatoxin contamination of the
Products. Plaintiff viewed this information on the Midwestern Pet Food packaging
as well as on Defendant’s website.
19.
During the week of January 3, 2021, Plaintiff noticed health problems
arising in several of her dogs, including vomiting and diarrhea. The dogs who had
gotten sick recovered on their own after several days of illness.
20.
On January 13, 2021, Plaintiff’s puppy remained ill, so she contacted
her veterinarian’s office, Ocmulgee Veterinary Clinic in Eastman, Georgia, and
was advised that he needed treatment for colitis. Based on this advice, Plaintiff
purchased Metronidazole 250mg tablets from her veterinarian to treat her puppy’s
colitis.
21.
Plaintiff has been advised by her veterinarian that the puppy will also
have to undergo future testing for liver damage as a result of the colitis.
22.
After receiving this diagnosis, Plaintiff returned the product to Tractor
Supply, where she had purchased it, and bought a more expensive brand, Purina
dog food, and paid the difference out-of-pocket.
23.
Neither the Defendant, nor any of its agents, dealers or other
representatives, informed Plaintiff of the existence of the Aflatoxin contamination
of the Products prior to purchase. Had Defendant disclosed the contamination to
Plaintiff, Plaintiff would not have purchased Midwestern Pet Food, and would
have avoided the veterinary and other costs resulting from its use.
24.
Plaintiff has suffered an ascertainable loss as a result of Defendant’s
omissions and/or misrepresentations associated with the Aflatoxin contamination
of the Products, including, but not limited to, the out-of-pocket expenses and loss
associated with the medical and veterinary expenses resulting from the Products,
and the cost of replacement dog food.
Defendant Midwestern Pet Foods, Inc.
25.
Defendant Midwestern Pet Foods, Inc., is a domestic for-profit
corporation registered to do business in Indiana with its principal place of business
located at 9634 Hedden Road, Evansville, Indiana, 47725, USA.4
26.
Defendant designs, manufactures, distributes, sells and warrants pet
foods, including Products branded as Pro Pac; Splash Fat Cat; Nunn Better;
Sportstrail 50; and SPORTMiX.
27.
Upon information and belief, Defendant develops the Products’
directions, marketing materials, ingredient composition, safety guides, and other
accompanying product information for Midwestern Pet Food.
28.
Defendant engages in continuous and substantial business throughout
the United States, including in Indiana.
FACTUAL ALLEGATIONS
A.
The Aflatoxin Contamination in Midwestern Pet Food
29.
Midwestern Pet Foods, Inc. has been in business since 1926.5 It sells
numerous lines of pet food including SPORTMiX and other brands.
4 Public Business Search, INDIANA SECRETARY OF STATE,
https://bsd.sos.in.gov/PublicBusinessSearch/BusinessFilings (search term: “Midwestern Pet
Foods”) (last visited Jan. 14, 2020).
5 MIDWESTERN PET FOODS – ABOUT US, https://midwesternpetfoods.com/#about-us (last visited
Jan. 14, 2021).
30.
Defendant touts that it creates its “own nutritious dry recipes and
treats and prepare[s its] foods in . . . 4 family-owned kitchens.”6
31.
In December 2020, the Food and Drug Administration (“FDA”)
reported that certain Midwestern Pet Food products produced in Defendant’s
Oklahoma production facility were contaminated with Aflatoxin.7
32.
Aflatoxin is a mold-borne toxin which can contaminate grains, nuts,
and corn when they are inappropriately stored in conditions which facilitate fungal
growth.8 Aflatoxin is a formidable toxin and carcinogen which poses severe health
risks to humans and animals.9
33.
On December 30, 2020, Defendant issued a recall for many products
in the Sportmix line, including certain lots of:
a. Sportmix Energy Plus (50 lb. and 44 lb. bags)
b. Sportmix Premium High Energy (50 lb. and 44 lb. bags)
c. Sportmix Original Cat (31 lb. and 15 lb. bags)10
6 https://midwesternpetfoods.com/.
7 FDA ALERT: CERTAIN LOTS OF SPORTMIXPET FOOD RECALLED FOR POTENTIALLY FATAL
LEVELS OF AFLATOXIN, https://www.fda.gov/animal-veterinary/outbreaks-and-advisories/fda-
alert-certain-lots-sportmix-pet-food-recalled-potentially-fatal-levels-aflatoxin (last visited Jan.
14, 2021).
8 C.D. WILLIAMS & H. JAESHKE, FUNGAL HEPATOXINS (2011).
9 C.D. WILLIAMS & H. JAESHKE, FUNGAL HEPATOXINS (2011).
10 “Company Announcement: Midwestern Pet Foods Voluntarily Recalls Pet Food Recall for
Aflatoxin Health Risk” (Dec. 30, 2020), attached as Exhibit A; see also, FDA ALERT: CERTAIN
LOTS OF SPORTMIX PET FOOD RECALLED FOR POTENTIALLY FATAL LEVELS OF AFLATOXIN,
https://www.fda.gov/animal-veterinary/outbreaks-and-advisories/fda-alert-certain-lots-sportmix-
pet-food-recalled-potentially-fatal-levels-aflatoxin (last visited Jan. 14, 2021).
34.
On January 11, 2021, Defendant expanded this recall to include
certain lots of:
a. Pro Pac Adult Mini Chunk
b. Pro Pac Performance Puppy
c. Splash Fat Cat 32%
d. Nunn Better Maintenance
e. Sportstrail 50
f. Sportmix Maintenance
g. Sportmix High Protein
h. Sportmix Stamina
i. Sportmix Bite Size
j. Sportmix High Energy
k. Sportmix Premium Puppy11
35.
As a result of the Aflatoxin contamination of Midwestern Pet Foods,
the Products are unreasonably dangerous and unsuited for the ordinary and
intended purpose of providing nutrition to pets.
11 “Company Announcement: Midwestern Pet Foods Voluntarily Expands Recall of Pet Food for
Aflatoxin Health Risk” (Jan. 11, 2021), attached as Exhibit B; see also, FDA ALERT: CERTAIN
LOTS OF SPORTMIX PET FOOD RECALLED FOR POTENTIALLY FATAL LEVELS OF AFLATOXIN,
https://www.fda.gov/animal-veterinary/outbreaks-and-advisories/fda-alert-certain-lots-sportmix-
pet-food-recalled-potentially-fatal-levels-aflatoxin (last visited Jan. 14, 2021).
B.
Defendant’s Knowledge of the Contaminated Products
36.
At all times relevant to this Complaint, including prior to recalling the
Product and selling it to Plaintiff and Class Members, Defendant was or should
have been aware of the problems with the Midwestern Pet Food.
37.
As a seasoned manufacturer with almost a century of experience in
making pet foods, Defendant analyzes the nutritional content of its products, and
conducts testing, including health and nutrition testing, on all of its products.
38.
Defendant touts the nutrition and safeguards of its Products in
statements such as:
a. “Midwestern Pet Foods has quality control personnel and laboratories
at each plant to test incoming ingredients and finished products. This
ranges from managing guarantees, to testing things like degree of
cook and microbial confirmation for release. All of our plants are
FSMA-ready and follow the GMP regulations as put out through
FSMA and the FDA. Additionally, all of our safety technicians follow
all OSHA and state regulations.”
b. “All SPORTMIX foods are designed to provide complete and
balanced nutrition and meet Association of American Feed Control
Officials (AAFCO) requirements.”
c. “When introducing a new product, Association of American Feed
Control Officials (AAFCO) feeding trials are completed at a farm
with an in-home atmosphere that is non-invasive, non-lethal and cage-
free.”12
39.
Through these quality control measures, Defendant knew or should
have known that the Midwestern Pet Food at issue was unsafe for pet consumption.
40.
Plaintiff and Class members were without access to the information
concealed by Defendant as described herein, and therefore reasonably relied on
Defendant’s representations and warranties regarding the quality, nutrition, and
safety of Midwestern Pet Food. Had Plaintiff and Class members known of the
contamination and the potential harm posed by Midwestern Pet Food, they would
have taken steps to avoid that harm and/or not have purchased the Products at all.
41.
Despite Defendant’s knowledge of the Aflatoxin contamination of
Midwestern Pet Food, it failed to either notify Plaintiff and Class members of the
nature and extent of the problems with the Product or to provide an adequate
remedy.
CLASS ACTION ALLEGATIONS
42.
Plaintiff brings this action on her own behalf, and on behalf of the
following Class pursuant to FED. R. CIV. P. 23(a), 23(b)(2), and/or 23(b)(3).
Specifically, the Class consists of the following:
12 SPORTMIX – FAQ, https://www.sportmix.com/faq/ (last visited Jan. 14, 2021)
Nationwide Class:
All persons or entities in the United States who purchased Midwestern Pet
Foods that were subject to Defendant’s December 30, 2020 and/or January
11, 2021 recalls.
and/or, in the alternative,
Georgia Class:
All persons or entities in Georgia who purchased Midwestern Pet Foods that
were subject to Defendant’s December 30, 2020 and/or January 11, 2021
recalls.
and/or, in the alternative,
Indiana Class:
All persons or entities in Indiana who purchased Midwestern Pet Foods that
were subject to Defendant’s December 30, 2020 and/or January 11, 2021
recalls.
43.
Together, the Nationwide Class, the Georgia Class, and the Indiana
Class will be referred to collectively as the “Class.” Excluded from the Class are
Defendant, its affiliates, employees, officers and directors, persons or entities that
purchased Midwestern Pet Food for resale, and the Judge(s) assigned to this case.
Plaintiff reserves the right to modify, change or expand the Class definition.
44.
Numerosity: Upon information and belief, the Class is so numerous
that joinder of all members is impracticable. While the exact number and identities
of individual members of the Class are unknown at this time, such information
being in the sole possession of Defendant and obtainable by Plaintiff only through
the discovery process, Plaintiff believes that hundreds or thousands of
contaminated Products have been sold in each of the states that are the subject of
the Class.
45.
Existence and Predominance of Common Questions of Fact and Law:
Common questions of law and fact exist as to all members of the Class. These
questions predominate over the questions affecting individual Class members.
These common legal and factual questions include, but are not limited to:
a. whether the Midwestern Pet Food purchased by Plaintiff and Class is
or was affected by Aflatoxin contamination;
b. whether Defendant knowingly failed to disclose the existence and
cause of the Aflatoxin contamination on Midwestern Pet Food and its
adverse medical effects on pets;
c. whether Defendant’s conduct violates the Georgia Fair Business
Practices Act, Ga. Code Ann. §§ 10-1-390, et seq;
d. whether Defendant’s conduct violates the Georgia Uniform Deceptive
Trade Practices Act, Ga. Code Ann. §§ 10-1-370, et seq.;
e. whether Defendant’s conduct violates the Indiana Deceptive
Consumer Sales Act, Ind. Code §§ 24-5-0.5-1, et seq.;
f. whether Defendant is strictly liable for the state statutory violations;
g. whether Defendant’s conduct constitutes negligence;
h. whether Defendant’s conduct constitutes a breach of express
warranty;
i. whether Defendant’s conduct constitutes a breach of implied
warranty;
j. whether Defendant’s conduct constitutes common law fraud;
k. whether Defendant’s conduct constitutes unjust enrichment; and
l. whether Plaintiff and Class members are entitled to monetary
damages and/or other remedies and, if so, the nature of any such
relief.
46.
Typicality: All of Plaintiff’s claims are typical of the claims of the
Class since Plaintiff purchased contaminated Midwestern Pet Food, as did each
member of the Class. Furthermore, Plaintiff and all members of the Class sustained
monetary and economic injuries including, but not limited to, ascertainable loss
arising out of Defendant’s wrongful conduct. Plaintiff is advancing the same
claims and legal theories on behalf of herself and all absent Class members.
47.
Adequacy: Plaintiff is an adequate representative because her interests
do not conflict with the interests of the Class that she seeks to represent, she has
retained counsel competent and highly experienced in complex class action
litigation, and she intends to prosecute this action vigorously. The interests of the
Class will be fairly and adequately protected by Plaintiff and her counsel.
48.
Superiority: A class action is superior to all other available means of
fair and efficient adjudication of the claims of Plaintiff and members of the Class.
The injury suffered by each individual Class member is relatively small in
comparison to the burden and expense of individual prosecution of the complex
and extensive litigation necessitated by Defendant’s conduct. It would be virtually
impossible for members of the Class to individually and effectively redress the
wrongs done to them. Even if the members of the Class could afford such
individual litigation, the court system could not. Individualized litigation presents a
potential for inconsistent or contradictory judgments. Individualized litigation also
increases the delay and expense to all parties, and to the court system, presented by
the complex legal and factual issues of the case. By contrast, the class action
device presents far fewer management difficulties, and provides the benefits of
single adjudication, economy of scale, and comprehensive supervision by a single
court. Upon information and belief, members of the Class can be readily identified
and notified based on, inter alia, Defendant’s sale information and records, and
FDA complaints and communications.
49.
Defendant has acted, and refused to act, on grounds generally
applicable to the Class, thereby making appropriate final equitable relief with
respect to the Class as a whole.
VIOLATIONS ALLEGED
COUNT I
VIOLATIONS OF GEORGIA FAIR BUSINESS PRACTICES ACT
(Ga. Code Ann. §§ 10-1-390, et seq.)
(Brought on Behalf of the Georgia Class)
50.
Plaintiff incorporates by reference all allegations of the preceding
paragraphs as though fully set forth herein.
51.
Defendant is a “person” as defined by the Georgia Fair Business
Practices Act (“Georgia FBPA”). Ga. Code Ann. § 10-1-392(a)(24).
52.
Plaintiff and Class Members are “consumers” within the meaning of
the Georgia FBPA. Ga. Code Ann. § 10-1-392(a)(6).
53.
The purchase of Midwestern Pet Food by Plaintiff and Class Members
constituted “consumer transactions” as defined by the Georgia FBPA. Ga. Code
Ann. § 10-1-392(a)(10).
54.
The Georgia FBPA declares “[u]nfair or deceptive acts or practices in
the conduct of consumer transactions and consumer acts or practices in trade or
commerce” to be unlawful, Ga. Code Ann. § 10-1-393(a), including but not limited
to “representing that goods or services have sponsorship, approval, characteristics,
ingredients, uses, or benefits that they do not have,” “[r]epresenting that goods or
services are of a particular standard, quality, or grade … if they are of another,”
and “[a]dvertising goods or services with intent not to sell them as advertised,” id.
§§ 10-1-393(b)(5), (7) & (9).
55.
Defendant represents on its website that it thoroughly tests its
products to ensure consumer satisfaction including in statements such as:
a. “Midwestern Pet Foods has quality control personnel and laboratories
at each plant to test incoming ingredients and finished products. This
ranges from managing guarantees, to testing things like degree of
cook and microbial confirmation for release. All of our plants are
FSMA-ready and follow the GMP regulations as put out through
FSMA and the FDA. Additionally, all of our safety technicians follow
all OSHA and state regulations.”
b. “All SPORTMIX foods are designed to provide complete and
balanced nutrition and meet Association of American Feed Control
Officials (AAFCO) requirements.”
c. “When introducing a new product, Association of American Feed
Control Officials (AAFCO) feeding trials are completed at a farm
with an in-home atmosphere that is non-invasive, non-lethal and cage-
free.”
56.
By failing to disclose the Aflatoxin contamination of the Product to
Plaintiff and Class Members, Defendant violated the Georgia FBPA because
Defendant represented that Midwestern Pet Food had characteristics and benefits
that it does not have, and represented that the Products were of a particular
standard, quality, or grade (i.e., nutritious, balanced, etc.) when they were of
another. See Ga. Code Ann. §§ 10-1-393(b)(5) & (7).
57.
Defendant advertised the Products as nutritious and of a good quality,
with the intent not to sell them as advertised, in violation of § 10-1-393(b)(9).
58.
Defendant’s unfair and deceptive acts or practices occurred repeatedly
in Midwestern’s course of trade or business, were material, were capable of
deceiving a substantial portion of the purchasing public, and as a result, caused
economic harm to owners and purchasers of Midwestern Pet Food.
59.
Through its product testing, Defendant knew or should have known
about the defective nature of the Midwestern Pet Food.
60.
Defendant was under a duty to Plaintiff and Class Members to
disclose the defective nature of the Product, because:
a. Defendant was in a superior position to know the true state of facts
about Midwestern Pet Food.
b. Plaintiff and Class Members could not reasonably have been expected
to learn or discover that the Midwestern Pet Food was contaminated
until it actually caused adverse health effects in their pets; and
c. Defendant knew that Plaintiff and Class Members could not
reasonably have been expected to learn or discover that the
Midwestern Pet Food was contaminated until it actually caused
adverse health effects in their pets.
61.
Defendant knew or should have known that its conduct violated the
Georgia FBPA.
62.
In failing to disclose the defective nature of Midwestern Pet Food,
Defendant knowingly and intentionally concealed material facts and breached its
duty not to do so.
63.
The facts Defendant concealed from Plaintiff and Class Members are
material in that a reasonable consumer would have considered them to be
important in deciding whether to purchase the Product. Moreover, a reasonable
consumer would consider the contamination to be an undesirable quality, as
Plaintiff and Class Members did. Had Plaintiff and Class Members known about
the contamination, they would not have purchased the Product.
64.
Plaintiff and Class Members, like all objectively reasonable
consumers, did not expect their pet food purchase to be contaminated. It is a
reasonable and objective consumer expectation for consumers to expect pet food
not to poison their pets.
65.
As a result of Defendant’s misconduct, Plaintiff and Class Members
have been harmed and suffered actual damages including veterinary bills, medical
expenses, replacement pet food, and emotional anguish resulting from death or
illness of a cherished pet.
66.
As a direct and proximate result of Defendant’s unfair or deceptive
acts or practices, Plaintiff and Class Members suffered and will continue to suffer
actual damages in that they have experienced and may continue to experience
ongoing medical expenses, and emotional anguish, due to damage to their pets’
health.
67.
Defendant’s violations present a continuing risk to Plaintiff and to the
general public. Defendant’s unlawful acts and practices complained of herein
affect the public interest.
68.
Thus, pursuant to Ga. Code Ann. § 10-1-399, Plaintiff seeks, in
addition to equitable relief, actual and statutory damages, attorneys’ fees and
expenses, treble damages, and punitive damages as permitted under the Georgia
FBPA and applicable law.
COUNT II
VIOLATIONS OF THE GEORGIA
UNIFORM DECEPTIVE TRADE PRACTICES ACT
(Ga. Code Ann. §§ 10-1-370, et seq.)
(On Behalf of the Georgia Class)
69.
Plaintiff incorporates by reference all allegations of the preceding
paragraphs as though fully set forth herein.
70.
Plaintiff brings this claim on behalf of herself and the Georgia Class.
71.
Defendant, Plaintiff, and Class members are “persons” within the
meaning of Georgia’s Uniform Deceptive Trade Practices Act (“Georgia
UDTPA”). Ga. Code Ann. § 10-1-371(5).
72.
The Georgia UDTPA prohibits “deceptive trade practices” which
include the “misrepresentation of standard, quality, or grade of goods and
services,” “engaging in any other conduct which similar creates a likelihood of
confusion or misunderstanding,” and “representing that goods or services have
sponsorship, approval, characteristics, ingredients, uses, or benefits that they do not
have,” and “[a]dvertising goods or services with intent not to sell them as
advertised.” Ga. Code Ann. § 10-1-372.
73.
By failing to disclose the defective nature of the Product to Plaintiff
and Class Members, Defendant engaged in deceptive trade practices in violation of
the Georgia UDTPA, because Defendant represented that the Class Vehicles had
characteristics and benefits that they do not have, and represented that the Class
Vehicles were of a particular standard, quality, or grade (i.e. nutritious and high-
quality, etc.) when they were of another. See Ga. Code Ann. §§ 10-1- 372(5), (7),
74.
Defendant advertised Midwestern Pet Food as nutritious and of high
quality, with the intent not to sell the Products as advertised, in violation of Ga.
Code Ann. § 10-1-372(12). Defendant’s unfair and deceptive acts or practices
occurred repeatedly in Defendant’s course of trade or business, were material, were
capable of deceiving a substantial portion of the purchasing public, and as a result,
caused economic harm on owners and purchasers of Midwestern Pet Food.
75.
Through Defendant’s product testing, it knew or should have known
about the defective nature of Midwestern Pet Food.
76.
Defendant was under a duty to Plaintiff and Class Members to
disclose the defective nature of the Product, because:
a. Defendant was in a superior position to know the true state of facts
about Midwestern Pet Food.
b. Plaintiff and Class members could not reasonably have been expected
to learn or discover that Midwestern Pet Food was contaminated until
it actually caused adverse health effects in their pets; and
c. Defendant knew that Plaintiff and Class members could not
reasonably have been expected to learn or discover that Midwestern
Pet Food was contaminated until it actually caused adverse health
effects in their pets.
77.
Thus, Defendant knew or should have known that its conduct violated
the Georgia UDTPA.
78.
In failing to disclose the defective nature of the Product, Defendant
knowingly and intentionally concealed material facts and breached its duty not to
do so.
79.
The facts Defendant concealed from Plaintiff and Class Members are
material in that a reasonable consumer would have considered them to be
important in deciding whether to purchase the Product. Moreover, a reasonable
consumer would consider the contamination to be an undesirable quality, as
Plaintiff and Class Members did. Had Plaintiff and Class Members known that
about the contamination, they would not have purchased the Product.
80.
Plaintiff and Class Members, like all objectively reasonable
consumers, did not expect their pet food purchase to be contaminated. It is a
reasonable and objective consumer expectation for consumers to expect pet food
not to harm their pets.
81.
As a result of Defendant’s misconduct, Plaintiff and Class members
have been harmed and suffered actual damages including veterinary bills, medical
expenses, replacement pet food, and the loss of pets for which they had paid.
82.
As a direct and proximate result of Defendant’s unfair or deceptive
acts or practices, Plaintiff and Class members suffered and will continue to suffer
actual damages in that they have experienced and may continue to experience
ongoing medical expenses, and the loss of pets for which they had paid.
83.
The violations of UDTPA by Defendant present a continuing risk to
Plaintiff, Class members, and to the general public. Defendant’s unlawful acts and
practices complained of herein affect the public interest.
84.
Plaintiff seeks an order enjoining Defendant’s unfair, unlawful, and/or
deceptive practices, attorneys’ fees, and any other just and proper relief available
under the Georgia UDTPA and applicable law.
COUNT III
VIOLATION OF THE INDIANA DECEPTIVE CONSUMER SALES ACT
(Ind. Code §§ 24-5-0.5-1, et seq.)
(Brought on Behalf of the Indiana Class)
85.
Plaintiff incorporates by reference all allegations of the preceding
paragraphs as though fully set forth herein.
86.
The Indiana Deceptive Consumer Sales Act, Indiana Code §§ 24-5-
0.5-1, et seq. prohibits unfair and deceptive acts, omissions or practices in
connection with consumer transactions acts, including, inter alia, the following,
whether made orally, in writing, or by electronic communication:
(b) (1) That such subject of a consumer transaction has . . .
performance, characteristics, accessories, uses, or benefits it does not
have which the supplier knows or should reasonably know it does not
have.
(2) That such subject of a consumer transaction is of a particular
standard, quality, . . . if it is not and if the supplier knows or should
reasonably know that it is not.
. . .
(11) That the consumer will be able to purchase the subject of the
consumer transaction as advertised by the supplier, if the supplier
does not intend to sell it.
Ind. Code § 24-5-0.5-3.
87.
The sale and distribution of Midwestern Pet Food to members of the
Indiana Class constitutes “consumer transactions” as defined by the Indiana
Deceptive Consumer Sales Act, Indiana Code § 24-5-0.5-2.
88.
Defendant engaged in unlawful conduct in violation of the Indiana
Deceptive Consumer Sales Act by making knowing and intentional omissions.
Defendant knowingly failed to disclose the Aflatoxin contamination of Midwestern
Pet Food in order to secure the sale of the Products, and to offer them at a premium
price.
89.
Defendant represents on its website that it thoroughly tests its
products to ensure consumer satisfaction including in statements such as:
a. “Midwestern Pet Foods has quality control personnel and laboratories
at each plant to test incoming ingredients and finished products. This
ranges from managing guarantees, to testing things like degree of
cook and microbial confirmation for release. All of our plants are
FSMA-ready and follow the GMP regulations as put out through
FSMA and the FDA. Additionally, all of our safety technicians follow
all OSHA and state regulations.”
b. “All SPORTMIX foods are designed to provide complete and
balanced nutrition and meet Association of American Feed Control
Officials (AAFCO) requirements.”
c. “When introducing a new product, Association of American Feed
Control Officials (AAFCO) feeding trials are completed at a farm
with an in-home atmosphere that is non-invasive, non-lethal and cage-
free.”13
90.
These statements are false and misleading because Defendant sold
Midwestern Pet Food despite Aflatoxin contamination.
91.
Defendant did not fully and truthfully disclose to its customers the
true nature of the inherent defect in Midwestern Pet Food which was not readily
discoverable until after purchase. As a result, Indiana Class members were
fraudulently induced to purchase Midwestern Pet Food that had been contaminated
by Aflatoxin along with all of the resultant actual and potential problems. These
facts that Defendant concealed were solely within its possession.
92.
Defendant intended that Indiana Class members rely on the acts of
concealment and omissions, so that they would purchase the Product.
93.
The Indiana Class actually relied on Defendant’s misrepresentations
and omissions alleged herein which caused the Indiana Class to purchase the
Products. Defendant’s conduct caused Indiana Class members to suffer an
13 SPORTMIX – FAQ, https://www.sportmix.com/faq/ (last visited Jan. 14, 2021).
ascertainable loss. In addition to direct monetary losses, Indiana Class members
have suffered an ascertainable loss by receiving less than what was promised.
94.
A causal relationship exists between Defendant’s unlawful conduct
and the ascertainable losses suffered by the Indiana Class. Had the Aflatoxin
contamination of the Products been disclosed, consumers would not have
purchased Midwestern Pet Food.
95.
The Indiana Class did not receive the benefit of their bargain as a
result of Defendant’s conduct.
96.
Defendant’s unlawful acts, omissions or practices complained of
herein affect the public interest. As a direct and proximate result of Defendant’s
violations of the Indiana Deceptive Consumer Sales Act, the members of the
Indiana Class have suffered injury-in-fact and/or actual damage.
97.
By engaging in the acts, omissions or practices discussed above,
including, but not limited to, the sale and distribution of the contaminated Product,
Defendant has violated Ind. Code § 24-5-0.5-3.
98.
Pursuant to Ind. Code § 24-5-0.5-4, the Indiana Class seeks actual
damages, treble damages, attorneys’ fees, and any other just and proper relief as
provided under the Indiana Deceptive Consumer Sales Act.
COUNT IV
STRICT LIABILITY
(Brought on Behalf of the Nationwide Class, or Alternatively, On Behalf of the
Georgia and/or Indiana Class)
99.
Plaintiff incorporates by reference all allegations of the preceding
paragraphs as though fully set forth herein.
100. Plaintiff and the Class incorporate by reference the preceding and
subsequent paragraphs as if fully set forth herein.
101. Defendant is engaged in the business of designing, manufacturing,
maintaining, inspecting, testing, marketing, packaging, labeling, selling and/or
distributing pet food.
102. Defendant designed, manufactured, inspected, tested, marketed,
packaged, labeled, sold and/or distributed Midwestern Pet Food product to Plaintiff
and Class Members.
103. At the time the Products left the possession, custody and control of
Defendant, Defendant knew or had reason to know of the use and purpose for
which Midwestern Pet Food was intended.
104. At the time the Products left the possession, custody and control of
Defendant, Defendant knew or had reason to know that selling, supplying and/or
distributing defective Midwestern Pet Food would cause the Product to become
inherently dangerous for users thereof, including Plaintiff and Class members, and
thus Defendant owed a duty of care and skill in the design, manufacture,
inspection, testing, marketing, packaging, labeling, selling, and/or distribution of
Midwestern Pet Food, and to further exercise ordinary and reasonable care to
ascertain that the Products were reasonably fit, suitable and safe for their intended
and reasonably foreseeable purposes.
105. At the time the Products left the possession, custody and control of
Defendant, Defendant had a duty to exercise reasonable care in issuing adequate
and sufficient instructions and warnings regarding the proper use of Midwestern
Pet Food, along with the hazards posed by defects within the Products.
106. At the time the Product left the possession, custody and control of the
Defendant, Midwestern Pet Food was in an unreasonably dangerous and defective
condition and was unfit, unsuitable and unsafe for its intended purposes.
107. Defendant failed to inform Plaintiff and Class members regarding
Midwestern Pet Food’s Aflatoxin contamination.
108. As a direct, proximate and foreseeable result of the aforesaid
negligent, careless, willful, wanton, malicious, grossly negligent and/or reckless
acts and/or omissions of Defendant, acting by and through its agents, servants
and/or employees in the course and scope of their employment, contaminated
Midwestern Pet Food was purchased and used by Plaintiff and Class members,
causing foreseeable harm to their pets.
COUNT V
NEGLIGENCE
(Brought on Behalf of the Nationwide Class, or Alternatively, On Behalf of the
Georgia and/or Indiana Class)
109. Plaintiff incorporates by reference all allegations of the preceding
paragraphs as though fully set forth herein.
110. Defendant owed Plaintiff and Class members a duty to provide safe
and nutritious food for their pets.
111. Defendant acted with a lack of care towards Plaintiff and Class
members through its acts and omissions, including: maintaining, inspecting,
testing, marketing, packaging, labeling, selling and/or distributing pet food that
was unsafe.
112. By failing to exercise ordinary care through its acts and omissions,
Defendant caused harm to Plaintiff and Class members.
113. Because of Defendant’s breach of its duty of care, Defendant
foreseeably caused harm to Plaintiff and Class members.
COUNT VI
BREACH OF EXPRESS WARRANTY
(Brought on Behalf of the Nationwide Class, or Alternatively, On Behalf of the
Georgia and/or Indiana Class)
114. Plaintiff incorporates by reference all allegations of the preceding
paragraphs as though fully set forth herein.
115. Defendant warrants its products as “100% guaranteed for taste and
nutrition.”14
116. Defendant breached this express warranty by selling to Plaintiff and
Class members Midwestern Pet Food known to suffer from the Aflatoxin
contamination so that it was not nutritious, not of high quality, and which was
unsuited for its ordinary and intended purpose, while refusing to cover the cost of
medical and veterinary bills resulting from the contamination.
117. As a result of Defendant’s actions, Plaintiff and Class members have
suffered economic damages including but not limited to veterinary bills, other
medical expenses, and replacement pet food.
118. Plaintiff and Class members have complied with all obligations under
the warranty, or otherwise have been excused from performance of said obligations
as a result of Defendant’s conduct described herein.
COUNT VIII
BREACH OF IMPLIED WARRANTY
(Brought on Behalf of the Nationwide Class, or Alternatively, On Behalf of the
Georgia and/or Indiana Class)
119. Plaintiff incorporates by reference all allegations of the preceding
paragraphs as though fully set forth herein.
120. A warranty that Midwestern Pet Food was in merchantable condition
14 SPORTMIX – FAQ, https://www.sportmixcom/faq/ (last visited Jan. 14, 2021)
is implied by law.
121. The Products, when sold and at all times thereafter, were not in
merchantable condition and are not fit for the ordinary purpose for which pet food
is used. Specifically, Midwestern Pet Food is inherently defective in that it is
contaminated with a potent fungal toxin and thus cannot safely be fed to pets.
122. As a direct and proximate result of Defendant’s breaches of the
implied warranty of merchantability, Plaintiff and the other Class members have
been damaged in an amount to be proven at trial.
COUNT IX
COMMON LAW FRAUD
(Brought on Behalf of the Nationwide Class, or Alternatively, On Behalf of the
Georgia and/or Indiana Class)
123. Plaintiff incorporates by reference all allegations of the preceding
paragraphs as though fully set forth herein.
124. Defendant made material omissions concerning a presently existing or
past fact. For example, Defendant did not fully and truthfully disclose to its
customers that Midwestern Pet Food had been contaminated by Aflatoxin, which
was not readily discoverable by Plaintiff and Class members until after Midwestern
Pet Food was purchased and ingested by their pets. As a result, Plaintiff and the
other Class members were fraudulently induced to purchase Midwestern Pet Food
with the contamination and all of the resultant problems.
125. These omissions were made by Defendant with knowledge of their
falsity, and with the intent that Plaintiff and Class members rely upon them.
126. Plaintiff and Class members reasonably relied on these omissions, and
suffered damages as a result.
COUNT X
UNJUST ENRICHMENT
(On Behalf of the Nationwide Class, or Alternatively, On Behalf of the
Georgia and/or Indiana Class)
127. Plaintiff incorporates by reference all allegations of the preceding
paragraphs as though fully set forth herein.
128. Plaintiff and members of the Class conferred a benefit on the
Defendant.
129. Defendant had knowledge that this benefit was conferred upon it.
130. Defendant has been and continues to be unjustly enriched at the
expense of Plaintiff, and its retention of this benefit under the circumstances would
be inequitable.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff, on behalf of herself and members of the Class,
respectfully requests that this Court:
A.
determine that the claims alleged herein may be maintained as a class
action under Rule 23 of the Federal Rules of Civil Procedure, and
issue an order certifying the Class as defined above;
B.
appoint Plaintiff as the representative of the Class and her counsel as
Class Counsel;
C.
award all actual, general, special, incidental, statutory, punitive, and
consequential damages to which Plaintiff and Class members are
entitled;
D.
award pre-judgment and post-judgment interest on such monetary
relief;
E.
grant appropriate injunctive and/or declaratory relief;
F.
award reasonable attorney’s fees and costs; and
G.
grant such further relief that this Court deems appropriate.
JURY DEMAND
Plaintiff demands a trial by jury on all issues so triable.
DATED: January 15, 2021
Respectfully Submitted,
/s/ Scott D. Gilchrist
Scott D. Gilchrist
COHEN & MALAD, LLP
One Indiana Square, Suite 1400
Indianapolis, IN 46204
Phone: 317.636.6481 (ext. 271)
Facsimile: 317.636.2593
Email: [email protected]
Joseph G. Sauder
Lori G. Kier
SAUDER SCHELKOPF, LLC
1109 Lancaster Avenue
Berwyn, PA 19312
Phone: 888.711.9975
Facsimile: 610.421.1326
Email: [email protected]
Email: [email protected]
Attorneys for Plaintiff and
the Putative Class
| products liability and mass tort |
P8DiDIcBD5gMZwcz4GN0 | UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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JOSUE ROMERO, on behalf of himself and
all others similarly situated,
Plaintiffs,
CLASS ACTION COMPLAINT
v.
AND
DEMAND FOR JURY TRIAL
KNOW STYLE, INC.,
Defendant.
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INTRODUCTION
1.
Plaintiff JOSUE ROMERO, on behalf of himself and others similarly situated,
asserts the following claims against Defendant KNOW STYLE, INC. as follows.
2.
Plaintiff is a visually-impaired and legally blind person who requires screen-
reading software to read website content using his computer. Plaintiff uses the terms
“blind” or “visually-impaired” to refer to all people with visual impairments who
meet the legal definition of blindness in that they have a visual acuity with
correction of less than or equal to 20 x 200. Some blind people who meet this
definition have limited vision. Others have no vision.
3.
Based on a 2010 U.S. Census Bureau report, approximately 8.1 million people in
the United States are visually impaired, including 2.0 million who are blind, and
according to the American Foundation for the Blind’s 2015 report, approximately
400,000 visually impaired persons live in the State of New York.
4.
Plaintiff brings this civil rights action against Defendant for its failure to design,
construct, maintain, and operate its website to be fully accessible to and
independently usable by Plaintiff and other blind or visually-impaired people.
Defendant’s denial of full and equal access to its website, and therefore denial of
its goods and services offered thereby, is a violation of Plaintiff’s rights under the
Americans with Disabilities Act (“ADA”).
5.
Because Defendant’s website, www.knowstyleusa.com (the “Website” or
“Defendant’s website”), is not equally accessible to blind and visually-impaired
consumers, it violates the ADA. Plaintiff seeks a permanent injunction to cause a
change in Defendant’s corporate policies, practices, and procedures so that
Defendant’s website will become and remain accessible to blind and visually-
impaired consumers.
JURISDICTION AND VENUE
6.
This Court has subject-matter jurisdiction over this action under 28 U.S.C. § 1331
and 42 U.S.C. § 12181, as Plaintiff’s claims arise under Title III of the ADA, 42
U.S.C. § 12181, et seq., and 28 U.S.C. § 1332.
7.
This Court has supplemental jurisdiction under 28 U.S.C. § 1367 over Plaintiff’s
New York State Human Rights Law, N.Y. Exec. Law Article 15, (“NYSHRL”) and
New York City Human Rights Law, N.Y.C. Admin. Code § 8-101 et seq.,
(“NYCHRL”) claims.
8.
Venue is proper in this district under 28 U.S.C. §1391(b)(1) and (2) because
Defendant conducts and continues to conduct a substantial and significant amount
of business in this District, and a substantial portion of the conduct complained of
herein occurred in this District because Plaintiff attempted to utilize, on a number
of occasions, the subject Website within this Judicial District.
9.
Defendant is subject to personal jurisdiction in this District. Defendant has been
and is committing the acts or omissions alleged herein in the Southern District of
New York that caused injury, and violated rights the ADA prescribes to Plaintiff
and to other blind and other visually impaired-consumers. A substantial part of the
acts and omissions giving rise to Plaintiff’s claims occurred in this District: on
several separate occasions, Plaintiff has been denied the full use and enjoyment of
the facilities, goods and services offered to the general public, on Defendant’s
Website in New York County. These access barriers that Plaintiff encountered have
caused a denial of Plaintiff’s full and equal access multiple times in the past, and
now deter Plaintiff on a regular basis from accessing the Defendant’s Website in
the future.
10.
This Court is empowered to issue a declaratory judgment under 28 U.S.C. §§ 2201
and 2202.
THE PARTIES
11.
Plaintiff JOSUE ROMERO, at all relevant times, is a resident of Brooklyn, New
York. Plaintiff is a blind, visually-impaired handicapped person and a member of
member of a protected class of individuals under the ADA, under 42 U.S.C. §
12102(1)-(2), and the regulations implementing the ADA set forth at 28 CFR §§
36.101 et seq., the NYSHRL and NYCHRL.
12.
Defendant is and was at all relevant times a Georgia Corporation doing business in
New York.
13.
Defendant’s Website, and its facilities, goods, and services offered thereupon, is a
public accommodation within the definition of Title III of the ADA, 42 U.S.C. §
12181(7).
NATURE OF ACTION
14.
The Internet has become a significant source of information, a portal, and a tool for
conducting business, doing everyday activities such as shopping, learning, banking,
researching, as well as many other activities for sighted, blind and visually-
impaired persons alike.
15.
In today’s tech-savvy world, blind and visually-impaired people have the ability to
access websites using keyboards in conjunction with screen access software that
vocalizes the visual information found on a computer screen or displays the content
on a refreshable Braille display. This technology is known as screen-reading
software. Screen-reading software is currently the only method a blind or visually-
impaired person may independently access the internet. Unless websites are
designed to be read by screen-reading software, blind and visually-impaired
persons are unable to fully access websites, and the information, products, goods
and contained thereon.
16.
Blind and visually-impaired users of Windows operating system-enabled
computers and devices have several screen reading software programs available to
them. Some of these programs are available for purchase and other programs are
available without the user having to purchase the program separately. Job Access
With Speech, otherwise known as “JAWS” is currently the most popular, separately
purchased and downloaded screen-reading software program available for a
Windows computer.
17.
For screen-reading software to function, the information on a website must be
capable of being rendered into text. If the website content is not capable of being
rendered into text, the blind or visually-impaired user is unable to access the same
content available to sighted users.
18.
The international website standards organization, the World Wide Web
Consortium, known throughout the world as W3C, has published version 2.0 of the
Web Content Accessibility Guidelines (“WCAG 2.1”). WCAG 2.1 are well-
established guidelines for making websites accessible to blind and visually-
impaired people. These guidelines are universally followed by most large business
entities and government agencies to ensure their websites are accessible.
19.
Non-compliant websites pose common access barriers to blind and visually-
impaired persons. Common barriers encountered by blind and visually impaired
persons include, but are not limited to, the following:
a.
A text equivalent for every non-text element is not provided;
b.
Title frames with text are not provided for identification and
navigation;
c.
Equivalent text is not provided when using scripts;
d.
Forms with the same information and functionality as for sighted
persons are not provided;
e.
Information about the meaning and structure of content is not
conveyed by more than the visual presentation of content;
f.
Text cannot be resized without assistive technology up to 200%
without losing content or functionality;
g.
If the content enforces a time limit, the user is not able to extend,
adjust or disable it;
h.
Web pages do not have titles that describe the topic or purpose;
i.
The purpose of each link cannot be determined from the link text
alone or from the link text and its programmatically determined link
context;
j.
One or more keyboard operable user interface lacks a mode of
operation where the keyboard focus indicator is discernible;
k.
The default human language of each web page cannot be
programmatically determined;
l.
When a component receives focus, it may initiate a change in
context;
m.
Changing the setting of a user interface component may
automatically cause a change of context where the user has not been advised
before using the component;
n.
Labels or instructions are not provided when content requires user
input, which include captcha prompts that require the user to verify that he
or she is not a robot;
o.
In content which is implemented by using markup languages,
elements do not have complete start and end tags, elements are not nested
according to their specifications, elements may contain duplicate attributes,
and/or any IDs are not unique;
p.
Inaccessible Portable Document Format (PDFs); and,
q.
The name and role of all User Interface elements cannot be
programmatically determined; items that can be set by the user cannot be
programmatically set; and/or notification of changes to these items is not
available to user agents, including assistive technology.
STATEMENT OF FACTS
Defendant’s Barriers on Its Website
20.
Defendant is a clothing manufacturer and retail company, and owns and operates
the website, www.knowstyleusa.com (its “Website”), offering features which
should allow all consumers to access the goods and services and which Defendant
ensures the delivery of such goods throughout the United States, including New
York State.
21.
Defendant operates and distributes its products throughout the United States,
including New York.
22.
Defendant offers the commercial website, www.knowstyleusa.com, to the public.
The website offers features which should allow all consumers to access the goods
and services whereby Defendant allows for the delivery of those ordered goods to
consumers throughout the United States, including New York State. The goods and
services offered by Defendant include, but are not limited to the following: the
ability to browse various clothing products for purchase and delivery, view rompers
and jumpsuits, obtain defendant’s contact information, and related goods and
services available online.
23.
It is, upon information and belief, Defendant’s policy and practice to deny Plaintiff,
along with other blind or visually-impaired users, access to Defendant’s website,
and to therefore specifically deny the goods and services that are offered to the
general public. Due to Defendant’s failure and refusal to remove access barriers to
its website, Plaintiff and visually-impaired persons have been and are still being
denied equal access to Defendant’s Website, and the numerous goods and services
and benefits offered to the public through the Website.
24.
Plaintiff is a visually-impaired and legally blind person, who cannot use a computer
without the assistance of screen-reading software. Plaintiff is, however, a proficient
JAWS screen-reader user and uses it to access the Internet. Plaintiff has visited the
Website on separate occasions using the JAWS screen-reader.
25.
During Plaintiff’s visits to the Website, the last occurring in August 2020, Plaintiff
encountered multiple access barriers that denied Plaintiff full and equal access to
the facilities, goods and services offered to the public and made available to the
public; and that denied Plaintiff the full enjoyment of the facilities, goods and
services of the Website.
26.
While attempting to navigate the Website, Plaintiff encountered multiple
accessibility barriers for blind or visually-impaired people that include, but are not
limited to, the following:
27.
Lack of Alternative Text (“alt-text”), or a text equivalent. Alt-text is an invisible
code embedded beneath a graphical image on a website. Web accessibility requires
that alt-text be coded with each picture so that screen-reading software can speak
the alt-text where a sighted user sees pictures, which includes captcha prompts. Alt-
text does not change the visual presentation, but instead a text box shows when the
cursor moves over the picture. The lack of alt-text on these graphics prevents screen
readers from accurately vocalizing a description of the graphics.
28.
Empty Links That Contain No Text causing the function or purpose of the link to
not be presented to the user. This can introduce confusion for keyboard and screen-
reader users;
29.
Redundant Links where adjacent links go to the same URL address which results
in additional navigation and repetition for keyboard and screen-reader users; and
30.
Linked Images Missing Alt-text, which causes problems if an image within a link
contains no text and that image does not provide alt-text. A screen reader then has
no content to present the user as to the function of the link, including information
contained in PDFs.
31.
As a result of visiting Defendant’s Website and from investigations performed on
his behalf, Plaintiff is aware that the Website includes at least the following
additional barriers blocking his full and equal use:
a. A Pop-up has been identified stating, "Just one more step we will
notify you about new products and special offers." With the option of
clicking "Later" or "Allow". There is no indication that a Pop-Up is on
the screen, therefore, negates the purpose of the Pop-Up itself and
because the information is missing, screen readers are unable to
interpret the Pop-Up and the user will miss the promotion and
discounts that are being offered.
b. Product sizes, when relevant, offer the size as an abbreviated letter
(S=small,M = medium, L = large, etc.). When the screen reader
interprets the size information, it will read "S, radio button, 1 of 3",
"M, radio button, 2 of 3", and "L, radio button, 3 of 3", and not read
the actual word or explanation and/or description of the size feature or
what it relates to.
c. Some product images have text that describe the item, the original
price and sale price. When the screen reader interprets the pricing,
both prices are read but there is no distinction between original and
sale prices nor is there any way to determine what price the item is
being offered at.
d. Site element like text is not labeled properly to integrate with screen
reader, some text is spelled out instead of read as a whole word,
barring the user from thoroughly understanding the text. For example,
the name of the company is KNOWSTYLEUSA, its interpreted and
read as a whole word because it does not contain spaces separating it
into three single words.
Defendant Must Remove Barriers To Its Website
32.
Due to the inaccessibility of Defendant’s Website, blind and visually-impaired
customers such as Plaintiff, who need screen-readers, cannot fully and equally use
or enjoy the facilities, products, and services Defendant offers to the public on its
Website. The access barriers Plaintiff encountered have caused a denial of
Plaintiff’s full and equal access in the past, and now deter Plaintiff on a regular
basis from visiting the Website, presently and in the future.
33.
These access barriers on Defendant’s Website have deterred Plaintiff from learning
about those various clothing products for purchase and delivery, and enjoying them
equal to sighted individuals because: Plaintiff was unable to determine and or
purchase items from its Website, among other things.
34.
If the Website was equally accessible to all, Plaintiff could independently navigate
the Website and complete a desired transaction as sighted individuals do.
35.
Through his attempts to use the Website, Plaintiff has actual knowledge of the
access barriers that make these services inaccessible and independently unusable
by blind and visually-impaired people.
36.
Because simple compliance with the WCAG 2.1 Guidelines would provide Plaintiff
and other visually-impaired consumers with equal access to the Website, Plaintiff
alleges that Defendant has engaged in acts of intentional discrimination, including
but not limited to the following policies or practices:
a.
Constructing and maintaining a website that is inaccessible to
visually-impaired individuals, including Plaintiff;
b.
Failure to construct and maintain a website that is sufficiently intuitive
so as to be equally accessible to visually-impaired individuals, including
Plaintiff; and,
c.
Failing to take actions to correct these access barriers in the face of
substantial harm and discrimination to blind and visually-impaired
consumers, such as Plaintiff, as a member of a protected class.
37.
Defendant therefore uses standards, criteria or methods of administration that have the
effect of discriminating or perpetuating the discrimination of others, as alleged herein.
38.
The ADA expressly contemplates the injunctive relief that Plaintiff seeks in this
action. In relevant part, the ADA requires:
In the case of violations of . . . this title, injunctive relief shall include an order to
alter facilities to make such facilities readily accessible to and usable by individuals
with disabilities . . . Where appropriate, injunctive relief shall also include requiring
the . . . modification of a policy . . .
42 U.S.C. § 12188(a)(2).
39.
Because Defendant’s Website have never been equally accessible, and because
Defendant lacks a corporate policy that is reasonably calculated to cause its Website
to become and remain accessible, Plaintiff invokes 42 U.S.C. § 12188(a)(2) and
seeks a permanent injunction requiring Defendant to retain a qualified consultant
acceptable to Plaintiff (“Agreed Upon Consultant”) to assist Defendant to comply
with WCAG 2.1 guidelines for Defendant’s Website. Plaintiff seeks that this
permanent injunction requires Defendant to cooperate with the Agreed Upon
Consultant to:
a.
Train Defendant’s employees and agents who develop the Website
on accessibility compliance under the WCAG 2.1 guidelines;
b.
Regularly check the accessibility of the Website under the WCAG
2.0 guidelines;
c.
Regularly test user accessibility by blind or vision-impaired persons
to ensure that Defendant’s Website complies under the WCAG 2.1
guidelines; and,
d.
Develop an accessibility policy that is clearly disclosed on Defendant’s
Websites, with contact information for users to report accessibility-related
problems.
40.
If the Website was accessible, Plaintiff and similarly situated blind and visually-
impaired people could independently view service items, shop for and otherwise
research related goods and services available via the Website.
41.
Although Defendant may currently have centralized policies regarding maintaining
and operating its Website, Defendant lacks a plan and policy reasonably calculated
to make them fully and equally accessible to, and independently usable by, blind
and other visually-impaired consumers.
42.
Defendant has, upon information and belief, invested substantial sums in
developing and maintaining their Website and has generated significant revenue
from the Website. These amounts are far greater than the associated cost of making
their Website equally accessible to visually impaired customers.
43.
Without injunctive relief, Plaintiff and other visually-impaired consumers will
continue to be unable to independently use the Website, violating their rights.
CLASS ACTION ALLEGATIONS
44.
Plaintiff, on behalf of himself and all others similarly situated, seeks to certify a
nationwide class under Fed. R. Civ. P. 23(a) and 23(b)(2): all legally blind
individuals in the United States who have attempted to access Defendant’s Website
and as a result have been denied access to the equal enjoyment of goods and services,
during the relevant statutory period.
45.
Plaintiff, on behalf of himself and all others similarly situated, seeks certify a New
York State subclass under Fed. R. Civ. P. 23(a) and 23(b)(2): all legally blind
individuals in the State of New York who have attempted to access Defendant’s
Website and as a result have been denied access to the equal enjoyment of those
services, during the relevant statutory period.
46.
Plaintiff, on behalf of himself and all others similarly situated, seeks certify a New
York City subclass under Fed. R. Civ. P. 23(a) and 23(b)(2): all legally blind
individuals in the City of New York who have attempted to access Defendant’s
Website and as a result have been denied access to the equal enjoyment of goods and
services offered, during the relevant statutory period.
47.
Common questions of law and fact exist amongst Class, including:
a.
Whether Defendant’s Website is a “public accommodation” under
the ADA;
b.
Whether Defendant’s Website is a “place or provider of public
accommodation” under the NYSHRL or NYCHRL;
c.
Whether Defendant’s Website denies the full and equal enjoyment
of
its
products,
services,
facilities,
privileges,
advantages,
or
accommodations to people with visual disabilities, violating the ADA; and
d.
Whether Defendant’s Website denies the full and equal enjoyment
of
its
products,
services,
facilities,
privileges,
advantages,
or
accommodations to people with visual disabilities, violating the NYSHRL
or NYCHRL.
48.
Plaintiff’s claims are typical of the Class. The Class, similarly to the Plaintiff, are
severely visually impaired or otherwise blind, and claim that Defendant has
violated the ADA, NYSYRHL or NYCHRL by failing to update or remove access
barriers on its Website so either can be independently accessible to the Class.
49.
Plaintiff will fairly and adequately represent and protect the interests of the Class
Members because Plaintiff has retained and is represented by counsel competent
and experienced in complex class action litigation, and because Plaintiff has no
interests antagonistic to the Class Members. Class certification of the claims is
appropriate under Fed. R. Civ. P. 23(b)(2) because Defendant has acted or refused
to act on grounds generally applicable to the Class, making appropriate both
declaratory and injunctive relief with respect to Plaintiff and the Class as a whole.
50.
Alternatively, class certification is appropriate under Fed. R. Civ. P. 23(b)(3) because
fact and legal questions common to Class Members predominate over questions
affecting only individual Class Members, and because a class action is superior to
other available methods for the fair and efficient adjudication of this litigation.
51.
Judicial economy will be served by maintaining this lawsuit as a class action in that
it is likely to avoid the burden that would be otherwise placed upon the judicial
system by the filing of numerous similar suits by people with visual disabilities
throughout the United States.
FIRST CAUSE OF ACTION
VIOLATIONS OF THE ADA, 42 U.S.C. § 12181 et seq.
52.
Plaintiff, on behalf of himself and the Class Members, repeats and realleges every
allegation of the preceding paragraphs as if fully set forth herein.
53.
Section 302(a) of Title III of the ADA, 42 U.S.C. § 12101 et seq., provides:
No individual shall be discriminated against on the basis of disability in the full and
equal enjoyment of the goods, services, facilities, privileges, advantages, or
accommodations of any place of public accommodation by any person who owns,
leases (or leases to), or operates a place of public accommodation.
42 U.S.C. § 12182(a).
54.
Defendant’s Website is a public accommodations within the definition of Title III
of the ADA, 42 U.S.C. § 12181(7). The Website is a service that is offered to the
general public, and as such, must be equally accessible to all potential consumers.
55.
Under Section 302(b)(1) of Title III of the ADA, it is unlawful discrimination to
deny individuals with disabilities the opportunity to participate in or benefit from
the products, services, facilities, privileges, advantages, or accommodations of an
entity. 42 U.S.C. § 12182(b)(1)(A)(i).
56.
Under Section 302(b)(1) of Title III of the ADA, it is unlawful discrimination to
deny individuals with disabilities an opportunity to participate in or benefit from
the products, services, facilities, privileges, advantages, or accommodation, which
is equal to the opportunities afforded to other individuals. 42 U.S.C. §
12182(b)(1)(A)(ii).
57.
Under Section 302(b)(2) of Title III of the ADA, unlawful discrimination also
includes, among other things:
[A] failure to make reasonable modifications in policies, practices, or procedures,
when such modifications are necessary to afford such goods, services, facilities,
privileges, advantages, or accommodations to individuals with disabilities, unless
the entity can demonstrate that making such modifications would fundamentally
alter the nature of such goods, services, facilities, privileges, advantages or
accommodations; and a failure to take such steps as may be necessary to ensure that
no individual with a disability is excluded, denied services, segregated or otherwise
treated differently than other individuals because of the absence of auxiliary aids
and services, unless the entity can demonstrate that taking such steps would
fundamentally alter the nature of the good, service, facility, privilege, advantage,
or accommodation being offered or would result in an undue burden.
42 U.S.C. § 12182(b)(2)(A)(ii)-(iii).
58.
The acts alleged herein constitute violations of Title III of the ADA, and the
regulations promulgated thereunder. Plaintiff, who is a member of a protected class
of persons under the ADA, has a physical disability that substantially limits the
major life activity of sight within the meaning of 42 U.S.C. §§ 12102(1)(A)-(2)(A).
Furthermore, Plaintiff has been denied full and equal access to the Website, has not
been provided services that are provided to other patrons who are not disabled, and
has been provided services that are inferior to the services provided to non-disabled
persons. Defendant has failed to take any prompt and equitable steps to remedy its
discriminatory conduct. These violations are ongoing.
59.
Under 42 U.S.C. § 12188 and the remedies, procedures, and rights set forth and
incorporated therein, Plaintiff, requests relief as set forth below.
SECOND CAUSE OF ACTION
VIOLATIONS OF THE NYSHRL
60.
Plaintiff, on behalf of himself and the New York State Sub-Class Members, repeats
and realleges every allegation of the preceding paragraphs as if fully set forth herein.
61.
N.Y. Exec. Law § 296(2)(a) provides that it is “an unlawful discriminatory practice
for any person, being the owner, lessee, proprietor, manager, superintendent, agent
or employee of any place of public accommodation . . . because of the . . . disability
of any person, directly or indirectly, to refuse, withhold from or deny to such person
any of the accommodations, advantages, facilities or privileges thereof.”
62.
Defendant’s Website and its’ sale of goods to the general public, constitute sales
establishments and public accommodations within the definition of N.Y. Exec. Law
§ 292(9). Defendant’s Website is a service, privilege or advantage of Defendant.
63.
Defendant is subject to New York Human Rights Law because it owns and operates
its Website. Defendant is a person within the meaning of N.Y. Exec. Law § 292(1).
64.
Defendant is violating N.Y. Exec. Law § 296(2)(a) in refusing to update or remove
access barriers to its Website, causing its Website to be completely inaccessible to
the blind. This inaccessibility denies blind patrons full and equal access to the
facilities, services that Defendant makes available to the non-disabled public.
65.
Under N.Y. Exec. Law § 296(2)(c)(i), unlawful discriminatory practice includes,
among other things, “a refusal to make reasonable modifications in policies,
practices, or procedures, when such modifications are necessary to afford facilities,
privileges, advantages or accommodations to individuals with disabilities, unless
such person can demonstrate that making such modifications would fundamentally
alter the nature of such facilities, privileges, advantages or accommodations being
offered or would result in an undue burden".
66.
Under N.Y. Exec. Law § 296(2)(c)(ii), unlawful discriminatory practice also
includes, “a refusal to take such steps as may be necessary to ensure that no
individual with a disability is excluded or denied services because of the absence
of auxiliary aids and services, unless such person can demonstrate that taking such
steps would fundamentally alter the nature of the facility, privilege, advantage or
accommodation being offered or would result in an undue burden.”
67.
Readily available, well-established guidelines exist on the Internet for making
websites accessible to the blind and visually impaired. These guidelines have been
followed by other large business entities and government agencies in making their
website accessible, including but not limited to: adding alt-text to graphics and
ensuring that all functions can be performed using a keyboard. Incorporating the
basic components to make its Website accessible would neither fundamentally alter
the nature of Defendant’s business nor result in an undue burden to Defendant.
68.
Defendant’s actions constitute willful intentional discrimination against the class
on the basis of a disability in violation of the NYSHRL, N.Y. Exec. Law § 296(2)
in that Defendant has:
a.
constructed and maintained a website that is inaccessible to blind
class members with knowledge of the discrimination; and/or
b.
constructed and maintained a website that is sufficiently intuitive
and/or obvious that is inaccessible to blind class members; and/or
c.
failed to take actions to correct these access barriers in the face of
substantial harm and discrimination to blind class members.
69.
Defendant has failed to take any prompt and equitable steps to remedy their
discriminatory conduct. These violations are ongoing.
70.
Defendant discriminates, and will continue in the future to discriminate against
Plaintiff and New York State Sub-Class Members on the basis of disability in the
full and equal enjoyment of the products, services, facilities, privileges, advantages,
accommodations and/or opportunities of Defendant’s Website under § 296(2) et
seq. and/or its implementing regulations. Unless the Court enjoins Defendant from
continuing to engage in these unlawful practices, Plaintiff and the Sub-Class
Members will continue to suffer irreparable harm.
71.
Defendant’s actions were and are in violation of New York State Human Rights
Law and therefore Plaintiff invokes his right to injunctive relief to remedy the
discrimination.
72.
Plaintiff is also entitled to compensatory damages, as well as civil penalties and
fines under N.Y. Exec. Law § 297(4)(c) et seq. for each and every offense.
73.
Plaintiff is also entitled to reasonable attorneys’ fees and costs.
74.
Under N.Y. Exec. Law § 297 and the remedies, procedures, and rights set forth and
incorporated therein Plaintiff prays for judgment as set forth below.
THIRD CAUSE OF ACTION
VIOLATION OF THE NEW YORK STATE CIVIL RIGHTS LAW
75.
Plaintiff, on behalf of himself and the New York State Sub-Class Members, repeats
and realleges every allegation of the preceding paragraphs as if fully set forth herein.
76.
Plaintiff served notice thereof upon the attorney general as required by N.Y. Civil
Rights Law § 41.
77.
N.Y. Civil Rights Law § 40 provides that “all persons within the jurisdiction of this
state shall be entitled to the full and equal accommodations, advantages, facilities
and privileges of any places of public accommodations, resort or amusement,
subject only to the conditions and limitations established by law and applicable
alike to all persons. No persons, being the owner, lessee, proprietor, manager,
superintendent, agent, or employee of any such place shall directly or indirectly
refuse, withhold from, or deny to any person any of the accommodations,
advantages, facilities and privileges thereof . . .”
78.
N.Y. Civil Rights Law § 40-c(2) provides that “no person because of . . . disability,
as such term is defined in section two hundred ninety-two of executive law, be
subjected to any discrimination in his or her civil rights, or to any harassment, as
defined in section 240.25 of the penal law, in the exercise thereof, by any other person
or by any firm, corporation or institution, or by the state or any agency or subdivision.”
79.
Defendant’s Website is a service, privilege or advantage of Defendant and its
Website which offers such goods and services to the general public is required to
be equally accessible to all.
80.
Defendant is subject to New York Civil Rights Law because it owns and operates
their Website, and Defendant is a person within the meaning of N.Y. Civil Law §
40-c(2).
81.
Defendant is violating N.Y. Civil Rights Law § 40-c(2) in refusing to update or
remove access barriers to its Website, causing its Website and the goods and
services integrated with such Website to be completely inaccessible to the blind.
This inaccessibility denies blind patrons full and equal access to the facilities, goods
and services that Defendant makes available to the non-disabled public.
82.
N.Y. Civil Rights Law § 41 states that “any corporation which shall violate any of the
provisions of sections forty, forty-a, forty-b or forty-two . . . shall for each and every
violation thereof be liable to a penalty of not less than one hundred dollars nor more
than five hundred dollars, to be recovered by the person aggrieved thereby . . .”
83.
Under NY Civil Rights Law § 40-d, “any person who shall violate any of the
provisions of the foregoing section, or subdivision three of section 240.30 or section
240.31 of the penal law, or who shall aid or incite the violation of any of said
provisions shall for each and every violation thereof be liable to a penalty of not
less than one hundred dollars nor more than five hundred dollars, to be recovered
by the person aggrieved thereby in any court of competent jurisdiction in the county
in which the defendant shall reside ...”
84.
Defendant has failed to take any prompt and equitable steps to remedy its
discriminatory conduct. These violations are ongoing.
85.
Defendant discriminates, and will continue in the future to discriminate against
Plaintiff and New York State Sub-Class Members on the basis of disability are
being directly or indirectly refused, withheld from, or denied the accommodations,
advantages, facilities and privileges thereof in § 40 et seq. and/or its implementing
regulations.
86.
Plaintiff is entitled to compensatory damages of five hundred dollars per instance,
as well as civil penalties and fines under N.Y. Civil Law § 40 et seq. for each and
every offense.
FOURTH CAUSE OF ACTION
VIOLATIONS OF THE NYCHRL
87.
Plaintiff, on behalf of himself and the New York City Sub-Class Members, repeats
and realleges every allegation of the preceding paragraphs as if fully set forth herein.
88.
N.Y.C. Administrative Code § 8-107(4)(a) provides that “It shall be an unlawful
discriminatory practice for any person, being the owner, lessee, proprietor,
manager, superintendent, agent or employee of any place or provider of public
accommodation, because of . . . disability . . . directly or indirectly, to refuse,
withhold from or deny to such person, any of the accommodations, advantages,
facilities or privileges thereof.”
89.
Defendant’s Website is a sales establishment and public accommodations within
the definition of N.Y.C. Admin. Code § 8-102(9).
90.
Defendant is subject to NYCHRL because it owns and operates its Website, making
it a person within the meaning of N.Y.C. Admin. Code § 8-102(1).
91.
Defendant is violating N.Y.C. Administrative Code § 8-107(4)(a) in refusing to
update or remove access barriers to Website, causing its Website and the services
integrated with such Website to be completely inaccessible to the blind. This
inaccessibility denies blind patrons full and equal access to the facilities, products,
and services that Defendant makes available to the non-disabled public.
92.
Defendant is required to “make reasonable accommodation to the needs of persons
with disabilities . . . any person prohibited by the provisions of [§ 8-107 et seq.]
from discriminating on the basis of disability shall make reasonable
accommodation to enable a person with a disability to . . . enjoy the right or rights
in question provided that the disability is known or should have been known by the
covered entity.” N.Y.C. Admin. Code § 8-107(15)(a).
93.
Defendant’s actions constitute willful intentional discrimination against the Sub-
Class on the basis of a disability in violation of the N.Y.C. Administrative Code §
8-107(4)(a) and § 8-107(15)(a) in that Defendant has:
a.
constructed and maintained a website that is inaccessible to blind
class members with knowledge of the discrimination; and/or
b.
constructed and maintained a website that is sufficiently intuitive
and/or obvious that is inaccessible to blind class members; and/or
c.
failed to take actions to correct these access barriers in the face of
substantial harm and discrimination to blind class members.
94.
Defendant has failed to take any prompt and equitable steps to remedy their
discriminatory conduct. These violations are ongoing.
95.
As such, Defendant discriminates, and will continue in the future to discriminate
against Plaintiff and members of the proposed class and subclass on the basis of
disability in the full and equal enjoyment of the products, services, facilities,
privileges, advantages, accommodations and/or opportunities of its Website under
§ 8-107(4)(a) and/or its implementing regulations. Unless the Court enjoins
Defendant from continuing to engage in these unlawful practices, Plaintiff and
members of the class will continue to suffer irreparable harm.
96.
Defendant’s actions were and are in violation of the NYCHRL and therefore
Plaintiff invokes his right to injunctive relief to remedy the discrimination.
97.
Plaintiff is also entitled to compensatory damages, as well as civil penalties and
fines under N.Y.C. Administrative Code § 8-120(8) and § 8-126(a) for each offense
as well as punitive damages pursuant to § 8-502.
98.
Plaintiff is also entitled to reasonable attorneys’ fees and costs.
99.
Under N.Y.C. Administrative Code § 8-120 and § 8-126 and the remedies,
procedures, and rights set forth and incorporated therein Plaintiff prays for
judgment as set forth below.
FIFTH CAUSE OF ACTION
DECLARATORY RELIEF
100.
Plaintiff, on behalf of himself and the Class and New York State and City Sub-
Classes Members, repeats and realleges every allegation of the preceding
paragraphs as if fully set forth herein.
101.
An actual controversy has arisen and now exists between the parties in that Plaintiff
contends, and is informed and believes that Defendant denies, that its Website
contains access barriers denying blind customers the full and equal access to the
products, services and facilities of its Website, which Defendant owns, operations
and controls, fails to comply with applicable laws including, but not limited to, Title
III of the Americans with Disabilities Act, 42 U.S.C. §§ 12182, et seq., N.Y. Exec.
Law § 296, et seq., and N.Y.C. Admin. Code § 8-107, et seq. prohibiting
discrimination against the blind.
102.
A judicial declaration is necessary and appropriate at this time in order that each of
the parties may know their respective rights and duties and act accordingly.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff respectfully requests this Court grant the following relief:
a.
A preliminary and permanent injunction to prohibit Defendant from
violating the Americans with Disabilities Act, 42 U.S.C. §§ 12182, et seq.,
N.Y. Exec. Law § 296, et seq., N.Y.C. Administrative Code § 8-107, et seq.,
and the laws of New York;
b.
A preliminary and permanent injunction requiring Defendant to take
all the steps necessary to make its Website into full compliance with the
requirements set forth in the ADA, and its implementing regulations, so that
the Website is readily accessible to and usable by blind individuals;
c.
A declaration that Defendant owns, maintains and/or operates its
Website in a manner that discriminates against the blind and which fails to
provide access for persons with disabilities as required by Americans with
Disabilities Act, 42 U.S.C. §§ 12182, et seq., N.Y. Exec. Law § 296, et seq.,
N.Y.C. Administrative Code § 8-107, et seq., and the laws of New York
d.
An order certifying the Class and Sub-Classes under Fed. R. Civ. P.
23(a) & (b)(2) and/or (b)(3), appointing Plaintiff as Class Representative,
and his attorneys as Class Counsel;
e.
Compensatory damages in an amount to be determined by proof,
including all applicable statutory and punitive damages and fines, to
Plaintiff and the proposed class and subclasses for violations of their civil
rights under New York State Human Rights Law and City Law;
f.
Pre- and post-judgment interest;
g.
An award of costs and expenses of this action together with
reasonable attorneys’ and expert fees; and
h.
Such other and further relief as this Court deems just and proper.
DEMAND FOR TRIAL BY JURY
Pursuant to Fed. R. Civ. P. 38(b), Plaintiff demands a trial by jury on all questions
of fact the Complaint raises.
Dated: Brooklyn, New York
September 2, 2020
COHEN & MIZRAHI LLP
By: /s/ Joseph H. Mizrahi
Joseph H. Mizrahi, Esq.
[email protected]
300 Cadman Plaza West, 12th Fl.
Brooklyn, New York 11201
Tel: (929) 575-4175
Fax: (929) 575-4195
Attorneys For Plaintiff
| civil rights, immigration, family |
5d6eEIcBD5gMZwczV3d8 | UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
MIAMI DIVISION
CASE NO.:
Plaintiff,
Defendants.
/
COMPLAINT
Plaintiff, JESSICA FINKELSON, ("FINKELSON" or "Plaintiff"), on behalf of herself
JURISDICTION
1.
Jurisdiction in this Court is proper as the claims are brought pursuant to the Fair
2.
The jurisdiction of the Court over this controversy is based upon 29 U.S.C.
3.
This Court has the authority to grant declaratory relief pursuant to the FLSA and
PARTIES
4.
At all times material hereto, Plaintiff was and continues to be a resident of Miami-
5.
At all times material hereto, TL was and continues to be a Florida Limited
6.
At all times relevant to this action, "JA" was an individual resident of the State of
7.
At all times material hereto, Plaintiff was "engaged in commerce" within the
8.
At all times material hereto, Plaintiff was an "employee" of Defendants within the
9.
At all times material hereto, Defendants were the "employer" within the meaning
10.
Defendants were and continue to be "employers" within the meaning of FLSA.
11.
At all times material hereto, TL was and continues to be "an enterprise engaged in
12.
At all times material hereto, TL was and continues to be an enterprise engaged in
13.
Based upon information and belief, the annual gross revenue of Defendants was
2
14.
At all times relevant hereto, Defendants had more than two employees.
15.
At all times material hereto, Defendants had two (2) or more employees handling,
16.
At all times hereto, Plaintiff was "engaged in commerce" and subject to
17.
At all times hereto, Plaintiff was engaged in the "production of goods for
18.
The additional persons who may become plaintiffs in this action are/were
19.
At all times material hereto, the work performed by the Plaintiff was directly
STATEMENT OF FACTS
20.
On or about August 20, 2010, Defendants hired Plaintiff to work as a "clerical
21.
At various material times hereto, Plaintiff worked for Defendants in excess of
22.
From at least August 20, 2010, and continuing through June 7, 2011, Defendants
3
23.
Plaintiff should be compensated at the rate of one and one-half times Plaintiff's
24.
Defendants have violated Title 29 U.S.C. §207 from August 20, 2010 through
a.
Plaintiff worked in excess of forty (40) hours per week for the period of
employment with Defendants;
b.
No payments or provisions for payment have been made by Defendants to
properly compensate Plaintiff at the statutory rate of one and one-half times
Plaintiff's regular rate for those hours worked in excess of forty (40) hours
per work week, as provided by the FLSA; and
c.
Defendants failed to maintain proper time records as mandated by the
FLSA.
25.
Plaintiff has retained the law firm of MORGAN & MORGAN, P.A. to represent
COUNT I
VIOLATION OF 29 U.S.C. §207 OVERTIME COMPENSATION
26.
Plaintiff re-alleges and reavers paragraphs 1 through 25 of the Complaint, as if
27.
From August 20, 2010 and continuing through June 7, 2011, Plaintiff worked in
428.
Plaintiff was and is entitled to be paid at the statutory rate of one and one-half
29.
At all times material hereto, Defendants failed and continue to fail to maintain
30.
Defendants' actions were willful and/or showed reckless disregard for the
31.
Defendants failed to properly disclose or apprise Plaintiff of her rights under the
32.
Due to the intentional, willful, and unlawful acts of Defendants, Plaintiff suffered
33.
Plaintiff is entitled to an award of reasonable attorney's fees and costs pursuant to
34.
At all times material hereto, Defendants failed to comply with Title 29 and United
35.
Based upon information and belief, the employees and former employees of
5
36.
Plaintiff demands a trial by jury.
COUNT II
DECLARATORY RELIEF
37.
Plaintiff adopts all allegations in paragraphs 1 through 36.
38.
Plaintiff and Defendants have a Fair Labor Standards Act dispute pending, which
39.
The Court, also, has jurisdiction to hear Plaintiff's request for declaratory relief
40.
Plaintiff may obtain declaratory relief.
41.
Defendants employed Plaintiff.
42.
Defendants are an enterprise.
43.
Plaintiff was individually covered by the FLSA.
44.
Defendants failed to pay Plaintiff for all hours worked.
45.
Defendants did not keep accurate time records pursuant to 29 U.S.C. § 211(c) and
46.
Defendants did not rely upon a good faith defense.
47.
Plaintiff is entitled to an equal amount of liquidated damages.
48.
It is in the public interest to have these declarations of rights recorded.
49.
Plaintiff's declaratory judgment action serves the useful purpose of clarifying and
50.
The declaratory judgment action terminates and affords relief from uncertainty,
6
51.
Plaintiff demands trial by jury.
WHEREFORE, Plaintiff respectfully requests that judgment be entered in her favor
a.
Declaring, pursuant to 29 U.S.C. §§2201 and 2202, that the acts and
practices complained of herein are in violation of the maximum hour and
minimum wage provisions of the FLSA;
b.
Awarding Plaintiff liquidated damages in an amount equal to the overtime
award;
c.
Awarding Plaintiff liquidated damages in an amount equal to the overtime
wages award;
d.
Awarding Plaintiff reasonable attorney's fees and costs and expenses of the
litigation pursuant to 29 U.S.C. $216(b);
e.
Awarding Plaintiff pre-judgment interest;
f.
Granting Plaintiff an Order, on an expedited basis, allowing her to send
Notice of this action, pursuant to 216(b) and/or FRCP 23, to those similarly
situated to Plaintiff;
g.
Ordering any other further relief the Court deems just and proper.
7
JURY DEMAND
Plaintiff demands trial by jury on all issues SO triable as a matter of right by jury.
Respectfully submitted,
MORGAN & MORGAN, P.A.
6824 Griffin Road
Davie, Florida 33314
Telephone (954) 3 8-0268
Facsimile: (954) 333-3512
E-mail: [email protected]
ANDREWER ISC H, ESQ.
Florida Bar No. 27777
Trial Counsel for Plaintiff
8 | employment & labor |
z7NUC4cBD5gMZwczrdvz | IN THE UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF TEXAS
MIDLAND/ODESSA DIVISION
JOHN NEWSOME, JR., Individually and
PLAINTIFF
on behalf of All Others Similarly Situated
vs.
No. 7:19-cv-150
QES PRESSURE CONTROL, LLC
DEFENDANT
ORIGINAL COMPLAINT—COLLECTIVE ACTION
COMES NOW Plaintiff John Newsome, Jr., individually and on behalf of all
others similarly situated, by and through his attorneys Merideth Q. McEntire and Josh
Sanford of Sanford Law Firm, PLLC, and for his Original Complaint—Collective Action
against Defendant QES Pressure Control, LLC (“Defendant”), and in support thereof he
does hereby state and allege as follows:
I.
PRELIMINARY STATEMENTS
1.
This is a collective action brought by John Newsome, Jr. (“Plaintiff”), both
individually and on behalf of all other salaried Field Supervisors employed by Defendant
at any time within the three-year period preceding filing of this Complaint.
2.
Plaintiff brings this action under the Fair Labor Standards Act, 29 U.S.C. §
201, et seq. (“FLSA”) for declaratory judgment, monetary damages, liquidated
damages, prejudgment interest, and costs, including reasonable attorneys’ fees as a
result of Defendant’s failure to pay Plaintiff and other Field Supervisors lawful overtime
compensation for hours worked in excess of forty (40) hours per week.
3.
Plaintiff and the members of the proposed class were misclassified by
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John Newsome, Jr., et al v. QES Pressure Control, LLC
Defendant as salary/exempt.
4.
Upon information and belief, for at least three (3) years prior to the filing of
this Complaint, Defendant has willfully and intentionally committed violations of the
FLSA as described, infra.
II.
JURISDICTION AND VENUE
5.
The United States District Court for the Western District of Texas has
subject matter jurisdiction over this suit under the provisions of 28 U.S.C. § 1331
because this suit raises federal questions under the FLSA.
6.
The acts complained of herein were committed and had their principal
effect within the Midland/Odessa Division of the Western District of Texas; therefore,
venue is proper within this District pursuant to 28 U.S.C. § 1391.
7.
Defendant does business in this District and a substantial part of the
events alleged herein occurred in this District.
8.
Venue is proper in this District. See 28 U.S.C. §§ 1391 (b) & (c).
III.
THE PARTIES
9.
Plaintiff repeats and re-alleges all the preceding paragraphs of this
Complaint as if fully set forth in this section.
10.
Plaintiff is a resident and citizen of Upshur County.
11.
Plaintiff worked for Defendant as a Field/Coil Tubing Supervisor from
approximately May of 2016 through May of 2019, in Texas and New Mexico.
12.
Within the relevant time period, Plaintiff was classified by Defendant as
exempt from overtime wages and paid a salary and bonuses.
13.
At all times material herein, Plaintiff has been entitled to the rights,
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John Newsome, Jr., et al v. QES Pressure Control, LLC
protection and benefits provided under the Fair Labor Standards Act 29 U.S.C. § 201, et
14.
Defendant is a foreign limited liability corporation licensed to do business
in the State of Texas with an office at 350 North Saint Paul Street, Dallas, Texas 75201.
15.
Defendant is a provider of oil and gas services including coiled tubing,
fluid pumping, nitrogen, rig-assist snubbing, well control, and special services.
16.
Defendant maintains a website at https://quintanaenergyservices.com.
17.
Defendant may be served through its registered agent: Capitol Corporate
Services, Inc., 206 East Ninth Street, Suite 1300, Austin, Texas 78701.
18.
Defendant is an “employer” within the meaning set forth in the FLSA, and
was, at all times relevant to the allegations in this Complaint, Plaintiff’s employer, as
well as the employer of the members of the class.
19.
Defendant has employees engaged in commerce and has employees
handling or otherwise working on goods or materials that have been moved in or
produced for commerce by others.
20.
Defendant’s annual gross volume of sales made or business done is not
less than $500,000.00 (exclusive of excise taxes at the retail level that are separately
stated).
IV.
REPRESENTATIVE ACTION ALLEGATIONS
21.
Plaintiff repeats and re-alleges all the preceding paragraphs of this
Complaint as if fully set forth in this section.
22.
Plaintiff brings this claim for relief for violation of the FLSA as a collective
action pursuant to Section 16(b) of the FLSA, 29 U.S.C. § 216(b), on behalf of all
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John Newsome, Jr., et al v. QES Pressure Control, LLC
persons similarly situated as Field Operators who were or are employed by Defendant
and who are entitled to payment for all of their overtime wages which Defendant failed
to pay from three years prior to the date of the filing of this lawsuit, through the time of
the trial of this case.
23.
In addition, and in the alternative, Plaintiff brings this action in his
individual and personal capacity, separate and apart from the class claims set forth
herein.
24.
Plaintiff also brings this claim for relief for violation of the FLSA as a
collective action pursuant to Section 16(b) of the FLSA, 29 U.S.C. § 216(b). The
Collective Class is defined as follows:
All Salaried Field Supervisors employed within the past three years.
25.
This group includes, but is not necessarily limited to, salaried supervisory
workers employed by Defendant. Defendant failed to pay these workers at the proper
overtime rate. These employees are similarly situated to Plaintiff and are owed overtime
for the same reasons.
26.
Plaintiff is unable to state the exact number of the class but believes that
the class membership exceeds ten (10) persons. Defendant can readily identify the
members of the classes, who are a certain portion of the current and former employees
of Defendant.
27.
The names and physical and mailing addresses of the probable FLSA
collective action Plaintiffs are available from Defendant, and notice should be provided
to the probable FLSA collective action Plaintiffs via first class mail to their last known
physical and mailing addresses as soon as possible.
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John Newsome, Jr., et al v. QES Pressure Control, LLC
28.
The email addresses or cell phone numbers of many of the probable
FLSA collective action Plaintiffs are available from Defendant, and notice should be
provided to the probable FLSA collective action Plaintiffs via email and/or text message
to their last known email addresses/cell phone as soon as possible.
29.
Oilfield workers are by definition not at their residences as frequently as
many other working-class Americans. As such, they rely on text messaging and email
just as much or more so than typical wage earners, who themselves live their lives with
a growing dependence upon text messages and email as opposed to traditional U.S.
30.
The proposed FLSA class members are similarly situated in that they have
been subject to uniform practices by Defendant which violated the FLSA, including:
A.
Defendant’s uniform misclassification of them as exempt employees under
the FLSA; and
B.
Defendant’s failure to pay members of the class overtime compensation in
violation of the FLSA, 29 U.S.C. § 201 et seq.
31.
Plaintiff alleges that Defendant failed to paid Plaintiff and members of the
class an overtime rate of one and one-half times their regular rate of pay as required by
the FLSA; Defendant paid Plaintiff and members of the class a salary with no overtime
premium.
32.
This action is properly brought as a collective action pursuant to the
collective action procedures of the FLSA.
33.
Plaintiff brings this action on behalf of himself individually and all other
similarly situated employees, former and present, who were and/or are affected by
Defendant’s willful and intentional violation of the FLSA.
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John Newsome, Jr., et al v. QES Pressure Control, LLC
V.
FACTUAL ALLEGATIONS
34.
Plaintiff repeats and re-alleges all the preceding paragraphs of this
Complaint as if fully set forth in this section.
35.
Within the time period relevant to this case, Plaintiff worked for Defendant
as a Field/Coil Tubing Supervisor.
36.
Plaintiff’s duties as a Field Supervisor included working at oil well and gas
well sites to assist in pumping and fracking the wells.
37.
Within the time period relevant to this case, Plaintiff and other similarly-
situated employees worked in excess of forty (40) hours per week throughout their
tenure with Defendant.
38.
On average, Plaintiff and other similarly-situated employees worked over
ninety (90) hours per week. They did not receive any overtime compensation.
39.
Within the time period relevant to this case, Plaintiff and other similarly-
situated employees were misclassified as exempt and paid a salary.
40.
Within the time period relevant to this case, Plaintiff and other similarly-
situated employees were also paid bonuses.
41.
Plaintiff and other similarly-situated employees never agreed that their
salary would be sufficient to cover all hours worked.
42.
In performing their services for Defendant, Plaintiff and other similarly-
situated employees were not required to utilize any professional education relevant to
their job duties.
43.
Plaintiff and other similarly-situated employees were classic blue-collar
workers, spending physical, demanding, long shifts working on and with machinery at
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John Newsome, Jr., et al v. QES Pressure Control, LLC
remote locations, and not in an office.
44.
During the course of their employment, Plaintiff and other similarly-
situated employees did not manage the enterprise or a customarily recognized
subdivision of the enterprise.
45.
Plaintiff and other similarly-situated employees did not select any
employees for hire nor did they provide any training for any employee. Plaintiff and
other similarly-situated employees had no ability to hire and fire any employee.
46.
Plaintiff and other similarly-situated employees did not have any control of
or authority over any employee’s rate of pay.
47.
Plaintiff and other similarly-situated employees did not maintain or prepare
production reports or sales records for use in supervision or control of the business.
48.
Similarly, Plaintiff and other similarly-situated employees did not have any
responsibility for planning or controlling budgets.
49.
Defendant did not pay Plaintiff and other similarly-situated employees one
and one-half times their regular rate of pay for all hours worked over forty per week.
50.
Plaintiff worked for Defendant in various places in Texas and New Mexico,
and Defendant’s pay practices were the same at all locations.
51.
Defendant knew, or showed reckless disregard for whether, the way it
paid Plaintiff and its other Field Supervisors violated the FLSA.
52.
To perform their job duties, at least two employees of Defendant routinely
used hard hats, drilling equipment, pump equipment, lubricators, blow-out preventers,
and various hand-tools, at least some of which had been moved in or produced for
interstate commerce.
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John Newsome, Jr., et al v. QES Pressure Control, LLC
53.
Throughout the time relevant to this complaint, Defendant has been an
enterprise engaged in interstate commerce as defined by the FLSA.
54.
Upon information and belief, Defendant knew, or showed reckless
disregard for whether, its pay practices toward Plaintiff and other Field Supervisors
violated the FLSA.
VI.
FIRST CLAIM FOR RELIEF
(Individual Claim for Violation of FLSA)
55.
Plaintiff repeats and re-alleges all the preceding paragraphs of this
Complaint as if fully set forth in this section.
56.
Defendant intentionally misclassified Plaintiff as exempt from overtime
compensation.
57.
Defendant deprived Plaintiff of overtime compensation for all of the hours
over forty (40) per week in violation of the FLSA.
58.
Defendant’s conduct and practice, as described above, is and has been at
all times relevant hereto, willful, intentional, unreasonable, arbitrary, and in bad faith.
59.
By reason of the unlawful acts alleged herein, Defendant is liable to
Plaintiff for monetary damages, liquidated damages and costs, including reasonable
attorney’s fees provided by the FLSA for all violations which occurred beginning at least
three (3) years preceding the filing of Plaintiff’s initial complaint, plus periods of
equitable tolling.
60.
Alternatively, should the Court find that Defendant acted in good faith in
failing to pay Plaintiff as provided by the FLSA, Plaintiff is entitled to an award of
prejudgment interest at the applicable legal rate.
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John Newsome, Jr., et al v. QES Pressure Control, LLC
VII.
SECOND CLAIM FOR RELIEF
(Collective Action Claim for Violation of FLSA)
61.
Plaintiff repeats and re-alleges all the preceding paragraphs of the Original
Complaint above, as if fully set forth herein.
62.
Defendant required Plaintiff and similarly situated members of the class to
work in excess of forty (40) hours each week but failed to pay Plaintiff and the class
members overtime compensation for all of the hours in excess of forty (40) in each
workweek.
63.
Defendant
deprived
Plaintiff
and
the
class
members
overtime
compensation for all of the hours over forty (40) per week, in violation of the FLSA.
64.
Defendant’s conduct and practice, as described above, was/is willful,
intentional, unreasonable, arbitrary, and in bad faith.
65.
By reason of the unlawful acts alleged herein, Defendant is liable to
Plaintiff and similarly situated members of the class for monetary damages, liquidated
damages and costs, including reasonable attorney’s fees provided by the FLSA.
66.
Alternatively, should the Court find that Defendant acted in good faith in
failing to pay Plaintiff and similarly situated members of the class as provided by the
FLSA, Plaintiff and similarly situated members of the class are entitled to an award of
prejudgment interest at the applicable legal rate.
VIII.
PRAYER FOR RELIEF
WHEREFORE, premises considered, Plaintiff John Newsome, Jr., individually
and on behalf of all others similarly situated, respectfully prays for declaratory relief and
damages as follows:
(a)
That Defendant be summoned to appear and answer herein;
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John Newsome, Jr., et al v. QES Pressure Control, LLC
(b)
That Defendant be required to account to Plaintiff, the collective members,
and the Court for all of the hours worked by Plaintiff and the collective members and all
monies paid to them;
(c)
A declaratory judgment that Defendant’s practices alleged herein violate
the Fair Labor Standards Act, 29 U.S.C. §201, et seq., and attendant regulations at 29
C.F.R. § 516 et seq.;
(d)
Certification of, and proper notice to, together with an opportunity to
participate in the litigation, all qualifying current and former Field Supervisors;
(e)
Judgment for damages for all unpaid overtime compensation under the
Fair Labor Standards Act, 29 U.S.C. §201, et seq., and attendant regulations at 29
C.F.R. §516 et seq.;
(e)
Judgment for liquidated damages pursuant to the Fair Labor Standards
Act, 29 US.C. §201, et seq., and attendant regulations at 29 C.F.R. §516 et seq., in an
amount equal to all unpaid overtime compensation owed to Plaintiff and members of the
Class during the applicable statutory period;
(f)
An order directing Defendant to pay Plaintiff and members of the
Collective prejudgment interest, reasonable attorney’s fees and all costs connected with
this action; and
(g)
Such other and further relief as this Court may deem necessary, just and
proper.
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John Newsome, Jr., et al v. QES Pressure Control, LLC
Respectfully submitted,
JOHN NEWSOME, JR.,
Individually and on behalf of All
Others Similarly Situated, PLAINTIFF
SANFORD LAW FIRM, PLLC
One Financial Center
650 S. Shackleford, Suite 411
Little Rock, Arkansas 72211
Telephone: (501) 221-0088
Facsimile: (888) 787-2040
/s/ Merideth Q. McEntire _
Merideth Q. McEntire
Tex. Bar No. 24105123
[email protected]
/s/ Josh Sanford
Josh Sanford
Tex. Bar No. 24077858
[email protected]
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John Newsome, Jr., et al v. QES Pressure Control, LLC
| employment & labor |
BaanCYcBD5gMZwczIlrS | Jon B. Fougner (State Bar No. 314097)
[email protected]
600 California Street, 11th Floor
San Francisco, California 94108
Telephone: (415) 577-5829
Facsimile: (206) 338-0783
[Additional counsel appear on signature page]
Attorneys for Plaintiff Dr. Sarbjit Dhesi and the
Proposed Class
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
OAKLAND DIVISION
DR. SARBJIT DHESI, individually and on
behalf of all others similarly situated,
Plaintiff,
v.
XPRESSION OF AWARENESS, INC., d/b/a
“RETHINK CBD,” a/k/a “CBD RETHINK,”
Defendant.
NO.
COMPLAINT FOR INJUNCTION AND
DAMAGES
DEMAND FOR JURY TRIAL
CLASS ACTION
Plaintiff Dr. Sarbjit Dhesi, by his undersigned counsel, for this class action complaint
against Defendant Xpression of Awareness, Inc., d/b/a “ReThink CBD,” a/k/a “CBD ReThink,”
and its present, former, and future direct and indirect parent companies, subsidiaries, affiliates,
agents, and other related entities, alleges as follows:
I.
INTRODUCTION
1. Nature of Action. Plaintiff, individually and as proposed class representative for all
others similarly situated, brings this action against Defendant for violations of the Telephone
Consumer Protection Act (“TCPA”), 47 U.S.C. § 227.
II.
PARTIES
2. Plaintiff is a natural person residing in this District.
3. Defendant is a for-profit corporation.
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4. Defendant is incorporated under the laws of Florida.
5. Defendant’s principal place of business in Miami, Florida.
6. Defendant has informed the Florida Department of State that its principal address is
11231 NW 20 Street, Unit 140-195, Miami, Florida 33172.
7. Defendant has informed the Florida Department of State that its CEO is Hamid
Mchatet of 4958 SW 168th Avenue, Miramar, Florida 33027.
8. Defendant’s CEO is Hamid Mchatet of 4958 SW 168th Avenue, Miramar, Florida
9. Defendant does business in California and throughout the United States.
III.
JURISDICTION AND VENUE
10. Jurisdiction. This Court has subject matter jurisdiction over Plaintiff’s claims under
28 U.S.C. § 1331 because the TCPA is a federal statute. Mims v. Arrow Fin. Servs., LLC, 565
U.S. 368, 372 (2012).
11. Personal Jurisdiction. This Court has personal jurisdiction over Defendant because a
substantial part of the acts challenged in this complaint—namely, the delivery of the illegal
advertisement—occurred in California, as was Defendant’s intention.
12. Venue. Venue is proper in this District pursuant to 28 U.S.C. § 1391(b)(1)-(2)
because Plaintiff resides in this District and a substantial part of the events giving rise to
Plaintiff’s claims—namely, the delivery of the illegal advertisement—occurred in this District.
13. Intradistrict Assignment. Assignment to this Division is proper pursuant to Local
Rule 3-2(c)-(d) because a substantial part of the events that give rise to Plaintiff’s claims—
namely, the delivery of the illegal advertisement—occurred in San Ramon, in Contra Costa
County.
IV.
THE TELEPHONE CONSUMER PROTECTION ACT OF 1991, 47 U.S.C. § 227
14. In 1991, Congress enacted the TCPA in response to a growing number of complaints
about telemarketing.
15. The TCPA forbids sending unsolicited advertisements for goods or services via
facsimile (“Junk Faxes”). 47 U.S.C. § 227(b)(1)(C).
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16. The TCPA requires that even those fax advertisements being sent to those who
consented to their receipt, or with whom the advertiser has an established business relationship,
include an opt-out notice (“Opt-Out Notice”). Id. § 227(b)(2)(D).
17. In order to comply with the TCPA’s Opt-Out Notice requirements, each fax
advertisement must include, inter alia, all of the following:
a) clear and conspicuous language on the first page stating that recipients may
request that the sender not send any unsolicited advertisements and informing
recipients that failure to comply with such a request within 30 days is unlawful;
b) a 24/7 phone number that the recipient may call to submit a request to cease
transmitting fax advertisements to the recipient; and
c) a 24/7 facsimile number to which a recipient may send a request to cease
transmitting fax advertisements to the recipient.
47 U.S.C. § 227(b)(1)(C); 47 C.F.R. § 64.1200(a)(4)(iii)-(v).
12. The TCPA provides a private right of action to recipients of illegal fax advertisements.
47 U.S.C. § 227(b)(3).
V.
FACTUAL ALLEGATIONS
A.
Factual Allegations regarding Defendant and Its Spam Fax Campaign
18. Defendant’s business is selling cannabis-based products that it claims treat pain.
19. Defendant’s business model includes marketing through fax advertisements.
20. Recipients of Defendant’s Junk Faxes, including Plaintiff, are health care
professionals or entities through which such professionals practice that have never consented to
receive them and that have no preexisting business relationship with Defendant.
21. Many of these recipients, including Plaintiff, are chiropractors.
22. When Defendant sends Junk Faxes to practitioners, its goal is to sell them cannabis-
based products that it claims treat pain.
B.
Factual Allegations regarding Plaintiff
23. Plaintiff is, and at all relevant times has been, a “person” as defined by 47 U.S.C. §
153(39).
- 3 -
24. On June 20, 2019, Defendant sent Plaintiff the fax that is reproduced on the last page
of this complaint (after the signature block).
25. The fax announced the commercial availability of Defendant’s goods.
26. The fax gives several indications that it was sent by Defendant. For example:
a) It claims to be from “Rethink CBD.”
b) It lists a “cbdrethink.com” URL and email address.
c) It has a “ReThink” logo.
27. The fax advertisement was unsolicited.
28. The fax described itself as a “fax broadcast.”
29. The fax lacked a TCPA-compliant Opt-Out Notice. For instance, it lacked a fax
number to which Plaintiff could send a do-not-fax request.
30. The fax was addressed to “Sarbjit Dhesi Dc Qme Daapm Frccm Actar.”
31. The fact that the fax was address to a gibberish addressee indicates that a large
number of such faxes were populated by a process akin to “mail merge,” used for mass-mailing
(here, mass-faxing).
32. Other than the addressee line, the capitalization of which appears to be the result of a
“title-casing” software script operated at a mass scale without human review, the fax was 100%
generic.
33. Plaintiff did not provide permission to Defendant to send him fax advertisements, or
faxes at all.
34. Plaintiff has never been a customer of Defendant, nor has he ever been interested in
being a customer of Defendant.
35. Plaintiff and all members of the Class, defined below, have been harmed by the acts
of Defendant because their privacy has been violated, they were subjected to annoying and
harassing faxes that constituted a nuisance, and their fax lines were interfered with.
VI.
CLASS ACTION ALLEGATIONS
36. Class Definition. Pursuant to Federal Rule of Civil Procedure 23(b)(2) and (b)(3),
Plaintiff brings this case as a class action on behalf of a class (the “Class”).
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37. The Class is defined as follows:
All persons and entities to whom: (a) Defendant and/or a third
party acting on Defendant’s behalf sent one or more faxes; (b)
advertising Defendant’s goods or services (d) at any time in the
period that begins four years before the date of filing this
complaint and ends at the date of trial.
38. Exclusions: Excluded from the Class are Defendant, any entity in which Defendant
has a controlling interest or that has a controlling interest in Defendant, Defendant’s legal
representatives, assignees, and successors, the judges to whom this case is assigned and the
immediate family members of all of the foregoing.
39. Numerosity. The Class is so numerous that joinder of all members is impracticable.
On information and belief, judging from the generic nature of the fax, the Class has more than
100 members. It will be more efficient for the Court and the parties to resolve these alleged
violations of the TCPA in one fell swoop than in hundreds or thousands of individual trials.
40. Commonality. There are many questions of law and fact that have the same answer
for all class members and the answers to which will be determinative of the outcome of the
litigation. That is no surprise, given the generic nature and content of the fax. The common
questions include:
a.
Who sent the faxes?
b.
Were the faxes sent in order to make sales?
c.
Did the faxes contain a compliant Opt-Out Notice?
d.
Did Defendant have a practice of obtaining consent before sending
facsimile advertisements?
e.
Where did Defendant get the list of phone numbers and addressees used
for the “mail merge”?
f.
Did the faxes violate the TCPA?
g.
Were Defendant’s violations knowing or willful, within the meaning of
the TCPA?
- 5 -
h.
Should Defendant be enjoined from sending medical professionals
unsolicited facsimile advertisements?
41. Typicality. Plaintiff’s claims are typical of the claims of the Class. Plaintiff’s claims
and the claims of the Class arise from identical or similar boilerplate faxes and are based on the
same provisions of the TCPA.
42. Adequacy. Plaintiff will fairly and adequately protect the interests of the Class.
Plaintiff has retained competent and capable attorneys with significant experience in complex
and class action litigation, including TCPA class actions. Plaintiff and his counsel are committed
to prosecuting this action vigorously on behalf of the Class and have the financial resources to do
so. The interests of Plaintiff and his counsel are aligned with those of the proposed Class.
43. Predominance. Defendant has engaged in a telephonically routinized course of
conduct toward Plaintiff and members of the Class. The common issues arising from this
repetitive conduct that affect Plaintiff and members of the Class predominate over any individual
44. Superiority. A class action is the superior method for the fair and efficient
adjudication of this controversy. Classwide relief is essential to compel Defendant to comply
with the TCPA. The interest of individual members of the Class in individually controlling the
prosecution of separate claims against Defendant is small because the damages in an individual
action for violation of the TCPA are small. Management of these claims is likely to present
significantly fewer difficulties than are presented in many class actions because the faxes at issue
are automated and because the TCPA articulates bright-line standards for liability and damages.
Class treatment is superior to multiple individual suits or piecemeal litigation because it
conserves judicial resources, promotes consistency and efficiency of adjudication, provides a
forum for small claimants, and deters illegal activities. There will be no significant difficulty in
the management of this case as a class action.
45. Injunctive and Declaratory Relief Is Appropriate. Defendant has acted on grounds
generally applicable to the Class, thereby making final injunctive relief and corresponding
declaratory relief with respect to the Class appropriate on a classwide basis.
- 6 -
VII.
FIRST CLAIM FOR RELIEF
(Violations of the Telephone Consumer Protection Act, 47 U.S.C. § 227(b))
On Behalf of Plaintiff and the Class
46. Plaintiff realleges and incorporates by reference each and every allegation set forth in
the preceding paragraphs.
47. Defendant violated the TCPA, 47 U.S.C. § 227(b)(1)(C), by sending fax
advertisements for its goods.
48. Plaintiff and members of the Class are entitled to an award of $500 in damages for
each violation of the statute, which amount may be increased up to $1,500 for each willful or
knowing violation. Id. § 227(b)(3).
49. Plaintiff and members of the Class are also entitled to, id. § 227(b)(3)(A), and do seek
an injunction prohibiting Defendant and all other persons who are in active concert or
participation with it from sending fax advertisements.
VIII.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff, on his own behalf and on behalf of all members of the Class,
prays for judgment against Defendant as follows:
A.
Certification of the proposed Class;
B.
Appointment of Plaintiff as representative of the Class;
C.
Appointment of the undersigned counsel as counsel for the Class;
D.
A declaration that actions complained of herein by Defendant violate the TCPA;
E.
An order enjoining Defendant and all other persons who are in active concert or
participation with it from sending fax advertisements;
F.
An award to Plaintiff and the Class of damages, as allowed by law;
G.
An award to Plaintiff and the Class of attorneys’ fees and costs, to the extent
allowed by law, equity and/or California Code of Civil Procedure section 1021.5;
H.
Leave to amend this Complaint to conform to the evidence presented at trial; and
I.
Orders granting such other and further relief as the Court deems necessary, just,
and proper.
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IX.
DEMAND FOR JURY
Plaintiff demands a trial by jury for all issues so triable.
X.
SIGNATURE ATTESTATION
The CM / ECF user filing this paper attests that concurrence in its filing has been
obtained from its other signatories.
RESPECTFULLY SUBMITTED on July 23, 2019.
By: /s/ Jon B. Fougner
Jon B. Fougner
Anthony I. Paronich
[email protected]
PARONICH LAW, P.C.
350 Lincoln Street, Suite 2400
Hingham, Massachusetts 02043
Telephone: (617) 485-0018
Subject to Pro Hac Vice
Andrew W. Heidarpour
[email protected]
HEIDARPOUR LAW FIRM, PLLC
1300 Pennsylvania Avenue NW, 190-318
Washington, District of Columbia 20004
Telephone: (202) 234-2727
Subject to Pro Hac Vice
- 8 -
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| privacy |
JtoVEIcBD5gMZwcz0i1m | UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
FORT LAUDERDALE DIVISION
MICHAEL SHORE, on behalf of
Case No.:
himself and all others similarly situated,
Plaintiff,
v.
JPMORGAN CHASE BANK, N.A. d/b/a
CHASE, and PHELAN HALLINAN
DIAMOND & JONES, PLLC,
Defendants.
CLASS ACTION COMPLAINT
Plaintiff Michael Shore, on behalf of himself and all others similarly situated, alleges
breach of contract and violations of the Fair Debt Collection Practices Act 15 U.S.C. § 1692 et
seq. (“FDCPA”), Florida Consumer Collection Practices Act § 559.55 et seq. (“FCCPA”), and
Florida Deceptive and Unfair Trade Practices Act § 501.201 et seq. (“FDUTPA”), against
Defendants JPMORGAN CHASE BANK, N.A. (“Chase”) and PHELAN HALLINAN
DIAMOND & JONES, PLLC (“Phelan Hallinan”) (collectively “Defendants”).
1.
Hundreds of thousands of homes are in some stage of foreclosure in the United
States every month. http://www.corelogic.com/research/foreclosure-report/national-foreclosure-
report-january-2015.pdf. Most homeowners facing foreclosure are desperate to keep their homes
and are willing to do close to anything to continue living in them with their families. Defendants
exploit their desperation by placing them in danger of foreclosure if homeowners do not pay fees
Defendants demand—including fabricated debt characterized as “estimated” fees in the
reinstatement amounts.
2.
Chase provides loans to mortgagors throughout the United States. If a homeowner
defaults on payments, Chase imposes certain conditions on homeowners to avoid foreclosure,
including payment of Chase’s attendant fees, like attorney’s fees. Despite its contractual
obligations in its standard form Mortgage Agreements and Notes to only charge actual fees
allowed under applicable law, Chase leverages its position of power over homeowners facing
foreclosure and demands payment of “estimated” fees not actually owed; that is, fees Chase
projects to incur but has not actually incurred.
3.
Chase factors these “estimated” fees into its total demand to homeowners and
insists they are required to pay the full amount before Chase will reinstate their loans to avoid
foreclosure. Phelan Hallinan then turns a profit by acting as a third party debt collector for
mortgagees like Chase and by demanding the illegal charges on behalf of Chase. The Eleventh
Circuit found that demands for “estimated attorneys’ fees” associated with reinstatement of loans
violate the FDCPA and FCCPA.
4.
Defendants must be held accountable for their actions. Chase and Phelan Hallinan
knowingly violated state and federal debt collection statutes by demanding these fictitious fees.
Chase also breached its mortgage contract by charging fees not allowed under applicable law.
JURISDICTION AND VENUE
5.
The Court has subject matter jurisdiction under 28 U.S.C. § 1331 because this
action arises out of the FDCPA, a federal statute.
6.
The Court has supplemental jurisdiction over the FCCPA, FDUTPA, and breach
of contract claims under 28 U.S.C. § 1367 because the basis of the FDCPA federal claim
involves the same debt collection practices that form the basis of the state claims.
7.
The Court has personal jurisdiction because Defendants do business throughout
the United States, including Florida. Further, their voluntary contact with Plaintiff to charge and
collect debts in Florida made it foreseeable that Defendants would be haled into a Florida court.
See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474 (1985).
8.
Venue is proper in this District under 28 U.S.C. §§ 1391(b)-(c) because
Defendants are deemed to reside in any judicial district in which they are subject to personal
jurisdiction at the time the action is commenced and because Defendants’ contacts with this
District are sufficient to subject them to personal jurisdiction.
PARTIES
9.
Plaintiff Michael Shore is a natural person who currently resides in this District.
10.
Defendant Chase is an association with a principal places of business at 270 Park
Avenue, New York, New York 10017. Chase is a national banking association doing business
throughout the United States, including Florida, and is a wholly-owned subsidiary of JPMorgan
Chase & Co., one of the largest banks in the United States.
11.
Defendant Phelan Hallinan is a partnership with a principal place of business at
1617 JFK Boulevard Suite 1400, Philadelphia, Pennsylvania 19103. It is a law firm representing
and supporting mortgage bankers in various states throughout the United States. It acts as a third
party debt collector for banks, like Chase.
APPLICABLE LAW
FDCPA
12.
The purpose of the FDCPA is “to eliminate abusive debt collection practices . . .
and to promote consistent State action to protect consumers against debt collection abuses.” 15
U.S.C. § 1692.
13.
The FDCPA prohibits debt collectors from using “any false, deceptive, or
misleading representation or means in connection with the collection of any debt,” which
includes the false representation of “the character, amount, or legal status of any debt.” Id. §
14.
The FDCPA also prohibits debt collectors from “unfair or unconscionable means
to collect or attempt to collect any debt,” including “the collection of any amount unless such
amount is expressly authorized by the agreement creating the debt or permitted by law.” Id. §
15.
The FDCPA creates a private right of action under 15 U.S.C. § 1692k.
16.
The FDCPA defines “consumer” as “any natural person obligated or allegedly
obligated to pay any debt.” Id. § 1692a(3).
17.
The FDCPA defines “debt collector” as “any person who uses . . . any business
the principal purpose of which is the collection of any debts, or who regularly collects or
attempts to collect . . . debt owed . . . or asserted to be owed or due another.” Id. § 1692a(6).
18.
The FDCPA defines communication as “conveying of information regarding a
debt directly or indirectly to any person through any medium.” Id. § 1692a(2).
19.
The FDCPA defines “debt” as “any obligation or alleged obligation of a consumer
to pay money arising out of a transaction . . . [that] are primarily for personal, family, or
household purposes.” Id. § 1692a(5).
FCCPA
20.
The Florida Supreme Court liberally construes public protection statutes in favor
of the public. Samara Dev. Corp. v. Marlow, 556 So. 2d 1097, 1100 (Fla. 1990).
21.
The FCCPA prohibits debt collectors from engaging in certain abusive practices
in the collection of consumer debts. See generally Fla. Stat. § 559.72.
22.
The FCCPA’s goal is to “provide the consumer with the most protection
possible.” LeBlanc v. Unifund CCR Partners, 601 F.3d 1185, 1192 (11th Cir. 2010) (citing Fla.
Stat. § 559.552).
23.
Specifically, the FCCPA states that no person shall “claim, attempt, or threaten to
enforce a debt when such person knows that the debt is not legitimate, or assert the existence of
some other legal right when such person knows that the right does not exist.” Fla. Stat. §
559.72(9).
24.
The FCCPA creates a private right of action under Fla. Stat. § 559.77.
25.
The FCCPA defines “consumer” as “any natural person obligated or allegedly
obligated to pay any debt.” Id. § 559.55(8).
26.
The FCCPA mandates that “no person” shall engage in certain practices in
collecting consumer debt. Id. § 559.72. This language includes all allegedly unlawful attempts at
collecting consumer claims. Williams v. Streeps Music Co., 333 So. 2d 65, 67 (Fla. Dist. Ct. App.
27.
The FCCPA defines “debt” as “any obligation or alleged obligation of a consumer
to pay money arising out of a transaction in which the money, property, insurance, or services
which are the subject of the transaction are primarily for personal, family, or household
purposes, whether or not such obligation has been reduced to judgment.” Id. § 559.55(6).
FDUPTA
28.
The FDUTPA is “construed liberally to promote” the protection of consumers and
businesses from “unfair methods of competition, or unconscionable, deceptive, or unfair acts or
practices in the conduct of any trade or commerce.” Fla. Stat. § 501.202.
29.
The FDUTPA creates a private right of action for FDUTPA violations. Id. §
501.211.
30.
The FDUTPA prohibits “unfair methods of competition, unconscionable acts or
practices, or unfair or deceptive acts or practices in the conduct of any trade or commerce”
against consumers. Id. § 501.204(1).
31.
The FDUTPA defines “consumer” broadly as an individual, entity, or any group
or combination. Id. § 501.203(7).
32.
The FDUTPA defines “trade or commerce” as “advertising, soliciting, providing,
offering, or distributing, whether by sale, rental, or otherwise, of any good or service, or any
property, whether tangible or intangible, or any other article, commodity, or thing of value,
wherever situated.” Id. § 501.203(8).
33.
Where there is a violation of a statute prohibiting unfair or deceptive acts, a per se
violation of Florida’s FDUTPA has also occurred. See Fla. Stat. § 501.203(3) (stating a violation
of any law proscribing unfair methods of competition, or unfair, deceptive, or unconscionable
acts is also a violation the FDUTPA); Blair v. Wachovia Mortg. Corp., No. 11–cv–566–Oc–
37TBS, 2012 WL 868878, at *3 (M.D. Fla. Mar. 14, 2012) (“[A] per se violation of FDUTPA
stems from the transgression of any law, statute, rule, regulation, or ordinance which proscribes
unfair methods of competition or unfair, deceptive, or unconscionable acts or practices.”).
FACTUAL ALLEGATIONS
34.
On or around March 29, 2008, Plaintiff purchased a home in Fort Lauderdale,
Florida through a $192,000 loan from Chase, secured by a mortgage on the property. While the
original lender to the mortgage was Chase Bank, USA, N.A., the mortgage was later assigned to
Chase, as successor to Chase Home Finance, LLC. Copies of the Plaintiff’s Mortgage
Agreement and Mortgage Note are enclosed as Exhibit “A” and Exhibit “B” respectively.
35.
Plaintiff made continuous payments on his mortgage but fell behind sometime
before April 30, 2015.
36.
In a letter dated April 30, 2015, Phelan Hallinan informed Plaintiff that Chase
“referred” his loan to it “for foreclosure.” Phelan Hallinan advised Plaintiff that if he wished to
avoid foreclosure, he must comply with Chase’s requirements for reinstatement of his loan,
which included compensation for past money due and other compensation associated with costs
incurred in his default. This letter is enclosed as Exhibit “C”.
37.
On May 12, 2015, Phelan Hallinan sent Plaintiff a letter including a “Restatement
Quote” requesting a “TOTAL ESTIMATED REINSTATMENT” amount of $8,370.56, which
included an amount for estimated foreclosure fees and costs not actually incurred by Defendants.
The “estimated” amounts were based on projected amounts due in the event Plaintiff did not
actually pay before a certain future date. This letter is enclosed as Exhibit “D”.
38.
On August 26, 2015, Phelan Hallinan sent Plaintiff a letter including a
“Restatement Quote” requesting a “TOTAL ESTIMATED REINSTATMENT” amount of
$13,964.11, which included an amount of estimated foreclosure fees and costs not actually
incurred by Defendants. One line item was listed as “***Estimated Court fees necessary to
terminate foreclosure” and an amount due of $18.50. The “estimated” amounts were based on
projected amounts due in the event Plaintiff did not actually pay before a certain future date. This
letter is enclosed as Exhibit “E”.
39.
On October 9, 2015, Phelan Hallinan sent Plaintiff a letter including a
“Restatement Quote” requesting a “TOTAL ESTIMATED REINSTATMENT” amount of
$14,519.42, which included an amount of estimated foreclosure fees and costs not actually
incurred by Defendants. One line item was listed as “***Estimated Court fees necessary to
terminate foreclosure” and an amount due of $18.50. The “estimated” amounts were based on
projected amounts due in the event Plaintiff did not actually pay before a certain future date. This
letter is enclosed as Exhibit “F”.
40.
On December 31, 2015, Phelan Hallinan sent Plaintiff a letter including a
“Restatement Figure” requesting a “TOTAL” amount due of $18,883.45, which included an
amount of estimated foreclosure fees and costs not actually incurred by Defendants. One line
item was listed as “***Pending Foreclosure Attorney Fees” which was an estimated amount and
an amount due of $215.00. The “Pending” attorneys’ fees are estimated amounts stated
separately from another line item of actually incurred “Foreclosure Attorney Fees” with an
amount due of $4,145.00. The “estimated” amounts were based on projected amounts due in the
event Plaintiff did not actually pay before a certain future date. This letter is enclosed as Exhibit
41.
On the letters from Phelan Hallinan to Plaintiff dated May 12, 2015, August 26,
2015 and October 9, 2015, Phelan Hallinan stated that if the amount in the ““TOTAL
ESTIMATED REINSTATMENT” contained anticipated or estimated fees, the amount not
actually incurred would be returned to Plaintiff. However, Phelan Hallinan stated that any
amount tendered less than the “TOTAL ESTIMATED REINSTATMENT” amount “the lender
or servicer reserves the right to reject your payment.” Each of the letters acknowledged that some
portion of the reinstatement amount included estimated fees and costs.
42.
In all Phelan Hallinan’s letters to Plaintiff stated in all capital letters Phelan
Hallinan was a “debt collector” “attempt[ing] to collect a debt.”
43.
Phelan Hallinan attempted to collect amounts on behalf of its principal, Chase.
44.
Despite not actually owing these “estimated” amounts, since many of the fees had
not actually been incurred, Chase, through Phelan Hallinan, nonetheless demanded the full
amount projected as immediately due.
45.
These demands were a direct breach of each of the following contract provisions,
permitting only recovery of actually amounts due: (1) Paragraph 9 of the Mortgage Agreement
(Exhibit A) permitted Chase recovery of “amounts disbursed” in protecting its interest and rights
in the mortgage agreement (emphasis added); (2) Paragraph 14 of the Mortgage Agreement
prohibited Chase from charging estimated fees, stating “[l]ender may not charge fees that are
expressly prohibited in this Security Instrument or by Applicable Law”; (3) Paragraph 22 of
Chase’s Mortgage Agreement permitted Chase to collect “expenses incurred in pursuing” certain
actions under the Paragraph which governed default, notice of default, actions to cure default,
and reinstatement of loans (emphasis added); and (4) Paragraph 6(E) of Chase’s Mortgage Note
(Exhibit B) permitted Chase the “right to be paid back . . . for all of its costs and expenses in
enforcing” the note, which included “reasonable attorneys’ fees” (emphasis added).
46.
Several times, Plaintiff tried to tender some amount to reinstate the loan, but was
rejected by Defendants, who would only accept the total reinstatement amount, which included
“estimated fees.”
47.
By charging “estimated fees” tacked on to the reinstatement amount, Defendants
frustrated Plaintiff’s ability to reinstate his loan.
48.
In a remarkably similar case involving demands for “estimated” attorney’s fees
associated with loan reinstatement to avoid foreclosure, the Eleventh Circuit reversed the district
court’s grant of summary judgment on the FDCPA and FCCPA claims, opining, among other
things, that the defendant had indeed falsely represented what the plaintiff owed and that no
agreement expressly obligated the plaintiff to pay these “estimated” fees. See Prescott v. Seterus,
Inc., No. 15-10038, 2015 WL 7769235, at *2-6 (11th Cir. Dec. 3, 2015) (“[Defendant] violated
the FDCPA and FCCPA by charging [Plaintiff] estimated attorney’s fees that he had not agreed
to pay in the security agreement.”).
CLASS ACTION ALLEGATIONS
National Class 1
49.
Plaintiff brings this action under Rule 23(b)(2) and (b)(3) of the Federal Rules of
Civil Procedure on behalf of the following class of persons aggrieved by Phelan Hallinan’s
FDCPA violations (the “National Class 1”), subject to modification after discovery and case
development:
All persons in the United States to whom Phelan Hallinan, charged, collected, or
attempted to collect “estimated” reinstatement of loan amounts during the
applicable statute of limitations.
National Class 2
50.
Additionally, Plaintiff brings this action under Rule 23(b)(2) and (b)(3) of the
Federal Rules of Civil Procedure on behalf of the following class of persons aggrieved by
Chase’s breach of contract violations (the “National Class 2”), subject to modification after
discovery and case development:
All persons in the United States who entered into mortgage notes and/or
agreements with Chase that did not authorize charging “estimated” fees, but to
whom Chase nonetheless charged “estimated” fees associated with reinstatement
of loans during the applicable statute of limitations.
Florida Subclass 1
51.
Additionally, Plaintiff brings this action under Rule 23(b)(2) and (b)(3) of the
Federal Rules of Civil Procedure on behalf of the following class of persons aggrieved by
Defendants’ FCCPA violations ( “Florida Subclass 1”), subject to modification after discovery
and case development:
All Florida residents to whom Defendants charged, collected, or attempted to
collect “estimated” reinstatement of loan amounts during the applicable statute of
limitations.
Florida Subclass 2
52.
Additionally, Plaintiff brings this action under Rule 23(b)(2) and (b)(3) of the
Federal Rules of Civil Procedure on behalf of the following class of persons aggrieved by
Defendants’ FDUTPA violations ( “Florida Subclass 2”), subject to modification after discovery
and case development:
All Florida residents to whom Defendants charged, collected, or attempted to
collect “estimated” reinstatement of loan amounts during the applicable statute
of limitations.
53.
Class members are identifiable through Defendants’ records and payment
databases.
54.
Excluded from the Classes are: (1) Defendants; (2) any entities in which
Defendants have a controlling interest; (3) Defendants’ agents and employees; (4) any Judge to
whom this action is assigned; and (5) any member of such Judge’s staff and immediate family.
55.
Plaintiff proposes that he serve as class representative.
56.
Plaintiff and the Classes have all been harmed by the actions of Defendants.
57.
Numerosity is satisfied, as there are likely tens of thousands of class members.
Individual joinder of these persons is impracticable.
58.
There are questions of law and fact common to Plaintiff and to the Classes,
including, but not limited to:
a. Whether Phelan Hallinan violated the FDCPA by charging monies not due;
b. Whether Defendants violated the FCCPA by charging monies not due;
c. Whether Defendants violated general provisions of the FDUTPA by charging
monies not due;
d. Whether the violations of the FDCPA and/or FCCPA were per se violations of the
FDUTPA;
e. Whether Chase breached its mortgage agreement and/or note by charging fees not
due.
f. Whether Plaintiff and class members are entitled to actual or statutory damages as
a result of Defendants’ actions;
g. Whether Plaintiff and the Classes are entitled to attorney’s fees and costs; and
h. Whether Defendants should be enjoined from engaging in such conduct in the
future.
59.
Plaintiff’s claims are typical of the claims of the Classes.
60.
Plaintiff is an adequate representative of the Classes because his interests do not
conflict with the interests of the Classes, he will fairly and adequately protect the interests of the
Classes, and he is represented by counsel skilled and experienced in class actions.
61.
Common questions of law and fact predominate over questions affecting only
individual class members, and a class action is the superior method for fair and efficient
adjudication of this controversy.
62.
The prosecution of separate claims by individual class members would create a
risk of inconsistent or varying adjudications concerning individual class members.
COUNT I AS TO PHELAN HALLINAN’S VIOLATIONS OF THE FAIR DEBT
COLLECTION PRACTICES ACT §§ 1692e, 1692f
(National Class 1)
63.
Plaintiff incorporates by reference the prior paragraphs as if set forth fully herein.
64.
Plaintiff is a “consumer” as defined by 15 U.S.C. § 1692a(3) when he purchased
his home by mortgage in Fort Lauderdale, Florida.
65.
Defendant Phelan Hallinan is a “debt collector” as defined by 15 U.S.C. §
1692a(6) when it attempted to collect a debt from Plaintiff for reinstatement of loans. In its debt
collection letter to Plaintiff, Defendant disclosed in all capital letters that it was a debt collector.
Specifically, Defendant is a third party debt collector on behalf of Plaintiff’s mortgage with
Chase.
66.
Phelan Hallinan engaged in “communications” with Plaintiff as defined by 15
U.S.C. § 1692a(2) when it sent letters to Plaintiff demanding money due for reinstatement of his
loan to avoid foreclosure.
67.
Phelan Hallinan violated 15 U.S.C. § 1692e when it made false, deceptive, and
misleading representations about the character and amount that Plaintiff owed to reinstate his
loan to avoid foreclosure.
68.
Phelan Hallinan violated 15 U.S.C. § 1692f when it charged “estimated” fees not
owed, which was not expressly authorized by agreement.
69.
As a result of Phelan Hallinan’s FDCPA violations, Plaintiff suffered substantial
damage, including but not limited to financial damage incurred from Phelan Hallinan’s illegal
billing practices.
COUNT II AS TO CHASE’S BREACH OF CONTRACT
(National Class 2)
70.
Chase entered into a Mortgage Agreement and Note with Plaintiff whereby Chase
loaned money to Plaintiff to purchase his property in exchange for certain payment over time,
and in the event of default, a certain mechanism to avoid foreclosure.
71.
Plaintiff’s Mortgage Agreement and Note only authorized payment actually
incurred amounts associated with the default and allowed under applicable law.
72.
Chase breached the contract with Plaintiff when it charged him estimated amounts
exceeding the amount actually incurred and not allowed under applicable law.
73.
Plaintiff was harmed by Chase’s breach.
COUNT III AS TO PHELAN HALLINAN AND CHASE’S VIOLATIONS OF THE
FLORIDA CONSUMER COLLECTION PRACTICES ACT § 559.72(9)
(Florida Subclass 1)
74.
Plaintiff incorporates by reference the prior paragraphs as if set forth fully herein.
75.
Plaintiff is a “consumer” as defined by Fla. Stat. § 559.55(8) when he purchased
his home by mortgage.
76.
Defendants are a “persons” as stated in the FCCPA.
77.
Defendants attempted to enforce, claimed, and asserted a known non-existent
legal right to a debt as defined by Fla. Stat. § 559.55(6) when Chase charged and Phelan Hallinan
attempted to collect fees not owed. Id. § 559.72(9).
78.
Defendants’ acts of illegally attempting to collect a debt from Plaintiff and
deliberately including the amount not owed into the total amount “required” for reinstatement
constitutes a knowing violation of § 559.72(9) of the FCCPA.
79.
As a result of Defendants’ FCCPA violations, Plaintiff suffered substantial
damage, including but not limited to financial damage incurred from Defendants’ illegal billing
practices.
COUNT IV AS TO PHELAN HALLINAN AND CHASE’S VIOLATIONS OF THE
FLORIDA DECEPTIVE AND UNFAIR TRADE PRACTICES ACT §§ 501.203(3),
501.204(1)
(Florida Subclass 2)
80.
Plaintiff incorporates by reference the prior paragraphs as if set forth fully herein.
81.
Plaintiff is a “consumer” as defined by Fla. Stat. § 501.203(7).
82.
Chase engaged in “trade or commerce” as defined by Id. § 501.203(8) when it
advertised, offered, and provided the loan to purchase Plaintiff’s property.
83.
Phelan Hallinan engaged in “trade or commerce” as defined by Id. § 501.203(8)
when it attempted to collect a debt for Chase for some compensation.
84.
Defendants violated § 559.72(9) of the FCCPA when Phelan Hallinan attempted
to collect, and Chase charged, an amount not owed.
85.
A violation of Fla. Stat. § 559.72(9) of the FCCPA is a per se violation of
FDUTPA under Fla. Stat. § 501.203(3).
86.
In addition to the above-referenced per se FDUTPA violations, Defendants also
generally violated FDUTPA under Fla. Stat. § 501.204(1) when they engaged in unfair and
deceptive practices in trade or commerce by taking advantage of consumers in claiming and
collecting debts for amounts not owed.
87.
As a result of Defendants’ FDUTPA violations, Plaintiff suffered substantial
damage, including but not limited to financial damage incurred from Defendants’ unlawful
billing practices.
JURY DEMAND AND RESERVATION OF PUNITIVE DAMAGES
88.
Plaintiff is entitled to and respectfully demands a trial by jury on all issues so
triable.
89.
Plaintiff reserves the right to amend his Complaint and add a claim for punitive
damages.
RELIEF REQUESTED
WHEREFORE. Plaintiff, himself and on behalf of the Classes, respectfully requests this
Court to enter judgment against Defendants for all of the following:
a.
That Plaintiff and all class members be awarded actual damages, including but not
limited to forgiveness of all amounts not owed;
b.
That Plaintiff and all class members be awarded statutory damages;
c.
That Plaintiff and all class members be awarded costs and attorney’s fees;
d.
That the Court enter a judgment permanently enjoining Defendants from charging
and/or collecting debt in violation of the FDCPA and FCCPA;
e.
That, should the Court permit Defendants to continue charging and/or collecting
debt, it enter a judgment requiring them to adopt measures to ensure FDCPA and
FCCPA compliance, and that the Court retain jurisdiction for a period of six
months to ensure that Defendants comply with those measures;
f.
That the Court enter a judgment awarding any other injunctive relief necessary to
ensure Defendants’ compliance with the FDCPA and FCCPA;
g.
That the Court enter an order that Defendants and their agents, or anyone acting
on their behalf, are immediately restrained from altering, deleting or destroying
any documents or records that could be used to identify class members;
h.
That the Court certify Plaintiff’s claims and all other persons similarly situated as
class action claims under Rule 23 of the Federal Rules of Civil Procedure; and
i.
Such other and further relief as the Court may deem just and proper.
Dated: January 20, 2016
Respectfully Submitted,
/s/ James L. Kauffman
James L. Kauffman (Fla. Bar. No. 12915)
1054 31st Street, Suite 230
Washington, DC 20007
Telephone: (202) 463-2101
Facsimile: (202) 342-2103
Email: [email protected]
J. Dennis Card, Jr., (Fla. Bar. No. 0487473)
Darren Newhart, (Fla. Bar No. 0115546)
Hicks Motto & Ehrlich, P.A.
3399 PGA Boulevard, Suite 300
Palm Beach Gardens, FL 33410
Telephone: (561) 687-1717
Facsimile: (561) 697-3852
Email: [email protected]
Christopher Legg, Esq. (Fla. Bar. No.
44460)
Christopher W. Legg, P.A.
3837 Hollywood Blvd., Suite B
Hollywood, FL 33021
Telephone: (954) 235-3706
Facsimile: (954) 927-2451
Email: [email protected]
Counsel for Plaintiff and the Putative Class
| consumer fraud |
LEd2_YgBF5pVm5zY3YiG | UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
RICHARD SCHMITT,
Plaintiff,
Case No.
2:20-cv-13151
v.
Hon.
BELLE TIRE DISTRIBUTORS, INC.,
Defendant.
__________________________________________________________________
DAVID M. BLANCHARD (P67190)
FRANCES J. HOLLANDER (P82180)
BLANCHARD & WALKER PLLC
Attorneys for Plaintiffs
221 N. Main Street, Suite 300
Ann Arbor, MI 48104
(734) 929-4313
[email protected]
[email protected]
__________________________________________________________________
COMPLAINT AND JURY DEMAND
Plaintiff RICHARD SCHMITT (“Plaintiff” or “Mr. Schmitt”), through his
attorneys, BLANCHARD & WALKER PLLC, individually and on behalf of all
others similarly situated, files this civil lawsuit against Defendant BELLE TIRE
DISTRIBUTORS, INC. seeking all available relief under the Fair Labor Standards
Act of 1938, 29 U.S.C. § 201, et seq. (“FLSA”).
NATURE OF THE CASE
1.
Plaintiff has initiated the instant action to redress violations of the
FLSA caused by Defendant Belle Tire Distributors, Inc.’s (“Defendant” or “Belle
Tire”) failure to pay proper overtime wages to Plaintiff and similarly situated
employees.
2.
Mr. Schmitt worked for Defendant from 2018 to November 2020.
3.
Mr. Schmitt was paid on a flat sum, piece-rate basis. An employee paid
on a piece-rate basis for mechanic work is entitled to overtime compensation for
hours worked over forty (40) in a week.
4.
While working for Defendant, Plaintiff and others similarly situated
worked more than forty (40) hours per workweek but were not paid the legally-
required overtime premium for all of their overtime hours.
JURISDICTION AND VENUE
5.
This Court has subject matter jurisdiction to hear this Complaint and to
adjudicate the claims stated herein under 28 U.S.C. § 1331 and 29 U.S.C. §§ 216(b)
and 217 because this action involves a federal question under the FLSA.
6.
Venue is proper in this judicial district pursuant to 28 U.S.C. § 1391(b)
because Defendant is headquartered and conducts business in this district.
PARTIES
7.
Plaintiff Richard Schmitt is an adult resident of the State of
Connecticut, and he worked for Defendant in Michigan at all relevant times.
8.
Mr. Schmitt began his employment with Defendant on or about
November 16, 2018.
9.
Mr. Schmitt is a covered “employee” within the meaning of the FLSA,
29 U.S.C. § 203(e).
10.
While working for Defendant, Mr. Schmitt was individually engaged
in commerce or in the production of goods for commerce.
11.
Defendant Belle Tire Distributors, Inc. (“Belle Tire”) is a Michigan for-
profit corporation with its corporate headquarters located in Allen Park, Michigan.
12.
The compensation policies and practices challenged herein are set and
carried out on an enterprise-wide basis from Defendant’s corporate headquarters in
Allen Park, Michigan.
13.
At all times material, Defendant was an “enterprise engaged in
commerce or in the production of goods for commence” as defined by the FLSA, 29
U.S.C. 203(s)(1).
14.
Defendant is the “employer” of Plaintiff within the meaning of the
FLSA, 29 U.S.C. § 203.
15.
At all times pertinent to this Complaint, Defendant was an enterprise
engaged in interstate commerce; had gross operating revenues in excess of
$500,000.00; and employed two or more persons in interstate commerce.
COLLECTIVE DEFINITION
16.
Plaintiff brings this lawsuit pursuant to 29 U.S.C. § 216(b) as a
collective action on behalf of himself and the following collective of potential FLSA
opt-in litigants:
All individuals who worked for Defendant and were compensated
predominately based on a fixed amount per automotive service without
regard for the cost or profit received for the work (“piece rate”) from
the date three years prior to the date this Complaint was filed and who
did not receive an overtime premium when they worked more than forty
hours in a week (the “FLSA Collective” or “Collective”).
17.
Plaintiff reserves the right to redefine the Collective prior to notice and
certification, and thereafter, as necessary.
GENERAL ALLEGATIONS
18.
Plaintiff began his employment as an Alignment Technician with
Defendant on or around November 2018.
19.
Plaintiff and similarly situated technicians and mechanics are
compensated almost exclusively on a piece rate for each service performed. Such
amount does not vary based on the price of the service or the profits of the company.
20.
For instance, Plaintiff and similarly situated technicians and mechanics
are paid a flat rate of $10 per oil change performed, regardless of whether the
customer pays $31.00, $89.99, or nothing at all.
21.
Likewise, Plaintiff and similarly situated technicians and mechanics are
paid a fixed piece rate per each wheel alignment performed. The amount does not
vary whether the customer pays $50.00, $89.99, or nothing at all.
22.
These fixed compensation rates for oil changes and wheel alignments
account for 90% or more of the weekly compensation paid to Plaintiff and similarly
situated technicians and mechanics
23.
Plaintiff and similarly situated technicians and mechanics are not paid
on an hourly basis.
24.
Defendant mislabels these piece-rate payments as “commission” in an
attempt to conceal and avoid paying overtime pay.
25.
There is no proportionality between these piece-rate payments to
employees and the amount charged to the customer.
26.
The piece-rate system does not constitute a “commission” in fact or in
27.
No exemption to the overtime law applies. In particular, the FLSA
Section 7(i) overtime exemption for commissioned employees does not
apply because less than half of total earnings for Plaintiff and others similarly
situated in any representative period consist of commissions.
28.
Plaintiff and similarly situated technicians and mechanics are not
responsible for making sales or setting prices, nor are they paid based on those sales
or prices. Defendant has a dedicated sales staff.
29.
Employees paid on a piece-rate basis are entitled to a half-time overtime
premium of their hourly rate for all hours worked over forty (40) in a workweek,
based on an hourly rate calculated by totaling all sums received in the workweek and
dividing by the total hours actually worked. 29 C.F.R. § 778.111.
30.
Defendant does not pay the required overtime premium to its piece-rate
employees.
31.
Although the FLSA provides for certain exemptions to the mandates of
paying overtime compensation, no exemption applies in this case.
32.
Plaintiff had the primary job duty of repairing and replacing tires and
aligning wheels on automobiles used in interstate commerce.
33.
Plaintiff and the Collective are not regularly engaged in the
management and general business administration of Defendant’s operations.
34.
Plaintiff and the Collective regularly work more than 40 hours per
workweek without being paid their proper overtime compensation, in violation of
the FLSA.
35.
Defendant has willfully failed to pay Plaintiff and the Collective
overtime as required under the FLSA and have done so knowingly and without any
good faith legal basis.
36.
Defendant willfully operates under a common scheme to deprive
Plaintiff and the Collective of proper overtime compensation by paying them less
than what is required under law.
37.
Defendant is aware, or should have been aware, of its unlawful failure
to pay overtime and recklessly chose to disregard the consequences of its actions.
COLLECTIVE ACTION ALLEGATIONS UNDER THE FLSA
38.
Plaintiff brings this lawsuit pursuant to 29 U.S.C. § 216(b) as a
collective action on behalf of the FLSA Collective defined above.
39.
Plaintiff desires to pursue his FLSA claims on behalf of all individuals
who opt-in to this action pursuant to 29 U.S.C. § 216(b).
40.
Plaintiff and the FLSA Collective Members are “similarly situated” as
that term is used in 29 U.S.C. § 216(b) because, inter alia, all such individuals have
been subject to Defendant’s common business and compensation practices as
described herein, and, as a result of such practices, have not been paid the legally-
mandated overtime compensation for hours worked over forty (40) during the
workweek. Resolution of this action requires inquiry into common facts, including
Defendant’s compensation and payroll practices.
41.
Employees paid on a piece-rate basis are entitled to a half-time overtime
premium of their hourly rate for all hours worked over forty (40) in a workweek, at
an hourly rate calculated by totaling all sums received in the workweek and dividing
by the total hours actually worked. 29 C.F.R. § 778.111.
42.
Defendant did not pay its piece-rate employees overtime compensation
for hours worked in excess of forty a week.
43.
Defendant encouraged Plaintiff and similarly situated employees to
work at least 48 hours a week by threatening to withhold certain fringe benefits for
those who worked less.
44.
The similarly situated employees are known to Defendant, are readily
identifiable, and can easily be located through Defendant’s business and human
resources records.
45.
Similarly situated employees may be readily notified of this action
through electronic mail, U.S. Mail, and/or others means, and allowed to opt-in to
this action pursuant to 29 U.S.C. § 216(b), for the purpose of collectively
adjudicating their claims for overtime compensation, liquidated damages, and
attorneys’ fees and costs under the FLSA.
COUNT I
Fair Labor Standards Act, 29 U.S.C. § 201, et seq.
Failure to Pay Required Overtime Rates
46.
All previous paragraphs are incorporated as though fully set forth
herein.
47.
At all relevant times, Defendant has been an “employer” of Plaintiff
and the FLSA Collective. 29 U.S.C. § 203(d).
48.
At all relevant times, Plaintiff and the FLSA Collective have been
“employees” of Defendant. 29 U.S.C. § 203(e).
49.
Plaintiff and the FLSA Collective are victims of Defendant’s common
policy of failing to pay overtime compensation to its piece-rate employees. This
policy has resulted in willful violations of Plaintiff’s and the FLSA Collective’s
rights under the FLSA, and has caused significant damage to Plaintiff and the FLSA
Collective.
50.
Although the FLSA provides for certain exemptions to the mandates of
paying overtime compensation, no exemption applies in this case.
51.
Plaintiff and the FLSA Collective regularly work more than forty (40)
hours per week for Defendant, but Defendant does not properly compensate them
for all of their overtime hours as required by the FLSA.
52.
Plaintiff and the FLSA Collective are not employed pursuant to a bona
fide individual contract that specifies a regular rate of pay of not less than the
minimum hourly rate required by law.
53.
Plaintiff and the FLSA Collective are not employed pursuant to a bona
fide individual contract that provides a weekly guarantee of pay for not less than
sixty hours.
54.
Plaintiff and the FLSA Collective are not paid on a salary basis.
55.
Plaintiff and the FLSA Collective are not paid a guaranteed amount
each week.
56.
Defendant does not and has not made a good-faith effort to comply with
the FLSA.
57.
Defendant willfully failed and refused to pay Plaintiff and the FLSA
Collective wages at the required overtime rates.
58.
Defendant’s willful failure and refusal to pay Plaintiff and the FLSA
Collective overtime wages for time worked violates the FLSA. 29 U.S.C. § 207.
59.
As a direct and proximate result of these unlawful practices, Plaintiff
and the FLSA Collective suffered and continue to suffer wage loss and are therefore
entitled to recover unpaid overtime wages for up to three years prior to the filing of
their claims, liquidated damages or prejudgment interest, attorneys’ fees and costs,
and such others legal and equitable relief as the Court deems just and proper.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff Richard Schmitt seeks the following relief on behalf
of himself and the members of the FLSA Collective:
a. An Order permitting this litigation to proceed as a collective action
pursuant to 29 U.S.C. § 216(b);
b. Prompt notice, pursuant to 29 U.S.C. § 216(b), of this litigation to all
potential members of the FLSA Collective;
c. Back pay damages (including unpaid overtime compensation and
unpaid wages) and prejudgment interest to the fullest extent permitted
under the law;
d. Liquidated damages to the fullest extent permitted under the law;
e. Litigation costs, expenses, and attorneys’ fees to the fullest extent
permitted under the law; and
f. All further relief as the Court deems just and equitable.
Respectfully submitted,
/s/ David M. Blanchard
David M. Blanchard (P67190)
Frances J. Hollander (P82180)
BLANCHARD & WALKER, PLLC
221 N. Main Street, Suite 300
Ann Arbor, MI 48104
Telephone: (734) 929-4313
[email protected]
Date: December 1, 2020
[email protected]
DEMAND FOR A JURY TRIAL
Now Comes Plaintiff, Richard Schmitt, by and through his attorneys,
Blanchard & Walker, PLLC, and hereby demands a trial by jury in the above-
captioned matter.
Respectfully submitted,
/s/ David M. Blanchard
David M. Blanchard (P67190)
Frances J. Hollander (P82180)
BLANCHARD & WALKER, PLLC
221 N. Main Street, Suite 300
Ann Arbor, MI 48104
Telephone: (734) 929-4313
[email protected]
[email protected]
Date: December 1, 2020
| employment & labor |
JA6fFocBD5gMZwczBsMd | UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
KAREEM NISBETT, Individually and on
behalf of all other persons similarly
situated,
Plaintiff,
v.
ECF CASE
No.: ____________________
CLASS ACTION COMPLAINT
JURY TRIAL DEMANDED
HEMPED NYC LLC and HEMPED NYC
ON ORCHARD LLC,
Defendants.
INTRODUCTION
1.
Plaintiff Kareem Nisbett, who is legally blind, brings this civil rights action
against Defendants Hemped NYC LLC and Hemped NYC on Orchard LLC
(“Defendants”) for their failure to design, construct, maintain, and operate their website,
www.hempednyc.com (the “Website”), to be fully accessible to and independently usable
by Plaintiff Nisbett and other blind or visually-impaired people. Defendants deny full and
equal access to their Website.
2.
Plaintiff Nisbett, individually and on behalf of others similarly situated,
asserts claims under the Americans With Disabilities Act (“ADA”), and New York State
Human Rights Law (“NYSHRL”) against Defendants.
3.
Plaintiff Nisbett seeks a permanent injunction to cause Defendants to
change their corporate policies, practices, and procedures so that their Website will become
and remain accessible to blind and visually-impaired consumers.
THE PARTIES
4.
Plaintiff Nisbett is, at all relevant times, a resident of the Bronx, New York,
Bronx County. As a blind, visually-impaired handicapped person, he is a member of a
protected class of individuals under Title III of the ADA, under 42 U.S.C. § 12102(1)-(2),
and the regulations implementing the ADA set forth at 28 CFR §§ 36.101 et seq., and the
NYSHRL.
5.
Defendant Hemped NYC LLC is at all relevant times a domestic limited
liability company that is organized under New York law, and is authorized to do business
in the State of New York.
6.
Defendant Hemped NYC on Orchard LLC is at all relevant times a domestic
limited liability company that is organized under New York law, and is authorized to do
business in the State of New York.
JURISDICTION AND VENUE
7.
This Court has subject-matter jurisdiction over this action under 28 U.S.C.
§ 1331 and 42 U.S.C. § 12181, as Plaintiff Nisbett’s claims arise under Title III of the
ADA, 42 U.S.C. § 12181, et seq., and 28 U.S.C. § 1332.
8.
This Court has supplemental jurisdiction under 28 U.S.C. § 1367 over
Plaintiff Nisbett’s NYSHRL, N.Y. Exec. Law Article 15 claims.
9.
Venue is proper under §1391(b)(2) as a substantial part of the events giving
rise to the claims occurred in this District: Plaintiff Nisbett is a resident of this District; and
he has attempted to access the Website in this District and, in doing so, was denied the full
use and enjoyment of the facilities, goods, and services of the Website while in New York
County.
10.
This Court is empowered to issue a declaratory judgment under 28 U.S.C.
§§ 2201 and 2202.
NATURE OF ACTION
11.
Blind and visually impaired users of Windows operating system-enabled
computers and devices have several screen-reading software programs available to them.
Some of these programs are available for purchase and other programs are available
without the user having to purchase the program separately. Job Access With Speech
(“JAWS”), NVDA and VoiceOver are among the most popular.
12.
For screen-reading software to function, the information on a website must
be capable of being rendered into text. If the website content is not capable of being
rendered into text, the blind or visually impaired user is unable to access the same content
available to sighted users.
13.
The international website standards organization, the World Wide Web
Consortium, known throughout the world as W3C, has published version 2.0 of the Web
Content Accessibility Guidelines (“WCAG 2.0”). WCAG 2.0 are well-established
guidelines for making websites accessible to blind and visually impaired people. These
guidelines are universally followed by most large business entities and government
agencies to ensure their websites are accessible.
14.
For a website to be equally accessible to a blind or visually impaired person,
under these guidelines, it should have following:
a.
Alternative text (“alt-text”) or text equivalent for every non-text
element. Alt-text is an invisible code embedded beneath a graphical image on a website.
Web accessibility requires that alt-text be coded with each picture so that screen-reading
software can speak the alt-text where a sighted user sees pictures, which includes captcha
prompts. Alt-text does not change the visual presentation, but instead a text box shows
when the mouse moves over the picture. The lack of alt-text on these graphics prevents
screen readers from accurately vocalizing a description of the graphics, depriving that
person from knowing what is on the website.
b.
Videos have audio description.
c.
Title frames with text are provided. Absent these titles, navigating a
website is particularly difficult.
d.
Webpage headings are properly labeled with the topic or purpose of
the webpage, versus being blank. Screen readers read out page headings, allowing users to
quickly skip to a section. Navigation is, however, very difficult without those headings.
e.
Equivalent text is provided when using scripts.
f.
Forms may be completed with the same information and
functionality as for sighted persons. Absent forms being properly labeled, it is difficult for
a visually impaired or blind individual to complete the forms, as they do not know what
the fields, how to input data, or what options to select (e.g., selecting a date or a size). A
compliant website will, instead, provide labels or instructions when content requires user
input. This includes captcha prompts, requiring the user to verity that he or she is not a
robot.
g.
Information about the meaning and structure of content is conveyed
by more than the visual presentation of content.
h.
Web pages do not share the same ID or title. When two or more
elements on a web page share the same ID or title, it cause problems in screen readers
which use IDs for labeling controls and table headings.
i.
Linked images must contain alt-text explaining the image. Absent
that alt-text, a screen reader has no content to present the user as to what the image is.
j.
The purpose of each link is easily determined from how the link is
labeled. Absent properly labeling each link or when no description exists, it confuses
keyboard and screen-reader users as they do not know the purpose of the links. This
includes captcha prompts.
k.
No redundant links where adjacent links go to the same URL
address. When redundant links exist, it causes additional navigation and repetition for
keyboard and screen-reader users.
l.
Portable Document Formats (PDFs) are accessible. When they are
inaccessible, the visually impaired or blind individual cannot learn what information is on
them.
m.
One or more keyboard operable user interface has a mode of
operation where the keyboard focus indicator is discernible.
n.
Changing the setting of a user interface component does not
automatically cause a change of content where the user has not been advised before using
the component.
o.
The name and role of all user interface elements can be
programmatically determined; items that can be set by the user can be programmatically
set; and/or notification of changes to these items are available to user agents, including
assistive technology.
STATEMENT OF FACTS
Defendants, Their Website And Their Website’s Barriers
14.
Defendants are retailers of CBD products for men, women and pets. They
have locations throughout the country, including three locations in New York City,
including 247 Bleecker Street, New York, New York, 199 Orchard Street, New York, and
2196 Flatbush Ave, Brooklyn, New York. At these locations, Defendants sell tinctures,
capsules, creams and bath products, animal treats and similar items. Items can also be
purchased online through the Website and delivered by mail.
15.
Defendants’ Website is heavily integrated with their retail operation,
serving as its gateway. Through the Website, Defendants’ customers are, inter alia, able to:
learn information about Defendants’ company, including its store locations; learn
information about hemp and CBD, including how it can be administered and effects; learn
about the products available for purchase in stores and on the Website; learn about the
return policy and contact the company through an online form.
16.
It is, upon information and belief, Defendants’ policy and practice to deny
Plaintiff Nisbett and other blind or visually-impaired users access to their Website, thereby
denying the facilities and services that are offered and integrated with their CBD stores.
Due to their failure and refusal to remove access barriers to their Website, Plaintiff Nisbett
and visually-impaired persons have been and are still being denied equal access to
Defendants’ stores and the numerous facilities, goods, services, and benefits offered to the
public through their Website.
17.
Plaintiff Nisbett cannot use a computer without the assistance of screen-
reading software. He is, however, a proficient screen-reader user and uses it to access the
Internet. He has visited the Website on separate occasions using screen-reading software.
18.
During his visits to the Website, the last occurring on or about February 20,
2020, Plaintiff Nisbett encountered multiple access barriers that denied him the full
enjoyment of the facilities, goods, and services of the Website and the facilities, goods, and
services of Defendants’ stores. Because of these barriers he was unable to, substantially
equal to sighted individuals:
a.
Know what is on the Website. This is in part due to the non-text
images lacking alt-text describing them. Some images are not event detected by screen
reader. There are unlabeled elements throughout the Website. Plaintiff Nisbett had
difficulty learning about Defendant’s products because the sub-links in the main navigation
menu are not accessible to a screen reader. For example, a sighted user can hover over oil
tinctures and access sub-links that will take the user to a page for broad spectrum CBD oil
tinctures. Hovering is a feature that is consistently incompatible with screen readers unless
it is done properly. In this case, there appears to be no way for a screen reader user to
expand the main navigation links and clicking on Oil tinctures takes the user to a page with
all oil tinctures. He or she must then arrow or scroll through several pages of items to find
a specific item. Plaintiff Nisbett was also unable to learn about lab results equal to a sighted
user because they are presented as an inaccessible image. Lastly, Plaintiff Nisbett could
not learn about Defendant’s social media accounts because they are not properly labeled.
b.
Navigate the Website. Plaintiff Nisbett had difficulty navigating this
Website with his screen reader. As mentioned above, several navigation links are
inaccessible to screen reader users. Checking out is very difficult for screen reader users.
There is no alert that an item has been added to the cart. When viewing the cart, the layout
is not intuitive or predictable. For example, the shipping information is before the name
and address field, which is not the usual manner. Forms on the checkout field are also
unlabeled, for example the credit card field just reads as “bullet bullet bullet” over and over
again.
19.
Plaintiff Nisbett was denied full and equal access to the facilities and
services Defendants offers to the public on their Website because he encountered multiple
accessibility barriers that visually-impaired people often encounter with non-compliant
websites:
a.
Lack of alt-text for images.
b.
Fieldset elements are not labeled with legend elements.
c.
Document titles are blank.
d.
PDFs are not tagged and therefore are inaccessible to screen readers.
e.
Button elements are empty and have no programmatically
determined name.
f.
Form controls have no labels and no programmatically determined
names.
g.
Radio button groups are not contained in a fieldset element.
h.
Webpages have no headings.
i.
Several links on a page share the same link text, but go to different
destinations.
j.
Webpages have markup errors.
Defendants Must Remove Barriers to Their Website
20.
Due to the inaccessibility of their Website, blind and visually-impaired
customers such as Plaintiff Nisbett, who need screen-readers, cannot fully and equally use
or enjoy the facilities, goods, and services Defendants offer to the public on their Website.
The Website’s access barriers that Plaintiff Nisbett encountered have caused a denial of his
full and equal access in the past, and now deter him on a regular basis from accessing the
Website. These access barriers have likewise deterred him from visiting Defendants’ stores
and enjoying it equal to sighted individuals.
21.
If the Website was equally accessible to all, Plaintiff Nisbett could
independently navigate it, learn about Defendants’ stores, learn about the products
available for purchase in stores and online, and complete a purchase, equal to sighted users.
22.
Through his attempts to use the Website, Plaintiff Nisbett has actual
knowledge of the access barriers that make these services inaccessible and independently
unusable by blind and visually-impaired people.
23.
Because simple compliance with the WCAG 2.0 Guidelines would provide
Plaintiff Nisbett and other visually-impaired consumers with equal access to the Website,
Plaintiff Nisbett alleges that Defendants have engaged in acts of intentional discrimination,
including, but not limited to, the following policies or practices:
a.
Constructing and maintaining a website that is inaccessible to
visually-impaired individuals, including Plaintiff Nisbett;
b.
Failing to construct and maintain a website that is sufficiently
intuitive to be equally accessible to visually-impaired individuals, including Plaintiff
Nisbett; and,
c.
Failing to take actions to correct these access barriers in the face of
substantial harm and discrimination to blind and visually impaired consumers, such as
Plaintiff Nisbett, as a member of a protected class.
24.
Defendants therefore use standards, criteria or methods of administration
that have the effect of discriminating or perpetuating the discrimination of others, as
alleged herein.
25.
Title III of the ADA expressly contemplates the injunctive relief that
Plaintiff Nisbett seeks under 42 U.S.C. § 12188(a)(2).
26.
Because their Website has never been equally accessible, and because
Defendants lack a corporate policy that is reasonably calculated to cause their Website to
become and remain accessible, Plaintiff Nisbett seeks a permanent injunction under 42
U.S.C. § 12188(a)(2) requiring Defendants to retain a qualified consultant acceptable to
Plaintiff Nisbett to assist Defendants to comply with WCAG 2.0 guidelines for their
Website:
a.
Remediating the Website to be WCAG 2.0 AA compliant;
b.
Training Defendants’ employees and agents who develop the
Website on accessibility compliance under the WCAG 2.0 guidelines;
c.
Regularly checking the accessibility of the Website under the
WCAG 2.0 guidelines;
d.
Regularly testing user accessibility by blind or vision-impaired
persons to ensure that Defendants’ Website complies under the WCAG 2.0 guidelines; and,
e.
Developing an accessibility policy that is clearly disclosed on
Defendants’ Website, with contact information for users to report accessibility-related
problems.
27.
Although Defendants may currently have centralized policies on
maintaining and operating their Website, Defendants lack a plan and policy reasonably
calculated to make them fully and equally accessible to, and independently usable by, blind
and other visually impaired consumers.
28.
Without injunctive relief, Plaintiff Nisbett and other visually impaired
consumers will continue to be unable to independently use the Website, violating its rights.
29.
Defendants have, upon information and belief, invested substantial sums in
developing and maintaining their Website and have generated significant revenue from the
Website. These amounts are far greater than the associated cost of making their Website
equally accessible to visually impaired customers.
30.
Defendants have failed to take any prompt and equitable steps to remedy its
discriminatory conduct. These violations are ongoing.
CLASS ACTION ALLEGATIONS
31.
Plaintiff Nisbett seeks to certify a nationwide class under Fed. R. Civ. P.
23(a) and 23(b)(2): all legally blind individuals in the United States who have attempted to
access Defendants’ Website and as a result have been denied access to the enjoyment of
Defendants’ stores during the relevant statutory period (“Class Members”).
32.
Plaintiff Nisbett seeks to certify a State of New York subclass under Fed.
R. Civ. P. 23(a) and 23(b)(2): all legally blind individuals in the State of New York who
have attempted to access the Website and as a result have been denied access to the equal
enjoyment of Defendants’ stores during the relevant statutory period (“New York Subclass
Members”).
33.
Common questions of law and fact exist amongst the Class Members and
the New York Subclass Members:
a.
Whether Defendants’ stores, are a “public accommodation” or a
service or good “of a place of public accommodation” under Title III of the ADA;
b.
Whether Defendants’ Website is a “place or provider of public
accommodation” or an “accommodation, advantage, facility or privilege” under the
NYSHRL;
c.
Whether Defendants’ Website denies the full and equal enjoyment
of its goods, services, facilities, privileges, advantages, or accommodations to people with
visual disabilities, violating Title III of the ADA; and
d.
Whether Defendants’ Website denies the full and equal enjoyment
of its goods, services, facilities, privileges, advantages, or accommodations to people with
visual disabilities, violating the NYSHRL.
35.
Plaintiff Nisbett’s claims are typical of the Class Members, and New York
Subclass Members: they are all severely visually impaired or otherwise blind, and claim
that Defendants have violated Title III of the ADA, or NYSHRL by failing to update or
remove access barriers on their Website so it can be independently accessible to the
visually impaired individuals.
36.
Plaintiff Nisbett will fairly and adequately represent and protect the Class
and Subclasses’ interests because he has retained and is represented by counsel competent
and experienced in complex class action litigation, and because he has no interests
antagonistic to the Class or Subclasses. Class certification of the claims is appropriate
under Fed. R. Civ. P. 23(b)(2) because Defendants have acted or refused to act on grounds
generally applicable to the Class and Subclasses, making appropriate both declaratory and
injunctive relief with respect to Plaintiff, the Class and Subclasses.
37.
Alternatively, class certification is appropriate under Fed. R. Civ. P.
23(b)(3) because fact and legal questions common to Class and Subclass Members
predominate over questions affecting only individuals, and because a class action is
superior to other available methods for the fair and efficient adjudication of this litigation.
38.
Judicial economy will be served by maintaining this lawsuit as a class action
in that it is likely to avoid the burden that would be otherwise placed upon the judicial
system by the filing of numerous similar suits by people with visual disabilities throughout
the United States.
FIRST CAUSE OF ACTION
VIOLATIONS OF THE ADA, 42 U.S.C. § 12181 et seq.
39.
Plaintiff Nisbett, individually and on behalf of the Class Members, repeats
and realleges every allegation of the preceding paragraphs as if fully set forth herein.
40.
Title III of the ADA prohibits “discriminat[ion] on the basis of disability in
the full and equal enjoyment of the goods, services, facilities, privileges, advantages, or
accommodations of any place of public accommodation by any person who owns, leases
(or leases to), or operates a place of public accommodation.” 42 U.S.C. § 12182(a).
41.
Defendants’ stores constitute public accommodations under Title III of the
ADA, 42 U.S.C. § 12181(7). Their Website is a service, privilege, or advantage that is
integrated with their stores.
42.
Under Title III of the ADA, it is unlawful discrimination to deny individuals
with disabilities the opportunity to participate in or benefit from the goods, services,
facilities, privileges, advantages, or accommodations of an entity. 42 U.S.C. §
12182(b)(1)(A)(i).
43.
Under Title III of the ADA, it is unlawful discrimination to deny individuals
with disabilities an opportunity to participate in or benefit from the goods, services,
facilities, privileges, advantages, or accommodation, which is equal to the opportunities
afforded to other individuals. 42 U.S.C. § 12182(b)(1)(A)(ii).
44.
Under Title III of the ADA, unlawful discrimination also includes, among
other things:
[A] failure to make reasonable modifications in policies, practices, or
procedures, when such modifications are necessary to afford such goods,
services, facilities, privileges, advantages, or accommodations to
individuals with disabilities, unless the entity can demonstrate that making
such modifications would fundamentally alter the nature of such goods,
services, facilities, privileges, advantages or accommodations; and a failure
to take such steps as may be necessary to ensure that no individual with a
disability is excluded, denied services, segregated or otherwise treated
differently than other individuals because of the absence of auxiliary aids
and services, unless the entity can demonstrate that taking such steps would
fundamentally alter the nature of the good, service, facility, privilege,
advantage, or accommodation being offered or would result in an undue
burden.
42 U.S.C. § 12182(b)(2)(A)(ii)-(iii).
45.
These acts violate Title III of the ADA, and the regulations promulgated
thereunder. Plaintiff Nisbett, who is a member of a protected class of persons under Title
III of the ADA, has a physical disability that substantially limits the major life activity of
sight within the meaning of 42 U.S.C. §§ 12102(1)(A)-(2)(A). Furthermore, he has been
denied full and equal access to the Website, has not been provided services that are
provided to other patrons who are not disabled, and has been provided services that are
inferior to the services provided to non-disabled persons.
46.
Under 42 U.S.C. § 12188 and the remedies, procedures, and rights set forth
and incorporated therein, Plaintiff Nisbett requests the relief as set forth below.
SECOND CAUSE OF ACTION
VIOLATIONS OF THE NYSHRL
47.
Plaintiff Nisbett, individually and on behalf of the New York Subclass
Members, repeats and realleges every allegation of the preceding paragraphs as if fully set
forth herein.
48.
N.Y. Exec. Law § 296(2)(a) provides that it is “an unlawful discriminatory
practice for any person, being the owner, lessee, proprietor, manager, superintendent, agent
or employee of any place of public accommodation . . . because of the . . . disability of any
person, directly or indirectly, to refuse, withhold from or deny to such person any of the
accommodations, advantages, facilities or privileges thereof.”
49.
Defendants’ State of New York stores are public accommodations under
N.Y. Exec. Law § 292(9). Defendants’ Website is a service, privilege or advantage of their
stores. Defendants’ Website is a service that is by and integrated with these stores.
50.
Defendants are subject to NYSHRL because they own and operates their
stores and the Website. Defendants are a “person” under N.Y. Exec. Law § 292(1).
51.
Defendants are violating N.Y. Exec. Law § 296(2)(a) in refusing to update
or remove access barriers to their Website, causing their Website and the services
integrated with their stores to be completely inaccessible to the blind. This inaccessibility
denies blind patrons full and equal access to the facilities, goods and services that
Defendants make available to the non-disabled public.
52.
Under N.Y. Exec. Law § 296(2)(c)(i), unlawful discriminatory practice
includes, among other things, “a refusal to make reasonable modifications in policies,
practices, or procedures, when such modifications are necessary to afford facilities,
privileges, advantages or accommodations to individuals with disabilities, unless such
person can demonstrate that making such modifications would fundamentally alter the
nature of such facilities, privileges, advantages or accommodations being offered or would
result in an undue burden.”
53.
Under N.Y. Exec. Law § 296(2)(c)(ii), unlawful discriminatory practice
also includes, “a refusal to take such steps as may be necessary to ensure that no individual
with a disability is excluded or denied services because of the absence of auxiliary aids and
services, unless such person can demonstrate that taking such steps would fundamentally
alter the nature of the facility, privilege, advantage or accommodation being offered or
would result in an undue burden.”
54.
Readily available, well-established guidelines exist on the Internet for
making websites accessible to the blind and visually impaired. These guidelines have been
followed by other large business entities and government agencies in making their websites
accessible, including but not limited to: adding alt-text to graphics and ensuring that all
functions can be performed using a keyboard. Incorporating the basic components to make
their Website accessible would neither fundamentally alter the nature of its business nor
result in an undue burden to them.
55.
Defendants’ actions constitute willful intentional discrimination against the
class because of a disability, violating the NYSHRL, N.Y. Exec. Law § 296(2), in that
Defendants have:
a.
Constructed and maintained a website that is inaccessible to Class
Members with knowledge of the discrimination; and/or
b.
Constructed and maintained a website that is sufficiently intuitive
and/or obvious that is inaccessible to blind class members; and/or
c.
Failed to take actions to correct these access barriers in the face of
substantial harm and discrimination to blind class members.
56.
Defendants discriminate, and will continue in the future to discriminate
against Plaintiff Nisbett and New York Subclass Members on the basis of disability in the
full and equal enjoyment of the goods, services, facilities, privileges, advantages,
accommodations and/or opportunities of Defendants’ Website and their stores under §
296(2) et seq. and/or its implementing regulations. Unless the Court enjoins Defendants
from continuing to engage in these unlawful practices, Plaintiff and the New York Subclass
Members will continue to suffer irreparable harm.
57.
As Defendants’ actions violate the NYSHRL, Plaintiff Nisbett seeks
injunctive relief to remedy the discrimination.
58.
Plaintiff Nisbett is entitled to compensatory damages and civil penalties and
fines under N.Y. Exec. Law § 297(4)(c) et seq. for every offense.
59.
Plaintiff Nisbett is entitled to reasonable attorneys’ fees and costs.
60.
Under N.Y. Exec. Law § 297 and the remedies, procedures, and rights set
forth and incorporated therein Plaintiff prays for judgment as set forth below.
THIRD CAUSE OF ACTION
VIOLATIONS OF THE NYCHRL
61.
Plaintiff Nisbett, individually and on behalf the New York City Subclass
Members, repeats and realleges every allegation of the preceding paragraphs as if fully set
forth herein.
62.
The NYCHRL provides that “It shall be an unlawful discriminatory practice
for any person, being the owner, lessee, proprietor, manager, superintendent, agent or
employee of any place or provider of public accommodation, because of . . . disability . . .
directly or indirectly, to refuse, withhold from or deny to such person, any of the
accommodations, advantages, facilities or privileges thereof.” N.Y.C. Admin. Code § 8-
107(4)(a)
63.
The Website is a public accommodation under NYCHRL, N.Y.C. Admin.
Code § 8-102(9).
64.
Defendants are subject to NYCHRL because they own and operate their
Website, making them persons under N.Y.C. Admin. Code § 8-102(1).
65.
Defendants are violating the NYCHRL in refusing to update or remove
access barriers to Website, causing their Website and the services integrated with their
retail operations to be completely inaccessible to the blind. This inaccessibility denies blind
patrons full and equal access to the facilities, goods, and services that Defendant makes
available to the non-disabled public. N.Y.C. Admin. Code §§ 8-107(4)(a), 8-107(15)(a).
66.
Defendants’ actions constitute willful intentional discrimination against the
Subclass because of a disability, violating the NYCHRL, N.Y.C. Admin. Code § 8-
107(4)(a) and § 8-107(15)(a,) in that it has:
a.
Constructed and maintained a website that is inaccessible to blind class
members with knowledge of the discrimination; and/or
b.
Constructed and maintained a website that is sufficiently intuitive and/or
obvious that is inaccessible to blind class members; and/or
c.
Failed to take actions to correct these access barriers in the face of
substantial harm and discrimination to blind class members.
67.
As such, Defendants discriminate, and will continue in the future to
discriminate against Plaintiff Nisbett and the New York City Subclass Members because
of disability in the full and equal enjoyment of the goods, services, facilities, privileges,
advantages, accommodations and/or opportunities of its Website and its online retail
operations under § 8-107(4)(a) and/or its implementing regulations. Unless the Court
enjoins Defendant from continuing to engage in these unlawful practices, Plaintiff and the
New York City Subclass will continue to suffer irreparable harm.
68.
As Defendants’ actions violate the NYCHRL, Plaintiff Nisbett seeks
injunctive relief to remedy the discrimination.
69.
Plaintiff Nisbett is also entitled to compensatory damages, as well as civil
penalties and fines for each offense. N.Y.C. Admin. Code §§ 8-120(8), 8-126(a).
70.
Plaintiff Nisbett is also entitled to reasonable attorneys’ fees and costs.
71.
Under N.Y.C. Admin. Code § 8-120 and § 8-126 and the remedies,
procedures, and rights set forth and incorporated therein Plaintiff prays for judgment as set
forth below.
FOURTH CAUSE OF ACTION
DECLARATORY RELIEF
72.
Plaintiff Nisbett, individually and on behalf the Class Members, repeats and
realleges every allegation of the preceding paragraphs as if fully set forth herein.
73.
An actual controversy has arisen and now exists between the parties in that
Plaintiff Nisbett contends, and is informed and believes that Defendants deny, that their
Website contains access barriers denying blind customers the full and equal access to the
goods, services and facilities of their Website and by extension their stores, which
Defendants own, operate and control, fails to comply with applicable laws including, but
not limited to, Title III of the Americans with Disabilities Act, 42 U.S.C. §§ 12182, et seq.,
and N.Y. Exec. Law § 296, et seq. prohibiting discrimination against the blind.
74.
A judicial declaration is necessary and appropriate now in order that each
of the parties may know its respective rights and duties and act accordingly.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff Nisbett respectfully requests this Court grant the
following relief:
a.
A preliminary and permanent injunction to prohibit Defendants
from violating Title III of the ADA, 42 U.S.C. §§ 12182, et seq., N.Y. Exec. Law § 296, et
seq., and the laws of New York;
b.
A preliminary and permanent injunction requiring Defendants to
take all the steps necessary to make their Website into full compliance with the
requirements set forth in Title III of the ADA, and its implementing regulations, so that the
Website is readily accessible to and usable by blind individuals;
c.
A declaration that Defendants owns, maintains and/or operates the
Website in a manner that discriminates against the blind and which fails to provide access
for persons with disabilities as required by ADA, 42 U.S.C. §§ 12182, et seq., N.Y. Exec.
Law § 296, et seq., and the laws of New York
d.
An order certifying the Class and Subclasses under Fed. R. Civ. P.
23(a) & (b)(2) and/or (b)(3), appointing Plaintiff as Class Representative, and his attorneys
as Class Counsel;
e.
Compensatory damages in an amount to be determined by proof,
including all applicable statutory damages, punitive damages and fines;
f.
Pre- and post-judgment interest;
g.
An award of costs and expenses of this action together with
reasonable attorneys’ and expert fees; and
h.
Such other and further relief as this Court deems just and proper.
DEMAND FOR TRIAL BY JURY
Pursuant to Fed. R. Civ. P. 38(b), Plaintiff Nisbett demands a trial by jury on all
questions of fact the Complaint raises.
Dated: New York, New York
March 13, 2020
LIPSKY LOWE LLP
s/ Christopher H. Lowe
Christopher H. Lowe
Douglas B. Lipsky
420 Lexington Avenue, Suite 1830
New York, New York 10170
212.392.4772
[email protected]
[email protected]
| civil rights, immigration, family |
2bogDIcBD5gMZwczFUPq | X
11 vil Action CN No. 1918
CLASS ACTION
Plaintiff,
COMPLAINT FOR VIOLATION OF THE
FEDERAL SECURITIES LAWS
VS.
:
Defendants.
X
Plaintiff has alleged the following based upon the investigation of Plaintiff's counsel, which
NATURE OF THE ACTION
1.
This is a federal class action on behalf of purchasers of the common stock of
JURISDICTION AND VENUE
2.
The claims asserted herein arise under and pursuant Sections 10(b) and 20(a) of the
3.
This Court has jurisdiction over the subject matter of this action pursuant to 28 U.S.C.
4.
Venue is proper in this District pursuant to Section 27 of the Exchange Act and 28
5.
In connection with the acts alleged in this Complaint, Defendants, directly or
PARTIES
6.
Plaintiff James Thomas Turner, as set forth in the accompanying certification and
7.
Defendant ShengdaTech is a Nevada corporation that is headquartered in Shanghai,
8.
Defendant Xiangzhi Chen ("Xiangzhi Chen") is, and was at all relevant times,
9.
Defendant Andrew Weiwen Chen ("Andrew Chen") served as the Company's Chief
10.
Defendant Anhui Guo ("Guo") is, and was at all relevant times, a Director and Chief
11.
Defendants Xiangzhi Chen, Andrew Chen and Guo are collectively referred to herein
12.
During the Class Period, the Individual Defendants, as senior executive officers
- -2- -
13.
The Individual Defendants are liable as direct participants in the wrongs complained
14.
The Individual Defendants, because of their positions with the Company, controlled
15.
As senior executive officers and/or directors and as controlling persons of a publicly
- 3 -16.
The Individual Defendants are liable as participants in a fraudulent scheme and
CLASS ACTION ALLEGATIONS
17.
Plaintiff brings this action as a class action pursuant to Federal Rule of Civil
18.
The members of the Class are SO numerous that joinder of all members is
- 4 -
19.
Plaintiff's claims are typical of the claims of the members of the Class as all members
20.
Plaintiff will fairly and adequately protect the interests of the members of the Class
21.
Common questions of law and fact exist as to all members of the Class and
(a)
whether the federal securities laws were violated by Defendants' acts as
(b)
whether statements made by Defendants to the investing public during the
(c)
whether the price of ShengdaTech common stock was artificially inflated
(d)
to what extent the members of the Class have sustained damages and the
22.
A class action is superior to all other available methods for the fair and efficient
- 5 -
SUBSTANTIVE ALLEGATIONS
23.
Defendant ShengdaTech and its subsidiaries are primarily engaged in developing,
24.
The Class Period begins on March 15, 2010. On that date, ShengdaTech filed with
(a)
Disclosure Controls and Procedures.
Disclosure controls and procedures (as defined in Rules 13a - 15(e) and 15d-15(e)
under the Securities Exchange Act of 1934, as amended (the Exchange Act")) are
designed to ensure that information required to be disclosed in our reports filed under
the Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission's rules and forms.
This information is accumulated and communicated to management, including our
Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely
decisions regarding required disclosures. Our management, under the supervision
and with the participation of our Chief Executive Officer and Chief Financial
Officer, evaluated the effectiveness of the design and operation of our disclosure
controls and procedures as of the end of the period covered by this report. Based on
the evaluation, our Chief Executive Officer and Chief Financial Officer concluded
that our disclosure controls and procedures were effective as of December 31, 2009.
(b)
Management's report on internal control over financial reporting.
- 6 -Internal control over financial reporting (as defined in Rules 13a - 15(f) and 15d-
15(f) under the Exchange Act) is a process that is designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted
accounting principles, and includes those policies and procedures that:
Pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of assets of the Company,
Provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures are being made only in
accordance with authorizations of management and the board of directors of the
Company, and
Provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the Company's assets that could have
a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies and
procedures may deteriorate.
Based on our evaluation of internal control over financial reporting as of December
31, 2009, management has determined that our internal control over financial
reporting was effective. We acquired Chaodong in December 2009, and
management excluded from its assessment of the effectiveness of our internal control
over financial reporting as of December 31, 2009. Chaodong's internal control over
financial reporting associated with total assets of $4,593,970 and nil revenue, which
was included in the consolidated financial statements of the Company. We also did
not assess the effectiveness of the internal control over financial reporting of
Chaodong. The Company's evaluation of the effectiveness of our internal control
over financial reporting is based on the criteria established in COSO's Internal
Control - Integrated Framework.
Our independent registered public accounting firm, KPMG has audited the
effectiveness of the Company's internal control over financial reporting as of
December 31, 2009, as stated in their report, which appears below.
(c)
Changes in internal control over financial reporting.
As previously reported under "Item 4 - Controls and Procedures" in our quarterly
report on Form 10-Q for the quarter ended September 30, 2009, management
concluded that our internal control over financial reporting was not effective based
on the material weaknesses identified in the Company's internal control over
financial reporting described in the Company's Annual Report on Form 10-K for the
- 7 -
fiscal year ended December 31, 2008. Management has continued to work on
remediation efforts since the filing of that report.
During the quarter ended December 31, 2009, changes in our internal control over
financial reporting occurred related to the two previously reported material
weaknesses as follows:
Management had concluded that for non-routine transactions and related
disclosures, we did not maintain adequate policies and procedures and lacked
personnel possessing adequate technical accounting expertise to ensure that those
transactions are properly accounted for and disclosed in our consolidated financial
statements. As of December 31, 2009, management has concluded that the severity
of this previously reported material weakness has been sufficiently reduced and
remediated such that the previously reported material weakness is no longer a
material weakness. We have designed adequate policies and procedures and hired
and trained enough technically-qualified personnel to properly account for and
disclose non-routine transactions. In addition, as part of the 2009 period-end
financial closing procedures, management utilized a monthly monitoring process.
Based on these reviews, which are part of the control process, non-routine
transactions and related disclosure controls are deemed to be operating effectively.
Management had concluded that we did not design and maintain effective
policies and procedures to ensure adequate maintenance of tax records, timely
reconciliation of income tax accounts and adequate analysis and review of deferred
tax calculations. As a result, we did not maintain effective internal control over the
accounting for income taxes and related financial statement disclosures. As of
December 31, 2009, management has concluded that the severity of this previously
reported material weakness has been sufficiently reduced and remediated such that
the previously reported material weakness is no longer a material weakness. We
have designed policies and procedures to ensure the maintenance of tax records,
timely reconciliation of income tax accounts and adequate analysis and review of
deferred tax calculations and hired qualified third party specialists to perform these
procedures. In addition, as part of the 2009 period-end financial closing procedures,
management utilized a monthly monitoring process. Based on these reviews, which
are part of the control process, tax records, timely reconciliation of income tax
accounts and adequate analysis and review of deferred tax calculations and related
disclosure controls are deemed to be operating effectively.
I, [Defendant Xiangzhi Chen and Andrew Chen], certify that:
1.
I have reviewed this annual report on Form 10-K of ShengdaTech, Inc. (the
"registrant");
2.
Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the statements made,
- 8 -in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
3
Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
4.
The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
a.
Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being
prepared;
b.
Designed such internal control over financial reporting, or
caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
c.
Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
d.
Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrants' most
recent fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the registrant's
auditors and the audit committee of the registrant's board of directors (or persons
performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
- 9 -
b.
Any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrant's internal
control over financial reporting.
25.
The above representations and certifications were repeated in all material respects in
26.
On March 16, 2010, ShengdaTech issued a press release announcing its financial
Shengda Tech expects to complete repairs and maintenances, as well as equipment
and technological upgrades at its recently acquired NPCC facility in Chaodong,
Anhui Province, and start production in April 2010. Once completed, as a first phase,
the facility will have a planned annual capacity of 10,000 metric tons.
By 2013, as demand dictates, Shengda Tech plans to expand the Chaodong Facility
incrementally with an additional 200,000 MT of production capacity in several
phases with a total investment commitment of approximately $175.7 million.
In addition, as reported, the production building currently housing Phase I of the new
NPCC facility in Zibo was constructed to allow for an additional 40,000 MT of
capacity. Shengda] Tech plans to purchase equipment to bring the additional 40,000
MT of designed capacity online in October 2010.
The total planned annual NPCC production capacity for 2010 is expected to reach
approximately 300,000 MT by year end with the addition of the new lines in Zibo
and the 10,000 MT of production facility in Chaodong, Anhui Province. This will be
an increase of 20% compared to the 250,000 MT of capacity reached at the end of
2009.
The Company expects 2010 revenue and net income from NPCC to be in the range
of $123.0 million to $126.0 million and $25.0 million to $27.0 million, respectively.
Our management team remains steadfastly committed to increasing Shengda Tech's
market penetration and to expanding its global reach. Our business strategy in 2010
is to stay highly focused on identified keys to our success - capacity expansion, new
product development, and wider and deeper geographic coverage. In 2010, we plan
to start laying the groundwork to capitalize on the enormous market opportunity and
long-term potential now available in the untapped, prospect-rich Yangtze River Delta
economic region through our recently acquired NPCC facility in Anhui Province.
We also expect to launch new breakthrough NPCC products in a range of new
- 10 -applications, including the high potential asphalt market, which is expected to
achieve long-awaited approval from our five testing and fully engaged potential
large-volume customers. Upon approvals, we anticipate beginning to ship increasing
volumes of NPCC going forward. We will sustain our leading competitive edge as
we continue to prove our value proposition with every satisfied customers. We also
continue to evaluate growth opportunities in the technology-driven chemical market
that will help us leverage our management expertise and offer attractive margins for
future growth and profitability. With the improvement in the global economy
positively influencing manufacturing spending, we are increasingly confident of
achieving our fiscal 2010 goals and continuing to create long-term shareholder value.
27.
Following the Company's 2009 fourth quarter and year end earnings announcement,
28.
On May 10, 2010, ShengdaTech filed with the SEC its Form 10-Q for the quarter
The accompanying interim condensed consolidated financial statements of the
Company include ShengdaTech and its wholly owned subsidiaries. The financial
statements have been prepared in accordance with U.S. generally accepted
accounting principles ("US GAAP") for interim financial information and the
instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and
Exchange Commission. In the opinion of the Company's management, the interim
condensed consolidated financial information provided herein reflects all adjustments
(consisting of normal and recurring adjustments) necessary for a fair presentation of
the Company's consolidated financial position as of March 31, 2010, the results of its
operations for the three months ended March 31, 2010 and 2009, and its cash flows
for the three months ended March 31, 2010 and 2009.
29.
In addition, the March 2010 Form 10-Q included representations about the
30.
On May 11,2010, ShengdaTech issued a press release announcing its financial results
- 11 -
We are delighted to report another strong record-breaking quarter for our NPCC
business evidenced by robust top-line growth coupled with improved margins. Our
investments in R&D and end-market development continue to bear fruit, as we shift
our product mix to more value-added NPCC applications to meet the rising demand
from high-end-product markets, where we can justify greater pricing flexibility and
realize sustainable growth potential.
As a nano-technology leader in the specialty chemical sector in China, we remain
proactive in new-product development and in expanding our application base. Our
engineers work closely with our customers to design solutions for them to enhance
their product functionalities and reliabilities and to lower their costs as well. This is
the value proposition that has successfully set us apart from other product offerings
in this space. By extending our record of complete customer satisfaction into many
more manufacturing sectors, we expect rapidly growing opportunities in our
addressable markets for NPCC.
31.
Following the 2010 first quarter announcement, Defendants held a conference call
32.
On June 15, 2010, ShengdaTech filed with the SEC a Form S-3 registration statement
33.
On July 29, 2010, ShengdaTech filed with the SEC Amendment No. 1 to the
- 12 -
34.
On August 9, 2010, ShengdaTech filed with the SEC its Form 10-Q for the quarter
The accompanying interim condensed consolidated financial statements of the
Company include ShengdaTech and its wholly owned subsidiaries. The financial
statements have been prepared in accordance with U.S. generally accepted
accounting principles ("US GAAP") for interim financial information and the
instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and
Exchange Commission. In the opinion of the Company's management, the interim
condensed consolidated financial information provided herein reflects all adjustments
(consisting of normal and recurring adjustments) necessary for a fair presentation of
the Company's consolidated financial position as of June 30, 2010, the results of its
operations for the three and six months ended June 30, 2010 and 2009, and its cash
flows for the six months ended June 30, 2010 and 2009.
35.
In addition, the June 2010 Form 10-Q included representations about the Company's
36.
On August 10, 2010, ShengdaTech issued a press release announcing its financial
Our growth continued in the second quarter of 2010 as our enhanced R&D efforts
have created much higher value-added products, which are generating robust sales.
Our solid financial performance also comes from the economies-of-scale contributed
by our increases in production capacity. We will continue to target the high-end
markets and industries ideal for our nano-technology applications.
We believe that with our increased production capacity and on-going acquisition of
limestone mining rights, along with our strong R&D support, we are well-positioned
to achieve high gross margins. We remain confident in the industry's growth
prospects and we are well positioned to sustain our demonstrated leadership and
record of success in this sector.
- 13 -37.
Following the 2010 second quarter announcement, Defendants held a conference call
38.
On September 15, 2010, ShengdaTech filed with the SEC amendments the
39.
On October 1, 2010, ShengdaTech filed a Form 8-K with the SEC disclosing that on
40.
On October 20, 2010, ShengdaTech filed with the SEC Amendment No. 2 to the
41.
On November 8, 2010, ShengdaTech filed with the SEC its Form 10-Q for the quarter
The accompanying interim condensed consolidated financial statements of the
Company include ShengdaTech and its wholly owned subsidiaries. The financial
statements have been prepared in accordance with U.S. generally accepted
accounting principles ("US GAAP") for interim financial information and the
instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and
Exchange Commission. In the opinion of the Company's management, the interim
condensed consolidated financial information provided herein reflects all adjustments
(consisting of normal and recurring adjustments) necessary for a fair presentation of
the Company's consolidated financial position as of September 30, 2010, the results
of its operations for the three and nine months ended September 30, 2010 and 2009,
and its cash flows for the nine months ended September 30, 2010 and 2009.
- 14 -
42.
In addition, the September 2010 Form 10-Q included representations about the
43.
Also on November 8, 2010, ShengdaTech issued a press release announcing its
Our strong revenue and net income growth in the third quarter of 2010 was led by
continued capacity expansion fueled by growth in customer demand. Demand for
our NPCC products continues to rise as we further penetrate our existing end-markets
and expand into new markets. We are aggressively ramping up capacity utilization at
our new NPCC facility in Anhui Province and are in advanced negotiations with
prospective customers in this high-potential, prospect-rich economic region.
One of our leading competitive advantages in the NPCC market is our ability to
introduce new, value-added product applications for NPCC. For example, in the
third quarter of 2010, we recognized our first sales of our new NPCC application for
asphalt and expect orders to accelerate in the coming months. We plan to patent
protect this application to capitalize on this market opportunity and reap maximum
benefits from our intensive and extensive research efforts.
44.
Following the 2010 third quarter announcement, Defendants held a conference call
45.
That same day, November 8, 2010, ShengdaTech filed with the SEC Amendment No.
46.
On November 18, 2010 Shengda Tech filed with the SEC Amendment No. 4 to the
- 15 -
47.
On November 23, 2010 ShengdaTech filed with the SEC Amendment No. 5 to the
48.
On December 9, 2010, ShengdaTech issued a press release announcing plans to offer
49.
On December 10, 2010, ShengdaTech announced that it entered into a purchase50.
On December 15, 2010, the Company announced that issued $130 million aggregate
51.
The statements referenced above in TT24-31,34-38 and 41-44 were each materially
(a)
that ShengdaTech was operating with material deficiencies in the system of
(b)
that ShengdaTech's financial statements, during at least 2010, were not fairly
- 16 -
(c)
that based on the foregoing, Defendants lacked a reasonable basis for their
52.
Then, on March 15, 2011, the Company issued a press release announcing that it had
53.
The Company further announced that: (i) the Company's audit committee retained
54.
In response to this unexpected announcement, trading in the Company's shares was
55.
The market for Shengda Tech common stock was open, well-developed and efficient
56.
During the Class Period, Defendants materially misled the investing public, thereby
- 17 -
57.
At all relevant times, the material misrepresentations and omissions particularized in
Additional Scienter Allegations
58.
As alleged herein, Defendants acted with scienter in that Defendants knew that the
- 18 -
59.
Defendants were further motivated to engage in a fraudulent course of conduct in
Loss Causation/Economic Loss
60.
During the Class Period, as detailed herein, Defendants engaged in a scheme to
61.
By failing to disclose to investors the adverse facts detailed herein, Defendants
62.
As a direct result of Defendants' prior misrepresentations and fraudulent conduct- 19 -
Applicability of Presumption of Reliance:
Fraud on the Market Doctrine
63.
At all relevant times, the market for ShengdaTech common stock was an efficient
(a)
Shengda Tech common stock met the requirements for listing, and was listed
(b)
as a regulated issuer, ShengdaTech filed periodic public reports with the SEC
(c)
Shengda Tech regularly communicated with public investors via established
(d)
Shengda Tech was followed by several securities analysts employed by major
64.
As a result of the foregoing, the market for ShengdaTech common stock promptly
- 20 -
No Safe Harbor
65.
The statutory safe harbor provided for forward-looking statements under certain
COUNT I
Violation of Section 10(b) of
the Exchange Act and Rule 10b-5
Promulgated Thereunder Against All Defendants
66.
Plaintiff repeats and realleges each and every allegation contained above as if fully set
67.
During the Class Period, Defendants disseminated or approved the materially false
68.
Defendants: (a) employed devices, schemes, and artifices to defraud; (b) made untrue
- 21 -
69.
Plaintiff and the Class have suffered damages in that, in reliance on the integrity of
70.
As a direct and proximate result of Defendants' wrongful conduct, Plaintiff and the
COUNT II
Violation of Section 20(a) of
the Exchange Act Against the Individual Defendants
71.
Plaintiff repeats and realleges each and every allegation contained above as if fully set
72.
The Individual Defendants acted as controlling persons of ShengdaTech within the
WHEREFORE, Plaintiff prays for relief and judgment, as follows:
- 22 -A.
Determining that this action is a proper class action, designating Plaintiff as Lead
B.
Awarding compensatory damages in favor of Plaintiff and the other Class members
C.
Awarding Plaintiff and the Class their reasonable costs and expenses incurred in this
D.
Such other and further relief as the Court may deem just and proper.
JURY TRIAL DEMANDED
Plaintiff hereby demands a trial by jury.
ROBBINS GELLER RUDMAN
& DOWD LLP
SAMUEL H. RUDMAN
JM
SAMUEL H. RUDMAN
58 South Service Road, Suite 200
Melville, NY 11747
Telephone: 631/367-7100
631/367-1173 (fax)
- 23 -
MICHAEL I. FISTEL, JR.
MARSHALL DEES
HOLZER, HOLZER & FISTEL, LLC
200 Ashford Center North, Suite 300
Atlanta, Georgia 30338
Telephone: 770/392-0090
770/392-0029 (fax)
DYER & BERENS, LLP
JEFFREY A. BERENS
303 East 17th Avenue, Suite 300
Denver, Colorado 80203
Telephone: 303/861-1764
303/395-0393 (fax)
Attorneys for Plaintiff
- 24 -
CERTIFICATION OF NAMED PLAINTIFF
PURSUANT TO FEDERAL SECURITIES LAWS
The undersigned declares, as to the claims asserted under the federal securities laws, that:
1.
Plaintiff has reviewed the complaint and authorized its filing.
2.
Plaintiff did not purchase and/or acquire the security that is the subject of this
action at the direction of Plaintiff's counsel or in order to participate in any private action
under the federal securities laws.
3.
Plaintiff is willing to serve as a representative party on behalf of the class, including
providing testimony at deposition and trial, if necessary. I understand that this is not a
claim form, and that my ability to share in any recovery as a member of the class is not
dependent upon execution of this Plaintiff Certification.
4.
Plaintiff's transactions in the security that is the subject of this action during the
Class Period are as follows:
Purchases:
Name of Company
Date(s) Purchased
# Shares Purchased
SDTH
FEB. 22,2011
1500
Sales:
Name of Company Date(s) Sold
# Shares Sold
Proceeds
SDTH
5.
During the three (3) years prior to the date of this certification, Plaintiff has not
sought to serve or served as a class representative in an action filed under the federal
securities laws except for the following (if any):
I
6.
Plaintiff will not accept any payment for serving as a representative party on behalf
of the class beyond Plaintiff's pro rata share of any recovery, except such reasonable costs
and expenses (including lost wages) directly relating to the representation of the class as
ordered or approved by the court.
I declare under penalty of perjury that the foregoing is true and correct.
TA
Executed this 18' day of MARCH 2011 in ROBERTS CRissie
City
State Prior
(Signature) X
2
The and the Information contained herein neither replace nor supplement the filing and service of
pleadings required by law, except as provided by local rules of court. This form, approved by the Judicial
Conference of the United States in September 1974, is required for use of the Clerk of Court for the purpose of initialized
18 2011
the civil docket sheet.
DEFENDANTS
CHEN, and ANHUI GUO,
ATTORNEYS (IF KNOWN)
(DO NOT CITE JURISDICTIONAL STATUTES UNLESS DIVERSITY)
Yes?
Judge Previously Assigned
Invol.
Dismissed. No
Yes
If yes, give date
& Case No.
NATURE OF SUIT
TORTS
ACTIONS UNDER STATUTES
PERSONAL INJURY
PERSONAL INJURY
FORFEITURE/PENALTY
BANKRUPTCY
OTHER STATUTES
310 AIRPLANE
[ 362 PERSONAL INJURY
610
AGRICULTURE
[ 1422 APPEAL
400 STATE
315 AIRPLANE PRODUCT
MED MALPRACTICE
620
OTHER FOOD &
28 USC 158
LIABILITY
365
PERSONAL INJURY
DRUG
1423 WITHDRAWAL
410 ANTITRUST
320 ASSAULT, LIBEL &
PRODUCT LIABILITY
[ 625
DRUG RELATED
28 USC 157
SLANDER
368
ASBESTOS PERSONAL
SEIZURE OF
450 COMMERCE
330 FEDERAL
INJURY PRODUCT
PROPERTY
EMPLOYERS'
LIABILITY
21 USC 881
PROPERTY RIGHTS
LIABILITY
630
LIQUOR LAWS
340 MARINE
PERSONAL PROPERTY
640
RR & TRUCK
820 COPYRIGHTS
345
MARINE PRODUCT
650
AIRLINE REGS
830 PATENT
(RICO)
LIABILITY
370 OTHER FRAUD
660 OCCUPATIONAL
840 TRADEMARK
350
MOTOR VEHICLE
371TRUTH IN LENDING
SAFETY/HEALTH
355
MOTOR VEHICLE
380
OTHER PERSONAL
690 OTHER
PRODUCT LIABILITY
PROPERTY DAMAGE
SOCIAL SECURITY
360
OTHER PERSONAL
[ 385
PROPERTY DAMAGE
INJURY
PRODUCT LIABILITY
LABOR
861 HIA (1395ff)
EXCHANGE
862 BLACK LUNG (923)
[ 875 CUSTOMER
[ 710
FAIR LABOR
863 DIWC/DIWW (405(g))
CHALLENGE
STANDARDS ACT
864 SSID TITLE XVI
12 USC 3410
[ 720 LABOR/MGMT
865 RSI (405(g))
RELATIONS
ACTIONS
1730
LABOR/MGMT
REPORTING &
FEDERAL TAX SUITS
892 ECONOMIC
ACTIONS UNDER STATUTES
DISCLOSURE ACT
740
RAILWAY LABOR ACT
870
TAXES (U.S. Plaintiff or
CIVIL RIGHTS
PRISONER PETITIONS
790
OTHER LABOR
Defendant)
MATTERS
LITIGATION
[
871
IRS-THIRD PARTY
894 ENERGY
441 VOTING
510 MOTIONS TO
791
EMPL RET INC
26 USC 7609
442 EMPLOYMENT
VACATE SENTENCE
SECURITY ACT
443 HOUSING/
20 USC 2255
ACCOMMODATIONS
530
HABEAS CORPUS
IMMIGRATION
444 WELFARE
535
DEATH PENALTY
445 AMERICANS WITH
540
MANDAMUS & OTHER
[ 462
NATURALIZATION
DISABILITIES -
550
CIVIL RIGHTS
APPLICATION
EMPLOYMENT
555 PRISON CONDITION
[ 463
HABEAS CORPUS-
[ 446
AMERICANS WITH
ALIEN DETAINEE
DISABILITIES -OTHER
[ 465
OTHER IMMIGRATION
440
OTHER CIVIL RIGHTS
ACTIONS
IF SO, STATE:
OTHER
JUDGE
DOCKET NUMBER
YES
NO
ORIGIN
2a. Removed from
3
Remanded from
4 Reinstated or
5
Transferred from
6 Multidistrict
State Court
Appellate Court
Reopened
(Specify District)
Litigation
2b.
Removed from
State Court AND
at leest one
party is pro se.
BASIS OF JURISDICTION
2 U.S. DEFENDANT
3 FEDERAL QUESTION
4 DIVERSITY
(U.S. NOT A PARTY)
CITIZENSHIP OF PRINCIPAL PARTIES (FOR DIVERSITY CASES ONLY)
PTF DEF
PTF DEF
[]1 [ 1
CITIZEN OR SUBJECT OF A
[ 13[13
INCORPORATED end PRINCIPAL PLACE
FOREIGN COUNTRY
OF BUSINESS IN ANOTHER STATE
[ ]2 [ 12
INCORPORATED or PRINCIPAL PLACE
[14[]4
FOREIGN NATION
OF BUSINESS IN THIS STATE
1473 Park Avenue
Roberts Creek, B.C.
Von 2W2
Unit 2003 East Tower 620 Zhang Yang Road
Zhong Rong Heng Rui International Plaza Pudong District
Shanghai, 200122
China
THIS ACTION SHOULD BE ASSIGNED TO:
WHITE PLAINS
MANHATTAN
(DO NOT check either box if this a PRISONER PETITION.)
My
SIGNATURE OF ATTORNEY OF RECORD
ADMITTED TO PRACTICE IN THIS DISTRICT
NO
05
Yr.
[X] YES (DATE ADMITTED Mo.
Attorney Bar Code # SR7957
FREEMAN
Designated.
Deputy Clerk, DATED | securities |
cPeuE4cBD5gMZwczqSE5 | THE ROSEN LAW FIRM, P.A.
Laurence M. Rosen, Esq. (LR 5733)
Phillip Kim, Esq. (PK 9384)
275 Madison Ave., 34th Floor
New York, New York 10016
Telephone: (212) 686-1060
Fax: (212) 202-3827
Email: [email protected]
[email protected]
Counsel for Plaintiff
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
Case No.
CLASS ACTION COMPLAINT FOR
VIOLATION OF THE FEDERAL
SECURITIES LAWS
JURY TRIAL DEMANDED
CIOE INVESTMENTS INC., Individually and
on behalf of all others similarly situated,
Plaintiff,
v.
HEALTH INSURANCE INNOVATIONS,
INC., GAVIN D. SOUTHWELL, and
MICHAEL D. HERSHBERGER,
Defendants.
Plaintiff Cioe Investments Inc. (“Plaintiff”), individually and on behalf of all other
persons similarly situated, by Plaintiff’s undersigned attorneys, for Plaintiff’s complaint against
Defendants (defined below), alleges the following based upon personal knowledge as to
Plaintiff and Plaintiff’s own acts, and information and belief as to all other matters, based upon,
inter alia, the investigation conducted by and through Plaintiff’s attorneys, which included,
among other things, a review of the Defendants’ public documents, conference calls and
announcements made by Defendants, United States Securities and Exchange Commission
(“SEC”) filings, wire and press releases published by and regarding Health Insurance
Innovations, Inc. (“Health Insurance Innovations” or the “Company”), analysts’ reports and
1
advisories about the Company, and information readily obtainable on the Internet. Plaintiff
believes that substantial evidentiary support will exist for the allegations set forth herein after a
reasonable opportunity for discovery.
NATURE OF THE ACTION
1.
This is a federal securities class action on behalf of a class consisting of all
persons and entities other than Defendants who purchased or otherwise acquired the publicly
traded securities of Health Insurance Innovations from August 2, 2017 through September 11,
2017, both dates inclusive (the “Class Period”). Plaintiff seeks to recover compensable damages
caused by Defendants’ violations of the federal securities laws and to pursue remedies under
Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule
10b-5 promulgated thereunder.
JURISDICTION AND VENUE
2.
The claims asserted herein arise under and pursuant to §§10(b) and 20(a) of the
Exchange Act (15 U.S.C. §§78j(b) and §78t(a)) and Rule 10b-5 promulgated thereunder by the
SEC (17 C.F.R. §240.10b-5).
3.
This Court has jurisdiction over the subject matter of this action under 28 U.S.C.
§1331 and §27 of the Exchange Act.
4.
Venue is proper in this judicial district pursuant to §27 of the Exchange Act (15
U.S.C. §78aa) and 28 U.S.C. §1391(b) as a significant portion of Defendants’ actions and
subsequent damages took place within this judicial district.
5.
In connection with the acts, conduct and other wrongs alleged in this Complaint,
Defendants, directly or indirectly, used the means and instrumentalities of interstate commerce,
including but not limited to, the United States mail, interstate telephone communications and the
facilities of the national securities exchange.
2
PARTIES
6.
Plaintiff, as set forth in the accompanying Certification, purchased the Company’s
securities at artificially inflated prices during the Class Period and was damaged upon the
revelation of the alleged corrective disclosure.
7.
Defendant Health Insurance Innovations operates as a developer, distributor, and
administrator of cloud-based individual health and family insurance plans, and supplemental
products in the United States. The Company is incorporated in Delaware and its principal
executive offices are located at 15438 North Florida Avenue Suite 201 Tampa, Florida. The
Company’s securities are traded on The Nasdaq Global Market (“NASDAQ”) under the ticker
symbol “HIIQ.”
8.
Defendant Gavin D. Southwell (“Southwell”) has been the Company’s Chief
Executive Officer throughout the Class Period.
9.
Defendant Michael D. Hershberger (“Hershberger”) has been the Company’s
Chief Financial Officer throughout the Class Period.
10.
Defendants Southwell and Hershberger are sometimes referred to herein as the
“Individual Defendants.”
11.
Each of the Individual Defendants:
(a)
directly participated in the management of the Company;
(b)
was directly involved in the day-to-day operations of the Company at the highest
levels;
(c)
was privy to confidential proprietary information concerning the Company and its
business and operations;
(d)
was directly or indirectly involved in drafting, producing, reviewing and/or
disseminating the false and misleading statements and information alleged herein;
3
(e)
was directly or indirectly involved in the oversight or implementation of the
Company’s internal controls;
(f)
was aware of or recklessly disregarded the fact that the false and misleading
statements were being issued concerning the Company; and/or
(g)
approved or ratified these statements in violation of the federal securities laws.
12.
The Company is liable for the acts of the Individual Defendants and its employees
under the doctrine of respondeat superior and common law principles of agency because all of
the wrongful acts complained of herein were carried out within the scope of their employment.
13.
The scienter of the Individual Defendants and other employees and agents of the
Company is similarly imputed to the Company under respondeat superior and agency principles.
14.
The Company and the Individual Defendants are referred to herein, collectively,
as the “Defendants.”
SUBSTANTIVE ALLEGATIONS
Materially False and Misleading Statements
15.
On August 2, 2017, the Company issued a press release announcing its second
quarter 2017 financial and operation results, stating in part:
Health Insurance Innovations, Inc. Reports Record Second Quarter 2017
Financial and Operating Results
Revised 2017 Guidance Metrics Upwards
Record Revenue of $61.8 million, up 39% YOY
Diluted Earnings per Share of $0.35, up 46% YOY
Record Adjusted Earnings per Share of $0.46, up 70% YOY
Record Policies in force totaled approximately 359,500, up 39% YOY
TAMPA. Fla., Aug. 02, 2017 (GLOBE NEWSWIRE) -- Health Insurance
Innovations, Inc. (NASDAQ:HIIQ), a leading developer, distributor, and cloud-
based administrator of affordable health insurance and supplemental plans
announced financial results for the second quarter ended June 30, 2017. The
Company will host a live conference call on Thursday, August 3, 2017 at 8:30
A.M. EDT.
4
Second Quarter 2017 Consolidated Financial Highlights
• Record revenue was $61.8 million, an increase of 38.9% over $44.5
million in the second quarter of 2016.
• Record total collections from customers (premium equivalents) of $98.9
million, an increase of 28.5% over $77.0 million in the second quarter of
2016.
• Record adjusted EBITDA (earnings before interest, taxes, depreciation
and amortization) was $12.5 million, compared to $6.5 million in the
second quarter of 2016, an increase of 92.3%.
• GAAP diluted earnings per share was $0.35, compared to $0.24 in the
second quarter of 2016, an increase of 45.8%.
• Record adjusted earnings per share also referred to as Adjusted Net
Income per Share, was $0.46 compared to $0.27 in the second quarter of
2016, an increase of 70.4%.
• Record policies in force as of June 30, 2017, totaled approximately
359,500, a 39.1% increase from 258,400 as of June 30, 2016.
• Premium equivalents, adjusted EBITDA, and adjusted EPS are non-GAAP
financial measures. See the reconciliations of these measures to their
respective most directly comparable GAAP measure below in this press
release.
Revised 2017 Full Year Guidance
We are revising our guidance upwards for the full year 2017. We expect Revenue
to grow 22% to 25% year-over-year ($225 million to $230 million), Adjusted
EBITDA to grow 41% to 51% year-over-year ($39 million to $42 million) and
Adjusted EPS to grow 29% to 38% ($1.45 to $1.55). Previously we guided to
Revenue of $212 million to $222 million, Adjusted EBITDA of $36 million to
$39 million and Adjusted EPS of $1.40 to $1.50.
"In our record second quarter results, we continue to drive top line growth and
bottom line results with disciplined execution of our strategy. In the second half
of 2017, we will continue to focus on our product and technology innovation to
meet consumers' affordable health care needs" said Gavin Southwell, HIIQ's
Chief Executive Officer and President.
Second Quarter 2017 Financial Discussion
Second quarter revenues of $61.8 million increased 38.9%, compared to the
second quarter of 2016, driven primarily by an increase in policies in force.
Total SG&A expense was $14.7 million (23.8% of revenues) in the second
quarter of 2017, compared to $11.7 million (26.3% of revenues) in the same
period in 2016. Our core SG&A for the quarter - total SG&A less marketing leads
5
and advertising, stock compensation, transaction, severance, restructuring and
other costs - was $11.1 million (18.0% of revenues) in the second quarter of 2017,
compared to $8.7 million (19.5% of revenues) in the same period of 2016.
EBITDA was $10.7 million in the second quarter of 2017, compared to $5.7
million in the same period in 2016, an increase of 87.7%.
Adjusted EBITDA was $12.5 million in the second quarter of 2017, an increase of
92.3% over $6.5 million in the same period in 2016. Adjusted EBITDA as a
percentage of revenue was 20.3% in the second quarter of 2017, compared to
14.7% in the same period in 2016. Adjusted EBITDA is calculated as EBITDA,
adjusted for items that are not part of regular operating activities, including
restructuring costs, tax receivable adjustments and other non-cash items such as
stock-based compensation. A reconciliation of net income to EBITDA and
adjusted EBITDA for the three months ended June 30, 2017 and 2016 is included
within this press release.
GAAP diluted earnings per share for the second quarter was $0.35, compared to
$0.24 in the second quarter of 2016.
Adjusted EPS for the second quarter of 2017 was $0.46, compared to $0.27 in the
prior year. A reconciliation of net income to adjusted net income per share is
included within this press release.
The Company makes short-term loans to our distributors, based on actual sales,
that we refer to as advanced commissions. These advanced commissions assist
our distributors with cost-of-lead acquisition and provide working capital. We
recover the loans from future commissions earned on premiums collected over the
period in which policies renew. The second quarter advanced commission
balance of $30.7 million is a decrease of $6.3 million from December 31, 2016
and a decrease of $5.0 million sequentially.
Cash and cash equivalents totaled $27.5 million at June 30, 2017, an increase of
$15.3 million from December 31, 2016 and an increase of $11.7 million
sequentially.
On May 5, 2017 the Company filed a Registration Statement on Form S-3,
effective May 19, 2017, to offer and sell, from time to time, up to $150 million of
any combination of debt securities, Class A Common Stock, Preferred Stock,
Warrants, Units or Purchase Contracts as described in the prospectus. Securities
may be sold in one or more classes or series and in amounts, at prices and on
terms that we will determine at the times of the offerings and we may offer the
securities independently or together in any combination for sale directly to
purchasers or through underwriters, dealers or agents to be designated at a future
date. We intend to use the net proceeds from the sale of the securities for general
corporate purposes, including potentially expanding existing businesses, acquiring
6
businesses and investing in other business opportunities. At June 30, 2017, the
Company had not sold any securities under this Registration Statement.
On July 17, 2017, subsequent to the quarter-end, the Company entered into a
Credit Agreement with SunTrust Bank. The Credit Agreement provides for a
$30.0 million revolving credit facility pursuant to which the Lender has agreed to
make revolving loans and issue letters of credit. The Credit Facility will be used
for general corporate purposes, including to fund ongoing working capital needs,
capital expenditures, and permitted acquisitions. The Credit Facility also provides
the Company with the right to request additional incremental term loans
thereunder up to an aggregate additional amount of $20 million, subject to the
satisfaction of certain additional conditions provided therein. Concurrent with the
execution of the Credit Agreement, the Company terminated its existing $15.0
million line of credit established on December 15, 2014.
We believe that both the shelf filing and the increased and extended revolving line
of credit will allow the Company the flexibility to access capital, if needed, and
will contribute to the generation of future shareholder value. We expect to
continue to generate cash flow from operations throughout 2017.
16.
On August 4, 2017, the Company filed a Form 10-Q for quarterly period ended
June 30, 2017 (the “2017 Q2 10-Q”) with the SEC, which provided the Company’s quarterly
financial results and position. The 2017 Q2 10-Q was signed by Defendants Southwell and
Hershberger. The 2017 Q2 10-Q also contained signed certifications pursuant to the Sarbanes-
Oxley Act of 2002 (“SOX”) by Defendants Southwell and Hershberger attesting to the accuracy
of financial reporting, the disclosure of any material changes to the Company’s internal controls
over financial reporting, and the disclosure of all fraud.
17.
The 2017 Q2 10-Q stated the following regarding the Company’s application for a
third-party insurance administrators license with the Florida Office of Insurance Regulation:
TPA Licensure
Many states have statutes that require the licensure of third-party insurance
administrators (“TPA”). The statutes and applicable regulations vary from state-
to-state with respect to the nature of the business activities that may require
licensure. Where the Company believes that statutes are unclear or open to
interpretation, it takes the prudent approach of applying for a TPA license.
Therefore, the Company applied for a TPA license with the Florida Office of
7
Insurance Regulation ("OIR"). In June 2017, the OIR denied the Company’s
application based on its determination that the Company had not yet provided all
information required to process the application. In June 2017, the Company
appealed the denial with the Florida Division of Administrative Hearings. A final
hearing on the matters has been scheduled for October 17-20, 2017, but the
Company is working with the OIR to reach a mutually agreeable resolution of the
matter prior to the hearing, including discussing whether the OIR will require the
Company to hold such a license at all.
18.
The statements referenced in ¶¶ 15-17 above were materially false and/or
misleading because they misrepresented and failed to disclose the following adverse facts
pertaining to the Company’s business, operational and financial results, which were known to
Defendants or recklessly disregarded by them. Specifically, Defendants made false and/or
misleading statements and/or failed to disclose that: (1) the Company’s application for a third-
party insurance administrators license with the Florida Office of Insurance Regulation was
denied due in part to material errors and omissions; (2) the Florida Office of Insurance
Regulation’s rejection of the Company’s application for a third-party insurance administrators
license could result in its losing licenses in the other states; and (3) as a result, the Company’s
public statements were materially false and misleading at all relevant times.
The Truth Emerges
19.
On September 11, 2017, SeekingAlpha.com published an article asserting that: (1)
in June 2017, the Company was rejected for a key insurance license in its home state of Florida,
as the regulator uncovered undisclosed legal actions against Health Insurance Innovations
insiders; (2) the Company warned the Florida regulator of the disastrous “domino effect” from
this rejection by which licensing denials will then spread to the other states in which Health
Insurance Innovations does business, stating in part:
8
Health Insurance Innovations: Penalties To Exceed $100 Million And
Undisclosed ‘Domino Effect’
Sep. 11, 2017 9:40 AM ET7 comments
by: Richard Pearson
Summary
• New data points: Fraud penalties expected to reach $100 million or more.
Other insurers required to cease doing business with HIIQ as part of their
fraud settlements.
• June 2017: HIIQ rejected for key insurance license in home state of
Florida as regulator uncovers undisclosed legal actions against HIIQ
insiders.
• HIIQ privately warns of disastrous “domino effect” spreading to other
states, causing additional loss of licenses. HIIQ makes no disclosure to
investors.
• Regulatory catalysts now approaching in October 2017. Insiders have
been publicly hyping the stock while simultaneously dumping $50 million
in shares.
• HIIQ is nearly identical to five of my past trades where Craig Hallum was
on the other side. Each one plunged by 80-100%. SEC investigations,
fraud suits, and delistings.
*****
From the Florida OIR:
9
*****
10
As shown, following its rejection for licensure as a 3rd party administrator in
Florida, HIIQ / HPIH wrote a letter of appeal to the Florida regulator dated June
16, 2017. In that letter, HIIQ warned that a rejection in Florida would comprise a
“reporting event”, obligating HIIQ to inform the other states in which it does
business. In HIIQ’s own words, this would then trigger a “domino effect” which
could result in its losing licenses in the other states where it does business. In
other words, according to HIIQ itself, the consequences of a regulatory rejection
in Florida will be catastrophic.
(Note that in HIIQ’s SEC filings, the name of HIIQ and its VIE “HPIH” (“Health
Plan Intermediaries Holdings”) are used interchangeably.)
20.
On this news, shares of the Company fell $6.55 per share, or almost 22%, from its
previous closing price to close at $23.35 per share on September 11, 2017, damaging investors.
21.
As a result of Defendants’ wrongful acts and omissions, and the precipitous
decline in the market value of the Company’s securities, Plaintiff and other Class members have
suffered significant losses and damages.
PLAINTIFF’S CLASS ACTION ALLEGATIONS
22.
Plaintiff brings this action as a class action pursuant to Federal Rule of Civil
Procedure 23(a) and (b)(3) on behalf of a Class, consisting of all those who purchased or
otherwise acquired the publicly traded securities of Health Insurance Innovations during the
Class Period (the “Class”) and were damaged upon the revelation of the alleged corrective
disclosure. Excluded from the Class are Defendants herein, the officers and directors of the
Company, at all relevant times, members of their immediate families and their legal
11
representatives, heirs, successors or assigns and any entity in which Defendants have or had a
controlling interest.
23.
The members of the Class are so numerous that joinder of all members is
impracticable. Throughout the Class Period, the Company’s securities were actively traded on
the NASDAQ. While the exact number of Class members is unknown to Plaintiff at this time and
can be ascertained only through appropriate discovery, Plaintiff believes that there are hundreds
or thousands of members in the proposed Class. Record owners and other members of the Class
may be identified from records maintained by the Company or its transfer agent and may be
notified of the pendency of this action by mail, using the form of notice similar to that
customarily used in securities class actions.
24.
Plaintiff’s claims are typical of the claims of the members of the Class as all
members of the Class are similarly affected by Defendants’ wrongful conduct in violation of
federal law that is complained of herein.
25.
Plaintiff will fairly and adequately protect the interests of the members of the
Class and has retained counsel competent and experienced in class and securities litigation.
Plaintiff has no interests antagonistic to or in conflict with those of the Class.
26.
Common questions of law and fact exist as to all members of the Class and
predominate over any questions solely affecting individual members of the Class. Among the
questions of law and fact common to the Class are:
(a)
whether Defendants’ acts as alleged violated the federal securities laws;
(b)
whether Defendants’ statements to the investing public during the Class Period
misrepresented material facts about the financial condition, business, operations,
and management of the Company;
12
(c)
whether Defendants’ statements to the investing public during the Class Period
omitted material facts necessary to make the statements made, in light of the
circumstances under which they were made, not misleading;
(d)
whether the Individual Defendants caused the Company to issue false and
misleading SEC filings and public statements during the Class Period;
(e)
whether Defendants acted knowingly or recklessly in issuing false and misleading
SEC filings and public statements during the Class Period;
(f)
whether the prices of the Company’s securities during the Class Period were
artificially inflated because of the Defendants’ conduct complained of herein; and
(g)
whether the members of the Class have sustained damages and, if so, what is the
proper measure of damages.
27.
A class action is superior to all other available methods for the fair and efficient
adjudication of this controversy since joinder of all members is impracticable. Furthermore, as
the damages suffered by individual Class members may be relatively small, the expense and
burden of individual litigation make it impossible for members of the Class to individually
redress the wrongs done to them. There will be no difficulty in the management of this action as
a class action.
28.
Plaintiff will rely, in part, upon the presumption of reliance established by the
fraud-on-the-market doctrine in that:
(a)
Defendants made public misrepresentations or failed to disclose material facts
during the Class Period;
(b)
the omissions and misrepresentations were material;
(c)
the Company’s securities are traded in efficient markets;
13
(d)
the Company’s securities were liquid and traded with moderate to heavy volume
during the Class Period;
(e)
the Company traded on the NASDAQ, and was covered by multiple analysts;
(f)
the misrepresentations and omissions alleged would tend to induce a reasonable
investor to misjudge the value of the Company’s securities; Plaintiff and members
of the Class purchased and/or sold the Company’s securities between the time the
Defendants failed to disclose or misrepresented material facts and the time the
true facts were disclosed, without knowledge of the omitted or misrepresented
facts; and
(g)
Unexpected material news about the Company was rapidly reflected in and
incorporated into the Company’s stock price during the Class Period.
29.
Based upon the foregoing, Plaintiff and the members of the Class are entitled to a
presumption of reliance upon the integrity of the market.
30.
Alternatively, Plaintiff and the members of the Class are entitled to the
presumption of reliance established by the Supreme Court in Affiliated Ute Citizens of the State
of Utah v. United States, 406 U.S. 128, 92 S. Ct. 2430 (1972), as Defendants omitted material
information in their Class Period statements in violation of a duty to disclose such information,
as detailed above.
COUNT I
Violation of Section 10(b) of The Exchange Act and Rule 10b-5
Against All Defendants
31.
Plaintiff repeats and realleges each and every allegation contained above as if
fully set forth herein.
14
32.
This Count is asserted against the Company and the Individual Defendants and is
based upon Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5 promulgated
thereunder by the SEC.
33.
During the Class Period, the Company and the Individual Defendants,
individually and in concert, directly or indirectly, disseminated or approved the false statements
specified above, which they knew or deliberately disregarded were misleading in that they
contained misrepresentations and failed to disclose material facts necessary in order to make the
statements made, in light of the circumstances under which they were made, not misleading.
34.
The Company and the Individual Defendants violated §10(b) of the 1934 Act and
Rule 10b-5 in that they: employed devices, schemes and artifices to defraud; made untrue
statements of material facts or omitted to state material facts necessary in order to make the
statements made, in light of the circumstances under which they were made, not misleading;
and/or engaged in acts, practices and a course of business that operated as a fraud or deceit upon
plaintiff and others similarly situated in connection with their purchases of the Company’s
securities during the Class Period.
35.
The Company and the Individual Defendants acted with scienter in that they knew
that the public documents and statements issued or disseminated in the name of the Company
were materially false and misleading; knew that such statements or documents would be issued
or disseminated to the investing public; and knowingly and substantially participated, or
acquiesced in the issuance or dissemination of such statements or documents as primary
violations of the securities laws. These defendants by virtue of their receipt of information
reflecting the true facts of the Company, their control over, and/or receipt and/or modification of
the Company’s allegedly materially misleading statements, and/or their associations with the
15
Company which made them privy to confidential proprietary information concerning the
Company, participated in the fraudulent scheme alleged herein.
36.
Individual Defendants, who are the senior officers and/or directors of the
Company, had actual knowledge of the material omissions and/or the falsity of the material
statements set forth above, and intended to deceive Plaintiff and the other members of the Class,
or, in the alternative, acted with reckless disregard for the truth when they failed to ascertain and
disclose the true facts in the statements made by them or other personnel of the Company to
members of the investing public, including Plaintiff and the Class.
37.
As a result of the foregoing, the market price of the Company’s securities was
artificially inflated during the Class Period. In ignorance of the falsity of the Company’s and the
Individual Defendants’ statements, Plaintiff and the other members of the Class relied on the
statements described above and/or the integrity of the market price of the Company’s securities
during the Class Period in purchasing the Company’s securities at prices that were artificially
inflated as a result of the Company’s and the Individual Defendants’ false and misleading
statements.
38.
Had Plaintiff and the other members of the Class been aware that the market price
of the Company’s securities had been artificially and falsely inflated by the Company’s and the
Individual Defendants’ misleading statements and by the material adverse information which the
Company’s and the Individual Defendants did not disclose, they would not have purchased the
Company’s securities at the artificially inflated prices that they did, or at all.
39.
As a result of the wrongful conduct alleged herein, Plaintiff and other members
of the Class have suffered damages in an amount to be established at trial.
16
40.
By reason of the foregoing, the Company and the Individual Defendants have
violated Section 10(b) of the 1934 Act and Rule 10b-5 promulgated thereunder and are liable to
the Plaintiff and the other members of the Class for substantial damages which they suffered in
connection with their purchases of the Company’s securities during the Class Period.
COUNT II
Violation of Section 20(a) of The Exchange Act
Against The Individual Defendants
41.
Plaintiff repeats and realleges each and every allegation contained in the
foregoing paragraphs as if fully set forth herein.
42.
During the Class Period, the Individual Defendants participated in the operation
and management of the Company, and conducted and participated, directly and indirectly, in the
conduct of the Company’s business affairs. Because of their senior positions, they knew the
adverse non-public information regarding the Company’s business practices.
43.
As officers and/or directors of a publicly owned company, the Individual
Defendants had a duty to disseminate accurate and truthful information with respect to the
Company’s financial condition and results of operations, and to correct promptly any public
statements issued by the Company which had become materially false or misleading.
44.
Because of their positions of control and authority as senior officers, the
Individual Defendants were able to, and did, control the contents of the various reports, press
releases and public filings which the Company disseminated in the marketplace during the Class
Period. Throughout the Class Period, the Individual Defendants exercised their power and
authority to cause the Company to engage in the wrongful acts complained of herein. The
Individual Defendants therefore, were “controlling persons” of the Company within the meaning
17
of Section 20(a) of the Exchange Act. In this capacity, they participated in the unlawful conduct
alleged which artificially inflated the market price of the Company’s securities.
45.
Each of the Individual Defendants, therefore, acted as a controlling person of the
Company. By reason of their senior management positions and/or being directors of the
Company, each of the Individual Defendants had the power to direct the actions of, and
exercised the same to cause, the Company to engage in the unlawful acts and conduct
complained of herein. Each of the Individual Defendants exercised control over the general
operations of the Company and possessed the power to control the specific activities which
comprise the primary violations about which Plaintiff and the other members of the Class
complain.
46.
By reason of the above conduct, the Individual Defendants are liable pursuant to
Section 20(a) of the Exchange Act for the violations committed by the Company.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff demands judgment against Defendants as follows:
A.
Determining that the instant action may be maintained as a class action under
Rule 23 of the Federal Rules of Civil Procedure, and certifying Plaintiff as the Class
representative;
B.
Requiring Defendants to pay damages sustained by Plaintiff and the Class by
reason of the acts and transactions alleged herein;
C.
Awarding Plaintiff and the other members of the Class prejudgment and post-
judgment interest, as well as their reasonable attorneys’ fees, expert fees and other costs; and
D.
Awarding such other and further relief as this Court may deem just and proper.
18
DEMAND FOR TRIAL BY JURY
Plaintiff hereby demands a trial by jury.
Dated: September 11, 2017
Respectfully submitted,
THE ROSEN LAW FIRM, P.A.
By: /s/Phillip Kim
Laurence M. Rosen, Esq. (LR 5733)
Phillip Kim, Esq. (PK 9384)
275 Madison Ave, 34th Floor
New York, NY 10016
Phone: (212) 686-1060
Fax: (212) 202-3827
Email: [email protected]
[email protected]
Counsel for Plaintiff
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_AM_FYcBD5gMZwczsrfZ | UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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YASEEN TRAYNOR, on behalf of himself and
all others similarly situated,
Plaintiffs,
CLASS ACTION COMPLAINT
v.
AND
DEMAND FOR JURY TRIAL
MUSICNOTES, INC.,
Defendant.
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INTRODUCTION
1.
Plaintiff YASEEN TRAYNOR, on behalf of himself and others similarly situated, asserts
the following claims against Defendant MUSICNOTES, INC. as follows.
2.
Plaintiff is a visually-impaired and legally blind person who requires screen-reading
software to read website content using his computer. Plaintiff uses the terms “blind” or
“visually-impaired” to refer to all people with visual impairments who meet the legal
definition of blindness in that they have a visual acuity with correction of less than or equal
to 20 x 200. Some blind people who meet this definition have limited vision. Others have
no vision.
3.
Based on a 2010 U.S. Census Bureau report, approximately 8.1 million people in the
United States are visually impaired, including 2.0 million who are blind, and according to
the American Foundation for the Blind’s 2015 report, approximately 400,000 visually
impaired persons live in the State of New York.
4.
Plaintiff brings this civil rights action against Defendant for its failure to design, construct,
maintain, and operate its website to be fully accessible to and independently usable by
Plaintiff and other blind or visually-impaired people. Defendant’s denial of full and equal
access to its website, and therefore denial of its goods and services offered thereby, is a
violation of Plaintiff’s rights under the Americans with Disabilities Act (“ADA”).
5.
Because Defendant’s website, www.musicnotes.com (the “Website” or “Defendant’s
website”), is not equally accessible to blind and visually-impaired consumers, it violates
the ADA. Plaintiff seeks a permanent injunction to cause a change in Defendant’s corporate
policies, practices, and procedures so that Defendant’s website will become and remain
accessible to blind and visually-impaired consumers.
JURISDICTION AND VENUE
6.
This Court has subject-matter jurisdiction over this action under 28 U.S.C. § 1331 and 42
U.S.C. § 12181, as Plaintiff’s claims arise under Title III of the ADA, 42 U.S.C. § 12181,
et seq., and 28 U.S.C. § 1332.
7.
This Court has supplemental jurisdiction under 28 U.S.C. § 1367 over Plaintiff’s New York
State Human Rights Law, N.Y. Exec. Law Article 15, (“NYSHRL”) and New York City
Human Rights Law, N.Y.C. Admin. Code § 8-101 et seq., (“NYCHRL”) claims.
8.
Venue is proper in this district under 28 U.S.C. §1391(b)(1) and (2) because Defendant
conducts and continues to conduct a substantial and significant amount of business in this
District. A substantial portion of the conduct complained of herein occurred in this District
because Plaintiff attempted, on a number of occasions, to utilize the subject Website within
this Judicial District.
9.
Defendant is subject to personal jurisdiction in this District. Defendant has been and is
committing the acts or omissions alleged herein in the Southern District of New York that
caused injury, and violated rights the ADA prescribes to Plaintiff and to other blind and
other visually-impaired consumers. A substantial part of the acts and omissions giving rise
to Plaintiff’s claims occurred in this District: on several separate occasions, Plaintiff has
been denied the full use and enjoyment of the facilities, goods and services offered to the
general public, on Defendant’s Website in New York County. These access barriers that
Plaintiff encountered have caused a denial of Plaintiff’s full and equal access multiple times
in the past, and now deter Plaintiff on a regular basis from accessing the Defendant’s
Website in the future.
10.
This Court is empowered to issue a declaratory judgment under 28 U.S.C. §§ 2201 and
2202.
THE PARTIES
11.
Plaintiff YASEEN TRAYNOR, at all relevant times, is a resident of Bronx, New York.
Plaintiff is a blind, visually-impaired handicapped person and a member of a protected
class of individuals under the ADA, under 42 U.S.C. § 12102(1)-(2), and the regulations
implementing the ADA set forth at 28 CFR §§ 36.101 et seq., the NYSHRL and NYCHRL.
12.
Defendant is and was at all relevant times a Wisconsin Corporation doing business in New
York.
13.
Defendant’s Website, and its facilities, goods, and services offered thereupon, is a public
accommodation within the definition of Title III of the ADA, 42 U.S.C. §12181.
NATURE OF ACTION
14.
The Internet has become a significant source of information, a portal, and a tool for
conducting business, doing everyday activities such as shopping, learning, banking,
researching, as well as many other activities for sighted, blind and visually-impaired
persons alike.
15.
In today’s tech-savvy world, blind and visually-impaired people have the ability to access
websites using keyboards in conjunction with screen access software that vocalizes the
visual information found on a computer screen or displays the content on a refreshable
Braille display. This technology is known as screen-reading software. Screen-reading
software is currently the only method a blind or visually-impaired person may
independently access the internet. Unless websites are designed to be read by screen-
reading software, blind and visually-impaired persons are unable to fully access websites,
and the information, products, goods and contained thereon.
16.
Blind and visually-impaired users of Windows operating system-enabled computers and
devices have several screen reading software programs available to them. Some of these
programs are available for purchase and other programs are available without the user
having to purchase the program separately. Job Access With Speech, otherwise known as
“JAWS” is currently the most popular, separately purchased and downloaded screen-
reading software program available for a Windows computer.
17.
For screen-reading software to function, the information on a website must be capable of
being rendered into text. If the website content is not capable of being rendered into text,
the blind or visually-impaired user is unable to access the same content available to sighted
users.
18.
The international website standards organization, the World Wide Web Consortium,
known throughout the world as W3C, has published version 2.1 of the Web Content
Accessibility Guidelines (“WCAG 2.1”). WCAG 2.1 are well-established guidelines for
making websites accessible to blind and visually-impaired people. These guidelines are
universally followed by most large business entities and government agencies to ensure
their websites are accessible.
19.
Non-compliant websites pose common access barriers to blind and visually-impaired
persons. Common barriers encountered by blind and visually impaired persons include, but
are not limited to, the following:
a. A text equivalent for every non-text element is not provided;
b. Title frames with text are not provided for identification and navigation;
c. Equivalent text is not provided when using scripts;
d. Forms with the same information and functionality as for sighted persons are not
provided;
e. Information about the meaning and structure of content is not conveyed by more
than the visual presentation of content;
f. Text cannot be resized without assistive technology up to 200% without losing
content or functionality;
g. If the content enforces a time limit, the user is not able to extend, adjust or disable
it;
h. Web pages do not have titles that describe the topic or purpose;
i. The purpose of each link cannot be determined from the link text alone or from the
link text and its programmatically determined link context;
j. One or more keyboard operable user interface lacks a mode of operation where the
keyboard focus indicator is discernible;
k. The default human language of each web page cannot be programmatically
determined;
l. When a component receives focus, it may initiate a change in context;
m. Changing the setting of a user interface component may automatically cause a
change of context where the user has not been advised before using the component;
n. Labels or instructions are not provided when content requires user input, which
include CAPTCHA prompts that require the user to verify that he or she is not a
robot;
o. In content which is implemented by using markup languages, elements do not have
complete start and end tags, elements are not nested according to their
specifications, elements may contain duplicate attributes, and/or any IDs are not
unique;
p. Inaccessible Portable Document Format (PDFs); and,
q. The name and role of all User Interface elements cannot be programmatically
determined; items that can be set by the user cannot be programmatically set; and/or
notification of changes to these items is not available to user agents, including
assistive technology.
STATEMENT OF FACTS
20.
Defendant is a sheet music retailer, and owns and operates www.musicnotes.com (its
“Website”), offering features which should allow all consumers to access the goods and
services and which Defendant ensures the delivery of such goods throughout the United
States, including New York State.
21.
Defendant’s Website offers products and services for online sale and general delivery to
the public. The Website offers features which ought to allow users to browse for items,
access navigation bar descriptions and prices, and avail consumers of the ability to peruse
the numerous items offered for sale.
22.
Plaintiff is a visually-impaired and legally blind person, who cannot use a computer
without the assistance of screen-reading software. Plaintiff is, however, a proficient JAWS
and NVDA screen-reader user and uses it to access the Internet. Plaintiff has visited the
Website on separate occasions using a screen-reader.
23.
On multiple occasions in March of 2019, Plaintiff visited Defendant’s website,
www.musicnotes.com, in an effort to purchase sheet music. Despite his efforts, however,
Plaintiff was denied the same shopping experience afforded to a sighted individual due to
the website’s lack of a variety of features and accommodations, which effectively barred
Plaintiff from being able to determine what specific products are offered for sale, browse
the site in general, and make any purchases.
24.
Among other things, the Website lacks prompting information necessary to allow Plaintiff,
who uses the JAWS and NVDA screen reading programs, to locate and narrow down a
specific field of desired products and price range. This omission was exacerbated by the
lack of alt. text, which is the invisible code embedded beneath a graphical image on a
website As a result of the missing alt. text, Plaintiff was unable to equally discover those
products offered.
25.
The Website also requires the use of a mouse to initiate and complete a transaction. Yet
Plaintiff cannot use a mouse because manipulating the mouse is a visual activity of moving
the mouse pointer from one visual spot on the page to another. Specifically, Plaintiff
attempted to establish an online profile, but was denied the ability to do so due to
descriptive errors which caused confusion regarding the information necessary to create a
profile.
26.
These access barriers effectively denied Plaintiff the ability to use and enjoy Defendant’s
website the same way sighted individuals do.
27.
It is, upon information and belief, Defendant’s policy and practice to deny Plaintiff, along
with other blind or visually-impaired users, access to Defendant’s website, and to therefore
specifically deny the goods and services that are offered to the general public. Due to
Defendant’s failure and refusal to remove access barriers to its website, Plaintiff and
visually-impaired persons have been and are still being denied equal access to Defendant’s
Website, and the numerous goods and services and benefits offered to the public through
the Website.
28.
More generally, while attempting to navigate the Website, Plaintiff encountered multiple
accessibility barriers for blind or visually-impaired people that include, but are not limited
to, the following:
a. Lack of Alternative Text (“alt-text”), or a text equivalent. Alt-text is an invisible
code embedded beneath a graphical image on a website. Web accessibility requires
that alt-text be coded with each picture so that screen-reading software can speak
the alt-text where a sighted user sees pictures, which includes CAPTCHA prompts.
Alt-text does not change the visual presentation, but instead a text box shows when
the mouse moves over the picture. The lack of alt-text on these graphics prevents
screen readers from accurately vocalizing a description of the graphics. As a result,
visually-impaired individuals are unable to determine what is on the website,
browse available products, and find information on promotions and related goods
and services available online.
b. Empty Links That Contain No Text causing the function or purpose of the link
to not be presented to the user. This can introduce confusion for keyboard and
screen-reader users;
c. Redundant Links where adjacent links go to the same URL address which results
in additional navigation and repetition for keyboard and screen-reader users; and
d. Linked Images Missing Alt-text, which causes problems if an image within a link
contains no text and that image does not provide alt-text. A screen reader then has
no content to present the user as to the function of the link, including information
contained in PDFs.
29.
Due to the inaccessibility of Defendant’s Website, blind and visually-impaired customers
such as Plaintiff, who need screen-readers, cannot fully and equally use or enjoy the
facilities, products, and services Defendant offers to the public on its Website. The access
barriers Plaintiff encountered have caused a denial of Plaintiff’s full and equal access in
the past, and now deter Plaintiff on a regular basis from visiting the Website, presently and
in the future.
30.
If the Website was equally accessible to all, Plaintiff could independently navigate the
Website and complete a desired transaction as sighted individuals do.
31.
Through his attempts to use the Website, Plaintiff has actual knowledge of the access
barriers that make these services inaccessible and independently unusable by blind and
visually-impaired people.
32.
Because simple compliance with the WCAG 2.1 Guidelines would provide Plaintiff and
other visually-impaired consumers with equal access to the Website, Plaintiff alleges that
Defendant has engaged in acts of intentional discrimination, including but not limited to
the following policies or practices:
a. Constructing and maintaining a website that is inaccessible to visually-impaired
individuals, including Plaintiff;
b. Failure to construct and maintain a website that is sufficiently intuitive so as to be
equally accessible to visually-impaired individuals, including Plaintiff; and,
c. Failing to take actions to correct these access barriers in the face of substantial harm
and discrimination to blind and visually-impaired consumers, such as Plaintiff, as
a member of a protected class.
33.
Defendant therefore uses standards, criteria or methods of administration that have the
effect of discriminating or perpetuating the discrimination of others, as alleged herein.
34.
The ADA expressly contemplates the injunctive relief that Plaintiff seeks in this action. In
relevant part, the ADA requires:
In the case of violations of . . . this title, injunctive relief shall include an order to alter
facilities to make such facilities readily accessible to and usable by individuals with
disabilities . . . Where appropriate, injunctive relief shall also include requiring the . . .
modification of a policy . . .
42 U.S.C. § 12188(a)(2).
35.
Because Defendant’s Website has never been equally accessible, and because Defendant
lacks a corporate policy that is reasonably calculated to cause its Website to become and
remain accessible, Plaintiff invokes 42 U.S.C. § 12188(a)(2) and seeks a permanent
injunction requiring Defendant to retain a qualified consultant acceptable to Plaintiff
(“Agreed Upon Consultant”) to assist Defendant to comply with WCAG 2.1 guidelines for
Defendant’s Website. Plaintiff seeks that this permanent injunction requires Defendant to
cooperate with the Agreed Upon Consultant to:
a. Train Defendant’s employees and agents who develop the Website on accessibility
compliance under the WCAG 2.1 guidelines;
b. Regularly check the accessibility of the Website under the WCAG 2.1 guidelines;
c. Regularly test user accessibility by blind or vision-impaired persons to ensure that
Defendant’s Website complies under the WCAG 2.1 guidelines; and,
d. Develop an accessibility policy that is clearly disclosed on Defendant’s Websites,
with contact information for users to report accessibility-related problems.
36.
Although Defendant may currently have centralized policies regarding maintaining and
operating its Website, Defendant lacks a plan and policy reasonably calculated to make
them fully and equally accessible to, and independently usable by, blind and other visually-
impaired consumers.
37.
Defendant has, upon information and belief, invested substantial sums in developing and
maintaining their Website and has generated significant revenue from the Website. These
amounts are far greater than the associated cost of making their Website equally accessible
to visually impaired customers.
38.
Without injunctive relief, Plaintiff and other visually-impaired consumers will continue to
be unable to independently use the Website, violating their rights.
CLASS ACTION ALLEGATIONS
39.
Plaintiff, on behalf of himself and all others similarly situated, seeks to certify a nationwide
class under Fed. R. Civ. P. 23(a) and 23(b)(2): all legally blind individuals in the United
States who have attempted to access Defendant’s Website and as a result have been denied
access to the equal enjoyment of goods and services, during the relevant statutory period.
40.
Plaintiff, on behalf of himself and all others similarly situated, seeks to certify a New York
State subclass under Fed. R. Civ. P. 23(a) and 23(b)(2): all legally blind individuals in the
State of New York who have attempted to access Defendant’s Website and as a result have
been denied access to the equal enjoyment of those services, during the relevant statutory
period.
41.
Plaintiff, on behalf of himself and all others similarly situated, seeks to certify a New York
City subclass under Fed. R. Civ. P. 23(a) and 23(b)(2): all legally blind individuals in the
City of New York who have attempted to access Defendant’s Website and as a result have
been denied access to the equal enjoyment of goods and services offered, during the
relevant statutory period.
42.
Common questions of law and fact exist amongst Class, including:
a. Whether Defendant’s Website is a “public accommodation” under the ADA;
b. Whether Defendant’s Website is a “place or provider of public accommodation”
under the NYSHRL or NYCHRL;
c. Whether Defendant’s Website denies the full and equal enjoyment of its products,
services, facilities, privileges, advantages, or accommodations to people with visual
disabilities, violating the ADA; and
d. Whether Defendant’s Website denies the full and equal enjoyment of its products,
services, facilities, privileges, advantages, or accommodations to people with visual
disabilities, violating the NYSHRL or NYCHRL.
43.
Plaintiff’s claims are typical of the Class. The Class, similarly to the Plaintiff, are severely
visually impaired or otherwise blind, and claim that Defendant has violated the ADA,
NYSYRHL or NYCHRL by failing to update or remove access barriers on its Website so
either can be independently accessible to the Class.
44.
Plaintiff will fairly and adequately represent and protect the interests of the Class Members
because Plaintiff has retained and is represented by counsel competent and experienced in
complex class action litigation, and because Plaintiff has no interests antagonistic to the
Class Members. Class certification of the claims is appropriate under Fed. R. Civ. P.
23(b)(2) because Defendant has acted or refused to act on grounds generally applicable to
the Class, making appropriate both declaratory and injunctive relief with respect to Plaintiff
and the Class as a whole.
45.
Alternatively, class certification is appropriate under Fed. R. Civ. P. 23(b)(3) because fact
and legal questions common to Class Members predominate over questions affecting only
individual Class Members, and because a class action is superior to other available methods
for the fair and efficient adjudication of this litigation.
46.
Judicial economy will be served by maintaining this lawsuit as a class action in that it is
likely to avoid the burden that would be otherwise placed upon the judicial system by the
filing of numerous similar suits by people with visual disabilities throughout the United
States.
FIRST CAUSE OF ACTION
VIOLATIONS OF THE ADA, 42 U.S.C. § 12181 et seq.
47.
Plaintiff, on behalf of himself and the Class Members, repeats and realleges every
allegation of the preceding paragraphs as if fully set forth herein.
48.
Section 302(a) of Title III of the ADA, 42 U.S.C. § 12101 et seq., provides:
No individual shall be discriminated against on the basis of disability in the full and equal
enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of
any place of public accommodation by any person who owns, leases (or leases to), or
operates a place of public accommodation.
42 U.S.C. § 12182(a).
49.
Defendant’s Website is a public accommodation within the definition of Title III of the
ADA, 42 U.S.C. § 12181(7). The Website is a service that is offered to the general public,
and as such, must be equally accessible to all potential consumers.
50.
Under Section 302(b)(1) of Title III of the ADA, it is unlawful discrimination to deny
individuals with disabilities the opportunity to participate in or benefit from the products,
services, facilities, privileges, advantages, or accommodations of an entity. 42 U.S.C. §
12182(b)(1)(A)(i).
51.
Under Section 302(b)(1) of Title III of the ADA, it is unlawful discrimination to deny
individuals with disabilities an opportunity to participate in or benefit from the products,
services, facilities, privileges, advantages, or accommodation, which is equal to the
opportunities afforded to other individuals. 42 U.S.C. § 12182(b)(1)(A)(ii).
52.
Under Section 302(b)(2) of Title III of the ADA, unlawful discrimination also includes,
among other things:
[A] failure to make reasonable modifications in policies, practices, or procedures, when
such modifications are necessary to afford such goods, services, facilities, privileges,
advantages, or accommodations to individuals with disabilities, unless the entity can
demonstrate that making such modifications would fundamentally alter the nature of such
goods, services, facilities, privileges, advantages or accommodations; and a failure to take
such steps as may be necessary to ensure that no individual with a disability is excluded,
denied services, segregated or otherwise treated differently than other individuals because
of the absence of auxiliary aids and services, unless the entity can demonstrate that taking
such steps would fundamentally alter the nature of the good, service, facility, privilege,
advantage, or accommodation being offered or would result in an undue burden.
42 U.S.C. § 12182(b)(2)(A)(ii)-(iii).
53.
The acts alleged herein constitute violations of Title III of the ADA, and the regulations
promulgated thereunder. Plaintiff, who is a member of a protected class of persons under
the ADA, has a physical disability that substantially limits the major life activity of sight
within the meaning of 42 U.S.C. §§ 12102(1)(A)-(2)(A). Furthermore, Plaintiff has been
denied full and equal access to the Website, has not been provided services that are
provided to other patrons who are not disabled, and has been provided services that are
inferior to the services provided to non-disabled persons. Defendant has failed to take any
prompt and equitable steps to remedy its discriminatory conduct. These violations are
ongoing.
54.
Under 42 U.S.C. § 12188 and the remedies, procedures, and rights set forth and
incorporated therein, Plaintiff, requests relief as set forth below.
SECOND CAUSE OF ACTION
VIOLATIONS OF THE NYSHRL
55.
Plaintiff, on behalf of himself and the New York State Sub-Class Members, repeats and
realleges every allegation of the preceding paragraphs as if fully set forth herein.
56.
N.Y. Exec. Law § 296(2)(a) provides that it is “an unlawful discriminatory practice for any
person, being the owner, lessee, proprietor, manager, superintendent, agent or employee of
any place of public accommodation . . . because of the . . . disability of any person, directly
or indirectly, to refuse, withhold from or deny to such person any of the accommodations,
advantages, facilities or privileges thereof.”
57.
Defendant and Defendant’s Website, because of their sale of goods to the general public,
constitute sales establishments and public accommodations within the definition of N.Y.
Exec. Law § 292(9). Defendant’s Website is a service, privilege or advantage of Defendant.
58.
Defendant is subject to New York Human Rights Law because it owns and operates its
Website. Defendant is a person within the meaning of N.Y. Exec. Law § 292(1).
59.
Defendant is violating N.Y. Exec. Law § 296(2)(a) in refusing to update or remove access
barriers to its Website, causing its Website to be completely inaccessible to the blind. This
inaccessibility denies blind patrons full and equal access to the facilities, services that
Defendant makes available to the non-disabled public.
60.
Under N.Y. Exec. Law § 296(2)(c)(i), unlawful discriminatory practice includes, among
other things, “a refusal to make reasonable modifications in policies, practices, or
procedures, when such modifications are necessary to afford facilities, privileges,
advantages or accommodations to individuals with disabilities, unless such person can
demonstrate that making such modifications would fundamentally alter the nature of such
facilities, privileges, advantages or accommodations being offered or would result in an
undue burden".
61.
Under N.Y. Exec. Law § 296(2)(c)(ii), unlawful discriminatory practice also includes, “a
refusal to take such steps as may be necessary to ensure that no individual with a disability
is excluded or denied services because of the absence of auxiliary aids and services, unless
such person can demonstrate that taking such steps would fundamentally alter the nature
of the facility, privilege, advantage or accommodation being offered or would result in an
undue burden.”
62.
Readily available, well-established guidelines exist on the Internet for making websites
accessible to the blind and visually impaired. These guidelines have been followed by other
large business entities and government agencies in making their website accessible,
including but not limited to: adding alt-text to graphics and ensuring that all functions can
be performed using a keyboard. Incorporating the basic components to make its Website
accessible would neither fundamentally alter the nature of Defendant’s business nor result
in an undue burden to Defendant.
63.
Defendant’s actions constitute willful intentional discrimination against the class on the
basis of a disability in violation of the NYSHRL, N.Y. Exec. Law § 296(2) in that
Defendant has:
a. constructed and maintained a website that is inaccessible to blind class members
with knowledge of the discrimination; and/or
b. constructed and maintained a website that is sufficiently intuitive and/or obvious
that is inaccessible to blind class members; and/or
c. failed to take actions to correct these access barriers in the face of substantial harm
and discrimination to blind class members.
64.
Defendant has failed to take any prompt and equitable steps to remedy their discriminatory
conduct. These violations are ongoing.
65.
Defendant discriminates, and will continue in the future to discriminate against Plaintiff
and New York State Sub-Class Members on the basis of disability in the full and equal
enjoyment of the products, services, facilities, privileges, advantages, accommodations
and/or opportunities of Defendant’s Website under § 296(2) et seq. and/or its
implementing regulations. Unless the Court enjoins Defendant from continuing to engage
in these unlawful practices, Plaintiff and the Sub-Class Members will continue to suffer
irreparable harm.
66.
Defendant’s actions were and are in violation of New York State Human Rights Law and
therefore Plaintiff invokes his right to injunctive relief to remedy the discrimination.
67.
Plaintiff is also entitled to compensatory damages, as well as civil penalties and fines under
N.Y. Exec. Law § 297(4)(c) et seq. for each and every offense.
68.
Plaintiff is also entitled to reasonable attorneys’ fees and costs.
69.
Under N.Y. Exec. Law § 297 and the remedies, procedures, and rights set forth and
incorporated therein Plaintiff prays for judgment as set forth below.
THIRD CAUSE OF ACTION
VIOLATION OF THE NEW YORK STATE CIVIL RIGHTS LAW
70.
Plaintiff, on behalf of himself and the New York State Sub-Class Members, repeats and
realleges every allegation of the preceding paragraphs as if fully set forth herein.
71.
Plaintiff served notice thereof upon the attorney general as required by N.Y. Civil Rights
Law § 41.
72.
N.Y. Civil Rights Law § 40 provides that “all persons within the jurisdiction of this state
shall be entitled to the full and equal accommodations, advantages, facilities and privileges
of any places of public accommodations, resort or amusement, subject only to the
conditions and limitations established by law and applicable alike to all persons. No
persons, being the owner, lessee, proprietor, manager, superintendent, agent, or employee
of any such place shall directly or indirectly refuse, withhold from, or deny to any person
any of the accommodations, advantages, facilities and privileges thereof . . .”
73.
N.Y. Civil Rights Law § 40-c(2) provides that “no person because of . . . disability, as such
term is defined in section two hundred ninety-two of executive law, be subjected to any
discrimination in his or her civil rights, or to any harassment, as defined in section 240.25 of
the penal law, in the exercise thereof, by any other person or by any firm, corporation or
institution, or by the state or any agency or subdivision.”
74.
Defendant’s Website is a service, privilege or advantage of Defendant and its Website
which offers such goods and services to the general public is required to be equally
accessible to all.
75.
Defendant is subject to New York Civil Rights Law because it owns and operates their
Website, and Defendant is a person within the meaning of N.Y. Civil Law § 40-c(2).
76.
Defendant is violating N.Y. Civil Rights Law § 40-c(2) in refusing to update or remove
access barriers to its Website, causing its Website and the goods and services integrated
with such Website to be completely inaccessible to the blind. This inaccessibility denies
blind patrons full and equal access to the facilities, goods and services that Defendant
makes available to the non-disabled public.
77.
N.Y. Civil Rights Law § 41 states that “any corporation which shall violate any of the
provisions of sections forty, forty-a, forty-b or forty-two . . . shall for each and every
violation thereof be liable to a penalty of not less than one hundred dollars nor more than
five hundred dollars, to be recovered by the person aggrieved thereby . . .”
78.
Under NY Civil Rights Law § 40-d, “any person who shall violate any of the provisions of
the foregoing section, or subdivision three of section 240.30 or section 240.31 of the penal
law, or who shall aid or incite the violation of any of said provisions shall for each and
every violation thereof be liable to a penalty of not less than one hundred dollars nor more
than five hundred dollars, to be recovered by the person aggrieved thereby in any court of
competent jurisdiction in the county in which the defendant shall reside ...”
79.
Defendant has failed to take any prompt and equitable steps to remedy its discriminatory
conduct. These violations are ongoing.
80.
Defendant discriminates, and will continue in the future to discriminate against Plaintiff
and New York State Sub-Class Members on the basis of disability are being directly or
indirectly refused, withheld from, or denied the accommodations, advantages, facilities and
privileges thereof in § 40 et seq. and/or its implementing regulations.
81.
Plaintiff is entitled to compensatory damages of five hundred dollars per instance, as well
as civil penalties and fines under N.Y. Civil Law § 40 et seq. for each and every offense.
FOURTH CAUSE OF ACTION
VIOLATIONS OF THE NYCHRL
82.
Plaintiff, on behalf of himself and the New York City Sub-Class Members, repeats and
realleges every allegation of the preceding paragraphs as if fully set forth herein.
83.
N.Y.C. Administrative Code § 8-107(4)(a) provides that “It shall be an unlawful
discriminatory practice for any person, being the owner, lessee, proprietor, manager,
superintendent, agent or employee of any place or provider of public accommodation,
because of . . . disability . . . directly or indirectly, to refuse, withhold from or deny to such
person, any of the accommodations, advantages, facilities or privileges thereof.”
84.
Defendant’s Website is a sales establishment and public accommodation within the
definition of N.Y.C. Admin. Code § 8-102(9).
85.
Defendant is subject to NYCHRL because it owns and operates its Website, making it a
person within the meaning of N.Y.C. Admin. Code § 8-102(1).
86.
Defendant is violating N.Y.C. Administrative Code § 8-107(4)(a) in refusing to update or
remove access barriers to Website, causing its Website and the services integrated with
such Website to be completely inaccessible to the blind. This inaccessibility denies blind
patrons full and equal access to the facilities, products, and services that Defendant makes
available to the non-disabled public.
87.
Defendant is required to “make reasonable accommodation to the needs of persons with
disabilities . . . any person prohibited by the provisions of [§ 8-107 et seq.] from
discriminating on the basis of disability shall make reasonable accommodation to enable a
person with a disability to . . . enjoy the right or rights in question provided that the
disability is known or should have been known by the covered entity.” N.Y.C. Admin.
Code § 8-107(15)(a).
88.
Defendant’s actions constitute willful intentional discrimination against the Sub-Class on
the basis of a disability in violation of the N.Y.C. Administrative Code § 8-107(4)(a) and
§ 8-107(15)(a) in that Defendant has:
a. constructed and maintained a website that is inaccessible to blind class members
with knowledge of the discrimination; and/or
b. constructed and maintained a website that is sufficiently intuitive and/or obvious
that is inaccessible to blind class members; and/or
c. failed to take actions to correct these access barriers in the face of substantial harm
and discrimination to blind class members.
89.
Defendant has failed to take any prompt and equitable steps to remedy their discriminatory
conduct. These violations are ongoing.
90.
As such, Defendant discriminates, and will continue in the future to discriminate against
Plaintiff and members of the proposed class and subclass on the basis of disability in the
full and equal enjoyment of the products, services, facilities, privileges, advantages,
accommodations and/or opportunities of its Website under § 8-107(4)(a) and/or its
implementing regulations. Unless the Court enjoins Defendant from continuing to engage
in these unlawful practices, Plaintiff and members of the class will continue to suffer
irreparable harm.
91.
Defendant’s actions were and are in violation of the NYCHRL and therefore Plaintiff
invokes his right to injunctive relief to remedy the discrimination.
92.
Plaintiff is also entitled to compensatory damages, as well as civil penalties and fines under
N.Y.C. Administrative Code § 8-120(8) and § 8-126(a) for each offense as well as punitive
damages pursuant to § 8-502.
93.
Plaintiff is also entitled to reasonable attorneys’ fees and costs.
94.
Under N.Y.C. Administrative Code § 8-120 and § 8-126 and the remedies, procedures, and
rights set forth and incorporated therein Plaintiff prays for judgment as set forth below.
FIFTH CAUSE OF ACTION
DECLARATORY RELIEF
95.
Plaintiff, on behalf of himself and the Class and New York State and City Sub-Classes
Members, repeats and realleges every allegation of the preceding paragraphs as if fully set
forth herein.
96.
An actual controversy has arisen and now exists between the parties in that Plaintiff
contends, and is informed and believes that Defendant denies, that its Website contains
access barriers denying blind customers the full and equal access to the products, services
and facilities of its Website, which Defendant owns, operations and controls, fails to
comply with applicable laws including, but not limited to, Title III of the Americans with
Disabilities Act, 42 U.S.C. §§ 12182, et seq., N.Y. Exec. Law § 296, et seq., and N.Y.C.
Admin. Code § 8-107, et seq. prohibiting discrimination against the blind.
97.
A judicial declaration is necessary and appropriate at this time in order that each of the
parties may know their respective rights and duties and act accordingly.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff respectfully requests this Court grant the following relief:
a. A preliminary and permanent injunction to prohibit Defendant from violating the
Americans with Disabilities Act, 42 U.S.C. §§ 12182, et seq., N.Y. Exec. Law § 296, et
seq., N.Y.C. Administrative Code § 8-107, et seq., and the laws of New York;
b. A preliminary and permanent injunction requiring Defendant to take all the steps necessary
to make its Website into full compliance with the requirements set forth in the ADA, and
its implementing regulations, so that the Website is readily accessible to and usable by
blind individuals;
c. A declaration that Defendant owns, maintains and/or operates its Website in a manner that
discriminates against the blind and which fails to provide access for persons with
disabilities as required by Americans with Disabilities Act, 42 U.S.C. §§ 12182, et seq.,
N.Y. Exec. Law § 296, et seq., N.Y.C. Administrative Code § 8-107, et seq., and the laws
of New York;
d. An order certifying the Class and Sub-Classes under Fed. R. Civ. P. 23(a) & (b)(2) and/or
(b)(3), appointing Plaintiff as Class Representative, and his attorneys as Class Counsel;
e. Compensatory damages in an amount to be determined by proof, including all applicable
statutory and punitive damages and fines, to Plaintiff and the proposed class and subclasses
for violations of their civil rights under New York State Human Rights Law and City Law;
f. Pre- and post-judgment interest;
g. An award of costs and expenses of this action together with reasonable attorneys’ and
expert fees; and
h. Such other and further relief as this Court deems just and proper.
DEMAND FOR TRIAL BY JURY
Pursuant to Fed. R. Civ. P. 38(b), Plaintiff demands a trial by jury on all questions of fact
the Complaint raises.
Dated: Hackensack, New Jersey
/s/ Dov Mittelman
April 11, 2019
STEIN SAKS, PLLC
By: Dov Mittelman
Dov Mittelman, Esq.
[email protected]
285 Passaic Street
Hackensack, NJ 07601
Tel: (201) 282-6500
Fax: (201) 282-6501
ATTORNEYS FOR PLAINTIFF
| civil rights, immigration, family |
29asD4cBD5gMZwczHNoe | IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION
1:13-cv-3521-CAP
Civil Action No.
JURY TRIAL DEMANDED
COLLECTIVE CERTIFICATION
SOUGHT
WAYNE WILLIAMS, on behalf of
himself and all others similarly situated,
Plaintiff,
v.
PROTECT SECURITY, LLC.
Defendant.
__________________________________
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COMPLAINT FOR DAMAGES
COMES NOW Plaintiff Wayne Williams (“Plaintiff” or “Williams”), on
behalf of himself and all others similarly situated, and files this lawsuit against
Defendant Protect Security, LLC (“Defendant” or “Protect Security”), and shows
the following:
I.
Nature of Complaint
1.
Plaintiff brings this action to obtain full and complete relief and to redress
the unlawful employment practices described herein. Plaintiff brings this action as
the representative party for all similarly situated employees of Defendant.
2.
This action seeks declaratory relief, along with liquidated and actual
damages, attorney’s fees and costs for Defendant’s failure to pay federally
mandated overtime wages to Plaintiff and similarly situated individuals in violation
of the Fair Labor Standards Act of 1938, as amended, 29 U.S.C. §201 et seq.
(hereinafter the “FLSA”).
II.
Jurisdiction and Venue
3.
The jurisdiction of this Court is invoked pursuant to 29 U.S.C. § 216(b) and
28 U.S.C. § 1331.
4.
Defendant Protect Security, LLC is a Georgia corporation and resides in this
district. Defendant does business in and is engaged in commerce in the State of
Georgia. Venue is proper in this district pursuant to 29 U.S.C. § 1391(b) because
Defendant resides in this district and a substantial part of the events and omissions
that give rise to Plaintiff’s claims occurred in this district.
III.
Parties and Facts
5.
Plaintiff is a resident of the State of Georgia.
6.
Plaintiff has been employed by Defendant since September 2008.
7.
During the last three years, Plaintiff has been an “employee” of Defendant,
as that term has been defined by the FLSA, 29 U.S.C.S. § 201 et seq., 29 U.S.C. §
203(e).
8.
During the last three years, Plaintiff has been employed by Defendant as a
non-exempt security officer performing security services at apartment complexes.
9.
During the last three years, Plaintiff worked an amount of time that was
more than forty (40) hours in given workweeks and was not paid the overtime
wage differential for all hours worked over (40) in such weeks.
10.
Defendant is a private employer engaged in interstate commerce, and its
gross revenues exceed $500,000 per year.
11.
During the last three years, Defendant suffered or permitted Plaintiff to work
in excess of (40) hours in given workweeks without receiving overtime
compensation.
12.
During the last three years, Defendant maintained a policy of misclassifying
Plaintiff and those similarly situated to him as “independent contractors.”
13.
During the last three years, Plaintiff’s job duties and the performance
thereof, along with his hours worked were controlled by Defendant.
14.
During the last three years, Plaintiff had absolutely no opportunity for profit
and loss in his employment with Defendant, as he was paid an hourly wage for
work performed and he did not perform any managerial tasks.
15.
During the last three years, Defendant required Plaintiff to wear a company
uniform.
16.
The labor involved in Plaintiff performing the job of an unarmed security
officer at apartment complexes does not require specialized skill.
17.
During the last three years of his employment with Defendant, Plaintiff has
been economically dependent on Defendant.
18.
During the last three years, while employed by Defendant as a security
officer, Plaintiff worked in excess of (40) hours in a number of workweeks.
19.
Defendant is an “employer” within the definition of the FLSA, 29 U.S.C.
§203(d).
20.
Defendant is governed by and subject to the FLSA, 29 U.S.C. §204 and
§207.
21.
During the last three years, Plaintiff was paid an hourly rate for all hours
worked, without overtime compensation calculated at one and one-times his
regular rate of pay for hours he worked in excess of (40) hours in given
workweeks.
IV. Collective Action Allegations
22.
Plaintiff brings Count I of this Complaint on behalf of himself and all other
similarly situated individuals pursuant to 29 U.S.C. § 216(b). Plaintiff and the
similarly situated individuals are individuals who, at any time during the last three
years, have been employed by Defendant as “security officers,” and whose primary
duty includes providing security services.
23.
During the last three years, Plaintiff and the Collective Class routinely
worked in excess of (40) hours per workweek without receiving overtime
compensation for hours they worked over 40 hours in given work weeks while
performing the duties of security officers.
24.
During the last three years, Defendant was aware that Plaintiff and the
Collective Class were working in excess of 40 hours in given workweeks without
receiving overtime compensation.
25.
During the last three years, Defendant maintained a policy of misclassifying
Plaintiff and members of the Collective Class as “independent contractors,” and
failed to pay them overtime compensation, calculated at one and one-half times
their regular rate of pay for hours they worked in excess of (40) in given
workweeks.
26.
During the last three years, the primary duty of Plaintiff and the Collective
Class was the performance of non-exempt work, specifically security services.
27.
During the last three years, Defendant paid Plaintiff and the Collective Class
on an hourly basis, and failed to pay the employees overtime compensation,
calculated at one and one-half times their regular rate of pay, for hours worked in
excess of (40) in given workweeks.
28.
During the last three years, while being paid on an hourly basis, Plaintiff and
the Collective Class regularly worked in excess of 40 hours in given work weeks,
without receiving overtime compensation, calculated at one and one-half times
their regular rate, for hours worked in excess of 40 hours in such weeks.
29.
Plaintiff and the Collective Class are entitled to overtime pay for the hours
they worked over (40) in given workweeks. Defendant’s practices violate the
provisions of the FLSA, 29 U.S.C. § 201, et seq. including but not limited to 29
U.S.C. § 207. As a result of Defendant’s unlawful practices, Plaintiff and the
Collective Class have suffered lost wages.
30.
During the last three years, Plaintiff’s and the Collective Class’ job duties
and the performance of their duties, along with their hours worked were controlled
by Defendant.
31.
During the last three years, Plaintiff and the Collective Class had absolutely
no opportunity for profit and loss in their employment with Defendant, as they
were paid an hourly wage for work performed.
32.
During the last three years, Defendant required Plaintiff and the Collective
Class to wear a company uniform.
33.
The labor involved in Plaintiff’s and the Collective Class’ providing security
services for Defendant does not require specialized skill.
Count I
Violation of the Overtime Wage Requirement of
the Fair Labor Standards Act (Plaintiff and the Collective Class)
34.
Plaintiff repeats and re-alleges each and every allegation contained in the
preceding paragraphs of this Complaint with the same force and effect as if set
forth herein.
35.
Defendant has violated the FLSA, 29 U.S.C. § 201, et seq. including but not
limited to 29 U.S.C. § 207, by failing to pay overtime wages for hours Plaintiff and
the Collective Class worked in excess of (40) hours in given workweeks.
36.
The FLSA, 29 U.S.C. § 207, requires employers to pay employees one and
one-half times the regular rate of pay for all hours worked in excess of (40) hours
in a workweek.
37.
Defendant suffered and permitted Plaintiff and the Collective Class to
routinely work more than (40) hours per week without overtime compensation.
38.
Defendant’s actions, policies and/or practices as described above violate the
FLSA’s overtime requirement by regularly and repeatedly failing to compensate
Plaintiff and the Collective Class at the required overtime rate.
39.
Defendant knew, or showed reckless disregard for the fact that Defendant
failed to pay Plaintiff and the Collective Class overtime compensation in violation
of the FLSA.
40.
Defendant failed to accurately report, record and/or preserve records of
hours worked by Plaintiff and the Collective Class, and thus has failed to make,
keep and preserve records with respect to each of their employees sufficient to
determine their wages, hours and other conditions and practices of employment, in
violation of the FLSA.
41.
Plaintiff and the Collective Class were subject to the same unlawful policy
of Defendant, i.e. Defendant misclassifying Plaintiff and the Collective Class as
“independent contractors” and failing to pay them overtime compensation
calculated at one and one-half times their regular rate for hours worked in excess
of (40) in given workweeks.
42.
Defendant’s violations of the FLSA were willful and in bad faith.
43.
Pursuant to the FLSA, 29 U.S.C. § 216, Plaintiff and the Collective Class are
entitled to recover the unpaid overtime wage differential, liquidated damages in an
equal amount to unpaid overtime, attorneys’ fees, and the costs of this litigation
incurred in connection with these claims.
Prayer for Relief
WHEREFORE, Plaintiff respectfully requests that this Court:
(A)
Grant Plaintiff a trial by jury as to all triable issues of fact;
(B)
Enter judgment against Defendant and awarding Plaintiff unpaid
wages pursuant to the FLSA, 29 U.S.C. §§ 206(d), 207, and 216,
liquidated damages as provided by 29 U.S.C. § 216, pre-judgment
interest on unpaid wages, court costs, expert witness fees, and
reasonable attorneys’ fees pursuant to 29 U.S.C. § 216, and all other
remedies allowed under the FLSA; and,
(C)
Grant declaratory judgment declaring that Plaintiff’s rights have been
violated and that Defendant willfully violated the FLSA;
(D)
Grant conditional certification and provide notice of this action to all
similarly situated individuals;
(E)
Grant Plaintiff leave to add additional state law claims if necessary;
and
(F)
Award Plaintiff such further and additional relief as may be just and
appropriate.
This 24th day of October, 2013.
BARRETT & FARAHANY, LLP
/s/ V. Severin Roberts
Amanda A. Farahany
Georgia Bar No. 646135
Benjamin F. Barrett
Georgia Bar No. 039586
V. Severin Roberts
Georgia Bar No. 940504
Attorneys for Plaintiff Wayne Williams
1100 Peachtree Street
Suite 500
Atlanta, GA 30309
(404) 214-0120
(404) 214-0125 facsimile
| employment & labor |
2rIfC4cBD5gMZwcz4DJ1 | IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Civil Action No. 1:21-1554
SPENCER KONTNIK,
for himself and other
similarly situated individuals,
Plaintiff,
v.
LexVid Services, Inc.,
Defendant.
__________________________________________________________________
CLASS ACTION COMPLAINT FOR DECLARATORY AND INJUNCTIVE
RELIEF UNDER THE AMERICANS WITH DISABILITIES ACT
__________________________________________________________________
I. INTRODUCTION
1.
Attorneys licensed in 46 states are subject to mandatory Continuing
Legal Education (CLE) requirements as a condition of maintaining their licenses.
At least in part because of that mandated patronage, providing CLE courses
accepted by various state bars is a thriving business, and has attracted many
entrants, including Defendant.
2.
Many of those courses, including all or virtually all of Defendant’s
courses, are offered online, either live in real time or recorded. Because of
1
convenience and flexibility, the online format is attractive to many attorneys.
Online offerings are generally less expensive than in-person CLE courses.
3.
Plaintiff Spencer Kontnik has a significant hearing loss, as do many
other attorneys, and he is unable to fully understand and benefit from online CLE
courses using the online audio. Kontnik requires captioning, in which the spoken
material is put into written form displayed in synch with the oral presentation.
4.
Defendant does not offer captioning, and therefore denies Kontnik and
all members of the putative class the benefit of Defendant’s course offerings.
5.
As is set forth in this Complaint, the Americans with Disabilities Act
(ADA) requires CLE providers to make those accommodations available. The
Complaint seeks 1) a declaratory judgment stating that Defendant must provide
those accommodations, 2) a nationwide injunction requiring Defendant to offer
those accommodations to Kontnik and to any other members of the putative class
who wish to take Defendant’s CLE courses, and to publicize the availability of
those accommodation, and 3) for attorneys’ fees and litigation costs and expenses.
II. PARTIES
6.
Plaintiff Spencer Kontnik is an attorney licensed in Colorado and a
resident of Denver. He is a principal in the Denver firm of Kontnik | Cohen
specializing in employment and disability-rights litigation. He graduated from the
2
University of Denver Sturm College of Law in 2014, and received a bachelor’s
degree from the University of Colorado in 2010.
5.
Defendant LexVid Services, Inc., is a Delaware corporation
headquartered in San Diego, California, offering CLE courses under the name
LexVid, https://www.lexvid.com/. LexVid is an approved Colorado CLE provider.
III. JURISDICTION AND VENUE
6.
This Court has jurisdiction over the subject matter of this case
pursuant to 28 U.S.C. § 1331 because the claims are made under the federal
Americans with Disabilities Act, 42 U.S.C. § 12101 et seq., and specifically 42
U.S.C. § 12189, which applies to any person that offers courses related to
licensing. This Court may grant equitable relief pursuant to 42 U.S.C. §
12188(a)(1) and (2), and may award fees, costs and expenses to a prevailing party
pursuant to 42 U.S.C. § 12205.
7.
This Court has personal jurisdiction over non-resident Defendant
because it actively solicits business in Colorado, advertises that its courses will
fulfill Colorado CLE requirements and has undertaken the necessary steps to
qualify as an approved CLE provider in Colorado. This case arises out of those
purposeful acts.
3
8.
Venue is proper in this district and division because plaintiff Kontnik
is a resident and some of the acts and omissions giving rise to this case occurred
IV. OPERATIVE FACTS
9.
Colorado requires attorneys to complete and report 45 hours of CLE
every three years. Colorado permits some of those hours to be obtained through
online, on-demand courses, and during the Covid quarantine, permits all 45 hours
to be earned through on-demand online courses.
10.
Defendant offers individual courses approved for CLE credit by the
Colorado Board of Continuing Legal Education. Defendant also offers both annual
individual CLE passes and “bundles” of pre-approved or attorney-selected
Colorado courses sufficient to satisfy the full 45-hour CLE requirement with a
single purchase. Both the unlimited annual package ($129 as of June 1, 2021) and
the Colorado bundles ($69 for a curated selection of 45 hours) are offered at a very
substantial savings over the individually purchased courses.
11.
Plaintiff Kontnik has had a profound hearing loss in his right ear since
he was six (6) years old, and had a severe-to-profound impairment in his left ear, in
which he wore a hearing aid. He now has a cochlear implant (CI) and a hearing
aid, and when he removes those, he is unable to hear.
4
12.
Virtually all television sets have a closed-caption feature, enabling
viewers, at their option, to display captions on the screen while not altering the
television experience for individuals who do not wish to see the captions. Kontnik
watches television with the captions engaged, and the captions enable him to enjoy
television.
13.
Online CLE material can also have a closed-caption feature, giving
viewers the option of activating captions should they choose to do so. If Defendant
included that option, Kontnik could benefit from its courses.
14.
Kontnik has a busy litigation practice, so he appreciates the
convenience and flexibility of on-demand, online CLE such as the courses offered
by Defendant. He also does not always space out his CLE obligations evenly over
his three-year reporting period, which can prompt a demand for a significant
number of on-demand CLE courses.
15.
Because Defendant is among the lowest-cost providers of bundled
CLE courses approved in Colorado, Kontnik wishes to include their courses among
his available CLE options.
16.
On April 23, counsel sent letters by email attachment on behalf of
Kontnik and seven other deaf and hard of hearing attorneys to Defendant and
several other online CLE providers asking whether captioning was or could be
5
provided, asking for a response on or before May 14 and stating that a failure to
respond would be construed as a denial of those requests.
17.
Later on April 23, Defendant sent an email that acknowledged receipt
of the letter and stated that representatives would be in touch, but Defendant did
not respond by the requested date, and has not done so.
18.
Kontnik has checked Defendant’s website and seen that Defendant
offers courses he would be interested in considering, he has found no indication
that the courses are captioned and therefore accessible to him. He would therefore
have to buy those courses without any way of knowing whether he could benefit
from them.
V. CAUSE OF ACTION
19.
The Americans with Disabilities Act is a “national mandate for the
elimination of discrimination against individuals with disabilities,” 42 U.S.C. §
12101 (b)(1).
20.
The ADA has a specific provision dealing addressing the issue
presented by this lawsuit, as follows:
Any person that offers examinations or courses related to
applications, licensing, certification, or credentialing for
secondary or postsecondary education, professional, or
trade purposes shall offer such examinations or courses in a
place and manner accessible to persons with disabilities or
offer alternative accessible arrangements for such
individuals.
6
42 U.S.C. § 12189.
21.
Courses that satisfy requirements necessary to maintain an active
license to practice law are related to licensing for professional purposes, and must
therefore be offered in a manner accessible to persons with disabilities.
22.
The ADA defines “disability” as “a physical or mental impairment that
substantially limits one or more major life activities of such individual,” 42 U.S.C. §
12102 (1)(A), and lists hearing, learning and working as among “major life
activities,” 42 U.S.C. § 12102(2)(A). The existence of a disability is to be
determined “without regard to the ameliorative effects of mitigating measures such
as … hearing aids and cochlear implants,” 42 U.S.C. § 12102(4)(E)(i)(I). Because
his hearing impairment prevents Kontnik from understanding and therefore
learning from online CLE courses that lack captioning, he is a person with a
disability within the meaning of the ADA as it applies to online CLE courses.
23.
The regulations specifically implementing § 12189 state that
providing courses in an accessible format may require the provider to offer
“auxiliary aids and services,” 28 C.F.R. § 36.309(c)(3), which are defined by
example as “interpreters or other effective methods of making orally delivered
materials available to individuals with hearing impairments,” id. Regulations
generally implementing Title III of the ADA, of which § 12189 is a part, explicitly
7
list “open and closed captioning” as examples of auxiliary aids and services. 28
C.F.R. § 36.303(b)(1).
24.
By failing to provide captioning or any other effective method of
making orally delivered material available to Kontnik or other members of the
putative class of similarly situated attorneys, Defendant is violating the ADA.
25.
Captioning online CLE content is feasible. The Practicing Law
Institute has been offering captioning since at least 2018,
https://www.pli.edu/accessibility (last visited May 16, 2021). Attorney Credits
captions its streaming videos. https://www.attorneycredits.com/features/feature-faq
(last visited May 16, 2021). In response to the April 23 letter, the National
Business Institute, https://www.nbi-sems.com/, MyLawCLE,
https://mylawcle.com/ (which shares CLE content with the Federal Bar
Association) and the National Academy of Continuing Legal Education
https://www.nacle.com/ committed both to providing captions and to indicating
that captioning is available. MyLawCLE has done so for at least some of its
offerings, https://mylawcle.com/products/how-the-ada-impacts-websites-and-
mobile-apps-and-what-businesses-should-do-about-it/ (last visited June 3, 2021).
26.
Kontnik and other members of the putative class of deaf and hard of
hearing attorneys are entitled to the full range of CLE options available to
attorneys without hearing impairments.
8
27.
If Defendant provided captioning and made that availability known,
Kontnik and other members of the putative class would be able to at least consider
those courses as possible means of satisfying their CLE requirements in Colorado
and other states where Defendant is an approved CLE provider.
28.
The ADA permits private individuals to bring an action for injunctive
relief to prevent further violations, 42 U.S.C. § 12188(a)(1) (incorporating
remedies available under 42 U.S.C. § 2000a-3), including an order that necessary
auxiliary aids and services be provided, 42 U.S.C. § 12188(a)(2).
29.
The Federal Declaratory Judgment Act, 28 U.S.C. § 2201, and Rule
57, Fed. R. Civ. P., empower this Court to declare the rights of interested parties.
30.
Plaintiff Kontnik is entitled to a declaratory judgment that Defendant
must provide captioning and other auxiliary aids and services to make its courses
accessible to him and to other members of the putative class of similarly situated
attorneys, and to an injunction requiring Defendant to do so.
31.
Additionally, Kontnik is entitled to a declaratory judgment that the
Defendant must indicate on its websites and in any other advertising that
captioning or other auxiliary aids and services can be provided for its courses, and
if captioning is provided for fewer than all courses, must indicate the courses for
which captioning is available through such designation as a [cc] icon placed next to
each course title.
9
VI. CLASS ALLEGATIONS
32.
Plaintiff brings this action pursuant to Rule 23(b)(2), Federal Rules of
Civil Procedure, and ask this Court to certify a class defined as follows:
All attorneys subject to mandatory Continuing Legal
Education requirements who, because of their hearing
losses, need captioning or other auxiliary aids and
services to understand and therefore benefit from the
courses offered by Defendants.
33.
Based on objective data from a random sample of the adult
population, Lin et al. from Johns Hopkins University estimate that some 15 million
Americans between the ages of 20 and 70 have an impairing hearing loss, which is
roughly 7% of the overall population in that age range.
https://www.statista.com/statistics/241488/population-of-the-us-by-sex-and-age/
(last visited May 15, 2021).
34.
There are roughly 1.33 million lawyers in the United States as of
2020, https://www.statista.com/statistics/740222/number-of-lawyers-
us/#:~:text=The%20total%20number%20of%20lawyers,2015%20figure%20of%2
01.3%20million. (last visited May 15, 2021). If lawyers sustain impairing hearing
loss at the same rate as the general population aged 20-70, these numbers would
10
suggest that over 90,000 U.S. attorneys have an impairing hearing loss, and many
would benefit from captioning or other auxiliary aids and services.
35.
The requirements of Rule 23(a), Fed. R. Civ. P., are satisfied for the
following reasons:
Numerosity: As stated in Paragraphs 26 and 27, the putative class members
are too numerous to be joined and impossible to identify.
Commonality and Typicality: The questions of law and fact raised by
Kontnik’s complaint would be common to the issues raised by any other attorney
with hearing loss concerning Defendant’s courses, and the requested relief would
benefit all members of the putative class. Because the claim is being brought under
Title III of the ADA, which does not permit individuals to recover monetary
damages, there are no individual issues, although members of the putative
injunction class could still seek damages under any state or local law that might
provider for such relief.
Fair and Adequate Representation: There are no conflicts between
Kontnik’s claims and the interests of any member of the putative class because an
injunction requiring the provision of necessary auxiliary aids and services
including captioning would not preclude any class member from seeking the
particular aid and service required by that individual. Undersigned pro hac vice
counsel has considerable experience representing plaintiffs in cases seeking to
11
require the provision of auxiliary aids and services for people with hearing loss,
including Childress v. Fox, 932 F.3d 1165 (8th Cir. 2019) and Washington State
Comm’n Access Project v. Regal Cinemas et al., 293 P.3d 413 (Wash. App. 2013).
Because certification is being sought under Rule 23(b)(2), which does not require
notice or provide for opting out of the claims for equitable relief, there will be no
difficulty managing the class. Kontnik can fairly represent the interests of all such
potential claimants.
36.
The requirements of Rule 23(b)(2) are satisfied because Defendant’s
failures to provide auxiliary aids and services affects all potential class members
equally, and injunctive and declaratory relief requiring Defendant to provide
captioning and other auxiliary aids and services would remedy that failure for all
members of the putative class.
VII. PRAYER FOR RELIEF
32.
Plaintiff is entitled to relief as follows pursuant to the provisions of 42
U.S.C. § 12188(a)(1), which incorporates the remedies of 42 U.S.C. § 2000a(3):
a.
For a declaratory judgment stating that the ADA requires
Defendant to provide auxiliary aids and services including but not limited to
captioning for all courses, and for a nationwide injunction requiring it to do so;
b.
For a declaratory judgment stating that Defendant must provide
notice in all advertising that captioning and other auxiliary aids and services are
12
available, and for which courses, and for a nationwide injunction requiring
Defendant to do so;
c.
For all costs of court, including reasonable attorneys’ fees,
pursuant to 42 U.S.C. § 12205;
d.
For such other and further relief as may be appropriate.
DATED this 9th day of June, 2021.
/s/ John F. Waldo
John F. Waldo
Texas Bar. No. 20679900
Law Office of John F. Waldo
2108 McDuffie Street
Houston, TX 77019
206-849-5009
[email protected]
13
| civil rights, immigration, family |
Hq_ACocBD5gMZwcznjOy | Todd M. Friedman (SBN 216752)
Adrian R. Bacon (SBN 280332)
Meghan E. George (SBN 274525)
LAW OFFICES OF TODD M. FRIEDMAN, P.C.
21550 Oxnard St., Suite 780
Woodland Hills, CA 91367
Phone: 877-206-4741
Fax: 866-633-0228
tfriedman@ toddflaw.com
abacon@ toddflaw.com
[email protected]
Attorneys for Plaintiff
UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF CALIFORNIA
Civil Case No.:
CIVIL ACTION
CLASS ACTION COMPLAINT
TERI BROWN, individually and on
behalf of all others similarly situated,
Plaintiff
-against-
and
JURY TRIAL DEMAND
CHARTER COMMUNICATIONS,
INC. d/b/a SPECTRUM and JOHN
DOES 1-10,
Defendants
Plaintiff, TERI BROWN (“Plaintiff”), individually and on behalf of all
others similarly situated, alleges the following upon information and belief based
upon personal knowledge:
NATURE OF THE CASE
1. Plaintiff brings this action individually and on behalf of all others similarly
situated seeking damages and any other available legal or equitable remedies
resulting from the illegal actions of CHARTER COMMUNICATIONS,
INC. d/b/a SPECTRUM, (“Defendant” or “Spectrum”), in negligently,
knowingly, and/or willfully contacting Plaintiff on Plaintiff’s cellular
telephone in violation of the Telephone Consumer Protection Act, 47. U.S.C.
§ 227 et seq. (“TCPA”), thereby invading Plaintiff’s privacy.
JURISDICTION & VENUE
2. This Court has federal question jurisdiction because this case arises out of
violations of federal law. See 47 U.S.C. § 227(b); Mims v. Arrow Fin. Servs.,
LLC, 132 S. Ct. 740 (2012).
3. To have standing in federal court, Plaintiff must have suffered a
particularized and concrete harm.
4. Unwanted calls cause tangible harms and intangible harms.
5. In the recent Supreme Court decision of Spokeo, Inc. v. Robin, __ U.S. ____,
2016 WL 282447 (May 16, 2016), the Court stated that one way to establish
that an intangible injury is concrete is to evaluate whether it “has a close
relationship to a harm that has traditionally been regarded as providing a
basis for a lawsuit in English or American court.” Id at *7.
6. For example, invasion of privacy is a harm that is recognized by the common
law and is recognized as a common law tort.
7. When enacting the TCPA, Congress stressed the purpose of protecting
consumers’ privacy.
8. As Senator Hollings, the Act’s sponsor, stated “Computerized calls are the
scourge of modern civilization. They wake us up in the morning; they
interrupt our dinner at night; they force the sick and elderly out of bed; they
hound us until we want to rip the telephone right out of the wall.” 137 Cong.
Rec. 30,821-30,822 (1991).
9. Venue is proper in the United States District Court for the Eastern District
of California pursuant to 28 U.S.C. § 1391(b)(1) and 28 U.S.C. § 1391(b)(2)
because the Defendant is located and conducts business in this judicial
district and because a substantial part of the act and/or omissions giving rise
to the claims set forth herein occurred in this judicial district.
PARTIES
10. Plaintiff is a natural person residing in Bakersfield, California and is a
“person” as defined by 47 U.S.C. § 153 (10).
11. Defendant Spectrum is a corporation incorporated in the State of Delaware
with its principal place of business located in the State of Connecticut.
FACTUAL ALLEGATIONS
12. On information and belief, on a date better known to Defendants, Defendants
began their campaign of communicating with the Plaintiff via the use of an
automated telephone dialing system and prerecorded messages throughout
the past year by calling her cell phone number of (661) 472-4330 numerous
times in attempts to market its services.
13. Such calls constitute solicitation calls pursuant to 47 C.F.R. § 64.1200, as
they were made in an attempt to promote or sell Defendant’s services to
Plaintiff.
14. Plaintiff is the subscriber of the T-Mobile account bearing the phone number
of (661) 472-4330, and has been the subscriber of that account at all times
relevant hereto.
15. Plaintiff is the regular user of the cellular phone number (661) 472-4330, and
has been the regular user of that phone number at all times relevant hereto.
16. The Defendant called from numerous phone numbers, including but not
limited to (844) 207-1531, (855) 383-5891, and (203) 404-6762, which
phone number belongs to Defendant.
17. When Plaintiff answered a phone call from the Defendant, she was subjected
to an unwanted and uninvited sales pitch from the Defendant.
18. On or around March 22, 2017, Plaintiff spoke with the Defendant and stated
emphatically that she is not interested in this service.
19. Despite that, Defendant has continued to call the Plaintiff’s cellular
telephone number without prior express consent.
20. The phone calls either state that they are from Spectrum, from Charter
Communications, or from Spectrum formerly known as BrightHouse.
21. When the phone number (844) 207-1531 is called back, the caller is
prompted to a pre-recorded message that states:
“Spectrum attempted to call you to inform you about new offers in
your area. We will attempt to call you again in the near future. If you
would like to have your number added to our do not call list press
one.”
22. Defendant specifically used an automated telephone dialing system and
prerecorded messages to call the Plaintiff on her cell phone at least five times
from February 2017 to present.
23. Defendant’s use of an automated telephone dialing system was clearly
indicated by the pre-recorded message and that a customer service
representative only coming on the line after the Plaintiff answered the phone
and hearing silence when she answered the call.
24. The Plaintiff never gave the Defendants her prior, express permission to call
her cell phone via the use of an automated telephone dialing system.
25. Upon information and belief, Plaintiff has never provided her cell phone
number to Defendant or had any business, educational or personal
relationship with the Defendant.
26. Plaintiff did not have an established business relationship with Defendant
during the time of the solicitation calls from Defendant.
27. Upon information and belief, at all relevant times, Defendant failed to
establish and/or implement reasonable policies and procedures to effectively
prevent telephone solicitations in violation of the regulations prescribed
under 47 U.S.C. § 227(c)(5), including 47 C.F.R.
64.1200(c) and (d).
28. Plaintiff advised the Defendant that she was not interested in their services.
29. Defendant ignored the Plaintiff’s and continued placing numerous auto-
dialed calls to the Plaintiff’s cellular phone.
30. By placing auto-dialed calls and prerecorded messages to the Plaintiff’s cell
phone, the Defendant violated 47 USC §227(b)(A)(iii) which prohibits using
any automated telephone dialing system or an artificial prerecorded voice to
any telephone number assigned to a cellular telephone service when calling
to the plaintiff’s cell phone.
31. The Defendant’s repeated calls caused the Plaintiff to be harassed, stressed,
frustrated and annoyed by refusing to cease its incessant calls despite
Plaintiff’s repeated pleas for the calls to stop. The Defendant’s repeated calls
further interrupted the Plaintiff’s day, and wasted the Plaintiff’s time spent
answering and otherwise addressing these repeated robocalls.
32. As a result of Defendant’s acts and omissions outlined above, Plaintiff has
suffered concrete and particularized injuries and harm, which include, but
are not limited to, the following:
a. Invasion of privacy;
b. Intrusion upon and occupation of the capacity of Plaintiff’s cellular
telephone;
c. Wasting Plaintiff’s time;
d. Risk of personal injury due to interruption and distraction when
receiving
unwanted telemarketing calls from Defendant;
e. Depletion of Plaintiff’s cellular telephone battery; and
f. The cost of electricity to recharge Plaintiff’s cellular telephone
battery.
33. The Defendant therefore willfully violated the TCPA numerous times by
placing autodialed calls and prerecorded messages to the Plaintiff's cell
phone without her prior, express consent.
CLASS ALLEGATIONS
34. Plaintiff brings this action on behalf of herself and all others similarly
situated, as a member of the proposed class (hereafter “The Class”) defined
as follows:
All persons within the United States who received any telephone calls
from Defendant to said person’s cellular telephone made through the
use of any automatic telephone dialing system and such person had
not previously consented to receiving such calls within the four years
prior to the filing of this Complaint.
35. Plaintiff represents, and is a member of, the Class, consisting of all persons
within the United States who received any telephone calls from Defendant
to said person’s cellular telephone made through the use of any automatic
telephone dialing system and such person had not previously not provided
their cellular telephone number to Defendant within the four years prior to
the filing of this Complaint.
36. Defendant, its employees and agents are excluded from The Class.
37. Plaintiff does not know the number of members in The Class, but believes
the Class members number in the thousands, if not more. Thus, this matter
should be certified as a Class Action to assist in the expeditious litigation of
the matter.
38. The Class is so numerous that the individual joinder of all of its members is
impractical. While the exact number and identities of The Class members
are unknown to Plaintiff at this time and can only be ascertained through
appropriate discovery, Plaintiff is informed and believes and thereon alleges
that The Class includes thousands of members. Plaintiff alleges that The
Class members may be ascertained by the records maintained by Defendant.
39. Plaintiff and members of The Class were harmed by the acts of Defendant in
at least the following ways: Defendant illegally contacted Plaintiff and Class
members via their cellular telephones thereby causing Plaintiff and Class
members to incur certain charges or reduced telephone time for which
Plaintiff and Class members had previously paid by having to retrieve or
administer messages left by Defendant during those illegal calls, and
invading the privacy of said Plaintiff and Class members.
40. Common questions of fact and law exist as to all members of The Class
which predominate over any questions affecting only individual members of
The Class. These common legal and factual questions, which do not vary
between Class members, and which may be determined without reference to
the individual circumstances of any Class members, include, but are not
limited to, the following:
a. Whether, within the four years prior to the filing of this Complaint,
Defendant made any call (other than a call made for emergency
purposes or made with the prior express consent of the called party)
to a Class member using any automatic telephone dialing system to
any telephone number assigned to a cellular telephone service;
b. Whether Plaintiff and the Class members were damages thereby, and
the extent of damages for such violation; and
c. Whether Defendant should be enjoined from engaging in such conduct
in the future.
41. As a person that received numerous calls from Defendant using an automatic
telephone dialing system, without Plaintiff’s prior express consent, Plaintiff
is asserting claims that are typical of The Class.
42. Plaintiff will fairly and adequately protect the interests of the members of
The Class. Plaintiff has retained attorneys experienced in the prosecution of
claims arising under the Telephone Consumer Protection Act and in
prosecuting class actions.
43. A class action is superior to other available methods of fair and efficient
adjudication of this controversy, since individual litigation of the claims of
all Class members is impracticable. Even if every Class member could afford
individual litigation, the court system could not. It would be unduly
burdensome to the courts in which individual litigation of numerous issues
would proceed. Individualized litigation would also present the potential for
varying, inconsistent, or contradictory judgments and would magnify the
delay and expense to all parties and to the court system resulting from
multiple trials of the same complex factual issues. By contrast, the conduct
of this action as a class action presents fewer management difficulties,
conserves the resources of the parties and of the court system, and protects
the rights of each Class member.
44. The prosecution of separate actions by individual Class members would
create a risk of adjudications with respect to them that would, as a practical
matter, be dispositive of the interests of the other Class members not parties
to such adjudications or that would substantially impair or impede the ability
of such non-party Class members to protect their interests.
45. Defendant has acted or refused to act in respects generally applicable to The
Class, thereby making appropriate final and injunctive relief with regard to
the members of the California Class as a whole.
FIRST CAUSE OF ACTION
Negligent Violations of the Telephone Consumer Protection Act
47 U.S.C. §227 et seq.
46. Plaintiff repeats and incorporates by reference into this cause of action the
allegations set forth above.
47. The foregoing acts and omissions of Defendant constitute numerous and
multiple negligent violations of the TCPA, including but not limited to each
and every one of the above cited provisions of 47 U.S.C. § 227 et seq.
including the implementing regulations of 47 C.F.R.
64.1200(c) and (d).
48. As a result of Defendant’s negligent violations of 47 U.S.C. § 227 et seq.,
Plaintiff and the Class Members are entitled an award of $500.00 in statutory
damages, for each and every violation, pursuant to 47 U.S.C. § 227(b)(3)(B).
49. Plaintiff and the Class members are also entitled to and seek injunctive relief
prohibiting such conduct in the future.
SECOND CAUSE OF ACTION
Knowing and/or Willful Violations of the Telephone Consumer Protection
Act
47 U.S.C. §227 et seq.
50. Plaintiff repeats and incorporates by reference into this cause of action the
allegations set forth above at Paragraphs 1-41.
51. Plaintiff had no wish to be contacted on her cell phone via the use of an
autodialer, and expressly directed Defendants to stop calling her cell phone
number on numerous occasions.
52. Defendant willfully continued calling the Plaintiff’s cellular phone via an
autodialer and prerecorded messages despite Plaintiff’s repeated requests to
cease contacting her.
53. The foregoing acts and omissions of Defendant constitute numerous and
multiple knowing and/or willful violations of the TCPA, including but not
limited to each and every one of the above cited provisions of 47 U.S.C. §
227 et seq.
54. As a result of Defendant’s knowing and/or willful violations of 47 U.S.C. §
227 et seq., Plaintiff and the Class members are entitled an award of
$1,500.00 in statutory damages, for each and every violation, pursuant to 47
U.S.C. § 227(b)(3)(B) and 47 U.S.C. § 227(b)(3)(C).
55. Plaintiff and the Class members are also entitled to and seek injunctive relief
prohibiting such conduct in the future.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff respectfully prays that judgment be entered
against the Defendant as follows:
A.
For mandatory statutory damages of $500.00 for each and every
call placed to the cellular phones of the Plaintiff and the members of The Class in
violation of the TCPA, as provided and pursuant to 47 USC §227;
B.
For enhanced trebled damages of $1,500.00, for each and every
call placed to the cellular phones of the Plaintiff and the members of The Class in
willful violation of the TCPA, as provided and pursuant to 47 USC §227;
C.
For any such other and further relief, as well as further costs,
expenses and disbursements of this action, as this Court may deem just and proper.
DEMAND FOR TRIAL BY JURY
Pursuant to her rights under the Seventh Amendment to the Constitution of
the United States of America and Rule 38 of the Federal Rules of Civil Procedure,
Plaintiff hereby requests a trial by jury on all issues so triable.
Respectfully Submitted this 15th Day of May, 2017.
LAW OFFICES OF TODD M. FRIEDMAN, P.C.
By: /s/ Todd M. Friedman
Todd M. Friedman
Law Offices of Todd M. Friedman
Attorney for Plaintiff
| consumer fraud |
swtAFocBD5gMZwczLshO | UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF PENNSYLVANIA
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JOHN MAHONEY, on behalf of himself and all
others similarly situated,
Plaintiffs,
v.
CLASS ACTION COMPLAINT
FOR INJUNCTIVE AND
DECLARATORY RELIEF
DEL GROSSO’S AMUSEMENT PARK, INC.,
Defendant.
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INTRODUCTION
1.
Plaintiff JOHN MAHONEY (“Plaintiff” or “MAHONEY”), on behalf of himself and
others similarly situated, asserts the following claims against Defendant DEL GROSSO’S
AMUSEMENT PARK, INC. as follows.
2.
Based on a 2010 U.S. Census Bureau report, approximately 8.1 million people in the
United States are visually impaired, including 2.1 million who are blind, and according to
the American Foundation for the Blind’s 2016 report, approximately 300,000 visually
impaired persons live in the State of Pennsylvania.
3.
“Being unable to access website puts individuals at a great disadvantage in today’s society,
which is driven by a dynamic electronic marketplace and unprecedented access to
information.” U.S. Dep’t of Justice, Statement of Eve L. Hill before the Senate Comm. on
Health, Educ., Labor & Pensions, at 3 (May 14, 2013).
4.
Plaintiff is a blind, visually-impaired handicapped person and a member of a protected
class of individuals under the
5.
ADA, under 42 U.S.C. § 12102(1)-(2), and the regulations implementing the ADA set
forth at 28 CFR §§ 36.101 et seq.
6.
Plaintiff requires screen-reading software to read website content using his computer.
Plaintiff uses the terms “blind” or “visually-impaired” to refer to all people with visual
impairments who meet the legal definition of blindness in that they have a visual acuity
with correction of less than or equal to 20 x 200.
7.
Plaintiff brings this civil rights action against Defendant to enforce Title III of the
Americans with Disabilities Act, 42 U.S.C. § 12101 et seq. (“Title III”), which requires,
among other things, that a public accommodation (1) not deny persons with disabilities the
benefits of its services, facilities, privileges and advantages; (2) provide such persons with
benefits that are equal to those provided to nondisabled persons; (3) provide auxiliary aids
and services—including electronic services for use with a computer screen reading
program—where necessary to ensure effective communication with individuals with a
visual disability, and to ensure that such persons are not excluded, denied services,
segregated or otherwise treated differently than sighted individuals; and (4) utilize
administrative methods, practices, and policies that provide persons with disabilities equal
access to online content.
8.
By failing to make its Website available in a manner compatible with computer screen
reader programs, DEL GROSSO’S AMUSEMENT PARK, INC., a public accommodation
subject to Title III, deprives blind and visually-impaired individuals the benefits of its
online goods, content, and services—all benefits it affords nondisabled individuals—
thereby increasing the sense of isolation and stigma among these Americans that Title III
was meant to redress.
9.
Upon information and belief, because DEL GROSSO’S AMUSEMENT PARK, INC.’s
Website has never been accessible and because DEL GROSSO’S AMUSEMENT PARK,
INC. does not have, and has never had, an adequate corporate policy that is reasonably
calculated to cause its Website to become and remain accessible, Plaintiff invokes 42
U.S.C. § 12188(a)(2) and seeks a permanent injunction requiring:
a. that DEL GROSSO’S AMUSEMENT PARK, INC. retain a qualified
consultant acceptable to Plaintiff (“Mutually Agreed Upon Consultant”) who
shall assist it in improving the accessibility of its Website so the goods and
services on them may be equally accessed and enjoyed by individuals with
vision related disabilities;
b. that DEL GROSSO’S AMUSEMENT PARK, INC. work with the Mutually
Agreed Upon Consultant to ensure that all employees involved in website
development and content development be given web accessibility training on a
periodic basis, including onsite training to create accessible content at the
design and development stages;
c. that DEL GROSSO’S AMUSEMENT PARK, INC. work with the Mutually
Agreed Upon Consultant to perform an automated accessibility audit on a
periodic basis to evaluate whether DEL GROSSO’S AMUSEMENT PARK,
INC.’s Website may be equally accessed and enjoyed by individuals with vision
related disabilities on an ongoing basis;
d. that DEL GROSSO’S AMUSEMENT PARK, INC. work with the Mutually
Agreed Upon Consultant to perform end-user accessibility/usability testing on
a periodic basis with said testing to be performed by individuals with various
disabilities to evaluate whether DEL GROSSO’S AMUSEMENT PARK,
INC.’s Website may be equally accessed and enjoyed by individuals with vision
related disabilities on an ongoing basis;
e. that DEL GROSSO’S AMUSEMENT PARK, INC. work with the Mutually
Agreed Upon Consultant to create an accessibility policy that will be posted on
its Website, along with an e-mail address and tollfree phone number to report
accessibility-related problems; and
f. that Plaintiff, their counsel and its experts monitor Defendant’s Website for up
to two years after the Mutually Agreed Upon Consultant validates it is free of
accessibility errors/violations to ensure DEL GROSSO’S AMUSEMENT
PARK, INC. has adopted and implemented adequate accessibility policies.
10.
Web-based technologies have features and content that are modified on a daily, and
in some instances, an hourly, basis, and a one time “fix” to an inaccessible website will not
cause the website to remain accessible without a corresponding change in corporate
policies related to those web-based technologies. To evaluate whether an inaccessible
website has been rendered accessible, and whether corporate policies related to web-based
technologies have been changed in a meaningful manner that will cause the website to
remain accessible, the website must be reviewed on a periodic basis using both automated
accessibility screening tools and end user testing by disabled individuals.
JURISDICTION AND VENUE
11.
This Court has subject-matter jurisdiction over this action under 28 U.S.C. § 1331 and 42
U.S.C. § 12188.
12.
DEL GROSSO’S AMUSEMENT PARK, INC. purposefully targets and otherwise solicits
business from Pennsylvania residents through its Website. Because of this targeting, it is
not unusual for DEL GROSSO’S AMUSEMENT PARK, INC. to conduct business with
Pennsylvania residents. In fact, the opposite is true: DEL GROSSO’S AMUSEMENT
PARK, INC. clearly does business over the Internet with Pennsylvania residents, having
entered into contracts with Pennsylvania residents that involve the knowing and repeated
transmission of computer files over the Internet. See Gniewkowski v. Lettuce Entertain
You, Order, ECF No. 123 (W.D. Pa Apr. 25, 2017) clarified by Order of Court, ECF No.
169 (W.D. Pa. June 22, 2017) (Judge Schwab) (The court exercised personal jurisdiction
over an out-of-forum defendant for claims its website is inaccessible to a visually disabled
resident of the forum state.); see also Access Now Inc. v. Otter Products, LLC, Case No.
1:17-cv-10967-PBS (D.Mass. Dec. 4, 2017) (exercising personal jurisdiction over forum-
based plaintiff’s website accessibility claims against out-of-forum website operator).
13.
Venue in this District is proper under 28 U.S.C. § 1391(b)(2) because this is the judicial
district in which a substantial part of the acts and omissions giving rise to Plaintiff claims
occurred.
14.
This Court is empowered to issue a declaratory judgment under 28 U.S.C. §§ 2201 and
2202.
PARTIES
15.
Plaintiff, at all relevant times, is and was a resident of Bucks County, Pennsylvania.
16.
Defendant is and was at all relevant times a Pennsylvania Corporation doing business in
Pennsylvania, including its location at 4352 E Pleasant Valley Blvd, Tipton, PA 16684.
17.
Defendant’s products, its Website and the goods and services offered thereupon, is a public
accommodation within the definition of Title III of the ADA, 42 U.S.C. § 12181(7).
NATURE OF ACTION
18.
The Internet has become a significant source of information, a portal, and a tool for
conducting business, doing everyday activities such as shopping, learning, banking,
researching, as well as many other activities for sighted, blind and visually-impaired
persons alike.
19.
In today’s tech-savvy world, blind and visually impaired people have the ability to access
website using keyboards in conjunction with screen access software that vocalizes the
visual information found on a computer screen or displays the content on a refreshable
Braille display. This technology is known as screen-reading software. Screen-reading
software is currently the only method a blind or visually-impaired person may
independently access the internet. Unless website are designed to be read by screen-reading
software, blind and visually-impaired persons are unable to fully access website, and the
information, products, goods and contained thereon.
20.
Blind and visually-impaired users of Windows operating system-enabled computers and
devices have several screen reading software programs available to them. Some of these
programs are available for purchase and other programs are available without the user
having to purchase the program separately. Job Access With Speech, otherwise known as
“JAWS” is currently the most popular, separately purchased and downloaded screen-
reading software program available for a Windows computer. Another popular screen-
reading software program is NonVisual Desktop Access “NVDA.” Plaintiff uses the latter.
21.
For screen-reading software to function, the information on a website must be capable of
being rendered into text. If the website content is not capable of being rendered into text,
the visually-impaired user is unable to access the same content available to sighted users.
22.
The international website standards organization, the World Wide Web Consortium,
known throughout the world as W3C, has published version 2.1 of the Web Content
Accessibility Guidelines (“WCAG 2.1”). WCAG 2.1 are well-established guidelines for
making website accessible to blind and visually-impaired people. These guidelines are
universally followed by most large business entities and government agencies to ensure
their website are accessible.
23.
Non-compliant website pose common access barriers to blind and visually-impaired
persons. Common barriers encountered by blind and visually impaired persons include, but
are not limited to, the following:
a.
A text equivalent for every non-text element is not provided;
b.
Title frames with text are not provided for identification and navigation;
c.
Equivalent text is not provided when using scripts;
d.
Forms with the same information and functionality as for sighted
persons are not provided;
e.
Information about the meaning and structure of content is not
conveyed by more than the visual presentation of content;
f.
Text cannot be resized without assistive technology up to 200%
without losing content or functionality;
g.
If the content enforces a time limit, the user is not able to extend,
adjust or disable it;
h.
Web pages do not have titles that describe the topic or purpose;
i.
The purpose of each link cannot be determined from the link text
alone or from the link text and its programmatically determined link context;
j.
One or more keyboard operable user interface lacks a mode of
operation where the keyboard focus indicator is discernible;
k.
The default human language of each web page cannot be
programmatically determined;
l.
When a component receives focus, it may initiate a change in
context;
m.
Changing the setting of a user interface component may
automatically cause a change of context where the user has not been advised before
using the component;
n.
Labels or instructions are not provided when content requires user
input, which include captcha prompts that require the user to verify that he or she
is not a robot;
o.
In content which is implemented by using markup languages,
elements do not have complete start and end tags, elements are not nested according
to their specifications, elements may contain duplicate attributes, and/or any IDs
are not unique;
p.
Inaccessible Portable Document Format (PDFs); and,
q.
The name and role of all User Interface elements cannot be
programmatically determined; items that can be set by the user cannot be
programmatically set; and/or notification of changes to these items is not available
to user agents, including assistive technology.
STATEMENT OF FACTS
24.
Defendant
is
an
amusement
park
company
that
owns
and
operates
www.mydelgrossopark.com (its “Website”), offering features which should allow all
consumers to access its goods and services throughout the United States, including
Pennsylvania.
25.
Plaintiff is a visually-impaired and legally blind person, who cannot use a computer
without the assistance of screen-reading software. Plaintiff is, however, a proficient NVDA
screen-reader user and uses it to access the Internet.
26.
Plaintiff has attempted to use Defendant’s Website at least once in the past. Unfortunately,
because of DEL GROSSO’S AMUSEMENT PARK, INC.’s failure to build its Website in
a manner that is compatible with screen reader programs, he is unable to understand, and
thus is denied the benefit of, much of the content and services he wishes to access or use.
For example:
a. Many features on the Website lacks alt. text, which is the invisible code
embedded beneath a graphical image. As a result, Plaintiff was unable to
differentiate what options were on the screen due to the failure of the Website
to adequately describe its content.
b. Many features on the Website also fail to Add a label element or title attribute
for each field. This is a problem for the visually impaired because the screen
reader fails to communicate the purpose of the page element. It also leads to the
user not being able to understand what he or she is expected to insert into the
subject field.
c. The Website also contains a host of broken links, which is a hyperlink to a non-
existent or empty webpage. For the visually impaired this is especially
paralyzing due to the inability to navigate or otherwise determine where one is
on the website once a broken link is encountered.
27.
As a result of visiting DEL GROSSO’S AMUSEMENT PARK, INC.’s Website and from
investigations performed on his behalf, Plaintiff is aware the Website include at least the
following additional barriers blocking his full and equal use:
a. The Website does not provide a text equivalent for every non-text element;
b. The purpose of each link cannot be determined from the link text alone or from
the link text and its programmatically determined link context;
c. Web pages lack titles that describe their topic or purpose;
d. Headings and labels do not describe topic or purpose;
e. Keyboard user interfaces lack a mode of operation where the keyboard focus
indicator is visible;
f. The default human language of each web page cannot be programmatically
determined;
g. The human language of each passage or phrase in the content cannot be
programmatically determined;
h. Labels or instructions are not always provided when content requires user input;
i. Text cannot be resized up to 200 percent without assistive technology so that it
may still be viewed without loss of content or functionality;
j. A mechanism is not always available to bypass blocks of content that are
repeated on multiple web pages;
k. A correct reading sequence is not provided on pages where the sequence in
which content is presented affects its meaning;
l. In content implemented using markup languages, elements do not always have
complete start and end tags, are not nested according to their specifications,
may contain duplicate attributes, and IDs are not always unique; and
m. The name and role of all UI elements cannot be programmatically determined;
things that can be set by the user cannot be programmatically set; and/or
notification of changes to these items is not available to user agents, including
assistive technology.
28.
These barriers, and others, deny Plaintiff full and equal access to all of the services the
Website offers, and now deter him from attempting to use the Website and/or visit DEL
GROSSO’S AMUSEMENT PARK, INC. Still, Plaintiff would like to, and intends to,
attempt to access DEL GROSSO’S AMUSEMENT PARK, INC.’s Website in the future
to research the services the Website offers, or to test the Website for compliance with the
ADA.
29.
Due to Defendant’s failure and refusal to remove access barriers to its website, Plaintiff
and visually-impaired persons have been and are still being denied equal access to
Defendant’s Website, and the numerous goods and services and benefits offered to the
public through the Website.
30.
If the Website were accessible, i.e. if DEL GROSSO’S AMUSEMENT PARK, INC.
removed the access barriers described above, Plaintiff could independently research the
Website’s offerings, personal banking and mortgage banking available at the DEL
GROSSO’S AMUSEMENT PARK, INC..
31.
Through his attempts to use the Website, Plaintiff has actual knowledge of the access
barriers that make these services inaccessible and independently unusable by blind and
visually-impaired people.
32.
Though DEL GROSSO’S AMUSEMENT PARK, INC. may have centralized policies
regarding the maintenance and operation of its Website, upon and information and belief,
DEL GROSSO’S AMUSEMENT PARK, INC. has never had a plan or policy that is
reasonably calculated to make its Website fully accessible to, and independently usable by,
individuals with vision related disabilities. As a result, the complained of access barriers
are permanent in nature and likely to persist.
33.
The law requires that DEL GROSSO’S AMUSEMENT PARK, INC. reasonably
accommodate Plaintiff’s disabilities by removing these existing access barriers. Removal
of the barriers identified above is readily achievable and may be carried out without much
difficulty or expense.
34.
Plaintiff’s above request for injunctive relief is consistent with the work performed by the
United States Department of Justice, Department of Transportation, and U.S. Architectural
and Transportation Barriers Compliance Board (the “Access Board”), all of whom have
relied upon or mandated that the public-facing pages of website complies with an
international compliance standard known as Web Content Accessibility Guidelines version
2.1 AA (“WCAG 2.1 AA”), which is published by an independent third party known as
the Worldwide Web Consortium (“W3C”).
35.
Plaintiff and the Class have been, and in the absence of an injunction will continue to be,
injured by DEL GROSSO’S AMUSEMENT PARK, INC.’s failure to provide its online
content and services in a manner that is compatible with screen reader technology.
36.
DEL GROSSO’S AMUSEMENT PARK, INC. has long known that screen reader
technology is necessary for individuals with visual disabilities to access its online content
and services, and that it is legally responsible for providing the same in a manner that is
compatible with these auxiliary aids.
37.
Indeed, the Disability Rights Section of the DOJ reaffirmed in a 2015 Statement of Interest
before the United States District Court for the District of Massachusetts that it has been a
“longstanding position” of the Department of Justice “that the ADA applies to website of
public accommodations.” See National Association of the Deaf v. Massachusetts Institute
of Technology, No. 3:15-cv-300024-MGM, DOJ Statement of Interest in Opp. To Motion
to Dismiss or Stay, Doc. 34, p. 4 (D. Mass. Jun. 25, 2015) (“MIT Statement of Interest”);
see also National Association of the Deaf. v. Harvard University, No. 3:15-cv-30023-
MGM, DOJ Statement of Interest of the United States of America, Doc. 33, p.4 (D. Mass.
Jun. 25, 2015) (“Harvard Statement of Interest”).
38.
The ADA expressly contemplates the injunctive relief that Plaintiff seeks in this action. In
relevant part, the ADA requires:
In the case of violations of . . . this title, injunctive relief shall include an order to alter
facilities to make such facilities readily accessible to and usable by individuals with
disabilities . . . Where appropriate, injunctive relief shall also include requiring the . . .
modification of a policy . . .
42 U.S.C. § 12188(a)(2).
39.
There is no DOJ administrative proceeding that could provide Plaintiff with Title III
injunctive relief.
40.
While DOJ has rulemaking authority and can bring enforcement actions in court, Congress
has not authorized it to provide an adjudicative administrative process to provide Plaintiff
with relief.
41.
Plaintiff alleges violations of existing and longstanding statutory and regulatory
requirements to provide auxiliary aids or services necessary to ensure effective
communication, and courts routinely decide these types of matters.
42.
Resolution of Plaintiff’s claims does not require the Court to unravel intricate, technical
facts, but rather involves consideration of facts within the conventional competence of the
courts, e.g. (a) whether DEL GROSSO’S AMUSEMENT PARK, INC. offers content and
services on its Website, and (b) whether Plaintiff can access the content and services.
43.
Without injunctive relief, Plaintiff and other visually-impaired consumers will continue to
be unable to independently use the Website, violating their rights.
CLASS ACTION ALLEGATIONS
44.
Plaintiff, on behalf of himself and all others similarly situated, seeks to certify a nationwide
class under Fed. R. Civ. P. 23(a) and 23(b)(2): all legally blind individuals in the United
States who have attempted to access Defendant’s Website and as a result have been denied
access to the equal enjoyment of goods and services, during the relevant statutory period.
45.
Common questions of law and fact exist amongst Class, including:
a.
Whether Defendant’s Website is a “public accommodation” under
the ADA;
b.
Whether Defendant’s Website denies the full and equal enjoyment
of its products, services, facilities, privileges, advantages, or accommodations to
people with visual disabilities, violating the ADA.
46.
Plaintiff’s claims are typical of the Class. The Class, like Plaintiff, are visually impaired or
otherwise blind, and claim that Defendant has violated the ADA by failing to remove
access barriers on its Website so as to be independently accessible to the Class.
47.
Plaintiff will fairly and adequately represent and protect the interests of the Class Members
because Plaintiff has retained and is represented by counsel competent and experienced in
complex class action litigation, and because Plaintiff has no interests antagonistic to the
Class Members.
48.
Class certification of the claims is appropriate under Fed. R. Civ. P. 23(b)(2) because
Defendant has acted or refused to act on grounds generally applicable to the Class, making
appropriate both declaratory and injunctive relief with respect to the Class as a whole.
49.
Alternatively, class certification is appropriate under Fed. R. Civ. P. 23(b)(3) because fact
and legal questions common to Class Members predominate over questions affecting only
individual Class Members, and because a class action is superior to other available methods
for the fair and efficient adjudication of this litigation.
50.
Judicial economy will be served by maintaining this lawsuit as a class action in that it is
likely to avoid the burden that would be otherwise placed upon the judicial system by the
filing of numerous similar suits throughout the United States.
FIRST CAUSE OF ACTION
VIOLATIONS OF THE ADA, 42 U.S.C. § 12181 et seq.
51.
Plaintiff, on behalf of himself and the Class Members, repeats and realleges every
allegation of the preceding paragraphs as if fully set forth herein.
52.
Section 302(a) of Title III of the ADA, 42 U.S.C. § 12101 et seq., provides:
No individual shall be discriminated against on the basis of disability in the full and equal
enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of
any place of public accommodation by any person who owns, leases (or leases to), or
operates a place of public accommodation.
42 U.S.C. § 12182(a).
53.
Defendant’s Website is a public accommodations within the definition of Title III of the
ADA, 42 U.S.C. § 12181(7). The Website is a service that is offered to the general public,
and as such, must be equally accessible to all potential consumers.
54.
Under Section 302(b)(1) of Title III of the ADA, it is unlawful discrimination to deny
individuals with disabilities the opportunity to participate in or benefit from the products,
services, facilities, privileges, advantages, or accommodations of an entity. 42 U.S.C. §
12182(b)(1)(A)(i).
55.
Under Section 302(b)(1) of Title III of the ADA, it is unlawful discrimination to deny
individuals with disabilities an opportunity to participate in or benefit from the products,
services, facilities, privileges, advantages, or accommodation, which is equal to the
opportunities afforded to other individuals. 42 U.S.C. § 12182(b)(1)(A)(ii).
56.
Under Section 302(b)(2) of Title III of the ADA, unlawful discrimination also includes,
among other things:
[A] failure to make reasonable modifications in policies, practices, or procedures, when
such modifications are necessary to afford such goods, services, facilities, privileges,
advantages, or accommodations to individuals with disabilities, unless the entity can
demonstrate that making such modifications would fundamentally alter the nature of such
goods, services, facilities, privileges, advantages or accommodations; and a failure to take
such steps as may be necessary to ensure that no individual with a disability is excluded,
denied services, segregated or otherwise treated differently than other individuals because
of the absence of auxiliary aids and services, unless the entity can demonstrate that taking
such steps would fundamentally alter the nature of the good, service, facility, privilege,
advantage, or accommodation being offered or would result in an undue burden.
42 U.S.C. § 12182(b)(2)(A)(ii)-(iii).
57.
The acts alleged herein constitute violations of Title III of the ADA, and the regulations
promulgated thereunder. Plaintiff, who is a member of a protected class of persons under
the ADA, has a physical disability that substantially limits the major life activity of sight
within the meaning of 42 U.S.C. § 12102(1)(A)-(2)(A). Furthermore, Plaintiff has been
denied full and equal access to the Website, has not been provided services that are
provided to other patrons who are not disabled, and has not been provided any reasonable
accommodation to those services. Defendant has failed to take any prompt and equitable
steps to remedy its discriminatory conduct. These violations are ongoing.
58.
Under 42 U.S.C. § 12188 and the remedies, procedures, and rights set forth and
incorporated therein, Plaintiff, requests relief as set forth below.
SECOND CAUSE OF ACTION
DECLARATORY RELIEF
59.
Plaintiff, on behalf of himself and the Class Members, repeats and realleges every
allegation of the preceding paragraphs as if fully set forth herein.
60.
An actual controversy has arisen and now exists between the parties in that Plaintiff
contends, and is informed and believes that Defendant denies, that its Website contains
access barriers denying blind customers the full and equal access to the products, services
and facilities of its Website, which Defendant owns, operations and controls, fails to
comply with applicable laws including, but not limited to, Title III of the Americans with
Disabilities Act, 42 U.S.C. § 12182, et seq. prohibiting discrimination against the blind.
61.
A judicial declaration is necessary and appropriate at this time in order that each of the
parties may know their respective rights and duties and act accordingly.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff respectfully requests this Court grant the following relief:
62.
A Declaratory Judgment that at the commencement of this action DEL GROSSO’S
AMUSEMENT PARK, INC. was in violation of the specific requirements of Title III of
the ADA described above, and the relevant implementing regulations of the ADA, in that
DEL GROSSO’S AMUSEMENT PARK, INC. took no action that was reasonably
calculated to ensure that its Website is fully accessible to, and independently usable by,
individuals with visual disabilities;
63.
A permanent injunction pursuant to 42 U.S.C. § 12188(a)(2) and 28 CFR § 36.504(a) which
directs Defendant to take all steps necessary to bring its Website into full compliance with
the requirements set forth in the ADA, and its implementing regulations, so that its Website
is fully accessible to, and independently usable by, blind individuals, and which further
directs that the Court shall retain jurisdiction for a period to be determined to ensure that
Defendant has adopted and is following an institutional policy that will in fact cause it to
remain fully in compliance with the law—the specific injunctive relief requested by
Plaintiff is described more fully in paragraph 8 above;
64.
An award of costs and expenses of this action;
65.
Payment of reasonable attorneys’ fees, pursuant to 42 U.S.C. § 12205 and 28 CFR §
36.505, including costs of monitoring Defendant’s compliance with the judgment (see
Hadix v. Johnson, 143 F.3d 246 (6th Cir. 1998), aff'd in part, rev'd in part, 527 U.S. 343
(1999); Jenkins v. Missouri, 127 F.3d 709 (8th Cir. 1997); Walker v. U.S. Dep't of Hous.
& Urban Dev., 99 F.3d 761 (5th Cir. 1996); Stewart v. Gates, 987 F.2d 1450, 1452 (9th
Cir. 1993) (district court should permit compensation for the post judgment monitoring
efforts by the plaintiff’s counsel that are “useful and necessary to ensure compliance with
the court's orders”); Garrity v. Sununu, 752 F.2d 727, 738-39 (1st Cir. 1984); Adams v.
Mathis, 752 F.2d 553 (11th Cir. 1985); Willie M. v. Hunt, 732 F.2d 383, 385, 387 (4th Cir.
1984); Bond v. Stanton, 630 F.2d 1231, 1233-34 (7th Cir. 1980); Northcross v. Board of
Educ., 611 F.2d 624, 637 (6th Cir. 1979) (“Services devoted to reasonable monitoring of
the court's decrees, both to ensure full compliance and to ensure that the plan is indeed
working…are essential to the long-term success of the plaintiff's suit.”) (citing 3rd Circuit’s
support for District Court’s award of prospective fees to plaintiff’s counsel);
66.
An order certifying the Class under Fed. R. Civ. P. 23(a) & (b)(2) and/or (b)(3), appointing
Plaintiff as Class Representative, and his attorneys as Class Counsel; and
67.
Such other and further relief as this Court deems just and proper.
Dated: Philadelphia, Pennsylvania
August 24, 2020
GLANZBERG TOBIA LAW, P.C.
By: /s/ David S. Glanzberg
David S. Glanzberg, Esq.
[email protected]
123 South Broad Street, Suite 1640
Philadelphia, PA 19109
Tel: (215) 981-5400
Fax: (267) 319-1993
ATTORNEYS FOR PLAINTIFF
| civil rights, immigration, family |
lEiL_YgBF5pVm5zYHzzo | UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
GARY KLEINSCHMIDT, Individually and
on behalf of All Others Similarly Situated,
Case No.
JURY TRIAL DEMANDED
Plaintiff,
v.
ALFI, INC., PAUL PEREIRA, DENNIS
MCINTOSH, JOHN M. COOK, II, JIM LEE,
JUSTIN ELKOURI, ALLISON FICKEN,
FRANK SMITH, RICHARD MOWSER,
KINGSWOOD CAPITAL MARKETS,
REVERE SECURITIES LLC, and
WESTPARK CAPITAL, INC.,
Defendants,
CLASS ACTION COMPLAINT FOR VIOLATIONS
OF THE FEDERAL SECURITIES LAWS
Plaintiff Gary Kleinschmidt (“Plaintiff”), individually and on behalf of all others similarly
situated, by and through his attorneys, alleges the following upon information and belief, except
as to those allegations concerning Plaintiff, which are alleged upon personal knowledge. Plaintiff’s
information and belief is based upon, among other things, his counsel’s investigation, which
includes without limitation: (a) review and analysis of regulatory filings made by Alfi, Inc. (“Alfi”
or the “Company”) with the United States (“U.S.”) Securities and Exchange Commission (“SEC”);
(b) review and analysis of press releases and media reports issued by and disseminated by Alfi;
and (c) review of other publicly available information concerning Alfi.
NATURE OF THE ACTION AND OVERVIEW
1.
This is a class action on behalf of persons and entities that purchased or otherwise
acquired Alfi: (a) common stock or warrants pursuant and/or traceable to the Registration
Statement issued in connection with the Company’s initial public offering (the “IPO” or
1
“Offering”) conducted on or about May 4, 2021; and/or (b) securities between May 4, 2021 and
November 15, 2021, inclusive (the “Class Period”). Plaintiff pursues claims against the Defendants
under the Securities Act of 1933 (the “Securities Act”) and the Securities Exchange Act of 1934
(the “Exchange Act”).
2.
Alfi is a technology company that offers a software as a service in the “Digital Out
of Home (DOOH) Smart Advertising segment,” which includes “artificial intelligence, machine
& deep learning, edge computing, Big Data, telecommunications, and the Internet of Things
(IoT).”
3.
On May 5, 2021, the Company filed its prospectus on Form 424B4 with the SEC,
which forms part of the Registration Statement. In the IPO, the Company sold approximately
4,850,746 shares of common stock and warrants to purchase 4,850,746 shares of common stock at
the combined public offering price of $4.15 per share. The Company received aggregate proceeds
of approximately $17.8 million from the Offering. The proceeds from the IPO were purportedly
to be used to repay certain debt and for general corporate purposes, including working capital,
business development, sales and marketing activities, and capital expenditures.
4.
On October 28, 2021, after the market closed, Alfi revealed that, on October 22,
2021, its Board of Directors had placed the Company’s President and Chief Executive Officer
(“CEO”), its Chief Financial Officer (“CFO”) and Treasurer, and its Chief Technology Officer
(“CTO”) “on administrative leave [pending] an independent internal investigation regarding
certain corporate transactions and other matters.” It also stated that on October 28, 2021, Alfi
terminated the CTO’s employment.
5.
On this news, Alfi’s stock price fell $1.24, or 22%, to close at $4.42 per share on
October 29, 2021, on unusually heavy trading volume.
2
6.
On November 1, 2021, Alfi revealed that the internal investigation concerned the
purchase of a condominium and the Company’s commitment to sponsor a sports tournament,
which was partially payable through the issuance of unregistered Alfi shares.
7.
On November 15, 2021, after the market closed, Alfi disclosed receipt of a
document preservation request that related to an ongoing investigation by the SEC. Specifically,
the Company was required to preserve “documents and data created on or after April 1, 2018 that
. . . relate or refer to the condominium or the sports tournament sponsorship . . . , or financial
reporting and disclosure controls, policies, or procedures.” The Company also stated that it could
not timely file its quarterly report on Form 10-Q for the period ended September 30, 2021. The
Company also stated that its third quarter 2021 results were a “significant change” from the prior
quarter’s results, including because Alfi “was party to material transactions which are expected to
result in significant one-time expenses.”
8.
On this news, the Company’s stock price fell $0.24, or 5%, to close at $4.37 per
share on November 16, 2021.
9.
Throughout the Class Period, Defendants made materially false and/or misleading
statements, as well as failed to disclose material adverse facts about the Company’s business,
operations, and prospects. Specifically, Defendants failed to disclose to investors: (1) that Alfi’s
employees had engaged in certain improper corporate transactions; (2) that, as a result, Alfi’s
disclosure controls and procedures were ineffective; (3) that, as a result of the foregoing, the
Company was reasonably likely to face regulatory scrutiny, reputational harm, and penalties; and
(4) that, as a result of the foregoing, Defendants’ positive statements about the Company’s
business, operations, and prospects were materially misleading and/or lacked a reasonable basis.
3
10.
As a result of Defendants’ wrongful acts and omissions, and the precipitous decline
in the market value of the Company’s securities, Plaintiff and other Class members have suffered
significant losses and damages.
JURISDICTION AND VENUE
11.
The claims asserted herein arise under Sections 11 and 15 of the Securities Act (15
U.S.C. §§ 77k and 77o), Sections 10(b) and 20(a) of the Exchange Act (15 U.S.C. §§ 78j(b) and
78t(a)) and Rule 10b-5 promulgated thereunder by the SEC (17 C.F.R. § 240.10b-5).
12.
This Court has jurisdiction over the subject matter of this action pursuant to 28
U.S.C. § 1331, Section 22 of the Securities Act (15 U.S.C. § 77v), and Section 27 of the Exchange
Act (15 U.S.C. § 78aa).
13.
Venue is proper in this Judicial District pursuant to 28 U.S.C. § 1391(b) and Section
27 of the Exchange Act (15 U.S.C. § 78aa(c)). Substantial acts in furtherance of the alleged fraud
or the effects of the fraud have occurred in this Judicial District. Many of the acts charged herein,
including the dissemination of materially false and/or misleading information, occurred in
substantial part in this Judicial District. In addition, the Company’s principal executive offices are
in this District.
14.
In connection with the acts, transactions, and conduct alleged herein, Defendants
directly and indirectly used the means and instrumentalities of interstate commerce, including the
United States mail, interstate telephone communications, and the facilities of a national securities
exchange.
PARTIES
15.
Plaintiff Gary Kleinschmidt, as set forth in the accompanying certification,
incorporated by reference herein, purchased Alfi securities pursuant and/or traceable to the IPO
4
and during the Class Period, and suffered damages as a result of the federal securities law
violations and false and/or misleading statements and/or material omissions alleged herein.
16.
Defendant Alfi is incorporated under the laws of Delaware with its principal
executive offices located in Miami Beach, Florida. Alfi’s common stock trades on the NASDAQ
Exchange under the symbol “ALF” and its warrants under the symbol “ALFIW.”
17.
Defendant Paul Pereira (“Pereira”) was the Company’s Chief Executive Officer
(“CEO”) at all relevant times. He signed or authorized the signing of the Company’s Registration
Statement filed with the SEC.
18.
Defendant Dennis McIntosh (“McIntosh”) was the Company’s Chief Financial
Officer (“CFO”) at all relevant times. He signed or authorized the signing of the Company’s
Registration Statement filed with the SEC.
19.
Defendants Pereira and McIntosh (collectively the “Individual Defendants”),
because of their positions with the Company, possessed the power and authority to control the
contents of the Company’s reports to the SEC, press releases and presentations to securities
analysts, money and portfolio managers and institutional investors, i.e., the market. The Individual
Defendants were provided with copies of the Company’s reports and press releases alleged herein
to be misleading prior to, or shortly after, their issuance and had the ability and opportunity to
prevent their issuance or cause them to be corrected. Because of their positions and access to
material non-public information available to them, the Individual Defendants knew that the
adverse facts specified herein had not been disclosed to, and were being concealed from, the public,
and that the positive representations which were being made were then materially false and/or
misleading. The Individual Defendants are liable for the false statements pleaded herein.
5
20.
Defendant John M. Cook, II (“Cook”) was the Company’s Chief Business
Development Officer and a director of the Company at all relevant times. He signed or authorized
the signing of the Company’s Registration Statement filed with the SEC.
21.
Defendant Jim Lee (“Lee”) was a director of the Company and signed or authorized
the signing of the Company’s Registration Statement filed with the SEC.
22.
Defendant Justin Elkouri (“Elkouri”) was a director of the Company and signed or
authorized the signing of the Company’s Registration Statement filed with the SEC.
23.
Defendant Allison Ficken (“Ficken”) was a director of the Company and signed or
authorized the signing of the Company’s Registration Statement filed with the SEC.
24.
Defendant Frank Smith (“Smith”) was a director of the Company and signed or
authorized the signing of the Company’s Registration Statement filed with the SEC.
25.
Defendant Richard Mowser (“Mowser”) was a director of the Company and signed
or authorized the signing of the Company’s Registration Statement filed with the SEC.
26.
Defendants Pereira, McIntosh, Cook, Lee, Elkouri, Ficken, Smith, and Mowser are
collectively referred to hereinafter as the “Securities Act Individual Defendants.”
27.
Defendant Kingswood Capital Markets (“Kingswood”) served as an underwriter
for Alfi’s IPO. In the IPO, Kingswood agreed to purchase 3,003,417 shares of the Company’s
common stock, exclusive of the over-allotment option.
28.
Defendant Revere Securities LLC (“Revere”) served as an underwriter for Alfi’s
IPO. In the IPO, Revere agreed to purchase 481,927 shares of the Company’s common stock,
exclusive of the over-allotment option.
6
29.
Defendant Westpark Capital, Inc. (“Westpark”) served as an underwriter for Alfi’s
IPO. In the IPO, Westpark agreed to purchase 246,000 shares of the Company’s common stock,
exclusive of the over-allotment option.
30.
Defendants Kingswood, Revere, and Westpark are collectively referred to
hereinafter as the “Underwriter Defendants.”
SUBSTANTIVE ALLEGATIONS
Background
31.
Alfi is a technology company that offers a software as a service in the “Digital Out
of Home (DOOH) Smart Advertising segment,” which includes “artificial intelligence, machine
& deep learning, edge computing, Big Data, telecommunications, and the Internet of Things
(IoT).”
The Company’s False and/or Misleading
Registration Statement and Prospectus
32.
On January 8, 2021, the Company filed its Registration Statement on Form S-1 with
the SEC, which forms part of the Registration Statement.
33.
On April 26, 2021, the Company filed its final amendment to the Registration
Statement with the SEC on Form S-1/A, which forms part of the Registration Statement. The
Registration Statement was declared effective on May 3, 2021.
34.
On May 5, 2021, the Company filed its prospectus on Form 424B4 with the SEC,
which forms part of the Registration Statement. In the IPO, the Company sold approximately
4,850,746 shares of common stock and warrants to purchase 4,850,746 shares of common stock at
the combined public offering price of $4.15 per share. The Company received aggregate proceeds
of approximately $17.8 million from the Offering. The proceeds from the IPO were purportedly
7
to be used to repay certain debt and for general corporate purposes, including working capital,
business development, sales and marketing activities, and capital expenditures.
35.
The Registration Statement was negligently prepared and, as a result, contained
untrue statements of material facts or omitted to state other facts necessary to make the statements
made not misleading, and was not prepared in accordance with the rules and regulations governing
its preparation.
36.
Under applicable SEC rules and regulations, the Registration Statement was
required to disclose known trends, events or uncertainties that were having, and were reasonably
likely to have, an impact on the Company’s continuing operations.
37.
The Registration Statement stated:
Our disclosure controls and procedures are designed to reasonably assure that
information required to be disclosed by us in reports we file or submit under the
Exchange Act is accumulated and communicated to management, recorded,
processed, summarized and reported within the time periods specified in the
rules and forms of the SEC.
38.
The Registration Statement noted that “internal control over financial reporting is
a process designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements in accordance with generally accepted accounting
principles.” It stated that “In connection with this offering, we intend to begin the process of
documenting, reviewing and improving our internal controls and procedures for compliance with
Section 404 of the Sarbanes-Oxley Act, which will require annual management assessment of the
effectiveness of our internal control over financial reporting.”
39.
The Registration Statement was materially false and misleading and omitted to
state: (1) that Alfi’s employees had engaged in certain improper corporate transactions; (2) that,
as a result, Alfi’s disclosure controls and procedures were ineffective; (3) that, as a result of the
foregoing, the Company was reasonably likely to face regulatory scrutiny, reputational harm, and
8
penalties; and (4) that, as a result of the foregoing, Defendants’ positive statements about the
Company’s business, operations, and prospects were materially misleading and/or lacked a
reasonable basis.
Materially False and Misleading
Statements Issued During the Class Period
40.
The Class Period begins on May 4, 2021. On that day, Alfi’s common stock and
warrants began publicly trading pursuant to the Registration Statement, including the statements
identified in ¶¶ 37-38.
41.
On June 10, 2021, Alfi filed its quarterly report on Form 10-Q for the period ended
March 31, 2021 (the “1Q21 10-Q”), stating that the Company’s:
disclosure controls and procedures are effective to ensure that information required
to be disclosed by us in the reports that we file or submit under the Exchange Act
(i) are recorded, processed, summarized and reported, within the time periods
specified in the SEC’s rules and forms and (ii) are accumulated and communicated
to management, specifically our Chief Executive Officer and Chief Financial
Officer, as appropriate to allow timely decisions regarding required disclosure.
42.
The 1Q21 10-Q further stated that “[t]here was no change in our internal control
over financial reporting . . . that occurred during the fiscal quarter ended March 31, 2021 that has
materially affected, or is reasonably likely to materially affect, our internal control over financial
reporting.”
43.
On August 16, 2021, Alfi filed its quarterly report on Form 10-Q for the period
ended June 30, 2021 (the “2Q21 10-Q”), stating that the Company’s:
disclosure controls and procedures are effective to ensure that information required
to be disclosed by us in the reports that we file or submit under the Exchange Act
(i) are recorded, processed, summarized and reported, within the time periods
specified in the SEC’s rules and forms and (ii) are accumulated and communicated
to management, specifically our chief executive officer and chief financial officer,
as appropriate to allow timely decisions regarding required disclosure.
9
44.
The 2Q21 10-Q further stated that “[t]here was no change in our internal control
over financial reporting . . . that occurred during the fiscal quarter ended June 30, 2021 that has
materially affected, or is reasonably likely to materially affect, our internal control over financial
reporting.”
45.
The 2Q21 10-Q also noted the purchase of an “Office Condo,” stating that “[t]he
Company signed a contract to acquire additional office space for $1,100,000 in Miami Beach, FL
on July 12, 2021,” which was “expected to close in late August.”
46.
The above statements identified in ¶¶ 40-45 were materially false and/or
misleading, and failed to disclose material adverse facts about the Company’s business, operations,
and prospects. Specifically, Defendants failed to disclose to investors: (1) that Alfi’s employees
had engaged in certain improper corporate transactions; (2) that, as a result, Alfi’s disclosure
controls and procedures were ineffective; (3) that, as a result of the foregoing, the Company was
reasonably likely to face regulatory scrutiny, reputational harm, and penalties; and (4) that, as a
result of the foregoing, Defendants’ positive statements about the Company’s business, operations,
and prospects were materially misleading and/or lacked a reasonable basis.
47.
The truth began to emerge on October 28, 2021, after the market closed, when Alfi
revealed that its Board of Directors had placed the Company’s President and CEO, its CFO and
Treasurer, and its CTO “on administrative leave [pending] an independent internal investigation
regarding certain corporate transactions and other matters.” In a Form 8-K filed with the SEC, the
Company stated:
On October 22, 2021, the Board of Directors (the “Board”) of Alfi, Inc. (the
“Company”) placed each of Paul Pereira, the Company’s President and Chief
Executive Officer, Dennis McIntosh, the Company’s Chief Financial Officer and
Treasurer, and Charles Pereira, the Company’s Chief Technology Officer, on paid
administrative leave and authorized an independent internal investigation regarding
certain corporate transactions and other matters.
10
*
*
*
On October 28, 2021, Mr. C. Pereira’s employment with the Company was
terminated.
48.
On this news, Alfi’s stock price fell $1.24 or 22%, to close at $4.42 per share on
October 29, 2021, on unusually heavy trading volume.
49.
On November 1, 2021, Alfi filed another Form 8-K with the SEC, stating that its
independent registered public accounting firm, Friedman LLP, had resigned. Also, one of the
Company’s directors, Richard Mowser, resigned because, among other things, he believed that the
decision to replace the CEO, CFO, and CTO “in my opinion was personal and calculated and
driven by certain directors/shareholders to take control of the company without any regard for due
process.” It also revealed information about the corporate transactions subject to the internal
investigation:
The corporate transactions that precipitated the Board’s actions to place the
executives on paid administrative leave and to authorize the independent internal
investigation included: (i) the Company’s purchase of a condominium for a
purchase price of approximately $1.1 million and the related erroneously certified
corporate resolution regarding the unanimous approval by the Board and the
Company’s stockholders of such purchase, and (ii) the Company’s commitment to
sponsor a sports tournament in the amount of $640,000, a portion of which was
payable through the issuance by the Company of unregistered shares of the
Company’s common stock, and as to which the Company would be obligated to
pay additional cash amounts if the net proceeds received by the recipient upon the
sale of such shares are less than an amount specified in the contract and for which
the Company would be given a credit toward sponsorship or attendance at events
in the future if the net proceeds received by the recipient upon the sale of such
shares exceed an amount specified in the contract. (The Company’s entry into the
contract for the purchase of the condominium was disclosed in the Company’s
Quarterly Report on Form 10-Q for the quarter ended June 30, 2021.) These
transactions were undertaken by the Company’s management without sufficient
and appropriate consultation with or approval by the Board. The independent
internal investigation is expected to investigate the details of the above-noted
transactions and any other matters that come to the Board’s attention regarding
actions taken by the executives in their management of the Company. One of the
goals of the independent internal investigation is to help the Company in
developing improved corporate governance policies and procedures to ensure
that the Board is provided the opportunity to consider and provide appropriate
11
input to the Company’s management on significant corporate transactions. If,
during the course of the independent internal investigation, the Board uncovers any
wrongdoing, it will take appropriate action with respect to the person or persons
responsible therefor.
50.
The above statements identified in ¶ 47 and ¶ 49 were materially false and/or
misleading, and failed to disclose material adverse facts about the Company’s business, operations,
and prospects. Specifically, Defendants failed to disclose to investors: (1) that the Company was
reasonably likely to face regulatory scrutiny, reputational harm, and penalties for certain improper
transactions; and (2) that, as a result of the foregoing, Defendants’ positive statements about the
Company’s business, operations, and prospects were materially misleading and/or lacked a
reasonable basis.
The Subsequent Disclosures
51.
On November 15, 2021, after the market closed, Alfi filed a Form 8-K with the
SEC, in which it disclosed receipt of a document preservation request that related to an ongoing
investigation by the SEC. Specifically, the Company stated:
On November 9, 2021, the Company received a letter from the staff of the
Securities and Exchange Commission (the “SEC”) indicating that the Company, its
affiliates and agents may possess documents and data relevant to an ongoing
investigation being conducted by the staff of the SEC and notifying the Company
that such documents and data should be reasonably preserved and retained until
further notice. The materials to be preserved and retained include documents and
data created on or after April 1, 2018 that: (i) were created, modified or accessed
by certain named former and current officers and directors of the Company or any
other officer or director of the Company; or (ii) relate or refer to the condominium
or the sports tournament sponsorship identified in the Company’s Current Report
on Form 8-K filed on November 1, 2021, or financial reporting and disclosure
controls, policies or procedures. The Company intends to cooperate fully with the
SEC in this matter.
52.
Also on November 15, 2021, Alfi filed a Notification of Late Filing on Form 12b-
25 with the SEC, stating that it could not timely file its quarterly report on Form 10-Q for the
period ended September 30, 2021. Alfi also stated that it “anticipates a significant change in the
12
results of operations from the quarter ended June 30, 2021, including because Alfi “was party to
material transactions which are expected to result in significant one-time expenses.” The Company
cited the following factors causing the delay:
Alfi, Inc. (the “Company”) is unable, without unreasonable effort or expense, to
file its Quarterly Report on Form 10-Q for the quarter ended September 30, 2021
(the “Quarterly Report”) by the November 15, 2021 filing date applicable to smaller
reporting companies: (i) due to recent changes in the Company’s Chief Executive
Officer and Chief Financial Officer and in the Chair of the Audit Committee (the
“Audit Committee”) of the Company’s Board of Directors (the “Board”); and (ii)
because the Company has not yet engaged a new independent registered public
accounting firm, which is needed to provide the required review of the Company’s
financial statements to be filed as part of the Quarterly Report.
53.
On this news, the Company’s stock price fell $0.24, or 5%, to close at $4.37 per
share on November 16, 2021.
54.
By the commencement of this action, Alfi shares were trading as low as $2.77 per
share, a nearly 33% decline from the $4.15 per share IPO price.
CLASS ACTION ALLEGATIONS
55.
Plaintiff brings this action as a class action pursuant to Federal Rule of Civil
Procedure 23(a) and (b)(3) on behalf of a class, consisting of all persons and entities that purchased
or otherwise acquired Alfi (a) common stock or warrants pursuant and/or traceable to the
Registration Statement issued in connection with the Company’s initial public offering (the “IPO”)
conducted on or about May 4, 2021; and/or (b) securities between May 4, 2021 and November 15,
2021, inclusive, and who were damaged thereby (the “Class”). Excluded from the Class are
Defendants, the officers and directors of the Company, at all relevant times, members of their
immediate families and their legal representatives, heirs, successors, or assigns, and any entity in
which Defendants have or had a controlling interest.
56.
The members of the Class are so numerous that joinder of all members is
impracticable. Throughout the Class Period, Alfi’s shares actively traded on the NASDAQ. While
13
the exact number of Class members is unknown to Plaintiff at this time and can only be ascertained
through appropriate discovery, Plaintiff believes that there are at least hundreds or thousands of
members in the proposed Class. Millions of Alfi shares were traded publicly during the Class
Period on the NASDAQ. Record owners and other members of the Class may be identified from
records maintained by Alfi or its transfer agent and may be notified of the pendency of this action
by mail, using the form of notice similar to that customarily used in securities class actions.
57.
Plaintiff’s claims are typical of the claims of the members of the Class as all
members of the Class are similarly affected by Defendants’ wrongful conduct in violation of
federal law that is complained of herein.
58.
Plaintiff will fairly and adequately protect the interests of the members of the Class
and has retained counsel competent and experienced in class and securities litigation.
59.
Common questions of law and fact exist as to all members of the Class and
predominate over any questions solely affecting individual members of the Class. Among the
questions of law and fact common to the Class are:
(a)
whether the federal securities laws were violated by Defendants’ acts as
alleged herein;
(b)
whether statements made by Defendants to the investing public during the
Class Period omitted and/or misrepresented material facts about the business, operations, and
prospects of Alfi; and
(c)
to what extent the members of the Class have sustained damages and the
proper measure of damages.
60.
A class action is superior to all other available methods for the fair and efficient
adjudication of this controversy since joinder of all members is impracticable. Furthermore, as the
14
damages suffered by individual Class members may be relatively small, the expense and burden
of individual litigation makes it impossible for members of the Class to individually redress the
wrongs done to them. There will be no difficulty in the management of this action as a class action.
UNDISCLOSED ADVERSE FACTS
61.
The market for Alfi’s securities was open, well-developed and efficient at all
relevant times. As a result of these materially false and/or misleading statements, and/or failures
to disclose, Alfi’s securities traded at artificially inflated prices during the Class Period. Plaintiff
and other members of the Class purchased or otherwise acquired Alfi’s securities relying upon the
integrity of the market price of the Company’s securities and market information relating to Alfi,
and have been damaged thereby.
62.
During the Class Period, Defendants materially misled the investing public, thereby
inflating the price of Alfi’s securities, by publicly issuing false and/or misleading statements and/or
omitting to disclose material facts necessary to make Defendants’ statements, as set forth herein,
not false and/or misleading. The statements and omissions were materially false and/or misleading
because they failed to disclose material adverse information and/or misrepresented the truth about
Alfi’s business, operations, and prospects as alleged herein.
63.
At all relevant times, the material misrepresentations and omissions particularized
in this Complaint directly or proximately caused or were a substantial contributing cause of the
damages sustained by Plaintiff and other members of the Class. As described herein, during the
Class Period, Defendants made or caused to be made a series of materially false and/or misleading
statements about Alfi’s financial well-being and prospects. These material misstatements and/or
omissions had the cause and effect of creating in the market an unrealistically positive assessment
of the Company and its financial well-being and prospects, thus causing the Company’s securities
to be overvalued and artificially inflated at all relevant times. Defendants’ materially false and/or
15
misleading statements during the Class Period resulted in Plaintiff and other members of the Class
purchasing the Company’s securities at artificially inflated prices, thus causing the damages
complained of herein when the truth was revealed.
LOSS CAUSATION
64.
Defendants’ wrongful conduct, as alleged herein, directly and proximately caused
the economic loss suffered by Plaintiff and the Class.
65.
During the Class Period, Plaintiff and the Class purchased Alfi’s securities at
artificially inflated prices and were damaged thereby. The price of the Company’s securities
significantly declined when the misrepresentations made to the market, and/or the information
alleged herein to have been concealed from the market, and/or the effects thereof, were revealed,
causing investors’ losses.
SCIENTER ALLEGATIONS
66.
As alleged herein, Defendants acted with scienter since Defendants knew that the
public documents and statements issued or disseminated in the name of the Company were
materially false and/or misleading; knew that such statements or documents would be issued or
disseminated to the investing public; and knowingly and substantially participated or acquiesced
in the issuance or dissemination of such statements or documents as primary violations of the
federal securities laws. As set forth elsewhere herein in detail, the Individual Defendants, by virtue
of their receipt of information reflecting the true facts regarding Alfi, their control over, and/or
receipt and/or modification of Alfi’s allegedly materially misleading misstatements and/or their
associations with the Company which made them privy to confidential proprietary information
concerning Alfi, participated in the fraudulent scheme alleged herein.
16
APPLICABILITY OF PRESUMPTION OF RELIANCE
(FRAUD-ON-THE-MARKET DOCTRINE)
67.
The market for Alfi’s securities was open, well-developed and efficient at all
relevant times. As a result of the materially false and/or misleading statements and/or failures to
disclose, Alfi’s securities traded at artificially inflated prices during the Class Period. On June 28,
2021, the Company’s share price closed at a Class Period high of $18.59 per share. Plaintiff and
other members of the Class purchased or otherwise acquired the Company’s securities relying
upon the integrity of the market price of Alfi’s securities and market information relating to Alfi,
and have been damaged thereby.
68.
During the Class Period, the artificial inflation of Alfi’s shares was caused by the
material misrepresentations and/or omissions particularized in this Complaint causing the damages
sustained by Plaintiff and other members of the Class. As described herein, during the Class
Period, Defendants made or caused to be made a series of materially false and/or misleading
statements about Alfi’s business, prospects, and operations. These material misstatements and/or
omissions created an unrealistically positive assessment of Alfi and its business, operations, and
prospects, thus causing the price of the Company’s securities to be artificially inflated at all
relevant times, and when disclosed, negatively affected the value of the Company shares.
Defendants’ materially false and/or misleading statements during the Class Period resulted in
Plaintiff and other members of the Class purchasing the Company’s securities at such artificially
inflated prices, and each of them has been damaged as a result.
69.
At all relevant times, the market for Alfi’s securities was an efficient market for the
following reasons, among others:
(a)
Alfi shares met the requirements for listing, and was listed and actively
traded on the NASDAQ, a highly efficient and automated market;
17
(b)
As a regulated issuer, Alfi filed periodic public reports with the SEC and/or
the NASDAQ;
(c)
Alfi regularly communicated with public investors via established market
communication mechanisms, including through regular dissemination of press releases on the
national circuits of major newswire services and through other wide-ranging public disclosures,
such as communications with the financial press and other similar reporting services; and/or
(d)
Alfi was followed by securities analysts employed by brokerage firms who
wrote reports about the Company, and these reports were distributed to the sales force and certain
customers of their respective brokerage firms. Each of these reports was publicly available and
entered the public marketplace.
70.
As a result of the foregoing, the market for Alfi’s securities promptly digested
current information regarding Alfi from all publicly available sources and reflected such
information in Alfi’s share price. Under these circumstances, all purchasers of Alfi’s securities
during the Class Period suffered similar injury through their purchase of Alfi’s securities at
artificially inflated prices and a presumption of reliance applies.
71.
A Class-wide presumption of reliance is also appropriate in this action under the
Supreme Court’s holding in Affiliated Ute Citizens of Utah v. United States, 406 U.S. 128 (1972),
because the Class’s claims are, in large part, grounded on Defendants’ material misstatements
and/or omissions. Because this action involves Defendants’ failure to disclose material adverse
information regarding the Company’s business operations and financial prospects—information
that Defendants were obligated to disclose—positive proof of reliance is not a prerequisite to
recovery. All that is necessary is that the facts withheld be material in the sense that a reasonable
investor might have considered them important in making investment decisions. Given the
18
importance of the Class Period material misstatements and omissions set forth above, that
requirement is satisfied here.
NO SAFE HARBOR
72.
The statutory safe harbor provided for forward-looking statements under certain
circumstances does not apply to any of the allegedly false statements pleaded in this Complaint.
The statements alleged to be false and misleading herein all relate to then-existing facts and
conditions. In addition, to the extent certain of the statements alleged to be false may be
characterized as forward looking, they were not identified as “forward-looking statements” when
made and there were no meaningful cautionary statements identifying important factors that could
cause actual results to differ materially from those in the purportedly forward-looking statements.
In the alternative, to the extent that the statutory safe harbor is determined to apply to any forward-
looking statements pleaded herein, Defendants are liable for those false forward-looking
statements because at the time each of those forward-looking statements was made, the speaker
had actual knowledge that the forward-looking statement was materially false or misleading,
and/or the forward-looking statement was authorized or approved by an executive officer of Alfi
who knew that the statement was false when made.
FIRST CLAIM
Violation of Section 11 of the Securities Act
(Against All Defendants)
73.
Plaintiff repeats and re-alleges each and every allegation contained above as if fully
set forth herein.
74.
This Count is brought pursuant to Section 11 of the Securities Act, 15 U.S.C. § 77k,
on behalf of the Class, against the Defendants.
19
75.
The Registration Statement for the IPO was inaccurate and misleading, contained
untrue statements of material facts, omitted to state other facts necessary to make the statements
made not misleading, and omitted to state material facts required to be stated therein.
76.
Alfi is the registrant for the IPO. The Defendants named herein were responsible
for the contents and dissemination of the Registration Statement.
77.
As issuer of the shares, Alfi is strictly liable to Plaintiff and the Class for the
misstatements and omissions.
78.
None of the Defendants named herein made a reasonable investigation or possessed
reasonable grounds for the belief that the statements contained in the Registration Statement was
true and without omissions of any material facts and were not misleading.
79.
By reasons of the conduct herein alleged, each Defendant violated, and/or
controlled a person who violated Section 11 of the Securities Act.
80.
Plaintiff acquired Alfi shares pursuant and/or traceable to the Registration
Statement for the IPO.
81.
Plaintiff and the Class have sustained damages. The value of Alfi shares has
declined substantially subsequent to and due to the Defendants’ violations.
SECOND CLAIM
Violation of Section 15 of the Securities Act
(Against the Securities Act Individual Defendants)
82.
Plaintiff repeats and re-alleges each and every allegation contained above as if fully
set forth herein, except any allegation of fraud, recklessness or intentional misconduct.
83.
This count is asserted against the Securities Act Individual Defendants and is based
upon Section 15 of the Securities Act.
20
84.
The Securities Act Individual Defendants, by virtue of their offices, directorship,
and specific acts were, at the time of the wrongs alleged herein and as set forth herein, controlling
persons of Alfi within the meaning of Section 15 of the Securities Act. The Securities Act
Individual Defendants had the power and influence and exercised the same to cause Alfi to engage
in the acts described herein.
85.
The Securities Act Individual Defendants’ positions made them privy to and
provided them with actual knowledge of the material facts concealed from Plaintiff and the Class.
86.
By virtue of the conduct alleged herein, the Securities Act Individual Defendants
are liable for the aforesaid wrongful conduct and are liable to Plaintiff and the Class for damages
suffered.
THIRD CLAIM
Violation of Section 10(b) of The Exchange Act and
Rule 10b-5 Promulgated Thereunder
Against Alfi and the Individual Defendants
87.
Plaintiff repeats and re-alleges each and every allegation contained above as if fully
set forth herein.
88.
During the Class Period, Defendants carried out a plan, scheme and course of
conduct which was intended to and, throughout the Class Period, did: (i) deceive the investing
public, including Plaintiff and other Class members, as alleged herein; and (ii) cause Plaintiff and
other members of the Class to purchase Alfi’s securities at artificially inflated prices. In
furtherance of this unlawful scheme, plan and course of conduct, Defendants, and each defendant,
took the actions set forth herein.
89.
Defendants (i) employed devices, schemes, and artifices to defraud; (ii) made
untrue statements of material fact and/or omitted to state material facts necessary to make the
21
statements not misleading; and (iii) engaged in acts, practices, and a course of business which
operated as a fraud and deceit upon the purchasers of the Company’s securities in an effort to
maintain artificially high market prices for Alfi’s securities in violation of Section 10(b) of the
Exchange Act and Rule 10b-5. All Defendants are sued either as primary participants in the
wrongful and illegal conduct charged herein or as controlling persons as alleged below.
90.
Defendants, individually and in concert, directly and indirectly, by the use, means
or instrumentalities of interstate commerce and/or of the mails, engaged and participated in a
continuous course of conduct to conceal adverse material information about Alfi’s financial well-
being and prospects, as specified herein.
91.
Defendants employed devices, schemes and artifices to defraud, while in
possession of material adverse non-public information and engaged in acts, practices, and a course
of conduct as alleged herein in an effort to assure investors of Alfi’s value and performance and
continued substantial growth, which included the making of, or the participation in the making of,
untrue statements of material facts and/or omitting to state material facts necessary in order to
make the statements made about Alfi and its business operations and future prospects in light of
the circumstances under which they were made, not misleading, as set forth more particularly
herein, and engaged in transactions, practices and a course of business which operated as a fraud
and deceit upon the purchasers of the Company’s securities during the Class Period.
92.
Each of the Individual Defendants’ primary liability and controlling person liability
arises from the following facts: (i) the Individual Defendants were high-level executives and/or
directors at the Company during the Class Period and members of the Company’s management
team or had control thereof; (ii) each of these defendants, by virtue of their responsibilities and
activities as a senior officer and/or director of the Company, was privy to and participated in the
22
creation, development and reporting of the Company’s internal budgets, plans, projections and/or
reports; (iii) each of these defendants enjoyed significant personal contact and familiarity with the
other defendants and was advised of, and had access to, other members of the Company’s
management team, internal reports and other data and information about the Company’s finances,
operations, and sales at all relevant times; and (iv) each of these defendants was aware of the
Company’s dissemination of information to the investing public which they knew and/or
recklessly disregarded was materially false and misleading.
93.
Defendants had actual knowledge of the misrepresentations and/or omissions of
material facts set forth herein, or acted with reckless disregard for the truth in that they failed to
ascertain and to disclose such facts, even though such facts were available to them. Such
defendants’ material misrepresentations and/or omissions were done knowingly or recklessly and
for the purpose and effect of concealing Alfi’s financial well-being and prospects from the
investing public and supporting the artificially inflated price of its securities. As demonstrated by
Defendants’ overstatements and/or misstatements of the Company’s business, operations,
financial well-being, and prospects throughout the Class Period, Defendants, if they did not have
actual knowledge of the misrepresentations and/or omissions alleged, were reckless in failing to
obtain such knowledge by deliberately refraining from taking those steps necessary to discover
whether those statements were false or misleading.
94.
As a result of the dissemination of the materially false and/or misleading
information and/or failure to disclose material facts, as set forth above, the market price of Alfi’s
securities was artificially inflated during the Class Period. In ignorance of the fact that market
prices of the Company’s securities were artificially inflated, and relying directly or indirectly on
the false and misleading statements made by Defendants, or upon the integrity of the market in
23
which the securities trades, and/or in the absence of material adverse information that was known
to or recklessly disregarded by Defendants, but not disclosed in public statements by Defendants
during the Class Period, Plaintiff and the other members of the Class acquired Alfi’s securities
during the Class Period at artificially high prices and were damaged thereby.
95.
At the time of said misrepresentations and/or omissions, Plaintiff and other
members of the Class were ignorant of their falsity, and believed them to be true. Had Plaintiff
and the other members of the Class and the marketplace known the truth regarding the problems
that Alfi was experiencing, which were not disclosed by Defendants, Plaintiff and other members
of the Class would not have purchased or otherwise acquired their Alfi securities, or, if they had
acquired such securities during the Class Period, they would not have done so at the artificially
inflated prices which they paid.
96.
By virtue of the foregoing, Defendants violated Section 10(b) of the Exchange Act
and Rule 10b-5 promulgated thereunder.
97.
As a direct and proximate result of Defendants’ wrongful conduct, Plaintiff and the
other members of the Class suffered damages in connection with their respective purchases and
sales of the Company’s securities during the Class Period.
FOURTH CLAIM
Violation of Section 20(a) of The Exchange Act
Against the Individual Defendants
98.
Plaintiff repeats and re-alleges each and every allegation contained above as if fully
set forth herein.
99.
Individual Defendants acted as controlling persons of Alfi within the meaning of
Section 20(a) of the Exchange Act as alleged herein. By virtue of their high-level positions and
their ownership and contractual rights, participation in, and/or awareness of the Company’s
24
operations and intimate knowledge of the false financial statements filed by the Company with the
SEC and disseminated to the investing public, Individual Defendants had the power to influence
and control and did influence and control, directly or indirectly, the decision-making of the
Company, including the content and dissemination of the various statements which Plaintiff
contends are false and misleading. Individual Defendants were provided with or had unlimited
access to copies of the Company’s reports, press releases, public filings, and other statements
alleged by Plaintiff to be misleading prior to and/or shortly after these statements were issued and
had the ability to prevent the issuance of the statements or cause the statements to be corrected.
100.
In particular, Individual Defendants had direct and supervisory involvement in the
day-to-day operations of the Company and, therefore, had the power to control or influence the
particular transactions giving rise to the securities violations as alleged herein, and exercised the
101.
As set forth above, Alfi and Individual Defendants each violated Section 10(b) and
Rule 10b-5 by their acts and omissions as alleged in this Complaint. By virtue of their position as
controlling persons, Individual Defendants are liable pursuant to Section 20(a) of the Exchange
Act. As a direct and proximate result of Defendants’ wrongful conduct, Plaintiff and other
members of the Class suffered damages in connection with their purchases of the Company’s
securities during the Class Period.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff prays for relief and judgment, as follows:
(a)
Determining that this action is a proper class action under Rule 23 of the Federal
Rules of Civil Procedure;
25
(b)
Awarding compensatory damages in favor of Plaintiff and the other Class members
against all defendants, jointly and severally, for all damages sustained as a result of Defendants’
wrongdoing, in an amount to be proven at trial, including interest thereon;
(c)
Awarding Plaintiff and the Class their reasonable costs and expenses incurred in
this action, including counsel fees and expert fees; and
(d)
Such other and further relief as the Court may deem just and proper.
JURY TRIAL DEMANDED
Plaintiff hereby demands a trial by jury.
Dated: December 15, 2021
Respectfully submitted,
SAXENA WHITE P.A.
By: /s/ Adam D. Warden
Joseph E. White, III (FL Bar No. 621064)
Adam D. Warden (FL Bar No. 873691)
Jonathan D. Lamet (FL Bar No. 106059)
7777 Glades Road
Suite 300
Boca Raton, FL 33434
Telephone: (561) 394-3399
Facsimile: (561) 394-3382
[email protected]
[email protected]
[email protected]
Local Counsel for Plaintiff
GLANCY PRONGAY & MURRAY LLP
Robert V. Prongay
Charles H. Linehan
Pavithra Rajesh
1925 Century Park East, Suite 2100
Los Angeles, CA 90067
Telephone: (310) 201-9150
Facsimile: (310) 201-9160
LAW OFFICES OF HOWARD G. SMITH
Howard G. Smith
3070 Bristol Pike, Suite 112
26
Bensalem PA 19020
Telephone: (215) 638-4847
Facsimile: (215) 638-4867
Counsel for Plaintiff
27
| securities |
6ejiEYcBD5gMZwczlqsI |
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
Aaron Posen, individually and on behalf of all others
similarly situated,
Civil Action No: 1:21-cv-4071
Plaintiff,
CLASS ACTION COMPLAINT
DEMAND FOR JURY TRIAL
-v.-
Portnoy Schneck, L.L.C.,
Cavalry SPV I, LLC,
Defendant(s).
Plaintiff Aaron Posen (hereinafter referred to as “Plaintiff”) brings this Class Action
Complaint by and through his attorneys, Stein Saks, PLLC, against Defendant Portnoy Schneck,
L.L.C., formerly known as Schachter Portnoy Schneck, L.L.C. (hereinafter referred to as
“Defendant Portnoy”) and Defendant Cavalry SPV I, LLC (hereinafter referred to as “Defendant
Cavalry”), individually and on behalf of a class of all others similarly situated, pursuant to Rule 23
of the Federal Rules of Civil Procedure, based upon information and belief of Plaintiff’s counsel,
except for allegations specifically pertaining to Plaintiff, which are based upon Plaintiff's personal
knowledge.
INTRODUCTION/PRELIMINARY STATEMENT
1.
Congress enacted the Fair Debt Collection Practices Act (“the FDCPA”) in 1977 in
response to the “abundant evidence of the use of abusive, deceptive, and unfair debt collection
practices by many debt collectors.” 15 U.S.C. §1692(a). At that time, Congress was concerned
that “abusive debt collection practices contribute to the number of personal bankruptcies, to
marital instability, to the loss of jobs, and to invasions of individual privacy.” Id. Congress
concluded that “existing laws…[we]re inadequate to protect consumers,” and that “the effective
collection of debts” does not require “misrepresentation or other abusive debt collection
practices.” 15 U.S.C. §§ 1692(b) & (c).
2.
Congress explained that the purpose of the Act was not only to eliminate abusive
debt collection practices, but also to “insure that those debt collectors who refrain from using
abusive debt collection practices are not competitively disadvantaged.” Id. § 1692(e). After
determining that the existing consumer protection laws were inadequate Id. § l692(b), Congress
gave consumers a private cause of action against debt collectors who fail to comply with the
Act. Id. § 1692k.
JURISDICTION AND VENUE
3.
The Court has jurisdiction over this class action pursuant to 28 U.S.C. § 1331 and
15 U.S.C. § 1692 et. seq. The Court has pendent jurisdiction over the State law claims in this
action pursuant to 28 U.S.C. § 1367(a).
4.
Venue is proper in this judicial district pursuant to 28 U.S.C. § 1391(b)(2) as this is
where the Plaintiff resides, as well as where a substantial part of the events or omissions giving
rise to the claim occurred.
NATURE OF THE ACTION
5.
Plaintiff brings this class action on behalf of a class of New York consumers under
§ 1692 et seq. of Title 15 of the United States Code, commonly referred to as the Fair Debt
Collections Practices Act (“FDCPA”), and
6.
Plaintiff is seeking damages and declaratory relief.
PARTIES
7.
Plaintiff is a resident of the State of New York, County of Kings.
8.
Defendant Portnoy is a “debt collector” as the phrase is defined in 15 U.S.C.
§ 1692(a)(6), with a business address at 500 Summit Lake Drive, Suite 4A, Valhalla, NY 10595.
9.
Upon information and belief, Defendant Portnoy uses the mail, telephone, and
facsimile and regularly engages in business, the principal purpose of which is to attempt to
collect debts alleged to be owed or due another.
10.
Defendant Cavalry is a “debt collector” as the phrase is defined in 15 U.S.C.
§ 1692(a)(6), with its headquarters at 500 Summit Lake Drive, Suite 400, Valhalla, NY 10595
and
an
address
for
service
of
process
at
C
T
Corporation
System
28 Liberty St, New York, NY 10005.
11.
Upon information and belief, Defendant Cavalry uses the mail, telephone, and
facsimile and regularly engages in business, the principal purpose of which is to attempt to
collect debts.
CLASS ALLEGATIONS
12.
Plaintiff brings this claim on behalf of the following case, pursuant to Fed. R. Civ.
P. 23(a) and 23(b)(3).
13.
The Class consists of:
a. all individuals with addresses in the State of New York;
b. to whom Defendant Portnoy sent a response to a validation request;
c. on behalf of Defendant Cavalry;
d. in which Defendant Portnoy includes an amount of “payments and/or credits
made on the debt since charge-off”;
e. without explaining the nature of the “payments and/or credits”;
f. which letter was sent on or after a date one (1) year prior to the filing of this
action and on or before a date twenty-one (2l) days after the filing of this action.
14.
The identities of all class members are readily ascertainable from the records of
Defendants and those companies and entities on whose behalf they attempt to collect and/or
have purchased debts.
15.
Excluded from the Plaintiff Class are the Defendants and all officers, members,
partners, managers, directors and employees of the Defendants and their respective immediate
families, and legal counsel for all parties to this action, and all members of their immediate
families.
16.
There are questions of law and fact common to the Plaintiff Class, which common
issues predominate over any issues involving only individual class members. The principal issue
is whether the Defendants’ written communications to consumers, in the form attached as
Exhibit A violates 15 U.S.C. § l692e and § 1692g et seq.
17.
The Plaintiff’s claims are typical of the class members, as all are based upon the same
facts and legal theories. The Plaintiff will fairly and adequately protect the interests of the
Plaintiff Class defined in this complaint. The Plaintiff has retained counsel with experience in
handling consumer lawsuits, complex legal issues, and class actions, and neither the Plaintiff
nor his attorneys have any interests, which might cause them not to vigorously pursue this action.
18.
This action has been brought, and may properly be maintained, as a class action
pursuant to the provisions of Rule 23 of the Federal Rules of Civil Procedure because there is a
well-defined community interest in the litigation:
a. Numerosity: The Plaintiff is informed and believes, and on that basis alleges,
that the Plaintiff Class defined above is so numerous that joinder of all members
would be impractical.
b. Common Questions Predominate: Common questions of law and fact exist as
to all members of the Plaintiff Class and those questions’ predominance over any
questions or issues involving only individual class members. The principal issue
is whether the Defendants’ written communications to consumers, in the form
attached as Exhibit A violates 15 U.S.C. § l692e and § 1692g et seq.
c. Typicality: The Plaintiff’s claims are typical of the claims of the class members.
The Plaintiff and all members of the Plaintiff Class have claims arising out of the
Defendants’ common uniform course of conduct complained of herein.
d. Adequacy: The Plaintiff will fairly and adequately protect the interests of the
class members insofar as Plaintiff has no interests that are averse to the absent
class members. The Plaintiff is committed to vigorously litigating this matter.
Plaintiff has also retained counsel experienced in handling consumer lawsuits,
complex legal issues, and class actions. Neither the Plaintiff nor his counsel have
any interests which might cause them not to vigorously pursue the instant class
action lawsuit.
e. Superiority: A class action is superior to the other available means for the fair
and efficient adjudication of this controversy because individual joinder of all
members would be impracticable. Class action treatment will permit a large
number of similarly situated persons to prosecute their common claims in a single
forum efficiently and without unnecessary duplication of effort and expense that
individual actions would engender.
19.
Certification of a class under Rule 23(b)(3) of the Federal Rules of Civil Procedure
is also appropriate in that the questions of law and fact common to members of the Plaintiff
Class predominate over any questions affecting an individual member, and a class action is
superior to other available methods for the fair and efficient adjudication of the controversy.
20.
Depending on the outcome of further investigation and discovery, Plaintiff may, at
the time of class certification motion, seek to certify a class(es) only as to particular issues
pursuant to Fed. R. Civ. P. 23(c)(4).
FACTUAL ALLEGATIONS
21.
Plaintiff repeats, reiterates and incorporates the allegations contained in paragraphs
numbered above herein with the same force and effect as if the same were set forth at length
herein.
22.
At some point in time, on a date better known to Defendants, an obligation was
incurred to the original creditor, Citibank, N.A. The subject debt was allegedly incurred solely
for personal, household or family purposes, specifically a Citi Simplicity credit card.
23.
The Plaintiff is a “consumer” as defined by 15 U.S.C.§ 1692a(3).
24.
Upon information and belief, Citibank, N.A. sold or assigned the defaulted debt to
Defendant Cavalry on October 19, 2018 for the purpose of debt collection. Therefore, Defendant
Cavalry is a “debt collector” as defined by 15 U.S.C.§ 1692a(6).
25.
Upon information and belief, Defendant Cavalry contracted Defendant Portnoy to
collect the defaulted debt. Therefore, Defendant Contract is a “debt collector” as defined by 15
U.S.C.§ 1692a(6).
26.
The subject obligation is consumer-related, and therefore a “debt” as defined by 15
U.S.C.§ 1692a(5).
27.
Defendant Cavalry has policies and procedures in place that govern Defendant
Portnoy’s debt collection practices, specifically with regard to collecting the subject debt,
thereby evidencing Defendant Cavalry’s control over Defendant Portnoy’s collection practices.
28.
By virtue of the relationship between the two Defendants, Defendant Cavalry
exercised control over Defendant Portnoy while the latter was engaged in collecting the subject
debt on behalf of the former.
29.
Therefore, Defendant Cavalry should be held vicariously liable for any and all
violations committed by Defendant Portnoy.
Violation – March 29, 2021 Collection Letter
30.
On or about March 29, 2021, Defendant Portnoy sent Plaintiff a response to a dispute
made by the Plaintiff regarding the alleged debt, originally owed to Citibank, N.A. (See “Letter”
attached as Exhibit A).
31.
Included in the subject of the Letter, it lists in relevant part:
Our client/Current Creditor: Cavalry SPV I, LLC
Original Creditor: Citibank, N.A.
Total amount of the debt due as of charge-off: $4,652.60
Total amount of interest accrued since charge-off: $0.00
Total amount of non-interest charges or fees accrued since charge-off: $0.00
Total amount of payments and/or credits made on the debt since charge-off:
$102.88
Total amount of the debt due: $4,549.72
32.
The Letter includes a final billing statement from Citibank (Billing period: 08/09/18-
09/10/18) which lists the balance as $4,652.60.
33.
The Letter claims to be a “substantiation” of the Plaintiff’s debt. However, it remains
unclear as to why Defendants discounted the total amount owed by $102.88.
34.
The Letter categorizes the difference between the charge-off amount and the amount
of debt due into a nebulous grouping called “payments and/or credits” but fails to explain the
nature of such “payments and/or credits”.
35.
The letter is open to more than one reasonable interpretation:
a)
The $102.88 amount could represent a payment made by the Plaintiff;
b)
The $102.88 amount could represent a credit conferred by the creditor;
c)
The $102.88 amount could represent a mistake by the debt collector.
36.
If Defendants intended Option A, then they falsely represent a payment made by the
Plaintiff.
37.
This misrepresentation serves Defendants’ interest of extending the statute of
limitations for suing upon the defaulted debt.
38.
Furthermore, the Plaintiff is confused because he does not remember making any
recent payments of $102.88.
39.
If Defendants intended Option B, then “payments and/or credits” does not capture
what Defendants are doing. If Defendants are in fact waiving the last interest amount applied by
Citibank, then they should have clearly conveyed their waiver to the Plaintiff. It is misleading
to label a waiver of interest as a “credit”.
40.
Without being provided with further explaination, the Plaintiff does not understand
why the debt collector would want to waive interest. It is unexpected, counterintuitive, and calls
into question Defendants’ right to collect on this debt altogether.
41.
If Defendants made a mistake, as per Option C, then the amount of debt owed is
misrepresented in the Letter.
42.
The fact that the stated total amount of the debt due is less than the charge-off amount
does not change the fact that the amount sought by the debt collector is incorrect.
43.
The failure to state the correct amount of the debt is not merely a technical detail. It
is material because the amount of the debt goes to the essence of the validation.
44.
The body of the letter also fails to elaborate on the term “payments and/or credits.”
45.
This type of boilerplate validation letter should not pass legal muster and Defendants
should not be permitted to continue to proliferate this type of bare-bones “validation.”
46.
Once a debt collector receives a dispute from a consumer, it is their obligation to
conduct a basic investigation as to the validity of the debt and provide substantiation to the
consumer for why they are collecting this debt.
47.
In result, the Plaintiff remains unaware of how much, if anything, he owes to the
creditor, despite the fact that he disputed the debt and anticipated receiving some explaination
to validate that he owed a particular amount of money to a specific entity.
48.
A consumer dispute puts the debt collector on notice that there might be problems
with the debt which require some investigation on the part of the debt collector.
49.
When a consumer duly disputes a debt, a debt collector must validate that the debt
they are attempting to collect is legitimate, properly linked to the disputing consumer, and
represents the correct debt amount owed by the consumer.
50.
The validation letter must clear up the confusion and demonstrate the debt collector’s
right to collect this debt, properly owed by this consumer, for this amount the debt collector
seeks. Otherwise, the “validation” lacks the essence of what a validation is intended to
accomplish – to verify the debt collector’s right to collect this debt from this consumer.
51.
The Letter is confusing and misleading. The Plaintiff was confused if he was required
to pay the balance listed on the original debt or the balance listed on the debt collector’s Letter.
The least sophisticated consumer, and the Plaintiff included, remains puzzled as to which entity
is correct, the original creditor or the debt collector.
52.
The Defendants’ letter failed to satisfy the validation requirement mandated by
Congress in the FDCPA.
53.
Plaintiff is in the zone of injury that Congress contemplated when they enacted the
FDCPA. He duly disputed his debt and failed to receive the type of validation Congress
anticipated when they required a debt collector to provide a response to the consumer.
54.
The Plaintiff incurred a concrete and particularized harm in that Congress identified
a consumer’s substantive right to receive validation of a disputed debt. This harm is closely
related to the traditional common law tort of fraud.
55.
Due to Defendants’ failure to actually validate the debt, Plaintiff wasted time and
money trying to figure out if this is a legitimate debt obligation for the amount stated.
56.
Therefore, the Letter provided by the Defendants which ostensibly intends to validate
the Plaintiff’s debt has no meaning and serves only to mislead and confuse the consumer as the
true balance cannot be determined from the Letter.
57.
The Plaintiff could not determine the correct amount owed from the Letter because
two different balances were provided without any meaningful explanation for the difference
between the balances.
58.
Plaintiff incurred an injury as he could not ascertain from the deceptive and
misleading Letter the total amount he currently owed on the debt.
59.
Further, Defendants’ letter is potentially a false representation of the amount of the
debt due, depending on what motivated Defendants’ total amount of the debt due – either a
mistake or a consumer payment which was never actually paid.
60.
As a result of Defendants’ false, deceptive, and misleading debt collection practices,
Plaintiff has been damaged.
COUNT I
VIOLATIONS OF THE FAIR DEBT COLLECTION PRACTICES ACT
15 U.S.C. §1692e et seq.
61.
Plaintiff repeats, reiterates and incorporates the allegations contained in paragraphs
above herein with the same force and effect as if the same were set forth at length herein.
62.
Defendants’ debt collection efforts attempted and/or directed towards the Plaintiff
violated various provisions of the FDCPA, including but not limited to 15 U.S.C. § 1692e.
63.
Pursuant to 15 U.S.C. §1692e, a debt collector may not use any false, deceptive, or
misleading representation or means in connection with the collection of any debt.
64.
Defendants violated §1692e:
a. As the letter falsely represents the character, amount and/or legal status of the
debt in violation of §1692e(2)(A); and
b. As the letter makes a false and misleading representation in violation of
§1692e(10).
65.
By reason thereof, Defendants are liable to Plaintiff for judgment in that Defendants’
conduct violated Section 1692e et seq. of the FDCPA, actual damages, statutory damages, costs
and attorneys’ fees.
COUNT II
VIOLATIONS OF THE FAIR DEBT COLLECTION PRACTICES ACT
15 U.S.C. §1692g et seq.
66.
Plaintiff repeats, reiterates and incorporates the allegations contained in paragraphs
above herein with the same force and effect as if the same were set forth at length herein.
67.
Defendants’ debt collection efforts attempted and/or directed towards the Plaintiff
violated various provisions of the FDCPA, including but not limited to 15 U.S.C. § 1692g.
68.
Pursuant to 15 U.S.C. § 1692g(a):
Within five days after the initial communication with a consumer in
connection with the collection of any debt, a debt collector shall, unless the
following information is contained in the initial communication or the
consumer has paid the debt, send the consumer a written notice containing –
1. The amount of the debt;
2. The name of the creditor to whom the debt is owed;
3. A statement that unless the consumer, within thirty days after
receipt of the notice, disputes the validity of the debt, or any
portion thereof, the debt will be assumed to be valid by the debt-
collector;
4. A statement that the consumer notifies the debt collector in
writing within the thirty-day period that the debt, or any portion
thereof, is disputed, the debt collector will obtain verification of
the debt or a copy of a judgment against the consumer and a copy
of such verification or judgment will be mailed to the consumer
by the debt collector; and
5. A statement that, upon the consumer’s written request within the
thirty-day period, the debt collector will provide the consumer
with the name and address of the original creditor, if different
from the current creditor.
69.
Defendants violated § 1692g(a) by failing to meaningfully verify the debt, leaving
Plaintiff unsure of how much he owed, unclear if he really owed the obligation to this debt
collector.
70.
Furthermore, Defendants deprived Plaintiff of his substantive right to dispute the
debt and receive meaningful validation of the debt.
71.
Pursuant to § 1692g(b):
If the consumer notifies the debt collector in writing within the thirty-day
period described in subsection (a) that the debt, or any portion thereof, is
disputed, or that the consumer requests the name and address of the original
creditor, the debt collector shall cease collection of the debt, or any disputed
portion thereof, until the debt collector obtains verification of the debt or a
copy of a judgment, or the name and address of the original creditor, and a
copy of such verification or judgment, or name and address of the original
creditor, is mailed to the consumer by the debt collector.
72.
Defendants violated § 1692g(b) by failing to properly verify the debt to the Plaintiff.
73.
By reason thereof, Defendants are liable to Plaintiff for judgment in that Defendants’
conduct violated Section 1692g et seq. of the FDCPA, actual damages, statutory damages, costs
and attorneys’ fees.
DEMAND FOR TRIAL BY JURY
74.
Pursuant to Rule 38 of the Federal Rules of Civil Procedure, Plaintiff hereby requests
a trial by jury on all issues so triable.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff Aaron Posen, individually and on behalf of all others similarly
situated, demands judgment from Defendant Portnoy Schneck, L.L.C. and Defendant Cavalry SPV
I, LLC as follows:
1.
Declaring that this action is properly maintainable as a Class Action and certifying
Plaintiff as Class representative, and Tamir Saland, Esq. as Class Counsel;
2.
Awarding Plaintiff and the Class statutory damages;
3.
Awarding Plaintiff and the Class actual damages;
4.
Awarding Plaintiff costs of this Action, including reasonable attorneys’ fees and
expenses;
5.
Awarding pre-judgment interest and post-judgment interest; and
6.
Awarding Plaintiff and the Class such other and further relief as this Court may deem
just and proper.
Dated: July 20, 2021
Respectfully Submitted,
STEIN SAKS, PLLC
_/s/ Tamir Saland________
Tamir Saland, Esq.
One University Plaza, Ste. 620
Hackensack, NJ 07601
Ph: 201-282-6500 ext. 122
Fax: 201-282-6501
[email protected]
Counsel for Plaintiff
| consumer fraud |
aQNIFYcBD5gMZwczFfvf | INTRODUCTION
1.
Yahoo! Inc. (“Yahoo”) is a leading internet company that provides web-based services,
including Yahoo! Mail, to millions of users. In exchange for using Yahoo’s “free” services, Yahoo
catalogues personal and confidential information and turns profit by selling that information for targeted
advertising. Over time, Yahoo has developed technology that increasingly encroaches on consumers’
privacy rights by monitoring and recording confidential communications without making adequate
disclosures of its conduct so that consumers are even aware that their rights are being violated.
Moreover, Yahoo not only reviews the contents of its own users’ correspondence, but also scans
incoming email from non-Yahoo users and uses all of the data it gathers to sell advertising and other
content based on the information it collects. As a result, Yahoo is violating state and federal privacy
laws that have been enacted to prohibit the abuses this type of technology can have in intercepting
electronic communications.
2.
Plaintiffs Eric Holland and Cody Baker bring this class action lawsuit against Yahoo for
its violation of consumers’ state and federal privacy rights that are designed to protect citizens from
invasions of their private, privileged, and confidential communications. Through this proposed class
action, Plaintiffs Holland and Baker request relief from the Court in the form of damages on behalf of
themselves and the proposed class, injunctive and declaratory relief to curb or prohibit Yahoo’s conduct
complained of herein, and any other relief the Court deems appropriate.
PARTIES
3.
Plaintiff Holland is a resident of Derry, New Hampshire.
4.
Plaintiff Baker is a resident of Brooklyn, New York.
5.
Defendant Yahoo! Inc. is a Delaware corporation with its principal place of business at
701 First Avenue, Sunnyvale, California 94089. Yahoo does business throughout the State of California
and the United States.
JURISDICTION AND VENUE
6.
This Court has original jurisdiction pursuant to the Class Action Fairness Act, 28 U.S.C.
§ 1332(d), because (a) at least one member of the putative class is a citizen of a state different from
Defendant, (b) the amount in controversy exceeds $5,000,000, exclusive of interest and costs, (c) the
proposed class consists of more than 100 class members, and (d) none of the exceptions under the
subsection apply to this action.
7.
Venue is proper in this District under 28 U.S.C. § 1391(b) because Yahoo maintains its
headquarters and principal place of business in this District and a substantial part of the events giving
rise to Plaintiffs’ Complaint occurred in this District.
INTRADISTRICT ASSIGNMENT
8.
Assignment is proper to the San Jose division of this District under Local Rule 3-2(c), as
a substantial part of the events and omissions giving rise to Plaintiffs’ claims occurred in Santa Clara
County, and Yahoo is headquartered in Santa Clara County.
COMMON FACTUAL ALLEGATIONS
The ECPA and CIPA
9.
Congress enacted the Electronic Communications Privacy Act of 1986 (“ECPA”), 18
U.S.C. §§ 2510 et seq., to update the existing federal wiretapping law to include new forms of electronic
communications, including new “electronic mail” technology. At the time, the use of email was
primarily for business purposes, but its use was expanding and projected to grow. The Senate Report on
the ECPA stated that its purpose was to “clarify federal privacy protections and standards in light of
dramatic changes in new computer and telecommunications technologies.” The Senate Committee on
the Judiciary also noted that it was “increasingly possible for private parties to intercept the personal or
proprietary communications of others.” As a result, the ECPA protects citizens from unwanted
invasions of their electronic communications, such as email or instant messaging. In order to enforce
the ECPA’s privacy protections, Congress authorized private citizens to bring civil actions for damages,
injunctive relief, and attorneys’ fees. The ECPA provides that any person harmed may be awarded
damages in the amount of $100 per day for each violation, or $10,000, whichever is greater.
10.
The state of California has also long recognized the privacy rights of its citizens, which
are well rooted in California’s Constitution. Cal. Const. Art 1, § 1. California has enacted many laws
regulating citizens’ right to privacy, including California Invasion of Privacy Act (“CIPA”), California
Penal Code §§ 630, et seq. Similar to the ECPA, California recognized that technological advances
allowed eavesdropping on private communications and were an “invasion of privacy” that was “a
serious threat to the free exercise of personal liberties [that] cannot be tolerated in a free and civilized
society.” By enforcing its Constitutional rights through the CIPA, California made it clear that an
individual’s right to privacy must be balanced against technological developments. Much like the
ECPA, California also grants citizens a private right of action to recover in court for violations of the
law. Under CIPA, any person who is injured by a violation of the statute may recover $5,000 or three
times his or her actual damages, whichever is greater. A plaintiff may also seek injunctive relief to
prohibit future violations.
Yahoo! Mail
11.
Founded in 1994, Yahoo!, Inc. provides internet-based services across its Yahoo.com
platform, including the popular Yahoo! Mail email service that was launched in 1997 with the first
version of “Yahoo! Mail Classic.” The “Yahoo! Mail Classic” interface was available to users until
2013, when all Yahoo users were migrated to “Yahoo! Mail.”
12.
Yahoo supports its “free” Yahoo! Mail services by selling advertising that is delivered
directly to users through the interfaces on their computer screens or mobile devices. Yahoo is able to
charge premium prices for its advertisements because Yahoo has developed and employed advanced
technology that can review and analyze the contents of users’ email and instant messages and match
advertisers to their targeted demographics based on information culled from these communications. For
example, Yahoo profits from its intrusive technology by selling advertisers services such as “Smart
Ads” that Yahoo claims use a “powerful combination of industry-leading, dynamic creative and
unmatched Yahoo user data.” Yahoo reportedly derives 75% of its entire revenue from advertisements
which drives its increasingly aggressive business practices to take as much consumer data it can in order
to maximize profits.
13.
On its website, Yahoo provides its “Terms of Service” and “Privacy Policy” that
purportedly govern the use of Yahoo’s products, including Yahoo! Mail. Yahoo’s Privacy Policy states
that Yahoo collects and shares information with its “trusted partners” in order to “customize the
advertising and content [users] see.” Yahoo states in its fine print that “[w]hen you use the new Yahoo
Mail our automated systems scan and analyze all incoming and outgoing communications content sent
and received from your account.” Yahoo admits to categorizing this information “for immediate and
future use.”
14.
Over time, Yahoo has become increasingly aggressive in its use of consumers’
information. Now, Yahoo scans and analyzes each and every email sent to Yahoo! Mail users, including
those sent from non-Yahoo! Mail users who: (1) are not on notice of Yahoo’s Terms of Service or
Privacy Policy; and (2) have no knowledge that their communications to Yahoo! Mail users will be
scanned, intercepted, stored, analyzed, and used for Yahoo’s profit.
15.
As email replaces traditional mail as the primary means of written communication in the
digital age, consumers have a reasonable expectation of privacy in their email. Among other things,
consumers share sensitive financial information through email. Banks, retailers, and investment
advisors share receipts, account information, bank statements and other reports with customers via
email. Doctors and lawyers also routinely communicate privileged and sensitive information with their
patients and clients over email. Email has become increasingly confidential and sensitive to the point
that many email service providers like Microsoft reportedly require court-ordered search warrants before
turning over the contents of a citizen’s email account to law enforcement.
16.
Consumers regularly send emails through Yahoo that contain personal, confidential,
privileged, financial, health, or other private information in which they have a reasonable expectation of
privacy. Accordingly, Yahoo’s conduct alleged herein intrudes on the legally recognized privacy of
these consumers in violation of the ECPA and CIPA.
PLAINTIFFS’ EXPERIENCES
17.
Plaintiff Holland is a resident of Derry, New Hampshire. Plaintiff Holland has held an
@aol.com address for approximately 15 years. His @aol.com address has been his primary email
address for email communications in which he has a reasonable expectation of privacy.
18.
Throughout the time period he has held his @aol.com email address, Plaintiff Holland
has regularly corresponded with Yahoo! Mail users through their @yahoo.com email
addresses. Because of this, his email address and the contents of his emails to and from Yahoo users
have been intercepted, scanned, stored, read, and analyzed by Yahoo.
19.
Plaintiff Baker is a resident of Brooklyn, New York. Plaintiff Baker has held a
gmail.com address since approximately 2004. His @gmail.com account has been his primary email
address for email communications in which he has a reasonable expectation of privacy.
20.
Throughout the time period he has held his @gmail.com email address, Plaintiff Baker
has regularly corresponded with Yahoo! Mail users through their @yahoo.com email addresses.
Because of this, his email address and the contents of his emails to and from Yahoo users have been
intercepted, scanned, stored, read, and analyzed by Yahoo.
CLASS ACTION ALLEGATIONS
21.
Plaintiffs Holland and Baker bring this action pursuant to Federal Rule of Civil Procedure
23 on behalf of themselves and a class preliminarily defined as:
All persons who, through non-Yahoo! Mail accounts, either received an
email message from a Yahoo! Mail user with an @yahoo.com email
address or sent an email to a Yahoo! Mail user with an @yahoo.com email
address within the past two years.
Excluded from the class are Yahoo; any agent, affiliate, parent, or subsidiary of Yahoo; any entity in
which Yahoo has a controlling interest; any officer or director of Yahoo; any successor or assign of
Yahoo; and any Judge to whom this case is assigned, as well as his or her staff and immediate family.
22.
Plaintiffs satisfy the numerosity, commonality, typicality, and adequacy prerequisites for
suing as a representative party pursuant to Rule 23.
23.
Numerosity. The proposed class consists of millions of persons—far too many to
practically join in a single action.
24.
Commonality. Plaintiffs’ and class members’ claims raise predominantly common
factual and legal questions that can be answered for all class members through a single class-wide
proceeding. Among other questions, the following inquiries are relevant to all Plaintiffs’ and class
members’ claims, and the answers to these questions are apt to advance the litigation:
a. Is Yahoo a person, or do they act through persons for whose actions they are
liable? Cal. Penal Code § 7; 18 U.S.C. §2510(6).
b. Did Yahoo intercept or make an unauthorized connection to electronic
communications or messages in order to read them or learn the meaning of their
contents without consent? Cal. Penal Code § 631; 18 U.S.C. §§ 2510(4),
2511(1)(a), 2511(2)(d).
c. When Yahoo’s interception or unauthorized connection was made, was it made
possible by use of a machine, instrument, contrivance, or electronic or mechanical
device? Cal. Penal Code § 631; 18 U.S.C. § 2510(4).
d. When Yahoo’s unauthorized connection was made, were the messages in transit
to or from the Yahoo! Mail users, and passing over any wire, line, or cable and
did Yahoo use those same lines or cables to make the connection? Cal. Penal
Code § 631.
e. Do emails qualify as messages, reports, communications or electronic
communications? Cal. Penal Code § 631; 18 U.S.C. § 2510(12).
f. Do users have a reasonable expectation that their emails are confidential
communications? Cal. Penal Code § 632.
g. Was Yahoo’s conduct of intercepting, wiretapping, reading, scanning, and
analyzing of email intentional and willful? Cal. Penal Code § 631; 18 U.S.C. §
2511.
h. Is Yahoo liable for statutory damages in the amount of $5,000 or three times
actual damages for Plaintiffs’ and class members’ CIPA claims, and $100 per day
for each violation, or $10,000 for Plaintiffs’ and class members’ ECPA claims?
Cal. Penal Code § 637.2; 18 U.S.C. § 2520.
i. Should the Court issue injunctive or declaratory relief and award Plaintiffs’
attorneys’ fees and costs against Yahoo for its violations of the ECPA and CIPA?
Cal. Penal Code § 637.2; 18 U.S.C. § 2520.
25.
Typicality. Plaintiffs’ claims are typical of class members’ claims as they arise from
Yahoo’s conduct and the same alleged privacy violations.
26.
Adequacy. Plaintiffs will fairly and adequately protect the interests of the class. Their
interests do not conflict with class members’ interests and they have retained counsel experienced in
complex class action litigation and data privacy lawsuits to vigorously prosecute this action on behalf of
the class.
27.
In addition to satisfying the prerequisites of Rule 23(a), Plaintiffs satisfy the requirements
for maintaining a class action under Rule 23(b)(3). Common questions of law and fact predominate
over any questions affecting only individual members and a class action is superior to individual
litigation. The amount of damages available to individual plaintiffs may be insufficient to make
litigation addressing Yahoo’s conduct economically feasible in the absence of the class action
procedure.
28.
In the alternative, class certification is appropriate under Rule 23(b)(2) and/or (c)(4)
because Defendant has acted or refused to act on grounds generally applicable to the class, thereby
making final injunctive relief appropriate with respect to the members of the class as a whole and/or
there are particular issues that can be collectively resolved for all class members through the efficiencies
of a class action.
FIRST CAUSE OF ACTION
(For violation of California’s Invasion of Privacy Act, Cal. Penal Code §§ 630, et seq.)
29.
Plaintiffs incorporate the above allegations by reference.
30.
By scanning, analyzing, indexing, reading, learning, storing or otherwise using Plaintiffs’
email communications intentionally and without Plaintiffs’ consent, as set forth above, Yahoo has
violated and continues to violate California’s Invasion of Privacy Act (“CIPA”), Cal. Penal Code §§ 630
et seq. Yahoo admits to using the information it unlawfully acquires for marketing purposes, including
but not limited to, selling targeted advertising to its subscribers.
31.
Yahoo, as a corporation, is a person under the California Penal Code.
32.
Under section 631(a) of the California Penal Code, it is unlawful for any person to use
“any machine, instrument, or contrivance” to “willfully and without the consent of all parties to the
communication … read, or [attempt] to read or to learn the contents of meaning of any message, report,
or communication,” while the message is “in transit or passing over any wire, line, or cable.”
33.
Yahoo’s practices set forth above violates the privacy rights CIPA was enacted to protect.
Such conduct is unlawful because consumers have not given either express or implied consent to
Yahoo’s practices, nor are they on notice that the contents of their communications are monitored and
used by Yahoo.
34.
Yahoo’s practices also violate section 632 of the California Penal Code, which prohibits
non-consensual recording of confidential communications. Communications are confidential if a party
to the communication has an objectively reasonable expectation that their conversation is private.
Plaintiffs and class members did not consent to Yahoo’s practices of scanning and storing their private
communications, in whose confidentiality they held a reasonable belief. Plaintiffs’ and class members’
email correspondence contained private and confidential materials including but not limited to
information about health and financial matters, personally sensitive information, and identification
information.
35.
These communications were made directly from the non-Yahoo! Mail user’s account to
an @yahoo.com email address. Much like sending a paper letter directly to a postal address,
communicating directly from one email address to another creates an objectively reasonable expectation
among Plaintiffs and the class that their emails were private and would not be scanned, analyzed, stored,
or otherwise used by Yahoo in a manner that the sender did not have notice of or consent to.
36.
Yahoo has willfully and intentionally violated Plaintiffs’ and class members’ privacy by
scanning, analyzing, reading, attempting to read, and learning the contents of and storing email
communications without Plaintiffs’ and class members’ consent or knowledge. Yahoo’s conduct
subjects it to statutory damages and injunctive relief pursuant to section 637.2 of the California Penal
Code. Plaintiffs and class members are entitled to, among other things: preliminary and permanent
injunctive relief to require Yahoo to cease its violations and change its practices; declaratory relief;
monetary relief in the amount of $5,000 or three times actual damages for each violation, as set forth in
§ 637.2(a)(1), as well as reasonable attorneys’ fees and costs of suit.
SECOND CAUSE OF ACTION
(For violation of the Electronic Communications Privacy Act, 18 U.S.C. §§ 2510, et seq.)
37.
Plaintiffs incorporate the above allegations by reference.
38.
Yahoo’s unlawful interception and use of Plaintiffs’ and class members’ email
communication violates the ECPA, 18 U.S.C. §§ 2510, et seq. Plaintiffs have standing to assert their
claims under ECPA on behalf of themselves and similarly situated individuals pursuant to 18 U.S.C. §
2520(a), which grants standing to “persons[s] whose… electronic communication[s] [were]
intercepted… in violation of this chapter.”
39.
Yahoo, as a corporation, is a “person” under 18 U.S.C. § 2510(6).
40.
Yahoo! Mail is offered as a service throughout the United States, and its conduct affects
interstate commerce. Additionally, Plaintiffs and class members reside in various states, and frequently
send email to states outside their own, the contents of which may be routed to or through California in
the course of Yahoo’s unlawful practices.
41.
The ECPA protects those, like Plaintiffs, whose privacy has been violated by any person
or corporation who “intentionally intercepts, endeavors to intercept… any wire, oral, or electronic
communication,” and who then “intentionally uses or endeavors to use, the contents of any wire, oral, or
electronic communication, knowing or having reason to know that the information was obtained through
the interception of a wire, oral, or electronic communication in violation of this subsection.” 18 U.S.C. §
42.
Yahoo intercepted and used the contents of Plaintiffs’ and class members’ email for the
purpose of driving profits from, among other things, the marketing of their personal data and the sales of
targeted advertising and content. The scanning, analyzing, and storing of email that Yahoo undertakes is
beyond what is necessary to operate an electronic communication platform. Yahoo is incentivized to
scan emails in order to sell targeted advertising at a premium, but the scanning is not essential to the
email service itself.
43.
As a result of Yahoo’s violations of the ECPA, pursuant to 18 U.S.C. § 2520, Plaintiffs
and class members are entitled to appropriate relief including, but not limited to: preliminary and
permanent injunctive relief to require Yahoo to stop the unlawful conduct alleged herein; statutory
damages for Plaintiffs and class members in the amount of $100 per day of violation, or $10,000; plus
reasonable attorneys’ fees and costs of suit.
PRAYER FOR RELIEF
WHEREFORE, Plaintiffs, individually and on behalf of the Class, request that the Court:
a.
Certify this case as a class action on behalf of the class defined above, appoint Plaintiffs
Holland and Baker as class representatives, and appoint Girard Gibbs LLP as class
counsel;
b.
Award injunctive and other equitable relief as is necessary to protect the interests of
Plaintiffs and other class members;
c.
Award statutory damages to Plaintiffs and class members in an amount to be determined
at trial;
d.
Award Plaintiffs and class members their reasonable litigation expenses and attorneys'
fees under CIPA, the ECPA, Federal Rule of Civil Procedure 23, California Code of Civil
Procedure 1021.5, or other applicable law;
e.
Award Plaintiffs and class members pre- and post-judgment interest, to the extent
allowable; and
f.
Award such other and further relief as equity and justice may require.
JURY TRIAL
Plaintiffs demand a trial by jury for all issues so triable.
Dated: October 25, 2013
GIRARD GIBBS LLP
By:
Matthew B. George
Daniel C. Girard
Matthew B. George
Heidi H. Kalscheur
601 California Street, 14th Floor
San Francisco, California 94108
Telephone: (415) 981-4800
Facsimile: (415) 981-4846
Attorneys for Plaintiffs
| privacy |
xdIYD4cBD5gMZwczUTR8 |
INDIA LIN BODIEN, ATTORNEY AT LA W
2522 North Proctor Street, #387
Tacoma, Washington 98406-5338
Telephone: (253) 212-7913
Fascimile: (253)276-0081
[email protected]
Craig J. Ackermann, WSBA #53330
Brian Denlinger, WSBA #53177
ACKERMANN & TILAJEF, P.C.
2602 North Proctor Street, #205
Tacoma, Washington, 98406
Telephone:
(310) 277-0614
Facsimile:
(310) 277-0635
[email protected]
[email protected]
Attorneys for Plaintiff and the Putative Class
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WASHINGTON AT SPOKANE
JOSEPH STIGAR, individually and on
behalf of all others similarly situated,
CASE NO: ___________________________
PLAINTIFF’S ANTITRUST CLASS
ACTION COMPLAINT FOR:
(1) VIOLATIONS OF SECTION 1 OF
THE SHERMAN ACT
[15 U.S.C. §§ 1, et. seq.]; and
(2) UNFAIR COMPETITION
Plaintiff,
v.
DOUGH DOUGH, INC., a Washington
Corporation, AUNTIE ANNE’S
FRANCHISOR SPV, LLC, a Delaware
Limited Liability Company; and DOES 1
through 10, inclusive,
[Washington Unfair Business Practices
Act, RCW 19.86, et. seq.];
DEMAND FOR JURY TRIAL
Defendants.
Plaintiff JOSEPH STIGAR (“Plaintiff Stigar”), individually and on behalf of all those
similarly situated, by and through his counsel, brings this Class Action Complaint (“Complaint”)
against Defendants DOUGH DOUGH, INC. (“Dough Dough”), AUNTIE ANNE’S
FRANCHISOR SPV, LLC (“Auntie Anne’s”); and Does 1 through 10 (who collectively shall be
referred to hereinafter as “Defendants”), on personal knowledge with respect to himself and his
own acts, and on information and belief as to other matters, alleges as follows:
I. NATURE OF ACTION
1.
Plaintiff Stigar, on behalf of himself, on behalf of the Washington general public,
and as a class action on behalf of Defendants’ employees and workers from July 12, 2014
through the present (“Class Members”), seeks millions of dollars in lost wages, plus triple
damages, and interest, caused by Defendants’ long-standing and illegal mutual non-solicitation
agreements (i.e., agreements that Auntie Anne’s franchisees could not solicit for employment the
employees of Auntie Anne’s and/or of other Auntie Anne’s franchisees) and anti-poach
agreements (i.e., agreements that Auntie Anne’s franchisees could not hire the employees of
Auntie Anne’s and/or other Auntie Anne’s franchisees) that were all entered into by Auntie
Anne’s franchises throughout Washington State and that had the intended and actual effect of
significantly reducing Class Members’ wages and salaries. The genesis of the anti-poach and
non-solicitation agreements at issue were franchise agreements between Auntie Anne’s and its
franchisees, and between its franchisees, including, upon information and belief, Dough Dough.
2.
This illegal conspiracy among and between Defendants and other Auntie Anne’s
franchisees to not employ, seek to employ, or to recruit one another’s employees, in order to
thereby suppress their wages, was not known, to Plaintiff and the Class Members until July 12,
2018, when the Washington State Attorney General (“AG”) revealed as part of its then-pending
investigation into illegal behavior by some of the largest fast food franchises in Washington and
the United States, including Auntie Anne’s, that Auntie Anne’s would no longer enforce
provisions in its franchise agreements that prevented workers from being hired by other Auntie
Anne’s franchisees. In sum, Defendants engaged in per se violations of the Washington Unfair
Competition Act and the Sherman Act by entering into anti-poach and non-solicitation
agreements, for the express purpose of depressing and/or reducing market-based wages and
benefit increases for Class Members that are typically associated with the active recruitment of
employees and workers in a competitive industry. While protecting and enhancing their profits,
Defendants, through their anti-poaching agreements, robbed Class Members millions of dollars-
worth of wages for which Plaintiff and the Class now seek relief.
II. JURISDICTION AND VENUE
3.
This Court has jurisdiction over the subject of this action pursuant to 15 U.S. C.
§§ 4 and 16, as well as 28 U.S.C. §§ 1331 and 1337. This Court has supplemental jurisdiction
over the claims brought under the laws of the State of Washington pursuant to 28 U.S.C. §
1367(a), since the matters at the heart of the Washington Unfair Competition Claims form part of
the same case or controversy.
4.
Venue as to each Defendant is proper in this judicial district, pursuant to 15
U.S.C. §§ 22 and 28 and 28 U.S. C. §1391(b)(1) and (2), because Defendants transact business
and/or has transacted business during the relevant time period within the counties encompassed
by the jurisdiction of the United States District Court for the Eastern District of Washington.
Defendants do sufficient business in this District to be subject to personal jurisdiction herein,
because a substantial part of the events or omissions giving rise to the claims occurred in this
District.
III. THE PARTIES
5.
Plaintiff Joseph Stigar, who at all relevant times was a resident of Washington, is
a former employee of Defendant Dough Dough. Plaintiff Stigar worked as a crewmember at
Dough Dough’s Wenatchee, Washington Auntie Anne’s store from approximately December 15,
2017 to April 1, 2018. As a result, Plaintiff Stigar was subject to and victimized by the anti-
poaching conspiracy between and among the Defendants, resulting in him having lost wages.
6.
Defendant Dough Dough is a Washington corporation. Defendant Dough Dough
does business in Washington State as Auntie Anne’s Pretzels, with its principal place of business
located at 511 Valley Mall Parkway in Wenatchee, Washington. Upon information and belief,
Defendant Dough Dough entered into a franchise agreement with Defendant Auntie Anne’s that
contained anti-poaching and non-solicitation provisions.
7.
Defendant Auntie Anne’s is a Delaware limited liability company. Upon
information and belief, Defendant Auntie Anne’s principal place of business is located at 5620
Glenridge Drive Northeast in Atlanta, Georgia. Defendant Auntie Anne’s is a franchisor.
Defendant Auntie Anne’s is in the business of soft pretzel stores, which it franchises throughout
Washington and the United States. Upon information and belief, Defendant Auntie Anne’s
entered into agreements with its franchisees, including Dough Dough, that contained anti-
poaching and non-solicitation provisions.
8.
The true names and capacities, whether individual, corporate, associate, or
otherwise, of Defendants sued herein as DOES 1 to 10, inclusive, are currently unknown to
Plaintiff, who therefore sues Defendants by such fictitious names. Does 1 through 10 are the
other largest franchisees of Auntie Anne’s in Washington State based on number of employees
employed. Plaintiff is informed and believes, and based thereon alleges, that each of the
Defendants designated herein as a Doe is legally responsible in some manner for the unlawful
acts referred to herein in that they are additional co-conspirators. Plaintiff will seek leave of
court to amend this Complaint to reflect the true names and capacities of the Defendants
designated hereinafter as Does when such identities become known. Defendants and the Does 1-
10 shall collectively be referred to as “Defendants.”
9.
Plaintiff is informed and believes, and based thereon alleges, that each Defendant
acted in all respects pertinent to this action as the agent of the other Defendants, carried out a
joint scheme, business plan or policy in all respects pertinent hereto, and the acts of each
Defendant are legally attributable to the other Defendants. Furthermore, Defendants in all
respects acted pursuant to the mutual non-solicitation and anti-poaching agreements that were
intended to suppress and had the effect of suppressing wages and salaries for the Class Members.
IV. FACTS EVIDENCING THE CONSPIRACY
10.
Defendants had a longstanding agreement to control their employees’ wages and
mobility by agreeing not employ or recruit each other’s employees.
11.
The specific provisions of Defendants’ franchise agreements that violated federal
and state antitrust laws are found at Section 15.4.A(v) and Section 15.4.B(c), and the last
sentence of Section 18.4.A (“You further agree that you will not employee or seek to employ an
employee of ours or another franchisee, or attempt to induce such an employee to cease his/her
employment without the prior written consent of such employee’s employer”) and Section
XVIB(ii) and Section SVI.C(ii) (providing restrictions on franchisee’s ability to “employ or seek
to employ an employee of Franchisee, Franchisor, or Franchisor’s franchisees or attempt to
induce the person to leave his/her employment without the prior written consent of the
employer”).1
12.
The mutual non-poaching and non-solicitation agreement itself constituted a per
se violation of the Sherman Antitrust Act and Washington’s Unfair Business Practices Act
between Defendants for years until it was brought to light by the AG’s investigation
commencing in 2018 in the course of the AG’s investigation into similarly illegal mutual non-
solicitation and anti-poach agreements entered into between several of the largest fast food
franchisors operating in Washington and the United States.
13.
Upon information and belief, Dough Dough and other franchisees, that own a
total of approximately 27 Auntie Anne’s stores in Washington state, entered into franchisee
agreements with the anti-poaching and non-solicitation terms set forth above.
14.
The AG investigated the non-solicitation and anti-poaching agreement issued by
Auntie Anne’s to its franchisees and found that Auntie Anne’s and its franchisees’ conduct
constituted a contract, combination, or conspiracy in restraint of trade in violation of the
Washington Unfair Business Practices Act – Consumer Protection Act, RCW 19.86.030. The AG
concluded that “[f]or years, the franchise agreements entered into between Auntie Anne’s and its
franchisees have provided that franchisees subject to such agreements could not solicit for
employment the employees of Auntie Anne’s…and in certain years provided that franchisees
subject to such agreements could not hire the employees of Auntie Anne’s and/or other Auntie
Anne’s franchisees.”2
1 See In Re: Franchise No Poaching Provisions, Auntie Anne’s Franchisor SPV LLC Assurance of Discontinuance,
Case No. 18-2-17231-4SEA, Exhibit B (Dkt. No. 1) (July 12, 2018) (hereinafter “Auntie Anne’s AOD”).
2 Auntie Anne’s AOD, § 2.2.
15.
As set forth herein, upon information and belief, all of the Defendants entered into
the mutual non-solicitation agreements with the anti-poaching and non-solicitation terms above,
with the common interest and intention to keep their employees’ wage costs down, so that profits
continued to rise or at least not be undercut by rising salaries across the industry. As a result,
Defendants engaged in anti-competitive behavior in advancement of a common and illegal goal
of profiting at the expense of competitive market-based salaries.
16.
Defendants agreements unreasonably restrained trade in violation of the Sherman
Act 15 U.S.C. §§ 1, et seq., and constituted unfair competition and unfair practices in violation
of Washington’s Unfair Business Practices law, 19.86, et seq. Plaintiff Joseph Stigar, on behalf
of himself and on behalf of the Class defined herein, seeks to recover the difference between the
wages and salaries that Class Members were paid and what Class Members would have been
paid in a competitive market, in the absence of Defendants’ unlawful agreements, treble
damages, attorneys fees, and interest, allowed under the law.
V. HARM TO COMPETITION AND ANTITRUST INJURY
17.
Defendants are in the business of operating fast food soft pretzel stores where
pretzels are twisted and baked in-store by crewmembers. In order to operate, Defendants owned
other stores in Washington and hired crewmembers in their stores to make and sell pretzels.
18.
Anti-poach and non-solicitation agreements create downward pressure on fast
food worker wages. Anti-poach agreements restrict worker mobility, which prevents low-wage
workers from seeking and obtaining higher pay. This artificially suppresses fast food worker
wages. In fact, fast food worker wages have remained stagnant.
19.
Unrestricted competition and the Free Market are the foundations of the American
economic system. That is because “[f]ree and open markets are the foundation of a vibrant
economy. Just as competition among sellers in an open marketplace gives consumers the benefits
of lower prices, higher quality products and services, more choices, and greater innovation,
competition among employer helps actual and potential employees through higher wages, better
benefits, or other terms of employment.” DOJ/FTC Antitrust Guidance for HR Professionals,
Oct. 2016, at p. 2.
20.
Upon information and belief, Defendants conspired not to actively solicit each
other’s employees and workers as part of one overarching conspiracy to suppress the
compensation of their employees and other Class Members. The desired effect was obtained.
Defendants’ conspiracy suppressed Plaintiff’s and the Class’s compensation and restricted
competition in the labor markets in which Plaintiff and the other members of the Class sold their
services. It did so through an overarching agreement concerning mutual non-solicitation and
anti-poaching.
21.
Concerning the non-solicitation agreements, active solicitations have a significant
beneficial impact for individual employees’ compensation. As understood by Defendants, active
recruitment by rival employers, here other franchisees doing business as Auntie Anne’s, often
include enticing offers that exceed an employee’s wages, salary, and/or benefits, thereby
incentivizing the employee to leave his or her current employment in order to receive greater
compensation for his or her labor, or alternatively, allowing the employee to negotiate increased
compensation from his or her current employer. Employees receiving active solicitation offers
often inform other employees of the offer(s) they received, spreading information about higher
wage and salary levels that can similarly lead to movement for the purposes of higher salary and
wages and/or negotiation by those other employees with their current employer or others for
greater compensation.
22.
Active solicitation similarly affects compensation practices by employers. A
franchisee that actively solicits other franchisees’ employees or other workers will learn whether
their offered compensation is enough to attract their competitors’ employees, and may increase
the offers to make their own company and its salaries more competitive in the marketplace.
Similarly, companies losing or at risk of losing employees to competitors engaged in active
recruitment of employees or workers associated with their competitors may preemptively
increase their employees’ compensation in order to reduce their competitors’ appeal.
23.
Defendants’ efforts to maintain internal equity coupled with their non-solicitation
agreements ensured that their conspiracy caused the compensation of all their employees to be
suppressed.
VI.
INTERSTATE COMMERCE
24.
During the Class Period, Defendants employed Plaintiff and other Class
Members in Washington and numerous other states.
25.
States compete to attract low wage workers, including fast food workers, leading
employment in the industry to cross state lines.
26.
Both Defendants and Plaintiff and other Class Members view labor competition in
the industry to be nationwide. Defendants considered each other’s wages to be competitively
relevant regardless of location, and many Class Members moved between states to pursue
opportunities at Defendants’ stores.
27.
Defendants’ conduct substantially affected interstate commerce throughout the
United States and caused antitrust injury throughout the United States.
VII.
CLASS ACTION ALLEGATIONS
28.
Plaintiff brings this case as a class action pursuant to Federal Rule of Civil
Procedure 23(b)(3) on behalf of a Class consisting of:
All persons who were employed by Dough Dough, Inc., or Auntie Anne’s Franchisor
SPV, LLC, or any of the ten largest franchises of Auntie Anne’s in Washington State at
any time from July 12, 2014 through the conclusion of this action (the “Class Period”).3
29.
Plaintiff believes there are more than 500 current and former employees in the
Class. Given Defendants’ systemic failure to comply with United States and Washington laws
outlined in this case, the members of the Class are so numerous that joinder of all members is
impractical. The Class is ascertainable from either Defendants’ employment and hiring records.
30.
Plaintiff’s claims are typical of the claims of the members of the Class, because
all Class Members are or were employees who sustained damages arising out of (a) Defendants’
illegal mutual non-poaching and anti-solicitation arrangements in violation of Section 1 of the
Sherman Act that resulted in wage suppression for all of the Class Members; and (b) Defendants’
unfair business practices in violation of Washington law.
31.
Plaintiff will fairly and adequately represent the interests of the Class. Plaintiff
has no conflict of interest with any member of the Class. Plaintiff has retained counsel competent
and experienced in complex class action litigation with the resources and expertise necessary to
litigate this case through to conclusion.
32.
Common questions of law and fact exist as to all members of the Class, and
predominate over any questions solely affecting individual members of the Class. Among the
questions of law and fact common to Plaintiff and Class Members are:
3 Plaintiff reserves the right to modify the class definition at a later date to conform to new facts learned, including
the properly named entity Defendant(s).
a.
Whether Defendants agreed not to actively recruit each other’s employees
in positions held by the Class Members;
b.
Whether the mutual non-solicitation and anti-poaching agreements
between Defendants were per se violations of the Sherman Act, 15 U.S.C.
§ 1, et seq.;
c.
Whether Defendants violated the Sherman Act by agreeing to not actively
recruit or solicit one another’s workers in positions held by Class
Members;
d.
Whether Defendants violated RCW 19.86, et seq., by entering into
agreements to not actively recruit each other’s workers in positions held
by Class Members;
e.
whether and the extent to which Defendants’ conduct suppressed wages
and salaries below competitive levels;
f.
whether Plaintiff and the other Class Members suffered injury as a result
of Defendants’ agreements;
g.
whether any such injury constitutes antitrust injury;
h. whether Class Members are entitled to treble damages; and
i.
the measure of damages suffered by Plaintiff and the Class.
33.
Class action treatment is superior to any alternative to ensure the fair and efficient
adjudication of the controversy alleged herein. Such treatment will permit a large number of
similarly situated persons to prosecute their common claims in a single forum simultaneously,
efficiently, and without duplication of effort and expense that numerous individuals would entail.
No difficulties are likely to be encountered in the management of this class action that would
preclude its maintenance as a class action, and no superior alternative exists for the fair and
efficient adjudication of this controversy. The Class Members are readily identifiable from
Defendants’ employee rosters, payroll records or other company records.
34.
Defendants’ actions are generally applicable to the entire Class. Prosecution of
separate actions by individual members of the Class creates the risk of inconsistent or varying
adjudications of the issues presented herein, which, in turn, would establish incompatible
standards of conduct for Defendants.
35.
Because joinder of all members is impractical, a class action is superior to other
available methods for the fair and efficient adjudication of this controversy. Furthermore,
the amounts at stake for many members of the Class, while substantial, may not be sufficient to
enable them to maintain separate suits against Defendants.
VIII. STATUTE OF LIMITATIONS AND DEFENDANTS’ CONTINUING
VIOLATION
36.
Defendants’ conspiracy was a continuing violation in which Defendants
repeatedly invaded Plaintiff’s and Class Members’ interests by adhering to, enforcing, and
reaffirming the anticompetitive agreements described herein.
37.
Before July 12, 2018, Plaintiff and the members of the Class had neither actual
nor constructive knowledge of the pertinent facts constituting their claims for relief asserted
herein. Plaintiff and members of the Class did not discover, and could not have discovered
through the exercise of reasonable diligence, the existence of any conspiracy until at the earliest
July 12, 2018 when the investigation by the AG into non-solicitation agreements among fast
food franchisees/franchisors including Auntie Anne’s was first revealed publicly. This case is
filed within four years of the moment when it was first revealed that the AG investigation had
unearthed that Auntie Anne’s had engaged in mutual non-solicitation and anti-poaching
agreements with Dough Dough and other Auntie Anne’s franchisees.
38.
Defendants engaged in a conspiracy that did not give rise to facts that would put
Plaintiff or the Class on inquiry notice that there was a conspiracy among Auntie Anne’s and
franchisees to restrict competition for Class Members’ services through non-solicitation and anti-
poaching agreements.
IX.
CAUSES OF ACTION
FIRST CAUSE OF ACTION
VIOLATION OF SECTION ONE OF SHERMAN ACT
[15 U.S.C. § 1, et seq.]
(On Behalf of Plaintiff and the Class)
39.
Plaintiff incorporates by reference the allegations in the above paragraphs as if
fully set forth herein.
40.
Defendants, by and through their officers, directors, employees, agents or other
representatives, have entered into an unlawful agreement, combination and conspiracy in
restraint of trade, in violation of 15 U.S.C. § 1, et seq. Specifically, Defendants agreed to restrict
competition for Class Members’ services through non-solicitation agreements and non-poaching
agreements, all with the purpose and effect of suppressing Class Members’ compensation and
restraining competition in the market for Class Members’ services.
41.
According to the Department of Justice (“DOJ”) and Federal Trade Commission
(“FTC”), “…no-poaching agreements, among employers…are per se illegal under the antitrust
laws.” DOJ/FTC Antitrust Guidance for HR Professionals, Oct. 2016, at p. 3. “It is unlawful for
competitors to expressly or implicitly agree not to compete with one another, even if they are
motivated by a desire to reduce costs.” Id. at p. 2.
42.
Defendants’ conduct injured Class Members by lowering their compensation and
depriving them of free and fair competition in the market for their services.
43.
Defendants’ agreements are per se violations of the Sherman Act.
44.
Plaintiff seeks the relief set forth below, including underpaid and treble damages.
SECOND CAUSE OF ACTION
UNFAIR COMPETITION AND UNLAWFUL BUSINESS PRACTICE
[Washington Unfair Business Practices Act, 19.86 et seq.]
45.
Plaintiff incorporates by reference the allegations in the above paragraphs as if
fully set forth herein.
46.
Revised Code of Washington Section 19.86, et seq., prohibits unfair or deceptive
methods of competition or acts or practices. Specifically, RCW 19.86.030 prohibits contracts,
combinations, or conspiracies that restrain trade or commerce.
47.
As stated above, the Washington State Attorney General investigated Auntie
Anne’s and determined that the anti-poach and non-solicitation provisions of its franchise
agreements, by and between itself and its franchisees, constituted a contract, combination, or
conspiracy in restraint of trade in violation of the Washington Unfair Business Practices Act –
Consumer Protection Act, RCW 19.86.030.
48.
Through its conspiracy and actions as alleged herein, Defendants’ efforts to
restrain competition for and suppress compensation of their employees through their franchise
agreements constitutes unfair competition and unlawful and unfair business practices in violation
of the Washington Unfair Business Practices Act, RCW 19.86, et seq. Specifically, Defendants
agreed to restrict competition for Class Members’ services through non-solicitation and anti-
poach agreements, all with the purpose and effect of suppressing Class Members’ compensation
and restraining competition in the market for Class Members’ services. Defendants’ illegal
conspiracy was substantially injurious to Plaintiff and the Class Members.
49.
Defendants’ acts were unfair, unlawful, and/or unconscionable, both in their own
50.
Defendants’ conduct injured Plaintiff and other Class Members by lowering their
compensation and depriving them of free and fair competition in the market for their services,
allowing Defendants to unlawfully retain money that otherwise would have been paid to Plaintiff
and other Class Members. Plaintiff and other Class Members are therefore persons who have
suffered injury in fact and lost money or property as a result of the unfair competition under
RCW 19.86.090.
51.
The harm to Plaintiff and members of the Class in being denied payment for their
services in the amount of higher wages and salaries that they would have received in the absence
of the conspiracy outweighs the utility, if any, of Defendants’ illegal non-solicitation and non-
poaching agreements and, therefore, Defendants’ actions described herein constitute an unfair
business practice or act within the meaning of RCW 19.86, et seq.
52.
Pursuant to RCW 19.86.090, any person who is injured by a violation of RCW
19.86.030 may bring a civil action to recover actual damages, treble damages, and attorneys’ fees
and costs.
53.
Plaintiff seeks the relief set forth below.
X.
JURY DEMAND AND DESIGNATION OF PLACE OF TRIAL
Pursuant to Federal Rule of Civil Procedure 38(b), Plaintiff demands a trial by jury on all
issues so triable.
XI.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff Joseph Stigar, on behalf of himself and a class of all others
similarly situated, requests that the Court enter an order or judgment against Defendants including
the following:
a. Certification of the class described herein pursuant to Rule 23 of the Federal
Rules of Civil Procedure;
b. Appointment of Plaintiff Joseph Stigar as Class Representative and his counsel
of record as Class Counsel;
c. Compensatory damages in an amount to be proven at trial and trebled thereafter;
d. Pre-judgment and post-judgment interest as provided for by law or allowed in
equity;
e. The costs of bringing this suit, including reasonable attorneys’ fees and costs;
f. An incentive award to compensate Plaintiff Joseph Stigar for his efforts in
pursuit of this litigation;
g. Interest under Washington law; and
h. All other relief to which Plaintiff Joseph Stigar and the Class may be entitled at
law or in equity.
Dated August 3, 2018.
Respectfully submitted,
India Lin Bodien, Attorney at Law
Ackermann & Tilajef, P.C.
_________________________________________
By: India Lin Bodien, WSBA #44898
INDIA LIN BODIEN, ATTORNEY AT LA W
2522 North Proctor Street, #387
Tacoma, Washington 98406-5338
Telephone: (253) 212-7913
Fascimile: (253)276-0081
[email protected]
Craig J. Ackermann, WSBA #53330
Brian Denlinger, WSBA #53177
ACKERMANN & TILAJEF, P.C.
2602 North Proctor Street, #205
Tacoma, Washington, 98406
Telephone: (310) 277-0614
Facsimile: (310) 277-0635
[email protected]
[email protected]
| antitrust |
btWED4cBD5gMZwczvJ5R |
Case No. 18-cv-4424
SHAKED LAW GROUP, P.C.
Dan Shaked (DS-3331)
44 Court Street, Suite 1217
Brooklyn, NY 11201
Tel. (917) 373-9128
Fax (718) 504-7555
Attorneys for Plaintiff and the Class
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
-----------------------------------------------------------X
MARION KILER, Individually and as the
representative of a class of similarly situated persons,
Plaintiff,
- against -
BARKBOX, INC. a/k/a Bark & Co.
Defendants.
-----------------------------------------------------------X
COMPLAINT – CLASS ACTION
INTRODUCTION
1. Plaintiff, Marion Kiler (“Plaintiff” or “Kiler”), brings this action on behalf of
herself and all other persons similarly situated against Barkbox, Inc. a/k/a Bark & Co. (hereinafter
“Barkbox” or “Defendant”), and states as follows:
2. Plaintiff is a visually-impaired and legally blind person who requires screen-
reading software to read website content using his computer. Plaintiff uses the terms “blind” or
“visually-impaired” to refer to all people with visual impairments who meet the legal definition of
blindness in that they have a visual acuity with correction of less than or equal to 20 x 200. Some
blind people who meet this definition have limited vision; others have no vision.
3. Based on a 2010 U.S. Census Bureau report, approximately 8.1 million people
in the United States are visually impaired, including 2.0 million who are blind, and according to
1
the American Foundation for the Blind’s 2015 report, approximately 400,000 visually impaired
persons live in the State of New York.
4. Plaintiff brings this civil rights action against Barkbox for their failure to design,
construct, maintain, and operate their website to be fully accessible to and independently usable
by Plaintiff and other blind or visually-impaired persons. Defendant is denying blind and visually-
impaired persons throughout the United States with equal access to the goods and services Barkbox
provides to their non-disabled customers through http//:www.Barkbox.com (hereinafter
“Barkbox.com” or “the website”). Defendants’ denial of full and equal access to its website, and
therefore denial of its products and services offered, and in conjunction with its physical locations,
is a violation of Plaintiff’s rights under the Americans with Disabilities Act (the “ADA”).
5. Barkbox.com provides to the public a wide array of the goods, services, price
specials, employment opportunities and other programs offered by Barkbox. Yet, Barkbox.com
contains thousands of access barriers that make it difficult if not impossible for blind and visually-
impaired customers to use the website. In fact, the access barriers make it impossible for blind
and visually-impaired users to even complete a transaction on the website. Thus, Barkbox
excludes the blind and visually-impaired from the full and equal participation in the growing
Internet economy that is increasingly a fundamental part of the common marketplace and daily
living. In the wave of technological advances in recent years, assistive computer technology is
becoming an increasingly prominent part of everyday life, allowing blind and visually-impaired
persons to fully and independently access a variety of services.
6. The blind have an even greater need than the sighted to shop and conduct
transactions online due to the challenges faced in mobility. The lack of an accessible website
means that blind people are excluded from experiencing transacting with defendant’s website and
from purchasing goods or services from defendant’s website.
2
7. Despite readily available accessible technology, such as the technology in use at
other heavily trafficked retail websites, which makes use of alternative text, accessible forms,
descriptive links, resizable text and limits the usage of tables and JavaScript, Defendant has chosen
to rely on an exclusively visual interface. Barkbox’s sighted customers can independently browse,
select, and buy online without the assistance of others. However, blind persons must rely on
sighted companions to assist them in accessing and purchasing on Barkbox.com.
8. By failing to make the website accessible to blind persons, Defendant is violating
basic equal access requirements under both state and federal law.
9. Congress provided a clear and national mandate for the elimination of
discrimination against individuals with disabilities when it enacted the ADA. Such discrimination
includes barriers to full integration, independent living, and equal opportunity for persons with
disabilities, including those barriers created by websites and other public accommodations that are
inaccessible to blind and visually impaired persons. Similarly, New York state law requires places
of public accommodation to ensure access to goods, services, and facilities by making reasonable
accommodations for persons with disabilities.
10. Plaintiff is the owner of a seeing eye dog, a black Labrador named “socs.”
Plaintiff browsed and intended to make an online purchase of a monthly box of dog goodies on
Barkbox.com. However, unless Defendant remedies the numerous access barriers on its website,
Plaintiff and Class members will continue to be unable to independently navigate, browse, use,
and complete a transaction on Barkbox.com.
11. Because Defendant’s website, Barkbox.com, is not equally accessible to blind
and visually-impaired consumers, it violates the ADA. Plaintiff seeks a permanent injunction to
cause a change in Barkbox’s policies, practices, and procedures to that Defendant’s website will
become and remain accessible to blind and visually-impaired consumers. This complaint also
3
seeks compensatory damages to compensate Class members for having been subjected to unlawful
discrimination.
JURISDICTION AND VENUE
12. This Court has subject matter jurisdiction over this action under 28 U.S.C. §
1331 and 42 U.S.C. § 12181, as Plaintiff’s claims arise under Title III of the ADA, 42 U.S.C. §
12181 et seq., and 28 U.S.C. § 1332, because this is a class action, as defined by 28 U.S.C. §
1332(d)(1)(B), in which a member of the putative class is a citizen of a different state than
Defendant, and the amount in controversy exceeds the sum or value of $5,000,000, excluding
interest and costs. See 28 U.S.C. § 133(d)(2).
13. This Court also has supplemental jurisdiction over pursuant to 28 U.S.C. §
1367, over Plaintiff’s pendent claims under the New York State Human Rights Law, N.Y. Exec.
Law, Article 15 (Executive Law § 290 et seq.) and the New York City Human Rights Law, N.Y.C.
Administrative Code § 8-101 et seq. (“City Law”).
14. Venue is proper in this District of New York pursuant to 28 U.S.C. §§ 1391(b)-
(c) and 144(a) because Plaintiff resides in this District, Defendant conducts and continues to
conduct a substantial and significant amount of business in this District, and a substantial portion
of the conduct complained of herein occurred in this District.
15. Defendant is registered to do business in New York State and has been
conducting business in New York State, including in this District. Defendant purposefully targets
and otherwise solicits business from New York State residents through its website and sells its
products in this District. Because of this targeting, it is not unusual for Barkbox to conduct
business with New York State residents. Defendant also has been and is committing the acts
alleged herein in this District and has been and is violating the rights of consumers in this District
and has been and is causing injury to consumers in this District. A substantial part of the act and
4
omissions giving rise to Plaintiff’s claims have occurred in this District. Specifically, Plaintiff
attempted to purchase a monthly box of dog goodies on Defendant’s website, Barkbox.com.
PARTIES
16. Plaintiff, is and has been at all relevant times a resident of Kings County,
State of New York.
17. Plaintiff is legally blind and a member of a protected class under the ADA, 42
U.S.C. § 12102(l)-(2), the regulations implementing the ADA set forth at 28 CFR §§ 36.101 et
seq., the New York State Human Rights Law and the New York City Human Rights Law.
Plaintiff, Marion Kiler, cannot use a computer without the assistance of screen reader software.
Plaintiff, Marion Kiler, has been denied the full enjoyment of the facilities, goods and services of
Barkbox.com as a result of accessibility barriers on Barkbox.com.
18. Defendant, Barkbox, Inc., is a Delaware Foreign Business Corporation doing
business in New York with its principal place of business located at 221 Canal Street, New York,
NY 10013.
19. Upon information and belief, Barkbox has raised nearly $82 million from
venture capital firms and is preparing for an initial public offering. Upon information and belief,
not a single dollar of the $82 million raised has been used to make its website accessible to the
visually-impaired even though it is public knowledge that a large percentage of the visually-
impaired own dogs.
20. Barkbox provides to the public a website known as Barkbox.com which
provides consumers with access to an array of goods and services, including, the ability to view
the various monthly subscriptions of boxes of dog goodies, make purchases, learn about the
content of the boxes, and give gifts, among other features. Consumers across the United States
and the world use Defendant’s website to purchase monthly subscriptions of dog goodies.
5
Defendant’s website is a place of public accommodation within the definition of Title III of the
ADA, 42 U.S.C. § 12181(7). See Victor Andrews v. Blick Art Materials, LLC, No. 17-cv-767,
2017 WL 3278898 (E.D.N.Y. August 1, 2017). The inaccessibility of Barkbox.com has deterred
Plaintiff from buying a monthly box of dog goodies.
NATURE OF THE CASE
21. The Internet has become a significant source of information, a portal, and a tool
for conducting business, doing everyday activities such as shopping, learning, banking,
researching, as well as many other activities for sighted, blind and visually-impaired persons alike.
22. The blind access websites by using keyboards in conjunction with screen-
reading software which vocalizes visual information on a computer screen. Except for a blind
person whose residual vision is still sufficient to use magnification, screen access software
provides the only method by which a blind person can independently access the Internet. Unless
websites are designed to allow for use in this manner, blind persons are unable to fully access
Internet websites and the information, products and services contained therein.
23. For screen-reading software to function, the information on a website must be
capable of being rendered into text. If the website content is not capable of being rendered into
text, the blind user is unable to access the same content available to sighted users.
24. Blind users of Windows operating system-enabled computers and devises have
several screen-reading software programs available to them. Job Access With Speech, otherwise
known as “JAWS” is currently the most popular, separately purchase and downloaded screen-
reading software program available for blind computer users.
25. The international website standards organization, the World Wide Web
Consortium, known throughout the world as W3C, has published version 2.0 of the Web Content
Accessibility Guidelines (“WCAG 2.0”). WCAG 2.0 are well-established guidelines for making
6
websites accessible to blind and visually-impaired persons. These guidelines are universally
followed by most large business entities and government agencies to ensure their websites are
accessible. Many Courts have also established WCAG 2.0 as the standard guideline for
accessibility. The federal government has also promulgated website accessibility standards under
Section 508 of the Rehabilitation Act. These guidelines are readily available via the Internet, so
that a business designing a website can easily access them. These guidelines recommend several
basic components for making websites accessible, including but not limited to: adding invisible
alt-text to graphics, ensuring that all functions can be performed using a keyboard and not just a
mouse, ensuring that image maps are accessible, and adding headings so that blind persons can
easily navigate the site. Without these very basic components, a website will be inaccessible to a
blind person using a screen reader. Websites need to be accessible to the “least sophisticated” user
of screen-reading software and need to be able to work with all browsers. Websites need to be
continually updated and maintained to ensure that they remain fully accessible.
FACTUAL ALLEGATIONS
26. Defendant, Barkbox, Inc., controls and operates Barkbox.com. in New York
State and throughout the United States and the world.
27. Barkbox.com is a commercial website that offers products and services for
online sale. The online store allows the user to browse dog goodie box subscription options, make
purchases, and perform a variety of other functions.
28. Among the features offered by Barkbox.com are the following:
(a) Consumers may use the website to connect with Barkbox on social media, using
such sites as Facebook, Twitter, Instagram, and Pinterest;
(b) an online store, allowing customers to purchase monthly boxes of dog goodies;
7
(c) learning about career opportunities, promotions, themes, and about the
company.
29. This case arises out of Barkbox’s policy and practice of denying the blind access
to the goods and services offered by Barkbox.com. Due to Barkbox’s failure and refusal to remove
access barriers to Barkbox.com, blind individuals have been and are being denied equal access to
Barkbox, as well as to the numerous goods, services and benefits offered to the public through
Barkbox.com.
30. Barkbox denies the blind access to goods, services and information made
available through Barkbox.com by preventing them from freely navigating Barkbox.com.
31. Barkbox.com contains access barriers that prevent free and full use by Plaintiff
and blind persons using keyboards and screen-reading software. These barriers are pervasive and
include, but are not limited to: lack of alt-text on graphics, inaccessible drop-down menus, the lack
of navigation links, the lack of adequate prompting and labeling, the denial of keyboard access,
empty links that contain no text, redundant links where adjacent links go to the same URL address,
and the requirement that transactions be performed solely with a mouse.
32. Alternative text (“Alt-text”) is invisible code embedded beneath a graphical
image on a website. Web accessibility requires that alt-text be coded with each picture so that a
screen-reader can speak the alternative text while sighted users see the picture. Alt-text does not
change the visual presentation except that it appears as a text pop-up when the mouse moves over
the picture. There are many important pictures on Barkbox.com that lack a text equivalent. The
lack of alt-text on these graphics prevents screen readers from accurately vocalizing a description
of the graphics (screen-readers detect and vocalize alt-text to provide a description of the image to
a blind computer user). As a result, Plaintiff and blind Barkbox.com customers are unable to
determine what is on the website, browse the website or investigate and/or make purchases.
8
33. Barkbox.com also lacks prompting information and accommodations
necessary to allow blind shoppers who use screen-readers to locate and accurately fill-out online
forms. On a shopping site such as Barkbox.com, these forms include search fields to select dog
size and select monthly plans, and fields used to fill-out personal information, including address
and credit card information. Due to lack of adequate labeling, Plaintiff and blind customers
cannot make a selection or inquiries as to Defendant’s merchandise, nor can they enter their
personal identification and financial information with confidence and security. In fact, when
Plaintiff attempted to click on one of the dog size options, her screen-reader could not recognize
the button. Consequently, she was unable to proceed to selecting a monthly plan and unable to
complete a transaction.
34. Furthermore, Barkbox.com lacks accessible image maps. An image map is a
function that combines multiple words and links into one single image. Visual details on this
single image highlight different “hot spots” which, when clicked on, allow the user to jump to
many different destinations within the website. For an image map to be accessible, it must
contain alt-text for the various “hot spots.” The image maps on Barkbox.com’s menu page do
not contain adequate alt-text and are therefore inaccessible to Plaintiff and the other blind
individuals attempting to make a purchase. When Plaintiff tried to access the menu link in order
to make a purchase, she was unable to access it completely.
35. Moreover, the lack of navigation links on Defendant’s website makes
attempting to navigate through Barkbox.com even more time consuming and confusing for
Plaintiff and blind consumers.
36. Barkbox.com requires the use of a mouse to complete a transaction. Yet, it is
a fundamental tenet of web accessibility that for a web page to be accessible to Plaintiff and
blind people, it must be possible for the user to interact with the page using only the keyboard.
9
Indeed, Plaintiff and blind users cannot use a mouse because manipulating the mouse is a visual
activity of moving the mouse pointer from one visual spot on the page to another. Thus,
Barkbox.com’s inaccessible design, which requires the use of a mouse to complete a transaction,
denies Plaintiff and blind customers the ability to independently navigate and/or make purchases
on Barkbox.com.
37. Due to Barkbox.com’s inaccessibility, Plaintiff and blind customers must in
turn spend time, energy, and/or money to make their purchases at traditional brick-and-mortar
retailers. Some blind customers may require a driver to get to the stores or require assistance in
navigating the stores. By contrast, if Barkbox.com was accessible, a blind person could
independently investigate products and make purchases via the Internet as sighted individuals
can and do. According to WCAG 2.0 Guideline 2.4.1, a mechanism is necessary to bypass
blocks of content that are repeated on multiple webpages because requiring users to extensively
tab before reaching the main content is an unacceptable barrier to accessing the website.
Plaintiff must tab through every navigation bar option and footer on Defendant’s website in an
attempt to reach the desired service. Thus, Barkbox.com’s inaccessible design, which requires
the use of a mouse to complete a transaction, denies Plaintiff and blind customers the ability to
independently make purchases on Barkbox.com.
38. Barkbox.com thus contains access barriers which deny the full and equal
access to Plaintiff, who would otherwise use Barkbox.com and who would otherwise be able to
fully and equally enjoy the benefits and services of Barkbox.com in New York State and
throughout the United States.
39. Plaintiff, Marion Kiler, has made numerous attempts to complete a purchase
on Barkbox.com, most recently in July 2018, but was unable to do so independently because of
the many access barriers on Defendant’s website. These access barriers have caused
10
Barkbox.com to be inaccessible to, and not independently usable by, blind and visually-impaired
persons. Amongst other access barriers experienced, Plaintiff was unable to purchase a monthly
box of dog goodies.
40. As described above, Plaintiff has actual knowledge of the fact that
Defendant’s website, Barkbox.com, contains access barriers causing the website to be
inaccessible, and not independently usable by, blind and visually-impaired persons.
41. These barriers to access have denied Plaintiff full and equal access to, and
enjoyment of, the goods, benefits and services of Barkbox.com.
42. Defendant engaged in acts of intentional discrimination, including but not
limited to the following policies or practices:
(a) constructed and maintained a website that is inaccessible to blind class
members with knowledge of the discrimination; and/or
(b) constructed and maintained a website that is sufficiently intuitive and/or
obvious that is inaccessible to blind class members; and/or
(c) failed to take actions to correct these access barriers in the face of substantial
harm and discrimination to blind class members.
43. Defendant utilizes standards, criteria or methods of administration that have
the effect of discriminating or perpetuating the discrimination of others.
44. Because of Defendant’s denial of full and equal access to, and enjoyment of,
the goods, benefits and services of Barkbox.com, Plaintiff and the class have suffered an injury-
in-fact which is concrete and particularized and actual and is a direct result of defendant’s
conduct.
CLASS ACTION ALLEGATIONS
11
45. Plaintiff, on behalf of herself and all others similarly situated, seeks
certification of the following nationwide class pursuant to Rule 23(a) and 23(b)(2) of the Federal
Rules of Civil Procedure: “all legally blind individuals in the United States who have attempted
to access Barkbox.com and as a result have been denied access to the enjoyment of goods and
services offered by Barkbox.com, during the relevant statutory period.”
46. Plaintiff seeks certification of the following New York subclass pursuant to
Fed.R.Civ.P. 23(a), 23(b)(2), and, alternatively, 23(b)(3): “all legally blind individuals in New
York State who have attempted to access Barkbox.com and as a result have been denied access
to the enjoyment of goods and services offered by Barkbox.com, during the relevant statutory
period.”
47. There are hundreds of thousands of visually-impaired persons in New York
State. There are approximately 8.1 million people in the United States who are visually-
impaired. Id. Thus, the persons in the class are so numerous that joinder of all such persons is
impractical and the disposition of their claims in a class action is a benefit to the parties and to
the Court.
48. This case arises out of Defendant’s policy and practice of maintaining an
inaccessible website denying blind persons access to the goods and services of Barkbox.com.
Due to Defendant’s policy and practice of failing to remove access barriers, blind persons have
been and are being denied full and equal access to independently browse, select and shop on
Barkbox.com.
49. There are common questions of law and fact common to the class, including
without limitation, the following:
(a) Whether Barkbox.com is a “public accommodation” under the ADA;
12
(b) Whether Barkbox.com is a “place or provider of public accommodation”
under the laws of New York;
(c) Whether Defendant, through its website, Barkbox.com, denies the full and
equal enjoyment of its goods, services, facilities, privileges, advantages, or accommodations to
people with visual disabilities in violation of the ADA; and
(d) Whether Defendant, through its website, Barkbox.com, denies the full and
equal enjoyment of its goods, services, facilities, privileges, advantages, or accommodations to
people with visual disabilities in violation of the law of New York.
50. The claims of the named Plaintiff are typical of those of the class. The class,
similar to the Plaintiff, is severely visually-impaired or otherwise blind, and claims Barkbox has
violated the ADA, and/or the laws of New York by failing to update or remove access barriers on
their website, Barkbox.com, so it can be independently accessible to the class of people who are
legally blind.
51. Plaintiff will fairly and adequately represent and protect the interests of the
members of the Class because Plaintiff has retained and is represented by counsel competent and
experienced in complex class action litigation, and because Plaintiff has no interests antagonistic
to the members of the class. Class certification of the claims is appropriate pursuant to Fed. R.
Civ. P. 23(b)(2) because Defendant has acted or refused to act on grounds generally applicable to
the Class, making appropriate both declaratory and injunctive relief with respect to Plaintiff and
the Class as a whole.
52. Alternatively, class certification is appropriate under Fed. R. Civ. P. 23(b)(3)
because questions of law and fact common to Class members clearly predominate over questions
affecting only individual class members, and because a class action is superior to other available
methods for the fair and efficient adjudication of this litigation.
13
53. Judicial economy will be served by maintenance of this lawsuit as a class
action in that it is likely to avoid the burden that would be otherwise placed upon the judicial
system by the filing of numerous similar suits by people with visual disabilities throughout the
United States.
54. References to Plaintiff shall be deemed to include the named Plaintiff and
each member of the class, unless otherwise indicated.
FIRST CAUSE OF ACTION
(Violation of 42 U.S.C. §§ 12181 et seq. – Title III of the Americans with Disabilities Act)
55. Plaintiff repeats, realleges and incorporates by reference the allegations
contained in paragraphs 1 through 54 of this Complaint as though set forth at length herein.
56. Title III of the American with Disabilities Act of 1990, 42 U.S.C. § 12182(a)
provides that “No individual shall be discriminated against on the basis of disability in the full
and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations
of any place of public accommodation by any person who owns, leases (or leases to), or operates
a place of public accommodation.” Title III also prohibits an entity from “[u]tilizing standards or
criteria or methods of administration that have the effect of discriminating on the basis of
disability.” 42 U.S.C. § 12181(b)(2)(D)(I).
57. Barkbox.com is a sales establishment and public accommodation within the
definition of 42 U.S.C. §§ 12181(7).
58. Defendant is subject to Title III of the ADA because it owns and operates
Barkbox.com.
59. Under Title III of the ADA, 42 U.S.C. § 12182(b)(1)(A)(I), it is unlawful
14
discrimination to deny individuals with disabilities or a class of individuals with disabilities the
opportunity to participate in or benefit from the goods, services, facilities, privileges, advantages,
or accommodations of an entity.
60. Under Title III of the ADA, 42 U.S.C. § 12182(b)(1)(A)(II), it is unlawful
discrimination to deny individuals with disabilities or a class of individuals with disabilities an
opportunity to participate in or benefit from the goods, services, facilities, privileges, advantages,
or accommodation, which is equal to the opportunities afforded to other individuals.
61. Specifically, under Title III of the ADA, 42 U.S.C. § 12182(b)(2)(A)(II),
unlawful discrimination includes, among other things, “a failure to make reasonable
modifications in policies, practices, or procedures, when such modifications are necessary to
afford such goods, services, facilities, privileges, advantages, or accommodations to individuals
with disabilities, unless the entity can demonstrate that making such modifications would
fundamentally alter the nature of such goods, services, facilities, privileges, advantages or
accommodations.”
62. In addition, under Title III of the ADA, 42 U.S.C. § 12182(b)(2)(A)(III),
unlawful discrimination also includes, among other things, “a failure to take such steps as may
be necessary to ensure that no individual with disability is excluded, denied services, segregated
or otherwise treated differently than other individuals because of the absence of auxiliary aids
and services, unless the entity can demonstrate that taking such steps would fundamentally alter
the nature of the good, service, facility, privilege, advantage, or accommodation being offered or
would result in an undue burden.”
63. There are readily available, well-established guidelines on the Internet for
making websites accessible to the blind and visually-impaired. These guidelines have been
followed by other business entities in making their websites accessible, including but not limited
15
to ensuring adequate prompting and accessible alt-text. Incorporating the basic components to
make their website accessible would neither fundamentally alter the nature of Defendant’s
business nor result in an undue burden to Defendant.
64. The acts alleged herein constitute violations of Title III of the ADA, 42 U.S.C.
§ 12101 et seq., and the regulations promulgated thereunder. Patrons of Barkbox who are blind
have been denied full and equal access to Barkbox.com, have not been provided services that are
provided to other patrons who are not disabled, and/or have been provided services that are
inferior to the services provided to non-disabled patrons.
65. Defendant has failed to take any prompt and equitable steps to remedy its
discriminatory conduct. These violations are ongoing.
66. As such, Defendant discriminates, and will continue in the future to
discriminate against Plaintiff and members of the proposed class and subclass on the basis of
disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages,
accommodations and/or opportunities of Barkbox.com in violation of Title III of the Americans
with Disabilities Act, 42 U.S.C. §§ 12181 et seq. and/or its implementing regulations.
67. Unless the Court enjoins Defendant from continuing to engage in these
unlawful practices, Plaintiff and members of the proposed class and subclass will continue to
suffer irreparable harm.
68. The actions of Defendant were and are in violation of the ADA, and therefore
Plaintiff invokes his statutory right to injunctive relief to remedy the discrimination.
69. Plaintiff is also entitled to reasonable attorneys’ fees and costs.
70. Pursuant to 42 U.S.C. § 12188 and the remedies, procedures, and rights set
forth and incorporated therein, Plaintiff prays for judgment as set forth below.
SECOND CAUSE OF ACTION
16
(Violation of New York State Human Rights Law, N.Y. Exec. Law
Article 15 (Executive Law § 292 et seq.))
71. Plaintiff repeats, realleges and incorporates by reference the allegations
contained in paragraphs 1 through 70 of this Complaint as though set forth at length herein.
72. N.Y. Exec. Law § 296(2)(a) provides that it is “an unlawful discriminatory
practice for any person, being the owner, lessee, proprietor, manager, superintendent, agent, or
employee of any place of public accommodation . . . because of the . . . disability of any person,
directly or indirectly, to refuse, withhold from or deny to such person any of the
accommodations, advantages, facilities or privileges thereof.”.
73. Barkbox.com is a sales establishment and public accommodation within the
definition of N.Y. Exec. Law § 292(9).
74. Defendant is subject to the New York Human Rights Law because it owns and
operates Barkbox.com. Defendant is a person within the meaning of N.Y. Exec. Law. § 292(1).
75. Defendant is violating N.Y. Exec. Law § 296(2)(a) in refusing to update or
remove access barriers to Barkbox.com, causing Barkbox.com to be completely inaccessible to
the blind. This inaccessibility denies blind patrons the full and equal access to the facilities,
goods and services that Defendant makes available to the non-disabled public.
76. Specifically, under N.Y. Exec. Law § unlawful discriminatory practice
includes, among other things, “a refusal to make reasonable modifications in policies, practices,
or procedures, when such modifications are necessary to afford facilities, privileges, advantages
or accommodations to individuals with disabilities, unless such person can demonstrate that
making such modifications would fundamentally alter the nature of such facilities, privileges,
advantages or accommodations.”
17
77. In addition, under N.Y. Exec. Law § 296(2)(c)(II), unlawful discriminatory
practice also includes, “a refusal to take such steps as may be necessary to ensure that no
individual with a disability is excluded or denied services because of the absence of auxiliary
aids and services, unless such person can demonstrate that taking such steps would
fundamentally alter the nature of the facility, privilege, advantage or accommodation being
offered or would result in an undue burden.”
78. There are readily available, well-established guidelines on the Internet for
making websites accessible to the blind and visually-impaired. These guidelines have been
followed by other business entities in making their website accessible, including but not limited
to: adding alt-text to graphics and ensuring that all functions can be performed by using a
keyboard. Incorporating the basic components to make their website accessible would neither
fundamentally alter the nature of Defendant’s business nor result in an undue burden to
Defendant.
79. Defendant’s actions constitute willful intentional discrimination against the
class on the basis of a disability in violation of the New York State Human Rights Law, N.Y.
Exec. Law § 296(2) in that Defendant has:
(a) constructed and maintained a website that is inaccessible to blind class
members with knowledge of the discrimination; and/or
(b) constructed and maintained a website that is sufficiently intuitive and/or
obvious that is inaccessible to blind class members; and/or
(c) failed to take actions to correct these access barriers in the face of substantial
harm and discrimination to blind class members.
80. Defendant has failed to take any prompt and equitable steps to remedy their
discriminatory conduct. These violations are ongoing.
18
81. As such, Defendant discriminates, and will continue in the future to
discriminate against Plaintiff and members of the proposed class and subclass on the basis of
disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages,
accommodations and/or opportunities of Barkbox.com under N.Y. Exec. Law § 296(2) et seq.
and/or its implementing regulations. Unless the Court enjoins Defendant from continuing to
engage in these unlawful practices, Plaintiff and members of the class will continue to suffer
irreparable harm.
82. The actions of Defendant were and are in violation of the New York State
Human Rights Law and therefore Plaintiff invokes his right to injunctive relief to remedy the
discrimination.
83. Plaintiff is also entitled to compensatory damages, as well as civil penalties
and fines pursuant to N.Y. Exec. Law § 297(4)(c) et seq. for each and every offense.
84. Plaintiff is also entitled to reasonable attorneys’ fees and costs.
85. Pursuant to N.Y. Exec. Law § 297 and the remedies, procedures, and rights set
forth and incorporated therein, Plaintiff prays for judgment as set forth below.
THIRD CAUSE OF ACTION
(Violation of New York State Civil Rights Law, NY CLS Civ R,
Article 4 (CLS Civ R § 40 et seq.))
86. Plaintiff repeats, realleges and incorporates by reference the allegations
contained in paragraphs 1 through 85 of this Complaint as though set forth at length herein.
87. Plaintiff served notice thereof upon the attorney general as required by N.Y.
Civil Rights Law § 41.
88. N.Y. Civil Rights Law § 40 provides that “all persons within the jurisdiction
of this state shall be entitled to the full and equal accommodations, advantages, facilities, and
privileges of any places of public accommodations, resort or amusement, subject only to the
19
conditions and limitations established by law and applicable alike to all persons. No persons,
being the owner, lessee, proprietor, manager, superintendent, agent, or employee of any such
place shall directly or indirectly refuse, withhold from, or deny to any person any of the
accommodations, advantages, facilities and privileges thereof . . .”
89. N.Y. Civil Rights Law § 40-c(2) provides that “no person because of . . .
disability, as such term is defined in section two hundred ninety-two of executive law, be
subjected to any discrimination in his or her civil rights, or to any harassment, as defined in
section 240.25 of the penal law, in the exercise thereof, by any other person or by any firm,
corporation or institution, or by the state or any agency or subdivision.”
90. Barkbox.com is a sales establishment and public accommodation within the
definition of N.Y. Civil Rights Law § 40-c(2).
91. Defendant is subject to New York Civil Rights Law because it owns and
operates Barkbox.com. Defendant is a person within the meaning of N.Y. Civil Law § 40-c(2).
92. Defendant is violating N.Y. Civil Rights Law § 40-c(2) in refusing to update
or remove access barriers to Barkbox.com, causing Barkbox.com to be completely inaccessible
to the blind. This inaccessibility denies blind patrons full and equal access to the facilities, goods
and services that Defendant makes available to the non-disabled public.
93. There are readily available, well-established guidelines on the Internet for
making websites accessible to the blind and visually-impaired. These guidelines have been
followed by other business entities in making their website accessible, including but not limited
to: adding alt-text to graphics and ensuring that all functions can be performed by using a
keyboard. Incorporating the basic components to make their website accessible would neither
fundamentally alter the nature of Defendant’s business nor result in an undue burden to
Defendant.
20
94. In addition, N.Y. Civil Rights Law § 41 states that “any corporation which
shall violate any of the provisions of sections forty, forty-a, forty-b or forty two . . . shall for each
and every violation thereof be liable to a penalty of not less than one hundred dollars nor more
than five hundred dollars, to be recovered by the person aggrieved thereby . . .”
95. Specifically, under N.Y. Civil Rights Law § 40-d, “any person who shall
violate any of the provisions of the foregoing section, or subdivision three of section 240.30 or
section 240.31 of the penal law, or who shall aid or incite the violation of any of said provisions
shall for each and every violation thereof be liable to a penalty of not less than one hundred
dollars nor more than five hundred dollars, to be recovered by the person aggrieved thereby in
any court of competent jurisdiction in the county in which the defendant shall reside . . .”
96. Defendant has failed to take any prompt and equitable steps to remedy their
discriminatory conduct. These violations are ongoing.
97. As such, Defendant discriminates, and will continue in the future to
discriminate against Plaintiff and members of the proposed class on the basis of disability are
being directly indirectly refused, withheld from, or denied the accommodations, advantages,
facilities and privileges thereof in § 40 et seq. and/or its implementing regulations.
98. Plaintiff is entitled to compensatory damages of five hundred dollars per
instance, as well as civil penalties and fines pursuant to N.Y. Civil Rights Law § 40 et seq. for
each and every offense.
FOURTH CAUSE OF ACTION
(Violation of New York City Human Rights Law,
N.Y.C. Administrative Code § 8-102, et seq.)
99. Plaintiff repeats, realleges and incorporates by reference the allegations
contained in paragraphs 1 through 98 of this Complaint as though set forth at length herein.
21
100. N.Y.C. Administrative Code § 8-107(4)(a) provides that “it shall be an
unlawful discriminatory practice for any person, being the owner, lessee, proprietor, manager,
superintendent, agent or employee of any place or provider of public accommodation, because of
. . . disability . . . directly or indirectly, to refuse, withhold from or deny to such person, any of
the accommodations, advantages, facilities or privileges thereof.”
101. Barkbox.com is a sales establishment and public accommodation within the
definition of N.Y.C. Administrative Code § 8-102(9).
102. Defendant is subject to City Law because it owns and operates Barkbox.com.
Defendant is a person within the meaning of N.Y.C. Administrative Code § 8-102(1).
103. Defendant is violating N.Y.C. Administrative Code § 8-107(4)(a) in refusing
to update or remove access barriers to Barkbox.com, causing Barkbox.com to be completely
inaccessible to the blind. This inaccessibility denies blind patrons full and equal access to the
facilities, goods, and services that Defendant makes available to the non-disabled public.
Specifically, Defendant is required to “make reasonable accommodation to the needs of persons
with disabilities . . . any person prohibited by the provisions of [§ 8-107 et seq.] from
discriminating on the basis of disability shall make reasonable accommodation to enable a
person with a disability to . . . enjoy the right or rights in question provided that the disability is
known or should have been known by the covered entity.” N.Y.C. Administrative Code § 8-
107(15)(a).
104. Defendant’s actions constitute willful intentional discrimination against the
class on the basis of a disability in violation of the N.Y.C. Administrative Code § 8-107(4)(a)
and § 8-107(15)(a) in that Defendant has:
(a) constructed and maintained a website that is inaccessible to blind class
members with knowledge of the discrimination; and/or
22
(b) constructed and maintained a website that is sufficiently intuitive and/or
obvious that is inaccessible to blind class members; and/or
(c) failed to take actions to correct these access barriers in the face of substantial
harm and discrimination to blind class members.
105. Defendant has failed to take any prompt and equitable steps to remedy their
discriminatory conduct. These violations are ongoing.
106. As such, Defendant discriminates, and will continue in the future to
discriminate against Plaintiff and members of the proposed class and subclass on the basis of
disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages,
accommodations and/or opportunities of Barkbox.com under N.Y.C. Administrative Code § 8-
107(4)(a) and/or its implementing regulations. Unless the Court enjoins Defendant from
continuing to engage in these unlawful practices, Plaintiff and members of the class will continue
to suffer irreparable harm.
107. The actions of Defendant were and are in violation of City law and therefore
Plaintiff invokes his right to injunctive relief to remedy the discrimination.
108. Plaintiff is also entitled to compensatory damages, as well as civil penalties
and fines under N.Y.C. Administrative Code § 8-120(8) and § 8-126(a) for each offense.
109. Plaintiff is also entitled to reasonable attorneys’ fees and costs.
110. Pursuant to N.Y.C. Administrative Code § 8-120(8) and § 8-126(a) and the
remedies, procedures, and rights set forth and incorporated therein, Plaintiff prays for judgment
as set forth below.
FIFTH CAUSE OF ACTION
(Declaratory Relief)
23
111. Plaintiff repeats, realleges and incorporates by reference the allegations
contained in paragraphs 1 through 110 of this Complaint as though set forth at length herein.
112. An actual controversy has arisen and now exists between the parties in that
Plaintiff contends, and is informed and believes that Defendant denies, that Barkbox.com
contains access barriers denying blind customers the full and equal access to the goods, services
and facilities of Barkbox.com, which Barkbox owns, operates and/or controls, fails to comply
with applicable laws including, but not limited to, Title III of the American with Disabilities Act,
42 U.S.C. §§ 12182, et seq., N.Y. Exec. Law § 296, et seq., and N.Y.C. Administrative Code §
8-107, et seq. prohibiting discrimination against the blind.
113. A judicial declaration is necessary and appropriate at this time in order that
each of the parties may know their respective rights and duties and act accordingly.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff respectfully demands judgment in favor of Plaintiff and
the class and against the Defendants as follows:
a)
A preliminary and permanent injunction to prohibit Defendant from violating the
Americans with Disabilities Act, 42 U.S.C. §§ 12182, et seq., N.Y. Exec. Law § 296, et
seq., and N.Y.C. Administrative Code § 8-107, et seq., and the laws of New York;
b) A preliminary and permanent injunction requiring Defendant to take all the steps
necessary to make its website, Barkbox.com, into full compliance with the requirements
set forth in the ADA, and its implementing regulations, so that Barkbox.com is readily
accessible to and usable by blind individuals;
c)
A declaration that Defendant owns, maintains and/or operates its website, Barkbox.com,
in a manner which discriminates against the blind and which fails to provide access for
persons with disabilities as required by Americans with Disabilities Act, 42 U.S.C. §§
24
12182, et seq., N.Y. Exec. Law § 296, et seq., and N.Y.C. Administrative Code § 8-107,
et seq., and the laws of New York;
d) An order certifying this case as a class action under Fed. R. Civ. P. 23(a) & (b)(2) and/or
(b)(3), appointing Plaintiff as Class Representative, and his attorneys as Class Counsel;
e)
An order directing Defendants to continually update and maintain its website to ensure
that it remains fully accessible to and usable by the visually-impaired;
f)
Compensatory damages in an amount to be determined by proof, including all applicable
statutory damages and fines, to Plaintiff and the proposed class for violations of their civil
rights under New York State Human Rights Law and City Law;
g) Plaintiff’s reasonable attorneys’ fees, expenses, and costs of suit as provided by state and
federal law;
h) For pre- and post-judgment interest to the extent permitted by law; and
i)
For such other and further relief which this court deems just and proper.
Dated: Brooklyn, New York
August 6, 2018
SHAKED LAW GROUP, P.C.
Attorneys for Plaintiff
By:/s/Dan Shaked_________
Dan Shaked (DS-3331)
44 Court St., Suite 1217
Brooklyn, NY 11201
Tel. (917) 373-9128
e-mail: [email protected]
25
| civil rights, immigration, family |
ZKkECocBD5gMZwczY0h2 | UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF FLORIDA
FORT PIERCE DIVISION
2:20-cv-14328
Civil Action No. _________________________________
VIRGINIA Y. EBANKS, individually, and
on behalf of all others similarly situated,
Plaintiff,
VIKING CLIENT SERVICES, LLC,
Defendant.
_______________________________________/
CLASS ACTION COMPLAINT
NOW COMES, VIRGINIA Y. EBANKS, individually, and on behalf of all others
similarly situated, through her undersigned counsel, complaining of VIKING CLIENT
SERVICES, LLC, as follows:
NATURE OF THE ACTION
1.
This action seeks redress for Defendant’s violation(s) of the Fair Debt Collection
Practices Act (“FDCPA”), 15 U.S.C. § 1692 et seq.
JURISDICTION AND VENUE
2.
This Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1331.
3.
Venue in this district is proper under 28 U.S.C. § 1391(b)(2).
PARTIES
4.
VIRGINIA Y. EBANKS (“Plaintiff”) is a natural person, over 18-years-of-age,
who at all times relevant resided in Port St. Lucie, Florida.
5.
Plaintiff is a “consumer” as defined by 15 U.S.C. § 1692a(3).
1
6.
VIKING CLIENT SERVICES, LLC (“Defendant”) is a limited liability company
organized and existing under the laws of the State of Minnesota.
7.
Defendant maintains its principal place of business at 7500 Office Ridge Circle,
Suite 100, Eden Prairie, Minnesota 55344.
8.
Defendant is a “debt collector” as defined by 15 U.S.C. § 1692a(6) as the principal
purpose of Defendant’s business is the collection of debt owed to others.
FACTUAL ALLEGATIONS
9.
Plaintiff applied for and obtained a Kohl’s Inc. credit card.
10.
Plaintiff made various charges to the credit card for personal purposes.
11.
Due to financial difficultly, Plaintiff defaulted on her Kohl’s, Inc. credit card
account (“subject debt”).
12.
The subject debt is a “debt” as defined by 15 U.S.C. § 1692a(5).
13.
The subject debt was eventually placed with Defendant for collection.
14.
On September 2, 2020, Defendant mailed Plaintiff a letter in an attempt to collect
the subject debt (“Defendant’s Collection Letter”).
15.
Defendant’s Collection Letter depicted, in pertinent part, as follows:
2
16.
Defendant’s Collection Letter is a “communication” as defined by 15 U.S.C. §
1692a(2).
17.
Defendant’s Collection Letter did not conspicuously identify the current creditor
as required by §1692g(a)(2) of the FDCPA.
18.
Specifically, Defendant’s Collection Letter identified “Capital One, N.A.” as the
“Original Creditor” and “Creditor” but did not identify the current creditor.
19.
Moreover, Defendant’s Collection Letter represented that “Kohl’s, Inc. has
assigned the above account to Viking Client Services, LLC for collections.”
20.
Accordingly, Defendant’s Collection Letter confused Plaintiff as she was unable to
determine whether “Kohl’s Inc.” or “Capital One, N.A.” was the current creditor to whom the
subject debt is owed to.
21.
Moreover, the identity of the current creditor was further obscured by the
conflicting representations that “Capital One, N.A.” was the “Creditor” while “Kohl’s Inc.” was
the entity that placed the subject debt with Defendant for collection.
22.
Accordingly, Defendant’s Collection Letter failed to conspicuously identify the
current creditor as required by the FDCPA.
23.
The confusing presentation in Defendant’s Collector Letter impacted Plaintiff’s
decision to pay the subject debt.
24.
Accordingly, Plaintiff was deprived of her right to receive critical information
required by the FDCPA.
CLASS ALLEGATIONS
25.
All paragraphs of this Complaint are expressly adopted and incorporated herein as
though fully set forth herein.
26.
Plaintiff brings this action pursuant to and Fed. R. Civ. P. 23, individually, and on
behalf of all others similarly situated (“Putative Class”).
27.
The Putative Class is defined as follows:
All natural persons residing in the State of Florida (a) that received a
correspondence from Defendant; (b) attempting to collect a consumer debt placed
by Kohl’s Inc. with Defendant for collection; (c) that failed to conspicuously
identify the current creditor; (d) within the one (1) year preceding the date of this
complaint through the date of class certification.
28.
The following individuals are excluded from the Putative Class: (1) any Judge
presiding over this action and members of their families; (2) Defendant, Defendant’s subsidiaries,
parents, successors, predecessors, and any entity in which Defendant or their parents have a
controlling interest and their current or former employees, officers and directors; (3) Plaintiff’s
attorneys; (4) persons who properly execute and file a timely request for exclusion from the
Putative Class; (5) the legal representatives, successors or assigns of any such excluded persons;
and (6) persons whose claims against Defendant have been fully and finally adjudicated and/or
released.
A.
Numerosity:
29.
Upon information and belief, Defendant mailed hundreds of similar letters to
consumers nationwide.
30.
The exact number of members of the Putative Class are unknown and not available
to Plaintiff at this time, but it is clear that individual joinder is impracticable.
31.
Members of the Putative Class can be objectively identified from records of
Defendant to be gained in discovery.
B.
Commonality and Predominance:
32.
There are many questions of law and fact common to the claims of Plaintiff and the
Putative Class, and those questions predominate over any questions that may affect individual
members of the Putative Class.
C.
Typicality:
33.
Plaintiff’s claims are representative of the claims of other members of the Putative
34.
Plaintiff’s claims are typical of members of the Putative Class because Plaintiff and
members of the Putative Class are entitled to damages as result of Defendant’s conduct.
D.
Superiority and Manageability:
35.
This case is also appropriate for class certification as class proceedings are superior
to all other available methods for the efficient and fair adjudication of this controversy.
36.
The damages suffered by the individual members of the Putative Class will likely
be relatively small, especially given the burden and expense required for individual prosecution.
37.
By contrast, a class action provides the benefits of single adjudication, economies
of scale, and comprehensive supervision by a single court.
38.
Economies of effort, expense, and time will be fostered and uniformity of decisions
ensured.
E.
Adequate Representation:
39.
Plaintiff will adequately and fairly represent and protect the interests of the Putative
40.
Plaintiff has no interests antagonistic to those of the Putative Class, and Defendant
has no defenses unique to Plaintiff.
41.
Plaintiff has retained competent and experienced counsel with substantial
experience in consumer law.
CLAIMS FOR RELIEF
COUNT I:
Fair Debt Collection Practices Act (15 U.S.C. § 1692 et seq.)
(On behalf of Plaintiff and the Member of Putative Class)
42.
All Paragraphs of this Complaint are expressly adopted and incorporated herein as
though fully set forth herein.
Violation(s) of 15 U.S.C. § 1692g
43.
Section 1692g(a) of the FDCPA provides:
(a) Within five days after the initial communication with a consumer in connection
with the collection of any debt, a debt collector shall, unless the following
information is contained in the initial communication or the consumer has paid the
debt, send the consumer a written notice containing –
(1)
the amount of the debt;
(2)
the name of the creditor to whom the debt is owed;
(3)
a statement that unless the consumer, within thirty days after receipt
of the notice, disputes the validity of the debt, or any portion thereof,
the debt will be assumed to be valid by the debt collector;
(4)
a statement that if the consumer notifies the debt collector in writing
within the thirty-day period that the debt or any portion thereof, is
disputed, the debt collector will obtain verification of the debt or a
copy of a judgment against the consumer and a copy of such
verification or judgment against the consumer and a copy of such
verification or judgment will be mailed to the consumer by the debt
collector; and
(5)
a statement that, upon the consumer’s written request within the
thirty-day period, the debt collector will provide the consumer with
the name and address of the original creditor, if different from the
current creditor.
(emphasis added).
44.
Section 1692g of the FDCPA requires debt collectors to make certain disclosures,
including the identity of the current creditor.
45.
Defendant violated 15 U.S.C. §1692g by failing to adequately provide Plaintiff with
the disclosures required by the FDCPA
46.
As set forth above, Defendant’s Collection Letter violated §1692g(a)(2) because it
failed to conspicuously identify the current creditor to whom the debt is owed. See Steffek v.
Client Services, Inc., 948 F.3d 761, 765 (7th Cir. 2020) (finding that the mere presence of the
correct name of the current creditor is insufficient to satisfy the requirements of §1692g(a)(2)).
47.
As pled above, Plaintiff was deprived of critical information required by the
FDCPA and the confusing presentation in Defendant’s Collection Letter impacted Plaintiff’s
decision to pay the subject debt.
WHEREFORE, Plaintiff requests the following relief:
A.
Declaring that Defendant’s Collection Letter violates Section 1692g(a)(2) of the
FDCPA;
B.
Enjoining Defendant from sending similar collection letters to consumers;
C.
Awarding Plaintiff statutory and actual damages, in an amount to be determined at
trial, for the underlying FDCPA violations;
D.
Awarding Class Members statutory damages and actual damages;
E.
Awarding Plaintiff her costs and reasonable attorney’s fees pursuant to 15 U.S.C.
§1692k; and
F.
Awarding any relief as this Honorable Court deems just and proper.
DEMAND FOR JURY TRIAL
Pursuant to Fed. R. Civ. P. 38(b), Plaintiff demands a trial by jury.
Dated: September 17, 2020
Respectfully submitted,
VIRGINIA Y. EBANKS
By: Alexander J. Taylor
Alexander J. Taylor, Esq.
Florida Bar No. 1013947
SULAIMAN LAW GROUP, LTD.
2500 South Highland Avenue
Suite 200
Lombard, Illinois 60148
+1 630-575-8181
[email protected]
8
| consumer fraud |
1KtRCocBD5gMZwczjLTs | FILED
STEPHEN L. PEV AR
American Civil Liberties Union Foundation
330 Main St., First Floor
Hartford, Connecticut 06106
(860) 570-9830
MAR 2 1 2013
~~
DANA L. HANNA
Hanna Law Office, P .C.
816 Sixth St.
P.O. Box 3080
Rapid City, South Dakota 57709
605-791-1832
ROBERT DOODY
ACLU of South Dakota
P.O. Box 1170
Sioux Falls, SD 57101
605-332-2508
Attorneys for Plaintiffs
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH DAKOTA
Civ. No.
\ ~- ~Q~ \)
OGLALA SIOUX TRIBE and ROSEBUD SIOUX
TRIBE, as parens patriae, to protect the rights of
their tribal members; and ROCHELLE
WALKING EAGLE, MADONNA PAPPAN, and
LISA YOUNG, individually and on behalf of all
other persons similarly situated,
CLASS ACTION COMPLAINT
FOR DECLARATORY AND
INJUNCTIVE RELIEF
Plaintiffs,
LUANN VAN HUNNIK; MARK VARGO; HON.
JEFF DAVIS; and KIM MALSAM-RYSDON, in
their official capacities.
Defendants.
INTRODUCTION
Congress passed the Indian Child Welfare Act of 1978 (ICWA) in part because
officials in South Dakota and other states were removing scores of Indian children from
their homes based on insufficient evidence, and in perfunctory and inadequate hearings,
in violation of federal law. Yet today, despite the added protections of ICWA, officials in
Pennington County, South Dakota are removing scores of Indian children from their
homes based on insufficient evidence, and in perfunctory and inadequate hearings, in
violation of federal law.
Attached to this complaint as "Exhibit I" is the transcript of one such Pennington
County hearing. This hearing, involving Plaintiff Madonna Pappan, her husband, and
their two children, lasted little more than sixty seconds. The court did not permit the
Pappans to see the petition that had been filed against them by state officials. When Mr.
Pappan asked what he was permitted to discuss, the court changed the subject and, a few
seconds later, terminated the hearing. The court immediately entered an order (attached
as "Exhibit 2") which found that "active efforts have been made to provide remedial
services and rehabilitative programs" to the Pappans, and that taking the Pappan children
away from their parents "is the least restrictive alternative available," even though no
evidence was introduced during the hearing on those issues. The order stripped the
Pappans of custody over their children for at least sixty days and gave that custody to the
officials who had filed the secret petition. As discussed below, Plaintiffs Rochelle
Walking Eagle and Lisa Young, like many other Indian parents in Pennington County,
were treated similarly during their hearings, and their children were removed from their
custody. This lawsuit seeks a speedy end to such a disgraceful process.
This action is brought by the Oglala Sioux Tribe and the Rosebud Sioux Tribe,
federally recognized Indian tribes with reservations in South Dakota, and by three Indian
parents, individually and as representatives of a class of all Indian parents residing in
Pennington County. Defendants are various state officials who routinely remove Indian
children from their families in a manner that violates federal law.
This lawsuit challenges three policies, practices, and customs of the Defendants:
(1) removing Indian children from their homes without affording them, their parents, or
their tribe a timely and adequate hearing as required by the Due Process Clause, (2)
removing Indian children from their homes without affording them, their parents, or their
tribe a timely and adequate hearing as required by the Indian Child Welfare Act, and (3)
removing Indian children from their homes without affording them, their parents, or their
tribe a timely and adequate hearing and then coercing the parents into waiving their rights
under the Due Process Clause and the Indian Child Welfare Act to such a hearing.
JURISDICTION AND VENUE
1.
This action arises under the Fourteenth Amendment to the Constitution and the Indian
Child Welfare Act of 1978,25 U.S.C. §§ 1901 et seq. (ICWA), and seeks relief pursuant
to 42 U.S.C. § 1983. The Court has jurisdiction over this action pursuant to 28 U.S.C. §§
1331 and 1343(a)(3) and (4). Venue is properly found in this District pursuant to 28
U.S.C. §1391 (b), in that all parties reside, and plaintiffs' claims arose, within the District.
THE TRIBAL PLAINTIFFS
2.
Plaintiffs Oglala Sioux Tribe and Rosebud Sioux Tribe are Indian tribes officially
recognized as such by the United States, with reservations located within the state of
South Dakota. Both tribes have treaties with the federal government.
3.
The Tribes bring this action as parens patriae to vindicate rights afforded to their
members by the Due Process Clause of the Fourteenth Amendment and by ICW A. The
Tribes and their members have a close affiliation, indeed kinship, with respect to the
rights and interests at stake in this litigation. The future and well-being of the Tribes is
inextricably linked to the health, welfare, and family integrity of their members. See
State ofAlaska, Dep't ofHealth and Social Services v. Native Village of Curyung, 151
P.3d 388, 402 (Alaska 2006) (recognizing that Indian tribes have a right to bring suit "as
parens patriae to prevent future violations" of ICWA). See also Native Village of
Venetie IRA Council v. Alaska, 155 F.3d 1150, 1152 (9th Cir. 1998) (same); State v.
Native Village ofTanana, 249 P.3d 734, 736 (Alaska 2011) (same). See also Santosky v.
Kramer, 455 u.s. 745, 766 (1982) (recognizing "a parens patriae interest is preserving
and promoting" the welfare of children and families).
4.
The Tribes also seek to vindicate their own rights under ICW A. ICWA was enacted in
large measure to protect the survival of Indian tribes. See 25 U.S.C. § 1901(3)
(recognizing that nothing "is more vital to the continued existence and integrity of Indian
tribes than their children.") See also Mississippi Band ofChoctaw Indians v. Holyfield,
490 U.S. 30, 50-52 (1989). Indeed, the rights that tribes have under ICWA cannot be
defeated or waived by tribal members. Id. at 34,52-53. As discussed below, the policies,
practices, and customs of Defendants at issue in this litigation undermine, if not
eviscerate, rights afforded these tribes by the Indian Child Welfare Act.
THE INDIVIDUAL PLAINTIFFS
5.
Named plaintiffs Rochelle Walking Eagle, Madonna Pappan, and Lisa Young reside in
Pennington County, South Dakota and are members of the Rosebud Sioux Tribe, the
Oglala Sioux Tribe, and the Standing Rock Sioux Tribe, respectively. They bring this
action on their own behalf and on behalf of all other members of federally recognized
Indian tribes, present and future, whose rights to family integrity are being or will be
unlawfully infringed upon by the Defendants, as theirs were. The named plaintiffs are
not seeking to interfere with, or overturn decisions in, their own cases but rather are
seeking to expose and challenge systemic policies, practices, and customs of the
Defendants that violate federal law.
6.
Each named plaintiff has two children who were taken into custody by the Defendants
or their agents on the grounds that these children were allegedly abused or neglected by
their parents, and remained in state custody for months before finally being returned
home. All three of these mothers suffered, and watched their children suffer, extreme
emotional and psychological trauma as a result of this forced separation. They bring this
action in an effort to protect themselves and other Indian parents and children from
experiencing the irreparable and grievous injuries that they and their children suffered.
THE PLAINTIFF CLASS
7.
The named plaintiffs bring this action on their own behalf and on behalf of all other
members of federally recognized Indian tribes who reside in Pennington County, South
Dakota and who, like the plaintiffs, are parents or custodians ofIndian children.
8.
Class certification is sought pursuant to F.R.Civ.P. 23(a), (b)(2). Class certification is
appropriate because the members of the class are so numerous that joinder of all persons
is impracticable; there are questions of fact and law common to the class; the
representative parties' claims are typical of the claims of the class; and the named
plaintiffs will fairly and adequately represent the interests of the class. In addition, the
defendants have acted or refused to act on grounds generally applicable to all members of
the class, thereby making appropriate final declaratory and injunctive relief to the class as
a whole, and the questions of law or fact common to members of the class predominate
over any questions affecting individual members. See Doe v. Staples, 706 F.2d 985, 986
(6th Cir. 1983) (certifying a class, as here, of parents who challenged a state's practice of
removing children from their homes in a manner inconsistent with the Due Process
Clause); Nicholson v. Williams, 205 F.R.D. 92 (E.D.N.Y. 2001) (similar); People United
for Children, Inc. v. City ofNew York, 214 F.R.D. 252 (S.D.N.Y. 2003) (similar).
DEFENDANTS
9.
Defendant Kim Malsam-Rysdon is the Secretary of the South Dakota Department of
Social Services (DSS). In that capacity, she is the person in charge of the day-to-day
operation of DSS, including Child Protection Services (CPS). DSS/CPS is the state
agency that routinely submits affidavits in temporary custody proceedings seeking the
removal of Indian children from their homes, is the agency to which custody is often
granted of said children by state courts, and is then the agency responsible for placing
those children in foster care settings. Defendant LuAnn Van Hunnik is the person in
charge of CPS for Pennington County, South Dakota.
10. Defendant Mark Vargo is the duly elected State's Attorney for Pennington County. In
that capacity, said Defendant (and his subordinates) represent the state, including DSS, in
all abuse and neglect proceedings and in other proceedings to acquire temporary custody
ofchildren under state law.
11.
Defendant Jeff Davis is the presiding judge of the Seventh Judicial Circuit Court of
the state of South Dakota, and in that capacity, is the chief administrator of said Court.
He and the other judges of the Seventh Judicial Circuit routinely consider Petitions for
Temporary Custody filed by state officials involving members of the Plaintiff Tribes and
members of the Plaintiff class, and routinely enter orders granting those petitions in a
manner that violates federal law.
12.
All of the acts set forth herein were undertaken by the Defendants under color of state
law. All of the Defendants are sued in their official capacities only. Each Defendant is a
"policy maker" with respect to the policies challenged in this lawsuit.
FACTUAL ALLEGATIONS
13. Custody of one's child is one of the most precious of all rights, and "perhaps the oldest
of the fundamental liberties recognized by [the Supreme] Court." Troxel v. Granville, 530
U.S. 57, 65 (2000). "The bonds between a parent and child are, in a word, sacrosanct"
and protected by federal law. Swipies v. Kofka, 419 F.3d 709, 715 (8th Cir. 2005).
14. The right of parents and children to maintain their relationship without unnecessary
interference by the state is a constitutionally protected liberty interest. Stanley v. Illinois,
405 U.S. 645, 649-58 (1972). "Both parents and children have a liberty interest in the
care and companionship of each other." Whisman v. Rinehart, 119 F.3d 1303, 1309 (8th
Cir.1997).
15.
Every constitutionally protected liberty (or property) interest is protected against loss
by the Due Process Clause. See Board of Pardons v. Allen, 482 U.S. 369, 371, 381
(1987). That Clause requires the state to afford certain procedural safeguards whenever it
seeks to limit or withhold a liberty or property interest. See Boddie v. Connecticut, 401
U.S. 371 (1971); Swipies, 419 F.3d at 713-14; Whisman, 119 F.3d at 1309.
16.
The Due Process Clause guarantees, among other things, "the opportunity to be heard
at a meaningful time and in a meaningful manner." Armstrong v. Manzo, 380 U.S. 545,
552 (1965). See Swipies, 419 F.3d at 715.
17. Normally, procedural safeguards guaranteed by the Due Process Clause, including the
right to notice and hearing, must be afforded by the government prior to a deprivation of
a liberty or property interest. See Boddie, 401 U.S. at 379. When a genuine emergency
exists and pre-deprivation notice and hearing are impossible, the state must provide those
safeguards with reasonable promptness post-deprivation. See Goss v. Lopez, 419 U.S.
565,581-84 (1975); Coleman v. Watt, 40 F.3d 255,260-61 (8th Cir. 1994).
18. Because maintaining one's family integrity is a liberty interest, whenever state officials
involuntarily remove a child from his or her home without a pre-deprivation hearing, the
state must provide a prompt and adequate post-deprivation hearing. See Swipies, 419 F.3d
at 715; Whisman, 119 F.3d at 1310 ("Even if defendants had a right to take temporary
custody of [the child], defendants had a corresponding obligation to afford [the parents]
an adequate post-deprivation hearing."); Whisman, at 1311 ("Of even more concern is the
failure [of defendants] to provide [the child] his right to a prompt post-deprivation
hearing; he clearly was not in a position to secure that right for himself."); K.D. v. County
o/Crow Wing, 434 F.3d 1051, 1056 n.6 (8th Cir. 2006) ("Once a child is removed from
parental custody without a court order, the state bears the burden to initiate prompt
judicial proceedings to a provide post deprivation hearing. ")
19. Different interests protected by the Due Process Clause require different process. See
Morrissey v. Brewer, 408 U.S. 471,481 (1972) ("Once it is determined that due process
applies, the question remains what process is due. ") Determining what process is due in
any given situation requires a balancing of the following three interests:
First, the private interest that will be affected by the official action;
second, the risk of an erroneous deprivation of such interest through the
procedures used, and the probable value, if any, of additional or
substitute procedural safeguards; and finally, the Government's interest,
including the functions involved and the fiscal and administrative
burdens that the additional or substitute procedural requirement would
entail.
Mathews v. Eldridge, 424 U.S. 319, 335 (1976). See Coleman, 40 F.3d at 260-61.
20. The Eighth Circuit applied the Mathews balancing test in Coleman to determine what
post-deprivation process was due to the owner of a car that had been impounded under
exigent circumstances by local officials. The owner was given a hearing seven days after
the impoundment, a delay the owner claimed violated his rights. The Eighth Circuit
agreed with the owner (1) that automobiles "occupy a central place in the lives of most
Americans;" (2) that "a more expeditious hearing would significantly reduce the harm
suffered" by owners wrongly deprived of their vehicles; and (3) that the only interest the
state has in delaying the hearing is the inconvenience of gathering the facts sooner, given
that the hearing "must be provided in any event." Coleman, 40 F.3d at 260-61. Applying
the Mathews test, the court held that a seven-day delay was unconstitutional.
21. In Swipies, the Eighth Circuit applied the rationale of Coleman to the very situation at
issue here: the removal of children from their families. As in Coleman, the court found
that the private interest at stake is significant; the risk of an erroneous deprivation and its
attendant unnecessary injury is high when adequate process is not provided in a timely
manner; and providing a speedy hearing is a minimal burden because the state must
eventually provide such a hearing anyway. The court held:
To put the matter otherwise, if seven days is too long for a car owner to
wait for a post-deprivation hearing after his or her car has been towed
and impounded, Coleman v. Watt, 40 F.3d 255, 260-61 (8th Cir. 1994),
as a matter of law, a parent should not have to wait seventeen days
after his or her child has been removed for a hearing.
Swipies, 419 F.3d at 715 (emphasis added).
22. Removing a child from his or her home is among the most drastic actions that a state
can take against a liberty interest, and therefore the delay in providing an adequate
hearing "should ordinarily be measured in hours and days, as opposed to weeks." Brown
v. Daniels, 128 Fed.Appx. 910, 915 (3d Cir. 2005).
23. The private interests affected by the forceful removal of children from their parents
could hardly be more profound. Numerous studies have reported the traumatic and often
permanently scarring effect of removing children from their homes. See, e.g., Paul Chill,
"Burden of Proof Begone: The Pernicious Effect of Emergency Removal in Child
Protective Proceedings," 4 Family Court Review 457 (2003) ("Removals can be terrifying
experiences for children and families ....Children are thrust into alien environments,
separated from parents, siblings, and all else familiar, with little if any idea of why they
have been taken there."). Feelings of terror, grief, and abandonment are typical, and a
child's forced separation from parents at the hands of a stranger can adversely affect his
or her capacity to form attachments in the future and to trust authority. See id. at 458.
24. "The decision to remove a [child] from the family home is always serious and the
resulting disruptions can often be traumatic for both parent and child." Rivera v. Marcus,
696 F .2d 1016, 1017 (2d Cir. 1982). Children should be separated from their parents by
the state only in exigent circumstances when there is an imminent risk of serious injury.
See generally Wallis v. Spencer, 202 F.3d 1126, 1138 (9th Cir. 2002); Nicholson v.
Williams, 203 F. Supp.2d 153, 198-99 (E.D.N.Y. 2002) (citing expert testimony that even
a short breach in the familial bond caused by involuntary separation of the child from his
or her home will likely be detrimental to the child's well-being, cause distress and
despair, and result in feelings of self-blame that could last a lifetime); B.S. v. Somerset
County, 704 F.3d 270, 272 (3d Cir. 2013) (recognizing that removing a child from the
home is a "drastic" action that has "profound ramifications for the integrity of the family
unit and for each member of it. ").
25. This is especially true for Indian children, most of whom are placed by the Defendants
in non-Indian settings after removal from their families, and thus will suffer both a
cultural as well as a familial separation. Indeed, one reason Congress passed ICWA was
to protect Indian children from experiencing those injuries ifat all possible.
26. Yet, as explained more fully below, for at least the past three years, the Defendants
have pursued a policy, practice, and custom of separating Indian children from their
parents without providing them with a prompt and adequate post-deprivation hearing. In
fact, Indian parents in Pennington County whose children have been removed by state
officials usually wait a minimum of sixty days (and often ninety days) before receiving a
hearing that complies with the Due Process Clause.
27. South Dakota has established a process for the removal of children from their homes in
exigent circumstances. See SDCL Chap. 26-7 A. In South Dakota, a child may be taken
into state custody by a law enforcement or court services officer without a court order
when there is an "imminent danger to the child's life or safety" and there is insufficient
time to apply for a court order. SDCL § 26-7A-12(4).
28. Alternatively, a court may order temporary custody of a child upon application by a
state's attorney, social worker of DSS, or law enforcement officer, if there is good cause
to believe that "[t]here exists an imminent danger to the child's life or safety and
immediate removal of the child from the child's parents, guardian, or custodian appears to
be necessary for the protection ofthe child." Id. § 26-7A-13(1)(b).
29. No child may be held in custody longer than 48 hours (except weekends) "unless a
temporary custody petition for an apparent abuse or neglect case or other petition has
been filed." ld. § 26-7 A-14. The court must convene a hearing within 48 hours after the
child is taken into custody (except weekends) "unless extended by the court." ld. § 26
7A-15.
30. Whoever takes a child into state custody must immediately inform the child's parents or
custodians, orally or in writing, that they have "the right to a prompt hearing by the court
to determine whether temporary custody should be continued." ld. § 26-7A-I5. If the
child is an Indian child, an effort must also be made to notify the child's tribe. ld.
31. South Dakota amended its laws after the passage of lewA to require that in any
custody proceeding involving an Indian child, the state's attorney must provide notice to
"the parent or Indian custodian and the Indian child's tribe, if known, of the pending
proceedings and of their right of intervention." ld. § 26-7A-15.1(1). The notice "shall be
written in clear and understandable language and shall include" a copy of the petition for
temporary custody and a statement ofthe rights of the parents, custodians, and tribe. ld. §
26-7 A-I5.1 (4). The notice must state that the tribe has a right "to be granted up to twenty
days from the receipt of the notice to prepare for the proceeding." ld. § 26-7A
15.1 (4)(d)(iii).
32. No foster care placement proceeding may be held "until at least ten days after receipt"
of notice by both the parents and the child's Indian tribe, and both the parents and the
tribe have a right to request an additional ten days. ld. § 26-7A-15.l(3). (ICWA, too,
prohibits a foster care placement hearing from occurring until ten days after service of
formal notice to the parents and the child's tribe. 25 U.S.C. § 1912(e)).
33. The purpose of South Dakota's temporary custody (or "48-hour") hearing is "to
determine whether temporary custody should be continued" or whether the child may
safely be returned to the parents. S.D.C.L. § 26-7 A-15.
34.
The 48-hour hearing is expected to be an evidentiary hearing. See id. § 26-7A-18 ("At
the temporary custody hearing the court shall consider the evidence of the need for
continued temporary custody ofthe child in keeping with the best interests of the child. ").
The court's duty to conduct an evidentiary hearing is explained in the "South Dakota
Guidelines for Judicial Process in Child Abuse and Neglect Cases," promulgated by the
South Dakota Unified Judicial System ("Guidelines") in 2007 (available at
sdjudicial.comlcourtinfo/childabuse.aspx). The Guidelines state:
Pursuant to SDCL 26-7A-18, at the 48 Hour Temporary Custody
Hearing the court shall consider evidence of the need for continued
temporary custody ... to determine whether continued custody outside
the home is necessary to protect the child. The purpose is to decide
whether the child can be safely returned home and when. The decision
should be based on a competent assessment of the risks and dangers to
the child. The Court should evaluate the current and future danger to
the child and what can be done to eliminate the danger.
Guidelines, at 33 (emphasis added).
35. No court can reasonably make a "competent assessment of risk," evaluate "current and
future danger to the child," and determine "what can be done to eliminate the danger"
without hearing the relevant facts and offering the parents a meaningful opportunity to
present evidence and contest the allegations against them.
36. The Guidelines anticipate that the court will hear evidence from the family services
specialist assigned by DSS to the case. The Guidelines state: "The family services
specialist should be ready to detail reasonable efforts [to avoid removal of the child] at
the 48 hour hearing," including "historical and current information" such as contacts with
the parents since the child's removal and previous abuse or neglect issues. Id. at 37-38.
37. The Guidelines state that where the child is Indian, DSS must support its Petition for
Temporary Custody either with an "ICW A Affidavit" or by oral testimony from a
"'qualified expert that the continued custody of the child by the parent or Indian custodian
is likely to result in serious emotional or physical damage to the child (25 USC 1912(e))."
Guidelines, at 46. Attached to the Guidelines is a model ICW A affidavit ("Form 6"), a
copy ofwhich is attached to this complaint as "Exhibit 3."
38. The Guidelines also state that, in any 48-hour hearing involving an Indian child, "the
Court must determine whether the agency has made active efforts to preserve the family
(25 U.S.C.A. 1912(d))" and whether the person endangering the child has "been removed
from the home so the child could remain." Guidelines, at 38. Moreover, at the conclusion
of the hearing, the court must "determine that removal of the child is or was necessary
because continued presence in the home or return to the home would be contrary to the
child's welfare. Id. at 37.
39. The fact that South Dakota law anticipates that the 48-hour hearing will be an
evidentiary hearing is reflected by the model "Temporary Custody Order" attached to the
Guidelines as "Form 7," a copy of which is attached hereto as "Exhibit 4." The model
order recommends that the court make the following findings:
That there is probable cause to believe that the child(ren) is/are abused
or neglected, ....That temporary custody is the least restrictive
alternative in the child(ren)'s best interest. ... That active efforts have
been made to provide remedial services and rehabilitative programs
designed to prevent the break-up of the Indian family and that these
efforts have proven unsuccessful. . . . That continued custody of the
child by the parents or Indian custodian is likely to result in serious
emotional or physical damage to the child.
40.
The Guidelines recognize that gathering all the evidence required by the 48-hour
hearing could be so time-consuming that the court may need to continue the hearing:
A 48 Hour Temporary Custody Hearing involves substantial time and
resources. . . .[The court's decision must be] based on careful
consideration of the circumstances of the case. Due to constraints of
time, it might not be possible for the Court to conduct a complete initial
custody hearing.
In these circumstances, the Court should . . . (c)
Continue the 48 Hour Temporary Custody Hearing and set the time, date
and place ofthe continued hearing.
Guidelines, at 41-42 (emphasis added).
41. Under South Dakota law, the court has at least three options at the conclusion of the 48
hour hearing. First, the court may order that the child be returned to the family. Second,
the court may direct that DSS file a formal petition alleging abuse or neglect. Third, the
court may order that custody of the child be continued without the filing of a formal
petition "under the terms and conditions for duration and placement that the court
requires, including placement of temporary custody of the child with the Department of
Social Services, in foster care or shelter." SDCL § 26-7 A -19(2). If the court selects the
third option, "the court shall review the child's temporary custody placement at least once
every sixty days.!! ld. South Dakota allows a child to "be held in temporary custody until
released by order of the court." ld. § 26-7A-16.
42.
As discussed below, Defendants' hearings never involve the "substantial time and
resources" contemplated by the Guidelines (as Ms. Pappan's sixty-second hearing
illustrates), never allow for any witness testimony, never allow the parents to see the
petition filed against them, never allow the parents to see the affidavit filed in support of
that petition, never allow the parents to comment on whether continued custody is the
least restrictive alternative, never allow the parents to comment on whether the state has
engaged in active efforts to prevent a break-up of the family; and never allow the parents
to obtain counsel and resume the hearing in a timely manner. Similarly, the Defendants
also fail to afford Indian tribes the safeguards to which they are entitled.
43. Certain aspects of Defendants' 48-hour hearings were recently determined by the South
Dakota Supreme Court to comply with state law and with ICW A. See Cheyenne River
Sioux Tribe v. Davis, 2012 S.D. 69 (2012). However, the court did not address the due
process issues raised here. Moreover, the court's interpretation of ICW A is not binding
on federal courts.
A federal court is not bound by what a state court has decided on a
federal claim. See Olcott v. The Supervisors, 83 U.S. 678, 683 (1872); Lawrence County
v. Lead-Deadwood School Dist. No. 40-1, 469 U.S. 256 (1985) (rejecting an
interpretation of federal law made by the South Dakota Supreme Court).
44.
It is federal law-not state law-that determines what process is due whenever the
state removes children from their families. See Swipies, 419 F.3d at 716 ("a state statute
cannot dictate what procedural protections must attend a liberty interest-even a state
created one-as this is the sole province of federal law. II (Citation omitted.)). Any state
law that conflicts with federal law is invalid under the Supremacy Clause of the
Constitution. See Lawrence County, 469 U.S. at 703; Ross v. Arkansas State Police, 479
U.S. 1 (1986).
45. Nothing in state law prevents the Defendants from including within their 48-hour
hearing all the procedural safeguards required by federal law, or from continuing that
hearing for several days and to then meet federal requirements. Rather, the Defendants
have chosen not to provide a meaningful hearing at a meaningful time.
46. Likewise, nothing in state law prevents Defendants Van Hunnik, Vargo, and Malsam
Rysdon from training their staff to request that the court afford Indian parents the
procedural safeguards required by federal law at each 48-hour hearing, and from giving
parents a copy of the documents that these Defendants have filed with the court. Rather,
these Defendants have chosen not to do so.
47. Defendants Van Hunnik, Malsam-Rysdon, and Vargo may contend that the practice of
refusing to afford an adequate hearing until sixty days (or longer) after Plaintiffs' liberty
interests have been breached is the fault of Judge Davis and the other judges on the
Seventh Circuit However, even if the judiciary initiated this practice, the other Defen
dants have ratified and adopted it, and it has become the official policy, practice, and
custom of all the Defendants. See Coleman, 40 F.3d at 262 (holding that where executive
officials voluntarily adopt a practice initiated by a court, the practice becomes an official
policy, practice, and custom of the executive branch for purposes of federal liability).
F or instance, rather than request a prompt due process hearing for Indian parents, these
Defendants almost always request that the court grant DSS custody of Indian children for
a minimum of sixty days before affording the parents a proper hearing. Thus, these
Defendants do not even try to comply with the Due Process Clause.
48.
DSS is required to ensure that Indian families subjected to temporary custody hearings,
as well as the tribes in which these families are members, receive the procedural
protections guaranteed them by federal law. Defendants Vargo, Malsam-Rayson, and
Van Hunnik must train their staff accordingly. These Defendants are failing to do so,
exhibiting deliberate indifference to the rights of Indian parents and Indian tribes, causing
them to suffer irreparable injury. See City of Canton v. Harris, 489 U.S. 378, 387-88
(1989); Whisman, 119 F.3d at 1311 (noting that plaintiffs' claims were, like the claims
here, "based upon failure to properly train and supervise as well as creating, encouraging
and following the unconstitutional custom and practice of detaining children for thirty
[here: sixty to ninety] days without a due process hearing.").
49. The policy, practice, and custom of the Defendants of not providing constitutionally
adequate notice and hearing promptly after the removal of Indian children from their
homes has injured the named Plaintiffs, and will continue to injure all Indian parents,
until this policy, practice, and custom ends.
50. All three of the named plaintiffs-Madonna Pappan, Rochelle Walking Eagle, and Lisa
Young--were victims of Defendants' policies, practices, and customs described above and
had their children removed in court proceedings that violated federal law.
51. In all three cases, DSS employees under the supervision of Defendants Malsam-Rysdon
and Van Hunnik prepared a petition and signed an ICWA affidavit alleging that the
children of these parents were at risk of serious injury if they remained in their homes.
At their respective hearings, the parents were (a) not allowed to see the petition, (b) not
allowed to see the affidavit, (c) not allowed to cross-examine the person who submitted
the affidavit, (d) not allowed to offer any evidence contesting the allegations, (e) not
allowed to offer any evidence as to whether the state had made active efforts to prevent
the break-up of the family, and (1) not allowed to offer any evidence regarding whether
removal of their children was the least restrictive alternative.
The only "evidence"
mentioned at the hearing were hearsay statements from the state's attorney.
52.
Nevertheless, at the conclusion of all three hearings, the court removed all six children
from their respective homes for a minimum of sixty days. In addition, in all three cases
the court issued virtually identical findings adverse to the parents regarding issues that
were not addressed in these hearings, such as a finding that the Defendants had made
active efforts to prevent the breakup of the family and that removal of the children from
the home was the least drastic alternative available.
53. Attached as "Exhibit 5" is another transcript that illustrates Defendants' unconstitutional
practices. As the transcript shows, the court (per Defendant Davis) was asked by the
intervener Oglala Sioux Tribe (through its counsel Dana Hanna) if the Tribe could
"advise the Court as to the basic facts of taking [the) children." The court denied the
request, stating: "It's a 48 hour hearing, Mr. Hanna, and I'm not going to go into why the
children were removed. That's not my concern at this point." (Exhibit 5 at 8.)
54. Next, Mr. Hanna asked Judge Davis to return the children to the mother because no
evidence had been submitted to support any other result. Judge Davis denied the motion,
stating: !II don't have what I need here today at the 48 hour hearing to make [that
decision)." (Id. at 10.)
55. Given that Judge Davis (by his own admission) lacked sufficient information to
determine if the allegations against the mother were valid, the court should have set the
matter for a speedy evidentiary hearing. This is precisely what Mr. Hanna requested. See
id. at 12 (requesting the continuation of the hearing until "a week from now or within the
reasonably near future to [determine) whether there's any factual basis at all for taking
these children."). The court not only denied the motion but decided all issues against the
mother and removed the children from the home for a minimum of sixty days.
56.
Thus, Judge Davis prevented anyone from introducing the evidence upon which he
could have made an informed decision. He rendered the allegations submitted by the
state's attorney and DSS irrefutable.
57. The practice of these Defendants, then, is to allow DSS to wield virtually unlimited
authority to remove Indian children from their families.
Any evidence that might
contradict the allegations in the state's petition is barred from the 48-hour proceeding.
58. Defendants' 48-hour hearing is more akin to an ex parte proceeding than an adversarial
hearing. The parents are not permitted to discuss the allegations, and those allegations
are presumed true by the court. Similarly, the tribe is not permitted to intervene in any
meaningful way because all the relevant documents are kept a secret, and no one is
permitted to call witnesses or cross-examine the DSS worker who signed the affidavit.
59. Defendants' 48-hour hearings usually result in the forced removal of Indian children
from their homes for a minimum of sixty days (and most often ninety days) before the
parents and their children are afforded a post-deprivation hearing at which they can
present evidence and contest the allegations against them. This is what happened to
Plaintiffs Walking Eagle, Pappan, and Young.
60. Moreover, Defendants' 48-hour hearings typically result in the placement of Indian
children in non-Indian homes or private institutions operated by non-Indians, as was the
case with the children of Plaintiffs Walking Eagle, Pappan, and Young. Therefore, the
Oglala and Rosebud Sioux Tribes, as well as every Indian parent living in Pennington
County with Indian children, have a fundamental interest in seeking to halt the
continuation ofthe policies, practices, and customs challenged in this lawsuit.
61. It took a minimum of sixty days before Plaintiffs Walking Eagle, Pappan, and Young
were permitted to retain custody of their children. All three Plaintiffs have a good faith
and reasonable belief that had the court afforded them a due process hearing soon after
the 48-hour hearing, there is substantial likelihood that the court would have ordered DSS
to return their children. Indeed, at the 60-day hearing for Plaintiff Walking Eagle, the
court dismissed the charges against her, rejected the claims of DSS of abuse and neglect,
and ordered DSS to return her children forthwith.
CLAIM I: VIOLATION OF THE DUE PROCESS CLAUSE
62. Whenever state officials forcibly remove a child from his or her family, the state is
required by the Due Process Clause to provide a meaningful post-deprivation hearing at a
meaningful time. Newton v. Burgin, 363 F. Supp. 782 (W.D.N.C. 1973) (three-judge
court), affd mem" 414 U.S. 1139 (1974); Swipies v, Kofka. 419 F.3d 709 (8th Cir. 2005);
Whisman v, Rinehart, 119 F .3d 1303 (8th Cir. 1997).
63. The 48-hour hearings that Defendants convene following the involuntary removal of
Indian children from their homes are not meaningful hearings for purposes of the Due
Process Clause.
64. Therefore, Defendants must hold a constitutionally adequate hearing soon after their
48-hour hearings. See Martin v, Texas Dep't ofProtective and Regulatory Services. 405
F. Supp.2d 775. 790 (S.D. Tex. 2005) (noting that the state's early hearing may not have
passed constitutional scrutiny but defect was cured when state provided an adequate
hearing ten days later).
65. The policy, practice, and custom of the Defendants is to wait at least sixty days (and
more often ninety days) before providing parents whose children have been removed
from their custody with adequate notice, an opportunity to present evidence on their
behalf, an opportunity to contest the allegations, and a written decision based on
competent evidence. As a matter of law, such an exorbitant delay violates the Due
Process Clause. See Swipies, 419 F.3d at 715; Whisman, 119 F.3d at 1309; Coleman, 40
F.3d at 260-61; Doe v. Staples, 706 F.2d 985, 990-91 (6th Cir. 1983); Weller v. Dep't of
(4th
Social Services, 901 F.2d 387, 393
Cir. 1990). See also Heartland Academy
Community Church v. Waddle, 427 F.3d 525, 535 (8th Cir. 2005).
66. Plaintiffs are unaware of a single 48-hour hearing that did not accept the allegations
made by DSS and order the removal of Indian children from their homes, even though the
parents were not afforded adequate notice and an opportunity to contest those allegations.
These hearings are, as Justice Sabers stated in a related context, a "rubber stamping
formality." See In re D.M, 677 N.W.2d 578, 582 (S.D. 2004) (Sabers, J., dissenting).
67. The first Mathews factor considers the private interests at stake in the deprivation.
Here, as noted earlier, the private interests in maintaining family integrity are particularly
substantial.
68. The second Mathews factor considers whether the process employed by the state
increases the risk of an erroneous deprivation and whether additional process might
reduce that risk. Here, the process employed by the Defendants drastically increases the
risk of an erroneous deprivation because the Defendants withhold from parents the very
procedures that have long been recognized as fundamental to due process of law.
69. Indeed, Defendants' practices could hardly be more unfair and unreliable.
At
Defendants' 48-hour hearings, the state is permitted to speak on the issues to be decided
but not the parents. Providing parents with rudimentary due process, including notice
and an opportunity to contest the charges, will obviously reduce the risk of an erroneous
deprivation. See Swipies, 419 F.3d at 715; Coleman, 40 F.3d at 260-61; Rivera v. Marcus,
696 F.2d 1016, 1027-28 (2d Cir. 1972) (commenting that where, as here, parents are
provided with no opportunity at an early stage to explain their fitness and contest
allegations of having neglected their children, the risk of an erroneous deprivation is
unacceptably high); Johnson v. City ofNew York, 2003 WL 1826122 at *13 (S.D.N.Y.
2003) (similar).
70.
The third Mathews factor considers whether the state would be unnecessarily burdened
by having to provide additional procedures.
Defendants eventually provide a
constitutionally adequate post-deprivation hearing to parents whose children have been
removed from the home, and thus there will be slight (if any) additional burden on the
Defendants if the same hearing is provided at an earlier time. See Rivera, 696 F.2d at
1028 (finding fault with a system similar to the one at issue here, given that procedures
"are already in place" by which a prompt hearing could have been provided to the
parents); Swipies, 419 F.3d at 715; Coleman, 40 F.3d at 260-61.
71. The mere fact that the Defendants will have to expedite their trial preparations is no
reason to deny Indian families time-honored procedural safeguards against unnecessary
injury. See County ofRiverside v. McLaughlin, 500 U.S. 44 (1991) (holding that county
officials must provide arrestees with a probable cause hearing within 48 hours of arrest
despite the administrative burden necessary to meet that short deadline).
72. Normally, parents should be afforded an adequate post-deprivation hearing within
seven days after the removal of their children. See Coleman, 40 F.3d at 260-61 (holding
that a seven-day delay in providing a hearing to car owners following the impoundment
of their cars by state officials violated the Due Process Clause); Swipies, 419 F 3d at 715
(citing Coleman in holding that a seventeen-day delay in providing a hearing to parents
following the removal of their children by a state agency clearly violates the Due Process
Clause); Brown v. Daniels, 128 Fed.Appx. 910, 915 (3d Cir. 2005) (holding that the delay
in providing an adequate hearing following the removal of children from the home
"should ordinarily be measured in hours and days, as opposed to weeks."). For reasons
explained in the next section, in order to fulfill the congressional purposes of the Indian
Child Welfare Act, Indian parents and Indian tribes are entitled to a few additional days
to prepare for the due process hearing, but without question, Defendants' policy, practice,
and custom of delaying the hearing for a minimum of sixty days violates the Fourteenth
Amendment.
73.
Defendants' policy, practice, and custom of denying Indian parents--as Plaintiffs
Walking Eagle, Pappan, and Young were denied--a meaningful hearing at a meaningful
time following the removal of their children violates rights guaranteed to them by the
Fourteenth Amendment and has caused, is causing, and will continue to cause Indian
parents to suffer irreparable injury. Redress is sought pursuant to 42 U.S.C. § 1983.
CLAIM II: VIOLATIONS OF THE INDIAN CHILD WELFARE ACT
74. The Indian Child Welfare Act (ICWA), 25 U.S.C. §§ 1901 et seq., is a remedial statute.
The Act was passed in response to the removal of large numbers of American Indian
children from their homes by state agencies under dubious circumstances and without
adequate procedural guarantees.
75. After years of hearings and studies, Congress found "that an alarmingly high
percentage of Indian families are broken up by the removal, often unwarranted, of their
children from them by nontribal public and private agencies and that an alanningly high
percentage of such children are placed in non-Indian foster and adoptive homes and
institutions." 25 U.S.C. § 1901(4) (emphasis added).
76. Congress also found "that the States, exercising their recognized jurisdiction over
Indian child custody proceedings through administrative and judicial bodies, have often
failed to recognize the essential tribal relations of Indian people and the cultural and
social standards prevailing in Indian communities and families." ld. §1901(5).
77. These removals were disastrous not only for many Indian families but also for their
tribes, which were losing their future generations. The wholesale separation of Indian
children from their families "is perhaps the most tragic and destructive aspect of
American Indian life today," resulting in a crisis "of massive proportions." H.R. Rep. No.
95-1386 p. 9 (1978).
78. Another reason ICW A was passed was to enforce the federal government's trust
obligations to Indians and tribes. See 25 U.S.C. § 1901(3) (explaining that "the United
States has a direct interest, as trustee, in protecting Indian children who are members of
or are eligible for membership in an Indian tribe. It).
79. In enacting ICWA, Congress declared "that it is the policy of this Nation to protect the
best interests of Indian children and to promote the stability and security of Indian tribes
and families by the establishment of minimum Federal standards for the removal of
Indian children from their families and the placement of such children in foster or
adoptive homes which will reflect the unique values of Indian culture. II ld. § 1902.
80. The stated purpose of the Act is "to protect the best interests of Indian children and to
promote the stability and security of Indian tribes and families." ld. Congress recognized
that nothing "is more vital to the continued existence and integrity of Indian tribes than
their children." Id. § 1901(3).
81. ICW A was enacted "to prevent states from improperly removing Indian children from
their parents, extended families, and tribes." Cohen's Handbook of Federal Indian Law
(Nell Jessup Newton ed., 2005) at 820.
82. The Oglala Sioux Tribe and the Rosebud Sioux Tribe are among the intended
beneficiaries of ICW A and have enforceable rights under ICW A. See Holyfield, 490 U.S.
at 52 (recognizing that Indian tribes have an interest in the custody of Indian children
"which is distinct from but on parity with the interest of the parents" and which "finds no
parallel in other cultures found in the United States. It is a relationship that many non
Indians find difficult to understand and that non-Indian courts are slow to recognize.").
83. In fact, many of the safeguards set forth in ICWA apply only to Indian tribes. See, e.g.,
25 U.S.C. §§ 1911(a) (right to exclusive jurisdiction over children domiciled on the
reservation); 1911(c) (right of intervention in state court proceedings); 1912(a) (right to
notice in involuntary proceedings in state court); 1912(c) (right to examine documents
filed with state courts); 1914 (right to petition to invalidate a state court order); and
1915(e) (right to request the record ofany Indian child's state court placement).
84. Because ICWA is a remedial statute passed for the benefit of Indians and tribes, it
"'must be liberally construed with all doubts resolved in favor of the Indians.' Preston v.
Heckler, 734 F.2d 1359, 1369 (9th Cir. 1984); accord Bryan v. Itasca County, Minn., 426
U.S. 373, 392 (1976)." In re Esther, 248 P.3d 863, 869 (N.M. 2011). See also In re
J.8.B., 691 N.W.2d 611, 619 (S.D. 2005) (holding that these rules of construction apply
to ICW A and stating that, given ICW A, "it is to the benefit of Indian children to remain
within their families and only after 'active efforts' to reunite those families have proven
unsuccessful should the children be removed.").
85.
ICW A creates a set of procedures that were expressly intended to supplant state
procedures whenever the two are in conflict.
As the Supreme Court explained in
Mississippi Band ofChoctaw Indians v. Holyfield, 490 U.S. 30,44-45 (1989):
[T]he purpose of the ICW A gives no reason to believe that Congress
intended to rely on state law for the definition of a critical term; quite
the contrary. It is clear from the very text of the ICWA, not to mention
its legislative history and the hearings that led to its enactment, that
Congress was concerned with the rights of Indian families and Indian
communities vis-Ii-vis state authorities.
86. Among other things, ICW A confers rights and protections on Indian parents and
children in any "foster care placement," 25 U.S.C. § 1912, as well as on Indian tribes,
including "a right to intervene at any point in [a foster care] proceeding." Id. § 1913(c).
87. A "foster care placement" for purpose of ICWA, is "any action removing an Indian
child from its parents or Indian custodian for temporary placement in a foster home or
institution or the home of a guardian or conservator where the parent or Indian custodian
cannot have the child returned upon demand, but where parental rights have not been
terminated." Id. § 1903(1 )(i).
88. Thus, the 48-hour hearing conducted by the Defendants is a "foster care placement"
under ICWA whenever the court, at the conclusion of the hearing, issues an order
removing an Indian child from its parents or Indian custodian.
89. The fact that the 48-hour hearing is a "foster care placement" for purposes of ICWA is
acknowledged in the Green Book.
The Green Book contains a model Temporary
Custody Order, see Green Book at 113-14 (a copy of which is attached as "Exhibit 4"),
and it includes ICW A-related findings that the court must make.
The Green Book
explains: "In ICWA cases, if the child(ren) remain in foster care, these additional findings
must be added to avoid a challenge of the validity of the foster care placement." See
Green Book at 114 n. 6 (emphasis added).
90. Accordingly, the Defendants must ensure that the Indian parents, Indian children, and
Indian tribes involved in their 48-hour bearings are afforded all of the procedural
protections that ICW A mandates in foster care placements.
91. The policies, practices, and customs of the Defendants violate three provisions of
ICWA--§§ 1922, 1912(d), and 1912(e)--and are inconsistent with the Act's purpose.
1. Defendants are violating § 1922
92.
Section 1922 imposes two duties-one procedural, one substantive-on state officials
when they remove an Indian child from the horne in an emergency. First, as a matter of
procedure, state authorities "shall expeditiously initiate a child custody proceeding" that
must comply with ICWA.
93. Second, as a matter of substance, state officials "shall insure that the emergency
removal or placement terminates immediately when such removal or placement is no
longer necessary to prevent imminent physical damage or harm to the child. It (Emphasis
added.)
94. The substantive duty imposed by § 1922 is consistent with the overarching purpose of
ICWA, as it guarantees that whenever state authorities remove Indian children from their
homes, the separation will be for the shortest time reasonably possible, and that state
officials will monitor this process to insure that the removal "terminates immediately"
after the causes for the removal have been rectified.
95. Defendants routinely violate their substantive duties under § 1922.
Never during
Defendants' 48-hour hearings is there an inquiry into whether the cause of the removal
has been rectified, nor does the court direct DSS to pursue that inquiry after the hearing.
Yet, this is precisely what the 48-hour must do in order to comply with ICWA. It is at
the 48-hour hear that the court must hear evidence as to whether removal of the child "is
no longer necessary to prevent imminent physical damage or harm to the child." Id Ifthe
state does not meet that burden of proof, the child must be returned to the family.
96. Attached as "Exhibit 6" is a decision issued in Plaintiff Lisa Young's case by a judge on
Judge Davis' court, Judge Thorstenson (who left the bench in January 2013). As the
decision reflects, rather than view § 1922 as imposing federal requirements in 48-hour
hearings, the Defendants interpret § 1922 as authorizing state courts to ignore ICWA
until much later in the process. See id. at 3 (citing § 1922 for the proposition that "48
hour hearings are conducted under state statute, ... and ICWA, including its notice
requirements, is not implicated at the 48-hour hearing. "). As Judge Thorstenson stated
when counsel for the Oglala Sioux Tribe sought compliance with ICWA during Ms.
Young's 48-hour hearing: "you have brought this issue up on numerous occasions, [and
the court has consistently held] that ICWA does not apply to emergency hearings." Id at
11. Indeed, as a result of § 1922, according to Judge Thorstenson, "state law prevails in
the 48-hour hearing" and "the Tribe does not have a fundamental right to fairness under
ICWA" at that hearing. Id at 5-6.
97. Similarly, Defendants Malsam-Rysdon and Van Hunnik have not trained or directed
their staff to insure that sufficient efforts will be made by DSS to reunite the family
following 48-hour hearings and determine whether separating the family remains
necessary. Indeed, Plaintiffs Walking Eagle, Pappan, and Young assert that had DSS
complied with § 1922, their children would have been returned to their homes much
sooner than they were.
98. Defendants' policy, practice, and custom of ignoring their substantive duties under §
1922 violates federal law and is causing Indian parents to suffer irreparable injury by
keeping Indian children in foster care longer than necessary.
2. Defendants are violating § 1912(d)
99. Section 1912( d) of I CW A sets forth another right that Defendants are violating. That
statute provides:
Any party seeking to effect a foster care placement of . . . an Indian
child under State law shall satisfY the court that active efforts have been
made to provide remedial services and rehabilitative programs designed
to prevent the break-up of the Indian family and that these efforts have
proved unsuccessful.
100.
By policy, practice, and custom, the Defendants never comply with §1912(d) in
any meaningful manner at 48-hour hearings.
Although ICWA affidavits filed by
Defendant Vargo and his staff in connection with 48-hour hearings usually contain
averments regarding efforts made by DSS to provide remedial services and rehabilitative
programs to the family, parents are not permitted to see those averments, are not
permitted to contest them, and are not permitted to make any statements or offer any
evidence on those subjects. Yet at the conclusion of the 48-hour hearing, the court
always makes findings adverse to the parents on the § 1912(d) inquiry. See, e.g., Exhibit
2 (Temporary Custody Order for Plaintiff Pappan); Exhibit 7 (Temporary Custody Order
for Plaintiff Young).
101.
Defendants Van Hunnik, Vargo, and Malsam-Rysdon and their subordinates
never seek to introduce sufficient evidence, and the court never receives sufficient
evidence, at 48-hour hearings to comply with § 1912(d). Yet the court uses the Model
Order and renders "active efforts" findings against the parents in virtually every case.
102.
Defendants' policy, practice, and custom regarding the interpretation of, and
application of, § 1912( d) violates federal law and is causing Indian parents, such as
Plaintiffs Walking Eagle, Pappan, and Young, to suffer irreparable injury.
3. Defendants are violating § 1912(e)
103.
Section 1912(e) of ICWA sets forth another right that Defendants are violating.
That statute provides:
No foster care placement may be ordered in such proceeding in the
absence of a determination, supported by clear and convincing
evidence, including testimony of qualified expert witnesses, that the
continued custody of the child by the parent or Indian custodian is
likely to result in serious emotional or physical damage to the child.
104.
By policy, practice, and custom, the Defendants never comply with §1912(e) in
any meaningful manner at 48-hour hearings.
Although ICWA affidavits filed by
Defendants Vargo and his staff in connection with 48-hour hearings usually contain
averments that continued custody in the home is likely to result in serious emotional or
physical damage to the child, parents are not permitted to see those averments, are not
permitted to contest them, and are not permitted to make any statements or offer any
evidence on those subjects. Yet at the conclusion of the 48-hour hearing, the court
always makes findings adverse to the parents on the § 1912(e) inquiry. See, e.g., Exhibits
2 and 7 (Temporary Custody Orders for PlaintiffPappan and Young, respectively).
105.
No evidence of damage to the child is ever submitted into the record except by
DSS under the cloak of secrecy, protected from rebuttal. Even though nothing bars the
Defendants from providing Indian parents prior to or even during the hearing with a copy
ofthe documents filed against them, the Defendants never do.
106.
Defendants' 4S-hour hearings are not designed to obtain the truth. Rather, they
are designed to ratify the opinions of DSS and allow DSS to continue retaining custody
of Indian children for a minimum of sixty days.
107.
Judge Thorstenson issued her decision in Ms. Young's case (Exhibit 6) "as a
means of clarifying some recurring questions of law that are prevalent in this case." See
id. at 1. One recurring question was whether § 1912(d) and § 1912( e) apply to 4S-hour
hearings. Consistent with Defendants' policy, practice, and custom, she ruled that they do
not. See Exhibit 6 at 4 ("Simply stated, § 1912 was not violated in this case because §
1912 does not apply at this stage ofthe proceedings. ").
lOS.
According to Judge Thorstenson, 4S-hour hearings "are ill-suited for making §
1912( d) and (e) findings." /d. However, the following three things, not mentioned in the
court's decision, are true. First, Judge Thorstenson always made § 1912(d) and § 1912(e)
findings after each 4S-hour hearing anyway, as recommended in the Green Book's model
Temporary Custody Order, Form 7. (See Exhibit 4.)
109.
Second, the only reason why Defendants' 4S-hour hearings are "ill-suited" to
make the findings required by § 1912(d) and § 1912(e) is because it is Defendants'
policy, practice, and custom to keep them that way.
No state law prohibits the
Defendants from addressing those issues in their 4S-hour hearings.
110.
Third, Indian parents and Indian tribes are entitled to at least ten days' notice of a
foster care placement proceeding under both state and federal law. See SDCL § 26-7 A
15.1(3); 25 U.S.C. § 1912(e). Thus, the appropriate time to make the findings required
by §§ 1912(d) and (e) is in a hearing held on or shortly following the tenth day after
notice has been received (unless the tribe requests a 1O-day extension under § 1912(a».
One solution, then, is for the court to continue the 48-hour hearing until that time.
111.
Defendants Vargo, Malsam-Rysdon, and Van Hunnik and their subordinates
never seek to introduce sufficient evidence, and the court never receives sufficient
evidence, at 48-hour hearings to comply with § 1912(e). Yet the court renders § 1912(e)
findings against the parents in virtually every case.
112.
Nothing prevents the Defendants from holding a meaningful hearing ten days
after notice has been received by the parents and tribe and then making the § 1912( d) and
§ 1912( e) findings. Instead, Defendants typically delay such a proceeding for at least
sixty days. This policy, practice, and custom violates ICWA and is causing Indian
parents and the tribes of which they are members, as it caused Plaintiffs Walking Eagle,
Pappan, and Young and their tribes, to suffer irreparable injury. Relief is sought pursuant
to 42 U.S.C. § 1983.
CLAIM III: DEFENDANTS' COERCED WAIVERS VIOLATE FEDERAL LAW
113.
As discussed above, Indian parents have rights under both the Due Process Clause
and ICWA in foster care proceedings.
Unfortunately, for at least the past three years,
Defendant Davis and other Seventh Circuit judges have pursued a policy, practice, and
custom of coercing Indian parents into waiving many of those rights, which is exactly
what occurred to Plaintiffs Walking Eagle, Pappan, and Young.
114.
The presiding judge tells parents at the outset of each 48-hour hearing that if
they agree to "work with" DSS, the court will enter an order that could result in a return
of their children by DSS without further court involvement. See Exhibit 7 (transcript of
proceedings of Plaintiff Lisa Young) at 5.
115.
Enticed by the prospect of an early reunification with their children, most parents
agree to "work with" DSS and waive their rights under state and federal law to adequate
notice and a timely hearing. Perhaps this process has resulted in a reunification within
weeks for a few families (although the Plaintiffs are unaware of any examples) but it
definitely has not had that effect for Indian parents known to the Plaintiffs.
116.
Moreover, the court never provides Indian parents with the information they need
to make an informed decision, and the entire process is inherently coercive because the
parents have already been deprived of their children.
117.
In nearly all 48-hour hearings, for instance, the following information is not
provided to parents prior to their being asked to waive their rights to a prompt and
meaningful hearing: (a) the parents are not provided with adequate notice of the
allegations against them and are not shown the petition for temporary custody or the
IeWA affidavit; (b) the parents are not told that by agreeing to "work with" DSS, this
will authorize DSS to retain custody of their children for at least another sixty days,
during which time the parents will be allowed to visit their children only when and if
DSS permits it; (c) the parents are not told that if they opt not to "work with" DSS, they
may get a hearing more quickly; and (d) the parents are not told that if they decline, DSS
has a duty under both state and federal law to work with the parents (and engage in active
efforts to reunite the family) anyway.
118.
Thus, Indian parents who agree to "work with" DSS place themselves in a state of
suspended animation during which time DSS has full control over their children, has no
duty to file a petition that would trigger formal process, and has no deadline for working
with the family. Additionally, even those parents who agree to "work with" DSS are still
saddled with a court order that finds as a matter of law that continued custody of the child
by the parents "is likely to result in serious emotional or physical damage to the child"
and that DSS "has provided reasonable efforts to prevent the removal of the children
from the home" even though no evidence was submitted at the 48-hour hearing on those
issues. See Exhibits 2 and 7 (Temporary Custody Orders for Plaintiffs Pappan and
Young, respectively).
119.
The waivers obtained by the Defendants in their 48-hour hearings are invalid
because the Defendants fail to provide parents with adequate notice of the facts, of their
rights under federal and state law, and of the consequences of their consent. See In re
Esther, 248 P.3d 863, 876 (N.M. 2011) (holding in circumstances similar to those here
that a purported waiver by a parent during an ICW A custody hearing was invalid);
Rivera, 696 F.2d at 1026 (holding that a parent's waiver of her rights at a custody hearing
was invalid because she was not informed "of the legal implications of her decision").
120.
'''[CJourts indulge every reasonable presumption against waiver' of fundamental
constitutional rights." Johnson v. Zerbst, 304 U.S. 458, 464 (1938) (internal citation
omitted). This rule applies to parents who are being asked to waive their constitutional
rights to a meaningful hearing at a meaningful time following the removal of their
children from the home by state officials.
121.
Moreover, even when Indian parents agree to "work with" DSS, DSS rarely works
with Indian parents in any meaningful manner. The court's inducement is a cruel hoax.
122.
For instance, about the only "work" that DSS performed for Plaintiffs Walking
Eagle, Pappan, and Young was to arrange weekly visitation with their children. DSS
made no effort to provide any counseling to the family or information on treatment
programs. DSS did not assist Ms. Young in obtaining housing in a domestic violence
shelter, even though she needed it. DSS did not tell any of the women what they should
do, or what needed to be improved, in order to regain custody of their children. Ms.
Walking Eagle telephoned the DSS office several times seeking assistance, left a message
each time, and no one returned her calls.
123.
In fact, DSS made matters worse. To illustrate, DSS instructed all the women not
to discuss their cases with their children or explain why the children had been taken
away. This exacerbated the situation immensely and made it impossible for the mothers
to address their children's questions and concerns about the future.
124.
In one early visit between Ms. Walking Eagle and her son Tristan (age 3), Tristan
began to cry. The DSS worker told Tristan that if he continued to cry, he would not be
allowed to meet with his mother anymore.
Thereafter, Tristan fought back tears
whenever he saw his mother. DSS prohibited frank and emotional exchanges between
Ms. Walking Eagle and her son.
125.
When Ms. Young asked her DSS worker if she could visit her children more than
once a week, the worker told Ms. Young that she did not have the time to arrange
additional meetings, even though additional meetings would help the family.
126.
Ms. Walking Eagle had a two-day trial sixty days after DSS removed her
children.
DSS strenuously argued that the children should not be returned to Ms.
Walking Eagle. The court rejected those claims and returned the children to Ms. Walking
Eagle. Had that hearing been held sooner, the children would have been returned sooner.
127.
All three named Plaintiffs state that the forced removal of their children caused
their children to suffer emotional and psychological harm, including (to varying degrees)
separation anxiety, bed-wetting, suicidal tendencies, emotional swings, and fear of being
separated from their parents. To this day, Ms. Pappan's daughter, who was 3 years old at
the time she was removed from the family, often wakes up in the middle of the night and
goes to her mother's bedroom just to make sure she is there.
128.
Defendants Malsam-Rysdon and Van Hunnik have inadequately trained their
staff to work with Indian parents in a meaningful way. They have also failed to commit
the staff and resources necessary to insure that Indian families will be reunited at the
earliest reasonable opportunity.
129.
Defendants' policy, practice, and custom of keeping Indian parents in the dark
about the allegations against them, their right to a meaningful hearing at a meaningful
time, and the consequences oftheir waivers, and then proceeding to deny those parents of
their rights under the Due Process Clause and ICW A after obtaining waivers from them,
violates the rights of Indian parents under federal law and causes them to suffer
irreparable injury. Relief is sought pursuant to 42 U.S.C. § 1983.
PRAYER FOR RELIEF
WHEREFORE, Plaintiffs pray that this Court will:
1. Assume jurisdiction over this matter;
2. Certify this action as a class action pursuant to F.R.Civ.P. Rule 23(a), (b)(2), with the
class consisting of all Indian parents and custodians who are members of federally
recognized Indian tribes who reside with their Indian children in Pennington County,
South Dakota;
3. Issue a declaratory judgment pursuant to 28 U.S.C. §§ 2201 and 2202 that declares as
a matter oflaw that (a) Defendants' policy, practice, and custom of refusing and failing to
provide Indian families and Indian tribes with adequate notice and a meaningful hearing
at a meaningful time following the removal of Indian children from their homes by state
officials violates the Due Process Clause, (b) Defendants' policy, practice, and custom of
refusing and failing to provide Indian families and Indian tribes with adequate notice and
a meaningful hearing at a meaningful time following the removal of Indian children from
their homes by state officials violates the Indian Child Welfare Act, and (c) Defendants'
policy, practice, and custom of coercing Indian parents into waiving their rights to
adequate notice and a meaningful hearing at a meaningful time violates the Due Process
Clause and the Indian Child Welfare Act;
4. Issue preliminary and permanent injunctive relief pursuant to F.R.Civ.P. Rule 65,
enjoining the Defendants 1 and all persons in concert with them, and their successors in
office, from (a) failing and refusing to provide Indian parents and Indian tribes with
adequate notice and a meaningful hearing at a meaningful time following the removal of
Indian children from their homes by state officials in a manner consistent with the Due
Process Clause, (b) failing and refusing to provide Indian parents and Indian tribes with
adequate notice and a meaningful hearing at a meaningful time following the removal of
I Plaintiffs are aware that the Federal Courts Improvement Act of 1996, now codified as part of 42 U.S.C. §
1983, prohibits the issuance of injunctive relief against judicial officers such as Defendant Davis.
Therefore, as to him, this Court may grant only declaratory relief.
Indian children from their homes by state officials in a manner consistent with the Indian
Child Welfare Act, and (c) from improperly coercing Indian parents into waiving their
rights to adequate notice and a meaningful hearing at a meaningful time.
5. Grant plaintiffs their costs and attorneys' fees in this matter, and such other
and further relief as to the Court may seem just and proper.
Attorneys for Plaintiffs
| civil rights, immigration, family |
KuapEYcBD5gMZwczN96F | x
:
Civil Action No. 18-2868
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
--------------------------------------------------
JENNIEBEL ROSARIO, on behalf of
herself and others similarly situated,
:
:
Plaintiff,
:
- against
:
:
FLSA COLLECTIVE ACTION and
RULE 23 CLASS ACTION
COMPLAINT
:
BABA P. ADAMS; EBRIMA TOURAY;
AND CITYSTYLE NYC; and JOHN
DOE,
:
:
Jury Trial Demanded
Defendants.
X
--------------------------------------------------
Plaintiff Jenniebel Rosario (“Plaintiff”), on behalf of herself and others similarly situated
employees, as class representative, by and through her attorney, Mohammed Gangat, Esq., files
this Complaint against defendants Baba P. Adams; Ebrima Touray, CityStyle NYC, and John
Doe (collectively, the Defendants) and alleges upon personal knowledge as to herself and upon
information and belief as to other matters, as follows:
NATURE OF THE ACTION
1.
Plaintiff alleges that, pursuant to the Fair Labor Standards Act, as amended, 29
U.S.C. §§ 201, et seq. (“FLSA”), she and a proposed class of others similarly situated are entitled
to recover from the Defendants: (1) unpaid minimum wage and overtime compensation, (2)
unpaid spread of hours: premium for each day she worked in excess of ten hours, (3) liquidated
damages and civil penalties pursuant to the New York Labor Law and the New York State Wage
Theft Prevention Act; (5) pre-judgment and post-judgment interest; and (6) attorneys’ fees and
2.
Plaintiff further alleges that, pursuant to the New York Labor Law “NYLL”, she
and a proposed class of others similarly situated employees who work or have worked at any of
the retail stores operating under the trade name and brand “CityStyleNYC” including the
following: “CityStyle NYC” located at 135 E. Fordham Road, Bronx, NY 10468;
“CityStyleNYC” located at 435 Fulton Street, Brooklyn, NY 11201, are entitled to recover from
the Defendants: (1) unpaid minimum wage and overtime compensation; (2) unpaid spread of
hours premium for each day worked in excess of ten hours; (3) penalties and damages for illegal
deductions from wages (4) liquidated damages and civil penalties pursuant to the New York
Labor Law and the New York State Wage Theft Prevention Act; (5) prejudgment and post-
judgment interest; and (6) attorneys' fees and costs.
JURISDICTION AND VENUE
3.
This Court has subject matter jurisdiction over Plaintiff’s federal claims pursuant
to the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201 et seq., and 28 U.S.C. §§ 1331 and
1337 and 1343 and has supplemental jurisdiction over Plaintiff’s state law claims pursuant to 28
U.S.C. § 1367(a).
4.
Venue is proper in the Southern District of New York pursuant to 28 U.S.C. §
1391 because at least one defendant resides in the district and the conduct making up the basis of
the complaint took place in this judicial district.
PARTIES
5.
Plaintiff is a resident of Bronx, New York.
6.
Defendant CityStyle NYC (the “Corporate Defendant”) is a an entity of unknown
incorporation status and statehood.
7.
Defendant Baba P. Adams (“Individual Defendant”) is the co-owner, shareholder,
director, supervisor, managing agent, and/or proprietor, of the Corporate Defendant, who
actively participates in the day-to-day operations of the Corporate Defendant and acted
intentionally and maliciously and is an employer pursuant to the FLSA, 29 U.S.C. § 203(d) and
Regulations promulgated thereunder, 29 C.F.R. § 791.2, as well as New York Labor Law§ 2 and
the Regulations thereunder, and is jointly and severally liable with the Corporate Defendant.
8.
Defendant Ebrima Touray (“Individual Defendant”) is the co-owner, shareholder,
director, supervisor, managing agent, and/or proprietor of the Corporate Defendant, who actively
participates in the day-to-day operations of the Corporate Defendant and acted intentionally and
maliciously and is an employer pursuant to the FLSA, 29 U.S.C. § 203(d) and Regulations
promulgated thereunder, 29 C.F.R. § 791.2, as well as New York Labor Law§ 2 and the
Regulations thereunder, and is jointly and severally liable with Mr. Adams and the Corporate
Defendant.
1.
Defendant John Doe represents the currently unknown entity that employed the
named Defendants and was otherwise involved in or otherwise responsible for the production,
scheduling, hiring, termination terms & conditions of employment, compensation and/or overall
pay practices applicable to employees working at CityStyle NYC, including Plaintiffs.
9.
Defendants exercise control over the terms and conditions of their employees’
employment, in that they have the power to: (i) hire and fire employees, (ii) determine rates and
methods of pay, (iii) determine work schedules, (iv) supervise and control the work of the
employees, and (v) otherwise affect the quality of the employees’ employment.
10.
At all relevant times, CityStyle NYC met the definition of an “employer” under
all applicable statutes.
11.
At all relevant times, Baba P. Adams met the definition of an “employer” under
all applicable statutes.
12.
At all relevant times, Ebrima Touray met the definition of an “employer” under
all applicable statutes.
13.
Defendants have the power to hire and fire employees.
14.
Defendants supervised and controlled all employees’ work schedules.
15.
Defendants supervised and controlled all employees’ conditions of employment.
16.
Defendants have the power to change compensation practices for all employees.
17.
Defendants maintain employment records, including records of pay, hours
worked, performance, and licensing and certifications.
18.
Defendants hired and continuously employed plaintiff Jenniebel Rosario
(“Plaintiff”) in the State of New York to work as a non-exempt employee for CityStyle NYC
from in or about December 2016.
19.
The work performed by Plaintiff was directly essential to the business operated by
Defendants.
20.
Defendants knowingly and willfully failed to pay Plaintiff her lawfully earned
minimum wage and overtime compensation in direct contravention of the FLSA and New York
Labor Law.
21.
Defendants knowingly and willfully failed to pay Plaintiff her lawfully earned
“spread of hours” premium in direct contravention to the New York Labor Law.
22.
Plaintiff has satisfied all conditions precedent to the institution of this action, or
such conditions have been waived.
STATEMENT OF FACTS
23.
Defendants employed Plaintiff as a sales associate for CityStyle NYC.
24.
Ms. Rosario worked at CityStyle NYC beginning in or about December 2016.
25.
Plaintiff regularly worked over forty (40) hours per week.
26.
For the following approximately four months after being hired by Defendants,
Ms. Rosario worked a regular schedule consisting of 6.5 days a week, from 10am to 8:30 pm,
and on occasion 9pm or even later. For this time period, Defendants agreed to and did in fact pay
Plaintiff wages of $50 for each day of work.
27.
Ms. Rosario then took a brief hiatus from work, and then returned for
approximately 8 additional months, to a regular schedule consisting of 5 days a week from 10am
to 8:30 pm, and on occasion, 9pm or even later.
28.
Ms. Rosario was initially paid $50 for each day of work. Her pay was later
increased to $60 for each day of work.
29.
Defendants supervised and controlled Plaintiff’s work schedule.
30.
Defendants determined each employees’ rate of pay.
31.
Plaintiff is a covered employee of the Defendants within the meaning of the
FLSA and NYLL.
32.
Defendants failed to provide wage statements for each week that Plaintiff worked
and failed to provide required wage notices indicating rate of pay, and overtime rate
33.
Defendants did not pay Plaintiff the proper minimum wage and overtime wages as
required by law for all hours worked over 40 in a workweek.
34.
Defendants knowingly and willfully operated their business with a policy of not
paying Plaintiff and other similarly situated employees the FLSA overtime rate (of time and one-
half), and the New York State overtime rate (of time and one-half), in direct violation of the
FLSA and New York Labor Law and the supporting federal and New York State Department of
Labor Regulations.
35.
Defendants knowingly and willfully operated their business with a policy of not
paying Plaintiff and other similarly situated employees “spread of hours” premium for each day
that he worked a shift in excess of ten (10) hours, in direct violation of the New York Labor Law
and the supporting federal and New York State Department of Labor Regulations.
COLLECTIVE ACTION ALLEGATIONS
36.
Plaintiff brings this action individually and as class representatives on behalf of
himself and all other current and former non-exempt employees who have been or were
employed by Defendants as a sales associate between March 30, 2015 and the date of final
judgment in this matter (the "FLSA Collective").
37.
Upon information and belief, the total number of members of the proposed
collective action class is so numerous that joinder of all members is impracticable. Although the
precise number of such persons is unknown, and the facts upon which the calculation of that
number are presently within the sole control of the Defendants, upon information and belief,
there are more than twenty five (25) Collective Action Members who worked for the Defendants
during the Collective Action Period, most of whom would not be likely to file individual suits
because they lack adequate financial resources, access to attorneys, or knowledge of their claims.
Therefore, Plaintiff submits that this matter should be certified as a collective action under the
FLSA, 29 U.S.C. § 216(b).
38.
Plaintiff will fairly and adequately protect the interests of the Collective Action
Members and has retained counsel that is experienced and competent in the fields of employment
law and class action litigation. Plaintiff has no interests that are contrary to or in conflict with
those members of this collective action.
39.
This action should be certified as a collective action because the prosecution of
separate actions by individual members of the class would create a risk of either inconsistent or
varying adjudications with respect to individual members of the class, or adjudications with
respect to individual members of the class that would as a practical matter be dispositive of the
interests of the other members not parties to the adjudication, or substantially impair or impede
their ability to protect their interests.
40.
A collective action is superior to other available methods for the fair and efficient
adjudication of this controversy, since joinder of all members is impracticable. Furthermore,
inasmuch as the damages suffered by individual Collective Action Members may be relatively
small, the expense and burden of individual litigation make it virtually impossible for the
members of the collective action to individually seek redress for the wrongs done to them. There
will be no difficulty in the management of this action as a collective action.
41.
Questions of law and fact common to the members of the collective action
predominate over questions that may affect only individual members because Defendants have
acted on grounds generally applicable to all members. Among the common questions of law and
fact common to Plaintiff and other Collective Action Members are:
a. Whether the Defendants employed Plaintiff and the Collective Action Members
within the meaning of the FLSA;
b. Whether the Defendants had the power to hire and fire Plaintiff and the Collective
Action Members;
c. Whether the Defendants had the power to set compensation policies for the
Plaintiff and the Collective Action Members;
d. Whether the Defendants had the power to set conditions of employment for the
Plaintiff and the Collective Action Members;
e. Whether the Defendants had the power to set the work schedules of the Plaintiff
and the Collective Action Members;
f. Whether the Defendants maintained employee records, including records of
certifications and qualifications required to work, with respect to Plaintiff and the
Collective Action Members;
g. Whether the Defendants' violations of the FLSA are willful as that term is used
within the context of the FLSA;
h. Whether the Defendants are liable for all damages claimed hereunder, including
but not limited to compensatory, liquidated and statutory damages, interest,
attorneys' fees, and costs and disbursements; and
i. Whether the Defendants failed to pay the Plaintiff and the Class members the
applicable minimum wage for all straight time hours worked and the required
overtime compensation for all hours worked in excess of forty (40) hours per
workweek, in violation of the New York Labor Law and the regulations
promulgated thereunder.
42.
Plaintiff knows of no difficulty that will be encountered in the management of this
litigation that would preclude its maintenance as a collective action.
43.
Plaintiff and others similarly situated have been substantially damaged by the
Defendants' wrongful conduct.
CLASS ACTION ALLEGATIONS
44.
Plaintiff sues on her own behalf and on behalf of a class of persons under Rules
23(a), (b)(2), and (b)(3) of the Federal Rules of Civil Procedure.
45.
Plaintiff brings her New York Labor Law claims on behalf of all persons who
were employed by Defendants at any time in the six years preceding the date the complaint in
this action was filed (the "Class Period") as a sales associate between March 30, 2012 and the
date of final judgment in this matter (the "Collective Action Members").
46.
Upon information and belief, the persons in the Class identified herein are so
numerous that joinder of all members is impracticable. Although the identity and precise number
of such persons is unknown, and the facts upon which the calculation of that number may be
ascertained are presently within the sole control of the Defendants, the Class consists of all non-
managerial current and former employees and, therefore, is so numerous that joinder is
impracticable and most of whom would not be likely to file individual suits because they lack
financial resources, access to attorneys, or knowledge of their claims.
47.
The claims of Plaintiff are typical of the claims of the Class, and a class action is
superior to other available methods for the fair and efficient adjudication of the controversy,
particularly in the context of wage and hour litigation, where individuals lack the financial
resources to vigorously prosecute a lawsuit in federal court against a corporate defendant.
48.
The Defendants have acted on grounds generally applicable to the Class, thereby
making appropriate final injunctive relief or corresponding declaratory relief with respect to the
Class as a whole.
49.
Plaintiff has committed herself to pursuing this action and has retained counsel
experienced in employment law and class action litigation.
50.
Plaintiff will fairly and adequately protect the interests of the NY Class members.
Plaintiff understands that, as a class representative, she assumes a fiduciary responsibility to the
Class and Collective Action Members to represent their interests fairly and adequately, and that
she must consider the interests of the Class and Collective Action Members just as she would
represent and consider her own interests, and that she may not favor her own interests over those
of the Class or Collective Action Members.
51.
Plaintiff recognizes that any resolution of a class action lawsuit, including any
settlement or dismissal thereof, must be in the best interests of the Class and Collective Action
Members. Plaintiff understands that in order to provide adequate representation, she must remain
informed of litigation developments and she understands that she may be called upon to testify in
depositions and at trial.
52.
Plaintiff has the same interests in this matter as all other members of the Class and
Plaintiff claims are typical of the Class.
53.
There are questions of law and fact common to the Class which predominate over
any questions solely affecting the individual members of the Class, including but not limited to:
a. Whether the Defendants employed Plaintiff and the Class members within the
meaning of the New York Labor Law;
b. Whether the Defendants had the power to hire and fire Plaintiff and the Class
members;
c. Whether the Defendants had the power to set compensation policies for Plaintiff
and the Class members;
d. Whether the Defendants had the power to set conditions of employment for the
Plaintiff and the Class members;
e. Whether the Defendants had the power to set work schedules for the Plaintiff and
the Class members;
f. Whether the Defendants maintained employees’ records, including records of
certifications and qualifications required to work for the Plaintiff and the Class
member;
g. Whether the Defendants failed to pay the Plaintiff and the Class members the
applicable minimum wage for all straight time hours worked, the required
overtime compensation for all hours worked in excess of forty (40) hours per
workweek, in violation of the New York Labor Law and the regulations
promulgated thereunder;
h. Whether the Defendants failed to pay Plaintiff and the Collective Action
Members required spread of hours pay for each hour they worked in excess of 10
hours per day;
i. Whether the Defendants' violations of the New York Labor Law are willful as that
term is used within the context of the New York Labor Law; and,
j. Whether the Defendants are liable for all damages claimed hereunder, including
but not limited to compensatory, liquidated and statutory damages, interest, costs,
attorneys' fees, and costs and disbursements.
STATEMENT OF CLAIM
COUNT I
[Violation of the Fair Labor Standards Act]
54.
Plaintiff re-alleges and re-avers each and every allegation and statement contained
in paragraphs "l" through "53" of this Complaint as if fully set forth herein.
55.
At all relevant times, upon information and belief, Defendants were and continue
to be an employer engaged in interstate commerce and/or the production of goods for commerce
within the meaning of the FLSA, 29 U.S.C. §§ 206(a) and 207(a). Further, Plaintiff and the
Collective Action Members are covered individuals within the meaning of the FLSA, 29 U.S.C.
§§ 206(a) and 207(a).
56.
At all relevant times, Defendants employed Plaintiff and the Collective Action
Members within the meaning of the FLSA.
57.
Upon information and belief, at all relevant times, Defendants have had gross
revenues in excess of $500,000.
58.
Plaintiff and the Collective Action Members were entitled to be paid at the rate of
time and one-half for all hours worked in excess of the maximum hours provided for in the
59.
Defendants failed to pay Plaintiff and the Collective Action Members overtime
compensation in the lawful amount for all hours worked in excess of the maximum hours
provided for in the FLSA.
60.
At all relevant times, Defendants had, and continue to have a policy and practice
of refusing to pay overtime compensation at the statutory rate of time and one-half to Plaintiff
and the Collective Action Members for all hours worked in excess of forty (40) hours per work
week, which violated and continues to violate the FLSA, 29 U.S.C. §§ 201, et seq., including 29
U.S.C. §§ 207(a)(l) and 215(a).
61.
Defendants knowingly and willfully disregarded the provisions of the FLSA as
evidenced by their failure to compensate Plaintiff and the Collective Action Members at the
statutory overtime rate of time and one-half for all hours worked in excess of forty (40) hours per
week, when they knew or should have known such was due and that non-payment of overtime
compensation would financially injure Plaintiff and the Collective Action Members.
62.
Defendants have failed to make, keep and preserve records with respect to each of
its employees sufficient to determine the wages, hours and other conditions and practices of
employment in violation of the FLSA, 29 U.S.A. §§ 201, et seq., including 29 U.S.C. §§ 21 l(c)
and 215(a).
63.
Defendants failed to properly disclose or apprise Plaintiff and the Collective
Action Members of their rights under the FLSA.
64.
As a direct and proximate result of Defendants' violation of the FLSA, Plaintiff
and the Collective Action Members are entitled to liquidated damages pursuant to the FLSA.
65.
Due to the reckless, willful and unlawful acts of the Defendants, Plaintiff and the
Collective Action Members suffered damages in an amount not presently ascertainable of unpaid
overtime compensation, an equal amount as liquidated damages, and prejudgment interest
thereon.
66.
Plaintiff and the Collective Action Members are entitled to an award of their
reasonable attorneys' fees, costs and expenses, pursuant to 29 U.S.C. § 216(b).
COUNT II
[Violation of the New York Labor Law]
67.
Plaintiff re-alleges and re-avers each and every allegation and statement contained
in paragraphs "l" through "66" of this Complaint as if fully set forth herein.
68.
Defendants employed Plaintiff and the Class members within the meaning of New
York Labor Law §§ 2 and 651.
69.
Defendants knowingly and willfully violated the rights of Plaintiffs and the Class
members by failing to pay Plaintiffs and the Class members required overtime compensation
at the rate of time and one-half for each hour worked in excess of forty (40) hours in a
workweek.
70.
Employers are required to pay a "spread of hours" premium of one (1) additional
hour' s pay at the statutory minimum hourly wage rate for each day where the spread of hours in
an employee's workday exceeds ten (10) hours. New York State Department of Labor
Regulations § 146-1.6.
71.
Defendants knowingly and willfully violated the rights of Plaintiff and the Class
members by failing to pay "spread of hours" premium to Plaintiff and the Class members for
each day they worked in excess of ten (10) hours pursuant to New York State Department of
Labor Regulations.
72.
Defendants failed to properly disclose or apprise Plaintiff and the Class members
of their rights under the New York Labor Law.
73.
Defendants failed to furnish Plaintiff and the Class members with a statement
with every payment of wages listing gross wages, deductions and net wages, in contravention of
New York Labor Law § 195(3) and New York State Department of Labor Regulations § 146-2.3.
74.
Defendants failed to furnish Plaintiff and the Class members with a statement
with every payment of wages listing gross wages, deductions and net wages, in contravention of
New York Labor Law § 195(3) and New York State Department of Labor Regulations § 146-2.3.
75.
Defendants failed to keep true and accurate records of hours worked by each
employee covered by an hourly minimum wage rate, the wages paid to all employees, and
other similar information in contravention of New York Labor Law § 661.
76.
Defendants failed to establish, maintain, and preserve for not less than six (6)
years payroll records showing the hours worked, gross wages, deductions, and net wages for
each employee, in contravention of the New York Labor Law§ 194(4), and New York State
Department of Labor Regulations§ 146-2.1.
77.
At the time of their hiring, Defendants failed to notify Plaintiff and the Class
members of their rates of pay and their regularly designated payday, in contravention of New
York Labor Law § 195(1).
78.
Due to the Defendants' New York Labor Law violations, Plaintiff and the Class
members are entitled to recover from Defendants the difference between their actual wages and
the amounts that were owed under the New York Labor law. The deficiency accounts for
overtime compensation for all overtime hours, "spread of hours" premium, reimbursement of the
cost of deductions from wages made by Defendants’, reasonable attorneys’ fees, and costs and
disbursements of this action, pursuant to New York Labor Law§§ 663(1), 198.
79.
Plaintiff and the Class members are also entitled to liquidated damages pursuant
to New York Labor Law§ 663(1), as well as civil penalties and/or liquidated damages pursuant
to the New York State Wage Theft Prevention Act.
PRAYER FOR RELEIF
WHEREFORE, Plaintiff, Jenniebel Rosario, on behalf of herself and all similarly situated
Collective Action Members and Class members, respectfully requests that this Court grant the
following relief:
i.
That, at the earliest possible time, Plaintiff be allowed to give notice of this collective
action, or that the Court issue such notice, to all persons who are presently, or have at
any time during the six years immediately preceding the filing of this suit, up through
and including the date of this Court’s issuance of court-supervised notice, been
employed by Defendants as a retail associate, with such notice informing employees
that this civil action has been filed, the nature of the action, and of the employees’
right to join this lawsuit if the employee believes he or she was denied proper wages;
ii.
An award for unpaid minimum wage and overtime compensation due under the FLSA
and New York Labor Law;
iii.
An award of liquidated damages as a result of Defendants' failure to pay minimum
wage and overtime compensation pursuant to 29 U.S.C. § 216;
iv.
An award of liquidated damages as a result of Defendants' failure to pay minimum
wage, overtime compensation and “spread of hours” premium pursuant to the New
York Labor Law and the New York State Wage Theft Prevention Act;
v.
An award of civil penalties pursuant to the New York State Wage Theft Prevention
Act in the amount of $50 for each workweek Defendants failed to provided Plaintiff
and any class member proper annual wage notices as provided by NYLL Article 6,
Section 198, and statutory penalties in the amount of $100 for each workweek
Defendants failed to provided Plaintiff and any class member proper wage statements
as provided by NYLL Article 6, Section 198;
vi.
Certification of this case as a class action pursuant to Rule 23 of the Federal Rules of
Civil Procedure;
vii.
Designation of Plaintiff as representative of the Rule 23 Class, and counsel of record
as Class Counsel;
viii.
Payment of a service award to Plaintiff, in recognition of the services he renders to
the FLSA Collective and Rule 23 Class;
ix.
Issuance of a declaratory judgment that the practices complained of in this complaint
are unlawful under the NYLL and supporting regulations;
x.
An award of prejudgment and post-judgment interest;
xi.
An award of costs and expenses associated with this action, together with reasonable
attorneys' and expert fees pursuant to 29 U.S.C. 216(b) and the NYLL; and
xii.
Such other and further relief as this Court determines to be just and proper.
JURY DEMAND
Pursuant to Rule 38(b) of the Federal Rules of Civil Procedure, Plaintiff demands trial by jury on
all issues.
Dated: New York, New York
March 30, 2018
LAW OFFICE OF MOHAMMED GANGAT
By:
______________________
Mohammed Gangat, Esq.
675 3rd Avenue, Suite 1810
New York, NY
(718) 669-0714
[email protected]
Attorneys for Plaintiff Jenniebel Rosario
| employment & labor |
E8xWDocBD5gMZwczaxeC | UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
_________________________________________________
WILLIAM FRINTZILAS and ANGELO POZZUTO,
Individually and On Behalf of All Others Similarly
Situated,
Civil Action No.:
Plaintiffs,
-against-
DIRECTV, LLC and MAS TEC, INC.,
Defendants.
__________________________________________________
CLASS ACTION COMPLAINT
Plaintiffs, individually, and on behalf of all others similarly situated, upon
knowledge as to themselves and upon information and belief as to all other matters,
as and for their Complaint against Defendants, allege as follows:
NATURE OF CLAIMS
1.
Plaintiffs bring this action individually, and on behalf of all similarly situated
persons and/or entities (“Landlords”) that own and lease residential dwelling unit
properties (“RDU’s”) in the State of New York, upon which Defendants, by their
agents, servants and/or employees have, on at least one occasion during the
applicable statutory period, without first receiving prior written or verbal Landlord
authorization and/or permission, installed DIRECTV equipment on the roof and/or
exterior walls of said RDU. Plaintiffs seek injunctive relief, compensatory,
consequential and punitive damages; costs and reasonable attorney’s fees.
2.
Plaintiffs allege violations of §349 of the New York General Business Law
and seek injunctive relief, actual/compensatory damages, costs and reasonable
attorney’s fees for Defendants’ deceptive business practices and violations of public
policy, as herein alleged.
JURISDICTION AND VENUE
3.
This Court has original jurisdiction over this class action pursuant to 18
U.S.C. §1332(d), which under the provisions of the Class Action Fairness Act
(“CAFA”) explicitly provides for the original jurisdiction of the Federal Courts in
any class action in which any member of the plaintiff class is a citizen of a State
different from any defendant, and in which the matter in controversy exceeds the
sum of $5,000,000.00, exclusive of interests and costs.
4.
Plaintiffs allege that the total claims of individual class members in this
action are well in excess of $5,000,000.00 in the aggregate, exclusive of interests
and costs, as required by 28 U.S.C. §§ 1332(d)(2), (5).
5.
Plaintiffs are Citizens of New York. DIRECTV is a Citizen of California;
MAS TEC, INC., is a citizen of Florida. Thus, any member of the proposed class is a
citizen of a state different than any Defendant.
6.
Diversity of citizenship exists under CAFA, as required by 28 U.S.C. §§
1332(d) (5) (B).
7.
The total approximate number of members of the proposed Plaintiff Class is
75,000 persons/entities.
8.
Venue is proper in the United States District Court for the Southern District
of New York under 28 U.S.C. §§ 1391, because a substantial part of the events or
omissions giving rise to the claim occurred in this District and Defendants are
subject to personal jurisdiction in this District.
THE PARTIES
9.
DIRECTV, LLC, ("DIRECTV") is a California limited liability corporation
with its principal place of business located at 2230 East Imperial Highway, El
Segundo, CA 90245.
10.
DIRECTV actively transacts and is doing business in the State of New York.
11.
MAS TEC, INC., (“MAS TEC”) is a Florida corporation with its principal
place of business located at 800 S. Douglas Road, Coral Gables, FL 33134.
12.
MAS TEC actively transacts and is doing business in the State of New York.
13.
Plaintiff, WILLIAM FRINTZILAS, is a citizen and resident of Glen Cove,
New York 11542.
14.
Plaintiff, ANGELO POZZUTO, is a citizen and resident of Mahopac, New
York 10541.
15.
At all relevant times, Plaintiff FRINTZILAS was the owner and landlord of
an RDU located at 35 Katherine Street, Locust Valley, New York 11560.
16.
At all relevant times, Plaintiff FRINTZILAS was the owner and landlord of
an RDU located at 35 13th Street, Locust Valley, New York 11560.
17.
At all relevant times, Plaintiff FRINTZILAS was the owner and landlord of
an RDU located at 10 Robert Road, Glen Cove, New York 11542.
18.
At all relevant times, Plaintiff FRINTZILAS was the owner and landlord of
an RDU located at 12 Forest Avenue, Glen Cove, New York 11542.
19.
At all relevant times, Plaintiff POZZUTO was the owner and landlord of an
RDU located at 1772 Hanover Street, Yorktown Heights, New York 10598.
STATEMENT OF MATERIAL FACTS
20.
At all relevant times, DIRECTV has been engaged in the marketing and sales
of DIRECTV satellite television service and the leasing and installation of
DIRECTV antennae such as a satellite dish and or other equipment designed for
over-the-air reception of television broadcast signals (“Equipment”) in the State of
New York.
21.
DIRECTV is a leading provider, in New York, of digital television
entertainment programming via satellite to residential and commercial subscribers.
22.
DIRECTV’s digital entertainment programming is provided to subscribers by
means of the Equipment that it licenses/leases to its subscribers and installs upon
the RDU in which the subscriber rents and resides.
23.
MAS TEC is a specialty contractor providing installation fulfillment services
to DIRECTV and other companies specializing in the telecommunications,
broadband cable, wireless, and satellite industries.
24.
MAS TEC is one of the largest DIRECTV installation and service companies
in the United States, serving over 200,000 customers each month.
25.
At all relevant times, MAS TEC had a contractual relationship with
DIRECTV to install DIRECTV equipment at Plaintiffs’ MDU property and at or on
other MDUs, located elsewhere in Connecticut.
26.
The contracts between DIRECTV and MAS TEC specify the nature of the
satellite dish installation services they are to provide, and establish policies and
procedures to which MAS TEC technicians must adhere.
27.
Satellite system equipment installed by MAS TEC, pursuant to these
contracts, is provided and/or sold to MAS TEC by DIRECTV.
28.
DIRECTV satellite system equipment is installed by MAS TEC at the places
of residence of DIRECTV customers/subscribers.
29.
DIRECTV requires all prospective MAS TEC technicians to pass a criminal
background check and drug screening test before working on behalf of DIRECTV.
30.
DIRECTV directs MAS TEC technicians to specific work sites and details the
timeframe in which jobs must be completed.
31.
DIRECTV monitors the location of MAS TEC technicians, specifies the time
at which they are supposed to arrive at appointments, and regularly evaluates
completed work to ensure that it meets DIRECTV standards.
32.
DIRECTV determines the number of its customers that will be serviced by
MAS TEC technicians on any given day and the rate at which they are paid for each
33.
In accordance with the Federal Communication Commission’s Second Report
and Order, In the Matter of Implementation of Section 207 of the
Telecommunications Act of 1996, Restrictions on Over-the-Air Reception Devices ,
1998 WL 888546 (1998), 47 C.F.R. 1.4000(d) a tenant does not have direct or
indirect control over the exterior walls or roof of an MDU, which are common or
restricted areas, and therefore the Regulation does not authorize installation of
Equipment in those areas without consent of the Landlord. In particular, the
Second Report and Order makes clear that DIRECTV cannot drill holes in an
exterior wall or roof of an MDU without consent of the Landlord.
34.
As a requirement of FCC rule and regulation, Defendants were required to
secure the prior verbal or written consent of the Plaintiffs- landlord/owners, before
drilling holes in the exterior walls or roofs of their New York RDUs and
permanently affixing DIRECTV Equipment thereto.
35.
Instead, as a prerequisite for installation of the Equipment DIRECTV
requires its subscribers to execute a written permission form, representing that the
tenant has secured verbal permission/authorization from their landlord.
36.
MAS TEC technicians were required to secure from DIRECTV subscribers,
an executed written permission form as a pre-requisite for installation of the
Equipment
37.
MAS TEC technicians are trained not to seek verbal/written approval and
consent for installation, directly from landlords.
38.
The leases between Plaintiffs and their tenants at the subject RDUs prohibit
the installation of satellite dishes, including DIRECTV Equipment, on roofs and/or
exterior walls of the subject MDUs.
39.
Defendants had constructive/actual knowledge that the leases between
Plaintiffs and their tenants prohibit the installation of DIRECTV Equipment on
roofs and/or exterior walls of the subject RDUs, but ignored this prohibition.
40.
At all relevant times, herein, Defendants did not require Tenant-subscribers
to produce any evidence of prior Landlord approval to install DIRECTV system
Equipment.
41.
At all relevant times, herein, Defendants did not require Tenant-subscribers
to produce any evidence that the subject lease or rental agreement did not have any
prohibitions in connection with installation of DIRECTV system Equipment on roofs
and/or exterior walls of the subject RDUs.
42.
DIRECTV caused the installation of DIRECTV equipment on roofs and/or
exterior walls of the RDUs owned by Plaintiffs and putative members of the Class,
on the mere representation of any Tenant-subscriber and/or family member over the
age of 18 years, that “DIRECTV System installation at (address) has been verbally
approved by my landlord (or is not required pursuant to my lease or rental
agreement.)”
43.
MAS TECH installed DIRECTV equipment on roofs and/or exterior walls of
RDUs owned by Plaintiffs and putative members of the Class, on the mere
representation of the Tenant-subscriber and/or family member over the age of 18
years that “DIRECTV System installation at (address) has been verbally approved
by my landlord (or is not required pursuant to my lease or rental agreement.)”
44.
MAS TECH installed DIRECTV equipment on roofs and/or exterior walls of
the RDUs owned by Plaintiffs and putative members of the Class, without any
knowledge, one way or the other, whether Plaintiff Landlords and putative
members of the class had authorized such installation.
45.
During all relevant times, herein, Defendants, by their agents, servants
and/or employees knowingly and intentionally violated the above-referenced FCC
rules and regulations, by drilling holes in the exterior walls or roofs of New York
RDUs and permanently affixing DIRECTV Equipment thereto, without the prior
verbal or written consent of the Plaintiffs-Owners and putative members of the
46.
Defendants have circumvented FCC regulations and violated public policy by
performing installation of the DIRECTV Equipment on roofs and exterior walls of
RDUs without securing prior written/verbal permission from the Plaintiffs-
Landlords and/or putative class members.
47.
At all relevant times, herein, Defendants never paid any fees and/or other
monetary consideration to Plaintiffs or putative members of the Class, for the
use/occupancy/installation of DIRECTV system Equipment in or on the roofs and
exterior walls of RDUs owned by Plaintiffs-Landlords or putative members of the
48.
At all relevant times, herein, upon the termination of tenant subscriptions to
its satellite television service, DIRECTV abandons its Equipment permanently
affixed to roofs and exterior walls of RDUs, requiring Plaintiffs-Landlords and
putative Class members to expend their own time, money and resources to remove
the Equipment and repair the RDU at the site of affixation.
CLASS ACTION ALLEGATIONS
49.
Plaintiffs incorporate all preceding paragraphs of this complaint as if fully set
forth herein.
50.
This action is brought and may be properly maintained as a Class action
pursuant to The Class Action Fairness Act, 28 U.S.C. § 1332.
51.
This action has been brought and may properly be maintained as a class
action against Defendants pursuant to the provisions of Rule 23 of the Federal Rule
of Civil Procedure, because there is a well-defined community of interest in the
litigation and the proposed Class is easily ascertainable.
52.
Plaintiffs bring this action on behalf of themselves and all others similarly
situated, and seek certification of a Class, defined as:
All persons and/or entities (“Landlords”) that own and lease residential
dwelling units (“RDU’s”) in the State of New York, upon which Defendants, by their
agents, servants and/or employees have, on at least one occasion during the
applicable statutory period, without first receiving prior written Landlord
authorization and/or permission, installed and affixed DIRECTV equipment on the
roof and/or exterior walls of said RDU.
53.
The following are excluded from the Class: any person or entity in which
Defendants have a controlling interest; the officers, directors, employees, affiliates,
subsidiaries, legal representatives, heirs, successors and their assigns of any such
person or entity, together with any immediate family member of any officers,
directors, employee of said persons and/or entities.
54.
The proposed Class Period is the time beginning three (3) years prior to the
date of filing of this Class Action Complaint, and extending to the date of
prospective entry of Judgment for the Class.
55.
Numerosity: Plaintiffs do not know the exact size of the class, but it is
reasonably estimated that the Class is composed of at least seventy-five thousand
(75,000) persons/entities. While the identities of Class members are unknown at
this time, this information can be readily ascertained through appropriate discovery
of the records maintained by Defendants.
56.
The persons/entities in the Class are so numerous that the joinder of all such
persons/entities is impracticable and the disposition of their claims in a class action
rather than in individual actions will benefit the parties and the courts.
57.
This action involves common questions of law and fact, because each Class
Member’s claim derives from the same nucleus of facts and common relief by way of
damages as is sought by Plaintiffs.
58.
The questions of law and fact common to the class members predominate
over questions affecting only individual class members. Thus, proof of a common or
single set of facts will establish the right of each member of the Classes to recover
and include, but are not limited, to the following:
(a)
Whether Defendants' acts and conduct, as alleged herein, constitute
‘consumer-oriented’ activity.
(b)
Whether Defendants' acts and conduct, as alleged herein, caused harm to the
public interest.
(c)
Whether Defendants' acts and conduct, as alleged herein, were misleading in a
material way.
(d)
Whether Defendants' acts and conduct, as alleged herein, proximately
resulted in injury to Plaintiffs and members of the Class.
(e)
Whether Defendants' acts and conduct, as alleged herein, constitute
deceptive or unfair trade practices under N.Y. Gen. Bus. § 349;
59.
The claims asserted by Plaintiffs in this action are typical of the claims of
other Class members, as the claims arise from the same course of conduct by
Defendants and the relief sought is identical.
60.
Plaintiffs’ claims are typical of the members of the Class, since all such
claims arise out of the same business practices of Defendants, characterized by the
permanent installation of DIRECTV system Equipment in or on roofs and/or
exterior walls of MDUs, without paying consideration and in the absence of securing
prior verbal or written permission therefor from the Plaintiffs-Landlords and
putative class members.
61.
Plaintiffs have no interest(s) antagonistic to the interests of the other
members of the Class.
62.
Plaintiffs are committed to the vigorous prosecution of this action and have
retained competent counsel experienced in Class action litigation.
63.
Plaintiffs are adequate representatives and will fairly and adequately protect
the interests of the Class.
64.
The Class, of which each Plaintiff is a member, is readily identifiable.
65.
A Class action is a superior and cost effective method for the fair and efficient
adjudication of the present controversy and there would accrue enormous savings to
both the Courts and the Class in litigating the common issues on a class wide,
instead of on a repetitive individual basis.
66.
No unusual difficulties are likely to be encountered in the management of
this class action in that all questions of law and/or fact to be litigated at the liability
stage of this action are common to the Class.
67.
A Class action is superior to other available methods for the fair and efficient
adjudication of this controversy, since joinder of all members is impractical. While
the damages suffered by the individual Class members are not insignificant, the
amounts are modest compared to the expense and burden of individual litigation.
68.
A Class action will cause an orderly and expeditious administration of the
claims of the Class and will foster economies of time, effort and expense.
69.
The prosecution of separate actions by individual members of the Class would
run the risk of inconsistent or varying adjudications, which would (a) establish
incompatible standards of conduct of Defendants in this action and (b) create the
risk that adjudications with respect to individual members of the Class would, as a
practical matter, be dispositive of the interests of the other members not parties to
the adjudications or substantially impair or impede their ability to protect their
interests.
70.
Prosecution as a class action will eliminate the possibility of repetitious
litigation.
FIRST COUNT
(Class Claims under N.Y. Gen. Bus. § 349)
71.
Plaintiffs incorporate all preceding paragraphs of this complaint as if fully set
forth herein.
72.
Defendants’ actions and conduct, as described herein, offends public policy as
it has been established by statutes, the common law and otherwise.
73.
Defendants’ actions and conduct, as described herein violates the Federal
Communication Commission’s Second Report and Order, In the Matter of
Implementation of Section 207 of the Telecommunications Act of 1996, Restrictions
on Over-the-Air Reception Devices,1998 WL 888546 (1998), 47 C.F.R. 1.4000(d).
74.
A tenant does not have direct or indirect control over the exterior walls or
roof of an MDU, which are common or restricted areas, and therefore the
Regulation does not authorize installation of satellite television equipment in those
areas, without written consent of the Landlord.
75.
Defendants’ actions and conduct, as described herein, tortiously interfered
with and circumvented the terms and conditions of the leases and leasehold
interests existing between Plaintiffs/members of the Class and their respective
tenants.
76.
Defendants installed satellite dishes on the exterior and roofs of real property
owned by Plaintiffs and members of the Class, without their consent and in
accordance with a business practice that was designed to circumvent their right to
withhold consent.
77.
Defendants have installed and subsequently abandoned dishes without
landlord consent on numerous buildings in the State of New York.
78.
Defendants engage in a systematic practice designed to carry out commercial
activities while avoiding their duties under the law; Defendants knew they may
only install satellite dishes when they have owner consent, but they train their
employees to subvert this requirement and to remain intentionally ignorant of
whether such consent has been given. This is precisely the kind of deceptive and
fraudulent business practice that New York General Business Law § 349 was
broadly designed to remedy.
79.
Defendants’ deceptive business practices succeed by exploiting the very lack
of their direct business relationship with the actual property owners and by taking
advantage instead of the pre-existing business relationship between tenants and
landlords.
80.
Defendants have engaged as a regular course of business practice in the
perpetration of a scheme to enrich themselves by means of victimizing and
sacrificing the property interests of landlords to control what fixtures are installed
on and remain on the landlords’ property.
81.
Defendants’ actions and conduct, as described herein demonstrated a reckless
disregard of the exclusive possessory real property interests of Plaintiffs and Class
members.
82.
Defendants’ actions and conduct, as described herein were immoral,
unethical, oppressive and unscrupulous.
83.
Defendants’ actions and conduct, as described herein, constitute a material
deception and fraudulent business practice in violation of New York General
Business Law, §349.
84.
Defendants’ actions and conduct, as described herein, have directly caused
Plaintiffs and members of the Class to have suffered ascertainable loss.
85.
Plaintiffs and members of the Class have suffered actual injury and loss as a
direct result of Defendants’ violations of New York General Business Law, §349, in
that they have been compelled to incur costs and expenses to remove satellite dishes
from the exterior walls or roof of an RDU, which are in common or restricted areas.
86.
Plaintiffs and members of the Class have suffered actual injury and loss as a
direct result of Defendants’ violations of New York General Business Law, §349, in
that they have been compelled to incur costs and expenses to repair areas of
exterior walls or roofs of an RDU, from which satellite dishes have been removed.
87.
Plaintiffs and members of the Class have suffered actual injury and loss as a
direct result of Defendants’ violations of New York General Business Law, §349, in
that the fair market value of their real property has been caused to be diminished,
as a result of the unauthorized affixation of unsightly satellite dishes on exterior
walls or roofs of RDUs.
88.
Plaintiffs and members of the Class have suffered actual injury and loss as a
direct result of Defendants’ violations of New York General Business Law, §349, in
that they have been compelled to incur the costs and expenses to retain legal
representation to protect their real property interests.
89.
As a proximate result of Defendants’ continuing violations of New York
General Business Law, §349. Defendants are liable to Plaintiffs and members of the
Class for compensatory damages.
90.
As a proximate result of Defendants’ continuing violations of New York
General Business Law, §349. Defendants are liable to Plaintiffs and members of the
Class for actual damages.
91.
As a proximate result of Defendants’ continuing violations of New York
General Business Law, §349, Defendants are liable to Plaintiffs and members of the
Class for consequential damages.
92.
Punitive damages are expressly waived on behalf of the Class.
93.
As a proximate result of Defendants’ continuing violations of New York
General Business Law, §349, Defendants are liable to Plaintiffs and members of the
Class for reasonable attorney’s fees and the costs of this litigation.
94.
Plaintiffs and members of the Class are entitled to injunctive and other
equitable relief, enjoining Defendants’ continuing violations of New York General
Business Law, §349, as alleged herein.
SECOND COUNT
(Individual Trespass Claims)
95.
Plaintiffs incorporate all preceding paragraphs of this complaint as if fully set
forth herein.
96.
Defendants intentionally and knowingly installed DIRECTV system
Equipment in or on roofs and/or exterior walls of an RDU located at 35 Katherine
Street, Locust Valley, New York 11560, without first securing the prior verbal or
written permission from Plaintiff FRINTZILAS.
97.
Defendants intentionally and knowingly installed DIRECTV system
equipment in or on roofs and/or exterior walls of an RDU located at 35 13th Street,
Locust Valley, New York 11560, without first securing the prior verbal or written
permission from Plaintiff FRINTZILAS.
98.
Defendants intentionally and knowingly installed DIRECTV system
equipment in or on roofs and/or exterior walls of an RDU located at 10 Robert Road,
Glen Cove, New York 11542, without first securing the prior verbal or written
permission from Plaintiff FRINTZILAS.
99.
Defendants intentionally and knowingly installed DIRECTV system
equipment in or on roofs and/or exterior walls of an RDU located at 12 Forest
Avenue, Glen Cove, New York 11542, without first securing the prior verbal or
written permission from Plaintiff FRINTZILAS.
100. Defendants intentionally and knowingly installed DIRECTV system
equipment in or on roofs and/or exterior walls of an RDU located at 1772 Hanover
Street, Yorktown Heights, New York 10598, without first securing the prior verbal
or written permission from Plaintiff POZZUTO.
101. Defendants’ acts and conduct were a physical invasion and intrusion affecting
the exclusive possessory interest of the respective Plaintiffs, in their real property.
102. Defendants knowingly and intentionally violated FCC rules and regulations
by drilling holes in the exterior walls or roofs of Plaintiffs’ RDUs and permanently
affixing DIRECTV Equipment thereto, without the prior verbal or written consent
of Plaintiffs.
103. Defendants never paid either Plaintiff any type of monetary consideration,
for the privilege of installing and/ or maintaining DIRECTV Equipment on the roofs
and/or exterior walls of their RDUs.
104. Defendants refused to remove DIRECTV Equipment affixed to Plaintiffs’
RDUs without their authorization/consent, despite multiple demands by Plaintiffs.
105. Defendants’ unauthorized entry upon, use and occupancy of the above
described RDUs owned by Plaintiffs, constitutes trespass.
106. Defendants’ unauthorized entry upon, and unabated use and occupancy of
the subject RDUs owned by Plaintiffs, constitutes continuing trespass.
107. Defendants are strictly liable to Plaintiffs for trespass.
108. As a proximate result of Defendants’ trespass, Plaintiffs have sustained
economic damage and pecuniary injury.
109. As a proximate result of Defendants’ continuing trespass on Plaintiffs’ RDUs,
Defendants are liable to Plaintiffs for damages measured by the value of the illegal
use of Plaintiffs’ real property to DIRECTTV.
110. As a proximate result of Defendants’ continuing trespass on Plaintiffs’ RDUs,
Defendants are liable to Plaintiffs for damages measured by the value of the illegal
use of Plaintiffs’ real property to MAS TEC.
111. As a proximate result of Defendants’ continuing trespass upon Plaintiffs’
RDUs, Defendants are liable to Plaintiffs for damages for the costs to remove the
DIRECTV Equipment and repair the exterior/roofs at the sites of affixation.
112. Defendants’ continuing trespass upon Plaintiffs’ RDUs has been intentional,
deliberate, with knowledge of a high degree of probability of harm to Plaintiffs and
reckless indifference to the law.
113. Defendants’ continuing trespass upon Plaintiffs’ RDUs offends public policy,
as it has been established by statutes, the common law and otherwise; is immoral,
unethical, oppressive, unscrupulous and demonstrates a reckless disregard of the
exclusive possessory real property interests of Plaintiffs.
114. Defendants are liable to Plaintiffs for punitive damages.
PRAYER FOR RELIEF
WHEREFORE, Plaintiffs, on behalf of themselves and all others similarly
situated, pray for Judgment as follows:
(a)
Certifying this case as a Class Action with Plaintiffs as Class representatives
and their attorneys as Class counsel;
(b)
Awarding Judgment to Plaintiffs and all Class Members, for all available
damages and other relief under the FIRST COUNT asserted;
(c)
Awarding Judgment to Plaintiffs, individually, for all available damages and
other relief under the SECOND COUNT asserted;
(d)
Awarding Plaintiffs and members of the Class their costs and disbursements,
including reasonable attorney’s fees;
(e)
Awarding Plaintiffs and members of the Class pre-judgment and post-
judgment interest;
(f)
Granting such other and further relief as may be deemed just and proper in
the premises.
Dated: April 2, 2017
____________________________________
Steven Bennett Blau
Shelly A. Leonard
BLAU, LEONARD LAW GROUP, LLC
23 Green Street, Suite 303
Huntington, NY 11743
(631) 458-1010
[email protected]
[email protected]
Attorneys for Plaintiffs
| intellectual property & communication |
7rWKC4cBD5gMZwcz5o-J | CARELLA, BYRNE, CECCHI, OLSTEIN,
BRODY & AGNELLO, P.C.
JAMES E. CECCHI
5 Becker Farm Road
Roseland, NJ 07068
Telephone: 973/994-1700
973/994-1744 (fax)
[email protected]
Attorneys for Plaintiff
[Additional counsel appear on signature page.]
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
No.
CLASS ACTION
ANDREW L. WARREN, Individually
and on Behalf of All Others Similarly
Situated,
Plaintiff,
COMPLAINT FOR VIOLATIONS OF
THE FEDERAL SECURITIES LAWS
vs.
AURORA CANNABIS INC., TERRY
BOOTH, STEPHEN DOBLER, GLEN
IBBOTT, CAMERON BATTLEY,
MICHAEL SINGER and JASON
DYCK,
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
DEMAND FOR JURY TRIAL
Defendants.
Plaintiff Andrew L. Warren, individually and on behalf of all others similarly
situated, by plaintiff’s undersigned attorneys, for plaintiff’s complaint against
defendants, alleges the following based upon personal knowledge as to plaintiff and
plaintiff’s own acts and upon information and belief as to all other matters based on
the investigation conducted by and through plaintiff’s attorneys, which included,
among other things, a review of U.S. Securities and Exchange Commission (“SEC”)
filings by Aurora Cannabis Inc. (“Aurora” or the “Company”), Company press
releases, analyst reports, media reports, and other publicly disclosed reports and
information about the Company. Plaintiff believes that substantial additional
evidentiary support will exist for the allegations set forth herein after a reasonable
opportunity for discovery.
NATURE OF THE ACTION
1.
This is a securities class action on behalf of all purchasers of Aurora
securities between October 23, 2018 and January 6, 2020, inclusive (the “Class
Period”), against Aurora and certain of the Company’s executive officers and/or
directors seeking to pursue remedies under the Securities Exchange Act of 1934 (the
“Exchange Act”).
JURISDICTION AND VENUE
2.
The claims asserted herein arise under §§10(b) and 20(a) of the Exchange
Act, 15 U.S.C. §§78j(b) and 78t(a), and Rule 10b-5, 17 C.F.R. §240.10b-5.
Jurisdiction is conferred by §27 of the Exchange Act, 15 U.S.C. §78aa.
3.
Venue is proper in this District pursuant to §27 of the Exchange Act. The
acts and transactions giving rise to the violations of law complained of occurred in
part in this District, including the dissemination of false and misleading statements
into this District. In addition, an earlier-filed case arising from the same nucleus of
operative facts and asserting claims under the Exchange Act on behalf of Aurora
shareholders was filed in this District, Wilson v. Aurora Cannabis Inc., No. 2:19-cv-
20588.
4.
In connection with the acts and conduct alleged in this complaint,
defendants, directly or indirectly, used the means and instrumentalities of interstate
commerce, including, but not limited to, the mails and interstate wire and telephone
communications.
PARTIES
5.
Plaintiff Andrew L. Warren purchased Aurora securities during the Class
Period as described in the Certification attached hereto and incorporated herein by
reference and suffered damages.
6.
Defendant Aurora is a manufacturer and distributor of cannabis products
based in Canada. Aurora’s common stock trades on the New York Stock Exchange
(“NYSE”) under the ticker symbol “ACB.”
7.
Defendant Terry Booth (“Booth”) served as the Company’s Chief
Executive Officer (“CEO”) and a member of Aurora’s Board of Directors (“Board”)
during the Class Period. Defendant Booth is a co-founder of Aurora.
8.
Defendant Stephen Dobler (“Dobler”) served as the Company’s President
and a member of the Board during the Class Period. Defendant Dobler is a co-founder
of Aurora.
9.
Defendant Glen Ibbott (“Ibbott”) served as the Company’s Chief
Financial Officer (“CFO”) during the Class Period.
10.
Defendant Cameron Battley (“Battley”) was the Company’s Chief
Corporate Officer (“CCO”) and a prominent corporate spokesperson from early 2018
until December 2019, when he abruptly left the Company.
11.
Defendant Michael Singer (“Singer”) served as the Company’s Executive
Chairman during the Class Period.
12.
Defendant Jason Dyck (“Dyck”) served as a member of the Board during
the Class Period.
13.
Defendants Booth, Dobler, Ibbott, Battley, Singer, and Dyck are
collectively referred to herein as the “Individual Defendants.”
14.
During the Class Period, the Individual Defendants ran the Company as
hands-on managers overseeing Aurora’s operations and finances and made the
materially false and misleading statements described herein. The Individual
Defendants had intimate knowledge about core aspects of Aurora’s financial and
business operations, including demand for the Company’s products, capital
expenditures, and compliance with licensing requirements. They were also intimately
involved in deciding which disclosures would be made by the Company.
BACKGROUND
15.
Defendant Aurora is headquartered in Edmonton, Alberta, Canada. The
Company markets and sells cannabis, hemp, cannabis devices, and related products in
the cannabis consumer and medical markets. Aurora operates in more than 25
countries on five continents.
16.
Founded in 2006 and receiving its license to grow cannabis in Canada in
2014, Aurora has been publicly traded on the Toronto Stock Exchange since July
2017, was traded over-the-counter in the United States under the ticker symbol
“ACBFF” until October 2018, and since October 23, 2018 has traded on the NYSE
under the ticker symbol “ACB.”
17.
Aurora has presented itself as a premier medical cannabis company with
higher quality cannabis than its competitors. Leading up to and during the Class
Period, Aurora engaged in an aggressive expansion strategy, building production
capacity internally and through acquisitions and investments and launching operations
in jurisdictions around the world, including most notably the European market.
Several of these acquisitions were paid for in whole or in part with Aurora stock.
Aurora justified this rapid expansion and spending spree as due to the purported need
to rapidly ramp up production to meet exploding consumer demand. For example,
defendant Booth, Aurora’s CEO, claimed during the Class Period, in February 2019,
that “I lose sleep over our ability to supply this global cannabis market” and that it
would be “at least 5 years before we have an oversupply situation.”
DEFENDANTS’ FALSE AND MISLEADING STATEMENTS
DURING THE CLASS PERIOD
18.
The Class Period begins on October 23, 2018, when Aurora shares began
trading on the NYSE. In the days leading up to the start of the Class Period,
defendants artificially inflated the trading price of Aurora securities by issuing false
and misleading statements and omitting to disclose material facts necessary to make
defendants’ statements not misleading. For example, on October 18, 2018, Aurora
issued a press release as an exhibit to a Form 6-K filed with the SEC, titled “Aurora
Cannabis to Commence Trading on the NYSE,” announcing that its common shares
had been approved for listing on the NYSE and would commence trading effective the
open of markets, October 23, 2018. In the press release, defendant Booth touted the
“growing” demand for consumer cannabis. The press release stated in pertinent part:
“Our NYSE listing represents another important milestone that
reflects our commitment to all stakeholders as we continue advancing
domestic and international growth initiatives, which includes expanding
our base of global institutional and retail investors,” said Terry Booth,
CEO of Aurora. “Aurora has rapidly developed into a globally mature
organization with industry leading and technologically advanced
production facilities available to produce at unprecedented scale to meet
the growing demand for high-quality cannabis both in Canada and
abroad. We are also uniquely committed to leveraging our deep
knowledge base to further scientific research into medical applications of
cannabis, and developing novel, higher-margin product offerings that
strongly differentiate Aurora from our competition.”
*
*
*
Highly differentiated from its peers, Aurora has established a
uniquely advanced, consistent and efficient production strategy, based on
purpose-built facilities that integrate leading-edge technologies across all
processes, defined by extensive automation and customization, resulting
in the massive scale production of high quality product at low cost.
Intended to be replicable and scalable globally, our production facilities
are designed to produce cannabis of significant scale, with high quality,
industry-leading yields, and low per gram production costs. Each of
Aurora’s facilities is built to meet EU GMP standards, and its first
production facility, the recently acquired MedReleaf Markham facility,
and its wholly owned European medical cannabis distributor Aurora
Deutschland, have achieved this level of certification.1
19.
On November 12, 2018, the Company issued a press release announcing
first quarter 2019 financial results for the quarter ended September 30, 2018.2 The
release stated that Aurora had achieved 260% revenue growth to $29.7 million and
1 Emphasis has been added throughout unless otherwise noted.
2 Aurora’s fiscal year ends on June 30 of the calendar year.
that pro form revenues were up 333% during the quarter to $35.8 million. The press
release continued, in pertinent part:
Facilities and Production update
During and subsequent to the quarter, the Company made
significant progress towards increasing its production capacity, including
receipt of various sales and production licenses. Based on grow rooms
in production, the Company currently is running at an annualized run
rate of 70,000 kg. Management anticipates that around calendar year
end 2018 into the beginning of calendar 2019, Aurora will have a
production run rate in excess of 150,000 kg per annum based on grow
rooms in production, with subsequent scale up to over 500,000 kg per
annum (excluding additional capacity through the acquisition of ICC
Labs).
20.
Aurora’s management’s discussion and analysis for the quarter, filed on
Form 6-K on November 13, 2019, stated in pertinent part:
The Company’s financial results for the first quarter of fiscal
2019 continued to show strong growth in its core cannabis businesses.
Compared to the prior quarter, total cannabis revenue increased by
65%, while at the same time Aurora was bolstering its inventory levels
to continue serving multiple customer markets.
21.
On January 8, 2019, Aurora issued a press release providing updated
second quarter 2019 (“2Q19”) results for the quarter ended December 31, 2018. The
Company represented that its strategic expansion was well underway and that it was
executing in not only increasing revenues, but also in controlling costs. The press
release stated in pertinent part:
“Aurora continues to execute effectively across all market
segments, as demonstrated by its revenue growth anticipated to exceed
68% as compared to last quarter, supported by continued strong
performance in the Canadian adult consumer use market,” said Terry
Booth, CEO of Aurora. . . . “Going forward, we see sustained strong
demand from the adult usage market, as evidenced by public
statements from the Canadian provinces, as well as strong patient-
driven demand for medical cannabis in Canada and abroad. These
factors, together with our focus on disciplined management of operating
expenses, and our growing portfolio of higher margin products, put us in
a position to rapidly achieve positive EBITDA within the next two
quarters”
22.
On February 11, 2019, the Company issued a press release announcing its
2Q19 results. The press release stated that the Company had achieved “83%
Sequential Net Revenue Growth to $54.2 Million.” In addition, the Company
promoted the progress it was purportedly making on its Aurora Sky facility, which it
claimed would yield production efficiencies. The press release stated in pertinent
Aurora Sky is now fully complete and commissioned, and is
expected to reach its full production capacity, based on Health
Canada approved planted rooms, shortly. Recent harvests
completed to date at the facility have exceeded targeted yields,
reflecting that the facility’s commissioning has been successful,
all environmental and nutrition systems, and operating protocols
are dialed in, and technology components are functioning well.
*
*
*
The Company anticipates that with Aurora Sky operating at full
capacity, as well as continued reduction in operating costs, the cash cost
to produce per gram will trend significantly lower. Management
reiterates its expectation that the sustainable long-term operating cost at
its Sky Class facilities will be well below $1 per gram.
23.
The press release quoted defendants Booth and Ibbott at length,
highlighting the purported strong and sustained demand for the Company’s products
and the completion of progress milestones at the Company’s production facilities.
The release stated in pertinent part:
Management Commentary
“Aurora continues to execute strongly across all of its market
segments, as demonstrated by the 83% revenue growth over last
quarter and the significant increase in confirmed production results,”
said Terry Booth, CEO of Aurora. “Our brands continue to resonate
extremely well in the consumer market, our patient numbers continue
to increase steadily, and we have maintained our market leadership in
Germany and other key international markets. We are experiencing
exceptional demand for our Canadian medical and consumer products,
as well as sustained strong demand internationally. With our Aurora
Sky and MedReleaf Bradford facilities ramping up production as
anticipated and our other licensed facilities operating at full capacity,
we are reiterating our earlier guidance of achieving sustained
EBITDA positive results from the second calendar quarter of this year
(our fiscal Q4).”
Glen Ibbott, CFO of Aurora added, “We are also very pleased with
our recent placement of US$345 million in convertible notes. These
convertible notes were subscribed by high-quality US, Canadian, and
international institutions and offer Aurora the flexibility and optionality
to settle the entire principal amount of the notes in the future for cash,
shares, or any combination thereof. This funding sufficiently supports
the global opportunity for us to continue our commitment to growth in
the legal, regulated medical and consumer cannabis systems across the
globe. This is a unique time and position as we maintain a high
cadence of increasing product supply and international market
expansion.”
Mr. Booth concluded, “With our strong performance in the
Canadian medical and consumer markets, our early mover advantage in a
growing list of important international markets, together with our
leadership in high-quality, CBD-rich hemp production, Aurora is
strategically positioned across the entire cannabis industry value chain
to further extend our rapid growth.”
24.
On February 11, 2019, Aurora hosted a 2Q19 earnings call led by
defendants Booth, Ibbott, and Battley. During the call, defendant Battley emphasized
the “strong market demand” for the Company’s products that purportedly justified
ramping up production, stating in pertinent part:
To address the continued strong market demand from the
Canadian and international medical market and the Canadian
consumer market, we are ramping up production rapidly. Currently,
based on planted rooms approved by Health Canada, we are running at
an annual production rate of about 120,000 kilograms or 120 million
grams per year, and we expect to reach over 150,000 kilos of annual
production by the end of next month based on planted and approved
rooms.
25.
Defendant Battley also represented that in Europe, Aurora “continue[d]
to capitalize on the strong central presence [it had] established in Germany.”
26.
During the same call, defendant Ibbott similarly emphasized the “very
strong demand” for Aurora’s products, stating in pertinent part:
With the rapid scale-up of our production and the related
increase in product availability, the continued very strong demand for
our products, our planned expansion of a derivative product portfolio of
these higher-margin products and continued discipline in our operating
cost, we are very comfortable in reiterating our earlier guidance of
achieving positive EBITDA in our fiscal Q4, that’s April to June 2019,
with positive operational cash flow following shortly thereafter. We are
executing well as reflected in these results and in our expectations going
forward, and we are exceptionally well positioned as one of the clear
leaders in the global cannabis industry.
27.
During the call, defendant Booth claimed that Aurora had an “awesome
demand” for its products. Defendant Booth also stated that he would “lose sleep over
our ability to supply this global cannabis market. It is – it’s coming in. It’s very fast.”
He continued: “I see this world expansion as the cannabis-based [study] being close to
being set properly. And it’s at least 5 years before we have an oversupply situation
for companies that can export under EU GMP-compliant facility.”
28.
On April 10, 2019, Aurora issued a press release providing an update on
its Aurora Sun construction project. The press release stated in pertinent part:
“Aurora Sun represents the next evolution in our Sky Class facility
design, delivering massive scale, low cost production, and consistent,
high-quality cannabis,” said Terry Booth, CEO of Aurora. “Particularly
in newly-opened markets, establishing first-mover position and
embedding Aurora’s market share and brand requires a stable and
reliable supply of high-quality cannabis for these markets. The
increased scale of Aurora Sun reflects our expectations for the long-
term growth in global demand, especially the higher margin
international medical markets which will be faced with significant
supply shortages for the foreseeable future. Sun is also designed with
flexibility in mind to enable us to quickly meet changing market
demands, particularly as breeding and cultivation technologies evolve
and as customer preferences and requirements change.”
*
*
*
Ground work at the facility is nearing completion, erection of the
steel structure is advancing and installation of the glass at Sun is
expected to be completed in May 2019. Like Aurora Sky, Health
Canada licensing requests have determined that rooms will be available
for planting before the entire facility is completed.
29.
On May 14, 2019, Aurora issued a press release announcing its third
quarter 2019 financial results for the quarter ended March 31, 2019. The release again
highlighted Aurora’s purported strong execution in meeting growing consumer
demand and controlling costs. The press release stated in pertinent part:
“I’m exceptionally proud of our company and team as Aurora
continues to deliver on our domestic and international growth strategy.
We achieved solid revenue growth and strong operating results in a
quarter proven challenging across the industry. We are laser focused on
building a long-term sustainable business,” said Terry Booth, CEO.
“During the quarter, we formally welcomed Nelson Peltz a key strategic
advisor. He has been incredibly engaged, collaborative, and strategically
focused on assisting our pursuit of growth in global markets and with
mature companies in adjacent industries.”
Glen Ibbott, CFO, added, “Aurora is an extremely active and
diversified company, leading the industry in cannabis research, product
development, cultivation, global scale, and revenue growth. With a solid
Q3 on all fronts, it’s time to move the yardsticks for the industry again.
The company we have built with purpose through both organic growth
and targeted acquisitions has provided a unique opportunity: continue
to lead the industry in revenue growth while also progressing to
positive operating earnings in the near term.”
*
*
*
With Aurora Sky now operating at full capacity, the Company
anticipates continued reduction in production and manufacturing costs
allowing cash costs per gram to continue to trend lower. Management
reiterates its expectation that the average cash cost to produce per gram
at its Sky Class facilities will be below $1.
With disciplined cost management, the Company expects SG&A
costs to grow modestly over the remainder of the fiscal year.
Consequently, management anticipates that with sustained revenue
growth and lower cash costs per gram, Aurora is well positioned to
achieve positive EBITDA beginning in fiscal Q4 2019 (calendar Q2
2019).
30.
On June 21, 2019, Aurora issued a press release stating that it was
“prepared” for the “expansion of Canada’s cannabis market.” The press release
continued in pertinent part:
“Aurora is the world’s leading producer of high-quality cannabis
and we’re ready to introduce high-value product additions to this
improved, federally legal market,” said the Company’s CEO Terry
Booth. “From the beginning, we’ve invested in industry-leading
production and distribution technology, and in consumer research to
drive products to market that consumers will desire. These things,
together with the dynamic partnerships we’ve entered into on the
accessory and technology fronts, position us well for this new market
launch in December as per Health Canada’s recent regulatory
amendments.”
31.
On August 6, 2019, Aurora issued a press release providing an update on
its fourth quarter 2019 (“4Q19”) results for the quarter ended June 30, 2019. The
press release stated in pertinent part:
“Our Q4 2019 guidance highlights Aurora’s continued
leadership,” said Terry Booth, CEO of Aurora. “We set out to be best-
in-class cultivators, and through carefully evaluated acquisitions, that
vision continues to drive exceptional results today. We are the leader in
cultivation capacity, production available for sale and revenues for
cannabis in the Canadian medical and consumer markets. We continue
to lead the build out of European and other international medical
cannabis markets. Our success to date comes from a focus on quality,
regulatory compliance, appropriate Board of Directors oversight, and
delivering a profitable, low risk and sustainable business for our
shareholders.”
32.
On September 11, 2019, Aurora issued a press release announcing its
4Q19 and full-year 2019 financial results. The release represented that Aurora was
continuing to meet evolving demand and successfully keeping costs under control as it
continued to ramp up production. The press release stated in pertinent part:
Glen Ibbott, CFO, added, “We continue to see strong growth in
cannabis revenues in both medical and consumer categories. Our
cultivation execution continues to drive production costs lower and
improve gross margins. Aurora’s diversified product portfolio remains
in demand with patients and consumers alike. With the Canadian
launch of derivative products in the coming months, we have made the
necessary investments to ensure readiness and focus on a variety of value
added products. We are very excited to supply an expanded consumer
market with premium cannabis and new product forms.”
*
*
*
The global cannabis and hemp markets represent a significant
opportunity for Aurora and the Company will continue to make the
necessary investments today to build long-term value for shareholders.
However, Aurora will take a balanced approach to these investments
with a focus on operating a sustainable and profitable business.
The introduction of new product formats to the Canadian
consumer market this fall represents a significant opportunity for the
Company. Aurora expects to have a robust product line-up ready to
launch in December. Given the very early stage of development of the
consumer market in Canada and international medical markets,
management anticipates that quarter to quarter sales volumes and
revenues may be volatile. The Company expects adjusted EBITDA to
continue to improve in the future due to expected revenue growth,
improvements in gross margin and prudent SG&A growth.
33.
On October 3, 2019, Aurora issued a press release updating investors on
its global growth initiatives and operations, and specifically on the status of its
construction projects for the Aurora Nordic 2 and Aurora Sun facilities. The press
release stated in pertinent part:
“Aurora takes its leadership position in the global cannabis
industry seriously, and is committed to being open and transparent with
all of our stakeholders,” said Terry Booth, CEO of Aurora. “The Aurora
team is working to advance several major strategic initiatives in Canada,
the United States and abroad aimed at further strengthening Aurora’s
global position. We are laser-focused on delivering on our business plan
and prudently managing our investors’ capital.”
Update on Facilities in Construction:
As Aurora executes on its strategy of leading scalable, purpose-
built cultivation, it continues to prudently manage capital allocation
decisions driven by global forecasts for demand. Many of the
Company’s significant construction projects are nearing completion of
major milestones with significant capital investments concluded.
Aurora Sun and Aurora Nordic 2 Construction Update
Aurora continues to progress construction of its 1.6 million
square foot facility, Aurora Sun, located in Medicine Hat, Alberta, and
its 1 million square foot facility, Nordic Sky, strategically located in
Odense, Denmark. The new purpose-built, “Sky Class” facilities Aurora
are [sic] constructing will have full control over all anticipated
environmental and harvest conditions, resulting in the production of
consistently high yielding, high-quality cannabis at low-cost.
Mr. Booth added, “Aurora Sun in Medicine Hat and Aurora
Nordic in Denmark represent the next evolution of our “Sky Class”
cultivation philosophy and construction of these projects is proceeding
well. Aurora Sun is nearing completion with the majority of capital
investment now behind us, while at Aurora Nordic the primary outdoor
construction, including the enclosure of the facility, nears completion.
Our design philosophy allows for flexibility in licensing and
commissioning in-line with the long-term growth in global demand for
medical cannabis.”
34.
The statements referenced in ¶¶18-33 above were materially false and/or
misleading when made because they failed to disclose the following adverse facts
pertaining to the Company’s business, operations and financial condition, which were
known to or recklessly disregarded by defendants:
(a)
that defendants had materially overstated the demand and potential
market for Aurora’s consumer cannabis products;
(b)
that Aurora’s ability to sell products had been materially impaired
by extraordinary market oversupply, including oversupply that was the product of
Aurora’s own aggressive ramp in production capacity;
(c)
that Aurora’s spending growth and capital commitments were
slated to exceed its revenue growth;
(d)
that, as a result of (a)-(c) above, Aurora faced heightened liquidity
concerns and the need to significantly curtail capital expenditures, including the
cessation of development of the Aurora Sun and Aurora Nordic 2 facilities;
(e)
that Aurora had violated German law mandating that companies
receive special permission to distribute medical products exposed to regulated
irradiation techniques, threatening its primary European market access; and
(f)
that all of the foregoing had negatively impacted the Company’s
business, operations, and prospects and impaired the Company’s ability to achieve
profitability as represented by defendants.
35.
Then, on November 14, 2019, Aurora announced deeply disappointing
financial results for its first quarter of 2020 (“1Q20”), ended September 30, 2019.
The Company stated it had generated net income of only C$12.8 million compared to
C$105.5 million in the year-ago period, representing a nearly 90% decline. The
Company also posted an adjusted loss of C$39.7 million, nearly 50% larger than the
C$20.8 million expected by analysts. The results further showed a C$23.8 million, or
a 25%, sequential decline in sales, despite defendants’ claims of rapidly growing
consumer demand. Shockingly, Aurora’s consumer cannabis revenue fell by 33% and
its wholesale bulk revenue fell by 49% sequentially. In the release, Aurora admitted
that recreational cannabis orders from the provinces had “slowed considerably” in the
summer. To stem the Company’s dire capital needs, Aurora also announced that it
was indefinitely deferring the remaining construction and commission activities at
Aurora Sun and Aurora Nordic 2, despite reassuring investors about the purportedly
successful progress on the facilities only a few weeks previously.
36.
During Aurora’s earnings call to discuss the 1Q20 results, defendant
Booth belatedly acknowledged the market oversupply and stated that this drop-off was
anticipated heading into the quarter, despite defendants’ prior statement to the
contrary, stating that, “yes, we had a drop in cannabis sales, but it was anticipated.
The provinces were oversupplied.”
37.
Analysts were shocked and dismayed by the Company’s disclosures. For
example, in a November 15, 2019 report entitled “Q1: Investor Conviction Around No
More Dilution Likely to be Minimal,” Jeffries analyst Owen Bennett stated that “lack
of investor trust” was “likely to remain a headwind.” The Jeffries report stated:
With possible cash pressures evident, announcing ceased construction at
facilities despite a press release just 6 weeks ago praising progression,
and now EBITDA (and cash) positive looking unlikely this year, it
would be fair for investors not to believe them. Linked to trust are
possible surprises on write-downs.
It further suggested that Aurora would likely have to take goodwill impairments.
38.
Similarly, an article in Marketwatch.com dated November 18, 2019,
entitled “Aurora Cannabis stock suffers worst day in more than five years, analyst
says ‘it would be fair for investors not to believe them,’” provided the following
additional detail:
Analysts said that investors had a reason for anger and distrust
after the report, and should be thinking about whether it means that it is
time to run away from the cannabis industry altogether.
“If Aurora is less eager to deploy capital to this industry, we
believe investors should also be reluctant to place capital in the
industry,” MKM Partners analyst Bill Kirk, who has a sell rating and $3
price target on the stock, wrote in a note.
Jeffries analyst Owen Bennett noted that dilution from the
debenture conversion could swing investor sentiment even more, and
believes a writedown for a goodwill impairment from the MedReleaf
acquisition could be on the way. He also suggested that beyond negative
sentiment, investor trust could be a real issue after Aurora’s optimistic
statement before Thursday’s disappointment.
“With possible cash pressures evident, announcing ceased
construction at facilities despite a press release just 6 weeks ago praising
progression, and now EBITDA (and cash) positive looking unlikely this
year, it would be fair for investors not to believe them,” wrote the analyst
. . . .
39.
Following these revelations, the price of Aurora common stock declined.
On November 15, 2019, Aurora’s share price fell $0.56 per share, from $3.29 per
share on November 14, 2019 to $2.73 per share on November 15, 2019, or over 17%,
on unusually heaving trading volume.
40.
Then, on November 29, 2019, Marijuana Business Daily reported that
German pharmacies were recently asked to stop the sale of Aurora’s cannabis
products by German health authorities. The report stated that the Company’s products
were awaiting inspection by health authorities due to a proprietary step in Aurora’s
production process. The report also stated the production step in question was
connected to a method that Aurora uses to protect the shelf life of the flower, which
was later reported to relate to irradiation techniques. As later reports noted:
Even if the interruption is short, it could create undesirable
consequences for the company, as patients who already use Aurora’s
product will have to switch to another supplier.
If and when Aurora’s product sales commence again, patients
would need a new prescription, and doctors are known to be reluctant
about prescribing products with inconsistent availability, according to
Marijuana Business Daily.
41.
Following these revelations, the price of Aurora common stock again
declined. On November 29, 2019, Aurora’s share price fell $0.17 per share, from an
open of $2.61 per share on November 29, 2019 to a close of $2.44 per share on
December 2, 2019, or approximately 7%.
42.
On Friday, December 20, 2019, Aurora filed an insider transaction
disclosure revealing that defendant Dyck had sold 1,082,500 shares of Aurora at
C$3.095 per share, representing about 57% of his holdings.
43.
Shortly thereafter, on Saturday, December 21, 2019, after an internal
memo leaked, Aurora issued a press release announcing that defendant Battley, the
Company’s CCO, and would be stepping down. Media reports stated that Battley had
been forced out.
44.
On this news, the price of Aurora common stock fell once again.
Aurora’s share price fell from $2.25 per share on December 20, 2019 to $2.01 per
share on December 23, 2019, or more than 10%.
45.
Then, on January 6, 2020, media reports stated that the Company had
listed its nine-hectare greenhouse in Exeter, Ontario, for sale for $17 million. Aurora
had obtained the greenhouse as part of its $3.2 billion acquisition of MedReleaf Corp.
in 2018. Analysts immediately connected the move as implying that significant write-
downs could be on the horizon. For example, MKM Partners analyst Bill Kirk said in
a January 7, 2019 note to clients: “This listing, for 75% of former MedReleaf’s
capacity, signals major writedowns ahead.” Kirk further criticized Aurora’s
management for their lack of candor: “We are also discouraged with the visibility of
Aurora’s strategy – investors were unaware Aurora was trying to sell Exeter,” despite
a corporate update on December 23, 2019. Kirk said he expected the Company to
record C$2 billion worth of write-downs.
46.
Following these revelations, the price of Aurora common stock declined
again. On January 6, 2020, Aurora’s share price fell $0.19 per share, from an open of
$2.02 per share on January 6, 2020 to a close of $1.83 per share on January 7, 2020, or
nearly 10%.
47.
As a result of defendants’ wrongful acts and omissions, plaintiff and the
Class (defined below) purchased Aurora securities at artificially inflated prices,
suffered significant losses and were damaged thereby.
NO SAFE HARBOR
48.
Defendants’ “Safe Harbor” warnings accompanying Aurora’s reportedly
forward-looking statements (“FLS”) issued during the Class Period were ineffective to
shield those statements from liability. Because most of the false and misleading
statements related to existing facts or conditions, the Safe Harbor has no applicability.
To the extent that known trends should have been included in the Company’s financial
reports prepared in accordance with Generally Accepted Accounting Principles, they
are excluded from the protection of the statutory Safe Harbor. 15 U.S.C. §78u-
5(b)(2)(A).
49.
The defendants are also liable for any false or misleading FLS pleaded
because, at the time each FLS was made, the speaker knew the FLS was false or
misleading and the FLS was authorized and/or approved by an executive officer
and/or director of Aurora who knew that the FLS was false. In addition, the FLS were
contradicted by existing undisclosed material facts that were required to be disclosed
so that the FLS would not be misleading. Finally, most of the purported “Safe
Harbor” warnings were themselves misleading because they warned of “risks” that
had already materialized or failed to provide any meaningful disclosures of the
relevant risks.
ADDITIONAL SCIENTER ALLEGATIONS
50.
As alleged herein, defendants acted with scienter in that they knew that
the public documents and statements issued or disseminated in the name of the
Company were materially false and misleading; knew that such statements or
documents would be issued or disseminated to the investing public; and knowingly
and substantially participated or acquiesced in the issuance or dissemination of such
statements or documents and actions intended to manipulate the market price of
Aurora securities as primary violations of the federal securities laws. As set forth
elsewhere herein in detail, defendants, by virtue of their receipt of information
reflecting the true facts regarding Aurora, their control over, and/or receipt or
modification of Aurora’s allegedly materially misleading misstatements and/or their
associations with the Company which made them privy to confidential proprietary
information concerning Aurora, participated in the fraudulent scheme alleged herein.
51.
Defendants had reason to conceal this information from the investing
public. Aurora needed to keep the price of its stock inflated in order to continue with
its acquisition and expansion strategy, which included several acquisitions paid for
with inflated Aurora stock. In addition, Aurora wanted to keep its stock price inflated
in order to qualify for and be listed on the NYSE. Finally, Aurora filed a shelf
registration statement on Form F‐10 to make offerings of common shares, debt
securities, subscription receipts, units, warrants or any combination thereof of up to
US$750 million during the Class Period.
52.
The adverse developments at issue also impacted the Company’s most
important revenue streams and directly contradicted defendants’ public
representations regarding the state of Aurora’s business and the success of the
Company’s strategic initiatives. For example, Aurora revealed that it was halting
production on facilities only a few weeks after it had praised the production of such
facilities. The Individual Defendants have also held themselves out to investors as the
executives most knowledgeable about the adverse facts impacting Aurora’s business
alleged herein, and have belatedly admitted on conference calls that they knew about
slowing demand trends during the Class Period. As such, the Individual Defendants
knew or were reckless in not knowing of the undisclosed facts detailed herein.
LOSS CAUSATION
53.
During the Class Period, as detailed herein, defendants engaged in a
scheme to deceive the market and a course of conduct that artificially inflated the
prices of Aurora securities and operated as a fraud or deceit on purchasers of Aurora
securities. As detailed above, when the truth about Aurora’s misconduct was revealed
over time, the value of the Company’s securities declined precipitously as the prior
artificial inflation no longer propped up the securities’ prices. The declines in the
prices of Aurora securities were the direct result of the nature and extent of
defendants’ fraud finally being revealed to investors and the market. The timing and
magnitude of the price declines negate any inference that the losses suffered by
plaintiff and other members of the Class were caused by changed market conditions,
macroeconomic or industry factors, or Company specific facts unrelated to the
defendants’ fraudulent conduct. The economic loss, i.e., damages, suffered by
plaintiff and other Class members was a direct result of defendants’ fraudulent scheme
to artificially inflate the prices of the Company’s securities and the subsequent
significant decline in the value of the Company’s securities when defendants’ prior
misrepresentations and other fraudulent conduct were revealed.
54.
At all relevant times, defendants’ materially false and misleading
statements or omissions alleged herein directly or proximately caused the damages
suffered by plaintiff and other Class members. Those statements were materially false
and misleading through their failure to disclose a true and accurate picture of Aurora’s
business, operations, and financial condition, as alleged herein. Throughout the Class
Period, defendants issued materially false and misleading statements and omitted
material facts necessary to make defendants’ statements not false or misleading,
causing the prices of Aurora’s securities to be artificially inflated. Plaintiff and other
Class members purchased Aurora securities at those artificially inflated prices,
causing them to suffer damages as complained of herein.
APPLICABILITY OF PRESUMPTION OF RELIANCE:
FRAUD-ON-THE-MARKET DOCTRINE
55.
At all relevant times, the market for Aurora securities was an efficient
market for the following reasons, among others:
(a)
Aurora stock met the requirements for listing and was listed and
actively traded on the NYSE, a highly efficient and automated market;
(b)
according to the Company’s Form 40-F for the fiscal year ended
June 30, 2019, it had in excess of 1 billion common shares outstanding;
(c)
as a regulated issuer, Aurora filed periodic public reports with the
(d)
Aurora regularly communicated with public investors via
established market communication mechanisms, including the regular dissemination
of press releases on national circuits of major newswire services, the Internet, and
other wide-ranging public disclosures; and
(e)
unexpected material news about Aurora was rapidly reflected in
and incorporated into prices for the Company’s securities during the Class Period.
56.
As a result of the foregoing, the market for Aurora securities promptly
digested current information regarding Aurora from publicly available sources and
reflected such information in the prices of Aurora securities. Under these
circumstances, all purchasers of Aurora securities during the Class Period suffered
similar injury through their purchase of Aurora securities at artificially inflated prices,
and a presumption of reliance applies.
CLASS ACTION ALLEGATIONS
57.
This is a class action on behalf of all purchasers of Aurora securities
during the Class Period who were damaged thereby (the “Class”). Excluded from the
Class are defendants and their families, the officers and directors of the Company, at
all relevant times, members of their immediate families and their legal representatives,
heirs, successors or assigns, and any entity in which defendants have or had a
controlling interest.
58.
Common questions of law and fact predominate and include: (a) whether
defendants violated the Exchange Act; (b) whether defendants omitted and/or
misrepresented material facts; (c) whether defendants knew or recklessly disregarded
that their statements were false; (d) whether the prices of Aurora securities were
artificially inflated during the Class Period; and (e) the extent of and appropriate
measure of damages.
59.
The members of the Class are so numerous that joinder of all members is
impracticable. Throughout the Class Period, Aurora common shares were actively
traded on the NYSE. Upon information and belief, these shares are held by hundreds
or thousands of individuals located geographically throughout the country.
60.
Plaintiff’s claims are typical of those of the Class. Prosecution of
individual actions would create a risk of inconsistent adjudications. Plaintiff will
adequately protect the interests of the Class. A class action is superior to other
available methods for the fair and efficient adjudication of this controversy.
COUNT I
For Violation of §10(b) of the Exchange Act and Rule 10b-5
Against All Defendants
61.
Plaintiff incorporates ¶¶1-60 by reference.
62.
During the Class Period, defendants disseminated or approved the false
or misleading statements specified above, which they knew or recklessly disregarded
were misleading in that they contained misrepresentations and failed to disclose
material facts necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading.
63.
Defendants violated §10(b) of the Exchange Act and Rule 10b-5 in that
they, directly and indirectly, by the use of the means or instrumentality of interstate
commerce, or the mails or facility of a national securities exchange:
(a)
Employed devices, schemes, and artifices to defraud;
(b)
Made untrue statements of material fact or omitted to state material
facts necessary in order to make the statements made, in light of the circumstances
under which they were made, not misleading; or
(c)
Engaged in acts, practices, and a course of business that operated
as a fraud or deceit upon plaintiff and others similarly situated in connection with their
purchases of Aurora securities during the Class Period.
64.
Plaintiff and the Class have suffered damages in that, in reliance on the
integrity of the market, they paid artificially inflated prices for Aurora securities.
Plaintiff and the Class would not have purchased Aurora securities at the prices they
paid, or at all, had they been aware that the market prices had been artificially and
falsely inflated by defendants’ misleading statements.
65.
By virtue of the foregoing, defendants have violated §10(b) of the
Exchange Act and Rule 10b-5 promulgated thereunder.
66.
As a direct and proximate result of defendants’ wrongful conduct,
plaintiff and the other members of the Class suffered damages in connection with their
purchases of Aurora securities during the Class Period.
COUNT II
For Violation of §20(a) of the Exchange Act
Against the Individual Defendants
67.
Plaintiff incorporates ¶¶1-66 by reference.
68.
During the Class Period, the Individual Defendants acted as controlling
persons of Aurora within the meaning of §20(a) of the Exchange Act. By virtue of
their share ownership, executive and Board positions and stock ownership, and their
culpable participation, as alleged above, the Individual Defendants had the power to
influence and control and did, directly or indirectly, influence and control the decision
making of the Company, including the content and dissemination of the various
statements that plaintiff contends were false and misleading as detailed herein.
69.
The Individual Defendants were provided with or had unlimited access to
the Company’s internal reports, press releases, public filings, and other statements
alleged by plaintiff to be misleading prior to or shortly after these statements were
issued, and had the ability to prevent the issuance of the statements or cause them to
be corrected. In particular, the Individual Defendants had direct involvement in and
responsibility over the day-to-day operations of the Company and, therefore, are
presumed to have had the power to control or influence the particular transactions
giving rise to the securities violations as alleged herein.
70.
By reason of such wrongful conduct, the Individual Defendants are liable
pursuant to §20(a) of the Exchange Act.
71.
As a direct and proximate result of these defendants’ wrongful conduct,
plaintiff and the other members of the Class suffered damages in connection with their
purchases of the Company’s common stock during the Class Period.
PRAYER FOR RELIEF
WHEREFORE, plaintiff prays for judgment as follows:
A.
Determining that this action is a proper class action, designating plaintiff
as Lead Plaintiff and certifying plaintiff as a Class representative under Rule 23 of the
Federal Rules of Civil Procedure and plaintiff’s counsel as Lead Counsel;
B.
Awarding compensatory damages in favor of plaintiff and the other Class
members against all defendants, jointly and severally, for all damages sustained as a
result of defendants’ wrongdoing, in an amount to be proven at trial, including interest
thereon;
C.
Awarding plaintiff and the Class their reasonable costs and expenses
incurred in this action, including counsel fees and expert fees; and
D.
Awarding such other and further relief as the Court may deem just and
proper.
JURY DEMAND
Plaintiff demands a trial by jury.
DATED: January 16, 2020
CARELLA, BYRNE, CECCHI, OLSTEIN,
BRODY & AGNELLO, P.C.
/s/ James E. Cecchi
JAMES E. CECCHI
5 Becker Farm Road
Roseland, NJ 07068
Telephone: 973/994-1700
973/994-1744 (fax)
[email protected]
ROBBINS GELLER RUDMAN
& DOWD LLP
SAMUEL H. RUDMAN
58 South Service Road, Suite 200
Melville, NY 11747
Telephone: 631/367-7100
631/367-1173 (fax)
[email protected]
ROBBINS GELLER RUDMAN
& DOWD LLP
BRIAN E. COCHRAN
200 South Wacker Drive, 31st Floor
Chicago, IL 60606
Telephone: 312/674-4674
312/674-4676 (fax)
[email protected]
ADEMI & O’REILLY, LLP
GURI ADEMI
3620 East Layton Avenue
Cudahy, WI 53110
Telephone: 414/482-8000
414/482-8001 (fax)
Attorneys for Plaintiff
| securities |
A-EAEYcBD5gMZwczAYtA | Jennifer Pafiti (SBN 282790)
POMERANTZ LLP
468 North Camden Drive
Beverly Hills, CA 90210
Telephone:
(818) 532-6449
Email:
[email protected]
Jeremy A. Lieberman
J. Alexander Hood II
Marc Gorrie
POMERANTZ LLP
600 Third Avenue, 20th Floor
New York, New York 10016
Telephone: (212) 661-1100
Facsimile:
(212) 661-8665
Email:
[email protected]
[email protected]
[email protected]
(additional counsel on signature page)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
BRIAN H. ROBB, Individually and on Behalf
of All Others Similarly Situated,
Plaintiff,
vs.
FITBIT INC., JAMES PARK, and WILLIAM
R. ZERELLA,
Case No.
CLASS ACTION
COMPLAINT FOR VIOLATION OF
THE FEDERAL SECURITIES LAWS
DEMAND FOR JURY TRIAL
Defendants
INTRODUCTION
1.
Plaintiff, individually and on behalf of all the other persons similarly situated, by
plaintiff's undersigned attorneys, alleges the following based upon personal knowledge as to plaintiff
and plaintiff's own acts, and upon information and belief as to all other matters based on the
investigation conducted by and through plaintiff's attorneys, which included, among other things, a
review of Securities and Exchange Commission (“SEC”) filings by Fitbit Inc. (“Fitbit” or the
“Company”), as well as conference call transcripts and media and analyst reports about the Company.
Plaintiff believes that substantial evidentiary support will exist for the allegations set forth herein after a
reasonable opportunity for discovery.
SUMMARY OF THE ACTION
2.
This is a federal securities class action on behalf of a class consisting of all persons other
than defendants who purchased or otherwise acquired Fitbit securities: (1) pursuant and/or traceable to
FitBit’s false and misleading Registration Statement and Prospectus issued in connection with the
Company’s initial public offering on or about June 18, 2015 (the “IPO” or the “Offering”); and/or (2)
on the open market between June 18, 2015 and January 6, 2016, both dates inclusive, seeking to recover
compensable damages caused by defendants’ violations of the Securities Act of 1933 (the “Securities
Act”) and the Securities Exchange Act of 1934 (the “Exchange Act”) (the “Class”).
BACKGROUND
3.
Fitbit manufactures and provides wearable fitness-tracking devices worldwide. The
Company’s main products are wrist bands and clippable devices that purport to monitor a user’s fitness
activity by tracking his/her health and fitness activities. Among the Company’s products are Fitbit
Charge HR (“Charge HR”), a wireless heart rate and activity wristband, and Fitbit Surge (“Surge”), a
fitness watch that consists of a GPS watch, heart rate tracker, activity tracker, and smartwatch. Fitbit
Inc. sells its products primarily through retailers and distributors.
2
name to Fitbit, Inc. in October 2007. The Company was founded in 2007 and is headquartered in San
Francisco, California. Fitbit’s stock trades on the NYSE under the ticker symbol “FIT.”
5.
On or about June 18, 2015, Fitbit completed its IPO, issuing 36,575,000 shares and
raising net proceeds of approximately $732 million.
6.
Defendants made materially false and misleading statements regarding the Company’s
business, operational and compliance policies. Specifically, defendants made false and/or misleading
statements and/or failed to disclose that: (i) Fitbit’s heart rate monitoring technology was inaccurate and
did not consistently deliver accurate heart rate readings during exercise; (ii) the inaccuracy of Fitbit’s
heart rate monitoring technology posed serious health risks to users of Fitbit’s products; and (iii) as a
result of the foregoing, Fitbit’s public statements were materially false and misleading at all relevant
7.
On January 6, 2016, a class action lawsuit was reported as filed against Fitbit in the U.S.
District Court for the Northern District of California, alleging that the heart rate monitoring systems on
the Company's Charge HR and Surge devices were dangerously inaccurate and posed serious health
risks to users (McLellan et al. v. Fitbit, Inc., 3:16-cv-00036 (N.D. Cal. Jan. 5, 2016) (the “Fitbit
Consumer Class Action”). The claims against Fitbit include violations of California's Unfair
Competition Law and Consumers Legal Remedies Act, common law fraud, and unjust enrichment.
8.
On this news, Fitbit’s stock fell $1.40, or 5.8%, to close at $22.90 on January 6, 2016.
9.
As a result of Defendants’ false and/or misleading statements, Fitbit securities traded at
inflated prices. However, after disclosure of Defendants’ false and/or misleading statements, Fitbit’s
stock suffered a precipitous decline in market value, thereby causing significant losses and damages to
Plaintiff and other Class members.
3
JURISDICTION AND VENUE
10.
The claims asserted herein arise under and pursuant to Sections 11 and 15 of the
Securities Act (15 U.S.C. §§ 77k and 77o), and Sections 10(b) and 20(a) of the Exchange Act (15
U.S.C. §§ 78j(b) and 78t(a)) and Rule 10b-5 promulgated thereunder by the SEC (17 C.F.R. § 240.10b-
11.
This Court has jurisdiction over the subject matter of this action pursuant to 28 U.S.C. §
1331, Section 22 of the Securities Act (15 U.S.C. § 77v), and Section 27 of the Exchange Act (15
U.S.C. §78aa).
12.
Venue is proper in this Judicial District pursuant to Section 27 of the Exchange Act (15
U.S.C. § 78aa) and 28 U.S.C. § 1391(b) as the alleged Defendant Fitbit maintains its principal
executive offices in this District.
13.
In connection with the acts, conduct and other wrongs alleged herein, Defendants either
directly or indirectly used the means and instrumentalities of interstate commerce, including but not
limited to the United States mails, interstate telephone communications and the facilities of the national
securities exchange.
PARTIES
14.
Plaintiff purchased or otherwise acquired Fitbit common stock as described in the
attached certification and was damaged by the revelation of the alleged corrective disclosure.
15.
Defendant Fitbit is incorporated in Delaware, and its stock trades on the NYSE under the
ticker symbol “FIT.” The Company's corporate headquarters are located at 405 Howard Street, Suite
550, San Francisco, California 94105.
16.
Defendant James Park (“Park”) has served at all relevant times as Chief Executive
Officer, Chairman, and President of Fitbit.
4
Financial Officer of Fitbit.
18.
The defendants named in ¶¶ 16-17 are sometimes referred to herein as the “Individual
Defendants.”
SUBSTANTIVE ALLEGATIONS
Background
19.
Fitbit manufactures and provides wearable fitness-tracking devices worldwide. The
Company’s main products are wrist bands and clippable devices that purport to monitor a user’s fitness
activity by tracking his/her health and fitness activities. Among the Company’s products are Charge
HR, a wireless heart rate and activity wristband, and Surge, a fitness watch that consists of a GPS
watch, heart rate tracker, activity tracker, and smartwatch. Fitbit Inc. sells its products primarily through
retailers and distributors.
20.
The Company was formerly known as Healthy Metrics Research, Inc. and changed its
name to Fitbit, Inc. in October 2007. The Company was founded in 2007 and is headquartered in San
Francisco, California. Fitbit’s stock trades on the NYSE under the ticker symbol “FIT.”
21.
On May 7, 2015, Fitbit filed a registration statement on Form S-1 with the SEC in
connection with the IPO. The registration statement was subsequently amended several times, with the
final amended registration statement filed on Form S-1/A with the SEC on June 16, 2015 (collectively,
the “Registration Statement”).
22.
The Registration Statement contained a preliminary prospectus. The final prospectus
(the “Prospectus”) was filed with the SEC on June 18, 2015.
23.
On June 17, 2015, the SEC declared the Registration Statement effective.
24.
On or about June 18, 2015, the Company completed its IPO, issuing 36,575,000 shares
and raising net proceeds of approximately $732 million.
5
25.
On June 18, 2015, Fitbit filed its Prospectus with the SEC, which forms part of the
Registration Statement. In the Prospectus, the Company stated, in relevant part:
Our Competitive Strengths—What Sets Us Apart
We believe the following strengths will allow us to maintain and extend our leadership
position:
Leading market position and global brand. Our singular focus on building a
connected health and fitness platform, coupled with our leading market share, has
led to our brand becoming synonymous with the connected health and fitness
category. According to The NPD Group, we had the highest selling connected
activity trackers in the United States in the first quarter of 2015, with an 85%
share of the U.S. connected activity tracker market, by dollars, up from 70% for
the year 2014 and 59% for the year 2013. In addition, according to The NPD
Group, Fitbit Surge, which we began selling in December 2014, was the highest
selling GPS fitness watch in the United States in the first quarter of 2015, with a
61% share of the U.S. GPS fitness watch market, by dollars, up from 3% in
2014.*
. . .
Advanced, purpose-built hardware and software technologies. Our connected
health and fitness devices leverage industry-standard technologies, such as
Bluetooth low energy, as well as proprietary technologies, such as our PurePulse
continuous heart rate tracking, and our algorithms that more accurately measure
and analyze user health and fitness metrics. Our online and mobile apps provide
in-depth analysis and guidance and our highly-scalable cloud infrastructure
enables millions of users around the world to engage with our platform in real-
time.
. . .
Our Devices
We believe everyone’s approach to fitness is different, so we have created products with
a wide variety of styles, sizes, features, and price points.
. . .
Fitbit Charge HR is a wireless heart rate and activity wristband that has all the
features available on the Fitbit Charge and also includes our proprietary PurePulse
heart rate tracking technology. Fitbit Charge HR has a U.S. MSRP of $149.95.
6
Fitbit Surge is our fitness “super watch” that combines popular features of a GPS
watch, heart rate tracker, activity tracker, and smartwatch. Fitbit Surge has a U.S.
MSRP of $249.95.
. . .
Our Users
Active users exercise regularly to reach their fitness goals through activities such as
running, using cardio equipment, and playing sports recreationally. As a result, these
users are often interested in monitoring exercise intensity through heart rate tracking in
addition to activity tracking. We primarily market the Fitbit Charge HR to Active users.
Performance users train regularly to improve their performance and achieve their
personal bests. These users participate in endurance sports and fitness activities with
higher intensity and longer duration, such as interval or distance running and cycling, and
thrive on personal improvement and competition. Accordingly, these users are interested
in GPS tracking of speed, distance, and exercise routes, in addition to heart rate and daily
activity tracking. We primarily market the Fitbit Surge to Performance users.
26.
The Registration Statement was signed by the Individual Defendants.
27.
On August 5, 2015, Fitbit issued a press release and filed a Form 8-K with the SEC
announcing the Company’s financial and operating results for the quarter ended June 30, 2015 (the “Q2
2015 8-K”). For the quarter, the Company reported net income of $17.68 million, or $0.07 per diluted
share, on revenue of $400.41 million, compared to net income of $14.75 million on revenue of $113.57
million for the same period in the prior year.
28.
On August 7, 2015, Fitbit filed a quarterly report on Form 10-Q with the SEC reiterating
the financial and operating results previously announced in the Q2 2015 8-K (the “Q2 2015 10-Q”).
29.
The Q2 2015 10-Q contained signed certifications pursuant to the Sarbanes-Oxley Act of
2002 (“SOX”) by the Individual Defendants, stating that the financial information contained in the Q2
2015 10-Q was accurate and disclosed any material changes to the Company’s internal control over
financial reporting.
30.
On November 2, 2015, Fitbit issued a press release and filed a Form 8-K with the SEC
announcing the Company’s financial and operating results for the quarter ended September 30, 2015
7
diluted share, on revenue of $409.26 million, compared to net income of $68.91 million on revenue of
$152.86 million for the same period in the prior year.
31.
In the Q3 2015 8-K, under the heading “Third Quarter 2015 Financial Highlights,” Fitbit
announced that “Charge, Charge HR and Surge comprised 79% of revenue.”
32.
On November 2, 2015, Fitbit also filed a quarterly report on Form 10-Q with the SEC
reiterating the financial and operating results previously announced in the Q3 2015 8-K (the “Q3 2015
10-Q”).
33.
The Q3 2015 10-Q contained signed certifications pursuant to the Sarbanes-Oxley Act of
2002 (“SOX”) by the Individual Defendants, stating that the financial information contained in the Q3
2015 10-Q was accurate and disclosed any material changes to the Company’s internal control over
financial reporting.
34.
On November 2, 2015, Fitbit filed a registration statement and prospectus on Form S-1
with the SEC in connection with a secondary offering of the Company’s securities (the “Secondary
Offering S-1”). In the Secondary Offering 424B4, Fitbit stated, in relevant part:
Our Competitive Strengths—What Sets Us Apart
. . .
Advanced, purpose-built hardware and software technologies. Our connected
health and fitness devices leverage industry-standard technologies, such as
Bluetooth low energy, as well as proprietary technologies, such as our PurePulse
continuous heart rate tracking, and our algorithms that more accurately measure
and analyze user health and fitness metrics. Our online and mobile apps
provide in-depth analysis
and
guidance
and
our
highly-scalable
cloud
infrastructure enables millions of users around the world to engage with our
platform in real-time.
. . .
Our Devices
We believe everyone’s approach to fitness is different, so we have created products with
a wide variety of syles, sizes, features, and price points.
8
Fitbit Charge HR is a wireless heart rate and activity wristband that has all the
features available on the Fitbit Charge and also includes our proprietary PurePulse
heart rate tracking technology. Fitbit Charge HR has a U.S. MSRP of $149.95.
Fitbit Surge is our fitness “super watch” that combines popular features of a GPS
watch, heart rate tracker, activity tracker, and smartwatch. Fitbit Surge has a U.S.
MSRP of $249.95.
. . .
Our Users
. . .
Active users exercise regularly to reach their fitness goals through activities such as
running, using cardio equipment, and playing sports recreationally. As a result, these
users are often interested in monitoring exercise intensity through heart rate tracking in
addition to activity tracking. We primarily market the Fitbit Charge HR to Active users.
Performance users train regularly to improve their performance and achieve their
personal bests. These users participate in endurance sports and fitness activities with
higher intensity and longer duration, such as interval or distance running and cycling, and
thrive on personal improvement and competition. Accordingly, these users are interested
in GPS tracking of speed, distance, and exercise routes, in addition to heart rate and daily
activity tracking. We primarily market the Fitbit Surge to Performance users.
35.
On November 3, 2015, defendant Park was interviewed for a Bloomberg Radio segment
entitled “The Bloomberg Advantage,” a transcript of which Fitbit subsequently filed with the SEC on
Form FWP on November 6, 2015 (the “Bloomberg Interview Transcript”). In the Bloomberg Interview
Transcript, defendant Park stated, in part:
Sometimes we just have to wait for technology to really reach maturity, so for instance,
our Pure Pulse optical heart rate technology, which is in our Charge HR and Surge
devices took over three years to develop, and so, you know, that’s resulted in two
products which are incredible leaders in the categories. So Fitbit Charge HR is a number
one wearable activity tracking device in the market today and Fitbit Surge is the number
one GPS fitness watch, so I think that’s a great example of how our technology
development has resulted in really break-through products.
36.
On November 9, 2015, Fitbit filed an amended registration statement and prospectus on
Form S-1/A with the SEC in connection with a secondary offering of the Company’s securities (the
9
contained in the Company’s Secondary Offering S-1 described above at ¶ 34.
37.
On November 13, 2015, Fitbit filed a prospectus on Form 424B4 with the SEC in
connection with a secondary offering of the Company’s securities (the “Secondary Offering 424B4”).
In the Secondary Offering 424B4, the Company reiterated the statements contained in the Company’s
Secondary Offering S-1 described above at ¶¶ 34 and 36.
38.
The statements referenced in ¶¶ 25-37 were materially false and misleading because
defendants made false and/or misleading statements, as well as failed to disclose material adverse facts
about the Company’s business, operational and compliance policies. Specifically, defendants made
false and/or misleading statements and/or failed to disclose that: (i) Fitbit’s heart rate monitoring
technology was inaccurate and did not consistently deliver accurate heart rate readings during exercise;
(ii) the inaccuracy of Fitbit’s heart rate monitoring technology posed serious health risks to users of
Fitbit’s products; and (iii) as a result of the foregoing, Fitbit’s public statements were materially false
and misleading at all relevant times.
The Truth Emerges
39.
On January 6, 2016, a class action lawsuit was reported as filed against Fitbit in the U.S.
District Court for the Northern District of California, alleging that the heart rate monitoring systems on
the Company's Charge HR and Surge devices were dangerously inaccurate and posed serious health
risks to users (McLellan et al. v. Fitbit, Inc., 3:16-cv-00036 (N.D. Cal. Jan. 5, 2016)). The claims
against Fitbit include violations of California's Unfair Competition Law and Consumers Legal
Remedies Act, common law fraud, and unjust enrichment.
40.
Specifically, the complaint in the Fitbit Consumer Class Action alleged that by
understating a user’s heart rate, the inaccurate heart rate monitoring systems in Fitbit’s Charge HR and
Surge devices created a risk of life-threatening overexertion. For example:
10
At an intense personal training session in mid-June 2015, Plaintiff[‘s] personal trainer
manually recorded her heart rate, which was 160 beats per minute (“bpm”). In stark
contrast, her Charge HR indicated her heart rate was only 82 bpm. Plaintiff Black was
approaching the maximum recommended heart rate for her age, and if she had continued
to rely on her inaccurate PurePulse Tracker, she may well have exceeded it, thereby
jeopardizing her health and safety.
41.
On this news, Fitbit’s stock fell $1.40, or 5.8%, to close at $22.90 on January 6, 2016.
42.
As a result of Defendants’ false and/or misleading statements, Fitbit securities traded at
inflated prices. However, after disclosure of Defendants’ false and/or misleading statements, Fitbit’s
stock suffered a precipitous decline in market value, thereby causing significant losses and damages to
Plaintiff and other Class members.
CLASS ACTION ALLEGATIONS
43.
Plaintiff brings this action as a class action pursuant to Rule 23 of the Federal Rules of
Civil Procedure on behalf of the Class (as defined supra at ¶ 2). Excluded from the Class are
defendants and their family members, directors and officers of Fitbit and their families and affiliates.
44.
The members of the Class are so numerous that joinder of all members is impracticable.
The disposition of their claims in a class action will provide substantial benefits to the parties and the
Court. Fitbit has more than 100 million shares of stock outstanding, owned by hundreds or thousands of
persons.
45.
There is a well-defined community of interest in the questions of law and fact involved
in this case. Questions of law and fact common to the members of the Class that predominate over
questions that may affect individual Class members include:
(a)
Whether the Securities Act was violated by defendants;
(b)
Whether the Exchange Act was violated by defendants;
(c)
Whether defendants omitted and/or misrepresented material facts;
11
the statements made, in light of the circumstances under which they were made, not misleading;
(e)
Whether defendants knew or recklessly disregarded that their statements were
false and misleading;
(f)
Whether the price of Fitbit common stock was artificially inflated; and
(g)
The extent of damage sustained by Class members and the appropriate measure
of damages.
46.
Plaintiff's claims are typical of those of the Class because plaintiff and the Class
sustained damages from defendants' wrongful conduct.
47.
Plaintiff will adequately protect the interests of the Class and has retained counsel who
are experienced in class action securities litigation. Plaintiff has no interests which conflict with those
of the Class.
48.
A class action is superior to other available methods for the fair and efficient
adjudication of this controversy.
NO SAFE HARBOR
49.
Fitbit’s verbal “Safe Harbor” warnings accompanying its oral forward-looking
statements (“FLS”) were ineffective to shield those statements from liability.
50.
The defendants are also liable for any false or misleading FLS pleaded because, at the
time each FLS was made, the speaker knew the FLS was false or misleading and the FLS was
authorized and/or approved by an executive officer of Fitbit who knew that the FLS was false. None of
the historic or present tense statements made by defendants were assumptions underlying or relating to
any plan, projection or statement of future economic performance, as they were not stated to be such
assumptions underlying or relating to any projection or statement of future economic performance when
12
be dependent on those historic or present tense statements when made.
APPLICABILITY OF PRESUMPTION OF RELIANCE:
FRAUD ON THE MARKET
51.
Plaintiff will rely upon the presumption of reliance established by the fraud-on-the-
market doctrine in that, among other things:
(a)
Defendants made public misrepresentations or failed to disclose material facts;
(b)
The omissions and misrepresentations were material;
(c)
The Company's stock traded in an efficient market;
(d)
The misrepresentations alleged would tend to induce a reasonable investor to
misjudge the value of the Company's stock; and
(e)
Plaintiff and other members of the Class purchased Fitbit common stock between
the time defendants misrepresented or failed to disclose material facts and the time the true facts were
disclosed, without knowledge of the misrepresented or omitted facts.
52.
At all relevant times, the market for Fitbit’s common stock was efficient for the
following reasons, among others:
(a) As a regulated issuer, Fitbit filed periodic public reports with the SEC; and
(b) Fitbit regularly communicated with public investors via established market
communication mechanisms, including through regular dissemination of press releases on the major
news wire services and through other wide-ranging public disclosures, such as communications with
the financial press, securities analysts and other similar reporting services
53.
As a result of the foregoing, the market for Fitbit’s securities promptly digested current
information regarding Fitbit from all publicly available sources and reflected such information in
Fitbit’s stock price. Under these circumstances, all purchasers of Fitbit’s securities at relevant times
13
presumption of reliance applies.
COUNT I
Violation of Section 10(b) of The Exchange Act
and Rule 10b-5 Promulgated Thereunder Against All Defendants
54.
Plaintiff repeats and realleges each and every allegation contained above as if fully set
forth herein.
55.
Defendants carried out a plan, scheme and course of conduct which was intended to and
did: (1) deceive the investing public, including Plaintiff and other Class members, as alleged herein;
and (2) cause Plaintiff and other members of the Class to purchase Fitbit’s securities at artificially
inflated prices. In furtherance of this unlawful scheme, plan and course of conduct, each of the
Defendants took the actions set forth herein.
56.
Defendants: (a) employed devices, schemes, and artifices to defraud; (b) made untrue
statements of material fact and/or omitted to state material facts necessary to make the statements not
misleading; and (c) engaged in acts, practices, and a course of business that operated as a fraud and
deceit upon the purchasers of the Company’s securities in an effort to maintain artificially high market
prices for Fitbit securities in violation of Section 10(b) of the Exchange Act and Rule 10b-5
promulgated thereunder. All Defendants are sued either as primary participants in the wrongful and
illegal conduct charged herein or as controlling persons as alleged below.
57.
Defendants, individually and in concert, directly and indirectly, by the use, means or
instrumentalities of interstate commerce and/or of the mails, engaged and participated in a continuous
course of conduct to conceal adverse material information about the business and future prospects of
Fitbit as specified herein.
14
possession of material adverse non-public information, and engaged in acts, practices, and a course of
conduct as alleged herein in an effort to assure investors of Fitbit’s value and performance and
continued substantial growth, which included the making of, or participation in the making of, untrue
statements of material facts and omitting to state material facts necessary in order to make the
statements made about Fitbit and its business operations and future prospects in the light of the
circumstances under which they were made, not misleading, as set forth more particularly herein, and
engaged in transactions, practices and a course of business that operated as a fraud and deceit upon the
purchasers of Fitbit securities.
59.
Each of the Individual Defendants’ primary liability, and controlling person liability,
arises from the following facts: (1) the Individual Defendants were high-level executives, directors,
and/or agents at the Company at all relevant times and members of the Company’s management team
or had control thereof; (2) each of these Defendants, by virtue of his responsibilities and activities as a
senior officer and/or director of the Company, was privy to and participated in the creation,
development and reporting of the Company’s business prospects and operations; (3) each of these
Defendants enjoyed significant personal contact and familiarity with the other Defendants and was
advised of and had access to other members of the Company’s management team, internal reports and
other data and information about the Company’s operations and business projects at all relevant times;
and (4) each of these Defendants was aware of the Company’s dissemination of information to the
investing public which they knew or recklessly disregarded was materially false and misleading.
60.
Defendants had actual knowledge of the misrepresentations and omissions of material
facts set forth herein, or acted with reckless disregard for the truth in that they failed to ascertain and to
disclose such facts, even though such facts were available to them. Such Defendants’ material
misrepresentations and/or omissions were done knowingly or recklessly and for the purpose and effect
15
securities. As demonstrated by Defendants’ omissions and misstatements of the Company’s business
strategy, Defendants, if they did not have actual knowledge of the misrepresentations and omissions
alleged, were reckless in failing to obtain such knowledge by deliberately refraining from taking those
steps necessary to discover whether those statements were false or misleading.
61.
As a result of the dissemination of the materially false and misleading information and
failure to disclose material facts, as set forth above, the market price of Fitbit securities was artificially
inflated. In ignorance of the fact that market prices of Fitbit’s securities were artificially inflated, and
relying directly or indirectly on the false and misleading statements made by Defendants, or upon the
integrity of the market in which the securities trade, and/or on the absence of material adverse
information that was known to or recklessly disregarded by Defendants but not disclosed in public
statements by Defendants, Plaintiff and the other members of the Class acquired Fitbit securities at
artificially high prices and were or will be damaged thereby.
62.
At the time of said misrepresentations and omissions, Plaintiff and other members of the
Class were ignorant of their falsity, and believed them to be true. Had Plaintiff and the other members
of the Class and the marketplace known the truth regarding the Company’s flawed manufacturing
processes, which was not disclosed by Defendants, Plaintiff and other members of the Class would not
have purchased or otherwise acquired their Fitbit securities, or, if they had acquired such securities,
they would not have done so at the artificially inflated prices that they paid.
63.
By virtue of the foregoing, Defendants have violated Section 10(b) of the Exchange Act,
and Rule 10b-5 promulgated thereunder.
64.
As a direct and proximate result of Defendants’ wrongful conduct, Plaintiff and the other
members of the Class suffered damages in connection with their respective purchases and sales of the
Company’s securities.
16
each plaintiff’s purchases of securities giving rise to the cause of action.
COUNT II
Violation of Section 20(a) of the Exchange Act Against the Individual Defendants
66.
Plaintiff repeats and realleges each and every allegation contained above as if fully set
forth herein.
67.
The Individual Defendants acted as controlling persons of Fitbit within the meaning of
Section 20(a) of the Exchange Act as alleged herein. By virtue of their high-level positions, agency,
ownership and contractual rights, and participation in and/or awareness of the Company’s operations
and/or intimate knowledge of the false financial statements filed by the Company with the SEC and
disseminated to the investing public, the Individual Defendants had the power to influence and control,
and did influence and control, directly or indirectly, the decision-making of the Company, including the
content and dissemination of the various statements that Plaintiff contends are false and misleading.
The Individual Defendants were provided with or had unlimited access to copies of the Company’s
reports, press releases, public filings and other statements alleged by Plaintiff to have been misleading
prior to and/or shortly after these statements were issued and had the ability to prevent the issuance of
the statements or to cause the statements to be corrected.
68.
In particular, each of these Defendants had direct and supervisory involvement in the
day-to-day operations of the Company and, therefore, is presumed to have had the power to control or
influence the particular transactions giving rise to the securities violations as alleged herein, and
exercised the same.
69.
As set forth above, Fitbit and the Individual Defendants each violated Section 10(b), and
Rule 10b-5 promulgated thereunder, by their acts and omissions as alleged in this Complaint.
17
pursuant to Section 20(a) of the Exchange Act. As a direct and proximate result of Defendants’
wrongful conduct, Plaintiff and other members of the Class suffered damages in connection with their
purchases of the Company’s securities.
71.
This action was filed within two years of discovery of the fraud and within five years of
each Plaintiff’s purchases of securities giving rise to the cause of action.
COUNT III
Violation of Section 11 of
The Securities Act Against All Defendants
72.
Plaintiff repeats and incorporates each and every allegation contained above as if fully
set forth herein, except any allegation of fraud, recklessness or intentional misconduct.
73.
This Count is brought pursuant to Section 11 of the Securities Act, 15 U.S.C. §77k, on
behalf of the Class, against the Individual Defendants.
74.
The Registration Statement for the IPO was inaccurate and misleading, contained untrue
statements of material facts, omitted to state other facts necessary to make the statements made not
misleading, and omitted to state material facts required to be stated therein.
75.
Fitbit is the registrant for the IPO. Individual Defendants named herein were responsible
for the contents and dissemination of the Registration Statement.
76.
As issuer of the shares, Fitbit is strictly liable to Plaintiff and the Class for the
misstatements and omissions.
77.
None of the Individual Defendants named herein made a reasonable investigation or
possessed reasonable grounds for the belief that the statements contained in the Registration Statement
were true and without omissions of any material facts and were not misleading.
78.
By reasons of the conduct herein alleged, each Individual Defendant violated, and/or
controlled a person who violated Section 11 of the Securities Act.
18
for the IPO.
80.
Plaintiff and the Class have sustained damages. The value of Fitbit securities has
declined substantially subsequent to and due to the Individual Defendants’ violations.
COUNT IV
Violation of Section 15 of
The Securities Act Against the Individual Defendants
81.
Plaintiff repeats and incorporates each and every allegation contained above as if fully
set forth herein, except any allegation of fraud, recklessness or intentional misconduct.
82.
This count is asserted against the Individual Defendants and is based upon Section 15 of
the Securities Act.
83.
Individual Defendants, by virtue of their offices, directorship, and specific acts were, at
the time of the wrongs alleged herein and as set forth herein, controlling persons of Fitbit within the
meaning of Section 15 of the Securities Act. Individual Defendants had the power and influence and
exercised the same to cause Fitbit to engage in the acts described herein.
84.
Individual Defendants’ positions made them privy to and provided them with actual
knowledge of the material facts concealed from Plaintiff and the Class.
85.
By virtue of the conduct alleged herein, the Individual Defendants are liable for the
aforesaid wrongful conduct and are liable to Plaintiff and the Class for damages suffered.
WHEREFORE, Plaintiff prays for relief and judgment, as follows:
A.
Determining that this action is a proper class action, designating Plaintiff as Lead
Plaintiff and certifying Plaintiff as a class representative under Rule 23 of the Federal Rules of Civil
Procedure and Plaintiff’s counsel as Lead Counsel;
19
against all Defendants, jointly and severally, for all damages sustained as a result of Defendants’
wrongdoing, in an amount to be proven at trial, including interest thereon;
C.
Awarding Plaintiff and the Class their reasonable costs and expenses incurred in this
action, including counsel fees and expert fees; and
D.
Such other and further relief as the Court may deem just and proper.
JURY DEMAND
Plaintiff hereby demands a trial by jury.
DATED: January 11, 2016
Respectfully submitted,
/s/Jennifer Pafiti____________
Jennifer Pafiti (SBN 282790)
POMERANTZ LLP
468 North Camden Drive
Beverly Hills, CA 90210
Telephone: (818) 532-6449
Email:
[email protected]
Jeremy A. Lieberman
J. Alexander Hood II
Marc Gorrie
POMERANTZ LLP
600 Third Avenue, 20th Floor
New York, New York 10016
Telephone: (212) 661-1100
Facsimile: (212) 661-8665
Email: [email protected]
[email protected]
[email protected]
Patrick V. Dahlstrom
POMERANTZ LLP
10 South La Salle Street, Suite 3505
Chicago, Illinois 60603
20
Telephone: (312) 377-1181
Facsimile: (312) 377-1184
Email: [email protected]
Attorneys for Plaintiff
21
CERTIFICATION PURSUANT
TO FEDERAL SECURITIES LAWS
Brian H. Robb, MSc
1. I, ___________________________________________________________, make this
declaration pursuant to Section 27(a)(2) of the Securities Act of 1933 (“Securities Act”) and/or Section
21D(a)(2) of the Securities Exchange Act of 1934 (“Exchange Act”) as amended by the Private Securities
Litigation Reform Act of 1995.
2. I have reviewed a Complaint against FitBit Inc. (“FitBit” or the “Company”), and authorize the
filing of a comparable complaint on my behalf.
3. I did not purchase or acquire FitBit securities at the direction of plaintiffs counsel or in order to
participate in any private action arising under the Securities Act or Exchange Act.
4. I am willing to serve as a representative party on behalf of a Class of investors who purchased or
acquired FitBit securities during the class period, including providing testimony at deposition and trial, if
necessary. I understand that the Court has the authority to select the most adequate lead plaintiff in this action.
5. To the best of my current knowledge, the attached sheet lists all of my transactions in FitBit
securities during the Class Period as specified in the Complaint.
6. During the three-year period preceding the date on which this Certification is signed, I have not
sought to serve as a representative party on behalf of a class under the federal securities laws, except: Brian H.
Robb v. Education Management Corporation, et al., 2:14-cv-1287 (DSC).
7. I agree not to accept any payment for serving as a representative party on behalf of the class as set
forth in the Complaint, beyond my pro rata share of any recovery, except such reasonable costs and expenses
directly relating to the representation of the class as ordered or approved by the Court.
01-07-2016
Brian H. Robb, MSc
8. I declare under penalty of perjury that the foregoing is true and correct.
Executed _____________________________
(Date)
_______________________________________
(Signature)
_______________________________________
(Type or Print Name)
{
FITBIT INC. (FIT)
Robb, Brian H.
LIST OF PURCHASES AND SALES
PURCHASE
NUMBER OF
PRICE PER
DATE
OR SALE
SHS/UTS
SH/UT
11/30/2015
Purchase
1,490
$28.6200
12/03/2015
Purchase
1,460
$30.0796
12/04/2015
Purchase
1,417
$31.7695
12/04/2015
Purchase
1,407
$31.3499
12/04/2015
Purchase
1,389
$32.0000
12/07/2015
Purchase
1,293
$34.3300
12/08/2015
Purchase
32
$33.1100
12/16/2015
Purchase
100
$29.9642
12/28/2015
Purchase
9
$29.9220
12/28/2015
Purchase
3
$30.0699
12/02/2015
Sale
1,490
$29.5501
12/04/2015
Sale
1,460
$30.7000
12/04/2015
Sale
1,281
$31.1020
12/04/2015
Sale
36
$31.1001
12/04/2015
Sale
1,407
$31.7000
12/04/2015
Sale
1,389
$32.2000
12/04/2015
Sale
100
$31.4300
| securities |
oQ-nFocBD5gMZwczYgbN |
SHAMIS & GENTILE, P.A.
Mariam Grigorian, Esq. (pro hac vice forthcoming)
14 NE 1st Avenue, Suite 705
Miami, Florida 33132
Telephone: 305-479-2299
[email protected]
Counsel for Plaintiff and the Proposed Class
IN THE UNITED STATES DISTRICT COURT
DISTRICT OF ARIZONA
KASANDRA HUNTER,
individually and on behalf of all others
similarly situated,
Plaintiff,
Case No.
CLASS ACTION
COMPLAINT FOR VIOLATIONS
OF THE TELEPHONE
CONSUMER PROTECTION
ACT, 47 U.S.C. §§ 227, ET SEQ.
(TCPA)
JURY TRIAL DEMANDED
vs.
HOLISTIC PATIENT WELLNESS
GROUP, INC. and EAST VALLEY
PATIENT WELLNESS GROUP,
INC., d/b/a SOL FLOWER, Arizona
corporations,
Defendants.
CLASS ACTION COMPLAINT
1.
Plaintiff Kasandra Hunter brings this action against Defendants, Holistic
Patient Wellness Group, Inc. and East Valley Patient Wellness Group, Inc., d/b/a Sol
Flower, to secure redress for violations of the Telephone Consumer Protection Act
(“TCPA”), 47 U.S.C. § 227.
NATURE OF THE ACTION
2.
This is a putative class action pursuant to the Telephone Consumer
Protection Act, 47 U.S.C. §§ 227, et seq. (the “TCPA”).
3.
Defendants are a cannabis dispensary business. To promote their services,
Defendants engage in aggressive unsolicited marketing, harming thousands of
consumers in the process.
4.
Through this action, Plaintiff seeks injunctive relief to halt Defendants’
illegal conduct, which has resulted in the invasion of privacy, harassment, aggravation,
and disruption of the daily life of thousands of individuals. Plaintiff also seeks statutory
damages on behalf of herself and members of the Class, and any other available legal
or equitable remedies.
JURISDICTION AND VENUE
5.
This Court has federal question subject matter jurisdiction over this action
pursuant to 28 U.S.C. § 1331, as the action arises under the Telephone Consumer
Protection Act, 47 U.S.C. §§ 227, et seq. (“TCPA”).
6.
The Court has personal jurisdiction over Defendants and venue is proper
in this District because Defendants direct, market, and provide their business activities
to this District, and because Defendants’ unauthorized marketing scheme was directed
by Defendants to consumers in this District, including Plaintiff.
PARTIES
7.
Plaintiff is a natural person who, at all times relevant to this action, was a
resident of Maricopa County, Arizona.
2
8.
Defendant Holistic Patient Wellness Group, Inc. d/b/a Sol Flower is an
Arizona corporation whose pricipal place of business is located at 5090 N. 40th Street,
Suite 170, Phoenix, AZ, 85018, USA. Defendant directs, markets, and provides its
business activities throughout the United States, including throughout the state of
Arizona.
9.
Defendant East Valley Patient Wellness Group, Inc. d/b/a Sol Flower is
an Arizona corporation whose principal place of business is located at 5090 N. 40th
Street, Suite 170, Phoenix, AZ, 85018, USA. Defendant directs, markets, and provides
its business activities throughout the United States, including throughout the state of
Arizona.
10.
Unless otherwise indicated, the use of Defendants’ name in this
Complaint includes all agents, employees, officers, members, directors, heirs,
successors, assigns, principals, trustees, sureties, subrogees, representatives, vendors,
and insurers of Defendants.
THE TCPA
11.
The TCPA prohibits: (1) any person from calling a cellular telephone
number; (2) using an automatic telephone dialing system; (3) without the recipient’s
prior express consent. 47 U.S.C. § 227(b)(1)(A).
12.
The TCPA defines an “automatic telephone dialing system” (“ATDS”) as
“equipment that has the capacity - (A) to store or produce telephone numbers to be
called, using a random or sequential number generator; and (B) to dial such numbers.”
47 U.S.C. § 227(a)(1).
13.
In an action under the TCPA, a plaintiff must only show that the
defendant “called a number assigned to a cellular telephone service using an automatic
dialing system or prerecorded voice.” Breslow v. Wells Fargo Bank, N.A., 857 F. Supp. 2d
1316, 1319 (S.D. Fla. 2012), aff'd, 755 F.3d 1265 (11th Cir. 2014).
3
14.
The Federal Communications Commission (“FCC”) is empowered to
issue rules and regulations implementing the TCPA. According to the FCC’s findings,
calls in violation of the TCPA are prohibited because, as Congress found, automated
or prerecorded telephone calls are a greater nuisance and invasion of privacy than live
solicitation calls, and such calls can be costly and inconvenient. The FCC also
recognized that wireless customers are charged for incoming calls whether they pay in
advance or after the minutes are used. Rules and Regulations Implementing the Telephone
Consumer Protection Act of 1991, CG Docket No. 02-278, Report and Order, 18 FCC Rcd
14014 (2003).
15.
In 2012, the FCC issued an order tightening the restrictions for automated
telemarketing calls, requiring “prior express written consent” for such calls to wireless
numbers. See In the Matter of Rules & Regulations Implementing the Tel. Consumer Prot. Act of
1991, 27 F.C.C.R. 1830, 1838 ¶ 20 (Feb. 15, 2012) (emphasis supplied).
16.
To obtain express written consent for telemarketing calls, a defendant
must establish that it secured the plaintiff’s signature in a form that gives the plaintiff a
“‘clear and conspicuous disclosure’ of the consequences of providing the requested
consent….and having received this information, agrees unambiguously to receive such
calls at a telephone number the [plaintiff] designates.” In re Rules & Regulations
Implementing the Tel. Consumer Prot. Act of 1991, 27 F.C.C.R. 1830, 1837 ¶ 18, 1838 ¶ 20,
1844 ¶ 33, 1857 ¶ 66, 1858 ¶ 71 (F.C.C. Feb. 15, 2012).
17.
The TCPA regulations promulgated by the FCC define “telemarketing”
as “the initiation of a telephone call or message for the purpose of encouraging the
purchase or rental of, or investment in, property, goods, or services.” 47 C.F.R. §
64.1200(f)(12). In determining whether a communication constitutes telemarketing, a
court must evaluate the ultimate purpose of the communication. See Golan v. Veritas
Entm't, LLC, 788 F.3d 814, 820 (8th Cir. 2015).
4
18.
“Neither the TCPA nor its implementing regulations ‘require an explicit
mention of a good, product, or service’ where the implication of an improper purpose
is ‘clear from the context.’” Id. (citing Chesbro v. Best Buy Stores, L.P., 705 F.3d 913, 918
(9th Cir. 2012)).
19.
“‘Telemarketing’ occurs when the context of a call indicates that it was
initiated and transmitted to a person for the purpose of promoting property, goods, or
services.” Golan, 788 F.3d at 820 (citing 47 C.F.R. § 64.1200(a)(2)(iii); 47 C.F.R. §
64.1200(f)(12); In re Rules and Regulations Implementing the Telephone Consumer Protection Act
of 1991, 18 F.C.C. Rcd at 14098 ¶ 141, 2003 WL 21517853, at *49).
20.
The FCC has explained that calls motivated in part by the intent to sell
property, goods, or services are considered telemarketing under the TCPA. See In re
Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, 18 FCC Rcd.
14014, ¶¶ 139-142 (2003). This is true whether call recipients are encouraged to
purchase, rent, or invest in property, goods, or services during the call or in the future. Id.
21.
In other words, offers “that are part of an overall marketing campaign to
sell property, goods, or services constitute” telemarketing under the TCPA. See In re
Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, 18 FCC Rcd.
14014, ¶ 136 (2003).
22.
If a call is not deemed telemarketing, a defendant must nevertheless
demonstrate that it obtained the plaintiff’s prior express consent. See In the Matter of
Rules and Regulations Implementing the Tel. Consumer Prot. Act of 1991, 30 FCC Rcd. 7961,
7991-92 (2015) (requiring express consent “for non-telemarketing and non-advertising
calls”).
23.
Further, the FCC has issued rulings and clarified that consumers are
entitled to the same consent-based protections for text messages as they are for calls to
wireless numbers. See Satterfield v. Simon & Schuster, Inc., 569 F.3d 946, 952 (9th Cir. 2009)
(The FCC has determined that a text message falls within the meaning of “to make any
5
call” in 47 U.S.C. § 227(b)(1)(A)); Toney v. Quality Res., Inc., 2014 WL 6757978, at *3
(N.D. Ill. Dec. 1, 2014) (Defendant bears the burden of showing that it obtained
Plaintiff's prior express consent before sending him the text message). (emphasis
added).
24.
As recently held by the United States Court of Appeals for the Ninth
Circuit: “Unsolicited telemarketing phone calls or text messages, by their nature, invade
the privacy and disturb the solitude of their recipients. A plaintiff alleging a violation
under the TCPA ‘need not allege any additional harm beyond the one Congress has
identified.’” Van Patten v. Vertical Fitness Grp., No. 14-55980, 2017 U.S. App. LEXIS
1591, at *12 (9th Cir. May 4, 2016) (quoting Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1549
(2016) (emphasis original)).
FACTUAL ALLEGATIONS
25.
Beginning on or about December 2019, Defendants sent the following
telemarketing text messages to Plaintiff’s cellular telephone number ending in 9252 (the
“9252 Number”):
6
7
8
9
26.
Defendants’ text messages were transmitted to Plaintiff’s cellular
telephone, and within the time frame relevant to this action.
27.
Defendants’ text messages constitute telemarketing because they
encouraged the future purchase or investment in property, goods, or services, i.e.,
selling Plaintiff cannabis products.
28.
The information contained in the text message advertises Defendants’
various discounts and promotions, which Defendants send to promote their businesses.
29.
Plaintiff received the subject texts within this judicial district and,
therefore, Defendants’ violation of the TCPA occurred within this district. Upon
information and belief, Defendants caused other text messages to be sent to individuals
residing within this judicial district.
30.
At no point in time did Plaintiff provide Defendants with her express
written consent to be contacted using an ATDS.
31.
Plaintiff is the subscriber and sole user of the 9252 Number and is
financially responsible for phone service to the 9252 Number.
32.
The impersonal and generic nature of Defendants’ text messages
demonstrates that Defendants utilized an ATDS in transmitting the messages. See
Jenkins v. LL Atlanta, LLC, No. 1:14-cv-2791-WSD, 2016 U.S. Dist. LEXIS 30051, at
*11 (N.D. Ga. Mar. 9, 2016) (“These assertions, combined with the generic, impersonal
nature of the text message advertisements and the use of a short code, support an
inference that the text messages were sent using an ATDS.”) (citing Legg v. Voice Media
Grp., Inc., 20 F. Supp. 3d 1370, 1354 (S.D. Fla. 2014) (plaintiff alleged facts sufficient to
infer text messages were sent using ATDS; use of a short code and volume of mass
messaging alleged would be impractical without use of an ATDS); Kramer v. Autobytel,
Inc., 759 F. Supp. 2d 1165, 1171 (N.D. Cal. 2010) (finding it "plausible" that defendants
used an ATDS where messages were advertisements written in an impersonal manner
and sent from short code); Hickey v. Voxernet LLC, 887 F. Supp. 2d 1125, 1130; Robbins
10
v. Coca-Cola Co., No. 13-CV-132-IEG NLS, 2013 U.S. Dist. LEXIS 72725, 2013 WL
2252646, at *3 (S.D. Cal. May 22, 2013) (observing that mass messaging would be
impracticable without use of an ATDS)).
33.
The text messages originated from telephone number (928) 440-9646, a
number which upon information and belief is owned and operated by Defendants.
34.
The number used by Defendants (928) 440-9646 is known as a “long
code,” a standard 10-digit code that enables Defendants to send SMS text messages en
masse, while deceiving recipients into believing that the message was personalized and
sent from a telephone number operated by an individual.
35.
Long codes work as follows: Private companies known as SMS gateway
providers have contractual arrangements with mobile carriers to transmit two-way SMS
traffic. These SMS gateway providers send and receive SMS traffic to and from the
mobile phone networks' SMS centers, which are responsible for relaying those messages
to the intended mobile phone. This allows for the transmission of a large number of
SMS messages to and from a long code.
36.
Specifically, upon information and belief, Defendants utilized a
combination of hardware and software systems to send the text messages at issue in
this case. The systems utilized by Defendants have the capacity to store telephone
numbers using a random or sequential number generator, and to dial such numbers
from a list without human intervention.
37.
To send the text messages, Defendants used a messaging platform (the
“Platform”) that permitted Defendants to transmit thousands of automated text
messages without any human involvement.
38.
The Platform has the capacity to store telephone numbers, which capacity
was in fact utilized by Defendants.
39.
The Platform has the capacity to generate sequential numbers, which
capacity was in fact utilized by Defendants.
11
40.
The Platform has the capacity to dial numbers in sequential order, which
capacity was in fact utilized by Defendants.
41.
The Platform has the capacity to dial numbers from a list of numbers,
which capacity was in fact utilized by Defendants.
42.
The Platform has the capacity to dial numbers without human
intervention, which capacity was in fact utilized by Defendants.
43.
The Platform has the capacity to schedule the time and date for future
transmission of text messages, which occurs without any human involvement.
44.
To transmit the messages at issue, the Platform automatically executed the
following steps:
a) The Platform retrieved each telephone number from a list of numbers
in the sequential order the numbers were listed;
b) The Platform then generated each number in the sequential order
listed and combined each number with the content of Defendants’
message to create “packets” consisting of one telephone number and
the message content;
c) Each packet was then transmitted in the sequential order listed to an
SMS aggregator, which acts an intermediary between the Platform,
mobile carriers (e.g. AT&T), and consumers.
d) Upon receipt of each packet, the SMS aggregator transmitted each
packet – automatically and with no human intervention – to the
respective mobile carrier for the telephone number, again in the
sequential order listed by Defendants. Each mobile carrier then sent
the message to its customer’s mobile telephone.
45.
The above execution these instructions occurred seamlessly, with no
human intervention, and almost instantaneously. Indeed, the Platform is capable of
12
transmitting thousands of text messages following the above steps in minutes, if not
46.
Further, the Platform “throttles” the transmission of the text messages
depending on feedback it receives from the mobile carrier networks. In other words,
the platform controls how quickly messages are transmitted depending on network
congestion. The platform performs this throttling function automatically and does not
allow a human to control the function.
47.
The following graphic summarizes the above steps and demonstrates that
the dialing of the text messages at issue was done by the Platform automatically and
without any human intervention:
48.
Defendants’ unsolicited text messages caused Plaintiff actual harm,
including invasion of her privacy, aggravation, annoyance, intrusion on seclusion,
trespass, and conversion. Defendants’ text messages also inconvenienced Plaintiff and
caused disruption to her daily life.
49.
Defendants’ unsolicited text messages caused Plaintiff actual harm.
Specifically, Plaintiff estimates that she has wasted a total of ten minutes reviewing
Defendants’ unwanted messages. Each time, Plaintiff had to stop what she was doing
to either retrieve her phone and/or look down at the phone to review the message.
50.
Furthermore, Defendants’ text messages took up memory on Plaintiff’s
cellular phone. The cumulative effect of unsolicited text messages like Defendants’
poses a real risk of ultimately rendering the phone unusable for text messaging purposes
13
as
a
result
of
the
phone’s
memory
being
taken
up.
See
https://www.consumer.ftc.gov/articles/0350-text-message-spam#text (finding that
text message solicitations like the ones sent by Defendant present a “triple threat” of
identity theft, unwanted cell phone charges, and slower cell phone performance).
51.
Defendants’ text messages also can slow cell phone performance by taking
up
space
on
the
recipient
phone’s
memory.
See
https://www.consumer.ftc.gov/articles/0350-text-message-spam#text (finding that
spam text messages can slow cell phone performance by taking up phone memory
space).
CLASS ALLEGATIONS
PROPOSED CLASS
52.
Plaintiff brings this case as a class action pursuant to Fed. R. Civ. P. 23,
on behalf of herself and all others similarly situated.
53.
Plaintiff brings this case on behalf of the Class defined as follows:
No Consent Class: All persons in the United States
who, within four years prior to the filing of this
action, (1) were sent a text message by or on behalf
of Defendant, (2) using an automatic telephone
dialing system, (3) for the purpose of soliciting
Defendants’ goods and services, (4) without prior
express consent of the recipient, or with the same
manner of purported consent Defendants claim to
have obtained from Plaintiff, if any.
54.
Defendants and their employees or agents are excluded from the Class.
Plaintiff does not know the number of members in the Class but believes the Class
members number in the several thousands, if not more.
NUMEROSITY
55.
Upon information and belief, Defendants have placed automated calls to
cellular telephone numbers belonging to thousands of consumers throughout the
14
United States without their prior express consent. The members of the Class, therefore,
are believed to be so numerous that joinder of all members is impracticable.
56.
The exact number and identities of the members of the Class are unknown
at this time and can only be ascertained through discovery. Identification of the Class
members is a matter capable of ministerial determination from Defendants’ call records.
COMMON QUESTIONS OF LAW AND FACT
57.
There are numerous questions of law and fact common to members of
the Class which predominate over any questions affecting only individual members of
the Class. Among the questions of law and fact common to the members of the Class
a) Whether Defendants made non-emergency calls to Plaintiff’s and
Class members’ cellular telephones using an ATDS;
b) Whether Defendants can meet their burden of showing that they
obtained prior express written consent to make such calls;
c) Whether Defendants’ conduct was knowing and willful;
d) Whether Defendants are liable for damages, and the amount of such
damages; and
e) Whether Defendants should be enjoined from such conduct in the
future.
58.
The common questions in this case are capable of having common
answers. If Plaintiff’s claim that Defendants routinely transmits text messages to
telephone numbers assigned to cellular telephone services is accurate, Plaintiff and the
Class members will have identical claims capable of being efficiently adjudicated and
administered in this case.
TYPICALITY
59.
Plaintiff’s claims are typical of the claims of the Class members, as they
are all based on the same factual and legal theories.
15
PROTECTING THE INTERESTS OF THE CLASS MEMBERS
60.
Plaintiff is a representative who will fully and adequately assert and protect
the interests of the Class, and has retained competent counsel. Accordingly, Plaintiff is
an adequate representative and will fairly and adequately protect the interests of the
PROCEEDING VIA CLASS ACTION IS SUPERIOR AND ADVISABLE
61.
A class action is superior to all other available methods for the fair and
efficient adjudication of this lawsuit, because individual litigation of the claims of all
members of the Class is economically unfeasible and procedurally impracticable. While
the aggregate damages sustained by the Class are in the millions of dollars, the individual
damages incurred by each member of the Class resulting from Defendants’ wrongful
conduct are too small to warrant the expense of individual lawsuits. The likelihood of
individual Class members prosecuting their own separate claims is remote, and, even if
every member of the Class could afford individual litigation, the court system would be
unduly burdened by individual litigation of such cases.
62.
The prosecution of separate actions by members of the Class would create
a risk of establishing inconsistent rulings and/or incompatible standards of conduct for
Defendants. For example, one court might enjoin Defendants from performing the
challenged acts, whereas another may not. Additionally, individual actions may be
dispositive of the interests of the Class, although certain class members are not parties
to such actions.
COUNT I
Violations of the TCPA, 47 U.S.C. § 227(b)
(On Behalf of Plaintiff and the Class)
63.
Plaintiff re-alleges and incorporates the foregoing allegations as if fully set
forth herein.
64.
It is a violation of the TCPA to make “any call (other than a call made for
emergency purposes or made with the prior express consent of the called party) using
16
any automatic telephone dialing system … to any telephone number assigned to a …
cellular telephone service ….” 47 U.S.C. § 227(b)(1)(A)(iii).
65.
Defendants – or third parties directed by Defendants – used equipment
having the capacity to dial numbers without human intervention to make non-
emergency telephone calls to the cellular telephones of Plaintiff and the other members
of the Class defined below.
66.
These calls were made without regard to whether or not Defendants had
first obtained express permission from the called party to make such calls. In fact,
Defendants did not have prior express consent to call the cell phones of Plaintiff and
the other members of the putative Class when its calls were made.
67.
Defendants have, therefore, violated § 227(b)(1)(A)(iii) of the TCPA by
using an automatic telephone dialing system to make non-emergency telephone calls to
the cell phones of Plaintiff and the other members of the putative Class without their
prior express written consent.
68.
Defendants knew that it did not have prior express consent to make these
calls, and knew or should have known that it was using equipment that at constituted
an automatic telephone dialing system. The violations were therefore willful or
knowing.
69.
As a result of Defendants’ conduct and pursuant to § 227(b)(3) of the
TCPA, Plaintiff and the other members of the putative Class were harmed and are each
entitled to a minimum of $500.00 in damages for each violation. Plaintiff and the
members of the Class are also entitled to an injunction against future calls. Id.
COUNT II
Knowing and/or Willful Violation of the TCPA, 47 U.S.C. § 227(b)
(On Behalf of Plaintiff and the Class)
70.
Plaintiff re-alleges and incorporates the foregoing allegations as if fully set
forth herein.
17
71.
At all times relevant, Defendants knew or should have known that their
conduct as alleged herein violated the TCPA.
72.
Defendants knew that they did not have prior express consent to make
these calls, and knew or should have known that their conduct was a violation of the
TCPA.
73.
Because Defendants knew or should have known that Plaintiff and Class
Members had not given prior express consent to receive their autodialed calls, the Court
should treble the amount of statutory damages available to Plaintiff and the other
members of the putative Class pursuant to § 227(b)(3) of the TCPA.
74.
As a result of Defendants’ violations, Plaintiff and the Class Members are
entitled to an award of $1,500.00 in statutory damages, for each and every violation,
pursuant to 47 U.S.C. § 227(b)(3)(B) and 47 U.S.C. § 227(b)(3)(C).
PRAYER FOR RELIEF
WHEREFORE, Plaintiff, individually and on behalf of the Class, prays for the
following relief:
a) An order certifying this case as a class action on behalf of the Class as
defined above, and appointing Plaintiff as the representative of the Class
and Plaintiff’s counsel as Class Counsel;
b) An award of actual and statutory damages for Plaintiff and each member
of the Class;
c) As a result of Defendants’ negligent violations of 47 U.S.C. §§ 227, et seq.,
Plaintiff seeks for herself and each member of the Class $500.00 in
statutory damages for each and every violation pursuant to 47 U.S.C. §
277(b)(3)(B);
d) As a result of Defendants’ knowing and/or willful violations of 47 U.S.C.
§§ 227, et seq., Plaintiff seeks for herself and each member of the Class
18
treble damages, as provided by statute, up to $1,500.00 for each and every
violation pursuant to 47 U.S.C. § 277(b)(3)(B) and § 277(b)(3)(C);
e) An order declaring that Defendants’ actions, as set out above, violate the
TCPA;
f) A declaratory judgment that Defendants’ telephone calling equipment
constitutes an automatic telephone dialing system under the TCPA;
g) An injunction requiring Defendants to cease all unsolicited text messaging
activity, and to otherwise protect the interests of the Class;
h) An injunction prohibiting Defendants from using, or contracting the use
of, an automatic telephone dialing system without obtaining, recipient’s
consent to receive calls made with such equipment;
i) Such further and other relief as the Court deems necessary.
JURY DEMAND
Plaintiff hereby demands a trial by jury.
Dated: December 28, 2020
Respectfully submitted,
By: _/s/ Mariam Grigorian_
SHAMIS & GENTILE, P.A.
Mariam Grigorian, Esq. (pro hac vice forthcoming)
14 NE 1st Avenue, Suite 705
Miami, FL 33132
Telephone: 305-479-2299
[email protected]
Counsel for Plaintiff and the Proposed Class
19
| privacy |
J6IfCYcBD5gMZwczBxbU | IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF LOUISIANA
YUSIF AHMED, Individually, and On Behalf of
All Others Similarly Situated,
Civil Action No.:
Plaintiff,
CLASS AND COLLECTIVE
ACTIONS COMPLAINT
-against-
JURY TRIAL DEMANDED
BROTHERS FOOD MART and IMAD FAIEZ
HAMDAN,
Defendants.
COMPLAINT
Plaintiff, YUSIF AHMED, individually and on behalf of all others similarly situated, by
and through his attorneys JTB LAW GROUP, LLC and RIDDLE LAW OFFICE, alleges upon
information and belief, as follows:
PRELIMINARY STATEMENT
1.
Plaintiff brings this action, individually and on behalf of all others similarly situated, to
recover monetary damages, liquidated damages, interest and costs, including reasonable
attorneys’ fees as a result of Defendants’, BROTHERS FOOD MART and IMAD FAIEZ
HAMDAN (collectively “Defendants”) violation of the Fair Labor Standards Act, 29 U.S.C.
§201 et seq. (“FLSA”).
2.
Specifically, Plaintiff brings this action, individually and on behalf of all others similarly
situated, in connection with Defendants’ violation of their statutory obligations to pay overtime
compensation, at a rate not less than one and one-half (1.5) times their regular rate of pay for
work in excess of forty (40) hours per week pursuant to 29 U.S.C. § 207(a).
3.
Plaintiff also brings this action, individually and on behalf of the putative class
members, pursuant to Louisiana Civil Code § 2298 (Unjust Enrichment), to recover monetary
damages due to that Defendants have been unjustly enriched without cause by failing to pay
Plaintiff, YUSIF AHMED, and members of the putative Class proper overtime compensation.
4.
Upon information and belief, for at least three (3) years prior to the filing of this
Complaint, Defendants have willfully and intentionally committed widespread violations of
the above-described federal and state wage and hour statutes and corresponding regulations,
in the manner described herein.
5.
In additional to the aforesaid FLSA collective action and Louisiana state law Rule 23
class action, Plaintiff, YUSIF AHMED, further brings his individual action against
Defendants for retaliatory firing in violation of the FLSA’s anti-retaliation provisions under
29 U.S.C. §215 and Louisiana Revised Statutes 23 § 967(A)(1).
JURISDICTION AND VENUE
6.
This Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1331, because this
action involves the Fair Labor Standards Act, 29 U.S.C. § 201 et seq., a Federal Statute. As to
claims under Louisiana State Law, this Court has supplemental subject matter jurisdiction
pursuant to 28 U.S.C. § 1367.
7.
Venue is proper in this District pursuant to 28 U.S.C. § 1391 (b) and (c) because a
substantial part of the acts or omissions giving rise to this action occurred in this District
and Defendants are subject to personal jurisdiction in this District.
THE PARTIES
8.
Defendant, BROTHERS FOOD MART, is a domestic business corporation organized
and existing under the laws of the State of Louisiana.
9.
Defendant, BROTHERS FOOD MART, is a privately owned establishment operating
and doing business as a gas station, convenience store, and restaurant chain.
2
10.
Upon information and belief, Defendant, IMAD FAIEZ HAMDAN, is the Chief
Executive Officer and the Sole Owner of BROTHERS FOOD MART and is personally
involved in the day to day operation and management of all of the BROTHERS FOOD
MART locations.
11.
Upon information and belief, Defendant, BROTHERS FOOD MART, through its
applicant, IMAD FAIEZ HAMDAN, has registered with the Louisiana Secretary of State its
address at 118 NATCHEZ TRACE DR., HARVEY, LA 70058 for purposes of accepting
service.
12.
Defendants, BROTHERS FOOD MART and IMAD FAIEZ HAMDAN, are actively
doing business in this State and District and maintain facilities and principal places of
business at the following thirty-two (32) addresses:
a. 1729 Lafayette St., Ste 200, Gretna, LA 70053;
b. 9000 Westbank Expwy., Westwego, LA 70094;
c. 2210 Airline Hwy, Kenner, LA 70062;
d. 1020 Bridge City Ave., Bridge City, LA 70094
e. 3124 Downs Blvd., Metairie, LA 70001;
f. 8692 River Road., Waggaman, LA 70094;
g. 148 Carondelet St., New Orleans, LA 70130;
h. 2698 Barataria Blvd., Marrero, LA 70072;
i. 1600 Manhattan Blvd., Harvey, LA 70058;
j. 1227 Veterans Blvd., Kenner, LA 70062;
k. 123 Terry Parkway., Terrytown, LA 70056;
l. 801 Behrman Hwy., Gretna, LA 70056;
3
m. 3441 Manhattan Blvd., Harvey, LA 70058;
n. 4408 S I-10 Service Road W., Metairie, LA 70003;
o. 3528 S I-10 Service Road W., Metairie, LA 70001;
p. 10431 Airline Hwy., St. Rose, LA 70078;
q. 3101 Esplanade Ave., New Orleans, LA 70019;
r. 1926 Newton St., New Orleans, LA 70114;
s. 1944 Belle Chasse Hwy., Gretna, LA 70056;
t. 321 3659 Laplaco Blvd., Harvey, LA 70058;
u. 3659 Laplaco Blvd., Harvey, LA 70058;
v. 6600 Veterans Blvd., Metairie, LA 70003;
w. 7001 Bullard Ave., New Orleans, LA 70128;
x. 2901 Hwy 90, Avondale, LA 70094;
y. 2000 Carol Sue Ave, Gretna, LA 70056;
z. 502 Terry Parkway, Terrytown, LA 70056;
aa. 5701 Crowder Blvd, New Orleans, LA 70127;
bb. 1675 Gause Blvd, Slidell, LA 70458;
cc. 900 Bridge City Ave., Bridge City, LA 70094;
dd. 5104 St. Claude Ave., New Orleans, LA 70117;
ee. 3622 General DeGaulle Dr., New Orleans, LA 70114; and
ff. 6090 Bullard Ave., New Orleans, LA 70128.
13.
At all times relevant herein, Defendant, BROTHERS FOOD MART, has been an
"enterprise engaged in commerce or in the production of goods for commerce" as defined
under 29 U.S.C. §203(s) (1).
4
14.
At all times relevant herein, Defendant, BROTHERS FOOD MART, operates and
controls an enterprise engaged in commerce, with an annual gross volume of business
exceeding $500,000.00.
15.
At relevant times herein, Plaintiff, YUSIF AHMED, was a resident of New Orleans
Parish, Louisiana.
16.
Plaintiff, YUSIF AHMED was formerly employed by Defendants as a Cashier at 801
Behrman Hwy., Gretna, LA 70056 from approximately January 2013 to May 2013.
FACTUAL ALLEGATIONS
17.
Plaintiff repeats and realleges all preceding paragraphs of the Complaint, as if fully set
forth herein.
18.
At all times material and relevant herein, Defendants were jointly the "employer" of
Plaintiff and similarly situated employees within the meaning of 29 U.S.C §203(d) and
Louisiana Revised Statutes 23:900.
19.
At all times material and relevant herein, Defendants either directly or indirectly hired
Plaintiff and similarly situated Cashiers; controlled their work schedules and conditions of
employment; determined the rate and method of the payment of wages; and kept at least some
records regarding their employment.
20.
Upon information and belief, during the applicable statutory period, Defendants
employed, in aggregate, at least ninety (90) Cashiers at the above-listed thirty-two (32) branch
stores.
21.
Upon information and belief, at all times material and relevant herein, Plaintiff,
YUSIF AHMED, and all other similarly situated Cashiers at each of the Defendants’ branch
store performed job duties that do not fall under any exemptions under the FLSA.
5
22.
Upon information and belief, at all times material and relevant herein, Plaintiff,
YUSIF AHMED, and all other similarly situated Cashiers were required by Defendants and
did regularly work well over forty (40) hours per week.
23.
Upon information and belief, at all relevant times herein, Plaintiff, YUSIF
AHMED, and all other similarly situated Cashiers were treated as non-exempt hourly
employees by Defendants.
24.
At all relevant times Plaintiff, YUSIF AHMED, and all other similarly situated
Cashiers did not receive overtime compensation at a rate not less than one and one-half (1.5)
times their regular rate of pay for work in excess of forty (40) hours per week.
25.
At all relevant times herein, Defendants maintained control, oversight, and direction
over the Plaintiff, YUSIF AHMED, and the putative members of the proposed
collective/class, including the promulgation and enforcement of policies affecting the
payment of wages for overtime compensation.
26.
Upon information and belief, Defendants never posted a notice explaining the
minimum hourly wage and overtime pay rights provided by FLSA in any area of its business
facility where Plaintiff and similarly situated employees were employed, in violation of 29
C.F.R. §516.4.
27.
Upon information and belief, at all times material and relevant herein, Defendants
failed to keep full and accurate records of Plaintiff, YUSIF AHMED’s and all other similarly
situated Cashiers’ hours and wages, in violation of 29 C.F.R. §§ 516.5, 516.6.
28.
Upon information and belief, at all times material and relevant herein, Defendants
consistently and continuously enforced a uniform policy and/or practice of permitting,
encouraging and/or requiring Plaintiff, YUSIF AHMED, and all other similarly situated
6
Cashiers to work over 40 hours per week.
29.
Defendants’ wrongful acts and/or omissions/commissions, as alleged herein, were not
made in good faith or in conformity with and in reliance on any written administrative
regulation, order, ruling, approval, or interpretation by the U.S. Department of Labor and/or
the Louisiana Workforce Commission, or any administrative practice or enforcement policy
of such a department or bureau.
30.
Defendants’ widespread violations of the above-described federal wage and hour
statutes and regulations were willful, arbitrary, unreasonable and/or in bad faith.
31.
Upon information and belief, in or around May 2013, as a proximate result of his
verbal complaints to Defendants about the company’s illegal overtime pay practices, Plaintiff,
YUSIF AHMED, was terminated in retaliation, in violation of 29 USC § 215(a)(3) and
Louisiana Revised Statutes 23 § 967(A)(1).
CLASS AND COLLECTIVE ACTION ALLEGATIONS
32.
Plaintiff repeats and realleges all the preceding paragraphs of this Complaint, as if
fully set forth herein.
33.
Plaintiff brings this collective and class action individually and on behalf of all other
similarly situated Cashiers who were/are affected by Defendants’ willful and intentional
violation of the FLSA and Louisiana Civil Code as described in this Complaint.
34.
Plaintiff brings this collective action to recover monetary damages owed by
Defendants to Plaintiff and members of the putative Collective for all unpaid overtime
compensation for hours in a work week in excess of forty (40) pursuant to the FLSA.
35.
Plaintiff also brings this class action to recover monetary damages owed by
Defendants to Plaintiff and members of the putative Class for all unpaid overtime
7
compensation for hours in a work week in excess of forty (40) pursuant to the regulations
forbidding unjust enrichment and/or breach of contract under the Louisiana Civil Code.
36.
Plaintiff brings this claim for relief for violation of the FLSA, as a collective action
pursuant to Section 216(b) of the FLSA, 29 U.S.C. § 216(b). The Collective is defined as
follows:
All current and former employees of Defendants, who were/are 1)
employed as Cashiers in the State of Louisiana during the applicable
statutory period; and 2) not paid overtime compensation at a rate not
less than one and one-half (1.5) times their regular rate of pay for
hours in a work week in excess of forty (40).
37.
Plaintiff brings this class action claim for relief under Rule 23 of the Federal Rules of
Civil Procedure and the Louisiana Civil Code § 2298. The Class is defined as follows:
All current and former employees of Defendants, who were/are 1)
employed as hourly employees in the State of Louisiana during the
applicable statutory period; and 2) not paid proper overtime
compensation, without cause, for hours worked in a week in excess of
forty (40).
38.
This action is properly brought as a collective action pursuant to the collective action
procedures of the FLSA and as a class action pursuant to Rule 23 of the Federal Rules of Civil
Procedure. The Collective/Class is so numerous that joinder of all members is impractical.
While the exact number and identities of putative Collective and Class members are unknown
at this time, and can only be ascertained through appropriate discovery, Plaintiff believes that
at least ninety (90) putative collective and class members have worked for Defendants during
the applicable statutory period, without receiving appropriate overtime compensation, as
required by law.
39.
This litigation is properly brought as a collective/class action because of the existence
8
of questions of fact and law common to the Collective/Class which predominates over any
questions affecting only individual members, including:
a. Whether Defendants are liable to Plaintiff and members of the Collective/Class for
violations of the FLSA and Louisiana State law, and the Louisiana Civil Code;
b. Whether Plaintiff and all other similarly situated Cashiers worked in excess of forty
(40) hours in a week; and
c. Whether Defendants failed to pay Plaintiff and members of the Collective/Class
overtime compensation at a rate not less than one and one-half (1.5) times their
regular rate of pay for all hours in the work week in excess of forty (40).
40.
This litigation is properly brought as a collective/class action because Plaintiff, YUSIF
AHMED's claims are typical of the claims of the members of the Collective/Class, inasmuch
as all such claims arise from Defendants’ standard policies and practices, as alleged herein.
Like all Collective/Class members, Plaintiff was damaged by Defendants’ system-wide
policies and practices of failing to pay overtime compensation at a rate not less than one and
one-half (1.5) times their regular rate of pay for all hours in a work week in excess of forty
(40), in violation of the FLSA and Louisiana Civil Code § 2298.
41.
A collective/class action is an appropriate and superior method for the fair and
efficient adjudication of the present controversy given the following factors:
a. Common questions of law and/or fact predominate over any individual questions
which may arise, and, accordingly, there would accrue savings to both the Court and
the Collective/Class in litigating the common issues on a classwide basis instead of
on a repetitive individual basis;
b. Despite the size of individual Collective/Class members’ claims, their aggregate
volume, coupled with the economies of scale inherent in litigating similar claims on
9
a common basis, will enable this case to be litigated as a Collective/Class action on
a cost-effective basis, especially when compared with repetitive individual
litigation; and
c. No unusual difficulties are likely to be encountered in the management of this
collective/class action in that all questions of law and/or fact to be litigated at the
liability stage of this action are common to the Collective/Class.
42.
Collective/Class certification is also fair and efficient because prosecution of separate
actions by individual Collective/Class members would create a risk of differing adjudications
with respect to such individual members of the Collective/Class, which as a practical matter
may be dispositive of the interests of other members no parties to the adjudication, or
substantially impair or impede their ability to protect their interests.
43.
Plaintiff anticipates that there will be no difficulty in the management of this litigation.
This litigation presents FLSA claims of a type that have often been prosecuted on a classwide
basis, and the manner of identifying the Collective/Class and providing any monetary relief to
it can easily be effectuated from a review of Defendants’ records.
44.
Plaintiff and the putative collective and class members demand a trial by jury.
FIRST CLAIM FOR RELIEF
(Individual Claim for Violation of FLSA Wage Provisions)
45.
Plaintiff repeats and realleges all the preceding paragraphs of this Complaint, as if
fully set forth herein.
46.
Defendants required Plaintiff and all other similarly situated Cashiers to work hours in
a work week in excess of forty (40).
47.
Defendants failed to pay Plaintiff and all other similarly situated Cashiers overtime
10
compensation at a rate not less than one and one-half (1.5) times their regular rate of pay for
hours in a work week in excess of forty (40).
48.
Defendants’ failure to pay Plaintiff, YUSIF AHMED, and the Collective/Class proper
overtime compensation for hours in a work week in excess of forty (40) violates the FLSA.
49.
Defendants’ uniform conduct and practices, as described above, was/is willful,
intentional, unreasonable, arbitrary and in bad faith.
50.
Because Defendants willfully violated the FLSA, as aforesaid, a three (3) year statute
of limitations shall apply to such violation, pursuant to 29 U.S.C. § 255.
51.
As a result of Defendants’ uniform policy and practice described above, Plaintiffs
were illegally deprived of overtime compensation earned, in such amounts to be determined at
trial, and is entitled to recovery of such total unpaid amounts, liquidated damages, pre-
judgment interest, costs, reasonable attorneys’ fees and other compensation pursuant to 29
U.S.C § 216(b).
SECOND CLAIM FOR RELIEF
(Collective Action Claim for Violation of FLSA Wage Provisions)
52.
Plaintiff repeats and realleges all the preceding paragraphs of this Complaint, as if
fully set forth herein.
53.
Defendants required Plaintiff, YUSIF AHMED and all other similarly situated
Cashiers employed in the State of Louisiana to work hours in a work week in excess of forty
54.
Defendants failed to pay Plaintiff and all other similarly situated Cashiers overtime
compensation at a rate not less than one and one-half (1.5) times their regular rate of pay for
hours in a work week in excess of forty (40).
11
55.
Defendants’ failure to pay Plaintiff and all other similarly situated Cashiers proper
overtime compensation for hours in a work week in excess of forty (40) violates the FLSA.
56.
Defendants’ uniform policy and practice, as described above, was/is willful,
intentional, unreasonable, arbitrary and in bad faith.
57.
Because Defendants willfully violated the FLSA, as aforesaid, a three (3) year statute
of limitations shall apply to such violation, pursuant to 29 U.S.C. § 255.
58.
As a result of Defendants’ foregoing violation, Plaintiff and all other similarly situated
Cashiers were illegally deprived of overtime compensation earned, in such amounts to be
determined at trial, and are entitled to recovery of such total unpaid amounts, liquidated
damages, pre-judgment interest, costs, reasonable attorney’s fees and other compensation
pursuant to 29 U.S.C § 216(b).
THIRD CLAIM FOR RELIEF
(Individual Claim for Unjust Enrichment)
59.
Plaintiff repeats and realleges all the preceding paragraphs of this Complaint, as if
fully set forth herein.
60.
Defendants recognized the benefits conferred upon them by Plaintiff, YUSIF
AHMED, and all other similar situated Cashiers.
61.
Defendants accepted and retained the benefits under circumstances that would render
such retention inequitable.
62.
Defendants were aware and/or notified of the work performed without compensation
and demand was made for payment for such work.
63.
Defendants have thereby been unjustly enriched without cause and Plaintiff has been
damaged, and there is no valid justification for such enrichment under the law.
12
64.
The payment requested by Plaintiff for the benefits produced by him is based on
customary and reasonable rates for such services at the time and in the locality where the
services were rendered, and the amount by which Plaintiff was impoverished and Defendants
were enriched is identical.
65.
No other remedy exists under the laws of the State of Louisiana to recover these
unlawfully unpaid wages.
66.
Plaintiff is entitled to damages equal to all unpaid wages due within three (3) years
preceding the filing of this Complaint plus periods of equitable tolling, as allowed by
Louisiana Civil Code § 3494(1).
67.
Plaintiff is entitled to an award of pre-judgment and post-judgment interest at the
applicable legal rate.
FOURTH CLAIM FOR RELIEF
(Rule 23 Class Action Claim for Unjust Enrichment)
68.
Plaintiff repeats and realleges all the preceding paragraphs of this Complaint, as if
fully set forth herein.
69.
Defendants recognized the benefits conferred upon them by Plaintiffs and members of
the putative Class.
70.
Defendants accepted and retained the benefits conferred by Plaintiff and members of
the putative Class under circumstances that would render such retention inequitable.
71.
Defendants were aware and/or notified of the work performed without compensation
and demand was made for payment for such work.
72.
Defendants have thereby been unjustly enriched without cause and Plaintiff and
members of the putative Class have been damaged, and there is no valid justification for such
13
enrichment under the law.
73.
The payment requested by Plaintiff and members of the putative Class for the benefits
produced by them is based on customary and reasonable rates for such services at the time and
in the locality where the services were rendered, and the amount by which Plaintiff and
members of the putative Class were impoverished and Defendants were enriched is identical.
74.
No other remedy exists under the laws of the State of Louisiana to recover these
unlawfully unpaid wages.
75.
Plaintiff and members of the putative Class are entitled to damages equal to all unpaid
wages due within three (3) years preceding the filing of this Complaint plus periods of
equitable tolling, as allowed by Louisiana Civil Code § 3494(1).
76.
Plaintiff and members of the putative Class are entitled to an award of pre-judgment
and post-judgment interest at the applicable legal rate.
FIFTH CLAIM FOR RELIEF
(Individual Claim for Retaliation)
77.
Plaintiff repeats and realleges all the preceding paragraphs of this Complaint, as if
fully set forth herein.
78.
Plaintiff, YUSIF AHMED, brought violations of FLSA overtime provisions to the
attention of Defendants.
79.
Defendants terminated Plaintiff, YUSIF AHMED, when wage violations were brought
to their attention.
80.
There is temporal proximity between Plaintiff, YUSIF AHMED’s last verbal
complaint and his termination.
81.
Retaliatory firing resulting from bringing FLSA violations to an employer’s attention
14
is a violation of FLSA’s anti-retaliation provisions under 29 USC § 215(a)(3).
82.
Retaliatory firing resulting from bringing violations of the law to an employer’s
attention is a violation of the Louisiana Anti-Retaliation Statute, Louisiana Revised Statutes
23 § 967(A)(1).
83.
Defendants’ conduct and practices, as described above, was/is willful, intentional,
unreasonable, arbitrary and in bad faith.
84.
As a result of Defendants’ retaliatory firing Plaintiff was illegally deprived of
compensation, in such amounts to be determined at trial, and is entitled to recovery of total
unpaid amounts, compensatory damages for emotional distress, liquidated damages, pre-
judgment interest, costs, punitive damages, reasonable attorneys’ fees and other compensation
pursuant to 29 U.S.C § 216(b).
PRAYER FOR RELIEF
WHEREFORE, Plaintiff, YUSIF AHMED, and the putative Collective/Class members
demand declaratory, injunctive and monetary judgment and relief against Defendants, and each
of them, individually, jointly and severally, as follows:
A.
A declaratory judgment that Defendants’ wage practices alleged herein violate
overtime compensation provisions of the Fair Labor Standards Act, 29 U.S.C. §201, et seq., and
attendant regulations at 29 C.F.R. §516 et seq.
B.
A declaratory judgment that Defendants were unjustly enriched as a result of their
unlawful overtime compensation practices under the Louisiana Civil Code § 2298.
15
C.
An order for injunctive relief ordering the Defendants to end all of the illegal
wage practices alleged herein pursuant to FLSA, Louisiana Civil Code, and related laws and
regulations.
D.
An Order directing Defendants, at their own expense, to investigate and account
for the number of overtime hours actually worked by the Plaintiff and all putative collective and
class members.
E.
Judgment for unpaid overtime compensation to which Plaintiff and all other
similarly situated Cashiers are lawfully entitled pursuant to the Fair Labor Standards Act, 29
U.S.C. §201, et seq., and attendant regulations at 29 C.F.R. §516 et seq.
F.
Judgment for liquidated damages pursuant to the Fair Labor Standards Act, 29
US.C. §201, et seq., and attendant regulations at 29 C.F.R. §516 et seq., in an amount equal to all
overtime compensation owed to Plaintiff and members of the Collective during the applicable
statutory period.
G.
An Order directing Defendants to pay Plaintiff and members of the putative
Collective prejudgment interest, reasonable attorney’s fees and all costs connected with this
action pursuant to the Fair Labor Standard Act, 29 U.S.C. §201, et esq.
H.
Judgment for compensatory damages pursuant to Plaintiff’s and the Class
members’ Unjust Enrichment claims, in an amount to be determined at trial, together with
interest, costs, and attorney’s fees.
I.
A declaratory judgment stating that Plaintiff, YUSIF AHMED was wrongfully
terminated in retaliation for bringing wage and hour law violations to the Defendants’ attention.
16
J.
Judgment for compensatory damages, reasonable attorneys’ fees, court costs, pre-
judgment interest, and post-judgment interest for Plaintiff, YUSIF AHMED’s retaliatory firing,
pursuant to the Fair Labor Standards Act, 29 U.S.C. §201, et seq., attendant regulations at 29
C.F.R. §516 et seq and Louisiana Revised Statutes 23 § 967(A)(1).
K.
Judgment for liquidated and punitive damages for Plaintiff, YUSIF AHMED’s
retaliatory firing pursuant to Fair Labor Standards Act, 29 U.S.C. §201, et seq., and attendant
regulations at 29 C.F.R. §516 et seq.
L.
Judgment for any and all civil penalties to which Plaintiff and all other similarly
situated Cashiers may be entitled.
M.
Incentive awards for the lead Plaintiff, YUSIF AHMED.
N.
Leave to add additional plaintiffs by motion, the filing of written consents, or any
other method approved by the court.
O.
Equitably tolling for the Collective effective the date of the filing of the instant
Complaint.
P.
An Order designating this action as a collective action on behalf of the Collective
Class and issuance of notice pursuant to 29 U.S.C. 216(b) to all similarly situated individuals.
Q.
An Order certifying this action as a class action on behalf of the proposed Rule 23
R.
An order designating the Plaintiff, YUSIF AHMED, as a representative of the
proposed FLSA Collective and Rule 23 Class.
17
S.
Such other and further relief as to this Court may deem necessary, just and
proper.
Dated: September 9, 2013
Respectfully submitted,
RIDDLE LAW OFFICE
s:/CHARLES A. RIDDLE, III
By:
Charles A. Rillde, III (#10974)
[email protected]
Jenny Donaghey-Beckham, (#34522) Of Counsel
208 East Market Street
P.O. Box 608
Marksville, Louisiana 71351
Tel: (318) 240-7217
Fax: (318) 240-9000
-And-
JTB LAW GROUP, LLC
Jason T. Brown (will seek Pro Hac Vice admission)
[email protected]
155 2nd Street, Suite 4
Jersey City, New Jersey 07302
Tel: (201) 630-0000
Fax: (855) 582-5297
Attorneys for Plaintiff
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19
| employment & labor |
atIZD4cBD5gMZwczaz3p | UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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MARY WEST, on behalf of herself and all others
similarly situated,
CLASS ACTION COMPLAINT
AND
Plaintiffs,
v.
DEMAND FOR JURY TRIAL
1:20-cv-3591
LORITO BOOKS, INC.,
Defendant.
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INTRODUCTION
1.
Plaintiff MARY WEST, on behalf of herself and others similarly situated, asserts
the following claims against Defendant LORITO BOOKS, INC. as follows.
2.
Plaintiff is a visually-impaired and legally blind person who requires screen-
reading software to read website content using her computer. Plaintiff uses the
terms “blind” or “visually-impaired” to refer to all people with visual impairments
who meet the legal definition of blindness in that they have a visual acuity with
correction of less than or equal to 20 x 200. Some blind people who meet this
definition have limited vision. Others have no vision.
3.
Based on a 2010 U.S. Census Bureau report, approximately 8.1 million people in
the United States are visually impaired, including 2.0 million who are blind, and
according to the American Foundation for the Blind’s 2015 report, approximately
400,000 visually impaired persons live in the State of New York.
4.
Plaintiff brings this civil rights action against Defendant for its failure to design,
construct, maintain, and operate its website to be fully accessible to and
independently usable by Plaintiff and other blind or visually-impaired people.
Defendant’s denial of full and equal access to its website, and therefore denial of
its goods and services offered thereby, is a violation of Plaintiff’s rights under the
Americans with Disabilities Act (“ADA”).
5.
Because Defendant’s website, www.loritobooks.com (the “Website”), is not
equally accessible to blind and visually impaired consumers, it violates the ADA.
Plaintiff seeks a permanent injunction to cause a change in Defendant’s corporate
policies, practices, and procedures so that Defendant’s website will become and
remain accessible to blind and visually-impaired consumers.
JURISDICTION AND VENUE
6.
This Court has subject-matter jurisdiction over this action under 28 U.S.C. § 1331
and 42 U.S.C. § 12181, as Plaintiff’s claims arise under Title III of the ADA, 42
U.S.C. § 12181, et seq., and 28 U.S.C. § 1332.
7.
This Court has supplemental jurisdiction under 28 U.S.C. § 1367 over Plaintiff’s
New York City Human Rights Law, N.Y.C. Admin. Code § 8-101 et seq.,
(“NYCHRL”) claims.
8.
Venue is proper in this district under 28 U.S.C. §1391(b)(1) and (2) because
Defendant conducts and continues to conduct a substantial and significant amount
of business in this District, and a substantial portion of the conduct complained of
herein occurred in this District because Plaintiff attempted to utilize, on a number
of occasions, the subject Website within this Judicial District.
9.
Defendant is subject to personal jurisdiction in this District. Defendant has been
and is committing the acts or omissions alleged herein in the Southern District of
New York that caused injury and violated rights the ADA prescribes to Plaintiff
and to other blind and other visually impaired-consumers. A substantial part of the
acts and omissions giving rise to Plaintiff’s claims occurred in this District: on
several separate occasions, Plaintiff has been denied the full use and enjoyment of
the facilities, goods and services offered to the general public, on Defendant’s
Website in New York County. These access barriers that Plaintiff encountered have
caused a denial of Plaintiff’s full and equal access multiple times in the past, and
now deter Plaintiff on a regular basis from accessing the Defendant’s Website in
the future.
10.
This Court is empowered to issue a declaratory judgment under 28 U.S.C. §§ 2201
and 2202.
THE PARTIES
11.
Plaintiff MARY WEST, at all relevant times, is and was a resident of Kings County,
New York.
12.
Plaintiff is a blind, visually-impaired handicapped person and a member of a
protected class of individuals under the ADA, under 42 U.S.C. § 12102(1)-(2), and
the regulations implementing the ADA set forth at 28 CFR §§ 36.101 et seq., and
NYCHRL.
13.
Defendant is and was at all relevant times a Colorado Corporation doing business
in New York.
14.
Defendant’s Website, and its goods, and services offered thereupon, is a public
accommodation within the definition of Title III of the ADA, 42 U.S.C. § 12181(7).
NATURE OF ACTION
15.
The Internet has become a significant source of information, a portal, and a tool for
conducting business, doing everyday activities such as shopping, learning, banking,
researching, as well as many other activities for sighted, blind and visually-
impaired persons alike.
16.
In today’s tech-savvy world, blind and visually impaired people have the ability to
access websites using keyboards in conjunction with screen access software that
vocalizes the visual information found on a computer screen or displays the content
on a refreshable Braille display. This technology is known as screen-reading
software. Screen-reading software is currently the only method a blind or visually-
impaired person may use to independently access the internet. Unless websites are
designed to be read by screen-reading software, blind and visually-impaired
persons are unable to fully access websites, and the information, products, goods
and contained thereon.
17.
Blind and visually-impaired users of Windows operating system-enabled
computers and devices have several screen reading software programs available to
them. Some of these programs are available for purchase and other programs are
available without the user having to purchase the program separately. Job Access
With Speech, otherwise known as “JAWS” is currently the most popular, separately
purchased and downloaded screen-reading software program available for a
Windows computer. Another popular screen-reading software program available
for a Windows computer is NonVisual Desktop Access “NVDA”.
18.
For screen-reading software to function, the information on a website must be
capable of being rendered into text. If the website content is not capable of being
rendered into text, the blind or visually-impaired user is unable to access the same
content available to sighted users.
19.
The international website standards organization, the World Wide Web
Consortium, known throughout the world as W3C, has published version 2.1 of the
Web Content Accessibility Guidelines (“WCAG 2.1”). WCAG 2.1 are well-
established guidelines for making websites accessible to blind and visually-
impaired people. These guidelines are universally followed by most large business
entities and government agencies to ensure their websites are accessible.
20.
Non-compliant websites pose common access barriers to blind and visually-
impaired persons. Common barriers encountered by blind and visually impaired
persons include, but are not limited to, the following:
a.
A text equivalent for every non-text element is not provided;
b.
Title frames with text are not provided for identification and
navigation;
c.
Equivalent text is not provided when using scripts;
d.
Forms with the same information and functionality as for sighted
persons are not provided;
e.
Information about the meaning and structure of content is not
conveyed by more than the visual presentation of content;
f.
Text cannot be resized without assistive technology up to 200%
without losing content or functionality;
g.
If the content enforces a time limit, the user is not able to extend,
adjust or disable it;
h.
Web pages do not have titles that describe the topic or purpose;
i.
The purpose of each link cannot be determined from the link text
alone or from the link text and its programmatically determined link
context;
j.
One or more keyboard operable user interface lacks a mode of
operation where the keyboard focus indicator is discernible;
k.
The default human language of each web page cannot be
programmatically determined;
l.
When a component receives focus, it may initiate a change in
context;
m.
Changing the setting of a user interface component may
automatically cause a change of context where the user has not been advised
before using the component;
n.
Labels or instructions are not provided when content requires user
input, which include captcha prompts that require the user to verify that he
or she is not a robot;
o.
In content which is implemented by using markup languages,
elements do not have complete start and end tags, elements are not nested
according to their specifications, elements may contain duplicate attributes,
and/or any IDs are not unique;
p.
Inaccessible Portable Document Format (PDFs); and,
q.
The name and role of all User Interface elements cannot be
programmatically determined; items that can be set by the user cannot be
programmatically set; and/or notification of changes to these items is not
available to user agents, including assistive technology.
STATEMENT OF FACTS
21.
Defendant is a children’s Spanish book and audiobook company that owns and
operates www.loritobooks.com (its “Website”), offering features which should
allow all consumers to access the goods and services and which Defendant ensures
the delivery of such goods throughout the United States, including New York State.
22.
Defendant’s Website offers products and services for online sale and general
delivery to the public. The Website offers features which ought to allow users to
browse for items, access navigation bar descriptions, inquire about pricing, and
avail consumers of the ability to peruse the numerous items offered for sale.
23.
Plaintiff is a visually-impaired and legally blind person, who cannot use a computer
without the assistance of screen-reading software. Plaintiff is, however, a proficient
NVDA screen-reader user and uses it to access the Internet. Plaintiff has visited the
Website on separate occasions using a screen-reader.
24.
On multiple occasions, the last occurring in March of 2020, Plaintiff visited
Defendant’s website, www.loritobooks.com, to make a purchase. Despite her
efforts, however, Plaintiff was denied a shopping experience similar to that of a
sighted individual due to the website’s lack of a variety of features and
accommodations, which effectively barred Plaintiff from being able to determine
what specific products were offered for sale.
25.
Many features on the Website lacks alt. text, which is the invisible code
embedded beneath a graphical image. As a result, Plaintiff was unable to
differentiate what products were on the screen due to the failure of the Website to
adequately describe its content. Such issues were predominant in the section where
Plaintiff was attempting, but was unsuccessful, in making a purchase.
26.
Many features on the Website also fail to Add a label element or title attribute for
each field. This is a problem for the visually impaired because the screen reader
fails to communicate the purpose of the page element. It also leads to the user not
being able to understand what he or she is expected to insert into the subject field.
As a result, Plaintiff and similarly situated visually impaired users of Defendant’s
Website are unable to enjoy the privileges and benefits of the Website equally to
sighted users.
27.
Many pages on the Website also contain the same title elements. This is a problem
for the visually impaired because the screen reader fails to distinguish one page
from another. In order to fix this problem, Defendant must change the title elements
for each page.
28.
The Website also contained a host of broken links, which is a hyperlink to a non-
existent or empty webpage. For the visually impaired this is especially paralyzing
due to the inability to navigate or otherwise determine where one is on the website
once a broken link is encountered. For example, upon coming across a link of
interest, Plaintiff was redirected to an error page. However, the screen-reader failed
to communicate that the link was broken. As a result, Plaintiff could not get back
to her original search.
29.
These access barriers effectively denied Plaintiff the ability to use and enjoy
Defendant’s website the same way sighted individuals do.
30.
It is, upon information and belief, Defendant’s policy and practice to deny Plaintiff,
along with other blind or visually-impaired users, access to Defendant’s website,
and to therefore specifically deny the goods and services that are offered to the
general public. Due to Defendant’s failure and refusal to remove access barriers to
its website, Plaintiff and visually-impaired persons have been and are still being
denied equal access to Defendant’s Website, and the numerous goods and services
and benefits offered to the public through the Website.
31.
Due to the inaccessibility of Defendant’s Website, blind and visually-impaired
customers such as Plaintiff, who need screen-readers, cannot fully and equally use
or enjoy the facilities, products, and services Defendant offers to the public on its
Website. The access barriers Plaintiff encountered have caused a denial of
Plaintiff’s full and equal access in the past, and now deter Plaintiff on a regular
basis from equal access to the Website.
32.
If the Website were equally accessible to all, Plaintiff could independently navigate
the Website and complete a desired transaction as sighted individuals do.
33.
Through her attempts to use the Website, Plaintiff has actual knowledge of the
access barriers that make these services inaccessible and independently unusable
by blind and visually-impaired people.
34.
Because simple compliance with the WCAG 2.1 Guidelines would provide Plaintiff
and other visually-impaired consumers with equal access to the Website, Plaintiff
alleges that Defendant has engaged in acts of intentional discrimination, including
but not limited to the following policies or practices:
a.
Constructing and maintaining a website that is inaccessible to
visually-impaired individuals, including Plaintiff;
b.
Failure to construct and maintain a website that is sufficiently intuitive
so as to be equally accessible to visually impaired individuals, including
Plaintiff; and,
c.
Failing to take actions to correct these access barriers in the face of
substantial harm and discrimination to blind and visually-impaired
consumers, such as Plaintiff, as a member of a protected class.
35.
Defendant therefore uses standards, criteria or methods of administration that have the
effect of discriminating or perpetuating the discrimination of others, as alleged herein.
36.
The ADA expressly contemplates the injunctive relief that Plaintiff seeks in this
action. In relevant part, the ADA requires:
In the case of violations of . . . this title, injunctive relief shall include an order to
alter facilities to make such facilities readily accessible to and usable by individuals
with disabilities . . . Where appropriate, injunctive relief shall also include requiring
the . . . modification of a policy . . .
42 U.S.C. § 12188(a)(2).
37.
Because Defendant’s Website has never been equally accessible, and because
Defendant lacks a corporate policy that is reasonably calculated to cause its Website
to become and remain accessible, Plaintiff invokes 42 U.S.C. § 12188(a)(2) and
seeks a permanent injunction requiring Defendant to retain a qualified consultant
acceptable to Plaintiff (“Agreed Upon Consultant”) to assist Defendant to comply
with WCAG 2.1 guidelines for Defendant’s Website. Plaintiff seeks that this
permanent injunction requires Defendant to cooperate with the Agreed Upon
Consultant to:
a.
Train Defendant’s employees and agents who develop the Website
on accessibility compliance under the WCAG 2.1 guidelines;
b.
Regularly check the accessibility of the Website under the WCAG
2.1 guidelines;
c.
Regularly test user accessibility by blind or vision-impaired persons
to ensure that Defendant’s Website complies under the WCAG 2.1
guidelines; and,
d.
Develop an accessibility policy that is clearly disclosed on Defendant’s
Websites, with contact information for users to report accessibility-related
problems.
38.
Although Defendant may currently have centralized policies regarding maintaining
and operating its Website, Defendant lacks a plan and policy reasonably calculated
to make them fully and equally accessible to, and independently usable by, blind
and other visually-impaired consumers.
39.
Defendant has, upon information and belief, invested substantial sums in
developing and maintaining their Website and has generated significant revenue
from the Website. These amounts are far greater than the associated cost of making
their Website equally accessible to visually impaired customers.
40.
Without injunctive relief, Plaintiff and other visually-impaired consumers will
continue to be unable to independently use the Website, violating their rights.
CLASS ACTION ALLEGATIONS
41.
Plaintiff, on behalf of herself and all others similarly situated, seeks to certify a
nationwide class under Fed. R. Civ. P. 23(a) and 23(b)(2): all legally blind
individuals in the United States who have attempted to access Defendant’s Website
and as a result have been denied access to the equal enjoyment of goods and services,
during the relevant statutory period.
42.
Plaintiff, on behalf of herself and all others similarly situated, seeks to certify a New
York City subclass under Fed. R. Civ. P. 23(a) and 23(b)(2): all legally blind
individuals in the City of New York who have attempted to access Defendant’s
Website and as a result have been denied access to the equal enjoyment of goods and
services offered, during the relevant statutory period.
43.
Common questions of law and fact exist amongst the Class, including:
a.
Whether Defendant’s Website is a “public accommodation” under
the ADA;
b.
Whether Defendant’s Website is a “place or provider of public
accommodation” under the NYCHRL;
c.
Whether Defendant’s Website denies the full and equal enjoyment
of
its
products,
services,
facilities,
privileges,
advantages,
or
accommodations to people with visual disabilities, violating the ADA; and
d.
Whether Defendant’s Website denies the full and equal enjoyment
of
its
products,
services,
facilities,
privileges,
advantages,
or
accommodations to people with visual disabilities, violating the NYCHRL.
44.
Plaintiff’s claims are typical of the Class. The Class, similarly to the Plaintiff, are
severely visually impaired or otherwise blind, and claim that Defendant has
violated the ADA or NYCHRL by failing to update or remove access barriers on
its Website so either can be independently accessible to the Class.
45.
Plaintiff will fairly and adequately represent and protect the interests of the Class
Members because Plaintiff has retained and is represented by counsel competent
and experienced in complex class action litigation, and because Plaintiff has no
interests antagonistic to the Class Members. Class certification of the claims is
appropriate under Fed. R. Civ. P. 23(b)(2) because Defendant has acted or refused
to act on grounds generally applicable to the Class, making appropriate both
declaratory and injunctive relief with respect to Plaintiff and the Class as a whole.
46.
Alternatively, class certification is appropriate under Fed. R. Civ. P. 23(b)(3) because
fact and legal questions common to Class Members predominate over questions
affecting only individual Class Members, and because a class action is superior to
other available methods for the fair and efficient adjudication of this litigation.
47.
Judicial economy will be served by maintaining this lawsuit as a class action in that
it is likely to avoid the burden that would be otherwise placed upon the judicial
system by the filing of numerous similar suits by people with visual disabilities
throughout the United States.
FIRST CAUSE OF ACTION
VIOLATIONS OF THE ADA, 42 U.S.C. § 12181 et seq.
48.
Plaintiff, on behalf of herself and the Class Members, repeats and realleges every
allegation of the preceding paragraphs as if fully set forth herein.
49.
Section 302(a) of Title III of the ADA, 42 U.S.C. § 12101 et seq., provides:
No individual shall be discriminated against on the basis of disability in the full and
equal enjoyment of the goods, services, facilities, privileges, advantages, or
accommodations of any place of public accommodation by any person who owns,
leases (or leases to), or operates a place of public accommodation.
42 U.S.C. § 12182(a).
50.
Defendant’s Website is a public accommodations within the definition of Title III
of the ADA, 42 U.S.C. § 12181(7). The Website is a service that is offered to the
general public, and as such, must be equally accessible to all potential consumers.
51.
Under Section 302(b)(1) of Title III of the ADA, it is unlawful discrimination to
deny individuals with disabilities the opportunity to participate in or benefit from
the products, services, facilities, privileges, advantages, or accommodations of an
entity. 42 U.S.C. § 12182(b)(1)(A)(i).
52.
Under Section 302(b)(1) of Title III of the ADA, it is unlawful discrimination to
deny individuals with disabilities an opportunity to participate in or benefit from
the products, services, facilities, privileges, advantages, or accommodation, which
is equal to the opportunities afforded to other individuals. 42 U.S.C. §
12182(b)(1)(A)(ii).
53.
Under Section 302(b)(2) of Title III of the ADA, unlawful discrimination also
includes, among other things:
[A] failure to make reasonable modifications in policies, practices, or procedures,
when such modifications are necessary to afford such goods, services, facilities,
privileges, advantages, or accommodations to individuals with disabilities, unless
the entity can demonstrate that making such modifications would fundamentally
alter the nature of such goods, services, facilities, privileges, advantages or
accommodations; and a failure to take such steps as may be necessary to ensure that
no individual with a disability is excluded, denied services, segregated or otherwise
treated differently than other individuals because of the absence of auxiliary aids
and services, unless the entity can demonstrate that taking such steps would
fundamentally alter the nature of the good, service, facility, privilege, advantage,
or accommodation being offered or would result in an undue burden.
42 U.S.C. § 12182(b)(2)(A)(ii)-(iii).
54.
The acts alleged herein constitute violations of Title III of the ADA, and the
regulations promulgated thereunder. Plaintiff, who is a member of a protected class
of persons under the ADA, has a physical disability that substantially limits the
major life activity of sight within the meaning of 42 U.S.C. §§ 12102(1)(A)-(2)(A).
Furthermore, Plaintiff has been denied full and equal access to the Website, has not
been provided services that are provided to other patrons who are not disabled, and
has been provided services that are inferior to the services provided to non-disabled
persons. Defendant has failed to take any prompt and equitable steps to remedy its
discriminatory conduct. These violations are ongoing.
55.
Under 42 U.S.C. § 12188 and the remedies, procedures, and rights set forth and
incorporated therein, Plaintiff, requests relief as set forth below.
SECOND CAUSE OF ACTION
VIOLATIONS OF THE NYCHRL
56.
Plaintiff, on behalf of herself and the New York City Sub-Class Members, repeats
and realleges every allegation of the preceding paragraphs as if fully set forth herein.
57.
N.Y.C. Administrative Code § 8-107(4)(a) provides that “It shall be an unlawful
discriminatory practice for any person, being the owner, lessee, proprietor,
manager, superintendent, agent or employee of any place or provider of public
accommodation, because of . . . disability . . . directly or indirectly, to refuse,
withhold from or deny to such person, any of the accommodations, advantages,
facilities or privileges thereof.”
58.
Defendant’s Website is a sales establishment and public accommodations within
the definition of N.Y.C. Admin. Code § 8-102(9).
59.
Defendant is subject to NYCHRL because it owns and operates its Website, making
it a person within the meaning of N.Y.C. Admin. Code § 8-102(1).
60.
Defendant is violating N.Y.C. Administrative Code § 8-107(4)(a) in refusing to
update or remove access barriers to Website, causing its Website and the services
integrated with such Website to be completely inaccessible to the blind. This
inaccessibility denies blind patrons full and equal access to the facilities, products,
and services that Defendant makes available to the non-disabled public.
61.
Defendant is required to “make reasonable accommodation to the needs of persons
with disabilities . . . any person prohibited by the provisions of [§ 8-107 et seq.]
from discriminating on the basis of disability shall make reasonable
accommodation to enable a person with a disability to . . . enjoy the right or rights
in question provided that the disability is known or should have been known by the
covered entity.” N.Y.C. Admin. Code § 8-107(15)(a).
62.
Defendant’s actions constitute willful intentional discrimination against the Sub-
Class on the basis of a disability in violation of the N.Y.C. Administrative Code §
8-107(4)(a) and § 8-107(15)(a) in that Defendant has:
a.
constructed and maintained a website that is inaccessible to blind
class members with knowledge of the discrimination; and/or
b.
constructed and maintained a website that is sufficiently intuitive
and/or obvious that is inaccessible to blind class members; and/or
c.
failed to take actions to correct these access barriers in the face of
substantial harm and discrimination to blind class members.
63.
Defendant has failed to take any prompt and equitable steps to remedy their
discriminatory conduct. These violations are ongoing.
64.
As such, Defendant discriminates, and will continue in the future to discriminate
against Plaintiff and members of the proposed class and subclass on the basis of
disability in the full and equal enjoyment of the products, services, facilities,
privileges, advantages, accommodations and/or opportunities of its Website under
§ 8-107(4)(a) and/or its implementing regulations. Unless the Court enjoins
Defendant from continuing to engage in these unlawful practices, Plaintiff and
members of the class will continue to suffer irreparable harm.
65.
Defendant’s actions were and are in violation of the NYCHRL and therefore
Plaintiff invokes her right to injunctive relief to remedy the discrimination.
66.
Plaintiff is also entitled to compensatory damages, as well as civil penalties and
fines under N.Y.C. Administrative Code § 8-120(8) and § 8-126(a) for each offense
as well as punitive damages pursuant to § 8-502.
67.
Plaintiff is also entitled to reasonable attorneys’ fees and costs.
68.
Under N.Y.C. Administrative Code § 8-120 and § 8-126 and the remedies,
procedures, and rights set forth and incorporated therein Plaintiff prays for
judgment as set forth below.
THIRD CAUSE OF ACTION
DECLARATORY RELIEF
69.
Plaintiff, on behalf of herself and the Class and New York City Sub-Classes
Members, repeats and realleges every allegation of the preceding paragraphs as if
fully set forth herein.
70.
An actual controversy has arisen and now exists between the parties in that Plaintiff
contends, and is informed and believes that Defendant denies, that its Website
contains access barriers denying blind customers the full and equal access to the
products, services and facilities of its Website, which Defendant owns, operates and
controls, fails to comply with applicable laws including, but not limited to, Title III
of the Americans with Disabilities Act, 42 U.S.C. §§ 12182, et seq., and N.Y.C.
Admin. Code § 8-107, et seq. prohibiting discrimination against the blind.
71.
A judicial declaration is necessary and appropriate at this time in order that each of
the parties may know their respective rights and duties and act accordingly.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff respectfully requests this Court grant the following relief:
a.
A preliminary and permanent injunction to prohibit Defendant from
violating the Americans with Disabilities Act, 42 U.S.C. §§ 12182, et seq.,
N.Y.C. Administrative Code § 8-107, et seq., and the laws of New York;
b.
A preliminary and permanent injunction requiring Defendant to take
all the steps necessary to make its Website into full compliance with the
requirements set forth in the ADA, and its implementing regulations, so that
the Website is readily accessible to and usable by blind individuals;
c.
A declaration that Defendant owns, maintains and/or operates its
Website in a manner that discriminates against the blind and which fails to
provide access for persons with disabilities as required by Americans with
Disabilities Act, 42 U.S.C. §§ 12182, et seq., N.Y.C. Administrative Code
§ 8-107, et seq., and the laws of New York
d.
An order certifying the Class and Sub-Classes under Fed. R. Civ. P.
23(a) & (b)(2) and/or (b)(3), appointing Plaintiff as Class Representative,
and her attorneys as Class Counsel;
e.
Compensatory damages in an amount to be determined by proof,
including all applicable statutory and punitive damages and fines, to
Plaintiff and the proposed class and subclasses for violations of their civil
rights under New York City Human Rights Law and City Law;
f.
Pre- and post-judgment interest;
g.
An award of costs and expenses of this action together with
reasonable attorneys’ and expert fees; and
h.
Such other and further relief as this Court deems just and proper.
DEMAND FOR TRIAL BY JURY
Pursuant to Fed. R. Civ. P. 38(b), Plaintiff demands a trial by jury on all questions
of fact the Complaint raises.
Dated: Hackensack, New Jersey
May 8, 2020
STEIN SAKS, PLLC
By: /s/ David P. Force
David P. Force, Esq.
[email protected]
285 Passaic Street
Hackensack, NJ 07601
Tel: (201) 282-6500
Fax: (201) 282-6501
ATTORNEYS FOR PLAINTIFF
| civil rights, immigration, family |
gPRYE4cBD5gMZwczt250 | BARSHAY, RIZZO & LOPEZ, PLLC
445 Broadhollow Road | Suite CL18
Melville, New York 11747
Tel: (631) 210-7272
Fax: (516) 706-5055
Attorneys for Plaintiff
Our File No.: BRL21201
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
CENTRAL ISLIP DIVISION
Kenneth Washington, individually and on behalf of all
others similarly situated,
Plaintiff,
Case No:
CLASS ACTION COMPLAINT
v.
JURY TRIAL DEMANDED
Professional Claims Bureau, Inc.,
Defendant.
Plaintiff Kenneth Washington, individually and on behalf of all others similarly situated,
by and through the undersigned counsel, complains, states, and alleges against defendant
Professional Claims Bureau, Inc. as follows:
INTRODUCTION
1.
This is an action to recover damages for violations of the Fair Debt Collection
Practices Act, 15 U.S.C. § 1692, et seq. (the “FDCPA”).
JURISDICTION AND VENUE
2.
This Court has federal subject matter jurisdiction pursuant to 28 U.S.C. § 1331, 28
U.S.C. § 1337 and 15 U.S.C. § 1692k(d). The Court has supplemental jurisdiction of any state
law claims pursuant to 28 U.S.C. §1367.
3.
This court has jurisdiction over defendant Professional Claims Bureau, Inc. because
it regularly conducts and transacts business in this state, and the conduct complained of herein
occurred in this Judicial District.
4.
Venue is proper in this Judicial District under 28 U.S.C. § 1391(b) because a
substantial part of the conduct complained of herein occurred in this Judicial District.
PARTIES
5.
Plaintiff Kenneth Washington (“Plaintiff”) is a natural person who is a citizen of
the State of New York residing in Suffolk County, New York.
6.
Plaintiff is a “consumer” as that term defined by 15 U.S.C. § 1692a(3).
7.
Defendant Professional Claims Bureau, Inc. (“Defendant”) is a company existing
under the laws of the State of New York, with its principal place of business in Garden City, New
8.
Defendant has transacted business within this state as is more fully set forth
hereinafter in this Complaint.
9.
Defendant regularly collects or attempts to collect debts asserted to be owed to
others.
10.
Defendant is regularly engaged, for profit, in the collection of debts allegedly owed
by consumers.
11.
The principal purpose of Defendant’s business is the collection of such debts.
12.
Defendant uses instrumentalities of interstate commerce, including telephones and
the mails, in furtherance of its debt collection business.
13.
Defendant is a “debt collector” as that term is defined by 15 U.S.C. § 1692a(6).
14.
The acts of Defendant as described in this Complaint were performed by Defendant
or on Defendant’s behalf by its owners, officers, agents, and/or employees acting within the scope
of their actual or apparent authority. As such, all references to “Defendant” in this Complaint shall
mean Defendant or its owners, officers, agents, and/or employees.
FACTUAL ALLEGATIONS
15.
On June 2, 2020 Plaintiff received medical services from Good Samaritan Hospital.
16.
Thereafter, Good Samaritan Hospital claimed Plaintiff incurred a debt of $150.00
for the medical services (“the alleged Debt”).
17.
The alleged Debt is an alleged obligation of Plaintiff to pay money arising out of a
transaction in which the money, property, insurance, or services which are the subject of the
transaction are primarily for personal, family, or household purposes.
18.
The alleged Debt does not arise from any business enterprise of Plaintiff.
19.
The alleged Debt is a “debt” as that term is defined by 15 U.S.C. § 1692a(5).
20.
At an exact time known only to Defendant, the alleged Debt was assigned or
otherwise transferred to Defendant for collection.
21.
At the time the alleged Debt was assigned or otherwise transferred to Defendant for
collection, the alleged Debt was in default.
22.
In its efforts to collect the alleged Debt, Defendant decided to contact Plaintiff by
written correspondence.
23.
Upon information and belief, rather than preparing and mailing such written
correspondence to Plaintiff on its own, Defendant decided to utilize a third-party vendor to perform
such activities on its behalf.
24.
Upon information and belief, as part of its utilization of the third-party vendor,
Defendant conveyed information regarding the alleged Debt to the third-party vendor.
25.
Upon information and belief, the information conveyed by Defendant to the third-
party vendor included Plaintiff’s status as a debtor, the precise amount of the alleged Debt, the
entity to which Plaintiff allegedly owed the debt, and the fact that the alleged Debt concerned
Plaintiff’s medical treatment, among other things.
26.
Defendant’s conveyance of the information regarding the alleged Debt to the third-
party vendor is a “communication” as that term is defined by 15 U.S.C. § 1692a(2).
27.
Upon information and belief, the third-party vendor then populated some or all this
information into a prewritten template, printed, and mailed the letter to Plaintiff at Defendant’s
direction.
28.
That letter, dated December 1, 2020, was received and read by Plaintiff. (A true
and accurate copy of that collection letter (the “Letter”) is annexed hereto as “Exhibit 1.”)
29.
The Letter, which conveyed information about the alleged Debt, is a
“communication” as that term is defined by 15 U.S.C. § 1692a(2).
FIRST COUNT
Violation of 15 U.S.C. § 1692c(b) and § 1692f
30.
Plaintiff repeats and realleges the foregoing paragraphs as if fully restated herein.
31.
15 U.S.C. § 1692c(b) provides that, subject to several exceptions not applicable
here, “a debt collector may not communicate, in connection with the collection of any debt,” with
anyone other than the consumer “without the prior consent of the consumer given directly to the
debt collector.”
32.
The third-party vendor does not fall within any of the exceptions provided for in 15
U.S.C. § 1692c(b).
33.
Plaintiff never consented to Defendant’s communication with the third-party
vendor concerning the alleged Debt.
34.
Plaintiff never consented to Defendant’s communication with the third-party
vendor concerning Plaintiff’s personal and/or confidential information.
35.
Plaintiff never consented to Defendant’s communication with anyone concerning
the alleged Debt or concerning Plaintiff’s personal and/or confidential information.
36.
Upon information and belief, Defendant has utilized a third-party vendor for these
purposes thousands of times.
37.
Defendant utilizes a third-party vendor in this regard for the sole purpose of
maximizing its profits.
38.
Defendant utilizes a third-party vendor without regard to the propriety and privacy
of the information which it discloses to such third-party.
39.
Defendant utilizes a third-party vendor with reckless disregard for the harm to
Plaintiff and other consumers that could result from Defendant’s unauthorized disclosure of such
private and sensitive information.
40.
Defendant violated 15 U.S.C. § 1692c(b) when it disclosed information about
Plaintiff’s alleged Debt to the third-party vendor.
41.
15 U.S.C. § 1692f provides that a debt collector may not use unfair or
unconscionable means to collect or attempt to collect any debt.
42.
The unauthorized disclosure of a consumer’s private and sensitive information is
both unfair and unconscionable.
43.
Defendant disclosed Plaintiff’s private and sensitive information to the third-party
vendor.
44.
Defendant violated 15 U.S.C. § 1692f when it disclosed information about
Plaintiff’s alleged Debt to the third-party vendor.
45.
For the foregoing reasons, Defendant violated 15 U.S.C. §§ 1692c(b) and 1692f
and is liable to Plaintiff therefor.
SECOND COUNT
Violations of 15 U.S.C. §§ 1692e and 1692e(10)
46.
Plaintiff repeats and realleges the foregoing paragraphs as if fully restated herein.
47.
15 U.S.C. § 1692e provides, generally, that a debt collector may not use any false,
deceptive, or misleading representation or means in connection with the collection of any debt.
48.
15 U.S.C. § 1692e(5) prohibits the use of threats to take any action that are not
intended to be undertaken.
49.
15 U.S.C. § 1692e(10) prohibits the use of any false representation or deceptive
means to collect or attempt to collect any debt.
50.
A debt collection practice can be a “false, deceptive, or misleading” practice in
violation of 15 U.S.C. § 1692e even if it does not fall within any of the subsections of 15 U.S.C. §
1692e.
51.
A collection letter violates 15 U.S.C. § 1692e if, in the eyes of the least
sophisticated consumer, it is open to more than one reasonable interpretation, at least one of which
is inaccurate.
52.
The Letter states the “Due Date” for payment as December 11, 2020.
53.
The Letter further states that, “if the account is not resolved, we will assume that
you have no intention of settling this outstanding debt.”
54.
The Letter makes it appear that the payment would need to be made by the above-
mentioned date or it will not be accepted.
55.
However, the Defendant continues to send more of these letters with the same false
threat after the expiry of the due date.
56.
Plaintiff has the interest and right to be free from false threats pertaining to actions
that are not intended to be undertaken.
57.
Plaintiff has the interest and right to be free from deceptive and/or misleading
communications from debt collectors, including Defendant.
58.
As such, Defendant’s representation that payment to be accepted can only be made
till the due date, is a false, deceptive, and/or misleading representation made in connection with
the collection of the alleged debt in violation of 15 U.S.C. § 1692e.
59.
Defendant’s representation that payment to be accepted can only be made till the
due date is a threat that to signify the payment window will close, which is false threat not intended
to be acted upon in violation of 15 U.S.C. § 1692e(5).
60.
Defendant’s allegation that payment to be accepted can only be made till the due
date is a false representation made in an attempt to collect the alleged debt in violation of 15 U.S.C.
§ 1692e(10).
61.
For the foregoing reasons, Defendant violated 15 U.S.C. §§ 1692e, 1692e(5) and
1692e(10) and is liable to Plaintiff therefor.
CLASS ALLEGATIONS
62.
Plaintiff brings this action individually and as a class action on behalf of all
consumers similarly situated in the State of New York.
63.
Plaintiff seeks to certify two classes of:
i. All consumers where Defendant sent information concerning the
consumer’s debt to a third-party vendor without obtaining the prior
consent of the consumer, which disclosure was made on or after a date
one year prior to the filing of this action to the present.
ii. All consumers to whom Defendant sent a collection letter with
payment due dates, only to send subsequent collection letters with
additional due dates, which letter was sent on or after a date one year
prior to the filing of this action to the present.
64.
This action seeks a finding that Defendant’s conduct violates the FDCPA and asks
that the Court award damages as authorized by 15 U.S.C. § 1692k.
65.
The Class consists of more than thirty-five persons.
66.
Plaintiff’s claims are typical of the claims of the Class. Common questions of law
or fact raised by this action affect all members of the Class and predominate over any individual
issues. Common relief is therefore sought on behalf of all members of the Class. A class action is
superior to other available methods for the fair and efficient adjudication of this controversy.
67.
The prosecution of separate actions by individual members of the Class would
create a risk of inconsistent or varying adjudications with respect to the individual members of the
Class, and a risk that any adjudications with respect to individual members of the Class would, as
a practical matter, either be dispositive of the interests of other members of the Class not party to
the adjudication, or substantially impair or impede their ability to protect their interests. Defendant
has acted in a manner applicable to the Class as a whole such that declaratory relief is warranted.
68.
Plaintiff will fairly and adequately protect and represent the interests of the Class.
The management of the class is not extraordinarily difficult, and the factual and legal issues raised
by this action will not require extended contact with the members of the Class, because Defendant’s
conduct was perpetrated on all members of the Class and will be established by common proof.
Moreover, Plaintiff has retained counsel experienced in actions brought under consumer protection
JURY DEMAND
69.
Plaintiff hereby demands a trial of this action by jury.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff respectfully requests judgment be entered as follows:
a. Certifying this action as a class action; and
b. Appointing Plaintiff as Class Representative and Plaintiff’s
attorneys as Class Counsel; and
c. Finding Defendant’s actions violate the FDCPA; and
d. Awarding damages to Plaintiff and the Class pursuant to 15
U.S.C. § 1692k; and
e. Awarding Plaintiff’s attorneys’ fees pursuant to 15 U.S.C. §
1692k, calculated on a “lodestar” basis; and
f. Awarding the costs of this action to Plaintiff; and
g. Awarding pre-judgment interest and post-judgment interest to
Plaintiff; all together with
h. Such other and further relief that the Court determines is just and
proper.
DATED: May 13, 2021
BARSHAY, RIZZO & LOPEZ, PLLC
By: s/ David M. Barshay
David M. Barshay, Esquire
445 Broadhollow Road | Suite CL18
Melville, New York 11747
Tel: (631) 210-7272
Fax: (516) 706-5055
Our File No.: BRL21201
Attorneys for Plaintiff
| consumer fraud |
OKotCocBD5gMZwczDo_4 | UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF WASHINGTON
CASE NO.: 2:21-cv-00872
DARK CATT STUDIOS HOLDINGS, INC., a
Delaware corporation, and DARK CATT
STUDIOS INTERACTIVE LLC, an Illinois
limited liability company, on behalf of themselves
and all others similarly situated,
CLASS ACTION COMPLAINT
FOR DAMAGES AND INJUNCTIVE
RELIEF FOR:
Plaintiffs,
v.
VIOLATION OF SECTION 2 OF THE
SHERMAN ACT (15 U.S.C. § 2) AND
WASHINGTON CONSUMER
PROTECTION ACT
VALVE CORPORATION, a Washington
corporation,
JURY DEMAND
Defendant.
WILSON SONSINI GOODRICH & ROSATI
TABLE OF CONTENTS
Page
I.
INTRODUCTION AND NATURE OF THE CASE ......................................................... 1
II.
PARTIES ............................................................................................................................ 6
III.
JURISDICTION AND VENUE ......................................................................................... 7
IV.
ANTITRUST LAWS .......................................................................................................... 8
V.
ADDITIONAL FACTUAL ALLEGATIONS ................................................................... 9
VI.
RELEVANT MARKET.................................................................................................... 16
A.
The Relevant Product Market Is PC Game Distribution ...................................... 17
B.
The Relevant Geographic Market Is Worldwide .................................................. 21
VII.
VALVE’S MONOPOLIZATION SCHEME ................................................................... 22
A.
Valve Is in a Dominant Position in the Market for PC Game Distribution .......... 22
B.
Anticompetitive Contracts Imposed on Developers ............................................. 25
1.
Valve’s MFN Provisions Are Anticompetitive......................................... 25
2.
Valve’s Exclusivity Provision Is Anticompetitive .................................... 26
C.
Valve’s Use of Steam Keys to Control Developers Is Anticompetitive ............... 28
D.
Valve’s Use of Its Review System to Control Developers Is
Anticompetitive..................................................................................................... 32
E.
Valve Reaps Rewards from Its Monopoly at Developers’ Expense ..................... 37
VIII.
CLASS ACTION ALLEGATIONS ................................................................................. 39
IX.
CLAIMS FOR RELIEF .................................................................................................... 41
X.
PRAYER FOR RELIEF ................................................................................................... 45
XI.
JURY DEMAND .............................................................................................................. 46
-i-
WILSON SONSINI GOODRICH & ROSATI
TABLE OF AUTHORITIES
CASES
Epic Games, Inc. v. Apple, Inc.,
No. 4:20-cv-05640-YGR (N.D. Cal.) ................................................................................19
United States v. Microsoft Corp.,
253 F.3d 34 (D.C. Cir. 2001) ...............................................................................................6
STATUTES
15 U.S.C. § 15 ........................................................................................................................7, 8, 45
15 U.S.C. § 22 ..............................................................................................................................7, 8
15 U.S.C. § 26 ........................................................................................................................7, 8, 45
28 U.S.C. § 1331 ..............................................................................................................................7
28 U.S.C. § 1337 ..............................................................................................................................7
28 U.S.C. § 1367 ..............................................................................................................................7
28 U.S.C. §§ 1391(b), (c), and (d) ...................................................................................................8
15 U.S.C. § 2 .......................................................................................................................... passim
Washington Consumer Protection Act (RCW 19.86) ............................................................ passim
RULES
Federal Rule of Civil Procedure 38(b) ...........................................................................................46
Federal Rule of Civil Procedure 23(a). (b)(2), and (b)(3) ..................................................39, 41, 45
-ii-
WILSON SONSINI GOODRICH & ROSATI
Plaintiffs Dark Catt Studios Holdings, Inc. and Dark Catt Studios Interactive LLC
(collectively, “Dark Catt”) bring this antitrust action against Defendant Valve Corporation
(“Valve” or “Defendant”) under Section 2 of the Sherman Antitrust Act, 15 U.S.C. § 2, and the
Washington Consumer Protection Act, on behalf of themselves and a class of similarly situated
personal computer (“PC”) video game developers (collectively, “Developers”), and allege as
follows on personal knowledge as to themselves and upon information and belief as to all others:
I.
INTRODUCTION AND NATURE OF THE CASE
1.
Dark Catt is a game developer that set out to make, market, and sell an exciting new
PC game. To reach customers, Dark Catt launched its game on Valve’s Steam gaming website.
PC game Developers like Dark Catt have no viable choice but to publish and sell through Steam
because Valve uses its monopoly power to serve as the gatekeeper to PC game distribution and
therefore to PC gaming customers.
2.
Dark Catt was required to pay Valve supracompetitive fees on its game sales (and
did so), paying Valve 30% of the sales price on Steam plus other fees. Dark Catt is not Valve’s
only victim. All Developers that publish through Steam are subject to Valve’s excessive and
anticompetitive revenue share requirement and other monopolistic practices that serve only to
prevent competition.
3.
Founded in 1996 and incorporated in 2003, Valve started as a video game
developer, publishing popular games such as the Half-Life, Portal, and Counter-Strike franchises.
A significant shift in Valve’s business came with its launch of Steam as a digital content
distribution channel in 2003.1 Since then, it has used a playbook of tactics to wrongfully attempt
to gain and/or wrongfully maintain a monopoly in PC game distribution, extract anticompetitive
rents from Developers, and prevent other game distribution stores from gaining a foothold to
compete effectively in the market.
1
About Us, Valve Corporation, https://www.valvesoftware.com/en/about (last accessed
June 25, 2021).
4.
Steam originally served as a software client for Valve’s own games, allowing it to
distribute game patches for online games; it also included anti-piracy and anti-cheat measures.
Valve released Half-Life 2 in November 2004 and required the Steam client to be installed on the
user’s PC to play the game, even if the customer purchased a physical copy of the game.
Customers could not play the game unless they created a Steam account and installed Steam on
their PC. Soon thereafter, Valve began contracting with third parties to digitally distribute their
games on Steam. By May 2007, 150 games were available for sale on the Steam store, with Valve
taking a cut of developers’ revenues in exchange for maintaining the content delivery system.
There are now at least 50,000 games available on Steam.2
5.
Valve, through Steam, became the world’s largest distributor of PC games, holding
approximately 75% of the global market. In 2017, Steam generated over $4 billion worth of sales.3
Last year, Steam recorded 120 million monthly active players.4
6.
Valve’s success as a company has largely tracked the growth of Steam. In 2005,
Forbes estimated that Valve had grossed $70 million. As of 2012, the company was worth over
$3 billion. Valve Chief Executive Officer Gabe Newell asserted it was more profitable per
employee than Google or Apple.5 As of 2019, Valve’s market capitalization had ballooned to $10
billion. Steam is Valve’s largest source of revenue.
7.
In transforming itself from plucky gaming upstart to corporate behemoth, Valve
has monopolized and/or attempted to monopolize the PC game distribution industry. Valve has
already reaped a substantial reward for its early development of a digital distribution system that
2 Dustin Bailey, Steam Just Reached 50,000 Games Listed, PCGamesN (Feb. 12, 2021),
https://www.pcgamesn.com/steam/total-games.
3
Arthur Zuckerman, 75 Steam Statistics: 2020/2021 Facts, Market Share & Data Analysis,
Compare Camp (May 15, 2020), https://comparecamp.com/steam-statistics.
4 Valve Corporation, 2020 Year in Review (Jan. 13, 2021), https://store.steampowered.com/
news/group/4145017/view/2961646623386540826.
5 Oliver Chiang, The Master of Online Mayhem, Forbes (Feb. 28, 2011),
http://www.forbes.com/forbes/2011/0228/technology-gabe-newell-videogames-valve-online-
mayhem.html.
can support third-party applications. Valve has more than recovered for its business acumen back
in 2003.
8.
Valve’s monopoly tactics harm hundreds of game Developers and millions of game
buyers, all of whom pay monopoly rents to Valve in the form of, among other tributes, (a) inflated
revenue sharing on game sales (overcharges Valve imposes on all Developers) or (b) potentially
inflated game sales prices (overcharges that may be paid by game buyers as a result of the inflated
revenue sharing). Valve keeps 30% of the sales price for purchases on its site and remits the
remaining 70% to the Developer, not including sales taxes and other fees that further lower the
Developer’s share. Recently, Valve reduced the percentage to 25% or 20% for the highest selling
tiers of games, but the majority of games remain subject to Valve’s 30% tax, a percentage Valve
has not been forced to lower through competitive pressures for almost twenty years.
9.
Valve executes its scheme to gain and maintain its PC game distribution monopoly
in at least three ways. First, Valve extends its reach beyond its own Steam store; it controls
Developers’ activities—including their pricing and marketing, such as minimum pricing and
exclusive offerings (“exclusives”)6—on other, third-party storefronts competing to sell the same
games available on Steam. For example, Valve instructs Developers not to “give Steam customers
a worse deal” when Developers publish and sell their games through other stores. Valve makes
clear that if a Developer were to offer a discount elsewhere, it must offer Steam customers a
comparable discount within a reasonable time. Valve enforces these requirements in various ways.
10.
In the absence of Valve’s restrictions, Developers would be able to publish, market,
and sell their games on better terms than they receive from Valve and potentially for lower prices
to consumers than consumers pay on Steam. Indeed, Developers could and would make more
money from each sale because other storefronts commonly offer lower revenue sharing
commitments than those imposed by Steam and may offer financial incentives for temporary
exclusive offerings. Developers would keep a larger percentage of each sale, which may also
6
Exclusive offerings generally involve (a) limited releases of a game or update, either for a
specified time or permanently, to one storefront; or (b) special values for a game, such as bundles
where the game is free with the purchase of hardware.
allow them to offer a lower sales price to consumers without sacrificing profits and/or pour more
money into innovation and game upgrades.
11.
Thus, if not for Valve’s restrictive terms requiring Developers to offer their best
pricing and availability on Steam compared to another store, Developers could offer to sell their
games—and enhancements to their games—at lower prices on competing storefronts. Competing
storefronts would be able to gain traction in the industry, and increased competition in PC game
distribution would result in greater exposure for Developers’ games, more money to Developers,
more choices for Developers and consumers, and more innovation and/or potentially lower prices
for consumers, among other benefits.
12.
Second, Valve uses its system of authorization numbers called “Steam keys” to
enforce its restrictive pricing and marketing terms and to control Developers. Steam keys are
crucial to the PC gaming industry from pre-commercialization beta testing of new games and
media and influencer publicity, to post-release expansion onto third-party stores.
13.
Valve builds and maintains its monopoly by ensuring Steam keys remain the
industry standard for distributing authorized, licensed copies of games. The critical need for access
to Steam keys keeps Developers from violating Valve’s overly restrictive pricing and marketing
terms.
14.
Valve collects Steam key usage and other data concerning Developers’ sales
through other stores. Valve uses Steam keys to punish Developers for selling their games at lower
prices or offering exclusives on other stores when Steam too is selling the game. It also uses its
control over Steam keys to limit the number of sales Developers can make through other stores.
15.
Indeed, despite Developers’ need for Steam keys, access to Steam keys is governed
by Valve’s secret whim. Valve retains sole discretion to approve Steam keys for Developers, even
the so-called “dev comp” keys that provide Developers access to their own Steam-hosted games.
Valve provides no clear, objective, or consistent rules or guidelines as to when key requests may
be approved or denied, and Developers have no recourse when their request is denied. Valve may
and sometimes does arbitrarily delay or deny Steam keys to the Developer, as Dark Catt found out.
16.
Third, Valve uses its control of the publicity and visibility of games on the Steam
store to keep Developers in check and maintain its monopoly power in PC game distribution.
Valve’s Steam store review system punishes Developers that threaten Steam’s power or control.
17.
Via its Steam review system, Valve is willing to ban games or Developers after
little or no investigation of reported wrongful behavior, allowing users to attack games without
merit. Steam’s loyal and zealous user base will post baseless negative reviews for certain
Developers’ games on the Steam store, and Valve fails to remove negative reviews for Developers
it opaquely determines to have acted against Valve in some way. When done in large numbers,
the succession of negative reviews is called “review bombing.”7 These negative reviews do not
address the quality of the game or its technical performance; they instead reflect users’ displeasure
with the Developer, often due to the Developer’s use of alternative distribution sites.
18.
Although unrelated to the game, the volume of negative reviews can have
devastating results for future sales and can bury the game among thousands of others in search
results and recommendations. The reviews can result in lower sales for Developers and even
Developers unjustifiably being banned from Steam altogether.
19.
Thus, Valve’s use of the Steam review system is a powerful tool in its control over
Developers’ pricing, publishing, and marketing on other sites.
20.
Impact: Valve’s anticompetitive practices have exploited the plaintiff class of
Developers, who find themselves reliant on Steam’s massive user base and locked into publishing
and selling their games on Steam. Valve imposes on Developers abusive contractual provisions
and unjustified pricing and marketing restrictions, as well as instilling an unwarranted yet well-
grounded fear of retaliation. Without strict fealty to Valve in the first instance, Developers are
unable practicably to pursue and take full advantage of beneficial commercial opportunities
7
“Review bombing is the practice of flooding a digital review service with negative
feedback, to artificially lower an item’s overall rating. It’s a practice used frequently in the gaming
industry, though it’s by no means exclusively there.” Rachel Kaser, Game review bombs are here
to stay – so let’s use them for good, The Next Web (Mar. 4, 2019), https://thenextweb.com/gaming/
2019/03/04/game-review-bombing-steam-good-bad/.
elsewhere. Developers are forced to pay Valve a supracompetitive fee, in the form of an inflated
revenue share, and are blocked from entering more favorable and procompetitive arrangements
with other storefronts.
21.
Valve’s practices have also harmed others not party to this lawsuit, including
Valve’s would-be competitors, third-party storefronts like Epic Games Store, Electronic Arts’
Origin, Microsoft’s store, Tiny Build’s store, and Discord’s store, which have been consistently
unable to make incursions on Steam’s market share despite pursuing more efficient business
models and offering more favorable opportunities for Developers.
22.
Valve’s practices have also harmed PC gaming consumers, who are now inured to
Steam, paying supracompetitive prices on games and add-ons purchased, and/or being denied the
benefits of the higher quality, higher quantity, and/or cheaper games and more innovative delivery
systems that they would receive in a competitive marketplace.
23.
Now a giant company of 25-year vintage, Valve has proven itself incapable of
succeeding only on its legitimate merits; it has crossed the line into illegal monopolization. See
United States v. Microsoft Corp., 253 F.3d 34 (D.C. Cir. 2001). Its conduct needs to be redressed.
II.
PARTIES
24.
Plaintiff Dark Catt Studios Holdings, Inc. (“DCS Holdings”) is a multimedia
production company and development studio with a focus on film, animation, and narrative media
forms. It is incorporated in the State of Delaware with its principal place of business in Illinois.
25.
Plaintiff Dark Catt Studios Interactive LLC (“DCS Interactive”) is a wholly owned
subsidiary of DCS Holdings and specializes in PC software, gaming, interactive content, and
experiences. It is formed under the laws of the State of Illinois and has its principal place of
business in Illinois.
26.
DCS Holdings contracted with Valve under the Steam Distribution Agreement
(“SDA”) during the Class Period (defined below). DCS Interactive created a PC game and made
it compatible with Steam by incorporating the Steamworks software development kit (“SDK”),
subjecting it to the Steamworks Documentation rules. DCS Interactive, bound by the terms of its
parent DCS Holdings’ contracts with Valve and the Steamworks Documentation, published its
game for sale on Steam, sold its game to consumers on Steam, and paid various sums to Valve,
including Valve’s mandatory 30% revenue share on game sales on Steam.
27.
Defendant Valve Corporation is a game developer, hardware manufacturer, and
digital content distributor. It is the world’s largest PC game distributor. Valve Corporation is
incorporated in the State of Washington and has its principal place of business at 10900 NE 4th
Street, Suite 500, Bellevue, Washington 98004. It operates the Steam store, distributes PC games
online, and, among other conduct, contracts with PC video game developers through the SDA and
Steamworks Documentation.
III.
JURISDICTION AND VENUE
28.
The United States District Court for the Western District of Washington has
subject-matter jurisdiction under Sections 4 and 16 of the Clayton Act (15 U.S.C. §§ 15(a) & 26)
and 28 U.S.C. § 1331 and 28 U.S.C. § 1337, because this action arises under Section 2 of the
Sherman Act (15 U.S.C. § 2). The Court has supplemental jurisdiction for the Washington state
law claim under 28 U.S.C. § 1367.
29.
The United States District Court for the Western District of Washington has
personal jurisdiction over Defendant under 15 U.S.C. § 22, because Valve Corporation is a resident
of the Western District of Washington and, inter alia: (a) transacted business throughout the
United States, including in the Western District of Washington; (b) contracted with Developers
within the United States, including in the Western District of Washington; (c) had substantial
contacts within the United States, including in the Western District of Washington; and/or (d) was
engaged in an illegal anticompetitive scheme that was directed at and had the intended effect of
causing injury to persons residing in, located in, or doing business throughout the United States,
including in the Western District of Washington.
30.
Venue is proper in the United States District Court for the Western District of
Washington because a substantial part of the events giving rise to Dark Catt’s claim occurred in
this District and a substantial portion of the affected interstate trade and commerce was carried out
in this District, as provided in 15 U.S.C. § 22 and 28 U.S.C. §§ 1391(b), (c), and (d). Further,
Valve selected the courts in King County, Washington, as the venue for disputes arising under, in
connection with, or incident to the SDA.
IV.
ANTITRUST LAWS
31.
Section 2 of the Sherman Act (15 U.S.C. § 2) makes it unlawful for any person to
“monopolize, or attempt to monopolize, or combine or conspire with any other person or persons,
to monopolize any part of the trade or commerce among the several States.”
32.
Section 2 makes it illegal to acquire or maintain monopoly power through improper
means. The offense of monopolization has two elements: (1) the possession of monopoly power
in the relevant market, and (2) the willful acquisition or maintenance of that power as distinguished
from growth or development as a consequence of a superior product, business acumen, or historic
accident.
33.
The offense of attempted monopolization has three elements: (1) anticompetitive
conduct; (2) a specific intent to monopolize; and (3) a dangerous probability of success, i.e.,
achieving monopoly power.
34.
Monopoly power is the power to control prices or exclude competition and can
ordinarily be inferred from a dominant share of the relevant market.
35.
The monopoly power must be accompanied by some element of exclusionary
conduct that harms competition in the relevant market.
36.
A specific intent to monopolize entails an intent to destroy competition or build
monopoly.
37.
The dangerous probability of achieving monopoly power is determined by
evaluating the relevant market and the ability to lessen competition in that market. The defendant
is not required to have monopoly power, and the minimum showing of market share required is a
lower quantum than the minimum showing required for an actual monopolization claim.
38.
Sections 4 and 16 of the Clayton Act (15 U.S.C. §§ 15 and 26) authorize any person
(including Dark Catt) injured in its business or property by reason of the antitrust law violations
alleged in this complaint to sue in this Court for damages sustained thereby, and the costs of suit,
including a reasonable attorney’s fee, as well as for injunctive relief.
39.
The Washington Consumer Protection Act (RCW 19.86) prohibits unfair methods
of competition and unfair or deceptive practices in the conduct of trade or commerce. The offense
has five elements: (1) an unfair or deceptive act or practice; (2) occurring in trade or commerce;
(3) public interest impact; (4) injury to the plaintiff in his or her business or property; and (5)
causation.
V.
ADDITIONAL FACTUAL ALLEGATIONS
40.
This antitrust suit arises from Valve’s willful attempted and/or actual acquisition
and maintenance of monopoly power in the global market for PC game distribution. The relevant
product and geographic markets are further defined below.
41.
Valve dominates the PC game distribution market through the use and control of
its digital distribution store, Steam, and associated Steam keys. Developers contract with Valve
to publish their games on Steam. Consumers can then purchase (from Steam directly or from other
stores selling Steam keys), download, and play a given PC game on Steam.
42.
Steam is the world’s largest distributor of PC video games, holding approximately
75% of the global market. In 2020, Steam reported that it recorded 120 million monthly active
players, 25 million peak concurrent users, and 2.6 million new purchases per month.8
43.
Prior to October 2018, Valve imposed a standard revenue share percentage on all
Developers, keeping 30% of the sales price for all purchases on its site for itself and remitting the
remaining 70% to the Developer. Since then, Valve continues to keep 30% of most sales but
reduces the percentage to 25% or 20% for the highest selling tiers of games. Developers also pay
other fees to Valve.
44.
Valve contracts with Developers to distribute games on Steam through the SDA.
Valve also includes extensive rules throughout the Steamworks Documentation that governs the
8
Steam – 2020 Year in Review, supra note 4.
use of Steamworks, which is Steam’s SDK that Developers must use to make their game
compatible with Steam.
45.
Since at least April 27, 2017 and continuing through the present until the effects of
its scheme are eliminated (“Class Period”), Valve has illegally attempted and/or actually acquired
and maintained its monopoly through the SDA, Steamworks Documentation, and other acts.
Indeed, Valve uses the SDA and terms of the Steamworks Documentation to maintain its
monopoly in the PC game distribution market.
46.
The SDA suppresses competition by, among other tactics, requiring Developers to
make their games (and any updated version) available on Steam at the same time they become
commercially available through any other source.
47.
Developers are therefore unable to offer a new game, update, or add-on through a
third-party store before delivering that application to Steam. This prohibits Developers from
entering exclusive offerings with other storefronts. Valve suppresses competition by ensuring
Steam has access to the newest inventory, on its terms, instead of having to negotiate for the newest
releases in a competitive market.
48.
Without Valve’s undue restraints, Developers could and would contract with other
storefronts to offer exclusives, which are valuable promotional tools for both stores and
Developers to attract customers and increase game sales. In response, Valve would have to
compete with other stores in negotiations with Developers—including, for example, in terms of
price, revenue share, minimum sales guarantees, and marketing support—to get an exclusive
offering on Steam, or simultaneous release rather than an exclusive on a competing marketplace.
49.
Competition for exclusives would result in procompetitive benefits for Developers
and consumers, for example, upfront payments that Developers invest in additional development
resources, increasing the quality, innovation, and number of games offered to consumers. Instead,
Steam requires delivery by right of contract and artificially keeps prices high.
50.
The SDA also suppresses competition through its restrictions on downloadable
content (“DLC”), which is digital content a consumer can add onto a complete video game. It is
related to a game, but available separately from the base game. DLC may consist of cosmetic
changes such as new character “skins” or new stories, modes, or missions that provide hours of
additional playing time. Under the SDA, DLC also includes any game-related services provided
for an additional payment.
51.
DLC can be a significant source of revenue to Developers. In a 2019 survey, 87%
of gamers reported that they purchased DLC. Each player of the decade-old game League of
Legends spent an average of $92 on DLC for the game in 2019. Valve’s game Counter-Strike saw
an average $70 spend per player.9
52.
Indie developers also benefit from DLC, particularly to drive sales later in the
lifecycle of a release. As examples, EXOR Studios shared the lifetime sales of its game X-Morph:
Defense, released in 2017. It had sold about 80,500 copies of the base game and 73,300 total units
of its three DLC offerings. Its bundled “complete version,” including the game and DLC,
accounted for almost half its sales. The studio Fellow Traveler reported that one-third of its
revenues for its game Hacknet have been from DLC. And studio No More Robots offers a $20
game and a $10 story DLC, with between one-fourth and one-third of customers (depending on a
non-sale or sale period, respectively) also purchasing the DLC.10
53.
Valve, through the SDA, requires Developers to offer their DLC to Steam
customers at the best price and earliest availability for which it is available on any other
marketplace. If a Developer distributes a game available on Steam through another store also, and
is going to distribute DLC for that game through the other store, the Developer must provide
comparable DLC to Steam users at the same time the DLC becomes available on the other store.
Further, the Developer must provide the DLC at the same price on Steam and the other storefront.
9
Statistica, Share of gamers who purchase downloadable content in the United States in
2019 (Mar. 3, 2021), https://www.statista.com/statistics/274130/purchased-virtual-gaming-items-
and-content-in-the-us/; Statistica, Average annual spend on downloadable content (DLC) in
selected video games in the United States in 2019 (Mar. 3, 2021), https://www.statista.com/
statistics/1104745/video-gaming-dlc-spend-game/.
10 Simon Carless, The surprising way that paid DLC works, Gamasutra (July 13, 2020),
https://www.gamasutra.com/blogs/SimonCarless/20200713/366297/The_surprising_way_
that_paid_DLC_works.php.
54.
Valve’s restrictions on DLC as well as other terms imposed on Developers are, in
practice and effect, a type of Most Favored Nation (“MFN”) provision preventing price
competition between storefronts. The MFN also keeps Developers on Steam because they may
not monetize their DLC at a better rate on another store or use DLC exclusives to attract customers
to another store.
55.
Likewise, the Steamworks Documentation prohibits Developers from offering a
game at a lower price on another storefront, imposing a corresponding MFN on the base game.
56.
Steamworks is the SDK used to add various tools and features to a game that will
run on Steam. One component, called SteamPipe, is required to upload content to Steam, making
use of Steamworks mandatory for a Developer to publish its game on Steam.11
57.
All Developers therefore must become “Steamworks partners” to publish their
games on Steam, and in turn must comply with the rules and guidelines in the Steamworks
Documentation.
58.
Developers who want to run a beta test, provide free access to media, or distribute
their Steam-hosted game on third-party stores must use Steam keys. Steam keys are alphanumeric
codes that provide a way to authenticate users and grant a game license to valid purchasers.
59.
The Steamworks Documentation on Steam Keys requires Developers to offer
games on Steam at the best available price. The Rules and Guidelines section states, for example:
“We ask you to treat Steam customers no worse than customers buying Steam keys
outside of Steam.”
“You should use keys to sell your game on other stores in a similar way to how you
sell your game on Steam. It is important that you don’t give Steam customers a worse
deal.”
“It’s OK to run a discount on different stores at different times as long as you plan to
give a comparable offer to Steam customers within a reasonable amount of time.”
11 Valve Corporation, Steamworks SDK, https://partner.steamgames.com/doc/sdk (last
accessed June 25, 2021); Valve Corporation, Uploading to Steam, https://partner.steamgames.com/
doc/sdk/uploading (last accessed June 25, 2021). Other features in the SDK are optional but
frequently incorporated into games to provide features such as game notifications, player statistics,
and “matchmaking” to find other users who want to play a multiplayer game.
“Keep in mind that the perceived price in the bundle/subscription should be a price you
are willing to run the game at a standalone price or discount on Steam. . . . We want to
avoid a situation where customers get a worse offer on the Steam store, so feel free
to reach out to us via the Developer Support tool if you want to talk through a
specific scenario.” (emphasis in original)
“We reserve the right to deny requests for keys or revoke key requesting privileges for
partners that are abusing them or disadvantaging Steam customers.”
“If we detect that you have requested an extreme number of keys and you aren’t
offering Steam customers a good value, we may deny your request.”
“We reserve the right to remove key requesting privileges from any partner whose sole
business is selling Steam keys and not providing value or a fair deal to Steam
customers.”
(collectively, “Steam Key Rules”).12
60.
Although Valve specifically avoids using the word “price” in most of the above
statements, it is well understood by industry participants that “deal,” “offer,” and “value” mean
price, consistent with those terms’ common usage. This understanding comes in part from Valve’s
enforcement of the terms as requiring price parity across stores, i.e., an MFN.
61.
Epic CEO Tim Sweeney explained how this affects prices on his company’s store,
even though it does not sell Steam keys:
Steam has veto power over prices, so if a multi-store developer wishes to sell their
game for a lower price on the Epic Games store than Steam, then:
1) Valve can simply say ‘no’
2) Pricing disparity would likely anger Steam users, leading to review bombing,
etc.13
62.
The Steam Key Rules and DLC restrictions together act as an MFN controlling PC
gaming prices throughout the industry, requiring that Steam receive the lowest prices for base
12 Valve Corporation, Steam Keys, https://partner.steamgames.com/doc/features/keys (last
accessed June 25, 2021).
13 https://twitter.com/TimSweeneyEpic/status/1090663312814157824 (Jan. 30, 2019); see
also Kyle Orland, Epic CEO: “You’re Going to See Lower Prices” on Epic Games Store, Ars
Technica (Mar. 20, 2019), https://arstechnica.com/gaming/2019/03/epic-ceo-youre-going-to-see-
lower-prices-on-epic-games-store/ (“The Epic Games Store’s much-ballyhooed 88-percent
revenue share has been great news for developers who are no longer forced to accept Steam’s de
facto 70-percent standard. But this new behind-the-scenes monetary split hasn’t resulted in
savings for gamers, who thus far have seen the same price tags for games on Epic’s storefront as
on Steam (when titles are available on both).”).
games and any add-on content. These terms allow Valve to maintain its monopoly in the PC game
distribution market by unilaterally controlling the price floor of all Steam-based PC games
regardless of where else they are sold. Other PC gaming stores have had great difficulty in
effectively gaining market share and contesting Valve’s monopoly because Valve’s conduct as
alleged in this complaint prevents them from competing on price.
63.
While Epic is trying to succeed with its own distribution site, other developers and
publishers, even giant companies such as Electronic Arts (“EA”), Ubisoft, and Microsoft, are
unable to take similar actions to challenge Valve’s monopoly. Other developers or publishers
cannot sustain the losses that Epic has in trying to compete with Valve; Epic reportedly lost $181
million on the Epic Games Store in 2019, $273 million in 2020 (projected), and expects to lose
$139 million in 2021.14
64.
Epic launched its store by offering the already highly popular Fortnite game. In
addition to its lower revenue sharing percentage for sales on its store, Epic waived the royalty for
developers using its popular Unreal Engine game engine for their game (typically 5% of gross
revenue after a revenue threshold is reached). It has also spent hundreds of millions of dollars
attracting developers through minimum revenue guarantees, committing $444 million to
exclusivity deals in 2020.15 Its sales of third-party games in 2020 were $265 million, by
comparison.16
65.
Epic spends heavily to attract customers as well. In 2020 alone, it gave away 103
games worth a total of $2,407, with customers claiming a total of 749 million copies of the free
games.17
14 Tyler Wilde, Epic will lose over $300M on Epic Games Store exclusive, is fine with that,
PC Gamer (Apr. 10, 2021), https://www.pcgamer.com/epic-games-store-exclusives-apple-
lawsuit/.
15
Id.
16 Epic Games, Inc., Epic Games Store 2020 Year in Review (Jan. 28, 2021),
https://www.epicgames.com/store/en-US/news/epic-games-store-2020-year-in-review.
17
Id.
66.
Smaller game stores do not have the financial resources to offer these benefits to
developers and consumers and sustain the losses in an attempt to challenge Valve’s exclusionary
exercise of monopoly power.
67.
Even other billion-dollar companies with popular PC games, similar to Epic, have
been unable to compete with Steam in the market for PC game distribution.
68.
EA created its Origin store and game launcher in 2011, allowing users to buy,
download, and play games directly from EA. It stopped releasing its games on Steam at that time.
Despite the draw of its popular franchises such as FIFA, the Sims, and Battlefield, EA was unable
to break through Valve’s anticompetitive tactics in the PC game distribution market and returned
its games to Steam in 2020 to “be where the players are.”18
69.
Microsoft also attempted to challenge Valve’s monopoly using its popular games
and Windows operating system to attract users to its store. But it was likewise unable to make
inroads into Steam’s market dominance and began selling its PC games on Steam in 2019.19
70.
Ubisoft, publisher of blockbuster franchises such as Assassin’s Creed, Tom
Clancy’s Rainbow Six Siege, and Anno, launched its Uplay gaming client and online store in 2009.
Though it has the ability to publish and sell games fully independently of Steam and Valve, Ubisoft
continues to sell its games on Steam because of Valve’s monopolistic hold on the market.
71.
Discord, a communication service popular among gamers, attempted to enter the
PC game distribution market in late 2018. It had an existing user base of millions of active PC
gamers and offered more favorable terms for developers. Within a year, Discord shut down both
the store and its monthly subscription service for PC games.
72.
Absent the Steam Key Rules, DLC restrictions, marketing limitations, and Valve’s
other conduct, Developers could and would contract with other stores to offer their games and
18 Chaim Gartenberg, EA games are returning to Steam along with the EA Access subscription
service, The Verge (Oct. 29, 2019), https://www.theverge.com/2019/10/29/20937055/ea-games-
steam-access-subscription-service-pc-storefront-jedi-fallen-order-sales.
19 Nick Statt, Microsoft will distribute more Xbox titles through Steam and finally support
Win32 games, The Verge (May 30, 2019), https://www.theverge.com/2019/5/30/18645250/
microsoft-xbox-game-studios-publishing-valve-steam-32-bit-windows.
DLC with exclusive offers and potentially at lower prices than the prices offered for the same
games on Steam. This would attract additional customers to purchase games on the other stores,
driving market share away from Steam and onto other PC game distributor stores. Further, this
would allow Developers to reach a broader consumer base and increase revenues even if they offer
a lower retail price to game buyers.
73.
With competition for distribution of PC games, Valve would be pushed to offer
better revenue sharing agreements with Developers, allowing Developers to keep more of the sales
revenues from their products. In other words, the 30% revenue share Valve imposes on the
majority of Developers would be (and should have been) reduced.
74.
Dark Catt contracted with Valve under the SDA and the rules governing use of
Steamworks. During that time, Valve prohibited Dark Catt from entering into agreements with
other publishers or stores to sell its game or DLC at lower prices than those offered through the
Steam store or engage in exclusives.
75.
As a direct consequence of Valve’s anticompetitive conduct, Dark Catt and
Developers: (a) paid Valve a supracompetitive revenue share; (b) could not take advantage of
better revenue share agreements offered on other stores; and (c) could not engage in exclusives on
other stores, thereby depriving Dark Catt and Developers of additional game sales and better
marketing support. Thus, Dark Catt and Developers suffered antitrust injury.
76.
Dark Catt brings this action on behalf of itself and a putative Class of Developers
in the public interest and to redress Valve’s abuse of its market power to attempt to monopolize
and maintain its illegal monopoly in the PC game distribution market through the SDA and
Steamworks Documentation terms, as well as the other anticompetitive practices described herein,
in violation of Section 2 of the Sherman Act (15 U.S.C. § 2) and the Washington Consumer
Protection Act.
VI.
RELEVANT MARKET
77.
The relevant product market is the PC game distribution market. The market is
worldwide in geographic scope.
A.
The Relevant Product Market Is PC Game Distribution
78.
At all relevant times, Valve had substantial market power in the PC game
distribution market. Valve had the power to profitably maintain the prices offered on Steam at
supracompetitive levels without losing sales to other stores that offer the same games. It similarly
had the power to exclude potential competitors from the PC game distribution market, harming
Developers and potentially PC gaming customers.
79.
As an initial matter, PC games are not reasonably interchangeable with console
games or mobile games. PC games are only playable on personal computers and are not
compatible with game consoles (e.g., Microsoft Xbox, Sony PlayStation) or mobile devices. The
differences between the platforms inform the distinct distribution markets for PC games, console
games, and mobile apps.
80.
The cross-elasticity of demand between PC games and console games is low, and
consumers will not respond to a small but significant price change for a PC game by purchasing a
console game instead.
81.
There are thousands more games available for PC than game consoles, and they
retail at lower average prices than console games. Steam has over 50,000 games available, while
Xbox One, PlayStation 4, and Nintendo Switch each have around 3,000 games.20 The pricing
difference is compounded by the frequent sales on digital distribution sites for PC games (and the
need to purchase the required gaming console).
82.
The cross-elasticity of demand between PC games and mobile games is even lower
as most mobile games are free to play (and supported by ads or in-game purchases). When they
do have a retail price, these prices are generally lower than PC games. According to a market
researcher, of the 2.6 billion mobile gamers in 2020, about 38% paid for games, and 98% of mobile
gaming revenues were from in-game transactions rather than a purchase price.21
20 Xbox One has the fewest at about 2,700, while Switch has the most at almost 3,300.
21 Tom Wijman, The World’s 2.7 Billion Gamers Will Spend $159.3 Billion on Games in
2020; The Market Will Surpass $200 Billion by 2023, Newzoo (May 8, 2020),
https://newzoo.com/insights/articles/newzoo-games-market-numbers-revenues-and-audience-
83.
Consumers generally will not switch to a free-to-play mobile game designed to be
played in shorter intervals and “on the go” in response to a price increase of a PC game. Likewise,
PC game consumers will not switch to mobile games in response to output decreases of PC games.
84.
Games made for consoles or mobile apps are not economic substitutes for games
made for PCs. Other factors drive consumers’ preferences. PC, console, and mobile offer different
user experiences and game functionality, which are significant considerations for a consumer
deciding to purchase PC games.
85.
For example, a PC version can support richer graphics and greater memory
requirements. Mobile devices in particular present processing limitations for games, making the
complex animation, code, color/lighting, and audio files featured in most PC games impossible to
match. PC games also offer more reactive controls using a keyboard and/or mouse rather than a
controller or smartphone screen, creating a different playing experience.
86.
Customers view these three different ways to play games as economic
complements, rather than substitutes, because they have different use cases.
87.
Given the differences in the games themselves, PC game distribution also differs
from distribution models used for console and mobile games. PC games moved to digital
distribution earlier than console games, which still have a significant physical distribution
component.22 Mobile games are solely digitally distributed and are available on mobile app stores
accessible from and optimized for a mobile device.
88.
Mobile app stores do not sell PC games, and PC game stores do not sell mobile
apps. Similarly, consoles have their own digital storefronts specific to the brand (e.g., PlayStation
or Xbox) that do not sell PC games, and vice versa. Because the applications are downloaded on
the device after purchase, they must be accessed by the compatible device—PC, console, or phone.
2020-2023/. There are approximately 1.3 billion PC gamers, or half the number of mobile gamers,
according to the study.
22 Riordan Zentler, Digital vs. physical: How the video game industry learned from
Microsoft’s missteps, The Spokesman-Review (Apr. 30, 2020), https://www.spokesman.com/
stories/2020/apr/30/digital-vs-physical-how-the-video-game-industry-le/.
A Developer cannot sell its PC game on the PlayStation Store or the Apple App Store in response
to Valve’s supracompetitive revenue sharing requirement.
89.
Valve itself recognizes that PC games do not compete with mobile games.23 For
example, Valve has stated, “Valve does not make or sell phones, tablets, or video games for mobile
devices, or otherwise compete in the mobile market. Valve also operates Steam, an online platform
that lets users purchase and play PC games on their laptops and desktops. Steam users cannot buy
or use mobile apps on Steam.”24 Valve adds that it “does not compete in the mobile market or sell
‘apps.’”25
90.
Additionally, the size of game files helps explain why games on different platforms
(PC, console, and mobile) are complements rather than substitutes, and why their distribution
channels also are not reasonably interchangeable.
91.
Factors that affect playability and the user experience include rich graphics and
textures, audio, and maps; these add significant data volume. The average size of an iOS mobile
game in 2020 was 465 MB, while in 2016 it was only 264 MB.26 Even the most basic PC game is
generally larger than that. In fact, with games primarily distributed digitally, high-end PC games
now often exceed the data capacity of a DVD or Blu-Ray disc.27
92.
Console games are more likely to remain limited by the capacity of a disc because
of the continued importance of physical distribution, although digital purchases of console games
have increased over the Class Period.28
23
See, e.g., February 18, 2021 Joint Letter Brief Regarding Apple’s Subpoena to Non-Party
Valve Corporation, Epic Games, Inc. v. Apple, Inc., No. 4:20-cv-05640-YGR (N.D. Cal.), ECF
No. 346.
24
Id. at 5.
25
Id. at 7.
26 Craig Chapple, The Average Size of the U.S. App Store’s Top Games Has Grown 76% in
Five Years, Sensor Tower (Mar. 9, 2021), https://sensortower.com/blog/ios-game-size-growth-
2020.
27 Jarred Walton, Why are game install sizes getting so big?, PC Gamer (Oct. 31, 2019),
https://www.pcgamer.com/why-are-game-install-sizes-getting-so-big/.
28 Kyle Orland, Despite 100GB video games, average download times are decreasing, Ars
93.
And, on the supply side, PC game developers also view PC games as distinct from
console and mobile games. While some game developers design the same game for both PC and
console, they must design a different version of the game to be played on a console as the PC
version is not compatible, and vice versa. The same is true for a PC game and a mobile version of
the game.
94.
Game files created for a PC cannot be used on a console; the same is true for mobile
games. Developers must expend significant time and resources to recode the game to be
compatible with the different platform. Mobile games for iOS require a different programming
language from games built for Android. And these differ from the languages most commonly used
for PC games and console games.
95.
Further, the developer must account for the differences between PC game
distribution, console game distribution, and mobile game distribution. The developer will have to
incorporate the SDKs for the appropriate hardware device or site, such as Xbox or Steam.
96.
The SDKs for Xbox and PlayStation are not publicly available to developers—
developers must be approved by Microsoft and Sony, respectively, prior to developing a version
of their game for those consoles. This makes it more difficult for Developers to switch to a console
game as a substitute for a PC game due to PC game distribution restrictions or prices. Development
on some consoles also requires specialized developer hardware units that can cost several thousand
dollars and be difficult to obtain, increasing the barriers to entry into the console market.
97.
Further preventing substitutability, these hardware systems look to Steam sales and
reviews as an indicator of market viability when evaluating PC games to port over to their systems.
Consoles therefore cannot be used by a Developer to substitute away from distribution through
98.
PC games have different monetization strategies than console games and mobile
games, which affect their design and distribution strategies. Strategies for marketing and gaining
Technica (June 9, 2020), https://arstechnica.com/gaming/2020/06/ars-analysis-were-spending-
less-time-downloading-games-on-average/.
visibility on distribution methods also differ as stores offer different ways to highlight products
through, for example, sales, reviews, and advertising.
99.
Accordingly, PC Developers cannot simply substitute to development of mobile or
console games in response to Valve’s supracompetitive revenue share percentage on PC games.
They likewise cannot substitute to distribution channels for console or mobile games to sell their
PC games.
100.
PC game Developers are not competing with console developers or mobile
developers for distribution access or customers.
101.
Industry participants and analysts also recognize PC games, console games, and
mobile games as separate categories and track and report metrics for each category.
102.
In sum, the PC game distribution market is different from, and does not include,
console and mobile game distribution.
B.
The Relevant Geographic Market Is Worldwide
103.
The relevant geographic market for PC game distribution is worldwide. Valve
distributes games for sale over the internet, and Steam is available anywhere in the world to a user
with an internet connection.
104.
According to Valve, Steam store sales revenues are approximately evenly divided
between North America (34%), Western Europe (29%), and the rest of the world (37%) as
consumers can purchase games on Steam worldwide.
105.
As Valve explains: “Steam is a global platform with official support for 26
languages across many platform features. Supporting as many languages, currencies and payment
methods as possible enables Steam to provide the best experience possible to customers around
the world. Over 60% of Steam users use it in a language other than English, so tailoring your
experience for those users is important.”29
29 Valve Corporation, Localization and Languages, https://partner.steamgames.com/
doc/store/localization (last accessed June 25, 2021).
106.
Developers can localize their store page and game so the content will be available
in multiple languages, and they can set prices in all supported currencies.
107.
Steam hosts games from developers all over the world, and the Steam Workshop, a
community content marketplace, includes contributors from 75 countries. More than 30 million
users of its 95 million monthly active user base are in China.
108.
The majority of PC game distribution through other channels besides Steam is
likewise digital and lacks any geographic constraints. For example, Epic claims its Creators
represent 235 countries and territory.30 EA’s Origin includes 33 country-specific stores, with users
in any other country defaulting to the closest store.
109.
Because PC gamers are limited in their demand for products only by the language
spoken, there is little physical distribution of PC games on discs, and developers anywhere in the
world seek to access as broad a market as possible, the market for PC game distribution is
worldwide in scope.
VII.
VALVE’S MONOPOLIZATION SCHEME
A.
Valve Is in a Dominant Position in the Market for PC Game Distribution
110.
Valve owns and operates Steam for the distribution of PC games. Since it was
launched in 2003, Steam has become the dominant distributor of PC games. Steam has millions
of active users worldwide (approximately 120 million monthly active users in 2020) and over one
billion user accounts.
111.
Through Steam, Valve sells and distributes its own games, as well as third-party
112.
For third-party games, Valve collects a percentage of every sales transaction
amount. Valve is the payment processor for all transactions, and it remits monthly sales revenues
minus its revenue share (and other fees or holdbacks) to Developers.
113.
Before October 1, 2018, Valve’s revenue share for all sales on Steam was 30%,
meaning Valve received 30% of the purchase price for any sale of a PC game on Steam. Effective
30
Epic Games Store 2020 Year in Review, supra note 16.
October 1, 2018, Valve modified the revenue share agreement to three tiers as follows: Valve
takes 30% on all of a game’s earnings under $10 million; 25% on all of a game’s earnings between
$10 million and $50 million; and 20% on all of a game’s earnings over $50 million.
114.
Though Valve lowered its revenue share for games earning over $10 million, its
share for all three tiers is above the revenue share that would be offered in a competitive market.
The lowered fees for the highest selling games are an admission that the 30% rate was
supracompetitive, and it remains supracompetitive for even the highest selling games.
115.
Valve charges additional fees for transactions in a community market or workshop,
on top of the revenue shares.
116.
Valve generates billions of dollars each year from Steam, reportedly earning
approximately $4.3 billion in game sales in 2017, not including DLC and micro-transactions.
117.
Developers seek access to consumers and to publish and sell their PC games on
storefronts such as Steam. Almost all game developers lack the resources to establish and maintain
their own digital storefront, including the ability to combat credit card fraud that is rampant in the
industry. It takes even more resources to establish the content delivery network and digital rights
management (“DRM”) tools necessary to fully host a Developer’s game(s).
118.
For example, after Tiny Build began investing in games in addition to its internal
development of games, it attempted to run its own store to avoid Steam’s pricing restrictions and
revenue share. It closed down after just a few months due to crippling credit card chargebacks.
119.
Even if they could overcome the financial barriers to entry, it would be almost
impossible to attract a user base due to Valve’s monopoly power and anticompetitive conduct to
prevent new entry. Industry behemoths like EA have been unable to gain market share because of
Valve’s conduct.
120.
This is the same problem facing any seller without its own retail stores or digital
store, regardless of industry. In the past, game developers sold, and may still sell, physical copies
of PC games through big-box stores like Best Buy, Target, and Wal-Mart, and specialty stores like
GameStop. PC games are now primarily purchased online and Developers must be able to sell
games online to reach consumers.31
121.
Valve uses its restrictive SDA, Steam Key Rules, and other tactics to foreclose
competition in the market for PC game distribution, ensuring that the vast majority of PC game
sales go through Steam and accordingly are subject to Valve’s revenue sharing agreements.
122.
Other PC gaming stores, both digital and physical, operating throughout the Class
Period were or are reselling access to Steam-based games. These stores do not provide Developers
a PC game distribution channel independent of Steam and outside of Steam’s control.
123.
The few stores that offer their own gaming client and content delivery system are
not options for many Developers because (a) they only host and sell their own games; (b) they
only take high-profile games or games with a proven sales record as a business strategy to draw
gamers from Steam; or (c) they offer only DRM-free games, meaning Developers do not have any
anti-piracy protections.
124.
Due to Steam’s market dominance and exclusion of potential rivals, Developers
must have their game on Steam to have sufficient access to the market and an opportunity to
generate revenue.
125.
Developers also need to have their game on Steam to have access to Steam keys,
which have become the industry standard for distributing licensed copies of the game. The
important role of Steam keys in Valve’s scheme is explained further below.
126.
Other entities in the PC game distribution market do not provide a sufficient
competitive constraint on Steam. Valve has entrenched its position as a monopolist in PC game
distribution and foreclosed rivals so successfully that virtually all Developers have no feasible path
to market without going through Steam.
127.
Valve engages in a scheme to maintain its dominance in the PC game distribution
market through multiple tactics, including: (a) contract provisions and rules imposed on
31 Consistent with the shift to digital, physical retailers sell product boxes that contain digital
download codes rather than a disc.
Developers; (b) the Steam key authorization system; and (c) Steam store reviews, the game
recommendation algorithm, and other enforcement mechanisms.
B.
Anticompetitive Contracts Imposed on Developers
1.
Valve’s MFN Provisions Are Anticompetitive
128.
Valve contracts with Developers through the SDA and Steamworks
Documentation. Valve requires that Developers offer the best price for their game and DLC on
Steam, imposing an MFN on Developers’ retail pricing for all products. Developers may not offer
their game or DLC at better prices on other storefronts.
129.
Most favored nation provisions can be procompetitive. The MFN imposed by
Valve is not. Instead, it has two principal anticompetitive effects that outweigh any supposed
procompetitive benefit (and there are substantially less restrictive ways to achieve any such
benefit): it keeps revenue sharing percentages (and potentially game prices) artificially high and
discourages new market entry.
130.
First, because Developers cannot offer their games for lower prices on other
storefronts willing to charge lower revenue shares, the market lacks a mechanism to force Valve
to whittle down the revenue sharing percentages it imposes on Developers distributing their games
on Steam. The MFN discourages “selective discounting” because if the Developer offers a lower
price elsewhere, it must extend that lower price to its sales on Steam due to Valve’s MFN price
parity protection. This penalizes a Developer for discounting. A Developer is required to reduce
prices on Steam if it wants to reduce its prices to any portion of its customers. With Valve’s high
revenue share, the Developer has an incentive not to reduce its prices to anyone, even temporarily.
131.
The actual or potential effect is higher prices for consumers, lower revenues for
Developers, and reduced flexibility in pricing and promoting games.
132.
Second, the MFN imposed on Developers erects a barrier to entry by preventing
Developers from benefiting from more efficient distribution stores. For example, new entrants
may attempt to offer their services at lower prices, which they can do profitably by working out
more favorable terms with Developers or otherwise innovating to create efficiencies. The MFN
prevents these stores from benefiting from their efficiencies and using lower prices (combined
with lower revenue sharing percentages) to gain a foothold in the market by forcing Developers to
offer their games for the same prices on Steam. Valve’s MFN thereby erects an artificial barrier
to entry against potential competitors and stifles competition from other storefronts that would
benefit Developers and potentially consumers.
133.
Developers have reduced incentive to lower retail prices to try to gain customers
because they have to correspondingly lower their price on Steam. The Developer must be able to
make enough sales on the other storefront to offset the lost revenue from sales on Steam at the new
lower price. Because of Steam’s dominant position as a PC game distributor and the
supracompetitive revenue share Valve extracts, this is highly unlikely to occur. Given the price
match, customers will continue to buy on Steam, and Developers will make less money on each
134.
Even if the other storefront offers Developers a more favorable revenue share, they
cannot encourage consumers to switch storefronts through lower pricing. The other storefront’s
offer becomes less meaningful in application and the Developers remain reliant on Steam and
135.
By removing price competition across the market and charging Developers a
supracompetitive revenue share, Valve also suppresses quantity and quality of PC games by
limiting Developers’ distribution options and ways to earn a return on their investment.
2.
Valve’s Exclusivity Provision Is Anticompetitive
136.
Valve also prohibits exclusives through the terms it imposes on Developers. An
exclusive occurs when a Developer offers a promotional deal on only one storefront. The
promotional deal can be in terms of a discount, special content, and/or an earlier release date. The
storefront of choice tends to market and promote the exclusive heavily, thereby generating
customer attention and potentially significant revenue for the Developer (and the other storefront
trying to build its market presence).
137.
Under the SDA, Valve insists that it must receive a copy of game updates and
localized versions no later than when they are made available to any other third party for
commercial release.
138.
Valve’s restrictions remove exclusives from the market, and therefore competition
for exclusives, ensuring that Steam always has the latest game versions and newest releases.
139.
In a competitive market permitting exclusives, Valve would have to compete with
other storefronts on price, revenue sharing rates, promotional activity, and/or other benefits for
Developers to win exclusives. Instead, Valve forgoes doing so to the detriment of Developers,
rival storefronts, and gaming customers.
140.
For example, Epic Games Store solicits timed exclusives from Developers with
benefits including a lower revenue share rate of 12%, minimum revenue guarantees, and upfront
payments. These deals also benefit consumers because Developers can sell the game at a lower
price due to the lower revenue share or improve the quality of the game using the guaranteed
funding and greater financial security.
141.
Instead, Valve does not pass on any procompetitive benefits to Developers and
consumers. Valve keeps the price of games artificially high on Steam and competing storefronts,
and it alone receives the benefit of the higher prices and reduced output.
142.
By prohibiting exclusives on other storefronts, Valve has exercised undue control
in the marketplace and deprived Developers of higher sales and more favorable revenue share
agreements that they otherwise could have received through a promotional exclusive on another
143.
The Steam Key Rules, DLC restrictions, and marketing limitations are
anticompetitive because they prevent rival stores from competing with Steam on price and
offerings. This restricts competition from rival stores that would allow broader distribution and
more revenues for Developers.
C.
Valve’s Use of Steam Keys to Control Developers Is Anticompetitive
144.
Valve uses Steam keys to control access to games available on Steam, including
Developers’ attempts to sell their games on other storefronts. Steam keys also allow it to control
the quantity of Steam-hosted games sold on third-party stores and implement an output restraint
to gain and protect its monopoly.
145.
A Steam key is simply a product authorization code Valve generates.
146.
Under the SDA and Steamworks Documentation, a Developer must request and
obtain Steam keys from Valve to distribute copies of its game on a third-party store. The
Developer provides the Steam keys to a store. The store then sells the Steam keys to the customer,
who must authenticate the key with Steam to access the game through Steam.
147.
Steam keys provide a way to help ensure lawful access to games. Valve developed
a large-scale digital authentication system to replace the previously standard practice of including
serial numbers in the box with a physical copy of the game. The Steam key system and Steam
infrastructure allowed game studios to distribute and sell online in addition to physical copies sold
in stores.
148.
But Valve is now protecting the position of Steam keys as the standardized
authentication system in the PC gaming industry—relied on by Developers, publishers,
distributors, gamers, and the media—through abusive use of its market power and restrictive
contract provisions.
149.
Maintenance of Steam keys as the industry standard helps build and maintain
Valve’s monopoly in PC game distribution by allowing Valve to collect data on, among other
information, Developers’ sales on other stores and keeping Developers reliant on access to Steam
keys, with access determined at Valve’s discretion, to participate in the broader PC gaming
ecosystem.
150.
Developers can obtain keys from Steam to sell their games on third-party stores
like Green Man Gaming and Humble Bundle, which are authorized retailers of Steam keys. In
fact, 28% of Steam’s game sales in 2020 were on these third-party stores.32
151.
There are also unauthorized and unlicensed Steam key resellers (e.g., G2A,
Kinguin) operating in a gray market by selling both legitimate and improperly obtained keys. The
sources of these keys vary, including an individual who (a) bought a legitimate bundle but did not
want one of the included games; (b) purchased in bulk during a Steam sale to then resell at profit
once the sale concluded (a violation of Steam’s terms of service); (c) purchased Steam keys
illegally with stolen credit card information; or (d) posed as a member of the press to obtain a free
promotional demonstration key.
152.
Prior to August 2017, Valve allowed Developers to generate keys for their games
without Valve’s oversight.33
153.
Valve now grants Developers access to Steam keys at Valve’s discretion and
without defined guidelines. The Steam Key Rules provide that Valve can refuse or revoke keys to
Developers “that are abusing them,” that requested “an extreme number of keys,” or are “not
providing value” to Steam customers. These Rules are intentionally vague to give Valve broad
discretion in administering them.
154.
Valve’s denial of Steam key requests for amounts of keys it deems too large
prevents Developers from selling more copies of their games on third-party stores than they sell
on Steam. This control, which has minimal or no procompetitive reason, cements Steam’s market
dominance by allowing Valve to cap a Developer’s sales of the Developer’s own game on other
stores. By limiting the inventory of game copies available on third party stores, Valve ensures
Steam remains the dominant PC game distributor and ensures that Valve extracts its
supracompetitive revenue share from most sales of PC games.
32
75 Steam Statistics, supra note 3.
33 Rishi Alwan, Valve Doesn’t Want You to Buy Steam Games Outside of Steam, Gadgets 360
(Aug. 18, 2017), https://gadgets.ndtv.com/games/news/steam-key-developer-restrictions-bundle-
valve-1739145.
155.
Valve, with the sole ability to generate Steam keys, has made itself the de facto
gatekeeper to the PC gaming ecosystem. Steam keys permeate the gaming ecosystem and keep
Developers dependent on Valve for access, which also keeps them from challenging Valve’s
anticompetitive conduct.
156.
Valve’s control of Steam keys is yet another reason why Developers must have
their games on Steam. Most other third-party stores are simply retailing or reselling Steam keys.
157.
As the industry standard, PC distributors and publishers require Steam keys to
evaluate a game for possible funding, marketing support, or distribution, and industry media
require Developers to provide Steam keys to trial games. These entities will accept only Steam
keys, rather than, for example, an .exe file, to protect themselves from alleged violations of
nondisclosure agreements or intellectual property protections. Developers can obtain keys prior
to the commercial launch of their game.
158.
Valve uses its sole ability to generate Steam keys to keep Developers loyal to it and
punish behavior seen as contrary to its position as gatekeeper to the PC gaming ecosystem,
including countering or speaking out against its anticompetitive scheme.
159.
For example, Valve views exclusive offerings and temporary sales on other stores
as a threat to its monopoly in PC game distribution. When Developers enter into exclusives with
other stores or publishers, Valve may delay approval of or cut off Developers’ access to Steam
keys to cripple their sales and ability to run further promotions. It may also remove them from the
Steam storefront.
160.
Valve substantially delayed granting Dark Catt’s request for Steam keys it planned
to sell on Humble Bundle.
161.
Without Steam keys, Developers cannot offer their games for sale on most rival
stores. They also cannot provide access to publishers and media who might help them gain access
to distribution channels not reliant on Steam.
162.
Dark Catt has had multiple requests for Steam keys from interested publishers
wanting to trial its game that it cannot fulfill because Valve, without reasonable explanation, cut
off its access and will not authorize Steam keys.
163.
Dark Catt and other Developers have been victimized by Valve through its control
of Steam keys for taking action Valve perceived as against its interests. For example:
164.
Developer Ys Net raised funds for Shenmue 3, the third installment in its popular
series, via Kickstarter. Ys Net anticipated being able to provide a Steam key at release to backers
who wanted a PC version of the game. Ys Net created a Steam page well in advance of release to
generate user interest. On or about June 11, 2019, Ys Net and its publisher Deep Silver announced
that the game would be a timed exclusive on Epic Games Store and therefore not available on
Steam until after the year-long exclusivity period. Because of this exclusivity, Valve would not
authorize Steam keys for Ys Net to provide its backers as anticipated.34 Gamers also review
bombed Steam-hosted predecessors Shenmue 1 and 2 in retaliation for the Epic Games Store
exclusive.35
165.
Studio Wildcard offered its game Ark: Survival Evolved, originally released in
2017, as a free giveaway for one week in June 2020 on Epic Games Store and participated in
Humble Bundle’s end-of-summer sale in 2020. It was temporarily unable to fulfill the orders it
received on Humble Bundle because Valve delayed approving additional Steam keys in retaliation
for the promotions on other sites. Ark was removed from the Humble Bundle store because of the
supply shortage.36
34 Ys
Net,
Update
on
PC
Version
Rewards,
Kickstarter
(July
2,
2019),
https://www.kickstarter.com/projects/ysnet/shenmue-3/posts/2553891.
35 Robert Purchese, Clarification amid backlash: Shenmue 3 will come to Steam, Eurogamer
(June 11, 2019), https://www.eurogamer.net/articles/2019-06-11-clarification-amid-backlash-
shenmue-3-will-come-to-steam; Nick Statt, Epic Games will cover refunds of Shenmue III to
protect developer after backlash, The Verge (July 2, 2019), https://www.theverge.com/2019/7/2/
20680121/epic-game-store-shenmue-3-kickstarter-refunds-policy-controversy.
36 Press Release, Ark: Survival Evolved Available Now For Free on the Epic Game Store,
Studio Wildcard (June 11, 2020), https://www.gamasutra.com/view/pressreleases/364606/; Steam
Community Discussions, ARK: Survival Evolved, Steam keys for Humble Bundle ARK buyers
166.
In an unexplained purge in November 2019, Valve banned approximately 1,000
games from Steam in a single day for allegedly abusing “some Steamworks tools.” These games
included the entire 48-game library of one publisher, and legitimate games from other developers
that had thousands of purchases and reviews. Some games were soon restored to Steam, a rare
admission of Valve’s errors.37
167.
Others were less fortunate: indie studio Idalgame was accused of using Steamworks
tools to sell bundles to customers, but denied wrongdoing. Idalgame’s games were nonetheless
pulled and its access to the Steamworks backend was revoked, preventing it from accessing its
own games, activity, and Steam Support (to try to resolve the error).38
D.
Valve’s Use of Its Review System to Control Developers Is Anticompetitive
168.
In addition to using Steam keys to control and punish Developers, Valve
encourages and/or allows its users to improperly attack Developers using Steam reviews and
community discussions, and does not timely remove such inappropriate reviews, if at all.
169.
For example, when Developers offer exclusives on other stores, Valve may use
social media channels to notify its followers of the Developers’ action, resulting in an attack on
the Developer on social media or by “review bombing” on the Steam store.
(Sept. 9, 2020), https://steamcommunity.com/app/346110/discussions/0/2950376844043274493;
Humble Bundle, Facebook post (Sept. 22, 2020), https://www.facebook.com/humblebundle/
posts/keys-for-ark-survival-evolved-have-been-restocked-please-head-to-your-download-
p/3441295855913694/.
37 Alex McHugh, 1000 games removed from Steam due to Steamworks ‘abuse’, Green Man
Gaming (Nov. 26, 2019), https://www.greenmangaming.com/newsroom/2019/11/26/1000-games-
removed-from-steam-due-to-steamworks-abuse; Reddit, Steam is removing hundreds of games
from the store atm (Nov. 25, 2019), https://www.reddit.com/r/Steam/comments/e1obe3/
steam_is_removing_ hundreds_of_games_from_the/.
38 Nathan Grayson, Valve Removes 1,000 Games From Steam As Punishment For Abusing
Tools, Kotaku (Nov. 26, 2019), https://kotaku.com/valve-removes-1-000-games-from-steam-as-
punishment-for-1840054771 (“First-person adventure game Electric Highways, for example, had
been on Steam since 2015 and had over 1,300 positive reviews. In other words, this round of bans
didn’t just impact dodgy developers whose games probably shouldn’t have made it onto Steam in
the first place. These games’ chances of making it back onto Steam do not seem good, though.”).
170.
When the online community learns of an exclusive on another store, they will
quickly begin leaving negative reviews on that game or Developer page on Steam, and will do so
in volume.
171.
If a game does not have a Steam page, the Steam community will instead use the
pages for other games by the Developer or community discussion boards to voice their discontent.
172.
For example, 4A Games and Deep Silver faced review bombing for entering a
temporary exclusive with Epic Games Store for the new release Metro Exodus. Metro Exodus had
been available for pre-sale on Steam before announcing, on or about January 28, 2019, the one-
year exclusive with Epic. Valve issued a statement criticizing the exclusive, calling the decision
“unfair to Steam customers,” and posted the statement on Metro Exodus’s Steam store page. “This
led to a bunch of negative review spamming on the previous Metro games, Metro 2033 Redux and
Metro Last Light Redux” on Steam.39 The “hefty review-bombing” featured reviews mentioning
Epic Games Store rather than negative comments on the games themselves.40
173.
The game would be available on Steam after the exclusivity period. Those who
had purchased the game through the Steam pre-sale would still have access to the game through
Steam on the release date, the content would be the same, and future updates and free or premium
DLC would be released simultaneously for both the Epic and Steam versions.41
174.
The game was $10 cheaper on Epic Games Store than on the Steam pre-sale.
39 Jake Tucker, People are review-bombing Metro Exodus, but this time: it’s positive, Trusted
Reviews (Feb. 25, 2019), https://www.trustedreviews.com/news/people-review-bombing-metro-
exodus-time-positive-3664757.
40 Ali Jones, Metro games are getting review-bombed on Steam, PCGamesN (Jan. 30, 2019),
www.pcgamesn.com/metro-exodus/metro-2033-last-light-review-bomb.
41 Andy Chalk, Players protest Epic’s Metro Exodus exclusive by review-bombing the series
on Steam, PC Gamer (Jan. 30, 2019), https://www.pcgamer.com/metro-review-bomb-steam/;
Michael McWhertor, Valve calls exclusive Metro Exodus deal with Epic ‘unfair’ to Steam
customers, Polygon (Jan. 28, 2019), https://www.polygon.com/2019/1/28/18201004/valve-metro-
exodus-epic-games-store.
175.
Notably, Metro Exodus is a single-player game, rather than an online multiplayer,
and can be added to a user’s Steam library, meaning there is no disadvantage in playability or harm
to the Steam user community from initially purchasing the game from Epic Games Store.
176.
On or about April 3, 2019, game studio Gearbox announced its highly anticipated
new game Borderlands 3 would be an Epic Games Store exclusive, a decision made by publisher
2K/Take Two, not Gearbox. The launch date was September 13, 2019, and the game would be
available on other digital storefronts in April 2020. Thousands of fans immediately went on Steam
to review bomb the currently available Gearbox games, including Borderlands 2, in protest,
specifically mentioning Epic Games. Valve refused to remove the false reviews.42
177.
Glumberland, an indie studio, signed a temporary exclusivity deal with Epic Games
Store for a guaranteed minimum on sales of its new game Ooblets. The revenue guarantee was
crucial to allowing the two-person studio, partially funded through Patreon supporters throughout
its years in development, to stay in business and continue to improve the game. Within days, the
two developers reportedly received thousands of threats as commenters angry about the Epic
Games Store unleashed an internet mob on the individual developers.43
178.
Review bombing can cause a game’s Steam score, or average user rating, to
plummet. For example, Metro 2033 dropped from an 89% positive review to 46%, and Metro Last
Light dropped from 90% to 43%.44 Consequently, the game likely will not be featured on the
Steam store homepage, which includes recommendations from friends, curators, and the Steam
42 Austin Wood, Randy Pitchford on Steam review bombing: “makes me kind of happy”
Borderlands 3 PC is an Epic exclusive, Gamesradar (Apr. 9, 2019), https://www.gamesradar.com/
randy-pitchford-on-steam-review-bombing-makes-me-kind-of-happy-borderlands-3-pc-is-an-
epic-exclusive/.
43 Jason Rodriguez, Ooblets: The Story So Far – What’s with the outrage and fake
screenshots?, PC Invasion (Aug. 6, 2019), https://www.pcinvasion.com/ooblets-the-story-so-far-
whats-with-the-outrage-and-fake-screenshots/; Matthew Handrahan, Ooblets dev received
thousands of “hateful, threatening messages” over Epic exclusivity, gamesindustry.biz (Aug. 5,
2019),
https://www.gamesindustry.biz/articles/2019-08-05-ooblets-dev-received-thousands-of-
hateful-threatening-messages-over-epic-exclusivity.
44 Jones, Metro games are getting review-bombed on Steam, supra note 40.
community, plus trending and popular categories, or included in specific recommendations and
discovery queues to customers as those algorithms rely on Steam scores.
179.
This results in fewer sales and lower revenue for the Developer because the game
will not surface to new potential purchasers. Given that Steam offers over 50,000 games, a
mechanism for discovery can be critical to drive sales for a lesser known game.
180.
Although a game may be purchased through numerous authorized outlets, only
reviews from users who purchased on Steam contribute to the Steam score that is used in the game
store algorithms. That is, reviews from users who care less about the store from which they
purchase and therefore are less likely to be outraged by an exclusivity deal, but who have
legitimately purchased a Steam-hosted game and played the game on Steam using a valid account
and valid Steam key, do not count for purposes of the Steam score algorithms.
181.
As a practical matter, gamers principally rely on Steam and Metacritic ratings when
evaluating games. Other PC gaming stores import Steam reviews rather than using their own
review system, further spreading the impact of review bombing on Steam and impairing
Developers’ ability to survive in the marketplace.
182.
Valve has a policy of not deleting reviews, even when clearly irrelevant to the game
itself and abusive (and accordingly in violation of the terms of use of the system). In 2019, it
implemented a new process to use “tools and developer feedback to identify anomalous review
activity”; internally “dig into what happened”; and “discuss whether the review activity should be
marked ‘off-topic.’”45 Valve has full discretion to even undertake a review and then make a
unilateral, uncontestable decision to mark review bombs as “off-topic.”
183.
Reviews marked “off-topic” will not count for the Steam score by default, but users
can change this setting to include “off-topic” reviews in the Steam scores they see and that generate
their recommendations. Regardless, the reviews remain on the game or Developer page.
45 Valve
Corporation,
Steam
–
2019
Year
in
Review
(Feb.
5,
2020),
https://steamcommunity.com/groups/steamworks/announcements/detail/1697229969000435735.
184.
Consequently, bad reviews, without any connection to the quality of a game but
instead employed as punishment for “disloyalty” to Steam, can bury a game on the Steam store
and permanently cripple a Developer’s sales, even in the rare instances where Valve will review
and mark them as off-topic.
185.
Though these reviews are not posted by Valve itself, it refuses to remove the
reviews although they violate its rules and guidelines, including rules requiring reviews to be
relevant and constructive and rules against harassment, abusive language, and swearing.46
186.
And developers have gotten the message. For example, Unfold Games, Wlad
Marhulets’ one-person development studio, was preparing to launch its first game, Darq. The
game had been listed on Steam for some time and generated a lot of interest. Mr. Marhulets refused
an offer from Epic Games Store to enter a one-year timed exclusive deal that included an upfront
payment and minimum revenue guarantee. This offer occurred around the time that Glumberland
announced its timed exclusive with Epic to great backlash, and Mr. Marhulets received many
inquiries about whether he would enter a similar deal. He made a public statement that he had
refused the Epic exclusive, although recognizing that he probably would have made more money
on Epic, because he had already announced the game would be available on Steam on a specific
date and did not want to upset customers.47
187.
The SDA gives Developers 30 days to cure any breach of the agreement, including
fixing any pricing discrepancies. When it suits itself, Valve disregards this clause and removes
games from the Steam store without giving Developers the specified time to cure the alleged
breach. Valve may also refuse to provide an explanation for the alleged breach or the information
the Developer needs to cure it.
46 Valve Corporation, Rules and Guidelines For Steam: Discussions, Reviews, and User
Generated Content, https://support.steampowered.com/kb_article.php?ref=4045-USHJ-3810 (last
accessed June 25, 2021).
47 Unfold Games, Why I turned down exclusivity deal from the Epic Games Store (Aug. 17,
2019),
https://medium.com/@unfoldgames/why-i-turned-down-exclusivity-deal-from-the-epic-
store-developer-of-darq-7ee834ed0ac7.
188.
Steam removes games or Developers as a show of strength to keep Developers loyal
and to maintain its monopoly, despite the cost. Valve trades revenues it would receive from sales
of the games it removes from Steam for acquisition and maintenance of its monopoly. Valve’s
conduct makes economic sense only through the exclusion of competition.
189.
Valve engages in the above actions—including its abuse of contractual provisions,
market access, and its review system—to secure and maintain Steam’s monopoly in the worldwide
PC game distribution market.
E.
Valve Reaps Rewards from Its Monopoly at Developers’ Expense
190.
Under the SDA, Valve requires Developers to enter a revenue sharing agreement
through which it extracts enormous profits from the volume of games and DLC sold on Steam.
191.
As noted above, beginning October 1, 2018, Valve implemented a three-tiered
revenue share agreement it imposed on Developers: 30% on all of a game’s earnings under $10
million go to Valve; 25% on all of a game’s earnings between $10 million and $50 million; and
20% on all of a game’s earnings over $50 million. Previously, all sales were subject to a 30%
commission to Valve. Developers pay other fees as well.
192.
The majority of Developers selling to consumers on Steam are subject to the 30%
commission rate. Smaller Developers most in need of access to the Steam store to monetize their
games are charged the highest commission rate.
193.
Other storefronts offer more Developer-friendly revenue share agreements. For
example, Discord offered a 90/10 revenue split (Discord’s store is now out of business), Indie
Game Store offered a 80/20 split (with the option for a developer to reduce its share to 70% and
give the remaining 10% to a charity of choice) (Indie Game Store is now out of business), Epic
Games Store offers an 88/12 revenue split, and Humble Bundle offers a 75/25 split for games on
the Humble Store and 95/5 revenue split for sales through the Humble Widget. Microsoft recently
announced it would lower its revenue share for PC games on the Microsoft Store to an 88/12 split,
matching Epic Games Store. Itch.io, a popular store for indie games, allows developers to set their
own revenue share percentage anywhere from 0% to 100%.
194.
Given the SDA DLC restrictions and Steam Key Rules, Developers must offer the
best price for their games on Steam; they cannot use the more advantageous revenue share
agreements to offer a lower price on competing stores to try to boost sales.
195.
In a competitive market, Developers may choose to offer lower prices to consumers
on competing stores but they could still earn more money from a greater number of transactions at
the lower retail prices given the other store’s lower revenue share. Valve’s revenue share
percentages would be forced down by competitive market pressure.
196.
For example, assuming a Developer could sell its game for $30 on Steam and $25
on the Microsoft Store, the revenue split would be $21 / $9 on Steam (70% / 30%) and $22 / $3
on Microsoft (88% / 12%), earning more money for the Developer and costing the customer
significantly less. In this example, the consumer would save $5, which would likely lead to
increased sales (and revenues) on the site offering the cheaper price. And the Developer would
earn more revenue on each sale and more total revenue from higher sales.
197.
However, the SDA DLC restrictions and Steam Key Rules require that Developers
offer no worse than the same price on the Microsoft Store as they offer on Steam. Given Steam’s
market dominance, Steam will get more sales than other publishers when prices are equal, and its
dominance will continue.
198.
Storefronts will only be able to attract a sufficient user base to become a real
competitor to Steam when they can offer a better price or better promotions, but Developers are
not able to work with the other stores to offer better terms to consumers because of the Steam
contract restrictions on Developers, enforced by Steam’s retaliatory conduct.
199.
The SDA DLC restrictions and Steam Key Rules therefore prevent competition
from other stores. Under normal market circumstances, Valve would have to lower its revenue
sharing rate (at all three tiers of sales) to compete with the lower revenue sharing agreements
offered by its competitors.
200.
Consequently, Developers pay a supracompetitive revenue share to Valve because
Valve prevents competition from other stores that would otherwise drive down its
supracompetitive revenue sharing rate.
201.
Finally, consumers are harmed because Developers are not able fully to invest in
game improvements, new games, and/or lower retail prices.
VIII.
CLASS ACTION ALLEGATIONS
202.
Dark Catt brings this action on behalf of itself and all others similarly situated
pursuant to Federal Rule of Civil Procedure 23(a), (b)(2), and (b)(3) as representative of a Class
defined as follows:
All persons or entities in the United States that have contracted with Valve
Corporation to distribute a PC game via Steam and sold such game on or after April
27, 2017, and continuing through the present until the effects of its scheme are
eliminated (the “Class Period”). Excluded from the Class are (a) Defendant, its
subsidiaries, affiliate entities, and employees, and (b) the Court and its personnel.
203.
The Class Members are so numerous that joinder is impracticable. Hundreds of
Developers have sold their games on Steam during the Class Period and continue to sell their
games on Steam and on other stores using Steam keys.
204.
The anticompetitive conduct of Valve alleged herein has imposed, and threatens to
continue to impose, a common antitrust injury on the Class Members.
205.
The identity of all Class Members is known by Valve. Valve can identify the Class
Members via its internal business records, including, but not limited to, Class Members’ account,
Steam key usage, contractual, financial, publishing, and sales histories with Valve and Steam.
206.
There are numerous questions of law and fact that are common to the Class and that
predominate over any issues affecting any individual Class Member, including inter alia:
a.
Whether the restrictions Valve imposes on Developers, including the
contractual restrictions outlined in its SDA and Steamworks Documentation, are anticompetitive;
b.
Whether Valve has substantial market power in the market for PC game
distribution in the United States and globally;
c.
Whether Valve has unlawfully monopolized, or attempted to monopolize,
the PC game distribution market, including by way of contractual terms, policies, practices,
mandates, and restraints described herein;
d.
Whether Valve has substantially foreclosed competition in the market for
PC game distribution in the United States and worldwide;
e.
Whether Valve’s scheme has permitted it to illegally acquire and/or
maintain its monopoly in the PC game distribution market;
f.
Whether the conduct alleged herein artificially created, maintained,
preserved, or enhanced Valve’s market power in the PC game distribution market;
g.
Whether Valve’s scheme has a legitimate procompetitive justification and,
if so, whether it is outweighed by the anticompetitive effects of its conduct, and whether there are
substantially less restrictive ways to achieve any supposed procompetitive purpose;
h.
The operative time period and extent of Valve’s antitrust violations and any
continuing effects;
i.
Whether the conduct alleged herein caused damages to Class Members in
the form of paying a supracompetitive revenue share to Valve;
j.
The amount of damages incurred by the Class because of Valve’s conduct;
k.
The nature and scope of injunctive and other equitable relief necessary to
restore a competitive market and protect the public interest.
207.
Dark Catt’s interests are typical of, and not antagonistic to, those of other or absent
Class Members, such that it can fairly and adequately represent and protect the interests of the
Class Members.
208.
Dark Catt has retained counsel with substantial experience litigating complex
antitrust class actions.
209.
Class treatment of Dark Catt’s federal and state antitrust claims is a superior method
for the fair and efficient adjudication of this controversy in that, among other things, such treatment
will permit a large number of similarly situated persons to prosecute common claims in a single
forum simultaneously, efficiently, and without the unnecessary duplication of effort and expense
that numerous individual actions would engender.
210.
Valve’s relationships with Dark Catt and the Class have been substantially uniform
in that Dark Catt paid Valve the supracompetitive revenue share (among other fees) and has been
subjected to Valve’s monopolistic tactics. Common questions of law and fact will predominate
over any individual questions of law and fact for the Class.
211.
Valve acts and continues to act on grounds generally applicable to the Class,
thereby making appropriate final equitable and injunctive relief with respect to the Class as a
212.
Dark Catt knows of no difficulty likely to be encountered in the maintenance of this
action as a class action under Federal Rule of Civil Procedure 23(a), (b)(2), and (b)(3).
IX.
CLAIMS FOR RELIEF
COUNT ONE
Illegal Monopoly Maintenance in Violation of 15 U.S.C. § 2
213.
Dark Catt repeats and incorporates each of the allegations contained in the
paragraphs above as if fully set forth herein.
214.
Valve, through its ownership and control of Steam, has a monopoly in the PC game
distribution market and uses the Steam SDA and Steamworks Documentation and other conduct
alleged herein to maintain its monopoly.
215.
Valve, through its monopoly power and contracts, acts in an anticompetitive
manner to control the price of games and DLC set by Developers in the PC game distribution
market and keep prices at an elevated and uniform level.
216.
Valve’s revenue sharing rate is substantially higher than it otherwise would be in a
competitive PC game distribution market free from Valve’s anticompetitive practices. Valve is
only able to maintain its supracompetitive rates due to the SDA DLC restrictions, Steam Key
Rules, the SDA marketing limitations, and/or other exclusionary and anticompetitive behavior.
217.
A marketplace without the restrictions imposed by the SDA DLC restrictions and
Steam Key Rules would result in Steam lowering its revenue sharing rates to compete with its rival
stores, resulting in increased revenues for Developers.
218.
A marketplace without the restrictions imposed by the SDA would result in rival
stores using revenue sharing percentages, marketing efforts, revenue guarantees, and development
funds to compete for Developers’ games and DLC, and in turn compete for consumers.
219.
As discussed herein, the restrictions imposed by the SDA DLC restrictions, Steam
Key Rules, and SDA marketing limitations and other conduct alleged herein prevent competition
on Valve’s revenue sharing rates and other business terms with Developers, which would lower
Steam’s market share and Valve’s profits. Valve’s conduct excludes rival storefronts (those in
existence and potential new market entrants) from competing on price and number of offerings,
and is anticompetitive.
220.
Dark Catt was injured in its business and property by paying a supracompetitive
revenue share to Valve for sales of its game on Steam.
221.
Class Members were similarly harmed in their business or property as a direct
result of Valve’s anticompetitive conduct. Due to the conduct described herein, they too paid a
supracompetitive revenue share to Valve.
222.
Valve uses the SDA DLC restrictions, Steam Key Rules, SDA marketing
limitations, and other conduct alleged herein to illegally maintain monopoly power and hinder
competition in the PC game distribution market.
223.
Every day Valve continues with its conduct described herein and the SDA DLC
restrictions, Steam Key Rules, and SDA marketing limitations remain in effect, Valve continues
to violate Section 2 of the Sherman Act.
COUNT TWO
Illegal Attempted Monopolization in Violation of 15 U.S.C. § 2
224.
Dark Catt repeats and incorporates each of the allegations contained in the
paragraphs above as if fully set forth herein.
225.
Valve, through its market power, contracts, and other conduct alleged herein, acts
in an anticompetitive and exclusionary manner to control the price of games and DLC set by
Developers in the PC game distribution market. Valve acts with the specific intent of
monopolizing the PC game distribution market and maintaining its supracompetitive revenue
sharing rate.
226.
Through its contracting practices, including the SDA DLC restrictions, Steam Key
Rules, the SDA marketing limitations, and/or other exclusionary and anticompetitive conduct,
Valve has a dangerous probability of success in monopolizing the PC game distribution market.
227.
Valve’s conduct has no legitimate business purpose but is designed to monopolize
the PC game distribution market.
228.
A marketplace without the restrictions imposed by the SDA DLC restrictions,
Steam Key Rules, and SDA marketing limitations would force Valve to compete with rival stores
on the terms they offer to Developers to distribute PC games, and in turn compete for consumers.
229.
Instead, Valve’s conduct excludes current and potential future rival storefronts
from competing on price, quantity, and quality of PC games, which is anticompetitive. Valve’s
conduct is intended to establish and maintain Steam’s monopoly in PC game distribution.
230.
Dark Catt was injured in its business and property by paying a supracompetitive
revenue share to Valve for sales of its game on Steam prior to being banned by Valve.
231.
Class Members were similarly harmed in their business or property as a direct result
of Valve’s anticompetitive conduct in attempting to monopolize the PC game distribution market.
The conduct described herein caused Class Members to pay a supracompetitive revenue share to
232.
Every day the SDA DLC restrictions, Steam Key Rules, and SDA marketing
limitations remain in effect, Valve continues to attempt to monopolize the global PC game
distribution market in violation of Section 2 of the Sherman Act.
COUNT THREE
Violation of Washington Consumer Protection Act (RCW 19.86)
233.
Dark Catt repeats and incorporates each of the allegations contained in the
paragraphs above as if fully set forth herein.
234.
Valve’s conduct alleged herein, including its contractual terms, exercise of its
market power, and anticompetitive use of Steam keys, constitutes unfair or deceptive acts or
practices.
235.
As alleged herein, Valve has attempted to monopolize or has monopolized the
global PC game distribution market. This conduct affects the trade or commerce of Washington,
including because Valve has its principal place of business in Washington and does business with
Developers within Washington.
236.
A marketplace without the restrictions imposed by the SDA DLC restrictions,
Steam Key Rules, and SDA marketing limitations would force Valve to compete with rival stores
on the terms they offer to Developers to distribute PC games, and in turn compete for consumers.
237.
Valve’s conduct causes Developers to pay a supracompetitive revenue share to
Valve and deprives game purchasers of a competitive marketplace with more innovative offerings
and potentially lower prices. Valve’s conduct is accordingly against the public interest. The
exclusion of rival storefronts harms gaming consumers by limiting their options of where to
purchase PC games and keeping the retail prices they pay above the competitive level and/or
keeping the quality and quantity of games available below the competitive level.
238.
Dark Catt was injured in its business and property by paying a supracompetitive
revenue share to Valve for sales of its game on Steam.
239.
Class Members were similarly harmed in their business or property as a direct
result of Valve’s unfair methods of competition. The conduct described herein caused Class
Members to pay a supracompetitive revenue share to Valve.
240.
These injuries to Dark Catt and members of the Class were and are a direct and
proximate result of Valve’s unfair and deceptive acts or practices.
X.
PRAYER FOR RELIEF
241.
WHEREFORE, Dark Catt, on behalf of itself and those similarly situated, demands
a trial by jury and respectfully requests:
a.
That the Court determine that Dark Catt’s claim regarding the Class alleged herein is
suitable for class treatment and certify the proposed Class pursuant to Fed. R. Civ. P.
23(a), (b)(2), and (b)(3);
b. That the Court appoint Dark Catt as a representative of the Class;
c.
That Dark Catt’s counsel be appointed as counsel for the Class;
d. That the Court award, pursuant to 15 U.S.C. § 15 and the Washington Consumer
Protection Act, damages, including compensatory and trebled damages, to the Class
resulting from Valve’s violations of the Sherman Act and Washington Consumer
Protection Act;
e.
That the Court award, pursuant to 15 U.S.C. § 15 and the Washington Consumer
Protection Act, Dark Catt’s costs (including litigation, class notice, deposition, expert,
database, and other costs) and reasonable attorneys’ fees resulting from this suit;
f.
That the Court order, pursuant to 15 U.S.C. § 26 and the Washington Consumer
Protection Act, permanent injunctive relief preventing Valve from continuing its
unlawful acts in violation of the Sherman Act and Washington Consumer Protection
Act;
g. That Dark Catt and the Class be awarded pre-judgment and post-judgment interest as
allowed by law on all sums awarded;
h. That the Court adjudge and declare that Valve’s conduct violates the laws set forth
herein; and
i.
That the Court award such other and further relief as the Court may deem equitable,
just and proper, or the law may allow.
XI.
JURY DEMAND
Pursuant to Fed. R. Civ. P. 38(b), Dark Catt demands a trial by jury of all issues properly
triable to a jury in this case.
Dated: June 28, 2021
By: s/ Stephanie L. Jensen
Stephanie L. Jensen, WSBA #42042
WILSON SONSINI GOODRICH & ROSATI, P.C.
701 Fifth Avenue, Suite 5100
Seattle, WA 98104-7036
Telephone:
(206) 883-2500
Facsimile:
(206) 883-2699
Email:
[email protected]
Kenneth R. O’Rourke (pro hac vice pending)
Scott A. Sher (pro hac vice pending)
Allison B. Smith (pro hac vice pending)
WILSON SONSINI GOODRICH & ROSATI, P.C.
1700 K Street, NW, Suite 500
Washington, DC 20006
Telephone: (202) 973-8800
Facsimile:
(202) 973-8899
Email:
[email protected]
[email protected]
[email protected]
W. Joseph Bruckner (pro hac vice pending)
Joseph C. Bourne (pro hac vice pending)
Leona B. Ajavon (pro hac vice pending)
LOCKRIDGE GRINDAL NAUEN P.L.L.P.
100 Washington Avenue S, Suite 2200
Minneapolis, MN 55401
Telephone: (612) 339-6900
Facsimile:
(612) 339-0981
Email:
[email protected]
[email protected]
[email protected]
Attorneys for Plaintiffs Dark Catt Studios Holdings,
Inc. and Dark Catt Studios Interactive LLC, and
Putative Class
| antitrust |
Fs_RDocBD5gMZwczuvtL | IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
AUSTIN DIVISION
CAROL KRAEMER, individually and on
behalf of similarly situated individuals
1:21-CV-00398
Plaintiff,
CIVIL ACTION NO. ________
v.
CROSSOVER MARKET, LLC,
TRIOLOGY ENTERPRISES, INC.
AND ESW CAPITAL, LLC
Defendants
§
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§
ORIGINAL COMPLAINT
Plaintiff, CAROL KRAEMER, (“Plaintiff” or “Kraemer”), and on behalf of all others
similarly situated, by and through her undersigned counsel, hereby brings this action against
Defendants, Crossover Market, LLC, Trilogy Enterprises, Inc., and ESW Capital, LLC
("Defendants"), pursuant to the Fair Labor Standards Act of 1938 (FLSA), 52 Stat. 1060, as
amended, 29 U.S.C. §201 et seq (1994 ed. and Supp. III)("FLSA").
PARTIES
1.
Plaintiff Kramer worked exclusively for Crossover Market, LLC, Trilogy
Enterprises, Inc., and ESW Capital, LLC, as an hourly worker from about October 2018 until about
May 2020. Throughout her employment with Defendants, she was paid by the hour with no
overtime compensation and was classified as an independent contractor.
2.
Kraemer brings this action on behalf of herself and all other similarly situated
workers who were classified as independent contractors and paid by Defendants as hourly workers.
Defendants paid each of these workers an hourly rate and failed to pay them overtime for all hours
that they worked in excess of 40 hours in a workweek in accordance with the FLSA. The class of
similarly situated employees (“Hourly Employees”) consists of:
Current and former hourly workers employed by, or working on behalf
of, Crossover Market, LLC, Triology, Inc., during the past three years
who were classified as independent contractors and paid by the hour.
3.
From about October 2018 to May 2020, Defendants employed Plaintiff as a remote
worker and paid her straight time for overtime.
4.
Defendants gave Plaintiff the titles of Vice President of Finance, Revenue
Recognition, and Accounting Controller, and paid her on an hourly basis.
5.
Plaintiff, CAROL KRAEMER, was an "employee" of Defendants, as that term is
defined by the FLSA. During her employment with the Defendants, the Plaintiff was individually
and directly engaged in interstate commerce by her regular and recurring use the instrumentalities
thereof as part of her regular and recurring job duties, and her work was essential to Defendants'
businesses. Plaintiff would use emails to request wire transfers, internet banking, mail and
interstate telephone. Many of the companies that Plaintiff handled accounting for were located
out of state.
6.
Defendant CROSSOVER MARKET, LLC, (“Crossover”) is a professional
corporation formed and existing under the laws of the State of Texas and which maintains and
operates a recruitment and contractor clearinghouse business in Travis County, Texas, and is
subject to the provisions of the FLSA because at all relevant times it engaged in interstate
commerce or was part of an enterprise engaged in interstate commerce as defined by 29 U.S.C.
§§203(r) and (s).
7.
Defendant Crossover Market, LLC is a Foreign Limited Liability Company whose
registered agent for service of process is Registered Agents, Inc., 5900 Balcones Drive, Suite 100,
Austin, Texas 78731.
8.
Crossover markets itself as a cloud-based company that recruits talented workers
internationally to work remotely through cloud platforms.
“At Crossover, we understand that you’re looking for professional growth and
competitive compensation. That’s just what we offer to candidates who have the
skills to stand out, and the willingness to complete our rigorous evaluation
process. Our jobs are location-independent, long-term, and offer competitive
hourly rates by U.S. standards.”
https://www.crossover.com/pages/for-candidates
9.
The company offers jobs to qualified candidates and arranges for them to apply for
positions (i.e. Engineering, Finance, Marketing, Operations, and Product Management Positions),
receive training, and work remotely. https://www.crossover.com/jobs
10.
Defendant, ESW CAPITAL, LLC, (“ESW”) owns and operates Crossover. ESW
describes itself as a company that is “[b]ased in Austin, Texas, the ESW Capital group specifically
focuses on buying, strengthening, then growing mature business software companies.”
https://www.linkedin.com/company/eswcapital. The company engages in interstate commerce by
“taking advantage of its unique operating platform, ESW revitalizes its acquisitions for sustainable
success while making customer satisfaction a top priority. ESW and its affiliated companies have
been in the enterprise software space since 1988, and the group includes notable brands such as
Aurea, Ignite Technologies, Trilogy, and Versata” https://www.linkedin.com/company/eswcapital
11.
Defendant ESW Capital, LLC is a Foreign Limited Liability Company whose
registered agent for service of process is Capitol Corporate Services, Inc 206 E. 9th Street, Suite
1300, Austin, Texas 78701.
12.
Trilogy Enterprises, Inc. (DE) (‘Trilogy”) is wholly owned by Trilogy, Inc. (DE) a
sister company to ESW Capital LLC with shared ownership. ESW Capital is referred to as “The
Group” or Shareholders of Trilogy Inc (DE) and ESW Capital LLC (DE), and others. Trilogy
Enterprises Inc. is the company that runs the shared corporate services for all of the companies
owned by ESW. Plaintiff’s position was with Trilogy Enterprises Inc.
13.
Defendant Trilogy Enterprises Inc. is a Foreign For-Profit Corporation whose
registered agent for service of process is Capitol Corporate Services, Inc 206 E. 9th Street, Suite
1300, Austin, Texas 78701.
14.
ESW Capital, LLC is the umbrella company that owns and operates Crossover and
Trilogy.
15.
Crossover, Trilogy, and ESW Capital, employed and/or jointly employed Kraemer
and the Hourly Workers.
16.
Crossover, Trilogy, and ESW Capital, are joint employers for purposes of the
FLSA. See 29 C.F.R. § 791.2.
17.
Crossover is the personnel hub and clearing house that assigned corporate resources
to be assigned to the ESW Capital Group; Crossover also performs some contractor management
for other companies not owned/wholly owned by ESW. Crossover assigns Plaintiff to work for
companies owned by ESW Capital Group.
18.
ESW Capital Group is a private equity fund whose strategy is to acquire
software/tech companies, bring them under group management, as part of acquisition strategy it
shuts down all physical offices and generally lays off all staff including back office, support, and
shared service staff (accounting, finance, legal), in their stead uses resources already working
through Crossover Market, LLC. In the case of back office and professional services and support
these employees would be Trilogy Enterprises, Inc. staff, additional resources would be hired from
Crossover Market, LLC should additional workload require additional resource.
19.
ESW Capital Group, Trilogy Enterprises Inc and Crossover Markets LLC are joint
employers and operate as a single enterprise.
20.
At all times material to this complaint, Defendants had employees subject to the
provisions of 29 U.S.C. § 206 in the facility where Plaintiff was employed.
FACTS
21.
Joe Liemandt is an Austin Billionaire that owns ESW Capital Group – ESW Capital
LLC, Crossover Markets LLC, and Trilogy Enterprises Inc, among others.
22.
ESW Capital is Liemandt’s private equity firm located in Austin.
23.
Mr. Liemandt uses ESW Capital to buy distressed or underperforming technology
companies.
24.
In order to staff the companies, he acquires, Mr. Liemandt owns a little-known
recruiting firm called Crossover Market, LLC.
25.
Crossover is a national and international recruiting company that searches for
developers and software engineers as well as back-office staff (Accounting, Finance, Legal,
Customer Service, etc.). Crossover has remote workers that work from home, cafes, and remote
places all over the globe.
26.
Crossover assigns back-office staff like Plaintiff (for Trilogy Enterprises Inc) to
support the numerous companies owned by ESW Capital.
27.
Crossover and Trilogy apply the same operations and pay policies to U.S. workers
that it does to workers they hired abroad.
28.
For the least the past three years, Kraemer and the Hourly Workers were engaged
in commerce or in the production of goods for commerce.
29.
Crossover and Trilogy treated Kraemer and the Hourly Workers as employees and
uniformly dictated the pay practices to which Kraemer and their other employees (including so-
called “independent contractors”) were subjected.
30.
Crossover and Trilogy misclassification of Kraemer and independent contractors
does not alter its status employers for the purpose of this FLSA collective action.
31.
During her employment, Defendants paid Plaintiff on an hourly basis.
32.
Plaintiff’s primary duties were to provide basic accounting functions for ESW’s
companies, support auditors in gathering documents requested on audit lists provided by auditors.
33.
As ESW acquires new companies, the accounting would be integrated into ESW
family.
34.
Defendants controlled Plaintiff’s work and activities through the degree of control
exercised by the alleged employer. Management would set weekly and monthly goals for Plaintiff
to achieve. For example, management would give Plaintiff deadlines when she must generate
certain reports. Plaintiff’s hours of work varied based on Defendants' assignments and workload
for the week.
35.
The relative investments of ESW into the operation is greater than Plaintiff:
a. Plaintiff used computers and the existing home internet service that has dual use
for personal and work.
b. Defendants invested in leased space in the Frost Bank building on 401 Congress
Ave, Ste 2650 Austin, TX 78701, paid for hundreds of support and management
staff, cloud software time management software (Worksmart Pro), SaaS accounting
software (Intaact and NetSuite), G-Suite (email, drive, and productivity tools -
sheets, docs, etc.), Amazon Web Services (AWS) for the group.
36.
Defendants set Plaintiff’s hourly rate of pay when they hired her. The hourly rate
of pay was not negotiable. The Defendants set the number of hours Kraemer worked each week.
37.
Defendants controlled Plaintiff’s hours and used a software that audits her key
stroke and presence before the web cam on her computer.
38.
Defendants required Plaintiff to download and install the surveillance software
when she started working for the company.
39.
If the audit team and software checked in on Kraemer and did not see her working,
they would not pay her for that 10-minute time frame.
COLLECTIVE/CLASS ACTION ALLEGATIONS
40.
Kraemer, bring this claim under Section 216(b) of the FLSA as a collective action.
41.
The same policy that caused Kraemer, to be denied their overtime pay caused
Defendants’ other hourly workers to be denied their overtime pay.
42.
While the precise job duties performed by the FLSA Collective members might
vary somewhat, these differences don’t matter for the purposes of determining their entitlement to
overtime.
43.
Nor do any differences in job duties matter for determining whether Defendants’
policy of not paying hourly workers overtime is legal.
44.
The members of the FLSA Collective are all entitled to overtime for all hours
worked over forty (40) in a workweek consistent with the overtime requirements of the FLSA.
45.
Because Defendants uniformly failed to pay overtime to all hourly workers,
Plaintiff(s) and the FLSA Collective members are similarly situated within the meaning of 29
U.S.C. § 216(b).
46.
Upon information and belief, Defendants employed numerous hourly employees
like Plaintiff during the past three (3) years.
47.
Nearly all of the questions related to Plaintiff and the FLSA Collective can be
answered on a collective basis.
48.
Defendants’ practice of refusing to pay hourly workers overtime is based on
established companywide policies.
49.
The most important questions presented in this case can be resolved on a collective-
wide basis.
50.
Absent a collective action, many members of the FLSA Collective likely will not
obtain redress of their injuries and Defendant(s) will retain the proceeds of its violations of the
51.
Furthermore, individual litigation would be unduly burdensome to the judicial
system.
52.
Concentrating the litigation in one forum will promote judicial economy and parity
among the claims of individual members of the class and provide for judicial consistency.
STRAIGHT TIME FOR OVERITME
53.
Plaintiff typically worked 60 hours a week. Defendants paid Plaintiff straight time
for overtime.
OFF THE CLOCK WORK
54.
Crossover and Trilogy workers must agree to install spyware on their computers so
Crossover’s productivity team in India can track the number of times they click their mouse or
stroke their keyboard. The tracking software takes screenshots every ten minutes and snaps photos
from PC webcam.
https://www.forbes.com/sites/nathanvardi/2018/11/19/how-a-mysterious-tech-billionaire-
created-two-fortunesand-a-global-software-sweatshop/#6310d6846cff
55.
As a condition to working for Trilogy, Plaintiff agreed to install Crossover’s
tracking software and subjected herself to be timed and compensated based on the software’s
tracking of her activities.
56.
Plaintiff’s work was not always based on the computer.
57.
Many times during the day, Plaintiff would print out a document to review or write
58.
Plaintiff would receive phone calls from work when she is not in front of the
computer webcam.
59.
Plaintiff regularly had Zoom video conferences on her mobile phone away from
her computer webcam.
60.
Crossover’s spyware software would not give credit for Plaintiff’s work when it
did not detect her sitting in front of the computer, keystrokes on her keyboard or movement of her
61.
Crossover has workers in India whose job is to watch the Trilogy workers through
video feed provided by the Spyware software and established recorded basis for withholding pay
for inactivity.
62.
Crossover’s surveillance team has provided Trilogy with the basis to deduct time
from Plaintiff’s work time because they did not detect her working in front of her computer.
63.
As a result, Plaintiff would not be paid for all hours worked.
64.
There are limited skills and initiative required in running standard accounting
reports and verify their accuracy.
65.
Plaintiff worked for Defendants from October 2018 until May 2020.
66.
Even though Plaintiff regularly worked over 40 hours a week, Defendants did not
pay her overtime premium. Instead, Defendants only paid Plaintiff at straight time for overtime.
JURISDICTION AND VENUE
67.
This Court has jurisdiction under the FLSA pursuant to 28 U.S.C. §I331 and 29
U.S.C. §216(b).
68.
Venue is proper pursuant to 28 U.S.C. § 1391(b), because Defendants and Plaintiff
transacted business within this judicial district and the events underlying this complaint occurred
within this judicial district.
69.
At all times material to this complaint, Defendants employed two or more
employees and had an annual dollar volume of sales or business done of at least $500,000.00.
70.
At all times material to this complaint, Defendants were an enterprise engaged in
interstate commerce, operating a business engaged in commerce or in the production of goods for
commerce as defined by § 3(r) and 3(s) of the Act, 29 U.S.C. §§ 203(r)-(s).
UNPAID OVERTIME WAGES
71.
Between October 2018 to May 2020, Plaintiff worked numerous workweeks in
excess of 40 hours per week.
72.
Defendants paid Plaintiff on an hourly basis.
73.
During the weeks of employment where Plaintiff worked more than 40 hours,
Defendants failed to pay Plaintiff time and one-half her regular rate of pay as required by the
FLSA.
74.
At all times relevant to this case, the Defendants had knowledge of Plaintiff’s
regular and overtime work. Defendants approved Plaintiff’s work and hours. Plaintiff’s work
benefitted Defendants.
75.
Defendants' actions were willful and in blatant disregard for Plaintiff’s federally
protected rights.
76.
As a result of Defendants' unlawful conduct, Plaintiff is entitled to actual and
compensatory damages, including the amount of overtime, which was not paid, and which should
have been paid at the proper overtime premium.
77.
Plaintiff further seeks liquidated damages as Defendants' conduct is in violation of
Section 7 of the FLSA, 29 U.S.C. § 207.
78.
Plaintiff also seeks compensation of recoverable expenses, costs of court, and
reasonable and necessary attorney's fees pursuant to 29 U.S.C. §216(b).
79.
Plaintiff has retained the law firm of Tran Law Firm to represent her in this suit.
Plaintiff has entered into a valid contract with Tran Law Firm and has appointed that firm and the
undersigned counsel to be her sole agent, attorney in-fact, and representative in this suit, exclusive
of all other parties, including Plaintiff. To avoid tortious interference with Plaintiff's obligations
to their attorneys in this suit, all communications concerning this suit must be made by Defendants
and Defendants’ attorneys solely to and through the undersigned counsel. Plaintiff's contract with
representation by Tran Law Firm and the undersigned attorney gives rise to a claim for reasonable
and necessary attorney's fees that Plaintiff is entitled to collect from Defendants pursuant to 29 U.
S. C. § 216(b).
PRAYER FOR RELIEF
Plaintiff, CAROL KRAEMER, prays that the Court assume jurisdiction of this cause and
that Defendants be cited to appear. Plaintiff prays that the Court award the following relief, under
law and equity, as applicable:
a. An order finding Crossover, Trilogy, and ESW Capital to be joint employer
pursuant to the FLSA and state laws.
b. Judgment against Defendants, jointly and severally, for all unpaid overtime wages
found to be due and owing;
c. Judgment against Defendants, jointly and severally, that their violations of the
FLSA were willful;
d. Judgment against Defendants, jointly and severally, for an amount equal to the
unpaid overtime compensation as liquidated damages;
e. If liquidated damages are not awarded, an award of pre-judgment interest;
f. Post-judgment interest at the applicable rate;
g. All costs, recoverable expenses and attorney's fees incurred in prosecuting these
claims;
h. Leave to amend to add claims under applicable state laws, if necessary; and
i. For such further relief as the Court deems just and equitable to which Plaintiff is
entitled.
JURY TRIAL DEMAND
Plaintiff, CAROL KRAEMER, hereby demands a trial by jury on all claims she has
asserted in this Complaint.
Respectfully Submitted,
TRAN LAW FIRM
/s/ Trang Q. Tran
Trang Q. Tran
Federal I.D: 20361
Texas Bar No. 00795787
2537 S. Gessner, Suite 104
Houston, Texas 77063
Telephone: (713) 223-8855
[email protected]
[email protected]
ATTORNEY FOR PLAINTIFF
| employment & labor |
oQMpFYcBD5gMZwczTAMs | POMERANTZ LLP
Jennifer Pafiti
468 North Camden Drive
Beverly Hills, CA 90210
Telephone: (310) 285-5330
Email: [email protected]
POMERANTZ LLP
Jeremy A. Lieberman
J. Alexander Hood II
C. Dov Berger
600 Third Avenue, 20th Floor
New York, New York 10016
Telephone: (212) 661-1100
Facsimile: (212) 661-8665
Email: [email protected]
[email protected]
[email protected]
Attorneys for Plaintiff
[Additional Counsel on signature page]
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF CALIFORNIA
'15CV1478
JMA
BEN
HAROLD ENG, Individually and on
Behalf of All Others Similarly Situated,
Plaintiff,
vs.
EDISON INTERNATIONAL,
THEODORE F. CRAVER, JR. and
WILLIAM JAMES SCILACCI,
Defendants
Case No.
CLASS ACTION
COMPLAINT FOR VIOLATIONS
OF THE FEDERAL SECURITIES
LAWS
DEMAND FOR JURY TRIAL
situated, by Plaintiff’s undersigned attorneys, for Plaintiff’s complaint against defendants,
alleges the following based upon personal knowledge as to Plaintiff and Plaintiff’s own
acts, and upon information and belief as to all other matters based on the investigation
conducted by and through Plaintiff’s attorneys, which included, among other things, a
review of Securities and Exchange Commission ("SEC") filings by Edison International
("Edison" or the "Company"), as well as media reports about the Company. Plaintiff
believes that substantial additional evidentiary support will exist for the allegations set
forth herein after a reasonable opportunity for discovery.
INTRODUCTION AND OVERVIEW
1.
This is a federal securities class action on behalf of a class consisting of all
persons other than defendants who purchased or otherwise acquired Edison securities
between July 31, 2014 and June 24, 2015, both dates inclusive (the “Class Period”),
seeking to recover damages caused by defendants’ violations of the federal securities laws
and to pursue remedies under §§ 10(b) and 20(a) of the Securities Exchange Act of 1934
(the “Exchange Act”) and Rule 10b-5 promulgated thereunder against the Company and
certain of its top officials.
2.
Defendant Edison, through its subsidiaries, generates and distributes
electrical power and invests in energy services and technologies. Southern California
Edison (“SCE”), Edison’s largest subsidiary, is one of the largest utilities in the United
States, serving nearly 14 million people in Central, Coastal and Southern California. SCE
“Commission”) and by the Federal Energy Regulatory Commission.
3.
The Company was founded in 1987 and is incorporated in California, with
headquarters in Rosemead, California. Its shares trade on the NYSE under the ticker
symbol “EIX.”
4.
Edison, through SCE, was at all relevant times the operator and majority
owner of the San Onofre Nuclear Generating Station (“SONGS”), a now-inoperative
nuclear power plant in Southern California. In January 2012, Edison shut down two
SONGS reactor units for maintenance. Although the units never returned to service,
Edison continued to bill SCE customers tens of millions of dollars in rates each month to
support the defunct units and to buy replacement power.
5.
On October 25, 2012, the CPUC instituted an investigation into the causes of
and accountability for the SONGS unit closures. After extensive settlement negotiations
under the auspices of the CPUC, Edison reached a 3.3 billion dollar settlement (the
“SONGS Settlement”), pursuant to which, among other terms, Edison would refund
customers and reduce rates in compensation for the excess charges they had incurred after
the SONGS units were taken offline. Several environmental and consumer advocacy
groups were parties to the settlement, including the Utility Reform Network (“TURN”).
On November 19, 2014, the CPUC approved the SONGS Settlement.
6.
Throughout the Class Period, defendants made materially false and
misleading statements regarding the Company’s business, operational and compliance
to disclose that: (i) Edison’s ex parte contacts with CPUC decision makers were more
extensive than the Company had reported to CPUC; (ii) that belated disclosure of Edison’s
ex parte contacts with CPUC personnel would jeopardize the Company’s $3.3 billion
dollar SONGS Settlement; and (iii) as a result of the above, the Company’s financial
statements were materially false and misleading at all relevant times.
7.
On February 9, 2015, SCE submitted a notice to the CPUC disclosing that a
previously unreported ex parte contact between Stephen Pickett (“Pickett”), then an
executive vice president at SCE, and Michael Peevey (“Peevey”), then president of the
CPUC, had occurred at an industry conference on March 26, 2013. At that time the
SONGS Settlement negotiations were ongoing, and Pickett and Peevey’s conversation
concerned the future of SONGS and a possible resolution of the CPUC’s investigation.
Pursuant to the CPUC’s rules, the Company’s failure to timely report the ex parte meeting
between Pickett and Peevey represented a possible violation of CPUC rules governing ex
parte contact between CPUC decision makers and interested parties.
8.
Prompted by SCE’s belated disclosure and amidst growing public criticism
of the relationship between the CPUC and California’s utilities, the CPUC ordered SCE
to turn over additional communications regarding the SONGS Settlement’s negotiation.
On April 29, 2015, SCE duly complied. After reviewing the additional SCE documents,
TURN’s attorney stated that the documents showed “a number of unreported ex parte
contacts and that Edison violated the rules by not reporting those communications.”
released documents revealed a previously unreported May 2014 meeting between Peevey
and SCE executives, at which the parties discussed donating millions of dollars to a UCLA
institute at which Peevey held an advisory post.
10.
On this news, shares of Edison declined $2.87 per share over two days of
trading, or roughly 3.75%, to close at $59.60 on May 6, 2015.
11.
On June 22, 2015, the law firm Strumwasser & Woocher released an
independent report commissioned by the CPUC in connection with a review of ex parte
meetings between utility lobbyists or executives and CPUC decision makers (the
“Strumwasser Report”). The Strumwasser Report described such ex parte meetings as
“frequent, pervasive, and at least sometimes outcome-determinative,” and recommended
banning them altogether in rate cases.
12.
On June 24, 2015, in response to the Strumwasser Report and SCE’s earlier
disclosures in February and April, TURN filed an application with the CPUC that charged
SCE with “fraud by concealment” and urged the CPUC to set aside the SONGS Settlement
and reopen its investigation.
13.
On this news, shares of Edison declined $1.56 per share or over 2.70%, to
close at $56.07 on June 24, 2015.
14.
As a result of defendants' wrongful acts and omissions, and the precipitous
decline in the market value of the Company's securities, Plaintiff and other Class members
have suffered significant losses and damages.
15.
The claims asserted herein arise under and pursuant to Sections 10(b) and
20(a) of the Exchange Act (15 U.S.C. § 78j(b) and 78t(a)) and Rule 10b-5 promulgated
thereunder (17 C.F.R. § 240.10b-5).
16.
This Court has jurisdiction over the subject matter of this action pursuant to
§ 27 of the Exchange Act (15 U.S.C. § 78aa) and 28 U.S.C. § 1331.
17.
Venue is proper in this District pursuant to §27 of the Exchange Act, 15
U.S.C. §7 8aa and 28 U.S.C. §1391(b), as the Company maintains corporate offices in this
District.
18.
In connection with the acts, conduct and other wrongs alleged in this
Complaint, defendants, directly or indirectly, used the means and instrumentalities of
interstate commerce, including but not limited to, the United States mail, interstate
telephone communications and the facilities of the national securities exchange.
THE PARTIES
19.
Plaintiff, as set forth in the attached Certification, acquired Edison securities
at artificially inflated prices during the Class Period and was damaged upon the revelation
of the alleged corrective disclosures.
20.
Defendant Edison is a California corporation with its principal executive
offices located at 2244 Walnut Grove Avenue, Rosemead, California 91770. Edison's
common stock is traded on the NYSE under the ticker symbol "EIX."
Chairman, President and Chief Executive Officer of Edison.
22.
Defendant William James Scilacci ("Scilacci") served at all relevant times as
Executive Vice President, Chief Financial Officer and Treasurer of Edison.
23.
The defendants referenced above in ¶¶ 21-22 are sometimes collectively
referred to herein as the "Individual Defendants."
SUBSTANTIVE ALLEGATIONS
Background
24.
Defendant Edison, through its subsidiaries, generates and distributes
electrical power and invests in energy services and technologies. SCE, Edison’s largest
subsidiary, is one of the largest utilities in the United States, serving nearly 14 million
people in Central, Coastal and Southern California. SCE is regulated by the CPUC and
by the Federal Energy Regulatory Commission.
25.
The Company was founded in 1987 and is incorporated in California, with
headquarters in Rosemead, California. Its shares trade on the NYSE under the ticker
symbol “EIX.”
26.
Edison, through SCE, was at all relevant times the operator and majority
owner of SONGS, a now-inoperative nuclear power plant in Southern California. In
January 2012, Edison shut down two SONGS reactor units for maintenance. Although the
units never returned to service, Edison continued to bill SCE customers tens of millions
of dollars in rates each month to support the defunct units and to buy replacement power.
and accountability for the SONGS unit closures. After extensive settlement negotiations
under the auspices of the CPUC, Edison reached a $3.3 billion settlement, pursuant to
which, among other terms, Edison would refund customers and reduce rates in
compensation for the excess charges they had incurred after the SONGS units were taken
offline. Several environmental and consumer advocacy groups were parties to the
settlement, including TURN. On November 19, 2014, the CPUC approved the SONGS
Settlement.
Materially False and Misleading
Statements Issued During the Period
28.
The Class Period begins on July 31, 2014, when Edison filed a quarterly
report on Form 10-Q with the SEC announcing its financial and operating results for the
second quarter ended June 30, 2014 (the “Q2 2014 10-Q”). For the second quarter, net
income was $566 million, or $1.63 per diluted share, on revenue of $3.02 billion,
compared to a net loss of $70 million, or $0.29 per diluted share, on revenue of $3.05 for
the same period in the prior year. In addition, the Q2 2014 10-Q contained signed
certifications pursuant to SOX by defendants Craver and Scilacci, stating that the financial
information contained in the Q2 2014 10-Q was accurate and disclosed any material
changes to the Company’s internal control over financial reporting.
29.
In the Q2 2014 10-Q, the Company stated, in part, that:
In October 2012, the CPUC issued an Order Instituting Investigation ("OII")
that consolidated all San Onofre issues in related CPUC regulatory
proceedings to consider appropriate cost recovery for all San Onofre costs,
including among other costs, the cost of the steam generator replacement
project, substitute market power costs, capital expenditures, and operation and
maintenance costs.
On March 27, 2014, SCE entered into a settlement agreement (the "San
Onofre OII Settlement Agreement") with The Utility Reform Network
("TURN"), the CPUC's Office of Ratepayer Advocates ("ORA") and
SDG&E, which was later joined by the Coalition of California Utility
Employees ("CUE") and Friends of the Earth ("FOE") (together, the "Settling
Parties"). If implemented, the San Onofre OII Settlement Agreement will
constitute a complete and final resolution of the CPUC's OII and related
proceedings regarding the Steam Generator Replacement Project ("SGRP") at
San Onofre and the related outage and subsequent shutdown of San Onofre.
The San Onofre OII Settlement Agreement does not affect proceedings before
the NRC or proceedings related to recoveries from third parties described
below, but does describe how shareholders and customers will share any
potential recoveries. Implementation of the San Onofre OII Settlement
Agreement is subject to the approval of the CPUC. The parties to the San
Onofre OII Settlement Agreement have agreed to exercise their best efforts to
obtain CPUC approval. The San Onofre OII Settlement Agreement is subject
to termination by any of the Settling Parties if the CPUC has not approved it
within six months of submission, but there can be no certainty of when or
what the CPUC will actually decide. . . .
On April 3, 2014, the Settling Parties filed a motion in the OII requesting the
CPUC to approve the San Onofre OII Settlement Agreement without change,
find the Settlement Agreement reasonable and expedite consideration of the
San Onofre OII Settlement Agreement in order to provide the benefits of it as
soon as possible. . . . The Settling Parties further agree to review any CPUC
orders regarding the San Onofre OII Settlement Agreement to determine if the
CPUC has changed or modified it, deleted a term or imposed a new term. If
any Settling Party is unwilling to accept any such change, modification,
deletion or addition of a new term, then the Settling Parties will negotiate in
good faith to seek a resolution acceptable to all Settling Parties. If they are
unable to resolve the matter to the satisfaction of all Settling Parties or to
obtain prompt CPUC approval of an agreed upon resolution, then any Settling
Party can terminate the Settlement Agreement upon prompt notice.
Under CPUC rules, parties in the OII have had an opportunity to comment on
the San Onofre OII Settlement Agreement, and the CPUC held an evidentiary
hearing on May 14, 2014 and a public participation meeting on June 16, 2014,
at which various intervenors who were not Settling Parties opposed the
proposed settlement and others supported it. Following conclusion of the
public participation meeting, approval of the San Onofre OII Settlement
Agreement was submitted to an Administrative Law Judge to render a
proposed decision for further consideration by the CPUC. CPUC rules do not
provide for any fixed time period for the CPUC to act on the San Onofre OII
Settlement Agreement. Pursuant to the CPUC's rules, no settlement becomes
binding on the parties to it unless the CPUC approves the settlement based on
a finding that it is reasonable in light of the whole record, consistent with law,
and in the public interest. The CPUC has discretion to approve or disapprove
a settlement, or to condition its approval on changes to the settlement, which
the parties may accept or reject.
30.
On October 28, 2014, Edison filed a quarterly report on Form 10-Q with the
SEC announcing its financial and operating results for the third quarter ended September
30, 2014 (the “Q3 2014 10-Q”). For the third quarter, net income was $508 million, or
$1.46 per diluted share, on revenue of $4.36 billion, compared to a net income of $463
million, or $1.34 per diluted share, on revenue of $3.96 billion for the same period in the
prior year. In addition, the Q3 2014 10-Q contained signed certifications pursuant to SOX
by defendants Craver and Scilacci, stating that the financial information contained in the
Q3 2014 10-Q was accurate and disclosed any material changes to the Company’s internal
control over financial reporting.
31.
In the Q3 2014 10-Q, the Company stated, in part, that:
In October 2012, the CPUC issued an Order Instituting Investigation ("OII")
that consolidated all San Onofre issues in related CPUC regulatory
proceedings to consider appropriate cost recovery for all San Onofre costs,
including among other costs, the cost of the steam generator replacement
project, substitute market power costs, capital expenditures, and operation and
maintenance costs.
On September 23, 2014, SCE entered into an Amended and Restated
Settlement Agreement (the "San Onofre OII Amended Settlement
Agreement") with The Utility Reform Network ("TURN"), the CPUC's Office
of Ratepayer Advocates ("ORA"), SDG&E, the Coalition of California Utility
Employees ("CUE"), and Friends of the Earth ("FOE") (together, the "Settling
Parties"). If implemented, the San Onofre OII Amended Settlement
Agreement will constitute a complete and final resolution of the CPUC's OII
and related proceedings regarding the Steam Generator Replacement Project
("SGRP") at San Onofre and the related outage and subsequent shutdown of
San Onofre. The Settling Parties agreed to amend the Settlement Agreement
that was originally entered into in March 2014 in response to an Assigned
Commissioner's and Administrative Judges’ Ruling that was issued on
September 5, 2014. The San Onofre OII Amended Settlement Agreement . . .
describes how shareholders and customers will share any potential recoveries.
Implementation of the San Onofre OII Amended Settlement Agreement is
subject to the approval of the CPUC. The San Onofre OII Amended
Settlement Agreement is subject to termination by any of the Settling Parties
if the CPUC has not approved it by December 23, 2014. On October 9, 2014,
the Administrative Law Judges in the OII issued a Proposed Decision
approving the San Onofre OII Amended Settlement Agreement. Under
applicable rules, the CPUC cannot render a final decision for at least thirty
days following the date of the Proposed Decision, but there can be no certainty
of when or what the CPUC will actually decide. The parties to the San Onofre
OII Amended Settlement Agreement have agreed to exercise their best efforts
to obtain CPUC approval.
32.
The statements referenced in ¶¶ 28-31 were materially false and misleading
because defendants made false and/or misleading statements and/or failed to disclose that:
(i) Edison’s ex parte contacts with CPUC decision makers were more extensive than the
Company had reported to CPUC; (ii) that belated disclosure of Edison’s ex parte contacts
with CPUC personnel would jeopardize the Company’s $3.3 billion dollar SONGS
Settlement; and (iii) as a result of the above, the Company’s financial statements were
materially false and misleading at all relevant times.
33.
On February 9, 2015, SCE submitted a notice to the CPUC disclosing that a
previously unreported ex parte contact between Pickett, then an executive vice president
at SCE, and Peevey, then president of the CPUC, had occurred at an industry conference
on March 26, 2013. At that time the SONGS Settlement negotiations were ongoing, and
Pickett’s and Peevey’s conversation concerned the future of SONGS and a possible
resolution of the CPUC’s investigation. Pursuant to the CPUC’s rules, the Company’s
failure to timely report the ex parte meeting between Pickett and Peevey thus represented
a possible violation of CPUC rules governing ex parte contact between CPUC decision
makers and interested parties.
34.
On February 24, 2015, Edison filed an annual report on Form 10-K with the
SEC announcing its financial and operating results for the fourth quarter and fiscal year
ended December 31, 2014 (the “2014 10-K”). For the fourth quarter, net income was $448
million, or $1.27 per diluted share, on revenue of $3.11 billion, compared to net income
of $326 million, or $0.92 per diluted share, on revenue of $2.94 billion for the same period
in the prior year. For 2014, net income was $1.72 billion, or $4.89 per diluted share, on
revenue of $13.41 billion, compared to net income of $1.02 billion, or $2.78 per diluted
share, on revenue of $12.58 billion for 2013. In addition, the 2014 10-K contained signed
certifications pursuant to SOX by defendants Craver and Scilacci, stating that the financial
information contained in the 2014 10-K was accurate and disclosed any material changes
to the Company’s internal control over financial reporting.
In October 2012, the CPUC issued an OII that consolidated all San Onofre
issues in related CPUC regulatory proceedings to consider appropriate cost
recovery for all San Onofre costs, including among other costs, the cost of the
steam generator replacement project, substitute market power costs, capital
expenditures, and operation and maintenance costs.
On November 20, 2014, the CPUC approved the Amended and Restated
Settlement Agreement (the "San Onofre OII Settlement Agreement") that
SCE had entered into with TURN, the ORA, SDG&E, the Coalition of
California Utility Employees, and Friends of the Earth (together, the "Settling
Parties"). The San Onofre OII Settlement Agreement resolved the CPUC's OII
and related proceedings regarding the Steam Generator Replacement Project
at San Onofre and the related outage and subsequent shutdown of San Onofre.
The San Onofre OII Settlement Agreement does not affect proceedings related
to recoveries from third parties described below, but does describe how
shareholders and customers will share any potential recoveries. SCE has
recorded the effects of the San Onofre OII Settlement Agreement. Such
amounts do not reflect any recoveries from third parties by SCE.
. . . On February 9, 2015, SCE filed in the OII proceeding a Late-Filed Notice
of Ex Parte Communication regarding a meeting in March 2013 between an
SCE senior executive and the president of the CPUC, both of whom have since
retired from their respective positions. In response, the Alliance for Nuclear
Responsibility, one of the intervenors in the OII, filed an application
requesting that the CPUC institute an investigation into whether sanctions
should be imposed on SCE in connection with the ex parte communication.
The application requests that the CPUC order SCE to produce all ex parte
communications between SCE and the CPUC or its staff since January 31,
2012 and all internal SCE unprivileged communications that discuss such ex
parte communications.
36.
On April 28, 2015, Edison filed a quarterly report on Form 10-Q with the
SEC announcing its financial and operating results for the first quarter ended March 31,
2015 (the “Q1 2015 10-Q”). For the first quarter, net income was $327 million, or $0.91
per diluted share, on revenue of $2.51 billion, compared to a net income of $202 million,
year. In addition, the Q1 2015 10-Q contained signed certifications pursuant to SOX by
defendants Craver and Scilacci, stating that the financial information contained in the Q1
2015 10-Q was accurate and disclosed any material changes to the Company’s internal
control over financial reporting.
37.
In the Q1 2015 10-Q, the Company stated, in part, that:
As discussed in the 2014 Form 10-K, in November 2014, the CPUC approved
the San Onofre OII Settlement Agreement that SCE had entered into with
TURN, the ORA, SDG&E, the Coalition of California Utility Employees, and
Friends of the Earth. The San Onofre OII Settlement Agreement resolved the
CPUC's OII and related proceedings regarding the Steam Generator
Replacement Project at San Onofre and the related outage and subsequent
shutdown of San Onofre. The San Onofre OII Settlement Agreement does not
affect proceedings related to recoveries from third parties described below,
but does describe how shareholders and customers will share any potential
recoveries.
A federal lawsuit challenging the CPUC's authority to permit rate recovery of
San Onofre costs and an application to the CPUC for rehearing of its decision
approving the San Onofre OII Settlement Agreement were filed in November
and December 2014, respectively. On April 16, 2015, a ruling was issued
dismissing the federal lawsuit with prejudice.
In February 2015, SCE filed in the OII proceeding a Late-Filed Notice of Ex
Parte Communication regarding a meeting in March 2013 between an SCE
senior executive and the president of the CPUC, both of whom have since
retired from their respective positions. In response, the Alliance for Nuclear
Responsibility, one of the intervenors in the OII, filed an application
requesting that the CPUC institute an investigation into whether sanctions
should be imposed on SCE in connection with the ex parte communication.
The application requests that the CPUC order SCE to produce all ex parte
communications between SCE and the CPUC or its staff since January 31,
2012 and all internal SCE unprivileged communications that discuss such ex
parte communications.
On April 14, 2015, the OII ALJs ordered SCE to produce unprivileged
documents pertaining to oral and written communications regarding the
possible settlement of the OII proceeding between any SCE employee and
CPUC decision makers. SCE's response is due on April 29, 2015.
On April 17, 2015, ORA and TURN issued press releases asking the CPUC
to impose penalties on SCE in connection with the ex parte communication.
ORA recommended penalties in the amount of $648 million, representing
ORA's calculation of the difference in ratepayer value between ORA's initial
negotiating position in the SONGS OII and the approved settlement. TURN
did not recommend a penalty amount. Neither party asked the CPUC to reopen
the settlement. TURN stated that, based on SCE's response to the OII ALJs'
April 14, 2015 order, it may seek a reopening of the OII proceeding. On April
27, 2015, the Alliance for Nuclear Responsibility filed a petition to modify
the CPUC’s decision approving the San Onofre OII Settlement Agreement
due to the ex parte communication. The petition seeks the reversal of the
decision approving the San Onofre OII Settlement Agreement and
reinstatement of the OII proceeding.
SCE cannot predict the outcome of these proceedings.
38.
The statements referenced in ¶¶ 34-37 were materially false and misleading
because defendants made false and/or misleading statements and/or failed to disclose that:
(i) Edison’s ex parte contacts with CPUC decision makers were more extensive than the
Company had reported to CPUC; (ii) that belated disclosure of Edison’s ex parte contacts
with CPUC personnel would jeopardize the Company’s $3.3 billion dollar SONGS
Settlement; and (iii) as a result of the above, the Company’s financial statements were
materially false and misleading at all relevant times.
39.
Prompted by SCE’s belated disclosure and amidst growing public criticism
of the relationship between the CPUC and California’s utilities, the CPUC ordered SCE
to turn over additional communications regarding the SONGS Settlement’s negotiation.
TURN’s attorney stated that the documents showed “a number of unreported ex parte
contacts and that Edison violated the rules by not reporting those communications.”
40.
On May 4, 2015, an article published by SFGate reported that SCE’s newly
released documents revealed a previously unreported May 2014 meeting between Peevey
and SCE executives, at which the parties discussed donating millions of dollars to a UCLA
institute at which Peevey held an advisory post.
41.
On this news, shares of Edison declined $2.87 per share over two days of
trading, or roughly 3.75%, to close at $59.60 on May 6, 2015.
42.
On June 22, 2015, the law firm Strumwasser & Woocher released an
independent report commissioned by the CPUC in connection with a review of ex parte
meetings between utility lobbyists or executives and CPUC decision makers. The
Strumwasser Report described such ex parte meetings as “frequent, pervasive, and at least
sometimes outcome-determinative,” and recommended banning them altogether in rate
43.
On June 24, 2015, in response to the Strumwasser Report and SCE’s earlier
disclosures in February and April, TURN filed an application with the CPUC that charged
SCE with “fraud by concealment” and urged the CPUC to set aside the SONGS Settlement
and reopen its investigation.
44.
On this news, shares of Edison declined $1.56 per share, or over 2.70%, to
close at $56.07 on June 24, 2015.
decline in the market value of the Company's securities, Plaintiff and other Class members
have suffered significant losses and damages.
PLAINTIFF’S CLASS ACTION ALLEGATIONS
46.
Plaintiff brings this action as a class action pursuant to Federal Rule of Civil
Procedure 23(a) and (b)(3) on behalf of a Class, consisting of all those who purchased or
otherwise acquired Edison securities during the Class Period (the “Class”); and were
damaged upon the revelation of the alleged corrective disclosures. Excluded from the
Class are Defendants herein, the officers and directors of the Company, at all relevant
times, members of their immediate families and their legal representatives, heirs,
successors or assigns and any entity in which Defendants have or had a controlling interest.
47.
The members of the Class are so numerous that joinder of all members is
impracticable. Throughout the Edison Class Period, securities of Edison were actively
traded on the NYSE. While the exact number of Class members is unknown to Plaintiff
at this time and can only be ascertained through appropriate discovery, Plaintiff believes
that there are hundreds or thousands of members in the proposed Class. Record owners
and other members of the Class may be identified from records maintained by Edison or
their transfer agents and may be notified of the pendency of this action by mail, using the
form of notice similar to that customarily used in securities class actions.
members of the Class are similarly affected by defendants’ wrongful conduct in violation
of federal law complained of herein.
49.
Plaintiff will fairly and adequately protect the interests of the members of the
Class and has retained counsel competent and experienced in class action and securities
litigation.
50.
Common questions of law and fact exist as to all members of the Class and
predominate over any questions solely affecting individual members of the Class. Among
the questions of law and fact common to the Class are:
whether the federal securities laws were violated by Defendants’ acts as
alleged herein;
whether statements made by Defendants to the investing public during the
Class Period misrepresented material facts about the business, operations and
management of Edison;
whether the Individual Defendants caused Edison to issue false and
misleading financial statements during the Class Period;
whether Defendants acted knowingly or recklessly in issuing false and
misleading financial statements;
whether the prices of Edison securities during the Class Period were
artificially inflated because of the Defendants’ conduct complained of herein;
and,
whether the members of the Class have sustained damages and, if so, what is
the proper measure of damages.
efficient adjudication of this controversy since joinder of all members is impracticable.
Furthermore, as the damages suffered by individual Class members may be relatively
small, the expense and burden of individual litigation make it impossible for members of
the Class to individually redress the wrongs done to them. There will be no difficulty in
the management of this action as a class action.
52.
Plaintiff will rely, in part, upon the presumption of reliance established by the
fraud-on-the-market doctrine in that:
Defendants made public misrepresentations or failed to disclose material
facts during the Class Period;
the omissions and misrepresentations were material;
Edison securities are traded in efficient markets;
the Company’s shares were liquid and traded with moderate to heavy volume
during the Class Period;
the Company traded on the NYSE, and was covered by multiple analysts;
the misrepresentations and omissions alleged would tend to induce a
reasonable investor to misjudge the value of the Company’s securities; and
Plaintiff and members of the Class purchased and/or sold Edison securities
between the time the Defendants failed to disclose or misrepresented material
facts and the time the true facts were disclosed, without knowledge of the
omitted or misrepresented facts.
to a presumption of reliance upon the integrity of the market.
54.
Alternatively, Plaintiff and the members of the Class are entitled to the
presumption of reliance established by the Supreme Court in Affiliated Ute Citizens of the
State of Utah v. United States, 406 U.S. 128, 92 S. Ct. 2430 (1972), as Defendants omitted
material information in their Class Period statements in violation of a duty to disclose such
information, as detailed above.
COUNT I
(Against All Defendants for Violations of Section
10(b) and Rule 10b-5 Promulgated Thereunder)
55.
Plaintiff repeats and realleges each and every allegation contained above as
if fully set forth herein.
56.
This Count is asserted against defendants and is based upon Section 10(b) of
the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5 promulgated thereunder by the SEC.
57.
During the Class Period, defendants engaged in a plan, scheme, conspiracy
and course of conduct, pursuant to which they knowingly or recklessly engaged in acts,
transactions, practices and courses of business which operated as a fraud and deceit upon
Plaintiff and the other members of the Class; made various untrue statements of material
facts and omitted to state material facts necessary in order to make the statements made,
in light of the circumstances under which they were made, not misleading; and employed
devices, schemes and artifices to defraud in connection with the purchase and sale of
(i) deceive the investing public, including Plaintiff and other Class members, as alleged
herein; (ii) artificially inflate and maintain the market price of Edison securities; and (iii)
cause Plaintiff and other members of the Class to purchase or otherwise acquire Edison
securities and options at artificially inflated prices. In furtherance of this unlawful scheme,
plan and course of conduct, defendants, and each of them, took the actions set forth herein.
58.
Pursuant to the above plan, scheme, conspiracy and course of conduct, each
of the defendants participated directly or indirectly in the preparation and/or issuance of
the quarterly and annual reports, SEC filings, press releases and other statements and
documents described above, including statements made to securities analysts and the
media that were designed to influence the market for Edison securities. Such reports,
filings, releases and statements were materially false and misleading in that they failed to
disclose material adverse information and misrepresented the truth about Edison’s
finances and business prospects.
59.
By virtue of their positions at Edison, defendants had actual knowledge of
the materially false and misleading statements and material omissions alleged herein and
intended thereby to deceive Plaintiff and the other members of the Class, or, in the
alternative, defendants acted with reckless disregard for the truth in that they failed or
refused to ascertain and disclose such facts as would reveal the materially false and
misleading nature of the statements made, although such facts were readily available to
defendants. Said acts and omissions of defendants were committed willfully or with
that material facts were being misrepresented or omitted as described above.
60.
Defendants were personally motivated to make false statements and omit
material information necessary to make the statements not misleading in order to
personally benefit from the sale of Edison securities from their personal portfolios.
61.
Information showing that defendants acted knowingly or with reckless
disregard for the truth is peculiarly within defendants’ knowledge and control. As the
senior managers and/or directors of Edison, the Individual Defendants had knowledge of
the details of Edison’s internal affairs.
62.
The Individual Defendants are liable both directly and indirectly for the
wrongs complained of herein. Because of their positions of control and authority, the
Individual Defendants were able to and did, directly or indirectly, control the content of
the statements of Edison. As officers and/or directors of a publicly-held company, the
Individual Defendants had a duty to disseminate timely, accurate, and truthful information
with respect to Edison’s businesses, operations, future financial condition and future
prospects. As a result of the dissemination of the aforementioned false and misleading
reports, releases and public statements, the market price of Edison securities was
artificially inflated throughout the Class Period. In ignorance of the adverse facts
concerning Edison’s business and financial condition which were concealed by
defendants, Plaintiff and the other members of the Class purchased or otherwise acquired
Edison securities at artificially inflated prices and relied upon the price of the securities,
defendants, and were damaged thereby.
63.
During the Class Period, Edison securities were traded on an active and
efficient market. Plaintiff and the other members of the Class, relying on the materially
false and misleading statements described herein, which the defendants made, issued or
caused to be disseminated, or relying upon the integrity of the market, purchased or
otherwise acquired shares of Edison securities at prices artificially inflated by defendants’
wrongful conduct. Had Plaintiff and the other members of the Class known the truth, they
would not have purchased or otherwise acquired said securities, or would not have
purchased or otherwise acquired them at the inflated prices that were paid. At the time of
the purchases and/or acquisitions by Plaintiff and the Class, the true value of Edison
securities was substantially lower than the prices paid by Plaintiff and the other members
of the Class. The market price of Edison securities declined sharply upon public disclosure
of the facts alleged herein to the injury of Plaintiff and Class members.
64.
By reason of the conduct alleged herein, defendants knowingly or recklessly,
directly or indirectly, have violated Section 10(b) of the Exchange Act and Rule 10b-5
promulgated thereunder.
65.
As a direct and proximate result of defendants’ wrongful conduct, Plaintiff
and the other members of the Class suffered damages in connection with their respective
purchases, acquisitions and sales of the Company’s securities during the Class Period,
statements to the investing public.
COUNT II
(Violations of Section 20(a) of the
Exchange Act Against The Individual Defendants)
66.
Plaintiff repeats and realleges each and every allegation contained in the
foregoing paragraphs as if fully set forth herein.
67.
During the Class Period, the Individual Defendants participated in the
operation and management of Edison, and conducted and participated, directly and
indirectly, in the conduct of Edison’s business affairs. Because of their senior positions,
they knew the adverse non-public information about Edison’s misstatement of income and
expenses and false financial statements.
68.
As officers and/or directors of a publicly owned company, the Individual
Defendants had a duty to disseminate accurate and truthful information with respect to
Edison’s financial condition and results of operations, and to correct promptly any public
statements issued by Edison which had become materially false or misleading.
69.
Because of their positions of control and authority as senior officers, the
Individual Defendants were able to, and did, control the contents of the various reports,
press releases and public filings which Edison disseminated in the marketplace during the
Class Period concerning Edison’s results of operations. Throughout the Class Period, the
Individual Defendants exercised their power and authority to cause Edison to engage in
the wrongful acts complained of herein. The Individual Defendants therefore, were
In this capacity, they participated in the unlawful conduct alleged which artificially
inflated the market price of Edison securities.
70.
Each of the Individual Defendants, therefore, acted as a controlling person of
Edison. By reason of their senior management positions and/or being directors of Edison,
each of the Individual Defendants had the power to direct the actions of, and exercised the
same to cause, Edison to engage in the unlawful acts and conduct complained of herein.
Each of the Individual Defendants exercised control over the general operations of Edison
and possessed the power to control the specific activities which comprise the primary
violations about which Plaintiff and the other members of the Class complain.
71.
By reason of the above conduct, the Individual Defendants are liable pursuant
to Section 20(a) of the Exchange Act for the violations committed by Edison.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff prays for judgment as follows:
A.
Determining that this action is a proper class action, designating Plaintiff as
Lead Plaintiff and certifying Plaintiff as class representative under Rule 23 of the Federal
Rules of Civil Procedure and Plaintiff’s counsel as Lead Counsel;
B.
Awarding Plaintiff and the members of the Class damages and interest;
C.
Awarding Plaintiff’s reasonable costs, including attorneys' fees; and
D.
Awarding such equitable/injunctive or other relief as the Court may deem just
and proper.
Plaintiff hereby demands a trial by jury.
Dated: July 6, 2015
Respectfully submitted,
POMERANTZ LLP
/s/ Jennifer Pafiti
Jennifer Pafiti
468 North Camden Drive
Beverly Hills, CA 90210
Telephone: (310) 285-5330
Email: [email protected]
POMERANTZ LLP
Jeremy A. Lieberman
J. Alexander Hood II
C. Dov Berger
600 Third Avenue, 20th Floor
New York, New York 10016
Telephone: (212) 661-1100
Facsimile: (212) 661-8665
Email: [email protected]
[email protected]
[email protected]
POMERANTZ LLP
Patrick V. Dahlstrom
10 South La Salle Street, Suite 3505
Chicago, Illinois 60603
Telephone: (312) 377-1181
Facsimile: (312) 377-1184
Email: [email protected]
| securities |
JMxeDocBD5gMZwcz5Vzd |
CLASS ACTION
COMPLAINT
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
DOMINIK ZOLKOS, on behalf of himself and all
others similarly situated,
Plaintiff,
-against-
SCRIPTFLEET, Inc., f/k/a NETWORK EXPRESS,
and FLEETGISTICS HOLDINGS, INC.,
Defendants.
Plaintiff Dominik Zolkos (“Zolkos”), on behalf of himself and on behalf of all others
similarly situated, by and through undersigned counsel, alleges as follows::
INTRODUCTION
1.
This is a collective action under the Fair Labor Standards Act, 29 U.S.C. §§ 201
et seq., and is brought to remedy widespread violations by Scriptfleet, Inc., f/k/a Network
Express, and Fleetgistics Holdings, Inc., (collectively “Scriptfleet” or “Defendants”), that have
deprived Plaintiff and all other current and former Scriptfleet drivers, couriers and delivery
drivers throughout the United States of overtime and other wages to which they are entitled.
2.
Plaintiff also brings this action as a class action pursuant to Federal Rule of Civil
Procedure 23 on behalf of himself and all similarly situated current and former drivers, couriers
and delivery drivers who worked for Scriptfleet in Illinois, to remedy violations of the labor laws
of Illinois.
3.
Scriptfleet misclassifies its drivers as independent contractors, despite exercising
extensive control over the manner in which they conduct their work.
4.
Under federal and Illinois law, employees must be paid 1.5 times their regular rate
of pay for all hours over 40 worked in a week, unless they qualify for a statutory exemption.
5.
Despite these statutory requirements, Scriptfleet requires their drivers, couriers
and delivery drivers to work without any overtime pay whatsoever when in fact their duties do
not qualify them for exempt status.
6.
Scriptfleet also deducts amounts from its drivers’, couriers’ and delivery drivers’
wages for uniforms, equipment and insurance that Scriptfleet requires its drivers, couriers and
delivery drivers to use in the course of their work.
7.
Defendants’ acts violate federal and Illinois law and affect hundreds of their
drivers, couriers and delivery drivers, current and former. Accordingly, Plaintiff, on behalf of
himself and all others similarly situated, bring these claims and seek unpaid compensation, an
equal amount of liquidated damages, attorneys’ fees and costs, and all other available and
appropriate relief to which he and the other drivers, couriers and delivery drivers are entitled.
JURISDICTION AND VENUE
8.
This Court has subject matter jurisdiction over this action pursuant to the FLSA,
29 U.S.C. § 216(b) and 28 U.S.C. § 1331 and 1337.
9.
The Court also has subject matter jurisdiction over this action pursuant to 28
U.S.C. § 1332(d). Plaintiff is diverse from Defendant Fleetgistics Holdings, Inc. The amount in
controversy in this matter exceeds the sum or value of $5,000,000, exclusive of interest and
costs. Upon information and belief, the number of members of all proposed plaintiff classes in
the aggregate is more than 100.
10.
This Court has supplemental jurisdiction over Plaintiff’s state law claims pursuant
to 28 U.S.C. § 1367 because these claims are so related to the claims in the FLSA action that
they form a part of the same case or controversy.
11.
Venue is proper in this district under 28 U.S.C. § 1391 because the acts or
omissions giving rise to claims in this Complaint took place in this judicial district.
12.
This Court is empowered to issue a declaratory judgment pursuant to 28 U.S.C.
§§ 2201 and 2202.
PARTIES
Plaintiff Dominik Zolkos
13.
Plaintiff Dominik Zolkos is an individual residing in Oak Lawn, Illinois. He
worked for Defendants as a driver delivering prescription medications to nursing homes from
approximately February 9, 2009 until approximately September 2012.
14.
Plaintiff’s primary routes were in Libertyville, Northbrook, Oak Lawn, Palos
Heights, Normal and Decatur, Illinois.
15.
Plaintiff was paid for his work based on the mileage and number of stops for each
route, regardless of the time it took him to complete his work. Plaintiff made his deliveries
primarily from a closed door pharmacy in Woodridge, Illinois and also from a closed door
pharmacy in Bensonville, Illinois.
16.
Throughout this period, Defendants deducted approximately $100 from each of
Plaintiff’s bi-weekly paychecks for uniform rentals, cargo insurance, and the rental of a scanner,
all of which Defendants required their drivers to obtain from them, and to maintain. For the first
approximately 2½ (two and a half) years of this period, Plaintiff Zolkos regularly worked 48
hours a week, or more, was never paid overtime premium pay.
Defendants
17.
Defendant Scriptfleet, Inc. is a corporation organized and existing under the laws
of the state of Florida. Its principal office is located in St. Louis, Missouri. It is registered to do
business in Illinois and retains a registered agent within Illinois. Until 2009, it was known as
Network Express.
18.
Defendant Fleetgistics Holdings, Inc. is a corporation organized and existing
under the laws of Delaware. Fleetgistics Holdings, Inc. is composed of three courier companies:
Scriptfleet, Inc., Medifleet, Inc. and Partsfleet, Inc. Through its own activities in Illinois and
those of its agents and subsidiaries, Fleetgistics Holdings, Inc. has subjected itself to the
jurisdiction of the state of Illinois.
19.
In this Complaint, “Scriptfleet” refers (unless otherwise stated) to both
Defendants and all successor, predecessor, subsidiary and related entities to which these
allegations pertain.
20.
Scriptfleet, which is subject to FLSA requirements, is an employer within the
meaning of the FLSA. Scriptfleet is the employer of Plaintiff and all other Scriptfleet drivers,
couriers and delivery drivers across the country.
COLLECTIVE ACTION ALLEGATIONS
21.
Plaintiff sues on behalf of himself and all other Scriptfleet drivers, couriers and
delivery drivers across the country. This is an appropriate collective or representative action
under 29 U.S.C. § 216(b). Plaintiff and the other drivers, couriers and delivery drivers are
similarly situated in that they are all subject to Scriptfleet’s common plan or practice of
designating them as independent contractors (when in fact their work and the extent of control
Defendants exerted over them rendered them employees), and making unlawful deductions from
their paychecks.
CLASS ALLEGATIONS
22.
Plaintiff brings the Second and Third Causes of Action under Rule 23 of the
Federal Rules of Civil Procedure, on behalf of himself and all persons who have worked for
Defendants as drivers, couriers or delivery drivers (or in comparable roles with different titles) in
Illinois between October 12, 2009 and the date of final judgment in this matter (the “Illinois
Class”).
23.
Excluded from the Illinois Class are Defendants’ legal representatives, officers,
directors, assigns, and successors, or any individual who has, or who at any time during the class
period has had, a controlling interest in Defendants; the Judge(s) to whom this case is assigned
and any member of the Judges’ immediate family; and all persons who will submit timely and
otherwise proper requests for exclusion from the Illinois Class.
24.
The persons in the Illinois Class identified above are so numerous that joinder of
all members is impracticable. Although the precise number of such persons is not known to
Plaintiff, the facts on which the calculation of that number can be based are presently within the
sole control of Defendants.
25.
Defendants acted or refused to act on grounds generally applicable to the Illinois
Class, thereby making appropriate final injunctive relief or corresponding declaratory relief with
respect to the Illinois Class as a whole.
26.
The Second and Third Causes of Action are properly maintainable as a class
action under Federal Rule of Civil Procedure 23(b)(3). There are questions of law and fact
common to the Illinois Class that predominate over any questions solely affecting individual
members of the Illinois Class, including but not limited to:
(a)
whether Defendants violated The Illinois Minimum Wage Law
(“IMWL”), 820 Ill. Comp. Stat. 105, the Illinois Wage Payment and
Collection Act (“IWPCA”), 820 Ill. Comp. Stat. 115, and supporting
Illinois Department of Labor (“IDOL”) regulations, 56 Ill. Admin. Code
210 and 56 Ill. Admin. Code 300, as alleged herein;
(b)
whether Plaintiff and the members of the Illinois Class were employees of
Defendant pursuant to 820 Ill. Comp. Stat. 105/3(d) and 820 Ill. Comp.
Stat. 115/2 and supporting IDOL regulations;
(c)
whether Defendants failed and/or refused to pay Plaintiff and the Illinois
Class for all hours worked;
(d)
whether Defendants failed and/or refused to pay Plaintiff and the Illinois
Class overtime pay for hours worked in excess of 40 hours per workweek;
(e)
whether Defendants have had a policy of failing to pay workers for time
that they work;
(f)
whether Defendants’ policy of failing to pay workers was instituted
willfully or in reckless disregard of the law;
(g)
whether it was Defendants’ policy or practice to make deductions from
the wages of Plaintiff and the Illinois Class in violation of 820 Ill. Comp.
Stat. 115/9 and supporting IDOL regulations;
(h)
whether it was Defendants’ policy or practice to fail to keep true and
accurate time and pay records for all hours worked by its employees,
and other records required by the IMWL;
(i)
what proof of hours worked is sufficient where an employer fails in its
duty to maintain true and accurate time records;
(j)
whether it was Defendants’ policy or practice to fail to comply with the
posting and notice requirements of the IMWL;
(k)
the nature and extent of class-wide injury and the measure of damages for
those injuries.
27.
Plaintiff’s claims are typical of the claims of the Illinois Class. Plaintiff and the
members of the Illinois Class work or have worked for Defendants and have been subjected to
their policy and pattern or practice of misclassifying them as independent contractors and failing
to pay overtime wages for hours worked in excess of 40 hours per week. Plaintiff and the
Illinois Class Members enjoy the same statutory rights under the IMWL and IWPCA to be paid
for all hours worked, and to be paid overtime wages. Plaintiff and Illinois Class Members all
have sustained similar types of damages as a result of Defendants’ failure to comply with the
IMWL and IWPCA. Plaintiff and the Illinois Class Members all have been injured in that they
have been uncompensated or under-compensated due to Defendants’ common policies, practices,
and patterns.
28.
Defendants acted and refused to act on grounds generally applicable to the Illinois
Class, thereby making declaratory relief with respect to the Illinois Class appropriate.
29.
Plaintiff will fairly and adequately represent and protect the interests of the
Illinois Class. Plaintiff understands that, as the class representative, he assumes a fiduciary
responsibility to the Illinois Class to represent its interests fairly and adequately. Plaintiffs
recognize that as the class representative, he must represent and consider the interests of the
Illinois Class just as he would represent and consider his own interests. Plaintiff understands that
in decisions regarding the conduct of the litigation and its possible settlement, he must not favor
his own interests over those of the Illinois Class. Plaintiff recognizes that any resolution of a
class action lawsuit, including any settlement or dismissal thereof, must be in the best interests of
the Illinois Class. Plaintiff understands that in order to provide adequate representation, he must
remain informed of developments in the litigation, cooperate with class counsel by providing
them with information and any relevant documentary material in their possession, and testify, if
required, in a deposition and in trial.
30.
Plaintiff has retained counsel competent and experienced in complex class action
employment litigation.
31.
A class action is superior to other available methods for the fair and efficient
adjudication of this litigation – particularly in the context of wage litigation like the present
action, where individual plaintiffs may lack the financial resources to vigorously prosecute a
lawsuit in federal court against a corporate defendant. The members of the Illinois Class have
been damaged and are entitled to recovery as a result of Defendants’ common and uniform
policies, practices, and procedures. Although the relative damages suffered by individual
members of the Illinois Class are not de minimis, such damages are small compared to the
expense and burden of individual prosecution of this litigation. In addition, class treatment is
superior because it will obviate the need for unduly duplicative litigation that might result in
inconsistent judgments about Defendants’ practices
FACTS
32.
At all relevant times, Plaintiff worked as a driver for Scriptfleet. There are many
Scriptfleet drivers, couriers and delivery drivers around the country who share common job
duties.
33.
Scriptfleet required Plaintiff and all other drivers, couriers and delivery drivers to
sign a contract designating them as independent contractors.
34.
While Plaintiff and the class members have been designated by Defendants as
independent contractors, in fact, Scriptfleet controlled and directed the performance of their
work, their work was within Scriptfleet’s usual course of business, and they were not in an
independently established trade, occupation, profession or business.
35.
Plaintiff was not in business for himself, but rather depended on Scriptfleet’s
business for the opportunity to render services to the long-term care pharmacies and nursing
homes they served.
36.
Plaintiff had no opportunity for profit or loss without Scriptfleet. He could not
deal directly with the long-term care pharmacies or nursing homes to offer his delivery services.
Instead, he had to go through Scriptfleet to provide this service.
37.
Scriptfleet’s business is to deliver prescriptions from long-term care pharmacies
to nursing homes and other long-term care facilities. In order to conduct this business,
Scriptfleet engages drivers, couriers and delivery drivers to pick the prescriptions up from the
long-term care pharmacy and deliver them to their designated recipients.
38.
Plaintiff’s relationship with Scriptfleet was neither temporary nor sporadic.
Rather, Plaintiff worked full-time for Scriptfleet for approximately 2½ years.
39.
Plaintiff had to stick to a particular delivery schedule and could not come and go
as he pleased. Plaintiff worked for a regular schedule for Defendants 6 days a week, Monday
through Saturday. He worked a 1:00 p.m. route Monday through Saturday, a 1:00 a.m. route
Mondays, Tuesday, Thursdays and Saturdays, and a 10:00 p.m. route Wednesdays and Fridays.
40.
In order to perform his job, Plaintiff used Defendant’s equipment, including a
scanner and other necessary equipment.
41.
Scriptfleet boasts a nationwide network of couriers in 39 states and Puerto Rico.
See www.scriptfleet.com.
42.
Scriptfleet’s drivers, couriers and delivery drivers are required to use their own
vehicles for their work. They are not reimbursed for maintaining their vehicles, and are only
sometimes paid a gasoline premium, which covers only a small portion of their gasoline costs.
43.
Scriptfleet requires its drivers, couriers and delivery drivers to wear a uniform,
which they must rent or buy from Scriptfleet, when picking up and making deliveries.
Scriptfleet deducts an amount from drivers’, couriers’ and delivery drivers’ pay for the uniforms.
44.
Scriptfleet requires its drivers, couriers and delivery drivers to use a specialized
scanner, which they must rent from Scriptfleet. Scriptfleet deducts an amount from drivers’,
couriers’ and delivery drivers’ pay for the specialized scanner.
45.
Scriptfleet requires its drivers, couriers and delivery drivers to maintain car
insurance, and to maintain specialized cargo insurance, which they must obtain from Scriptfleet.
Scriptfleet deducts an amount from drivers’, couriers’ and delivery drivers’ pay for the cargo
insurance.
46.
Plaintiff’s work was performed for the benefit of the Defendants, in the normal
course of the Defendants’ business and was integrated into the business of the Defendants.
47.
The work performed by Plaintiff and the class members required little skill. Their
duties did not include managerial responsibilities or the exercise of independent judgment. They
were not engaged in making sales, and did not drive vehicles weighing over 10,000 pounds.
48.
Defendants exerted a great deal of control over Plaintiff and his work.
Defendants required Plaintiff to arrive at the pharmacy to pick up prescriptions for delivery at a
certain time, that he check for work using his scanner 90 minutes before each route time, that he
wear a uniform while making deliveries, and that he work the same schedule every week.
49.
Scriptfleet’s violations have been willful and intentional in that it has known all
along that Plaintiff and other drivers, couriers and delivery drivers were employees, worked
more than forty hours per week, and the requirements of the law.
50.
As a result of Scriptfleet’s willful violations of the FLSA and the Illinois
Minimum Wage Law, 820 Ill. Comp. Stat. 105 (“IMWL”); the Illinois Wage Payment and
Collection Act, 820 Ill. Comp. Stat. 115 (“IWPCL”) and related regulations, 56 Ill. Admin. Code
§210 and 56 Ill. Admin. Code §300 (collectively the “Illinois Wage Laws”), Plaintiff and all
other similarly situated drivers, couriers and delivery drivers have suffered damages in that they
have not received proper compensation in accordance with the FLSA and the Illinois Wage
LEGAL CLAIMS
FIRST CAUSE OF ACTION
Fair Labor Standards Act, 29 U.S.C. §§ 201 et seq.
On behalf of Plaintiff and the FLSA Collective
51.
Plaintiff, on behalf of himself and all Collective Action Members, re-alleges and
incorporates by reference paragraphs 1 through 44 as if they were set forth again herein.
52.
Defendants have engaged in a widespread pattern, policy, and practice of
violating the FLSA, as detailed in this Collective Action Complaint.
53.
At all times relevant, Plaintiff and the FLSA Collective members were employed
by an entity engaged in commerce and/or the production or sale of goods for commerce within
the meaning of 29 U.S.C. §§ 203(e), (m), and 206(a), and/or they were engaged in commerce
and/or the production or sale of goods for commerce within the meaning of 29 U.S.C. §§ 203(e),
(m), and 206(a).
54.
At all times relevant, Plaintiff and the FLSA Collective members were or have
been employees within the meaning of 29 U.S.C. §§ 203(e), (m) and 206(a).
55.
At all times relevant, Defendants have been employers of Plaintiff and the FLSA
Collective members, engaged in commerce and/or the production of goods for commerce within
the meaning of 29 U.S.C. §§ 203(e) and 206(a).
56.
The overtime wage provisions set forth in the FLSA. 29 U.S.C. §§ 210 et seq.,
and supporting federal regulations apply to Defendants and protect Plaintiff and the FLSA
collective members.
57.
Defendants have failed to pay Plaintiff and the FLSA Collective members
overtime wages for hours that they worked in excess of 40 hours in a workweek.
58.
Based on the foregoing, Scriptfleet’s conduct in this regard was a willful violation
of the Fair Labor Standards Act and entitles Plaintiff and all other similarly situated drivers,
couriers, and delivery drivers who opt into this litigation to compensation for all overtime hours
worked, liquidated damages, attorneys’ fees and court costs.
SECOND CAUSE OF ACTION
820 Ill. Comp. Stat. 105/4a; 56 Ill. Admin. Code §210.400 et seq. – Unpaid Overtime
On behalf of Plaintiff and the Illinois Class Members
59.
Plaintiff realleges and incorporates by reference all allegations in all preceding
paragraphs.
60.
At all relevant times, Defendants have been, and continue to be, an “employer”
within the meaning of the Illinois Wage Laws. At all relevant times, Defendants employed
employees, including Plaintiff and each of the Illinois Class members, within the meaning of the
Illinois Wage Laws.
61.
Illinois law requires employers, such as Defendants, to pay overtime
compensation to all non-exempt employees for all hours worked over forty per workweek.
62.
Plaintiff and the Illinois Class members are non-exempt employees entitled to be
paid overtime compensation for all overtime hours worked.
63.
Throughout the Illinois Class period, and continuing through the present, Plaintiff
and the Illinois Class members regularly worked in excess of forty hours in a workweek.
64.
Defendants have engaged in a widespread pattern, policy, and practice of
violating the overtime provisions of the Illinois Minimum Wage Law, 820 Ill. Comp. Stat.
105/4a, and supporting IDOL regulations, 56 Ill. Admin. Code §210.400 et seq., as detailed in
this Complaint.
65.
As a direct and proximate result of Defendants’ unlawful conduct, as set forth
herein, Plaintiff and the Illinois Class members have sustained damages, including loss of
earnings for hours of overtime worked on behalf of Defendants in an amount to be established at
trial, prejudgment interest, and costs and attorneys’ fees, pursuant to statute and other applicable
THIRD CAUSE OF ACTION
820 Ill. Comp. Stat. 115/9; 56 Ill. Admin. Code §300.700 et seq. – Unlawful Wage
Deductions
On behalf of Plaintiff and the Members of the Illinois Classes
66.
Plaintiff realleges and incorporates by reference all allegations in all preceding
paragraphs.
67.
Defendants have engaged in a widespread pattern, policy, and practice of
violating 820 Ill. Comp. Stat. 115/9, as detailed in this Class Action Complaint.
68.
At all times relevant, Plaintiff and Illinois Class Members have been employees
within the meaning of 820 Ill. Comp. Stat. 105/3(d) and 820 Ill. Comp. Stat. 115/2 and
supporting IDOL Regulations.
69.
At all times relevant, Defendants have been an employer within the meaning of
820 Ill. Comp. Stat. 105/3(c) and 820 Ill. Comp. Stat. 115 and supporting IDOL Regulations.
70.
The Illinois Wage Payment and Collection Act and supporting IDOL Regulations
apply to Defendants and protect the Plaintiff and the Class Members.
71.
By conduct described herein, Defendants made unlawful deductions from
Plaintiff’s and Class Member’s wages in violation of 820 Ill. Comp. Stat. 115/9 and 56 Ill.
Admin. Code §300.700 et seq. Defendants deducted wages from Plaintiff’s and Illinois Class
Members’ paychecks for uniform rentals and/or purchases, for cargo insurance, and for a
specialized scanner, all of which Defendants required Plaintiff and Illinois Class Members to use
in the course of their work for Defendants.
DEMAND FOR RELIEF
72.
WHEREFORE, Plaintiff claims:
a.
Designation of this action as a collective action pursuant to the FLSA and
prompt issuance of notice pursuant to 29 U.S.C. § 216(b);
b.
Certification of the state law claims in this action as a class action
pursuant to Federal Rule of Civil Procedure 23;
c.
Designation of Plaintiff as Class Representative;
d.
A declaratory judgment that the practices complained of herein are
unlawful under appropriate state law;
e.
Appropriate equitable and injunctive relief to remedy Defendants’
violations of state law, including but not necessarily limited to an order
enjoining Defendants from continuing their unlawful practices;
f.
Unpaid overtime wages under the Fair Labor Standards Act and the
Illinois Wage Laws;
g.
Liquidated damages under the Fair Labor Standards Act and the Illinois
Wage Laws;
h.
Appropriate statutory penalties;
i.
Restitution;
j.
Pre-Judgment and Post-Judgment interest, as provided by law;
k.
Attorneys’ fees and costs under the Fair Labor Standards Act and the
Illinois Wage Laws, including expert fees and costs; and
l.
Such other injunctive and equitable relief as the Court may deem just and
proper.
JURY DEMAND
Plaintiff demands a trial by jury by all issues so triable.
Dated: October 12, 2012
New York, NY
Respectfully submitted,
/s/ Justin M. Swartz
OUTTEN & GOLDEN LLP
Justin M. Swartz
Paul W. Mollica
Rachel M. Bien (pro hac vice motion forthcoming)
Naomi B. Sunshine (pro hac vice motion forthcoming)
3 Park Avenue, 29th Floor
New York, New York 10016
Telephone: (212) 245-1000
Facsimile: (212) 977-4005
Attorneys for Plaintiffs and the Putative Class and
Collective
CERTIFICATION OF SERVICE
I hereby certify that on October 12, 2012 a copy of Plaintiff’s Class and Collective Action
Complaint was filed electronically and service made by mail to anyone unable to accept
electronic filing. Notice of this filing will be sent by email to all parties by operation of the
Court’s electronic filing system or by mail for anyone unable to accept electronic filing. Parties
may access this filing through the Court’s system.
/s/ Justin M. Swartz
| employment & labor |
Ut6rEIcBD5gMZwczUOBj | IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION
Rachelle Bradburn, individually and on )
behalf of all others similarly situated,
)
)
Plaintiff,
)
)
v.
)
No. 1:20-cv-2271
)
Helvey & Associates, Inc., an Indiana
)
corporation,
)
)
Defendant.
)
Jury Demanded
COMPLAINT – CLASS ACTION
Plaintiff, Rachelle Bradburn, individually, and on behalf of all others similarly
situated, bring this action under the Fair Debt Collection Practices Act, 15 U.S.C. §
1692, et seq. ("FDCPA"), for a finding that Defendant’s form debt collection letters
violated the FDCPA, and to recover damages, and alleges:
JURISDICTION AND VENUE
1.
This Court has jurisdiction pursuant to § 1692k(d) of the FDCPA, and 28
U.S.C. § 1331.
2.
Venue is proper in this District because: a) the acts and transactions
occurred here; b) Plaintiff resides here; and, c) Defendant resides and transacts
business here.
PARTIES
3.
Plaintiff, Rachelle Bradburn (“Bradburn”), is a citizen of the State of
Indiana, residing in the Southern District of Indiana, from whom Defendant attempted to
collect a defaulted consumer debt, which she allegedly owed to Duke Energy Indiana.
4.
Defendant, Helvey & Associates, Inc. (“Helvey”), is an Indiana corporation,
that acts as a debt collector, as defined by § 1692a of the FDCPA, because it regularly
uses the mails and/or the telephone to collect, or attempt to collect, defaulted consumer
debts that it did not originate. Defendant Helvey operates a defaulted debt collection
business and attempts to collect defaulted debts from consumers in several states,
including the State of Indiana. In fact, Defendant Helvey was acting as a debt collector
as to the defaulted consumer debt it attempted to collect from Plaintiff.
5.
Defendant Helvey is authorized to conduct business in Indiana, and
maintains a registered agent here, see, record from the Indiana Secretary of State,
attached as Exhibit A. In fact, Defendant conducts business in Indiana.
6.
Defendant Helvey is licensed as a debt collection agency in the State of
Indiana, see, record from NMLS Consumer Access, attached as Exhibit B. In fact,
Defendant acts as a collection agency in Indiana.
FACTUAL ALLEGATIONS
7.
Ms. Bradburn fell behind on paying her bills, including a debt she allegedly
owed to Duke Energy Indiana. Sometime after that debt went into default, Defendant
tried to collect it by sending Ms. Bradburn an initial form collection letter, dated October
7, 2019. This collection letter stated “Re: DUKE ENERGY INDIANA”, and then further
stated “Your account has been placed with us for collection”. The letter failed to advise
Plaintiff who the creditor was to whom the debt was owed. A copy of Defendant’s letter
is attached as Exhibit C.
9.
The letter did not say whether Duke Energy Indiana still owned the
account in question or instead had sold the debt to another entity. Thus, Defendant’s
letter failed to state effectively the name of the creditor to whom the debt was then
owed. In fact, Plaintiff is informed and believes, through counsel, that Duke Energy
Indiana still owned the debt.
10.
A statement that Duke Energy Indiana still owned the debt and was the
current creditor to whom the debt was then owed, would have sufficed to identify
effectively the name of the creditor to whom the debt was then owed.
11.
Violations of the FDCPA which would lead a consumer to alter his or her
course of action as to whether to pay a debt, or which would be a factor in the
consumer's decision making process, are material, see, Lox v. CDA, 689 F.3d 818, 827
(7th Cir. 2012). Moreover, the identification of the creditor is such a factor because,
amongst other things, it is a factor for a consumer in determining whether an attempt to
collect a debt is fraudulent, see, Janetos v. Fulton, Friedman & Gullace, 825 F.3rd 317,
319-25 (7th Cir. 2016). Plaintiff was, in fact, confused as to whom she allegedly owed
this debt. Plaintiff, and anyone else who received this letter, would be left unsure as to
whether Defendant’s form collection letter was a legitimate collection attempt or a
fraudulent one.
12.
Defendant’s collection actions complained of herein occurred within one
year of the date of this Complaint.
13.
Defendant’s collection communications are to be interpreted under the
“unsophisticated consumer” standard, see, Gammon v. GC Services, Ltd. Partnership,
27 F.3d 1254, 1257 (7th Cir. 1994).
Violation Of § 1692g(a)(2)
Failure To Identify Effectively The Current Creditor
14.
Section 1692g of the FDCPA requires that, within 5 days of Defendant’s
first communication to a consumer, they had to provide Ms. Bradburn with an effective
validation notice, containing, among other disclosures, “(2) the name of the creditor to
whom the debt is owed” see, 15 U.S.C. § 1692g(a)(2).
15.
Defendant’s form collection letter violates § 1692g(a)(2) of the FDCPA
because it failed to identify effectively the creditor to whom the debt was owed, see,
Janetos, 825 F.3rd at 321-23; see also, Steffek v. Client services, Inc., 948 F.3d 766-67
(7th Cir. 2020.
16.
Defendant’s violation of § 1692g of the FDCPA renders it liable for
statutory damages, costs, and reasonable attorneys’ fees, see, 15 U.S.C. § 1692k.
CLASS ALLEGATIONS
17.
Plaintiff, Rachelle Bradburn, brings this action individually and as a class
action on behalf of all persons similarly situated in the State of Indiana from whom
Defendant attempted to collect a defaulted consumer debt allegedly owed for a Duke
Energy Indiana debt, via the same form collection letter (Exhibit C), that Defendant sent
to Plaintiff, from one year before the date of this Complaint to the present. This action
seeks a finding that Defendant’s form letter violates the FDCPA, and asks that the Court
award damages as authorized by § 1692k(a)(2) of the FDCPA.
18.
Defendant regularly engages in debt collection, using the same form
collection letter it sent Plaintiff Bradburn, in its attempts to collect a defaulted consumer
debt from other consumers.
19.
The Class consists of more than 35 persons from whom Defendant
attempted to collect defaulted consumer debts by sending other consumers the same
form collection letter it sent Plaintiff Bradburn.
20.
Plaintiff’s claims are typical of the claims of the Class. Common questions
of law or fact raised by this class action complaint affect all members of the Class and
predominate over any individual issues. Common relief is therefore sought on behalf of
all members of the Class. This class action is superior to other available methods for the
fair and efficient adjudication of this controversy.
21.
The prosecution of separate actions by individual members of the Class
would create a risk of inconsistent or varying adjudications with respect to the individual
members of the Class, and a risk that any adjudications with respect to individual
members of the Class would, as a practical matter, either be dispositive of the interests
of other members of the Class not party to the adjudication, or substantially impair or
impede their ability to protect their interests. Defendant has acted in a manner
applicable to the Class as a whole such that declaratory relief is warranted.
22.
Plaintiff Bradburn will fairly and adequately protect and represent the
interests of the Class. The management of the class action proposed is not
extraordinarily difficult, and the factual and legal issues raised by this class action
complaint will not require extended contact with the members of the Class, because
Defendant’s conduct was perpetrated on all members of the Class and will be
established by common proof. Moreover, Plaintiff Bradburn has retained counsel
experienced in class action litigation, including class actions brought under the FDCPA.
PRAYER FOR RELIEF
Plaintiff, Rachelle Bradburn, individually and on behalf of all others similarly
situated, prays that this Court:
1.
Certify this action as a class action;
2.
Appoint Plaintiff Bradburn as Class Representative of the Class, and her
attorneys as Class Counsel;
3.
Find that Defendant’s form collection letters violates the FDCPA;
4.
Enter judgment in favor of Plaintiff Bradburn and the Class, and against
Defendant, for statutory damages, costs, and reasonable attorneys’ fees as provided by
§ 1692k(a) of the FDCPA; and,
5.
Grant such further relief as deemed just.
JURY DEMAND
Plaintiff, Rachelle Bradburn, individually and on behalf of all others similarly
situated, demand trial by jury.
Rachelle Bradburn, individually and on
behalf of all others similarly situated,
By: /s/ David J. Philipps___________
One of Plaintiff’s Attorneys
Dated: August 31, 2020
David J. Philipps
(Ill. Bar No. 06196285)
Mary E. Philipps
(Ill. Bar No. 06197113)
Angie K. Robertson (Ill. Bar No. 06302858)
Philipps & Philipps, Ltd.
9760 S. Roberts Road, Suite One
Palos Hills, Illinois 60465
(708) 974-2900
(708) 974-2907 (FAX)
[email protected]
[email protected]
[email protected]
John T. Steinkamp (Ind. Bar No. 19891-49)
John Steinkamp & Associates
5214 S. East Street
Suite D1
Indianapolis, Indiana 46227
(317) 780-8300
(317) 217-1320 (FAX)
[email protected]
| consumer fraud |
Pa6kCocBD5gMZwczplJ1 |
UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF WASHINGTON
Case No. :
CLASS ACTION COMPLAINT
DEMAND FOR JURY TRIAL
JULIE ROBERTS, individually and on behalf
of all others similarly situated,
Plaintiff,
v.
PREMIER TECHNOLOGY SERVICES,
LLC dba REALISTIQ, a Nevada limited
liability company,
Defendant.
CLASS ACTION COMPLAINT AND DEMAND FOR JURY TRIAL
Plaintiff Julie Roberts (“Roberts” or “Plaintiff”) brings this Class Action Complaint and
Demand for Jury Trial (“Complaint”) against Defendant Premier Technology Services, LLC
(“PTS” or “Defendant”) to (1) stop its practice of sending text messages using an “automatic
telephone dialing system” to the cellular telephones of consumers nationwide without their prior
express written consent, (2) enjoin Defendant from continuing to send autodialed text messages to
consumers who did not provide their prior express written consent to receive them, and (3) obtain
redress, including injunctive relief, for all persons injured by its conduct. Plaintiff, for her
Complaint, alleges as follows upon personal knowledge as to herself and her own acts and
Plaintiff’s Class Action Complaint
Law Offices of Stefan Coleman
experiences, and, as to all other matters, upon information and belief, including investigation
conducted by her attorneys.
NATURE OF THE ACTION
1.
Defendant PTS is a company that designs websites and provides leads for its clients in the
real estate industry.
2.
Unfortunately for consumers, Defendant’s aggressive attempts to sell its services (namely
its lead generation and home-appraisal services) involves an unlawful telemarketing campaign
through which its sends, or has its agents send on its behalf and with its knowledge, unsolicited
telemarketing text messages to consumers.
3.
Defendant and/or its agents failed to obtain prior express written consent from consumers
to send such text messages and therefore have violated the Telephone Consumer Protection Act,
47 U.S.C. § 227 (“TCPA”) and in violation of the Washington Automatic Dialing and
Announcing Device Statute (the “WADAD”), RCW 80.36.400 et seq.
4.
In response to Defendant’s unlawful conduct, Plaintiff filed the instant lawsuit seeking an
injunction requiring Defendant to cease all unsolicited text-messaging activities as well as an
award of statutory damages to the members of the Classes as provided under the TCPA and
WADAD, together with costs and reasonable attorneys’ fees.
5.
With respect to the WADAD, in 1986, the Washington State Legislature enacted the
WADAD, RCW 80.36.400. As defined by the statute, “[a]n automatic dialing and announcing
Plaintiff’s Class Action Complaint
Law Offices of Stefan Coleman
1011 W. Colter St., #236
Phoenix, Arizona 85013
602.441.3704
-2-
device is a device which automatically dials the telephone numbers and plays a recorded message
once a connection is made.” See RCW 80.36.400(1)(2).1
6.
Furthermore, a violation of the WADAD is a violation of the Washington Consumer
Protection Act, RCW 19.86 et seq. (“WCPA”). See RCW 80.36.400(3).
7.
Similar to the TCPA, the WADAD makes it unlawful for any person to use an automatic
dialing and announcing device “for purposes of commercial solicitation” and “applies to all
commercial solicitation intended to be received by telephone consumers within the state” of
Washington. See RCW 80.36.400(2).
8.
By sending these autodialed text messages, Defendant caused Plaintiff and the members of
the Classes actual harm and cognizable legal injury. This includes the aggravation and nuisance
and invasions of privacy that result from the receipt of such text messages, in addition to the wear
and tear on their cellular telephones, consumption of battery life, lost cellular minutes, loss of
value realized for the monies users paid for the receipt of such text messages, in the form of the
diminished use, enjoyment, value, and utility of their cellular telephone plans. Furthermore,
Defendant sent the text messages knowing they interfered with Plaintiff and the other Class
members’ use and enjoyment of, and the ability to access their cellphones, including the related
data, software, and hardware components.
9.
The TCPA and WADAD were enacted to protect consumers from autodialed text
messages like those alleged and described herein. In response to Defendant’s unlawful conduct,
1 The WADAD is a parallel statute to the Telephone Consumer Protection Act, 47 U.S.C. § 227,
et seq. (“TCPA”), and federal analysis of the TCPA may also provide guidance for interpreting
the WADAD.
Plaintiff’s Class Action Complaint
Law Offices of Stefan Coleman
1011 W. Colter St., #236
Phoenix, Arizona 85013
602.441.3704
-3-
Plaintiff files this lawsuit seeking injunctive relief, requiring Defendant to cease all autodialed
text-messaging activities to cellular telephones without first obtaining prior express written
consent, as well as an award of statutory damages to the members of the Classes under the TCPA
and WADAD, and additionally, costs and reasonable attorney’s fees
PARTIES
10.
Plaintiff Julie Roberts is over 18 years of age and is a natural person residing in
Mountlake Terrace, Washington.
11.
Defendant Premier Technology Services, LLC dba RealistIQ is a limited liability
company organized and existing under the laws of the State of Nevada with a principal place of
business located at 8290 West Sahara Ave., Suite 200, Las Vegas, Nevada 89117. Defendant
conducts business throughout this District, the State of Washington, and the United States.
JURISDICTION AND VENUE
12.
This Court has jurisdiction over the subject matter of this action under 28 U.S.C. § 1331,
as the action arises under the TCPA, which is a federal statute. This Court has personal
jurisdiction over Defendant because it conducts a significant amount of business in this District,
made and continues to send unsolicited autodialed text messages in this District, and because the
wrongful conduct giving rise to this case occurred in, was directed to, and/or emanated from this
District.
13.
Venue is proper in this District under 28 U.S.C. § 1391(b) because Defendant conducts a
significant amount of business within this District, markets to this District, and because the
wrongful conduct giving rise to this case occurred in, was directed to, and/or emanated from this
District.
Plaintiff’s Class Action Complaint
Law Offices of Stefan Coleman
1011 W. Colter St., #236
Phoenix, Arizona 85013
602.441.3704
-4-
14.
This Court has supplemental jurisdiction over the WADAD and WCPA claims under 28
U.S.C. § 1367, as the action sufficiently forms part of the case or controversy under Article III of
the U.S. Constitution and is sufficiently related to Plaintiff’s TCPA claim.
COMMON FACTUAL ALLEGATIONS
15.
Defendant PTS is a company that designs websites and provides leads for its clients in the
real estate industry.
16.
Unfortunately for consumers, Defendant, on its own and/or through its agents, has turned
to a tried and true, albeit unlawful, method of reaching new customers: unsolicited telemarketing.
17.
Text messages, like the ones sent in the instant action, are considered calls under the
TCPA. See Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991,
CG Docket No. 02-278, Report and Order, 18 FCC Rcd. 14014, 14115, ¶ 165 (July 3, 2003); see
also Satterfield v. Simon & Schuster, Inc., 569 F.3d 946, 954 (9th Cir. 2009) (noting that text
messaging is a form of communication used primarily between telephones and is therefore
consistent with the definition of a “call”).
18.
As explained by the Federal Communications Commission (“FCC”) in its 2012 order, the
TCPA requires “prior express written consent for all autodialed or prerecorded telemarketing
calls to wireless numbers and residential lines.” In the Matter of Rules and Regulations
Implementing the Telephone Consumer Protection Act of 1991, CG No. 02-278, FCC 12-21, 27
FCC Rcd. 1830 ¶ 2 (Feb. 15, 2012).
19.
Yet in violation of this rule, Defendant fails to obtain any prior express written consent to
send these text messages to cellular telephone numbers.
Plaintiff’s Class Action Complaint
Law Offices of Stefan Coleman
1011 W. Colter St., #236
Phoenix, Arizona 85013
602.441.3704
-5-
20.
Specifically, Defendant and/or its agents sends thousands of outbound telemarketing text
messages each day to consumers nationwide.
21.
These text messages are sent for the express purpose of soliciting the text messages
recipients to purchase and or otherwise utilize Defendant’s services or other products from or
through Defendant, namely its home appraisal and lead generation services.
22.
At all times material to this Complaint, Defendant was and is fully aware that unsolicited
telephone text messages are being sent to consumers’ cellular telephones either through its own
efforts and their agents.
23.
Defendant knowingly made (and continues to make) unsolicited telemarketing text
messages without the prior express written consent of the text message recipients. In so doing,
Defendant not only invaded the personal privacy of Plaintiff and members of the putative Class,
but also intentionally and repeatedly violated the TCPA, the WADAD, and the WCPA.
FACTS SPECIFIC TO PLAINTIFF ROBERTS
24.
On or about March 14, 2017, Plaintiff an unsolicited text message from PTS from
telephone number 949-662-8107.
25.
The text message she received read, “Area home prices if flux! Curious to know your
home’s value? Go to: ultimatehomevalue.com/47iuukm now for your instant home valuation.
Reply stop unsub.”
26.
A reproduced image of the aforementioned text message is reproduced below:
Plaintiff’s Class Action Complaint
Law Offices of Stefan Coleman
1011 W. Colter St., #236
Phoenix, Arizona 85013
602.441.3704
-6-
27.
Plaintiff does not have a direct relationship with PTS. Plaintiff has never provided her
telephone number directly to PTS, or requested that PTS send telemarketing text messages to her.
Upon information and belief, Plaintiff has never provided her prior express written consent to
PTS to send text messages to her cellular telephone and has no business relationship with PTS.
28.
By sending unauthorized autodialed text messages as alleged herein, PTS has caused
consumers actual harm in the form of annoyance, nuisance, and invasion of privacy. In addition,
the text messages disturbed Plaintiff’s use and enjoyment of her cellular telephone, in addition to
the wear and tear on the cellular telephone’s hardware (including its battery) and the consumption
of memory on Plaintiff’s cellular telephone.
29.
In order to redress these injuries, Plaintiff, on behalf of herself and Classes of similarly
situated individuals, bring suit under the Telephone Consumer Protection Act, 47 U.S.C. § 227, et
seq., which prohibits unsolicited autodialed text messages to cellular telephones.
30.
Additionally, Plaintiff, on behalf of herself and Classes of similarly situated individuals,
brings suit under the Washington Automatic Dialing and Announcing Device statute, RCW
80.36.400, et seq. and the Washington Consumer Protection Act, RCW 19.86 et seq.
Plaintiff’s Class Action Complaint
Law Offices of Stefan Coleman
1011 W. Colter St., #236
Phoenix, Arizona 85013
602.441.3704
-7-
31.
The text messages sent by PTS clearly constitute “soliciting donations of money, property,
goods, or services” within the meaning of the RCW 80.36.390(1) and were made for the express
purpose of “encouraging a person to purchase property, goods, or services” within the meaning of
RCW 80.36.400(1)(6).
32.
The text messages sent by PTS clearly constitute a “telephone solicitation” under RCW
80.36.390(1) or a “commercial solicitation” under RCW 80.36.400(1)(b).
33.
Specifically, Plaintiff and the members of the Classes are encouraged and/or solicited to
utilize PTS’s services.
34.
On behalf of the Classes, Plaintiff seeks an injunction requiring PTS to cease all
unsolicited autodialed text-messaging activities and an award of statutory damages to the Class
members, together with costs and reasonable attorney’s fees.
CLASS ALLEGATIONS
35.
Plaintiff brings this action pursuant to Federal Rule of Civil Procedure 23(b)(2) and Rule
23(b)(3) on behalf of herself and all others similarly situated and seeks certification of the
following three Classes:
Text Message No Consent Class: All persons in the United States from
four years to the filing of the instant action who (1) Defendant (or a third
person acting on behalf of Defendant) sent text messages to, (2) on the
person’s cellular telephone, (3) using an automated telephone dialing
system, and (4) for whom Defendant (or a third person acting on behalf of
Defendant) claims it obtained prior express written consent in the same
manner as Defendant (or a third person acting on behalf of Defendant)
claims it supposedly obtained prior express written consent to call the
Plaintiff.
Washington State Text Message Class: All persons within Washington
State from four years prior to the filing of the instant action who: (1)
received a non-emergency text message from Defendant (or a third person
Plaintiff’s Class Action Complaint
Law Offices of Stefan Coleman
1011 W. Colter St., #236
Phoenix, Arizona 85013
602.441.3704
-8-
acting on behalf of Defendant); (2) through the use of an automatic
telephone dialing system; and who (3) did not provide prior express written
consent for such calls.
Washington State Unsolicited Text Message Class: All persons within
Washington State who from the last four years prior to the filing of the
instant action who: (1) Defendant (or a third person acting on behalf of
Defendant) sent text messages to on his/her cellular telephone: (2) for the
purpose of selling goods and services; and for whom (3) Defendant claims
it obtained prior express written consent in the same manner Defendant
claims it obtained prior express written consent to call Plaintiff.
36.
The following individuals are excluded from the Classes: (1) any Judge or Magistrate
presiding over this action and members of their families; (2) Defendant, its subsidiaries, parents,
successors, predecessors, and any entity in which Defendant or its parents have a controlling
interest and their current or former employees, officers and directors; (3) Plaintiff’s attorney; (4)
persons who properly execute and file a timely request for exclusion from the Classes; (5) the
legal representatives, successors or assigns of any such excluded persons; and (6) persons whose
claims against Defendant have been fully and finally adjudicated and/or released. Plaintiff
anticipates the need to amend the class definition following appropriate discovery.
37.
Numerosity: The exact size of the Classes is unknown and not available to Plaintiff at this
time, but it is clear that individual joinder is impracticable. On information and belief, Defendant
placed autodialed text messages to thousands of consumers who fall into the definition of the
Classes. Members of the Classes can be easily identified through Defendant’s records.
38.
Commonality and Predominance: There are many questions of law and fact common to
the claims of Plaintiff and the Classes, and those questions predominate over any questions that
may affect individual members of the Classes. Common questions for the Classes include, but are
not necessarily limited to the following:
Plaintiff’s Class Action Complaint
Law Offices of Stefan Coleman
1011 W. Colter St., #236
Phoenix, Arizona 85013
602.441.3704
-9-
(a) whether Defendant’s conduct constitutes a violation of the TCPA;
(b) whether Defendant’s conduct constitutes a violation of the WCPA;
(c) whether Defendant systematically sent text messages to members of the
Classes without first obtaining prior express oral or written consent to send
the text messages;
(d) whether Defendant utilized an automatic telephone dialing system to send
its text messages to members of the Classes;
(e) whether members of the Classes are entitled to treble damages based on the
willfulness of Defendant’s conduct;
(f) whether Defendant obtained prior express written consent to contact any
Class members; and
(g) whether Defendant obtained prior express oral consent to contact any Class
members.
39.
Adequate Representation: Plaintiff will fairly and adequately represent and protect the
interests of the Classes, and has retained counsel competent and experienced in class actions.
Plaintiff has no interests antagonistic to those of the Classes, and Defendant has no defenses
unique to Plaintiff. Plaintiff and her counsel are committed to vigorously prosecuting this action
on behalf of the members of the Classes, and have the financial resources to do so. Neither
Plaintiff nor her counsel has any interest adverse to the Classes.
40.
Appropriateness: This class action is also appropriate for certification because Defendant
has acted or refused to act on grounds generally applicable to the Classes and as wholes, thereby
requiring the Court’s imposition of uniform relief to ensure compatible standards of conduct
toward the members of the Classes and making final class-wide injunctive relief appropriate.
Defendant’s business practices apply to and affect the members of the Classes uniformly, and
Plaintiff’s challenge of those practices hinges on Defendant’s conduct with respect to the Classes
Plaintiff’s Class Action Complaint
Law Offices of Stefan Coleman
1011 W. Colter St., #236
Phoenix, Arizona 85013
602.441.3704
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as wholes, not on facts or law applicable only to Plaintiff. Additionally, the damages suffered by
individual members of the Classes will likely be small relative to the burden and expense of
individual prosecution of the complex litigation necessitated by Defendant’s actions. Thus, it
would be virtually impossible for the members of the Classes to obtain effective relief from
Defendant’s misconduct on an individual basis. A class action provides the benefits of single
adjudication, economies of scale, and comprehensive supervision by a single court. Economies of
time, effort, and expense will be fostered and uniformity of decisions will be ensured.
FIRST CAUSE OF ACTION
Telephone Consumer Protection Act
(Violations of 47 U.S.C. § 227 et seq.)
On Behalf of Plaintiff Roberts and the Text Message No Consent Class
41.
Plaintiff incorporates the foregoing factual allegations as if fully set forth herein.
42.
Defendant sent autodialed text messages to cellular telephone numbers belonging to
Plaintiff and other members of the Text Message No Consent Class without first obtaining prior
express written consent to receive such text messages.
43.
Defendant sent the text messages using equipment that had the capacity to store or
produce telephone numbers using a random or sequential number generator, to receive and store
lists of phone numbers, and to dial such numbers, en masse, without human intervention.
44.
The telephone dialing equipment utilized by Defendant, also known as a predictive dialer,
dialed numbers from a list, or dialed numbers from a database of telephone numbers, in an
automatic and systematic manner. Defendant’s autodialer disseminated information en masse to
Plaintiff and other members of the Text Message No Consent Class.
Plaintiff’s Class Action Complaint
Law Offices of Stefan Coleman
1011 W. Colter St., #236
Phoenix, Arizona 85013
602.441.3704
-11-
45.
By sending the unsolicited text messages to Plaintiff and the Text Message No Consent
Class members’ cellular telephones without their prior express written consent, Defendant
violated 47 U.S.C. § 227(b)(1)(A)(iii).
46.
As a result of Defendant’s unlawful conduct, Plaintiff and the members of the Text
Message No Consent Class are each entitled a minimum of Five Hundred Dollars ($500.00) in
damages for each such violation of the TCPA.
47.
In the event that the Court determines that Defendant’s conduct was willful and knowing,
it may, under 47 U.S.C. § 227(b)(3)(C), treble the amount of statutory damages recoverable by
Plaintiff and the other members of the Text Message No Consent Class.
SECOND CAUSE OF ACTION
Washington Automatic Dialing and Announcing Device Statute
(Violations of RCW 80.36.400 et seq.)
(On Behalf of Plaintiff Roberts and the Washington State Text Message Class)
48.
Plaintiff incorporates the foregoing factual allegations as if fully set forth herein.
49.
At all times material hereto, Defendant used an automatic dialing and announcing device
(“ADAD”) as defined in RCW 80.36.400(1)(a).
50.
Defendant sent the text messages, which were commercial solicitations made for the
purpose of encouraging and/or soliciting Plaintiff and the other members of the Washington State
Text Message Class to utilize its home appraisal services on behalf of itself and/or its clients.
51.
Defendant and/or its agents have continually and repeatedly violated RCW 80.36.400(2)
by using ADADs to send text messages for the purpose of encouraging and/or soliciting Plaintiff
and the Washington State Text Message Class to utilize its home appraisal services on behalf of
itself and/or its clients.
Plaintiff’s Class Action Complaint
Law Offices of Stefan Coleman
1011 W. Colter St., #236
Phoenix, Arizona 85013
602.441.3704
-12-
52.
As a result of Defendant and/or its agents’ violations of RCW 80.36.400(2), Plaintiff and
the Washington State Text Message Class are entitled to an award of $500 in statutory damages
for each and every call in violation of the statute, pursuant to RCW 80.36.400(3).
THIRD CAUSE OF ACTION
Washington Consumer Protection Act
(Violations of RCW 19.86 et seq.)
(On Behalf of Plaintiff Roberts and the Washington State Unsolicited Text Message Class)
53.
Plaintiff incorporates the foregoing factual allegations as if fully set forth herein.
54.
Pursuant to RCW 80.36.400(3), which provides that a violation of RCW 80.36.400
constitutes a violation of the Washington State Consumer Protection Act, RCW 19.86, et seq.,
Defendant and its agents have continually and repeatedly violated the WCPA by using ADADs to
send text messages for the purpose of encouraging and/or soliciting Plaintiff and the Washington
State Unsolicited Text Message Class to utilize its home appraisal services on behalf of itself
and/or its clients.
55.
The unsolicited text messages were made to Washington State.
56.
As a direct result of Defendant’s conduct, Plaintiff and the other Washington State
Unsolicited Text Message Class members suffered damages, including $500 in statutory damages
for each and every text message in violation of the WADAD. The full amount of damages will be
proven at trial. Plaintiff and the other members of the Washington State Unsolicited Text
Message Class are additionally entitled to treble damages, civil penalties, and costs and attorneys’
fees as provided by RCW 19.86.090.
PRAYER FOR RELIEF
Plaintiff’s Class Action Complaint
Law Offices of Stefan Coleman
1011 W. Colter St., #236
Phoenix, Arizona 85013
602.441.3704
-13-
WHEREFORE, Plaintiff Julie Roberts, individually and on behalf of the Classes, prays
for the following relief:
1.
An order certifying the Classes as defined above, appointing Plaintiff as the
representative of the Classes, and appointing her counsel as Class Counsel;
2.
An award of actual monetary loss from such violations or the sum of five hundred
dollars ($500.00) for each violation, whichever is greater all to be paid into a common fund for
the benefit of the Plaintiff and the members of the Classes;
3.
An order declaring that Defendant’s actions, as set out above, violate the TCPA;
4.
An order declaring that Defendant’s actions, as set out above, violate the
WADAD;
5.
An order declaring that Defendant’s actions, as set out above, violate the WCPA;
6.
A declaratory judgment that Defendant’s text-messaging equipment constitutes an
automatic telephone dialing system under the TCPA and the WADAD;
7.
An order requiring Defendant to disgorge any ill-gotten funds acquired as a result
of its unlawful text-messaging practices;
8.
An order requiring Defendant to identify any third-party involved in the text-
messaging activity as set out above, as well as the terms of any contract or compensation
arrangement it has with such third parties;
9.
An injunction requiring Defendant to cease all unsolicited text-messaging
activities, and otherwise protecting the interests of the Classes;
Plaintiff’s Class Action Complaint
Law Offices of Stefan Coleman
1011 W. Colter St., #236
Phoenix, Arizona 85013
602.441.3704
-14-
10.
An injunction prohibiting Defendant from using, or contracting the use of, an
automatic telephone dialing system without obtaining, and maintaining records of, call recipient’s
prior express written consent to receive text messages made with such equipment;
11.
An injunction prohibiting Defendant from contracting with any third-party for
marketing purposes until it establishes and implements policies and procedures for ensuring the
third-party’s compliance with the TCPA, the WADAD, and the WCPA;
12.
An award of reasonable attorneys’ fees and costs to be paid out of the common
fund prayed for above; and
13.
Such other and further relief that the Court deems reasonable and just.
JURY DEMAND
Plaintiff requests a trial by jury of all claims that can be so tried.
Plaintiff’s Class Action Complaint
Law Offices of Stefan Coleman
1011 W. Colter St., #236
Phoenix, Arizona 85013
602.441.3704
-15-
Respectfully Submitted,
JULIE ROBERTS, individually and on behalf of
Classes of similarly situated individuals,
Dated: April 10, 2017
By: /s/ Reba Weiss
Weiss Law Firm, PLLC
12537 15th Avenue N.E., Suite 108
Seattle, WA 98125
[email protected]
(206) 508-5933
By: /s/_Blake Dugger ____
Blake J. Dugger, Pro Hac Vice
[email protected]
LAW OFFICES OF STEFAN COLEMAN, P.A.
1011 W. Colter St., #236
Phoenix, Arizona 85013
Telephone: (602) 441-3704
Facsimile: (888) 498-8946
Attorneys for Plaintiff and the Classes
Plaintiff’s Class Action Complaint
Law Offices of Stefan Coleman
1011 W. Colter St., #236
Phoenix, Arizona 85013
602.441.3704
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| privacy |
v3P1FYkB9sM9pEmaMiyV | UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
JODGE BATTS
Case No.:
CLASS ACTION COMPLAINT
Plaintiffs,
JURY TRIAL DEMANDED
V.
is
NOV
U.S.D.C
CASHIERS
S.D.
N.Y.
Defendants.
Plaintiffs Stephen and Leyla Hill ("Plaintiffs") file this class action complaint against
I.
NATURE OF ACTION
1.
On June 24, 2011, Irving H. Picard ("Trustee"), as trustee for the substantively
2.
Bernard L. Madoff, though BLMIS, committed one of the largest, if not the
3.
While numerous financial institutions enabled Madoff's fraud, JPMC was at the
4.
JPMC was Madoff's and BLMIS' primary banker for over 20 years, and was
5.
While numerous financial institutions enabled Madoff's fraud, JPMC was at the
6.
Indeed, billions of dollars flowed through the 703 Account, but virtually none of7.
Not only was JPMC aware that the 703 Account activity was inconsistent with
8.
JPMC had yet further knowledge that Madoff engaged in banking activities with
9.
In addition to being Madoff's and BLMIS' banker, JPMC also profited from the
10.
JPMC's due diligence yet again revealed fraud at BLMIS. But JPMC was not
fraud in the order
for JPMC to be affected." JPMC also relied on the Securities Investor
11.
JPMC looked the other way, ignoring the evidence of fraud, even in the aftermath12.
Indeed, JPMC's due diligence team was further concerned about fraud at BLMIS
The "DO" [due diligence] done by all counterparties seems suspect. Given the
scale and duration of the Petters fraud it cannot be sufficient that there's simply
trust in an individual and there's been a long operating history. Let's go see
Friehling and Horowitz the next time we're in NY to see that the address isn't a
car wash at least.
13.
In or about September 2008, as JPMC was re-evaluating its hedge fund
14.
As reported in the French press, by the end of October 2008, JPMC admitted in a
(1) [T ]he investment performance achieved by [BLMIS') funds
is SO
consistently and significantly ahead of its peers year-on-year, even in the prevailing
market conditions, as to appear too good to be true-meaning that it probably is; and
(2) the lack of transparency around Madoff Securities trading techniques, the
implementation of its investment strategy and the identity of its OTC option
counterparties; and
(3) its unwillingness to provide helpful information.
15.
None of this information was new to JPMC it had known it for years. It was only
16.
Even when it admitted knowing that Madoff had to be a fraud in October 2008,
17.
It was Madoff himself who ultimately proclaimed his fraud to the world in
II.
JURISDICTION AND VENUE
18.
This Court has subject matter jurisdiction over this action pursuant to 28 U.S.C.
19.
Venue in this Court is proper under 28 U.S.C. § 1391 because many of the
III.
PARTIES
20.
Plaintiffs Stephen and Leyla Hill are individuals residing in California. Plaintiffs
21.
Defendant JPMorgan Chase & Co. ("JPMorgan Chase") is a financial holding22.
JPMorgan Chase played a role in the Defendants' relationship with BLMIS.
23.
Defendant JPMorgan Chase Bank, N.A. ("Chase Bank") is one of JPMorgan
24.
Upon information and belief, the Risk Management Division of the Investment
25.
Defendant J.P. Morgan Securities LLC ("JPM Securities (US)") is the principal
26.
Upon information and belief, JPMorgan Chase's Financial Institutions Group and
27.
Defendant J.P. Morgan Securities Ltd. ("JPM Securities (UK)") is organized
28.
Upon information and belief, JPMorgan Chase's Equity Exotics & Hybrids Desk
29.
This Court has personal jurisdiction over all of the Defendants captioned herein.
30.
The Defendants have: (a) intentionally taken full advantage of the rights, benefits,
31.
JPMorgan Chase operates six business segments: Investment Banking,
32.
JPMorgan Chase does not operate its various business segments, divisions, and
33.
Matt Zames, who heads Interest Rate Trading, Global Foreign Exchange, Public
34.
Plaintiffs bring this action against all Defendants because, upon information andIV.
GENERAL ALLEGATIONS
35.
Madoff is a former chairman of the Board of Directors of the NASDAQ stock
36.
Defendant BMIS was a broker-dealer and investment adviser registered with the
37.
A number of fund managers recently expressed wariness of investing with Madoff
38.
On or about December 10, 2008, Madoff is reported to have told two senior
39.
There were several red flags with regard to Madoff's illicit use of investment
40.
JPMC is or has been regulated by both federal and New York state agencies. Until
41.
Pursuant to the regulations of these agencies, JPMC was required to report to
42.
Plaintiffs are informed and believe, based on the facts currently available, as
43.
Throughout its relationship with BLMIS, Madoff, and certain BLMIS customers,
44.
JPMC had yet further knowledge that Madoff engaged in banking activities with
45.
The Defendants knew that Madoff and/or BLMIS were breaching their fiduciary46.
The Defendants knew since at least the 1990s that the transactions taking place in
47.
The Defendants were aware since at least 2004 that Madoff and/or BLMIS
to
48.
After performing minimal due diligence on Madoff and/or BLMIS and the
49.
Since at least 2007, the Defendants knew, among other things, that: Madoff did
50.
Since at least 2008, and prior to Madoff's arrest, the Defendants knew, among
51.
JPMC is required under the Bank Secrecy Act, the Patriot Act, and was required
52.
JPMC is required under the Bank Secrecy Act, the Patriot Act and was required53.
Based on the information uniquely available to JPMC, JPMC knew that the only
54.
In light of the above information, JPMC's failure to fully and accurately report to
55.
JPMC's failure to fully and accurately report allowed it to maintain a number of
56.
As one of the world's largest banks, and one that advertised itself as the gold
57.
JPMC proclaimed itself to be a bank that substantially complied with all
58.
Given JPMC's global reputation and its boasts about its compliance, the regulators
V.
CLASS ACTION ALLEGATIONS
59.
Plaintiff brings this action as a class action pursuant to Federal Rule of Civil
60.
The members of the proposed Class are SO numerous that joinder of all members
61.
Plaintiff's claims are typical of the claims of the members of the proposed Class
62.
Plaintiff will fairly and adequately protect the interests of the members of the
63.
Common questions of law and fact exist as to all members of the proposed Class
a.
Whether Defendants violated duties owed to Plaintiffs as alleged herein, including
without limitation;
i.
knowing participation in a breach of trust;
ii.
aiding and abetting fraud;
iii.
aiding and abetting breach of fiduciary duty, and/or
iv.
unlawfully converting property of the class members.
b.
Whether Defendants aided and abetted in BLMIS fraud of Plaintiffs; and
C.
To what extent the members of the Class have sustained damages, and the proper
measure of damages.
64.
A class action is superior to all other available methods for the fair and efficient
VI.
CLAIMS FOR RELIEF
COUNT ONE
KNOWING PARTICIPATION IN A BREACH OF TRUST
65.
Paragraphs 1 thorough 64 are realleged and incorporated by reference as if set66.
In purporting to act as investment advisers, Madoff and/or BLMIS had fiduciary
67.
The Defendants knew that Madoff and/or BLMIS were operating an investment
68.
In addition, since at least 2006, the Defendants knew, among other things, that
69.
Moreover, since at least 2007, the Defendants knew that Madoff and/or BLMIS
70.
JPMC further knew that many BLMIS customers were fiduciaries and trustees in
71.
Madoff and/or BLMIS breached this trust by misappropriating and diverting the
72.
The Defendants knew that Madoff and/or BLMIS were breaching their fiduciary
73.
The Defendants knew since at least the 1990s that the transactions taking place in
74.
The Defendants were aware since at least 2004 that Madoff and/or BLMIS
75.
After performing minimal due diligence on Madoff and BLMIS and the BLMIS
76.
Since at least 2007, the Defendants knew, among other things, that: Madoff did
77.
Since at least 2008, and prior to Madoff's arrest, the Defendants knew, among78.
In October 2008, the Defendants admitted that the information they learned no
79.
Despite this knowledge, the Defendants moved billions of dollars in and out of the
80.
The Defendants are therefore liable for all funds Madoff and/or BLMIS
81.
As a result of the Defendants' knowing participation in this breach of trust,
82.
As a direct and proximate result of Defendants' knowing participation in breach
COUNT TWO
AIDING AND ABETTING FRAUD
83.
Paragraphs 1 thorough 82 are realleged and incorporated by reference as if set
84.
Madoff committed a massive fraud through BLMIS. The Defendants had actual
85.
Plaintiffs bring this claim against all Defendants because, upon information and
86.
Madoff committed the largest Ponzi scheme in history through BLMIS. Madoff
87.
The Defendants knew, or at least consciously avoided knowledge, of the fraud.
88.
The Defendants were aware since at least 2004 that Madoff through BLMIS
89.
After performing minimal due diligence on Madoff and BLMIS, the Defendants
90.
Since at least 2007, the Defendants knew, among other things, that: Madoff did91.
Since at least 2008, and prior to Madoff's arrest, the Defendants knew, among
92.
In October 2008, the Defendants admitted that the information they learned no
93.
The Defendants knew Madoff was a fraud. At a minimum, the Defendants were
94.
The Defendants substantially assisted Madoff through BLMIS in committing the
95.
The Defendants' assistance was a proximate cause of the fraud. Without the
96.
As a result of the Defendants' aiding and abetting Madoff's and/or BLMIS' fraud,
COUNT THREE
AIDING AND ABETTING BREACH OF FIDUCIARY DUTY
97.
Paragraphs 1 thorough 96 are realleged and incorporated by reference as if set
98.
Madoff and/or BLMIS owed a fiduciary duty to BLMIS customers. Madoff
99.
Plaintiffs bring this claim against all Defendants because, upon information and
100. Madoff and/or BLMIS were in a fiduciary relationship with BLMIS' customers.
101.
The Defendants knew Madoff and/or BLMIS had a fiduciary duty to BLMIS'102.
The Defendants also knew, or at least consciously avoided the knowledge that,
103.
December 2001, the Defendants were aware of what appeared to be a check-fraud
104,
The Defendants were aware since at least 2004 that Madoff and/or BLMIS
105.
After performing minimal due diligence on Madoff and/or BLMIS, the
106.
Since at least 2007, the Defendants knew, among other things, that: Madoff did
107. Since at least 2008, and prior to Madoff's arrest, the Defendants knew, among
108. In October 2008, the Defendants admitted that the information they learned no109.
The Defendants knew Madoff and/or BLMIS were breaching a fiduciary duty to
110. The Defendants participated in, and provided substantial assistance to, Madoff's
111. The Defendants' assistance was a proximate cause of the breach. Without the
112.
As a result of the Defendants' aiding and abetting this breach of fiduciary duty,
COUNT FOUR
BREACH OF FIDUCIARY DUTY
113.
Plaintiffs incorporate by reference and re-allege the allegations contained in the
114. As a result of Defendant's conduct above, and responsibilities with respect to the
115.
As a result of the Defendants' breach of fiduciary duty, customers, creditors,
COUNT FIVE
CONVERSION
116. Plaintiffs incorporate by reference and re-allege the allegations contained in the
117. JPMC debited in excess of $145 million from the 703 Account to satisfy a debt
118.
BLMIS customers have a possessory right and interest in the billions of dollars
119.
These investment funds constitute customer property and are recoverable by the
120.
At the time JPMC debited the $145 million from the 703 Account, JPMC was on
COUNT SIX
AIDING AND ABETTING CONVERSION
121.
Plaintiffs incorporate by reference and re-allege the allegations contained in the
122. Through the IA Business, Madoff and/or BLMTS converted billions of dollars of
123.
Plaintiffs, as BLMIS customers, have a legal right and interest in the billions of
124.
JPMC had actual knowledge of the conversion and lent substantial assistance to
125.
JPMC was aware that Madoff and/or BLMIS were a broker-dealer and an
126. Madoff and/or BLMIS converted billions of dollars of BLMIS customers' money.
127.
JPMC also knew, or at least consciously avoided knowing, that Madoff and/or128. JPMC was aware since at least 2004 that Madoff and/or BLMIS submitted false
129.
After performing minimal due diligence on Madoff and/or BLMIS and the
130.
Since at least 2007, JPMC knew, among other things, that: Madoff and/or BLMIS
131.
Since at least 2008, and prior to Madoff's arrest, JPMC knew, among other things,
132.
In October 2008, JPMC admitted that the information it learned no later than 2006
133. JPMC substantially assisted Madoff and/or BLMIS in converting customer
134. JPMC's assistance was a proximate cause of the conversion. Without it, Madoff
135. As a result of the Defendants' aiding and abetting Madoff's and/or BLMIS'
COUNT SEVENUNJUST ENRICHMENT
136. Plaintiffs incorporate by reference and re-allege the allegations contained in the
137. JPMC has unjustly benefitted through its receipt of customer property-benefits
138. Since 2002, JPMC received approximately $149 million from BLMIS-
139.
JPMC earned these benefits at the expense of BLMIS customers, creditors, and/or
140.
JPMC helped perpetuate Madoff's and/or BLMIS' fraud by ignoring the evidence
141. Equity and good conscience require full restitution of the monies received by
142. Likewise, JPMC proximately caused the loss to customers, creditors, and/or
143.
As a result of the Defendants' fraud upon federal and state regulators, Plaintiffs
VII.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff prays for relief and judgment, as follows:
A.
Determining that this action is a proper class action, certifying Plaintiffs as class
B.
Awarding compensatory and/or consequential damages, and as permitted by law,
C.
Awarding Plaintiff and the Class disgorgement of profits and fees received by
D.
Awarding Plaintiff and the Class restitution of monies JPMC received from
E.
Establishment of a constructive trust over the proceeds of the Initial Transfers,
F.
On all claims for relief, an accounting of all Initial Transfers and Subsequent
G.
Awarding Plaintiff and the Class their reasonable costs and expenses incurred in
H.
Such other and further relief as the Court may deem just and proper.DEMAND FOR JURY TRIAL
Plaintiff hereby demands a trial by jury, pursuant to Rule 38(b) of the Federal Rules of
HAGENS BERMAN SOBOL SHAPIRO LLP
By
Team JASON A. ZWEIG Beeing (IZ-8107)
One Penn Plaza
36th Floor
New York, NY 10119
Tel. (212) 752-5455
Fax. (917) 210-3980
[email protected]
STEVE W. BERMAN
HAGENS BERMAN SOBOL SHAPIRO LLP
1301 Fifth Avenue, Suite 2900
Seattle, WA 98101
Telephone: (206) 623-7292
Facsimile: (206) 623-0594
REED KATHREIN
HAGENS BERMAN SOBOL SHAPIRO LLP
715 Hearst Avenue, Suite 202
Berkeley, CA 94710
Telephone: (510) 725-3000
Facsimile: (501) 725-3001
LEE M. GORDON
HAGENS BERMAN SOBOL SHAPIRO LLP
700 South Flower St., Suite 2940
Los Angeles, CA 90017-4101
Telephone: (213) 330-7150
Facsimile: (213) 330-7152
ENTWISTLE & CAPPUCCI LLP
ANDREW J. ENTWISTLE
VINCE CAPPUCCI
ENTWISTLE & CAPPUCCILLP
280 Park Avenue
26th Floor West
New York, New York 10017
Telephone: (212) 894-7200
Attorneys for Plaintiff and the Proposed Class | securities |
R9jfD4cBD5gMZwczYnd_ | UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF NORTH CAROLINA
LORENZO QUINTANA, on behalf of himself
and all others similarly situated,
Case No.
Plaintiff,
CLASS ACTION COMPLAINT
v.
JURY TRIAL DEMANDED
BB&T CORPORATION
Defendant.
}
}
}
}
}
}
}
}
}
}
}
}
}
}
Plaintiff Lorenzo Quintana (“Plaintiff” or “Mr. Quintana”), individually and on behalf of
all others similarly situated, alleges the following on information and belief against BB&T
Corporation (“BB&T” or “Defendant”) regarding Defendant’s violations of the Telephone
Consumer Protection Act (TCPA). Plaintiff brings this Complaint to: (1) stop Defendant’s
practice of placing calls using an “automatic telephone dialing system” (ATDS) to the cellular
telephones of consumers nationwide without their prior express written consent; (2) enjoin
Defendant from continuing to place autodialed telephone calls to consumers who did not provide
their prior express written consent to receive them, and (3) obtain redress for all persons injured
by its conduct.
STATEMENT OF FACTS
1.
This case concerns BB&T’s violations of the TCPA.
2.
The TCPA does not allow “any person. . . to make any call (other than a call . . .
made with the prior express consent of the called party) using any automatic telephone dialing
system or an artificial or prerecorded voice . . . to any telephone number assigned to a . . .
cellular telephone service.” 47 U.S.C. § 227(b)(1).
3.
Without prior express consent, BB&T Corporation called Mr. Quintana’s cellular
telephone at least once using an automatic telephone dialing system, including a call on July 27,
2018 from telephone number (888) 765-1808.
4.
When Plaintiff answered the call, Defendant’s representative informed Plaintiff
that they were looking for an “Allen Smith,” not Plaintiff, regarding an outstanding debt.
5.
When Plaintiff answered Defendant’s call, he heard a momentary pause.
6.
This pause indicates that Defendants placed the calls at issue with a predictive
dialer with the present capacity to function as an autodialer by generating random or sequential
telephone numbers and dialing those numbers.
7.
Plaintiff was not the intended recipient of BB&T’s autodialed call.
8.
Upon receiving the call, Plaintiff informed the caller that he was not the person
they were looking for and asked that he not be called again.
9.
Plaintiff is not a customer of BB&T, and has no prior relationship with BB&T.
10.
Plaintiff does not owe any debt to BB&T.
11.
Plaintiff never provided express written consent to be called by BB&T.
12.
BB&T’s unlawful call to Plaintiff is part of BB&T’s pattern of practice of calling
consumers on their cellular telephones using an autodialer who have no direct relationship with
BB&T and are not the proper subjects of the debt collection calls.
13.
BB&T placed these calls with a predictive dialer with the present capacity to
function as an autodialer by generating random or sequential telephone numbers and dialing
those numbers.
14.
BB&T conducted (and continues to conduct) a wide-scale campaign that makes
unwanted autodialed phone calls to consumers’ cellular telephones without prior express written
consent, all in violation of the TCPA, 47 U.S.C. § 227.
15.
By making these autodialed calls, BB&T caused Plaintiff and the members of the
Classes actual harm and cognizable legal injury.
16.
This includes the aggravation and nuisance and invasions of privacy that result
from the receipt of such calls, in addition to the consumption of battery life, lost cellular minutes,
loss of value realized for the monies consumers paid to their wireless carriers for the receipt of
such calls, in the form of the diminished use, enjoyment, value, and utility of their cellular
telephone plans.
17.
Furthermore, BB&T made the calls knowing they interfered with Plaintiff’s and
the other Class members’ use and enjoyment of, and the ability to access their cellphones,
including the related data, software, and hardware components.
18.
Plaintiff brings this action for injunctive relief and statutory damages arising out
of and relating to the conduct of Defendant in negligently, knowingly, and willfully contacting
Plaintiff and class members on their telephones using an ATDS without their prior express
written consent within the meaning of the TCPA.
PARTIES
19.
Plaintiff Lorenzo Quintana is, and at all times mentioned herein was, a resident of
Youngsville, North Carolina, and a citizen of the State of North Carolina.
20.
Defendant BB&T is, upon information and belief, a North Carolina corporation
with a principle place of business at 200 West Second Street, Winston-Salem, North Carolina
27101.
21.
BB&T conducts business throughout this District and the State of North Carolina.
JURISDICTION AND VENUE
22.
This Court has subject matter jurisdiction over this action pursuant to the Class
Action Fairness Act of 2005, Pub. L. No. 109-2 Stat. 4 (“CAFA”), which, inter alia, amends 28
U.S.C. § 1332, at new subsection (d), conferring federal jurisdiction over class actions where, as
here: (a) there are 100 or more members in the proposed class; (b) some members of the
proposed class have a different citizenship from Defendant; and (c) the claims of the proposed
class members exceed the sum or value of five million dollars ($5,000,000) in aggregate. See 28
U.S.C. § 1332(d)(2) and (6).
23.
This Court also has federal question jurisdiction pursuant to 28 U.S.C. § 1331
because this action involves violations of a federal statute, the TCPA.
24.
This Court has personal jurisdiction over Defendant because Defendant has its
headquarters and principal place of business in this District, solicits consumers in this District,
made and continues to make unwanted autodialed calls in this District, and because the wrongful
conduct giving rise to this case occurred in, was directed to, and/or emanated from this District.
25.
Venue is proper in this District under 28 U.S.C. § 1391(b) because Defendant has
its headquarters and principal place of business within this District, and because the wrongful
conduct giving rise to this case occurred in, was directed to, and/or emanated from this District.
FACTS COMMON TO THE CLASS
A.
The TCPA of 1991
26.
In 1991, Congress enacted the TCPA in response to a growing number of
consumer complaints regarding certain telemarketing practices.
27.
The TCPA regulates, among other things, the use of automated telephone
equipment, or “autodialers,” defined as equipment which “has the capacity . . . (a) to store or
produce telephone numbers to be called, using a random or sequential number generator; and (b)
to dial such numbers.” 47 U.S.C. § 227(a)(1). Specifically, the plain language of section
227(b)(1)(A)(iii) prohibits the use of autodialers to make any call to a wireless number in the
absence of an emergency or the prior express consent of the called party.
28.
The FCC has issued rulings clarifying that in order to obtain an individual’s
consent, a clear, unambiguous, and conspicuous written disclosure must be provided by the
individual. 2012 FCC Order, 27 FCC Rcd. at 1839 (“[R]equiring prior written consent will
better protect consumer privacy because such consent requires conspicuous action by the
consumer—providing permission in writing—to authorize autodialed or prerecorded
telemarketing calls. . . .”).
B. BB&T’s Calls to Plaintiff and Class Members
29.
Plaintiff has never been a customer of Defendant.
30.
Defendant called Plaintiff at least once, including a call on July 27, 2018 from
telephone number (888) 765-1808, using an autodialer without his prior express written consent
for the purpose of collecting a debt not owed by Plaintiff. Plaintiff was not the intended recipient
of the call.
31.
Defendant owns the telephone number (888) 765-1808.
32.
In fact, when the number is dialed back, an automation answers which states:
“Welcome to BB&T . . .”
33.
Specifically, the hardware and software used by Defendant placed the calls at
issue with a predictive dialer with the present capacity to function as an autodialer by generating
random or sequential telephone numbers and dialing those numbers, en masse, in an automated
fashion without human intervention.
34.
Defendant’s automated dialing equipment also is, or includes features
substantially similar to, a predictive dialer, meaning that it is capable of making numerous phone
calls simultaneously and automatically connecting answered calls to then available callers and
disconnecting the rest (all without human intervention).
35.
When Plaintiff answered Defendant’s call, he heard a momentary pause before
someone started speaking to him.
36.
Plaintiff’s situation is not unique because, when placing these calls, Defendant
fails to obtain prior express written consent as required by the TCPA from cellular telephone
owners/users to make such calls and routinely makes debt-collection calls to consumers who are
not the intended recipients of the calls.
37.
At all times material to this Complaint, Defendant was and is fully aware that
unwanted autodialed telemarketing calls are being made to consumers’ cellular telephones
through its own efforts and their agents.
38.
Defendant knowingly made (and continues to make) autodialed and prerecorded
solicitation calls to cellular telephones without the prior express written consent of the call
recipients.
39.
In so doing, Defendant not only invaded the personal privacy of Plaintiff and
members of the putative Class, but also intentionally and repeatedly violated the TCPA.
40.
Online consumer complaints regarding Defendant’s unsolicited phone calls from
this same number are legion:
a. One customer identifying the caller as BB&T states: “I have received calls
from this number. Called them back and finally spoke to someone. Stated
they were sorry for the calls. Claimed it was about a past account. Never
had an account with this bank and promise never to use them in the future
for they are idiots. Asked to remove my number from their list. Now 2
months later and the calls have started again. I am sick of this.”1
b. “Called didn't answer, left message said it was BB&T with an important
message about my account.”2
c. “I keep getting calls from BB&T and I have never, ever, done business
with them.”3
d. “Legit call from BB&T. They had the wrong number listed. . . .”4
e. “I got a message from BB&T (Branch Bank & Trust Co) to call them
regarding my account. I do not have an acc[oun]t with them but I like to
bust chops so I called them back. Here is the story. This is a collection
company for BB&T looking for a neighbor on my block. They got my
number and most [likely] yours from a reverse directory lookup by
address. They call all nearby on block to see what information they can
garner from ne[i]ghbors then put it together, etc.”5
f. “[G]etting several calls, I don't answer and let go to voice mail. is BBT of
which I have never had an account with!”6
g. “I was out of town and had 4 messages from BB&T when I
returned. Called them back. They were looking for someone else and
would not give any details. The guy was a foreigner and I could barely
understand him. He was a [***] - very rude. I would never use BB&T for
1 https://800notes.com/Phone.aspx/1-888-765-1808 (last checked 8/7/18)
2 Id.
3 Id.
4 Id.
5 Id.
6 Id.
anything! The company I work for uses that bank and it is one mistake
after another!”7
h. Another consumer, identifying the caller as BB&T, stated: “I keep getting
calls from this number. Well [I] called them back this morning and they
w[]ere looking for some[]one else. I told them that that person they are
looking for do[es] not live here.”8
i. “[BB&T has] called and left message and called back and I answered and
it was for some one that [I] did not know. Need to get my number off this
calling list!!!!!!!!!! BB&T is supposed to be a decent bank!!! Best check
out their phone numbers!!!”9
j. “BB&T keeps calling me but I've never had an account with them and I
don't care to have one. I've been called at 8 in the morning and 12 in the
morning. I have been called in school as well and it's becoming
annoying. I think the girl who used to have my number had an account
and [I]'m sick of [her] problems annoying me!”10
k. “Have been getting calls non[-]stop, I just got this number and I guess the
person that had the number before me had this number. I called and told
them, they said they would remove the number. I hope they do. So tired of
the calls. This is from BB&T Bank collections.”11
l. “I let it to voicemail and I don't have bb&t account.”12
CLASS ACTION ALLEGATIONS
41.
Plaintiff brings this action on behalf of himself and on behalf of all other
persons similarly situated.
42.
Plaintiff proposes the following Class definition:
All persons within the United States who were not listed in
Defendant’s records as the intended recipient of a telephone call,
and from four years prior to the filing of this action to the date that
class notice is disseminated, received from or on behalf of
Defendant one or more telephone calls on their cellular telephone.
43.
Plaintiff represents, and is a member of, this proposed class.
7 Id.
8 Id.
9 Id.
10 Id.
11 Id.
12 Id.
44.
Excluded from the Class is Defendant and any entities in which Defendant has a
controlling interest, Defendant’s agents and employees, any Judge and/or Magistrate Judge to
whom this action is assigned and any member of such Judges’ staffs and immediate families.
45.
Plaintiff does not know the exact number of members in the proposed Class, but
reasonably believes, based on the scale of Defendant’s business, that the class is so numerous
that individual joinder would be impracticable.
46.
Plaintiff and all members of the proposed Class have been harmed by the acts of
Defendant in the form of multiple involuntary telephone and electrical charges, the aggravation,
nuisance, and invasion of privacy that necessarily accompanies the receipt of unsolicited and
harassing telephone calls, and violations of their statutory rights.
47.
The disposition of the claims in a class action will provide substantial benefit to
the parties and the Court in avoiding a multiplicity of identical suits.
48.
The proposed class can be identified easily through records maintained by
Defendant.
49.
There are well defined, nearly identical, questions of law and fact affecting all
50.
The questions of law and fact involving the class claims predominate over
questions which may affect individual members of the proposed class. Those common question
of law and fact include, but are not limited to, the following:
a. Whether Defendant made telephone calls to Plaintiff and class members
using an autodialer without their prior express written consent;
b. Whether Defendant’s conduct was knowing and/or willful;
c. Whether Defendant is liable for damages, and the amount of such
damages; and
d. Whether Defendant should be enjoined from engaging in such conduct in
the future.
51.
Plaintiff asserts claims that are typical of each member of the class because he is a
person who received at least one call on his cellular telephone using an autodialer without his
prior express written consent.
52.
Plaintiff will fairly and adequately represent and protect the interests of the
proposed class, and has no interests which are antagonistic to any member of the proposed class.
53.
Plaintiff has retained counsel experienced in handling class action claims
involving violations of federal and state consumer protection statutes.
54.
A class action is the superior method for the fair and efficient adjudication of this
controversy.
55.
Class wide relief is essential to compel Defendant to comply with the TCPA.
56.
The interest of the members of the proposed class in individually controlling the
prosecution of separate claims against Defendant is small because the statutory damages in an
individual action for violation of the TCPA are relatively small.
57.
Management of these claims is likely to present significantly fewer difficulties
than are presented in many class claims because the calls at issue are all automated and the
members of the class, by definition, did not provide the prior express consent required under the
statute to authorize calls to their telephones.
58.
Defendant has acted on grounds generally applicable to the proposed class,
thereby making final injunctive relief and corresponding declaratory relief with respect to the
proposed class as a whole appropriate.
59.
Moreover, on information and belief, Plaintiff alleges that the TCPA violations
complained of herein are substantially likely to continue in the future if an injunction is not
entered.
FIRST CAUSE OF ACTION
KNOWING AND/OR WILLFUL VIOLATIONS OF THE TELEPHONE CONSUMER
PROTECTION ACT, 47 U.S.C. § 227, et seq.
60.
Plaintiff incorporates by reference the foregoing paragraphs of this Complaint as
if fully stated herein.
61.
The foregoing acts and omissions of Defendant constitute numerous and multiple
knowing and/or willful violations of the TCPA, including but not limited to each of the above-
cited provisions of 47 U.S.C. § 227 et seq.
62.
As a result of Defendant’s knowing and/or willful violations of 47 U.S.C. § 227 et
seq., Plaintiff and members of the proposed class are entitled to treble damages of up to
$1,500.00 for each and every call in violation of the statute, pursuant to 47 U.S.C. §
227(b)(3)(C).
63.
Plaintiff and members of the proposed class are also entitled to and do seek
injunctive relief prohibiting such conduct violating the TCPA by Defendant in the future.
64.
Plaintiff and members of the proposed class are also entitled to an award of
attorneys’ fees and costs.
SECOND CAUSE OF ACTION
VIOLATIONS OF THE TELEPHONE CONSUMER PROTECTION ACT, 47 U.S.C. §
227, et seq.
65.
Plaintiff incorporates by reference the foregoing paragraphs of this Complaint as
if fully stated herein.
66.
The foregoing acts and omissions of Defendant constitute numerous and multiple
violations of the TCPA, including but not limited to each of the above-cited provisions of 47
U.S.C. § 227 et seq.
67.
As a result of Defendant’s violations of 47 U.S.C. § 227 et seq., Plaintiff and
members of the proposed class are entitled to an award of $500.00 in statutory damages for each
and every call in violation of the statute, pursuant to 47 U.S.C. § 227(b)(3)(B).
68.
Plaintiff and members of the proposed class are also entitled to, and do, seek
injunctive relief prohibiting such conduct violating the TCPA by Defendant in the future.
69.
Plaintiff and members of the proposed class are also entitled to an award of
attorneys’ fees and costs.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff respectfully requests that the Court grant Plaintiff and all
members of the proposed class the following relief against Defendant:
a. Injunctive relief prohibiting such violations of the TCPA by Defendant in
the future;
b. As a result of Defendant’s willful and/or knowing violations of the TCPA,
Plaintiff seeks for himself and each member of the proposed Class treble
damages, as provided by statute, of up to $1,500.00 for each and every call
that violated the TCPA;
c. As a result of Defendant’s violations of the TCPA, Plaintiff seeks for
himself and each member of the proposed Class $500.00 in statutory damages
for each and every call that violated the TCPA;
d. An award of attorneys’ fees and costs to counsel for Plaintiff and the
proposed class;
e. An order certifying this action to be a proper class action pursuant to
Federal Rule of Civil Procedure 23, establishing appropriate class, finding that
Plaintiff is a proper representative of the class, and appointing the lawyers and
law firm representing Plaintiff as counsel for the class;
f. Such other relief as the Court deems just and proper.
DEMAND FOR JURY TRIAL
Pursuant to Federal Rule of Civil Procedure 38(b), Plaintiff demands a trial by jury of
any and all issues in this action so triable of right.
Dated: August 31, 2018
Respectfully submitted,
By: /s/ Scott C. Harris
Scott C. Harris
WHITFIELD BRYSON & MASON LLP
900 W. Morgan Street
Raleigh, North Carolina 27603
Telephone: (919) 600-5003
Facsimile: (919) 600-5035
BURSOR & FISHER, P.A.
Joshua D. Arisohn (To Be Admitted PHV)
Andrew Obergfell (To Be Admitted PHV)
888 Seventh Avenue
New York, NY 10019
Telephone: (646) 837-7150
Facsimile: (212) 989-9163
E-Mail: [email protected]
[email protected]
Attorneys for Plaintiff
| privacy |
2BadF4cBD5gMZwczScFS | HIRALDO, P.A.
Manuel S. Hiraldo, Esq.
401 E. Las Olas Blvd., Suite 1400
Fort Lauderdale, Florida 33301
(954) 400-4713
[email protected]
(Pro Hac Vice Application Forthcoming)
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
Case No.:
Plaintiff,
COMPLAINT AND JURY DEMAND
PUTATIVE CLASS ACTION
Defendant.
INTRODUCTION
1.
Plaintiff Mario Rivero ("Plaintiff") brings this Class Action Complaint for
2.
The TCPA was designed to prevent calls and text messages like the ones described
3.
In enacting the TCPA, Congress intended to give consumers a choice as to how
Banning such automated or prerecorded telephone calls to the home, except
when the receiving party consents to receiving the call or when such calls
are necessary in an emergency situation affecting the health and safety of
the consumer, is the only effective means of protecting telephone consumers
from this nuisance and privacy invasion.
4.
Congress also specifically found that "the evidence presented to the Congress
"
Id. at § § 12-13.
5.
The TCPA also expressly applies to unsolicited faxes as well as other forms of
6.
Congress recognized that not only can unsolicited calls, faxes, and text messages
7.
With the advancement of technology, numerous courts have recognized the
8.
Persons, like Plaintiff herein, have no control to stop unsolicited and unwanted text
9.
Every transmission of a text message uses data, and the longer the text is, the more
10.
Once an unsolicited text message is received, not only is it a nuisance to the
11.
As set forth herein, that is exactly what occurred to Plaintiff and other members of
12.
Plaintiff and the members of the proposed class received unsolicited sales text
JURISDICTION AND VENUE
13.
This Court has federal question jurisdiction because this case arises out of
14.
Venue is proper in the United States District Court for the District of New Jersey
PARTIES
15.
Plaintiff is, and at all times mentioned herein was, a citizen and resident of the
16.
Defendant is a Limited Liability Company which operates as a fitness center in
17.
Defendant, at all times during the relevant class period, participated in, endorsed,
FACTS
18.
Defendant owns and operates a fitness center in Somerset County, New Jersey.
19.
To remain competitive and increase sales of its goods and services, Defendant has
20.
Specifically, between December 29, 2016 and May 16, 2018, Defendant or its955-77
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21.
Plaintiff is the subscriber and sole user of the 7663 Number.
22.
At no point in time did Plaintiff provide Defendant with his express consent to be
23.
Defendant was required to obtain Plaintiff's "prior express consent," as defined
24.
Under the TCPA, "prior express consent" is defined as:
an agreement, in writing, bearing the signature of the person called that clearly
authorizes the seller to deliver or cause to be delivered to the person called
advertisements or telemarketing messages using an automatic telephone
dialing system or an artificial or prerecorded voice, and the telephone number
to which the signatory authorizes such advertisement or telemarketing
messages to be delivered.
47 C.F.R. § 64.1200(f)(8).
25.
Plaintiff further alleges that Defendant, or its agent, sent the above text messages
26.
The texts were sent to Plaintiff and the putative class for general marketing
27.
Specifically, the text messages attempt to entice Plaintiff into becoming a member
28.
The text messages provide Defendant's contact information including its phone
29.
Defendant's website markets defendant's goods and/ or services, including flexible
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30.
The texts were not sent to Plaintiff and the putative class for emergency purposes
31.
It is a violation of the TCPA to make "any call (other than a call made for
1 Crunchgreenbrook.com (last visited June 4, 2018).
to any telephone number assigned to a
cellular
" 47 U.S.C. § 227(b)(1)(A)(iii).
32.
The TCPA defines an "automatic telephone dialing system" (hereinafter "ATDS")
33.
Defendant - or third parties directed by Defendant- - used an ATDS to send Plaintiff
34.
Specifically, upon information and belief, Defendant utilized a combination of
35.
The impersonal and generic nature of Defendant's text messages establish that
36.
Specifically, nine of the ten text messages fail to state the name of their intended
37.
Additionally, while the September 28, 2017 text message does include Plaintiff's
38.
Another indicator of Defendant's use of an ATDS is Defendant's utilization of a
39.
A final indicator of Defendant's use of an ATDS is the inclusion of opt-out
40.
As outlined herein, the unsolicited commercial texts sent by Defendant or its agents
CLASS ACTION ALLEGATIONS
46.
Plaintiff brings this action under Fed. R. Civ. P. 23 on behalf of a proposed class
All persons within the United States who, within the four years
prior to the filing of this Complaint, were sent a [voice call, text
message, or prerecorded message] from Defendant or anyone
on Defendant's behalf, to said person's cellular telephone
number; using the same equipment, or type of equipment, used
to call Plaintiff's cellular telephone.
47.
The class for whose benefit this action is brought is SO numerous that joinder of all
48.
The exact number and identities of the persons who fit within the proposed class
49.
The proposed class is composed of over 1,000 persons.
50.
The claims in this action arise exclusively from Defendant's uniform policies as
51.
No violations alleged are a result of any oral communications or individualized
52.
There are common questions of law and fact affecting the rights of the class
a) Whether Defendant or its agents sent text messages to the cellular telephones of
Plaintiff and the class;
b) Whether the Defendant obtained express written consent from Plaintiff and the
class before sending such text messages;
c) Whether Defendant's uniform policies and common course of conduct, as alleged
herein, violated the TCPA;
d) Whether Plaintiff and the class are entitled to damages arising from Defendant's
conduct alleged herein; and
e) Whether Plaintiff and the class are entitled to an order for injunctive and
declaratory relief, enjoining Defendant from carrying on the policies alleged
herein.
53.
Plaintiff is a member of the class he seeks to represent.
54.
The claims of Plaintiff are not only typical of all class members, they are identical
55.
Plaintiff has no interest antagonistic to, or in conflict with, the class.
56.
Plaintiff will thoroughly and adequately protect the interests of the class, having
57.
Defendant has acted and refused to act on grounds generally applicable to the class,
58.
The prosecution of separate actions by individual class members would create a59.
A class action is superior to other available methods for the fair and efficient
60.
Common questions will predominate, and there will be no unusual manageability
COUNT I
NEGLIGENT VIOLATIONS OF THE TCPA, 47 U.S.C. § 227, et seq.
63.
Plaintiff incorporates by reference all of the above paragraphs of his Complaint as
64.
The foregoing acts and omissions of Defendant constitutes numerous and multiple
65.
As a result of Defendant's negligent violations of 47 U.S.C. § 227, et seq., Plaintiff
66.
Plaintiff and the class are also entitled to and seek injunctive relief prohibiting such
COUNT II
KNOWING AND/OR WILLFUL VIOLATIONS
OF THE TCPA, 47 U.S.C. § 227, et seq.
67.
Plaintiff incorporates by reference all of the above paragraphs of his Complaint as
68.
The foregoing acts and omissions of Defendant constitutes numerous and multiple
69.
As a result of Defendant's knowing and/or willful violations of 47 U.S.C. § 227,
70.
Plaintiff and the class are also entitled to and seek injunctive relief prohibiting such
PRAYER FOR RELIEF
WHEREFORE, Plaintiff and members of the class respectfully pray for the following
A. Certification of the class under Fed. R. Civ. P. 23;
B. On the First Count, as a result of Defendant's negligent violations of 47 U.S.C. §
227(b)(2)(D), Plaintiff and each member of the Class is entitled to and requests
five hundred dollars ($500.00) in statutory damages, for each and every violation,
pursuant to 47 U.S.C. § 227(b)(3)(B);
C. On the Second Count, as a result of Defendant's willful and/or knowing violations
of 47 U.S.C. § 227(b)(2)(D), Plaintiff and each member of the Class is entitled to
and requests treble damages, as provided by statute, up to one thousand five
hundred dollars ($1,500.00), for each and every violation pursuant to 47 U.S.C. §
227(b)(3)(B) and 47 U.S.C. § 227(b)(3)(C);
D. An Order, pursuant to 47 U.S.C. § 227(b)(3)(A), enjoining Defendant from
violating 47 U.S.C. § 227(b)(2)(D);
E. Attorney's fees and costs; and
F. Such other and further relief as the Court may deem just and proper.
DEMAND FOR JURY TRIAL
Pursuant to Rule 38(b) of the Federal Rules of Civil Procedure, Plaintiff, on behalf of
DeNITTIS OSEFCHEN PRINCE, P.C.
By:
s/ Ross H. Schmierer
Ross H. Schmierer, Esq.
Stephen P. DeNittis, Esq.
525 Route 73 North, Suite 410
Marlton, New Jersey 08053
(T): (856) 797-9951
[email protected]
HIRALDO, P.A.
Manuel S. Hiraldo, Esquire
(Pro Hac Vice Application Forthcoming)
401 E. Las Olas Boulevard, Suite 1400
Fort Lauderdale, Florida 33301
(T): (954) 400-4713
[email protected]
Attorneys for Plaintiff
CERTIFICATION PURSUANT TO L. CIV. R. 11.2
I certify that, to the best of my knowledge, this matter is not the subject of any other action
DeNITTIS OSEFCHEN PRINCE, P.C.
By:
s/ Ross H. Schmierer
Ross H. Schmierer, Esq.
Stephen P. DeNittis, Esq.
525 Route 73 North, Suite 410
Marlton, New Jersey 08053
(T): (856) 797-9951
[email protected]
Attorneys for Plaintiff | privacy |
gEbnAokBRpLueGJZ5DB3 | UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
TEAIRRA PURVIS, individually,
)
on behalf of her minor child, J.A.,
) Case No.
and on behalf of all others similarly
)
situated,
) CLASS ACTION COMPLAINT
)
Plaintiffs,
)
) JURY TRIAL DEMANDED
vs.
)
)
AVEANNA HEALTHCARE, LLC.,
)
)
Defendant.
)
CLASS ACTION COMPLAINT
1.
Plaintiffs TEAIRRA PURVIS and J.A. individually, and on behalf of
all others similarly situated, bring this action against Defendant AVEANNA
HEALTHCARE, LLC (“AVEANNA” or “Defendant”) to obtain damages,
restitution, and injunctive relief for the Class, as defined below, from Defendant.
Plaintiffs make the following allegations upon information and belief, except as to
their own actions, the investigation of their counsel, and the facts that are a matter
of public record.
JURISDICTION AND VENUE
2.
This Court has jurisdiction over this action under the Class Action
Fairness Act (“CAFA”), 28 U.S.C. § 1332(d). There are at least 100 members in the
proposed class, the aggregated claims of the individual Class Members exceed the
1
sum or value of $5,000,000.00 exclusive of interest and costs, and members of the
Proposed Class (such as named Plaintiffs) are citizens of states different from
Defendant.
3.
Also, this Court has federal question subject matter jurisdiction over
this action pursuant to 28 U.S.C. § 1331 because the Plaintiffs assert claims that
necessarily raise substantial disputed federal issues under the Health Insurance
Portability and Accountability Act of 1996 (“HIPAA”), the Federal Trade
Commission Act (15 U.S.C. § 45) and the Gramm-Leach-Bliley Act (15 U.S.C. §
6801).
4.
Defendant has sufficient minimum contacts in Georgia, as it conducts
the majority (if not all) of its business in the State of Georgia, thus rendering the
exercise of jurisdiction by this Court proper and necessary.
5.
Venue is proper in this District under 28 U.S.C. § 1391 because a
substantial part of the events and omissions giving rise to these claims occurred in
this District.
NATURE OF THE ACTION
6.
This class action arises out of a July 2019 cyberattack and data breach
(“Data Breach”) at AVEANNA’s medical facilities. As a result of the Data Breach,
Plaintiffs and approximately 166,077 Class Members suffered ascertainable losses
in the form of the loss of the benefit of their bargain, out-of-pocket expenses, and
2
the value of their time reasonably incurred to remedy or mitigate the effects of the
attack. In addition, Plaintiffs and Class Members’ sensitive personal information—
which was entrusted to AVEANNA, its officials, and agents—was compromised
and unlawfully accessed due to the Data Breach. Information compromised in the
Data Breach includes social security numbers, dates of birth, bank account and credit
card details, passport numbers, driver’s licenses, medical record numbers, patient
account numbers, diagnosis information, treatment type, and other protected health
information as defined by the Health Insurance Portability and Accountability Act
of 1996 (“HIPAA”), and additional personally identifiable information (“PII”) and
protected health information (“PHI”) that AVEANNA collected and maintained
(collectively the “Private Information”).
7.
Plaintiffs bring this class action lawsuit on behalf of those similarly
situated to address Defendant’s inadequate safeguarding of Class Members’ Private
Information that Defendant collected and maintained, and for failing to provide
timely and adequate notice to Plaintiffs and other Class Members that their Private
Information had been subject to the unauthorized access of an unknown third party
and precisely what specific Private Information was accessed.
8.
Defendant maintained the Private Information in a reckless manner. In
particular, the Private Information was maintained on AVEANNA’s computer
network in a condition vulnerable to cyberattacks, including the infiltration of certain
3
AVEANNA email accounts containing Plaintiffs’ and Class Members’ Private
Information. Upon information and belief, the mechanism of the cyberattack and
potential for improper disclosure of Plaintiffs and Class Members’ Private
Information was a known risk to Defendant, and thus Defendant was on notice that
failing to take steps necessary to secure the Private Information from those risks left
that property in a dangerous condition.
9.
In addition, AVEANNA and its employees failed to properly monitor
the computer network and systems that housed the Private Information. Had
AVEANNA properly monitored the aforementioned network and systems, it would
have discovered the intrusion sooner.
10.
Plaintiffs and Class Members’ identities are now at risk of compromise
because of Defendant’s negligent conduct since the Private Information that
AVEANNA collected and negligently maintained is now in the hands of data
thieves.
11.
Armed with the Private Information accessed in the Data Breach, data
thieves can commit a variety of crimes including, by way of non-exhaustive
examples: opening new financial accounts in Class Members’ names; taking out
loans in Class Members’ names; using Class Members’ names to obtain medical
services; using Class Members’ health information to target other phishing and
hacking intrusions based on their individual health needs; using Class Members’
4
information to obtain government benefits; filing fraudulent tax returns using Class
Members’ information; obtaining driver’s licenses in Class Members’ names but
with another person’s photograph; and giving false information to police during an
arrest.
12.
As a result of the Data Breach, Plaintiffs and Class Members have been
exposed to a heightened and imminent risk of fraud and identity theft. Plaintiffs and
Class Members must now and in the future closely monitor their financial accounts,
credit reports, tax returns, and similar, otherwise secure accounts to guard against
identity theft.
13.
Plaintiffs and Class Members may also incur out of pocket costs for, by
way of non-exhaustive examples: purchasing credit monitoring services; credit
freezes; credit reports; or other protective measures to deter and detect identity theft.
14.
By their Complaint, Plaintiffs seek to remedy these harms on behalf of
themselves and all similarly situated individuals whose Private Information was
accessed during the Data Breach.
15.
Plaintiffs seek remedies including, but not limited to, nominal damages,
compensatory damages, reimbursement of out-of-pocket costs, the cost of identity
theft protection, and injunctive relief including improvements to Defendant’s data
security systems, future annual audits, and funded by Defendant.
5
16.
Accordingly, Plaintiffs bring this action against Defendant seeking
redress for its unlawful conduct, and asserting claims for: (i) negligence; (ii)
intrusion into private affairs; (iii) negligence per se; (iv) breach of express contract;
(v) breach of implied contract; (vi) breach of fiduciary duty; and (vii) breach of
confidence.
PARTIES
17.
Plaintiff TEAIRRA PURVIS is, and at all times mentioned herein was,
an individual citizen of the state of Georgia residing in the City of Decatur.
18.
Plaintiff J.A. is, and at all times mentioned herein was, an individual
citizen of the state of Georgia residing in the City of Decatur.
19.
Defendant AVEANNA is a corporation organized under the laws of the
state of Delaware with its principal place of business in Atlanta, Georgia.
DEFENDANT’S BUSINESS
20.
AVEANNA is the nation's largest provider of pediatric home care. It
offers pediatric nursing, pediatric therapy, autism services, enteral nutrition, therapy,
and adult services.
21.
AVEANNA was formed after two of the largest providers of pediatric
care in the nation—Epic Health Services and PSA Healthcare—were merged.
22.
Today, AVEANNA cares for patients in twenty-three (23) states
through its network of more than 200 branch offices.
6
23.
According to AVEANNA, its broad range of services expands beyond
in-home private duty nursing care to include in-home aide services, respite care,
school nurse services, therapies, and rehabilitation.
24.
In the ordinary course of receiving treatment and health care services
from AVEANNA, patients are required to provide Defendant with sensitive,
personal, and private information such as:
•
Name, address, phone number and email address;
•
Date of birth;
•
Demographic information;
•
Social Security number;
•
Information relating to individual medical history;
•
Insurance information and coverage;
•
Information concerning an individual’s doctor, nurse, or other
medical providers;
•
Photo identification;
•
Employer information, and;
•
Other information that may be deemed necessary to provide care.
25.
AVEANNA also gathers certain medical information about patients
and creates records of the care it provides to them.
7
26.
Additionally, AVEANNA may receive private and personal
information from other individuals and/or organizations that are part of a patient’s
“circle of care,” such as referring physicians, patients’ other doctors, patients’ health
plan(s), close friends, and/or family members.
27.
All of Defendant’s employees, staff, entities, clinics, sites, and
locations may share patient information with each other for various purposes without
a written authorization, as disclosed in AVEANNA’s Joint Notice of Privacy
Practices (the “Privacy Notice”).1 The current Privacy Notice has an effective date
of January 2003 and most recently revised date of January 2014.
28.
The Privacy Notice is provided to every patient upon request and is
posted on Defendant’s website.
29.
Because of the highly sensitive and personal nature of the information
Defendant acquires and stores with respect to its patients, AVEANNA promises to,
among other things: (i) “[m]aintain the privacy of protected health information;” (ii)
“[p]rovide you with this notice of its legal duties and privacy practices with respect
to your protected health information;” (iii) “[n]otify you following a breach of
unsecured protected health information;” (iv) [a]bide by the terms of this notice; and;
1 https://www.aveanna.com/privacyhipaa/.
8
(v) “[o]btain your written authorization to use or disclose your health information
for reasons other than those listed above and permitted under law.”2
THE CYBERATTACK AND DATA BREACH
30.
In July 2019, a cyberattack against AVEANNA occurred that involved
some of its patients' Private Information that was contained in email accounts of
AVEANNA employees.3
31.
Those employee email accounts were compromised by data thieves,
utilizing “phishing” techniques.
32.
AVEANNA became aware of the incident on or about August 24, 2019.
33.
Upon learning of the incident, AVEANNA initiated a security incident
investigation to determine the nature and scope of the cyberattack.
34.
The investigation determined that an unknown intruder accessed certain
employee email accounts between July 9, 2019 and August 24, 2019.
35.
AVEANNA determined that the compromised employee email
accounts contained Private Information belonging to patients like Plaintiffs and
Class Members, including Social Security Numbers, Dates of Birth, Employee
Identification Numbers, Bank/Financial Account Numbers, Credit/Debit Card
Numbers with CVV and Expiration Date, Passport Numbers, Driver’s License
2 Id.
3 https://www.aveanna.com/data-privacy-event/.
9
Numbers, Usernames and Passwords, Medical Record Numbers, Patient Account
Numbers, Diagnosis Information, Treatment Type and Location, Doctor Names,
Health Insurance Information, Billing/Claims Information, Medicare/Medicaid ID
Numbers, and Prescription/Medication Information.
36.
Plaintiffs believe their Private Information was stolen (and
subsequently sold) in the Data Breach.
37.
AVEANNA similarly has been unable to rule out if Private Information
was stolen in the Data Breach.
38.
Despite being unable to rule out that the Private Information of
Plaintiffs and the Class Members was not compromised, AVEANNA did not begin
to notify potentially affected patients until February 18, 2020, nearly six (6) months
after the Data Breach was first discovered in August 2019.
39.
Defendant had obligations created by HIPAA, contract, industry
standards, common law, and representations made to Plaintiffs and Class Members,
to keep their Private Information confidential and to protect it from unauthorized
access and disclosure.
40.
Plaintiffs and Class Members provided their Private Information to
Defendant with the reasonable expectation and mutual understanding that Defendant
would comply with its obligations to keep such information confidential and secure
from unauthorized access.
10
41.
Defendant’s data security obligations were particularly important given
the substantial increase in cyberattacks and data breaches in the healthcare industry
preceding the date of the Data Breach.
42.
Indeed, cyberattacks have become so notorious that the Federal Bureau
of Investigation (“FBI”) and United States Secret Service have issued a warning to
potential targets, so they are aware of, and prepared for, a potential attack. As one
report explained, “[e]ntities like smaller municipalities and hospitals are attractive
to ransomware criminals . . . because they often have lesser IT defenses and a high
incentive to regain access to their data quickly.”4
43.
Therefore, the increase in such attacks, and attendant risk of future
attacks, was widely known to the public and to anyone in Defendant’s industry,
including AVEANNA.
44.
Defendant breached its obligations to Plaintiffs and Class Members
and/or was otherwise negligent and reckless because it failed to properly maintain
and safeguard its computer systems and data—including Plaintiffs and Class
Members’ Private Information. Defendant’s unlawful conduct includes, but is not
limited to, the following acts and/or omissions:
4 https://www.law360.com/consumerprotection/articles/1220974/fbi-secret-service-warn-of-
targeted-ransomware?nl_pk=3ed44a08-fcc2-4b6c-89f0-
aa0155a8bb51&utm_source=newsletter&utm_medium=email&utm_campaign=consumerprotect
ion (emphasis added).
11
a.
Failing to maintain an adequate data security system to reduce
the risk of data breaches and cyberattacks;
b.
Failing to adequately protect patients’ Private Information;
c.
Failing to properly monitor its own data security systems for
existing intrusions;
d.
Failing to ensure that its vendors with access to its computer
systems and data employed reasonable security procedures;
e.
Failing to ensure the confidentiality and integrity of electronic
PHI it created, received, maintained, and/or transmitted, in
violation of 45 C.F.R. § 164.306(a)(1);
f.
Failing to implement technical policies and procedures for
electronic information systems that maintain electronic PHI
to allow access only to those persons or software programs
that have been granted access rights in violation of 45 C.F.R.
§ 164.312(a)(1);
g.
Failing to implement policies and procedures to prevent,
detect, contain, and correct security violations in violation of
45 C.F.R. § 164.308(a)(1)(i);
h.
Failing to implement procedures to review records of
information system activity regularly, such as audit logs,
12
access reports, and security incident tracking reports in
violation of 45 C.F.R. § 164.308(a)(1)(ii)(D);
i.
Failing to protect against reasonably anticipated threats or
hazards to the security or integrity of electronic PHI in
violation of 45 C.F.R. § 164.306(a)(2);
j.
Failing to protect against reasonably anticipated uses or
disclosures of electronic PHI that are not permitted under the
privacy rules regarding individually identifiable health
information in violation of 45 C.F.R. § 164.306(a)(3);
k.
Failing to ensure compliance with HIPAA security standard
rules by its workforces in violation of 45 C.F.R. §
164.306(a)(4);
l.
Failing to train all members of its workforces effectively on
the policies and procedures regarding PHI as necessary and
appropriate for the members of its workforces to carry out
their functions and to maintain security of PHI, in violation of
45 C.F.R. § 164.530(b); and/or
m.
Failing to render the electronic PHI it maintained unusable,
unreadable, or indecipherable to unauthorized individuals, as
it had not encrypted the electronic PHI as specified in the
13
HIPAA Security Rule by “the use of an algorithmic process
to transform data into a form in which there is a low
probability of assigning meaning without use of a confidential
process or key” (45 C.F.R. § 164.304 definition of
encryption).
45.
As the result of computer systems in dire need of security upgrading,
inadequate procedures for handling emails containing viruses or other malignant
computer code, and employees who opened files containing the virus or malignant
code that perpetrated the cyberattack, Defendant AVEANNA negligently and
unlawfully failed to safeguard Plaintiffs and Class Members’ Private Information.
46.
Accordingly, as outlined below, Plaintiffs and Class Members’ daily
lives were severely disrupted. What’s more, they now face an increased risk of fraud
and identity theft. Plaintiffs and the Class Members also lost the benefit of the
bargain they made with Defendant.
CYBERATTACKS AND DATA BREACHES CAUSE DISRUPTION AND
PUT CONSUMERS AT AN INCREASED RISK OF
FRAUD AND IDENTIFY THEFT
47.
Cyberattacks and data breaches at medical facilities like AVEANNA
are especially problematic because of the disruption they cause to the medical
treatment and overall daily lives of patients affected by the attack.
14
48.
Researchers have found that at medical facilities that experienced a data
security incident, the death rate among patients increased in the months and years
after the attack.5
49.
Researchers have found that at medical facilities that experienced a data
security incident, the death rate among patients increased in the months and years
after the attack.6
50.
Researchers have further found that at medical facilities that
experienced a data security incident, the incident was associated with deterioration
in timeliness and patient outcomes, generally.7
51.
Cyberattacks such as one at issue here are considered a breach under
the HIPAA Rules because there is an access of PHI not permitted under the HIPAA
Privacy Rule:
A breach under the HIPAA Rules is defined as, “ . . . the acquisition,
access, use, or disclosure of PHI in a manner not permitted under the
[HIPAA Privacy Rule] which compromises the security or privacy of
the PHI.” See 45 C.F.R. 164.40.8
52.
The United States Government Accountability Office released a report
in 2007 regarding data breaches (“GOA Report”) in which it noted that victims of
5 See https://www.pbs.org/newshour/science/ransomware-and-other-data-breaches-linked-to-
uptick-in-fatal-heart-attacks
6 See https://www.pbs.org/newshour/science/ransomware-and-other-data-breaches-linked-to-
uptick-in-fatal-heart-attacks
7 See https://onlinelibrary.wiley.com/doi/full/10.1111/1475-6773.13203.
8 Id.
15
identity theft will face “substantial costs and time to repair the damage to their good
name and credit record.”9
53.
The FTC recommends that identity theft victims take several steps to
protect their personal and financial information after a data breach, including
contacting one of the credit bureaus to place a fraud alert (consider an extended fraud
alert that lasts for seven (7) years if someone steals their identity), reviewing their
credit reports, contacting companies to remove fraudulent charges from their
accounts, placing a credit freeze on their credit, and correcting their credit reports.10
54.
Identity thieves use stolen personal information such as Social Security
numbers for a variety of crimes, including credit card fraud, phone or utilities fraud,
and bank/finance fraud.
55.
Identity thieves can also use Social Security numbers to obtain a
driver’s license or official identification card in the victim’s name but with the thief’s
picture; use the victim’s name and Social Security number to obtain government
benefits; or file a fraudulent tax return using the victim’s information. In addition,
identity thieves may obtain a job using the victim’s Social Security number, rent a
house or receive medical services in the victim’s name, and may even give the
victim’s personal information to police during an arrest resulting in an arrest warrant
9 See “Data Breaches Are Frequent, but Evidence of Resulting Identity Theft Is Limited;
However, the Full Extent Is Unknown,” p. 2, U.S. Government Accountability Office, June
2007, https://www.gao.gov/new.items/d07737.pdf (last visited Apr. 12, 2019) (“GAO Report”).
10 See https://www.identitytheft.gov/Steps (last visited Apr. 12, 2019).
16
being issued in the victim’s name. A study by Identity Theft Resource Center shows
the multitude of harms caused by fraudulent use of personal and financial
information:11
56.
What’s more, theft of Private Information is also gravely serious.
PII/PHI is a valuable property right.12 Its value is axiomatic, considering the value
of Big Data in corporate America and the consequences of cyber thefts include heavy
11 “Credit Card and ID Theft Statistics” by Jason Steele, 10/24/2017, at:
https://www.creditcards.com/credit-card-news/credit-card-security-id-theft-fraud-statistics-
1276.php (last visited June 20, 2019).
12 See, e.g., John T. Soma, et al, Corporate Privacy Trend: The “Value” of Personally Identifiable
Information (“PII”) Equals the “Value" of Financial Assets, 15 Rich. J.L. & Tech. 11, at *3-4
(2009) (“PII, which companies obtain at little cost, has quantifiable value that is rapidly reaching
a level comparable to the value of traditional financial assets.”) (citations omitted).
17
prison sentences. Even this obvious risk to reward analysis illustrates beyond doubt
that Private Information has considerable market value.
57.
Theft of PHI, in particular, is gravely serious: “A thief may use your
name or health insurance numbers to see a doctor, get prescription drugs, file claims
with your insurance provider, or get other care. If the thief’s health information is
mixed with yours, your treatment, insurance and payment records, and credit report
may be affected.”13 Drug manufacturers, medical device manufacturers, pharmacies,
hospitals and other healthcare service providers often purchase PII/PHI on the black
market for the purpose of target marketing their products and services to the physical
maladies of the data breach victims themselves. Insurance companies purchase and
use wrongfully disclosed PHI to adjust their insureds’ medical insurance premiums.
58.
It must also be noted there may be a substantial time lag—measured in
years—between when harm occurs versus when it is discovered, and also between
when Private Information, financial information, and other sensitive data is stolen
and when it is used. According to the U.S. Government Accountability Office, which
conducted a study regarding data breaches:
[L]aw enforcement officials told us that in some cases, stolen data may
be held for up to a year or more before being used to commit identity
theft. Further, once stolen data have been sold or posted on the Web,
fraudulent use of that information may continue for years. As a result,
13 See Federal Trade Commission, Medical Identity Theft,
http://www.consumer.ftc.gov/articles/0171-medical-identity-theft (last visited Mar. 27, 2020).
18
studies that attempt to measure the harm resulting from data breaches
cannot necessarily rule out all future harm.
See GAO Report at 29.
59.
Private Information and financial information are such valuable
commodities to identity thieves that once the information has been compromised,
criminals often trade the information on the “cyber black-market” for years.
60.
There is a strong probability that entire batches of stolen information
have been dumped on the black market and are yet to be dumped on the black market,
meaning Plaintiffs and Class Members are at an increased risk of fraud and identity
theft for many years into the future. Thus, Plaintiffs and Class Members must
vigilantly monitor their financial and medical accounts for many years to come.
61.
Medical information is especially valuable to identity thieves.
According to account monitoring company LogDog, coveted Social Security
numbers were selling on the dark web for just $1 in 2016—the same as a Facebook
account. That pales in comparison with the asking price for medical data, which was
selling for $50 and up.14
62.
Because of its value, the medical industry has experienced
disproportionally higher numbers of data theft events than other industries.
Defendant therefore knew or should have known this and strengthened its network
14 https://nakedsecurity.sophos.com/2019/10/03/ransomware-attacks-paralyze-and-sometimes-
crush-hospitals/#content; https://getlogdog.com/blogdog/email-security-you-are-doing-it-wrong/
19
and data systems accordingly. Defendant was put on notice of the substantial and
foreseeable risk of harm from a data breach, yet it failed to properly prepare for that
risk, resulting in the Data Breach.
PLAINTIFFS AND CLASS MEMBERS’ DAMAGES
63.
To date, Defendant has done absolutely nothing to provide Plaintiffs
and the Class Members with relief for the damages they have suffered as a result of
the Data Breach.
64.
To date, Defendant has not even offered Plaintiffs and the Class
Members any free credit monitoring, identity theft protection, or identity restoration
services.
65.
Free credit monitoring was only offered to those whose Social Security
numbers were deemed compromised, and even then, the credit monitoring was
inadequate, covering only one year, when the type of fraud and other risks can lag
and persist for years.
66.
Instead of offering any real assistance or compensation, Defendant
actively encouraged Plaintiffs and the Class Members to spend their personal time
dealing with the aftereffects of the Data Breach, recommending that Plaintiffs and
Class Members take the time to “regularly monitor credit reports, account statements
20
and benefit statements,” rather than offering a service to monitor on behalf of
Plaintiffs and Class Members.15
67.
Plaintiffs and Class Members have been damaged by the compromise
of their Private Information in the Data Breach.
68.
Plaintiffs’ PII and PHI was compromised as a direct and proximate
result of the Data Breach.
69.
As a direct and proximate result of Defendant’s conduct, Plaintiffs and
Class Members have been placed at an imminent, immediate, and continuing
increased risk of harm from fraud and identity theft. Defendant inherently recognizes
this imminent, immediate, and continuing increased risk because of its
acknowledgement that Plaintiffs and Class Members should “regularly monitor
credit reports, account statements and benefit statements.”
70.
As a direct and proximate result of Defendant’s conduct, Plaintiffs and
Class Members have been forced to expend time dealing with the effects of the Data
Breach.
71.
Plaintiffs and Class Members face substantial risk of out-of-pocket
fraud losses such as loans opened in their names, medical services billed in their
names, tax return fraud, utility bills opened in their names, credit card fraud, and
similar identity theft.
15 https://www.AVEANNAhealth.org/notice-of-data-security-incident.html
21
72.
Plaintiffs and Class Members face substantial risk of being targeted for
future phishing, data intrusion, and other illegal schemes based on their Private
Information as potential fraudsters could use that information to target such schemes
more effectively to Plaintiffs and Class Members.
73.
Plaintiffs and Class Members may also incur out-of-pocket costs for
protective measures such as credit monitoring fees, credit report fees, credit freeze
fees, and similar costs directly or indirectly related to the Data Breach.
74.
Plaintiffs and Class Members also suffered a loss of value of their
Private Information when it was acquired by cyber thieves in the Data Breach.
Numerous courts have recognized the propriety of loss of value damages in related
75.
Plaintiffs and Class Members were also damaged via benefit-of-the-
bargain damages. Plaintiffs and Class Members overpaid for a service that was
intended to be accompanied by adequate data security but was not. Part of the price
Plaintiffs and Class Members paid to Defendant was intended to be used by
Defendant to fund adequate security of AVEANNA’s computer property and
Plaintiffs and Class Members’ Private Information. Thus, Plaintiffs and the Class
Members did not get what they paid for.
22
76.
Plaintiffs and Class Members have spent and will continue to spend
significant amounts of time to monitor their financial and medical accounts and
records for misuse.
77.
Plaintiffs and Class Members have suffered or will suffer actual injury
as a direct result of the Data Breach. Many victims suffered ascertainable losses in
the form of out-of-pocket expenses and the value of their time reasonably incurred
to remedy or mitigate the effects of the Data Breach relating to:
a.
Finding fraudulent charges;
b.
Canceling and reissuing credit and debit cards;
c.
Purchasing credit monitoring and identity theft prevention;
d.
Addressing their inability to withdraw funds linked to compromised
accounts;
e.
Taking trips to banks and waiting in line to obtain funds held in
limited accounts;
f.
Placing “freezes” and “alerts” with credit reporting agencies;
g.
Spending time on the phone with or at a financial institution to
dispute fraudulent charges;
h.
Contacting financial institutions and closing or modifying financial
accounts;
23
i.
Resetting automatic billing and payment instructions from
compromised credit and debit cards to new ones;
j.
Paying late fees and declined payment fees imposed as a result of
failed automatic payments that were tied to compromised cards that
had to be cancelled; and
k.
Closely reviewing and monitoring bank accounts and credit reports
for unauthorized activity for years to come.
78.
Moreover, Plaintiffs and Class Members have an interest in ensuring
that their Private Information, which is believed to remain in the possession of
Defendant, is protected from further breaches by the implementation of sufficient
security measures and safeguards, including but not limited to, making sure that the
storage of data or documents containing personal and financial information is not
accessible online and that access to such data is password-protected.
79.
Further, as a result of Defendant’s conduct, Plaintiffs and Class
Members are forced to live with the anxiety that their Private Information—which
contains the most intimate details about a person’s life, including what ailments they
suffer, whether physical or mental—may be disclosed to the entire world, thereby
subjecting them to embarrassment and depriving them of any right to privacy
whatsoever.
24
80.
As a direct and proximate result of Defendant’s actions and inactions,
Plaintiffs and Class Members have suffered anxiety, emotional distress, and loss of
privacy, and are at an increased risk of future harm.
CLASS ACTION ALLEGATIONS
81.
Plaintiffs bring this action on behalf of themselves and on behalf of all
other persons similarly situated (“the Class”).
82.
Plaintiffs propose the following Class definition, subject to amendment
as appropriate:
All persons who utilized Defendant AVEANNA’s services whose
Private Information was maintained on Defendant AVEANNA’s email
and computer system that was compromised in the Data Breach, and
who received notice of the Data Breach.
83.
Excluded from the Class are Defendant’s officers, directors, and
employees; any entity in which Defendant has a controlling interest; and the
affiliates, legal representatives, attorneys, successors, heirs, and assigns of
Defendant. Excluded also from the Class are members of the judiciary to whom this
case is assigned, their families and members of their staff.
84.
Numerosity. The Members of the Class are so numerous that joinder of
all of them is impracticable. While the exact number of Class Members is unknown
to Plaintiffs at this time, based on information and belief, the Class consists of
approximately 166,077 patients of Defendant AVEANNA whose data was
compromised in Data Breach.
25
85.
Commonality. There are questions of law and fact common to the Class,
which predominate over any questions affecting only individual Class Members.
These common questions of law and fact include, without limitation:
a.
Whether Defendant unlawfully used, maintained, lost, or
disclosed Plaintiffs and Class Members’ Private Information;
b.
Whether Defendant failed to implement and maintain
reasonable security procedures and practices appropriate to
the nature and scope of the information compromised in the
Data Breach;
c.
Whether Defendant’s data security systems prior to and
during the Data Breach complied with applicable data
security laws and regulations including, e.g., HIPAA;
d.
Whether Defendant’s data security systems prior to and
during the Data Breach were consistent with industry
standards;
e.
Whether Defendant owed a duty to Class Members to
safeguard their Private Information;
f.
Whether Defendant breached its duty to Class Members to
safeguard their Private Information;
26
g.
Whether computer hackers obtained Class Members’ Private
Information in the Data Breach;
h.
Whether Defendant knew or should have known that its data
security systems and monitoring processes were deficient;
i.
Whether Plaintiffs and Class Members suffered legally
cognizable damages as a result of Defendant’s misconduct;
j.
Whether Defendant’s conduct was negligent;
k.
Whether Defendant’s conduct was per se negligent;
l.
Whether
Defendant’s
acts,
inactions,
and
practices
complained of herein amount to acts of intrusion upon
seclusion under the law;
m.
Whether Defendant failed to provide notice of the Data
Breach in a timely manner, and;
n.
Whether Plaintiffs and Class Members are entitled to
damages, civil penalties, punitive damages, and/or injunctive
relief.
86.
Typicality. Plaintiffs’ claims are typical of those of other Class
Members because Plaintiffs’ Private Information, like that of every other Class
Member, was compromised in the Data Breach.
27
87.
Adequacy of Representation. Plaintiffs will fairly and adequately
represent and protect the interests of the Members of the Class. Plaintiffs’ Counsel
are competent and experienced in litigating class actions.
88.
Predominance. Defendant has engaged in a common course of conduct
toward Plaintiffs and Class Members, in that all the Plaintiffs and Class Members’
Private Information was stored on the same computer systems and unlawfully
accessed in the same way. The common issues arising from Defendant’s conduct
affecting Class Members set out above predominate over any individualized issues.
Adjudication of these common issues in a single action has important and desirable
advantages of judicial economy.
89.
Superiority. A class action is superior to other available methods for the
fair and efficient adjudication of the controversy. Class treatment of common
questions of law and fact is superior to multiple individual actions or piecemeal
litigation. Absent a class action, most Class Members would likely find that the cost
of litigating their individual claims is prohibitively high and would therefore have
no effective remedy. The prosecution of separate actions by individual Class
Members would create a risk of inconsistent or varying adjudications with respect
to individual Class Members, which would establish incompatible standards of
conduct for Defendant. In contrast, the conduct of this action as a class action
28
presents far fewer management difficulties, conserves judicial resources and the
parties’ resources, and protects the rights of each Class Member.
90.
Defendant has acted on grounds that apply generally to the Class as a
whole, so that class certification, injunctive relief, and corresponding declaratory
relief are appropriate on a class-wide basis.
CAUSES OF ACTION
FIRST COUNT
Negligence
(On Behalf of Plaintiffs and All Class Members)
91.
Plaintiffs re-allege and incorporate by reference Paragraphs 1 through
90 above as if fully set forth herein.
92.
Defendant required Plaintiffs and Class Members to submit non-public
Private Information in order to obtain medical services.
93.
By collecting and storing this data in its computer property, and sharing
it and using it for commercial gain, Defendant had a duty of care to use reasonable
means to secure and safeguard its computer property—and Plaintiffs and Class
Members’ Private Information held within it—to prevent disclosure of the Private
Information, and to safeguard the Private Information from theft. Defendant’s duty
included a responsibility to implement processes by which it could detect a breach
of its security systems in a reasonably expeditious period of time and to give prompt
notice to those affected in the case of a data breach.
29
94.
Defendant owed a duty of care to Plaintiffs and Class Members to
provide data security consistent with industry standards and other requirements
discussed herein, and to ensure that its systems and networks, and the personnel
responsible for them, adequately protected the Private Information.
95.
Defendant’s duty of care to use reasonable security measures arose as
a result of the special relationship that existed between Defendant and its client
patients, which is recognized by laws and regulations including but not limited to
HIPAA, as well as common law. Defendant was in a position to ensure that its
systems were sufficient to protect against the foreseeable risk of harm to Class
Members from a data breach.
96.
Defendant’s duty to use reasonable security measures under HIPAA
required Defendant to “reasonably protect” confidential data from “any intentional
or unintentional use or disclosure” and to “have in place appropriate administrative,
technical, and physical safeguards to protect the privacy of protected health
information.” 45 C.F.R. § 164.530(c)(1). Some or all of the medical information at
issue in this case constitutes “protected health information” within the meaning of
HIPAA.
97.
In addition, Defendant had a duty to employ reasonable security
measures under Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45,
which prohibits “unfair . . . practices in or affecting commerce,” including, as
30
interpreted and enforced by the FTC, the unfair practice of failing to use reasonable
measures to protect confidential data.
98.
Defendant’s duty to use reasonable care in protecting confidential data
arose not only as a result of the statutes and regulations described above, but also
because Defendant is bound by industry standards to protect confidential Private
Information.
99.
Defendant breached its duties, and thus was negligent, by failing to use
reasonable measures to protect Plaintiffs and Class Members’ Private Information.
The specific negligent acts and omissions committed by Defendant include, but are
not limited to, the following:
a.
Failing to adopt, implement, and maintain adequate security
measures to safeguard Plaintiffs and Class Members’ Private
Information;
b.
Failing to adequately monitor the security of its networks and
systems;
c.
Failure to periodically ensure that its email system had plans in place
to maintain reasonable data security safeguards;
d.
Allowing unauthorized access to Plaintiffs and Class Members’
Private Information;
31
e.
Failing to detect in a timely manner that Plaintiffs and Class
Members’ Private Information had been compromised; and
f.
Failing to timely notify Plaintiffs and Class Members about the Data
Breach so that they could take appropriate steps to mitigate the
potential for identity theft and other damages.
100. It was foreseeable that Defendant’s failure to use reasonable measures
to protect Plaintiffs and Class Members’ Private Information would result in injury
to Plaintiffs and Class Members. Further, the breach of security was reasonably
foreseeable given the known high frequency of cyberattacks and data breaches in the
medical industry.
101. It was therefore foreseeable that the failure to adequately safeguard
Plaintiffs and Class Members’ Private Information would result in one or more types
of injuries to Plaintiffs and Class Members.
102. Plaintiffs and Class Members are entitled to compensatory and
consequential damages suffered as a result of the Data Breach
103. Plaintiffs and Class Members are also entitled to injunctive relief
requiring Defendant to, inter alia: (i) strengthen its data security systems and
monitoring procedures; (ii) submit to future annual audits of those systems and
monitoring procedures; and (iii) continue to provide adequate credit monitoring to
all Class Members.
32
SECOND COUNT
Intrusion Into Private Affairs / Invasion Of Privacy
(On Behalf of Plaintiffs and All Class Members)
104. Plaintiffs repeat and re-allege each and every allegation contained in
Paragraphs 1 through 90 as if fully set forth herein.
105. The state of Georgia recognizes the tort of Intrusion into Private
Affairs, and adopts the formulation of that tort found in the Restatement (Second) of
Torts, which states:
One who intentionally intrudes, physically or otherwise, upon the
solitude or seclusion of another or his private affairs or concerns, is
subject to liability to the other for invasion of his privacy, if the
intrusion would be highly offensive to a reasonable person.
Restatement (Second) of Torts § 652B (1977).
106. Plaintiffs and Class Members had a reasonable expectation of privacy
in the Private Information Defendant mishandled.
107. Defendant’s conduct as alleged above intruded upon Plaintiffs and
Class Members’ seclusion under common law.
108. By intentionally failing to keep Plaintiffs and Class Members’ Private
Information safe, and by intentionally misusing and/or disclosing said information
to unauthorized parties for unauthorized use, Defendant intentionally invaded
Plaintiffs and Class Members’ privacy by:
33
a.
Intentionally and substantially intruding into Plaintiffs and Class
Members’ private affairs in a manner that identifies Plaintiffs and
Class Members and that would be highly offensive and
objectionable to an ordinary person;
b.
Intentionally publicizing private facts about Plaintiffs and Class
Members, which is highly offensive and objectionable to an
ordinary person; and
c.
Intentionally causing anguish or suffering to Plaintiffs and Class
Members.
109. Defendant knew that an ordinary person in Plaintiffs’ or a Class
Member’s position would consider Defendant’s intentional actions highly offensive
and objectionable.
110. Defendant invaded Plaintiffs and Class Members’ right to privacy and
intruded into Plaintiffs and Class Members’ private affairs by intentionally misusing
and/or disclosing their Private Information without their informed, voluntary,
affirmative, and clear consent.
111. Defendant intentionally concealed from Plaintiffs and Class Members
an incident that misused and/or disclosed their Private information without their
informed, voluntary, affirmative, and clear consent.
34
112. As a proximate result of such intentional misuse and disclosures,
Plaintiffs and Class Members’ reasonable expectations of privacy in their Private
Information was unduly frustrated and thwarted. Defendant’s conduct, amounting to
a substantial and serious invasion of Plaintiffs and Class Members’ protected privacy
interests, caused anguish and suffering such that an ordinary person would consider
Defendant’s intentional actions or inaction highly offensive and objectionable.
113. In failing to protect Plaintiffs and Class Members’ Private Information,
and in intentionally misusing and/or disclosing their Private Information, Defendant
acted with intentional malice and oppression and in conscious disregard of Plaintiffs
and Class Members’ rights to have such information kept confidential and private.
Plaintiffs, therefore, seek an award of damages on behalf of themselves and the
THIRD COUNT
Breach of Express Contract
(On Behalf of Plaintiffs and All Class Members)
114. Plaintiffs re-allege and incorporate by reference Paragraphs 1 through
90 above as if fully set forth herein.
115. Plaintiffs and Members of the Class allege that they entered into valid
and enforceable express contracts, or were third-party beneficiaries of valid and
enforceable express contracts, with Defendant.
35
116. The valid and enforceable express contracts that Plaintiffs and Class
Members entered into with Defendant include Defendant’s promise to protect
nonpublic Private Information given to Defendant or that Defendant gathers on its
own from disclosure.
117. Under these express contracts, Defendant and/or its affiliated
healthcare providers, promised and were obligated to: (a) provide healthcare to
Plaintiffs and Class Members; and (b) protect Plaintiffs and the Class Members’
PII/PHI: (i) provided to obtain such healthcare; and/or (ii) created as a result of
providing such healthcare. In exchange, Plaintiffs and Members of the Class agreed
to pay money for these services, and to turn over their Private Information.
118. Both the provision of healthcare and the protection of Plaintiffs and
Class Members’ Private Information were material aspects of these contracts.
119. At all relevant times, Defendant expressly represented in its Privacy
Notice that it would, among other things: (i) “[m]aintain the privacy of protected
health information;” (ii) “[p]rovide you with this notice of its legal duties and privacy
practices with respect to your protected health information;” (iii) “[n]otify you
following a breach of unsecured protected health information;” (iv) [a]bide by the
terms of this notice; and (v) “[o]btain your written authorization to use or disclose
your health information for reasons other than those listed above and permitted under
36
120. Defendant’s express representations, including, but not limited to,
express representations found in its Notice of Privacy Practices, formed an express
contract requiring Defendant to implement data security adequate to safeguard and
protect the privacy of Plaintiffs and Class Members’ Private Information.
121. Consumers of healthcare value their privacy, the privacy of their
dependents, and the ability to keep their Private Information associated with
obtaining healthcare private. To customers such as Plaintiffs and Class Members,
healthcare that does not adhere to industry standard data security protocols to protect
Private Information is fundamentally less useful and less valuable than healthcare
that adheres to industry-standard data security. Plaintiffs and Class Members would
not have entered into these contracts with Defendant and/or its affiliated healthcare
providers as a direct or third-party beneficiary without an understanding that their
Private Information would be safeguarded and protected.
122. A meeting of the minds occurred, as Plaintiffs and Members of the
Class provided their Private Information to Defendant and/or its affiliated healthcare
providers, and paid for the provided healthcare in exchange for, amongst other
things, protection of their Private Information.
123. Plaintiffs and Class Members performed their obligations under the
contract when they paid for their health care services and provided their Private
Information.
37
124. Defendant materially breached its contractual obligation to protect the
nonpublic Private Information Defendant gathered when the information was
accessed and exfiltrated by unauthorized personnel as part of the Data Breach.
125. Defendant materially breached the terms of these express contracts,
including, but not limited to, the terms stated in the relevant Notice of Privacy
Practices. Defendant did not maintain the privacy of Plaintiffs and Class Members’
Private Information as evidenced by its notifications of the Data Breach to Plaintiffs
and approximately 166,077 Class Members. Specifically, Defendant did not comply
with industry standards, or otherwise protect Plaintiffs and the Class Members’
Private Information, as set forth above.
126. The Data Breach was a reasonably foreseeable consequence of
Defendant’s actions in breach of these contracts.
127. As a result of Defendant’s failure to fulfill the data security protections
promised in these contracts, Plaintiffs and Members of the Class did not receive the
full benefit of the bargain, and instead received healthcare and other services that
were of a diminished value to that described in the contracts. Plaintiffs and Class
Members therefore were damaged in an amount at least equal to the difference in the
value of the healthcare with data security protection they paid for and the healthcare
they received.
38
128. Had Defendant disclosed that its security was inadequate or that it did
not adhere to industry-standard security measures, neither the Plaintiffs, the Class
Members, nor any reasonable person would have purchased healthcare from
Defendant and/or its affiliated healthcare providers.
129. As a direct and proximate result of the Data Breach, Plaintiffs and Class
Members have been harmed and have suffered, and will continue to suffer, actual
damages and injuries, including without limitation the release, disclosure, and
publication of their Private Information, the loss of control of their Private
Information, the imminent risk of suffering additional damages in the future,
disruption of their medical care and treatment, out-of-pocket expenses, and the loss
of the benefit of the bargain they had struck with Defendant.
130. Plaintiffs and Class Members are entitled to compensatory and
consequential damages suffered as a result of the Data Breach.
FOURTH COUNT
Breach of Implied Contract
(On Behalf of Plaintiffs and All Class Members)
131. Plaintiffs re-allege and incorporate by reference Paragraphs 1 through
90 above as if fully set forth herein.
132. When Plaintiffs and Class Members provided their Private Information
to AVEANNA in exchange for Defendant’s services, they entered into implied
39
contracts with Defendant pursuant to which Defendant agreed to reasonably protect
such Private Information.
133. Defendant solicited and invited Class Members to provide their Private
Information as part of Defendant’s regular business practices. Plaintiffs and Class
Members accepted Defendant’s offers and provided their Private Information to
Defendant.
134. In entering into such implied contracts, Plaintiffs and Class Members
reasonably believed and expected that Defendant’s data security practices complied
with relevant laws and regulations, including HIPAA, and were consistent with
industry standards.
135. Class Members who paid money to Defendant reasonably believed and
expected that Defendant would use part of those funds to obtain adequate data
security. Defendant failed to do so.
136. Plaintiffs and Class Members would not have entrusted their Private
Information to Defendant in the absence of the implied contract between them and
Defendant to keep their information reasonably secure. Plaintiffs and Class
Members would not have entrusted their Private Information to Defendant in the
absence of its implied promise to monitor its computer systems and networks to
ensure that it adopted reasonable data security measures.
40
137. Plaintiffs and Class Members fully and adequately performed their
obligations under the implied contracts with Defendant.
138. Defendant breached its implied contracts with Plaintiffs and Class
Members by failing to safeguard and protect their Private Information.
139. As a direct and proximate result of Defendant’s breaches of the implied
contracts, Plaintiffs and Class Members sustained damages as alleged herein.
140. Plaintiffs and Class Members are entitled to compensatory and
consequential damages suffered as a result of the Data Breach.
141. Plaintiffs and Class Members are also entitled to injunctive relief
requiring Defendant to, inter alia: (i) strengthen its data security systems and
monitoring procedures; (ii) submit to future annual audits of those systems and
monitoring procedures; and (iii) immediately provide adequate credit monitoring to
all Class Members.
FIFTH COUNT
Negligence Per Se
(On Behalf of Plaintiffs and All Class Members)
142. Plaintiffs re-allege and incorporate by reference Paragraphs 1 through
90 above as if fully set forth herein.
143. Pursuant to Section 5 of the Federal Trade Commission Act (15 U.S.C.
§ 45), Defendant had a duty to provide fair and adequate computer systems and data
41
security practices to safeguard Plaintiffs and Class Members’ Private Information.
144. Pursuant to HIPAA (42 U.S.C. § 1302d, et seq.), Defendant had a duty
to implement reasonable safeguards to protect Plaintiffs and Class Members’ Private
Information.
145. Pursuant to HIPAA, Defendant had a duty to render the electronic PHI
it maintained unusable, unreadable, or indecipherable to unauthorized individuals,
as specified in the HIPAA Security Rule by “the use of an algorithmic process to
transform data into a form in which there is a low probability of assigning meaning
without use of a confidential process or key” (45 C.F.R. § 164.304 definition of
encryption).
146. Pursuant to the Gramm-Leach-Bliley Act (15 U.S.C. § 6801),
Defendant had a duty to protect the security and confidentiality of Plaintiffs’ and
Class Members’ Private Information.
147. Defendant breached its duties to Plaintiffs and Class Members under
the Federal Trade Commission Act, HIPAA, and the Gramm-Leach-Bliley Act by
failing to provide fair, reasonable, or adequate computer systems and data security
practices to safeguard Plaintiffs’ and Class Members’ Private Information.
148. Defendant’s failure to comply with applicable laws and regulations
constitutes negligence per se.
42
149. But for Defendant’s wrongful and negligent breach of its duties owed
to Plaintiffs and Class Members, Plaintiffs and Class Members would not have been
injured.
150. The injury and harm suffered by Plaintiffs and Class Members was the
reasonably foreseeable result of Defendant’s breach of its duties. Defendant knew
or should have known that it was failing to meet its duties, and that Defendant’s
breach would cause Plaintiffs and Class Members to experience the foreseeable
harms associated with the exposure of their Private Information.
151. As a direct and proximate result of Defendant’s negligent conduct,
Plaintiffs and Class Members have suffered injury and are entitled to compensatory,
consequential, and punitive damages in an amount to be proven at trial.
SIXTH COUNT
Breach of Fiduciary Duty
(On Behalf of Plaintiffs and All Class Members)
152. Plaintiffs re-allege and incorporate by reference Paragraphs 1 through
90 above as if fully set forth herein.
153. In light of the special relationship between Defendant and Plaintiffs and
Class Members, whereby Defendant became guardians of Plaintiffs and Class
Members’ Private Information, Defendant became a fiduciary by its undertaking and
guardianship of the Private Information, to act primarily for the benefit of its
patients, including Plaintiffs and Class Members: (i) for the safeguarding of
43
Plaintiffs and Class Members’ Private Information; (ii) to timely notify Plaintiffs
and Class Members of a data breach and disclosure; and (iii) maintain complete and
accurate records of what Private Information (and where) Defendant did and does
154. Defendant has a fiduciary duty to act for the benefit of Plaintiffs and
Class Members upon matters within the scope of its patients’ relationship, in
particular, to keep secure the Private Information of its patients.
155. Defendant breached its fiduciary duties to Plaintiffs and Class Members
by failing to diligently discovery, investigate, and give notice of the Data Breach in
a reasonable and practicable period of time.
156. Defendant breached its fiduciary duties to Plaintiffs and Class Members
by failing to encrypt and otherwise protect the integrity of the systems containing
Plaintiffs and Class Members’ Private Information.
157. Defendant breached its fiduciary duties owed to Plaintiffs and Class
Members by failing to timely notify and/or warn Plaintiffs and Class Members of
the Data Breach.
158. Defendant breached its fiduciary duties owed to Plaintiffs and Class
Members by failing to ensure the confidentiality and integrity of electronic PHI
Defendant created, received, maintained, and transmitted, in violation of 45 C.F.R.
§ 164.306(a)(1).
44
159. Defendant breached its fiduciary duties owed to Plaintiffs and Class
Members by failing to implement technical policies and procedures for electronic
information systems that maintain electronic PHI to allow access only to those
persons or software programs that have been granted access rights in violation of 45
C.F.R. § 164.312(a)(1).
160. Defendant breached its fiduciary duties owed to Plaintiffs and Class
Members by failing to implement policies and procedures to prevent, detect, contain,
and correct security violations, in violation of 45 C.F.R. § 164.308(a)(1).
161. Defendant breached its fiduciary duties owed to Plaintiffs and Class
Members by failing to identify and respond to suspected or known security incidents
and to mitigate, to the extent practicable, harmful effects of security incidents that
are known to the covered entity in violation of 45 C.F.R. § 164.308(a)(6)(ii).
162. Defendant breached its fiduciary duties owed to Plaintiffs and Class
Members by failing to protect against any reasonably anticipated threats or hazards
to the security or integrity of electronic PHI in violation of 45 C.F.R. §
164.306(a)(2).
163. Defendant breached its fiduciary duties owed to Plaintiffs and Class
Members by failing to protect against any reasonably anticipated uses or disclosures
of electronic PHI that are not permitted under the privacy rules regarding
45
individually identifiable health information in violation of 45 C.F.R. §
164.306(a)(3).
164. Defendant breached its fiduciary duties owed to Plaintiffs and Class
Members by failing to ensure compliance with the HIPAA security standard rules
by its workforce in violation of 45 C.F.R. § 164.306(a)(94).
165. Defendant breached its fiduciary duties owed to Plaintiffs and Class
Members by impermissibly and improperly using and disclosing PHI that is and
remains accessible to unauthorized persons in violation of 45 C.F.R. § 164.502, et
166. Defendant breached its fiduciary duties owed to Plaintiffs and Class
Members by failing to effectively train all Members of its workforce (including
independent contractors) on the policies and procedures with respect to PHI as
necessary and appropriate for the members of its workforce to carry out their
functions and to maintain security of PHI in violation of 45 C.F.R. § 164.530(b) and
45 C.F.R. § 164.308(a)(5).
167. Defendant breached its fiduciary duties owed to Plaintiffs and Class
Members by failing to design, implement, and enforce policies and procedures
establishing physical and administrative safeguards to reasonably safeguard PHI, in
compliance with 45 C.F.R. § 164.530(c).
46
168. Defendant breached its fiduciary duties to Plaintiffs and Class Members
by otherwise failing to safeguard Plaintiffs and Class Members’ Private Information.
169. As a direct and proximate result of Defendant’s breaches of its fiduciary
duties, Plaintiffs and Class Members have suffered and will suffer injury, including
but not limited to: (i) actual identity theft; (ii) the compromise, publication, and/or
theft of their Private Information; (iii) out-of-pocket expenses associated with the
prevention, detection, and recovery from identity theft and/or unauthorized use of
their Private Information; (iv) lost opportunity costs associated with effort expended
and the loss of productivity addressing and attempting to mitigate the actual and
future consequences of the Data Breach, including but not limited to efforts spent
researching how to prevent, detect, contest, and recover from identity theft; (v) the
continued risk to their Private Information, which remains in Defendant’s possession
and is subject to further unauthorized disclosures so long as Defendant fails to
undertake appropriate and adequate measures to protect the Private Information in
its continued possession; (vi) future costs in terms of time, effort, and money that
will be expended as result of the Data Breach for the remainder of the lives of
Plaintiffs and Class Members; and (vii) the diminished value of Defendant’s services
they received.
170. As a direct and proximate result of Defendant’s breaches of its fiduciary
duties, Plaintiffs and Class Members have suffered and will continue to suffer other
47
forms of injury and/or harm, and other economic and non-economic losses.
SEVENTH COUNT
Breach of Confidence
(On Behalf of Plaintiffs and All Class Members)
171. Plaintiffs re-allege and incorporate by reference Paragraphs 1 through
90 above as if fully set forth herein.
172. At all times during Plaintiffs and Class Members’ interactions with
Defendant, Defendant was fully aware of the confidential and sensitive nature of
Plaintiffs and Class Members’ Private Information that Plaintiffs and Class Members
provided to Defendant.
173. As alleged herein and above, Defendant’s relationship with Plaintiffs
and Class Members was governed by terms and expectations that Plaintiffs and Class
Members’ Private Information would be collected, stored, and protected in
confidence, and would not be disclosed the unauthorized third parties.
174. Plaintiffs and Class Members provided their respective Private
Information to Defendant with the explicit and implicit understandings that
Defendant would protect and not permit the Private Information to be disseminated
to any unauthorized parties.
175. Plaintiffs and Class Members also provided their Private Information
to Defendant with the explicit and implicit understandings that Defendant would
take precautions to protect that Private Information from unauthorized disclosure,
48
such as following basic principles of protecting its networks and data systems,
including employees’ email accounts.
176. Defendant voluntarily received in confidence Plaintiffs and Class
Members’ Private Information with the understanding that Private Information
would not be disclosed or disseminated to the public or any unauthorized third
parties.
177. Due to Defendant’s failure to prevent, detect, avoid the Data Breach
from occurring by, inter alia, following best information security practices to secure
Plaintiffs and Class Members’ Private Information, Plaintiffs and Class Members’
Private Information was disclosed and misappropriated to unauthorized third parties
beyond Plaintiffs and Class Members’ confidence, and without their express
permission.
178. As a direct and proximate cause of Defendant’s actions and/or
omissions, Plaintiffs and Class Members have suffered damages.
179. But for Defendant’s disclosure of Plaintiffs and Class Members’
Private Information in violation of the parties’ understanding of confidence, their
Private Information would not have been compromised, stolen, viewed, accessed,
and used by unauthorized third parties. Defendant’s Data Breach was the direct and
legal cause of the theft of Plaintiffs and Class Members’ Private Information, as well
as the resulting damages.
49
180. The injury and harm Plaintiffs and Class Members suffered was the
reasonably foreseeable result of Defendant’s unauthorized disclosure of Plaintiffs
and Class Members’ Private Information. Defendant knew its computer systems and
technologies for accepting and securing Plaintiffs and Class Members’ Private
Information had numerous security vulnerabilities.
181. As a direct and proximate result of Defendant’s breaches of confidence,
Plaintiffs and Class Members have suffered and will suffer injury, including but not
limited to: (i) actual identity theft; (ii) the compromise, publication, and/or theft of
their Private Information; (iii) out-of-pocket expenses associated with the
prevention, detection, and recovery from identity theft and/or unauthorized use of
their Private Information; (iv) lost opportunity costs associated with effort expended
and the loss of productivity addressing and attempting to mitigate the actual and
future consequences of the Data Breach, including but not limited to efforts spent
researching how to prevent, detect, contest, and recover from identity theft; (v) the
continued risk to their Private Information, which remains in Defendant’s possession
and is subject to further unauthorized disclosures so long as Defendant fails to
undertake appropriate and adequate measures to protect the Private Information in
its continued possession; (vi) future costs in terms of time, effort, and money that
will be expended as result of the Data Breach for the remainder of the lives of
50
Plaintiffs and Class Members; and (vii) the diminished value of Defendant’s services
they received .
182. As a direct and proximate result of Defendant’s breaches of its fiduciary
duties, Plaintiffs and Class Members have suffered and will continue to suffer other
forms of injury and/or harm, and other economic and non-economic losses.
PRAYER FOR RELIEF
WHEREFORE, Plaintiffs pray for judgment as follows:
a)
For an Order certifying this action as a Class action and appointing
Plaintiffs and their counsel to represent the Class;
b)
For equitable relief enjoining Defendant from engaging in the
wrongful conduct complained of herein pertaining to the misuse
and/or disclosure of Plaintiffs and Class Members’ Private
Information, and from refusing to issue prompt, complete and
accurate disclosures to Plaintiffs and Class Members;
c)
For equitable relief compelling Defendant to utilize appropriate
methods and policies with respect to consumer data collection,
storage, and safety, and to disclose with specificity the type of PII
and PHI (i.e., Private Information) compromised during the Data
Breach;
51
d)
For equitable relief requiring restitution and disgorgement of the
revenues wrongfully retained as a result of Defendant’s wrongful
conduct;
e)
For an award of actual damages, compensatory damages, and
nominal damages, in an amount to be determined, as allowable by
law;
f)
For an award of punitive damages, as allowable by law;
g)
For an award of attorneys’ fees and costs, and any other expense,
including expert witness fees;
h)
Pre- and post-judgment interest on any amounts awarded; and
i)
Such other and further relief as this court may deem just and proper.
JURY TRIAL DEMANDED
Plaintiffs demand a trial by jury on all claims so triable.
Dated: May 28, 2020
Respectfully submitted,
/s/ Shireen Hormozdi
Shireen Hormozdi
HORMOZDI LAW FIRM, LLC
1770 Indian Trial Lilburn Road, Suite 175
Norcross, GA 30093
Phone: (678) 395-7795
Fax: (866) 929-2434
[email protected]
52
MASON LIETZ & KLINGER LLP
Gary E. Mason (pro hac vice forthcoming)
David K. Lietz (pro hac vice forthcoming)
5101 Wisconsin Avenue NW, Suite 305
Washington, D.C. 20016
Phone: (202) 429-2290
Fax: (202) 429-2294
[email protected]
[email protected]
Gary M. Klinger (pro hac vice forthcoming)
MASON LIETZ & KLINGER LLP
227 W. Monroe Street, Suite 2100
Chicago, IL 60630
Phone: (847) 208-4585
Fax: (773) 496-8617
[email protected]
Attorneys for Plaintiffs and the Proposed
Class
53
| consumer fraud |
ckyYA4kBRpLueGJZq1wx | IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF NORTH CAROLINA
JENNIFER McCREARY, on
behalf of herself and all others
similarly situated,
Plaintiff,
Case No.
v.
FILTERS FAST LLC,
Defendant,
)
)
)
)
)
)
)
)
)
)
)
CLASS ACTION COMPLAINT
Plaintiff, Jennifer McCreary, individually and on behalf of the Classes defined below of
similarly situated persons, alleges the following against Filters Fast LLC (“Filters Fast” or
“Defendant”) based upon personal knowledge with respect to herself and on information and belief
derived from, among other things, investigation of counsel and review of public documents as to
all other matters:
JURISDICTION AND VENUE
1.
This Court has subject matter jurisdiction over this action under the Class Action
Fairness Act, 28 U.S.C. § 1332(d)(2). The amount in controversy exceeds $5 million exclusive of
interest and costs. Plaintiff and Defendant are citizens of different states. There are more than 100
putative class members.
2.
This Court has personal jurisdiction over Defendant because it is a domestic limited
liability company organized under the laws of the State of North Carolina, regularly conducts
business in North Carolina, has sufficient minimum contacts in North Carolina (including its
headquarters and principal place of business), and intentionally avails itself of this jurisdiction by
1
marketing and selling products and services in North Carolina via its ecommerce site
www.filtersfast.com.
3.
Venue is proper in this Court pursuant to 28 U.S.C. § 1391(a)(1) because a
substantial part of the events and omissions giving rise to this action occurred in this District,
including (upon information and belief) the data security incident involving Defendant’s website.
Defendant caused harm to Plaintiff and Class Members through its actions in this District.
THE DATA BREACH
4.
On August 25, 2020, the electronic data security company RapidSpike published a
blog post entitled “Filter Company Allowed 3.4 Million Customers to Shop on Hacked Site.” See
https://www.rapidspike.com/blog/filters-fast-allowed-3-4-million-customers-to-shop-on-hacked-
site/ (last accessed October 27, 2020).
5.
The blog post stated that “Filters Fast knowingly allowed approximately 3.4
Million customers to shop on their compromised website for over 5 months, in a year-long data
breach.” (hereinafter the “Data Breach”).
6.
Filters Fast customers across the United States have suffered real and imminent
harm as a direct consequence of Defendant’s conduct, which includes: (a) refusing to take adequate
and reasonable measures to ensure its data systems were protected; (b) refusing to take available
steps to prevent the breach from happening; (c) failing to disclose to its customers the material fact
that it did not have adequate computer systems and security practices to safeguard customers’
personal and financial information; and (d) failing to provide timely and adequate notice of the
data breach.
2
7.
As a result of the Data Breach, the personal information of approximately 3.4
million Filters Fast customers, including, but may not be limited to, payment card data (“PCD”),
has been exposed to criminals for misuse.
8.
The injuries suffered by Plaintiff and the proposed Classes as a direct result of the
Data Breach include, inter alia:
a.
Unauthorized charges on their payment card accounts;
b.
Theft of their personal and financial information;
c.
Costs associated with the detection and prevention of identity theft and
unauthorized use of their financial accounts;
d.
Loss of use of and access to their account funds and costs associated with
inability to obtain money from their accounts or being limited in the amount
of money they were permitted to obtain from their accounts, including
missed payments on bills and loans, late charges and fees, and adverse
effects on their credit including decreased credit scores and adverse credit
notations;
e.
Costs associated with time spent and the loss of productivity from taking
time to address and attempting to ameliorate, mitigate, and deal with the
actual and future consequences of the data breach, including finding
fraudulent charges, cancelling and reissuing cards, purchasing credit
monitoring and identity theft protection services, imposition of withdrawal
and purchase limits on compromised accounts, and the stress, nuisance and
annoyance of dealing with all issues resulting from the data breach;
3
f.
The imminent and certainly impending injury flowing from potential fraud
and identity theft posed by their personal information and PCD being placed
in the hands of criminals and already misused via the sale of Plaintiff’s and
Class Members’ information on the Internet black market;
g.
Damages to and diminution in value of their personal and financial
information entrusted to Filters Fast for the sole purpose of making
purchases from Filters Fast and with the mutual understanding that Filters
Fast would safeguard Plaintiff’s and Class Members’ data against theft and
not allow access to and misuse of their information by others;
h.
Money paid to Filters Fast during the period of the data breach in that
Plaintiff and Class Members would not have purchased from Filters Fast
had Defendant disclosed that it lacked adequate systems and procedures to
reasonably safeguard customers’ personal information and PCD and had
Filters Fast provided timely and accurate notice of the data breach;
i.
Continued risk to their personal information and PCD, which remains in the
possession of Filters Fast and which is subject to further breaches so long
as Filters Fast continues to fail to undertake appropriate and adequate
measures to protect Plaintiff’s and Class Members’ data in its possession.
9.
Examples of the harms to Filters Fast customers as a direct and foreseeable
consequence of its conduct include the experience of the representative Plaintiff, which is
described below.
4
PARTIES
10.
Plaintiff Jennifer McCreary is a resident of Hillsboro, Virginia. She is (and was
during the period of the data breach) a citizen of the Commonwealth of Virginia.
11.
Defendant Filters Fast is a domestic limited liability company organized under the
laws of the State of North Carolina, with a principle place of business at 5905 Stockbridge Drive,
Monroe, NC 28110-8106.
12.
On July 4, 2020, Plaintiff purchased replacement Maytag appliance water filters
from Defendant’s website, order number XXXX3926. See Email Confirmation of Purchase,
attached hereto as Exhibit A.
13.
Plaintiff used one of her credit cards to make this purchase.
14.
Subsequent to making this purchase, Plaintiff received a letter dated August 18,
2020 entitled Notice of Data Breach from the Defendant. See Notice of Data Breach, attached
hereto as Exhibit B.
15.
The Notice of Data Breach letter informed Plaintiff that unauthorized individuals
may have gained access to her name, shipping and billing address, and PCD (collectively, the
“Private Information”) that she used to make her purchase on Defendant’s website. See Exhibit
16.
Since her purchase on Defendant’s website, Plaintiff has received security alerts
that her personal information was released onto the Dark Web. She was forced to take time to put
a security freeze on all credit report companies. As a result, there were several extra steps required
when trying to get approved for credit with a lower interest rate. The obstacles were so great that
Plaintiff had to keep her higher interest rates rather than trying to resolve the issues preventing her
from applying for lower credit rates.
5
17.
Plaintiff would not have used her credit card to make purchases from the Filters
Fast website—indeed, she would not have shopped with Filters Fast at all during the period of the
data breach—had Filters Fast disclosed that it lacked adequate computer systems and data security
practices to safeguard customers’ personal and financial information from theft, and that it was
subject to an ongoing data breach at the time Plaintiff made her purchases. Filters Fast also failed
to provide Plaintiff with timely and accurate notice of the data breach.
18.
Plaintiff suffered actual injury from having her personal information and PCD
compromised and/or stolen as a result of the Data Breach.
19.
Plaintiff suffered actual injury and damages in paying money to and purchasing
products from Filters Fast during the data breach that she would not have paid or purchased had
Filters Fast disclosed that it lacked computer systems and data security practices adequate to
safeguard customers’ personal and financial information and had Filters Fast provided timely and
accurate notice of the Data Breach.
20.
Plaintiff suffered actual injury in the form of damages to and diminution in the
value of her personal and financial information—a form of intangible property that the Plaintiff
entrusted to Filters Fast for the purpose of making purchases at FiltersFast.com and which was
compromised in and as a result of the Data Breach.
21.
Plaintiff suffered imminent and impending injury arising from the substantially
increased risk of future fraud, identity theft and misuse posed by her personal and financial
information being placed in the hands of criminals who have already misused such information
stolen in the Data Breach via sale of Plaintiff’s and Class Members’ personal and financial
information on the Internet black market.
6
22.
Plaintiff suffered actual injury in the form of time spent dealing with fraud resulting
from the Data Breach and/or monitoring her accounts for fraud.
23.
Plaintiff suffered actual injury in the form of fraudulent charges and the loss of use
of funds while disputing such charges and additional damages resulting from such loss of use.
24.
Plaintiff has a continuing interest in ensuring that her private information, which
remains in the possession of Filters Fast, is protected and safeguarded from future breaches.
25.
Plaintiff was not reimbursed for the loss of use of, loss of access to, or restrictions
placed upon her accounts and the resulting loss of use of her own funds that occurred as a result
of the Data Breach.
STATEMENT OF FACTS
26.
FiltersFast.com sells a variety of home filtration products. The company is based
in North Carolina, USA, and according to SimilarWeb, the company averages approximately
574,190 website visitors each month.
27.
In a Notice of Data Breach sent to customers, the company explains that in late
February 2020, “Filters Fast was made aware of a possible data security incident affecting its e-
commerce website:”
What Happened
In late February 2020, we were informed of a possible data security
incident affecting our website. We immediately began investigating the
potential issue. Our investigation included hiring an outside, expert
forensics firm to analyze our systems and determine if there was a
breach of our security. On July 20, 2020, that investigation revealed that
attackers had succeeded in adding malicious code to our website on July
15, 2019, which allowed unauthorized individuals to capture certain
information during the checkout process. We removed that malicious
code on July 10, 2020, during an unrelated update of our website ending
the unauthorized access to our website.
7
What Information Was Involved?
On July 20, 2020, we confirmed the possibility that unauthorized
individuals may have gained access to your name, shipping and billing
address, and the payment card information used to make your purchase
on FiltersFast.com.
None of your other personal information was at risk of being impacted
during this incident.
28.
Despite knowledge of the data security incident, the company did not take its
website offline to investigate, and therefore customers who were unaware of any data security
issues were able to continue to shop on the compromised website.
29.
As one internet security researcher commented, “It is irresponsible for companies
to knowingly allow their customers to shop on a website that is compromised.”1
30.
Filters Fast commissioned an investigation into the incident, and the investigation
revealed on July 20, 2020 “…that attackers had succeeded in adding malicious code to the Filters
Fast website on July 15, 2019, which allowed unauthorized individuals to capture certain
information during the checkout process.”
31.
This means that any customer who purchased from the website between July 2019
and July 2020 most likely had their personal and credit card information stolen. Stolen information
included names, shipping and billing addresses, and payment card information.
32.
The malicious code was removed from the Filters Fast website on July 10, 2020,
“during an unrelated update of the website, ending the unauthorized access.”
33.
By the time the malicious code was removed, it is estimated that over 3.4 million
customers shopped on the Filters Fast site from February – July 2020, putting each of those
customers at risk of data theft (provided they made a purchase).
1 https://www.rapidspike.com/blog/filters-fast-allowed-3-4-million-customers-to-shop-on-
hacked-site/ (last accessed October 27, 2020).
8
34.
While it is unknown exactly how many customers this data breach has affected, in
a series of notification letters to various states’ Attorney Generals, Filters Fast states that they are
notifying approximately 26,093 individuals who reside in California, 755 individuals in North
Dakota, and 3,272 individuals in Iowa of the cyber-attack. Therefore, there are at the very least
30,000 victims in this attack.
35.
Filters Fast also substantially delayed providing notice of this data breach. Despite
finding out about the data security incident in late February 2020, and announcing the removal of
the malicious code in July 2020, notice was not sent to Filters Fast customers until August 14-18,
2020, a delay of either 5 ½ months or one month.
36.
While Filters Fast claims in its Notice of Data Breach that “we think it is unlikely
that the unauthorized individuals could use the information collected to steal your identity,” the
Plaintiff in this case already experienced substantial identity theft and financial fraud, and there
were multiple reports posted online of other Filters Fast customers noticing unauthorized
purchases on their credit cards.
37.
Filters Fast also claims in its Notice of Privacy Practices that it encrypts all payment
data. However, this contention is belied by the facts of this case – specifically the release of Filters
Fast customers’ unencrypted Private Information onto the Dark Web, including that of Plaintiff.
38.
In a debit or credit card purchase transaction, card data must flow through multiple
systems and parties to be processed. Generally, the cardholder presents a credit or debit card to an
e-commerce retailer (through an e-commerce website) to pay for merchandise. The card is then
“swiped” and information about the card and the purchase is stored in the retailer’s computers and
then transmitted to the acquirer or processor (i.e., the retailer’s bank). The acquirer relays the
transaction information to the payment card company, who then sends the information to the issuer
9
(i.e., cardholder’s bank). The issuer then notifies the payment card company of its decision to
authorize or reject the transaction. See graphic below:2
39.
There are two points in the payment process where sensitive cardholder data is at
risk of being exposed or stolen: pre-authorization when the merchant has captured a consumer’s
data and it is waiting to be sent to the acquirer; and post-authorization when cardholder data has
been sent back to the merchant with the authorization response from the acquirer, and it is placed
into some form of storage in the merchant’s servers.
2 Source: “Payments 101: Credit and Debit Card Payments,” a white paper by First Data, at:
https://www.firstdata.com/downloads/thought-leadership/payments101wp.pdf
(last
accessed
October 27, 2020).
10
40.
Encryption mitigates security weaknesses that exist when cardholder data has been
stored, but not yet authorized, by using algorithmic schemes to transform plain text information
into a non-readable format called “ciphertext.” By scrambling the payment card data the moment
it is “swiped,” hackers who steal the data are left with useless, unreadable text in the place of
payment card numbers accompanying the cardholder’s personal information stored in the retailer’s
computers.
41.
While Filters Fast claims that it encrypts all payment data, the financial fraud
suffered by Plaintiff and other customer demonstrates that Filters Fast chose not to invest in the
technology to encrypt payment card data (PCD) at point-of-sale to make its customers’ data more
secure; failed to install updates, patches, and malware protection or to install them in a timely
manner to protect against a data security breach; and/or failed to provide sufficient control
employee credentials and access to computer systems to prevent a security breach and/or theft of
42.
While Filters Fast purports to offer its customers a year of free credit monitoring
after the data breach, it provides a very short time for customers to sign up for credit monitoring
service – until November 14, 2020, or less than three (3) months after notices to some customers
were even sent (with notices being mailed beginning on August 14, 2020, and continuing until
August 18, 2020). Of course, the notices were also mailed during a time frame when the struggles
of the US Postal Service to provide timely delivery are well-publicized, and this further limits the
amount of time that customers have to sign up for the offered credit monitoring.
11
43.
In any event, credit monitoring is of no actual value to customers as a preventative
measure because it is reactionary—it does nothing to prevent fraud in the first instance. As reported
on Krebs:3
[Credit monitoring services] are basically PR vehicles for most of the
breached companies who offer credit report monitoring to potentially
compromised consumers… it does absolutely nothing to compensate for the
fact that a criminal stole credit card mag stripe account… [Credit
monitoring services] only give consumers limited help with a very small
percentage of the crimes that can be inflicted on them… [a]nd consumers
can get most of that limited help for free via the government website or free
monitoring from a breached entity where their data inevitably was
compromised.
44.
As reported in the Chicago Tribune, retailers offering credit monitoring services
and instructing their customers to check their credit reports in the wake of a data breach is “bad
advice” because “[p]ayment card breaches have nothing to do with credit reports.”4 As one security
expert noted, offering credit monitoring “seems to be the knee-jerk reaction” after a breach but
“makes no sense at all.”5 The biggest concern is that credit monitoring offers customers a false
sense of security but in reality offers little protection once the customer’s personal information is
exposed.6
45.
A study by the Identity Theft Resource Center shows the multitude of harms caused
by fraudulent use of personal information:7
3 “Are Credit Monitoring Services Worth It?” Krebs on Security, 03/19/14, at https://krebson
security.com/2014/03/are-credit-monitoring-services-worth-it/comment-page-1/ (last accessed
October 27, 2020).
4 “Why credit monitoring will not help you after a data breach,” Chicago Tribune, 08/15/14, at
https://www.chicagotribune.com/business/chi-why-credit-monitoring-will-not-help-you-after-a-data-breach-
20140815-story.html (last accessed October 27, 2020).
7 Source: “Credit Card and ID Theft Statistics” by Jason Steele, 10/24/17, at:
https://www.creditcards.com/credit-card-news/credit-card-security-id-theft-fraud-statistics-1276/ (last visited
October 27, 2020).
12
Plaintiff and the Class have experienced one or more of these harms as a result of the data breach.
46.
What’s more, theft of Private Information is also gravely serious. PII is a valuable
property right. Its value is axiomatic, considering the value of Big Data in corporate America
and the consequences of cyber thefts include heavy prison sentences. Even this obvious risk to
reward analysis illustrates beyond doubt that Private Information has considerable market value.
47.
Filters Fast’s offer of one year of credit monitoring to customers whose personal
information was exposed is also inadequate because it does not continue long enough. There may
be a time lag between when harm occurs versus when it is discovered, and also between when
personal information or PCD is stolen and when it is used. According to the U.S. Government
Accountability Office, which conducted a study regarding data breaches:
[L]aw enforcement officials told us that in some cases, stolen data may be held for
up to a year or more before being used to commit identity theft. Further, once stolen
data have been sold or posted on the Web, fraudulent use of that information may
13
continue for years. As a result, studies that attempt to measure the harm resulting
from data breaches cannot necessarily rule out all future harm.8
48.
Private Information and financial information are such valuable commodities to
identity thieves that once the information has been compromised, criminals often trade the
information on the “cyber black-market” for years.
49.
There is a strong probability that entire batches of stolen information have been
dumped on the black market or are yet to be dumped on the black market, meaning Plaintiff and
Class Members are at an increased risk of fraud and identity theft for many years into the future.
Thus, Plaintiff and Class Members must vigilantly monitor their financial and medical accounts
for many years to come.
50.
Plaintiff and members of the classes defined below have or will suffer actual injury
as a direct result of Filters Fast’s data breach. In addition to fraudulent charges and damage to their
credit, many victims spent substantial time and expense relating to:
a.
Finding fraudulent charges;
b.
Canceling and reissuing cards;
c.
Purchasing credit monitoring and identity theft prevention;
d.
Addressing their inability to withdraw funds linked to compromised
accounts;
e.
Removing withdrawal and purchase limits on compromised accounts;
f.
Taking trips to banks and waiting in line to obtain funds held in limited
accounts;
8 “Data Breaches Are Frequent, but Evidence of Resulting Identity Theft Is Limited; However, the
Full Extent Is Unknown” by GAO, June 2007, at: https://www.gao.gov/assets/270/262904.html
(last accessed October 27, 2020).
14
g.
Spending time on the phone with or at the financial institution to dispute
fraudulent charges;
h.
Resetting automatic billing instructions; and
i.
Paying late fees and declined payment fees imposed as a result of failed
automatic payments.
51.
Plaintiff and Class Members have been damaged by the compromise of their Private
Information in the Data Breach.
52.
Plaintiff’s PII was compromised as a direct and proximate result of the Data Breach.
53.
As a direct and proximate result of the Data Breach, Plaintiff’s PII was exfiltrated
and is in the hands of identity thieves and criminals, as evidenced by the identity theft and fraud
perpetrated against Plaintiff described above.
54.
As a direct and proximate result of Defendant’s conduct, Plaintiff and Class
Members have suffered actual identity theft and fraud.
55.
As a direct and proximate result of Filters Fast’s conduct, Plaintiff and the Class
have been placed at an imminent, immediate, and continuing increased risk of harm from fraud
and identity theft. Plaintiff now has to take the time and effort to mitigate the actual and potential
impact of the data breach on her everyday life, including placing “freezes” and “alerts” with credit
reporting agencies, contacting her financial institutions, closing or modifying financial accounts,
and closely reviewing and monitoring bank accounts and credit reports for unauthorized activity
for years to come.
56.
Moreover, Plaintiff and the Class have an interest in ensuring that their information,
which remains in the possession of Filters Fast is protected from further breaches by the
implementation of security measures and safeguards.
15
57.
Plaintiff and Class Members face substantial risk of being targeted for future
phishing, data intrusion, and other illegal schemes based on their Private Information as potential
fraudsters could use that information to target such schemes more effectively to Plaintiff and Class
Members.
58.
Plaintiff and Class Members may also incur out-of-pocket costs for protective
measures such as credit monitoring fees, credit report fees, credit freeze fees, and similar costs
directly or indirectly related to the Data Breach.
59.
Plaintiff and Class Members also suffered a loss of value of their Private
Information when it was acquired by cyber thieves in the Data Breach. Numerous courts have
recognized the propriety of loss of value damages in related cases.
60.
Plaintiff and Class Members were also damaged via benefit-of-the-bargain
damages. The implied contractual bargain entered into between Plaintiff and Filters Fast included
Defendant’s contractual obligation to provide adequate data security, which Defendant failed to
provide. Thus, Plaintiff and the Class Members did not get what they paid for.
61.
Plaintiff and Class Members have spent and will continue to spend significant
amounts of time to monitor their financial and medical accounts and records for misuse.
62.
Plaintiff and the Class have suffered, and continue to suffer, economic damages
and other actual harm for which they are entitled to compensation, including:
a.
Trespass, damage to and theft of their personal property including personal
information and PCD;
b.
Improper disclosure of their personal information and PCD property;
c.
The imminent and certainly impending injury flowing from potential fraud
and identity theft posed by customers’ personal information and PCD being
16
placed in the hands of criminals and having been already misused via the
sale of such information on the Internet black market;
d.
Damages flowing from Filters Fast’s untimely and inadequate notification
of the data breach;
e.
Loss of privacy suffered as a result of the data breach;
f.
Ascertainable losses in the form of out-of-pocket expenses and the value of
their time reasonably incurred to remedy or mitigate the effects of the data
breach;
g.
Ascertainable losses in the form of deprivation of the value of customers’
personal information for which there is a well-established and quantifiable
national and international market; and
h.
The loss of use of and access to their account funds and costs associated
with inability to obtain money from their accounts or being limited in the
amount of money customers were permitted to obtain from their accounts.
63.
Further, as a result of Defendant’s conduct, Plaintiff and Class Members are forced
to live with the anxiety that their Private Information may be disclosed to the entire world, thereby
subjecting them to embarrassment and depriving them of any right to privacy whatsoever.
64.
As a direct and proximate result of Defendant’s actions and inactions, Plaintiff and
Class Members have suffered a loss of privacy and are at an imminent and increased risk of future
65.
The substantial delay in providing notice of the Data Breach, and continuing to
operate the compromised e-commerce website even after discovery of the malware infecting that
site, deprived Plaintiff and the Class Members of the ability to promptly mitigate potential adverse
17
consequences resulting from the Data Breach. As a result of Defendant’s delay in detecting and
notifying consumers of the Data Breach, the risk of fraud for Plaintiff and Class Members was and
has been driven even higher.
CLASS ALLEGATIONS
66.
Plaintiff brings this action on behalf of herself and on behalf of all other persons
similarly situated (“the Class”).
67.
Plaintiff proposes the following Class definitions, subject to amendment as
appropriate:
Nationwide Class:
All residents of the United States whose personal information was compromised as a result
of the Data Breach first disclosed by Filters Fast in August 2020.
Virginia Subclass:
All residents of Virginia whose personal information was compromised as a result of the
Data Breach first disclosed by Filters Fast in August 2020.
68.
Excluded from each of the above Classes are Defendant and its parents or
subsidiaries, any entities in which it has a controlling interest, as well as its officers, directors,
affiliates, legal representatives, heirs, predecessors, successors, and assigns. Also excluded are any
Judge to whom this case is assigned as well as his or her judicial staff and immediate family
members.
69.
Each of the proposed classes meet the criteria for certification under Fed. R. Civ.
P. 23(a), (b)(2), and (b)(3).
70.
Numerosity. The Members of the Class are so numerous that joinder of all of them
is impracticable. While the exact number of Class Members is unknown to Plaintiff at this time,
18
based on information and belief, the Class consists of approximately 3.4 million customers of
Filters Fast whose data was compromised in the Data Breach.
71.
Commonality. There are questions of law and fact common to the Class, which
predominate over any questions affecting only individual Class Members. These common
questions of law and fact include, without limitation:
a.
Whether Filters Fast engaged in the conduct alleged herein;
b.
Whether Filters Fast’s conduct constituted Deceptive Trade Practices (as
defined below) actionable under the applicable consumer protection laws;
c.
Whether Filters Fast had a legal duty to adequately protect Plaintiff’s and
Class Members’ personal information;
d.
Whether Filters Fast breached its legal duty by failing to adequately protect
Plaintiff’s and Class Members’ personal information;
e.
Whether Filters Fast had a legal duty to provide timely and accurate notice
of the data breach to Plaintiff and Class Members;
f.
Whether Filters Fast breached its duty to provide timely and accurate notice
of the data breach to Plaintiff and Class Members;
g.
Whether and when Filters Fast knew or should have known that Plaintiff’s
and Class Members’ personal information stored on its computer systems
was vulnerable to attack;
h.
Whether Plaintiff and Class Members are entitled to recover actual damages
and/or statutory damages; and
19
i.
Whether Plaintiff and Class Members are entitled to equitable relief,
including injunctive relief, restitution, disgorgement, and/or the
establishment of a constructive trust.
72.
Typicality. Plaintiff’s claims are typical of those of other Class Members because
Plaintiff’s Private Information, like that of every other Class Member, was compromised in the
Data Breach.
73.
Adequacy of Representation. Plaintiff will fairly and adequately represent and
protect the interests of the Members of the Class. Plaintiff’s Counsel are competent and
experienced in litigating class actions, including data breach class actions.
74.
Predominance. Defendant has engaged in a common course of conduct toward
Plaintiff and Class Members, in that all the Plaintiff and Class Members’ Private Information was
stored on the same computer systems and unlawfully accessed in the same way. The common
issues arising from Defendant’s conduct affecting Class Members set out above predominate over
any individualized issues. Adjudication of these common issues in a single action has important
and desirable advantages of judicial economy.
75.
Superiority. A class action is superior to other available methods for the fair and
efficient adjudication of the controversy. Class treatment of common questions of law and fact is
superior to multiple individual actions or piecemeal litigation. Absent a class action, most Class
Members would likely find that the cost of litigating their individual claims is prohibitively high
and would therefore have no effective remedy. The prosecution of separate actions by individual
Class Members would create a risk of inconsistent or varying adjudications with respect to
individual Class Members, which would establish incompatible standards of conduct for
Defendant. In contrast, the conduct of this action as a class action presents far fewer management
20
difficulties, conserves judicial resources and the parties’ resources, and protects the rights of each
Class Member.
76.
Class certification also is appropriate under Fed. R. Civ. P. 23(b)(2). Filters Fast
has acted or has refused to act on grounds generally applicable to the Class, so that final injunctive
relief or corresponding declaratory relief is appropriate as to the Class as a whole.
77.
Finally, all members of the purposed Classes are readily ascertainable. Filters Fast
has access to addresses and other contact information for millions of members of the Classes,
which can be used to identify Class Members.
COUNT I
VIOLATION OF NORTH CAROLINA
UNFAIR AND DECEPTIVE TRADE PRACTICES ACT
(on behalf of Plaintiff and the Nationwide class)
78.
Plaintiff realleges, as if fully set forth, the allegations of the preceding paragraphs.
79.
Plaintiff and members of the Nationwide Class (the “Class” for purposes of this
claim) are consumers who used their payment cards to purchase products or services from Filters
Fast primarily for personal, family, or household purposes.
80.
Filters Fast is headquartered and engaged in business in North Carolina. Filters
Fast’s response to, and corporate decisions surrounding data security and its response to the data
breach were made from and in North Carolina.
81.
North Carolina, which seeks to protect the rights and interests of North Carolinians
and others against a company doing business in North Carolina, has an interest in the claims of
Plaintiff and the Class and is intimately concerned with the claims and outcome of this litigation.
Accordingly, Plaintiff and the Class assert claims under the North Carolina Unfair and Deceptive
Trade Practices Act (“UDTPA”), N.C. Gen. Stat. § 75-1.1 et seq.
82.
Plaintiff and the Class entrusted Filters Fast with their personal information.
21
83.
As alleged herein this Complaint, Filters Fast engaged in unfair or deceptive acts
or practices in the conduct of consumer transactions, including the following, in violation of the
UDTPA:
a.
Failure to maintain the security of payment card information;
b.
Failure to maintain adequate computer systems and data security practices
to safeguard payment card information and other personal information;
c.
Failure to disclose that its computer systems and data security practices
were inadequate to safeguard payment card information and other personal
information from theft;
d.
Continued acceptance of payment card and storage of payment card and
other personal information after Filters Fast knew or should have known of
the security vulnerabilities of the systems that were exploited in the data
breach; and
e.
Allowing unauthorized persons to have access to and make unauthorized
charges to its customers’ payment card accounts.
84.
Filters Fast knew or should have known that its computer systems and data security
practices were inadequate to safeguard the personal information of Plaintiff and Class Members,
deter hackers, and detect a breach within a reasonable time, and that the risk of a data breach was
highly likely.
85.
As a direct and proximate result of Filters Fast’s violation of the UDTPA, Plaintiff
and Class Members suffered damages including, but not limited to: damages arising from the
unauthorized charges on their debit or credit cards or on cards that were fraudulently obtained
through the use of the personal information of Plaintiff and the Class; damages arising from
22
Plaintiff’s inability to use their debit or credit cards or accounts because those cards or accounts
were cancelled, suspended, or otherwise rendered unusable as a result of the data breach and/or
false or fraudulent charges stemming from the data breach, including but not limited to late fees
charges; damages from lost time and effort to mitigate the actual and potential impact of the data
breach on their lives including, inter alia, contacting their financial institutions to dispute
fraudulent charges, closing or modifying financial accounts, closely reviewing and monitoring
their accounts for unauthorized activity, and other damages from the exposure of their personal
information, which may take months if not years to discover and detect. The nature of other forms
of economic damage and injury is certainly impending.
86.
Also as a direct result of Filters Fast’s knowing violation of the UDTPA, Plaintiff
and the Class are entitled to damages as well as injunctive relief, including, but not limited to:
a.
Ordering that Filters Fast engage third-party security auditors/penetration
testers as well as internal security personnel to conduct testing, including
simulated attacks, penetration tests, and audits on its systems on a periodic
basis, and ordering Filters Fast to promptly correct any problems or issues
detected by such third-party security auditors;
b.
Ordering that Filters Fast engage third-party security auditors and internal
personnel to run automated security monitoring;
c.
Ordering that Filters Fast audit, test, and train its security personnel
regarding any new or modified procedures;
d.
Ordering that Filters Fast segment customer data by, among other things,
creating firewalls and access controls so that if one area of Filters Fast is
23
compromised, hackers cannot gain access to other portions of Filters Fast’s
systems;
e.
Ordering that Filters Fast purge, delete, and destroy in a reasonably secure
manner customer data not necessary for its provisions of services;
f.
Ordering that Filters Fast conduct regular database scanning and securing
checks;
g.
Ordering that Filters Fast routinely and continually conduct internal training
and education to inform internal security personnel how to identify and
contain a breach when it occurs and what to do in response to a breach, and
h.
Ordering Filters Fast to meaningfully educate its customers about the threats
they face as a result of the loss of personal information to third parties, as
well as the steps its customers must take to protect themselves.
87.
Plaintiff and the Class are entitled to a judgment against Filters Fast for actual and
consequential damages, treble damages and attorneys’ fees pursuant to the OCPA, costs, and such
other further relief as the Court deems just and proper.
COUNT II
NEGLIGENCE
(on behalf of Plaintiff and the Nationwide class, or,
alternatively, Plaintiff and the Virginia subclass)
88.
Plaintiff realleges, as if fully set forth, the allegations of the preceding paragraphs.
89.
Filters Fast solicited, gathered, and stored personal information, including PCD, of
Plaintiff and the Nationwide Negligence Class or, alternatively, the Virginia Negligence Subclass
(collectively, the “Class” as used in this Count) to facilitate sales transactions.
90.
Filters Fast knew, or should have known, of the risks inherent in collecting and
storing the personal information of Plaintiff and the Class Members and the importance of
24
adequate security. Filters Fast received warnings that hackers routinely attempted to access
personal information, and PCD in particular, without authorization. Filters Fast also knew about
numerous, well-publicized data breaches by other national retailers.
91.
Filters Fast owed duties of care to Plaintiff and the Class Members whose personal
information was entrusted to it. Filters Fast’s duties included the following:
a.
To exercise reasonable care in obtaining, retaining, securing, safeguarding,
deleting and protecting personal information and PCD in its possession;
b.
To protect customers’ personal information and PCD using reasonable and
adequate security procedures and systems that are compliant with the PCI-
DSS standards and consistent with industry-standard practices;
c.
To implement processes to quickly detect a data breach and to timely act on
warnings about data breaches, and
d.
To promptly notify Plaintiff and Class Members of the data breach.
92.
By collecting and storing this data in its computer property, and using it for
commercial gain, Defendant had a duty of care to use reasonable means to secure and safeguard
its computer property—and Plaintiff and Class Members’ Private Information held within it—to
prevent disclosure of the Private Information, and to safeguard the Private Information from theft.
Defendant’s duty included a responsibility to implement processes by which it could detect a
breach of its security systems in a reasonably expeditious period of time and to give prompt notice
to those affected in the case of a data breach.
93.
Because Filters Fast knew that a breach of its systems would damage millions of
its customers, including Plaintiff and Class Members, it had a duty to adequately protect their
personal information.
25
94.
Filters Fast owed a duty of care not to subject Plaintiff and the Class Members to
an unreasonable risk of harm because they were foreseeable and probable victims of any
inadequate security practices.
95.
According to North Carolina law, Filters Fast had a duty to implement and maintain
reasonable security procedures and practices to safeguard Plaintiff’s and Class Members’ personal
information. See N.C. Gen. Stat. § 75–60 et seq.
96.
Filters Fast knew, or should have known, that its computer systems did not
adequately safeguard the personal information of Plaintiff and the Class Members.
97.
Filters Fast breached its duties of care by failing to provide fair, reasonable, or
adequate computer systems and data security practices to safeguard the personal information of
Plaintiff and the Class Members.
98.
Filters Fast breached its duties of care by failing to provide prompt notice of the
data breach to the persons whose personal information was compromised.
99.
Filters Fast acted with reckless disregard for the security of the personal
information of Plaintiff and the Class Members because Filters Fast knew or should have known
that its computer systems and data security practices were not adequate to safeguard the personal
information that that it collected and stored, which hackers were attempting to access.
100.
Filters Fast acted with reckless disregard for the rights of Plaintiff and the Class
Members by failing to provide prompt and adequate notice of the data breach so that they could
take measures to protect themselves from damages caused by the fraudulent use the personal
information compromised in the data breach.
101.
Filters Fast had a special relationship with Plaintiff and the Class Members.
Plaintiff’s and the Class Members’ willingness to entrust Filters Fast with their personal
26
information was predicated on the understanding that Filters Fast would take adequate security
precautions. Moreover, only Filters Fast had the ability to protect its systems (and the personal
information that it stored on them) from attack.
102.
Filters Fast own conduct also created a foreseeable risk of harm to Plaintiff and
Class Members and their personal information. Filters Fast’s misconduct included failing to:
a.
Secure its e-commerce website;
b.
Secure access to its servers;
c.
Comply with industry standard security practices;
d.
Follow the PCI-DSS standards;
e.
Encrypt PCD at the point-of-sale and during transit;
f.
Employ adequate network segmentation;
g.
Implement adequate system and event monitoring;
h.
Utilize modern payment systems that provided more security against
intrusion;
i.
Install updates and patches in a timely manner, and
j.
Implement the systems, policies, and procedures necessary to prevent this
type of data breach.
103.
Filters Fast also had independent duties under state laws that required it to
reasonably safeguard Plaintiff’s and the Class Members’ personal information and promptly notify
them about the data breach.
104.
Filters Fast breached the duties it owed to Consumer Plaintiff and Class Members
in numerous ways, including:
27
a.
By creating a foreseeable risk of harm through the misconduct previously
described;
b.
By failing to implement adequate security systems, protocols and practices
sufficient to protect their personal information both before and after
learning of the data breach;
c.
By failing to comply with the minimum industry data security standards,
including the PCI-DSS, during the period of the data breach, and
d.
By failing to timely and accurately disclose that the personal information of
Plaintiff and the Class had been improperly acquired or accessed.
105.
But for Filters Fast’s wrongful and negligent breach of the duties it owed Plaintiff
and the Class Members, their personal and financial information either would not have been
compromised or they would have been able to prevent some or all of their damages.
106.
As a direct and proximate result of Filters Fast’s negligent conduct, Plaintiff and
the Class Members have suffered damages and are at imminent risk of further harm.
107.
The injury and harm that Plaintiff and Class Members suffered (as alleged above)
was reasonably foreseeable.
108.
The injury and harm that Consumer Plaintiff and Class Members suffered (as
alleged above) was the direct and proximate result of Filters Fast’s negligent conduct.
109.
Plaintiff and Class Members have suffered injury and are entitled to damages in an
amount to be proven at trial.
COUNT III
NEGLIGENCE PER SE
(on behalf of Plaintiff and the Nationwide class or,
alternatively, Plaintiff and the Virginia subclass)
110.
Plaintiff realleges, as if fully set forth, the allegations of the preceding paragraphs.
28
111.
Pursuant to Section 5 of the Federal Trade Commission Act (“FTCA”), 15 U.S.C.
§ 45, Filters Fast had a duty to provide fair and adequate computer systems and data security to
safeguard the personal information, including PCD, of Plaintiff and the Nationwide Class (“the
Class,” for purposes of this count).
112.
The FTCA prohibits “unfair . . . practices in or affecting commerce,” including, as
interpreted and enforced by the FTC, the unfair act or practice by businesses, such as Filters Fast,
of failing to use reasonable measures to protect personal information. The FTC publications and
orders described above also form part of the basis of Filters Fast’s duty in this regard.
113.
Filters Fast solicited, gathered, and stored personal information, including PCD, of
Plaintiff and the Nationwide Negligence Per Se Class or, alternatively, the Virginia Negligence
Per Se Subclass (collectively, the “Class” as used in this Count) to facilitate sales transactions that
affect commerce.
114.
Filters Fast violated the FTCA by failing to use reasonable measures to protect
personal information of Plaintiff and the Class and not complying with applicable industry
standards, as described herein.
115.
Filters Fast’s violation of the FTCA constitutes negligence per se.
116.
Plaintiff and the Class are within the class of persons that the FTC Act was intended
to protect.
117.
The harm that occurred as a result of the Data Breach is the type of harm the FTCA
was intended to guard against. The FTC has pursued enforcement actions against businesses,
which, as a result of their failure to employ reasonable data security measures and avoid unfair and
deceptive practices, caused the same harm as that suffered by Plaintiff and the Class.
29
118.
As a direct and proximate result of Filters Fast’s negligence per se, Plaintiff and
the Class have suffered, and continue to suffer, injuries damages arising from their inability to use
their debit or credit cards because those cards were cancelled, suspended, or otherwise rendered
unusable as a result of the data breach and/or false or fraudulent charges stemming from the data
breach, including but not limited to late fees charges; damages from lost time and effort to mitigate
the actual and potential impact of the data breach on their lives including, inter alia, by contacting
their financial institutions to place to dispute fraudulent charges, closing or modifying financial
accounts, closely reviewing and monitoring their accounts for unauthorized activity which is
certainly impending.
119.
Filters Fast breached its duties to Plaintiff and the Class under these states’ laws by
failing to provide fair, reasonable, or adequate computer systems and data security practices to
safeguard Plaintiff’s and the Class’ personal information.
120.
Filters Fast’s violation of the FTCA constitutes negligence per se.
121.
But for Defendant’s wrongful and negligent breach of its duties owed to Plaintiff
and Class Members, Plaintiff and Class Members would not have been injured.
122.
The injury and harm suffered by Plaintiff and Class Members was the reasonably
foreseeable result of Defendant’s breach of its duties. Defendant knew or should have known that
it was failing to meet its duties, and that Defendant’s breach would cause Plaintiff and Class
Members to experience the foreseeable harms associated with the exposure of their Private
Information.
123.
As a direct and proximate result of Defendant’s negligent conduct, Plaintiff and
Class Members have suffered injury and are entitled to compensatory and consequential damages
in an amount to be proven at trial.
30
COUNT IV
BREACH OF IMPLIED CONTRACT
(on behalf of Plaintiff and the Nationwide class, or,
alternatively, Plaintiff and the Virginia subclass)
124.
Plaintiff realleges, as if fully set forth, the allegations of the preceding paragraphs.
125.
When Plaintiff and the members of the Nationwide class or, alternatively, the
members of the Virginia Subclass (collectively, the “Class” as used in this Count), provided their
personal information to Filters Fast in making purchases on the FiltersFast.com website, they
entered into implied contracts by which Filters Fast agreed to protect their personal information
and timely notify them in the event of a data breach.
126.
Filters Fast invited its customers, including Plaintiff and the Class, to make
purchases on the FiltersFast.com website using payment cards in order to increase sales by making
purchases more convenient.
127.
An implicit part of the offer was that Filters Fast would safeguard the personal
information using reasonable or industry-standard means and would timely notify Plaintiff and the
Class in the event of a data breach.
128.
Filters Fast also affirmatively represented that it protected the Private Information
of Plaintiff and the Class in several ways:
Security
We take precautions to protect your information. When you submit
sensitive information via the website, your information is protected
both online and offline.
Sensitive information, such as credit card data, that is collected is
encrypted and transmitted to us in a secure way. You can verify this
by looking for a closed lock icon at the bottom of your web browser
or looking for "https" at the beginning of the address of the web page.
While we use encryption to protect sensitive information transmitted
online, we also protect your Information offline. Only employees
31
who need the information to perform a specific job (for example,
billing or customer service) are granted access to personally
identifiable information. The computers/servers in which we store
personally identifiable information are kept in a secure environment
here in the USA.9
129.
Based on the implicit understanding and also on Filters Fast’s representations,
Plaintiff and the Class accepted the offers and provided Filters Fast with their personal information
by using their payment cards in connection with purchases on the FiltersFast.com website during
the period of the data breach.
130.
Filters Fast manifested its intent to enter into an implied contract that included a
contractual obligation to reasonably protect Plaintiff’s and Class Members’ Private Information
through, among other things, its Privacy Notice.
131.
In entering into such implied contracts, Plaintiff and Class Members reasonably
believed and expected that Defendant’s data security practices complied with relevant laws and
regulations and were consistent with industry standards.
132.
Plaintiff and Class Members would not have provided their personal information to
Filters Fast had they known that Filters Fast would not safeguard their personal information as
promised or provide timely notice of a data breach.
133.
Plaintiff and Class Members fully performed their obligations under the implied
contracts with Filters Fast.
134.
Filters Fast breached the implied contracts by failing to safeguard Plaintiff’s and
Class Members’ personal information and failing to provide them with timely and accurate notice
when their personal information was compromised in the data breach.
9 https://www.filtersfast.com/termsAndCond.asp (last accessed October 27, 2020).
32
135.
The losses and damages Plaintiff and Class Members sustained (as described
above) were the direct and proximate result of Filters Fast’s breaches of its implied contracts with
COUNT V
UNJUST ENRICHMENT
(on behalf of Plaintiff and the Nationwide class, or,
alternatively, Plaintiff and the Virginia subclass)
136.
Plaintiff realleges, as if fully set forth, the allegations of the preceding paragraphs.
137.
This count is plead in the alternative to Count IV above.
138.
Plaintiff and members of the Nationwide class or, alternatively, the members of the
Virginia Subclass (collectively, the “Class” as used in this Count), conferred a monetary benefit
on Filters Fast. Specifically, they made purchases from Filters Fast and provided Filters Fast with
their personal information by using their payment cards for the purchases that they would not have
made if they had known that Filters Fast did not provide adequate protection of their personal
information.
139.
Filters Fast knew that Plaintiff and the Class conferred a benefit on FiltersFast.com.
Filters Fast profited from their purchases and used their personal information for its own business
purposes.
140.
Filters Fast failed to secure the Plaintiff’s and Class Members’ personal
information, and therefore was unjustly enriched by the purchases made by Plaintiff and the Class
that they would not have made had they known that Filters Fast did not keep their personal
information secure.
141.
Plaintiff and the Class have no adequate remedy at law.
142.
Under the circumstances, it would be unjust for Filters Fast to be permitted to retain
any of the benefits that Plaintiff and Class Members of the Class conferred on it.
33
143.
Filters Fast should be compelled to disgorge into a common fund or constructive
trust for the benefit of Plaintiff and Class Members proceeds that it unjustly received from them.
In the alternative, Filters Fast should be compelled to refund the amounts that Plaintiff and the
Class overpaid.
COUNT VI
DECLARATORY JUDGMENT
(on behalf of Plaintiff and the Nationwide class or,
alternatively, Plaintiff and the Virginia subclass)
144.
Plaintiff realleges, as if fully set forth, the allegations of the preceding paragraphs.
145.
Plaintiff and members of the Nationwide Class and Virginia Subclass (“the Class”
for purposes of this count) entered into an implied contract that required Filters Fast to provide
adequate security for the personal information it collected from their payment card transactions.
146.
Filters Fast owes duties of care to Plaintiff and the members of the Class that require
it to adequately secure personal information.
147.
Filters Fast still possesses personal information regarding the Plaintiff’s and the
Class Members.
148.
Since the data breach, Filters Fast announced no changes to its data security to fix
the vulnerabilities in its systems which permitted the intrusions and to prevent further attacks, and
no changes to Filters Fast’s data security were mentioned in the Notice of Data Breach sent to
Plaintiff and Class Members.
149.
Accordingly, Filters Fast still has not satisfied its contractual obligations and legal
duties to Plaintiff and the Class. In fact, now that Filters Fast’s lax approach towards information
security has become public, the personal information in Filters Fast’s possession is more
vulnerable than it was previously.
34
150.
Actual harm has arisen in the wake of Filters Fast’s data breach regarding its
contractual obligations and duties of care to provide security measures to Plaintiff and the members
of the Class. Further, Plaintiff and the members of the Class are at risk of additional or further
harm due to the exposure of their personal information and Filters Fast’s failure to address the
security failings that lead to such exposure.
151.
There is no reason to believe that Filters Fast’s security measures are any more
adequate than they were before the breach to meet Filters Fast’s contractual obligations and legal
152.
Plaintiff, therefore, seeks a declaration (1) that Filters Fast’s existing security
measures do not comply with its contractual obligations and duties of care to provide adequate
security, and (2) that to comply with its contractual obligations and duties of care, Filters Fast must
implement and maintain reasonable security measures, including, but not limited to:
a.
Ordering that Filters Fast engage third-party security auditors/penetration
testers as well as internal security personnel to conduct testing, including
simulated attacks, penetration tests, and audits on its systems on a periodic
basis, and ordering Filters Fast to promptly correct any problems or issues
detected by such third-party security auditors;
b.
Ordering that Filters Fast engage third-party security auditors and internal
personnel to run automated security monitoring;
c.
Ordering that Filters Fast audit, test, and train its security personnel
regarding any new or modified procedures;
d.
Ordering that Filters Fast segment customer data by, among other things,
creating firewalls and access controls so that if one area of Filters Fast is
35
compromised, hackers cannot gain access to other portions of Filters Fast’s
systems;
e.
Ordering that Filters Fast purge, delete, and destroy in a reasonably secure
manner customer data not necessary for its provisions of services;
f.
Ordering that Filters Fast conduct regular database scanning and securing
checks;
g.
Ordering that Filters Fast routinely and continually conduct internal training
and education to inform internal security personnel how to identify and
contain a breach when it occurs and what to do in response to a breach, and
h.
Ordering Filters Fast to meaningfully educate its customers about the threats
they face as a result of the loss of personal information to third parties, as
well as the steps its customers must take to protect themselves.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff, on behalf of herself and the Classes described above, seeks the
following relief:
a.
An order certifying this action as a class action under Fed. R. Civ. P. 23,
defining the classes as requested herein, appointing the undersigned as
Class counsel, and finding that Plaintiff is a proper representative of the
Classes requested herein;
b.
Judgment in favor of Plaintiff and the Class awarding them appropriate
monetary relief, including actual damages, statutory damages, equitable
relief, restitution, disgorgement, attorney’s fees, statutory costs, and such
other and further relief as is just and proper;
36
c.
An order providing injunctive and other equitable relief as necessary to
protect the interests of the Class as requested herein;
d.
An order requiring Filters Fast to pay the costs involved in notifying the
Class Members about the judgment and administering the claims process;
e.
A judgment in favor of Plaintiff and the Classes awarding them pre-
judgment and post judgment interest, reasonable attorneys’ fees, costs and
expenses as allowable by law, and
f.
An award of such other and further relief as this Court may deem just and
proper.
DEMAND FOR JURY TRIAL
Plaintiff demands a trial by jury on all triable issues.
DATED: October 27, 2020
Respectfully submitted,
/s/ Martin A. Ramey
Joel Rhine, NC SBN 16028
Martin A. Ramey, NC SBN 33617
RHINE LAW FIRM, P.C.
1612 Military Cutoff Rd., Suite 300
Wilmington, NC 28403
Tel.: (910) 772-9960
Fax: (910) 772-9062
[email protected]
[email protected]
Gary E. Mason (pro hac vice forthcoming)
DC Bar. No. 418073
David Lietz (pro hac vice forthcoming)
DC Bar No. 430557
MASON LIETZ & KLINGER LLP
5101 Wisconsin Avenue NW, Suite 305
Washington, DC 20016
Tel.: (202) 640-1160
[email protected]
[email protected]
Attorneys for Plaintiffs and the Proposed Class
37
| securities |
ffInE4cBD5gMZwczG9_T | UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF NORTH CAROLINA
DURHAM DIVISION
Case No. 1:20-cv-470
LUCIA BINOTTI, individually and on
behalf of all others similarly situated,
Plaintiff
v.
COMPLAINT - CLASS ACTION
DUKE UNIVERSITY
DEMAND FOR JURY TRIAL
Defendant.
TABLE OF CONTENTS
Page
I.
SUMMARY OF THE ACTION ..........................................................................................1
II.
JURISDICTION AND VENUE ..........................................................................................2
III.
THE PARTIES.....................................................................................................................3
A.
Plaintiff .................................................................................................................3
B.
Defendant .................................................................................................................3
C.
Unnamed Co-Conspirators .......................................................................................3
IV.
CLASS ACTION ALLEGATIONS ....................................................................................3
V.
FACTUAL ALLEGATIONS ..............................................................................................5
A.
Trade and Commerce ...............................................................................................5
B.
Competition For Academic Faculty Between Duke and UNC ................................5
C.
Duke And UNC Had A Decades-Long Understanding Not To Compete
For Each Other’s Faculty .........................................................................................9
D.
Duke and UNC Concealed The No-Poach Understanding From the Class,
Including Plaintiff ..................................................................................................10
FIRST CLAIM FOR RELIEF .......................................................................................................11
SECOND CLAIM FOR RELIEF ..................................................................................................13
PRAYER FOR RELIEF ................................................................................................................14
JURY DEMAND ...........................................................................................................................15
Lucia Binotti, individually and on behalf of a class of similarly situated
individuals, hereby states and alleges the following against Defendant Duke University
(“Duke”).
I.
SUMMARY OF THE ACTION
1.
This class action challenges an illegal understanding between Duke and the
University of North Carolina, Chapel Hill (“UNC”), to suppress competition for each
other’s faculty (the “No-Poach Understanding”). The No-Poach Understanding covered
all faculty across the two universities. Duke and UNC first reached this understanding
long ago, no later than 1974. Senior administrators of both institutions periodically
reaffirmed and policed the understanding throughout the subsequent decades. The
express purpose of the No-Poach Understanding was to suppress the pay of Duke and
UNC faculty.
2.
The No-Poach Understanding continued until no later than February 5,
2018, the effective date of the settlement reached between a class of medical faculty and
UNC, the University of North Carolina School of Medicine, the University of North
Carolina Health Care System, and Dr. William L. Roper in Seaman v. Duke University, et
al., 15-CV-462-CCE-JLW (M.D.N.C.) (“Seaman”). In that settlement, UNC agreed to a
Consent Decree prohibiting UNC from participating in the No-Poach Understanding or
anything like it, and requiring UNC to implement a variety of safeguards to ensure that
UNC complied. That Consent Decree was buttressed by a second settlement between the
medical faculty class and Duke and Duke University Health System, whereby Duke also
agreed not to participate in the No-Poach Understanding or anything like it, and to
undertake similar steps to ensure compliance. The Duke settlement also included a
robust role for the United States Department of Justice to ensure that the No-Poach
Understanding ended and would not be reinstated.
3.
The Duke Seaman settlement released claims of faculty with an academic
appointment at the Duke or UNC Schools of Medicine, who were employed by either
institution from January 1, 2012 through June 4, 2019. Neither the Duke nor UNC
Seaman settlements released the claims of the alleged class in this action against Duke.
The purpose of this action is to seek damages on behalf of injured Duke and UNC faculty
who are not members of the Seaman settlement class.
4.
The purpose of the Seaman litigation was to pursue claims of a class of
medical faculty. In the course of that case, evidence of a much broader understanding
between Duke and UNC came to light, and was made public for the first time on August
25, 2017, when filings related to class certification were added to the public docket. Prior
to that date, members of the class alleged here had no reason to know that the No-Poach
Understanding extended beyond the two medical schools. Further, as alleged in more
detail below, Duke and UNC took affirmative steps to conceal their misconduct from the
5.
The No-Poach Understanding restrained trade and was per se unlawful
under federal and North Carolina law. Plaintiff seeks damages for violations of: Section
1 of the Sherman Act, 15 U.S.C. § 1, and North Carolina General Statutes §§ 75-1 and
II.
JURISDICTION AND VENUE
6.
Plaintiff brings this action to recover treble damages, costs of suit, and
reasonable attorneys’ fees, arising from Duke’s violations of Section 1 of the Sherman
Act, 15 U.S.C. § 1, and North Carolina General Statutes §§ 75-1 and 75-2.
7.
The Court has subject matter jurisdiction pursuant to Sections 4 and 16 of
the Clayton Act (15 U.S.C. §§ 15 and 26) and 28 U.S.C. §§ 1331, 1337, and 1367.
8.
Venue is proper in this judicial district pursuant to Section 12 of the
Clayton Act (15 U.S.C. § 22) and 28 U.S.C. § 1391(b), (c), and (d) because a substantial
part of the events giving rise to Plaintiff’s claims occurred in this district, a substantial
portion of the affected interstate trade and commerce was carried out in this district, and
Duke resides in this District.
III.
THE PARTIES
A.
Plaintiff
9.
Plaintiff Lucia Binotti is a citizen and resident of the State of North
Carolina. Professor Binotti has been a Professor of Spanish at the University of North
Carolina, Chapel Hill since 1990 in UNC’s Department of Romance Studies. Professor
Binotti was injured in her business or property by reason of the violation alleged herein.
B.
Defendant
10.
Defendant Duke University is a private, tax-exempt, non-profit university
with its principal place of business in Durham, North Carolina, that owns and operates
educational and research facilities.
C.
Unnamed Co-Conspirators
11.
UNC is a public university incorporated under North Carolina law and a
constituent institution of the University of North Carolina System, which was created
pursuant to statute by the North Carolina General Assembly. See generally N.C. Gen.
Stat. § 116-1, et seq. UNC has its principal place of business in Chapel Hill, Orange
County, North Carolina.
IV.
CLASS ACTION ALLEGATIONS
12.
Plaintiff brings this action on behalf of herself and all others similarly
situated (the “Proposed Class”) pursuant to Federal Rules of Civil Procedure 23(a),
23(b)(2), and 23(b)(3). The Proposed Class is defined as follows:
All natural persons employed by Duke University or the
University of North Carolina, Chapel Hill from the start of the
No-Poach Understanding (to be determined from further
discovery) through February 5, 2018, as a faculty member.
Excluded from the Class are: members of the boards of
directors and boards of trustees, boards of governors, and
senior administrators of Duke and UNC; and any and all
judges and justices, and chambers’ staff, assigned to hear or
adjudicate any aspect of this litigation.
13.
Plaintiff does not, as yet, know the exact size of the Proposed Class because
such information is in the exclusive control of Duke and UNC. Based upon publically
available information, there are at least thousands of Class members. Joinder of all
members of the Class, therefore, is not practicable.
14.
The questions of law or fact common to the Class include but are
not limited to:
a.
whether Duke and UNC had a No-Poach Understanding between
approximately 2001 and February 5, 2018;
b.
whether Duke and UNC concealed the existence of the No-Poach
Understanding from members of the Proposed Class;
c.
whether Duke’s conduct violated the Sherman Act;
d.
whether the No-Poach Understanding is a per se violation of the
Sherman Act;
e.
whether Duke violated N.C. Gen. Stat. §§ 75-1 and 75-2;
f.
whether the No-Poach Understanding is a per se violation of N.C.
Gen. Stat. §§ 75-1 and 75-2;
g.
whether the No-Poach Understanding restrained trade, commerce, or
competition for faculty between Duke and UNC;
h.
whether Plaintiff and the Proposed Class have suffered antitrust
injury; and
i.
the difference between the total compensation Plaintiff and the
Proposed Class received from Duke and UNC, and the total compensation Plaintiff and
the Proposed Class would have received from Duke and UNC in the absence of the No-
Poach Understanding.
15.
These and other questions of law and fact are common to the Proposed
Class, and predominate over any questions affecting only individual members of the
Proposed Class.
16.
Plaintiff’s claims are typical of the claims of the Proposed Class.
17.
Plaintiff will fairly and adequately represent the interests of the Proposed
Class and has no conflict with the interests of the Proposed Class.
18.
Plaintiff has retained counsel experienced in antitrust and class action
litigation to represent herself and the Proposed Class.
19.
This class action is superior to the alternatives, if any, for the fair and
efficient adjudication of this controversy. Prosecution as a class action will eliminate the
possibility of repetitive litigation. There will be no material difficulty in the management
of this action as a class action. By contrast, prosecution of separate actions by individual
members of the Proposed Class would create the risk of inconsistent or varying
adjudications, and be inefficient and burdensome to the parties and the Court.
V.
FACTUAL ALLEGATIONS
A.
Trade and Commerce
20.
During the Class Period, Duke and UNC employed members of the
Proposed Class in North Carolina, including in this judicial district.
21.
The No-Poach Understanding has substantially affected interstate
commerce throughout North Carolina and the United States, and has caused antitrust
injury throughout North Carolina and the United States.
B.
Competition For Academic Faculty Between Duke and UNC
22.
Duke and UNC are the leading employers of academic faculty in North
Carolina. No other employer of academic faculty in North Carolina offers the prestige,
research support, or quality of academic culture that Duke and UNC provide.
23.
In a properly functioning and lawfully competitive labor market, Duke and
UNC would compete for faculty members by recruiting and hiring from each other,
particularly because Duke and UNC are only about 14 miles apart, well-within
commuting distance. The consequence of this proximity on competition for faculty is
profound. Any other potential employer with similar prestige, research support, and
quality of academic culture would require a faculty member to move to a distant city.
This involves significant costs, such as uprooting a family, finding new schools for
children, finding new places of worship, and finding alternative employment for a
spouse. None of these costs would occur if a faculty member switched between Duke
and UNC. As a result, but for the No-Poach Understanding, Duke and UNC would have
been very important competitors for faculty, and their competition would have driven up
faculty pay.
24.
Duke and UNC hired junior faculty immediately after the new hires
received their relevant graduate degrees, but these hires require training, and have no
track record as a faculty member from which Duke and UNC could accurately and
confidently predict job performance. Such junior hires also require supervision,
particularly as they seek to attain tenure. Further, tenure reviews themselves are labor-
intensive and costly for the hiring institution to conduct. Hiring experienced faculty, by
contrast, results in a faculty member with a proven track record of success. Faculty hired
directly into a tenured position require far less supervision and training than junior
faculty hired directly from their graduate program. But for the No-Poach Understanding,
therefore, Duke and UNC would have recruited and hired experienced faculty from each
25.
Competition for faculty via recruiting and lateral hiring has a significant
impact on faculty compensation in a variety of ways. First, when faculty employers
become aware of attractive outside opportunities for their faculty, the threat of losing
faculty to competitors encourages employers to preemptively increase compensation to
increase morale and competitive positioning, and ultimately to retain valuable faculty. If
faculty employers do not react to competition, their faculty may seek positions that offer
more generous compensation and benefits elsewhere, or may be receptive to recruiting by
a rival employer. Once a faculty member has received an offer from a rival, retaining the
faculty member may require a disruptive increase in compensation for one individual, if
retention is possible at all. Faculty employers therefore have an incentive to preempt
lateral departures by paying all faculty well enough that they are unlikely to seek or
pursue outside opportunities. Preemptive retention measures thus lead to increased
compensation for all faculty.
26.
Second, the availability of desirable positions at competing employers
forces employers to reactively increase compensation to retain faculty who are likely to
join a competitor institution. This can occur both when a particular faculty member or
group of faculty become interested in switching employers and the current employer
responds by offering a compensation increase to retain them, or when an employer
responds to overall attrition rates among its faculty by increasing compensation levels. In
the former case, even a targeted increase designed to retain specific faculty members will
put upward pressure on the entire faculty compensation structure.
27.
The positive compensation effects of hiring faculty from competitors are
not limited to the particular individuals who seek new employment, or to the particular
individuals who would have pursued new positions but for the No-Poach Understanding.
Instead, the effects of recruiting and hiring from competitors (and the effects of
suppressing recruiting and hiring, pursuant to agreement) commonly impact all faculty of
the participating institutions.
28.
Duke and UNC carefully monitored and managed their internal
compensation levels to achieve certain goals, including:
a.
maximize both internal and external equity;
b.
maintain approximate compensation parity among faculty within the
same department and seniority categories (for example, among Assistant Professors in the
English Department);
c.
maintain certain compensation relationships among faculty across
different categories (for example, among Assistant Professors relative to Associate
Professors, or between the Biology and Chemistry Departments);
d.
avoid discrimination on the basis of race and gender;
e.
maintain high faculty morale and productivity;
f.
retain faculty; and
g.
attract new and talented faculty.
29.
To accomplish these objectives, Duke and UNC set compensation levels for
different faculty categories that apply to all faculty within those categories. Duke and
UNC also compared compensation levels across different faculty categories to ensure
equity as between categories. Duke and UNC also analyze and update their faculty
compensation structures annually, in a process that involves the very senior
administrators who entered into, implemented, and enforced the No-Poach
Understanding.
30.
While Duke and UNC sometimes engaged in negotiations regarding
compensation levels with individual faculty members, these negotiations occurred from a
starting point of the pre-existing and pre-determined compensation level. The eventual
compensation any particular faculty receives is either entirely determined by the preset
level, or is profoundly influenced by it.
31.
Thus, if operating under competitive and lawful conditions, Duke and UNC
would have recruited and hired faculty from each other, driving faculty pay up. Duke
and UNC both understood this at the time, and avoided paying their faculty more by
entering into the No-Poach Understanding.
C.
Duke And UNC Had A Decades-Long Understanding Not To Compete
For Each Other’s Faculty
32.
Duke senior administrators discussed the No-Poach Understanding at a
Dean’s Cabinet meeting on October 1, 2001. Attendees included Kate Bartlett (then
Dean of Duke Law School), Doug Breeden (then Dean of Duke School of Business), Bill
Chafe (then Dean of the Duke Faculty of Arts and Sciences and Vice-Provost for
Undergraduate Education), Rob Clark (then Dean of the Duke School of Engineering),
Greg Jones (then Dean of the Duke Divinity School), Nannerl Keohane (then President of
Duke), Peter Lange (then Duke Provost), Bill Schlesinger (then Dean of the Duke School
of the Environment), Lew Siegel (then Dean of the Duke Graduate School), and Tallman
Trask (then Duke’s Executive Vice President and Treasurer). The first item of business
at the meeting was to discuss “Agreements Between Duke/UNC Regarding Recruiting”,
and the minutes confirm: “There has been a casual understanding between Duke and
UNC that no recruiting would take place between the two institutions.” The minutes
further explain: “It is mutually advantageous to both schools to adhere to this practice.”
33.
The No-Poach Understanding continued well past 2001, and was enforced
by many of the same senior administrators who attended the October 1, 2001 Dean’s
Cabinet meeting. For example, in 2011, Duke’s Lange discussed the matter in-person
with UNC’s Chancellor, Holden Thorpe. Thorpe testified that Lange told him: “we
[UNC] should not be trying to move Duke faculty to UNC because if we did, Duke had a
lot more money than we did and we were going to come out on the losing end of that
deal.” Internal UNC emails exchanged with Thorpe thereafter referenced the No-Poach
Understanding.
34.
The express purpose of the No-Poach Understanding was to suppress pay
of the alleged class as a whole, not simply to restrict the mobility of individual faculty
members. For example, in 1995, Thomas Keller, who was then Dean of Duke School of
Business, wrote Keohane to complain that his counterpart at UNC was recruiting Duke
faculty in violation of the No-Poach Understanding. Keller explained that, while Duke
“could certainly make a decision that we want to keep a person and raise their salary, . . .
this creates an internal inequity and is difficult in this environment when we have fairly
low raises overall. This type of situation is likely to lead to bad internal attitudes.”
Keller’s solution was not to compete against UNC and raise faculty pay. Instead, he
asked Keohane to get the UNC Chancellor to “abide by our inter-institutional agreements
of not aggressively seeking faculty and staff from the other institution which basically
has the end result of increasing salaries at both institutions with no net increase in the
quality of the faculty/staff and/or the productivity of the faculty/staff.”
35.
At the time, Keller also confirmed to Keohane that the No-Poach
Understanding had been in place for decades. He wrote to her: “I can say that I have
been informed, ever since I’ve been the Dean, we have an agreement with UNC that we
will not aggressively seek faculty or staff between our institutions.” Keller had been the
Dean of Duke School of Business since 1974.
D.
Duke and UNC Concealed The No-Poach Understanding From the
Class, Including Plaintiff
36.
Duke and UNC actively concealed their No-Poach Understanding from the
Proposed Class, including Plaintiff. For example, it was the practice of both entities not
to disclose the existence of the No-Poach Understanding to their faculty or to the public.
Yet, behind the scenes, when faculty from one school attempted to apply to the other,
administrators at both institutions often engaged in secret back-channel communications
concerning the applicant as a means of enforcing and abiding by the No-Poach
Understanding—without the applicant’s knowledge. Further, Duke and UNC
affirmatively avoided memorializing the No-Poach Understanding in a written agreement
despite its multi-decade duration, opting instead to train new administrators about the
agreement’s existence on a primarily verbal basis. The reason for this practice was to
avoid alerting the Proposed Class of the No-Poach Understanding’s existence and, thus,
to deter potential litigation. The minutes of the 2001 Dean’s Cabinet Meeting regarding
the No-Poach Understanding, for example, state that “[t]he President would like to see
this policy in writing as a goodwill policy and will consult with the Counsel’s Office to
see if this is an appropriate action.” Yet the policy was never formalized in writing—
perhaps at the advice of counsel.
37.
But for discovery made public from the Seaman case, Plaintiff would have
remained unaware that the No-Poach Understanding occurred. Because of the secrecy of
the No-Poach Understanding and Duke and UNC’s acts of concealment, Plaintiff and the
proposed Class did not and could not have known that UNC and Duke were engaged in
an illegal conspiracy to suppress faculty wages by restraining recruitment and hiring of
one another’s faculty prior to August 25, 2017. Further, the secrecy of the No-Poach
Understanding and Defendants’ acts of concealment would have thwarted any reasonable
effort to discover the No-Poach Understanding prior to August 25, 2017.
FIRST CLAIM FOR RELIEF
(Violation of the Sherman Act, § 1)
38.
Plaintiff, on behalf of herself and all others similarly situated, realleges and
incorporates herein by reference each of the allegations contained in the preceding
paragraphs of this Complaint, and further allege against Duke as follows.
39.
Duke and UNC entered into and engaged in unlawful agreements in
restraint of the trade and commerce described above in violation of Section 1 of the
Sherman Act, 15 U.S.C. § 1. Beginning no later than 2001 and continuing until
approximately February 5, 2018, Duke and UNC engaged in continuing trusts in restraint
of trade and commerce in violation of Section 1 of the Sherman Act.
40.
Duke and UNC’s agreements have included concerted action and
undertakings among them with the purpose and effect of: (a) fixing the compensation of
Plaintiff and the Class at artificially low levels; and (b) eliminating, to a substantial
degree, competition between Duke and UNC for faculty.
41.
As a direct and proximate result of Duke and UNC’s No-Poach
Understanding, members of the Proposed Class have suffered injury to their property and
have been deprived of the benefits of free and fair competition on the merits.
42.
The unlawful No-Poach Understanding had the following effects, among
others:
a.
competition between Duke and UNC for faculty was suppressed,
restrained, or eliminated; and
b.
Plaintiff and members of the Proposed Class have received lower
compensation from Duke and UNC than they otherwise would have received in the
absence of the No-Poach Understanding, and, as a result, have been injured in their
property and have suffered damages in an amount according to proof at trial.
43.
The acts done by Duke and UNC as part of, and in furtherance of, their
contracts, combinations or conspiracies were authorized, ordered, or done by their
respective administrators while actively engaged in the management of Duke and UNC’s
affairs.
44.
The No-Poach Understanding is a per se violation of Section 1 of the
Sherman Act.
45.
Accordingly, Plaintiff and members of the Proposed Class seek three times
their damages caused by Duke and UNC’s violations of Section 1 of the Sherman Act,
the costs of bringing suit, reasonable attorneys’ fees, and a declaration that such
agreement is unlawful.
SECOND CLAIM FOR RELIEF
(Violation of N.C. Gen. Stat. §§ 75-1 & 75-2)
46.
Plaintiff, on behalf of herself and all others similarly situated, realleges and
incorporates herein by reference each of the allegations contained in the preceding
paragraphs of this Complaint, and further allege against Defendant Duke as follows.
47.
Duke and UNC entered into and engaged in unlawful agreements in
restraint of the trade and commerce described above in violation of N.C. Gen. Stat.
§§ 75-1 and 75-2.
48.
Duke and UNC’s agreements have included concerted action and
undertakings among them with the purpose and effect of: (a) fixing the compensation of
Plaintiff and the Class at artificially low levels; and (b) eliminating, to a substantial
degree, competition between Duke and UNC for faculty.
49.
As a direct and proximate result of Duke and UNC’s No-Poach
Understanding, members of the Proposed Class have suffered injury to their property and
have been deprived of the benefits of free and fair competition on the merits.
50.
The unlawful No-Poach Understanding had the following effects, among
others:
a.
competition between Duke and UNC for faculty was suppressed,
restrained, or eliminated; and
b.
Plaintiff and members of the Proposed Class have received lower
compensation from Duke and UNC than they otherwise would have received in the
absence of the No-Poach Understanding, and, as a result, have been injured in their
property and have suffered damages in an amount according to proof at trial.
51.
The acts done by Duke and UNC as part of, and in furtherance of, their
contracts, combinations or conspiracies were authorized, ordered, or done by their
respective administrators while actively engaged in the management of Duke and UNC’s
affairs.
52.
The No-Poach Understanding is a per se violations of N.C. Gen. Stat.
§§ 75-1 and 75-2.
53.
Accordingly, Plaintiff and members of the Class seek three times their
damages caused by Duke and UNC’s violations of N.C. Gen. Stat. §§ 75-1 and 75-2, the
costs of bringing suit, reasonable attorneys’ fees, and a declaration that such agreement is
unlawful.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff prays that this Court enter judgment on her behalf and
that of the Proposed Class by adjudging and decreeing that:
A.
This action may be maintained as a class action, with Plaintiff as the
designated Class representative and their counsel as Class counsel;
B.
Duke engaged in a trust, contract, combination, or conspiracy in violation
of Section 1 of the Sherman Act and N.C. Gen. Stat. §§ 75-1 and 75-2, and that Plaintiff
and the members of the Proposed Class have been damaged and injured in their business
and property as a result of this violation;
C.
The alleged combinations and conspiracy be adjudged and decreed to be
per se violations of the Sherman Act and N.C. Gen. Stat. §§ 75-1 and 75-2;
D.
Plaintiff and the members of the Proposed Class she represents recover
threefold the damages determined to have been sustained by them as a result of the
conduct of Duke and UNC complained of herein, and that judgment be entered against
Duke for the amount so determined;
E.
Judgment be entered against Duke in favor of Plaintiff and each member of
the Proposed Class she represents, for restitution and disgorgement of ill-gotten gains as
allowed by law and equity as determined to have been sustained by them, together with
the costs of suit, including reasonable attorneys’ fees;
F.
For prejudgment and post-judgment interest;
H.
For equitable relief, including a judicial determination of the rights and
responsibilities of the parties;
I.
For attorneys’ fees;
J.
For costs of suit; and
K.
For such other and further relief as the Court may deem just and proper.
JURY DEMAND
Pursuant to Federal Rule of Civil Procedure 38(b), Plaintiff demands a jury trial
for all claims and issues so triable.
Dated: May 27, 2020
Respectfully submitted,
/s/ Dean M. Harvey
Dean M. Harvey (pro hac vice forthcoming)
Anne B. Shaver (pro hac vice forthcoming)
Lin Y. Chan (pro hac vice forthcoming)
Yaman Salahi (pro hac vice forthcoming)
LIEFF CABRASER HEIMANN & BERNSTEIN, LLP
275 Battery Street, 29th Floor
San Francisco, CA 94111-3339
Telephone: (415) 956-1000
Facsimile: (415) 956-1008
[email protected]
[email protected]
[email protected]
[email protected]
/s/ M. Travis Payne
M. Travis Payne
N.C. State Bar No. 8452
EDELSTEIN & PAYNE
315 East Jones Street
Raleigh, NC 27601
Telephone: (919) 828-1456
Facsimile: (919) 828-4689
[email protected]
Robert M. Elliot
N.C. State Bar No. 7709
Daniel Lyon
N.C. State Bar No. 43828
ELLIOT MORGAN PARSONAGE, PLLC
426 Old Salem Rd.
Brickenstein-Leinbach House
Winston-Salem, NC 27101
Telephone: (336) 724-2828
Facsimile: (336) 724-3335
[email protected]
Counsel for Individual and Representative Plaintiff
Lucia Binotti
| antitrust |
glBt_ogBF5pVm5zYTRXH | IN THE UNITED STATES DISTRICT COURT FOR THE
DISTRICT OF NEW JERSEY
RUFUS MCGILL, individually and on behalf
of all others similarly situated,
Plaintiff,
Case No.
CLASS ACTION COMPLAINT
JURY TRIAL DEMANDED
v.
CHW GROUP, INC., d/b/a Choice Home
Warranty, a New Jersey corporation
Defendant.
CLASS ACTION COMPLAINT
Plaintiff Rufus McGill (“McGill”) brings this Class Action Complaint against Defendant
CHW Group, Inc., d/b/a Choice Home Warranty (“Choice Home Warranty” or “Defendant”) to:
(1) stop its practice of placing calls using an automatic telephone dialing system (“ATDS”) to the
cellular telephones of consumers nationwide without their prior express consent and to
consumers who have specifically requested to Defendant to stop calling them, (2) to make pre-
recorded calls to landlines without the proper consent; (3) stop Defendant from calling
consumers who are registered on the National Do Not Call Registry, and (4) stop calls to
consumers who have already specifically demanded that the calls stop. Plaintiff, for his
Complaint, allege as follows upon personal knowledge as to themselves and their own acts and
experiences, and, as to all other matters, upon information and belief, including investigation
conducted by their attorneys.
PARTIES
1.
Plaintiff McGill is a resident of Heidelberg, Mississippi.
2.
Defendant Choice Home Warranty is a corporation incorporated and existing
under the laws of the State of New Jersey. Its principal office address is 1090 King Georges Post
Rd, Edison, New Jersey 08837. Choice Home Warranty does business throughout the United
States, including in the State of Illinois and in this District. 1
JURISDICTION & VENUE
3.
This Court has subject matter jurisdiction over this action pursuant to 28 U.S.C.
§1331, as the action arises under the Telephone Consumer Protection Act, 47 U.S.C. §227, a
federal statute.
4.
The Court has personal jurisdiction over Defendant and venue is proper in this
District because Defendant regularly conducts business in this District,2 and a substantial part of
the events giving rise to the claims asserted herein occurred in this District.
5.
Venue is proper in this District under 28 U.S.C. § 1391(b) because Defendant is
located in this District and because the wrongful conduct giving rise to this case occurred in, was
directed to, and/or emanated from this District.
COMMON ALLEGATIONS OF FACT
6.
Defendant Choice Home Warranty offers appliance service contracts that purport
to protect homeowners against high repair and replacement costs.
7.
Unfortunately for consumers, Defendant Choice Home Warranty casts its
marketing net too wide. That is, in an attempt to promote Choice Home Warranty’s business and
services, Defendant conducted (and continue to conduct) a wide-scale telemarketing campaign
that features the making of repeated unsolicited autodialed and pre-recorded calls to consumers’
1 Defendant has a subsidiary or affiliate in Illinois, Home Warranty Administrator of Illinois, Inc.
See http://www.choicehomewarranty.com/user_agreement.php (“In Illinois, the company
obligated under this Agreement is Home Warranty Administrator of Illinois.”)
2 Id.
cellular and landline telephones—including numbers that appear on the National Do Not Call
Registry—without consent, all in violation of the Telephone Consumer Protection Act, 47 U.S.C.
§ 227 et seq. (the “TCPA”). In addition, Defendant calls consumers who have specifically
requested that the calls stop.
8.
While certain types of calls may be within the letter of the law for calls placed to
landline (“wireline”) telephones, the same calls to cellular (“wireless”) telephones violate the
TCPA where they are made without prior express written or oral consent. As explained by the
Federal Communications Commission (“FCC”) in its 2012 order:
Additionally, we note that many commenters expressed concern about
obtaining written consent for certain types of autodialed or prerecorded calls,
including debt collection calls, airline notification calls, bank account fraud
alerts, school and university notifications, research or survey calls, and wireless
usage notifications. Again, such calls, to the extent that they do not contain
telemarketing messages, would not require any consent when made to
residential wireline consumers, but require either written or oral consent if
made to wireless consumers and other specified recipients. [Emphasis added].
See In re Rules and Regulations Implementing the Tel. Consumer Protection
Act of 1991, 27 FCC Rcd. 1830 (Feb. 15, 2012).
9.
Yet in violation of this rule, Choice Home Warranty fails to obtain any prior
express consent (oral or written) to make the pre-recorded calls described herein to cellular
telephone numbers.
10.
Consumer complaints about Choice Home Warranty’s invasive and repetitive
calls are legion. As a sample, consumers have complained as follows:
•
“Choice home warranty. They won't stop calling even though I've asked
repeatedly.”3
•
“I’ve asked them repeatedly to stop calling me. I’ve added them to the
auto rejection list.”4
•
“I get calls from these people time and time again. I keep telling them to
3 https://www.shouldianswer.com/phone-number/8008144345
4 Id.
stop calling me. Its choice home warranty. If i was thinking about giving
them any business, they lost it by their constant harassing phone calls”5
•
“Company keeps calling my phone and most times don’t say anything
when I answer the phone.”6
•
“I have asked for them to stop calling and to be removed from the list and
yet they call 8-9 times a day”7
•
“This number keeps calling and hanging up and another number does the
same, 732-898-3609”8
•
“some home warranty robo call”9
•
“rang once then hung up I told them to stop calling . I keep blocking
numbers they call from.”10
•
“I was looking for an appliance warranty online and got sucked in by these
jacka$$es promise of a free quote online. Stupidly entered my phone
number... received NO quote online, but did receive daily and some times
4-5 times daily phone calls. I have answered on numerous occasions, told
them I'm not interested so I finally just blocked them.”11
•
“Got one this morning and have been getting them every other day; no
message left. Called it from a different number and they answered as
‘choice home warranty.’”12
•
“It was from a home warrant service - Choice .....I have asked a few time
to be removed from the list ....I asked again today!”13
11.
In placing the calls that form the basis of this Complaint, Defendant Choice Home
Warranty, or its affiliated entities, utilized an ATDS in violation of the TCPA. Specifically, the
hardware and software used by Choice Home Warranty has the capacity to generate and store
random numbers, and/or receive and store lists of telephone numbers, and to dial such numbers,
en masse, in an automated fashion without human intervention. Choice Home Warranty’s
automated dialing equipment also is, or includes features substantially similar to, a predictive
dialer, meaning that it is capable of making numerous phone calls simultaneously and
5 https://800notes.com/Phone.aspx/1-732-374-3353/2
6 id
7 id
8 id
9 http://800notes.com/Phone.aspx/1-800-814-4345
10 Id.
11 Id.
12 http://800notes.com/Phone.aspx/1-732-374-3396
13 Id.
automatically connecting answered calls to then available callers and disconnecting the rest (all
without human intervention).14
12.
Telemarketers who wish to avoid calling numbers listed on the National Do Not
Call Registry can easily and inexpensively do so by “scrubbing” their call lists against the
National Do Not Call Registry database. The scrubbing process identifies those numbers on the
National Do Not Call Registry, allowing telemarketers to remove those numbers and ensure that
no calls are placed to consumers who opt-out of telemarketing calls.
13.
To avoid violating the TCPA by calling registered numbers, telemarketers must
scrub their call lists against the National Do Not Call Registry at least once every thirty-one
days. See 16 C.F.R. § 310.4(b)(3)(iv).
14.
There are numerous third-party services that will additionally scrub the call lists
for a telemarketer to segment out landline and cellular telephone numbers, since the consent
standards differ depending on what type of phone a telemarketer is calling.15 Indeed, one service
notes that they can:
Instantly verify whether a specific phone number is wireless or wireline to
learn if TCPA regulations apply – and verify the identity of the current
subscriber to determine if they are the same party who provided you with
consent.16
15.
When placing these calls to consumers, Choice Home Warranty failed to get the
prior express consent of cellular telephone owners/users as required by the TCPA, Oregon
14 It is without argument that Defendant uses an ATDS. See
https://www.choicehomewarranty.com/quote-start.php (“By entering my information and
clicking “Get Quote” I am providing express consent to be contacted by via email, phone and
text, including my wireless phone number, regarding product and servicing information using
automated technology.”)
15 See e.g. http://www.dncsolution.com/do-not-call.asp; http://www.donotcallprotection.com/do-
not-call-compliance-solutions-1; http://www.mindwav.com/tcpa_compliance_solution.asp;
16 https://www.neustar.biz/services/tcpa-compliance
UTPA, and Illinois DNC Law to make such calls.
16.
Furthermore, Defendant calls these consumers who have no “established business
relationship” with Defendant and who are registered on the National Do Not Call Registry.
17.
Finally, even when consumers try to opt out of future calls by requesting to never
be called again, Defendant continues to call them.
18.
Defendant knowingly made (and continues to make) telemarketing calls to
cellular telephones without the prior express consent of the call recipients. As such, Defendant
not only invaded the personal privacy of Plaintiff and other members of the putative Classes but
also intentionally and repeatedly violated the TCPA, Oregon UTPA, and Illinois DNC Law.
19.
By making the autodialed telephone calls at issue in this Complaint, Defendant
caused Plaintiff and the members of the Classes actual harm and cognizable legal injury. This
includes the aggravation and nuisance and invasions of privacy that result from the receipt of
such calls, in addition to a loss of value realized for the monies consumers paid to their wireless
carriers for the receipt of such calls. Furthermore, the calls intentionally interfered with the
Plaintiff and the other Class members use and enjoyment of their cellular telephones, including
the related data, software, and hardware components.
20.
The TCPA was enacted to protect consumers from unsolicited telephone calls like
those alleged in this case. In response to Defendant’s unlawful conduct, Plaintiff file the instant
lawsuit and seeks an injunction requiring Defendant to cease all unsolicited telephone calling
activities to consumers as complained of herein and an award of statutory damages to the
members of the Classes under the TCPA, Oregon UTPA, and Illinois DNC Law, together with
costs and reasonable attorneys’ fees.
FACTS SPECIFIC TO PLAINTIFF RUFUS McGILL
21.
On December 2, 2014, Plaintiff McGill registered his cellular phone number on
the National Do Not Call registry to avoid receiving unsolicited calls from telemarketers.
22.
On October 28, 2016, Plaintiff McGill received an autodialed call from Defendant
using phone number 800-814-4345 to his cellular phone. The call began with a noticeable pause,
which is indicative of the use of an autodialer. The agent explained that they were calling about
offering insurance in case something goes wrong in Plaintiff’s home. Though Plaintiff did not
consent to receive any calls from Defendant, he told the agent that he needed some time to think
if this was something he would like to purchase.
23.
On November 29, 2016, Plaintiff McGill received another autodialed call from
Defendant using phone number 800-814-4345 to his cellular phone. This time, Plaintiff made it
clear he was not interested in the services being offered by Defendant.
24.
Despite making it clear he wasn’t interested, McGill received yet another
unsolicited, autodialed phone call on November 30, 2016 from Defendant using phone number
800-814-4345. This time, McGill made it clear he was not interested and wanted the phone calls
to stop.
25.
Unfortunately for Plaintiff McGill, the phone calls did not stop. McGill received
at least 49 more unsolicited, autodialed phone calls from Defendant to his cellular phone. The
final known call that McGill received was on August 3, 2017.
26.
In total, Plaintiff McGill estimates that he received over 50 unsolicited, autodialed
and unwanted calls from Defendant to his cellular phone. Numerous voicemail messages were
left for McGill, who had to keep erasing them in order to free up the memory on his voicemail
service.
27.
Plaintiff McGill never provided any type of consent for Defendant Choice Home
Warranty to call him on his cell phone using an autodialer.
28.
Defendant at all times is and was aware that the above-described autodialed
telephone calls were and are being made to consumers like Plaintiff who had not consented to
receive them.
29.
By making unauthorized autodialed and pre-recorded calls to consumer’s
telephone as alleged herein and to phone numbers that are registered on the do not call registry,
Choice Home Warranty has caused consumers actual harm. In the present case, a consumer
could be subjected to many unsolicited telephone calls as Choice Home Warranty’s opt-out
mechanism does not work.
CLASS ACTION ALLEGATIONS
30.
In accordance with F. R. Civ. P. 23(b)(1), (b)(2) and (b)(3), Plaintiff McGill
brings this action on behalf of themselves and the five classes defined as follows:
Autodialed No Consent Class: All persons in the United States who from four
years prior to the filing of the initial complaint in this action to the present: (1)
Defendant (or a third person acting on behalf of Defendant) called; (2) on the
person’s cellular telephone number using an ATDS; (3) for the purpose of selling
Defendant’s products and services; and (4) for whom Defendant claims it
obtained prior express consent in the same manner as Defendant claims it
obtained prior express consent to call the Plaintiff.
Autodialed Stop Class: All persons in the United States who from four years
prior to the filing of this action through the present: (1) Defendant (or an agency
acting on behalf of Defendant) called, (2) on the person’s cellular telephone, (3)
using an automatic telephone dialing system, (4) after the person informed
Defendant that s/he no longer wished to receive phone calls from Defendant.
Do Not Call Registry Class: All persons in the United States who from four
years prior to the filing of the initial complaint in this action to the present: (1)
Defendant (or a third person acting on behalf of Defendant) called more than one
time on his/her cellular telephone; (2) within any 12-month period (3) where the
telephone number had been listed on the National Do Not Call Registry for at
least thirty days; (4) for the purpose of selling Defendant’s products and services;
and (5) for whom Defendant claims it obtained prior express consent in the same
manner as Defendant claims it obtained prior express consent to call the Plaintiff.
Stop Call DNC Registry Class: All persons in the United States who from four
years prior to the filing of the initial complaint in this action to the present: (1)
Defendant (or a third person acting on behalf of Defendant) called, (2) on the
person’s telephone number, (3) where the telephone number had been listed on
the National Do Not Call Registry for at least thirty days, (4) for the purpose of
selling Defendant’s products and services (5) at least thirty (30) days after the
person informed Defendant (or a third person acting on behalf of Defendant) that
s/he no longer wished to receive calls from Defendant (or a third person acting on
behalf of Defendant).
31.
The following individuals are excluded from the Class: (1) any Judge or
Magistrate presiding over this action and members of their families; (2) Defendant, Defendant’s
subsidiaries, parents, successors, predecessors, and any entity in which Defendant or their
parents have a controlling interest and their current or former employees, officers and directors;
(3) Plaintiff’s attorneys; (4) persons who properly execute and file a timely request for exclusion
from the Class; (5) the legal representatives, successors or assigns of any such excluded persons;
and (6) persons whose claims against Defendant have been fully and finally adjudicated and/or
released. Plaintiff anticipates the need to amend the class definition following appropriate
discovery.
32.
Numerosity: The exact sizes of the Classes are unknown and not available to
Plaintiff at this time, but it is clear that individual joinder is impracticable. On information and
belief, Defendant made telephone calls to thousands of consumers who fall into the definition of
the Classes. Members of the Classes can be objectively identified through reference to
Defendant’s records, consumer phone records, and other evidence to be gained in discovery.
33.
Commonality and Predominance: There are many questions of law and fact
common to the claims of Plaintiff and the Classes, and those questions predominate over any
questions that may affect individual members of the Classes. Common questions for the Classes
include, but are not necessarily limited to the following:
a.
Whether Defendant violated the provisions of 47 U.S.C. § 227 and the
regulations promulgated thereunder;
b.
Whether Defendant systematically made telephone calls to individuals
who did not previously provide Defendant and/or its agents with their prior
express consent to receive such phone calls;
c.
Whether Defendant made the calls with the use of an ATDS;
d.
Whether Defendant systematically made telephone calls to consumers
whose telephone numbers were registered with the National Do Not Call
Registry;
e.
Whether Defendant made calls to consumers, despite requests for the calls
to be stopped;
f.
Whether the Plaintiff and the other members of the Class are entitled to
statutory damages; and
g.
Whether Defendant acted willfully so as to require an award of treble
damages.
34.
Typicality: Plaintiff’s claims are typical of the claims of the other members of the
Classes. Plaintiff and the Classes sustained damages as a result of Defendant’s uniform wrongful
conduct during transactions with Plaintiff and the Classes.
35.
Fair and Adequate Representation: Plaintiff will fairly and adequately
represent and protect the interests of the Classes, and have retained counsel competent and
experienced in complex class actions. Plaintiff has no interest antagonistic to those of the
Classes, and Defendant has no defenses unique to Plaintiff.
36.
Policies Generally Applicable to the Classes: This class action is appropriate for
certification because Defendant has acted or refused to act on grounds generally applicable to the
Classes as respective wholes, thereby requiring the Court’s imposition of uniform relief to ensure
compatible standards of conduct toward the Class members, and making final injunctive relief
appropriate with respect to the Classes as respective wholes. Defendant’s practices challenged
herein apply to and affect the Class members uniformly, and Plaintiff’s challenge of those
practices hinges on Defendant’s conduct with respect to the Classes as respective wholes, not on
facts or law applicable only to Plaintiff.
37.
Superiority: This case is also appropriate for class certification because class
proceedings are superior to all other available methods for the fair and efficient adjudication of
this controversy given that joinder of all parties is impracticable. The damages suffered by the
individual members of the Classes will likely be relatively small, especially given the burden and
expense of individual prosecution of the complex litigation necessitated by Defendant’s actions.
Thus, it would be virtually impossible for the individual members of the Classes to obtain
effective relief from Defendant’s misconduct. Even if members of the Classes could sustain such
individual litigation, it would still not be preferable to a class action, because individual litigation
would increase the delay and expense to all parties due to the complex legal and factual
controversies presented in this Complaint. By contrast, a class action presents far fewer
management difficulties and provides the benefits of single adjudication, economy of scale, and
comprehensive supervision by a single court for each of the Classes. Economies of time, effort
and expense will be fostered and uniformity of decisions ensured.
FIRST CAUSE OF ACTION
Violation of 47 U.S.C. § 227 et seq.
(On behalf of Plaintiff McGill and the Autodialed No Consent Class)
38.
Plaintiff incorporates the foregoing allegations as if fully set forth herein.
39.
Defendant Choice Home Warranty, made unsolicited and unwanted autodialed
telephone calls to cellular telephone numbers belonging to Plaintiff McGill and other members
of the Autodialed No Consent Class without first obtaining prior express consent to receive such
calls in an effort to sell its products and services.
40.
Defendant made the telephone calls using equipment that had the capacity to store
or produce telephone numbers to be called using a random or sequential number generator,
and/or receive and store lists of phone numbers, and to dial such numbers, en masse.
41.
The telephone dialing equipment utilized by Defendant, also known as a
predictive dialer, dialed numbers from a list, or dialed numbers from a database of telephone
numbers, in an automatic and systematic manner. Defendant’s ATDS disseminated information
en masse to Plaintiff McGill and other consumers.
42.
By making the unsolicited telephone calls to Plaintiff McGill and the Autodialed
No Consent Class members’ cellular telephones without their prior express consent, and by
utilizing an ATDS to make those calls, Defendant violated 47 U.S.C. § 227(b)(1)(A)(iii).
43.
As a result of Defendant’s unlawful conduct, Plaintiff McGill and the members of
the Autodialed No Consent Class suffered actual damages in the form of monies paid to receive
the unsolicited telephone calls on their cellular telephones and, under 47 U.S.C. § 227(b)(3)(B),
are each entitled to, inter alia, a minimum of $500 in damages for each such violation of the
44.
Should the Court determine that Defendant’s conduct was willful and knowing,
the Court may, pursuant to 47 U.S.C. § 227(b)(3), treble the amount of statutory damages
recoverable by Plaintiff McGill and the other members of the Autodialed No Consent Class.
THIRD CAUSE OF ACTION
Telephone Consumer Protection Act
(Violation of 47 U.S.C. § 227)
(On Behalf of Plaintiff McGill and the Autodialed Stop Class)
45.
Plaintiff McGill incorporate the foregoing allegations as if fully set forth herein.
46.
Defendant and/or its agents made unwanted solicitation telephone calls to cellular
telephone numbers belonging to Plaintiff McGill and the other members of the Autodialed Stop
Call Class after being told to stop calling.
47.
These solicitation telephone calls were made en masse.
48.
Defendant has, therefore, violated 47 U.S.C. §§ 227(b)(1)(A)(iii), (c)(5). As a
result of Defendant’s conduct, Plaintiff McGill and the other members of the Autodialed Stop
Call Class are each entitled to a minimum of $500 in damages, and up to $1,500 in damages, for
each violation.
FOURTH CAUSE OF ACTION
Violation of 47 U.S.C. § 227 et seq.
(On behalf of Plaintiff McGill and the Do Not Call Registry Class)
49.
Plaintiff incorporate the foregoing allegations as if fully set forth herein.
50.
47 U.S.C. § 227(c) provides that any “person who has received more than one
telephone call within any 12-month period by or on behalf of the same entity in violation of the
regulations prescribed under this subsection may” bring a private action based on a violation of
said regulations, which were promulgated to protect telephone subscribers’ privacy rights to
avoid receiving telephone solicitations to which they object.
51.
The TCPA’s implementing regulation, 47 C.F.R. § 64.1200(c), provides that “[n]o
person or entity shall initiate any telephone solicitation” to “[a] residential telephone subscriber
who has registered his or her telephone number on the national do-not-call registry of persons
who do not wish to receive telephone solicitations that is maintained by the federal government.”
52.
47 C.F.R. § 64.1200(e), provides that § 64.1200(c) and (d) “are applicable to any
person or entity making telephone solicitations or telemarketing calls to wireless telephone
numbers to the extent described in the Commission’s Report and Order, CG Docket No. 02-278,
FCC 03-153, ‘Rules and Regulations Implementing the Telephone Consumer Protection Act of
1991,’” which the Report and Order, in turn, provides as follows:
The Commission’s rules provide that companies making telephone
solicitations to residential telephone subscribers must comply with time of
day restrictions and must institute procedures for maintaining do-not-call
lists. For the reasons described above, we conclude that these rules apply to
calls made to wireless telephone numbers. We believe that wireless
subscribers should be afforded the same protections as wireline
subscribers.17
53.
47 C.F.R. § 64.1200(d) further provides that “[n]o person or entity shall initiate
any call for telemarketing purposes to a residential telephone subscriber unless such person or
entity has instituted procedures for maintaining a list of persons who request not to receive
telemarketing calls made by or on behalf of that person or entity. The procedures instituted must
meet the following minimum standards:
(1) Written policy. Persons or entitles making calls for telemarketing
purposes must have a written policy, available upon demand, for
maintaining a do-not-call list.
(2) Training of personnel engaged in telemarketing. Personnel engaged in
any aspect of telemarketing must be informed and trained in the existence
and use of the do-not-call list.
(3) Recording, disclosure of do-not-call requests. If a person or entity
making a call for telemarketing purposes (or on whose behalf such a call is
made) receives a request from a residential telephone subscriber not to
receive calls from that person or entity, the person or entity must record
the request and place the subscriber’s name, if provided, and telephone
number on the do-not-call list at the time the request is made. Persons or
entities making calls for telemarketing purposes (or on whose behalf such
17 68 Fed. Reg. 44143, 44166 (July 25, 2003).
calls are made) must honor a residential subscriber’s do-not-call request
within a reasonable time from the date such request is made. This period
may not exceed thirty days from the date of such request . . . .
(4) Identification of sellers and telemarketers. A person or entity making a
call for telemarketing purposes must provide the called party with the
name of the individual caller, the name of the person or entity on whose
behalf the call is being made, and a telephone number or address at which
the person or entity may be contacted. The telephone number provided
may not be a 900 number or any other number for which charges exceed
local or long distance transmission charges.
(5) Affiliated persons or entities. In the absence of a specific request by
the subscriber to the contrary, a residential subscriber’s do-not-call request
shall apply to the particular business entity making the call (or on whose
behalf a call is made), and will not apply to affiliated entities unless the
consumer reasonably would expect them to be included given the
identification of the caller and the product being advertised.
(6) Maintenance of do-not-call lists. A person or entity making calls for
telemarketing purposes must maintain a record of a consumer’s request
not to receive further telemarketing calls. A do-not-call request must be
honored for 5 years from the time the request is made.
54.
Defendant violated 47 C.F.R. § 64.1200(c) by initiating, or causing to be initiated,
telephone solicitations to wireless telephone subscribers such as Plaintiff McGill and the Do Not
Call Registry Class members who registered their respective telephone numbers on the National
Do Not Call Registry, a listing of persons who do not wish to receive telephone solicitations that
is maintained by the federal government. These consumers requested to not receive calls from
Defendant, as set forth in 47 C.F.R. § 64.1200(d)(3).
55.
Defendant also violated 47 C.F.R. § 64.1200(d) by failing to have a written policy
of dealing with do not call requests, by failing to inform or train its personnel regarding any do
not call list, and by failing to record and honor do not call requests.
56.
Defendant made more than one unsolicited telephone call to Plaintiff McGill and
other members of the Do Not Call Registry Class within a 12-month period without their prior
express consent to receive such calls. Plaintiff McGill and other members of the Do Not Call
Registry Class never provided any form of consent to receive telephone calls from Defendant,
and/or Defendant does not have a current record of consent to place telemarketing calls to them.
57.
Defendant violated 47 C.F.R. § 64.1200(d) by initiating calls for telemarketing
purposes to residential and wireless telephone subscribers, such as Plaintiff McGill and the Do
Not Call Registry Class, without instituting procedures that comply with the regulatory minimum
standards for maintaining a list of persons who request not to receive telemarketing calls from
58.
Defendant violated 47 U.S.C. § 227(c)(5) because Plaintiff McGill and the Do
Not Call Registry Class received more than one telephone call in a 12-month period made by or
on behalf of Defendant in violation of 47 C.F.R. § 64.1200, as described above. As a result of
Defendant’s conduct as alleged herein, Plaintiff McGill and the Do Not Call Registry Class
suffered actual damages and, under 47 U.S.C. § 227(c), are each entitled, inter alia, to receive up
to $500 in damages for such violations of 47 C.F.R. § 64.1200.
59.
To the extent Defendant’s misconduct is determined to be willful and knowing,
the Court should, pursuant to 47 U.S.C. § 227(c)(5), treble the amount of statutory damages
recoverable by the members of the Do Not Call Registry Class.
FIFTH CAUSE OF ACTION
Violation of 47 U.S.C. § 227 et seq.
(On behalf of Plaintiff McGill and the Stop Call DNC Registry Class)
60.
Plaintiff incorporates the foregoing allegations as if fully set forth herein.
61.
Plaintiff McGill and other members of the Stop Call DNC Registry Class
expressly requested that Defendant no longer place calls to them, after which Defendant failed to
place Plaintiff and other members of the Stop Call DNC Registry Class on Defendant’s internal
do-not-call list (or failed to do so within a reasonable time period).
62.
More than thirty days following Plaintiff McGill and the other members of the
Stop Call DNC Registry Class’ express requests to not receive calls from Defendant, Defendant
placed additional calls to them without their consent and in contradiction of their requests not to
be called.
63.
Defendant violated 47 C.F.R. § 64.1200 (d) by initiating calls for telemarketing
purposes to residential and wireless telephone subscribers, such as Plaintiff McGill and the Stop
Call DNC Registry Class, without instituting procedures that comply with the regulatory
minimum standards for maintaining a list of persons who request not to receive telemarketing
calls from them.
64.
Defendant violated 47 U.S.C. § 227(c)(5) because Plaintiff McGill and the Stop
Call DNC Registry Class received more than one telephone call within a 12-month period made
by or on behalf of the Defendant in violation of 47 C.F.R. § 64.1200, as described above. As a
result of Defendant’s conduct as alleged herein, Plaintiff and the Stop Call Registry DNC Class
suffered actual damages, an invasion of his privacy, and, under 47 U.S.C. § 227(c), are each
entitled to, inter alia, up to $500 in damages for such violations of 47 C.F.R. § 64.1200.
65.
To the extent Defendant’s misconduct is determined to be willful and knowing,
the Court should, pursuant to 47 U.S.C. § 227(c)(5), treble the amount of statutory damages
recoverable by the members of the Stop Call Registry DNC Class.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff, on behalf of himself and the Class, prays for the following
1.
An order certifying the Classes as defined above, appointing Plaintiff
Rufus McGill as the representatives of the Classes and appointing his counsel as Class Counsel;
2.
An award of actual and statutory damages to be paid into a common fund
for the benefit of the Plaintiff and the Class Members;
3.
An order declaring that Defendant’s actions, as set out above, violate the
4.
A declaratory judgment that Defendant’s telephone calling equipment
constitutes an automatic telephone dialing system under the TCPA;
5.
An order requiring Defendant to disgorge any ill-gotten funds acquired as
a result of its unlawful telephone calling practices;
6.
An order requiring Defendant to identify any third-party involved in the
autodialed calling as set out above, as well as the terms of any contract or compensation
arrangement it has with such third parties;
7.
An injunction requiring Defendant to cease all unsolicited autodialed and
prerecorded calling activities, and otherwise protecting the interests of the Classes;
8.
An injunction prohibiting Defendant from using, or contracting the use of,
an automatic telephone dialing system without obtaining, and maintaining records of, call
recipient’s prior express written consent to receive calls made with such equipment;
9.
An injunction prohibiting Defendant from contracting with any third-party
for marketing purposes until it establishes and implements policies and procedures for ensuring
the third-party’s compliance with the TCPA;
10.
An injunction prohibiting Defendant from conducting any future
telemarketing activities until it has established an internal Do Not Call List as required by the
11.
An award of reasonable attorneys’ fees and costs to be paid out of the
common fund prayed for above; and
12.
Such other and further relief that the Court deems reasonable and just.
JURY DEMAND
Plaintiff request a trial by jury of all claims that can be so tried.
RUFUS MCGILL, individually and on behalf of
all others similarly situated,
Dated: May 13, 2020
By: /s/ Stefan Coleman
Stefan Coleman
([email protected])
Law Offices of Stefan Coleman, P.A.
1072 Madison Ave,
Lakewood, NJ 08701
Telephone: (877) 333-9427
Facsimile: (888) 498-8946
Counsel for Plaintiff and the Putative Class
| privacy |
3LjZC4cBD5gMZwczvAt- | KEVIN GAREY, on behalf of himself and all
others similarly situated,
Plaintiffs,
CLASS ACTION COMPLAINT
v.
BUY BUY BABY, INC.,
Defendant.
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INTRODUCTION
1. This putative class action seeks to put an end to systemic civil rights violations committed
by Defendant, BUY BUY BABY, INC. (hereafter “Defendant”), against sight-impaired,
disabled individuals, as is under Title III of the Americans with Disability Act (“ADA”),
within the State of New York and across the United States.
2. The Plaintiff, KEVIN GAREY, on behalf of himself and all other similarly situated
individuals, asserts the following claims against the Defendants, BUY BUY BABY, INC.
3. The Plaintiff is a visually-impaired and legally blind person who requires screen-
reading software to access and read website content using his computer. The Plaintiff
uses the terms “blind” or “visually-impaired” to refer to all individuals with visual
impairments who meet the legal definition of blindness in that they have a visual acuity
with correction of less than or equal to 20/200. Some blind individuals who meet this
definition have limited vision. Others have no vision.
4. Based on a 2010 U.S. Census Bureau report, approximately 8.1 million individuals in
the United States are visually impaired, including 2.0 million who are blind, and
according to the American Foundation for the Blind’s 2015 report, approximately
400,000 visually impaired persons live in the State of New York.
independently usable by the Plaintiff and other similarly situated blind or visually-
impaired persons. The Defendant’s denial of full and equal access to its website, and
therefore denial of its products and services offered thereby and in conjunction with its
physical location, is a violation of the Plaintiff’s rights under the Americans with
Disabilities Act (ADA).
6. Because the Defendant’s website is not equally accessible to blind and visually-
impaired individuals, it violates the ADA. The Plaintiff seeks a permanent injunction to
cause a change in the Defendant’s corporate policies, practices, and procedures so that the
Defendant’s website will thus become and remain accessible to blind and visually-
impaired persons.
JURISDICTION AND VENUE
7. This Court has subject-matter jurisdiction over this action under 28 U.S.C. § 1331 and
42 U.S.C. § 12181, as the Plaintiff’s claims arise under Title III of the ADA, 42 U.S.C. §
12181, et seq., and 28 U.S.C. § 1332.
8. This Court has supplemental jurisdiction under 28 U.S.C. § 1367 over the Plaintiff’s New
York State Human Rights Law, N.Y. Exec. Law article 15, (NYSHRL), New York State
Civil Rights Law article 4 (NYSCRL), and New York City Human Rights Law, N.Y.C.
Admin. Code § 8- 101, et seq., (NYCHRL) claims.
9. Venue is proper in this district under 28 U.S.C. §1391(b)(1) and (2) because the Plaintiff
resides in this district, the Defendant conducted and continue to conduct a substantial and
significant amount of business in this district, the Defendant is subject to personal
jurisdiction in this district, and a substantial portion of the conduct complained of herein
occurred in this district.
10. The Defendant is subject to personal jurisdiction in this district. The Defendant
and visually-impaired persons. A substantial part of the acts and omissions giving rise
to the Plaintiff’s claims occurred in this district: on separate occasions, the Plaintiff has
been denied the full use and enjoyment of the facilities, goods, products and services of
the Defendant’s website in this district. These access barriers that the Plaintiff
encountered have caused a denial of the Plaintiff’s full and equal access in the past,
and now deter the Plaintiff on a regular basis from visiting the Defendant’s premises.
This includes the Plaintiff attempting to obtain information about the Defendant’s
location(s), address, and hours in this district as well as those services, accommodations,
privileges, and other important information.
11. These access barriers have deterred Plaintiff from revisiting Defendant’s website
and/or visiting its physical location(s), despite an intention to do so.
12. This Court is empowered to issue a declaratory judgment under 28 U.S.C. §§ 2201 and
2202.
PARTIES
13. The Plaintiff, KEVIN GAREY, at all relevant times, was a resident of Bronx County. The
Plaintiff is a legally blind, visually-impaired, handicapped person and a member of a
protected class of individuals under the ADA, 42 U.S.C. § 12102(1)-(2), and the
regulations implementing the ADA set forth at 28 CFR § 36.101, et seq., the NYSHRL,
and NYCHRL.
14. Defendant is and was at all relevant times a Delaware business corporation doing
business in New York.
15. Defendant operates BUY BUY BABY, INC., along with a store and a website,
www.buybuybaby.com, offering features which should allow all consumers to access the
goods and services which Defendant offers in connection with its store.
17. Defendant is a retailer who offers products made for infants and young children.
Defendant’s website is offered to the public and provides consumers and the general
public with access to products including, but not limited to, a range of apparel, footwear,
strollers, car seats, furniture, bedding, and accessories for infants and young children.
Defendant’s website also offers services such as store hours and location, the ability to
browse and purchased Store products for delivery, and setting up a gift registry.
18. These stores constitute places of public accommodation. The Defendant’s stores are
public accommodations within the definition of Title III of the ADA, 42 U.S.C. §
12181(7). The Defendant’s website is a service, privilege, or advantage that is heavily
integrated with the Defendant’s physical locations and operates as a gateway thereto.
CLASS ACTION ALLEGATIONS
19. The Plaintiff, on behalf of himself and all others similarly situated, seeks to certify a New
York City subclass under Fed. R. Civ. P. 23(a) and 23(b)(2): all legally blind persons in
the City of New York who have attempted to access the Defendant’s website and as a
result have been denied access to the equal enjoyment of goods and services offered in the
Defendant’s physical locations, during the relevant statutory period.
20. Common questions of law and fact exist among the class, including: whether the
Defendant’s website is a “public accommodation” under the ADA; whether the
Defendant’s website is a “place or provider of public accommodation” under the NYSHRL
or NYCHRL; whether the Defendant’s website denies the full and equal enjoyment of its
goods, services, facilities, privileges, advantages, or accommodations to individuals with
visual disabilities, violating the ADA; and whether the Defendant’s website denies the full
and equal enjoyment of its goods, services, facilities, privileges, advantages, or
accommodations to individuals with visual disabilities, violating the NYSHRL or
limitation, the following:
a.
Whether www.buybuybaby.com is a “public accommodation” under the ADA;
b.
Whether www.buybuybaby.com is a “place or provider of public accommodation”
under the laws of the New York;
c.
Whether Defendant through its website www.buybuybaby.com denies the full and
equal enjoyment of its goods, services, facilities, privileges, advantages, or
accommodations to people with visual disabilities in violation of the ADA; and
d.
Whether Defendant through its website www.buybuybaby.com denies the full and
equal enjoyment of its goods, services, facilities, privileges, advantages, or
accommodations to people with visual disabilities in violation of the laws of New
York.
22. The Plaintiff’s claims are typical of the class. The class, similarly to the Plaintiff, are
severely visually impaired or otherwise blind, claim that the Defendants violated the ADA,
NYSHRL, and NYCHRL by failing to update or remove access barriers on the
Defendant’s website so it can be independently accessible to the class.
23. The Plaintiff will fairly and adequately represent and protect the interests of the class
because the Plaintiff has retained and is represented by counsel. Class certification of the
claims is appropriate under Fed. R. Civ. P. 23(b)(2) because the Defendant has acted or
refused to act on grounds generally applicable to the class, making appropriate both
declaratory and injunctive relief with respect to the Plaintiff and the class as a whole.
24. Alternatively, class certification is appropriate under Fed. R. Civ. P. 23(b)(3) because fact
and legal questions common to the class predominate over questions affecting only
individual class members, and because a class action is superior to other available methods
likely to avoid the burden that would be otherwise placed upon the judicial system by the
filing of numerous similar suits by individuals with visual disabilities throughout the
United States.
26. References to Plaintiff shall be deemed to include the named Plaintiff and each member
of the class, unless otherwise indicated.
NATURE OF ACTION
27. The Internet has become a significant source of information, a portal, and a tool for
conducting business, doing everyday activities such as shopping, learning, banking,
researching, as well as many other activities for sighted, blind and visually-impaired
persons alike.
28. The blind and visually-impaired persons can access websites using keyboards in
conjunction with screen access software that vocalizes the visual information found on a
computer screen or displays the content on a refreshable Braille display. This technology
is known as screen-reading software. Screen-reading software is currently the only method
a blind or visually-impaired person may independently access the internet. Unless websites
are designed to be read by screen-reading software, blind and visually-impaired persons
are unable to fully access websites, and the information, and services contained thereon.
An accessibility notice is put on a website by the creator thereof to showcase that the
website is working diligently to create a better experience for low-vision or blind users.
29. Blind and visually-impaired users of Windows operating system-enabled computers and
devices have several screen-reading software programs available to them. Some of these
programs are available for purchase and other programs are available without the user
having to purchase the program separately, like NVDA. Moreover, also available is the
Job Access With Speech (“JAWS”), which is currently the most popular, separately
30. For screen-reading software to function, the information on a website must be capable of
being rendered into text. If the website content is not capable of being rendered into text,
the blind or visually-impaired user is unable to access the same content available to sighted
users.
31. The International website standards organization, the World Wide Web Consortium,
known throughout the world as W3C, has published version 2.0 of the Web Content
Accessibility Guidelines (WCAG 2.0). WCAG 2.0 are well-established guidelines for
making websites accessible to blind and visually-impaired individuals. These guidelines
are universally followed by most large business entities and government agencies to ensure
their websites are accessible. Many Courts have also established WCAG 2.0 as the
standard guideline for accessibility.
32. There are well-established guidelines for making websites accessible to blind persons.
These guidelines have been in place for at least several years and have been followed
successfully by other large business entities in making their websites accessible. The Web
Accessibility Initiative (WAI), a project of the World Wide Web Consortium which is the
leading standards organization of the Web, has developed guidelines for website
accessibility. The federal government has also promulgated website accessibility standards
under Section 508 of the Rehabilitation Act. These guidelines are readily available via the
Internet, so that a business designing a website can easily access them. These guidelines
recommend several basic components for making websites accessible, including, but not
limited to: adding invisible alt-text to graphics; ensuring that all functions can be
performed using a keyboard and not just a mouse; ensuring that image maps are accessible,
and adding headings so that blind people can easily navigate the site. Without these very
basic components a website will be inaccessible to a blind person using a screen reader.
but are not limited to, the following: a text equivalent for every non-text element is not
provided; title frames with text are not provided for identification and navigation;
equivalent text is not provided when using scripts; forms with the same information and
functionality as for sighted persons are not provided; information about the meaning and
structure of content is not conveyed by more than the visual presentation of content; text
cannot be resized without assistive technology up to 200% without losing content or
functionality; if the content enforces a time limit, the user is not able to extend, adjust or
disable it; web pages do not have titles that describe the topic or purpose; the purpose of
each link cannot be determined from the link text alone or from the link text and its
programmatically determined link context; one or more keyboard operable user interface
lacks a mode of operation where the keyboard focus indicator is discernible; the default
human language of each web page cannot be programmatically determined; when a
component receives focus, it may initiate a change in context; changing the setting of a
user interface component may automatically cause a change of context where the user has
not been advised before using the component; labels or instructions are not provided when
content requires user input, which include captcha prompts that require the user to verify
that he or she is not a robot; in content which is implemented by using markup languages,
elements do not have complete start and end tags, elements are not nested according to
their specifications, elements may contain duplicate attributes and/or any IDs are not
unique; inaccessible Portable Document Format (PDF) files; the name and role of all user
interface elements cannot be programmatically determined; and items that can be set by
the user cannot be programmatically set and/or notification of changes to these items is
not available to user agents, including assistive technology.
STATEMENT OF FACTS
their physical location(s). Defendant is a retailer who offers products made for infants and
young children. Defendant’s website is offered to the public and provides consumers and
the general public with access to products including, but not limited to, a range of apparel,
footwear, strollers, car seats, furniture, bedding, and accessories for infants and young
children. Defendant’s website also offers services such as store hours and location, the
ability to browse and purchased Store products for delivery, and setting up a gift registry.
35. Plaintiff was in the market for infant apparel for a loved one. Upon researching and
browsing several options Plaintiff came across Defendant’s website. Plaintiff was unable
to properly access and browse Defendant’s website which prevented Plaintiff from
obtaining necessary information about products and services Defendant offers through
both online and physical channels.
36. It is, upon information and belief, the Defendant’s policy and practice to deny the
Plaintiff, along with other blind or visually-impaired users, access to the Defendant’s
website, and to therefore specifically deny the goods and services that are offered and
are heavily integrated with the Defendant’s locations. Due to the Defendant’s failure
and refusal to remove access barriers to its website, the Plaintiff and other visually-
impaired persons have been and are still being denied equal access to Defendant’s store
locations, information pertaining to good availability, information about store amenities,
including hours of operation, and related goods and services.
37. The Plaintiff is a visually-impaired and legally blind person, who cannot use a
computer without the assistance of screen-reading software. The Plaintiff is, however, a
proficient NVDA screen-reader user and uses it to access the Internet. The Plaintiff has
visited the website on separate occasions using the NVDA screen-reader.
38. During the Plaintiff’s visits to the website, the last occurring in February 2019, the
and that denied the Plaintiff the full enjoyment of the goods, and services of the website,
as well as to the goods, and services of the Defendant’s locations in New York by being
unable to learn more information about store locations, information pertaining to
availability of goods, information about store amenities, including hours of operation, and
related goods and services, among other things readily available to sighted individuals.
39. While attempting to navigate the website, the Plaintiff encountered multiple
accessibility barriers for blind or visually-impaired individuals that include, but are not
limited to: (1) Lack of alternative text (“alt-text”), or a text equivalent. Alt-text is an
invisible code embedded beneath a graphical image on a website. Web accessibility
requires that alt-text be coded with each picture so that screen-reading software can
speak the alt-text where a sighted user sees pictures, which includes captcha prompts. Alt-
text does not change the visual presentation, but instead a text box shows when the mouse
moves over the picture. The lack of alt-text on these graphics prevents screen readers from
accurately vocalizing a description of the graphics. As a result, the Defendant’s visually-
impaired customers are unable to determine what is on the website, browse, look for
store locations, information about store amenities, including hours of operation, and
related goods and services. (2) Empty links that contain no text causing the function or
purpose of the link to not be presented to the user. This can introduce confusion for
keyboard and screen-reader users. (3) Redundant links where adjacent links go to the same
URL address which results in additional navigation and repetition for keyboard and
screen-reader users. (4) Linked images missing alt-text, which causes problems if an
image within a link contains no text and that image does not provide alt-text. A screen
reader then has no content to present the user as to the function of the link, including
information contained in PDFs.
use or enjoy the facilities, goods, and services the Defendant offers to the public on
its website. The access barriers the Plaintiff encountered have caused a denial of the
Plaintiff’s full and equal access in the past, and now deter the Plaintiff on a regular basis
from accessing the website.
41. These access barriers on the Defendant’s website have deterred the Plaintiff from visiting
the Defendant’s physical store location(s) and enjoying them equal to sighted individuals
because: the Plaintiff was unable to find the location and hours of operation of the
Defendant’s locations on its website, preventing the Plaintiff from visiting the
locations to view and purchase goods and/or services. The Plaintiff intends to visit the
Defendant’s website and physical locations in the near future if the Plaintiff could access
the Defendant’s website.
42. If the website was equally accessible to all, the Plaintiff could independently navigate
the website and complete a desired transaction, as sighted individuals do.
43. The Plaintiff, through the Plaintiff’s attempts to use the website, has actual knowledge
of the access barriers that make these services inaccessible and independently unusable
by blind and visually-impaired persons.
44. Because basic compliance with WCAG 2.0 would provide the Plaintiff and other
visually-impaired persons with equal access to the website, the Plaintiff alleges that the
Defendant engaged in acts of intentional discrimination, including, but not limited
to, the following policies or practices: constructing and maintaining a website that is
inaccessible to visually-impaired persons, including the Plaintiff; failing to construct and
maintain a website that is sufficiently intuitive so as to be equally accessible to visually-
impaired persons, including the Plaintiff; and failing to take actions to correct these access
barriers in the face of substantial harm and discrimination to blind and visually-impaired
the effect of discriminating or perpetuating the discrimination against others, as alleged
herein.
46. The ADA expressly contemplates the injunctive relief that the Plaintiff seeks in this
action. In relevant part, the ADA requires:
In the case of violations of … this title, injunctive relief shall include an order to
alter facilities to make such facilities readily accessible to and usable by individuals
with disabilities …. Where appropriate, injunctive relief shall also include requiring
the … modification of a policy ….42 U.S.C. § 12188(a)(2).
47. Because the Defendant’s website has never been equally accessible, and because the
Defendant lacks a corporate policy that is reasonably calculated to cause the Defendant’s
website to become and remain accessible, the Plaintiff invokes 42 U.S.C. § 12188(a)(2)
and seeks a permanent injunction requiring the Defendant to retain a qualified consultant
acceptable to the Plaintiff to assist the Defendant to comply with WCAG 2.0 guidelines
for the Defendant’s website. The website must be accessible for individuals with
disabilities who use desktop computers, laptops, tablets, and smartphones. The Plaintiff
seeks that this permanent injunction require the Defendant to cooperate with the agreed-
upon consultant to: train the Defendant’s employees and agents who develop the
website on accessibility compliance under the WCAG 2.0 guidelines; regularly check
the accessibility of the website under the WCAG 2.0 guidelines; regularly test user
accessibility by blind or vision-impaired persons to ensure that the Defendant’s website
complies under the WCAG 2.0 guidelines; and develop an accessibility policy that is
clearly disclosed on the Defendant’s website, with contact information for users to report
accessibility-related problems and require that any third-party vendors who participate
on the Defendant’s website to be fully accessible to the disabled by conforming with
and visually-impaired persons could independently access information about store
locations, information about store amenities, including hours of operation, and related
goods and services.
49. Although the Defendant may currently have centralized policies regarding maintaining
and operating the Defendant’s website, the Defendant lacks a plan and policy reasonably
calculated to make the Defendant’s website fully and equally accessible to, and
independently usable by, blind and other visually-impaired persons.
50. The Defendant has, upon information and belief, invested substantial sums in developing
and maintaining the Defendant’s website and the Defendant has generated significant
revenue from the Defendant’s website. These amounts are far greater than the associated
cost of making the Defendant’s website equally accessible to visually impaired customers.
51. Without injunctive relief, the Plaintiff and other visually-impaired persons will continue
to be unable to independently use the Defendant’s website, violating their rights.
FIRST CAUSE OF ACTION
VIOLATIONS OF THE ADA, 42 U.S.C. § 1281 et seq.
52. Plaintiff, on behalf of himself and the Class Members, repeats and realleges every
allegation of the preceding paragraphs as if fully set forth herein.
53. Section 302(a) of Title III of the ADA, 42 U.S.C. § 12101 et seq., provides:
No individual shall be discriminated against on the basis of disability in the full and equal
enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of
any place of public accommodation by any person who owns, leases (or leases to), or
operates a place of public accommodation. 42 U.S.C. § 12182(a).
54. Defendant’s stores are public accommodations within the definition of Title III of the
ADA, 42 U.S.C. § 12181(7). Defendant’s Website is a service, privilege, or advantage of
Defendant’s store(s). The Website is a service that is integrated with these location(s).
55. Under Section 302(b)(1) of Title III of the ADA, it is unlawful discrimination to deny
12182(b)(1)(A)(i).
56. Under Section 302(b)(1) of Title III of the ADA, it is unlawful discrimination to deny
individuals with disabilities an opportunity to participate in or benefit from the products,
services, facilities, privileges, advantages, or accommodation, which is equal to the
opportunities afforded to other individuals. 42 U.S.C. § 12182(b)(1)(A)(ii).
57. Under Section 302(b)(2) of Title III of the ADA, unlawful discrimination also includes,
among other things:
[A] failure to make reasonable modifications in policies, practices, or procedures, when
such modifications are necessary to afford such goods, services, facilities, privileges,
advantages, or accommodations to individuals with disabilities, unless the entity can
demonstrate that making such modifications would fundamentally alter the nature of such
goods, services, facilities, privileges, advantages or accommodations; and a failure to take
such steps as may be necessary to ensure that no individual with a disability is excluded,
denied services, segregated or otherwise treated differently than other individuals because
of the absence of auxiliary aids and services, unless the entity can demonstrate that taking
such steps would fundamentally alter the nature of the good, service, facility, privilege,
advantage, or accommodation being offered or would result in an undue burden. 42 U.S.C.
§ 12182(b)(2)(A)(ii)-(iii).
58. The acts alleged herein constitute violations of Title III of the ADA, and the regulations
promulgated thereunder. Plaintiff, who is a member of a protected class of persons under
the ADA, has a physical disability that substantially limits the major life activity of sight
within the meaning of 42 U.S.C. §§ 12102(1)(A)-(2)(A). Furthermore, Plaintiff has been
denied full and equal access to the Website, has not been provided services that are
provided to other patrons who are not disabled, and has been provided services that are
inferior to the services provided to non-disabled persons. Defendant has failed to take any
prompt and equitable steps to remedy its discriminatory conduct. These violations are
ongoing.
59. Under 42 U.S.C. § 12188 and the remedies, procedures, and rights set forth and
incorporated therein, Plaintiff, requests relief as set forth below.
60. Plaintiff, on behalf of himself and the New York State Sub-Class Members, repeats and
realleges every allegation of the preceding paragraphs as if fully set forth herein.
61. N.Y. Exec. Law § 296(2)(a) provides that it is “an unlawful discriminatory practice for
any person, being the owner, lessee, proprietor, manager, superintendent, agent or
employee of any place of public accommodation . . . because of the . . . disability of any
person, directly or indirectly, to refuse, withhold from or deny to such person any of the
accommodations, advantages, facilities or privileges thereof.”
62. Defendant’s physical location(s) are located in State of New York and throughout the
United States and constitute sales establishments and public accommodations within the
definition of N.Y. Exec. Law § 292(9). Defendant’s Website is a service, privilege or
advantage of Defendant. Defendant’s Website is a service that is by and integrated with
these physical locations.
63. Defendant is subject to New York Human Rights Law because it owns and operates its
physical locations and Website. Defendant is a person within the meaning of N.Y. Exec.
Law § 292(1).
64. Defendant is violating N.Y. Exec. Law § 296(2)(a) in refusing to update or remove access
barriers to its Website, causing its Website and the services integrated with Defendant’s
physical locations to be completely inaccessible to the blind. This inaccessibility denies
blind patrons full and equal access to the facilities, services that Defendant makes
available to the non-disabled public.
65. Under N.Y. Exec. Law § 296(2)(c)(i), unlawful discriminatory practice includes, among
other things, “a refusal to make reasonable modifications in policies, practices, or
procedures, when such modifications are necessary to afford facilities, privileges,
advantages or accommodations to individuals with disabilities, unless such person can
undue burden".
66. Under N.Y. Exec. Law § 296(2)(c)(ii), unlawful discriminatory practice also includes, “a
refusal to take such steps as may be necessary to ensure that no individual with a disability
is excluded or denied services because of the absence of auxiliary aids and services,
unless such person can demonstrate that taking such steps would fundamentally alter the
nature of the facility, privilege, advantage or accommodation being offered or would
result in an undue burden.”
67. Readily available, well-established guidelines exist on the Internet for making websites
accessible to the blind and visually impaired. These guidelines have been followed by
other large business entities and government agencies in making their website accessible,
including but not limited to: adding alt-text to graphics and ensuring that all functions can
be performed using a keyboard. Incorporating the basic components to make its Website
accessible would neither fundamentally alter the nature of Defendant’s business nor result
in an undue burden to Defendant.
68. Defendant’s actions constitute willful intentional discrimination against the class on the
basis of a disability in violation of the NYSHRL, N.Y. Exec. Law § 296(2) in that
Defendant has:
a.
constructed and maintained a website that is inaccessible to blind
class members with knowledge of the discrimination; and/or
b.
constructed and maintained a website that is sufficiently intuitive
and/or obvious that is inaccessible to blind class members; and/or
c.
failed to take actions to correct these access barriers in the face of
substantial harm and discrimination to blind class members.
69. Defendant has failed to take any prompt and equitable steps to remedy their
and New York State Sub-Class Members on the basis of disability in the full and equal
enjoyment of the products, services, facilities, privileges, advantages, accommodations
and/or opportunities of Defendant’s Website and its physical locations under § 296(2) et
seq. and/or its implementing regulations. Unless the Court enjoins Defendant from
continuing to engage in these unlawful practices, Plaintiff and the Sub-Class Members
will continue to suffer irreparable harm.
71. Defendant’s actions were and are in violation of New York State Human Rights Law and
therefore Plaintiff invokes his right to injunctive relief to remedy the discrimination.
72. Plaintiff is also entitled to compensatory damages, as well as civil penalties and fines
under N.Y. Exec. Law § 297(4)(c) et seq. for each and every offense.
73. Plaintiff is also entitled to reasonable attorneys’ fees and costs.
74. Under N.Y. Exec. Law § 297 and the remedies, procedures, and rights set forth and
incorporated therein Plaintiff prays for judgment as set forth below.
THIRD CAUSE OF ACTION
VIOLATION OF THE NEW YORK STATE CIVIL RIGHTS LAW
75. Plaintiff, on behalf of himself and the New York State Sub-Class Members, repeats and
realleges every allegation of the preceding paragraphs as if fully set forth herein.
76. Plaintiff served notice thereof upon the attorney general as required by N.Y. Civil
Rights Law § 41.
77. N.Y. Civil Rights Law § 40 provides that “all persons within the jurisdiction of this state
shall be entitled to the full and equal accommodations, advantages, facilities and
privileges of any places of public accommodations, resort or amusement, subject only to
the conditions and limitations established by law and applicable alike to all persons. No
persons, being the owner, lessee, proprietor, manager, superintendent, agent, or employee
78. N.Y. Civil Rights Law § 40-c(2) provides that “no person because of . . . disability, as
such term is defined in section two hundred ninety-two of executive law, be subjected to
any discrimination in his or her civil rights, or to any harassment, as defined in section
240.25 of the penal law, in the exercise thereof, by any other person or by any firm,
corporation or institution, or by the state or any agency or subdivision.”
79. Defendant’s New York State physical location(s) are sales establishments and public
accommodations within the definition of N.Y. Civil Rights Law § 40-c(2). Defendant’s
Website is a service, privilege or advantage of Defendant and its Website is a service that
is by and integrated with these establishments.
80. Defendant is subject to New York Civil Rights Law because it owns and operates its
physical location(s) and Website. Defendant is a person within the meaning of N.Y. Civil
Law § 40-c(2).
81. Defendant is violating N.Y. Civil Rights Law § 40-c(2) in refusing to update or remove
access barriers to its Website, causing its Website and the goods and services integrated
with Defendant’s physical location(s) to be completely inaccessible to the blind. This
inaccessibility denies blind patrons full and equal access to the facilities, goods and
services that Defendant makes available to the non-disabled public.
82. N.Y. Civil Rights Law § 41 states that “any corporation which shall violate any of the
provisions of sections forty, forty-a, forty-b or forty-two . . . shall for each and every
violation thereof be liable to a penalty of not less than one hundred dollars nor more than
five hundred dollars, to be recovered by the person aggrieved thereby . . .”
83. Under NY Civil Rights Law § 40-d, “any person who shall violate any of the provisions
of the foregoing section, or subdivision three of section 240.30 or section 240.31 of the
more than five hundred dollars, to be recovered by the person aggrieved thereby in any
court of competent jurisdiction in the county in which the defendant shall reside ...”
84. Defendant has failed to take any prompt and equitable steps to remedy its discriminatory
conduct. These violations are ongoing.
85. Defendant discriminates, and will continue in the future to discriminate against Plaintiff
and New York State Sub-Class Members on the basis of disability are being directly or
indirectly refused, withheld from, or denied the accommodations, advantages, facilities
and privileges thereof in § 40 et seq. and/or its implementing regulations.
86. Plaintiff is entitled to compensatory damages of five hundred dollars per instance, as well
as civil penalties and fines under N.Y. Civil Law § 40 et seq. for each and every offense.
FOURTH CAUSE OF ACTION
VIOLATIONS OF THE NYCHRL
87. Plaintiff, on behalf of himself and the New York City Sub-Class Members, repeats and
realleges every allegation of the preceding paragraphs as if fully set forth herein.
88. N.Y.C. Administrative Code § 8-107(4)(a) provides that “It shall be an unlawful
discriminatory practice for any person, being the owner, lessee, proprietor, manager,
superintendent, agent or employee of any place or provider of public accommodation,
because of . . . disability . . . directly or indirectly, to refuse, withhold from or deny to
such person, any of the accommodations, advantages, facilities or privileges thereof.”
89. Defendant’s location(s) are sales establishments and public accommodations within the
definition of N.Y.C. Admin. Code § 8-102(9), and its Website is a service that is
integrated with its establishment(s).
90. Defendant is subject to NYCHRL because it owns and operates its physical locations in
the City of New York and its Website, making it a person within the meaning of N.Y.C.
or remove access barriers to Website, causing its Website and the services integrated with
its physical locations to be completely inaccessible to the blind. This inaccessibility
denies blind patrons full and equal access to the facilities, products, and services that
Defendant makes available to the non-disabled public.
92. Defendant is required to “make reasonable accommodation to the needs of persons with
disabilities . . . any person prohibited by the provisions of [§ 8-107 et seq.] from
discriminating on the basis of disability shall make reasonable accommodation to enable
a person with a disability to . . . enjoy the right or rights in question provided that the
disability is known or should have been known by the covered entity.” N.Y.C. Admin.
Code § 8-107(15)(a).
93. Defendant’s actions constitute willful intentional discrimination against the Sub-Class on
the basis of a disability in violation of the N.Y.C. Administrative Code § 8-107(4)(a) and
§ 8-107(15)(a) in that Defendant has:
a.
constructed and maintained a website that is inaccessible to blind
class members with knowledge of the discrimination; and/or
b.
constructed and maintained a website that is sufficiently intuitive
and/or obvious that is inaccessible to blind class members; and/or
c.
failed to take actions to correct these access barriers in the face of
substantial harm and discrimination to blind class members.
94. Defendant has failed to take any prompt and equitable steps to remedy their
discriminatory conduct. These violations are ongoing.
95. As such, Defendant discriminates, and will continue in the future to discriminate against
Plaintiff and members of the proposed class and subclass on the basis of disability in the
107(4)(a) and/or its implementing regulations. Unless the Court enjoins Defendant from
continuing to engage in these unlawful practices, Plaintiff and members of the class will
continue to suffer irreparable harm.
96. Defendant’s actions were and are in violation of the NYCHRL and therefore Plaintiff
invokes his right to injunctive relief to remedy the discrimination.
97. Plaintiff is also entitled to compensatory damages, as well as civil penalties and fines
under N.Y.C. Administrative Code § 8-120(8) and § 8-126(a) for each offense as well as
punitive damages pursuant to § 8-502.
98. Plaintiff is also entitled to reasonable attorneys’ fees and costs.
99. Under N.Y.C. Administrative Code § 8-120 and § 8-126 and the remedies, procedures,
and rights set forth and incorporated therein Plaintiff prays for judgment as set forth
below.
FIFTH CAUSE OF ACTION
DECLARATORY RELIEF
100. Plaintiff, on behalf of himself and the Class and New York State and City Sub-Classes
Members, repeats and realleges every allegation of the preceding paragraphs as if fully
set forth herein.
101. An actual controversy has arisen and now exists between the parties in that Plaintiff
contends, and is informed and believes that Defendant denies, that its Website contains
access barriers denying blind customers the full and equal access to the goods and services
and facilities of its Website and by extension its physical locations, which Defendant
owns, operations and controls, fails to comply with applicable laws including, but not
limited to, Title III of the Americans with Disabilities Act, 42 U.S.C. §§ 12182, et seq.,
N.Y. Exec. Law § 296, et seq., and N.Y.C. Admin. Code § 8-107, et seq. prohibiting
parties may know their respective rights and duties and act accordingly.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff respectfully requests this Court grant the following relief:
a.
A preliminary and permanent injunction to prohibit Defendant from violating the
Americans with Disabilities Act, 42 U.S.C. §§ 12182, et seq., N.Y. Exec. Law §
296, et seq., N.Y.C. Administrative Code § 8-107, et seq., and the laws of New
York;
b.
A preliminary and permanent injunction requiring Defendant to take all the steps
necessary to make its Website into full compliance with the requirements set forth
in the ADA, and its implementing regulations, so that the Website is readily
accessible to and usable by blind individuals;
c.
A declaration that Defendant owns, maintains and/or operates its Website in a
manner that discriminates against the blind and which fails to provide access for
persons with disabilities as required by Americans with Disabilities Act, 42
U.S.C. §§ 12182, et seq., N.Y. Exec. Law § 296, et seq., N.Y.C. Administrative
Code § 8-107, et seq., and the laws of New York;
d.
An order certifying the Class and Sub-Classes under Fed. R. Civ. P. 23(a) & (b)(2)
and/or (b)(3), appointing Plaintiff as Class Representative, and his attorneys as
Class Counsel;
e.
Compensatory damages in an amount to be determined by proof, including all
applicable statutory and punitive damages and fines, to Plaintiff and the proposed
class and subclasses for violations of their civil rights under New York State
Human Rights Law and City Law;
f.
Pre- and post-judgment interest;
h.
Such other and further relief as this Court deems just and proper.
DEMAND FOR TRIAL BY JURY
Pursuant to Fed. R. Civ. P. 38(b), Plaintiff demands a trial by jury on all questions of fact
the Complaint raises.
Dated: Queens, New York
February 19, 2019
SHALOM LAW, PLLC
By: /s/Jonathan Shalom
Jonathan Shalom, Esq.
[email protected]
124-04 Metropolitan Avenue
Kew Gardens, NY 11415
Telephone: (718) 971-9474
Facsimile: (718) 865-0943
ATTORNEYS FOR PLAINTIFF
| civil rights, immigration, family |
ZE0u_ogBF5pVm5zYs-mC | Barbara Quinn Smith (Pro Hac Vice)
Ohio Bar No. 0055328
[email protected]
MADDOX, HARGETT & CARUSO
9930 Johnnycake Ridge Rd., #3F
Mentor, OH 44060
Telephone: 440-354-4010
Facsimile: 440-848-8175
Additional Counsel Listed Below
IN THE UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
OAKLAND DIVISION
4:13-cv-00877-KAW
FIRST AMENDED CLASS ACTION
COMPLAINT
JURY TRIAL DEMANDED
VICTORIA EARLE, Individually and
on behalf of a Class of Individuals
Similarly Situated,
Plaintiff,
-v-
CASTING360, LLC
and
GAMBIT MOBILE, LLC
Defendants
)
)
)
)
)
)
)
)
)
)
)
)
)
)
Casting360, LLC (“Casting360”), Gambit Mobile, LLC (“Gambit Mobile”), and their unknown
agents (collectively, “Defendants”) to stop Defendants’ practice of making unsolicited text message
calls to cellular telephones, and to obtain redress for all persons injured by its conduct. Named
Plaintiff, for her Class Action Complaint, alleges as follows on personal knowledge as to herself and
her own experiences, and as to all other matters, upon information and belief, including investigation
conducted by her attorneys.
NATURE OF THE CASE
1.
In an effort to promote Casting360’s business, Defendants have engaged in an
especially malevolent form of marketing: the unauthorized transmission of advertisements in the
form of “text message“ calls to the cellular telephones of consumers throughout the nation.
2.
By effectuating these unauthorized text message calls ("unauthorized text
messages"), Defendants subject consumers to the aggravation and harm of receiving unwanted text
messages
3.
To redress these injuries, Named Plaintiff, on behalf of herself and a nationwide class
of similarly situated individuals, brings suit under the Telephone Consumer Protection Act, 47
U.S.C. § 1227, et seq. (“TCPA”), which prohibits unsolicited voice and text calls to cell phones.
4.
On behalf of the class, Named Plaintiff seeks an injunction requiring Defendants to
cease all unauthorized text messaging and an award of statutory damages to the class members,
together with costs and reasonable attorneys’ fees.
PARTIES
5.
Named Plaintiff is a resident of Arizona.
6.
Defendant Casting360 is a California corporation with its principal place of business
in San Francisco, California. An entertainment casting and talent agency, Casting360 does business
throughout the United States, including in this district.
7.
Defendant Gambit Mobile is a California corporation with its principal place of
business in San Francisco, California. Gambit Mobile is a marketing and advertising agency that
1
the United States, including in this district.
8.
Various persons, partnerships, sole proprietors, firms, corporations and individuals
not named as Defendants in this lawsuit, the identities of which are presently unknown, have
participated with Defendants Casting360 and Gambit Mobile in the offenses alleged in this
Complaint. The true names and capacities, whether individual, corporate, associate, and/or
representative are unknown to Plaintiff and their identities will require discovery. Named Plaintiff
will amend this Complaint to allege the true names and capacities of additional responsible parties
when their identities become known.
JURISDICTION & VENUE
9.
The court has subject matter jurisdiction over this action pursuant to 28 U.S.C. § 1331
because this action involves a claim arising under the laws of the United States.
10.
This Court has personal jurisdiction over Casting360 because Casting360 is a resident
of this district.
11.
This Court has personal jurisdiction over Gambit Mobile because Gambit Mobile is a
resident of this district.
12.
Venue is proper in this district under 28 USC § 1391 as all Defendants reside in this
District.
DISTRICT ASSIGNMENT
13.
This matter has been assigned to the Oakland division of the Northern District of
California.
STATEMENT OF FACTS
14.
In recent years, marketers who have felt restricted by federal laws limiting solicitation
by telephone, facsimile machine, and email have increasingly looked to alternative technologies
through which to send bulk solicitations at a low cost.
15.
One type of bulk marketing is to advertise through Short Message Services. The term
"Short Message Service or “SMS" is a messaging system that allows cellular telephone subscribers
2
characters.
16.
An “SMS message” is a text message call directed to a wireless device through the
use of the telephone number assigned to the device. When an SMS message call is successfully
made, the recipient’s cell phone rings, alerting him or her is that a call is being received. As cellular
telephones are inherently mobile and are frequently carried on their owners’ person, calls to cellular
telephones, including SMS messages, may be received by the called party virtually anywhere world,
17.
Unlike more conventional advertisements, text messages cost the recipient money,
because cell phone users must pay their wireless service providers either for each text message call
they receive or incur a usage allocation deduction to their text plan, regardless of whether the
message is authorized.
18.
Over the course of an extended period beginning possibly in 2010, but definitely by
September 12, 2012, Defendants and their agents directed the mass transmission of unauthorized text
messages to cell phones nationwide.
19.
Casting360 contracted with Gambit Mobile to advertise its business. In carrying out
those activities, Gambit Mobile acted as an agent for Casting360. Gambit Mobile had actual and/or
apparent authority to act on behalf of Casting360 with respect to all activities described herein, and
its activities in connection therewith were ratified by Casting360.
20.
Defendants, as part of their advertising campaign, sent or caused to be sent an
unauthorized text message to Named Plaintiffs’ cellular telephone on December 18, 2012. The
body of the text message read:
MOVIE EXTRAS, Actors and Models WANTED! No Experience Required.
To Register Call 888–216-3410. To UNSUB, reply STOP.
21.
Named Plaintiff followed the instructions in that message and sent a reply reading
“STOP”, in order to stop transmission of the unauthorized text messages. A copy of the text is
attached hereto as Exhibit 1.
3
Named Plaintiff’s cellular telephone. The body of the text message (attached hereto as Exhibit 2)
read:
MOVIE EXTRAS, Actors and Models WANTED! No Experience Required.
To Register Call 888–398–2941. To UNSUB, reply STOP.
23.
At no time did Named Plaintiff consent to the receipt of these messages or any other
text messages from Defendants.
CLASS ACTION ALLEGATIONS
24.
Named Plaintiff brings this action pursuant to Federal Rule of Civil Procedure
23(b)(2) and 23(b)(3) on behalf of herself and a class (the “Class”) defined as “All persons in the
United States and its Territories who received one or more unauthorized text message
advertisements from or on behalf of Casting360, LLC as part of an advertising campaign conducted
by Gambit Mobile, LLC.”
25.
Upon information and belief, there are over 1,000 members of the Class such that
joinder of all members is impracticable.
26.
Named Plaintiff will fairly and adequately represent and protect the interest of the
members of the Class. Named Plaintiff has retained counsel with substantial experience in
prosecuting complex litigation and class actions. Named Plaintiff and her counsel are committed to
vigorously prosecuting this action on behalf of the members of the class, and have the financial
resources to do so. Neither Named Plaintiff nor her counsel have any interest adverse to those of the
other members of the class.
27.
Absent a class action, most members of the class would find the cost of litigating their
claims to be prohibitive, and will have no effective remedy. Class treatment of common questions of
law and fact is also superior to multiple individual actions in that it conserves the resources of the
Court and the litigants, and promotes consistency and efficiency of adjudication.
28.
Defendants have acted and failed to act on grounds generally applicable to the Named
Plaintiff and the other members of the Class by transmitting the unauthorized text messages at issue,
4
members of the Class.
29.
The transmission of the unauthorized text messages alleged herein forms the factual
and legal basis of Defendants’ liability to Named Plaintiff and to the other members of the Class.
This conduct was the same toward all members of the Class, and resulted in injury to the Named
Plaintiffs and to all of the other members of the Class.
30.
There are many questions of law and fact common to the claims of Named Plaintiff
and the Class, and those questions predominate over any questions that may affect individual
members of the Class. Common questions include, but are not limited to the following:
(a)
Do the text messages distributed by or on behalf of Defendants violate 47 U.S.C. §
227?
(b)
Are the Class’s members entitled to treble damages based on the willfulness of
Defendant’s conduct?
(c)
Did the conduct described above violate the Class’s right to privacy?
(d)
Did Gambit Mobile act as an agent for Casting360 in sending the text messages?
FIRST CAUSE OF ACTION
(Violation of 47 U.S.C. 227)
31.
Named Plaintiff incorporates by reference the foregoing allegations as if fully re-
written herein.
32.
Defendants made unsolicited commercial text calls, including the messages described
above to the wireless telephone numbers of Named Plaintiff and Class Members. Each such text
message call was made using equipment that had the capacity to store or produce telephone numbers
to be called using a random or sequential number generator and to dial such numbers.
33.
These text calls were made en masse and without the prior express consent of the
Named Plaintiff and the other members of the Class.
34.
Defendants knew or should have known that they did not have the express consent of
the recipients of these messages because they had not received express consent.
5
Defendants’ conduct, the members of the Class suffered actual damages by having to pay their
respective wireless carriers for the receipt of such text messages and, under § 227(b)(3)(B) are each
entitled to, inter alia, a minimum of $500 in damages for each violation of such act.
36.
Because Defendants knew or should have known that Named Plaintiff and the Class
did not consent to the receipt of these text messages, the court should, pursuant to 47 USC §
227(b)(3)(C), treble the amount of statutory damages recoverable by the Named Plaintiff and the
other members of the class.
WHEREFORE, Named Plaintiff Victoria Earle, on behalf of herself and the Class, prays for
the following relief:
1. An Order certifying the Class as defined above;
2. An award of actual and statutory damages;
3. An injunction requiring Defendant to cease all unauthorized text messaging activity;
4. An award of reasonable attorneys’ fees and costs; and
5. Such further and other relief the Court deems reasonable and just.
A trial by the maximum number of jurors permitted by law is hereby demanded.
Dated: September 11, 2013
Respectfully submitted,
By __/s/ Barbara Quinn Smith__________
Barbara Quinn Smith
Daniel E. Birkhaeuser (SBN 136646)
BRAMSON, PLUTZIK, MAHLER
& BIRKHAEUSER, LLP
[email protected]
Jenelle W. Welling (SBN 209480)
[email protected]
2125 Oak Grove Rd., #120
Walnut Creek, CA 94598
Telephone: 925-945-0200
Facsimile: 925-945-8792
6
| privacy |
KLe6C4cBD5gMZwczrBAM | FILED
IN CLERK'S OF RICE
JUL 24 2012
Plaintiff,
LONG ISLAND OF
-against-
TOWNES, J.
Defendant.
CLASS ACTION COMPLAINT
Introduction
Plaintiff Berel Zweibel seeks redress for the illegal practices of First National Credit
Bureau, Inc. in which it unlawfully engaged in the collection of consumer debts in
violation of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692, et seq.
("FDCPA").
Plaintiff is a citizen of the State of New York who resides within this District.
Plaintiff is a consumer as that term is defined by Section 1692(a)(3) of the FDCPA.
The alleged debt that Defendant sought to collect from the Plaintiff involves a consumer
debt.
Upon information and belief, Defendant's principal place of business is located within
McCarran, Nevada.
-1-
Defendant is regularly engaged, for profit, in the collection of debts allegedly owed by
consumers.
Defendant is a "debt Collector" as that term is defined by the FDCPA, 15 U.S.C. §
1692(a)(6).
Jurisdiction and Venue
This Court has federal question jurisdiction under 15 U.S.C. § 1692k(d) and 28 U.S.C. §
1331.
Venue is proper in this district pursuant to 28 U.S.C. § 1391(b), as the acts and
transactions that give rise to this action occurred, in substantial part, within this district.
Allegations Particular to Berel Zweibel
Upon information and belief, on a date better known by Defendant, Defendant began to
attempt to collect an alleged consumer debt from the Plaintiff.
Within the one year immediately preceding this action, the Defendant left many
messages on the Plaintiff's answering machine on numerous occasions.
The callers presented a standard prerecorded stating: "Hello, we are trying to reach Berel
Zwiebel, if you are not this person, please press the two key now. If you are this person
please press the one key now or you can return the call at 1800 824 6191 at your earliest
convince. Thank you."
The callers failed to identify themselves as debt collectors attempting to collect a debt.
Upon information and belief, the said messages were either pre-scripted or pre-recorded.
Defendant has engaged in a pattern of leaving messages without disclosing that the
communication is from a debt collector.
-2-
The said telephone messages are in violation of 15 U.S.C. §§ 1692e(10) and 1692e(11)
for failing to indicate that the messages were from a debt collector which constitutes a
deceptive practice.
On or about June 27, 2012, a representative from First National Credit Bureau, Inc.
called the Plaintiff.
The Plaintiff answered the telephone, and the following conversation ensued:
Collector: "One moment please." "First National Collection Bureau. This is Gloria,
how can I help you?"
Plaintiff: "Hi, you guys just called me..."
Collector: "How are you today sir?"
Plaintiff: "I'm alright."
Collector: "I'm glad to hear that, it looks like we're trying to speak with I'm not even
pulling up your phone number, are you calling from a different law I've got a wrong
number in here, hold on."
Plaintiff: "I didn't call you, you guys called me."
Collector: "Berel Zweibel?"
Plaintiff: "Correct."
Collector: "Alright, do you live at 16 apt 4F?"
Plaintiff: "Correct."
Collector: "This call is being recorded for quality assurance, it is an attempt to collect a
debt, and any information obtained will be used for that purpose. My name is Lori
Klorbitt, this is a Direct Marketing account, sir, the amount owed is nine thirty nine and
-3-
73 cents."
Collector: "The open date on this was July 22 of 2003, and the last charge date on it
was, three-thirty of 2005, the last payment was $100."
Plaintiff: "And what's the name of the company whom I owe the money to?"
Collector: "The company that you owe now was AIS Services, they bought it from
Direct Marketing, and "
Plaintiff: "Ok you know what I just dispute this then."
Collector: "That's fine, I am going to take the account that you are refusing to pay and
let my client decide what they'd like to
"
Plaintiff: "No I said Listen what I said hello.
"
Collector: "Ok sir, in order to dispute an account you must write us an official letter, do
you want my address?"
Plaintiff: "That's the only way to make a dispute?"
Collector: "Yes, and you have to explain why you want to dispute it, and then my client
will decide if they will allow you dispute it or not."
Plaintiff: "Oh Ok so the only way that they're going to report it to the credit bureaus
as disputed is if I send in this letter?"
Collector: "You have to send in the letter and then they have to agree upon it just
because you send a letter, it doesn't mean that they're going to excuse you."
Plaintiff: "Ok."
Collector: "What is your dispute?"
-4-Plaintiff: "What's the address?"
Collector: "It's First National Collection Bureau, 610 Waltham Way Sparks, Nevada
NV 89434 please put your reference number on your letter, it's 036520426."
Collector: "And what is your dispute sir?"
Plaintiff: "No, I just want them to tell the credit bureau that it's disputed."
Collector: "They're not going to do that, but go ahead and send your letter have a
good day."
Plaintiff: "Bye Bye."
From the said telephone conversation, the Defendant implied that Plaintiff could not
dispute the debt over the phone, but rather, Plaintiff must put his dispute in writing, and
that there has to be some kind of a basis for the dispute.
The FDCPA does not require the consumer to provide any reason at all in order
to dispute a debt. Sambor V. Omnia Credit Servs., 183 F. Supp. 2d 1234 (D. Haw. 2002);
Mendez V. M.R.S. Assoc., 2004 WL 1745779 *2 (N.D. Ill. Aug. 3, 2004)
(a consumer is entitled to dispute the validity of a debt for a good reason, a bad reason,
or no reason at all); Whitten V. ARS National Servs. Inc., 2002 WL 1050320 *4 (N.D.
111. May 23, 2002) (imposing a requirement that a consumer have a `valid' reason to
dispute the debt is inconsistent with FDCPA); Castro V. ARS National Servs., Inc., 2000
WL 264310 (S.D.N.Y. Mar. 8, 2000); Frey V. Satter, Beyer & Spires., 1999 WL 301650
(N.D. Ill. May 3, 1999); DeSantis V. Computer Credit, Inc., 269 f.3d 159 (2nd Cir.
2001); Mejia V. Marauder Corporation., 2007 WL 806486 (N.D. Cal. 2007) (unlawful to
suggest that proof of payment required for dispute).
-5-
The FDCPA allows the consumer to orally dispute a debt. Brady V. The Credit Recovery
Company, Inc., 160 F.3d 64 (1st Cir. 1998). The FDCPA does not limit the time period
for disputing a debt. A consumer can always dispute a debt with a debt Collector,
regardless of the passage of time. Credit reporting constitutes an attempt to collect a
debt. See, e.g., Rivera V. Bank One., 145 F.R.D. 614, 623 (D.P.R. 1993) (a creditor's
report of a debt to a consumer reporting agency is a "powerful tool, designed, in part, to
wrench compliance with payment terms from its cardholder"); Matter of Sommersdorf..
139 B.R. 700, 701 (Bankr.S.D. Ohio 1991); Ditty V. CheckRite, Ltd., 973 F.Supp. 1320,
1331 (D.Utah 1997).
A consumer is entitled to dispute a debt orally and need not seek validation to overcome
the debt Collector's assumption of validity. See. Rosado V. Taylor., 324 F. Supp. 2d 917
(N.D. Ind. 2004). (The collection attorney violated § § 1692g(a)(3) by requiring that
disputes be in writing to prevent the Collector from considering the debt valid. The court
noted that oral disputes overcome the assumption of validity and impose a requirement
under § 1692e(8) that the debt Collector report the dispute if reporting the debt to third
parties).
It is well settled that § 1692g(a)(3) does not impose a writing requirement on a
consumer See. Register V. Reiner, Reiner & Bendett, P.C., 488 F.Supp.2d 143 (D.Conn
2007); Jerman V. Carlisle, McNellie, Rini, Kramer & Ulrich, 464 F.Supp.2d 720 (N.D.
Ohio 2006); Baez V. Wagner & Hunt, P.A., 442 F.Supp.2d 1273 (S.D.Fla. 2006); Turner
V. Shenandoah Legal Group, P.C., No. 3:06CV045, 2006 WL 1685698 (E.D. Va.
2006); Vega V. Credit Bureau Enters., No. CIVA02CV1550, 2005 WL 711657
-6-
(E.D.N.Y. Mar. 29, 2005); Nasca V. GC Servs. Ltd. P'ship, No 01CIV10127, 2002 WL
31040647 (S.D.N.Y. Sept. 12, 2002); In re Risk Mgmt. Alternatives, Inc., Fair Debt
Collection Practices Act Litig., 208 F.R.D. 493 (S.D.N.Y. June 14, 2002); Sambor V.
Omnia Credit Servs., Inc., 183 F.Supp.2d 1234 (D.Haw. 2002); Sanchez V. Robert E.
Weiss, Inc., 173 F.Supp.2d 1029 (N.D. Cal. 2001); Castro V. ARS Nat'l Servs., Inc., No.
99 CIV. 4596, 2000 WL 264310 (S.D.N.Y. Mar. 8, 2000); Ong V. Am. Collections
Enter., No. 98-CV-5117, 1999 WL 51816 (E.D.N.Y. Jan. 15, 1999); Reed V. Smith.
Smith & Smith, No. Civ. A. 93-956, 1995 WL 907764 (M.D.La. Feb. 8, 1995); Harvey
V. United Adjusters, 509 F.Supp.1218 (D.Or. 1981).
Semper V. JBC Legal Group, 2005 WL 2172377 (W.D. Wash. Sept. 6, 2005). (Collector
must communicate that a debt is disputed. The FDCPA does not give debt Collectors the
authority to determine unilaterally whether a dispute has merit.) Purnell V. Arrow Fin.
Servs., LLC, 2007 U.S. Dist. LEXIS 7630, 2007 WL 421828 (E.D. Mich. Feb. 2, 2007)
(The court stated "Congress has identified as harmful the failure to report a disputed debt
as disputed, and, whatever the wisdom of that policy choice, Congress did not
distinguish between communications that were intended and knowing as opposed to
unintended and automatic. Indeed, the "directly or indirectly" language of Section
1692a(2) suggests that Congress saw no difference between the two. From the
perspective of a consumer disputing a debt, it similarly matters not how it is that a
dispute marker is lost. The harm inheres in the simple fact that information about an
apparently undisputed debt in that person's name exists in the credit reporting industry,
which can have untold negative consequences for people who engage in commerce.")
-7-
Hoffman V. Partners in Collections, Inc., 1993 U.S. Dist. LEXIS 12702 (N.D. Ill. Sept.
13,1993) (The court held that the FDCPA did not require that the consumer notify the
agency of his basis for disputing the debt, or that any stated reason for the dispute had to
be one that would relieve the consumer of any part of the liability for the debt. The
complaint alleged that the consumer notified the collection agency that the debt was
disputed and that the agency did not cease collection of the debt until it obtained
verification of the debt. The complaint was sufficient to allege a violation of 15 U.S.C.S.
§ 1692g(b). The court also held that the complaint sufficiently alleged a violation of 15
U.S.C.S. § 1692e(8) by stating that the agency reported the disputed debt to credit
agencies without disclosing that it had been disputed. The court noted that n There is no
requirement that any dispute be "valid" for this statute to apply; only that there be a
dispute." Failure to communicate a dispute whether or not valid will violate 15 U.S.C. §
1692e(8) for failure to communicate that a disputed debt is disputed.)Upon information and belief, First National Credit Bureau, Inc. and its employee as a
matter of procedural practice and pattern never intend to follow through with the
validation rights they purportedly provide in the initial communication.
Upon information and belief, First National Credit Bureau, Inc. and its employees when
receiving written disputes as a matter of procedural practice and pattern, do not provide
verification of debts since they maintain all disputes in writing must be submitted with a
valid reason.
First National Credit Bureau, Inc. and its employee intentionally denied the Plaintiff his
dispute rights afforded to him under the FDCPA.
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First National Credit Bureau, Inc. and its employee wrongfully stated to the Plaintiff that
he could not orally dispute the debt with the First National Credit Bureau, Inc.
First National Credit Bureau, Inc. and its employee wrongfully stated to the Plaintiff that
he could only dispute a debt in writing.
First National Credit Bureau, Inc. and its employee wrongfully stated to the Plaintiff that
he must have a reason to dispute a debt.
Upon information and belief, First National Credit Bureau, Inc. and its employee by
intentionally denying the Plaintiff and any other debtor to dispute the debt orally and
without a valid reason unfairly intimidate and force debtors in to paying disputed debts.
The First National Credit Bureau, Inc. employee who spoke with Berel Zweibel intended
to speak the said words to the Plaintiff.
The acts and omissions of First National Credit Bureau, Inc. and its employee done in
connection with efforts to collect a debt from the Plaintiff were done intentionally and
willfully.
Upon information and belief, First National Credit Bureau, Inc. and its employees
intentionally and willfully violated the FDCPA and do so as a matter of pattern and
practice by not letting any of the class members orally dispute the debt and by
maintaining that the debtors have a valid reason to dispute any debt contrary to the
FDCPA and the rights given by the Defendant purportedly in the validation notice.
As an actual and proximate result of the acts and omissions of First National Credit
Bureau, Inc. and its employees, Plaintiff has suffered actual damages and injury,
including but not limited to, fear, stress, mental anguish, emotional stress, acute
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embarrassment and suffering for which she should be compensated in an amount to be
established by a jury at trial.
In addition, when the Plaintiff inquired as to whether or not the debt would be reported
as disputed to the credit bureaus, the Defendant stated: "They're not going to do that "
Said language is a threat to communicate false credit information.
1692e(8) clearly states " threatening to communicate to any person credit information
which is known or which should be known to be false, including the failure to
communicate that a disputed debt is disputed."
The Defendant's said statement also constitutes a deceptive and misleading
representation or means used in connection with the collection of a debt, in violation of
the FDCPA, 1692e and 1692e(10).
AS AND FOR A FIRST CAUSE OF ACTION
and the members of a class, as against the Defendant.
Plaintiff re-states, re-alleges, and incorporates herein by reference, paragraphs one (1)
through thirty six (36) as if set forth fully in this cause of action.
This cause of action is brought on behalf of Plaintiff and the members of three classes.
Class A consists of all persons whom Defendant's records reflect resided in the State of
New York and who received a telephonic message from Defendant's representative
within one year prior to the date of the within complaint up to the date of the filing of
the complaint; (a) that the Defendant denied the Plaintiff the right to dispute the debt
orally and required the Plaintiff to provide a valid reason to dispute.
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Class B consists of all persons whom Defendant's records reflect resided in the State of
New York and who received a telephonic message from Defendant's representative
within one year prior to the date of the within complaint up to the date of the filing of
the complaint; (a) that the Defendant made false threats of credit information in
violation of 15 U.S.C. §§ 1692e, 1692e(5), 1692e(8), and 1692e(10).
Class C consists of all persons: (a) whom Defendant's records reflect resided within the
State of New York who received telephonic messages from Defendant within one year
prior to the date of the within complaint up to and including the date of the filing of this
Complaint; (b) involving telephone messages which were placed without setting forth
that the communication was from a debt collector; and (c) that the telephone messages
were in violation of 15 U.S.C. 1692 §§ 1692e(10) and 1692e(11).
Pursuant to Federal Rule of Civil Procedure 23, a class action is appropriate and
preferable in this case because:
(a)
Based on the fact that form telephonic messages are at the heart of this litigation,
the class is so numerous that joinder of all members is impracticable.
(b)
There are questions of law and fact common to the class and these questions
predominate over any question(s) affecting only individual class members. Theprincipal question presented by this claim is whether the Defendant violated the
FDCPA.
(c)
The only individual issue involves the identification of the consumers who
received such telephonic messages (i.e. the class members). This is purely a
matter capable of ministerial determination from the records of the Defendant.
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(d)
The claims of the Plaintiff are typical of those of the class members. All of
the respective class claims are based on substantially similar facts and legal
theories.
(e)
The Plaintiff will fairly and adequately represent the class members'
interests. The Plaintiff has retained counsel experienced in bringing
class actions and collection abuse claims. The Plaintiff's interests are
consistent with those of the members of the class.
A class action is superior for the fair and efficient adjudication of the class members'
claims. Congress specifically envisions class actions as a principal means of enforcing
the FDCPA. 15 U.S.C. 1692(k). The members of the class are generally unsophisticated
individuals, whose rights will not be vindicated in the absence of a class action.
Prosecution of separate actions by individual members of the classes would create the
risk of inconsistent or varying adjudications resulting in the establishment of
inconsistent or varying standards for the parties and would not be in the interest of
judicial economy.
If the facts are discovered to be appropriate, the Plaintiff will seek to certify a class
pursuant to Rule 23(b)(3) of the Federal Rules of Civil Procedure.
Collection attempts, such as those made by the Defendant are to be evaluated by the
objective standard of the hypothetical "least sophisticated consumer."
Violations of the Fair Debt Collection Practices Act
The Defendant's actions as set forth above in the within complaint violates the Fair Debt
Collection Practices Act.
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Because the Defendant violated of the Fair Debt Collection Practices Act, the Plaintiff
and the members of the class are entitled to damages in accordance with the Fair Debt
Collection Practices Act.
Statutory and actual damages provided under the FDCPA, 15 U.S.C. 1692(k);
And
Attorney fees, litigation expenses and costs incurred in bringing this action; and
Any other relief that this Court deems appropriate and just under the
circumstances.
Dated: Cedarhurst, New York
July 2, 2012
all
Adam J. Fishbein, P.C. (AF-9508)
Attorney At Law
Attorney for the Plaintiff
483 Chestnut Street
Cedarhurst, New York 11516
Telephone (516) 791-4400
Facsimile (516) 791-4411
a
Adam J. Fishbein (AF-9508)
-13- | consumer fraud |
twxgFocBD5gMZwczTsrp | UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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JASON CAMACHO AND ON BEHALF OF ALL
OTHER PERSONS SIMILARLY SITUATED,
Plaintiffs,
v.
ECF CASE
No.: 18cv10599
CLASS ACTION COMPLAINT
JURY TRIAL DEMANDED
EAST STROUDSBURG UNIVERSITY,
Defendant.
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INTRODUCTION
1.
Plaintiff JASON CAMACHO, on behalf of himself and others similarly
situated, asserts the following claims against Defendant EAST STROUDSBURG
UNIVERSITY as follows.
2.
Plaintiff is a visually-impaired and legally blind person who requires
screen-reading software to read website content using his computer. Plaintiff uses the terms
“blind” or “visually-impaired” to refer to all people with visual impairments who meet the
legal definition of blindness in that they have a visual acuity with correction of less than or
equal to 20 x 200. Some blind people who meet this definition have limited vision. Others
have no vision.
3.
Based on a 2010 U.S. Census Bureau report, approximately 8.1 million
people in the United States are visually impaired, including 2.0 million who are blind, and
according to the American Foundation for the Blind’s 2015 report, approximately 400,000
visually impaired persons live in the State of New York.
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4.
Plaintiff brings this civil rights action against EAST STROUDSBURG
UNIVERSITY (“Defendant”) for its failure to design, construct, maintain, and operate its
website to be fully accessible to and independently usable by Plaintiff and other blind or
visually-impaired people. Defendant’s denial of full and equal access to its website, and
therefore denial of its products and services offered thereby and in conjunction with its
physical locations, is a violation of Plaintiff’s rights under the Americans with Disabilities
Act (“ADA”) and Section 504 of the Rehabilitation Act of 1973 (“RA”).
5.
Because Defendant’s website, WWW.ESU.EDU (the “Website” or
“Defendant’s website”), is not equally accessible to blind and visually-impaired
consumers, it violates the ADA and the RA. Plaintiff seeks a permanent injunction to cause
a change in Defendant’s corporate policies, practices, and procedures so that Defendant’s
website will become and remain accessible to blind and visually-impaired consumers.
JURISDICTION AND VENUE
6.
This Court has subject-matter jurisdiction over this action under 28 U.S.C.
§ 1331 and 42 U.S.C. § 12181, as Plaintiff’s claims arise under Title III of the ADA, 42
U.S.C. § 12181, et seq., 28 U.S.C. § 1332 and Section 504 of the Rehabilitation Act of
1973, 29 U.S.C. §794.
7.
This Court has supplemental jurisdiction under 28 U.S.C. § 1367 over
Plaintiff’s New York State Human Rights Law, N.Y. Exec. Law Article 15, (“NYSHRL”)
and New York City Human Rights Law, N.Y.C. Admin. Code § 8-101 et seq.,
(“NYCHRL”) claims.
8.
Venue is proper in this district under 28 U.S.C. §1391(b)(1) and (2) because
Defendant conducts and continues to conduct a substantial and significant amount of
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business in this District, Defendant is subject to personal jurisdiction in this District, and a
substantial portion of the conduct complained of herein occurred in this District.
9.
Defendant is subject to personal jurisdiction in this District. Defendant has
been and is committing the acts or omissions alleged herein in the Southern District of New
York that caused injury, and violated rights the ADA and RA prescribes to Plaintiff and to
other blind and other visually impaired-consumers. A substantial part of the acts and
omissions giving rise to Plaintiff’s claims occurred in this District: on separate occasions,
Plaintiff has been denied the full use and enjoyment of the facilities, goods, and services
of Defendant’s Website while attempting to access Defendant’s website from his home in
New York after attending the Defendant’s exhibit in New York, NY. EAST
STROUDSBURG’S main campus is located in East Stroudsburg, Pennsylvania. These
access barriers that Plaintiff encountered have caused a denial of Plaintiff’s full and equal
access in the past, and now deter Plaintiff on a regular basis from visiting Defendant’s
school. This includes, Plaintiff attempting to obtain information about Defendant’s school
as hereinafter set forth in more detail.
10.
Defendant is a university, college or other institution of higher learning.
Defendant regularly and systematically markets and solicits to prospective students in order
to encourage them to apply to and ultimately register and attend Defendant’s school and
thereby generate revenue for the Defendant. Defendant’s marketing campaign consists of
inter alia sending Defendant’s representatives (usually affiliated with Defendant’s Office
of Admissions) to various functions attended by prospective students such as high schools
and college fairs or exhibits.
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11.
Defendant regularly and systematically markets and solicits to prospective
students in New York City and the rest of New York State. Upon information and belief, a
substantial number of students attending Defendant’s school are from New York State.
12.
The Javits Convention Center, located in New York, NY (“Javits”) is a large
and well known place of exhibition or entertainment, or convention center or place of
public gathering and is a place of public accommodations within the definitions set forth
in 42 U.S.C. 12181 (7)(c) and (d).
13.
The National Association of College Admissions Counseling (“NACAC”)
has, for a number of years, sponsored college fairs or exhibits at Javits at least annually
and continues to do so.
14.
Defendant is a member institution of NACAC.
15.
On Nov. 5, 2018, NACAC sponsored a college fair or exhibit at Javits at
which the Defendant set up and maintained a booth with sales or admissions representatives
of the Defendant in order to market and solicit prospective students from the New York
City metropolitan area and the rest of New York State.
16.
The Defendant’s actions of marketing and soliciting prospective students in
New York State by various means including, but not limited to, exhibiting at college fairs
in New York City and utilizing their website in conjunction therewith constitutes doing
business in New York and subjects the Defendant to personal jurisdiction in this District.
See, South Dakota v. Wayfair, 585 U.S. __, (6/21/18).
17.
This Court is empowered to issue a declaratory judgment under 28 U.S.C.
§§ 2201 and 2202.
THE PARTIES
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18.
Plaintiff JASON CAMACHO, at all relevant times, is a resident of
Brooklyn, New York. Plaintiff is a blind, visually-impaired handicapped person and a
member of a protected class of individuals under the ADA, 42 U.S.C. § 12102(1)-(2), and
the regulations implementing the ADA set forth at 28 CFR §§ 36.101 et seq., under the
RA, 29 U.S.C. § 701 et seq. and the regulations implementing the RA set forth at 34
C.F.R. §104 et seq., and the NYSHRL.
19.
Upon information and belief, Defendant is and was, at all relevant times
herein, chartered or incorporated by or licensed pursuant to the Education and/or Business
Corporation laws of the state of Pennsylvania. Defendant operates EAST
STROUDSBURG UNIVERSITY as well as the EAST STROUDSBURG UNIVERSITY
website (WWW.ESU.EDU) and advertises, markets, distributes, and/or provides courses
of learning in the State of New York and throughout the United States.
20.
This school and its exhibits at Javits constitute places of public
accommodation. Defendant’s school provides to the public important educational services.
Defendant’s Website provides consumers with access to an array of services including
information about: school location and hours, curriculum and programs of instruction,
academic calendars, course and admission prerequisites, cost of tuition, available financial
aid, career services, accreditation, faculty, campus security, transfer credits, textbooks, and
other vital information needed by prospective students in order to make informed decisions
about the Defendant’s school.
21.
Defendant’s school is a public accommodation within the definition of Title
III of the ADA, 42 U.S.C. § 12181(7)(j). Defendant’s Website is a service, privilege, or
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advantage that is heavily integrated with Defendant’s physical school and its exhibits at
college fairs and operates as a gateway thereto.
NATURE OF ACTION
22.
The Internet has become a significant source of information, a portal, and a
tool for conducting business, doing everyday activities such as shopping, learning, banking,
researching, as well as many other activities for sighted, blind and visually-impaired
persons alike.
23.
In today’s tech-savvy world, blind and visually-impaired people have the
ability to access websites using keyboards in conjunction with screen access software that
vocalizes the visual information found on a computer screen or displays the content on a
refreshable Braille display. This technology is known as screen-reading software. Screen-
reading software is currently the only method a blind or visually-impaired person may
independently access the internet. Unless websites are designed to be read by screen-
reading software, blind and visually-impaired persons are unable to fully access websites,
and the information, products, and services contained thereon. An accessibility notice is
put on a website by the creator thereof to showcase that the website is working diligently
to create a better experience for low-vision or blind users.
24.
Blind and visually-impaired users of Windows operating system-enabled
computers and devices have several screen reading software programs available to them.
Some of these programs are available for purchase and other programs are available
without the user having to purchase the program separately. Job Access With Speech,
otherwise known as “JAWS” is currently the most popular, separately purchased and
downloaded screen-reading software program available for a Windows computer.
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25.
For screen-reading software to function, the information on a website must
be capable of being rendered into text. If the website content is not capable of being
rendered into text, the blind or visually-impaired user is unable to access the same content
available to sighted users.
26.
The international website standards organization, the World Wide Web
Consortium, known throughout the world as W3C, has published version 2.0 of the Web
Content Accessibility Guidelines (“WCAG 2.0”). WCAG 2.0 are well-established
guidelines for making websites accessible to blind and visually-impaired people. These
guidelines are universally followed by most large business entities and government
agencies to ensure their websites are accessible. Many Courts have also established WCAG
2.0 as the standard guideline for accessibility.
27.
Non-compliant websites pose common access barriers to blind and visually-
impaired persons. Common barriers encountered by blind and visually impaired persons
include, but are not limited to, the following:
a.
A text equivalent for every non-text element is not provided;
b.
Title frames with text are not provided for identification and
navigation;
c.
Equivalent text is not provided when using scripts;
d.
Forms with the same information and functionality as for sighted
persons are not provided;
e.
Information about the meaning and structure of content is not
conveyed by more than the visual presentation of content;
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f.
Text cannot be resized without assistive technology up to 200%
without losing content or functionality;
g.
If the content enforces a time limit, the user is not able to extend,
adjust or disable it;
h.
Web pages do not have titles that describe the topic or purpose;
i.
The purpose of each link cannot be determined from the link text
alone or from the link text and its programmatically determined link context;
j.
One or more keyboard operable user interface lacks a mode of
operation where the keyboard focus indicator is discernible;
k.
The default human language of each web page cannot be
programmatically determined;
l.
When a component receives focus, it may initiate a change in
context;
m.
Changing the setting of a user interface component may
automatically cause a change of context where the user has not been advised before using
the component;
n.
Labels or instructions are not provided when content requires user
input, which include captcha prompts that require the user to verify that he or he is not a
robot;
o.
In content which is implemented by using markup languages,
elements do not have complete start and end tags, elements are not nested according to
their specifications, elements may contain duplicate attributes and/or any IDs are not
unique;
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p.
Inaccessible Portable Document Format (PDFs); and,
q.
The name and role of all User Interface elements cannot be
programmatically determined; items that can be set by the user cannot be programmatically
set; and/or notification of changes to these items is not available to user agents, including
assistive technology.
STATEMENT OF FACTS
Defendant’s Barriers on Its Website
28.
Defendant offers the commercial website, WWW.ESU.EDU, to the public.
The website offers features which should allow all consumers to access the services which
Defendant offers in connection with their physical locations. The services offered by
Defendant include, but are not limited to the following, which allow consumers to find
information about: school location and hours, curriculum and programs of instruction,
academic calendars, course and admission prerequisites, cost of tuition, available financial
aid, career services, accreditation, faculty, campus security, transfer credits, textbooks, and
other vital information needed by prospective students in order to make an informed
decision about the Defendant’s school.
29.
It is, upon information and belief, Defendant’s policy and practice to deny
Plaintiff, along with other blind or visually-impaired users, access to Defendant’s website,
and to therefore specifically deny the services that are offered and are heavily integrated
with Defendant’s school and exhibits at college fairs. Due to Defendant’s failure and
refusal to remove access barriers to its website, Plaintiff and visually-impaired persons
have been and are still being denied equal access to Defendant’s school and the numerous
services and benefits offered to the public through the Website.
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30.
Plaintiff is a visually-impaired and legally blind person, who cannot use a
computer without the assistance of screen-reading software. Plaintiff is, however, a
proficient JAWS screen-reader user and uses it to access the Internet. Plaintiff has visited
the Website on separate occasions using the JAWS screen-reader.
31.
Plaintiff, Jason Camacho, attended the NACAC college fair at Javits on
Nov. 5, 2018 in order to obtain information from the college exhibitors presenting and
marketing at the fair including the Defendant’s school.
32.
Soon after attending the Javits fair, Mr. Camacho attempted to access the
Defendant’s website in order to obtain additional information about the Defendant’s school
but was thwarted in his efforts to do so due to the inaccessibility of the Defendant’s website
as set forth herein.
33.
During Plaintiff’s visits to the Website, Plaintiff encountered multiple
access barriers that denied Plaintiff full and equal access to the facilities and services
offered to the public and made available to the public; and that denied Plaintiff the full
enjoyment of the facilities and services of the Website, as well as to the facilities and
services of Defendant’s physical school location by being unable to learn more information
about: school location and hours, curriculum and programs of instruction, academic
calendars, course and admission prerequisites, cost of tuition, available financial aid, career
services, accreditation, faculty, campus security, transfer credits, textbooks, and other vital
information needed by prospective students in order to make an informed decision about
the Defendant’s school.
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34.
While attempting to navigate the Website, Plaintiff encountered multiple
accessibility barriers for blind or visually-impaired people that include, but are not limited
to, the following:
a.
Lack of Alternative Text (“alt-text”), or a text equivalent. Alt-text is
an invisible code embedded beneath a graphical image on a website. Web accessibility
requires that alt-text be coded with each picture so that screen-reading software can speak
the alt-text where a sighted user sees pictures, which includes captcha prompts. Alt-text
does not change the visual presentation, but instead a text box shows when the keyboard
scrolls over the picture. The lack of alt-text on these graphics prevents screen readers from
accurately vocalizing a description of the graphics. As a result, visually-impaired
prospective students of the Defendant are unable to determine what is on the website,
browse, look for: school location and hours, curriculum and programs of instruction,
academic calendars, course and admission prerequisites, cost of tuition, available financial
aid, career services, accreditation, faculty, campus security, transfer credits, textbooks, and
other vital information needed by prospective students in order to make an informed
decision about the Defendant’s school.
b.
Empty Links That Contain No Text causing the function or purpose
of the link to not be presented to the user. This can introduce confusion for keyboard and
screen-reader users;
c.
Redundant Links where adjacent links go to the same URL address
which results in additional navigation and repetition for keyboard and screen-reader users;
and
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d.
Linked Images Missing Alt-text, which causes problems if an image
within a link contains no text and that image does not provide alt-text. A screen reader then
has no content to present the user as to the function of the link, including information
contained in PDFs.
35.
The stated principles of NACAC members include “They strive to
eliminate bias within the educational system based on …disability.”1
36.
By its failure to provide a website that is accessible to the blind or vision
impaired, Defendant, that is a member of NACAC, intentionally violated NACAC’s basic
principles to eliminate bias toward the disabled as well as federal, state and city statutes
and regulations designed to protect those members of society who are in need of protection
by those various laws.
37.
NACAC maintains a business relationship with the New York Daily News
newspaper which publishes full page advertisements for the NACAC college fairs at Javits
and an onsite guide to the exhibitors which is distributed free of charge to attendees at the
college fairs. Exhibitors, such as the Defendant, may participate in the New York Daily
News advertisements and/or advertise in the onsite guide.
38.
NACAC exhibitors at Javits also participate in a cooperative lead retrieval
service to aid in their marketing efforts to prospective students in order to increase their
revenue generated by tuition paying students.
Defendant Must Remove Barriers To Its Website
1https://www.nacacnet.org/globalassets/documents/advocacy-and-ethics/statement-of-principles-of-good-
practice/spgp_10_1_2016_final.pdf last accessed Nov. , 2018.
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39.
Due to the inaccessibility of Defendant’s Website, blind and visually-
impaired customers such as Plaintiff, who need screen-readers, cannot fully and equally
use or enjoy the facilities and services Defendant offers to the public on its Website. The
access barriers Plaintiff encountered have caused a denial of Plaintiff’s full and equal
access in the past, and now deter Plaintiff on a regular basis from accessing the Website.
40.
These access barriers on Defendant’s Website have deterred Plaintiff from
visiting Defendant’s school and enjoying the services offered by the Defendant equal to
sighted individuals because: Plaintiff was unable to find information about: school location
and hours, curriculum and programs of instruction, academic calendars, course and
admission prerequisites, cost of tuition, available financial aid, career services,
accreditation, faculty, campus security, transfer credits, textbooks, and other vital
information needed by prospective students in order to make an informed decision about
the Defendant’s school. Plaintiff intends to visit Defendant's school in the near future if he
could access their website.
41.
If the Website was equally accessible to all, Plaintiff could independently
navigate the Website and complete a desired transaction as sighted individuals do.
42.
Through his attempts to use the Website, Plaintiff has actual knowledge of
the access barriers that make these services inaccessible and independently unusable by
blind and visually-impaired people.
43.
Because simple compliance with the WCAG 2.0 Guidelines would provide
Plaintiff and other visually-impaired consumers with equal access to the Website, Plaintiff
alleges that Defendant has engaged in acts of intentional discrimination or with deliberate
indifference, including, but not limited to, the following policies or practices:
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a.
Constructing and maintaining a website that is inaccessible to
visually-impaired individuals, including Plaintiff;
b.
Failure to construct and maintain a website that is sufficiently
intuitive so as to be equally accessible to visually-impaired individuals, including Plaintiff;
and,
c.
Failing to take actions to correct these access barriers in the face of
substantial harm and discrimination to blind and visually-impaired consumers, such as
Plaintiff, as a member of a protected class.
44.
Defendant therefore uses standards, criteria or methods of administration
that have the effect of discriminating or perpetuating the discrimination of others, as
alleged herein.
45.
The ADA expressly contemplates the injunctive relief that Plaintiff seeks in
this action. In relevant part, the ADA requires:
In the case of violations of . . . this title, injunctive relief shall include an order to alter
facilities to make such facilities readily accessible to and usable by individuals with
disabilities . . . Where appropriate, injunctive relief shall also include requiring the
. . . modification of a policy . . .
42 U.S.C. § 12188(a)(2).
46.
Because Defendant’s Website has never been equally accessible, and
because Defendant lacks a corporate policy that is reasonably calculated to cause its
Website to become and remain accessible, Plaintiff invokes 42 U.S.C. § 12188(a)(2) and
seeks a permanent injunction requiring Defendant to retain a qualified consultant
acceptable to Plaintiff (“Agreed Upon Consultant”) to assist Defendant to comply with
WCAG 2.0 guidelines for Defendant’s Website. The Website must be accessible for
individuals with disabilities who use computers, laptops, tablets and smart phones. Plaintiff
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seeks that this permanent injunction requires Defendant to cooperate with the Agreed Upon
Consultant to:
a.
Train Defendant’s employees and agents who develop the Website
on accessibility compliance under the WCAG 2.0 guidelines;
b.
Regularly check the accessibility of the Website under the WCAG
2.0 guidelines;
c.
Regularly test user accessibility by blind or vision-impaired persons
to ensure that Defendant’s Website complies under the WCAG 2.0 guidelines; and,
d.
Develop an accessibility policy that is clearly disclosed on
Defendant’s Website, with contact information for users to report accessibility-related
problems and require that any third party vendors who participate on its Website to be fully
accessible to the disabled by conforming with WCAG 2.0 criteria.
47.
If the Website was accessible, Plaintiff and similarly situated blind and
visually-impaired people could independently view service items, locate Defendant’s
school, shop for and otherwise research related services available via the Website such as
curriculum, financial aids, campus tours and other vital information.
48.
Although Defendant may currently have centralized policies regarding
maintaining and operating its Website, Defendant lacks a plan and policy reasonably
calculated to make them fully and equally accessible to, and independently usable by, blind
and other visually-impaired consumers.
49.
Defendant has, upon information and belief, invested substantial sums in
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developing and maintaining its Website and has generated significant revenue from the
Website. These amounts are far greater than the associated cost of making their Website
equally accessible to visually impaired customers.
50.
Without injunctive relief, Plaintiff and other visually-impaired consumers
will continue to be unable to independently use the Website, violating their rights.
CLASS ACTION ALLEGATIONS
51.
Plaintiff, on behalf of himself and all others similarly situated, seeks to
certify a nationwide class under Fed. R. Civ. P. 23(a) and 23(b)(2): all legally blind
individuals in the United States who have attempted to access Defendant’s Website and as
a result have been denied access to the equal enjoyment of services offered in Defendant’s
physical locations and on its website, during the relevant statutory period.
52.
Plaintiff, on behalf of himself and all others similarly situated, seeks to
certify a New York State subclass under Fed. R. Civ. P. 23(a) and 23(b)(2): all legally blind
individuals in the State of New York who have attempted to access Defendant’s Website
and as a result have been denied access to the equal enjoyment of services offered in
Defendant’s physical locations and on its website, during the relevant statutory period.
53.
Plaintiff, on behalf of himself and all others similarly situated, seeks to
certify a New York City subclass under Fed. R. Civ. P. 23(a) and 23(b)(2): all legally blind
individuals in the City of New York who have attempted to access Defendant’s Website
and as a result have been denied access to the equal enjoyment of services offered in
Defendant’s physical locations and on its website, during the relevant statutory period.
54.
Common questions of law and fact exist amongst Class, including:
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a.
Whether Defendant’s Website is a “public accommodation” under
the ADA;
b.
Whether Defendant’s Website is a “place or provider of public
accommodation” under the NYSHRL or NYCHRL;
c.
Whether Defendant’s Website denies the full and equal enjoyment
of its services, facilities, privileges, advantages, or accommodations to people with visual
disabilities, violating the ADA and the RA; and
d.
Whether Defendant’s Website denies the full and equal enjoyment
of its services, facilities, privileges, advantages, or accommodations to people with visual
disabilities, violating the NYSHRL and the NYCHRL.
55.
Plaintiff’s claims are typical of the Class. The Class, similarly to the
Plaintiff, are severely visually impaired or otherwise blind, and claim that Defendant has
violated the ADA, RA, NYSHRL and NYCHRL by failing to update or remove access
barriers on its Website so it can be independently accessible to the Class.
56.
Plaintiff will fairly and adequately represent and protect the interests of the
Class Members because Plaintiff has retained and is represented by counsel competent and
experienced in complex class action litigation, and because Plaintiff has no interests
antagonistic to the Class Members. Class certification of the claims is appropriate under
Fed. R. Civ. P. 23(b)(2) because Defendant has acted or refused to act on grounds generally
applicable to the Class, making appropriate both declaratory and injunctive relief with
respect to Plaintiff and the Class as a whole.
57.
Alternatively, class certification is appropriate under Fed. R. Civ. P.
23(b)(3) because fact and legal questions common to Class Members predominate over
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questions affecting only individual Class Members, and because a class action is superior
to other available methods for the fair and efficient adjudication of this litigation.
58.
Judicial economy will be served by maintaining this lawsuit as a class action
in that it is likely to avoid the burden that would be otherwise placed upon the judicial
system by the filing of numerous similar suits by people with visual disabilities throughout
the United States.
FIRST CAUSE OF ACTION
VIOLATIONS OF THE ADA, 42 U.S.C. § 12181 et seq.
59.
Plaintiff, on behalf of himself and the Class Members, repeats and realleges
every allegation of the preceding paragraphs as if fully set forth herein.
60.
Section 302(a) of Title III of the ADA, 42 U.S.C. § 12101 et seq., provides:
No individual shall be discriminated against on the basis of disability in the full and equal
enjoyment of the goods, services, facilities, privileges, advantages, or
accommodations of any place of public accommodation by any person who owns,
leases (or leases to), or operates a place of public accommodation.
42 U.S.C. § 12182(a).
61.
Defendant’s school and it’s exhibits at Javits are public accommodations
within the definition of Title III of the ADA, 42 U.S.C. § 12181(7). Defendant’s Website
is a service, privilege, or advantage of Defendant’s school. The Website is a service that is
heavily integrated with these locations and is a gateway thereto.
62.
Under Section 302(b)(1) of Title III of the ADA, it is unlawful
discrimination to deny individuals with disabilities the opportunity to participate in or
benefit from the goods, services, facilities, privileges, advantages, or accommodations of
an entity. 42 U.S.C. § 12182(b)(1)(A)(i).
-18-
63.
Under Section 302(b)(1) of Title III of the ADA, it is unlawful
discrimination to deny individuals with disabilities an opportunity to participate in or
benefit from the goods, services, facilities, privileges, advantages, or accommodation,
which is equal to the opportunities afforded to other individuals. 42 U.S.C. §
12182(b)(1)(A)(ii).
64.
Under Section 302(b)(2) of Title III of the ADA, unlawful discrimination
also includes, among other things:
[A] failure to make reasonable modifications in policies, practices, or procedures, when
such modifications are necessary to afford such goods, services, facilities,
privileges, advantages, or accommodations to individuals with disabilities, unless
the entity can demonstrate that making such modifications would fundamentally
alter the nature of such goods, services, facilities, privileges, advantages or
accommodations; and a failure to take such steps as may be necessary to ensure that
no individual with a disability is excluded, denied services, segregated or otherwise
treated differently than other individuals because of the absence of auxiliary aids
and services, unless the entity can demonstrate that taking such steps would
fundamentally alter the nature of the good, service, facility, privilege, advantage,
or accommodation being offered or would result in an undue burden.
42 U.S.C. § 12182(b)(2)(A)(ii)-(iii).
65.
The acts alleged herein constitute violations of Title III of the ADA, and the
regulations promulgated thereunder. Plaintiff, who is a member of a protected class of
persons under the ADA, has a physical disability that substantially limits the major life
activity of sight within the meaning of 42 U.S.C. §§ 12102(1)(A)-(2)(A). Furthermore,
Plaintiff has been denied full and equal access to the Website, has not been provided
services that are provided to other patrons who are not disabled, and has been provided
services that are inferior to the services provided to non-disabled persons. Defendant has
failed to take any prompt and equitable steps to remedy its discriminatory conduct. These
violations are ongoing.
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66.
Under 42 U.S.C. § 12188 and the remedies, procedures, and rights set forth
and incorporated therein, Plaintiff, requests relief as set forth below.
SECOND CAUSE OF ACTION
VIOLATIONS OF THE NYSHRL
67.
Plaintiff, on behalf of himself and the New York State Sub-Class Members,
repeats and realleges every allegation of the preceding paragraphs as if fully set forth
herein.
68.
N.Y. Exec. Law § 296(2)(a) provides that it is “an unlawful discriminatory
practice for any person, being the owner, lessee, proprietor, manager, superintendent, agent
or employee of any place of public accommodation . . . because of the . . . disability of any
person, directly or indirectly, to refuse, withhold from or deny to such person any of the
accommodations, advantages, facilities or privileges thereof.”
69.
Defendant’s physical exhibit locations are located in the State of New York
and constitutes a public accommodation within the definition of N.Y. Exec. Law § 292(9).
Defendant’s Website is a service, privilege or advantage of Defendant. Defendant’s
Website is a service that is heavily integrated with these physical locations and is a gateway
thereto.
70.
Defendant is subject to New York Human Rights Law because it owns and
operates its physical locations and Website. Defendant is a person within the meaning of
N.Y. Exec. Law § 292(1).
71.
Defendant is violating N.Y. Exec. Law § 296(2)(a) in refusing to update or
remove access barriers to its Website, causing its Website and the services integrated with
Defendant’s physical locations to be completely inaccessible to the blind. This
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inaccessibility denies blind patrons full and equal access to the facilities and services that
Defendant makes available to the non-disabled public.
72.
Under N.Y. Exec. Law § 296(2)(c)(i), unlawful discriminatory practice
includes, among other things, “a refusal to make reasonable modifications in policies,
practices, or procedures, when such modifications are necessary to afford facilities,
privileges, advantages or accommodations to individuals with disabilities, unless such
person can demonstrate that making such modifications would fundamentally alter the
nature of such facilities, privileges, advantages or accommodations being offered or would
result in an undue burden".
73.
Under N.Y. Exec. Law § 296(2)(c)(ii), unlawful discriminatory practice
also includes, “a refusal to take such steps as may be necessary to ensure that no individual
with a disability is excluded or denied services because of the absence of auxiliary aids and
services, unless such person can demonstrate that taking such steps would fundamentally
alter the nature of the facility, privilege, advantage or accommodation being offered or
would result in an undue burden.”
74.
Readily available, well-established guidelines exist on the Internet for
making websites accessible to the blind and visually impaired. These guidelines have been
followed by other large business entities and government agencies in making their website
accessible, including but not limited to: adding alt-text to graphics and ensuring that all
functions can be performed using a keyboard. Incorporating the basic components to make
its Website accessible would neither fundamentally alter the nature of Defendant’s business
nor result in an undue burden to Defendant.
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75.
Defendant’s actions constitute willful intentional discrimination against the
State Sub-class on the basis of a disability in violation of the NYSHRL, N.Y. Exec. Law §
296(2) in that Defendant has:
a.
constructed and maintained a website that is inaccessible to blind
class members with knowledge of the discrimination; and/or
b.
constructed and maintained a website that is sufficiently intuitive
and/or obvious that is inaccessible to blind class members; and/or
c.
failed to take actions to correct these access barriers in the face of
substantial harm and discrimination to blind class members.
76.
Defendant has failed to take any prompt and equitable steps to remedy their
discriminatory conduct. These violations are ongoing.
77.
Defendant discriminates, and will continue in the future to discriminate
against Plaintiff and New York State Sub-Class Members on the basis of disability in the
full and equal enjoyment of the goods, services, facilities, privileges, advantages,
accommodations and/or opportunities of Defendant’s Website and its physical locations
under § 296(2) et seq. and/or its implementing regulations. Unless the Court enjoins
Defendant from continuing to engage in these unlawful practices, Plaintiff and the State
Sub-Class Members will continue to suffer irreparable harm.
78.
Defendant’s actions were and are in violation of New York State Human
Rights Law and therefore Plaintiff invokes his right to injunctive relief to remedy the
discrimination.
79.
Plaintiff is also entitled to compensatory damages, as well as civil penalties
and fines under N.Y. Exec. Law § 297(4)(c) et seq. for each and every offense.
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80.
Plaintiff is also entitled to reasonable attorneys’ fees and costs.
81.
Under N.Y. Exec. Law § 297 and the remedies, procedures, and rights set
forth and incorporated therein Plaintiff prays for judgment as set forth below.
THIRD CAUSE OF ACTION
VIOLATION OF THE NEW YORK STATE CIVIL RIGHTS LAW
82.
Plaintiff, on behalf of himself and the New York State Sub-Class Members,
repeats and realleges every allegation of the preceding paragraphs as if fully set forth
herein.
83.
Plaintiff served notice thereof upon the attorney general as required by N.Y.
Civil Rights Law § 41.
84.
N.Y. Civil Rights Law § 40 provides that “all persons within the jurisdiction
of this state shall be entitled to the full and equal accommodations, advantages, facilities
and privileges of any places of public accommodations, resort or amusement, subject only
to the conditions and limitations established by law and applicable alike to all persons. No
persons, being the owner, lessee, proprietor, manager, superintendent, agent, or employee
of any such place shall directly or indirectly refuse, withhold from, or deny to any person
any of the accommodations, advantages, facilities and privileges thereof . . .”
85.
N.Y. Civil Rights Law § 40-c(2) provides that “no person because of . . .
disability, as such term is defined in section two hundred ninety-two of executive law, be
subjected to any discrimination in his or her civil rights, or to any harassment, as defined
in section 240.25 of the penal law, in the exercise thereof, by any other person or by any
firm, corporation or institution, or by the state or any agency or subdivision.”
86.
Defendant’s New York physical locations are public accommodations
within the definition of N.Y. Civil Rights Law § 40-c(2). Defendant’s Website is a service,
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privilege or advantage of Defendant and its Website is a service that is heavily integrated
with these establishments and is a gateway thereto.
87.
Defendant is subject to New York Civil Rights Law because it owns and
operates its physical locations and Website. Defendant is a person within the meaning of
N.Y. Civil Law § 40-c(2).
88.
Defendant is violating N.Y. Civil Rights Law § 40-c(2) in refusing to update
or remove access barriers to its Website, causing its Website and the services integrated
with Defendant’s physical locations to be completely inaccessible to the blind. This
inaccessibility denies blind patrons full and equal access to the facilities, goods and
services that Defendant makes available to the non-disabled public.
89.
N.Y. Civil Rights Law § 41 states that “any corporation which shall violate
any of the provisions of sections forty, forty-a, forty-b or forty two . . . shall for each and
every violation thereof be liable to a penalty of not less than one hundred dollars nor more
than five hundred dollars, to be recovered by the person aggrieved thereby . . .”
90.
Under NY Civil Rights Law § 40-d, “any person who shall violate any of
the provisions of the foregoing section, or subdivision three of section 240.30 or section
240.31 of the penal law, or who shall aid or incite the violation of any of said provisions
shall for each and every violation thereof be liable to a penalty of not less than one hundred
dollars nor more than five hundred dollars, to be recovered by the person aggrieved thereby
in any court of competent jurisdiction in the county in which the defendant shall reside ...”
91.
Defendant has failed to take any prompt and equitable steps to remedy its
discriminatory conduct. These violations are ongoing.
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92.
Defendant discriminates, and will continue in the future to discriminate
against Plaintiff and New York State Sub-Class Members on the basis of disability are
being directly or indirectly refused, withheld from, or denied the accommodations,
advantages, facilities and privileges thereof in § 40 et seq. and/or its implementing
regulations.
93.
Plaintiff is entitled to compensatory damages of five hundred dollars per
instance, as well as civil penalties and fines under N.Y. Civil Law § 40 et seq. for each and
every offense.
FOURTH CAUSE OF ACTION
VIOLATIONS OF THE REHABILITATION ACT of 1973, §504
94.
Plaintiff, on behalf of himself and the Class Members, repeats and realleges
every allegation of the preceding paragraphs as if fully set forth herein.
95.
29 U.S.C. § 794(a) provides “No otherwise qualified individual with a
disability in the United States … shall, solely by reason of her or his disability, be excluded
from participation in, be denied the benefits of, or be subjected to discrimination under any
program or activity receiving Federal financial assistance….”
96.
29 U.S.C. § 794(b) defines “program or activity” as “all operations
of…(2)(A) a college, university, or other postsecondary institution, or a public system of
education; or (B) a local educational agency…, system of career and technical education,
or other school system.”
97.
Defendant receives Federal financial assistance.
98.
Defendant’s operations, including its website, is a program or activity
within the meaning of 29 U.S.C. § 794.
99.
The acts alleged herein constitute violations of THE REHABILITATION
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ACT of 1973, § 504, and the regulations promulgated thereunder. Plaintiff, who is a
member of a protected class of persons under the RA, has a physical disability that
substantially limits the major life activity of sight within the meaning of 42 U.S.C. §§
12102(1)(A)-(2)(A). Furthermore, Plaintiff has been denied full and equal access to the
Website, has not been provided services that are provided to other patrons who are not
disabled, and has been provided services that are inferior to the services provided to non-
disabled persons. Defendant has failed to take any prompt and equitable steps to remedy
its discriminatory conduct. These violations are ongoing.
100.
Defendant discriminates, and will continue in the future to discriminate
against Plaintiff and the Class Members on the basis of disability in the full and equal
enjoyment of the goods, services, facilities, privileges, advantages, accommodations and/or
opportunities of Defendant’s Website and its physical locations under the RA and/or its
implementing regulations. Unless the Court enjoins Defendant from continuing to engage
in these unlawful practices, Plaintiff and the Class Members will continue to suffer
irreparable harm.
101.
Defendant’s violations of Sec. 504 of the RA were intentional or with
deliberate indifference.
102.
As a result of Defendant’s violations, Plaintiff is entitled to damages from
the Defendant.
FIFTH CAUSE OF ACTION
VIOLATIONS OF THE NYCHRL
103.
Plaintiff, on behalf of himself and the New York City Sub-Class Members,
repeats and realleges every allegation of the preceding paragraphs as if fully set forth
herein.
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104.
N.Y.C. Administrative Code § 8-107(4)(a) provides that “It shall be an
unlawful discriminatory practice for any person, being the owner, lessee, proprietor,
manager, superintendent, agent or employee of any place or provider of public
accommodation, because of . . . disability . . . directly or indirectly, to refuse, withhold
from or deny to such person, any of the accommodations, advantages, facilities or
privileges thereof.”
105.
Defendant’s locations are public accommodations within the definition of
N.Y.C. Admin. Code § 8-102(9), and its Website is a service that is integrated with its
establishments.
106.
Defendant is subject to NYCHRL because it owns and operates its physical
locations in the City of New York and its Website, making it a person within the meaning
of N.Y.C. Admin. Code § 8-102(1).
107.
Defendant is violating N.Y.C. Administrative Code § 8-107(4)(a) in
refusing to update or remove access barriers to Website, causing its Website and the
services integrated with its physical locations to be completely inaccessible to the blind.
This inaccessibility denies blind patrons full and equal access to the facilities, goods, and
services that Defendant makes available to the non-disabled public.
108.
Defendant is required to “make reasonable accommodation to the needs of
persons with disabilities . . . any person prohibited by the provisions of [§ 8-107 et seq.]
from discriminating on the basis of disability shall make reasonable accommodation to
enable a person with a disability to . . . enjoy the right or rights in question provided that
the disability is known or should have been known by the covered entity.” N.Y.C. Admin.
Code § 8-107(15)(a).
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109.
Defendant’s actions constitute willful intentional discrimination against the
City Sub-Class on the basis of a disability in violation of the N.Y.C. Administrative Code
§ 8-107(4)(a) and § 8-107(15)(a) in that Defendant has:
a.
constructed and maintained a website that is inaccessible to blind
class members with knowledge of the discrimination; and/or
b.
constructed and maintained a website that is sufficiently intuitive
and/or obvious that is inaccessible to blind class members; and/or
c.
failed to take actions to correct these access barriers in the face of
substantial harm and discrimination to blind class members.
110.
Defendant has failed to take any prompt and equitable steps to remedy their
discriminatory conduct. These violations are ongoing.
111.
As such, Defendant discriminates, and will continue in the future to
discriminate against Plaintiff and members of the proposed City Sub-class on the basis of
disability in the full and equal enjoyment of the goods, services, facilities, privileges,
advantages, accommodations and/or opportunities of its Website and its establishments
under § 8-107(4)(a) and/or its implementing regulations. Unless the Court enjoins
Defendant from continuing to engage in these unlawful practices, Plaintiff and members
of the City Sub-class will continue to suffer irreparable harm.
112.
Defendant’s actions were and are in violation of the NYCHRL and therefore
Plaintiff invokes his right to injunctive relief to remedy the discrimination.
113.
Plaintiff is also entitled to compensatory damages, as well as civil penalties
and fines under N.Y.C. Administrative Code § 8-120(8) and § 8-126(a) for each offense as
well as punitive damages pursuant to § 8-502(a).
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114.
Plaintiff is also entitled to reasonable attorneys’ fees and costs.
115.
Under N.Y.C. Administrative Code § 8-120 and § 8-126 and the remedies,
procedures, and rights set forth and incorporated therein Plaintiff prays for judgment as set
forth below.
SIXTH CAUSE OF ACTION
DECLARATORY RELIEF
116.
Plaintiff, on behalf of himself and the Class and New York State and City
Sub-Classes Members, repeats and realleges every allegation of the preceding paragraphs
as if fully set forth herein.
117.
An actual controversy has arisen and now exists between the parties in that
Plaintiff contends, and is informed and believes that Defendant denies, that its Website
contains access barriers denying blind customers the full and equal access to the goods,
services and facilities of its Website and by extension its physical locations, which
Defendant owns, operates and controls and fails to comply with applicable laws including,
but not limited to, Title III of the Americans with Disabilities Act, 42 U.S.C. §§ 12182, et
seq., N.Y. Exec. Law § 296, et seq., N.Y.C. Admin. Code § 8-107, et seq. and The
Rehabilitation Act of 1973, § 504 et seq. prohibiting discrimination against the blind.
118.
A judicial declaration is necessary and appropriate at this time in order
that each of the parties may know their respective rights and duties and act accordingly.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff respectfully requests this Court grant the following relief:
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a.
A preliminary and permanent injunction to prohibit Defendant from
violating the Americans with Disabilities Act, 42 U.S.C. §§ 12182, et seq., The
Rehabilitation Act of 1973, 29 U.S.C. § 794 et seq. N.Y. Exec. Law § 296, et seq., N.Y.C.
Admin. Code § 8-107, et seq. and the laws of New York;
b.
A preliminary and permanent injunction requiring Defendant to take
all the steps necessary to make its Website into full compliance with the requirements set
forth in the ADA and the RA, and its implementing regulations, so that the Website is
readily accessible to and usable by blind individuals;
c.
A declaration that Defendant owns, maintains and/or operates its
Website in a manner that discriminates against the blind and which fails to provide access
for persons with disabilities as required by Americans with Disabilities Act, 42 U.S.C. §§
12182, et seq., The Rehabilitation Act of 1973, 29 U.S.C. § 794 et seq., N.Y. Exec. Law §
296, et seq., N.Y.C. Admin. Code § 8-107, et seq. and the laws of New York
d.
An order certifying the Class and the State and City Sub-Classes
under Fed. R. Civ. P. 23(a) & (b)(2) and/or (b)(3), appointing Plaintiff as Class
Representative, and his attorneys as Class Counsel;
e.
Compensatory and damages in an amount to be determined by
proof, including all applicable statutory and punitive damages and fines, to Plaintiff and
the proposed class for violations of their civil rights under The Rehabilitation Act of 1973,
New York State Human Rights Law and City Law;
f.
Pre- and post-judgment interest;
g.
An award of costs and expenses of this action together with
reasonable attorneys’ and expert fees; and
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h.
Such other and further relief as this Court deems just and proper.
DEMAND FOR TRIAL BY JURY
Pursuant to Fed. R. Civ. P. 38(b), Plaintiff demands a trial by jury on all questions
of fact the Complaint raises.
Dated: New York, New York
Nov. 14, 2018
GOTTLIEB & ASSOCIATES
s/ Jeffrey M. Gottlieb
Jeffrey M. Gottlieb
Jeffrey M. Gottlieb (JG-7905)
Dana L. Gottlieb (DG-6151)
GOTTLIEB & ASSOCIATES
150 East 18th Street, Suite PHR
New York, New York 10003
Tel: 212.879-0240
Fax: 212.982.6284
[email protected]
[email protected]
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| civil rights, immigration, family |
6LxaDIcBD5gMZwczSxc5 |
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UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
**************************************
)
ISIDORO BLANCO, CARLOS ASCENCIO,
and NELSON OMAR HERNANDEZ, on
behalf of themselves and all others similarly
situated,
Civil Action No.:
)
Plaintiffs,
)
)
v.
)
)
)
)
)
)
)
)
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UNITED COMB AND NOVELTY
CORPORATION d/b/a UNITED
SOLUTIONS and UNITED PLASTICS, ASI
STAFFING GROUP CORP. d/b/a ASI
GROUP CORPORATION, AMAA
ASSOCIATES, INC., AMAA GROUP, INC.,
INTERIM RECRUITING SOLUTIONS, INC.,
TML INTERNATIONAL, INC., US
STAFFING CORP., EDWARD W. ZEPHIR,
SETARA B. SHETU, ANTONIO CARRERO,
MOHAMMED SUMAN, MAZHARUL
ISLAM, and MONZUR KHAN,
)
Defendants.
)
)
**************************************
CLASS AND COLLECTIVE ACTION COMPLAINT
AND DEMAND FOR JURY TRIAL
INTRODUCTION
1.
This is an action seeking payment of overtime premiums due to Plaintiffs
and other similarly situated low-wage workers under federal and state law for work
performed at a plastics factory located at 33 Patriots Circle in Leominster, Massachusetts.
2.
These low-wage workers regularly work or worked at the plastics factory
between four and seven 12-hour shifts per week, that is, between 48 and 84 hours per
week. Their employers, described more particularly below, regularly and deliberately
failed to pay overtime pay as required by both state and federal law and illegally and
deliberately evaded the state and federal overtime laws by paying workers for work
performed at the plastics factory with two separate checks or with a combination of check
and cash.
JURISDICTION AND VENUE
3.
Jurisdiction over this action is conferred on this court under 29 U.S.C. §
216(b) and 28 U.S.C. § 1331.
4.
Venue in this district is appropriate pursuant to 28 U.S.C. § 1391(b)
because the events or omissions giving rise to this claim occurred in this district at the
plastics factory located at 33 Patriots Circle, Leominster, Massachusetts, (hereinafter, the
“Patriots Circle Factory”).
PARTIES
5.
Plaintiff Isidoro F. Blanco is a resident of Leominster, Massachusetts.
6.
Plaintiff Carlos Asencio is a resident of Leominster, Massachusetts.
7.
Plaintiff Nelson Omar Hernandez is a resident of Leominster,
Massachusetts.
8.
Defendant United Comb and Novelty Corporation, doing business as
United Solutions and/or United Plastics (hereinafter “United”), is a domestic corporation
organized under the laws of Massachusetts. It has operations located at 33 Patriots Circle,
Leominster, Massachusetts, 01453-5967, as well as in Sardis, Mississippi and Gilbert,
Arizona. According to corporate filings with the Massachusetts Secretary of the
Commonwealth (hereinafter “corporate filings”), its business office is located at 161 Sixth
Street, Leominster, Massachusetts, 01453. United was incorporated in Massachusetts in
1977. United fabricates molded plastic products for commercial, governmental and
residential use under its own and other corporate trademarks.
9.
At all times relevant to this litigation, Defendant United has been owned
and operated by Defendant Edward Zephir, who is also United’s president, treasurer,
secretary, director, and registered agent. Edward Zephir’s address is identified in United’s
corporate filings as 437 West Street, Leominster, Massachusetts, 01453.
10.
Defendant ASI Staffing Group Corporation, d/b/a ASI Group Corporation
(hereinafter “ASI Staffing”) is a domestic corporation organized under the laws of
Massachusetts, with its principal Massachusetts office located at 774 Crawford Street,
Fitchburg, Massachusetts, 01420, and a second office located at 345 Central Street,
Leominster, Massachusetts, 01453. ASI Staffing has operated in Massachusetts since at
least 2006 and was incorporated in Massachusetts in 2009. According to its articles of
incorporation, ASI Staffing was organized to provide “temporary employment.” ASI
Staffing claims on its website that it offers “staffing services” and that it handles all of its
clients’ “staffing needs and all legal and financial responsibilities.” According to its
website, ASI Staffing also has operations in Sardis, Mississippi, Gilbert, Arizona, and
Norcross, Georgia.
11.
At all times during ASI Staffing’s existence, Defendant Setara B. Shetu has
been its sole corporate officer, serving as its president, treasurer, secretary, director, and
registered agent. Setara Shetu’s address is identified in ASI Staffing’s corporate filings as
96 Oak Street, Taunton, Massachusetts, 02780.
12.
Defendant AMAA Associates, Inc., also d/b/a AMAA Group, Inc.
(hereinafter “AMAA”), is a domestic corporation organized under the laws of
Massachusetts; its date of incorporation is listed in corporate filings as March 24, 2011.
AMAA’s principal Massachusetts office is located at 163 Pioneer Drive, 2nd Floor,
Leominster, Massachusetts, 01453. According to its articles of incorporation, AMAA
was incorporated as an “employment agency.”
13.
At all times during AMAA’s existence, Defendant Mazaharul Islam has
been its sole corporate officer, serving as its president, treasurer, secretary, vice president,
director, and registered agent. Mazaharul Islam’s address is identified in AMAA’s
corporate filings as 163 Pioneer Drive, 2nd Floor, Leominster, Massachusetts, 01453, and
345 Central Street, Leominster, Massachusetts, 01453.
14.
Defendant Interim Recruiting Solutions, Inc. (hereinafter “Interim
Recruiting”), is a domestic corporation organized under the laws of Massachusetts;
according to its articles of incorporation, Interim Recruiting was incorporated on
September 30, 2010. Interim Recruiting has offices located at 2886 Keeley Cove,
Southaven, Massachusetts, 38671, and 163 Pioneer Drive, Leominster, Massachusetts,
01453. According to its articles of incorporation, Interim Recruiting was incorporated as
an “employment agency.”
15.
At all times during Interim Recruiting’s existence, Defendant Antonio
Carrero has been its sole corporate officer, serving as its president, vice president,
treasurer, secretary, and director. Antonio Carrero’s addresses are identified in Interim
Recruiting’s corporate filings as 255 Granite Street, Leominster, Massachusetts, 01453,
and 2886 Keeley Cove, Southaven, Massachusetts, 38671.
16.
Defendant TML International, Inc. (hereinafter “TML”) is a domestic
corporation organized under the laws of Massachusetts; according to its articles of
incorporation, TML was incorporated on or about March 16, 2009. TML has offices at 95
Montello Street, No. 101, Brockton, Massachusetts, 02301. According to its initial articles
of incorporation, TML was incorporated to provide “factory/office consultant” assistance;
its mission was amended in 2009 to provide “IT/Office Help/Consulting/Any other work
permitted under the law.”
17.
At all times during Interim Recruiting’s existence, Defendant Monzur
Khan has been its president, treasurer, director, and registered agent. Monzur Khan’s
addresses are identified in TML’s corporate filings as 95 Montello Street, Taunton,
Massachusetts, 02301, 95 Montello Street, Brockton, Massachusetts, 02301, and 96 Oak
Street, Taunton, Massachusetts, 02780.
18.
Defendant US Staffing Corp. (hereinafter “US Staffing”), is a domestic
corporation organized under the laws of Massachusetts; according to its corporate filings,
US Staffing was incorporated on or about November 29, 2011. US Staffing has offices at
29 Comstock Road, Leominster, Massachusetts, 01453. According to its articles of
incorporation, US Staffing was incorporated as an “employment agency.”
19.
At all times during US Staffing’s existence, Defendant Mohammed Suman
has been its sole corporate officer, serving as its president, vice president, treasurer,
secretary, director, and registered agent. Mohammed Suman’s addresses are identified in
US Staffing’s corporate filings as 29 Comstock Road, Leominster, Massachusetts, 01453,
and 1040 Hampton Hill Ct., Lawrenceville, Georgia, 30044.
20.
Hereinafter United, ASI Staffing, AMAA, Interim Recruiting, TML, and
US Staffing are referred to collectively as the “Corporate Defendants.”
21.
Hereinafter Edward Zephir, Setara Shetu, Mazaharul Islam, Antonio
Carrero, Monzur Khan, and Mohammed Suman are referred to collectively as the
“Individual Defendants.”
FACTUAL ALLEGATIONS
22.
The plastics factory located at 33 Patriots Circle, Leominster,
Massachusetts (“Patriot’s Circle Factory”) is owned and operated by Defendant United.
The Patriots Circle Factory manufactures molded plastic goods for residential and
commercial use under United’s trade label as well as the labels of other companies with
which United has manufacturing agreements.
23.
Since well before April 1, 2010 and continuing to the present date,
Defendant United has operated the Patriots Circle Factory 24 hours a day, 7 days a week.
Manufacturing, finishing, and maintenance work at the Patriots Circle Factory is
performed in two 12-hour shifts, 7:00 a.m. to 7:00 p.m. or 7:00 p.m. to 7:00 a.m.
24.
Between approximately April 2002 and approximately November 2012,
Plaintiff Isidoro Blanco worked at the Patriots Circle Factory. For work performed after
April 1, 2010, Plaintiff Blanco earned a base hourly wage rate between $8.00 and $9.25
per hour.
25.
Between approximately 2009 and approximately May 2012, Plaintiff
Carlos Asencio worked at the Patriots Circle Factory. For work performed after April 1,
2010, Plaintiff Asencio earned a base hourly wage rate between $8.00 and $8.75 an hour.
26.
Between approximately November 2006 and January 2013, Plaintiff
Nelson Omar Hernandez worked at the Patriots Circle Factory. For all work performed
after April 1, 2010, Plaintiff Hernandez earned a base hourly wage rate between $8.25 and
$9.75 an hour.
27.
During the period between April 1, 2010 and continuing to the present date,
the above-named Plaintiffs and all other similarly situated individuals (hereinafter
“Plaintiffs”) performed manufacturing, finishing, and maintenance functions at the
Patriots Circle Factory necessary to turn raw materials into molded plastic products—e.g.,
such as garbage cans, storage containers, laundry hampers,—and to prepare them for sale.
28.
At all times between April 1, 2010 and the present date, when the
Plaintiffs were working at the Patriots Circle Factory, Defendant United, through its
employees and agents, directed and oversaw the Plaintiffs’ work on a day-to-day basis.
United employees and agents hired, disciplined and/or terminated Plaintiffs working at
the Patriots Circle Factory. On information and belief, United, through its employees and
agents, set all job classifications working in the factory, set rates of pay for all job
classifications, set shifts, and assigned the Plaintiffs’ job duties in the Patriots Circle
Factory. United’s employees supervised and reviewed work performed by the Plaintiffs at
the Patriots Circle Factory. On information and belief, United owned or leased the
Patriots Circle Factory and all equipment and machinery operated by the Plaintiffs
therein. On information and belief, the goods produced by the Plaintiffs at the Patriots
Circle Factory were sold exclusively under the United label and/or under the labels of
other companies with whom United had a manufacturing agreement.
29.
At all times between April 1, 2010 and the present date, when the Plaintiffs
were working at the Patriots Circle Factory, Defendant ASI Staffing, through its
employees and agents, performed and/or oversaw numerous human resources functions at
the factory on behalf of Defendant United. Defendant ASI Staffing hired, disciplined,
and/or terminated Plaintiffs at the Patriots Circle Facility. Defendant ASI Staffing,
through its employees and agents, also addressed the Plaintiffs’ grievances, assigned the
Plaintiffs to daily shifts, maintained each Plaintiff’s attendance and time records, ran the
Patriot Circle Factory’s operations payroll, and held itself out as responsible for ensuring
that each of the Plaintiffs was paid for each week worked at the Factory. During some
weeks that the Plaintiffs worked at the Patriots Circle Factory, the Plaintiffs were on
Defendant ASI Staffing’s payroll. During those same weeks, they were paid with checks
identifying ASI Staffing as the payor. Concurrently, Defendant ASI Staffing maintained
worker’s compensation insurance for all Plaintiffs working at the Factory.
30.
During certain time periods between April 1, 2010 and the present date,
when the Plaintiffs were working at the Factory, the Plaintiffs were on Defendant
AMAA’s payroll when they worked at the Patriots Circle Factory. During those same
weeks, the Plaintiffs were paid with checks identifying AMAA as the payor.
31.
During certain time periods between April 1, 2010, and the present date,
when the Plaintiffs were working at the Patriots Circle Factory, the Plaintiffs were on
Defendant Interim Recruiting’s payroll. During those same weeks, the Plaintiffs were
paid with checks identifying Interim Recruiting as the payor.
32.
During certain time periods between April 1, 2010, and the present date,
when the Plaintiffs were working at the Patriots Circle Factory, the Plaintiffs were on
Defendant US Staffing’s payroll. During those same weeks, the Plaintiffs were paid with
checks identifying US Staffing as the payor.
33.
During certain time periods between April 1, 2010, and the present date,
when the Plaintiffs were working at the Patriots Circle Factory the Plaintiffs were on
Defendant TML’s payroll. During those same weeks, the Plaintiffs were paid with checks
identifying TML as the payor.
34.
Between April 1, 2010, and the present date, the Plaintiffs routinely were
required to work four 12-hour shifts per week or more, in excess of forty (40) hours per
week.
35.
Between April 1, 2010, and the present date, the Plaintiffs’ total hours
worked at the Patriots Circle Factory were recorded on a daily basis by Defendant United
and its employees and agents, and/or Defendant ASI Staffing and its employees and
agents.
36.
On information and belief, between April 1, 2010, and the present date,
each Plaintiff’s base hourly wage rate was set by Defendant United and/or Defendant ASI
Staffing. Although base hourly wage rates differed among the Plaintiffs, the Plaintiffs
were generally paid the same base hourly wage rate by every Corporate Defendant who
paid them to work at the Patriots Circle Factory.
37.
Between April 1, 2010, and the present date, the Plaintiffs were paid on a
weekly basis for all weeks worked at the Patriots Circle Factory. For each week they
worked at the Patriots Circle Factory, the Plaintiffs received wages, in the form of a check
or cash, from one or more of the following Defendants: ASI Staffing, AMAA, US
Staffing, TML, and Interim Recruiting.
38.
For almost every weekly pay period between April 1, 2010, and the present
date, the Plaintiffs did not receive any overtime premium (one-half of their base hourly
rate) in addition to their base hourly wage rate for each hour worked in excess of 40 in a
week (“overtime hours”) at the Patriots Circle Factory. Instead, during these weeks, the
Plaintiffs received only their respective base hourly wage rates for all overtime hours
worked.
39.
On information and belief, the Plaintiffs were not paid for any hour they
did not work at the Patriots Circle Factory.
40.
Since his last day of work at the Patriots Circle Factory, Plaintiff Blanco
has not been paid any outstanding overtime premiums owed for overtime hours worked.
41.
Since his last day of work at the Patriots Circle Factory, Plaintiff Ascencio
has not been paid any outstanding overtime premiums owed for overtime hours worked.
42.
Since his last day of work at the Patriots Circle Factory, Plaintiff
Hernandez has not been paid any outstanding overtime premiums owed for overtime hours
worked.
43.
To date, none of the Plaintiffs have been paid overtime premiums earned
for overtime hours worked between April 1, 2010, and the present.
44.
At all relevant times to this litigation, the Defendants were aware of their
obligation to pay overtime premiums at .5 times the Plaintiffs’ respective base rates of
pay, but nonetheless failed to do so. For example, on information and belief, posters
explaining the state and federal overtime laws were posted in the Patriots Circle Factory.
EXHAUSTION OF ADMINISTRATIVE PROCEDURES
45.
The Plaintiffs have satisfied all statutory prerequisites and conditions
precedent necessary to seek remedy against Defendants on their state law claims by
submitting complaints to the Massachusetts Office of the Attorney General and waiting
before filing suit until the Office of the Attorney General authorized them to do so.
46.
Attached as Exhibit A is a letter from the Office of the Attorney General
authorizing the named Plaintiffs to pursue their state nonpayment of wage and overtime
complaints in court.
CLAIMS FOR RELIEF
Count I: Fair Labor Standards Act – OVERTIME
47.
The Plaintiffs hereby restate, reallege and incorporate by reference the
allegations of paragraphs 1 through 46 above.
48.
Corporate Defendants, and each of them, are an enterprise engaged in
commerce or in the production of goods for commerce, as defined by 29 U.S.C. §
203(s)(1).
49.
At all times relevant to this Complaint, Defendants constituted a single
employer and/or joint employers of the Plaintiffs within the meaning of 29 U.S.C. §
203(d).
50.
Defendants, and each of them, suffered or permitted the Plaintiffs to work
at the Patriots Circle Factory within the meaning of 29 U.S.C. § 203(g).
51.
Defendants, and each of them, acted directly or indirectly in the interest of
the Plaintiffs’ employer or employers at the Patriot’s Circle Factory under the Fair Labor
Standards Act and are the Plaintiffs’ employers under the Fair Labor Standards Act, as
defined by 29 U.S.C. § 203(d).
52.
Under the Fair Labor Standards Act, 29 U.S.C. § 207(a), Defendants were
required to pay the Plaintiffs at a rate not less than one and one-half times the Plaintiffs’
“regular rate” of wages for all hours the Plaintiffs worked in excess of 40 in a workweek
at the Patriots Circle Factory.
53.
Defendants have regularly failed to pay the Plaintiffs one and one-half
times the “regular rate” at which they were employed for all hours worked longer than 40
in a workweek during weeks they worked at the Patriot’s Circle Factory.
54.
Defendants’ failure to pay one and a half times the employees’ regular rate
of pay for hours worked beyond 40 hours in a workweek violates the Fair Labor Standards
Act.
55.
Defendants acted willfully or with reckless disregard as to their obligation
to pay one and a half times the employees’ regular rate of pay for hours worked beyond 40
hours in a workweek, and accordingly, the violation was willful for purposes of the Fair
Labor Standards Act, 29 U.S.C. §§ 255(a) and 260.
56.
As a result of Defendants’ unlawful conduct, the Plaintiffs suffered a loss
of overtime compensation.
57.
As a result of Defendants’ unlawful conduct, the Plaintiffs have incurred
harm and loss in an amount to be determined at trial, along with liquidated damages,
attorneys’ fees and costs of litigation.
Count II: G.L c. 151 § 1A; G.L. c. 151 § 1B--OVERTIME
58.
The Plaintiffs repeat and incorporate the allegations contained in
paragraphs 1 through 57 of the Complaint as if fully set forth herein.
59.
At all times relevant to this Complaint, Defendants were “employers” of
the Plaintiffs within the meaning of M.G.L. c. 151.
60.
At all times relevant to this Complaint, Defendants constituted a single
employer and/or joint employers of the Plaintiffs within the meaning of M.G.L. c. 151.
61.
At all times relevant to this Complaint, the Plaintiffs were “employees” of
Defendants within the meaning of M.G.L. c. 151.
62.
At all times relevant to this Complaint, Defendants employed the
Plaintiffs within the meaning of M.G.L. c. 151.
63.
While employed by the Defendants, the Plaintiffs consistently worked in
excess of 40 hours a week and, therefore, were entitled to overtime compensation pursuant
to M.G.L. c. 151 § 1A.
64.
Under the M.G.L. c. 151 § 1A, Defendants were required to pay the
Plaintiffs at a wage rate not less than one and one-half times the Plaintiffs’ “regular rate”
for all hours the Plaintiffs worked at the Patriots Circle Factory in excess of 40 in a
workweek.
65.
Defendants failed to pay the overtime premium to the Plaintiffs for all
hours of work for which overtime payments were required, instead paying the Plaintiffs
their regular hourly wage rate for hours worked in excess of 40 hours a week, in violation
of M.G.L. c. 151 § 1A.
66.
As a result of Defendants violation of the G.L. c. 151 § 1A, the Plaintiffs
have incurred harm and loss in an amount to be determined at trial, along with treble
damages, attorneys’ fees and costs of litigation.
Count III: Aiding and Abetting
67.
The Plaintiffs repeat and incorporate the allegations contained in
paragraphs 1 through 73 of the Complaint as if fully set forth herein.
68.
Defendants, individually and/or jointly, breached their statutory obligations
to pay overtime premiums under federal and state law, causing each of the Plaintiffs
financial harm.
69.
Each Defendant substantially assisted or encouraged one or more of the
other Defendants by holding itself out as a temporary employer or staffing agency paying
a portion of Plaintiffs’ wages, by serving as an officer of such temporary employer or
staffing agency, or by providing a common work location and accepting the services of the
Plaintiffs.
70.
At the time each Defendant so assisted the other Defendants, each such
Defendant was aware that the other Defendants were not paying overtime premiums due
to the Plaintiffs for all overtime hours worked in contravention of state and federal law.
71.
In doing so, each such Defendant knowingly and substantially assisted the
other Defendants in breaching their statutory obligations to pay the Plaintiffs an overtime
premium for each hour worked in excess of 40 in a seven-day week.
72.
As a result, each such Defendant is liable under Massachusetts common
law for aiding and abetting such wrongful actions.
73.
As a result of Defendants’ aiding and abetting, Plaintiffs have incurred
harm and loss in an amount to be determined at trial, along with attorneys’ fees and costs
of litigation.
JURY DEMAND
Plaintiffs request a trial by jury on their claims.
DEMAND FOR JUDGMENT
WHEREFORE, Plaintiffs pray that this Court grant relief in their favor, and against
Defendants on a joint and several basis, as follows:
A. Award all Plaintiffs actual damages, multiple damages, liquidated damages
and pre-judgment interest as a result of the wrongful conduct complained of
herein;
B.
Award all Plaintiffs their costs and expenses in this litigation, including
reasonable attorneys’ fees and expert fees;
C.
Enter declaratory and injunctive relief prohibiting Defendants and each of
them from failing to pay overtime;
D. Provide such other and further relief as the Court deems just and proper.
Respectfully submitted,
PLAINTIFFS
By their attorneys,
/s/Nicole Horberg Decter
Indira Talwani, Esq., BBO # 645577
Nicole Horberg Decter, Esq. BBO #658268
SEGAL ROITMAN, LLP
111 Devonshire Street, 5th Floor
Boston, MA 02109
Telephone: 617-742-0208
Facsimile: 617-742-2187
[email protected]
[email protected]
/s/Audrey Richardson
Audrey R. Richardson, Esq., BBO # 630782
Greater Boston Legal Services
197 Friend Street
Boston, MA 02114
Telephone: 617-603-1662
Facsimile: 617-371-1222
[email protected]
Dated: April 10, 2013
| employment & labor |
nOoiEocBD5gMZwczLKpI |
Case No. 19-cv-00114
CLASS ACTION COMPLAINT
JURY TRIAL DEMANDED
Exempt From Filing Fees Under
38 U.S.C. § 4323(h)(1)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
ERIC WHITE, on behalf of himself and
all others similarly situated,
Plaintiff,
v.
UNITED AIRLINES, INC. and UNITED
CONTINENTAL HOLDINGS, INC.,
Defendants,
Plaintiff Eric White, on behalf of himself and other similarly situated individuals, by and
through his attorneys, alleges as follows:
INTRODUCTION
1.
This is a class action under the Uniformed Services Employment and
Reemployment Rights Act (“USERRA”), 38 U.S.C. § 4301 et seq., on behalf of current and
former employees of United Continental Holdings, Inc., and United Airlines, Inc. (collectively,
“Defendants” or “United”), who took-short term military leave from United but were not paid
their normal wages or salaries by Defendant during such periods of military leave as required by
USERRA, and/or did not receive credit under the United Continental Holdings, Inc. Profit
Sharing Plan for periods of military leave as required by USERRA.
2.
USERRA protects the rights of servicemembers who take leaves of absence from
their civilian employers to perform qualified military service. USERRA § 4316(b) requires
military leave to be treated no less favorably than other, comparable forms of leave with respect
to the rights and benefits that employees receive during their leaves of absence. Since at least
January 1, 2006, Defendants violated this provision in two ways.
3.
First, Defendants had a policy and practice of continuing to pay their employees’
regular wages or salaries during certain leaves-of-absence (such as jury duty and sick leave), but
not paying regular wages or salaries to employees when they take short-term military leave. By
paying employees when they took jury duty leave, sick leave, and other comparable forms of
non-military leave, Defendants were required by USERRA to do the same for their employees
who took short-term military leave. By failing to pay wages and salaries to military service
members during their short-term military leave, while continuing to pay employees their wages
or salaries during periods of jury duty, sick leave, and other comparable forms of non-military
leave, Defendants violated USERRA’s mandate to treat military leave no less favorably than
other comparable forms of non-military leave.
4.
Second, Defendant United Continental Holdings, Inc. failed to credit employees’
imputed earnings associated with military leave or otherwise credit their military leave for the
purpose of calculating such employees’ profit sharing awards under the United Continental
Holdings, Inc. Profit Sharing Plan (“the Plan”). By doing so, Defendant United Continental
Holdings, Inc. violated USERRA § 4318, which requires all employee pension benefit plans –
like United’s profit sharing plan – to treat military service as continued service for an employer.
In addition, because Defendants did not give profit-sharing credit to employees who took short-
term military leave but gave credit for the purpose of the profit sharing plan to employees when
they took comparable forms of non-military leave such as sick leave and jury duty, Defendant
United Continental Holdings, Inc. violated USERRA § 4316(b), which requires that employees
who take military leave receive the same rights and benefits, including profit sharing, as
employees who take comparable forms of non-military leave.
5.
As a result of these violations, Plaintiffs and other servicemembers employed by
Defendants received less compensation than they would have received if Defendants had
provided them with paid leave during periods of short-term military leave. In addition, Plaintiff
and other servicemembers who were participants in the Profit Sharing Plan received smaller
profit sharing awards than they otherwise would have received if they had been paid during
military leave or if the Profit Sharing Plan had credited their imputed earnings associated with
their military leave for the purposes of calculating profit sharing awards.
6.
This action seeks a declaration that Defendants violated USERRA by failing to
pay Plaintiff and members of the proposed Class during their periods of short-term military
leave, a declaration that Defendant United Continental Holdings, Inc. violated USERRA by
failing to credit employees’ short-term military leave and long-term military leave for the
purpose of calculating their profit sharing awards, an order requiring Defendants to pay
employees when they take short-term military leave in the future so long as Defendants provide
pay to employees when they take other comparable forms of non-military leave, an order
requiring Defendant United Continental Holdings, Inc. to credit employees’ military service for
the purposes of calculating their profit sharing awards in the future, an order requiring
Defendants to pay Plaintiff and members of the Class the wages or salaries they should have
earned during their periods of short-term military leave since 2006, and an order requiring
Defendants to recalculate and pay Plaintiff and members of the Class the profit sharing awards
they received since 2006, consistent with the requirements of USERRA.
JURISDICTION AND VENUE
7.
This Court has subject matter jurisdiction over this action under 28 U.S.C. §
1331, because this action arises under USERRA, a law of the United States. This Court has
subject matter jurisdiction over the USERRA claim pursuant to 38 U.S.C. § 4323(b)(3), which
provides the district courts of the United States with jurisdiction over any USERRA action
brought against a private employer.
8.
Venue is proper in this District under 38 U.S.C. § 4323(c)(2), because Defendants
are the private employers of Plaintiff and maintain a place of business in at least two locations in
this District. Both United Continental Holdings, Inc. and United Airlines have their corporate
headquarters at 233 S. Wacker Drive, Chicago, IL 60606. In addition, United Airlines maintains
one of its hubs at Chicago’s O’Hare International Airport, where it employs thousands of
employees. Venue is also proper in this District pursuant to 28 U.S.C. § 1391(b)(2), as a
substantial part of the events giving rise to the claims in this action occurred in this District.
PARTIES
9.
Plaintiff Eric White is and has been employed as a pilot by Defendants or their
predecessor companies since 2005. White was a pilot at Continental Airlines from 2005 to 2010,
and became a United Airlines pilot in 2010, when Continental Airlines was acquired by UAL
Corporation. As part of the merger, UAL Corporation changed its name to United Continental
Holdings, Inc. White currently serves as a First Officer flying 787 passenger airplanes for
United. During his career at United, White has routinely flown to and from Chicago’s O’Hare
International Airport in this District. Since 2000, White has served continuously as a pilot in the
Air Force, including on active duty and on reserve duty. During his employment with
Defendants, White has routinely taken military leave, including numerous periods of short-term
military leave and long-term military leave. White resides in Ladera Ranch, California.
10.
Defendant United Continental Holdings, Inc. (“UCH”) is a publicly traded
company and is a holding company. Its principal, wholly-owned subsidiary is United Airlines,
Inc. UCH is and has been incorporated under the laws of the State of Delaware since December
30, 1968. UCH’s corporate headquarters and principal executive office is located at 233 South
Wacker Drive, Chicago, Illinois 60606. UCH is the sponsor of the United Continental Holdings,
Inc. Profit Sharing Plan. Defendant UCH is also a private employer within the meaning of the
38 U.S.C. § 4303(4)(A), because, has UCH has “control over employment opportunities” at its
wholly-owned subsidiary, United Airlines.
11.
Defendant United Airlines, Inc. (“UAL”) is a wholly owned subsidiary of United
Continental Holdings, Inc. Defendant UAL is an employer within the meaning of 38 U.S.C. §
4303(4)(A), because it “pays salary or wages for work performed” and has “control over
employment opportunities” of its employees, including Plaintiff.
CLASS ACTION ALLEGATIONS
12.
Plaintiff brings this action as a class action pursuant to Rule 23 of the Federal
Rules of Civil Procedure on behalf of the following Classes:
(1)
The Paid Leave Class: Current or former employees of United Continental
Holdings, Inc., United Airlines, Inc., Continental Airlines, Inc., and/or any of their
subsidiaries or predecessors, who during their employment with any of these
entities took short-term military leave from their employment and during such
short-term military leave were not paid the wages or salary that they would have
earned had they continued to work their ordinary work schedules from January 1,
2006, through the date of judgment in this action.
(2)
The Profit Sharing Class: Qualified Employees under the United Continental
Holdings, Inc. Profit Sharing Plan who took short-term military leave or long-
term military leave from their employment with an Employer under the Plan
during a Plan Year in which they were eligible to receive an award under the Plan
(or would have been eligible to receive an award under the Plan if their earnings
associated with their military leave had been credited), from January 1, 2006,
through the date of judgment in this action.
Excluded from the Classes are any members of the Committee who were responsible for
administering the Profit Sharing Plan, any person to whom UCH and/or the Committee delegated
authority to manage or control the administration of the Plan, and all former or current
employees who previously reached settlements with or judgments against Defendants in
USERRA actions concerning United’s failure to pay wages or salaries during periods of short-
term military leave and United’s failure to credit employees’ military service for the purposes of
calculating profit sharing awards.
Impracticality of Joinder
13.
The members of the Classes are so numerous that joinder of all members of the
proposed Classes is impracticable. According to Defendants’ 2017 Annual Report, as of
December 31, 2017, Defendants employed 89,800 employees, including 11,492 pilots, 22,676
flight attendants, 13,299 passenger service employees, 13,187 fleet service employees, 9,535
technicians, 1,000 storekeeper employees, and 402 dispatchers. According to Defendants’
website, https://united-veterans.jobs/, “United has many employees who have proudly served in
the military, and some who continue to serve in the reserve components.” And Defendants’ web
site states that they actively recruit members of the military as employees. Based on these
statements, at least several thousand former and current employees of Defendants are members
of each of the Classes.
14.
According to United’s Corporate Fact Sheet, https://hub.united.com/corporate-
fact-sheet/, United Airlines serves 231 airports in the United States of which six are hubs
(Chicago, Denver, Houston, Los Angeles, Newark, San Francisco and Washington-Dulles), plus
125 international destinations. Based on the varied locations of Defendants’ employees, the
members of the Classes are geographically dispersed across the United States, if not the world.
Commonality
15.
The central questions in this case, which will generate common answers, are (1)
whether Defendants’ policy or practice of failing to pay their employees’ wages and/or salaries
during periods of short-term military leave violates USERRA § 4316, and whether (2) Defendant
UCH’s policy of failing to credit imputed earnings from military service for the purposes of
calculating profit sharing awards violated USERRA § 4316 and USERRA § 4318.
16.
Plaintiff’s claims raise subsidiary common questions, including the following:
(a)
whether Defendants maintain a policy or practice of refusing to pay their
employees when they take short-term military leave, while paying employees
when they take other forms of comparable leave;
(b)
whether short-term military leave is comparable to jury duty, sick leave,
and other forms of non-military leave for which Defendants have provided wages,
salaries, and/or profit sharing to their employees;
(c)
whether USERRA § 4316(b) requires Defendants to provide the same
rights and benefits to employees who take short-term military leave as other
comparable forms of non-military leave, including pay or salaries and profit
sharing awards.
(d)
whether Defendant UCH is and was required by USERRA § 4318 to
credit all military service for the purposes of calculating profit sharing awards;
and
(e)
whether Defendants’ violations of USERRA were willful, such that they
should be required to pay liquidated damages to Plaintiff and the members of the
proposed Classes.
17.
Because Defendants adopted and applied uniform policies or practices of not
paying employees when they take short-term military leave and failing to credit imputed
earnings from all military service for the purposes of calculating profit sharing awards, answers
to these questions will produce common answers for all members of the Class. As Defendants
acted in a uniform, systematic manner with respect to both Classes, all members of each Class
suffered the same type of injury based on the same policies or practices, and resolving their
claims will be based on common legal and factual questions
18.
Defendants’ policy or practice of refusing to pay employees when they take short-
term military leave, while paying employees when they take other comparable forms of non-
military leave, was applied uniformly to the Paid Leave Class, the issues relating to the relief that
Class Members should receive will be common. Likewise, because Defendants UCH’s policy or
practice of failing to credit imputed earnings from all military service for the purposes of
calculating profit sharing awards was applied uniformly to the Profit Sharing Class, the issues
relating to the relief Class members should receive will be common. To the extent that any of
these policies or practices are found to violate USERRA, the determination of the amounts to be
paid to members of each Class will be formulaic and can be readily calculated pursuant to a
common formula.
Typicality
19.
Plaintiff’s claims are typical of the other members of both Classes, because the
claims challenge uniform policies or practices by which Defendants failed to pay employees
when they take short-term military leave and failed to credit or impute earnings from military
service for the purposes of calculating profit sharing awards, while paying employees and
crediting their earnings when they take other, comparable forms of leave. In addition, Plaintiff
and the Class Members were all injured by the same uniform policies or practices.
Adequacy
20.
Plaintiff will fairly and adequately protect the interests of other members of both
Classes.
21.
Plaintiff does not have any conflict with any other member of either Class.
Plaintiff understands his obligations as a class representative, has already undertaken steps to
fulfill them, and is prepared to continue to fulfill his duties as class representative.
22.
Defendants have no unique defenses against the Plaintiff that would interfere with
Plaintiff’s representation of the Classes.
23.
Plaintiff is represented by counsel with significant experience in prosecuting class
action litigation, including class action litigation involving rights and benefits of servicemembers
under USERRA.
Rule 23(b)(1)
24.
This action can be maintained as a class action under Rule 23(b)(1)(A) of the
Federal Rules of Civil Procedure. The central questions are whether the uniform policies or
practices by which Defendants failed to pay their employees when they take short-term military
leave and failing to credit imputed earnings from military service for the purposes of calculating
profit sharing awards violates USERRA. As a result, prosecution of separate claims by
individual members as to the legality of the same policy would create the risk of inconsistent or
varying adjudications that would establish incompatible standards of conduct.
25.
This action can be maintained as a class action under Rule 23(b)(1)(B) of the
Federal Rules of Civil Procedure. As a practical matter, resolution of whether Defendants were
required under USERRA to pay employees when they take short-term military leave and credit
the imputed earnings from military service for the purposes of calculating profit sharing awards
would be dispositive of that matter for other employees even if they were not parties to this
litigation and would substantially impair or impede their ability to protect their interests if they
are not made parties to this litigation by being included in the Classes.
Rule 23(b)(2)
26.
This action can also be maintained as a class action under Rule 23(b)(2) of the
Federal Rules of Civil Procedure. Defendants have acted and/or failed to act on grounds
generally applicable to each Class, making declaratory and injunctive relief appropriate with
respect to the Class as a whole.
27.
Defendants maintained uniform policies or practices as to all members of each
Class. Defendants are alleged to have violated USERRA by refusing to pay employees when
they take short-term military leave and/or failing to credit or impute earnings from military
service for the purposes of calculating profit sharing awards. As such, Defendants have acted or
refused to act on grounds that apply generally to the Class. As a result, final declaratory and
injunctive relief is appropriate respecting the Class as a whole.
28.
The relief sought consists primarily of (a) a declaration establishing that
Defendants have violated USERRA by failing to pay employees when they take short-term
military leave and failing to credit imputed earnings from military service for the purposes of
calculating profit sharing awards, (b) an order requiring Defendants to pay the Paid Leave Class
Members the wages or salaries that they should have received during their periods of short-term
military leave, consistent with USERRA, and (c) an order requiring Defendant UCH to
recalculate and pay the Profit Sharing Class Members the profit sharing awards they would have
received had their imputed earnings for military leave been credited. The monetary relief sought
either flows from and/or is incidental to the declaratory relief sought, as it flows directly from the
ordering of such declaratory relief and can be calculated in a simple, objective, and mechanical
manner. Specifically, the amount owed to the Class Members can be calculated by identifying
the wages or salaries the Class Members would have received during their periods of short-term
military leave, i.e., their imputed earnings, and by identifying the profit sharing awards they
would have received had their imputed earnings for military leave been credited.
Rule 23(b)(3)
29.
This action can also be maintained as a class action under Rule 23(b)(3) of the
Federal Rules of Civil Procedure, because the questions of law and fact common to the members
of the Class predominate over questions affecting only individual members, and a class action is
superior to other available methods for the fair and efficient resolution of this controversy.
30.
The common questions of law and fact concern whether Defendants’ policies or
practices of failing to pay employees when they take short-term military leave and failing to
credit imputed earnings from military service for the purposes of calculating profit sharing
awards violated USERRA. As the Class Members were all employees of Defendants who took
military leave and had their compensation or profit sharing reduced by Defendants’ violations,
common questions related to Defendants’ liability will necessarily predominate over any
individual questions.
31.
Because the calculation of Class Members’ wages and/or salaries during periods
of short-term military leave and proper profit sharing awards can be readily calculated based on
their wage and/or salary rates and the relevant profit sharing award calculations, and because the
relief primarily consists of a declaration and an order requiring Defendants to pay the Class
Members the wages or salaries they are owed and/or the profit sharing awards they are owed
consistent with USERRA, common questions as to remedies will predominate over any
individual issues.
32.
A class action is superior to other available methods for the fair and efficient
resolution of this controversy. By resolving the common issues in a single class proceeding, the
issues will be efficiently resolved in a single proceeding rather than multiple proceedings. Class
certification is a superior method of proceeding here, because it will obviate the need for unduly
duplicative litigation that might result in inconsistent judgments about Defendants’ obligations
under USERRA and of the remedy that should be provided under USERRA.
33.
Additional factors set forth in Rule 23(b)(3) also support certification.
(a)
The members of each Class have an interest in a unitary adjudication of
the issues presented in this action for the same reasons why this case should be
certified under Rule 23(b)(1). Additionally, many members of the Classes are
unlikely to have sufficient damages to justify pursuing an individual action in
federal court or obtain counsel to pursue an individual action. But all Class
Members would benefit from a class action that obtains relief for all members of
the Classes.
(b)
No other litigation concerning claims that Defendants should have paid
their employees when they take short-term military leave or that Defendants
should have credited imputed earnings of employees who take military leave for
the purposes of calculating profit sharing awards has been filed by any other
members of the Classes.
(c)
This is an appropriate forum for these claims because, among other
reasons, jurisdiction and venue are proper, Chicago is the corporate headquarters
for both Defendants. As Chicago O’Hare Airport is a hub for United Airlines and
one of its busiest hubs by departures and arrivals, a significant portion of the
Classes work and/or reside in this District.
(d)
There are no difficulties in managing this case as a class action.
FACTUAL ALLEGATIONS
Defendants’ Policy Regarding Military Leave
34.
When an employee of Defendants is required to be absent from his or her
employment for one of a number of reasons (unrelated to military leave), including that the
employee is required to perform jury service or has fallen ill, Defendant continues to pay the
employee’s wages and/or salary during his or her absence from work. However, Defendants do
not continue to pay an employee’s wages and/or salary when the employee takes short-term
military leave (i.e., military leave that lasts no more than 30 days).
35.
Since at least 2010, and upon information and belief since January 1, 2006,
Defendants have maintained a policy or practice of refusing to pay employees their wages or
salaries when they take short-term military leave, while continuing to pay employees their wages
or salaries when they take other comparable forms of non-military leave, such as jury duty and
sick leave.
USERRA Required Defendants to Pay Employees Who Took Short-Term Military Leave,
Because They Paid Employees Who Took Other Comparable Forms of Non-Military Leave
36.
USERRA § 4316(b) provides in relevant part that “a person who is absent from a
position of employment by reason of service in the uniformed services shall be”
(A) deemed to be on furlough or leave of absence while performing such service; and
(B) entitled to such other rights and benefits not determined by seniority as are
generally provided by the employer of the person to employees having similar
seniority, status, and pay who are on furlough or leave of absence under a
contract, agreement, policy, practice, or plan in effect at the commencement of
such service or established while such person performs such service.
38 U.S.C. § 4316(b)(1).
37.
Accordingly, if an employer provides non-seniority rights and benefits to
similarly situated employees, including compensation, USERRA § 4316(b) requires the
employer to provide the same rights and benefits to employees during their military leave. See
id.; 20 C.F.R. § 1002.150(a).
38.
As the USERRA regulations explain, the “most significant factor to compare” two
types of leave to determine if they are a “comparable form of leave” is “the duration of the
leave.” 20 C.F.R. § 1002.150(b). “[O]ther factors such as the purpose of the leave and the
ability of the employee to choose when to take the leave should also be considered.” Id.
39.
Pursuant to their policy and practice of refusing to pay employees their regular
wages or salaries during periods of short-term military leave, Defendants failed to pay Plaintiff
and the Class Members their regular wages or salaries during each period in which they took
short-term military leave.
40.
Upon information and belief, since January 1, 2006, Defendants paid their
employees their regular wages or salaries while they were on leave from their employment
because of jury duty and sick leave.
41.
Jury duty and sick leave are comparable to short-term military leave in terms of
the duration of these forms of leave and in terms of the involuntary nature of the leave.
42.
For Defendants’ employees, the duration of jury duty and sick leave is
comparable to the duration of short-term military leave. Each of these types of leaves commonly
lasts several days, and usually not more than a couple of weeks.
43.
Like jury duty and sick leave, short-term military leave is ordinarily involuntary.
Jury duty is required by federal, state, or local law. Sick leave occurs due to a short-term,
involuntary medical condition that prevents the employee from working. And short-term
military leave occurs due to an employee-servicemember’s obligation to perform military service
in the Armed Forces.
44.
In addition, the purpose of jury duty is the same as short-term military leave: to
perform service for our government and engage in public service for the benefit of our society.
45.
Defendants’ policy or practice of refusing to pay employees their wages or
salaries when they take short-term military leave, and continuing to pay employees their wages
or salaries when they take other comparable forms of non-military leave violates USERRA §
4316(b), because it denies Defendants’ employees a non-seniority right or benefit that is
provided to similarly situated employees who are on furlough or leave of absence. 38 U.S.C. §
4316(b).
46.
This policy or practice has unlawfully denied Defendants’ employees the wages
or salaries that they should have received when they engaged in short-term military leave
compared to employees who received wages or salaries when they engaged in jury duty, sick
leave, or other comparable forms of non-military leave.
United’s Profit Sharing Plan Provides Profit Sharing Awards Based on Employees’
Earnings, But Excludes Imputed Earnings From Periods of Military Leave
47.
Defendant UCH sponsors the United Continental Holdings, Inc. Profit Sharing
Plan (“the Plan”) for the benefit of employees of UAL, Continental Airlines, and other Affiliates
in which Defendant UCH owns or controls at least an 80% interest.
48.
Many of the terms of the Plan are and have been since January 1, 2016 been set
forth in a written document entitled the “United Continental Holdings, Inc. Profit Sharing Plan
Amended and Restated Effective January 1, 2016,” which is referred to as “the Plan” but for
purposes of clarity will be referred to as the 2016 Plan Document. According to Section VI.C of
the 2016 Plan Document, other terms of the Plan are set forth in the Plan Rules, Plan
Administration and collective bargaining agreements. Plaintiff has not been provided with a
written copy of the Plan Rules or Plan Administration.
49.
The Plan commenced on January 1, 2006, as the UAL Corporation Success
Sharing Program – Profit Sharing Plan, and was amended effective January 1, 2011 and on
January 1, 2014. Upon information and belief, the relevant terms of the Plan have not materially
changed since 2006.
50.
Section IV.A of the 2016 Plan Document provides that Defendant UCH or its
delegate and as to certain matters, the Compensation Committee of the Board of Directors (or
another committee appointed by the Board), has authority and responsibility to manage and
control the administration of the Plan.
51.
Pursuant to Section III.C.5 of the 2016 Plan Document, UCH has delegated the
authority to determine – other than those items specifically listed on Appendix A – whether an
item of compensation is included or excluded from the definition of Wages under the Plan to the
UCH Executive Vice President – Human Resources and Labor Relations. From at least
December 2010 through December 2017, the Executive Vice President – Human Resources and
Labor Relations was Michael P. Bonds.
52.
Pursuant to Section I.C and I.F of the 2016 Plan Document, Qualified Employees
(i.e., those employees who are qualified to receive profit sharing under the Plan) are Domestic
Employees, which means any regular full-time or part-time U.S. employee (and certain
international based employees) of United Airlines, Inc., Continental Airlines, Inc., Continental
Micronesia, Mileage Plus, Inc., and several other Affiliates in which UCH owns or controls a
greater than 80% interest, who have completed a year of service as of December 31 of the year
for which profit sharing is awarded.
53.
Sections III.A and III.B of the 2016 Plan Document provide that if Defendant
UCH’s pre-tax Profit for a certain year exceeds a threshold—which in the 2016 Plan Document
is $10 million—then Defendant UCH will make profit sharing awards to eligible employees
based on a formula that takes into account the “Wages” each employee earned during that year in
relation to the total “Wages” of all eligible employees, as well as the employee’s occupation or
labor group. For example, pilots and flight attendants’ Wages are given twice as much weight or
credit as the Wages of customer service employees or storekeeper employees.
54.
Section III.C of the 2016 Plan Document sets forth what compensation is included
in the term “Wages,” and Appendix A-1 sets forth a list of certain compensation that is
specifically included in the definition of “Wages” under the Plan. Appendix A-2 sets forth a list
of certain compensation that is specifically excluded from the definition of “Wages” under the
Plan. While neither jury duty nor military leave is specifically addressed in the 2016 Plan
Document, given the longstanding practice by UCH of crediting jury duty leave as “Wages”
under the Plan (and paying employees who take jury duty), but not crediting military leave, and
based on the procedures and practices of UCH, the practices under the Plan constitute UCH
policy since at least 2006.
55.
Pursuant to Section III.C.1 and III.C.2 of the Plan and Appendix A, Wages under
the Plan include the compensation that employees receive when they take non-military leaves of
absence such as sick leave and other circumstances in which they are not working, such as
holidays and vacation. Appendix A does not mention either compensation for jury duty leave or
the compensation that employees would have earned had they not taken military leave (i.e.,
employees’ imputed earnings from military leave).
56.
Pursuant to the formula under the Plan (as set forth in Section III), the higher
amount of Wages that a Qualified Employee receives credit for under the Plan, the higher his or
her profit sharing award will be in a year in which profit sharing awards are made, and the higher
his or her share of all employees’ profit sharing awards will be, regardless of the employee’s
occupation or labor group.
57.
From the inception of the Plan to the present, the Plan has not included as Wages
the imputed earnings of Qualified Employees who take military leave for the purposes of
calculating profit sharing awards and because Defendants have not paid employees when they
take military leave, Qualified Employees who have taken military leave from Defendants have
been denied credit for all of their military service when profit sharing awards under the Plan have
been calculated and paid since 2006.
58.
Other major airlines in the United States, such as Southwest Airlines and Delta
Airlines, consider the imputed earnings of employees who take military leave for the purposes of
calculating their employees’ profit sharing awards.
59.
Pursuant to Section III.D. of the 2016 Plan Document, Qualified Employees
receive profit sharing awards no later than March 15 or as soon as practicable thereafter
following a year in which qualified employees are entitled to receive profit sharing awards.
60.
Pursuant to Section III.E. of the 2016 Plan Document, Qualified Employees who
receive profit-sharing awards may elect to receive a cash payment or contribute their profit
sharing award into an employer-sponsored 401(k) plan in which the employee is eligible to
participate.
61.
Qualified Employees received profit sharing awards for the following years:
2006, 2010, 2011, 2012, 2013, 2014, 2015, 2016, and 2017. Qualified Employees who took
military leave during these years would have received greater profit sharing awards in such years
if their military leave been credited for the purposes of calculating their profit sharing awards,
Plaintiff’s USERRA-Protected Military Leave & Awards Under the Plan
62.
Since his employment with Defendants began in 2005, Plaintiff took dozens of
periods of short-term military leave of 30 days or less that qualified as service in the uniformed
services within the meaning of USERRA, 38 U.S.C. § 4303(13), including in the following
years: 2006, 2007, 2010, 2011, 2012, 2013, 20414, 2015, 2016, 2017, and 2018. In addition,
Plaintiff took a number of long term periods of military leave since 2005.
63.
For the times that Plaintiff took military leave, including short-term military
leave, Defendants did not pay Plaintiff his regular wages.
64.
For the times that Plaintiff took short-term military leave and long-term military
leave, Defendant UCH did not credit any of Plaintiff’s imputed earnings from those periods of
military leave as qualified wages in calculating his profit sharing awards in the years in which he
and other employees received profit sharing awards.
65.
Plaintiff was a Qualified Employee in the Plan and received a profit sharing
award in 2011, 2012, 2013, 2014, 2015, 2016, and 2017. Had Plaintiff’s military leave,
including short-term military leave, had been credited for the purposes of calculating his profit
sharing award, Plaintiff’s profit sharing award would have been greater than it was in such years.
COUNT I
VIOLATION OF USERRA, 38 U.S.C. § 4316(b)(1), AGAINST DEFENDANTS
(For Failure to Pay Wages or Salaries During Periods of Short-Term Military Leave)
On Behalf of the Paid Leave Class
66.
Plaintiff hereby repeats and incorporates the allegations contained in the
foregoing paragraphs as if fully set forth herein.
67.
USERRA, 38 U.S.C. § 4316(b)(1), provides that “a person who is absent from a
position of employment by reason of service in the uniformed services shall be (A) deemed to be
on furlough or leave of absence while performing such service; and (B) entitled to such other
rights and benefits not determined by seniority as are generally provided by the employer of the
person to employees having similar seniority, status, and pay who are on furlough or leave of
absence under a contract, agreement, policy, practice, or plan in effect at the commencement of
such service or established while such person performs such service.”
68.
The U.S. Department of Labor’s regulations, which implement and interpret
USERRA § 4316(b)(1), provide that “[i]f the non-seniority benefits to which employees on
furlough or leave of absence are entitled vary according to the type of leave, the employee must
be given the most favorable treatment accorded to any comparable form of leave when he or she
performs service in the uniformed services.” 20 C.F.R. § 1002.150(b). Under these regulations,
the “duration of leave” “may be the most significant factor” to determine whether two forms of
leave are comparable, and other relevant factors include “the purpose of the leave and the ability
of the employee to choose when to take the leave.” Id.
69.
As described above, Defendants have maintained a policy or practice of failing to
pay employees their wages or salaries when they take short-term military leave, while continuing
to pay employees their wages or salaries when they take other comparable forms of non-military
leave, such as jury duty and sick leave.
70.
As described above, jury duty leave and sick leave are comparable to short-term
military leave in terms of the duration, purpose, and/or the ability of the employee to determine
whether to take the leave.
71.
By adopting and applying a policy or practice of failing to pay the Paid Leave
Class Members when they take short-term military leave, Defendants denied Plaintiff and the
Paid Leave Class Members the same rights and benefits, including compensation, that
Defendants provided to employees who took comparable forms of non-military leave, including
jury duty leave and sick leave, and thus failed to provide the Paid Leave Class Members the most
favorable treatment accorded to employees who took other comparable forms of non-military
leave. By doing so, Defendants violated and continues to violate USERRA § 4316(b)(1).
72.
Due to Defendants’ failure to comply with USERRA § 4316(b)(1), Plaintiff and
other members of the Paid Leave Class received lower wages, salaries, and/or compensation than
they would have received had Defendants complied with USERRA and the Department of
Labor’s implementing regulations.
73.
Upon information and belief, Defendants’ violation of USERRA § 4316(b)(1)
was willful. Accordingly, Defendants should be required to pay liquidated damages pursuant to
38 U.S.C. § 4323(d)(1)(C).
COUNT II
VIOLATION OF USERRA, 38 U.S.C. § 4316(b)(1), AGAINST DEFENDANT UCH
(For Failure to Credit Short-Term Military Leave in Calculating Profit Sharing Awards)
On Behalf of the Profit Sharing Class
74.
Plaintiff hereby repeats and incorporates the allegations contained in the
foregoing paragraphs as if fully set forth herein.
75.
USERRA, 38 U.S.C. § 4316(b)(1), provides that “a person who is absent from a
position of employment by reason of service in the uniformed services shall be (A) deemed to be
on furlough or leave of absence while performing such service; and (B) entitled to such other
rights and benefits not determined by seniority as are generally provided by the employer of the
person to employees having similar seniority, status, and pay who are on furlough or leave of
absence under a contract, agreement, policy, practice, or plan in effect at the commencement of
such service or established while such person performs such service.”
76.
The U.S. Department of Labor’s regulations, which implement and interpret
USERRA § 4316(b)(1), provide that “[i]f the non-seniority benefits to which employees on
furlough or leave of absence are entitled vary according to the type of leave, the employee must
be given the most favorable treatment accorded to any comparable form of leave when he or she
performs service in the uniformed services.” 20 C.F.R. § 1002.150(b). Under the Regulations,
the “duration of leave” “may be the most significant factor” to determine whether two forms of
leave are comparable, and other relevant factors include “the purpose of the leave and the ability
of the employee to choose when to take the leave.” 20 C.F.R. § 1002.150(b).
77.
As described above, Defendant UCH has maintained a policy or practice of
failing to credit the imputed earnings of employees who take short-term military leave when
calculating their profit sharing awards, while crediting the earnings of employees who take other
comparable forms of non-military leave, such as jury duty and sick leave, when calculating their
profit sharing awards.
78.
As described above, jury duty leave and sick leave are comparable to short term
military leave in terms of the duration, purpose, and/or the ability of the employee to determine
whether to take the leave.
79.
By adopting and applying a policy or practice of failing to credit the imputed
earnings of employees who take short-term military leave when calculating their profit sharing
awards while crediting the earnings of employees who take other comparable forms of non-
military leave, such as jury duty and sick leave, when calculating their profit sharing awards,
Defendants failed to provide Plaintiff and the Profit Sharing Class Members who took short-term
military leave the most favorable treatment accorded to employees who took other comparable
forms of non-military leave. By doing so, Defendants violated and continues to violate
USERRA § 4316(b)(1).
80.
Due to Defendants’ failure to comply with USERRA § 4316(b)(1), Plaintiff and
other members of the Profit Sharing Class received lower profit sharing awards than they would
have received had Defendants complied with USERRA and the Department of Labor’s
implementing regulations.
81.
Upon information and belief, Defendants’ violation of USERRA § 4316(b)(1)
was willful. Accordingly, Defendants should be required to pay liquidated damages pursuant to
38 U.S.C. § 4323(d)(1)(C).
COUNT III
VIOLATION OF USERRA, 38 U.S.C. § 4318, AGAINST DEFENDANT UCH
(For Failure to Credit All Military Leave in Calculating Profit Sharing Awards)
On Behalf of the Profit Sharing Class
82.
Plaintiff hereby repeats and incorporates the allegations contained in the
foregoing paragraphs as if fully set forth herein.
83.
USERRA § 4318 applies to both ERISA plans and non-ERISA plans. USERRA
§ 4318(a)(1)(A) provides that USERRA applies to “an employee pension benefit plan,” which
includes a pension plan under ERISA § 3(2), 29 U.S.C. § 1002(2), but also expressly states that §
4318 applies to pension plans that are not covered by ERISA.
84.
The Department of Labor’s regulations, 20 C.F.R. § 1002.260(a), likewise explain
that while all ERISA-covered pension plan are covered by USERRA, “USERRA covers certain
pension plans not covered by ERISA.”
85.
Section I.C. of the 2016 Plan Document asserts that the Plan “is not intended to be
. . . an employee benefit plan within the meaning of ERISA.” Not only is a statement of whether
a Plan is intended to be covered by ERISA irrelevant to whether a plan is covered by ERISA, but
nothing in the 2016 Plan attempts to disclaim coverage as a pension plan under USERRA §
86.
The Plan is an employee benefit pension plan under USERRA, 38 U.S.C. § 4318,
because, among other things, the Plan permits employees to designate an amount of their profit
sharing awards that will be paid to their retirement plans and thereby defer their profit sharing
awards until the termination of their employment and/or have the awards paid as retirement
income.
87.
Under USERRA § 4318(a)(2)(B), an employee’s service in the uniformed service
will be deemed to constitute service with the employer for purposes of determining the accrual of
benefits under a pension plan.
88.
The Department of Labor’s regulations require that “[o]n reemployment,
the employee [be] treated as not having a break in service with the employer or the employers
maintaining a pension plan, for purposes of participation, vesting and accrual of benefits, by
reason of the period of absence from employment due to or necessitated by service in the
uniformed services.” 20 C.F.R. § 1002.259.
89.
Pursuant to USERRA, 38 U.S.C. § 4318(b)(1), an employer reemploying a person
after a period of service in the uniformed services is liable to the employee benefit pension plan
for funding any obligation of the plan to provide benefits, including those accrued under
USERRA § 4318(a)(2)(B).
90.
For the purposes of computing an employer’s liability under USERRA 38 U.S.C.
§ 4318(b), the employee’s compensation during the period of service described in § 4318
(a)(2)(B) shall be computed either (A) at the rate the employee would have received but for the
period of service described in Section 4318(a)(2)(B), or (B) in the case that the determination of
such rate is not reasonably certain, on the basis of the employee’s average rate of compensation
during the 12-month period immediately preceding such period (or, if shorter, the period of
employment immediately preceding such period).
91.
Defendant UCH adopted a policy that did not treat any service of employees who
took leave in the uniformed service as service with an Employer under the Plan.
92.
By failing to treat the service of employees who took short-term miltiary leave or
long-term military leave as service under the Plan, Defendant UCH violated and continue to
violate USERRA § 4318.
93.
As a result of Defendant UCH’s failure to comply with USERRA § 4318, Plaintiff
and other members of the Profit Sharing Class received profit sharing awards that were smaller
than what they would have received had Defendants complied with USERRA. In addition,
Plaintiff and other members of the Profit Sharing Class were unable to use the amounts that
should have been allocated to them to contribute those amounts into their tax-qualified
retirement plans.
94.
Upon information and belief, Defendants’ violation of USERRA § 4318 was
PRAYER FOR RELIEF
WHEREFORE, Plaintiff prays that judgment be entered against Defendants on all claims
and respectfully requests that this Court award the following relief:
A.
Declare that Defendants’ policies or practices of failing to pay their employees’
regular wages, salaries, or compensation during periods of short-term military leave, while
providing pay to employees when they took other comparable forms of non-military leave, and
failing to credit the imputed earnings of employees’ short-term military leave for the purposes of
calculating profit sharing awards, while crediting the earnings of employees who took other
comparable forms of non-military leave, violated the rights of Plaintiff and the Class under
USERRA § 4316(b);
B.
Declare that Defendant UCH’s failure to credit the imputed earnings of
employees’ short-term military leave and long-term military leave for the purposes of calculating
profit sharing awards violated USERRA § 4318.
C.
Declare that Defendants’ violations of USERRA were willful under 38 U.S.C. §
4323(d)(1)(C).
D.
Declare that Defendants must pay their employees’ regular compensation during
periods of short-term military leave and credit their imputed earnings from employees’ periods
of short-term military leave for the purposes of calculating profit sharing awards.
E.
Require Defendants to comply with USERRA § 4316 by paying Plaintiff and the
Class Members their regular wages, salaries, and/or compensation during periods of short-term
military leave in the future, and crediting their imputed earnings from employees’ periods of
short-term military leave for the purposes of calculating profit sharing awards in the future.
F.
Require Defendant UCH to comply with USERRA § 4318 by crediting imputed
earnings for all periods of military leave for the purposes of calculating profit sharing awards in
the future.
G.
Require Defendants to pay Plaintiff and the Class Members the wages, salaries,
and/or compensation they should have received for periods of short-term military leave in
accordance with the Court’s declaration, or at a minimum to pay Plaintiff and the Class Members
the difference between the wages, salaries, and/or compensation they should have received for
periods of short-term military leave and the payments that Plaintiff and the Class Members
received from the Armed Forces for their military service during such short-term military leave
periods.
H.
Require Defendant UCH to recalculate the profit sharing awards that Plaintiff and
the Class Members should have received under the Plan in accordance with the Court’s
declaration;
I.
Order Defendants to pay all members of the Class liquidated damages in an
amount to be determined at trial, 38 U.S.C. § 4323(d)(1)(C).
J.
Award pre-judgment and post-judgment interest on any monetary relief awarded
or required by order of this Court.
K.
Require Defendants to pay attorneys’ fees, expert witness fees, litigation expenses
and costs pursuant to 38 U.S.C. § 4323(h) and/or order the payment of reasonable fees and
expenses in this action to Plaintiff’s Counsel based on the common benefit and/or common fund
doctrine out of any money or benefit recovered for the Class in this Action.
L.
Grant such other and further relief as the Court deems proper, just and/or
equitable.
JURY TRIAL DEMAND
Pursuant to Rule 38 of the Federal Rules of Civil Procedure or any similar rule or law,
Plaintiff demands a trial by jury for all causes of action and issues for which trial by jury is
available.
Dated: January 7, 2019
Respectfully submitted,
/ s / Peter Romer-Friedman
Peter Romer-Friedman (Admitted to N.D. Ill.)
Outten & Golden LLP
601 Massachusetts Avenue NW
Second Floor West
Washington, DC 20001
Tel: (202) 847-4400
Email: [email protected]
Paul W. Mollica (Admitted to N.D. Ill.).
Outten & Golden LLP
161 North Clark Street
Suite 1600
Chicago, IL 60601
(312) 809-7010
[email protected]
R. Joseph Barton (Admitted to N.D. Ill.).
Block & Leviton LLP
1735 20th Street NW
Washington, DC 20009
Tel: (202) 734-7046
Fax: (617) 507-6020
Email: [email protected]
Thomas G. Jarrard (pro hac vice motion
forthcoming)
Law Office of Thomas G. Jarrard LLC
1020 N. Washington Street
Spokane, WA 99201
Tel: (425) 239-7290
Fax: (509) 326-2932
Email: [email protected]
Matthew Z. Crotty (pro hac vice motion
forthcoming
Crotty & Son Law Firm, PLLC
905 W. Riverside Avenue
Suite 404
Spokane, WA 99201
Tel: (509) 850-7011
Email: [email protected]
Attorneys for Plaintiff
| employment & labor |
_KDwCIcBD5gMZwcz1qOE | Michael Grinblat (4159752)
Law Offices of Michael Grinblat
817 Broadway, Fourth Floor
New York, NY 10003
Tel: (347) 796-0712
Fax: (212) 202-5130
[email protected]
Attorney for the Plaintiff
IN THE UNITED STATES DISTRICT COURT
IN AND FOR THE EASTERN DISTRICT OF NEW YORK
COMPLAINT
SEMYON GRINBLAT, individually and on
behalf of all others similarly situated,
Plaintiff,
-against-
CASE NO.: 20-cv-1646
JURY DEMANDED
WILLIAM BAY LIMITED LIABILITY
COMPANY, 450 BAY STREET LLC,
JOHN DOE 1-X, persons yet unknown,
Limited Liability Companies, Partnerships,
Corporations 1-X, entities yet unknown,
Defendants.
CIVIL COMPLAINT
SEMYON GRINBLAT (“Plaintiff”), as and for his complaint against WILLIAM BAY
LIMITED LIABILITY COMPANY d/b/a WILLIAM BAY LLC (“WILLIAM BAY LLC”), 450
BAY STREET LLC, JOHN DOE 1-X, persons yet unknown, Limited Liability Companies,
Partnerships, Corporations 1-X, entities yet unknown (“Defendants”), respectfully brings before
the Court the below allegations.
STATEMENT OF THE PLAINTIFF’S CLAIMS
1. This is an action under Title III of the Americans with Disabilities Act of 1990 (the “ADA”)
to enjoin unlawful discrimination based on disability. The Plaintiff was discriminated
against on the basis of disability and was denied full and equal enjoyment of the goods,
services, facilities, privileges, advantages, or accommodations of the place of public
accommodation owned, leased, controlled, managed, or operated, by the Defendants.
2. The Plaintiff files this action for himself, and those similarly situated, complaining of the
violations of Title III of the ADA. This action is brought under ADA 42 U.S.C. §12182,
§12183 and §12188(a) – incorporating by reference the remedies and procedures found in
42 U.S.C. §2000a-3, §204 of the Civil Rights Act of 1964 – the ADA’s Accessibility
Guidelines, 28 C.F.R. Part 36, subpart D, the 2004 ADA Accessibility Guidelines
(“ADAAG”) at 36 C.F.R. Part 1191, appendices B and D, the 2010 ADA Standards for
Accessible Design (“2010 Standards”), the Building Code of the State of New York, as
well as New York State Civil Rights Law §40-c and §40-d, New York State Human Rights
Law §296 and New York City Human Rights Law [Administrative Code] §8-107.
JURISDICTION AND VENUE
3. This Court has jurisdiction over this action pursuant to 28 U.S.C. §451, §1331, §1337,
§1343, §2201, §2202 and 42 U.S.C.A. §12181, et seq., as it involves federal questions
regarding the deprivation of the Plaintiff’s rights under the ADA.
4. This Court has supplemental jurisdiction over the Plaintiff’s allegations arising from the
Defendants’ state law violations pursuant to 28 U.S.C. §1367(a).
5. Venue is proper in this district pursuant to 28 U.S.C. §1391(b), because all events, or
omissions, giving rise to this action, and alleged herein, occurred in this district. Venue is
also proper in this district, because the Defendants’ property, a public accommodation,
which is the subject of this action, is located in, and does business within, this judicial
district.
PARTIES
6. The Plaintiff is, and at all times material to this litigation has been, a resident of Monmouth
County, New Jersey.
7. The Plaintiff is a qualified individual with a disability within the meaning of 42 U.S.C.
§12131, who is expressly authorized to bring this action under §308 of the ADA, 42 U.S.C.
§12188(a) – incorporating by reference the remedies and procedures found in 42 U.S.C.
§2000a-3, §204 of the Civil Rights Act of 1964.
8. The Defendants own, and/or lease (or lease to), and/or have control over, and/or manage,
and/or maintain, and/or designed, and/or built, and/or constructed, and/or altered, and/or
operate, and at all relevant times operated, the restaurant Dunkin’ Donuts (“Dunkin’
Donuts”) and the parking lot adjacent to it, which is provided for the use of the restaurant’s
customers.
9. The aforementioned restaurant, Dunkin’ Donuts, and the adjacent parking lot (collectively,
the “Subject Facility”) are the subjects of this lawsuit.
10. The Subject Facility is located at 450 Bay Street, Staten Island, NY 10305.
11. Upon information and belief, WILLIAM BAY LLC owns, and/or leases, and/or manages,
and/or maintains, and/or has control over, and/or designed, and/or built, and/or constructed,
and/or altered, and/or marked, and/or placed signs on, and/or operates, and at all relevant
times operated, the restaurant under the name of Dunkin’ Donuts.
12. Upon information and belief, WILLIAM BAY LLC owns, and/or leases, and/or manages,
and/or maintains, and/or has control over, and/or designed, and/or built, and/or constructed,
and/or altered, and/or operates, and/or marked, and/or placed signs on, and at all relevant
times operated, the parking lot adjacent to the restaurant Dunkin’ Donuts, which is
provided for the use of its customers.
13. WILLIAM BAY LLC is an American for-profit corporation organized under the laws of
New Jersey.
14. WILLIAM BAY LLC is licensed to conduct business in the State of New York by the New
York State Department of State (“NYS DOS”).
15. NYS DOS maintains entity information for WILLIAM BAY LLC in its Corporation and
Business Entity Database.
16. The corporate record for WILLIAM BAY LLC shows no registered agent.
17. The address to which NYS DOS mails process, when accepted on behalf of WILLIAM
BAY LLC, is William Bay Limited Liability Company, PO Box 560, Edison, NJ 08818.
18. The Office of the Richmond County Clerk maintains a deed record showing that the
commercial lot, on which the Subject Facility is located, is owned by 450 Bay Street LLC.
19. Upon information and belief, 450 BAY STREET LLC manages, and/or maintains, and/or
has control over, and/or designed, and/or built, and/or constructed, and/or altered, and/or
marked, and/or placed signs on, and/or operates, and at all relevant times operated, the
parking lot adjacent to the restaurant Dunkin’ Donuts.
20. Upon information and belief, 450 BAY STREET LLC leases the Subject Facility to
WILLIAM BAY LLC.
21. 450 BAY STREET LLC is a domestic for-profit corporation organized under the laws of
New York State.
22. 450 BAY STREET LLC is licensed to conduct business in the State of New York by the
NYS DOS.
23. NYS DOS maintains entity information for 450 BAY STREET LLC in its Corporation and
Business Entity Database.
24. The corporate record shows that 450 BAY STREET LLC has the following registered
agent: John M. Shall, 1675 Richmond Road, Staten Island, NY 10304.
25. The corporate record also shows that 450 BAY STREET LLC can accept service of process
at 1675 Richmond Road, Staten Island, NY 10304, when accepted by the Secretary of State
on behalf of the corporation.
26. The Subject Facility is a public accommodation within the meaning of Title III of the ADA,
42 U.S.C. §12181(7)(B) and 28 C.F.R. §36.104 Place of public accommodation (2), the
New York State Human Rights Law §292(9) and the New York City Human Rights Law,
Admin. Code of the City of New York, §8-107(4).
27. Defendants JOHN DOE 1-X and Limited Liability Companies, Partnerships and
Corporations 1-X are persons or entities yet unknown, but who or which might share
liability as owners or tenants of the Subject Facility. At all relevant times they might have
been, and currently might be, either owners, lessors, or operators of the commercial real
estate lot in Richmond County, on which the Subject Facility is located, and of the building
in which it operates. Either one or several of them might be a landlord and lease its/their
building and land, on which the parking lot of the Subject Facility is located, to defendant
WILLIAM BAY LLC.
28. The Plaintiff reserves the right to amend this Complaint to add such persons or entities as
Defendants when discovered during the course of this action.
29. Either one, or all, of the Defendants, jointly, or severally, simultaneously, or at different
times, at all relevant times, was an owner, and/or landlord, and/or lessor, and/or lessee,
and/or tenant, of the commercial lot in Richmond County, on which the Subject Facility is
located, who jointly, or severally, owned, and/or leased, and/or managed, and/or had
control over, and/or designed, and/or constructed, and/or built, and/or altered, and/or
modified, and/or painted, and/or marked, and/or placed signs on, and/or operated, and/or
maintained, the parking lot adjacent to the restaurant, Dunkin’ Donuts, which is provided
for the purpose of enabling customers of the restaurant to park at and visit the Subject
Facility.
30. Either one of the Defendants, or all of them, jointly or severally, simultaneously, or at
different times, at all relevant times, was an owner, and/or landlord, and/or lessor, and/or
lessee, and/or tenant, and/or managed, and/or had control over, and/or operated, and/or
designed, and/or constructed, and/or built, and/or painted, and/or marked, and/or placed
signs on, and/or maintained, and/or altered the building, and/or the restaurant, Dunkin’
Donuts, which is part of the Subject Facility.
31. The Defendants are jointly and severally liable for the design, construction, maintenance,
management, control, alteration and/or operation of the parking lot, which is part of the
Subject Facility.
32. The Defendants are jointly and severally liable for the design, construction, maintenance,
management, control, alteration and/or operation of the restaurant, Dunkin’ Donuts, which
is part of the Subject Facility.
CLASS ACTION
33. The Plaintiff brings this suit for declaratory and injunctive relief, and as a class action, on
behalf of all those similarly situated, who, as persons who must use a wheelchair by reason
of various disabilities, and who use or desire to use the services and accommodations
offered to the public by the Defendants, are protected by, and are beneficiaries of, the ADA,
the New York State Civil Rights Laws, and the New York State and City Human Rights
Laws.
34. The Plaintiff, complaining for himself, and all other similarly situated disabled individuals
in the City and State of New York, hereby alleges the following:
a. The class is so numerous that joinder of all members, whether otherwise required
or permitted, is impracticable;
b. There are questions of law or fact common to the class, which predominate over
any questions affecting only individual members;
c. The claims or defenses of the representative party are typical of the claims or
defenses of the class;
d. The representative party will fairly and adequately protect the interests of the class;
and
e. A class action is superior to other available methods for the fair and efficient
adjudication of the controversy.
35. The claims of the Plaintiff are typical of those of the class. The class, similarly to the
Plaintiff, was also not able to have access to the Subject Facility because of the architectural
barriers.
36. The Plaintiff will fairly and adequately represent and protect the interests of the members
of the class, because, in accordance with Fed. R. Civ. P. 23(g), he has retained, and is
represented by, an experienced counsel, who has done the work in identifying and
investigating potential claims in the action, who knows the applicable law, who may
commit resources to representing the class, who would represent the Plaintiff in complex
class action litigation, and because the Plaintiff has no interests antagonistic to the members
of the class.
37. A class action may be maintained under Fed. R. Civ. P. 23(a), which is satisfied, as
prosecuting separate actions by, or against, individual class members would create a risk
of adjudications with respect to them that, as a practical matter, would be dispositive of the
interests of the other members, not parties to the individual adjudications, or would
substantially impair, or impede, their ability to protect their interests. That risk includes,
but is not limited to, the Defendants removing the architectural barriers without either
compensating members of the class, or paying them compensatory, and/or statutory, and/or
punitive damages, for discrimination, discomfort, personal injuries, pain of body and mind,
emotional distress, inconvenience and humiliation, which the class members have suffered
as a result of the Defendants’ actions, which violated the ADA, the New York State Civil
Rights laws, the New York State Human Rights laws, and the New York City Human
Rights laws.
38. Class certification of the claims is appropriate pursuant to Fed. R. Civ. P. 23(b)(2), because
the Defendants had acted, or refused to act, on grounds that apply generally to the class, so
that final injunctive relief, or corresponding declaratory relief, is appropriate respecting the
class as a whole.
39. Alternatively, class certification is appropriate under Fed. R. Civ. P. 23(b)(3), because
questions of law, or fact, common to class members, clearly predominate over any
questions affecting only individual class members, and because a class action is superior
to other available methods for the fair and efficient adjudication of this litigation.
40. Judicial economy would be served by allowing the matter to proceed as a class action in
that it would likely avoid the burden that would be otherwise placed upon the judicial
system by the filing numerous similar suits by people who use a wheelchair in the Eastern
District of New York.
41. Clarity, consistency and uniformity in law would also be preserved, as maintenance of this
lawsuit as a class action would likely eliminate the possibility of inconsistent verdicts,
which may be issued, if plaintiffs were to initiate individual lawsuits against the
Defendants.
42. References to the Plaintiff shall be deemed to include the named Plaintiff and each member
of the class, unless otherwise indicated.
STATUTORY SCHEME
43. On July 26, 1990, the United States Congress enacted the ADA, establishing important
civil rights for individuals with disabilities, including the right to full and equal enjoyment
of goods, services, facilities, privileges and access to places of public accommodation.
Congress made the following findings:
a. Some 43,000,000 Americans have one or more physical
or mental disabilities, and this number is increasing as
the population as a whole is growing older;
b. Historically, society has tended to isolate and segregate
individuals with disabilities, and, despite some
improvements, such forms of discrimination against
individuals with disabilities continue to be a serious and
pervasive social problem;
c. Discrimination against individuals with disabilities
persists in such critical areas as employment, housing,
public
accommodation,
education,
transportation,
communication, recreation, institutionalization, health
services, voting and access to public services;
d. Individuals with disabilities continually encounter
various forms of discrimination, including outright
intentional exclusion, the discriminatory effects of
architectural,
transportation,
and
communication
barriers, overprotective rules and policies, failure to
make modifications to existing facilities and practices,
exclusionary qualification standards and criteria,
segregation, and regulation to lesser services, programs,
activities, benefits, jobs or other opportunities; and
e. The continuing existence of unfair and unnecessary
discrimination and prejudice denies people with
disabilities the opportunity to compete on an equal basis
and to pursue those opportunities for which our free
society is justifiably famous, and costs the United States
billions of dollars in unnecessary expenses resulting
from dependency and non-productivity.
42 U.S.C. §12101(a)(1)-(3), (5) and (8)
44. Furthermore, Congress also explicitly stated that the ADA had to:
a. Provide a clear and comprehensive national mandate for
the elimination of discrimination against individuals
with disabilities;
b. Provide clear, strong, consistent, enforceable standards
addressing discrimination against individuals with
disabilities; and
c. Invoke the sweep of congressional authority, including
the power to enforce the fourteenth amendment and to
regulate commerce, in order to address the major areas
of discrimination faced day-to-day by people with
disabilities.
42 U.S.C. §12101(b)(1)(2) and (4)
45. Furthermore, pursuant to 42 U.S.C. §12182 and 28 C.F.R. §36.201(a), the congressional
intent was to ensure that no place of public accommodation may discriminate against an
individual on the basis of such individual’s disability, with regard to the full and equal
enjoyment of the goods, services, facilities, privileges, advantages, or accommodations at
that place of public accommodation.
46. Congress provided commercial businesses at least 18 months from enactment to make their
facilities compliant with the regulations in the ADA. The effective date of Title III of the
ADA was January 26, 1992, or January 26, 1993, if a defendant has ten (10), or fewer,
employees and gross receipts of $500,000, or less. 42 U.S.C. §12183; 28 C.F.R.
§36.508(a).
47. The 2000 United States census indicates that in the civilian non-institutionalized population
more than 49.7 million people in the United States have a disability. The census also
indicates that more than 1.39 million New Yorkers have a mobility disability.
48. ADA 42 U.S.C. §12182(a), the New York State Civil Rights laws, the New York State
Human Rights laws, and the New York City Human Rights laws recognize individuals
with disabilities as a protected class.
49. It is unlawful for a private entity, which owns, leases, leases to, or operates a place of public
accommodation, to discriminate against an individual with a disability. 42 U.S.C.
§12182(b)(1)(A), 28 C.F.R. §36.201(a) and (b).
50. Pursuant to the mandates of 42 U.S.C. §12134(a), on July 26, 1991, the Department of
Justice, Office of the Attorney General, promulgated Federal Regulations to implement the
requirements of the ADA, known as the ADAAG, 28 C.F.R. §36, under which it may
obtain civil penalties of up to $110,000 for the first violation and $150,000 for any
subsequent violation.
51. The landlord, who owns the building that houses a place of public accommodation and the
tenant, who owns, or operates the place of public accommodation, have a non-delegable
duty to comply with the ADA, 28 C.F.R. §36.201(a) and (b), the New York State Civil
Rights laws, and the New York State and City Human Rights laws.
52. The Subject Facility affects interstate commerce within the meaning of the ADA, 42 U.S.C.
§12181(7)(B), and 28 C.F.R. §36.104 Place of public accommodation (2).
53. Regardless of any contractual provisions stating otherwise, the landlord and owner of the
property, which houses the public accommodation, cannot escape liability for the tenant’s
failure to comply with the ADA, 28 C.F.R. §36.201, the New York State Civil Rights laws,
and the New York State and City Human Rights laws.
54. Discriminatory intent is not required to establish liability under the ADA, the New York
State Civil Rights Laws, and the New York State and City Human Rights laws.
55. One type of disability discrimination is the failure of an owner, or an operator, of a public
accommodation to remove those architectural barriers, removal of which is readily
achievable.
A public accommodation shall remove architectural barriers
in existing facilities, including communication barriers that
are structural in nature, where such removal is readily
achievable, i.e., easily accomplishable and able to be carried
out without much difficulty or expense.
28 C.F.R. §36.304
56. If an individual with a disability is dissuaded from entering, or receiving services of a place
of public accommodation, because of the existence of an architectural barrier, the landlord
and tenant are subject to criminal liability for discrimination on the basis of disability.
57. The Defendants must remove all barriers, removal of which is readily achievable, that deny
an individual with a disability the opportunity to participate in, or benefit from, services,
or accommodations, on the basis of their disability, 28 C.F.R. §36.304.
58. Removal of the architectural barriers is readily achievable by the Defendants.
The Plaintiff is informed and believes, and therefore alleges, that the Subject Facility has
begun operations, and/or undergone substantial remodeling, repairs and/or alterations,
since January 26, 1990, and/or has sufficient income to make readily achievable
accessibility modifications.
FACTUAL ALLEGATIONS AND FIRST CAUSE OF ACTION
The Plaintiff’s Background
59. The Plaintiff, who was born in 1949, is an elderly man aged well beyond his years. He
suffers from debilitating diseases and was diagnosed with a neurological condition that
affects his walking. The Plaintiff’s treating neurologist determined that he has gait
dysfunction, the causes of which include peripheral neuropathy due to diabetes mellitus,
chronic right basilar ganglia lacunar infarct and cerebellar ataxia. The Plaintiff’s treating
neurologist also determined that he has essential tremor. Furthermore, the Plaintiff has
decreased vision due to glaucoma and is blind in the right eye. The Plaintiff’s gait is
unsteady and he falls when he walks short distances. His treating neurologist prescribed
him a wheelchair and an accessible parking placard. The Plaintiff obtained the wheelchair
and uses it regularly. The New Jersey Motor Vehicle Commission issued him a disability
parking placard together with a disability identification card. The disability placard can be
used in any car, in which the Plaintiff is travelling. The Plaintiff relies on his wheelchair
and parks appropriately in accessible parking spaces. He also needs appropriate and
statutorily mandated access aisle next to that car, so that he may transfer from the car to
the wheelchair. The Plaintiff is “disabled” under the statute, which in pertinent part states:
Disability means, with respect to an individual, a physical or
mental impairment that substantially limits one or more of
the major life activities of such individual…. The phrase
major life activities means functions such as caring for one’s
self, performing manual tasks, walking, seeing, hearing,
speaking, breathing, learning and working.
28 C.F.R. §36.104 (italics in original).
60. The Plaintiff must rely on his adult son for the management of his day-to-day care. The
son helps the Plaintiff to get to places the Plaintiff wants to visit, such as medical facilities,
doctors, pharmacies, stores, supermarkets, restaurants and parks near his home in New
Jersey, and near his former home in New York, where he lived for decades, and where his
son and friends still live.
61. The parking lot of the Subject Facility has 13 parking spaces.
62. The parking lot of the Subject Facility has 2 accessible parking spaces, which are so
designated by blue marking lines on pavement, as well as by the international symbol of
accessibility painted on the ground.
63. The parking lot of the Subject Facility has one access aisle.
64. The parking lot of the Subject Facility has no van-accessible parking space.
65. In March 2020, the Plaintiff came to the Subject Facility by car with his son.
66. The Plaintiff and his son parked in the accessible parking space in its parking lot.
67. The Plaintiff’s son placed the wheelchair in the access aisle.
68. The wheelchair rolled down the steep slope of the access aisle.
69. When the Plaintiff was transferring from the car to the wheelchair, he barely avoided falling
on the steep surface of the access aisle.
70. The Plaintiff was then not able to move the wheelchair by rotating its wheels, because the
access aisle is too steep.
71. Consequently, the Plaintiff had to rely on his son’s assistance to prevent the wheelchair
from rolling down the access aisle.
72. The Plaintiff was then not able to open the restaurant’s entrance door by himself, because
the tension of the door’s spring was too high.
73. The Plaintiff had to rely on his son’s assistance to open the restaurant’s door for him.
74. Inside of the restaurant, Dunkin’ Donuts, when the Plaintiff was paying for the item he was
purchasing at the register, he was not able to extend his knees and toes under the sales
counter, because there was no space under it for his knees and toes.
75. As a result, the Plaintiff had to rely on his son’s assistance to hand his debit card to the
cashier.
76. When the Plaintiff was exiting the restaurant, he was not able to open the door, because the
spring’s tension is too high.
77. The Plaintiff had to rely on his son’s assistance to open the restaurant’s door for him.
78. On the way back, the Plaintiff was not able to roll the wheelchair to the car with his hands,
by rotating its wheels, because the slope of the access aisle is impermissibly steep.
79. Consequently, the Plaintiff had to rely on his son’s assistance to ride to the car’s door.
80. When the Plaintiff was transferring from the wheelchair to the car in the access aisle, he
barely avoided falling on its steep surface.
81. Frustrated, disappointed and humiliated, the Plaintiff left the Subject Facility’s parking lot.
82. The Subject Facility’s parking lot was designed by people, who did not have the Plaintiff
and his needs, and needs of others similarly situated, in mind, to accommodate him and
facilitate his access to the Subject Facility.
83. The parking lot of the Subject Facility was designed by the Defendants, who disregarded
the accessibility requirements of the Plaintiff, and those similarly situated, by failing to
accommodate him and facilitate his access to the restaurant, or worse, and much more
likely, designed the parking lot of the Subject Facility with the aim of frustrating his efforts
as much as possible by way of architectural barriers, making him understand and feel the
futility of his exertion and patronage of the Subject Facility, and that his patronage of the
restaurant is neither needed, desired, or welcomed by the Defendants.
84. The parking lot of the Subject Facility was not designed to accommodate the needs of the
Plaintiff, and other similarly situated individuals.
85. The parking lot of the Subject Facility was not constructed to facilitate access to the
restaurant by the Plaintiff and other similarly situated individuals.
The Plaintiff Intends to Return to the Subject Facility
86. The Subject Facility is located near the Stapleton Waterfront Park on Staten Island, along
the way from the Plaintiff’s home to his son’s home. The Plaintiff enjoys visiting that
neighborhood and comes there often.
87. The Subject Facility is conveniently located. The Plaintiff intends to visit the Subject
Facility, purchase items offered for sale in it, and enjoy its services, as soon as the
architectural barriers are removed.
Violations of Title III in the Subject Facility
88. The Plaintiff has difficulties gaining access to the Subject Facility, because of the unlawful
architectural barriers, and therefore has suffered an injury in fact.
89. Since at least March 2020, the Defendants have engaged in unlawful practices in violation
of the ADA, the New York State Civil laws, and the New York State and City Human
Rights laws.
90. The Plaintiff has difficulties visiting the Defendants’ Subject Facility, continues to be
discriminated against due to the architectural barriers, which remain at the Subject Facility,
all in violation of the ADA, the New York State Civil Rights laws, and the New York State
and New York City Human Rights laws.
91. The barriers to access the Subject Facility have effectively denied the Plaintiff ability to
visit the property and have caused him personal injuries, including, but not limited to, pain
of body and mind, emotional distress, embarrassment, humiliation and frustration.
92. Because the Subject Facility is a public accommodation, the Defendants are responsible
for complying with ADA 28 C.F.R. §36.304.
93. The numerous architectural barriers to access the Subject Facility have endangered the
Plaintiff’s safety.
94. The Subject Facility violates 42 U.S.C. §12181, §12182, §12183, §12204 of the ADA, 28
C.F.R. §36.302 and §36.304.
95. The Department of Justice (“DOJ”) published revised regulations for Title III of the ADA
in the Federal Register on September 15, 2010. “These regulations adopted revised,
enforceable accessibility standards called the 2010 ADA Standards for Accessible Design,
‘2010 Standards’”. (See, 2010 Standards, Overview) These standards “set minimum
requirements – both scoping and technical – for newly designed and constructed, or altered
… public accommodation, and commercial facilities to be readily accessible to and usable
by individuals with disabilities.” Id. The DOJ provided that document in one publication
and it includes the 2010 Standards for public accommodation and commercial facilities,
which consist of the Title III regulations at 28 C.F.R. Part 36, subpart D, and the 2004
ADAAG at 36 C.F.R. Part 1191, appendices B and D.
96. The Defendants are discriminating against the Plaintiff, and others similarly situated,
because at their Subject Facility they are denying him access to, as well as full and equal
enjoyment of, the goods, services, facilities, privileges, advantages and/or accommodations
of the building, and its parking lot, by means of the architectural barriers, the existence of
which is in violation of the ADA, including, but not limited to, those listed below.
97. “Identification. Parking space identification signs shall include the International Symbol
of Accessibility complying with 703.7.2.1. Signs identifying van parking spaces shall
contain the designation “van accessible.” Signs shall be 60 inches (1525 mm) minimum
above the finish floor or ground surface measured to the bottom of the sign.” See 2010
Standards §502.6.
98. The Defendants have failed to hang a single solitary accessible parking space identification
sign in the parking lot of the Subject Facility.
99. “Van Parking Spaces. For every six or fraction of six parking spaces required by §208.2
to comply with §502, at least one shall be a van parking space complying with §502.” See
2010 Standards §208.2.4.
100.
The Defendants have failed to place a van-accessible parking space in the Subject
Facility’s parking lot.
101.
“Vehicle Spaces. Car parking spaces shall be 96 inches (2440 mm) wide minimum
and van parking spaces shall be 132 inches (3350 mm) wide minimum, shall be marked to
define the width, and shall have an adjacent access aisle complying with §502.3.
EXCEPTION: Van parking spaces shall be permitted to be 96 inches (2440 mm) wide
minimum where the access aisle is 96 inches (2440 mm) wide minimum.” See 2010
Standards §502.2.
102.
The left-hand and right-hand identifications of the designated parking spaces,
below, are from the point of view of a person driving into them.
103.
The designated left-hand accessible parking space at the Subject Facility is 102
inches wide.
104.
The designated right-hand accessible parking space at the Subject Facility is 90
inches wide.
105.
The designated access aisle in between the left-hand and right-hand accessible
parking spaces at the Subject Facility is 56 inches wide.
106.
At the Subject Facility, the right-hand parking space, designated as an accessible
parking space, does not comply with the minimum width requirements for an accessible
parking space.
107.
The designated accessible parking spaces, in combination with the access aisle, fail
to comply with the minimum width requirements for an accessible van space under §502.2
of the 2010 Standards.
108.
There is no van-accessible parking space in the parking lot of the Defendants’
Subject Facility.
109.
“Floor or Ground Surfaces. Access aisles are required to be nearly level in all
directions to provide a surface for wheelchair transfer to and from vehicles. The exception
allows sufficient slope for drainage. Built-up curb ramps are not permitted to project into
access aisles and parking spaces because they would create slopes greater than 1:48.” See
2010 Standards, §502.4 & Advisory.
110.
“Floor or Ground Surfaces. Parking spaces and access aisles serving them shall
comply with 302. Access aisles shall be at the same level as the parking spaces they serve.
Changes in level are not permitted. EXCEPTION: Slopes not steeper than 1:48 shall be
permitted.” See 2010 Standards §502.4.
111.
Thus, maximum permissible slopes of accessible parking spaces and access aisles
serving them must not be steeper than 2.08%. See 2010 Standards §502.4.
112.
The Defendants grossly violated §502.4 of 2010 Standards.
113.
The designated right-hand accessible parking space has a slope of 4.5%, which is
equivalent to the slope steepness of 1:22.22.
114.
The designated right-hand accessible parking space has a cross slope of 5.2%,
which is equivalent to the slope steepness of 1:19.23.
115.
The designated accessible access aisle has a cross slope of 6.7%, which is
equivalent to the slope steepness of 1:14.93.
116.
“Door and Gate Opening Force. Fire doors shall have a minimum opening force
allowable by the appropriate administrative authority. The force for pushing or pulling
open a door or gate other than fire doors shall be as follows: 1. Interior hinged doors and
gates: 5 pounds (22.2 N) maximum.” See 2010 Standards §404.2.9.
117.
10 pounds of force are required for pushing or pulling open the exterior hinged door
on the left side of the restaurant at the Subject Facility, as one enters the restaurant.
118.
12 pounds of force are required for pushing or pulling open the exterior hinged door
on the right side of the restaurant at the Subject Facility, as one enters the restaurant.
119.
“Forward Approach. A portion of the counter surface that is 30 inches (760 mm)
long minimum and 36 inches (915 mm) high maximum shall be provided. Knee and toe
space complying with 306 shall be provided under the counter. A clear floor or ground
space complying with 305 shall be positioned for a forward approach to the counter.” See
2010 Standards §904.4.2.
120.
Knee and toe spaces are not provided under the counter in the restaurant at the
Subject Facility.
121.
The individual Plaintiff, and all others similarly situated, will continue to suffer
discrimination and injury without the immediate relief provided by the ADA, as requested
herein. In order to remedy this discriminatory situation, the Plaintiff requires an inspection
of the Subject Facility in order to measure and photograph architectural barriers that are in
violation of the ADA to determine all of the areas of non-compliance with the law.
122.
The Defendants have failed to remove architectural barriers to accessibility to the
Subject Facility in violation of 42 U.S.C. §12182(b)(2)(A)(iv).
123.
Upon information and belief, since 1992, the Defendants have altered the areas in
their Subject Facility, which affect, or could affect, access to or usability of their place of
public accommodation.
124.
The Subject Facility has not been designed, constructed, altered, or maintained in
compliance with the accessibility standards of Title III of the ADA.
125.
The Defendants have violated their statutory obligation to ensure that their policies,
practices and procedures address compliance with the 2010 Standards in that they did not
make reasonable accommodations for the individual Plaintiff, and all others similarly
situated, and also violated their obligation to remove architectural barriers in order to let
disabled individuals enjoy goods and services provided by the public accommodation
under their control, thus discriminating against them.
126.
To date, the architectural barriers, the removal of which was, and is, readily
achievable, and other violations of the ADA, still exist at the Subject Facility and have not
been remedied, or altered, in such a way as to effectuate compliance with the provisions of
the ADA.
127.
Pursuant to the ADA, 42 U.S.C. §12101, §12182, and 28 C.F.R. §36.304, the
Defendants were required to make their Subject Facility accessible to persons with
disabilities, and should have removed architectural barriers by January 26, 1992. To date,
the Defendants have failed to comply with that mandate.
128.
The Defendants’ failure to remove the barriers to access constitutes a pattern and
practice of intentional disability discrimination and is subject to enforcement under 42
U.S.C. §12188 and 28 C.F.R. §503.
129.
It was not structurally impracticable for the Defendants to make the Subject Facility
accessible.
130.
Removal of all architectural barriers existing at the Subject Facility was, and is,
readily achievable by the Defendants.
131.
The Defendants may, should and are required to make reasonable accommodations
at the Subject Facility and their making them would be readily achievable.
132.
Accommodations to the Plaintiff, and other persons similarly situated, and removal
of architectural barriers at the Subject Facility by the Defendants, are readily achievable,
would not impose an undue hardship on them and would not fundamentally alter the nature
of their program, activity, or nature of the business.
133.
The Plaintiff has a realistic, credible, existing and continuing threat of
discrimination from the Defendants’ non-compliance with the ADA in connection with the
Subject Facility.
134.
The Defendants’ failure to make their Subject Facility accessible denied the
Plaintiff and others, similarly situated, an equal opportunity to participate in, or to benefit
from, services, or accommodations, on the basis of their disability.
135.
The effect of the practices complained of has been to deprive the Plaintiff, and all
other similarly situated individuals, of the full and equal enjoyment of the Subject Facility
and to otherwise adversely affect his status as a member of the public interested in
accessing the place of public accommodation owned, leased, leased to, constructed,
maintained, managed and/or operated by the Defendants.
136.
The Subject Facility is not accessible to, or readily usable by, individuals with
disabilities.
137.
Pursuant to 42 U.S.C. §12188, this Court was vested with the authority to grant the
Plaintiff injunctive relief, including an order to alter the Subject Facility, to make it
accessible to, and useable by, the Plaintiff, and other similarly situated individuals with
disabilities, to the extent required by the ADA, as well as close the Subject Facility until
the required modifications are completed.
138.
The Defendants’ flagrant disregard for the ADA, and the New York laws, which
obligate them to make all readily achievable accommodations and modifications to remove
architectural barriers to access and use of their Subject Facility is legally inexcusable.
Allowing the Defendants to deleteriously detrimentally prolong their practices would
encourage them to continue to blatantly disregard the ADA, the New York State Civil laws,
and the New York State and City Human Rights laws, and discriminate against the
Plaintiff, and other similarly situated individuals.
139.
The inexcusability of the Defendants’ actions is exacerbated by the fact that over
25 years have passed since the effective date of Title III of the ADA. During that time
period they operated at a profit, should have accumulated sufficient funds to make
alterations and had numerous opportunities to remove the architectural barriers and end
discrimination, but intentionally chose not to do so. By intentionally not removing the
architectural barriers, which barred the Plaintiff’s access, inconvenienced and embarrassed
him, humiliated him and caused him personal injuries, including emotional distress to him,
and others similarly situated, the Defendants gave a crystal-clear message to disabled
customers that their patronage is neither needed, desired, welcomed, or wanted.
SECOND CAUSE OF ACTION
Violations of the New York State Human Rights Laws
140.
The Plaintiff re-alleges, and incorporates, by this reference, all the allegations set
forth in this complaint, as if fully set forth herein.
141.
The New York State Human Rights Law, in relevant part, provides the following:
It shall be an unlawful discriminatory practice for any
person, being the owner, lessee, proprietor, manager,
superintendent, agent or employee of any place of public
accommodation … because of the … disability … of any
person, directly or indirectly, to refuse, withhold from or
deny to such person any of the accommodations, advantages,
facilities or privileges thereof … to the effect that any of the
accommodations, advantages, facilities and privileges of any
such place shall be refused, withheld from or denied to any
person on account of … disability … .
NYS Executive Law §296(2)(a)
142.
The Subject Facility is a place of public accommodation, as defined in New York
State Human Rights Law §292(9).
143.
The Defendants have further violated the New York State Human Rights Law by
being in violation of the rights provided under the ADA.
144.
The Defendants are in violation of the New York State Human Rights Law by
denying the Plaintiff, and others similarly situated, full and safe access to all of the benefits,
accommodations and services of the Subject Facility.
145.
The Defendants do not provide the Plaintiff, and others similarly situated, with
equal opportunity to use their public accommodation.
146.
The Defendants have failed to make all readily achievable accommodations and
modifications to remove barriers to access in violation of Executive Law §296(2)(c)(iii).
147.
As a direct and proximate result of the Defendants’ unlawful discrimination, which
is in violation of the Executive Law, the Plaintiff has suffered, and continues to suffer,
personal injuries, which include emotional distress, including, but not limited to,
humiliation, embarrassment, stress and anxiety.
148.
The Defendants have not provided the Plaintiff, and others similarly situated, with
evenhanded treatment in violation of New York State Human Rights Law §296.
149.
The Defendants’ direct, or indirect, unequal treatment of the Plaintiff, and others
similarly situated, was demonstrated when he was discriminated against.
150.
The Defendants have, because of the Plaintiff’s disability, directly, or indirectly,
refused, withheld from, or denied him the accommodations, advantages, facilities, or
privileges of their public accommodation.
151.
The Defendants have demonstrated that the patronage, or custom, of the Plaintiff,
and other similarly situated individuals, is unwelcome, unwanted, undesirable,
unacceptable and objectionable.
152.
In violation of the New York State Human Rights Law, the Defendants and their
agents discriminated against the Plaintiff.
153.
As a direct and proximate result of the Defendants’ unlawful discrimination, which
was, and is, in violation of the New York State Human Rights Law, the Plaintiff has
suffered, and continues to suffer, personal injuries, such as mental anguish and emotional
distress, including, but not limited to, depression, humiliation, stress, embarrassment,
anxiety, loss of self-esteem and self-confidence, together with emotional pain and
suffering.
154.
The Plaintiff requests compensatory damages from each Defendant in the amount
of $1,000 under the New York State Human Rights Law, NY CLS Exec §297(9).
THIRD CAUSE OF ACTION
Violations of the New York State Civil Rights Laws
155.
The Plaintiff re-alleges, and incorporates by this reference, all the allegations set
forth in this complaint, as if fully set forth herein.
156.
The Defendants have violated the Plaintiff’s civil rights on the basis of his
disability.
157.
Consequently, the Plaintiff is entitled to recover the penalty prescribed by New
York State Civil Rights Law §40-c and §40-d, in the amount of $500 for each violation
from each Defendant.
158.
Pursuant to New York State Civil Rights Law §40-d, the Defendants are guilty of
a class A misdemeanor.
159.
Notice of this action is being served upon the attorney general, as required by New
York Civil Rights Law, §40-d, in accordance with the statute.
FOURTH CAUSE OF ACTION
Violations of the New York City Human Rights Law
160.
The Plaintiff re-alleges, and incorporates by this reference, all the allegations set
forth in this complaint, as if fully set forth herein.
161.
The New York City Human Rights Law, in relevant part, provides the below.
It shall be an unlawful discriminatory practice for any person
who is the owner, franchisor, franchisee, lessor, lessee,
proprietor, manager, superintendent, agent or employee of
any place or provider of public accommodation:
1. Because of any person’s actual or perceived …
disability …, directly or indirectly:
(a) to refuse, withhold from or deny to such
person the full and equal enjoyment, on equal
terms and conditions, of any of the
accommodations,
advantages,
services,
facilities or privileges of the place or provider
of public accommodation;
NYC Admin. Code §8-107(4)
162.
The Defendants have not reasonably accommodated the Plaintiff, and other
disabled individuals, in violation of New York City’s Administrative Code §8-102(4), (16),
(17), (18), §8-107(4) and §8-107(15).
163.
In violation of the New York City Administrative Code, the Defendants have
unlawfully discriminated against the Plaintiff and all others similarly situated.
164.
Reasonable accommodations and modifications are necessary to enable the
Plaintiff, and all others similarly situated, the ability to enjoy non-restricted access and use
of the Defendants’ Subject Facility.
165.
In violation of the New York City Administrative Code the owners, operators,
lessees, proprietors, managers, agents and/or employees of the Subject Facility have,
because of the actual, or perceived, disability of the Plaintiff directly, or indirectly, refused,
withheld from, and denied him the accommodations, advantages, facilities, or privileges
thereof.
166.
In violation of the New York City Administrative Code, on the basis of the
Plaintiff’s disability, the Defendants have demonstrated that the patronage, or custom, of
the Plaintiff, and all others similarly situated, is unwelcome, objectionable and not
acceptable.
167.
The Defendants are in violation of the New York City Human Rights Law by
denying the Plaintiff full and safe access to all of the benefits, accommodations and
services of the Subject Facility.
168.
Pursuant to New York City Human Rights Law §8-502(c), notice of this action is
being served upon the New York City Commission on Human Rights in accordance with
the statute.
169.
As a direct and proximate result of the Defendants’ disability discrimination, in
violation of the New York City Human Rights Law, the Plaintiff has suffered, and
continues to suffer, personal injuries, including mental anguish and emotional distress,
including, but not limited to, depression, humiliation, stress, embarrassment, anxiety, loss
of self-esteem and self-confidence, emotional pain and suffering.
170.
The Plaintiff requests compensatory damages in the amount of $1,000 from each
Defendant under the New York City Human Rights Law, NYC Admin. Code §8-125.
ATTORNEY’S FEES AND COSTS
171.
The Plaintiff had to retain the undersigned counsel for the filing and prosecution of
this action. The Plaintiff is entitled to have his reasonable attorney’s fees, including
litigation expenses, and costs, including expert fees, paid by the Defendants, pursuant to
the ADA, 28 C.F.R. §36.505 and New York Executive Law §297(10). Furthermore,
pursuant to the New York City Human Rights Law, the Court may award the prevailing
party reasonable attorney’s fees. Under that law’s definition “prevailing” includes a
Plaintiff, whose commencement of litigation has acted as a catalyst to effect policy change
on the part of the defendant. NYCHRL, in pertinent part, states the below.
In any civil action commenced pursuant to this section, the
Court, in its discretion, may award the prevailing party
reasonable attorney’s fees, expert fees and other costs. For
the purposes of this subdivision, the term “prevailing”
includes a Plaintiff whose commencement of litigation has
acted as a catalyst to effect policy change on the part of the
defendant, regardless of whether that change has been
implemented voluntarily, as a result of a settlement or as a
result of a judgment in such Plaintiff’s favor. The Court shall
apply the hourly rate charged by attorneys of similar skill
and experience litigating similar cases in New York County
when it chooses to factor the hourly rate into the attorney’s
fee award.
NYC Admin. Code §8-502(g)
COMPENSATORY AND STATUTORY MONETARY DAMAGES
172.
The Plaintiff requests compensatory damages in the amount of $1,000 from each
Defendant under the New York State Human Rights Law, NY CLS Exec §297(9) and the
New York City Human Rights Law, NYC Admin. Code §8-125.
In calculating compensatory damages under the NYSHRL
and the NYCHRL, a Court in the Southern District of New
York just a few months ago found relevant the fact that ‘[t]he
New York City Human Rights Commission has deemed
awards of $1,000 to be sufficient in cases where
complainants did not establish any particular damage ‘other
than what a decent and reasonable individual would suffer
when faced with such ignorant behavior.’
Shalto v. Bay of Bengal Kabob Corp., 2013 WL 867429, (quoting and adapting Kreisler,
2012 WL 3961304, at *14)
173.
The Plaintiff requests statutory monetary damages in the sum of $500 from each
Defendant to compensate him for their violation of New York Civil Rights Law §40-c and
§40-d.
New York Civil Rights Law §40-c holds that any person
[emphasis added] who shall violate any of the provisions of
New York Civil Rights Law §40-d ‘shall for each and every
violation thereof be liable to a penalty of not less than one
hundred dollars nor more than five hundred dollars, to be
recovered by the person aggrieved thereby in any Court of
competent jurisdiction in the county in which the defendant
shall reside. … [T]his Court has the authority to order
Defendant to pay Plaintiff the $500 in statutory damages
contemplated by the New York Civil Rights Law for the
disability discrimination Plaintiff has suffered….
Shalto v. Bay of Bengal Kabob Corp., 2013 WL 867429
174.
The reason the Plaintiff requests $500 from each Defendant, and not a lower
amount envisioned by the statutes, is due to the high number and extent of the violations,
which were alleged in detail in this complaint. Furthermore, the number of violations may
be even greater, and they may be even more extensive, than those alleged here and it is
likely that they will be revealed upon inspection of the Subject Facility by an expert.
PUNITIVE DAMAGES
175.
The Plaintiff requests punitive damages from each Defendant to compensate him
for their violation of the New York City Human Rights Law.
With respect to punitive damages, “the standard for
determining damages under the NYCHRL is whether the
wrongdoer has engaged in discrimination with willful or
wanton negligence, or recklessness, or a ‘conscious
disregard of the rights of others or conduct so reckless as to
amount to such disregard.’” Chauca v. Abraham, 885 F.3d
122, 124 (2d Cir. 2018) (quoting Chauca v. Abraham, 30
N.Y.3d 325, 67 N.Y.S.3d 85, 89 N.E.3d 475, 481 (N.Y.
2017)). This standard requires “a lower degree of
culpability” than is required for punitive damages under
other statutes, as it “requires neither a showing of malice nor
awareness of the violation of a protected right.” Id. (quoting
Chauca, 89 N.E.3d at 481).
Kreisler v. Humane Soc’y of N.Y., 2018 U.S. Dist. LEXIS 171147
INJUNCTIVE RELIEF
176.
Pursuant to 42 U.S.C. §12188 this Court is vested with the authority to grant the
Plaintiff injunctive relief, including an order to alter the Subject Facility to make it readily
accessible to, and useable by, individuals with disabilities to the extent required by the
ADA, the New York State Civil Rights Law, the New York State Human Rights Law, the
New York City Human Rights Law and close the Subject Facility until the requisite
modifications are completed.
177.
The Plaintiff requests the Court to issue a permanent injunction enjoining the
Defendants from disability discrimination.
178.
The Plaintiff requests the Court to issue a permanent injunction and order the
Defendants to alter their Subject Facility to make it readily accessible to and usable by
individuals with disabilities. To achieve that, the Plaintiff requests the Court to adapt relief
ordered in Shariff v. Alsaydi, 2013 WL 4432218. The Plaintiff requests the Court to order
the Defendants to prepare architectural plans remedying the violations of the 2010
Standards and to provide the Plaintiff’s counsel with those plans for review within 60 days
of the Court’s order. The Plaintiff also requests that the injunction provide him with 30
days to file a motion seeking relief should the Defendants’ proposed architectural plans be
inadequate to remedy the 2010 Standards violations specified in this complaint. The
Plaintiff further requests that the injunction requires the Defendants to implement the
architectural plans and remedy the violations within 60 days of either the Plaintiff’s
agreement, or a ruling by the Court stating that the plans are adequate.
179.
The Plaintiff requests the Court to issue a permanent injunction requiring the
Defendants to make all necessary modifications to the Defendants’ policies, practices and
procedures, so that the Plaintiff, and other persons similarly situated, would not be subject
to further unlawful discrimination.
180.
Injunctive relief is also necessary to order the Defendants to provide auxiliary aid,
or service, and/or alternative methods, to allow the Plaintiff, and others similarly situated,
to use the place of public accommodation in accordance with Title III of the ADA, the New
York State Civil Rights Laws, and the New York State and City Human Rights Laws.
DECLARATORY RELIEF
181.
The Plaintiff is entitled to declaratory relief for the violations committed by the
Defendants, specifying the rights of the Plaintiff, and other persons similarly situated, as
to the removal of the architectural barriers from the Subject Facility by the Defendants, and
as to their policies, practices, procedures, facilities, goods and services.
PRAYER FOR RELIEF
WHEREFORE, the Plaintiff hereby respectfully demands judgment against the
Defendants, jointly and severally, and requests that this Court:
A.
Certify this case as a class action;
B.
Grant a permanent injunction
i.) Enjoining the Defendants, their officers, management personnel, employees,
agents, successors and assigns from engaging in discrimination based on disability;
ii.) Requiring the Defendants to alter their Subject Facility to make it readily accessible
to, and usable for, individuals with disabilities;
iii.) Compelling the Defendants to make all necessary modifications to their policies,
practices and procedures, so that the Plaintiff would not be subject to further
discrimination;
iv.) Ordering the Defendants to provide auxiliary aids and services, as well as to modify
their policies, or procedures, or provide an alternative method, so that the Plaintiff
would be able to obtain the full and equal enjoyment of the Subject Facility owned,
operated, maintained, or leased, by the Defendants, in accordance with Title III of
the ADA, the New York State Civil Rights Laws, and the New York State and City
Human Rights Laws; and
v.) Ordering the Defendants to make the Subject Facility readily accessible to and
usable by individuals with disabilities.
C.
Enter declaratory judgment specifying the Defendants’ violations of the ADA, the New
York State Civil laws, the New York State and City Human Rights laws, and declare
the rights of the Plaintiff, and other persons similarly situated, as to the Defendants’
policies, procedures, facilities, goods and services offered to the public;
D.
Enter declaratory judgment specifying that the Subject Facility owned, operated,
leased, controlled, maintained and/or administered by the Defendants violates the
ADA, the New York State Civil Rights Law, and the New York State and City Human
Rights laws;
E.
Enter an order requiring the Defendants to alter their Subject Facility and amenities to
make it accessible to, and usable by, individuals with disabilities to the full extent
required by Title III of the ADA, the New York State Civil Rights Law, and the New
York State and City Human Rights laws;
F.
Hold each of the Defendants liable for $500 in statutory monetary damages for each
violation and awards that sum to the Plaintiff pursuant to the New York State Civil
Rights Laws §40-c and §40-d;
G.
Hold each of the Defendants liable for compensatory damages in the amount of $1,000
under the New York State and City Human Rights laws.
H.
Hold each of the Defendants liable for punitive damages for their violation of the New
York City Human Rights Law.
I.
Find the Defendants guilty of class A misdemeanor pursuant to New York State Civil
Rights Law §40-d;
J.
Retain its jurisdiction over the Defendants until their unlawful practices, acts and
omissions no longer exist;
K.
Find that the Plaintiff is a prevailing party in this litigation and award attorney’s fees,
expert fees, costs and expenses, together with such other and further relief at law, or in
equity, to which the Plaintiff, and other persons similarly situated, may be entitled; and
L.
Award such other and further relief as it deems necessary, just and proper.
JURY DEMANDED
The Plaintiff demands a trial by jury of all the issues of fact and damages.
Signed: April 1, 2020
Michael Grinblat, Esq. (4159752)
Law Offices of Michael Grinblat
817 Broadway, Fourth Floor
New York, NY 10003
Tel: (347) 796-0712
Fax: (212) 202-5130
[email protected]
Attorney for the Plaintiff
| civil rights, immigration, family |
VUeC_YgBF5pVm5zYcu_U | UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF OHIO
EASTERN DIVISION
No.
COLLECTIVE AND CLASS ACTION
COMPLAINT
David Coffman, individually and on behalf
of all others similarly situated,
Plaintiffs,
v.
AM Communications, Inc., an Ohio
Corporation; AM Communications, Ltd., an
Ohio Corporation; James Johnson, LLC, an
Ohio Limited Liability Company and James
Johnson,
Defendants.
Plaintiff, David Coffman (“Plaintiff”), sues the Defendants, AM Communications, Inc.,
AM Communications, Ltd., James Johnson, LLC, and James Johnson (collectively
“Defendants”) and alleges as follows:
PRELIMINARY STATEMENT
1.
This is an action for unpaid wages, liquidated damages, attorneys’ fees, costs, and
interest under the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201, et seq. and Ohio Revised
Code Ann. (“ORC”) § 4111.0 for Defendants’ failure to pay Plaintiff all earned minimum and
overtime wages.
2.
The FLSA was enacted “to protect all covered workers from substandard wages
and oppressive working hours.” Barrentine v. Ark Best Freight Sys. Inc., 450 U.S. 728, 739
(1981). Under the FLSA, employers must pay all non-exempt employees a minimum wage of
pay for all time spent working during their regular 40-hour workweeks. See 29 U.S.C. § 206(a).
Under the FLSA, employers must pay all non-exempt employees one and one-half their regular
rate of pay for all hours worked in excess of 40 hours in a workweek. See 29 U.S.C § 207.
3.
ORC § 4111 establishes the law regarding minimum wage and overtime within
the State of Ohio.
4.
Plaintiff brings this action on behalf of himself and all similarly-situated current
and former employees of Defendants who were Cable Installers1 classified by Defendants as
independent contractors.
5.
Plaintiff, individually, and on behalf of all others similarly-situated, brings this
action against Defendants for their unlawful failure to pay minimum wage and overtime in
violation of the Fair Labor Standards Act, 29 U.S.C. § 201-219 (the “FLSA”).
6.
Plaintiff, individually, and on behalf of all others similarly-situated, brings this
action against Defendants for their unlawful failure to pay minimum wage and overtime due and
owing Plaintiff and others similarly-situated in violation of ORC § 4111.
7.
Plaintiff brings a collective action under the FLSA to recover the unpaid
minimum wages and overtime owed to him individually and on behalf of all other similarly-
situated employees, current and former, of Defendants. Members of the Collective Action are
referred to as the “Collective Members.”
8.
Additionally, Defendants’ failure to compensate Plaintiff and all other similarly-
situated employees at a rate equal to Ohio’s required minimum wage and overtime rates violates
1
For the purposes of this Complaint, “Cable Installer” is exclusively a job title used for the
purpose of classifying the putative class of similarly situated individuals, is not necessarily the
job title of the Plaintiff and putative class, and has no bearing or relation to any specialization,
skill, education, training, or other qualification that might otherwise be associated with such a
job title. For example, some Cable Installers may have also installed internet or telephone
services yet are still appropriate putative class members.
Ohio Revised Statutes § 4111. Plaintiff, therefore, brings a class action pursuant to Rule 23 of
the Federal Rules of Civil Procedure to recover unpaid wages and other damages owed under
Ohio wage laws. Members of the Ohio Rule 23 Class Action are referred to as the “Ohio Class
Action Members.”
9.
The Collective Members are all current and former employees who worked as
Cable Installers for Defendants and were classified as independent contractors at any time
starting three years before this Complaint was filed, up to the present.
10.
The Ohio Class Action Members are all current and former employees who
worked as Cable Installers for Defendants in the State of Ohio and were classified as
independent contractors at any time starting three years before this Complaint was filed, up to the
present.
11.
Defendants own and operate cable installation companies that contract with
Spectrum Cable to provide cable installation and other related services.
12.
At all relevant times, Defendants have operated pursuant to a policy and practice
of intentionally misclassifying Plaintiff and all other similarly-situated employees as independent
contractors.
13.
At all relevant times, pursuant to this misclassification, Defendants have willfully
refused to pay a minimum wage; willfully refuse to pay overtime; and willfully reduced
employee wages through unlawful deductions.
14.
In willfully refusing to pay a minimum wage; willfully refusing to pay overtime;
and willfully reducing employee wages through unlawful deductions, Defendants have violated
the minimum wage provisions of 29 U.S.C. § 206 and the overtime provisions of 29 U.S.C. §
15.
In willfully refusing to pay a minimum wage and willfully refusing to pay
overtime, Defendants have violated the minimum wage and overtime provisions of Ohio Revised
Code Ann. § 4111.
JURISDICTION AND VENUE
16.
This Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1331 and 29
U.S.C. § 201, et seq. because this civil action arises under the Constitution and law of the United
States. This Court also has subject matter jurisdiction pursuant 28 U.S.C. § 1367 because the
state law claims asserted herein are so related to claims in this action over which this Court has
subject matter jurisdiction that they form part of the same case or controversy under Article III of
the United States Constitution.
17.
Venue is proper in this district pursuant to 28 U.S.C. § 1391(b)(ii) because acts
giving rise to the claims of Plaintiffs occurred within the Northern District of Ohio, and
Defendants regularly conduct business in and have engaged in the wrongful conduct alleged
herein – and, thus, are subject to personal jurisdiction in – this judicial district.
PARTIES
18.
At all material times, Plaintiff is an individual residing in Summit County, Ohio,
and is a former employee of Defendants.
19.
At all material times, Plaintiff regularly performed work for Defendants in
Cuyahoga County, Ohio.
20.
At all material times, Defendant AM Communications, Inc. is an Ohio
corporation licensed to transact business in the State of Ohio. At all material times, Defendant
AM Communications, Inc. does business, has offices, and/or maintains agents for the transaction
of its customary business in Crawford County, Ohio.
21.
At all material times, Defendant AM Communications, Inc. does business as “AM
Communications.”
22.
At all relevant times, Defendant AM Communications, Inc. was Plaintiff’s
employer under the FLSA. The FLSA defines “employer” as any person who acts directly or
indirectly in the interest of an employer in relation to an employee. At all relevant times,
Defendant AM Communications, Inc. had the authority to hire and fire employees, supervised
and controlled work schedules or the conditions of employment, determined the rate and method
of payment, and maintained employment records in connection with Plaintiffs’ employment with
Defendants. As a person who acted in the interest of Defendants in relation to the company’s
employees, Defendant AM Communications, Inc. is subject to liability under the FLSA.
23.
At all material times, Defendant AM Communications, Ltd. is an Ohio
corporation licensed to transact business in the State of Ohio. At all material times, Defendant
AM Communications, Ltd. does business, has offices, and/or maintains agents for the transaction
of its customary business in Crawford County, Ohio.
24.
At all material times, Defendant AM Communications, Ltd. does business as
“AM Communications.”
25.
At all relevant times, Defendant AM Communications, Ltd. was Plaintiff’s
employer under the FLSA. The FLSA defines “employer” as any person who acts directly or
indirectly in the interest of an employer in relation to an employee. At all relevant times,
Defendant AM Communications, Ltd. had the authority to hire and fire employees, supervised
and controlled work schedules or the conditions of employment, determined the rate and method
of payment, and maintained employment records in connection with Plaintiffs’ employment with
Defendants. As a person who acted in the interest of Defendants in relation to the company’s
employees, Defendant AM Communications, Ltd. is subject to liability under the FLSA.
26.
At all material times, Defendant James Johnson, LLC is an Ohio limited liability
company licensed to transact business in the State of Ohio. At all material times, Defendant
James Johnson, LLC does business, has offices, and/or maintains agents for the transaction of its
customary business in Stark County, Ohio.
27.
At all material times, Defendant James Johnson, LLC does business as “James
Johnson, LLC.”
28.
At all relevant times, Defendant James Johnson, LLC was Plaintiff’s employer
under the FLSA. The FLSA defines “employer” as any person who acts directly or indirectly in
the interest of an employer in relation to an employee. At all relevant times, Defendant James
Johnson, LLC had the authority to hire and fire employees, supervised and controlled work
schedules or the conditions of employment, determined the rate and method of payment, and
maintained employment records in connection with Plaintiffs’ employment with Defendants. As
a person who acted in the interest of Defendants in relation to the company’s employees,
Defendant James Johnson, LLC is subject to liability under the FLSA.
29.
Defendant James Johnson is an owner of James Johnson, LLC and was at all
relevant times Plaintiff’s employer as defined by the FLSA, 29 U.S.C. § 203(d).
30.
Under the FLSA, Defendant James Johnson is Plaintiff’s employer. The FLSA
defines “employer” as any person who acts directly or indirectly in the interest of an employer in
relation to an employee. Defendant James Johnson is an owner of James Johnson, LLC. At all
relevant times, Defendant James Johnson had the authority to hire and fire employees,
supervised and controlled work schedules or the conditions of employment, determined the rate
and method of payment, and maintained employment records in connection with Plaintiffs’
employment with Defendants. As a person who acted in the interest of Defendants in relation to
the company’s employees, Defendant James Johnson is subject to individual liability under the
FLSA.
31.
At all material times, Defendants AM Communications, Inc., AM
Communications, Ltd., James Johnson, LLC, and James Johnson are Plaintiff’s “employer” as
defined by Ohio Revised Code § 4111, et seq. The Ohio Revised Code defines “employer” as
any individual, partnership, association, corporation, business trust, or any person or group of
persons, acting in the interest of an employer in relation to an employee.” As detailed above, and
further herein, Defendants AM Communications, Inc., AM Communications, Ltd., James
Johnson, LLC and James Johnson each acted in the interest of their business enterprise in
relation to Plaintiff by setting Plaintiff’s rate and method of pay, controlling his work schedules,
controlling his conditions of employment, and maintaining his employment records. Each of
these decisions by Defendants was designed to ensure the profitability and success of
Defendants’ business enterprise.
32.
At all material times, Defendants AM Communications, Inc., AM
Communications, Ltd., James Johnson, LLC and James Johnson were Plaintiff’s “Joint
Employer”. Two or more distinct entities can exert significant control over the same employee
such that they are “joint employers.” E.g. In re Enterprise Rent-A-Car, 683 F.3d 462, 467 (3d
Cir. 2012). Analyzing whether an entity is a “joint employer” for purposes of the FLSA requires
looking to several, non-exclusive factors in relation to the alleged employer’s: (1) authority to
hire and fire the relevant employees; (2) authority to promulgate work rules and assignments and
to set the employees’ conditions of employment: compensation, benefits, and work schedules,
including the rate and method of payment; (3) involvement in day-to-day employee supervision,
including employee discipline; and (4) actual control of employee records, such as payroll,
insurance, or taxes. The Court may also consider the totality of the circumstances, economic
realities, and other information suggesting “significant control,” which can be persuasive in
conjunction with the enumerated elements of the test. Id. at 470.
29.
At all material times, Defendant AM Communications, Inc., AM
Communications, Ltd., James Johnson, LLC and James Johnson had the authority to fire
Plaintiff. Moreover, Plaintiff was required and expected to abide by the enterprise-wise rules and
procedures established by both AM Communications, Inc., AM Communications, Ltd., and
James Johnson, LLC. The decision to misclassify Plaintiff as an independent contractor, and
therefore fail to pay Plaintiff according to the minimum wage requirements of the FLSA and
Ohio law, was made jointly by AM Communications, Inc., AM Communications, Ltd., James
Johnson, LLC and James Johnson. Moreover, the reduction in labor costs and corresponding
increase in profits that resulted from misclassifying Plaintiff as an independent contractor were
shared by AM Communications, Inc., AM Communications, Ltd., James Johnson, LLC and
James Johnson.
30.
At all material times, Defendants AM Communication, Inc., AM
Communications, Ltd., James Johnson, LLC and James Johnson were Plaintiff’s “single
employer.” Single employer/enterprise theory examines whether “separate corporations are not
what they appear to be, that in truth they are but divisions or departments of a single enterprise.”
Davis v. Abington Mem’l Hosp., 817 F. Supp. 2d 556, 564 (E.D. Pa. 2011) (citing NLRB v.
Deena Artware, Inc., 361 U.S. 398, 401 (1960)). The analysis has four elements: (1) the
interrelation of operations between the corporations; (2) whether the corporations share common
management; (3) whether there was centralized control of labor relations; and (4) whether there
existed common ownership or financial control. Katz v. DNC Servs. Corp. , No. CV 16-5800,
2018 WL 692164, at *3 (E.D. Pa. Sep. 27, 2019) (citing Nesbit v. Gears Unlimited, Inc., 347
F.3d 72, 84 (3d Cir. 2003)).
33.
Defendants AM Communication, Inc., AM Communications, Ltd., James
Johnson, LLC and James Johnson work together as a single enterprise in the business of
providing cable, internet and phone installation services for Spectrum Cable customers.
Defendants AM Communication, Inc., AM Communications, Ltd., James Johnson, LLC and
James Johnson all share in any profit or loss resulting in the operation of their enterprise.
Defendants AM Communication, Inc., AM Communications, Ltd., and James Johnson, LLC
routinely share management, a role performed for both entities by James Johnson. The decision
to misclassify Plaintiff as an independent contractor, and therefore fail to pay Plaintiff according
to the minimum wage requirements of the FLSA and Ohio law, was made jointly by AM
Communications, Inc., AM Communications, Ltd., James Johnson, LLC and James Johnson.
Moreover, the reduction in labor costs and corresponding increase in profits that resulted from
misclassifying Plaintiff as an independent contractor were shared by AM Communications, Inc.,
AM Communications, Ltd., James Johnson, LLC and James Johnson. Defendants individually
and/or through an enterprise or agent, directed and exercised control over Plaintiff’s work and
wages at all relevant times.
34.
Plaintiff, in his work for Defendants, was employed by an enterprise engaged in
commerce that had annual gross sales of at least $500,000.
35.
Plaintiff, in his work for Defendants, was employed by an enterprise that had
annual gross volume of sales made for business in excess of one hundred fifty thousand dollars,
exclusive of excise taxes at the retail level.
36.
At all relevant times, Plaintiff, in his work for Defendants, was engaged in
commerce or the production of goods for commerce.
37.
At all relevant times, Plaintiff, in his work for Defendants, was engaged in
interstate commerce.
38.
Plaintiff, in his work for Defendants, regularly handled goods produced or
transported in interstate commerce.
NATURE OF THE CLAIM
39.
Defendants do business as AM Communications and James Johnson, LLC and
offer cable installation services to customers.
40.
At all relevant times, Defendant AM Communications subcontracts with
Spectrum Cable to provide cable installation services for Spectrum Cable’s customers.
41.
At all relevant times, Defendant AM Communications in turn contracts with other
subcontractors, such as James Johnson LLC, to perform such cable installation services.
42.
Upon information and belief, at all relevant times, Defendant AM
Communications contracts with at least three subcontractors, including Defendant James
Johnson, LLC, to provide such services.
43.
At all relevant times, when a work order comes into Spectrum Cable, Spectrum
Cable submits that work to Defendant AM Communications. Defendant AM Communications
then determines which sub-contractor to assign the work to. That sub-contractor then assigns the
work to a Cable Installer, such as Plaintiff or another member of the Collective and/or Ohio
Class Action Members.
44.
At all relevant times, Defendant AM Communications has retained and exercised
control over the manner and method that Cable Installers perform their work for their respective
sub-contractors.
45.
For example, Defendant AM Communications, at all relevant times, controlled,
supervised, and critiqued Plaintiff in his work for James Johnson LLC.
46.
At all relevant times, all Defendants have controlled the work assigned to Plaintiff
and the Collective Members and the Ohio Class Action Members.
47.
At all relevant times, Cable Installers are not permitted to turn down jobs assigned
to them by Defendants.
48.
At all relevant times, in his work for Defendants, Plaintiff attempted to refuse jobs
that were scheduled too late in the evening for him. When Plaintiff tried to refuse jobs, he was
told that if he refused, he would no longer be permitted to work for the company.
49.
Upon information and belief, Collective Members and Ohio Class Action
Members were told the same thing by Defendants if they tried to turn down a job that was
assigned to them by Defendants.
50.
Plaintiff was hired by Defendants and worked for Defendants as a Cable Installer
from approximately 2014 through approximately November 2020.
51.
At all relevant times, in his work for Defendants, Plaintiff worked as a Cable
Installer, performing cable installation services for customers.
52.
Defendants, in their sole discretion, agreed to compensate Plaintiff at a flat rate
per service job her performed. Plaintiff was compensated by Defendants in this manner,
regardless of how many hours he worked in a given workweek.
53.
Plaintiff typically worked between 60 and 70 hours per week.
54.
Rather than classify Plaintiff as an employee, Defendants classified him as an
independent contractor.
55.
As a matter of common policy and practice, Defendants misclassify all of their
Cable Installers as independent contractors.
56.
Consistent with this common policy and practice, Plaintiff and others similarly
situated individuals have been intentionally misclassified by Defendants as independent
contractors in and effort by Defendants to minimize labor costs and maximize profits across their
enterprise.
57.
As a result of Defendants’ common misclassification policy, Defendants have not
paid a minimum wage or overtime pay to Plaintiff and others similarly situated.
58.
Specifically, Defendants required Plaintiff and others similarly situated to sign
illegal “Independent Contractor Agreements” pursuant to which Plaintiff and others similarly
situated were not paid an hourly wage equal to the applicable minimum wage and were not paid
overtime compensation at a rate of one and one-half times their regular rates.
59.
Pursuant to Plaintiff’s Independent Contractor Agreement, Plaintiff and others
similarly situated were paid a flat rate per service job they performed. Plaintiff and others
similarly situated were compensated by Defendants in this manner, regardless of how many
hours they worked in a given workweek.
60.
The FLSA applies to Plaintiff and all individuals similarly situated at all times
during which they worked for Defendants. No exceptions or exemptions to the FLSA apply to
Plaintiffs and those similarly situated.
61.
Upon information and belief, Defendants employed hundreds of Cable Installers
throughout the relevant time period without paying a minimum wage or overtime pay, and while
denying them the rights and benefits due an employee.
62.
At all relevant times, Defendants directly or indirectly exercised significant
control over the wages, hours, and working conditions of Plaintiff and similarly situated
individuals.
63.
At all relevant times, the employment terms, conditions, and policies that applied
to Plaintiff were the same as those applied to other putative Collective Members and Ohio Class
Action Members who also worked as Cable Installers for Defendants.
64.
Plaintiff and the putative Collective Members and Ohio Class Action Members
incurred financial loss, injury, and damage as a result of Defendants’ business practice of
misclassifying them as independent contractors and failing to pay them a minimum wage and
overtime pay.
65.
Because Defendants failed to pay their employees proper wages, the putative
Collective Members’ and Ohio Class Action Members’ income consisted solely of the flat rate
per service job performed.
66.
Defendants’ misclassification of Plaintiff and other putative Collective Members
and Ohio Class Action Members as independent contractors was specifically intended to enhance
Defendants’ profit margins at the expense of the putative Collective Members and Ohio Class
Action Members as follows: (1) willfully failing to pay Cable Installers the minimum wage in
violation of the FLSA and ORC § 4111; (2) willfully suffering and permitting Plaintiffs and the
putative Collective Members and Ohio Class Action Members to work in excess of 40 hours in a
given workweek without paying overtime compensation at a rate of one and one-half times their
regular rates; and (3) adopting and implementing employment policies that violate the FLSA and
ORC § 4111.
67.
Defendants’ misclassification of Plaintiff and those similarly situated was willful.
68.
Defendants knew or should have known that it was improper to classify Plaintiff
and the putative Collective Members and Ohio Class Action Members as independent
contractors.
69.
Workers in the putative Collective and Class cannot “elect” to be treated as
employees or independent contractors. Nor can workers in the putative Collective or Classes
agree to be paid less than the applicable minimum wage. Despite this, Defendants unfairly,
unlawfully, fraudulently, and unconscionably attempted to coerce workers in the putative
Collective and Class to waive their statutory rights and elect to be treated as independent
contractors.
70.
Any contract which attempts to have workers in the putative Collective and Class
waive, limit, or abridge their statutory rights to be treated as an employee under the FLSA or
other applicable wage and hour laws is void, unenforceable, unconscionable, and contrary to
public policy.
71.
The determining factor as to whether Plaintiff and those similarly situated are
employees or independent contractors under the FLSA is not the workers’ elections, subjective
intent, or any contract. Rather, the test for determining whether an individual is an “employee”
under the FLSA is the economic reality test. See Rutherford Food Corp. v. McComb, 331 U.S.
722, 727 (1947). Under the economic reality test, employee status turns on whether the
individual is, as a matter of economic reality, in business for herself and truly independent, or,
rather, is economically dependent upon finding employment in others.
72.
Under the applicable test, court use the following factors to determine economic
dependence and employment status: (1) the degree of control exercised by the alleged employer;
(2) the relative investments of the alleged employer and employee; (3) the degree to which the
employee’s opportunity for profit and loss is determine by the employer; (4) the skill and
initiative required in performing the job; (5) the permanency of the relationship; and (6) the
degree to which the alleged employee’s tasks are integral to the employer’s business.
73.
The totality of circumstances surrounding the employment relationship between
Defendants and the putative Collective and Classes establishes economic dependence by the
putative Collective and Classes on Defendants and employee status. Here, Plaintiff and all
individuals similarly situated are not in business for themselves and truly independent, but rather
are economically dependent upon Defendants. The putative Collective and Classes are not
engaged in occupations or businesses distinct from that of Defendants. To the contrary, the
putative Collective and Classes are the basis for Defendants’ business. Defendants obtain the
customers who seek out cable installation services, and Defendants provide the workers who
conduct the cable installation services on behalf of Defendants. Defendants retain pervasive
control over the business operation as a whole, and putative Collective and Classes.
Degree of Control Exercised by Defendants
74.
Plaintiff and the other members of the putative Collective and Class do not exert
control over any meaningful part of Defendants’ business operation and do not stand as a
separate economic entity from Defendants. Defendants exercise control over all aspects of the
working relationship with Plaintiff and the other putative Collective and Ohio Class Action
Members.
75.
Plaintiffs and putative Collective and Ohio Class Action Members’ economic
status is inextricably linked to conditions over which Defendants have complete control,
including without limitation advertising and promotion, business and financial relationships with
customers, business and financial relationship with insurers, and customer volume.
76.
Defendants exercise the following significant control over the work conditions of
Plaintiffs and others similarly situated:
a.
Defendants require Plaintiff and putative Collective and Classes to
routinely work in excess of 40 hours per week;
b.
Defendants pay Plaintiffs and the putative Collective and Classes only
varying flat rates based on the job performed;
c.
Defendants direct Plaintiff and the putative Collective and Classes with
respect to which service jobs/runs to perform and what types of service to
provide;
d.
Defendants require Plaintiff and the putative Collective and Classes to
wear Defendants’ uniform;
e.
Defendants require Plaintiff and the putative Collective and Classes to use
a phone application to obtain lists of their jobs and gather any necessary
customer signatures;
f.
Defendants determined the tools and equipment Plaintiff and the putative
Collective and Classes have to use; and
g.
Defendants required Plaintiff and the putative Collective and Classes to
purchase necessary equipment from them.
Facts Establishing No Skill or Initiative of a Person in Business for Themselves
77.
Plaintiff, like all members of the putative Collective and Classes, does not
exercise the skill and initiative of a person in business for oneself;
78.
Plaintiff, like all members of the putative Collective and Classes, do not have the
opportunity to exercise the business skills and initiative necessary to elevate their status to that of
an independent contractor: they own no enterprise, nor do they maintain a separate business
structure or facility.
79.
Plaintiff and the putative Collective and Classes have no control over customers,
nor do they actively participate in any efforts to increase Defendants’ customer base or profit, or
to improve business in any capacity.
80.
Defendants do not permit Plaintiff and the putative Collective and Classes to hire
or subcontract other qualified individuals to provide additional cable installation to customers,
thereby increasing their revenue, as an independent contractor in business for himself would
have the authority to do.
Facts Establishing Relative Investment
81.
Plaintiff’s and the putative Collective’s and Classes’ relative investment is minor
when compared to the investment made by Defendants.
82.
Plaintiff and the putative Collective and Classes make no financial investment in
Defendants’ facilities, advertising, maintenance, staffing, and contractual relationships. All
capital investment and risk belong to Defendants.
83.
Plaintiff’s and the putative Collective’s and Classes’ investment is limited to fuel
and amounts paid to Defendants for signage, uniforms, and tools. Absent Defendants’
investment and provision of the business, the Cable Installers would not earn anything.
Facts Establishing Opportunity for Profit and Loss
84.
Defendants manage all aspects of the business operation, including without
limitation attracting investors, establishing business and customer relationships, maintaining the
premises, establishing the hours of operation, coordinating advertising, and hiring and
controlling of staff. Defendants provide all necessary capital to open and operate the business.
85.
Neither Plaintiff nor the putative Collective and Classes have responsibility for
any aspect of Defendants’ ongoing business risk.
Facts Establishing Permanency
86.
Plaintiff worked for Defendants as a Cable Installer from approximately 2014
through approximately November 2020.
Fact Establishing Members of the Putative Collective and Classes Are an Integral
Part of Defendants’ Business
87.
Plaintiff and the putative Collective and Classes are critical to Defendants’
success. Defendants’ operation in wholly dependent on the cable, internet, and telephone
installation services that Plaintiff and the putative Collective and Classes provide for customers.
88.
The primary “product” or “good” Defendants are in business to sell consists of
cable installation services provided by members of the putative Collective and Classes.
89.
Members of the putative Collective and Classes, like Plaintiff, are economically
dependent on Defendants and subject to significant control by Defendants.
Facts Establishing that Defendants’ Acts Were Willful
90.
All actions and agreements by Defendants described herein were willful and
intentional, and they were not the result of mistake or inadvertence.
91.
Defendants were aware that the FLSA applies to their business at all relevant
times and that, under the economic realities test applicable to determining employment status
under those laws, Plaintiff and Members of the putative Collective and Classes were
misclassified as independent contractors.
92.
Cable Installers working under conditions similar to those employed with
Defendants have been determined to be employees–not independent contractors–in other FLSA
93.
Despite this notice of their violations, and in an effort to enhance Defendants’
profits, Defendants continued to intentionally misclassify Cable Installers like Plaintiff and
similarly situated individuals, failed to pay them minimum wage in violation of the FLSA, and
knowingly suffered or permitted them to work in excess of 40 hours during a workweek without
paying them overtime compensation at a rate of one and one-half times their regular rate. Such
conduct was intentional, unlawful, fraudulent, deceptive, unfair, and contrary to public policy.
INJURY AND DAMAGE
94.
Plaintiff and all Members of the putative Collective and Classes suffered harm,
injury, and damages, including financial loss, as a result of Defendants’ conduct complained of
95.
Plaintiff and all Members of the putative Collective and Classes were entitled to a
minimum wage and overtime pay for their work performed for Defendants. By failing to pay
Plaintiff and the Members of the putative Collective and Classes a minimum wage and overtime
pay and interfering with their right to retain all of their earnings, Defendants injured Plaintiff and
the Members of the putative Collective and Classes and caused them financial loss, harm, injury,
and damage.
FLSA COLLECTIVE ACTION ALLEGATIONS
96.
Plaintiff realleges and incorporates by reference all allegations in all preceding
paragraphs.
97.
Plaintiff brings the FLSA claims in this action as a collective action under 29
U.S.C. § 216(b).
98.
Plaintiff asserts those claims on behalf of himself, and on behalf of all similarly
situated Cable Installers of Defendants, who were not paid all minimum wage and overtime
compensation required by the FLSA during the relevant time period as a result of Defendants’
compensation policies and practices.
99.
Plaintiff seeks to notify the following individuals of their rights under 29 U.S.C. §
216(b) to join this action by filing in this Court written notice of their consent to join this action:
All Cable Installers (or individuals with other similar job
duties or titles) who worked for Defendants, or any
subcontractor of Defendants, and were misclassified as
independent contractors at any time during the past three
years.
100.
The FLSA provides for a three-year statute of limitations for causes of action
arising out of a willful violation of the Act. 29 U.S.C. § 255. As alleged above, Plaintiff and
similarly situated Cable Installers’ claims arise out of Defendants’ willful violations of the
FLSA. Accordingly, the Court should require appropriate notice of this action be given to all
tipped employees employed by Defendants within three years from the filing of this Complaint.
101.
Upon information and belief, Defendants have employed more than one hundred
(100) Cable Installers during the period relevant to this action.
102.
The identities of these individuals, as a group, are known only to Defendants.
Because the numerous members of this collective action are unknown to Plaintiff, joinder of
each member is not practicable.
103.
Because these similarly situated tipped employees are readily identifiable by
Defendants and may be located through their records, they may be readily notified of this action
and allowed to opt into it pursuant to 29 U.S.C. § 216(b), for the purpose of collectively
adjudicating their FLSA claims.
104.
Collective adjudication is appropriate in this case because the individuals whom
Plaintiff wishes to notify of this action have been employed in positions similar to Plaintiff; have
performed work similar to Plaintiff; and have been subject to compensation practices similar to
those to which Plaintiff have been subjected, including unlawful misclassification as independent
contractors and failure to pay the applicable minimum wage and overtime rates as required by
the FLSA.
OHIO CLASS ACTION ALLEGATIONS
105.
Plaintiff realleges and incorporates by reference all allegations in all preceding
paragraphs.
106.
Plaintiff brings his Ohio wage claims as a Rule 23 class action on behalf of the
following Ohio Class Action Members:
All Cable Installers (or individuals with other similar job
duties or titles) who worked for Defendants, or subcontractors
of Defendants, in Ohio and were misclassified as independent
contractors at any time during the past three years.
107.
Numerosity. The number of Ohio Class Action Members is believed to be over
one hundred. This volume makes bringing the claims of each individual Ohio Class Action
Member before this Court impracticable. Likewise, joining each individual Ohio Class Action
Member as a plaintiff in this action is impracticable. Furthermore, the identity of the Ohio Class
Action Members will be determined from Defendants’ records, as will the compensation paid to
each of them. As such, a class action is a reasonable and practical means of resolving these
claims. To require individual actions would prejudice the Ohio Class Action Members and
Defendants.
108.
Typicality. Plaintiff’s Ohio claims are typical of the Ohio Class Action Members
because like the Ohio Class Action Members, Plaintiff was subject to Defendants’ uniform
policies and practices and was compensated in the same manner as the other Ohio Class Action
Members. Defendants regularly required Plaintiff and the Ohio Class Action Members to work
in excess of 40 hours in a given workweek without paying them overtime. Defendants
misclassified Plaintiff and the Ohio Class Action Members as independent contractors. This was
commonly, though not exclusively, done in order to prevent Plaintiff and the Ohio Class Action
Members from being paid a minimum wage for all hours worked and overtime for all hours
worked in excess of 40 in a given workweek. As a result, Defendants failed to pay Plaintiff and
the Ohio Class Action Members both minimum wage and overtime for all hours worked.
109.
As a result of such policy and practice by Defendants, Defendants violated the
minimum and overtime wage provisions of Ohio Revised Code § 4111.
110.
Adequacy. Plaintiff is a representative party who will fairly and adequately
protect the interests of the Ohio Class Action Members because it is in his interest to effectively
prosecute the claims in this Complaint in order to obtain the unpaid wages and penalties required
under Ohio law. Plaintiff has retained attorneys who are competent in both class actions and
wage and hour litigation. Plaintiff does not have any interest that may be contrary to or in
conflict with the claims of the Ohio Class Action Members he seeks to represent.
111.
Commonality. Common issues of fact and law predominate over any individual
questions in this matter. The common issues of fact include, but are not limited to:
a.
The number of hours worked by Plaintiff and the Ohio Class Action
Members;
b.
The amounts paid to Plaintiff and the Ohio Class Action Members;
c.
The degree of control Defendants exerted over Plaintiff and the Ohio
Class Action Members;
d.
The relative investments of Defendants and Plaintiff and the Ohio Class
Action Members;
e.
The degree to which Plaintiff’s and the Ohio Class Action Members’
opportunity for profit and loss was determined by Defendants;
f.
The skill and initiative required in performing the job;
g.
The permanency of the relationship; and
h.
The degree to which Plaintiff’s and the Ohio Class Action Members’ tasks
are integral to Defendants’ business.
112.
Common issues of law include, but are not limited to:
a.
Whether Defendants paid all minimum wages due and owing to Plaintiff
and the Ohio Class Action Members;
b.
Whether Defendants paid overtime wages due and owing to Plaintiff and
the Ohio Class Action Members for all hours worked in excess of 40 in a
given workweek;
c.
Whether Defendants improperly misclassified Plaintiff and the Ohio Class
Action Members as independent contractors;
d.
Whether Plaintiff and the Ohio Class Action Members are entitled to
compensatory damages;
e.
The proper measure of damages sustained by Plaintiff and the Ohio Class
Action Members; and
f.
Whether Defendants’ actions were “willful.”
113.
Superiority. A class action is superior to other available means for the fair and
efficient adjudication of this lawsuit. Even in the event any of the Ohio Class Action Members
could afford to pursue individual litigation against companies the size of Defendants, doing so
would unduly burden the system. Individual litigation would magnify the delay and expense to
all parties and burden the court system with duplicative lawsuits. Prosecution of separate actions
by individual Ohio Class Action Members would create the risk of inconsistent or varying
judicial results and establish incompatible standards of conduct for Defendants.
114.
A class action, by contrast, presents far fewer management difficulties and affords
the benefits of uniform adjudication of the claims, financial economy for the parties, and
comprehensive supervision by a single court and Judge. By concentrating this litigation in one
forum, judicial economy and parity among the claims of individual Ohio Class Action Members
are promoted. Additionally, class treatment in this matter will provide for judicial consistency.
The identities of the Ohio Class Action Members are readily identifiable from Defendants’
records.
115.
This type of case is well-suited for class action treatment because: (1) Defendants’
practices, policies, and/or procedures were uniform; (2) the burden is on each Defendant to prove
it properly compensated its employees; (3) the burden is on each Defendant to accurately record
hours worked by employees; and (4) the burden is on each Defendant to prove it properly
imposed the tip credit upon its employees.
116.
Ultimately, a class action is a superior forum to resolve the Ohio state law claims
set forth in this Complaint because of the common nucleus of operative facts centered on the
continued failure of Defendants to pay Plaintiff and the Ohio Class Action Members according to
applicable Ohio laws.
117.
Nature of Notice to be Proposed. As to the Rule 23 Ohio Class Action Members,
it is contemplated that notice would be issued giving putative class members an opportunity to
opt out of the class if they so desire, i.e. an “opt-out notice.” Notice of the pendency and
resolution of the action can be provided to the Ohio Class Action Members by mail, electronic
mail, print, broadcast, internet, and/or multimedia publication.
COUNT ONE: FAIR LABOR STANDARDS ACT
FAILURE TO PAY MINIMUM WAGE
(Against All Defendants)
118.
Plaintiff realleges and incorporates by reference all allegations in all preceding
paragraphs.
119.
Defendants willfully failed or refused to pay Plaintiff and the Collective Members
minimum wage for all hours worked in a given workweek throughout the duration of their
employment.
120.
As a result, Defendants failed to compensate Plaintiff and the Collective Members
at least the applicable minimum wage rate for all hours worked.
121.
Defendants’ practice of willfully failing or refusing to pay Plaintiff and the
Collective Members at the required minimum wage rate violates the FLSA, 29 U.S.C. § 206(a).
122.
Defendants knew that – or acted with reckless disregard as to whether – their
failure to pay Plaintiff and the Collective Members the proper minimum wage rate would violate
federal and state law, and Defendants were aware of the FLSA minimum wage requirements
during Plaintiff and the Collective Members employment. As such, Defendants’ conduct
constitutes a willful violation of the FLSA.
123.
Plaintiff and the Collective Members are therefore entitled to compensation for
the unpaid minimum wages at an hourly rate, to be proven at trial, plus an additional equal
amount as liquidated damages, together with interest, reasonable attorney’s fees, and costs.
WHEREFORE, Plaintiff, David Coffman, individually, and on behalf of all Cable
Installers similarly situated, respectfully request that the Court grant relief in Plaintiff’s favor,
and against Defendants for compensation for unpaid overtime wages, plus an additional equal
amount as liquidated damages, prejudgment and post-judgment interest, reasonable attorneys’
fees, costs, and disbursements of this action, and any additional relief this Court deems just and
COUNT TWO: FAIR LABOR STANDARDS ACT
FAILURE TO PAY OVERTIME
(Against All Defendants)
124.
Plaintiff realleges and incorporates by reference all allegations in all preceding
paragraphs.
125.
Defendants willfully failed or refused to pay Plaintiff and the Collective Members
the applicable overtime wage for all hours worked in excess of 40 in a given workweek
throughout the duration of their employment.
126.
As a result, Defendants failed to compensate Plaintiff and the Collective Members
at least the applicable overtime wage rate for all hours worked in excess of 40 in a given
workweek.
127.
Defendants’ practice of willfully failing or refusing to pay Plaintiff and the
Collective Members at the required overtime wage rate violates the FLSA, 29 U.S.C. § 207(a).
128.
Defendants knew that – or acted with reckless disregard as to whether – their
failure to pay Plaintiff and the Collective Members the proper overtime rate would violate
federal and state law, and Defendants were aware of the FLSA overtime requirements during
Plaintiff and the Collective Members employment. As such, Defendants’ conduct constitutes a
willful violation of the FLSA.
129.
Plaintiff and the Collective Members are therefore entitled to compensation for
the unpaid overtime wages at an hourly rate, to be proven at trial, plus an additional equal
amount as liquidated damages, together with interest, reasonable attorney’s fees, and costs.
WHEREFORE, Plaintiff, David Coffman, individually, and on behalf of all Cable
Installers similarly situated, respectfully request that the Court grant relief in Plaintiff’s favor,
and against Defendants for compensation for unpaid overtime wages, plus an additional equal
amount as liquidated damages, prejudgment and post-judgment interest, reasonable attorneys’
fees, costs, and disbursements of this action, and any additional relief this Court deems just and
COUNT THREE: OHIO REVISED CODE § 4111
FAILURE TO PAY MINIMUM WAGE
(Against All Defendants)
130.
Plaintiff realleges and incorporates by reference all allegations in all preceding
paragraphs.
131.
Defendants willfully failed or refused to pay Plaintiff and the Ohio Class Action
Members minimum wage for all hours worked in a given workweek throughout the duration of
their employment.
132.
As a result, Defendants failed to compensate Plaintiff and the Ohio Class Action
Members at least the applicable minimum wage rate for all hours worked.
133.
Defendants’ practice of willfully failing or refusing to pay Plaintiff and the Ohio
Class Action Members at the required minimum wage rate violates the minimum wage
provisions of ORC § 4111.
134.
Defendants knew that – or acted with reckless disregard as to whether – their
failure to pay Plaintiff and the Ohio Class Action Members the proper minimum wage rate
would violate federal and state law, and Defendants were aware of the FLSA minimum wage
requirements during Plaintiff’s and the Ohio Class Action Members’ employment. As such,
Defendants’ conduct constitutes a willful violation of the FLSA.
135.
Plaintiff and the Ohio Class Action Members are therefore entitled to
compensation for the unpaid minimum wages at an hourly rate, to be proven at trial, plus an
additional equal amount as liquidated damages, together with interest, reasonable attorney’s fees,
and costs.
WHEREFORE, Plaintiff, David Coffman, individually, and on behalf of all Cable
Installers similarly situated, respectfully request that the Court grant relief in Plaintiff’s favor,
and against Defendants for compensation for unpaid overtime wages, plus an additional equal
amount as liquidated damages, prejudgment and post-judgment interest, reasonable attorneys’
fees, costs, and disbursements of this action, and any additional relief this Court deems just and
COUNT FOUR: OHIO REVISED CODE § 4111
FAILURE TO PAY OVERTIME
(Against All Defendants)
136.
Plaintiff realleges and incorporates by reference all allegations in all preceding
paragraphs.
137.
Defendants willfully failed or refused to pay Plaintiff and the Ohio Class Action
Members the applicable overtime wage for all hours worked in excess of 40 in a given workweek
throughout the duration of their employment.
138.
As a result, Defendants failed to compensate Plaintiff and the Ohio Class Action
Members at least the applicable overtime wage rate for all hours worked in excess of 40 in a
given workweek.
139.
Defendants’ practice of willfully failing or refusing to pay Plaintiff and the Ohio
Class Action Members at the required overtime wage rate violates the overtime provisions of
ORC § 4111.
140.
Defendants knew that – or acted with reckless disregard as to whether – their
failure to pay Plaintiff and the Ohio Class Action Members the proper overtime rate would
violate federal and state law, and Defendants were aware of the FLSA overtime requirements
during Plaintiff’s and the Ohio Class Action Members’ employment. As such, Defendants’
conduct constitutes a willful violation of the FLSA.
141.
Plaintiff and the Ohio Class Action Members are therefore entitled to
compensation for the unpaid overtime wages at an hourly rate, to be proven at trial, plus an
additional equal amount as liquidated damages, together with interest, reasonable attorney’s fees,
and costs.
WHEREFORE, Plaintiff, David Coffman, individually, and on behalf of all Cable
Installers similarly situated, respectfully request that the Court grant relief in Plaintiff’s favor,
and against Defendants for compensation for unpaid overtime wages, plus an additional equal
amount as liquidated damages, prejudgment and post-judgment interest, reasonable attorneys’
fees, costs, and disbursements of this action, and any additional relief this Court deems just and
RESPECTFULLY SUBMITTED this 22nd day of March, 2021.
BENDAU & BENDAU PLLC
By: /s/ Clifford P. Bendau, II
Clifford P. Bendau, II (OH No. 0089601)
BENDAU & BENDAU PLLC
P.O. Box 97066
Phoenix, Arizona 85060
Telephone AZ: (480) 382-5176
Email: [email protected]
[email protected]
THE LAW OFFICES OF SIMON & SIMON
By: /s/ James L. Simon
James L. Simon (OH No. 0089483)
6000 Freedom Square Dr.
Independence, OH 44131
Telephone: (216) 525-8890
Facsimile: (216) 642-5814
Email: [email protected]
| employment & labor |
A6olCocBD5gMZwczlFNj | UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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EUGENE DUNCAN AND ON BEHALF OF ALL
OTHER PERSONS SIMILARLY SITUATED,
1:19-cv-3336
Plaintiffs,
v.
ECF CASE
No.: _________________
CLASS ACTION COMPLAINT
JURY TRIAL DEMANDED
EEMERGE.NYC LLC AND SL GREEN REALTY
CORP.,
Defendants.
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INTRODUCTION
1.
Plaintiff, EUGENE DUNCAN, on behalf of himself and others similarly
situated, asserts the following claims against Defendants, EEMERGE.NYC LLC AND
SL GREEN REALTY CORP., as follows.
2.
Plaintiff is a visually-impaired and legally blind person who requires
screen-reading software to read website content using his computer. Plaintiff uses the
terms “blind” or “visually-impaired” to refer to all people with visual impairments who
meet the legal definition of blindness in that they have a visual acuity with correction of
less than or equal to 20 x 200. Some blind people who meet their definition have limited
vision. Others have no vision.
3.
Based on a 2010 U.S. Census Bureau report, approximately 8.1 million
people in the United States are visually impaired, including 2.0 million who are blind,
and according to the American Foundation for the Blind’s 2015 report, approximately
400,000 visually impaired persons live in the State of New York.
4.
Plaintiff brings his civil rights action against EEMERGE.NYC LLC AND
SL GREEN REALTY CORP., (collectively “Defendant” or “Company”) for its failure to
design, construct, maintain, and operate its website to be fully accessible to and
independently usable by Plaintiff and other blind or visually-impaired people.
Defendant’s denial of full and equal access to its website, and therefore denial of its
products and services offered thereby and in conjunction with its physical locations, is a
violation of Plaintiff’s rights under the Americans with Disabilities Act (“ADA”).
5.
Plaintiff is being deterred from patronizing the Defendant’s physical
locations due to Defendant’s discrimination by failing to maintain access to the Website
for visually-impaired consumers. Plaintiff intends to return to Defendant’s Website and
rental space location once Defendant ceases its on-going discriminatory practices.
6.
Because Defendant’s website, WWW.EMERGE212.COM (the “Website”
or “Defendant’s website”), is not equally accessible to blind and visually-impaired
consumers, it violates the ADA. Plaintiff seeks a permanent injunction to cause a change
in Defendant’s corporate policies, practices, and procedures so that Defendant’s website
will become and remain accessible to blind and visually-impaired consumers.
JURISDICTION AND VENUE
7.
The Court has subject-matter jurisdiction over this action under 28 U.S.C.
§ 1331 and 42 U.S.C. § 12181, as Plaintiff’s claims arise under Title III of the ADA, 42
U.S.C. § 12181, et seq., and 28 U.S.C. § 1332.
8.
The Court has supplemental jurisdiction under 28 U.S.C. § 1367 over
Plaintiff’s New York State Human Rights Law, N.Y. Exec. Law Article 15,
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(“NYSHRL”) and New York City Human Rights Law, N.Y.C. Admin. Code § 8-101 et
seq., (“NYCHRL”) claims.
9.
Venue is proper in this district under 28 U.S.C. §1391(b)(1) and (2)
because Defendant is subject to personal jurisdiction in this District and a substantial
portion of the conduct complained of herein occurred in this District.
10.
Defendant is subject to personal jurisdiction in this District. Defendant has
been and is committing the acts or omissions alleged herein in the Southern District of
New York that caused injury, and violated rights the ADA prescribes to Plaintiff and to
other blind and other visually impaired-consumers. A substantial part of the acts and
omissions giving rise to Plaintiff’s claims occurred in the in this District: on several
separate occasions, Plaintiff has been denied the full use and enjoyment of the facilities,
goods, and services of Defendant’s Website while attempting to access the Defendant’s
website from his home. These access barriers that Plaintiff encountered have caused a
denial of Plaintiff’s full and equal access multiple times in the past, and now deter
Plaintiff on a regular basis from visiting or returning to Defendant’s brick-and mortar
locations and Website. This includes, the ability to view floor plans and virtual office
packages and prices, learn information about the different locations, such as building
amenities, access to floor plans and building photos, transportation options and services
available, read blog posts and frequently asked questions, subscribe to newsletter and
schedule a tour of the spaces, participate in other social interactive experiences and to
learn about other important information.
11.
The Court is empowered to issue a declaratory judgment under 28 U.S.C.
§§ 2201 and 2202.
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THE PARTIES
12.
Plaintiff, EUGENE DUNCAN, at all relevant times, is a resident of
Queens, New York. Plaintiff is a blind, visually-impaired handicapped person and a
member of member of a protected class of individuals under the ADA, under 42 U.S.C. §
12102(1)-(2), and the regulations implementing the ADA set forth at 28 CFR §§ 36.101
et seq., the NYSHRL and NYCHRL.
13.
On information and belief, Defendant, EEMERGE.NYC LLC, is and was,
at all relevant times herein a Foreign Limited Liability Company organized under the
laws of Delaware with its principal executive office in New York, NY. Defendant jointly
owns and operates multiple rental spaces as well as the WWW.EMERGE212.COM
website, and those affiliated or directly linked, and advertises, markets, offers and sells its
services and workspaces within the State of New York and throughout the United States.
14.
On information and belief, Defendant, SL GREEN REALTY CORP., is
and was, at all relevant times herein a Foreign Business Corporation organized under the
laws of Maryland with its principal executive office in New York, NY. Defendant jointly
owns and operates multiple rental spaces as well as the WWW.EMERGE212.COM
website, and those affiliated or directly linked, and advertises, markets, offers and sells its
services and workspaces within the State of New York and throughout the United States.
15.
Defendant operates their website across the United States, and also owns
and operates different rental office spaces in New York, New York. These locations
constitute a place of public accommodation. Defendant’s locations provide to the public
important goods and services. Defendant’s Website provides consumers with access to an
array of goods and services including the ability to view floor plans and virtual office
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packages and prices, learn information about the different locations, such as building
amenities, access to floor plans and building photos, transportation options and services
available, read blog posts and frequently asked questions, subscribe to newsletter and
schedule a tour of the spaces, participate in other social interactive experiences and to
learn about other important information.
16.
Defendant’s rental space locations are a place of public accommodation
within the definition of Title III of the ADA, 42 U.S.C. § 12181(7). Defendant’s Website
is a service, privilege, or advantage that is heavily integrated with Defendant’s physical
locations and operates as a gateway thereto.
NATURE OF ACTION
17.
The Internet has become a significant source of information, a portal, and
a tool for conducting business, doing everyday activities such as shopping, learning,
banking, researching, as well as many other activities for sighted, blind and visually-
impaired persons alike.
18.
In today’s tech-savvy world, blind and visually-impaired people have the
ability to access websites using keyboards in conjunction with screen access software that
vocalizes the visual information found on a computer screen or displays the content on a
refreshable Braille display. Their technology is known as screen-reading software.
Screen-reading software is currently the only method a blind or visually-impaired person
may independently access the internet. Unless websites are designed to be read by screen-
reading software, blind and visually-impaired persons are unable to fully access websites,
and the information, products, and services contained thereon.
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19.
Blind and visually-impaired users of Windows operating system-enabled
computers and devices have several screen reading software programs available to them.
Some of these programs are available for purchase and other programs are available
without the user having to purchase the program separately. Job Access With Speech,
otherwise known as “JAWS” is currently the most popular, separately purchased and
downloaded screen-reading software program available for a Windows computer.
20.
For screen-reading software to function, the information on a website must
be capable of being rendered into text. If the website content is not capable of being
rendered into text, the blind or visually-impaired user is unable to access the same
content available to sighted users.
21.
The international website standards organization, the World Wide Web
Consortium, known throughout the world as W3C, has published version 2.0 of the Web
Content Accessibility Guidelines (“WCAG 2.0”). WCAG 2.0 are well-established
guidelines for making websites accessible to blind and visually-impaired people. These
guidelines are universally followed by most large business entities and government
agencies to ensure their websites are accessible.
22.
Non-compliant websites pose common access barriers to blind and
visually-impaired persons. Common barriers encountered by blind and visually impaired
persons include, but are not limited to, the following:
a.
A text equivalent for every non-text element is not provided;
b.
Title frames with text are not provided for identification and
navigation;
c.
Equivalent text is not provided when using scripts;
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d.
Forms with the same information and functionality as for sighted
persons are not provided;
e.
Information about the meaning and structure of content is not
conveyed by more than the visual presentation of content;
f.
Text cannot be resized without assistive technology up to 200%
without losing content or functionality;
g.
If the content enforces a time limit, the user is not able to extend,
adjust or disable it;
h.
Web pages do not have titles that describe the topic or purpose;
i.
The purpose of each link cannot be determined from the link text
alone or from the link text and its programmatically determined link context;
j.
One or more keyboard operable user interface lacks a mode of
operation where the keyboard focus indicator is discernible;
k.
The default human language of each web page cannot be
programmatically determined;
l.
When a component receives focus, it may initiate a change in
context;
m.
Changing the setting of a user interface component may
automatically cause a change of context where the user has not been advised before using
the component;
n.
Labels or instructions are not provided when content requires user
input, which include captcha prompts that require the user to verify that he or she is not a
robot;
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o.
In content which is implemented by using markup languages,
elements do not have complete start and end tags, elements are not nested according to
their specifications, elements may contain duplicate attributes and/or any IDs are not
unique;
p.
Inaccessible Portable Document Format (PDFs); and,
q.
The name and role of all User Interface elements cannot be
programmatically determined; items that can be set by the user cannot be
programmatically set; and/or notification of changes to these items is not available to user
agents, including assistive technology.
STATEMENT OF FACTS
Defendant’s Barriers on Its Website
23.
Defendant offers the commercial website, WWW.EMERGE212.COM, to
the public. The website offers features which should allow all consumers to access the
goods and services which Defendant offers in connection with their physical locations.
The goods and services offered by Defendant include, but are not limited to the
following, which allow consumers to: find information about the physical locations, the
ability to view floor plans and virtual office packages and prices, learn about building
amenities, access to floor plans and building photos, transportation options and services
available, read blog posts and frequently asked questions, subscribe to newsletter and
schedule a tour of the spaces, participate in other social interactive experiences and to
learn about other important information.
24.
It is, upon information and belief, Defendant’s policy and practice to deny
Plaintiff, along with other blind or visually-impaired users, access to Defendant’s
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website, and to therefore specifically deny the goods and services that are offered and
integrated with Defendant’s locations. Due to Defendant’s failure and refusal to remove
access barriers to its website, Plaintiff and visually-impaired persons have been and are
still being denied equal access to Defendant’s physical locations and the numerous goods,
services, and benefits offered to the public through the Website.
25.
Plaintiff is a visually-impaired and legally blind person, who cannot use a
computer without the assistance of screen-reading software. Plaintiff is, however, a
proficient JAWS screen-reader user and uses it to access the Internet. Plaintiff has visited
the Website on separate occasions using the JAWS screen-reader.
26.
During Plaintiff’s visits to the Website, the last occurring in March, 2019,
Plaintiff encountered multiple access barriers that denied Plaintiff full and equal access to
the facilities, goods and services offered to the public and made available to the public;
and that denied Plaintiff the full enjoyment of the facilities, goods, and services of the
Website, as well as to the facilities, goods, and services of Defendant’s physical locations
in New York by being unable to learn more information about the Defendant’s rental
space locations, the ability to view floor plans and virtual office packages and prices,
learn about building amenities, access to floor plans and building photos, transportation
options and services available, read blog posts and frequently asked questions, subscribe
to newsletter and schedule a tour of the spaces, participate in other social interactive
experiences and to learn about other important information.
27.
While attempting to navigate the Website, Plaintiff encountered multiple
accessibility barriers for blind or visually-impaired people that include, but are not
limited to, the following:
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a.
Lack of Alternative Text (“alt-text”), or a text equivalent. Alt-text
is an invisible code embedded beneath a graphical image on a website. Web accessibility
requires that alt-text be coded with each picture so that screen-reading software can speak
the alt-text where a sighted user sees pictures, which includes captcha prompts. Alt-text
does not change the visual presentation, but instead a text box shows when the mouse
moves over the picture. The lack of alt-text on these graphics prevents screen readers
from accurately vocalizing a description of the graphics. As a result, visually-impaired
EMERGE212 customers are unable to determine what is on the website, browse, look for
the rental space locations, check out Defendant’s pricing and programs, or make any
purchases;
b.
Empty Links That Contain No Text causing the function or
purpose of the link to not be presented to the user. They can introduce confusion for
keyboard and screen-reader users;
c.
Redundant Links where adjacent links go to the same URL address
which results in additional navigation and repetition for keyboard and screen-reader
users; and
d.
Linked Images Missing Alt-text, which causes problems if an
image within a link contains no text and that image does not provide alt-text. A screen
reader then has no content to present the user as to the function of the link, including
information contained in PDFs.
e.
Defendant’s website requires the use of a mouse to complete a
transaction. Yet, it is a fundamental tenet of web accessibility that for a web page to be
accessible to Plaintiff and blind people, it must be possible for the user to interact with
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the page using only the keyboard. Indeed, Plaintiff and blind users cannot use a mouse
because manipulating the mouse is a visual activity of moving the mouse pointer from
one visual spot on the page to another. Thus, Defendant’s website’s inaccessible design,
which requires the use of a mouse to complete a transaction, denies Plaintiff and blind
customers the ability to independently navigate and/or make purchases.
Defendant Must Remove Barriers To Its Website
28.
Due to the inaccessibility of Defendant’s Website, blind and visually-
impaired customers such as Plaintiff, who need screen-readers, cannot fully and equally
use or enjoy the facilities, goods, and services Defendant offers to the public on its
Website. The access barriers Plaintiff encountered have caused a denial of Plaintiff’s full
and equal access in the past, and now deter Plaintiff on a regular basis from accessing the
Website.
29.
These access barriers on Defendant’s Website have deterred Plaintiff from
visiting or returning to Defendant’s physical locations and Website, and enjoying them
equal to sighted individuals because: Plaintiff was unable to find the location and hours
of operation of Defendant’s physical locations on its Website and other important
information, preventing Plaintiff from visiting or returning to the locations and Website
to purchase items and to view the items.
30.
If the Website was equally accessible to all, Plaintiff could independently
navigate the Website and complete a desired transaction as sighted individuals do.
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31.
Through his attempts to use the Website, Plaintiff has actual knowledge of
the access barriers that make these services inaccessible and independently unusable by
blind and visually-impaired people.
32.
Because simple compliance with the WCAG 2.0 Guidelines would
provide Plaintiff and other visually-impaired consumers with equal access to the Website,
Plaintiff alleges that Defendant has engaged in acts of intentional discrimination,
including but not limited to the following policies or practices:
a.
Constructing and maintaining a website that is inaccessible to
visually-impaired individuals, including Plaintiff;
b.
Failure to construct and maintain a website that is sufficiently
intuitive so as to be equally accessible to visually-impaired individuals, including
Plaintiff; and,
c.
Failing to take actions to correct these access barriers in the face of
substantial harm and discrimination to blind and visually-impaired consumers, such as
Plaintiff, as a member of a protected class.
33.
Defendant therefore uses standards, criteria or methods of administration
that have the effect of discriminating or perpetuating the discrimination of others, as
alleged herein.
34.
The ADA expressly contemplates the injunctive relief that Plaintiff seeks
in this action. In relevant part, the ADA requires:
In the case of violations of . . . their title, injunctive relief shall include an order to alter
facilities to make such facilities readily accessible to and usable by individuals
with disabilities . . . Where appropriate, injunctive relief shall also include
requiring the . . . modification of a policy . . .
42 U.S.C. § 12188(a)(2).
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35.
Because Defendant’s Website has never been equally accessible, and
because Defendant lacks a corporate policy that is reasonably calculated to cause its
Website to become and remain accessible, Plaintiff invokes 42 U.S.C. § 12188(a)(2) and
seeks a permanent injunction requiring Defendant to retain a qualified consultant
acceptable to Plaintiff (“Agreed Upon Consultant”) to assist Defendant to comply with
WCAG 2.0 guidelines for Defendant’s Website. Plaintiff seeks that their permanent
injunction requires Defendant to cooperate with the Agreed Upon Consultant to:
a.
Train Defendant’s employees and agents who develop the Website
on accessibility compliance under the WCAG 2.0 guidelines;
b.
Regularly check the accessibility of the Website under the WCAG
2.0 guidelines;
c.
Regularly test user accessibility by blind or vision-impaired
persons to ensure that Defendant’s Website complies under the WCAG 2.0 guidelines;
and,
d.
Develop an accessibility policy that is clearly disclosed on
Defendant’s Websites, with contact information for users to report accessibility-related
problems.
36.
If the Website was accessible, Plaintiff and similarly situated blind and
visually-impaired people could independently view service items, locate Defendant’s
rental space locations, book tours and purchase office packages and otherwise research
related products and services via the Website.
37.
Although Defendant may currently have centralized policies regarding
maintaining and operating its Website, Defendant lacks a plan and policy reasonably
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calculated to make them fully and equally accessible to, and independently usable by,
blind and other visually-impaired consumers.
38.
Defendant has, upon information and belief, invested substantial sums in
developing and maintaining their Website and has generated significant revenue from the
Website. These amounts are far greater than the associated cost of making their Website
equally accessible to visually impaired customers.
39.
Without injunctive relief, Plaintiff and other visually-impaired consumers
will continue to be unable to independently use the Website, violating their rights.
CLASS ACTION ALLEGATIONS
40.
Plaintiff, on behalf of himself and all others similarly situated, seeks to
certify a nationwide class under Fed. R. Civ. P. 23(a) and 23(b)(2): all legally blind
individuals in the United States who have attempted to access Defendant’s Website and
as a result have been denied access to the equal enjoyment of goods and services offered
in Defendant’s physical locations, during the relevant statutory period.
41.
Plaintiff, on behalf of himself and all others similarly situated, seeks
certify a New York State subclass under Fed. R. Civ. P. 23(a) and 23(b)(2): all legally
blind individuals in the State of New York who have attempted to access Defendant’s
Website and as a result have been denied access to the equal enjoyment of goods and
services offered in Defendant’s physical locations, during the relevant statutory period.
42.
Plaintiff, on behalf of himself and all others similarly situated, seeks
certify a New York City subclass under Fed. R. Civ. P. 23(a) and 23(b)(2): all legally
blind individuals in the City of New York who have attempted to access Defendant’s
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Website and as a result have been denied access to the equal enjoyment of goods and
services offered in Defendant’s physical locations, during the relevant statutory period.
43.
Common questions of law and fact exist amongst Class, including:
a.
Whether Defendant’s Website is a “public accommodation” under
the ADA;
b.
Whether Defendant’s Website is a “place or provider of public
accommodation” under the NYSHRL or NYCHRL;
c.
Whether Defendant’s Website denies the full and equal enjoyment
of its goods, services, facilities, privileges, advantages, or accommodations to people
with visual disabilities, violating the ADA; and
d.
Whether Defendant’s Website denies the full and equal enjoyment
of its goods, services, facilities, privileges, advantages, or accommodations to people
with visual disabilities, violating the NYSHRL or NYCHRL.
44.
Plaintiff’s claims are typical of the Class. The Class, similarly to the
Plaintiff, are severely visually impaired or otherwise blind, and claim that Defendant has
violated the ADA, NYSYRHL or NYCHRL by failing to update or remove access
barriers on its Website so either can be independently accessible to the Class.
45.
Plaintiff will fairly and adequately represent and protect the interests of
the Class Members because Plaintiff has retained and is represented by counsel
competent and experienced in complex class action litigation, and because Plaintiff has
no interests antagonistic to the Class Members. Class certification of the claims is
appropriate under Fed. R. Civ. P. 23(b)(2) because Defendant has acted or refused to act
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on grounds generally applicable to the Class, making appropriate both declaratory and
injunctive relief with respect to Plaintiff and the Class as a whole.
46.
Alternatively, class certification is appropriate under Fed. R. Civ. P.
23(b)(3) because fact and legal questions common to Class Members predominate over
questions affecting only individual Class Members, and because a class action is superior
to other available methods for the fair and efficient adjudication of their litigation.
47.
Judicial economy will be served by maintaining their lawsuit as a class
action in that it is likely to avoid the burden that would be otherwise placed upon the
judicial system by the filing of numerous similar suits by people with visual disabilities
throughout the United States.
FIRST CAUSE OF ACTION
VIOLATIONS OF THE ADA, 42 U.S.C. § 12181 et seq.
48.
Plaintiff, on behalf of himself and the Class Members, repeats and
realleges every allegation of the preceding paragraphs as if fully set forth herein.
49.
Section 302(a) of Title III of the ADA, 42 U.S.C. § 12101 et seq.,
provides:
No individual shall be discriminated against on the basis of disability in the full and equal
enjoyment of the goods, services, facilities, privileges, advantages, or
accommodations of any place of public accommodation by any person who owns,
leases (or leases to), or operates a place of public accommodation.
42 U.S.C. § 12182(a).
50.
Defendant’s rental spaces are a place of public accommodations within the
definition of Title III of the ADA, 42 U.S.C. § 12181(7). Defendant’s Website is a
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service, privilege, or advantage of Defendant’s rental spaces. The Website is a service
that is integrated with this location.
51.
Under Section 302(b)(1) of Title III of the ADA, it is unlawful
discrimination to deny individuals with disabilities the opportunity to participate in or
benefit from the goods, services, facilities, privileges, advantages, or accommodations of
an entity. 42 U.S.C. § 12182(b)(1)(A)(i).
52.
Under Section 302(b)(1) of Title III of the ADA, it is unlawful
discrimination to deny individuals with disabilities an opportunity to participate in or
benefit from the goods, services, facilities, privileges, advantages, or accommodation,
which is equal to the opportunities afforded to other individuals. 42 U.S.C. §
12182(b)(1)(A)(ii).
53.
Under Section 302(b)(2) of Title III of the ADA, unlawful discrimination
also includes, among other things:
[A] failure to make reasonable modifications in policies, practices, or procedures, when
such modifications are necessary to afford such goods, services, facilities,
privileges, advantages, or accommodations to individuals with disabilities, unless
the entity can demonstrate that making such modifications would fundamentally
alter the nature of such goods, services, facilities, privileges, advantages or
accommodations; and a failure to take such steps as may be necessary to ensure
that no individual with a disability is excluded, denied services, segregated or
otherwise treated differently than other individuals because of the absence of
auxiliary aids and services, unless the entity can demonstrate that taking such
steps would fundamentally alter the nature of the good, service, facility, privilege,
advantage, or accommodation being offered or would result in an undue burden.
42 U.S.C. § 12182(b)(2)(A)(ii)-(iii).
54.
The acts alleged herein constitute violations of Title III of the ADA, and
the regulations promulgated thereunder. Plaintiff, who is a member of a protected class of
persons under the ADA, has a physical disability that substantially limits the major life
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activity of sight within the meaning of 42 U.S.C. §§ 12102(1)(A)-(2)(A). Furthermore,
Plaintiff has been denied full and equal access to the Website, has not been provided
services that are provided to other patrons who are not disabled, and has been provided
services that are inferior to the services provided to non-disabled persons. Defendant has
failed to take any prompt and equitable steps to remedy its discriminatory conduct. These
violations are ongoing.
55.
Under 42 U.S.C. § 12188 and the remedies, procedures, and rights set
forth and incorporated therein, Plaintiff, requests relief as set forth below.
SECOND CAUSE OF ACTION
VIOLATIONS OF THE NYSHRL
56.
Plaintiff, on behalf of himself and the New York State Sub-Class
Members, repeats and realleges every allegation of the preceding paragraphs as if fully
set forth herein.
57.
N.Y. Exec. Law § 296(2)(a) provides that it is “an unlawful discriminatory
practice for any person, being the owner, lessee, proprietor, manager, superintendent,
agent or employee of any place of public accommodation . . . because of the . . . disability
of any person, directly or indirectly, to refuse, withhold from or deny to such person any
of the accommodations, advantages, facilities or privileges thereof.”
58.
Defendant’s physical location is located in State of New York and
throughout the United States and constitute a sales establishment and place of public
accommodation within the definition of N.Y. Exec. Law § 292(9). Defendant’s Website
is a service, privilege or advantage of Defendant. Defendant’s Website is a service that is
by and integrated with these physical locations.
-18-
59.
Defendant is subject to New York Human Rights Law because it owns and
operates its physical locations and Website. Defendant is a person within the meaning of
N.Y. Exec. Law § 292(1).
60.
Defendant is violating N.Y. Exec. Law § 296(2)(a) in refusing to update or
remove access barriers to its Website, causing its Website and the services integrated
with Defendant’s physical locations to be completely inaccessible to the blind. Their
inaccessibility denies blind patrons full and equal access to the facilities, goods and
services that Defendant makes available to the non-disabled public.
61.
Under N.Y. Exec. Law § 296(2)(c)(i), unlawful discriminatory practice
includes, among other things, “a refusal to make reasonable modifications in policies,
practices, or procedures, when such modifications are necessary to afford facilities,
privileges, advantages or accommodations to individuals with disabilities, unless such
person can demonstrate that making such modifications would fundamentally alter the
nature of such facilities, privileges, advantages or accommodations being offered or
would result in an undue burden".
62.
Under N.Y. Exec. Law § 296(2)(c)(ii), unlawful discriminatory practice
also includes, “a refusal to take such steps as may be necessary to ensure that no
individual with a disability is excluded or denied services because of the absence of
auxiliary aids and services, unless such person can demonstrate that taking such steps
would fundamentally alter the nature of the facility, privilege, advantage or
accommodation being offered or would result in an undue burden.”
63.
Readily available, well-established guidelines exist on the Internet for
making websites accessible to the blind and visually impaired. These guidelines have
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been followed by other large business entities and government agencies in making their
website accessible, including but not limited to: adding alt-text to graphics and ensuring
that all functions can be performed using a keyboard. Incorporating the basic components
to make its Website accessible would neither fundamentally alter the nature of
Defendant’s business nor result in an undue burden to Defendant.
64.
Defendant’s actions constitute willful intentional discrimination against
the class on the basis of a disability in violation of the NYSHRL, N.Y. Exec. Law §
296(2) in that Defendant has:
a.
constructed and maintained a website that is inaccessible to blind
class members with knowledge of the discrimination; and/or
b.
constructed and maintained a website that is sufficiently intuitive
and/or obvious that is inaccessible to blind class members; and/or
c.
failed to take actions to correct these access barriers in the face of
substantial harm and discrimination to blind class members.
65.
Defendant has failed to take any prompt and equitable steps to remedy
their discriminatory conduct. These violations are ongoing.
66.
Defendant discriminates, and will continue in the future to discriminate
against Plaintiff and New York State Sub-Class Members on the basis of disability in the
full and equal enjoyment of the goods, services, facilities, privileges, advantages,
accommodations and/or opportunities of Defendant’s Website and its physical locations
under § 296(2) et seq. and/or its implementing regulations. Unless the Court enjoins
Defendant from continuing to engage in these unlawful practices, Plaintiff and the Sub-
Class Members will continue to suffer irreparable harm.
-20-
67.
Defendant’s actions were and are in violation of New York State Human
Rights Law and therefore Plaintiff invokes his right to injunctive relief to remedy the
discrimination.
68.
Plaintiff is also entitled to compensatory damages, as well as civil
penalties and fines under N.Y. Exec. Law § 297(4)(c) et seq. for each and every offense.
69.
Plaintiff is also entitled to reasonable attorneys’ fees and costs.
70.
Under N.Y. Exec. Law § 297 and the remedies, procedures, and rights set
forth and incorporated therein Plaintiff prays for judgment as set forth below.
THIRD CAUSE OF ACTION
VIOLATION OF THE NEW YORK STATE CIVIL RIGHTS LAW
71.
Plaintiff, on behalf of himself and the New York State Sub-Class
Members, repeats and realleges every allegation of the preceding paragraphs as if fully
set forth herein.
72.
Plaintiff served notice thereof upon the attorney general as required by
N.Y. Civil Rights Law § 41.
73.
N.Y. Civil Rights Law § 40 provides that “all persons within the
jurisdiction of this state shall be entitled to the full and equal accommodations,
advantages, facilities and privileges of any places of public accommodations, resort or
amusement, subject only to the conditions and limitations established by law and
applicable alike to all persons. No persons, being the owner, lessee, proprietor, manager,
superintendent, agent, or employee of any such place shall directly or indirectly refuse,
withhold from, or deny to any person any of the accommodations, advantages, facilities
and privileges thereof . . .”
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74.
N.Y. Civil Rights Law § 40-c(2) provides that “no person because of . . .
disability, as such term is defined in section two hundred ninety-two of executive law, be
subjected to any discrimination in his or her civil rights, or to any harassment, as defined
in section 240.25 of the penal law, in the exercise thereof, by any other person or by any
firm, corporation or institution, or by the state or any agency or subdivision.”
75.
Defendant’s New York State physical location is a sales establishment and
place of public accommodation within the definition of N.Y. Civil Rights Law § 40-c(2).
Defendant’s Website is a service, privilege or advantage of Defendant and its Website is
a service that is by and integrated with these establishments.
76.
Defendant is subject to New York Civil Rights Law because it advertises,
owns and operates its physical location and Website. Defendant is a person within the
meaning of N.Y. Civil Law § 40-c(2).
77.
Defendant is violating N.Y. Civil Rights Law § 40-c(2) in refusing to
update or remove access barriers to its Website, causing its Website and the services
integrated with Defendant’s physical locations to be completely inaccessible to the blind.
Their inaccessibility denies blind patrons full and equal access to the facilities, goods and
services that Defendant makes available to the non-disabled public.
78.
N.Y. Civil Rights Law § 41 states that “any corporation which shall
violate any of the provisions of sections forty, forty-a, forty-b or forty two . . . shall for
each and every violation thereof be liable to a penalty of not less than one hundred dollars
nor more than five hundred dollars, to be recovered by the person aggrieved thereby . . .”
79.
Under NY Civil Rights Law § 40-d, “any person who shall violate any of
the provisions of the foregoing section, or subdivision three of section 240.30 or section
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240.31 of the penal law, or who shall aid or incite the violation of any of said provisions
shall for each and every violation thereof be liable to a penalty of not less than one
hundred dollars nor more than five hundred dollars, to be recovered by the person
aggrieved thereby in any court of competent jurisdiction in the county in which the
defendant shall reside ...”
80.
Defendant has failed to take any prompt and equitable steps to remedy its
discriminatory conduct. These violations are ongoing.
81.
Defendant discriminates, and will continue in the future to discriminate
against Plaintiff and New York State Sub-Class Members on the basis of disability are
being directly or indirectly refused, withheld from, or denied the accommodations,
advantages, facilities and privileges thereof in § 40 et seq. and/or its implementing
regulations.
82.
Plaintiff is entitled to compensatory damages of five hundred dollars per
instance, as well as civil penalties and fines under N.Y. Civil Law § 40 et seq. for each
and every offense.
FOURTH CAUSE OF ACTION
VIOLATIONS OF THE NYCHRL
83.
Plaintiff, on behalf of himself and the New York City Sub-Class
Members, repeats and realleges every allegation of the preceding paragraphs as if fully
set forth herein.
84.
N.Y.C. Administrative Code § 8-107(4)(a) provides that “It shall be an
unlawful discriminatory practice for any person, being the owner, lessee, proprietor,
manager, superintendent, agent or employee of any place or provider of public
accommodation, because of . . . disability . . . directly or indirectly, to refuse, withhold
-23-
from or deny to such person, any of the accommodations, advantages, facilities or
privileges thereof.”
85.
Defendant’s location is a sales establishment and a place of public
accommodation within the definition of N.Y.C. Admin. Code § 8-102(9), and its Website
is a service that is integrated with its establishment.
86.
Defendant is subject to NYCHRL because it advertises, owns and operates
its physical location and its Website in the City of New York, making it a person within
the meaning of N.Y.C. Admin. Code § 8-102(1).
87.
Defendant is violating N.Y.C. Administrative Code § 8-107(4)(a) in
refusing to update or remove access barriers to Website, causing its Website and the
services integrated with its physical location to be completely inaccessible to the blind.
The inaccessibility denies blind patrons full and equal access to the facilities, goods, and
services that Defendant makes available to the non-disabled public.
88.
Defendant is required to “make reasonable accommodation to the needs of
persons with disabilities . . . any person prohibited by the provisions of [§ 8-107 et seq.]
from discriminating on the basis of disability shall make reasonable accommodation to
enable a person with a disability to . . . enjoy the right or rights in question provided that
the disability is known or should have been known by the covered entity.” N.Y.C.
Admin. Code § 8-107(15)(a).
89.
Defendant’s actions constitute willful intentional discrimination against
the Sub-Class on the basis of a disability in violation of the N.Y.C. Administrative Code
§ 8-107(4)(a) and § 8-107(15)(a) in that Defendant has:
-24-
a.
constructed and maintained a website that is inaccessible to blind
class members with knowledge of the discrimination; and/or
b.
constructed and maintained a website that is sufficiently intuitive
and/or obvious that is inaccessible to blind class members; and/or
c.
failed to take actions to correct these access barriers in the face of
substantial harm and discrimination to blind class members.
90.
Defendant has failed to take any prompt and equitable steps to remedy
their discriminatory conduct. These violations are ongoing.
91.
As such, Defendant discriminates, and will continue in the future to
discriminate against Plaintiff and members of the proposed class and subclass on the
basis of disability in the full and equal enjoyment of the goods, services, facilities,
privileges, advantages, accommodations and/or opportunities of its Website and its
establishments under § 8-107(4)(a) and/or its implementing regulations. Unless the Court
enjoins Defendant from continuing to engage in these unlawful practices, Plaintiff and
members of the class will continue to suffer irreparable harm.
92.
Defendant’s actions were and are in violation of the NYCHRL and
therefore Plaintiff invokes his right to injunctive relief to remedy the discrimination.
93.
Plaintiff is also entitled to compensatory damages, as well as civil
penalties and fines under N.Y.C. Administrative Code § 8-120(8) and § 8-126(a) for each
offense as well as punitive damages pursuant to § 8-502.
94.
Plaintiff is also entitled to reasonable attorneys’ fees and costs.
-25-
95.
Under N.Y.C. Administrative Code § 8-120 and § 8-126 and the remedies,
procedures, and rights set forth and incorporated therein Plaintiff prays for judgment as
set forth below.
FIFTH CAUSE OF ACTION
DECLARATORY RELIEF
96.
Plaintiff, on behalf of himself and the Class and New York State and City
Sub-Classes Members, repeats and realleges every allegation of the preceding paragraphs
as if fully set forth herein.
97.
An actual controversy has arisen and now exists between the parties in that
Plaintiff contends, and is informed and believes that Defendant denies, that its Website
contains access barriers denying blind customers the full and equal access to the goods,
services and facilities of its Website and by extension its physical location, which
Defendant owns, operates and controls, fails to comply with applicable laws including,
but not limited to, Title III of the Americans with Disabilities Act, 42 U.S.C. §§ 12182, et
seq., N.Y. Exec. Law § 296, et seq., and N.Y.C. Admin. Code § 8-107, et seq. prohibiting
discrimination against the blind.
98.
A judicial declaration is necessary and appropriate at this time in order
that each of the parties may know their respective rights and duties and act accordingly.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff respectfully requests the Court grant the following relief:
a.
A preliminary and permanent injunction to prohibit Defendant
from violating the Americans with Disabilities Act, 42 U.S.C. §§ 12182, et seq., N.Y.
-26-
Exec. Law § 296, et seq., N.Y.C. Administrative Code § 8-107, et seq., and the laws of
New York;
b.
A preliminary and permanent injunction requiring Defendant to
take all the steps necessary to make its Website into full compliance with the
requirements set forth in the ADA, and its implementing regulations, so that the Website
is readily accessible to and usable by blind individuals;
c.
A declaration that Defendant owns, maintains and/or operates its
Website in a manner that discriminates against the blind and which fails to provide access
for persons with disabilities as required by Americans with Disabilities Act, 42 U.S.C. §§
12182, et seq., N.Y. Exec. Law § 296, et seq., N.Y.C. Administrative Code § 8-107, et
seq., and the laws of New York
d.
An order certifying the Class and Sub-Classes under Fed. R. Civ.
P. 23(a) & (b)(2) and/or (b)(3), appointing Plaintiff as Class Representative, and his
attorneys as Class Counsel;
e.
Compensatory damages in an amount to be determined by proof,
including all applicable statutory and punitive damages and fines, to Plaintiff and the
proposed class and subclasses for violations of their civil rights under New York State
Human Rights Law and City Law;
f.
Pre- and post-judgment interest;
g.
An award of costs and expenses of the action together with
reasonable attorneys’ and expert fees; and
h.
Such other and further relief as this Court deems just and proper.
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DEMAND FOR TRIAL BY JURY
Pursuant to Fed. R. Civ. P. 38(b), Plaintiff demands a trial by jury on all questions
of fact the Complaint raises.
Dated: New York, New York
April 12, 2019
THE MARKS LAW FIRM, PC
__________________________
Bradly G. Marks
175 Varick St., 3rd Floor
New York, New York 10014
Tel: (646) 770-3775
Fax: (646) 867-2639
[email protected]
Jeffrey M. Gottlieb (JG-7905)
Dana L. Gottlieb (DG-6151)
GOTTLIEB & ASSOCIATES
150 East 18th Street, Suite PHR
New York, New York 10003
Tel: 212.228.9795
Fax: 212.982.6284
[email protected]
[email protected]
-28-
| civil rights, immigration, family |
dvNGE4cBD5gMZwczodzQ | JOHNSON FISTEL, LLP
Frank J. Johnson (SBN 174882)
[email protected]
Brett M. Middleton (SBN 199427)
[email protected]
655 West Broadway, Suite 1400
San Diego, CA 92101
Telephone: (619) 230-0063
Facsimile: (619) 255-1856
Counsel for Plaintiff
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
Case No.: 4:21-cv-00164
DANIEL GUIRGUIS, on behalf of himself
and a class of similarly situated investors,
Plaintiff,
CLASS ACTION COMPLAINT FOR
VIOLATION OF THE FEDERAL
SECURITIES LAWS
v.
CLASS ACTION
SPLUNK INC., DOUGLAS S. MERRITT,
and JASON E. CHILD
JURY TRIAL DEMANDED
Defendants.
Plaintiff Daniel Guirguis (“Plaintiff”), individually and on behalf of all others similarly
situated, by and through Plaintiff’s counsel, alleges the following upon information and belief,
except as to those allegations concerning Plaintiff, which are alleged upon personal knowledge.
Plaintiff’s information and belief are based upon, inter alia, counsel’s investigation, which
included review and analysis of: (i) regulatory filings made by Splunk Inc. (“Splunk” or the
“Company”) with the United States Securities and Exchange Commission (“SEC”); (ii) press
releases and media reports issued by and disseminated by the Company; and (iii) analyst reports,
media reports, and other publicly disclosed reports and information about the Company.
Plaintiff believes that substantial additional evidentiary support will exist for the allegations set
forth herein after a reasonable opportunity for discovery.
NATURE OF THE ACTION
This is a securities fraud class action on behalf of all purchasers of Splunk
common stock between August 26, 2020 and December 2, 2020, inclusive (the “Class Period”),
who were damaged thereby (the “Class”). The claims asserted herein arise under Sections 10(b)
and 20(a) of the Securities Exchange Act of 1934 (“1934 Act”). These claims are asserted
against Splunk and certain of its officers who made materially false and misleading statements
during the Class Period in press releases and filings with the SEC.
Based in San Francisco, California, Splunk develops and markets software
solutions that enable organizations to gather, organize, and analyze their enterprise data.
Throughout the Class Period, defendants violated the federal securities laws by
disseminating false and misleading statements to the investing public and/or failing to disclose
adverse facts pertaining to the Company’s business, operations, and prospects. Specifically,
defendants concealed material information and/or failed to disclose that:
(a)
Splunk was facing pushback from clients across its largest and most
important accounts as it attempted to implement a new pricing model and secure
customer renewals;
(b)
Splunk had failed to close several deals with its largest customers;
(c)
Splunk had fallen far behind previously announced financial targets; and
(d)
consequently, defendants lacked a reasonable factual basis to make the
statements they made regarding Splunk’s results and operational performance.
On December 2, 2020, after the market closed, Splunk was forced to disclose a
severe revenue shortfall and disappointing financial results. While defendants attributed the
shortfall to “uncertainty and volatility for macro factors” that “cause[d] customers to delay
spending commitments, particularly for high-value contracts,” Wall Street analysts challenged
defendants’ explanation in light of significantly better performance by Splunk’s competitors.
For example, analysts at BTIG pointed out that Splunk’s explanation “is fairly confusing given
that most peers in the software space (and particularly in security software) saw relatively strong
trends.” J.P. Morgan analysts were similarly “blindsided by the magnitude of too many large
deals slipping in the final days of October.”
On this news, the price of Splunk common stock declined more than 23%.
As a result of defendants’ wrongful acts and omissions, plaintiff and the Class
(as defined below) purchased Splunk common stock at artificially inflated prices and were
damaged thereby.
JURISDICTION AND VENUE
The claims asserted herein arise under and pursuant to §§ 10(b) and 20(a) of the
1934 Act, 15 U.S.C. §§ 78j(b) and 78t(a), and Rule 10b-5, 17 C.F.R. § 240.10b-5, promulgated
thereunder by the SEC.
This Court has jurisdiction over the subject matter of this action pursuant to
28 U.S.C. § 1331 and § 27 of the 1934 Act.
Venue is proper in this District pursuant to § 27 of the 1934 Act and 28 U.S.C.
§ 1391(b). Defendant Splunk is located in this District and many of the acts charged herein,
including the preparation and dissemination of materially false and misleading information,
occurred in substantial part in this District.
In connection with the acts alleged in this complaint, defendants, directly or
indirectly, used the means and instrumentalities of interstate commerce, including, but not
limited to, the mails, interstate telephone communications, and the facilities of the national
securities markets.
PARTIES
Plaintiff Daniel Guirguis, as set forth in the accompanying certification,
purchased Splunk common stock during the Class Period and was damaged thereby.
Defendant Splunk, incorporated in Delaware, maintains its principal executive
offices at 270 Brannan Street, San Francisco, California 94017. Splunk common stock trades
on the NASDAQ under the ticker symbol “SPLK.”
Defendant Douglas S. Merritt (“Merritt”) is, and at all relevant times was,
President, Chief Executive Officer (“CEO”) and a director of Splunk.
Defendant Jason E. Child is, and at all relevant times was, Chief Financial Officer
(“CFO”) and Senior Vice President of Splunk.
The defendants referenced above in ¶¶ 13–14 are referred to herein as the
“Individual Defendants.” The Individual Defendants made, or caused to be made, false
statements that artificially inflated the price of Splunk stock during the Class Period. The
Individual Defendants, because of their positions with the Company, possessed the power and
authority to control the contents of Splunk’s quarterly reports, press releases, and presentations
to analysts, money and portfolio managers, and institutional investors, i.e., the market. They
were provided with copies of the Company’s reports and press releases alleged herein to be
misleading prior to or shortly after their issuance and had the ability and opportunity to prevent
their issuance or cause them to be corrected. Because of their positions with the Company and
their access to material non-public information available to them but not to the public, the
Individual Defendants knew that the adverse facts specified herein had not been disclosed to and
were being concealed from the public and that the positive representations being made were then
materially false and misleading. The Individual Defendants are liable for the false and
misleading statements pleaded herein.
FRAUDULENT SCHEME AND COURSE OF BUSINESS
Defendants are liable for: (i) making false statements; or (ii) failing to disclose
adverse facts known to them about Splunk. Defendants’ fraudulent scheme and course of
business that operated as a fraud or deceit on purchasers of Splunk stock was a success, as it:
(i) deceived the investing public regarding Splunk’s business and prospects; (ii) artificially
inflated the price of Splunk stock; (iii) permitted defendants Merritt and Child to sell
58,550 shares of their Splunk stock for proceeds of more than $11.3 million; and (iv) caused
plaintiff and other members of the Class to purchase Splunk stock at artificially inflated prices.
DEFENDANTS’ SCIENTER
During the Class Period, defendants had the motive and opportunity to commit
securities fraud. During the Class Period, defendant Merritt sold nearly $9.2 million worth of
his personal Splunk shares at prices as high as $219.74 per share. Similarly, during the Class
Period, defendant Child sold nearly $2.2 million worth of his personal Splunk shares at prices
as high as $210.00 per share. These sales were suspicious in both timing and amount.
Defendants also had actual knowledge of the misleading statements they made and/or acted in
reckless disregard of the truth at the time. In doing so, defendants participated in a scheme to
defraud and committed acts and practices and participated in a course of business that operated
as a fraud or deceit on purchasers of Splunk stock during the Class Period.
FACTUAL BACKGROUND
Splunk develops and markets software solutions that enable organizations to gain
real-time operational intelligence in the United States and internationally. According to the
Company’s most recent Form 10-K filed with the SEC, the Company “provides innovative
software solutions that ingest data from different sources including systems, devices and
interactions, and turn that data into meaningful business insights across the organization.”
Splunk states that its “Data-to-Everything platform enables users to investigate, monitor,
analyze and act on data regardless of format or source.”
DEFENDANTS’ MATERIALLY FALSE AND MISLEADING STATEMENTS
ISSUED DURING THE CLASS PERIOD
The Class Period begins on August 26, 2020, when Splunk issued a press release
announcing its results for the second fiscal quarter of 2021 (ending July 31, 2020). The press
release also provided guidance for the third fiscal quarter of 2021 (ending October 31, 2020),
stating that “[t]otal revenues are expected to be between $600 million and $630 million,” and
that “[n]on-GAAP operating margin is expected to be between 2% and 5%.” The press release
further stated in part:
“Splunk’s cloud business continues to accelerate, now representing more than
half of our software bookings in the quarter – a major milestone in our cloud
journey,” Merritt continued. “I’m very proud of our team, strong execution and
continued momentum as we look forward to revealing our line-up of trendsetting
product innovations at .conf20.”
“Splunk’s rapid transformation to the cloud has enabled us to reach key
milestones ahead of schedule. Cloud ARR growth accelerated to 89%, or $568
Million, far exceeding our expectations. We also now have nearly 400
customers with ARR in excess of $1 million as more and more businesses
embrace our cloud platform,” said Jason Child, chief financial officer, Splunk.
“Our customers want the flexibility to transition to cloud, and with our diligent
planning, we’ve continued to advance our mission to remove the barriers
between data and action.”
Also on August 26, 2020, Splunk held an earnings conference call to discuss the
quarterly results hosted by defendants Merritt and Child. During his prepared remarks,
defendant Merritt stated: “Many of the purchasing trends we saw in Q1 continued or accelerated
in Q2.” Defendant Child similarly stated in part:
Turning to guidance. It’s important to highlight that the fundamentals of the
business remains strong, and we’re confident in our ability to deliver continued
high growth over the long term. Given current visibility, we are maintaining our
total ARR growth targets of mid-40% this year and a 3-year CAGR of 40%
through FY ‘23.
On September 24, 2020, Splunk announced that Susan St. Ledger, the
Company’s former President, Worldwide Field Operations (i.e., the head of sales), would be
leaving Splunk to work at another technology company. No additional information was
provided regarding the reasons for Ms. St Ledger’s departure.
On October 21, 2020, just ten days before the close of Splunk’s third fiscal
quarter of 2021, defendants assured investors during an investor conference call that everything
was on track for the close of the quarter and reaffirmed Splunk’s quarterly guidance. During
the conference call, defendant Merritt represented in part:
[B]y the end of this year, we’ll have reached our fiscal ‘23 goal, nearly 2 years
early. And our customers are increasingly committing to bigger deals, as you
can see in the tally of customers with ARR over $1 million.
*
*
*
Given the importance of ARR and using that as a prime comparison, Splunk is
growing faster, actually much faster than the household name cloud software
players when they’re at our stage. At the end of Q2 with our ARR, just short of
$2 billion, Splunk grew at 50% year-over-year. And as I said earlier, that was
our seventh quarter of at least 50% growth. That means this block is growing
faster than ServiceNow at $2 billion, faster than Salesforce at $2 billion and
faster than Workday at $2 billion.
Additionally during the conference call, defendant Child stated, in part:
Our transformation has made our financials complicated, and I’m excited to
bring some clarity to you today and make the most recent progress on our
financials clearer. And most importantly, to make clear why we are so excited
about both our near-term and long-term future growth prospects and our ability
to generate meaningful cash flow from operations.
*
*
*
Moving on to ARR. I first want to take a moment to dig a little deeper into our
ARR numbers published up until this point and shine a light on some of the
components of ARR. We dug into the numbers to determine 2 things that I think
might be helpful for you.
First, we quantified the tailwind to ARR attributable to our shift away from
perpetual and renewable software. Perpetual contracts, which fell to only 1% of
software bookings by the end of FY ‘20, only generated ARR from their
maintenance streams, whereas term and cloud contract value is fully counted in
ARR.
As we’ve been asked many times, how much of an impact the shift away from
perpetual has had on our ARR numbers, we decided to quantify this for you
today. No more mystery, it’s all laid out here for you.
Second, we quantified the tailwind impact from the acquisition of SignalFx.
This one shouldn’t be a surprise. We told you in Q3 of last year that SignalFx
had a 300 basis point tailwind to total ARR. However, any benefit received from
SignalFx completely disappears beginning this quarter as we lapped the date of
the acquisition.
And here’s the critical takeaway. By the end of Q4, we estimate that the tailwind
from the shift from perpetual falls to less than 1%. So looking forward, we are
reiterating our 40% compounded annual growth rate target for ARR from FY
‘20 through ‘23. It should be clear now why we remained confident in these
targets given growth tailwinds that I described earlier.
Defendant Child also discussed as the first of the “4 biggest drivers of growth”
for the Company “the significant and growing customer renewal base.” He continued: “So yes,
we’re still sticking to the $1 billion cash flow target for ‘23. My hope is that the slide would
kind of provide a little more context and hopefully help you understand why we feel good about
that. . . . So yes, we’re definitely sticking to that target.”
Defendant Child highlighted Splunk’s biggest and most important accounts,
claiming that, “[f]or our larger customers, we’re adding particular value across the expanded
data volumes and infrastructures,” and that Splunk had “been successful with growing those
relationships and offering new areas of value over time.” Defendant Child further stated, in part:
Let’s now move on to the cloud and why our shift to being cloud-first reinforces
our confidence in hitting our growth targets. First, we want to level set for you
what our renewal base looks like over the next couple of years. As we shifted
away from selling perpetual software licenses and ramped up our renewable mix
to reach 99% of all software bookings by Q4 of last year, we’ve created an
accelerated renewal base that you can see ramps up sharply over the next 3 years.
Through the end of FY ‘20, our term and cloud contracts had an average duration
of approximately 3 years. So as we anniversary the contract renewal date for
this renewable software base, you can see how much contract value on an ARR
basis is up for renewal in any given year. This is what fuels our confidence in
our long-term growth. Every one of these contracts up for renewal is an
opportunity for us to grow.
The statements referenced above were materially false and misleading because
they misrepresented and/or failed to disclose the following adverse facts that were known to
defendants or recklessly disregarded by them:
(a)
That Splunk was facing pushback from clients across its largest and most
important accounts as it attempted to implement a new pricing model and secure
customer renewals;
(b)
That Splunk had failed to close several deals with its largest customers;
(c)
That Splunk had fallen far behind previously announced financial targets;
and
(d)
That, consequently, defendants lacked a reasonable factual basis to make
the statements they had made during the Class Period regarding Splunk’s financial and
operational results and third quarter guidance.
On December 2, 2020, after the market closed, Splunk announced its financial
results for its third fiscal quarter of 2021, ended October 31, 2020. The results came in far below
guidance, despite the fact defendants had recently reaffirmed that guidance with just days left in
the quarter. For example, Splunk achieved only $559 million in quarterly revenues, down 11%
year over year and 9% below the mid-point of previous projections. That same day, the
Company also held an earnings call during which defendant Merritt blamed the terrible results
on a “much lower-than-normal close rate among our largest deals, which caused us to fall short
of our bookings target.” Defendant Child echoed that comment, stating that “close rates for
several large transactions slowed significantly in the final weeks of the quarter, resulting in total
bookings coming in below plan.”
The sudden and inexplicable failure to close deals with several of Splunk’s
largest and most important customers across its business surprised the market. Analysts at BTIG
wrote that defendants’ explanation “is fairly confusing given that most peers in the software
space (and particularly in security software) saw relatively strong trends.” Analysts at J.P.
Morgan echoed this sentiment, writing that they were “blindsided by the magnitude of too many
large deals slipping in the final days of October on the heels of an upbeat analyst day 10 days
prior to the quarter close, at which the company reaffirmed guidance and stated that it was
excited about near term and long term growth prospects.” J.P. Morgan and numerous other
analysts immediately downgraded their ratings for Splunk stock and slashed their target prices.
In response to these disclosures, the price for Splunk stock declined more
than 23%, the largest single-day decline in the Company’s history, damaging Splunk’s
shareholders.
As a result of defendants’ wrongful acts and omissions, plaintiff and the Class
purchased Splunk common stock at artificially inflated prices and were damaged thereby.
LOSS CAUSATION AND ECONOMIC LOSS
During the Class Period, as detailed herein, defendants engaged in a scheme to
deceive the market and a course of conduct that artificially inflated the price of Splunk stock
and operated as a fraud or deceit on purchasers of Splunk stock. As detailed above, when the
truth about Splunk’s misconduct was revealed, the value of the Company’s stock declined
precipitously as the prior artificial inflation no longer propped up the stock’s price. The decline
in Splunk’s stock price was the direct result of the nature and extent of defendants’ fraud being
revealed to investors and the market. The timing and magnitude of the share price decline negate
any inference that the losses suffered by plaintiff and other members of the Class were caused
by changed market conditions, macroeconomic or industry factors, or Company-specific facts
unrelated to defendants’ fraudulent conduct. The economic loss, i.e., damages, suffered by
plaintiff and other Class members was a direct result of defendants’ fraudulent scheme to
artificially inflate the price of the Company’s stock and the subsequent significant decline in the
value of the Company’s stock when defendants’ prior misrepresentations and other fraudulent
conduct were revealed.
At all relevant times, defendants’ materially false and misleading statements or
omissions alleged herein directly or proximately caused the damages suffered by plaintiff and
other Class members. Those statements were materially false and misleading through their
failure to disclose a true and accurate picture of Splunk’s business and operations as alleged
herein.
Throughout the Class Period, defendants issued materially false and misleading
statements and omitted material facts necessary to make defendants’ statements not false or
misleading, causing the price of Splunk stock to be artificially inflated. Plaintiff and other Class
members purchased Splunk stock at artificially inflated prices, causing them to suffer damages
as complained of herein.
APPLICABILITY OF PRESUMPTION OF RELIANCE
Plaintiff will rely upon the presumption of reliance established by the fraud-on-
the-market doctrine in that, among other things:
(a)
defendants made public misrepresentations or failed to disclose material
facts during the Class Period;
(b)
the omissions and misrepresentations were material;
(c)
the Company’s stock traded in an efficient market;
(d)
the misrepresentations and omissions alleged would tend to induce a
reasonable investor to misjudge the value of the Company’s stock; and
(e)
plaintiff and other members of the Class purchased Splunk stock between
the time defendants misrepresented or failed to disclose material facts and the time the
true facts were disclosed, without knowledge of the misrepresented or omitted facts.
At all relevant times, the market for Splunk stock was efficient for the following
reasons, among others:
(a)
Splunk stock met the requirements for listing and was listed and actively
traded on the NASDAQ, a highly efficient market;
(b)
as a regulated issuer, Splunk filed periodic public reports with the SEC;
and
(c)
Splunk regularly communicated with public investors via established
market communication mechanisms, including through the regular dissemination of
press releases on major news wire services and through other wide-ranging public
disclosures, such as communications with the financial press, securities analysts, and
other similar reporting services.
NO SAFE HARBOR
Defendants’ false or misleading statements during the Class Period were not
forward-looking statements (“FLS”), or were not identified as such by defendants, and thus did
not fall within any “Safe Harbor.”
Splunk’s verbal “Safe Harbor” warnings accompanying its oral FLS issued
during the Class Period were ineffective to shield those statements from liability.
Defendants are also liable for any false or misleading FLS pleaded because, at
the time each FLS was made, the speaker knew the FLS was false or misleading and the FLS
was authorized and/or approved by an executive officer of Splunk who knew that the FLS was
false. Further, none of the historic or present-tense statements made by defendants were
assumptions underlying or relating to any plan, projection, or statement of future economic
performance, as they were not stated to be such assumptions underlying or relating to any
projection or statement of future economic performance when made.
CLASS ACTION ALLEGATIONS
Plaintiff brings this action on behalf of all purchasers of Splunk common stock
during the Class Period who were damaged thereby (the “Class”). Excluded from the Class are
defendants and their immediate families, the officers and directors of the Company and their
immediate families, the legal representatives, heirs, successors, or assigns of any of the
foregoing, and any entity in which any of the defendants have or had a controlling interest.
The members of the Class are so numerous that joinder of all members is
impracticable. Throughout the Class Period, Splunk shares were actively traded on the
NASDAQ. While the exact number of Class members is unknown to plaintiff at this time and
can only be ascertained through appropriate discovery, plaintiff believes that there are hundreds
or thousands of members in the proposed Class located geographically throughout the country.
Joinder would be highly impracticable. Record owners and other members of the Class may be
identified from records maintained by Splunk or its transfer agent and may be notified of the
pendency of this action by mail, using the form of notice similar to that customarily used in
securities class actions.
Plaintiff’s claims are typical of the claims of the members of the Class as all
members of the Class are similarly affected by defendants’ wrongful conduct in violation of the
federal laws complained of herein.
Plaintiff will fairly and adequately protect the interests of the members of the
Class and has retained counsel competent and experienced in class and securities litigation.
Plaintiff has no interests antagonistic to or in conflict with those of the Class.
Common questions of law and fact exist as to all members of the Class and
predominate over any questions solely affecting individual members of the Class. Among the
questions of law and fact common to the Class are:
(a)
whether the federal securities laws were violated by defendants’ acts as
alleged herein;
(b)
whether defendants acted knowingly or with deliberate recklessness in
issuing false and misleading statements;
(c)
whether the price of Splunk stock during the Class Period was artificially
inflated because of defendants’ conduct complained of herein; and
(d)
whether the members of the Class have sustained damages and, if so, the
proper measure of damages.
A class action is superior to all other available methods for the fair and efficient
adjudication of this controversy since joinder of all members is impracticable. Furthermore, as
the damages suffered by individual Class members may be relatively small, the expense and
burden of individual litigation make it impossible for members of the Class to individually
redress the wrongs done to them. There will be no difficulty in the management of this action
as a class action.
COUNT I
For Violation of § 10(b) of the 1934 Act and Rule 10b-5
Against All Defendants
Plaintiff incorporates ¶¶ 1–44 by reference.
During the Class Period, defendants disseminated or approved the false or
misleading statements specified above, which they knew or recklessly disregarded were
misleading in that they contained misrepresentations and failed to disclose material facts
necessary in order to make the statements made, in light of the circumstances under which they
were made, not misleading.
Defendants violated § 10(b) of the 1934 Act and Rule 10b-5 in that they:
(a)
employed devices, schemes, and artifices to defraud;
(b)
made untrue statements of material fact or omitted to state material facts
necessary in order to make the statements made, in light of the circumstances under
which they were made, not misleading; or
(c)
engaged in acts, practices, and a course of business that operated as a
fraud or deceit upon Plaintiff and others similarly situated in connection with their
purchases of Splunk stock during the Class Period.
Plaintiff and the Class have suffered damages in that, in reliance on the integrity
of the market, they paid artificially inflated prices for Splunk stock. Plaintiff and the Class
would not have purchased Splunk stock at the prices they paid, or at all, had they been aware
that the market prices were artificially and falsely inflated by defendants’ misleading statements.
As a direct and proximate result of defendants’ wrongful conduct, plaintiff and
the other members of the Class suffered damages in connection with their purchases of Splunk
stock during the Class Period.
COUNT II
For Violation of § 20(a) of the 1934 Act
Against All Defendants
Plaintiff incorporates ¶¶ 1–49 by reference.
During the Class Period, defendants acted as controlling persons of Splunk within
the meaning of § 20(a) of the 1934 Act. By virtue of their positions and their power to control
public statements about Splunk, the Individual Defendants had the power and ability to control
the actions of Splunk and its employees. Splunk controlled the Individual Defendants and its
other officers and employees. By reason of such conduct, defendants are liable pursuant to
§ 20(a) of the 1934 Act.
PRAYER FOR RELIEF
WHEREFORE, plaintiff prays for judgment as follows:
A.
Determining that this action is a proper class action, designating plaintiff as Lead
Plaintiff and certifying plaintiff as Class representative under Rule 23 of the Federal Rules of
Civil Procedure and plaintiff’s counsel as Lead Counsel;
B.
Awarding plaintiff and the members of the Class damages and interest;
C.
Awarding plaintiff’s reasonable costs, including attorneys’ fees; and
D.
Awarding such equitable/injunctive or other relief as the Court may deem just
and proper.
JURY DEMAND
Plaintiff demands a trial by jury.
Dated: January 8, 2021
JOHNSON FISTEL, LLP
By:
/s/ Brett M. Middleton
BRETT M. MIDDLETON
FRANK J. JOHNSON
655 West Broadway, Suite 1400
San Diego, CA 92101
Telephone: (619) 230-0063
Facsimile: (619) 255-1856
[email protected]
[email protected]
| securities |
cAs2FocBD5gMZwczWXic | LIONEL Z. GLANCY (#134180)
MICHAEL GOLDBERG (#188669)
ROBERT V. PRONGAY (#270796)
GLANCY BINKOW & GOLDBERG LLP
1925 Century Park East, Suite 2100
Los Angeles, California 90067
Telephone: (310) 201-9150
Facsimile: (310) 201-9160
E-mail: [email protected]
[email protected]
[email protected]
[email protected]
Jeremy A. Lieberman
Lesley F. Portnoy
POMERANTZ GROSSMAN HUFFORD
DAHLSTROM & GROSS LLP
600 Third Avenue, 20th Floor
New York, New York 10016
Telephone: (212) 661-1100
Facsimile: (212) 661-8665
Counsel for Plaintiff
[Additional Counsel on Signature Page]
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
CHRIS VAFINIS, Individually and on Behalf of
All Other Persons Similarly Situated,
Plaintiff,
v.
Case No.:
CLASS ACTION COMPLAINT
FOR VIOLATIONS OF THE
FEDERAL SECURITIES LAWS
JURY TRIAL DEMANDED
VELTI PLC, ALEX MOUKAS, WILSON W.
CHEUNG, and JEFFREY G. ROSS,
Defendants.
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CLASS ACTION COMPLAINT
Plaintiff Chris Vafinis (“Plaintiff”), by and through his attorneys, alleges the following upon
information and belief, except as to those allegations concerning Plaintiff, which are alleged upon
personal knowledge. Plaintiff’s information and belief is based upon, among other things, his counsel’s
investigation, which includes without limitation: (a) review and analysis of regulatory filings made by
Velti plc (“Velti” or the “Company”), with the United States Securities and Exchange Commission
(“SEC”); (b) review and analysis of press releases and media reports issued by and disseminated by
Velti; and (c) review of other publicly available information concerning Velti.
NATURE OF THE ACTION AND OVERVIEW
1.
This is a class action on behalf of purchasers of Velti’s securities between January 27,
2011 and August 20, 2013, inclusive (the “Class Period”), seeking to pursue remedies under the
Securities Exchange Act of 1934 (the “Exchange Act”).
2.
Velti engages in the provision of mobile marketing and advertising technology and
solutions for brands, advertising agencies, mobile operators, and media companies primarily in Europe,
the Americas, Asia, and Africa.
3.
On August 20, 2013, the Company reported its 2013 fiscal second quarter financial
results and disclosed that for the quarter revenue had decreased 46.84% to $31.2 million from the year-
earlier quarter and that adjusted earnings per share had decreased to $-0.25 in the quarter versus
earnings per share of $-0.01 in the year-earlier quarter. Moreover, the Company announced a “major
restructuring” of its business.
4.
On this news, shares of Velti declined $0.66 per share, more than 66%, to close on
August 21, 2013, at $0.34 per share, on heavy trading volume.
5.
Throughout the Class Period, Defendants made false and/or misleading statements, as
well as failed to disclose material adverse facts about the Company’s business, operations, and
(1) that the Company was overstating its revenue; (2) that the Company was having difficulties
collecting its receivables from certain customers; (3) that the Company lacked a reasonable basis for
assuming that its receivables would be paid by certain customers; (4) that the Company lacked adequate
internal and financial controls; and (5) that, as a result of the foregoing, the Company’s statements were
materially false and misleading at all relevant times.
6.
As a result of Defendants’ wrongful acts and omissions, and the precipitous decline in
the market value of the Company’s securities, Plaintiff and other Class members have suffered
significant losses and damages.
JURISDICTION AND VENUE
7.
The claims asserted herein arise under Sections 10(b) and 20(a) of the Exchange Act (15
U.S.C.§§78j(b) and 78t(a)) and Rule 10b-5 promulgated thereunder by the SEC (17 C.F.R. § 240.10b-
8.
This Court has jurisdiction over the subject matter of this action pursuant to 28 U.S.C.
§1331 and Section 27 of the Exchange Act (15 U.S.C. §78aa).
9.
Venue is proper in this Judicial District pursuant to 28 U.S.C. §1391(b) and Section 27
of the Exchange Act (15 U.S.C. §78aa(c)). Substantial acts in furtherance of the alleged fraud or the
effects of the fraud have occurred in this Judicial District. Many of the acts charged herein, including
the preparation and dissemination of materially false and/or misleading information, occurred in
substantial part in this Judicial District.
10.
In connection with the acts, transactions, and conduct alleged herein, Defendants directly
and indirectly used the means and instrumentalities of interstate commerce, including the United States
mail, interstate telephone communications, and the facilities of a national securities exchange.
PARTIES
11.
Plaintiff, as set forth in the accompanying certification, incorporated by reference herein,
purchased Velti common stock during the Class Period, and suffered damages as a result of the federal
securities law violations and false and/or misleading statements and/or material omissions alleged
12.
Defendant Velti is a Jersey corporation with its principal executive offices located at
First Floor, 28-32 Pembroke Street Upper, Dublin 2, Republic of Ireland.
13.
Defendant Alex Moukas (“Moukas”) was, at all relevant times, Chief Executive Officer
(“CEO”) and a director of the Company.
14.
Defendant Wilson W. Cheung (“Cheung”) was, at all relevant times, Chief Financial
Officer (“CFO”) of the Company until January 2013.
15.
Defendant Jeffrey G. Ross (“Ross”) was, at all relevant times, CFO of the Company
since January 2013.
16.
Defendants Moukas, Cheung and Ross are collectively referred to hereinafter as the
“Individual Defendants.” The Individual Defendants, because of their positions with the Company,
possessed the power and authority to control the contents of Velti’s reports to the SEC, press releases
and presentations to securities analysts, money and portfolio managers and institutional investors, i.e.,
the market. Each defendant was provided with copies of the Company’s reports and press releases
alleged herein to be misleading prior to, or shortly after, their issuance and had the ability and
opportunity to prevent their issuance or cause them to be corrected. Because of their positions and
access to material non-public information available to them, each of these defendants knew that the
adverse facts specified herein had not been disclosed to, and were being concealed from, the public, and
that the positive representations which were being made were then materially false and/or misleading.
each “group-published” information, the result of the collective actions of the Individual Defendants.
SUBSTANTIVE ALLEGATIONS
Background
17.
Velti engages in the provision of mobile marketing and advertising technology and
solutions for brands, advertising agencies, mobile operators, and media companies primarily in Europe,
the Americas, Asia, and Africa.
Materially False and Misleading
Statements Issued During the Class Period
18.
The Class Period starts on January 27, 2011. On this day, the Company’s final
Registration Statement for its Initial Public Offering (“IPO”) was declared effective. The final
Prospectus for the IPO, which was filed with the SEC on January 28, 2011, prior to the opening of the
market, and was dated January 27, 2011, in relevant part, described the Company’s revenue recognition
policy as follows:
Revenue Recognition
We account for our SaaS revenue, license and software revenue and managed
services revenue in accordance with Accounting Standards Codification (ASC)
Topic 605 — Revenue Recognition and ASC Topic 985-605 — Certain Revenue
Arrangements that Include Software Elements. We recognize revenue when all of
the following conditions are satisfied: (i) there is persuasive evidence of an
arrangement; (ii) the service has been rendered or delivery has occurred; (iii) the
fee to be paid by the customer is fixed or determinable; and (iv) collectability of
the fee is reasonably assured.
Software as a service revenue generated from our "usage-based" services,
including subscription fees for use of individual software modules and our
automated mobile marketing campaign creation templates, and fees charged for
access to our technology platform, are recognized ratably over the period of the
agreement as the fees are earned.
For our variable performance-based fees, we recognize revenue when the
transaction is completed, the specific quantitative goals are met or the milestone is
achieved. For the majority of our contracts, we act as the principal and contract
directly with suppliers for purchase of media and other third party production
costs, and are responsible for payment of such costs as the primary obligor. We
recognize the revenue generated on fees charged for such third party costs using
the gross method. We recognize revenue at the gross amount billed when revenue
is earned for services rendered and record the associated fees we pay as third
party costs in the period such costs are incurred.
Revenue related to perpetual licensing arrangements is recognized upon the
delivery of the license. Fees charged to customize our software solution are
recognized using the completed contract or the percentage-of-completion method
according to ASC 605-35, Revenue Recognition — Construction-Type and
Production-Type Contracts, based on the ratio of costs incurred to the estimated
total costs at completion.
Managed services revenue, when sold with software and support offerings, is
accounted for separately when these services (i) have value to the customer on a
standalone basis, (ii) are not essential to the functionality of the software and (iii)
there is objective and reliable evidence of fair value of each deliverable. When
accounted for separately, revenue is recognized as the services are rendered for
time and material contracts, and ratably over the term of the contract when
accepted by the customer for fixed price contracts. For revenue arrangements with
multiple deliverables, such as an arrangement that includes license, support and
professional services, we allocate the total amount the customer will pay to the
separate units of accounting based on their relative fair values, as determined by
the price of the undelivered items when sold separately.
The timing of revenue recognition in each case depends upon a variety of factors,
including the specific terms of each arrangement and the nature of our
deliverables and obligations, and the existence of evidence to support recognition
of our revenue as of the reporting date. For contracts with extended payment
terms for which we have not established a successful pattern of collection history,
we recognize revenue when all of the criteria are met and when the fees under the
contract are due and payable.
In the event that we have incurred costs associated with a specific revenue
arrangement prior to the execution of the related contract, those costs are
expensed as incurred.
Fees are recognized as revenue when all revenue recognition criteria have been
met. Fees that have been invoiced are recorded in trade receivables and fees that
have not been invoiced as of the reporting date but on which all revenue
recognition criteria are met are accrued and reported as accrued contract
receivables on the balance sheets and recognized as revenue in the period when
the fees are earned.
We present revenue net of value-added tax, sales tax, excise tax and other similar
assessments.
19.
On March 16, 2011, the Company issued a press release entitled, “VELTI
ANNOUNCES FOURTH QUARTER AND FISCAL YEAR END 2010 RESULTS.” Therein, the
Company, in relevant part, stated:
Velti plc (Nasdaq: VELT; AIM: VEL), the leading mobile marketing and
advertising technology provider for brands, advertising agencies, mobile operators
and media, announced its financial results for the fourth quarter and fiscal year
ended December 31, 2010.
Financial Highlights
•
Q4 2010 revenue of $57.5 million; fiscal 2010 revenue of $116.3 million
•
Q4 adjusted EBITDA of $22.5 million; fiscal 2010 adjusted
EBITDA of $27.2 million
•
Q4 GAAP net income of $2.0 million and EPS of $0.05; fiscal
2010
GAAP net loss of $15.7 million and EPS of $0.41
•
Q4 adjusted net income of $13.5 million and adjusted EPS of
0.34;
fiscal 2010 adjusted net income of $3.0 million and
adjusted EPS of $0.07
***
Revenue and Business Growth
For the fourth quarter of 2010, Velti reported revenue of $57.5 million, compared
with $20.6 million in the prior quarter ended September 30, 2010. On a GAAP
basis, net income for the fourth fiscal quarter ended.
December 31, 2010 was $2.0 million or $0.05 per share, compared with a net loss
of $6.0 or $0.16 per share, in the prior quarter ended September 30, 2010. On a
non-GAAP basis, adjusted net income for the fourth fiscal quarter ended
December 31, 2010 was $13.5 million. Adjusted EBITDA for the fourth quarter
ended December 31, 2010 was $22.5 million, compared with $3.3 million
reported in the third quarter ended September 30, 2010.
Velti’s total revenue has grown to $116.3 million for the year ended
December 31, 2010, an increase of 29% from $90.0 million for the fiscal year
ended December 31, 2009. On a GAAP basis, net loss for fiscal year ended
December 31, 2010 was $15.7 million or $0.41 per share, compared with a net
income of $6.5 million, or $0.17 per share, in the 2009 fiscal year.
On a non-GAAP basis, adjusted net income for fiscal year ended
December 31, 2010 was $3.0 million or $0.07 per share, compared with adjusted
net income of $11.1 million, or $0.29 per share, in the fiscal year ended
December 31, 2009.
Velti’s business strategy is to become the world’s most widely adopted SaaS
platform for mobile marketing and advertising. Since 2009, the Company has
focused intensive technology acquisition and development, deployment and sales
efforts on making its platform, called Velti mGage, a standard for planning,
delivering, analyzing and optimizing end-to-end mobile marketing campaign
around the world.
20.
On April 12, 2011, Velti filed its Annual Report on Form 20-F with the SEC for the
2010 fiscal year. The Company’s Form 20-F was signed by Defendants Moukas and Cheung, and
reaffirmed the Company’s statements previously announced on March 16, 2016. The Company’s Form
20-F also contained Sarbanes-Oxley required certifications, signed by Defendants Moukas and Cheung,
who certified:
1. I have reviewed this annual report on Form 20-F of Velti plc, for the fiscal
year ended December 31, 2010;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made,
not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the Company as of,
and for, the periods presented in this report;
4. The Company's other certifying officer and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
Group and have:
a)
Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
Company, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which
this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting
principles;
c)
Evaluated the effectiveness of the Company's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
d)
Disclosed in this report any change in the Company's internal control
over financial reporting that occurred during the period covered by the
annual report that has materially affected, or is reasonably likely to
materially affect, the Company's internal control over financial
reporting; and
5. The Company's other certifying officers and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
Company's auditors and the Audit Committee of the Board of Directors (or
persons performing the equivalents functions):
a)
All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting, which are
reasonably likely to adversely affect the Company's ability to record,
process, summarize and report financial information; and
b)
Any fraud, whether or not material, that involves management or other
employees who have a significant role in the Company's internal
control over financial reporting.
21.
Additionally, the Company’s Annual Report filed on Form 20-F with the SEC on April
12, 2011, described Velti’s revenue recognition policy as follows:
Revenue Recognition
We derive our revenue from three sources:
1. software as a service (SaaS) revenue, which consists of fees from customers who
subscribe to our hosted mobile marketing and advertising platform, generally
referred to as "usage-based" services, and fees from customers who utilize our
software solutions to measure the progress of their transaction-based mobile
marketing and advertising campaigns, generally referred to as "performance-
based" services;
2. license and software revenue, which consists of revenue from customers who
license our mobile marketing and advertising platform and fees for customized
software solutions delivered to and installed on the customers' server; and
3. managed services revenue, which consists of fees charged to customers for
professional services related to the implementation, execution, and monitoring of
customized mobile marketing and advertising solutions.
We account for our revenue for these services and licenses in accordance with
Accounting Standards Codification (ASC) Topic 605 — Revenue Recognition
and ASC Topic 985-605 — Certain Revenue Arrangements that Include Software
Elements. We recognize revenue when all of the following conditions are
satisfied: (i) there is persuasive evidence of an arrangement; (ii) the service has
been rendered or delivery has occurred; (iii) the fee to be paid by the customer is
fixed or determinable; and (iv) collectability of the fee is reasonably assured.
SaaS revenue generated from our "usage-based" services, including subscription
fees for use of individual software modules and our automated mobile marketing
campaign creation templates, and fees charged for access to our technology
platform, are recognized ratably over the period of the agreement as the fees are
earned.
SaaS revenue generated from our "performance-based" services is generally based
on specified metrics, typically relating to the number of transactions performed or
number of text messages generated during the campaign multiplied by the cost per
transaction or response in accordance with the terms of the related contracts.
Some of our performance-based contracts include performance incentive
provisions that link a portion of revenue that we may earn under the contract to
the performance of the customer's campaign relative to quantitative or other
milestones, such as the growth in the consumer base, reduced consumer churn, or
the effectiveness of the end-user response. For our variable performance-based
fees, we recognize revenue when the transaction is completed, the specific
quantitative goals are met, or the milestone is achieved. For the majority of our
contracts, we act as the principal and contract directly with suppliers for purchase
of media and other third party production costs, and are responsible for payment
of such costs as the primary obligor. We recognize the revenue generated on fees
charged for such third party costs using the gross method. We recognize revenue
at the gross amount billed when revenue is earned for services rendered and
record the associated fees we pay as third party costs in the period such costs are
incurred.
License and software revenue consists of fees charged for our mobile marketing
and advertising technology provided on a perpetual license, and fees charged for
services to customize and implement the specific software solution, including fees
to customize the platform for use with the different media used by the customer in
a campaign. Revenue related to perpetual licensing arrangements is recognized
upon the delivery of the license. Fees charged to customize our software solution
are recognized using the completed contract or percentage-of-completion method
according to ASC 605-35, Revenue Recognition — Construction-Type and
Production-Type Contracts, based on the ratio of costs incurred to the estimated
total costs at completion.
Managed services revenue, when sold with software and support offerings, are
accounted for separately when these services (i) have value to the customer on a
standalone basis, (ii) are not essential to the functionality of the software and (iii)
there is objective and reliable evidence of fair value of each deliverable. When
accounted for separately, revenues are recognized as the services are rendered for
time and material contracts, and ratably over the term of the contract when
accepted by the customer for fixed price contracts. For revenue arrangements with
multiple deliverables, such as an arrangement that includes license, support and
professional services, we allocate the total amount the customer will pay to the
separate units of accounting based on their relative fair values, as determined by
the price of the undelivered items when sold separately.
The timing of revenue recognition in each case depends upon a variety of factors,
including the specific terms of each arrangement and the nature of our
deliverables and obligations, and the existence of evidence to support recognition
of our revenue as of the reporting date. For contracts with extended payment
terms for which we have not established a successful pattern of collection history,
we recognize revenue when all of the criteria are met and when the fees under the
contract are due and payable.
In the event that we have incurred costs associated with a specific revenue
arrangement prior to the execution of the related contract, those costs are
expensed as incurred.
Fees that have been invoiced are recorded in trade receivables and in revenue
when all revenue recognition criteria have been met. Fees that have not been
invoiced as of the reporting date but all revenue recognition criteria are met are
accrued and reported as accrued contract receivables on the balance sheets and
recognized as revenue in the period when the fees are earned.
We present revenue net of value-added tax, sales tax, excise tax and other similar
assessments.
Our revenue arrangements do not contain general rights of return.
22.
On May 12, 2011, the Company issued a press release entitled, “Velti Announces First
Quarter 2011 Results.” Therein, the Company, in relevant part, stated:
Financial Highlights
•
Revenue of $29.6 million, an increase of 82% from Q1 2010
($16.2
million);
•
Adjusted EBITDA of $1.3 million; an increase of 180% from
Q1
2010 ($457 thousand);
•
GAAP net loss of $15.9 million and EPS of $(0.34);
•
Adjusted net loss of $5.2 million and adjusted EPS of $(0.11)
***
Revenue and Business Growth
For first quarter ended March 31, 2011, Velti reported revenue of $29.6 million,
compared with $16.2 million in the quarter ended March 31, 2010. On a GAAP
basis, net loss for the quarter ended March 31, 2011 was $15.9 million or $(0.34)
per share, compared with a net loss of $5.2 million or $(0.14) per share, for the
quarter ended March 31, 2010. On a non-GAAP basis, adjusted net loss for the
quarter ended March 31, 2011 was $5.2 million or $(0.11) per share compared
with an adjusted net loss of $3.2 million or $(0.08) per share for the quarter ended
March 31, 2010. Adjusted EBITDA for the quarter ended March 31, 2011 was
$1.3 million, compared with $457 thousand for the quarter ended March 31, 2010.
Velti's business strategy is to become the world's most widely adopted SaaS
platform for mobile marketing and advertising. Since 2009, the Company has
focused its technology acquisition and development, deployment, and sales efforts
on making its platform, Velti mGage, a standard for planning, delivering,
analyzing and optimizing end-to-end mobile marketing campaigns around the
world.
23.
On August 10, 2011, the Company issued a press release entitled, “Velti Reports Second
Quarter 2011 Financial Results.” Therein, the Company, in relevant part, stated:
Financial Highlights
•
Revenue of $34.4 million, an increase of 57% from Q2 2010;
•
Adjusted EBITDA of $3.1 million; an increase of 205% from
Q2
2010;
•
GAAP net loss of $25.1 million and EPS of $(0.47); and
•
Adjusted net loss of $2.0 million and adjusted EPS of $(0.04)
***
Revenue and Business Growth
For the second quarter ended June 30, 2011, Velti reported revenue of $34.4
million, compared with $21.9 million in the second quarter ended June 30, 2010.
On a GAAP basis, net loss for the quarter ended June 30, 2011 was $25.1 million,
or $(0.47) per share, compared with a net loss of $6.4 million, or $(0.17) per
share, for the quarter ended June 30, 2010. On a non-GAAP basis, adjusted net
loss for the quarter ended June 30, 2011 was $2.0 million, or $(0.04) per share
compared with an adjusted net loss of $3.4 million, or $(0.09) per share for the
quarter ended June 30, 2010. Adjusted EBITDA for the quarter ended June 30,
2011 was $3.1 million, compared with $1.0 million for quarter ended June 30,
2010.
Velti's goal is to continue to be the foremost mobile marketing technology
company and offer the most widely adopted SaaS platform for mobile marketing
and advertising. Since 2009, the Company has focused its technology acquisition
and development, deployment, and sales efforts on making its platform, Velti
mGage, a standard for planning, delivering, analyzing and optimizing end-to-end
mobile marketing campaigns around the world.
24.
On August 29, 2011, Velti filed an Interim Report on Form 6-K with the SEC for the
2011 fiscal second quarter. The Company’s Interim Report reaffirmed the Company’s statements
previously announced on August 10, 2011. The Company’s Interim Report also contained Sarbanes-
Oxley required certifications, signed by Defendants Moukas and Cheung, substantially similar to the
certifications contained in ¶ 20, supra.
25.
On November 15, 2011, the Company issued a press release entitled, “Velti Reports
Third-Quarter 2011 Results.” Therein, the Company, in relevant part, stated:
Q3 Financial Highlights
•
Revenue of $38.2 million, an increase of 85% from Q3 2010,
driven
by overall growth in smart phones, increased mobile
marketing spend, and
new blue chip clients
•
Adjusted EBITDA of $5.6 million, compared with $3.3 million
in Q3
2010, an increase of 73%;
•
GAAP net income attributable to Velti of $0.6 million and EPS
of
$0.01 compared with a net loss of $6.0 million and EPS of $(0.16) for Q3 2010;
and
•
Adjusted net loss of $1.1 million and adjusted EPS of $(0.02)
compared
with an adjusted net loss of $3.9 million and adjusted EPS
of $(0.10) for Q3 2010
26.
On December 2, 2011, Velti filed an Interim Report on Form 6-K with the SEC for the
2011 fiscal third quarter. The Company’s Interim Report reaffirmed the Company’s statements
previously announced on November 15, 2011. The Company’s Interim Report also contained Sarbanes-
Oxley required certifications, signed by Defendants Moukas and Cheung, substantially similar to the
certifications contained in ¶ 20, supra.
27.
On March 12, 2012, the Company issued a press release entitled, “Velti Announces a
Strong Fourth Quarter and Fiscal Year 2011 With 63% Year on Year Revenue and 95% Adjusted
EBITDA Growth, Provides Guidance for a Robust 2012.” Therein, the Company, in relevant part,
•
Announces fourth quarter revenue of $87.1 million and full year
revenue of $189.2 million, a growth of 52% and
63%,respectively;
•
Announces fourth quarter Adjusted EBITDA of $43.1 million
and
full
year Adjusted EBITDA of $53.1 million, a growth of 92% and
95%, respectively.
DUBLIN, Ireland and SAN FRANCISCO, March 12, 2012 (GLOBE
NEWSWIRE) -- Velti plc (Nasdaq:VELT), the leading global provider of mobile
marketing and advertising technology and solutions, today announced its financial
results for the fourth quarter and fiscal year ended December 31, 2011.
***
Fiscal Year 2011 Financial Highlights
•
Revenue of $189.2 million, an increase of 63% from fiscal year
2010;
•
Revenue less 3rd party costs of $135.3 million (resulting in a
margin
of 72% as a percentage of revenue), an increase of 70%
from fiscal
year
2010;
•
Adjusted EBITDA of $53.1 million, compared with $27.2 million
in
fiscal year 2010, an increase of 95%;
•
GAAP net loss attributable to Velti of $15.4 million and EPS of
$(0.28)
compared with a net loss of $15.7 million and EPS of
$(0.41)
for
fiscal
year 2010; and
•
Adjusted net income of $29.0 million and adjusted diluted EPS
of
$0.50 compared with adjusted net income of $3.0 million and adjusted diluted
EPS of $0.07 for 2010.
Mobile Advertising and Marketing Revenues and Third Party Costs
•
Mobile advertising revenue of $29.8 million and mobile
advertising
3rd party costs of $25.0 million; resultant mobile
advertising
revenue less 3rd
party costs of $4.8 million
(16% as a percentage
of revenue);
•
Mobile marketing revenue of $159.4 million, an increase of
45%
from fiscal year 2010 and mobile marketing 3rd party
costs of $28.9
million; resultant mobile marketing revenue less
3rd party costs of $130.5
million (82% as a percentage of
revenue), an increase of
67%
from
fiscal year 2010.
28.
On April 26, 2012, Velti filed its Annual Report on Form 20-F with the SEC for the
2011 fiscal year. The Company’s Form 20-F was signed by Defendants Moukas and Cheung, and
reaffirmed the Company’s statements previously announced on March 12, 2012. The Company’s Form
20-F also contained also contained Sarbanes-Oxley required certifications, signed by Defendants
Moukas and Cheung, substantially similar to the certifications contained in ¶ 20, supra.
29.
Additionally, the Company’s Annual Report filed on Form 20-F with the SEC on April
26, 2012, described the Company’s revenue recognition practices as follows:
Revenue Recognition
We derive our revenue from three sources:
•
software as a service (SaaS) revenue, which consists of fees
from
customers who subscribe to our hosted mobile marketing and
advertising
platform, generally referred to as “usage
based” services, and
fees from
customers who utilize our
software solutions to measure the
progress of
their transaction-based
mobile
marketing
and
advertising
campaigns,
generally
referred
to
as
“performance-based”
services;
•
license and software revenue, which consists of revenue from
customers
who license our mobile marketing and advertising
platform and fees for customized software solutions
delivered
to
and installed on the customers'
server either in
perpetual
or
term
licenses; and
•
manaed services revenue, which consists of fees charged to customers for
professional services related to the implementation, execution, and monitoring
of customized mobile marketing and advertising solutions.
We account for revenue for these services and licenses in accordance with
Accounting Standards Codification (ASC) Topic 605 - Revenue Recognition and
ASC Topic 985-605 - Certain Revenue Arrangements that Include Software
Elements. We recognize revenue when all of the following conditions are
satisfied: (i) there is persuasive evidence of an arrangement; (ii) the service has
been rendered or delivery has occurred; (iii) the fee to be paid by the customer is
fixed or determinable; and (iv) collectability of the fee is reasonably assured.
SaaS revenue generated from our “usage-based” services, including subscription
fees for use of individual software modules and our automated mobile marketing
campaign creation templates, and fees charged for access to our technology
platform, are recognized ratably over the period of the agreement as the fees are
earned.
SaaS revenue generated from our “performance-based” services is generally
based on specified metrics, typically relating to the number of transactions
performed during the campaign multiplied by the cost per action in accordance
with the terms of the related contracts. Some of our performance-based contracts
include performance incentive provisions that link a portion of revenue that we
may earn under the contract to the performance of the customer's campaign
relative to quantitative or other milestones, such as the growth in the consumer
base, reduced consumer churn, or the effectiveness of the end-user response. We
consider the performance-based fees to be contingent fees. We recognize this
revenue monthly based on actual performance, which is when the fees are earned
and the amount of the fee can be reliably measured. Our performance-based
arrangements are typically invoiced monthly, which can occur in a period
subsequent to revenue being recognized.
License and software revenue consists of fees charged for our mobile marketing
and advertising technology provided on a perpetual or term-based license. These
types or arrangements do not typically include any ongoing support arrangements
or rights to upgrades or enhancements and therefore revenue related to perpetual
licensing arrangements is recognized upon the delivery of the license. Revenue
from term based licenses are recognized over the related term. Fees charged to
customize our software solution are recognized using the completed contract or
percentage-of-completion
method
according
to
ASC
605-35,
Revenue
Recognition- Construction-Type and Production-Type Contracts, based on the
ratio of costs incurred to the estimated total costs at completion.
Managed services revenue, when sold with software and support offerings, are
accounted for separately when these services (i) have value to the customer on a
standalone basis, (ii) are not essential to the functionality of the software and (iii)
there is objective and reliable evidence of the selling price of each deliverable.
When accounted for separately, revenue is recognized as the services are rendered
for time and material contracts, and ratably over the term of the contract when
accepted by the customer for fixed price contracts. For revenue arrangements with
multiple deliverables, such as an arrangement that includes license, support and
professional services, we allocate the total amount the customer will pay to the
separate units of accounting based on their relative selling prices, as determined
by the price of the undelivered items when sold separately.
The timing of revenue recognition in each case depends upon a variety of factors,
including the specific terms of each arrangement and the nature of our
deliverables and obligations, and the existence of evidence to support recognition
of our revenue as of the reporting date. For contracts with extended payment
terms for which we have not established a successful pattern of collection history,
we recognize revenue when all other criteria are met and when the fees under the
contract are due and payable. Fees that have been invoiced are recorded in trade
receivables and in revenue when all revenue recognition criteria have been met.
Fees that have not been invoiced as of the reporting date but for which all revenue
recognition criteria are met are reported as accrued contract receivables on the
balance sheets.
We present revenue net of value-added tax, sales tax, excise tax and other similar
assessments. Our revenue arrangements do not contain general rights of return.
30.
On May 15, 2012, the Company issued a press release entitled, “Velti Announces Solid
First Quarter 2012 Financial Results: 75% Year on Year Revenue and 260% Adjusted EBITDA
Growth, Increases 2012 Guidance.” Therein, the Company, in relevant part, stated:
•
Announces first quarter revenue of $51.8 million, growth of
75%,
compared to Q1 2011
•
Announces first quarter adjusted EBITDA of $4.6 million, growth
of
260%, compared to Q1 2011
•
Increases annual revenue and adjusted EBITDA guidance and
reiterates commitment to achieve break-even operating cash
flow
by Q3 2012 and positive free cash flow by Q4 2012
***
Q1 2012 Financial Highlights
•
Revenue of $51.8 million, an increase of 75% from Q1 2011,
with
improving margins;
•
Revenue less 3rd party costs of $34.9 million, an increase of
85%
from Q1 2011, and resultant margin of 67% as percentage of
revenue,
in
comparison to 64% in Q1 2011;
•
Adjusted EBITDA of $4.6 million, compared with $1.3 million
in Q1
2011, an increase of 260%;
•
GAAP net loss attributable to Velti of $8.8 million and EPS of
$(0.14)
compared with a net loss of $15.9 million and EPS of
$(0.34) for Q1 2011;
and
•
Adjusted net loss of $1.1 million and adjusted EPS of $(0.02)
compared with an adjusted net loss of $5.2 million and adjusted
EPS of
$(0.11) for
Q1 2011.
Mobile Advertising and Marketing Revenues, Margins and Cash Flow
•
Mobile advertising revenue of $11.2 million and mobile
advertising
3rd party costs of $8.8 million; resultant mobile
advertising revenue less 3rd
party costs of $2.5 million (22% as a percentage of revenue);
•
Mobile marketing revenue of $40.6 million, an increase of 76%
from
Q1 2011 and mobile marketing 3rd party costs of $8.1
million;
resultant
mobile marketing revenue less 3rd party
costs of $32.5 million (80%
as a percentage of revenue), an
increase of 82% from Q1 2011;
•
Velti's margins across both mobile marketing and advertising
continue to
increase year-on-year.
Reach and Revenue Contribution
•
Velti's platform provides marketers the ability to reach 4.3 billion
consumers in 67 countries and our customers have already connected
with 1.4 billion consumers;
•
The Americas, which we expect to be our largest region globally in
2012, contributed revenues of $13.3 million, compared to $8.2
million
in Q1 2011;
•
Europe, excluding the U.K., contributed $15.2 million, compared to
$11.8 million in the same period last year, a solid increase defying a
hard macroeconomic environment;
•
The U.K. contributed $16.0 million, compared to $7.0 million in the
same period last year;
•
Asia and Africa revenue grew to $7.3 million, compared to $2.6
million
in Q1 2011; and
•
For Q1 2012, SaaS revenue contributed 90% of total revenue, in
comparison to 79% for Q1 2011; license and managed services
revenue fell to 3% and 7%, respectively, vs. 9% and 12% in Q1 2011.
31.
On May 15, 2012, the Company hosted a conference call with investors and analysts.
Defendants Moukas and Cheung were present. Therein, Defendant Cheung, in relevant part, stated:
Trade receivables, net of reserves, and accrued receivables were $85.5 million and
$103.3 million respectively as of March 31, 2012, compared with $71 million and
$98.2 million respectively as of December 31, 2011. Can we spend a bit of time
discussing our receivables here? Recall, in Q4, due to many performance-based
campaigns completed in the later part of December, we recognized a large portion
of accrued revenues, resulting in a large accrued receivables balance at year-end.
Subsequently, in the first quarter, a lot of invoicing took place, moving a large
amount of balance from accrued to trade receivables. As a result, for Q1 2012, our
accrued receivables as a percentage of total AR, which is trade plus the accrued
receivables, has decreased to 55% from 58% in Q4.
While we believe this percentage is still relatively high, bear in mind we had the
strongest Q1 revenues ever in our history. And we managed to keep the accrued
receivables balance roughly the same as Q4, while increasing our trade
receivables balance by $14.5 million. We're actively managing the percentage of
accrued receivables versus trade receivables, so as to drive free cash flows to the
company as quickly as possible.
Now to the topic of trade DSOs. Excluding the impact of our acquisitions of
Air2Web, MIG and CASEE, for the trailing 12 month period ended March 31
trade DSOs were 116 days, at approximately the same level as the 113 days in Q1
of 2011. Given the seasonality in our business, we expected a modest Q4 to Q1
increase and we consider this encouraging, given; A, the increase in year-over-
year sales; and B, that after discussing with our investors we wound down
significantly the factoring of receivables since last year to virtually nothing now;
and C, our companywide mandate to move more quickly or to convert the accrued
receivables into trade receivables so as to rapidly convert the receivables to cash.
In other words, trade DSOs may suffer modestly in the short-term, while we push
accrued receivables to trade receivables to turn to cash more quickly. Our long-
term trade DSO goal, however, is to reach the low 70 days in 18 to 24 months. So
just to reconfirm, this will be driven by the lower DSOs in geographies such as
the U.S. and the U.K.
32.
Additionally, in response to questions from analysts, Defendant Cheung, in relevant part,
[Analyst]: Great. And the other – just two other quick questions. In terms of
contracts, one of the other slings that's thrown at you is that some of the contracts
you have with large European carriers, for example, European companies, is they
have ridiculously good payment terms, like 180 days or twice a year. Help me –
based on some of our work in – we're hearing that you're actually renegotiating
those contracts on better payment terms, is that correct?
And can you give us any update on how many companies you've been able to
renegotiate effectively better payment terms and therefore increased price?
[Defendant Cheung]: We are doing a lot of things here in order to bring ourselves
to operating free cash flow positive. So, obviously, one of the things that you've
mentioned is that we are actually looking at a lot of the existing contracts, but
more importantly is actually looking at some of the new contracts with the new
customers.
We are pushing to make sure that the structure is such that the payment terms are
better and we would be able to generate cash much faster. But there are some
other leverages that we are pulling as well.
Number one, we are also pushing the accrued receivables more into trade
receivables. We are also enhancing our collection efforts on the existing trade AR.
And if you look at our aging right now, less than $10 million of those trade AR
balances are actually invoiced more than 150 days. That's very critical.
And secondly, we are going to focus on revenue growth in geographies where we
have much more favorable payment cycles, and I think that's what we're focusing
on given the revenue shift mix that we have.
***
[Analyst]: And finally I just wanted to return to the issue of the accrued contract
receivables. Sounds like you made some relative progress there. Just wondering
what were sort of gating factors on getting those invoices out, and it sounds like
you are making a push. Just any reference you could make, anything that you're
doing specifically to try to address that going forward? Thank you.
[Defendant Cheung]: Definitely it requires a lot of discipline. Internally, we have
dedicated people, basically looking at all the contracts and working with our sales
force to ensure that nothing falls through the cracks.
We have been making a lot of phone calls as well to make sure that we push the
collections, and this is an ongoing process. We now have the wherewithal to
improve the – beef up the team, sales, administration and what have you, to make
sure that we get the people and convert all that into cash on a much quicker cycle.
33.
On this news, shares of Velti declined $2.88 per share, more than 33%, to close on May
16, 2012, at $5.72 per share, on heavy trading volume.
34.
On June 1, 2012, Velti filed an Interim Report on Form 6-K with the SEC for the 2012
fiscal first quarter. The Company’s Interim Report was signed by Defendant Cheung and reaffirmed the
Company’s statements previously announced on May 15, 2012. The Company’s Interim Report also
contained Sarbanes-Oxley required certifications, signed by Defendants Moukas and Cheung,
substantially similar to the certifications contained in ¶ 20, supra.
35.
On August 14, 2012, the Company issued a press release entitled, “Velti Announces
Record Q2 Financial Results and Free Cash Flow Generation; Revenue Growth of 71 Percent and
Adjusted EBITDA of 100 Percent Year-Over-Yeaelti Announces Record Q2 Financial Results and Free
Cash Flow Generation; Revenue Growth of 71 Percent and Adjusted EBITDA of 100 Percent Year-
Over-Year.” Therein, the Company, in relevant part, stated:
•
Announces second quarter revenue of $58.7 million, growth of
71
percent,
compared with Q2 2011
•
Announces second quarter adjusted EBITDA of $6.2 million,
growth
of
100 percent, compared with Q2 2011
•
Generates $25.0 million in operating cash flow. Generated $7.0
million
in free cash flow excluding acquisition and debt
payments,
$4.4
million
inclusive of acquisition and debt
payments
•
Increases annual revenue and adjusted EBITDA guidance, reiterates
expectation for neutral operating cash flow in the
third
quarter
and
sustainable positive free cash flow by Q4
2012
***
Revenue Contribution and Mobile Advertising and Marketing Revenues and
Margins
•
The Americas contributed a record 29 percent of revenues or
$16.7
million, compared with $7.4 million in Q2 2011. The
U.S. will be
our single largest market this year;
•
Europe, excluding the U.K., contributed $18.8 million,
compared with
$15.6 million in Q2 2011;
•
The U.K. contributed $13.6 million, compared with $4.7
million in the
same period last year;
•
Asia and Africa revenue grew to $9.5 million, compared with
$6.7
million
in Q2 2011;
•
For Q2 2012, SaaS revenue contributed 83 percent of total revenue,
compared with 80 percent for Q2 2011; license and software
revenue
contributed 5 percent of total revenue,
compared with 12 percent for
Q2 2011; and managed services
revenue contributed 12 percent of total
revenue, compared with
8 percent for Q2 2011;
•
Mobile advertising revenue of $13.9 million (24 percent of total
revenue), an increase of 137 percent from Q2 2011 and mobile
advertising 3rd party costs of $10.4 million; resultant mobile
advertising revenue less 3rd party costs of $3.5 million; and
•
Mobile marketing revenue of $44.8 million (76 percent of total
revenue), an increase of 57 percent from Q2 2011 and mobile
marketing 3rd party costs of $10.6 million; resultant mobile
marketing revenue less 3rd party costs of $34.2 million.
36.
On August 23, 2012, Velti filed an Interim Report on Form 6-K with the SEC for the
2012 fiscal second quarter. The Company’s Interim Report was signed by Defendant Cheung and
reaffirmed the Company’s statements previously announced on August 14, 2012. The Company’s
and Cheung, substantially similar to the certifications contained in ¶ 20, supra.
37.
On November 14, 2012, the Company issued a press release entitled, “Velti Announces
Third Quarter 2012 Results.” Therein, the Company, in relevant part, stated:
Q3 2012 Financial Highlights
•
Record revenue of $62.4 million, an increase of 62 percent from Q3 2011;
$66.6 million or 74 percent on a constant
currency basis;
•
Revenue less 3rd party costs of $39.7 million, an increase of 63
percent
from Q3 2011;
•
Adjusted EBITDA of $6.7 million, compared with $5.6 million
in Q3
2011, an increase of 19 percent;
•
Commencing in the third quarter Velti is significantly reducing
its
capitalization of internal software development to reflect the
company's
accelerated software development cycles and
focus. This change
resulted
in higher research and
development expenses in the third
quarter, and accordingly, negatively impacted its adjusted EBITDA results.
Going forward, Velti expects to continually reduce its internal
capitalized
software development investments. The effect of
this change is $1.2
million in the third quarter;
•
GAAP net loss attributable to Velti of $24.7 million and EPS of
$(0.38)
compared with a net income of $0.6 million and EPS of
$0.01 for Q3 2011;
included in the GAAP net loss is a $9.6
million non-cash expected loss on
assets held for sale (primarily
attributable
to
$7.8
million
of
discount associated with the deferred consideration from the company's
divestiture), as
well as a $5.3 million non-cash charge associated
with the re-
measurement of MIG's final deferred consideration; and
•
Adjusted net loss of $1.8 million and adjusted EPS of $(0.03)
compared
with an adjusted net loss of $1.1 million and adjusted EPS
of $(0.02) for Q3 2011.
***
Revenue Contribution and Mobile Advertising and Marketing Revenue
and
Margins
•
The Americas contributed 26 percent of revenue or $16.2 million, compared
with $9.0 million in Q3 2011. The U.S. will be Velti's
single largest market this
year;
•
The U.K. contributed 27 percent of revenue or $17.1 million,
compared
with $5.3 million in the same period last year;
•
For Q3 2012, SaaS revenue contributed 78 percent of total revenue,
compared with 67 percent for Q3 2011; license and software revenue
contributed 8 percent of total revenue, compared with 26 percent for
Q3
2011; and managed services revenue contributed 14 percent of
total
revenue,
compared with 7 percent for Q3 2011;
•
Mobile advertising revenue was $14 .0 million (22 percent of total revenue), an
increase of 87 percent from Q3 2011 and mobile
advertising
3rd party costs were
$10.5 million; resultant mobile
advertising revenue less 3rd party costs were $3.4
million; and
•
Mobile marketing revenue was $48.4 million (78 percent of total revenue), an
increase of 58 percent from Q3 2011 and mobile
marketing 3rd party costs were
$12.2 million; resultant mobile
marketing revenue less 3rd party costs were $36.3
million.
38.
On this news, shares of Velti declined $2.27 per share, more than 34%, to close on
November 15, 2012, at $4.37 per share, on heavy trading volume.
39.
On November 30, 2012, Velti filed an Interim Report on Form 6-K with the SEC for the
2012 fiscal third quarter. The Company’s Interim Report was signed by Defendant Cheung and
reaffirmed the Company’s statements previously announced on November 14, 2012. The Company’s
Interim Report also contained Sarbanes-Oxley required certifications, signed by Defendants Moukas
and Cheung, substantially similar to the certifications contained in ¶ 20, supra.
40.
On January 30, 2013, the Company’s common stock declined $1.38 per share (or
25.23%) to close at $4.09 per share, on unusually heavy volume, following commentary that day by
Velti’s management at the Company’s analyst day. According to a January 31, 2013 news story, an
analyst report issued by Wells Fargo noted that the market had reacted negatively to disclosures that the
discipline with contract quality:
Shares of Velti (NASDAQ: VELT) fell 25 percent yesterday afternoon following
cautious management comments from the company's analyst day. Today analysts
at Wells Fargo are weighing in and have downgraded shares from Outperform to
Market Perform and lowered their valuation range from $10-12 to $4.50-6.00.
"Though we believe management did a solid job of outlining the evolution of the
mobile marketing landscape, the range of Velti's capabilities, and the significant
opportunity ahead for the company as the market matures, we have growing
concern that 2013 will prove to be a year of transition for VELT as management
works to correct areas of weak execution," analyst Peter Stabler states. "Based on
our interpretation of CFO Ross' comments, we expect greater discipline on
contract quality and geographical mix will have a significant negative impact
on both revenue and EBITDA growth in the near term."
They note CFO Ross declined to offer a range of formal guidance for 2013, but
made it clear to attendees that "smart growth" and improving Velti's cash flow
generation are his top two priorities. "Though his remarks were brief, we came
away convinced that the cash collection weakness that has challenged Velti over
the last year has likely been due to an over-reliance on growth from customers
(primarily in Eastern Europe/Middle East/Africa) with poorly structured
contracts, where contracts with weak payment terms may have been renewed in
exchange for headline growth increasing the level of delayed payment risk."
(Emphasis added).
41.
On March 12, 2013, the Company issued a press release entitled, “Velti Announces
Fourth Quarter and Fiscal Year 2012 Results.” Therein, the Company, in relevant part, stated:
Fiscal Year 2012 Financial Highlights
•
Revenue of $270.3 million, an increase of 43 percent from fiscal
year
2011;
•
Revenue less 3rd party costs of $178.9 million (resulting in a
margin
of 66 percent), an increase of 32 percent compared with
revenue less 3rd party
costs from fiscal year 2011;
•
Adjusted EBITDA of $42.6 million, which includes a $7.4 million
allowance for doubtful accounts; this is a decrease of 20
percent from fiscal
year 2011;
•
GAAP net loss attributable to Velti of $56.4 million and EPS of
$(.88)
compared with a net loss of $15.4 million and EPS of
$(0.28) for fiscal year
2011, including $16.9 million related to
the write-off of certain capitalized
software and;
•
Adjusted net income of $22.2 million and adjusted diluted EPS
of $.34
compared with adjusted net income of $29.0 million
and adjusted diluted
EPS of $0.50 for 2011.
Mobile Advertising and Marketing Revenues and Third Party Costs
•
Mobile advertising revenue of $54.3 million, an increase of 82
percent
from fiscal year 2011 and mobile advertising 3rd party
costs
of
$41.1
million; resultant mobile advertising revenue less 3rd party costs of $13.3
million (resulting in a margin of 24 percent);
•
Mobile marketing revenue of $216.0 million, an increase of 36
percent
from fiscal year 2011 and mobile marketing 3rd party
costs
of
$50.3
million; resultant mobile marketing revenue less
3rd party costs of $165.7
million (resulting in a margin of 77 percent).
Q4 2012 Financial Highlights
•
Revenue of $97.5 million, an increase of 12 percent from Q4
2011;
•
Revenue less 3rd party costs of $66.6 million (resulting in a
margin
of 68 percent), a decrease of 2 percent compared with
revenue less 3rd party
costs from Q4 2011;
•
Adjusted EBITDA of $25.1 million, compared with $43.1 million in Q4
2011, a decrease of 42 percent;
•
GAAP net loss attributable to Velti of $5.2 million and diluted
EPS of
$(.08) compared with net income of $25.0 million and
EPS of $0.40 for Q4
2011;
•
Adjusted net income of $26.0 million and adjusted diluted EPS
of $.39
compared with adjusted net income of $37.3 million
and adjusted diluted
EPS of $0.59 for Q4 2011;
42.
On this news, shares of Velti declined $0.71 per share, more than 22%, to close on
March 13, 2013, at $2.40 per share, on heavy trading volume.
43.
On April 11, 2011, Velti filed its Annual Report on Form 20-F with the SEC for the
2012 fiscal year. The Company’s Form 20-F was signed by Defendants Moukas and Cheung, and
20-F also contained also contained Sarbanes-Oxley required certifications, signed by Defendants
Moukas and Cheung, substantially similar to the certifications contained in ¶ 20, supra.
44.
On May 13, 2013, the Company issued a press release entitled, “Velti Announces First
Quarter 2013 Results.” Therein, the Company, in relevant part, stated:
Q1 2013 Financial Highlights
•
Revenue of $41.0 million, a decrease of 21 percent from Q1
2012;
•
Revenue less 3rd party costs in Q1 of $17.6 million;
•
Adjusted EBITDA of ($18.3) million, or ($16.1) million
excluding the
bad
debt provision compared with $4.6 million in Q1 2012;
•
GAAP net loss attributable to Velti of $156.4 million and diluted EPS of
($2.38) during Q1 compared with a net loss of
$8.8 million and EPS of
($0.14) for Q1 2012; Velti incurred a
non-cash charge of $133.1
million related to the write-down of substantially
all
goodwill
and
other
intangible assets, which was triggered by our decline in market value and was
largely
mechanical based on our stock price on March 31st.
Notwithstanding the required accounting treatment, our view is
that
both the businesses acquired and the intangibles acquired
or
developed
by the Company have substantial economic value in our ongoing business
operations; and
•
Adjusted net loss of $18.1 million and adjusted diluted EPS of
($0.27)
compared with adjusted net loss of $1.1 million and adjusted
diluted
EPS
of
($0.02) for Q1 2012.
Mobile Advertising and Marketing Revenues and Third Party Costs
•
Mobile advertising revenue of $10.1 million, and mobile
advertising
3rd party costs of $7.0 million; resultant mobile
advertising revenue less 3rd
party costs of $3.1 million, or a
margin of 30 percent; and
•
Mobile marketing revenue of $30.9 million, and mobile
marketing 3rd
party costs of $16.3 million; resultant mobile
marketing revenue less 3rd
party costs of $14.6 million, or a
margin of 47 percent.
45.
On June 10, 2012, Velti filed an Interim Report on Form 6-K with the SEC for the 2013
fiscal first quarter. The Company’s Interim Report was signed by Defendant Ross and reaffirmed the
contained Sarbanes-Oxley required certifications, signed by Defendants Moukas and Ross, substantially
similar to the certifications contained in ¶20, supra.
46.
The statements contained in ¶¶ 18-45 were materially false and/or misleading when
made because defendants failed to disclose or indicate the following: (1) that the Company was
overstating its revenue; (2) that the Company was having difficulties collecting its receivables from
certain customers; (3) that the Company lacked a reasonable basis for assuming that its receivables
would be paid by certain customers; (4) that the Company lacked adequate internal and financial
controls; and (5) that, as a result of the foregoing, the Company’s statements were materially false and
misleading at all relevant times.
Disclosures at the End of the Class Period
47.
On August 21, 2013, the Company issued a press release entitled, “Velti Announces
Second Quarter 2013 Results.” Therein, the Company, in relevant part, stated:
Velti plc (Nasdaq: VELT), the leading global provider of mobile marketing and
advertising technology and solutions, today announced financial results for the
second quarter ended June 30, 2013.
"While we understood there would be challenges to improving Velti's financial
position and driving longterm growth, the second quarter proved to be more
difficult than expected," said Alex Moukas, chief executive officer. "We
continued however to take significant steps to focus the company on predictable
business, customers and geographies. We also began a major restructuring effort
to align our organization to our business strategy and current revenue level,
removing approximately $40 million in annualized costs, in addition to our
previously announced $40 million reduction of capital expenditures.
"Over the past few months we have made significant progress extricating
ourselves from businesses at the root of many of our difficulties, focusing instead
on core opportunities for growth in mobile marketing in key geographies like
Western Europe, North America, India and China. For example, in the fourth
quarter of 2012 we began to reduce our commercial activities in Greece and
Cyprus, and as of the end of Q2 2013 we are generating no meaningful revenue
from customers in this region. Notwithstanding this reduction of business,
customers with business activities in Greece and Cyprus continued to account for
a significant portion of the Company's outstanding receivables. Due to a
deterioration in collections from these customers, and indications that future
payments were also at risk, we made the decision to writedown more than $100
million in outstanding receivables."
"We remain focused on creating and executing highly effective campaigns for our
customers. Our mobile marketing customers have responded with a retention rate
of more than 95% and we continue to sign substantial contracts with new
customers."
"We move into the second half of the year as a more disciplined, focused
organization that remains a leader in mobile marketing. We are committed to
doing all we can to deliver value to customers and shareholders and our actions
position Velti to become profitable and cash flow positive in 2014."
Engagement of Advisors
•
The company engaged an investment bank to sell its supply-
side
U.S. advertising business, also known as Mobclix, as well as
look
at
other
strategic opportunities for the company.
•
The company engaged Deloitte Financial Advisory Services to
assist
in evaluating the near-term and longer-term collectability of receivables on the
books of its Greek and Cypriot
subsidiaries. As a result of this evaluation,
Velti is taking a
charge in Q2 of approximately $111 million to its trade
receivables and accrued contract receivables relating to its enterprise
business, which primarily sold customized mobile marketing
platforms
to
customers with operations principally
within Greece and Cyprus. As part of
Deloitte's engagement,
Scott Avila from Deloitte is serving as the
company's chief
restructuring officer to provide restructuring advice and
assistance.
Q2 Business Highlights
•
Velti continues to experience demand for its services. During
the
second quarter it won and renewed programs with premier global brands such as
Vodafone, Nokia, Coca-Cola, Toyota and
China Unicom.
•
The company launched Velti Pay, a mobile payment and
messaging
solution.
•
Velti launched an enhanced version of its mGage Inspire platform
that
gives customers greater control over managing
programs
that
support
customer life-cycle management and long-term loyalty.
•
Velti's new release of the mGage Communicate Pro platform is
currently being rolled out simultaneously in the USA and the
United
Kingdom. The platform brings new functionality to allow
brands
to
conduct
interactive mobile marketing campaigns with a global reach.
Q2 2013 Financial Highlights
•
Revenue of $31.2 million, a decrease of 47 percent from Q2
2012.
•
Revenue less third-party costs in Q2 of $8.8 million.
•
Adjusted EBITDA on a consolidated basis of $(20.9) million,
excluding the one-time write off of certain receivables of $110.7
million, compared with $6.2 million in Q2 2012.
•
Adjusted EBITDA, excluding Starcapital (our variable interest
entity,
or "VIE", that holds previously divested assets which we are
required
to
consolidate despite a lack of equity ownership)
of $(17.5) million, excluding
bad debt expense of $98.7 million, compared with $6.2 million in Q2 2012.
•
GAAP net loss attributable to Velti of $130.3 million and diluted EPS of
$(1.56) during Q2 compared with a net loss of
$17.7 million and EPS of
$(0.28) for Q2 2012.
Mobile Advertising and Marketing Revenues and Third-Party Costs
•
Mobile advertising revenue of $8.9 million, and mobile
advertising
third-party costs of $5.4 million; resultant mobile advertising
revenue
less
third-party costs of $3.6 million, or a
margin of 40 percent.
•
Mobile marketing revenue of $22.3 million, and mobile
marketing
third-party costs of $17.0 million; resultant mobile marketing revenue less third-
party costs of $5.3 million, or a
margin of 23 percent.
Cash, Operating and Free Cash Flow
•
Cash position of $19.4 million as of June 30, 2013.
•
Q2 operating cash flow of $0.3 million, which excludes $7.6
million
of acquisition-related payments associated with MIG.
•
Q2 free cash flow of ($3.3) million, which excludes $7.6 million
of
acquisition-related payments associated with MIG.
48.
On this news, shares of Velti declined $0.66 per share, more than 66%, to close on
August 21, 2013, at $0.34 per share, on heavy trading volume.
CLASS ACTION ALLEGATIONS
49.
Plaintiff brings this action as a class action pursuant to Federal Rule of Civil Procedure
23(a) and (b)(3) on behalf of a class, consisting of all those who purchased Velti’s securities between
January 27, 2011 and August 20, 2013, inclusive (the “Class Period”) and who were damaged thereby
relevant times, members of their immediate families and their legal representatives, heirs, successors or
assigns and any entity in which Defendants have or had a controlling interest.
50.
The members of the Class are so numerous that joinder of all members is impracticable.
Throughout the Class Period, Velti’s securities were actively traded on the NASDAQ Stock Exchange
(the “NASDAQ”). While the exact number of Class members is unknown to Plaintiff at this time and
can only be ascertained through appropriate discovery, Plaintiff believes that there are hundreds or
thousands of members in the proposed Class. Millions of Velti shares were traded publicly during the
Class Period on the NASDAQ. As of March 31, 2013, the Company had 65,622,141 shares of common
stock outstanding. Record owners and other members of the Class may be identified from records
maintained by Velti or its transfer agent and may be notified of the pendency of this action by mail,
using the form of notice similar to that customarily used in securities class actions.
51.
Plaintiff’s claims are typical of the claims of the members of the Class as all members of
the Class are similarly affected by Defendants’ wrongful conduct in violation of federal law that is
complained of herein.
52.
Plaintiff will fairly and adequately protect the interests of the members of the Class and
has retained counsel competent and experienced in class and securities litigation.
53.
Common questions of law and fact exist as to all members of the Class and predominate
over any questions solely affecting individual members of the Class. Among the questions of law and
fact common to the Class are:
a) Whether the federal securities laws were violated by Defendants’ acts as alleged herein;
b) Whether statements made by Defendants to the investing public during the
Class Period omitted and/or misrepresented material facts about the
business, operations, and prospects of Velti; and
c) To what extent the members of the Class have sustained damages and the
proper measure of damages.
54.
A class action is superior to all other available methods for the fair and efficient
adjudication of this controversy since joinder of all members is impracticable. Furthermore, as the
damages suffered by individual Class members may be relatively small, the expense and burden of
individual litigation makes it impossible for members of the Class to individually redress the wrongs
done to them. There will be no difficulty in the management of this action as a class action.
UNDISCLOSED ADVERSE FACTS
55.
The market for Velti’s securities was open, well-developed and efficient at all relevant
times. As a result of these materially false and/or misleading statements, and/or failures to disclose,
Velti’s securities traded at artificially inflated prices during the Class Period. Plaintiff and other
members of the Class purchased or otherwise acquired Velti’s securities relying upon the integrity of
the market price of the Company’s securities and market information relating to Velti, and have been
damaged thereby.
56.
During the Class Period, Defendants materially misled the investing public, thereby
inflating the price of Velti’s securities, by publicly issuing false and/or misleading statements and/or
omitting to disclose material facts necessary to make Defendants’ statements, as set forth herein, not
false and/or misleading. Said statements and omissions were materially false and/or misleading in that
they failed to disclose material adverse information and/or misrepresented the truth about Velti’s
business, operations, and prospects as alleged herein.
57.
At all relevant times, the material misrepresentations and omissions particularized in this
Complaint directly or proximately caused or were a substantial contribVelting cause of the damages
sustained by Plaintiff and other members of the Class. As described herein, during the Class Period,
Defendants made or caused to be made a series of materially false and/or misleading statements about
Velti’s financial well-being and prospects. These material misstatements and/or omissions had the
financial well-being and prospects, thus causing the Company’s securities to be overvalued and
artificially inflated at all relevant times. Defendants’ materially false and/or misleading statements
during the Class Period resulted in Plaintiff and other members of the Class purchasing the Company’s
securities at artificially inflated prices, thus causing the damages complained of herein.
LOSS CAUSATION
58.
Defendants’ wrongful conduct, as alleged herein, directly and proximately caused the
economic loss suffered by Plaintiff and the Class.
59.
During the Class Period, Plaintiff and the Class purchased Velti’s securities at artificially
inflated prices and were damaged thereby. The price of the Company’s securities significantly declined
when the misrepresentations made to the market, and/or the information alleged herein to have been
concealed from the market, and/or the effects thereof, were revealed, causing investors’s losses.
SCIENTER ALLEGATIONS
60.
As alleged herein, Defendants acted with scienter in that Defendants knew that the
public documents and statements issued or disseminated in the name of the Company were materially
false and/or misleading; knew that such statements or documents would be issued or disseminated to
the investing public; and knowingly and substantially participated or acquiesced in the issuance or
dissemination of such statements or documents as primary violations of the federal securities laws. As
set forth elsewhere herein in detail, Defendants, by virtue of their receipt of information reflecting the
true facts regarding Velti, his/her control over, and/or receipt and/or modification of Velti’s allegedly
materially misleading misstatements and/or their associations with the Company which made them
privy to confidential proprietary information concerning Velti, participated in the fraudulent scheme
alleged herein.
APPLICABILITY OF PRESUMPTION OF RELIANCE
(FRAUD-ON-THE-MARKET DOCTRINE)
61.
The market for Velti’s securities was open, well-developed and efficient at all relevant
times. As a result of the materially false and/or misleading statements and/or failures to disclose, Velti’s
securities traded at artificially inflated prices during the Class Period. On July 15, 2011, the Company’s
stock closed at a Class Period high of $19.71 per share. Plaintiff and other members of the Class
purchased or otherwise acquired the Company’s securities relying upon the integrity of the market price
of Velti’s securities and market information relating to Velti, and have been damaged thereby.
62.
During the Class Period, the artificial inflation of Velti’s stock was caused by the
material misrepresentations and/or omissions particularized in this Complaint causing the damages
sustained by Plaintiff and other members of the Class. As described herein, during the Class Period,
Defendants made or caused to be made a series of materially false and/or misleading statements about
Velti’s business, prospects, and operations. These material misstatements and/or omissions created an
unrealistically positive assessment of Velti and its business, operations, and prospects, thus causing the
price of the Company’s securities to be artificially inflated at all relevant times, and when disclosed,
negatively affected the value of the Company stock. Defendants’ materially false and/or misleading
statements during the Class Period resulted in Plaintiff and other members of the Class purchasing the
Company’s securities at such artificially inflated prices, and each of them has been damaged as a result.
63.
At all relevant times, the market for Velti’s securities was an efficient market for the
following reasons, among others:
a) Velti stock met the requirements for listing, and was listed and actively traded on the
NASDAQ, a highly efficient and automated market;
b) As a regulated issuer, Velti filed periodic public reports with the SEC and/or the
NASDAQ;
c) Velti regularly communicated with public investors via established market
communication mechanisms, including through regular dissemination of press releases
on the national circuits of major newswire services and through other wide-ranging
public disclosures, such as communications with the financial press and other similar
reporting services; and/or
d) Velti was followed by securities analysts employed by brokerage firms who wrote
reports about the Company, and these reports were distributed to the sales force and
certain customers of their respective brokerage firms. Each of these reports was publicly
available and entered the public marketplace.
64.
As a result of the foregoing, the market for Velti’s securities promptly digested current
information regarding Velti from all publicly available sources and reflected such information in Velti’s
stock price. Under these circumstances, all purchasers of Velti’s securities during the Class Period
suffered similar injury through their purchase of Velti’s securities at artificially inflated prices and a
presumption of reliance applies.
NO SAFE HARBOR
65.
The statutory safe harbor provided for forward-looking statements under certain
circumstances does not apply to any of the allegedly false statements pleaded in this Complaint. The
statements alleged to be false and misleading herein all relate to then-existing facts and conditions. In
addition, to the extent certain of the statements alleged to be false may be characterized as forward
looking, they were not identified as “forward-looking statements” when made and there were no
meaningful cautionary statements identifying important factors that could cause actual results to differ
materially from those in the purportedly forward-looking statements. In the alternative, to the extent
that the statutory safe harbor is determined to apply to any forward-looking statements pleaded herein,
Defendants are liable for those false forward-looking statements because at the time each of those
forward-looking statements was made, the speaker had actual knowledge that the forward-looking
statement was materially false or misleading, and/or the forward-looking statement was authorized or
approved by an executive officer of Velti who knew that the statement was false when made.
FIRST CLAIM
Violation of Section 10(b) of
The Exchange Act and Rule 10b-5
Promulgated Thereunder Against All Defendants
66.
Plaintiff repeats and realleges each and every allegation contained above as if fully set
forth herein.
67.
During the Class Period, Defendants carried out a plan, scheme and course of conduct
which was intended to and, throughout the Class Period, did: (i) deceive the investing public, including
Plaintiff and other Class members, as alleged herein; and (ii) cause Plaintiff and other members of the
Class to purchase Velti’s securities at artificially inflated prices. In furtherance of this unlawful scheme,
plan and course of conduct, defendants, and each of them, took the actions set forth herein.
68.
Defendants (i) employed devices, schemes, and artifices to defraud; (ii) made untrue
statements of material fact and/or omitted to state material facts necessary to make the statements not
misleading; and (iii) engaged in acts, practices, and a course of business which operated as a fraud and
deceit upon the purchasers of the Company’s securities in an effort to maintain artificially high market
prices for Velti’s securities in violation of Section 10(b) of the Exchange Act and Rule 10b-5. All
Defendants are sued either as primary participants in the wrongful and illegal conduct charged herein or
as controlling persons as alleged below.
69.
Defendants, individually and in concert, directly and indirectly, by the use, means or
instrumentalities of interstate commerce and/or of the mails, engaged and participated in a continuous
course of conduct to conceal adverse material information about Velti’s financial well-being and
prospects, as specified herein.
70.
These defendants employed devices, schemes and artifices to defraud, while in
possession of material adverse non-public information and engaged in acts, practices, and a course of
conduct as alleged herein in an effort to assure investors of Velti’s value and performance and
untrue statements of material facts and/or omitting to state material facts necessary in order to make the
statements made about Velti and its business operations and future prospects in light of the
circumstances under which they were made, not misleading, as set forth more particularly herein, and
engaged in transactions, practices and a course of business which operated as a fraud and deceit upon
the purchasers of the Company’s securities during the Class Period.
71.
Each of the Individual Defendants’ primary liability, and controlling person liability,
arises from the following facts: (i) the Individual Defendants were high-level executives and/or
directors at the Company during the Class Period and members of the Company’s management team or
had control thereof; (ii) each of these defendants, by virtue of their responsibilities and activities as a
senior officer and/or director of the Company, was privy to and participated in the creation,
development and reporting of the Company’s internal budgets, plans, projections and/or reports; (iii)
each of these defendants enjoyed significant personal contact and familiarity with the other defendants
and was advised of, and had access to, other members of the Company’s management team, internal
reports and other data and information about the Company’s finances, operations, and sales at all
relevant times; and (iv) each of these defendants was aware of the Company’s dissemination of
information to the investing public which they knew and/or recklessly disregarded was materially false
and misleading.
72.
The defendants had actual knowledge of the misrepresentations and/or omissions of
material facts set forth herein, or acted with reckless disregard for the truth in that they failed to
ascertain and to disclose such facts, even though such facts were available to them. Such defendants’
material misrepresentations and/or omissions were done knowingly or recklessly and for the purpose
and effect of concealing Velti’s financial well-being and prospects from the investing public and
supporting the artificially inflated price of its securities. As demonstrated by Defendants’
prospects throughout the Class Period, Defendants, if they did not have actual knowledge of the
misrepresentations and/or omissions alleged, were reckless in failing to obtain such knowledge by
deliberately refraining from taking those steps necessary to discover whether those statements were
false or misleading.
73.
As a result of the dissemination of the materially false and/or misleading information
and/or failure to disclose material facts, as set forth above, the market price of Velti’s securities was
artificially inflated during the Class Period. In ignorance of the fact that market prices of the
Company’s securities were artificially inflated, and relying directly or indirectly on the false and
misleading statements made by Defendants, or upon the integrity of the market in which the securities
trades, and/or in the absence of material adverse information that was known to or recklessly
disregarded by Defendants, but not disclosed in public statements by Defendants during the Class
Period, Plaintiff and the other members of the Class acquired Velti’s securities during the Class Period
at artificially high prices and were damaged thereby.
74.
At the time of said misrepresentations and/or omissions, Plaintiff and other members of
the Class were ignorant of their falsity, and believed them to be true. Had Plaintiff and the other
members of the Class and the marketplace known the truth regarding the problems that Velti was
experiencing, which were not disclosed by Defendants, Plaintiff and other members of the Class would
not have purchased or otherwise acquired their Velti securities, or, if they had acquired such securities
during the Class Period, they would not have done so at the artificially inflated prices which they paid.
75.
By virtue of the foregoing, Defendants have violated Section 10(b) of the Exchange Act
and Rule 10b-5 promulgated thereunder.
members of the Class suffered damages in connection with their respective purchases and sales of the
Company’s securities during the Class Period.
SECOND CLAIM
Violation of Section 20(a) of
The Exchange Act Against the Individual Defendants
77.
Plaintiff repeats and realleges each and every allegation contained above as if fully set
forth herein.
78.
The Individual Defendants acted as controlling persons of Velti within the meaning of
Section 20(a) of the Exchange Act as alleged herein. By virtue of their high-level positions, and their
ownership and contractual rights, participation in and/or awareness of the Company’s operations and/or
intimate knowledge of the false financial statements filed by the Company with the SEC and
disseminated to the investing public, the Individual Defendants had the power to influence and control
and did influence and control, directly or indirectly, the decision-making of the Company, including the
content and dissemination of the various statements which Plaintiff contends are false and misleading.
The Individual Defendants were provided with or had unlimited access to copies of the Company’s
reports, press releases, public filings and other statements alleged by Plaintiff to be misleading prior to
and/or shortly after these statements were issued and had the ability to prevent the issuance of the
statements or cause the statements to be corrected.
79.
In particular, each of these Defendants had direct and supervisory involvement in the
day-to-day operations of the Company and, therefore, is presumed to have had the power to control or
influence the particular transactions giving rise to the securities violations as alleged herein, and
exercised the same.
80.
As set forth above, Velti and the Individual Defendants each violated Section 10(b) and
Rule 10b-5 by their acts and/or omissions as alleged in this Complaint. By virtue of their positions as
As a direct and proximate result of Defendants’ wrongful conduct, Plaintiff and other members of the
Class suffered damages in connection with their purchases of the Company’s securities during the Class
PRAYER FOR RELIEF
WHEREFORE, Plaintiff prays for relief and judgment, as follows:
a)
Determining that this action is a proper class action under Rule 23 of the Federal Rules
of Civil Procedure;
b)
Awarding compensatory damages in favor of Plaintiff and the other Class members
against all defendants, jointly and severally, for all damages sustained as a result of Defendants’
wrongdoing, in an amount to be proven at trial, including interest thereon;
c)
Awarding Plaintiff and the Class their reasonable costs and expenses incurred in this
action, including counsel fees and expert fees; and
d)
Such other and further relief as the Court may deem just and proper.
JURY TRIAL DEMANDED
Plaintiff hereby demands a trial by jury.
DATED: August 26, 2013
GLANCY BINKOW & GOLDBERG LLP
By: s/ Lionel Z. Glancy
Lionel Z. Glancy
Michael Goldberg
1925 Century Park East, Suite 2100
Los Angeles, California 90067
Telephone: (310) 201-9150
Facsimile: (310) 201-9160
Email: [email protected]
POMERANTZ GROSSMAN HUFFORD
DAHLSTROM & GROSS LLP
Jeremy A. Lieberman
Lesley F. Portnoy
600 Third Avenue, 20th Floor
New York, New York 10016
Telephone: 212-661-1100
Facsimile: 212-661-8665
POMERANTZ GROSSMAN HUFFORD
DAHLSTROM & GROSS LLP
Patrick V. Dahlstrom
10 South LaSalle Street, Suite 3505
Chicago, IL 60603
Telephone: 312-377-1181
Facsimile: 312-377-1184
Counsel for Plaintiff
| securities |
-8tBDocBD5gMZwczWWw6 | UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF OHIO
AKRON DIVISION
Dannella Reynolds, individually and on behalf of all others
similarly situated,
Civil Action No: ____________
Plaintiff,
CLASS ACTION COMPLAINT
DEMAND FOR JURY TRIAL
-v.-
FirstCredit Inc.and
John Does 1-25,
Defendants.
Plaintiff Dannella Reynolds (hereinafter, “Plaintiff”), an Ohio resident, brings this Class Action
Complaint by and through her attorneys, Zukowsky Law LLC, against FirstCredit Inc.(hereinafter
“Defendant”), individually and on behalf of a class of all others similarly situated, pursuant to Rule
23 of the Federal Rules of Civil Procedure, based upon information and belief of Plaintiff’s counsel,
except for allegations specifically pertaining to Plaintiff, which are based upon Plaintiff's personal
knowledge.
INTRODUCTION/PRELIMINARY STATEMENT
1.
Congress enacted the Fair Debt Collection Practices Act (hereinafter “the FDCPA”)
in 1977 in response to the "abundant evidence of the use of abusive, deceptive, and unfair debt
collection practices by many debt collectors." 15 U.S.C. §1692(a). At that time, Congress was
concerned that "abusive debt collection practices contribute to the number of personal
bankruptcies, to material instability, to the loss of jobs, and to invasions of individual privacy."
1
Id. Congress concluded that "existing laws…[we]re inadequate to protect consumers," and that
"'the effective collection of debts" does not require "misrepresentation or other abusive debt
collection practices." 15 U.S.C. §§ 1692(b) & (c).
2.
Congress explained that the purpose of the Act was not only to eliminate abusive
debt collection practices, but also to "insure that those debt collectors who refrain from using
abusive debt collection practices are not competitively disadvantaged." Id. § 1692(e). After
determining that the existing consumer protection laws ·were inadequate, Id § l692(b), Congress
gave consumers a private cause of action against debt collectors who fail to comply with the
Act. Id. § 1692k.
JURISDICTION AND VENUE
3.
The Court has jurisdiction over this class action pursuant to 28 U.S.C. § 1331 and
15 U.S.C. § 1692 et. seq. The Court has pendent jurisdiction over the State law claims in this
action pursuant to 28 U.S.C. § 1367(a).
4.
Venue is proper in this judicial district pursuant to 28 U.S.C. § 1391(b)(2) as this is
where a substantial part of the events or omissions giving rise to the claim occurred.
NATURE OF THE ACTION
5.
Plaintiff brings this class action on behalf of a class of Ohio consumers under § 1692
et seq. of Title 15 of the United States Code, commonly referred to as the Fair Debt Collections
Practices Act ("FDCPA"), and
6.
Plaintiff is seeking damages and declaratory relief.
PARTIES
7.
Plaintiff is a resident of the State of Ohio, County of Portage, residing at 6056
Winchell Rd., Hiram OH 44234.
8.
Defendant is a "debt collector" as the phrase is defined in 15 U.S.C. § 1692(a)(6) and
used in the FDCPA with an address at 3250 West Market Street, Akron, Summit County, Ohio.
9.
Upon information and belief, Defendant is a company that uses the mail, telephone,
and facsimile and regularly engages in business the principal purpose of which is to attempt to
collect debts alleged to be due another.
10.
John Does l-25, are fictitious names of individuals and businesses alleged for the
purpose of substituting names of Defendants whose identities will be disclosed in discovery and
should be made parties to this action.
CLASS ALLEGATIONS
11.
Plaintiff brings this claim on behalf of the following case, pursuant to Fed. R. Civ.
P. 23(a) and 23(b)(3).
12.
The Class consists of:
a. all individuals with addresses in the State of Ohio;
b. to whom Defendant sent a collection letter attempting to collect a consumer debt;
c. regarding collection of a debt;
d. that imposed an additional service fee for credit card payments;
e. which letter was sent on or after a date one (1) year prior to the filing of this
action and on or before a date twenty-one (2l) days after the filing of this action.
13.
The identities of all class members are readily ascertainable from the records of
Defendants and those companies and entities on whose behalf they attempt to collect and/or
have purchased debts.
14.
Excluded from the Plaintiff Class are the Defendants and all officer, members,
partners, managers, directors and employees of the Defendants and their respective immediate
families, and legal counsel for all parties to this action, and all members of their immediate
families.
15.
There are questions of law and fact common to the Plaintiff Class, which common
issues predominate over any issues involving only individual class members. The principal issue
is whether the Defendants' written communications to consumers, in the forms attached as
Exhibit A, violate 15 U.S.C. §§ l692e and 1692f.
16.
The Plaintiff’s claims are typical of the class members, as all are based upon the same
facts and legal theories. The Plaintiff will fairly and adequately protect the interests of the
Plaintiff Class defined in this complaint. The Plaintiff has retained counsel with experience in
handling consumer lawsuits, complex legal issues, and class actions, and neither the Plaintiff
nor her attorneys have any interests, which might cause them not to vigorously pursue this
action.
17.
This action has been brought, and may properly be maintained, as a class action
pursuant to the provisions of Rule 23 of the Federal Rules of Civil Procedure because there is a
well-defined community interest in the litigation:
a. Numerosity: The Plaintiff is informed and believes, and on that basis alleges,
that the Plaintiff Class defined above is so numerous that joinder of all members
would be impractical.
b. Common Questions Predominate: Common questions of law and fact exist as
to all members of the Plaintiff Class and those questions predominance over any
questions or issues involving only individual class members. The principal issue
is whether the Defendants' written communications to consumers, in the forms
attached as Exhibit A violate 15 § l692e and §1692f.
c. Typicality: The Plaintiff’s claims are typical of the claims of the class members.
The Plaintiff and all members of the Plaintiff Class have claims arising out of the
Defendants' common uniform course of conduct complained of herein.
d. Adequacy: The Plaintiff will fairly and adequately protect the interests of the
class members insofar as Plaintiff has no interests that are adverse to the absent
class members. The Plaintiff is committed to vigorously litigating this matter.
Plaintiff has also retained counsel experienced in handling consumer lawsuits,
complex legal issues, and class actions. Neither the Plaintiff nor her counsel have
any interests which might cause them not to vigorously pursue the instant class
action lawsuit.
e. Superiority: A class action is superior to the other available means for the fair
and efficient adjudication of this controversy because individual joinder of all
members would be impracticable. Class action treatment will permit a large
number of similarly situated persons to prosecute their common claims in a single
forum efficiently and without unnecessary duplication of effort and expense that
individual actions would engender.
18.
Certification of a class under Rule 23(b)(3) of the Federal Rules of Civil Procedure
is also appropriate in that the questions of law and fact common to members of the Plaintiff
Class predominate over any questions affecting an individual member, and a class action is
superior to other available methods for the fair and efficient adjudication of the controversy.
19.
Depending on the outcome of further investigation and discovery, Plaintiff may, at
the time of class certification motion, seek to certify a class(es) only as to particular issues
pursuant to Fed. R. Civ. P. 23(c)(4).
FACTUAL ALLEGATIONS
20.
Plaintiff repeats, reiterates and incorporates the allegations contained in paragraphs
numbered above herein with the same force and effect as if the same were set forth at length
herein.
21.
Some time prior to February 21, 2020, obligations were allegedly incurred to
University Hospitals Geauga Regional and Cleveland Clinic.
22.
The University Hospitals Geauga Regional and Cleveland Clinic obligations arose
out of transactions involving a involving a medical debt incurred by Plaintiff with University
Hospitals Geauga Regional and Cleveland Clinic in which money, property, insurance or
services, which are the subject of the transaction, were incurred for medical services.
23.
The alleged University Hospitals Geauga Regional and Cleveland Clinic obligation
is a "debt" as defined by 15 U.S.C.§ 1692a(5).
24.
University Hospitals Geauga Regional and Cleveland Clinic is a "creditor"(s) as
defined by 15 U.S.C.§ 1692a(4).
25.
University Hospitals Geauga Regional and Cleveland Clinic or a subsequent owner
of the University Hospitals Geauga Regional and Cleveland Clinic debt contracted with the
Defendant to collect the alleged debt.
26.
Defendant collects and attempts to collect debts incurred or alleged to have been
incurred for personal, family or household purposes on behalf of creditors using the United
States Postal Services, telephone and internet.
Violation – February 21, 2020 Collection Letter
27.
On or about February 21, 2020, Defendant sent the Plaintiff a collection letter (the
“Letter”) regarding the alleged debt owed to University Hospitals Geauga Regional and
Cleveland Clinic. See Collection Letter – Attached hereto as Exhibit A.
28.
The collection letter indicated that Defendant charges a $3.50 service fee for payment
via credit card.
29.
Plaintiff did not agree to such a collection charge.
30.
The addition of this collection fee by Defendant which was not authorized by the
agreement creating the debt or permitted by law, was an attempt to collect an amount not owed
by Plaintiff.
31.
Defendant misled and deceived Plaintiff into the belief that she falsely owed an
additional $3.50 when this charge is a violation of the FDCPA.
32.
As a result of Defendant’s deceptive misleading and false debt collection practices,
Plaintiff has been damaged.
COUNT I
VIOLATIONS OF THE FAIR DEBT COLLECTION PRACTICES ACT 15 U.S.C. §1692e
et seq.
33.
Plaintiff repeats, reiterates and incorporates the allegations contained in paragraphs
above herein with the same force and effect as if the same were set forth at length herein.
34.
Defendant’s debt collection efforts attempted and/or directed towards the Plaintiff
violated various provisions of the FDCPA, including but not limited to 15 U.S.C. § 1692e.
35.
Pursuant to 15 U.S.C. §1692e, a debt collector may not use any false, deceptive, or
misleading representation or means in connection with the collection of any debt.
36.
Defendant violated said section by:
a. Making a false and misleading representation in violation of §1692e(10).
37.
By reason thereof, Defendant is liable to Plaintiff for judgment that Defendant's
conduct violated Section 1692e et seq. of the FDCPA, actual damages, statutory damages, costs
and attorneys’ fees.
COUNT II
VIOLATIONS OF THE FAIR DEBT COLLECTION PRACTICES ACT 15 U.S.C.
§1692f et seq.
38.
Plaintiff repeats, reiterates and incorporates the allegations contained in paragraphs
above herein with the same force and effect as if the same were set forth at length herein.
39.
Defendant’s debt collection efforts attempted and/or directed towards the Plaintiff
violated various provisions of the FDCPA, including but not limited to 15 U.S.C. § 1692f.
40.
Pursuant to 15 U.S.C. §1692f, a debt collector may not use any unfair or
unconscionable means in connection with the collection of any debt.
41.
Defendant violated this section by
a.
unfairly advising Plaintiff that she owed Defendant more money than the
amount of her debt; and
b.
attempting to collect an amount not expressly authorized by the underlying
agreement creating the debt or permitted by law in violation of § 1692f(1).
42.
By reason thereof, Defendant is liable to Plaintiff for judgment that Defendant's
conduct violated Section 1692f et seq. of the FDCPA, actual damages, statutory damages, costs
and attorneys’ fees.
DEMAND FOR TRIAL BY JURY
43.
Pursuant to Rule 38 of the Federal Rules of Civil Procedure, Plaintiff hereby requests
a trial by jury on all issues so triable.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff Dannella Reynolds, individually and on behalf of all others
similarly situated demands judgment from Defendant FirstCredit, Inc. as follows:
1.
Declaring that this action is properly maintainable as a Class Action and certifying
Plaintiff as Class representative, and Amichai Zukowsky, Esq. as Class Counsel;
2.
Awarding Plaintiff and the Class statutory damages;
3.
Awarding Plaintiff and the Class actual damages;
4.
Awarding Plaintiff costs of this Action, including reasonable attorneys’ fees and
expenses;
5.
Awarding pre-judgment interest and post-judgment interest; and
6.
Awarding Plaintiff and the Class such other and further relief as this Court may deem
just and proper.
Dated: February 18, 2021
Respectfully Submitted,
BY:/s/ Amichai Zukowsky
Amichai E. Zukowsky
Attorney for Plaintiff
Amichai E. Zukowsky, Esq.
Zukowsky Law, LLC
23811 Chagrin Blvd, Suite 160
Beachwood, OH 44122
Phone: 216.800.5529
Email: [email protected]
| consumer fraud |
qw6eFocBD5gMZwczlMCD | KEREN E. GESUND, ESQ.
Louisiana Bar No. 34397
THE BOURASSA LAW GROUP, LLC
166 Country Club Dr.
New Orleans, LA 70124
Tel: (702) 300-1180
Fax: (702) 851-2189
[email protected]
Attorneys for Plaintiffs
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
VIOLETTE C. IKONOMIDIS, an individual,
on behalf of themselves and those similarly
situated;
Plaintiffs,
vs.
Case No.:
CLASS ACTION COMPLAINT FOR
VIOLATIONS OF THE FAIR DEBT
COLLECTION PRACTICES ACT
JURY DEMANDED
SOURCE RECEIVABLES MANAGEMENT,
LLC a North Carolina limited liability company,
Defendant.
COMPLAINT
Plaintiff, VIOLETTE C. IKONOMIDIS (hereinafter referred to as “PLAINTIFF”) by
and through undersigned attorney, alleges upon knowledge as to herself and her own acts, and
upon information and belief as to all other matters, brings this complaint against the above-
named defendant and in support thereof alleges the following:
PRELIMINARY STATEMENT
1.
PLAINTIFF bring this action on her own behalf and on the behalf of all others
similarly situated for actual and statutory damages arising from DEFENDANT’S violations of
the Fair Debt Collection Practices Act (hereinafter referred to as the “FDCPA”), 15 U.S.C. §
1692, et seq.
JURISDICTION AND VENUE
2.
Jurisdiction of this Court is invoked under 15 U.S.C. § 1692k(d) and 28 U.S.C. §
1331, and supplemental jurisdiction exists for the state law claims under 28 U.S.C. § 1367.
3.
Venue in this District is proper because PLAINTIFF and DEFENDANT reside
and/or do business in the Eastern District of Louisiana. Venue is also proper in this district
because the acts and transactions that give rise to this action occurred, in substantial part, in the
Eastern District of Louisiana.
PARTIES
4.
PLAINTIFF is a natural person who resides in Louisiana.
5.
PLAINTIFF is a “consumer” as defined in the FDCPA at 15 U.S.C. § 1692a(3).
6.
PLAINTIFF allegedly owes a (past due) consumer debt as defined by 15 U.S.C.
§ 1692a(5).
7.
SOURCE RECEIVABLES MANAGEMENT, LLC (hereinafter referred to as
“DEFENDANT”) is a North Carolina limited liability corporation, the principal purpose of
whose business is the collection of debts.
8.
PLAINTIFF is informed and believe, and thereon alleges, that DEFENDANT
regularly collects or attempts to collect consumer debts owed or due or asserted to be owed or
due another and that the DEFENDANT is a “debt collector” as defined by 15 U.S.C. §
1692a(6).
STATEMENT OF FACTS
9.
PLAINTIFF repeats, re-alleges, and incorporates by reference, paragraphs 1
through 8 inclusive, above.
10.
On or about August 16, 2012, DEFENDANT mailed or caused to be mailed a
form collection letter to PLAINTIFF, in an attempt to collect a consumer debt from
PLAINTIFF allegedly owed to another. A true and correct copy of the form letter is attached
hereto as Exhibit “1”.
11.
The form letter sent by DEFENDANT to PLAINTIFF states, in pertinent part:
Unless you notify this office within 30 days after receiving this
notice that you dispute the validity of the debt or any portion
thereof, this office will assume the debt is valid. If you notify this
office in writing within 30 days from receiving this notice that you
dispute the validity of this debt or any portion of it, this office will
obtain verification of the debt or obtain a copy of a judgment and
mail you a copy of such judgment or verification. If you request of
this office within 30 days after receiving this notice, this office
will provide you with the name and address of the original
creditor, if different from the current creditor. (emphasis
added).
12.
According to the August 16, 2012 letter, PLAINTIFF was required to make a
payment “no later than 09/06/12,” or within 21 days from the date the letter was mailed.
(emphasis in original).
CLASS ALLEGATIONS
13.
PLAINTIFF repeats, re-alleges, and incorporates by reference, paragraphs 1
through 12 inclusive, above.
14.
These claims for relief are brought by PLAINTIFF individually and on behalf of
the following classes :
a. Class Number One: A national class consisting of consumers who:
i. Within one year prior to the filing of this action;
ii. Were sent a collection letter by DEFENDANT;
iii. Which contained the following provision: “If you request of this office
within 30 days after receiving this notice, this office will provide you
with the name and address of the original creditor, if different from the
current creditor;” and
iv. The letter was not returned by the postal service as undelivered.
b. Class Number Two: A national class consisting of consumers who:
v. Within one year prior to the filing of this action;
vi. Were sent a collection letter by DEFENDANT;
vii. Which demanded payment within the 30 day validation payment; and
viii. The letter was not returned by the postal service as undelivered.
15.
Under Federal Rule of Civil Procedure Rule 23, a class action is appropriate and
preferable in this case because:
a. The collection letter at the heart of this litigation is a form letter and the class
is so numerous that joinder of all members is impractical.
b. There are questions of law and fact common to the class that predominate
over any questions affecting individual class members. The principal
question presented by this case is whether the form letter attached as Exhibit
1 violated various provisions of the FDCPA, including but not limited to 15
U.S.C. § 1692g.
c. The only issue related to the individuals of class is the identification of the
individual consumers who received the Form Letters (i.e. the class members),
a matter capable of ministerial determination from the DEFENDANT’S
records.
d. PLAINTIFF’S claims are typical of those of the class members. All are based
on the same facts and legal theories.
e. PLAINTIFF will fairly and adequately represent the class members’ interests
and have retained counsel experienced in handling class actions and
collection abuse claims.
16.
A class action is superior for the fair and efficient adjudication of the class
members’ claims as Congress specifically envisioned class actions as a principal means of
enforcing the FDCPA. See 15 U.S.C.§ 1692k. The members of the class are generally
unsophisticated consumers, whose rights will not be vindicated in the absence of a class action.
Prosecution of separate actions by individual members of the classes would also create the risk
of inconsistent or varying adjudications resulting in the establishment of inconsistent or varying
standards and would not be in the best interest of judicial economy.
17.
If facts are discovered to be appropriate, PLAINTIFF will seek to certify the
class under Rule 23(b)(3) of the Federal Rules of Civil Procedure.
FIRST CLAIM FOR RELIEF
BROUGHT BY PLAINTIFF INDIVIDUALLY AND ON BEHALF OF
A CLASS OF SIMILARLY SITUATED PERSONS DEFINED HEREIN AS CLASS ONE
AND CLASS TWO
FOR VIOLATIONS OF THE FDCPA 15 U.S.C.§ 1692g(a)
18.
PLAINTIFF repeats, re-alleges, and incorporate by reference, paragraphs 1
through 17 inclusive, above.
19.
The FDCPA requires that, when first communicating with a consumer in
connection with the collection of a debt or within five days afterwards, debt collectors shall
send the consumer a written notice containing:
(1) the amount of the debt;
(2) the name of the creditor to whom the debt is owed;
(3) a statement that unless the consumer, within thirty days after
receipt of the notice, disputes the validity of the debt, or any
portion thereof, the debt will be assumed to be valid by the debt
collector;
(4) a statement that if the consumer notifies the debt collector in
writing within the thirty-day period that the debt, or any portion
thereof, is disputed, the debt collector will obtain verification of
the debt or a copy of a judgment against the consumer and a copy
of such verification or judgment will be mailed to the consumer
by the debt collector; and
(5) a statement that, upon the consumer's written request within
the thirty-day period, the debt collector will provide the consumer
with the name and address of the original creditor, if different
from the current creditor.
15 U.S.C. § 1692g(a).
20.
The form letters sent by DEFENDANT to PLAINTIFF and the class members
are deceptive and misleading because they fail to identify that a consumer must provide a
written request within the thirty-day period to obtain the name and address of the original
creditor, if different from the current creditor in violation of 15 U.S.C. section 1692g(a). See
McMurray v. ProCollect, Inc., 687 F.3d 665, 668 (5th Cir. 2012); see also Yrok Gee Au Chan v.
N. Am. Collectors, Inc. 2006 WL 778642 (N.D. Cal. Mar. 24, 2006).
21.
As a result of the FDCPA violations by DEFENDANT, PLAINTIFF has suffered
actual damages to be shown specifically at the time of trial, and is entitled to an award of
statutory damages.
22.
It has been necessary for PLAINTIFF to obtain the services of an attorney to
pursue this claim and PLAINTIFF is entitled to recover reasonable attorneys’ fees therefor.
SECOND CLAIM FOR RELIEF
BROUGHT BY PLAINTIFFS INDIVIDUALLY AND ON BEHALF OF
A CLASS OF SIMILARLY SITUATED PERSONS DEFINED HEREIN AS CLASS ONE
AND CLASS TWO
FOR VIOLATIONS OF THE FDCPA 15 U.S.C.§ 1692g(b)
23.
PLAINTIFF repeats, re-alleges, and incorporates by reference, paragraphs 1
through 22 inclusive, above.
24.
15 U.S.C. § 1692g(b) provides, in pertinent part: “Any collection activities and
communication during the 30-day period may not overshadow or be inconsistent with the
disclosure of the consumer’s right to dispute the debt or request the name and address of the
original creditor.”
25.
The form letters are deceptive and misleading, and violate 15 U.S.C. § 1692g(b)
in that PLAINTIFF’S and the class members’ rights to dispute the debt are overshadowed in the
letter by DEFENDANT’S contradictory requirement that PLAINTIFF and the class members’
must pay to resolve the account within 21 days from the date of the letter. See McMurray v.
ProCollect, Inc., 687 F.3d 665, 670 (5th Cir. 2012); see also Peter v. GC Services L.P. 310 F.3d
344, 349 (5th Cir. 2002).
26.
As a result of the FDCPA violations by DEFENDANT, PLAINTIFF has suffered
actual damages to be shown specifically at the time of trial, and is entitled to an award of
statutory damages.
27.
It has been necessary for PLAINTIFF to obtain the services of an attorney to
pursue this claim and PLAINTIFF is entitled to recover reasonable attorneys’ fees therefor.
DEMAND FOR JURY TRIAL
30.
Please take notice that PLAINTIFF demands trial by jury in this action.
PRAYER FOR RELIEF
WHEREFORE, PLAINTIFF respectfully prays that this Court grant the following relief
in PLAINTIFF’S favor, and on behalf of the class, and that judgment be entered against
DEFENDANT for the following:
(1)
For actual damages incurred by PLAINTIFF pursuant to 15 U.S.C. §
1692k(a)(1);
(2)
For statutory damages awarded to PLAINTIFF, not to exceed $1000, pursuant to
15 U.S.C. § 1692k(a)(2)(A);
Exhibit “1”
Exhibit “1”
| consumer fraud |
Van7CYcBD5gMZwczxQJc | IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION
3:20-cv-135
TERRI CHURCH
:
CASE NO.
2076 Mattis Drive
:
Dayton, OH 45439,
:
JUDGE
:
Plaintiff, Individually, and on
behalf of other members of the
general public similarly situated,
:
:
:
:
v
:
:
THE PINE CLUB, LLC
:
COMPLAINT
c/o CT Corp. System, Statutory Agent
:
440 Easton Commons Way, Suite 125
:
Jury Demand Endorsed Herein
Columbus, OH 43219,
:
:
Defendant.
:
COMPLAINT
NOW COMES Plaintiff Terri Church (hereinafter, “Plaintiff”) and proffers this Complaint
for damages against Defendant The Pine Club, LLC (hereinafter, “Defendant”).
JURISDICTION AND VENUE
1.
This action is brought pursuant to O.R.C. Chapter 4112, et seq., Fair Labor Standards Act
(“FLSA”), 29 U.S.C. § 201, et seq., Ohio Minimum Fair Wage Standards Act, O.R.C. 4111
(“MFWSA” or “Chapter 4111”), Ohio Prompt Pay Act, O.R.C. § 4113.15(“OPPA”)
(MFWSA and OPPA referred to collectively as the “Ohio Acts”), Ohio Constitution, Art.
II, §34a (the “Ohio Constitution”) (collectively Chapter 4111, OPPA, and the Ohio
Constitution will be referred to collectively as the “Ohio Wage Laws”), and 28 U.S.C.
§1331.
2.
This Court has federal question jurisdiction over this action pursuant to Section 16(b) of
the FLSA, 29 U.S.C. § 216(b) and 28 U.S.C. § 1331.
3.
This Court has jurisdiction over Plaintiff’s State Law Claims pursuant to supplemental
jurisdiction as codified at 28 U.S.C. § 1367.
4.
Venue is proper in this forum pursuant to 28 U.S.C. §1391, because Plaintiff entered into
an employment relationship with Defendant in the Southern District of Ohio and performed
her job duties there and Defendant is doing and has done substantial business in the
Southern District of Ohio.
THE PARTIES
5.
Plaintiff Terri Church is an individual, a United States citizen, and a resident of the state
of Ohio.
6.
Plaintiff is a former employee, as defined by 29 U.S.C. § 203(e) and Chapter 4111, of
Defendant. Plaintiff was employed by Defendant in a tipped position since 2011.
7.
Plaintiff has evidenced her consent to bring this lawsuit by filing the attached Notice of
Consent pursuant to 29 U.S.C. § 216(b). (See Exhibit A).
8.
At all times relevant herein, Plaintiff was an “employee” of Defendant as that term is
defined under the FLSA, O.R.C. Chapter 4111 et seq., OPPA, and O.R.C. Chapter 4112 et
seq.
9.
Defendant, The Pine Club, LLC, is an Ohio limited liability company doing business in the
Southern District of Ohio.
2
10.
Upon information and belief, Defendant was engaged in interstate commerce and
Defendant had an annual gross volume sales and/or business in an amount of not less than
$500,000.00.
11.
Upon information and belief, Defendant, at all times relevant hereto, was fully aware of
the fact that it was legally required to comply with the wage and hour laws of the United
States and of the State of Ohio.
12.
During relevant times, Defendant had knowledge of and acted willfully in regards to its
conduct described herein.
13.
At all times relevant herein, Defendant was a covered “employer” as that term is defined
under FLSA, O.R.C. Chapter 4111 et seq., and O.R.C. Chapter 4112 et seq.
FACTUAL BACKGROUND
14.
Plaintiff began working for Defendant as a server in approximately July 2011. Plaintiff’s
employment ended at Defendant on or about October 9, 2019.
15.
Throughout Plaintiff’s employment, Defendant paid Plaintiff on an hourly basis when
working in a non-exempt position as a server at cash wage rates less than the Federal and
Ohio minimum wage.
16.
At the time Defendant hired Plaintiff and throughout Plaintiff’s employment, Defendant
failed to notify Plaintiff of the required tip credit provisions prior to taking a tip credit.
17.
On or about October 2, 2019, one of the bussers at Defendant, Tyler (LNU), asked Plaintiff
if she “could keep a secret?” Tyler asked Plaintiff this while she was taking a smoke break
behind the restaurant.
18.
Plaintiff responded to Tyler’s request by asking, “What do you want?” Tyler then said to
Plaintiff, “Do you want to see a picture of my big dick?”
3
19.
Plaintiff quickly responded to Tyler’s statement by saying, “no,” and became very upset.
20.
Plaintiff took Tyler’s request seriously given, among other reasons, Tyler dated a bartender
at Defendant for quite a bit of time.
21.
A few days later, Plaintiff called Defendant’s General Manager, Karen Watson, to inform
her about Tyler’s comments from a few days prior.
22.
Plaintiff was originally hesitant to raise this issue to Ms. Watson given that Tyler was her
nephew, but Plaintiff had no choice because the situation kept bothering her some much.
23.
During the call, Ms. Watson asked no details about Plaintiff’s complaint regarding Tyler.
Instead, Ms. Watson demanded that Plaintiff take a drug test.
24.
A few hours after the call, Ms. Watson called Plaintiff to inform her that Defendant was
suspending Plaintiff’s employment, providing no explanation for Defendant’s decision.
25.
Approximately five days, while Plaintiff was still out on suspension, Defendant informed
Plaintiff that her employment was terminated.
COLLECTIVE ACTION ALLEGATIONS
26.
Plaintiff brings this action on behalf of herself and all persons who were, are, or will be
employed by Defendant in a tipped position for which a tip credit was applied while
working for Defendant at any time within the three (3) years prior to the date this Complaint
is filed through the date of the final disposition of this action (the “FLSA Period”), on
behalf of herself and all persons who were, are, or will be employed in any tipped position
for which a tip credit was, is, or will be applied.
4
27.
This class has damages under the FLSA as a result of Defendant’s policy which failed to
inform its employees of the required tip credit provisions prior to taking a tip credit. See
29 U.S.C. § 203(m) and 29 C.F.R. § 531.59(b).
28.
This FLSA claim is brought as an “opt-in” collective action pursuant to 29 U.S.C. § 216(b)
as claims for unpaid wages or withheld compensation violation of the FLSA, liquidated
damages and attorneys’ fees and costs under the FLSA. In addition to Plaintiff, numerous
Similarly Situated Persons (“SSPs”) have been denied proper compensation due to
Defendant’s payroll policies and practices. Plaintiff is representative of those other
employees and is acting on behalf of their interests as well as her own in bringing this
action.
29.
These SSPs are known to Defendant and readily identifiable through Defendant’s payroll
records. These individuals may be readily notified of this action, and allowed to opt into
it pursuant to 29 U.S.C. § 216(b), for the purpose of collectively adjudicating their claims
for minimum wage compensation, liquidated damages, attorneys’ fees, and costs under the
FLSA.
CAUSES OF ACTION
FIRST CAUSE OF ACTION:
FLSA – COLLECTIVE ACTION FOR FAILURE
TO INFORM EMPLOYEES OF TIP CREDIT PROVISIONS
30.
All of the preceding paragraphs are realleged as if fully rewritten herein.
31.
This claim is brought as part of a collective action by Plaintiff on behalf of herself and
other SSPs.
32.
During the three years preceding the filing of this Complaint, Defendant employed Plaintiff
and other SSPs.
5
33.
Plaintiff and SSPs were paid on an hourly basis when working in non-exempt positions at
cash wage rates less than the Federal and Ohio minimum wage.
34.
Defendant knew or should have known of the tip credit provisions of the FLSA.
35.
During the past three years, Defendant has knowingly and willfully failed to inform
Plaintiff and the SSPs of the tip credit provisions prior to applying a tip credit.
36.
As a direct and proximate result of Defendant’s conduct, Plaintiff and the SSPs have
suffered damages. Plaintiff seeks unpaid compensation, liquidated damages, interest and
attorneys’ fees, and all other remedies available, on behalf of themselves and all other
SSPs.
SECOND CAUSE OF ACTION:
MINIMUM WAGE VIOLATIONS ON BEHALF
OF PLAINTIFF AND SSPS
37.
All of the preceding paragraphs are realleged as if fully rewritten herein.
38.
During all times material to this Complaint, Defendant has been an “employer” within the
meaning of O.R.C. § 4111.14(B) and has been required to comply with the Ohio
Constitution’s mandates.
39.
During all times material to this Complaint, Plaintiff and the SSPs have been employees
within the meaning of O.R.C. § 4111.14(B), and not otherwise exempt.
40.
Article II, Section 34a of the Ohio Constitution permits an employer to take a “tip credit”
to use towards satisfying their obligation of paying tipped employees the Ohio
Constitution’s establish minimum wage.
41.
During all times material to this Complaint, Defendant has taken a tip credit without
informing Plaintiff and the SSPs of the proper tip credit provisions.
6
42.
Defendant, by applying the tip credit without informing Plaintiff and the SSPs of the proper
tip credit provisions, violated Article II, Section 34a of the Ohio Constitution and were not
eligible or permitted to apply a tip credit to Plaintiff’s and the SSP’s wages.
43.
Accordingly, Defendant, by paying Plaintiff and the SSPs at a cash wage less than the Ohio
minimum wage, violated Article II, Section 34a of the Ohio Constitution.
44.
Defendant willfully and knowingly failed to pay Plaintiff and the SSPs the proper wages
prior to providing the requisite tip credit disclosures.
THIRD CAUSE OF ACTION
VIOLATIONS OF THE OPPA ON BEHALF
OF PLAINTIFF AND SSPS
45.
All of the preceding paragraphs are realleged as if fully rewritten herein.
46.
During all times material to this Complaint, Defendant has been an employer required to
comply with the mandates of the OPPA, O.R.C. § 4113.15.
47.
Plaintiff and the SSPs were employed by Defendant within the meaning of the OPPA, and
were not otherwise exempt.
48.
The OPPA requires that Defendant pay Plaintiff and the SSPs all wages owed, on or before
the first (1st) day of each month for wages earned by them during the first (1st) half of the
preceding month ending with the fifteenth (15th) day thereof, and, on or before the fifteenth
(15th) day of each month, for wages earned by them during the preceding calendar month.
See O.R.C. § 4113.15(A).
49.
During all times material to this Complaint, because of Defendant’s failure to compensate
Plaintiff and the SSPs fully and properly for all work performed, Plaintiff and the SSPs
7
were not paid all wages earned within thirty (30) days of performing the work. See O.R.C.
§ 4113.15(B).
50.
The Plaintiff’s and SSP’s earned minimum wages remain unpaid for more than thirty (30)
days beyond their regularly scheduled payday.
51.
In violating the OPPA, Defendant has acted willfully and with reckless disregard.
FOURTH CAUSE OF ACTION
UNLAWFUL RETALIATION IN VIOLATION OF
O.R.C. § 4112 ET SEQ. ON BEHALF OF PLAINTIFF
52.
All of the preceding paragraphs are realleged as if fully rewritten herein.
53.
Plaintiff was qualified to do her job because, among other reasons, she performed her duties
without incident or complaint about her performance.
54.
Plaintiff engaged in protected activity by, among other things, raising a complaint of sexual
harassment in the workplace when she complained about Tyler’s sexual comments towards
her.
55.
Plaintiff was subject to an adverse employment action when she was suspended from her
position of employment and ultimately terminated by Defendant.
56.
Plaintiff’s termination is causally connected to her protected activities because, among
other reasons, there is a close temporal proximity (i.e., days) between her termination and
her most recent protected activity. Plaintiff also can establish a causal connection given
that she was treated less favorably than similarly-situated employees who did not engage
in protected conduct.
57.
Plaintiff can establish that any stated reason for her termination was a pretext for retaliation
because, among other reasons, Defendant’s reason for termination lacks a basis in fact,
Defendant’s motivation for terminating Plaintiff was insufficient to warrant Plaintiff’s
8
termination, and Defendant’s stated reason for terminating Plaintiff was not the actual
reason that Plaintiff was terminated.
58.
As a result of Defendant’s unlawful retaliation, Plaintiff has been damaged.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff, on behalf of herself and all members of the FLSA Collective Action,
pray for relief as follows:
A. Judgment that Defendant is liable to Plaintiff and the Collective Plaintiffs for
the conduct described herein of Defendant;
B. Designation of this action as a collective action on behalf of the Ohio FLSA
Collective members and prompt issuance of notice pursuant to 29 U.S.C. §
216(b) to all similarly situated members of the FLSA Collective Action,
apprising them of the pendency of this action, and permitting them to assert
timely FLSA claims in this action by filing individual Consent to join forms
pursuant to 29 U.S.C. § 216(b);
C. An injunction prohibiting Defendants from engaging in future FLSA violations;
D. Lost minimum wages and improperly deducted monies to the fullest extent
permitted under the law;
E. Liquidated damages, prejudgment interest, and monetary penalties to the fullest
extent permitted under the law;
F. Litigation costs, expenses, and attorneys’ fees to the fullest extent permitted
under the law;
G. Damages as set forth in OPPA;
9
H. Treble damages, prejudgment interest, and monetary penalties to the fullest
extent permitted under the law; and
I. Such other and further relief as this Court deems just and proper
Respectfully submitted,
/s/ Bradley L. Gibson
Bradley L. Gibson (0085196), Trial Attorney
Angela J. Gibson (0080928)
GIBSON LAW, LLC
9200 Montgomery, Rd., Suite 11A
Cincinnati, OH 45242
[email protected]
[email protected]
513-834-8254 [T]
513-834-8253 [F]
Attorneys for Plaintiff
JURY DEMAND
Plaintiff demands a jury trial by the maximum persons permitted by law on all issues herein
triable to a jury.
/s/ Bradley L. Gibson
Bradley L. Gibson (0085196)
10
| employment & labor |
sLfFC4cBD5gMZwczomgZ | LAW OFFICES OF RONALD A. MARRON
RONALD A. MARRON (SBN 175650)
[email protected]
ALEXIS M. WOOD (SBN 270200)
[email protected]
KAS L. GALLUCCI (SBN 288709)
[email protected]
651 Arroyo Drive
San Diego, California 92103
Telephone:(619) 696-9006
Facsimile: (619) 564-6665
Attorneys for Plaintiff and the Proposed Class
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF CALIFORNIA
AARON ROSALES, on behalf of
himself, and all others similarly situated,
Plaintiff,
v.
THE HART GROUP, LLC,
Defendant.
Case No.:
CLASS ACTION
COMPLAINT FOR DAMAGES
AND INJUNCTIVE RELIEF
PURSUANT TO THE
TELEPHONE CONSUMER
PROTECTION ACT, 47 U.S.C. §§
227 et seq.
DEMAND FOR JURY TRIAL
INTRODUCTION
Plaintiff Aaron Rosales (“Plaintiff”) brings this Class Action Complaint for
damages, injunctive relief, and any other available legal or equitable remedies,
resulting from the illegal actions of Defendant The Hart Group, LLC (“The Hart
Group” or “Defendant”), in negligently, and/or willfully contacting Plaintiff through
text messages on Plaintiff’s cellular telephone, in violation of the Telephone
Consumer Protection Act, 47 U.S.C. §§ 227 et seq., (“TCPA”), thereby invading
Plaintiff’s privacy. Plaintiff alleges as follows upon personal knowledge as to his
own acts and experiences and, as to all other matters, upon information and belief,
including investigation conducted by his attorneys.
NATURE OF THE ACTION
1.
The TCPA strictly forbids nuisance text messages exactly like those
alleged in this Complaint – intrusive text messages to private cellular phones, placed
to numbers obtained without the prior express consent of the recipients.
2.
In a misguided effort to solicit new employees, The Hart Group
routinely contacts individuals through mass text messaging with automatic
telephone dialing equipment. However, The Hart Group regularly sends these text
messages to cellular telephones, without consent, let alone prior express written
consent, in violation of the TCPA.
3.
The Hart Group’s violations caused Plaintiff and members of the Class
to experience actual harm, included aggravation, nuisance, and invasion of privacy
that necessarily accompanies the receipt of unsolicited and harassing text message
calls, as well as the violation of their statutory rights.
4.
Plaintiff and members of the Class suffered a concrete injury in fact,
whether tangible or intangible, that is directly traceable to Defendant’s conduct, and
is likely to be redressed by a favorable decision in this action.
1
5.
Plaintiff seeks an injunction stopping The Hart Group from sending
unsolicited text messages, as well as an award of statutory damages under the TCPA,
together with costs and reasonable attorneys’ fees.
JURISDICTION AND VENUE
6.
This Court has federal question subject matter jurisdiction under 28
U.S.C. § 1331, as the action arises under the Telephone Consumer Protection Act,
47 U.S.C. § 227 et seq., a federal statute. Mims v. Arrow Financial Services, LLC,
132 S.Ct. 740, 751-53 (2012).
7.
The Court has personal jurisdiction over Defendant and venue is proper
in this District because Defendant has its principal place of business located at 2140
West Grant Line Road, Tracy, California 95377, Defendant transacts significant
amounts of business within this District, and the conduct and events giving rise to
the claims occurred in this District.
PARTIES
8.
Plaintiff Aaron Rosales is, and at all times mentioned was, a resident of
the State of California, County of Manteca. He is, and at all times mentioned herein,
was a “person” as defined by 47 U.S.C. § 153 (39).
9.
Defendant The Hart Group, LLC is a California limited liability
company, headquartered in Tracy, California and is a “person” as defined by 47
U.S.C. § 153 (39).
THE TELEPHONE CONSUMERS PROTECTION ACT OF 1991 (“TCPA”)
47 U.S.C. §§ 227 et seq.
10.
In 1991, Congress enacted the Telephone Consumer Protection Act, 47
U.S.C. § 227 (TCPA),1 in response to a growing number of consumer complaints
regarding certain telemarketing practices.
1 Telephone Consumer Protection Act of 1991, Pub. L. No. 102-243, 105 Stat. 2394
(1991), codified at 47 U.S.C. § 227 (TCPA). The TCPA amended Title II of the
Communications Act of 1934, 47 U.S.C. §§ 201 et seq.
2
11.
The TCPA regulates, among other things, the use of automated
telephone equipment, or “autodialers.” Specifically, the plain language of section
227(b)(1)(A)(iii) prohibits the use of autodialers to make any call to a wireless
number in the absence of an emergency or the prior express consent of the called
party.2 As recognized by the Federal Communication Commission (“FCC”) and the
Courts, a text message is a call under the TCPA. Satterfield v. Simon & Schuster,
Inc., 569 F.3d 946, 955 (9th Cir. 2009).
12.
According to findings by the Federal Communications Commission
(“FCC”), the agency Congress vested with authority to issue regulations
implementing the TCPA, such calls are prohibited because, as Congress found,
automated or prerecorded telephone calls are a greater nuisance and invasion of
privacy than live solicitation calls, and such calls can be costly and inconvenient.
The FCC also recognized that wireless customers are charged for incoming calls
whether they pay in advance or after the minutes are used.3
13.
One of the most bulk advertising methods employed by companies
today involves the use of “Short Message Services” (or “SMS”), which is a system
that allows for transmission and receipt of short text messages to and from wireless
telephones.
14.
SMS text messages are directed to a wireless device through a
telephone number assigned to the device. When an SMS text message is
successfully transmitted, the recipient’s wireless phone alerts the recipient that a
message has been received. Because wireless telephones are carried on their
owner’s person, SMS text message are received virtually anywhere in the world.
2 47 U.S.C. § 227(b)(1)(A)(iii).
3 In Rules & Regulations Implementing the Tel. Consumer Prot. Act of 1991, 18
FCC Rcd. 14014 (2003) (“2003 TCPA Order”).
3
15.
Unlike
more
conventional
advertisements,
SMS
message
advertisements can actually cost their recipients money because wireless phone users
must pay their wireless service providers either for each text message they receive
or incur a usage allocation deduction to their text messaging or data plan, regardless
of whether the message is authorized.
16.
Moreover, the transmission of an unsolicited SMS text message to a
cellular device is distracting and aggravating to the recipient; intrudes upon the
recipient’s seclusion; wastes a quantifiable amount of available data on the
recipient’s cellular device, thereby reducing its data storage capacity; temporarily
reduces the available computing power and application processing speed on the
recipient’s device; diminishes the available battery power which shortens the battery
life; and requires expending a quantifiable amount of energy (electricity) to recoup
the battery power lost as a result of receiving such a message.
17.
The TCPA makes it “unlawful for any person within the United States
... (A) to make any call (other than a call made for emergency purposes or made with
the prior express consent of the called party) using any automatic telephone dialing
system or an artificial or prerecorded voice ... (iii) to any telephone number assigned
to a ... cellular telephone service.” 47 U.S.C. § 227(b)(1)(A)(iii).
18.
“A person or entity” can bring a claim to recover the greater of actual
damages or $500 for a violation of § 227(b)(1)(A)(iii). Id. § 227(b)(3). A court may
award treble damages for a willful or knowing violation. Id.
19.
The TCPA defines “automatic telephone dialing systems” (ATDS) as
follows: (1) The term ‘automatic telephone dialing system’ means equipment which
has the capacity—(A) to store or produce telephone numbers to be called, using a
random or sequential number generator; and (B) to dial such numbers. See Pub. L.
No. 102-243, § 227, 105 Stat. 2394, 2395.
20.
“[T]he statutory definition of ATDS is not limited to devices with the
capacity to call numbers produced by a “random or sequential number generator,”
4
but also includes devices with the capacity to dial stored numbers automatically.”
Marks v. Crunch San Diego, LLC, 904 F.3d 1041, 1052 (9th Cir. 2018).
21.
Prior express consent is an affirmative defense on which Defendant
bear the burden of proof. The type of consent required depends on the content of
the message. If the message contains advertising or is telemarketing, the sender must
have secured, prior to sending the message, the signature of the recipient in a written
agreement that includes several specified disclosures. See 47 C.F.R. § 64.1200(f)(8).
22.
As of October 16, 2013, express written consent is required to make
any such telemarketing calls.4 The express written consent must be signed and be
sufficient to show the consumer received clear and conspicuous disclosure of the
significance of providing consent and must further unambiguously agree to receive
future phone calls.5
COMMON FACTUAL ALLEGATIONS
23.
The Hart Group is a provider of supplemental life and health insurance
benefits for labor unions, credit unions and associations. In an attempt to grow its
business, The Hart Group regularly recruits persons to join its company as a
customer service and benefit representatives to sell supplemental life and health
insurance.
24.
Unfortunately, The Hart Group often places text message calls to
persons without having the necessary prior express written consent to do so in
violation of the TCPA.
25.
The Hart Group places these unsolicited text message calls using
equipment that has the capacity to store or produce telephone numbers, and to dial
such numbers, without any need for human intervention.
4 In Rules & Regulations Implementing the Tel. Consumer Prot. Act of 1991, 27 FCC
Rcd. 1830, 1837 ¶ 18, 1839 ¶ 20, 1858 ¶ 71 (2012) (“2012 FCC Order”).
5 2012 FCC Order at 1844 ¶ 13.
5
26.
These unsolicited text message calls placed to wireless telephones were
placed via an “automatic telephone dialing system,” (“ATDS”) as defined by 47
U.S.C. § 227 (a)(1) and by using “an artificial or prerecorded voice” system as
prohibited by 47 U.S.C. § 227 (b)(1)(A), which had the capacity to produce or store
numbers randomly or sequentially, and to dial such numbers, to place text message
calls to consumers’ cellular telephone.
27.
The TCPA was intended to give individuals control over how and
where they receive calls and text messages. When The Hart Group places the text
message calls to consumers without their consent, it fails to address or respect the
limitations imposed by the TCPA. In doing so, it takes control away from the
consumers and violates both the spirit and the letter of the TCPA.
28.
Under the TCPA and pursuant to the FCC’s January 2008 Declaratory
Ruling, the burden is on Defendant to demonstrate that Plaintiff provided express
consent within the meaning of the statute.
FACTS SPECIFIC TO PLAINTIFF
29.
On or around October 23, 2019, Plaintiff began receiving unsolicited
text messages from The Hart Group to his wireless phone ending in the number 6625,
for which Plaintiff provided no consent to call or text, in an attempt to solicit his
employment.
30.
Defendant has utilized the SMS Code 981-99 to send promotional text
messages to Plaintiff. This number is owned or leased by The Hart Group.
31.
The promotional text messages The Hart Group sent to Plaintiff on his
mobile telephone were soliciting Plaintiff for potential employment.
32.
Plaintiff received unsolicited text messages from Defendant on, at least,
October 28, 2019, October 29, 2019, and October 30, 2019.
33.
Specifically, Plaintiff received the following text messages from
Defendant:
a. On October 28, 2019 at 10:06 a.m.:
6
Hi Aaron , I received your resume & would like to talk to
schedule an interview. Call me at 916-627-8365 Thanks Sue
www.hart-group.info/.
b. On October 28, 2019 at 10:07 a.m.:
Please call me to schedule an interview Call/text directly on my
cell at 916-627-8365 Thanks Sue HART-GROUP
c. On October 28, 2019 at 10:25 a.m.:
Aaron , Please call me to schedule an interview Call/text directly
on my cell at 209-407-9723 Thanks Rhianna -HART-GROUP
d. On October 29, 2019 at 10:05 a.m.:
Aaron , Please call me to schedule an interview Call/text directly
on my cell at 916-627-9365.
e. On October 29, 2019 at 10:06 a.m.:
Please call me to schedule an interview Call/text directly on my
cell at 916-627-8365 Thanks Sue-HART-GROUP
f. On October 29, 2019 at 10:25 a.m.:
Hi Aaron , I received your resume & would like to talk to
schedule an interview. Call me at 209-407-972
g. On October 30, 2019 at 10:05 a.m.:
I received your resume. To schedule an interview please respond
with INTERESTED or STOP www.hart-group.info/
34.
In response to the text messages Plaintiff told the Defendant that he did
not submit his resume, he was not interested, and asked to be removed from their
list, but the text messages continued. Thus, as early as October 28, 2019 at 10:06
a.m., Defendant knew that Plaintiff did not consent to receive unsolicited text
messages from Defendant; however, the unsolicited text messages continued.
7
35.
Plaintiff has never done business with Defendant and has never
provided Defendant his phone number or consented to text message calls from
Defendant on his mobile telephone.
36.
These unsolicited and promotional text messages placed to Plaintiff’s
mobile telephone were placed via an “automatic telephone dialing system,”
(“ATDS”) as defined by 47 U.S.C. § 227 (a)(1), which had the capacity to produce
or store numbers randomly or sequentially, and to place text message calls to
Plaintiff’s cellular telephone by dialing such numbers.
37.
The unsolicited and promotional text messages placed to Plaintiff’s
mobile telephone also featured a prerecorded voice as the text messages were pre-
populated with uniform text.
38.
The telephone number that Defendant, or its agents, called was assigned
to a cellular telephone service for which Plaintiff incurred a charge for incoming
calls pursuant to 47 U.S.C. § 227 (b)(1).
39.
These text messages constitute calls that were not for emergency
purposes as defined by 47 U.S.C. § 227(b)(1)(A)(i).
40.
Plaintiff did not provide Defendant or its agents prior express consent
to receive unsolicited text messages pursuant to 47 U.S.C. § 227 (b)(1)(A) and/or
has revoked any alleged prior express consent.
41.
These text messages by Defendant or its agents therefore violated 47
U.S.C. § 227(b)(1).
CLASS ACTION ALLEGATIONS
42.
Plaintiff brings this action pursuant to Federal Rule of Civil Procedure
23(b)(2) and 23(b)(3) on behalf of himself and on behalf of and all others similarly
situated (“the Class”).
43.
Plaintiff represents, and is a member of the Class, consisting of all
persons within the United States who received any unsolicited, promotional text
message from Defendant or its agents on their cellular telephones through the use of
8
any automatic telephone dialing system as set forth in 47 U.S.C. § 227(b)(1)(A)(3)
or featuring prerecorded voice messages, which text messages by Defendant or its
agents were not made for emergency purposes or with the recipients’ prior express
consent, within four years prior to the filing of this Complaint through the date of
final approval.
44.
Defendant and its employees or agents are excluded from the Class.
Plaintiff does not know the number of members in the Class, but believes the Class
members number in the hundreds of thousands, if not more. Thus, this matter should
be certified as a Class action to assist in the expeditious litigation of this matter.
45.
Plaintiff and members of the Class were harmed by the acts of
Defendant in at least the following ways: Defendant, either directly or through its
agents, illegally contacted Plaintiff and the Class members via their cellular
telephones by using unsolicited promotional text messages, thereby causing Plaintiff
and the Class members to incur certain cellular telephone charges or reduce cellular
telephone time for which Plaintiff and the Class members previously paid, and
invading the privacy of said Plaintiff and the Class members. Plaintiff and the Class
members were damaged thereby.
46.
This suit seeks only statutory damages and injunctive relief for on
behalf of the Class and it expressly is not intended to request any recovery for
personal injury and claims related thereto. Plaintiff reserves the right to expand the
Class definition to seek recovery on behalf of additional persons as warranted as
facts are learned in further investigation and discovery.
47.
The joinder of the Class members is impractical and the disposition of
their claims in the Class action will provide substantial benefits both to the parties
and to the Court. The Class can be identified through Defendant’s records or
Defendant’s agents’ records.
48.
There is a well-defined community of interest in the questions of law
and fact involved affecting the parties to be represented. The questions of law and
9
fact to the Class predominate over questions which may affect individual Class
members, including the following:
a. Whether, within the four years prior to the filing of this Complaint
through the date of final approval, Defendant or its agents sent
promotional text messages without the recipients’ prior express consent
(other than a text message made for emergency purposes or made with
the prior express consent of the called party) to a Class member using
any automatic telephone dialing system, to any telephone number
assigned to a cellular telephone service;
b. Whether the equipment Defendant, or its agents, used to send the text
messages in question was an automatic telephone dialing system as
contemplated by the TCPA;
c. Whether Defendant, or its agents, systematically sent promotional text
messages to persons who did not previously provide Defendant with
their prior express consent to receive such text messages;
d. Whether Plaintiff and the Class members were damaged thereby, and
the extent of damages for such violation; and
e. Whether Defendant and its agents should be enjoined from engaging in
such conduct in the future.
49.
As a person that received at least one unsolicited promotional text
message to his cellular telephone without Plaintiff’s prior express contest, Plaintiff
is asserting claims that are typical of the Class. Plaintiff will fairly and adequately
represent and protect the interests of the Class in that Plaintiff has no interest
antagonistic to any member of the Class.
50.
Plaintiff and the members of the Class have all suffered irreparable
harm as a result of the Defendant’s unlawful and wrongful conduct. Absent a class
action, the Class will continue to face the potential for irreparable harm. In addition,
these violations of law will be allowed to proceed without remedy and Defendant
10
will likely continue such illegal conduct. Because of the size of the individual Class
member’s claims, few, if any, Class members could afford to individually seek legal
redress for the wrongs complained of herein.
51.
A class action is a superior method for the fair and efficient adjudication
of this controversy because joinder of all parties is impracticable. Class-wide
damages are essential to induce Defendant to comply with federal law. The interest
of Class members in individually controlling the prosecution of separate claims
against Defendant is small because the maximum statutory damages in an individual
action for violation of privacy are minimal, especially given the burden and expense
of individual prosecution of the complex litigation necessitated by Defendant’s
actions. Thus, it would be virtually impossible for the individual members of the
Class to obtain effective relief from Defendant’s misconduct. Even if members of
the Class could sustain such individual litigation, it would still not be preferable to
a class action because individual litigation would increase the delay and expense to
all parties due to the complex legal and factual controversies presented in this
Complaint. By contrast, a class action presents far fewer management difficulties
and provides the benefits of single adjudication, economy of scale, and
comprehensive supervision by a single Court. Economies of time, effort and expense
will be fostered and uniformity of decisions ensured.
52.
Defendant has acted on grounds generally applicable to the Class,
thereby making appropriate final injunctive relief and corresponding declaratory
relief with respect to the Class as a whole.
11
COUNT 1
NEGLIGENT VIOLATIONS OF THE TCPA
47 U.S.C. §§ 227 ET SEQ.
53.
Plaintiff incorporates by reference all of the above paragraphs of this
Complaint as though fully stated herein.
54.
Defendant made unauthorized automated text message calls using an
automatic telephone dialing system or prerecorded voice to the cellular telephone
number of Plaintiff and the other members of the Class without their prior express
written consent.
55.
These text message calls were made en masse using equipment that,
upon information and belief, had the capacity to store or produce telephone numbers
to be called, using a random or sequential number generator, and to dial such
numbers. By using such equipment, Defendant was able to send thousands of text
messages simultaneously to thousands of consumers’ cellphones without human
intervention. These text messages are analogous to a prerecorded voice made
without the prior express consent of the Plaintiff.
56.
The foregoing acts and omissions of Defendant and its agents constitute
multiple negligent violations of the TCPA, including but not limited to each and
every one of the above-cited provisions of 47 U.S.C. § 227 et seq.
57.
As a result of Defendant’s, and Defendant’s agents’, negligent
violations of 47 U.S.C. § 227 et seq., Plaintiff is entitled to an award of $500.00 in
statutory damages, for each and every violation, pursuant to 47 U.S.C. §
227(b)(3)(B).
58.
Plaintiff is also entitled to and seek injunctive relief prohibiting such
conduct in the future.
COUNT 2
12
KNOWING AND/OR WILLFUL VIOLATIONS OF THE TCPA
47 U.S.C. §§ 227 ET SEQ.
59.
Plaintiff incorporates by reference paragraphs 1-52 of this Complaint
as though fully stated herein.
60.
Defendant made unauthorized automated text message calls using an
automatic telephone dialing system or prerecorded voice to the cellular telephone
number of Plaintiff and the other members of the Class without their prior express
written consent.
61.
These text message calls were made en masse using equipment that,
upon information and belief, had the capacity to store or produce telephone numbers
to be called, using a random or sequential number generator, and to dial such
numbers. By using such equipment, Defendant was able to send thousands of text
messages simultaneously to thousands of consumers’ cellphones without human
intervention. These text messages are analogous to a prerecorded voice made
without the prior express consent of the Plaintiff.
62.
The foregoing acts and omissions of Defendant constitutes multiple
knowing and/or willful violations of the TCPA, including but not limited to each and
every one of the above-cited provisions of 47 U.S.C. §§ 227 et seq.
63.
As a result of Defendant’s knowing and/or willful violations of 47
U.S.C. § 227 et seq., Plaintiff and the Class are entitled to treble damages, as
provided by statute, up to $1,500.00, for each and every violation, pursuant to 47
U.S.C. § 227(b)(3)(B) and 47 U.S.C. § 227(b)(3)(C).
64.
Plaintiff and the Class are also entitled to and seek injunctive relief
prohibiting such conduct in the future.
13
PRAYER FOR RELIEF
Wherefore, Plaintiff respectfully requests the Court to grant Plaintiff and the Class
the following relief against Defendant:
FIRST COUNT FOR NEGLIGENT VIOLATION OF THE TCPA
47 U.S.C. §§ 227 ET SEQ.
65.
As a result of Defendant’s, and Defendant’s agents’, negligent
violations of 47 U.S.C. § 227(b)(1), Plaintiff seeks for himself and each Class
member $500.00 in statutory damages, for each and every violation, pursuant to 47
U.S.C. § 227(b)(3)(B).
66.
Pursuant to 47 U.S.C. § 227(b)(3)(A), Plaintiff seeks injunctive relief
prohibiting such conduct in the future.
SECOND COUNT FOR KNOWING AND/OR WILLFUL VIOLATION OF THE TCPA
47 U.S.C. §§ 227 ET SEQ.
67.
As a result of Defendant’s, and Defendant’s agents’, willful and/or
knowing violations of 47 U.S.C. § 227(b)(1), Plaintiff seeks for himself and each
Class member treble damages, as provided by statute, up to $1,500.00 for each and
every violation, pursuant to 47 U.S.C. § 227(b)(3)(B) and 47 U.S.C. § 227(b)(3)(C).
68.
Pursuant to 47 U.S.C. § 227(b)(3)(A), injunctive relief prohibiting such
conduct in the future.
* * *
69.
Any other relief the Court may deem reasonable, just and proper.
JURY DEMAND
Plaintiff hereby demands a trial by jury on all issues so triable.
14
DOCUMENT PRESERVATION DEMAND
Plaintiff hereby demands that Defendant take affirmative steps to preserve all
text messages, recordings, data, emails, documents and all other tangible things that
relate to the allegations herein, Plaintiff or the putative class members, or the
sending of text messages, the events described herein, any third party associated
with any telephone call, campaign, account, sale or file associated with Plaintiff or
the account in question, and any account or number or symbol relating to any of
them. These materials are very likely relevant to the litigation of this claim. If
Defendant is aware of any third party that has possession, custody or control of any
such materials, Plaintiff demands that Defendant request that such third party also
take steps to preserve the materials, and notify the undersigned of the circumstances
immediately so that counsel may take appropriate action. This demand shall not
narrow the scope of any independent document preservation duties of Defendant.
Dated: January 16, 2020
s/ Ronald A. Marron
By: Ronald A. Marron
LAW OFFICES OF RONALD A.
MARRON
RONALD A. MARRON
ALEXIS M. WOOD
KAS L. GALLUCCI
651 Arroyo Drive
San Diego, California 92103
Telephone: (619) 696-9006
Facsimile: (619) 564-6665
Attorneys for Plaintiff
and the Proposed Class
15
| privacy |
k1Yl_4gBF5pVm5zYrX2H | UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
-----------------------------------------------------------------------X
LEONEL RODRIGUEZ, on behalf of himself,
individually, and all other persons similarly situated,
Docket No.:
Plaintiff,
COMPLAINT
-against-
PLAYSITES + SURFACES, INC. a/k/a PLAYSITES
PLUS SURFACES, INC., TYW CONTRACTING INC.,
and WILLIAM CALDERONE,
Defendants.
-----------------------------------------------------------------------X
Plaintiff, LEONEL RODRIGUEZ, on behalf of himself, individually, and all other persons
similarly situated, by and through his counsel, the Law Office of Peter A. Romero PLLC,
complaining of the Defendants, PLAYSITES + SURFACES, INC. a/k/a PLAYSITES PLUS
SURFACES, INC., TYW CONTRACTING INC., and WILLIAM CALDERONE (collectively as
“Defendants”), alleges as follows:
NATURE OF THE CLAIM
1.
Plaintiff brings this action to recover unpaid overtime wages under the Fair Labor
Standards Act, 29 U.S.C. § 201 et seq. (“FLSA”), and the New York Labor Law Articles 6 and 19,
§ 650 et seq., and the supporting New York State Department of Labor Regulations, 12 N.Y.C.R.R.
Part 142 (“NYLL”), unpaid wages stemming from Defendants’ failure to pay Plaintiff wages for
certain hours worked at his agreed upon rates of pay under the NYLL, failure to provide accurate
wage statements for each pay period under NYLL § 195(3), failure to furnish a wage notice upon
his hire in his primary language under NYLL § 195(1), and any other claim(s) that can be inferred
from the facts set forth herein.
2.
Plaintiff brings this lawsuit against the Defendants pursuant to the collective action
provisions of the FLSA, 29 U.S.C. § 216(b), on behalf of himself, individually, and on behalf of
all other persons similarly-situated during the applicable FLSA limitations period who suffered
damages as a result of the Defendants’ willful violations of the FLSA. Plaintiff brings his claims
under the NYLL on behalf of himself, individually, and on behalf of any FLSA Collective Action
Plaintiff, as that term is defined below, who opts-in to this action.
JURISDICTION AND VENUE
3.
This Court has subject matter jurisdiction pursuant to 28 U.S.C. §§ 1331 and 1337
and supplemental jurisdiction over Plaintiff’s state law claims pursuant to 28 U.S.C. § 1367.
4.
Venue is proper in this United States District Court pursuant to 28 U.S.C. §
1391(b)(1) as all Defendants reside within the Eastern District of New York, and 28 U.S.C. §
1391(b)(2) as a substantial part of the events or omissions giving rise to the claims occurred within
the Eastern District of New York.
THE PARTIES
5.
At all times relevant, Plaintiff LEONEL RODRIGUEZ (“Rodriguez”) is and was a
resident of the County of Suffolk, State of New York.
6.
At all times relevant, Plaintiff Rodriguez was an “employee” within the meaning
of the FLSA, 29 U.S.C. § 203(e) and New York Labor Law § 190(2).
7.
At all times relevant, Defendant PLAYSITES + SURFACES, INC. a/k/a
PLAYSITES PLUS SURFACES, INC. (hereinafter “Playsites”) is and was a domestic business
corporation with a principal place of business located at 103 Brightside Avenue, Central Islip, New
York 11722.
8.
At all times relevant, Defendant TYW CONTRACTING INC. (hereinafter as
“TYW Contracting”) is and was a domestic business corporation with a principal place of business
located at 103 Brightside Avenue, Central Islip, New York 11722.
9.
At all relevant times, Playsites and TYW Contracting were subject to the
requirements of the FLSA because they together had annual gross revenue of at least, or exceeding,
$500,000, were engaged in interstate commerce and had employees handling, selling, or otherwise
working on goods or materials that have been moved in or produced for commerce, including but
not limited to playground materials, materials for safety surfaces, fuel for vehicles, vehicles, office
supplies, and other tools, equipment and materials, many of which originated outside of New York.
Moreover, Defendants operated in New York and many other states, requiring employees,
including Plaintiff, to travel in vehicles on highways and interstate routes across state lines from
New York to other states and from other states to New York.
10.
Defendants Playsites and TYW Contracting are two corporations that operate as a
common enterprise. Defendants Playsites and TYW Contracting, in all respects, operate as a single
enterprise as if they were one and the same. Playsites and TYW Contracting share interrelated
operations, a centralized control of labor relations, and common financial control within their
businesses. Indeed, Playsites and TYW Contracting share a common facility at their mutual
principal place of business at 103 Brightside Avenue, Central Islip, New York 11722.
Additionally, Plaintiff and employees of Playsites and TYW Contracting cannot ascertain which
corporation is their employer or which corporation they are performing services for at any given
time. Moreover, Plaintiff receives compensation from both corporations, as he is paid by check
from both Playsites and TYW Contracting, often for work performed in the same workweek, in
which Defendants split Plaintiff’s hours worked between the two corporations in a flagrant attempt
by Defendants to avoid paying Plaintiff’s full wages owed for overtime under the FLSA and
11.
At all times relevant, Defendants Playsites and TYW Contracting were and are
“employers” within the meaning of the FLSA, 29 U.S.C. § 203(d) and New York Labor Law §
12.
At all times relevant, Defendant, WILLIAM CALDERONE, is and/or was an
officer or owner of Playsites, had authority to make payroll and personnel decisions for Playsites,
had authority to hire and fire, and set the rates of pay for employees of Playsites, was active in the
day to day management of Playsites, including the payment of wages to Plaintiff and determining
what wages were paid to Plaintiff, was responsible for maintaining employment records, and is
liable to Plaintiff as an “employer” within the meaning of the FLSA and NYLL.
FACTS
13.
Defendants design and install playgrounds and safety surfaces for its clients
throughout New York State, including in New York City, Nassau County, and Suffolk County.
Defendants provide these services in numerous other states as well, including, inter alia, in New
Jersey, Connecticut, Massachusetts, Rhode Island, Pennsylvania, Maryland, District of Columbia,
Delaware, Virginia, Chicago, and Florida.
14.
Defendants’ employees, including Plaintiff, performed services throughout Long
Island, New York, New York State and New Jersey.
15.
Defendants employed Plaintiff as a non-exempt laborer and construction worker
from in or about April 2015 through in or about August 2019.
16.
Throughout his employment, Plaintiff regularly worked five to six days per week
on Mondays through Friday, and commonly on Saturdays, from between 4:45 a.m. and 6:00 a.m.
until between 5:00 p.m. and 8:00 p.m., and sometimes even later. Accordingly, Defendants
required Plaintiff to work, Plaintiff did regularly work, between 55 hours and 81 hours during each
workweek.
17.
Throughout his employment, Defendants paid Plaintiff an hourly regular rate of
pay for both his regular hours worked during the first forty hours of work each workweek and for
most of his hours worked in excess of forty hours per workweek. As a result, throughout his
employment, Defendants paid Plaintiff at his straight-time regular rate of pay for most of his hours
worked in excess of forty hours per workweek, and – with the exception of rare occurrences where
some overtime hours were paid at his correct rate – was not his statutorily-mandated overtime rate
of pay of one and one-half times his regular rate of pay for his hours worked in excess of forty
hours per workweek.
18.
Throughout his employment, Defendants tracked Plaintiff’s hours worked. Despite
doing so, throughout his employment, Defendants repeatedly failed to pay Plaintiff for certain
hours worked during many workweeks, instead failing to pay him at any rate of pay for certain
hours of work during many workweeks. Thus, due to Defendants’ practice of failing to
compensate Plaintiff for all hours worked, Defendants have deprived Plaintiff of compensation for
many hours at his applicable overtime rates of pay, and at his agreed upon rates of pay, during
many workweeks.
19.
Moreover, throughout his employment, Defendants required Plaintiff to commence
his workday at Defendants’ facility and travel to his assigned worksite and return to Defendants’
facility from his assigned worksite at the end of his shift to conclude his workday. Throughout his
employment, Defendants paid Plaintiff at a reduced hourly rate of pay for his time spent traveling
from Defendants’ facility to his assigned worksite and from his assigned worksite to Defendants’
facility. As a result, Defendants have deprived Plaintiff of compensation for many hours at his
proper overtime rate of pay of one and one-half times his applicable regular rate of pay, and at his
agreed upon rates of pay, during many workweeks.
20.
Throughout his employment, Defendants paid Plaintiff by check. However, despite
working for one common business enterprise, Defendants Playsites and TYW Contracting both
paid Plaintiff for his work performed. In a scheme to willfully deprive him of overtime
compensation and to violate the FLSA and NYLL, Defendants Playsites and TYW Contracting
commonly split Plaintiff’s hours worked during a single workweek between two checks issued by
each of the corporate defendants, thereby giving the appearance of minimizing the number of hours
that Plaintiff worked in a single workweek and masking that Plaintiff worked hours in excess of
forty hours in a single workweek.
21.
Defendants willfully disregarded and purposefully evaded record keeping
requirements of the FLSA and NYLL by disregarding records of Plaintiff’s actual hours worked
during many workweeks, and by splitting Plaintiff’s hours worked for one business enterprise
between two corporate entities, in order to intentionally deprive Plaintiff of overtime compensation
and compensation at his agreed upon rates of pay, in violation of the FLSA and NYLL.
22.
Defendants failed to provide Plaintiff with a notice and acknowledgement of his
wage rate in his primary language upon his hire as required by NYLL § 195(1).
23.
Defendants failed to provide Plaintiff with accurate statements of his wages earned,
including his correct hourly rates of pay, amount of regular and overtime hours worked, gross
wages, net wages and deductions, for each pay period as required by NYLL § 195(3).
24.
Defendants treated and paid Plaintiff and the collective action members in the same
or similar manner.
COLLECTIVE ACTION ALLEGATIONS
25.
At all times relevant, Plaintiff and other FLSA Collective Action Plaintiffs are and
have been similarly situated, have had substantially similar job requirements and pay provisions,
and are and have been subject to Defendants’ decisions, policies, plans and common policies,
programs, practices, procedures, protocols, routines, and rules willfully failing and refusing to pay
them proper overtime compensation for hours worked in excess of forty (40) hours each week.
26.
Upon information and belief, there are many current and former employees who
are similarly situated to the Plaintiff, who have been underpaid in violation of the FLSA. The
named Plaintiff is representative of those other workers and is acting on behalf of the Defendants’
current and former employees’ interests as well as his own interest in bringing this action.
27.
Plaintiff seeks to proceed as a collective action with regard to the First Claim for
Relief, pursuant to 29 U.S.C. § 216(b) on behalf of himself and the following similarly situated
employees:
All non-exempt persons who are currently, or have been employed
by the Defendants as a manual laborer, construction worker and/or
in any other similarly-situated position, at any time during the three
(3) years prior to the filing of their respective consent forms (“FLSA
Collective Action Plaintiffs”).
28.
The First Claim for Relief is properly brought under and maintained as an opt-in
collective action pursuant to 29 U.S.C. § 216(b). The FLSA Collective Action Plaintiffs are readily
ascertainable. For purposes of notice and other purposes related to this action, their names and
addresses are readily available from the Defendants. These similarly situated employees should
be notified of and allowed to opt-into this action pursuant to 29 U.S.C. § 216(b). Unless the Court
promptly issues such a notice, persons similarly situated to the Plaintiff, who have been unlawfully
deprived of overtime pay in violation of the FLSA, will be unable to secure compensation to which
they are entitled and which has been unlawfully withheld from them by the Defendants.
FIRST CLAIM FOR RELIEF
(FAIR LABOR STANDARDS ACT – UNPAID OVERTIME WAGES)
29.
Plaintiff, and any FLSA Collective Action Plaintiff who opts-into this action,
repeats, reiterates, and re-alleges each and every allegation set forth above with the same force and
effect as if fully set forth herein.
30.
Defendants employed Plaintiff and persons similarly situated to Plaintiff for
workweeks longer than forty (40) hours and willfully failed to compensate them for all of their
hours worked in excess of forty (40) hours per week at a rate of at least one and one-half times the
regular hourly rate, in violation of the FLSA.
31.
Defendants’ violations of the FLSA, as described in this Complaint, have been
willful and intentional.
32.
Because Defendants’ violations of the FLSA have been willful, a three-year statute
of limitations applies, pursuant to 29 U.S.C. § 255.
33.
As a result of Defendants’ unlawful acts, Plaintiff and persons similarly situated to
Plaintiff are entitled to recover overtime compensation in amounts to be determined at trial,
liquidated damages, attorneys’ fees and costs pursuant to 29 U.S.C. § 216(b).
SECOND CLAIM FOR RELIEF
(NEW YORK LABOR LAW – UNPAID OVERTIME WAGES)
34.
Plaintiff, and any FLSA Collective Action Plaintiff who opts-into this action,
repeats, reiterates, and re-alleges each and every allegation set forth above with the same force and
effect as if fully set forth herein.
35.
Defendants employed Plaintiff, and any FLSA Collective Action Plaintiff who
opts-into this action, for workweeks longer than forty (40) hours and failed to compensate the
Plaintiff, and any FLSA Collective Action Plaintiff who opts-into this action, for all hours worked
in excess of forty (40) hours per week, at a rate of at least one and one-half times the regular hourly
rate, in violation of the NYLL.
36.
By Defendants’ failure to pay Plaintiff, and any FLSA Collective Action Plaintiff
who opts-into this action, proper overtime wages for hours worked in excess of 40 hours per week,
Defendants violated the NYLL, Article 19, § 650 et seq., and the supporting New York State
Department of Labor Regulations, including 12 N.Y.C.R.R. § 142.
37.
Defendants’ violations of the New York Labor Law, as described in this Complaint,
have been willful and intentional.
38.
Due to Defendants’ violations of the New York Labor Law, Plaintiff, and any FLSA
Collective Action Plaintiff who opts-into this action, are entitled to recover from Defendants
unpaid overtime wages, liquidated damages, reasonable attorneys’ fees and costs of this action,
and interest as permitted by law.
THIRD CLAIM FOR RELIEF
(FAILURE TO PAY WAGES DUE UNDER NEW YORK LABOR LAW)
39.
Plaintiff, and any FLSA Collective Action Plaintiff who opts-into this action,
repeats, reiterates, and re-alleges each and every allegation set forth above with the same force and
effect as if fully set forth herein.
40.
NYLL §§ 190, 191, 198 and 663(1) require that employers pay wages to their
employees in accordance with their agreed terms of employment.
41.
Defendants failed to compensate Plaintiff, and any FLSA Collective Action
Plaintiff who opts-into this action, at their regular rate of pay for each hour that they worked in
accordance with their agreed terms of employment.
42.
Due to Defendants’ violations of the New York Labor Law, Plaintiff, and any FLSA
Collective Action Plaintiff who opts-into this action, are entitled to recover for all hours worked
for Defendants for which Defendants did not provide compensation at their regular rate of pay in
accordance with their agreed terms of employment.
43.
Due to Defendants’ violations of the New York Labor Law, Plaintiff, and any FLSA
Collective Action Plaintiff who opts-into this action, are also entitled to liquidated damages,
attorneys’ fees, costs of this action, and interest as permitted by law.
FOURTH CLAIM FOR RELIEF
(VIOLATION OF NEW YORK LABOR LAW § 195(3))
44.
Plaintiff, and any FLSA Collective Action Plaintiff who opts-into this action,
repeats, reiterates, and re-alleges each and every allegation set forth above with the same force and
effect as if fully set forth herein.
45.
Defendants failed to provide Plaintiff, and any FLSA Collective Action Plaintiff
who opts-into this action, with accurate statements of their wages earned, including their correct
hourly rates of pay, amount of regular and overtime hours worked, gross wages, net wages and
deductions, for each pay period as required by NYLL § 195(3).
46.
Due to Defendants’ failure to provide Plaintiff, and any FLSA Collective Action
Plaintiff who opts-into this action, with accurate wage statements with their wages as required by
NYLL § 195(3), Plaintiff, and any FLSA Collective Action Plaintiff who opts-into this action, are
entitled to statutory damages, reasonable attorneys’ fees and costs of this action.
FIFTH CLAIM FOR RELIEF
(VIOLATION OF NEW YORK LABOR LAW § 195(1))
47.
Plaintiff, and any FLSA Collective Action Plaintiff who opts-into this action whose
primary language is not English, repeats, reiterates, and re-alleges each and every allegation set
forth above with the same force and effect as if fully set forth herein.
48.
Defendants failed to provide Plaintiff, and any FLSA Collective Action Plaintiff
who opts-into this action whose primary language is not English, with a written notice upon hire
in their primary language, regarding their rate of pay; the basis of their rate of pay; the employee’s
regular pay day; the name, address and telephone number of the employer; and other information,
as required by NYLL § 195(1).
49.
Due to Defendants’ failure to provide Plaintiff, and any FLSA Collective Action
Plaintiff who opts-into this action whose primary language is not English, with the notice required
by NYLL § 195(1), Plaintiff, and any FLSA Collective Action Plaintiff who opts-into this action
whose primary language is not English, are entitled to statutory damages, reasonable attorneys’
fees and costs of this action.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff and FLSA Collective Action Plaintiffs pray for the following
i.
An order restraining Defendants from any retaliation against Plaintiff and FLSA
Collective Action Plaintiffs for participation in any form in this litigation;
ii.
Issuance of a declaratory judgment that the practices complained of in this
Complaint are unlawful under the Fair Labor Standards Act, and its supporting
regulations, and the New York Labor Law, Article 19, § 650 et seq., and the
supporting New York State Department of Labor Regulations;
iii.
Designation of this action as an FLSA collective action on behalf of the Plaintiff
and FLSA Collective Action Plaintiffs and prompt issuance of notice pursuant to
29 U.S.C. § 216(b) to the FLSA Collective Action Plaintiffs, apprising them of the
pendency of this action, permitting them to assert timely FLSA claims in this action
by filing individual Consents to Sue pursuant to 29 U.S.C. § 216(b), and tolling of
the statute of limitations;
iv.
Unpaid overtime wages and an additional and equal amount as liquidated damages
pursuant to 29 U.S.C. § 201 et seq. and the supporting United States Department of
Labor regulations;
v.
Unpaid wages, including but not limited to unpaid overtime compensation and
unpaid wages owed at their agreed upon rates of pay, pursuant to the NYLL and
Department of Labor Regulations, plus an additional and equal amount as
liquidated damages;
vi.
Damages pursuant to New York Labor Law § 195(1), (3);
vii.
Pre- and post-judgment interest as permitted by law;
viii.
All attorneys’ fees incurred in prosecuting these claims;
ix.
All costs incurred in prosecuting these claims; and
x.
Such other and further relief as this Court deems just and proper.
Dated: Hauppauge, New York
August 28, 2020
LAW OFFICE OF PETER A. ROMERO PLLC
Attorneys for Plaintiff
825 Veterans Highway, Suite B
Hauppauge, New York 11788
Tel.: (631) 257-5588
By:
______________________________
DAVID D. BARNHORN, ESQ.
PETER A. ROMERO, ESQ.
| employment & labor |
4AoNFocBD5gMZwczly61 | UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
CASE NO.
CHRISTOPHER LEGG, an individual, on
behalf of himself and all others similarly situated,
Plaintiff,
v.
COMPLAINT - CLASS ACTION
DOMINO’S PIZZA, LLC,
a Michigan limited liability company, and
MOGREET, INC., a Delaware corporation,
Defendants.
_________________________________________/
CLASS ACTION COMPLAINT FOR STATUTORY DAMAGES AND
INJUNCTIVE RELIEF UNDER 47 U.S.C. § 227 et seq., THE TELEPHONE
CONSUMER PROTECTION ACT
JURY DEMAND
1.
The Pew Research Center has reported 69% percent of cellular users
who use text messaging receive unwanted text message spam with 25% percent of
them on a weekly basis.1 Plaintiff is one such person who regularly receives text
message spam. After several requests to stop texting to no avail, Plaintiff has
decided to bring the instant class action complaint alleging violations of 47 U.S.C.
§ 227 et seq., the Telephone Consumer Protection Act (“TCPA”). Simply put,
Plaintiff has filed the instant lawsuit in an effort to put an end to this form of text
1 Source: http://pewinternet.org/Reports/2012/Mobile-phone-problems/Main-findings.aspx (last
visited: November 25, 2014).
message spam and protect his fundamental right to privacy as well as the rights of
the putative class members.
2.
In brief, Defendants have sent out thousands of unlawful text
messages in violation of the TCPA. By effectuating these unauthorized text
message calls (also known as “SMS Messages”), Defendants have caused
consumers actual harm, not only because consumers were subjected to the
aggravation that necessarily accompanies mobile spam, but also because
consumers frequently have to pay their cell phone service providers for the receipt
of such spam and such messages diminish cellular battery life, waste data storage
capacity, and are an intrusion upon seclusion.
3.
In order to redress these injuries, Plaintiff, on behalf of himself and
the proposed classes of similarly situated individuals described below, brings this
suit under the TCPA, which specifically prohibits unsolicited voice and text calls
to cell phones. Defendants have sent unwanted text messages in a manner which
violates the right of privacy of the putative class members. Defendants continued
to send these unwanted text messages even after Plaintiff and other putative class
members requested that the offending texts stop. On behalf of the class, Plaintiff
seeks an injunction requiring Defendants to cease all unlawful text messages and
an award of statutory damages to the class members, together with costs and
reasonable attorney’s fees. All allegations contained herein are based upon
information and belief of Plaintiff or the investigative efforts of the undersigned
counsel.
JURISDICTION AND VENUE
4.
This Court has jurisdiction over this class action lawsuit under 28
U.S.C. § 1331 and 47 U.S.C. § 227. Venue in this District is proper because
Plaintiff resides here and Defendants regularly send text messages to individuals
residing within this District.
INTERESTED PARTIES
5.
Plaintiff, CHRISTOPHER LEGG (hereinafter, “Plaintiff” or “Mr.
Legg”), is a natural person, and citizen of the State of Florida, residing in Broward
County, Florida.
6.
Defendant, DOMINO’S PIZZA, LLC (hereinafter, “Domino’s”), is a
Michigan limited liability company, headquartered in Ann Arbor, MI, and an
international pizza chain.
7.
Defendant MOGREET, INC. (hereinafter “MoGreet”) is a Delaware
corporation, Headquartered in Los Angeles, CA and is a mobile marketing
company that specializes in sending SMS advertisements to cellular telephones.
A BRIEF OVERVIEW OF TEXT MESSAGING
8.
In recent years, marketers who often have felt stymied by federal laws
limiting solicitation by telephone, facsimile machine, and email have increasingly
looked to alternative technologies through which to send bulk solicitations cheaply.
9.
One of the newest types of such bulk marketing is to advertise through
Short Message Services. The term “Short Message Service” or “SMS” describes a
messaging system that allows cellular telephone subscribers to use their cellular
telephones to send and receive short text messages, usually limited to 120 - 500
characters.
10.
An “SMS message” is a text message call directed to a wireless device
through the use of the telephone number assigned to the device. When an SMS
message call is successfully made, the recipient’s cell phone rings, alerting him or
her that a call is being received.
11.
The open rate for SMS messages exceeds 99% percent, and 90%
percent of those messages are read within three minutes.2 Conversely, the open
rate for email in the retail industry is 31% percent.3
2 Source: http://www.tatango.com/blog/sms-open-rates-exceed-99/ (last visited: November 25,
2014).
3 Source: http://mailchimp.com/resources/research/email-marketing-benchmarks/ (last visited:
November 25, 2014).
12.
Unlike more conventional advertisements, SMS calls, and particularly
wireless or mobile spam, can actually cost their recipients money, because cell
phone users must frequently pay their respective wireless service providers either
for each text message call they receive or incur a usage allocation deduction to
their text plan, regardless of whether or not the message is authorized.
13.
Most commercial SMS messages are sent from “short codes” (also
known as “short numbers”), which are special cellular telephone exchanges,
typically only five or six digit extensions, that can be used to address SMS
messages to mobile phones. Short codes are generally easier to remember and are
utilized by consumers to subscribe to such services as television program voting or
more benevolent uses, such as making charitable donations.
14.
A short code is sent to consumers along with the actual text message
and conclusively reveals the originator of the SMS message.
15.
Text messages are “calls” within the context of the TCPA. Satterfield
v. Simon & Schuster, Inc., 569 F.3d 946 (9th Cir. 2009).
16.
According to findings by the Federal Communication Commission
(“FCC”), the agency Congress vested with authority to issue regulations
implementing the TCPA, such automated calls are prohibited because, as Congress
found, automated telephone calls are a greater nuisance and invasion of privacy
than live solicitation calls, and such calls can be costly and inconvenient. The FCC
also recognized that wireless customers are charged for incoming calls whether
they pay in advance or after the minutes are used. See Rules and Regulations
Implementing the Telephone Consumer Protection Act of 1991, CG Docket No. 02-
278, Report and Order, 18 FCC Rcd 14014 (2003).
17.
Under the TCPA and pursuant to the FCC’s January 2008 Declaratory
Ruling, the burden is on Defendant to demonstrate that Plaintiff provided express
consent within the meaning of the statute. See FCC Declaratory Ruling, 23 FCC
Rcd at 565 (¶10).
18.
The FCC specifically ruled that a consumer’s prior express consent to
receive future text messages may be revoked and texts sent after revocation violate
the TCPA. In re SoundBite Communications, Inc., --- FCC Rcd. ----, No. 02-278,
2012 WL 5986338 (Nov. 29, 2012).
19.
Even before the FCC Order that consent to receive a text message
could be revoked, the Mobile Marketing Association declared in October 2012 in
its U.S. Consumer Best Practices for Messaging that “[a] subscriber must be able
to stop participating and receiving messages from any program by sending STOP
to the short code used for that program…” and “… if the subscriber sent STOP or
STOP ALL to the short code, they are opted out of all programs they were enrolled
in on that short code.”
FACTUAL ALLEGATIONS
20.
Defendant Domino’s operated via its mobile marketer MoGreet and
promoted a text alert service that utilizes the short code 366-466. On a telephone
keypad, 366466 is the alphanumeric equivalent of the word “DOMINO.” See
Exhibit A attached hereto.
21.
Defendants sent Plaintiff multiple text messages offering him
discounts or deals on Domino’s pizza.
22.
On or about July 9, 2014, Plaintiff replied to a text message from
Defendants with the instruction to Stop sending him texts.
23.
On or about July 9, 2014, Defendants sent Plaintiff a response text
message confirming that it received Plaintiff’s Stop instruction, and further stating
that Plaintiff would not receive any more text messages from Defendant.4
24.
Despite confirming Plaintiff’s Stop request and stating that Plaintiff
would not receive any further text messages, Defendants caused additional
promotional text messages to be sent to Plaintiff on at least October 29, 2014 and
November 13, 2014.
25.
On November 12, 2013 MoGreet entered into a nationwide class
settlement agreement to resolve claims arising from violations of the TCPA.
4 Plaintiff does not allege that the confirmatory opt-out text message was in any way unlawful –
only the subsequent text messages sent by Defendants thereafter.
26.
The settlement of that lawsuit created a $16 million dollar settlement
27.
“Domino’s Pizza” is listed as one of the retailers on whose behalf
MoGreet sent violative the text message advertising.
28.
Given Defendants’ extensive use of mobile marketing and long
malfunctioning text message alert service, there are likely thousands of putative
class members as further described herein. Moreover, taking into consideration
Defendants’ national presence, there is no practical way to send the above-
described text message alerts without using an automatic telephone dialing system.
29.
Based upon an industry average opt-out rate of 3.7% percent,5 a class
of more than forty people would exist assuming at least 1,082 people had
previously subscribed to the Defendant’s text message alert service over the last
four years. See generally, Cox v. Am. Cast Iron Pipe Co., 784 F.2d 1546, 1553-57
(11th Cir. 1986) (noting that more than 40 generally suffices and holding that 240
certainly did).
30.
Upon information and belief, all members of the putative class
received messages that were sent en masse using an automatic telephone dialing
system, also known as an “auto-dialer”; the device Defendant used to send the
5
Source:
http://www.tatango.com/blog/average-opt-out-rate-for-retail-sms-marketing-
campaigns/ (last visited: November 27, 2014).
aforesaid text messages had the capacity to store or produce telephone numbers to
be called using a random or sequential number generator and to dial such numbers.
CLASS ACTION ALLEGATIONS
31.
This action is also brought on behalf of four classes. Class 1 consists
All persons in the United States who instructed MoGreet to stop
sending text message advertisements to their cellular telephone
number and to whom MoGreet subsequently sent a text
message advertising the same goods or services between March
6, 2014 and the date of certification, through the use of an
automatic telephone dialing system.
and a sub class consisting of:
All persons in the United States who instructed MoGreet to stop
sending text message advertisements of Domino’s to their
cellular telephone number and to whom MoGreet subsequently
sent a text message advertising Domino’s between March 6,
2014 and the date of certification, through the use of an
automatic telephone dialing system.
32.
Class 2 consists of:
All persons in the United States who instructed MoGreet to stop
sending text message advertisements to their cellular telephone
number and to whom MoGreet sent at least two text messages
within a 12 month period advertising the same goods or
services between March 6, 2014 and the date of certification,
and more than 30 days after the stop instruction.
and a sub class consisting of:
All persons in the United States who instructed MoGreet to stop
sending text message advertisements of Domino’s to their
cellular telephone number and to whom MoGreet sent at least
two text messages within a 12 month period advertising
Domino’s between March 6, 2014 and the date of certification,
and more than 30 days after the stop instruction.
33.
Class 3 consists of:
All persons in the United States who instructed Domino’s, or
any other person sending text messages on Domino’s behalf, to
stop sending text messages advertising Domino’s to their
cellular telephone number and to whom Domino’s, or that third
party, subsequently sent a text message advertising Domino’s
between March 6, 2014 and the date of certification, through
the use of an automatic telephone dialing system.
34.
Class 4 consists of:
All persons in the United States who instructed Domino’s, or
any other person sending text messages on Domino’s behalf, to
stop sending text messages advertising Domino’s to their
cellular telephone number and to whom Domino’s, or that third
party, sent at least two text messages within a 12 month period
advertising Domino’s between March 6, 2014 and the date of
certification, and more than 30 days after the stop instruction.
35.
Excluded from the Classes are Defendants, their legal representatives,
assigns, and successors, and any entity in which the Defendants have a controlling
interest. Also excluded from the Classes is the Judge to whom this case is
assigned, the Judge’s immediate family, and Plaintiff’s counsel and their
employees. Plaintiff reserves the right to amend the above-stated class definitions
based upon facts learned in discovery.
36.
Plaintiff alleges on information and belief based upon the Defendants’
use of mass text messages that each Class is so numerous that joinder of all
members of the class is impractical. There are more than forty-one (41)
individuals in each Class as previously defined herein.
37.
There are questions of law or fact common to the Classes, which
common issues predominate over any issues involving only individual class
members. Factual and/or legal issues common to each class member include:
a. Whether Defendants’ conduct is governed by the TCPA.
b. Whether the text message advertisements sent by Defendants after
Plaintiff unsubscribed violated the TCPA.
c. Whether the class members entitled to treble damages based upon
the willfulness of Defendants’ conduct.
d. Whether Defendants should be enjoined from engaging in such
conduct in the future.
38.
Plaintiff’s claim is typical of those of the members of each Class.
Within each Class, all claims are based on the same facts and legal theories.
39.
Plaintiff will fairly and adequately protect the interests of each Class.
He has retained counsel experienced in handling actions involving unlawful
practices under the TCPA and class actions. Neither Plaintiff nor his counsel has
any interest that might cause them not to vigorously pursue this action.
40.
Certification of each Class under Rule 23(b)(3) of the Federal Rules
of Civil Procedure is also appropriate in that:
(1)
The questions of law or fact common to the members of each
Class predominate over any questions affecting individual
members.
(2)
A class action is superior to other available methods for the fair
and efficient adjudication of the controversy.
41.
Certification of each Class under Rule 23(b)(2) of the Federal Rules
of Civil Procedure is also appropriate in that Defendant has acted on grounds
generally applicable to each Class thereby making appropriate relief with respect to
each Class as a whole.
42.
Mr. Legg requests that each Class be certified as a hybrid class under
Rule 23(b)(3) for monetary damages, and pursuant to Rule 23(b)(2) for injunctive
COUNT I
NEGLIGENT VIOLATIONS OF §227(b) OF THE
TELEPHONE CONSUMER PROTECTION ACT
ON BEHALF OF CLASS 1
43.
Plaintiff incorporates Paragraphs 1 through 42.
44.
Defendants sent unwanted text messages to Plaintiff and the members
of Class 1 that included or introduced an advertisement using an automatic
telephone dialing system.
45.
The excessive calls (i.e., text messages sent post-revocation) were
made without the prior express written consent of the parties.
46.
The aforesaid calls violate the TCPA, 47 U.S.C. § 227(b)(1)(A)(iii),
and its regulations, at 47 C.F.R. § 64.1200(a)(2).
WHEREFORE, Plaintiff requests that the Court enter judgment in his favor
and in favor of Class 1, and against Defendants for:
(a)
An order certifying this case to proceed as a class action;
(b)
Statutory damages of $500 dollars per call for negligent
violations of the TCPA;
(c)
An
injunction
requiring
Defendants
to
cease
all
communications in violation of the TCPA;
(d)
Reasonable attorney’s fees and costs; and
(e)
Such further relief as this Court may deem appropriate.
COUNT II
WILLFUL OR KNOWING VIOLATIONS OF §227(b) OF THE
TELEPHONE CONSUMER PROTECTION ACT
ON BEHALF OF CLASS 1
47.
Plaintiff incorporates Paragraphs 1 through 42.
48.
Defendants willfully or knowingly sent unwanted text messages to
Plaintiff and the members of Class 1 that included or introduced an advertisement
using an automatic telephone dialing system.
49.
The excessive calls (i.e., text messages sent post-revocation) were
made without the prior express written consent of the parties.
50.
The aforesaid calls violate the TCPA, 47 U.S.C. § 227(b)(1)(A)(iii),
and its regulations, at 47 C.F.R. § 64.1200(a)(2).
WHEREFORE, Plaintiff requests that the Court enter judgment in his favor
and in favor of Class 1, and against Defendants for:
(a)
An order certifying this case to proceed as a class action;
(b)
Statutory damages of up to $1,500 dollars per call for each
willful or knowing violation of the TCPA;
(c)
An
injunction
requiring
Defendants
to
cease
all
communications in violation of the TCPA;
(d)
Reasonable attorney’s fees and costs; and
(e)
Such further relief as this Court may deem appropriate.
COUNT III
NEGLIGENT VIOLATIONS OF §227(c) OF THE
TELEPHONE CONSUMER PROTECTION ACT
ON BEHALF OF CLASS 2
51.
Plaintiff incorporates Paragraphs 1 through 42.
52.
Defendants sent more than one text message advertisement to Plaintiff
and each member of Class 2 for telemarketing purposes within a 12-month period
more than 30 days after being told to stop.
53.
The aforesaid calls violate the TCPA, 47 U.S.C. § 227(c), and its
regulations, at 47 C.F.R. § 64.1200(d).
WHEREFORE, Plaintiff requests that the Court enter judgment in his favor
and in favor of Class 2, and against Defendant for:
(a)
An order certifying this case to proceed as a class action
(b)
Statutory damages of up to $500 dollars per call for negligent
violations of the TCPA;
(c)
An
injunction
requiring
Defendants
to
cease
all
communications in violation of the TCPA;
(d)
Reasonable attorney’s fees and costs; and
(e)
Such further relief as this Court may deem appropriate.
COUNT IV
WILLFUL OR KNOWING VIOLATIONS OF §227(c)
OF THE TELEPHONE CONSUMER PROTECTION ACT
ON BEHALF OF CLASS 2
54.
Plaintiff incorporates Paragraphs 1 through 42.
55.
Defendants willfully or knowingly sent more than one text message
advertisement to Plaintiff and each member of Class 2 for telemarketing purposes
within a 12-month period more than 30 days after being told to stop.
56.
The aforesaid calls violate the TCPA, 47 U.S.C. § 227(c), and its
regulations, at 47 C.F.R. § 64.1200(d).
WHEREFORE, Plaintiff requests that the Court enter judgment in his favor
and in favor of the Class 2, and against Defendants for:
(a)
An order certifying this case to proceed as a class action
(b)
Statutory damages of up to $1,500 dollars per call for each
willful violation of the TCPA;
(c)
An
injunction
requiring
Defendants
to
cease
all
communications in violation of the TCPA;
(d)
Reasonable attorney’s fees and costs; and
(e)
Such further relief as this Court may deem appropriate.
COUNT V
NEGLIGENT VIOLATIONS OF §227(b) OF THE
TELEPHONE CONSUMER PROTECTION ACT
ON BEHALF OF CLASS 3
57.
Plaintiff incorporates Paragraphs 1 through 42.
58.
Defendants sent unwanted text messages to Plaintiff and the members
of Class 3 that included or introduced an advertisement using an automatic
telephone dialing system.
59.
The excessive calls (i.e., text messages sent post-revocation) were
made without the prior express written consent of the parties.
60.
The aforesaid calls violate the TCPA, 47 U.S.C. § 227(b)(1)(A)(iii),
and its regulations, at 47 C.F.R. § 64.1200(a)(2).
WHEREFORE, Plaintiff requests that the Court enter judgment in his favor
and in favor of Class 3, and against Defendants for:
(a)
An order certifying this case to proceed as a class action;
(b)
Statutory damages of $500 dollars per call for negligent
violations of the TCPA;
(c)
An
injunction
requiring
Defendants
to
cease
all
communications in violation of the TCPA;
(d)
Reasonable attorney’s fees and costs; and
(e)
Such further relief as this Court may deem appropriate.
COUNT VI
WILLFUL OR KNOWING VIOLATIONS OF §227(b) OF THE
TELEPHONE CONSUMER PROTECTION ACT
ON BEHALF OF CLASS 3
61.
Plaintiff incorporates Paragraphs 1 through 42.
62.
Defendants willfully or knowingly sent unwanted text messages to
Plaintiff and the members of Class 3 that included or introduced an advertisement
using an automatic telephone dialing system.
63.
The excessive calls (i.e., text messages sent post-revocation) were
made without the prior express written consent of the parties.
64.
The aforesaid calls violate the TCPA, 47 U.S.C. § 227(b)(1)(A)(iii),
and its regulations, at 47 C.F.R. § 64.1200(a)(2).
WHEREFORE, Plaintiff requests that the Court enter judgment in his favor
and in favor of Class 3, and against Defendants for:
(a)
An order certifying this case to proceed as a class action;
(b)
Statutory damages of up to $1,500 dollars per call for each
willful or knowing violation of the TCPA;
(c)
An
injunction
requiring
Defendants
to
cease
all
communications in violation of the TCPA;
(d)
Reasonable attorney’s fees and costs; and
(e)
Such further relief as this Court may deem appropriate.
COUNT VII
NEGLIGENT VIOLATIONS OF §227(c) OF THE
TELEPHONE CONSUMER PROTECTION ACT
ON BEHALF OF CLASS 4
65.
Plaintiff incorporates Paragraphs 1 through 42.
66.
Defendants sent more than one text message advertisement to Plaintiff
and each member of Class 4 for telemarketing purposes within a 12-month period
more than 30 days after being told to stop.
67.
The aforesaid calls violate the TCPA, 47 U.S.C. § 227(c), and its
regulations, at 47 C.F.R. § 64.1200(d).
WHEREFORE, Plaintiff requests that the Court enter judgment in his favor
and in favor of Class 4, and against Defendant for:
(a)
An order certifying this case to proceed as a class action
(b)
Statutory damages of up to $500 dollars per call for negligent
violations of the TCPA;
(c)
An
injunction
requiring
Defendants
to
cease
all
communications in violation of the TCPA;
(d)
Reasonable attorney’s fees and costs; and
(e)
Such further relief as this Court may deem appropriate.
COUNT VIII
WILLFUL OR KNOWING VIOLATIONS OF §227(c)
OF THE TELEPHONE CONSUMER PROTECTION ACT
ON BEHALF OF CLASS 4
68.
Plaintiff incorporates Paragraphs 1 through 42.
69.
Defendants willfully or knowingly sent more than one text message
advertisement to Plaintiff and each member of Class 4 for telemarketing purposes
within a 12-month period more than 30 days after being told to stop.
70.
The aforesaid calls violate the TCPA, 47 U.S.C. § 227(c), and its
regulations, at 47 C.F.R. § 64.1200(d).
WHEREFORE, Plaintiff requests that the Court enter judgment in his favor
and in favor of the Class 4, and against Defendants for:
(a)
An order certifying this case to proceed as a class action
(b)
Statutory damages of up to $1,500 dollars per call for each
willful violation of the TCPA;
(c)
An
injunction
requiring
Defendants
to
cease
all
communications in violation of the TCPA;
(d)
Reasonable attorney’s fees and costs; and
(e)
Such further relief as this Court may deem appropriate.
JURY DEMAND
Plaintiff demands trial by jury.
Dated: November 30, 2014
Respectfully submitted,
By:/s/ Scott D. Owens
Scott D. Owens, Esq.
Florida Bar No. 0597651
SCOTT D. OWENS, P.A.
3800 S Ocean Dr., Suite 235
Hollywood, Florida 33019
Telephone: 954-589-0588
Facsimile: 954-337-0666
[email protected]
Keith J. Keogh
Michael S. Hilicki
Timothy J. Sostrin
Katherine M. Bowen
KEOGH LAW, LTD.
55 W. Monroe St., Suite 3390
Chicago, IL 60603
312-726-1092 (Phone) / 312-726-1093 (Fax)
[email protected]
Attorneys for Plaintiff and the Putative Classes
| privacy |
Z0Qr_YgBF5pVm5zYguou | PACIFIC TRIAL ATTORNEYS
A Professional Corporation
Scott J. Ferrell, Bar No. 202091
[email protected]
4100 Newport Place Drive, Ste. 800
Newport Beach, CA 92660
Tel: (949) 706-6464
Fax: (949) 706-6469
Attorneys for Plaintiff
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF CALIFORNIA
'22CV1564
BLM
BAS
JOSE LICEA, individually and on behalf
of all others similarly situated,
Plaintiff,
v.
Case No.
CLASS ACTION COMPLAINT
WOLVERINE WORLD WIDE, INC., a
Delaware corporation; and DOES 1
through 25, inclusive,
Defendants.
22
INTRODUCTION
Defendant (1) secretly wiretaps the private conversations of everyone who
communicates through the chat feature at www.saucony.com (the “Website”); and
(2) allows at least one third party to eavesdrop on such communications in real
time and during transmission to harvest data for financial gain.
Defendant does not obtain visitors’ consent to either the wiretapping or the
eavesdropping. As a result, Defendant has violated the California Invasion of
Privacy Act (“CIPA”) in numerous ways.
JURISDICTION AND VENUE
1.
This Court has subject matter jurisdiction of this action pursuant to 28
U.S.C. Section 1332 of the Class Action Fairness Act of 2005 because: (i) there are 100
or more class members, (ii) there is an aggregate amount in controversy exceeding
$5,000,000, exclusive of interest and costs, and (iii) there is at least minimal diversity
because at least one Plaintiff and Defendant are citizens of different states. Indeed,
based upon the information available to Plaintiff, there are believed to be at least 5,000
class members, each entitled to $5,000 in statutory damages, thus making the amount in
controversy at least $25,000,0000 exclusive of interests and costs.
2.
Pursuant to 28 U.S.C. Section 1391, venue is proper because a substantial
part of the acts and events giving rise to the claims occurred in this District.
3.
Defendant is subject to personal jurisdiction because it has sufficient
minimum contacts with California and it does business with California residents.
22
PARTIES
4.
Plaintiff is a resident and citizen of California.
5.
Defendant is a Delaware corporation that owns, operates, and/or controls
the above-referenced website.
6.
The above-named Defendant, along with its affiliates and agents, are
collectively referred to as “Defendants.” The true names and capacities of the
Defendants sued herein as DOE DEFENDANTS 1 through 25, inclusive, are currently
unknown to Plaintiff, who therefore sues such Defendants by fictitious names. Each of
the Defendants designated herein as a DOE is legally responsible for the unlawful acts
alleged herein. Plaintiff will seek leave of Court to amend the Complaint to reflect the
true names and capacities of the DOE Defendants when such identities become known.
7.
Plaintiff is informed and believes that at all relevant times, every
Defendant was acting as an agent and/or employee of each of the other Defendants and
was acting within the course and scope of said agency and/or employment with the full
knowledge and consent of each of the other Defendants, and that each of the acts and/or
omissions complained of herein was ratified by each of the other Defendants.
FACTUAL ALLEGATIONS
8.
The California Invasion of Privacy Act (“CIPA”) prohibits both
wiretapping and eavesdropping of electronic communications without the consent of all
parties to the communication. Compliance with CIPA is easy, and the vast majority of
website operators comply by conspicuously warning visitors when their conversations
are being recorded or if third parties are eavesdropping on them.1
9.
Unlike most companies, Defendant ignores CIPA. Instead, Defendant both
wiretaps the conversations of all website visitors and allows a third party to eavesdrop
on the conversations in real time during transmission. Why? Because, as one industry
expert notes, “Live chat transcripts are the gold mines of customer service. At your
fingertips, you have valuable customer insight. . .When people are chatting, you have
direct access to their exact pain points.”). See https://www.ravience.co/post/improve-
marketing-roi-live-chat-transcripts (last downloaded October 2022).
10.
Defendant’s wiretapping and eavesdropping are not incidental to the act of
facilitating e-commerce, nor are they undertaken in the ordinary course of business. To
1 See www.leechtishman.com/insights/blog (“CIPA Compliance is not difficult. A business must take certain steps. .
.with a chat feature. . .to ensure that it obtains valid consent consistent with the holdings of courts interpreting CIPA.”)
(last downloaded October 2022).
the contrary, Defendant’s actions violate both industry norms and the legitimate
expectations of consumers.2
11.
To enable the wiretapping, Defendant has covertly embedded code into its
chat feature that automatically records and creates transcripts of all such conversations.
To enable the eavesdropping, Defendant allows at least one independent third-party
vendor to secretly intercept (during transmission and in real time), eavesdrop upon, and
store transcripts of Defendant’s chat communications with unsuspecting website visitors
– even when such conversations are private and deeply personal.
12.
Defendant neither informed visitors of this conduct nor obtained their
consent to these intrusions.3
13.
Given the nature of Defendant’s business, visitors often share highly
sensitive personal data with Defendant via the website chat feature. As noted above,
visitors would be shocked and appalled to know that Defendant secretly records those
conversations, and would be even more troubled to learn that Defendant allows a third
party to eavesdrop on the conversations in real time under the guise of “data analytics.”
14.
Defendant’s conduct is illegal, offensive, and contrary to visitor
expectations: indeed, a recent study conducted by the Electronic Privacy Information
Center, a respected thought leader regarding digital privacy, found that: (1) nearly 9 in
10 adults are “very concerned” about data privacy, and (2) 75% of adults are unaware of
the extent to which companies gather, store, and exploit their personal data.
15.
Plaintiff is a consumer privacy advocate with dual motivations for
initiating a conversation with Defendant. First, Plaintiff was genuinely interested in
learning more about the goods and services offered by Defendant. Second, Plaintiff is a
“tester” who works to ensure that companies like Defendant abide by the strict privacy
2 According to a recent poll, nearly eight in ten Americans believe that companies do not collect or share consumer data
gathered online, while about seven in ten believe that they remain anonymous when engaged in online activities like web
browsing and chatting. See https://www.ipsos.com/en-us/news-polls/data-privacy-2022 (last downloaded October 2022).
3
After being notified that it had been “caught” violating the law and that a lawsuit was imminent, Defendant belatedly
added a disclosure to its website admitting the accuracy of the allegations herein. See https://www.saucony.com/en/home
(“This chat may be monitored or recorded by us or our providers.”) (last downloaded October 2022).
obligations imposed upon them by California law. As someone who advances
important public interests at the risk of vile personal attacks, Plaintiff should be “praised
rather than vilified.” Murray v. GMAC Mortgage Corp., 434 F.3d 948, 954 (7th Cir.
2006).4
16.
In enacting CIPA, the California legislature intentionally chose to extend
its protections to all “persons” utilizing public telephone lines. Indeed, because they
expressly extend protection to persons beyond “bona fide patrons” or individuals who
suffer pecuniary loss, statutes like CIPA are largely enforced by “testers” such as
Plaintiff. See Tourgeman v. Collins Fin. Servs., Inc., 755 F.3d 1109 (9th Cir. 2014)
(explaining why testers have Article III standing and generally discussing value and
importance of testers in enforcement of consumer protection and civil rights statutes).
17.
Within the statute of limitations period, Plaintiff visited Defendant’s
Website. Plaintiff used a smart phone (a cellular telephones with an integrated
computer to enable web browsing) and had a conversation with Defendant. As such,
Plaintiff’s communications with Defendant were transmitted from a “cellular radio
telephone” as defined by CIPA.
18.
By definition, Defendant’s chat communications from its website are
transmitted to website visitors by telephony subject to the mandates of CIPA. See
https://www.britannica.com/technology/Internet (“The Internet works through a series
of networks that connect devices around the world through telephone lines.”) (last
downloaded October 2022).
19.
Defendant did not inform Plaintiff or Class Members that Defendant was
secretly recording their conversations or allowing, aiding, and abetting a third party to
intercept and eavesdrop on them in real time. Plaintiff did not learn that Defendant
4 American civil rights hero Rosa Parks was also acting as a litigation “tester” when she initiated the Montgomery Bus
Boycott in 1955, as she voluntarily subjected herself to an unlawful practice in order to obtain standing to challenge the
practice. See https://www.naacpldf.org/press-release/ldf-pays-tribute-to-rosa-parks-on-the-sixtieth-anniversary-of-her-
courageous-stand-against-segregation/ “(Contrary to popular myth, Rosa Parks was not just a tired seamstress who merely
wanted to sit down on a bus seat that afternoon. She refused to give up her seat on principle. Parks had long served as the
secretary of the Montgomery branch of the NAACP. Challenging segregation in Montgomery’s transportation system was
on the local civil rights agenda for some time.”) (last downloaded October 2022).
secretly recorded the conversations or allowed a third party to eavesdrop upon it until
after the conversation was completed and additional, highly technical research was
completed.
20.
Defendant did not obtain Class Members’ express or implied consent to
wiretap or allow third parties to eavesdrop on visitor conversations, nor did Class
Members know at the time of the conversations that Defendant was secretly wiretapping
them and allowing third parties to eavesdrop on them.
CLASS ALLEGATIONS
21.
Plaintiff brings this action individually and on behalf of all others similarly
situated (the “Class”) defined as follows:
All persons within California who within the statute of
limitations period: (1) communicated with Defendant via the
chat feature on Defendant’s Website using a cellular telephone,
and
(2)
whose
communications
were
recorded
and/or
eavesdropped upon without prior consent.
22.
NUMEROSITY: Plaintiff does not know the number of Class Members
but believes the number to be in the thousands, if not more. The exact identities of Class
Members may be ascertained by the records maintained by Defendant.
23.
COMMONALITY: Common questions of fact and law exist as to all Class
Members, and predominate over any questions affecting only individual members of the
Class. Such common legal and factual questions, which do not vary between Class
members, and which may be determined without reference to the individual
circumstances of any Class Member, include but are not limited to the following:
a.
Whether Defendant caused electronic communications from class members
with the Website to be recorded, intercepted, and/or monitored;
b.
Whether Defendant aided and abetted a third party in eavesdropping on
such communications;
c.
Whether Plaintiff and Class Members are entitled to statutory penalties;
d.
Whether Class Members are entitled to injunctive relief.
24.
TYPICALITY: As a person who visited Defendant’s Website and whose
chat was recorded, intercepted and eavesdropped upon without prior knowledge or
consent, Plaintiff is asserting claims that are typical of the Class.
25.
ADEQUACY: Plaintiff will fairly and adequately protect the interests of
the members of The Class. Plaintiff has retained attorneys experienced in the class
action litigation. All individuals with interests that are actually or potentially adverse to
or in conflict with the class or whose inclusion would otherwise be improper are
excluded.
26.
SUPERIORITY: A class action is superior to other available methods of
adjudication because individual litigation of the claims of all Class Members is
impracticable and inefficient. Even if every Class Member could afford individual
litigation, the court system could not. It would be unduly burdensome to the courts in
which individual litigation of numerous cases would proceed.
FIRST CAUSE OF ACTION
Violations of the California Invasion of Privacy Act
Cal. Penal Code § 631
27.
Section 631(a) of California’s Penal Code imposes liability upon any entity
that “by means of any machine, instrument, contrivance, or in any other manner,” (1)
“intentionally taps, or makes any unauthorized connection, whether physically,
electrically, acoustically, inductively, or otherwise, with any telegraph or telephone
wire, line, cable, or instrument, including the wire, line, cable, or instrument of any
internal telephonic communication system,” or (2) “willfully and without the consent of
all parties to the communication, or in any unauthorized manner, reads, or attempts to
read, or to learn the contents or meaning of any message, report, or communication
while the same is in transit or passing over any wire, line, or cable, or is being sent
from, or received at any place within this state” or (3) “uses, or attempts to use, in any
manner, or for any purpose, or to communicate in any way, any information so
obtained, or who aids, agrees with, employs, or conspires with any person or persons to
unlawfully do, or permit, or cause to be done any of the acts or things mentioned above
in this section”. Here, Defendant does all three.
28.
Section 631 of the California Penal Code applies to internet
communications and thus applies to Plaintiff’s and the Class’s electronic
communications with Defendant’s Website. “Though written in terms of wiretapping,
Section 631(a) applies to Internet communications. It makes liable anyone who ‘reads,
or attempts to read, or to learn the contents’ of a communication ‘without the consent of
all parties to the communication.’ Javier v. Assurance IQ, LLC, 2022 WL 1744107, at
*1 (9th Cir. 2022).
29.
The software embedded on Defendant’s Website to record and eavesdrop
upon the Class’s communications qualifies as a “machine, instrument, contrivance, or
… other manner” used to engage in the prohibited conduct alleged herein.
30.
At all relevant times, Defendant intentionally caused the internet
communication between Plaintiff and Class Members with Defendant’s Website to be
recorded. Defendant also aided, abetted at least one third party to eavesdrop upon such
conversations during transmission and in real time.
31.
Plaintiff and Class Members did not expressly or impliedly consent to any
of Defendant’s actions.
32.
Defendant’s conduct constitutes numerous independent and discreet
violations of Cal. Penal Code § 631(a), entitling Plaintiff and Class Members to
injunctive relief and statutory damages.
SECOND CAUSE OF ACTION
Violations of the California Invasion of Privacy Act
Cal. Penal Code § 632.7
33.
Section 632.7 of California’s Penal Code imposes liability upon anyone
“who, without the consent of all parties to a communication, intercepts or receives and
intentionally records, or assists in the interception or reception and intentional
recordation of, a communication transmitted between two cellular radio telephones, a
cellular radio telephone and a landline telephone, two cordless telephones, a cordless
telephone and a landline telephone, or a cordless telephone and a cellular radio
telephone.” As summarized by the California Supreme Court in Smith v. Loanme,
under section 632.7(a) it is a crime when a person intercepts or records “a
communication transmitted between a cellular or cordless telephone and another
telephone.” Stated differently, only one party to the conversation needs to be using a
cellular phone for the prohibitions of Section 632.7 to apply.
34.
Section 632.7 defines “Communication” exceptionally broadly –
including not only voice communication, but also communications transmitted by “data,
or image, including facsimile.” Text messages sent from a smart phone to a computer
or internet, like the messages at issue here, are considered data transmissions via
cellular telephony to landline telephony, thus subject to Section 632.7. See
https://www.techtarget.com/searchmobilecomputing/definition/texting (“Text messaging is the act
of sending short, alphanumeric communications between cellphones, pagers or other
hand-held devices, as implemented by a wireless carrier. . . Users can also send text
messages from a computer to a hand-held device. Web texting, as it's called, is made
possible by websites called SMS gateways.”) (last downloaded October 2022).
35.
The prohibitions set forth in Section 637.2 “apply to all communications,
not just confidential communications.” Kearney v. Salomon Smith Barney, Inc. (2006)
39 Cal.4th 95, 122.
36.
Plaintiff and the class members communicated with Defendant using
telephony subject to the mandates and prohibitions of Section 632.7.
37.
Defendant’s communication from the chat feature on its website is
transmitted via telephony subject to the mandates and prohibitions of Section 632.7.
38.
As set forth above, Defendant recorded telephony communication without
the consent of all parties to the communication in violation of Section 632.7.
39.
As set forth above, Defendant also aided and abetted a third party in the
interception, reception, and/or intentional recordation of telephony communication in
violation of Section 632.7.
40.
Defendant’s conduct constitutes numerous independent and discreet
violations of Cal. Penal Code § 632.7, entitling Plaintiff and Class Members to
injunctive relief and statutory damages.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff prays for the following relief against Defendant:
1.
An order certifying the Class, naming Plaintiff as the representative of the
Class and Plaintiff’s attorneys as Class counsel;
2.
An order declaring Defendant’s conduct violates CIPA;
3.
An order of judgment in favor of Plaintiff and the Class and against
Defendant on the causes of action asserted herein;
4.
An order enjoining Defendant’s conduct as alleged herein and any other
injunctive relief that the Court finds proper;
5.
Statutory damages pursuant to CIPA;
6.
Punitive damages;
7.
Prejudgment interest;
8.
Reasonable attorneys’ fees and costs; and
9.
All other relief that would be just and proper as a matter of law or equity,
as determined by the Court.
Dated: October 12, 2022
PACIFIC TRIAL ATTORNEYS, APC
By:
Scott. J. Ferrell
Attorneys for Plaintiff
| privacy |
jhDKFocBD5gMZwczHR5P |
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT SEATTLE
DEBORAH BIRRANE, on her own behalf and
on behalf of other similarly situated persons,
Plaintiff,
Case No.
COMPLAINT FOR INJUNCTIVE
RELIEF AND DAMAGES
v.
TERRY HARMON, an individual; TOM
HARMON, an individual; INTERNATIONAL
CLINIC CONSULTANTS LLC, a Hawaii
company doing business as UNIVERSAL
MEN’S CLINIC and HAWAII MALE
MEDICAL CLINIC; WASHINGTON CLINIC
CONSULTANTS, LLC, a Washington
company doing business as UNIVERSAL
MEN’S CLINIC; MJD MEDICAL P.S., INC.,
a Washington company doing business as
UNIVERSAL MEN’S CLINIC; JOHN DOES
1 - 5; and DOE COMPANIES 1 - 5,
Defendants.
I. INTRODUCTION
1.
With the push of a single button, modern computers can transmit text messages to
millions of telephones. To advertisers, this is a powerful and irresistible method of mass
communication. At very minimal cost, a business can achieve targeted, immediate, and vast
promotion of its brand. At the same time, text messages are uniquely personal. Each
advertisement directs special importance to itself by causing a telephone to buzz or ring, and the
advertisement is placed quite literally into the hands of a consumer.
2.
As this case illustrates, consumers are vulnerable to these technologies. With a
few keystrokes, defendants uploaded thousands of telephone numbers to a computerized text
messaging platform. With a few more clicks, defendants transmitted an advertisement to
thousands of cellular telephones. Defendants intruded upon the lives of consumers,
approximately 12,000 times, by causing beeping, buzzing, and/or ringing, and a text message to
appear on their telephones. Any recipient who stopped what they were doing and reached for
their telephone did not find information from family or greetings from a friend, but instead found
an advertisement regarding erectile dysfunction.
3.
Plaintiff Deborah Birrane (“Representative Plaintiff”), on her own behalf and on
behalf of all other similarly situated persons, brings this Complaint for Injunctive Relief and
Damages to obtain from defendants all damages, injunctive relief, attorneys’ fees, costs, and
other remedies Plaintiffs are entitled to recover under law and equity.
II. JURISDICTION AND VENUE
4.
Federal question jurisdiction exists because Plaintiff asserts legal claims under
federal law, the Telephone Consumer Protection Act, 47 U.S.C. § 227.
5.
Many of the wrongful acts and omissions referenced in this complaint occurred,
were initiated, were furthered, or were given assistance in King County and Washington State.
6.
Defendants conduct business or harmed consumers in King County and
Washington State.
7.
Venue is proper in this Court.
III. PARTIES
8.
Plaintiff Deborah Birrane is an individual domiciled and residing in King County,
Washington.
9.
Defendant Terry Harmon is an entrepreneur who has been involved in at least 16
separate businesses across the United States. One of those businesses is a profit-making
company known as “Universal Men’s Clinic,” which Harmon owns and manages together with
Michael Dimitrion, and James Rautio. Considered together, these three business executives have
been involved in dozens of for-profit companies in California, Hawaii, Nevada, New York,
Oregon, Texas, and Washington.
10.
In late 2011 and early 2012, Harmon, Dimitrion, and Rautio formed a business
plan to sell services and medication for erectile dysfunction and low testosterone. They set out
to form an independently owned branch of “National Male Medical Clinic,” which is a highly
profitable business formed in 1998 with operations in California, Illinois, Indiana, Tennessee,
Texas, and Washington. According to their own marketing materials, Universal Men’s Clinic
has “developed a pattern of customer care and follow-up that generates a high rate of return
patients” and “ever increasing revenue and profit.”
11.
Entrepreneurs Harmon, Dimitrion, and Rautio formulated an aggressive growth
business strategy, which was to quickly establish and market a chain of “Universal Men’s
Clinic” profit centers. They hired a “Regional Manager,” Steve Ponce, who previously had
opened and managed “Male Medical Clinics” in San Diego, Las Vegas, and Los Angeles. Ponce
was hired to scout new business locations and to help execute business growth and expansion.
12.
Defendants opened their first location in April 2012 under the trade name “Hawaii
Male Medical Clinic,” which subsequently was renamed to “Universal Men’s Clinic.” In rapid
succession, Universal Men’s Clinic opened additional locations in Oregon and Washington.
13.
The Washington operation was launched in December 2012. During that month:
(a) the State of Washington opened a revenue account for Washington Clinic Consultants, LLC,
with the trade name “Universal Men’s Clinic” (UBI 603258051) and Terry Harmon listed as the
governing party; (b) defendants registered Washington Clinic Consultants, LLC, with the
Washington Secretary of State, with Terry Harmon and James Rautio listed as the
Members/Managers; (c) defendants opened a revenue account with the State of Washington,
entitled “MJD Medical P.S., Inc.” and the trade name “Universal Men’s Clinic” (UBI
603253668); and (d) defendants registered with the Secretary of State MJD Medical P.S., Inc.
doing business as Universal Men’s Clinic. Each of these entities listed as their business address
1229 Madison Street in Seattle, which is a location of Universal Men’s Clinic. They also used
the same Hawaii mailing address that has been used for Universal Men’s Clinic, Hawaii Male
Medical Clinic, and International Clinic Consultants LLC.
14.
Published reports indicate that Universal Men’s Clinic is targeting additional
profit centers in California, Colorado, Maryland, Nevada, Oregon, Virginia, and Washington.
15.
Universal Men’s Clinic is owned and managed through the business entities
named as defendants herein. These include (a) defendant International Clinic Consultants LLC,
a company organized and operating under the laws of the State of Hawaii and doing business as
Hawaii Male Medical Clinic and Universal Men’s Clinic; (b) Washington Clinic Consultants
LLC, a company organized under the laws of the State of Washington and doing business as
Universal Men’s Clinic; and (c) MJD Medical P.S., Inc., a Washington company doing business
under the Universal Men’s Clinic trade name. Each of these closely held entities is owned and
managed, together or separately, by Terry Harmon, Michael Dimitrion, and James Rautio.
16.
Defendant Tom Harmon is an individual believed to reside in Arlington, Texas.
His ownership and role in Universal Men’s Clinic is unknown at the present time. However,
evidence indicates that Tom Harmon directly participated in the commission of wrongful acts
that are the subject of this complaint.
17.
Messrs. Dimitrion and Rautio are not named as defendants herein pending
discovery into their knowledge of the text messaging at issue in this case, whether they failed to
take efforts to implement appropriate policies or procedures designed to comply with the
Telephone Consumer Protection Act (“TCPA”), or whether they authorized or engaged in
conduct that violated the TCPA. For these reasons, the case caption above names “DOE”
defendants, which may be amended at a later date to include Dimitrion, Rautio, or other
individuals or business entities liable to Plaintiff or Plaintiffs.
18.
All defendants directly or else through other persons acting on their behalf,
conspired to, agreed to, contributed to, assisted with, and/or otherwise caused all of the wrongful
acts and omissions that are the subject of this complaint. But for the conduct of the defendants
and others acting on their behalf, none of the wrongful acts and injuries alleged herein would
have occurred.
IV. FACTUAL ALLEGATIONS
19.
In conjunction with their business strategy of rapid expansion, defendants
launched a coordinated and intensive promotional campaign to lure customers to their newly
opened profit centers. As part of their marketing blitz, defendants intentionally sent unsolicited
and illegal commercial text messages to approximately 12,000 cellular telephones, intending to
reach consumers in Hawaii, Washington, and other states. These text messages were sent using
an automatic telephone dialing system.
20.
After setting up Hawaii Male Medical Clinic, Terry Harmon contracted with
MessageMedia, a company that operates an automatic telephone dialing system. Using the
MessageMedia platform, a user such as Harmon can upload lists of telephone numbers and then
blast mass text messages to those numbers. Terry Harmon signed the contract with
MessageMedia as agent for “Hawaii Male Medical Clinic” and set up the account with user
name “HawaiiMaleMed003.” At all relevant times, the MessageMedia invoices were issued to
and paid by “Hawaii Male Medical Clinic,” and the account listed Terry Harmon’s telephone
number as the primary contact.
21.
It appears that the idea to send spam text messages was hatched on July 18, 2012.
On that date, Tom Harmon called customer service at MessageMedia and asked, “How can we
do a mass text?” In the months that followed, the MessageMedia account for
“HawaiiMaleMed003” was used to send thousands of spam text messages promoting Universal
Men’s Clinic.
22.
Before spam text messages were sent from the “HawaiiMaleMed003” account,
periodic “test” messages were sent to a telephone number used by Tom Harmon, (817) 797-
xxxx. “Tom Harmon” also is named in some of the test messages as an intended recipient.
Likewise, periodic test messages were sent to a telephone number used by Terry Harmon, (817)
797-xxxx.
23.
The first spam text messages from the “HawaiiMaleMed003” account were sent
in February 2013 to promote the opening of defendants’ first Washington location. In
connection with the opening, defendants unleashed a barrage of coordinated marketing and
promotional activities. Terry Harmon led and directed the promotional campaign, assisted by a
public relations firm, Becker Communications, and an advertising and marketing consultant,
Alan Pollock of True Marketing Adventures. Harmon and others traveled to Washington for
presentations, pitches, appearances, and/or interviews with television, radio, print, and electronic
media – such as KING TV, KOMO TV, KIRO Radio, KIRO ESPN Radio, KISW, KOMO News
Radio, FOX KCPQ, KKNW, West Seattle Herald, Seattle Weekly, Seattle Met, the Stranger, and
Seattle Health Magazine. Key to this promotional marketing blitz was the transmission of
unsolicited and illegal text messages.
24.
On February 18, 2013, “HawaiiMaleMed003” sent one of its test messages to the
telephone number used by Terry Harmon. The message stated: “New clinic for MEN, at
SWEDISH MEDICAL on First Hill. Expert Doctors specialize in sexual health and low
testosterone. www.UniversalClinic.com 206.529.1111.” After this test, spam text messages were
then sent to approximately 246 recipients.
25.
Defendants sent spam text messages to promote their Hawaii and Washington
locations, as follows:
APPROXIMATE
DATE
NUMBER OF
CONTENT OF TEXT MESSAGE
MESSAGES SENT
February 18,
2013
246
New clinic for MEN, at SWEDISH MEDICAL on First
Hill. Expert Doctors specialize in sexual health and low
testosterone. www.UniversalClinic.com 206.529.1111
February 20,
2013
1,400
Universal Men's Clinic at SWEDISH MEDICAL on
First Hill. Expert doctors specialize in Sexual Health
and Low Testosterone. www.UniversalClinic.com
808.529.1111
February 26,
2013
1,400
New Clinic for MEN, at SWEDISH MEDICAL on First
Hill. Expert Doctors specialize in sexual health and low
testosterone. www.UniversalClinic.com 206.529.1111
February 28,
2013
1,700
CALL UNIVERSAL MEN'S CLINIC 808-529-0000
to book your appointment. Local Doctors specialize in
male sexual health and low testosterone.
www.UniversalClinic.com
March 4,
20131
2,700
New clinic for MEN. Ala Moana Building-Expert
Doctors specializein Men's Low Testosterone and
Sexual Health. www.UniversalClinic.com
(808) 529.0000
March 6,
2013
1,900
New Clinic for Men at SWEDISH MEDICAL on First
Hill. Expert Doctors specialize in low testosterone and
sexual health. www.UniversalClinic.com (206) 529-
1111
1 On this same day, Terry Harmon called MessageMedia customer service with a technical
question. He identified himself as “Hawaii Male Medical Clinic.”
APPROXIMATE
DATE
NUMBER OF
CONTENT OF TEXT MESSAGE
MESSAGES SENT
March 20,
20132
2,300
Medical Solutions for aging men! Doctors Specialize in
Low Testosterone and Sexual Health. at SWEDISH
MEDICAL on First Hill. UniversalClinic.com
206.529.1111
26.
As part of their marketing scheme, defendants used a system of electronic
transmission devices with the capability to send tens of thousands, if not millions, of text
messages to consumers in an automated manner, and thereby sent the unsolicited text messages
identified above to numerous consumers throughout the United States, including Plaintiff.
Defendants sent far more text messages than humans could manually transmit in an economical
manner. The transmission of so many unsolicited text messages burdened and/or injured the
telecommunications infrastructure through which all text messages must pass. As a consequence,
cellular service providers incurred avoidable costs which negatively impact the price that
consumers like Plaintiffs must pay for cellular telephone services.
27.
Consumers have no effective means to avoid the receipt of unsolicited text
messages. Prior to the transmission of these text messages, none of the consumers to whom these
text messages were directed provided defendants with consent to be sent the text messages.
Defendants did not obtain clear and unmistakably stated consent from the intended recipients
before sending these text messages.
28.
Plaintiff did not provide her cellular telephone number to defendants or their
agents for the purpose of receiving marketing messages via text message or any other telephonic
communication. Nor did she provide authorization or consent to defendants to send her any text
message or to store her personal contact information for purposes of marketing male sexual
health services. Defendants nevertheless sent Plaintiff one of the spam text messages identified
above.
2 On this same day, Terry Harmon called MessageMedia customer service to complain that he
was having difficulty uploading a list of telephone numbers.
29.
By the conduct detailed above, defendants directly and/or through authorized
agents caused the unlawful transmission of text messages to the cellular telephone numbers of
plaintiff and other similarly situated consumers and otherwise engaged in unlawful marketing
and advertising practices.
V. CLASS ACTION ALLEGATIONS
30.
Representative Plaintiff brings this class action on behalf of herself and as a
representative of the following class of persons entitled to remedies under the Telephone
Consumer Protection Act including, but not limited to, damages:
All persons in the United States of America who were sent, to their
cellular telephone numbers, at least one unsolicited text message
by defendants, or someone acting on behalf of a defendant.
31.
Plaintiff’s class claims satisfy all of the requirements for class action certification
pursuant to the Civil Procedure Rules 23(a) and 23(b)(1), 23(b)(2), and 23(b)(3).
32.
Satisfying all requisite numerosity requirements, numerous consumers in the
United States are believed to be members of this class. Joinder of so many class members in to a
single action is impracticable. In fact, given the number of class members, the only way to
deliver substantial justice to all members of the class is by means of a single class action.
33.
There are questions of fact and law common to the class, which predominate over
any questions affecting only individual members. The questions of law and fact common to the
class arising from defendants’ conduct include, without limitation, the following:
a.
Whether defendants negligently, willfully, and/or knowingly caused
violations of the Telephone Consumer Protection Act, 47 U.S.C. § 227, when sending
unsolicited text messages to Representative Plaintiff and the class?
b.
Whether defendants used an automated telephone dialing system
(“ATDS”) to send text messages to Plaintiffs?
c.
What are the statutory damages that the defendants must pay for each of
the unsolicited text messages that the defendants caused to be sent to the Plaintiffs?
34.
The questions set forth above predominate over any questions affecting only
individual persons, and a class action is superior with respect to considerations of consistency,
economy, efficiency, fairness and equity, to other available methods for the fair and efficient
adjudication of Plaintiffs’ claims.
35.
Representative Plaintiff’s claims are typical of those of the class in that she, just
like the other members of the class, was the victim of the unlawful marketing practices
referenced in this complaint. The text message which Representative Plaintiff received is typical
of the text messages which were transmitted to other members of the class.
36.
A class action is the appropriate method for the fair and efficient adjudication of
this controversy. Defendant has acted in a general manner to the damage of the class. The
presentation of separate actions by individual class members could create a risk of inconsistent
and varying adjudications, establish incompatible standards of conduct for Defendant, and/or
substantially impair or impede the ability of class members to protect their interests. Moreover,
the individual damages of each of the Plaintiffs are so low that it would be economically
impracticable for putative class members to bring their claims individually.
37.
A primary factor in Plaintiff’s bringing this case is for final injunctive relief
which is necessary and appropriate to ensure that Defendant ceases its unlawful and wrongful
conduct. A class action is the most efficient means to ensure that Defendant does not injure the
class in the future.
38.
Representative Plaintiff is an adequate representative of the class because she is a
member of the class and her interests do not conflict with the interests of the members of the
class she seeks to represent. The interests of the members of the class will be fairly and
adequately protected by Representative Plaintiff. Representative Plaintiff is represented by
attorneys who have extensive, multi-jurisdictional experience representing clients in complex
class action litigation.
39.
Maintenance of this action as a class action is a fair and efficient method for the
adjudication of this controversy. It would be impractical and undesirable for each member of the
class who suffered harm to bring a separate action. In addition, the maintenance of separate
actions would place a substantial and unnecessary burden on the courts and could result in
inconsistent adjudications, while a single class action can determine, with judicial economy, the
rights of all class members.
40.
If this action is not certified as a class action, then the only way that the court
system will not be overburdened by a multiplicity of suits over the subject matter of this
complaint is if members of the class cannot or do not pursue an action against Defendant for
reasons altogether unrelated to the merits of their claims, e.g., challenges in accessing legal
counsel, the mundane realities of surviving in a challenging economy, et cetera. Most Plaintiffs
can obtain legal representation for their claims only through a class action. The only practical
way to ensure that all members of the class are afforded an opportunity to obtain substantial
justice with regard to the wrongs and injuries inflicted upon them by defendants is to resolve the
subject matter of this complaint through a class action.
VI. FIRST COUNT
Violations of the Telephone Consumer Protection Act
(Representative Plaintiff and the National Class vs. Defendants)
41.
Plaintiff reasserts and re-alleges the allegations set forth in the above paragraphs
as if the same were alleged herein this count.
42.
At all times material herein, Plaintiffs have been entitled to the rights, protections,
and benefits provided under the Telephone Consumer Protection Act, 47 U.S.C. § 227.
43.
Negligently, recklessly, willfully, and/or intentionally, Defendant directly and/or
vicariously engaged in acts, omissions, and/or other actions that violate the Telephone Consumer
Protection Act. Defendants directly and/or vicariously created, designed, deployed, and
otherwise used an ATDS which initiated numerous telephone calls to Plaintiffs’ cellular
telephone numbers. These telephone calls transmitted unsolicited commercial text messages to
the cellular telephones of Representative Plaintiff and the other Plaintiffs as referenced in this
complaint.
44.
Plaintiff and each member of the proposed class are entitled to recover $500 in
damages from the defendants for each violation of the Telephone Consumer Protection Act.
45.
Additionally, Plaintiffs are entitled to all damages referenced herein and in accord
with proof, attorneys’ fees, costs, treble damages, and other remedies allowed by the Telephone
Consumer Protection Act or else otherwise permitted by law.
46.
The defendants should cease their unlawful conduct now and in the future with (a)
a judicial declaration which clearly states the illegality of the conduct and (b) an injunction
barring defendants from engaging in such illegal conduct in the future.
VII. PRAYER FOR RELIEF
WHEREFORE, Representative Plaintiff, and all others similarly situated, demand
judgment against defendants and pray this Court do the following:
A.
Issue a declaration which makes clear the illegality of defendants’ wrongful
conduct.
B.
Grant a permanent injunction enjoining defendants, their officers, successors,
agents, assigns, and all persons in active concert or participation with defendants, from engaging
in the unlawful conduct, including without limitation using an automated telephone dialing
system to send unsolicited text messages.
C.
Order defendants to make Representative Plaintiff and the other class members
whole by providing compensation for past and future pecuniary losses resulting from the
unlawful practices described above in amounts to be determined at trial, but in no event less than
$500.00 for each violation of 47 U.S.C. § 227. et seq.
D.
Order defendants to make Representative Plaintiff and the other class members
whole by providing appropriate prejudgment interest, in an amount to be determined at trial, and
other affirmative relief necessary to eradicate the effects of the unlawful practices.
E.
Order defendants to pay Representative Plaintiff and the other class members
punitive and/or treble damages to the fullest extent allowed by law, including but not limited to
all punitive and/or treble damages for a knowing or willful violation of the Telephone Consumer
Protection Act.
F.
Award Representative Plaintiff and the other class members the costs of this
action, including attorneys’ fees, as authorized by law and/or as sounds in tort, contract, or
G.
Grant any additional or further relief as provided by law or equity which this
Court finds appropriate, equitable, or just.
RESPECTFULLY SUBMITTED: August 1, 2013.
HEYRICH KALISH MCGUIGAN PLLC
1325 Fourth Avenue, Suite 540
Seattle, WA 98101
Tel: (206) 838-2504
Fax: (206) 838-2505
/s/ Donald W. Heyrich
Donald W. Heyrich, WSBA #23091
[email protected]
/s/ Daniel Kalish
Daniel Kalish, WSBA #35815
[email protected]
Attorneys for Plaintiff
| privacy |
9k7MA4kBRpLueGJZICcX | UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
DAVID L. OWENS, SR., Individually and
On Behalf of All Others Similarly Situated,
Plaintiff,
v.
Case No.
CLASS ACTION COMPLAINT FOR
VIOLATIONS OF THE FEDERAL
SECURITIES LAWS
JURY TRIAL DEMANDED
LIFEMD, INC. F/K/A CONVERSION
LABS, INC., JUSTIN SCHREIBER, JUAN
MANUEL PIÑEIRO DAGNERY, and
MARC BENATHEN,
Defendants.
Plaintiff David L. Owens, Sr. (“Plaintiff”), individually and on behalf of all others similarly
situated, by and through his attorneys, alleges the following upon information and belief, except
as to those allegations concerning Plaintiff, which are alleged upon personal knowledge. Plaintiff’s
information and belief is based upon, among other things, his counsel’s investigation, which
includes without limitation: (a) review and analysis of regulatory filings made by LifeMD, Inc.
f/k/a Conversion Labs, Inc. (“LifeMD” or the “Company”) with the United States (“U.S.”)
Securities and Exchange Commission (“SEC”); (b) review and analysis of press releases and media
reports issued by and disseminated by LifeMD; and (c) review of other publicly available
information concerning LifeMD.
NATURE OF THE ACTION AND OVERVIEW
1.
This is a class action on behalf of persons and entities that purchased or otherwise
acquired LifeMD securities between January 19, 2021 and April 13, 2021, inclusive (the “Class
Period”). Plaintiff pursues claims against the Defendants under the Securities Exchange Act of
1934 (the “Exchange Act”).
2.
LifeMD is a direct-to-patient telehealth company. It offers a telemedicine platform
that purports to help patients access licensed providers for diagnoses, virtual care, and prescription
medications.
3.
On April 14, 2021, Culper Research issued a report alleging that “LifeMD appears
to
use
unlicensed
doctors
to
dispense
OTC
medications,
has
implemented
an
autoshipping/autobilling scheme, failed to honor guarantees, and put in place abusive
telemarketing practices.” The report also alleged that several of the Company’s executives were
involved in “wide ranging fraud” at Redwood Scientific, which was charged by the U.S. Federal
Trade Commission for “unlawful autoshipping, abusive telemarketing, and false claims.”
Specifically, according to Culper Research, “many customers are effectively duped into
purchasing subscriptions rather than one-time purchases” and LifeMD “makes cancellations
difficult if not impossible.”
4.
On this news, the Company’s share price fell $2.84, or 24%, to close at $9.00 per
share on April 14, 2021, on unusually heavy trading volume.
5.
Throughout the Class Period, Defendants made materially false and/or misleading
statements, as well as failed to disclose material adverse facts about the Company’s business,
operations, and prospects. Specifically, Defendants failed to disclose to investors: (1) that many of
LifeMD’s executives were associated with Redwood Scientific when it was charged for unlawful
autoshipping, abusive telemarketing, and false claims, and that they employed similar practices at
the Company; (2) that LifeMD engaged in autoshipping products to unwilling customers to record
recurring revenue and the Company made it difficult to cancel such subscriptions; (3) that certain
of the purportedly licensed physicians on the Company’s platform were not in fact licensed and
faced disciplinary action; (4) that, as a result of the foregoing practices, the Company was
reasonably likely to face regulatory scrutiny and/or reputational harm; and (5) that, as a result of
the foregoing, Defendants’ positive statements about the Company’s business, operations, and
prospects were materially misleading and/or lacked a reasonable basis.
6.
As a result of Defendants’ wrongful acts and omissions, and the precipitous decline
in the market value of the Company’s securities, Plaintiff and other Class members have suffered
significant losses and damages.
JURISDICTION AND VENUE
7.
The claims asserted herein arise under Sections 10(b) and 20(a) of the Exchange
Act (15 U.S.C. §§ 78j(b) and 78t(a)) and Rule 10b-5 promulgated thereunder by the SEC (17
C.F.R. § 240.10b-5).
8.
This Court has jurisdiction over the subject matter of this action pursuant to 28
U.S.C. § 1331 and Section 27 of the Exchange Act (15 U.S.C. § 78aa).
9.
Venue is proper in this Judicial District pursuant to 28 U.S.C. § 1391(b) and Section
27 of the Exchange Act (15 U.S.C. § 78aa(c)). Substantial acts in furtherance of the alleged fraud
or the effects of the fraud have occurred in this Judicial District. Many of the acts charged herein,
including the dissemination of materially false and/or misleading information, occurred in
substantial part in this Judicial District. In addition, the Company’s principal executive offices are
in this District.
10.
In connection with the acts, transactions, and conduct alleged herein, Defendants
directly and indirectly used the means and instrumentalities of interstate commerce, including the
United States mail, interstate telephone communications, and the facilities of a national securities
exchange.
PARTIES
11.
Plaintiff David L. Owens, Sr., as set forth in the accompanying certification,
incorporated by reference herein, purchased LifeMD securities during the Class Period, and
suffered damages as a result of the federal securities law violations and false and/or misleading
statements and/or material omissions alleged herein.
12.
Defendant LifeMD is incorporated under the laws of Delaware with its principal
executive offices located in New York. LifeMD’s common stock trades on the NASDAQ
exchange under the symbol “LFMD.” LifeMD was previously known as Conversion Labs, Inc.,
and its common stock traded on the NASDAQ exchange under the symbol “CVLB.” The
Company’s name was changed effective February 19, 2021, and the stock symbol changed
effective February 22, 2021.
13.
Defendant Justin Schreiber (“Schreiber”) was the Company’s Chief Executive
Officer (“CEO”) at all relevant times.
14.
Defendant Juan Manuel Piñeiro Dagnery (“Dagnery”) was the Company’s Chief
Financial Officer (“CFO”) until February 4, 2021.
15.
Defendant Marc Benathen (“Benathen”) has been the Company’s CFO since
February 4, 2021.
16.
Defendants Schreiber, Dagnery, and Benathen (collectively the “Individual
Defendants”), because of their positions with the Company, possessed the power and authority to
control the contents of the Company’s reports to the SEC, press releases and presentations to
securities analysts, money and portfolio managers and institutional investors, i.e., the market. The
Individual Defendants were provided with copies of the Company’s reports and press releases
alleged herein to be misleading prior to, or shortly after, their issuance and had the ability and
opportunity to prevent their issuance or cause them to be corrected. Because of their positions and
access to material non-public information available to them, the Individual Defendants knew that
the adverse facts specified herein had not been disclosed to, and were being concealed from, the
public, and that the positive representations which were being made were then materially false
and/or misleading. The Individual Defendants are liable for the false statements pleaded herein.
SUBSTANTIVE ALLEGATIONS
Background
17.
LifeMD is a direct-to-patient telehealth company. It offers a telemedicine platform
that purports to help patients access licensed providers for diagnoses, virtual care, and prescription
medications.
Materially False and Misleading
Statements Issued During the Class Period
18.
The Class Period begins on January 19, 2021. On that day, the Company announced
its preliminary fourth quarter and full year 2020 financial results in a press release that stated:1
Revenue for the fourth quarter is expected to total $13.6 million, up 265% from
$3.7 million in the fourth quarter of 2019. Revenue for the full year is expected to
total $38.0 million, up 205% from $12.5 million in 2019.
*
*
*
Annual recurring revenue (ARR) generated by subscriptions reached $26.0 million
by the end of the year, up 525% compared to the end of 2019 (see description of
ARR, below). ARR increased by more than $3.0 million from November to
December—another record-setting monthly gain.
Conversion Labs’ head of corporate development, Corey Deutsch, commented:
“Conversion Labs is playing an important role in making healthcare accessible to
now more than 250,000 patients nationwide. We believe our growth in ARR and
continued rapid expansion of this customer base demonstrates strong satisfaction
with our products and services, and we expect it to further strengthen as we execute
our strategic growth objectives in 2021.”
19.
On March 29, 2021, LifeMD announced its fourth quarter and full year 2020
financial results, stating in relevant part:
Q4 Financial Highlights
• Revenue increased 227% to a record $12.9 million.
• 82% of Q4 2020 revenue was generated by subscriptions, up from 48% in
Q4 2019.
• Telemedicine net orders increased 275% to more than 117,000.
• Annual recurring revenue (ARR) from subscriptions at December 31,
2020 reached $53.4 million, up 443% compared to the end of 2019 (see
description of ARR, below). At March 29, 2021, ARR from subscriptions
increased to $75.9 million, up 267% year-over-year.
*
*
*
1 Unless otherwise stated, all emphasis in bold and italics is added hereinafter.
• Launched LifeMD™ telehealth platform (formerly Veritas MD™) to
deliver greater access and convenience to consumers seeking medical
treatment, prescription medications and over-the-counter personal health
products direct-to-home.
20.
On March 29, 2021, LifeMD held a conference call to discuss the fourth quarter
and full year 2020 financial results. During the call, Defendant Schreiber touted that the
“subscription rate for new telemedicine orders has grown from 20% early last year to now more
than 91%” and Defendant Benathen stated that “[a]nnual recurring revenue, or ARR, from
subscriptions at December 31, 2020 reached a record $53.3 million, up 443% compared to the end
of 2019.” Defendant Benathen continued: “As of today, we estimate our ARR from subscriptions
was increased to $75.9 million, up 267% year-over-year.” Defendant Benathen explained
LifeMD’s subscription business, stating:
[M]ost of the subscription revenue and all of it on the telehealth business today is
product driven, so what the customer gathers – on the prescription side say on Rex
or it’s on the OTC or prescription side on Shapiro – they get the products that they
need for their given diagnosis, they will get that subscription every box shipped to
their door[.] [W]e charge them on a recurring basis alternatively, we also do offer
three months subscription options where you will get a three month supply and then
it will get billed every three months. But it’s truly recurring revenue in nature
where we build a customer on a recurring basis every month auto ship, auto
charge.
21.
On March 30, 2021, LifeMD filed its annual report on Form 10-K for the period
ended December 31, 2020 (the “2020 10-K”), affirming the previously reported financial results.
As to the quality of the healthcare providers on its platform, LifeMD stated in its 2020 10-K:
If we are unable to attract and retain high quality healthcare providers for our
customers, our business, financial condition, and results of operations may be
materially and adversely affected.
Our success depends on our continued ability to maintain customer access to a
network of qualified healthcare providers, which include medical doctors,
physician assistants, and nurse practitioners. If we are unable to recruit and retain
licensed physicians and other qualified providers to perform services on our
platform, it could have a material adverse effect on our business and ability to grow
and could adversely affect our results of operations. In any particular market,
providers could demand higher payments or take other actions that could result in
higher medical costs, less attractive service for our customers, or difficulty meeting
regulatory requirements. The failure to maintain or to secure new cost-effective
arrangements with third party medical groups and independent providers on our
platform may result in a loss of, or inability to grow, our customer base, higher
costs, less attractive service for our customers and/or difficulty in meeting
regulatory requirements, any of which could have a material adverse effect on our
business, financial condition, and results of operations.
22.
Regarding LifeMD’s compliance with applicable regulations, the 2020 10-K stated,
in relevant part:
Although we have adopted policies and procedures designed to comply with these
laws and regulations and conduct internal reviews of our compliance with these
laws, our compliance is also subject to governmental review. The growth of our
business and sales organization and our future expansion outside of the United
States may increase the potential of violating these laws or our internal policies and
procedures. The risk of being in violation of these or other laws and regulations is
further increased by the fact that many have not been fully interpreted by the
regulatory authorities or the courts, and their provisions are open to a variety of
interpretations. Any action brought against us for violation of these or other laws
or regulations, even if we successfully defend against it, could cause us to incur
significant legal expenses and divert our management’s attention from the
operation of our business. If our operations are found to be in violation of any of
the federal, state, and foreign laws described above or any other current or future
fraud and abuse or other healthcare laws and regulations that apply to us, we may
be subject to penalties, including significant criminal, civil, and administrative
penalties, damages, and fines, disgorgement, additional reporting requirements and
oversight, imprisonment for individuals and exclusion from participation in
government healthcare programs, such as Medicare and Medicaid, as well as
contractual damages and reputational harm. We could also be required to curtail or
cease our operations. Any of the foregoing consequences could seriously harm our
business and our financial results.
23.
The above statements identified in ¶¶ 18-22 were materially false and/or
misleading, and failed to disclose material adverse facts about the Company’s business, operations,
and prospects. Specifically, Defendants failed to disclose to investors: (1) that many of LifeMD’s
executives were associated with Redwood Scientific when it was charged for unlawful
autoshipping, abusive telemarketing, and false claims, and that they employed similar practices at
the Company; (2) that LifeMD engaged in autoshipping products to unwilling customers to record
recurring revenue and the Company made it difficult to cancel such subscriptions; (3) that certain
of the purportedly licensed physicians on the Company’s platform were not in fact licensed and
faced disciplinary action; (4) that, as a result of the foregoing practices, the Company was
reasonably likely to face regulatory scrutiny and/or reputational harm; and (5) that, as a result of
the foregoing, Defendants’ positive statements about the Company’s business, operations, and
prospects were materially misleading and/or lacked a reasonable basis.
Disclosures at the End of the Class Period
24.
On April 14, 2021, Culper Research issued a report alleging that “LifeMD appears
to
use
unlicensed
doctors
to
dispense
OTC
medications,
has
implemented
an
autoshipping/autobilling scheme, failed to honor guarantees, and put in place abusive
telemarketing practices.” The report also alleged that several of the Company’s executives were
involved in “wide ranging fraud” at Redwood Scientific, which was charged by the U.S. Federal
Trade Commission for “unlawful autoshipping, abusive telemarketing, and false claims.”
Moreover, according to Culper Research, “many customers are effectively duped into purchasing
subscriptions rather than one-time purchases” and LifeMD “makes cancellations difficult if not
impossible.” Specifically, the report discussed LifeMD’s executives involvement with Redwood
Scientific:
LifeMD Executives Omit “Wide Ranging” Redwood Scientific Fraud from
Their Resumes
We are highly concerned that LifeMD executives have not disclosed their
involvement in material fraud, namely in Redwood Scientific, prior to their joining
LifeMD. We find this especially concerning in light of the business practices we
believe are occurring at LifeMD which mirror those that landed Redwood federal
charges. Redwood claimed, in part, to “develop and market consumer homeopathic
drugs and supplements … All the company’s products are sold either through a
membership subscription model (a direct marketing program) or at any given
number of retail locations.” Redwood even claimed a revolutionary product for
erectile dysfunction, just as LifeMD now apparently sells OTC ED pills relying on
unlicensed doctors. However, in October 2018, the FTC took notice and prosecuted
Redwood for what they called a “wide ranging scheme of fraud and deception.”
[image omitted]
Furthermore, the Defendants not only executed the fraud at Redwood, but after it
was discovered, were found to have lied and obstructed the Courts, hiding their
millions in illicit proceeds generated from the scheme. We believe many of these
same practices have made their way to LifeMD, where the Company is now
subjecting itself to the same risks.
Apparently unbeknownst to LifeMD investors, at least 4 current and past LifeMD
executives were intricately involved at Redwood:
- LifeMD CEO Justin Schreiber was Redwood’s own formation agent and
incorporator listed in the Redwood’s initial Puerto Rico formation documents. He
was also a significant shareholder.
- LifeMD CTO Stefan Galluppi was Redwood’s CTO. LFMD initially disclosed
Galluppi’s history with Redwood in its 2016 Form 10-K, yet removed these
disclosures in 2017.
- LifeMD former CFO Juan Manual Pinero Dagnery was a significant Redwood
shareholder.
- Finally, LifeMD former CFO Robert Kalkstein was a significant Redwood
shareholder. LifeMD’s investor presentation omits Redwood from Schreiber’s,
Galluppi’s, and Pinero Dagnery’s biographies, in our view suggesting a cover-up
attempt after the fraud was discovered.
25.
Culper Research also compared the fraudulent practices at Redwood Scientific with
the Company’s current sales tactics, stating:
LifeMD Practices Mirror the Redwood Scientific Fraud
In light of the Company’s apparent cover-up of involvement in the “wide-ranging
fraud” at Redwood (per the FTC), we are particularly concerned by LifeMD
practices which we think mirror those at Redwood. In short, we think LifeMD’s
business is fatally flawed, unsustainable, and likely to draw regulatory scrutiny,
especially in light of Schreiber and Galluppi’s histories:
26.
Culper Research highlighted that certain doctors at the Company’s core businesses
had disciplinary actions and revoked licenses. Specifically, the report stated:
LifeMD’s two core businesses are Shapiro MD (hair loss products at 57% of 2020
product revenues) and RexMD (ED pills and associated products at 42% of 2020
product revenues). We’ve found highly problematic practices at both Shapiro MD
and RexMD.
RexMD’s “Best Physicians” and “Real Doctors” – Meet Dr. Roozbeh Badii
RexMD claims to offer “telemedicine for men”, which in practice means generic
ED pills are prescribed through doctors over the internet. On the Q4 2020
conference call, CEO Schreiber stated that, “our vision has always been to radically
change health care by making access to the best physicians, diagnosis and
treatment, easily accessible, convenient and affordable.” Perhaps Schreiber has a
different definition of “the best physicians”, as the very first doctor listed by
RexMD – Roozbeh Badii – has had his license to practice suspended or otherwise
revoked in several states, including Florida, where the Company still claims he is
licensed to practice:
[image omitted]
In May 2020, the State of Virginia suspended Badii’s license in connection with his
failure to cooperate with an investigation of his telemedicine prescribing practices:
On March 31, 2021, the DEA published notice of the revocation of Badii’s DEA
registration, following the State of Virginia. The order noted that it is a felony to
dispense controlled substances without a current valid license: [image omitted]
- In October 2020, the State of Connecticut suspended Badii’s license,
characterizing his continued practice as “a clear and immediate danger to the public
health and safety.”
- In December 2020, the State of Florida suspended Badii’s license after having
previously placed conditions on his license in November 2017, hence RexMD’s
claim that Badii is licensed in Florida is false.
- Badii was also reprimanded or placed on probation in Maryland (November
2016), Ohio (February 2017), New York (September 2017), Michigan (March
2018), California (June 2018), and Massachusetts (September 2019).
*
*
*
RexMD Also Appears to Have Falsely Claimed Dr. Joshua Kalter is Licensed in
California
Prior to Dr. Badii, a November 2019 archived version of RexMD’s website claimed
another one of its doctors was Dr. Joshua Kalter, a licensed physician in California:
[image omitted]
However, the Medical Board of California shows zero resultsfor any licensed
doctors by the name of Joshua Kalter, indicating that Kalter has never in fact held
a license in California as claimed by RexMD. Docinfo reports that Dr. Kalter is
licensed only in the state of Massachusetts, where a simple Google search also
reveals that he resides. We call on LifeMD to disclose a full list of its so-called
“fully licensed” physicians who have prescribed drugs for the Company in the past
24 months.
27.
According to Culper Research, LifeMD “engages in autoshipping, makes
cancellations difficult if not impossible, and telephones consumers possibly in violation of TCPA
laws.” Specifically, it stated:
LifeMD touts its supposed “recurring revenue” generated from subscriptions,
which in Q4 2020 amounted to 82% of total Company revenues. On the Company’s
most recent conference call, CEO Schreiber himself admits to autoshipping, as he
states, “it’s truly recurring basis every month. It’s auto-shipped, auto-charged.”
This line rings familiar to the one touted by Redwood, which claimed to sell product
through a “membership subscription” model. However, just as for Redwood, we
think many customers are effectively duped into purchasing subscriptions rather
than one-time purchases. See for example a review by “Lady Alopecia”3 which,
even as she compliments the shampoo itself, encourages her readers to order from
Amazon, rather than directly from the Company, as it appears “Shapiro is running
a kind of scam”:
See a table of recent Shapiro MD reviews via Sitejabber, a few of which note
product purchases through Facebook:
Reviews of this kind are not unique to Sitejabber nor to Shapiro MD; see a table of
recent RexMD customer reviews via Trustpilot:
28.
Culper Research further questioned whether LifeMD’s purported telehealth
platform existed because the firm was “unable to find that Veritas MD was even available for
public use.” The report stated:
Back in the real world however, we were unable to find that Veritas MD was even
available for public use. We found no associated apps on either the iOS or Android
stores, nor could we determine any method by which consumers could sign up for
the supposedly “state-of-the-art” telehealth service. Indeed, Veritas MD’s website
only offers rudimentary graphic depictions of an apparently non-existent app, and
a contact form for interested service providers. Per the Q4 2020 conference call in
March 2021, the Company now claims Veritas MD is being rebranded and that
“we’re aiming to launch it this summer.” We thus ask the Company under what
conditions it felt qualified to issue a press release claiming a “launch” in December
2020. We find the claims indicative of management’s willingness to trumpet
promotional material while at the same time sweeping uncomfortable truths under
the rug.
*
*
*
Instead, we think LifeMD is a cash-burning direct marketing response business.
The core driver of Rex MD, the Company’s pill-pushing business, is a paid search
and web marketing operation which only incinerates more shareholder cash over
time. In order to generate traffic to its website, the Company must spend heavily on
Facebook and paid search ads. Top keywords include “Viagra online”, “generic
Viagra”, and “Cialis”. SimilarWeb indicates that RexMD and Shapiro MD traffic
originating from Paid Search and Facebook is multiples higher than for Hims. We
estimate that RexMD spent $18.0 million in marketing spend in Q4 2020 alone,
almost rivaling Hims despite the Company generating just $6.45 million in
revenues compared to $40.1M for Hims[.]
29.
On this news, the Company’s share price fell $2.84, or 24%, to close at $9.00 per
share on April 14, 2021, on unusually heavy trading volume.
CLASS ACTION ALLEGATIONS
30.
Plaintiff brings this action as a class action pursuant to Federal Rule of Civil
Procedure 23(a) and (b)(3) on behalf of a class, consisting of all persons and entities that purchased
or otherwise acquired LifeMD securities between January 19, 2021 and April 13, 2021, inclusive,
and who were damaged thereby (the “Class”). Excluded from the Class are Defendants, the
officers and directors of the Company, at all relevant times, members of their immediate families
and their legal representatives, heirs, successors, or assigns, and any entity in which Defendants
have or had a controlling interest.
31.
The members of the Class are so numerous that joinder of all members is
impracticable. Throughout the Class Period, LifeMD’s shares actively traded on the NASDAQ.
While the exact number of Class members is unknown to Plaintiff at this time and can only be
ascertained through appropriate discovery, Plaintiff believes that there are at least hundreds or
thousands of members in the proposed Class. Millions of LifeMD shares were traded publicly
during the Class Period on the NASDAQ. Record owners and other members of the Class may be
identified from records maintained by LifeMD or its transfer agent and may be notified of the
pendency of this action by mail, using the form of notice similar to that customarily used in
securities class actions.
32.
Plaintiff’s claims are typical of the claims of the members of the Class as all
members of the Class are similarly affected by Defendants’ wrongful conduct in violation of
federal law that is complained of herein.
33.
Plaintiff will fairly and adequately protect the interests of the members of the Class
and has retained counsel competent and experienced in class and securities litigation.
34.
Common questions of law and fact exist as to all members of the Class and
predominate over any questions solely affecting individual members of the Class. Among the
questions of law and fact common to the Class are:
(a)
whether the federal securities laws were violated by Defendants’ acts as
alleged herein;
(b)
whether statements made by Defendants to the investing public during the
Class Period omitted and/or misrepresented material facts about the business, operations, and
prospects of LifeMD; and
(c)
to what extent the members of the Class have sustained damages and the
proper measure of damages.
35.
A class action is superior to all other available methods for the fair and efficient
adjudication of this controversy since joinder of all members is impracticable. Furthermore, as the
damages suffered by individual Class members may be relatively small, the expense and burden
of individual litigation makes it impossible for members of the Class to individually redress the
wrongs done to them. There will be no difficulty in the management of this action as a class action.
UNDISCLOSED ADVERSE FACTS
36.
The market for LifeMD’s securities was open, well-developed and efficient at all
relevant times. As a result of these materially false and/or misleading statements, and/or failures
to disclose, LifeMD’s securities traded at artificially inflated prices during the Class Period.
Plaintiff and other members of the Class purchased or otherwise acquired LifeMD’s securities
relying upon the integrity of the market price of the Company’s securities and market information
relating to LifeMD, and have been damaged thereby.
37.
During the Class Period, Defendants materially misled the investing public, thereby
inflating the price of LifeMD’s securities, by publicly issuing false and/or misleading statements
and/or omitting to disclose material facts necessary to make Defendants’ statements, as set forth
herein, not false and/or misleading. The statements and omissions were materially false and/or
misleading because they failed to disclose material adverse information and/or misrepresented the
truth about LifeMD’s business, operations, and prospects as alleged herein.
38.
At all relevant times, the material misrepresentations and omissions particularized
in this Complaint directly or proximately caused or were a substantial contributing cause of the
damages sustained by Plaintiff and other members of the Class. As described herein, during the
Class Period, Defendants made or caused to be made a series of materially false and/or misleading
statements about LifeMD’s financial well-being and prospects. These material misstatements
and/or omissions had the cause and effect of creating in the market an unrealistically positive
assessment of the Company and its financial well-being and prospects, thus causing the
Company’s securities to be overvalued and artificially inflated at all relevant times. Defendants’
materially false and/or misleading statements during the Class Period resulted in Plaintiff and other
members of the Class purchasing the Company’s securities at artificially inflated prices, thus
causing the damages complained of herein when the truth was revealed.
LOSS CAUSATION
39.
Defendants’ wrongful conduct, as alleged herein, directly and proximately caused
the economic loss suffered by Plaintiff and the Class.
40.
During the Class Period, Plaintiff and the Class purchased LifeMD’s securities at
artificially inflated prices and were damaged thereby. The price of the Company’s securities
significantly declined when the misrepresentations made to the market, and/or the information
alleged herein to have been concealed from the market, and/or the effects thereof, were revealed,
causing investors’ losses.
SCIENTER ALLEGATIONS
41.
As alleged herein, Defendants acted with scienter since Defendants knew that the
public documents and statements issued or disseminated in the name of the Company were
materially false and/or misleading; knew that such statements or documents would be issued or
disseminated to the investing public; and knowingly and substantially participated or acquiesced
in the issuance or dissemination of such statements or documents as primary violations of the
federal securities laws. As set forth elsewhere herein in detail, the Individual Defendants, by virtue
of their receipt of information reflecting the true facts regarding LifeMD, their control over, and/or
receipt and/or modification of LifeMD’s allegedly materially misleading misstatements and/or
their associations with the Company which made them privy to confidential proprietary
information concerning LifeMD, participated in the fraudulent scheme alleged herein.
APPLICABILITY OF PRESUMPTION OF RELIANCE
(FRAUD-ON-THE-MARKET DOCTRINE)
42.
The market for LifeMD’s securities was open, well-developed and efficient at all
relevant times. As a result of the materially false and/or misleading statements and/or failures to
disclose, LifeMD’s securities traded at artificially inflated prices during the Class Period. On
February 17, 2021, the Company’s share price closed at a Class Period high of $30.55 per share.
Plaintiff and other members of the Class purchased or otherwise acquired the Company’s securities
relying upon the integrity of the market price of LifeMD’s securities and market information
relating to LifeMD, and have been damaged thereby.
43.
During the Class Period, the artificial inflation of LifeMD’s shares was caused by
the material misrepresentations and/or omissions particularized in this Complaint causing the
damages sustained by Plaintiff and other members of the Class. As described herein, during the
Class Period, Defendants made or caused to be made a series of materially false and/or misleading
statements about LifeMD’s business, prospects, and operations. These material misstatements
and/or omissions created an unrealistically positive assessment of LifeMD and its business,
operations, and prospects, thus causing the price of the Company’s securities to be artificially
inflated at all relevant times, and when disclosed, negatively affected the value of the Company
shares. Defendants’ materially false and/or misleading statements during the Class Period resulted
in Plaintiff and other members of the Class purchasing the Company’s securities at such artificially
inflated prices, and each of them has been damaged as a result.
44.
At all relevant times, the market for LifeMD’s securities was an efficient market
for the following reasons, among others:
(a)
LifeMD shares met the requirements for listing, and was listed and actively
traded on the NASDAQ, a highly efficient and automated market;
(b)
As a regulated issuer, LifeMD filed periodic public reports with the SEC
and/or the NASDAQ;
(c)
LifeMD regularly communicated with public investors via established
market communication mechanisms, including through regular dissemination of press releases on
the national circuits of major newswire services and through other wide-ranging public disclosures,
such as communications with the financial press and other similar reporting services; and/or
(d)
LifeMD was followed by securities analysts employed by brokerage firms
who wrote reports about the Company, and these reports were distributed to the sales force and
certain customers of their respective brokerage firms. Each of these reports was publicly available
and entered the public marketplace.
45.
As a result of the foregoing, the market for LifeMD’s securities promptly digested
current information regarding LifeMD from all publicly available sources and reflected such
information in LifeMD’s share price. Under these circumstances, all purchasers of LifeMD’s
securities during the Class Period suffered similar injury through their purchase of LifeMD’s
securities at artificially inflated prices and a presumption of reliance applies.
46.
A Class-wide presumption of reliance is also appropriate in this action under the
Supreme Court’s holding in Affiliated Ute Citizens of Utah v. United States, 406 U.S. 128 (1972),
because the Class’s claims are, in large part, grounded on Defendants’ material misstatements
and/or omissions. Because this action involves Defendants’ failure to disclose material adverse
information regarding the Company’s business operations and financial prospects—information
that Defendants were obligated to disclose—positive proof of reliance is not a prerequisite to
recovery. All that is necessary is that the facts withheld be material in the sense that a reasonable
investor might have considered them important in making investment decisions. Given the
importance of the Class Period material misstatements and omissions set forth above, that
requirement is satisfied here.
NO SAFE HARBOR
47.
The statutory safe harbor provided for forward-looking statements under certain
circumstances does not apply to any of the allegedly false statements pleaded in this Complaint.
The statements alleged to be false and misleading herein all relate to then-existing facts and
conditions. In addition, to the extent certain of the statements alleged to be false may be
characterized as forward looking, they were not identified as “forward-looking statements” when
made and there were no meaningful cautionary statements identifying important factors that could
cause actual results to differ materially from those in the purportedly forward-looking statements.
In the alternative, to the extent that the statutory safe harbor is determined to apply to any forward-
looking statements pleaded herein, Defendants are liable for those false forward-looking
statements because at the time each of those forward-looking statements was made, the speaker
had actual knowledge that the forward-looking statement was materially false or misleading,
and/or the forward-looking statement was authorized or approved by an executive officer of
LifeMD who knew that the statement was false when made.
FIRST CLAIM
Violation of Section 10(b) of The Exchange Act and
Rule 10b-5 Promulgated Thereunder
Against All Defendants
48.
Plaintiff repeats and re-alleges each and every allegation contained above as if fully
set forth herein.
49.
During the Class Period, Defendants carried out a plan, scheme and course of
conduct which was intended to and, throughout the Class Period, did: (i) deceive the investing
public, including Plaintiff and other Class members, as alleged herein; and (ii) cause Plaintiff and
other members of the Class to purchase LifeMD’s securities at artificially inflated prices. In
furtherance of this unlawful scheme, plan and course of conduct, Defendants, and each defendant,
took the actions set forth herein.
50.
Defendants (i) employed devices, schemes, and artifices to defraud; (ii) made
untrue statements of material fact and/or omitted to state material facts necessary to make the
statements not misleading; and (iii) engaged in acts, practices, and a course of business which
operated as a fraud and deceit upon the purchasers of the Company’s securities in an effort to
maintain artificially high market prices for LifeMD’s securities in violation of Section 10(b) of the
Exchange Act and Rule 10b-5. All Defendants are sued either as primary participants in the
wrongful and illegal conduct charged herein or as controlling persons as alleged below.
51.
Defendants, individually and in concert, directly and indirectly, by the use, means
or instrumentalities of interstate commerce and/or of the mails, engaged and participated in a
continuous course of conduct to conceal adverse material information about LifeMD’s financial
well-being and prospects, as specified herein.
52.
Defendants employed devices, schemes and artifices to defraud, while in
possession of material adverse non-public information and engaged in acts, practices, and a course
of conduct as alleged herein in an effort to assure investors of LifeMD’s value and performance
and continued substantial growth, which included the making of, or the participation in the making
of, untrue statements of material facts and/or omitting to state material facts necessary in order to
make the statements made about LifeMD and its business operations and future prospects in light
of the circumstances under which they were made, not misleading, as set forth more particularly
herein, and engaged in transactions, practices and a course of business which operated as a fraud
and deceit upon the purchasers of the Company’s securities during the Class Period.
53.
Each of the Individual Defendants’ primary liability and controlling person liability
arises from the following facts: (i) the Individual Defendants were high-level executives and/or
directors at the Company during the Class Period and members of the Company’s management
team or had control thereof; (ii) each of these defendants, by virtue of their responsibilities and
activities as a senior officer and/or director of the Company, was privy to and participated in the
creation, development and reporting of the Company’s internal budgets, plans, projections and/or
reports; (iii) each of these defendants enjoyed significant personal contact and familiarity with the
other defendants and was advised of, and had access to, other members of the Company’s
management team, internal reports and other data and information about the Company’s finances,
operations, and sales at all relevant times; and (iv) each of these defendants was aware of the
Company’s dissemination of information to the investing public which they knew and/or
recklessly disregarded was materially false and misleading.
54.
Defendants had actual knowledge of the misrepresentations and/or omissions of
material facts set forth herein, or acted with reckless disregard for the truth in that they failed to
ascertain and to disclose such facts, even though such facts were available to them. Such
defendants’ material misrepresentations and/or omissions were done knowingly or recklessly and
for the purpose and effect of concealing LifeMD’s financial well-being and prospects from the
investing public and supporting the artificially inflated price of its securities. As demonstrated by
Defendants’ overstatements and/or misstatements of the Company’s business, operations,
financial well-being, and prospects throughout the Class Period, Defendants, if they did not have
actual knowledge of the misrepresentations and/or omissions alleged, were reckless in failing to
obtain such knowledge by deliberately refraining from taking those steps necessary to discover
whether those statements were false or misleading.
55.
As a result of the dissemination of the materially false and/or misleading
information and/or failure to disclose material facts, as set forth above, the market price of
LifeMD’s securities was artificially inflated during the Class Period. In ignorance of the fact that
market prices of the Company’s securities were artificially inflated, and relying directly or
indirectly on the false and misleading statements made by Defendants, or upon the integrity of the
market in which the securities trades, and/or in the absence of material adverse information that
was known to or recklessly disregarded by Defendants, but not disclosed in public statements by
Defendants during the Class Period, Plaintiff and the other members of the Class acquired
LifeMD’s securities during the Class Period at artificially high prices and were damaged thereby.
56.
At the time of said misrepresentations and/or omissions, Plaintiff and other
members of the Class were ignorant of their falsity, and believed them to be true. Had Plaintiff
and the other members of the Class and the marketplace known the truth regarding the problems
that LifeMD was experiencing, which were not disclosed by Defendants, Plaintiff and other
members of the Class would not have purchased or otherwise acquired their LifeMD securities,
or, if they had acquired such securities during the Class Period, they would not have done so at the
artificially inflated prices which they paid.
57.
By virtue of the foregoing, Defendants violated Section 10(b) of the Exchange Act
and Rule 10b-5 promulgated thereunder.
58.
As a direct and proximate result of Defendants’ wrongful conduct, Plaintiff and the
other members of the Class suffered damages in connection with their respective purchases and
sales of the Company’s securities during the Class Period.
SECOND CLAIM
Violation of Section 20(a) of The Exchange Act
Against the Individual Defendants
59.
Plaintiff repeats and re-alleges each and every allegation contained above as if fully
set forth herein.
60.
Individual Defendants acted as controlling persons of LifeMD within the meaning
of Section 20(a) of the Exchange Act as alleged herein. By virtue of their high-level positions and
their ownership and contractual rights, participation in, and/or awareness of the Company’s
operations and intimate knowledge of the false financial statements filed by the Company with the
SEC and disseminated to the investing public, Individual Defendants had the power to influence
and control and did influence and control, directly or indirectly, the decision-making of the
Company, including the content and dissemination of the various statements which Plaintiff
contends are false and misleading. Individual Defendants were provided with or had unlimited
access to copies of the Company’s reports, press releases, public filings, and other statements
alleged by Plaintiff to be misleading prior to and/or shortly after these statements were issued and
had the ability to prevent the issuance of the statements or cause the statements to be corrected.
61.
In particular, Individual Defendants had direct and supervisory involvement in the
day-to-day operations of the Company and, therefore, had the power to control or influence the
particular transactions giving rise to the securities violations as alleged herein, and exercised the
62.
As set forth above, LifeMD and Individual Defendants each violated Section 10(b)
and Rule 10b-5 by their acts and omissions as alleged in this Complaint. By virtue of their position
as controlling persons, Individual Defendants are liable pursuant to Section 20(a) of the Exchange
Act. As a direct and proximate result of Defendants’ wrongful conduct, Plaintiff and other
members of the Class suffered damages in connection with their purchases of the Company’s
securities during the Class Period.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff prays for relief and judgment, as follows:
(a)
Determining that this action is a proper class action under Rule 23 of the Federal
Rules of Civil Procedure;
(b)
Awarding compensatory damages in favor of Plaintiff and the other Class members
against all defendants, jointly and severally, for all damages sustained as a result of Defendants’
wrongdoing, in an amount to be proven at trial, including interest thereon;
(c)
Awarding Plaintiff and the Class their reasonable costs and expenses incurred in
this action, including counsel fees and expert fees; and
(d)
Such other and further relief as the Court may deem just and proper.
JURY TRIAL DEMANDED
Plaintiff hereby demands a trial by jury.
Dated: April 16, 2021
By: /s/ Gregory B. Linkh
GLANCY PRONGAY & MURRAY LLP
Gregory B. Linkh (GL-0477)
230 Park Ave., Suite 358
New York, NY 10169
Telephone: (212) 682-5340
Facsimile: (212) 884-0988
Email: [email protected]
Robert V. Prongay
Charles H. Linehan
Pavithra Rajesh
1925 Century Park East, Suite 2100
Los Angeles, CA 90067
Telephone: (310) 201-9150
Facsimile: (310) 201-9160
THE LAW OFFICES OF FRANK R. CRUZ
Frank R. Cruz
1999 Avenue of the Stars, Suite 1100
Los Angeles, CA 90067
Telephone: (310) 914-5007
Attorneys for Plaintiff David L. Owens Sr.
LIFEMD, INC. SECURITIES LITIGATION
I, David L. Owens Sr., certify that:
1. I have reviewed the Complaint and authorize its filing and/or the filing of a Lead
Plaintiff motion on my behalf.
2. I did not purchase the LifeMD, Inc. securities that are the subject of this action at the
direction of plaintiff’s counsel or in order to participate in any private action arising
under this title.
3. I am willing to serve as a representative party on behalf of a class and will testify at
deposition and trial, if necessary.
4. My transactions in LifeMD, Inc. securities during the Class Period set forth in the
Complaint are as follows:
(See attached transactions)
5. I have not sought to serve, nor served, as a representative party on behalf of a class
under this title during the last three years, except for the following:
6. I will not accept any payment for serving as a representative party, except to receive
my pro rata share of any recovery or as ordered or approved by the court, including
the award to a representative plaintiff of reasonable costs and expenses (including lost
wages) directly relating to the representation of the class.
I declare under penalty of perjury that the foregoing are true and correct statements.
4/14/2021
________________
_________________________________________
Date
David L. Owens Sr.
David L. Owens Sr.'s Transactions in LifeMD, Inc. (LFMD)
Date
Transaction Type
Quantity
Unit Price
1/19/2021
Bought
204
$7.64
1/19/2021
Bought
23
$7.72
1/19/2021
Bought
100
$7.72
1/19/2021
Bought
100
$7.72
1/19/2021
Bought
100
$7.72
1/26/2021
Bought
216
$14.25
2/4/2021
Bought
100
$21.45
2/4/2021
Bought
172
$23.22
2/4/2021
Bought
172
$23.14
2/5/2021
Bought
4
$21.97
2/22/2021
Bought
72
$26.38
2/23/2021
Bought
42
$19.90
2/23/2021
Bought
100
$19.86
3/2/2021
Bought
185
$19.20
3/3/2021
Bought
1
$15.74
3/3/2021
Bought
58
$15.80
3/3/2021
Bought
100
$16.29
3/3/2021
Bought
58
$16.55
3/3/2021
Bought
60
$17.20
3/3/2021
Bought
115
$17.24
3/4/2021
Bought
96
$14.02
3/4/2021
Bought
110
$14.13
3/5/2021
Bought
1
$16.16
3/5/2021
Bought
3
$16.37
| consumer fraud |
hU9R_ogBF5pVm5zY_yIr |
Case No. ______________
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF MICHIGAN
THOMAS WINARSKI, individually and on
behalf of all others similarly situated,
CLASS ACTION COMPLAINT
Plaintiff,
JURY TRIAL DEMANDED
v.
BIBLICAL ARCHAEOLOGY SOCIETY,
INC.,
Defendant.
Plaintiff Thomas Winarski (“Plaintiff”), individually and on behalf of all
others similarly situated, by and through his attorneys, makes the following
allegations pursuant to the investigation of his counsel and based upon information
and belief, except as to allegations specifically pertaining to himself and his counsel,
which are based on personal knowledge.
INTRODUCTION
1.
Defendant Biblical Archaeology Society, Inc. (“BAS”) rented,
exchanged, and/or otherwise disclosed detailed information about Plaintiff’s
Biblical Archaeology Review magazine subscription to data aggregators, data
appenders, data cooperatives, and list brokers, among others, which in turn disclosed
his information to aggressive advertisers, political organizations, and non-profit
companies. As a result, Plaintiff has received a barrage of unwanted junk mail. By
renting, exchanging, and/or otherwise disclosing Plaintiff’s Private Reading
Information (defined below) during the relevant pre-July 31, 2016 time period,1 BAS
violated Michigan’s Preservation of Personal Privacy Act, H.B. 5331, 84th Leg.
Reg. Sess., P.A. No. 378, §§ 1-4 (Mich. 1988), id. § 5, added by H.B. 4694, 85th
Leg. Reg. Sess., P.A. No. 206, § 1 (Mich. 1989) (the “PPPA”).2
2.
Documented evidence confirms these facts. For example, a list broker,
NextMark, Inc. (“NextMark”), offers to provide renters access to the mailing list
titled “Biblical Archaeology Review Mailing List”, which contains the Private
Reading Information of 121,364 of BAS’s active U.S. subscribers at a base price of
“$110.00/M [per thousand],” (i.e., 11.0 cents apiece), as shown in the screenshot
below:
1
The statutory period for this action is six years. See M.C.L. § 600.5813.
2
In May 2016, the Michigan legislature amended the PPPA. See S.B. 490, 98th
Leg., Reg. Sess., P.A. No. 92 (Mich. 2016) (codified at M.C.L. § 445.1711, et seq.).
The May 2016 amendment to the PPPA, which became effective on July 31, 2016,
does not apply retroactively to claims that accrued prior to its July 31, 2016 effective
date. See Boelter v. Hearst Commc’ns, Inc., 192 F. Supp. 3d 427, 439-41 (S.D.N.Y.
2016) (holding that “the amendment to the [PP]PA does not apply to Plaintiffs’
claims, and the Court will assess the sufficiency of those claims under the law as it
was when Plaintiffs’ claims accrued.”) (citing Landgraf v. USI Film Prods., 511 U.S.
224, 286 (1994)). Because the claims alleged herein accrued, and thus vested, prior
to the July 31, 2016 effective date of the amended version of the PPPA, the pre-
amendment version of the PPPA applies in this case. See Horton v. GameStop,
Corp., 380 F. Supp. 3d 679, 683 (W.D. Mich. 2018).
See Exhibit A hereto.
3.
By renting, exchanging, or otherwise disclosing the Private Reading
Information of its Michigan-based subscribers during the relevant pre-July 31, 2016
time period, BAS violated the PPPA. Subsection 2 of the PPPA provides:
[A] person, or an employee or agent of the person,
engaged in the business of selling at retail, renting, or
lending books or other written materials . . . shall not
disclose to any person, other than the customer, a record
or information concerning the purchase . . . of those
materials by a customer that indicates the identity of the
customer.
PPPA § 2.
4.
Accordingly, Plaintiff brings this Class Action Complaint against BAS
for its intentional and unlawful disclosure of its customers’ Private Reading
Information in violation of the PPPA.
NATURE OF THE CASE
5.
To supplement its revenues, BAS rents, exchanges, or otherwise
discloses its customers’ information—including their full names, titles of
publications subscribed to, and home addresses (collectively “Private Reading
Information”), as well as myriad other categories of individualized data and
demographic information such as gender—to data aggregators, data appenders, data
cooperatives, and other third parties without the written consent of its customers.
6.
By renting, exchanging, or otherwise disclosing – rather than selling –
its customers’ Private Reading Information, BAS is able to disclose the information
time and time again to countless third parties.
7.
BAS’s disclosure of Private Reading Information and other
individualized information is not only unlawful, but also dangerous because it allows
for the targeting of particularly vulnerable members of society.
8.
While BAS profits handsomely from the unauthorized rental,
exchange, and/or disclosure of its customers’ Private Reading Information and other
individualized information, it does so at the expense of its customers’ statutory
privacy rights (afforded by the PPPA) because BAS does not obtain its customers’
written consent prior to disclosing their Private Reading Information.
PARTIES
9.
Plaintiff Thomas Winarski is a natural person and citizen of the State
of Michigan and resides in Gladwin, Michigan. Plaintiff was a subscriber to Biblical
Archaeology Review magazine, including prior to July 31, 2016. Biblical
Archaeology Review magazine is published by BAS. While residing in, a citizen of,
and present in Michigan, Plaintiff purchased his subscription to Biblical
Archaeology Review magazine directly from BAS. Prior to and at the time Plaintiff
subscribed to Biblical Archaeology Review, BAS did not notify Plaintiff that it
discloses the Private Reading Information of its customers, and Plaintiff has never
authorized BAS to do so. Furthermore, Plaintiff was never provided any written
notice that BAS rents, exchanges, or otherwise discloses its customers’ Private
Reading Information, or any means of opting out. Since subscribing to Biblical
Archaeology Review, and during the relevant pre-July 31, 2016 time period, BAS
disclosed, without the requisite consent or prior notice, Plaintiff’s Private Reading
Information to data aggregators, data appenders, and/or data cooperatives, who then
supplement that information with data from their own files. Moreover, during that
same period, BAS rented or exchanged mailing lists containing Plaintiff’s Private
Reading Information to third parties seeking to contact BAS subscribers, without
first obtaining the requisite written consent from Plaintiff or even giving him prior
notice of the rentals, exchanges, and/or other disclosures.
10.
Defendant Biblical Archaeology Society, Inc. is a Washington, D.C.
corporation with its headquarters and principal place of business in Washington D.C.
BAS does business throughout Michigan and the entire United States. BAS is the
publisher of Biblical Archaeology Review.
JURISDICTION AND VENUE
11.
This Court has subject matter jurisdiction over this civil action
pursuant to 28 U.S.C. § 1332(d) because there are more than 100 class members and
the aggregate amount in controversy exceeds $5,000,000, exclusive of interest, fees,
and costs, and at least one Class member is a citizen of a state different from
Defendant.
12.
The Court has personal jurisdiction over BAS because Plaintiff’s
claims arose in substantial part from actions and omissions in Michigan, including
from Plaintiff’s purchase of a Biblical Archaeology Review subscription in
Michigan, BAS’s direction of such Biblical Archaeology Review subscription into
Michigan, and BAS’s failure to obtain Plaintiff’s written consent in Michigan prior
to disclosing his Private Reading Information, including his residential address in
Michigan, to another person, the effects of which were felt from within Michigan by
a citizen and resident of Michigan. Personal jurisdiction also exists over BAS in
Michigan because BAS conducts substantial business within Michigan, such that
BAS has significant, continuous, and pervasive contacts with the State of Michigan.
13.
Venue is proper in this District pursuant to 28 U.S.C. § 1391 because
Plaintiff resides in this judicial District, BAS does substantial business in this
judicial District, BAS is subject to personal jurisdiction in this judicial District, and
a substantial part of the events giving rise to Plaintiff’s claims took place within this
judicial District.
FACTUAL BACKGROUND
Michigan’s Preservation of Personal Privacy Act
14.
In 1988, members of the United States Senate warned that records of
consumers’ purchases and rentals of audiovisual and publication materials offer “a
window into our loves, likes, and dislikes,” and that “the trail of information
generated by every transaction that is now recorded and stored in sophisticated
record-keeping systems is a new, more subtle and pervasive form of surveillance.”
S. Rep. No. 100-599 at 7–8 (1988) (statements of Sens. Simon and Leahy,
respectively).
15.
Recognizing the need to further protect its citizens’ privacy rights,
Michigan’s legislature enacted the PPPA to protect “privacy with respect to the
purchase, rental, or borrowing of certain materials,” by prohibiting companies from
disclosing certain types of sensitive consumer information. H.B. No. 5331, 1988
Mich. Legis. Serv. 378 (West).
16.
Subsection 2 of the PPPA states:
[A] person, or an employee or agent of the person,
engaged in the business of selling at retail, renting, or
lending books or other written materials . . . shall not
disclose to any person, other than the customer, a record
or information concerning the purchase . . . of those
materials by a customer that indicates the identity of the
customer.
PPPA § 2 (emphasis added).
17.
Michigan’s protection of reading information reflects the “gut feeling
that people ought to be able to read books and watch films without the whole world
knowing,” and recognizes that “[b]ooks and films are the intellectual vitamins that
fuel the growth of individual thought. The whole process of intellectual growth is
one of privacy—of quiet, and reflection. This intimate process should be protected
from the disruptive intrusion of a roving eye.” S. Rep. No. 100–599, at 6 (Statement
of Rep. McCandless).
18.
As Senator Patrick Leahy recognized in proposing the Video and
Library Privacy Protection Act (later codified as the Video Privacy Protection Act,
18 U.S.C. § 2710), “[i]n practical terms our right to privacy protects the choice of
movies that we watch with our family in our own homes. And it protects the
selection of books that we choose to read.” 134 Cong. Rec. S5399 (May 10, 1988).
19.
Senator Leahy also explained why choices in movies and reading
materials are so private: “These activities . . . reveal our likes and dislikes, our
interests and our whims. They say a great deal about our dreams and ambitions, our
fears and our hopes. They reflect our individuality, and they describe us as people.”
20.
Michigan’s passage of the PPPA also established as a matter of law
“that a person’s choice in reading, music, and video entertainment is a private matter,
and not a fit subject for consideration by gossipy publications, employers, clubs, or
anyone else for that matter.” Privacy: Sales, Rentals of Videos, etc., House
Legislative Analysis Section, H.B. No. 5331, Jan. 20, 1989 (attached hereto as
Exhibit B).
21.
Despite the fact that thousands of Michigan residents subscribe to
BAS’s publications, BAS disregarded its legal responsibility by systematically
violating the PPPA.
The Private Information Market:
Consumers’ Private Information Has Real Value
22.
In 2001, Federal Trade Commission (“FTC”) Commissioner Orson
Swindle remarked that “the digital revolution . . . has given an enormous capacity
to the acts of collecting and transmitting and flowing of information, unlike anything
we’ve ever seen in our lifetimes . . . [and] individuals are concerned about being
defined by the existing data on themselves.”3
23.
More than a decade later, Commissioner Swindle’s comments ring
truer than ever, as consumer data feeds an information marketplace that supports a
$26 billion dollar per year online advertising industry in the United States.4
24.
The FTC has also recognized that consumer data possesses inherent
monetary value within the new information marketplace and publicly stated that:
Most consumers cannot begin to comprehend the types
and amount of information collected by businesses, or why
their information may be commercially valuable. Data is
currency. The larger the data set, the greater potential for
analysis—and profit.5
25.
In fact, an entire industry exists while companies known as data
3
Exhibit C, The Information Marketplace: Merging and Exchanging
Consumer
Data
(Mar.
13,
2001),
at
8:15-11:16,
available
at
https://www.ftc.gov/sites/default/files/documents/public_events/information-
marketplace-merging-and-exchanging-consumer-data/transcript.pdf (last visited
July 30, 2021).
4
See Exhibit D, Web’s Hot New Commodity: Privacy, WSJ (Feb. 28, 2011),
http://online.wsj.com/article/SB10001424052748703529004576160764037920274
.html (last visited July 30, 2021).
5
Exhibit E, Statement of FTC Commissioner Pamela Jones Harbour (Dec.
7, 2009), at 2, available at
https://www.ftc.gov/sites/default/files/documents/public_statements/remarks-ftc-
exploring-privacy-roundtable/091207privacyroundtable.pdf (last visited July 30,
2021).
aggregators purchase, trade, and collect massive databases of information about
consumers. Data aggregators then profit by selling this “extraordinarily intrusive”
information in an open and largely unregulated market.6
26.
The scope of data aggregators’ knowledge about consumers is
immense: “If you are an American adult, the odds are that [they] know[] things like
your age, race, sex, weight, height, marital status, education level, politics, buying
habits, household health worries, vacation dreams—and on and on.”7
27.
Further, “[a]s use of the Internet has grown, the data broker industry
has already evolved to take advantage of the increasingly specific pieces of
information about consumers that are now available.”8
28.
Recognizing the serious threat the data mining industry poses to
consumers’ privacy, on July 25, 2012, the co-Chairmen of the Congressional Bi-
6
See Exhibit F, Martha C. White, Big Data Knows What You’re Doing Right
Now, TIME.com (July 31, 2012), http://moneyland.time.com/2012/07/31/big-data-
knows-what-youre-doing-right-now/ (last visited July 30, 2021).
7
Exhibit G, Natasha Singer, You for Sale: Mapping, and Sharing, the
Consumer
Genome,
N.Y.
Times
(June
16,
2012),
available
at
https://www.immagic.com/eLibrary/ARCHIVES/GENERAL/GENPRESS/N12061
6S.pdf (last visited July 30, 2021).
8
Exhibit H, Letter from Senator John D. Rockefeller IV, Chairman, Senate
Committee on Commerce, Science, and Transportation, to Scott E. Howe, Chief
Executive
Officer,
Acxiom
(Oct.
9,
2012)
available
at
http://www.commerce.senate.gov/public/?a=Files.Serve&File_id=3bb94703-5ac8-
4157-a97b-a658c3c3061c (last visited July 30, 2021).
Partisan Privacy Caucus sent a letter to nine major data brokerage companies
seeking information on how those companies collect, store, and sell their massive
collections of consumer data.9
29.
In their letter, the co-Chairmen recognized that “[b]y combining data
from numerous offline and online sources, data brokers have developed hidden
dossiers on every U.S. consumer,” which “raises a number of serious privacy
concerns.”10
30.
Data aggregation is especially troublesome when consumer
information is sold to direct-mail advertisers. In addition to causing waste and
inconvenience, direct-mail advertisers often use consumer information to lure
unsuspecting consumers into various scams,11 including fraudulent sweepstakes,
charities, and buying clubs. Thus, when companies like BAS share information with
data aggregators, data cooperatives, and direct-mail advertisers, they contribute to
the “[v]ast databases” of consumer data that are often “sold to thieves by large
9
See Exhibit I, Bipartisan Group of Lawmakers Query Data Brokers About
Practices Involving Consumers’ Personal Information, Website of Senator Ed
Markey
(July
24,
2012),
http://www.markey.senate.gov/news/press-
releases/bipartisan-group-of-lawmakers-query-data-brokers-about-practices-
involving-consumers-personal-information (last visited July 30, 2021).
10
Id.
11
See
Exhibit
J,
Prize
Scams,
Federal
Trade
Commission,
http://www.consumer.ftc.gov/articles/0199-prize-scams (last visited July 30, 2021).
publicly traded companies,” which “put[s] almost anyone within the reach of
fraudulent telemarketers” and other criminals.12
31.
Information disclosures like those made by BAS are particularly
dangerous to the elderly. “Older Americans are perfect telemarketing customers,
analysts say, because they are often at home, rely on delivery services, and are lonely
for the companionship that telephone callers provide.”13 The FTC notes that “[t]he
elderly often are the deliberate targets of fraudulent telemarketers who take
advantage of the fact that many older people have cash reserves or other assets to
spend on seemingly attractive offers.”14 Indeed, an entire black market exists where
the private information of vulnerable elderly Americans is exchanged.
32.
Thus, information disclosures like BAS’s are particularly troublesome
because of their cascading nature: “Once marked as receptive to [a specific] type of
spam, a consumer is often bombarded with similar fraudulent offers from a host of
12
Exhibit K, Charles Duhigg, Bilking the Elderly, With a Corporate Assist,
N.Y.
Times,
May
20,
2007,
available
at
http://www.nytimes.com/2007/05/20/business/20tele.html (last visited July 30,
2021).
13
Id.
14
Exhibit L, Fraud Against Seniors: Hearing before the Senate Special
Committee on Aging (August 10, 2000) (prepared statement of the FTC), available
at
https://www.ftc.gov/sites/default/files/documents/public_statements/prepared-
statement-federal-trade-commission-fraud-against-seniors/agingtestimony.pdf (last
visited July 30, 2021).
scam artists.”15
33.
BAS is not alone in jeopardizing its subscribers’ privacy and well-
being in exchange for increased revenue: disclosing subscriber information to data
aggregators, data appenders, data cooperatives, direct marketers, and other third
parties is a widespread practice in the publishing industry.
34.
Thus, as consumer data has become an ever-more valuable
commodity, the data mining industry has experienced rapid and massive growth.
Unfortunately for consumers, this growth has come at the expense of their most
basic privacy rights.
Consumers Place Monetary Value on their Privacy and
Consider Privacy Practices When Making Purchases
35.
As the data aggregation and cooperative industry has grown, so too
have consumer concerns regarding the privacy of their information.
36.
A recent survey conducted by Harris Interactive on behalf of
TRUSTe, Inc. showed that 89 percent of consumers polled avoid doing business
with companies who they believe do not protect their privacy online.16 As a result,
15
See id.
16
See Exhibit M, 2014 TRUSTe US Consumer Confidence Privacy Report,
TRUSTe, http://www.theagitator.net/wp-
content/uploads/012714_ConsumerConfidenceReport_US1.pdf (last visited July
30, 2021).
81 percent of smartphone users polled said that they avoid using smartphone apps
that they don’t believe protect their privacy online.17
37.
Thus, as consumer privacy concerns grow, consumers are increasingly
incorporating privacy concerns and values into their purchasing decisions and
companies viewed as having weaker privacy protections are forced to offer greater
value elsewhere (through better quality and/or lower prices) than their privacy-
protective competitors.
38.
In fact, consumers’ private information has become such a valuable
commodity that companies are beginning to offer individuals the opportunity to sell
their information themselves.18
39.
These companies’ business models capitalize on a fundamental tenet
underlying the consumer information marketplace: consumers recognize the
economic value of their private data. Research shows that consumers are willing to
pay a premium to purchase services from companies that adhere to more stringent
policies of protecting their data.19
17
Id.
18
See Exhibit N, Joshua Brustein, Start-Ups Seek to Help Users Put a Price on
Their
Personal
Data,
N.Y.
Times
(Feb.
12,
2012),
available
at
http://www.nytimes.com/2012/02/13/technology/start-ups-aim-to-help-users-put-a-
price-on-their-personal-data.html (last visited July 30, 2021).
19
See Exhibit O, Tsai, Cranor, Acquisti, and Egelman, The Effect of Online
Privacy Information on Purchasing Behavior, 22(2) Information Systems Research
40.
Thus, in today’s economy, individuals and businesses alike place a
real, quantifiable value on consumer data and corresponding privacy rights.20
BAS Unlawfully Rents, Exchanges, And Discloses Its Customers’ Private
Reading Information
41.
BAS maintains a vast digital database comprised of its customers’
Private Reading Information. BAS discloses its customers’ Private Reading
Information to data aggregators and appenders, who then supplement that
information with additional sensitive private information about each BAS customer,
including his or her gender. (See, e.g., Exhibit A).
42.
BAS then rents and/or exchanges its mailing lists—which include
subscribers’ Private Reading Information identifying which individuals purchased
subscriptions to particular magazines, and can include the sensitive information
obtained from data aggregators and appenders—to other data aggregators and
appenders, other consumer-facing businesses, non-profit organizations seeking to
raise awareness and solicit donations, and to political organizations soliciting
254, 254 (2011) discussed in see also European Network and Information Security
Agency, Study on monetising privacy (Feb. 27, 2012), available at
https://www.enisa.europa.eu/activities/identity-and-
trust/library/deliverables/monetising-privacy (last visited July 30, 2021).
20
See Exhibit P, Hann, et al., The Value of Online Information Privacy: An
Empirical Investigation (Oct. 2003) at 2, available at
http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.321.6125&rep=rep1&ty
pe=pdf (last visited July 30, 2021) (“The real policy issue is not whether
consumers value online privacy. It is obvious that people value online privacy.”).
donations, votes, and volunteer efforts. (See Exhibit A).
43.
BAS also discloses its customers’ Private Reading Information to data
cooperatives, who in turn give BAS access to their own mailing list databases.
44.
As a result of BAS’s data compiling and sharing practices, companies
can purchase and/or obtain mailing lists from BAS that identify BAS’s customers
by their most intimate details such as their gender. BAS’s disclosures of such
sensitive and private information puts consumers, especially the more vulnerable
members of society, at risk of serious harm from scammers.
45.
BAS does not seek its customers’ prior consent, written or otherwise,
to any of these disclosures and its customers remain unaware that their Private
Reading Information and other sensitive information is being rented and exchanged
on the open market.
46.
During the relevant pre-July 31, 2016 time period, consumers
purchased subscriptions to BAS’s publications through numerous media outlets,
including the Internet, telephone, or traditional mail. Regardless of how the
consumer subscribes, BAS never required the individual to read or affirmatively
agree to any terms of service, privacy policy, or information-sharing policy during
the relevant pre-July 31, 2016 time period. Consequently, during the relevant pre-
July 31, 2016 time period, BAS uniformly failed to obtain any form of consent from
– or even provide effective notice to – its customers before disclosing their Private
Reading Information.
47.
As a result, BAS disclosed its customers’ Private Reading Information
– including their reading habits and preferences that can “reveal intimate facts about
our lives, from our political and religious beliefs to our health concerns”21 – to
anybody willing to pay for it.
48.
By and through these actions, BAS has intentionally disclosed to third
parties its Michigan customers’ Private Reading Information without consent, in
direct violation of the PPPA.
CLASS ACTION ALLEGATIONS
49.
Plaintiff seeks to represent a class defined as all Michigan residents
who, at any point during the relevant pre-July 31, 2016 time period, had their Private
Reading Information disclosed to third parties by BAS without consent (the
“Class”). Excluded from the Class is any entity in which Defendant has a controlling
interest, and officers or directors of Defendant.
50.
Members of the Class are so numerous that their individual joinder
herein is impracticable. On information and belief, members of the Class number in
the thousands. The precise number of Class members and their identities are
unknown to Plaintiff at this time but may be determined through discovery. Class
21
Exhibit Q, California’s Reader Privacy Act Signed into Law, Electronic
Frontier Foundation (Oct. 3, 2011), https://www.eff.org/press/archives/2011/10/03
(last visited July 30, 2021).
members may be notified of the pendency of this action by mail and/or publication
through the distribution records of Defendant.
51.
Common questions of law and fact exist as to all Class members and
predominate over questions affecting only individual Class members. Common
legal and factual questions include, but are not limited to: (a) whether BAS is a
“retailer or distributor” of publications (i.e., magazines); (b) whether BAS obtained
consent before disclosing to third parties Plaintiff’s and the Class’s Private Reading
Information; and (c) whether BAS’s disclosure of Plaintiff’s and the Class’s Private
Reading Information violated the PPPA.
52.
The claims of the named Plaintiff are typical of the claims of the Class
in that the named Plaintiff and the Class suffered invasions of their statutorily
protected right to privacy (as afforded by the PPPA) as a result of Defendant’s
uniform wrongful conduct, based upon Defendant’s disclosure of Plaintiff’s and the
Class’s Private Reading Information.
53.
Plaintiff is an adequate representative of the Class because his interests
do not conflict with the interests of the Class members he seeks to represent, he has
retained competent counsel experienced in prosecuting class actions, and he intends
to prosecute this action vigorously. The interests of Class members will be fairly
and adequately protected by Plaintiff and his counsel.
54.
The class mechanism is superior to other available means for the fair
and efficient adjudication of the claims of Class members. Each individual Class
member may lack the resources to undergo the burden and expense of individual
prosecution of the complex and extensive litigation necessary to establish
Defendant’s liability. Individualized litigation increases the delay and expense to
all parties and multiplies the burden on the judicial system presented by the complex
legal and factual issues of this case. Individualized litigation also presents a potential
for inconsistent or contradictory judgments. In contrast, the class action device
presents far fewer management difficulties and provides the benefits of single
adjudication, economy of scale, and comprehensive supervision by a single court on
the issue of Defendant’s liability. Class treatment of the liability issues will ensure
that all claims and claimants are before this Court for consistent adjudication of the
liability issues.
CAUSE OF ACTION
Violation of Michigan’s Preservation of Personal Privacy Act
(PPPA § 2)
55.
Plaintiff repeats the allegations contained in the foregoing paragraphs
as if fully set forth herein.
56.
Plaintiff brings this claim individually and on behalf of members of the
Class against Defendant BAS.
57.
As a magazine publisher that sells subscriptions to consumers, BAS is
engaged in the business of selling written materials at retail. See PPPA § 2.
58.
By purchasing a subscription to Biblical Archaeology Review
magazine, Plaintiff purchased written materials directly from BAS. See PPPA § 2.
59.
Because Plaintiff purchased written materials directly from BAS, he is
a “customer” within the meaning of the PPPA. See PPPA § 1.
60.
At various times during the pre-July 31, 2016 time period, BAS
disclosed Plaintiff’s Private Reading Information, which identified him as a Biblical
Archaeology Review customer, in at least three ways.
61.
First, BAS disclosed mailing lists containing Plaintiff’s Private
Reading Information to data aggregators and data appenders, who then
supplemented the mailing lists with additional sensitive information from their own
databases, before sending the mailing lists back to BAS.
62.
Second, BAS disclosed mailing lists containing Plaintiff’s Private
Reading Information to data cooperatives, who in turn gave BAS access to their own
mailing list databases.
63.
Third, BAS rented and/or exchanged its mailing lists containing
Plaintiff’s Private Reading Information—enhanced with additional information
from data aggregators and appenders—to third parties, including other consumer-
facing companies, direct-mail advertisers, and organizations soliciting monetary
contributions, volunteer work, and votes.
64.
Because the mailing lists included the additional information from the
data aggregators and appenders, the lists were more valuable, and BAS was able to
increase its profits gained from the mailing list rentals and/or exchanges.
65.
By renting, exchanging, or otherwise disclosing its customer lists,
during the relevant pre-July 31, 2016 time period, BAS disclosed to persons other
than Plaintiff records or information concerning his purchase of written materials
from BAS. See PPPA § 2.
66.
The information BAS disclosed indicates Plaintiff’s name and address,
as well as the fact that he subscribed to Biblical Archaeology Review. Accordingly,
the records or information disclosed by BAS indicated Plaintiff’s identity. See PPPA
67.
Plaintiff and the members of the Class never consented to BAS
disclosing their Private Reading Information to anyone.
68.
Worse yet, Plaintiff and the members of the Class did not receive notice
before BAS disclosed their Private Reading Information to third parties.
69.
BAS’s disclosures of Plaintiff’s and the Class’s Private Reading
Information during the relevant pre-July 31, 2016 time period were not made
pursuant to a court order, search warrant, or grand jury subpoena.
70.
BAS’s disclosures of Plaintiff’s and the Class’s Private Reading
Information during the relevant pre-July 31, 2016 time period were not made to
collect payment for their subscriptions.
71.
BAS’s disclosures of Plaintiff’s Private Reading Information during the
relevant pre-July 31, 2016 time period were made to data aggregators, data
appenders, data cooperatives, direct-mail advertisers, and organizations soliciting
monetary contributions, volunteer work, and votes—all in order to increase BAS’s
revenue. Accordingly, BAS’s disclosures were not made for the exclusive purpose
of marketing goods and services directly to Plaintiff and the members of the Class.
72.
By disclosing Plaintiff’s and the Class’s Private Reading Information
during the relevant pre-July 31, 2016 time period, BAS violated Plaintiff’s and the
Class’s statutorily protected right to privacy in their reading habits. See PPPA § 2.
73.
As a result of BAS’s unlawful disclosure of their Private Reading
Information, Plaintiff and the members of the Class have suffered invasions of their
statutorily protected right to privacy (afforded by the PPPA). On behalf of himself
and the Class, Plaintiff seeks: (1) $5,000.00 to Plaintiff and each Class member
pursuant to PPPA § 5(a); and (2) costs and reasonable attorneys’ fees pursuant to
PPPA § 5(b).
PRAYER FOR RELIEF
WHEREFORE, Plaintiff, individually and on behalf of all others similarly
situated, seeks a judgment against Defendant as follows:
A.
For an order certifying the Class under Rule 23 of the
Federal Rules of Civil Procedure and naming Plaintiff as
representative of the Class and Plaintiff’s attorneys as Class
Counsel to represent the Class;
B.
For an order declaring that Defendant’s conduct as
described herein violated the Preservation of Personal
Privacy Act;
C.
For an order finding in favor of Plaintiff and the Class on
all counts asserted herein;
D.
For an award of $5,000 to Plaintiff and each Class member,
as provided by the Preservation of Personal Privacy Act,
PPPA § 5(a);
E.
For prejudgment interest on all amounts awarded; and
F.
For an order awarding Plaintiff and the Class their
reasonable attorneys’ fees and expenses and costs of suit.
JURY DEMAND
Plaintiff demands a trial by jury on all causes of action and issues so triable.
Dated: August 12, 2022
Respectfully submitted,
THOMAS WINARSKI,
/s/ E. Powell Miller
E. Powell Miller (P39487)
Sharon S. Almonrode (P33938)
Dennis A. Lienhardt (P81118)
William Kalas (P82113)
THE MILLER LAW FIRM, P.C.
950 W. University Drive, Suite 300
Rochester, MI 48307
Tel: 248-841-2200
[email protected]
[email protected]
[email protected]
[email protected]
Joseph I. Marchese
Philip L. Fraietta
BURSOR & FISHER, P.A.
888 Seventh Avenue
New York, New York 10019
Tel: 646.837.7150
Fax: 212.989.9163
[email protected]
[email protected]
Frank S. Hedin
Arun G. Ravindran
HEDIN HALL LLP
1395 Brickell Avenue, Suite 1140
Miami, Florida 33131
Tel: 305.357.2107
Fax: 305.200.8801
[email protected]
[email protected]
Counsel for Plaintiff and the Putative Class
| privacy |
D-H8EIcBD5gMZwcz2HH_ | UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
Deloise Guyton, on behalf of herself and
others similarly situated,
Plaintiff,
v.
Civil Action No.: 3:21-cv-629
CLASS ACTION COMPLAINT
JURY TRIAL DEMANDED
Abrahamsen Gindin, LLC,
Defendant.
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Nature of Action
1.
Deloise Guyton (“Plaintiff”) brings this class action under the Fair Debt
Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692 et seq., for the benefit of (1)
Florida consumers whose private, debt-related information Abrahamsen Gindin,
LLC (“Defendant”) disclosed to an unauthorized third party, in connection with the
collection of consumer debts, and (2) Florida consumers who have been subject to
Defendant’s debt collection efforts.
2.
Congress enacted the FDCPA in 1977 to “eliminate abusive debt
collection practices by debt collectors, to insure that those debt collectors who
refrain from using abusive debt collection practices are not competitively
disadvantaged,” 15 U.S.C. § 1692(e), and in response to “abundant evidence of the
use of abusive, deceptive, and unfair debt collection practices by many debt
collectors,” which Congress found to have contributed “to the number of personal
bankruptcies, to marital instability, to the loss of jobs, and to invasions of individual
privacy.” Id., § 1692(a).
3.
As the Consumer Financial Protection Bureau (“CFPB”)—the federal
agency tasked with enforcing the FDCPA—once explained, “[h]armful debt
collection practices remain a significant concern today. In fact, the CFPB receives
more consumer complaints about debt collection practices than about any other
issue.”1
4.
Pertinent here, section 1692c(b) of the FDCPA, titled “Communication
with third parties,” states:
Except as provided in section 1692b of this title, without the prior
consent of the consumer given directly to the debt collector, or the
express permission of a court of competent jurisdiction, or as
reasonably necessary to effectuate a postjudgment judicial remedy, a
debt collector may not communicate, in connection with the collection
of any debt, with any person other than the consumer, his attorney, a
consumer reporting agency if otherwise permitted by law, the creditor,
the attorney of the creditor, or the attorney of the debt collector.
15 U.S.C. § 1692c(b).
5.
The provision that section 1692c(b) cross-references—section 1692b—
governs the manner in which a debt collector may communicate “with any person
1
See Brief for the CFPB as Amicus Curiae, ECF No. 14, p. 10, Hernandez v.
Williams, Zinman, & Parham, P.C., No. 14-15672 (9th Cir. Aug. 20, 2014),
http://www.ftc.gov/system/files/documents/amicus_briefs/hernandez-v.williams-
zinman-parham-p.c./140821briefhernandez1.pdf (last visited June 21, 2021).
other than the consumer for the purpose of acquiring location information.” 15
U.S.C. § 1692b.
6.
The FDCPA thus broadly prohibits a debt collector from
communicating with anyone other than the consumer “in connection with the
collection of any debt,” subject to several carefully crafted exceptions—some
enumerated in section 1692c(b), and others in section 1692b—none of which are
applicable here.
7.
Despite this prohibition—one designed to protect consumers’
privacy—debt collectors, including Defendant, often send information regarding
consumers’ alleged debts to third-party mail vendors.
8.
Indeed, “over 85 percent of debt collectors surveyed by the [CFPB]
reported using letter vendors.”2
9.
These third-party mail vendors use information provided by debt
collectors—such as a consumer’s name, the name of the creditor to whom a debt is
allegedly owed, the name of an original creditor, and the amount of an alleged debt—
to fashion, print, and mail debt collection letters to consumers.
2
See
https://www.federalregister.gov/documents/2019/05/21/2019-
09665/debt-collection-practices-regulation-f#citation-749-p23396 at n. 749 (last
accessed June 21, 2021).
10.
This unnecessary practice exposes private information regarding
alleged debts to third parties not exempted by the FDCPA.
11.
Upon information and belief, Defendant routinely provides, in
connection with the collection of consumer debts, protected information regarding
consumer debts to third-party mail vendors in violation of the FDCPA.
12.
Plaintiff therefore seeks relief for herself and on behalf of similarly
situated Florida consumers to whom Defendant sent debt collection letters that were
prepared, printed, or mailed by a third-party mail vendor.
13.
Separately, the Florida Consumer Collection Practices Act (“FCCPA”),
Fla. Stat., § 559.55 et seq., was enacted with a similar goal as the FDCPA, namely
“to eliminate abusive and harassing tactics in the collection of debts.” Brindise v.
U.S. Bank Nat’l Ass’n, 183 So. 3d 1215, 1221 (Fla. 2d DCA 2016), rev. denied, No.
SC16–300, 2016 WL 1122325 (Fla. Mar. 22, 2016).
14.
Pursuant to the FCCPA, prior to engaging in any business in Florida, a
person who acts as a consumer collection agency must register with the State of
Florida Office of Financial Regulation. Fla. Stat., § 559.555(1).
15.
The Florida legislature determined this licensing requirement to be of
such import to the citizens of Florida that it made a violator of this provision subject
to up to one year in jail. Fla. Stat., § 559.785.
16.
Despite engaging in consumer debt collection activities in Florida,
Defendant is not registered as a consumer collection agency.
17.
As a result, Plaintiff also seeks relief for herself and on behalf of
similarly situated Florida consumers with whom Defendant engaged in debt
collection activity.
Parties
18.
Plaintiff is a natural person who at all relevant times resided in
Jacksonville, Florida.
19.
Plaintiff is obligated, or allegedly obligated, to pay a debt owed or due,
or asserted to be owed or due, a creditor other than Defendant.
20.
Plaintiff’s obligation, or alleged obligation, owed or due, or asserted to
be owed or due, arises from a transaction in which the money, property, insurance,
or services that are the subject of the transaction were incurred primarily for
personal, family, or household purposes—namely, a personal car loan (the “Debt”).
21.
Plaintiff is a “consumer” as defined by 15 U.S.C. § 1692a(3).
22.
Defendant is a professional limited liability company with its principal
office in Dickson City, Pennsylvania.
23.
Defendant is an entity that at all relevant times was engaged, by use of
the mails and telephone, in the business of attempting to collect a “debt” from
Plaintiff, as defined by 15 U.S.C. § 1692a(5).
24.
Defendant describes itself as “a multi-state creditor’s rights law firm
focused in the area of consumer collections.”3
25.
At the time Defendant attempted to collect the Debt from Plaintiff, the
Debt was in default, or Defendant treated the Debt as if it were in default from the
time that Defendant acquired it for collection.
26.
Defendant uses instrumentalities of interstate commerce or the mails in
a business the principal purpose of which is the collection of any debts, or to
regularly collect or attempt to collect, directly or indirectly, debts owed or due, or
asserted to be owed or due, another.
27.
Defendant is a “debt collector” as defined by the FDCPA, 15 U.S.C. §
1692a(6).
28.
Defendant identified itself as a debt collector in its written
communication to Plaintiff.
Jurisdiction and Venue
29.
This Court has jurisdiction under 15 U.S.C. § 1692k(d) and 28 U.S.C.
§ 1331.
30.
Venue is proper before this Court under 28 U.S.C. § 1391(b) as a
substantial part of the events giving rise to the claims occurred in this district, and
3
See https://www.ag-lawllc.com/ (last visited June 21, 2021).
as Defendant caused debt collection correspondence to be sent to Plaintiff in this
district.
Factual Allegations
31.
On or about March 9, 2021, Defendant caused a written communication
to be sent to Plaintiff at her Jacksonville, Florida address, in connection with the
collection of the Debt.
32.
A true and correct copy of the March 9, 2021 communication to
Plaintiff is attached, in redacted form, as Exhibit A.
33.
Defendant attempted to collect a debt from Plaintiff in Florida even
though Defendant is not registered with the state of Florida as a consumer collection
agency.
34.
The March 9, 2021 letter disclosed the “amount due” on the Debt. Ex.
35.
The March 9, 2021 letter identified the creditor to whom Defendant
alleged the Debt is and was owed. Id.
36.
The March 9, 2021 letter identified the merchant that originated the
subject obligation. Id.
37.
The March 9, 2021 letter identified additional information regarding
the Debt, including a client account number, Defendant’s file number, as well as
Plaintiff’s home address. Id.
38.
Defendant did not print the March 9, 2021 letter.
39.
Rather, Defendant, in connection with the collection of a consumer
debt, provided information regarding Plaintiff and the Debt, including Plaintiff’s
name, address, the amount of the Debt, and other private details regarding the Debt,
to a third-party mail vendor.
40.
The third-party mail vendor then printed the March 9, 2021
communication and sent it to Plaintiff.
41.
The return address on the March 9, 2021 communication does not
match Defendant’s address.
42.
The return address on the March 9, 2021 communication includes a
P.O. Box in Oaks, Pennsylvania that is associated with RevSpring, Inc., a third-party
mail vendor and software company.
43.
RevSpring is owned by private equity firm GTCR LLC.
44.
RevSpring maintains corporate offices in Oaks, Pennsylvania and
offers comprehensive print and mail services, among other services.4
45.
RevSpring
touts
that
“North
America’s
leading
healthcare
organizations, revenue cycle management, and accounts receivables management
companies trust us to maximize their financial results through dynamic and
4
https://revspringinc.com/about/ (last visited June 21, 2021).
personalized print, online, phone, email, and text communications and self-service
payment options.”5
46.
Plaintiff did not provide consent to Defendant to communicate or share
any information about the Debt with RevSpring.
47.
Plaintiff did not provide consent to Defendant to communicate or share
any information about the Debt with any third-party mail vendor.
48.
A third-party mail vendor printed the March 9, 2021 communication
sent to Plaintiff.
49.
A third-party mail vendor mailed the March 9, 2021 communication to
Plaintiff.
50.
RevSpring printed the March 9, 2021 communication sent to Plaintiff.
51.
RevSpring mailed the March 9, 2021 communication to Plaintiff.
52.
Defendant transmitted information regarding the Debt to RevSpring.
53.
Defendant provided Plaintiff’s name to RevSpring.
54.
Defendant provided Plaintiff’s address to RevSpring.
55.
Defendant provided the amount of the Debt to RevSpring.
56.
Defendant provided the name of the creditor of the Debt to RevSpring.
57.
Defendant provided the client account number it associates with the
Debt to RevSpring.
5
Id.
Class Action Allegations
58.
Plaintiff brings this action as a class action pursuant to Federal Rules of
Civil Procedure 23(a) and (b)(3) on behalf of two classes consisting of:
Vendor Class: All persons (a) with a Florida address, (b) to which
Abrahamsen Gindin, LLC sent, or caused to be sent, a written debt
collection communication, (c) in connection with the collection of a
consumer debt, (d) that was printed or mailed by a third-party vendor,
(e) where Defendant provided the vendor with information contained
in the mailed communication in the one year preceding the date of this
complaint through the date of class certification.
Florida Collection Class: All persons (a) with a Florida address, (b)
from whim Abrahamsen Gindin, LLC attempted to collect a consumer
debt, (c) in the one year preceding the date of this complaint through
the date of class certification.
59.
Excluded from the classes is Defendant, its officers and directors,
members of their immediate families and their legal representatives, heirs,
successors, or assigns, and any entity in which Defendant has or had controlling
interests.
60.
The classes satisfy Rule 23(a)(1) because, upon information and belief,
they are so numerous that joinder of all members is impracticable.
61.
The exact number of class members is unknown to Plaintiff at this time
and can only be determined through appropriate discovery.
62.
The classes are ascertainable because they are defined by reference to
objective criteria.
63.
In addition, upon information and belief, the names and addresses of all
members of the proposed classes can be identified through business records
maintained by Defendant.
64.
The classes satisfy Rules 23(a)(2) and (3) because Plaintiff’s claims are
typical of the claims of the members of the classes.
65.
To be sure, Plaintiff’s claims and those of the members of the Vendor
Class originate from the same practice utilized by Defendant—the communication
with and sending of personal, private information regarding alleged debts to a third-
party mail vendor—and Plaintiff thus possesses the same interests and has suffered
the same injuries as each member of the Vendor Class.
66.
As well, Plaintiff’s claims and those of the members of the Florida
Collection Class originate from the same practice utilized by Defendant—its
attempts to collect debts from persons in Florida despite not being registered with
the state of Florida—and Plaintiff thus possesses the same interests and has suffered
the same injuries as each member of the Florida Collection Class.
67.
Plaintiff satisfies Rule 23(a)(4) because she will fairly and adequately
protect the interests of the members of the classes and has retained counsel
experienced and competent in class action litigation.
68.
Plaintiff has no interests that are contrary to or in conflict with the
members of the classes that she seeks to represent.
69.
A class action is superior to all other available methods for the fair and
efficient adjudication of this controversy since, upon information and belief, joinder
of all members is impracticable.
70.
Furthermore, as the damages suffered by individual members of the
classes may be relatively small, the expense and burden of individual litigation could
make it impracticable for the members of the classes to individually redress the
wrongs done to them.
71.
There will be no unusual difficulty in the management of this action as
a class action.
72.
Issues of law and fact common to the members of the classes
predominate over any questions that may affect only individual members, in that
Defendant has acted on grounds generally applicable to the classes.
73.
Among the issues of law and fact common to the classes:
a. Defendant’s violations of the FDCPA as Plaintiff alleges;
b. whether Defendant is a debt collector as defined by the FDCPA;
c. whether Defendant’s communications with third-party mail vendors
regarding consumers’ alleged debts violate the FDCPA;
d. whether Defendant was registered as consumer collection agency with
the State of Florida Office of Financial Regulation;
e. the availability of declaratory relief;
f. the availability of actual damages and statutory penalties; and
g. the availability of attorneys’ fees and costs.
74.
Absent a class action, Defendant’s violations of the law will be allowed
to proceed without a full, fair, judicially supervised remedy.
Count I: Violation of the Fair Debt Collection Practices Act, 15 U.S.C. §
1692c(b), on behalf of Plaintiff and the Vendor Class
75.
Plaintiff repeats and re-alleges each and every factual allegation
contained in paragraphs 1 through 74 above.
76.
Pertinent here, the FDCPA at 15 U.S.C. § 1692c(b) provides that “a
debt collector may not communicate, in connection with the collection of any debt,
with any person other than the consumer, his attorney, a consumer reporting agency
if otherwise permitted by law, the creditor, the attorney of the creditor, or the
attorney of the debt collector.”
77.
By communicating regarding the Debt, including by disclosing, among
other things, the existence of the Debt, the amount owed, Plaintiff’s home address,
and the alleged creditor, with a third-party mail vendor, Defendant violated 15
U.S.C. § 1692c(b). Hunstein v. Preferred Collection & Mgmt. Servs., Inc., 994 F.3d
1341 (11th Cir. 2021).
78.
The harm Plaintiff suffered is particularized in that Defendant’s
communications to a third party involved her alleged debt and private, personal
information.
79.
And the violation of Plaintiff’s right not to have her private information
shared with third parties is a concrete injury sufficient to confer standing.
80.
To be sure, the harm Plaintiff alleges here—disclosure of private
information of a personal, sensitive nature to a third-party vendor—is precisely the
type of abusive debt collection practice that the FDCPA was designed to prevent.
81.
Additionally, by communicating with a third party in connection with
the collection of the Debt, Defendant harmed Plaintiff by invading her privacy.
82.
That is, by communicating with a third party in connection with the
collection of the Debt, Defendant harmed Plaintiff by disclosing private facts about
her and the Debt.
Count II: Violation of the Fair Debt Collection Practices Act, 15 U.S.C. §
1692e, on behalf of Plaintiff and the Florida Collection Class
83.
Plaintiff repeats and re-alleges each and every factual allegation
contained in paragraphs 1 through 74 above.
84.
The FDCPA at 15 U.S.C. § 1692e provides that “[a] debt collector may
not use any false, deceptive, or misleading representation or means in connection
with the collection of any debt.”
85.
No entity may engage in business in Florida as a consumer collection
agency, or continue to do business in Florida as a consumer collection agency,
without first registering with the State of Florida Office of Financial Regulation, and
thereafter maintaining a valid registration.
86.
Defendant attempted to collect the Debt from Plaintiff even though
Defendant had not registered as a consumer collection agency with the State of
Florida Office of Financial Regulation at the time it sent a collection letter to her.
87.
Defendant is still not registered as a consumer collection agency with
the State of Florida Office of Financial Regulation.
88.
Defendant’s attempts to collect the Debt from Plaintiff at a time when
Defendant was barred by Florida law from doing so constitutes a false, deceptive,
and misleading representation or means in connection with the collection of the
89.
The harm suffered by Plaintiff is particularized in that the violative debt
collection conduct was directed at her personally and regarded her personal alleged
90.
The FCCPA’s registration requirement furthers the purpose of
protecting debtors from abusive debt collection activity by requiring any person who
engages in collection activity in Florida to obtain a license to do so, allowing the
state of Florida greater oversight of such activity.
91.
The Florida legislature’s determination that a debt collector’s failure to
register under Fla. Stat. § 559.555 and subsequent pursuit of unauthorized debt
collection activity is a misdemeanor criminal act demonstrates the seriousness with
which the State of Florida deems violations of the FCCPA’s registration
requirement.
92.
Moreover, section 1692e of the FDCPA was enacted to prevent and
curb abusive debt collection conduct.
93.
And Defendant’s action in attempting to collect the Debt from Plaintiff
when Defendant was not registered with the State of Florida Office of Financial
Regulation created a material risk of harm to the concrete interest Congress was
trying to protect in enacting the FDCPA by exposing Plaintiff to abusive practices
by an unlicensed collection agency.
94.
In addition, Defendant’s actions invaded a specific private right created
by Congress, and the invasion of that right creates the risk of real harm
Count III: Violation of the Fair Debt Collection Practices Act, 15 U.S.C. §
1692f, on behalf of Plaintiff and the Florida Collection Class
95.
Plaintiff repeats and re-alleges each and every factual allegation
contained in paragraphs 1 through 74.
96.
The FDCPA at 15 U.S.C. § 1692f provides that “[a] debt collector may
not use unfair or unconscionable means to collect or attempt to collect any debt.”
97.
No entity may engage in business in Florida as a consumer collection
agency, or continue to do business in Florida as a consumer collection agency,
without first registering with the State of Florida Office of Financial Regulation, and
thereafter maintaining a valid registration.
98.
Defendant attempted to collect the Debt from Plaintiff even though
Defendant had not registered as a consumer collection agency with the State of
Florida Office of Financial Regulation at the time it sent a collection letter to her.
99.
Defendant is still not registered as a consumer collection agency with
the State of Florida Office of Financial Regulation.
100. Defendant’s attempts to collect the Debt from Plaintiff at a time when
Defendant was barred by Florida law from doing so constitutes an unfair or
unconscionable means to collect or attempt to collect the Debt.
101. The harm suffered by Plaintiff is particularized in that the violative debt
collection conduct was directed to her personally and regarded her personal alleged
102. The FCCPA’s registration requirement furthers the purpose of
protecting debtors from abusive debt collection activity by requiring any person who
engages in collection activity in Florida to obtain a license to do so, allowing the
state of Florida greater oversight of such activity.
103. The Florida legislature’s determination that a debt collector’s failure to
register under Fla. Stat. § 559.555 and subsequent pursuit of unauthorized debt
collection activity is a misdemeanor criminal act demonstrates the seriousness with
which the State of Florida deems violations of the FCCPA’s registration
requirement.
104. Moreover, section 1692f of the FDCPA was enacted to prevent and
curb abusive debt collection conduct.
105. And Defendant’s action in attempting to collect the Debt from Plaintiff
when Defendant was not registered with the State of Florida Office of Financial
Regulation created a material risk of harm to the concrete interest Congress was
trying to protect in enacting the FDCPA by exposing Plaintiff to abusive practices
by an unlicensed collection agency.
106. In addition, Defendant’s actions invaded a specific private right created
by Congress, and the invasion of that right creates the risk of real harm.
WHEREFORE, Plaintiff respectfully requests relief and judgment as follows:
A. Determining that this action is a proper class action under Rule 23 of
the Federal Rules of Civil Procedure;
B. Adjudging and declaring that Defendant violated 15 U.S.C. § 1692c(b),
15 U.S.C. § 1692e, and 15 U.S.C. § 1692f;
C. Awarding Plaintiff and members of the classes statutory damages
pursuant to 15 U.S.C. § 1692k;
D. Awarding members of the classes actual damages incurred, as
applicable, pursuant to 15 U.S.C. § 1692k;
E. Enjoining Defendant from future violations of 15 U.S.C. § 1692c(b)
with respect to Plaintiff and the Vendor Class;
F. Enjoining Defendant from future violations of 15 U.S.C. § 1692e and
15 U.S.C. § 1692f with respect to Plaintiff and the Florida Collection
Class;
G. Awarding Plaintiff and members of the classes their reasonable costs
and attorneys’ fees incurred in this action, including expert fees,
pursuant to 15 U.S.C. § 1692k and Rule 23 of the Federal Rules of Civil
Procedure;
H. Awarding Plaintiff and the members of the classes any pre-judgment
and post-judgment interest as may be allowed under the law; and
I. Awarding other and further relief as the Court may deem just and
proper.
Jury Demand
Pursuant to Federal Rule of Civil Procedure 38(b), Plaintiff demands a trial
by jury of any and all triable issues.
Dated: June 23, 2021
Respectfully submitted,
/s/ Michael L. Greenwald
Michael L. Greenwald
Florida Bar No. 761761
James L. Davidson
Florida Bar No. 723371
GREENWALD DAVIDSON RADBIL
PLLC
7601 N. Federal Hwy., Suite A-230
Boca Raton, FL 33487
Tel: (561) 826-5477
[email protected]
[email protected]
Alexander D. Kruzyk
Florida Bar No. 112052
GREENWALD DAVIDSON RADBIL
PLLC
401 Congress Avenue, Suite 1540
Austin, TX 78701
Tel: (512) 803-1578
[email protected]
Counsel for Plaintiff and the proposed
classes
| consumer fraud |
6rjvC4cBD5gMZwczILhY | IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF GEORGIA
AUGUSTA DIVISION
JOHNNY BRANTLEY, GARY
)
EDWARD FLETCHER, ROBERT
)
M. POU, and BRANNON
)
STUART, individually
)
and on behalf of others similarly
)
situated
)
)
CIVIL ACTION FILE
Plaintiffs,
)
NO.
)
VS.
)
COMPLAINT
)
JURY DEMANDED
FERRELL ELECTRIC, INC.,
)
FAIR LABOR STANDARDS
JAMES N. FERRELL, and
)
ACT – OVERTIME
CHRISTIE C. FERRELL
)
COLLECTIVE ACTION
)
Defendants. )
Plaintiffs, JOHNNY BRANTLEY, GARY EDWARD FLETCHER, ROBERT M.
POU, and BRANNON STUART by way of their Complaint in the above captioned
matter, would allege and show unto this Honorable Court the following:
Introduction
1.This is a civil representative action brought by Named Plaintiffs JOHNNY
BRANTLEY (“BRANTLEY”) GARY EDWARD FLETCHER (“FLETCHER”),
ROBERT M. POU (“POU”), and BRANNON STUART (“STUART”), (collectively
“Plaintiffs” or “Named Plaintiffs”), in both their individual and representative
capacities against defendants FERRELL ELECTRIC, INC., JAMES N. FERRELL,
and CHRISTIE C. FERRELL; (collectively “Defendants”).
2. This action is brought under the Fair Labor Standards Act, 29 U.S.C. §201 et seq.
BRANTLEY V. FERRELL ELECTRIC -- COMPLAINT JANUARY 20, 2014
Page 1
(“FLSA”).
3. Plaintiffs and other similarly situated employees who are, or were, employed by
Defendants aver that Defendants willfully failed and/or refused to pay straight time
and overtime compensation to Plaintiffs and other similarly situated employees who
were, or are, employed by Defendants, in violation of the FLSA.
4. Plaintiffs and other similarly situated employees who are or were employed by
Defendants also aver that Defendants’ failure and/or refusal to pay overtime
compensation to them was both intentional and willful and was not in good faith.
5. Defendants told Plaintiffs and all other similarly situated employees that Defendants
did not have to pay overtime or straight time for certain of Plaintiffs' activities.
6. Defendants failed to properly disclose or apprise Plaintiffs and all other similarly
situated employees of their rights under the FLSA, as required by FLSA and
regulations thereunder, 29 C.F.R. § 516.4.
7. Defendants did not provide any posting about the Fair Labor Standards Act in the
workplace or about workers’ rights to overtime pay as required by FLSA and
regulations thereunder, 29 C.F.R. § 516.4.
8. The Defendants intentionally misled and deceived Plaintiffs about their rights to
overtime wages under the FLSA.
9. The Defendants intentionally hired employees who were not informed of their legal
rights to overtime wages.
10. The statute of limitations should be tolled due to the Defendants’ deceptive and
FLSA- noncompliant conduct.
BRANTLEY V. FERRELL ELECTRIC -- COMPLAINT JANUARY 20, 2014
Page 2
Jurisdiction and Venue
11. This Court has jurisdiction over the claims presented pursuant to 29 U.S.C. § 216.
This Court has subject-matter jurisdiction over this action pursuant to 28 U.S.C. §1331
because this action is based on unpaid overtime compensation under the FLSA.
12. Venue is proper in this Court pursuant to 28 U.S.C. § 1391(b)(1), because
Defendants have their principal place of business in Columbia County, Georgia and the
acts complained of in this Complaint occurred in Columbia County, Georgia; other
counties in Georgia; and other counties in South Carolina.
Parties
13. BRANTLEY is a resident of McDuffie County, Georgia, and is a proper plaintiff in
this matter as he was an employee who was employed as the terms are defined by 29
U.S.C. § 203. FLETCHER is a resident of Burke County, Georgia, and is a proper
plaintiff in this matter as he was an employee who was employed as the terms are
defined by 29 U.S.C. § 203. POU is a resident of AIKEN County, South Carolina, and
is a proper plaintiff in this matter as he was an employee who was employed as the
terms are defined by 29 U.S.C. § 203. STUART is a resident of Aiken County, South
Carolina, and is a proper plaintiff in this matter as he was an employee who was
employed as the terms are defined by 29 U.S.C. § 203.
14. FERRELL ELECTRIC, INC. (“FERRELL ELECTRIC”) is a corporation
organized and existing under the laws of the State of Georgia, and it maintains an
office in Columbia County, Georgia, from which it regularly conducts business,
including, but not limited to calculating payroll; analyzing the immigration status of
BRANTLEY V. FERRELL ELECTRIC -- COMPLAINT JANUARY 20, 2014
Page 3
employees; issuing paychecks to its employees; and undertaking personnel, financial,
and day-to-day business decisions. FERRELL ELECTRIC is and has been at all times
material herein an employer as that term is defined by 29 U.S.C. § 203.
15. JAMES N. FERRELL A/K/A JIMMY FERREL (“FERRELL”) is and has been an
officer and owner of FERRELL ELECTRIC, and at all times material herein, actively
engaged in the management and direction of employees, including the Plaintiffs, and
employee pay matters, and has possessed and exercised authority and discretion to fix,
adjust, and determine hours worked and amounts paid with respect to Plaintiffs.
FERRELL is and has been at all times material herein an “employer” within the
meaning 29 U.S.C. § 203. FERRELL is a resident of Columbia County, Georgia.
CHRISTIE C. FERRELL (“CHRISTIE FERRELL”) is and has been an officer and
owner of FERRELL ELECTRIC, and at all times material herein, actively engaged in
the management and direction of employees, including the Plaintiffs, and employee
pay matters, and has possessed and exercised authority and discretion to fix, adjust,
and determine hours worked and amounts paid with respect to Plaintiffs. CHRISTIE
FERRELL is and has been at all times material herein an “employer” within the
meaning 29 U.S.C. § 203. CHRISTIE FERRELL is a resident of Columbia County,
Georgia.
16. At all times material hereto, Plaintiffs were employees of Defendants within the
meaning of 29 U.S.C. § 203(e).
17. Defendants are an “enterprise” engaged in interstate commerce pursuant to 29
U.S.C. § 203(r) and (s) of the FLSA, in that Defendants are for profit businesses which
have gross volume of sales in excess of $500,000 per annum and has employees
engaged in commerce or in the production of goods for commerce, or that has
employees handling, selling, or otherwise working on goods or materials that have
been moved in or produced for commerce by any person; as such terms are defined in
the FLSA. Defendants are employers subject to the jurisdiction of the FLSA.
BRANTLEY V. FERRELL ELECTRIC -- COMPLAINT JANUARY 20, 2014
Page 4
18. At all times herein mentioned, the acts and omissions of the Defendants, concurred
in and contributed to the various acts and omissions of each and every one of the other
Defendants in proximately causing the complaints, injuries, and damages alleged
herein.
19. At all times herein mentioned, the Defendants, and each of them, approved of,
condoned and/or otherwise ratified each and every one of the acts or omissions of the
other Defendants complained of herein.
20. At all times herein mentioned, the Defendants, and each of them, aided and abetted
the acts and omissions of each and every one of the other Defendants, thereby
proximately causing the damages as herein alleged.
21. At all times material hereto, Plaintiffs were individually engaged in interstate
commerce.
Factual Allegations
22. On or about January 13, 2009, BRANTLEY began working full time for
Defendants as an electrician. On or about September 8, 2009, FLETCHER began
working full time for Defendants as an electrician. On or about July 11, 2011, POU
began working full time for Defendants as an electrician. On or about August 15,
2012, STUART began working full time for Defendants as an electrician.
23. BRANTLEY was initially paid $13.00 per hour. FLETCHER was initially paid
$12.00 per hour. POU was initially paid $15.00 per hour. STUART was initially
paid $8.50 per hour.
24. BRANTLEY, FLETCHER, POU, and STUART recorded their time worked for
BRANTLEY V. FERRELL ELECTRIC -- COMPLAINT JANUARY 20, 2014
Page 5
Defendants using a paper time sheet.
25. BRANTLEY, FLETCHER, POU, and STUART were often suffered or required to
work more than the eight hours each day.
26. During BRANTLEY's, FLETCHER's, POU's, and STUART's employment with
Defendants, they routinely worked over (40) forty hours per week for Defendants.
27. Defendants did not pay BRANTLEY, FLETCHER, POU, or STUART straight
time and overtime pay for all the straight time and overtime hours they worked for
Defendants.
28. Defendants have failed to pay BRANTLEY, FLETCHER, POU, and STUART
overtime pay for work performed over forty hours in a given work week.
29. BRANTLEY’s employment with Defendants ended on April 13, 2013.
FLETCHER’s employment with Defendants ended on May 25, 2011. POU’s
employment with Defendants ended on July 6, 2012. STUART’s employment with
Defendants ended on July 25, 2013.
Class Action Allegations
30. This action is currently maintainable as an “opt-in” collective action pursuant to 29
U.S.C. § 216(b) as to claims for owed overtime wages, liquidated damages, attorneys’
fees, and costs under the FLSA.
31. In addition to the Plaintiffs named herein, the Defendants failed to properly pay
straight time and overtime to numerous current and former employees who are
similarly situated to the Plaintiffs named herein, in that Plaintiffs and such similarly
situated employees suffered similar violations of the FLSA from Defendants failure to
BRANTLEY V. FERRELL ELECTRIC -- COMPLAINT JANUARY 20, 2014
Page 6
properly pay straight time and overtime.
32. Plaintiffs named herein bring this representative action on behalf of themselves
and all other similarly situated employees and/or former employees (“Uncompensated
Employees”) pursuant to 29 U.S.C. § 216(b). The cohort of Uncompensated
Employees that Plaintiffs seek to represent is defined as follows: All of Defendants’
present and former non-exempt employees who were caused to sustain damages or
who will sustain damages because they were not paid straight time and/or overtime.
33. The precise number of Uncompensated Employees and their addresses are
unknown to Plaintiffs. These employees may be identified from Defendants’ records,
and may be notified of the pendency of this representative action by mail,
supplemented, if deemed necessary, by published notice.
34. There is a well-defined community of interest in the questions of law and fact
involved in this case which affect all Uncompensated Employees. Questions of law
and fact common to Uncompensated Employees include, but are not limited to, the
following: a. Whether Defendants failed to pay Plaintiffs and other Uncompensated
Employees straight time and overtime wages that were legally due and owing to them
pursuant to FLSA; b. Whether Plaintiffs named herein and other Uncompensated
Employees are entitled to the relief prayed for below; and c. The proper measure of the
Plaintiffs' and Uncompensated Employees’ damages.
35. There is no apparent benefit to be derived from maintaining this action individually
by Plaintiffs or each putative class member. Plaintiffs and Uncompensated Employees
share similar backgrounds, work skills, damage claims, and work environment.
Therefore each individual case will be substantively similar and better maintained as a
class action.
36. This is the third action commenced in this matter by any member of the class.
BRANTLEY V. FERRELL ELECTRIC -- COMPLAINT JANUARY 20, 2014
Page 7
37. Once a class is established, Named Plaintiffs foresee little difficulty in managing
such a class action. Named Plaintiffs and Uncompensated Employees share similar
background, and employment identities, all of which will make the maintenance of this
action as a class action eminently achievable.
38. Wherefore, for the foregoing reasons, Named Plaintiffs seek certification of the
instant matter as a class action pursuant to 29 U.S.C. § 216(b).
Count I Fair Labor Standards Act of 1938, 29 U.S.C. § 201, et seq.
(Collection of Wages)
39. Named Plaintiffs incorporate the allegations above as though fully alleged herein.
40. Pursuant to 29 U.S.C. § 216(b), Named Plaintiffs have consented in writing to be
party Plaintiffs in this FLSA action.
41. Plaintiffs, at all times pertinent hereto, have been non-exempt employees within
the meaning of the FLSA and the implementing rules and regulations of the FLSA.
42. Plaintiffs never supervised employees with Defendants.
43. Plaintiffs never exercised independent judgment or discretion on the job with
Defendants.
44. The Defendants violated 29 U.S.C. § 207 by failing to pay the Named Plaintiffs
and others similarly situated at an hourly rate equal to the regular hourly rate at which
they were employed for all compensable time they were employed below forty hours
in each work week and an hourly rate equal to one and a half times the regular hourly
rate at which they were employed for all compensable time they were employed in
BRANTLEY V. FERRELL ELECTRIC -- COMPLAINT JANUARY 20, 2014
Page 8
excess of forty (40) hours in each workweek.
45. In particular, Defendants failed to pay straight time and overtime compensation for
all hours worked by Plaintiffs resulting from their compensable time spent returning to
the Defendants' place of business at the end of each work day. Additionally,
Defendants failed to pay straight time and overtime compensation for all hours spent
by Plaintiffs resulting from their compensable time spent loading, unloading, cleaning,
and maintaining Defendants' work trucks at the beginning and end of each work day
46. The Defendants’ failures to pay the Named Plaintiffs and others similarly situated
the federally mandated straight time and overtime wage rate, are willful violations of
the FLSA within the meaning of 29 U.S.C. § 255(a).
47. As a consequence of the Defendants’ violations of the FLSA, the Plaintiffs and
others similarly situated are now entitled to recover their unpaid overtime wages, plus
an additional equal amount in liquidated damages, pursuant to 29 U.S.C. § 216(b).
48. Through the actions alleged above, the Defendants failed and/or refused to pay to
the Plaintiffs and similarly situated employees straight time and overtime wages in
violation of the Fair Labor Standards Act, 29 U.S.C. § 201, et seq.
49. The actions of the Defendants were taken with willful disregard for the rights of
the Plaintiffs and similarly situated employees under the Fair Labor Standards Act, 29
U.S.C. § 201, et seq.
50. As a result of the Defendant’s unlawful conduct, the Plaintiffs and all similarly
situated employees suffered a loss of wages.
51. For violations of Fair Labor Standards Act of 1938, 29 U.S.C. § 201, et seq., 29
U.S.C. § 216(b) allows Plaintiffs and all similarly situated employees to recover from
BRANTLEY V. FERRELL ELECTRIC -- COMPLAINT JANUARY 20, 2014
Page 9
Defendants, in addition to any judgment awarded, an additional equal amount as
liquidated damages. Title 29 U.S.C. § 216(b) further provides that Plaintiffs and all
other similarly situated employees may receive, without limitation, employment,
reinstatement, promotion, the costs of this action, as well as a reasonable attorney’s fee
to be paid by the Defendants.
Prayer for Relief
WHEREFORE, Plaintiffs BRANTLEY, FLETCHER, POU, and STUART pray this
Honorable Court for the following relief:
A. An order appointing Named Plaintiffs and their counsel of record to represent all
other Uncompensated Employees;
B. An order conditionally certifying this case as a collective action;
C. An order declaring that the defendants willfully violated the overtime provisions of
the Fair Labor Standards Act, as set forth in Count One;
D. An order that the Defendants be permanently enjoined from the improper activities
and practices described herein;
F. Judgment against the Defendants, jointly and severally, in the amount of economic
damages, compensatory damages, and liquidated damages to be determined at trial,
pre-judgment interest, plus attorneys’ fees, costs of this action, and any other relief this
Honorable Court deems just and proper to award.
PLAINTIFFS HEREBY REQUEST A TRIAL BY JURY.
Respectfully submitted,
s/John P. Batson
JANUARY 20, 2014
JOHN P. BATSON (ID#042150)
P.O. BOX 3248
AUGUSTA, GEORGIA 30904-4459
(706) 737-4040 Fax 706-736-3391 [email protected]
Attorney for Plaintiffs JOHNNY BRANTLEY, GARY
EDWARD FLETCHER, ROBERT M. POU, and
BRANNON STUART
BRANTLEY V. FERRELL ELECTRIC -- COMPLAINT JANUARY 20, 2014
Page 10
| employment & labor |
Ibe8C4cBD5gMZwcznCDu |
Case No.
UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
RONALD J. MIGYANKO, individually and on
behalf of all others similarly situated,
Plaintiff,
v.
BED BATH & BEYOND INC.,
Defendant.
CLASS ACTION COMPLAINT
Plaintiff, Ronald J. Migyanko, (“Plaintiff”), individually and on behalf of all others
similarly situated, brings this class action against Bed Bath & Beyond Inc. (“Defendant”), alleging
violations of Title III of the Americans with Disabilities Act, 42 U.S.C. § 12101 et seq., (the
“ADA”) and its implementing regulations, for declaratory and injunctive relief, attorneys’ fees,
expenses and costs pursuant to 42 U.S.C. § 12181 et seq. (the “ADA”) and its implementing
regulations.
INTRODUCTION
1.
Defendant positions a host of obstructions, including merchandise displays,
stocking carts, bins, dollies, and ladders so that they block or narrow the aisle pathways of their
2.
This practice is a well-established marketing ploy, driven by a calculated judgment
that impeding interior paths of travel increases sales revenue and profits. See, e.g., Stuff Piled in
the Aisle? It’s There to Get You to Spend More, The New York Times, (April 7, 2011);1 see also,
Why a Messy, Cluttered Store is Good for Business, Time Magazine, (April 8, 2011).2
3.
Although this practice may increase profits, it does so at the expense of basic civil
rights guaranteed to people with disabilities by the ADA because it results in unlawful access
barriers.
4.
Plaintiff, at all times relevant hereto, has suffered from a legal disability as defined
by the ADA, 42 U.S.C. § 12102(2). He is therefore a member of the protected class under the ADA
and the regulations implementing the ADA set forth at 28 C.F.R. § 36.101 et. seq.
5.
Plaintiff has visited Defendant’s stores and has repeatedly been denied full and
equal access to the stores as a result of accessibility barriers existing in interior paths of travel.
These access barriers include but are not limited to: merchandise displays, bins, dollies, and
ladders, positioned so that they impermissibly block or narrow the aisle pathways. These
conditions violate the ADA and severely impede Plaintiff’s ability to access the goods and services
offered at Defendant’s stores.
6.
The access barriers described herein are not temporary and isolated. They are
systemic, recurring, and reflective of Defendant’s marketing and store policies and practices.
Plaintiff has encountered the same barriers on multiple occasions and has been repeatedly deterred
from accessing Defendant’s goods and services as a result.
1 Available at https://www.nytimes.com/2011/04/08/business/08clutter.html as of March 29,
2019.
2 Available at http://business.time.com/2011/04/08/why-a-messy-cluttered-store-is-good-for-
business/ as of March 29, 2019.
7.
Counsel for Plaintiff have overseen an investigation into Defendant’s stores which
has confirmed the widespread existence of interior access barriers that are the same as, or similar
to, the barriers directly experienced by Plaintiff.
8.
Unless Defendant is required to remove the access barriers described herein, and
required to change its policies and practices so that these access barriers do not reoccur at
Defendant’s stores, Plaintiff and the proposed Class will continue to be denied full and equal access
to the stores and will be deterred from fully using Defendant’s stores.
9.
In accordance with 42 U.S.C. § 12188(a)(2), Plaintiff seeks a permanent injunction
requiring that:
a) Defendant remediate all interior path of travel access barriers at Defendant’s
Pennsylvania stores, consistent with the ADA;
b) Defendant change its policies and practices so that the interior path of travel
access barriers at Defendant’s Pennsylvania stores do not reoccur; and
c) Plaintiff’s representatives shall monitor Defendant’s Pennsylvania stores to
ensure that the injunctive relief ordered pursuant to this Complaint has been
implemented and will remain in place.
10.
Plaintiff’s claims for permanent injunctive relief are asserted as class claims
pursuant to Fed. R. Civ. P. 23(b)(2). Rule 23(b)(2) was specifically intended to be utilized in civil
rights cases where the plaintiff seeks injunctive relief for his or her own benefit and the benefit of
a class of similarly situated individuals. To that end, the note to the 1996 amendment to Rule 23
Subdivision(b)(2). This subdivision is intended to reach situations where a party
has taken action or refused to take action with respect to a class, and final relief of
an injunctive nature or a corresponding declaratory nature, settling the legality of
the behavior with respect to the class as a whole, is appropriate…. Illustrative are
various actions in the civil rights field where a party is charged with discriminating
unlawfully against a class, usually one whose members are incapable of specific
enumeration.
THE ADA’S CLEAR AND COMPREHENSIVE MANDATE
11.
The ADA was enacted over a quarter century ago and was intended to “provide a
clear and comprehensive national mandate for the elimination of discrimination against individuals
with disabilities.” 42 U.S.C. § 12101(b)(1).
12.
The ADA is the central civil rights law protecting people with disabilities, a group
of Americans who are too often overlooked and undervalued. Like other civil rights laws, the
purpose of the ADA is clear: the eradication of discrimination. As one legal scholar explained: “A
single step in front of a store may not immediately call to mind images of Lester Maddox standing
in the door of his restaurant to keep blacks out. But in a crucial respect they are the same, for a
step can exclude a person who uses a wheelchair just as surely as a no-blacks-allowed rule can
exclude a class of people.” Samuel Bagenstos, The Perversity of Limited Civil Rights Remedies:
The Case of “Abusive” ADA Litigation, 54 UCLA L. Rev. 1, 23 (2006).
13.
The Supplementary Information to 28 C.F.R. § 36 explains, among other things:
“Some of the most frequently cited qualitative benefits of increased access are the increase in one’s
personal sense of dignity that arises from increased access and the decrease in possibly humiliating
incidents due to accessibility barriers. Struggling [to use a non-accessible facility] negatively
affect[s] a person’s sense of independence and can lead to humiliating accidents, derisive
comments, or embarrassment. These humiliations, together with feelings of being stigmatized as
different or inferior from being relegated to use other, less comfortable or pleasant elements of a
facility . . . all have a negative impact on persons with disabilities.”
14.
Title III of the ADA requires that “[n]o individual shall be discriminated against on
the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges,
advantages, or accommodations of any place of public accommodation by any person who owns,
leases (or leases to), or operates a place of public accommodation.” 42 U.S.C. § 12182(a). It
prohibits places of public accommodation, either directly or through contractual, licensing, or other
arrangements, from outright denying individuals with disabilities the opportunity to participate in
the goods or services offered by a place of public accommodation, 42 U.S.C. § 12182(b)(1)(A)(i),
or denying individuals with disabilities the opportunity to fully and equally participate in a place
of public accommodation, 42 U.S.C. § 12182(b)(1)(A)(ii).
15.
Discrimination on the basis of disability can occur, generally, through a denial of
the opportunity to participate in or benefit from goods, services, facilities, or accommodations (42
U.S.C. § 12182(b)(1)(A)(i)); or from affording goods, services, facilities, or accommodations that
are not equal to those afforded to other individuals (42 U.S.C. § 12182(b)(1)(A)(ii)); or from
providing goods, services, facilities, or accommodations that are separate from those provided to
other individuals (42 U.S.C. § 12182(b)(1)(A)(iii)).
THE ADA AND THE RIGHT OF NON-DISCRIMINATORY
ACCESS TO GOODS
16.
The ADA specifically prioritizes “measures to provide access to those areas where
goods and services are made available to the public. These measures include, for example,
adjusting the layout of display racks, rearranging tables…” 28 C.F.R. § 36.304
17.
The ADA and its implementing regulations define prohibited discrimination to
include the following: A) the failure to remove architectural barriers when such removal is readily
achievable for places of public accommodation that existed prior to January 26, 1992, 28 C.F.R. §
36.304(a) and 42 U.S.C. § 12182(b)(2)(A)(iv); B) the failure to design and construct places of
public accommodation for first occupancy after January 26, 1993, that are readily accessible to
and usable by individuals with disabilities, 28 C.F.R. § 36.401 and 42 U.S.C. § 12183(a)(1); c) for
alterations to public accommodations made after January 26, 1992, the failure to make alterations
so that the altered portions of the public accommodation are readily accessible to and usable by
individuals with disabilities, 28 C.F.R. § 36.402 and 42 U.S.C. § 12183(a)(2); and D) the failure
to maintain those features of public accommodations that are required to be readily accessible to
and usable by persons with disabilities, 28 C.F.R. § 36.211.
18.
To be “readily accessible” under Title III of the ADA, merchandise on fixed aisle
shelving in a retail store such as Bed Bath & Beyond must be located on an accessible route. The
Department of Justice, pursuant to 42 U.S.C. § 12186(b), has promulgated the ADA Accessibility
Guidelines (“ADAAG”) in implementing Title III of the ADA. There are two active ADAAGs
that set forth the technical structural requirements that a public accommodation must meet in order
to be “readily accessible”: the 1991 ADAAG Standards, 28 C.F.R. § pt. 36, App. D (“1991
Standards”), and the 2010 ADAAG Standards, 36 C.F.R. § pt. 1191, App. D (“2010 Standards”).
The applicable “accessible route” standards are set forth in the 2010 Standards at Section 403.5.1.
See
also,
ADA
Guide
for
Small
Businesses,
June
1999,
available
at
https://www.ada.gov/smbustxt.htm (noting that “when sales items are displayed or stored on
shelves for selection by customers, the store must provide an accessible route to fixed shelves and
displays, if doing so is readily achievable.”) ADA Figure 403.5.1 explains that an accessible route
must be a minimum of 36 inches, but can be reduced to 32 inches for a length of no more than 24
inches, such as at doors, so long as the 32 inch segments are at least 48 inches apart. See ADA
Figure 403.5.1 available at https://www.access-board.gov/guidelines-and-standards/buildings-
andsites/about-the-ada-standards/ada-standards/chapter-4-accessible-routes (last accessed on
October 9, 2018).
19.
The ADA further requires places of public accommodations to design and construct
facilities to be independently usable by individuals with disabilities. 42 U.S.C. § 12183(a)(1).
20.
The ADA further prohibits places of public accommodation from utilizing methods
of administration that have the effect of discriminating on the basis of a disability. 42 U.S.C. §
12182(b)(1)(D).
21.
The ADA further requires Defendant to provide individuals who use wheelchairs
or scooters full and equal enjoyment of its facilities. 42 U.S.C. § 12182(a).
22.
When
discriminatory
architectural
conditions
exist
within
a
public
accommodation’s facility, the ADA directs that a “public accommodation shall remove
architectural barriers in existing facilities . . . where such removal is readily achievable, i.e., easily
accomplishable and able to be carried out without much difficulty or expense.” 28 C.F.R. §
36.304(b) (emphasis added); see also 42 U.S.C. § 12182(b)(2)(A)(iv) (the failure to remove
architectural barriers, where such removal is readily achievable, constitutes discrimination).
23.
In addition to tangible barrier removal requirements as well as physical design,
construction, and alteration requirements, the ADA requires reasonable modifications in policies,
practices, or procedures when necessary to afford goods, services, facilities, or accommodations
to individuals with disabilities, unless the public accommodation can demonstrate that making
such modifications would fundamentally alter their nature. 42 U.S.C. § 12182(b)(2)(A)(ii).
24.
The remedies and procedures set forth at 42 U.S.C. § 2000a-3(a) are provided to
any person who is being subjected to discrimination on the basis of disability or who has reasonable
grounds for believing that such person is about to be subjected to discrimination in violation of 42
U.S.C. § 12183. 42 U.S.C. 12188(a)(1).
25.
The access barriers described herein demonstrate that Defendant’s facilities are not
altered, designed, or constructed in a manner that causes them to be readily accessible to and usable
by individuals who use wheelchairs or scooters and/or that Defendant’s facilities are not
maintained so as to ensure that they remained accessible to and usable by individuals who use
wheelchairs or scooters.
26.
Defendant’s repeated and systemic practices herein described constitute unlawful
discrimination on the basis of a disability in violation of Title III of the ADA.
JURISDICTION AND VENUE
27.
This Court has federal question jurisdiction pursuant to 28 U.S.C. § 1331 and 42
U.S.C. § 12188.
28.
Plaintiff’s claims asserted herein arose in this judicial district, and Defendant does
substantial business in this judicial district.
29.
Venue in this judicial district is proper under 28 U.S.C. § 1391(b)(2) in that this is
the judicial district in which a substantial part of the events and/or omissions at issue occurred.
PARTIES
30.
Plaintiff Ronald J. Migyanko, is, and at all times relevant hereto was, a resident of
Cranberry Township, Pennsylvania.
31.
Plaintiff, as a result of a mobility disability, uses a wheelchair for mobility and is
therefore a member of a protected class under the ADA, 42 U.S.C. § 12102(2), and the regulations
implementing the ADA set forth at 28 C.F.R. §§ 36.101 et seq.
32.
Plaintiff is both a tester in this litigation and a consumer who wishes to access
Defendant’s goods and services. See, e.g., Nanni v. Aberdeen Marketplace, Inc., 878 F.3d 447,
457 (4th Cir. 2017); Civil Rights Educ. & Enf’t Ctr. v. Hosp. Props. Tr., 867 F.3d 1093, 1102 (9th
Cir. 2017); Colo. Cross Disability Coal. v. Abercrombie & Fitch Co., 765 F.3d 1205, 1211-12
(10th Cir. 2014); Houston v. Marod Supermarkets, Inc., 733 F.3d 1323, 1334 (11th Cir. 2013); see
also Havens Realty Corp. v. Coleman, 455 U.S. 363, 372-74 (1982).
33.
Defendant Bed Bath & Beyond Inc. is a corporation formed under New York state
law, and headquartered at 650 Liberty Avenue, Union, New Jersey.
34.
Defendant’s stores are places of public accommodation pursuant to 42 U.S.C.
§12181(7).
FACTUAL ALLEGATIONS AND PLAINTIFF’S EXPERIENCE
I.
Plaintiff Has Been Denied Full and Equal Access to Defendant’s Facilities.
35.
Plaintiff has repeatedly visited Defendant’s stores including Defendant’s store
located at 2011 Route 19, Cranberry Township, Pennsylvania (the “Subject Property”) and
encountered unlawful and discriminatory interior access barriers including, but not necessarily
limited to, merchandise displays, boxes, and ladders positioned so that they block or narrow the
aisle pathways in violation of the requirements of the 2010 Standards Section 403.5.1.
36.
Plaintiff’s Investigator also separately examined the Subject Property and
encountered the same types of access barriers Plaintiff has repeatedly encountered, as depicted in
the following photographs:
Figure 1 – Bed, Bath, & Beyond, Cranberry Township, PA
Figure 2 – Bed, Bath, & Beyond, Cranberry Township, PA
Figure 3 – Bed, Bath, & Beyond, Cranberry Township, PA
Figure 4 – Bed, Bath, & Beyond, Cranberry Township, PA
Figure 5 – Bed, Bath, & Beyond, Cranberry Township, PA
Figure 6 – Bed, Bath, & Beyond, Cranberry Township, PA
37.
As a result of Defendant’s non-compliance with the ADA, Plaintiff’s right to full
and equal, non-discriminatory, and safe access to Defendant’s goods and facilities has been denied.
38.
Plaintiff will be deterred from returning to and fully and safely accessing
Defendant’s facilities so long as Defendant’s facilities remain non-compliant, and so long as
Defendant continue to employ the same policies and practices that have led, and in the future will
lead, to inaccessibility at Defendant’s facilities.
39.
Without injunctive relief, Plaintiff will continue to be unable to fully and safely
access Defendant’s facilities in violation of his rights under the ADA.
40.
As an individual with a mobility disability who is dependent upon a wheelchair,
Plaintiff is directly interested in whether public accommodations, like Defendant’s facilities, have
access barriers that impede full accessibility to those accommodations by individuals with
mobility-related disabilities.
II.
Defendant Denies Individuals With Disabilities Full and Equal Access to its Facilities.
41.
Defendant is engaged in the ownership, management, operation, and development
of retail stores throughout the United States, including, upon information and belief, approximately
1550 stores in the United States, of which there are, upon information and belief, 31 in
Pennsylvania.
42.
As the owner and manager of its properties, Defendant employs centralized
policies, practices, and procedures with regard to the design, construction, alteration, maintenance,
and operation of its facilities.
43.
However, as set forth herein, these policies, practices, and procedures are
inadequate in that Defendant’s facilities are operated and maintained in violation of the
accessibility requirements of Title III of the ADA.
44.
On Plaintiff’s behalf, investigators examined multiple locations owned, controlled,
and/or operated by Defendant, and found the following locations contain the same problematic
access barriers and do not have fully accessible interior paths of travel and access to goods, in
violation of Section 403.5.1 of the 2010 Standards:
a) 2011 Route 19, Cranberry Township, Pennsylvania;
b) 980 Freeport Road, Pittsburgh, Pennsylvania;
c) 160 Quinn Drive, Pittsburgh, Pennsylvania;
d) 490 Waterfront Drive, Homestead, Pennsylvania;
e) 340 Town Centre Drive, Johnstown, Pennsylvania;
f) 3739 William Penn Hwy, Monroeville, Pennsylvania; and,
g) 1700 Oxford Drive, Bethel Park, Pennsylvania.
45.
As evidenced by the widespread inaccessibility of Defendant’s stores, absent a
change in Defendant’s corporate policies and practices, access barriers are likely to reoccur in
Defendant’s facilities even after they have been remediated in the first instance.
46.
Accordingly, Plaintiff seeks an injunction to remove the barriers currently present
at Defendant’s facilities and an injunction to modify the policies and practices that have created or
allowed, and will create or allow, access barriers in Defendant’s stores.
CLASS ALLEGATIONS
47.
Plaintiff brings this action under Rule 23(a) and (b)(2) of the federal rules of civil
procedure individually and on behalf of the following classes:
All persons with qualified mobility disabilities who have attempted, or will
attempt, to access the interior of any store owned or operated by Defendant in
Pennsylvania and have, or will have, experienced discriminatory access to
Defendant goods due to Defendant failure to comply with the ADA’s
prohibition against access barriers in interior paths of travel.
48.
Numerosity: The class described above is so numerous that joinder of all individual
members in one action would be impracticable. The disposition of the individual claims of the
respective class members through this class action will benefit both the parties and this Court, and
will facilitate judicial economy.
49.
Typicality: Plaintiff’s claims are typical of the claims of the members of the class.
The claims of Plaintiff and members of the class are based on the same legal theories and arise
from the same unlawful conduct.
50.
Common Questions of Fact and Law: There is a well-defined community of interest
and common questions of fact and law affecting members of the class in that they all have been
and/or are being denied their civil rights to full and equal access to, and use and enjoyment of,
Defendant’s facilities and/or services due to Defendant’s failure to make its facilities fully
accessible and independently usable as above described. The questions of law and fact that are
common to the class include:
a. Whether Defendant operates places of public accommodation and are subject to Title
III of the ADA and its implementing regulations;
b. Whether storing merchandise in interior aisles of the stores makes the stores
inaccessible to Plaintiff and putative class members; and,
c. Whether Defendant’s storage, stocking and setup policies and practices discriminate
against Plaintiff and putative class members in violation of Title III of the ADA and its
implementing regulations.
51.
Adequacy of Representation: Plaintiff is an adequate representative of the class
because his interests do not conflict with the interests of the members of the class. Plaintiff will
fairly, adequately, and vigorously represent and protect the interests of the members of the class,
and he has no interests antagonistic to the members of the class. Plaintiff has retained counsel who
are competent and experienced in the prosecution of class action litigation, generally, and who
possess specific expertise in the context of class litigation under the ADA.
52.
Class certification is appropriate pursuant to Fed. R. Civ. P. 23(b)(2) because
Defendant have acted or refused to act on grounds generally applicable to the class, making
appropriate both declaratory and injunctive relief with respect to Plaintiff and the class as a whole.
CAUSE OF ACTION: VIOLATION OF THE ADA
53.
Defendant has failed, and continues to fail, to provide individuals who use
wheelchairs or scooters with full and equal enjoyment of its facilities.
54.
Defendant has discriminated against Plaintiff and the class in that Defendant has
failed to make Defendant’s facilities fully accessible to, and independently usable by, individuals
who use wheelchairs or scooters in violation of 42 U.S.C. § 12182(a) as described above; Section
403.5.1 of the 210 Standards.
55.
Defendant’s conduct is ongoing and continuous, and Plaintiff has been harmed by
Defendant’s conduct.
56.
Unless Defendant is restrained from continuing its ongoing and continuous course
of conduct, Defendant will continue to violate the ADA and will continue to inflict injury upon
Plaintiff and the class.
57.
Given that Defendant has not complied with the ADA’s requirements to make
Defendant’s facilities fully accessible to, and independently usable by, individuals who use
wheelchairs or scooters, Plaintiff invokes his statutory rights to declaratory and injunctive relief,
as well as costs and attorneys’ fees.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff, on behalf of himself and the members of the class, prays for:
a.
A declaratory judgment that Defendant is in violation of the specific requirements
of Title III of the ADA, and the relevant implementing regulations of the ADA, in
that Defendant’s facilities are not fully accessible to and independently usable by
individuals who use wheelchairs or scooters;
b.
A permanent injunction pursuant to 42 U.S.C. § 12188(a)(2) and 28 C.F.R. §
36.501(b) that: (i) directs Defendant to take all steps necessary to remove the access
barriers described above and to bring its facilities into full compliance with the
requirements set forth in the ADA, and its implementing regulations, so that the
facilities are fully accessible to, and independently usable by, individuals who use
wheelchairs, scooters or other mobility devices; (ii) directs Defendant to change its
policies and practices to prevent the reoccurrence of access barriers post-
remediation; and (iii) directs that Plaintiff shall monitor Defendant’s facilities to
ensure that the injunctive relief ordered above remains in place.
c.
An Order certifying the classes proposed by Plaintiff, naming Plaintiff as class
representative, and appointing his counsel as class counsel;
d.
Payment of costs of suit;
e.
Payment of reasonable attorneys’ fees, pursuant to 42 U.S.C. § 12205 and 28 C.F.R.
§ 36.505; and,
f.
The provision of whatever other relief the Court deems just, equitable, and
appropriate.
Dated: March 29, 2019
Respectfully submitted,
/s/ R. Bruce Carlson
R. Bruce Carlson
Kelly K. Iverson
Bryan A. Fox
CARLSON LYNCH, LLP
1133 Penn Avenue, 5th Floor
Pittsburgh PA, 15222
(412) 322-9243 (Tel.)
[email protected]
[email protected]
[email protected]
Patrick W. Michenfelder (#024207X)
Chad Throndset (#0261191X)
THRONDSET MICHENFELDER, LLC
Cornerstone Building
One Central Avenue West, Suite 203
St. Michael, MN 55376
Tel: (763) 515-6110
Fax: (763) 226-2515
[email protected]
[email protected]
(Pro Hac Vice Application Forthcoming)
Attorneys for Plaintiff
| civil rights, immigration, family |
GfM6E4cBD5gMZwcz_X_U | UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
________________________________________________
RICHARD O. KLING, M.D., STEVE ROTKER,
GENNARO PURCHIA Individually and On Behalf
of All Others Similarly Situated,
Civil Case No.
Plaintiffs,
-against-
THE WORLD HEALTH ORGANIZATION,
Defendant.
_____________________________________________
CLASS ACTION COMPLAINT
RICHARD O. KLING, M.D., STEVE ROTKER and GENNARO PURCHIA
individually, and on behalf of all others similarly situated, (collectively “Plaintiffs”)
by and through their attorneys, BLAU LEONARD LAW GROUP, LLC, as and for
their Complaint against THE WORLD HEALTH ORGANIZATION, allege upon
personal knowledge and upon information and belief as to all other matters, as
follows:
NATURE OF THE CLAIMS
1.
This is a class action brought against the WORLD HEALTH
ORGANIZATION [“WHO”] for the substantial damages suffered by Plaintiffs and
Class Members, proximately resulting from WHO’s gross negligence in failing to
timely declare Coronavirus [COVID-19] a public health emergency of international
concern (“PHEIC”); in failing to properly monitor the response to the Coronavirus
pandemic in China generally and within Hubei Province and the City of Wuhan; in
failing to timely promulgate the correct treatment guidelines to its members; in
failing to issue appropriate guidance to its members on how they should respond to
the Coronavirus pandemic emergency, including travel and trade restrictions; and
in failing to act as a global coordinator, shepherding scientific data and experts to
where they were most needed.
2.
The WHO mishandled and mismanaged the response to the discovery of the
coronavirus and upon information and belief, engaged in a cover-up of the COVID-
19 pandemic in China generally, and within Hubei Province and the City of Wuhan,
thereby causing and/or contributing to the subsequent spread of the coronavirus all
over the world, including to the United States of America and the State of New
3.
The negligent commissions and omissions of WHO have caused injury and
incalculable harm to Plaintiffs and Class Members. Such injuries and harm are
continuing in nature and will multiply exponentially for the indefinite future,
causing additional personal injuries and deaths, as well as progressive economic
damages.
PARTIES
4.
RICHARD O. KLING, M.D. is a resident of New Rochelle, New York who has
been injured and damaged by WHO’s negligent conduct and actions as described
herein.
5.
STEVE ROTKER is a resident of New Rochelle, New York who has been
injured and damaged by WHO’s negligent conduct and actions as described herein.
6.
GENNARO PURCHIA is a resident of Scarsdale, New York who has been
injured and damaged by WHO’s negligent conduct and actions as described herein.
7.
The WHO is a specialized agency of the United Nations responsible for
international public health.
8.
The WHO is part of the U.N. Sustainable Development Group, a consortium
of 36 United Nations funds, programs, specialized agencies, departments and offices
that play a role in development. It was created by the Secretary-General of the
United Nations in order to improve the effectiveness of United Nations development
activities at the country level.
9.
The WHO maintains offices at the United Nations, 1 Dag Hammarskjold
Plaza 885 Second Avenue, New York, N.Y. 10017.
JURISDICTION AND VENUE
10.
This Court has subject matter jurisdiction over this class action pursuant to
the Class Action Fairness Act of 2005 (CAFA) and 28 U.S.C. § 1332(d). The matter
in controversy, exclusive of interest and costs, exceeds the sum or value of
$5,000,000; there exists minimal diversity between parties; and there are
approximately 968,000 persons who are putative class members.
11.
This Court further has jurisdiction under the Foreign Sovereign Immunities
Act (FSIA) of 1976, 28 U.S.C. §§ 1602 et seq., and particularly the exceptions of
§1605(a)(2) (for acts outside the territory of the United States in connection with a
commercial activity of the Defendants, that cause a direct effect in the United
States), and §1605(a)(5) (for money damages for personal injury or death, or damage
to or loss of property, occurring in the United States and caused by the tortious acts
or omissions of Defendants, or of any official or employee of Defendants while acting
within the scope of his office or employment).
12.
There is no “discretionary acts” exception to jurisdiction under the FSIA, as
the WHO has acted clearly contrary to and in violation of conduct prohibited by the
tenets of international health within the United Nations system, as well as the
principles of human rights, universality and equity established in WHO’s
Constitution, as well as the ethical standards of the Organization.
13.
This Court has personal jurisdiction because the WHO has caused tortious
harm to Plaintiffs and Class Members, in the State of New York and this District
and has sufficient contacts in New York and this District to render the exercise of
jurisdiction by this Court permissible.
14.
Venue is proper in this District pursuant to 28 U.S.C. § 1391(b)(2) and (c)
because a substantial part of the events or omissions giving rise to claims of
Plaintiffs and Class Members occurred in this District.
15.
All conditions precedent to the filing of this lawsuit have been met and/or
waived by the conduct of the WHO.
GENERAL ALLEGATIONS
The World Health Organization
16.
The WHO, founded in 1948, is a specialized agency of the United Nations. As
outlined in its constitution, the WHO has a broad mandate to “act as the directing
and coordinating authority on international health work” within the United Nations
system.
17.
The WHO's broad mandate includes advocating for universal healthcare,
monitoring public health risks, coordinating responses to health emergencies, and
promoting human health and well -being.
18.
The WHO was established to provide technical assistance to countries, set
international health standards and guidelines, and collect data on global health
issues.
19.
Influenza pandemics are unpredictable but recurring events that can have
serious consequences for human health and economic well-being worldwide.
Advance planning and preparedness to ensure the capacities for pandemic response
are critical for countries to mitigate the risk and impact of a pandemic.
20.
Over the years, the WHO has provided up-to-date evidence-based guidance to
support countries to develop pandemic preparedness plans and the capacities to
prevent, prepare for and respond to the threat of a pandemic.
21.
However, the WHO’s reputation became irrefutably damaged during the
Ebola epidemic in West Africa (2013–2016), with a general consensus in the global
health community that it fell short of its leadership responsibilities.
22.
The WHO failed to take into account the range of factors that contributed to
Ebola transmission, and provided an inadequate response to the second wave of the
outbreak appearing in May 2014 As the WHO has suggested, its own shortcomings
at this time were numerous:
The initial response was slow and insufficient, we were not aggressive in alerting
the world, our surge capacity was limited, we did not work effectively in
coordination with other partners, there were shortcomings in risk communication,
and there was confusion of role and responsibilities at the three levels
[Headquarters, Regional Office and Country Offices] of the organisation [20,21].
[WHO. 2015 WHO Leadership statement on the Ebola Response and WHO reforms.
See http://www.who.int/csr/disease/ebola/joint-statement-ebola/en/(accessed 15 May
2016)]
23.
The U.S. government has long been actively engaged with the WHO,
providing financial and technical support, as well as participating in its governance
structure.
24.
The WHO is financed by contributions from member states and outside
donors. As of 2020, the biggest contributor is the United States, which gives over
$400 million annually. U.S. contributions to the WHO are funded through the U.S.
State Department’s account for Contributions to International Organizations (CIO).
The Outbreak of COVID-19
25.
The COVID-19 virus is a new pathogen that is highly contagious, can spread
quickly, and must be considered capable of causing enormous health, economic and
societal impacts in any setting.
26.
On or before December 31, 2019, the WHO China Country Office was
informed of cases of pneumonia of unknown etiology (unknown cause) detected in
Wuhan City, Hubei Province of China.
27.
On March 13,2020, an unverified report from the South China Morning Post
suggested a case traced back to November 17, 2019, in a 55-year-old from Hubei
province, may have been the first. A report in The Lancet by Chinese doctors from
Wuhan’s Jin Yin-tan Hospital refers to the first patient in the study occurring on
December 1, 2019.
28.
As of January 3, 2020, a total of 44 patients with pneumonia of unknown
etiology had been reported to WHO by the national authorities in China.
29.
On the 5th of January 2020 the WHO officially notified all Member States of
this new outbreak and published a disease outbreak news on its website.
30.
On January 10, 2020, Chinese officials announced the first known death from
the new coronavirus. The commission advised that there is no evidence that the
virus can be spread between humans.
31.
On January 11, 2020, Chinese scientists publicly released the genetic
sequence of COVID-19.
32.
On January 13, 2020, WHO Officials confirmed a case of COVID-19 in
Thailand, the first recorded case outside of China.
33.
On January 14, 2020 WHO representatives noted in a press briefing there
may have been limited human-to-human transmission of the coronavirus (in the 41
confirmed cases), mainly through family members, and that there was a risk of a
possible wider outbreak.
34.
On January 20, 2020, the United States announced its first case of
COVID-19.
35.
From January 20th to 21st WHO experts from its China and Western Pacific
regional offices conducted a brief field visit to Wuhan.
36.
On January 22, 2020 the WHO mission to China issued a statement saying
that there was evidence of human-to-human transmission in Wuhan, but more
investigation was needed to understand the full extent of transmission.
37.
From January 22nd to 23rd, the WHO Director- General convened an
Emergency Committee under the International Health Regulations (IHR 2005) to
assess whether the outbreak constituted a public health emergency of international
concern. No consensus could be reached based on the evidence available at the time.
38.
On January 28, 2020 a senior WHO delegation led by the Director-General
[Dr. Tedros] travelled to Beijing to meet China’s leadership, learn more about
China’s response, and to offer any technical assistance. While in Beijing, Dr. Tedros
agreed with Chinese government leaders that an international team of leading
scientists would travel to China on a mission to better understand the context, the
overall response, and exchange information and experience.
39.
On January 30, 2020 the WHO declared that the outbreak of COVID-19
constituted a Public Health Emergency of International Concern (PHEIC). WHO
did not recommend any travel or trade restriction.
40.
COVID-19 is the 6th time the WHO has declared a PHEIC since the
International Health Regulations (IHR) came into force in 2005.
41.
On February 2, 2020, the Trump administration suspended entry into the
United States of “immigrants or nonimmigrants, of all aliens who were physically
present within the People’s Republic of China.”
42.
On March 11, 2020 the WHO made the assessment that COVID-19 can be
characterized as a pandemic.
43.
Between November 2019 - when the first case of this new virus was first
detected until March 11, 2020, when the WHO declared the COVID-19 outbreak a
pandemic, the Chinese government and the WHO intentionally mislead the
international community, including the named Plaintiffs, about the coronavirus and
its devastating medical and economic effects.
44.
Upon information and belief, the WHO conspired with the Chinese
government to cover-up the severity of the COVID-19 heath pandemic.
45.
Upon information and belief, the WHO had actual and/or constructive
knowledge that the Chinese government, in order to effectuate this this cover-up,
intimidated doctors, scientists, journalists, and lawyers and ordered the destruction
of medical testing and data.
46.
Upon information and belief, the WHO had actual and/or constructive
knowledge that the Chinese government failed to timely report the COVID-19
outbreak, under reported the severity of the virus, underreported the deaths caused
by COVID-19, and failed to properly contain the outbreak.
47.
The WHO has recklessly and negligently managed this deadly pandemic and
assisted China to play down the severity, prevalence and scope of the COVID-19
outbreak.
48.
From the outset, the WHO has defended China, despite its gross
mismanagement of the highly contagious disease. As the number of cases and the
death toll soared, the WHO took months to declare the COVID-19 outbreak as a
pandemic, even though it had met the criteria of transmission between people, high
fatality rates and worldwide spread.
49.
When the U.S. took a critical step to stop the coronavirus at U.S. borders by
issuing a travel ban as early as January 31,2020, the WHO admonished the Trump
Administration that widespread travel bans and restrictions were not needed to
stop the outbreak and could “have the effect of increasing fear and stigma, with
little public health benefit.” WHO officials also warned that interfering with
transportation and trade could harm efforts to address the crisis and advised other
countries not to follow the U.S. lead.
50.
When the WHO should have been focusing on global counter-pandemic
efforts, it was instead politicizing the crisis and using the WHO platform to defend
the Chinese government’s gross violation of human rights. Although China has been
dishonest about the coronavirus’s origin and prevalence, misinforming and
misleading the World and member nations, the WHO publicly praised China’s
“transparency” in battling the spread of the disease.
51.
The WHO violated its own code of ethics and professional conduct by failing
to disclose any conflict of interest or potential situation of conflict with China,
affecting its conduct in connection with its COVID-19 activities.
52.
The WHO violated its own code of ethics and professional conduct by failing
to refrain from seeking or obtaining, under any circumstance, instructions or undue
assistance from Chinese government officials or from any other authority external
to the Organization, in conducting its COVID-19 activities.
53.
The WHO violated its own code of ethics and professional conduct by failing
to exercise discretion in its corporate political activities and in expressing its
corporate political opinions and beliefs.
54.
As the sole and impartial entity charged with acquiring the greatest
knowledge of COVID-19 circumstances in China, the WHO negligently failed to
further enhance the systematic and real-time sharing of epidemiologic data, clinical
results and experience to inform the global response by member nations, including
the U.S.
55.
Because of the WHO’s negligence, mismanagement and lack of leadership as
described herein, the world may have missed a critical window to halt the COVID-
19 pandemic or mitigate its virulence in its early stages.
56.
As a proximate result of all of the foregoing, as of April 15, 2020, more than
2.04 million cases of COVID-19 have been reported in 210 countries and territories,
resulting in more than 133,000 deaths.
57.
As a proximate result of all of the foregoing, as of April 15, 2020 there have
been approximately 22,0000 confirmed cases and almost 700 deaths from COVID-19
deaths in the County of Westchester, State of New York.
The Effects of the COVID-19 Outbreak
58.
In February 2020 the United States barred plane travel from China, the
European Union, and most countries in the world.
59.
The New York Stock Exchange has suffered its worst losses since the great
depression. US stocks have lost almost 28% of their value, resulting in almost 5
Trillion Dollars in lost wealth.
60.
Political conventions, functions and events have been cancelled in an election
61.
The playing seasons for all professional sports in the US and New York have
been suspended indefinitely.
62.
In New York, hotels, shows, cinemas, restaurants and gyms have been
closed. Tourism has been decimated.
63.
In New York, all small “non-essential” businesses are closed. For the
businesses that remain open, many of them cannot get supplies or equipment,
and/or they have few customers.
64.
There is a panic for food shortage and many supplies like toilet paper, hand
sanitizers, face masks, and medicines are difficult to find.
65.
As a proximate result of the WHO’s negligent actions and conduct, as
described herein, Plaintiffs and Class Members have or are virtually certain to
suffer physical illness or death, as well as emotional distress, and its physical
manifestations, from the effects of the COVID-19 outbreak and other damages.
66.
As a proximate result of the WHO’s negligent actions and conduct, as
described herein, Plaintiffs and Class Members who own or operate businesses,
possess investments and own personal assets have or are virtually certain to suffer
injury and damages from the effects of the COVID-19 outbreak.
67.
This COVID-19 pandemic is likely to injure a substantial majority of all
persons and entities within the United States and the State of New York.
68.
The personal injuries being sustained are universal and not linked to
individualized factors.
CLASS ACTION ALLEGATIONS
69.
Plaintiffs repeat and reallege all preceding paragraphs, as if fully set forth
herein.
70.
Plaintiffs bring this action on an individual basis and on behalf of all others
similarly situated pursuant to Rules 23(a), (b)(1), (b)(3) and/or 23(c)(4) of the
Federal Rules of Civil Procedure
71.
Plaintiffs seek to represent the following Class:
All adult persons in the County of Westchester, State of New York who have
suffered injury, damage and loss related to the outbreak of the COVID-19
virus.
72.
Plaintiffs are members of the Class they seek to represent.
73.
Excluded from the Class are the following: (1) the WHO and any
parent, subsidiary or affiliate organizations, and the officers, directors, agents,
servants, or employees of same, and the members of the immediate family of any
such person. (2) all persons and entities who timely opt out of this proceeding; (3) all
persons who have given valid releases releasing Defendants from the claims
asserted in this Complaint; (4) all persons who, prior to the filing of this Complaint,
have filed a nonclass action claim against the WHO for the claims asserted in this
Complaint; and (5) the judge(s) to whom this case is assigned, their employees and
clerks, and immediate family members.
74.
The Class is sufficiently numerous such that the joinder of all members of the
Class in a single action is impracticable. The population of the County of
Westchester, State of New York is approximately 968,000 and a substantial
majority of those persons have been or will in the immediate future, be affected by
Defendant’s negligent and wrongful conduct.
75.
There are numerous common questions of law and fact that predominate over
any questions affecting only individual members of the Class. Among these common
questions of law and fact are the following:
a.
Whether the WHO’s conduct was negligent and/or reckless.
b.
Whether the WHO’s conduct was contrary to the precepts of humanity and
violated its own code of ethics and professional conduct.
c.
Whether the WHO intentionally mislead the international community,
including the named Plaintiffs, about the coronavirus and its devastating
medical and economic effects.
d.
Whether the WHO had actual and/or constructive knowledge that the
Chinese government failed to timely report the COVID-19 outbreak, under
reported the severity of the virus, underreported the deaths caused by
COVID-19, and failed to properly contain the outbreak.
e.
Whether the WHO negligently failed to further enhance the systematic and
real-time sharing of epidemiologic data, clinical results and experience to
inform the global response by member nations, including the U.S.
f.
Whether because of the WHO’s negligence, mismanagement and lack of
leadership as described herein, the world may have missed a critical window
to halt the COVID-19 pandemic or mitigate its virulence in its early stages.
g.
Whether as a proximate result of the WHO’s negligent actions and conduct,
as described herein, Plaintiffs and Class Members have or are virtually
certain to suffer physical illness or death, as well as emotional distress, and
its physical manifestations, from the effects of the COVID-19 outbreak and
other damages.
76.
The claims of the Plaintiffs are typical of the claims of each member of the
Class in that, among other issues:
a.
Plaintiff’s claims arise from the same course of conduct of the WHO giving
rise to the claims of other Class Members.
b.
The claims of the Plaintiffs and each member of the Class are based upon the
same legal theories.
c.
The Plaintiffs and each member of the Class have an interest in prevailing on
the same legal claims.
d.
The types of damages incurred by the Plaintiffs are similar to those incurred
by the other Class Members.
e.
The defenses asserted by the WHO will be very similar, if not identical, as to
all Plaintiffs and Class Members.
77.
Plaintiffs are adequate representatives of the Class because together with
their legal counsel, each will fairly and adequately protect the interests of Class.
78.
Plaintiffs and all Class Members have a similar, if not identical interest in
obtaining the relief sought. Proof of the claims of the Plaintiffs will also prove the
claims of the Class.
79.
Plaintiffs are not subject to any unique defenses.
80.
Plaintiffs have no known conflict with the Class and are committed to the
vigorous prosecution of this action.
81.
The undersigned counsel are competent counsel experienced in class action
litigation, mass torts, and complex litigation involving such widespread harm.
Counsel will fairly and adequately protect the interests of the Class.
82.
The various claims asserted in this action are certifiable under the provisions
of Federal Rules of Civil Procedure 23(b)(1) because prosecuting separate actions by
individual Class Members would create a risk of inconsistent or varying
adjudications with respect to individual Class Members that would establish
incompatible standards of conduct for the party opposing the Classes; or
adjudications with respect to individual Class Members that, as a practical matter,
would be dispositive of the interests of the other Class Members who are not parties
to the individual adjudications, or would substantially impair or impede their
ability to protect their interests.
83.
Plaintiffs’ legal claims are properly certified pursuant to Rule 23(b)(3) in that:
(1) a class action is superior in this case to other methods of dispute resolution; (2)
the Class Members have an interest in class adjudication rather than individual
adjudication because of their overlapping rights; (3) it is highly desirable to
concentrate the resolution of these claims in this single forum because it would be
difficult and highly unlikely that the affected Class Members would protect their
rights on their own without this class action case; (4) the disparity between the
resources of Defendant and Class Members would make prosecution of individual
actions a financial hardship on Class Members; (5) the prosecution of separate
actions by individual Class Members, or the individual joinder of all Class Members
is impractical and would create a massive and unnecessary burden on the Court’s
resources; and (6) Management of the class will be efficient and far superior to the
management of individual lawsuits. Moreover, currently, the undersigned counsel is
unaware of any other pending litigation regarding this controversy with respect to
the claims asserted here.
84.
The issues particularly common to the Class Members’ claims, some of which
are identified above, are alternatively certifiable pursuant to Fed. R. Civ. P.23(c)(4),
as resolution of these issues would materially advance the litigation, and class
resolution of these issues is superior to repeated litigation of these issues in
separate trials.
85.
Named Plaintiffs have retained the undersigned counsel to represent them in
this lawsuit and are obligated to pay said counsel reasonable attorneys’ fees, as per
the terms of their retainer agreement, provided monetary recovery is obtained.
COUNT I – NEGLIGENCE
86.
Plaintiffs repeat and reallege all preceding paragraphs, as if fully set forth
herein.
87.
The WHO, which on its website holds itself out as “ the global guardian of
public health,” had a duty to persons in the United States, including Plaintiffs and
the members of the Class residing in the State of New York, not to act negligently
and recklessly in its investigation, management and provision of up-to-date
evidence-based guidance to support member countries to develop pandemic
preparedness plans and the capacities to prevent, prepare for and respond to the
threat of the COVID-19 pandemic.
88.
The WHO breached its duty to Plaintiffs and the members of the class, by,
among other things:
a.
Conspiring with the Chinese government to mislead the international
community about the coronavirus and its devastating medical and economic
effects.
b.
Failing to disclose to its member nations and the world that the Chinese
government failed to timely report the COVID-19 outbreak, under reported
the severity of the virus, underreported the deaths caused by COVID-19, and
failed to properly contain the outbreak.
c.
Conspiring with the Chinese government to cover-up the severity of the
COVID-19 heath pandemic.
d.
Failing to disclose that the Chinese government, in order to effectuate this
this cover-up, intimidated doctors, scientists, journalists, and lawyers and
ordered the destruction of medical testing and data.
e.
Failing to timely declare the COVID-19 outbreak as a pandemic, even though
it had met the criteria of transmission between people, high fatality rates and
worldwide spread.
f.
Disseminating materials and statements to the International community that
contained misleading, inaccurate or false information about COVID-19.
g.
Failing to timely provide member nations, including the U.S., with the
required advance planning and preparedness guidance to ensure the
capacities for pandemic response and mitigative protocols to reduce the risk
and impact of the COVID-19 pandemic.
h.
By reason of the WHO’s negligence, mismanagement and lack of leadership,
depriving the world of a critical window to halt the COVID-19 pandemic or
mitigate its virulence in its early stages.
89.
The WHO knew or should have known that their conduct and actions,
described herein, would unnecessarily cause an excessive and preventable number
of persons throughout the world to suffer physical illness or death, as well as
emotional distress, and its physical manifestations. The WHO acted in conscious
disregard of such foreseeable risk.
90.
As a direct and proximate result of the WHO’s negligent breaches of duty, as
described herein, Plaintiffs and members of the class have or are virtually certain to
suffer physical illness or death, as well as emotional distress, and its physical
manifestations, from the effects of the COVID-19 outbreak and other damages.
91.
As a proximate result of the WHO’s negligent actions and conduct, as
described herein, Plaintiffs and Class Members who own or operate businesses,
possess investments and own personal assets have or are virtually certain to suffer
injury and damages from the effects of the COVID-19 outbreak.
92.
There is a temporal and close causal connection between the WHO’s
negligent actions described herein and the harm suffered, or the risk of imminent
harm suffered by Plaintiffs and the Class.
93.
Plaintiffs seek actual, special, and compensatory damages in such amounts
as a jury may award at the trial of this action.
DEMAND FOR JURY TRIAL
Plaintiffs, on their own behalf and on behalf the Class, demand a trial by jury
on all issues so triable.
DEMAND FOR PRESERVATION OF EVIDENCE
Addendum attached.
PRAYER FOR RELIEF
WHEREFORE, RICHARD O. KLING, M.D., STEVEN ROTKER, GENNARO
PURCHIA Individually and On Behalf of All Others Similarly Situated, demand
judgment against the WORLD HEALTH ORGANIZATION and pray for relief as
follows:
a.
Certifying this case as a Rule 23 Class Action with Plaintiffs as Class
representatives and their attorneys, as Class counsel.
b.
An order requiring that the WHO pay compensatory and other damages to
Plaintiffs and the Class Members, for their economic and non-economic
damages identified herein, to the full extent permitted by the law.
c.
An order awarding all damages allowed by any governing statutes.
d.
Reasonable costs and expenses in this litigation, including, but not limited to,
expert fees, filing fees, and reasonable attorneys’ fees; and
e.
Such other and different relief as the Court may deem just and proper.
Dated April 20, 2020
_________________________________
BLAU LEONARD LAW GROUP LLC
Steven Bennett Blau
Shelly A. Leonard
23 Green Street, Suite 105
Huntington, New York 11743
631.458.1010
[email protected]
[email protected]
ADDENDUM “1”
DEMAND FOR PRESERVATION
PLEASE TAKE NOTICE that THE WORLD HEALTH ORGANIZATION is
not to destroy, conceal or alter in any manner whatsoever any or all evidence,
documents, information, paper or electronic data and/or other tangible items
pertaining or relevant to materials discoverable in the above referenced matter.
This notice applies to THE WORLD HEALTH ORGANIZATION’s on- and off-
site computer systems and removable electronic media, plus all computer systems,
services, and devices (including all remote access and wireless devices) used for your
overall operation. This includes, but is not limited to, e-mail and other electronic
communications; electronically stored documents, records, images, graphics,
recordings, spreadsheets, databases; calendars, system usage logs, contact manager
information, telephone logs, internet usage files, deleted files, cache files, user
information, and other data. Further, this notice applies to archives, backup and
disaster recovery tapes, discs, drives, cartridges, voicemail and other data. All
operating systems, software, applications, hardware, operating manuals, codes keys
and other support information needed to fully search, use, and access the
electronically stored information.
Electronically stored information (hereinafter “ESI”) should be afforded the
broadest possible definition and includes (by way of example and not as an exclusive
list) potentially relevant information electronically, magnetically or optically stored
•
Digital communications (e.g., e-mail, voice mail, instant messaging);
•
Word processed documents (e.g., Word or WordPerfect documents and drafts);
•
Spreadsheets and tables (e.g., Excel or Lotus 123 worksheets);
•
Accounting Application Data (e.g., QuickBooks, Money, Peachtree data files);
•
Image and Facsimile Files (e.g., .PDF, .TIFF, .JPG, .GIF images);
•
Sound Recordings (e.g., .WAV and .MP3 files);
•
Video and Animation (e.g., .AVI and .MOV files);
•
Databases (e.g., Access, Oracle, SQL Server data, SAP);
•
Contact and Relationship Management Data (e.g., Outlook, ACT!);
22
•
Calendar and Diary Application Data (e.g., Outlook PST, Yahoo, blog tools);
•
Online Access Data (e.g., Temporary Internet Files, History, Cookies);
•
Presentations (e.g., PowerPoint, Corel Presentations)
•
Network Access and Server Activity Logs;
•
Project Management Application Data;
•
Computer Aided Design/Drawing Files; and,
•
Back Up and Archival Files (e.g., Zip, .GHO)
You are directed to immediately initiate a litigation hold for potentially
relevant ESI, documents and tangible things, and to act diligently and in good faith
to secure and audit compliance with such litigation hold. You are further directed
to immediately identify and modify or suspend features of your information systems
and devices that, in routine operation, operate to cause the loss of potentially
relevant ESI. Examples of such features and operations include:
•
Purging the contents of e-mail repositories by age, capacity or other criteria;
•
Using data or media wiping, disposal, erasure or encryption utilities or
devices;
•
Overwriting, erasing, destroying or discarding back up media;
•
Re-assigning, re-imaging or disposing of systems, servers, devices or media;
•
Running antivirus or other programs effecting wholesale metadata
alteration;
•
Releasing or purging online storage repositories;
•
Using metadata stripper utilities;
•
Disabling server or IM logging; and,
•
Executing drive or file defragmentation or compression programs.
In order to assure that your obligation to preserve documents and things will
be met, please forward a copy of this letter to any and all persons and entities with
custodial responsibilities for the items referred to herein. Notify all individuals and
affiliated organizations of the need and duty to take the necessary affirmatives
steps to comply with the duty to preserve evidence.
23
| products liability and mass tort |
XqkBCocBD5gMZwczEi3_ | UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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SHAEL CRUZ, on behalf of himself and
all others similarly situated,
Plaintiffs,
CLASS ACTION COMPLAINT
v.
AND
DEMAND FOR JURY TRIAL
EMBRACE PET INSURANCE AGENCY, LLC,
Defendant.
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INTRODUCTION
1.
Plaintiff SHAEL CRUZ, on behalf of himself and others similarly situated, asserts
the following claims against Defendant EMBRACE PET INSURANCE AGENCY,
LLC as follows.
2.
Plaintiff is a visually-impaired and legally blind person who requires screen-
reading software to read website content using his computer. Plaintiff uses the terms
“blind” or “visually-impaired” to refer to all people with visual impairments who
meet the legal definition of blindness in that they have a visual acuity with
correction of less than or equal to 20 x 200. Some blind people who meet this
definition have limited vision. Others have no vision.
3.
Based on a 2010 U.S. Census Bureau report, approximately 8.1 million people in
the United States are visually impaired, including 2.0 million who are blind, and
according to the American Foundation for the Blind’s 2015 report, approximately
400,000 visually impaired persons live in the State of New York.
4.
Plaintiff brings this civil rights action against Defendant for its failure to design,
construct, maintain, and operate its website to be fully accessible to and
independently usable by Plaintiff and other blind or visually-impaired people.
Defendant’s denial of full and equal access to its website, and therefore denial of
its goods and services offered thereby, is a violation of Plaintiff’s rights under the
Americans with Disabilities Act (“ADA”).
5.
Because Defendant’s website, www.embracepetinsurance.com (the “Website” or
“Defendant’s website”), is not equally accessible to blind and visually-impaired
consumers, it violates the ADA. Plaintiff seeks a permanent injunction to cause a
change in Defendant’s corporate policies, practices, and procedures so that
Defendant’s website will become and remain accessible to blind and visually-
impaired consumers.
JURISDICTION AND VENUE
6.
This Court has subject-matter jurisdiction over this action under 28 U.S.C. § 1331
and 42 U.S.C. § 12181, as Plaintiff’s claims arise under Title III of the ADA, 42
U.S.C. § 12181, et seq., and 28 U.S.C. § 1332.
7.
This Court has supplemental jurisdiction under 28 U.S.C. § 1367 over Plaintiff’s
New York State Human Rights Law, N.Y. Exec. Law Article 15, (“NYSHRL”) and
New York City Human Rights Law, N.Y.C. Admin. Code § 8-101 et seq.,
(“NYCHRL”) claims.
8.
Venue is proper in this district under 28 U.S.C. §1391(b)(1) and (2) because
Defendant conducts and continues to conduct a substantial and significant amount
of business in this District, and a substantial portion of the conduct complained of
herein occurred in this District because Plaintiff attempted to utilize, on a number
of occasions, the subject Website within this Judicial District.
9.
Defendant is subject to personal jurisdiction in this District. Defendant has been
and is committing the acts or omissions alleged herein in the Southern District of
New York that caused injury, and violated rights the ADA prescribes to Plaintiff
and to other blind and other visually impaired-consumers. A substantial part of the
acts and omissions giving rise to Plaintiff’s claims occurred in this District: on
several separate occasions, Plaintiff has been denied the full use and enjoyment of
the facilities, goods and services offered to the general public, on Defendant’s
Website in New York County. These access barriers that Plaintiff encountered have
caused a denial of Plaintiff’s full and equal access multiple times in the past, and
now deter Plaintiff on a regular basis from accessing the Defendant’s Website in
the future.
10.
This Court is empowered to issue a declaratory judgment under 28 U.S.C. §§ 2201
and 2202.
THE PARTIES
11.
Plaintiff SHAEL CRUZ, at all relevant times, is a resident of New York, New York.
Plaintiff is a blind, visually-impaired handicapped person and a member of member
of a protected class of individuals under the ADA, under 42 U.S.C. § 12102(1)-(2),
and the regulations implementing the ADA set forth at 28 CFR §§ 36.101 et seq.,
the NYSHRL and NYCHRL.
12.
Defendant is and was at all relevant times an Ohio Limited Liability Company
doing business in New York.
13.
Defendant’s Website, and its facilities, goods, and services offered thereupon, is a
public accommodation within the definition of Title III of the ADA, 42 U.S.C. §
12181(7).
NATURE OF ACTION
14.
The Internet has become a significant source of information, a portal, and a tool for
conducting business, doing everyday activities such as shopping, learning, banking,
researching, as well as many other activities for sighted, blind and visually-
impaired persons alike.
15.
In today’s tech-savvy world, blind and visually-impaired people have the ability to
access websites using keyboards in conjunction with screen access software that
vocalizes the visual information found on a computer screen or displays the content
on a refreshable Braille display. This technology is known as screen-reading
software. Screen-reading software is currently the only method a blind or visually-
impaired person may independently access the internet. Unless websites are
designed to be read by screen-reading software, blind and visually-impaired
persons are unable to fully access websites, and the information, products, goods
and contained thereon.
16.
Blind and visually-impaired users of Windows operating system-enabled
computers and devices have several screen reading software programs available to
them. Some of these programs are available for purchase and other programs are
available without the user having to purchase the program separately. Job Access
With Speech, otherwise known as “JAWS” is currently the most popular, separately
purchased and downloaded screen-reading software program available for a
Windows computer.
17.
For screen-reading software to function, the information on a website must be
capable of being rendered into text. If the website content is not capable of being
rendered into text, the blind or visually-impaired user is unable to access the same
content available to sighted users.
18.
The international website standards organization, the World Wide Web
Consortium, known throughout the world as W3C, has published version 2.0 of the
Web Content Accessibility Guidelines (“WCAG 2.1”). WCAG 2.1 are well-
established guidelines for making websites accessible to blind and visually-
impaired people. These guidelines are universally followed by most large business
entities and government agencies to ensure their websites are accessible.
19.
Non-compliant websites pose common access barriers to blind and visually-
impaired persons. Common barriers encountered by blind and visually impaired
persons include, but are not limited to, the following:
a.
A text equivalent for every non-text element is not provided;
b.
Title frames with text are not provided for identification and
navigation;
c.
Equivalent text is not provided when using scripts;
d.
Forms with the same information and functionality as for sighted
persons are not provided;
e.
Information about the meaning and structure of content is not
conveyed by more than the visual presentation of content;
f.
Text cannot be resized without assistive technology up to 200%
without losing content or functionality;
g.
If the content enforces a time limit, the user is not able to extend,
adjust or disable it;
h.
Web pages do not have titles that describe the topic or purpose;
i.
The purpose of each link cannot be determined from the link text
alone or from the link text and its programmatically determined link
context;
j.
One or more keyboard operable user interface lacks a mode of
operation where the keyboard focus indicator is discernible;
k.
The default human language of each web page cannot be
programmatically determined;
l.
When a component receives focus, it may initiate a change in
context;
m.
Changing the setting of a user interface component may
automatically cause a change of context where the user has not been advised
before using the component;
n.
Labels or instructions are not provided when content requires user
input, which include captcha prompts that require the user to verify that he
or she is not a robot;
o.
In content which is implemented by using markup languages,
elements do not have complete start and end tags, elements are not nested
according to their specifications, elements may contain duplicate attributes,
and/or any IDs are not unique;
p.
Inaccessible Portable Document Format (PDFs); and,
q.
The name and role of all User Interface elements cannot be
programmatically determined; items that can be set by the user cannot be
programmatically set; and/or notification of changes to these items is not
available to user agents, including assistive technology.
STATEMENT OF FACTS
Defendant’s Barriers on Its Website
20.
Defendant is a pet insurance company, and owns and operates the website,
www.embracepetinsurance.com (its “Website”), offering features which should
allow all consumers to access the goods and services and which Defendant ensures
the delivery of such goods throughout the United States, including New York State.
21.
Defendant operates and distributes its products throughout the United States,
including New York.
22.
Defendant offers the commercial website, www.embracepetinsurance.com, to the
public. The website offers features which should allow all consumers to access the
goods and services whereby Defendant allows for the delivery of those ordered
goods to consumers throughout the United States, including New York State. The
goods and services offered by Defendant include, but are not limited to the
following: the ability to browse pet insurance for purchase, view a blog, obtain
defendant’s contact information, and related goods and services available online.
23.
It is, upon information and belief, Defendant’s policy and practice to deny Plaintiff,
along with other blind or visually-impaired users, access to Defendant’s website,
and to therefore specifically deny the goods and services that are offered to the
general public. Due to Defendant’s failure and refusal to remove access barriers to
its website, Plaintiff and visually-impaired persons have been and are still being
denied equal access to Defendant’s Website, and the numerous goods and services
and benefits offered to the public through the Website.
24.
Plaintiff is a visually-impaired and legally blind person, who cannot use a computer
without the assistance of screen-reading software. Plaintiff is, however, a proficient
JAWS screen-reader user and uses it to access the Internet. Plaintiff has visited the
Website on separate occasions using the JAWS screen-reader.
25.
During Plaintiff’s visits to the Website, the last occurring in November 2020,
Plaintiff encountered multiple access barriers that denied Plaintiff full and equal
access to the facilities, goods and services offered to the public and made available
to the public; and that denied Plaintiff the full enjoyment of the facilities, goods and
services of the Website.
26.
While attempting to navigate the Website, Plaintiff encountered multiple
accessibility barriers for blind or visually-impaired people that include, but are not
limited to, the following:
27.
Lack of Alternative Text (“alt-text”), or a text equivalent. Alt-text is an invisible
code embedded beneath a graphical image on a website. Web accessibility requires
that alt-text be coded with each picture so that screen-reading software can speak
the alt-text where a sighted user sees pictures, which includes captcha prompts. Alt-
text does not change the visual presentation, but instead a text box shows when the
cursor moves over the picture. The lack of alt-text on these graphics prevents screen
readers from accurately vocalizing a description of the graphics.
28.
Empty Links That Contain No Text causing the function or purpose of the link to
not be presented to the user. This can introduce confusion for keyboard and screen-
reader users;
29.
Redundant Links where adjacent links go to the same URL address which results
in additional navigation and repetition for keyboard and screen-reader users; and
30.
Linked Images Missing Alt-text, which causes problems if an image within a link
contains no text and that image does not provide alt-text. A screen reader then has
no content to present the user as to the function of the link, including information
contained in PDFs.
31.
As a result of visiting Defendant’s Website and from investigations performed on
his behalf, Plaintiff is aware that the Website includes at least the following
additional barriers blocking his full and equal use:
a. The missing skip link is an easy way to implement accessibility
structure that allows users to have immediate access to pertinent
content. For example, skip to content, skip to header or skip to footer
buttons which direct you to a specific area. A skip (navigation) link
provides a way for users of assistive technology to skip what can often
be many navigation links.
b. The telephone number provided on the website lacks a full description.
It is read as a number; however, it does not specify it is a telephone
number thus barring the user from contacting the company for
assistance.
c. Site element such as text providing product information is not labeled
to integrate with the screen reader. The "shop now" link associated with
it is accessible, however, it does not contain a description as to what the
"shop now" link is for. The lack of sufficient description keeps the user
from fully understanding the information the site is to convey.
Defendant Must Remove Barriers To Its Website
32.
Due to the inaccessibility of Defendant’s Website, blind and visually-impaired
customers such as Plaintiff, who need screen-readers, cannot fully and equally use
or enjoy the facilities, products, and services Defendant offers to the public on its
Website. The access barriers Plaintiff encountered have caused a denial of
Plaintiff’s full and equal access in the past, and now deter Plaintiff on a regular
basis from visiting the Website, presently and in the future.
33.
These access barriers on Defendant’s Website have deterred Plaintiff from learning
about those various pet insurance for purchase, and enjoying them equal to sighted
individuals because: Plaintiff was unable to determine and or purchase items from
its Website, among other things.
34.
If the Website was equally accessible to all, Plaintiff could independently navigate
the Website and complete a desired transaction as sighted individuals do.
35.
Through his attempts to use the Website, Plaintiff has actual knowledge of the
access barriers that make these services inaccessible and independently unusable
by blind and visually-impaired people.
36.
Because simple compliance with the WCAG 2.1 Guidelines would provide Plaintiff
and other visually-impaired consumers with equal access to the Website, Plaintiff
alleges that Defendant has engaged in acts of intentional discrimination, including
but not limited to the following policies or practices:
a.
Constructing and maintaining a website that is inaccessible to
visually-impaired individuals, including Plaintiff;
b.
Failure to construct and maintain a website that is sufficiently intuitive
so as to be equally accessible to visually-impaired individuals, including
Plaintiff; and,
c.
Failing to take actions to correct these access barriers in the face of
substantial harm and discrimination to blind and visually-impaired
consumers, such as Plaintiff, as a member of a protected class.
37.
Defendant therefore uses standards, criteria or methods of administration that have the
effect of discriminating or perpetuating the discrimination of others, as alleged herein.
38.
The ADA expressly contemplates the injunctive relief that Plaintiff seeks in this
action. In relevant part, the ADA requires:
In the case of violations of . . . this title, injunctive relief shall include an order to
alter facilities to make such facilities readily accessible to and usable by individuals
with disabilities . . . Where appropriate, injunctive relief shall also include requiring
the . . . modification of a policy . . .
42 U.S.C. § 12188(a)(2).
39.
Because Defendant’s Website have never been equally accessible, and because
Defendant lacks a corporate policy that is reasonably calculated to cause its Website
to become and remain accessible, Plaintiff invokes 42 U.S.C. § 12188(a)(2) and
seeks a permanent injunction requiring Defendant to retain a qualified consultant
acceptable to Plaintiff (“Agreed Upon Consultant”) to assist Defendant to comply
with WCAG 2.1 guidelines for Defendant’s Website. Plaintiff seeks that this
permanent injunction requires Defendant to cooperate with the Agreed Upon
Consultant to:
a.
Train Defendant’s employees and agents who develop the Website
on accessibility compliance under the WCAG 2.1 guidelines;
b.
Regularly check the accessibility of the Website under the WCAG
2.0 guidelines;
c.
Regularly test user accessibility by blind or vision-impaired persons
to ensure that Defendant’s Website complies under the WCAG 2.1
guidelines; and,
d.
Develop an accessibility policy that is clearly disclosed on Defendant’s
Websites, with contact information for users to report accessibility-related
problems.
40.
If the Website was accessible, Plaintiff and similarly situated blind and visually-
impaired people could independently view service items, shop for and otherwise
research related goods and services available via the Website.
41.
Although Defendant may currently have centralized policies regarding maintaining
and operating its Website, Defendant lacks a plan and policy reasonably calculated
to make them fully and equally accessible to, and independently usable by, blind
and other visually-impaired consumers.
42.
Defendant has, upon information and belief, invested substantial sums in
developing and maintaining their Website and has generated significant revenue
from the Website. These amounts are far greater than the associated cost of making
their Website equally accessible to visually impaired customers.
43.
Without injunctive relief, Plaintiff and other visually-impaired consumers will
continue to be unable to independently use the Website, violating their rights.
CLASS ACTION ALLEGATIONS
44.
Plaintiff, on behalf of himself and all others similarly situated, seeks to certify a
nationwide class under Fed. R. Civ. P. 23(a) and 23(b)(2): all legally blind
individuals in the United States who have attempted to access Defendant’s Website
and as a result have been denied access to the equal enjoyment of goods and services,
during the relevant statutory period.
45.
Plaintiff, on behalf of himself and all others similarly situated, seeks certify a New
York State subclass under Fed. R. Civ. P. 23(a) and 23(b)(2): all legally blind
individuals in the State of New York who have attempted to access Defendant’s
Website and as a result have been denied access to the equal enjoyment of those
services, during the relevant statutory period.
46.
Plaintiff, on behalf of himself and all others similarly situated, seeks certify a New
York City subclass under Fed. R. Civ. P. 23(a) and 23(b)(2): all legally blind
individuals in the City of New York who have attempted to access Defendant’s
Website and as a result have been denied access to the equal enjoyment of goods and
services offered, during the relevant statutory period.
47.
Common questions of law and fact exist amongst Class, including:
a.
Whether Defendant’s Website is a “public accommodation” under
the ADA;
b.
Whether Defendant’s Website is a “place or provider of public
accommodation” under the NYSHRL or NYCHRL;
c.
Whether Defendant’s Website denies the full and equal enjoyment
of
its
products,
services,
facilities,
privileges,
advantages,
or
accommodations to people with visual disabilities, violating the ADA; and
d.
Whether Defendant’s Website denies the full and equal enjoyment
of
its
products,
services,
facilities,
privileges,
advantages,
or
accommodations to people with visual disabilities, violating the NYSHRL
or NYCHRL.
48.
Plaintiff’s claims are typical of the Class. The Class, similarly to the Plaintiff, are
severely visually impaired or otherwise blind, and claim that Defendant has
violated the ADA, NYSYRHL or NYCHRL by failing to update or remove access
barriers on its Website so either can be independently accessible to the Class.
49.
Plaintiff will fairly and adequately represent and protect the interests of the Class
Members because Plaintiff has retained and is represented by counsel competent
and experienced in complex class action litigation, and because Plaintiff has no
interests antagonistic to the Class Members. Class certification of the claims is
appropriate under Fed. R. Civ. P. 23(b)(2) because Defendant has acted or refused
to act on grounds generally applicable to the Class, making appropriate both
declaratory and injunctive relief with respect to Plaintiff and the Class as a whole.
50.
Alternatively, class certification is appropriate under Fed. R. Civ. P. 23(b)(3) because
fact and legal questions common to Class Members predominate over questions
affecting only individual Class Members, and because a class action is superior to
other available methods for the fair and efficient adjudication of this litigation.
51.
Judicial economy will be served by maintaining this lawsuit as a class action in that
it is likely to avoid the burden that would be otherwise placed upon the judicial
system by the filing of numerous similar suits by people with visual disabilities
throughout the United States.
FIRST CAUSE OF ACTION
VIOLATIONS OF THE ADA, 42 U.S.C. § 12181 et seq.
52.
Plaintiff, on behalf of himself and the Class Members, repeats and realleges every
allegation of the preceding paragraphs as if fully set forth herein.
53.
Section 302(a) of Title III of the ADA, 42 U.S.C. § 12101 et seq., provides:
No individual shall be discriminated against on the basis of disability in the full and
equal enjoyment of the goods, services, facilities, privileges, advantages, or
accommodations of any place of public accommodation by any person who owns,
leases (or leases to), or operates a place of public accommodation.
42 U.S.C. § 12182(a).
54.
Defendant’s Website is a public accommodations within the definition of Title III
of the ADA, 42 U.S.C. § 12181(7). The Website is a service that is offered to the
general public, and as such, must be equally accessible to all potential consumers.
55.
Under Section 302(b)(1) of Title III of the ADA, it is unlawful discrimination to
deny individuals with disabilities the opportunity to participate in or benefit from
the products, services, facilities, privileges, advantages, or accommodations of an
entity. 42 U.S.C. § 12182(b)(1)(A)(i).
56.
Under Section 302(b)(1) of Title III of the ADA, it is unlawful discrimination to
deny individuals with disabilities an opportunity to participate in or benefit from
the products, services, facilities, privileges, advantages, or accommodation, which
is equal to the opportunities afforded to other individuals. 42 U.S.C. §
12182(b)(1)(A)(ii).
57.
Under Section 302(b)(2) of Title III of the ADA, unlawful discrimination also
includes, among other things:
[A] failure to make reasonable modifications in policies, practices, or procedures,
when such modifications are necessary to afford such goods, services, facilities,
privileges, advantages, or accommodations to individuals with disabilities, unless
the entity can demonstrate that making such modifications would fundamentally
alter the nature of such goods, services, facilities, privileges, advantages or
accommodations; and a failure to take such steps as may be necessary to ensure that
no individual with a disability is excluded, denied services, segregated or otherwise
treated differently than other individuals because of the absence of auxiliary aids
and services, unless the entity can demonstrate that taking such steps would
fundamentally alter the nature of the good, service, facility, privilege, advantage,
or accommodation being offered or would result in an undue burden.
42 U.S.C. § 12182(b)(2)(A)(ii)-(iii).
58.
The acts alleged herein constitute violations of Title III of the ADA, and the
regulations promulgated thereunder. Plaintiff, who is a member of a protected class
of persons under the ADA, has a physical disability that substantially limits the
major life activity of sight within the meaning of 42 U.S.C. §§ 12102(1)(A)-(2)(A).
Furthermore, Plaintiff has been denied full and equal access to the Website, has not
been provided services that are provided to other patrons who are not disabled, and
has been provided services that are inferior to the services provided to non-disabled
persons. Defendant has failed to take any prompt and equitable steps to remedy its
discriminatory conduct. These violations are ongoing.
59.
Under 42 U.S.C. § 12188 and the remedies, procedures, and rights set forth and
incorporated therein, Plaintiff, requests relief as set forth below.
SECOND CAUSE OF ACTION
VIOLATIONS OF THE NYSHRL
60.
Plaintiff, on behalf of himself and the New York State Sub-Class Members, repeats
and realleges every allegation of the preceding paragraphs as if fully set forth herein.
61.
N.Y. Exec. Law § 296(2)(a) provides that it is “an unlawful discriminatory practice
for any person, being the owner, lessee, proprietor, manager, superintendent, agent
or employee of any place of public accommodation . . . because of the . . . disability
of any person, directly or indirectly, to refuse, withhold from or deny to such person
any of the accommodations, advantages, facilities or privileges thereof.”
62.
Defendant’s Website and its’ sale of goods to the general public, constitute sales
establishments and public accommodations within the definition of N.Y. Exec. Law
§ 292(9). Defendant’s Website is a service, privilege or advantage of Defendant.
63.
Defendant is subject to New York Human Rights Law because it owns and operates
its Website. Defendant is a person within the meaning of N.Y. Exec. Law § 292(1).
64.
Defendant is violating N.Y. Exec. Law § 296(2)(a) in refusing to update or remove
access barriers to its Website, causing its Website to be completely inaccessible to
the blind. This inaccessibility denies blind patrons full and equal access to the
facilities, services that Defendant makes available to the non-disabled public.
65.
Under N.Y. Exec. Law § 296(2)(c)(i), unlawful discriminatory practice includes,
among other things, “a refusal to make reasonable modifications in policies,
practices, or procedures, when such modifications are necessary to afford facilities,
privileges, advantages or accommodations to individuals with disabilities, unless
such person can demonstrate that making such modifications would fundamentally
alter the nature of such facilities, privileges, advantages or accommodations being
offered or would result in an undue burden".
66.
Under N.Y. Exec. Law § 296(2)(c)(ii), unlawful discriminatory practice also
includes, “a refusal to take such steps as may be necessary to ensure that no
individual with a disability is excluded or denied services because of the absence
of auxiliary aids and services, unless such person can demonstrate that taking such
steps would fundamentally alter the nature of the facility, privilege, advantage or
accommodation being offered or would result in an undue burden.”
67.
Readily available, well-established guidelines exist on the Internet for making
websites accessible to the blind and visually impaired. These guidelines have been
followed by other large business entities and government agencies in making their
website accessible, including but not limited to: adding alt-text to graphics and
ensuring that all functions can be performed using a keyboard. Incorporating the
basic components to make its Website accessible would neither fundamentally alter
the nature of Defendant’s business nor result in an undue burden to Defendant.
68.
Defendant’s actions constitute willful intentional discrimination against the class
on the basis of a disability in violation of the NYSHRL, N.Y. Exec. Law § 296(2)
in that Defendant has:
a.
constructed and maintained a website that is inaccessible to blind
class members with knowledge of the discrimination; and/or
b.
constructed and maintained a website that is sufficiently intuitive
and/or obvious that is inaccessible to blind class members; and/or
c.
failed to take actions to correct these access barriers in the face of
substantial harm and discrimination to blind class members.
69.
Defendant has failed to take any prompt and equitable steps to remedy their
discriminatory conduct. These violations are ongoing.
70.
Defendant discriminates, and will continue in the future to discriminate against
Plaintiff and New York State Sub-Class Members on the basis of disability in the
full and equal enjoyment of the products, services, facilities, privileges, advantages,
accommodations and/or opportunities of Defendant’s Website under § 296(2) et
seq. and/or its implementing regulations. Unless the Court enjoins Defendant from
continuing to engage in these unlawful practices, Plaintiff and the Sub-Class
Members will continue to suffer irreparable harm.
71.
Defendant’s actions were and are in violation of New York State Human Rights
Law and therefore Plaintiff invokes his right to injunctive relief to remedy the
discrimination.
72.
Plaintiff is also entitled to compensatory damages, as well as civil penalties and
fines under N.Y. Exec. Law § 297(4)(c) et seq. for each and every offense.
73.
Plaintiff is also entitled to reasonable attorneys’ fees and costs.
74.
Under N.Y. Exec. Law § 297 and the remedies, procedures, and rights set forth and
incorporated therein Plaintiff prays for judgment as set forth below.
THIRD CAUSE OF ACTION
VIOLATION OF THE NEW YORK STATE CIVIL RIGHTS LAW
75.
Plaintiff, on behalf of himself and the New York State Sub-Class Members, repeats
and realleges every allegation of the preceding paragraphs as if fully set forth herein.
76.
Plaintiff served notice thereof upon the attorney general as required by N.Y. Civil
Rights Law § 41.
77.
N.Y. Civil Rights Law § 40 provides that “all persons within the jurisdiction of this
state shall be entitled to the full and equal accommodations, advantages, facilities
and privileges of any places of public accommodations, resort or amusement,
subject only to the conditions and limitations established by law and applicable
alike to all persons. No persons, being the owner, lessee, proprietor, manager,
superintendent, agent, or employee of any such place shall directly or indirectly
refuse, withhold from, or deny to any person any of the accommodations,
advantages, facilities and privileges thereof . . .”
78.
N.Y. Civil Rights Law § 40-c(2) provides that “no person because of . . . disability,
as such term is defined in section two hundred ninety-two of executive law, be
subjected to any discrimination in his or her civil rights, or to any harassment, as
defined in section 240.25 of the penal law, in the exercise thereof, by any other person
or by any firm, corporation or institution, or by the state or any agency or subdivision.”
79.
Defendant’s Website is a service, privilege or advantage of Defendant and its
Website which offers such goods and services to the general public is required to
be equally accessible to all.
80.
Defendant is subject to New York Civil Rights Law because it owns and operates
their Website, and Defendant is a person within the meaning of N.Y. Civil Law §
40-c(2).
81.
Defendant is violating N.Y. Civil Rights Law § 40-c(2) in refusing to update or
remove access barriers to its Website, causing its Website and the goods and
services integrated with such Website to be completely inaccessible to the blind.
This inaccessibility denies blind patrons full and equal access to the facilities, goods
and services that Defendant makes available to the non-disabled public.
82.
N.Y. Civil Rights Law § 41 states that “any corporation which shall violate any of the
provisions of sections forty, forty-a, forty-b or forty-two . . . shall for each and every
violation thereof be liable to a penalty of not less than one hundred dollars nor more
than five hundred dollars, to be recovered by the person aggrieved thereby . . .”
83.
Under NY Civil Rights Law § 40-d, “any person who shall violate any of the
provisions of the foregoing section, or subdivision three of section 240.30 or section
240.31 of the penal law, or who shall aid or incite the violation of any of said
provisions shall for each and every violation thereof be liable to a penalty of not
less than one hundred dollars nor more than five hundred dollars, to be recovered
by the person aggrieved thereby in any court of competent jurisdiction in the county
in which the defendant shall reside ...”
84.
Defendant has failed to take any prompt and equitable steps to remedy its
discriminatory conduct. These violations are ongoing.
85.
Defendant discriminates, and will continue in the future to discriminate against
Plaintiff and New York State Sub-Class Members on the basis of disability are
being directly or indirectly refused, withheld from, or denied the accommodations,
advantages, facilities and privileges thereof in § 40 et seq. and/or its implementing
regulations.
86.
Plaintiff is entitled to compensatory damages of five hundred dollars per instance,
as well as civil penalties and fines under N.Y. Civil Law § 40 et seq. for each and
every offense.
FOURTH CAUSE OF ACTION
VIOLATIONS OF THE NYCHRL
87.
Plaintiff, on behalf of himself and the New York City Sub-Class Members, repeats
and realleges every allegation of the preceding paragraphs as if fully set forth herein.
88.
N.Y.C. Administrative Code § 8-107(4)(a) provides that “It shall be an unlawful
discriminatory practice for any person, being the owner, lessee, proprietor,
manager, superintendent, agent or employee of any place or provider of public
accommodation, because of . . . disability . . . directly or indirectly, to refuse,
withhold from or deny to such person, any of the accommodations, advantages,
facilities or privileges thereof.”
89.
Defendant’s Website is a sales establishment and public accommodations within
the definition of N.Y.C. Admin. Code § 8-102(9).
90.
Defendant is subject to NYCHRL because it owns and operates its Website, making
it a person within the meaning of N.Y.C. Admin. Code § 8-102(1).
91.
Defendant is violating N.Y.C. Administrative Code § 8-107(4)(a) in refusing to
update or remove access barriers to Website, causing its Website and the services
integrated with such Website to be completely inaccessible to the blind. This
inaccessibility denies blind patrons full and equal access to the facilities, products,
and services that Defendant makes available to the non-disabled public.
92.
Defendant is required to “make reasonable accommodation to the needs of persons
with disabilities . . . any person prohibited by the provisions of [§ 8-107 et seq.]
from discriminating on the basis of disability shall make reasonable
accommodation to enable a person with a disability to . . . enjoy the right or rights
in question provided that the disability is known or should have been known by the
covered entity.” N.Y.C. Admin. Code § 8-107(15)(a).
93.
Defendant’s actions constitute willful intentional discrimination against the Sub-
Class on the basis of a disability in violation of the N.Y.C. Administrative Code §
8-107(4)(a) and § 8-107(15)(a) in that Defendant has:
a.
constructed and maintained a website that is inaccessible to blind
class members with knowledge of the discrimination; and/or
b.
constructed and maintained a website that is sufficiently intuitive
and/or obvious that is inaccessible to blind class members; and/or
c.
failed to take actions to correct these access barriers in the face of
substantial harm and discrimination to blind class members.
94.
Defendant has failed to take any prompt and equitable steps to remedy their
discriminatory conduct. These violations are ongoing.
95.
As such, Defendant discriminates, and will continue in the future to discriminate
against Plaintiff and members of the proposed class and subclass on the basis of
disability in the full and equal enjoyment of the products, services, facilities,
privileges, advantages, accommodations and/or opportunities of its Website under
§ 8-107(4)(a) and/or its implementing regulations. Unless the Court enjoins
Defendant from continuing to engage in these unlawful practices, Plaintiff and
members of the class will continue to suffer irreparable harm.
96.
Defendant’s actions were and are in violation of the NYCHRL and therefore
Plaintiff invokes his right to injunctive relief to remedy the discrimination.
97.
Plaintiff is also entitled to compensatory damages, as well as civil penalties and
fines under N.Y.C. Administrative Code § 8-120(8) and § 8-126(a) for each offense
as well as punitive damages pursuant to § 8-502.
98.
Plaintiff is also entitled to reasonable attorneys’ fees and costs.
99.
Under N.Y.C. Administrative Code § 8-120 and § 8-126 and the remedies,
procedures, and rights set forth and incorporated therein Plaintiff prays for
judgment as set forth below.
FIFTH CAUSE OF ACTION
DECLARATORY RELIEF
100.
Plaintiff, on behalf of himself and the Class and New York State and City Sub-
Classes Members, repeats and realleges every allegation of the preceding
paragraphs as if fully set forth herein.
101.
An actual controversy has arisen and now exists between the parties in that Plaintiff
contends, and is informed and believes that Defendant denies, that its Website
contains access barriers denying blind customers the full and equal access to the
products, services and facilities of its Website, which Defendant owns, operations
and controls, fails to comply with applicable laws including, but not limited to, Title
III of the Americans with Disabilities Act, 42 U.S.C. §§ 12182, et seq., N.Y. Exec.
Law § 296, et seq., and N.Y.C. Admin. Code § 8-107, et seq. prohibiting
discrimination against the blind.
102.
A judicial declaration is necessary and appropriate at this time in order that each of
the parties may know their respective rights and duties and act accordingly.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff respectfully requests this Court grant the following relief:
a.
A preliminary and permanent injunction to prohibit Defendant from
violating the Americans with Disabilities Act, 42 U.S.C. §§ 12182, et seq.,
N.Y. Exec. Law § 296, et seq., N.Y.C. Administrative Code § 8-107, et seq.,
and the laws of New York;
b.
A preliminary and permanent injunction requiring Defendant to take
all the steps necessary to make its Website into full compliance with the
requirements set forth in the ADA, and its implementing regulations, so that
the Website is readily accessible to and usable by blind individuals;
c.
A declaration that Defendant owns, maintains and/or operates its
Website in a manner that discriminates against the blind and which fails to
provide access for persons with disabilities as required by Americans with
Disabilities Act, 42 U.S.C. §§ 12182, et seq., N.Y. Exec. Law § 296, et seq.,
N.Y.C. Administrative Code § 8-107, et seq., and the laws of New York
d.
An order certifying the Class and Sub-Classes under Fed. R. Civ. P.
23(a) & (b)(2) and/or (b)(3), appointing Plaintiff as Class Representative,
and his attorneys as Class Counsel;
e.
Compensatory damages in an amount to be determined by proof,
including all applicable statutory and punitive damages and fines, to
Plaintiff and the proposed class and subclasses for violations of their civil
rights under New York State Human Rights Law and City Law;
f.
Pre- and post-judgment interest;
g.
An award of costs and expenses of this action together with
reasonable attorneys’ and expert fees; and
h.
Such other and further relief as this Court deems just and proper.
DEMAND FOR TRIAL BY JURY
Pursuant to Fed. R. Civ. P. 38(b), Plaintiff demands a trial by jury on all questions
of fact the Complaint raises.
Dated: Brooklyn, New York
November 24, 2020
COHEN & MIZRAHI LLP
By: /s/ Joseph H. Mizrahi
Joseph H. Mizrahi, Esq.
[email protected]
300 Cadman Plaza West, 12th Fl.
Brooklyn, New York 11201
Tel: (929) 575-4175
Fax: (929) 575-4195
Attorneys For Plaintiff
| civil rights, immigration, family |
0ndpFokB9sM9pEmaIzTg | COMPLAINT
Civil No. 16-cv-2041
JURY TRIAL DEMANDED
Plaintiff BLANCA RAQUEL BRAVO VELEZ ("Ms. Velez" or "Plaintiff"), on behalf of
JURISDICTION AND VENUE
This Court has subject matter jurisdiction over this suit pursuant to 28 U.S.C. §§ 1331
because this case is brought under the Fair Labor Standards Act, 29 U.S.C. §§ 201 et seq.
Article III of the United States Constitution.
1
Venue is proper in the Eastern District of New York pursuant to 28 U.S.C. § 1391 because
Defendants conduct business in this District and because a substantial part of the
acts/omissions giving rise to the claims herein occurred in this District.
THE PARTIES
Plaintiff Blanca Raquel Bravo Velez is a resident of Queens, New York.
Defendant MDM is incorporated in and authorized to do business in the State of New York
and is located in Queens, New York.
Defendant Mr. Minchala is an owner and officer of MDM and is, upon information and
belief, a resident of the State of New York.
Defendant Mrs. Julia Minchala is an owner and officer of MDM and is, upon information
and belief, a resident of the State of New York.
Upon information and belief, Defendant Ms. Soledad Minchala is an owner and/or officer
of MDM and is a resident of the State of New York.
FLSA COLLECTIVE ACTION ALLEGATIONS
Plaintiff brings her first and second claims herein for relief as a collective action pursuant
to FLSA Section 16(b), 29 U.S.C. § 216(b), on behalf of all non-exempt persons employed
by Defendants at any location on or after the date that is three years before the filing of this
Complaint, as defined herein ("Collective Plaintiffs").
At all relevant times, Plaintiff and the other Collective Plaintiffs are and have been similarly
situated, have had substantially similar job requirements and pay provisions, and are and
have been subject to Defendants' decisions, plans, policies, programs, practices, procedures
protocols, routines, and rules in willfully failing and refusing to pay them at the legally
required minimum wage for all hours worked and one and one half times this rate for work
2
in excess of forty (40) hours per workweek. Plaintiff's claims herein are in essence the
same as those of the other Collective Plaintiffs.
The first and second claims for relief herein are properly brought under and maintained as
an opt-in collective action pursuant to Section 16(b) of the FLSA, 29 U.S.C. § 216(b). The
Collective Plaintiffs are readily ascertainable. For purposes of notice and other purposes,
Collective Plaintiffs' names and addresses are readily available from Defendants. Notice
can be provided to the Collective Plaintiffs through first class mail to the last known address
of each individual Collective Plaintiff.
Plaintiff's Consent to Sue form is attached hereto as Exhibit A.
FRCP RULE 23 CLASS ACTION ALLEGATIONS
Plaintiff bring her state law claims for relief (the third, fourth, fifth and sixth counts)
pursuant to the Federal Rules of Civil Procedure, Rule 23 ("FRCP 23"), on behalf of all
non-exempt employees employed by Defendants at any New York location in any hourly
position on or after the date that is six years before the filing of this Complaint, as defined
herein (the "Class").
The Class members are readily ascertainable. The number and identity of the Class
members are determinable from Defendants' records. Class members' hours, positions
held and rates of pay are also readily ascertainable from defendants' records. For purposes
from Defendants. Notice can be provided by means permissible pursuant to FRCP 23.
number is within the sole control of Defendants, upon information and belief, there are at
least fifty (50) Class members.
Plaintiff's claims are typical of those claims which could be alleged by any Class member,
and the relief sought is typical of the relief which would be sought be each Class member
in separate actions. All class members were subject to the same corporate practices of
Defendants, as alleged herein, of failing to pay minimum wage and overtime compensation
in accord with the law. Defendants' policies and practices affected all Class members
similarly, and Defendants have benefited from the same type of unfair and/or wrongful
acts/omissions as to each Class member. Plaintiff and other Class members sustained
similar losses, injuries and damages arising from the same unlawful policies, practices and
procedures.
Plaintiff is able to fairly and adequately protect the interests of the Class and has no interests
contrary to the Class' interests. Plaintiff is represented by attorneys who are experienced
and competent in both class action litigation and employment litigation and have previously
represented clients in wage and hour cases.
A class action is superior to other available methods for the fair and efficient adjudication
of the controversy-particularly in the context of wage and hour litigation where individual
class members lack the financial resources to vigorously prosecute a lawsuit against
corporate Defendants. Class action treatment will permit a large number of similarly
situated persons to prosecute their common claims in a single forum simultaneously,
efficiently and without the unnecessary duplication of efforts and expense that numerous
individual actions would engender. Because the losses, injuries and damages suffered byexpenses and burden of individual litigation would make it extremely difficult or
impossible for the individual Class members to redress the wrongs they suffered.
Moreover, important public interests will be served by addressing this matter as a class
action. The adjudication of individual litigation claims would result in a great expenditure
of Court and public resources; however, treating the claims as a class action would result
in a significant saving of these costs. The prosecution of separate actions by individual
members of the Class would create a risk of inconsistent and/or varying adjudications with
conduct for Defendants and resulting in the impairment of Class members' rights and the
disposition of their interests through actions to which they were not parties. The issues in
appropriate, the Court can, and is empowered to, fashion methods to efficiently manage
this action as a class action.
these risks.
questions affecting only individual Class members, including:
(a) Whether Defendants employed Plaintiff and the Class members within the
meaning of the law;
(b) Whether Defendants paid Plaintiff and the Class members the federal and state
minimum wage for all hours worked;
(c) At what common rate, or rates subject to common methods of calculation, were
and are Defendants required to pay Plaintiff and the Class members for their work;
(d) Whether Defendants properly compensated Plaintiff and the Class members for
overtime hours worked; and
(e) Whether Defendants paid employees New York's "spread of hours" premium
when the workdays exceeded ten (10) hours.
FACTUAL ALLEGATIONS
Minchalas in Queens.
excess of $500,000.
and NYLL.
Soledad had control over compensation and benefits practices at MDM.
rates.
6
Upon information and belief, at all relevant times, Mr. Minchala and/or Julia and/or
Soledad had the power to hire and fire employees at MDM and to otherwise control the
terms and conditions of employment.
Upon information and belief, at all relevant times, Mr. Minchala and/or Julia and/or
Soledad is actively involved in managing the day-to-day operations of MDM.
Plaintiff was employed by Defendants as part of the service staff at MDM, located at 104-
10 Roosevelt Avenue, Queens, New York from on or about September 9, 2015 through on
or about December 6, 2015.
On or about December 6, 2015, Plaintiff was held against her will by Julia and Soledad and
was physically assaulted by Soledad.
At the end of her shift, at around 6:20, Plaintiff encountered Julia in the MDM dining room.
Julia instructed Plaintiff to meet her in the building's basement where Defendants have an
office area and separate space for a pantry or warehouse.
Plaintiff met Julia in the basement's office space, where she also encountered Mr. Segundo
Minchala, and two of Julia and Segundo's daughters. Soledad was standing nearby, but was
not in the office area.
Julia told Plaintiff that they would speak in the warehouse. Plaintiff proceeded to walk to
the warehouse and was followed by Julia and Soledad.
Once all three were in the warehouse, Julia closed and locked the door.
Julia told Plaintiff that her employment was being terminated and that this day is the last
day Plaintiff would be working at MDM.
Julia also told Plaintiff that it was wrong of her to speak with Mr. Minchala and his son,
Soledad's husband, who was also involved with MDM.Soledad told Plaintiff that she was shameless and taking advantage of the family who gave
her a job and fed her, and that Soledad's marriage was breaking up because of Plaintiff.
At that point, someone knocked on the door and also tried to open the door, but Julia and
Soledad told the person to go away and that nothing was happening.
Julia eventually opened the door and her son, Soledad's husband was there.
Soledad went up to him and started hitting and pushing him. He left. Julia locked the door
again.
Julia told Plaintiff to not show up at work anymore and that she is an "illegal," therefore
cannot do anything about this.
Julia also threatened Plaintiff's family's safety and told Plaintiff that if Plaintiff returned to
work she would go after Plaintiff's father and her family would be unsafe.
Julia and Soledad continued to accuse Plaintiff of inappropriate communications with both
women's husbands, but Plaintiff explained that she only spoke with them at work and did
not know how she could work at MDM without talking with them and getting instructions.
husband.
Plaintiff on her body and slapping and scratching Plaintiff's face.
Plaintiff feared that Soledad may use some item in the warehouse as a weapon.
insulting Plaintiff throughout the incident.
scratched in the eyes.
8
Julia watched the entire attack and continued to insult Plaintiff and told Plaintiff that she
was nothing and she couldn't do anything about what was happening to her.
At around 7:00 p.m., Julia unlocked the door and she and Soledad exited the warehouse;
Plaintiff exited behind them.
After leaving the workplace, Plaintiff contacted the New York City Police Department and
reported the events; she also went to the hospital and was treated for her injuries.
As a direct consequence of these events, Plaintiff was diagnosed with, among other things,
severe distress, anxiety, and depression.
The Queens County District Attorney brought against Soledad Minchala charges of assault
in the third degree and harassment in the second degree. Soledad pled guilty to disorderly
conduct and was sentenced to a conditional discharge.
Plaintiff was also granted a full Order of Protection for two (2) years.
During her employment by D3efendants, Plaintiff was not given any notice of pay rate.
employment, but was told that she would be paid $120.00 per six-day work week, or $20.00
per day.
While Plaintiff was part of the wait staff, she also cleaned the building outside, cleaned the
dining area and restrooms, did food preparation, and bussed her own tables. Plaintiff also
earned tips from the customers she served.
Of those shifts, on weekdays Plaintiff worked from 8:50 am to 11:00 am cleaning and
working on food preparation and performed another half hour of cleaning at the end of the
shift. Her wait staff duties were from 11:00 am to around 5:50 pm.
On weekends, Plaintiff worked from 7:50 am to approximately 10:00 am cleaning and
working on food preparation and performed another half hour of cleaning at the end of the
shift. Her wait staff duties were from 10:00 am to around 5:50 pm.
More than two hours and more than twenty percent (20%) of Plaintiff's shift each day was
spent on cleaning, food preparation and other non-tipped work.
The dinner wait staff began work at 6 pm and worked until MDM closed at 4 am. On
information and belief, the dinner wait staff was paid $25.00 to $30.00 per shift.
Plaintiff got one day off per week, usually on Wednesday. However, Defendants
sometimes changed Plaintiff's day off, and during one period she worked thirteen (13) days
in a row without a day off.
During Plaintiff's regular work days, she got only one food break at 11:00 am for food,
which lasted ten to fifteen minutes.
During one Saturday shift, Plaintiff worked from 8 am to midnight-sixteen hours-to fill
in for an absent co-worker.
Also, once during a football game involving the team from Ecuador, Plaintiff worked from
8:50 am to 7:30 pm.
During that eleven hour shift, Plaintiff also got only one food break at 11:00 am.
If the restaurant was busy, as was often the case on weekends, Plaintiff sometimes had no
break at all to eat.In or about November 2015, defendants asked Plaintiff (and all other members of the wait
staff) to sign a journal prior to getting paid.
The journal included a picture of each worker's passport and beneath it each worker's
weekly salary. Plaintiff's salary was listed at $120.00 for the week.
Plaintiff asked why the journal said her salary was $120.00, when she only got paid
$100.00. Defendants explained that the extra $20.00 was paid to the bartender.
At the same time, Plaintiff also had to sign the journal for tips over $40.00.
Plaintiff signed the journal for her weekly salary two times and for her tips over $40.00 two
times.
COUNT I
VIOLATION OF THE FAIR LABOR STANDARDS ACT OF 1938 ("FLSA")
29 U.S.C. §§ 201, et seq.
(Minimum Wage-Against All Defendants)
Plaintiff, on behalf of herself and of the Collective Plaintiffs, hereby realleges and
incorporates by reference each and every allegation contained in the previous paragraphs
of this Complaint as though fully set forth herein.
At all relevant times, Defendants were employers engaged in interstate commerce within
the meaning of the FLSA, 29 U.S.C. § 203. At all relevant times, Defendants employed
Plaintiff and the Collective Plaintiffs.
At all relevant times, Defendants knowingly, willfully, regularly and repeatedly failed to
pay Plaintiff and the Collective Plaintiffs the federally required minimum wage for each
hour worked pursuant to 29 U.S.C. § 206.
As a result of the wrongful conduct alleged herein, Plaintiff, on behalf of herself and of
the Collective Plaintiffs, are entitled to an award of damages in an amount to be
11
determined at trial that includes their respective unpaid compensation, liquidated
damages, attorneys' fees and costs, and such other relief as this Court deems just and
proper.
COUNT II
VIOLATION OF THE FAIR LABOR STANDARDS ACT OF 1938 ("FLSA")
29 U.S.C. §§ 201, et seq.
(Overtime-Against All Defendants)
Plaintiff, on behalf of herself and of the Collective Plaintiffs, hereby realleges and
incorporates by reference each and every allegation contained in the previous paragraphs
of this Complaint as though fully set forth herein.
At all relevant times, Plaintiff and Collective Plaintiffs regularly worked in excess of
forty (40) hours per week.
At all relevant times, Defendants knowingly, willfully, regularly and repeatedly failed to
pay Plaintiff and the Collective Plaintiffs at the federally required overtime rate of one-
and-a-half times their regular rate of pay for hours worked in excess of forty (40) per
week pursuant to 29 U.S.C. § 207.
As a result of the wrongful conduct alleged herein, Plaintiff, on behalf of herself and of
the Collective Plaintiffs, is entitled to an award of damages in an amount to be determined
at trial that includes their respective unpaid overtime compensation, liquidated damages,
attorneys' fees and costs, and such other relief as this Court deems just and proper.
COUNT III
VIOLATION OF THE NEW YORK LABOR LAW ("NYLL")
NYLL §§ 650, et seq.; 12 NYCRR § 146-1.1 et seq.
(Minimum Wage-Against All Defendants)
Plaintiff, on behalf of herself and of the Class, hereby realleges and incorporates by
reference each and every allegation contained in the previous paragraphs of this
Complaint as though fully set forth herein.
At all relevant times, Defendants knowingly, willfully, regularly and repeatedly failed to
pay Plaintiff and the Class members the required New York minimum wage for each hour
worked pursuant to NYLL §§ 652 and 663 and 12 NYCRR § 146-1.2.
As a result of the wrongful conduct alleged herein, Plaintiff, on behalf of herself and of
the Class, is entitled to an award of damages in an amount to be determined at trial that
includes their respective unpaid compensation, liquidated damages, attorneys' fees and
costs, and such other relief as this Court deems just and proper.
COUNT IV
VIOLATION OF THE NEW YORK LABOR LAW ("NYLL")
NYLL §§ 650, 12 NYCRR 146-1.1 et seq.
(Overtime-Against All Defendants)
Plaintiff, on behalf of herself and of the Class, hereby realleges and incorporates by
reference each and every allegation contained in the previous paragraphs of this
Complaint as though fully set forth herein.
At all relevant times, Plaintiff and Class members regularly worked in excess of forty
(40) hours per week.
At all relevant times, Defendants knowingly, willfully, regularly and repeatedly failed to
pay Plaintiff and the Class members at the required New York overtime rate of one-and-a-half times their regular rate of pay for hours worked in excess of forty (40) per week
pursuant to 12 NYCRR § 146-1.4.
As a result of the wrongful conduct alleged herein, Plaintiff, on behalf of herself and of
the Class, are entitled to an award of damages in an amount to be determined at trial that
includes their respective unpaid compensation, liquidated damages, attorneys' fees and
costs, and such other relief as this Court deems just and proper.
COUNT V
VIOLATION OF THE NEW YORK LABOR LAW ("NYLL")
NYLL §§ 650 et seq., 12 NYCRR 146-1.1 et seq.
(Spread of Hours-Against All Defendants)
Plaintiff, on behalf of herself and of the Class, hereby realleges and incorporates by
reference each and every allegation contained in the previous paragraphs of this
Complaint as though fully set forth herein.
At all relevant times, Plaintiff and Class members regularly had workdays that extended
over a period of time in excess of ten (10) hours.
At all relevant times, Defendants knowingly, willfully, regularly and repeatedly failed to
pay Plaintiff and the Class members one hour's pay at the basic minimum hourly wage
rate when their workdays extended over a period of more than ten hours pursuant to 12
NYCRR § 146-1.6.
As a result of the wrongful conduct alleged herein, Plaintiff, on behalf of herself and of
the Class, is entitled to an award of damages in an amount to be determined at trial that
includes their respective unpaid compensation, liquidated damages, attorneys' fees and
costs, and such other relief as this Court deems just and proper.
14
COUNT VI
VIOLATION OF THE NEW YORK LABOR LAW ("NYLL")
NYLL §§ 190 et seq., 12 NYCRR 146-2.1 et seq.
(Wage Notice Violation-Against All Defendants)
Plaintiff, on behalf of herself and of the Class, hereby realleges and incorporates by
reference each and every allegation contained in the previous paragraphs of this
Complaint as though fully set forth herein.
Defendants failed to provide Plaintiff and Class members with wage notices pursuant to
NYLL § 195 and 12 NYCRR § 146-2.2.
As a result of the wrongful conduct alleged herein, Plaintiff on behalf of herself and of
the Class, is entitled to an award of damages in an amount to be determined at trial.
COUNT VII
EMOTIONAL DISTRESS/NEGLIGENCE
(Against All Defendants)
Plaintiff, on behalf of herself only, hereby realleges and incorporates by reference each
and every allegation contained in the previous paragraphs of this Complaint as though
fully set forth herein.
Soledad and Julia Minchala's assault, false imprisonment and Intentional Infliction of
Emotional Distress and Soledad Minchala's battery against Plaintiff were committed
within the scope of their employment.
By their indifference and/or inaction in response to these transgressions against Plaintiff,
Defendants condoned and/or authorized Soledad and Julia Minchala's conduct.
Defendants are vicariously liable for these transgressions against Plaintiff pursuant to the
doctrine of respondeat superior.
Based on the foregoing, Plaintiff suffered damages including pain and suffering, mental
anguish, psychological trauma, emotional distress, loss of income and the cost of medical
care and treatment.
By reason of the foregoing, Plaintiff is entitled to all legal and equitable remedies
available including an award of damages to include punitive damages, prejudgement
interest, attorneys' fees, costs and other compensation in an amount to be determined
upon the trial of this action.
COUNT VIII
ASSAULT
(Against Julia Minchala and Soledad Minchala)
Plaintiff, on behalf of herself only, hereby realleges and incorporates by reference each
and every allegation contained in the previous paragraphs of this Complaint as though
fully set forth herein.
Defendants Julia Minchala and Soledad Minchala by their conduct placed Plaintiff in
apprehension of harmful contact.
Based on the foregoing, Plaintiff suffered damages including fear, anguish, apprehension,
pain and suffering, mental anguish, psychological trauma, emotional distress, loss of
income and the cost of medical care and treatment.
available including an award of damages to include punitive damages, prejudgement
interest, attorneys' fees, costs and other compensation in an amount to be determined
upon the trial of this action.
16
COUNT IX
BATTERY
(Against Soledad Minchala)
Plaintiff, on behalf of herself only, hereby realleges and incorporates by reference each
and every allegation contained in the previous paragraphs of this Complaint as though
fully set forth herein.
Soledad Minchala intentionally made wrongful and offensive and injurious bodily contact
with Plaintiff without Plaintiff's consent.
Based on the foregoing, Plaintiff suffered damages including fear, anguish, apprehension,
pain and suffering, mental anguish, psychological trauma, emotional distress, loss of
income and the cost of medical care and treatment.
By reason of the foregoing, Plaintiff is entitled to all legal and equitable remedies
available including an award of damages to include punitive damages, prejudgement
interest, attorneys' fees, costs and other compensation in an amount to be determined
upon the trial of this action.
COUNT X
FALSE IMPRISONMENT
(Against Defendants Julia Minchala and Soledad Minchala)
Plaintiff, on behalf of herself only, hereby realleges and incorporates by reference each
and every allegation contained in the previous paragraphs of this Complaint as though
fully set forth herein.
Defendants Julia Minchala and Soledad Minchala by their actions intentionally confined
Plaintiff without any privilege to do SO and Plaintiff was conscious of the confinement;
and did not consent to the confinement.Based on the foregoing, Plaintiff suffered damages including fear, anguish, apprehension,
pain and suffering, mental anguish, psychological trauma, emotional distress, loss of
income and the cost of medical care and treatment.
available including an award of damages to include punitive damages, prejudgement
interest, attorneys' fees, costs and other compensation in an amount to be determined
upon the trial of this action.
COUNT XI
INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS
(Against Julia Minchala and Soledad Minchala)
Plaintiff, on behalf of herself only, hereby realleges and incorporates by reference each
and every allegation contained in the previous paragraphs of this Complaint as though
fully set forth herein.
Defendants Julia Minchala and Soledad Minchala by their actions willfully, wrongfully
and intentionally engaged in the extreme and outrageous conduct of deliberate, systematic
and malicious harassment, intimidation, humiliation and abuse of Plaintiff with and intent
to cause, or with disregard of a substantial probability of causing, severe emotional
distress; a causal connection between the conduct and injury; and severe emotional
distress.
pain and suffering, mental anguish, psychological trauma, emotional distress, loss of
income and the cost of medical care and treatment.
available including an award of damages to include punitive damages, prejudgement
interest, attorneys' fees, costs and other compensation in an amount to be determined
upon the trial of this action.
COUNT XII
AIDING AND ABBETTING
(Against Julia Minchala and Soledad Minchala)
Plaintiff, on behalf of herself only, hereby realleges and incorporates by reference each
and every allegation contained in the previous paragraphs of this Complaint as though
fully set forth herein.
Soledad Minchala by her actions produced emotional and physical injuries to Plaintiff
with respect to the alleged acts in assault, battery, false imprisonment and intentional
infliction of emotional distress.
Julia Minchala by her actions produced emotional and physical injuries to Plaintiff with
respect to the alleged acts in assault, false imprisonment and intentional infliction of
emotional distress.
Julia Minchala and Soledad Minchala were each aware of the other's role in the overall
tortious activity of the other and knowingly provided substantial assistance in each
aforesaid violation.
pain and suffering, mental anguish, psychological trauma, emotional distress, loss of
income and the cost of medical care and treatment.
By reason of the foregoing, Plaintiff is entitled to all legal and equitable remedies
available including an award of damages to include punitive damages, prejudgement
interest, attorneys' fees, costs and other compensation in an amount to be determined
upon the trial of this action.
19
WHEREFORE, Plaintiff, on behalf of herself and the Collective Plaintiffs and Class
A.
Designation of this action as a collective action on behalf of the Collective
Plaintiffs (asserting FLSA claims and state claims) and prompt issuance of notice
pursuant to 29 U.S.C. § 216(b) to all similarly situated members of the FLSA opt-in
collective, apprising them of the pendency of this action, and permitting them to assert
timely FLSA claims and state law claims in this action by filing individual Consent to
Sue forms pursuant to 29 U.S.C. § 216(b).
B.
Designation of Plaintiffs as Representatives of the (FLSA) Collective Plaintiffs.
C.
Designation of this action as a class action pursuant to FRCP Rule 23.
D.
Designation of Plaintiffs as Representatives of the (Rule 23) Class.
E.
Designation of The Kaplan Law Office as class counsel.
F.
An award of damages, including liquidated damages, to be paid by Defendants.
G.
All penalties available under applicable laws.
H.
An award of litigation costs and expenses, including, but not limited to,
reasonable attorneys' fees and costs pursuant to 29 U.S.C. § 216 and NYLL § 663 and
other applicable statutes or rules.
I.
Pre-judgment and post-judgment interest as provided by law.
J.
An award for emotional and physical injuries including punitive damages.
K.
An award of any additional and further relief as this Court deems just and proper.
20
JURY DEMAND
Plaintiff demands a trial by jury on all issues triable of right by jury.
April 26, 2016
THE KAPLAN LAW OFFICE
John
Susan Kaplan, Esq. (SK 1735)
Charles Caranicas, Esq. (CC 9244)
30 Wall St., 8th Floor
New York, New York 10005
Tel: 347.683.2505
Attorneys for PlaintiffI hereby consent to be a plaintiff in a wage and hour lawsuit under the Fair Labor
I hereby authorize The Kaplan Law Office and any associated attorneys as well as any
, 2016
Signature: John Blanca Raquel Bravo
Velez
STANDARDS ACT" (CONDICIONES RAZONABLES DE TRABAJO)
Por la presente doy mi consentimiento para ser el demandante en una accion judicial
Yo autorizo al The Kaplan Law Office, abogados asociados, y sus sucesores y
, 2016
Signature: June
Blanca Raquel Bravo Velez
21 | employment & labor |
OgRJFYcBD5gMZwczSwVa | UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
ALLEN SPRADLING,
Plaintiff,
v.
Case No.
CLASS ACTION COMPLAINT
JURY TRIAL DEMANDED
SURGICAL CARE AFFILIATES, LLC, SCAI
HOLDINGS, LLC, ANDREW HAYEK,
UNITEDHEALTH GROUP, INC., UNITED
SURGICAL PARTNERS HOLDING
COMPANY, INC., UNITED SURGICAL
PARTNERS INTERNATIONAL, INC., TENET
HEALTHCARE CORPORATION, and
JOHN DOES 1-10,
Defendants.
Plaintiff Allen Spradling, on behalf of himself and all others similarly situated, brings this
Class Action Complaint against Defendants Surgical Care Affiliates, LLC, SCAI Holdings, LLC,
and Andrew Hayek (collectively “SCA”); UnitedHealth Group, Inc. (“United”), United Surgical
Partners Holding Company, Inc., United Surgical Partners International, Inc., and Tenet
Healthcare Corporation (collectively “USPI”); and John Does 1-10 (“Does”), for violations of
Section 1 the Sherman Act, 15 U.S.C. § 1, and Section 4 of the Clayton Act, 15 U.S.C. § 15(a),
as follows:
INTRODUCTION
1. SCA, United, USPI, and Does (collectively “Defendants”) agreed not to compete for each
other’s senior-level employees in the United States, refraining from soliciting or hiring
employees absent the knowledge and consent of their existing employers. Defendants’ conduct is
a per se violation of Section 1 the Sherman Act, 15 U.S.C. § 1, and Section 4 of the Clayton Act,
15 U.S.C. § 15(a). These “no-poach” or “no hire” agreements (collectively “no poach
agreements”) began no later than 2010 and continued through at least 2017. Defendants’ most
senior executives entered into, monitored and enforced these agreements.
2. Defendants’ no-poach agreements were not necessary to any legitimate business
transaction or lawful collaboration among the companies. Defendants’ conspiracy was strictly a
tool to suppress their senior-level employees’ compensation, thereby reducing their own
expenses.
3. Defendants’ no-poach agreements accomplished their purpose. The agreements reduced
competition for Defendants’ senior-level employees and suppressed Defendants’ senior-level
employees’ compensation below competitive levels. The conspiracy disrupted the efficient
allocation of labor that would have existed if Defendants had competed for, rather than colluded
against, their current and prospective senior-level employees.
4. Defendants’ agreements also denied their senior-level employees access to job
opportunities, restricted their mobility, and deprived them of significant information that they
could have used to negotiate for better compensation and terms of employment.
5. Defendants’ conspiracy was initially revealed publicly on January 7, 2021, when the
United States Department of Justice (“DOJ”) issued a press release announcing a criminal
indictment against SCA, which detailed the conspiracy. That indictment references two co-
conspirator companies—“Company A” and “Company B.” See Indictment, United States v.
Surgical Care Affiliates, LLC, No. 3:21-cr-00011 (N.D. Tex.) (filed Jan. 5, 2021). Upon
information and belief, Plaintiff alleges that “Company A” refers to USPI.
6. Plaintiff is a former, senior-level employee of SCA and brings this suit individually and
on behalf of the Proposed Class to recover damages and injunctive relief to prevent Defendants
from retaining the benefits of their antitrust violations.
JURISDICTION AND VENUE
7. Plaintiff brings this action on his own behalf as well as that of the Class to recover
damages, including treble damages, costs of suit, and reasonable attorneys’ fees arising from
Defendants’ violations of Section 1 of the Sherman Act (15 U.S.C. § 1) and Section 4 of the
Clayton Act (15 U.S.C. § 15(a)), as well as any and all equitable relief afforded them under the
federal laws pled herein.
8. Jurisdiction and venue are proper in this judicial district pursuant to Section 12 of the
Clayton Act (15 U.S.C. § 22), and 28 U.S.C. § 1391(b), (c) and (d), because a substantial part of
the events giving rise to Plaintiff’s claims occurred in this District, a substantial portion of the
affected interstate trade and commerce was carried out in this District, and one or more of the
Defendants reside in this District or are licensed to do business in this District. Defendants
transacted business, maintained substantial contacts, and/or committed overt acts in furtherance
of the illegal scheme and conspiracy throughout the United States, including in this District.
Defendant SCA has its principal place of business in this District. The scheme and conspiracy
have been directed at, and have had the intended effect of, causing injury to persons residing in,
located in, or doing business throughout the United States, including in this District.
PARTIES
9. Allen Spradling is a resident of Hoover, Alabama. He was employed by Defendant
Surgical Care Affiliates, LLC from September 22, 2008 to April 26, 2013, first as a Manager,
Program Management Office, and then as a Director, Information Technology.
10. Defendant Surgical Care Affiliates, LLC is a company organized and existing under the
laws of Delaware with its principal place of business at 510 Lake Cook Road, Suite 400,
Deerfield, Illinois, 60015. Surgical Care Affiliates, LLC is a wholly owned subsidiary of
UnitedHealth Group. Inc.
11. Defendant SCAI Holdings, LLC is a company organized and existing under the laws of
Delaware with its principal place of business at 510 Lake Cook Road, Suite 400, Deerfield,
Illinois, 60015. SCAI Holdings, LLC is a wholly owned subsidiary of UnitedHealth Group, Inc.
12. Defendant Andrew Hayek is a resident of Illinois. He was President and Chief Executive
Officer of SCA from 2008 until 2017. In 2017, he became Chief Executive Officer of
OptumHealth. In 2019, he became Executive Vice President of Optum. Upon information and
belief, Defendant Hayek is referred to as “Individual 1” in the DOJ indictment.
13. Defendants Surgical Care Affiliates, LLC, SCAI Holdings, LLC, and Andrew Hayek are
collectively referred to as “SCA.” SCA owns and operates approximately 230 outpatient medical
care facilities across the United States and employs approximately 10,000 individuals to operate
its business at its headquarters location and at other locations across the United States, serving
almost one million patients each year. SCA’s mission is to “provid[e] high quality outcomes and
a better experience for patients and providers, all at a lower total cost of care.” In Fiscal Year
2016, SCA had net operating revenues of approximately $1.2 billion, with $226 million in
EBITDA. In 2017, SCA was acquired by United through its subsidiaries for $2.3 billion.
14. Defendant UnitedHealth Group, Inc. (“United”) is a company organized and existing
under the laws of Delaware, with its principal place of business at 9900 Bren Road East,
UnitedHealth Group Center, Minnetonka, MN 55343. Through its subsidiaries, United operates
two distinct business platforms: health insurance and health services. In 2020, it was the second-
largest healthcare company by revenue with $257.1 billion, and the largest insurance company
by Net Premiums. United was ranked 7th on the 2020 Fortune 500 list.
15. Defendant United Surgical Partners Holding Company, Inc. is a company organized and
existing under the laws of Delaware with its principal place of business at 14201 Dallas
Parkway, Dallas, Texas, 75254. United Surgical Partners Holding Company, Inc. is a wholly
owned subsidiary of Defendant Tenet.
16. Defendant United Surgical Partners International, Inc. is a company organized and
existing under the laws of Delaware with its principal place of business at 14201 Dallas
Parkway, Dallas, Texas, 75254. United Surgical Partners International, Inc. is a wholly owned
subsidiary of Defendant Tenet.
17. Defendant Tenet Healthcare Corporation (“Tenet”) is a company organized and existing
under the laws of Nevada with its principal place of business at 14201 Dallas Parkway, Dallas,
Texas 75254. Tenet, through its many subsidiaries, owns and operates outpatient medical
facilities throughout the United States. Tenet is a public company traded on the New York Stock
Exchange under the symbol “THC.” Tenet is the parent corporation of USPI. On June 16, 2015,
Tenet completed a transaction that combined its freestanding ambulatory surgery and imaging
center assets with the surgical facility assets of USPI. In April 2016, Tenet paid $127 million to
purchase additional shares, which increased its ownership interest in USPI from 50.1% to
approximately 56.3%. In July 2017, Tenet paid $716 million for the purchase of additional
shares, which increased its ownership interest in USPI to 80.0%. In April 2018, Tenet paid
approximately $630 million for the purchase of an additional 15% ownership interest in USPI,
which increased its ownership interest in USPI to 95%.
18. Defendants United Surgical Partners Holding Company, Inc., United Surgical Partners
International, Inc., and Tenet Healthcare Corporation are collectively referred to as “USPI.”
USPI “is the largest ambulatory surgery platform in the country,” owns and operates over 550
outpatient medical facilities and other facilities, employs 110,000 people, partners with
approximately 5,000 physicians, and serves 10 million patients annually in 28 states. USPI was
“founded with a promise to deliver high-quality, lower-cost solutions for [its] communities.”
19. John Does 1-10 are persons and entities that conspired with SCA as described herein.
They include, at a minimum, “Company B.” The identity of the John Doe Defendants cannot be
known without discovery from SCA. Plaintiff will request leave to amend this complaint upon
learning the identity of the John Doe Defendants during appropriate discovery.
20. “Company B” is a company organized and existing under the laws of Delaware with its
principal place of business in Denver, Colorado. “Company B” owns and operates outpatient
medical care facilities across the United States and employs individuals to operate its business at
its headquarters location and at other location across the United States.
GOVERNMENT INVESTIGATION
21. The United States Department of Justice issue a press release on January 7, 2021
confirming the existence of the conspiracy and announcing a criminal indictment against SCA.
That indictment references two co-conspirator companies—“Company A” and “Company B.”
See Indictment, United States v. Surgical Care Affiliates, LLC, No. 3:21-cr-00011 (N.D. Tex.)
(filed Jan. 5, 2021). Upon information and belief, Plaintiff alleges that “Company A” refers to
USPI. The indictment alleges that “Individual 1” also participated in the conspiracy.
AGENTS AND CO-CONSPIRATORS
22. The anticompetitive and unlawful acts alleged against Defendants in this Class Action
Complaint were authorized, ordered or performed by the Defendants’ respective officers, agents,
employees, representatives, or shareholders while actively engaged in the management,
direction, or control of the Defendants’ businesses or affairs.
23. The Defendants’ agents operated under the explicit and apparent authority of their
principals.
24. The Defendants, through their subsidiaries, affiliates and agents operated as a single
unified entity.
25. Various persons and/or firms not named as Defendants herein may have participated as
co-conspirators in the violations alleged herein and may have performed acts and made
statements in furtherance thereof. These include, at a minimum, “Company B” named in the
Indictment, which is a company organized and existing under the laws of Delaware with its
principal place of business in Denver, Colorado. “Company B” owns and operates outpatient
medical care facilities across the United States and employs individuals to operate its business at
its headquarters location and at other location across the United States.
26. Each Defendant acted as the principal, agent or joint venture of, or for other Defendants
with respect to the acts, violations, and common course of conduct alleged herein.
INDUSTRY BACKGROUND
27. During the Class Period, medical costs accounted for a substantial percentage of spending
in America. The United States spent $2.7 trillion on healthcare in 2011, according to Centers for
Medicare and Medicaid Services (“CMS”), and the percentage of gross domestic product
devoted to healthcare increased from 7.2% in 1970 to 17.9% in 2011. According to SCA’s 2014
SEC filings, surgical delivery was one of the largest components of medical costs in the United
States, representing approximately 30% of medical spending for individuals with commercial
insurance.
28. At the same time, the healthcare industry was in the midst of a transition characterized by
increased focus on cost containment and clinical outcomes, driven by regulatory efforts and new
payment and delivery models, such as Accountable Care Organizations (“ACOs”).
29. These measures led to an increase in outpatient surgeries. According to the American
Hospital Association, from 1991 to 2011, outpatient surgeries increased from 52.3% of total
surgery volumes to 64.2%. In addition, a significant share of outpatient surgeries shifted from
hospitals to free-standing facilities over a similar period. Advancements in medical technology,
such as lasers, arthroscopy, fiber optics and enhanced endoscopic techniques, reduced the trauma
of surgery and the amount of recovery time required by patients following certain surgical
procedures. Improvements in anesthesia also shortened the recovery time for many patients by
minimizing post-operative side effects such as nausea and drowsiness, thereby avoiding, in some
cases, overnight hospitalization. These medical advancements significantly increased the number
of procedures that could be performed in a surgery center and fueled the migration of surgical
procedures out of hospitals and into outpatient settings.
30. The transition to outpatient care led to a consolidation in the market as provider networks
sought to buy up competition. In 2015, Tenet purchased a 50.1% stake in USPI and completed its
purchase in 2018. The combined company operated 244 ambulatory surgery centers, 16 short-
stay surgery hospitals and 20 imaging centers in 29 states. In 2016, Envision merged with
AmSurg to create a $10 billion enterprise that owned and operated 260 surgery centers and one
surgical hospital in 35 states and the District of Columbia. In 2017, United purchased SCA for
$2.3 billion in 2017, creating a network that services about 1 million patients a year across 30
states.
31. These companies dominated the outpatient medical care market and were driven by
investors to maximize profit. At the same time, constituents across the healthcare continuum,
including government payors, private insurance companies and self-insured employers,
implemented cost containment measures. Insurance providers created networks to drive down
medical care costs, reimbursing care from only those providers that met cost containment
measures. This meant that despite consolidation in the outpatient medical care market, these
companies’ revenue was constrained by powerful buyers (insurance companies) that limited
reimbursements.
32. To increase profits, outpatient medical care centers had incentive to decrease costs at the
place with least resistance—employee wages. Since the 1970s, the United States has experienced
slow wage growth and rising inequality, a trend that has accelerated over the last fifteen years.
Unemployment is at historic lows and job openings are at an all-time high, yet wage growth has
remained sluggish and has not kept pace with increased productivity in the labor market.
33. Several factors contribute to this trend, including market concentration of employers and
employer collusion. Labor markets are inherently inelastic (unresponsive to changes in price)
because employees cannot easily respond to stagnant or decreasing wages. Labor is “an
extremely perishable commodity” because “an hour not worked today can never be recovered.”
Thus, collusion amongst employers is especially effective because employees cannot easily
switch to another employer to mitigate the wages already lost. To correct these market
inefficiencies, federal and state antitrust enforcers have begun to take particular focus on
anticompetitive conduct in labor markets in recent years.
FACTUAL ALLEGATIONS
34. Defendants, in an effort to reduce costs, sought to artificially depress employee wages
through an anticompetitive conspiracy. Over a period spanning at least the years 2010 through
2017, Defendants entered agreements not to solicit senior-level employees. This type of
conspiracy is known as a “no-poach” agreement. These no-poach agreements were executed and
enforced by the companies’ most senior executives. The no-poach agreements suppressed
competition for the services of senior-level employees, and were not reasonably necessary to any
separate, legitimate business transaction or collaboration among the companies.
35. Defendants participated in meetings, conversations, and communications to discuss the
no-poach agreements, and agreed during those meetings, conversations, and communications not
to solicit each other’s senior-level employees.
36. For example, on or about May 14, 2010, the CEO of USPI emailed other employees of
USPI: “I had a conversation w [Defendant Hayek] re people and we reached agreement that we
would not approach each other’s proactively.”
37. On or about October 20, 2014, the CEO of Company B emailed Defendant Hayek the
following: “Someone called me to suggest they reach out to your senior biz dev guy for our
corresponding spot. I explained I do not do proactive recruiting into your ranks.”
38. Defendants told certain executives, employees, and recruiters to avoid soliciting senior-
level employees of each other’s companies. For example, on or about November 11, 2013, a
senior human resources employee at USPI told a recruiter the following: “Please do not schedule
a call w/ [candidate], thanks. She would have had to apply for the job first. We cannot reach out
to SCA folks. Take any SCA folks off the list.”
39. On or about December 12, 2015, SCA’s human resources executive instructed a recruiter
to “note that [USPI] and [Company B] are off limits to SCA.”
40. Defendants told each other’s senior-level employees who were candidates for
employment at the other companies that they were required to notify their current employer to
that effect. For example, on or about November 1, 2013, employees of USPI discussed whether
to interview a candidate employed by SCA considering the “verbal agreement with SCA to not
poach their folks ….” The CEO of USPI disclosed that “[w]e do have that agreement and want to
stick by it. If [candidate] indeed did approach us, and is willing to tell Defendant Hayek] that I’m
ok.” The senior human resources officer at USPI responded: “Yikes, she is not going to want to
do that. But I will check.”
41. On or about April 26, 2016, SCA’s human resources executive emailed a candidate from
Company B that she could not recruit from Company B, with the exception of “candidates [who]
have been given explicit permission by their employers that they can be considered for
employment with us.”
42. On or about October 16, 2015, Defendant Hayek emailed a SCA human resources
executive: “Putting two companies in italics ([USPI] and [Company B]) - we can recruit junior
people (below Director), but our agreement is that we would only speak with senior executives if
they have told their boss already that they want to leave and are looking.”
43. Defendants alerted their co-conspirators when each other’s senior-level employees were
recruited, and policed violations of the conspiracy. For example, on or about December 8, 2015,
the CEO of USPI informed the Defendant Hayek: “Just wanted to let you know that [recruiting
company] is reaching out to a couple of our execs. I’m sure they are not aware of our
understanding.” Defendant Hayek told other SCA executives: “We should continue to flag
[USPI] on our ‘do not call’ list to recruiters - is [sic] OK if we get an inbound inquiry and the
leader has communicated within [USPI] that they want to leave, but outbound calls should not be
occurring.”
44. On or about June 13, 2016, an employee of SCA forwarded news of a recruitment, noting
that: “I thought there was a gentlemen’s agreement between us and [Company B] re: poaching
talent.” An SCA officer replied: “There is. Do you mind if I share with [Defendant Hayek], who
has most recently addressed this with [Company B’s CEO].” Defendant Hayek relayed the news
to Company B’s CEO, who replied “Will check it out.”
45. Defendants refrained from soliciting each other’s senior-level employees. For example,
on or about July 17, 2017, a human resources employee of USPI, believing a candidate to be
employed by SCA, emailed a recruiting coordinator for USPI that, although the candidate
“look[ed] great” she “can’t poach her.”
46. On or about April 7, 2017, Defendant Hayek was contacted by a consultant regarding his
interest in a candidate employed by Company B, and responded: “In order to pursue [candidate],
he would need to have already communicated that he is planning to leave [Company B] — that’s
the relationship that we have with [Company B].” The consultant responded, “. . . I’m glad you
arrived at that agreement with [Company B’s CEO].”
CLASS ALLEGATIONS
47. Plaintiff brings this action for damages and injunctive relief on behalf of himself and as a
class action pursuant to Federal Rules of Civil Procedure, Rule 23(a), (b)(2) and (b)(3), on behalf
of a similarly situated Class, which is defined, as follows:
All natural persons who worked in senior-level positions in the
United States for one or more of the following: (a) from May 1, 2010
to October 31, 2017 for Surgical Care Affiliates, LLC or one of its
subsidiary outpatient medical care facilities; (b) from May 1, 2010
to October 31, 2017 for United Surgical Partners Holding Company,
Inc., United Surgical Partners International, Inc. or one of its
subsidiary outpatient medical care facilities; or (c) from February 1,
2012 to July 31, 2017 for Company B, or one of its subsidiary
outpatient medical care facilities (the “Class Period”).
This definition specifically excludes the following person or entities:
a.
Any of the Defendants named herein;
b.
Any of the Defendants’ co-conspirators;
c.
Any of Defendants’ parent companies, subsidiaries, and affiliates;
d.
Any of Defendants’ senior corporate officers, including Chief Executive
Officers, Chief Financial Officer, or Chief Operating Officer;
e.
All governmental entities;
f.
The judges and chambers staff in this case, as well as any members of
their immediate families; and
g.
Senior corporate officers and personnel in the human resources, recruiting,
and legal departments of SCA, USPI, or Company B.
48. Based on the Indictment, the term “senior-level” as used throughout this complaint and in
the proposed Class Definition includes, at a minimum, those with the title of Director or higher,
as well as the top administrators at each outpatient medical care facility, such as Chief Nursing
Officers. The term does not include the senior corporate officers of each Defendant.
49. Plaintiff does not know the exact number of Class members, because such information is
in the exclusive control of Defendants. Plaintiff is informed and believes that, due to the nature
of the trade and commerce involved, there are thousands of Class members geographically
dispersed throughout the United States and elsewhere, such that joinder of all Class members in
the prosecution of this action is impracticable.
50. Plaintiff’s claims are typical of the claims of his fellow Class members because Plaintiff
was employed by SCA as a senior-level employee during the Class Period, Plaintiff and all Class
members were damaged by the same wrongful conduct of Defendants as alleged herein, and the
relief sought herein is common to all members of the Class.
51. Numerous questions of law or fact common to the entire Class—including, but not
limited to those identified below—arise from Defendants’ anticompetitive and unlawful conduct:
a. Whether Defendants agreed not to solicit or hire each other’s senior-level
employees;
b. Whether such agreements were per se violations of the Sherman Act;
c. Whether Defendants have fraudulently concealed their misconduct;
d. Whether and the extent to which Defendants’ conduct suppressed compensation
below competitive levels for their senior-level employees;
e. Whether Plaintiff and the Class suffered antitrust injury because of Defendants’
agreements; and
f. The type and measure of damages suffered by Plaintiff and the Class.
52. These and other questions of law and fact are common to the Class and predominate over
any questions affecting the Class members individually.
53. Plaintiff will fairly and adequately represent the interests of the Class because he was
employed by SCA as a senior-level employee during the Class Period and does not have
conflicts with any other members of the Class. Furthermore, Plaintiff has retained sophisticated
and competent counsel who is experienced in prosecuting no-poach class actions, as well as
price-fixing and other complex litigation.
54. Defendants have acted on grounds generally applicable to the Class, thereby making final
injunctive relief appropriate with respect to the Class as a whole.
55. This class action is superior to alternatives, if any, for the fair and efficient adjudication
of this controversy. Prosecuting the claims pled herein as a class action will eliminate the
possibility of repetitive litigation. There will be no material difficulty in the management of this
action as a class action.
56. The prosecution of separate actions by individual Class members would create the risk of
inconsistent or varying adjudications, establishing incompatible standards of conduct for
Defendants.
ANTICOMPETITIVE EFFECTS AND LACK OF PROCOMPETITIVE
JUSTIFICATION
57. The conspiracy substantially reduced competition for labor. Defendants and the unnamed
co-conspirators entered, implemented and policed these agreements with the knowledge of the
overall conspiracy, and did so with the intent and effect of fixing, restraining and stabilizing the
compensation paid to their personnel at artificially low levels.
58. Defendants adhered to a policy of internal equity. Internal equity is the comparison of
positions within a business under which businesses generally compensate workers of similar title
and job descriptions equivalently. Under application of principles of internal equity, changes in
compensation will be experienced broadly across an organization. The conspiracy reduced
competition across the employees of Defendants and their co-conspirator firms such that
compensation and mobility was decreased broadly across them.
59. The harm not only reached individuals who sought to change their employment from one
company to another, but also extended to those who had no intention of changing companies,
due to, inter alia, the Defendants’ efforts to maintain internal equity in their compensation
structures, as well as the reduction of transparency.
60. The conspiracy constitutes a per se violation of the Sherman Act because there were
naked restraints on trade that lacked any redeeming virtue.
61. In the alternative, Defendants are liable under a “quick look” analysis where one with
even a rudimentary understanding of economics could conclude that the arrangements and
agreements alleged would have an anticompetitive effect on class members and markets.
62. In the alternative, Defendants are liable under a “rule of reason” analysis because they
exploited their collective market power in the market for senior-level employees in outpatient
medical care facilities in the United States and there are no procompetitive effects.
63. Even if there were purported procompetitive effects—which there are not—these effects
could be achieved by less restrictive alternatives and are outweighed by the anticompetitive
harm. For example, in many states, employers can use non-compete clauses to protect
investments they have made in senior-level employees. Unlike employee noncompete clauses,
employer no-poach agreements operate at the employer level, and employees are not parties to
such agreements or necessarily aware of them, although they can limit their opportunities. No-
poach agreements, therefore, may cause employees to stay with the company longer than they
otherwise would have under the false belief that they are being turned away from other jobs due
to their lack of qualifications.
64. In addition, any procompetitive effects that may have resulted from the conspiracy
and/or the conduct of Defendants and their agents and coconspirators in furtherance thereof were
and are outweighed by the anticompetitive harm alleged herein, including but not limited to
restricting employee mobility and suppressing wages, benefits and other aspects of
compensation.
MARKET DEFINITION AND MARKET POWER
65. While the theory of labor supply and demand proves somewhat useful to describe the
interaction between workers offering their skills and employers looking to fill spots- and the
concurrent determination of wages, economists have argued that due to so-called market
imperfections, special emphasis needs to be placed in firms’ potential monopsony power, search
costs, training and human capital investments and geographical mobility.
66. In general, the labor market is the overarching term that economists use for all the
different markets for labor, maintaining that there is no single labor market but rather different
ones for every different type of labor that share certain similarities. For example, labor differs by
type of work, skill level, and location but is similar in that wages tend to be “sticky” (they do not
change much throughout a worker’s lifetime), almost never go down, and workers tend to be
paid progressively more for more years of education and training. While each labor market is
different, they all tend to operate in similar ways and are heavily related to the state of the
economy in general. For example, when wages go up in one labor market, they tend to go up in
others too.
67. In a perfectly competitive labor market, the supply and demand for jobs meet at an
equilibrium price (i.e. wage), with the workers providing the services that employers demand.
The worker offers her services for compensation while the employer needs an individual to do a
specific job or to complete a task. The worker is then comparable to a seller while the employer
is the buyer. A common factor that connects the two entities is the salary or wage that is agreed
to be received by the worker from the employer. Through the labor market, workers can find
work that suits their skills and qualifications, and where both agree on the wages, benefits, and
other forms of compensation.
68. With perfect competition and labor mobility, it is assumed that workers move to where
there is a demand for their skills, whether this is in their local region or abroad. Moreover,
workers are also replaceable, which means that a person who can do the job better can be
employed to take over the other worker’s job. Furthermore, salaries are not fixed, meaning they
can go up or down, and are dependent on the worker’s performance, education level and skills.
Compensation, including wages, is the highest motivating factor in the labor market. Labor
markets are an integral part of an organization’s recruitment process because it not only helps it
find the most qualified workers for the jobs that it offers but also ensures that it provides a
competitive compensation package to its workers. This is important for an organization to be
able to keep its competent workers and, thus, continue its productivity.
69. When labor markets operate competitively, employers pay the value of the workers
marginal productivity to the firm. Workers benefit from this process by obtaining the highest
compensation for their skills and training.
70. In a perfectly competitive labor market, both firms can hire all the labor they want at the
going market wage. Therefore, the total amount of workers employed is L1 where the going
market wage equals the value of the marginal product of labor. The equilibrium wage and
employment level are determined where the market demand for labor equals the market supply
of labor.
71. When the labor market has imperfect competition, employers can gain monopsony
power—the ability to offer lower than competitive wages—as bargaining power moves away
from the workforce into the hands of employers. This transfer of power causes depressed wages,
as employers are not required by competitive market conditions to offer wages at the value of the
marginal product of labor.
72. Training, education, and experience are some of the most important determinants of wage
and are crucial for a worker when negotiating better employment conditions and higher
compensation. No poach agreements suppress a worker’s fundamental right to seek better
employment terms once they have acquired new skills. Through these agreements, employers
can pay less than competitive wages.
73. The relevant geographic market is the United States. Defendants own and operate
outpatient medical care facilities nationally and compete nationwide for a workforce to staff their
businesses. Due to licensing restrictions, language barriers, and low international job mobility,
Defendants do not meaningfully compete in the international labor market.
74. The relevant product market is senior-level employees working at outpatient medical care
facilities. The product market is limited to senior-level employees because they have the training,
education, and experience to compete for the jobs impacted by Defendants’ no-poach
agreements. The product market is limited to outpatient medical care facilities because these
facilities differ from other medical care facilities. First, outpatient medical care facilities perform
medical care that does not require an overnight stay at the facility. By contrast, inpatient facilities
such as hospitals allow a patient to spend the night. Second, the procedures are less complex- and
therefore, the expertise necessary to treat the patient population differs. Third, employees at
outpatient medical care facilities have better work-life balance, as they are not required to work
overnight or be on call. This attracts workers who are willing to forgo increased pay in favor of a
more flexible 9 to 5 schedule. Fourth, inpatient medical care facilities are generally smaller,
attracting employees that want to know all their co-workers. Fifth, inpatient medical facilities are
more specialized, and attract employees that have particularized knowledge and do not need the
wide range of experiences and opportunities that inpatient medical care facilities can provide.
75. Defendants had monopoly power in the market for outpatient medical care facilities.
Defendants operated, and continue to operate, the largest networks of outpatient medical care
facilities in the United States. SCA employs 10,000 workers, owns and operates more than 230
surgical care facilities, and serves nearly 1 million patients per year. USPI owns and operates
over 400 ambulatory facilities serving 9,000 physicians and 3.4 million patients annually in 28
EFFECTS ON INTERSTATE COMMERCE
76. During the Class Period, Defendants employed members of the Class throughout the
United States.
77. Defendants’ conspiracy substantially reduced competition in the labor market for senior-
level professionals in outpatient medical care facilities in the United States and suppressed the
efficient movement and compensation of senior-level professionals in outpatient medical care
facilities in the United States, harming Plaintiff and members of the Class. The harm extended
not only to those who did or would otherwise have sought to change companies- but also to those
who had no intention of seeking other employment because the no-poach agreements enabled
Defendants to maintain suppressed compensation levels generally.
78. Thus, Defendants’ no-poach agreements and related conduct substantially affected the
interstate labor market for senior-level professionals in outpatient medical care facilities in the
United States and caused antitrust injury throughout the United States.
STATUTE OF LIMITATIONS AND TOLLING
79. During the Class Period, Defendants concealed their conspiracy, such that Plaintiff and
Class members could not have discovered it through the exercise of reasonable diligence.
80. Until the DOJ announced its criminal indictment on January 7, 2021, Plaintiff and Class
members did not discover and did not know of any facts that would have caused a reasonable
person to suspect that Defendants were conspiring to restrain competition for the services of their
senior-level employees. Nor did Plaintiff have any reason to suspect that Defendants were
illegally acting in concert to suppress wages and the labor market. At no point did Defendants
inform Plaintiff that his compensation was not competitive but was instead suppressed by
Defendants’ anticompetitive agreements.
81. Conspiracies, by their nature, must be concealed. To keep the conspiracy hidden from
those it affected most—employees and prospective employees—Defendants and their co-
conspirators did not publicize their no-poach agreements. Defendants also did not inform
employees of the conspiracy during the application process or the new employee onboarding
process.
82. Defendants also concealed the conspiracy by giving false and pretextual explanations for
hiring and compensation decisions, including that the decisions were based on merit, the
operation of free and open competition, and other considerations, instead of pursuant to an
unlawful agreement.
83. For these reasons, all applicable statutes of limitation have been tolled based on the
discovery rule, the doctrine of equitable tolling, and/or Defendants’ fraudulent concealment.
Defendants are thus estopped from relying on any statute of limitation in defense of this action.
CLAIM FOR RELIEF
COUNT 1
Restraint of Trade in Violation of Section 1 of the Sherman Act
(15 U.S.C. § 1)
84. Plaintiff incorporates and re-alleges each allegation set forth in the preceding paragraphs
of this Complaint, and further alleges the following:
85. Beginning no later than May 1, 2010, and continuing until at least October 31, 2017,
Defendants entered into and engaged in an unlawful agreements in restraint of trade and
commerce, in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1.
86. Specifically, in or around May 1, 2010, Defendants Surgical Care Affiliates, LLC, and/or
SCAI Holdings, LLC, and Defendants United Surgical Partners Holding Company, Inc. and/or
United Surgical Partners International, Inc. entered into a no-poach agreement.
87. In or around February 1, 2012, Defendants Surgical Care Affiliates, LLC, and/or SCAI
Holdings, LLC and Company B entered into a no-poach agreement.
88. Defendant Andrew Hayek directly participated in, or knowingly ratified or approved of
the no-poach agreements. The acts committed by Hayek, and the anticompetitive conduct
charged herein, are inherently wrongful, and subject to criminal liability under Section 1 of the
Sherman Act, 15 U.S.C. § 1.
89. Defendant UnitedHealth Group, Inc. either knowingly participated in or ratified the no-
poach agreements, or assumed the liabilities of Defendants Surgical Care Affiliates, LLC, and
SCAI Holdings, LLC, through its acquisition.
90. Defendant Tenet Healthcare Corporation either knowingly participated in or ratified the
no-poach agreements, or assumed the liabilities of Defendants United Surgical Partners Holding
Company, Inc. and United Surgical Partners International, Inc. through its acquisition.
91. Defendants’ agreement included concerted actions and undertakings among themselves
and their co-conspirators with the purpose and effect of: (a) fixing, reducing and stabilizing the
wages, benefits and other aspects of compensation of Plaintiff and the Class at artificially low
levels; and (b) eliminating, to a substantial degree, competition among Defendants for labor.
92. As a direct and proximate result of Defendants’ combination and contract to restrain trade
and eliminate competition for labor, Plaintiff and members of the Class have suffered injury and
have been deprived of the benefits of free and fair competition on the merits.
93. The unlawful agreement among Defendants and their co-conspirators has had the
following effects, among others:
a. competition among Defendants for labor has been suppressed, restrained, and
eliminated; and
b. Plaintiff and Class members have received lower compensation from Defendants
than they otherwise would have received in the absence of the Conspiracy and, as
a result, have been injured in their property and have suffered damages in an
amount subject to proof at trial.
94. The acts done by each Defendant as part of, and in furtherance of, their contract,
combination, and/or conspiracy was authorized, ordered, or committed by their respective
officers, directors, agents, employees, or representatives while actively engaged in the
management of each Defendant’s affairs.
95. Defendants’ contract, combination, and/or conspiracy is a per se violation of Section 1 of
the Sherman Act.
96. Accordingly, Plaintiff and Class members are entitled to three times their damages
caused by Defendants’ violations of Section 1 of the Sherman Act, as well as the costs of
bringing suit, reasonable attorneys’ fees, and a permanent injunction prohibiting Defendants
from ever again entering into similar agreements in violation of the antitrust laws.
DEMAND FOR JURY TRIAL
97. Pursuant to Federal Rule of Civil Procedure 38(b), Plaintiff, on behalf of himself and the
Class, demands a jury trial as to all issues triable by a jury.
PRAYER FOR RELIEF
98. WHEREFORE, Plaintiff prays that this Court enter judgment on his behalf and that of
the Class by adjudging and decreeing that:
a. This action may be maintained as a class action, with Plaintiff as the designated
Class representative and his counsel as Class counsel;
b. Defendants have engaged in trusts, contracts, combinations, or conspiracies in
violation of Section 1 of the Sherman Act, and that Plaintiff and the Class
members have been damaged and injured in their business and property as a result
of these violations;
c. The alleged conspiracy are per se violations of the Sherman Act;
d. Defendants are enjoined from attempting to enter into, entering into, maintaining,
or enforcing any no-poach agreement, or other illegal anticompetitive agreement
or understanding, as alleged herein;
e. Judgment be entered for Plaintiff and Class members against Defendants, for
three times the amount of damages sustained by Plaintiff and the Class, as
allowed by law;
f. Plaintiff and the Class recover pre-judgment and post-judgment interest as
permitted by law;
g. Plaintiff and the Class recover their costs of suit, including attorneys’ fees, as
provided by law; and
h. Plaintiff and the Class are entitled to such other and further relief as is just and
proper under the circumstances.
Dated: March 9, 2021
By: /s/ Douglas A. Millen
Douglas A. Millen
William H. London
Michael E. Moskovitz
FREED KANNER LONDON & MILLEN LLC
2201 Waukegan Road, Suite 130
Bannockburn, IL 60015
Tel: (224) 632-4500
Fax: (224) 632-4521
[email protected]
[email protected]
[email protected]
Joseph R. Saveri (admitted under L.R. 83.10)
Steven N. Williams (pro hac vice forthcoming)
Chris K.L. Young (pro hac vice forthcoming)
Kyle P. Quackenbush (pro hac vice forthcoming)
Anupama K. Reddy (pro hac vice forthcoming)
JOSEPH SAVERI LAW FIRM, INC.
601 California Street, Suite 1000
San Francisco, California 94108
Tel: (415) 500-6800
Fax: (415) 395-9940
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
Ashley Keller
Travis Lenkner
Jason A. Zweig
KELLER LENKNER LLC
150 N. Riverside Plaza, Suite 4270
Chicago, IL 60606
Tel: 312.741.5220
[email protected]
[email protected]
[email protected]
Kimberly A. Justice (pro hac vice forthcoming)
FREED KANNER LONDON & MILLEN LLC
923 Fayette Street
Conshohocken, PA 19428
Tel: (610) 234-6770
Fax: (224) 632-4521
[email protected]
Counsel for Individual and Representative Plaintiff
Allen Spradling
| antitrust |
L6V9CYcBD5gMZwczYwo5 | Shana E. Scarlett (SBN 217895)
HAGENS BERMAN SOBOL SHAPIRO LLP
715 Hearst Avenue, Suite 202
Berkeley, CA 94710
Telephone: (510) 725-3000
Facsimile: (510) 725-3001
[email protected]
Steve W. Berman (pro hac vice forthcoming)
Robert F. Lopez (pro hac vice forthcoming)
HAGENS BERMAN SOBOL SHAPIRO LLP
1301 Second Ave., Ste. 2000
Seattle, WA 98101
Telephone: (206) 623-7292
Facsimile: (206) 623-0594
[email protected]
[email protected]
Attorneys for Plaintiffs and
the Proposed Classes
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
SAN JOSE DIVISION
DONALD R. CAMERON, a California resident; and
PURE SWEAT BASKETBALL, INC., an Illinois
corporation, on behalf of themselves and all others
similarly situated,
Plaintiffs,
v.
APPLE INC., a California corporation,
Defendant.
No.
CLASS ACTION COMPLAINT
COMPLAINT FOR VIOLATION OF THE
SHERMAN ACT AND CALIFORNIA
UNFAIR COMPETITION LAW
JURY TRIAL DEMANDED
TABLE OF CONTENTS
Page
I.
INTRODUCTION ................................................................................................................... 1
II.
JURISDICTION ...................................................................................................................... 4
III.
VENUE .................................................................................................................................... 5
IV.
PARTIES ................................................................................................................................. 6
A.
The Plaintiffs ............................................................................................................... 6
B.
The Defendant ............................................................................................................. 7
V.
RELEVANT FACTS ............................................................................................................... 8
A.
iOS developers distribute apps via Apple’s App Store. .............................................. 9
B.
Apple is a monopolist in the U.S. market for iOS app and in-app-
product distribution services. ..................................................................................... 14
C.
Alternatively, Apple is an attempted monopolist in the U.S. market
for iOS app and in-app-product distribution services. ............................................... 17
D.
Alternatively, Apple behaves as a monopsonist retailer, or
attempted monopsonist retailer, of iOS apps and related digital
products. .................................................................................................................... 17
E.
By Apple’s design, no one, including Google, provides market
constraints. ................................................................................................................. 18
F.
Apple’s practices with respect to the App Store further restrain and
injure competition in the U.S. market for iOS app and in-app-
product distribution services, where already there are high barriers
to entry. ...................................................................................................................... 19
G.
Apple’s unlawful practices harm competition, developers, and
consumers of apps and in-app products, too. ............................................................ 20
1.
Apple harms consumers and competition by depressing
output. ............................................................................................................ 21
2.
Apple’s behavior stifles innovation. .............................................................. 21
3.
Apple harms developers by denying them the opportunity
to choose other means to get paid for their work. ......................................... 25
4.
Apple harms consumers of its distribution services by way
of supra-competitive pricing and other pricing mandates. ............................ 25
H.
By requiring that only it can distribute iOS apps via the App Store,
Apple depresses output by burying apps (and therefore in-app
products) among the millions available for sale there. .............................................. 30
I.
Apple has admitted that iOS developers have antitrust standing to
bring this suit. ............................................................................................................ 30
VI.
INTERSTATE TRADE AND COMMERCE ....................................................................... 33
VII.
RELEVANT MARKET ........................................................................................................ 33
VIII.
CLASS ALLEGATIONS ...................................................................................................... 34
IX.
APPLICABILITY OF CALIFORNIA LAW ........................................................................ 37
X.
CLAIMS FOR RELIEF ......................................................................................................... 38
FIRST CAUSE OF ACTION VIOLATION OF THE SHERMAN ACT –
MONOPOLIZATION/MONOPSONY (15 U.S.C. § 2) ....................................................... 38
SECOND CAUSE OF ACTION VIOLATION OF THE SHERMAN ACT –
ATTEMPTED MONOPOLIZATION/MONOPSONY (15 U.S.C. § 2) .............................. 40
THIRD CAUSE OF ACTION VIOLATION OF THE UNFAIR COMPETITION
ACT (CAL. BUS. & PROF. CODE §§ 17200 ET SEQ.) ...................................................... 42
PRAYER FOR RELIEF .................................................................................................................... 45
JURY TRIAL DEMANDED ............................................................................................................ 46
For their complaint against defendant Apple Inc. (Apple), plaintiffs, on their own behalf and
on behalf of all others similarly situated, allege as follows:
I.
INTRODUCTION
1.
Plaintiffs Donald R. Cameron and Pure Sweat Basketball, Inc., are application
developers for the iPhone, a device powered by Apple’s iOS operating system. iOS developers
create the applications and in-app products that bring Apple iPhones, iPads, and iPod touch music
players to life. Their apps allow users to play games while on line at the grocery store, to edit
documents, to make exercise more fun, to help meditate, and so much more.
Apple’s abusive monopoly in iOS app/in-app distribution services
2.
Plaintiffs and their fellow iOS developers sell their iOS apps via Apple’s App Store.
They have no choice in the matter, but not because Apple built an app store that beat all comers fair
and square. Instead, from the outset, Apple attained monopoly power in the U.S. market for iOS app
and in-app-product1 distribution services2 by slamming the door shut on any and all potential
competitors. And it has barred the door ever since. On the thinnest of pretenses—that somehow it is
uniquely qualified to ensure the safety and device-compatibility of apps3—Apple has never permitted
1 Throughout, in-app products also refer to subscriptions, though at times plaintiffs break out
these terms for clarity. In-app products might include, for example, paid virtual implements that a
consumer buys in a game that is nominally free. Subscriptions might include changing or updated
content delivered through an app for a periodic fee. Here, both products can be paid via the Apple
Store, and if they are, then Apple collects a fee or commission as alleged herein. (See, e.g. n.6, infra
(referring to Apple explanations on its website).)
2 Alternatively, as alleged herein, Apple is a de facto monopsonist given its status as the sole
retailer of the app developers’ products.
3 See, e.g., “Submitting iOS apps to the App Store,” available at:
https://developer.apple.com/ios/submit/ (“The App Store is designed to provide customers with apps
that work seamlessly with their device’s capabilities.”) (last accessed June 3, 2019); Brief of
Petitioner Apple Inc., submitted to the U.S. Supreme Court in Apple Inc. v. Pepper, Aug. 10, 2018,
Sup. Ct. No. 17-204 (Apple Sup. Ct. Pet. Br.), at 7 (“Apple designed, from the ground up, an
ecosystem for the use, development, sale, and distribution of apps. That ecosystem has two relevant
features: (1) iPhones will only download third party software that Apple has reviewed for malware
and offensive content, among other things, and (2) to distribute those third party apps, Apple created
a new kind of software distribution platform, the App Store.”).
anyone else to distribute apps and related digital products4 to the many millions of U.S. owners of its
mobile devices.
3.
Further, Apple’s market power has allowed it to charge developers a supra-
competitive 30% commission on the sale of paid apps and in-app products for almost 11 years now,
despite the inevitable accrual of experience and economies of scale. Additionally, it collects a $99
annual fee from all developers who wish (and must) sell their products through the App Store. Apple
also dictates minimum and greater price points, which prevent developers from offering paid
products at less than $.99 or at price points ending in anything other than $.99. And so, while Apple
is fond of pointing to impressive-sounding sales numbers and dollars earned by developers,
nonetheless, its exorbitant fee for distribution (or retail sales) services, coupled with its $99 annual
fee and pricing mandates, have cut unlawfully into what would have been developers’ earnings in a
competitive landscape.
4.
Also, Apple’s overly expensive 30% commission, its $99 annual developer fee, and
its pricing mandate have depressed output of paid app and in-app-product transactions. The
consumer apps marketplace, which gives rise to the sale of Apple’s distribution or retail-sales
services to iOS developers, resoundingly favors low-priced or free apps.5 Developers and would-be
developers, who can only earn 70% on the dollar on each paid app or product, in addition to paying
$99 annually to gain entry to the App Store, undoubtedly think very hard about whether to spend the
effort, time, and energy that is required to design and program an app or related product, bring it to
market in the single store available, and hope to recoup costs and make a reasonable profit. For
many, the calculus makes no economic sense. This process, which is ongoing, leads to less output in
sales, and ergo, distribution transactions.
4 Those few who have tried have had to use unsanctioned workarounds, some of which required
the owners to jailbreak their devices and lose warranty coverage and support in the process. (See,
e.g., “Cydia closes purchases for its iOS jailbreak store,” The Verge, Dec. 16, 2018, available at:
https://www.theverge.com/2018/12/16/18143422/cydia-disables-in-app-purchases-ios-jailbreak-
store-apple-iphone (last accessed June 2, 2019).)
5 See n.55, infra.
5.
But for those who nonetheless soldier on towards offering paid products in the App
Store, they face yet another output-depressing scenario: the sheer number of apps in the App Store,
together with the number of new weekly entrants,6 means that most apps and in-app products will
never be discovered by consumers. Because there are so many apps available in the one iOS App
Store that exists, due to Apple’s usurpation of the entire marketplace, huge numbers of apps
necessarily get lost. Apps buried among the 2 million+ available apps7 do not sell because no one
sees them, leading to less distribution transactions for apps and in-app products. If Apple did not
shut out all competition from access to iOS device owners, there would be more stores that could
feature more apps, as well as stores that would specialize in certain kinds of apps. Overall, this
would boost output in and sale distribution transactions because more apps could be featured, such
that more buyers would see and buy them. The only solution for this output-depressing condition is
to allow other providers of distribution services, including those who undoubtedly would specialize
in certain kinds of apps, to compete for app and in-app product sales to iOS consumers. More
exposure for more apps would mean more transactions. And relatedly, with competition, Apple and
other market entrants would be incentivized to innovate in developing better technology to pair users
with the applications that they are looking for and need.
Alternatively: Apple’s abusive monopsony in iOS app/in-app retailing
6.
There is another way to view Apple’s acquisition and abuse of anti-competitive
market power. Alternatively, by way of the same anti-competitive conduct described above, Apple
has improperly attained and exercised monopsony power—buy-side monopoly power8—as the sole
6 According to a piece recently published by Apple at its website, it reviews an astounding
“100k” apps weekly. (“App Store—Overview,” available at: https://www.apple.com/ios/app-
store/principles-practices/ (last accessed June 2, 2019).) It says that of these, it approves 60% and
rejects 40%, and it rejects the 40% mostly for “minor bugs, followed by privacy concerns.” (Id.) It
also currently provides an avenue for appeal of sorts to those whose apps are rejected. (Id.) No
doubt these processes lead to large numbers of new entrants into the App Store every week, which
further exacerbates the already serious discoverability problem.
7 Apple told the U.S. Supreme Court in August 2018 that as of then, “there [we]re over 2 million
apps offered through the App Store.” (Apple Sup. Ct. Pet. Br. at 9 (emphasis deleted). It would
appear that there are many more today. (See, e.g., n.6, supra.)
8 As the Supreme Court has put it:
retailer of iOS apps and in-app products. It uses this immense power to force iOS developers to take
70% on the dollar for their paid products by way of subtracting its supra-competitive 30%
commission.9 This practice is analogous to a monopsonist retailer paying artificially low wholesale
prices to its suppliers. In both paradigms a competitive market would yield better post-commission
or wholesale prices, and fairer profit, for developers’ digital products. It would also mean higher,
and fairer, profits for developers as Apple’s $.99 and end-in-$.99 pricing mandates were
extinguished by competitive forces, such that developers could price at lower and different price
points in order to maximize volumes.
7.
Plaintiffs, on their own behalf and that of similarly situated developers, seek monetary
recovery and injunctive relief for harm caused by Apple’s violations of federal antitrust law and
California’s Unfair Competition Law—harm that persists and will never abate unless Apple is called
to account for its anti-competitive behavior.
II.
JURISDICTION
8.
This Court has subject matter jurisdiction over this matter pursuant to the Class
Action Fairness Act of 2005, 28 U.S.C. § 1332(d), because the proposed classes consist of 100 or
more members; the amount in controversy exceeds $5,000,000, exclusive of costs and interest; and,
given the vast number of iOS developers as alleged herein, it is believed, and therefore alleged, that
at least one member of the class of plaintiffs (for example, plaintiff Pure Sweat Basketball, Inc.) is a
citizen of a state different from the defendant, which is a California corporation.
Monopsony power is market power on the buy side of the market. Blair & Harrison,
Antitrust Policy and Monopsony, 76 Cornell L.Rev. 297 (1991). As such, a
monopsony is to the buy side of the market what a monopoly is to the sell side and is
sometimes colloquially called a ‘buyer's monopoly.’ See id., at 301, 320; Piraino, A
Proposed Antitrust Approach to Buyers’ Competitive Conduct, 56 Hastings L.J. 1121,
1125 (2005).”
Weyerhaeuser Co. v. Ross-Simmons Hardwood Lumber Co., Inc., 549 U.S. 312, 320 (2007).
9 The current exception is subscriptions, where the rate drops to 15% after a year. (E.g., “App
Store—Overview,” available at: https://www.apple.com/ios/app-store/principles-practices/ (last
accessed June 2, 2019).)
9.
Furthermore, this Court has federal question jurisdiction pursuant to the federal
antitrust law invoked herein, including the Sherman Act and Clayton Antitrust Act. E.g., 28 U.S.C. §
1331, 28 U.S.C. § 1337(a), and 15 U.S.C. § 15(a).
III.
VENUE
10.
Venue is proper in this judicial district under 28 U.S.C. § 1391 because a substantial
part of the events or omissions giving rise to plaintiffs’ claims occurred in this judicial district.
11.
There also is a venue provision specifying this judicial district in the operative
contract with iOS developers.10
12.
Furthermore, Apple’s principal place of business is in this judicial district, and it is
believed, and therefore alleged, that a substantial amount of the conduct of which plaintiffs complain
occurred in this judicial district. Also, Apple has marketed, advertised, and sold affected devices
within this judicial district. Additionally, the San Jose division of this Court is the proper division
for filing, given Apple’s headquarters in Cupertino, California.
13.
Intra-district assignment: Assignment to the San Jose division of the Court is proper
pursuant to Northern District of California Local Rule 3-2(d) because a substantial part of the events
giving rise to the claims arose in this District. Furthermore, Apple’s principal place of business is in
this judicial district, and it is believed, and therefore alleged, that a substantial amount of the conduct
of which plaintiffs complain occurred in this judicial district. For example, Phil Schiller, Apple’s
Senior Vice President, Worldwide Marketing, who heads the App Store,11 has his office at Apple’s
headquarters in Cupertino.12 Therefore, decisions regarding the App Store and those giving rise to
plaintiffs’ claims were made at, and emanate from, that California location.
10 See Ex. A (exemplar of Apple Developer Agreement), ¶ 17.
11 See, e.g., “Apple's Phil Schiller is now in charge of the App Store,” The Verge, Dec. 1, 2015,
available at: https://www.theverge.com/2015/12/17/10412204/apple-phil-schiller-now-leads-app-
store (last accessed June 3, 2019).
12 E.g., “Apple to host annual Worldwide Developers Conference June 3-7 in San Jose,” Mar. 14,
2019, quoting Mr. Schiller, and listing Cupertino, CA at the top of the release (last accessed June 3,
2019); https://www.apple.com/contact/ (listing Apple’s corporate address as One Apple Park Way
Cupertino, CA 95014) (last accessed June 3, 2019).
IV.
PARTIES
A.
The Plaintiffs
Donald R. Cameron
14.
Plaintiff Cameron is a California resident. He co-developed a baby-naming app, Lil’
Baby Names, which he has made available for sale in the App Store since July 2015. Mr. Cameron
is a party to the developer contracts with Apple referenced herein. These contracts specify the
commission rate and pricing and other mandates at issue in this suit. Also, in order to be permitted
to make his app available for sale in the App Store, Mr. Cameron has paid Apple’s mandatory $99
annual developer fee since July 2015, with the last such payment made in December 2018. Based on
a review of his records, Mr. Cameron’s last sale of his app was in or about April 2019. Because Mr.
Cameron’s product is a paid app, he has paid Apple’s 30% commission on each sale.
15.
Mr. Cameron’s app was developed in the Swift programming language for the iOS
ecosystem.
16.
Additionally, Mr. Cameron’s app has always been subject to Apple’s requirement that
paid apps be priced at a minimum of $.99 as well as its end-in-$.99 pricing mandate. Throughout its
availability in the App Store, Mr. Cameron has priced his app at $2.99. If, however, Mr. Cameron
could have priced his app at above zero but below $.99, he might well have done so, in order to
attempt to capture volume sales. Of course, Mr. Cameron still would have faced the grave
discoverability problem faced by all iOS app developers. With so many apps crammed into the sole
iOS app store, consumers cannot find good apps. In fact, a search for “baby naming” in the app store
yields pages and pages of such apps—but not Mr. Cameron’s (at least before a typical, reasonable
consumer would stop scrolling).13 That search reveals apps to help with Sikh baby naming and
13 Apple’s recent efforts to revamp the look of the App Store, and to feature more apps, will
never be enough when there are only 365 days in the year, only so much space, and so very many
apps of all sorts crowded into a single store. (See, e.g., “App Store discovery is climbing after the
iOS 11 redesign,” Business Insider, May 16, 2018, available at:
https://www.businessinsider.com/apple-redesign-boosting-app-store-discovery-2018-5 (discussing
effect of September 2017 design change that allows more apps to be featured, which was quite
limited, especially when compared to the total number of apps in the App Store, and also considering
that most apps are found by search—which again will yield way too many results to prove fruitful to
vast numbers of developers) (last accessed June 1, 2019).
Icelandic baby naming and Albanian baby naming, among so many others, but not Mr. Cameron’s
app.
17.
In order to reach consumers of iOS devices, Mr. Cameron and the other plaintiffs
required iOS distribution services (and not Android OS or other OS distribution services). Because
Apple excluded all competition for iOS distribution services, Mr. Cameron, like his fellow plaintiffs,
had no choice but to pay what Apple demanded for its iOS distribution services, i.e., the 30%
commission on all sales of his paid app.
Pure Sweat Basketball, Inc.
18.
Plaintiff Pure Sweat Basketball, Inc. is an Illinois corporation company with its
principal place of business in Crystal Lake, Illinois. It has developed the Pure Sweat Basketball
Workout App. Pure Sweat Basketball Inc is a party to the developer contracts referenced herein.
The agreements specify the commission rate and pricing and other mandates described herein. Also,
in order to be permitted to make its app available for sale in the App Store, Pure Sweat Basketball
Inc. has paid Apple’s mandatory $99 annual developer fee. Pure Sweat Basketball last sale of his
App was in 2019. Pure Sweat Basketball charges a monthly subscription of $4.99, Pure Sweat
Basketball has paid Apple’s 30% commission on each sale.
19.
Additionally, Pure Sweat Basketball’s app has always been subject to Apple’s
requirement that app transaction be priced at a minimum of $.99 as well as its end-in-$.99 pricing
mandate.
B.
The Defendant
20.
Apple, the designer, manufacturer, and vendor of iPhones, iPads, and iPod touch
music players; the designer and author of iOS and iOS updates; and the owner and operator of the
App Store, is a California corporation. It maintains its headquarters and principal place of business
in Cupertino, California.
21.
Also upon information and belief, and as alleged above, Apple took all decisions and
actions complained of herein at or near its corporate headquarters in Cupertino, California, or
elsewhere in the state of California. It is believed, and therefore alleged, that substantially all of the
misconduct alleged in this complaint occurred in or emanated from California.14
V.
RELEVANT FACTS
22.
Apple has injured plaintiffs and competition by way of its unlawful behavior in the
U.S. market for iOS app and in-app product distribution or retailing services. As the holder of an
improperly obtained monopoly in this market (or, effectively, as a monopsonist in the retailing of
apps and in-app products), Apple’s behavior has resulted in overcharges in these transactions due to
its imposition of a supra-competitive and profit-reducing 30% fee on each paid sale from its store.15
This is a boon to Apple—while its hardware sales may vary or even decline at times, analysts have
predicted that its App Store revenues will increase.16
23.
Apple’s minimum and end-in-$.99 pricing mandates for paid apps and in-app
products also depress output. Further, Apple’s aggressive and improper monopolization of this
market, or the abuse of its monopsony powers in the retailing space, has stifled competition by
preventing the emergence of any viable competitors whatsoever, which reinforces and strengthens its
pernicious and overbearing power in a market already distinguished by high barriers to entry.
Additionally, its exclusion of any competitors depresses the output of iOS app and in-app-product
distribution transactions by rendering undiscoverable vast numbers of apps (and related in-app
products) due to the sheer number of apps available in the one app store available to developers and
app and in-app-product buyers.
14 See, e.g., nn.11-12, supra.
15 Again, the rate for subscriptions now drops to 15% after one year. (E.g., “App Store—
Overview,” available at: https://www.apple.com/ios/app-store/principles-practices/.)
16 See, e.g., “The 30 Percent App Fees Are Too Damn High,” Bloomberg Businessweek, available
at https://www.bloomberg.com/news/articles/2019-01-07/the-30-percent-fees-app-developers-have-
to-pay-are-too-damn-high (“Apple skipped its typical disclosure of full-year App Store purchases
and developer payouts for 2018, but analysts estimate revenue has risen steadily. At the same time,
growth of its iPhone income stream has become unreliable.”) (last accessed June 3, 2019).
A.
iOS developers distribute apps via Apple’s App Store.
Inception of the App Store
24.
Apple introduced the App Store in July 2008, about a year after it introduced the
iPhone.17 This followed its introduction in May 2008 of a software development kit for third-party
app developers.18
iOS app and in-app product distribution/retail sales
25.
Americans own some 189 million iPhones,19 all of which run iOS apps and in-app
products.20 They own tens of millions more iPads and iPod touch devices, 21 which also run iOS
apps and in-app products. The U.S. market for the distribution of iOS apps and related digital
products22 is huge—so huge, in fact, that Apple’s 2018 global earnings for the App Store were likely
in the $13 billion dollar range,23 such that its U.S. earnings alone were undoubtedly in the several-
billion-dollar range, too.
17 Apple Sup. Ct. Br. at 7.
18 Id.
19 “189 Million iPhones Are Currently in Use in the U.S.,” Cult of Mac, Feb. 7, 2019, available
at: https://www.cultofmac.com/605442/189-million-iphones-are-currently-in-use-in-the-u-s/
(“According to new research published by Consumer Intelligence Research Partners, Apple’s total
U.S. install base (the number of active iPhones being used) currently stands at 189 million units.
With the U.S. population in the vicinity of 325.7 million people, that’s more than one iPhone for
every two people in the country.”) (last accessed June 3, 2019).
20 See also http://www.pewinternet.org/fact-sheet/mobile/ (last accessed June 3, 2019).
21 The number of iPad users in the U.S. in the 2018-19 time frame was and is approximately 81
million. (See “Number of iPad users in the United States from 2013 to 2020 (in millions),” available
at: https://www.statista.com/statistics/208039/ipad-users-forecast-in-the-us/ (last accessed June 3,
2019). And all time, Apple has sold some 400 million+ iPods. (“This Is the Number of iPods Sold
All Time,” Lifewire, updated May 6, 2019, available at: https://www.lifewire.com/number-of-ipods-
sold-all-time-1999515 (last accessed June 3, 2019).) While that figure is not U.S. only, nor is it
iPod touch only, nonetheless, it suggests that millions of Americans have bought apps and in-app
products from the App Store for their devices over time, some no doubt in recent years.
22 See, e.g., Apple Sup. Ct. Pet. Br. at 9 (emphasis deleted).
23 Apple has reported that globally, iOS developers earned some $34 billion from sales in the
App Store. (E.g., “Developer’s [sic] $34 Billion Earnings from Apple’s App Store Rose 28% in
2018,” Fortune, Jan. 29, 2019, available at: fortune.com/2019/01/28/apple-app-store-developer-
earning-2018/ (last accessed June 2, 2019). Apple reduced certain fees for App Store subscription
sales beginning in September 2016. (E.g., Google matches Apple by reducing Play Store fee for
Android app subscriptions,” The Verge, Oct. 19, 2017, available at:
https://www.theverge.com/2017/10/19/16502152/google-play-store-android-apple-app-store-
subscription-revenue-cut) (last accessed June 2, 2019). Applying a hypothetical blended rate of 27%
26.
The iOS operating system is unique and incompatible with other mobile operating
systems. So, then, is the market for iOS distribution services. An iOS developer needs distribution
services that will allow his product to reach iOS device owners. It is of no consequence to an iOS
developer that there are other distribution channels set up to reach owners of products powered by a
different mobile operating system.
27.
By Apple’s anti-competitive fiat, the App Store is the sole way in which iOS apps and
in-app items can be sold to iOS device owners. This store is exclusive and anti-competitive by
design, and so, then, are Apple’s iOS distribution services. Apple insists that buyers of its devices
purchase apps and in-app products only through the App Store.24 Ostensibly, this is so it can vet aps
“for malware and offensive content,25 among other things”26—as if other app store owners could not
provide similar services. To reach Apple iOS device owners, then, developers have no choice but to
sell via the App Store. In other words, Apple insists on exclusivity with iOS developers, too.
28.
Therefore, Apple has a monopoly in the U.S. market for iOS app and in-app-product
distribution services—one that it has improperly acquired and maintained by shutting out
competition for no justifiable reason. Alternatively, notwithstanding its commission model, Apple
acts as a retailer monopsonist vis-à-vis iOS apps and related digital products.
29.
Since July 2008, when it launched the App Store, and despite the accrual of
efficiencies and economies of scale, Apple has charged iOS developers a 30% distribution fee, or
for Apple’s iOS distribution fees would yield some $13.11 billion in Apple iOS developer fees for
2018 based on iOS developer earnings of $34 billion.
24 See, e.g., Brief of Appellee Apple Inc., submitted to the U.S. Court of Appeals for the Ninth
Circuit in Apple Inc. v. Pepper, July 11, 2014, Ninth Cir. No. 14-15000 (Apple Ninth Cir. App. Br.),
at 44 (citing to its March 2008 press release, in which it stated from the outset: “Third party iPhone
and iPod touch applications must be approved by Apple and will be available exclusively through the
App Store.”).
25 Apple certainly is not infallible in its efforts, which underscores that competitors could provide
similar if not better services. (See, e.g., “Apple Battles App Store Malware Outbreak,” available at:
https://www.bankinfosecurity.com/apple-battles-app-store-malware-outbreak-a-8538 (noting that
U.S. consumers were affected: “[f]or example, WeChat is widely used across the Asia-Pacific
region, while business card scanning program CamCard - which is developed by a Chinese company
- is the most-downloaded business card reader and scanner in many countries, including the United
States.”) (last accessed June 3, 2019).)
26 Apple Sup. Ct. Pet. Br. at 7.
commission, on sales of apps and in-app products. And it gets maximum punch from this expensive
commission by also insisting that paid apps and in-app products be priced no less than $.99 at
minimum and in sums ending in 99 cents for higher-priced apps and in-app products —no $.49 or (to
provide one example) $1.49 apps regular-priced apps or in-app items allowed. This maximizes
Apple’s profit by ensuring that it collects roughly $.30 on every paid sale.27
30.
What is more, Apple charges its “tens of thousands of registered iOS app developers”
an additional $99 per year.28 This additional charge surely offsets and exceeds the cost of Apple’s
curation and security efforts for most if not all such developers, as well as payment processing and
other functions. (And on the developer side, paying that $99 fee annually can also obliterate profits
for app developers who are trying to build business, including because it cuts into funds available to
market (a critical matter given the severe discoverability problem in a single store crammed with 2
million+ apps).
31.
Apple’s anti-competitive app distribution system has led to enormous, supra-
competitive profits29 over the years. There is, after all, no check on Apple’s behavior. For example,
27 While many apps are initially free to consumers, such that Apple does not charge their
developers at the time consumers download them, developers often monetize their work by offering
in-app products for a fee (and Apple collects its 30% commission accordingly). (See, e.g., id. at 9
n.3; see also “App Store—Overview,” available at: https://www.apple.com/ios/app-store/principles-
practices/.) Thus, in 2014, under pressure from the European Commission, Apple stopped labeling
free-to-acquire apps in the App Store as “free,” going instead to “get.” This better accounts for the
fact that in-app products were offered for a charge rather than for free. (See, e.g., “Apple Relabels
‘Free,’ Download Buttons On iTunes And Mac App Store To ‘Get,’ Following Pressure from EC,
dated Nov. 19, 2014,” Techcrunch, available at: https://techcrunch.com/2014/11/19/apple-relabels-
free-download-buttons-on-itunes-and-mac-app-store-to-get-following-pressure-from-ec/ (last
accessed June 3, 2019).)
Apple addresses in-app purchases here, among other places: https://developer.apple.com/in-app-
purchase/ (“In-app purchases can be used to sell a variety of content, including subscriptions, new
features, and services.”) (last accessed June 3, 2019). Apple touts at least two business models for
so-called free apps that developers can monetize by way of selling in-app products: “freemium” and
“paymium.” (See, e.g., https://developer.apple.com/app-store/business-models/ (last accessed June
3, 2019). Again, Apple charges developers its 30% commission on such sales.
28 Apple Sup. Ct. Pet. Br. at 7.
29 See, e.g., https://www.forbes.com/sites/chuckjones/2018/01/06/apples-app-store-generated-
over-11-billion-in-revenue-for-the-company-last-year/#63205d266613 (“Apple reported that its App
Store generated over $26.5 billion in revenue for developers in 2017, which was up about 30% year-
over-year. This means that the App Store created approximately $11.5 billion in revenue for the
company.”) (emphasis added) (last accessed June 3, 2019). And while Apple likes to tout what iOS
developers have earned by selling their products through the only iOS store available to them, the
Google Inc. owns and operates the analogous Google Play store. But Google Play is for the sale of
Android OS apps that operate on Android OS devices. As Google explains: “Other operating
systems: Devices running other operating systems (including Apple and Windows devices) are not
supported for downloading Android apps on Google Play.”30 This is because iOS and Android
devices and apps are incompatible. So again, even if the Google Play store were available on iOS
devices—and it is not—it would put no pressure on Apple to lower distribution fees to iOS
developers because those developers could not sell their wares in Google Play. And because Apple
does not allow its device owners access to other iOS stores (and prohibits its iOS developers from
selling in alternative venues anyway), there is no downward pressure on Apple’s commissions.
32.
Nor does Apple need to fear new competitors that might challenge its commissions,
fees, and pricing structure. Among other barriers to entry, such as the technical expertise and
financial wherewithal to open, operate, and adequately publicize an app store, Apple has created the
ultimate roadblock: it simply will not allow outside access to iOS device owners.
How the App Store works
33.
For their products to be sold in the App Store, iOS application developers31 enter into
the Apple Developer Agreement,32 the Apple Developer Program License Agreement,33 and
Schedule 2 to that latter agreement,34 among possibly others. Investigation is ongoing, but plaintiffs
believe, and therefore allege, that the pertinent terms of these agreements, including those alleged
fact that the numbers may be large in the abstract does not speak to their fairness vis-a-vis Apple’s
developer fees and other charges. Developers would have earned more but-for Apple’s mandates
and practices as alleged herein.
30 “System requirements,” available at:
https://support.google.com/googleplay/answer/2844198?hl=en (last visited June 3, 2019).
31 Except presumably Apple, which also offers its own products—including its paid Apple Music
product—in the App Store. (See, e.g., “App Store—Overview,” available at:
https://www.apple.com/ios/app-store/principles-practices/ (last accessed June 3, 2019).
32 See Ex. A.
33 See Ex. B (exemplar of Apple Developer Program License Agreement). Upon information and
belief, this may previously have been denominated the iPhone Developer Program License
Agreement.
34 Upon information and belief, this Schedule 2 agreement is available, or was available at
pertinent times, here: https://itunesconnect.apple.com/login (last accessed June 1, 2019), at the
“Agreements, Tax, and Banking” link.
herein, have been the same, or substantially the same, during at least the four years preceding the
filing of this complaint. Schedule 2 contains the terms requiring payment by developers of Apple’s
30% commission on paid sales of apps and in-app products.35
34.
A developer must obtain Apple’s approval for its apps and in-app products before it
can sell them in the App Store.36
35.
Developers ostensibly set prices for products sold in the App Store, but their
discretion is sharply limited by Apple. As alleged above, Apple requires that paid products be sold
to U.S. consumers at a regular price of no lower than $.99, and that pricing be set via a tier system
with prices ending in $.99.37
36.
According to Apple, the App Store is like a mall. Developers sell their wares, and
Apple charges a (hefty) distribution fee.38
37.
In other words, as Apple admits, developers are direct purchasers of distribution
services from Apple.39 In a recent brief to the U.S. Supreme Court, Apple depicted its transactions
with developers this way:
35 See id. at, e.g., ¶ 3.4.
36 See, e.g., n.6, supra.
37 Apple attaches a pricing schedule to Schedule 2 to as an exhibit. (See id., ¶ 3.1.) This pricing
schedule sets forth the pricing regime described here. Also, per the pricing schedule, the maximum
price that Apple has allowed in the years at issue was and is $999.99.
38 Apple Ninth Cir. App. Br. at 28 (“As Plaintiffs allege, Apple sells software distribution
services to developers, much in the way that a shopping mall leases physical space to various stores.
The fact that Apple’s charge for those distribution services is expressed as a percentage of the
developer’s sales proceeds is immaterial.”).
39 E.g., id. at 41 (“Apps developers have standing under Illinois Brick to argue whatever they
want because they are direct purchasers of distribution services from Apple . . . .”) (emphasis
added).
Accordingly, developers pay Apple a 30% fee (with the 15% long-term subscription caveat) for the
distribution services that Apple sells to them directly on each sale of a paid app or in-app product in
the App Store.
38.
Or, viewed in the alternative, the 30% fee is a commission that Apple charges
developers for retailing their products at the App Store. Because the commission is supra-
competitive, it cuts improperly into, and otherwise contributes to the diminishment of, what ought to
be the developers’ profits. As to the latter point, the commission rate lowers sales and developer
profits because it is too high.
B.
Apple is a monopolist in the U.S. market for iOS app and in-app-product distribution
services.
39.
Apple is a monopolist in the U.S. market for iOS app and in-app-product distribution
services.
The market
40.
The iOS ecosystem is founded on a unique and discrete operating system. Thus, there
is no substitute for the iOS-related distribution services that only Apple provides.
41.
For example, Google’s distribution services are meaningless to developers who
program apps and in-app products for use on iOS-powered devices. Developers may learn to code in
the Swift programming language for iOS, and they and their employees, if any, may not know how
to code in a different programming language applicable to devices running on a different operating
system. And they cannot simply run a program to convert these applications to the code used for a
different operating system environment in the way that one might convert a WAV file to a FLAC
file; instead, the apps must be written anew in the code for that environment.40
42.
Also, differences in operating system versions come into play, as do the adoption
rates for those versions. Additionally, there are differences among the various devices and screen
sizes available for devices in that other ecosystem. In short, there is no simple or cost effective way
to abandon the Apple iOS environment and flee to another environment with the hope that
distribution fees will be cheaper, or that if enough other developers move, Apple would be forced to
lower its distribution-service prices. What is more, a move away from the iOS system would mean
that a developer could no longer offer its iOS apps or in-app products to millions of consumers who
would have no other way to buy these products for their devices. And the developer would face the
same 30% basic commission at the Google Play store, too, thanks to Google’s similar anti-
competitive behavior.41
43.
Thus, Google offers no competitive downward pressure on iOS distribution-services
pricing. Google’s distribution services, which are tied to offerings in its Google Play store, do not
cover iOS products—only Android OS products distributed via Google Play. The same is true of
40 Compare, e.g., “8 Free Audio Converter Software Programs,” Lifewire, May 9, 2019
(updated), available at: https://www.lifewire.com/free-audio-converter-software-programs-2622863
(last accessed June 2, 2019), with, e.g. “How to Convert an Android App to an iOS App (and Vice
Versa),” Upwork, available at: https://www.upwork.com/hiring/for-clients/convert-android-app-ios-
app-vice-versa/ (“Porting Android to iOS is not the same as making a copy of a JPEG image or
converting MP3 music file to WAV. . . . To convert an app from one platform to another you have
to hire developers that will build a new app (which, actually, will have the same or almost the same
functionality and interface) specifically for the chosen platform . . . .”) (reprinted with permission
from Stormotion) (last accessed June 1, 2019).
41 “Transaction fees,” available at: https://support.google.com/googleplay/android-
developer/answer/112622?hl=en (last accessed June 3, 2019).
Amazon’s distribution services, which are tied to its App Store—these, too, are solely for Android
OS products, and never for iOS items.42
44.
Europe has recognized these realities in addressing anti-competitiveness concerns
with Google Play. As the European Commission put it in terms specifically regarding Android, but
with logic and facts equally applicable to iOS:
As a licensable operating system, Android is different from operating systems
exclusively used by vertically integrated developers (like Apple iOS or Blackberry).
Those are not part of the same market because they are not available for license by
third party device manufacturers.
Nevertheless, the Commission investigated to what extent competition for end
users (downstream), in particular between Apple and Android devices, could
indirectly constrain Google’s market power for the licensing of Android to device
manufacturers (upstream). The Commission found that this competition does not
sufficiently constrain Google upstream for a number of reasons, including:
End user purchasing decisions are influenced by a variety of factors (such as
hardware features or device brand), which are independent from the mobile operating
system;
Apple devices are typically priced higher than Android devices and may
therefore not be accessible to a large part of the Android device user base;
Android device users face switching costs when switching to Apple devices,
such as losing their apps, data and contacts, and having to learn how to use a new
operating system; and . . . .43
45.
Regarding app stores specifically, the European Commission has stated (again with
specific regard to Google Play, but with an observation that applies to the iOS App Store as well):
This market is also characterized by high barriers to entry. For similar reasons
to those already listed above, Google’s app store dominance is not constrained by
Apple’s App Store, which is only available on iOS devices.44
46.
In sum, the U.S. market for iOS app and in-app-product distribution services is
discrete.
42 E.g., Appstore for Android, available at: https://www.amazon.com/mobile-
apps/b?ie=UTF8&node=2350149011&ref_=appstore_categorynav0 (last accessed June 1, 2019).
43 See “Antitrust: Commission fines Google €4.34 billion for illegal practices regarding Android
mobile devices to strengthen dominance of Google's search engine,” available at:
http://europa.eu/rapid/press-release_IP-18-4581_en.htm (last accessed June 3, 2019).
44 Id. (emphasis added).
Apple’s market share
47.
By design, Apple’s market share in this important market is likely close to 100%.45
48.
Apple admits that it shuts out all competition from app-distribution to iOS device
consumers, ostensibly to protect its device customers from bad apps and malware. But this is
overblown pretense. There is no reason to believe that other reputable vendors, including Amazon,
for example, could not host an app store and provide a trustworthy app-distribution system if Apple
were to open up its system to other providers.
C.
Alternatively, Apple is an attempted monopolist in the U.S. market for iOS app and in-
app-product distribution services.
49.
Alternatively, for the foregoing reasons, Apple is an attempted monopolist in the U.S.
market for iOS app and in-app-product distribution services. Given that the facts alleged amply
support a finding that Apple has always maintained monopoly status in this U.S. market, a fortiori
they support a finding that Apple is attempting to monopolize this U.S. distribution-services market
by improper means.
50.
In fact, even if one were to consider a broader market consisting of all app and in-app
product distribution services to include other discrete device market, Apple’s share would still hover
currently around 54.47% as of May 201946—enough to sustain an attempted monopolization claim in
that theoretical—and improperly drawn—U.S. market.
D.
Alternatively, Apple behaves as a monopsonist retailer, or attempted monopsonist
retailer, of iOS apps and related digital products.
47.
Alternatively, by requiring that it be the sole retailer of iOS developers’ digital
products, Apple acts as a monopsonist, or attempted monopsonist. A monopsonist is a buy-side
monopolizer. The circumstances and effects are essentially the same as with monopoly or attempted
45 There is no approved way to distribute iOS apps except through the App Store. Others, such as
Cydia, have tried and failed to use unapproved ways to, and they have failed. (See, e.g., “Cydia
closes purchases for its iOS jailbreak store,” The Verge, Dec. 16, 2018, available at:
https://www.theverge.com/2018/12/16/18143422/cydia-disables-in-app-purchases-ios-jailbreak-
store-apple-iphone (last accessed June 3, 2019).
46 “Mobile Operating System Market Share United States of America,” GlobalStates statcounter,
available at: http://gs.statcounter.com/os-market-share/mobile/united-states-of-america (last accessed
June 3, 2019).
monopoly: by Apple’s behavior as alleged herein, Apple uses its monopsony power as the sole
retailer-distributor for iOS apps and in-app products to pay iOS developers below the price they
would obtain in a competitive market for their products. The effect is the same as if Apple, in a
wholesale-retail model, had depressed wholesale prices by way of its anti-competitive market power
and behavior.
E.
By Apple’s design, no one, including Google, provides market constraints.
51.
Nor does any other entity providing app and in-app-product distribution services,
including Google, provide any constraints to Apple’s market power. The apps sold for devices
running one operating system or the other are incompatible; and, accordingly and not surprisingly,
developers of iOS apps cannot sell their iOS products via the Google Play store. Therefore,
Google’s Android OS distribution services are of no use to developers. And certainly they cannot
aid iOS developers in reaching the many tens of millions of iOS device consumers for whom they
programmed their apps and-in app products.
52.
Furthermore, the switching costs between developing for iOS and Android are high.
App developers must learn the discrete programming languages peculiar to each ecosystem. This
takes time (including diversion from other economic opportunities), money, and much effort.
53.
Most recently, iOS native apps are usually written in Apple’s Swift programming
language.47 Previously, most iOS apps were written in the Objective-C programming language.48
As for native Android OS apps, on the other hand:
Android apps can be written using Kotlin, Java, and C++ languages. The
Android SDK tools compile your code along with any data and resource files into an
APK, an Android package, which is an archive file with an .apk suffix. One APK file
47 See, e.g., Apple Developer, “Swift,” available at: https://developer.apple.com/swift/ (“Swift is
a powerful and intuitive programming language for macOS, iOS, watchOS, tvOS and beyond.
Writing Swift code is interactive and fun, the syntax is concise yet expressive, and Swift includes
modern features developers love.”) (last accessed June 3, 2019).
48 See, e.g., “A Short History of Objective-C,” Medium, Apr. 24, 2017, available at:
https://medium.com/chmcore/a-short-history-of-objective-c-aff9d2bde8dd (last accessed June 3,
2019).
contains all the contents of an Android app and is the file that Android-powered
devices use to install the app.49
54.
Given the use of these different programming languages, it is no simple task to switch
from iOS apps to Android apps because the ecosystems, like the markets to which they give rise, are
separate and discrete. So again, the fact that Google may offer distribution services for Android OS
phones, tablets, and music players is of no moment to iOS developers.
55.
Europe is in accord: Google offers no counterbalance to Apple in the iOS distribution-
services market.50
56.
Moreover, for sales in its Google Play store, Google charges Android OS developers
the same 30% commission on paid apps, paid in-app products, and subscriptions (initially).51
Apple’s practices and mandates give Google the cover it needs, in its discrete ecosystem, to charge
developers similarly supra-competitive rates. So even if an iOS developer were to think about
spending the time, money, and effort to develop apps for Android OS devices, there would be no
respite from supra-competitive and profit-killing transaction fees.
F.
Apple’s practices with respect to the App Store further restrain and injure competition
in the U.S. market for iOS app and in-app-product distribution services, where already
there are high barriers to entry.
57.
Apple’s unlawful practices in aid of establishing and maintaining its monopoly
restrain and injure competition in the U.S. market for iOS app and in-app-product distribution
services, where already there are high barriers to entry.52 Even were it not for Apple shutting out
competitors by design, market-participant hopefuls would still need the resources to build and
maintain the app store client for iOS devices, to program and maintain the requisite software and
algorithms going forward, to advertise the client and the steps needed to install it (assuming that
49 Android Developers, “Application Fundamentals,” available at:
https://developer.android.com/guide/components/fundamentals (last accessed June 3, 2019).
50 See ¶¶ 44-45, supra.
51 “Transaction fees,” available at: https://support.google.com/googleplay/android-
developer/answer/112622?hl=en (last accessed June 3, 2019).
52 See, e.g., ¶¶ 32, 45, supra.
Apple would never allow it to be distributed via the App Store, as is currently the case), among other
barriers.
58.
To reiterate: the European Commission also has concluded that there are high barriers
to entering the market for app distribution via app stores.53 The same factors it cited as high barriers
to entry in “the worldwide market (excluding China) for licensable smart operating systems,” with
specific respect to Google’s OS ecosystem, apply as well with respect to entry into the U.S. market
for iOS app and in-app-product distribution services.54
G.
Apple’s unlawful practices harm competition, developers, and consumers of apps and
in-app products, too.
59.
Apple’s monopolistic practices in the U.S. market for iOS app and in-app-product
distribution services harm competition by depressing the output of distribution transactions.
Additionally, these practices harm iOS device consumers by robbing them of innovation and choice.
Apple’s distribution charges are so high that undoubtedly they keep developers out of the App Store;
why take the financial risk and invest development time when Apple will take such a large
percentage of their app and in-app product sales? Also, these practices harm consumers owning iOS
mobile devices because they rob them of more other apps that might be truly useful, fun, or
innovative, due to the exorbitant distribution charges that developers must pay, and also due to
Apple’s refusal to permit the sale of paid apps and in-app products that do not end in 99 cents—e.g.,
there are no $.49 cent apps available to them. Additionally, the fact that apps are not discoverable
due to the sheer amount of product in the one iOS app store hurts developers and buyers of iOS apps
and in-app products as well. Unquestionably, Apple’s anti-competitive mandate that it be the sole
provider of distribution services, and that it run the lone iOS app store, hurts competition greatly.
53 See “Antitrust: Commission fines Google €4.34 billion for illegal practices regarding Android
mobile devices to strengthen dominance of Google’s search engine,” available at:
http://europa.eu/rapid/press-release_IP-18-4581_en.htm. (Id. (“Google is dominant in the worldwide
market (excluding China) for app stores for the Android mobile operating system. Google’s app
store, the Play Store, accounts for more than 90% of apps downloaded on Android devices. This
market is also characterised by high barriers to entry. . . .”).) Further, while plaintiffs’ complaint is
not based on Google search dominance, nonetheless, Google search is germane because Google Play
is bundled with Google search products, which has aided in achieving Google Play’s monopoly
status in the U.S.
54 See ¶¶ 5, 23, 45, and n.53, supra.
1.
Apple harms consumers and competition by depressing output.
60.
Evidence shows that consumers of app-store products are quite price sensitive.55
Apple’s high transaction fees, therefore, inhibit sales of products sold via the App Store.56 Thus,
distribution transactions are inhibited as well. In other words, Apple’s fees depress output.
61.
So do Apple’s $.99 minimum price and end-in-.99 pricing. Apple itself recognizes
this by way of contractual terms that set and allow alternative prices in certain other countries57:
lower prices move more apps and in-app products, which would give rise to more distribution
transactions.
2.
Apple’s behavior stifles innovation.
62.
Apple’s anti-competitive behavior also stifles innovation in the U.S. market for iOS
app and in-app-product distribution services.58
63.
For example, Amazon devised an alternative way of distributing Android OS apps,
Amazon Underground, which made apps and in-app purchases “actually free” to consumers.59
Amazon paid (or pays) developers according to how much time consumers spend interacting with the
apps.60 Yet Apple’s contracts and practices would not allow Amazon or any other competitor to
distribute the client for an iOS version of this store (or something similar) via the App Store (even as
55 See, e.g., “Only 33% of US Mobile Users Will Pay for Apps This Year,” Feb. 5, 2015,
available at: https://www.emarketer.com/Article/Only-33-of-US-Mobile-Users-Will-Pay-Apps-This-
Year/1011965 (“Put a dollar sign in front of an app, and the number of people who are willing to
download and install it drops dramatically. According to a new forecast from eMarketer, 80.1 million
US consumers will pay for mobile apps at least once this year, representing only 33.3% of all mobile
users.”) (last accessed June 3, 2019).
56 See ¶¶ 23, 59, supra.
57 See n.37, supra (discussing pricing schedule).
58 E.g., Stephen D. Houck, Injury to Competition/Consumers in High Tech Cases, St. Johns L.
Rev. Vol. 5, Iss. 4, 593, 598 (2001) (“Any assessment of a restraint’s anticompetitive impact,
however, will be incomplete if limited to price and output effects. The restraint’s impact on
consumer choice and innovation must also be considered.”).
59 See, e.g., “Amazon offers up ‘actually free’ apps and games with its new Underground app,”
Android Authority, Aug. 26, 2016, available at: https://www.androidauthority.com/amazon-
underground-new-app-actually-free-637062/ (last accessed June 2, 2019).
60 Id.
Amazon distributes several other Amazon apps through the App Store).61 Simply put, Apple bars all
competitors from offering distribution services to iOS developers.
64.
Surely Apple’s aggressive, anti-competitive behavior is one reason why Amazon will
be shuttering Amazon Underground in 2019.62 Industry analysts perceived Amazon’s extreme uphill
battle from the outset. One put it this way:
The first issue is scale. For a system like this you need critical mass and scale
in terms of audience and content. Amazon’s hands were tied because they weren’t
able to make Underground readily available on iOS (obviously) or Google devices.63
That means they were always going to be limited to those people with Fire
devices or who were motivated enough to use more than one app store. . . .64
65.
Another analyst put it this way:
User acquisition is still the biggest challenge
Amazon’s revamped plans offer app publishers an innovative new model for
monetising certain apps but it may not be enough to address its major challenge: how
to persuade Android users to download an alternative store to Google Play. . . .
Underground’s economics will not fit all apps
Amazon has published guidelines regarding which apps best suit the new
Underground service, focusing on apps which had either previously been paid apps
and those which monetise via non-subscription in-app purchases. Amazon can also
insert advertising within each Underground app, which will help it monetise the
audience rather than simply using Underground to attract a new audience.
Amazon promises to pay $0.0020 to developers for each minute spent within
app, meaning a user would have to spend 8.3 hours using an app to generate a $1 pay-
out to the developer.
Unlike the traditional freemium model, in which a good conversion rate would
mean 2%-5% of the audience pays for any content, developers using Amazon
Underground will get some form of monetisation from each app user.
61 See, e.g., n.3, supra.
62 See, e.g., “Why is Amazon shutting down its Underground Initiative?” May 9, 2017, available
at: https://www.pocketgamer.biz/mobile-mavens/65694/why-is-amazon-shutting-down-its-
underground-initiative/ (“It was part of a long-term strategy with bold ambitions to change the way
mobile developers made games, but two years on Amazon has announced that Underground will no
longer feature on the Amazon Appstore as of Summer 2017, with the program officially ending in
2019.”) (last accessed June 3, 2019).
63 Of course, iOS users cannot download alternative stores at all per Apple’s admitted design and
practices.
64 Id. (quoting Oscar Clark, “Author, Consultant and Independent Developer Rocket Lolly
Games”) (emphasis added).
Developers at the top of the app store chart, whose apps generate hundreds of
millions of dollars revenue per quarter, are unlikely to adopt Amazon Underground.
But for developers with apps lower down the charts and those looking to extend the
life of older catalogue titles, Amazon Underground is worth consideration as a way to
drive incremental revenues . . . .65
Other stores are unlikely to follow suit, for now
Amazon’s Underground app program is a response challenging market
position. As a challenger store with limited market share, Amazon has to innovate to
attract users. It also needs to give developers a reason to provide content for its store.
Amazon can offset the costs of running the Underground program by tying its users
more closely into its ecosystem and driving retail transactions and other content
revenues; Amazon Prime Video and its retail store are available alongside mobile
apps in Underground. Market leaders Apple and Google do not struggle to attract
users or app publishers and the share they take from app transactions have become
significant revenue streams, so there is no incentive for them to adopt a similar
program.66
66.
And as Apple shuts out even a well-resourced potential competitor such as Amazon,
Amazon itself continues to soldier on by way of its Amazon Coins program, which allows consumers
to buy apps at a discount in the Amazon Appstore.67 For example, on April 22, 2019, the popular
game Minecraft for Android OS is priced at the same nominal sum of $6.99 in both Apple’s App
Store and Amazon’s Appstore.68 But by using Amazon Coins, a purchaser could save 20%, bringing
her price to approximately $5.59:
65 This sort of competition and innovation also would boost output of transactions.
66 See “Amazon Underground innovates with free apps but faces challenges,” Oct. 7, 2015,
available at: https://technology.ihs.com/550085/amazon-underground-innovates-with-free-apps-but-
faces-challenges (emphasis added) (last accessed June 3, 2019).
67 Amazon’s presumptive revenue split in its own Appstore is also 70% developer / 30% store
operator, as with Apple. On the other hand, its Amazon Coins program allows consumers to save
money on the purchase price of apps everyday while developers continue to earn their 70%
developer share. (See
https://www.amazon.com/dp/B018HB6E80/ref=twister_B009CDKIA8?_encoding=UTF8&psc=1#w
here (explaining Amazon Coins programs and noting: “Save up to 20% when you buy Amazon
Coins”); https://developer.amazon.com/blogs/appstore/post/cbadeae1-990d-4d52-bef5-
ea61f6114b94/announcement-amazon-actually-free-program (“Customers can buy Amazon Coins at
a discount, while developers continue to get their full 70 percent revenue share.”) (last accessed June
3, 2019).
68 Compare https://play.google.com/store/apps/details?id=com.mojang.minecraftpe (last accessed
June 3, 2019) with, https://www.amazon.com/Mojang-
Minecraft/dp/B00992CF6W/ref=sr_1_1?s=mobile-apps&ie=UTF8&qid=1549260798&sr=1-
1&keywords=minecraft (last accessed June 3, 2019).
Minecraft
Mojang
* * *
Price: $6.99
Save up to 20% on this app and its in-app items when you purchase Amazon Coins. Learn
More
Sold by: Amazon Digital Services, Inc.
This program drives transaction volumes by offering consumers lower prices, while at the same time
allowing developers their revenue share based on the nominal price (in this case, $6.99).69
Effectively, Amazon lowers the price of its distribution fee through this program. By remitting $4.89
($6.99 x .7) to the developer on the sale of a game that is nominally priced at $6.99, but for which it
collects only $5.59 ($6.99 x .8) from the consumer, this leaves only approximately $.70 for the
distribution fee it collects. Thus, Amazon effectively lowers the commission rate to only 10% of the
$6.99 nominal price or 12.5% of the $5.59 effective price. This is the sort of competition that
developers are denied by way of Apple’s abusive monopoly: more sales driven by consumer-side
discounts, with lower distribution fees.
67.
Amazon has also initiated merchandising programs for developers.70 And its
“Actually Free” program may continue for now—but only until sometime this year.71
68.
Apple’s abusive monopoly also stifles innovation in apps—another way it hurts
competition generally. Other vibrant app stores would mean more places for featuring apps. With so
many apps available on the market, massive volumes of product can and does get lost in the App
Store. Consumers, as well as developers and competition generally, would benefit from other venues
that would surface good, new product and encourage the development of yet more and better apps—
all of which would engender more output in the market here at issue.
69 https://www.amazon.com/Mojang-Minecraft/dp/B00992CF6W/ref=sr_1_1?s=mobile-
apps&ie=UTF8&qid=1549260798&sr=1-1&keywords=minecraft (ratings content omitted).
70 See, e.g., “Announcement: Amazon Underground Actually Free Program,” available at:
https://developer.amazon.com/blogs/appstore/post/cbadeae1-990d-4d52-bef5-
ea61f6114b94/announcement-amazon-actually-free-program (last accessed June 3, 2019).
71 See ¶¶ 63, 69, supra.
3.
Apple harms developers by denying them the opportunity to choose other means
to get paid for their work.
69.
Apple’s aggressive, anti-competitive behavior diminishes the choice offered by
endeavors such as Amazon Underground. As explained above, this program lowered prices (even to
zero, with its Actually Free component), while also offering developers another way to earn from
their work. iOS developers could not hope to benefit from Amazon Underground or any other such
third-party program because Apple will not permit it.
4.
Apple harms consumers of its distribution services by way of supra-competitive
pricing and other pricing mandates.
70.
There is no good, pro-competitive, or otherwise justified reason for Apple’s 30%
transaction rate, which it has maintained since the opening of its App Store.72 Rather, this unnatural
price stability, under the circumstances alleged herein, is a sure sign of Apple’s unlawful acquisition
of monopoly power and the abuse of that market power.
71.
Nor do the facts and circumstances of app and in-app product distribution give rise to
any pro-competitive justification for Apple’s contractual terms requiring $.99 minimum pricing for
paid apps and in-app products, or its end-in-$.99 pricing mandate. These, too, are abuses of Apple’s
improperly obtained monopoly power.
Supra-competitive 30% distribution-services fee
72.
In spite of not having to carry physical inventory (as distinct from a mere bit of digital
storage for uploaded content); having such a large and growing pre-install base for the App Store,
which has multiplied not by building more physical stores but simply by replicating a software client
pre-installed on iOS devices; and economies of scale that have grown over time, Apple has continued
to take nearly a third of every dollar spent as a distribution-services fee for all covered App Store
transactions. Given how large the market is, there is plainly enough revenue to support distribution
72 See, e.g., “A decade on, Apple and Google’s 30% app store cut looks pretty cheesy,” Aug. 29,
2018, available at: https://www.theregister.co.uk/2018/08/29/app_store_duopoly_30_per_cent/
(“Apple unveiled the App Store in July 2008, and Android Market the following month, opening
with the first Android device that October. Apple set the 30 per cent rate, Google simply followed
suit.”) (last accessed June 3, 2019).
functions while providing a healthy profit in the event the 30% transaction fee73 were lowered to a
reasonable rate—one the market could generate on its own but for Apple’s improperly acquired
monopoly in U.S. market for iOS app and in-app-product distribution services.
73.
In addition to the foregoing example of Amazon’s lowered effective rate for
distribution services as a function of its Coins program, other examples help to illustrate the
exorbitant, and supra-competitive, nature of Apple’s 30% distribution-services fee.
Epic Games
74.
In its August 29, 2018 article entitled, “A decade on, Apple and Google’s 30% app
store cut looks pretty cheesy,” The Register raised several important points and asked as many hard
questions with regard to Apple’s long-standing fee structure. The impetus for the article was the
developer Epic Games’ decision to distribute its popular Fortnite game to Android device owners
outside of Google Play.74 (Of course, due to Apple’s completely exclusionary practices, Epic cannot
abandon the App Store—if it did so, thanks to Apple’s admitted policies and practices, it could not
reach any consumers in the iOS device and apps market.)
75.
As reported in the article, Epic’s CEO, Tim Sweeney, told Forbes75 that “[a]voiding
the 30 percent ‘store tax’ is a part of Epic’s motivation.”76 “It’s a high cost in a world where game
developers’ 70 per cent must cover all the cost of developing, operating, and supporting their games.
And it’s disproportionate to the cost of the services these stores perform, such as payment
73 Or alternatively, the 30% fee is a retail commission, and Appel is able to impose this high tax
on retail sales because it is a monopsonist.
74 https://www.theregister.co.uk/2018/08/29/app_store_duopoly_30_per_cent/ (last accessed June
3, 2019). The article’s subtitle and URL refer to a “duopoly.” There is no duopoly in a legal sense,
given the incompatibility between Android OS apps on the one hand and Apple iOS apps on the
other.
75 See “From ‘Fortnite’ To ‘Fallout 76,’ Publishers Are Sick Of Google, Apple and Steam’s Store
Cuts,” Aug.13, 2018, available at: https://www.forbes.com/sites/insertcoin/2018/08/13/from-fortnite-
to-fallout-76-publishers-are-sick-of-google-apple-and-steams-store-cuts/#1c118ff2578c (last
accessed June 3, 2019) (“Epic announced that Fortnite would indeed be coming to Android, but it
would not be sold through the Google Play store. Players would have to (somewhat clunkily)
download it from Epic’s website on their phones, and the game would then update itself
independently of the Play store going forward.”).
76 https://www.theregister.co.uk/2018/08/29/app_store_duopoly_30_per_cent/.
processing, download bandwidth, and customer service.”77 In a previous Register article, Mr.
Sweeney put it this way: “[F]rom the [developer’s] 70 percent, the developer pays all the costs, of
developing the game, operating it, marketing it, acquiring users and everything else. For most
developers that eats up the majority of their revenue.”78
76.
After noting that one reader of a previous Register article had written: “I learned
something. Google take[s] 30%. That is some serious gouging,” the later article stated: “More
pertinently, after a decade, is the question why Apple and Google still take a 30 per cent cut. In a
competitive marketplace, wouldn’t that rate have been whittled down over the years?”79 As
plaintiffs allege and demonstrate herein, the answer is yes.
77.
While the scale of Epic’s own endeavor—not only the sale of Fortnite outside of
Google Play, but a new game store for Android OS device owners—will be small compared to the
Apple behemoth, such that it cannot benefit from Apple’s economies of scale (or experience at
keeping down costs), its owners have provided information illustrating the supra-competitive nature
of Apple’s 30% distribution-services fee. For its own store, Epic will employ a 12% transaction fee.
78.
This is plenty to achieve a reasonable profit, as explained by Epic’s CEO. Per an
MCV article entitled, “New Epic Games Store takes on Steam with just 12% revenue share – Tim
Sweeney answers our questions”80:
“While running Fortnite we [Epic] learned a lot about the cost of running a
digital store on PC. The math is quite simple: we pay around 2.5 per cent to 3.5 per
cent for payment processing for major payment methods, less than 1.5 per cent for
CDN costs (assuming all games are updated as often as Fortnite), and between 1 and 2
per cent for variable operating and customer support costs.” Sweeney told us.
“Fixed costs of developing and supporting the platform become negligible at a
large scale. In our analysis, stores charging 30 per cent are marking up their costs by
300 to 400 per cent," he reveals. “But with developers receiving 88 per cent of
77 Id.
78 “Game over for Google: Fortnite snubs Play Store, keeps its 30%, sparks security fears, Aug.
3, 2018,” Aug. 3, 2018, available at:
https://www.theregister.co.uk/2018/08/03/fortnite_security_fears/ (last accessed June 3, 2019). The
security fears of which the article also speaks could be avoided if Google Play permitted the
distribution of alternative game-store clients through Google Play.
79 https://www.theregister.co.uk/2018/08/29/app_store_duopoly_30_per_cent/.
80 https://www.mcvuk.com/business/new-epic-games-store-takes-on-steam-with-just-12-revenue-
share-tim-sweeney-answers-our-questions (dated Dec. 4, 2018) (last accessed June 3, 2019).
revenue and Epic receiving 12 per cent, this store will still be a profitable business for
us,” he explains.81
79.
That a newcomer like Epic can run a store profitably with a 12% fee demonstrates
how supra-competitive Apple’s 30% developer fee truly is. Given Apple’s experience, huge pre-
installation base for the App Store (given that each iPhone, iPad, and iPod touch bears the store
client out of the box), and the economies of scale that have accrued over the years, it is likely that it
could earn a healthy profit by charging even less than 12% per covered transaction.
Chrome Web Store
80.
Another comparator comes from Google. Google has for years operated the Chrome
Web Store, whereby it sells certain apps for use on computers, such as Windows laptops and
desktops.82 Google’s Chrome Web Store distribution fee for certain paid apps or in-app products is
only 5%,83 not the App Store’s (or Google Play’s) 30%.
81.
There is no indication that the Chrome Web Store is an eleemosynary venture, or that
Google is losing money by way of transaction fees set at 5%.
Microsoft Store
82.
More recently, Microsoft announced that it has lowered its distribution-service fees
for various apps and in-app products.84
83.
Microsoft’s current App Developer Agreement, v. 8.4, with an effective date of
March 5, 2019, covers apps built for Windows and sold through the Microsoft Store. Among other
fee reductions, Microsoft has reduced its distribution fees (called Store Fees) for the following
category of times from 30% to:
81 Id.
82 See https://chrome.google.com/webstore/category/extensions (last accessed June 3, 2019).
83 https://developer.chrome.com/webstore/pricing#seller (“Each time someone buys your app
using Chrome Web Store Payments, Google charges you a 5% transaction fee. For example, if you
charge $1.99, you’ll receive $1.89; if you charge $9.99, you’ll receive $9.49.”) (last accessed Feb. 2,
2019); https://developer.chrome.com/webstore/money (same transaction fee for in-app payments
when using the Chrome Web Store API) (last accessed June 3, 2019).
84 See, e.g., “Microsoft is now giving consumer app developers up to 95 percent of their Store
app sales,” ZD Net, March 7, 2019, available at: https://www.zdnet.com/article/microsoft-is-now-
giving-consumer-app-developers-up-to-95-percent-of-their-store-app-sales/ (last accessed June 3,
2019).
iii. Fifteen percent (15%) of Net Receipts for any Apps that are not Games (and any
In-App Products in such Apps) when: (a) a Customer acquires such App or In-App
Product in a version of the Microsoft Store not listed in Section 6(b)(i)(c) on a
Windows 10 device that is not an Xbox console; and (b) the Customer acquisition was
driven by Microsoft (with such acquisition referral being marked with an OCID).
iv. Five percent (5%) of Net Receipts for any Apps that are not Games (and any In-
App Products in such Apps) when: (a) a Customer acquires such App or In-App
Product in a version of the Microsoft Store not listed in Section 6(b)(i)(c) on a
Windows 10 device that is not an Xbox console; and (b) there is either:
(i) Customer acquisition of such App or In-App Product driven by you (with
such acquisition referral being marked with a CID);
(ii) Customer acquisition of such App or In-App Product driven by both you
and Microsoft (with such acquisition referral being marked with a CID and an OCID);
or
(iii) Customer acquisition of such App or In-App Product that was not driven
by either party (with such lack of acquisition referral being marked by the absence of
either an OCID or a CID).85
84.
Again, these 5% and 15% rates contrast with Apple’s supra-competitive 30% rate for
apps and in-app products. There is no indication that Microsoft will not earn a reasonable profit on
covered transactions.
Minimum and end-in-$.99 pricing
85.
Apple’s minimum $.99 and end-in-$.99 pricing are also unlawful exercises of its ill-
gotten monopoly market power.
86.
As described above, Apple mandates $.99 minimum pricing in its developer
contracts.86 Low-price apps sell especially well, but Apple will not allow regular paid pricing in the
U.S. to fall below $.99, to the detriment of developers, who see less sales than they would if they
could price apps at lower price points such as $.49. This diminishes output in app and in-app product
transactions.
85 Compare Microsoft App Developer Agreement, v.8.4, Effective Date: Mar. 5, 2019, available
at: https://docs.microsoft.com/en-us/legal/windows/agreements/app-developer-agreement (last
accessed June 3, 2019) with, Microsoft App Developer Agreement, Effective Date: v.8.3, Effective
Date: May 23, 2018, available at:
https://web.archive.org/web/20190117150043/https://docs.microsoft.com/en-
us/legal/windows/agreements/app-developer-agreement (last accessed June 3, 2019).
86 See ¶ 35 and n.37, supra.
87.
Apple’s requirement of prices ending in $.99 also inhibits sales and output in app and
in-app-product transactions. Developers cannot offer $1.49 or $1.69 paid apps or in-app products, as
examples, and there is no lawful justification for this transaction-inhibiting restraint.
H.
By requiring that only it can distribute iOS apps via the App Store, Apple depresses
output by burying apps (and therefore in-app products) among the millions available
for sale there.
88.
Apple touts the 2 million+ apps available in the App Store, of every type and
variety.87 It says it reviews “100k” more each week, with 60% approved on the first try.88 In a
competitive marketplace, the availability of more and varied product for sale would lead to more
distribution-transaction output.
89.
But by making itself the sole avenue of distribution for iOS apps and in-app products,
Apple depresses output in the U.S. market for iOS app and in-app-product distribution services by
way of the sheer number and variety of apps that clog the App Store.89 By strongly inhibiting
discoverability, apps (and therefore, in-app products) get lost. This leads to fewer sales, which in
turn leads to fewer distribution transactions and fees.90
90.
If Apple did not prohibit all competition by inescapable fiat, other stores from
competitors big and small would be inevitable, as others sought to service the many tens of millions
of iOS device consumers and the hundreds of thousands of iOS app developers. Large competitors
such as Amazon might enter the field, as it has with respect to Android OS apps, but also specialty
stores as well. Each such store would become another way by which iOS app developers could get
their products seen. This would lead to more sales and the need for more distribution transactions,
such that output in the iOS distribution-services market would increase.
I.
Apple has admitted that iOS developers have antitrust standing to bring this suit.
91.
Apple has admitted that the iOS developers such as the plaintiffs have standing to
bring the antitrust claims in this suit.
87 See nn.6-7, supra.
88 See n. 6, supra.
89 See ¶¶ 5, 23, 59.
90 See id.
92.
Apple admits that iOS apps are distributed solely through its App Store.91 Ostensibly,
this is so that it can review them “for malware and similar issues,” though this is certainly something
other distributors could do.92
93.
According to Apple, “[d]evelopers are the ones who purchase distribution [from it],
not consumers.”93
94.
As between consumers of apps and in-app products vs. consumers of its app and in-
app-product distribution services, Apple admits that distributors have antitrust standing. In briefing
to the Ninth Circuit, Apple has stated: “The software developers who are directly impacted by
Apple’s 30% commission absolutely would have antitrust standing to bring a monopolization case, if
they wanted to . . . .”94 “App developers have standing under Illinois Brick to argue whatever they
want because they are direct purchasers of distribution services from Apple, and if they want to
argue, for example, that their consent [to Apple’s fees] was coerced by Apple’s market power, they
can.”95 With respect to Illinois Brick issues, “[a]pp developers are the ones who have antitrust
standing to bring any claim about Apple’s ‘monopolization’ of Apps distribution.”96
95.
Similarly, in briefing to the U.S. Supreme Court, Apple has stated: “The developer is
also the first person to bear the alleged overcharge on the allegedly monopolized service, and by that
definition also the ‘direct purchaser.’”97 According to Apple, “it is plainly the iOS developers—the
91 “Indeed, Apple does require iOS developers to submit iOS apps to Apple for review for
malware and similar issues. Approved native iOS apps are then distributed solely through the App
Store (otherwise developers could circumvent the approval process)” (App. Sup. Ct. Br. at 2.) See
also id. at 7 (“That [iOS] ecosystem has two relevant features: (1) iPhones will only download third
party software that Apple has reviewed for malware and offensive content, among other things,” and
(2) to distribute those third party apps, Apple created a new kind of software distribution system, the
App Store.”) (emphasis added).
92 For example, as noted above, Amazon runs a store for Android OS apps. It is not credible that
it or another potential competitor could not perform the same functions as Apple. In fact, Apple
itself is by no means infallible in its curation and security functions. (See, e.g., n.25, supra.)
93 Apple. Sup. Ct. Br. at 36.
94 App. Ninth Cir. App. Br. at 18.
95 Id. at 41.
96 Id.
97 See Apple Sup. Ct. Br. at 37 (emphasis in original).
direct purchasers and ‘consumers’ of the allegedly monopolized distribution services, and the group
that meets all of the relevant ‘efficient enforcer’ criteria,” who is the direct purchaser, “the one
appropriate plaintiff group among the categories of possible plaintiffs . . . .”98
96.
Finally, as Apple told the Supreme Court, “the first party that directly pays an
overcharge”—here, the developers, per its own admissions—“has a complete and undiluted cause of
action for the entire overcharge.”99 According to Apple, Supreme Court precedent mandates that
“‘the overcharged direct purchaser, and not others in the chain of manufacture or distribution, is the
party” injured in his business or property” within the meaning of the [Clayton Act].’”100 Apple
stated: the Supreme Court’s prior “decision in Hanover Shoe, Inc. v. United Shoe Machinery Corp.,
392 U.S. 481 (1968), gives developers a claim for 100% of any overcharge.”101 Per Apple,
“Hanover Shoe ‘concentrate[s] the full recovery for the overcharge’ in the direct purchaser’s
hands.”102
97.
There is simply no doubt in Apple’s view that developers, as opposed to app and in-
app product consumers, are the proper plaintiffs in a suit regarding its iOS distribution-service fees.
As it has told the Supreme Court, “[t]here is no ‘next best plaintiff’ theory that permits indirect
purchasers [such as consumers of the apps and in-app products themselves] to secure their own
standing by undermining the claims of those who first bear an alleged overcharge”103—here, the iOS
developers who are the plaintiffs and putative class members.
98 Id. at 33.
99 Id. at 17.
100 Id. at 24 (citation omitted); see also Reply Brief of Petitioner Apple Inc., submitted to the U.S.
Supreme Court in Apple Inc. v. Pepper, Sup. Ct. No. 17-204 (Apple Sup. Ct. Rep. Br.), at 4
(“[D]evelopers would be the parties first and directly injured by any allegedly excessive
commissions.”).
101 Apple Sup. Ct. Rep. Br. at 4.
102 Id. at 18 (citation omitted).
103 Id. at 21.
98.
But even without these admissions, the Supreme Court of the United States recently
recognized developer standing in this matter. As the Court put it with respect to a monopsony case,
which plaintiffs plead in the alternative here:
And it could be that some upstream app developers will also sue Apple on a monopsony
theory. In this instance, the two suits would rely on fundamentally different theories of
harm and would not assert dueling claims to a “common fund,” as that term was used
in Illinois Brick. The consumers seek damages based on the difference between the
price they paid and the competitive price. The app developers would seek lost profits
that they could have earned in a competitive retail market. Illinois Brick does not bar
either category of suit.104
VI.
INTERSTATE TRADE AND COMMERCE
99.
The activities of Apple as alleged in this complaint were within the flow of, and
substantially affected, interstate commerce. Apple sells its distribution services to developers across,
and without regard to, state lines.
VII.
RELEVANT MARKET
100.
The antitrust injuries alleged herein, including harm to developers of iOS apps and in-
app products, competition, and consumers of iOS devices, have occurred in the U.S. market for iOS
app and in-app-product distribution services (or, alternatively, in the U.S. market for iOS app and in-
app-product retailing services). Apple monopolizes this market (or acts as a monopsonist retailer) as
alleged herein.
101.
Due to the incompatibility of Apple’s iOS with Google’s Android OS, as well as the
incompatibility of iOS and Android OS apps as alleged herein, Google Play offers no competition to,
and is not a substitute for, the App Store. Nor do other distribution service providers such as
Amazon or Microsoft, which also do not provide distribution for iOS apps and in-app products (and
which Apple bars from competing in any event). Even with a small but significant—or large—price
increase, whatever the duration, plaintiff developers have nowhere to go to serve the iOS market for
which they have developed apps and in-app products—they need iOS distribution services. And
Apple is the sole, monopolistic provider thanks to its deliberate exclusion of competition.
104 Apple Inc. v. Pepper, 2019 WL 2078087, at *8 (May 13, 2019).
Furthermore, even if a developer were to seek lower prices elsewhere, he or she would not find them
in Google’s parallel store, Google Play. Thanks to having split the world neatly between them,
Google’s fees are as high as Apple’s.
102.
Alternatively, even if one were to consider all distribution services for any apps or in-
app products, whatever the underlying operating system, or whatever the platform or devices,
Apple’s distribution services for iOS apps and in-app products would form a distinct relevant sub-
market.
103.
Apple’s restraints on competition directly impact the U.S. market for iOS app and in-
app-product distribution services as alleged herein.
104.
As it has admitted, Apple is a direct seller of iOS distribution services to iOS
developers.105
105.
Plaintiffs seek relief on behalf of themselves and other developers. Insofar as the App
Store may be or is a two-sided platform, lower prices to developers for distribution services (or for
retail commissions) would not lead to any discernible negative indirect network effects under the
circumstances described herein. For example, unlike with respect to credit-card transaction
platforms, lower fees or prices would not mean less money available to pay rebates or rewards to
consumers. To the contrary, Apple does not share its transaction fees with consumers. Here,
Apple’s restraints do not help to establish or enhance participation inter se developers and
consumers, nor do they help to prevent erosion in participation. In fact, Apple can point to no
considerations that countervail the propriety of the monetary and injunctive relief that plaintiffs seek.
VIII. CLASS ALLEGATIONS
106.
Plaintiffs bring this proposed class action pursuant to Fed. R. Civ. P. 23(b)(1), (2), and
(3).
107.
Plaintiffs bring this action on behalf of themselves and the following nationwide
class, for monetary and injunctive relief based on violations of the federal Sherman Act:
105 See, e.g., n.39, supra.
All U.S. developers of any Apple iOS application or in-app product (including
subscriptions) sold for a non-zero price via Apple’s iOS App Store.
Excluded from this proposed class is the defendant; defendant’s affiliates and subsidiaries;
defendant’s current or former employees, officers, directors, agents, and representatives; and the
district judge or magistrate judge to whom this case is assigned, as well as those judges’ immediate
family members.
108.
Plaintiffs also bring this action on behalf of themselves and the following nationwide
class, for monetary (i.e., restitutionary) and injunctive relief based on violations of California’s
Unfair Competition Law:
All U.S. developers of any Apple iOS application or in-app product (including
subscriptions) sold for a non-zero price via Apple’s iOS App Store.
Excluded from this proposed class is the defendant; defendant’s affiliates and subsidiaries;
defendant’s current or former employees, officers, directors, agents, and representatives; and the
district judge or magistrate judge to whom this case is assigned, as well as those judges’ immediate
family members.
109.
Numerosity: The exact number of the members of the proposed classes is unknown
and is not available to the plaintiffs at this time, but upon information and belief, supported by
Apple’s past statements,106 the classes will consist of at least tens of thousands of members, and
possibly hundreds of thousands of members, such that individual joinder in this case is impracticable.
110.
Commonality: Numerous questions of law and fact are common to the claims of the
plaintiffs and members of the proposed classes. These include, but are not limited to:
a.
Whether there is a U.S. market for iOS app and in-app-product distribution
services;
106 See, e.g., App. Ninth Cir. Br. at 18 (referring in 2014 brief to “275,000 iOS Apps
developers”). Plaintiffs believe that this number has greatly increased since 2014, and discovery will
reveal the precise numbers of developers making up the putative class.
According to Apple, it “now ha[s] 20 million developers in [its] Apple Developer Program.”
“App Store—Overview,” available at: https://www.apple.com/ios/app-store/principles-practices/.
While this includes developers on other Apple platforms, almost certainly there are many more iOS
developers than the 275,000 Apple referenced in its 2014 brief to the Ninth Circuit.
b.
Alternatively, whether there is a U.S. sub-market for iOS app and in-app-product
distribution services;
c.
Whether Apple has unlawfully monopolized, or attempted to monopolize, the U.S.
market for iOS app and in-app-product distribution services, including by way of the contractual
terms, policies, practices, mandates, and restraints described herein;
d.
Whether competition in the U.S. market for iOS app and in-app-product
distribution services has been restrained and harmed by Apple’s monopolization, or attempted
monopolization, of that market;
e.
Alternatively, whether Apple has behaved as a monopsonist, or attempted
monopsonist, retailer of iOS apps and in-app products (including subscriptions), as alleged herein;
f.
Whether plaintiffs and members of the proposed classes are entitled to declaratory
or injunctive relief to halt Apple’s unlawful practices, and to their attorney fees, costs, and expenses;
g.
Whether plaintiffs and members of the proposed classes are otherwise entitled to
any damages, including treble damages, or restitution, and to their attorney fees, costs, and expenses
related to any recovery of such monetary relief; and
h.
Whether plaintiffs and members of the proposed classes are entitled to any
damages, including treble damages, or restitution incidental to the declaratory or injunctive relief
they seek, and to their attorney fees, costs, and expenses related to any recovery of such monetary
relief.
111.
Typicality: Plaintiffs’ claims are typical of the claims of the members of the
proposed classes. The factual and legal bases of Apple’s liability are the same and resulted in injury
to plaintiffs and all of the other members of the proposed classes.
112.
Adequate representation: Plaintiffs will represent and protect the interests of the
proposed classes both fairly and adequately. He has retained counsel competent and experienced in
complex class-action litigation. Plaintiffs have no interests that are antagonistic to those of the
proposed classes, and his interests do not conflict with the interests of the proposed class members he
seeks to represent.
113.
Prevention of inconsistent or varying adjudications: If prosecution of a myriad of
individual actions for the conduct complained of were undertaken, there likely would be inconsistent
or varying results. This would have the effect of establishing incompatible standards of conduct for
the defendant. Certification of plaintiffs’ proposed classes would prevent these undesirable
outcomes.
114.
Injunctive and declaratory relief: By way of its conduct described in this
complaint, Apple has acted on grounds that apply generally to the proposed classes. Accordingly,
final injunctive relief or corresponding declaratory relief is appropriate respecting the classes as a
whole.
115.
Predominance and superiority: This proposed class action is appropriate for
certification. Class proceedings on these facts and this law are superior to all other available
methods for the fair and efficient adjudication of this controversy, given that joinder of all members
is impracticable. Even if members of the proposed classes could sustain individual litigation, that
course would not be preferable to a class action because individual litigation would increase the
delay and expense to the parties due to the complex factual and legal controversies present in this
matter. Here, the class action device will present far fewer management difficulties, and it will
provide the benefit of a single adjudication, economies of scale, and comprehensive supervision by
this Court. Further, uniformity of decisions will be ensured.
IX.
APPLICABILITY OF CALIFORNIA LAW
116.
There is a California law provision incorporated by reference in Apple’s Apple
Developer Program License Agreement.107 Accordingly, plaintiffs allege that California law applies
107 See, e.g., Ex. B, ¶ 14.10 (“Dispute Resolution; Governing Law”) (“Any litigation or other
dispute resolution between You and Apple arising out of or relating to this Agreement, the Apple
Software, or Your relationship with Apple will take place in the Northern District of California . . . .
This agreement will be governed by and construed in accordance with the laws of the United States
and the State of California, except that body of California law concerning conflicts of law. . . .”).
Upon information and belief, this or an effectively identical provision has been in force for at least
the preceding four years, but likely since the inception of Apple’s provision of distribution services
to iOS developers. (See, e.g., Apple Sup. Ct. Br. at 36-37 n. 15 (“The [developer’s] obligations were
in fact contained in the then-named iPhone Developer Program License Agreement (copies of which
are widely available on the internet), and are now found in the Apple Developer Program License
Agreement.”).); see also Ex. A, ¶ 17 (also containing California choice-of-law provision).
to the state law claims they assert on their own behalf and on behalf of the proposed nationwide
classes.
117.
Furthermore, upon information and belief, the unlawful conduct alleged in this
complaint, including the drafting, dissemination, and consummation of anti-competitive contracts
and policies, as well as the levying and collection of Apple’s supra-competitive 30% distribution-
services fee from iOS app and in-app-product developers, and the enforcement of minimum-price
and end-in-$.99 price terms, was effected, implemented, adopted, and ratified in the state of
California, where Apple maintains its U.S. headquarters. Therefore, a substantial part of the anti-
competitive conduct took place in California. For these reasons, too, plaintiffs allege that they and
the proposed nationwide classes are entitled to monetary and injunctive relief pursuant to California
law.
X.
CLAIMS FOR RELIEF
FIRST CAUSE OF ACTION
VIOLATION OF THE SHERMAN ACT – MONOPOLIZATION/MONOPSONY
(15 U.S.C. § 2)
118.
Plaintiffs repeat and re-make every allegation above as if set forth herein in full.
119.
Plaintiffs bring this federal law claim on their own behalf and on behalf of each
member of the proposed nationwide class described above.
120.
The relevant market is the U.S. market for iOS app and in-app-product distribution
services, or for retailing iOS apps and in-app products. Alternatively, the relevant market is the U.S.
sub-market for iOS app and in-app-product distribution services, or for retailing iOS apps, in-app
products, and subscriptions.
121.
Apple has gained and maintains monopoly power in the relevant market (or sub-
market) by improper and unlawful means. Alternatively, Apple, as the sole U.S. retailer of iOS apps
and in-app products, and, upon information and belief, a seller of a significant sum of in-app
subscriptions, acts as a monopsonist in the relevant market (or sub-market). More specifically,
Apple has willfully acquired and maintained such power by its patently exclusionary conduct,
including its refusal to allow iOS device owners to purchase iOS apps and in-app products other than
through its own App Store; refusing to allow other app stores to be allowed on its devices; and
mandating that iOS developers who sell through the App Store cannot sell their apps though any
other means that are meant to reach iOS device consumers. Each of these instances of exclusionary
conduct is also directly exclusionary in the U.S. market (or sub-market) for iOS app and in-app-
product distribution services, or for retailing iOS apps, in-app products, or subscriptions, because
they ensure that iOS app developers must use Apple’s distribution services to reach iOS device
owners.
122.
For the reasons stated herein, substantial barriers to entry and expansion exist in the
relevant market (or sub-market).
123.
Apple has the power to exclude competition in the relevant market (or sub-market),
and it has used that power, including by way of its unlawful practices in restraint of trade as
described herein, in order to maintain and expand its monopoly power in that market.
124.
Apple’s conduct as described herein, including its unlawful practices in restraint of
trade, is exclusionary vis-à-vis its rivals in the U.S. market (or sub-market) for iOS app and in-app-
product distribution services.
125.
Apple has behaved as alleged herein to maintain and grow its monopoly in the U.S.
market for iOS app and in-app-product distribution services, with the effect being that competition is
foreclosed and that consumer choice is gravely diminished. So is innovation. Additionally, Apple
has abused its market power by insisting on 30% transaction fees, minimum price fixing, and end-in-
$.99 pricing as alleged herein. Further, Apple’s actions have depressed output as alleged in this
complaint.
126.
There is no business necessity or other pro-competitive justification for Apple’s
conduct.
127.
Plaintiffs and the federal law class have been injured, and will continue to be injured,
in their businesses and property as a result of Apple’s conduct, including by way of overpaying for
iOS app and in-app-product distribution services. Additionally, or alternatively, plaintiffs and the
federal law class have suffered damages because they were underpaid by Apple as a result of the
Apple’s conduct as described herein.
128.
Plaintiffs are inclined to distribute iOS applications in the future, in part because of
his investment in programming for the iOS system, and also because of his desire to continue selling
applications and in-app items via the App Store. Plaintiffs and the federal law class also are entitled
to injunctive relief to prevent Apple from persisting in its unlawful, inequitable, and unjustified
behavior to their detriment, with such an injunction at a minimum prohibiting Apple from continuing
to: charge supra-competitive distribution fees, mandate minimum pricing and pricing in sums ending
in $.99, and bar competitors from providing distribution services or retail sales services to iOS
developers. See, e.g., 15 U.S.C. § 26.
SECOND CAUSE OF ACTION
VIOLATION OF THE SHERMAN ACT – ATTEMPTED
MONOPOLIZATION/MONOPSONY
(15 U.S.C. § 2)
129.
Plaintiffs repeat and re-make every allegation above as if set forth herein in full.
130.
Plaintiffs bring this claim on their own behalf and on behalf of each member of the
proposed nationwide federal law class described above.
131.
The relevant market is the U.S. market for iOS app and in-app-product distribution
services, The relevant market is the U.S. market for iOS app and in-app-product distribution services,
or for retailing iOS apps, in-app products, or subscriptions. Alternatively, the relevant market is the
U.S. sub-market for iOS app and in-app-product distribution services, or for retailing iOS apps, in-
app products, or subscriptions.. Alternatively, the relevant market is the U.S. sub-market for iOS app
and in-app-product distribution services, or for retailing iOS apps, in-app products, and
subscriptions. Alternatively, the relevant market is the U.S. sub-market for iOS app and in-app-
product distribution services, or for retailing iOS apps, in-app products, and subscriptions.
132.
Apple has attempted to monopolize the U.S. market (or sub-market) for iOS app and
in-app-product distribution services, or for retailing iOS apps, in-app products, or subscriptions.
Alternatively, Apple, as the sole U.S. retailer of iOS apps and in-app products, and, upon information
and belief, a seller of a significant sum of in-app subscriptions, is an attempted monopsonist in the
relevant market (or sub-market). More specifically, Apple has willfully acquired and maintained
market power by its patently exclusionary conduct, including its refusal to allow iOS device owners
to purchase iOS apps and in-app products other than through its own App Store; refusing to allow
other app stores to be allowed on its devices; and mandating that iOS developers who sell through
the App Store cannot sell their apps though any other means that are meant to reach iOS device
consumers. Each of these instances of exclusionary conduct is also directly exclusionary in the U.S.
market (or sub-market) for iOS app and in-app-product distribution services, or for retailing iOS
apps, in-app products, or subscriptions, because they ensure that iOS app developers must use
Apple’s distribution services to reach iOS device owners.
133.
Apple’s anti-competitive conduct has created a dangerous probability that it will
achieve monopoly power in the U.S. market (or sub-market) for iOS app and in-app-product
distribution services.
134.
Apple has a specific intent to achieve monopoly power in the U.S. market (or sub-
market) for iOS app and in-app-product distribution services, or for retailing iOS apps, in-app
products, or subscriptions. Now, and if its unlawful restraints are not checked, Apple has a
dangerous probably of success not only in the relevant market as defined by the plaintiffs, but even a
hypothetical market including Google.
135.
Apple has the power to exclude competition in the U.S. market (or sub-market) for
iOS app and in-app-product distribution services, or for retailing iOS apps, in-app products, or
subscriptions, and it has used that power, including by way of its unlawful practices in restraint of
trade as described herein, in an attempt to monopolize that relevant market (or sub-market).
136.
Apple’s conduct as described herein, including its unlawful practices in restraint of
trade, is exclusionary vis-à-vis its rivals in the U.S. market (or sub-market) for iOS app and in-app-
product distribution services, or for retailing iOS apps, in-app products, or subscriptions.
137.
Apple has behaved as alleged herein in an attempt to obtain a monopoly in the U.S.
market (or sub-market) for iOS app and in-app-product distribution services, or for retailing iOS
apps, in-app products, or subscriptions, with the effect being that competition is foreclosed and that
consumer choice is gravely diminished. So is innovation. Additionally, Apple has abused its market
power by charging supra-competitive 30% distribution fees and mandating minimum prices and end-
in-$.99 pricing for iOS apps and in-app products. Further, Apple’s actions have depressed output as
alleged herein.
138.
There is no business necessity or other pro-competitive justification for Apple’s
conduct.
139.
Plaintiffs and the federal law class have been injured, and will continue to be injured,
in their businesses and property as a result of Apple’s conduct, including by way of overpaying for
iOS app and in-app-product distribution services. Additionally, or alternatively, plaintiffs and the
federal law class have suffered damages because they were underpaid by Apple as a result of the
Apple’s conduct as described herein.
140.
Plaintiffs are inclined to distribute iOS applications in the future, in part because of
his investment in programming for the iOS system, and also because of their desire to continue
selling applications and in-app items via the App Store. Plaintiffs and the federal law class also are
entitled to injunctive relief to prevent Apple from persisting in its unlawful, inequitable, and
unjustified behavior to their detriment, with such an injunction at a minimum prohibiting Apple from
continuing to: charge supra-competitive distribution fees, mandate minimum pricing and pricing in
sums ending in $.99, and bar competitors from providing distribution services or retail sales services
to iOS developers. See, e.g., 15 U.S.C. § 26.
THIRD CAUSE OF ACTION
VIOLATION OF THE UNFAIR COMPETITION ACT
(CAL. BUS. & PROF. CODE §§ 17200 ET SEQ.)
141.
Plaintiffs repeat and re-make every allegation above as if set forth herein in full.
142.
Plaintiffs bring this claim on their own behalf and on behalf of each member of the
proposed nationwide California law class described above. Alternatively, if the Court does not apply
California law on a nationwide basis, plaintiffs bring this claim on their own behalf and on behalf of
each member of a California resident class.
143.
California’s Unfair Competition Law (UCL) defines “unfair competition” to include
any “unlawful, unfair, or fraudulent” business act or practice. CAL. BUS. & PROF. CODE §§ 17200 et
seq. As these are stated in the disjunctive, the UCL sets up three prongs—the unlawful, unfair, and
fraudulent prongs—the violation of any of which constitutes a violation of the UCL.
144.
Apple has engaged in, and continues to engage in, acts of unfair competition as
defined in California’s UCL. More specifically, Apple, based upon the conduct alleged herein, has
violated the unlawful and unfair prongs of the UCL.
145.
Not only is there a California choice-of-law provision in the pertinent developer
contracts,108 but also, the conduct complained of took place in, and has emanated from, California at
all pertinent times, as alleged herein.
146.
Most developers, including the plaintiffs, are individuals (¶¶Mr. Cameron) or small
businesses (Pure Sweat Basketball, Inc.). As such, they lack sophistication and power.
147.
They also are consumers of Apple’s distribution services. Furthermore, consumers
of: (a) apps and in-app products sold through the App Store; and (b) Apple’s iOS devices, including
individuals and small business, are also negatively impacted by Apple’s supra-competitive 30%
developer’s fee as well as its diktats regarding minimum pricing and restricting consumer prices to
those ending in $.99. As alleged herein, Apple’s abusive fees and pricing policies affect output.
While Apple may point to large numbers of available apps and in-app products and high sales
figures, nonetheless, even more apps and in-app products would be available to consumers (or
remain available to them) but for Apple’s abusive fees and concomitant pricing practices. In sum,
Apple’s behavior affects consumers not only of its distribution services but also of iOS apps and in-
app products.
Unlawful prong
148.
Apple’s acts of unfair competition include its violations of the Sherman Act as alleged
herein. Therefore, Apple has violated the unlawful prong of the UCL.
149.
Apple’s conduct has harmed developers, competition, and even consumers of iOS
apps, in-app products, and subscriptions. Developers have overpaid for distribution services (or
Apple’s retail commission) due to Apple’s actions as alleged herein. iOS developers have no
alternative but to distribute their wares through the App Store and to pay Apple’s supra-competitive
108 See Ex. A, ¶ 17.
fees. Apple exploits this state of affairs. But for Apple’s anti-competitive and abuse behavior, the
cost of distribution services would have been lower than what it was and is.
Unfair prong
150.
Apple’s acts of unfair competition include its violations of the Sherman Act and the
policies underlying it, as alleged herein. More specifically:
(a)
The acts or practices alleged in this complaint violate the unfair prong of the UCL
because the injuries complained of herein are substantial, including in their financial impact on
developers as consumers of Apple’s distribution services, as well as consumers of iOS apps, in-app
products, and subscriptions. There are no countervailing benefits to consumers or competition from
Apple’s unjustified, supra-competitive pricing, or from Apple’s mandatory minimum and end-in-
$.99 pricing, which helps to inflate its profits at the expense of plaintiffs and other consumers.
Neither developers as consumers of Apple’s distribution services, nor consumers of iOS apps and in-
app products, could reasonably avoid the injuries inflicted upon them by Apple. Apple mandates
these harmful practices, which it is able to do thanks to its market power as alleged herein;
(b)
Apple’s behavior is also unfair because it offends the nation’s antitrust policies as
alleged herein. Additionally, the supra-competitive pricing and mandatory end-in-$.99 pricing are
substantially injurious to developers and other consumers as alleged herein. They are immoral,
unethical, oppressive, and unscrupulous because they are a function of the abuse of Apple’s market
power as alleged herein; and
(c)
Apple’s behavior is also unfair because it violates public policy that is tethered to this
country’s statutory antitrust regulation, as expressed in part in the Sherman Act.
In sum, for all or any of these reasons, Apple has violated the unfair prong of the UCL.
151.
Apple’s conduct has harmed competition, consumers of its distribution services, and
even consumers of iOS apps, in-app products, and subscriptions. Developers have overpaid for
distribution services (or Apple’s retail commission) due to Apple’s actions as alleged herein.
Developers have no alternative but to distribute their wares through the App Store and to pay
Apple’s supra-competitive fees. Apple exploits this state of affairs. But for Apple’s anti-competitive
and abuse behavior, the cost of distribution services would have been lower than what it was.
152.
Plaintiffs and the proposed classes are entitled to recover restitution in at least the
amount of the difference between the supra-competitive distribution fees they have paid Apple on the
one hand and what the fees would be but for Apple’s unlawful, inequitable, and unjustified behavior,
including abuses of its market power, on the other. See, e.g., Cal. Bus. & Prof. Code § 17203.
153.
Plaintiffs are inclined to distribute iOS applications in the future, in part because of
his investment in programming for the iOS system, and also because of his desire to continue selling
applications and in-app items via the App Store. Plaintiffs and the California law class (or,
alternatively, plaintiffs and a class consisting of California residents) are also entitled to injunctive
relief to prevent Apple from persisting in its unlawful, inequitable, and unjustified behavior to their
detriment, with such an injunction at a minimum prohibiting Apple from continuing to: charge supra-
competitive distribution fees, mandate minimum pricing and pricing in sums ending in $.99, and bar
competitors from providing distribution services to iOS developers. See, e.g., Cal. Bus. & Prof.
Code § 17203.
PRAYER FOR RELIEF
WHEREFORE, plaintiffs respectfully request the following relief on their own behalf and on
behalf of all those similarly situated:
A.
That the Court certify this case as a class action; that it certify the proposed federal
law class on a nationwide basis, the proposed California law class on a nationwide basis, or,
alternatively with respect to plaintiffs’ California law claim, and at a minimum, a California-resident
class based on California law; and that it appoint them as class representatives and their counsel as
class counsel;
B.
That the Court award them and the proposed classes all appropriate relief, to include,
but not be limited to, injunctive relief requiring that Apple cease the abusive, unlawful, and anti-
competitive practices described herein (including pursuant to federal antitrust law: see, e.g., 15
U.S.C. § 26 and state law: see, e.g., Cal. Bus. & Prof. Code § 17203), as requested herein;
declaratory relief, adjudging such practices unlawful; as well as monetary relief, whether by way of
restitution (see, e.g., Cal. Bus. & Prof. Code § 17203) or damages, including treble damages (see,
e.g., 15 U.S.C. § 15(a)), or other multiple or punitive damages, or restitution, where mandated by law
(including federal antitrust law: see, e.g., 15 U.S.C. § 15(a)) or equity or as otherwise available;
together with recovery of their costs of suit, including their reasonable attorneys’ fees, costs, and
expenses (including pursuant to federal antitrust law: see, e.g., 15 U.S.C. § 15(a) and/or 15 U.S.C. §
26; see also Cal. Code Civ. Pro. § 1021.5);
C.
That the Court grant such additional orders or judgments as may be necessary to
remedy or prevent the unlawful practices complained of herein; and
D.
That the Court award them and proposed classes such other, favorable relief as may
be available and appropriate under federal or state law, or at equity.
JURY TRIAL DEMANDED
Plaintiffs demand a trial by jury on all issues so triable.
DATED: June 4, 2019
Respectfully submitted,
HAGENS BERMAN SOBOL SHAPIRO LLP
By
/s/ Shana E. Scarlett
Shana E. Scarlett
HAGENS BERMAN SOBOL SHAPIRO LLP
715 Hearst Avenue, Suite 202
Berkeley, CA 94710
Telephone: (510) 725-3000
Facsimile: (510) 725-3001
[email protected]
Steve W. Berman (pro hac vice forthcoming)
Robert F. Lopez (pro hac vice forthcoming)
HAGENS BERMAN SOBOL SHAPIRO LLP
1301 Second Avenue, Suite 2000
Seattle, WA 98101
Telephone: (206) 623-7292
Facsimile: (206) 623-0594
[email protected]
[email protected]
Attorneys for Plaintiffs and the Proposed Classes
EXHIBIT A
THIS IS A LEGAL AGREEMENT BETWEEN YOU AND APPLE INC. ("APPLE") STATING THE
TERMS THAT GOVERN YOUR PARTICIPATION AS AN APPLE DEVELOPER. PLEASE READ
THIS APPLE DEVELOPER AGREEMENT (“AGREEMENT”) BEFORE PRESSING THE
"AGREE" BUTTON AND CHECKING THE BOX AT THE BOTTOM OF THIS PAGE. BY
PRESSING "AGREE," YOU ARE AGREEING TO BE BOUND BY THE TERMS OF THIS
AGREEMENT. IF YOU DO NOT AGREE TO THE TERMS OF THIS AGREEMENT, PRESS
"CANCEL".
Apple Developer Agreement
1.
Relationship With Apple; Apple ID and Password. You understand and agree that by
registering with Apple to become an Apple Developer (“Apple Developer”), no legal partnership or
agency relationship is created between you and Apple. You agree not to represent otherwise. You
also certify that you are at least thirteen years of age and you represent that you are legally
permitted to register as an Apple Developer. This Agreement is void where prohibited by law and
the right to register as an Apple Developer is not granted in such jurisdictions. Unless otherwise
agreed or permitted by Apple in writing, you cannot share or transfer any benefits you receive from
Apple in connection with being an Apple Developer. The Apple ID and password you use to log
into your Apple Developer account cannot be shared in any way or with anyone. You are
responsible for maintaining the confidentiality of your Apple ID and password and for any activity in
connection with your account.
2.
Developer Benefits. As an Apple Developer, you may have the opportunity to attend
certain Apple developer conferences, technical talks, and other events (including online or
electronic broadcasts of such events) (“Apple Events”). In addition, Apple may offer to provide
you with certain services (“Services”), as described more fully herein and on the Apple Developer
web pages (“Site”), solely for your own use in connection with your participation as an Apple
Developer. Services may include, but not be limited to, any services Apple offers at Apple Events
or on the Site as well as the offering of any content or materials displayed on the Site (“Content”).
Apple may change, suspend or discontinue providing the Services, Site and Content to you at any
time, and may impose limits on certain features and materials offered or restrict your access to
parts or all of such materials without notice or liability.
3.
Restrictions. You agree not to exploit the Site, or any Services, Apple Events or Content
provided to you by Apple as an Apple Developer, in any unauthorized way, including but not limited
to, by trespass, burdening network capacity or using the Services, Site or Content other than for
authorized purposes. Copyright and other intellectual property laws protect the Site and Content
provided to you, and you agree to abide by and maintain all notices, license information, and
restrictions contained therein. Unless expressly permitted herein or otherwise permitted in a
separate agreement with Apple, you may not modify, publish, network, rent, lease, loan, transmit,
sell, participate in the transfer or sale of, reproduce, create derivative works based on, redistribute,
perform, display, or in any way exploit any of the Site, Content or Services. You may not
decompile, reverse engineer, disassemble, or attempt to derive the source code of any software or
security components of the Services, Site, or Content (except as and only to the extent any
foregoing restriction is prohibited by applicable law or to the extent as may be permitted by any
licensing terms accompanying the foregoing). Use of the Site, Content or Services to violate,
tamper with, or circumvent the security of any computer network, software, passwords, encryption
codes, technological protection measures, or to otherwise engage in any kind of illegal activity, or
to enable others to do so, is expressly prohibited. Apple retains ownership of all its rights in the
Site, Content, Apple Events and Services, and except as expressly set forth herein, no other rights
or licenses are granted or to be implied under any Apple intellectual property.
4.
Confidentiality. Except as otherwise set forth herein, you agree that any Apple pre-
release software, services, and/or hardware (including related documentation and materials)
provided to you as an Apple Developer (“Pre-Release Materials”) and any information disclosed
by Apple to you in connection with Apple Events will be considered and referred to as “Apple
Confidential Information”.
Notwithstanding the foregoing, Apple Confidential Information will not include: (a) information that is
generally and legitimately available to the public through no fault or breach of yours; (b) information
that is generally made available to the public by Apple; (c) information that is independently
developed by you without the use of any Apple Confidential Information; (d) information that was
rightfully obtained from a third party who had the right to transfer or disclose it to you without
limitation; or (e) any third party software and/or documentation provided to you by Apple and
accompanied by licensing terms that do not impose confidentiality obligations on the use or
disclosure of such software and/or documentation. Further, Apple agrees that you will not be
bound by the foregoing confidentiality terms with regard to technical information about Apple pre-
release software, services and/or hardware disclosed by Apple at WWDC (Apple’s Worldwide
Developers Conference), except that you may not post screen shots of, write public reviews of, or
redistribute any such materials.
5.
Nondisclosure and Nonuse of Apple Confidential Information. Unless otherwise
expressly agreed or permitted in writing by Apple, you agree not to disclose, publish, or
disseminate any Apple Confidential Information to anyone other than to other Apple Developers
who are employees and contractors working for the same entity as you and then only to the extent
that Apple does not otherwise prohibit such disclosure. Except for your authorized purposes as an
Apple Developer or as otherwise expressly agreed or permitted by Apple in writing, you agree not
to use Apple Confidential Information in any way, including, without limitation, for your own or any
third party’s benefit without the prior written approval of an authorized representative of Apple in
each instance. You further agree to take reasonable precautions to prevent any unauthorized use,
disclosure, publication, or dissemination of Apple Confidential Information. You acknowledge that
unauthorized disclosure or use of Apple Confidential Information could cause irreparable harm and
significant injury to Apple that may be difficult to ascertain. Accordingly, you agree that Apple will
have the right to seek immediate injunctive relief to enforce your obligations under this Agreement
in addition to any other rights and remedies it may have. If you are required by law, regulation or
pursuant to the valid binding order of a court of competent jurisdiction to disclose Apple
Confidential Information, you may make such disclosure, but only if you have notified Apple before
making such disclosure and have used commercially reasonable efforts to limit the disclosure and
to seek confidential, protective treatment of such information. A disclosure pursuant to the
previous sentence will not relieve you of your obligations to hold such information as Apple
Confidential Information.
6.
Confidential Pre-Release Materials License and Restrictions. If Apple provides you
with Pre-Release Materials, then subject to your compliance with the terms and conditions of this
Agreement, Apple hereby grants you a nonexclusive, nontransferable, right and license to use the
Pre-Release Materials only for the limited purposes set forth in this Section 6; provided however
that if such Pre-Release Materials are subject to a separate license agreement, you agree that the
license agreement accompanying such materials in addition to Sections 4 and 5 of this Agreement
shall also govern your use of the Pre-Release Materials. You further agree that in the event of any
inconsistency between Section 4 and 5 of this Agreement and the confidentiality restrictions in the
license agreement, the license agreement shall govern. You agree not to use the Pre-Release
Materials for any purpose other than testing and/or development by you of a product designed to
operate in combination with the same operating system for which the Pre-Release Materials are
designed. This Agreement does not grant you any right or license to incorporate or make use of
any Apple intellectual property (including for example and without limitation, trade secrets, patents,
copyrights, trademarks and industrial designs) in any product. Except as expressly set forth herein,
no other rights or licenses are granted or to be implied under any Apple intellectual property. You
agree not to decompile, reverse engineer, disassemble, or otherwise reduce the Pre-Release
Materials to a human-perceivable form, and you will not modify, network, rent, lease, transmit, sell,
or loan the Pre-Release Materials in whole or in part.
7.
Developer Content License and Restrictions. As an Apple Developer, you may have
access to certain proprietary content (including, without limitation, video presentations and audio
recordings) that Apple may make available to you from time to time (“Content”). Content shall be
considered Apple Confidential Information, unless otherwise agreed or permitted in writing by
Apple. You may not share the Content with anyone, including, without limitation, employees and
contractors working for the same entity as you, regardless of whether they are Apple Developers,
unless otherwise expressly permitted by Apple. Subject to these terms and conditions, Apple
grants you a personal and nontransferable license to access and use the Content for authorized
purposes as an Apple Developer; provided that you may only download one (1) copy of the
Content and such download must be completed within the time period specified by Apple for such
download. Except as expressly permitted by Apple, you shall not modify, translate, reproduce,
distribute, or create derivative works of the Content or any part thereof. You shall not rent, lease,
loan, sell, sublicense, assign or otherwise transfer any rights in the Content. Apple and/or Apple’s
licensor(s) retain ownership of the Content itself and any copies or portions thereof. The Content is
licensed, not sold, to you by Apple for use only under this Agreement, and Apple reserves all rights
not expressly granted to you. Your rights under this license to use and access the Content will
terminate automatically without notice from Apple if you fail to comply with any of these provisions.
8.
Compatibility Labs; Developer Technical Support (DTS). As an Apple Developer, you
may have access to Apple’s software and/or hardware compatibility testing and development labs
(“Labs”) and/or developer technical support incidents (“DTS Services”) that Apple may make
available to you from time to time as an Apple developer benefit or for a separate fee. You agree
that all use of such Labs and DTS Services will be in accordance with Apple’s usage policies for
such services, which are subject to change from time to time, with or without prior notice to you.
Without limiting the foregoing, Apple may post on the Site and/or send an email to you with notices
of such changes. It is your responsibility to review the Site and/or check your email address
registered with Apple for any such notices. You agree that Apple shall not be liable to you or any
third party for any modification or cessation of such services. As part of the DTS Services, Apple
may supply you with certain code snippets, sample code, software, and other materials
(“Materials”). You agree that any Materials that Apple provides as part of the DTS Services are
licensed to you and shall be used by you only in accordance with the terms and conditions
accompanying the Materials. Apple retains ownership of all of its right, title and interest in such
Materials and no other rights or licenses are granted or to be implied under any Apple intellectual
property. You have no right to copy, decompile, reverse engineer, sublicense or otherwise
distribute such Materials, except as may be expressly provided in the terms and conditions
accompanying the Materials. YOU AGREE THAT WHEN REQUESTING AND RECEIVING
TECHNICAL SUPPORT FROM DTS SERVICES, YOU WILL NOT PROVIDE APPLE WITH ANY
INFORMATION, INCLUDING THAT INCORPORATED IN YOUR SOFTWARE, THAT IS
CONFIDENTIAL TO YOU OR ANY THIRD PARTY. YOU AGREE THAT ANY NOTICE,
LEGEND, OR LABEL TO THE CONTRARY CONTAINED IN ANY SUCH MATERIALS
PROVIDED BY YOU TO APPLE SHALL BE WITHOUT EFFECT. APPLE SHALL BE FREE TO
USE ALL SUCH INFORMATION IT RECEIVES FROM YOU IN ANY MANNER IT DEEMS
APPROPRIATE, SUBJECT TO ANY APPLICABLE PATENTS OR COPYRIGHTS. Apple
reserves the right to reject a request for access to Labs or for DTS Services at any time and for any
reason, in which event Apple may credit you for the rejected lab or support request. You shall be
solely responsible for any restoration of lost or altered files, data, programs or other materials
provided.
9.
Amendment; Communication. Apple reserves the right, at its discretion, to modify this
Agreement, including any rules and policies at any time. You will be responsible for reviewing and
becoming familiar with any such modifications (including new terms, updates, revisions,
supplements, modifications, and additional rules, policies, terms and conditions)(“Additional
Terms”) communicated to you by Apple. All Additional Terms are hereby incorporated into this
Agreement by this reference and your continued use of the Site will indicate your acceptance of
any Additional Terms. In addition, Apple may be sending communications to you from time to time.
Such communications may be in the form of phone calls and/or emails and may include, but not be
limited to, membership information, marketing materials, technical information, and updates and/or
changes regarding your participation as an Apple Developer. By agreeing to this Agreement, you
consent that Apple may provide you with such communications.
10.
Term and Termination. Apple may terminate or suspend you as a registered Apple
Developer at any time in Apple’s sole discretion. If Apple terminates you as a registered Apple
Developer, Apple reserves the right to deny your reapplication at any time in Apple’s sole
discretion. You may terminate your participation as a registered Apple Developer at any time, for
any reason, by notifying Apple in writing of your intent to do so. Upon any termination or, at
Apple’s discretion, suspension, all rights and licenses granted to you by Apple will cease, including
your right to access the Site, and you agree to destroy any and all Apple Confidential Information
that is in your possession or control. At Apple’s request, you agree to provide certification of such
destruction to Apple. No refund or partial refund of any fees paid hereunder or any other fees will
be made for any reason. Following termination of this Agreement, Sections 1, 3-5, 7 (but only for
so long as the duration specified by Apple for such usage), 10-19 shall continue to bind the parties.
11.
Apple Independent Development. Nothing in this Agreement will impair Apple’s right to
develop, acquire, license, market, promote or distribute products, software or technologies that
perform the same or similar functions as, or otherwise compete with, any other products, software
or technologies that you may develop, produce, market, or distribute. In the absence of a separate
written agreement to the contrary, Apple will be free to use any information, suggestions or
recommendations you provide to Apple pursuant to this Agreement for any purpose, subject to any
applicable patents or copyrights.
12.
Use Of Apple Trademarks, Logos, etc. You agree to follow Apple’s trademark and
copyright guidelines as published at: www.apple.com/legal/guidelinesfor3rdparties.html
(“Guidelines”) and as may be modified from time to time. You agree not to use the marks “Apple,”
the Apple Logo, “Mac”, “iPhone,” “iPod touch” or any other marks belonging or licensed to Apple in
any way except as expressly authorized in writing by Apple in each instance or as permitted in
Apple’s Guidelines. You agree that all goodwill arising out of your authorized use of Apple’s marks
shall inure to the benefit of and belong to Apple.
13.
No Warranty. APPLE AND ITS AFFILIATES, SUBSIDIARIES, OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS, PARTNERS, AND LICENSORS (COLLECTIVELY, “APPLE” FOR
PURPOSES OF THIS SECTION 13 AND 14) DO NOT PROMISE THAT THE SITE, CONTENT,
SERVICES (INCLUDING, FUNCTIONALITY OR FEATURES OF THE FOREGOING), LABS, DTS
SERVICES, OR ANY OTHER INFORMATION OR MATERIALS THAT YOU RECEIVE
HEREUNDER AS AN APPLE DEVELOPER (COLLECTIVELY, THE “SERVICE” FOR PURPOSES
OF THIS SECTION 13 AND 14) WILL BE ACCURATE, RELIABLE, TIMELY, SECURE, ERROR-
FREE OR UNINTERRUPTED, OR THAT ANY DEFECTS WILL BE CORRECTED. THE SERVICE
IS PROVIDED ON AN “AS-IS” AND “AS-AVAILABLE” BASIS AND THE SERVICE IS SUBJECT
TO CHANGE WITHOUT NOTICE. APPLE CANNOT ENSURE THAT ANY CONTENT
(INCLUDING FILES, INFORMATION OR OTHER DATA) YOU ACCESS OR DOWNLOAD FROM
THE SERVICE WILL BE FREE OF VIRUSES, CONTAMINATION OR DESTRUCTIVE
FEATURES. FURTHER, APPLE DOES NOT GUARANTEE ANY RESULTS OR
IDENTIFICATION OR CORRECTION OF PROBLEMS AS PART OF THE SERVICE AND APPLE
DISCLAIMS ANY LIABILITY RELATED THERETO. APPLE DISCLAIMS ALL WARRANTIES,
EXPRESS OR IMPLIED, INCLUDING ANY WARRANTIES OF ACCURACY, NON-
INFRINGEMENT, MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. APPLE
DISCLAIMS ANY AND ALL LIABILITY FOR THE ACTS, OMISSIONS AND CONDUCT OF ANY
THIRD PARTIES IN CONNECTION WITH OR RELATED TO YOUR USE OF THE SERVICE.
YOU ASSUME TOTAL RESPONSIBILITY AND ALL RISKS FOR YOUR USE OF THE SERVICE,
INCLUDING, BUT NOT LIMITED TO, ANY INFORMATION OBTAINED THEREON. YOUR SOLE
REMEDY AGAINST APPLE FOR DISSATISFACTION WITH THE SERVICE IS TO STOP USING
THE SERVICE. THIS LIMITATION OF RELIEF IS A PART OF THE BARGAIN BETWEEN THE
PARTIES. TO THE EXTENT THAT APPLE MAKES ANY PRE-RELEASE SOFTWARE,
HARDWARE OR OTHER PRODUCTS, SERVICES OR INFORMATION RELATED THERETO
AVAILABLE TO YOU AS AN APPLE DEVELOPER, YOU UNDERSTAND THAT APPLE IS
UNDER NO OBLIGATION TO PROVIDE UPDATES, ENHANCEMENTS, OR CORRECTIONS, OR
TO NOTIFY YOU OF ANY PRODUCT OR SERVICES CHANGES THAT APPLE MAY MAKE, OR
TO PUBLICLY ANNOUNCE OR INTRODUCE THE PRODUCT(S) OR SERVICE AT ANY TIME IN
THE FUTURE.
14.
Disclaimer of Liability. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW, IN
NO EVENT WILL APPLE BE LIABLE FOR PERSONAL INJURY, OR ANY INCIDENTAL,
SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES WHATSOEVER,
INCLUDING, WITHOUT LIMITATION, DAMAGES RESULTING FROM DELAY OF DELIVERY,
FOR LOSS OF PROFITS, DATA, BUSINESS OR GOODWILL, FOR BUSINESS INTERRUPTION
OR ANY OTHER COMMERCIAL DAMAGES OR LOSSES, ARISING OUT OF OR RELATED TO
THIS AGREEMENT OR YOUR USE OR INABILITY TO USE THE SERVICE, HOWEVER
CAUSED, WHETHER UNDER A THEORY OF CONTRACT, WARRANTY, TORT (INCLUDING
NEGLIGENCE), PRODUCTS LIABILITY, OR OTHERWISE, EVEN IF APPLE HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, AND NOTWITHSTANDING THE
FAILURE OF ESSENTIAL PURPOSE OF ANY REMEDY. IN NO EVENT SHALL APPLE’S
TOTAL LIABILITY TO YOU UNDER THIS AGREEMENT FOR ALL DAMAGES (OTHER THAN AS
MAY BE REQUIRED BY APPLICABLE LAW IN CASES INVOLVING PERSONAL INJURY)
EXCEED THE AMOUNT OF FIFTY DOLLARS ($50.00).
15.
Third-Party Notices and Products. Third-party software provided by Apple to you as an
Apple Developer may be accompanied by its own licensing terms, in which case such licensing
terms will govern your use of that particular third-party software. Mention of third-parties and third-
party products in any materials, documentation, advertising, or promotions provided to you as an
Apple Developer is for informational purposes only and constitutes neither an endorsement nor a
recommendation. All third-party product specifications and descriptions are supplied by the
respective vendor or supplier, and Apple shall have no responsibility with regard to the selection,
performance, or use of these vendors or products. All understandings, agreements, or warranties,
if any, take place directly between the vendors and the prospective users.
16.
Export Control. You may not use or otherwise export or re-export any Apple Confidential
Information received from Apple except as authorized by United States law and the laws of the
jurisdiction in which the Apple Confidential Information was obtained. In particular, but without
limitation, the Apple Confidential Information may not be exported or re-exported (a) into any U.S.
embargoed countries or (b) to anyone on the U.S. Treasury Department's list of Specially
Designated Nationals or the U.S. Department of Commerce Denied Person's List or Entity List or
any other restricted party lists. By becoming an Apple Developer or using any Apple Confidential
Information, you represent and warrant that you are not located in any such country or on any such
list. You also agree that you will not use any Apple Confidential Information for any purposes
prohibited by United States law, including, without limitation, the development, design, manufacture
or production of nuclear, chemical or biological weapons.
17.
Governing Law. This Agreement will be governed by and construed in accordance with
the laws of the State of California, excluding its conflict of law provisions. The parties further submit
to and waive any objections to personal jurisdiction of and venue in any of the following forums:
U.S. District Court for the Northern District of California, California Superior Court for Santa Clara
County, Santa Clara County Municipal Court, or any other forum in Santa Clara County, for any
disputes arising out of this Agreement.
18.
Government End Users. Certain Apple Confidential Information may be considered
“Commercial Items”, as that term is defined at 48 C.F.R. §2.101, consisting of “Commercial
Computer Software” and “Commercial Computer Software Documentation”, as such terms are
used in 48 C.F.R. §12.212 or 48 C.F.R. §227.7202, as applicable. Consistent with 48 C.F.R.
§12.212 or 48 C.F.R. §227.7202-1 through 227.7202-4, as applicable, the Commercial Computer
Software and Commercial Computer Software Documentation are being licensed to U.S.
Government end users (a) only as Commercial Items and (b) with only those rights as are granted
to all other end users pursuant to the terms and conditions herein. Unpublished-rights reserved
under the copyright laws of the United States.
19.
Miscellaneous. No delay or failure to take action under this Agreement will constitute a
waiver unless expressly waived in writing, signed by a duly authorized representative of Apple, and
no single waiver will constitute a continuing or subsequent waiver. This Agreement will bind your
successors but may not be assigned, in whole or part, by you without the written approval of an
authorized representative of Apple. Any non-conforming assignment shall be null and void. If any
provision is found to be unenforceable or invalid, that provision shall be limited or eliminated to the
minimum extent necessary so that this Agreement shall otherwise remain in full force and effect
and enforceable. This Agreement constitutes the entire agreement between the parties with
respect to its subject matter and supersedes all prior or contemporaneous understandings
regarding such subject matter. No addition to or removal or modification of any of the provisions of
this Agreement will be binding upon Apple unless made in writing and signed by an authorized
representative of Apple. The parties hereto confirm that they have requested that this Agreement
and all attachments and related documents be drafted in English. Les parties ont exigé que le
présent contrat et tous les documents connexes soient rédigés en anglais.
EA1283
6/8/15
EXHIBIT B
PLEASE READ THE FOLLOWING APPLE DEVELOPER PROGRAM LICENSE AGREEMENT
TERMS AND CONDITIONS CAREFULLY BEFORE DOWNLOADING OR USING THE APPLE
SOFTWARE OR APPLE SERVICES. THESE TERMS AND CONDITIONS CONSTITUTE A
LEGAL AGREEMENT BETWEEN YOU AND APPLE.
Apple Developer Program License Agreement
Purpose
You would like to use the Apple Software (as defined below) to develop one or more Applications
(as defined below) for Apple-branded products. Apple is willing to grant You a limited license to
use the Apple Software and Services provided to You under this Program to develop and test
Your Applications on the terms and conditions set forth in this Agreement.
Applications developed under this Agreement for iOS Products, Apple Watch, or Apple TV can be
distributed in four ways: (1) through the App Store, if selected by Apple, (2) through the Custom
App Distribution area of the App Store, if selected by Apple, (3) on a limited basis for use on
Registered Devices (as defined below), and (4) for beta testing through TestFlight. Applications
developed for macOS can be distributed through the App Store, if selected by Apple, or
separately distributed under this Agreement.
Applications that meet Apple's Documentation and Program Requirements may be submitted for
consideration by Apple for distribution via the App Store, Custom App Distribution, or for beta
testing through TestFlight. If submitted by You and selected by Apple, Your Applications will be
digitally signed by Apple and distributed, as applicable. Distribution of free (no charge)
Applications (including those that use the In-App Purchase API for the delivery of free content)
will be subject to the distribution terms contained in Schedule 1 to this Agreement. If You would
like to distribute Applications for which You will charge a fee or would like to use the In-App
Purchase API for the delivery of fee-based content, You must enter into a separate agreement
with Apple (“Schedule 2”). If You would like to distribute Applications via Custom App
Distribution, You must enter into a separate agreement with Apple (“Schedule 3”). You may also
create Passes (as defined below) for use on Apple-branded products running iOS or watchOS
under this Agreement and distribute such Passes for use by Wallet.
1.
Accepting this Agreement; Definitions
1.1
Acceptance
In order to use the Apple Software and Services, You must first accept this Agreement. If You do
not or cannot accept this Agreement, You are not permitted to use the Apple Software or
Services. Do not download or use the Apple Software or Services in that case. You accept and
agree to the terms of this Agreement on Your own behalf and/or on behalf of Your company,
organization, educational institution, or agency, instrumentality, or department of the federal
government as its authorized legal representative, by doing either of the following:
(a) checking the box displayed at the end of this Agreement if You are reading this on an Apple
website; or
(b) clicking an “Agree” or similar button, where this option is provided by Apple.
1.2
Definitions
Whenever capitalized in this Agreement:
“Ad Network APIs” means the Documented APIs that provide a way to validate the successful
conversion of advertising campaigns on supported Apple-branded products using a combination
of cryptographic signatures and a registration process with Apple.
Program Agreement
“Ad Support APIs” means the Documented APIs that provide the Advertising Identifier and
Advertising Preference.
“Advertising Identifier” means a unique, non-personal, non-permanent identifier provided by
iOS or tvOS through the Ad Support APIs that is associated with a particular iOS Product or
Apple TV and is to be used solely for advertising purposes, unless otherwise expressly approved
by Apple in writing.
“Advertising Preference” means the Apple setting that enables an end-user to set an ad
tracking preference.
“Agreement” means this Apple Developer Program License Agreement, including any
attachments, Schedule 1 and any exhibits thereto which are hereby incorporated by this
reference. For clarity, this Agreement supersedes the iOS Developer Program License
Agreement (including any attachments, Schedule 1 and any exhibits thereto), the Safari
Extensions Digital Signing Agreement, the Safari Extensions Gallery Submission Agreement, and
the Mac Developer Program License Agreement.
“App Store” means an electronic store and its storefronts branded, owned, and/or controlled by
Apple, or an Apple Subsidiary or other affiliate of Apple, through which Licensed Applications may
be acquired.
“App Store Connect” means Apple’s proprietary online content management tool for
Applications.
“Apple” means Apple Inc., a California corporation with its principal place of business at One
Apple Park Way, Cupertino, California 95014, U.S.A.
“Apple Certificates” means the Apple-issued digital certificates provided to You by Apple under
the Program.
“Apple Maps Service” means the mapping platform and Map Data provided by Apple via the
MapKit API for iOS version 6 or later and for use by You only in connection with Your
Applications, or the mapping platform and Map Data provided by Apple via MapKit JS for use by
You only in connection with Your Applications, websites, or web applications.
“Apple Pay APIs” means the Documented APIs that enable end-users to send payment
information they have stored on a supported Apple-branded product to an Application to be used
in payment transactions made by or through the Application, and includes other payment-related
functionality as described in the Documentation.
“Apple Pay Payload” means a customer data package passed through the Apple Software and
Apple Pay APIs as part of a payment transaction (e.g., name, email, billing address, shipping
address, and device account number).
“Apple Push Notification Service” or “APN” means the Apple Push Notification service that
Apple may provide to You to enable You to transmit Push Notifications to Your Application or for
use as otherwise permitted herein.
“APN API” means the Documented API that enables You to use the APN to deliver a Push
Notification to Your Application or for use as otherwise permitted herein.
“Apple Services” or “Services” means the developer services that Apple may provide or make
available through the Apple Software or as part of the Program for use with Your Covered
Products or development, including any Updates thereto (if any) that may be provided to You by
Apple under the Program.
Program Agreement
“Apple Software” means Apple SDKs, iOS, watchOS, tvOS, and/or macOS, the Provisioning
Profiles, FPS SDK, FPS Deployment Package, and any other software that Apple provides to You
under the Program, including any Updates thereto (if any) that may be provided to You by Apple
under the Program.
“Apple SDKs” means the Apple-proprietary Software Development Kits (SDKs) provided
hereunder, including but not limited to header files, APIs, libraries, simulators, and software
(source code and object code) labeled as part of iOS, watchOS, tvOS, or Mac SDK and included
in the Xcode Developer Tools package for purposes of targeting Apple-branded products running
iOS, watchOS, tvOS, or macOS, respectively.
“Apple Subsidiary” means a corporation at least fifty percent (50%) of whose outstanding shares
or securities (representing the right to vote for the election of directors or other managing
authority) are owned or controlled, directly or indirectly, by Apple, and that is involved in the
operation of or otherwise affiliated with the App Store, Custom App Distribution, TestFlight, and
as otherwise referenced herein (e.g., Attachment 4).
“Apple TV” means an Apple-branded product that runs the tvOS.
“Apple Watch” means an Apple-branded product that runs the watchOS.
“Application” means one or more software programs (including extensions, media, and Libraries
that are enclosed in a single software bundle) developed by You in compliance with the
Documentation and the Program Requirements, for distribution under Your own trademark or
brand, and for specific use with an Apple-branded product running iOS, watchOS, tvOS, or
macOS, as applicable, including bug fixes, updates, upgrades, modifications, enhancements,
supplements to, revisions, new releases and new versions of such software programs.
“Authorized Developers” means Your employees and contractors, members of Your
organization or, if You are an educational institution, Your faculty and staff who (a) each have an
active and valid Apple Developer account with Apple, (b) have a demonstrable need to know or
use the Apple Software in order to develop and test Covered Products, and (c) to the extent such
individuals will have access to Apple Confidential Information, each have written and binding
agreements with You to protect the unauthorized use and disclosure of such Apple Confidential
Information.
“Authorized Test Units” means Apple-branded hardware units owned or controlled by You that
have been designated by You for Your own testing and development purposes under this
Program, and if You permit, Apple-branded hardware units owned or controlled by Your
Authorized Developers so long as such units are used for testing and development purposes on
Your behalf and only as permitted hereunder.
“Beta Testers” means end-users whom You have invited to sign up for TestFlight in order to test
pre-release versions of Your Application and who have accepted the terms and conditions of the
TestFlight Application.
“Custom App Distribution” means the Apple program that offers third parties the ability to obtain
volume purchases of Licensed Applications and/or customized Licensed Applications through
Apple Business Manager, Apple School Manager, or as otherwise permitted by Apple.
“ClassKit APIs” means the Documented APIs that enable You to send student progress data for
use in a school-managed environment.
Program Agreement
“CloudKit APIs” means the Documented APIs that enable Your Applications, Web Software,
and/or Your end-users (if You permit them) to read, write, query and/or retrieve structured data
from public and/or private containers in iCloud.
“Covered Products” means Your Applications, Libraries, Passes, Safari Extensions, Safari Push
Notifications, and/or FPS implementations developed under this Agreement.
“DeviceCheck APIs” means the set of APIs, including server-side APIs, that enable You to set
and query two bits of data associated with a device and the date on which such bits were last
updated.
“DeviceCheck Data” means the data stored and returned through the DeviceCheck APIs.
“Documentation” means any technical or other specifications or documentation that Apple may
provide to You for use in connection with the Apple Software, Apple Services, Apple Certificates,
or otherwise as part of the Program.
“Documented API(s)” means the Application Programming Interface(s) documented by Apple in
published Apple Documentation and which are contained in the Apple Software.
“Face Data” means information related to human faces (e.g., face mesh data, facial map data,
face modeling data, facial coordinates or facial landmark data, including data from an uploaded
photo) that is obtained from a user’s device and/or through the use of the Apple Software (e.g.,
through ARKit, the Camera APIs, or the Photo APIs), or that is provided by a user in or through
an Application (e.g., uploads for a facial analysis service).
“FPS” or “FairPlay Streaming” means Apple’s FairPlay Streaming Server key delivery
mechanism as described in the FPS SDK.
“FPS Deployment Package” means the D Function specification for commercial deployment of
FPS, the D Function reference implementation, FPS sample code, and set of unique production
keys specifically for use by You with an FPS implementation, if provided by Apple to You.
“FPS SDK” means the FPS specification, FPS server reference implementation, FPS sample
code, and FPS development keys, as provided by Apple to You.
“FOSS” (Free and Open Source Software) means any software that is subject to terms that, as a
condition of use, copying, modification or redistribution, require such software and/or derivative
works thereof to be disclosed or distributed in source code form, to be licensed for the purpose of
making derivative works, or to be redistributed free of charge, including without limitation software
distributed under the GNU General Public License or GNU Lesser/Library GPL.
“Game Center” means the gaming community service and related APIs provided by Apple for
use by You in connection with Your Applications that are associated with Your developer account.
“HealthKit APIs” means the Documented APIs that enable reading, writing, queries and/or
retrieval of an end-user’s health and/or fitness information in Apple’s Health application.
“HomeKit Accessory Protocol” means the proprietary protocol licensed by Apple under Apple’s
MFi/Works with Apple Program that enables home accessories designed to work with the
HomeKit APIs (e.g., lights, locks) to communicate with compatible iOS Products, Apple Watch
and other supported Apple-branded products.
“HomeKit APIs” means the Documented APIs that enable reading, writing, queries and/or
retrieval of an end-user’s home configuration or home automation information from that end-
user’s designated area of Apple’s HomeKit Database.
Program Agreement
“HomeKit Database” means Apple’s repository for storing and managing information about an
end-user’s Licensed HomeKit Accessories and associated information.
“iCloud” or “iCloud service” means the iCloud online service provided by Apple that includes
remote online storage.
“iCloud Storage APIs” means the Documented APIs that allow storage and/or retrieval of user-
generated documents and other files, and allow storage and/or retrieval of key value data (e.g., a
list of stocks in a finance App, settings for an App) for Applications and Web Software through the
use of iCloud.
“In-App Purchase API” means the Documented API that enables additional content, functionality
or services to be delivered or made available for use within an Application with or without an
additional fee.
“Intermediary Party” means a party that passes an Apple Pay end-user’s Apple Pay Payload to
a Merchant for processing such end-user’s payment transaction outside of an Application.
"iOS" means the iOS operating system software provided by Apple for use by You only in
connection with Your Application development and testing, including any successor versions
thereof.
“iOS Product” means an Apple-branded product that runs iOS.
“iPod Accessory Protocol” or “iAP” means Apple’s proprietary protocol for communicating with
iOS Products and which is licensed under the MFi/Works with Apple Program.
“Library” means a code module that cannot be installed or executed separately from an
Application and that is developed by You in compliance with the Documentation and Program
Requirements only for use with iOS Products, Apple Watch, or Apple TV.
“Licensed Application” means an Application that (a) meets and complies with all of the
Documentation and Program Requirements, and (b) has been selected and digitally signed by
Apple for distribution, and includes any additional permitted functionality, content or services
provided by You from within an Application using the In-App Purchase API.
“Licensed Application Information” means screen shots, images, artwork, previews, icons
and/or any other text, descriptions, representations or information relating to a Licensed
Application that You provide to Apple for use in accordance with Schedule 1, or, if applicable,
Schedule 2 or Schedule 3.
“Licensed HomeKit Accessories” means hardware accessories licensed under the MFi/Works
with Apple Program that support the HomeKit Accessory Protocol.
“Local Notification” means a message, including any content or data therein, that Your
Application delivers to end-users at a pre-determined time or when Your Application is running in
the background and another application is running in the foreground.
“MFi Licensee” means a party who has been granted a license by Apple under the MFi/Works
with Apple Program.
“MFi/Works with Apple Accessory” or “MFi Accessory” means a non-Apple branded hardware
device that interfaces, communicates, or otherwise interoperates with or controls an Apple-
branded product using technology licensed under the MFi/Works with Apple Program (e.g., the
ability to control an iOS Product through the iPod Accessory Protocol).
Program Agreement
“MFi/Works with Apple Program” means a separate Apple program that offers developers,
among other things, a license to incorporate or use certain Apple technology in or with hardware
accessories or devices for purposes of interfacing, communicating or otherwise interoperating
with or controlling select Apple-branded products.
“macOS” means the macOS operating system software, including any successor versions
thereof.
“Map Data” means any content, data or information provided through the Apple Maps Service
including, but not limited to, imagery, terrain data, latitude and longitude coordinates, transit data,
points of interest and traffic data.
“MapKit API” means the Documented API that enables You to add mapping features or
functionality to Applications.
“MapKit JS” means the JavaScript library that enables You to add mapping features or
functionality to Your Applications, websites, or web applications.
“Merchant” means a party who processes Apple Pay payment transactions under their own
name, trademark, or brand (e.g., their name shows up on the end-user’s credit card statement).
“Motion & Fitness APIs” means the Documented APIs that are controlled by the Motion &
Fitness privacy setting in an iOS Product and that enable access to motion and fitness sensor
data (e.g., body motion, step count, stairs climbed), unless the end-user has disabled access to
such data.
“Multitasking” means the ability of Applications to run in the background while other Applications
are also running.
“MusicKit APIs” means the set of APIs that enable Apple Music users to access their
subscription through Your Application or as otherwise permitted by Apple in the Documentation.
“MusicKit Content” means music, video, and/or graphical content rendered through the MusicKit
APIs.
“MusicKit JS” means the JavaScript library that enables Apple Music users to access their
subscription through Your Applications, websites, or web applications.
“Network Extension Framework” means the Documented APIs that provide Applications with
the ability to customize certain networking features of iOS and macOS (e.g., customizing the
authentication process for WiFi Hotspots, VPN features, and content filtering mechanisms).
“Pass(es)” means one or more digital passes (e.g., movie tickets, coupons, loyalty reward
vouchers, boarding passes, membership cards, etc.) developed by You under this Agreement,
under Your own trademark or brand, and which are signed with Your Pass Type ID.
“Pass Information” means the text, descriptions, representations or information relating to a
Pass that You provide to or receive from Your end-users on or in connection with a Pass.
“Pass Type ID” means the combination of an Apple Certificate and Push Application ID that is
used by You to sign Your Passes and/or communicate with the APN.
“Program” means the overall Apple development, testing, digital signing, and distribution
program contemplated in this Agreement.
Program Agreement
“Program Requirements” mean the technical, human interface, design, product category,
security, performance, and other criteria and requirements specified by Apple, including but not
limited to the current set of requirements set forth in Section 3.3, as they may be modified from
time to time by Apple in accordance with this Agreement.
“Provisioning Profiles” means the files (including applicable entitlements or other identifiers)
that are provided by Apple for use by You in connection with Your Application development and
testing, and limited distribution of Your Applications for use on Registered Devices and/or on
Authorized Test Units.
“Push Application ID” means the unique identification number or other identifier that Apple
assigns to an Application, Pass or Site in order to permit it to access and use the APN.
“Push Notification” or “Safari Push Notification” means a notification, including any content or
data therein, that You transmit to end-users for delivery in Your Application, Your Pass, and/or in
the case of macOS, to the macOS desktop of users of Your Site who have opted in to receive
such messages through Safari on macOS.
“Registered Devices” means Apple-branded hardware units owned or controlled by You, or
owned by individuals who are affiliated with You, where such Products have been specifically
registered with Apple under this Program.
“Safari Extensions” means one or more software extensions developed by You under this
Agreement only for use with Safari on macOS in compliance with this Agreement.
“Safari Extensions Gallery” means the Apple-curated collection of Safari Extensions that are
hosted by Apple for end-users to download for use with Safari on macOS.
“Security Solution” means the proprietary Apple content protection system marketed as
Fairplay, to be applied to Licensed Applications distributed on the App Store to administer Apple's
standard usage rules for Licensed Applications, as such system and rules may be modified by
Apple from time to time.
“SiriKit” means the set of APIs that allow Your Application to access or provide SiriKit domains,
intents, shortcuts, donations, and other related functionality, as set forth in the Documentation.
“Site” means a website provided by You under Your own name, trademark or brand.
“Single Sign-on Specification” means the Documentation provided by Apple hereunder for the
Single Sign-On API, as updated from time to time.
“Term” means the period described in Section 11.
“TestFlight” means Apple’s beta testing service for pre-release Applications made available
through Apple’s TestFlight Application.
“TestFlight Application” means Apple’s application that enables the distribution of pre-release
versions of Your Applications to a limited number of Your Authorized Developers and to a limited
number of Beta Testers (as specified in App Store Connect) through TestFlight.
“TV App API” means the API documented in the TV App Specification that enables You to
provide Apple with TV App Data.
“TV App Data” means the data described in the TV App Specification to be provided to Apple
through the TV App API.
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“TV App Features” means functionality accessible via the TV App and/or tvOS, iOS and/or
macOS devices, which functionality provides the user the ability to view customized information
and recommendations regarding content and to access such content through the user’s apps,
and/or provides the user the ability to continue play of previously viewed content.
“TV App Specification” means the Documentation provided by Apple hereunder for the TV App
API, as updated from time to time.
“tvOS” means the tvOS operating system software, including any successor versions thereof.
“Updates” means bug fixes, updates, upgrades, modifications, enhancements, supplements, and
new releases or versions of the Apple Software or Services, or to any part of the Apple Software
or Services.
“Wallet” means Apple’s application that has the ability to store and display Passes for use on iOS
Products or Apple Watch.
“WatchKit Extension” means an extension bundled as part of Your Application that accesses the
WatchKit framework on iOS to run and display a WatchKit app on the watchOS.
“watchOS” means the watchOS operating system software, including any successor versions
thereof.
“Web Software” means web-based versions of Your software applications that have the same
title and substantially equivalent features and functionality as Your Licensed Application (e.g.,
feature parity).
“Website Push ID” means the combination of an Apple Certificate and Push Application ID that is
used by You to sign Your Site’s registration bundle and/or communicate with the APN.
“You” and “Your” means and refers to the person(s) or legal entity (whether the company,
organization, educational institution, or governmental agency, instrumentality, or department) that
has accepted this Agreement under its own developer account and that is using the Apple
Software or otherwise exercising rights under this Agreement.
Note: For the sake of clarity, You may authorize contractors to develop Applications on Your
behalf, but any such Applications must be owned by You, submitted under Your own developer
account, and distributed as Applications only as expressly permitted herein. You are responsible
to Apple for Your contractors’ activities under Your account (e.g., adding them to Your team to
perform development work for You) and their compliance with this Agreement. Any actions
undertaken by Your contractors arising out of this Agreement shall be deemed to have been
taken by You, and You (in addition to Your contractors) shall be responsible to Apple for all such
actions.
2.
Internal Use License and Restrictions
2.1
Permitted Uses and Restrictions; Program services
Subject to the terms and conditions of this Agreement, Apple hereby grants You during the Term,
a limited, non-exclusive, personal, revocable, non-sublicensable and non-transferable license to:
(a) Install a reasonable number of copies of the Apple Software provided to You under the
Program on Apple-branded products owned or controlled by You, to be used internally by You or
Your Authorized Developers for the sole purpose of developing or testing Covered Products
designed to operate on the applicable Apple-branded products, except as otherwise expressly
permitted in this Agreement;
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(b) Make and distribute a reasonable number of copies of the Documentation to Authorized
Developers for their internal use only and for the sole purpose of developing or testing Covered
Products, except as otherwise expressly permitted in this Agreement;
(c) Install a Provisioning Profile on each of Your Authorized Test Units, up to the number of
Authorized Test Units that You have registered and acquired licenses for, to be used internally by
You or Your Authorized Developers for the sole purpose of developing and testing Your
Applications, except as otherwise expressly permitted in this Agreement;
(d) Install a Provisioning Profile on each of Your Registered Devices, up to the limited number of
Registered Devices that You have registered and acquired licenses for, for the sole purpose of
enabling the distribution and use of Your Applications on such Registered Devices; and
(e) Incorporate the Apple Certificates issued to You pursuant to this Agreement for purposes of
digitally signing Your Applications, Passes, Safari Extensions, Safari Push Notifications, and as
otherwise expressly permitted by this Agreement.
Apple reserves the right to set the limited number of Apple-branded products that each Licensee
may register with Apple and obtain licenses for under this Program (a “Block of Registered
Device Licenses”). For the purposes of limited distribution on Registered Devices under
Section 7.3 (Ad Hoc distribution), each company, organization, educational institution or
affiliated group may only acquire one (1) Block of Registered Device Licenses per company,
organization, educational institution or group, unless otherwise agreed in writing by Apple. You
agree not to knowingly acquire, or to cause others to acquire, more than one Block of Registered
Device Licenses for the same company, organization, educational institution or group.
Apple may provide access to services by or through the Program for You to use with Your
developer account (e.g., device or app provisioning, managing teams or other account
resources). You agree to access such services only through the Program web portal (which is
accessed through Apple’s developer website) or through Apple-branded products that are
designed to work in conjunction with the Program (e.g., Xcode, App Store Connect) and only as
authorized by Apple. If You (or Your Authorized Developers) access Your developer account
through these other Apple-branded products, You acknowledge and agree that this Agreement
shall continue to apply to any use of Your developer account and to any features or functionality
of the Program that are made available to You (or Your Authorized Developers) in this manner
(e.g., Apple Certificates and Provisioning Profiles can be used only in the limited manner
permitted herein, etc.). You agree not to create or attempt to create a substitute or similar service
through use of or access to the services provided by or through the Program. Further, You may
only access such services using the Apple ID associated with Your developer account or
authentication credentials (e.g., keys, tokens, password) associated with Your developer account,
and You are fully responsible for safeguarding Your Apple ID and authentication credentials from
compromise and for using them only as authorized by Apple and in accordance with the terms of
this Agreement, including but not limited to Section 2.8 and 5. Except as otherwise expressly
permitted herein, You agree not to share, sell, resell, rent, lease, lend, or otherwise provide
access to Your developer account or any services provided therewith, in whole or in part, to
anyone who is not an Authorized Developer on Your team, and You agree not to solicit or request
Apple Developer Program members to provide You with their Apple IDs, authentication
credentials, and/or related account information and materials (e.g., Apple Certificates used for
distribution or submission to the App Store or TestFlight). You understand that each team
member must have their own Apple ID or authentication credentials to access Your account, and
You shall be fully responsible for all activity performed through or in connection with Your
account. To the extent that You own or control an Apple-branded computer running Apple’s
macOS Server or Xcode Server (“Server”) and would like to use it for Your own development
purposes in connection with the Program, You agree to use Your own Apple ID or other
authentication credentials for such Server, and You shall be responsible for all actions performed
by such Server.
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2.2
Authorized Test Units and Pre-Release Apple Software
As long as an Authorized Test Unit contains any pre-release versions of the Apple Software or
uses pre-release versions of Services, You agree to restrict access to such Authorized Test Unit
to Your Authorized Developers and to not disclose, show, rent, lease, lend, sell or otherwise
transfer such Authorized Test Unit to any third party. You further agree to take reasonable
precautions to safeguard, and to instruct Your Authorized Developers to safeguard, all Authorized
Test Units from loss or theft. Further, subject to the terms of this Agreement, You may deploy
Your Applications to Your Authorized Developers for use on a limited number of Authorized Test
Units for Your own internal testing and development purposes.
You acknowledge that by installing any pre-release Apple Software or using any pre-
release Services on Your Authorized Test Units, these Units may be “locked” into testing
mode and may not be capable of being restored to their original condition. Any use of any
pre-release Apple Software or pre-release Services are for evaluation and development purposes
only, and You should not use any pre-release Apple Software or pre-release Services in a
commercial operating environment or with important data. You should back up any data prior to
using the pre-release Apple Software or pre-release Services. Apple shall not be responsible for
any costs, expenses or other liabilities You may incur as a result of provisioning Your Authorized
Test Units and Registered Devices, Your Covered Product development or the installation or use
of this Apple Software or any pre-release Apple Services, including but not limited to any damage
to any equipment, or any damage, loss, or corruption of any software, information or data.
2.3
Confidential Nature of Pre-Release Apple Software and Services
From time to time during the Term, Apple may provide You with pre-release versions of the Apple
Software or Services that constitute Apple Confidential Information and are subject to the
confidentiality obligations of this Agreement, except as otherwise set forth herein. Such pre-
release Apple Software and Services should not be relied upon to perform in the same manner as
a final-release, commercial-grade product, nor used with data that is not sufficiently and regularly
backed up, and may include features, functionality or APIs for software or services that are not
yet available. You acknowledge that Apple may not have publicly announced the availability of
such pre-release Apple Software or Services, that Apple has not promised or guaranteed to You
that such pre-release software or services will be announced or made available to anyone in the
future, and that Apple has no express or implied obligation to You to announce or commercially
introduce such software or services or any similar or compatible technology. You expressly
acknowledge and agree that any research or development that You perform with respect to pre-
release versions of the Apple Software or Services is done entirely at Your own risk.
2.4
Copies
You agree to retain and reproduce in full the Apple copyright, disclaimers and other proprietary
notices (as they appear in the Apple Software and Documentation provided) in all copies of the
Apple Software and Documentation that You are permitted to make under this Agreement.
2.5
Ownership
Apple retains all rights, title, and interest in and to the Apple Software, Services, and any Updates
it may make available to You under this Agreement. You agree to cooperate with Apple to
maintain Apple's ownership of the Apple Software and Services, and, to the extent that You
become aware of any claims relating to the Apple Software or Services, You agree to use
reasonable efforts to promptly provide notice of any such claims to Apple. The parties
acknowledge that this Agreement does not give Apple any ownership interest in Your Covered
Products.
2.6
No Other Permitted Uses
Except as otherwise set forth in this Agreement, You agree not to rent, lease, lend, upload to or
host on any website or server, sell, redistribute, or sublicense the Apple Software, Apple
Certificates, or any Services, in whole or in part, or to enable others to do so. You may not use
the Apple Software, Apple Certificates, or any Services provided hereunder for any purpose not
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expressly permitted by this Agreement, including any applicable Attachments and Schedules.
You agree not to install, use or run the Apple SDKs on any non-Apple-branded computer, and not
to install, use or run iOS, watchOS, tvOS, macOS and Provisioning Profiles on or in connection
with devices other than Apple-branded products, or to enable others to do so. You may not and
You agree not to, or to enable others to, copy (except as expressly permitted under this
Agreement), decompile, reverse engineer, disassemble, attempt to derive the source code of,
modify, decrypt, or create derivative works of the Apple Software, Apple Certificates or any
Services provided by the Apple Software or otherwise provided hereunder, or any part thereof
(except as and only to the extent any foregoing restriction is prohibited by applicable law or to the
extent as may be permitted by licensing terms governing use of open-sourced components or
sample code included with the Apple Software). You agree not to exploit any Apple Software,
Apple Certificates, or Services provided hereunder in any unauthorized way whatsoever,
including but not limited to, by trespass or burdening network capacity, or by harvesting or
misusing data provided by such Apple Software, Apple Certificates, or Services. Any attempt to
do so is a violation of the rights of Apple and its licensors of the Apple Software or Services. If
You breach any of the foregoing restrictions, You may be subject to prosecution and damages.
All licenses not expressly granted in this Agreement are reserved and no other licenses, immunity
or rights, express or implied are granted by Apple, by implication, estoppel, or otherwise. This
Agreement does not grant You any rights to use any trademarks, logos or service marks
belonging to Apple, including but not limited to the iPhone or iPod word marks. If You make
reference to any Apple products or technology or use Apple’s trademarks, You agree to comply
with the published guidelines at
http://www.apple.com/legal/trademark/guidelinesfor3rdparties.html, as they may be modified by
Apple from time to time.
2.7
FPS SDK and FPS Deployment Package
You may use the FPS SDK to develop and test a server-side implementation of FPS, solely for
use with video streamed by You (or on Your behalf) through Your Applications, or video
downloaded for viewing through Your Applications, on iOS Products and/or Apple TV, through
Safari on macOS, or as otherwise approved by Apple in writing (collectively, “Authorized FPS
Applications”). You understand that You will need to request the FPS Deployment Package on
the Program web portal prior to any production or commercial use of FPS. As part of such
request, You will need to submit information about Your requested use of FPS. Apple will review
Your request and reserves the right to not provide You with the FPS Deployment Package at its
sole discretion, in which case You will not be able to deploy FPS. Any development and testing
You perform with the FPS SDK is at Your own risk and expense, and Apple will not be liable to
You for such use or for declining Your request to use FPS in a production or commercial
environment.
If Apple provides You with the FPS Deployment Package, You agree to use it solely as approved
by Apple and only in connection with video content streamed by You (or on Your behalf) to
Authorized FPS Applications or downloaded for viewing through Your Authorized FPS
Applications. Except as permitted in Section 2.9 (Third-Party Service Providers), You will not
provide the FPS Deployment Package to any third party or sublicense, sell, resell, lease,
disclose, or re-distribute the FPS Deployment Package or FPS SDK to any third party (or any
implementation thereof) without Apple’s prior written consent.
You acknowledge and agree that the FPS Deployment Package (including the set of FPS
production keys) is Apple Confidential Information as set forth in Section 9 (Confidentiality).
Further, such FPS keys are unique to Your company or organization, and You are solely
responsible for storing and protecting them. You may use such FPS keys solely for the purpose
of delivering and protecting Your content key that is used to decrypt video content streamed by
You to Authorized FPS Applications or downloaded for viewing through Your Authorized FPS
Applications. Apple will have no liability or responsibility for unauthorized access to or use of any
FPS key or any content streamed or otherwise delivered under this Agreement in connection with
FPS. In the event that Your FPS key is disclosed, discovered, misappropriated or lost, You may
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request that Apple revoke it by emailing [email protected], and You understand that
Apple will have no obligation to provide a replacement key. Apple reserves the right to revoke
Your FPS key at any time if requested by You, in the event of a breach of this Agreement by You,
if otherwise deemed prudent or reasonable by Apple, or upon expiration or termination of this
Agreement for any reason.
You acknowledge and agree that Apple reserves the right to revoke or otherwise remove Your
access to and use of FPS (or any part thereof) at any time in its sole discretion. Further, Apple
will have no obligation to provide any modified, updated or successor version of the FPS
Deployment Package or the FPS SDK to You and will have no obligation to maintain compatibility
with any prior version. If Apple makes new versions of the FPS Deployment Package or FPS
SDK available to You, then You agree to update to them within a reasonable time period if
requested to do so by Apple.
2.8
Use of Apple Services
Apple may provide access to Apple Services that Your Covered Products may call through APIs
in the Apple Software and/or that Apple makes available to You through other mechanisms, e.g.,
through the use of keys that Apple may make accessible to You under the Program. You agree
to access such Apple Services only through the mechanisms provided by Apple for such access
and only for use on Apple-branded products. Except as permitted in Section 2.9 (Third-Party
Service Providers) or as otherwise set forth herein, You agree not to share access to
mechanisms provided to You by Apple for the use of the Services with any third party. Further,
You agree not to create or attempt to create a substitute or similar service through use of or
access to the Apple Services.
You agree to access and use such Services only as necessary for providing services and
functionality for Your Covered Products that are eligible to use such Services and only as
permitted by Apple in writing, including in the Documentation. You may not use the Apple
Services in any manner that is inconsistent with the terms of this Agreement or that infringes any
intellectual property rights of a third party or Apple, or that violates any applicable laws or
regulations. You agree that the Apple Services contain proprietary content, information and
material owned by Apple and its licensors, and protected by applicable intellectual property and
other laws. You may not use such proprietary content, information or materials in any way
whatsoever, except for the permitted uses of the Apple Services under this Agreement, or as
otherwise agreed by Apple in writing.
You understand there may be storage capacity, transmission, and/or transactional limits for the
Apple Services both for You as a developer and for Your end-users. If You reach or Your end-
user reaches such limits, then You or Your end-user may be unable to use the Apple Services or
may be unable to access or retrieve data from such Services through Your Covered Products or
through the applicable end-user accounts. You agree not to charge any fees to end-users solely
for access to or use of the Apple Services through Your Covered Products or for any content,
data or information provided therein, and You agree not to sell access to the Apple Services in
any way. You agree not to fraudulently create any end-user accounts or induce any end-user to
violate the terms of their applicable end-user terms or service agreement with Apple or to violate
any Apple usage policies for such end-user services. Except as expressly set forth herein, You
agree not to interfere with an end-user’s ability to access or use any such services.
Apple reserves the right to change, suspend, deprecate, deny, limit, or disable access to the
Apple Services, or any part thereof, at any time without notice (including but not limited to
revoking entitlements or changing any APIs in the Apple Software that enable access to the
Services or not providing You with an entitlement). In no event will Apple be liable for the
removal of or disabling of access to any of the foregoing. Apple may also impose limits and
restrictions on the use of or access to the Apple Services, may remove the Apple Services for
indefinite time periods, may revoke Your access to the Apple Services, or may cancel the Apple
Services (or any part thereof) at any time without notice or liability to You and in its sole
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discretion.
Apple does not guarantee the availability, accuracy, completeness, reliability, or timeliness of any
data or information displayed by any Apple Services. To the extent You choose to use the Apple
Services with Your Covered Products, You are responsible for Your reliance on any such data or
information. You are responsible for Your use of the Apple Software and Apple Services, and if
You use such Services, then it is Your responsibility to maintain appropriate alternate backup of
all Your content, information and data, including but not limited to any content that You may
provide to Apple for hosting as part of Your use of the Services. You understand and agree that
You may not be able to access certain Apple Services upon expiration or termination of this
Agreement and that Apple reserves the right to suspend access to or delete content, data or
information that You or Your Covered Product have stored through Your use of such Services
provided hereunder. You should review the Documentation and policy notices posted by Apple
prior to using any Apple Services.
Apple Services may not be available in all languages or in all countries, and Apple makes no
representation that any such Services would be appropriate, accurate or available for use in any
particular location or product. To the extent You choose to use the Apple Services with Your
Applications, You do so at Your own initiative and are responsible for compliance with any
applicable laws. Apple reserves the right to charge fees for Your use of the Apple Services.
Apple will inform You of any Apple Service fees or fee changes by email and information about
such fees will be posted in the Program web portal, App Store Connect, or the CloudKit
dashboard. Apple Service availability and pricing are subject to change. Further, Apple Services
may not be made available for all Covered Products and may not be made available to all
developers. Apple reserves the right to not provide (or to cease providing) the Apple Services to
any or all developers at any time in its sole discretion.
2.9
Third-Party Service Providers
Unless otherwise prohibited by Apple in the Documentation or this Agreement, You are permitted
to employ or retain a third party (“Service Provider”) to assist You in using the Apple Software
and Services provided pursuant to this Agreement, including, but not limited to, engaging any
such Service Provider to maintain and administer Your Applications’ servers on Your behalf,
provided that any such Service Provider’s use of the Apple Software and Services or any
materials associated therewith is done solely on Your behalf and only in accordance with these
terms. Notwithstanding the foregoing, You may not use a Service Provider to submit an
Application to the App Store or use TestFlight on Your behalf. You agree to have a binding
written agreement with Your Service Provider with terms at least as restrictive and protective of
Apple as those set forth herein. Any actions undertaken by any such Service Provider in relation
to Your Applications or use of the Apple Software or Apple Services and/or arising out of this
Agreement shall be deemed to have been taken by You, and You (in addition to the Service
Provider) shall be responsible to Apple for all such actions (or any inactions). In the event of any
actions or inactions by the Service Provider that would constitute a violation of this Agreement or
otherwise cause any harm, Apple reserves the right to require You to cease using such Service
Provider.
2.10
Updates; No Support or Maintenance
Apple may extend, enhance, or otherwise modify the Apple Software or Services (or any part
thereof) provided hereunder at any time without notice, but Apple shall not be obligated to provide
You with any Updates to the Apple Software or Services. If Updates are made available by
Apple, the terms of this Agreement will govern such Updates, unless the Update is accompanied
by a separate license in which case the terms of that license will govern. You understand that
such modifications may require You to change or update Your Covered Products. Further, You
acknowledge and agree that such modifications may affect Your ability to use, access, or interact
with the Apple Software and Services. Apple is not obligated to provide any maintenance,
technical or other support for the Apple Software or Services. You acknowledge that Apple has
no express or implied obligation to announce or make available any Updates to the Apple
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Software or to any Services to anyone in the future. Should an Update be made available, it may
have APIs, features, services or functionality that are different from those found in the Apple
Software licensed hereunder or the Services provided hereunder.
3.
Your Obligations
3.1
General
You certify to Apple and agree that:
(a) You are of the legal age of majority in the jurisdiction in which You reside (at least 18 years of
age in many countries) and have the right and authority to enter into this Agreement on Your own
behalf, or if You are entering into this Agreement on behalf of Your company, organization,
educational institution, or agency, instrumentality, or department of the federal government, that
You have the right and authority to legally bind such entity or organization to the terms and
obligations of this Agreement;
(b) All information provided by You to Apple or Your end-users in connection with this Agreement
or Your Covered Products, including without limitation Licensed Application Information or Pass
Information, will be current, true, accurate, supportable and complete and, with regard to
information You provide to Apple, You will promptly notify Apple of any changes to such
information. Further, You agree that Apple may share such information (including email address
and mailing address) with third parties who have a need to know for purposes related thereto
(e.g., intellectual property questions, customer service inquiries, etc.);
(c) You will comply with the terms of and fulfill Your obligations under this Agreement, including
obtaining any required consents for Your Authorized Developers’ use of the Apple Software and
Services, and You agree to monitor and be fully responsible for all such use by Your Authorized
Developers and their compliance with the terms of this Agreement;
(d) You will be solely responsible for all costs, expenses, losses and liabilities incurred, and
activities undertaken by You and Your Authorized Developers in connection with the Apple
Software and Apple Services, the Authorized Test Units, Registered Devices, Your Covered
Products and Your related development and distribution efforts, including, but not limited to, any
related development efforts, network and server equipment, Internet service(s), or any other
hardware, software or services used by You in connection with Your use of any services;
(e) For the purposes of Schedule 1(if applicable), You represent and warrant that You own or
control the necessary rights in order to appoint Apple and Apple Subsidiaries as Your worldwide
agent for the delivery of Your Licensed Applications, and that the fulfillment of such appointment
by Apple and Apple Subsidiaries shall not violate or infringe the rights of any third party; and
(f) You will not act in any manner which conflicts or interferes with any existing commitment or
obligation You may have and no agreement previously entered into by You will interfere with Your
performance of Your obligations under this Agreement.
3.2
Use of the Apple Software and Apple Services
As a condition to using the Apple Software and any Apple Services, You agree that:
(a) You will use the Apple Software and any services only for the purposes and in the manner
expressly permitted by this Agreement and in accordance with all applicable laws and
regulations;
(b) You will not use the Apple Software or any Apple Services for any unlawful or illegal activity,
nor to develop any Covered Product, which would commit or facilitate the commission of a crime,
or other tortious, unlawful or illegal act;
(c) Your Application, Library and/or Pass will be developed in compliance with the Documentation
and the Program Requirements, the current set of which is set forth in Section 3.3 below;
(d) To the best of Your knowledge and belief, Your Covered Products, Licensed Application
Information, and Pass Information do not and will not violate, misappropriate, or infringe any
Apple or third party copyrights, trademarks, rights of privacy and publicity, trade secrets, patents,
or other proprietary or legal rights (e.g., musical composition or performance rights, video rights,
photography or image rights, logo rights, third party data rights, etc. for content and materials that
may be included in Your Application);
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(e) You will not, through use of the Apple Software, Apple Certificates, Apple Services or
otherwise, create any Covered Product or other code or program that would disable, hack or
otherwise interfere with the Security Solution, or any security, digital signing, digital rights
management, verification or authentication mechanisms implemented in or by iOS, watchOS,
tvOS, the Apple Software, or any Services, or other Apple software or technology, or enable
others to do so (except to the extent expressly permitted by Apple in writing);
(f) You will not, directly or indirectly, commit any act intended to interfere with the Apple Software
or Services, the intent of this Agreement, or Apple’s business practices including, but not limited
to, taking actions that may hinder the performance or intended use of the App Store, Custom App
Distribution, or the Program (e.g., submitting fraudulent reviews of Your own Application or any
third party application, choosing a name for Your Application that is substantially similar to the
name of a third party application in order to create consumer confusion, or squatting on
application names to prevent legitimate third party use). Further, You will not engage, or
encourage others to engage, in any unlawful, unfair, misleading, fraudulent, improper, or
dishonest acts or business practices relating to Your Covered Products (e.g., engaging in bait-
and-switch pricing, consumer misrepresentation, deceptive business practices, or unfair
competition against other developers); and
(g) Applications for iOS Products, Apple Watch, or Apple TV developed using the Apple Software
may be distributed only if selected by Apple (in its sole discretion) for distribution via the App
Store, Custom App Distribution, for beta distribution through TestFlight, or through Ad Hoc
distribution as contemplated in this Agreement. Passes developed using the Apple Software may
be distributed to Your end-users via email, a website or an Application in accordance with the
terms of this Agreement, including Attachment 5. Safari Extensions signed with an Apple
Certificate may be distributed to Your end-users in accordance with the terms of this Agreement,
including Attachment 7. Applications for macOS may be distributed outside of the App Store
using Apple Certificates and/or tickets as set forth in Section 5.3 and 5.4.
3.3
Program Requirements
Any Application that will be submitted to the App Store, Custom App Distribution or TestFlight, or
that will be distributed through Ad Hoc distribution, must be developed in compliance with the
Documentation and the Program Requirements, the current set of which is set forth below in this
Section 3.3. Libraries and Passes are subject to the same criteria:
APIs and Functionality:
3.3.1
Applications may only use Documented APIs in the manner prescribed by Apple and
must not use or call any private APIs. Further, macOS Applications submitted to Apple for
distribution on the App Store may use only Documented APIs included in the default installation
of macOS or as bundled with Xcode and the Mac SDK; deprecated technologies (such as Java)
may not be used.
3.3.2
Except as set forth in the next paragraph, an Application may not download or install
executable code. Interpreted code may be downloaded to an Application but only so long as
such code: (a) does not change the primary purpose of the Application by providing features or
functionality that are inconsistent with the intended and advertised purpose of the Application as
submitted to the App Store, (b) does not create a store or storefront for other code or
applications, and (c) does not bypass signing, sandbox, or other security features of the OS.
An Application that is a programming environment intended for use in learning how to program
may download and run executable code so long as the following requirements are met: (i) no
more than 80 percent of the Application’s viewing area or screen may be taken over with
executable code, except as otherwise permitted in the Documentation, (ii) the Application must
present a reasonably conspicuous indicator to the user within the Application to indicate that the
user is in a programming environment, (iii) the Application must not create a store or storefront for
other code or applications, and (iv) the source code provided by the Application must be
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completely viewable and editable by the user (e.g., no pre-compiled libraries or frameworks may
be included with the code downloaded).
3.3.3
Without Apple’s prior written approval or as permitted under Section 3.3.25 (In-App
Purchase API), an Application may not provide, unlock or enable additional features or
functionality through distribution mechanisms other than the App Store, Custom App Distribution
or TestFlight.
3.3.4
An Application for iOS, watchOS, or tvOS may only read data from or write data to an
Application's designated container area on the device, except as otherwise specified by Apple.
For macOS Applications submitted to Apple for distribution on the App Store: (a) all files
necessary for the Application to execute on macOS must be in the Application bundle submitted
to Apple and must be installed by the App Store; (b) all localizations must be in the same
Application bundle and may not include a suite or collection of independent applications within a
single Application bundle; (c) native user interface elements or behaviors of macOS (e.g., the
system menu, window sizes, colors, etc.) may not be altered, modified or otherwise changed; (d)
You may not use any digital rights management or other copy or access control mechanisms in
such Applications without Apple’s written permission or as specified in the Documentation; and
(e) except as otherwise permitted by Section 3.3.25 (In-App Purchase API), such Applications
may not function as a distribution mechanism for software and may not include features or
functionality that create or enable a software store, distribution channel or other mechanism for
software delivery within such Applications (e.g., an audio application may not include an audio
filter plug-in store within the Application).
3.3.5
An Application for an iOS Product must have at least the same features and functionality
when run by a user in compatibility mode on an iPad (e.g., an iPhone app running in an
equivalent iPhone-size window on an iPad must perform in substantially the same manner as
when run on the iPhone; provided that this obligation will not apply to any feature or functionality
that is not supported by a particular hardware device, such as a video recording feature on a
device that does not have a camera). Further, You agree not to interfere or attempt to interfere
with the operation of Your Application in compatibility mode.
3.3.6
You may use the Multitasking services only for their intended purposes as described in
the Documentation.
User Interface, Data Collection, Local Laws and Privacy:
3.3.7
Applications must comply with the Human Interface Guidelines (HIG) and other
Documentation provided by Apple. You agree to follow the HIG to develop an appropriate user
interface and functionality for Your Application that is compatible with the design of Apple-
branded products (e.g., a watch App should have a user interface designed for quick interactions
in accordance with the HIG’s watchOS design themes).
3.3.8
If Your Application captures or makes any video, microphone, or camera recordings,
whether saved on the device or sent to a server (e.g., an image, photo, voice or speech capture,
or other recording) (collectively “Recordings”), a reasonably conspicuous audio, visual or other
indicator must be displayed to the user as part of the Application to indicate that a Recording is
taking place.
- In addition, any form of data, content or information collection, processing, maintenance,
uploading, syncing, storage, transmission, sharing, disclosure or use performed by, through or in
connection with Your Application must comply with all applicable privacy laws and regulations as
well as any related Program Requirements, including but not limited to any notice or consent
requirements.
Program Agreement
3.3.9
You and Your Applications (and any third party with whom You have contracted to serve
advertising) may not collect user or device data without prior user consent, whether such data is
obtained directly from the user or through the use of the Apple Software, Apple Services, or Apple
SDKs, and then only to provide a service or function that is directly relevant to the use of the
Application, or to serve advertising in accordance with Sections 3.3.12. You may not broaden or
otherwise change the scope of usage for previously collected user or device data without
obtaining prior user consent for such expanded or otherwise changed data collection. You may
not use analytics software in Your Application to collect and send device data to a third party.
Further, neither You nor Your Application will use any permanent, device-based identifier, or any
data derived therefrom, for purposes of uniquely identifying a device.
3.3.10 You must provide clear and complete information to users regarding Your collection, use
and disclosure of user or device data, e.g., a description of Your use of user and device data in
the App Description on the App Store. Furthermore, You must take appropriate steps to protect
such data from unauthorized use, disclosure or access by third parties. If a user ceases to
consent or affirmatively revokes consent for Your collection, use or disclosure of his or her user or
device data, You (and any third party with whom You have contracted to serve advertising) must
promptly cease all such use. You must provide a privacy policy in Your Application, on the App
Store, and/or on Your website explaining Your collection, use, disclosure, sharing, retention, and
deletion of user or device data. You agree to notify Your users, in accordance with applicable
law, in the event of a data breach in which user data collected from Your Application is
compromised (e.g., You will send an email notifying Your users if there has been an unintentional
disclosure or misuse of their user data).
3.3.11 Applications must comply with all applicable criminal, civil and statutory laws and
regulations, including those in any jurisdictions in which Your Applications may be offered or
made available. In addition:
- You and the Application must comply with all applicable privacy and data collection laws and
regulations with respect to any collection, use or disclosure of user or device data (e.g., a user’s
IP address, the name of the user’s device, and any installed apps associated with a user);
- Applications may not be designed or marketed for the purpose of harassing, abusing,
spamming, stalking, threatening or otherwise violating the legal rights (such as the rights of
privacy and publicity) of others;
- Neither You nor Your Application may perform any functions or link to any content, services,
information or data or use any robot, spider, site search or other retrieval application or device to
scrape, mine, retrieve, cache, analyze or index software, data or services provided by Apple or its
licensors, or obtain (or try to obtain) any such data, except the data that Apple expressly provides
or makes available to You in connection with such services. You agree that You will not collect,
disseminate or use any such data for any unauthorized purpose; and
- If Your Application is intended for human subject research or uses the HealthKit APIs for clinical
health-related uses which may involve personal data (e.g., storage of health records), then You
agree to inform participants of the intended uses and disclosures of their personally identifiable
data as part of such research or clinical health uses and to obtain consent from such participants
(or their guardians) who will be using Your Application for such research or clinical health
purposes. Further, You shall prohibit third parties to whom You provide any de-identified or
coded data from re-identifying (or attempting to re-identify) any participants using such data
without participant consent, and You agree to require that such third parties pass the foregoing
restriction on to any other parties who receive such de-identified or coded data.
Program Agreement
Advertising Identifier and Preference; Ad Network APIs:
3.3.12 You and Your Applications (and any third party with whom You have contracted to serve
advertising) may use the Advertising Identifier, and any information obtained through the use of
the Advertising Identifier, only for the purpose of serving advertising. If a user resets the
Advertising Identifier, then You agree not to combine, correlate, link or otherwise associate, either
directly or indirectly, the prior Advertising Identifier and any derived information with the reset
Advertising Identifier. For Applications compiled for any iOS version or tvOS version providing
access to the Ad Support APIs, You agree to check a user’s Advertising Preference prior to
serving any advertising using the Advertising Identifier, and You agree to abide by a user’s setting
in the Advertising Preference in Your use of the Advertising Identifier. In addition, You may
request to use the Ad Network APIs to track application advertising conversion events. If You are
granted permission to use the Ad Network APIs, You agree not to use such APIs, or any
information obtained through the use of the Ad Network APIs, for any purpose other than verifying
ad validation information as part of an advertising conversion event. You agree not to combine,
correlate, link, or otherwise associate, either directly or indirectly, information that is provided as
part of the ad validation through the use of the Ad Network APIs with other information You may
have about a user. Apple reserves the right to reject any requests to use the Ad Network APIs, in
its sole discretion.
Location and Maps; User Consents:
3.3.13 Applications that use location-based APIs (e.g., Core Location, MapKit API) or otherwise
provide location-based services may not be designed or marketed for automatic or autonomous
control of vehicle behavior, or for emergency or life-saving purposes.
3.3.14 Applications that offer location-based services or functionality, or that otherwise obtain a
user’s location through the use of the Apple Software or Apple Services, must notify and obtain
consent from an individual before his or her location data is collected, transmitted or otherwise
used by the Application and then such data must be used only as consented to by the user and
as permitted herein. For example, if You use the “Always On” location option in Your Application
for the purpose of continuous collection and use of a user’s location data, You should provide a
clearly defined justification and user benefit that is presented to the user at the time the
permission.
3.3.15 If You choose to provide Your own location-based service, data and/or information in
conjunction with the Apple maps provided through the Apple Maps Service (e.g., overlaying a
map or route You have created on top of an Apple map), You are solely responsible for ensuring
that Your service, data and/or information correctly aligns with any Apple maps used. For
Applications that use location-based APIs for real-time navigation (including, but not limited to,
turn-by-turn route guidance and other routing that is enabled through the use of a sensor), You
must have an end-user license agreement that includes the following notice: YOUR USE OF
THIS REAL TIME ROUTE GUIDANCE APPLICATION IS AT YOUR SOLE RISK. LOCATION
DATA MAY NOT BE ACCURATE.
3.3.16 Applications must not disable, override or otherwise interfere with any Apple-
implemented system alerts, warnings, display panels, consent panels and the like, including, but
not limited to, those that are intended to notify the user that the user's location data, address book
data, calendar, photos, audio data, and/or reminders are being collected, transmitted, maintained,
processed or used, or intended to obtain consent for such use. Further, if You have the ability to
add a description in such alerts, warnings, and display panels (e.g., information in the purpose
strings for the Camera APIs), any such description must be accurate and not misrepresent the
scope of use. If consent is denied or withdrawn, Applications may not collect, transmit, maintain,
process or utilize such data or perform any other actions for which the user’s consent has been
denied or withdrawn.
Program Agreement
3.3.17 If Your Application (or Your website or web application, as applicable) uses or accesses
the MapKit API or MapKit JS from a device running iOS version 6 or later, Your Application (or
Your website or web application, as applicable) will access and use the Apple Maps Service. All
use of the MapKit API, MapKit JS, and Apple Maps Service must be in accordance with the terms
of this Agreement (including the Program Requirements) and Attachment 6 (Additional Terms for
the use of the Apple Maps Service). If Your Application uses or accesses the MapKit API from a
device running iOS version 5 or earlier, Your Application will access and use the Google Mobile
Maps (GMM) service. Such use of the GMM Service is subject to Google’s Terms of Service
which are set forth at: http://code.google.com/apis/maps/terms/iPhone.html. If You do not accept
such Google Terms of Service, including, but not limited to all limitations and restrictions therein,
You may not use the GMM service in Your Application, and You acknowledge and agree that
such use will constitute Your acceptance of such Terms of Service.
Content and Materials:
3.3.18 Any master recordings and musical compositions embodied in Your Application must be
wholly-owned by You or licensed to You on a fully paid-up basis and in a manner that will not
require the payment of any fees, royalties and/or sums by Apple to You or any third party. In
addition, if Your Application will be distributed outside of the United States, any master recordings
and musical compositions embodied in Your Application (a) must not fall within the repertoire of
any mechanical or performing/communication rights collecting or licensing organization now or in
the future and (b) if licensed, must be exclusively licensed to You for Your Application by each
applicable copyright owner.
3.3.19 If Your Application includes or will include any other content, You must either own all
such content or have permission from the content owner to use it in Your Application.
3.3.20 Applications may be rejected if they contain content or materials of any kind (text,
graphics, images, photographs, sounds, etc.) that in Apple’s reasonable judgment may be found
objectionable or inappropriate, for example, materials that may be considered obscene,
pornographic, or defamatory.
3.3.21 Applications must not contain any malware, malicious or harmful code, program, or other
internal component (e.g., computer viruses, trojan horses, “backdoors”) which could damage,
destroy, or adversely affect the Apple Software, services, Apple-branded products, or other
software, firmware, hardware, data, systems, services, or networks.
3.3.22 If Your Application includes any FOSS, You agree to comply with all applicable FOSS
licensing terms. You also agree not to use any FOSS in the development of Your Application in
such a way that would cause the non-FOSS portions of the Apple Software to be subject to any
FOSS licensing terms or obligations.
3.3.23 Your Application may include promotional sweepstake or contest functionality provided
that You are the sole sponsor of the promotion and that You and Your Application comply with
any applicable laws and fulfill any applicable registration requirements in the country or territory
where You make Your Application available and the promotion is open. You agree that You are
solely responsible for any promotion and any prize, and also agree to clearly state in binding
official rules for each promotion that Apple is not a sponsor of, or responsible for conducting, the
promotion.
3.3.24 Your Application may include a direct link to a page on Your web site where You include
the ability for an end-user to make a charitable contribution, provided that You comply with any
applicable laws (which may include providing a receipt), and fulfill any applicable regulation or
registration requirements, in the country or territory where You enable the charitable contribution
to be made. You also agree to clearly state that Apple is not the fundraiser.
Program Agreement
In-App Purchase API:
3.3.25 All use of the In-App Purchase API and related services must be in accordance with the
terms of this Agreement (including the Program Requirements) and Attachment 2 (Additional
Terms for Use of the In-App Purchase API).
Network Extension Framework:
3.3.26 Your Application must not access the Network Extension Framework unless Your
Application is primarily designed for providing networking capabilities, and You have received an
entitlement from Apple for such access. You agree to the following if You receive such
entitlement:
- You agree to clearly disclose to end-users how You and Your Application will be using their
network information and, if applicable, filtering their network data, and You agree to use such
data and information only as expressly consented to by the end-user and as expressly permitted
herein;
- You agree to store and transmit network information or data from an end-user in a secure and
appropriate manner;
- You agree not to divert an end-user’s network data or information through any undisclosed,
improper, or misleading processes, e.g., to filter it through a website to obtain advertising revenue
or spoof a website;
- You agree not to use any network data or information from end-users to bypass or override any
end-user settings, e.g., You may not track an end-user’s WiFi network usage to determine their
location if they have disabled location services for Your Application; and
- Notwithstanding anything to the contrary in Section 3.3.9, You and Your Application may not
use the Network Extension Framework, or any data or information obtained through the Network
Extension Framework, for any purpose other than providing networking capabilities in connection
with Your Application (e.g., not for using an end-user’s Internet traffic to serve advertising or to
otherwise build user profiles for advertising).
Apple reserves the right to not provide You with an entitlement to use the Network Extension
Framework in its sole discretion and to revoke such entitlement at any time. In addition, if You
would like to use the Access WiFi Information APIs (which provide the WiFi network to which a
device is connected), then You must request an entitlement from Apple for such use,
and, notwithstanding anything to the contrary in Section 3.3.9, You may use such APIs only for
providing a service or function that is directly relevant to the Application (e.g., not for serving
advertising).
MFi Accessories:
3.3.27 Your Application may interface, communicate, or otherwise interoperate with or control an
MFi Accessory (as defined above) through wireless transports or through Apple's lightning or 30-
pin connectors only if (i) such MFi Accessory is licensed under Apple's MFi/Works with Apple
Program at the time that You initially submit Your Application, (ii) the MFi Licensee has added
Your Application to a list of those approved for interoperability with their MFi Accessory, and (iii)
the MFi Licensee has received approval from the Apple MFi/Works with Apple Program for such
addition.
Program Agreement
Regulatory Compliance:
3.3.28 You will fulfill any applicable regulatory requirements, including full compliance with all
applicable laws, regulations, and policies related to the manufacturing, marketing, sale and
distribution of Your Application in the United States, and in particular the requirements of the U.S.
Food and Drug Administration (FDA) as well as other U.S. regulatory bodies such as the FAA,
HHS, FTC, and FCC, and the laws, regulations and policies of any other applicable regulatory
bodies in any countries or territories where You use or make Your Application available, e.g.,
MHRA, CFDA. However, You agree that You will not seek any regulatory marketing permissions
or make any determinations that may result in any Apple products being deemed regulated or
that may impose any obligations or limitations on Apple. By submitting Your Application to Apple
for selection for distribution, You represent and warrant that You are in full compliance with any
applicable laws, regulations, and policies, including but not limited to all FDA laws, regulations
and policies, related to the manufacturing, marketing, sale and distribution of Your Application in
the United States, as well as in other countries or territories where You plan to make Your
Application available. You also represent and warrant that You will market Your Application only
for its cleared or approved intended use/indication for use, and only in strict compliance with
applicable regulatory requirements. Upon Apple’s request, You agree to promptly provide any
such clearance documentation to support the marketing of Your Application. If requested by the
FDA or by another government body that has a need to review or test Your Application as part of
its regulatory review process, You may provide Your Application to such entity for review
purposes. You agree to promptly notify Apple in accordance with the procedures set forth in
Section 14.5 of any complaints or threats of complaints regarding Your Application in relation to
any such regulatory requirements, in which case Apple may remove Your Application from
distribution.
Cellular Network:
3.3.29 If an Application requires or will have access to the cellular network, then additionally
such Application:
- Must comply with Apple's best practices and other guidelines on how Applications should
access and use the cellular network; and
- Must not in Apple's reasonable judgment excessively use or unduly burden network capacity or
bandwidth.
3.3.30 Because some mobile network operators may prohibit or restrict the use of Voice over
Internet Protocol (VoIP) functionality over their network, such as the use of VoIP telephony over a
cellular network, and may also impose additional fees, or other charges in connection with VoIP.
You agree to inform end-users, prior to purchase, to check the terms of agreement with their
operator, for example, by providing such notice in the marketing text that You provide
accompanying Your Application on the App Store. In addition, if Your Application allows end-
users to send SMS messages or make cellular voice calls, then You must inform the end-user,
prior to use of such functionality, that standard text messaging rates or other carrier charges may
apply to such use.
Apple Push Notification Service and Local Notifications:
3.3.31 All use of Push Notifications via the Apple Push Notification Service or Local Notifications
must be in accordance with the terms of this Agreement (including the Program Requirements)
and Attachment 1 (Additional Terms for Apple Push Notification Service and Local Notifications).
Program Agreement
Game Center:
3.3.32 All use of the Game Center must be in accordance with the terms of this Agreement
(including the Program Requirements) and Attachment 3 (Additional Terms for the Game Center).
iCloud:
3.3.33 All use of the iCloud Storage APIs and CloudKit APIs, as well as Your use of the iCloud
service under this Agreement, must be in accordance with the terms of this Agreement (including
the Program Requirements) and Attachment 4 (Additional Terms for the use of iCloud).
Wallet:
3.3.34 Your development of Passes, and use of the Pass Type ID and Wallet under this
Agreement, must be in accordance with the terms of this Agreement (including the Program
Requirements) and Attachment 5 (Additional Terms for Passes).
Additional Services or End-User Pre-Release Software:
3.3.35 From time to time, Apple may provide access to additional Services or pre-release Apple
Software for You to use in connection with Your Applications, or as an end-user for evaluation
purposes. Some of these may be subject to separate terms and conditions in addition to this
Agreement, in which case Your usage will also be subject to those terms and conditions. Such
services or software may not be available in all languages or in all countries, and Apple makes no
representation that they will be appropriate or available for use in any particular location. To the
extent You choose to access such services or software, You do so at Your own initiative and are
responsible for compliance with any applicable laws, including but not limited to applicable local
laws. To the extent any such software includes Apple’s FaceTime or Messages feature, You
acknowledge and agree that when You use such features, the telephone numbers and device
identifiers associated with Your Authorized Test Units, as well as email addresses and/or Apple
ID information You provide, may be used and maintained by Apple to provide and improve such
software and features. Certain services made accessible to You through the Apple Software may
be provided by third parties. You acknowledge that Apple will not have any liability or
responsibility to You or any other person (including to any end-user) for any third-party services
or for any Apple services. Apple and its licensors reserve the right to change, suspend, remove,
or disable access to any services at any time. In no event will Apple be liable for the removal or
disabling of access to any such services. Further, upon any commercial release of such software
or services, or earlier if requested by Apple, You agree to cease all use of the pre-release Apple
Software or Services provided to You as an end-user for evaluation purposes under this
Agreement.
3.3.36 If Your Application accesses the Twitter service through the Twitter API, such access is
subject to the Twitter terms of service set forth at: http://dev.twitter.com. If You do not accept
such Twitter terms of service, including, but not limited to all limitations and restrictions therein,
You may not access the Twitter service in Your Application through the use of the Twitter API,
and You acknowledge and agree that such use will constitute Your acceptance of such terms of
service.
3.3.37 If Your Application accesses data from an end-user’s Address Book through the Address
Book API, You must notify and obtain consent from the user before his or her Address Book data
is accessed or used by Your Application. Further, Your Application may not provide an
automated mechanism that transfers only the Facebook Data portions of the end-user’s Address
Book altogether to a location off of the end-user’s device. For the sake of clarity, this does not
prohibit an automated transfer of the user’s entire Address Book as a whole, so long as user
notification and consent requirements have been fulfilled; and does not prohibit enabling users to
Program Agreement
transfer any portion of their Address Book data manually (e.g., by cutting and pasting) or enabling
them to individually select particular data items to be transferred.
Extensions:
3.3.38 Applications that include extensions in the Application bundle must provide some
functionality beyond just the extensions (e.g., help screens, additional settings), unless an
Application includes a WatchKit Extension. In addition:
- Extensions (excluding WatchKit Extensions) may not include advertising, product promotion,
direct marketing, or In-App Purchase offers in their extension view;
- Extensions may not block the full screen of an iOS Product or Apple TV, or redirect, obstruct or
interfere in an undisclosed or unexpected way with a user’s use of another developer’s
application or any Apple-provided functionality or service;
- Extensions may operate only in Apple-designated areas of iOS, watchOS or tvOS as set forth
in the Documentation;
- Extensions that provide keyboard functionality must be capable of operating independent of any
network access and must include Unicode characters (vs. pictorial images only);
- Any keystroke logging done by any such extension must be clearly disclosed to the end-user
prior to any such data being sent from an iOS Product, and notwithstanding anything else in
Section 3.3.9, such data may be used only for purposes of providing or improving the keyboard
functionality of Your Application (e.g., not for serving advertising);
- Any message filtering done by an extension must be clearly disclosed to the end-user, and
notwithstanding anything else in Section 3.3.9, any SMS or MMS data (whether accessed
through a message filtering extension or sent by iOS to a messaging extension's corresponding
server) may be used only for purposes of providing or improving the message experience of the
user by reducing spam or messages from unknown sources, and must not be used for serving
advertising or for any other purpose. Further, SMS or MMS data from a user that is accessed
within the extension may not be exported from the extension’s designated container area in any
way; and
- Your Application must not automate installation of extensions or otherwise cause extensions to
be installed without the user’s knowledge, and You must accurately specify to the user the
purpose and functionality of the extension.
HealthKit APIs and Motion & Fitness APIs:
3.3.39 Your Application must not access the HealthKit APIs or Motion & Fitness APIs unless it is
primarily designed to provide health, motion, and/or fitness services, and this usage is clearly
evident in Your marketing text and user interface. In addition:
- Notwithstanding anything to the contrary in Section 3.3.9, You and Your Application may not
use the HealthKit APIs or the Motion & Fitness APIs, or any information obtained through the
HealthKit APIs or the Motion & Fitness APIs, for any purpose other than providing health, motion,
and/or fitness services in connection with Your Application (e.g., not for serving advertising);
- You must not use the HealthKit APIs or the Motion & Fitness APIs, or any information obtained
through the HealthKit APIs or the Motion & Fitness APIs, to disclose or provide an end-user’s
health, motion, and/or fitness information to a third party without prior express end-user consent,
and then only for purposes of enabling the third party to provide health, motion, and/or fitness
services as permitted herein. For example, You must not share or sell an end-user’s health
Program Agreement
information collected through the HealthKit APIs or Motion & Fitness APIs to advertising
platforms, data brokers, or information resellers. For clarity, You may allow end-users to consent
to share their data with third parties for medical research purposes; and
- You agree to clearly disclose to end-users how You and Your Application will be using their
health, motion, and/or fitness information and to use it only as expressly consented to by the end-
user and as expressly permitted herein.
3.3.40 If Your Application accesses NikeFuel points information through the HealthKit APIs, then
Your use of the NikeFuel points information is subject to the NikeFuel points terms of service set
forth at: https://developer.nike.com/healthkit/nikefuel-use-agreement.html. If You do not accept
such NikeFuel terms of service, including, but not limited to all limitations and restrictions therein,
You may not use such NikeFuel points information in Your Application, and You acknowledge
and agree that such use will constitute Your acceptance of such terms of service.
HomeKit APIs:
3.3.41 Your Application must not access the HomeKit APIs unless it is primarily designed to
provide home configuration or home automation services (e.g., turning on a light, lifting a garage
door) for Licensed HomeKit Accessories and this usage is clearly evident in Your marketing text
and user interface. You agree not to use the HomeKit APIs for any purpose other than
interfacing, communicating, interoperating with or otherwise controlling a Licensed HomeKit
Accessory or for using the HomeKit Database, and then only for home configuration or home
automation purposes in connection with Your Application. In addition:
- Your Application may use information obtained from the HomeKit APIs and/or the HomeKit
Database only on an iOS Product and may not export, remotely access or transfer such
information off a device (e.g., a lock password cannot be sent off an end-user’s device to be
stored in an external non-Apple database); and
- Notwithstanding anything to the contrary in Section 3.3.9, You and Your Application may not
use the HomeKit APIs, or any information obtained through the HomeKit APIs or through the
HomeKit Database, for any purpose other than providing or improving home configuration or
home automation services in connection with Your Application (e.g., not for serving advertising).
Apple Pay APIs:
3.3.42 Your Application may use the Apple Pay APIs solely for the purpose of facilitating
payment transactions that are made by or through Your Application, and only for the purchase of
goods and services that are to be used outside of any iOS Product or Apple Watch, unless
otherwise permitted by Apple in writing. For clarity, nothing in this Section 3.3.42 supplants any
of the rules or requirements for the use of the In-App Purchase API, including but not limited to
Section 3.3.3 and the guidelines. In addition:
- You acknowledge and agree that Apple is not a party to any payment transactions facilitated
through the use of the Apple Pay APIs and is not responsible for any such transactions, including
but not limited to the unavailability of any end-user payment cards or payment fraud. Such
payment transactions are between You and Your bank, acquirer, card networks, or other parties
You utilize for transaction processing, and You are responsible for complying with any
agreements You have with such third parties. In some cases, such agreements may contain
terms specifying specific rights, obligations or limitations that You accept and assume in
connection with Your decision to utilize the functionality of the Apple Pay APIs;
- You agree to store any private keys provided to You as part of Your use of the Apple Pay APIs
in a secure manner (e.g., encrypted on a server) and in accordance with the Documentation. You
agree not to store any end-user payment information in an unencrypted manner on an iOS
Program Agreement
Product. For clarity, You may not decrypt any such end-user payment information on an iOS
Product;
- You agree not to call the Apple Pay APIs or otherwise attempt to gain information through the
Apple Pay APIs for purposes unrelated to facilitating end-user payment transactions; and
- If You use Apple Pay APIs in Your Application, then You agree to use commercially reasonable
efforts to include Apple Pay Cash as a payment option with Your use of the Apple Pay APIs in
accordance with the Documentation and provided that Apple Pay Cash is available in the
jurisdiction in which the Application is distributed.
3.3.43 As part of facilitating an end-user payment transaction through the Apple Pay APIs, Apple
may provide You (whether You are acting as the Merchant or as an Intermediary Party) with an
Apple Pay Payload. If You receive an Apple Pay Payload, then You agree to the following:
- If You are acting as the Merchant, then You may use the Apple Pay Payload to process the
end-user payment transaction and for other uses that You disclose to the end-user, and only in
accordance with applicable law; and
- If You are acting as an Intermediary Party, then:
(a) You may use the Apple Pay Payload only for purposes of facilitating the payment transaction
between the Merchant and the end-user and for Your own order management purposes (e.g.,
customer service) as part of such transaction;
(b) You agree that You will not hold the Apple Pay Payload data for any longer than necessary to
fulfill the payment transaction and order management purposes for which it was collected;
(c) You agree not to combine data obtained through the Apple Pay APIs, including but not limited
to, the Apple Pay Payload with any other data that You may have about such end-user (except to
the limited extent necessary for order management purposes). For clarity, an Intermediary Party
may not use data obtained through the Apple Pay APIs for advertising or marketing purposes, for
developing or enhancing a user profile, or to otherwise target end-users;
(d) You agree to disclose to end-users that You are an Intermediary Party to the transaction and
to provide the identity of the Merchant for a particular transaction on the Apple Pay Payment
Sheet (in addition to including Your name as an Intermediary Party); and
(e) If You use a Merchant, then You will be responsible for ensuring that the Merchant You select
uses the Apple Pay Payload provided by You only for purposes of processing the end-user
payment transaction and for other uses they have disclosed to the end-user, and only in
accordance with applicable law. You agree to have a binding written agreement with such
Merchant with terms at least as restrictive and protective of Apple as those set forth herein. Any
actions undertaken by any such Merchant in relation to such Apple Pay Payload or the payment
transaction shall be deemed to have been taken by You, and You (in addition to such Merchant)
shall be responsible to Apple for all such actions (or any inactions). In the event of any actions or
inactions by such Merchant that would constitute a violation of this Agreement or otherwise cause
any harm, Apple reserves the right to require You to cease using such Merchant.
SiriKit:
3.3.44 Your Application may register as a destination to use the Apple-defined SiriKit domains,
but only if Your Application is designed to provide relevant responses to a user, or otherwise
carry out the user’s request or intent, in connection with the applicable SiriKit domain (e.g., ride
sharing) that is supported by Your Application and this usage is clearly evident in Your marketing
text and user interface. In addition, Your Application may contribute actions to SiriKit, but only if
such actions are tied to user behavior or activity within Your Application and for which You can
provide a relevant response to the user. You agree not to submit false information through SiriKit
about any such user activity or behavior or otherwise interfere with the predictions provided by
SiriKit (e.g., SiriKit donations should be based on actual user behavior).
Program Agreement
3.3.45 Your Application may use information obtained through SiriKit only on supported Apple
products and may not export, remotely access or transfer such information off a device except to
the extent necessary to provide or improve relevant responses to a user or carry out a user’s
request or in connection with Your Application. Notwithstanding anything to the contrary in
Section 3.3.9, You and Your Application may not use SiriKit, or any information obtained through
SiriKit, for any purpose other than providing relevant responses to a user or otherwise carrying
out a user’s request or intent in connection with an SiriKit domain, intent, or action supported by
Your Application and/or for improving Your Application’s responsiveness to user requests (e.g.,
not for serving advertising).
3.3.46 If Your Application uses SiriKit to enable audio data to be processed by Apple, You agree
to clearly disclose to end-users that You and Your Application will be sending their recorded
audio data to Apple for speech recognition, processing and/or transcription purposes, and that
such audio data may be used to improve and provide Apple products and services. You further
agree to use such audio data, and recognized text that may be returned from SiriKit, only as
expressly consented to by the end-user and as expressly permitted herein.
Single Sign-On API:
3.3.47 You must not access or use the Single Sign-On API unless You are a Multi-channel
Video Programming Distributor (MVPD) or unless Your Application is primarily designed to
provide authenticated video programming via a subscription-based MVPD service, and You have
received an entitlement from Apple to use the Single Sign-On API. If You have received such an
entitlement, You are permitted to use the Single Sign-On API solely for the purpose of
authenticating a user’s entitlement to access Your MVPD content for viewing on an Apple
Product, in accordance with the Single Sign-on Specification. Any such use must be in
compliance with the Documentation for the Single Sign-On Specification. You acknowledge that
Apple reserves the right to not provide You such an entitlement, and to revoke such entitlement,
at any time, in its sole discretion.
If You use the Single Sign-On API, You will be responsible for providing the sign-in page
accessed by users via the Single Sign-On API where users sign in to authenticate their right to
access Your MVPD content. You agree that such sign-in page will not display advertising, and
that the content and appearance of such page will be subject to Apple’s prior review and
approval. If You use the Single Sign-On API and Apple provides an updated version of such API
and/or the Single Sign-on Specification, You agree to update Your implementation to conform
with the newer version and specification within 3 months after receiving the update from Apple.
You authorize Apple to use, reproduce, and display the trademarks provided by You for use in
connection with the Single-Sign-On feature, including use in the user interface screens in Apple
products where the user selects the provider and authenticates through Single Sign-on, and/or to
provide the user with a list of apps that are accessible to such user through Single Sign-On. You
also grant Apple the right to use screen shots and images of such user interface, including but not
limited to use in instructional materials, training materials, marketing materials, and advertising in
any medium. Data provided via the Single Sign-On API will be considered Licensed Application
Information hereunder, but will be subject to the use limitations set forth in this Section.
You must not collect, store or use data provided via the Single Sign-On API for any purpose other
than to authenticate a user’s entitlement to access Your MVPD content on an Apple product, to
provide the user access to Your MVPD content, and/or to address performance and technical
problems with Your MVPD service. You will not provide or disclose data, content or information
obtained from use of the Single Sign-On API to any other party except for authentication
information provided to a video programming provider whose programming is offered as part of
an MVPD subscription offered by You, and solely for the purpose of authenticating the user’s
entitlement to access such video programming on an Apple product under the user’s MVPD
Program Agreement
subscription.
TV App API:
3.3.48 You may not use the TV App API unless (a) Your Application is primarily designed to
provide video programming, (b) You have received an entitlement from Apple, and (c) Your use is
in accordance with the TV App Specification. To the extent that You provide TV App Data to
Apple, Apple may store, use, reproduce and display such data solely for the purposes of: (a)
providing information and recommendations to users of TV App Features, (b) enabling users to
link from such recommendations and/or information to content for viewing via Your Licensed
Application, and/or (c) servicing, maintenance, and optimization of TV App Features. With
respect to any TV App Data that has been submitted by You prior to termination of this
Agreement, Apple may continue to use such data in accordance with this Section 3.3.48 after
termination of this Agreement. TV App Data will be considered Licensed Application Information
under this Agreement, but will be subject to the use limitations set forth in this Section. You
acknowledge that Apple reserves the right to not include Your Licensed Application in the TV App
Features, in its sole discretion.
Apple will obtain user consent based on the user’s Apple ID before including Your Licensed
Application in the TV App Features displayed under that Apple ID. Apple will also provide users
with the ability to withdraw such consent at any time thereafter and to delete their TV App Data
from Apple’s systems. In addition, You may solicit user consent based upon Your own subscriber
ID system. You are responsible for Your compliance with all applicable laws, including any
applicable local laws for obtaining user consent with respect to Your provision of TV App Data to
Apple.
Spotlight-Image-Search Service:
3.3.49 To the extent that You provide Apple’s spotlight-image-search service with access to any
of Your domains that are associated with Your Licensed Applications (the “Associated
Domain(s)”), You hereby grant Apple permission to crawl, scrape, copy, transmit and/or cache
the content found in the Associated Domain(s) (the “Licensed Content”) for the purposes set forth
in this section. The Licensed Content shall be considered Licensed Application Information under
this Agreement. You hereby further grant Apple a license to use, make, have made, reproduce,
crop and/or modify the file format, resolution and appearance of the Licensed Content (for the
purposes of reducing file size, converting to a supported file type and/or displaying thumbnails),
and to publicly display, publicly perform, integrate, incorporate and distribute the Licensed
Content to enhance search, discovery, and end-user distribution of the Licensed Content in
Apple’s Messages feature. Upon the termination of this Agreement for any reason, end users of
Apple-branded products will be permitted to continue using and distributing all Licensed Content
that they obtained through the use of Apple-branded products prior to such termination.
MusicKit:
3.3.50 You agree not to call the MusicKit APIs or use MusicKit JS (or otherwise attempt to gain
information through the MusicKit APIs or MusicKit JS) for purposes unrelated to facilitating
access to Your end users’ Apple Music subscriptions. If You access the MusicKit APIs or
MusicKit JS, then You must follow the Apple Music Identity Guidelines. You agree not to require
payment for or indirectly monetize access to the Apple Music service (e.g. in-app purchase,
advertising, requesting user info) through Your use of the MusicKit APIs, MusicKit JS, or
otherwise in any way. In addition:
- If You choose to offer music playback through the MusicKit APIs or MusicKit JS, full songs must
be enabled for playback, and users must initiate playback and be able to navigate playback using
standard media controls such as “play,” “pause,” and “skip”, and You agree to not misrepresent
the functionality of these controls;
Program Agreement
- You may not, and You may not permit Your end users to, download, upload, or modify any
MusicKit Content and MusicKit Content cannot be synchronized with any other content, unless
otherwise permitted by Apple in the Documentation;
- You may play MusicKit Content only as rendered by the MusicKit APIs or MusicKit JS and only
as permitted in the Documentation (e.g., album art and music-related text from the MusicKit API
may not be used separately from music playback or managing playlists);
- Metadata from users (such as playlists and favorites) may be used only to provide a service or
function that is clearly disclosed to end users and that is directly relevant to the use of Your
Application, website, or web application, as determined in Apple’s sole discretion; and
- You may use MusicKit JS only as a stand-alone library in Your Application, website, or web
application and only as permitted in the Documentation (e.g., You agree not to recombine
MusicKit JS with any other JavaScript code or separately download and re-host it).
DeviceCheck APIs:
3.3.51 If You use DeviceCheck APIs to store DeviceCheck Data, then You must provide a
mechanism for customers to contact You to reset those values, if applicable (e.g. resetting a trial
subscription or re-authorizing certain usage when a new user acquires the device). You may not
rely on the DeviceCheck Data as a single identifier of fraudulent conduct and must use the
DeviceCheck Data only in connection with other data or information, e.g., the DeviceCheck Data
cannot be the sole data point since a device may have been transferred or resold. Apple
reserves the right to delete any DeviceCheck Data at any time in its sole discretion, and You
agree not to rely on any such Data. Further, You agree not to share the DeviceCheck tokens You
receive from Apple with any third party, except a Service Provider acting on Your behalf.
Face Data:
3.3.52 If Your Application accesses Face Data, then You must do so only to provide a service or
function that is directly relevant to the use of the Application, and You agree to inform users of
Your intended uses and disclosures of Face Data by Your Application and to obtain clear and
conspicuous consent from such users before any collection or use of Face Data. Notwithstanding
anything to the contrary in Section 3.3.9, neither You nor Your Application (nor any third party
with whom You have contracted to serve advertising) may use Face Data for serving advertising
or for any other unrelated purposes. In addition:
- You may not use Face Data in a manner that will violate the legal rights of Your users (or any
third parties) or to provide an unlawful, unfair, misleading, fraudulent, improper, exploitative, or
objectionable user experience and then only in accordance with the Documentation;
- You may not use Face Data for authentication, advertising, or marketing purposes, or to
otherwise target an end-user in a similar manner;
- You may not use Face Data to build a user profile, or otherwise attempt, facilitate, or encourage
third parties to identify anonymous users or reconstruct user profiles based on Face Data;
- You agree not to transfer, share, sell, or otherwise provide Face Data to advertising platforms,
analytics providers, data brokers, information resellers or other such parties; and
- Face Data may not be shared or transferred off the user’s device unless You have obtained
clear and conspicuous consent for the transfer and the Face Data is used only in fulfilling a
specific service or function for Your Application (e.g., a face mesh is used to display an image of
the user within the Application) and only in accordance with these terms and the Documentation.
Program Agreement
You agree to require that Your service providers use Face Data only to the limited extent
consented to by the user and only in accordance with these terms.
ClassKit APIs:
3.3.53 Your Application must not include the ClassKit APIs unless it is primarily designed to
provide educational services, and this usage is clearly evident in Your marketing text and user
interface. You agree not to submit false or inaccurate data through the ClassKit APIs or to
attempt to redefine the assigned data categories for data submitted through the ClassKit APIs
(e.g., student location data is not a supported data type and should not be submitted).
4.
Changes to Program Requirements or Terms
Apple may change the Program Requirements or the terms of this Agreement at any time. New
or modified Program Requirements will not retroactively apply to Applications already in
distribution via the App Store or Custom App Distribution; provided however that You agree that
Apple reserves the right to remove Applications from the App Store or Custom App Distribution
that are not in compliance with the new or modified Program Requirements at any time. In order
to continue using the Apple Software, Apple Certificates or any Services, You must accept and
agree to the new Program Requirements and/or new terms of this Agreement. If You do not
agree to new Program Requirements or new terms, Your use of the Apple Software, Apple
Certificates and any Services will be suspended or terminated by Apple. You agree that Your
acceptance of such new Agreement terms or Program Requirements may be signified
electronically, including without limitation, by Your checking a box or clicking on an “agree” or
similar button. Nothing in this Section shall affect Apple's rights under Section 5 (Apple
Certificates; Revocation).
5.
Apple Certificates; Revocation
5.1
Certificate Requirements
All Applications must be signed with an Apple Certificate in order to be installed on Authorized
Test Units, Registered Devices, or submitted to Apple for distribution via the App Store, Custom
App Distribution, or TestFlight. Similarly, all Passes must be signed with an Apple Certificate to
be recognized and accepted by Wallet. Safari Extensions must be signed with an Apple
Certificate to run in Safari on macOS. You must use a Website ID to send Safari Push
Notifications to the macOS desktop of users who have opted in to receive such Notifications for
Your Site through Safari on macOS. You may also obtain other Apple Certificates and keys for
other purposes as set forth herein and in the Documentation.
In relation to this, You represent and warrant to Apple that:
(a) You will not take any action to interfere with the normal operation of any Apple Certificates,
keys, or Provisioning Profiles;
(b) You are solely responsible for preventing any unauthorized person or organization from
having access to Your Apple Certificates and keys, and You will use Your best efforts to
safeguard Your Apple Certificates and keys from compromise (e.g., You will not upload Your
Apple Certificate for App Store distribution to a cloud repository for use by a third-party);
(c) You agree to immediately notify Apple in writing if You have any reason to believe there has
been a compromise of any of Your Apple Certificates or keys;
(d) You will not provide or transfer Apple Certificates or keys provided under this Program to any
third party (except for a Service Provider who is using them on Your behalf in compliance with
this Agreement and only to the limited extent expressly permitted by Apple in the Documentation
or this Agreement (e.g., You are prohibited from providing or transferring Your Apple Certificates
that are used for distribution or submission to the App Store to a Service Provider), and You will
not use Your Apple Certificates to sign any third party's application, pass, extension, notification,
implementation, or site;
(e) You will use any Apple Certificates or keys provided under this Agreement solely as permitted
by Apple and in accordance with the Documentation; and
Program Agreement
(f) You will use Apple Certificates provided under this Program exclusively for the purpose of
signing Your Passes, signing Your Safari Extensions, signing Your Site’s registration bundle,
accessing the APN service, and/or signing Your Applications for testing, submission to Apple
and/or for limited distribution for use on Registered Devices or Authorized Test Units as
contemplated under this Program, or as otherwise permitted by Apple, and only in accordance
with this Agreement. As a limited exception to the foregoing, You may provide versions of Your
iOS Applications to Your Service Providers to sign with their Apple-issued iOS development
certificates, but solely for purposes of having them perform testing on Your behalf of Your
Applications on Apple-branded products running iOS and provided that all such testing is
conducted internally by Your Service Providers (e.g., no outside distribution of Your Applications)
and that Your Applications are deleted within a reasonable period of time after such testing is
performed. Further, You agree that Your Service Provider may use the data obtained from
performing such testing services only for purposes of providing You with information about the
performance of Your Applications (e.g., Your Service Provider is prohibited from aggregating
Your Applications’ test results with other developers’ test results).
You further represent and warrant to Apple that the licensing terms governing Your Application,
Your Safari Extension, Your Site’s registration bundle, and/or Your Pass, or governing any third
party code or FOSS included in Your Covered Products, will be consistent with and not conflict
with the digital signing or content protection aspects of the Program or any of the terms,
conditions or requirements of the Program or this Agreement. In particular, such licensing terms
will not purport to require Apple (or its agents) to disclose or make available any of the keys,
authorization codes, methods, procedures, data or other information related to the Security
Solution, digital signing or digital rights management mechanisms or security utilized as part of
any Apple software, including the App Store. If You discover any such inconsistency or conflict,
You agree to immediately notify Apple of it and will cooperate with Apple to resolve such matter.
You acknowledge and agree that Apple may immediately cease distribution of any affected
Licensed Applications or Passes, and may refuse to accept any subsequent Application or Pass
submissions from You until such matter is resolved to Apple’s reasonable satisfaction.
5.2
Relying Party Certificates
The Apple Software and Services may also contain functionality that permits digital certificates,
either Apple Certificates or other third-party certificates, to be accepted by the Apple Software or
Services (e.g., Apple Pay) and/or to be used to provide information to You (e.g., transaction
receipts). It is Your responsibility to verify the validity of any certifications or transaction receipts
You may receive from Apple prior to relying on them (e.g., You should verify that the receipt came
from Apple prior to any delivery of content to an end-user through the use of the In-App Purchase
API). You are solely responsible for Your decision to rely on any such certificates and receipts,
and Apple will not be liable for Your failure to verify that any such certificates or transaction
receipts came from Apple (or third parties) or for Your reliance on Apple Certificates or other
digital certificates.
5.3
Notarized Applications for macOS
To have Your macOS Application notarized, You may request a digital file for authentication of
Your Application from Apple’s digital notary service (a “Ticket”). You can use this Ticket with
Your Apple Certificate to receive an improved developer signing and user experience for Your
Application on macOS. To request this Ticket from Apple’s digital notary service, You must
upload Your Application to Apple through Apple’s developer tools (or other requested
mechanisms) for purposes of continuous security checking. This continuous security checking
will involve automated scanning, testing, and analysis of Your Application by Apple for malware or
other harmful or suspicious code or components or security flaws, and, in limited cases, a
manual, technical investigation of Your Application by Apple for such purposes. By uploading
Your Application to Apple for this digital notary service, You agree that Apple may perform such
security checks on Your Application for purposes of detecting malware or other harmful or
suspicious code or components, and You agree that Apple may retain and use Your Application
for subsequent security checks for the same purposes.
Program Agreement
If Apple authenticates Your developer signature and Your Application passes the initial security
checks, Apple may provide You with a Ticket to use with Your Apple Certificate. Apple reserves
the right to issue Tickets in its sole discretion, and Apple may revoke Tickets at any time in its
sole discretion in the event that Apple has reason to believe, or has reasonable suspicions, that
Your Application contains malware or malicious, suspicious or harmful code or components or
that Your developer identity signature has been compromised. You may request that Apple
revoke Your Ticket at any time by emailing: [email protected]. If Apple revokes Your
Ticket or Your Apple Certificate, then Your Application may no longer run on macOS.
You agree to cooperate with Apple regarding Your Ticket requests and to not hide, attempt to
bypass, or misrepresent any part of Your Application from Apple's security checks or otherwise
hinder Apple from being able to perform such security checks. You agree not to represent that
Apple has performed a security check or malware detection for Your Application or that Apple has
reviewed or approved Your Application for purposes of issuing a Ticket to You from Apple’s digital
notary service. You acknowledge and agree that Apple is performing security checks solely in
connection with Apple’s digital notary service and that such security checks should not be relied
upon for malware detection or security verification of any kind.
You are fully responsible for Your
own Application and for ensuring that Your Application is safe, secure, and operational for Your
end-users (e.g., informing Your end-users that Your Application may cease to run if there is an
issue with malware). Apple will not be liable to You or any third-party for any inability or failure to
detect any malware or other suspicious, harmful code or components in Your Application or other
security issues, or for any ticket issuance or revocation. Apple shall not be responsible for any
costs, expenses, damages, losses or other liabilities You may incur as a result of Your
Application development, use of the Apple Software, Apple Services (including this digital notary
service), or Apple Certificates, tickets, or participation in the Program, including without limitation
the fact that Apple performs security checks on Your Application.
5.4
Certificate Revocation
Except as otherwise set forth herein, You may revoke Apple Certificates issued to You at any
time. If You want to revoke the Apple Certificates used to sign Your Passes and/or issued to You
for use with Your macOS Applications distributed outside of the App Store, You may request that
Apple revoke these Apple Certificates at any time by emailing: [email protected].
Apple also reserves the right to revoke any Apple Certificates at any time, in its sole discretion.
By way of example only, Apple may choose to do this if: (a) any of Your Apple Certificates or
corresponding private keys have been compromised or Apple has reason to believe that either
have been compromised; (b) Apple has reason to believe or has reasonable suspicions that Your
Covered Products contain malware or malicious, suspicious or harmful code or components (e.g.,
a software virus); (c) Apple has reason to believe that Your Covered Products adversely affect
the security of Apple-branded products, or any other software, firmware, hardware, data,
systems, or networks accessed or used by such products; (d) Apple’s certificate issuance
process is compromised or Apple has reason to believe that such process has been
compromised; (e) You breach any term or condition of this Agreement; (f) Apple ceases to issue
the Apple Certificates for the Covered Product under the Program; (g) Your Covered Product
misuses or overburdens any Services provided hereunder; or (h) Apple has reason to believe that
such action is prudent or necessary. Further, You understand and agree that Apple may notify
end-users of Covered Products that are signed with Apple Certificates when Apple believes such
action is necessary to protect the privacy, safety or security of end-users, or is otherwise prudent
or necessary as determined in Apple’s reasonable judgment. Apple’s Certificate Policy and
Certificate Practice Statements may be found at: http://www.apple.com/certificateauthority.
6.
Application Submission and Selection
6.1
Submission to Apple for App Store or Custom App Distribution
You may submit Your Application for consideration by Apple for distribution via the App Store or
Custom App Distribution once You decide that Your Application has been adequately tested and
Program Agreement
is complete. By submitting Your Application, You represent and warrant that Your Application
complies with the Documentation and Program Requirements then in effect as well as with any
additional guidelines that Apple may post on the Program web portal or in App Store Connect.
You further agree that You will not attempt to hide, misrepresent or obscure any features,
content, services or functionality in Your submitted Applications from Apple's review or otherwise
hinder Apple from being able to fully review such Applications. In addition, You agree to inform
Apple in writing through App Store Connect if Your Application connects to a physical device,
including but not limited to an MFi Accessory, and, if so, to disclose the means of such
connection (whether iAP, Bluetooth Low Energy (BLE), the headphone jack, or any other
communication protocol or standard) and identify at least one physical device with which Your
Application is designed to communicate. If requested by Apple, You agree to provide access to
or samples of any such devices at Your expense (samples will not be returned). You agree to
cooperate with Apple in this submission process and to answer questions and provide information
and materials reasonably requested by Apple regarding Your submitted Application, including
insurance information You may have relating to Your Application, the operation of Your business,
or Your obligations under this Agreement. Apple may require You to carry certain levels of
insurance for certain types of Applications and name Apple as an additional insured. If You make
any changes to an Application (including to any functionality made available through use of the
In-App Purchase API) after submission to Apple, You must resubmit the Application to Apple.
Similarly all bug fixes, updates, upgrades, modifications, enhancements, supplements to,
revisions, new releases and new versions of Your Application must be submitted to Apple for
review in order for them to be considered for distribution via the App Store or Custom App
Distribution, except as otherwise permitted by Apple.
6.2
App Thinning and Bundled Resources
As part of Your Application submission to the App Store or Custom App Distribution, Apple may
optimize Your Application to target specific devices by repackaging certain functionality and
delivered resources (as described in the Documentation) in Your Application so that it will run
more efficiently and use less space on target devices (“App Thinning”). For example, Apple may
deliver only the 32-bit or 64-bit version of Your Application to a target device, and Apple may not
deliver icons or launch screens that would not render on the display of a target device. You
agree that Apple may use App Thinning to repackage Your Application in order to deliver a more
optimized version of Your Application to target devices.
As part of App Thinning, You can also request that Apple deliver specific resources for Your
Application (e.g., GPU resources) to target devices by identifying such bundled resources as part
of Your code submission (“Bundled Resources”). You can define such Bundled Resources to
vary the timing or delivery of assets to a target device (e.g., when a user reaches a certain level
of a game, then the content is delivered on-demand to the target device). App Thinning and
Bundled Resources are not available for all Apple operating systems, and Apple may continue to
deliver full Application binaries to some target devices.
6.3
Bitcode Submissions
For Application submissions to the App Store or Custom App Distribution for some Apple
operating systems (e.g., for watchOS), Apple may require You to submit an intermediate
representation of Your Application in binary file format for the LLVM compiler (“Bitcode”). You
may also submit Bitcode for other supported Apple operating systems. Such Bitcode submission
will allow Apple to compile Your Bitcode to target specific Apple-branded devices and to
recompile Your Bitcode for subsequent releases of Your Application for new Apple hardware,
software, and/or compiler changes. When submitting Bitcode, You may choose whether or not to
include symbols for Your Application in the Bitcode; however, if You do not include symbols, then
Apple will not be able to provide You with symbolicated crash logs or other diagnostic information
as set forth in Section 6.5 (Improving Your Application) below. Further, You may be required
to submit a compiled binary of Your Application with Your Bitcode.
Program Agreement
By submitting Bitcode to Apple, You authorize Apple to compile Your Bitcode into a resulting
binary that will be targeted for specific Apple-branded devices and to recompile Your Bitcode for
subsequent rebuilding and recompiling of Your Application for updated hardware, software,
and/or compiler changes (e.g., if Apple releases a new device, then Apple may use Your Bitcode
to update Your Application without requiring resubmission). You agree that Apple may compile
such Bitcode for its own internal use in testing and improving Apple’s developer tools, and for
purposes of analyzing and improving how applications can be optimized to run on Apple’s
operating systems (e.g., which frameworks are used most frequently, how a certain framework
consumes memory, etc.). You may use Apple’s developer tools to view and test how Apple may
process Your Bitcode into machine code binary form. Bitcode is not available for all Apple
operating systems.
6.4
TestFlight Submission
If You would like to distribute Your Application to Beta Testers outside of Your company or
organization through TestFlight, You must first submit Your Application to Apple for review. By
submitting such Application, You represent and warrant that Your Application complies with the
Documentation and Program Requirements then in effect as well as with any additional
guidelines that Apple may post on the Program web portal or in App Store Connect. Thereafter,
Apple may permit You to distribute updates to such Application directly to Your Beta Testers
without Apple’s review, unless such an update includes significant changes, in which case You
agree to inform Apple in App Store Connect and have such Application re-reviewed. Apple
reserves the right to require You to cease distribution of Your Application through TestFlight,
and/or to any particular Beta Tester, at any time in its sole discretion.
6.5
Improving Your Application
Further, if Your Application is submitted for distribution via the App Store, Custom App
Distribution or TestFlight, You agree that Apple may use Your Application for the limited purpose
of compatibility testing of Your Application with Apple products and services, for finding and fixing
bugs and issues in Apple products and services and/or Your Applications, for internal use in
evaluating iOS, watchOS, tvOS, and/or macOS performance issues in or with Your Application,
for security testing, and for purposes of providing other information to You (e.g., crash logs).
Except as otherwise set forth herein, You may opt in to send app symbol information for Your
Application to Apple, and if You do so, then You agree that Apple may use such symbols to
symbolicate Your Application for purposes of providing You with symbolicated crash logs and
other diagnostic information. In the event that Apple provides You with crash logs or other
diagnostic information for Your Application, You agree to use such crash logs and information
only for purposes of fixing bugs and improving the performance of Your Application and related
products. You may also collect numeric strings and variables from Your Application when it
crashes, so long as You collect such information only in an anonymous, non-personal manner
and do not recombine, correlate, or use such information to attempt to identify or derive
information about any particular end-user or device.
6.6
App Analytics
To the extent that Apple provides an Analytics service through App Store Connect for
Applications distributed through the App Store, You agree to use any data provided through such
App Analytics service solely for purposes of improving Your Applications and related products.
Further, You agree not to provide such information to any third parties, except for a Service
Provider who is assisting You in processing and analyzing such data on Your behalf and who is
not permitted to use it for any other purpose or disclose it to any other party. For clarity, You
must not aggregate (or permit any third-party to aggregate) analytics information provided to You
by Apple for Your Applications as part of this App Analytics service with other developers’
analytics information, or contribute such information to a repository for cross-developer analytics.
You must not use the App Analytics service or any analytics data to attempt to identify or derive
information about any particular end-user or device.
Program Agreement
6.7
Compatibility Requirement with Current Shipping OS Version
Applications that are selected for distribution via the App Store must be compatible with the
currently shipping version of Apple’s applicable operating system (OS) software at the time of
submission to Apple, and such Applications must stay current and maintain compatibility with
each new release of the applicable OS version so long as such Applications are distributed
through the App Store. You understand and agree that Apple may remove Applications from the
App Store when they are not compatible with the then-current shipping release of the OS at any
time in its sole discretion.
6.8
Selection by Apple for Distribution
You understand and agree that if You submit Your Application to Apple for distribution via the App
Store, Custom App Distribution, or TestFlight, Apple may, in its sole discretion:
(a) determine that Your Application does not meet all or any part of the Documentation or
Program Requirements then in effect;
(b) reject Your Application for distribution for any reason, even if Your Application meets the
Documentation and Program Requirements; or
(c) select and digitally sign Your Application for distribution via the App Store, Custom App
Distribution, or TestFlight.
Apple shall not be responsible for any costs, expenses, damages, losses (including without
limitation lost business opportunities or lost profits) or other liabilities You may incur as a result of
Your Application development, use of the Apple Software, Apple Services, or Apple Certificates
or participation in the Program, including without limitation the fact that Your Application may not
be selected for distribution via the App Store or Custom App Distribution. You will be solely
responsible for developing Applications that are safe, free of defects in design and operation, and
comply with applicable laws and regulations. You will also be solely responsible for any
documentation and end-user customer support and warranty for such Applications. The fact that
Apple may have reviewed, tested, approved or selected an Application will not relieve You of any
of these responsibilities.
7.
Distribution of Applications and Libraries
Applications:
Applications developed under this Agreement for iOS, watchOS, or tvOS may be distributed in
four ways: (1) through the App Store, if selected by Apple, (2) through the Custom App
Distribution, if selected by Apple, (3) through Ad Hoc distribution in accordance with Section 7.3,
and (4) for beta testing through TestFlight in accordance with Section 7.4. Applications for
macOS may be submitted to Apple for selection and distribution on the App Store, or may be
separately distributed.
7.1
Delivery of Free Licensed Applications via the App Store
If Your Application qualifies as a Licensed Application, it is eligible for delivery to end-users via
the App Store by Apple and/or an Apple Subsidiary. If You would like Apple and/or an Apple
Subsidiary to deliver Your Licensed Application or authorize additional content, functionality or
services You make available in Your Licensed Application through the use of the In-App
Purchase API to end-users for free (no charge) via the App Store, then You appoint Apple and
Apple Subsidiaries as Your legal agent and/or commissionaire pursuant to the terms of Schedule
1 for Licensed Applications designated by You as free-of-charge applications.
7.2
Schedule 2 and Schedule 3 for Fee-Based Licensed Applications; Receipts
If Your Application qualifies as a Licensed Application and You intend to charge end-users a fee
of any kind for Your Licensed Application or within Your Licensed Application through the use of
the In-App Purchase API, You must enter into a separate agreement (Schedule 2) with Apple
and/or an Apple Subsidiary before any such commercial distribution of Your Licensed Application
Program Agreement
may take place via the App Store or before any such commercial delivery of additional content,
functionality or services for which You charge end-users a fee may be authorized through the use
of the In-App Purchase API in Your Licensed Application. If Your Application has been
customized for use by specific third-party business customers, and You would like Apple to sign
and distribute it through Apple’s applicable Custom App Distribution, then You must enter into a
separate agreement (Schedule 3) with Apple and/or an Apple Subsidiary before any such
distribution may take place. To the extent that You enter (or have previously entered) into
Schedule 2 or Schedule 3 with Apple and/or an Apple Subsidiary, the terms of Schedule 2 or 3
will be deemed incorporated into this Agreement by this reference.
When an end-user installs Your Licensed Application, Apple will provide You with a transaction
receipt signed with an Apple Certificate. It is Your responsibility to verify that such certificate and
receipt were issued by Apple, as set forth in the Documentation. You are solely responsible for
Your decision to rely on any such certificates and receipts. YOUR USE OF OR RELIANCE ON
SUCH CERTIFICATES AND RECEIPTS IN CONNECTION WITH A PURCHASE OF A
LICENSED APPLICATION IS AT YOUR SOLE RISK. APPLE MAKES NO WARRANTIES OR
REPRESENTATIONS, EXPRESS OR IMPLIED, AS TO MERCHANTABILITY OR FITNESS FOR
ANY PARTICULAR PURPOSE, ACCURACY, RELIABILITY, SECURITY, OR NON-
INFRINGEMENT OF THIRD PARTY RIGHTS WITH RESPECT TO SUCH APPLE
CERTIFICATES AND RECEIPTS. You agree that You will only use such receipts and certificates
in accordance with the Documentation, and that You will not interfere or tamper with the normal
operation of such digital certificates or receipts, including but not limited to any falsification or
other misuse.
7.3
Distribution on Registered Devices (Ad Hoc Distribution)
Subject to the terms and conditions of this Agreement, You may also distribute Your Applications
for iOS, watchOS and tvOS to individuals within Your company, organization, educational
institution, group, or who are otherwise affiliated with You for use on a limited number of
Registered Devices (as specified on the Program web portal), if Your Application has been
digitally signed using Your Apple Certificate as described in this Agreement. By distributing Your
Application in this manner on Registered Devices, You represent and warrant to Apple that Your
Application complies with the Documentation and Program Requirements then in effect and You
agree to cooperate with Apple and to answer questions and provide information about Your
Application, as reasonably requested by Apple. You also agree to be solely responsible for
determining which individuals within Your company, organization, educational institution or
affiliated group should have access to and use of Your Applications and Registered Devices, and
for managing such Registered Devices. Apple shall not be responsible for any costs, expenses,
damages, losses (including without limitation lost business opportunities or lost profits) or other
liabilities You may incur as a result of distributing Your Applications in this manner, or for Your
failure to adequately manage, limit or otherwise control the access to and use of Your
Applications and Registered Devices. You will be responsible for attaching or otherwise
including, at Your discretion, any relevant usage terms with Your Applications. Apple will not be
responsible for any violations of Your usage terms. You will be solely responsible for all user
assistance, warranty and support of Your Applications.
7.4
TestFlight Distribution
A.
Internal Distribution to Authorized Developers and App Store Connect users
You may use TestFlight for internal distribution of pre-release versions of Your Applications to a
limited number of Your Authorized Developers or Your App Store Connect users who are
members of Your company or organization, but solely for their internal use in testing, evaluating
and/or developing Your Applications. Apple reserves the right to require You to cease distribution
of such Applications to Your Authorized Developers or Your App Store Connect users through
TestFlight, or to any particular Authorized Developer or App Store Connect user, at any time in its
sole discretion.
Program Agreement
B.
External Distribution to Beta Testers
You may also use TestFlight for external distribution of pre-release versions of Your Applications
to a limited number of Beta Testers (as specified in App Store Connect), but solely for their
testing and evaluation of such pre-release versions of Your Applications and only if Your
Application has been approved for such distribution by Apple as set forth in Section 6.4
(TestFlight Submission). You may not charge Your Beta Testers fees of any kind to participate
in Apple’s TestFlight or for the use of any such pre-release versions. You may not use TestFlight
for purposes that are not related to improving the quality, performance, or usability of pre-release
versions of Your Application (e.g., continuous distribution of demo versions of Your Application in
an attempt to circumvent the App Store or providing trial versions of Your Applications for
purposes of soliciting favorable App Store ratings are prohibited uses). Further, if Your
Application is primarily intended for children, You must verify that Your Beta Testers are of the
age of majority in their jurisdiction. If You choose to add Beta Testers to TestFlight, then You are
assuming responsibility for any invitations sent to such end-users and for obtaining their consent
to contact them. By uploading email addresses for the purposes of sending invites to Beta
Testers, You warrant that You have an appropriate legal basis for using such emails addresses
for the purposes of sending invites. If a Beta Tester requests that You stop contacting them
(either through TestFlight or otherwise), then You agree to promptly do so.
C.
Use of TestFlight Information
To the extent that TestFlight provides You with beta analytics information about Your end-user’s
use of pre-release versions of Your Application (e.g., installation time, frequency of an individual’s
use of an App, etc.) and/or other related information, You agree to use such data solely for
purposes of improving Your Applications and related products. You agree not to provide such
information to any third parties, except for a Service Provider who is assisting You in processing
and analyzing such data on Your behalf and who is not permitted to use it for any other purpose
or disclose it to any other party (and then only to the limited extent not prohibited by Apple). For
clarity, You must not aggregate (or permit any third-party to aggregate) beta analytics information
provided to You by Apple for Your Applications as part of TestFlight with other developers’ beta
analytics information, or contribute such information to a repository for cross-developer beta
analytics information. Further, You must not use any beta analytics information provided through
TestFlight for purposes of de-anonymizing information obtained from or regarding a particular
device or end-user outside of TestFlight (e.g., You may not attempt to connect data gathered
through TestFlight for a particular end-user with information that is provided in an anonymized
form through Apple’s analytics service).
Libraries:
7.5
Distribution of Libraries
You can develop Libraries using the Apple Software. Notwithstanding anything to the contrary in
the Xcode and Apple SDKs Agreement, under this Agreement You may develop Libraries for iOS,
watchOS, and tvOS using the applicable Apple SDKs that are provided as part of the Xcode and
Apple SDKs license, provided that any such Libraries are developed and distributed solely for use
with an iOS Product, Apple Watch, or Apple TV and that You limit use of such Libraries only to
use with such products. If Apple determines that Your Library is not designed for use with an iOS
Product, Apple Watch, or Apple TV, then Apple may require You to cease distribution of Your
Library at any time, and You agree to promptly cease all distribution of such Library upon notice
from Apple and cooperate with Apple to remove any remaining copies of such Library. For clarity,
the foregoing limitation is not intended to prohibit the development of libraries for macOS.
7.6
No Other Distribution Authorized Under this Agreement
Except for the distribution of freely available Licensed Applications through the App Store or
Custom App Distribution in accordance with Sections 7.1 and 7.2, the distribution of Applications
for use on Registered Devices as set forth in Section 7.2 (Ad Hoc Distribution), the distribution of
Applications for beta testing through TestFlight as set forth in Section 7.4, the distribution of
Libraries in accordance with Section 7.5, the distribution of Passes in accordance with
Program Agreement
Attachment 5, the delivery of Safari Push Notifications on macOS, the distribution of Safari
Extensions on macOS, the distribution of Applications and libraries for macOS, and/or as
otherwise permitted herein, no other distribution of programs or applications developed using the
Apple Software is authorized or permitted hereunder. In the absence of a separate agreement
with Apple, You agree not to distribute Your Application for iOS Products, Apple Watch, or Apple
TV to third parties via other distribution methods or to enable or permit others to do so. You
agree to distribute Your Covered Products only in accordance with the terms of this Agreement.
8.
Program Fees
As consideration for the rights and licenses granted to You under this Agreement and Your
participation in the Program, You agree to pay Apple the annual Program fee set forth on the
Program website, unless You have received a valid fee waiver from Apple. Such fee is non-
refundable, and any taxes that may be levied on the Apple Software, Apple Services or Your use
of the Program shall be Your responsibility. Your Program fees must be paid up and not in
arrears at the time You submit (or resubmit) Applications to Apple under this Agreement, and
Your continued use of the Program web portal and Services is subject to Your payment of such
fees, where applicable. If You opt-in to have Your annual Program fees paid on an auto-
renewing basis, then You agree that Apple may charge the credit card that You have on file with
Apple for such fees, subject to the terms You agree to on the Program web portal when You
choose to enroll in an auto-renewing membership.
9.
Confidentiality
9.1
Information Deemed Apple Confidential
You agree that all pre-release versions of the Apple Software and Apple Services (including pre-
release Documentation), pre-release versions of Apple hardware, the FPS Deployment Package,
any terms and conditions contained herein that disclose pre-release features, and the terms and
conditions of Schedule 2 and Schedule 3 will be deemed “Apple Confidential Information”;
provided however that upon the commercial release of the Apple Software the terms and
conditions that disclose pre-release features of the Apple Software or services will no longer be
confidential. Notwithstanding the foregoing, Apple Confidential Information will not include:
(i) information that is generally and legitimately available to the public through no fault or breach
of Yours, (ii) information that is generally made available to the public by Apple, (iii) information
that is independently developed by You without the use of any Apple Confidential Information,
(iv) information that was rightfully obtained from a third party who had the right to transfer or
disclose it to You without limitation, or (v) any FOSS included in the Apple Software and
accompanied by licensing terms that do not impose confidentiality obligations on the use or
disclosure of such FOSS. Further, Apple agrees that You will not be bound by the foregoing
confidentiality terms with regard to technical information about pre-release Apple Software and
services disclosed by Apple at WWDC (Apple’s Worldwide Developers Conference), except that
You may not post screen shots of, write public reviews of, or redistribute any pre-release Apple
Software, Apple Services or hardware.
9.2
Obligations Regarding Apple Confidential Information
You agree to protect Apple Confidential Information using at least the same degree of care that
You use to protect Your own confidential information of similar importance, but no less than a
reasonable degree of care. You agree to use Apple Confidential Information solely for the
purpose of exercising Your rights and performing Your obligations under this Agreement and
agree not to use Apple Confidential Information for any other purpose, for Your own or any third
party’s benefit, without Apple's prior written consent. You further agree not to disclose or
disseminate Apple Confidential Information to anyone other than: (i) those of Your employees and
contractors, or those of Your faculty and staff if You are an educational institution, who have a
need to know and who are bound by a written agreement that prohibits unauthorized use or
disclosure of the Apple Confidential Information; or (ii) except as otherwise agreed or permitted in
writing by Apple. You may disclose Apple Confidential Information to the extent required by law,
provided that You take reasonable steps to notify Apple of such requirement before disclosing the
Program Agreement
Apple Confidential Information and to obtain protective treatment of the Apple Confidential
Information. You acknowledge that damages for improper disclosure of Apple Confidential
Information may be irreparable; therefore, Apple is entitled to seek equitable relief, including
injunction and preliminary injunction, in addition to all other remedies.
9.3
Information Submitted to Apple Not Deemed Confidential
Apple works with many application and software developers and some of their products may be
similar to or compete with Your Applications. Apple may also be developing its own similar or
competing applications and products or may decide to do so in the future. To avoid potential
misunderstandings and except as otherwise expressly set forth herein, Apple cannot agree, and
expressly disclaims, any confidentiality obligations or use restrictions, express or implied, with
respect to any information that You may provide in connection with this Agreement or the
Program, including but not limited to information about Your Application, Licensed Application
Information, and metadata (such disclosures will be referred to as “Licensee Disclosures”). You
agree that any such Licensee Disclosures will be non-confidential. Except as otherwise
expressly set forth herein, Apple will be free to use and disclose any Licensee Disclosures on an
unrestricted basis without notifying or compensating You. You release Apple from all liability and
obligations that may arise from the receipt, review, use, or disclosure of any portion of any
Licensee Disclosures. Any physical materials You submit to Apple will become Apple property
and Apple will have no obligation to return those materials to You or to certify their destruction.
9.4
Press Releases and Other Publicity
You may not issue any press releases or make any other public statements regarding this
Agreement, its terms and conditions, or the relationship of the parties without Apple’s express
prior written approval, which may be withheld at Apple’s discretion.
10.
Indemnification
To the extent permitted by applicable law, You agree to indemnify and hold harmless, and upon
Apple’s request, defend, Apple, its directors, officers, employees, independent contractors and
agents (each an “Apple Indemnified Party”) from any and all claims, losses, liabilities, damages,
taxes, expenses and costs, including without limitation, attorneys’ fees and court costs
(collectively, “Losses”), incurred by an Apple Indemnified Party and arising from or related to any
of the following (but excluding for purposes of this Section, any Application for macOS that is
distributed outside of the App Store and does not use any Apple Services or Certificates): (i) Your
breach of any certification, covenant, obligation, representation or warranty in this Agreement,
including Schedule 2 and Schedule 3 (if applicable); (ii) any claims that Your Covered Product or
the distribution, sale, offer for sale, use or importation of Your Covered Product (whether alone or
as an essential part of a combination), Licensed Application Information, metadata, or Pass
Information violate or infringe any third party intellectual property or proprietary rights; (iii) Your
breach of any of Your obligations under the EULA (as defined in Schedule 1 or Schedule 2 or
Schedule 3 (if applicable)) for Your Licensed Application; (iv) Apple’s permitted use, promotion or
delivery of Your Licensed Application, Licensed Application Information, Safari Push Notification,
Safari Extension (if applicable), Pass, Pass Information, metadata, related trademarks and logos,
or images and other materials that You provide to Apple under this Agreement, including
Schedule 2 or Schedule 3 (if applicable); (v) any claims, including but not limited to any end-user
claims, regarding Your Covered Products, Licensed Application Information, Pass Information, or
related logos, trademarks, content or images; or (vi) Your use (including Your Authorized
Developers’ use) of the Apple Software or services, Your Licensed Application Information, Pass
Information, metadata, Your Authorized Test Units, Your Registered Devices, Your Covered
Products, or Your development and distribution of any of the foregoing.
You acknowledge that neither the Apple Software nor any Services are intended for use in the
development of Covered Products in which errors or inaccuracies in the content, functionality,
services, data or information provided by any of the foregoing or the failure of any of the
foregoing, could lead to death, personal injury, or severe physical or environmental damage, and,
Program Agreement
to the extent permitted by law, You hereby agree to indemnify, defend and hold harmless each
Apple Indemnified Party from any Losses incurred by such Apple Indemnified Party by reason of
any such use.
In no event may You enter into any settlement or like agreement with a third party that affects
Apple's rights or binds Apple in any way, without the prior written consent of Apple.
11.
Term and Termination
11.1
Term
The Term of this Agreement shall extend until the one (1) year anniversary of the original
activation date of Your Program account. Thereafter, subject to Your payment of annual renewal
fees and compliance with the terms of this Agreement, the Term will automatically renew for
successive one (1) year terms, unless sooner terminated in accordance with this Agreement.
11.2
Termination
This Agreement and all rights and licenses granted by Apple hereunder and any services
provided hereunder will terminate, effective immediately upon notice from Apple:
(a) if You or any of Your Authorized Developers fail to comply with any term of this Agreement
other than those set forth below in this Section 11.2 and fail to cure such breach within 30 days
after becoming aware of or receiving notice of such breach;
(b) if You or any of Your Authorized Developers fail to comply with the terms of Section 9
(Confidentiality);
(c) in the event of the circumstances described in the subsection entitled “Severability” below;
(d) if You, at any time during the Term, commence an action for patent infringement against
Apple;
(e) if You become insolvent, fail to pay Your debts when due, dissolve or cease to do business,
file for bankruptcy, or have filed against You a petition in bankruptcy; or
(f) if You engage, or encourage others to engage, in any misleading, fraudulent, improper,
unlawful or dishonest act relating to this Agreement, including, but not limited to, misrepresenting
the nature of Your submitted Application (e.g., hiding or trying to hide functionality from Apple’s
review, falsifying consumer reviews for Your Application, engaging in payment fraud, etc.).
Apple may also terminate this Agreement, or suspend Your rights to use the Apple Software or
services, if You fail to accept any new Program Requirements or Agreement terms as described
in Section 4. Either party may terminate this Agreement for its convenience, for any reason or no
reason, effective 30 days after providing the other party with written notice of its intent to
terminate.
11.3
Effect of Termination
Upon the termination of this Agreement for any reason, You agree to immediately cease all use of
the Apple Software and services and erase and destroy all copies, full or partial, of the Apple
Software and any information pertaining to the services (including Your Push Application ID) and
all copies of Apple Confidential Information in Your and Your Authorized Developers' possession
or control. At Apple’s request, You agree to provide written certification of such destruction to
Apple. Upon the expiration of the Delivery Period defined and set forth in Schedule 1, all
Licensed Applications and Licensed Application Information in Apple’s possession or control shall
be deleted or destroyed within a reasonable time thereafter, excluding any archival copies
maintained in accordance with Apple’s standard business practices or required to be maintained
by applicable law, rule or regulation. The following provisions shall survive any termination of this
Agreement: Sections 1, 2.3, 2.5, 2.6, 3.1(d), 3.1(e), 3.1(f), 3.2(d), 3.2(e), 3.2(f), 3.2(g), and 3.3,
the second paragraph of Section 5.1 (excluding the last two sentences other than the restrictions,
which shall survive), the third paragraph of Section 5.1, the last sentence of the first paragraph of
Section 5.3 and the limitations and restrictions of Section 5.3, Section 5.4, the first sentence of
and the restrictions of Section 6.5, the restrictions of Section 6.6, the second paragraph of
Section 6.8, Section 7.1 (Schedule 1 for the Delivery Period), the restrictions of Section 7.3, 7.4,
Program Agreement
and 7.5, Section 7.6, Section 9 through14 inclusive; within Attachment 1, the last sentence of
Section 1.1, Section 2, Section 3.2 (but only for existing promotions), the second and third
sentences of Section 4, Section 5, and Section 6; within Attachment 2, Sections 1.3, 2, 3, 4, 5, 6,
and 7; within Attachment 3, Sections 1, 2 (except the second sentence of Section 2.1), 3 and 4;
within Attachment 4, Sections 1.2, 1.5, 1.6, 2, 3, and 4; within Attachment 5, Sections 2.2, 2.3, 2.4
(but only for existing promotions), 3.3, and 5; within Attachment 6, Sections 1.2, 1.3, 2, 3, and 4;
and within Attachment 7, Section 1.1, and the last paragraph of Section 1.2 (but only for existing
promotions). Apple will not be liable for compensation, indemnity, or damages of any sort as a
result of terminating this Agreement in accordance with its terms, and termination of this
Agreement will be without prejudice to any other right or remedy Apple may have, now or in the
future.
12.
NO WARRANTY
The Apple Software or Services may contain inaccuracies or errors that could cause failures or
loss of data and it may be incomplete. Apple and its licensors reserve the right to change,
suspend, remove, or disable access to any Services (or any part thereof) at any time without
notice. In no event will Apple or its licensors be liable for the removal of or disabling of access to
any such Services. Apple or its licensors may also impose limits on the use of or access to
certain Services, or may remove the Services for indefinite time periods or cancel the Services at
any time and in any case and without notice or liability. TO THE MAXIMUM EXTENT
PERMITTED BY APPLICABLE LAW, YOU EXPRESSLY ACKNOWLEDGE AND AGREE THAT
USE OF THE APPLE SOFTWARE, SECURITY SOLUTION, AND ANY SERVICES IS AT YOUR
SOLE RISK AND THAT THE ENTIRE RISK AS TO SATISFACTORY QUALITY,
PERFORMANCE, ACCURACY AND EFFORT IS WITH YOU. THE APPLE SOFTWARE,
SECURITY SOLUTION, AND ANY SERVICES ARE PROVIDED “AS IS” AND “AS AVAILABLE”,
WITH ALL FAULTS AND WITHOUT WARRANTY OF ANY KIND, AND APPLE, APPLE’S
AGENTS AND APPLE'S LICENSORS (COLLECTIVELY REFERRED TO AS “APPLE” FOR
THE PURPOSES OF SECTIONS 12 AND 13) HEREBY DISCLAIM ALL WARRANTIES AND
CONDITIONS WITH RESPECT TO THE APPLE SOFTWARE, SECURITY SOLUTION, AND
SERVICES, EITHER EXPRESS, IMPLIED OR STATUTORY, INCLUDING WITHOUT
LIMITATION THE IMPLIED WARRANTIES AND CONDITIONS OF MERCHANTABILITY,
SATISFACTORY QUALITY, FITNESS FOR A PARTICULAR PURPOSE, ACCURACY,
TIMELINESS, AND NON-INFRINGEMENT OF THIRD PARTY RIGHTS. APPLE DOES NOT
WARRANT AGAINST INTERFERENCE WITH YOUR ENJOYMENT OF THE APPLE
SOFTWARE, SECURITY SOLUTION, OR SERVICES, THAT THE APPLE SOFTWARE,
SECURITY SOLUTION, OR SERVICES WILL MEET YOUR REQUIREMENTS, THAT THE
OPERATION OF THE APPLE SOFTWARE, SECURITY SOLUTION, OR THE PROVISION OF
SERVICES WILL BE UNINTERRUPTED, TIMELY, SECURE OR ERROR-FREE, THAT
DEFECTS OR ERRORS IN THE APPLE SOFTWARE, SECURITY SOLUTION, OR SERVICES
WILL BE CORRECTED, OR THAT THE APPLE SOFTWARE, SECURITY SOLUTION, OR
SERVICES WILL BE COMPATIBLE WITH FUTURE APPLE PRODUCTS, SERVICES OR
SOFTWARE OR ANY THIRD PARTY SOFTWARE, APPLICATIONS, OR SERVICES, OR THAT
ANY INFORMATION STORED OR TRANSMITTED THROUGH ANY APPLE SOFTWARE OR
SERVICES WILL NOT BE LOST, CORRUPTED OR DAMAGED. YOU ACKNOWLEDGE THAT
THE APPLE SOFTWARE AND SERVICES ARE NOT INTENDED OR SUITABLE FOR USE IN
SITUATIONS OR ENVIRONMENTS WHERE ERRORS, DELAYS, FAILURES OR
INACCURACIES IN THE TRANSMISSION OR STORAGE OF DATA OR INFORMATION BY OR
THROUGH THE APPLE SOFTWARE OR SERVICES COULD LEAD TO DEATH, PERSONAL
INJURY, OR FINANCIAL, PHYSICAL, PROPERTY OR ENVIRONMENTAL DAMAGE,
INCLUDING WITHOUT LIMITATION THE OPERATION OF NUCLEAR FACILITIES, AIRCRAFT
NAVIGATION OR COMMUNICATION SYSTEMS, AIR TRAFFIC CONTROL, LIFE SUPPORT
OR WEAPONS SYSTEMS. NO ORAL OR WRITTEN INFORMATION OR ADVICE GIVEN BY
APPLE OR AN APPLE AUTHORIZED REPRESENTATIVE WILL CREATE A WARRANTY NOT
EXPRESSLY STATED IN THIS AGREEMENT. SHOULD THE APPLE SOFTWARE, SECURITY
SOLUTION, OR SERVICES PROVE DEFECTIVE, YOU ASSUME THE ENTIRE COST OF ALL
Program Agreement
NECESSARY SERVICING, REPAIR OR CORRECTION. Location data as well as any maps
data provided by any Services or software is for basic navigational purposes only and is not
intended to be relied upon in situations where precise location information is needed or where
erroneous, inaccurate or incomplete location data may lead to death, personal injury, property or
environmental damage. Neither Apple nor any of its licensors guarantees the availability,
accuracy, completeness, reliability, or timeliness of location data or any other data or information
displayed by any Services or software.
13.
LIMITATION OF LIABILITY
TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW, IN NO EVENT WILL APPLE BE
LIABLE FOR PERSONAL INJURY, OR ANY INCIDENTAL, SPECIAL, INDIRECT,
CONSEQUENTIAL OR PUNITIVE DAMAGES WHATSOEVER, INCLUDING, WITHOUT
LIMITATION, DAMAGES FOR LOSS OF PROFITS, LOSS OF DATA, BUSINESS
INTERRUPTION OR ANY OTHER COMMERCIAL DAMAGES OR LOSSES, ARISING OUT OF
OR RELATED TO THIS AGREEMENT, YOUR USE OR INABILITY TO USE THE APPLE
SOFTWARE, SECURITY SOLUTION, SERVICES, APPLE CERTIFICATES, OR YOUR
DEVELOPMENT EFFORTS OR PARTICIPATION IN THE PROGRAM, HOWEVER CAUSED,
WHETHER UNDER A THEORY OF CONTRACT, WARRANTY, TORT (INCLUDING
NEGLIGENCE), PRODUCTS LIABILITY, OR OTHERWISE, EVEN IF APPLE HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, AND NOTWITHSTANDING THE
FAILURE OF ESSENTIAL PURPOSE OF ANY REMEDY. In no event shall Apple’s total liability
to You under this Agreement for all damages (other than as may be required by applicable law in
cases involving personal injury) exceed the amount of fifty dollars ($50.00).
14.
General Legal Terms
14.1
Third Party Notices
Portions of the Apple Software or Services may utilize or include third party software and other
copyrighted material. Acknowledgements, licensing terms and disclaimers for such material are
contained in the electronic documentation for the Apple Software and Services, and Your use of
such material is governed by their respective terms.
14.2
Consent to Collection and Use of Data
A.
Pre-Release Versions of iOS, watchOS, tvOS, and macOS
In order to provide, test and help Apple, its partners, and third party developers improve their
products and services, and unless You or Your Authorized Developers opt out in the pre-release
versions of iOS, watchOS, tvOS, or macOS, as applicable, You acknowledge that Apple and its
subsidiaries and agents will be collecting, using, storing, transmitting, processing and analyzing
(collectively, “Collecting”) diagnostic, technical, and usage logs and information from Your
Authorized Test Units (that are running pre-release versions of the Apple Software and services)
as part of the developer seeding process. This information will be Collected in a form that does
not personally identify You or Your Authorized Developers and may be Collected from Your
Authorized Test Units at any time, including when You or Your Authorized Developers sync to
iTunes or automatically over a secure over-the-air connection. The information that would be
Collected includes, but is not limited to, general diagnostic and usage data, various unique device
identifiers, various unique system or hardware identifiers, details about hardware and operating
system specifications, performance statistics, and data about how You use Your Authorized Test
Unit, system and application software, and peripherals, and, if Location Services is enabled,
certain location information. You agree that Apple may share such diagnostic, technical, and
usage logs and information with partners and third-party developers for purposes of allowing
them to improve their products and services that operate on or in connection with Apple-branded
products. By installing or using pre-release versions of iOS, watchOS, tvOS, or macOS on
Your Authorized Test Units, You acknowledge and agree that Apple and its subsidiaries
and agents have Your permission to Collect all such information and use it as set forth
above in this Section.
Program Agreement
B.
Other Pre-Release Apple Software and Services
In order to test, provide and improve Apple’s products and services, and only if You choose to
install or use other pre-release Apple Software or Services provided as part of the developer
seeding process or Program, You acknowledge that Apple and its subsidiaries and agents may
be Collecting diagnostic, technical, usage and related information from other pre-release Apple
Software and Services. Apple will notify You about the Collection of such information on the
Program web portal, and You should carefully review the Release Notes and other information
disclosed by Apple in such location prior to choosing whether or not to install or use any such pre-
release Apple Software or Services. By installing or using such pre-release Apple Software
and Services, You acknowledge and agree that Apple and its subsidiaries and agents have
Your permission to Collect any and all such information and use it as set forth above.
C.
Device Deployment Services
In order to set up and use the device provisioning, account authentication, and deployment
features of the Apple Software and Services, certain unique identifiers for Your computer, iOS
devices, watchOS devices, tvOS devices, and account information may be needed. These
unique identifiers may include Your email address, Your Apple ID, a hardware identifier for Your
computer, and device identifiers entered by You into the Apple Software or Services for Apple-
branded products running iOS, watchOS, or tvOS. Such identifiers may be logged in association
with Your interaction with the Service and Your use of these features and the Apple Software and
Services. By using these features, You agree that Apple and its subsidiaries and agents
may Collect this information for the purpose of providing the Apple Software and Services,
including using such identifiers for account verification and anti-fraud measures. If You do
not want to provide this information, do not use the provisioning, deployment or authentication
features of the Apple Software or Services.
D.
Apple Services
In order to test, provide and improve Apple’s products and services, and only if You choose to
use the Services provided hereunder (and except as otherwise provided herein), You
acknowledge that Apple and its subsidiaries and agents may be Collecting diagnostic, technical,
usage and related information from the Apple Services. Some of this information will be
Collected in a form that does not personally identify You. However, in some cases, Apple may
need to Collect information that would personally identify You, but only if Apple has a good faith
belief that such Collection is reasonably necessary to: (a) provide the Apple Services; (b) comply
with legal process or request; (c) verify compliance with the terms of this Agreement; (d) prevent
fraud, including investigating any potential technical issues or violations; or (e) protect the rights,
property, security or safety of Apple, its developers, customers or the public as required or
permitted by law. By installing or using such Apple Services, You acknowledge and agree
that Apple and its subsidiaries and agents have Your permission to Collect any and all
such information and use it as set forth in this Section. Further, You agree that Apple may
share the diagnostic, technical, and usage logs and information (excluding personally identifiable
information) with partners and third-party developers for purposes of allowing them to improve
their products and services that operate on or in connection with Apple-branded products.
E.
Privacy Policy
Data collected pursuant to this Section 14.2 will be treated in accordance with Apple’s Privacy
Policy which can be viewed at http://www.apple.com/legal/privacy.
14.3
Assignment; Relationship of the Parties
This Agreement may not be assigned, nor may any of Your obligations under this Agreement be
delegated, in whole or in part, by You by operation of law, merger, or any other means without
Apple’s express prior written consent and any attempted assignment without such consent will be
null and void. To submit a request for Apple’s consent to assignment, please email:
[email protected]. Except for the agency appointment as specifically set forth in
Schedule 1 (if applicable), this Agreement will not be construed as creating any other agency
relationship, or a partnership, joint venture, fiduciary duty, or any other form of legal association
Program Agreement
between You and Apple, and You will not represent to the contrary, whether expressly, by
implication, appearance or otherwise. This Agreement is not for the benefit of any third parties.
14.4
Independent Development
Nothing in this Agreement will impair Apple's right to develop, acquire, license, market, promote,
or distribute products or technologies that perform the same or similar functions as, or otherwise
compete with, Licensed Applications, Covered Products, or any other products or technologies
that You may develop, produce, market, or distribute.
14.5
Notices
Any notices relating to this Agreement shall be in writing. Notices will be deemed given by Apple
when sent to You at the email address or mailing address You provided during the sign-up
process. All notices to Apple relating to this Agreement will be deemed given (a) when delivered
personally, (b) three business days after having been sent by commercial overnight carrier with
written proof of delivery, and (c) five business days after having been sent by first class or
certified mail, postage prepaid, to this Apple address: Apple Developer Program Licensing, Apple
Inc., App Store Legal, One Apple Park Way, 169-4ISM, Cupertino, California, 95014 U.S.A. You
consent to receive notices by email and agree that any such notices that Apple sends You
electronically will satisfy any legal communication requirements. A party may change its email or
mailing address by giving the other written notice as described above.
14.6
Severability
If a court of competent jurisdiction finds any clause of this Agreement to be unenforceable for any
reason, that clause of this Agreement shall be enforced to the maximum extent permissible so as
to effect the intent of the parties, and the remainder of this Agreement shall continue in full force
and effect. However, if applicable law prohibits or restricts You from fully and specifically
complying with, or appointing Apple and Apple Subsidiaries as Your agent under Schedule 1 or
the Sections of this Agreement entitled “Internal Use License and Restrictions”, “Your
Obligations” or “Apple Certificates; Revocation”, or prevents the enforceability of any of those
Sections or Schedule 1, this Agreement will immediately terminate and You must immediately
discontinue any use of the Apple Software as described in the Section entitled “Term and
Termination.”
14.7
Waiver and Construction
Failure by Apple to enforce any provision of this Agreement shall not be deemed a waiver of
future enforcement of that or any other provision. Any laws or regulations that provide that the
language of a contract will be construed against the drafter will not apply to this Agreement.
Section headings are for convenience only and are not to be considered in construing or
interpreting this Agreement.
14.8
Export Control
You may not use, export, re-export, import, sell or transfer the Apple Software except as
authorized by United States law, the laws of the jurisdiction in which You obtained the Apple
Software, and any other applicable laws and regulations. In particular, but without limitation, the
Apple Software may not be exported or re-exported (a) into any U.S. embargoed countries or (b)
to anyone on the U.S. Treasury Department’s list of Specially Designated Nationals or the U.S.
Department of Commerce’s Denied Persons List or Entity List or any other restricted party lists.
By using the Apple Software, You represent and warrant that You are not located in any such
country or on any such list. You also agree that You will not use the Apple Software for any
purposes prohibited by United States law, including, without limitation, the development, design,
manufacture or production of nuclear, missile, chemical or biological weapons. You certify that
pre-release versions of the Apple Software will only be used for development and testing
purposes, and will not be rented, sold, leased, sublicensed, assigned, or otherwise transferred.
Further, You certify that You will not transfer or export any product, process or service that is a
direct product of such pre-release Apple Software.
Program Agreement
14.9
Government End-users
The Apple Software and Documentation are “Commercial Items”, as that term is defined at 48
C.F.R. §2.101, consisting of “Commercial Computer Software” and “Commercial Computer
Software Documentation”, as such terms are used in 48 C.F.R. §12.212 or 48 C.F.R. §227.7202,
as applicable. Consistent with 48 C.F.R. §12.212 or 48 C.F.R. §227.7202-1 through 227.7202-4,
as applicable, the Commercial Computer Software and Commercial Computer Software
Documentation are being licensed to U.S. Government end-users (a) only as Commercial Items
and (b) with only those rights as are granted to all other end-users pursuant to the terms and
conditions herein. Unpublished-rights reserved under the copyright laws of the United States.
14.10
Dispute Resolution; Governing Law
Any litigation or other dispute resolution between You and Apple arising out of or relating to this
Agreement, the Apple Software, or Your relationship with Apple will take place in the Northern
District of California, and You and Apple hereby consent to the personal jurisdiction of and
exclusive venue in the state and federal courts within that District with respect any such litigation
or dispute resolution. This Agreement will be governed by and construed in accordance with the
laws of the United States and the State of California, except that body of California law
concerning conflicts of law. Notwithstanding the foregoing:
(a) If You are an agency, instrumentality or department of the federal government of the United
States, then this Agreement shall be governed in accordance with the laws of the United States of
America, and in the absence of applicable federal law, the laws of the State of California will
apply. Further, and notwithstanding anything to the contrary in this Agreement (including but not
limited to Section 10 (Indemnification)), all claims, demands, complaints and disputes will be
subject to the Contract Disputes Act (41 U.S.C. §§601-613), the Tucker Act (28 U.S.C. § 1346(a)
and § 1491), or the Federal Tort Claims Act (28 U.S.C. §§ 1346(b), 2401-2402, 2671-2672, 2674-
2680), as applicable, or other applicable governing authority. For the avoidance of doubt, if You
are an agency, instrumentality, or department of the federal, state or local government of the U.S.
or a U.S. public and accredited educational institution, then Your indemnification obligations are
only applicable to the extent they would not cause You to violate any applicable law (e.g., the
Anti-Deficiency Act), and You have any legally required authorization or authorizing statute;
(b) If You (as an entity entering into this Agreement) are a U.S. public and accredited educational
institution or an agency, instrumentality, or department of a state or local government within the
United States, then (a) this Agreement will be governed and construed in accordance with the
laws of the state (within the U.S.) in which Your entity is domiciled, except that body of state law
concerning conflicts of law; and (b) any litigation or other dispute resolution between You and
Apple arising out of or relating to this Agreement, the Apple Software, or Your relationship with
Apple will take place in federal court within the Northern District of California, and You and Apple
hereby consent to the personal jurisdiction of and exclusive venue of such District unless such
consent is expressly prohibited by the laws of the state in which Your entity is domiciled; and
(c) If You are an international, intergovernmental organization that has been conferred immunity
from the jurisdiction of national courts through Your intergovernmental charter or agreement, then
any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall
be determined by arbitration administered by the International Centre for Dispute Resolution in
accordance with its International Arbitration Rules. The place of arbitration shall be London,
England; the language shall be English; and the number of arbitrators shall be three. Upon
Apple’s request, You agree to provide evidence of Your status as an intergovernmental
organization with such privileges and immunities.
This Agreement shall not be governed by the United Nations Convention on Contracts for the
International Sale of Goods, the application of which is expressly excluded.
14.11
Entire Agreement; Governing Language
This Agreement constitutes the entire agreement between the parties with respect to the use of
the Apple Software, Apple Services and Apple Certificates licensed hereunder and, except as
otherwise set forth herein, supersedes all prior understandings and agreements regarding its
Program Agreement
subject matter. Notwithstanding the foregoing, to the extent that You are provided with pre-
release materials under the Program and such pre-release materials are subject to a separate
license agreement, You agree that the license agreement accompanying such materials in
addition to Section 9 (Confidentiality) of this Agreement shall also govern Your use of such
materials. If You have entered or later enter into the Xcode and Apple SDKs Agreement, this
Apple Developer Program License Agreement will govern in the event of any inconsistencies
between the two with respect to the same subject matter; provided, however, that this Apple
Developer Program License Agreement is not intended to prevent You from exercising any rights
granted to You in the Xcode and Apple SDKs Agreement in accordance with the terms and
conditions set forth therein. This Agreement may be modified only: (a) by a written amendment
signed by both parties, or (b) to the extent expressly permitted by this Agreement (for example,
by Apple by written or email notice to You). Any translation is provided as a courtesy to You, and
in the event of a dispute between the English and any non-English version, the English version of
this Agreement shall govern, to the extent not prohibited by local law in Your jurisdiction. If You
are located in the province of Quebec, Canada or are a government organization within France,
then the following clause applies to You: The parties hereby confirm that they have requested
that this Agreement and all related documents be drafted in English. Les parties ont exigé que le
présent contrat et tous les documents connexes soient rédigés en anglais.
Program Agreement
Attachment 1
(to the Agreement)
Additional Terms for Apple Push Notification Service and Local Notifications
The following terms are in addition to the terms of the Agreement and apply to any use of the
APN (Apple Push Notification Service):
1.
Use of the APN and Local Notifications
1.1
You may use the APN only in Your Applications, Your Passes, and/or in sending Safari
Push Notifications to the macOS desktop of users of Your Site who have opted in to receive
Notifications through Safari on macOS. You, Your Application and/or Your Pass may access the
APN only via the APN API and only if You have been assigned a Push Application ID by Apple.
Except for a Service Provider who is assisting You with using the APN, You agree not to share
Your Push Application ID with any third party. You understand that You will not be permitted to
access or use the APN after expiration or termination of Your Agreement.
1.2
You are permitted to use the APN and the APN APIs only for the purpose of sending
Push Notifications to Your Application, Your Pass, and/or to the macOS desktop of users of Your
Site who have opted in to receive Notifications through Safari on macOS as expressly permitted
by the Agreement, the APN Documentation and all applicable laws and regulations (including all
intellectual property laws). You further agree that You must disclose to Apple any use of the APN
as part of the submission process for Your Application.
1.3
You understand that before You send an end-user any Push Notifications through the
APN, the end-user must consent to receive such Notifications. You agree not to disable, override
or otherwise interfere with any Apple-implemented consent panels or any Apple system
preferences for enabling or disabling Notification functionality. If the end-user’s consent to
receive Push Notifications is denied or later withdrawn, You may not send the end-user Push
Notifications.
2.
Additional Requirements
2.1
You may not use the APN or Local Notifications for the purpose of sending unsolicited
messages to end-users or for the purpose of phishing or spamming, including, but not limited to,
engaging in any types of activities that violate anti-spamming laws and regulations, or that are
otherwise improper, inappropriate or illegal. The APN and Local Notifications should be used for
sending relevant messages to a user that provide a benefit (e.g., a response to an end-user
request for information, provision of pertinent information relevant to the Application).
2.2
You may not use the APN or Local Notifications for the purposes of advertising, product
promotion, or direct marketing of any kind (e.g., up-selling, cross-selling, etc.), including, but not
limited to, sending any messages to promote the use of Your Application or advertise the
availability of new features or versions. Notwithstanding the foregoing, You may use the APN or
Local Notifications for promotional purposes in connection with Your Pass so long as such use is
directly related to the Pass, e.g., a store coupon may be sent to Your Pass in Wallet.
2.3
You may not excessively use the overall network capacity or bandwidth of the APN, or
unduly burden an iOS Product, Apple Watch, macOS or an end-user with excessive Push
Notifications or Local Notifications, as may be determined by Apple in its reasonable discretion.
In addition, You agree not to harm or interfere with Apple’s networks or servers, or any third party
servers or networks connected to the APN, or otherwise disrupt other developers’ use of the
APN.
Program Agreement
2.4
You may not use the APN or Local Notifications to send material that contains any
obscene, pornographic, offensive or defamatory content or materials of any kind (text, graphics,
images, photographs, sounds, etc.), or other content or materials that in Apple’s reasonable
judgment may be found objectionable by the end-user of Your Application, Pass or Site.
2.5
You may not transmit, store or otherwise make available any material that contains
viruses or any other computer code, files or programs that may harm, disrupt or limit the normal
operation of the APN or an iOS Product, Apple Watch, or macOS, and You agree not to disable,
spoof, hack or otherwise interfere with any security, digital signing, verification or authentication
mechanisms that are incorporated in or used by the APN, or enable others to do so.
3.
Additional Terms for Website Push IDs
3.1
Subject to the terms of this Agreement, You understand and agree that Safari Push
Notifications that You send using Your Website Push ID must be sent under Your own name,
trademark or brand (e.g., a user should know that the communication is coming from Your Site)
and must include an icon, trademark, logo or other identifying mark for Your Site. You agree not
to misrepresent or impersonate another Site or entity or otherwise mislead users about the
originator of the Safari Push Notification. To the extent that You reference a third party’s
trademark or brand within Your Safari Push Notification, You represent and warrant that You
have any necessary rights.
3.2
By enabling the APN and sending Safari Push Notifications for Your Site as permitted in
this Agreement, You hereby permit Apple to use (i) screen shots of Your Safari Push Notifications
on macOS; and (ii) trademarks and logos associated with such Notifications, for promotional
purposes in Apple’s marketing materials, excluding those portions which You do not have the
right to use for promotional purposes and which You identify in writing to Apple. You also permit
Apple to use images and other materials that You may provide to Apple, at Apple’s reasonable
request, for promotional purposes in marketing materials.
4.
Delivery by the APN or via Local Notifications. You understand and agree that in
order to provide the APN and make Your Push Notifications available on iOS Products, Apple
Watch, or macOS, Apple may transmit Your Push Notifications across various public networks, in
various media, and modify or change Your Push Notifications to comply with the technical and
other requirements for connecting to networks or devices. You acknowledge and agree that the
APN is not, and is not intended to be, a guaranteed or secure delivery service, and You shall not
use or rely upon it as such. Further, as a condition to using the APN or delivering Local
Notifications, You agree not to transmit sensitive personal or confidential information belonging to
an individual (e.g., a social security number, financial account or transactional information, or any
information where the individual may have a reasonable expectation of secure transmission) as
part of any such Notification, and You agree to comply with any applicable notice or consent
requirements with respect to any collection, transmission, maintenance, processing or use of an
end-user’s personal information.
5.
Your Acknowledgements. You acknowledge and agree that:
5.1
Apple may at any time, and from time to time, with or without prior notice to You (a)
modify the APN, including changing or removing any feature or functionality, or (b) modify,
deprecate, reissue or republish the APN APIs. You understand that any such modifications may
require You to change or update Your Applications, Passes or Sites at Your own cost. Apple has
no express or implied obligation to provide, or continue to provide, the APN and may suspend or
discontinue all or any portion of the APN at any time. Apple shall not be liable for any losses,
damages or costs of any kind incurred by You or any other party arising out of or related to any
such service suspension or discontinuation or any such modification of the APN or APN APIs.
Program Agreement
5.2
The APN is not available in all languages or in all countries and Apple makes no
representation that the APN is appropriate or available for use in any particular location. To the
extent You choose to access and use the APN, You do so at Your own initiative and are
responsible for compliance with any applicable laws, including but not limited to any local laws.
5.3
Apple provides the APN to You for Your use with Your Application, Pass, or Site, and
does not provide the APN directly to any end-user. You acknowledge and agree that any Push
Notifications are sent by You, not Apple, to the end-user of Your Application, Pass or Site, and
You are solely liable and responsible for any data or content transmitted therein and for any such
use of the APN. Further, You acknowledge and agree that any Local Notifications are sent by
You, not Apple, to the end-user of Your Application, and You are solely liable and responsible for
any data or content transmitted therein.
5.4
Apple makes no guarantees to You in relation to the availability or uptime of the APN and
is not obligated to provide any maintenance, technical or other support for the APN.
5.5
Apple reserves the right to remove Your access to the APN, limit Your use of the APN, or
revoke Your Push Application ID at any time in its sole discretion.
5.6
Apple may monitor and collect information (including but not limited to technical and
diagnostic information) about Your usage of the APN to aid Apple in improving the APN and other
Apple products or services and to verify Your compliance with this Agreement; provided however
that Apple will not access or disclose the content of any Push Notification unless Apple has a
good faith belief that such access or disclosure is reasonably necessary to: (a) comply with legal
process or request; (b) enforce the terms of this Agreement, including investigation of any
potential violation hereof; (c) detect, prevent or otherwise address security, fraud or technical
issues; or (d) protect the rights, property or safety of Apple, its developers, customers or the
public as required or permitted by law.
6.
Additional Liability Disclaimer. APPLE SHALL NOT BE LIABLE FOR ANY DAMAGES
OR LOSSES ARISING FROM ANY USE OF THE APN, INCLUDING ANY INTERRUPTIONS TO
THE APN OR ANY USE OF NOTIFICATIONS, INCLUDING, BUT NOT LIMITED TO, ANY
POWER OUTAGES, SYSTEM FAILURES, NETWORK ATTACKS, SCHEDULED OR
UNSCHEDULED MAINTENANCE, OR OTHER INTERRUPTIONS.
Program Agreement
Attachment 2
(to the Agreement)
Additional Terms for Use of the In-App Purchase API
The following terms are in addition to the terms of the Agreement and apply to any use of the In-
App Purchase API in Your Application:
1.
Use of the In-App Purchase API
1.1
You may use the In-App Purchase API only to enable end-users to access or receive
content, functionality, or services that You make available for use within Your Application (e.g.,
digital books, additional game levels, access to a turn-by-turn map service). You may not use the
In-App Purchase API to offer goods or services to be used outside of Your Application.
1.2
You must submit to Apple for review and approval all content, functionality, or services
that You plan to provide through the use of the In-App Purchase API in accordance with these
terms and the processes set forth in Section 6 (Application Submission and Selection) of the
Agreement. For all submissions, You must provide the name, text description, price, unique
identifier number, and other information that Apple reasonably requests (collectively, the
“Submission Description”). Apple reserves the right to review the actual content, functionality
or service that has been described in the Submission Descriptions at any time, including, but not
limited to, in the submission process and after approval of the Submission Description by Apple.
If You would like to provide additional content, functionality or services through the In-App
Purchase API that are not described in Your Submission Description, then You must first submit a
new or updated Submission Description for review and approval by Apple prior to making such
items available through the use of the In-App Purchase API. Apple reserves the right to withdraw
its approval of content, functionality, or services previously approved, and You agree to stop
making any such content, functionality, or services available for use within Your Application.
1.3
All content, functionality, and services offered through the In-App Purchase API are
subject to the Program Requirements for Applications, and after such content, services or
functionality are added to a Licensed Application, they will be deemed part of the Licensed
Application and will be subject to all the same obligations and requirements. For clarity,
Applications that provide keyboard extension functionality may not use the In-App Purchase API
within the keyboard extension itself; however, they may continue to use the In-App Purchase API
in separate areas of the Application.
2.
Additional Restrictions
2.1
You may not use the In-App Purchase API to enable an end-user to set up a pre-paid
account to be used for subsequent purchases of content, functionality, or services, or otherwise
create balances or credits that end-users can redeem or use to make purchases at a later time.
2.2
You may not enable end-users to purchase Currency of any kind through the In-App
Purchase API, including but not limited to any Currency for exchange, gifting, redemption,
transfer, trading or use in purchasing or obtaining anything within or outside of Your Application.
“Currency” means any form of currency, points, credits, resources, content or other items or units
recognized by a group of individuals or entities as representing a particular value and that can be
transferred or circulated as a medium of exchange.
2.3
Content and services may be offered through the In-App Purchase API on a subscription
basis (e.g., subscriptions to newspapers and magazines). Rentals of content, services or
functionality through the In-App Purchase API are not allowed (e.g., use of particular content may
not be restricted to a pre-determined, limited period of time).
Program Agreement
2.4
You may not use the In-App Purchase API to send any software updates to Your
Application or otherwise add any additional executable code to Your Application. An In-App
Purchase item must either already exist in Your Application waiting to be unlocked, be streamed
to Your Application after the In-App Purchase API transaction has been completed, or be
downloaded to Your Application solely as data after such transaction has been completed.
2.5
You may not use the In-App Purchase API to deliver any items that contain content or
materials of any kind (text, graphics, images, photographs, sounds, etc.) that in Apple’s
reasonable judgment may be found objectionable or inappropriate, for example, materials that
may be considered obscene, pornographic, or defamatory.
2.6
With the exception of items of content that an end-user consumes or uses up within Your
Application (e.g., virtual supplies such as construction materials) (a “Consumable”), any other
content, functionality, services or subscriptions delivered through the use of the In-App Purchase
API (e.g., a sword for a game) (a “Non-Consumable”) must be made available to end-users in
accordance with the same usage rules as Licensed Applications (e.g., any such content, services
or functionality must be available to all of the devices associated with an end-user’s account).
You will be responsible for identifying Consumable items to Apple and for disclosing to end-users
that Consumables will not be available for use on other devices.
3.
Your Responsibilities
3.1
For each successfully completed transaction made using the In-App Purchase API, Apple
will provide You with a transaction receipt. It is Your responsibility to verify the validity of such
receipt prior to the delivery of any content, functionality, or services to an end-user and Apple will
not be liable for Your failure to verify that any such transaction receipt came from Apple.
3.2
Unless Apple provides You with user interface elements, You are responsible for
developing the user interface Your Application will display to end-users for orders made through
the In-App Purchase API. You agree not to misrepresent, falsely claim, mislead or engage in any
unfair or deceptive acts or practices regarding the promotion and sale of items through Your use
of the In-App Purchase API, including, but not limited to, in the Licensed Application Information
and any metadata that You submit through App Store Connect. You agree to comply with all
applicable laws and regulations, including those in any jurisdictions in which You make content,
functionality, services or subscriptions available through the use of the In-App Purchase API,
including but not limited to consumer laws and export regulations.
3.3
Apple may provide hosting services for Non-Consumables that You would like to provide
to Your end-users through the use of the In-App Purchase API. Even if Apple hosts such Non-
Consumables on Your behalf, You are responsible for providing items ordered through the In-App
Purchase API in a timely manner (i.e., promptly after Apple issues the transaction receipt, except
in cases where You have disclosed to Your end-user that the item will be made available at a
later time) and for complying with all applicable laws in connection therewith, including but not
limited to, laws, rules and regulations related to cancellation or delivery of ordered items. You are
responsible for maintaining Your own records for all such transactions.
3.4
You will not issue any refunds to end-users of Your Application, and You agree that
Apple may issue refunds to end-users in accordance with the terms of Schedule 2.
4.
Apple Services
4.1
From time to time, Apple may choose to offer additional services and functionality relating
to In-App Purchase API transactions. Apple makes no guarantees that the In-App Purchase API
or any Services will continue to be made available to You or that they will meet Your
requirements, be uninterrupted, timely, secure or free from error, that any information that You
Program Agreement
obtain from the In-App Purchase API or any Services will be accurate or reliable or that any
defects will be corrected.
4.2
You understand that You will not be permitted to access or use the In-App Purchase API
after expiration or termination of Your Agreement.
5.
Your Acknowledgements. You acknowledge and agree that:
Apple may at any time, and from time to time, with or without prior notice to You (a) modify the In-
App Purchase API, including changing or removing any feature or functionality, or (b) modify,
deprecate, reissue or republish the In-App Purchase API. You understand that any such
modifications may require You to change or update Your Applications at Your own cost in order to
continue to use the In-App Purchase API. Apple has no express or implied obligation to provide,
or continue to provide, the In-App Purchase API or any services related thereto and may suspend
or discontinue all or any portion of thereof at any time. Apple shall not be liable for any losses,
damages or costs of any kind incurred by You or any other party arising out of or related to any
suspension, discontinuation or modification of the In-App Purchase API or any services related
thereto. Apple makes no guarantees to You in relation to the availability or uptime of the In-App
Purchase API or any other services that Apple may provide to You in connection therewith, and
Apple is not obligated to provide any maintenance, technical or other support related thereto.
Apple provides the In-App Purchase API to You for Your use with Your Application, and may
provide services to You in connection therewith (e.g., hosting services for Non-Consumable
items). Apple is not responsible for providing or unlocking any content, functionality, services or
subscriptions that an end-user orders through Your use of the In-App Purchase API. You
acknowledge and agree that any such items are made available by You, not Apple, to the end-
user of Your Application, and You are solely liable and responsible for such items ordered
through the use of the In-App Purchase API and for any such use of the In-App Purchase API in
Your Application or for any use of services in connection therewith.
6.
Use of Digital Certificates for In-App Purchase. When an end-user completes a
transaction using the In-App Purchase API in Your Application, Apple will provide You with a
transaction receipt signed with an Apple Certificate. It is Your responsibility to verify that such
certificate and receipt were issued by Apple, as set forth in the Documentation. You are solely
responsible for Your decision to rely on any such certificates and receipts. YOUR USE OF OR
RELIANCE ON SUCH CERTIFICATES AND RECEIPTS IN CONNECTION WITH THE IN-APP
PURCHASE API IS AT YOUR SOLE RISK. APPLE MAKES NO WARRANTIES OR
REPRESENTATIONS, EXPRESS OR IMPLIED, AS TO MERCHANTABILITY OR FITNESS FOR
ANY PARTICULAR PURPOSE, ACCURACY, RELIABILITY, SECURITY, OR NON-
INFRINGEMENT OF THIRD PARTY RIGHTS WITH RESPECT TO SUCH APPLE
CERTIFICATES AND RECEIPTS. You agree that You will only use such receipts and certificates
in accordance with the Documentation, and that You will not interfere or tamper with the normal
operation of such digital certificates or receipts, including but not limited to any falsification or
other misuse.
7.
Additional Liability Disclaimer. APPLE SHALL NOT BE LIABLE FOR ANY DAMAGES
OR LOSSES ARISING FROM THE USE OF THE IN-APP PURCHASE API AND ANY
SERVICES, INCLUDING, BUT NOT LIMITED TO, (I) ANY LOSS OF PROFIT (WHETHER
INCURRED DIRECTLY OR INDIRECTLY), ANY LOSS OF GOODWILL OR BUSINESS
REPUTATION, ANY LOSS OF DATA SUFFERED, OR OTHER INTANGIBLE LOSS, (II) ANY
CHANGES WHICH APPLE MAY MAKE TO THE IN-APP PURCHASE API OR ANY SERVICES,
OR FOR ANY PERMANENT OR TEMPORARY CESSATION IN THE PROVISION OF THE IN-
APP PURCHASE API OR ANY SERVICES (OR ANY FEATURES WITHIN THE SERVICES)
PROVIDED THEREWITH, OR (III) THE DELETION OF, CORRUPTION OF, OR FAILURE TO
PROVIDE ANY DATA TRANSMITTED BY OR THROUGH YOUR USE OF THE IN-APP
PURCHASE API OR SERVICES. It is Your responsibility to maintain appropriate alternate
backup of all Your information and data, including but not limited to any Non-Consumables that
You may provide to Apple for hosting services.
Program Agreement
Attachment 3
(to the Agreement)
Additional Terms for the Game Center
The following terms are in addition to the terms of the Agreement and apply to any use of the
Game Center service by You or Your Application.
1.
Use of the Game Center service
1.1
You and Your Application may not connect to or use the Game Center service in any way
not expressly authorized by Apple. You agree to only use the Game Center service in
accordance with this Agreement (including this Attachment 3), the Game Center Documentation
and in accordance with all applicable laws. You understand that neither You nor Your Application
will be permitted to access or use the Game Center service after expiration or termination of Your
Agreement.
1.2
Apple may provide You with a unique identifier which is associated with an end-user’s
alias as part of the Game Center service (the “Player ID”). You agree to not display the Player ID
to the end-user or to any third party, and You agree to only use the Player ID for differentiation of
end-users in connection with Your use of the Game Center. You agree not to reverse look-up,
trace, relate, associate, mine, harvest, or otherwise exploit the Player ID, aliases or other data or
information provided by the Game Center service, except to the extent expressly permitted
herein. For example, You will not attempt to determine the real identity of an end-user.
1.3
You will only use information provided by the Game Center service as necessary for
providing services and functionality for Your Applications. For example, You will not host or
export any such information to a third party service. Further, You agree not to transfer or copy
any user information or data (whether individually or in the aggregate) obtained through the
Game Center service to a third party except as necessary for providing services and functionality
for Your Applications, and then only with express user consent and only if not otherwise
prohibited in this Agreement.
1.4
You will not attempt to gain (or enable others to gain) unauthorized use or access to the
Game Center service (or any part thereof) in any way, including but not limited to obtaining
information from the Game Center service using any method not expressly permitted by Apple.
For example, You may not use packet sniffers to intercept any communications protocols from
systems or networks connected to the Game Center, scrape any data or user information from
the Game Center, or use any third party software to collect information through the Game Center
about players, game data, accounts, or service usage patterns.
2.
Additional Restrictions
2.1
You agree not to harm or interfere with Apple’s networks or servers, or any third party
servers or networks connected to the Game Center service, or otherwise disrupt other
developers' or end-users’ use of the Game Center. You agree that, except for testing and
development purposes, You will not create false accounts through the use of the Game Center
service or otherwise use the Game Center service to misrepresent information about You or Your
Application in a way that would interfere with an end-users’ use of the Game Center service, e.g.,
creating inflated high scores through the use of cheat codes or falsifying the number of user
accounts for Your Application.
2.2
You will not institute, assist, or enable any disruptions of the Game Center, such as
through a denial of service attack, through the use of an automated process or service such as a
spider, script, or bot, or through exploiting any bug in the Game Center service or Apple Software.
Program Agreement
You agree not to probe, test or scan for vulnerabilities in the Game Center service. You further
agree not to disable, spoof, hack, undermine or otherwise interfere with any data protection,
security, verification or authentication mechanisms that are incorporated in or used by the Game
Center service, or enable others to do so.
2.3
You will not transmit, store or otherwise make available any material that contains viruses
or any other computer code, files or programs that may harm, disrupt or limit the normal operation
of the Game Center or an iOS Product.
2.4
You agree not to use any portion of the Game Center service for sending any unsolicited,
improper or inappropriate messages to end-users or for the purpose of poaching, phishing or
spamming of Game Center users. You will not reroute (or attempt to reroute) users of the Game
Center to another service using any information You obtain through the use of the Game Center
service.
2.5
You shall not charge any fees to end-users for access to the Game Center service or for
any data or information provided therein.
2.6
To the extent that Apple permits You to manage certain Game Center features and
functionality for Your Application through App Store Connect (e.g., the ability to block fraudulent
users or eliminate suspicious leaderboard scores from Your Application’s leaderboard), You
agree to use such methods only when You have a reasonable belief that such users or scores
are the result of misleading, fraudulent, improper, unlawful or dishonest acts.
3.
Your Acknowledgements. You acknowledge and agree that:
3.1
Apple may at any time, and from time to time, with or without prior notice to You (a)
modify the Game Center service, including changing or removing any feature or functionality, or
(b) modify, deprecate, reissue or republish the Game Center APIs or related APIs. You
understand that any such modifications may require You to change or update Your Applications
at Your own cost. Apple has no express or implied obligation to provide, or continue to provide,
the Game Center service and may suspend or discontinue all or any portion of the Game Center
service at any time. Apple shall not be liable for any losses, damages or costs of any kind
incurred by You or any other party arising out of or related to any such service suspension or
discontinuation or any such modification of the Game Center service or Game Center APIs.
3.2
Apple makes no guarantees to You in relation to the availability or uptime of the Game
Center service and is not obligated to provide any maintenance, technical or other support for
such service. Apple reserves the right to remove Your access to the Game Center service at any
time in its sole discretion. Apple may monitor and collect information (including but not limited to
technical and diagnostic information) about Your usage of the Game Center service to aid Apple
in improving the Game Center and other Apple products or services and to verify Your
compliance with this Agreement.
4.
Additional Liability Disclaimer. APPLE SHALL NOT BE LIABLE FOR ANY DAMAGES
OR LOSSES ARISING FROM ANY INTERRUPTIONS TO THE GAME CENTER OR ANY
SYSTEM FAILURES, NETWORK ATTACKS, SCHEDULED OR UNSCHEDULED
MAINTENANCE, OR OTHER INTERRUPTIONS.
Program Agreement
Attachment 4
(to the Agreement)
Additional Terms for the use of iCloud
The following terms are in addition to the terms of the Agreement and apply to Your use of the
iCloud service for software development and testing in connection with Your Application, or Web
Software.
1.
Use of iCloud
1.1
Your Applications and/or Web Software may access the iCloud service only if You have
been assigned an entitlement by Apple. You agree not to access the iCloud service, or any
content, data or information contained therein, other than through the iCloud Storage APIs,
CloudKit APIs or via the CloudKit dashboard provided as part of the Program. You agree not to
share Your entitlement with any third party or use it for any purposes not expressly permitted by
Apple. You agree to use the iCloud service, the iCloud Storage APIs, and the CloudKit APIs only
as expressly permitted by this Agreement and the iCloud Documentation, and in accordance with
all applicable laws and regulations. Further, Your Web Software is permitted to access and use
the iCloud service (e.g., to store the same type of data that is retrieved or updated in a Licensed
Application) only so long as Your use of the iCloud service in such Web Software is comparable
to Your use in the corresponding Licensed Application, as determined in Apple’s sole discretion.
In the event Apple Services permit You to use more than Your allotment of storage containers in
iCloud in order to transfer data to another container for any reason, You agree to only use such
additional container(s) for a reasonable limited time to perform such functions and not to increase
storage and transactional allotments.
1.2
You understand that You will not be permitted to access or use the iCloud service for
software development or testing after expiration or termination of Your Agreement; however end-
users who have Your Applications or Web Software installed and who have a valid end-user
account with Apple to use iCloud may continue to access their user-generated documents,
private containers and files that You have chosen to store in such end-user’s account via the
iCloud Storage APIs or the CloudKit APIs in accordance with the applicable iCloud terms and
conditions and these terms. You agree not to interfere with an end-user’s ability to access iCloud
(or the end-user’s own user-generated documents, private containers and files) or to otherwise
disrupt their use of iCloud in any way and at any time. With respect to data You store in public
containers through the CloudKit APIs (whether generated by You or the end-user), Apple
reserves the right to suspend access to or delete such data, in whole or in part, upon expiration or
termination of Your Agreement, or as otherwise specified by Apple in the CloudKit dashboard.
1.3
Your Application is permitted to use the iCloud Storage APIs only for the purpose of
storage and retrieval of key value data (e.g., a list of stocks in a finance App, settings for an App)
for Your Applications and Web Software and for purposes of enabling Your end-users to access
user-generated documents and files through the iCloud service. Your Application or Web
Software application is permitted to use the CloudKit APIs for storing, retrieving, and querying of
structured data that You choose to store in public or private containers in accordance with the
iCloud Documentation. You agree not to knowingly store any content or materials via the iCloud
Storage APIs or CloudKit APIs that would cause Your Application to violate any of the iCloud
terms and conditions or the Program Requirements for Your Applications (e.g., Your Application
may not store illegal or infringing materials).
1.4
You may allow a user to access their user-generated documents and files from iCloud
through the use of Your Applications as well as from Web Software. However, You may not
share key value data from Your Application with other Applications or Web Software, unless You
are sharing such data among different versions of the same title, or You have user consent.
Program Agreement
1.5
You are responsible for any content and materials that You store in iCloud through the
use of the CloudKit APIs and iCloud Storage APIs and must take reasonable and appropriate
steps to protect information You store through the iCloud service. With respect to third party
claims related to content and materials stored by Your end-users in Your Applications through the
use of the iCloud Storage APIs or CloudKit APIs (e.g., user-generated documents, end-user
posts in public containers), You agree to be responsible for properly handling and promptly
processing any such claims, including but not limited to Your compliance with notices sent
pursuant to the Digital Millennium Copyright Act (DMCA).
1.6
Unless otherwise expressly permitted by Apple in writing, You will not use iCloud, the
iCloud Storage APIs, CloudKit APIs, or any component or function thereof, to create, receive,
maintain or transmit any sensitive, individually-identifiable health information, including “protected
health information” (as such term is defined at 45 C.F.R § 160.103), or use iCloud in any manner
that would make Apple (or any Apple Subsidiary) Your or any third party’s “business associate”
as such term is defined at 45 C.F.R. § 160.103. You agree to be solely responsible for complying
with any reporting requirements under law or contract arising from Your breach of this Section.
2.
Additional Requirements
2.1
You understand there are storage capacity, transmission, and transactional limits for the
iCloud service, both for You as a developer and for Your end-users. If You reach or Your end-
user reaches such limits, then You or Your end-user may be unable to use the iCloud service
until You or Your end-user have removed enough data from the service to meet the capacity
limits, increased storage capacity or otherwise modified Your usage of iCloud, and You or Your
end-user may be unable to access or retrieve data from iCloud during this time.
2.2
You may not charge any fees to users for access to or use of the iCloud service through
Your Applications or Web Software, and You agree not to sell access to the iCloud service in any
other way, including but not limited to reselling any part of the service. You will only use the
iCloud service in Your Application or Web Software to provide storage for an end-user who has a
valid end-user iCloud account with Apple and only for use in accordance with the terms of such
user account, except that You may use the CloudKit APIs to store of data in public containers for
access by end-users regardless of whether such users have iCloud accounts. You will not induce
any end-user to violate the terms of their applicable iCloud service agreement with Apple or to
violate any Apple usage policies for data or information stored in the iCloud service.
2.3
You may not excessively use the overall network capacity or bandwidth of the iCloud
service or otherwise burden such service with unreasonable data loads or queries. You agree
not to harm or interfere with Apple’s networks or servers, or any third party servers or networks
connected to the iCloud, or otherwise disrupt other developers' or users’ use of the iCloud
service.
2.4
You will not disable or interfere with any warnings, system settings, notices, or
notifications that are presented to an end-user of the iCloud service by Apple.
3.
Your Acknowledgements
You acknowledge and agree that:
3.1
Apple may at any time, with or without prior notice to You (a) modify the iCloud Storage
APIs or the CloudKit APIs, including changing or removing any feature or functionality, or (b)
modify, deprecate, reissue or republish such APIs. You understand that any such modifications
may require You to change or update Your Applications or Web Software at Your own cost.
Apple has no express or implied obligation to provide, or continue to provide, the iCloud service
Program Agreement
and may suspend or discontinue all or any portion of the iCloud service at any time. Apple shall
not be liable for any losses, damages or costs of any kind incurred by You or any other party
arising out of or related to any such service suspension or discontinuation or any such
modification of the iCloud service, iCloud Storage APIs or the CloudKit APIs.
3.2
The iCloud service is not available in all languages or in all countries and Apple makes
no representation that the iCloud service is appropriate or available for use in any particular
location. To the extent You choose to provide access to the iCloud service in Your Applications
or Web Software through the iCloud Storage APIs or CloudKit APIs (e.g., to store data in a public
or private container), You do so at Your own initiative and are responsible for compliance with
any applicable laws or regulations.
3.3
Apple makes no guarantees to You in relation to the availability or uptime of the iCloud
service and is not obligated to provide any maintenance, technical or other support for the iCloud
service. Apple is not responsible for any expenditures, investments, or commitments made by
You in connection with the iCloud service, or for any use of or access to the iCloud service.
3.4
Apple reserves the right to suspend or revoke Your access to the iCloud service or
impose limits on Your use of the iCloud service at any time in Apple’s sole discretion. In addition,
Apple may impose or adjust the limit of transactions Your Applications or Web Software may
send or receive through the iCloud service or the resources or capacity that they may use at any
time in Apple’s sole discretion.
3.5
Apple may monitor and collect information (including but not limited to technical and
diagnostic information) about usage of the iCloud service through the iCloud Storage APIs,
CloudKit APIs, or CloudKit dashboard, in order to aid Apple in improving the iCloud service and
other Apple products or services; provided however that Apple will not access or disclose any
end-user data stored in a private container through CloudKit, any Application data stored in a
public container through CloudKit, or any user-generated documents, files or key value data
stored using the iCloud Storage APIs and iCloud service, unless Apple has a good faith belief that
such access, use, preservation or disclosure is reasonably necessary to comply with a legal or
regulatory process or request, or unless otherwise requested by an end-user with respect to data
stored via the iCloud Storage APIs in that end-user’s iCloud account or in that end-user’s private
container via the CloudKit APIs.
3.6
Further, to the extent that You store any personal information relating to an individual or
any information from which an individual can be identified (collectively, “Personal Data”) in the
iCloud service through the use of the iCloud Storage APIs or CloudKit APIs, You agree that Apple
(and any applicable Apple Subsidiary for purposes of this Section 3.6) will act as Your agent for
the processing, storage and handling of any such Personal Data. Apple agrees to ensure that any
persons authorized to process such Personal Data have agreed to maintain confidentiality
(whether through terms or under an appropriate statutory obligation). Apple shall have no right,
title or interest in such Personal Data solely as a result of Your use of the iCloud service. You
agree that You are solely liable and responsible for ensuring Your compliance with all applicable
laws, including privacy and data protection laws, regarding the use or collection of data and
information through the iCloud service. You are also responsible for all activity related to such
Personal Data, including but not limited to, monitoring such data and activity, preventing and
addressing inappropriate data and activity, and removing and terminating access to data. Further,
You are responsible for safeguarding and limiting access to such Personal Data by Your
personnel and for the actions of Your personnel who are permitted access to use the iCloud
service on Your behalf. Personal Data provided by You and Your users to Apple through the
iCloud service may be used by Apple only as necessary to provide and improve the iCloud
service and to perform the following actions on Your behalf. Apple shall:
Program Agreement
(a) use and handle such Personal Data only in accordance with the instructions and permissions
from You set forth herein, as well as applicable laws, regulations, accords, or treaties. In the EEA
and Switzerland, Personal Data will be handled by Apple only in accordance with the instructions
and permissions from You set forth herein unless otherwise required by European Union or
Member State Law, in which case Apple will notify You of such other legal requirement (except in
limited cases where Apple is prohibited by law from doing so);
(b) provide You with reasonable means to manage any user access, deletion, or restriction
requests as defined in applicable law. In the event of an investigation of You arising from Your
good faith use of the iCloud service by a data protection regulator or similar authority regarding
such Personal Data, Apple shall provide You with reasonable assistance and support;
(c) notify You by any reasonable means Apple selects, without undue delay and taking account of
applicable legal requirements applying to You which mandate notification within a specific
timeframe, if Apple becomes aware that Your Personal Data has been altered, deleted or lost as
a result of any unauthorized access to the Service. You are responsible for providing Apple with
Your updated contact information for such notification purposes in accordance with the terms of
this Agreement;
(d) make available to You the information necessary to demonstrate compliance obligations set
forth in Article 28 of Regulation (EU) 2016/679 of the European Parliament and of the Council of
27 April 2016 (GDPR) and to allow for and contribute to audits required under these provisions;
provided however that You agree that Apple’s ISO 27001 and 27018 certifications shall be
considered sufficient for such required audit purposes;
(e) assist You, by any reasonable means Apple selects, in ensuring compliance with its
obligations pursuant to Articles 33 to 36 of the GDPR. If Apple receives a third party request for
information You have stored in the iCloud service, then unless otherwise required by law or the
terms of such request, Apple will notify You of its receipt of the request and notify the requester of
the requirement to address such request to You. Unless otherwise required by law or the request,
You will be responsible for responding to the request;
(f) use industry-standard measures to safeguard Personal Data during the transfer, processing
and storage of Personal Data. Encrypted Personal Data may be stored at Apple’s geographic
discretion; and
(g) ensure that where Personal Data, arising in the context of this Agreement, is transferred from
the EEA or Switzerland it is only to a third country that ensures an adequate level of protection or
using the Model Contract Clauses/Swiss Transborder Data Flow Agreement which will be
provided to You upon request if you believe that Personal Data is being transferred.
4.
Additional Liability Disclaimer. NEITHER APPLE NOR ITS SERVICE PROVIDERS
SHALL BE LIABLE FOR ANY DAMAGES OR LOSSES ARISING FROM ANY USE, MISUSE,
RELIANCE ON, INABILITY TO USE, INTERRUPTION, SUSPENSION OR TERMINATION OF
iCLOUD, iCLOUD STORAGE APIS, OR CLOUDKIT APIS, OR FOR ANY UNAUTHORIZED
ACCESS TO, ALTERATION OF, OR DELETION, DESTRUCTION, DAMAGE, LOSS OR
FAILURE TO STORE ANY OF YOUR DATA OR ANY END-USER DATA OR ANY CLAIMS
ARISING FROM ANY USE OF THE FOREGOING BY YOUR END-USERS, INCLUDING ANY
CLAIMS REGARDING DATA PROCESSING OR INAPPROPRIATE OR UNAUTHORIZED DATA
STORAGE OR HANDLING BY YOU IN VIOLATION OF THIS AGREEMENT.
Program Agreement
Attachment 5
(to the Agreement)
Additional Terms for Passes
The following terms are in addition to the terms of the Agreement and apply to Your development
and distribution of Passes:
1.
Pass Type ID Usage and Restrictions
You may use the Pass Type ID only for purposes of digitally signing Your Pass for use with
Wallet and/or for purposes of using the APN service with Your Pass. You may distribute Your
Pass Type ID as incorporated into Your Pass in accordance with Section 2 below only so long as
such distribution is under Your own trademark or brand. To the extent that You reference a third
party’s trademark or brand within Your Pass (e.g., a store coupon for a particular good), You
represent and warrant that You have any necessary rights. You agree not to share, provide or
transfer Your Pass Type ID to any third party (except for a Service Provider and only to the
limited extent permitted herein), nor use Your Pass Type ID to sign a third party's pass.
2.
Pass Distribution; Marketing Permissions
2.1
Subject to the terms of this Agreement, You may distribute Your Passes to end-users by
the web, email, or an Application. You understand that Passes must be accepted by such users
before they will be loaded into Wallet and that Passes can be removed or transferred by such
users at any time.
2.2
By distributing Your Passes in this manner, You represent and warrant to Apple that Your
Passes comply with the Documentation and Program Requirements then in effect and the terms
of this Attachment 5. Apple shall not be responsible for any costs, expenses, damages, losses
(including without limitation lost business opportunities or lost profits) or other liabilities You may
incur as a result of distributing Your Passes in this manner.
2.3
You agree to state on the Pass Your name and address, and the contact information
(telephone number; email address) to which any end-user questions, complaints, or claims with
respect to Your Pass should be directed. You will be responsible for attaching or otherwise
including, at Your discretion, any relevant end-user usage terms with Your Pass. Apple will not
be responsible for any violations of Your end-user usage terms. You will be solely responsible for
all user assistance, warranty and support of Your Pass. You may not charge any fees to end-
users in order to use Wallet to access Your Pass.
2.4
By distributing Your Passes as permitted in this Agreement, You hereby permit Apple to
use (i) screen shots of Your Pass; (ii) trademarks and logos associated with Your Pass; and (iii)
Pass Information, for promotional purposes in marketing materials and gift cards, excluding those
portions which You do not have the right to use for promotional purposes and which You identify
in writing to Apple. You also permit Apple to use images and other materials that You may
provide to Apple, at Apple’s reasonable request, for promotional purposes in marketing materials
and gift cards.
3.
Additional Pass Requirements
3.1
Apple may provide You with templates to use in creating Your Passes, and You agree to
choose the relevant template for Your applicable use (e.g., You will not use the boarding pass
template for a movie ticket).
Program Agreement
3.2
Passes may only operate and be displayed in Wallet, which is Apple's designated
container area for the Pass, through Wallet on the lock screen of an iOS Product, or on Apple
Watch in accordance with the Documentation.
3.3.
Notwithstanding anything else in Section 3.3.9 of the Agreement, with prior user consent,
You and Your Pass may share user and/or device data with Your Application so long as such
sharing is for the purpose of providing a service or function that is directly relevant to the use of
the Pass and/or Application, or to serve advertising in accordance with Sections 3.3.12 of the
Agreement.
3.4
If You would like to use embedded Near Field Communication (NFC) technology with
Your Pass, then You may request an Apple Certificate for the use of NFC with a Pass from the
Developer web portal. Apple will review Your request and may provide You with a separate
agreement for the use of such Apple Certificate. Apple reserves the right to not provide You with
such Apple Certificate.
4.
Apple’s Right to Review Your Pass; Revocation. You understand and agree that
Apple reserves the right to review and approve or reject any Pass that You would like to distribute
for use by Your end-users, or that is already in use by Your end-users, at any time during the
Term of this Agreement. If requested by Apple, You agree to promptly provide such Pass to
Apple. You agree not to attempt to hide, misrepresent, mislead, or obscure any features, content,
services or functionality in Your Pass from Apple's review or otherwise hinder Apple from being
able to fully review such Pass, and, You agree to cooperate with Apple and answer questions and
provide information and materials reasonably requested by Apple regarding such Pass. If You
make any changes to Your Pass after submission to Apple, You agree to notify Apple and, if
requested by Apple, resubmit Your Pass prior to any distribution of the modified Pass to Your
end-users. Apple reserves the right to revoke Your Pass Type ID and reject Your Pass for
distribution to Your end-users for any reason and at any time in its sole discretion, even if Your
Pass meets the Documentation and Program Requirements and terms of this Attachment 5; and,
in that event, You agree that You may not distribute such Pass to Your end-users.
5.
Additional Liability Disclaimer. APPLE SHALL NOT BE LIABLE FOR ANY DAMAGES
OR LOSSES ARISING FROM ANY USE, DISTRIBUTION, MISUSE, RELIANCE ON, INABILITY
TO USE, INTERRUPTION, SUSPENSION, OR TERMINATION OF WALLET, YOUR PASS
TYPE ID, YOUR PASSES, OR ANY SERVICES PROVIDED IN CONNECTION THEREWITH,
INCLUDING BUT NOT LIMITED TO ANY LOSS OR FAILURE TO DISPLAY YOUR PASS IN
WALLET OR ANY END-USER CLAIMS ARISING FROM ANY USE OF THE FOREGOING BY
YOUR END-USERS.
Program Agreement
Attachment 6
(to the Agreement)
Additional Terms for the use of the Apple Maps Service
The following terms are in addition to the terms of the Agreement and apply to any use of the
Apple Maps Service in Your Application, website, or web application.
1.
Use of the Maps Service
1.1
Your Application may access the Apple Maps Service only via the MapKit API or through
MapKit JS, and Your website or web application may access the Apple Maps Service only via
MapKit JS. You agree not to access the Apple Maps Service or the Map Data other than through
the MapKit API or MapKit JS, as applicable, and You agree that Your use of the Apple Maps
Service in Your Applications, websites, or web applications must comply with the Program
Requirements.
1.2
You will use the Apple Maps Service and Map Data only as necessary for providing
services and functionality for Your Application, website, or web application. You agree to use the
Apple Maps Service, MapKit API and MapKit JS only as expressly permitted by this Agreement
(including but not limited to this Attachment 6) and the MapKit and MapKit JS Documentation,
and in accordance with all applicable laws and regulations.
1.3
You acknowledge and agree that results You receive from the Apple Maps Service may
vary from actual conditions due to variable factors that can affect the accuracy of the Map Data,
such as weather, road and traffic conditions, and geopolitical events.
2.
Additional Restrictions
2.1
Neither You nor Your Application, website or web application may remove, obscure or
alter Apple’s or its licensors’ copyright notices, trademarks, or any other proprietary rights or legal
notices, documents or hyperlinks that may appear in or be provided through the Apple Maps
Service.
2.2
You will not use the Apple Maps Service in any manner that enables or permits bulk
downloads or feeds of the Map Data, or any portion thereof, or that in any way attempts to
extract, scrape or reutilize any portions of the Map Data. For example, neither You nor Your
Application may use or make available the Map Data, or any portion thereof, as part of any
secondary or derived database.
2.3
Except to the extent expressly permitted herein, You agree not to copy, modify, translate,
create a derivative work of, publish or publicly display the Map Data in any way. Further, You
may not use or compare the data provided by the Apple Maps Service for the purpose of
improving or creating another mapping service. You agree not to create or attempt to create a
substitute or similar service through use of or access to the Apple Maps Service.
2.4
Your Application, website, or web application may display the Map Data only as permitted
herein, and when displaying it on a map, You agree that it will be displayed only on an Apple map
provided through the Apple Maps Service. Further, You may not surface Map Data within Your
Application, website, or web application without displaying the corresponding Apple map (e.g., if
You surface an address result through the Apple Maps Service, You must display the
corresponding map with the address result).
2.5
Unless otherwise expressly permitted in the MapKit Documentation or MapKit JS
Documentation, Map Data may not be cached, pre-fetched, or stored by You or Your Application,
website, or web application other than on a temporary and limited basis solely to improve the
Program Agreement
performance of the Apple Maps Service with Your Application, website, or web application.
2.6
You may not charge any fees to end-users solely for access to or use of the Apple Maps
Service through Your Application, website, or web application, and You agree not to sell access
to the Apple Maps Service in any other way.
2.7
You acknowledge and agree that Apple may impose restrictions on Your usage of the
Apple Maps Service (e.g., limiting the number of transactions Your Application can make through
the MapKit API) or may revoke or remove Your access to the Apple Maps Service (or any part
thereof) at any time in its sole discretion. Further, You acknowledge and agree that results You
may receive from the Apple Maps Service may vary from actual conditions due to variable factors
that can affect the accuracy of Map Data, such as road or weather conditions.
3.
Your Acknowledgements. You acknowledge and agree that:
3.1
Apple may at any time, with or without prior notice to You (a) modify the Apple Maps
Service and/or the MapKit API or MapKit JS, including changing or removing any feature or
functionality, or (b) modify, deprecate, reissue or republish the MapKit API or MapKit JS. You
understand that any such modifications may require You to change or update Your Applications,
website, or web applications at Your own cost. Apple has no express or implied obligation to
provide, or continue to provide, the Apple Maps Service and may suspend or discontinue all or
any portion of the Apple Maps Service at any time. Apple shall not be liable for any losses,
damages or costs of any kind incurred by You or any other party arising out of or related to any
such service suspension or discontinuation or any such modification of the Apple Maps Service,
MapKit API, or MapKit JS.
3.2
The Apple Maps Service may not be available in all countries or languages, and Apple
makes no representation that the Apple Maps Service is appropriate or available for use in any
particular location. To the extent You choose to provide access to the Apple Maps Service in
Your Applications, website, or web applications or through the MapKit API or MapKit JS, You do
so at Your own initiative and are responsible for compliance with any applicable laws.
4.
Apple’s Right to Review Your MapKit JS Implementation. You understand and agree
that Apple reserves the right to review and approve or reject Your implementation of MapKit JS in
Your Application, website, or web applications, at any time during the Term of this Agreement. If
requested by Apple, You agree to promptly provide information regarding Your implementation of
MapKit JS to Apple. You agree to cooperate with Apple and answer questions and provide
information and materials reasonably requested by Apple regarding such implementation. Apple
reserves the right to revoke Your MapKit JS keys and similar credentials at any time in its sole
discretion, even if Your use of MapKit JS meets the Documentation and Program Requirements
and terms of this Attachment. By way of example only, Apple may do so if Your MapKit JS
implementation places an excessive and undue burden on the Apple Maps Service, obscures or
removes the Apple Maps logo or embedded links when displaying a map, or uses the Apple Maps
Service with corresponding offensive or illegal map content.
5.
Additional Liability Disclaimer. NEITHER APPLE NOR ITS LICENSORS OR
SERVICE PROVIDERS SHALL BE LIABLE FOR ANY DAMAGES OR LOSSES ARISING FROM
ANY USE, MISUSE, RELIANCE ON, INABILITY TO USE, INTERRUPTION, SUSPENSION OR
TERMINATION OF THE APPLE MAPS SERVICE, INCLUDING ANY INTERRUPTIONS DUE TO
SYSTEM FAILURES, NETWORK ATTACKS, OR SCHEDULED OR UNSCHEDULED
MAINTENANCE.
Program Agreement
Attachment 7
(to the Agreement)
Additional Terms for Safari Extensions
The following terms are in addition to the terms of the Agreement and apply to Safari Extensions
signed with an Apple Certificate:
1.1
Safari Extension Requirements
If You would like to submit Your Safari Extension for hosting by Apple in the Safari Extensions
Gallery or otherwise distribute Your Safari Extension signed with an Apple Certificate, then You
agree to abide by the following requirements for such Safari Extensions, as they may be modified
by Apple from time to time:
- Your Safari Extension must not contain any malware, malicious or harmful code, or other
internal component (e.g. computer viruses, trojan horses, “backdoors”), which could damage,
destroy, or adversely affect Apple hardware, software or services, or other third party software,
firmware, hardware, data, systems, services, or networks;
- Your Safari Extensions must not be designed or marketed for the purpose of harassing,
abusing, stalking, spamming, misleading, defrauding, threatening or otherwise violating the legal
rights (such as the rights of privacy and publicity) of others. Further, You may not create a Safari
Extension that tracks the behavior of a user (e.g., their browsing sites) without their express
consent;
- Your Safari Extension must only operate in Safari on macOS's designated container area for
the Safari Extension, and must not disable, override or otherwise interfere with any Apple-
implemented system alerts, warnings, display panels, consent panels and the like;
- Your Safari Extension must have a single purpose and updates must not change the single
purpose of Your Safari Extension. You agree to accurately represent the features and
functionality of Your Extension to the user and to act in accordance with such representations.
For example, Your Safari Extension may not redirect a link (or any affiliate link) on a website
unless that behavior is disclosed to the user;
- Your Safari Extension must not be bundled with an app that has a different purpose than the
Safari Extension.
- Your Safari Extension may not inject ads into a website and may not display pop up ads;
- You must not script or automate turning on Your Safari Extension or enable others to do so.
- You agree not to bundle Your .safariextz-based Safari Extension with any other applications or
extensions. You may allow a user to install Your .safariextz-based Safari Extension only by: (a)
clicking an Install button in the Safari Extensions Gallery; or (b) clicking the .safariextz file to open
the Safari Extension in Safari and allowing Safari to prompt the user to confirm the installation;
- Safari Extensions must not interfere with security, user interface, user experience, features or
functionality of Safari, macOS, or other Apple-branded products; and
- Your Safari Extensions must comply with the Documentation and all applicable laws and
regulations, including those in any jurisdictions in which such Safari Extensions may be offered or
made available. You should review the latest Safari Extensions Development Guide and Safari
App Extensions Development Guide available on the Developer web portal.
Program Agreement
You understand that Apple may revoke the Apple Certificates used to sign Your Safari Extensions
at any time, in its sole discretion. Further, You acknowledge and agree that Apple may block
Your Safari Extension (such that it may be unavailable or inaccessible to Safari users) if it does
not comply with the requirements set forth above in this Section 1.1 or otherwise adversely
affects users of Safari or macOS.
1.2
Submission to the Safari Extensions Gallery
If You are submitting Your Safari Extension for hosting by Apple on the Safari Extensions Gallery,
You agree that Your Safari Extension complies with the requirements set forth above in Section
1.1, and with any additional guidelines that Apple may post on the Program web portal for the
Safari Extensions Gallery.
You understand that Apple will review such Extensions prior to posting them on the Safari
Extensions Gallery and that Apple can approve or reject Your Safari Extension in its sole
discretion. Further, You agree that Apple reserves the right to remove Safari Extensions from the
Safari Extensions Gallery at any time in its sole discretion without notice to You. By submitting
Your Safari Extension for hosting by Apple, You consent to Apple hosting it for You on the Safari
Extensions Gallery. You will be responsible for attaching or otherwise including, at Your
discretion, any relevant end-user usage terms with such Safari Extension and for all user
assistance, warranty and support of Your Safari Extension. You may remove Your Safari
Extension from the Safari Extensions Gallery by emailing: [email protected].
By distributing Your Safari Extension through the Safari Extensions Gallery, You hereby permit
Apple to use (a) screen shots of Your Safari Extension; and (b) trademarks and logos associated
with Your Safari Extension for promotional purposes in marketing materials, excluding those
portions which You do not have the right to use for promotional purposes and which You identify
in writing to Apple. You also permit Apple to use images and other materials that You may
provide to Apple, at Apple’s reasonable request, for promotional purposes in marketing materials.
Program Agreement
Schedule 1
1.
Appointment of Agent
1.1
You hereby appoint Apple and Apple Subsidiaries (collectively “Apple”) as: (i) Your agent
for the marketing and delivery of the Licensed Applications to end-users located in those
countries listed on Exhibit A, Section 1 to this Schedule 1, subject to change; and (ii) Your
commissionaire for the marketing and delivery of the Licensed Applications to end-users located
in those countries listed on Exhibit A, Section 2 to this Schedule 1, subject to change, during the
Delivery Period. The most current list of App Store countries among which You may select shall
be set forth in the App Store Connect tool and may be updated by Apple from time to time. You
hereby acknowledge that Apple will market and make the Licensed Applications available for
download by end-users, through one or more App Stores, for You and on Your behalf. For
purposes of this Schedule 1, the following terms apply:
(a) “You” shall include App Store Connect users authorized by You to submit Licensed
Applications and associated metadata on Your behalf; and
(b) “end-user” includes individual purchasers as well as eligible users associated with their
account via Family Sharing. For institutional customers, “end-user” shall mean the individual
authorized to use the Licensed Application, the institutional administrator responsible for
management of installations on shared devices, as well as authorized institutional purchasers
themselves, including educational institutions approved by Apple, which may acquire the
Licensed Applications for use by their employees, agents, and affiliates.
(c) For the purposes of this Schedule 1, the term “Licensed Application” shall include any content,
functionality, extensions, stickers, or services offered in the software application.
1.2
In furtherance of Apple’s appointment under Section 1.1 of this Schedule 1, You hereby
authorize and instruct Apple to:
(a) market, solicit and obtain orders on Your behalf for Licensed Applications from end-users
located in the countries identified by You in the App Store Connect tool;
(b) provide hosting services to You subject to the terms of the Agreement, in order to allow for the
storage of, and end-user access to, the Licensed Applications and to enable third party hosting of
such Licensed Applications solely as otherwise licensed or authorized by Apple;
(c) make copies of, format, and otherwise prepare Licensed Applications for acquisition and
download by end-users, including adding the Security Solution and other optimizations identified
in the Agreement;
(d) allow or, in the case of cross-border assignments of VPP purchases, arrange for end-users to
access and re-access copies of the Licensed Applications, so that end-users may acquire from
You and electronically download those Licensed Applications, Licensed Application Information,
and associated metadata through one or more App Stores, and You hereby authorize distribution
of Your Licensed Applications under this Schedule 1 to end-users with accounts associated with
another end-user’s via Family Sharing. You also hereby authorize distribution of Your Licensed
Applications under this Schedule 1 for use by multiple end users under a single Apple ID when
the Licensed Application is provided to such end-users through Apple Configurator in accordance
with the Apple Configurator software license agreement or requested by a single institutional
customer via the Volume Purchase Program for use by its end-users and/or for installation on
devices with no associated iTunes Account that are owned or controlled by that institutional
customer in accordance with the Volume Purchase Program terms, conditions, and program
Program Agreement
requirements;
(e) use (i) screen shots, previews, and/or up to 30 second excerpts of the Licensed Applications;
(ii) trademarks and logos associated with the Licensed Applications; and (iii) Licensed Application
Information, for promotional purposes in marketing materials and gift cards, excluding those
portions of the Licensed Applications, trademarks or logos, or Licensed Application Information
which You do not have the right to use for promotional purposes, and which You identify in writing
at the time that the Licensed Applications are delivered by You to Apple under Section 2.1 of this
Schedule 1, and use images and other materials that You may provide to Apple, at Apple’s
reasonable request, for promotional purposes in marketing materials and gift cards. In addition,
and subject to the limitation set forth above, You agree that Apple may use screen shots, icons,
and up to 30 second excerpts of Your Licensed Applications for use at Apple Developer events
(e.g., WWDC, Tech Talks) and in developer documentation;
(f) otherwise use Licensed Applications, Licensed Application Information and associated
metadata as may be reasonably necessary in the delivery of the Licensed Applications in
accordance with this Schedule 1. You agree that no royalty or other compensation is payable for
the rights described above in Section 1.2 of this Schedule 1; and
(g) facilitate distribution of pre-release versions of Your Licensed Applications (“Beta Testing”) to
end-users designated by You in accordance with the Agreement, availability, and other program
requirements as updated from time to time in the App Store Connect tool. For the purposes of
such Beta Testing, You hereby waive any right to collect any purchase price, proceeds or other
remuneration for the distribution and download of such pre-release versions of Your Licensed
Application. You further agree that You shall remain responsible for the payment of any royalties
or other payments to third parties relating to the distribution and user of Your pre-release
Licensed Applications, as well as compliance with any and all laws for territories in which such
Beta Testing takes place. For the sake of clarity, no commission shall be owed to Apple with
respect to such distribution.
1.3
The parties acknowledge and agree that their relationship under this Schedule 1 is, and
shall be, that of principal and agent, or principal and commissionaire, as the case may be, as
described in Exhibit A, Section 1 and Exhibit A, Section 2 respectively, and that You, as principal,
are, and shall be, solely responsible for any and all claims and liabilities involving or relating to,
the Licensed Applications, as provided in this Schedule 1. The parties acknowledge and agree
that Your appointment of Apple as Your agent or commissionaire, as the case may be, under this
Schedule 1 is non-exclusive. You hereby represent and warrant that You own or control the
necessary rights in order to appoint Apple and Apple Subsidiaries as Your worldwide agent and/or
commissionaire for the delivery of Your Licensed Applications, and that the fulfillment of such
appointment by Apple and Apple Subsidiaries shall not violate or infringe the rights of any third party.
1.4
For purposes of this Schedule 1, the “Delivery Period” shall mean the period beginning
on the Effective Date of the Agreement, and expiring on the last day of the Agreement or any
renewal thereof; provided, however, that Apple’s appointment as Your agent shall survive
expiration of the Agreement for a reasonable phase-out period not to exceed thirty (30) days and
further provided that, solely with respect to Your end-users, subsections 1.2(b), (c), and (d) of this
Schedule 1 shall survive termination or expiration of the Agreement unless You indicate
otherwise pursuant to sections 4.1 and 6.2 of this Schedule 1.
1.5
All of the Licensed Applications delivered by You to Apple under Section 2.1 of this
Schedule 1 shall be made available by Apple for download by end-users at no charge. Apple
shall have no duty to collect any fees for the Licensed Applications for any end-user and shall
have no payment obligation to You with respect to any of those Licensed Applications under this
Schedule 1. In the event that You intend to charge end-users a fee for any Licensed Application
or In-App Purchase, You must enter (or have previously entered) into a separate extension of this
agreement (Schedule 2) with Apple with respect to that Licensed Application.
Program Agreement
2.
Delivery of the Licensed Applications to Apple
2.1
You will deliver to Apple, at Your sole expense, using the App Store Connect tool or other
mechanism provided by Apple, the Licensed Applications, Licensed Application Information and
associated metadata, in a format and manner prescribed by Apple, as required for the delivery of
the Licensed Applications to end-users in accordance with this Schedule 1. Metadata You deliver
to Apple under this Schedule 1 will include: (i) the title and version number of each of the
Licensed Applications; (ii) the countries You designate, in which You wish Apple to allow end-
users to download those Licensed Applications; (iii) any copyright or other intellectual property
rights notices; (iv) Your privacy policy, if any; (v) Your end-user license agreement (“EULA”), if
any, in accordance with Section 3.2 of this Schedule 1; and (vi) any additional metadata set forth
in the Documentation and/or the App Store Connect Tool as may be updated from time to time,
including metadata designed to enhance search and discovery for content on Apple-branded
hardware.
2.2
All Licensed Applications will be delivered by You to Apple using software tools, a secure
FTP site address and/or such other delivery methods as prescribed by Apple.
2.3
You hereby certify that all of the Licensed Applications You deliver to Apple under this
Schedule 1 are authorized for export from the United States to each of the countries designated
by You under Section 2.1 hereof, in accordance with the requirements of all applicable laws,
including but not limited to the United States Export Administration Regulations, 15 C.F.R. Parts
730-774 and the International Traffic in Arms Regulations 22 C.F.R. Parts 120-130. Without
limiting the generality of this Section 2.3, You certify that (i) none of the Licensed Applications
contains, uses or supports any data encryption or cryptographic functions; or (ii) in the event that
any Licensed Application contains, uses or supports any such data encryption or cryptographic
functionality, You certify that You have complied with the United States Export Administration
Regulations, and are in possession of, and will, upon request, provide Apple with a PDF copy of
Your Encryption Registration Number (ERN), or export classification ruling (CCATS) issued by
the United States Commerce Department, Bureau of Industry and Security and PDF copies of
appropriate authorizations from other countries that mandate import authorizations for that
Licensed Application, as required. You acknowledge that Apple is relying upon Your certification
in this Section 2.3 in allowing end-users to access and download the Licensed Applications under
this Schedule 1. Except as provided in this Section 2.3, Apple will be responsible for compliance
with the requirements of the Export Administration Regulations in allowing end-users to access
and download the Licensed Applications under this Schedule 1.
2.4
You shall be responsible for determining and implementing any age ratings or parental
advisory warnings required by the applicable government regulations, ratings board(s), service(s),
or other organizations (each a “Ratings Board”) for any video, television, gaming or other content
offered in Your Licensed Application for each locality in the Territory. Where applicable, you shall
also be responsible for providing any content restriction tools or age verification functionality
before enabling end-users to access mature or otherwise regulated content within Your Licensed
Application.
3.
Ownership and End-User Licensing and Delivery of the Licensed Applications to
End Users
3.1
You acknowledge and agree that Apple, in the course of acting as agent and/or
commissionaire for You, is hosting, or pursuant to Section 1.2(b) of this Schedule 1 may enable
authorized third parties to host, the Licensed Application(s), and is allowing the download of those
Licensed Application(s) by end-users, on Your behalf. However, You are responsible for hosting
and delivering content or services sold or delivered by You using the In-App Purchase API,
except for content that is included within the Licensed Application itself (i.e., the In-App Purchase
simply unlocks the content) or content hosted by Apple pursuant to Section 3.3 of Attachment 2 of
Program Agreement
the Agreement. The parties acknowledge and agree that Apple shall not acquire any ownership
interest in or to any of the Licensed Applications or Licensed Applications Information, and title,
risk of loss, responsibility for, and control over the Licensed Applications shall, at all times, remain
with You. Apple may not use any of the Licensed Applications or Licensed Application
Information for any purpose, or in any manner, except as specifically authorized in the Agreement
or this Schedule 1.
3.2
You may deliver to Apple Your own EULA for any Licensed Application at the time that
You deliver that Licensed Application to Apple, in accordance with Section 2.1 of this Schedule 1;
provided, however, that Your EULA must include and may not be inconsistent with the minimum
terms and conditions specified on Exhibit B to this Schedule 1 and must comply with all
applicable laws in all countries where You wish Apple to allow end-users to download that
Licensed Application. Apple shall enable each end-user to review Your EULA (if any) at the time
that Apple delivers that Licensed Application to that end-user, and Apple shall notify each end-
user that the end-user’s use of that Licensed Application is subject to the terms and conditions of
Your EULA (if any). In the event that You do not furnish Your own EULA for any Licensed
Application to Apple, You acknowledge and agree that each end-user’s use of that Licensed
Application shall be subject to Apple’s standard EULA (which is part of the App Store Terms of
Service).
3.3
You hereby acknowledge that the EULA for each of the Licensed Applications is solely
between You and the end-user and conforms to applicable law, and Apple shall not be
responsible for, and shall not have any liability whatsoever under, any EULA or any breach by
You or any end-user of any of the terms and conditions of any EULA.
3.4
A Licensed Application may read or play content (magazines, newspapers, books, audio,
music, video) that is offered outside of the Licensed Application (such as, by way of example,
through Your website) provided that You do not link to or market external offers for such content
within the Licensed Application. You are responsible for authentication access to content
acquired outside of the Licensed Application.
3.5
Subject to availability, You may offer in-app subscriptions for free in select territories
using the In-App Purchase API subject to the terms of this Schedule 1, provided that the Licensed
Application is Newsstand-enabled pursuant to section 3.7 below and You clearly and
conspicuously disclose to users the following information regarding Your in-app subscription:
- Title of publication or service
- Subscription may be discontinued at any time by removing app from device
- Links to Your Privacy Policy and Terms of Use
3.6
To the extent You promote and offer in-app subscriptions, You must do so in compliance
with all legal and regulatory requirements.
3.7
If Your Licensed Application is periodical content-based (e.g., magazines and
newspapers), Apple may provide You with the name, email address, and zip code associated
with an end-user’s account when they request an auto-renewing subscription via the In-App
Purchase API, provided that such user consents to the provision of data to You, and further
provided that You may only use such data to promote Your own products and do so in strict
compliance with Your publicly posted Privacy Policy, a copy of which must be readily viewed and
is consented to in Your Licensed Application.
3.8
Licensed Applications offering subscription services under this Schedule 1 must be
included in Apple’s Newsstand program provided that, in addition to the requirements set forth in
paragraphs 3.5, 3.6 and 3.7, You:
- Enable the Licensed Application as a Newsstand app in the App Store Connect tool
Program Agreement
- Authorize Apple to select “Newsstand” as the Licensed Application’s secondary category
- Utilize the In-App Purchase API, include any additional code, and comply with any other
requirements as identified and updated from time to time in Newsstand-related documentation
found in the iOS developer library and the App Store Connect Developer Guide
- Provide updated cover art with each new issue
- Confirm that the content of the Licensed Application is a periodical (e.g., newspaper or
magazine)
You acknowledge and agree that Apple reserves the right to recategorize or reject Your Licensed
Application if it is not appropriate for Newsstand.
4.
Content Restrictions and Software Rating
4.1
You represent and warrant that: (a) You have the right to enter into this Agreement, to
reproduce and distribute each of the Licensed Applications, and to authorize Apple to permit end-
users to download and use each of the Licensed Applications through one or more App Stores;
(b) none of the Licensed Applications, or Apple’s or end-users’ permitted uses of those Licensed
Applications, violate or infringe any patent, copyright, trademark, trade secret or other intellectual
property or contractual rights of any other person, firm, corporation or other entity and that You
are not submitting the Licensed Applications to Apple on behalf of one or more third parties; (c)
each of the Licensed Applications is authorized for distribution, sale and use in, export to, and
import into each of the countries designated by You under Section 2.1 of this Schedule 1, in
accordance with the laws and regulations of those countries and all applicable export/import
regulations; (d) none of the Licensed Applications contains any obscene, offensive or other
materials that are prohibited or restricted under the laws or regulations of any of the countries
You designate under Section 2.1 of this Schedule 1; (e) all information You provide using the App
Store Connect tool, including any information relating to the Licensed Applications, is accurate
and that, if any such information ceases to be accurate, You will promptly update it to be accurate
using the App Store Connect tool; and (f) in the event a dispute arises over the content of Your
Licensed Applications or use of Your intellectual property on the App Store, You agree to permit
Apple to share your contact information with the party filing such dispute and to follow Apple’s
app dispute process on a non-exclusive basis and without any party waiving its legal rights.
4.2
You shall use the software rating tool set forth on App Store Connect to supply
information regarding each of the Licensed Applications delivered by You for marketing and
fulfillment by Apple through the App Store under this Schedule 1 in order to assign a rating to
each such Licensed Application. For purposes of assigning a rating to each of the Licensed
Applications, You shall use Your best efforts to provide correct and complete information about
the content of that Licensed Application with the software rating tool. You acknowledge and
agree that Apple is relying on: (i) Your good faith and diligence in accurately and completely
providing the requested information for each Licensed Application; and (ii) Your representations
and warranties in Section 4.1 hereof, in making that Licensed Application available for download
by end-users in each of the countries You designate hereunder. Furthermore, You authorize
Apple to correct the rating of any Licensed Application of Yours that has been assigned an
incorrect rating; and You agree to any such corrected rating.
4.3
In the event that any country You designate hereunder requires the approval of, or rating
of, any Licensed Application by any government or industry regulatory agency as a condition for
the distribution and/or use of that Licensed Application, You acknowledge and agree that Apple
may elect not to make that Licensed Application available for download by end-users in that
country from any App Store.
5.
Responsibility and Liability
5.1
Apple shall have no responsibility for the installation and/or use of any of the Licensed
Applications by any end-user. You shall be solely responsible for any and all product warranties,
Program Agreement
end-user assistance and product support with respect to each of the Licensed Applications.
5.2
You shall be solely responsible for, and Apple shall have no responsibility or liability
whatsoever with respect to, any and all claims, suits, liabilities, losses, damages, costs and
expenses arising from, or attributable to, the Licensed Applications and/or the use of those
Licensed Applications by any end-user, including, but not limited to: (i) claims of breach of
warranty, whether specified in the EULA or established under applicable law; (ii) product liability
claims; and (iii) claims that any of the Licensed Applications and/or the end-user’s possession or
use of those Licensed Applications infringes the copyright or other intellectual property rights of
any third party.
6.
Termination
6.1
This Schedule 1, and all of Apple’s obligations hereunder, shall terminate upon the
expiration or termination of the Agreement.
6.2
In the event that You no longer have the legal right to distribute the Licensed
Applications, or to authorize Apple to allow access to those Licensed Applications by end-users,
in accordance with this Schedule 1, You shall promptly notify Apple and withdraw those Licensed
Applications from the App Store using the tools provided on the App Store Connect site; provided,
however, that such withdrawal by You under this Section 6.2 shall not relieve You of any of Your
obligations to Apple under this Schedule 1, or any liability to Apple and/or any end-user with
respect to those Licensed Applications.
6.3
Apple reserves the right to cease marketing, offering, and allowing download by end-
users of the Licensed Applications at any time, with or without cause, by providing notice of
termination to You. Without limiting the generality of this Section 6.3, You acknowledge that
Apple may cease allowing download by end-users of some or all of the Licensed Applications, or
take other interim measures in Apple’s sole discretion, if Apple reasonably believes that: (i) those
Licensed Applications are not authorized for export to one or more of the countries designated by
You under Section 2.1 hereof, in accordance with the Export Administration Regulations; (ii)
those Licensed Applications and/or any end-user’s possession and/or use of those Licensed
Applications, infringe patent, copyright, trademark, trade secret or other intellectual property rights
of any third party; (iii) the distribution and/or use of those Licensed Applications violates any
applicable law in any country You designate under Section 2.1 of this Schedule 1; or (iv) You
have violated the terms of the Agreement, this Schedule 1, or other documentation including
without limitation the iOS App Review Guidelines. An election by Apple to cease allowing
download of any Licensed Applications, pursuant to this Section 6.3, shall not relieve You of Your
obligations under this Schedule 1.
6.4
You may withdraw any or all of the Licensed Applications from the App Store, at any
time, and for any reason, by using the tools provided on the App Store Connect site, except that,
with respect to Your end-users, You hereby authorize and instruct Apple to fulfill sections 1.2(b),
(c), and (d) of this Schedule 1, which shall survive termination or expiration of the Agreement
unless You indicate otherwise pursuant to sections 4.1 and 6.2 of this Schedule 1.
7.
Legal Consequences
The relationship between You and Apple established by this Schedule 1 may have important
legal consequences for You. You acknowledge and agree that it is Your responsibility to consult
with Your legal advisors with respect to Your legal obligations hereunder.
Program Agreement
EXHIBIT A
(to Schedule 1)
1.
Apple as Agent
You appoint Apple Canada, Inc. (“Apple Canada”) as Your agent for the marketing and end-user
download of the Licensed Applications by end-users located in the following country:
Canada
You appoint Apple Pty Limited (“APL”) as Your agent for the marketing and end-user download of
the Licensed Applications by end-users located in the following countries:
Australia
New Zealand
You appoint Apple Inc. as Your agent pursuant to California Civil Code §§ 2295 et seq. for the
marketing and end-user download of the Licensed Applications by end-users located in the
following countries, as updated from time to time via the App Store Connect site:
Argentina
Cayman Islands
Guatemala
St. Kitts & Nevis
Anguilla
Chile
Honduras
St. Lucia
Antigua & Barbuda
Colombia
Jamaica
St. Vincent & The
Grenadines
Bahamas
Costa Rica
Mexico
Suriname
Barbados
Dominica
Montserrat
Trinidad & Tobago
Belize
Dominican Republic
Nicaragua
Turks & Caicos
Bermuda
Ecuador
Panama
Uruguay
Bolivia
El Salvador
Paraguay
Venezuela
Brazil
Grenada
Peru
United States
British Virgin Islands
Guyana
You appoint iTunes KK as Your agent pursuant to Article 643 of the Japanese Civil Code for the
marketing and end-user download of the Licensed Applications by end-users located in the
following country:
Japan
2.
Apple as Commissionaire
You appoint Apple Distribution International as Your commissionaire for the marketing and end-
user download of the Licensed Applications by end-users located in the following countries, as
updated from time to time via the App Store Connect site. For the purposes of this Agreement,
“commissionaire” means an agent who purports to act on his own behalf and concludes
agreements in his own name but acts on behalf of other persons, as generally recognized in
many Civil Law legal systems.
Albania
France
Madagascar
Senegal
Algeria
Gambia
Malawi
Seychelles
Angola
Germany
Malaysia
Sierra Leone
Armenia
Ghana
Mali
Singapore
Program Agreement
Austria
Greece
Malta, Republic of
Slovakia
Azerbaijan
Guinea-Bissau
Mauritania
Slovenia
Bahrain
Hong Kong
Mauritius
Solomon Islands
Belarus
Hungary
Micronesia (Federated States of)
South Africa
Belgium
Iceland
Moldova
Spain
Benin
India
Mongolia
Sri Lanka
Bhutan
Indonesia
Namibia
Swaziland
Botswana
Ireland
Nepal
Sweden
Brunei
Israel
Netherlands
Switzerland
Bulgaria
Italy
Niger
Taiwan
Burkina-Faso
Jordan
Nigeria
Tajikistan
Cambodia
Kazakhstan
Norway
Tanzania
Cape Verde
Kenya
Oman
Thailand
Chad
Korea
Pakistan
Tunisia
China
Kuwait
Palau
Turkey
Congo (Republic of)
Kyrgyzstan
Papua New Guinea
Turkmenistan
Croatia
Laos
Philippines
UAE
Cyprus
Latvia
Poland
Uganda
Czech Republic
Lebanon
Portugal
Ukraine
Denmark
Liberia
Sao Tome e Principe
United Kingdom
Egypt
Lithuania
Qatar
Uzbekistan
Estonia
Luxembourg
Romania
Vietnam
Fiji
Macau
Russia
Yemen
Finland
Macedonia
Saudi Arabia
Zimbabwe
Program Agreement
EXHIBIT B
(to Schedule 1)
Instructions for Minimum Terms of Developer’s
End-User License Agreement
1.
Acknowledgement: You and the end-user must acknowledge that the EULA is
concluded between You and the end-user only, and not with Apple, and You, not Apple, are
solely responsible for the Licensed Application and the content thereof. The EULA may not
provide for usage rules for Licensed Applications that are in conflict with, the App Store Terms of
Service as of the Effective Date (which You acknowledge You have had the opportunity to
review).
2.
Scope of License: The license granted to the end-user for the Licensed Application
must be limited to a non-transferable license to use the Licensed Application on any Apple-
branded Products that the end-user owns or controls and as permitted by the Usage Rules set
forth in the App Store Terms of Service, except that such Licensed Application may be accessed,
acquired, and used by other accounts associated with the purchaser via Family Sharing or
volume purchasing.
3.
Maintenance and Support: You must be solely responsible for providing any
maintenance and support services with respect to the Licensed Application, as specified in the
EULA, or as required under applicable law. You and the end-user must acknowledge that Apple
has no obligation whatsoever to furnish any maintenance and support services with respect to the
Licensed Application.
4.
Warranty: You must be solely responsible for any product warranties, whether express
or implied by law, to the extent not effectively disclaimed. The EULA must provide that, in the
event of any failure of the Licensed Application to conform to any applicable warranty, the end-
user may notify Apple, and Apple will refund the purchase price for the Licensed Application to
that end-user; and that, to the maximum extent permitted by applicable law, Apple will have no
other warranty obligation whatsoever with respect to the Licensed Application, and any other
claims, losses, liabilities, damages, costs or expenses attributable to any failure to conform to any
warranty will be Your sole responsibility.
5.
Product Claims: You and the end-user must acknowledge that You, not Apple, are
responsible for addressing any claims of the end-user or any third party relating to the Licensed
Application or the end-user’s possession and/or use of that Licensed Application, including, but
not limited to: (i) product liability claims; (ii) any claim that the Licensed Application fails to
conform to any applicable legal or regulatory requirement; and (iii) claims arising under consumer
protection or similar legislation. The EULA may not limit Your liability to the end-user beyond what
is permitted by applicable law.
6.
Intellectual Property Rights: You and the end-user must acknowledge that, in the
event of any third party claim that the Licensed Application or the end-user’s possession and use
of that Licensed Application infringes that third party’s intellectual property rights, You, not Apple,
will be solely responsible for the investigation, defense, settlement and discharge of any such
intellectual property infringement claim.
7.
Legal Compliance: The end-user must represent and warrant that (i) he/she is not
located in a country that is subject to a U.S. Government embargo, or that has been designated
by the U.S. Government as a “terrorist supporting” country; and (ii) he/she is not listed on any
U.S. Government list of prohibited or restricted parties.
8.
Developer Name and Address: You must state in the EULA Your name and address,
Program Agreement
Page 72
and the contact information (telephone number; E-mail address) to which any end-user questions,
complaints or claims with respect to the Licensed Application should be directed.
9.
Third Party Terms of Agreement: You must state in the EULA that the end-user must
comply with applicable third party terms of agreement when using Your Application, e.g., if You
have a VoIP application, then the end-user must not be in violation of their wireless data service
agreement when using Your Application.
10.
Third Party Beneficiary: You and the end-user must acknowledge and agree that
Apple, and Apple’s subsidiaries, are third party beneficiaries of the EULA, and that, upon the end-
user’s acceptance of the terms and conditions of the EULA, Apple will have the right (and will be
deemed to have accepted the right) to enforce the EULA against the end-user as a third party
beneficiary thereof.
Program Agreement
Page 73
EXHIBIT C
(to Schedule 1)
App Store Promo Code Terms
Notwithstanding any other provisions of the Agreement or this Schedule 1, You hereby agree that
the following terms shall apply to all promotional Custom Codes requested by You via the App
Store Connect tool. For the purposes of this Exhibit C, “You” shall include additional members of
Your App Store Connect team (e.g. individuals in the marketing and technical roles).
Except as otherwise expressed in writing herein, nothing in this Exhibit C shall be construed to
modify the Agreement or this Schedule 1 in any way, and all capitalized terms not defined below
shall have the meanings set forth in the Program Agreement.
1.
DEFINITIONS:
“Holder” means an individual located in a Territory to whom You provide one or more Custom
Codes;
“Custom Code” means a unique alphanumeric code generated and provided to You by Apple
pursuant to this Exhibit C which allows a Holder who is an App Store customer to download or
access for free from the App Store the Licensed Application for which You have requested such
code via the App Store Connect tool, whether offered for free or for a fee on the App Store (the
“Promo Content”); and
“Effective Period” means the period between the Custom Code Activation Date and the Custom
Code Expiration Date.
2.
AUTHORIZATION AND OBLIGATIONS: You hereby authorize and instruct Apple to
provide You with Custom Codes upon request, pursuant to the terms of this Exhibit C, and You
take full responsibility for ensuring that any team member that requests such codes shall abide by
the terms of this Exhibit C. You shall be responsible for securing all necessary licenses and
permissions relating to use of the Custom Codes and the Licensed Application, including any
uses by You of the name(s) or other indicia of the Licensed Application, or name(s) or likenesses
of the person(s) performing or otherwise featured in the Licensed Application, in any advertising,
marketing, or other promotional materials, in any and all media. Apple reserves the right to
request and receive copies of such licenses and permissions from You, at any time, during the
Effective Period.
3.
NO PAYMENT: Except for Your obligations set forth in Section 10 of this Exhibit C, You
are not obligated to pay Apple any commission for the Custom Codes.
4.
DELIVERY: Upon request by You via the App Store Connect tool, Apple shall provide the
Custom Codes electronically to You via App Store Connect, email, or other method as may be
indicated by Apple.
5.
CUSTOM CODE ACTIVATION DATE: Custom Codes will become active for use by
Holders upon delivery to You.
6.
CUSTOM CODE EXPIRATION DATE: All unused Custom Codes, whether or not applied
to an Apple ID, expire at midnight 11:59 PT on the earlier of: (a) the date that is twenty-eight (28)
days after the delivery of the Custom Codes; or (b) the termination of the Agreement.
7.
PERMITTED USE: You may distribute the Custom Codes until that date which is ten (10)
calendar days prior to the Custom Code Expiration Date solely for the purpose of offering
Program Agreement
Page 74
instances of the app for media review or promotional purposes. You may not distribute the
Custom Codes to Holders in any Territory in which You are not permitted to sell or distribute Your
Licensed Application.
8.
ADDITIONAL MATERIALS: Apple shall not be responsible for developing and
producing any materials in relation to the Custom Codes other than the Custom Codes
themselves.
9.
REPRESENTATIONS, WARRANTIES, AND INDEMNIFICATION: You represent and
warrant that: (i) You own or control all rights necessary to make the grant of rights, licenses, and
permissions listed in Section 2, and that the exercise of such rights, licenses, and permissions
shall not violate or infringe the rights of any third party, and (ii) any use of the Custom Codes shall
be in accordance with the terms of this Exhibit C and shall not infringe any third party rights or
violate any applicable laws, directives, rules, and regulations of any governmental authority in the
Territory or anywhere else in the world. You agree to indemnify and hold Apple, its subsidiaries
and affiliates (and their respective directors, officers, and employees) harmless from all losses,
liabilities, damages, or expenses (including reasonable attorneys’ fees and costs) resulting from
any claims, demands, actions, or other proceedings arising from a breach of the representations
and warranties set for h in this Section, or a breach of any other term of the Agreement and this
Schedule 1.
10.
PAYMENT WAIVER: You hereby waive any right to collect any royalties, proceeds, or
remuneration for the distribution and download of the Licensed Application via the Custom
Codes, regardless of whether any remuneration would otherwise be payable under the
Agreement, including Schedule 1 thereto, if applicable. The parties acknowledge that, as
between Apple and You, the parties’ respective responsibilities for the payment of any royalties or
other similar payments to third parties with respect to distribution and download of the Licensed
Application via the Custom Codes shall be as set forth in the Agreement.
11.
TERMS AND CONDITIONS: You further agree to the following terms:
(a) You shall not sell the Custom Codes or accept any form of payment, trade-in-kind, or other
compensation in connection with the distribution of the Custom Codes and You shall prohibit third
parties from doing so.
(b) Nothing in this Exhibit C shall cause the parties to become partners, joint venturers or co-
owners, nor shall either party constitute an agent, employee, or representative of the other, or
empower the other party to act for, bind, or otherwise create or assume any obligation on its
behalf, in connection with any transaction under this Exhibit C; provided, however, that nothing in
this Section 11(b) shall affect, impair, or modify either of the Parties’ respective rights and
obligations, including the agency or commissionaire relationship between them under Schedules
1, 2, and 3 of the Agreement.
(c) You shall prominently disclose any content age restrictions or warnings legally required in the
Territories and ensure that Custom Codes are distributed only to persons of an age appropriate
and consistent with the App Store rating for the associated Licensed Application.
(d) You shall conduct Yourself in an honest and ethical manner and shall not make any
statement, orally or in writing, or do any act or engage in any activity that is obscene, unlawful, or
encourages unlawful or dangerous conduct, or that may disparage, denigrate, or be detrimental
to Apple or its business.
(e) Apple shall not be responsible for providing any technical or customer support to You or
Holders above what Apple provides to standard or ordinary App Store users.
Program Agreement
Page 75
(f) You agree to the additional Custom Code Terms and Conditions attached hereto as
Attachment 1.
(g) YOU SHALL INCLUDE THE COUNTRY SPECIFIC CODE USER TERMS AS WELL AS THE
EXPIRATION DATE OF THE CUSTOM CODE ON ANY INSTRUMENT USED TO DISTRIBUTE
THE CUSTOM CODE TO HOLDERS (E.G. CERTIFICATE, CARD, EMAIL, ETC). YOU SHALL
RECEIVE AN EMAIL WITH THIS INFORMATION LOCALIZED FOR EACH TERRITORY UPON
REQUESTING THE CUSTOM CODES IN THE APP STORE CONNECT TOOL.
Code expires on [date] and is redeemable only on the App Store for [territory]. Requires an
iTunes account, subject to prior acceptance of license and usage terms. Compatible software
and hardware, and internet access (fees may apply) required. Not for resale. Full terms apply;
see [www.apple.com/legal/internet-services/us/terms.html]. For more information, see
www.apple.com/support/ In-app purchases sold separately. This app is provided to You by
[Developer’s name].
(h) You shall be solely responsible for Your use of the Custom Codes, including any use by other
members of Your App Store Connect team, and for any loss or liability to You or Apple therefrom.
(i) In the event Your Licensed Application is removed from the App Store for any reason, You
agree to cease distribution of the Custom Codes and that Apple may deactivate such Custom
Codes.
(j) You agree that Apple shall have the right to deactivate the Custom Codes, even if already
delivered to Holders, in the event You violate any of the terms of this Exhibit C, the Agreement, or
Schedules 1, 2, or 3 thereto.
(k) You may distribute the Custom Codes within the Territories, but agree that You shall not
export any Custom Code for use outside the Territories nor represent that You have the right or
ability to do so. Risk of loss and transfer of title for the Custom Codes pass to You upon delivery
to You within App Store Connect, via email, or other method provided by Apple.
12.
APPLE TRADEMARKS: Your use of Apple trademarks in connection with the Custom
Codes is limited only to “iTunes” and “App Store” (the “Marks”) subject to the following and any
additional guidelines Apple may issue from time to time:
(a) You may use the Marks only during the Effective Period
(b) You shall submit any advertising, marketing, promotional or other materials, in any and all
media now known or hereinafter invented, incorporating the Marks to Apple prior to use for written
approval. Any such materials not expressly approved in writing by Apple shall be deemed
disapproved by Apple.
(c) You may only use the Marks in a referential manner and may not use the Marks as the most
prominent visual element in any materials. Your company name, trademark(s), or service
mark(s) should be significantly larger than any reverence to the Marks.
(d) You may not directly or indirectly suggest Apple’s sponsorship, affiliation, or endorsement of
You, Your Licensed Applications, or any promotional activities for which You are requesting the
Custom Codes.
(e) You acknowledge that the Marks are the exclusive property of Apple and agree not to claim
any right, title, or interest in or to the Marks or at any time challenge or attack Apple’s rights in the
Marks. Any goodwill resulting from Your use of the Marks shall inure solely to the benefit of
Apple and shall not create any right, title, or interest for You in the Marks.
Program Agreement
Page 76
13.
GOVERNING LAW: Any litigation or other dispute resolution between You and Apple
arising out of or relating to this Exhibit C or facts relating thereto shall be governed by Section
14.10 of the Agreement.
Program Agreement
Page 77
Attachment 1
(to Exhibit C of Schedule 1)
Custom Code Terms and Conditions
1.
All Custom Codes delivered pursuant to this Exhibit C, whether or not applied to an App
Store account, expire as indicated in this Exhibit C.
2.
Custom Codes, and unused balances, are not redeemable for cash and cannot be
returned for a cash refund, exchanged, or used to purchase any other merchandise, or provide
allowances or iTunes Gifts by either You or Holder. This includes Custom Codes that have
expired unused.
3.
Custom Codes may only be redeemed through the App Store in the Territory, open only
to persons in the Territory with a valid Apple ID. Not all App Store products may be available in all
Territories. Internet access (fees may apply), the latest version of iTunes software, and other
compatible software and hardware are required.
4.
Access to, redemption of Custom Codes on, or purchases from, and use of products
purchased on, the App Store, are subject to acceptance of its Terms of Service presented at the
time of redemption or purchase, and found at http://www.apple.com/legal/itunes/ww/.
5.
Latest version of iTunes software required to access the App Store, and can be
downloaded at no charge at www.apple.com/itunes/download/. Use of iTunes software is subject
to acceptance of its software license agreement presented at the time of installation. The
minimum system requirements for running the software are available at
www.apple.com/itunes/download/.
6.
Custom Codes will be placed in the Holder’s applicable iTunes account and are not
transferable.
7.
If a Holder’s order exceeds the amount available on the Custom Codes, Holder must
establish an iTunes Store Purchaser account and pay for the balance with a credit card.
8.
Except as stated otherwise, data collection and use are subject to Apple’s Privacy Policy,
which can be found at http://www.apple.com/legal/privacy.
9.
Apple is not responsible for lost or stolen Custom Codes. If Holders have any questions,
they may visit Apple’s iTunes Store Purchaser Service at www.apple.com/support/itunes/.
10.
Apple reserves the right to close Holder accounts and request alternative forms of
payment if Custom Codes are fraudulently obtained or used on the App Store.
11.
APPLE AND ITS LICENSEES, AFFILIATES, AND LICENSORS MAKE NO
WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO CUSTOM CODES OR THE APP
STORE, INCLUDING WITHOUT LIMITATION, ANY EXPRESS OR IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. IN THE EVENT A
CUSTOM CODE IS NON-FUNCTIONAL, HOLDER’S OR COMPANY’S SOLE REMEDY, AND
APPLE’S SOLE LIABILITY, SHALL BE THE REPLACEMENT OF SUCH CUSTOM CODE.
THESE LIMITATIONS MAY NOT APPLY. CERTAIN LOCAL AND TERRITORY LAWS DO NOT
ALLOW LIMITATIONS ON IMPLIED WARRANTIES OR THE EXCLUSION OR LIMITATION OF
CERTAIN DAMAGES. IF THESE LAWS APPLY, SOME OR ALL OF THE ABOVE
DISCLAIMERS, EXCLUSIONS, OR LIMITATIONS MAY NOT APPLY, AND YOU OR HOLDER
MAY ALSO HAVE ADDITIONAL RIGHTS.
Program Agreement
Page 78
12.
Apple reserves the right to change any of the terms and conditions set forth in this
Attachment 1 from time to time without notice.
13.
Any part of these terms and conditions may be void where prohibited or restricted by law.
EP5493
10/19/18
Program Agreement
Page 79
| antitrust |
LU_3A4kBRpLueGJZGqhg | IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF INDIANA
RICHARD MCCLUSKEY,
:
on behalf of himself and all others
:
similarly situated,
:
Case No.
:
Plaintiff,
:
:
v.
:
DEMAND FOR JURY TRIAL
:
ARBITERSPORTS, LLC,
:
:
Defendant.
:
______________________________________ :
CLASS ACTION COMPLAINT
Plaintiff RICHARD MCCLUSKEY, on behalf of himself and all others similarly situated,
brings this action against Defendant ArbiterSports, LLC (“ArbiterSports” or “Defendant”) to
obtain damages, restitution, and injunctive relief for the Class, as defined below, from the
Defendant. Plaintiff makes the following allegations upon information and belief, except as to his
own actions, the investigation of his counsel, and the facts that are a matter of public record.
NATURE OF THE ACTION
This class action arises out of the recent cyberattack and data breach involving
Defendant ArbiterSports (the “Data Breach”), which held in its possession certain personally
identifiable information (“PII”) of the Plaintiff, and the putative Class Members, all of whom have
PII on ArbiterSports servers.
The PII compromised in the Data Breach included highly-sensitive information
including first and last names, addresses, dates of birth, username, passwords, Social Security
numbers, full bank account numbers, and payroll and withholding information.
The Data Breach was a direct result of Defendant’s failure to implement adequate
and reasonable cybersecurity procedures and protocols necessary to protect consumers’ PII.
Plaintiff brings this class action lawsuit on behalf of those similarly situated to
address Defendant’s inadequate safeguarding of Class Members’ PII that it collected and
maintained, and for failing to provide timely and adequate notice to Plaintiff and other Class
Members that their information had been subject to the unauthorized access of an unknown third
party and precisely what specific type of information was accessed.
In addition, Defendant ArbiterSports and its employees failed to properly monitor
and secure the computer network and systems that housed the PII. Had ArbiterSports properly
monitored its property, it would have discovered the intrusion sooner.
Defendant maintained the PII in a reckless manner. In particular, the PII was
maintained on Defendant ArbiterSports’s computer network in a condition vulnerable to
cyberattacks. Upon information and belief, the mechanism of the cyberattack and potential for
improper disclosure of Plaintiff’s and Class Members’ PII was a known risk to Defendant and thus
Defendant was on notice that failing to take steps necessary to secure the PII from those risks left
that property in a dangerous condition.
Defendant disregarded the rights of Plaintiff and Class Members (defined below)
by, inter alia, intentionally, willfully, recklessly, or negligently failing to take adequate and
reasonable measures to ensure its data systems were protected against unauthorized intrusions;
failing to disclose that it did not have adequately robust computer systems and security practices
to safeguard Class Member PII; and failing to take standard and reasonably available steps to
prevent the Data Breach.
Plaintiff’s and Class Members’ identities are now at risk because of Defendant’s
negligent conduct since the PII that Defendant collected and maintained is now in the hands of
data thieves.
Armed with the PII accessed in the Data Breach, data thieves can commit a variety
of crimes including, e.g., opening new financial accounts in Class Members’ names, taking out
loans in Class Members’ names, using Class Members’ information to obtain government benefits,
filing fraudulent tax returns using Class Members’ information, obtaining driver’s licenses in Class
Members’ names but with another person’s photograph, and giving false information to police
during an arrest.
As a result of the Data Breach, Plaintiff and Class Members have been exposed to
a heightened and imminent risk of fraud and identity theft. Plaintiff and Class Members must now
and in the future closely monitor their financial accounts to guard against identity theft.
Plaintiff and Class Members may also incur out of pocket costs for, e.g., purchasing
credit monitoring services, credit freezes, credit reports, or other protective measures to deter and
detect identity theft.
Through this Complaint, Plaintiff seeks to remedy these harms on behalf of himself
and all similarly situated individuals whose PII was accessed during the Data Breach.
Plaintiff seeks remedies including, but not limited to, compensatory damages,
reimbursement of out-of-pocket costs, and injunctive relief including improvements to
Defendant’s data security systems, future annual audits, and adequate credit monitoring services
funded by Defendant.
Accordingly, Plaintiff brings this action against Defendant seeking redress for its
unlawful conduct, and asserting claims for: (i) negligence, (ii) breach of express contract, (iii)
breach of implied contract; (iv) intrusion upon seclusion/invasion of privacy; and (v) breach of
confidence.
JURISDICTION AND VENUE
This Court has jurisdiction over this action under the Class Action Fairness Act
(“CAFA”), 28 U.S.C. § 1332(d). There are more than 100 members of the proposed class, the
aggregated claims of the individual Class Members exceed the sum or value of $5,000,000.00
exclusive of interest and costs, and members of the Proposed Class, including Plaintiff, are citizens
of states different from Defendant ArbiterSports.
Defendant ArbiterSports is a Utah limited liability company with its corporation
with its principal place of business in Salt Lake County, Utah. The National Collegiate Athletic
Association (“NCAA”) is a member of ArbiterSports with a majority membership interest. The
NCAA is an unincorporated association that is headquartered in Indianapolis, Indiana.
Venue is proper in this Court pursuant to 28 U.S.C. § 1391(b)(1). Defendant resides
in this District for jurisdictional and venue purposes because a member of ArbiterSports is
headquartered in this District.
PARTIES
Plaintiff Richard McCluskey (“McCluskey”) is and at all times mentioned herein
was as individual citizen of the State of Florida, residing in the city of Brooksville. Plaintiff
McCluskey received notice of the Data Breach from ArbiterSports on or about August 25, 2020.
A copy of the notice he received is attached hereto as Exhibit A (the “Notice Letter”).
Defendant ArbiterSports is a Utah limited liability company with its principal place
of business at 235 W. Sego Lily Drive, Suite 200, Sandy, Salt Lake County, Utah 84070.
ArbiterSports is majority owned by the NCAA, which is headquartered in Indianapolis.
STATEMENT OF FACTS
A.
Nature of Defendant’s Businesses
Defendant ArbiterSports is a technology company that provides tools related to
management of youth sports.
In the ordinary course of his role as a referee of high school football games for the
Florida High School Athletic Association, which in turn used ArbiterSports to assign him to games
and manage payroll, Plaintiff provided PII to Defendant, including his name, address, date of birth,
bank account information, username, password, email address, and Social Security number.
In the ordinary course of their relationship ArbiterSports, Class members, who are
also youth sports coaches and referees of organizations that use management services provided by
ArbiterSports, provided and were required to provide PII to ArbiterSports including their names,
addresses, dates of birth, username, passwords, email addresses, sand Social Security numbers.
Defendant ArbiterSports maintains this PII on its servers and within its data
infrastructure.
Defendant ArbiterSports has established a Privacy Policy wherein it details the PII
it collects through its website and its standards to maintain the security and integrity of such data.1
The aim of the Privacy Policy is to provide adequate and consistent safeguards for
the handling of employment data by Defendant ArbiterSports.
Defendant ArbiterSports agreed to and undertook legal duties to maintain the PII
entrusted to them by Plaintiff and Class Members safely, confidentially, and in compliance with
all applicable laws.
1 http://www.arbitersports.com/privacy-policy/ (last visited September 25, 2020).
Defendant ArbiterSports held the PII it collected on computer servers at a currently
unknown location.2
The PII held by Defendant ArbiterSports in its computer systems and networks
included the PII of Plaintiff and Class Members.
B.
The Data Breach
On June 3, 2020, Defendant ArbiterSports was hacked and PII was held for ransom
by the hackers. The hackers obtained PII from Plaintiff and the Class Members.
Defendant ArbiterSports alleges that it did not learn of the data breach until July
15, 2020. It claims to have launched an investigation and engaged a security firm. The investigation
revealed that a copy of a database containing PII was obtained by the hackers and the hackers
demanded payment in exchange for allegedly deleting the files. ArbiterSports paid the ransom and
claims that it “obtained confirmation that the unauthorized party deleted the files,” although as
discussed below, it is unlikely that the hackers did so or that the information is no longer available
in the dark web.
The data and files exfiltrated from Defendant ArbiterSports’s computer servers
included the PII of Plaintiff and Class Members, including full names, addresses, dates of birth,
passwords, usernames, and Social Security numbers.
On or about August 25, 2020 (nearly three months after the breach occurred),
Defendant ArbiterSports notified Plaintiff of the Data Breach. However, Defendant ArbiterSports
only provided notice of the Data Breach to individuals located in states where state law required
such disclosure.
2 See Ex. A, Notice Letter.
Defendant ArbiterSports notified the Indiana Attorney General of the breach and
disclosed that 539,309 individuals were affected by the breach.3
As a result of Defendant ArbiterSports’s disclosures, Defendant ArbiterSports
decided to offer of one (1) year of identity monitoring without cost to those who received the
notice, including Plaintiff McCluskey.
C.
ArbiterSports’s Privacy Policy
Defendant ArbiterSports had an obligation created by contract, industry standards,
common law, and representations made to Class Members, to keep Plaintiff’s and Class Members’
PII confidential and to protect it from unauthorized access and disclosure.
Plaintiff and Class Members provided their PII to Defendant ArbiterSports with the
reasonable expectation and mutual understanding that Defendant ArbiterSports would comply
with its obligations to keep such information confidential and secure from unauthorized access.
Defendant’s data security obligations were particularly important given the
substantial increase in cyberattacks and/or data breaches in the last few years.
Indeed, cyberattacks, such as the one experienced by Defendant, have become so
notorious that the Federal Bureau of Investigation (“FBI”) and U.S. Secret Service have issued a
warning to potential targets so they are aware of, and prepared for, a potential attack.
Therefore, the increase in such attacks, and attendant risk of future attacks, was
widely known to the public.
Defendant breached its obligations to Plaintiff and Class Members and/or was
otherwise negligent and reckless because it failed to properly maintain and safeguard its computer
3 https://www.in.gov/attorneygeneral/files/data%20breach%20sept2020.pdf (last visited Sept. 25,
2020).
systems and data infrastructure. Defendant’s unlawful conduct includes, but is not limited to, its
failure to:
maintain an adequate data security system to reduce the risk of data breaches and
cyberattacks;
adequately protect employees’ PII;
properly monitor its own data security systems for existing intrusions; and
ensure that vendors with access to payroll data employed reasonable security
procedures;
As the result of computer systems in need of security upgrading, failure to
implement proper cybersecurity hardware and software (such as next generation firewalls and
multi-factor authentication), inadequate procedures for handling phishing emails, and inadequately
trained employees, Defendant negligently and unlawfully failed to safeguard Plaintiff’s and Class
Members’ PII.
Indeed, as detailed by computer programmer (and victim of Defendant’s conduct)
Keith Mukai in an article for Medium4, “ArbiterSports’ security measures failed to adhere to the
most basic security best practices established 30+ years ago.”
Mr. Mukai, a 20-year professional programmer with a computer science degree
from Princeton, details how ArbiterSports kept passwords as decryptable data, instead of
“hashing” the data, which would transform the passwords into nonsense letters and numbers. Had
ArbiterSports done that, it would be mathematically impossible for the hackers to decrypt.
4 See Keith Mukai, ArbiterSports was hacked. Don’t use them ever again, Medium (Aug. 29,
2020), https://medium.com/@kdmukai_64726/arbitersports-was-hacked-dont-use-them-ever-
again-fddea92bcd21
“[B]ecause the attackers were able to decrypt the password data, that tells us that ArbiterSports
could not have been using hashing to protect user passwords.”5
Hashing is 1970s era technology that has been in mainstream use since the 1990s.
Further, ArbiterSports encrypted Social Security numbers on its servers—which
must be decrypted using an encryption key—in a manner subject to decryption with ease.
The industry standard encryption algorithm is called AES-256. It is the same
encryption used by the National Security Agency. AES-256 relies on an encryption key that must
be kept secret.
The fact that the hackers were able to decrypt the Social Security numbers means
either: (1) ArbiterSports was not using industry standard encryption and left themselves vulnerable
to attack; or (2) ArbiterSports was using AES-256 but did not adequately secure the encryption
Either option demonstrates that ArbiterSports’s data security was handled
incompetently and negligently.
Further, ArbiterSports’s claim that it has verified that the hackers deleted the PII is
preposterous.
As Keith Mukai states in his article about ArbiterSports, “Proof of deletion is not a
thing.”5
There is simply no way ArbiterSports could possibly know that the hackers did not
simply copy the data in another location before offering whatever “proof” that the original copy
was deleted. That ArbiterSports has put its trust in the very people responsible for the Data Breach
in the first place is a disaster in waiting.
Due to ArbiterSports’s incompetent security measures, Plaintiff and the Class
Members now face an increased risk of fraud and identity theft and must deal with that threat
forever.
D.
Data Breaches Cause Disruption and Put Consumers at an Increased Risk of
Fraud and Identify Theft
The United States Government Accountability Office released a report in 2007
regarding data breaches (“GAO Report”) in which it noted that victims of identity theft will face
“substantial costs and time to repair the damage to their good name and credit record.”6
The FTC recommends that identity theft victims take several steps to protect their
personal and financial information after a data breach, including contacting one of the credit
bureaus to place a fraud alert (consider an extended fraud alert that lasts for seven years if someone
steals their identity), reviewing their credit reports, contacting companies to remove fraudulent
charges from their accounts, placing a credit freeze on their credit, and correcting their credit
reports.7
Identity thieves use stolen personal information such as Social Security numbers
for a variety of crimes, including credit card fraud, phone or utilities fraud, and bank/finance fraud.
Identity thieves can also use Social Security numbers to obtain a driver’s license or
official identification card in the victim’s name but with the thief’s picture; use the victim’s name
and Social Security number to obtain government benefits; or file a fraudulent tax return using the
victim’s information. In addition, identity thieves may obtain a job using the victim’s Social
Security number, rent a house or receive medical services in the victim’s name, and may even give
6 See U.S. Gov’t Accountability Off., GAO-07-737, Data Breaches Are Frequent, but Evidence of
Resulting Identity Theft Is Limited; However, the Full Extent Is Unknown 2 (2007),
https://www.gao.gov/new.items/d07737.pdf (“GAO Report”).
7 See https://www.identitytheft.gov/Steps (last visited July 12, 2020).
the victim’s personal information to police during an arrest resulting in an arrest warrant being
issued in the victim’s name. A study by Identity Theft Resource Center shows the multitude of
harms caused by fraudulent use of personal and financial information:8
What’s more, theft of PII is also gravely serious. PII is a valuable property right.9
Its value is axiomatic, considering the value of Big Data in corporate America and the
consequences of cyber thefts include heavy prison sentences. Even this obvious risk to reward
analysis illustrates beyond doubt that PII has considerable market value.
8 Jason Steele, Credit Card and ID Theft Statistics, Creditcards.com (Oct. 24, 2017),
https://www.creditcards.com/credit-card-news/credit-card-security-id-theft-fraud-statistics 1276.
php (last visited July 12, 2020).
9 See, e.g., John T. Som, et al, Corporate Privacy Trend: The “Value” of Personally Identifiable
Information (“PII”) Equals the “Value" of Financial Assets, 15 Rich. J.L. & Tech. 11, at *3-4
(2009) (“PII, which companies obtain at little cost, has quantifiable value that is rapidly reaching
a level comparable to the value of traditional financial assets.”) (citations omitted).
It must also be noted there may be a substantial time lag—measured in years—
between when harm occurs versus when it is discovered, and also between when PII and/or
financial information is stolen and when it is used. According to the U.S. Government
Accountability Office, which conducted a study regarding data breaches:
[L]aw enforcement officials told us that in some cases, stolen data may be
held for up to a year or more before being used to commit identity theft.
Further, once stolen data have been sold or posted on the Web, fraudulent
use of that information may continue for years. As a result, studies that
attempt to measure the harm resulting from data breaches cannot necessarily
rule out all future harm.
See GAO Report, at p. 29.
PII and financial information are such valuable commodities to identity thieves that
once the information has been compromised, criminals often trade the information on the “cyber
black-market” for years.
There is a market for Plaintiff’s and Class Members PII, and the stolen PII has
inherent value.
That ArbiterSports has not even notified all of the Class Members who were
affected is outrageous. There is no notice of the breach on ArbiterSports’s website or Twitter
account. ArbiterSports’s Facebook page also did not disclose the breach. Instead, it posted on July
13, 2020, that the ArbiterSports’s website was experiencing “an unplanned outage.”
Plaintiff and Class Members are at an increased risk of fraud and identity theft for
many years into the future. Thus, Plaintiff and Class Members must vigilantly monitor their
financial accounts for many years to come.
PLAINTIFF’S AND CLASS MEMBERS’ DAMAGES
As a consequence of the Data Breach, Plaintiff McClusky has spent time
monitoring his accounts to protect against fraud. He has checked his credit report carefully and
must continue to do so for the foreseeable future. He performed a scan of the dark web and his
email address and phone number are described as compromised. Further, since the Data Breach,
he has received an increased number of phone calls to his cell phone attempting to scam him out
of money.
To date, Defendant has done absolutely nothing to compensate Class Members
for the damages they sustained in the Data Breach. Defendant has merely offered to provide
identity monitoring services for a paltry twelve (12) months by way of Experian’s
IdentityWorksSM Credit 3B.
Defendant’s offer is wholly inadequate as it fails to provide for the fact that victims
of data breaches and other unauthorized disclosures commonly face multiple years of ongoing
identity theft and it entirely fails to provide any compensation for the unauthorized release
and disclosure of Plaintiff’s and Class Members’ PII.
Furthermore, Defendant ArbiterSports’s credit monitoring offer squarely places
the burden on Plaintiff and Class Members, rather than on the Defendant, to investigate and protect
themselves from Defendant’s tortious acts resulting in the Data Breach. Rather than automatically
enrolling Plaintiff and Class Members in credit monitoring services upon discovery of the breach,
Defendant merely sent instructions to Plaintiff and Class Members about actions they can
affirmatively take to protect themselves.
Plaintiff and Class Members have been damaged by the compromise and
exfiltration of their PII in the Data Breach.
Plaintiff’s PII was compromised and exfiltrated by cyber criminals as a direct and
proximate result of the Data Breach.
As a direct and proximate result of Defendant’s conduct, Plaintiff and Class
Members have been placed at an imminent, immediate, and continuing increased risk of harm from
fraud and identity theft.
As a direct and proximate result of Defendant’s conduct, Plaintiff and Class
Members have been forced to expend time dealing with the effects of the Data Breach.
Plaintiff and Class Members face substantial risk of out-of-pocket fraud losses such
as loans opened in their names, tax return fraud, utility bills opened in their names, credit card
fraud, and similar identity theft. These dangers are not merely hypothetical, they are exactly why
data breaches happen in the first place. Cyber criminals steal this information in order to turn it
into monetary gain for themselves at the expense of the Class Members because they know how
valuable this information is.
Plaintiff and Class Members face substantial risk of being targeted for future
phishing, data intrusion, and other illegal schemes based on their PII as potential fraudsters could
use that information to more effectively target such schemes to Plaintiff and Class Members.
Plaintiff and Class Members may also incur out-of-pocket costs for protective
measures such as credit monitoring fees, credit report fees, credit freeze fees, and similar costs
directly or indirectly related to the Data Breach.
Plaintiff and Class Members also suffered a loss of value of their PII when it was
acquired by cyber thieves in the Data Breach. Numerous courts have recognized the propriety of
loss of value damages in related cases.
Plaintiff and Class Members have spent and will continue to spend significant
amounts of time to monitor their financial accounts and records for misuse.
Plaintiff and Class Members have suffered or will suffer actual injury as a direct
result of the Data Breach. Many victims suffered ascertainable losses in the form of out-of-pocket
expenses and the value of their time reasonably incurred to remedy or mitigate the effects of the
Data Breach relating to:
finding fraudulent charges;
canceling and reissuing credit and debit cards;
purchasing credit monitoring and identity theft prevention;
addressing their inability to withdraw funds linked to compromised accounts;
taking trips to banks and waiting in line to obtain funds held in limited accounts;
placing “freezes” and “alerts” with credit reporting agencies;
spending time on the phone with or at a financial institution to dispute fraudulent
charges;
contacting financial institutions and closing or modifying financial accounts;
resetting automatic billing and payment instructions from compromised credit and
debit cards to new ones;
paying late fees and declined payment fees imposed as a result of failed automatic
payments that were tied to compromised cards that had to be cancelled; and
reviewing and monitoring bank accounts and credit reports for unauthorized
activity for years to come.
Moreover, Plaintiff and Class Members have an interest in ensuring that their PII,
which is believed to remain in the possession of the Defendant, is protected from further breaches
by the implementation of security measures and safeguards, including but not limited to, making
sure that the storage of data or documents containing personal and financial information is not
accessible online and that access to such data is password-protected.
Further, as a result of Defendant’s conduct, Plaintiff and Class Members are forced
to live with the anxiety that their PII may be disclosed to the entire world, thereby subjecting them
to embarrassment and depriving them of any right to privacy whatsoever.
As a direct and proximate result of Defendant’s actions and inactions, Plaintiff and
Class Members have suffered anxiety, emotional distress, and loss of privacy, and are at an
increased risk of future harm.
Defendant’s delay in identifying and reporting the Data Breach caused additional
harm. It is axiomatic that “[t]he quicker a financial institution, credit card issuer, wireless carrier
or other service provider is notified that fraud has occurred on an account, the sooner these
organizations can act to limit the damage. Early notification can also help limit the liability of a
victim in some cases, as well as allow more time for law enforcement to catch the fraudsters in the
Indeed, once a Data Breach has occurred, “[o]ne thing that does matter is hearing
about a Data Breach quickly. That alerts consumers to keep a tight watch on credit card bills and
suspicious emails. It can prompt them to change passwords and freeze credit reports. And notifying
officials can help them catch cyber criminals and warn other businesses of emerging dangers. If
10 Identity Fraud Hits Record High with 15.4 Million U.S. Victims in 2016, Up 16 Percent
According to New Javelin Strategy & Research Study, Business Wire, https://www.businesswire.
com/news/home/20170201005166/en/Identity-Fraud-Hits-Record-High-15.4-Million
consumers don’t know about a breach because it wasn’t reported, they can’t take action to protect
themselves.”11
Here, more than a month passed between the breach and Defendant reacting to it,
and then another month passed before Defendant informed only some of the Class Members.
Defendant’s conduct is inexcusable.
CLASS ACTION ALLEGATIONS
Plaintiff brings this action on behalf of himself and on behalf of all other persons
similarly situated (the “Class”) pursuant to Rule 23(b)(2), (b)(3) and (c)(4) of the Federal Rules of
Civil Procedure.
Plaintiff proposes the following Class definition, subject to amendment as
appropriate:
All persons whose PII was compromised in the Data Breach disclosed by
ArbiterSports on or about August 25, 2020 (the “Class”).
Plaintiff proposes the following Subclass definition, subject to amendment as
appropriate:
All persons in the State of Florida whose PII was compromised in the Data
Breach disclosed by ArbiterSports on or about August 25, 2020 (the
“Subclass”).
Excluded from the Class are Defendant’s officers and directors, and any entity in
which Defendant has a controlling interest; and the affiliates, legal representatives, attorneys,
11 Allen St. John, Consumer Reports, The Data Breach Next Door: Security breaches don't just hit
giants like Equifax and Marriott. Breaches at small companies put consumers at risk, too (Jan. 31,
2019), https://www.consumerreports.org/data-theft/the-data-breach-next-door/ (internal citations
omitted).
successors, heirs, and assigns of Defendant. Excluded also from the Class are Members of the
judiciary to whom this case is assigned, their families and Members of their staff.
Plaintiff hereby reserves the right to amend or modify the class definitions with
greater specificity or division after having had an opportunity to conduct discovery. The proposed
Class meets the criteria for certification under Rule 23(a), 23(b)(2), 23(b)(3), and 23(c)(4).
Numerosity. The Members of the Class are so numerous that joinder of all of them
is impracticable. While the exact number of Class Members is unknown to Plaintiff at this time,
based on information and belief, the Class consists of approximately no less than 500,000
consumers whose data was compromised in the Data Breach.
Commonality. There are questions of law and fact common to the Class, which
predominate over any questions affecting only individual Class Members. These common question
of law and fact include, without limitation:
Whether Defendant unlawfully used, maintained, lost, or disclosed Plaintiff’s and
Class Members’ PII;
Whether Defendant failed to implement and maintain reasonable security
procedures and practices appropriate to the nature and scope of the information
compromised in the Data Breach;
Whether Defendant’s data security systems prior to and during the Data Breach
complied with applicable data security laws and regulations;
Whether Defendant’s data security systems prior to and during the Data Breach
were consistent with industry standards;
Whether Defendant owed a duty to Class Members to safeguard their PII;
Whether Defendant breached its duty to Class Members to safeguard their PII;
Whether computer hackers obtained Class Members’ PII in the Data Breach;
Whether Defendant knew or should have known that its data security systems and
monitoring processes were deficient;
Whether Plaintiff and Class Members suffered legally cognizable damages as a
result of Defendant’s misconduct;
Whether Defendant’s conduct was negligent;
Whether Defendant’s acts, inactions, and practices complained of herein amount to
acts of intrusion upon seclusion under the law;
Whether Defendant failed to provide notice of the Data Breach in a timely manner;
and
Whether Plaintiff and Class Members are entitled to damages, civil penalties,
punitive damages, and/or injunctive relief.
Typicality. Plaintiff’s claims are typical of those of other Class Members because
Plaintiff’s PII, like that of every other Class Member, was compromised in the Data Breach.
Adequacy of Representation. Plaintiff will fairly and adequately represent and
protect the interests of the Members of the Class. Plaintiff’s Counsel are competent and
experienced in litigating class actions, including data privacy litigation of this kind.
Predominance. Defendant has engaged in a common course of conduct toward
Plaintiff and Class Members, in that all the Plaintiff’s and Class Members’ data was stored on the
same computer systems and unlawfully accessed in the same way. The common issues arising
from Defendant’s conduct affecting Class Members set out above predominate over any
individualized issues. Adjudication of these common issues in a single action has important and
desirable advantages of judicial economy.
Superiority. A class action is superior to other available methods for the fair and
efficient adjudication of the controversy. Class treatment of common questions of law and fact is
superior to multiple individual actions or piecemeal litigation. Absent a class action, most Class
Members would likely find that the cost of litigating their individual claims is prohibitively high
and would therefore have no effective remedy. The prosecution of separate actions by individual
Class Members would create a risk of inconsistent or varying adjudications with respect to
individual Class Members, which would establish incompatible standards of conduct for
Defendant. In contrast, the conduct of this action as a class action presents far fewer management
difficulties, conserves judicial resources and the parties’ resources, and protects the rights of each
Class member.
Defendant has acted on grounds that apply generally to the Class as a whole, so that
class certification, injunctive relief, and corresponding declaratory relief are appropriate on a
Class-wide basis.
Likewise, particular issues under Rule 23(c)(4) are appropriate for certification
because such claims present only particular, common issues, the resolution of which would
advance the disposition of this matter and the parties’ interests therein. Such particular issues
include, but are not limited to:
Whether Defendant owed a legal duty to Plaintiff and the Class to exercise due care
in collecting, storing, and safeguarding their PII;
Whether Defendant’s security measures to protect its data systems were reasonable
in light of best practices recommended by data security experts;
Whether Defendant’s failure to institute adequate protective security measures
amounted to negligence;
Whether Defendant failed to take commercially reasonable steps to safeguard
consumer PII; and
Whether adherence to FTC data security recommendations, and measures
recommended by data security experts would have reasonably prevented the Data
Breach.
Finally, all members of the proposed Class are readily ascertainable. Defendant has
access to Class Members’ names and addresses affected by the Data Breach. At least some Class
Members have already been preliminarily identified and sent notice of the Data Breach by
Defendant.
CAUSES OF ACTION
FIRST COUNT
Negligence
(On behalf of Plaintiff and all Class Members against Defendant ArbiterSports,
or in the alternative, on behalf of Plaintiff and all Subclass Members against Defendant
ArbiterSports)
Plaintiff re-alleges and incorporates by reference all paragraphs above as if fully
set forth herein.
Plaintiff and Class Members were required to submit PII to ArbiterSports in order
to receive payment.
By collecting and storing this data in ArbiterSports’s computer property,
ArbiterSports had a duty of care to use reasonable means to secure and safeguard its computer
property—and Class Members’ PII held within it—to prevent disclosure of the information, and
to safeguard the information from theft. Defendant ArbiterSports’s duty included a responsibility
to implement processes by which it could detect a breach of its security systems in a reasonably
expeditious period of time and to give prompt notice to those affected in the case of a data breach.
Defendant ArbiterSports owed a duty of care to Plaintiff and Class Members to
provide data security consistent with industry standards and other requirements discussed herein,
and to ensure that its systems and networks, and the personnel responsible for them, adequately
protected the PII.
Defendant ArbiterSports had duty of care to use reasonable security measures
because it was in a position to ensure that its systems were sufficient to protect against the
foreseeable risk of harm to Class Members from a data breach.
Defendant ArbiterSports’s duty to use reasonable care in protecting confidential
data also arose also because it is bound by industry standards to protect confidential PII.
Defendant ArbiterSports breached its duties, and thus was negligent, by failing to
use reasonable measures to protect Class Members’ PII. The specific negligent acts and omissions
committed by Defendant ArbiterSports include, but are not limited to, the following:
a.
Failing to adopt, implement, and maintain adequate security measures to safeguard
Class Members’ PII;
b.
Failing to adequately monitor the security of its networks and systems;
c.
Failure to periodically ensure that its computer system had processes in place to
maintain reasonable data security safeguards;
d.
Allowing unauthorized access to Class Members’ PII;
e.
Failing to detect in a timely manner that Class Members’ PII had been
compromised; and
f.
Failing to timely notify Class Members about the Data Breach so that they could
take appropriate steps to mitigate the potential for identity theft and other damages.
It was foreseeable that Defendant’s failure to use reasonable measures to protect
Class Members’ PII would result in injury to Class Members. Further, the breach of security was
reasonably foreseeable given the known high frequency of cyberattacks and data breaches in the
financial services industry.
It was therefore foreseeable that the failure to adequately safeguard Class Members’
PII would result in one or more types of injuries to Class Members.
Plaintiff and Class Members are entitled to compensatory and consequential
damages suffered as a result of the Data Breach.
Plaintiff and Class Members are also entitled to injunctive relief requiring
Defendant to (i) strengthen its data security systems and monitoring procedures; (ii) submit to
future annual audits of those systems and monitoring procedures; and (iii) continue to provide
adequate credit monitoring to all Class Members.
SECOND COUNT
Breach of Contract
(On Behalf of Plaintiff and Class Members against Defendant ArbiterSports,
or in the alternative, on behalf of Plaintiff and all Subclass Members against Defendant
ArbiterSports)
Plaintiff re-alleges and incorporates by reference all paragraphs above as if
fully set forth herein.
Plaintiff and Class Members allege that Defendant’s privacy policy forms a binding
contract between Defendant and the Class Members when they gave their PII to Defendant.
Defendant breached these provisions of the contracts in that it did not have any
measures to stop accidental loss or alteration or unauthorized access to protect Plaintiff’s and Class
members’ Personal Information, and did not limit access to that information to the specified
individuals or entities. Defendant violated its commitment to maintain the confidentiality and
security of the PII of Plaintiff and the Class Members and failed to comply with its own policies
and applicable laws, regulations, and industry standards relating to data security.
The June 3, 2020 Data Breach, first disclosed to the Class Members on August 25,
2020, is a direct and legal cause of the injuries and damages suffered by Plaintiff and the Class
Members.
As a direct and proximate result of the Data Breach, Plaintiff and Class Members
have been harmed and have suffered, and will continue to suffer, actual damages and injuries,
including without limitation the release, disclosure, and publication of their PII, the loss of control
of their PII, the imminent risk of suffering additional damages in the future, and out-of-pocket
expenses.
Plaintiff and Class Members are entitled to compensatory and consequential
damages suffered as a result of the Data Breach.
THIRD COUNT
Breach of Implied Contract
(On Behalf of Plaintiff and Class Members against Defendant ArbiterSports,
or in the alternative, on behalf of Plaintiff and all Subclass Members against Defendant
ArbiterSports)
Plaintiff re-alleges and incorporates by reference all paragraphs above as if
fully set forth herein.
To the extent Defendant’s privacy policy did not form an express contract, the
course of conduct between and among Defendant and Class Members created implied contracts
between Defendant and the Class Members.
Defendant offered, solicited and invited Class Members to provide their PII as part
of Defendant’s regular business practices.
Plaintiff and Class Members accepted Defendant’s offers and provided their PII to
Defendant.
There was a meeting of the minds between the parties, and Defendant manifested
its intent to enter into an implied contract that included a contractual obligation to reasonably
protect Plaintiff’s and Class Members’ PII through, among other things, its Privacy Notice.
In entering into such implied contracts, Plaintiff and Class Members reasonably
believed and expected that Defendant’s data security practices complied with relevant laws and
regulations and were consistent with industry standards.
Plaintiff and Class Members would not have entrusted their PII to Defendant in the
absence of the implied contracts between them and Defendant to keep their information reasonably
secure. Plaintiff and Class Members would not have entrusted their PII to Defendant in the absence
of its implied promise to monitor its computer systems and networks to ensure that it adopted
reasonable data security measures.
Plaintiff and Class Members fully and adequately performed their obligations under
the implied contracts with Defendant.
Defendant breached such implied contracts by failing to adhere to the terms of its
privacy policy, violated its commitment to maintain the confidentiality of the PII of the Class
Members and failed to comply with its own policies and applicable laws, regulations and industry
standards relating to data security.
As a direct and proximate result of the Data Breach, Plaintiff and Class Members
have been harmed and have suffered, and will continue to suffer, actual damages and injuries,
including without limitation the release, disclosure, and publication of their PII, the loss of control
of their PII, the imminent risk of suffering additional damages in the future, and out-of-pocket
expenses.
Had Defendant disclosed that its data security was inadequate or that it did not
adhere to industry-standard security measures, neither the Plaintiff, the Class Members, nor any
reasonable person would have turned over their PII to Defendant.
Plaintiff and Class Members are entitled to compensatory and consequential
damages suffered as a result of the Data Breach.
FOURTH COUNT
Intrusion Upon Seclusion / Invasion of Privacy
((On behalf of Plaintiff and Class Members against Defendant ArbiterSports,
or in the alternative, on behalf of Plaintiff and all Subclass Members against Defendant
ArbiterSports)
Plaintiff repeats and re-alleges each and every allegation contained in all paragraphs
above as if fully set forth herein.
The Restatement (Second) of Torts states:
One who intentionally intrudes, physically or otherwise, upon the solitude
or seclusion of another or his private affairs or concerns, is subject to
liability to the other for invasion of his privacy, if the intrusion would be
highly offensive to a reasonable person.
Restatement (Second) of Torts § 652B (1977)
Plaintiff and Class Members had a reasonable expectation of privacy in the PII
Defendant mishandled. In failing to protect Plaintiff’s and Class Members’ PII, and in intentionally
misusing and/or disclosing their PII, Defendant acted with intentional malice and oppression and
in conscious disregard of Plaintiff’s and Class Members’ rights to have such information kept
confidential and private. Plaintiff, therefore, seeks an award of damages on behalf of himself and
the Class.
FIFTH COUNT
Breach of Confidence
(On behalf of Plaintiff and Class Members against Defendant ArbiterSports, or in the
alternative, on behalf of Plaintiff and all Subclass Members against Defendant
ArbiterSports)
Plaintiff re-alleges and incorporates by reference all paragraphs above as if fully
set forth herein.
At all times during Plaintiff’s and Class Members’ interactions with Defendant,
Defendant was fully aware of the confidential and sensitive nature of Plaintiff’s and Class
Members’ PII that Plaintiff and Class Members provided to Defendant.
As alleged herein and above, Defendant’s relationship with Plaintiff and Class
Members was governed by terms and expectations that Plaintiff’s and Class Members’ PII would
be collected, stored, maintained, and protected in confidence, and would not be disclosed the
unauthorized third parties.
Plaintiff and Class Members provided their respective PII to Defendant with the
explicit and implicit understandings that Defendant would protect and not permit the PII to be
disseminated to any unauthorized parties.
Plaintiff and Class Members also provided their PII to Defendant with the explicit
and implicit understandings that Defendant would take precautions to protect that PII from
unauthorized disclosure, such as following basic principles of protecting its networks and data
systems, including employees’ email accounts.
Defendant voluntarily received in confidence Plaintiff’s and Class Members’ PII
with the understanding that PII would not be disclosed or disseminated to the public or any
unauthorized third parties.
Due to Defendant’s failure to prevent, detect, avoid the Data Breach from occurring
by, inter alia, following best information security practices to secure Plaintiff’s and Class
Members’ PII, Plaintiff’s and Class Members’ PII was disclosed and misappropriated to
unauthorized third parties beyond Plaintiff’s and Class Members’ confidence, and without their
express permission.
As a direct and proximate cause of Defendant’s actions and/or omissions, Plaintiff
and Class Members have suffered damages.
But for Defendant’s disclosure of Plaintiff’s and Class Members’ PII in violation
of the parties’ understanding of confidence, their PII would not have been compromised, stolen,
viewed, accessed, and used by unauthorized third parties. Defendant’s Data Breach was the direct
and legal cause of the theft of Plaintiff’s and Class Members’ PII, as well as the resulting damages.
The injury and harm Plaintiff and Class Members suffered was the reasonably
foreseeable result of Defendant’s unauthorized disclosure of Plaintiff’s and Class Members’ PII.
Defendant knew its computer systems and technologies for accepting and securing Plaintiff’s and
Class Members’ PII had numerous security vulnerabilities.
As a direct and proximate result of Defendant’s breaches of confidence, Plaintiff
and Class Members have suffered and will suffer injury, including but not limited to: (i) actual
identity theft; (ii) the compromise, publication, and/or theft of their PII; (iii) out-of-pocket
expenses associated with the prevention, detection, and recovery from identity theft and/or
unauthorized use of their PII; (iv) lost opportunity costs associated with effort expended and the
loss of productivity addressing and attempting to mitigate the actual and future consequences of
the Data Breach, including but not limited to efforts spent researching how to prevent, detect,
contest, and recover from identity theft; (v) the continued risk to their PII, which remains in
Defendant’s possession and is subject to further unauthorized disclosures so long as Defendant
fails to undertake appropriate and adequate measures to protect the PII in its continued possession;
(vi) future costs in terms of time, effort, and money that will be expended as result of the Data
Breach for the remainder of the lives of Plaintiff and Class Members; and (vii) the diminished
value of Defendant’s services they received.
As a direct and proximate result of Defendant’s breaches of its duties, Plaintiff and
Class Members have suffered and will continue to suffer other forms of injury and/or harm, and
other economic and non-economic losses.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff prays for judgment as follows:
For an Order certifying this action as a class action and appointing Plaintiff and
their counsel to represent the Class and Subclass;
For equitable relief enjoining Defendant ArbiterSports from engaging in the
wrongful conduct complained of herein pertaining to the misuse and/or disclosure
of Plaintiff’s and Class Members’ PII;
For equitable relief compelling Defendant to utilize appropriate methods and
policies with respect to consumer data collection, storage, and safety, and to
disclose with specificity the type of PII compromised during the Data Breach;
Ordering Defendant to pay for not less than seven years of credit monitoring
services for Plaintiff and the Class;
For an award of actual damages, compensatory damages, statutory damages, and
statutory penalties, in an amount to be determined, as allowable by law;
For an award of punitive damages, as allowable by law;
For an award of attorneys’ fees and costs, and any other expense, including expert
witness fees;
Pre- and post-judgment interest on any amounts awarded; and
Such other and further relief as this court may deem just and proper.
JURY TRIAL DEMANDED
Plaintiff demands a trial by jury on all claims so triable.
Dated: October 1, 2020
Respectfully submitted,
/s/ Gary M. Klinger
Gary M. Klinger
MASON LIETZ & KLINGER LLP
227 W. Monroe Street, Suite 2100
Chicago, IL 60630
Tel.: (202) 429-2290
Email: [email protected]
James Felman*
Katherine Yanes*
KYNES MARKMAN & FELMAN
1000 South Ashley Drive, Suite 300
Tampa, FL 33602
Tel.: (813) 229-1118
Email: [email protected]
Email: [email protected]
Gary E. Mason*
David K. Lietz*
MASON LIETZ & KLINGER LLP
5101 Wisconsin Avenue NW, Suite 305
Washington, DC 20016
Tel.: (202) 429-2290
Email: [email protected]
Email: [email protected]
*pro hac vice to be filed
Attorneys for Plaintiff
| products liability and mass tort |
RE3FA4kBRpLueGJZiO07 | Todd M. Friedman (SBN 216752)
Adrian R. Bacon (SBN 280332)
LAW OFFICES OF TODD M. FRIEDMAN, P.C.
21550 Oxnard St., Suite 780
Woodland Hills, CA 91367
Phone: 323-306-4234
Fax: 866-633-0228
[email protected]
[email protected]
Attorneys for Plaintiffs,
UNITED STATES DISTRICT COURT
NORTHER DISTRICT OF CALIFORNIA
RODNEY CLAYTON, individually
and on behalf of all others similarly
situated,
Plaintiff,
vs.
Case No.
CLASS ACTION
COMPLAINT FOR VIOLATIONS
OF:
1. NEGLIGENT VIOLATIONS OF
THE TELEPHONE CONSUMER
PROTECTION ACT [47 U.S.C.
§227 ET SEQ.]
PIONEER CREDIT RECOVERY,
INC.; DOES 1 through 10, inclusive,
Defendants.
2. WILLFUL VIOLATIONS OF THE
TELEPHONE CONSUMER
PROTECTION ACT [47 U.S.C.
§227 ET SEQ.]
DEMAND FOR JURY TRIAL
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Plaintiff, RODNEY CLAYTON (“Plaintiff”), individually and all others
similarly situated, alleges the following upon information and belief based upon
personal knowledge:
NATURE OF THE CASE
1.
Plaintiff brings this action individually and on behalf of all others
similarly situated seeking damages and any other available legal or equitable
remedies resulting from the illegal actions of PIONEER CREDIT RECOVERY,
INC. (“Defendant”), in negligently, knowingly, and/or willfully contacting
Plaintiff on Plaintiff’s telephone in violation of the Telephone Consumer
Protection Act, 47. U.S.C. § 227 et seq. (“TCPA”), thereby invading Plaintiff’s
privacy.
JURISDICTION & VENUE
2.
Jurisdiction is proper under 28 U.S.C. § 1332(d)(2) because Plaintiff,
a resident of California, seeks relief on behalf of a Class, which will result in at
least one class member belonging to a different state than that of Defendant, a
Delaware company headquartered in New York State. Plaintiff also seeks up to
$1,500.00 in damages for each call in violation of the TCPA, which, when
aggregated among a proposed class in the thousands, exceeds the $5,000,000.00
threshold for federal court jurisdiction. Therefore, both diversity jurisdiction and
the damages threshold under the Class Action Fairness Act of 2005 (“CAFA”) are
present, and this Court has jurisdiction.
3.
Venue is proper in the United States District Court for the Central
District of California pursuant to 28 U.S.C. § 1391(b)(2) because Defendant does
business within the state of California and Plaintiff resides within this District.
PARTIES
4.
Plaintiff, RODNEY CLAYTON (“Plaintiff”), is a natural person
residing in Alameda County of the state of California and is a “person” as defined
by 47 U.S.C. § 153 (39).
5.
Defendant, PIONEER CREDIT RECOVERY, INC. (“Defendant”),
is a collection agency and is a “person” as defined by 47 U.S.C. § 153 (39).
6.
The above named Defendant, and its subsidiaries and agents, are
collectively referred to as “Defendants.” The true names and capacities of the
Defendants sued herein as DOE DEFENDANTS 1 through 10, inclusive, are
currently unknown to Plaintiff, who therefore sues such Defendants by fictitious
names. Each of the Defendants designated herein as a DOE is legally responsible
for the unlawful acts alleged herein. Plaintiff will seek leave of Court to amend
the Complaint to reflect the true names and capacities of the DOE Defendants
when such identities become known.
7.
Plaintiff is informed and believes that at all relevant times, each and
every Defendant was acting as an agent and/or employee of each of the other
Defendants and was acting within the course and scope of said agency and/or
employment with the full knowledge and consent of each of the other Defendants.
Plaintiff is informed and believes that each of the acts and/or omissions
complained of herein was made known to, and ratified by, each of the other
Defendants.
FACTUAL ALLEGATIONS
8.
On or about March 5, 2019, Defendant contacted Plaintiff on his
telephone, number ending in -1223, in an effort to collect on an alleged debt.
9.
Defendant called from telephone numbers confirmed to belong to
Defendant, including without limitation (716) 200-4750, (317) 960-1525, and
(765) 588-5864.
10.
Between March 5, 2019, and May 28, 2019, Defendant called
Plaintiff approximately 47 times.
11.
Plaintiff repeatedly asked Defendant to cease calling him. However,
Plaintiff’s repeated efforts to get Defendant to cease its automated barrage of
solicitations were to no avail, and Defendant continued to harass and annoy him
with calls.
12.
Defendant used an “automatic telephone dialing system,” as defined
by 47 U.S.C. § 227(a)(1) to place its calls to Plaintiff seeking to sell or solicit its
business services.
13.
Furthermore, at one or more instance during these calls, Defendant
utilized an “artificial or prerecorded voice” as prohibited by 47 U.S.C. §
227(b)(1)(A).
14.
Defendant’s calls constituted calls that were not for emergency
purposes as defined by 47 U.S.C. § 227(b)(1)(A).
15.
Defendant’s calls were placed to telephone number assigned to a
telephone service for which Plaintiff incurs a charge for incoming calls pursuant
to 47 U.S.C. § 227(b)(1).
16.
Plaintiff is not a customer of Defendant’s services and has never
provided any personal information, including his telephone number, to Defendant
for any purpose whatsoever. Accordingly, Defendant never received Plaintiff’s
“prior express consent” to receive calls using an automatic telephone dialing
system or an artificial or prerecorded voice on his telephone pursuant to 47 U.S.C.
§ 227(b)(1)(A).
CLASS ALLEGATIONS
17.
Plaintiff brings this action on behalf of himself and all others
similarly situated, as a member of the proposed class (hereafter “The Class”)
defined as follows:
All persons within the United States who received any
telephone calls from Defendant to said person’s
telephone made through the use of any automatic
telephone dialing system or an artificial or prerecorded
voice and such person had not previously consented to
receiving such calls within the four years prior to the
filing of this Complaint
18.
Plaintiff represents, and is a member of, The Class, consisting of All
persons within the United States who received any telephone calls from
Defendant to said person’s telephone made through the use of any automatic
telephone dialing system or an artificial or prerecorded voice and such person had
not previously not provided their telephone number to Defendant within the four
years prior to the filing of this Complaint.
19.
Defendant, its employees and agents are excluded from The Class.
Plaintiff does not know the number of members in The Class, but believes the
Class members number in the thousands, if not more. Thus, this matter should be
certified as a Class Action to assist in the expeditious litigation of the matter.
20.
The Class is so numerous that the individual joinder of all of its
members is impractical. While the exact number and identities of The Class
members are unknown to Plaintiff at this time and can only be ascertained
through appropriate discovery, Plaintiff is informed and believes and thereon
alleges that The Class includes thousands of members. Plaintiff alleges that The
Class members may be ascertained by the records maintained by Defendant.
21.
Plaintiff and members of The Class were harmed by the acts of
Defendant in at least the following ways: Defendant illegally contacted Plaintiff
and Class members via their telephones thereby causing Plaintiff and Class
members to incur certain charges or reduced telephone time for which Plaintiff
and Class members had previously paid by having to retrieve or administer
messages left by Defendant during those illegal calls, and invading the privacy of
said Plaintiff and Class members.
22.
Common questions of fact and law exist as to all members of The
Class which predominate over any questions affecting only individual members
of The Class. These common legal and factual questions, which do not vary
between Class members, and which may be determined without reference to the
individual circumstances of any Class members, include, but are not limited to,
the following:
a.
Whether, within the four years prior to the filing of this Complaint,
Defendant made any call (other than a call made for emergency
purposes or made with the prior express consent of the called party) to a
Class member using any automatic telephone dialing system or any
artificial or prerecorded voice to any telephone number assigned to a
telephone service;
b.
Whether Plaintiff and the Class members were damages thereby, and
the extent of damages for such violation; and
c.
Whether Defendant should be enjoined from engaging in such conduct
in the future.
23.
As a person that received numerous calls from Defendant using an
automatic telephone dialing system or an artificial or prerecorded voice, without
Plaintiff’s prior express consent, Plaintiff is asserting claims that are typical of
The Class.
24.
Plaintiff will fairly and adequately protect the interests of the
members of The Class. Plaintiff has retained attorneys experienced in the
prosecution of class actions.
25.
A class action is superior to other available methods of fair and
efficient adjudication of this controversy, since individual litigation of the claims
of all Class members is impracticable. Even if every Class member could afford
individual litigation, the court system could not. It would be unduly burdensome
to the courts in which individual litigation of numerous issues would proceed.
Individualized litigation would also present the potential for varying, inconsistent,
or contradictory judgments and would magnify the delay and expense to all
parties and to the court system resulting from multiple trials of the same complex
factual issues. By contrast, the conduct of this action as a class action presents
fewer management difficulties, conserves the resources of the parties and of the
court system, and protects the rights of each Class member.
26.
The prosecution of separate actions by individual Class members
would create a risk of adjudications with respect to them that would, as a practical
matter, be dispositive of the interests of the other Class members not parties to
such adjudications or that would substantially impair or impede the ability of such
non-party Class members to protect their interests.
27.
Defendant has acted or refused to act in respects generally applicable
to The Class, thereby making appropriate final and injunctive relief with regard to
the members of the California Class as a whole.
FIRST CAUSE OF ACTION
Negligent Violations of the Telephone Consumer Protection Act
47 U.S.C. §227 et seq.
28.
Plaintiff repeats and incorporates by reference into this cause of
action the allegations set forth above at Paragraphs 1-27.
29.
The foregoing acts and omissions of Defendant constitute numerous
and multiple negligent violations of the TCPA, including but not limited to each
and every one of the above cited provisions of 47 U.S.C. § 227 et seq.
30.
As a result of Defendant’s negligent violations of 47 U.S.C. § 227 et
seq., Plaintiff and the Class Members are entitled an award of $500.00 in
statutory damages, for each and every violation, pursuant to 47 U.S.C. §
227(b)(3)(B).
31.
Plaintiff and the Class members are also entitled to and seek
injunctive relief prohibiting such conduct in the future.
SECOND CAUSE OF ACTION
Knowing and/or Willful Violations of the Telephone Consumer Protection
Act
47 U.S.C. §227 et seq.
32.
Plaintiff repeats and incorporates by reference into this cause of
action the allegations set forth above at Paragraphs 1-31.
33.
The foregoing acts and omissions of Defendant constitute numerous
and multiple knowing and/or willful violations of the TCPA, including but not
limited to each and every one of the above cited provisions of 47 U.S.C. § 227 et
34.
As a result of Defendant’s knowing and/or willful violations of 47
U.S.C. § 227 et seq., Plaintiff and the Class members are entitled an award of
$1,500.00 in statutory damages, for each and every violation, pursuant to 47
U.S.C. § 227(b)(3)(B) and 47 U.S.C. § 227(b)(3)(C).
35.
Plaintiff and the Class members are also entitled to and seek
injunctive relief prohibiting such conduct in the future.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff requests judgment against Defendant for the following:
FIRST CAUSE OF ACTION
Negligent Violations of the Telephone Consumer Protection Act
47 U.S.C. §227 et seq.
• As a result of Defendant’s negligent violations of 47 U.S.C.
§227(b)(1), Plaintiff and the Class members are entitled to and
request $500 in statutory damages, for each and every violation,
pursuant to 47 U.S.C. 227(b)(3)(B); and
• Any and all other relief that the Court deems just and proper.
SECOND CAUSE OF ACTION
Knowing and/or Willful Violations of the Telephone Consumer Protection
Act
47 U.S.C. §227 et seq.
• As a result of Defendant’s willful and/or knowing violations of 47
U.S.C. §227(b)(1), Plaintiff and the Class members are entitled to
and request treble damages, as provided by statute, up to $1,500, for
each and every violation, pursuant to 47 U.S.C. §227(b)(3)(B) and
47 U.S.C. §227(b)(3)(C); and
• Any and all other relief that the Court deems just and proper.
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JURY DEMAND
36.
Plaintiff hereby enforces his right under the Seventh Amendment to
Constitution of the United States of America to a trial by jury on all issues so
triable.
Respectfully submitted this 4th day of November, 2019.
LAW OFFICES OF TODD M. FRIEDMAN, P.C.
By: /s Todd M. Friedman
Todd M. Friedman
Law Offices of Todd M. Friedman
Attorney for Plaintiff
| privacy |
H7auC4cBD5gMZwczn6-B | UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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VALENTIN REID, on behalf of himself and
all others similarly situated,
Civil Action: 1:19-cv-7969
Plaintiffs,
v.
CLASS ACTION COMPLAINT
AND
DEMAND FOR JURY TRIAL
DIAMOND SUPPLY COMPANY,
Defendant.
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INTRODUCTION
1.
Plaintiff VALENTIN REID, on behalf of himself and others similarly situated,
asserts the following claims against Defendant DIAMOND SUPPLY COMPANY
(hereinafter, “DIAMOND SUPPLY COMPANY”) as follows.
2.
Plaintiff is a visually-impaired and legally blind person who requires screen-
reading software to read website content using his computer. Plaintiff uses the terms
“blind” or “visually-impaired” to refer to all people with visual impairments who
meet the legal definition of blindness in that they have a visual acuity with
correction of less than or equal to 20 x 200. Some blind people who meet this
definition have limited vision. Others have no vision.
3.
Based on a 2010 U.S. Census Bureau report, approximately 8.1 million people in
the United States are visually impaired, including 2.1 million who are blind, and
according to the American Foundation for the Blind’s 2015 report, approximately
400,000 visually impaired persons live in the State of New York.
4.
Plaintiff brings this civil rights action against Defendant for its failure to design,
construct, maintain, and operate its website to be fully accessible to and
independently usable by Plaintiff and other blind or visually-impaired people.
Defendant’s denial of full and equal access to its website, and therefore denial of
its goods and services offered thereby and in conjunction with its physical locations,
is a violation of Plaintiff’s rights under the Americans with Disabilities Act
(“ADA”).
5.
Because Defendant’s website, www.diamondsupplyco.com (the “Website” or
“Defendant’s website”), is not equally accessible to blind and visually-impaired
consumers, it violates the ADA. Plaintiff seeks a permanent injunction to cause a
change in Defendant’s corporate policies, practices, and procedures so that
Defendant’s website will become and remain accessible to blind and visually-
impaired consumers.
JURISDICTION AND VENUE
6.
This Court has subject-matter jurisdiction over this action under 28 U.S.C. § 1331
and 42 U.S.C. § 12181, as Plaintiff’s claims arise under Title III of the ADA, 42
U.S.C. § 12181, et seq., and 28 U.S.C. § 1332.
7.
This Court has supplemental jurisdiction under 28 U.S.C. § 1367 over Plaintiff’s
New York State Human Rights Law, N.Y. Exec. Law Article 15, (“NYSHRL”) and
New York City Human Rights Law, N.Y.C. Admin. Code § 8-101 et seq.,
(“NYCHRL”) claims.
8.
Venue is proper in this district under 28 U.S.C. §1391(b)(1) and (2) because
Defendant conducts and continues to conduct a substantial and significant amount
of business in this District, and a substantial portion of the conduct complained of
herein occurred in this District.
9.
Defendant is subject to personal jurisdiction in this District. Defendant has been
and is committing the acts or omissions alleged herein in the Southern District of
New York that caused injury, and violated rights the ADA prescribes to Plaintiff
and to other blind and other visually impaired-consumers. A substantial part of the
acts and omissions giving rise to Plaintiff’s claims occurred in the in this District:
on several separate occasions, Plaintiff has been denied the full use and enjoyment
of the facilities, goods and services of Defendant’s physical locations and/or
Website in New York County. These access barriers that Plaintiff encountered have
caused a denial of Plaintiff’s full and equal access multiple times in the past, and
now deter Plaintiff on a regular basis from visiting Defendant’s brick-and mortar
physical locations.
10.
This Court is empowered to issue a declaratory judgment under 28 U.S.C. §§ 2201
and 2202.
THE PARTIES
11.
Plaintiff VALENTIN REID, at all relevant times, is a resident of Brooklyn, New
York. Plaintiff is a blind, visually-impaired handicapped person and a member of
member of a protected class of individuals under the ADA, under 42 U.S.C. §
12102(1)-(2), and the regulations implementing the ADA set forth at 28 CFR §§
36.101 et seq., the NYSHRL and NYCHRL.
12.
Defendant is and was at all relevant times a California Limited Liability Company
doing business in New York.
13.
Defendant’s stores and Website are public accommodations within the definition
of Title III of the ADA, 42 U.S.C. § 12181(7). Defendant’s Website is a service,
privilege, or advantage of Defendant’s stores.
NATURE OF ACTION
14.
The Internet has become a significant source of information, a portal, and a tool for
conducting business, doing everyday activities such as shopping, learning, banking,
researching, as well as many other activities for sighted, blind and visually-
impaired persons alike.
15.
In today’s tech-savvy world, blind and visually-impaired people have the ability to
access websites using keyboards in conjunction with screen access software that
vocalizes the visual information found on a computer screen or displays the content
on a refreshable Braille display. This technology is known as screen-reading
software. Screen-reading software is currently the only method a blind or visually-
impaired person may independently access the internet. Unless websites are
designed to be read by screen-reading software, blind and visually-impaired
persons are unable to fully access websites, and the information, products, goods
and contained thereon.
16.
Blind and visually-impaired users of Windows operating system-enabled
computers and devices have several screen reading software programs available to
them. Some of these programs are available for purchase and other programs are
available without the user having to purchase the program separately. Job Access
With Speech, otherwise known as “JAWS” is currently the most popular, separately
purchased and downloaded screen-reading software program available for a
Windows computer.
17.
For screen-reading software to function, the information on a website must be
capable of being rendered into text. If the website content is not capable of being
rendered into text, the blind or visually-impaired user is unable to access the same
content available to sighted users.
18.
The international website standards organization, the World Wide Web
Consortium, known throughout the world as W3C, has published version 2.1 of the
Web Content Accessibility Guidelines (“WCAG 2.1”). WCAG 2.1 are well-
established guidelines for making websites accessible to blind and visually-
impaired people. These guidelines are universally followed by most large business
entities and government agencies to ensure their websites are accessible.
19.
Non-compliant websites pose common access barriers to blind and visually-
impaired persons. Common barriers encountered by blind and visually impaired
persons include, but are not limited to, the following:
a.
A text equivalent for every non-text element is not provided;
b.
Title frames with text are not provided for identification and
navigation;
c.
Equivalent text is not provided when using scripts;
d.
Forms with the same information and functionality as for sighted
persons are not provided;
e.
Information about the meaning and structure of content is not
conveyed by more than the visual presentation of content;
f.
Text cannot be resized without assistive technology up to 200%
without losing content or functionality;
g.
If the content enforces a time limit, the user is not able to extend,
adjust or disable it;
h.
Web pages do not have titles that describe the topic or purpose;
i.
The purpose of each link cannot be determined from the link text
alone or from the link text and its programmatically determined link
context;
j.
One or more keyboard operable user interface lacks a mode of
operation where the keyboard focus indicator is discernible;
k.
The default human language of each web page cannot be
programmatically determined;
l.
When a component receives focus, it may initiate a change in
context;
m.
Changing the setting of a user interface component may
automatically cause a change of context where the user has not been advised
before using the component;
n.
Labels or instructions are not provided when content requires user
input, which include captcha prompts that require the user to verify that he
or she is not a robot;
o.
In content which is implemented by using markup languages,
elements do not have complete start and end tags, elements are not nested
according to their specifications, elements may contain duplicate attributes,
and/or any IDs are not unique;
p.
Inaccessible Portable Document Format (PDFs); and,
q.
The name and role of all User Interface elements cannot be
programmatically determined; items that can be set by the user cannot be
programmatically set; and/or notification of changes to these items is not
available to user agents, including assistive technology.
STATEMENT OF FACTS
Defendant’s Barriers on Its Website
20.
Defendant is a clothing and accessories retailer that operates DIAMOND SUPPLY
COMPANY stores as well as the www.diamondsupplyco.com website, offering
features which should allow all consumers to access the goods and services which
Defendant offers in connection with their physical locations.
21.
Defendant operates DIAMOND SUPPLY COMPANY in New York City, at 286
Lafayette St, New York, NY 10012.
22.
These stores constitute places of public accommodation. Defendant’s stores
provide to the public important goods and services. Defendant’s Website provides
consumers with access to an array of goods and services including store locations
and hours, the ability to browse and purchase Store products online for pickup or
delivery, including clothing and related products, available both in store and online.
23.
Defendant offers the commercial website, www.diamondsupplyco.com, to the
public. The website offers features which should allow all consumers to access the
goods and services which Defendant offers in connection with their physical
locations. The goods and services offered by Defendant include but are not limited
to the following: store locations and hours, the ability to browse and purchase
clothing and related accessories online.
24.
Due to the accessibility barriers encountered on the Website, such as lack of
alternate text and broken links, Plaintiff was not able to shop for the items he was
looking for, including accessories within his budget.
25.
It is, upon information and belief, Defendant’s policy and practice to deny Plaintiff,
along with other blind or visually-impaired users, access to Defendant’s website,
and to therefore specifically deny the goods and services that are offered and
integrated with Defendant’s stores. Due to Defendant’s failure and refusal to
remove access barriers to its website, Plaintiff and visually-impaired persons have
been and are still being denied equal access to Defendant’s stores and the numerous
goods and services and benefits offered to the public through the Website.
26.
Plaintiff is a visually-impaired and legally blind person, who cannot use a computer
without the assistance of screen-reading software. Plaintiff is, however, a proficient
JAWS screen-reader user and uses it to access the Internet. Plaintiff has visited the
Website on separate occasions using the JAWS screen-reader.
27.
During Plaintiff’s visits to the Website, the last occurring in August of 2019,
Plaintiff encountered multiple access barriers that denied Plaintiff full and equal
access to the facilities, goods and services offered to the public and made available
to the public; and that denied Plaintiff the full enjoyment of the facilities, goods and
services of the Website, as well as to the facilities, goods and services of
Defendant’s physical locations in New York by being unable to learn more
information about store locations and hours, the ability to browse and purchase
Store products online for pickup or delivery, including clothing and related
accessories.
28.
While attempting to navigate the Website, Plaintiff encountered multiple
accessibility barriers for blind or visually-impaired people that include, but are not
limited to, the following:
a. Many features on the Website lacks alt. text, which is the invisible code
embedded beneath a graphical image. As a result, Plaintiff was unable to
differentiate what products were on the screen due to the failure of the
Website to adequately describe its content. Such issues were predominant in
the apparel section where Plaintiff was attempting, but was unsuccessful, in
making a purchase.
b. Many features on the Website also fail to Add a label element or title attribute
for each field. This is a problem for the visually impaired because the screen
reader fails to communicate the purpose of the page element. It also leads to
the user not being able to understand what he or she is expected to insert into
the subject field. This was an issue on Defendant’s Website particularly in the
clothing section. As a result, Plaintiff and similarly situated visually impaired
users of Defendant’s Website are unable to enjoy the privileges and benefits
of the Website equally to sighted users.
c. Many pages on the Website also contain the same title elements. This is a
problem for the visually impaired because the screen reader fails to
distinguish one page from another. In order to fix this problem, Defendant
must change the title elements for each page.
d. The Website also contained a host of broken links, which is a hyperlink to a
non-existent or empty webpage. For the visually impaired this is especially
paralyzing due to the inability to navigate or otherwise determine where one
is on the website once a broken link is encountered. For example, upon
coming across a link of interest, the user is redirected to an error page.
However, the screen-reader fails to communicate that the link is broken. As a
result, a visually impaired user is not able to return to or continue his original
search.
Defendant Must Remove Barriers To Its Website
29.
Due to the inaccessibility of Defendant’s Website, blind and visually-impaired
customers such as Plaintiff, who need screen-readers, cannot fully and equally use
or enjoy the facilities, products, and services Defendant offers to the public on its
Website. The access barriers Plaintiff encountered have caused a denial of
Plaintiff’s full and equal access in the past, and now deter Plaintiff on a regular
basis from accessing the Website.
30.
These access barriers on Defendant’s Website have deterred Plaintiff from visiting
Defendant’s physical locations and enjoying them equal to sighted individuals
because: Plaintiff was unable to find the location and hours of operation of
Defendant’s physical stores on its Website and other important information,
preventing Plaintiff from visiting the locations to take advantage of the goods and
services that it provides to the public.
31.
If the Website was equally accessible to all, Plaintiff could independently navigate
the Website and complete a desired transaction as sighted individuals do.
32.
Through his attempts to use the Website, Plaintiff has actual knowledge of the
access barriers that make these services inaccessible and independently unusable
by blind and visually-impaired people.
33.
Because simple compliance with the WCAG 2.1 Guidelines would provide Plaintiff
and other visually-impaired consumers with equal access to the Website, Plaintiff
alleges that Defendant has engaged in acts of intentional discrimination, including
but not limited to the following policies or practices:
a.
Constructing and maintaining a website that is inaccessible to
visually-impaired individuals, including Plaintiff;
b.
Failure to construct and maintain a website that is sufficiently intuitive
so as to be equally accessible to visually-impaired individuals, including
Plaintiff; and,
c.
Failing to take actions to correct these access barriers in the face of
substantial harm and discrimination to blind and visually-impaired
consumers, such as Plaintiff, as a member of a protected class.
34.
Defendant therefore uses standards, criteria or methods of administration that have the
effect of discriminating or perpetuating the discrimination of others, as alleged herein.
35.
The ADA expressly contemplates the injunctive relief that Plaintiff seeks in this
action. In relevant part, the ADA requires:
In the case of violations of . . . this title, injunctive relief shall include an order to
alter facilities to make such facilities readily accessible to and usable by individuals
with disabilities . . . Where appropriate, injunctive relief shall also include requiring
the . . . modification of a policy . . .
42 U.S.C. § 12188(a)(2).
36.
Because Defendant’s Website have never been equally accessible, and because
Defendant lacks a corporate policy that is reasonably calculated to cause its Website
to become and remain accessible, Plaintiff invokes 42 U.S.C. § 12188(a)(2) and
seeks a permanent injunction requiring Defendant to retain a qualified consultant
acceptable to Plaintiff (“Agreed Upon Consultant”) to assist Defendant to comply
with WCAG 2.1 guidelines for Defendant’s Website. Plaintiff seeks that this
permanent injunction requires Defendant to cooperate with the Agreed Upon
Consultant to:
a.
Train Defendant’s employees and agents who develop the Website
on accessibility compliance under the WCAG 2.1 guidelines;
b.
Regularly check the accessibility of the Website under the WCAG
2.1 guidelines;
c.
Regularly test user accessibility by blind or vision-impaired persons
to ensure that Defendant’s Website complies under the WCAG 2.1
guidelines; and,
d.
Develop an accessibility policy that is clearly disclosed on
Defendant’s Websites, with contact information for users to report
accessibility-related problems.
37.
If the Website was accessible, Plaintiff and similarly situated blind and visually-
impaired people could independently view service items, locate Defendant’s
physical locations and hours of operation, shop for and otherwise research related
goods and services available via the Website.
38.
Although Defendant may currently have centralized policies regarding maintaining
and operating its Website, Defendant lacks a plan and policy reasonably calculated
to make them fully and equally accessible to, and independently usable by, blind
and other visually-impaired consumers.
39.
Defendant has, upon information and belief, invested substantial sums in
developing and maintaining their Website and has generated significant revenue
from the Website. These amounts are far greater than the associated cost of making
their Website equally accessible to visually impaired customers.
40.
Without injunctive relief, Plaintiff and other visually-impaired consumers will
continue to be unable to independently use the Website, violating their rights.
CLASS ACTION ALLEGATIONS
41.
Plaintiff, on behalf of himself and all others similarly situated, seeks to certify a
nationwide class under Fed. R. Civ. P. 23(a) and 23(b)(2): all legally blind
individuals in the United States who have attempted to access Defendant’s Website
and as a result have been denied access to the equal enjoyment of goods and services
offered in Defendant’s physical locations, during the relevant statutory period.
42.
Plaintiff, on behalf of himself and all others similarly situated, seeks certify a New
York State subclass under Fed. R. Civ. P. 23(a) and 23(b)(2): all legally blind
individuals in the State of New York who have attempted to access Defendant’s
Website and as a result have been denied access to the equal enjoyment of goods and
services offered in Defendant’s physical locations, during the relevant statutory period.
43.
Plaintiff, on behalf of himself and all others similarly situated, seeks certify a New
York City subclass under Fed. R. Civ. P. 23(a) and 23(b)(2): all legally blind
individuals in the City of New York who have attempted to access Defendant’s
Website and as a result have been denied access to the equal enjoyment of goods and
services offered in Defendant’s physical locations, during the relevant statutory period.
44.
Common questions of law and fact exist amongst Class, including:
a.
Whether Defendant’s Website is a “public accommodation” under
the ADA;
b.
Whether Defendant’s Website is a “place or provider of public
accommodation” under the NYSHRL or NYCHRL;
c.
Whether Defendant’s Website denies the full and equal enjoyment
of
its
products,
services,
facilities,
privileges,
advantages,
or
accommodations to people with visual disabilities, violating the ADA; and
d.
Whether Defendant’s Website denies the full and equal enjoyment
of
its
products,
services,
facilities,
privileges,
advantages,
or
accommodations to people with visual disabilities, violating the NYSHRL
or NYCHRL.
45.
Plaintiff’s claims are typical of the Class. The Class, similarly to the Plaintiff, are
severely visually impaired or otherwise blind, and claim that Defendant has
violated the ADA, NYSYRHL or NYCHRL by failing to update or remove access
barriers on its Website so either can be independently accessible to the Class.
46.
Plaintiff will fairly and adequately represent and protect the interests of the Class
Members because Plaintiff has retained and is represented by counsel competent
and experienced in complex class action litigation, and because Plaintiff has no
interests antagonistic to the Class Members. Class certification of the claims is
appropriate under Fed. R. Civ. P. 23(b)(2) because Defendant has acted or refused
to act on grounds generally applicable to the Class, making appropriate both
declaratory and injunctive relief with respect to Plaintiff and the Class as a whole.
47.
Alternatively, class certification is appropriate under Fed. R. Civ. P. 23(b)(3) because
fact and legal questions common to Class Members predominate over questions
affecting only individual Class Members, and because a class action is superior to
other available methods for the fair and efficient adjudication of this litigation.
48.
Judicial economy will be served by maintaining this lawsuit as a class action in that
it is likely to avoid the burden that would be otherwise placed upon the judicial
system by the filing of numerous similar suits by people with visual disabilities
throughout the United States.
FIRST CAUSE OF ACTION
VIOLATIONS OF THE ADA, 42 U.S.C. § 12181 et seq.
49.
Plaintiff, on behalf of himself and the Class Members, repeats and realleges every
allegation of the preceding paragraphs as if fully set forth herein.
50.
Section 302(a) of Title III of the ADA, 42 U.S.C. § 12101 et seq., provides:
No individual shall be discriminated against on the basis of disability in the full and
equal enjoyment of the goods, services, facilities, privileges, advantages, or
accommodations of any place of public accommodation by any person who owns,
leases (or leases to), or operates a place of public accommodation.
42 U.S.C. § 12182(a).
51.
Defendant’s stores are public accommodations within the definition of Title III of
the ADA, 42 U.S.C. § 12181(7). Defendant’s Website is a service, privilege, or
advantage of Defendant’s stores. The Website is a service that is integrated with
these locations.
52.
Under Section 302(b)(1) of Title III of the ADA, it is unlawful discrimination to
deny individuals with disabilities the opportunity to participate in or benefit from
the products, services, facilities, privileges, advantages, or accommodations of an
entity. 42 U.S.C. § 12182(b)(1)(A)(i).
53.
Under Section 302(b)(1) of Title III of the ADA, it is unlawful discrimination to
deny individuals with disabilities an opportunity to participate in or benefit from
the products, services, facilities, privileges, advantages, or accommodation, which
is equal to the opportunities afforded to other individuals. 42 U.S.C. §
12182(b)(1)(A)(ii).
54.
Under Section 302(b)(2) of Title III of the ADA, unlawful discrimination also
includes, among other things:
[A] failure to make reasonable modifications in policies, practices, or procedures,
when such modifications are necessary to afford such goods, services, facilities,
privileges, advantages, or accommodations to individuals with disabilities, unless
the entity can demonstrate that making such modifications would fundamentally
alter the nature of such goods, services, facilities, privileges, advantages or
accommodations; and a failure to take such steps as may be necessary to ensure that
no individual with a disability is excluded, denied services, segregated or otherwise
treated differently than other individuals because of the absence of auxiliary aids
and services, unless the entity can demonstrate that taking such steps would
fundamentally alter the nature of the good, service, facility, privilege, advantage,
or accommodation being offered or would result in an undue burden.
42 U.S.C. § 12182(b)(2)(A)(ii)-(iii).
55.
The acts alleged herein constitute violations of Title III of the ADA, and the
regulations promulgated thereunder. Plaintiff, who is a member of a protected class
of persons under the ADA, has a physical disability that substantially limits the
major life activity of sight within the meaning of 42 U.S.C. §§ 12102(1)(A)-(2)(A).
Furthermore, Plaintiff has been denied full and equal access to the Website, has not
been provided services that are provided to other patrons who are not disabled, and
has been provided services that are inferior to the services provided to non-disabled
persons. Defendant has failed to take any prompt and equitable steps to remedy its
discriminatory conduct. These violations are ongoing.
56.
Under 42 U.S.C. § 12188 and the remedies, procedures, and rights set forth and
incorporated therein, Plaintiff, requests relief as set forth below.
SECOND CAUSE OF ACTION
VIOLATIONS OF THE NYSHRL
57.
Plaintiff, on behalf of himself and the New York State Sub-Class Members, repeats
and realleges every allegation of the preceding paragraphs as if fully set forth herein.
58.
N.Y. Exec. Law § 296(2)(a) provides that it is “an unlawful discriminatory practice
for any person, being the owner, lessee, proprietor, manager, superintendent, agent
or employee of any place of public accommodation . . . because of the . . . disability
of any person, directly or indirectly, to refuse, withhold from or deny to such person
any of the accommodations, advantages, facilities or privileges thereof.”
59.
Defendant’s physical locations are located in State of New York and throughout
the United States and constitute sales establishments and public accommodations
within the definition of N.Y. Exec. Law § 292(9). Defendant’s Website is a service,
privilege or advantage of Defendant. Defendant’s Website is a service that is by
and integrated with these physical locations.
60.
Defendant is subject to New York Human Rights Law because it owns and operates
its physical locations and Website. Defendant is a person within the meaning of
N.Y. Exec. Law § 292(1).
61.
Defendant is violating N.Y. Exec. Law § 296(2)(a) in refusing to update or remove
access barriers to its Website, causing its Website and the services integrated with
Defendant’s physical locations to be completely inaccessible to the blind. This
inaccessibility denies blind patrons full and equal access to the facilities, services
that Defendant makes available to the non-disabled public.
62.
Under N.Y. Exec. Law § 296(2)(c)(i), unlawful discriminatory practice includes,
among other things, “a refusal to make reasonable modifications in policies,
practices, or procedures, when such modifications are necessary to afford facilities,
privileges, advantages or accommodations to individuals with disabilities, unless
such person can demonstrate that making such modifications would fundamentally
alter the nature of such facilities, privileges, advantages or accommodations being
offered or would result in an undue burden".
63.
Under N.Y. Exec. Law § 296(2)(c)(ii), unlawful discriminatory practice also
includes, “a refusal to take such steps as may be necessary to ensure that no
individual with a disability is excluded or denied services because of the absence
of auxiliary aids and services, unless such person can demonstrate that taking such
steps would fundamentally alter the nature of the facility, privilege, advantage or
accommodation being offered or would result in an undue burden.”
64.
Readily available, well-established guidelines exist on the Internet for making
websites accessible to the blind and visually impaired. These guidelines have been
followed by other large business entities and government agencies in making their
website accessible, including but not limited to: adding alt-text to graphics and
ensuring that all functions can be performed using a keyboard. Incorporating the
basic components to make its Website accessible would neither fundamentally alter
the nature of Defendant’s business nor result in an undue burden to Defendant.
65.
Defendant’s actions constitute willful intentional discrimination against the class
on the basis of a disability in violation of the NYSHRL, N.Y. Exec. Law § 296(2)
in that Defendant has:
a.
constructed and maintained a website that is inaccessible to blind
class members with knowledge of the discrimination; and/or
b.
constructed and maintained a website that is sufficiently intuitive
and/or obvious that is inaccessible to blind class members; and/or
c.
failed to take actions to correct these access barriers in the face of
substantial harm and discrimination to blind class members.
66.
Defendant has failed to take any prompt and equitable steps to remedy their
discriminatory conduct. These violations are ongoing.
67.
Defendant discriminates, and will continue in the future to discriminate against
Plaintiff and New York State Sub-Class Members on the basis of disability in the
full and equal enjoyment of the products, services, facilities, privileges, advantages,
accommodations and/or opportunities of Defendant’s Website and its physical
locations under § 296(2) et seq. and/or its implementing regulations. Unless the
Court enjoins Defendant from continuing to engage in these unlawful practices,
Plaintiff and the Sub-Class Members will continue to suffer irreparable harm.
68.
Defendant’s actions were and are in violation of New York State Human Rights
Law and therefore Plaintiff invokes his right to injunctive relief to remedy the
discrimination.
69.
Plaintiff is also entitled to compensatory damages, as well as civil penalties and
fines under N.Y. Exec. Law § 297(4)(c) et seq. for each and every offense.
70.
Plaintiff is also entitled to reasonable attorneys’ fees and costs.
71.
Under N.Y. Exec. Law § 297 and the remedies, procedures, and rights set forth and
incorporated therein Plaintiff prays for judgment as set forth below.
THIRD CAUSE OF ACTION
VIOLATION OF THE NEW YORK STATE CIVIL RIGHTS LAW
72.
Plaintiff, on behalf of himself and the New York State Sub-Class Members, repeats
and realleges every allegation of the preceding paragraphs as if fully set forth herein.
73.
Plaintiff served notice thereof upon the attorney general as required by N.Y. Civil
Rights Law § 41.
74.
N.Y. Civil Rights Law § 40 provides that “all persons within the jurisdiction of this
state shall be entitled to the full and equal accommodations, advantages, facilities
and privileges of any places of public accommodations, resort or amusement,
subject only to the conditions and limitations established by law and applicable
alike to all persons. No persons, being the owner, lessee, proprietor, manager,
superintendent, agent, or employee of any such place shall directly or indirectly
refuse, withhold from, or deny to any person any of the accommodations,
advantages, facilities and privileges thereof . . .”
75.
N.Y. Civil Rights Law § 40-c(2) provides that “no person because of . . . disability,
as such term is defined in section two hundred ninety-two of executive law, be
subjected to any discrimination in his or her civil rights, or to any harassment, as
defined in section 240.25 of the penal law, in the exercise thereof, by any other person
or by any firm, corporation or institution, or by the state or any agency or subdivision.”
76.
Defendant’s New York State physical locations are sales establishments and public
accommodations within the definition of N.Y. Civil Rights Law § 40-c(2).
Defendant’s Website is a service, privilege or advantage of Defendant and its
Website is a service that is by and integrated with these establishments.
77.
Defendant is subject to New York Civil Rights Law because it owns and operates
its physical locations and Website. Defendant is a person within the meaning of
N.Y. Civil Law § 40-c(2).
78.
Defendant is violating N.Y. Civil Rights Law § 40-c(2) in refusing to update or
remove access barriers to its Website, causing its Website and the goods and
services integrated with Defendant’s physical locations to be completely
inaccessible to the blind. This inaccessibility denies blind patrons full and equal
access to the facilities, goods and services that Defendant makes available to the
non-disabled public.
79.
N.Y. Civil Rights Law § 41 states that “any corporation which shall violate any of the
provisions of sections forty, forty-a, forty-b or forty-two . . . shall for each and every
violation thereof be liable to a penalty of not less than one hundred dollars nor more
than five hundred dollars, to be recovered by the person aggrieved thereby . . .”
80.
Under NY Civil Rights Law § 40-d, “any person who shall violate any of the
provisions of the foregoing section, or subdivision three of section 240.30 or section
240.31 of the penal law, or who shall aid or incite the violation of any of said
provisions shall for each and every violation thereof be liable to a penalty of not
less than one hundred dollars nor more than five hundred dollars, to be recovered
by the person aggrieved thereby in any court of competent jurisdiction in the county
in which the defendant shall reside ...”
81.
Defendant has failed to take any prompt and equitable steps to remedy its
discriminatory conduct. These violations are ongoing.
82.
Defendant discriminates, and will continue in the future to discriminate against
Plaintiff and New York State Sub-Class Members on the basis of disability are
being directly or indirectly refused, withheld from, or denied the accommodations,
advantages, facilities and privileges thereof in § 40 et seq. and/or its implementing
regulations.
83.
Plaintiff is entitled to compensatory damages of five hundred dollars per instance,
as well as civil penalties and fines under N.Y. Civil Law § 40 et seq. for each and
every offense.
FOURTH CAUSE OF ACTION
VIOLATIONS OF THE NYCHRL
84.
Plaintiff, on behalf of himself and the New York City Sub-Class Members, repeats
and realleges every allegation of the preceding paragraphs as if fully set forth herein.
85.
N.Y.C. Administrative Code § 8-107(4)(a) provides that “It shall be an unlawful
discriminatory practice for any person, being the owner, lessee, proprietor,
manager, superintendent, agent or employee of any place or provider of public
accommodation, because of . . . disability . . . directly or indirectly, to refuse,
withhold from or deny to such person, any of the accommodations, advantages,
facilities or privileges thereof.”
86.
Defendant’s locations are sales establishments and public accommodations within
the definition of N.Y.C. Admin. Code § 8-102(9), and its Website is a service that
is integrated with its establishments.
87.
Defendant is subject to NYCHRL because it owns and operates its physical
locations in the City of New York and its Website, making it a person within the
meaning of N.Y.C. Admin. Code § 8-102(1).
88.
Defendant is violating N.Y.C. Administrative Code § 8-107(4)(a) in refusing to
update or remove access barriers to Website, causing its Website and the services
integrated with its physical locations to be completely inaccessible to the blind.
This inaccessibility denies blind patrons full and equal access to the facilities,
products, and services that Defendant makes available to the non-disabled public.
89.
Defendant is required to “make reasonable accommodation to the needs of persons
with disabilities . . . any person prohibited by the provisions of [§ 8-107 et seq.]
from discriminating on the basis of disability shall make reasonable
accommodation to enable a person with a disability to . . . enjoy the right or rights
in question provided that the disability is known or should have been known by the
covered entity.” N.Y.C. Admin. Code § 8-107(15)(a).
90.
Defendant’s actions constitute willful intentional discrimination against the Sub-
Class on the basis of a disability in violation of the N.Y.C. Administrative Code §
8-107(4)(a) and § 8-107(15)(a) in that Defendant has:
a.
constructed and maintained a website that is inaccessible to blind
class members with knowledge of the discrimination; and/or
b.
constructed and maintained a website that is sufficiently intuitive
and/or obvious that is inaccessible to blind class members; and/or
c.
failed to take actions to correct these access barriers in the face of
substantial harm and discrimination to blind class members.
91.
Defendant has failed to take any prompt and equitable steps to remedy their
discriminatory conduct. These violations are ongoing.
92.
As such, Defendant discriminates, and will continue in the future to discriminate
against Plaintiff and members of the proposed class and subclass on the basis of
disability in the full and equal enjoyment of the products, services, facilities,
privileges, advantages, accommodations and/or opportunities of its Website and its
establishments under § 8-107(4)(a) and/or its implementing regulations. Unless the
Court enjoins Defendant from continuing to engage in these unlawful practices,
Plaintiff and members of the class will continue to suffer irreparable harm.
93.
Defendant’s actions were and are in violation of the NYCHRL and therefore
Plaintiff invokes his right to injunctive relief to remedy the discrimination.
94.
Plaintiff is also entitled to compensatory damages, as well as civil penalties and
fines under N.Y.C. Administrative Code § 8-120(8) and § 8-126(a) for each offense
as well as punitive damages pursuant to § 8-502.
95.
Plaintiff is also entitled to reasonable attorneys’ fees and costs.
96.
Under N.Y.C. Administrative Code § 8-120 and § 8-126 and the remedies,
procedures, and rights set forth and incorporated therein Plaintiff prays for
judgment as set forth below.
FIFTH CAUSE OF ACTION
DECLARATORY RELIEF
97.
Plaintiff, on behalf of himself and the Class and New York State and City Sub-
Classes Members, repeats and realleges every allegation of the preceding
paragraphs as if fully set forth herein.
98.
An actual controversy has arisen and now exists between the parties in that Plaintiff
contends, and is informed and believes that Defendant denies, that its Website
contains access barriers denying blind customers the full and equal access to the
products, services and facilities of its Website and by extension its physical
locations, which Defendant owns, operations and controls, fails to comply with
applicable laws including, but not limited to, Title III of the Americans with
Disabilities Act, 42 U.S.C. §§ 12182, et seq., N.Y. Exec. Law § 296, et seq., and
N.Y.C. Admin. Code § 8-107, et seq. prohibiting discrimination against the blind.
99.
A judicial declaration is necessary and appropriate at this time in order that each of
the parties may know their respective rights and duties and act accordingly.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff respectfully requests this Court grant the following relief:
a.
A preliminary and permanent injunction to prohibit Defendant from
violating the Americans with Disabilities Act, 42 U.S.C. §§ 12182, et seq.,
N.Y. Exec. Law § 296, et seq., N.Y.C. Administrative Code § 8-107, et seq.,
and the laws of New York;
b.
A preliminary and permanent injunction requiring Defendant to take
all the steps necessary to make its Website into full compliance with the
requirements set forth in the ADA, and its implementing regulations, so that
the Website is readily accessible to and usable by blind individuals;
c.
A declaration that Defendant owns, maintains and/or operates its
Website in a manner that discriminates against the blind and which fails to
provide access for persons with disabilities as required by Americans with
Disabilities Act, 42 U.S.C. §§ 12182, et seq., N.Y. Exec. Law § 296, et seq.,
N.Y.C. Administrative Code § 8-107, et seq., and the laws of New York
d.
An order certifying the Class and Sub-Classes under Fed. R. Civ. P.
23(a) & (b)(2) and/or (b)(3), appointing Plaintiff as Class Representative,
and his attorneys as Class Counsel;
e.
Compensatory damages in an amount to be determined by proof,
including all applicable statutory and punitive damages and fines, to
Plaintiff and the proposed class and subclasses for violations of their civil
rights under New York State Human Rights Law and City Law;
f.
Pre- and post-judgment interest;
g.
An award of costs and expenses of this action together with
reasonable attorneys’ and expert fees; and
h.
Such other and further relief as this Court deems just and proper.
DEMAND FOR TRIAL BY JURY
Pursuant to Fed. R. Civ. P. 38(b), Plaintiff demands a trial by jury on all questions
of fact the Complaint raises.
Dated: August 26, 2019
STEIN SAKS, PLLC
By: David P. Force
/s/David P. Force, Esq.
[email protected]
285 Passaic Street
Hackensack, NJ 07601
Tel: (201) 282-6500
Fax: (201) 282-6501
ATTORNEYS FOR PLAINTIFF
| civil rights, immigration, family |
VA6ZFocBD5gMZwczBpPP | 1
Harold M. Jaffe (Calif. State Bar #57397)
LAW OFFICES OF HAROLD M. JAFFE
2
3521 Grand Avenue
Oakland, CA 94610
3
Tel: (510) 452-2610 Fax: (510) 452-9125
email: [email protected]
4
Brian W. Newcomb (Calif. State Bar #55156)
5
LAW OFFICES OF BRIAN W. NEWCOMB
770 Menlo Avenue, Ste. 101
6
Menlo Park, CA 94025
Tel: (650) 322-7780
Fax: (650) 322-7740
7
email: [email protected]
8
9
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF CALIFORNIA
10
11
STEWART ROSEN, on Behalf of Himself and
CASE NO.
All Others Similarly Situated,
12
CLASS ACTION COMPLAINT FOR:
13
1)
Plaintiffs,
(15 U.S.C. § 1125(a);
14
2)
§ 17500;
15
VS.
3)
16
17200, ET SEQ.;
4)
17
UBER TECHNOLOGIES, INC., a Delaware
Corporation; RASIER, LLC, a Delaware
RELATIONS; AND
18
limited liability company; and RASIER-CA,
5)
LLC, a Delaware limited liability company,
19
RELATIONS
20
DEMAND FOR JURY TRIAL
Defendants.
21
/
22
I. INTRODUCTION
23
1.
24
25
26
27
1
II. BACKGROUND AND PARTIES
2
2.
3
4
5
for more than thirty years.
6
3.
7
8
Market Street, 4th Floor, San Francisco, California, 94103.
9
4.
10
11
12
13
UBER and licenses mobile application technology from defendant UBER.
14
5.
15
16
17
18
19
California Public Utilities Commission ("CPUC").
20
6.
UBER, a Transportation Network Company ("TNC") uses a Smart Phone
21
22
23
24
elsewhere.
25
III. JURISDICTION AND VENUE
26
7.
27
1
2
Competition Law (B & P Code § 17200).
3
8.
4
5
6
7
8
this district.
9
9.
10
with the State of California.
11
IV. GENERAL ALLEGATIONS
12
A.
Regulation of UBER in California.
13
10.
14
15
response, UBER changed its name to UBER.
16
11.
17
18
the PUC notified UBER that it was in violation of various rules and regulations.
19
12.
20
21
to UBER as well as the citation in the amount of $20,000 as of the date of the letter.
22
13.
23
24
25
26
271
2
3
4
14.
5
6
7
8
9
10
11
12
13
15.
UBER did not submit the APP technology to DMS for type evaluation.
14
16.
15
16
17
illegally by, inter alia ignoring the terms of the Permit.
18
17.
19
company that it must immediately submit the APP technology for type evaluation.
20
18.
UBER took no steps to comply with the law.
21
19.
22
23
24
25
26
27
1
vehicle and some drivers did not have valid driver's licenses. UBER ignored this letter.
2
20.
Public Utilities Code § 411 makes it unlawful to violate any "rule that
3
Commission, or
4
5
of California, including the CCSF, and unfairly damaging Plaintiffs.
6
21.
7
8
9
10
match, we notify you of your co-riders first name."
11
22.
12
13
a result, UBER was and is operating illegally in the CCSF, unfairly damaging Plaintiffs.
14
23.
15
16
allowed UBER to operate at the airport by agreement.
17
24.
18
19
V. FACTUAL ALLEGATIONS
20
A.
Plaintiffs' Taxicabs Compete With Uber Cars for Customers.
21
25.
22
convenient, reliable and safe taxi service in San Francisco County.
23
26.
24
customers looking for transportation with UBER cars.
25
27.
26
27
UBER are common carriers as that term is defined in Civil Code § 2168.1
2
compensation for the unlawful actions taken by UBER.
3
B.
Uber Touts the Safety of Rides on Its Platform.
4
1.
Uber's Representations Regarding Safety on Its Website.
5
29.
6
safety of rides on the UBER platform.
7
30.
8
9
10
11
offers "SAFE RIDES, SAFER CITIES."
12
31.
13
even more emphatically that UBER has the "safest rides on the road."
14
32.
15
drivers. That means setting strict safety standards
"
16
33.
17
18
19
34.
20
21
in part (in text that was posted on the blog until at least June 20, 2015):
22
"The Bottom Line
23
24
beginning.
25
doing everything we can to make UBER the safest experience on the road."
26
27
35.
1
2
for both riders and drivers."
3
36.
4
5
6
a taxi."
7
2.
Rides Fee".
8
9
37.
10
12
UberX ride, no matter the duration or distance of the ride.
13
38.
14
15
16
17
fee labeled as the "Safe Rides Fee."
18
39.
The UBER website states as follows:
19
20
21
22
APP."
23
40.
24
emphatically:
25
"What is The Safe Rides Fee
26
271
UberX receipt.
2
fee is always $1.00."
3
4
5
6
platform."
7
41.
8
9
10
11
12
13
14
any additional surcharge to ensure a "Safe Ride."
15
42.
16
17
opposed towards UBER's bottom line or some other aspect of the company.
18
43.
19
20
21
22
23
24
26
27
fees" including those received in the area served by Plaintiffs' taxicabs on safety measures.
1
Checks.
2
44.
As part of UBER's advertising campaign trumpeting its safety standards,
3
4
5
drivers are subject.
6
45.
One section of UBER's website currently states as follows:
7
"Rider Safety
8
9
process prior to driving with Uber (emphasis added)."
10
11
12
consistently improving standards
"
13
46.
14
15
16
standards."
17
47.
18
19
Casselman, stated:
20
21
county, federal and multi-state checks has set a new standard
22
UberX.
23
24
25
a taxi driver."
26
48.
Until at least December 10, 2014, this blog post stated, in part, even more
271
49.
2
3
4
industry-leading background check process."
5
50.
6
7
to ensure the safest possible platform for Uber riders and drivers."
8
C.
9
51.
UBER's representation about the safety of its rides are false and misleading.
10
52.
Plaintiffs offer a safer transportation experience then UberX in a variety of
11
different ways.
12
1.
13
UberX Requires.
14
53.
15
16
17
to more significant scrutiny.
18
54.
19
Scan" before they can begin transporting passengers.
20
55.
21
22
23
24
25
56.
26
27
a taxi driver.
1
2
just search public record systems."
3
58.
4
testing.
5
59.
6
7
8
9
7 years; and 3) the multi-state criminal data base going back 7 years.
10
60.
11
12
13
14
15
16
automatically be notified of this news.
17
61.
18
19
20
21
extra protection to aid in meeting industry guidelines, and helps prevent fraud."
22
62.
23
24
taxicab drivers must undergo. For example, one article stated:
25
26
271
2
3
4
this system."
5
63.
6
7
8
9
partners must go through a rigorous background check that leads the industry."
10
64.
11
12
13
to become a taxi driver is an outright lie."
14
2.
Allows Drivers With Criminal Records to Become Uber Drivers.
15
16
65.
17
18
19
20
21
22
Uber driver.
23
66.
24
25
had been convicted of reckless driving in Florida in September of 2014.
26
3.
They Are Supported by the Safe Rides Fee.
27
67.
1
rides fee to provide for "regular motor vehicle checks" and "driver's safety education."
2
68.
3
4
5
6
7
8
mechanic "come to you (usually your home address) at a time of your choosing
[to]
9
10
inspections provided they spend a set amount of money on repairs.
11
69.
12
13
14
15
16
for commercial drivers.
17
4.
18
Benefit Consumer Safety.
19
70.
20
21
safe rides for the consumer's that pay the safe rides fee in the CCSF.
22
71.
23
24
25
26
5.
27
Passengers.1
2
3
4
73.
5
6
7
8
9
10
11
74.
12
nor does it provide any other substantive safety training.
13
6.
Before Transporting Passengers.
14
15
75.
16
17
18
customers.
19
76.
20
21
22
23
relevant to safely transport passengers. 3
24
77.
25
contrary, as one rider who went undercover discovered, Uber will pretty much take anyone.
26
27
3
1
7.
2
3
78.
4
5
6
required for the taxicabs owned by the Medallion holders.
7
79.
8
9
10
form and receipt and email it to UBER.
11
80.
12
13
14
15
requirements.
16
8.
17
Who Drive for One Company.
18
81.
19
20
from using dispatch services provided by other taxicab companies.
21
82.
22
driving, and not become preoccupied with various dispatch services.
23
83.
25
Inc.
26
84.
271
2
3
4
5
crosswalks.
6
D.
UBER's False and Misleading Claims Cause Harm to Plaintiffs.
7
85.
UBER's false and misleading advertisement caused and continues to cause
8
9
10
11
12
taxicab rides in taxicabs with Plaintiffs' Medallions.
13
86.
14
15
by Plaintiffs themselves, the owners of the Medallions.
16
87.
17
18
reputational injury to Plaintiffs.
19
88.
UBER's false and misleading advertisements have caused customers to trust
20
21
89.
The false and misleading advertisements have caused lost profits.
22
90.
23
24
25
Hirease, Inc., who performs the background checks.
26
91.
27
1
2
responsibility."
3
92.
4
5
Scan. Regulators in the CCSF as well as Los Angeles, require Live Scan.
6
93.
7
8
9
10
11
process.
12
94.
13
14
15
16
17
the empty homes of customers he takes to the airport.
18
95.
19
20
21
holders in the CCSF.
22
96.
23
24
25
26
27
for taxi drivers.
1
E.
Some of the Same Advertising Misconduct Alleged in this Complaint.
2
3
97.
4
5
6
7
8
9
10
11
12
about background checks set forth herein.
13
VI. CLASS ACTION ALLEGATIONS
14
98.
15
16
17
holders in the CCSF. The class is initially defined as follows:
18
19
20
21
over this matter and the members of their immediate families and judicial staffs."
22
99.
23
24
25
Defendants.
26
100.
27
specificity or division into subclasses after having had an opportunity to conduct discovery.1
2
3
CCSF.
4
B.
Commonality.
5
102.
6
7
common questions of law and fact include, but are not limited to, the following:
8
a.
9
drivers;
10
b.
11
12
C.
13
collection of the safe rides fee to provide "driver safety education";
14
d.
15
16
e.
17
18
safety;
19
f.
Whether Defendants have been unjustly enriched;
20
g.
21
22
respectively; and
23
h.
24
the class members are entitled.
25
C.
Typicality.
26
103.
27
1
D.
Adequacy of Representation.
2
104.
3
4
class actions.
5
E.
Superiority of Class Action.
6
105.
7
8
9
10
difficulty in managing this action as a class action.
11
F.
Injunctive and Declaratory Relief.
12
13
14
15
respect to the class as a whole.
16
VII. CLAIMS FOR RELIEF
17
FIRST CLAIM FOR RELIEF
18
(Violation of the Lanham Act (15 U.S.C. § 1125(a) Against All Defendants)
19
107.
20
forth above as if set forth in full herein.
21
108.
22
23
109.
UBER has made false and misleading statements in commercial advertising
24
26
110.
271
111.
2
3
4
decisions.
5
112.
6
7
8
UberX ride.
9
113.
10
11
12
the Internet.
13
114.
14
15
taxicabs when not being driven by the Plaintiffs themselves.
16
115.
17
18
19
20
customers do not feel safe traveling in Plaintiffs' taxicabs.
21
116.
These injuries have been caused, in whole or in part, by UBER's advertising
22
discussed herein.
23
117.
24
25
26
27
1
the costs of this action.
2
118.
3
as hereinafter set forth.
4
SECOND CLAIM FOR RELIEF
5
(False Advertising; B & P Code § 17500 Against All Defendants)
6
119.
7
forth above as if set forth in full herein.
8
120.
9
10
11
12
13
14
15
16
practices caused further injuries to Plaintiffs as alleged herein.
17
121.
18
19
by Plaintiffs.
20
122.
UBER knew or should have known by exercising reasonable care that its
21
22
23
24
25
123.
26
271
2
3
in violation of B & P Code § 17500, et seq.
4
5
126.
6
7
Plaintiffs will suffer irreparable harm and/or injury.
8
127.
9
10
this action.
11
128.
12
as hereinafter set forth.
13
THIRD CLAIM FOR RELIEF
14
(Unfair Business Practices Pursuant to B & P Code §$17200 et seq.
Against All Defendants)
15
16
129.
17
forth above as if set forth in full herein.
18
130.
19
20
21
22
23
24
practice in violation of the unfair competition law.
25
131.
26
27
28
1
132.
2
3
4
5
6
proximate result of UBER's unpermitted taxi service in the CCSF.
7
8
9
10
11
of UBER's unfair and deceptive business practices.
12
13
hereinafter set forth.
14
FOURTH CLAIM FOR RELIEF
15
(Intentional Interference with Prospective Economic Relations
Against All Defendants)
16
17
134.
18
forth above as if set forth in full herein.
19
135.
20
21
22
23
transportation services. Therefore, UBER operates outside of the law.
24
136.
25
members of the Plaintiff Class have suffered damages in a sum according to proof.
26
27
Therefore, Plaintiffs are entitled to an award of punitive damages.
28
138.1
2
3
4
as set forth above.
5
6
hereinafter set forth.
7
FIFTH CLAIM FOR RELIEF
8
(Negligent Interference with Prospective Economic Relations
Against All Defendants)
9
10
11
forth above as if set forth in full herein.
12
140.
13
14
15
16
17
141.
18
suffered damages in an amount according to proof.
19
JURY DEMAND
20
Plaintiffs demand a trial by jury of all claims in this complaint that are SO triable.
21
REQUEST FOR RELIEF
22
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as follows:
25
1.
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27
undersigned counsel as class counsel;
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2.
1
2
as a result of Defendants' violations;
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3.
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profits;
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4.
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receive any other equitable relief that this Court deems just and proper;
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5.
13
14
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up the Plaintiff Class;
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6.
18
19
medallion owners such as Plaintiffs and members of the Plaintiff Class;
20
7.
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22
8.
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25
Prof. Code § 17200, et seq., including but not limited to, the following acts:
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a)
27
b)
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1
9.
For damages in a sum according to proof;
2
10.
3
11.
For interest thereon;
4
12.
For any such other and further relief as this Court may deem just and proper.
5
6
7
DATED: August 24, 2015
Hand m Joff
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and All Others Similarly Situated
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27 | intellectual property & communication |
L7kEDIcBD5gMZwcz_WmR | Case No.:
CLASS ACTION COMPLAINT FOR
VIOLATIONS OF THE FEDERAL
SECURITIES LAWS
JURY TRIAL DEMANDED
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
JASON MATTIE, Individually and on
Behalf of All Others Similarly Situated,
Plaintiff,
v.
AMAYA INC., DAVID BAAZOV, and
DANIEL SEBAG,
Defendants.
Plaintiff Jason Mattie (“Plaintiff”), by and through his attorneys, alleges the following
upon information and belief, except as to those allegations concerning Plaintiff, which are
alleged upon personal knowledge. Plaintiff’s information and belief is based upon, among other
things, his counsel’s investigation, which includes without limitation: (a) review and analysis of
regulatory filings made by Amaya Inc. (“Amaya” or the “Company”), with the United States
(“U.S.”) Securities and Exchange Commission (“SEC”); (b) review and analysis of press releases
and media reports issued by and disseminated by Amaya; and (c) review of other publicly
available information concerning Amaya.
NATURE OF THE ACTION AND OVERVIEW
1.
This is a class action on behalf of purchasers of Amaya securities between June 8,
2015 and March 22, 2016, inclusive (the “Class Period”), seeking to pursue remedies under the
Securities Exchange Act of 1934 (the “Exchange Act”).
2.
Amaya is a provider of technology-based products and services in the global
gaming and interactive entertainment industries. Amaya has two operating segments within its
Business-to-Consumer business: real-money online poker and real-money online casino and
sportsbook.
3.
On March 23, 2016, news outlets reported that Amaya’s Chief Executive Officer
(“CEO”), David Baazov, was charged with insider trading by Quebec securities regulators.
Bloomberg Business reported that the charges included “allegations of ‘aiding with trades while
in possession of privileged information,’ influencing or attempting to influence the market price
of securities of Amaya, and communicating privileged information . . . .”
4.
On this news, Amaya’s stock fell $3.07 per share, or more than 21%, to close at
$11.18 per share on March 23, 2016, on unusually heavy trading volume.
5.
Throughout the Class Period, Defendants made false and/or misleading
statements, as well as failed to disclose material adverse facts about the Company’s business,
operations, and prospects. Specifically, Defendants made false and/or misleading statements
and/or failed to disclose: (1) that the Company’s CEO was engaged in an insider trading scheme
that involved influencing the market price of the Company’s securities and communicating
privileged information to third parties; (2) the Company lacked adequate internal controls; and,
(3) that, as a result of the foregoing, Defendants’ statements about Amaya’s business, operations,
and prospects, were false and misleading and/or lacked a reasonable basis.
6.
As a result of Defendants’ wrongful acts and omissions, and the precipitous
decline in the market value of the Company’s securities, Plaintiff and other Class members have
suffered significant losses and damages.
JURISDICTION AND VENUE
7.
The claims asserted herein arise under Sections 10(b) and 20(a) of the Exchange
Act (15 U.S.C. §§78j(b) and 78t(a)) and Rule 10b-5 promulgated thereunder by the SEC (17
C.F.R. § 240.10b-5).
8.
This Court has jurisdiction over the subject matter of this action pursuant to 28
U.S.C. §1331 and Section 27 of the Exchange Act (15 U.S.C. §78aa).
9.
Venue is proper in this Judicial District pursuant to 28 U.S.C. §1391(b) and
Section 27 of the Exchange Act (15 U.S.C. §78aa(c)). Substantial acts in furtherance of the
alleged fraud or the effects of the fraud have occurred in this Judicial District. Many of the acts
charged herein, including the dissemination of materially false and/or misleading information,
occurred in substantial part in this Judicial District. In addition, the Company’s shares were
traded in this Judicial District.
10.
In connection with the acts, transactions, and conduct alleged herein, Defendants
directly and indirectly used the means and instrumentalities of interstate commerce, including the
United States mail, interstate telephone communications, and the facilities of a national securities
exchange.
PARTIES
11.
Plaintiff Jason Mattie, as set forth in the accompanying certification, incorporated
by reference herein, purchased Amaya common shares during the Class Period, and suffered
damages as a result of the federal securities law violations and false and/or misleading statements
and/or material omissions alleged herein.
12.
Defendant Amaya is a Canadian corporation with its principal executive offices
located at 7600 Trans Canada Hwy., Pointe-Claire, Quebec, Canada, H9R 1C8.
13.
Defendant David Baazov (“Baazov”) was, at all relevant times, CEO of Amaya.
14.
Defendant Daniel Sebag (“Sebag”) was, at all relevant times, Chief Financial
Officer (“CFO”) of Amaya.
15.
Defendants Baazov and Sebag are collectively referred to hereinafter as the
“Individual Defendants.” The Individual Defendants, because of their positions with the
Company, possessed the power and authority to control the contents of Amaya’s reports to the
SEC, press releases and presentations to securities analysts, money and portfolio managers and
institutional investors, i.e., the market. Each defendant was provided with copies of the
Company’s reports and press releases alleged herein to be misleading prior to, or shortly after,
their issuance and had the ability and opportunity to prevent their issuance or cause them to be
corrected. Because of their positions and access to material non-public information available to
them, each of these defendants knew that the adverse facts specified herein had not been
disclosed to, and were being concealed from, the public, and that the positive representations
which were being made were then materially false and/or misleading. The Individual
Defendants are liable for the false statements pleaded herein, as those statements were each
“group-published” information, the result of the collective actions of the Individual Defendants.
SUBSTANTIVE ALLEGATIONS
Background
16.
Amaya is a provider of technology-based products and services in the global
gaming and interactive entertainment industries. Amaya has two operating segments within its
Business-to-Consumer business: real-money online poker and real-money online casino and
sportsbook.
Materially False and Misleading
Statements Issued During the Class Period
17.
The Class Period begins on June 8, 2015. On that day, the Company issued a
press release announcing that the Company’s common shares would commence trading on The
Nasdaq Global Select Market. The press release also touted the Company’s business. Therein,
the Company, in relevant part, stated:
Amaya is a leading provider of technology-based solutions, products and services
in the global gaming and interactive entertainment industries. Amaya owns
gaming and related consumer businesses and brands including PokerStars, Full
Tilt, the European Poker Tour, PokerStars Caribbean Adventure, Latin American
Poker Tour and the Asia Pacific Poker Tour. These brands collectively form the
largest poker business in the world, comprising online poker games and
tournaments, live poker competitions, branded poker rooms in popular casinos in
major cities around the world, and poker programming created for television and
online audiences. PokerStars is the world’s most popular and successful online
poker brand. Amaya also provides B2B interactive gaming solutions to the
regulated gaming industry.
18.
Amaya’s Corporate website features a “Code of Business Conduct,” (the “Code”)
adopted
by
the
Company
on
or
around
May
12,
2015
and
available
at:
http://www.amaya.com/pdf/amaya-code-of-business-conduct-may-2015.pdf. The Code states
that, “Compliance with the provisions of this Code is mandatory for all employees, officers and
directors of the Company.” The Code further provides that employees, officers and directors,
“shall not use their status or position with the Company to obtain personal gain in any manner.”
And, that, “Employees, officers and directors must safeguard the Company’s Confidential
Information,” and, “Employees, officers and directors are prohibited from disclosing
Confidential Information or other information which might impair the Company’s competitive
position or which might violate private rights of individuals, enterprises or institutions without
appropriate authorization. . . Securities laws contain prohibitions against trading in securities of
the Company while in possession of material information regarding the Company that has not
been generally disclosed to the public and against informing others of such undisclosed material
information.”
19.
On August 13, 2015, Amaya issued a press release entitled, “Amaya Reports
Second Quarter 2015 Results.” Therein, the Company, in relevant part, stated:
MONTREAL, Canada, August 13, 2015 – Amaya Inc. (“Amaya” or the
“Corporation”) (TSX: AYA; NASDAQ: AYA) today reported its financial results
for the three and six-month periods ended June 30, 2015. Unless otherwise noted,
all references to “$” and “CAD” are to the Canadian dollar, “US$” and “USD”
are to the U.S. dollar and “€” and “EUR” are to the Euro.
“This was another exciting quarter for Amaya,” said David Baazov, Amaya’s
Chairman and CEO. “Our core poker business remains strong and our customers
have embraced our expansion into non-poker offerings.
“We’ve completed our transition to a pure B2C technology company having
finalized the divestiture of our B2B businesses,” added Baazov. “We substantially
reduced our leverage and improved our financial condition. Since the acquisition
of our B2C business, we’ve repaid approximately US$529 million of our long-
term debt, thereby eliminating an estimated US$62 million of related interest
expense.”
Key Q2 2015 Financial Highlights
Revenues grew 10% to approximately $320 million as compared to pro-
forma revenues for Q2 2014 of approximately $289 million.
o Revenues grew approximately 24% on a constant currency
basis and normalizing the impact of approximately $6 million in
value added taxes (“VAT”) charged in 2015 (but not in 2014) in
certain European Union jurisdictions, including Germany and
France. On the same basis, poker grew approximately 11%,
partially attributable to an increase in real-money unique players
and depositors on PokerStars.
o Online casino comprised approximately 11% of revenues, with the
remainder almost entirely from poker.
Adjusted EBITDA grew 24% to $138 million, or 43.5% of revenues, as
compared to pro-forma Adjusted EBITDA for Q2 2014 of approximately
$112 million, or 38.5% of revenues.
o Adjusted EBITDA year-over-year margin expansion was driven
primarily by the increase in high margin revenue streams,
including online casino, despite a material decline in the value of
global currencies as against the USD and the introduction of new
gaming duties and VAT (totaling approximately $10 million) not
in effect during Q2 2014.
Adjusted Net Earnings grew 43% to $86 million as compared to pro-forma
Adjusted Net Earnings for Q2 2014 of approximately $60 million.
Adjusted Net Earnings per Diluted Share grew 43% to $0.43 as compared
to pro-forma Adjusted Earnings per Diluted Share for Q2 2014 of
approximately $0.30.
*
*
*
Key Q2 2015 Operational Highlights
The Corporation’s B2C business added an aggregate of 1.9 million
customer registrations during the quarter, with registered customers
totalling more than 95 million as of June 30, 2015. Approximately 5.7
million of such total registered customers were active during the quarter.
The aggregate number of unique customers who played a real money
online offering during the quarter was approximately 2.3 million, of which
approximately 95% played on PokerStars, in line with Q2 2014.
Gross deposits increased approximately 4% on a constant currency basis,
including approximately 7% on PokerStars.
Key Q2 2015 and Subsequent Corporate and Other Financial Highlights
Since the acquisition of its B2C business on August 1, 2014, Amaya
repaid approximately US$529 million of long-term debt, reducing total
long-term debt from approximately US$3.134 billion to approximately
US$2.605 billion.
All previously announced B2B business divestitures were completed as of
July 31, 2015 and the majority of the net proceeds were used to help repay
debt and repurchase common shares.
o Approximately US$344 million of such proceeds were used to
repay outstanding long-term debt during the quarter.
o Approximately $35.6 million of such proceeds were used to
repurchase and cancel 1.1 million common shares pursuant to the
Corporation’s TSX-approved normal course issuer bid.
The previously announced refinancing was completed on August 12, 2015
(the “Refinancing”), including the repayment of approximately US$590
million of the Corporation’s USD second lien term loan. The Corporation
funded this repayment, as well as fees and related costs, through a
combination of an approximately US$315 million increase of its existing
USD first lien term loan, approximately €92 million increase of its
existing EUR first lien term loan and approximately US$195 million in
cash.
As a result of the Refinancing and the repayment of debt since the
acquisition of its B2C business, Amaya expects that its annual interest
expense will reduce by approximately US$62 million, of which
approximately US$26.2 million is related to the Refinancing, thereby
strengthening its cash flow generation, liquidity and leverage profile.
2015 Full Year Financial Guidance
Amaya is reaffirming its previously announced 2015 full-year financial guidance
provided in its earnings release on May 14, 2015 for the quarter ended March 31,
2015, with no changes to the ranges provided nor any material changes to the
assumptions used to determine such guidance, except for the expected impact of
approximately four and a half months’ interest savings as a result of the
Refinancing.
(Footnotes omitted).
20.
On November 10, 2015, Amaya issued a press release entitled, “Amaya Reports
Third Quarter 2015 Results.” Therein, the Company, in relevant part, stated:
MONTREAL, Canada, November 10, 2015 – Amaya Inc. (“Amaya” or the
“Corporation”) (NASDAQ: AYA; TSX: AYA) today reported its financial results
for the three and nine-month periods ended September 30, 2015. Unless otherwise
noted, all references to”$” and “CAD” are to the Canadian dollar, “US$” and
“USD” are to the U.S. dollar and “€” and “EUR” are to the Euro.
“Since Amaya’s acquisition of its B2C business, we have consistently delivered
shareholder value,” said David Baazov, Amaya’s Chairman and CEO. “And,
despite multiple recent global challenges to our core business, we believe we are
well positioned to increase our cash flow and continue to grow our customer base
in 2016 through a number of initiatives.”
Key Q3 2015 Financial Highlights
Revenues increased 8% to approximately $325 million as compared to
pro-forma revenues for Q3 20142 of approximately $300 million. Online
casino comprised approximately 14% of Q3 2015 revenues, with the
remainder almost entirely from real-money online poker.
o Revenues grew approximately 19% on a constant currency basis
and normalizing for the levy of certain value added taxes (VAT) in
European Union jurisdictions in the amount of $5 million, and
certain extraordinary events (“Extraordinary Events”) with respect
to our real-money operations in Portugal, Greece and certain
additional smaller markets.
The Extraordinary Events included (i) the temporary
suspension of real-money operations in Portugal as of July
2015 in anticipation of a new regulatory and licensing
regime, (ii) the impairment of real-money operations in
Greece as a result of the severe economic slowdown in that
country and the capital controls and banking restrictions
imposed by its government in 2015, and (iii) the suspension
of operations in approximately 30 other jurisdictions
following Amaya’s acquisition of the Rational Group in
2014. For Q3 2014, revenues attributable to Portugal,
Greece and the other suspended jurisdictions were
approximately US$9 million, the significant majority of
which were from Portugal and Greece.
o B2C poker revenues grew approximately 4.5% from Q3 2014 on a
constant currency basis and normalizing for VAT and the
Extraordinary Events.
Adjusted EBITDA increased 8% to $141 million, or 43.5% of revenues, as
compared to pro-forma Adjusted EBITDA for Q3 2014 of approximately
$131 million, or 43.6% of revenues.
Adjusted Net Earnings increased 13% to $91 million as compared to pro-
forma Adjusted Net Earnings for Q3 2014 of approximately $80 million.
*
*
*
Key Q3 2015 Operational Highlights
The Corporation’s B2C business added an aggregate of approximately
1.85 million customer registrations during the quarter, with registered
customers totalling approximately 97 million as of September 30, 2015,
approximately 9% more than a year earlier.
The aggregate number of unique customers who played a real-money
online offering during the quarter was approximately 2.2 million, of which
approximately 94% played on PokerStars, an approximately 3% decline
from Q3 2014 driven by the impact of the Extraordinary Events.
Key Q3 2015 and Subsequent Corporate and Other Financial Highlights
On September 30, 2015, the New Jersey Division of Gaming Enforcement
(the “DGE”) authorized Amaya to operate the PokerStars and Full Tilt
brands in New Jersey. The approval follows an unprecedented review by
the DGE of Amaya and its acquisition of the PokerStars and Full Tilt
businesses in August 2014. Amaya anticipates initially launching in New
Jersey in the first half of 2016 through its agreement with Resorts Casino
Hotel in Atlantic City, New Jersey.
Amaya was granted additional gaming licenses and approvals in Romania,
Ireland, and the Province of Quebec, Canada.
In August 2015, Amaya completed a debt refinancing (the “Refinancing”)
that resulted in the repayment of approximately US$590 million of the
Corporation’s USD second lien term loan. The Corporation funded this
repayment, as well as fees and related costs, through a combination of an
approximately US$315 million increase of its existing USD first lien term
loan, approximately €92 million increase of its existing EUR first lien
term loan and approximately US$195 million in cash.
All previously announced B2B business divestitures were completed as of
July 31, 2015 for aggregate gross cash proceeds, less transaction costs, of
approximately $594 million recorded in 2015. Through these proceeds
combined with cash flow generated from its continuing operations,
Amaya:
o repaid approximately $690 million of outstanding long-term debt;
and
o repurchased and canceled an aggregate of approximately 1.46
million common shares at a cost of approximately $45.5 million
($9.9 million of which were repurchased and canceled during the
quarter) pursuant to its TSX-approved normal course issuer bid,
which remains in effect.
Since the acquisition of its B2C business on August 1, 2014, Amaya has
reduced total long-term debt from approximately US$3.134 billion with a
weighted average interest rate of 6.38% to approximately US$2.603
billion with a weighted average interest rate of 5.28%. As a result of the
Refinancing and the repayment of debt, Amaya expects that its annualized
interest expenses will reduce by approximately US$62 million to
approximately US$136 million. The Corporation has generated
approximately US$364 million in operating cash flow from continuing
operations over the past 12 months.
Amaya will today file a preliminary short form base shelf prospectus (the
“Base Shelf”) with the securities commissions or similar authorities in all
provinces and territories in Canada and a corresponding shelf registration
statement on Form F-10 (the “F-10”) with the U.S. Securities and
Exchange
Commission
(the
“SEC”)
under
the
U.S.-Canada
Multijurisdictional Disclosure System.
o The Base Shelf and corresponding F-10, when made final or
effective, will allow for primary and secondary offerings of up to
US$3 billion of common shares, preferred shares, debt securities,
subscription receipts, warrants and units, or any combination
thereof, from time to time over a 25-month period. The specific
terms of any offering of securities will be set forth in a shelf
prospectus supplement. Amaya filed the Base Shelf and F-10 to
maintain financial flexibility, including efficient access to new
capital from time to time, but has no immediate intentions to
undertake an offering.
21.
On March 14, 2016, Amaya issued a press release entitled, “Amaya Reports
Fourth Quarter and Full Year 2015 Results.” Therein, the Company, in relevant part, stated:
MONTREAL, Canada, March 14, 2016 – Amaya Inc. (NASDAQ: AYA; TSX:
AYA) today reported financial results for the fourth quarter and year ended
December 31, 2015 and provided a performance update for the first two months
of 2016. Unless otherwise noted, all dollar ($) amounts are in Canadian dollars.
“Throughout 2015 we successfully executed on our strategy of diversifying our
operations while maintaining market dominance in poker,” said David Baazov,
Amaya Chairman and CEO. “Despite significant foreign exchange and product
rollout challenges, we achieved positive growth on a constant currency basis and,
through investments and initiatives that will continue through 2016, have laid the
foundation for becoming a leader across multiple gaming verticals.”
*
*
*
Fourth Quarter 2015 and Other Financial Highlights
Foreign Exchange and Other Impacts on Revenues - Excluding the
impact of year-over-year changes in foreign exchange rates, total revenues
for the quarter and full year would have increased by 12% and 15%,
respectively, and real-money online revenues for the quarter and full year
would have increased by 13% and 15%, respectively. On such constant
currency basis and excluding the levy of certain value added taxes (VAT)
introduced in certain European Union jurisdictions in 2015 and the
previously reported suspension or impairment of real-money operations in
Portugal, Greece and certain other jurisdictions, total revenues for the
quarter and full year would have increased by 16% and 19%, respectively,
and real-money online revenues for the quarter and full year would have
increased by 17% and 19%, respectively. Approximately US$6.8 million
of revenues for the quarter and full year were the result of accounting
adjustments for certain offsets to gross gaming revenue.
Operating Segment Revenues - Real-money online poker revenues and
real-money online casino and sportsbook combined revenues represented
approximately 78% and 17% of total revenues for the quarter,
respectively, as compared to 93% and 3%, respectively, for the fourth
quarter of 2014. Other offerings, including social and play-money
gaming, live poker events, branded poker rooms and daily fantasy sports,
and other nominal sources of revenue are aggregated into other revenues,
which comprise the remaining portion of total revenues for the periods.
Adjusted Net Leverage Ratio - Adjusted Net Leverage Ratio at
December 31, 2015 was 5.07.
Debt – During the year Amaya reduced total long-term debt from
approximately US$3.156 billion with a weighted average interest rate of
6.38% to approximately US$2.587 billion with a weighted average interest
rate of 5%. Amaya expects interest and debt principal payments to be
approximately US$173 million in 2016.
Fourth Quarter 2015 Operational Highlights
Customer Registrations - Aggregate customer registrations increased by
1.99 million to approximately 99 million at the end of 2015 and currently
exceed 100 million.
Quarterly Real-Money Active Uniques (QAUs) – Total combined
QAUs were 2.4 million, a decrease of approximately 2.3% year-over-year,
and PokerStars only QAUs were 2.3 million, an increase of approximately
0.6% year-over-year. Excluding the impact of the suspension or
impairment of certain real-money operations noted above, total combined
QAUs would have increased approximately 0.9%, and PokerStars only
QAUs would have increased approximately 4.1%. Approximately 95% of
total combined QAUs played on PokerStars. Amaya estimates that its
emerging online casino offerings are already among the world’s fastest
growing and have one of the largest player bases among its competitors.
Quarterly Net Yield (QNY) – Total QNY was $153, an increase of
16.8% year-over-year. Total QNY on a U.S. dollar basis was US$113, a
decrease of 2.4% year-over-year. Excluding the impact of year-over-year
changes in foreign exchange rates, total QNY was US$134, an increase of
15.2% year-over-year. On such constant currency basis and excluding the
levy of certain VAT and the suspension or impairment of certain real-
money operations noted above, total QNY on a U.S. dollar basis increased
by 13.5% year-over-year.
2016 Performance Update
Revenues – For the first two months of 2016, Amaya estimates that
unaudited consolidated revenues were approximately US$189 million,
representing an increase of approximately 4% over the same period of
2015. Of such revenues, 75% was attributable to real-money online poker
estimated revenues and 21% was attributable to real-money online casino
and sportsbook combined estimated revenues. Excluding the impact of
year-over-year changes in foreign exchange rates, Amaya estimates that
such revenues were approximately US$208 million, representing an
increase of approximately 14% over the same period of 2015.
2016 Guidance – As previously announced, the Special Committee of the
Board of Directors determined, in consultation with the Audit Committee
of the Board of Directors, that in view of the potential offer to acquire
Amaya that may be forthcoming from Mr. Baazov, and the fact that the
Special Committee’s financial advisor and the independent valuator have
commenced their review process, it would be inappropriate for Amaya to
provide guidance with respect to its 2016 financial performance at this
time. An analysis of management’s forecast of Amaya’s financial
performance will be part of the valuator’s work, and its report, which
would include certain forecast information, would be made public as part
of any disclosure document relating to an offer, if any, from Mr. Baazov.
Amaya is not otherwise precluded from providing 2016 financial guidance
in the future.
22.
The above statements contained in ¶¶17-21 were false and/or misleading, as well
as failed to disclose material adverse facts about the Company’s business, operations, and
prospects. Specifically, these statements were false and/or misleading statements and/or failed to
disclose: (1) that the Company’s CEO was engaged in an insider trading scheme that involved
influencing the market price of the Company’s securities and communicating privileged
information to third parties; (2) the Company lacked adequate internal controls; and, (3) that, as a
result of the foregoing, Defendants’ statements about Amaya’s business, operations, and
prospects, were false and misleading and/or lacked a reasonable basis.
Disclosures at the End of the Class Period
23.
On March 23, 2016, news outlets reported that Amaya’s CEO, David Baazov, was
charged with insider trading by Quebec securities regulators. Bloomberg Business reported that
the charges included “allegations of ‘aiding with trades while in possession of privileged
information,’ influencing or attempting to influence the market price of securities of Amaya, and
communicating privileged information . . . .”
24.
On this news, Amaya’s stock fell $3.07 per share, or more than 21%, to close at
$11.18 per share on March 23, 2016, on unusually heavy trading volume.
CLASS ACTION ALLEGATIONS
25.
Plaintiff brings this action as a class action pursuant to Federal Rule of Civil
Procedure 23(a) and (b)(3) on behalf of a class, consisting of all those who purchased Amaya’s
securities between June 8, 2015 and March 22, 2016, inclusive (the “Class Period”) and who
were damaged thereby (the “Class”). Excluded from the Class are Defendants, the officers and
directors of the Company, at all relevant times, members of their immediate families and their
legal representatives, heirs, successors or assigns and any entity in which Defendants have or had
a controlling interest.
26.
The members of the Class are so numerous that joinder of all members is
impracticable. Throughout the Class Period, Amaya’s securities were actively traded on the
NASDAQ Stock Market (the “NASDAQ”). While the exact number of Class members is
unknown to Plaintiff at this time and can only be ascertained through appropriate discovery,
Plaintiff believes that there are hundreds or thousands of members in the proposed Class.
Millions of Amaya shares were traded publicly during the Class Period on the NASDAQ. As of
December 31, 2015, Amaya had 133,426,193 common shares outstanding. Record owners and
other members of the Class may be identified from records maintained by Amaya or its transfer
agent and may be notified of the pendency of this action by mail, using the form of notice similar
to that customarily used in securities class actions.
27.
Plaintiff’s claims are typical of the claims of the members of the Class as all
members of the Class are similarly affected by Defendants’ wrongful conduct in violation of
federal law that is complained of herein.
28.
Plaintiff will fairly and adequately protect the interests of the members of the
Class and has retained counsel competent and experienced in class and securities litigation.
29.
Common questions of law and fact exist as to all members of the Class and
predominate over any questions solely affecting individual members of the Class. Among the
questions of law and fact common to the Class are:
(a)
whether the federal securities laws were violated by Defendants’ acts as
alleged herein;
(b)
whether statements made by Defendants to the investing public during the
Class Period omitted and/or misrepresented material facts about the business, operations, and
prospects of Amaya; and
(c)
to what extent the members of the Class have sustained damages and the
proper measure of damages.
30.
A class action is superior to all other available methods for the fair and efficient
adjudication of this controversy since joinder of all members is impracticable. Furthermore, as
the damages suffered by individual Class members may be relatively small, the expense and
burden of individual litigation makes it impossible for members of the Class to individually
redress the wrongs done to them. There will be no difficulty in the management of this action as
a class action.
UNDISCLOSED ADVERSE FACTS
31.
The market for Amaya’s securities was open, well-developed and efficient at all
relevant times. As a result of these materially false and/or misleading statements, and/or failures
to disclose, Amaya’s securities traded at artificially inflated prices during the Class Period.
Plaintiff and other members of the Class purchased or otherwise acquired Amaya’s securities
relying upon the integrity of the market price of the Company’s securities and market
information relating to Amaya, and have been damaged thereby.
32.
During the Class Period, Defendants materially misled the investing public,
thereby inflating the price of Amaya’s securities, by publicly issuing false and/or misleading
statements and/or omitting to disclose material facts necessary to make Defendants’ statements,
as set forth herein, not false and/or misleading. Said statements and omissions were materially
false and/or misleading in that they failed to disclose material adverse information and/or
misrepresented the truth about Amaya’s business, operations, and prospects as alleged herein.
33.
At all relevant times, the material misrepresentations and omissions particularized
in this Complaint directly or proximately caused or were a substantial contributing cause of the
damages sustained by Plaintiff and other members of the Class. As described herein, during the
Class Period, Defendants made or caused to be made a series of materially false and/or
misleading statements about Amaya’s financial well-being and prospects. These material
misstatements and/or omissions had the cause and effect of creating in the market an
unrealistically positive assessment of the Company and its financial well-being and prospects,
thus causing the Company’s securities to be overvalued and artificially inflated at all relevant
times. Defendants’ materially false and/or misleading statements during the Class Period
resulted in Plaintiff and other members of the Class purchasing the Company’s securities at
artificially inflated prices, thus causing the damages complained of herein.
LOSS CAUSATION
34.
Defendants’ wrongful conduct, as alleged herein, directly and proximately caused
the economic loss suffered by Plaintiff and the Class.
35.
During the Class Period, Plaintiff and the Class purchased Amaya’s securities at
artificially inflated prices and were damaged thereby. The price of the Company’s securities
significantly declined when the misrepresentations made to the market, and/or the information
alleged herein to have been concealed from the market, and/or the effects thereof, were revealed,
causing investors’ losses.
SCIENTER ALLEGATIONS
36.
As alleged herein, Defendants acted with scienter in that Defendants knew that
the public documents and statements issued or disseminated in the name of the Company were
materially false and/or misleading; knew that such statements or documents would be issued or
disseminated to the investing public; and knowingly and substantially participated or acquiesced
in the issuance or dissemination of such statements or documents as primary violations of the
federal securities laws. As set forth elsewhere herein in detail, Defendants, by virtue of their
receipt of information reflecting the true facts regarding Amaya, his/her control over, and/or
receipt and/or modification of Amaya’s allegedly materially misleading misstatements and/or
their associations with the Company which made them privy to confidential proprietary
information concerning Amaya, participated in the fraudulent scheme alleged herein.
APPLICABILITY OF PRESUMPTION OF RELIANCE
(FRAUD-ON-THE-MARKET DOCTRINE)
37.
The market for Amaya’s securities was open, well-developed and efficient at all
relevant times. As a result of the materially false and/or misleading statements and/or failures to
disclose, Amaya’s securities traded at artificially inflated prices during the Class Period. On
June 23, 2015, the Company’s stock closed at a Class Period high of $29.91 per share. Plaintiff
and other members of the Class purchased or otherwise acquired the Company’s securities
relying upon the integrity of the market price of Amaya’s securities and market information
relating to Amaya, and have been damaged thereby.
38.
During the Class Period, the artificial inflation of Amaya’s stock was caused by
the material misrepresentations and/or omissions particularized in this Complaint causing the
damages sustained by Plaintiff and other members of the Class. As described herein, during the
Class Period, Defendants made or caused to be made a series of materially false and/or
misleading statements about Amaya’s business, prospects, and operations. These material
misstatements and/or omissions created an unrealistically positive assessment of Amaya and its
business, operations, and prospects, thus causing the price of the Company’s securities to be
artificially inflated at all relevant times, and when disclosed, negatively affected the value of the
Company stock. Defendants’ materially false and/or misleading statements during the Class
Period resulted in Plaintiff and other members of the Class purchasing the Company’s securities
at such artificially inflated prices, and each of them has been damaged as a result.
39.
At all relevant times, the market for Amaya’s securities was an efficient market
for the following reasons, among others:
(a)
Amaya stock met the requirements for listing, and was listed and actively
traded on the NASDAQ, a highly efficient and automated market;
(b)
As a regulated issuer, Amaya filed periodic public reports with the SEC
and/or the NASDAQ;
(c)
Amaya regularly communicated with public investors via established
market communication mechanisms, including through regular dissemination of press releases
on the national circuits of major newswire services and through other wide-ranging public
disclosures, such as communications with the financial press and other similar reporting services;
(d)
Amaya was followed by securities analysts employed by brokerage firms
who wrote reports about the Company, and these reports were distributed to the sales force and
certain customers of their respective brokerage firms. Each of these reports was publicly
available and entered the public marketplace.
40.
As a result of the foregoing, the market for Amaya’s securities promptly digested
current information regarding Amaya from all publicly available sources and reflected such
information in Amaya’s stock price. Under these circumstances, all purchasers of Amaya’s
securities during the Class Period suffered similar injury through their purchase of Amaya’s
securities at artificially inflated prices and a presumption of reliance applies.
NO SAFE HARBOR
41.
The statutory safe harbor provided for forward-looking statements under certain
circumstances does not apply to any of the allegedly false statements pleaded in this Complaint.
The statements alleged to be false and misleading herein all relate to then-existing facts and
conditions. In addition, to the extent certain of the statements alleged to be false may be
characterized as forward looking, they were not identified as “forward-looking statements” when
made and there were no meaningful cautionary statements identifying important factors that
could cause actual results to differ materially from those in the purportedly forward-looking
statements. In the alternative, to the extent that the statutory safe harbor is determined to apply to
any forward-looking statements pleaded herein, Defendants are liable for those false forward-
looking statements because at the time each of those forward-looking statements was made, the
speaker had actual knowledge that the forward-looking statement was materially false or
misleading, and/or the forward-looking statement was authorized or approved by an executive
officer of Amaya who knew that the statement was false when made.
FIRST CLAIM
Violation of Section 10(b) of
The Exchange Act and Rule 10b-5
Promulgated Thereunder Against All Defendants
42.
Plaintiff repeats and re-alleges each and every allegation contained above as if
fully set forth herein.
43.
During the Class Period, Defendants carried out a plan, scheme and course of
conduct which was intended to and, throughout the Class Period, did: (i) deceive the investing
public, including Plaintiff and other Class members, as alleged herein; and (ii) cause Plaintiff and
other members of the Class to purchase Amaya’s securities at artificially inflated prices. In
furtherance of this unlawful scheme, plan and course of conduct, defendants, and each of them,
took the actions set forth herein.
44.
Defendants (i) employed devices, schemes, and artifices to defraud; (ii) made
untrue statements of material fact and/or omitted to state material facts necessary to make the
statements not misleading; and (iii) engaged in acts, practices, and a course of business which
operated as a fraud and deceit upon the purchasers of the Company’s securities in an effort to
maintain artificially high market prices for Amaya’s securities in violation of Section 10(b) of
the Exchange Act and Rule 10b-5. All Defendants are sued either as primary participants in the
wrongful and illegal conduct charged herein or as controlling persons as alleged below.
45.
Defendants, individually and in concert, directly and indirectly, by the use, means
or instrumentalities of interstate commerce and/or of the mails, engaged and participated in a
continuous course of conduct to conceal adverse material information about Amaya’s financial
well-being and prospects, as specified herein.
46.
These defendants employed devices, schemes and artifices to defraud, while in
possession of material adverse non-public information and engaged in acts, practices, and a
course of conduct as alleged herein in an effort to assure investors of Amaya’s value and
performance and continued substantial growth, which included the making of, or the
participation in the making of, untrue statements of material facts and/or omitting to state
material facts necessary in order to make the statements made about Amaya and its business
operations and future prospects in light of the circumstances under which they were made, not
misleading, as set forth more particularly herein, and engaged in transactions, practices and a
course of business which operated as a fraud and deceit upon the purchasers of the Company’s
securities during the Class Period.
47.
Each of the Individual Defendants’ primary liability, and controlling person
liability, arises from the following facts: (i) the Individual Defendants were high-level executives
and/or directors at the Company during the Class Period and members of the Company’s
management team or had control thereof; (ii) each of these defendants, by virtue of their
responsibilities and activities as a senior officer and/or director of the Company, was privy to and
participated in the creation, development and reporting of the Company’s internal budgets, plans,
projections and/or reports; (iii) each of these defendants enjoyed significant personal contact and
familiarity with the other defendants and was advised of, and had access to, other members of the
Company’s management team, internal reports and other data and information about the
Company’s finances, operations, and sales at all relevant times; and (iv) each of these defendants
was aware of the Company’s dissemination of information to the investing public which they
knew and/or recklessly disregarded was materially false and misleading.
48.
The Defendants had actual knowledge of the misrepresentations and/or omissions
of material facts set forth herein, or acted with reckless disregard for the truth in that they failed
to ascertain and to disclose such facts, even though such facts were available to them. Such
defendants’ material misrepresentations and/or omissions were done knowingly or recklessly and
for the purpose and effect of concealing Amaya’s financial well-being and prospects from the
investing public and supporting the artificially inflated price of its securities. As demonstrated
by Defendants’ overstatements and/or misstatements of the Company’s business, operations,
financial well-being, and prospects throughout the Class Period, Defendants, if they did not have
actual knowledge of the misrepresentations and/or omissions alleged, were reckless in failing to
obtain such knowledge by deliberately refraining from taking those steps necessary to discover
whether those statements were false or misleading.
49.
As a result of the dissemination of the materially false and/or misleading
information and/or failure to disclose material facts, as set forth above, the market price of
Amaya’s securities was artificially inflated during the Class Period. In ignorance of the fact that
market prices of the Company’s securities were artificially inflated, and relying directly or
indirectly on the false and misleading statements made by Defendants, or upon the integrity of
the market in which the securities trades, and/or in the absence of material adverse information
that was known to or recklessly disregarded by Defendants, but not disclosed in public
statements by Defendants during the Class Period, Plaintiff and the other members of the Class
acquired Amaya’s securities during the Class Period at artificially high prices and were damaged
thereby.
50.
At the time of said misrepresentations and/or omissions, Plaintiff and other
members of the Class were ignorant of their falsity, and believed them to be true. Had Plaintiff
and the other members of the Class and the marketplace known the truth regarding the problems
that Amaya was experiencing, which were not disclosed by Defendants, Plaintiff and other
members of the Class would not have purchased or otherwise acquired their Amaya securities,
or, if they had acquired such securities during the Class Period, they would not have done so at
the artificially inflated prices which they paid.
51.
By virtue of the foregoing, Defendants have violated Section 10(b) of the
Exchange Act and Rule 10b-5 promulgated thereunder.
52.
As a direct and proximate result of Defendants’ wrongful conduct, Plaintiff and
the other members of the Class suffered damages in connection with their respective purchases
and sales of the Company’s securities during the Class Period.
SECOND CLAIM
Violation of Section 20(a) of
The Exchange Act Against the Individual Defendants
53.
Plaintiff repeats and re-alleges each and every allegation contained above as if
fully set forth herein.
54.
The Individual Defendants acted as controlling persons of Amaya within the
meaning of Section 20(a) of the Exchange Act as alleged herein. By virtue of their high-level
positions, and their ownership and contractual rights, participation in and/or awareness of the
Company’s operations and/or intimate knowledge of the false financial statements filed by the
Company with the SEC and disseminated to the investing public, the Individual Defendants had
the power to influence and control and did influence and control, directly or indirectly, the
decision-making of the Company, including the content and dissemination of the various
statements which Plaintiff contends are false and misleading. The Individual Defendants were
provided with or had unlimited access to copies of the Company’s reports, press releases, public
filings and other statements alleged by Plaintiff to be misleading prior to and/or shortly after
these statements were issued and had the ability to prevent the issuance of the statements or
cause the statements to be corrected.
55.
In particular, each of these Defendants had direct and supervisory involvement in
the day-to-day operations of the Company and, therefore, is presumed to have had the power to
control or influence the particular transactions giving rise to the securities violations as alleged
herein, and exercised the same.
56.
As set forth above, Amaya and the Individual Defendants each violated Section
10(b) and Rule 10b-5 by their acts and/or omissions as alleged in this Complaint. By virtue of
their positions as controlling persons, the Individual Defendants are liable pursuant to Section
20(a) of the Exchange Act. As a direct and proximate result of Defendants’ wrongful conduct,
Plaintiff and other members of the Class suffered damages in connection with their purchases of
the Company’s securities during the Class Period.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff prays for relief and judgment, as follows:
(a)
Determining that this action is a proper class action under Rule 23 of the Federal
Rules of Civil Procedure;
(b)
Awarding compensatory damages in favor of Plaintiff and the other Class
members against all defendants, jointly and severally, for all damages sustained as a result of
Defendants’ wrongdoing, in an amount to be proven at trial, including interest thereon;
(c)
Awarding Plaintiff and the Class their reasonable costs and expenses incurred in
this action, including counsel fees and expert fees; and
(d)
Such other and further relief as the Court may deem just and proper.
JURY TRIAL DEMANDED
Plaintiff hereby demands a trial by jury.
Dated: March 25, 2016
GLANCY PRONGAY & MURRAY LLP
By: s/ Lesley F. Portnoy
Lesley F. Portnoy (LP-1941)
122 East 42nd Street, Suite 2920
New York, New York 10168
Telephone: (212) 682-5340
Facsimile: (212) 884-0988
[email protected]
-and-
Lionel Z. Glancy
Robert V. Prongay
Casey E. Sadler
Charles H. Linehan
1925 Century Park East, Suite 2100
Los Angeles, CA 90067
Telephone: (310) 201-9150
Facsimile: (310) 201-9160
Attorneys for Plaintiff Jason Mattie
3/24/2016
Jason Mattie's Transactions in
Amaya, Inc. (AYA)
Date
Transaction Type
Quantity
Unit Price
6/19/2015
Bought
100
$27.9499
6/23/2015
Bought
70
$29.9699
9/21/2015
Sold
-100
$20.6700
10/2/2015
Bought
96
$21.9000
10/6/2015
Bought
205
$24.3000
| securities |
1bj1C4cBD5gMZwcziuxm | Laurence M. Rosen, Esq. (SBN 219683)
THE ROSEN LAW FIRM, P.A.
355 South Grand Avenue, Suite 2450
Los Angeles, CA 90071
Telephone: (213) 785-2610
Facsimile: (213) 226-4684
Email: [email protected]
Counsel for Plaintiff
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
Case No:
CLASS ACTION COMPLAINT FOR
VIOLATION OF THE FEDERAL
SECURITIES LAWS
JURY TRIAL DEMANDED
ERIC ARDOLINO, INDIVIDUALLY
AND ON BEHALF OF ALL OTHERS
SIMILARLY SITUATED,
Plaintiff,
v.
MANNKIND CORPORATION,
ALFRED MANN, MATTHEW
PFEFFER, AND HAKAN EDSTROM,
Defendants.
Plaintiff Eric Ardolino, individually and on behalf of all other persons similarly
situated, by his undersigned attorneys, alleges in this Complaint the following upon
knowledge with respect to his own acts, and upon facts obtained through an
investigation conducted by his counsel, which included, inter alia: (a) review and
analysis of relevant filings made by MannKind Corporation (“MannKind” or the
“Company”) with the United States Securities and Exchange Commission (the
“SEC”); (b) review and analysis of Defendants’ public documents and press releases;
and (c) information readily obtainable on the Internet.
- 1 -
Plaintiff believes that further substantial evidentiary support will exist for the
allegations set forth herein after a reasonable opportunity for discovery. Most of the
facts supporting the allegations contained herein are known only to Defendants or are
exclusively within their control.
NATURE OF THE ACTION
1.
This is a securities class action on behalf of all persons or entities who
purchased or otherwise acquired MannKind securities between August 10, 2015 and
January 5, 2016, inclusive (the “Class Period”), seeking to recover compensable
damages caused by Defendants’ violations of federal securities law and to pursue
remedies under asserting claims under Sections 10(b) and 20(a) the Securities
Exchange Act of 1934 (the “Exchange Act”), and Rule 10b-5 promulgated
thereunder.
JURISDICTION AND VENUE
2.
The claims asserted herein arise under and pursuant to Sections 11,
12(a)(2), and 15 of the Securities Act (15 U.S.C. §§ 77k, 77l, and 77o), and Sections
10(b) and 20(a) of the Exchange Act (15 U.S.C. §§ 78j(b) and 78t(a)) and Rule 10b-5
promulgated thereunder by the SEC (17 C.F.R. § 240.10b-5).
3.
This Court has jurisdiction over the subject matter of this action pursuant
to 28 U.S.C. § 1331, Section 22 of the Securities Act (15 U.S.C. § 77v), and Section
27 of the Exchange Act (15 U.S.C. §78aa).
4.
Venue is proper in this Judicial District pursuant to Section 27 of the
Exchange Act (15 U.S.C. § 78aa) and 28 U.S.C. § 1391(b) as Defendants maintain an
office in this district and a significant portion of Defendants’ actions and the
subsequent damages took place within this District.
5.
In connection with the acts, conduct and other wrongs alleged herein,
Defendants either directly or indirectly used the means and instrumentalities of
interstate commerce, including but not limited to the United States mails, interstate
telephone communications and the facilities of the national securities exchange.
- 2 -
PARTIES
6.
Plaintiff Eric Ardolino purchased MannKind securities during the Class
Period and has suffered damages as set forth in the accompanying certification.
7.
MannKind is a Delaware corporation headquartered at 25134 Rye
Canyon Loop, Suite 300, Valencia, California 91355. During the Class Period, the
Company’s stock was traded on the NASDAQ Global Select Market (“NASDAQ”)
under the symbol “MNKD.”
8.
Defendant Alfred Mann (“Mann”) served as the Company’s Chief
Executive Officer (“CEO”) from before the beginning of the Class Period until
January 9, 2015 and again from November 19, 2015 to January 11, 2015.
9.
Defendant Matthew Pfeffer (“Pfeffer”) served as the Company’s Chief
Financial Officer (“CFO”) during the Class Period. Defendant Pfeffer assumed the
position of CEO on January 11, 2015.
10.
Defendant Hakan Edstrom (“Edstrom”) served as the Company’s CEO
from January 9, 2015 to November 19, 2015.
11.
Defendants Mann, Pfeffer, and Edstrom are collectively referred to
hereinafter as the “Individual Defendants.”
12.
Each of the Individual Defendants:
(a)
directly participated in the management of the Company;
(b)
was directly involved in the day-to-day operations of the
Company at the highest levels;
(c)
was privy to confidential proprietary information concerning the
Company and its business and operations;
(d)
was
involved
in
drafting,
producing,
reviewing
and/or
disseminating the false and misleading statements and information alleged
herein;
(e)
was aware of or recklessly disregarded the fact that the false and
misleading statements were being issued concerning the Company; and
- 3 -
(f)
approved or ratified these statements in violation of the federal
securities laws.
13.
As officers, directors, and controlling persons of a publicly-held
company whose securities are and were registered with the SEC pursuant to the
Exchange Act, and was traded on NASDAQ and governed by the provisions of the
federal securities laws, the Individual Defendants each had a duty to disseminate
accurate and truthful information promptly with respect to the Company’s business
prospects and operations, and to correct any previously-issued statements that had
become materially misleading or untrue to allow the market price of the Company’s
publicly-traded stock to reflect truthful and accurate information.
14.
MannKind is liable for the acts of the Individual Defendants and its
employees under the doctrine of respondeat superior and common law principles of
agency as all of the wrongful acts complained of herein were carried out within the
scope of their employment with authorization.
15.
The scienter of the Individual Defendants and other employees and
agents of the Company is similarly imputed to MannKind under respondeat superior
and agency principles.
SUBSTANTIVE ALLEGATIONS
Background
16.
MannKind is a biopharmaceutical company. Its main product, Afrezza,
is a rapid-acting insulin indicated to improve glycemic control in adults with type 1
and type 2 diabetes. Afrezza is inhaled at mealtimes to help control insulin levels, but
it is not a substitute for long-acting insulin and must be used along with long-acting
insulin.
17.
Afrezza was approved by the Food and Drug Administration (“FDA”) in
June 2014. With the approval, however, the FDA was concerned for the use of an
inhaled insulin with people who suffer from serious pulmonary disease or conditions
- 4 -
such as chronic pulmonary disease or asthma. Afrezza is not recommended for people
who smoke. Accordingly, the FDA imposed strict guidelines for the prescribing of
Afrezza and ongoing monitoring in patients including testing if a patient has a
existing significant pulmonary disease. Before getting a prescription for Afrezza, a
patient must provide his doctor with a detailed medical history, have a physical
examination, and take a spirometry, a lung test to identify any underlying lung
disease. To get a prescription, once the initial steps are taken, patients must take a 10
day sample of the drug. After that, a prescription can be written and patients must
have ongoing lung functioning tests every six months.
18.
The most common doctors who treat patients with diabetes are
endocrinologists and diabetologists. Although primary care doctors tend to have
access to spirometer instruments, about 30% of endocrinologists and even fewer
diabetologists have access to spirometers. Accordingly, many patients would have to
go to multiple doctors to get this test and follow through with their diabetes
treatment.
19.
On September 24, 2014, MannKind announced that it had entered in a
worldwide collaboration and licensing agreement with sanofi-aventis U.S. LLC
(“Sanofi”), a global healthcare company, for the development and commercialization
of Afrezza (the “Agreement”). Under the Agreement, Sanofi will be responsible for
the global commercialization, regulatory and development activities for Afrezza. In
return, MannKind will receive an upfront payment of $150 million and potential
milestone payments of up to $775 million. The milestone payments depended upon
regulatory and developmental targets as well as sales thresholds. Under the
Agreement, Sanofi will receive 65% of profits and MannKind will receive 35% of
profits.
20.
In February 2015, the sale of Afrezza began.
- 5 -
21.
On May 8, 2015, Defendants held a conference call reporting the
earnings and results from the first quarter of 2015. On that conference call, Defendant
Mann stated in relevant part:
The cost of that meter is only about what today would typically be
reimbursed on most insurance programs.
*
*
*
To minimize any such risk, the label approved by the agency alerts
prescribers with a boxed warning not to use this therapy in patients
with COPD or serious asthma. That is a simple test, but although
primary care physicians generally have spirometer instruments, very
few diabetologists and only about 30% of endocrinologist do.
Arrangements for spirometering and all other requirements in this
leading therapy takes considerable time and those pose obstacles
delaying initiation of therapy.
Sanofi’s equipment supply organization is working on overcoming the
testing obstacle and we at MannKind are investigating a possible
different solution. We have found an improved very inexpensive
nonrecording spirometering instrument that meets the standard of the
American Thoracic Society. We are evaluating a possible plan on
which a doctor would purchase a device and [indiscernible] the
patient.
The cost of that meter is only about what today would typically be
reimbursed on most insurance programs. It requires spirometering
management will be informed by the patient with that instrument
under the new provision of [indiscernible].
Hopefully, this will offer another approach to satisfying the regulatory
requirements.
22.
On the same call, Defendant Edstrom stated in relevant part:
It is very clear, reviewing the reasons for the current sales value that
is larger due to some administrative issues encountered during the
launch of Afrezza, doctor appointment, Spirometer scheduling, the 10
- 6 -
day patient sample use, doctor follow up [indiscernible] and managed
care prior authorization processes have initially slowed down the
penetration of Afrezza.
Endocrinologists, being the initial primary target physician do not
have that spirometers in thus they are forced to locate the
pulmonary testing lab where spirometer could take place. This fact
also significantly delayed the patients 10 day sample trail process,
which is required before they can get their first prescription. And
there has also been some delays in patients even getting an
appointment with an endocrinologists, particularly if they were not a
patient of that doctor earlier. The requirements of prior authorization
in short PA from the managed care companies have significantly
delayed and completed the prescription process. The PA process itself
is administrative demanding and it takes time before one have backed
from the managed care company with an approval, so a prescription
can be written.
(Emphasis added).
Defendants’ Materially False and Misleading Statements During the Class
Period
23.
The Class Period begins on August 10, 2015 when MannKind held a
conference call to discuss the second quarter of 2015 earnings. During the conference
call, Defendant Edstrom stated in relevant part:
Sanofi has made excellent moves to address the spirometry
requirements and our research shows that it’s no longer a
critical gating item.
(Emphasis added).
24.
On November 9, 2015, MannKind held a conference call to discuss the
third quarter of 2015 earnings. On the call Defendant Edstrom stated in relevant part:
Certainly in terms of pulmonary function testing with the support of
the sales reps and all the people from Sanofi, doctors know where to
- 7 -
turn in making that happen. So that there was initially a delay, but
they know how to address that. The prior authorization and the
dealing with the insurance companies is, I would say more
cumbersome, and takes more time, and there is a greater risk that
either the patients or the doctor kind of looses the patient to kind of
wait for it to happen. So from that point of view, we believe that to be
a bigger obstacle than just pulmonary function testing.
(Emphasis added).
25.
The statements referenced in ¶¶23-24 above were materially false and
misleading because they misrepresented and failed to disclose the following adverse
facts pertaining to the Company’s business, operations, and prospects, which were
known to Defendants or recklessly disregarded by them. Specifically, Defendants
made false and/or misleading statements and/or failed to disclose that: (1) contrary to
Defendants’ assurances, the mandated pulmonary testing or spirometry was still a
significant issue impeding sales of Afrezza; and (2) as a result, Defendants’
statements about MannKind’s business, operations, and prospects, were false and
misleading and/or lacked a reasonable basis at all relevant times.
THE TRUTH EMERGES
26.
On January 5, 2016, MannKind issued a press release entitled
“MannKind Corporation Announces Termination of License and Collaboration
Agreement With Sanofi.” The press release stated in relevant part:
VALENCIA, Calif., Jan. 05, 2016 (GLOBE NEWSWIRE) --
MannKind Corporation (Nasdaq:MNKD) (TASE:MNKD) today
announced the termination of its license and collaboration agreement
with
sanofi-aventis
U.S.
LLC
for
the
development
and
commercialization
of
Afrezza® (insulin
human)
Inhalation
Powder. The parties will promptly commence transition discussions
in order to effect a smooth and orderly transition in the development
and commercialization of Afrezza from Sanofi to MannKind over the
next 90 – 180 days. In any event, termination of the license
agreement in its entirety will be effective no later than six months
- 8 -
from the effective date of Sanofi’s notice of termination, or July 4,
2016.
MannKind is reviewing its strategic options for Afrezza as a result of
the termination of the collaboration with Sanofi.
27.
Also on January 5, 2016, Bloomberg reported that Sanofi spokesman,
Jack Cox, said in an emailed statement that Sanofi terminated the agreement with
MannKind due to continued low level of prescriptions “despite our [Sanofi’s]
substantial efforts.”
28.
StreetInsider.com reported that Sanofi spokesman, Jack Cox, further said
in his January 5, 2016 emailed statement that prescription levels of Afrezza never
even met “modest expectations.”
29.
On this news, the Company’s stock fell $0.70 per share or over 48% to
close at $0.75 per share on January 5, 2015, damaging investors.
30.
On January 6, 2015, James Rufus Koren of the LA Times, wrote an
article entitled “A rare stumble for biotech pioneer Alfred Mann.” In the article,
endocrinologist and early backer of Afrezza, Dr. Alan Marcus, stated that Afrezza
was unsuccessful because of the FDA-mandated lung tests. Particularly since
endocrinologists do not typically perform those tests, Dr. Marcus said that doctors
had “no hands-on training with either lung testing equipment or with the Afrezza
inhalers themselves.”
31.
On this news, the Company’s stock fell $0.02 per share or approximately
2.67% to close at $0.73 per share on January 6, 2015, damaging investors.
PLAINTIFF’S CLASS ACTION ALLEGATIONS
32.
Plaintiff brings this action as a class action pursuant to Federal Rule of
Civil Procedure 23(a) and (b)(3) on behalf of a Class, consisting of all those who
purchased or otherwise acquired MannKind securities traded on NASDAQ during the
Class Period (the “Class”); and were damaged upon the revelation of the alleged
- 9 -
corrective disclosure. Excluded from the Class are Defendants herein, the officers and
directors of the Company, at all relevant times, members of their immediate families
and their legal representatives, heirs, successors or assigns and any entity in which
Defendants have or had a controlling interest.
33.
The members of the Class are so numerous that joinder of all members is
impracticable. Throughout the Class Period, MannKind securities were actively
traded on NASDAQ. While the exact number of Class members is unknown to
Plaintiff at this time and can be ascertained only through appropriate discovery,
Plaintiff believes that there are hundreds or thousands of members in the proposed
Class. Record owners and other members of the Class may be identified from records
maintained by MannKind or its transfer agent and may be notified of the pendency of
this action by mail, using the form of notice similar to that customarily used in
securities class actions.
34.
Plaintiff’s claims are typical of the claims of the members of the Class as
all members of the Class are similarly affected by Defendants’ wrongful conduct in
violation of federal law that is complained of herein.
35.
Plaintiff will fairly and adequately protect the interests of the members
of the Class and has retained counsel competent and experienced in class and
securities litigation. Plaintiff has no interests antagonistic to or in conflict with those
of the Class.
36.
Common questions of law and fact exist as to all members of the Class
and predominate over any questions solely affecting individual members of the Class.
Among the questions of law and fact common to the Class are:
• whether the federal securities laws were violated by Defendants’ acts as
alleged herein;
• whether statements made by Defendants to the investing public during the
Class Period misrepresented material facts about the business and
operations of MannKind;
- 10 -
• whether the Individual Defendants caused MannKind to issue false and
misleading statements during the Class Period;
• whether Defendants acted knowingly or recklessly in issuing false and
misleading statements;
• whether the prices of MannKind securities during the Class Period were
artificially inflated because of the Defendants’ conduct complained of
herein; and,
• whether the members of the Class have sustained damages and, if so, what
is the proper measure of damages.
37.
A class action is superior to all other available methods for the fair and
efficient adjudication of this controversy since joinder of all members is
impracticable. Furthermore, as the damages suffered by individual Class members
may be relatively small, the expense and burden of individual litigation make it
impossible for members of the Class to individually redress the wrongs done to them.
There will be no difficulty in the management of this action as a class action.
38.
Plaintiff will rely, in part, upon the presumption of reliance established
by the fraud-on-the-market doctrine in that:
• Defendants made public misrepresentations or failed to disclose material
facts during the Class Period;
• the omissions and misrepresentations were material;
• MannKind securities are traded in efficient markets;
• the Company’s shares were liquid and traded with moderate to heavy
volume during the Class Period;
• the Company traded on NASDAQ, and was covered by multiple analysts;
- 11 -
• the misrepresentations and omissions alleged would tend to induce a
reasonable investor to misjudge the value of the Company’s securities; and
• Plaintiff and members of the Class purchased and/or sold MannKind
securities between the time the Defendants failed to disclose or
misrepresented material facts and the time the true facts were disclosed,
without knowledge of the omitted or misrepresented facts.
39.
Based upon the foregoing, Plaintiff and the members of the Class are
entitled to a presumption of reliance upon the integrity of the market.
40.
Alternatively, Plaintiffs and the members of the Class are entitled to the
presumption of reliance established by the Supreme Court in Affiliated Ute Citizens of
the State of Utah v. United States, 406 U.S. 128, 92 S. Ct. 2430 (1972), as Defendants
omitted material information in their Class Period statements in violation of a duty to
disclose such information, as detailed above.
41.
At all relevant times, the market for MannKind securities was an
efficient market for the following reasons, among others:
42.
As a result of the foregoing, the market for MannKind securities
promptly digested current information regarding MannKind from all publicly
available sources and reflected such information in MannKind’s stock price. Under
these circumstances, all purchasers of MannKind securities during the Class Period
suffered similar injury through their purchase of MannKind securities at artificially
inflated prices, and a presumption of reliance applies.
NO SAFE HARBOR
43.
The “Safe Harbor” warnings accompanying MannKind’s reportedly
forward-looking statements (“FLS”) issued during the Class Period were ineffective
to shield those statements from liability. To the extent that projected revenues and
earnings were included in the Company’s financial reports prepared in accordance
with GAAP, including those filed with the SEC on Form 8-K, they are excluded from
the protection of the statutory Safe Harbor. See 15 U.S.C. §78u-5(b)(2)(A).
- 12 -
44.
Defendants are also liable for any false or misleading FLS pleaded
because, at the time each FLS was made, the speaker knew the FLS was false or
misleading and the FLS was authorized and/or approved by an executive officer of
MannKind who knew that the FLS was false. None of the historic or present tense
statements made by Defendants were assumptions underlying or relating to any plan,
projection or statement of future economic performance, as they were not stated to be
such assumptions underlying or relating to any projection or statement of future
economic performance when made, nor were any of the projections or forecasts made
by Defendants expressly related to or stated to be dependent on those historic or
present tense statements when made.
FIRST CLAIM
Violation of Section 10(b) of The Exchange Act
and Rule 10b-5 Promulgated Thereunder Against All Defendants
45.
Plaintiff repeats and realleges each and every allegation contained above
as if fully set forth herein.
46.
During the Class Period, Defendants carried out a plan, scheme and
course of conduct which was intended to and, throughout the Class Period, did: (1)
deceive the investing public, including Plaintiff and other Class members, as alleged
herein; and (2) cause Plaintiff and other members of the Class to purchase MannKind
securities at artificially inflated prices. In furtherance of this unlawful scheme, plan
and course of conduct, each of the Defendants took the actions set forth herein.
47.
Defendants: (a) employed devices, schemes, and artifices to defraud; (b)
made untrue statements of material fact and/or omitted to state material facts
necessary to make the statements not misleading; and (c) engaged in acts, practices,
and a course of business that operated as a fraud and deceit upon the purchasers of the
Company’s securities in an effort to maintain artificially high market prices for
MannKind securities in violation of Section 10(b) of the Exchange Act and Rule 10b-
- 13 -
5 promulgated thereunder. All Defendants are sued either as primary participants in
the wrongful and illegal conduct charged herein or as controlling persons as alleged
below.
48.
Defendants, individually and in concert, directly and indirectly, by the
use, means or instrumentalities of interstate commerce and/or of the mails, engaged
and participated in a continuous course of conduct to conceal adverse material
information about the business, operations and future prospects of MannKind as
specified herein.
49.
These Defendants employed devices, schemes, and artifices to defraud
while in possession of material adverse non-public information, and engaged in acts,
practices, and a course of conduct as alleged herein in an effort to assure investors of
MannKind value and performance and continued substantial growth, which included
the making of, or participation in the making of, untrue statements of material facts
and omitting to state material facts necessary in order to make the statements made
about MannKind and its business operations and future prospects in the light of the
circumstances under which they were made, not misleading, as set forth more
particularly herein, and engaged in transactions, practices and a course of business
that operated as a fraud and deceit upon the purchasers of MannKind securities
during the Class Period.
50.
Each of the Individual Defendants’ primary liability, and controlling
person liability, arises from the following facts: (1) the Individual Defendants were
high-level executives, directors, and/or agents at the Company during the Class
Period and members of the Company’s management team or had control thereof; (2)
each of these Defendants, by virtue of his responsibilities and activities as a senior
officer and/or director of the Company, was privy to and participated in the creation,
development and reporting of the Company’s business prospects and operations; (3)
each of these Defendants enjoyed significant personal contact and familiarity with the
other Defendants and was advised of and had access to other members of the
- 14 -
Company’s management team, internal reports and other data and information about
the Company’s operations and business projects at all relevant times; and (4) each of
these Defendants was aware of the Company’s dissemination of information to the
investing public which they knew or recklessly disregarded was materially false and
misleading.
51.
Defendants had actual knowledge of the misrepresentations and
omissions of material facts set forth herein, or acted with reckless disregard for the
truth in that they failed to ascertain and to disclose such facts, even though such facts
were available to them. Such Defendants’ material misrepresentations and/or
omissions were done knowingly or recklessly and for the purpose and effect of
concealing MannKind’s the financial risk of the shift in strategy from the investing
public and supporting the artificially inflated price of its securities. As demonstrated
by Defendants’ omissions and misstatements of the Company’s business strategy
throughout the Class Period, Defendants, if they did not have actual knowledge of the
misrepresentations and omissions alleged, were reckless in failing to obtain such
knowledge by deliberately refraining from taking those steps necessary to discover
whether those statements were false or misleading.
52.
As a result of the dissemination of the materially false and misleading
information and failure to disclose material facts, as set forth above, the market price
of MannKind securities was artificially inflated during the Class Period. In ignorance
of the fact that market prices of MannKind securities were artificially inflated, and
relying directly or indirectly on the false and misleading statements made by
Defendants, or upon the integrity of the market in which the securities trade, and/or
on the absence of material adverse information that was known to or recklessly
disregarded by Defendants but not disclosed in public statements by Defendants
during the Class Period, Plaintiff and the other members of the Class acquired
MannKind securities during the Class Period at artificially high prices and were or
will be damaged thereby.
- 15 -
53.
At the time of said misrepresentations and omissions, Plaintiff and other
members of the Class were ignorant of their falsity, and believed them to be true. Had
Plaintiff and the other members of the Class and the marketplace known the truth
regarding the prospects of Afrezza, which was not disclosed by Defendants, Plaintiff
and other members of the Class would not have purchased or otherwise acquired their
MannKind securities, or, if they had acquired such securities during the Class Period,
they would not have done so at the artificially inflated prices that they paid.
54.
By virtue of the foregoing, Defendants have violated Section 10(b) of
the Exchange Act, and Rule 10b-5 promulgated thereunder.
55.
As a direct and proximate result of Defendants’ wrongful conduct,
Plaintiff and the other members of the Class suffered damages in connection with
their respective purchases and sales of the Company’s securities during the Class
Period.
56.
This action was filed within two years of discovery of the fraud and
within five years of each plaintiff’s purchases of securities giving rise to the cause of
action.
SECOND CLAIM
Violation of Section 20(a) of
The Exchange Act Against the Individual Defendants
57.
Plaintiff repeats and realleges each and every allegation contained above
as if fully set forth herein.
58.
The Individual Defendants acted as controlling persons of MannKind
within the meaning of Section 20(a) of the Exchange Act as alleged herein. By virtue
of their high-level positions, agency, ownership and contractual rights, and
participation in and/or awareness of the Company’s operations and/or intimate
knowledge of the false financial statements filed by the Company with the SEC and
disseminated to the investing public, the Individual Defendants had the power to
influence and control, and did influence and control, directly or indirectly, the
- 16 -
decision-making of the Company, including the content and dissemination of the
various statements that Plaintiff contends are false and misleading. The Individual
Defendants were provided with or had unlimited access to copies of the Company’s
reports, press releases, public filings and other statements alleged by Plaintiff to have
been misleading prior to and/or shortly after these statements were issued and had the
ability to prevent the issuance of the statements or to cause the statements to be
corrected.
59.
In particular, each of these Defendants had direct and supervisory
involvement in the day-to-day operations of the Company and, therefore, is presumed
to have had the power to control or influence the particular transactions giving rise to
the securities violations as alleged herein, and exercised the same.
60.
As set forth above, MannKind and the Individual Defendants each
violated Section 10(b), and Rule 10b-5 promulgated thereunder, by their acts and
omissions as alleged in this Complaint.
61.
By virtue of their positions as controlling persons, the Individual
Defendants are liable pursuant to Section 20(a) of the Exchange Act. As a direct and
proximate result of Defendants’ wrongful conduct, Plaintiff and other members of the
Class suffered damages in connection with their purchases of the Company’s
securities during the Class Period.
62.
This action was filed within two years of discovery of the fraud and
within five years of each Plaintiff’s purchases of securities giving rise to the cause of
action.
WHEREFORE, Plaintiff prays for relief and judgment, as follows:
a.
Determining that this action is a proper class action, designating Plaintiff
as Lead Plaintiff and certifying Plaintiff as a class representative under Rule 23 of the
Federal Rules of Civil Procedure and Plaintiff’s counsel as Lead Counsel;
b.
Awarding compensatory damages in favor of Plaintiff and the other
Class members against all Defendants, jointly and severally, for all damages
- 17 -
sustained as a result of Defendants’ wrongdoing, in an amount to be proven at trial,
including interest thereon;
c.
Awarding Plaintiff and the Class their reasonable costs and expenses
incurred in this action, including counsel fees and expert fees; and
d.
Such other and further relief as the Court may deem just and proper.
JURY TRIAL DEMANDED
Plaintiff hereby demands a trial by jury.
Dated: January 15, 2016
Respectfully submitted,
THE ROSEN LAW FIRM, P.A.
/s/ Laurence M. Rosen
Laurence M. Rosen, Esq. (SBN 219683)
355 S. Grand Avenue, Suite 2450
Los Angeles, CA 90071
Telephone: (213) 785-2610
Facsimile: (213) 226-4684
Email: [email protected]
Counsel for Plaintiff
- 18 -
| consumer fraud |
V_fGE4cBD5gMZwczMd6r |
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
Case No.
Shelli Buhr, on behalf of herself and others
similarly situated,
Plaintiff,
v.
ADT Inc. and ADT LLC,
Defendant
CLASS ACTION COMPLAINT
Plaintiff Shelli Buhr (“Plaintiff”), individually and on behalf of others similarly situated,
alleges the following against ADT Inc. and ADT LLC (together, “ADT” or “Defendant”):
SUMMARY OF THE ACTION
1.
Since August 2017, Plaintiff has received at least 175 unwanted calls from ADT.
ADT used an automatic telephone dialing system (“ATDS”) to repeatedly call Plaintiff’s cellular
phone—sometimes three times per day—despite the fact that Plaintiff requested that ADT stop
calling her cellular phone.
2.
Plaintiff brings this class action for damages and other equitable and legal
remedies resulting from the unlawful conduct of Defendant in placing non-emergency calls to
the cellular telephones of Plaintiff and Class members without their prior express consent, in
violation of the Telephone Consumer Protection Act, 47 U.S.C. §§ 227, et seq. (“TCPA”).
PARTIES
3.
Defendant ADT Inc. is a Delaware corporation with its headquarters and principal
place of business in Boca Raton, Florida.
4.
Defendant ADT LLC is a Delaware corporation with its headquarters and
principal place of business in Boca Raton, Florida.
5.
Plaintiff Shelli Buhr is a citizen of California who resides in Victorville,
California.
JURISDICTION AND VENUE
6.
This Court has original jurisdiction under 28 U.S.C. § 1331 based on Plaintiff’s
claims under the TCPA, 47 U.S.C. § 227, et seq.
7.
In addition, this Court has jurisdiction over this lawsuit under the Class Action
Fairness Act, 28 U.S.C. § 1332, because this is a proposed class action in which: (1) there are at
least 100 class members; (2) the combined claims of class members exceed $5,000,000 exclusive
of attorney fees, pre-judgment interest, and costs, because each putative class member is entitled
to $500.00 per call negligently placed in violation of the TCPA, or $1,500.00 per call knowingly
or willfully placed in violation of the TCPA; and (3) Plaintiff and Defendant reside in different
states.
8.
This Court has personal jurisdiction over Defendant because its principal place of
business is within this District and it has sufficient minimum contacts in Florida to render the
exercise of jurisdiction by this Court proper and necessary.
9.
Venue is likewise proper in this District under 28 U.S.C. § 1391(b) because
Defendant’s principal place of business is within this District.
FACTUAL ALLEGATIONS
A. ADT Placed Non-Emergency Calls on Plaintiff’s Cellular Phone Without Her Prior
Express Consent
10.
On August 3, 2017, Plaintiff received a call from ADT on her cellular telephone
regarding a debt she allegedly owed to ADT. Plaintiff answered the call and informed ADT that
she did not want to receive calls from ADT on her cellular phone.
11.
On August 15, Plaintiff received another call from ADT on her cellular phone.
She did not answer the call. Plaintiff also received a text message from ADT on her cellular
phone on August 15. The text message came from [email protected] and requested that
Plaintiff call ADT account services at “8002592478.” Plaintiff replied to the text message by
informing ADT that it had texted her cellular phone and that she did not want to receive
communications from ADT on her cellular phone.
12.
On August 16, Plaintiff received another call from ADT on her cellular phone.
Plaintiff answered and again asked the ADT representative not to call her cellular phone. The
ADT representative replied that ADT would continue to call her despite her request.
13.
Between August 16, 2017 and March 8, 2018, Plaintiff received at least 174 calls
from ADT on her cellular phone. In many cases, Plaintiff received three calls per day from
14.
Plaintiff never consented to receive such calls to her cellular phone, and to the
extent any alleged consent was given due to her contractual relationship with ADT, Plaintiff
revoked any prior consent to receive calls from ADT on her cellular phone by twice telling an
ADT representative that she did not want to receive calls on her cellular phone and by texting the
same to ADT. Subsequent to her request to stop further calls, Plaintiff did not provide consent
for ADT to contact her.
15.
Each call ADT made to Plaintiff’s cellular phone after August 16, 2017 was
knowing and willful.
16.
ADT’s calls to Plaintiff had no emergency purpose. Rather, ADT advised
Plaintiff that its calls were for the purpose of collecting an alleged debt.
B. ADT Used an Automatic Telephone Dialing System
17.
ADT called Plaintiff on her cellular phone using an ATDS. When Plaintiff
answered ADT’s calls on August 15 and 16, there was a time interval before an ADT
representative joined the line, which is characteristic of an automated dialer. ADT also left
voicemails with pre-recorded or artificial voices on Plaintiff’s cellular phone.
18.
ADT is a publicly traded company with a market cap that exceeds $6 billion.1
ADT services 8 million customers,2 which requires a sophisticated phone system capable of
storing phone numbers and dialing them automatically.
19.
Plaintiff’s caller ID identified 1-800-522-2455 as the phone number associated
with all of the calls she received from ADT. When Plaintiff attempted to return ADT’s calls by
dialing 1-800-522-2455 or 1-800-259-2478 (the number provided in ADT’s text message), she
encountered a pre-recorded response that said “Welcome to ADT, always there,” and then
offered a list of generic options for routing the call.
C. ADT’s Violations of the TCPA Harmed Plaintiff
20.
Plaintiff carries her cellular phone with her at most times so she can be available
to family (including her children), friends, and her employer.
21.
ADT’s repeated calls invaded Plaintiff’s privacy and intruded upon her right to
seclusion. The calls frustrated and upset Plaintiff by constantly interrupting her daily life and
1 https://finance.yahoo.com/quote/ADT?p=ADT (last visited May 1, 2018).
2 https://www.adt.com/about-adt (last visited May 1, 2018).
wasted her time by requiring Plaintiff to retrieve and administer messages left by Defendant’s
22.
ADT’s calls intruded upon and occupied the capacity of Plaintiff’s cellular phone
and depleted the battery of Plaintiff’s cellular phone. The clutter of ADT calls also impaired the
usefulness of the call log feature of Plaintiff’s cellular phone.
23.
Plaintiff’s attempts to block or reject ADT’s calls still resulted in ringing and
other alerts to Plaintiff’s cellular phone.
CLASS ACTION ALLEGATIONS
24.
Plaintiff brings this lawsuit under Federal Rules of Civil Procedure Rules 23(a),
(b)(2), and (b)(3) as a representative of the following class:
All persons within the United States who, within the four
years prior to the filing of this action, (i) received any non-
emergency telephone call from Defendant or its agents and/or
employees; (ii) to said person’s cellular telephone; (iii)
through the use of an automatic telephone dialing system
and/or with an artificial or prerecorded voice; (iii) which call
was not made with the recipient’s prior express consent.
25.
Excluded from the Class are Defendant, its employees, agents and assigns, and
any members of the judiciary to whom this case is assigned, their respective court staff, and the
parties’ counsel in this litigation. This suit seeks only damages and injunctive relief for recovery
of economic injury on behalf of the Class; it does not seek recovery for personal injury and
claims related thereto. Members of the above-defined Class can be identified through
Defendant’s records.
26.
Numerosity. The exact size of the class is information within the exclusive
knowledge of Defendant, but Plaintiff believes there are at least thousands of Class members.
This allegation is likely to have evidentiary support after a reasonable opportunity for further
investigation or discovery. This allegation is based on the following information: (1) ADT
services 8 million customers; (2) the purpose of automated dialers is to call numerous persons in
a short amount of time; and (3) many consumers have lodged complaints online about unwanted
calls received from ADT.3
27.
The alleged size and geographic dispersal of the Class makes joinder of all Class
members impracticable.
28.
Commonality and Predominance. Common questions of law and fact exist with
regard to each of the claims and predominate over questions affecting only individual Class
members. Questions common to the Class include:
(a)
Whether Defendant’s dialing system(s) constitute an automatic telephone
dialing system under the TCPA and/or the FCC’s rules;
(b)
Whether, within the four years prior to the filing of this Complaint,
Defendant used an automatic telephone dialing system to place non-emergency calls on the
cellular telephones of Plaintiff and Class members without their prior express consent;
(c)
Whether, within the four years prior the filing of this Complaint,
Defendant used an artificial or prerecorded voice in connection with its placement of non-
emergency calls on the cellular telephones of Plaintiff and Class members without their prior
express consent;
(d)
Whether Defendant’s telephone calls were made knowingly or willfully;
(e)
Whether Plaintiff and Class members were damaged by receiving such
calls, and the extent of those damages; and
3 E.g., https://800notes.com/Phone.aspx/1-800-522-2455/3 (last visited May 1, 2018).
(f)
Whether Defendant should be enjoined from engaging in such conduct in
the future.
29.
Typicality. Plaintiff’s claims are typical of the claims of the Class, in that
Plaintiff, like all Class members, has been injured by Defendant’s uniform misconduct—the
placement of non-emergency calls on cellular telephones using an automatic telephone dialing
system or an artificial or prerecorded voice without prior express consent.
30.
Adequacy of Representation. Plaintiff will fairly and adequately protect the
interests of the Class and is committed to the vigorous prosecution of this action. Plaintiff has
retained counsel experienced in complex consumer class action litigation and matters involving
TCPA violations.
31.
Superiority. A class action is superior to other available methods for the fair and
efficient adjudication of this controversy. Because the amount of each individual Class
member’s claim is small relative to the complexity of the litigation, and because of Defendant’s
financial resources, class members are unlikely to pursue legal redress individually for the
violations detailed in this complaint. Class-wide damages are essential to induce Defendant to
comply with Federal law. Individualized litigation would significantly increase the delay and
expense to all parties and to the Court and would create the potential for inconsistent and
contradictory rulings. By contrast, a class action presents fewer management difficulties, allows
claims to be heard which would otherwise go unheard because of the expense of bringing
individual lawsuits, and provides the benefits of adjudication, economies of scale, and
comprehensive supervision by a single court.
32.
Class certification is also appropriate under Rule 23(b)(2) because Defendant has
acted and refused to act on grounds that apply generally to the Class such that final injunctive
and/or declaratory relief is warranted with respect to the Class as a whole.
FIRST CLAIM FOR RELIEF
Negligent Violation of the Telephone Consumer Protection Act
47 U.S.C. §§ 227, et seq
33.
Plaintiff reincorporates and restates paragraphs 1-32 herein, and further alleges as
follows:
34.
Without prior express consent, Defendant placed non-emergency calls on the
cellular telephones of Plaintiff and Class members using an automatic telephone-dialing system.
35.
The foregoing acts and omissions constitute negligent violations of the TCPA,
including, but not limited to, violations of 47 U.S.C. § 227(b)(1)(A)(iii) and 47 C.F.R. §
64.1200(a)(1)(iii).
36.
Under 47 U.S.C. § 227(b)(3)(B), and as a result of the alleged negligent violations
of the TCPA, Plaintiff and Class members are entitled to an award of $500.00 in statutory
damages for each and every call placed in violation of the TCPA.
37.
Plaintiff and Class members are also entitled to and seek injunctive relief
prohibiting future violations of the TCPA.
SECOND CLAIM FOR RELIEF
Knowing or Willful Violation of the Telephone Consumer Protection Act
47 U.S.C. §§ 227, et seq
38.
Plaintiff reincorporates and restates paragraphs 1-32 herein, and further alleges as
follows:
39.
Without prior express consent, Defendant knowingly or willfully placed non-
emergency calls on the cellular telephones of Plaintiff and Class members using an automatic
telephone-dialing system.
40.
The foregoing acts and omissions constitute knowing and/or willful violations of
the TCPA, including, but not limited to, violations of 47 U.S.C. § 227(b)(1)(A)(iii) and 47 C.F.R.
§ 64.1200(a)(1)(iii).
41.
Pursuant to 47 U.S.C. § 227(b)(3)(C), and as a result of the alleged knowing
and/or willful violations of the TCPA, Plaintiff and Class Members are entitled to an award of
$1,500.00 in statutory damages for each and every non-emergency call placed in violation of the
42.
Plaintiff and Class Members are also entitled to and seek injunctive relief
prohibiting future violations of the TCPA.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff, individually and on behalf of the Class defined above,
respectfully requests that this Court:
(a)
Determine that the claims alleged herein may be maintained as a class
action under Federal Rule of Civil Procedure 23, and issue an order certifying the class defined
above and appointing Plaintiff as the Class representative;
(b)
Award $500 in statutory damages for each and every call that Defendant
negligently placed in violation of 47 U.S.C. § 227(b)(1) of the TCPA;
(c)
Award $1,500 in statutory damages for each and every call that Defendant
willfully or knowingly placed in violation of 47 U.S.C. § 227(b)(1) of the TCPA;
(d)
Grant appropriate injunctive and declaratory relief, including, without
limitation, an order requiring Defendant to implement measures to stop future violations of the
TCPA; and
(e)
Grant such further relief as the Court deems proper.
DEMAND FOR JURY TRIAL
Plaintiff hereby demands a jury trial on all issues so triable.
Dated: May 9, 2018
Respectfully submitted,
By: s/Adam Moskowitz
Adam M. Moskowitz, Esq.
[email protected]
Howard M. Bushman, Esq.
[email protected]
Joseph M. Kaye, Esq.
[email protected]
THE MOSKOWITZ LAW FIRM, PLLC
2 Alhambra Plaza
Suite 601
Coral Gables, FL 33134
Telephone: 305 740-1423
Counsel for Plaintiff and the Proposed Class
By: s/ Simon S. Grille
Daniel C. Girard (pro hac vice forthcoming)
Simon S. Grille (pro hac vice forthcoming)
GIRARD GIBBS LLP
601 California Street, 14th Floor
San Francisco, California 94108
Tel: (415) 981-4800
[email protected]
[email protected]
Counsel for Plaintiff and the Proposed Class
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vgV5FYcBD5gMZwczVodM | UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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DONALD NIXON, on behalf of himself and
all others similarly situated,
No.: ___________________
Plaintiffs,
CLASS ACTION COMPLAINT
v.
JURY TRIAL DEMANDED
BERKSHIRE HATHAWAY INC.,
Defendant.
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INTRODUCTION
1.
Plaintiff DONALD NIXON (hereinafter “Plaintiff”), on behalf of himself and
others similarly situated, asserts the following claims against Defendant
BERKSHIRE HATHAWAY INC., for its failure to design, construct, maintain,
and operate its website to be fully accessible to and independently usable by
Plaintiff and other blind or visually-impaired people.
2.
Plaintiff is a visually-impaired and legally blind person who suffers from what
constitutes a “qualified disability” under the Americans with Disabilities Act of
1990 (“ADA”) and thus requires screen-reading software to read website content
using his computer. Plaintiff uses the terms “blind” or “visually-impaired” to refer
to all people with visual impairments who meet the legal definition of blindness in
that they have a visual acuity with correction of less than or equal to 20 x 200. Some
blind people who meet this definition have limited vision while others are
completely impaired and have no vision.
3.
Defendant’s denial of full and equal access to its website, and therefore denial of
its goods and services offered thereby, is a violation of Plaintiff’s rights under the
ADA.
4.
Because Defendant’s website, www.starfurniture.com (the “Website” or
“Defendant’s website”), is not equally accessible to blind and visually-impaired
consumers, it violates the ADA. Defendant’s website contains various and multiple
access barriers that make it difficult if not impossible for blind and visually-
impaired consumers to attempt to complete a transaction.
5.
Plaintiff seeks a permanent injunction to initiate a change in Defendant’s corporate
policies, practices, and procedures so that Defendant’s website will become and
remain accessible to blind and visually-impaired consumers.
JURISDICTION AND VENUE
6.
This Court has subject-matter jurisdiction over this action under 28 U.S.C. § 1331
and 42 U.S.C. § 12181, as Plaintiff’s claims arise under Title III of the ADA, 42
U.S.C. § 12181, et seq., and 28 U.S.C. § 1332.
7.
This Court has supplemental jurisdiction under 28 U.S.C. § 1367 over Plaintiff’s
New York City Human Rights Law, N.Y.C. Admin. Code § 8-101 et seq.,
(“NYCHRL”) claims.
8.
Venue is proper in this district under 28 U.S.C. §1391(a)(2) because a substantial
part of the acts and/or omissions giving rise to Plaintiff’s claims occurred in this
District. Defendant have also been and is continuing to commit the alleged acts
and/or omissions in this District that caused injury and violated Plaintiff’s rights
and the rights of other disabled individuals.
9.
Defendant is subject to personal jurisdiction in this District. Defendant has been
and is committing the acts or omissions alleged herein in the Southern District of
New York that caused injury and violated rights the ADA prescribes to Plaintiff
and to other blind and other visually impaired-consumers. A substantial part of the
acts and omissions giving rise to Plaintiff’s claims occurred in this District: on
several separate occasions, Plaintiff has been denied the full use and enjoyment of
the facilities, goods and services offered to the general public, on Defendant’s
Website in Queens County. These access barriers that Plaintiff encountered have
caused a denial of Plaintiff’s full and equal access multiple times in the past, and
now deter Plaintiff on a regular basis from accessing the Defendant’s Website in
the future.
10.
This Court is empowered to issue a declaratory judgment under 28 U.S.C. §§ 2201
and 2202.
PARTIES
11.
Plaintiff DONALD NIXON, at all relevant times, is and was a resident of Queens,
New York.
12.
Plaintiff is a blind, visually-impaired handicapped person and a member of a
protected class of individuals under the ADA, under 42 U.S.C. § 12102(1)-(2), and
the regulations implementing the ADA set forth at 28 CFR §§ 36.101 et seq., and
the NYCHRL.
13.
Defendant is and was at all relevant times a Delaware Corporation doing business
in New York.
14.
Defendant owns, manages, controls and maintains the Website, and its facilities,
goods, and services offered thereupon, is a public accommodation within the
definition of Title III of the ADA, 42 U.S.C. § 12181(7).
15.
A Website is a place of accommodation defined as “places of exhibition and
entertainment,” places of recreation,” and “service establishments.” 28 CFR §§
36.201 (a); 42 U.S.C. § 12181 (7).
NATURE OF ACTION
16.
The Internet has become a significant source of information, a portal, and a tool for
conducting business, doing everyday activities such as shopping, learning, banking,
researching, as well as many other activities for sighted, blind and visually-
impaired persons alike.
17.
Blind and visually impaired users of Windows operating system computers and
devices have several screen-reading software programs available to them. Some of
these programs are available for purchase and other programs are available without
the user having to purchase the program separately. Job Access With Speech
(“JAWS”), and NonVisual Desktop Access (“NVDA”) are among the most
popular.
18.
In today’s world, blind and visually-impaired people have the ability to access
websites using keyboards in conjunction with screen access software that vocalizes
the visual information found on a computer screen or displays the content on a
refreshable Braille display. This technology is known as screen-reading software.
Screen-reading software is currently the only method a blind or visually-impaired
person may independently access the internet. Unless websites are designed to be
read by screen-reading software, blind and visually-impaired persons are unable to
fully access websites, and the information, products, goods and contained thereon.
19.
For screen-reading software to function, the information on a website must be
capable of being rendered into text. If the website content is not capable of being
rendered into text, the blind or visually-impaired user is unable to access the same
content available to sighted users.
20.
The international website standards organization, the World Wide Web
Consortium, known throughout the world as W3C, has published version 2.1 of the
Web Content Accessibility Guidelines (“WCAG 2.1”). WCAG 2.1 are well-
established guidelines for making websites accessible to blind and visually-
impaired people. These guidelines are universally followed by most large business
entities and government agencies to ensure their websites are accessible.
21.
Non-compliant websites pose common access barriers to blind and visually-
impaired persons. Common barriers encountered by blind and visually impaired
persons include, but are not limited to, the following:
a.
Alternative text (“alt-text”) or text equivalent for every non-text
element. Alt-text is an invisible code embedded beneath a graphical image on a website.
Web accessibility requires that alt-text be coded with each picture so that screen-reading
software can speak the alt-text where a sighted user sees pictures, which includes captcha
prompts. Alt-text does not change the visual presentation, but instead a text box shows
when the mouse moves over the picture;
b.
Videos that do not maintain audio descriptions;
c.
Title frames with text are not provided for identification and
navigation;
d.
Equivalent text is not provided when using scripts;
e.
Forms with the same information and functionality as for sighted
persons are not provided;
f.
Information about the meaning and structure of content is not
conveyed by more than the visual presentation of content;
g.
Text cannot be resized without assistive technology up to 200%
without losing content or functionality;
h.
If the content enforces a time limit, the user is not able to extend,
adjust or disable it;
i.
Web pages do not have titles that describe the topic or purpose;
j.
The purpose of each link cannot be determined from the link text
alone or from the link text and its programmatically determined link
context;
k.
One or more keyboard operable user interface lacks a mode of
operation where the keyboard focus indicator is discernible;
l.
The default human language of each web page cannot be
programmatically determined;
m.
When a component receives focus, it may initiate a change in
context;
n.
Changing the setting of a user interface component may
automatically cause a change of context where the user has not been advised
before using the component;
o.
Labels or instructions are not provided when content requires user
input, which include captcha prompts that require the user to verify that he
or she is not a robot;
p.
In content which is implemented by using markup languages,
elements do not have complete start and end tags, elements are not nested
according to their specifications, elements may contain duplicate attributes,
and/or any IDs are not unique;
q.
Inaccessible Portable Document Format (PDFs); and,
r.
The name and role of all User Interface elements cannot be
programmatically determined; items that can be set by the user cannot be
programmatically set; and/or notification of changes to these items is not
available to user agents, including assistive technology.
STATEMENT OF FACTS
22.
Defendant is a home furniture retailer. Defendant is an online retailer of sofas,
chairs, ottomans, tables, and various other furniture. Defendant owns, operates,
manages and controls the website, www.starfurniture.com (its “Website”), which
is a home furniture retailer. The Website offers features which should allow all
consumers to access the goods and services and which Defendant ensures the
delivery of such goods throughout the United States, including New York State.
23.
Defendant’s Website is integrated with its retail business operations, serving as its
gateway. The Website offers products and services for online sale and general
delivery to the public. The Website offers features which ought to allow users to
learn about Defendant’s products and services, browse for items, information,
access navigation bar descriptions, prices, savings and/or coupons and sale discount
items, and avail consumers of the ability to peruse the numerous items offered for
sale. The features offered by www.starfurniture.com include learning about the
products and/or items, about the company, read reviews, and make purchases.
24.
It is, upon information and belief, Defendant’s policy and practice to deny Plaintiff
and other blind or visually-impaired users access to its Website, thereby denying
the facilities and services that are offered and integrated with its retail operations.
Due to its failure and refusal to remove access barriers to its Website, Plaintiff and
visually-impaired persons have been and are still being denied equal access to
Defendant’s retail operations and the numerous facilities, goods, services, and
benefits offered to the public through its Website.
25.
Defendant’s Website is a commercial marketplace without any physical location.
Thus, Defendant’s Website is the main point of sale for its business operation.
26.
Plaintiff is a visually-impaired and legally blind person, who cannot use a computer
without the assistance of screen-reading software. Plaintiff has visited the Website
on separate occasions using a screen-reader.
27.
During Plaintiff’s visits to the Website, www.starfurniture.com, the last occurring
in March of 2020, Plaintiff encountered multiple access barriers which effectively
denied him the full enjoyment of the goods and services of the Website. Plaintiff
visited Defendant’s Website with an intent to browse and attempt to purchase a
three-piece power reclining sectional sofa. Despite his efforts, however, Plaintiff
was denied a shopping experience similar to that of a sighted individual due to the
website’s lack of a range of features and accommodations, which effectively barred
Plaintiff from being able to make his desired purchase.
28.
Many features on the Website lacks alt. text, which is the invisible code embedded
beneath a graphical image. As a result, Plaintiff was unable to differentiate what
products were on the screen due to the failure of the Website to adequately describe
its content.
29.
Many features on the Website also fail to add a label element or title attribute for
each field. This is a problem for the visually impaired because the screen reader
fails to communicate the purpose of the page element. It also leads to the user not
being able to understand what he or she is expected to insert into the subject field.
This was an issue on Defendant’s Website particularly in the select style section.
As a result, Plaintiff and similarly situated visually impaired users of Defendant’s
Website are unable to enjoy the privileges and benefits of the Website equally to
sighted users.
30.
Plaintiff
has
made
multiple
attempts
to
complete
a
purchase
on
www.starfurniture.com, most recently in March of 2020, but was unable to do so
independently because of the many access barriers on Defendant’s website. These
access barriers have caused www.starfurniture.com to be inaccessible to, and not
independently usable by, blind and visually-impaired persons.
31.
The Website also contained a host of broken links, which is a hyperlink to a non-
existent or empty webpage. For the visually impaired this is especially paralyzing
due to the inability to navigate or otherwise determine where one is on the website
once a broken link is encountered. For example, upon coming across a link of
interest, Plaintiff was redirected to an error page. However, the screen-reader failed
to communicate that the link was broken. As a result, Plaintiff could not get back
to his original search.
32.
These access barriers effectively denied Plaintiff the ability to use and enjoy
Defendant’s website the same way sighted individuals do. The access barriers
Plaintiff encountered have caused a denial of Plaintiff’s full and equal access in the
past, and now deter Plaintiff on a regular basis from accessing the Website.
33.
Due to the inaccessibility of Defendant’s Website, blind and visually-impaired
customers such as Plaintiff, who need screen-readers, cannot fully and equally use
or enjoy the facilities, products, and services Defendant offers to the public on its
Website. The access barriers Plaintiff encountered have caused a denial of
Plaintiff’s full and equal access in the past, and now deter Plaintiff on a regular
basis from visiting the Website, presently and in the future.
34.
If the Website was equally accessible to all, Plaintiff could independently navigate
the Website and complete a desired transaction as sighted individuals do.
35.
Through his attempts to use the Website, Plaintiff has actual knowledge of the
access barriers that make these services inaccessible and independently unusable
by blind and visually-impaired people.
36.
Because simple compliance with the WCAG 2.1 Guidelines would provide Plaintiff
and other visually-impaired consumers with equal access to the Website, Plaintiff
alleges that Defendant has engaged in acts of intentional discrimination, including
but not limited to the following policies or practices:
a.
Constructing and maintaining a website that is inaccessible to
visually-impaired individuals, including Plaintiff;
b.
Failure to construct and maintain a website that is sufficiently intuitive
so as to be equally accessible to visually-impaired individuals, including
Plaintiff; and,
c.
Failing to take actions to correct these access barriers in the face of
substantial harm and discrimination to blind and visually-impaired
consumers, such as Plaintiff, as a member of a protected class.
37.
Defendant therefore uses standards, criteria or methods of administration that have the
effect of discriminating or perpetuating the discrimination of others, as alleged herein.
38.
The ADA expressly contemplates the injunctive relief that Plaintiff seeks in this
action. In relevant part, the ADA requires:
In the case of violations of . . . this title, injunctive relief shall include an order to
alter facilities to make such facilities readily accessible to and usable by individuals
with disabilities . . . Where appropriate, injunctive relief shall also include requiring
the . . . modification of a policy . . .
42 U.S.C. § 12188(a)(2).
39.
Because Defendant’s Website has never been equally accessible, and because
Defendant lacks a corporate policy that is reasonably calculated to cause its Website
to become and remain accessible, Plaintiff invokes 42 U.S.C. § 12188(a)(2) and
seeks a permanent injunction requiring Defendant to retain a qualified consultant
acceptable to Plaintiff (“Agreed Upon Consultant”) to assist Defendant to comply
with WCAG 2.1 guidelines for Defendant’s Website. Plaintiff seeks that this
permanent injunction requires Defendant to cooperate with the Agreed Upon
Consultant to:
a.
Train Defendant’s employees and agents who develop the Website
on accessibility compliance under the WCAG 2.1 guidelines;
b.
Regularly check the accessibility of the Website under the WCAG
2.1 guidelines;
c.
Regularly test user accessibility by blind or vision-impaired persons
to ensure that Defendant’s Website complies under the WCAG 2.1
guidelines; and,
d.
Develop an accessibility policy that is clearly disclosed on Defendant’s
Websites, with contact information for users to report accessibility-related
problems.
40.
Although Defendant may currently have centralized policies regarding maintaining
and operating its Website, Defendant lacks a plan and policy reasonably calculated
to make them fully and equally accessible to, and independently usable by, blind
and other visually-impaired consumers.
41.
Without injunctive relief, Plaintiff and other visually-impaired consumers will
continue to be unable to independently use the Website, violating their rights.
42.
Defendant has, upon information and belief, invested substantial sums in
developing and maintaining its Website and has generated significant revenue from
the Website. These amounts are far greater than the associated cost of making its
Website equally accessible to visually impaired customers.
CLASS ACTION ALLEGATIONS
43.
Plaintiff, on behalf of himself and all others similarly situated, seeks to certify a
nationwide class under Fed. R. Civ. P. 23(a) and 23(b)(2): all legally blind
individuals in the United States who have attempted to access Defendant’s Website
and as a result have been denied access to the equal enjoyment of goods and services,
during the relevant statutory period.
44.
Plaintiff, on behalf of himself and all others similarly situated, seeks certify a New
York City subclass under Fed. R. Civ. P. 23(a) and 23(b)(2): all legally blind
individuals in the City of New York who have attempted to access Defendant’s
Website and as a result have been denied access to the equal enjoyment of goods and
services offered, during the relevant statutory period.
45.
Common questions of law and fact exist amongst Class, including:
a.
Whether Defendant’s Website is a “public accommodation” under
the ADA;
b.
Whether Defendant’s Website is a “place or provider of public
accommodation” under the NYCHRL;
c.
Whether Defendant’s Website denies the full and equal enjoyment
of
its
products,
services,
facilities,
privileges,
advantages,
or
accommodations to people with visual disabilities, violating the ADA; and
d.
Whether Defendant’s Website denies the full and equal enjoyment
of
its
products,
services,
facilities,
privileges,
advantages,
or
accommodations to people with visual disabilities, violating the NYCHRL.
46.
Plaintiff’s claims are typical of the Class. The Class, similarly, to the Plaintiff, are
severely visually impaired or otherwise blind, and claim that Defendant has
violated the ADA or NYCHRL by failing to update or remove access barriers on
its Website so either can be independently accessible to the Class.
47.
Plaintiff will fairly and adequately represent and protect the interests of the Class
Members because Plaintiff has retained and is represented by counsel competent
and experienced in complex class action litigation, and because Plaintiff has no
interests antagonistic to the Class Members. Class certification of the claims is
appropriate under Fed. R. Civ. P. 23(b)(2) because Defendant has acted or refused
to act on grounds generally applicable to the Class, making appropriate both
declaratory and injunctive relief with respect to Plaintiff and the Class as a whole.
48.
Alternatively, class certification is appropriate under Fed. R. Civ. P. 23(b)(3) because
fact and legal questions common to Class Members predominate over questions
affecting only individual Class Members, and because a class action is superior to
other available methods for the fair and efficient adjudication of this litigation.
49.
Judicial economy will be served by maintaining this lawsuit as a class action in that
it is likely to avoid the burden that would be otherwise placed upon the judicial
system by the filing of numerous similar suits by people with visual disabilities
throughout the United States.
FIRST CAUSE OF ACTION
VIOLATIONS OF THE ADA, 42 U.S.C. § 12181 et seq.
50.
Plaintiff, on behalf of himself and the Class Members, repeats and realleges every
allegation of the preceding paragraphs as if fully set forth herein.
51.
Section 302(a) of Title III of the ADA, 42 U.S.C. § 12101 et seq., provides:
No individual shall be discriminated against on the basis of disability in the full and
equal enjoyment of the goods, services, facilities, privileges, advantages, or
accommodations of any place of public accommodation by any person who owns,
leases (or leases to), or operates a place of public accommodation.
42 U.S.C. § 12182(a).
52.
Defendant’s Website is a public accommodation within the definition of Title III of
the ADA, 42 U.S.C. § 12181(7). The Website is a service that is offered to the
general public, and as such, must be equally accessible to all potential consumers.
53.
Under Section 302(b)(1) of Title III of the ADA, it is unlawful discrimination to
deny individuals with disabilities the opportunity to participate in or benefit from
the products, services, facilities, privileges, advantages, or accommodations of an
entity. 42 U.S.C. § 12182(b)(1)(A)(i).
54.
Under Section 302(b)(1) of Title III of the ADA, it is unlawful discrimination to
deny individuals with disabilities an opportunity to participate in or benefit from
the products, services, facilities, privileges, advantages, or accommodation, which
is equal to the opportunities afforded to other individuals. 42 U.S.C. §
12182(b)(1)(A)(ii).
55.
Under Section 302(b)(2) of Title III of the ADA, unlawful discrimination also
includes, among other things:
[A] failure to make reasonable modifications in policies, practices, or procedures,
when such modifications are necessary to afford such goods, services, facilities,
privileges, advantages, or accommodations to individuals with disabilities, unless
the entity can demonstrate that making such modifications would fundamentally
alter the nature of such goods, services, facilities, privileges, advantages or
accommodations; and a failure to take such steps as may be necessary to ensure that
no individual with a disability is excluded, denied services, segregated or otherwise
treated differently than other individuals because of the absence of auxiliary aids
and services, unless the entity can demonstrate that taking such steps would
fundamentally alter the nature of the good, service, facility, privilege, advantage,
or accommodation being offered or would result in an undue burden.
42 U.S.C. § 12182(b)(2)(A)(ii)-(iii).
56.
The acts alleged herein constitute violations of Title III of the ADA, and the
regulations promulgated thereunder. Plaintiff, who is a member of a protected class
of persons under the ADA, has a physical disability that substantially limits the
major life activity of sight within the meaning of 42 U.S.C. §§ 12102(1)(A)-(2)(A).
Furthermore, Plaintiff has been denied full and equal access to the Website, has not
been provided services that are provided to other patrons who are not disabled, and
has been provided services that are inferior to the services provided to non-disabled
persons. Defendant has failed to take any prompt and equitable steps to remedy its
discriminatory conduct. These violations are ongoing.
57.
Under 42 U.S.C. § 12188 and the remedies, procedures, and rights set forth and
incorporated therein, Plaintiff, requests relief as set forth below.
SECOND CAUSE OF ACTION
VIOLATIONS OF THE NYCHRL
58.
Plaintiff, on behalf of himself and the New York City Sub-Class Members, repeats
and realleges every allegation of the preceding paragraphs as if fully set forth herein.
59.
N.Y.C. Administrative Code § 8-107(4)(a) provides that “It shall be an unlawful
discriminatory practice for any person, being the owner, lessee, proprietor,
manager, superintendent, agent or employee of any place or provider of public
accommodation, because of . . . disability . . . directly or indirectly, to refuse,
withhold from or deny to such person, any of the accommodations, advantages,
facilities or privileges thereof.”
60.
Defendant’s Website is a sales establishment and public accommodations within
the definition of N.Y.C. Admin. Code § 8-102(9).
61.
Defendant is subject to NYCHRL because it owns and operates its Website, making
it a person within the meaning of N.Y.C. Admin. Code § 8-102(1).
62.
Defendant is violating N.Y.C. Administrative Code § 8-107(4)(a) in refusing to
update or remove access barriers to Website, causing its Website and the services
integrated with such Website to be completely inaccessible to the blind. This
inaccessibility denies blind patrons full and equal access to the facilities, products,
and services that Defendant makes available to the non-disabled public.
63.
Defendant is required to “make reasonable accommodation to the needs of persons
with disabilities . . . any person prohibited by the provisions of [§ 8-107 et seq.]
from discriminating on the basis of disability shall make reasonable
accommodation to enable a person with a disability to . . . enjoy the right or rights
in question provided that the disability is known or should have been known by the
covered entity.” N.Y.C. Admin. Code § 8-107(15)(a).
64.
Defendant’s actions constitute willful intentional discrimination against the Sub-
Class on the basis of a disability in violation of the N.Y.C. Administrative Code §
8-107(4)(a) and § 8-107(15)(a) in that Defendant has:
a.
constructed and maintained a website that is inaccessible to blind
class members with knowledge of the discrimination; and/or
b.
constructed and maintained a website that is sufficiently intuitive
and/or obvious that is inaccessible to blind class members; and/or
c.
failed to take actions to correct these access barriers in the face of
substantial harm and discrimination to blind class members.
65.
Defendant has failed to take any prompt and equitable steps to remedy their
discriminatory conduct. These violations are ongoing.
66.
As such, Defendant discriminates, and will continue in the future to discriminate
against Plaintiff and members of the proposed class and subclass on the basis of
disability in the full and equal enjoyment of the products, services, facilities,
privileges, advantages, accommodations and/or opportunities of its Website under
§ 8-107(4)(a) and/or its implementing regulations. Unless the Court enjoins
Defendant from continuing to engage in these unlawful practices, Plaintiff and
members of the class will continue to suffer irreparable harm.
67.
Defendant’s actions were and are in violation of the NYCHRL and therefore
Plaintiff invokes his right to injunctive relief to remedy the discrimination.
68.
Plaintiff is also entitled to compensatory damages, as well as civil penalties and
fines under N.Y.C. Administrative Code § 8-120(8) and § 8-126(a) for each offense
as well as punitive damages pursuant to § 8-502.
69.
Plaintiff is also entitled to reasonable attorneys’ fees and costs.
70.
Under N.Y.C. Administrative Code § 8-120 and § 8-126 and the remedies,
procedures, and rights set forth and incorporated therein Plaintiff prays for
judgment as set forth below.
THIRD CAUSE OF ACTION
DECLARATORY RELIEF
71.
Plaintiff, on behalf of himself and the Class and New York City Sub-Classes
Members, repeats and realleges every allegation of the preceding paragraphs as if
fully set forth herein.
72.
An actual controversy has arisen and now exists between the parties in that Plaintiff
contends, and is informed and believes that Defendant denies, that its Website
contains access barriers denying blind customers the full and equal access to the
products, services and facilities of its Website, which Defendant owns, operations
and controls, fails to comply with applicable laws including, but not limited to, Title
III of the Americans with Disabilities Act, 42 U.S.C. §§ 12182, et seq., N.Y. Exec.
Law § 296, et seq., and N.Y.C. Admin. Code § 8-107, et seq. prohibiting
discrimination against the blind.
73.
A judicial declaration is necessary and appropriate at this time in order that each of
the parties may know their respective rights and duties and act accordingly.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff respectfully requests this Court grant the following relief:
a.
A preliminary and permanent injunction to prohibit Defendant from
violating the Americans with Disabilities Act, 42 U.S.C. §§ 12182, et seq.,
N.Y.C. Administrative Code § 8-107, et seq., and the laws of New York;
b.
A preliminary and permanent injunction requiring Defendant to take
all the steps necessary to make its Website into full compliance with the
requirements set forth in the ADA, and its implementing regulations, so that
the Website is readily accessible to and usable by blind individuals;
c.
A declaration that Defendant owns, maintains and/or operates its
Website in a manner that discriminates against the blind and which fails to
provide access for persons with disabilities as required by Americans with
Disabilities Act, 42 U.S.C. §§ 12182, et seq., N.Y.C. Administrative Code
§ 8-107, et seq., and the laws of New York
d.
An order certifying the Class and Sub-Classes under Fed. R. Civ. P.
23(a) & (b)(2) and/or (b)(3), appointing Plaintiff as Class Representative,
and his attorneys as Class Counsel;
e.
Compensatory damages in an amount to be determined by proof,
including all applicable statutory and punitive damages and fines, to
Plaintiff and the proposed class and subclasses for violations of their civil
rights under New York City Human Rights Law;
f.
Pre- and post-judgment interest;
g.
An award of costs and expenses of this action together with
reasonable attorneys’ and expert fees; and
h.
Such other and further relief as this Court deems just and proper.
DEMAND FOR TRIAL BY JURY
Pursuant to Fed. R. Civ. P. 38(b), Plaintiff demands a trial by jury on all questions
of fact the Complaint raises.
Dated: Forest Hills, New York
March 13, 2020
SHALOM LAW, PLLC.
By: /s/Jonathan Shalom
Jonathan Shalom, Esq.
105-13 Metropolitan Avenue
Forest Hills, New York 11375
Tel: (718) 971-9474
Email: [email protected]
ATTORNEYS FOR PLAINTIFF
| civil rights, immigration, family |
DvDqEocBD5gMZwczrPjn | IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION
)
)
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Plaintiff,
)
)
No.
)
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JURY TRIAL DEMANDED
)
)
Defendant.
)
COMPLAINT & DEMAND FOR JURY TRIAL
COMES NOW Plaintiff, J'Hon Mainor ("Plaintiff"), on behalf of himself
PARTIES
1.
The Plaintiff, J'Hon Mainor ("Plaintiff"), is a resident of Fulton
2.
Plaintiff brings this action, on behalf of himself and all others
3.
Plaintiff worked for Defendant as a yard hostler in, among others,
4.
Defendant, Lazer Spot, Inc. is a Georgia corporation with its principal
5.
This action is brought under the FLSA to recover from Defendant
6.
Based upon information and belief, at all material times relevant to
7.
Defendant is engaged in interstate commerce and was SO engaged
8.
At all relevant times, Defendant had two or more employees of its
9.
Plaintiff was individually covered by the FLSA as he utilized the
JURISDICTION AND VENUE
10.
This Court has jurisdiction over Plaintiff's claims pursuant to 28
11.
Venue is proper in this judicial district pursuant to 28 U.S.C. §
FACTS
12. Plaintiff was employed by Defendant as a yard hostler from March
13.
From on or about July 2008 through January 2010, Plaintiff worked
14.
From on or about January 2010 through July 2010, Plaintiff worked
15.
As a yard hostler, Plaintiff drove a hostler tractor which he connected
16.
Plaintiff drove the hostler tractor for Defendant on or about
17.
Defendant paid Plaintiff an hourly rate for work performed for
18.
Plaintiff worked over forty (40) hours during one or more of the
19.
Defendant paid Plaintiff straight time, rather than time and a half, for
20.
Defendant failed to comply with 29 USC §§ 201-209 because
21. Plaintiff was not exempt from overtime under the Motor Carrier Act
22.
Upon information and belief, the records - to the extent such records
COUNT ONE:
RECOVERY OF OVERTIME COMPENSATION
23.
Plaintiff reasserts and incorporates by reference all allegations
24.
Plaintiff worked over forty (40) hours during one or more of the
25.
Defendant paid Plaintiff straight time, rather than time and a half, for
26.
Plaintiff was entitled to be paid overtime compensation at one and
27.
Defendant failed to compensate Plaintiff at one and one-half times his
28. Upon information and belief, Defendant's failure to properlyDAMAGES AND REQUESTED RELIEF
29.
As a result of Defendant's intentional, willful, and reckless failure to
30. As a result of Defendant's intentional, willful, and reckless
31. Plaintiff respectfully demands a trial by jury.
WHEREFORE, Plaintiff, and all other similarly situated employees,
Respectfully submitted,
MORGAN & MORGAN, PA
By:
s/Jennifer M. Bermel
Jennifer M. Bermel, # 794231
2600 One Commerce Square
Memphis, Tennessee 38103
Tel: (901) 217-7000
Fax: (901) 333-1871
Email: [email protected]
DATED: March 25, 2011 | employment & labor |
AQ6OFocBD5gMZwczx0G_ | UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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LUC BURBON, on behalf of herself and
all others similarly situated,
Plaintiffs,
v.
CLASS ACTION COMPLAINT
AND
DEMAND FOR JURY TRIAL
BLAZE PIZZA, LLC,
Defendant.
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INTRODUCTION
1.
Plaintiff LUC BURBON, on behalf of herself and others similarly situated, asserts
the following claims against Defendant BLAZE PIZZA, LLC (hereinafter,
“BLAZE PIZZA”) as follows.
2.
Plaintiff is a visually-impaired and legally blind person who requires screen-
reading software to read website content using her computer. Plaintiff uses the
terms “blind” or “visually-impaired” to refer to all people with visual impairments
who meet the legal definition of blindness in that they have a visual acuity with
correction of less than or equal to 20 x 200. Some blind people who meet this
definition have limited vision. Others have no vision.
3.
Based on a 2010 U.S. Census Bureau report, approximately 8.1 million people in
the United States are visually impaired, including 2.0 million who are blind, and
according to the American Foundation for the Blind’s 2015 report, approximately
400,000 visually impaired persons live in the State of New York.
4.
Plaintiff brings this civil rights action against BLAZE PIZZA (“Defendant”) for its
failure to design, construct, maintain, and operate its website to be fully accessible
to and independently usable by Plaintiff and other blind or visually-impaired
people. Defendant’s denial of full and equal access to its website, and therefore
denial of its goods and services offered thereby and in conjunction with its physical
locations, is a violation of Plaintiff’s rights under the Americans with Disabilities
Act (“ADA”).
5.
Because
Defendant’s
website,
www.blazepizza.com
(the
“Website”
or
“Defendant’s website”), is not equally accessible to blind and visually-impaired
consumers, it violates the ADA. Plaintiff seeks a permanent injunction to cause a
change in Defendant’s corporate policies, practices, and procedures so that
Defendant’s website will become and remain accessible to blind and visually-
impaired consumers.
JURISDICTION AND VENUE
6.
This Court has subject-matter jurisdiction over this action under 28 U.S.C. § 1331
and 42 U.S.C. § 12181, as Plaintiff’s claims arise under Title III of the ADA, 42
U.S.C. § 1281, et seq., and 28 U.S.C. § 1332.
7.
This Court has supplemental jurisdiction under 28 U.S.C. § 1367 over Plaintiff’s
New York State Human Rights Law, N.Y. Exec. Law Article 15, (“NYSHRL”) and
New York City Human Rights Law, N.Y.C. Admin. Code § 8-101 et seq.,
(“NYCHRL”) claims.
8.
Venue is proper in this district under 28 U.S.C. §1391(b)(1) and (2) because
Defendant conducts and continues to conduct a substantial and significant amount
of business in this District, and a substantial portion of the conduct complained of
herein occurred in this District.
9.
Defendant is subject to personal jurisdiction in this District. Defendant has been
and is committing the acts or omissions alleged herein in the Southern District of
New York that caused injury, and violated rights the ADA prescribes to Plaintiff
and to other blind and other visually impaired-consumers. A substantial part of the
acts and omissions giving rise to Plaintiff’s claims occurred in the in this District:
on several separate occasions, Plaintiff has been denied the full use and enjoyment
of the facilities, goods and services of Defendant’s physical locations and/or
Website in New York County. These access barriers that Plaintiff encountered have
caused a denial of Plaintiff’s full and equal access multiple times in the past, and
now deter Plaintiff on a regular basis from visiting Defendant’s brick-and mortar
physical locations.
10.
This Court is empowered to issue a declaratory judgment under 28 U.S.C. §§ 2201
and 2202.
THE PARTIES
11.
Plaintiff LUC BURBON, at all relevant times, is a resident of New York, New
York. Plaintiff is a blind, visually-impaired handicapped person and a member of
member of a protected class of individuals under the ADA, under 42 U.S.C. §
12102(1)-(2), and the regulations implementing the ADA set forth at 28 CFR §§
36.101 et seq., the NYSHRL and NYCHRL.
12.
Defendant BLAZE PIZZA is and was at all relevant times a California Limited
Liability Company doing business in New York.
13.
Defendant’s restaurants are public accommodations within the definition of Title
III of the ADA, 42 U.S.C. § 12181(7). Defendant’s Website is a service, privilege,
or advantage of Defendant’s restaurants.
NATURE OF ACTION
14.
The Internet has become a significant source of information, a portal, and a tool for
conducting business, doing everyday activities such as shopping, learning, banking,
researching, as well as many other activities for sighted, blind and visually-
impaired persons alike.
15.
In today’s tech-savvy world, blind and visually-impaired people have the ability to
access websites using keyboards in conjunction with screen access software that
vocalizes the visual information found on a computer screen or displays the content
on a refreshable Braille display. This technology is known as screen-reading
software. Screen-reading software is currently the only method a blind or visually-
impaired person may independently access the internet. Unless websites are
designed to be read by screen-reading software, blind and visually-impaired
persons are unable to fully access websites, and the information, products, goods
and contained thereon.
16.
Blind and visually-impaired users of Windows operating system-enabled
computers and devices have several screen reading software programs available to
them. Some of these programs are available for purchase and other programs are
available without the user having to purchase the program separately. Job Access
With Speech, otherwise known as “JAWS” is currently the most popular, separately
purchased and downloaded screen-reading software program available for a
Windows computer.
17.
For screen-reading software to function, the information on a website must be
capable of being rendered into text. If the website content is not capable of being
rendered into text, the blind or visually-impaired user is unable to access the same
content available to sighted users.
18.
The international website standards organization, the World Wide Web
Consortium, known throughout the world as W3C, has published version 2.0 of the
Web Content Accessibility Guidelines (“WCAG 2.0”). WCAG 2.0 are well-
established guidelines for making websites accessible to blind and visually-
impaired people. These guidelines are universally followed by most large business
entities and government agencies to ensure their websites are accessible.
19.
Non-compliant websites pose common access barriers to blind and visually-
impaired persons. Common barriers encountered by blind and visually impaired
persons include, but are not limited to, the following:
a.
A text equivalent for every non-text element is not provided;
b.
Title frames with text are not provided for identification and
navigation;
c.
Equivalent text is not provided when using scripts;
d.
Forms with the same information and functionality as for sighted
persons are not provided;
e.
Information about the meaning and structure of content is not
conveyed by more than the visual presentation of content;
f.
Text cannot be resized without assistive technology up to 200%
without losing content or functionality;
g.
If the content enforces a time limit, the user is not able to extend,
adjust or disable it;
h.
Web pages do not have titles that describe the topic or purpose;
i.
The purpose of each link cannot be determined from the link text
alone or from the link text and its programmatically determined link
context;
j.
One or more keyboard operable user interface lacks a mode of
operation where the keyboard focus indicator is discernible;
k.
The default human language of each web page cannot be
programmatically determined;
l.
When a component receives focus, it may initiate a change in
context;
m.
Changing the setting of a user interface component may
automatically cause a change of context where the user has not been advised
before using the component;
n.
Labels or instructions are not provided when content requires user
input, which include captcha prompts that require the user to verify that he
or she is not a robot;
o.
In content which is implemented by using markup languages,
elements do not have complete start and end tags, elements are not nested
according to their specifications, elements may contain duplicate attributes,
and/or any IDs are not unique;
p.
Inaccessible Portable Document Format (PDFs); and,
q.
The name and role of all User Interface elements cannot be
programmatically determined; items that can be set by the user cannot be
programmatically set; and/or notification of changes to these items is not
available to user agents, including assistive technology.
STATEMENT OF FACTS
Defendant’s Barriers on Its Website
20.
Defendant is a restaurant chain that operates BLAZE PIZZA restaurants as well as
the BLAZE PIZZA website, offering features which should allow all consumers to
access the goods and services which Defendant offers in connection with their
physical locations.
21.
Defendant operates BLAZE PIZZA restaurants across the United States, including
its restaurant in New York City located at 2590 Hylan Blvd, Staten Island, NY
10306.
22.
These restaurants constitute places of public accommodation. Defendant’s
restaurants provide to the public important goods and services. Defendant’s
Website provides consumers with access to an array of goods and services
including restaurant locations and hours, the ability to browse the menu, order food
online, purchase company apparel and gifts, and related goods and services
available both online and in restaurants.
23.
Defendant offers the commercial website, www.blazepizza.com, to the public. The
website offers features which should allow all consumers to access the goods and
services which Defendant offers in connection with their physical locations. The
goods and services offered by Defendant include, but are not limited to the
following: restaurant locations and hours, the ability to browse the menu, order food
online, purchase company apparel and gifts, and related goods and services
available both online and in restaurants.
24.
It is, upon information and belief, Defendant’s policy and practice to deny Plaintiff,
along with other blind or visually-impaired users, access to Defendant’s website,
and to therefore specifically deny the goods and services that are offered and
integrated with Defendant’s restaurants. Due to Defendant’s failure and refusal to
remove access barriers to its website, Plaintiff and visually-impaired persons have
been and are still being denied equal access to Defendant’s restaurants and the
numerous goods and services and benefits offered to the public through the
Website.
25.
Plaintiff is a visually-impaired and legally blind person, who cannot use a computer
without the assistance of screen-reading software. Plaintiff is, however, a proficient
JAWS screen-reader user and uses it to access the Internet. Plaintiff has visited the
Website on separate occasions using the JAWS screen-reader.
26.
During Plaintiff’s visits to the Website, the last occurring in June 2018, Plaintiff
encountered multiple access barriers that denied Plaintiff full and equal access to
the facilities, goods and services offered to the public and made available to the
public; and that denied Plaintiff the full enjoyment of the facilities, goods and
services of the Website, as well as to the facilities, goods and services of
Defendant’s physical locations in New York by being unable to learn more
information about restaurant locations and hours, the ability to browse the menu,
order food online, purchase company apparel and gifts, and related goods and
services available both online and in restaurants.
27.
While attempting to navigate the Website, Plaintiff encountered multiple
accessibility barriers for blind or visually-impaired people that include, but are not
limited to, the following:
a.
Lack of Alternative Text (“alt-text”), or a text equivalent. Alt-text is
an invisible code embedded beneath a graphical image on a website. Web
accessibility requires that alt-text be coded with each picture so that screen-
reading software can speak the alt-text where a sighted user sees pictures,
which includes captcha prompts. Alt-text does not change the visual
presentation, but instead a text box shows when the mouse moves over the
picture. The lack of alt-text on these graphics prevents screen readers from
accurately vocalizing a description of the graphics. As a result, visually-
impaired BLAZE PIZZA customers are unable to determine what is on the
website, browse, look for restaurant locations and hours, the ability to
browse the menu, order food online, purchase company apparel and gifts,
and related goods and services available both online and in restaurants.
b.
Empty Links That Contain No Text causing the function or purpose
of the link to not be presented to the user. This can introduce confusion for
keyboard and screen-reader users;
c.
Redundant Links where adjacent links go to the same URL address
which results in additional navigation and repetition for keyboard and
screen-reader users; and
d.
Linked Images Missing Alt-text, which causes problems if an image
within a link contains no text and that image does not provide alt-text. A
screen reader then has no content to present the user as to the function of
the link, including information contained in PDFs.
Defendant Must Remove Barriers To Its Website
28.
Due to the inaccessibility of Defendant’s Website, blind and visually-impaired
customers such as Plaintiff, who need screen-readers, cannot fully and equally use
or enjoy the facilities, products, and services Defendant offers to the public on its
Website. The access barriers Plaintiff encountered have caused a denial of
Plaintiff’s full and equal access in the past, and now deter Plaintiff on a regular
basis from visiting the Website.
29.
These access barriers on Defendant’s Website have deterred Plaintiff from visiting
Defendant’s physical locations and enjoying them equal to sighted individuals
because: Plaintiff was unable to find the location and hours of operation of
Defendant’s restaurants on its Website and other important information, preventing
Plaintiff from visiting the locations to take advantage of the goods and services that
it provides to the public.
30.
If the Website was equally accessible to all, Plaintiff could independently navigate
the Website and complete a desired transaction as sighted individuals do.
31.
Through her attempts to use the Website, Plaintiff has actual knowledge of the
access barriers that make these services inaccessible and independently unusable
by blind and visually-impaired people.
32.
Because simple compliance with the WCAG 2.0 Guidelines would provide Plaintiff
and other visually-impaired consumers with equal access to the Website, Plaintiff
alleges that Defendant has engaged in acts of intentional discrimination, including
but not limited to the following policies or practices:
a.
Constructing and maintaining a website that is inaccessible to
visually-impaired individuals, including Plaintiff;
b.
Failure to construct and maintain a website that is sufficiently intuitive
so as to be equally accessible to visually-impaired individuals, including
Plaintiff; and,
c.
Failing to take actions to correct these access barriers in the face of
substantial harm and discrimination to blind and visually-impaired
consumers, such as Plaintiff, as a member of a protected class.
33.
Defendant therefore uses standards, criteria or methods of administration that have the
effect of discriminating or perpetuating the discrimination of others, as alleged herein.
34.
The ADA expressly contemplates the injunctive relief that Plaintiff seeks in this
action. In relevant part, the ADA requires:
In the case of violations of . . . this title, injunctive relief shall include an order to
alter facilities to make such facilities readily accessible to and usable by individuals
with disabilities . . . Where appropriate, injunctive relief shall also include requiring
the . . . modification of a policy . . .
42 U.S.C. § 12188(a)(2).
35.
Because Defendant’s Website have never been equally accessible, and because
Defendant lacks a corporate policy that is reasonably calculated to cause its Website
to become and remain accessible, Plaintiff invokes 42 U.S.C. § 12188(a)(2) and
seeks a permanent injunction requiring Defendant to retain a qualified consultant
acceptable to Plaintiff (“Agreed Upon Consultant”) to assist Defendant to comply
with WCAG 2.0 guidelines for Defendant’s Website. Plaintiff seeks that this
permanent injunction requires Defendant to cooperate with the Agreed Upon
Consultant to:
a.
Train Defendant’s employees and agents who develop the Website
on accessibility compliance under the WCAG 2.0 guidelines;
b.
Regularly check the accessibility of the Website under the WCAG
2.0 guidelines;
c.
Regularly test user accessibility by blind or vision-impaired persons
to ensure that Defendant’s Website complies under the WCAG 2.0
guidelines; and,
d.
Develop an accessibility policy that is clearly disclosed on Defendant’s
Websites, with contact information for users to report accessibility-related
problems.
36.
If the Website was accessible, Plaintiff and similarly situated blind and visually-
impaired people could independently view service items, locate Defendant’s
physical locations and hours of operation, shop for and otherwise research related
goods and services available via the Website.
37.
Although Defendant may currently have centralized policies regarding maintaining
and operating its Website, Defendant lacks a plan and policy reasonably calculated
to make them fully and equally accessible to, and independently usable by, blind
and other visually-impaired consumers.
38.
Defendant has, upon information and belief, invested substantial sums in
developing and maintaining their Website and has generated significant revenue
from the Website. These amounts are far greater than the associated cost of making
their Website equally accessible to visually impaired customers.
39.
Without injunctive relief, Plaintiff and other visually-impaired consumers will
continue to be unable to independently use the Website, violating their rights.
CLASS ACTION ALLEGATIONS
40.
Plaintiff, on behalf of herself and all others similarly situated, seeks to certify a
nationwide class under Fed. R. Civ. P. 23(a) and 23(b)(2): all legally blind
individuals in the United States who have attempted to access Defendant’s Website
and as a result have been denied access to the equal enjoyment of goods and services
offered in Defendant’s physical locations, during the relevant statutory period.
41.
Plaintiff, on behalf of herself and all others similarly situated, seeks certify a New
York State subclass under Fed. R. Civ. P. 23(a) and 23(b)(2): all legally blind
individuals in the State of New York who have attempted to access Defendant’s
Website and as a result have been denied access to the equal enjoyment of goods and
services offered in Defendant’s physical locations, during the relevant statutory period.
42.
Plaintiff, on behalf of herself and all others similarly situated, seeks certify a New
York City subclass under Fed. R. Civ. P. 23(a) and 23(b)(2): all legally blind
individuals in the City of New York who have attempted to access Defendant’s
Website and as a result have been denied access to the equal enjoyment of goods and
services offered in Defendant’s physical locations, during the relevant statutory period.
43.
Common questions of law and fact exist amongst Class, including:
a.
Whether Defendant’s Website is a “public accommodation” under
the ADA;
b.
Whether Defendant’s Website is a “place or provider of public
accommodation” under the NYSHRL or NYCHRL;
c.
Whether Defendant’s Website denies the full and equal enjoyment
of
its
products,
services,
facilities,
privileges,
advantages,
or
accommodations to people with visual disabilities, violating the ADA; and
d.
Whether Defendant’s Website denies the full and equal enjoyment
of
its
products,
services,
facilities,
privileges,
advantages,
or
accommodations to people with visual disabilities, violating the NYSHRL
or NYCHRL.
44.
Plaintiff’s claims are typical of the Class. The Class, similarly to the Plaintiff, are
severely visually impaired or otherwise blind, and claim that Defendant has
violated the ADA, NYSYRHL or NYCHRL by failing to update or remove access
barriers on its Website so either can be independently accessible to the Class.
45.
Plaintiff will fairly and adequately represent and protect the interests of the Class
Members because Plaintiff has retained and is represented by counsel competent
and experienced in complex class action litigation, and because Plaintiff has no
interests antagonistic to the Class Members. Class certification of the claims is
appropriate under Fed. R. Civ. P. 23(b)(2) because Defendant has acted or refused
to act on grounds generally applicable to the Class, making appropriate both
declaratory and injunctive relief with respect to Plaintiff and the Class as a whole.
46.
Alternatively, class certification is appropriate under Fed. R. Civ. P. 23(b)(3) because
fact and legal questions common to Class Members predominate over questions
affecting only individual Class Members, and because a class action is superior to
other available methods for the fair and efficient adjudication of this litigation.
47.
Judicial economy will be served by maintaining this lawsuit as a class action in that
it is likely to avoid the burden that would be otherwise placed upon the judicial
system by the filing of numerous similar suits by people with visual disabilities
throughout the United States.
FIRST CAUSE OF ACTION
VIOLATIONS OF THE ADA, 42 U.S.C. § 1281 et seq.
48.
Plaintiff, on behalf of herself and the Class Members, repeats and realleges every
allegation of the preceding paragraphs as if fully set forth herein.
49.
Section 302(a) of Title III of the ADA, 42 U.S.C. § 12101 et seq., provides:
No individual shall be discriminated against on the basis of disability in the full and
equal enjoyment of the goods, services, facilities, privileges, advantages, or
accommodations of any place of public accommodation by any person who owns,
leases (or leases to), or operates a place of public accommodation.
42 U.S.C. § 12182(a).
50.
Defendant’s restaurants are public accommodations within the definition of Title
III of the ADA, 42 U.S.C. § 12181(7). Defendant’s Website is a service, privilege,
or advantage of Defendant’s restaurants. The Website is a service that is integrated
with these locations.
51.
Under Section 302(b)(1) of Title III of the ADA, it is unlawful discrimination to
deny individuals with disabilities the opportunity to participate in or benefit from
the products, services, facilities, privileges, advantages, or accommodations of an
entity. 42 U.S.C. § 12182(b)(1)(A)(i).
52.
Under Section 302(b)(1) of Title III of the ADA, it is unlawful discrimination to
deny individuals with disabilities an opportunity to participate in or benefit from
the products, services, facilities, privileges, advantages, or accommodation, which
is equal to the opportunities afforded to other individuals. 42 U.S.C. §
12182(b)(1)(A)(ii).
53.
Under Section 302(b)(2) of Title III of the ADA, unlawful discrimination also
includes, among other things:
[A] failure to make reasonable modifications in policies, practices, or procedures,
when such modifications are necessary to afford such goods, services, facilities,
privileges, advantages, or accommodations to individuals with disabilities, unless
the entity can demonstrate that making such modifications would fundamentally
alter the nature of such goods, services, facilities, privileges, advantages or
accommodations; and a failure to take such steps as may be necessary to ensure that
no individual with a disability is excluded, denied services, segregated or otherwise
treated differently than other individuals because of the absence of auxiliary aids
and services, unless the entity can demonstrate that taking such steps would
fundamentally alter the nature of the good, service, facility, privilege, advantage,
or accommodation being offered or would result in an undue burden.
42 U.S.C. § 12182(b)(2)(A)(ii)-(iii).
54.
The acts alleged herein constitute violations of Title III of the ADA, and the
regulations promulgated thereunder. Plaintiff, who is a member of a protected class
of persons under the ADA, has a physical disability that substantially limits the
major life activity of sight within the meaning of 42 U.S.C. §§ 12102(1)(A)-(2)(A).
Furthermore, Plaintiff has been denied full and equal access to the Website, has not
been provided services that are provided to other patrons who are not disabled, and
has been provided services that are inferior to the services provided to non-disabled
persons. Defendant has failed to take any prompt and equitable steps to remedy its
discriminatory conduct. These violations are ongoing.
55.
Under 42 U.S.C. § 12188 and the remedies, procedures, and rights set forth and
incorporated therein, Plaintiff, requests relief as set forth below.
SECOND CAUSE OF ACTION
VIOLATIONS OF THE NYSHRL
56.
Plaintiff, on behalf of herself and the New York State Sub-Class Members, repeats
and realleges every allegation of the preceding paragraphs as if fully set forth herein.
57.
N.Y. Exec. Law § 296(2)(a) provides that it is “an unlawful discriminatory practice
for any person, being the owner, lessee, proprietor, manager, superintendent, agent
or employee of any place of public accommodation . . . because of the . . . disability
of any person, directly or indirectly, to refuse, withhold from or deny to such person
any of the accommodations, advantages, facilities or privileges thereof.”
58.
Defendant’s physical locations are located in State of New York and throughout
the United States and constitute sales establishments and public accommodations
within the definition of N.Y. Exec. Law § 292(9). Defendant’s Website is a service,
privilege or advantage of Defendant. Defendant’s Website is a service that is by
and integrated with these physical locations.
59.
Defendant is subject to New York Human Rights Law because it owns and operates
its physical locations and Website. Defendant is a person within the meaning of
N.Y. Exec. Law § 292(1).
60.
Defendant is violating N.Y. Exec. Law § 296(2)(a) in refusing to update or remove
access barriers to its Website, causing its Website and the services integrated with
Defendant’s physical locations to be completely inaccessible to the blind. This
inaccessibility denies blind patrons full and equal access to the facilities, services
that Defendant makes available to the non-disabled public.
61.
Under N.Y. Exec. Law § 296(2)(c)(i), unlawful discriminatory practice includes,
among other things, “a refusal to make reasonable modifications in policies,
practices, or procedures, when such modifications are necessary to afford facilities,
privileges, advantages or accommodations to individuals with disabilities, unless
such person can demonstrate that making such modifications would fundamentally
alter the nature of such facilities, privileges, advantages or accommodations being
offered or would result in an undue burden".
62.
Under N.Y. Exec. Law § 296(2)(c)(ii), unlawful discriminatory practice also
includes, “a refusal to take such steps as may be necessary to ensure that no
individual with a disability is excluded or denied services because of the absence
of auxiliary aids and services, unless such person can demonstrate that taking such
steps would fundamentally alter the nature of the facility, privilege, advantage or
accommodation being offered or would result in an undue burden.”
63.
Readily available, well-established guidelines exist on the Internet for making
websites accessible to the blind and visually impaired. These guidelines have been
followed by other large business entities and government agencies in making their
website accessible, including but not limited to: adding alt-text to graphics and
ensuring that all functions can be performed using a keyboard. Incorporating the
basic components to make its Website accessible would neither fundamentally alter
the nature of Defendant’s business nor result in an undue burden to Defendant.
64.
Defendant’s actions constitute willful intentional discrimination against the class
on the basis of a disability in violation of the NYSHRL, N.Y. Exec. Law § 296(2)
in that Defendant has:
a.
constructed and maintained a website that is inaccessible to blind
class members with knowledge of the discrimination; and/or
b.
constructed and maintained a website that is sufficiently intuitive
and/or obvious that is inaccessible to blind class members; and/or
c.
failed to take actions to correct these access barriers in the face of
substantial harm and discrimination to blind class members.
65.
Defendant has failed to take any prompt and equitable steps to remedy their
discriminatory conduct. These violations are ongoing.
66.
Defendant discriminates, and will continue in the future to discriminate against
Plaintiff and New York State Sub-Class Members on the basis of disability in the
full and equal enjoyment of the products, services, facilities, privileges, advantages,
accommodations and/or opportunities of Defendant’s Website and its physical
locations under § 296(2) et seq. and/or its implementing regulations. Unless the
Court enjoins Defendant from continuing to engage in these unlawful practices,
Plaintiff and the Sub-Class Members will continue to suffer irreparable harm.
67.
Defendant’s actions were and are in violation of New York State Human Rights
Law and therefore Plaintiff invokes her right to injunctive relief to remedy the
discrimination.
68.
Plaintiff is also entitled to compensatory damages, as well as civil penalties and
fines under N.Y. Exec. Law § 297(4)(c) et seq. for each and every offense.
69.
Plaintiff is also entitled to reasonable attorneys’ fees and costs.
70.
Under N.Y. Exec. Law § 297 and the remedies, procedures, and rights set forth and
incorporated therein Plaintiff prays for judgment as set forth below.
THIRD CAUSE OF ACTION
VIOLATION OF THE NEW YORK STATE CIVIL RIGHTS LAW
71.
Plaintiff, on behalf of herself and the New York State Sub-Class Members, repeats
and realleges every allegation of the preceding paragraphs as if fully set forth herein.
72.
Plaintiff served notice thereof upon the attorney general as required by N.Y. Civil
Rights Law § 41.
73.
N.Y. Civil Rights Law § 40 provides that “all persons within the jurisdiction of this
state shall be entitled to the full and equal accommodations, advantages, facilities
and privileges of any places of public accommodations, resort or amusement,
subject only to the conditions and limitations established by law and applicable
alike to all persons. No persons, being the owner, lessee, proprietor, manager,
superintendent, agent, or employee of any such place shall directly or indirectly
refuse, withhold from, or deny to any person any of the accommodations,
advantages, facilities and privileges thereof . . .”
74.
N.Y. Civil Rights Law § 40-c(2) provides that “no person because of . . . disability,
as such term is defined in section two hundred ninety-two of executive law, be
subjected to any discrimination in his or her civil rights, or to any harassment, as
defined in section 240.25 of the penal law, in the exercise thereof, by any other person
or by any firm, corporation or institution, or by the state or any agency or subdivision.”
75.
Defendant’s New York State physical locations are sales establishments and public
accommodations within the definition of N.Y. Civil Rights Law § 40-c(2).
Defendant’s Website is a service, privilege or advantage of Defendant and its
Website is a service that is by and integrated with these establishments.
76.
Defendant is subject to New York Civil Rights Law because it owns and operates
its physical locations and Website. Defendant is a person within the meaning of
N.Y. Civil Law § 40-c(2).
77.
Defendant is violating N.Y. Civil Rights Law § 40-c(2) in refusing to update or
remove access barriers to its Website, causing its Website and the goods and
services integrated with Defendant’s physical locations to be completely
inaccessible to the blind. This inaccessibility denies blind patrons full and equal
access to the facilities, goods and services that Defendant makes available to the
non-disabled public.
78.
N.Y. Civil Rights Law § 41 states that “any corporation which shall violate any of the
provisions of sections forty, forty-a, forty-b or forty-two . . . shall for each and every
violation thereof be liable to a penalty of not less than one hundred dollars nor more
than five hundred dollars, to be recovered by the person aggrieved thereby . . .”
79.
Under NY Civil Rights Law § 40-d, “any person who shall violate any of the
provisions of the foregoing section, or subdivision three of section 240.30 or section
240.31 of the penal law, or who shall aid or incite the violation of any of said
provisions shall for each and every violation thereof be liable to a penalty of not
less than one hundred dollars nor more than five hundred dollars, to be recovered
by the person aggrieved thereby in any court of competent jurisdiction in the county
in which the defendant shall reside ...”
80.
Defendant has failed to take any prompt and equitable steps to remedy its
discriminatory conduct. These violations are ongoing.
81.
Defendant discriminates, and will continue in the future to discriminate against
Plaintiff and New York State Sub-Class Members on the basis of disability are
being directly or indirectly refused, withheld from, or denied the accommodations,
advantages, facilities and privileges thereof in § 40 et seq. and/or its implementing
regulations.
82.
Plaintiff is entitled to compensatory damages of five hundred dollars per instance,
as well as civil penalties and fines under N.Y. Civil Law § 40 et seq. for each and
every offense.
FOURTH CAUSE OF ACTION
VIOLATIONS OF THE NYCHRL
83.
Plaintiff, on behalf of herself and the New York City Sub-Class Members, repeats
and realleges every allegation of the preceding paragraphs as if fully set forth herein.
84.
N.Y.C. Administrative Code § 8-107(4)(a) provides that “It shall be an unlawful
discriminatory practice for any person, being the owner, lessee, proprietor,
manager, superintendent, agent or employee of any place or provider of public
accommodation, because of . . . disability . . . directly or indirectly, to refuse,
withhold from or deny to such person, any of the accommodations, advantages,
facilities or privileges thereof.”
85.
Defendant’s locations are sales establishments and public accommodations within
the definition of N.Y.C. Admin. Code § 8-102(9), and its Website is a service that
is integrated with its establishments.
86.
Defendant is subject to NYCHRL because it owns and operates its physical
locations in the City of New York and its Website, making it a person within the
meaning of N.Y.C. Admin. Code § 8-102(1).
87.
Defendant is violating N.Y.C. Administrative Code § 8-107(4)(a) in refusing to
update or remove access barriers to Website, causing its Website and the services
integrated with its physical locations to be completely inaccessible to the blind.
This inaccessibility denies blind patrons full and equal access to the facilities,
products, and services that Defendant makes available to the non-disabled public.
88.
Defendant is required to “make reasonable accommodation to the needs of persons
with disabilities . . . any person prohibited by the provisions of [§ 8-107 et seq.]
from discriminating on the basis of disability shall make reasonable
accommodation to enable a person with a disability to . . . enjoy the right or rights
in question provided that the disability is known or should have been known by the
covered entity.” N.Y.C. Admin. Code § 8-107(15)(a).
89.
Defendant’s actions constitute willful intentional discrimination against the Sub-
Class on the basis of a disability in violation of the N.Y.C. Administrative Code §
8-107(4)(a) and § 8-107(15)(a) in that Defendant has:
a.
constructed and maintained a website that is inaccessible to blind
class members with knowledge of the discrimination; and/or
b.
constructed and maintained a website that is sufficiently intuitive
and/or obvious that is inaccessible to blind class members; and/or
c.
failed to take actions to correct these access barriers in the face of
substantial harm and discrimination to blind class members.
90.
Defendant has failed to take any prompt and equitable steps to remedy their
discriminatory conduct. These violations are ongoing.
91.
As such, Defendant discriminates, and will continue in the future to discriminate
against Plaintiff and members of the proposed class and subclass on the basis of
disability in the full and equal enjoyment of the products, services, facilities,
privileges, advantages, accommodations and/or opportunities of its Website and its
establishments under § 8-107(4)(a) and/or its implementing regulations. Unless the
Court enjoins Defendant from continuing to engage in these unlawful practices,
Plaintiff and members of the class will continue to suffer irreparable harm.
92.
Defendant’s actions were and are in violation of the NYCHRL and therefore
Plaintiff invokes her right to injunctive relief to remedy the discrimination.
93.
Plaintiff is also entitled to compensatory damages, as well as civil penalties and
fines under N.Y.C. Administrative Code § 8-120(8) and § 8-126(a) for each offense
as well as punitive damages pursuant to § 8-502.
94.
Plaintiff is also entitled to reasonable attorneys’ fees and costs.
95.
Under N.Y.C. Administrative Code § 8-120 and § 8-126 and the remedies,
procedures, and rights set forth and incorporated therein Plaintiff prays for
judgment as set forth below.
FIFTH CAUSE OF ACTION
DECLARATORY RELIEF
96.
Plaintiff, on behalf of herself and the Class and New York State and City Sub-
Classes Members, repeats and realleges every allegation of the preceding
paragraphs as if fully set forth herein.
97.
An actual controversy has arisen and now exists between the parties in that Plaintiff
contends, and is informed and believes that Defendant denies, that its Website
contains access barriers denying blind customers the full and equal access to the
products, services and facilities of its Website and by extension its physical
locations, which Defendant owns, operations and controls, fails to comply with
applicable laws including, but not limited to, Title III of the Americans with
Disabilities Act, 42 U.S.C. §§ 12182, et seq., N.Y. Exec. Law § 296, et seq., and
N.Y.C. Admin. Code § 8-107, et seq. prohibiting discrimination against the blind.
98.
A judicial declaration is necessary and appropriate at this time in order that each of
the parties may know their respective rights and duties and act accordingly.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff respectfully requests this Court grant the following relief:
a.
A preliminary and permanent injunction to prohibit Defendant from
violating the Americans with Disabilities Act, 42 U.S.C. §§ 12182, et seq.,
N.Y. Exec. Law § 296, et seq., N.Y.C. Administrative Code § 8-107, et seq.,
and the laws of New York;
b.
A preliminary and permanent injunction requiring Defendant to take
all the steps necessary to make its Website into full compliance with the
requirements set forth in the ADA, and its implementing regulations, so that
the Website is readily accessible to and usable by blind individuals;
c.
A declaration that Defendant owns, maintains and/or operates its
Website in a manner that discriminates against the blind and which fails to
provide access for persons with disabilities as required by Americans with
Disabilities Act, 42 U.S.C. §§ 12182, et seq., N.Y. Exec. Law § 296, et seq.,
N.Y.C. Administrative Code § 8-107, et seq., and the laws of New York
d.
An order certifying the Class and Sub-Classes under Fed. R. Civ. P.
23(a) & (b)(2) and/or (b)(3), appointing Plaintiff as Class Representative,
and her attorneys as Class Counsel;
e.
Compensatory damages in an amount to be determined by proof,
including all applicable statutory and punitive damages and fines, to
Plaintiff and the proposed class and subclasses for violations of their civil
rights under New York State Human Rights Law and City Law;
f.
Pre- and post-judgment interest;
g.
An award of costs and expenses of this action together with
reasonable attorneys’ and expert fees; and
h.
Such other and further relief as this Court deems just and proper.
DEMAND FOR TRIAL BY JURY
Pursuant to Fed. R. Civ. P. 38(b), Plaintiff demands a trial by jury on all questions
of fact the Complaint raises.
Dated: Brooklyn, New York
June 11, 2018
COHEN & MIZRAHI LLP
By: ___________________
Joseph H. Mizrahi, Esq.
[email protected]
300 Cadman Plaza West, 12th Fl.
Brooklyn, New York 11201
Tel: (929) 575-4175
Fax: (929) 575-4195
GOTTLIEB & ASSOCIATES
Jeffrey M. Gottlieb (JG7905)
[email protected]
Dana L. Gottlieb (DG6151)
[email protected]
150 East 18th Street, Suite PHR
New York, N.Y. 10003-2461
Telephone: (212) 228-9795
ATTORNEYS FOR PLAINTIFF
| civil rights, immigration, family |
10Zm_YgBF5pVm5zYCfIu | UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF TEXAS
SHERMAN DIVISION
Case No. 4:21-cv-00307
JAMES CELESTE, Individually and On
Behalf of All Others Similarly Situated,
Plaintiff,
CLASS ACTION COMPLAINT FOR
VIOLATIONS OF THE FEDERAL
SECURITIES LAWS
v.
JURY TRIAL DEMANDED
INTRUSION INC., JACK BLOUNT, and
B. FRANKLIN BYRD,
Defendants.
Plaintiff James Celeste (“Plaintiff”), individually and on behalf of all others similarly
situated, by and through his attorneys, alleges the following upon information and belief, except
as to those allegations concerning Plaintiff, which are alleged upon personal knowledge. Plaintiff’s
information and belief is based upon, among other things, his counsel’s investigation, which
includes without limitation: (a) review and analysis of regulatory filings made by Intrusion Inc.
(“Intrusion” or the “Company”) with the United States (“U.S.”) Securities and Exchange
Commission (“SEC”); (b) review and analysis of press releases and media reports issued by and
disseminated by Intrusion; and (c) review of other publicly available information concerning
Intrusion.
NATURE OF THE ACTION AND OVERVIEW
1.
This is a class action on behalf of persons and entities that purchased or otherwise
acquired Intrusion securities between January 13, 2021 and April 13, 2021, inclusive (the “Class
Period”). Plaintiff pursues claims against the Defendants under the Securities Exchange Act of
1934 (the “Exchange Act”).
2.
Intrusion develops, sells, and supports products that purport to protect entities from
cyberattacks by combining advanced threat intelligence with real-time artificial intelligence. It
offers three products: Shield, a cybersecurity solution packaged as a comprehensive, real-time AI-
based Security-as-a-Service; TraceCop, a big data tool with IP intelligence, including reputation
information on known good and known bad active IP addresses; and Savant, a network monitoring
solution that identifies suspicious traffic in real-time.
3.
On April 14, 2021, White Diamond Research published a report alleging, among
other things, that Intrusion’s product, Shield, “has no patents, certifications, or insurance, which
are all essential for selling cybersecurity products” and that “Shield is based on open-source data
already available to the public.” Thus, the report stated that “Shield is a repackaging of pre-existing
technology rather than an innovative offering.” Moreover, the report alleged that the claims that
Shield “stopp[ed] a total of 77,539,801 cyberthreats from 805,110 uniquely malicious entities . . .
in the 90-day beta program” were “outlandish,” leading White Diamond to question “[h]ow have
these companies been able to function so far, as they’ve been attacked many times per minute by
ransomware, malware, data theft, phishing and DDoS attacks?”
4.
On this news, the Company’s share price fell $4.50, or over 16%, to close at $23.75
per share on April 14, 2021, on unusually heavy trading volume. The share price continued to
decline by $3.22, or 14%, over the next trading session to close at $20.53 per share on April 15,
5.
Throughout the Class Period, Defendants made materially false and/or misleading
statements, as well as failed to disclose material adverse facts about the Company’s business,
operations, and prospects. Specifically, Defendants failed to disclose to investors: (1) that
Intrusion’s Shield product was merely a repackaging of existing technology in the Company’s
portfolio; (2) that Shield lacked the patents, certifications, and insurance critical to the sale of
cybersecurity products; (3) that the Company had overstated the efficacy of Shield’s purported
ability to protect against cyberattacks; (4) that, as a result of the foregoing, Intrusion’s Shield was
reasonably unlikely to generate significant revenue; and (5) that, as a result of the foregoing,
Defendants’ positive statements about the Company’s business, operations, and prospects were
materially misleading and/or lacked a reasonable basis.
6.
As a result of Defendants’ wrongful acts and omissions, and the precipitous decline
in the market value of the Company’s securities, Plaintiff and other Class members have suffered
significant losses and damages.
JURISDICTION AND VENUE
7.
The claims asserted herein arise under Sections 10(b) and 20(a) of the Exchange
Act (15 U.S.C. §§ 78j(b) and 78t(a)) and Rule 10b-5 promulgated thereunder by the SEC (17
C.F.R. § 240.10b-5).
8.
This Court has jurisdiction over the subject matter of this action pursuant to 28
U.S.C. § 1331 and Section 27 of the Exchange Act (15 U.S.C. § 78aa).
9.
Venue is proper in this Judicial District pursuant to 28 U.S.C. § 1391(b) and Section
27 of the Exchange Act (15 U.S.C. § 78aa(c)). Substantial acts in furtherance of the alleged fraud
or the effects of the fraud have occurred in this Judicial District. Many of the acts charged herein,
including the dissemination of materially false and/or misleading information, occurred in
substantial part in this Judicial District. In addition, the Company’s principal executive offices are
in this District.
10.
In connection with the acts, transactions, and conduct alleged herein, Defendants
directly and indirectly used the means and instrumentalities of interstate commerce, including the
United States mail, interstate telephone communications, and the facilities of a national securities
exchange.
PARTIES
11.
Plaintiff James Celeste, as set forth in the accompanying certification, incorporated
by reference herein, purchased Intrusion securities during the Class Period, and suffered damages
as a result of the federal securities law violations and false and/or misleading statements and/or
material omissions alleged herein.
12.
Defendant Intrusion is incorporated under the laws of Delaware with its principal
executive offices located in 101 East Park Blvd., Suite 1300, Plano, Texas 75074. Intrusion’s
common stock trades on the NASDAQ exchange under the symbol “INTZ.”
13.
Defendant Jack B. Blount (“Blount”) was the Company’s Chief Executive Officer
(“CEO”) at all relevant times.
14.
Defendant B. Franklin Byrd (“Byrd”) was the Company’s Chief Financial Officer
(“CFO”) at all relevant times.
15.
Defendants Blount and Byrd (collectively the “Individual Defendants”), because of
their positions with the Company, possessed the power and authority to control the contents of the
Company’s reports to the SEC, press releases and presentations to securities analysts, money and
portfolio managers and institutional investors, i.e., the market. The Individual Defendants were
provided with copies of the Company’s reports and press releases alleged herein to be misleading
prior to, or shortly after, their issuance and had the ability and opportunity to prevent their issuance
or cause them to be corrected. Because of their positions and access to material non-public
information available to them, the Individual Defendants knew that the adverse facts specified
herein had not been disclosed to, and were being concealed from, the public, and that the positive
representations which were being made were then materially false and/or misleading. The
Individual Defendants are liable for the false statements pleaded herein.
SUBSTANTIVE ALLEGATIONS
Background
16.
Intrusion develops, sells, and supports products that purport to protect entities from
cyberattacks by combining advanced threat intelligence with real-time artificial intelligence. It
offers three products: Shield, a cybersecurity solution packaged as a comprehensive, real-time AI-
based Security-as-a-Service; TraceCop, a big data tool with IP intelligence, including reputation
information on known good and known bad active IP addresses; and Savant, a network monitoring
solution that identifies suspicious traffic in real-time.
Materially False and Misleading
Statements Issued During the Class Period
17.
The Class Period begins on January 13, 2021. On that day, the Company issued a
press release entitled “INTRUSION Successfully Completes Beta Testing of its Newest
Cybersecurity Solution, Shield; Announces General Availability.” It stated, in relevant part:
Beta testing of INTRUSION Shield confirmed the solution’s efficacy by stopping
a total of 77,539,801 cyberthreats from 805,110 uniquely malicious entities
attempting to breach 13 companies that participated in the 90-day beta program.
Shield was able to continuously protect these companies from ransomware, denial
of service attacks, malware, data theft, phishing and more. In fact, analysis by
INTRUSION also concluded that Shield would have defended against the Sunburst
malware that was at the heart of the recent cyberattacks involving SolarWinds and
FireEye, which impacted many government agencies and 18,000 SolarWinds
customers.
“With the high-risk patterns we’ve incorporated into the rule set that feeds our AI,
along with the reputation and suspicious activity that it searches for while
monitoring all traffic in and out of a network, we can confidently say Shield would
have protected our customers where clearly other security approaches failed,” said
Jack B. Blount, President and CEO of INTRUSION. “The malware had been living
on the SolarWinds network for at least nine months undetected – it got past
firewalls and many other cybersecurity products. This is all the more reason
companies need a multi-layered approach to cybersecurity, and specifically one that
stops threats in real-time to protect them from the damage cybercriminals can cause
over time.”
All companies participating in the beta program have made the decision to move
forward with Shield in production.
“The Shield solution has shown us that virtually every network is already infected,
and front-end protection is not possible. The understanding that networks are
already compromised and that the only means of protection is to monitor and
restrict outgoing traffic is the breakthrough of the Shield philosophy,” said Richard,
President of NovaTech.
Additionally, false positive security alerts – where legitimate traffic is identified as
a threat – are a significant problem among cybersecurity solutions available today,
with Ponemon Institute reporting that most cybersecurity companies see mistaken
alerts happening 33% of the time. Cybersecurity professionals spend hundreds of
hours investigating these alerts only to determine ultimately that there was no
threat. Beta testing for Shield showed a median false positive rate of 0.001% of
all traffic, far surpassing other solutions on the market and allowing businesses
to run uninterrupted. Multiple beta customers were happy to report they saw zero
false positives using Shield.
18.
On February 25, 2021, Intrusion announced its fourth quarter and full year financial
results in a press release that stated, in relevant part:
“Since releasing INTRUSION’s revolutionary Shield solution only 6 weeks ago,
we have received an unprecedented amount of interest and a growing pipeline of
customers that is nothing short of extraordinary,” said Jack B. Blount, President
and CEO of INTRUSION. “Shield is the first platform that uses real-time artificial
intelligence to not just block intruders, but to kill cyberattacks including zero-days.
. . .”
*
*
*
Fourth Quarter Financial Results
Revenue for the fourth quarter 2020 was $1.6 million, compared to $2.6 million in
the fourth quarter 2019 and $1.6 million for the third quarter 2020. For the full year
2020, revenue was $6.6 million as compared to $13.6 million in 2019.
Gross profit margin was 58% of revenue in the fourth quarter of 2020, compared to
61% in the fourth quarter 2019 and 59% in the third quarter 2020. For the full year
2020, gross margin was 59% as compared to 61% in the prior year.
Operating expenses in the fourth quarter of 2020 were $4.8 million, which included
a $1.1 million non-cash write-off related to a prior office lease agreement. This
compares to operating expenses of $1.3 million in the fourth quarter 2019 and $2.3
million in the third quarter 2020. Full year 2020 operating expenses were $10.4
million, which included the aforementioned non-cash write-off, compared to $3.8
million in 2019.
Net loss in the fourth quarter of 2020 was $3.9 million, which included the $1.1
million non-cash write-off and compares to net income of $0.3 million in the fourth
quarter 2019 and a net loss of $1.4 million in the third quarter 2020. For the full
year 2020, net loss was $6.5 million, which included the fourth quarter non-cash
write-off, compared to net income of $4.5 million in the prior year.
19.
On March 9, 2021, Intrusion filed its annual report on Form 10-K for the period
ended December 31, 2020 (the “2020 10-K”) with the SEC, affirming the previously reported
financial results. Regarding Shield’s performance, the Company stated, in relevant part:
We could experience damage to our reputation in the cybersecurity industry in
the event that our Shield solution fails to meet our customers’ needs or to achieve
market acceptance.
Our reputation in the industry as a provider of entity identification, data mining,
and advanced persistent threat detection solutions may be harmed, perhaps
significantly, in the event that Shield fails to perform as we expect it to. If Shield
does not perform as we expect, if we experience delivery delays, or if our customers
do not perceive the benefits of purchasing and using Shield as part of their
comprehensive cybersecurity solution, our position as a leader in this technology
space may be damaged and could affect the willingness of our customers, as well
as potential customers, to purchase our other solutions that function separately from
Shield. Any reputational damage could result in a decrease in orders for all of our
solutions, the loss of current customers, and a decrease in our overall revenues
which could in turn have a material adverse effect on our results of operation.
20.
On April 13, 2021, the Company issued a press release entitled “Intrusion Q1 2021
Results Surpass Expectations.” Therein, Intrusion stated, in relevant part:
Highlights from the quarter include:
INTRUSION Shield is now protecting over 50,000 seats (almost 8x the
company’s original Q1 goal)
Hired new Chief Sales Officer, Darryl Athans, to drive continued growth
Signed over 30 channel partners including resellers in Australia and Mexico
Company now able to sell latest innovation, Shield, globally
Since announcing the general availability of Shield in January 2021, the company
wasted no time ramping up its go-to-market activities to finish the first quarter with
several key wins. INTRUSION recently announced manufacturing giants
Kimberly-Clark and Lippert Components signing on as Shield customers, with
other customer additions including KBI and Geocent adopting Shield to protect
their networks.
21.
The above statements identified in ¶¶ 17-20 were materially false and/or
misleading, and failed to disclose material adverse facts about the Company’s business, operations,
and prospects. Specifically, Defendants failed to disclose to investors: (1) that Intrusion’s Shield
product was merely a repackaging of existing technology in the Company’s portfolio; (2) that
Shield lacked the patents, certifications, and insurance critical to the sale of cybersecurity products;
(3) that the Company had overstated the efficacy of Shield’s purported ability to protect against
cyberattacks; (4) that, as a result of the foregoing, Intrusion’s Shield was reasonably unlikely to
generate significant revenue; and (5) that, as a result of the foregoing, Defendants’ positive
statements about the Company’s business, operations, and prospects were materially misleading
and/or lacked a reasonable basis.
Disclosures at the End of the Class Period
22.
On April 14, 2021, White Diamond Research published a report alleging, among
other things, that Intrusion’s product, Shield, “has no patents, certifications, or insurance, which
are all essential for selling cybersecurity products” and that “Shield is based on open-source data
already available to the public.” Thus, the report stated that “Shield is a repackaging of pre-existing
technology rather than an innovative offering.” Specifically, it stated:
Despite heavy promotion and a supposedly successful beta test, we do not believe
Shield represents a novel offering from INTZ. In fact, we believe the company itself
has said this. During INTZ’s Q420 Earnings Call, and in a buzz-word flurry (AI,
cyber-, supercomputer, etc.), Blount revealed that Shield is simply a mashup of
INTZ’s existing products. In Blount’s words:
Shield is really all 3 of Intrusion’s technologies married together in
a single product solution.
While this may initially sound exciting, it hardly represents any ground-breaking
innovation.
Here are a few other statements that Blount made in the Q420 Earnings Call
suggesting Shield is a repackaging of pre-existing technology rather than an
innovative offering:
“The TraceCop database that we have created, managed, grown, used for
25 years, is the core of what makes Shield work today.”
“The Savant technology that we’ve had and improved for 12 years, again,
is a core piece of the technology of Shield. How we open, inspect every
packet of data is with the Savant technology. The only new thing that there
is in Shield is the artificial intelligence that learns from the database, that
can interpret what it finds when it opens a packet of data, and how it can
decide if it’s good or bad, when humans could look at that packet of data
and have not a clue whether it was normal traffic or not normal traffic.”
“You have to think about Shield as the combination of 25 years of R&D, 25
years of product and development, 25 years of expertise around cybercrime,
combined into a single product.”
*
*
*
We believe the timeline of the announcement coupled with the lack of direct R&D
investment into Shield preceding Blount’s appointment as CEO casts doubt on
Shield as the culmination of a quarter-century master plan.
Though INTZ’s R&D accounts for ~39% of the company’s expenses (aside
from a small peak in 2015/2016), R&D has remained reasonably
proportional to its total operating expenses.
According to its accounting policies, INTZ expenses R&D as it is incurred,
thus the recent uptick in R&D expense in 2020 would not be related to
Shield (if it truly is a product launching on the back of years worth of R&D).
Recent financial statements provide no indication that INTZ has been
ramping up to commercialize a cutting-edge cybersecurity product.
23.
Moreover, the report alleged that Intrusion’s claims that Shield “stopp[ed] a total
of 77,539,801 cyberthreats from 805,110 uniquely malicious entities . . . in the 90-day beta
program” were “outlandish,” leading White Diamond to question “[h]ow have these companies
been able to function so far, as they’ve been attacked many times per minute by ransomware,
malware, data theft, phishing and DDoS attacks?” Specifically, the report stated:
The Companies Featured From the Shield Beta Test Are Small And Have
Existing Relationships with Intrusion
In INTZ’s Needham Virtual Growth Conference presentation on 1/13/21, a slide
shows the testimonials of three companies that were part of the Shield beta test.
This slide is shown below:
*
*
*
All three customers have existing relationships with INTZ.
B. Riley Financial is INTZ’s investment banker who organized the equity
raise in October 2020 and then issued a glowing initiation report on the
stock.
Bard Associates is a shareholder of INTZ.
We interviewed the IT Manager for NovaTech, and he said the only reason
why they got involved in the beta testing is because an IT securities guy
works for both NovaTech and INTZ. We provide more details on this
interview later in this section.
In the PR, INTZ made a lot of bold claims for a product with no real traction in the
market. It states:
“Beta testing of INTRUSION Shield confirmed the solution’s efficacy by stopping
a total of 77,539,801 cyberthreats from 805,110 uniquely malicious entities
attempting to breach 13 companies that participated in the 90-day beta program.
Shield was able to continuously protect these companies from ransomware, denial
of service attacks, malware, data theft, phishing and more.”
These numbers don’t seem real, but something out of a science fiction movie. This
means that on average, over the 13 companies, each company was attacked 6M
times over the 90-day trial period / 66k times per day / 2.7k per hour / 46 times per
minute.
[table omitted]
How have these companies been able to function so far, as they’ve been attacked
many times per minute by ransomware, malware, data theft, phishing and DDoS
attacks?
The company also claims that Shield is so good, it could have prevented the recent
Sunburst malware attack. The PR states:
“In fact, analysis by INTRUSION also concluded that Shield would have defended
against the Sunburst malware that was at the heart of the recent cyberattacks
involving SolarWinds and FireEye, which impacted many government agencies
and 18,000 SolarWinds customers.”
SolarWinds (SWI) is a $5B+ IT infrastructure management software company. It
sells security and data protection products. It spent $32M in Research &
Development (R&D) and $82M in Sales and Marketing (S&M) in Q420, and a
whopping $126M for the entire year 2020. We don’t believe that INTZ has
developed a more sophisticated malware defending software than SWI, given what
each company has accomplished and that INTZ has invested so little in R&D.
24.
White Diamond also expressed doubt that Intrusion’s recent purported sales
agreements would lead to significant revenue. The report stated:
On 3/31/21, INTZ announced that it signed a “new agreement” with leading global
consumer products company Kimberly-Clark (KMB). One of the reasons why
investors should be skeptical of this “agreement” is that the announcement doesn’t
include any financial details or terms on duration. We are not convinced that the
contract is revenue generating and believe the “generalizations” in the
announcements could imply a pilot program.
We don’t believe a company the size of KMB would agree to migrate its network
to a cybersecurity software that doesn’t have any 3rd party certifications, without
first testing it on a trial basis.
On 4/6/21, INTZ announced a new Shield customer, Lippert Components from LCI
Industries (LCII). We don’t think this sale is a big deal because Lippert was a
former customer using INTZ’s Savant service. This is also another associated party
sale. James Gero is on the Board of Directors of both Lippert and INTZ. As shown
in the screen shots below:
[images omitted]
Notice the Lippert executive, Jamie A. Schnur, president of the aftermarket, used
the buzzword “AI” when describing why it is a Shield customer. However, Schnur
isn’t the IT guy in charge of cybersecurity.
We spoke with the investor relations rep of LCII. He said that the CFO told him
that there’s a wide range of programs they use for cybersecurity. From emails, to
cell phones, to any of their machinery that’s hooked up to the internet. And they
report to their audit committee about their cybersecurity measures.
25.
On this news, the Company’s share price fell $4.50, or over 16%, to close at $23.75
per share on April 14, 2021, on unusually heavy trading volume. The share price continued to
decline by $3.22, or 14%, over the next trading session to close at $20.53 per share on April 15,
CLASS ACTION ALLEGATIONS
26.
Plaintiff brings this action as a class action pursuant to Federal Rule of Civil
Procedure 23(a) and (b)(3) on behalf of a class, consisting of all persons and entities that purchased
or otherwise acquired Intrusion securities between January 13, 2021 and April 13, 2021, inclusive,
and who were damaged thereby (the “Class”). Excluded from the Class are Defendants, the
officers and directors of the Company, at all relevant times, members of their immediate families
and their legal representatives, heirs, successors, or assigns, and any entity in which Defendants
have or had a controlling interest.
27.
The members of the Class are so numerous that joinder of all members is
impracticable. Throughout the Class Period, Intrusion’s shares actively traded on the NASDAQ.
While the exact number of Class members is unknown to Plaintiff at this time and can only be
ascertained through appropriate discovery, Plaintiff believes that there are at least hundreds or
thousands of members in the proposed Class. Millions of Intrusion shares were traded publicly
during the Class Period on the NASDAQ. Record owners and other members of the Class may be
identified from records maintained by Intrusion or its transfer agent and may be notified of the
pendency of this action by mail, using the form of notice similar to that customarily used in
securities class actions.
28.
Plaintiff’s claims are typical of the claims of the members of the Class as all
members of the Class are similarly affected by Defendants’ wrongful conduct in violation of
federal law that is complained of herein.
29.
Plaintiff will fairly and adequately protect the interests of the members of the Class
and has retained counsel competent and experienced in class and securities litigation.
30.
Common questions of law and fact exist as to all members of the Class and
predominate over any questions solely affecting individual members of the Class. Among the
questions of law and fact common to the Class are:
(a)
whether the federal securities laws were violated by Defendants’ acts as
alleged herein;
(b)
whether statements made by Defendants to the investing public during the
Class Period omitted and/or misrepresented material facts about the business, operations, and
prospects of Intrusion; and
(c)
to what extent the members of the Class have sustained damages and the
proper measure of damages.
31.
A class action is superior to all other available methods for the fair and efficient
adjudication of this controversy since joinder of all members is impracticable. Furthermore, as the
damages suffered by individual Class members may be relatively small, the expense and burden
of individual litigation makes it impossible for members of the Class to individually redress the
wrongs done to them. There will be no difficulty in the management of this action as a class action.
UNDISCLOSED ADVERSE FACTS
32.
The market for Intrusion’s securities was open, well-developed and efficient at all
relevant times. As a result of these materially false and/or misleading statements, and/or failures
to disclose, Intrusion’s securities traded at artificially inflated prices during the Class Period.
Plaintiff and other members of the Class purchased or otherwise acquired Intrusion’s securities
relying upon the integrity of the market price of the Company’s securities and market information
relating to Intrusion, and have been damaged thereby.
33.
During the Class Period, Defendants materially misled the investing public, thereby
inflating the price of Intrusion’s securities, by publicly issuing false and/or misleading statements
and/or omitting to disclose material facts necessary to make Defendants’ statements, as set forth
herein, not false and/or misleading. The statements and omissions were materially false and/or
misleading because they failed to disclose material adverse information and/or misrepresented the
truth about Intrusion’s business, operations, and prospects as alleged herein.
34.
At all relevant times, the material misrepresentations and omissions particularized
in this Complaint directly or proximately caused or were a substantial contributing cause of the
damages sustained by Plaintiff and other members of the Class. As described herein, during the
Class Period, Defendants made or caused to be made a series of materially false and/or misleading
statements about Intrusion’s financial well-being and prospects. These material misstatements
and/or omissions had the cause and effect of creating in the market an unrealistically positive
assessment of the Company and its financial well-being and prospects, thus causing the
Company’s securities to be overvalued and artificially inflated at all relevant times. Defendants’
materially false and/or misleading statements during the Class Period resulted in Plaintiff and other
members of the Class purchasing the Company’s securities at artificially inflated prices, thus
causing the damages complained of herein when the truth was revealed.
LOSS CAUSATION
35.
Defendants’ wrongful conduct, as alleged herein, directly and proximately caused
the economic loss suffered by Plaintiff and the Class.
36.
During the Class Period, Plaintiff and the Class purchased Intrusion’s securities at
artificially inflated prices and were damaged thereby. The price of the Company’s securities
significantly declined when the misrepresentations made to the market, and/or the information
alleged herein to have been concealed from the market, and/or the effects thereof, were revealed,
causing investors’ losses.
SCIENTER ALLEGATIONS
37.
As alleged herein, Defendants acted with scienter since Defendants knew that the
public documents and statements issued or disseminated in the name of the Company were
materially false and/or misleading; knew that such statements or documents would be issued or
disseminated to the investing public; and knowingly and substantially participated or acquiesced
in the issuance or dissemination of such statements or documents as primary violations of the
federal securities laws. As set forth elsewhere herein in detail, the Individual Defendants, by virtue
of their receipt of information reflecting the true facts regarding Intrusion, their control over, and/or
receipt and/or modification of Intrusion’s allegedly materially misleading misstatements and/or
their associations with the Company which made them privy to confidential proprietary
information concerning Intrusion, participated in the fraudulent scheme alleged herein.
APPLICABILITY OF PRESUMPTION OF RELIANCE
(FRAUD-ON-THE-MARKET DOCTRINE)
38.
The market for Intrusion’s securities was open, well-developed and efficient at all
relevant times. As a result of the materially false and/or misleading statements and/or failures to
disclose, Intrusion’s securities traded at artificially inflated prices during the Class Period. On
April 13, 2021, the Company’s share price closed at a Class Period high of $28.25 per share.
Plaintiff and other members of the Class purchased or otherwise acquired the Company’s securities
relying upon the integrity of the market price of Intrusion’s securities and market information
relating to Intrusion, and have been damaged thereby.
39.
During the Class Period, the artificial inflation of Intrusion’s shares was caused by
the material misrepresentations and/or omissions particularized in this Complaint causing the
damages sustained by Plaintiff and other members of the Class. As described herein, during the
Class Period, Defendants made or caused to be made a series of materially false and/or misleading
statements about Intrusion’s business, prospects, and operations. These material misstatements
and/or omissions created an unrealistically positive assessment of Intrusion and its business,
operations, and prospects, thus causing the price of the Company’s securities to be artificially
inflated at all relevant times, and when disclosed, negatively affected the value of the Company
shares. Defendants’ materially false and/or misleading statements during the Class Period resulted
in Plaintiff and other members of the Class purchasing the Company’s securities at such artificially
inflated prices, and each of them has been damaged as a result.
40.
At all relevant times, the market for Intrusion’s securities was an efficient market
for the following reasons, among others:
(a)
Intrusion shares met the requirements for listing, and was listed and actively
traded on the NASDAQ, a highly efficient and automated market;
(b)
As a regulated issuer, Intrusion filed periodic public reports with the SEC
and/or the NASDAQ;
(c)
Intrusion regularly communicated with public investors via established
market communication mechanisms, including through regular dissemination of press releases on
the national circuits of major newswire services and through other wide-ranging public disclosures,
such as communications with the financial press and other similar reporting services; and/or
(d)
Intrusion was followed by securities analysts employed by brokerage firms
who wrote reports about the Company, and these reports were distributed to the sales force and
certain customers of their respective brokerage firms. Each of these reports was publicly available
and entered the public marketplace.
41.
As a result of the foregoing, the market for Intrusion’s securities promptly digested
current information regarding Intrusion from all publicly available sources and reflected such
information in Intrusion’s share price. Under these circumstances, all purchasers of Intrusion’s
securities during the Class Period suffered similar injury through their purchase of Intrusion’s
securities at artificially inflated prices and a presumption of reliance applies.
42.
A Class-wide presumption of reliance is also appropriate in this action under the
Supreme Court’s holding in Affiliated Ute Citizens of Utah v. United States, 406 U.S. 128 (1972),
because the Class’s claims are, in large part, grounded on Defendants’ material misstatements
and/or omissions. Because this action involves Defendants’ failure to disclose material adverse
information regarding the Company’s business operations and financial prospects—information
that Defendants were obligated to disclose—positive proof of reliance is not a prerequisite to
recovery. All that is necessary is that the facts withheld be material in the sense that a reasonable
investor might have considered them important in making investment decisions. Given the
importance of the Class Period material misstatements and omissions set forth above, that
requirement is satisfied here.
NO SAFE HARBOR
43.
The statutory safe harbor provided for forward-looking statements under certain
circumstances does not apply to any of the allegedly false statements pleaded in this Complaint.
The statements alleged to be false and misleading herein all relate to then-existing facts and
conditions. In addition, to the extent certain of the statements alleged to be false may be
characterized as forward looking, they were not identified as “forward-looking statements” when
made and there were no meaningful cautionary statements identifying important factors that could
cause actual results to differ materially from those in the purportedly forward-looking statements.
In the alternative, to the extent that the statutory safe harbor is determined to apply to any forward-
looking statements pleaded herein, Defendants are liable for those false forward-looking
statements because at the time each of those forward-looking statements was made, the speaker
had actual knowledge that the forward-looking statement was materially false or misleading,
and/or the forward-looking statement was authorized or approved by an executive officer of
Intrusion who knew that the statement was false when made.
FIRST CLAIM
Violation of Section 10(b) of The Exchange Act and
Rule 10b-5 Promulgated Thereunder
Against All Defendants
44.
Plaintiff repeats and re-alleges each and every allegation contained above as if fully
set forth herein.
45.
During the Class Period, Defendants carried out a plan, scheme and course of
conduct which was intended to and, throughout the Class Period, did: (i) deceive the investing
public, including Plaintiff and other Class members, as alleged herein; and (ii) cause Plaintiff and
other members of the Class to purchase Intrusion’s securities at artificially inflated prices. In
furtherance of this unlawful scheme, plan and course of conduct, Defendants, and each defendant,
took the actions set forth herein.
46.
Defendants (i) employed devices, schemes, and artifices to defraud; (ii) made
untrue statements of material fact and/or omitted to state material facts necessary to make the
statements not misleading; and (iii) engaged in acts, practices, and a course of business which
operated as a fraud and deceit upon the purchasers of the Company’s securities in an effort to
maintain artificially high market prices for Intrusion’s securities in violation of Section 10(b) of
the Exchange Act and Rule 10b-5. All Defendants are sued either as primary participants in the
wrongful and illegal conduct charged herein or as controlling persons as alleged below.
47.
Defendants, individually and in concert, directly and indirectly, by the use, means
or instrumentalities of interstate commerce and/or of the mails, engaged and participated in a
continuous course of conduct to conceal adverse material information about Intrusion’s financial
well-being and prospects, as specified herein.
48.
Defendants employed devices, schemes and artifices to defraud, while in
possession of material adverse non-public information and engaged in acts, practices, and a course
of conduct as alleged herein in an effort to assure investors of Intrusion’s value and performance
and continued substantial growth, which included the making of, or the participation in the making
of, untrue statements of material facts and/or omitting to state material facts necessary in order to
make the statements made about Intrusion and its business operations and future prospects in light
of the circumstances under which they were made, not misleading, as set forth more particularly
herein, and engaged in transactions, practices and a course of business which operated as a fraud
and deceit upon the purchasers of the Company’s securities during the Class Period.
49.
Each of the Individual Defendants’ primary liability and controlling person liability
arises from the following facts: (i) the Individual Defendants were high-level executives and/or
directors at the Company during the Class Period and members of the Company’s management
team or had control thereof; (ii) each of these defendants, by virtue of their responsibilities and
activities as a senior officer and/or director of the Company, was privy to and participated in the
creation, development and reporting of the Company’s internal budgets, plans, projections and/or
reports; (iii) each of these defendants enjoyed significant personal contact and familiarity with the
other defendants and was advised of, and had access to, other members of the Company’s
management team, internal reports and other data and information about the Company’s finances,
operations, and sales at all relevant times; and (iv) each of these defendants was aware of the
Company’s dissemination of information to the investing public which they knew and/or
recklessly disregarded was materially false and misleading.
50.
Defendants had actual knowledge of the misrepresentations and/or omissions of
material facts set forth herein, or acted with reckless disregard for the truth in that they failed to
ascertain and to disclose such facts, even though such facts were available to them. Such
defendants’ material misrepresentations and/or omissions were done knowingly or recklessly and
for the purpose and effect of concealing Intrusion’s financial well-being and prospects from the
investing public and supporting the artificially inflated price of its securities. As demonstrated by
Defendants’ overstatements and/or misstatements of the Company’s business, operations,
financial well-being, and prospects throughout the Class Period, Defendants, if they did not have
actual knowledge of the misrepresentations and/or omissions alleged, were reckless in failing to
obtain such knowledge by deliberately refraining from taking those steps necessary to discover
whether those statements were false or misleading.
51.
As a result of the dissemination of the materially false and/or misleading
information and/or failure to disclose material facts, as set forth above, the market price of
Intrusion’s securities was artificially inflated during the Class Period. In ignorance of the fact that
market prices of the Company’s securities were artificially inflated, and relying directly or
indirectly on the false and misleading statements made by Defendants, or upon the integrity of the
market in which the securities trades, and/or in the absence of material adverse information that
was known to or recklessly disregarded by Defendants, but not disclosed in public statements by
Defendants during the Class Period, Plaintiff and the other members of the Class acquired
Intrusion’s securities during the Class Period at artificially high prices and were damaged thereby.
52.
At the time of said misrepresentations and/or omissions, Plaintiff and other
members of the Class were ignorant of their falsity, and believed them to be true. Had Plaintiff
and the other members of the Class and the marketplace known the truth regarding the problems
that Intrusion was experiencing, which were not disclosed by Defendants, Plaintiff and other
members of the Class would not have purchased or otherwise acquired their Intrusion securities,
or, if they had acquired such securities during the Class Period, they would not have done so at the
artificially inflated prices which they paid.
53.
By virtue of the foregoing, Defendants violated Section 10(b) of the Exchange Act
and Rule 10b-5 promulgated thereunder.
54.
As a direct and proximate result of Defendants’ wrongful conduct, Plaintiff and the
other members of the Class suffered damages in connection with their respective purchases and
sales of the Company’s securities during the Class Period.
SECOND CLAIM
Violation of Section 20(a) of The Exchange Act
Against the Individual Defendants
55.
Plaintiff repeats and re-alleges each and every allegation contained above as if fully
set forth herein.
56.
Individual Defendants acted as controlling persons of Intrusion within the meaning
of Section 20(a) of the Exchange Act as alleged herein. By virtue of their high-level positions and
their ownership and contractual rights, participation in, and/or awareness of the Company’s
operations and intimate knowledge of the false financial statements filed by the Company with the
SEC and disseminated to the investing public, Individual Defendants had the power to influence
and control and did influence and control, directly or indirectly, the decision-making of the
Company, including the content and dissemination of the various statements which Plaintiff
contends are false and misleading. Individual Defendants were provided with or had unlimited
access to copies of the Company’s reports, press releases, public filings, and other statements
alleged by Plaintiff to be misleading prior to and/or shortly after these statements were issued and
had the ability to prevent the issuance of the statements or cause the statements to be corrected.
57.
In particular, Individual Defendants had direct and supervisory involvement in the
day-to-day operations of the Company and, therefore, had the power to control or influence the
particular transactions giving rise to the securities violations as alleged herein, and exercised the
58.
As set forth above, Intrusion and Individual Defendants each violated Section 10(b)
and Rule 10b-5 by their acts and omissions as alleged in this Complaint. By virtue of their position
as controlling persons, Individual Defendants are liable pursuant to Section 20(a) of the Exchange
Act. As a direct and proximate result of Defendants’ wrongful conduct, Plaintiff and other
members of the Class suffered damages in connection with their purchases of the Company’s
securities during the Class Period.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff prays for relief and judgment, as follows:
(a)
Determining that this action is a proper class action under Rule 23 of the Federal
Rules of Civil Procedure;
(b)
Awarding compensatory damages in favor of Plaintiff and the other Class members
against all defendants, jointly and severally, for all damages sustained as a result of Defendants’
wrongdoing, in an amount to be proven at trial, including interest thereon;
(c)
Awarding Plaintiff and the Class their reasonable costs and expenses incurred in
this action, including counsel fees and expert fees; and
(d)
Such other and further relief as the Court may deem just and proper.
JURY TRIAL DEMANDED
Plaintiff hereby demands a trial by jury.
Dated: April 16, 2021
Respectfully submitted,
/s/ Joe Kendall
JOE KENDALL
Texas Bar No. 11260700
KENDALL LAW GROUP, PLLC
3811 Turtle Creek Blvd., Suite 1450
Dallas, Texas 75219
Telephone: 214-744-3000
Facsimile: 214-744-3015
Email: [email protected]
GLANCY PRONGAY & MURRAY LLP
Lionel Z. Glancy
Charles H. Linehan
Pavithra Rajesh
1925 Century Park East, Suite 2100
Los Angeles, CA 90067
Telephone: (310) 201-9150
Facsimile: (310) 201-9160
Attorneys for Plaintiff James Celeste
| securities |
xdasD4cBD5gMZwczq9-i | IN THE UNITED STATES DISTRICT COURT
FOR THE CENTRAL DISTRICT OF ILLINOIS
PEORIA DIVISION
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Plaintiff,
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Case No.
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V.
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Equitable Relief Sought
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Jury Trial Demanded
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Defendants.
)
COMPLAINT AND DEMAND FOR JURY TRIAL
NOW COMES the Plaintiff, RHONDA S. WILLIAMS, on behalf of herself and others
Introduction
1.
This lawsuit is an individual and class action against all Defendants for wage and
JURISDICTION AND VENUE
2.
The Court has original jurisdiction over this lawsuit pursuant to 29 U.S.C. $216(b),
3.
This Court has supplemental jurisdiction over the state law claims pursuant to 28
4.
Venue is also proper in this district pursuant to 28 U.S.C. $1391(b)(2) and (c)
5.
This lawsuit is properly filed in the Peoria Division of the Central District of Illinois
The Parties
6.
Plaintiff RHONDA S. WILLIAMS (hereinafter "WILLIAMS") is a citizen of the
7.
During all relevant times, MERLE PHARMACY, INC. (hereinafter MERLE
8.
During all relevant times, MERLEPHARMACY was engaged in commerce and, at
-2-
9.
During all relevant times, CENTRAL ILLINOIS MEDICAL EQUIPMENT was
10.
During all relevant times, WILLIAM M. MARTIN (hereinafter MARTIN) was the
11.
During all relevant times, MARTIN controlled the operations of MERLE
12.
During all relevant times, MARTIN was an "employer" within the meaning of the
13.
During all relevant times, WILLIAMS was an "employee" of MERLE PHARMACY,
14.
During all relevant times, MERLE PHARMACY and CENTRAL ILLINOIS
COMMON FACTUAL ALLEGATIONS
15.
WILLIAMS (hereinafter "Plaintiff") was employed by MERLE PHARMACY,
16.
During all relevant times, Plaintiff was an hourly employee.
-3-
17.
Plaintiff's job description provided, inter alia, "EXPECTATIONS OF WORK
18.
Neither Plaintiff nor any of Defendants' other employee were salaried employees
19.
Plaintiff worked hours in excess of forty (40) hours per week for one or more weeks
20.
During all relevant times, it was Defendants' express policy that "OVERTIME:
21.
Defendants usually did not pay Plaintiff for hours she worked in excess of forty (40)
22.
Defendants never paid Plaintiff at a rate not less than 1 1/2 times the regular rate at
23.
Defendants usually did not pay any of their other employees any compensation for any
24.
During all relevant times, Defendants did not pay their other employees at a rate not
25.
During all relevant times, Defendants failed to provide Plaintiff with an itemized
-4-26.
During all relevant times, Defendants failed to provide their other employees with an
27.
Defendants failed to keep and preserve accurate records of hours worked by Plaintiff
28.
During all relevant times, Defendants failed to keep and preserve accurate records of
29.
During the course of her employment, Plaintiff repeatedly requested that she be
30.
Prior to the termination of her employment, Plaintiff repeatedly complained to
CLASS ALLEGATIONS
31.
Plaintiff seeks to represent a class of potentially fifteen or more individuals employed
32.
There are questions of law and fact common to the Class, including the following:
a. Whether Defendants maintained a policy or practice of not paying non-
exempt employees at a rate not less than 1 1/2 times their regular rate of pay
for all hours worked in excess of forty (40) hours per week;
-5-
b. Whether or not Defendants failed to keep and preserve accurate records of
hours worked by Plaintiff and Class Members, including the hours worked
each day in each work week;
C. Whether or not Defendants failed to keep and preserve accurate records of the
number of vacation days earned by Plaintiff and Class Members each year
and the dates on which vacation days were taken and paid.
d. Whether or not Defendants failed to provide Plaintiff and Class members an
itemized statement of deductions made from their wages for each pay period.
e. Whether Defendants' decision not to pay Plaintiff and Class Members at a
rate not less than 1 1/2 times their regular rate of pay, for hours worked in
excess of forty (40) hours per week, was willful.
33.
The wage and hour claims of Plaintiff are typical of the claims of the Class she seeks
34.
Questions of law or facts common to the members of the class predominate over
35.
Maintenance of this action will promote the efficient administration of justice by
-6-
36.
Maintenance of this action as a class action will promote the equitable administration
37.
A class action is superior to other available methods for the fair and efficient
38.
The prosecution of separate actions by individual members of the class would create a
39.
The prosecution of separate actions by individual members of the class would create a
COUNT I
Violation of the Fair Labor Standards Act:
Failure to Pay Overtime Compensation
40.
Plaintiff repeats and reasserts the preceding paragraphs as if fully set forth herein.
41.
During the time preceding this action, Defendants failed to pay Plaintiff and their
42.
Defendants' violations of 29 U.S.C. $207(a) were willful. Defendants knew or should
COUNT II
Violation of the Fair Labor Standards Act:
Failure to Create and Maintain Accurate Records
43.
Plaintiff repeats and reasserts the preceding paragraphs as if fully set forth herein.
-7-
44.
Defendants failed to keep and preserve accurate records of hours worked by Plaintiff
COUNT III
Violation of Illinois Minimum Wage Law
Failure to Pay Overtime Compensation
45.
Plaintiff repeats and reasserts the preceding paragraphs as if fully set forth herein.46.
During the time preceding this action, Defendants failed to pay Plaintiff and their
COUNT
Violation of Illinois Minimum Wage Law:
Failure to Create and Maintain Accurate Records
47.
Plaintiff repeats and reasserts the preceding paragraphs as if fully set forth herein.
48.
Defendants failed to keep and preserve accurate records of hours worked by Plaintiff
49.
Defendants failed to keep and preserve accurate records of the number of vacation
COUNT V
Violation of Illinois Wage Payment and Collection Act:
Failure to Provide Itemized Payroll Information for Each Pay Period
50.
Plaintiff repeats and reasserts the preceding paragraphs as if fully set forth herein.
51.
Defendants failed to provide Plaintiff and Class members an itemized statement of
-8-
WHEREFORE, Plaintiff prays that this Court:
A. Issue notice to all similarly situated current and former employees of Defendants
B. Certify the state law claims set forth in Counts III - V as a class action pursuant to Rule 23
C. Declare Defendants' policy of not paying Plaintiff and Class Members overtime wages for
D. Declare that Defendants violated the FLSA and state law by failing to maintain accurate
E. Declare that Defendants violated state law by failing to provide Plaintiff and Class
F. Declare that Defendants violated state law by failing to keep and preserve accurate records
G. Permanently enjoin Defendants from their unlawful pay and record practices;
H. Award Plaintiff and all Class Members their unpaid overtime rate of pay for all hours of
I. Award Plaintiff and all Class Members liquidated damages under 29 U.S.C. $216(b) and a
-9-
J. Award Plaintiff and all Class Members exemplary damages and thereafter a judgment be
K. Award Plaintiff and all Class Members their costs and attorneys' fees under 29 U.S.C.
L. Award such other relief deemed just and proper.
COUNT VI
52.
Plaintiff repeats and reasserts the preceding paragraphs as if full set forth herein.
53.
Beginning in approximately 2011, Defendants and Plaintiff agreed that Plaintiff
54.
At the time Plaintiff was terminated in 2014, she had at least 7 days of accrued and
55.
At the time of her termination, Plaintiff requested that she be paid her unused paid
56.
Plaintiff is owed at least 7 days of her unused paid vacation benefit by Defendants.
WHEREFORE, Plaintiff prays that this Court:
A. Declare Defendants violated the Illinois Wage Payment and Collection act by failing to
B. Award Plaintiff damages for her accrued and unused vacation time.
C. Award Plaintiff a penalty equal to 2% of the damages for her accrued and unused vacation
-10-
D. Award Plaintiff her costs and attorneys' fees under 820 ILCS § 115/14; and
L. Award such other relief deemed just and proper.
Respectfully submitted,
RHONDA S. WILLIAMS, Plaintiff
By:
s/Athena M. Herman
Athena M. Herman, Esq., Bar No. 94873
Attorney for Plaintiff
BENASSI & BENASSI, P.C.
300 N.E. Perry Avenue
Peoria, Illinois 61603
Telephone: (309) 674-3556
Facsimile: (309) 674-7989
E-Mail: [email protected]
- -11- | employment & labor |
9Q_DFocBD5gMZwczv-ov | FOR THE EASTERN DISTRICT PENNSYLVANIA
JONATHAN J. DiBELLO, for himself
Civil Action No.
and for a class of similarly situated
individuals,
Plaintiff,
v.,
ALPHA CENTURION SECURITY, INC.;
PLAINTIFF DEMANDS
JOANNA SMALL & PATRICK A.
A TRIAL BY JURY
PANETTA
Defendants.
COMPLAINT-CLASS ACTION
Jonathan J. DiBello files this complaint against Alpha Centurion Security,
Inc., Joanna Small and Patrick A. Panetta for making illegal payday loans at interest
rates in excess of 500% A.P.R. in violation of the Racketeer Influenced Corrupt
Organizations Act (“RICO”), 18 U.S.C. § 1962(c), the Truth-in-Lending Act, 15 U.S.C. §
1600 et seq., and the Pennsylvania Wage Payment and Collection Law, 43 P.S. §260.1 et
seq. The plaintiff makes the following averments in support of this complaint:
1.
Jonathan J. DiBello is a citizen of the Commonwealth of Pennsylvania
residing at 3728 School Lane Apt. B3, Drexel Hill, Pennsylvania.
2.
During all of the events discussed in this complaint, Mr. DiBello was a
citizen and resident of Pennsylvania.
3.
Alpha Centurion Security, Inc. (“Alpha”), is a corporation with a
principal office for business at 200 West Chester Pike, Havertown, PA 19083. Exhibit P-1.
1
governmental entities and is believed to employ one to two hundred people as security
5.
Joanna Small is the owner and chief executive of Alpha. Exhibit P-1.
6.
Patrick A. Panetta is employed by Alpha as chief of operations. Exhibit
7.
Ms. Small and Mr. Panetta are husband and wife and together they
share managerial responsibility for Alpha.
8.
Federal jurisdiction over this complaint arises under 18 U.S.C. § 1964
(RICO), 15 U.S.C. § 1640 (Truth-in-Lending), 28 U.S.C. § 1331 (federal questions), and 28
U.S.C. § 1367 (supplemental jurisdiction). Venue is appropriate in the Eastern District of
Pennsylvania where the parties reside and all of the acts alleged in the complaint occurred.
9.
Beginning on or about December 2006 until approximately November,
2012, Johnathan DiBello was employed by Alpha, first as a security guard and then later as
a field supervisor.
10.
Mr. DiBello's wages ranged from $8.50 an hour to $8.75 an hour.
11.
The terms and conditions of Mr. DiBello's employment were specified in
the Alpha Employee Handbook. The 2010 version of the handbook is attached as Exhibit P-
12.
As explained in the handbook, Alpha's practice was to pay its employees
every two weeks on Monday. Handbook at 12-13.
2
employees to obtain payment advances on their wages. Handbook at 13.
14.
For each pay advance, Alpha charged a 20% finance charge. Handbook
15.
For example, an employee who took an advance of $200 would have to
pay a finance charge of $40. See Exhibit P-3.
16.
At the end of the pay period, Alpha would deduct the advance and the
finance charge from the employees' pay, so the employee who took a $200 advance would see
a $240 deduction from his or her pay.
17.
On an annualized basis, the 20% finance charge equates to an interest
rate of 1,042.85% A.P.R. on a seven day loan or 521.42% A.P.R. on a fourteen day loan.
Exhibit P-4.
18.
Mr. DiBello took pay advances on a regular basis, and in each instance
paid the 20% finance charge to Alpha.
19.
Mr. DiBello believes that many other employees also took pay advances.
20.
For each pay advance, Alpha deducted the amount of the advance plus
the 20% finance charge from Mr. DiBello's pay check. See Exhibit P-5.
21.
Over the period of a year, provided Mr. DiBello took a $200 advance
each pay period, Mr. DiBello would have paid an aggregate finance charge to Alpha of
$1,040, nearly all of which would be usurious interest.
3
22.
This case is eligible for class certification under F.R.C.P. 23(b)(3).
23.
Questions of law or fact common to the class predominate over any
questions affecting individual members.
24.
The overarching issue is whether Alpha is liable to refund the 20%
finance charge imposed on employees for taking pay advances. Questions common to the
class include: (a). Whether the pay advance fee is usurious interest, (b). whether liability
arises under RICO for the collection of unlawful debt, (c). whether Alpha is liable for failing
to make material disclosures under the Truth-in-Lending Act, and (d). whether Alpha is
liable under the Pennsylvania Wage Payment and Collection Law for failing to pay
employees their full wages.
25.
The parties' claims and defenses with respect to the issues stated in
paragraph 25 will be the same for all employees. Resolution of these issues will determine
the defendants' liability to the class and predominate over any and all potential individual
26.
If the defendants are found liable on plaintiff's claims, damages will be
determined for the class based on a uniform standard, reimbursement of the 20% pay
advance fee plus statutory and treble damages, less lawful interest calculate at the rate of
6% per annum.
27.
Plaintiff proposes to represent a class consisting of all present and
former employees of Alpha who took pay advances within four years prior to the filing of
this case to the present. There would be a subclass under the Pennsylvania Wage Payment
4
starting three years prior to the filing of the case to the present and another subclass under
the Truth-In-Lending Act for all present and former employees who took pay advances
within one year of the filing of the case.
28.
Alpha is believed to regularly employee between one hundred to two
hundred people, many of whom have taken pay advances. If half of the present employees
took just one pay advance the class would consist of fifty to one hundred people who are
owed refunds, and the inclusion of former employees will make the class larger.
29.
A class action is a superior means to fairly and efficiently adjudicate this
dispute. Without a class action it is unlikely anyone would ever obtain a recovery.
30.
The defendants have made usurious payday advances for years, and so
far no employee has ever brought an individual action to recover usurious interest.
31.
The recovery in an individual action is likely to be so small it would not
justify bringing a case.
32.
In the absence of a class action, the defendants will be able to retain
funds wrongfully withheld from employees' wages without having to refund it and will
likely continue an unlawful lending practice into the future.
33.
Since the class is small, the case will be easy to manage.
34.
Mr. DiBello's claims are typical of the class, and thus he will be an
adequate class representative. Moreover, since Mr. DiBello is no longer an Alpha employee,
he has no concern for retaliation and will be able to vigorously represent all of Alpha's
current and former employees without a conflict of interest.
5
fully able to manage a small class action.
Count I
36.
This count is against Ms. Small and Mr. Panetta for violation of the
Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1962(c), for
using Alpha to collect unlawful debt. All of the preceding paragraphs are incorporated by
reference.
37.
Ms. Small and Mr. Panetta are persons within the meaning of section
38.
Alpha is an enterprise within the meaning of section 1962(c). Cedric
Kushner Promotions, LTD., v. Don King, 533 U.S. 158 (2001).
39.
Ms. Small and Mr. Panetta are employed by or associated with Alpha;
specifically they each work at Alpha as the president and chief operations officer,
respectively, and it is believed they both have an equity interest in the business.
40.
Alpha is engaged in interstate commerce and its activities affect
interstate commerce. Specifically, Alpha has accounts in which it supplies security guards
to locations in New Jersey and Delaware.
41.
Alpha also uses instrumentalities of interstate commerce in its daily
activities, including automobiles, telephones, the internet, and the mails.
42.
Alpha purchases good, supplies, and services from out-of-state suppliers.
For instance, Alpha uses Paychex, Inc., headquartered in Rochester, New York, to process
its payroll. See Exhibit P-5.
6
44.
Alpha employees spend a portion of their salaries on goods and services
from out-of-state.
45.
Ms. Small and Mr. Panetta conduct the affairs of Alpha or participate
in the affairs of Alpha through the collection of unlawful debt in violation of 18 U.S.C. §
46.
Specifically, Ms. Small and Mr. Panetta directed Alpha to make and
collect pay advances to and from its employees at a rate of interest far in excess of the legal
rate of interest in Pennsylvania.
47.
Over the course of Mr. DiBello's employment, Alpha made a series of
pay advances to him and for each such advance, Alpha withheld a 20% fee in addition to the
amount of the advance. See Exhibit P-5.
48.
The 20% advance fee constitutes unlawful debt within the meaning of
section 1962(c) as the term is defined in section 1961(6).
(a). Specifically, a substantial portion of the advance fee is
unenforceable under state usury law. Under Pennsylvania law, an unlicensed lender is
prohibited from charging a rate greater than 6% per annum as compensation for the use of
money. 41 P.S. § 201 et seq.
(b). Alpha makes pay advances as part of its business. Alpha's
practice of making usurious pay advances to employees is memorialized in its employee
handbook. Exhibit P-2 at 13. Alpha uses the advances as a scheme to pay employees less
wages than are lawfully due.
7
enforceable interest rate allowed in Pennsylvania. 18 U.S.C. § 1961(6).
49.
Mr. DiBello and the class were damaged by Alpha withholding illegal
and usurious finance charges from their pay checks. It is money the employees deserved to
be paid as compensation for their employment.
WHEREFORE, Mr. DiBello requests relief as follows against Ms. Small and
Mr. Panetta for himself and the class:
(a). An award of damages equivalent to three times the amount of unlawful
debt withheld from their pay;
(b). An award of attorney's fees and costs;
(c). Any other relief that is just and appropriate.
Count II
50.
This count is against Alpha for violating the Truth-In-Lending Act
(“TILA”), 15 U.S.C. § 1600 et seq. All of the preceding paragraphs are incorporated by
reference.
51.
Alpha's pay advances constitute “credit” within the meaning of TILA. 15
U.S.C. § 1602(f). The pay advance is a right to incur debt and defer its payment.
52.
The plaintiff and proposed class members are “consumers” within the
meaning of TILA. 15 U.S.C. § 1602(i).
53.
The plaintiff is a natural person, and the pay advance funds are
primarily for personal, family or household purposes, i.e., the funds represent plaintiff's
8
55.
Alpha regularly extends consumer credit which is payable by agreement
for which the payment of a finance charge is required and is the person to whom the debt is
initially payable.
56.
Alpha failed entirely to comply with any of the disclosure requirements
applicable to consumer credit transactions under TILA.
57.
Alpha failed to provide material disclosures for pay advance
transactions, including the annual percentage rate, finance charge, amount financed, or
total payments.
58.
Consequently, Alpha charged the plaintiff and class triple digit interest
rates in excess of 500% A.P.R. on pay advances without stating the actual interest rate.
WHEREFORE, Mr. DiBello requests relief against Alpha as follows for
himself and the class:
(a). An award of actual and statutory damages;
(b). An award of attorney's fees and costs; and
(c). Any other relief that is just and appropriate.
Count II
I
59.
This count is against Alpha for violating Pennsylvania's Wage Payment
and Collection Law (“WPCL”), 43 P.S. §260.1. All of the preceding paragraphs are
incorporated by reference.
60.
Alpha is obligated under the WPCL to pay to Mr. DiBello and the class
all lawfully earned wages less lawful deductions. 43 P.S. § 260.3(a).
9
DiBello and the class were not lawful deductions, but were an illegal and usurious finance
charge. 41 P.S. §§ 201, 408 & 502.
62.
Alpha is liable to Mr. DiBello and the class to compensate them for all
unpaid or wrongfully withheld wages under 43 P.S. § 260.9a, including specifically
wrongfully withheld finance charges on wage advances.
WHEREFORE, Mr. DiBello requests relief as follows against Alpha for himself
and the class:
(a). An award of damages equivalent to the amount of unlawful debt withheld
from plaintiff's pay;
(b). An award of attorney's fees and costs; and
(c). Any other relief that is just and appropriate.
Respectfully submitted,
Robert F. Salvin (RFS2522)
Two Bala Plaza, Suite 300
Bala Cynwyd, PA 19004
215-300-2388
215-271-2820 (fax)
[email protected]
10
| securities |
tv12FIcBD5gMZwczh2cw |
Case No. 19-cv-1464
SHAKED LAW GROUP, P.C.
Dan Shaked (DS-3331)
44 Court Street, Suite 1217
Brooklyn, NY 11201
Tel. (917) 373-9128
Email: [email protected]
Attorneys for Plaintiff and the Class
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
-----------------------------------------------------------X
MARY CONNER, Individually and as the
representative of a class of similarly situated persons,
Plaintiff,
- against -
ATLANTIC RECORDING CORPORATION
d/b/a BrunoMars.com,
Defendant.
-----------------------------------------------------------X
COMPLAINT – CLASS ACTION
INTRODUCTION
1. Plaintiff, Mary Conner (“Plaintiff” or “Conner”), brings this action on behalf of
herself and all other persons similarly situated against Atlantic Recording Corporation d/b/a
BrunoMars.com (“Atlantic” or “Defendant”), and states as follows:
2. Plaintiff is a visually-impaired and legally blind person who requires screen-
reading software to read website content using her computer. Plaintiff uses the terms “blind” or
“visually-impaired” to refer to all people with visual impairments who meet the legal definition of
blindness in that they have a visual acuity with correction of less than or equal to 20 x 200. Some
blind people who meet this definition have limited vision; others have no vision. Plaintiff has no
vision whatsoever.
1
3. Based on a 2010 U.S. Census Bureau report, approximately 8.1 million people
in the United States are visually impaired, including 2.0 million who are blind, and according to
the American Foundation for the Blind’s 2015 report, approximately 400,000 visually impaired
persons live in the State of New York.
4. Plaintiff brings this civil rights action against Atlantic for their failure to design,
construct, maintain, and operate their website to be fully accessible to and independently usable
by Plaintiff and other blind or visually-impaired persons. Defendant are denying blind and
visually-impaired persons throughout the United States with equal access to the goods and services
Atlantic provides to their non-disabled customers through http//:www.Brunomars.com (hereinafter
“Brunomars.com” or “the website”). Defendant’s denial of full and equal access to its website,
and therefore denial of its products and services offered, is a violation of Plaintiff’s rights under
the Americans with Disabilities Act (the “ADA”).
5. Brunomars.com provides to the public a wide array of the goods, services, price
specials, and other programs offered by Atlantic. Yet, Brunomars.com contains thousands of
access barriers that make it difficult if not impossible for blind and visually-impaired customers to
use the website. In fact, the access barriers make it impossible for blind and visually-impaired
users to even complete a transaction on the website. Thus, Atlantic excludes the blind and visually-
impaired from the full and equal participation in the growing Internet economy that is increasingly
a fundamental part of the common marketplace and daily living. In the wave of technological
advances in recent years, assistive computer technology is becoming an increasingly prominent
part of everyday life, allowing blind and visually-impaired persons to fully and independently
access a variety of services.
6. The blind have an even greater need than the sighted to shop and conduct
transactions online due to the challenges faced in mobility. The lack of an accessible website
2
means that blind people are excluded from experiencing transacting with Defendant’s website and
from purchasing goods or services from Defendant’s website.
7. Despite readily available accessible technology, such as the technology in use at
other heavily trafficked websites, which makes use of alternative text, accessible forms, descriptive
links, resizable text and limits the usage of tables and JavaScript, Defendant has chosen to rely on
an exclusively visual interface. Atlantic’s sighted customers can independently browse, select,
and buy online without the assistance of others. However, blind persons must rely on sighted
companions to assist them in accessing, enjoying and purchasing on Brunomars.com.
8. By failing to make the website accessible to blind persons, Defendant is violating
basic equal access requirements under both state and federal law.
9. Congress provided a clear and national mandate for the elimination of
discrimination against individuals with disabilities when it enacted the ADA. Such discrimination
includes barriers to full integration, independent living, and equal opportunity for persons with
disabilities, including those barriers created by websites and other public accommodations that are
inaccessible to blind and visually impaired persons. Similarly, New York state law requires places
of public accommodation to ensure access to goods, services, and facilities by making reasonable
accommodations for persons with disabilities.
10. Visually-impaired and blind persons are unable to enjoy most leisure and
entertainment activities and events to the same extent as sighted persons. For example, they are
unable to see or participate in most sporting events. They can only imagine what a slam dunk or
a stolen base or a backhand down the line looks like. Likewise, their experience at the movies or
live theater cannot compare to the visual images experienced by sighted persons. Seeing facial
expressions, action shots, set décor, and costumes are just a sample of the significant images that
blind people cannot experience at the movies and live theater. The one and only form of
3
entertainment that truly presents an even playing field between the visually-impaired and the
sighted is the joy of music. The blind and visually-impaired, including the Plaintiff, can listen to
music, attend musical events, and become fans of their favorite musical artists, in exactly the same
manner that sighted people can. As such, musical artists such as Bruno Mars, make efforts to
connect with their fans through their websites and other means. The artist websites usually contain
numerous images of the artist, the ability to “subscribe” in order to get advanced access to news
and merchandise, the ability to learn about, listen to and purchase music, the ability to learn about
tour dates and purchase tickets, the ability to shop for merchandise, and the ability to learn about
the artist. Unfortunately, this is where the connection between artist and fan end – at least where
the fan is blind or visually-impaired. Plaintiff has been a big fan of Bruno Mars for many years.
She regularly listens to and is familiar with many of his songs. Plaintiff dreams of attending a
Bruno Mars concert and listening to his music in a live setting. However, when she browsed the
Brunomars.com website, she encountered numerous barriers which limited her accessibility to the
goods and services offered on the website. Plaintiff browsed the brunomars.com website intending
to make an online purchase of the 24K Magic album and the 24K CXC Pinstripe Hockey Jersey
on Brunomars.com. However, unless Defendant remedies the numerous access barriers on its
website, Plaintiff and Class members will continue to be unable to independently navigate, browse,
use, and complete a transaction on Brunomars.com.
11. Because Defendant’s website, Brunomars.com, is not equally accessible to
blind and visually-impaired consumers, it violates the ADA. Plaintiff seeks a permanent injunction
to cause a change in Atlantic’s policies, practices, and procedures so that Defendant’s website will
become and remain accessible to blind and visually-impaired consumers. This complaint also
seeks compensatory damages to compensate Class members for having been subjected to unlawful
discrimination.
4
JURISDICTION AND VENUE
12. This Court has subject matter jurisdiction over this action under 28 U.S.C. §
1331 and 42 U.S.C. § 12181, as Plaintiff’s claims arise under Title III of the ADA, 42 U.S.C. §
12181 et seq., and 28 U.S.C. § 1332, because this is a class action, as defined by 28 U.S.C. §
1332(d)(1)(B), in which a member of the putative class is a citizen of a different state than
Defendant, and the amount in controversy exceeds the sum or value of $5,000,000, excluding
interest and costs. See 28 U.S.C. § 133(d)(2).
13. This Court also has supplemental jurisdiction over pursuant to 28 U.S.C. §
1367, over Plaintiff’s pendent claims under the New York State Human Rights Law, N.Y. Exec.
Law, Article 15 (Executive Law § 290 et seq.) and the New York City Human Rights Law, N.Y.C.
Administrative Code § 8-101 et seq. (“City Law”).
14. Venue is proper in this District of New York pursuant to 28 U.S.C. §§ 1391(b)-
(c) and 144(a) because Plaintiff resides in this District, Defendant conducts and continues to
conduct a substantial and significant amount of business in this District, and a substantial portion
of the conduct complained of herein occurred in this District.
15. Defendant is registered to do business in New York State and has been
conducting business in New York State, including in this District. Defendant purposefully targets
and otherwise solicits business from New York State residents through its website and sells its
products through many retailers in this District. Because of this targeting, it is not unusual for
Atlantic to conduct business with New York State residents. Defendant also has been and is
committing the acts alleged herein in this District and has been and is violating the rights of
consumers in this District and has been and is causing injury to consumers in this District. A
substantial part of the act and omissions giving rise to Plaintiff’s claims have occurred in this
District. Most courts support the placement of venue in the district in which Plaintiff tried and
5
failed to access the Website. In Access Now, Inc. v. Otter Products, LLC 280 F.Supp.3d 287 (D.
Mass. 2017), Judge Patti B. Saris ruled that “although the website may have been created and
operated outside of the district, the attempts to access the website in Massachusetts are part of the
sequence of events underlying the claim. Therefore, venue is proper in [the District of
Massachusetts].” Otter Prods., 280 F.Supp.3d at 294. This satisfies Due Process because the harm
– the barred access to the website – occurred here.” Otter Prods., 280 F.Supp.3d at 293.
Additionally, in Access Now, Inc. v. Sportswear, Inc., No. 17-cv-11211-NMG, 2018 Dist. LEXIS
47318 (D. Mass. Mar. 22, 2018), Judge Nathaniel M. Gorton stated that the Defendant “availed
itself of the forum state’s economic activities by targeting the residents of the Commonwealth . . .
. Such targeting evinces a voluntary attempt to appeal to the customer base in the forum.”
Sportswear, No. 1:17-cv-11211-NMG, 2018 U.S. Dist. LEXIS 47318 at *11. Thus, establishing
a customer base in a particular district is sufficient cause for venue placement. Specifically,
Plaintiff attempted learn more about the artist, subscribe, and intended to make an online purchase
of the 24K Magic album and the 24K CXC Pinstripe Hockey Jersey on Defendant’s website,
Brunomars.com.
PARTIES
16. Plaintiff, is and has been at all relevant times a resident of New York County,
State of New York.
17. Plaintiff is legally blind and a member of a protected class under the ADA, 42
U.S.C. § 12102(l)-(2), the regulations implementing the ADA set forth at 28 CFR §§ 36.101 et
seq., the New York State Human Rights Law and the New York City Human Rights Law.
Plaintiff, Mary Conner, cannot use a computer without the assistance of screen reader software.
Plaintiff, Mary Conner, has been denied the full enjoyment of the facilities, goods and services of
Brunomars.com as a result of accessibility barriers on Brunomars.com.
6
18. Defendant, Atlantic Recording Corporation, is a Delaware Foreign Business
Corporation doing business in New York with its principal place of business located at 1633
Broadway, New York, NY 10019.
19. Atlantic provides to the public a website known as Brunomars.com which
provides consumers with access to an array of goods and services, including, the ability to view
images of Bruno Mars, learn about Bruno Mars’s music and purchase albums, learn about tours
and purchase tickets, shop for merchandise, and subscribe for exclusive access among other
features. Consumers and fans across the United States and the world use Defendant’s website to
learn about the artist and purchase music and merchandise. Defendant’s website is a place of
public accommodation within the definition of Title III of the ADA, 42 U.S.C. § 12181(7). See
Victor Andrews v. Blick Art Materials, LLC, No. 17-cv-767, 2017 WL 3278898 (E.D.N.Y.
August 1, 2017). The inaccessibility of Brunomars.com has deterred Plaintiff from make an
online purchase of the 24K Magic album and the 24K CXC Pinstripe Hockey Jersey.
NATURE OF THE CASE
20. The Internet has become a significant source of information, a portal, and a tool
for conducting business, doing everyday activities such as shopping, learning, banking,
researching, as well as many other activities for sighted, blind and visually-impaired persons alike.
21. The blind access websites by using keyboards in conjunction with screen-
reading software which vocalizes visual information on a computer screen. Except for a blind
person whose residual vision is still sufficient to use magnification, screen access software
provides the only method by which a blind person can independently access the Internet. Unless
websites are designed to allow for use in this manner, blind persons are unable to fully access
Internet websites and the information, products and services contained therein.
7
22. For screen-reading software to function, the information on a website must be
capable of being rendered into text. If the website content is not capable of being rendered into
text, the blind user is unable to access the same content available to sighted users.
23. Blind users of Windows operating system-enabled computers and devises have
several screen-reading software programs available to them. Job Access With Speech, otherwise
known as “JAWS” is currently the most popular, separately purchase and downloaded screen-
reading software program available for blind computer users.
24. The international website standards organization, the World Wide Web
Consortium, known throughout the world as W3C, has published version 2.1 of the Web Content
Accessibility Guidelines (“WCAG 2.1”). WCAG 2.1 are well-established guidelines for making
websites accessible to blind and visually-impaired persons. These guidelines are universally
followed by most large business entities and government agencies to ensure their websites are
accessible. Many Courts have also established WCAG 2.1 as the standard guideline for
accessibility. The federal government has also promulgated website accessibility standards under
Section 508 of the Rehabilitation Act. These guidelines are readily available via the Internet, so
that a business designing a website can easily access them. These guidelines recommend several
basic components for making websites accessible, including but not limited to: adding invisible
alt-text to graphics, ensuring that all functions can be performed using a keyboard and not just a
mouse, ensuring that image maps are accessible, and adding headings so that blind persons can
easily navigate the site. Without these very basic components, a website will be inaccessible to a
blind person using a screen reader. Websites need to be accessible to the “least sophisticated” user
of screen-reading software and need to be able to work with all browsers. Websites need to be
continually updated and maintained to ensure that they remain fully accessible.
FACTUAL ALLEGATIONS
8
25. Defendant, Atlantic Recording Corporation, controls and operates
Brunomars.com. in New York State and throughout the United States and the world.
26. Brunomars.com is a commercial website that offers products, information and
services for online sale. The online store allows the user to browse merchandise, make purchases,
and perform a variety of other functions.
27. Among the features offered by Brunomars.com are the following:
(a) Consumers may use the website to connect with Bruno Mars on social media,
using such sites as Facebook, Twitter, Instagram, and Pinterest;
(b) an online store, allowing customers to purchase Bruno Mars music and the
various lines of Bruno Mars merchandise; and
(c) The ability to view images of Bruno Mars, learn about Bruno Mars’ music and
purchase albums, learn about tours and purchase tickets, and subscribe for exclusive access, among
other features.
28. This case arises out of Atlantic’s policy and practice of denying the blind access
to the goods and services offered by Brunomars.com. Due to Atlantic’s failure and refusal to
remove access barriers to Brunomars.com, blind individuals have been and are being denied equal
access to Bruno Mars, as well as to the numerous goods, services and benefits offered to the public
through Brunomars.com.
29. Atlantic denies the blind access to goods, services and information made
available through Brunomars.com by preventing them from freely navigating Brunomars.com.
30. Brunomars.com contains access barriers that prevent free and full use by
Plaintiff and blind persons using keyboards and screen-reading software. These barriers are
pervasive and include, but are not limited to: lack of alt-text on graphics, inaccessible drop-down
menus, the lack of navigation links, the lack of adequate prompting and labeling, the denial of
9
keyboard access, empty links that contain no text, redundant links where adjacent links go to the
same URL address, and the requirement that transactions be performed solely with a mouse.
31. Alternative text (“Alt-text”) is invisible code embedded beneath a graphical
image on a website. Web accessibility requires that alt-text be coded with each picture so that a
screen-reader can speak the alternative text while sighted users see the picture. Alt-text does not
change the visual presentation except that it appears as a text pop-up when the mouse moves over
the picture. There are many important pictures on Brunomars.com that lack a text equivalent. The
lack of alt-text on these graphics prevents screen readers from accurately vocalizing a description
of the graphics (screen-readers detect and vocalize alt-text to provide a description of the image to
a blind computer user). As a result, Plaintiff and blind Brunomars.com customers are unable to
determine what is on the website, browse the website or investigate and/or make purchases.
32. Brunomars.com also lacks prompting information and accommodations
necessary to allow blind shoppers who use screen-readers to locate and accurately fill-out online
forms. On a shopping site such as Brunomars.com, these forms include search fields to locate
Bruno Mars music and merchandise and fields used to fill-out personal information, including
address and credit card information. Due to lack of adequate labeling, Plaintiff and blind
customers cannot make purchases or inquiries as to Defendant’s merchandise, nor can they enter
their personal identification and financial information with confidence and security.
33. Similarly, Brunomars.com lacks accessible drop-down menus. Drop-down
menus allow customers to locate and choose products as well as specify the size of certain items.
On Brunomars.com, blind customers are not aware if the desired products, such as jerseys, have
been added to the shopping cart because the screen-reader does not indicate the type of product.
Moreover, blind customers are unable to select the size of the product they desire. Therefore,
blind customers are essentially prevented from purchasing any items on Brunomars.com.
10
34. Furthermore, Brunomars.com lacks accessible image maps. An image map is
a function that combines multiple words and links into one single image. Visual details on this
single image highlight different “hot spots” which, when clicked on, allow the user to jump to
many different destinations within the website. For an image map to be accessible, it must
contain alt-text for the various “hot spots.” The image maps on Brunomars.com’s menu page do
not contain adequate alt-text and are therefore inaccessible to Plaintiff and the other blind
individuals attempting to make a purchase. When Plaintiff tried to access the menu link in order
to make a purchase, she was unable to access it completely.
35. Plaintiff and the class of visually-impaired encountered the following additional
specific problems when visiting Brunomars.com:
(a) Tour: Tour dates and tour locations are not announced by the screen-reader.
Consequently, blind visitors to the website have no idea when and where a concert
will take place.
(b) Music + Video: The option to “buy physical” and “buy digital” buttons are
skipped altogether by the screen-reader. Likewise, the five “choose to stream”
button options are skipped by the screen-reader. All of these buttons lack a visible
focus and are skipped on all of the albums listed. Consequently, blind visitors to
the website will be unable to purchase music or stream music.
(c) Store: Blind visitors to the website will not be able to purchase merchandise in
the Store. The clothing items are not properly labeled on the products page. Instead
of hearing a description of the product, a screen-reader user hears the image source.
While the specific product page did announce the product correctly, the size combo
box is mislabeled and users will not be aware of its existence, the quantity box is
skipped, and most significantly, the “add to cart” button is skipped. Consequently,
blind visitors cannot add to cart or proceed to checkout.
Therefore, blind customers are essentially prevented from purchasing any items on
Brunomars.com.
36. Moreover, the lack of navigation links on Defendant’s website makes
attempting to navigate through Brunomars.com even more time consuming and confusing for
Plaintiff and blind consumers.
11
37. Brunomars.com requires the use of a mouse to complete a transaction. Yet, it
is a fundamental tenet of web accessibility that for a web page to be accessible to Plaintiff and
blind people, it must be possible for the user to interact with the page using only the keyboard.
Indeed, Plaintiff and blind users cannot use a mouse because manipulating the mouse is a visual
activity of moving the mouse pointer from one visual spot on the page to another. Thus,
Brunomars.com’s inaccessible design, which requires the use of a mouse to complete a
transaction, denies Plaintiff and blind customers the ability to independently navigate and/or
make purchases on Brunomars.com.
38. Due to Brunomars.com’s inaccessibility, Plaintiff and blind customers must in
turn spend time, energy, and/or money to make their purchases at traditional brick-and-mortar
retailers. Some blind customers may require a driver to get to the stores or require assistance in
navigating the stores. By contrast, if Brunomars.com was accessible, a blind person could
independently investigate products and make purchases via the Internet as sighted individuals
can and do. According to WCAG 2.1 Guideline 2.4.1, a mechanism is necessary to bypass
blocks of content that are repeated on multiple webpages because requiring users to extensively
tab before reaching the main content is an unacceptable barrier to accessing the website.
Plaintiff must tab through every navigation bar option and footer on Defendant’s website in an
attempt to reach the desired service. Thus, Brunomars.com’s inaccessible design, which requires
the use of a mouse to complete a transaction, denies Plaintiff and blind customers the ability to
independently make purchases on Brunomars.com.
39. Brunomars.com thus contains access barriers which deny the full and equal
access to Plaintiff, who would otherwise use Brunomars.com and who would otherwise be able
to fully and equally enjoy the benefits and services of Brunomars.com in New York State and
throughout the United States.
12
40. Plaintiff, Mary Conner, has made numerous attempts to visit, browse, and
complete a purchase on Brunomars.com, most recently in January 2019, but was unable to do so
independently because of the many access barriers on Defendant’s website. These access
barriers have caused Brunomars.com to be inaccessible to, and not independently usable by,
blind and visually-impaired persons. Amongst other access barriers experienced, Plaintiff was
unable to make an online purchase of the 24K Magic album and the 24K CXC Pinstripe Hockey
41. As described above, Plaintiff has actual knowledge of the fact that
Defendant’s website, Brunomars.com, contains access barriers causing the website to be
inaccessible, and not independently usable by, blind and visually-impaired persons.
42. These barriers to access have denied Plaintiff full and equal access to, and
enjoyment of, the goods, benefits and services of Brunomars.com.
43. Defendant engaged in acts of intentional discrimination, including but not
limited to the following policies or practices:
(a) constructed and maintained a website that is inaccessible to blind class
members with knowledge of the discrimination; and/or
(b) constructed and maintained a website that is sufficiently intuitive and/or
obvious that is inaccessible to blind class members; and/or
(c) failed to take actions to correct these access barriers in the face of substantial
harm and discrimination to blind class members.
44. Defendant utilizes standards, criteria or methods of administration that have
the effect of discriminating or perpetuating the discrimination of others.
45. Because of Defendant’s denial of full and equal access to, and enjoyment of,
the goods, benefits and services of Brunomars.com, Plaintiff and the class have suffered an
13
injury-in-fact which is concrete and particularized and actual and is a direct result of Defendant’s
conduct.
CLASS ACTION ALLEGATIONS
46. Plaintiff, on behalf of herself and all others similarly situated, seeks
certification of the following nationwide class pursuant to Rule 23(a) and 23(b)(2) of the Federal
Rules of Civil Procedure: “all legally blind individuals in the United States who have attempted
to access Brunomars.com and as a result have been denied access to the enjoyment of goods and
services offered by Brunomars.com, during the relevant statutory period.”
47. Plaintiff seeks certification of the following New York subclass pursuant to
Fed.R.Civ.P. 23(a), 23(b)(2), and, alternatively, 23(b)(3): “all legally blind individuals in New
York State who have attempted to access Brunomars.com and as a result have been denied
access to the enjoyment of goods and services offered by Brunomars.com, during the relevant
statutory period.”
48. There are hundreds of thousands of visually-impaired persons in New York
State. There are approximately 8.1 million people in the United States who are visually-
impaired. Id. Thus, the persons in the class are so numerous that subscribeder of all such persons
is impractical and the disposition of their claims in a class action is a benefit to the parties and to
the Court.
49. This case arises out of Defendant’s policy and practice of maintaining an
inaccessible website denying blind persons access to the goods and services of Brunomars.com.
Due to Defendant’s policy and practice of failing to remove access barriers, blind persons have
been and are being denied full and equal access to independently browse, select and shop on
Brunomars.com.
14
50. There are common questions of law and fact common to the class, including
without limitation, the following:
(a) Whether Brunomars.com is a “public accommodation” under the ADA;
(b) Whether Brunomars.com is a “place or provider of public accommodation”
under the laws of New York;
(c) Whether Defendant, through its website, Brunomars.com, denies the full and
equal enjoyment of its goods, services, facilities, privileges, advantages, or accommodations to
people with visual disabilities in violation of the ADA; and
(d) Whether Defendant, through its website, Brunomars.com, denies the full and
equal enjoyment of its goods, services, facilities, privileges, advantages, or accommodations to
people with visual disabilities in violation of the law of New York.
51. The claims of the named Plaintiff are typical of those of the class. The class,
similar to the Plaintiff, is severely visually-impaired or otherwise blind, and claims Atlantic has
violated the ADA, and/or the laws of New York by failing to update or remove access barriers on
their website, Brunomars.com, so it can be independently accessible to the class of people who
are legally blind.
52. Plaintiff will fairly and adequately represent and protect the interests of the
members of the Class because Plaintiff has retained and is represented by counsel competent and
experienced in complex class action litigation, and because Plaintiff has no interests antagonistic
to the members of the class. Class certification of the claims is appropriate pursuant to Fed. R.
Civ. P. 23(b)(2) because Defendant has acted or refused to act on grounds generally applicable to
the Class, making appropriate both declaratory and injunctive relief with respect to Plaintiff and
the Class as a whole.
15
53. Alternatively, class certification is appropriate under Fed. R. Civ. P. 23(b)(3)
because questions of law and fact common to Class members clearly predominate over questions
affecting only individual class members, and because a class action is superior to other available
methods for the fair and efficient adjudication of this litigation.
54. Judicial economy will be served by maintenance of this lawsuit as a class
action in that it is likely to avoid the burden that would be otherwise placed upon the judicial
system by the filing of numerous similar suits by people with visual disabilities throughout the
United States.
55. References to Plaintiff shall be deemed to include the named Plaintiff and
each member of the class, unless otherwise indicated.
FIRST CAUSE OF ACTION
(Violation of 42 U.S.C. §§ 12181 et seq. – Title III of the Americans with Disabilities Act)
56. Plaintiff repeats, realleges and incorporates by reference the allegations
contained in paragraphs 1 through 55 of this Complaint as though set forth at length herein.
57. Title III of the American with Disabilities Act of 1990, 42 U.S.C. § 12182(a)
provides that “No individual shall be discriminated against on the basis of disability in the full
and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations
of any place of public accommodation by any person who owns, leases (or leases to), or operates
a place of public accommodation.” Title III also prohibits an entity from “[u]tilizing standards or
criteria or methods of administration that have the effect of discriminating on the basis of
disability.” 42 U.S.C. § 12181(b)(2)(D)(I).
58. Brunomars.com is a sales establishment and public accommodation within the
definition of 42 U.S.C. §§ 12181(7).
16
59. Defendant is subject to Title III of the ADA because it owns and operates
Brunomars.com.
60. Under Title III of the ADA, 42 U.S.C. § 12182(b)(1)(A)(I), it is unlawful
discrimination to deny individuals with disabilities or a class of individuals with disabilities the
opportunity to participate in or benefit from the goods, services, facilities, privileges, advantages,
or accommodations of an entity.
61. Under Title III of the ADA, 42 U.S.C. § 12182(b)(1)(A)(II), it is unlawful
discrimination to deny individuals with disabilities or a class of individuals with disabilities an
opportunity to participate in or benefit from the goods, services, facilities, privileges, advantages,
or accommodation, which is equal to the opportunities afforded to other individuals.
62. Specifically, under Title III of the ADA, 42 U.S.C. § 12182(b)(2)(A)(II),
unlawful discrimination includes, among other things, “a failure to make reasonable
modifications in policies, practices, or procedures, when such modifications are necessary to
afford such goods, services, facilities, privileges, advantages, or accommodations to individuals
with disabilities, unless the entity can demonstrate that making such modifications would
fundamentally alter the nature of such goods, services, facilities, privileges, advantages or
accommodations.”
63. In addition, under Title III of the ADA, 42 U.S.C. § 12182(b)(2)(A)(III),
unlawful discrimination also includes, among other things, “a failure to take such steps as may
be necessary to ensure that no individual with disability is excluded, denied services, segregated
or otherwise treated differently than other individuals because of the absence of auxiliary aids
and services, unless the entity can demonstrate that taking such steps would fundamentally alter
the nature of the good, service, facility, privilege, advantage, or accommodation being offered or
would result in an undue burden.”
17
64. There are readily available, well-established guidelines on the Internet for
making websites accessible to the blind and visually-impaired. These guidelines have been
followed by other business entities in making their websites accessible, including but not limited
to ensuring adequate prompting and accessible alt-text. Incorporating the basic components to
make their website accessible would neither fundamentally alter the nature of Defendant’s
business nor result in an undue burden to Defendant.
65. The acts alleged herein constitute violations of Title III of the ADA, 42 U.S.C.
§ 12101 et seq., and the regulations promulgated thereunder. Patrons of Atlantic who are blind
have been denied full and equal access to Brunomars.com, have not been provided services that
are provided to other patrons who are not disabled, and/or have been provided services that are
inferior to the services provided to non-disabled patrons.
66. Defendant has failed to take any prompt and equitable steps to remedy its
discriminatory conduct. These violations are ongoing.
67. As such, Defendant discriminates, and will continue in the future to
discriminate against Plaintiff and members of the proposed class and subclass on the basis of
disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages,
accommodations and/or opportunities of Brunomars.com in violation of Title III of the
Americans with Disabilities Act, 42 U.S.C. §§ 12181 et seq. and/or its implementing regulations.
68. Unless the Court enjoins Defendant from continuing to engage in these
unlawful practices, Plaintiff and members of the proposed class and subclass will continue to
suffer irreparable harm.
69. The actions of Defendant were and are in violation of the ADA, and therefore
Plaintiff invokes his statutory right to injunctive relief to remedy the discrimination.
70. Plaintiff is also entitled to reasonable attorneys’ fees and costs.
18
71. Pursuant to 42 U.S.C. § 12188 and the remedies, procedures, and rights set
forth and incorporated therein, Plaintiff prays for judgment as set forth below.
SECOND CAUSE OF ACTION
(Violation of New York State Human Rights Law, N.Y. Exec. Law
Article 15 (Executive Law § 292 et seq.))
72. Plaintiff repeats, realleges and incorporates by reference the allegations
contained in paragraphs 1 through 71 of this Complaint as though set forth at length herein.
73. N.Y. Exec. Law § 296(2)(a) provides that it is “an unlawful discriminatory
practice for any person, being the owner, lessee, proprietor, manager, superintendent, agent, or
employee of any place of public accommodation . . . because of the . . . disability of any person,
directly or indirectly, to refuse, withhold from or deny to such person any of the
accommodations, advantages, facilities or privileges thereof.”.
74. Brunomars.com is a sales establishment and public accommodation within the
definition of N.Y. Exec. Law § 292(9).
75. Defendant is subject to the New York Human Rights Law because it owns and
operates Brunomars.com. Defendant is a person within the meaning of N.Y. Exec. Law. §
76. Defendant is violating N.Y. Exec. Law § 296(2)(a) in refusing to update or
remove access barriers to Brunomars.com, causing Brunomars.com to be completely
inaccessible to the blind. This inaccessibility denies blind patrons the full and equal access to the
facilities, goods and services that Defendant makes available to the non-disabled public.
77. Specifically, under N.Y. Exec. Law § unlawful discriminatory practice
includes, among other things, “a refusal to make reasonable modifications in policies, practices,
or procedures, when such modifications are necessary to afford facilities, privileges, advantages
or accommodations to individuals with disabilities, unless such person can demonstrate that
19
making such modifications would fundamentally alter the nature of such facilities, privileges,
advantages or accommodations.”
78. In addition, under N.Y. Exec. Law § 296(2)(c)(II), unlawful discriminatory
practice also includes, “a refusal to take such steps as may be necessary to ensure that no
individual with a disability is excluded or denied services because of the absence of auxiliary
aids and services, unless such person can demonstrate that taking such steps would
fundamentally alter the nature of the facility, privilege, advantage or accommodation being
offered or would result in an undue burden.”
79. There are readily available, well-established guidelines on the Internet for
making websites accessible to the blind and visually-impaired. These guidelines have been
followed by other business entities in making their website accessible, including but not limited
to: adding alt-text to graphics and ensuring that all functions can be performed by using a
keyboard. Incorporating the basic components to make their website accessible would neither
fundamentally alter the nature of Defendant’s business nor result in an undue burden to
Defendant.
80. Defendant’s actions constitute willful intentional discrimination against the
class on the basis of a disability in violation of the New York State Human Rights Law, N.Y.
Exec. Law § 296(2) in that Defendant has:
(a) constructed and maintained a website that is inaccessible to blind class
members with knowledge of the discrimination; and/or
(b) constructed and maintained a website that is sufficiently intuitive and/or
obvious that is inaccessible to blind class members; and/or
(c) failed to take actions to correct these access barriers in the face of substantial
harm and discrimination to blind class members.
20
81. Defendant has failed to take any prompt and equitable steps to remedy their
discriminatory conduct. These violations are ongoing.
82. As such, Defendant discriminates, and will continue in the future to
discriminate against Plaintiff and members of the proposed class and subclass on the basis of
disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages,
accommodations and/or opportunities of Brunomars.com under N.Y. Exec. Law § 296(2) et seq.
and/or its implementing regulations. Unless the Court enjoins Defendant from continuing to
engage in these unlawful practices, Plaintiff and members of the class will continue to suffer
irreparable harm.
83. The actions of Defendant were and are in violation of the New York State
Human Rights Law and therefore Plaintiff invokes his right to injunctive relief to remedy the
discrimination.
84. Plaintiff is also entitled to compensatory damages, as well as civil penalties
and fines pursuant to N.Y. Exec. Law § 297(4)(c) et seq. for each and every offense.
85. Plaintiff is also entitled to reasonable attorneys’ fees and costs.
86. Pursuant to N.Y. Exec. Law § 297 and the remedies, procedures, and rights set
forth and incorporated therein, Plaintiff prays for judgment as set forth below.
THIRD CAUSE OF ACTION
(Violation of New York State Civil Rights Law, NY CLS Civ R,
Article 4 (CLS Civ R § 40 et seq.))
87. Plaintiff repeats, realleges and incorporates by reference the allegations
contained in paragraphs 1 through 86 of this Complaint as though set forth at length herein.
88. Plaintiff served notice thereof upon the attorney general as required by N.Y.
Civil Rights Law § 41.
21
89. N.Y. Civil Rights Law § 40 provides that “all persons within the jurisdiction
of this state shall be entitled to the full and equal accommodations, advantages, facilities, and
privileges of any places of public accommodations, resort or amusement, subject only to the
conditions and limitations established by law and applicable alike to all persons. No persons,
being the owner, lessee, proprietor, manager, superintendent, agent, or employee of any such
place shall directly or indirectly refuse, withhold from, or deny to any person any of the
accommodations, advantages, facilities and privileges thereof . . .”
90. N.Y. Civil Rights Law § 40-c(2) provides that “no person because of . . .
disability, as such term is defined in section two hundred ninety-two of executive law, be
subjected to any discrimination in his or her civil rights, or to any harassment, as defined in
section 240.25 of the penal law, in the exercise thereof, by any other person or by any firm,
corporation or institution, or by the state or any agency or subdivision.”
91. Brunomars.com is a sales establishment and public accommodation within the
definition of N.Y. Civil Rights Law § 40-c(2).
92. Defendant is subject to New York Civil Rights Law because it owns and
operates Brunomars.com. Defendant is a person within the meaning of N.Y. Civil Law § 40-
93. Defendant is violating N.Y. Civil Rights Law § 40-c(2) in refusing to update
or remove access barriers to Brunomars.com, causing Brunomars.com to be completely
inaccessible to the blind. This inaccessibility denies blind patrons full and equal access to the
facilities, goods and services that Defendant makes available to the non-disabled public.
94. There are readily available, well-established guidelines on the Internet for
making websites accessible to the blind and visually-impaired. These guidelines have been
followed by other business entities in making their website accessible, including but not limited
22
to: adding alt-text to graphics and ensuring that all functions can be performed by using a
keyboard. Incorporating the basic components to make their website accessible would neither
fundamentally alter the nature of Defendant’s business nor result in an undue burden to
Defendant.
95. In addition, N.Y. Civil Rights Law § 41 states that “any corporation which
shall violate any of the provisions of sections forty, forty-a, forty-b or forty two . . . shall for each
and every violation thereof be liable to a penalty of not less than one hundred dollars nor more
than five hundred dollars, to be recovered by the person aggrieved thereby . . .”
96. Specifically, under N.Y. Civil Rights Law § 40-d, “any person who shall
violate any of the provisions of the foregoing section, or subdivision three of section 240.30 or
section 240.31 of the penal law, or who shall aid or incite the violation of any of said provisions
shall for each and every violation thereof be liable to a penalty of not less than one hundred
dollars nor more than five hundred dollars, to be recovered by the person aggrieved thereby in
any court of competent jurisdiction in the county in which the Defendant shall reside . . .”
97. Defendant has failed to take any prompt and equitable steps to remedy their
discriminatory conduct. These violations are ongoing.
98. As such, Defendant discriminates, and will continue in the future to
discriminate against Plaintiff and members of the proposed class on the basis of disability are
being directly indirectly refused, withheld from, or denied the accommodations, advantages,
facilities and privileges thereof in § 40 et seq. and/or its implementing regulations.
99. Plaintiff is entitled to compensatory damages of five hundred dollars per
instance, as well as civil penalties and fines pursuant to N.Y. Civil Rights Law § 40 et seq. for
each and every offense.
FOURTH CAUSE OF ACTION
23
(Violation of New York City Human Rights Law,
N.Y.C. Administrative Code § 8-102, et seq.)
100. Plaintiff repeats, realleges and incorporates by reference the allegations
contained in paragraphs 1 through 99 of this Complaint as though set forth at length herein.
101. N.Y.C. Administrative Code § 8-107(4)(a) provides that “it shall be an
unlawful discriminatory practice for any person, being the owner, lessee, proprietor, manager,
superintendent, agent or employee of any place or provider of public accommodation, because of
. . . disability . . . directly or indirectly, to refuse, withhold from or deny to such person, any of
the accommodations, advantages, facilities or privileges thereof.”
102. Brunomars.com is a sales establishment and public accommodation within
the definition of N.Y.C. Administrative Code § 8-102(9).
103. Defendant is subject to City Law because it owns and operates
Brunomars.com. Defendant is a person within the meaning of N.Y.C. Administrative Code § 8-
104. Defendant is violating N.Y.C. Administrative Code § 8-107(4)(a) in refusing
to update or remove access barriers to Brunomars.com, causing Brunomars.com to be completely
inaccessible to the blind. This inaccessibility denies blind patrons full and equal access to the
facilities, goods, and services that Defendant makes available to the non-disabled public.
Specifically, Defendant is required to “make reasonable accommodation to the needs of persons
with disabilities . . . any person prohibited by the provisions of [§ 8-107 et seq.] from
discriminating on the basis of disability shall make reasonable accommodation to enable a
person with a disability to . . . enjoy the right or rights in question provided that the disability is
known or should have been known by the covered entity.” N.Y.C. Administrative Code § 8-
107(15)(a).
24
105. Defendant’s actions constitute willful intentional discrimination against the
class on the basis of a disability in violation of the N.Y.C. Administrative Code § 8-107(4)(a)
and § 8-107(15)(a) in that Defendant has:
(a) constructed and maintained a website that is inaccessible to blind class
members with knowledge of the discrimination; and/or
(b) constructed and maintained a website that is sufficiently intuitive and/or
obvious that is inaccessible to blind class members; and/or
(c) failed to take actions to correct these access barriers in the face of substantial
harm and discrimination to blind class members.
106. Defendant has failed to take any prompt and equitable steps to remedy their
discriminatory conduct. These violations are ongoing.
107. As such, Defendant discriminates, and will continue in the future to
discriminate against Plaintiff and members of the proposed class and subclass on the basis of
disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages,
accommodations and/or opportunities of Brunomars.com under N.Y.C. Administrative Code § 8-
107(4)(a) and/or its implementing regulations. Unless the Court enjoins Defendant from
continuing to engage in these unlawful practices, Plaintiff and members of the class will continue
to suffer irreparable harm.
108. The actions of Defendant were and are in violation of City law and therefore
Plaintiff invokes his right to injunctive relief to remedy the discrimination.
109. Plaintiff is also entitled to compensatory damages, as well as civil penalties
and fines under N.Y.C. Administrative Code § 8-120(8) and § 8-126(a) for each offense.
110. Plaintiff is also entitled to reasonable attorneys’ fees and costs.
25
111. Pursuant to N.Y.C. Administrative Code § 8-120(8) and § 8-126(a) and the
remedies, procedures, and rights set forth and incorporated therein, Plaintiff prays for judgment
as set forth below.
FIFTH CAUSE OF ACTION
(Declaratory Relief)
112. Plaintiff repeats, realleges and incorporates by reference the allegations
contained in paragraphs 1 through 111 of this Complaint as though set forth at length herein.
113. An actual controversy has arisen and now exists between the parties in that
Plaintiff contends, and is informed and believes that Defendant denies, that Brunomars.com
contains access barriers denying blind customers the full and equal access to the goods, services
and facilities of Brunomars.com, which Atlantic owns, operates and/or controls, fails to comply
with applicable laws including, but not limited to, Title III of the American with Disabilities Act,
42 U.S.C. §§ 12182, et seq., N.Y. Exec. Law § 296, et seq., and N.Y.C. Administrative Code §
8-107, et seq. prohibiting discrimination against the blind.
114. A judicial declaration is necessary and appropriate at this time in order that
each of the parties may know their respective rights and duties and act accordingly.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff respectfully demands judgment in favor of Plaintiff and
the class and against the Defendants as follows:
a)
A preliminary and permanent injunction to prohibit Defendant from violating the
Americans with Disabilities Act, 42 U.S.C. §§ 12182, et seq., N.Y. Exec. Law § 296, et
seq., and N.Y.C. Administrative Code § 8-107, et seq., and the laws of New York;
b) A preliminary and permanent injunction requiring Defendant to take all the steps
necessary to make its website, Brunomars.com, into full compliance with the requirements
26
set forth in the ADA, and its implementing regulations, so that Brunomars.com is readily
accessible to and usable by blind individuals;
c)
A declaration that Defendant owns, maintains and/or operates its website,
Brunomars.com, in a manner which discriminates against the blind and which fails to
provide access for persons with disabilities as required by Americans with Disabilities
Act, 42 U.S.C. §§ 12182, et seq., N.Y. Exec. Law § 296, et seq., and N.Y.C.
Administrative Code § 8-107, et seq., and the laws of New York;
d) An order certifying this case as a class action under Fed. R. Civ. P. 23(a) & (b)(2) and/or
(b)(3), appointing Plaintiff as Class Representative, and his attorneys as Class Counsel;
e)
An order directing Defendants to continually update and maintain its website to ensure
that it remains fully accessible to and usable by the visually-impaired;
f)
Compensatory damages in an amount to be determined by proof, including all applicable
statutory damages and fines, to Plaintiff and the proposed class for violations of their civil
rights under New York State Human Rights Law and City Law;
g) Plaintiff’s reasonable attorneys’ fees, expenses, and costs of suit as provided by state and
federal law;
h) For pre- and post-judgment interest to the extent permitted by law; and
i)
For such other and further relief which this court deems just and proper.
Dated: Brooklyn, New York
February 11, 2019
SHAKED LAW GROUP, P.C.
Attorneys for Plaintiff
By:/s/Dan Shaked_________
Dan Shaked (DS-3331)
44 Court St., Suite 1217
Brooklyn, NY 11201
Tel. (917) 373-9128
e-mail: [email protected]
27
| civil rights, immigration, family |
F0dy_YgBF5pVm5zYGl6Z | LEE LITIGATION GROUP, PLLC
C.K. Lee (CL 4086)
Anne Seelig (AS 3976)
148 West 24th Street, 8th Floor
New York, NY 10011
Tel.: 212-465-1188
Fax: 212-465-1181
Attorneys for Plaintiffs, FLSA Collective Plaintiffs
and the Class
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
MARIA CASTRO and MARIO DEL VALLE MARTINEZ,
on behalf of themselves, FLSA Collective Plaintiffs
and the Class,
Case No:
Plaintiffs,
CLASS AND
COLLECTIVE
ACTION COMPLAINT
v.
HYPER STRUCTURE CORP.
Jury Trial Demanded
d/b/a HYPER STRUCTURE,
SAHEL KHAN, CHARLES TOLIVER,
and MOHAMMAD RAHMAN,
Defendants.
Plaintiffs MARIA CASTRO (“Plaintiff CASTRO” or “Plaintiff”) and MARIO DEL
VALLE MARTINEZ (“Plaintiff MARTINEZ” or “Plaintiff) on behalf of themselves and others
similarly situated, by and through their undersigned attorneys, hereby file this Class and Collective
Action
Complaint
against
Defendants
HYPER
STRUCTURE
CORP.
d/b/a
HYPERSTRUCTURE (“Corporate Defendant”), SAHEL KHAN, CHARLES TOLIVER, and
MOHAMMAD RAHMAN (collectively, “Individual Defendants”; and, together with Corporate
Defendant, “Defendants”), and state as follows:
INTRODUCTION
1.
Plaintiffs allege, pursuant to the Fair Labor Standards Act, as amended, 29 U.S.C.
§§ 201 et. seq. (“FLSA”), that they and others similarly situated are entitled to recover from
Defendants: (1) unpaid wages, including overtime, due to a fixed salary, (2) unpaid wages due to
time-shaving, (3) liquidated damages, and (4) attorneys’ fees and costs.
2.
Plaintiffs further allege that, pursuant to the New York Labor Law (“NYLL”), they
and others similarly situated are entitled to recover from Defendants: (1) unpaid wages, including
overtime, due to fixed salary, (2) unpaid wages due to time-shaving, (3) unpaid spread of hours
premium, (4) statutory penalties, (5) liquidated damages, and (6) attorneys’ fees and costs.
3.
Plaintiffs additionally allege for damages under the Internal Revenue Code, 26
U.S.C. § 7434 for relief, damages, fees and costs in this matter because Defendants willfully filed
fraudulent tax information forms with the Internal Revenue Service (“IRS”).
4.
The IRS will be notified of this Complaint as the Internal Revenue Code requires.
Specifically, the Internal Revenue Code provides that “[a]ny person bringing an action under [26
U.S.C. § 7434] Subsection (a) shall provide a copy of the complaint to the IRS upon the filing of
such complaint with the court.” 26 U.S.C. § 7434(d).
JURISDICTION AND VENUE
5.
This Court has jurisdiction over this controversy pursuant to 29 U.S.C. § 216(b),
28 U.S.C. §§1331, 1337 and 1343, and has supplemental jurisdiction over Plaintiffs’ state law
claims pursuant to 28 U.S.C. §1367.
6.
Venue is proper in the Eastern District pursuant to 28 U.S.C. § 1391.
PARTIES
7.
Plaintiff CASTRO is a resident of Queens County, New York.
8.
Plaintiff MARTINEZ is a resident of Kings County, New York.
9.
Corporate Defendant HYPER STRUCTURE CORP. d/b/a HYPER STRUCTURE
is a domestic business corporation organized under the laws of New York, with a principal place
of business located at 74 Pennsylvania Avenue, Suite 2, Brooklyn, New York 11207, and an
address for service of process located at c/o Mohammad Rahman, 1562 Pacific Street, Brooklyn,
New York 11213.
10.
Individual Defendant SAHEL KHAN is a principal of Corporate Defendant.
Defendant SAHEL KHAN exercises operational control as it relates to all employees including
Plaintiffs, FLSA Collective Plaintiffs and the Class. SAHEL KHAN exercises the power to (and
also delegates to managers and supervisors the power to) fire and hire employees, supervise and
control employee work schedules and conditions of employment, and determine the rate and
method of compensation of employees including those of Plaintiffs, FLSA Collective Plaintiffs
and the Class. At all times, employees could complain to SAHEL KHAN directly regarding any
of the terms of their employment, and SAHEL KHAN had the authority to effect any changes to
the quality and terms of employees’ employment, including changing their schedule,
compensation, or terminating or hiring such employees, and to reprimand any employees for
performing their job duties improperly.
11.
Individual Defendant CHARLES TOLIVER is a principal of Corporate Defendant.
Defendant CHARLES TOLIVER exercises operational control as it relates to all employees
including Plaintiffs, FLSA Collective Plaintiffs and the Class. CHARLES TOLIVER exercises the
power to (and also delegates to managers and supervisors the power to) fire and hire employees,
supervise and control employee work schedules and conditions of employment, and determine the
rate and method of compensation of employees including those of Plaintiffs, FLSA Collective
Plaintiffs and the Class. At all times, employees could complain to CHARLES TOLIVER directly
regarding any of the terms of their employment, and CHARLES TOLIVER had the authority to
effect any changes to the quality and terms of employees’ employment, including changing their
schedule, compensation, or terminating or hiring such employees, and to reprimand any employees
for performing their job duties improperly.
12.
Individual Defendant MOHAMMAD RAHMAN is the owner of Corporate
Defendant. Defendant MOHAMMAD RAHMAN exercises operational control as it relates to all
employees including Plaintiffs, FLSA Collective Plaintiffs and the Class. MOHAMMAD
RAHMAN exercises the power to (and also delegates to managers and supervisors the power to)
fire and hire employees, supervise and control employee work schedules and conditions of
employment, and determine the rate and method of compensation of employees including those of
Plaintiffs, FLSA Collective Plaintiffs and the Class. At all times, employees could complain to
MOHAMMAD RAHMAN directly regarding any of the terms of their employment, and
MOHAMMAD RAHMAN had the authority to effect any changes to the quality and terms of
employees’ employment, including changing their schedule, compensation, or terminating or
hiring such employees, and to reprimand any employees for performing their job duties
improperly.
13.
At all relevant times, Defendants have owned and operated Corporate Defendant as
a general contractor in the construction industry. Attached hereto as Exhibit A (Hyper Structure
LinkedIn Webpage) is a screenshot of Corporate Defendant’s LinkedIn webpage reflecting the
same. Defendants further represent themselves as a “multidisciplinary construction studio” on their
webpage located at http://www.hscny.com/studio-3/. Attached hereto as Exhibit B (Hyper
Structure Webpage) is a screenshot describing the same.
14.
At all relevant times, Corporate Defendant was and continues to be an “enterprise
engaged in commerce” within the meaning of the FLSA.
15.
At all relevant times, the work performed by Plaintiffs, FLSA Collective Plaintiffs
and Class members was directly essential to the business operated by Defendants.
FLSA COLLECTIVE ACTION ALLEGATIONS
16.
Plaintiffs bring claims for relief as a collective action pursuant to FLSA Section
16(b), 29 U.S.C. § 216(b), on behalf of all current and former non-exempt employees, (including
but not limited to construction workers, flag people, foremen, demolishers, laborers, carpenters,
painters, and electricians) employed by Defendants on or after the date that is six years before the
filing of the Complaint (“FLSA Collective Plaintiffs”).
17.
At all relevant times, Plaintiffs and the other FLSA Collective Plaintiffs are and
have been similarly situated, have had substantially similar job requirements and pay provisions,
and are and have been subjected to Defendants’ decisions, policies, plans, programs, practices,
procedures, protocols, routines, and rules of failing to pay proper wages, including overtime
compensation for all hours worked due to Defendants’ policy of time-shaving and a fixed salary.
Plaintiffs’ claims stated herein are essentially the same as those of the other FLSA Collective
Plaintiffs.
18.
The claims for relief are properly brought under and maintained as an opt-in
collective action pursuant to §16(b) of the FLSA, 29 U.S.C. 216(b). The FLSA Collective Plaintiffs
are readily ascertainable. For purposes of notice and other purposes related to this action, their
names and addresses are readily available from the Defendants. Notice can be provided to the
FLSA Collective Plaintiffs via first class mail to the last address known to Defendants.
RULE 23 CLASS ALLEGATIONS – NEW YORK
19.
Plaintiffs bring claims for relief pursuant to the Federal Rules of Civil Procedure
(“FRCP”) Rule 23, on behalf of all current and former non-exempt employees, (including but not
limited to construction workers, flag people, foremen, demolishers, laborers, carpenters, painters,
and electricians) employed by Defendants on or after the date that is six years before the filing of
the Complaint (the “Class Period”).
20.
All said persons, including Plaintiffs, are referred to herein as the “Class.” The
Class members are readily ascertainable. The number and identity of the Class members are
determinable from the records of Defendants. The hours assigned and worked, the position held,
and rates of pay for each Class member may also be determinable from Defendants’ records. For
purposes of notice and other purposes related to this action, their names and addresses are readily
available from Defendants. Notice can be provided by means permissible under FRCP 23.
21.
The proposed Class is so numerous such that a joinder of all members is
impracticable, and the disposition of their claims as a class will benefit the parties and the Court.
Although the precise number of such persons is unknown because the facts on which the
calculation of that number rests presently within the sole control of Defendants, there is no doubt
that there are more than forty (40) members of the Class.
22.
Plaintiffs’ claims are typical of those claims that could be alleged by any member
of the Class, and the relief sought is typical of the relief that would be sought by each member of
the Class in separate actions. All the Class members were subject to the same corporate practices
of Defendants, including (i) failing to pay proper wages, including overtime, due to a fixed salary
(ii) failing to pay proper wages due to time-shaving, (iii) failing to pay spread of hours premium,
(iv) failing to provide wage statements in compliance with NYLL, and (v) failing to provide wage
and hour notices upon hiring and as required thereafter, pursuant to NYLL. All the Class members
were also subject to the same corporate practices of Defendants, namely, filing fraudulent tax
information regarding their employment to the IRS.
23.
Defendants’ corporate-wide policies and practices affected all Class members
similarly, and Defendants benefited from the same type of unfair and/or wrongful acts as to each
Class member. Plaintiffs and other Class members sustained similar losses, injuries and damages
arising from the same unlawful policies, practices and procedures.
24.
Plaintiffs are able to fairly and adequately protect the interests of the Class and has
no interests antagonistic to the Class. Plaintiffs are represented by attorneys who are experienced
and competent in both class action litigation and employment litigation and have previously
represented plaintiffs in wage and hour cases.
25.
A class action is superior to other available methods for the fair and efficient
adjudication of the controversy – particularly in the context of the wage and hour litigation where
individual class members lack the financial resources to vigorously prosecute a lawsuit against
corporate defendants. Class action treatment will permit a large number of similarly situated
persons to prosecute common claims in a single forum simultaneously, efficiently, and without the
unnecessary duplication of efforts and expense that numerous individual actions engender.
Because losses, injuries and damages suffered by each of the individual Class members are small
in the sense pertinent to a class action analysis, the expenses and burden of individual litigation
would make it extremely difficult or impossible for the individual Class members to redress the
wrongs done to them. On the other hand, important public interests will be served by addressing
the matter as a class action. The adjudication of individual litigation claims would result in a great
expenditure of Court and public resources; however, treating the claims as a class action would
result in a significant saving of these costs. The prosecution of separate actions by individual
members of the Class would create a risk of inconsistent and/or varying adjudications with respect
to the individual members of the Class, establishing incompatible standards of conduct for
Defendants and resulting in the impairment of class members’ rights and the disposition of their
interests through actions to which they were not parties. The issues in this action can be decided
by means of common, class-wide proof. In addition, if appropriate, the Court can, and is
empowered to, fashion methods to efficiently manage this action as a class action.
26.
Defendants and other employers throughout the state violate the NYLL. Current
employees are often afraid to assert their rights out of fear of direct or indirect retaliation. Former
employees are fearful of bringing claims because doing so can harm their employment, future
employment, and future efforts to secure employment. Class actions provide class members who
are not named in the Complaint a degree of anonymity, which allows for the vindication of their
rights while eliminating or reducing these risks.
27.
There are questions of law and fact common to the Class which predominate over
any questions affecting only individual class members, including:
a) Whether Defendants employed Plaintiffs and the Class members within the
meaning of NYLL;
b) What are and were the policies, practices, programs, procedures, protocols and
plans of Defendants regarding the types of work and labor for which Defendants
did not pay Plaintiffs and the Class members;
c) At what common rate, or rates subject to common methods of calculation, were
and are Defendants required to pay Plaintiffs and the Class members for their
work;
d) Whether Defendants properly notified Plaintiffs and the Class members of their
hourly rate and overtime rate;
e) Whether Defendants paid Plaintiffs and Class members the proper wages for all
hours worked;
f) Whether Defendants caused time-shaving by paying Plaintiffs and Class
members only for those hours which they were scheduled to work, rather than
for the actual hours that they worked;
g) Whether Defendants paid Plaintiffs and Class members their spread of hours
premium for days worked in excess of ten (10) hours per workday;
h) Whether Defendants failed to withhold taxes from the wages of Plaintiffs and
the Class;
i) Whether Defendants provided Plaintiffs and the Class with accurate tax
statements for each tax year that they worked;
j) Whether Defendants provided proper wage notice, at date of hiring and dates
of all wage changes thereafter, to all non-exempt employees per requirements
of the NYLL; and
k) Whether Defendants provided proper wage statements for each pay period to
Plaintiffs and Class members, and whether those wage statements properly
stated Plaintiffs’ overtime compensation and spread of hours in accordance with
NYLL.
STATEMENT OF FACTS
PLAINTIFF MARIA CASTRO:
28.
In or around February 2019, Plaintiff CASTRO was hired by Defendants to work
as a flag person at a construction site located at 138-28 Queens Boulevard, Jamaica, New York,
11435 (the “Construction Site”). Plaintiff CASTRO’s employment with Defendants was
terminated in or around December 2019.
29.
Throughout her employment with Defendants, Plaintiff CASTRO was scheduled
to work five (5) days a week, from 7:30 a.m. to 3:00 p.m., for approximately thirty-seven and a
half (37.5) hours per week. However, approximately three (3) days each week, when concrete was
delivered to the Construction Site, Defendants required Plaintiff CASTRO to stay back and
perform off-the-clock work until 7:00 p.m. As a result, Plaintiff CASTRO worked approximately
twelve (12) hours off-the-clock.
30.
At all relevant times, Defendants compensated Plaintiff CASTRO in cash on a fixed
salary basis, regardless of her actual hours worked, and there was never any understanding that the
fixed salary was intended to cover any overtime hours over forty (40) hours worked by Plaintiff
CASTRO.
31.
Although they represented to her upon the time of her hiring that she would be
compensated at a rate of one-hundred fifty dollars ($150) per workday, Plaintiff CASTRO was
instead paid a fixed salary of four-hundred dollars ($400) per week. In or around December 2019,
Defendants began compensating Plaintiff CASTRO in the amount of three-hundred dollars ($300)
each week. For the final two (2) weeks of her employment, Plaintiff CASTRO did not receive any
compensation.
32.
At all relevant times, Plaintiff CASTRO did not receive any overtime
compensation, despite working over forty (40) hours. FLSA Collective Plaintiffs and Class
members similarly did not receive any overtime compensation.
33.
During the last month of Plaintiff CASTRO’s employment, Defendants knowingly
and willfully operated their business with a policy of not paying Plaintiff CASTRO, FLSA
Collective Plaintiffs and Class Members the proper minimum wage due to a fixed salary.
34.
Throughout her employment, when Plaintiff CASTRO worked in excess of ten (10)
hours in a workday, she was not compensated her spread of hours premium. Class members
similarly did not receive their spread of hours premium for workdays that exceeded ten (10) hours
in length.
PLAINTIFF MARIO DEL VALLE MARTINEZ:
35.
In or around October 2019, Plaintiff MARTINEZ was hired by Defendants to work
as a foreman at the Construction Site located at 138-28 Queens Boulevard, Jamaica, New York,
11435. Plaintiff MARTINEZ’s employment with Defendants was terminated in or around March
36.
Throughout his employment with Defendants, Plaintiff MARTINEZ was scheduled
to work five (5) days a week, from 6:30 a.m. to 4:30 p.m., for approximately fifty (50) hours per
week. However, when concrete was delivered to the Construction Site approximately three (3)
days each week, Defendants required Plaintiff MARTINEZ to perform off-the-clock work until
7:00 p.m. As a result, Plaintiff MARTINEZ worked approximately seven and a half (7.5) hours
off-the-clock.
37.
At all relevant times, Defendants compensated Plaintiff MARTINEZ on a fixed
salary basis in cash, regardless of actual hours worked. From the start of his employment until
January 2020, Plaintiff MARTINEZ was compensated at a rate of one thousand eight-hundred
dollars ($1800) per workweek. Starting in January 2020, Defendants compensated Plaintiff
MARTINEZ at a rate of one thousand dollars ($1000) per week. From January 2020 until end of
his employment in March 2020, Defendants failed to pay Plaintiff MARTINEZ his proper fixed
salary, amounting to Defendants owing Plaintiff MARTINEZ eight thousand five-hundred dollars
($8500).
38.
At all relevant times, Plaintiff MARTINEZ did not receive any overtime
compensation, despite working over forty (40) hours per week. FLSA Collective Plaintiffs and
Class members similarly did not receive any overtime compensation.
39.
Throughout his employment, Plaintiff MARTINEZ worked in excess of ten (10)
hours every workday, but he was not compensated his spread of hours premium. Class members
similarly did not receive their spread of hours premium for workdays that exceeded ten (10) hours
in length.
40.
At all relevant times, Plaintiffs were paid a fixed weekly salary, regardless of how
many hours they worked each workweek. However, there was never any agreement that Plaintiffs
fixed weekly salary was intended to cover the overtime hours in excess of forty (40) hours that
they worked. FLSA Collective Plaintiffs and Class members were similarly paid on a fixed salary
basis and were not compensated their overtime premium of time and a half for all hours worked
over forty (40) hours, even though there was never any agreement that their fixed salaries would
cover overtime.
41.
At all relevant times, Plaintiffs, FLSA Collective Plaintiffs and Class members
were not properly compensated for all hours worked, due to Defendant’s policy of time-shaving.
Defendants did not compensate Plaintiffs, FLSA Collective Plaintiffs and Class member for off-
the-clock work that they did on the days concreate was delivered. For approximately three (3) days
per week when concrete was delivered to the Construction Site, Plaintiffs, FLSA Collective
Plaintiffs and Class members stay until past their scheduled shifts.
42.
Throughout his employment, Plaintiff MARTINEZ worked in excess of ten (10)
hours every workday, but he was not compensated his spread of hours premium. Plaintiff
CASTRO worked in excess of ten (10) hours three days per week when concrete was delivered.
FLSA Collective Plaintiffs and Class members worked similar hours that regularly exceeded ten
(10) hours per day and were not compensated their spread of hours premium.
43.
Plaintiffs and Class members would be paid in cash and were not given proper wage
statements when they received pay.
44.
As a result of Defendants paying Plaintiffs and Class members in cash, Defendants
failed to withhold any of Plaintiffs’ and Class members’ wages for tax purposes.
45.
Defendants further failed to provide Plaintiffs and Class members with accurate W-
2 tax statements for each tax year during which they worked.
46.
Defendants knew or should have known that they had a legal duty to withhold taxes
from all of Plaintiffs’ and Class members’ earnings and to provide Plaintiffs and Class members
with accurate W-2 tax statements for each tax year during which Plaintiffs and Class members
worked.
47.
Defendants knowingly and willfully operated their business with a policy of not
paying Plaintiffs, FLSA Collective Plaintiffs, and Class members their lawful wages.
48.
Defendants knowingly and willfully operated their business with a policy of not
paying the proper overtime rate for hours worked in excess of forty (40) hours in each workweek
due to a fixed salary and time-shaving, to Plaintiff, FLSA Collective Plaintiffs and Class members.
49.
Defendants knowingly and willfully operated their business with a policy of not
paying spread of hours premiums to Plaintiffs and Class members, in violation of the NYLL.
50.
Defendants had a legal obligation to file accurate tax statements with the IRS.
51.
Defendants’ actions were willful, and showed reckless disregard for the provisions
of the Internal Revenue Code.
52.
Defendants knowingly and willfully operated their business with a policy of not
providing proper wage statements as required under the NYLL.
53.
Defendants knowingly and willfully operated their business with a policy of not
providing proper wage notices to employees, at the beginning of employment and at dates of all
wage changes thereafter, pursuant to the requirements of the NYLL.
54.
Plaintiffs retained Lee Litigation Group, PLLC to represent Plaintiffs, FLSA
Collective Plaintiffs and Class members, in this litigation and have agreed to pay the firm a
reasonable fee for its services.
STATEMENT OF CLAIM
COUNT I
VIOLATION OF THE FAIR LABOR STANDARDS ACT
55.
Plaintiffs reallege and reaver Paragraphs 1 through 54 of this Class and Collective
Action Complaint as if fully set forth herein.
56.
At all relevant times, Defendants were and continue to be employers engaged in
interstate commerce and/or the production of goods for commerce within the meaning of the
FLSA, 29 U.S.C. §§ 206(a) and 207(a). Further, Plaintiffs and FLSA Collective Plaintiffs are
covered individuals within the meaning of the FLSA, 29 U.S.C. §§ 206(a) and 207(a).
57.
At all relevant times, Defendants employed Plaintiffs and FLSA Collective
Plaintiffs within the meaning of the FLSA.
58.
At all relevant times, Corporate Defendant had gross annual revenues in excess of
$500,000.
59.
At all relevant times, Defendants engaged in a policy and practice of refusing to
pay proper wages, including overtime compensation at the statutory rate of time and one-half to
Plaintiffs and FLSA Collective Plaintiffs for all of their hours worked in excess of forty (40) hours
per workweek, due to a fixed salary and time-shaving.
60.
At all relevant times, Defendants engaged in a policy of refusing to pay the statutory
minimum wage to Plaintiff CASTRO and FLSA Collective Plaintiffs due to a fixed salary.
61.
Records concerning the number of hours worked by Plaintiffs and FLSA Collective
Plaintiffs and the actual compensation paid to Plaintiffs and FLSA Collective Plaintiffs should be
in the possession and custody of Defendants. Plaintiffs intend to obtain all records by appropriate
discovery proceedings to be taken promptly in this case and, if necessary, will then seek leave of
Court to amend this Complaint to set forth the precise amount due.
62.
Defendants knew of and/or showed a willful disregard for the provisions of the
FLSA as evidenced by their intentional failure to compensate Plaintiffs and FLSA Collective
Plaintiffs for every hour they worked, including regular hours and overtime hours.
63.
Defendants failed to properly disclose or apprise Plaintiffs and FLSA Collective
Plaintiffs of their rights under the FLSA.
64.
As a direct and proximate result of Defendants’ willful disregard of the FLSA,
Plaintiffs and FLSA Collective Plaintiffs are entitled to liquidated (i.e,, double) damages pursuant
to the FLSA.
65.
Due to the intentional, willful and unlawful acts of Defendants, Plaintiffs and FLSA
Collective Plaintiffs suffered damages in an amount not presently ascertainable of unpaid wages,
including overtime, due to fixed salary, unpaid wages due to time-shaving, and an equal amount
as liquidated damages.
66.
Plaintiffs and FLSA Collective Plaintiffs are entitled to an award of their reasonable
attorneys’ fees and costs pursuant to 29 U.S.C. §216(b).
COUNT II
VIOLATION OF THE NEW YORK LABOR LAW
67.
Plaintiffs reallege and reaver Paragraphs 1 through 66 of this Class and Collective
Action Complaint as if fully set forth herein.
68.
At all relevant times, Plaintiffs and Class members were employed by Defendants
within the meaning of the NYLL §§ 2 and 651.
69.
At all relevant times, Defendants willfully violated Plaintiffs’ and Class members’
rights by failing to pay them their proper wages, including overtime compensation at the rate of
not less than one- and one-half times the regular rate of pay for each hour worked in excess of
forty (40) hours in a workweek, due to a fixed salary and time-shaving.
70.
At all relevant times, Defendants engaged in a policy of time-shaving and refused
to compensate Plaintiffs and Class members for all of their hours that they actually worked each
71.
Defendants willfully violated Plaintiff CASTRO’s and Class members’ rights by
failing to pay them minimum wages in the lawful amount for hours worked due to a fixed salary.
72.
At all relevant times, Defendants willfully violated Plaintiffs’ and Class members’
rights by failing to pay “spread of hours” premiums to them for each workday that exceeded ten
(10) or more hours.
73.
Defendants failed to properly notify employees of their hourly pay rate and
overtime rate, in direct violation of NYLL.
74.
Defendants knowingly and willfully failed to provide Plaintiffs and Class members
with proper wage and hour notices as required under the NYLL.
75.
Defendants knowingly and willfully failed to provide Plaintiffs and Class members
with proper wage statements as required under NYLL.
76.
Due to the Defendants’ NYLL violations, Plaintiffs and Class members are entitled
to recover from Defendants their unpaid wages, including overtime, due to fixed salary, unpaid
wages due to time-shaving, unpaid spread of hours spread of hours premium, reasonable attorneys’
fees, liquidated damages, statutory penalties and costs and disbursements of the action.
COUNT III
CIVIL DAMAGES FOR FRAUDULENT FILING OF INFORMATION RETURNS
UNDER 26 U.S.C. § 7434(a)
77.
Plaintiffs reallege and reaver Paragraphs 1 through 76 of this Class and Collective
Action Complaint as if fully set forth herein.
78.
By failing to provide Plaintiffs, FLSA Collective Plaintiffs and Class members with
accurate IRS Forms W-2 for all of the tax years during which they were employed by Defendants,
and failing to properly record, account for, and report to the IRS all monies paid to Plaintiffs,
FLSA Collective Plaintiff and Class members as compensation for all of the work Plaintiffs, FLSA
Collective Plaintiff and Class members performed during the course of their employment with
Defendants, and failing to withhold amounts listed on W-2 forms as monies withheld, Defendants
filed fraudulent information returns with the IRS, in violation of 26 U.S.C. § 7434.
79.
Under the Internal Revenue Code, “[i]f any person willfully files a fraudulent
information return with respect to payments purported to be made to any other person, such person
may bring a civil action for damages against the person so filing such return.” 26 U.S.C. § 7434(a).
PRAYER FOR RELIEF
WHEREFORE, Plaintiffs, on behalf of themselves, FLSA Collective Plaintiffs and Class
members, respectfully requests that this Court grant the following relief:
a. A declaratory judgment that the practices complained of herein are unlawful under
the FLSA and the NYLL;
b. An injunction against Defendants and their officers, agents, successors, employees,
representatives and any and all persons acting in concert with them as provided by
law, from engaging in each of the unlawful practices, policies and patterns set forth
herein;
c. An award of unpaid wages, including overtime, due to a fixed salary and time-
shaving due under the FLSA and the NYLL;
d. An award of unpaid spread of hours premiums due under the NYLL;
e. An award of statutory damages as a result of Defendants’ failure to comply with
the Internal Revenue Code tax filing requirements;
f. Cost attributable to resolving deficiencies;
g. Damages resulting from the additional tax debt and additional time and expenses
associated with any necessary correction;
h. That Defendants be ordered to take all the necessary steps to correct the information
returns identified above;
i. An award of statutory penalties as a result of Defendants’ failure to comply with
NYLL wage notice and wage statement requirements;
j. An award of liquidated and/or punitive damages as a result of Defendants’ willful
failure to pay compensation for all hours worked and overtime compensation for
all hours worked over forty (40) hours per workweek, pursuant to 29 U.S.C. § 216;
k. An award of liquidated and/or punitive damages as a result of Defendants’ willful
failure to pay wages for off-the-clock work, including overtime hours, pursuant to
the NYLL;
l. An award of prejudgment and post judgment interest, costs and expenses of this
action together with reasonable attorneys’ and expert fees and statutory penalties;
m. Designation of Plaintiffs as Representatives of FLSA Collective Plaintiffs;
n. Designation of this action as a class action pursuant to FRCP 23;
o. Designation of Plaintiffs as Representatives of the Class; and
p. Such other and further relief as this Court deems just and proper.
JURY DEMAND
Pursuant to Rule 38(b) of the Federal Rules of Civil Procedure, Plaintiffs demand trial by
jury on all issues so triable as of right by jury.
Dated: March 16, 2021
Respectfully submitted,
By:
/s/ C.K. Lee
C.K. Lee, Esq.
LEE LITIGATION GROUP, PLLC
C.K. Lee (CL 4086)
Anne Seelig (AS 3976)
148 West 24th Street, 8th Floor
New York, NY 10011
Tel.: 212-465-1188
Fax: 212-465-1181
Attorneys for Plaintiffs,
FLSA Collective Plaintiffs and the Class
| employment & labor |
Me2JEocBD5gMZwczAubE |
BRODSKY & SMITH, LLC
Evan J. Smith, Esquire (SBN 242352)
[email protected]
Ryan P. Cardona, Esquire (SBN 302113)
[email protected]
9595 Wilshire Boulevard, Suite 900
Beverly Hills, CA 90212
Phone: (877) 534-2590
Facsimile: (310) 247-0160
Attorneys for Plaintiff
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF CALIFORNIA
DANIEL ESTES, on behalf of himself
and all others similarly situated,
Plaintiff,
vs.
Civil Action No. ______________
CLASS ACTION COMPLAINT FOR BREACH
OF FIDUCIARY DUTIES AND VIOLATIONS
OF SECTIONS 14(a) AND 20(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
JURY TRIAL DEMANDED
FITBIT, INC., JAMES PARK, ERIC N.
FRIEDMAN, LAURA ALBER,
MATTHEW BROMBER, GLENDA
FLANAGAN, BRADLEY M. FLUEGEL,
STEVEN MURRAY and CHRISTOPHER
PAISLEY,
Defendants.
Plaintiff, Daniel Estes (“Plaintiff”), by his attorneys, on behalf of himself and those
similarly situated, files this action against the defendants, and alleges upon information and belief,
except for those allegations that pertain to him, which are alleged upon personal knowledge, as
follows:
SUMMARY OF THE ACTION
1.
Plaintiff brings this stockholder class action on behalf of himself and all other
public stockholders of Fitbit, Inc. (“Fitbit” or the “Company”), against Fitbit and the Company’s
Board of Directors (the “Board” or the “Individual Defendants,” collectively with the Company,
the “Defendants”), for violations of Sections 14(a) and 20(a) of the Securities and Exchange Act
of 1934 (the “Exchange Act”) and breaches of fiduciary duty as a result of Defendants’ efforts to
sell the Company to Google, LLC (“Parent”), and Magnoliophyta, Inc. (“Merger Sub,” collectively
with Parent, “Google”) as a result of an unfair process for an unfair price, and to enjoin an
upcoming stockholder vote on a proposed all cash transaction valued at approximately $2.1 billion
(the “Proposed Transaction”).
2.
The terms of the Proposed Transaction were memorialized in a November 1, 2019,
filing with the Securities and Exchange Commission (“SEC”) on Form 8-K attaching the definitive
Agreement and Plan of Merger (the “Merger Agreement”). Under the terms of the Merger
Agreement, Fitbit will become an indirect wholly-owned subsidiary of Google, and Fitbit
stockholders will receive only $7.35 in cash for each share of Fitbit common stock they own. As
a result of the Proposed Transaction, Plaintiff and other Fitbit stockholders will be frozen out of
any future ownership interest in the Company.
3.
In approving the Proposed Transaction, the Individual Defendants have breached
their fiduciary duties of loyalty, good faith, due care and disclosure by, inter alia, (i) agreeing to
sell Fitbit without first taking steps to ensure that Plaintiff and Class members (defined below)
would obtain adequate, fair and maximum consideration under the circumstances; and (ii)
engineering the Proposed Transaction to benefit themselves and/or Google without regard for
Fitbit public stockholders. Accordingly, this action seeks to enjoin the Proposed Transaction and
compel the Individual Defendants to properly exercise their fiduciary duties to Fitbit stockholders.
4.
Next, it appears as though the Board has entered into the Proposed Transaction to
procure for themselves and senior management of the Company significant and immediate benefits
with no thought to the Company’s public stockholders. For instance, pursuant to the terms of the
Merger Agreement, upon the consummation of the Proposed Transaction, Company Board
Members and executive officers will be able to exchange all Company equity awards for the
merger consideration.
5.
On November 25, 2019, Fitbit filed a Preliminary Proxy Statement on Schedule
14A (the “Preliminary Proxy”) with the United States Securities and Exchange Commission
(“SEC”) in support of the Proposed Transaction.
6.
Defendants breached their fiduciary duties to the Company’s shareholders by
agreeing to the Proposed Transaction which undervalues Fitbit and is the result of a flawed sales
process. Post-closure, Fitbit shareholders will be frozen out of seeing the return on their
investment of any and all future profitability of Fitbit.
7.
Finally, in violation of sections 14(a) and 20(a) of the Securities and Exchange Act
of 1934 (the “Exchange Act”) and their fiduciary duties, Defendants caused to be filed the
materially deficient Preliminary Proxy on November 26, 2019 with the SEC in an effort to solicit
stockholders to vote their Fitbit shares in favor of the Proposed Transaction. The Preliminary
Proxy is materially deficient and deprives Fitibit stockholders of the information they need to make
an intelligent, informed and rational decision of whether to tender their shares in favor of the
Proposed Transaction. As detailed below, the Preliminary Proxy omits and/or misrepresents
material information concerning, among other things: (a) the Company’s financial projections; (b)
the sales process of the Company; and (b) the data and inputs underlying the financial valuation
analyses that purport to support the fairness opinions provided by the Company’s financial advisor,
Qatalyst Partners LLP (“Qatalyst”).
8.
Absent judicial intervention, the Proposed Transaction will be consummated,
resulting in irreparable injury to Plaintiff and the Class. This action seeks to enjoin the Proposed
Transaction or, in the event the Proposed Transaction is consummated, to recover damages
resulting from violation of the federal securities laws by Defendants.
PARTIES
9.
Plaintiff is a citizen of New Hampshire and, at all times relevant hereto, has been a
Fitbit stockholder.
10.
Defendant Fitbit provides health solutions in the United States and internationally.
The company offers a line of devices, including Fitbit Charge 3, Fitbit Surge, Fitbit Blaze, Fitbit
Charge 2, Alta HR, Alta, Fitbit Ace, Fitbit Flex 2, Fitbit One, and Fitbit Zip activity trackers; Fitbit
Ionic and Fitbit Versa smartwatches; Fitbit Aria 2 Wi-Fi smart scales; and a range of accessories,
such as bands and frames for its devices, as well as Fitbit Flyer, a wireless headphone designed for
fitness. Fitbit is incorporated under the laws of the State of Delaware and has its principal place
of business at 405. Howard Street, San Francisco, CA 94015. Shares of Fitbit common stock are
traded on the NasdaqGS under the symbol “FIT.”
11.
Defendant James Park (“Park") has been a Director of the Company at all relevant
times. In addition, Park serves as the President, Chairman of the Company Board, and the
Company’s Chief Executive Officer (“CEO”).
12.
Defendant Eric N. Friedman ("Friedman") has been a director of the Company at
all relevant times. In addition, Friedman serves as the Company’s Chief Technology Officer
(“CTO”).
13.
Defendant Glenda Flanagan ("Flanagan") has been a director of the Company
since 2016.
14.
Defendant Matthew Bromberg ("Bromberg") has been a director of the Company
since 2018.
15.
Defendant Laura Alber ("Alber") has been a director of the Company at all relevant
16.
Defendant Bradley M. Fluegel (“Fluegel”) has been a director of the Company
since 2018.
17.
Defendant Steven Murray (“Murray”) has been a director of the Company at all
relevant times.
18.
Defendant Christopher Paisley (“Paisley”) has been a director of the Company at
all relevant times.
19.
Defendants identified in ¶¶ 11 - 18 are collectively referred to as the “Individual
Defendants.”
20.
Non-Defendant Google, a subsidiary of Alphabet, Inc., primarily provides online
advertising services internationally. Google includes principal Internet products, such as Ads,
Android, Chrome, Commerce, Google Cloud, Google Maps, Google Play, Hardware, Search, and
YouTube, as well as technical infrastructure and newer efforts, including Virtual Reality. This
segment also offers digital content, enterprise cloud services, and hardware products, as well as
other miscellaneous products and services. Parent is a corporation organized under the laws of the
State of Delaware and has its principal place of business at 1600 Amphitheatre Parkway, Mountain
View, California 94043. Parent common stock is traded on the NasdaqGS under the ticker symbol
“GOOGL”.
21.
Non-Defendant Merger Sub is a wholly owned subsidiary of Parent created to
effectuate the Proposed Transaction.
JURISDICTION AND VENUE
22.
This Court has subject matter jurisdiction pursuant to Section 27 of the Exchange
Act (15 U.S.C. § 78aa) and 28 U.S.C. § 1331 (federal question jurisdiction) as Plaintiff alleges
violations of Sections 14(a) and Section 20(a) of the Exchange Act. This action is not a collusive
one to confer jurisdiction on a court of the United States, which it would not otherwise have.
23.
Personal jurisdiction exists over each defendant either because the defendant
conducts business in or maintains operations in this District, or is an individual who is either
present in this District for jurisdictional purposes or has sufficient minimum contacts with this
District as to render the exercise of jurisdiction over defendant by this Court permissible under
traditional notions of fair play and substantial justice.
24.
Venue is proper in this District pursuant to 28 U.S.C. § 1391, because Fitbit has its
principal place of business is located in this District, and each of the Individual Defendants, as
Company officers or directors, has extensive contacts within this District.
CLASS ACTION ALLEGATIONS
25.
Plaintiff brings this action pursuant to Federal Rule of Civil Procedure 23,
individually and on behalf of the stockholders of Fitbit common stock who are being and will be
harmed by Defendants’ actions described herein (the “Class”). The Class specifically excludes
Defendants herein, and any person, firm, trust, corporation or other entity related to, or affiliated
with, any of the Defendants.
26.
This action is properly maintainable as a class action because:
a. The Class is so numerous that joinder of all members is impracticable.
According to the Preliminary Proxy, as of November 15, 2018, there were over
260 million shares of Fitbit common stock outstanding. The actual number of
public stockholders of Fitbit will be ascertained through discovery;
b. There are questions of law and fact which are common to the Class, including
inter alia, the following:
i. Whether Defendants have violated the federal securities laws;
ii. Whether Defendants made material misrepresentations and/or omitted
material facts in the Preliminary Proxy; and
iii. Whether Plaintiff and the other members of the Class have and will
continue to suffer irreparable injury if the Proposed Transaction is
consummated.
c. Plaintiff is an adequate representative of the Class, has retained competent
counsel experienced in litigation of this nature and will fairly and adequately
protect the interests of the Class;
d. Plaintiff’s claims are typical of the claims of the other members of the Class
and Plaintiff does not have any interests adverse to the Class;
e. The prosecution of separate actions by individual members of the Class would
create a risk of inconsistent or varying adjudications with respect to individual
members of the Class which would establish incompatible standards of conduct
for the party opposing the Class;
f. Plaintiff anticipates that there will be no difficulty in the management of this
litigation and, thus, a class action is superior to other available methods for the
fair and efficient adjudication of this controversy; and
g. Defendants have acted on grounds generally applicable to the Class with respect
to the matters complained of herein, thereby making appropriate the relief
sought herein with respect to the Class as a whole.
THE INDIVIDUAL DEFENDANTS’ FIDUCAIRY DUTIES
27.
By reason of the Individual Defendants’ positions with the Company as officers
and/or directors, said individuals are in a fiduciary relationship with Fitbit and owe the Company
the duties of due care, loyalty, and good faith.
28.
By virtue of their positions as directors and/or officers of Fitbit, the Individual
Defendants, at all relevant times, had the power to control and influence, and did control and
influence and cause Fitbit to engage in the practices complained of herein.
29.
Each of the Individual Defendants are required to act with due care, loyalty, good
faith and in the best interests of the Company. To diligently comply with these duties, directors
of a corporation must:
a. act with the requisite diligence and due care that is reasonable under the
circumstances;
b. act in the best interest of the company;
c. use reasonable means to obtain material information relating to a given
action or decision;
d. refrain from acts involving conflicts of interest between the fulfillment
of their roles in the company and the fulfillment of any other roles or
their personal affairs;
e. avoid competing against the company or exploiting any business
opportunities of the company for their own benefit, or the benefit of
others; and
f. disclose to the Company all information and documents relating to the
company’s affairs that they received by virtue of their positions in the
company.
30.
In accordance with their duties of loyalty and good faith, the Individual
Defendants, as directors and/or officers of Fitbit, are obligated to refrain from:
a.
participating in any transaction where the directors’ or officers’
loyalties are divided;
b.
participating in any transaction where the directors or officers are
entitled to receive personal financial benefit not equally shared by the
Company or its public stockholders; and/or
c.
unjustly enriching themselves at the expense or to the detriment of
the Company or its stockholders.
31.
Plaintiff alleges herein that the Individual Defendants, separately and together, in
connection with the Proposed Transaction, violated, and are violating, the fiduciary duties they
owe to Fitbit, Plaintiff and the other public stockholders of Fitbit, including their duties of loyalty,
good faith, and due care.
32.
As a result of the Individual Defendants’ divided loyalties, Plaintiff and Class
members will not receive adequate, fair or maximum value for their Fitbit common stock in the
Proposed Transaction.
SUBSTANTIVE ALLEGATIONS
Company Background
33.
Fitbit provides health solutions and wearable fitness and health tracking technology
in the United States and internationally.
34.
The Company’s portfolio comprises of a line of devices, including Fitbit Charge 3,
Fitbit Surge, Fitbit Blaze, Fitbit Charge 2, Alta HR, Alta, Fitbit Ace, Fitbit Flex 2, Fitbit One, and
Fitbit Zip activity trackers; Fitbit Ionic and Fitbit Versa smartwatches; Fitbit Aria 2 Wi-Fi smart
scales; and a range of accessories, such as bands and frames for its devices, as well as Fitbit Flyer,
a wireless headphone designed for fitness.
35.
Fitbit offers online dashboard and mobile apps that sync automatically with and
display real-time data from its wearable devices; Fitbit Coach that offers exercise programs
through personal trainer and yoga apps; and Fitbit Care, a connected health platform for health
plans, employers, and health systems.
36.
The Company sells its products through consumer electronics and specialty, e-
commerce, mass merchant, department store, club, and sporting goods and outdoors retailers;
wireless carriers; distributor; and Fitbit.com, an online store, as well as directly to consumers.
37.
The Company’s recent financial performance indicated new memberships and a
shift in direction. For example, in a May 1, 2019 press release announcing its Q1 financial results,
the Company highlighted revenue up 10% and devices sold over 36% year-over-year. Smartwatch
sales increased 117%. Introduction of new trackers helped spark the first quarter of year-over-year
growth in tracker device sales in three years. This preceded the Q2 reported revenue increase of
5% year-over-year driven by 31% growth in devices sold in the quarter before. Fitbit also launched
Fitbit Premium, a paid membership in the Fitbit app that uses consumer’s unique data to deliver
personalized, actionable guidance which expects to generate more growth.
38.
In addition, Fitbit announced two major disease detection partnerships, Fibricheck
and Bristol-Meyers Squibb Pfizer Alliance, to target chronic condition areas and raise awareness
and support from screening to diagnosis for heart rhythm irregularities and atrial fibrillation. They
will be expanding to 59 Medicare Advantage plans in 2020 as a fully covered benefit from 42
39.
Speaking on these positive results, CEO Defendant Park stated, “In Q3 we
continued to make good progress shifting our business towards the faster growing smartwatch
category with the introduction of Versa 2, expanding Fitbit Health Solutions, and deepening our
relationship with consumers with the launch of Premium. The continued success of the Fitbit brand
is built on the trust of our users, and our commitment to strong user privacy and security will not
change.”
40.
These positive results are not an anomaly, but rather, are indicative of a trend of
continued financial progression by Fitbit. Clearly, based upon the positive outlook and increases
in revenue, the Company is likely to have tremendous future success and should command a much
higher consideration than the amount contained within the Proposed Transaction.
41.
Despite this upward trajectory and increasing financial results, the Individual
Defendants have caused Fitbit to enter into the Proposed Transaction for insufficient consideration.
The Proposed Transaction
42.
On November 1, 2019, Google and Fitbit issued a press release announcing the
Proposed Transaction. The press release stated, in relevant part:
SAN FRANCISCO--(BUSINESS WIRE) -- Fitbit, Inc. (NYSE: FIT) today
announced that it has entered into a definitive agreement to be acquired by Google
LLC for $7.35 per share in cash, valuing the company at a fully diluted equity value
of approximately $2.1 billion.
“More than 12 years ago, we set an audacious company vision – to make everyone in
the world healthier. Today, I’m incredibly proud of what we’ve achieved towards
reaching that goal. We have built a trusted brand that supports more than 28 million
active users around the globe who rely on our products to live a healthier, more active
life,” said James Park, co-founder and CEO of Fitbit. “Google is an ideal partner to
advance our mission. With Google’s resources and global platform, Fitbit will be able
to accelerate innovation in the wearables category, scale faster, and make health even
more accessible to everyone. I could not be more excited for what lies ahead.”
"Fitbit has been a true pioneer in the industry and has created terrific products,
experiences and a vibrant community of users," said Rick Osterloh, Senior Vice
President, Devices & Services at Google. "We're looking forward to working with
the incredible talent at Fitbit, and bringing together the best hardware, software and
AI, to build wearables to help even more people around the world."
Fitbit pioneered the wearables category by delivering innovative, affordable and
engaging devices and services. Being “on Fitbit” is not just about the device – it is an
immersive experience from the wrist to the app, designed to help users understand
and change their behavior to improve their health. Because of this unique approach,
Fitbit has sold more than 100 million devices and supports an engaged global
community of millions of active users, utilizing data to deliver unique personalized
guidance and coaching to its users. Fitbit will continue to remain platform-agnostic
across both Android and iOS.
Consumer trust is paramount to Fitbit. Strong privacy and security guidelines have
been part of Fitbit’s DNA since day one, and this will not change. Fitbit will continue
to put users in control of their data and will remain transparent about the data it
collects and why. The company never sells personal information, and Fitbit health
and wellness data will not be used for Google ads.
The transaction is expected to close in 2020, subject to customary closing conditions,
including approval by Fitbit’s stockholders and regulatory approvals.
Qatalyst Partners LLP acted as financial advisor to Fitbit, and Fenwick & West LLP
acted as legal advisor.
The Inadequate Merger Consideration
43.
Significantly, the Company’s financial prospects, opportunities for future growth,
and synergies with Google establish the inadequacy of the merger consideration.
44.
First, the compensation afforded under the Proposed Transaction to Company
stockholders significantly undervalues the Company. The proposed valuation does not adequately
reflect the intrinsic value of the Company. Moreover, the valuation does not adequately take into
consideration how the Company is performing, considering key financial improvements of the
Company in recent years.
45.
The transaction may undervalue the Company and would result in a substantial loss
for many Fitbit shareholders. For example, the consideration is 63 percent below the 2015 IPO
price of $20, well-below the all-time high near $50 per share and provides virtually no premium
over the share price as recently as February 2019. Since August 1 and months before the Merger
announcement, Fitbit stock has turned around, growing exponentially from around $3 per share to
its highest point since June 2018 to over $7 per share.
46.
Moreover, the Proposed Transaction represents a significant synergistic benefit to
Google, particularly in the healthcare arena. In a Forbes article discussing the synergies, the author
noted that Google will “use its ability to aggregate and analyze millions of points of data daily
from Fitbit’s 28 million users” to swiftly move into the growing tech healthcare field. The article
further noted, that Google’s 2.6 million users on its comparable product to Fitbit’s offering was
“not enough to become a game changer in driving health recommendations and interventions…
which they could not get there as quickly without Fitbit.” Lastly, Google’s Rick Osterloh, senior
vice president of Devices and Services said “over the years, Google has made progress with
partners in this space with Wear OS and Google Fit, but we see an opportunity to invest even more
in Wear OS as well as introduce Made by Google wearable devices into the market.”
47.
As a result, Google’s ability to analyze data of Fitbit’s active users supplying data
every day, in addition to Fitbit’s recent investments into disease and irregularity detection as
mentioned above, exemplify the significant synergistic benefits to Google and further raise the
stakes as to why Google did not pay more for the Company. Clearly, while the deal will be
beneficial to Google it comes at great expense to Plaintiff and other public stockholders of the
Company.
48.
Moreover, post-closure, Fitbit stockholders will be frozen out of any ownership
interest in the Company, forever foreclosing the ability to see the true return on their investments.
49.
It is clear from these statements and the facts set forth herein that this deal is
designed to maximize benefits for Google at the expense of Fitbit stockholders, which clearly
indicates that Fitbit stockholders were not an overriding concern in the formation of the Proposed
Transaction.
Preclusive Deal Mechanisms
50.
The Merger Agreement contains certain provisions that unduly benefit Google by
making an alternative transaction either prohibitively expensive or otherwise impossible.
Significantly, the Merger Agreement contains a termination fee provision that is especially onerous
and impermissible. Notably, in the event of termination, the merger agreement requires Fitbit to
pay up to $80,000,000 to Google, if the Merger Agreement is terminated under certain
circumstances. Moreover, under one circumstance, Fitbit must pay this termination fee even if it
consummates any competing Acquisition Proposal (as defined in the Merger Agreement) within
12 months following the termination of the Merger Agreement. The termination fee will make the
Company that much more expensive to acquire for potential purchasers. The termination fee in
combination with other preclusive deal protection devices will all but ensure that no competing
offer will be forthcoming.
51.
The Merger Agreement also contains a “No Solicitation” provision that restricts
Fitbit from considering alternative acquisition proposals by, inter alia, constraining Fitbit’s ability
to solicit or communicate with potential acquirers or consider their proposals. Specifically, the
provision prohibits the Company from directly or indirectly soliciting, initiating, proposing or
inducing any alternative proposal, but permits the Board to consider an unsolicited bona fide
“Acquisition Proposal” if it constitutes or is reasonably calculated to lead to a “Superior
Proposal” as defined in the Merger Agreement.
52.
Moreover, the Merger Agreement further reduces the possibility of a topping offer
from an unsolicited purchaser. Here, the Individual Defendants agreed to provide Google
information in order to match any other offer, thus providing Google access to the unsolicited
bidder’s financial information and giving Google the ability to top the superior offer. Thus, a rival
bidder is not likely to emerge with the cards stacked so much in favor of Google.
53.
These provisions, individually and collectively, materially and improperly impede
the Board’s ability to fulfill its fiduciary duties with respect to fully and fairly investigating and
pursuing other reasonable and more valuable proposals and alternatives in the best interests of the
Company and its public stockholders.
54.
Accordingly, the Company’s true value is compromised by the consideration
offered in the Proposed Transaction.
Potential Conflicts of Interest
55.
The breakdown of the benefits of the deal indicate that Fitbit insiders are the
primary beneficiaries of the Proposed Transaction, not the Company’s public stockholders. The
Board and the Company’s executive officers are conflicted because they will have secured unique
benefits for themselves from the Proposed Transaction not available to Plaintiff and the public
stockholders of Fitbit.
56.
Certain insiders stand to receive massive financial benefits as a result of the
Proposed Transaction. Notably, Company insiders, including the Individual Defendants, currently
own large, illiquid portions of Company stock that will be exchanged for large cash pay days upon
the consummation of the Proposed Transaction.
57.
Furthermore, upon the consummation of the Proposed Transaction, each
outstanding Company option or equity award, will be canceled and converted into the right to
receive certain consideration according to the merger agreement.
58.
Moreover, certain employment agreements with certain Fitbit executives, entitle
such executives to severance packages should their employment be terminated under certain
circumstances. These ‘golden parachute’ packages are significant, and will grant each director or
officer entitled to them millions of dollars, compensation not shared by Fitbit’s common
stockholders.
59.
These payouts will be paid to Fitbit insiders, as a consequence of the Proposed
Transaction’s consummation, as follows:
Heath
Equity
Insurance
Named Executive Officer
Cash($)(1)
Awards($)(2)
Premiums($)(3)
Total($)
James Park(4)
3,000,000
8,348,513
14,937 11,363,450
Eric Friedman(4)
796,250
3,875,537
29,430 4,701,217
Ronald Kisling
739,846
2,219,825
9,958 2,969,629
Andy Missan
780,362
1,567,762
30,016 2,378,140
Jeff Devine
704,615
1,333,724
29,903 2,068,242
60.
Thus, while the Proposed Transaction is not in the best interests of Fitbit
stockholders, it will produce lucrative benefits for the Company’s officers and directors.
The Materially Misleading and/or Incomplete Preliminary Proxy
61.
On November 26, 2019, the Board and Fitbit caused to be filed with the SEC a
materially misleading and incomplete Preliminary Proxy that, in violation their fiduciary duties,
failed to provide the Company’s stockholders with material information and/or provides them with
materially misleading information critical to the total mix of information available to the
Company’s stockholders concerning the financial and procedural fairness of the Proposed
Transaction.
Omissions and/or Material Misrepresentations Concerning the Sales Process leading up
to the Proposed Transaction
62.
Specifically, the Preliminary Proxy fails to provide material information
concerning the process conducted by the Company and the events leading up to the Proposed
Transaction. In particular, the Preliminary Proxy fails to disclose:
a. Any communications regarding post-transaction employment during the
negotiation of the underlying transaction must be disclosed to stockholders.
This information is necessary for stockholders to understand potential conflicts
of interest of management and the Board, as that information provides
illumination concerning motivations that would prevent fiduciaries from acting
solely in the best interests of the Company’s stockholders.
Omissions and/or Material Misrepresentations Concerning Fitbit’s Financial Projections
63.
The Preliminary Proxy fails to provide material information concerning financial
projections provided by Fitbit’s management and relied upon by Qatalyst in its analyses. The
Preliminary Proxy fails to disclose and/or discloses management-prepared financial projections
for the Company which are materially misleading. The Preliminary Proxy indicates that in
connection with the rendering of Qatalyst’s fairness opinion, Qatalyst reviewed “Other internal
documents relating to the history, current operations, and probable future outlook of the Company,
including financial projections for the Company, provided to Qatalyst by the Company’s
management (the “Management Projections”)”
64.
Accordingly, the Preliminary Proxy should have, but fails to provide, certain
information related to the Management Projections provided by Fitbit management to the Board
and Qatalyst. Courts have uniformly stated that “projections … are probably among the most
highly-prized disclosures by investors. Investors can come up with their own estimates of discount
rates or [] market multiples. What they cannot hope to do is replicate management’s inside view
of the company’s prospects.” In re Netsmart Techs., Inc. S’holders Litig., 924 A.2d 171, 201-203
(Del. Ch. 2007).
65.
Specifically, the Preliminary Proxy indicates that Qatalyst “also reviewed certain
forward-looking information relating to Fitbit, including certain non-public unaudited financial
forecasts for Fitbit as a standalone company, prepared by our management (the “Projections”).”
66.
The Preliminary Proxy provides non-GAAP financial metrics, including (i)
Adjusted EBITDA. (ii) Cost of Revenue, (iii) Gross Profit, (iv) Operating Expense, (v) NOPAT,
(vi)Net Income (Loss) and (vii) Earnings Per Share, but fails to disclose a reconciliation of all non-
GAAP to GAAP metrics. Also, the Preliminary Proxy fails to disclose the line items utilized to
calculate the above-referenced non-GAAP metrics.
67.
This information is necessary to provide Company stockholders a complete and
accurate picture of the sales process and its fairness. Without this information, stockholders were
not fully informed as to Defendants’ actions, including those that may have been taken in bad faith,
and cannot fairly assess the process.
68.
Without accurate projection data presented in the Preliminary Proxy, Plaintiff and
other stockholders of Fitbit are unable to properly evaluate the Company’s true worth, the accuracy
of Qatalyst’ financial analyses, or make an informed decision whether to vote their Company stock
in favor of the Proposed Transaction. As such, the Board has breached their fiduciary duties by
failing to include such information in the Preliminary Proxy.
Omissions and/or Material Misrepresentations Concerning the Financial Analyses by
Qatalyst
69.
In the Preliminary Proxy, Qatalyst describes its fairness opinion and the various
valuation analyses performed to render such opinion. However, the descriptions fail to include
necessary underlying data, support for conclusions, or the existence of, or basis for, underlying
assumptions. Without this information, one cannot replicate the analyses, confirm the valuations
or evaluate the fairness opinions.
70.
With respect to the Illustrative Discounted Cash Flow Analysis, the Preliminary
Proxy fails to disclose the following:
a. The number of fully-diluted shares of Fitbit;
b. The specific inputs and assumptions used to calculate the discount rate range of
12.5%-16.5%;
c. The terminal value and Cash on hand of the Company; and
d. The basis for applying a range of multiples of enterprise value to next-twelve-
months estimated revenue of 0.3x to 0.8x.
71.
These disclosures are critical for stockholders to be able to make an informed
decision on whether to vote their shares in favor of the Proposed Transaction.
72.
Without the omitted information identified above, Fitbit’s public stockholders are
missing critical information necessary to evaluate whether the proposed consideration truly
maximizes stockholder value and serves their interests. Moreover, without the key financial
information and related disclosures, Fitbit’s public stockholders cannot gauge the reliability of the
fairness opinion and the Board’s determination that the Proposed Transaction is in their best
interests. As such, the Board has breached their fiduciary duties by failing to include such
information in the Preliminary Proxy.
FIRST COUNT
Claim for Breach of Fiduciary Duties
(Against the Individual Defendants)
73.
Plaintiff repeats all previous allegations as if set forth in full herein.
74.
The Individual Defendants have violated their fiduciary duties of care, loyalty and
good faith owed to Plaintiff and the Company’s public stockholders.
75.
By the acts, transactions and courses of conduct alleged herein, Defendants,
individually and acting as a part of a common plan, are attempting to unfairly deprive Plaintiff and
other members of the Class of the true value of their investment in Fitbit.
76.
As demonstrated by the allegations above, the Individual Defendants failed to
exercise the care required, and breached their duties of loyalty and good faith owed to the
stockholders of Fitbit by entering into the Proposed Transaction through a flawed and unfair
process and failing to take steps to maximize the value of Fitbit to its public stockholders.
77.
Indeed, Defendants have accepted an offer to sell Fitbit at a price that fails to reflect
the true value of the Company, thus depriving stockholders of the reasonable, fair and adequate
value of their shares.
78.
Moreover, the Individual Defendants breached their duty of due care and candor by
failing to disclose to Plaintiff and the Class all material information necessary for them to make
an informed decision on whether to vote their shares in favor of the Proposed Transaction.
79.
The Individual Defendants dominate and control the business and corporate affairs
of Fitbit, and are in possession of private corporate information concerning Fitbit’s assets, business
and future prospects. Thus, there exists an imbalance and disparity of knowledge and economic
power between them and the public stockholders of Fitbit which makes it inherently unfair for
them to benefit their own interests to the exclusion of maximizing stockholder value.
80.
By reason of the foregoing acts, practices and course of conduct, the Individual
Defendants have failed to exercise due care and diligence in the exercise of their fiduciary
obligations toward Plaintiff and the other members of the Class.
81.
As a result of the actions of the Individual Defendants, Plaintiff and the Class will
suffer irreparable injury in that they have not and will not receive their fair portion of the value of
Fitbit’s assets and have been and will be prevented from obtaining a fair price for their common
82.
Unless the Individual Defendants are enjoined by the Court, they will continue to
breach their fiduciary duties owed to Plaintiff and the members of the Class, all to the irreparable
harm of the Class.
83.
Plaintiff and the members of the Class have no adequate remedy at law. Only
through the exercise of this Court’s equitable powers can Plaintiff and the Class be fully protected
from the immediate and irreparable injury which Defendants’ actions threaten to inflict.
SECOND COUNT
Aiding and Abetting the Board’s Breaches of Fiduciary Duty
Against Defendant Fitbit
84.
Plaintiff incorporates each and every allegation set forth above as if fully set forth
85.
Defendant Fitbit, knowingly assisted the Individual Defendants’ breaches of
fiduciary duty in connection with the Proposed Acquisition, which, without such aid, would not
have occurred.
86.
As a result of this conduct, Plaintiff and the other members of the Class have been
and will be damaged in that they have been and will be prevented from obtaining a fair price for
their shares.
87.
Plaintiff and the members of the Class have no adequate remedy at law.
THIRD COUNT
Violations of Section 14(a) of the Exchange Act
(Against All Defendants)
88.
Plaintiff repeats all previous allegations as if set forth in full herein.
89.
Defendants have disseminated the Preliminary Proxy with the intention of soliciting
stockholders to vote their shares in favor of the Proposed Transaction.
90.
Section 14(a) of the Exchange Act requires full and fair disclosure in connection
with the Proposed Transaction. Specifically, Section 14(a) provides that:
It shall be unlawful for any person, by the use of the mails or by any means
or instrumentality of interstate commerce or of any facility of a national
securities exchange or otherwise, in contravention of such rules and
regulations as the [SEC] may prescribe as necessary or appropriate in the
public interest or for the protection of investors, to solicit or to permit the
use of his name to solicit any proxy or consent or authorization in respect
of any security (other than an exempted security) registered pursuant to
section 78l of this title.
91.
As such, SEC Rule 14a-9, 17 C.F.R. 240.14a-9, states the following:
No solicitation subject to this regulation shall be made by means of any
proxy statement, form of proxy, notice of meeting or other communication,
written or oral, containing any statement which, at the time and in the light
of the circumstances under which it is made, is false or misleading with
respect to any material fact, or which omits to state any material fact
necessary in order to make the statements therein not false or misleading or
necessary to correct any statement in any earlier communication with
respect to the solicitation of a proxy for the same meeting or subject matter
which has become false or misleading.
92.
The Preliminary Proxy was prepared in violation of Section 14(a) because it is
materially misleading in numerous respects and omits material facts, including those set forth
above. Moreover, in the exercise of reasonable care, Defendants knew or should have known that
the Preliminary Proxy is materially misleading and omits material facts that are necessary to render
them non-misleading.
93.
The Individual Defendants had actual knowledge or should have known of the
misrepresentations and omissions of material facts set forth herein.
94.
The Individual Defendants were at least negligent in filing an Preliminary Proxy
that was materially misleading and/or omitted material facts necessary to make the Preliminary
Proxy not misleading.
95.
The misrepresentations and omissions in the Preliminary Proxy are material to
Plaintiff and the Class, and Plaintiff and the Class will be deprived of its entitlement to decide
whether to vote its shares in favor of the Proposed Transaction on the basis of complete information
if such misrepresentations and omissions are not corrected prior to the stockholder vote regarding
the Proposed Transaction.
FOURTH COUNT
Violations of Section 20(a) of the Exchange Act
(Against All Individual Defendants)
96.
Plaintiff repeats all previous allegations as if set forth in full herein.
97.
The Individual Defendants were privy to non-public information concerning the
Company and its business and operations via access to internal corporate documents, conversations
and connections with other corporate officers and employees, attendance at management and
Board meetings and committees thereof and via reports and other information provided to them in
connection therewith. Because of their possession of such information, the Individual Defendants
knew or should have known that the Preliminary Proxy was materially misleading to Company
stockholders.
98.
The Individual Defendants were involved in drafting, producing, reviewing and/or
disseminating the materially false and misleading statements complained of herein. The Individual
Defendants were aware or should have been aware that materially false and misleading statements
were being issued by the Company in the Preliminary Proxy and nevertheless approved, ratified
and/or failed to correct those statements, in violation of federal securities laws. The Individual
Defendants were able to, and did, control the contents of the Preliminary Proxy. The Individual
Defendants were provided with copies of, reviewed and approved, and/or signed the Preliminary
Proxy before its issuance and had the ability or opportunity to prevent its issuance or to cause it to
be corrected.
99.
The Individual Defendants also were able to, and did, directly or indirectly, control
the conduct of Fitbit’s business, the information contained in its filings with the SEC, and its public
statements. Because of their positions and access to material non-public information available to
them but not the public, the Individual Defendants knew or should have known that the
misrepresentations specified herein had not been properly disclosed to and were being concealed
from the Company’s stockholders and that the Preliminary Proxy was misleading. As a result, the
Individual Defendants are responsible for the accuracy of the Preliminary Proxy and are therefore
responsible and liable for the misrepresentations contained herein.
100.
The Individual Defendants acted as controlling persons of Fitbit within the meaning
of Section 20(a) of the Exchange Act. By reason of their position with the Company, the Individual
Defendants had the power and authority to cause Fitbit to engage in the wrongful conduct
complained of herein. The Individual Defendants controlled Fitbit and all of its employees. As
alleged above, Fitbit is a primary violator of Section 14 of the Exchange Act and SEC Rule
Preliminary Proxy. By reason of their conduct, the Individual Defendants are liable pursuant to
section 20(a) of the Exchange Act.
WHEREFORE, Plaintiff demands injunctive relief, in its favor and in favor of the Class,
and against the Defendants, as follows:
A.
Ordering that this action may be maintained as a class action and certifying Plaintiff
as the Class representatives and Plaintiff’s counsel as Class counsel;
B.
Enjoining the Proposed Transaction;
C.
In the event Defendants consummate the Proposed Transaction, rescinding it and
setting it aside or awarding rescissory damages to Plaintiff and the Class;
D.
Declaring and decreeing that the Merger Agreement was agreed to in breach of the
fiduciary duties of the Individual Defendants and is therefore unlawful and unenforceable;
E.
Directing the Individual Defendants to exercise their fiduciary duties to commence
a sale process that is reasonably designed to secure the best possible consideration for Fitbit
and obtain a transaction which is in the best interests of Fitbit and its stockholders;
F.
Directing defendants to account to Plaintiff and the Class for damages sustained
because of the wrongs complained of herein;
| securities |
ubImC4cBD5gMZwczcmdF | UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF CONNECTICUT
Sharon Isett,
individually and on behalf of all other
similarly situated individuals,
CIVIL Case No.
Plaintiff,
v.
Aetna Inc.,
NOVEMBER 14, 2014
Defendant.
COLLECTIVE ACTION COMPLAINT
Plaintiff Sharon Isett (“Plaintiff”), on behalf of herself and all others similarly situated,
by and through her attorneys, Nichols Kaster, PLLP, brings this action against Aetna Inc.
(“Aetna” or “Defendant”) for damages and other relief relating to violations of the Fair Labor
Standards Act.
JURISDICTION AND VENUE
1.
This Court has original jurisdiction to hear this Complaint and to adjudicate the
claims stated herein under 28 U.S.C. § 1331, this action being brought under the Fair Labor
Standards Act, 29 U.S.C. § 201 et seq. (“FLSA”).
2.
Venue is proper in the United States District Court for the District of Connecticut
pursuant to 28 U.S.C. § 1391 because Defendant operates in this district, and because a
substantial part of the events giving rise to the claims occurred in this district.
PARTIES
3.
Defendant Aetna Inc., (“Aetna”) is a Pennsylvania corporation with its corporate
headquarters located in Hartford, Connecticut.
4.
Aetna is one of the nation’s largest publicly traded health and supplemental
benefits companies, providing health insurance benefits under health maintenance organization
(HMO), Private Fee-For-Service (PFFS), and preferred provider organization (PPO) plans.
5.
According to its website, Aetna employs approximatelly 48,000 employees and
has approximately 23.6 million members in its medical benefit plans.
6.
Defendant operates in interstate commerce by, among other things, offering and
selling a wide array of health, pharmacy, dental, life and disability, Medicaid services, behavioral
health programs, and medical management products and services to customers and consumers in
multiple states across the country, including Connecticut and Michigan. Upon information and
belief, Defendant’s gross annual sales made or business done have been in excess of $500,000.00
at all relevant times.
7.
At all relevevant times, Defendant is, and has been, an “employer” engaged in
interstate commerce and/or the production of goods for commerce, within the meaning of the
FLSA, 29 U.S.C. § 203(d).
8.
Plaintiff Sharon Isett is an adult resident of the State of Michigan. Plaintiff has
been employed by Defendant as an “Appeals Nurse Consultant” (“ANC”) from approximately
November 2011 to the present.
9.
Plaintiff brings this action on behalf of herself and all other similarly situated
individuals pursuant to 29 U.S.C. § 216(b). Plaintiff and the similarly situated individuals were,
or are, employed by Defendant as ANCs, or other similar job positions performing similar duties
(e.g., Appeals Examiner), across the country during the applicable statutory period.
10.
Plaintiff and others similarly situated have been employed by Defendant within
two to three years prior to the filing of this lawsuit. See 29 U.S.C. § 255(a).
FACTUAL ALLEGATIONS
11.
At all times relevant herein, Defendant operated a willful scheme to deprive their
ANCs and others similarly situated of overtime compensation.
12.
Plaintiff and the similarly situated individuals worked or work as ANCs or other
job positions performing similar duties for Defendant. As ANCs, their primary job duty was
non-exempt work consisting of applying pre-determined criteria and guidelines to medical
authorization request appeals for health insurance coverage and payment purposes.
13.
Plaintiff and the similarly situated individuals were paid a salary with no overtime
14.
Defendant suffered and permitted Plaintiff and the similarly situated individuals
to work more than forty (40) hours per week without overtime pay.
15.
Defendant also employed licensed practical nurses (“LPNs”) or licensed
vocational nurses (“LVNs”) who had the same principle job duties as ANCs. Unlike the ANCs,
however, LPNs or LVNs, were paid hourly and eligible for overtime wages.
16.
Defendant has been aware, or should have been aware, that Plaintiff and the
similarly situated individuals performed non-exempt work that required payment of overtime
compensation. For instance, Defendant set productivity goals for Plaintiff and other similarly
situated individuals. Plaintiff and the similarly situated individuals were required to work long
hours, including overtime hours, to complete all of their job responsibilities and to meet and/or
exceed their goals.
17.
Plaintiff and others similarly situated also complained to supervisors in meetings
and conference calls about working unpaid overtime hours.
18.
Defendant did not make, keep, or preserve accurate records of the hours worked
by Plaintiff and the similarly situated individuals.
COLLECTIVE ACTION ALLEGATIONS
19.
Plaintiff, on behalf of herself and all similarly situated individuals, restates and
incorporates by reference the above paragraphs as if fully set forth herein.
20.
Plaintiff files this action on behalf of herself and all similarly situated individuals.
The proposed collective class for the FLSA claims is defined as follows:
All persons who worked as Appeals Nurse Consultants (or other job positions
performing similar duties) for Defendant at any time from three years prior to the
filing of this Complaint through the entry of judgment (the “FLSA Collective”).
21.
Plaintiff has consented in writing to be a part of this action pursuant to 29 U.S.C.
§ 216(b). Plaintiff’s signed consent form is attached as Exhibit A. As this case proceeds, it is
likely that other individuals will file consent forms and join as “opt-in” Plaintiffs.
22.
During the applicable statutory period, Plaintiff and the FLSA Collective
routinely worked in excess of forty (40) hours per workweek without receiving overtime
compensation for their overtime hours worked. Plaintiff estimates that she typically worked on
average between fifty and sixty hours per week.
23.
Defendant willfully engaged in a pattern of violating the FLSA, 29 U.S.C. § 201
et seq., as described in this Complaint in ways including, but not limited to, failing to pay its
employees overtime compensation. Defendant knew that it was subject to the FLSA; it knew
that its ANCs worked more than forty-hours per week; and it knew that they were not receiving
overtime premiums for this work.
24.
Defendant’s conduct constitutes a willful violation of the FLSA within the
meaning of 29 U.S.C. § 255(a).
25.
Defendant is liable under the FLSA for failing to properly compensate Plaintiff
and the similarly situated individuals. Accordingly, notice should be sent to the FLSA
Collective. There are numerous similarly situated current and former employees of Defendant
who have suffered from the Defendant’s practice of denying overtime pay, and who would
benefit from the issuance of court-supervised notice of this lawsuit and the opportunity to join.
Those similarly situated employees are known to Defendant, and are readily identifiable through
Defendant’s records.
CAUSES OF ACTION
COUNT I – VIOLATION OF THE FAIR LABOR STANDARDS ACT
FAILURE TO PAY OVERTIME
(on behalf of Plaintiff and the FLSA Collective)
26.
Plaintiff, on behalf of herself and all members of the FLSA Collective, restates
and incorporates by reference the above paragraphs as if fully set forth herein.
27.
The FLSA, 29 U.S.C. § 207, requires employers to pay employees one and one-
half (1.5) times the regular rate of pay for all hours worked over forty (40) hours per workweek.
28.
Defendant suffered and permitted Plaintiff and the FLSA Collective to routinely
work more than forty (40) hours per week without overtime compensation.
29.
Defendant’s actions, policies, and practices described above violate the FLSA’s
overtime requirement by regularly and repeatedly failing to compensate Plaintiff and the FLSA
Collective overtime compensation.
30.
Defendant knew, or showed reckless disregard for the fact, that it failed to pay
these individuals overtime compensation in violation of the FLSA.
31.
As a direct and proximate result of Defendant’s unlawful conduct, Plaintiff and
the FLSA Collective have suffered and will continue to suffer a loss of income and other
damages. Plaintiff and the FLSA Collective are entitled to liquidated damages and attorneys’
fees and costs incurred in connection with this claim.
32.
By failing to accurately record, report, and/or preserve records of hours worked
by Plaintiff and the FLSA Collective, Defendant has failed to make, keep, and preserve records
with respect to each of its employees sufficient to determine their wages, hours, and other
conditions and practice of employment, in violation of the FLSA, 29 U.S.C. § 201, et seq.
33.
The foregoing conduct, as alleged, constitutes a willful violation of the FLSA
within the meaning of 29 U.S.C. § 255(a). Defendant knew, or showed reckless disregard for the
fact, that its compensation practices were in violation of these laws.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff, on behalf of herself and all others similarly situated, pray for
relief as follows:
A.
Designation of this action as a collective action on behalf of the FLSA
Collective and prompt issuance of notice pursuant to 29 U.S.C. § 216(b) to
all similarly situated individuals apprising them of the pendency of this
action, and permitting them to assert FLSA claims in this action by filing
individual consent forms pursuant to 29 U.S.C. § 216(b);
B.
Judgment against Defendant in the amount of Plaintiff’s and the FLSA
Collectives’ unpaid back wages at the applicable overtime rates, and an
equal amount as liquidated damages;
C.
Appropriate civil penalties;
D.
A finding that Defendant’s violations of the FLSA were willful;
E.
All costs and attorneys’ fees incurred prosecuting this claim;
F.
An award of prejudgment interest (to the extent liquidated damages are
not awarded);
G.
An award of post-judgment interest;
H.
Leave to add additional Plaintiffs and/or state law claims by motion, the
filing of written consent forms, or any other method approved by the
Court; and
I.
All further relief as the Court deems just and equitable.
DEMAND FOR JURY TRIAL
Pursuant to Rule 38(b) of the Federal Rules of Civil Procedure, Plaintiff, on behalf of
herself, and all similarly situated individuals, demands a trial by jury.
DATED this 14th day of November, 2014.
THE HAYBER LAW FIRM
/s/ Richard E. Hayber
Richard E. Hayber, CT Bar No. ct11629
221 Main Street, Suite 502
Hartford, CT 06106
Telephone: (860) 522-8888
Fax: (860) 218-9555
[email protected]
NICHOLS KASTER, PLLP
Rachhana T. Srey, MN Bar No. 340133*
Rebekah L. Bailey, MN Bar No. 389599*
4600 IDS Center
80 South 8th Street
Minneapolis, MN 55402
Telephone: (612) 256-3200
Fax: (612) 215-6870
[email protected]
[email protected]
NACHT, ROUMEL, SALVATORE, BLANCHARD &
WALKER, P.C.
David M. Blanchard, MI Bar No. P67190*
Edward Macey, MI Bar No. P72939*
101 North Main Street, Suite 555
Ann Arbor, Michigan 48104
[email protected]
Attorneys For Plaintiff and the Similarly Situated
* Application for Pro Hac Vice Admission Forthcoming
| employment & labor |
xAswFocBD5gMZwcztUoA | UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
ORLANDO DIVISION
Plaintiffs,
CASE NO.: 6:14-cv-149-orl-18GJK
FLSA COLLECTIVE ACTION
Defendants.
/
COMPLAINT AND DEMAND FOR JURY TRIAL
COMES NOW, Plaintiffs, DEBRA MONSERRATE, KELLY BIRCHELL, SHAWN
Jurisdiction and Venue
1.
This is an action for damages by Plaintiffs, on behalf of themselves and other
1
2.
Venue is proper in this Court under Rule 1.02(c) of the Local Rules of the Middle
Parties and Factual Allegations
3.
This is an action for violation of Federal Wage and Hour Laws by and on behalf
4.
In this pleading, the term "Analyst" means all persons who have been, are, or in
a. Short Term Disability Analyst I
b. Short Term Disability Analyst II
c. Short Term Disability Analyst III
d. Long Term Disability Analyst I
e. Long Term Disability Analyst II
f. Long Term Disability Analyst III
g. Claims Examiner I
h. Claims Examiner II
2
i. Claims Examiner III
5.
Plaintiff, DEBRA MONSSERRATE was employed by Defendant, during the
6.
Plaintiff, KELLY BIRCHELL was employed by Defendant, during the relevant
7.
Plaintiff, SHAWN CRAFT was employed by Defendant, during the relevant time
8.
Plaintiff, VIVIAN EDWARDS was employed by Defendant, during the relevant
9.
Plaintiff, BILL FABER was employed by Defendant, during the relevant time
10.
Plaintiff, REID MAYBECK was employed by Defendant, during the relevant
3
11.
Plaintiff, SUSAN O'HEARN was employed by Defendant, during the relevant
12.
Plaintiff, FARRELL PRUDENT was employed by Defendant, during the relevant
13.
Plaintiff, PAMELA WARD, was employed by Defendant, during the relevant
14.
Defendant, HARTFORD FIRE INSURANCE COMPANY, is a Foreign for Profit
15.
Defendant is an enterprise engaged in commerce or in the production of goods for
16.
On a frequent basis throughout Plaintiffs' employment with Defendant, Plaintiffs
17.
Plaintiffs are informed and believe and thereon allege that, at all relevant times
418.
Upon information and belief, Defendant employs thousands of Analysts now and
19.
Specifically, upon information and belief, Defendant's managers, with the
a. Failing to pay employees overtime compensation for hours worked in
excess of forty hours per week; and
b. Failing to maintain accurate records of employees' time.
20.
Upon information and belief, other employees who worked for Defendant
21.
At all relevant times, Plaintiffs and the other FLSA Collective Plaintiffs are and
5
22.
Count I of this Complaint is properly brought under and maintained as an opt-in
23.
Plaintiffs have sustained substantial losses from Defendant's failure to pay them
24.
Plaintiffs have retained the LYTLE & BARSZCZ to represent them in this matter
COUNT I
VIOLATION OF THE OVERTIME PROVISIONS
OF THE FAIR LABOR STANDARDS ACT UNDER FEDERAL LAW
25.
Plaintiffs repeat and incorporate by reference Paragraphs 1 through 24 above, as
26.
Plaintiffs are informed and believe and thereon allege that at all relevant times,
27.
Throughout the statute of limitations period covered by these claims, Plaintiffs
6
28.
At all relevant times, Defendant has had, and continues to operate under a
29.
At all relevant times, Defendant willfully, regularly and repeatedly failed, and
30.
Plaintiff and the FLSA Collective Plaintiffs seek damages in the amount of their
31.
As a result of Defendant's willful violations of the FLSA, Plaintiffs are entitled to
32.
Plaintiffs have retained LYTLE & BARSZCZ to represent them in this matter and
WHEREFORE, Plaintiffs, on behalf of themselves and all other FLSA Collective
A. Certification of this action as a collective action brought pursuant to the FLSA
§ 216(b);
B. Designation of Plaintiffs as representatives of the FLSA Collective Action;
C. Unpaid overtime found to be due and owing;
7D. An additional amount equal to unpaid overtime found to be due and owing in
liquidated damages;
E. Prejudgment interest in the event liquidated damages are not awarded;
F. A reasonable attorney's fee and costs; and,
G. Such other relief as the Court finds just and equitable.
CLASS ACTION ALLEGATIONS
32.
Plaintiffs repeat and incorporate by reference Paragraphs 1 through 24 above, as
33.
Plaintiffs bring this action on behalf of themselves and all other employees,
34.
The number of members of the proposed class is unknown but could be greater
35.
The action presents issues of law and fact that are common to and affect the rights
36.
The named Plaintiffs will adequately represent the interests of the members of the
37.
This action will lie under Fla. R. Civ.P. 1. 220(a), (b)(2) and (b)(3).
DEMAND FOR JURY TRIAL
Plaintiff demands a jury trial on all issues so triable.
8
Mary E. Lytle, Esquire
Florida Bar No. 0007950
David V. Barszez, Esquire
Florida Bar No. 0750581
LYTLE & BARSZCZ
543 North Wymore Road
Suite 103
Maitland, FL 32751
Telephone: (407) 622-6544
Facsimile: (407) 622-6545
[email protected]
[email protected]
Counsel for Plaintiffs
9 | employment & labor |
xhIWF4cBD5gMZwcztIZs | Kevin Mahoney (SBN: 235367)
[email protected]
Katherine J. Odenbreit (SBN: 184619)
[email protected]
Atoy H. Wilson (SBN: 305259)
[email protected]
MAHONEY LAW GROUP, APC
249 East Ocean Blvd., Suite 814
Long Beach, CA 90802
Telephone: (562) 590-5550
Facsimile: (562) 590-8400
Attorneys for Plaintiff DONEYDA PEREZ as an individual and on behalf of all
others similarly situated
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA - SOUTHERN DIVISION
Case No.:
DONEYDA PEREZ as an individual
and on behalf of all others similarly
situated,
Plaintiff,
v.
[Assigned for All Purposes to The
Honorable _____________________;
Dept. _____]
CLASS ACTION COMPLAINT
AND JURY DEMAND
Complaint Filed:
Trial Date:
REQUEST FOR JURY TRIAL
DIRECTV GROUP HOLDINGS, LLC,
a Delaware Corporation, LONSTEIN
LAW OFFICES, P.C., a New York
Professional Corporation; JULIE
COHEN LONSTEIN; and DOES 1-10,
inclusive,
Defendants.
Plaintiff DONEYDA PEREZ (hereinafter “Ms. Perez” or “Plaintiff”) on
behalf of herself and all others similarly situated, complain and alleges as follows:
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NATURE OF THE CASE
1.
This is a putative class action brought on behalf of Plaintiff Doneyda
Perez and all others similarly situated which arises from the conduct and business
practices of Defendants DIRECTV GROUP HOLDINGS, LLC, LONSTEIN LAW
OFFICES, P.C. and JULIE COHEN LONSTEIN (hereinafter collectively referred
to as “Defendants”).
2.
Defendants have, and continue to, engage in a scheme and course of
conduct in which the owners of small businesses in the State of California (often
minorities based upon their race, ethnicity and/or national-origin) are the focus of
unsolicited sales campaigns to sell satellite cable television services provided by
Defendants for use in their small businesses. Defendants do not provide the
owners with any written contracts, agreements, notices or other documents
regarding the satellite cable television services which they have purchased.
3.
The business owners do not solicit, request or direct that the satellite
cable television services which they have purchased be provided under a
residential account; rather, they rely upon Defendants to provide the satellite cable
television services which they have purchased for their business under the proper
type of commercial accounts.
4.
Without the business owners being made aware, Defendants designate
the accounts as “residential,” despite the fact that Defendants solicited Ms. Perez
and those similarly situated because they were small business owners.
5.
After the satellite cable television services have been installed by
Defendants, and the owners have used those services in their businesses,
Defendants send “independent” auditors to the businesses where they clandestinely
obtain photographs and/or video recordings which purport to show that the
businesses are using the satellite cable television services in an unauthorized
manner as those services are provided under a residential, rather than commercial,
account.
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6.
Using the results of these audits, Defendants then send legal
correspondence to the business owners alleging that they have “pirated” or stolen
satellite cable television services, and threaten legal action unless the owners agree
to pay thousands of dollars and/or become “business subscribers.” Occasionally,
Defendants file lawsuits against the small business owners resulting in civil
judgments. Defendants do not confine themselves to minority small business
owners, however they target minority small business owners with the belief that
such owners are less likely to dispute or challenge the allegations.
7.
Thus, in addition to the monthly fees already paid by the small
businesses for the satellite cable television services, Defendants have obtained
thousands of dollars in additional money which have been paid to Defendants as
“settlements,” civil judgments, and/or attorney’s fees and costs, from threatened
and/or actual litigation against the small business owners who have been their
victims.
8.
Due to their course of conduct, Defendants have violated California
Business and Professions Code § 17200 (“Unfair Competition Law” or “UCL”)
and the Racketeer Influenced and Corrupt Organizations Act (“RICO”).
9.
Ms. Perez therefore seeks declaratory, injunctive and monetary
damages under the UCL and RICO, on behalf of herself and all others similarly
situated within the State of California.
THE PARTIES
10.
Plaintiff Doneyda Perez is an individual residing in Anaheim,
California. Ms. Perez is the sole owner of Oneida’s Beauty and Barber Salon, a
beauty salon located at 12342 Harbor Boulevard, Garden Grove, California 92840.
11.
Defendant DirecTV Group Holdings, LLC (“DirecTV”) is a limited
liability company organized under the laws of the State of Delaware, which
operates nationwide and maintains its principal executive offices in El Segundo,
California. At all times relevant hereto, Defendant DirecTV was and is engaged in
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the business of acquiring, promoting, selling and distributing digital entertainment
(i.e., broadcast and premium television programming) primarily through satellite
transmission to residential and commercial subscribers.
12.
Defendant Lonstein Law Office, P.C. (“Defendant LLO”) is a
professional corporation organized under the laws of the State of New York. At all
times relevant hereto, the Lonstein Law Office, P.C. was and is a law firm retained
by DirecTV to, inter alia, prosecute alleged thefts by small businesses in California
of the satellite cable television services of DirecTV.
13.
Defendant Julie Cohen Lonstein (“Defendant Lonstein”) is an
individual who is licensed to practice law in the State of New York, and is a
partner with the Lonstein Law Office, P.C. She is not admitted to practice law in
the State of California. At all times relevant hereto, Defendant Lonstein was and is
an attorney retained by DirecTV to, inter alia, prosecute alleged thefts by small
businesses in California of the satellite cable television services of DirecTV.
14.
DOES 1-10 are fictitiously named businesses which may have
liability under this action and should be made parties hereto, but whose identities
are not known at this time. DOES 1-10 are engaged in the business of selling,
installing, maintaining, providing, auditing and/or are otherwise involved in the
satellite cable television services provided by DirecTV to small businesses in
California.
JURISDICTION AND VENUE
15.
This action arises under the laws of the United States. This Court has
original jurisdiction over the subject matter of this action pursuant to 28 U.S.C. §
1331, because Plaintiff’s claims arise under the RICO Statute, 18 U.S.C. § 1962.
16.
This Court has personal jurisdiction over Defendants because they
have significant minimum contacts with this State, and intentionally availed
themselves of the laws of California by transacting a substantial amount of
business throughout the State and this District, including but not limited to, the
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promotion, marketing, advertising, and sale of cable television services by
DirecTV throughout the Central District of California, Southern Division.
17.
Venue is proper in this Court under 28 U.S.C. § 1391(b). Plaintiff
resides in the Central District of California, Southern Division, and Defendants are
located in and do business in, the Central District of California, Southern Division.
All of the events that are the subject of this Complaint took place in the Central
District of California, Southern Division.
FACTUAL ALLEGATIONS
18.
Plaintiff Doneyda Perez (“Ms. Perez”) is the owner of Oneida’s
Beauty and Barber Salon, a beauty salon located at 12342 Harbor Boulevard,
Garden Grove, California 92840.
19.
In or around 2014, Defendants’ authorized representative entered the
beauty salon and spoke with Ms. Perez. The individual represented that he was
acting on behalf of DirecTV and told Ms. Perez that DirecTV was offering a
promotional deal which would provide her business with satellite cable television
services for Twenty Seven Dollars and Fifty Cents ($27.50) a month for two (2)
years. Defendants had not been solicited by Ms. Perez, nor had she made a request
or inquiries to DirecTV regarding satellite cable television services.
20.
As a result of Defendants’ representation, Ms. Perez was interested in
purchasing the DirecTV promotional deal – which included Spanish-language
channels – for her business because she wanted something for her customers to
watch on television while they were in the beauty salon. Ms. Perez thought that
the deal offered by Defendants was a good one, and therefore agreed to purchase
the DirecTV promotional deal to provide her business with satellite cable
television services from DirecTV for Twenty Seven Dollars and Fifty Cents
($27.50) a month for two (2) years.
21.
Defendants never advised Ms. Perez that the satellite cable television
services from DirecTV would be provided to her business under a residential
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account; nor did Ms. Perez ever attempt to solicit, request or direct that the satellite
cable television services from DirecTV would be provided to her business under a
residential account. Instead, based upon the representations from Defendants and
the fact that those discussions had taken place inside the beauty salon, Ms. Perez
relied upon DirecTV to provide her business with satellite cable television services
from DirecTV under the correct type of account.
22.
Ms. Perez was not provided with – nor did she sign – a contract,
agreement, notice or any other documents related to the DirecTV promotional deal
to provide her business with satellite cable television from DirecTV for Twenty
Seven Dollars and Fifty Cents ($27.50) a month for two (2) years at the time she
agreed to purchase the DirecTV promotional deal. Ms. Perez was only asked to
provide her personal information and her bank account information to Defendants.
23.
Ms. Perez was never advised that the satellite cable television services
from DirecTV would be provided to her business under a residential account.
Similarly, Ms. Perez never attempted to solicit, request or direct that the satellite
cable television services from DirecTV would be provided to her business under a
residential account. Based upon the representations of Defendants and the fact the
installation was inside the beauty salon, Ms. Perez relied upon Defendants to
provide her business with satellite cable television services from DirecTV under
the correct type of account. This reliance is what induced Ms. Perez to provide
Defendants with her personal information and bank information.
24.
Moreover, Ms. Perez was not provided with – nor did she sign – a
contract, agreement, notice or any other documents related to the DirecTV
promotional deal at the time of the installation of the satellite cable television
services from DirecTV.
25.
Thereafter, the only documents related to the DirecTV promotional
deal which Ms. Perez ever received were the monthly invoices from DirecTV,
which were sent to “2127 West Dogwood Avenue, Anaheim, California 92801.”
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The monthly invoices did not state whether the account was commercial or
residential. See, e.g., the copy of the June 6, 2014 invoice from DirecTV attached
hereto as Exhibit A.
26.
Defendants’ authorized representative, with whom Ms. Perez spoke,
did not advise her that the satellite cable television services from DirecTV would
be (or had been) provided to her business under a residential account; nor did Ms.
Perez ever attempt to solicit, request or direct that the satellite cable television
services from DirecTV would be provided to her business under a residential
account. Instead, based upon the fact that DirecTV had provided satellite cable
television services to the salon for nearly two years, Ms. Perez continued to rely
upon DirecTV to provide her business with satellite cable television services from
DirecTV under the correct type of account.
27.
It was therefore much to Ms. Perez’s surprise that she received a
phone call in May 2016 from DirecTV, advising her that the Lonstein Law Office
had been retained by DirecTV “regarding the unauthorized reception and
commercial display of DIRECTV programming at your establishment in violation
of the Federal Communications Act and DIRECTV customer agreements.” During
the May 2015 phone call with Ms. Perez, DirecTV alleged that on April 8, 2015,
an “independent auditor” had “observed and recorded your exhibition of
DIRECTV programming” without authorization, and threatened prosecution and/or
litigation if Ms. Perez did not contact the Lonstein Defendants within seven (7)
days to resolve the matter.
28.
Ms. Perez received a letter, dated June 26, 2015, (the “June 26, 2015
letter”) on the letterhead of the Lonstein Law Office, P.C. with an attached
proposed settlement agreement. In the proposed settlement agreement, Ms.
Lonstein alleged that Ms. Perez’s business had used the satellite cable television
services of DirecTV without authorization and threatened prosecution and/or
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litigation if Ms. Perez did not pay $5,000.00. See copy of the June 26, 2015 letter
and proposed settlement agreement attached hereto as Exhibit B.
29.
As a result of being misled and fraudulently induced into agreeing to
pay $5,000.00 in order to resolve her alleged outstanding balance with DirecTV,
Ms. Perez began making monthly payments of $500.00 to DirecTV. See July 2,
2015 credit card receipt; August 7, 2015 letter; August 7, 2015 credit card receipt;
American Express Authorization Form; and June 1, 2016 statement attached
hereto as Exhibit C.
30.
As such, there was no formation of a contract or agreement;
moreover, since Ms. Perez was not provided with an agreement to arbitrate her
claims, or other form of waiver and/or release of her right to file a lawsuit and/or
class action, contemporaneously with her agreeing to purchase the satellite cable
television services from DirecTV, there is no binding or effective agreement to
arbitrate her claims or waiver and/or release of her right to file a lawsuit and/or
class action.
31.
The above-described conduct by Defendants in their transactions with
Ms. Perez are the same and/or substantially similar to the course of conduct
engaged in by Defendants in their transactions with numerous other small business
owners in California who are similarly situated to Ms. Perez.
RICO ALLEGATIONS
32.
Defendant Lonstein has never been licensed to practice law in the
State of California.
33.
DirecTV maintained sales representatives in California.
34.
At all times relevant hereto, Defendants conducted substantial
business throughout the State of California, including marketing, advertising, and
providing cable television services in Orange County.
35.
At all times relevant hereto, Defendants Lonstein and LLO acted for
or on behalf of DirecTV in undertaking the acts and/or omissions alleged herein.
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36.
DirecTV is an “enterprise” within the meaning of 18 U.S.C. §
1961(4), which conducted the pattern of racketeering activity described herein.
Defendants engaged in, and their activities affected interstate commerce because it
involved commercial activities across state lines, including national marketing
campaigns, and the solicitation and receipt of money from victims located
throughout the country.
37.
Defendants were knowingly and willing participants in the Scheme,
and reaped revenues and/or profits therefrom.
38.
Defendants knowingly, willfully, and unlawfully conducted or
participated, directly or indirectly, in a pattern of racketeering activity within the
meaning of 18 U.S.C. §§ 1961(1), 1961(5) and 1962(c). The racketeering activity
was made possible by the regular and repeated use of the services and distribution
channels of DirecTV.
39.
Defendants Lonstein and LLO committed multiple “Racketeering
Acts,” as described below, including aiding and abetting such acts.
40.
The Racketeering Acts were not isolated, but rather were related in
that they had the same or similar purposes and results, participants, victims, and
methods of commission.
41.
In devising and executing the Scheme, Defendants committed acts
constituting indictable offenses under 18 U.S.C. §§ 1341 and 1343, in that they
devised and knowingly carried out a material scheme or artifice to defraud or to
obtain money by means of materially false or fraudulent pretenses, representations,
promises, or omissions of material facts. For the purpose of executing the Scheme,
Defendants committed these Racketeering Acts, intentionally and knowingly, with
the specific intent to advance the Illegal Scheme.
42.
Defendants used numerous authorized representatives to create and
perpetuate the Scheme through virtually uniform misrepresentations, concealments
and material omissions.
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CLASS ALLEGATIONS
43.
This action is brought and may properly proceed as a class action,
pursuant to the provisions of Rule 3.765 of the California Rules of Court.
44.
Plaintiff seeks certification of a Class and Subclasses pursuant to
California Civil Code of Procedure § 382, which is composed of and defined as
follows:
a. CLASS: All small business owners in the United States who, at
any time on or after the day four years prior to the date on which
this Complaint is filed, were solicited by Defendants, jointly and/or
severally, to purchase satellite cable television services provided
by DirecTV for use in connection with their business and who (a)
purchased such satellite cable television services and (b) were
subsequently sent correspondence which was the same or similar
to the June 26, 2016 letters and proposed settlement agreement
sent to Plaintiff by the Lonstein Defendants regarding allegedly
unauthorized use by the business of those satellite cable television
services.
b. SUBCLASS: All members of the Class who are members of a
racial, ethnic and/or national origin minority.
c. SUBCLASS: All small business owners in the State of California
who, at any time on or after the day four years prior to the date on
which this Complaint is filed, were solicited by Defendants, jointly
and/or severally, to purchase satellite cable television services
provided by DirecTV for use in connection with their business and
who (a) purchased such satellite cable television services and (b)
were subsequently sent correspondence which was the same or
similar to the May DATE and/or June 26, 2016 letters and
proposed settlement agreement sent to Plaintiff by the Lonstein
Defendants regarding allegedly unauthorized use by the business
of those satellite cable television services.
45.
The members of the Class and Subclasses for whose benefit this
action is brought are so numerous that joinder of all members is impracticable.
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46.
There are questions of law and fact common to the members of the
Class and Subclasses that predominate over questions affecting only individuals.
These common questions include:
A. Whether Defendants’ actions, as set forth herein, were
unconscionable commercial practices, deception, fraud, false
pretenses, and/or misrepresentations in violation of the UCL;
B. Whether the targeting of minority small business owners, such as
Plaintiff, by Defendants constitutes an unconscionable business
practice which violates the UCL;
C. Whether Plaintiff and the members of the Class and/or Subclasses
suffered an ascertainable loss as a result of Defendants’
violation(s) of the UCL;
D. Whether Defendants’ actions constituted a violation of RICO;
E. Whether Plaintiff and the members of the Class and/or Subclasses
suffered damages as a result of Defendants’ violation(s) of RICO;
and
F. What relief are Plaintiff and the members of the Class and/or
Subclasses entitled to under the UCL and RICO.
47.
Plaintiff’s claims are typical of the claims of the members of the Class
and Subclasses which she represents because all such claims arise out of the same
policies, practices, and conduct, and the same or similar documents used by
Defendants in their dealings with Plaintiff.
48.
Plaintiff has no interests antagonistic to those of the Class and
Subclasses.
49.
The Class and Subclasses, of which Plaintiff is a member, are readily
identifiable.
50.
Plaintiff will fairly and adequately protect the interests of the Class
and Subclasses, and has retained competent counsel experienced in the prosecution
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of consumer litigation. Proposed Class Counsel has investigated and identified
potential claims in the action. Proposed Class Counsel has a great deal of
experience in handling class actions, other complex litigation, and claims of the
type asserted in this action.
51.
A class action is superior to other available methods for the fair and
efficient adjudication of this controversy since joinder of all members is
impracticable. While the economic damages suffered by the individual members of
the Class and Subclasses are significant, the amount is modest compared to the
expense and burden of individual litigation.
52.
The questions of law or fact common to the members of the Class and
Subclasses predominate over any questions affecting only individual members.
53.
The prosecution of separate actions by individual members of the
Class and Subclasses would run the risk of inconsistent or varying adjudications,
which would establish incompatible standards of conduct for the Defendants in this
action, or the prosecution of separate actions by individual members of the Class
and Subclasses would create the risk that adjudications with respect to individual
members of the Class and Subclasses would as a practical matter be dispositive of
the interests of the other members not parties to the adjudications, or substantially
impair or impede their ability to protect their interests. Prosecution as a class action
will eliminate the possibility of repetitious litigation.
54.
Defendants have acted, or refused to act, on grounds generally
applicable to Plaintiff and all class members, thereby making appropriate final
injunctive relief or corresponding declaratory relief with respect to the Class and
Subclasses as a whole.
55.
A class action will cause an orderly and expeditious administration of
the claims of the Class and Subclasses, and will foster economies of time, effort
and expense.
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56.
Plaintiff does not anticipate any difficulty in the management of this
litigation.
FIRST COUNT
(Unfair Competition Law)
57.
Plaintiff re-asserts and incorporates by reference each and every
allegation set forth in the preceding paragraphs as though set forth at length herein.
58.
California Business and Professions Code § 17200 et seq. (also
referred to herein as the “Unfair Business Practices Act” or “Unfair Competition
Law”) prohibits unfair competition in the form of any unlawful, unfair or
fraudulent business act or practice.
59.
Plaintiff is a “person” within the meaning of California Business and
Professions Code § 17204 which allows “any person who has suffered injury in
fact and has lost money or property as a result of such unfair competition” to
prosecute a civil action for violation of the Unfair Competition Law (“UCL”).
60.
Defendants, jointly and/or severally, engaged in unconscionable
commercial practices, deception, fraud, false pretenses, and/or misrepresentations
and violated the UCL by (1) targeting and soliciting Plaintiff to purchase satellite
cable television services from DirecTV at a “special” price or rate; (2) installing
residential satellite cable television services in Plaintiff’s business although
Defendants knew or should have known that Plaintiff intended to use those
services in her business; (3) providing satellite cable television to Plaintiff”s
business under a residential account although Plaintiff relied upon Defendants to
provide those services to her business under the proper type of account so that she
could use those services in her business; (4) deliberately and specifically targeting
Plaintiff for a “signal audit” with a resulting manufactured and pre-determined
finding that Plaintiff had “pirated” or “stolen” satellite cable television services
from DirecTV by using residential satellite cable television services which were
not authorized for commercial use; and (5) based upon the manufactured and pre-
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determined results of that signal audit, threatening Plaintiff with prosecution and/or
costly legal action for the purported theft of the satellite cable television services in
order to extort an unreasonable and unconscionable “settlement” from Plaintiff.
61.
Defendants engaged in the same conduct in their transactions with
small business owners similarly situated to Plaintiff. Defendants filed lawsuits
and/or obtained civil judgments against some of those small business owners.
62.
Defendants especially targeted minority small business owners, such
as Plaintiff, because of Defendants’ apparent belief that minority small business
owners would be less likely to dispute or contest their unconscionable business
practices. The targeting of minority small business owners such as Plaintiff by
Defendants is itself an unconscionable business practice which violates the UCL.
A.
Violation of the Digital Infrastructure and Video Competition Act of
2006 and Cable Television and Video Provider Customer Service
and Information Act Violates the UCL
63.
California’s legislature passed the Digital Infrastructure and Video
Competition Act of 2006, Public Utilities Code § 5800, et seq. (“DIVCA”) because
the “increasing competition for video and broadband services is a matter of
statewide concern” as “video and cable services provide numerous benefits to all
Californians including access to a variety of news, public information, education,
and entertainment programming.” DIVCA § 5810(1)(A).
64.
The regulations, promulgated under DIVCA are meant to “promote
the widespread access to the most technologically advanced cable and video
services to all California communities in a nondiscriminatory manner regardless of
socioeconomic status” and to “require market participants to comply with all
applicable consumer protection laws.” DIVCA § 5810(2)(B) and (D).
65.
Similarly, California’s legislature passed the Cable Television and
Video Provider Customer Service and Information Act (the “Cable Act”) because
“customers of cable and video providers should get their money’s worth for the
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service they subscribe to, and the one way to ensure this is to encourage that
customer service standards be established and that customers be informed to those
standards.” California Government Code § 53054.1(a).
66.
Defendant DirecTV is a cable television company providing
residential cable television services within the State of California and is therefore
subject to DIVCA and/or its enacting regulations and the Cable Act and/or its
enacting regulations.
67.
The Cable Act § 53055.1(b)(1) requires that notice be given to new
customers which includes “a listing of the services offered by the cable television
operator or video provider which clearly describes all levels of service, and
including the rates for each level of service, provided that, if the information
concerning levels of service and rates is otherwise distributed to new customers
upon installation by the cable television operator or video provider, the information
need not be included in the notice to new customers required by this section.”
68.
The Cable Act § 53055.1(a) requires that “each cable television
operator or video provider shall annually distribute to employees, to each
customer, and to the city, county, or city and county in which the cable television
operator or video provider furnishes service to customers, a notice describing these
customer service standards.”
69.
Plaintiff never received a listing of the services offered by Defendants
which clearly described all levels of service including the rates for each level of
service (residential/commercial), as required by the Cable Act in the selection of
the schedule of prices, rates, terms and conditions most favorable for her individual
requirements.
70.
Plaintiff never received the annual notice required by the Cable Act
which would have advised her of the customer monthly service packages and
corresponding rates available according to her billing classification, nor was she
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even advised of her billing classification for the satellite cable television services
from DirecTV.
71.
Defendants therefore violated DIVCA and the Cable Act and/or their
enacting regulations by failing to (1) provide Plaintiff with the listing of services
required by the Cable Act in the selection of the schedule of prices, rates, terms
and conditions most favorable for her individual requirements; and/or (2) provide
Plaintiff with the annual notice required by Cable Act § 53055.1(a), which would
have advised her of the monthly service packages and corresponding rates
available according to her billing classification.
72.
By failing to provide Plaintiff with the required listing of services,
reasonable efforts and/or timely notice of her billing classification, Defendants
caused her to face potential liability for alleged unauthorized use of satellite cable
television services from DirecTV, as she had no ability to have a purportedly
incorrect billing classification corrected. Without the alleged unauthorized use,
Defendants would have had no basis to threaten prosecution and/or litigation.
Without the threatened prosecution and/or litigation, Defendants would have no
basis to coerce Plaintiff into paying thousands of dollars. In other words, Plaintiff
would not have "failed" the audit, but for the failure by Defendant to comply with
the Cable Act.
73.
The violation of other statutes, particularly statutes that provide
specific protections to consumers such as DIVCA and the Cable Act, is evidence
of and constitutes an unconscionable commercial practice in violation of the UCL.
74.
The failure by Defendants to comply with DIVCA and the Cable Act
was in furtherance of their scheme to improperly threaten Plaintiff with
prosecution and/or litigation for purportedly unauthorized use of the satellite cable
television services from DirecTV, and thereby receive money, in addition to the
monthly fees already collected, in the form of, including but not limited to,
settlement payments, civil judgments and/or attorney's fees and costs. Defendants,
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jointly and/or severally, therefore engaged in unconscionable commercial
practices, deception, fraud, false pretenses, and/or misrepresentations and violated
§ 17200 of the UCL.
75.
Defendants engaged in the same conduct in their transactions with
small business owners similarly situated to Plaintiff. Defendants filed lawsuits
and/or obtained civil judgments against some of those small business owners.
76.
Defendants especially targeted minority small business owners, such
as Plaintiff, because of Defendants’ apparent belief that minority small business
owners would be less likely to dispute or contest their unconscionable business
practices. The targeting of minority small business owners such as Plaintiff by
Defendants is itself an unconscionable business practice which violates the UCL.
77.
As the result of Defendants’ violation of the UCL, Plaintiff has
suffered an ascertainable loss, including but not limited to the monthly fees which
she already paid for the satellite cable television services from DirecTV, the
indebtedness incurred in the amount of $5,000.00 as demanded in the June 26,
2015 letter and proposed settlement agreement from the Lonstein Defendants,
and/or the attorney’s fees incurred as a result.
78.
As the result of Defendants' violations of the UCL, those similarly
situated to Plaintiff also suffered ascertainable losses, including but not limited to
the monthly fees which they already paid for the satellite cable television services
from DirecTV, the indebtedness incurred in the amount demanded in the legal
correspondence sent by the Lonstein Defendants, the settlement payments and/or
civil judgments they paid, and/or the attorney's fees and costs which they incurred
as a result.
79.
Plaintiff and all others similarly situated are thus entitled to all
appropriate legal and equitable relief, an award of treble their ascertainable losses
and damages, plus actual damages, attorney’s fees, and costs pursuant to the
Business and Professions Code.
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SECOND COUNT
(Racketeer Influenced and Corrupt Organizations Act)
80.
Plaintiff re-asserts and incorporates by reference each and every
allegation set forth in the preceding paragraphs as though set forth at length herein.
81.
RICO provides that “It shall be unlawful for any person who has
received any income derived, directly or indirectly, from a pattern of racketeering
activity or through collection of an unlawful debt in which such person has
participated as a principal within the meaning of Section 2, Title 18, United States
Code, to use or invest, directly or indirectly, any part of such income, or the
proceeds of such income, in acquisition of any interest in, or the establishment or
operation of, any enterprise which is engaged in, or the activities of which affect,
interstate or foreign commerce.” 18 U.S.C. § 1962(a).
82.
RICO also provides that “It shall be unlawful for any person through a
pattern of racketeering activity or through collection of an unlawful debt to acquire
or maintain, directly or indirectly, any interest in or control of any enterprise which
is engaged in, or the activities of which affect, interstate or foreign commerce.” 18
U.S.C. § 1962(b).
83.
RICO further provides that “It shall be unlawful for any person
employed by or associated with any enterprise engaged in, or the activities of
which affect, interstate or foreign commerce, to conduct or participate, directly or
indirectly, in the conduct of such enterprises affairs through a pattern of
racketeering activity or collection of unlawful debt.” 18 U.S.C. § 1962(c).
84.
RICO also provides that “It shall be unlawful for any person to
conspire to violate any of the provisions of subsection (a), (b), or (c) of this
section.” 18 U.S.C. § 1962(d).
85.
At all relevant times, Defendants were "persons" within the meaning
of 18 U.S.C. § 1961(3), because they were individuals and/or entities capable of
holding a legal or beneficial interest in property.
- 18 -
86.
Defendants' scheme to defraud by improperly threatening Plaintiff and
others similarly situated to her with prosecution and/or litigation for purportedly
unauthorized use of satellite cable television services from DirecTV, and thereby
receive money, in addition to the monthly fees which they already collected,
including but not limited to, indebtedness, settlement payments, civil judgments
and/or attorney's fees and costs either paid or to be paid, is a fraudulent practice,
and is therefore a "racketeering activity" subject to RICO.
87.
Defendants have engaged in a pattern of racketeering activity, and
therefore have violated 18 U.S.C. § 1962(a), by receiving income from unlawful
debt, in the form of monthly fees, indebtedness, settlement payments, civil
judgments and/or attorney's fees and costs either paid or to be paid, in the operation
of an enterprise which is engaged in or the activities of which affect trade or
commerce.
88.
Defendants violated 18 U.S.C. § 1962(b) by acquiring or maintaining,
directly or indirectly, an interest in or control of enterprises which were engaged in
trade or commerce, through a pattern of racketeering activity or through collection
of an unlawful debt in the form of monthly fees, indebtedness, settlement
payments, civil judgments and/or attorney's fees and costs either paid or to be paid.
89.
Defendants violated 18 U.S.C. § 1962(c) by conducting or
participating, directly or indirectly, in the conduct of the affairs of an enterprise
engaged in trade or commerce through a pattern of racketeering activity or
collection of unlawful debt in the form of monthly fees, indebtedness, settlement
payments, civil judgments and/or attorney's fees and costs either paid or to be paid.
90.
Defendants violated 18 U.S.C. § 1962(d) by conspiring to engage in
racketeering activity.
91.
Defendants were used as a tool to carry out the scheme and pattern of
racketeering activity.
- 19 -
92.
Defendants, individually and jointly, as part of an enterprise agreed to
commit more than two racketeering acts, with knowledge that the objective was
unlawful and intended to further that unlawful objective. The multiple acts of
racketeering activity that they committed and/or conspired to, or aided and abetted
in the commission of, were related to each other, pose a threat of continued
racketeering activity, and therefore constitute a “pattern of racketeering activity.”
93.
Defendants’ predicate acts of racketeering within the meaning of 18
U.S.C. § 1961(1) include targeting and soliciting small business owners to
purchase satellite cable television services from DirecTV at a "special" price or
rate; installing residential satellite cable television services in the small businesses
although Defendants knew or should have known that the small business owners
intended to use those services in their businesses; providing satellite cable
television to small businesses under residential accounts although the small
business owners relied upon Defendants to provide those services to their
businesses under the proper type of account so that they could use those services in
their businesses; deliberately and specifically targeting small business owners for a
"signal audit'' with a resulting manufactured and pre-determined finding that the
small business owners had "pirated" or "stolen" satellite cable television services
from DirecTV by using residential satellite cable television services which were
not authorized for commercial use; and threatening the small business owners with
prosecution and/or costly legal action for the purported theft of the satellite cable
television services in order to extort an unreasonable and unconscionable
"settlement" from them.
94.
Defendants’ predicate acts of racketeering amount to a material
scheme to defraud and to obtain money on false pretenses, misrepresentations,
promises, and/or omissions.
95.
Defendants
knowingly
and
intentionally
made
these
misrepresentations, acts of concealment and failures to disclose. Defendants either
- 20 -
knew or recklessly disregarded that these were material representations and
omissions.
96.
Plaintiff and those similarly situated to her have suffered harm from
Defendants' violations of RICO in the amount of the monthly fees, indebtedness,
settlement payments, civil judgments and/or attorney's fees and costs either paid or
to be paid. In the absence of Defendants’ violations of 18 U.S.C. § 1962, Plaintiff
and the Class would not have incurred these losses.
97.
Plaintiff’s and the Class’s injuries were directly and proximately
caused by Defendants’ racketeering activity.
98.
Defendants knew and intended that Plaintiff and the Class would rely
on the scheme’s fraudulent representations and omissions. Defendants knew and
intended Plaintiff and the Class would pay fees as a result of same.
99.
Plaintiff and all others similarly situated are thus entitled to all
appropriate legal and equitable relief, an award of treble their damages, plus
attorney's fees, and costs pursuant to 18 U.S.C. § 1964(c).
WHEREFORE, Plaintiff, on behalf of herself and all others similarly
situated, demands judgment against Defendants as follows:
a. An order certifying the Class and Subclasses for declaratory and
injunctive relief and for money damages under Federal Rules of
Civil Procedure Rule 23 , and appointing Plaintiff as Class and
Subclasses Representative and appointing her attorneys as Class
Counsel;
b. A declaratory judgment that Defendants violated the UCL and/or
RICO;
c. A judgment for injunctive relief enjoining Defendants from
engaging in future violations of the UCL and/or RICO;
d. A judgment for injunctive relief enjoining the Lonstein Defendants
from engaging in future violations of the UCL and/or RICO;
- 21 -
e. An accounting of all amounts that Defendants collected from
Plaintiff and those similarly situated for the satellite cable
television services provided by DirecTV;
f. An accounting of all amounts that Defendants collected from
Plaintiff and those similarly situated for alleged unauthorized use
of the satellite cable television services provided by DirecTV;
g. A judgment for actual damages;
h. A judgment for compensatory damages;
i. A judgment for disgorgement of profits under the UCL;
j. A judgment for treble damages under RICO;
k. A judgment for reasonable attorney fees and costs of suit in
connection with this action, pursuant to the UCL and/or RICO,
California Civil Code 1021.5 and any other applicable statute;
l. A judgment for pre-judgment and post-judgment interest; and/or
m. (As an alternative to a judgment for damages) A judgment for
injunctive relief requiring Defendants to send formal notice to all
Class and Subclasses members, advising them of the declaratory
ruling and of their right to seek remedies under the UCL and/or
RICO, on their own and independent of this action; and
n. A judgment for all such other and further relief as the Court deems
equitable and just.
- 22 -
JURY DEMAND
Plaintiff demands a trial by jury on all issues subject to trial.
Dated: August 3, 2016
MAHONEY LAW GROUP, APC
/s/Kevin Mahoney
Kevin Mahoney
Katherine J. Odenbreit
Atoy H. Wilson
Attorneys for Plaintiff, DONEYDA PEREZ, and
on behalf of all others similarly situated
- 23 -
| criminal & enforcement |
FvDZEocBD5gMZwczL2zT | IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
MERRILL PRIMACK,
)
on behalf of plaintiff and the class defined
)
below,
)
)
Plaintiff,
)
13-cv-6228
)
vs.
)
)
CAREPLUS HEALTH PLANS, INC.,
)
HUMANA, INC., and DOES 1-10,
)
)
Defendants.
)
COMPLAINT – CLASS ACTION
INTRODUCTION
1.
Plaintiff Merrill Primack brings this action to secure redress from unlawful
telemarketing practices engaged in by defendants CarePlus Health Plans, Inc., and Humana, Inc.
Plaintiff alleges violation of the Telephone Consumer Protection Act, 47 U.S.C. §227 (“TCPA”).
2.
The TCPA restricts the use of automated equipment to dial cellular telephones.
VENUE AND JURISDICTION
3.
This Court has jurisdiction under 28 U.S.C. §§1331, 1337 and 1367.
4.
Venue and personal jurisdiction in this District are proper because:
a.
Defendant’s communications were received by plaintiff within this
District;
b.
Defendants do business within this District.
PARTIES
5.
Plaintiff Merrill Primack is an individual who resides in the Northern
District of Illinois.
6.
Defendant CarePlus Health Plans, Inc., is a Florida corporation with principal
offices at 11430 NW 20th Street, Suite 300, Doral, FL 33172.
7.
Defendant Humana, Inc., is a Delaware corporation with principal offices at 500
1
West Main Street, Louisville, KY 40202.
8.
Defendants CarePlus Health Plans, Inc., and Humana, Inc., sell health insurance.
9.
Defendant CarePlus Health Plans, Inc., is a subsidiary of defendant Humana, Inc.
10.
Defendants Does 1-10 are other persons or entities involved in the telemarketing
calls described below.
FACTS
11.
On or about June 28, 2013, plaintiff received a recorded call on his cell phone
from 502-301-1998, seeking to sell health insurance.
12.
The number 502-301-1998 is issued to and answered by CarePlus Health Plans,
13.
Plaintiff was uncertain exactly who called and called back the 502-301-1998
number from his landline phone, leaving a message inquiring what the call was about.
14.
Plaintiff then got a call on the landline on or about July 2, 2013 from a live person
identifying himself as being from Humana, seeking to sell health insurance.
15.
The cell phone call was placed using an automated dialing system.
16.
Plaintiff did not authorize the placement of robocalls to his cell phone.
17.
Plaintiff did not furnish his cell phone number to defendant.
18.
Plaintiff and each class member is entitled to statutory damages.
19.
Defendants violated the TCPA even if their actions were only negligent.
20.
Defendants should be enjoined from committing similar violations in the future.
COUNT I – TCPA
21.
Plaintiff incorporates paragraphs 1-20.
22.
The TCPA, 47 U.S.C. §227, provides:
§ 227. Restrictions on use of telephone equipment
. . . (b) Restrictions on use of automated telephone equipment.
(1) Prohibitions. It shall be unlawful for any person within the United
States, or any person outside the United States if the recipient is within the
2
United States–
(A) to make any call (other than a call made for emergency
purposes or made with the prior express consent of the called party)
using any automatic telephone dialing system or an artificial or
prerecorded voice–
(iii) to any telephone number assigned to a paging service,
cellular telephone service, specialized mobile radio service, or
other radio common carrier service, or any service for which
the called party is charged for the call; . . .
23.
The TCPA, 47 U.S.C. §227(b)(3), further provides:
Private right of action.
A person or entity may, if otherwise permitted by the laws or rules of court
of a State, bring in an appropriate court of that State–
(A) an action based on a violation of this subsection or the regulations
prescribed under this subsection to enjoin such violation,
(B) an action to recover for actual monetary loss from such a
violation, or to receive $500 in damages for each such violation,
whichever is greater, or
(C) both such actions.
If the Court finds that the defendant willfully or knowingly violated this
subsection or the regulations prescribed under this subsection, the court
may, in its discretion, increase the amount of the award to an amount equal
to not more than 3 times the amount available under the subparagraph (B) of
this paragraph.
24.
Defendant violated the TCPA by placing automated calls to plaintiff’s cell phone.
CLASS ALLEGATIONS
25.
Plaintiff brings this claim on behalf of a class, consisting of (a) all persons
(b) who, on or after a date four years prior to the filing of this action (28 U.S.C. §1658), (c)
received calls from defendant using an automated dialer or prerecorded voice (d) where
defendant records do not show that the person provided the number to defendants.
26.
The class is so numerous that joinder of all members is impractical.
Plaintiff alleges on information and belief that there are more than 40 members of the class.
Purchasing or contracting for automated dialing equipment would make no economic sense if
3
less than 40 calls were placed.
27.
There are questions of law and fact common to the class that predominate
over any questions affecting only individual class members. The predominant common
questions include:
a.
Whether defendants engaged in a pattern of placing prerecorded calls to
cellular telephones;
b.
The manner in which defendants obtained the cell phone numbers;
c.
Whether defendants thereby violated the TCPA.
28.
Plaintiff will fairly and adequately protect the interests of the class.
Plaintiff has retained counsel experienced in handling class actions and claims involving
unlawful business practices. Neither plaintiff nor plaintiff's counsel have any interests which
might cause them not to vigorously pursue this action.
29.
A class action is an appropriate method for the fair and efficient
adjudication of this controversy. The interest of class members in individually controlling the
prosecution of separate claims against defendants is small because it is not economically feasible
to bring individual actions.
30.
Several courts have certified class actions under the TCPA. Telephone call and
text message cases include: Meyer v. Portfolio Recovery Associates, LLC, No. 11-56600, 2012
U.S. App. LEXIS 21136, *7-9 (9th Cir., October 12, 2012); Manno v. Healthcare Revenue
Recovery Group, LLC, 289 F.R.D. 674 (S.D.Fla. 2013); Mitchem v Illinois Collection Serv., 271
F.R.D. 617 (N.D.Ill. 2011); Balbarin v. North Star Capital Acquisition, LLC,, 10 C 1846, 2011
U.S. Dist. LEXIS 686 (N.D. Ill., Jan. 5, 2011), later opinion, 2011 U.S. Dist. LEXIS 5763
(N.D.Ill., Jan. 21, 2011), later opinion, 2011 U.S. Dist. LEXIS 58761 (N.D. Ill., June 1, 2011);
Lo v. Oxnard European Motors, LLC, 11CV1009 JLS (MDD), 2012 U.S. Dist. LEXIS 73983
(S.D.Cal., May 29, 2012). Fax cases include: Sadowski v. Med1 Online, LLC, 07 C 2973, 2008
U.S. Dist. LEXIS 41766 (N.D.Ill., May 27, 2008); CE Design Ltd. v Cy's Crabhouse North, Inc.,
4
259 F.R.D. 135 (N.D.Ill. 2009); Targin Sign Sys. v Preferred Chiropractic Ctr., Ltd., 679 F.
Supp. 2d 894 (N.D.Ill. 2010); Garrett v. Ragle Dental Lab, Inc., 10 C 1315, 2010 U.S. Dist.
LEXIS 108339, 2010 WL 4074379 (N.D.Ill., Oct. 12, 2010); Hinman v. M & M Rental Ctr., 545
F.Supp. 2d 802 (N.D.Ill. 2008); Clearbrook v. Rooflifters, LLC, 08 C 3276, 2010 U.S. Dist.
LEXIS 72902 (N.D. Ill. July 20, 2010) (Cox, M.J.); G.M. Sign, Inc. v. Group C Communs., Inc.,
08 C 4521, 2010 U.S. Dist. LEXIS 17843 (N.D. Ill. Feb. 25, 2010); Holtzman v. Turza, 08 C
2014, 2009 U.S. Dist. LEXIS 95620 (N.D.Ill., Oct. 14, 2009); Kavu, Inc. v. Omnipak Corp., 246
F.R.D. 642 (W.D.Wash. 2007); Display South, Inc. v. Express Computer Supply, Inc., 961 So.2d
451, 455 (La. App. 1st Cir. 2007); Display South, Inc. v. Graphics House Sports Promotions, Inc.,
992 So. 2d 510 (La. App. 1st Cir. 2008); Lampkin v. GGH, Inc., 146 P.3d 847 (Ok. App. 2006);
ESI Ergonomic Solutions, LLC v. United Artists Theatre Circuit, Inc., 203 Ariz. (App.) 94, 50
P.3d 844 (2002); Core Funding Group, LLC v. Young, 792 N.E.2d 547 (Ind.App. 2003);
Critchfield Physical Therapy v. Taranto Group, Inc., 293 Kan. 285; 263 P.3d 767 (2011); Karen
S. Little, L.L.C. v. Drury Inns. Inc., 306 S.W.3d 577 (Mo. App. 2010); Lindsay Transmission,
LLC v. Office Depot, Inc., 4:12cv221 (E.D.Mo., Feb. 25, 2013).
31.
Management of this class action is likely to present significantly fewer
difficulties that those presented in many class actions, e.g. for securities fraud.
WHEREFORE, plaintiff requests that the Court enter judgment in favor of
plaintiff and the class and against defendants for:
a.
Statutory damages;
b.
An injunction against further violations;
c.
Costs of suit;
d.
Such other or further relief as the Court deems just and proper.
s/Daniel A. Edelman
Daniel A. Edelman
5
Daniel A. Edelman
Cathleen M. Combs
James O. Latturner
Francis R. Greene
EDELMAN, COMBS, LATTURNER
& GOODWIN, L.L.C.
120 S. LaSalle Street, 18th Floor
Chicago, Illinois 60603
(312) 739-4200
(312) 419-0379 (FAX)
6
NOTICE OF LIEN AND ASSIGNMENT
Please be advised that we claim a lien upon any recovery herein for 1/3 or such
amount as a court awards. All rights relating to attorney’s fees have been assigned to counsel.
s/Daniel A. Edelman
Daniel A. Edelman
Daniel A. Edelman
EDELMAN, COMBS, LATTURNER
& GOODWIN, LLC
120 S. LaSalle Street, 18th Floor
Chicago, Illinois 60603
(312) 739-4200
(312) 419-0379 (FAX)
8
| privacy |
UwYgM4cBD5gMZwczsLIk | POMERANTZ LLP
Jennifer Pafiti (SBN 282790)
1100 Glendon Avenue, 15th Floor
Los Angeles, California 90024
Telephone: (310) 405-7190
[email protected]
Attorney for Plaintiff
[Additional Counsel on Signature Page]
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
RICHARD SCHULTZ, Individually and on
Behalf of All Others Similarly Situated,
Plaintiff,
Case No.:
CLASS ACTION COMPLAINT FOR
VIOLATIONS OF THE FEDERAL
SECURITIES LAWS
JURY TRIAL DEMANDED
vs.
SKILLZ INC., f/k/a FLYING EAGLE
ACQUISITION CORP., ANDREW
PARADISE, CASEY CHAFKIN, and
MIRIAM AGUIRRE, SCOTT HENRY, and
HARRY SLOAN,
Defendants.
Plaintiff Richard Shultz (“Plaintiff”), individually and on behalf of all others similarly situated,
by and through his undersigned counsel, hereby brings this Class Action Complaint for Violation of
Federal Securities Law (“Complaint”) against Skillz Inc. f/k/a Flying Eagle Acquisition Corp.
(“FEAC”) (collectively, the “Skillz” or the “Company”); Andrew Paradise (“Paradise”), Skillz Chief
Executive Officer (“CEO”); Scott Henry (“Henry”), Skillz Chief Financial Officer (“CFO”); Casey
Chafkin (“Chafkin”), Skillz Chief Revenue Officer (“CRO”); Miriam Aguirre (“Aguirre”), Skillz Chief
Technology Officer (“CTO”), and Harry Sloan (“Sloan”), President of FEAC based upon, inter alia, the
investigation conducted by and under the supervision of Plaintiff’s counsel, which included a review of
the Company’s public documents, conference calls, and announcements, United States (“U.S.”)
Securities and Exchange Commission (“SEC”) filings, wire and press releases published by and
regarding the Company, analysts’ reports and advisories about the Company and readily obtainable
information. Plaintiff’s counsel’s investigation into the matters alleged herein is ongoing and many
relevant facts are known only to, or are exclusively within the custody or control of, the Company,
Defendant Paradise, Defendant Chafkin, Defendant Aguirre and Defendant Henry. Plaintiff believes
that substantial additional evidentiary support will exist for the allegations set forth herein after a
reasonable opportunity for discovery.
NATURE OF THE ACTION
1.
This is a federal securities class action on behalf of those who purchased or otherwise
acquired Skillz securities between December 16, 2020 and April 19, 2021, inclusive (the “Class
Period”). Plaintiff seeks to pursue remedies against Skillz and certain of the Company’s current senior
executives under the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5
promulgated thereunder.
2.
Skillz is an internet tech company that was founded in 2012 and is headquartered in San
Francisco, California. Skillz provides a proprietary gaming platform for mobile gaming users and
developers. It connects players worldwide by hosting fee-based competitive eSports games on its
platform. Skillz also provides an integrated “developer console” for its game developer customers that
enables them to create, rapidly integrate and monitor the performance of their games on Skillz’s
platform. According to Skillz, its gaming platform “allows us to deliver gaming experiences that our
player community trusts and loves and ‘levels the playing field’ for every developer. We believe we are
re-inventing competitive mobile gaming and thereby expanding the mobile gaming market. Our
technology platform aligns the interests of developers and gamers with respect to user monetization,
instead of putting them at odds.” Skillz revenue is derived exclusively by taking a percentage of player
entrance fees in paid contests. In 2013, Skillz was kicked off of the Google Play Store. Android users
must know how to use the Android Store or manually install the games.
3.
Throughout the Class Period, Defendants disseminated false and misleading statements
and omissions that materially misrepresented Skillz’s purported financial condition and prospects.
These materially misleading statements and omissions included representations relating to certain of
Skillz’s business operations, performance metrics and ultimate valuation, including, among others,
Skillz’s ability to attract new end-users, future profitability, the shrinking popularity of its hosted games
that accounted for 88% of its revenue, and the Company’s valuation. For example, one of the
Company’s objectively unrealistic promises included the unsupportable claim that the Company was
valued at $3.5 billon, based on revenue projections in excess of $550 million for 2022. However, the
Company failed to inform investors that downloads of the games that account for a majority share of its
revenue have been declining since at least November 2020. In reality, the Company’s prospects for
attaining that revenue scale was far from realistic given its size, market share, reliance on third-party
app stores, declining downloads of its most popular games and, critically, the enormous amount of
incentive Bonus Payments that Skillz routinely provides to its gamer customers, a fact that investors
were misled about. These Bonus Payments are routinely provided to its customers, who are expected to
use them for game entry fees, which, in turn, artificially inflates Skillz revenue.
4.
Skillz offers Bonus Cash in order to incentivize users and gamers to engage with their
platform. However, Skillz’s disclosure is materially incomplete since it fails to disclose that Bonus
Cash boomerangs back into the revenue stream. Essentially, Skillz has the ability to offer millions of
dollars in Bonus Cash and simultaneously report millions of dollars in revenue. Had this buried
information been candidly disclosed, investors would have had a more somber picture of the
Company’s growth potential.
5.
Skillz’s bullish market pronouncement misled investors into believing that the Company
was well-positioned for rapid long-term growth. As one research analyst later described the result of
Skillz’s strategy, “[i]ts just a pretty little piece of ice in the water until you hit it and found out it’s an
iceberg.”
6.
That iceberg hit investors just four months after Skillz was taken public. On March 8,
2021, Wolfpack Research released a report titled, “SKLZ: It Takes Little Skill to see this SPACtacular
Disaster Coming” (the “Wolfpack Report”). The Wolfpack Report alleges that the growth speculations
that Skillz and its insiders had touted were “entirely unrealistic.” The Wolfpack Report alleges that
Skillz’s top three games, representing 88% of Skillz’s revenue reported a decline in downloads since
the third quarter of 2020. It states that three games Skillz relies on for 88% of its revenue, produced by
two developers, Tether Studios and Big Run Studios, had begun to decline prior to Skillz going public.
Downloads of these games all declined by 52% (21 Blitz), 40% (Soliatare Cube), and 20% (Blackout
Bingo) in the fourth quarter of 2020. The Wolfpack Report concluded that Skillz buried this decline in
downloads and revenue in its disclosures while continuing to tout massive future revenue growth.
7.
The Wolfpack Report also reveals that Skillz is not taken seriously by industry experts
because Skillz’s platform is not robust enough to handle synchronous play and international
matchmaking. Skillz is also banned from the Google Play Store, a major conduit for game developers.
The Wolfpack Report also shows that Skillz has a history of boasting about future partnerships that
either do not have tremendous value, or never amount to anything. Lastly, the Wolfpack Report alleges
that CEO Paradise is not as experienced as Skillz purports to claim and in fact has been involved
several failed businesses.
8.
Upon release of the Wolfpack Report, Skillz stock plummeted 10.9% to close at $24.45,
down $3 from the previous day. This decline represented close to a $762 million loss in market value.
9.
Soon thereafter, on March 15, 2021, a Twitter user known as “@Restrinct” published a
report highlighting issues with Skillz’s unsustainable business model, unrealistic growth projections
and tremendous sales and marketing spending.
10.
Finally, on April 19, 2021, Eagle Eye Research posted an anonymous report on Twitter
in which it claimed that, through the use of providing users with incentive Bonus Payments, “the
company likely recognizes substantial non-cash revenue, and [] cash revenues may be less than ½ of
GAAP revenue”. On this news, SKLZ shares declined 6.61% to close at $14.11 (a decline of $1 from
the previous day) on April 19, 2021 and shares further declined the next day to an all-time low of
$12.55. The decline represented $254 million in loss of investor value.
11.
The new information to the market about Skillz’s failed business prospects and over-
hyped valuation was confirmed on May 5, 2020, when Skillz issued its first quarter earnings statement
which reflected a $53 million loss, despite the fact that its earnings had increased, as compared to the
same time in 2020.
JURISDICTION AND VENUE
12.
The claims asserted herein arise under Section 10(b) and 20(a) of the Exchange Act (15
U.S.C. §§ 78j(b), 78t(a)) and Rule 10b-5 promulgated thereunder by the SEC (17 C.F.R. § 240.10b-5).
13.
This Court has jurisdiction over the subject matter of this action pursuant to 28 U.S.C. §
1331 and Section 27 of the Exchange Act.
14.
This Court has jurisdiction over each defendant named herein because each defendant
has sufficient minimum contacts with the judicial district so as to render the exercise of jurisdiction by
this Court permissible under traditional notions of fair play and substantial justice. The Company is
also headquartered in this district.
15.
Venue is proper in this Judicial District pursuant to Section 27 of the Exchange Act (15
U.S.C. § 78aa) and 28 U.S.C. § 1391(b), as the alleged misstatements and omissions were made or
omitted, and the subsequent damages took place in this Judicial District and the Company is based in
this district.
16.
In connection with the acts alleged in this Complaint, Skillz, directly or indirectly, used
the instrumentalities of interstate commerce, including interstate wires, U.S. Postal Service mail,
wireless spectrum, and the national securities exchange.
17.
Intradistrict Assignment: Skillz maintains a corporate office in the County of San
Francisco. As such, this action may be properly assigned to the San Francisco/Oakland division of this
Court pursuant to Civil Local Rule 3-2(d).
PARTIES
18.
Plaintiff, as set forth in the accompanying Certification, purchased the Company’s
securities at artificially inflated prices during the Class Period and was damaged upon the revelation of
the alleged corrective disclosure.
19.
Defendant Skillz Inc. (“Skillz”), f/k/a Flying Eagle Acquisition Corp. (“FEAC”),
operates an online mobile multiplayer competition proprietary platform. Players use it to compete in
online competitions against other players across the world. Defendant Skillz is incorporated in
Delaware and maintains its principal executive offices at P.O. Box 445, San Francisco, CA 94104.
20.
Defendant Paradise is a co-founder of Skillz and currently serves as the Company’s
Chief Executive Officer.
21.
Defendant Henry has served as the Company’s Chief Financial Officer since August
22.
Defendant Chafkin is a co-founder of Skillz and currently serves as the Company’s
Chief Revenue Officer.
23.
Defendant Aguirre has served as the Company’s Chief Technology Officer since
November 2013.
24.
Defendant Sloan is currently a member of the Board of Directors of Skillz. Sloan was
also the President and Chairman of FEAC.
25.
Defendants Paradise, Henry, Chafkin, Aguirre, and Sloan are collectively referred to
herein as “Individual Defendants.”
26.
The Company is liable for the acts of the Individual Defendants and its employees under
the doctrine of respondeat superior and common law principles of agency because all of the wrongful
acts complained of herein were carried out within the scope of their employment.
27.
The scienter of the Individual Defendants and other employees and agents of the
Company is similarly imputed to the Company under respondeat superior and agency principles.
28.
The Company and the Individual Defendants are referred to herein, collectively, as the
“Defendants.”
SUBSTANTIVE ALLEGATIONS
A.
Blank Check Companies and SPACs
29.
FEAC was formed in early 2020 as a “blank check” company. A “blank check”
company is a company that has no specific established business plan or purpose or has indicated that its
business plan is to engage in a merger or acquisition with an unidentified company, entity or person.
30.
One type of “blank check” company is a “special purpose acquisition company,” or
“SPAC.” A SPAC is a publicly-traded company created specifically to pool funds through an initial
public offering for the purpose of completing an acquisition or other business combination with an
existing company. Generally, SPACs are founded by public companies or private asset managers.
Since 2014, there has been a resurgent interest in SPAC initial public offerings, and over $10 billion in
total funds were raised towards SPACs in 2017.
31.
In order to create a SPAC, founders must invest the initial capital to recruit an
investment bank to structure capital raising terms, prepare and file initial public offering
documentation, and pre-market the investment offering to interested investors. A target company
cannot be identified before the SPAC initial public offering is completed. Once capital is raised
through the initial public offering, at least 90% of the proceeds must be deposited into a trust account,
and any interest is paid to the investors. An appointed management team (typically the SPAC’s
founders) then has a specified time period, typically between 18 and 24 months, in which to identify an
appropriate target to complete the merger or acquisition. NASDAQ rules dictate the initial business
combination must be with one or more target businesses that together have a fair market value equal to
80% of the balance in the SPAC trust account. Although the only purpose of a SPAC is to acquire a
target company, SPACs generally have corporate governance structures similar to that of other
operating companies.
32.
Typically, common stockholders of the SPAC are granted voting rights to approve or
reject the business combination proposed by the management team. Thus, when the management team
identifies a target, a merger proxy statement must be filed on Form S-4 with the SEC and distributed to
all SPAC stockholders. The Form S-4 will include the target company’s complete audited financials
and the terms of the proposed business combination. Stockholders in SPACs depend on management to
honestly provide accurate information about any contemplated transactions in accordance with the
requirements under the federal securities laws. In anticipation of the shareholder vote, each SPAC
shareholder has three options, they can: (i) approve the transaction by voting in favor of it; (ii) elect to
sell their shares in the open market; or (iii) vote against the transaction and redeem their shares for a
pro-rata share of the trust account.
33.
If a merger or acquisition is successfully made within the allocated time frame,
shareholders and management of the SPAC can profit through their ownership of the common stock
and any related securities (it is common for SPAC initial public offerings to include “units” consisting
of both stock and out-of-the-money warrants). However, if an acquisition is not completed within the
time period specified at the time when the SPAC is organized, then the SPAC is automatically
dissolved, and the money held in trust is returned back to investors. No salaries, finder’s fees or other
cash compensation are paid to the founders and/or management team if they fail to consummate a
successful business combination. Accordingly, the founders and management team of a SPAC, who
typically own approximately 20% of the company, through founders’ shares, and invest significant
resources in the formation of the company and identifying acquisition targets, are highly incentivized to
get a qualifying transaction approved within the operating deadline.
34.
Indeed, leaders in the finance industry have opined that SPAC management teams face
an inherent conflict of interest with public stockholders in that management has an incentive to spend
the money they have raised, no matter what, so they can collect fees and pay themselves in salary and
stock options from the company they purchase. For example, Ben Dell, managing partner of
investment firm Kimmeridge Energy, recently stated that “SPACs are the most egregious example in
the industry of executive misalignment with investors.”
35.
As set forth herein, Skillz exemplified the problem with SPACs. Defendants were
incentivized to, and did, consummate the Business Combination that was not in the best interests of
public investors, to whom they made material misstatements and omissions about Skillz while actively
implementing practices to grossly overvalue the Company.
36.
FEAC was formed as a SPAC in early January 2020 by its sponsor Eagle Equity Partners
II, LLC, led and controlled by Defendant Sloan. Within eight months, Defendants FEAC and Sloan
had secured $158 million in private placement commitments in connection with a business combination
between FEAC and its target – Skillz. After a definitive merger agreement and subscription agreements
were executed, on September 8, 2020, FEAC, through its Board of Directors, filed a merger proxy
statement and prospectus with the SEC on Registration Form S-4 (“Merger Proxy Statement”).
37.
After a series of amendments to the Merger Proxy Statement were filed with the SEC
over the course of the next several months (the last of which was November 30, 2020), and FEAC filed
is final prospectus on December 1, 2020, FEAC and Skillz consummated their merger on December 16,
38.
This merger transaction valued Skillz at $3.5 billion. As described below, this valuation
was grossly overstated because it relied on revenue projections that had little basis in reality since,
according to Skillz own financial statements, a substantial portion of Skillz reported revenue is
generated through Skillz’s own cash, which it provides to its gamer customers in the form of Bonus
Cash incentives. Skillz’s gamer customers then simply recycle the funds back to Skillz as game
entrance fees and Skillz records it as revenue. And this cycle repeats itself over and over again.
39.
After the merger, Defendant Sloan became a Director on Skillz’s Board of Directors.
B.
SKILLZ BUSINESS AND OPERATIONS
40.
Skillz is an online mobile multiplayer competition platform that is integrated into a
number of iOS and Android games. Players use it to compete in competitions against other players
across the world. Skillz hosts esports tournaments and distributes prizes each month. Gamers pay an
entry fee to play in games or tournaments. From there, the developer takes a percentage cut, Skillz
takes a percentage cut, and winners get paid prizes as well. Skillz was originally founded in 2012 by
Paradise and Chafkin in Boston. However, the Company has since moved its current headquarters to
San Francisco, California.
41.
At the time of the merger with FEAC, Skillz touted 40 million registered users and more
than 30,000 registered developers on its gaming platform. “We were planning on being ready to go
public at the end of Q4 [2020], but the SPAC route allows us to go to market a little bit faster…” Skillz
founder
and
CEO
Andrew
Paradise
said
on
CNBC’s
“Squash
on
the
Street.”
(https://www.cnbc.com/2020/09/02/mobile-gaming-firm-skillz-is-the-next-deal-from-spac-behind-
draftkings.html).
42.
Following its merger with FEAC, Skillz went public and filed its first SEC Form 8-K on
December 17, 2020. Contained in that 8-K was a Press Release, dated December 16, 2020, announcing
that Skillz would begin trading on the New York Stock Exchange on December 17, 2020 under the
ticker symbol “SKLZ”. The press release further stated, “With just a fraction of the world’s 2.7 billion
gamers on its platform today, Skillz has a long runway for growth in building its service for 10 million
game developers globally. Skillz is uniquely positioned to capitalize on the rapidly expanding mobile
gaming market, which is expected to more than double by 2025 to $150 billion.”
C.
DEFENDANTS’ MATERIALLY FALSE AND MISLEADING STATEMENTS
DURING THE CLASS PERIOD
43.
FEAC issued a press release that was filed on SEC Form 8-K on September 2, 2020. The
press release stated, among other things:
“Today we’re a leader in casual esports and are well positioned to capture the
global esports opportunity which will increasingly define the gaming market,” said
Andrew Paradise, CEO and Founder of Skillz. “Skillz fulfills the human desire for
community and competition and is shaping the future of interactive entertainment.”
“I’ve been active in the evolution of gaming for 20 years, from ZeniMax to DraftKings,
and I believe Skillz has positioned itself as the platform for the future of gaming,
where entertainment, gaming, and enablement coverage,” said Flying Eagle Chairman
and CEO Harry E. Sloan.
(emphasis added).
44.
FEAC issued a press release that was filed on SEC Form 8-K on September 3, 2020 with
the attachment of the transcript of an investor call which was held on September 2, 2020:
Harry Sloan, CEO of Flying Eagle Acquisition Corp stated, “When I first met Andrew
three years ago, we thought we were watching the creation of a mobile game company
with some unique aspects of growth. We have since come to realize that what he has
actually created is a platform unto its own. Skillz is utterly unique and is positioned at
the intersection of several of the most powerful trends in the digital world. Gaming,
video gaming, is now larger than movies, music, and books. It’s driven by the
proliferation of mobile devices and high-speed bandwidth worldwide. Mobile gaming in
particular is the fastest-growing segment of the gaming market, and according to third-
party industry data, the segment is expected to grow from $68 billion last year to $150
billion in 2025.”
*
*
*
Andrew Paradise, CEO and founder of Skillz stated, “We’re proud of the business we
have built over the last seven years. We’ve focused on systematic skill and profitable
growth, and we’ve been able to double or triple the business every year. But
honestly, we’re much closer to the beginning than the end. We really view going public
is a milestone, but not the end of the race for our Company. Just to give you one
example, less than 10% of our revenue comes from outside North America today even
though the International Mobile Gaming Market is four times larger outside of North
America.”
Paradise went on to say, “All of this is simply built so the developer can make a living
doing what they love, and that love is translated into an incredible ecosystem. Our
number one title’s rotated many times over the last seven years, but gamers live in our
platform; they move game to game. If you ask me how long have I been playing video
games, it’s 30 plus years. Our paying users today have 10 Skillz games installed. In 2015
this number was 3 games installed. Even though the top title continues to rotate over
time, they’re not shrinking or disappearing. In fact, they continue to grow, often quiet
substantially, after being displaced from the number one position.”
To give you an idea of this, our 2015 number one title has grown 30% of revenue since
2015. Our 2016 number one title has grown 268% in revenue since 2016. Our 2017
number one title has grown 110%, and I can keep going on and on. Over the past 12
months, the number of games that are generating over 1 million in GMB in the
ecosystem has more than doubled. In fact, if you look at the other side of the ecosystem
at attrition, we’ve only ever had three developers or $19,000 of GMB ever leave the
system. That’s less than half of a basis point of the $1.6 billion in GMB we expect to
generate this year.
“One of our seven values of our Company is frugality. Frugality means we are all
about the efficient and thoughtful use of capital. We treat every dollar of capital as if
it’s our own. It’s the number one reason why we grant stock options to our employees.
We want them to be owners. It’s so ingrained in our operating ethos that with only $104
million of capital deployed, we’ve built a business that will generate $225 million of
revenue this year and $555 million of revenue by 2022. And that doesn’t require any
new games or geographies. Today we’re fully funded with well over $100 million of
cash and undrawn debt, but the opportunity for smart deployment of capital is perhaps
stronger now than ever for Skillz.”
(emphasis added).
45.
On September 8, 2020 FEAC filed its Merger Proxy Statement with the SEC, which was
signed by Defendants Sloan and Baker. Thereafter, on October 14, 2020, November 2, 2020,
November 17, 2020, November 30, 2020, respectively, FEAC filed revised versions of the prospectus
for the merger on forms S-4/A (collectively, with prior versions, the “Merger Proxy Statement”). The
Merger Proxy Statement stated the following as “FEAC’s Board of Directors’ Reasons for the Approval
of the Business Combination”:
On September 1, 2020, our board of directors unanimously (i) approved the signing of the
Merger Agreement and the transactions contemplated thereby and (ii) directed that the BCA,
related transaction documentation and other proposals necessary to consummate the Business
Combination be submitted to our stockholders for approval and adoption, and recommended
that our stockholders approve and adopt the BCA, related transaction documentation and such
other proposals. Before reaching its decision, our board of directors reviewed the results of
management’s due diligence, which included:
•
research on the growth of mobile gaming generally in the United States and around
the world, competitive platforms to Skillz and dynamics with other essential industry
players for mobile game distribution;
•
extensive meetings (virtually and in person) and calls with Skillz’s management
team and representatives regarding operations, company services, major customers,
financial prospects, the pipeline of potential new games and applications and
possible acquisitions, among other customary due diligence matters;
•
review of Skillz’s material business contracts and certain other legal and commercial
diligence;
•
regulatory review of Skillz’s model on a state-by-state basis and review of certain
international regions;
•
financial and accounting diligence; and
•
creation of an independent financial model in conjunction with management of
Skillz, which was generally consistent with the financial model prepared by each
respective company.
46.
Notably, the Merger Proxy Statement made clear that the FEAC did not seek to obtain a
formal appraisal of Skillz. Skillz had a valuation of $3.5 billion based on revenue projections in excess
of $550 million for 2022. These projections were based on unrealistic growth projections:
Our board of directors considered a wide variety of factors in connection with its
evaluation of the Business Combination. In light of the complexity of those factors,
the FEAC board of directors did not consider it practicable to, nor did it attempt
to, quantify or otherwise assign relative weights to the specific factors it took into
account in reaching its decision. Different individual members of our board of
directors may have given different weight to different factors in their evaluation of the
Business Combination.
(emphasis added).
47.
According to the Merger Proxy Statement, FEAC’s Board of Directors chose Skillz
because it met all of the criteria it outlined:
In considering the Business Combination, FEAC’s board of directors concluded
that [Skillz] met all the above criteria. In particular, the board considered the
following positive factors, although not weighted or in any order of significance:
High-Growth Industry. The global games market is substantial and
growing rapidly. According to Newzoo, the interactive entertainment
market grew from $84 billion in 2014 to $149 billion in 2019, and is
larger than each of the markets of film box office, music and books.
While the global games market as a whole has grown rapidly, the mobile
gaming market has outpaced the broader industry’s growth. According to
Newzoo, mobile games was a $68 billion market in 2019 and the largest
and fastest-growing segment of the global games market, growing at a
20% CAGR from 2014 to 2019. The proliferation of smartphones has
been a key driver of this growth. According to Statista, in 2019 over 40%
of the world’s population currently owns a smartphone and that number
continues to grow, creating an increasingly large market for game
developers to target. According to Statista, in 2019, a quarter of all time
on mobile devices was spent in games.
Extraordinary User Engagement. Skillz has developed a platform for
game developers and end-users that has proven engaging and “sticky.”
Additionally, as its platform features more content, end-users have played
more games. In the year ended December 31, 2019, Skillz estimates the
average paying user spent an average of 62 minutes per day of game play
on Skillz, exceeding the engagement levels of some of the most
successful and well known on-line and mobile platforms in social media,
games and general entertainment. Skillz tracks the number of games that
end users play but does not monitor end user playing time on its platform,
and this estimate is based on the time allowed to complete a tournament
in the top three games for paying users featured on our platform.
Accordingly, the actual time paying users spend per day on the platform
may be less than such estimate. This has resulted in an average three-year
Lifetime Value to User Acquisition Cost of 4.5x (and after taking into
account the end-user incentives recorded in sales and marketing expense
is expected to be 3.0x).
Significant Revenue and Earnings Growth Potential. Skillz’s platform
has enabled it to achieve an attractive financial profile, characterized
by strong existing growth and continued prospects of accelerated
growth. From 2017 to 2019, Skillz achieved a revenue CAGR of over
167%. FEAC believes that Skillz is well positioned to continue its
dynamic growth trajectory as it expands its distributions, expands its
product offering and grows its platform internationally.
Compelling Unit Economics. Skillz is a high growth consumer internet
business that yields favorable unit economics with an estimated four-
month end-user payback period in 2020. In 2020, Skillz expects to
achieve $225 million of revenue, with an estimated gross margin of 95%.
As the company grows to scale, Skillz expects that normalized end-user
acquisition costs, marketing expenses and relative size of its cost of
operations will result in EBITDA margins over 30% from revenue. This
makes Skillz an attractive investment, particularly relative to its peer
companies.
Experienced and Motivated Management Team. Skillz is a founder-
driven business led by its CEO, Paradise, and his co-founder, Casey
Chafkin. Mr. Paradise’s vision for the company and the competitive
gaming industry at large is unique and difficult to duplicate given Skillz’s
proprietary technology and unique positioning. Mr. Paradise has further
surrounded himself with top management talent, most recently, Scott
Henry, who was hired as Skillz’s Chief Financial Officer in August 2020.
(emphasis added).
48.
The Merger Proxy Statement also included statements concerning its potential
partnerships with brands as follows:
Increased Brand and Influencer Partnerships
We see a significant opportunity to build partnerships with brands to sponsor
tournaments on our platform. Brand advertisers are seeking new ways to engage with
existing and potential customers online and are increasingly looking to us for
sponsorship opportunities. In 2019, the majority of GMV on our platform was paid out
in prizes and we believe brand advertisers sponsoring prizes represents a material
business opportunity for us to both broaden our reach and increase profitability.
(emphasis added).
49.
The Merger Proxy Statement also stated the following, in pertinent part, regarding Skillz
and FEAC’s due diligence:
Q: Why is FEAC proposing the Business Combination?
A: FEAC was formed for the purpose of effecting a merger, capital stock exchange,
asset acquisition, stock purchase, reorganization or other similar business combination
with one or more operating businesses. Based on its due diligence investigations of
Skillz and the industries in which it operates, including the financial and other
information provided by Skillz in the course of FEAC’s due diligence
investigations, the FEAC board of directors believes that the Business Combination
with Skillz is in the best interests of FEAC and its stockholders and presents an
opportunity to increase stockholder value. However, there can be no assurances of
this.
(emphasis added).
50.
The Registration Statement touted Defendant Paradise’s experience and alluded to
difficulty in replicating him:
Experienced and Motivated Management Team. Skillz is a founder-driven business led
by its CEO, Paradise, and his co-founder, Casey Chafkin. Mr. Paradise’s vision for the
company and the competitive gaming industry at large is unique and difficult to
duplicate given Skillz’s proprietary technology and unique positioning. Mr. Paradise
has further surrounded himself with top management talent, most recently, Scott Henry,
who was hired as Skillz’s Chief Financial Officer in August 2020.
(emphasis added).
51.
The Merger Proxy Statement also included certain Risk Factors with respect to Skillz’s
reliance on third-party platforms:
In addition, we rely upon third-party platforms, such as the Apple App Store, for
distribution of the games featured on our platform. The promotion, distribution and
operation of apps are subject to the respective distribution platforms’ standard terms and
policies for application developers, which are very broad and subject to frequent changes
and interpretation. Furthermore, the distribution platforms may not enforce their
standard terms and policies for application developers consistently and uniformly across
all applications and with all publishers.
52.
With respect to the standardization of game development and distribution, the Merger
Proxy Statement stated:
In 2019, there were over 10 million game developers making content. Moreover,
distribution platforms such as Apple App Store, the Samsung Galaxy Store and the
Google Play Store have become ubiquitous, enabling developers to reach a broader
audience and fueling a surge in content.
(emphasis added).
53.
On December 1, 2020, FEAC filed its required final amended prospectus on SEC Form
424(b)(3) which was signed by Defendants Sloan and Paradise. This final amended prospectus
contained the same misrepresentations and omissions that were contained in the Merger Proxy
Statement.
54.
On December 16, 2020 Skillz issued a press release, which was attached to Skillz’s SEC
Form 8-K filed on December 17, 2020, entitled “SKILLZ BECOMES FIRST PUBLICLY-TRADED
MOBILE ESPORTS PLATFORM” which quoted Defendant Paradise, CEO and founder of Skillz
stating the following, in relevant part, regarding the Company’s capabilities:
Andrew Paradise, Founder and CEO of Skillz stated: “We built Skillz on the founding
belief that esports are for everyone, and have made significant progress toward our
vision of enabling everyone to share in future of competition…We stand at the
intersection of mobile gaming and esports, perhaps the two most exciting growth
opportunities of the next decade. I thank the entire Skillz team for their dedication,
passion, and creativity, which have led us to this incredible moment on our journey to
build the competition layer on the internet.”
I’ve had a front row seat to the video game and entertainment industry’s evolution over
the past two decades, from my role as founding investor and board member of Bethesda
Games to recently taking DraftKings public,” said Harry Sloan, Chairman of Flying
Eagle. “We believe that Andrew has positioned Skillz to lead the convergence of
mobile, gaming, and player enablement into the future of entertainment itself.
(emphasis added).
55.
Skillz continued to tout its unrealistic business prospects in the first quarter of 2021 and
failed to inform investors of the negative information it had in its possession about its business, in
particular the rapidly declining downloads and installs of its three most revenue producing games that
accounted for 88% of Skillz’s revenue. Skillz failed to disclose this and other information because it
was set to initiate another public offering.
56.
On February 8, 2021, Skillz announced it was issuing 32,000,000 shares of its Class A
common stock through an underwritten public offering (the “Secondary Offering”). This Secondary
Offering consisted of 17,000,000 shares being offered by Skillz and 15,000,000 shares being offered by
certain selling insider stockholders. In connection with this Secondary Offering, Skillz filed with the
SEC a Form S-1 Registration Statement (the “Secondary Offering Prospectus.”).
57.
Skillz’s Secondary Offering Prospectus contained the following statements about various
aspects of its financial condition and its industry and market:
•
“Our revenue increased 201% in 2018 to $51 million, and our net loss increased
147% to $28 million. Our revenue increased 136% in 2019 to $120 million, and our
net loss decreased 15% to $24 million. For the nine months ended September 30,
2020, our revenue increased 91% to $162 million, and our net loss increased 426%
to $79 million.”
•
“Mobile Gaming is Rapidly Growing: The mobile gaming market grew at a 20%
CAGR from 2014 to2019 and is expected to grow from $68 billion in 2019 to $150
billion in 2025.”
•
“Grow the Core: We reach fewer than 2% percent of mobile gamers in North
America markets and are investing in marketing to expand our audience.”
•
“Increase Brand and Influencer Partnerships: More than 80% of our GMV is paid out
in prizes today. We believe brand advertisers sponsoring those prizes have the
potential to broaden our reach and drive increased profitability for our business.”
58.
The Secondary Offering Prospectus touted the growth industry and numerous
opportunities that Skillz had to attract new customers. For example:
Mobile Gaming is Rapidly Growing
The global games market is substantial and growing rapidly. According to Newzoo, the
interactive entertainment market grew from $84 billion in 2014 to $149 billion in 2019,
and is larger than each of the markets of film box office, music and books. While the
global games market as a whole has grown rapidly, the mobile gaming market has
outpaced the broader industry’s growth. According to Newzoo, mobile games was a $68
billion market in 2019 and the largest and fastest-growing segment of the global games
market, growing at a 20% CAGR from 2014 to 2019. The proliferation of
smartphones has been a key driver of this growth. According to Statista, in 2019 over
40% of the world’s population currently owns a smartphone and that number continues
to grow, creating an increasingly large market for game developers to target. According
to Statista, in 2019, a quarter of all time on mobile devices was spent in games.
Democratization of Content Creation
The introduction of standardized game development and distribution platforms has
democratized content creation, leading to a significant increase in content. Traditionally,
game development required large studios and customized software development,
creating high barriers to entry. Today’s mobile game development tools such as Unity
and Unreal are intuitive and low-cost, transforming the game development process into a
“click-to-create” process enabling anyone to build game content. In 2019, there were
over 10 million game developers making content. Moreover, distribution platforms
such as Apple App Store, the Samsung Galaxy Store and the Google Play Store
have become ubiquitous, enabling developers to reach a broader audience and
fueling a surge in content.
Our Growth Strategy
According to Newzoo, there are currently 2.7 billion mobile gamers worldwide. We
currently serve only 2.7 million MAUs as of September 30, 2020, a small fraction of the
addressable market. We believe we are just in the early phases of addressing our
significant market opportunity.
59.
Lastly, the Secondary Offering Prospectus discussed “Key Components” of Skillz’s
revenue model. In particular, Skillz stated:
Key Components of Results of Operations Revenue
Skillz provides a service to the game developers aimed at improving the monetization of
their game content. The monetization service provided by Skillz allows developers to
offer multi-player competition to their end-users which increases end-user retention and
engagement.
By utilizing the Skillz monetization services, game developers can enhance the
player experience by enabling them to compete in head-to-head matches, live
tournaments, leagues, and charity tournaments and increase player retention
through referral bonus programs, loyalty perks, on-system achievements and
rewarding them with prizes (including Bonus Cash prizes)….
(emphasis added).
60.
Pursuant to the Secondary Offering, Skillz reportedly raised $408 million.
D.
THE TRUTH IS GRADUALLY REVEALED
61.
On March 8, 2021, a research report by Wolfpack Research titled “SKLZ: It Takes Little
Skill to see this SPACtacular Disaster Coming” (the “Wolfpack Report”) was publicly released which
described, among other things, how: (i) third-party app data shows installations of the three games
responsible for 88% of Skillz’s revenues (21 Blitz, Solitaire Cube, and Blackout Bingo) all declined
substantially; (ii) Skillz did not disclose the substantial decrease in the popularity of these three games
(despite their material importance to its growth trajectory); (iii) Skillz is not taken seriously by gaming
industry players; (iv) Skillz has a long history of boasting about “big partnerships” which have
amounted to nothing of value; and (v) CEO Paradise does not have the relevant experience that has
been expressed.
62.
The Wolfpack Report alleged that installations for three games which make up 88% of
Skillz revenue all declined substantially, stating, in pertinent part:
We found that the three games responsible for 88% of SKILZ’s revenues in the first 9
months of 2020 had all peaked by Q3 2020. Downloads for SKLZ’s full lineup of
games began to show overall declines in Q1 2021, while the company has projected
61.4% YoY growth in 1Q21.
*
*
*
SKLZ’s 63% revenue growth in 2021 is entirely unachievable without it stumbling upon
multiple new hits. Relying on unpredictable and rare successes from a highly
concentrated customer base is not a sustainable (or investible) business, in our review.
We foresee a lot of pain for SKLZ in 2021 as it attempts to live up to the unrealistic
projects it has provided for 2021-2022.
(emphasis added).
63.
The Wolfpack Report alleged that Skillz did not disclose the declining downloads with
the three games on which it relies upon for 88% of its revenues, even though those games were
declining in revenue, in an effort to conceal the true projections, stating, in pertinent part:
Third Party app data shows that installs of 21 Blitz, Solitaire Cube, and Blackout
Bingo al declined -52%, -40%, and -20%, respectively, in Q4 2020. As of March 3,
2021, those games were on track to continue their declines in Q1 2021.
Based on a careful reading of SKLZ’s prospectuses, we estimate that revenue from
Solitaire Cube and 21 Blitz, the top two games from Tether studios, shrank -5.9% in
Q3 2020. We believe Skillz did not disclose these issues because they render the
company’s lofty revenue projections farcical.
*
*
*
Considering the weakness that we are already seeing in Skillz’s top developer’s
games, we believe the company’s projections of +146% two-year revenue growth is
simply unattainable. This is why Skillz’s former shareholders took as much cash off
the table as soon as possible in the SPAC deal.
(emphasis added).
64.
The Wolfpack Report alleged that former employees and industry experts believe Skillz
is not taken seriously by gaming industry players, stating, in pertinent part:
Our conversations with former employees suggested that large studios are unwilling to
touch Skillz’s platform, both because the Skillz platform is not robust enough to
adequately handle their needs with synchronous play and international matchmaking.
One former Skillz employee we spoke to made the following statement regarding
Skillz’s reputation in the gaming industry:
“In the gaming industry, Skillz does not have good brand recognition. Most of the
players in the industry consider them a joke.”
Skillz was thrown off of the Google Play store in 2013, along with all real-money
gaming apps. Recently, Google reversed this long-standing prohibition for licensed
gambling apps like DraftKings but excluded Skillz and other real-money gaming apps
from the policy change. As you can see from the examples of violations, it’s almost as if
the third bullet point was written specifically for Skillz:
In our view, this explicit exclusion by Google suggests Skillz has no way in its current
business model to get back onto the most popular Android store.
*
*
*
Despite being snubbed repeatedly, Skillz CEO Andrew Paradise continues to tout
Android phones as a low-hanging $7 billion TAM expansion. We believe this is at best
an exaggeration and at worst, a fiction. Android Skillz users have to know to use
Samsung’s Galaxy App Store or to install the games via a multi-step, manual
process. Furthermore, Google is reportedly pushing for the elimination of the
Galaxy App Store altogether, a further risk to Skillz.
We expect CEO Andrew Paradise to keep trying to sell his Google Play dream, but
considering the verbiage in the “Examples of violations” shown above, a dream is all
that will ever be for SKLZ (as well as a likely nightmare for investors). We are also
looking forward to hearing him attempt to explain away our report and defend SKLZ’s
ridiculous Q1 and full year 2021 guidance. We’ll see how well Mr. Paradise keeps his
composure when pressed- we’ve heard he doesn’t react well to criticism.
(emphasis added).
65.
The Wolfpack Report also alleges that Skillz has a habit of boasting about “big
partnerships” which have amounted to nothing of value, stating in pertinent part:
We believe Skillz’s Superbowl week announcement of a “global game developer
challenge” to develop an NFL-themed mobile game on its platform was little more than
an opportunistic stock pump:
This press release was published the morning of February 4, 2021. SKLZ’s stock closed
at its all time high, up nearly 25% that day. The stock peaked at $43.72 the following
day, Friday, February 5.
Coincidentally, SKLZ filed an S-1 registering 38,616,576 Shares of Class A Common
Stock and 5,016,666 Warrants for selling shareholders the following Monday, February
8, enabling many early investors to sell millions of shares of SKLZ stock at this inflated
price.(https://www.sec.gov/Archives/edgar/data/1801661/000110465921016167/tm2118
44-1_s1.htm)
*
*
*
We made a developer profile on Skillz platform and found no evidence of an NFL deal
or contest being held in the developer portal. If this was a big multi-year deal, why
wouldn’t there be any documentation or details in the developer portal?
A site search of nfl.com does not even register the term “Skillz” unless we count the
people talking in slang. We were unable to find a reference from the NFL side at all
aside from Skillz press release itself.
*
*
*
Other Skillz announced partnerships that never came to fruition include:
•
2013: Skillz announced a partnership with Glu Mobile, which never actually
materialized.
(https://www.reuters.com/article/us-mobilegaming-glu-
idINBRE94T0EB20130530)
•
2014: “Buck Hunter” (part one) – SKLZ announced a deal with Buck Hunter
back in 2014 and the CEO, Andrew Paradise, made it sound like it would be
huge, but nothing ever came of the deal:
•
“We are excited to partner with such a well-known and storied brand," said Skillz
CEO Andrew Paradise. Now, everyone around the world can compete for cash
and glory with the Big Buck Hunter mobile app powered by Skillz.”
(https://www.pocketgamer.biz/news/60183/skillz-brings-cash-prizes-to-big-
buck-hunter/)
•
2017:
Skillz
reported
partnership
with
Beeline
Interactive
(https://www.skillz.com/beeline-partners-with-skillz-to-launch-street-fighter-on-
leading-mobile-competition-platform/), a division of Capcom, who owns the
Street Fighter franchise. There was a problem, though. Skillz platform can’t
host live 1v1 games. Nothing ever came of this “big partnership” either.
(https://comicbook.com/gaming/news/new-street-fighter-coming-to-mobile-
from-capcom-and-skillz/)
•
January 2021: “Buck Hunter” (part two) – Skillz announced another purported
partnership with Buck Hunter in a January 28, 2021 press release
(https://www.businesswire.com/news/home/20210128005171/en/Play-
Mechanix-Partners-with-Skillz-to-Bring-Mobile-Competition-to-Legendary-
First-Person-Shooter-Big-Buck-Hunter), wherein Mr. Paradise referred to Buck
Hunter as “a cultural icon for 20 years” but never mentions the 2014 purported
partnership.
•
February 2021: NFL – we aren’t holding our breath. At best, the competition
begins mid- 2021 and won’t be complete for another year after that. We doubt
anything of substance comes from this deal.
66.
The Wolfpack Report also alleges that CEO Paradise does not have the relevant
experience he claims, stating, in pertinent part:
While we have to give him credit for selling AisleBuyer to Intuit for $20 million
in 2012, (INTU Acquisitions via Bloomberg LP) the only other business we
could find Mr. Paradise claim to have sold was “Photrade.” However, we
wouldn’t consider his sale of Photrade to MPA, Inc. (who went bankrupt 2 years
later) for $3,829 in warrants, or the price of a used treadmill sitting in a
basement, enough to qualify him as a “serial entrepreneur.”
67.
On the day of the Wolfpack Report was released, shares of Skillz plummeted by 10.9%
to close at $24.45. This disclosure represented approximately $762 million loss of investor value.
68.
On March 12, 2021, Skillz filed its yearly report on Form 10-K with the SEC for the
fiscal year ending December 31, 2020 (the “2020 Annual Report”). The annual report was signed by
Defendants Paradise, Henry and Sloan. Attached to the 2020 Annual Report were certifications
pursuant to the Sarbanes-Oxley Act of 2002 (“SOX”) signed by Defendants Paradise and Henry
attesting to the accuracy of the financial statements and disclosures.
69.
The 2020 Annual Report stated in Item 1 “Our Platform Overview” was as follows:
Our proprietary platform revolutionizes and democratizes the mobile gaming industry
and allows us to deliver gaming experiences that our player community trusts and loves
and “levels the playing field” for every developer. We believe we are re-inventing
competitive mobile gaming and thereby expanding the mobile gaming market. Our
technology platform aligns the interests of developers and gamers with respect to user
monetization, instead of putting them at odds. Traditional mobile games utilize in-game
advertisements or purchase, which create friction in the user experience, hurting
engagement and retention. By monetizing user engagement primarily through prizes, we
create a compelling alternative for both developers and users for any competitive game.
With our system, the more users enjoy playing in contests for prizes and the longer they
play, the more revenue we generate for developers. This dynamic generates
significantly stronger monetization for developers.
(emphasis added).
70.
The 2020 Annual Report also stated the following regarding “Our Marketing”:
Our ability to effectively market to potential users is important to our operational
success. With a blend of our analytics and data science, we leverage software tools
to efficiently acquire, retain and engage users while reinforcing our trusted
consumer-facing brand for both the end users and our developer partners. We
acquire and engage users primarily through digital ad networks, our game developers
and affiliate partners. We use paid marketing channels, in combination with compelling
offers and exciting games, to achieve our objectives. We optimize our marketing
investment across all our channels in order to generate strong returns on our
marketing spending. We currently expect that the average Three-Year Lifetime Value
of our 2018, 2019 and 2020 cohorts will be 3.8x our total user acquisition cost (and after
taking into account the end-user incentives recorded and expected to be recorded in sales
and marketing expense is expected to be 2.5x). Three-Year Lifetime Value means
cumulative gross profit from a paying user over thirty-six (36) months following
user acquisition, which is based on a combination of historic data and extrapolation
of historic data for future periods. User acquisition costs include expenses incurred in
the period to acquire the cohort of users, including digital advertising costs, affiliate
marketing costs, third-party vendors and software tools used by the user acquisition
marketing team.
See Skillz 10-K filed on March 12, 2021 (emphasis added).
71.
The representations in the 2020 Annual Report were false and misleading in failing to
disclose the material facts set forth herein.
72.
On March 15, 2021, an anonymous Twitter user @Restrinct published a report (the
“Restrinct Report”) highlighting a myriad of problems with Skillz, specifically, Skillz’s massive sales
and marketing expenditures which are “essentially paying a dollar in advertising to show eighty cents in
growth”. The Restrinct Report stated the following and provided a link to Skillz’s 10-K:
We foresee S&M spend continuing to scale side-by-side with revenue growth in 2021
(just as it has in 2020 and 2019) in order for management to reach their forecasted
growth targets, however as the data shows it will be unsustainable as the company
continues to spend a dollar in marketing to show eighty cents in temporary revenue.
2019 Compared to 2018
Sales and marketing expenses increased by $59.7 million, or 115%, to $111.4 million in
2019 from $51.7 million in 2018. The increase was attributable primarily to a 113%
increase in spend to acquire new paying users and 145% increase in engagement
marketing spend. User acquisition marketing costs were $52.5 million and $24.2 million
in 2019 and 2018, respectively. Engagement marketing costs were $50.7 million and
$20.7 million in 2019 and 2018, respectively. Engagement marketing as a percentage of
revenue increased to 42% in 2019 from 41% in 2018.
73.
On March 12, 2021, Skillz held an earnings conference call regarding its Fourth Quarter
2020 and year-end results. During the conference call, CEO Paradise failed to specifically address a
direct question from an analyst concerning the issues raised by Wolfpack regarding the decline in
“download activity” and “how it might be slowing down a little bit in some of those key games.” CEO
Paradise deflected the question and did not address its core premise: the substantial decrease in
download activity of three key games. Paradise’s deliberate non-response to the analysts continued to
mislead investors regarding the Company’s growth prospects.
74.
Moreover, despite having promised the market that they would not sell their Class B
shares for at least 24 months after taking Skillz public, the Individual Defendants all sold substantial
portions of their Skillz holdings on March 23, 2021, reaping over $240 million in personal profit. For
example, defendant Paradise sold 8,402,866 shares at $23.24 reaping proceeds of $196.1 million. As
insiders, the Individual Defendants knew that the Company had disseminated false or misleading
information about the Company’s long-term growth.
75.
The Secondary Offering Prospectus was false and misleading in failing to disclose the
material facts set forth herein.
76.
On April 19, 2021, an anonymous Twitter account named Eagle Eye Research, released
a short seller report. The report states, “The company has never turned a profit and we doubt it ever
will”. The Eagle Eye Report alleges that Skillz is “recognizing revenue from ‘virtual’ money it gave its
customers to spend although no real cash is generated in the process”. The Eagle Eye Report places
emphasis on the fact that sales and marking includes “limited-time Bonus Cash”.
More importantly, when we dug into the composition of S&M expense for SKLZ, we
discovered a material expense for “end-user incentives”. The company defines these as
promotions that are “offered to end-users to draw, re-engage, or generally increase end-
users’ use of the Company’s platform.” These consist of “limited-time Bonus Cash”
offers as well as league prizes in the form of cash or luxury goods (p.63 of 10-K).
Limited-time Bonus Cash is issued to existing players to stimulate engagement and is
distinct from initial deposit Bonus Cash issued to new players (recorded as a reduction
of revenue). We believe limited-time Bonus Cash offers and cash prizes represent the
vast majority of end-user incentives within Sales and Marketing. This is problematic:
Bonus Cash and cash prizes incurred as an expense will be quickly recycled into
revenues in the form of entry fees. The users have no other use for Bonus Cash than to
redeploy into games, and winners of cash prizes tend to be highly active players who
need to fund regular and continuous play to maintain their winning activity. When the
incentives are recycled, SKLZ gets to recognize revenues based on their cut of entry fees
regardless of how they are paid, whether through real cash or Bonus Cash. This is
described in the company’s S-1:
Page F-37 of S-1 filed on February 8, 2021: SKLZ gets to recognize revenues based on
their cut of entry fees regardless of how they are paid, be it through real cash or Bonus
Cash.
(emphasis added).
77.
The Eagle Eye Report alleges that Skillz is effectively giving its customers money to
spend on Skillz and is recognizing revenue from it. The Eagle Eye Report calculated cash revenue,
citing Skillz’s revenue recognition policy mispresents the financial condition of the business and that
true cash revenue is less than one-half of what management portrays to investors.
78.
Short seller reports, Restrinct and Eagle Eye Research, claim that end user incentives
account for a large portion of Skillz’s revenue. In 2020, Skillz reported total revenue of $230.1 million
and totaled $91.5 million in sales and marketing expenses related to end user incentives. These end
user incentives account for 40% of Skillz’s revenue in 2020. This trend seems to not only continue but
is getting worse. In the most recent Q1 earnings for 2021, Skillz reported total revenue of $83.7 million
of which, $54.3 million was attributed to sales and marketing expenses related to end-user incentives.
End user incentives accounted for 64.8% in Q1 2021. The end user incentives in Q1 2021 saw a 2.9%
increase from Q1 2020 in which sales and marketing expenses related to end user incentives made up
61.9% of Skillz’s revenue.
79.
As a result of the information published in the Eagle Eye Report, shares of Skillz
plummeted by 6.61% to close at $14.11 on April 19, 2021.
80.
On May 5, 2021, Skillz filed a press release with the SEC on Form 8-K announcing its
results for the first quarter of 2021, which stated, inter alia, that Skillz’s revenues “grew to 83.7
million,” but that it recorded a net loss of $53.6 million. It also stated that GMV (Gross Marketplace
Volume), i.e., the total dollar amount of game entry fees paid by users, increased to $566.6 million.
This press release also showed its Sales & Marketing expenses, where Skillz records the Bonus Cash
incentives it provides to its gamers to enter its games, more than doubled as compared to the same
period in 2020.
81.
On this news, Skillz stock substantially declined by 8.72% to close at $15.48, and
continued to drop the next day, closing at $15.41.
82.
As a result of Defendants’ wrongful acts and omissions, and the precipitous declines in
the market value of the Company’s securities, Plaintiff and other Class members have suffered
significant losses and damages.
PLAINTIFF’S CLASS ALLEGATIONS
83.
Plaintiff brings this action as a class action pursuant to Federal Rules of Civil Procedure
23(a) and (b)(3) on behalf of a class consisting of all persons other than defendants who purchased
publicly traded Skillz securities on the NASDAQ during the Class Period, and who were damaged
thereby (the “Class”). Excluded from the Class are Defendants, the officers and directors of Skillz and
its subsidiaries, members of the Individual Defendants’ immediate families and their legal
representatives, heirs, successors or assigns and any entity in which Defendants have or had a
controlling interest.
84.
The members of the Class are so numerous that joinder of all members is impracticable.
Throughout the Class Period, Skillz securities were actively traded on the NASDAQ. While the exact
number of Class members is unknown to Plaintiff at this time and can be ascertained only through
appropriate discovery, Plaintiff believes that there are hundreds, if not thousands of members in the
proposed Class.
85.
Plaintiff’s claims are typical of the claims of the members of the Class as all members of
the Class are similarly affected by defendants’ wrongful conduct in violation of federal law that is
complained of herein.
86.
Plaintiff will fairly and adequately protect the interests of the members of the Class and
has retained counsel competent and experienced in class and securities litigation. Plaintiff has no
interest antagonistic to or in conflict with those of the Class.
87.
Common questions of law and fact exist as to all members of the Class and predominate
over any questions solely affecting individual members of the Class. Among the questions of law and
fact common to the Class are:
•
whether the Exchange Act was violated by Defendants’ acts as alleged herein;
•
whether statements made by Defendants to the investing public during the Class
Period misrepresented material facts about the financial condition and business of the Company;
•
whether Defendants’ public statements to the investing public during the Class
Period omitted material facts necessary to make the statements made, in light of the circumstances
under which they were made, not misleading;
•
whether the Defendants caused the Company to issue false and misleading filings
during the Class Period;
•
whether Defendants acted knowingly or recklessly in issuing false filings;
•
whether the prices of Skillz securities during the Class Period were artificially
inflated because of the Defendants’ conduct complained of herein; and
•
whether the members of the Class have sustained damages and, if so, what is the
proper measure of damages.
88.
A class action is superior to all other available methods for the fair and efficient
adjudication of this controversy since joinder of all members is impracticable. Furthermore, as the
damages suffered by individual Class members may be relatively small, the expense and burden of
individual litigation make it impossible for members of the Class to individually redress the wrongs
done to them. There will be no difficulty in the management of this action as a class action.
APPLICABILITY OF PRESUMPTION OF RELIANCE FRAUD ON THE MARKET
DOCTRINE
89.
The market for Skillz shares was open, well-developed and efficient at all relevant times.
As a result of the materially false and/or misleading statement and/or failures to disclose, Skillz’s shares
traded at artificially inflated prices during the Class Period. Plaintiff and other members of the Class
purchased or otherwise acquired the Company’s shares relying upon the integrity of the market price of
Skillz shares and market information relating to Skillz and have been damaged thereby.
90.
During the Class Period, the artificial inflation of Skillz’s shares was caused by material
misrepresentations and/or omissions particularized in this Complaint causing the damages sustained by
Plaintiff and other members of the Class. As described herein, during the Class Period, Defendants
made or caused to be made a series of materially false and/or misleading statements about Skillz’s
business, prospects, and operations. These material misstatements and/or omissions created an
unrealistically positive assessment of Skillz’s financials and its business, operations, and prospects, thus
causing the price of the Company’s shares to be artificially inflated at all relevant times, and when
disclosed, negatively affected the value of the Company’s shares. Defendants’ materially false and/or
misleading statements during the Class Period resulted in Plaintiff and other members of the Class
purchasing Skillz shares at such artificially inflated prices, and each of them has been damaged as a
91.
Plaintiff will rely, in part, upon the presumption of reliance established by the fraud-on-
the-market doctrine in that:
•
Skillz shares met the requirements for listing, and were listed and actively traded
on the NASDAQ, an efficient market;
•
As a public issuer, the Company filed periodic public reports;
•
Skillz regularly communicated with public investors via established market
communication mechanisms, including through the regular dissemination of press releases via major
newswire services and through other wide-ranging public disclosures, such as communications with the
financial press and other similar reporting services;
•
Skillz’s securities were liquid and traded with moderate to heavy volume during
the Class Period; and
•
The Company was followed by a number of securities analysts employed by
major brokerage firms who wrote reports that were widely distributed and publicly available.
92.
Based on the foregoing, the market for Skillz securities promptly digested current
information regarding the Company from all publicly available sources and reflected such information
in the prices of the securities, and Plaintiff and the members of the Class are entitled to a presumption
of reliance upon the integrity of the market.
93.
Alternatively, Plaintiff and the members of the Class are entitled to the presumption of
reliance established by the Supreme Court in Affiliated UTE Citizens of the State of Utah v. United
States, 406 U.S. 128 (1972), as Defendants omitted material information in their Class Period
statements in violation of a duty to disclose such information as detailed above.
LOSS CAUSATION
94.
Defendants’ wrongful conduct, as alleged herein, directly and proximately caused the
economic loss suffered by Plaintiff and the Class.
95.
During the Class Period, Plaintiffs and the Class purchased Skillz’s shares at artificially
inflated prices and were damaged thereby. The price of Skillz shares significantly declined when the
misrepresentations made to the market, and/or the information alleged herein to have been concealed
from the market, and/or the effects thereof, were revealed, causing investors’ losses.
NO SAFE HARBOR
96.
The statutory safe harbor provided for forward-looking statements under certain
circumstances does not apply to the allegedly false statements and omissions pled in this Complaint.
The statements alleged to be false and misleading herein all relate to then-existing facts and
circumstances. To the extent certain of the statements alleged to be false and misleading may be
characterized as forward-looking, they were not adequately identified as “forward-looking” statements
when made, and were not accompanied by meaningful cautionary statements identifying important
factors that could cause actual results to differ material from those in the purportedly forward-looking
statements. Alternatively, to the extent that the statutory safe harbor is intended to apply to any
forward-looking statements pled herein, Skillz and Individual Defendants were provided with copies of
the Company’s reports and press releases alleged herein to be misleading prior to, or shortly after, their
issuance and had the ability and opportunity to prevent their issuance or cause them to be corrected.
Due to Defendants’ positions with Skillz, and access to Skillz’s material information that was
unavailable to the public, Defendants knew that the adverse facts described herein were not disclosed to
and were being concealed from investors. Defendants are liable for the false statements and omissions
alleged herein.
SCIENTER ALLEGATIONS
97.
As alleged herein, Defendants acted with scienter since Defendants knew that the public
documents and statements issued or disseminated in the name of the Company were materially false
and/or misleading; knew that such statements or documents would be issued or disseminated to the
investing public; and knowingly and substantially participated or acquiesced in the issuance or
dissemination of such statements or documents as primary violations of the federal securities laws. As
set forth elsewhere herein in detail, Skillz and Individual Defendants, by virtue of their receipt of
information reflecting the true facts regarding Skillz, their control over, and/or receipt and/or
modification of Skillz’s allegedly materially misleading misstatements and/or their associations with
the Company which made them privy to confidential proprietary information concerning Skillz,
participated in the fraudulent scheme alleged herein.
98.
Defendants knew and/or recklessly disregarded the falsity and misleading nature of the
information that they caused to be disseminated to the investing public. The fraudulent scheme
described herein could not have been perpetrated during the Class Period without the knowledge and
complicity or, at least, the reckless disregard of the personnel at the highest levels of the Company.
99.
The Individual Defendants, because of their positions with Skillz, made and/or
controlled the contents of the Company's public statements during the Class Period. Each Defendant
was provided with or had access to the information alleged herein to be false and/or misleading prior to
or shortly after their issuance and had the ability and opportunity to prevent their issuance or cause
them to be corrected. Because of their positions and access to material non-public information, these
Defendants knew or recklessly disregarded that the adverse facts specified herein had not been
disclosed to and were being concealed from the public and that the positive representations that were
being made were materially false and misleading. As a result, each of these Defendants is responsible
for the accuracy of Skillz’s corporate statements and are therefore responsible and liable for the
representations contained therein. The Individual Defendants were highly motivated to personally
profit from misstatements that inflated the market prices of Skillz’ shares. For example, Defendant
Sloan stood to reap substantial benefits and recovery expenses in connection with the Business
Combination with Skillz approved on December 16, 2020. Similarly, several Individual Defendants
stood to profit from the sale of their shares at inflated prices pursuant to the Secondary Offering. Less
than one month later, the price of Skillz’s shares had declined by nearly one-half or $11 per share.
100.
According to the Secondary Offering Prospectus, on March 23, 2021, the Individual
Defendants sold millions of shares in the Secondary Offering. Specifically, Defendant Paradise sold
8,402,866 shares at an average price of $23.34 per share for a total sale of $196.1 million. Defendant
Aguirre sold 274,825 shares at an average price of $23.34 per share for a total sale of $6.41 million.
Defendant Chafkin sold 1,673,599 shares at an average price of $23.34 per share for a sale of $39
million. These Defendants had total sales of $240 million on March 23, 2021. The following day,
March 24, 2021, the stock price had decreased by 14.35% to $19.99.
COUNT I
For Violations of Section 10(b) And Rule 10b-5 Promulgated Thereunder
Against All Defendants
101.
Plaintiff repeats and realleges each and every allegation contained above as it fully set
forth herein.
102.
This Count is asserted against Defendants is based upon Section 10(b) of the Exchange
Act, 15 U.S.C. § 78j(b), and Rule 10b-5 promulgated thereunder by the SEC.
103.
During the Class Period, Defendants, individually and in concert, directly or indirectly,
disseminated or approved the false statements specified above, which they knew or deliberately
disregarded were misleading in that they contained misrepresentations and failed to disclose material
facts necessary in order to make the statements made, in light of the circumstances under which they
were made, not misleading.
104.
Defendants violated §10(b) of the 1934 Act and Rule 10b-5 in that they:
•
Employed devices, schemes and artifices to defraud;
•
Made untrue statements of material facts or omitted to state material facts necessary
in order to make the statements made, in light of the circumstances under which they
were made, not misleading; or Engaged in acts, practices and a course of business
that operated as a fraud or deceit upon plaintiff and others similarly situated in
connection with their purchased of Skillz securities during the Class Period.
105.
Defendants acted with scienter in that they knew that the public documents and
statements issued or disseminated in the name of the Company were materially false and misleading;
knew that such statements or documents would be issued or disseminated to the investing public; and
knowingly and substantially participated, or acquiesced in the issuance or dissemination of such
statements or documents as primary violations of the securities laws. These Defendants by virtue of
their receipt of information reflecting the true facts of the Company, their control over, and/or receipt
and/or modification of Skillz’s allegedly materially misleading statements, and/or their associations
with the Company which made them privy to confidential proprietary information concerning the
Company, participated in the fraudulent scheme alleged herein.
106.
Individual Defendants, who are or were the senior officers and/or directors of the
Company, had actual knowledge of the material omissions and/or the falsity of the material statements
set forth above, and intended to deceive Plaintiff and the other members of the Class, or, in the
alternative, acted with reckless disregard for the truth when they failed to ascertain and disclose the true
facts in the statements made by them or other Skillz personnel to members of the investing public,
including Plaintiff and the Class.
107.
As a result of the foregoing, the market price of Skillz securities was artificially inflated
during the Class Period. In ignorance of the falsity of Defendants’ statements, Plaintiff and the other
members of the Class relied on the statements described above and/or the integrity of the market price
of Skillz securities during the Class Period in purchasing Skillz securities at prices that were artificially
inflated as a result of Defendants’ false and misleading statements.
108.
Had Plaintiff and the other members of the Class been aware that the market price of
Skillz securities had been artificially and falsely inflated by Defendants’ misleading statements and by
the material adverse information which Defendants did not disclose, they would not have purchased
Skillz securities at the artificially inflated prices that they did, or at all.
109.
As a result of the wrongful conduct alleged herein, Plaintiff and other members of the
Class have suffered damages in an amount to be established at trial.
110.
By reason of the foregoing, Defendants have violated Section 10(b) of the 1934 Act and
Rule 10b-5 promulgated thereunder and are liable to the plaintiff and the other members of the Class for
substantial damages which they suffered in connection with their purchase of Skillz’s securities during
the Class Period.
COUNT II
Violations of Section 20(a) of the Exchange Act
Against the Individual Defendants
111.
Plaintiff repeats and realleges each and every allegation contained in the foregoing
paragraphs as it fully set forth herein.
112.
During the Class Period, the Individual Defendants participated in the operation and
management of the Company, and conducted and participated, directly and indirectly, in the conduct of
Skillz’s business affairs. Because of their senior positions, they knew the adverse non-public
information about the Company’s false financial statements.
113.
As officers of a publicly owned company, the Individual Defendants had a duty to
disseminate accurate and truthful information with respect to Skillz’s financial condition and results of
operations, and to correct promptly any public statements issued by the Company which had become
materially false or misleading.
114.
Because of their positions of control and authority as senior officers, the Individual
Defendants were able to, and did, control the contents of the various reports, press releases and public
filings which Skillz disseminated in the marketplace during the Class Period concerning the Company’s
results of operations. Throughout the Class Period, the Individual Defendants exercised their power
and authority to cause the Company to engage in the wrongful acts complained of herein. The
individual Defendants, therefore, were “controlling persons” of the Company within the meaning of
Section 20(a) of the Exchange Act. In this capacity, they participated in the unlawful conduct alleged
which artificially inflated the market price of Skillz securities.
115.
By reason of the above conduct, the Individual Defendants are liable pursuant to Section
20(a) of the Exchange Act for the violations committed by the Company.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff, on behalf of himself and the Class, prays for judgment and relief as
follows:
(a)
declaring this action to be a proper class action, designating plaintiff as Lead
Plaintiff and certifying plaintiff as a class representative under Rule 23 of the Federal Rules of Civil
Procedure and designating plaintiff’s counsel as Lead Counsel;
(b)
awarding damages in favor of plaintiff and the other Class members against all
defendants, jointly and severally, together with interest thereon;
(c)
awarding plaintiff and the Class reasonable costs and expenses incurred in this
action, including counsel fees and expert fees; and
(d)
awarding plaintiff and other members of the Class such other and further relief as
the Court may deem just and proper.
JURY TRIAL DEMANDED.
Plaintiff hereby demands a trial by jury.
Dated: June 17, 2021
Respectfully submitted,
POMERANTZ LLP
By: s/ Jennifer Pafiti
Jennifer Pafiti (SBN 282790)
1100 Glendon Avenue, 15th Floor
Los Angeles, CA 90024
Telephone: 310-405-7190
[email protected]
POMERANTZ, LLP
Jeremy A. Lieberman
(pro hac vice application forthcoming)
J. Alexander Hood II
(pro hac vice application forthcoming)
Thomas H. Przybylowski
(pro hac vice application forthcoming)
600 Third Avenue, 20th Floor
New York, New York 10016
Telephone: (212) 661-1100
Facsimile: (212) 661-8665
[email protected]
[email protected]
[email protected]
BRONSTEIN, GEWIRTZ &
GROSSMAN, LLC
Peretz Bronstein
(pro hac vice application forthcoming)
60 East 42nd Street, Suite 4600
New York, New York 10165
Telephone: (212) 697-6484
Facsimile: (212) 697-7296
[email protected]
Attorneys for Plaintiff
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pursuant *e $eciion 37(a[?) of thc Securifies Asl nf l$33 {"Securi*ies Act") itod/,or Section
2lD(aX2) of the Securities Exchange Act of 1934 ("Exchange Act") as amended by the Private
$ecurities Litignti*n Refnnn Ast cf l9$5"
2.
I have rsviewsd a Cor+p'-.laint *g*ins't $kil'la Inu' {*Skil:lut' or ttis "Compnny"} and
authsrice rhe filing *f a comp,.gable complaint rxr my behalf
3.
L did not pw,CIhess or aoqllife $kinz scouritiot at the dimctisn of plainlif,fs' counsel
cr in srd*r ro participate in anf;private nction ar-i*ilrg,under {hs,$esuritiss Act or Exchange Aot'
4.
I *m willing to $erve as a reprosentstive pafiy on behalf of a Class of investors who
purchased or oilrcnvi$e ercqtrirnd $lsillz se*urities during the class period, including Jrroviditrg
teutimony *t dopo*ition nmd trial, if ncce*nary" I undef$.tand that the Court has the authority to
selost fhc rxn$t sdequete lead $l*intilf irr this actior't,
j.
The nnached sheet lish all of my trn r$aotions in $killz securities during the Class
Period as cpecif,red in the Cor,nptaint
6.
During the tlu$e-year period preceding the date on whiCIh this Certification is
signed, I hnv* not $srvod ar sousht to serve as s fsprs$Ht*aiive party on boh*lf of a claas undor the
fedsrel sesurities laws.
,
7.
I agree not to accept any paylneni fbr serving &s fl, representative party on behalf of
&e class aq set fodt in the Complaint, bey.,*nd ary pro rata share of ar; recovsry, except su0h
reass$able co*t$ and *xpens.eq d*recily relatiag to the r€pres$ltetion of *re el*ss as ordsred CIr
approved by the Court
&.
I deelare rwdor ponatty tl per,jarry th{f SN furegsiltg is,hre ffid'esr, ect'
Xxecuted
5t16t21
(Date)
Richard G Shultz
(Typc or Print l'iam*)
Skillz Inc. f/k/a Flying Eagle Acquisition Corp. (SKLZ)
Shultz, Richard G
List of Purchases and Sales
Transaction
Number of
Price Per
Type
Date
Shares/Unit
Share/Unit
Purchase
1/6/2021
73
$23.8800
Purchase
1/6/2021
1,527
$23.8710
Purchase
1/25/2021
500
$29.8000
Purchase
3/3/2021
4,500
$30.0000
Purchase
3/9/2021
1,630
$25.9900
Purchase
3/9/2021
160
$25.3781
Purchase
3/26/2021
500
$19.0000
Purchase
3/26/2021
500
$18.7500
Purchase
3/26/2021
500
$18.5000
Purchase
3/26/2021
500
$18.2500
Purchase
3/26/2021
500
$17.7500
Purchase
3/29/2021
500
$18.0000
Purchase
3/30/2021
500
$17.0000
Purchase
4/1/2021
500
$19.2500
Purchase
4/1/2021
500
$19.0000
Purchase
4/1/2021
500
$18.7500
Purchase
4/1/2021
500
$18.5000
Sale
2/12/2021
(3,100)
$38.2000
Sale
3/24/2021
(6,290)
$21.7001
Sale
4/15/2021
(5,500)
$15.5500
RICHARD SCHULTZ, Individually and on Behalf of All Others Similarly Situated,
SKILLZ INC., f/k/a FLYING EAGLE ACQUISITION CORP., ANDREW PARADISE, CASEY CHAFKIN, and
MIRIAM AGUIRRE, SCOTT HENRY, and HARRY SLOAN,
Galveston County, Texas
San Francisco County, California
County of Residence of First Listed Defendant
(IN U.S. PLAINTIFF CASES ONLY)
(b) County of Residence of First Listed Plaintiff
(EXCEPT IN U.S. PLAINTIFF CASES)
NOTE: IN LAND CONDEMNATION CASES, USE THE LOCATION OF
THE TRACT OF LAND INVOLVED
Attorneys (If Known)
(c) Attorneys (Firm Name, Address, and Telephone Number)
Pomerantz LLP
1100 Glendon Avenue, 15th Floor, Los Angeles, CA 90024
Tel: 310-405-7190
II.
BASIS OF JURISDICTION (Place an “X” in One Box Only)
1
U S Government Plaintiff
3
Federal Question
(U.S. Government Not a Party)
2
U S Government Defendant
4
Diversity
(Indicate Citizenship of Parties in Item III)
III. CITIZENSHIP OF PRINCIPAL PARTIES (Place an “X” in One Box for Plaintiff
(For Diversity Cases Only)
and One Box for Defendant)
PTF
DEF
PTF
DEF
Citizen of This State
1
1
Incorporated or Principal Place
4
4
of Business In This State
Citizen of Another State
2
2
Incorporated and Principal Place
5
5
of Business In Another State
Citizen or Subject of a
3
3
Foreign Nation
6
6
Foreign Country
IV.
NATURE OF SUIT (Place an “X” in One Box Only)
625 Drug Related Seizure of
Property 21 USC § 881
690 Other
422 Appeal 28 USC § 158
423 Withdrawal 28 USC
§ 157
LABOR
PROPERTY RIGHTS
PERSONAL INJURY
365 Personal Injury – Product
Liability
367 Health Care/
Pharmaceutical Personal
Injury Product Liability
368 Asbestos Personal Injury
Product Liability
820 Copyrights
830 Patent
835 Patent─Abbreviated New
Drug Application
840 Trademark
880 Defend Trade Secrets
Act of 2016
SOCIAL SECURITY
710 Fair Labor Standards Act
720 Labor/Management
Relations
740 Railway Labor Act
751 Family and Medical
Leave Act
790 Other Labor Litigation
791 Employee Retirement
Income Security Act
PERSONAL INJURY
310 Airplane
315 Airplane Product Liability
320 Assault, Libel & Slander
330 Federal Employers’
Liability
340 Marine
345 Marine Product Liability
350 Motor Vehicle
355 Motor Vehicle Product
Liability
360 Other Personal Injury
362 Personal Injury -Medical
Malpractice
IMMIGRATION
PERSONAL PROPERTY
370 Other Fraud
371 Truth in Lending
380 Other Personal Property
Damage
385 Property Damage Product
Liability
CIVIL RIGHTS
PRISONER PETITIONS
CONTRACT
TORTS
FORFEITURE/PENALTY
BANKRUPTCY
OTHER STATUTES
110 Insurance
120 Marine
130 Miller Act
140 Negotiable Instrument
150 Recovery of
Overpayment Of
Veteran’s Benefits
151 Medicare Act
152 Recovery of Defaulted
Student Loans (Excludes
Veterans)
153 Recovery of
Overpayment
of Veteran’s Benefits
160 Stockholders’ Suits
190 Other Contract
195 Contract Product Liability
196 Franchise
861 HIA (1395ff)
862 Black Lung (923)
863 DIWC/DIWW (405(g))
864 SSID Title XVI
865 RSI (405(g))
462 Naturalization
Application
465 Other Immigration
Actions
REAL PROPERTY
FEDERAL TAX SUITS
870 Taxes (U S Plaintiff or
Defendant)
HABEAS CORPUS
463 Alien Detainee
510 Motions to Vacate
Sentence
530 General
535 Death Penalty
871 IRS–Third Party 26 USC
§ 7609
440 Other Civil Rights
441 Voting
442 Employment
443 Housing/
Accommodations
445 Amer w/Disabilities–
Employment
446 Amer w/Disabilities–Other
448 Education
375 False Claims Act
376 Qui Tam (31 USC
§ 3729(a))
400 State Reapportionment
410 Antitrust
430 Banks and Banking
450 Commerce
460 Deportation
470 Racketeer Influenced &
Corrupt Organizations
480 Consumer Credit
485 Telephone Consumer
Protection Act
490 Cable/Sat TV
850 Securities/Commodities/
Exchange
890 Other Statutory Actions
891 Agricultural Acts
893 Environmental Matters
895 Freedom of Information
Act
896 Arbitration
899 Administrative Procedure
Act/Review or Appeal of
Agency Decision
950 Constitutionality of State
Statutes
OTHER
540 Mandamus & Other
550 Civil Rights
555 Prison Condition
560 Civil Detainee–
Conditions of
Confinement
V.
ORIGIN (Place an “X” in One Box Only)
1
Original
2
Removed from
3
Remanded from
4
Reinstated or
5 Transferred from
6
Multidistrict
8 Multidistrict
Proceeding
State Court
Appellate Court
Reopened
Another District (specify)
Litigation–Transfer
Litigation–Direct File
(15 U.S.C. §§ 78j(b) and 78t(a)) and Rule 10b-5 promulgated thereunder by the SEC (17 C.F.R. § 240.10b-5), and the PSLRA
Cite the U.S. Civil Statute under which you are filing (Do not cite jurisdictional statutes unless diversity):
VI.
CAUSE OF
ACTION
Brief description of cause:
Plaintiff seeks to pursue remedies against Skillz Inc. for violations of federal securities laws
CHECK IF THIS IS A CLASS ACTION
DEMAND $
CHECK YES only if demanded in complaint:
UNDER RULE 23, Fed. R. Civ. P.
JURY DEMAND:
VII. REQUESTED IN
Yes
No
COMPLAINT:
Richard Seeborg
3:21-cv-03450-RS
VIII. RELATED CASE(S),
JUDGE
DOCKET NUMBER
IF ANY (See instructions):
IX.
DIVISIONAL ASSIGNMENT (Civil Local Rule 3-2)
(Place an “X” in One Box Only)
SAN FRANCISCO/OAKLAND
SAN JOSE
EUREKA-MCKINLEYVILLE
| securities |
tk2xA4kBRpLueGJZGTaE | Lionel Z. Glancy (#134180)
Robert V. Prongay (#270796)
Lesley F. Portnoy (#304851)
Charles H. Linehan (#307439)
Pavithra Rajesh (#323055)
GLANCY PRONGAY & MURRAY LLP
1925 Century Park East, Suite 2100
Los Angeles, California 90067
Telephone:(310) 201-9150
Facsimile: (310) 201-9160
Email:
[email protected]
Attorneys for Plaintiffs
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
Case No.
CLASS ACTION COMPLAINT
FOR VIOLATIONS OF THE
FEDERAL SECURITIES LAWS
OPUS CHARTERED ISSUANCES
S.A., COMPARTMENT 127 and AI
UNDERTAKING IV, Individually and
On Behalf of All Others Similarly
Situated,
Plaintiffs,
v.
EROS INTERNATIONAL PLC,
KISHORE LULLA, PREM
PARAMESWARAN, and JYOTI
DESHPANDE,,
Defendants.
Plaintiffs Opus Chartered Issuances, S.A., Compartment 127 and AI Undertaking
IV (“Plaintiffs”), individually and on behalf of all others similarly situated, by and
through their attorneys, alleges the following upon information and belief, except as to
those allegations concerning Plaintiffs, which are alleged upon personal knowledge.
Plaintiffs’ information and belief is based upon, among other things, their counsel’s
investigation, which includes without limitation: (a) review and analysis of regulatory
filings made by Eros International plc (“Eros” or the “Company”) with the United
States (“U.S.”) Securities and Exchange Commission (“SEC”); (b) review and analysis
of press releases and media reports issued by and disseminated by Eros; and (c) review
of other publicly available information concerning Eros.
NATURE OF THE ACTION AND OVERVIEW
1.
This is a class action on behalf of persons and entities that purchased or
otherwise acquired Eros securities between July 28, 2017 and June 5, 2019, inclusive
(the “Class Period”), seeking to pursue remedies under the Securities Exchange Act of
1934 (the “Exchange Act”).
2.
Eros is a global company in the Indian film entertainment industry that co-
produces, acquires, and distributes Indian language films in multiple formats
worldwide. Eros International Media Limited (“EIML”) is the Company’s majority
owned subsidiary.
3.
On June 5, 2019, EIML’s credit rating was downgraded to “default” by
India’s largest credit ratings agency, CARE ratings, over concerns of “ongoing
delays/default in debt servicing due to slowdown in collection from debtors, leading to
cash flow issues in the company.”
4.
On this news, the Company’s share price fell $3.59 per share, nearly 50%,
to close at $3.71 per share on June 6, 2019, on unusually heavy trading volume.
5.
On June 6, 2019, Hindenburg Research published a report alleging that the
Company “has been persistently unable to collect receivables from its debtors [because]
a significant portion of the receivables don’t actually exist” and that multiple
undisclosed related party transactions were designed to hide receivables.
6.
On this news, the Company’s share price fell $0.41 per share, or 11%, to
close at $3.30 per share on June 7, 2019, on unusually heavy trading volume.
7.
Throughout the Class Period, Defendants made materially false and/or
misleading statements, as well as failed to disclose material adverse facts about the
Company’s business, operations, and prospects. Specifically, Defendants failed to
disclose to investors: (1) that the Company and its executives used related party
transactions to fabricate reported receivables; (2) that, as a result, the Company’s
financial position was weaker than it had disclosed; (3) that, as a result, EIML missed
loan payments and had its credit downgraded; and (4) that, as a result of the foregoing,
Defendants’ positive statements about the Company’s business, operations, and
prospects were materially misleading and/or lacked a reasonable basis.
8.
As a result of Defendants’ wrongful acts and omissions, and the
precipitous decline in the market value of the Company’s securities, Plaintiff and other
Class members have suffered significant losses and damages.
JURISDICTION AND VENUE
9.
The claims asserted herein arise under Sections 10(b) and 20(a) of the
Exchange Act (15 U.S.C. §§ 78j(b) and 78t(a)) and Rule 10b-5 promulgated thereunder
by the SEC (17 C.F.R. § 240.10b-5).
10.
This Court has jurisdiction over the subject matter of this action pursuant
to 28 U.S.C. § 1331 and Section 27 of the Exchange Act (15 U.S.C. § 78aa).
11.
Venue is proper in this Judicial District pursuant to 28 U.S.C. § 1391(b)
and Section 27 of the Exchange Act (15 U.S.C. § 78aa(c)). Substantial acts in
furtherance of the alleged fraud or the effects of the fraud have occurred in this Judicial
District. Many of the acts charged herein, including the dissemination of materially
false and/or misleading information, occurred in substantial part in this Judicial District.
12.
In connection with the acts, transactions, and conduct alleged herein,
Defendants directly and indirectly used the means and instrumentalities of interstate
commerce, including the United States mail, interstate telephone communications, and
the facilities of a national securities exchange.
PARTIES
13.
Plaintiff Opus Chartered Issuances, S.A., Compartment 127, as set forth in
the accompanying certification, incorporated by reference herein, purchased Eros
securities during the Class Period, and suffered damages as a result of the federal
securities law violations and false and/or misleading statements and/or material
omissions alleged herein.
14.
Plaintiff AI Undertaking IV, as set forth in the accompanying certification,
incorporated by reference herein, purchased Eros securities during the Class Period, and
suffered damages as a result of the federal securities law violations and false and/or
misleading statements and/or material omissions alleged herein.
15.
Defendant Eros is incorporated under the laws of Isle of Man, United
Kingdom with its principal executive offices located in Secaucus, New Jersey. Eros’s
shares trades on the New York Stock Exchange (“NYSE”) under the symbol “EROS.”
16.
Defendant Kishore Lulla (“Lulla”) was the Chief Executive Officer of the
Company at all relevant times and has served as Group Chief Executive Officer and
Managing Director of the Company since April 1, 2018.
17.
Defendant Prem Parameswaran (“Parameswaran”) was the Chief Financial
Officer of the Company at all relevant times.
18.
Defendant Jyoti Desphande (“Deshpande”) served as Group CEO and
Managing Director of the Company from June 22, 2012 to April 1, 2018.
19.
Defendants Lulla, Parameswaran, and Desphande (collectively the
“Individual Defendants”), because of their positions with the Company, possessed the
power and authority to control the contents of the Company’s reports to the SEC, press
releases and presentations to securities analysts, money and portfolio managers and
institutional investors, i.e., the market. The Individual Defendants were provided with
copies of the Company’s reports and press releases alleged herein to be misleading
prior to, or shortly after, their issuance and had the ability and opportunity to prevent
their issuance or cause them to be corrected. Because of their positions and access to
material non-public information available to them, the Individual Defendants knew that
the adverse facts specified herein had not been disclosed to, and were being concealed
from, the public, and that the positive representations which were being made were then
materially false and/or misleading. The Individual Defendants are liable for the false
statements pleaded herein.
SUBSTANTIVE ALLEGATIONS
Background
20.
Eros is a global company in the Indian film entertainment industry that co-
produces, acquires, and distributes Indian language films in multiple formats
worldwide.
Materially False and Misleading
Statements Issued During the Class Period
21.
The Class Period begins on July 28, 2017. On that day, the Company
issued a press release containing its financial results for the fiscal year 2017, ended
March 31, 2017. Concerning trade receivables, that press release stated:
As of March 31, 2017, Trade Receivables increased to $226.8 million
from $169.43 million as of March 31, 2016 mainly due to significantly
higher catalogue sales in fiscal 2017 compared to fiscal 2016 where Eros
had held back at least $40 million of catalogue sales in the last two
quarters. Catalogue sales have payment terms that sometimes extend up to
a year. We have collected over $25 million of fiscal 2017 trade
receivables post balance sheet.
22.
On August 1, 2017, the Company issued another press release announcing
that it had filed its Annual Report on Form 20-F for the 2017 fiscal year, ended March
31, 2017 (“2017 20-F”) with the SEC. The 2017 20-F confirmed the financial results
from the July 28, 2017 Press Release and was signed by Defendant Deshpande.
Additionally, the 2017 20-F contained certifications signed by Defendants Deshpande
and Parameswaran pursuant to the Sarbanes-Oxley Act of 2002 (“SOX”) attesting to
the accuracy of the Company’s financial reporting.
23.
Concerning trade receivables, the 2017 20-F stated:
Our trade accounts receivables were $226.8 million as at March 31, 2017,
$169.3 million as of March 31, 2016 and $197.8 million as at March 31,
2015. If the cash flow, working capital, financial condition or results of
operations of our customers deteriorate, they may be unable, or they may
otherwise be unwilling, to pay trade account receivables owed to us
promptly or at all. In addition, from time to time, we have significant
concentrations of credit risk in relation to our trade account receivables as
a result of individual theatrical releases, television syndication deals or
music licenses. Although we use contractual terms to stagger receipts
and/or the release or airing of content, as of March 31, 2017, 25.1% of our
trade account receivables were represented by our top five debtors,
compared to 54.2% as of March 31, 2016. Any substantial defaults or
delays by our customers could materially and adversely affect our cash
flow, and we could be required to terminate our relationships with
customers, which could adversely affect our business, prospects, financial
condition, results of operations.
24.
The 2017 20-F further stated:
In fiscal year 2017, trade receivables increased to $226.8 million from
$169.3 million as of March 31, 2016 mainly due to resumption of
catalogue sales from April 2016 compared to muted catalogue sales in
fiscal year 2016 primarily due to sales held back during last two quarters
of fiscal 2016 to achieve working capital efficiencies. Catalogue sales
have payment terms extended up to a year. We have collected
approximately $ 35 million of fiscal year 2017 trade receivables
subsequent to reporting date.
25.
Concerning uncollectable receivables, the 2017 20-F stated that
“[u]ncollectible accounts receivable are written off when a settlement is reached for an
amount less than the outstanding balance or when the Group determines that the
balance will not be collected” and “[t]he allowance for doubtful accounts as of March
31, 2017 and March 31, 2016, was $2,430 and $1,315 respectively.” (amount stated in
thousands).
26.
The 2017 20-F also attested to the effectiveness of the Company’s internal
controls over financial reporting:
Management assessed the effectiveness of internal control over financial
reporting as at March 31, 2017, based on the criteria established in 2013
Internal Control — Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Based on the
above criteria, and as a result of this assessment, management concluded
that, as at March 31, 2017, our internal control over financial reporting
was effective in providing reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles.
27.
On July 31, 2018, the Company filed its Annual Report on Form 20-F for
the fiscal year 2018, ended March 31, 2018 (“2018 20-F”) with the SEC, which
confirmed the financial results from the June 27, 2018 Press Release. The 2018 20-F
was signed by Defendant Parameswaran. Additionally, the 2018 20-F contained
certifications signed by Defendants Lulla and Parameswaran pursuant to SOX attesting
to the accuracy of the Company’s financial reporting.
28.
Concerning trade receivables, the 2018 20-F made the same statement as
the June 27, 2018 Press Release and further stated:
Our trade accounts receivables were $225.0 million as at March 31, 2018,
$226.8 million as of March 31, 2017 and $169.3 million as at March 31,
2016. If the cash flow, working capital, financial condition or results of
operations of our customers deteriorate, they may be unable, or they may
otherwise be unwilling, to pay trade account receivables owed to us
promptly or at all. In addition, from time to time, we have significant
concentrations of credit risk in relation to our trade account receivables as
a result of individual theatrical releases, television syndication deals or
music licenses. Although we use contractual terms to stagger receipts, de-
recognition of financial assets and/or the release or airing of content, as of
March 31, 2018, 20.5% of our trade account receivables were represented
by our top five debtors, compared to 25.1% as of March 31, 2017. Any
substantial defaults or delays by our customers could materially and
adversely affect our cash flows, and we could be required to terminate our
relationships with customers, which could adversely affect our business,
prospects, financial condition, results of operations.
29.
Concerning uncollectable receivables, the 2018 20-F stated that
“[u]ncollectible accounts receivables are written off when a settlement is reached for an
amount less than the outstanding balance or when the Group determines that the
balance will not be collected” and “[t]he allowance for doubtful accounts/bad debt for
the year ended March 31, 2018 and March 31, 2017, was $4,740 and $2,430
respectively.” (amount stated in thousands).
30.
The 2018 20-F also attested to the effectiveness of the Company’s internal
controls over financial reporting:
Management assessed the effectiveness of internal control over financial
reporting as at March 31, 2018, based on the criteria established in 2013
Internal Control — Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Based on the
above criteria, and as a result of this assessment, management concluded
that, as at March 31, 2018, our internal control over financial reporting
was effective in providing reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles.
31.
On February 21, 2019, the Company issued a press release containing its
financial results for the third quarter of fiscal year 2019, ended December 31, 2018
(“February 21, 2019 Press Release”). Concerning trade receivables, that press release
stated: “As of December 31, 2018, Trade Receivables decreased to $210.0 million from
$225.0 million as of March 31, 2018 after considering expected credit loss reserve upon
adoption of new accounting standards during the period.”
32.
On February 26, 2019, the Company filed its quarterly report on Form 6-K
for third quarter of fiscal year 2019, ended December 31, 2018 (“3Q 2019 6-K”) with
the SEC, which confirmed the financial results from the February 21, 2019 Press
Release. The 3Q 2019 6-K was signed by Defendant Parameswaran.
33.
The above statements identified in ¶¶21-32 were materially false and/or
misleading, and failed to disclose material adverse facts about the Company’s business,
operations, and prospects. Specifically, Defendants failed to disclose to investors: (1)
that the Company and its executives used related party transactions to fabricate reported
receivables; (2) that, as a result, the Company’s financial position was weaker than it
had disclosed; (3) that, as a result, EIML missed loan payments and had its credit
downgraded; and (4) that, as a result of the foregoing, Defendants’ positive statements
about the Company’s business, operations, and prospects were materially misleading
and/or lacked a reasonable basis.
The Truth Begins to Emerge
34.
On June 5, 2019, EIML’s credit rating was downgraded to “default” by
India’s largest credit ratings agency, CARE ratings, over concerns of “ongoing
delays/default in debt servicing due to slowdown in collection from debtors, leading to
cash flow issues in the company.”
35.
On June 6, 2019, Eros issued a press release admitting that EIML was late
on two loan interest payments for April and May 2019.
36.
On this news, the Company’s share price fell $3.59 per share, over 49%, to
close at $3.71 per share on June 6, 2019, on unusually heavy trading volume.
37.
The next day, before the market opened, Hindenburg Research published a
report explaining why EIML had been downgraded. It stated, among other things, that
“a significant portion of Eros’s receivables don’t exist” and that they have documented
“multiple undisclosed related party transactions that appear designed to hide
receivables.”
38.
On this news, the Company’s share price fell $0.41 per share, or 11%, to
close at $3.30 per share on June 7, 2019, on unusually heavy trading volume.
CLASS ACTION ALLEGATIONS
39.
Plaintiff brings this action as a class action pursuant to Federal Rule of
Civil Procedure 23(a) and (b)(3) on behalf of a class, consisting of all persons and
entities that purchased or otherwise acquired Eros securities between July 28, 2017 and
June 5, 2019, inclusive, and who were damaged thereby (the “Class”). Excluded from
the Class are Defendants, the officers and directors of the Company, at all relevant
times, members of their immediate families and their legal representatives, heirs,
successors, or assigns, and any entity in which Defendants have or had a controlling
interest.
40.
The members of the Class are so numerous that joinder of all members is
impracticable. Throughout the Class Period, Eros’s common shares actively traded on
the NYSE. While the exact number of Class members is unknown to Plaintiff at this
time and can only be ascertained through appropriate discovery, Plaintiff believes that
there are at least hundreds or thousands of members in the proposed Class. Millions of
Eros common stock were traded publicly during the Class Period on the NYSE. Record
owners and other members of the Class may be identified from records maintained by
Eros or its transfer agent and may be notified of the pendency of this action by mail,
using the form of notice similar to that customarily used in securities class actions.
41.
Plaintiff’s claims are typical of the claims of the members of the Class as
all members of the Class are similarly affected by Defendants’ wrongful conduct in
violation of federal law that is complained of herein.
42.
Plaintiff will fairly and adequately protect the interests of the members of
the Class and has retained counsel competent and experienced in class and securities
litigation.
43.
Common questions of law and fact exist as to all members of the Class and
predominate over any questions solely affecting individual members of the Class.
Among the questions of law and fact common to the Class are:
(a)
whether the federal securities laws were violated by Defendants’ acts as
alleged herein;
(b)
whether statements made by Defendants to the investing public during the
Class Period omitted and/or misrepresented material facts about the business,
operations, and prospects of Eros; and
(c)
to what extent the members of the Class have sustained damages and the
proper measure of damages.
44.
A class action is superior to all other available methods for the fair and
efficient adjudication of this controversy since joinder of all members is impracticable.
Furthermore, as the damages suffered by individual Class members may be relatively
small, the expense and burden of individual litigation makes it impossible for members
of the Class to individually redress the wrongs done to them. There will be no
difficulty in the management of this action as a class action.
UNDISCLOSED ADVERSE FACTS
45.
The market for Eros’s securities was open, well-developed and efficient at
all relevant times. As a result of these materially false and/or misleading statements,
and/or failures to disclose, Eros’s securities traded at artificially inflated prices during
the Class Period. Plaintiff and other members of the Class purchased or otherwise
acquired Eros’s securities relying upon the integrity of the market price of the
Company’s securities and market information relating to Eros, and have been damaged
thereby.
46.
During the Class Period, Defendants materially misled the investing
public, thereby inflating the price of Eros’s securities, by publicly issuing false and/or
misleading statements and/or omitting to disclose material facts necessary to make
Defendants’ statements, as set forth herein, not false and/or misleading. The statements
and omissions were materially false and/or misleading because they failed to disclose
material adverse information and/or misrepresented the truth about Eros’s business,
operations, and prospects as alleged herein.
47.
At all relevant times, the material misrepresentations and omissions
particularized in this Complaint directly or proximately caused or were a substantial
contributing cause of the damages sustained by Plaintiff and other members of the
Class. As described herein, during the Class Period, Defendants made or caused to be
made a series of materially false and/or misleading statements about Eros’s financial
well-being and prospects. These material misstatements and/or omissions had the
cause and effect of creating in the market an unrealistically positive assessment of the
Company and its financial well-being and prospects, thus causing the Company’s
securities to be overvalued and artificially inflated at all relevant times. Defendants’
materially false and/or misleading statements during the Class Period resulted in
Plaintiff and other members of the Class purchasing the Company’s securities at
artificially inflated prices, thus causing the damages complained of herein when the
truth was revealed.
LOSS CAUSATION
48.
Defendants’ wrongful conduct, as alleged herein, directly and proximately
caused the economic loss suffered by Plaintiff and the Class.
49.
During the Class Period, Plaintiff and the Class purchased Eros’s securities
at artificially inflated prices and were damaged thereby. The price of the Company’s
securities significantly declined when the misrepresentations made to the market,
and/or the information alleged herein to have been concealed from the market, and/or
the effects thereof, were revealed, causing investors’ losses.
SCIENTER ALLEGATIONS
50.
As alleged herein, Defendants acted with scienter since Defendants knew
that the public documents and statements issued or disseminated in the name of the
Company were materially false and/or misleading; knew that such statements or
documents would be issued or disseminated to the investing public; and knowingly and
substantially participated or acquiesced in the issuance or dissemination of such
statements or documents as primary violations of the federal securities laws. As set
forth elsewhere herein in detail, the Individual Defendants, by virtue of their receipt of
information reflecting the true facts regarding Eros, their control over, and/or receipt
and/or modification of Eros’s allegedly materially misleading misstatements and/or
their associations with the Company which made them privy to confidential proprietary
information concerning Eros, participated in the fraudulent scheme alleged herein.
APPLICABILITY OF PRESUMPTION OF RELIANCE
(FRAUD-ON-THE-MARKET DOCTRINE)
51.
The market for Eros’s securities was open, well-developed and efficient at
all relevant times. As a result of the materially false and/or misleading statements
and/or failures to disclose, Eros’s securities traded at artificially inflated prices during
the Class Period. On March 12, 2019, the Company’s share price closed at a Class
Period high of $10.51 per share. Plaintiff and other members of the Class purchased or
otherwise acquired the Company’s securities relying upon the integrity of the market
price of Eros’s securities and market information relating to Eros, and have been
damaged thereby.
52.
During the Class Period, the artificial inflation of Eros’s shares was caused
by the material misrepresentations and/or omissions particularized in this Complaint
causing the damages sustained by Plaintiff and other members of the Class. As
described herein, during the Class Period, Defendants made or caused to be made a
series of materially false and/or misleading statements about Eros’s business, prospects,
and operations. These material misstatements and/or omissions created an
unrealistically positive assessment of Eros and its business, operations, and prospects,
thus causing the price of the Company’s securities to be artificially inflated at all
relevant times, and when disclosed, negatively affected the value of the Company
shares. Defendants’ materially false and/or misleading statements during the Class
Period resulted in Plaintiff and other members of the Class purchasing the Company’s
securities at such artificially inflated prices, and each of them has been damaged as a
result.
53.
At all relevant times, the market for Eros’s securities was an efficient
market for the following reasons, among others:
(a)
Eros shares met the requirements for listing, and was listed and actively
traded on the NYSE, a highly efficient and automated market;
(b)
As a regulated issuer, Eros filed periodic public reports with the SEC
and/or the NYSE;
(c)
Eros regularly communicated with public investors via established market
communication mechanisms, including through regular dissemination of press releases
on the national circuits of major newswire services and through other wide-ranging
public disclosures, such as communications with the financial press and other similar
reporting services; and/or
(d)
Eros was followed by securities analysts employed by brokerage firms
who wrote reports about the Company, and these reports were distributed to the sales
force and certain customers of their respective brokerage firms. Each of these reports
was publicly available and entered the public marketplace.
54.
As a result of the foregoing, the market for Eros’s securities promptly
digested current information regarding Eros from all publicly available sources and
reflected such information in Eros’s share price. Under these circumstances, all
purchasers of Eros’s securities during the Class Period suffered similar injury through
their purchase of Eros’s securities at artificially inflated prices and a presumption of
reliance applies.
55.
A Class-wide presumption of reliance is also appropriate in this action
under the Supreme Court’s holding in Affiliated Ute Citizens of Utah v. United States,
406 U.S. 128 (1972), because the Class’s claims are, in large part, grounded on
Defendants’ material misstatements and/or omissions. Because this action involves
Defendants’ failure to disclose material adverse information regarding the Company’s
business operations and financial prospects—information that Defendants were
obligated to disclose—positive proof of reliance is not a prerequisite to recovery. All
that is necessary is that the facts withheld be material in the sense that a reasonable
investor might have considered them important in making investment decisions. Given
the importance of the Class Period material misstatements and omissions set forth
above, that requirement is satisfied here.
NO SAFE HARBOR
56.
The statutory safe harbor provided for forward-looking statements under
certain circumstances does not apply to any of the allegedly false statements pleaded in
this Complaint. The statements alleged to be false and misleading herein all relate to
then-existing facts and conditions. In addition, to the extent certain of the statements
alleged to be false may be characterized as forward looking, they were not identified as
“forward-looking statements” when made and there were no meaningful cautionary
statements identifying important factors that could cause actual results to differ
materially from those in the purportedly forward-looking statements. In the alternative,
to the extent that the statutory safe harbor is determined to apply to any forward-
looking statements pleaded herein, Defendants are liable for those false forward-
looking statements because at the time each of those forward-looking statements was
made, the speaker had actual knowledge that the forward-looking statement was
materially false or misleading, and/or the forward-looking statement was authorized or
approved by an executive officer of Eros who knew that the statement was false when
made.
FIRST CLAIM
Violation of Section 10(b) of The Exchange Act and
Rule 10b-5 Promulgated Thereunder
Against All Defendants
57.
Plaintiff repeats and re-alleges each and every allegation contained above
as if fully set forth herein.
58.
During the Class Period, Defendants carried out a plan, scheme and course
of conduct which was intended to and, throughout the Class Period, did: (i) deceive the
investing public, including Plaintiff and other Class members, as alleged herein; and (ii)
cause Plaintiff and other members of the Class to purchase Eros’s securities at
artificially inflated prices. In furtherance of this unlawful scheme, plan and course of
conduct, Defendants, and each defendant, took the actions set forth herein.
59.
Defendants (i) employed devices, schemes, and artifices to defraud; (ii)
made untrue statements of material fact and/or omitted to state material facts necessary
to make the statements not misleading; and (iii) engaged in acts, practices, and a course
of business which operated as a fraud and deceit upon the purchasers of the Company’s
securities in an effort to maintain artificially high market prices for Eros’s securities in
violation of Section 10(b) of the Exchange Act and Rule 10b-5. All Defendants are
sued either as primary participants in the wrongful and illegal conduct charged herein
or as controlling persons as alleged below.
60.
Defendants, individually and in concert, directly and indirectly, by the use,
means or instrumentalities of interstate commerce and/or of the mails, engaged and
participated in a continuous course of conduct to conceal adverse material information
about Eros’s financial well-being and prospects, as specified herein.
61.
Defendants employed devices, schemes and artifices to defraud, while in
possession of material adverse non-public information and engaged in acts, practices,
and a course of conduct as alleged herein in an effort to assure investors of Eros’s value
and performance and continued substantial growth, which included the making of, or
the participation in the making of, untrue statements of material facts and/or omitting to
state material facts necessary in order to make the statements made about Eros and its
business operations and future prospects in light of the circumstances under which they
were made, not misleading, as set forth more particularly herein, and engaged in
transactions, practices and a course of business which operated as a fraud and deceit
upon the purchasers of the Company’s securities during the Class Period.
62.
Each of the Individual Defendants’ primary liability and controlling person
liability arises from the following facts: (i) the Individual Defendants were high-level
executives and/or directors at the Company during the Class Period and members of the
Company’s management team or had control thereof; (ii) each of these defendants, by
virtue of their responsibilities and activities as a senior officer and/or director of the
Company, was privy to and participated in the creation, development and reporting of
the Company’s internal budgets, plans, projections and/or reports; (iii) each of these
defendants enjoyed significant personal contact and familiarity with the other
defendants and was advised of, and had access to, other members of the Company’s
management team, internal reports and other data and information about the Company’s
finances, operations, and sales at all relevant times; and (iv) each of these defendants
was aware of the Company’s dissemination of information to the investing public
which they knew and/or recklessly disregarded was materially false and misleading.
63.
Defendants had actual knowledge of the misrepresentations and/or
omissions of material facts set forth herein, or acted with reckless disregard for the truth
in that they failed to ascertain and to disclose such facts, even though such facts were
available to them. Such defendants’ material misrepresentations and/or omissions were
done knowingly or recklessly and for the purpose and effect of concealing Eros’s
financial well-being and prospects from the investing public and supporting the
artificially inflated price of its securities. As demonstrated by Defendants’
overstatements and/or misstatements of the Company’s business, operations, financial
well-being, and prospects throughout the Class Period, Defendants, if they did not have
actual knowledge of the misrepresentations and/or omissions alleged, were reckless in
failing to obtain such knowledge by deliberately refraining from taking those steps
necessary to discover whether those statements were false or misleading.
64.
As a result of the dissemination of the materially false and/or misleading
information and/or failure to disclose material facts, as set forth above, the market price
of Eros’s securities was artificially inflated during the Class Period. In ignorance of the
fact that market prices of the Company’s securities were artificially inflated, and
relying directly or indirectly on the false and misleading statements made by
Defendants, or upon the integrity of the market in which the securities trades, and/or in
the absence of material adverse information that was known to or recklessly
disregarded by Defendants, but not disclosed in public statements by Defendants during
the Class Period, Plaintiff and the other members of the Class acquired Eros’s securities
during the Class Period at artificially high prices and were damaged thereby.
65.
At the time of said misrepresentations and/or omissions, Plaintiff and other
members of the Class were ignorant of their falsity, and believed them to be true. Had
Plaintiff and the other members of the Class and the marketplace known the truth
regarding the problems that Eros was experiencing, which were not disclosed by
Defendants, Plaintiff and other members of the Class would not have purchased or
otherwise acquired their Eros securities, or, if they had acquired such securities during
the Class Period, they would not have done so at the artificially inflated prices which
they paid.
66.
By virtue of the foregoing, Defendants violated Section 10(b) of the
Exchange Act and Rule 10b-5 promulgated thereunder.
67.
As a direct and proximate result of Defendants’ wrongful conduct,
Plaintiff and the other members of the Class suffered damages in connection with their
respective purchases and sales of the Company’s securities during the Class Period.
SECOND CLAIM
Violation of Section 20(a) of The Exchange Act
Against the Individual Defendants
68.
Plaintiff repeats and re-alleges each and every allegation contained above
as if fully set forth herein.
69.
Individual Defendants acted as controlling persons of Eros within the
meaning of Section 20(a) of the Exchange Act as alleged herein. By virtue of their
high-level positions and their ownership and contractual rights, participation in, and/or
awareness of the Company’s operations and intimate knowledge of the false financial
statements filed by the Company with the SEC and disseminated to the investing
public, Individual Defendants had the power to influence and control and did influence
and control, directly or indirectly, the decision-making of the Company, including the
content and dissemination of the various statements which Plaintiff contends are false
and misleading. Individual Defendants were provided with or had unlimited access to
copies of the Company’s reports, press releases, public filings, and other statements
alleged by Plaintiff to be misleading prior to and/or shortly after these statements were
issued and had the ability to prevent the issuance of the statements or cause the
statements to be corrected.
70.
In particular, Individual Defendants had direct and supervisory
involvement in the day-to-day operations of the Company and, therefore, had the power
to control or influence the particular transactions giving rise to the securities violations
as alleged herein, and exercised the same.
71.
As set forth above, Eros and Individual Defendants each violated Section
10(b) and Rule 10b-5 by their acts and omissions as alleged in this Complaint. By
virtue of their position as controlling persons, Individual Defendants are liable pursuant
to Section 20(a) of the Exchange Act. As a direct and proximate result of Defendants’
wrongful conduct, Plaintiff and other members of the Class suffered damages in
connection with their purchases of the Company’s securities during the Class Period.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff prays for relief and judgment, as follows:
(a)
Determining that this action is a proper class action under Rule 23 of the
Federal Rules of Civil Procedure;
(b)
Awarding compensatory damages in favor of Plaintiff and the other Class
members against all defendants, jointly and severally, for all damages sustained as a
result of Defendants’ wrongdoing, in an amount to be proven at trial, including interest
thereon;
(c)
Awarding Plaintiff and the Class their reasonable costs and expenses
incurred in this action, including counsel fees and expert fees; and
(d)
Such other and further relief as the Court may deem just and proper.
JURY TRIAL DEMANDED
Plaintiff hereby demands a trial by jury.
DATED: August 20, 2019
Respectfully submitted,
GLANCY PRONGAY & MURRAY LLP
By: /s/ Lesley F. Portnoy
Lionel Z. Glancy
Robert V. Prongay
Lesley F. Portnoy
Charles H. Linehan
Pavithra Rajesh
1925 Century Park East, Suite 2100
Los Angeles, California 90067
Telephone: (310) 201-9150
Facsimile: (310) 201-9160
Email: [email protected]
Attorneys for Plaintiffs
Opus - Chartered Issuances S.A., Compartment 127's
Transactions in Eros International Plc (EROS)
Date
Transaction Type
Quantity
Unit Price
1/23/2019
Bought
2,200
$9.0052
1/23/2019
Bought
200
$9.0400
1/23/2019
Bought
3,600
$9.2824
1/23/2019
Bought
49,000
$9.3700
1/24/2019
Bought
10,000
$9.1900
2/19/2019
Bought
1,000
$9.8960
2/19/2019
Bought
2,000
$9.8716
2/21/2019
Bought
1,000
$10.3220
2/21/2019
Bought
500
$10.2773
2/21/2019
Bought
500
$10.4500
2/21/2019
Bought
500
$10.3500
2/22/2019
Bought
460
$9.9000
3/5/2019
Sold
-35,960
$9.3800
3/8/2019
Bought
2,705
$9.6615
3/8/2019
Bought
7,295
$9.7100
3/8/2019
Bought
5,000
$9.7300
3/11/2019
Bought
986
$10.3685
3/11/2019
Bought
4,014
$10.3983
3/25/2019
Sold
-10,000
$10.0988
3/25/2019
Sold
-10,000
$10.1600
4/11/2019
Bought
1,000
$8.8200
4/11/2019
Bought
1,000
$8.6100
4/12/2019
Bought
1,000
$8.7000
4/12/2019
Bought
600
$8.6400
4/15/2019
Bought
1,000
$8.6200
4/15/2019
Bought
1,000
$8.5650
4/15/2019
Bought
1,000
$8.5000
4/15/2019
Bought
1,000
$8.4165
4/24/2019
Bought
500
$8.6700
4/24/2019
Bought
1,500
$8.6700
4/24/2019
Bought
1,500
$8.6600
4/24/2019
Bought
1,500
$8.6600
4/25/2019
Bought
1,000
$8.7000
4/26/2019
Bought
1,400
$8.8000
4/26/2019
Bought
2,000
$8.9200
4/29/2019
Bought
2,000
$8.8200
5/3/2019
Bought
1,000
$8.6800
5/9/2019
Bought
1,000
$8.2798
5/24/2019
Bought
400
$7.7400
5/24/2019
Bought
600
$7.7400
6/4/2019
Bought
1,000
$7.7000
AI Undertaking IV's Transactions in Eros International Plc
(EROS)
Date
Transaction Type
Quantity
Unit Price
4/11/2019
Bought
10,000
$8.7672
4/11/2019
Bought
2,000
$8.7763
4/11/2019
Bought
5,000
$8.7496
4/12/2019
Bought
3,000
$8.8100
4/15/2019
Bought
400
$8.5092
4/15/2019
Bought
2,600
$8.5300
4/16/2019
Bought
2,000
$8.6500
4/23/2019
Sold
-7,000
$8.2800
4/23/2019
Sold
-7,000
$8.2900
4/23/2019
Sold
-5,000
$8.4000
4/24/2019
Bought
4,000
$8.6700
4/24/2019
Bought
5,000
$8.6598
4/25/2019
Bought
2,000
$8.5868
4/25/2019
Bought
3,000
$8.7199
4/26/2019
Bought
2,000
$8.9200
4/29/2019
Bought
1,000
$8.8000
5/1/2019
Bought
400
$8.5189
5/1/2019
Bought
200
$8.5300
5/1/2019
Bought
1,400
$8.5400
5/6/2019
Bought
2,000
$8.4000
5/6/2019
Bought
2,397
$8.3496
5/6/2019
Bought
603
$8.4400
| securities |
ZwIcFYcBD5gMZwcz7KDe | 4
Dennis J. Stewart (SBN 99152)
GUSTAFSON GLUEK PLLC
600 B Street
17th Floor
San Diego, CA 92101
Telephone: (619) 595-3299
[email protected]
Additional Plaintiff’s Counsel Appear on the Signature Page
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
Civil Action No.
CLASS ACTION COMPLAINT
JURY TRIAL DEMANDED
MIKULA WEB SOLUTIONS, INC.,
individually and on behalf of all others
similarly situated,
Plaintiff,
v.
GOOGLE LLC,
Defendant.
Plaintiff Mikula Web Solutions, Inc. brings this action against Defendant Google LLC
(“Google” or “Defendant”) individually and as a class action, pursuant to Rule 23 of the Federal
Rules of Civil Procedure, on behalf of similarly situated publishers that sold digital Display Ad
inventory through Google’s AdSense targeting consumers in the United States since March 11,
2008. Plaintiff seeks treble damages and injunctive relief for Google’s longstanding and continuing
violations of sections 1 and 2 of the Sherman Act, 15 U.S.C. §§1, 2. Plaintiff alleges as follows
based on its personal knowledge, the investigation of Plaintiff’s counsel, and on information and
belief.
I.
NATURE OF THE ACTION
1.
This is a civil antitrust action under sections 1 and 2 of the Sherman Act for treble
damages and other relief arising out of Google’s exclusionary and anticompetitive campaign to
obtain and maintain monopolies in several distinct, but closely related, relevant markets, including
(a) publisher ad server services (“Publisher Ad Servers”); (b) display ad network services (“Ad
Networks”); (c) display ad exchanges (“Exchanges”); and (d) display ad buying tools (“Ad Buying
Tools”) (collectively, the “Relevant Markets”). These markets constitute what is referred to as the
“Display Ad Stack.”
2.
While Google got its start in Search, today it is an advertising company. Google
makes billions of dollars a year by collecting information about individual Internet users and then
using that information to help advertisers find suitable persons to whom they can send direct,
targeted ads. Google obtains user information from a number of sources, including through its
Google Search service and Chrome web browser. Thanks to these and other Google offerings,
Google knows when individual users log on, the websites they visit, the things they search for, the
products they buy, and other valuable information.
3.
Google has engaged in anticompetitive conduct that created and entrenched its
market power at all levels of the Display Ad Stack. As described further below, three events in
particular are key to Google’s dominance in these markets, and the resulting harms to publishers:
(1) Google’s acquisition of DoubleClick, which allowed Google to be a fully integrated player
spanning the entire Display Ad Stack; (2) the introduction of “header bidding” in 2015, which
allowed Google’s rivals to bid simultaneously against each other for publisher impressions; and
(3) Google’s subsequent introduction of Open Bidding in 2018, which was Google’s response to
the competition created by header bidding.
4.
Google used each of these events, along with other actions described herein, to
leverage its monopoly in Search into other markets, to exclude rivals, allocate markets, and
otherwise extend and defend its dominance in the Relevant Display Ad Markets.
5.
As a result, Google has control over a dominant share of the Display Ad inventory
on which advertisers will bid as well as over which advertisers can participate in the most
significant auctions and how publishers prioritize and compare different sources to identify the
advertiser that will ultimately “win” the right to place an ad in a particular ad slot.
Google’s exclusionary conduct has had substantial anticompetitive effects in the Relevant Markets
and has harmed publishers. Plaintiff and members of the proposed Class accordingly seek
compensatory and injunctive relief for violations of the Sherman Act, 15 U.S.C. §§ 1 & 2.
II.
JURISDICTION AND VENUE
6.
Plaintiff brings this action under sections 1 and 2 of the Sherman Act, 15 U.S.C. §§
1, 2.
7.
Plaintiff has been injured, and is likely to continue to be injured, as a direct result
of Google’s unlawful, anticompetitive conduct.
8.
The United States District Court for the Northern District of California has subject
matter jurisdiction over this action pursuant to 28 U.S.C. §§ 1331 and 1337(a), and section 4 of
the Clayton Act, 15 U.S.C. § 15(a)(2).
9.
The United States District Court for the Northern District of California also has
subject matter jurisdiction over this action pursuant to 28 U.S.C. § 1332(d). The amount in
controversy exceeds $5,000,000 exclusive of interests and costs, and Plaintiff and a significant
proportion of the members of the proposed Class are citizens of states different from Google.
10.
Venue is proper in this District under sections 4 and 12 of the Clayton Act, 15
U.S.C. §§ 15, 22. Google is headquartered in this District and its principal business operations are
based in this District. Moreover, Google’s anticompetitive conduct was directed and carried out in
this District. Venue also is proper pursuant to 28 U.S.C. § 1391 for the same reasons.
11.
Plaintiff and members of the Class also have contracts with Google that contain a
forum selection clause requiring all claims between the parties to be resolved “exclusively in the
federal or state courts of Santa Clara County, California,” which includes this District.
III.
PARTIES
12.
Plaintiff Mikula Web Solutions, Inc. is a small business incorporated in
Pennsylvania with its principal place of business in Doylestown, Pennsylvania. Plaintiff assists
small and medium sized business with complete website development solutions including website
design, e-commerce, database applications, online marketing solutions, and website hosting. As
part of that, Mikula Web Solutions, Inc. sells digital Display Ad inventory through Google. As a
direct result of Google’s unlawful, exclusionary conduct, Mikula Web Solutions, Inc. has been
paid lower-than-competitive rates for its digital Display Ad inventory.
13.
Defendant Google is a Delaware corporation with its principal place of business in
Mountain View, California. Google is owned by Alphabet Inc., a publicly traded company
incorporated and existing under the laws of the State of Delaware and headquartered in Mountain
View, California. Google engages in, and its activities substantially affect, interstate trade and
commerce. Google provides a range of products and services that are marketed, distributed, and
offered to consumers throughout the United States and internationally.
IV.
DISPLAY ADVERTISING
14.
Display Ads are ads that appear on a website, often in a side window or some other
designated space on the page. The suppliers of that ad space—usually the owner of the website—
are generally referred to as “publishers.” Because many publishers rely on Display Ads as an
important source of funds for their businesses, the price at which they can sell space on their pages
is critical.
15.
When an Internet user visits a publisher’s website where ad space is available, a
process is initiated to solicit and organize bids through various sources of advertiser demand to fill
that space. Once the winning bid has been identified, in a process that typically takes less than a
second, the Display Ad is placed on the publisher’s website. The intermediaries providing these
services receive compensation in a form of a share of the payments from advertisers for their
Display Ads to appear on the website.
16.
The Display Ad intermediation industry has four main layers: Sell-side Tools
(Publisher Ad Servers and Ad Networks), Exchanges, Ad Buying Tools, and Advertiser Ad
Servers. Together, these four layers are called the “Display Ad Stack.”
17.
Sell-side tools include Publisher Ad Servers and Ad Networks, which are used by
publishers selling space on their websites (“impressions”) to assist them in choosing which ads to
place on their sites. Generally, larger publishers use Publisher Ad Servers, and smaller publishers
use Ad Networks to sell space on their website.
18.
Exchanges, or “Supply-Side Platforms” (“SSPs”), run auctions of impressions.
Bidders in these auctions, who represent advertisers, use Ad Buying Tools, also called “Demand-
Side Platforms” (“DSPs”). These Ad Buying Tools help advertisers run ad campaigns and manage
bids on Exchanges. The DSPs also run their own auctions for impressions in which their advertiser
clients are the bidders.
19.
The winner of each DSP auction advances to one or more auctions run by the
Exchanges. The winner of each Exchange’s auction is then shown to the Publisher Ad Server or
Ad Network, which then selects and places an ad on the publisher’s site. Figure 1 provides a visual
representation of the industry.
20.
To provide an example based on this diagram, assume that Publisher 1 puts an
impression up for sale through DoubleClick for Publishers (“DCFP”), which is Google’s Publisher
Ad Server.1 DCFP will alert the three Exchanges, including Google’s AdX, that the impression is
up for sale. The Exchanges subsequently alert the DSP/Ad Buying Tools that the impression is for
sale. The advertisers on each of the DSPs then bid for the impression.
21.
The winning bids on each DSP will then compete among each other on the
Exchanges. For example, in the figure above, the advertiser with the highest bid on Buy-Side/Ad
Buying Tool 1 will compete with the winners from Google Ads and DV360, as well as the
advertiser that won the auction on Buy-Side/Ad Buying Tool 2 on various Exchanges. Each
Exchange that received bids will present each Publisher Ad Server its winning bid, which then
selects the winning bid from the three offered by the Exchanges. Once the winner is selected by
the publisher ad server, the advertiser sends the ad to be placed on the publisher’s website.
22.
Publishers using Google’s sell-side Publisher Ad Server, DCFP, or those that sell
impressions through AdSense and Google’s Ad Network pay Google a fee for the use of those
1 Google’s products underwent a rebranding in 2018. Its buy-side Ad Buying Tools, Google
AdWords (for non-premium advertisers) was rebranded as Google Ads, and DoubleClick Bid
Manager (“DCBM”) (for premium advertisers) was rebranded as DV360. Google’s sell-side tool
for non-premium publishers was left as Google AdSense. Its sell-side tool for premium publishers,
DCFP was rebranded as Google Ad Manager (“GAM”), which also absorbed DoubleClick’s Ad
Exchange (“AdX”) and integrated it into a single platform.
services. In the case of DCFP, the fee is based on a constant “cost-per-mile” or “cost per 1000
impressions.”
23.
Exchanges such as AdX (prior to rebranding) charge on the basis of a revenue share
with publishers. That is, an Exchange keeps a portion of the closing price of the auction it runs
related to the sale of the publisher’s inventory.
24.
Google’s buy-side tools, Google Ads and DV360, are used by advertisers directly
and indirectly. Google Ads tends to be used directly by smaller advertisers, whereas DV360 is
often used indirectly by advertisers that contract with media buying firms to run ad campaigns on
DV360. DV360 charges a fee to advertisers for its services, while Google Ads makes money by
keeping the difference between what the advertiser pays for an ad and what Google Ads bids into
the Exchange.
25.
A common metric used in digital advertising is the “take rate,” which is the
difference (in percentage terms) of the spending incurred by the advertiser and the amount received
by the publisher as the money flows through the Display Ad Stack. So, for example, if the
advertiser pays $100 and the publisher receives $60, then the take rate is 40%. Figure 2 provides
an illustration of take rates for 2019 in the United Kingdom as reported by the Competition &
Markets Authority (“CMA”).
FIGURE 2. TAKE-RATE AT EACH LAYER OF THE DISPLAY AD STACK IN THE UK (2019)
26.
The CMA found that Google has high market shares in all layers of the Display Ad
Stack, as set forth in Figure 3.
FIGURE 3. GOOGLE’S SHARE OF IMPRESSIONS
AT EACH LAYERS OF AD INTERMEDIATION IN THE UK
V.
RELEVANT MARKETS
A.
Google Has Market Power in the Publisher Ad Server Market in the
United States
27.
Publisher Ad Servers for Display Ad inventory in the United States is a relevant
antitrust market. Publisher Ad Servers are inventory management systems that publishers use to
manage their online display ad inventory. They provide features such as: (1) reservation-based
sales technology to support a publisher’s direct sales efforts; (2) inventory forecasting technology
to help a publisher determine what inventory will be available to sell; (3) a user interface through
which a publisher’s sales team can input directly sold campaign requirements; (4) co-management
of direct and indirect sales channels; (5) report generation of ad inventory performance; (6)
invoicing capabilities for a publisher's direct campaigns; and (7) yield management technology.
28.
Most publishers “single home” and use one ad server to manage all their web
display inventory. When a publisher sells more than one type of inventory (e.g., web display, in-
app, or video), they may then use one ad server product for their display inventory and a second
ad server for their in-app or video inventory or an ad server that manages more than one format.
Were a publisher to use multiple ad servers for the same format, they would have to resolve
conflicts between ad servers, thereby defeating the point of an ad server's inventory management
functions.
29.
Publisher Ad Servers are unique. They are not interchangeable with Exchange, Ad
Network, or Ad Buying Tools for large or small advertisers. Those tools do not similarly manage
a publisher’s direct sales channel or offer the reporting, invoicing, or forecasting functions that
publishers need to holistically manage inventory and optimize yield.
30.
The customers of Publisher Ad Servers are generally large publishers who need to
manage both direct and indirect sales channels.
31.
With respect to the Publisher Ad Server Market, the relevant geographic market is
the United States. Publisher ad servers available in other countries are not a reasonable substitute
for ad servers available in the United States. Therefore, the United States is the relevant geographic
market.
32.
Google’s monopoly power in this market is confirmed by its high market share.
More than 90 percent of large publishers use Google’s publisher ad server, Google Ad Manager
(formerly known as “DoubleClick for Publishers”), according to published reports. Google internal
documents also measured that Google Ad Manager served the vast majority-percent-of all online
display ad impressions in the United States in the third quarter of 2018.
33.
According to a complaint filed by the State of Texas and others, Google’s
monopoly power in the Publisher Ad Server Market is further confirmed by direct evidence,
including charged supra-competitive fees and degraded quality in the publisher ad server market,
defying the existence of any competitive restraints whatsoever.
34.
Google’s market power in the publisher ad server market is also protected by
significant barriers to entry. One barrier to entry is switching costs. Switching online ad servers is
risky and resource intensive. Some publishers have inventory on hundreds of thousands, or even
hundreds of millions, of webpages, which makes switching ad servers exceedingly expensive,
difficult, and time consuming. Moreover, the switching process also entails significant revenue
risk.
B.
Google Has Monopoly Power in the Ad Networks Market in the United States
35.
Ad Networks in the United States constitute a relevant antitrust product market. Ad
Networks are marketplaces that match small publishers’ ad inventory with advertisers without
providing impression-by-impression price transparency to the sell or buy sides of the transaction.
36.
Ad Networks are not interchangeable with Publisher Ad Servers, Exchanges, or Ad
Buying Tools. While Ad Networks are marketplaces for advertising inventory, they are not
interchangeable with Exchanges (discussed below) because they operate in a different manner and
serve a different type of publisher.
37.
Ad Networks do not offer the same type of impression-by-impression price
transparency to publishers and advertisers that Exchanges do. Ad Networks also typically serve
much smaller publishers that do not have sufficient traffic to sell their inventory through
exchanges. Ad Networks require little to no upfront spending by publishers, and publishers can
join networks to sell their inventory even if they do not have much inventory to sell. For example,
AdSense publishers on the Google Ad Network do not have monthly page view or impression
requirements. These types of publishers typically include local newspapers, niche websites, blogs,
and more.
38.
With respect to Ad Networks, the relevant geographic market is the United States.
Ad Networks available in other countries are not a reasonable substitute for display ad networks
available in the United States. Therefore, the United States is a relevant geographic market.
39.
Google has monopoly power in the Ad Network Market in the United States.
Google’s Ad Network, Google Display Network (“GDN”) reaches more user impressions and
websites than any other display network, including over 2 million small online publishers globally.
Google has immense scale amongst the long tail of small online publishers.
40.
According to the State of Texas, direct evidence also confirms the monopoly power
of Google’s Display Ad Network, with GDN charging very high double-digit percent commissions
on advertising transactions. Google reportedly acknowledges that its fees are very high and that
Google can demand high fees because of its market power.
41.
The market power of Google’s Ad Network is protected by barriers to entry. Google
imposes a significant barrier to entry by using its Publisher Ad Server to preferentially route
trading to its Ad Network through a host of anticompetitive conduct addressed below. Google also
generates a further barrier when its ad buying tool Google Ads preferentially routes trading to
GDN through a host of anticompetitive conduct discussed below. Finally, Ad Networks need scale
on both the supply and demand sides; natural network effects make it difficult for any new
networks to enter and achieve scale.
C.
Google Has Monopoly Power in the Exchange Market in the United States
42.
Exchanges in the United States constitute a relevant antitrust product market. These
exchanges are marketplaces that auction multiple publishers’ display inventory to multiple end-
advertisers through advertisers’ middlemen on an impression-by-impression basis and in real time.
On the sell side, Exchanges generally interface with publishers through publishers’ ad servers such
as Google's ad server. On the buy side, they interface with advertisers through ad buying tools,
including ad buying tools for large advertisers, ad buying tools for small advertisers, such as
Google Ads, and sometimes, even networks.
43.
Exchanges are not interchangeable with Publisher Ad Servers, Ad Networks, or Ad
Buying Tools. Publishers cannot sell their display ad inventory on an impression-by-impression
basis or in a real-time marketplace to end-advertisers using publisher ad servers, networks, or ad
buying tools. Moreover, unlike Ad Networks, Exchanges are designed to integrate with multiple
ad buying tools so that advertisers can optimize trading across exchanges; networks are more
restricted. Reflecting the fact that exchanges and networks offer different feature sets, exchanges
require publishers to commit to a large monthly volume of impressions or revenue, whereas
networks typically do not. Publishers that use Google’s ad server to sell their display ad inventory
through ad marketplaces primarily sell their inventory in exchanges, not networks. As an example,
one major online publisher in the United States sold over 80 percent of their indirect display
inventory to exchanges, not networks.
44.
Exchanges are also not interchangeable with the direct sales channel, for publishers
and advertisers. For publishers, selling inventory directly requires that they develop expertise
around managing, selling, and serving campaigns, which requires a specialized skill set and is
expensive to do. For advertisers, buying inventory directly from publishers also requires an
additional skill set and ongoing investment. For direct deals, publishers and advertisers must
typically hire and maintain internal staff to manage these one-to-one relationships. As a result, the
direct sales channel tends to be reserved for high-value publisher-advertiser transactions.
45.
With respect to display ad exchanges, the relevant geographic market is the United
States. Exchanges available in other countries are not a reasonable substitute for display ad
exchanges available in the United States. Therefore, the United States is a relevant geographic
market.
46.
Google has monopoly power in the United States in the Exchange market. Despite
an early competitive landscape, Google's Display Ad Exchange, historically called AdX, has been
the top exchange in the United States since at least 2013. Additionally, publisher and exchange
data reportedly shows that Google’s share of the Display Ad Exchange Market has substantially
increased since 2019. Finally, for online publishers reaching high-value users, Google’s Display
Ad Exchange transacts an even greater share of publishers' exchange impressions.
47.
Google’s market power in the Exchange market is also protected by significant
barriers to entry. New entrants must achieve sufficient scale and network effects to attract
publishers and advertisers to use their exchange. In addition, Google’s anticompetitive conduct
has created artificial barriers to entry. One significant Google-created barrier arises due to
Google’s Publisher Ad Server preferentially routing trading to Google’s exchange through a host
of anticompetitive conduct addressed below. Google creates another barrier to entry by exclusively
and preferentially routing the bids of advertisers using DV360 and Google Ads to its ad exchange
through a host of other anticompetitive conduct discussed below.
D.
Google Has Monopoly Power in the Market for Ad Buying Tools for
Small Advertisers
48.
The Market for Ad Buying Tools for Small Advertisers in the United States is a
relevant antitrust market. These tools provide an interface that smaller advertisers can use to bid
on and purchase the display ad inventory trading on ad exchanges and in ad networks. In this
respect, these tools allow advertisers to optimize for their own interests, including purchasing
quality display ad inventory for the lowest prices.
49.
Ad Buying Tools for Small Advertisers are not interchangeable with ad buying
tools for large advertisers, which are sometimes called demand-side platforms (or “DSPs”). The
two sets of tools serve different types of advertisers, exhibit different pricing and entry levels, and
offer different feature sets.
50.
Ad Buying Tools for Small Advertisers are also not interchangeable with Publisher
Ad Servers, Display Ad Networks, or Ad Exchanges, as none of these provide small advertisers
with a buying interface to bid on and purchase ad inventory in exchanges or networks.
51.
The relevant geographic market for Display Ad Buying Tools for small advertisers
is the United States. Display Ad Buying Tools for small advertisers available in other countries
are not a reasonable substitute for the tools available in the United States. Therefore, the United
States is a relevant geographic market.
52.
Google’s ad buying tool, “Google Ads,” has monopoly power in the United States
in the Display Ad Buying Tool Market for Small Advertisers. The market power of Google Ads is
evidenced by the fact that Google's exchange charges supra-competitive fees for exclusive access
to Google Ads advertisers.
53.
Google Ads also has market power over the small advertisers it serves because most
rely on a single ad buying tool for a given advertising format (e.g., display ads) and have switching
costs. Using multiple ad buying tools imposes additional costs on advertisers because of the
additional time, effort, training, and expense needed to manage campaigns across tools; Google
Ads also does not let small advertisers completely export the data they need to easily switch to
another tool. As a result, while very large advertisers might be able to absorb the costs of using
more than one tool at a time, small advertisers almost always use just one ad buying tool at a time
54.
Google’s market power with Google Ads is protected by various critical barriers to
entry.
a. First, Google Ads charges opaque fees and does not let advertisers readily audit the
ad inventory Google purchases on their behalf, both of which act as a barrier to
entry because they impede advertisers from switching to a low-cost provider.
b. Second, Google’s practice of withholding YouTube video inventory from rival ad
buying tools locks small advertisers who use one tool at a time into Google’s ad
buying tool.
c. Third, other providers of buying tools cannot compete with Google Ads for small
advertisers, because they cannot achieve sufficient scale with smaller advertisers
who want to buy display, YouTube, and even search ads, through just one tool.
d. Fourth, advertisers use ad buying tools to keep track of the users they have targeted
with ads, the users that have made purchases, and the users that they want to keep
targeting with more ads. Google Ads limits advertisers from accessing and taking
this data with them to another tool. As a result, advertisers are locked in and have
high switching costs.
VI.
GOOGLE’S EXCLUSIONARY CONDUCT TO CREATE AND EXTEND ITS
MARKET POWER IN THE RELEVANT DISPLAY AD MARKETS
A.
Google Has Monopoly Power in the Market for Ad Buying Tools for Small
Advertisers
55.
In 2009, Google began a series of acquisitions that allowed it to participate in every
level of the Display Ad Stack. The most significant of these acquisitions was DoubleClick, which
was vertically integrated across the entire ad tech supply chain. See Figure 4. DoubleClick offered
sell-side tools in the Publisher Ad Server Market (DoubleClick for Publishers, or “DCFP”), buy-
side tools in the Ad Buying Tools Market (DoubleClick Bid Manager, or “DCBM”), and ran an
exchange between buyers and sellers in the Exchange Market (DoubleClick Ad Exchange, or
“AdX”).
FIGURE 4. DOUBLECLICK’S VERTICAL INTEGRATION
56.
Google used the DoubleClick acquisition to exploit cross-side externalities between
publishers and advertisers (i.e. “network effects”). With the acquisition of DCFP (the dominant
Publisher Ad Server), Google instantly acquired a large, installed base of publishers to help attract
advertisers. The DoubleClick acquisition also included a technology called Dynamic Allocation,
which gave Google’s AdX an advantage over other Exchanges bidding for impressions from
DCFP.
57.
In 2010, Google acquired AdMob, which gave Google the ability to efficiently
serve ads in mobile apps; this allowed Google to extend its monopolistic reach into the mobile
markets. These, along with other acquisitions, expanded Google’s presence in the Display Ad
Stack while enabling Google to exclude others, thereby increasing Google’s market power in the
Relevant Display Ad Markets.
58.
After acquiring DoubleClick, Google required small advertisers bidding through
Google’s buy-side (Ad Buying Tools Market) Google Ads to transact in both Google’s Ad
Network and AdX in the Display Ad Exchange Market. Google also made it so that large
publishers who wished to receive bids from the “fire hose” of advertisers who used Google’s Ad
Buying Tools had to license DCFP in the Publisher Ad Server Market and trade in AdX in the
Exchange Market.
59.
In other words, Google demanded that it represent buyers, sellers, and run the
exchange in which they traded. This essentially tripled Google’s opportunity to extract fees (one
fee from the buy side in the Ad Buying Tools Market, another fee from the sell-side in either the
Publisher Ad Server Market or Display Ad Network Market, and a third for running the exchange
in the Exchange Market).
B.
Google Leveraged its Market Power in Search to Lure Advertisers to Use
Google’s Ad Buying Tools
60.
Because of its dominance in the Search Market, Google’s Search is considered a
mandatory advertising channel for most advertisers.
61.
Google requires advertisers placing Search Ads to use only Google’s Ad Buying
Tools, which automatically default to tools for the Google Display Network (a group of publisher
sites in the Ad Networks Market that are affiliated with Google due to their use of ad
intermediation tools). This tying of Search and Search Ads with Google’s Ad Buying Tools
reduces the incentive for advertisers to consider and choose other platforms in the Ad Buying
Tools Market.
62.
In addition, Google does not share data regarding Search Ad campaigns on Google
Search with rival Ad Buying Tool/DSPs. Advertisers therefore can only access and compare
complete results from advertising campaigns that include Search Ads and Display Ads by using
Google’s Ad Buying Tools. This further reduces the incentives of advertisers to multi-home.
63.
One antitrust concern specifically raised by lawmakers and regulators in connection
with Google’s acquisition of DoubleClick was that the deal would allow Google to combine user
data it collected from DoubleClick with user data collected from Google Search and other Google
properties (e.g., Google Chrome, Google Maps, Gmail, YouTube) to create individual user "super-
profiles." The fear was that Google could use these to obtain an unfair advantage in the Relevant
Display Ads Markets.
64.
Despite its promise not to do so, Google has been bundling user data from across
its entire eco-system since at least 2017 and selling that data to advertisers through its Google Ad
Buying Tools. Because rival DSPs are not privy to this large trove of user data, Google has an
unfair advantage in attracting advertisers to its Ad Buying Tools. This advantage is expected to
grow even stronger once Google implements its announced plan to eliminate cookies on the
Chrome browser.
C.
Google Misused its Market Power in Video Display Ads to Expand its
Presence in the Ad Buying Tools Market
65.
Google leveraged its vast YouTube ad inventory to entice advertisers to use
Google’s Ad Buying Tools by making YouTube exclusive to Google’s offerings.
66.
Prior to 2016, advertisers could bid on YouTube ad inventory using any Ad Buying
Tool/DSP. Since 2016, however, Google has refused to offer YouTube inventory to be auctioned
on AdX in the Exchange Market and has instead required that advertisers buy YouTube
impressions solely through Google’s DV360 platform in the Ad Buying Tools Market. This biases
advertisers into using Google’s Ad Buying Tools and reduces the incentive to multi-home across
various tools in that market.
D.
Google Sent Bids Generated Through its Ad Buying Tools to Google’s
Exchange, AdX, Instead of Non-Google Exchanges
67.
Google engaged in self-preferencing by sending most of its Google Ads bids to
Google’s Exchange, AdX, rather than competing Exchanges.
68.
This form of vertical foreclosure denied non-Google Exchanges the demand
coming from Google’s collection of advertisers and created an incentive for advertisers to use
Google Ads and other Google Ad Buying Tools. Google’s self-preferencing also created an
incentive among publishers to use DCFP in the Publisher Ad Server Market as it works best with
AdX. Both of these effects reinforced the use of Google products at both ends of the Display Ad
Stack.
E.
Google Misused its Sell-side Dominance as Leverage to Provide AdX a
Competitive Advantage in the Exchange Market
69.
Google has used a number of sell-side programs to extend and maintain its market
power in the Exchange Market.
70.
For example, Google’s DoubleClick acquisition included a technology called
“Dynamic Allocation” (later, “Enhanced Dynamic Allocation”) in which Google’s Publisher Ad
Server, DCFP, gave preferential treatment to Google’s AdX Exchange. Dynamic Allocation
established a minimum “floor price” made available only to AdX. This effectively gave AdX a
right of first refusal that AdX used to secure impressions by submitting bids only slightly above
the floor price.
71.
DCFP allowed AdX to compete for publishers’ impressions by returning live bids,
while requiring non-Google Exchanges to compete for the same impressions with static non-live
bids. This enabled AdX to obtain impressions for vastly less than advertisers were willing to pay,
and pocket the difference. If AdX could not secure the impression (i.e., its bid was lower than the
floor price), the impression was offered to the Exchange associated with the floor price. Thus,
Dynamic Allocation gave AdX an advantage over other Exchanges because it was allowed to pass
on impressions that were not high quality.
72.
Moreover, this process led to AdX, and no other Exchange, being able to bid on
every impression. This process was inefficient and resulted in publishers not getting the best prices
for their impressions.
73.
Google’s DCFP Publisher Ad Server, like financial trading intermediaries, was
supposed to act in the best interests of its customers by maximizing publishers’ revenue and
inventory yield. Consequently, Google concealed the nature of its conduct to publishers and falsely
told them that Dynamic Allocation and other publisher programs would help them maximize
revenue. In fact, all of these complex programs were designed by Google’s quantitative analysts
to serve a simple purpose: use Google’s information and access advantage in ways that no other
Exchange could replicate.
F.
Google Misused its Superior Data and Greater Demand Volume to “Cream
Skim,” to the Detriment of Publishers and Advertisers
74.
As alleged above, because Google’s AdX Exchange only had to bid one penny
above the price floor set by Google’s DCFP Publisher Ad Server, Google could win impressions
at a bargain and at a price below that which advertisers were willing to pay.
75.
The reason for this is that the price floor set by Google’s Publisher Ad Server was
based on the highest estimated price based on average historical price performance. If an
impression was worth more to a buyer (i.e. advertiser) than the historical average, Google could
win the impression at a deep discount and keep the difference for itself. Thus, Google “cream-
skimmed” relatively high-quality impressions at bargain-basement prices, and left lower-quality
impressions for its Exchange rivals to bid on.
G.
Google Used Dynamic Allocation with “Waterfalling” to Foreclose
Competition with Other Exchanges
76.
Google restricted its ad server DCFP from selling publishers’ inventory in more
than one Exchange at a time, a restrictive practice called “waterfalling.” Google used waterfalling
to block other Display Ad Exchanges from competing simultaneously for impressions. Then,
through Dynamic Allocation, Google’s Publisher Ad Server passed inside information to AdX and
permitted it to purchase valuable impressions at prices that were artificially depressed by Google’s
actions.
77.
Publishers were deprived of competitive bids, and competing Exchanges were
outbid on valuable impressions and left with the low-value impressions passed over by Google’s
exchange. Google thus foreclosed Exchange competition and dramatically increased the cost of
transacting on Exchanges, which helped enable Google’s Exchange, AdX, to obtain supra-
competitive fees and profits.
H.
Google Prevented Publishers from Using Their Advertising Data with
Other Exchanges
78.
Google further foreclosed competition by blocking publishers’ ability to access
information about their heterogenous inventory and share that information with Exchanges.
79.
Google’s Publisher Ad Server manages publishers’ heterogenous inventory and
maximizes inventory yield. However, the Publisher Ad Server is what also identifies the readers
and visitors associated with online publishers’ inventory, assigning to publishers user IDs. In 2009,
Google’s Publisher Ad Server, DCFP, started hashing or encrypting publishers’ ad server user IDs
and giving publishers and advertisers different IDs for the same user. Thus, Google strategically
prevents the user from being easily identified with one critical caveat: Google is able to use that
very same information for its own trade decisions.
80.
In stark contrast to representations made to the Federal Trade Commission and
Congress, Google trades on what was previously insider information. At a high level, the
encryption of publishers’ user IDs forecloses competition for publishers' inventory from non-
Google Exchanges and Ad Buying Tools.
81.
Publishers, and the Exchanges that sell inventory on their behalf, need to know the
identity of users associated with publishers’ impressions in order to sell those impressions for
competitive prices. When Exchanges cannot identify users in auctions (e.g., through cookies), the
prices of impressions on exchanges reportedly can fall by about 50 percent, according to one
Google study.
82.
In 2009, Google started restricting publishers’ ability to access and share the user
IDs that Google’s new Publisher Ad Server associated with publishers’ impressions. Google
accomplished this by encrypting unique user IDs for each publisher and for each advertiser bidding
through Google’s Ad Buying Tools. As a result, publishers and advertisers could not easily know
when two different user IDs actually belonged to the same user.
83.
While Google blocked publishers from accessing and sharing the user IDs with
Exchanges and Ad Networks, Google shared the same raw IDs with Google’s Ad Network and
Exchange, as well as Google’s advertising middlemen, DV360 and Google Ads. Thus, for
Google’s Ad Network, Exchange, and Ad Buying Tools, a user has only one ID, regardless of
whether the user is a buyer or a seller in the transaction. In other words, publishers and advertisers
could not easily determine that two different user IDs actually belonged to the same user unless
they used Google’s Ad Buying Tools and AdX.
I.
Google Engaged in Anticompetitive Conduct Intended to Undermine Header
Bidding
i. Google refused to participate in header bidding
84.
In 2015, a company called AppNexus came up with a way to bypass AdX and hold
a competitive auction in real time in the user’s browser.
85.
AdX refused to participate in header bidding auctions. As a result, when the winner
of the header bidding competition was sent to Google’s Publisher Ad Server, the ad server used
the winning bid price as the price floor offered to AdX. AdX then had a “last look” and could
outbid the winner of the header bidding auction or pass on the impression. This refusal to
interoperate with header bidding solutions gave Google an advantage in bidding for impressions.
Moreover, it was inefficient in that it allowed Google to win impressions at prices below that of
which some of its own advertisers would be willing to pay.
ii. Google made anticompetitive agreements with Facebook to stave off header
bidding and allocate markets
86.
In March of 2017, Facebook publicly announced it would support header bidding.
By doing so, Facebook would enable web and mobile app publishers and advertisers to bypass the
fees associated with transacting through Google’s Publisher Ad Server. When bidding into
Google’s ad server, networks, such as Facebook’s network (“FAN”), had to bid into exchanges
and pay exchange fees. Because header bidding cost nothing, Facebook would let web publishers,
mobile app publishers, and advertisers save on these fees altogether.
87.
Google feared that Facebook’s support of header bidding would crack Google’s
Publisher Ad Server monopoly and unlock Exchange competition. The wider industry also thought
that Facebook was prepared to challenge Google’s monopoly.
88.
The same day as Facebook’s March 2017 header bidding announcement, industry
publication AdAge wrote that Facebook was poised to execute a “digital advertising coup against
rival Google and its DoubleClick empire.” A Business Insider headline the same day read,
“Facebook Made an Unprecedented move to Partner With Ad Tech Companies—Including
Amazon—to Take on Google.”
89.
Facebook was helping publishers and advertisers match two to three times more
users in auctions and increasing third-party publishers’ revenue by 10-30 percent, according to
metrics posted in Facebook’s public blog. Such cost efficiencies for publishers and advertisers
were not welcome news to Google. Even before Facebook’s March 2017 announcement, Google
was concerned about large entrants supporting header bidding. Therefore, Google took steps to
neutralize the threat.
90.
After lengthy negotiations, in September 2018, Facebook and Google agreed that
Facebook would significantly curtail its header bidding initiatives, and bid through Google’s
Publisher Ad Server instead. In return, Google agreed to give Facebook numerous competitive
advantages such as (a) increasing the “timeouts” for Facebook bidders (but no other non-Google
bidders) before they were excluded from auctions; (b) providing Facebook with valuable user
information not available to other non-Google exchanges; and (c) increasing buy-sell spreads for
Facebook’s FAN Ad Network.
91.
As noted above, Google already manipulated publishers’ auctions by giving Google
bidders information and speed advantages. Google offered Facebook information advantages,
speed advantages, and other prioritizations, to the detriment of other auction participants.
92.
Google and Facebook did not disclose the fact that Facebook and Google receive
preferential treatment that advantages the bidders they represent, and disadvantages other bidders
in the same auctions. Indeed, Google publicly misrepresents that all bidders in publishers’ auctions
“compete equally for each impression on a net basis.” This false statement was intended to conceal
Google’s market allocation agreement with Facebook, as well as the other unlawful conduct
alleged in this complaint.
J.
Google Used Open Bidding to Continue to Provide Unfair Advantages to
its Display Ad Products.
93.
Increasing complaints from publishers over Google’s refusal to participate in
header bidding, and its practice of giving AdX the “last look” before closing on a bid, led Google
to introduce a proprietary server-side version of header bidding called “Open Bidding.” DCFP and
the AdX Exchange were combined and rebranded as "Google Ad Manager," and a real-time
“Unified Auction" was introduced within Google’s Publish Ad Server that is open to all bidders
(Exchanges and Ad Buyer Tools/DSPs). This change in the operation of Google’s ad
intermediation products is illustrated in Figures 5 and 6.
FIGURE 5. AD INTERMEDIATION PRIOR TO OPEN BIDDING
FIGURE 6. AD INTERMEDIATION AFTER OPEN BIDDING
94.
Even with Open Bidding, however, Google continues to engage in conduct that
provides it with significant competitive advantages.
a.
First, Google imposes an additional fee on non-Google winners of Open Bidding
auctions, which raises the costs of rival Exchanges and Ad Buying Tools/DSPs. This creates a
disincentive for DSPs to use rival Exchanges, as DSPs have to pay twice if their Exchange
ultimately wins an impression.
b. Second, Google does not share “minimum bid to win” data from the last Open
Bidding auction with header bidding winners. This information, which is provided
to all other bidders, can be used in planning future auctions. Google’s refusal to
provide this data to the winners of header bidding auctions hampers that as an
avenue for bidding on impressions.
c. Third, in Open Bidding, publishers are no longer able to link bid and bidder
information directly with information about impressions (such as final prices). In
particular, publishers cannot merge the new Bid Data Transfer (BDT) file with the
impression data files (Google Ad Manager Transfer files). This limits their ability
to efficiently analyze the performance of Google’s Open Bidding auctions.
d. Finally, prior to Open Bidding, publishers using Google’s Publisher Ad Server
(DCFP) were able to set different minimum price floors for each Exchange. Under
the new Unified Pricing Rules, however, Google removed this feature so that now
there is a single minimum price floor applicable to all Exchanges. As Google’s Ad
Buyer Tools tend to generate the highest prices for impressions, the inability to set
Exchange-specific price minimums means that Google has even more opportunity
to engage in “cream skimming” than it did before Open Bidding.
K.
Other Actions by Google Threaten to Diminish Competition in the Relevant
Display Ad Markets
i.
Planning the retirement of third-party cookies from Chrome
95.
Google has announced that it plans to retire cookies from Chrome, allegedly
beginning around 2022. This will significantly hinder non-Google Ad Buyer Tools as it will limit
their ability to identify the user behind an impression. Google will not suffer this limitation because
it already collects so much information about the user through its Google login ID.
ii.
Developing Accelerated Mobile Pages as a way to Impede Header Bidding
96.
Accelerated Mobile Pages (“AMP”) is a technology developed by Google that
allows for fast load speeds of mobile ads. In order to speed up ad loading, AMP requires that the
mobile site be entirely pre-loaded in Google’s own servers. That means that the ads would be
placed not on the user’s browser directly but on Google’s servers and then shown to the user.
97.
Although Google claims that AMP was developed as an open-source collaboration,
AMP is actually a Google-controlled initiative. Google originally registered and still owns AMP's
domain, ampproject.org.
98.
Header bidding is only possible if publishers can insert JavaScript code into the
header section of their webpages. To discourage header bidding, Google made AMP essentially
incompatible with JavaScript and header bidding. Thus, publishers must bypass header bidding if
they want to take advantage of AMP.
99.
Google coerces publishers to use AMP by claiming that the faster site load speed
improves the publishers’ positions in Google Search. Given the importance of appearing high on
the Google Search Engine Result Page (SERP), publishers are highly incented to adopt AMP in
the mobile space to the detriment of header bidding.
100.
Google used AMP to restrict competition in numerous other ways.
a. First, to limit AMP’s compatibility with header bidding, Google restricted the code
to prohibit publishers from routing their bids to, or sharing their user data with,
more than a few Exchanges a time. At the same time, Google made AMP fully
compatible with routing to Exchanges through Google’s sell-side tool.
b. Google also designed AMP to force publishers to route rival Exchange bids through
Google’s Publisher Ad Server, so that Google could continue to peek at rivals’ bids
and use the information to refine its own algorithms.
c. Third, Google designed AMP so that users loading AMP pages would make direct
communication with Google servers, rather than publishers’ servers. This enabled
Google's access to publishers’ inside and non-public user data. AMP pages also
limit the number of ads on a page, the types of ads publishers can sell, and the
amount of enriched content that publishers can have on their pages.
101.
In sum, Google offered publishers a no-win proposition: (1) publishers could forego
exchange competition in header bidding, use AMP, and pay supra-competitive fees to Google, or
(2) publishers could instead use header bidding and lose even more money, because Google Search
would suppress their search rankings and send traffic to competing AMP-compatible publishers.
L.
Excluding Exchange Competition Through Opaque Pricing
102.
When marketing its Exchange to publishers and advertisers, Google has explained
that an Exchange is “just like a stock exchange, which enables stocks to be traded in an open way.”
Google, however, purposefully keeps auction mechanics, terms, and pricing, opaque and
"nontransparent" to impede Exchange competition.
103.
Google’s non-transparent pricing strategy includes obfuscating the take rate that
publishers and advertisers pay Google. Google tells small advertisers using Google Ads the price
they pay Google for ad space, but not the price the inventory actually cleared for in Google’s
Exchange, the revenue the publisher receives, or the markup Google keeps.
104.
The lack of transparency decreases competitive pressure at different points in the
supply chain and increases opportunities for rent-seeking and arbitrage. In other words, Google
can charge higher fees at points in the supply chain where there is little competition and the lack
of transparency around fees impedes other firms from coming in and competing with Google by
offering the same services at lower prices.
105.
The lack of transparency also prevents Google’s potential and actual competitors
from assessing a possible return on investment if they enter or as they compete in the market.
VII.
GOOGLE’S ANTICOMPETITIVE CONDUCT FORECLOSED COMPETITION
AND HAD ANTICOMPETITIVE EFFECTS IN THE RELEVANT MARKETS
106.
As a result of the anticompetitive conduct described above, Google has foreclosed
other firms from competing in the Relevant Markets to the detriment of publishers like Plaintiff
and member of the proposed Class.
107.
Google then further reinforces its market position by impairing potential competing
Display Ad Stack service providers by using its market power in other markets (e.g., Search) to
prevent potential rivals from collecting rival datasets that could make the potential rivals viable
alternatives to Google for advertisers (which could, in turn, loosen Google’s hold on those
Markets).
108.
With Facebook, the one provider Google could not foreclose from the Relevant
Display Ad Markets due to Facebook’s ability to amass user data and a substantial number of
clients, Google entered into an unlawful market allocation and bid-rigging agreement. The
agreement turned Facebook from a potential challenger to Google’s market dominance in the
Relevant Display Ads Markets into a structural support of such dominance.
109.
Finally, Google foreclosed competition by steering auctions to Google’s services
and away from the other service providers, and taxing/raising such rivals’ costs when the rivals
managed to win auctions for Google’s ad inventory notwithstanding the hurdles Google imposed.
Because of this conduct, potential rivals lack the ability to generate scale sufficient to compete
with Google.
110.
The foreclosure caused by Google’s conduct in the Publisher Ad Server Market can
be seen by the exit and limited entry of competitors over the past decade or so. Today, few
Publisher Ad Server competitors remain in the United States.
111.
Moreover, entry into the Publisher Ad Server Market has been weak over this same
period. This lack of entry is a result of the artificial barriers arising from Google’s anticompetitive
conduct.
VIII.
GOOGLE’S ANTICOMPETITIVE CONDUCT HARMED PLAINTIFF AND THE
CLASS
112.
As a direct and proximate result of Google’s anticompetitive conduct, Plaintiff and
members of the proposed Class suffered substantial losses to their business or property.
113.
Revenues for publishers who sold Display Ads through Google’s Ad Networks and
Exchanges were artificially suppressed during the Class Period due to Google’s unlawful conduct.
Absent Google’s anticompetitive conduct, Plaintiff and members of the Class would have received
more revenue for advertising on their content. The full amount of such damages will be calculated
after discovery and upon proof at trial.
114.
Moreover, because of the reduced revenues publishers can generate due to Google’s
unlawful conduct, Plaintiff and similarly situated publishers have been forced to reduce output,
and many have gone out of business altogether.
115.
Thus, as a direct and proximate result of this anticompetitive conduct, Google reaps
more revenue, suppresses publishers’ revenues, and forces publishers to reduce the content they
produce causing further reductions in revenues.
116.
Google’s anticompetitive conduct is continuing and so are the damages suffered by
members of the Class.
IX.
INTERSTATE COMMERCE
117.
Google engages in interstate commerce and in activities substantially affecting
interstate commerce including, without limitation, (1) providing consumer services, such as
Search, Gmail, YouTube, and Android OS, to consumers throughout the United States and
globally, (2) providing advertiser buying platforms, Google Ads and Google Display & Video 360,
to advertisers targeting consumers throughout the United States and globally, and (3) providing
Google Ad Manager, Google AdSense, and Google AdMob to Publishers based throughout the
United States and globally. Publishers use Google’s services in the Relevant Markets to buy and
sell Display Ad inventory targeted at users across the United States.
X.
CLASS ALLEGATIONS
118.
Plaintiff brings this class action under Rules 23(a) and 23(b) of the Federal Rules
of Civil Procedure on behalf of the following Class:
All Publishers that sell digital display advertising inventory through Google’s
AdSense targeting consumers[DS1] in the United States between March 11, 2008 and
the date the Court certifies the Class.
Excluded from the Class are: (1) any Judge or Magistrate presiding over the class action and
members of their families; (2) Defendant and its subsidiaries, parents, successors, predecessors, or
any entity in which Defendant has a controlling interest; (3) persons who properly execute and file
a timely request for exclusion from the class; and (4) the legal representatives, successors, or
assigns of such excluded persons.
119.
Membership in the Class is so numerous that joinder of all members in one action
is impracticable. The Class is reasonably estimated to include many hundreds (if not thousands of)
participants.
120.
The objective facts are the same for all members of the Class in that, inter alia,
Google’s conduct in monopolizing the Relevant Markets was the same, e.g., Google’s conduct
outlined herein vis-à-vis publishers, its tying of separate products, its market allocation agreement
with Facebook, and its other conduct impairing other companies’ abilities to compete in the
Relevant Markets.
121.
For each Claim for Relief asserted below, the same legal standards govern
resolution of the same operative facts existing across all members of the Class’ individual claims.
If Defendant is liable to one member of the Class, Defendant is liable to all members of the Class.
122.
Because the claims of each member of the Class have a common origin and share
a common basis in terms of Google’s systematic misconduct, there are common questions of fact
and law which exist and which are susceptible to common answers as to each Class member under
Federal Rule of Civil Procedure 23(a)(2), and which predominate over any questions affecting
only individual members under Federal Rule of Civil Procedure 23(b).
123.
Substantial questions of fact and law that are common to all members of the Class,
and which are susceptible to common answers and which control this litigation and predominate
over any individual issues, include, inter alia, the following:
a.
whether the Relevant Markets alleged above are relevant markets in this
case;
b.
whether Google possesses monopoly power in one or more of the Relevant
Markets;
c.
whether, through the conduct alleged herein, Google willfully acquired,
maintained, and/or enhanced its monopoly power in one or more of the
Relevant Markets;
d.
whether Google’s conduct, as alleged herein, is anticompetitive;
e.
whether Google’s conduct, as alleged herein, had anticompetitive effects in
one or more of the Relevant Markets;
f.
whether Google’s conduct caused Plaintiff and members of the Class
antitrust injury;
g.
the appropriate measure of damages; and
h.
the propriety of declaratory and injunctive relief.
124.
Plaintiff’s claims are typical of the claims of the Class and arise from the same
course of conduct undertaken by Google against the Class. There are no conflicts between the
interests of the named Plaintiff and the interests of the members of the Class that Plaintiff seeks to
represent. The relief Plaintiff seeks is typical of the relief sought for members of the Class.
125.
Plaintiff will fairly and adequately represent and protect the interests of the Class
because of the common injury and interests of the members of the Class and the uniform conduct
of Google that is, and was, applicable to all members of the Class. Plaintiff has retained counsel
competent and experienced in antitrust class action litigation that will adequately represent and
protect the interests of the members of the Class.
126.
Class certification is appropriate under Federal Rule of Civil Procedure 23(b)(3)
not only because common questions of fact and law predominate, but also because a class action
is superior to other available methods for fairly and efficiently adjudicating the controversy. The
prosecution of separate actions by individual members of the Class would impose heavy burdens
upon the courts and Google and would create a risk of inconsistent or varying adjudications of the
questions of law and fact common to the Class. Class action status, on the other hand, would
achieve substantial economies of time, effort and expense, and would assure uniformity of decision
as to persons similarly situated without sacrificing procedural fairness or bringing about other
undesirable results.
127.
Plaintiff is not aware of any management difficulties which should preclude
maintenance of this litigation as a class action. Plaintiff does not anticipate any difficulty in the
management of this action as a class action.
XI.
CAUSES OF ACTION
COUNT I: Violation of Section 2 of the Sherman Act, 15 U.S.C. § 2
128.
Plaintiff hereby incorporates by reference the preceding paragraphs as if they were
fully set forth herein.
129.
Google possesses market power in the Relevant Markets, including the Ad Network
Market. Google has obtained, enhanced, and maintained dominance in these markets through the
anticompetitive conduct alleged herein to impair and foreclose competition in these markets.
130.
As a direct and proximate result of Google’s continuing violation of Section 2 of
the Sherman Act, Plaintiff and members of the Class have suffered injury and damages in the form
of artificially suppressed advertising revenues in amounts to be proven at trial.
131.
Plaintiff, on behalf of itself and other members of the Class, seek money damages
from Google for these violations. These damages represent the amount of Google’s overcharges
and additional advertising revenues the Class would have received absent Google’s
anticompetitive conduct alleged herein. Damages will be quantified on a class-wide basis. These
actual damages should be trebled under Section 4 of the Clayton Act, 15 U.S.C. § 15.
132.
Plaintiff, on behalf of itself and other members of the Class, seek injunctive relief
barring Google from engaging in the anticompetitive conduct alleged herein. The violations set
forth above, and the effects thereof, are continuing and will continue unless injunctive relief is
granted.
133.
Plaintiff’s and Class members’ injuries are of the type the antitrust laws were
designed to prevent, and flow directly from Google’s unlawful, anticompetitive conduct.
COUNT II: Violation of Section 1 of the Sherman Act, 15 U.S.C. § 1
134.
Plaintiff hereby incorporates by reference the preceding paragraphs as if they were
fully set forth herein.
135.
As described above, Google and Facebook, Inc. entered into and carried out an
unlawful market allocation and bid-rigging agreement in violation of Section 1 of the Sherman
Act, 15 U.S.C. § 1.
136.
Facebook’s agreement not to compete with Google by supporting “header bidding”
reinforced Google’s market dominance in the Relevant Markets, thereby lowering auction
revenues for publishers.
137.
In addition, by guaranteeing that Facebook would win a fixed percentage of
auctions, Google’s agreement with Facebook suppressed auction revenues publishers received for
their Display Ad inventory.
138.
As a direct and proximate result of Google’s unlawful agreement, Plaintiff and
members of the Class have suffered injury and damages in the form of artificially suppressed
advertising revenues in amounts to be proven at trial.
139.
Plaintiff, on behalf of itself and other members of the Class, seeks money damages
from Google for these violations. These damages represent the additional advertising revenues the
Class would have received absent Google’s anticompetitive conduct alleged herein. Damages will
be quantified on a class-wide basis. These actual damages should be trebled under Section 4 of the
Clayton Act, 15 U.S.C. § 15.
140.
Plaintiff’s and Class members’ injuries are of the type the antitrust laws were
designed to prevent, and flow directly from Google’s unlawful, anticompetitive conduct.
XII.
REQUEST FOR RELIEF
WHEREFORE, Plaintiff, on behalf of itself and the proposed Class, respectfully asks the
Court for a judgment that:
a.
Certifies this case as a class action on behalf of the proposed Class pursuant to Fed.
R. Civ. P. 23(a), 23(b)(2), and 23(b)(3), and appoint Plaintiff as class representative
and its attorneys as class counsel;
b.
Awards Plaintiff and each member of the Class treble the amount of damages
actually sustained by reason of Google’s antitrust violations alleged herein, plus the
reasonable costs of this action including attorneys’ fees;
c.
Orders such equitable relief as is necessary to correct for the anticompetitive market
effects caused by Google’s unlawful conduct; and
d.
Awards such other relief the Court deems reasonable and appropriate.
XIII.
JURY TRIAL DEMAND
Plaintiff requests a jury trial for all issues so triable.
DATED: February 2, 2021
Respectfully submitted,
/s/ Dennis Stewart
Dennis Stewart (SBN 99152)
GUSTAFSON GLUEK PLLC
600 B Street
17th Floor
San Diego, CA 92101
Telephone: (619) 595-3299
[email protected]
Daniel E. Gustafson
Daniel C. Hedlund
Daniel J. Nordin
Ling S. Wang
GUSTAFSON GLUEK PLLC
Canadian Pacific Plaza
120 South Sixth Street, Suite 2600
Minneapolis, MN 55402
Telephone: (612) 333-8844
[email protected]
[email protected]
[email protected]
[email protected]
Marc H. Edelson, Esq.
EDELSON LECHTZIN LLP
3 Terry Drive
Suite 205
Newtown, PA 18940
Telephone: (215) 867-2399
Facsimile: (267) 685-0676
[email protected]
Joshua H. Grabar
GRABAR LAW OFFICE
One Liberty Place
1650 Market Street, Suite 3600
Philadelphia, PA 19103
Tel: (267) 507-6085
Fax: (267) 507-6048
[email protected]
E. Powell Miller
Sharon S. Almonrode
Emily E. Hughes
THE MILLER LAW FIRM, P.C.
950 West University Drive, Suite 300
Rochester, MI 48307
Telephone: (248) 841-2200
Fax: (248) 652-2852
[email protected]
[email protected]
[email protected]
Simon Bahne Paris, Esquire
Patrick Howard, Esquire
SALTZ, MONGELUZZI & BENDESKY, P.C.
One Liberty Place, 52nd Floor
1650 Market Street
Philadelphia, PA 19103
Telephone: (215) 496-8282
Fax: (215) 496-0999
[email protected]
[email protected]
Kenneth A. Wexler
Kara A. Elgersma
WEXLER WALLACE LLP
55 West Monroe Street, Suite 3300
Chicago, IL 60603
[email protected]
[email protected]
Dianne M. Nast
Daniel N. Gallucci
Joseph N. Roda
NASTLAWLLC
1101 Market Street, Suite 2801
Philadelphia, PA 19106
[email protected]
[email protected]
[email protected]
Counsel for Plaintiff MIKULA WEB
SOLUTIONS, INC.
| antitrust |
ce1uEocBD5gMZwcz_RWW |
SUSAN MARTIN (AZ#014226)
JENNIFER KROLL #019859)
MARTIN & BONNETT, PLLC
1850 N. Central Ave. Suite 2010
Phoenix, Arizona 85004
Telephone: (602) 240-6900
[email protected]
[email protected]
POMERANTZ LLP
Patrick V. Dahlstrom (pro hac vice app. to be filed)
Ten South La Salle Street, Suite 3505
Chicago, Illinois 60603
Telephone: (312) 377-1181
Facsimile: (312) 377-1184
[email protected]
POMERANTZ LLP
Jeremy A. Lieberman (pro hac vice app. to be filed)
Lesley F. Portnoy (pro hac vice app. to be filed)
600 Third Avenue, 20th Floor
New York, New York 10016
Telephone: (212) 661-1100
Facsimile: (212) 661-8665
[email protected]
[email protected]
Attorneys for Plaintiff
UNITED STATES DISTRICT COURT
DISTRICT OF ARIZONA
NADER SALEH, Individually and On
Behalf of All Others Similarly Situated,
Plaintiff,
v.
APOLLO EDUCATION GROUP, INC.,
GREGORY W. CAPPELLI and BRIAN L.
SWARTZ,
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Defendants.
Case No.
CLASS ACTION
COMPLAINT FOR VIOLATION
OF THE FEDERAL SECURITIES
LAWS
DEMAND FOR JURY TRIAL
similarly situated, by his undersigned attorneys, for his complaint against defendants, alleges
the following based upon personal knowledge as to himself and his own acts, and information
and belief as to all other matters, based upon, inter alia, the investigation conducted by and
through his attorneys, which included, among other things, a review of the defendants’ public
documents, conference calls and announcements made by defendants, United States Securities
and Exchange Commission (“SEC”) filings, wire and press releases published by and regarding
Apollo Education Group, Inc. (“Apollo” or the “Company”), analysts’ reports and advisories
about the Company, and information readily obtainable on the Internet.
NATURE OF THE ACTION
1.
This is a federal securities class action on behalf of a class consisting of all
persons other than defendants who purchased or otherwise acquired Apollo securities between
October 19, 2011 and April 1, 2014, both dates inclusive (the “Class Period”), seeking to
recover damages caused by defendants’ violations of the federal securities laws and to pursue
remedies under §§ 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange
Act”) and Rules 10b-5 promulgated thereunder against the Company and certain of its top
officials and/or directors.
2.
Apollo is a publicly traded, for-profit education company headquartered in
Phoenix, Arizona. Apollo employs approximately 15,000 non-faculty employees, and
approximately 29,000 faculty members, and enrolls over 250,000 students across its online and
in person course offerings. The Company, through its subsidiaries, offers associate, bachelor,
masters and doctorate degrees to students around the world in over 100 fields. The Company’s
revenue.
3.
Apollo’s founder, John Sperling, is often credited as being the pioneer of the for-
profit education industry. Apollo and other companies in this industry tout themselves as
providing valuable educational opportunities to those who may be unable to attend traditional
colleges and universities – such as working adults, and those seeking to take on-line courses –
and as filling the education gap left by non-profit private and public institutions of higher
learning. Particularly, as many Americans have fallen on difficult economic times in recent
years, business has been booming for these for-profit institutions as students have sought out
new educational opportunities in hopes of improving their earning potential and embarking on
new career paths. In 2008, nearly two million students were enrolled in for-profit institutions.
Not only have these companies attracted substantial numbers of students, they have been able to
raise significant capital from investors by publicly portraying their business models as
successful, growing, and sustainable.
4.
The Company derives over 80% of its revenues from federal education funds,
such as the Pell grant and Stafford loan programs, which assist students in paying for higher
education programs.
5.
Because many students drop out of Apollo’s student programs, enrollment
growth is critical to the success of the Company. In order to meet revenue and profit
expectations, Apollo recruits as many students as possible to enroll in its programs.
as the financial crisis was peaking, and as private lenders ceased making loans to Apollo
students.
7.
The repayment management initiatives helps keep Apollo from running afoul of
the so-called “90/10 Rule,” a government regulation enacted in October 1999, that requires for
profit colleges such as Apollo, to ensure that at least 10% of their revenues comes from non-
state financial aid sources, such as Pell Grants or Stafford loans.
8.
Furthermore, under federal regulations, if an institution’s three-year cohort
default rate equals or exceeds 30% for any given year, it must establish a default prevention
task force and develop a default prevention plan with measurable objectives for improving the
default rate. The Company explicitly confirmed to investors that it was in compliance with
these federal regulations, stating: “[w]e believe that our current repayment management efforts
meet these requirements. Beginning with the three-year cohort default rate for the 2011 cohort
published in September 2014, only the three-year rates will be applied for purposes of
measuring compliance.”
9.
On August 3, 2010, the United States Government Accountability Office
(“GAO”) issued a report concluding that for-profit educational colleges such as Apollo had
engaged in an illegal and fraudulent course of action designed to recruit students and
overcharge the federal government for the cost of their education. Thereafter, a Congressional
Committee launched an investigation of such practices; the U.S. Department of Education
released data showing that the loan repayment rates for Apollo enrollees were well below the
default rates had significantly increased.
10.
Over the course of the following two years, and in response to the GAO report
and Congressional investigation, several state authorities began investigating the Company,
including the Attorney General’s Office for the states of Florida, Massachusetts, and Delaware.
11.
In response to reports of similar misconduct by other for-profit education
companies, in June 2011, President Obama released final regulations requiring for profit
colleges such as Apollo to better prepare students for gainful employment or risk losing access
to Federal student aid. Under the new gainful employment regulations:
[A] program would be considered to lead to gainful employment if it
meets at least one of the following three metrics: at least 35 percent
of former students are repaying their loans (defined as reducing the
loan balance by at least $1); the estimated annual loan payment of a
typical graduate does not exceed 30 percent of his or her
discretionary income; or the estimated annual loan payment of a
typical graduate does not exceed 12 percent of his or her total
earnings.
12.
Throughout the Class Period, the Company continually touted its compliance with
these new regulations.
13.
Despite these representations, the compliance efforts of the Company, including
the default management program, served only to perpetuate the inherent issues with the
Company’s high student default rates and low graduation and gainful employment statistics.
The Company’s compliance measures were in fact nothing more than a small bandage over a
deep and festering wound, which jeopardized the Company’s core operational health.
and Pensions Committee, completed a two-year investigation of the for-profit college industry,
and issued a report (the, “Harkin Report”) filled with troubling statistics and findings regarding
the for profit college industry, and specifically about Apollo.
15.
After the Harkin Report was published, the Company’s shares fell 4.1% or $1.17,
to close at $27.22 on July 30, 2012.
16.
According to the Harkin Report, the Company’s aggressive lending and recruiting
practices resulted in a student body that is underprepared for college, generally unable to obtain
gainful employment, and laden with a significant amount of debt. Indeed, the Company’s
student population has one of the highest default rates in the country, according to a study cited
by a United States Senate committee report, and is at risk of losing its eligibility for Federal
financial aid as a result of its extremely high default rate. The report stated:
The 3 year default rate across all 30 companies examined increased
each fiscal year between 2005 and 2008, from 17.1 percent to 22.6
percent. This change represents a 32.6 percent increase over 4 years.
Apollo’s default rate has similarly increased, growing from 12
percent for students entering repayment in 2005 to 20.9 percent for
students entering repayment in 2008. The company expects the rate
for 2009 to be 26.7 percent. Company officials have also told
investors that they do not expect the 2010 rate to exceed 30 percent.
This is important because, as of 2014, a 3-year default rate of
greater than 30 percent will result in a loss of access to title IV
funding.
***
An internal email from an associate vice president at Apollo makes
clear that the long-term prognosis for students is even worse. The
email documents that the company expects the lifetime default rates
for Associate degree students entering repayment in 2006 to be 77.7
percent and to be 55.8 percent for students entering repayment in
2007.
17.
Furthermore, according to the Harkin Report, in response to the rising default rate
of its student borrowers, the Company began a series of “default management” programs in an
attempt to prevent revocation of Apollo’s Federal financial aid eligibility. The default
management program, however, did not actually solve the issue of loan defaults, but instead
placed student loans on deferment and forbearance, to allow the Company to account for these
loans as performing and not in default, thus maintaining the appearance of compliance with
federal regulations. The report stated:
It is likely that the reported default rates significantly undercount
the number of students who ultimately face default, because of
companies’ efforts to place students in deferments and forbearances.
Helping get delinquent students into repayment, deferment, or
forbearance prior to default is encouraged by the Department of
Education. However, for many students forbearance and deferment
serve only to delay default beyond the 3-year measurement period
the Department of Education uses to track defaults.
Default management is sometimes accomplished by putting students
who have not made payments on their student loans into temporary
deferments or forbearances. While the use of deferment and
forbearance is fairly widespread throughout the sector, documents
produced indicate that a number of companies also pursue default
management strategies that include loan counseling, education, and
alternative repayment options. Default management contractors are
paid to counsel students into.
repayment options that ensure that students default outside the 2-
year, soon to be 3-year, statutory window, in which the Department
of Education monitors defaults.
Apollo, like many other for-profit colleges, contracted with the
General Revenue Corporation (GRC), a subsidiary of Sallie Mae, to
“cure” students who are approaching default. The company also
contracts with the i3 group for additional default management
services. According to executives, i3’s role is to “perform our
‘swat’ effort on the WIU F[iscal] Y[ear] 09 late stage delinquent
student borrower population.” In practice, documents indicate that
nearly all “cures” are accomplished by deferment or forbearance,
not by students actually repaying their loans. Some companies pay
different amounts for different types of cures, but it is unclear from
the documents produced if this is Apollo’s practice.
This practice is troubling for taxpayers. The cohort default rate is
designed not just as a sanction but also as a key indicator of a
school’s ability to serve its students and help them secure jobs. If
schools actively work to place students in forbearance and
deferment, that means taxpayers and policymakers fail to get an
accurate assessment of repayment and default rates. A school that
has large numbers of its students defaulting on their loans indicates
problems with program quality, retention, student services, career
services, and reputation in the employer community. Aggressive
default management undermines the validity of the default rate
indicator by masking the true number of students who end up
defaulting on their loans. Critically, schools that would otherwise
face penalties—including loss of access to further taxpayer funds—
continue to operate because they are able to manipulate their default
statistics.
Moreover, forbearances may not always be in the best interest of the
student. This is because during forbearance of Federal loans, as well
as during deferment of unsubsidized loans, interest still accrues. The
additional interest accrued during the period of forbearance is added
to the principal loan balance at the end of the forbearance, with the
result that interest then accrues on an even larger balance. Thus,
some students will end up paying much more over the life of their
loan after a forbearance or deferment.
18.
The Harkin Report criticized the deferment and forbearance programs as
especially detrimental to the long term prospects of students, as these programs usually have
negative long term financial consequences for the student-borrower, who will incur larger long
term borrowing costs, while the Company can report lower student default rates and offer a
rosier picture to investors and federal regulators. The report concluded:
Evidence suggests that some for-profit colleges use forbearance and
deferment as tools to move the school’s default rate, without concern
for a students’ particular situation or whether it is in the best
financial interest of the individual. Many students will end up paying
more over the life of their loan after a forbearance or deferment.
19.
In addition to issues with the Company’s lending practices, the Harkin Report
also disclosed an undercover investigation conducted by the GAO, which revealed serious
concerns regarding the academic quality of Apollo’s programs. The GAO investigation found
that the Company had very low academic standards, finding that there was very little interaction
between students and teachers, and that plagiarism and other academic misconduct was not
corrected by Apollo faculty.
20.
Throughout the Class Period, Defendants made materially false and misleading
statements regarding the Company’s business, operational and compliance policies.
Specifically, Defendants made false and/or misleading statements and/or failed to disclose that:
(i) defendants manipulated federal student loan and grant programs in order to appear to be in
compliance with new federal regulations enacted in June 2011; (ii) defendants’ predatory and
deceptive recruiting and enrollment practices violated federal regulations enacted beginning in
June 2011; and (iii) the Company engaged in a number of practices, including loan forbearance
programs, in order to create the appearance that the Company was in compliance with relevant
government regulations.
21.
On April 1, 2014, the Company disclosed that the Department of Education was
conducting an investigation into the company, and that the department had subpoenaed
documents and communications related to student recruitment, attendance, completion,
placement, defaults on loans, along with information on other corporate and financial matters.
$32.06 per share on April 2, 2014.
23.
As a result of defendants’ wrongful acts and omissions, and the precipitous
decline in the market value of the Company’s securities, Plaintiff and other Class members
have suffered significant losses and damages.
JURISDICTION AND VENUE
24.
The claims asserted herein arise under and pursuant to Sections 10(b) and 20(a) of
the Exchange Act (15 U.S.C. §§ 78j(b), 78n(a) and 78t(a)) and Rule 10b-5 promulgated
thereunder (17 C.F.R. § 240.10b-5, 17 C.F.R. § 240.14a-9).
25.
This Court has jurisdiction over the subject matter of this action pursuant to § 27
of the Exchange Act (15 U.S.C. § 78aa) and 28 U.S.C. § 1331.
26.
Venue is proper in this District pursuant to §27 of the Exchange Act, 15 U.S.C.
§78aa and 28 U.S.C. §1391(b), as Apollo’s securities are traded within this District.
27.
In connection with the acts, conduct and other wrongs alleged in this Complaint,
defendants, directly or indirectly, used the means and instrumentalities of interstate commerce,
including but not limited to, the United States mail, interstate telephone communications and
the facilities of the national securities exchange.
PARTIES
28.
Plaintiff, as set forth in the attached Certification, acquired Apollo securities at
artificially inflated prices during the Class Period and has been damaged thereby.
29.
Defendant Apollo is an Arizona corporation with its principal executive offices
located at 4025 S. Riverpoint Parkway, Phoenix, Arizona 85040. Apollo’s common stock
30.
Defendant Gregory W. Cappelli (“Cappelli”) served at all relevant times as the
Company’s Chief Executive Officer (“CEO”).
31.
Defendant Brian L. Swartz (“Swartz”) served at all relevant times as the
Company’s Senior Vice-President and Chief Financial Officer.
32.
The defendants referenced above in ¶¶ 30-31 are sometimes referred to herein as
the “Individual Defendants.”
SUBSTANTIVE ALLEGATIONS
Background
33.
Apollo is a publicly traded, for-profit education company headquartered in
Phoenix, Arizona. Apollo employs approximately 15,000 non-faculty employees, and
approximately 29,000 faculty members, and enrolls over 250,000 students across its online and
in person course offerings. The Company, through its subsidiaries, grants associate, bachelor,
masters and doctorate degrees to students in over 100 fields.
Materially False and Misleading
Statements Issued During the Class Period
34.
On October 19, 2011, the Company issued a press release announcing fiscal 2011
Fourth Quarter and Annual Results, and reported annual net revenue of $4.7 billion, or $4.04
per share, with total University of Phoenix Degree Enrollment at 380,800.
35.
The October 19, 2011 press release also stated:
We set out at the beginning of 2011 to implement leading-edge
student protections, differentiate University of Phoenix, and expand
our business, said Apollo Group Co-Chief Executive Officer Chas
Edelstein. We are pleased with our progress in each of these areas,
including enhancing our student-centric approach to admissions,
launching University Orientation, investing in our learning platform,
and advancing our plans to incorporate adaptive learning and
connect education to careers.
Apollo Group Co-Chief Executive Officer and Apollo Global
Chairman Greg Cappelli added, Through our focus on academic
quality and innovation, we are aligning learning outcomes to student
and employer needs and helping to bridge the workforce skills gap,
one of the biggest issues facing our economy today. Our
commitment is to support our students in achieving long-term
success.
36.
On October 20, 2011 the Company filed an annual report for the period ended
August 31, 2011 on a Form 10-K with the SEC signed by Defendants Capelli and Swartz,
where it reiterated the Company’s previously reported financial results and financial position.
The annual report disclosed that in 2012, the Company derived 84% of its revenues from
federal Title IV funds.
37.
In the Company’s annual report, the Company also stated the following regarding
its compliance efforts:
Accreditation
University of Phoenix is regionally accredited, which provides the
following:
•
recognition and acceptance by employers, other higher
education institutions and governmental entities of the
degrees and credits earned by students;
•
qualification to participate in Title IV programs (in
combination with state higher education operating and
degree granting authority); and
•
qualification for authority to operate in certain states.
Regional accreditation is accepted nationally as the basis for the
recognition of earned credit and degrees for academic purposes,
employment,
professional
licensure
and,
in
some
states,
authorization to operate as a degree-granting institution. Under the
terms of a reciprocity agreement among the six regional accrediting
associations, including the Higher Learning Commission (“HLC”) of
the North Central Association of Colleges and Schools, which is the
primary accrediting association of University of Phoenix,
representatives of each region in which a regionally accredited
institution operates may participate in the evaluations for
reaffirmation of accreditation of that institution by its accrediting
association.
In August 2010, University of Phoenix received a letter from HLC
requiring University of Phoenix to provide certain information and
evidence of compliance with HLC accreditation standards. The letter
related to the August 2010 report published by the U.S. Government
Accountability Office (“GAO”) of its undercover investigation into
the enrollment and recruiting practices of a number of proprietary
institutions of higher education, including University of Phoenix.
We submitted the response to HLC in September 2010 and
subsequently responded to further requests for information. In July
2011, HLC informed University of Phoenix that the Special
Committee formed to review this matter had completed its work,
concluding that based on its limited review, it found no apparent
evidence of systematic misrepresentations to students or that
University of Phoenix’s procedures in the areas of recruiting,
financial aid and admissions are significantly inadequate or
inappropriate. These were the areas on which HLC’s review was
focused. HLC also stated that there remain significant questions as
well as areas that University of Phoenix should work on improving.
HLC indicated that these will be reviewed by the comprehensive
evaluation team at its previously scheduled visit beginning in March
2012, which is its next comprehensive evaluation visit. These
questions relate to: student loans in collection and the minimization
of student loan defaults; the offering of limited career services
particularly in relation to associate programs; timing of prospective
student access to financial aid advisors during the recruiting process;
academic qualifications of admissions personnel and financial aid
advisors; the hiring and evaluation of financial aid officers; retention
of students, including the relationship of remediation to retention;
and the role of the University of Phoenix First Year Sequence, or
curriculum, in relation to University of Phoenix’s transfer policy and
impacts on student retention.
***
U.S. Department of Education Rulemaking Initiative. In November
2009, the U.S. Department of Education convened two new
negotiated rulemaking teams related to Title IV program integrity
issues and foreign school issues. The resulting program integrity
rules promulgated in October 2010 and June 2011 address numerous
topics. The most significant for our business are the following:
Modification of the standards relating to the payment of
incentive compensation to employees involved in student
recruitment and enrollment;
Implementation of standards for state authorization of
institutions of higher education;
Adoption of a definition of “gainful employment” for
purposes of the requirement for Title IV student financial aid
that a program of study offered by a proprietary institution
prepare students for gainful employment in a recognized
occupation; and
Expansion of the definition of misrepresentation, relating to
the Department’s authority under the Higher Education Act,
as reauthorized, to suspend or terminate an institution’s
participation in Title IV programs if the institution engages in
substantial misrepresentation of the nature of its educational
program, its financial charges, or the employability of
graduates, and expansion of the sanctions that the Department
may impose for engaging in a substantial misrepresentation.
The Department published final program integrity regulations in
October 2010, with most of the final rules effective July 1, 2011,
including some reporting and disclosure rules related to gainful
employment. On June 13, 2011, the Department published final
regulations, effective July 1, 2012, on the metrics for determining
whether an academic program prepares students for gainful
employment, as discussed further below.
The program integrity rules require a large number of reporting and
operational changes. We believe we have substantially complied with
the new reporting and disclosure requirements that were effective
July 1, 2011, and we expect to be in substantial compliance with the
remaining requirements by the respective effective dates. However,
because of the significance of the changes and the scale and
complexity of our educational programs, we may be unable to fully
develop, test and implement all of the necessary modifications to our
information management systems and administrative processes by
the required dates. We may be subject to administrative or other
sanctions if we are unable to comply with these reporting and
disclosure requirements on a timely basis. In addition, these changes,
individually or in combination, may impact our student enrollment,
persistence and retention in ways that we cannot now predict.
[Emphasis added.]
***
Incentive Compensation. A school participating in Title IV
programs may not pay any commission, bonus or other incentive
payments to any person involved in student recruitment or
admissions or awarding of Title IV program funds, if such payments
are based in any part directly or indirectly on success in enrolling
students or obtaining student financial aid. The law and regulations
governing this requirement do not establish clear criteria for
compliance in all circumstances. Previously, there were twelve safe
harbors that defined specific types of compensation that were
deemed to constitute permissible incentive compensation. Prior to
the effective date of the new program integrity regulations, we relied
on several of these safe harbors to ensure that our compensation and
recruitment practices complied with the applicable requirements.
In the final regulations adopted by the Department, the twelve safe
harbors were eliminated and, in lieu of the safe harbors, some of the
relevant concepts relating to the incentive compensation limitations
are defined. These changes increase the uncertainty about what
constitutes incentive compensation and which employees are
covered by the regulation. This makes the development of effective
and compliant performance metrics more difficult to establish. In
response to the Department’s concern about the impact of
compensation structures that relied on the safe harbors and in order
to enhance the admissions process for our students, we developed a
new structure, which we believe complies with the Department’s
new rule, and implemented it on a broad scale during the first quarter
of fiscal year 2011. In connection with this, we eliminated
enrollment results as a component of compensation for our
admissions personnel effective September 1, 2010.
This change in our approach to recruiting, which among other things
reduces the emphasis on enrollment and increases the emphasis on
improving the student experience, has adversely impacted our
enrollment rates and increased our operating costs. We believe this
change is consistent with our on-going efforts to lead the industry in
addressing the concerns of the Department and others, including
members of Congress, about admissions practices in the proprietary
sector. We anticipate that this increased cost and the impact on our
revenue from reduced enrollment will be offset partly by the benefits
realized from improved student retention. However, we are not able
to precisely predict the impact.
The elimination of the twelve safe harbors also affected the manner
in which we conduct our IPD business. Our IPD business previously
utilized a revenue sharing model with its client institutions, which
was expressly permitted under one of the twelve incentive
compensation safe harbors. We have modified this economic model
to comply with the rules effective July 1, 2011, which among other
things, has required changes to existing customer contracts and
caused certain customers to choose to discontinue their arrangement
with IPD, which has adversely impacted IPD’s financial results. We
believe our modifications to IPD’s economic model comply with the
Department’s new rule. IPD’s net revenue and operating income
represented less than 2% of our consolidated net revenue and
operating income in fiscal year 2011.
38.
On January 5, 2012, the Company issued a press release announcing results for
the three months ended November 30, 2011. Apollo reported net revenue of $1.17 billion and
diluted earnings per share of $1.28 per share, with degreed enrollment at 373,100.
39.
In that press release the Company stated:
Our strategic initiatives to further enhance the student experience
and provide world-class student protections remain our focus, said
Apollo Group Co-Chief Executive Officer and Apollo Global
Chairman Greg Cappelli. We are also pleased to report positive new
enrollment growth during the first quarter and improving trends in
admissions advisor effectiveness, while reaching students who we
believe can be successful in our degree programs.
Apollo Group Co-Chief Executive Officer Chas Edelstein added,
“During the first quarter, we continued to invest in areas that will
further differentiate University of Phoenix and enhance the student
experience. We believe the acquisition of Carnegie Learning will
accelerate our efforts to incorporate adaptive learning technologies
into our academic platform, which support our students’ success in
the classroom.
40.
On January 5, 2012, the Company filed a quarterly report for the period ended
November 30, 2011 on a Form 10-Q with the SEC, signed by Defendants Capelli and Swartz.
which reiterated the Company’s previously reported financial results and financial position.
41.
The quarterly report also stated the following regarding the Company’s financial
aid program and compliance with applicable regulations:
On May 25, 2011, we were notified that a qui tam complaint had
been filed against us in the U.S. District Court, Eastern District of
California, by private relators under the Federal False Claims Act
and California False Claims Act, entitled USA and State of
California ex rel. Hoggett and Good v. University of Phoenix, et al,
Case Number 2:10-CV-02478-MCE-KJN. When the federal
government declines to intervene in a qui tam action, as it has done
in this case, the relators may elect to pursue the litigation on behalf
of the federal government and, if successful, they are entitled to
receive a portion of the federal government’s recovery.
The complaint alleges, among other things, that University of
Phoenix has violated the Federal False Claims Act since December
12, 2009 and the California False Claims Act for the preceding ten
years by falsely certifying to the U.S. Department of Education and
the State of California that University of Phoenix was in compliance
with various regulations that require compliance with federal rules
regarding the payment of incentive compensation to admissions
personnel, in connection with University of Phoenix’s participation
in student financial aid programs. In addition to injunctive relief and
fines, the relators seek significant damages on behalf of the
Department of Education and the State of California, including all
student financial aid disbursed by the Department to our students
since December 2009 and by the State of California to our students
during the preceding ten years. On July 12, 2011, we filed a motion
to dismiss and on August 30, 2011, relators filed a motion to file a
Second Amended Complaint. On October 11, 2011 , the Court
granted Plaintiffs’ motion to file a Second Amended Complaint and
declined to consider the merits of our motion to dismiss at that time.
On November 2, 2011, we filed a motion to dismiss the relators
Second Amended Complaint, which is currently pending before the
Court.
Because of the many questions of fact and law that may arise, the
outcome of this legal proceeding is uncertain at this point. Based on
the information available to us at present, we cannot reasonably
estimate a range of loss for this action and, accordingly, we have not
accrued any liability associated with this action.
***
Higher Learning Commission. In August 2010, University of
Phoenix received a letter from its principal accreditor, the Higher
Learning Commission (“HLC”), requiring University of Phoenix to
provide certain information and evidence of compliance with HLC
accreditation standards. The letter related to the August 2010 report
published by the Government Accountability Office of its
undercover investigation into the enrollment and recruiting practices
of a number of proprietary institutions of higher education, including
University of Phoenix. In July 2011, HLC informed University of
Phoenix that the Special Committee formed to review this matter
had completed its work, concluding that based on its limited review,
it found no apparent evidence of systematic misrepresentations to
students or that University of Phoenix’s procedures in the areas of
recruiting, financial aid and admissions are significantly inadequate
or inappropriate. These were the areas on which HLC’s review was
focused. HLC also stated that there remain significant questions and
areas that University of Phoenix should work on improving. HLC
indicated that these areas of concern will be reviewed at its next
previously scheduled comprehensive evaluation visit in March 2012.
42.
On March 26, 2012, the Company issued a press release announcing results for
the three months ended February 29, 2012. Apollo reported net revenue of $969.6 billion, and
diluted earnings per share of $0.51 per share, with degreed enrollment at 355,800.
Empowering our students to achieve their desired academic and life
outcomes is our highest priority, said Apollo Group Co-Chief
Executive Officer and Apollo Global Chairman Greg Cappelli. We
are building on our mission to provide world class education, as well
as connecting education to careers, in order to further differentiate
University of Phoenix. We are committed to leading education into
the future.
Apollo Group Co-Chief Executive Officer Chas Edelstein added, We
are working to continually improve our services to students to
enhance their educational experience and outcomes. As we pursue
opportunities for increased operating efficiency, our efforts to
optimize allow us to invest in innovation and create new and better
ways to reach adult learners, while keeping education affordable and
accessible and delivering the best possible experience to our students
44.
On March 26, 2012, the Company filed a quarterly report for the period ended
February 29, 2012 on a Form 10-Q with the SEC signed by Defendants Capelli and Swartz,
where it reiterated the Company’s previously reported financial results and financial position.
45.
On June 25, 2012, the Company issued a press release announcing results for the
three months ended May 31, 2012. Apollo reported net revenue of $1.13 billion and diluted
earnings per share of $1.13 per share, with degreed enrollment at 346,300.
46.
In that press release the Company stated:
We are focused on delivering the best possible experience and
service to support working adults, to address workforce needs, and
to strengthen the connection to careers for our students, said Apollo
Group Co-Chief Executive Officer Chas Edelstein. Evaluating key
touch points, we are creating programs and support services that
allow our students to focus on learning, experiencing achievements
along the way to help inspire them and enhance their long-term
outcomes.
Apollo Group Co-Chief Executive Officer and Apollo Global
Chairman Greg Cappelli added, We are committed to being part of
the solution to empower our country by providing access to
affordable education and helping students develop the skills they
need to succeed. We are investing in innovation to create new and
better ways, enhanced by technology, to support adult learners and
to connect our students' academic path to their career aspirations.
47.
On June 25, 2012, the Company filed a quarterly report for the period ended May
31, 2012 on a Form 10-Q with the SEC signed by Defendants Capelli and Swartz, which
reiterated the Company’s previously reported financial results and financial position.
48.
The quarterly report also stated the following regarding the Company’s financial
aid program and compliance with applicable regulations:
California Grant Program (“Cal Grants”). In California, the state in
which we conduct the most business by revenue, University of
Phoenix students are eligible for Cal Grants, the principal state-
funded grant program. The Governor and the state legislature have
proposed several changes to the Cal Grant program for the student
aid year beginning July 1, 2012 which, if adopted, could reduce the
award amount or eliminate the eligibility of some or all of our new
and continuing students with regard to these grants. Our students
received approximately $20 million of grants under the Cal Grant
Program in fiscal year 2011 and we estimate they would receive
approximately $21 million in fiscal year 2012. These changes could
result in increased student borrowing, decreased enrollment and
adverse impacts on our 90/10 Rule percentage, as discussed below.
Higher Learning Commission. In August 2010, University of
Phoenix received a letter from its principal accreditor, the Higher
Learning Commission (“HLC”), requiring University of Phoenix to
provide certain information and evidence of compliance with HLC
accreditation standards. The letter related to the August 2010 report
published by the Government Accountability Office of its
undercover investigation into the enrollment and recruiting practices
of a number of proprietary institutions of higher education, including
University of Phoenix. In July 2011, HLC informed University of
Phoenix that the Special Committee formed to review this matter
had completed its work, concluding that based on its limited review,
it found no apparent evidence of systematic misrepresentations to
students or that University of Phoenix’s procedures in the areas of
recruiting, financial aid and admissions are significantly inadequate
or inappropriate. HLC also stated that there remain significant
questions and areas that University of Phoenix should work on
improving. HLC is reviewing these areas of concern as part of its
previously scheduled comprehensive evaluation visit, which began
in March 2012.
Rulemaking Initiatives. In October 2010 and June 2011, the U.S.
Department of Education promulgated new rules related to Title IV
program integrity issues and foreign school issues. The most
significant of these rules for our business are the following:
•
Modification of the standards relating to the payment of
incentive compensation to employees involved in student
recruitment and enrollment;
•
Implementation of standards for state authorization of
institutions of higher education;
•
Adoption of a definition of “gainful employment” for
purposes of the requirement of Title IV student financial aid
that a program of study offered by a proprietary institution
prepare students for gainful employment in a recognized
occupation; and
•
Expansion of the definition of misrepresentation, relating to
the Department’s authority to suspend or terminate an
institution’s participation in Title IV programs if the
institution engages in substantial misrepresentation about the
nature of its educational program, its financial charges, or the
employability of its graduates, and expansion of the sanctions
that the Department may impose for engaging in a substantial
misrepresentation.
49.
On October 16, 2012, the Company issued a press release announcing fiscal 2012
Fourth Quarter and Annual Results, and reported annual net revenue of $4.3 billion, or $3.22
per share, with total University of Phoenix Degreed Enrollment at 328,400.
50.
In the October 16, 2012 press release, the Company also stated:
This past year, we have made great strides in executing on our
strategy to differentiate University of Phoenix, diversify Apollo
Group, and refine our business processes and delivery structure to be
more efficient and effective, while providing a world-class student
experience, said Apollo Group Chief Executive Officer and Apollo
Global Chairman Greg Cappelli. As we build the university of the
future, our priority is to connect education to careers for our
students, helping them achieve their desired academic and life
outcomes.
51.
On October 22, 2012 the Company filed an annual report for the period ended
August 31, 2012 on a Form 10-K with the SEC signed by Defendants Capelli and Swartz,
where it reiterated the Company’s previously reported financial results and financial position.
The annual report disclosed that in 2012, the Company derived 84% of its revenues from
federal Title IV funds.
52.
The Company informed investors that the SEC was investigating Company
insiders for potentially violating securities law by engaging in illegal insider trading, Apollo
stated in relevant part:
During April 2012, we received notification from the Enforcement
Division of the Securities and Exchange Commission requesting
documents and information relating to certain stock sales by
company insiders and our February 28, 2012 announcement filed
with the Commission on Form 8-K regarding revised enrollment
forecasts.
53.
In the Company’s annual report, the Company also stated the following regarding
its compliance efforts:
In August 2010, HLC required University of Phoenix to provide
certain information and evidence of compliance with HLC
accreditation standards. This followed the August 2010 report
published by the U.S. Government Accountability Office of its
undercover investigation into the enrollment and recruiting practices
of a number of proprietary institutions of higher education, including
University of Phoenix. In July 2011, the Special Committee formed
to review this matter completed its work, concluding that based on
its limited review, it found no apparent evidence of systematic
misrepresentations to students or that University of Phoenix’s
procedures in the areas of recruiting, financial aid and admissions
were significantly inadequate or inappropriate. HLC also stated that
there remained significant questions and areas that University of
Phoenix should work on improving. HLC is reviewing these areas of
concern as part of its previously scheduled comprehensive
reaffirmation evaluation visit, which began in March 2012.
In September 2012, HLC required University of Phoenix to provide
a response to data submitted on University of Phoenix’s 2012
Institutional Annual Report. HLC reviews data from all of its
accredited and candidate for accreditation member institutions. HLC
identified three non-financial indicators for which it sought
additional information:
Increase or decrease in full-time faculty of 25% or more from the
prior year’s report. Ratio of undergraduate full-time equivalent
students to undergraduate faculty of greater than 35 in the period
reported; and three-year student loan default rate of 25% or more.
University of Phoenix expects to respond to HLC in late October
2012. HLC has indicated that it will assign several members of the
current team reviewing University of Phoenix’s reaffirmation to
evaluate University of Phoenix’s response to the report, and that
their evaluation will become an appendix to the review team’s report
on University of Phoenix’s reaffirmation.
***
90/10 Rule. University of Phoenix and Western International
University, and all other proprietary institutions of higher education,
are subject to the so-called “90/10 Rule” under the Higher Education
Act, as reauthorized. Under this rule, a proprietary institution will be
ineligible to participate in Title IV programs if for any two
consecutive fiscal years it derives more than 90% of its cash basis
revenue, as defined in the rule, from Title IV programs. An
institution that derives more than 90% of its cash basis revenue from
Title IV programs for any single fiscal year will be automatically
placed on provisional certification for two fiscal years and will be
subject to possible additional sanctions determined to be appropriate
under the circumstances by the U.S. Department of Education.
While the Department has broad discretion to impose additional
sanctions on such an institution, there is only limited precedent
available to predict what those sanctions might be, particularly in the
current regulatory environment.
***
Cohort Default Rates. To remain eligible to participate in Title IV
programs, educational institutions must maintain student loan cohort
default rates below specified levels. Each cohort is the group of
students who first enter into student loan repayment during a federal
fiscal year (ending September 30). The currently applicable cohort
default rate for each cohort is the percentage of the students in the
cohort who default on their student loans prior to the end of the
following federal fiscal year, which represents a two-year measuring
period. The cohort default rates are published by the U.S.
Department of Education approximately 12 months after the end of
the measuring period. Thus, in September 2012 the Department
published the two-year cohort default rates for the 2010 cohort,
which measured the percentage of students who first entered into
repayment during the year ended September 30, 2010 and defaulted
prior to September 30, 2011. As discussed below, the measurement
period for the cohort default rate has been increased to three years
starting with the 2009 cohort and both three-year and two-year
cohort default rates will be published each September until the 2011
three-year cohort default rate is published in September 2014.
If an educational institution’s two-year cohort default rate exceeds
10% for any one of the three preceding years, it must delay for 30
days the release of the first disbursement of U.S. federal student loan
proceeds to first time borrowers enrolled in the first year of an
undergraduate program. University of Phoenix and Western
International University implemented a 30-day delay for such
disbursements a few years ago. If an institution’s two-year cohort
default rate equals or exceeds 25% for three consecutive years or
40% for any given year, it will be ineligible to participate in Title IV
programs.
The two-year cohort default rates for University of Phoenix, Western
International University and for all proprietary postsecondary
institutions for the federal fiscal years 2010, 2009 and 2008 were as
follows:
Two-Year Cohort Default Rates for Cohort Years Ended September 30,
2010
2009
2008
University of Phoenix (1)
17.9%
18.8%
12.9%
Western International University (1)
7.7%
9.3%
10.7%
***
While we expect that the challenging economic environment will
continue to put pressure on our student borrowers, we believe that
our ongoing efforts to shift our student mix to a higher proportion of
bachelor’s and graduate level students, the full implementation of
our University Orientation program in November 2010 and our
investment in student protection initiatives and repayment
management services will continue to stabilize and over time
favorably impact our rates. As part of our repayment management
initiatives, effective with the 2009 cohort, we engaged third party
service providers to assist our students who are at risk of default.
These service providers contact students and offer assistance, which
includes
providing
students
with
specific
loan
repayment
information such as repayment options and loan servicer contact
information, and they attempt to transfer these students to the
relevant loan servicer to resolve their delinquency. In addition, we
are intensely focused on student retention and enrolling students who
have a reasonable chance to succeed in our programs, in part
because the rate of default is higher among students who do not
complete their degree program compared to students who graduate.
Based on the available preliminary data, we do not expect the
University of Phoenix or Western International University 2011 two-
year cohort default rates to equal or exceed 25%.
54.
Apollo’s annual report also touted the Company’s strong Academic standards:
Academic Quality. University of Phoenix has an academic quality
assessment plan that measures whether the institution provides
consistent quality and academic rigor through its delivery of
educational programs online and on geographically dispersed
campuses. A major component of this plan is the assessment of
student learning. To assess student learning, University of Phoenix
measures whether graduates meet its programmatic and learning
goals. The measurement is composed of the following four ongoing
and iterative steps:
Prepare an annual assessment result report for academic programs,
based on student learning outcomes;
Implementing improvements based on assessment results; and
Monitoring effectiveness of implemented improvements.
55.
On January 8, 2013, the Company issued a press release announcing results for
the three months ended November 30, 2012. Apollo reported net revenue of $1.1 billion and
diluted earnings per share of $1.18 per share, with degreed enrollment at 319,700.
56.
In that press release, the Company stated:
In the first quarter, we continued to execute on our strategy to
differentiate University of Phoenix, diversify Apollo Group and to
further optimize our operations, said Apollo Group Chief Executive
Officer Greg Cappelli. We are rolling out new career-oriented tools
for students, as well as working with leading companies to help them
meet their needs to develop an educated workforce. We are
committed to become the educator of choice to connect education to
careers and believe this approach will position us for long-term
success.
57.
On January 8, 2013, the Company filed a quarterly report for the period ended
November 30, 2012 on a Form 10-Q with the SEC signed by Defendants Capelli and Swartz,
where it reiterated the Company’s previously reported financial results and financial position.
58.
The quarterly report also stated the following regarding the Company’s financial
aid program and compliance with applicable regulations:
In fiscal year 2012, University of Phoenix generated 91% of our
total consolidated net revenue and more than 100% of our operating
income, and 84% of University of Phoenix’s cash basis revenue for
eligible tuition and fees was derived from Title IV financial aid
program funds, as calculated under the 90/10 Rule.
All U.S. federal financial aid programs are established by Title IV of
the Higher Education Act and regulations promulgated thereunder.
The U.S. Congress must periodically reauthorize the Higher
Education Act and annually determine the funding level for each
Title IV program. In August 2008, the Higher Education Act was
reauthorized through September 30, 2013 by the Higher Education
Opportunity Act. Changes to the Higher Education Act are likely to
occur in subsequent reauthorizations, and the scope and substance of
any such changes cannot be predicted.
The Higher Education Act, as reauthorized, specifies the manner in
which the U.S. Department of Education reviews institutions for
eligibility and certification to participate in Title IV programs. Every
educational institution involved in Title IV programs must be
certified to participate and is required to periodically renew this
certification.
University of Phoenix was recertified in November 2009 and entered
into a new Title IV Program Participation Agreement which expired
December 31, 2012. University of Phoenix has submitted necessary
documentation
for
re-certification.
University
of
Phoenix’s
eligibility continues on a month-to-month basis until the Department
issues its decision on the application. We have no reason to believe
that our application will not be renewed in due course, and it is not
unusual to be continued on a month-to-month basis until the
Department completes its review.
59.
On March 25, 2013, the Company issued a press release announcing results for
the three and six months ended February 28, 2013, Apollo reported second quarter revenue of
$834.4 million and diluted earnings per share of $0.12 per share, or $0.34 per share excluding
special items.
60.
In the press release, the Company stated:
“Higher education is rapidly evolving as workforce demands and
technological innovations drive change in our global economy,” said
Apollo Group Chief Executive Officer Greg Cappelli. “We are
further positioning our organization and brand with our continued
commitment to help students acquire real workplace skills, achieve
their academic goals, and – through the power of education – realize
their career aspirations.”
February 28, 2013 on a Form 10-Q with the SEC signed by Defendants Capelli and Swartz,
which reiterated the Company’s previously reported financial results and financial position.
62.
On June 25, 2013, the Company issued a press release announcing results for the
three and nine months ended May 31, 2013, with third quarter revenue of $946.8 million and
diluted earnings per share of $0.71 per share, or $1.05 per share excluding special items.
63.
In the press release, the Company stated:
This is a time of extraordinary change in higher education. At
Apollo Group we are creating a more nimble organization and
reengineering our learning solutions to better support our student’s
needs and meet the demands of employers. We are focused on
making the necessary changes to deliver an improved set of
educational offerings, said Apollo Group Chief Executive Officer
Greg Cappelli. As education evolves, the transfer of knowledge and
the acquisition of skills for working adults will be delivered in new
and different ways. We are working directly with employers to
define the skills students must bring to the workplace to more
effectively compete in a global economy. The repositioning of
higher education—also reflected in Apollo Group’s mission to create
a more educated global workforce—has perhaps never been more
important.
64.
On June 25, 2013, the Company filed a quarterly report for the period ended May
31, 2013 on a Form 10-Q with the SEC, signed by Defendants Capelli and Swartz, which
reiterated the Company’s previously reported financial results and financial position.
65.
On October 22, 2013, the Company issued a press release announcing financial
results for the three months and fiscal year ended August 31, 2013, with fourth quarter revenue
of $845.0 million and diluted earnings per share of $0.19 per share, or $0.55 per share
excluding special items.
Fiscal Year 2013 brought challenges and opportunities for Apollo
Group, said Apollo Group Chief Executive Officer Greg Cappelli.
We set out this year to differentiate University of Phoenix, diversify
Apollo Group and build a more efficient organization. We have
made meaningful progress in each of these areas. With hundreds of
millions of worldwide learners in need of higher education in this
decade alone, we are well positioned for 2014 and beyond to help
create a more educated global workforce and strengthen our great
partnerships across four continents.
67.
On October 22, 2013, the Company filed an annual report for the period ended
August 31, 2013 on a Form 10-K with the SEC signed by Defendants Cappelli and Swartz,
which reiterated the Company’s previously reported financial results and financial position.
68.
In its 10-K, the Company stated the following regarding its compliance efforts:
To be eligible to participate in Title IV programs, a postsecondary
institution must be accredited by an accrediting body recognized by
the U.S. Department of Education, must comply with the Higher
Education Act, as reauthorized, and all applicable regulations
thereunder, and must be authorized to operate by the appropriate
regulatory authority in each state where the institution maintains a
physical presence. We have summarized below recent material
activity in the regulatory environment affecting our business and the
most significant regulatory requirements applicable to our domestic
postsecondary operations.
Changes in or new interpretations of applicable laws, rules, or
regulations could have a material adverse effect on our eligibility to
participate in Title IV programs, accreditation, authorization to
operate in various states, permissible activities, and operating costs.
The failure to maintain or renew any required regulatory approvals,
accreditation, or state authorizations could have a material adverse
effect on us. Refer to Part I, Item 1A, Risk Factors - Risks Related to
the Highly Regulated Industry in Which We Operate.
Eligibility and Certification Procedures. The Higher Education Act,
as reauthorized, specifies the manner in which the U.S. Department
of Education reviews institutions for eligibility and certification to
participate in Title IV programs. Every educational institution
involved in Title IV programs must be certified to participate and is
required to periodically renew this certification. University of
Phoenix was recertified in November 2009 and entered into a new
Title IV Program Participation Agreement which expired on
December 31, 2012. University of Phoenix has submitted necessary
documentation for re-certification and its eligibility continues on a
month-to-month basis until the Department issues its decision on the
application. We have no reason to believe that the University’s
application will not be renewed in due course, and it is not unusual
to be continued on a month-to-month basis until the Department
completes its review. However, we cannot predict whether, or to
what extent, the imposition of the Notice sanction by The Higher
Learning Commission might have on this process.
Western International University was recertified in May 2010 and
entered into a new Title IV Program Participation Agreement which
expires on September 30, 2014.
U.S. Department of Education Rulemaking Initiative. Negotiated
rulemaking public hearings were held by the U.S. Department of
Education in May and June 2013. Topics included cash management
of Title IV program funds, state authorization for programs offered
through distance education or correspondence education, and gainful
employment, among others. The negotiated rulemaking process is
expected to produce new regulations which will be published this
fall and may be effective as soon as July 1, 2014. More information
can be found at
http://www2.ed.gov/policy/highered/reg/hearulemaking/2012/index.
html.
A negotiated rulemaking committee was convened by the
Department in September 2013 specifically on the topic of gainful
employment. Prior to the September 2013 committee meeting, the
Department released draft regulations on gainful employment. The
draft regulations provide for two metrics: an annual debt-to-earnings
ratio, and a debt service-to-discretionary income ratio. As proposed,
a program would become ineligible for Title IV funding if it fails
both metrics in two out of any three consecutive years, or is in a
specified “warning zone” for either metric in any four consecutive
years. The timing and substance of final regulations dealing with
gainful employment cannot be predicted at this time. More
information
can
be
found
at
http://www2.ed.gov/policy/highered/reg/hearulemaking/2012/gainfu
lemployment.html.
Refer to Part I, Item 1A, Risk Factors - Risks Related to the Highly
Regulated Industry in Which We Operate - Rulemaking by the U.S.
Department of Education could materially and adversely affect our
business.
90/10 Rule. University of Phoenix and Western International
University, and all other proprietary institutions of higher education,
are subject to the so-called “90/10 Rule” under the Higher Education
Act, as reauthorized. Under this rule, a proprietary institution will be
ineligible to participate in Title IV programs for at least two fiscal
years if for any two consecutive fiscal years it derives more than
90% of its cash basis revenue, as defined in the rule, from Title IV
programs. If an institution is determined to be ineligible, any
disbursements of Title IV program funds made while ineligible must
be repaid to the Department. An institution that derives more than
90% of its cash basis revenue from Title IV programs for any single
fiscal year will be automatically placed on provisional certification
for two fiscal years and will be subject to possible additional
sanctions determined to be appropriate under the circumstances by
the U.S. Department of Education.
***
We believe that our efforts to shift our student mix to a higher
proportion of bachelor’s and graduate level students and our
investment in student protection initiatives and repayment
management services will continue to stabilize and over time
favorably impact our rates. As part of our repayment management
initiatives, effective with the 2009 cohort, we engaged third-party
service providers to assist our students who are at risk of default.
These service providers contact students and offer assistance, which
includes
providing
students
with
specific
loan
repayment
information such as repayment options and loan servicer contact
information, and they attempt to transfer these students to the
relevant loan servicer to resolve their delinquency. In addition, we
are intensely focused on student retention and enrolling students who
have a reasonable chance to succeed in our programs, in part
because the rate of default is higher among students who do not
complete their degree program compared to students who graduate.
Based on our most recent trends, we expect that our 2011 three-year
cohort default rates will be lower than our 2010 three-year cohort
default rates. However, if our student loan default rates approach the
applicable limits, we may be required to increase efforts and
resources dedicated to improving these default rates. This is
challenging because most borrowers who are in default or at risk of
default are no longer students, and we may have only limited contact
with them. Furthermore, recently there has been increased attention
by members of Congress and others on default aversion activities of
proprietary education institutions. If such attention leads to
congressional or regulatory action restricting the types of default
aversion assistance that educational institutions are permitted to
provide, the default rates of our former students may be negatively
impacted. Accordingly, there is no assurance that we would be able
to effectively improve our default rates or improve them in a timely
manner to meet the requirements for continued participation in Title
IV funding if we experience a substantial increase in our student
loan default rates.
***
Office of the Inspector General of the U.S. Department of Education
(“OIG”) . In October 2011, the OIG notified us that it was
conducting a nationwide audit of the Department’s program
requirements, guidance, and monitoring of institutions of higher
education offering distance education. In connection with the OIG’s
audit of the Department, the OIG examined a sample of University
of Phoenix students who enrolled during the period from July 1,
2010 to June 30, 2011. The OIG subsequently notified the
University that in the course of this review it identified certain
conditions that the OIG believes are Title IV compliance exceptions
at University of Phoenix. Although the University is not the direct
subject of the OIG’s audit of the Department, the OIG has asked the
University to respond so that it may consider the University’s views
in formulating its audit report of the Department. In September
2013, the OIG provided to University of Phoenix, among other
institutions, a draft appendix to its audit report. The draft appendix
again identifies compliance exceptions at University of Phoenix.
University of Phoenix has responded to the appendix. These
exceptions relate principally to the calculation of the amount of Title
IV funds returned after student withdrawals and the process for
confirming student eligibility prior to disbursement of Title IV
funds.
the three months ended November 30, 2013, with revenue of $856.3 million and diluted
earnings per share of $0.87 per share, or $1.04 per share excluding special items.
70.
On January 7, 2014, the Company filed a quarterly report for the period ended
November 30, 2013 on a Form 10-Q with the SEC signed by Defendants Capelli and Swartz,
which reiterated the Company’s previously reported financial results and financial position.
71.
The statements referenced above were materially false and/or misleading because
they misrepresented and failed to disclose the following adverse facts, which were known to
defendants or recklessly disregarded by them, including: (i) defendants manipulated federal
student loan and grant programs in order to appear to be in compliance with new federal
regulations enacted beginning in June 2011; (ii) defendants’ predatory and deceptive recruiting
and enrollment practices violated federal regulations enacted beginning in June 2011; and (iii)
the Company engaged in a number of practices, including loan forbearance programs, in order
to create the appearance that the Company was in compliance with relevant government
regulations.
THE TRUTH EMERGES
72.
On April 1, 2014, the Company disclosed that the Department of Education was
conducting an investigation into the company, and that the department had subpoenaed
documents and communications related to student recruitment, attendance, completion,
placement, defaults on loans, along with information on other corporate and financial matters.
$32.06 per share on April 2, 2014.
PLAINTIFF’S CLASS ACTION ALLEGATIONS
74.
Plaintiff brings this action as a class action pursuant to Federal Rule of Civil
Procedure 23(a) and (b)(3) on behalf of a Class, consisting of all those who purchased or
otherwise acquired Apollo securities during the Class Period (the “Class”); and were damaged
upon the revelation of the corrective disclosures. Excluded from the Class are defendants
herein, the officers and directors of the Company, at all relevant times, members of their
immediate families and their legal representatives, heirs, successors or assigns and any entity in
which defendants have or had a controlling interest.
75.
The members of the Class are so numerous that joinder of all members is
impracticable. Throughout the Class Period, Apollo securities were actively traded on the
NASDAQ. While the exact number of Class members is unknown to Plaintiff at this time and
can be ascertained only through appropriate discovery, Plaintiff believes that there are hundreds
or thousands of members in the proposed Class. Record owners and other members of the
Class may be identified from records maintained by Apollo or its transfer agent and may be
notified of the pendency of this action by mail, using the form of notice similar to that
customarily used in securities class actions.
76.
Plaintiff’s claims are typical of the claims of the members of the Class as all
members of the Class are similarly affected by defendants’ wrongful conduct in violation of
federal law that is complained of herein.
77.
Plaintiff will fairly and adequately protect the interests of the members of the
Plaintiff has no interests antagonistic to or in conflict with those of the Class.
78.
Common questions of law and fact exist as to all members of the Class and
predominate over any questions solely affecting individual members of the Class. Among the
questions of law and fact common to the Class are:
whether the federal securities laws were violated by defendants’ acts as
alleged herein;
whether statements made by defendants to the investing public during the
Class Period misrepresented material facts about the business, operations and
management of Apollo;
whether the Individual Defendants caused Apollo to issue false and
misleading financial statements during the Class Period;
whether defendants acted knowingly or recklessly in issuing false and
misleading financial statements;
whether the prices of Apollo securities during the Class Period were
artificially inflated because of the defendants’ conduct complained of herein;
and
whether the members of the Class have sustained damages and, if so, what is
the proper measure of damages.
79.
A class action is superior to all other available methods for the fair and efficient
adjudication of this controversy since joinder of all members is impracticable. Furthermore, as
the damages suffered by individual Class members may be relatively small, the expense and
burden of individual litigation make it impossible for members of the Class to individually
redress the wrongs done to them. There will be no difficulty in the management of this action
as a class action.
fraud-on-the-market doctrine in that:
defendants made public misrepresentations or failed to disclose material facts
during the Class Period;
the omissions and misrepresentations were material;
Apollo securities are traded in an efficient market;
the Company’s shares were liquid and traded with moderate to heavy volume
during the Class Period;
the Company traded on the NASDAQ and was covered by multiple analysts;
the misrepresentations and omissions alleged would tend to induce a
reasonable investor to misjudge the value of the Company’s securities; and
Plaintiff and members of the Class purchased, acquired and/or sold Apollo
securities between the time the defendants failed to disclose or misrepresented
material facts and the time the true facts were disclosed, without knowledge of
the omitted or misrepresented facts.
81.
Based upon the foregoing, Plaintiff and the members of the Class are entitled to a
presumption of reliance upon the integrity of the market.
82.
Alternatively, Plaintiffs and the members of the Class are entitled to the
presumption of reliance established by the Supreme Court in Affiliated Ute Citizens of the State
of Utah v. United States, 406 U.S. 128, 92 S. Ct. 2430 (1972), as Defendants omitted material
information in their Class Period statements in violation of a duty to disclose such information,
as detailed above.
COUNT I
(Against All Defendants For Violations of
Section 10(b) and Rule 10b-5 Promulgated Thereunder)
83.
Plaintiff repeats and realleges each and every allegation contained above as if
84.
This Count is asserted against defendants and is based upon Section 10(b) of the
Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5 promulgated thereunder by the SEC.
85.
During the Class Period, defendants engaged in a plan, scheme, conspiracy and
course of conduct, pursuant to which they knowingly or recklessly engaged in acts,
transactions, practices and courses of business which operated as a fraud and deceit upon
Plaintiff and the other members of the Class; made various untrue statements of material facts
and omitted to state material facts necessary in order to make the statements made, in light of
the circumstances under which they were made, not misleading; and employed devices,
schemes and artifices to defraud in connection with the purchase and sale of securities. Such
scheme was intended to, and, throughout the Class Period, did: (i) deceive the investing public,
including Plaintiff and other Class members, as alleged herein; (ii) artificially inflate and
maintain the market price of Apollo securities; and (iii) cause Plaintiff and other members of
the Class to purchase or otherwise acquire Apollo securities and options at artificially inflated
prices. In furtherance of this unlawful scheme, plan and course of conduct, defendants, and
each of them, took the actions set forth herein.
86.
Pursuant to the above plan, scheme, conspiracy and course of conduct, each of the
defendants participated directly or indirectly in the preparation and/or issuance of the quarterly
and annual reports, SEC filings, press releases and other statements and documents described
above, including statements made to securities analysts and the media that were designed to
influence the market for Apollo securities. Such reports, filings, releases and statements were
materially false and misleading in that they failed to disclose material adverse information and
87.
By virtue of their positions at Apollo, defendants had actual knowledge of the
materially false and misleading statements and material omissions alleged herein and intended
thereby to deceive Plaintiff and the other members of the Class, or, in the alternative,
defendants acted with reckless disregard for the truth in that they failed or refused to ascertain
and disclose such facts as would reveal the materially false and misleading nature of the
statements made, although such facts were readily available to defendants. Said acts and
omissions of defendants were committed willfully or with reckless disregard for the truth. In
addition, each defendant knew or recklessly disregarded that material facts were being
misrepresented or omitted as described above.
88.
Information showing that defendants acted knowingly or with reckless disregard
for the truth is peculiarly within defendants’ knowledge and control. As the senior managers
and/or directors of Apollo, the Individual Defendants had knowledge of the details of Apollo’s
internal affairs.
89.
The Individual Defendants are liable both directly and indirectly for the wrongs
complained of herein. Because of their positions of control and authority, the Individual
Defendants were able to and did, directly or indirectly, control the content of the statements of
Apollo. As officers and/or directors of a publicly-held company, the Individual Defendants had
a duty to disseminate timely, accurate, and truthful information with respect to Apollo’s
businesses, operations, future financial condition and future prospects. As a result of the
dissemination of the aforementioned false and misleading reports, releases and public
statements, the market price of Apollo securities was artificially inflated throughout the Class
which were concealed by defendants, Plaintiff and the other members of the Class purchased or
otherwise acquired Apollo securities at artificially inflated prices and relied upon the price of
the securities, the integrity of the market for the securities and/or upon statements disseminated
by defendants, and were damaged thereby.
90.
During the Class Period, Apollo securities were traded on an active and efficient
market. Plaintiff and the other members of the Class, relying on the materially false and
misleading statements described herein, which the defendants made, issued or caused to be
disseminated, or relying upon the integrity of the market, purchased or otherwise acquired
shares of Apollo securities at prices artificially inflated by defendants’ wrongful conduct. Had
Plaintiff and the other members of the Class known the truth, they would not have purchased or
otherwise acquired said securities, or would not have purchased or otherwise acquired them at
the inflated prices that were paid. At the time of the purchases and/or acquisitions by Plaintiff
and the Class, the true value of Apollo securities was substantially lower than the prices paid by
Plaintiff and the other members of the Class. The market price of Apollo securities declined
sharply upon public disclosure of the facts alleged herein to the injury of Plaintiff and Class
members.
91.
By reason of the conduct alleged herein, defendants knowingly or recklessly,
directly or indirectly, have violated Section 10(b) of the Exchange Act and Rule 10b-5
promulgated thereunder.
92.
As a direct and proximate result of defendants’ wrongful conduct, Plaintiff and
the other members of the Class suffered damages in connection with their respective purchases,
that the Company had been disseminating misrepresented financial statements to the investing
public.
COUNT II
(Violations of Section 20(a) of the
Exchange Act Against The Individual Defendants)
93.
Plaintiff repeats and realleges each and every allegation contained in the
foregoing paragraphs as if fully set forth herein.
94.
During the Class Period, the Individual Defendants participated in the operation
and management of Apollo, and conducted and participated, directly and indirectly, in the
conduct of Apollo’s business affairs. Because of their senior positions, they knew the adverse
non-public information about Apollo’s misstatement of income and expenses and false financial
statements.
95.
As officers and/or directors of a publicly owned company, the Individual
Defendants had a duty to disseminate accurate and truthful information with respect to Apollo’s
financial condition and results of operations, and to correct promptly any public statements
issued by Apollo which had become materially false or misleading.
96.
Because of their positions of control and authority as senior officers, the
Individual Defendants were able to, and did, control the contents of the various reports, press
releases and public filings which Apollo disseminated in the marketplace during the Class
Period concerning Apollo’s results of operations. Throughout the Class Period, the Individual
Defendants exercised their power and authority to cause Apollo to engage in the wrongful acts
Apollo within the meaning of Section 20(a) of the Exchange Act. In this capacity, they
participated in the unlawful conduct alleged which artificially inflated the market price of
Apollo securities.
97.
Each of the Individual Defendants, therefore, acted as a controlling person of
Apollo. By reason of their senior management positions and/or being directors of Apollo, each
of the Individual Defendants had the power to direct the actions of, and exercised the same to
cause, Apollo to engage in the unlawful acts and conduct complained of herein. Each of the
Individual Defendants exercised control over the general operations of Apollo and possessed
the power to control the specific activities which comprise the primary violations about which
Plaintiff and the other members of the Class complain.
98.
By reason of the above conduct, the Individual Defendants are liable pursuant to
Section 20(a) of the Exchange Act for the violations committed by Apollo.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff demands judgment against defendants as follows:
A. Determining that the instant action may be maintained as a class action
under Rule 23 of the Federal Rules of Civil Procedure, and certifying Plaintiff as the
Class representative;
B. Requiring defendants to pay damages sustained by Plaintiff and the Class
by reason of the acts and transactions alleged herein;
post-judgment interest, as well as their reasonable attorneys’ fees, expert fees and
other costs; and
D. Awarding such other and further relief as this Court may deem just and
proper.
DEMAND FOR TRIAL BY JURY
Plaintiff hereby demands a trial by jury.
Dated this 24th day of April, 2014
MARTIN & BONNETT, P.L.L.C.
By: s/Susan Martin
Susan Martin
Jennifer Kroll
1850 N. Central Ave. Suite 2010
Phoenix, AZ 85004
(602) 240-6900
Facsimile: (602) 240-2345
[email protected]
[email protected]
POMERANTZ GROSSMAN HUFFORD
DAHLSTROM & GROSS LLP
Jeremy A. Lieberman (pro hac vice app. to be filed)
Lesley F. Portnoy (pro hac vice app. to be filed)
600 Third Avenue, 20th Floor
New York, New York 10016
Telephone: (212) 661-1100
Facsimile: (212) 661-8665
[email protected]
[email protected]
POMERANTZ GROSSMAN HUFFORD
DAHLSTROM & GROSS LLP
Patrick V. Dahlstrom (pro hac vice app. to be filed)
Ten South LaSalle Street, Suite 3505
Chicago, Illinois 60603
Telephone: (312) 377-1181
Facsimile: (312) 377-1184
[email protected]
Attorneys for Plaintiff
| securities |