ANDERSON v. UNITED PARCEL SERVICE OF AMERICA INC 100 (2024)

Order Granting Defendants' Motion to Dismiss (Dkt. 15)

Defendants United Parcel Service of America, Inc. and United Parcel Service, Inc. (collectively, UPS) move to dismiss Plaintiffs' complaint. Dkt. 15 (Mot.) Plaintiffs oppose. Dkt. 16 (Opp'n). The Court deems this matter appropriate for decision without oral argument. See Fed. R. Civ. P. 78; Local Rule 7-15. For the reasons stated below, the motion is granted.

I. BACKGROUND

Plaintiffs are six California residents who allege they “visited and used” UPS's website, ups.com. Dkt. 1-1 (Compl.) ¶¶ 11-16. Plaintiffs allege that in order to access ups.com, an individual must agree to UPS's Website Terms of Use (Terms). Id. ¶ 21. They allege that the Terms violate California Civil Code § 1670.8 because the Terms contain a non-disparagement clause. See id. ¶ 25. According to Plaintiffs, “UPS' Terms provide that ‘[b]y accessing or using the Site ․ [y]ou agree to use the Website ․ in a fashion that does not, in the sole judgment of UPS, negatively reflect on the goodwill or reputation of UPS ․’ ” Id. ¶ 22. Plaintiffs allege that UPS intentionally, willfully, and recklessly seeks to have Plaintiffs waive their right as consumers to make statements regarding UPS, which is prohibited under California law. Id. ¶ 52. Plaintiffs bring this claim as a putative class action on behalf of “all persons residing in California” who visited or used the website ups.com. Id. ¶ 27. Plaintiffs seek damages, statutory penalties, and injunctive relief.

II. LEGAL STANDARD

“Dismissal under Rule 12(b)(6) is proper when the complaint ․ fails to allege sufficient facts to support a cognizable legal theory.” Somers v. Apple, Inc., 729 F.3d 953, 959 (9th Cir. 2013). “[W]hen ruling on a defendant's motion to dismiss, a judge must accept as true all of the factual allegations contained in the complaint.” Erickson v. Pardus, 551 U.S. 89, 94, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007) (per curiam). However, a court is “not bound to accept as true a legal conclusion couched as a factual allegation.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). “Nor does a complaint suffice if it tenders ‘naked assertion[s]’ devoid of ‘further factual enhancement.’ ” Id. (alteration in original) (quoting Twombly, 550 U.S. at 557, 127 S.Ct. 1955). A complaint must “state a claim to relief that is plausible on its face.” Twombly, 550 U.S. at 570, 127 S.Ct. 1955. This means that the complaint must plead “factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678, 129 S.Ct. 1937. There must be “sufficient allegations of underlying facts to give fair notice and to enable the opposing party to defend itself effectively ․ [and] factual allegations that are taken as true must plausibly suggest an entitlement to relief, such that it is not unfair to require the opposing party to be subjected to the expense of discovery and continued litigation.” Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011).

Ruling on a motion to dismiss will be “a context-specific task that requires the reviewing court to draw on its judicial experience and common sense. But where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged—but it has not ‘show[n]’—‘that the pleader is entitled to relief.’ ” Iqbal, 556 U.S. at 679, 129 S.Ct. 1937 (alteration in original) (citations omitted).

Rule 15(a)(2) of the Federal Rules of Civil Procedure provides that the court should freely give leave to amend when justice requires. This rule should be interpreted and applied with “extreme liberality,” Roth v. Garcia Marquez, 942 F.2d 617, 628 (9th Cir. 1991) (simplified), and leave to amend “should be granted unless amendment would cause prejudice to the opposing party, is sought in bad faith, is futile, or creates undue delay.” Yakama Indian Nation v. State of Wash. Dep't of Revenue, 176 F.3d 1241, 1246 (9th Cir. 1999) (simplified); see also Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962) (identifying these factors).

III. DISCUSSION 1

UPS argues that Plaintiffs fail to state a claim for violation of Cal. Civ. Code § 1670.8, and even if Plaintiffs had stated a claim under § 1670.8, the claim is preempted by the Federal Aviation Administration Authorization Act of 1994 (FAAAA).

A. California Civil Code Section 1670.8 Claim

UPS contends that Plaintiffs fail to state a claim for violation of Cal. Civ. Code § 1670.8 because (1) Plaintiffs have not adequately alleged they are consumers; (2) Plaintiffs have not identified a contract for a sale or lease of consumer goods or services; (3) Plaintiffs have not alleged that the Terms prevent them from making public statements; and (4) Plaintiffs have not alleged a threat or penalty. Mot. at 6-10.

1. Private Right of Action

“A contract or proposed contract for the sale or lease of consumer goods or services may not include a provision waiving the consumer's right to make any statement regarding the seller or lessor or its employees or agents, or concerning the goods or services.” Cal. Civ. Code § 1670.8(a)(1). Section 1670.8(c) confers a right of action to the consumer, the Attorney General, or the district attorney or city attorney of the county or city in which the alleged violation occurred. Id. § 1670.8(c). Plaintiffs maintain that the term “consumer” should apply broadly because the term is undefined in the statute. Opp'n at 14.

Where a statute does not define the relevant terms, courts “must look to the statute's words and give them their usual and ordinary meaning.” People v. Arias, 45 Cal. 4th 169, 177, 85 Cal.Rptr.3d 1, 195 P.3d 103 (2008) (citation omitted). When attempting to ascertain the usual and ordinary meaning of a word, courts appropriately refer to the dictionary definition of that word. People v. Leal, 33 Cal. 4th 999, 1009, 16 Cal.Rptr.3d 869, 94 P.3d 1071 (2004). The statute's plain meaning controls the court's interpretation unless the words are ambiguous. Green v. State of Cal., 42 Cal. 4th 254, 260, 64 Cal.Rptr.3d 390, 165 P.3d 118 (2007). Black's Law Dictionary defines “consumer” as “[s]omeone who buys goods or services for personal, family, or household use, with no intention of resale; a natural person who uses products for personal rather than business purposes.” Black's Law Dictionary (11th ed. 2019). As this definition of “consumer” suggests, for a person to have a right of action under § 1670.8, the individual must buy a good or service for personal, family, or household use, with no intention of resale. Because Plaintiffs have not alleged that they are consumers within the plain meaning of the word, the Court finds Plaintiffs have not adequately alleged a claim under § 1670.8.

2. Contract for the Sale or Lease of Consumer Goods or Services

As the text of the statute makes clear, § 1670.8 applies to contracts for the sale or lease of goods or services only. Plaintiffs allege that UPS requires users to “agree to use the Website ․ in a fashion that does not, in the sole judgment of UPS, negatively reflect on the goodwill or reputation of UPS ․” in order for customers to have the privilege of accessing the goods and services offered and promoted on the Website. Compl. ¶ 6. However, this conclusory statement does not identify what goods or services are “offered and promoted” on the Website and, more importantly, which of these good or services are governed by the contract at issue. Plaintiffs have not provided sufficient facts to allege that the Terms are a contract for the sale or lease of goods or services. Therefore, the Court cannot conclude that § 1670.8 applies to the Terms.

3. Prevention of Public Statements

UPS also argues that § 1670.8 is inapplicable because the Terms govern the use of ups.com only, which does not contain a space or forum for public comments by visitors to the website. Mot. at 7-8. Plaintiffs contend that ups.com contains links that navigate users to spaces or forums for public comment, such as Facebook, Twitter, Instagram, LinkedIn, and YouTube. Opp'n at 18-19. According to Plaintiffs, the plain language of the Terms prevents consumers from using those website links in a fashion that would negatively reflect on the goodwill or reputation of UPS. Id. at 19. The Court rejects this argument because there are no facts asserted in the Complaint to support the contention that the Terms prevent consumers from posting comments on the third-party websites linked at ups.com. The Court also is not persuaded that the Terms, as written, plausibly could be interpreted to prohibit any statements made on a third-party website. The Court finds that Plaintiffs have failed to allege facts to support an allegation that the Terms prevent consumers from making public statements.

4. Threat or Penalty

UPS also alleges that Plaintiffs' claim fails because they fail to allege that UPS penalized them, threatened them, or in any way sought to enforce the Terms. Mot. at 9-10. The Court finds that § 1670.8 does not require Plaintiffs to allege a threat or penalty in order to state a claim. An individual or entity can violate § 1670.8 simply by including a non-disparagement clause in a contract or proposed contract for the sale or lease of consumer goods or services. See Cal. Civ. Code § 1670.8(a)(1). The Court interprets subsection (a)(1) of the statute to stand on its own. The Court rejects UPS's argument that § 1670.8 is violated only when a penalty or threat of a penalty is imposed.²

B. FAAAA Preemption

UPS also argues that Plaintiffs' § 1670.8 claim is preempted by the FAAAA. See Mot. at 10-13. The FAAAA expressly preempts any state law “related to a price, route, or service of any motor carrier ․ with respect to the transportation of property.” 49 U.S.C. § 14501(c)(1). The preemption provision is a broad one. “The phrase ‘related to’ embraces state laws ‘having a connection with or reference to’ carrier ‘rates, routes, or services,’ whether directly or indirectly.” Cal. Trucking Ass'n v. Su, 903 F.3d 953, 960 (9th Cir. 2018) (citation omitted). As the Ninth Circuit has explained, “[t]here can be no doubt that when Congress adopted the FAAAA Act, it intended to broadly preempt state laws that were ‘related to a price, route or service’ of a motor carrier.” Am. Trucking Ass'ns, Inc. v. City of Los Angeles, 559 F.3d 1046, 1053 (9th Cir. 2009). FAAAA preemption is broad, but not so broad that the sky is the limit. States retain the ability to execute their police power with laws that do not significantly impact rates, routes, or services. Dan's City Used Cars, Inc. v. Pelkey, 569 U.S. 251, 261, 133 S.Ct. 1769, 185 L.Ed.2d 909 (2013).

The Supreme Court has held that the FAAAA preempts only laws, regulations, and other provisions that single out for special treatment motor carriers of property. See Pelkey, 569 U.S. at 261, 133 S.Ct. 1769 (citing City of Columbus v. Ours Garage & Wrecker Serv., Inc., 536 U.S. 424, 449, 122 S.Ct. 2226, 153 L.Ed.2d 430 (2002) (Scalia, J., dissenting)). The Ninth Circuit has attempted to “draw a line between laws that are significantly related to rates, routes, or services, even indirectly, and thus are preempted, and those that have only a tenuous, remote, or peripheral connection to rates, routes, or services, and thus are not preempted.” Dilts v. Penske Logistics, LLC, 769 F.3d 637, 643 (9th Cir. 2014) (citation and quotation marks omitted). Preemption does not occur when the law is a “generally applicable background regulation in an area of traditional state power that has no significant impact on a carrier's prices, routes or services.” Su, 903 F.3d at 961; see also Dilts, 769 F.3d at 644.

A generally applicable law is one that affects individuals “solely in their capacity as members of the general public,” Rowe v. New Hampshire Motor Transport Ass'n, 552 U.S. 364, 375, 128 S.Ct. 989, 169 L.Ed.2d 933 (2008), and applies “to hundreds of different industries,” Dilts, 769 F.3d at 647 (citation omitted). A generally applicable law is not “related to a price, route, or service of any motor carrier” for purposes of the FAAAA unless the state law “binds the carrier to a particular price, route or service” or otherwise freezes them into place or determines them to a significant degree. Id. at 646. A law does not have a binding or freezing effect, and thus is not preempted, merely because a motor carrier must take the law into account when making business decisions. Id. at 646-47.

UPS argues that Plaintiffs' § 1670.8 claim fails because the claim is related to UPS's services and contract for the sale of services. Mot. at 12-13. The Court finds that Plaintiffs' claim is not preempted because the applicable state law is a generally applicable background regulation and has only a tenuous impact on UPS's services. Section 1670.8 is generally applicable because it applies to all contracts or proposed contracts for the sale or lease of consumer goods or services, not just to those goods or services related to motor carriers. Further, UPS has not established how § 1670.8 would have a binding or freezing effect on its services as considered in Dilts.

UPS maintains that courts repeatedly have held that consumer protection statutes like § 1670.8 are preempted when asserted against carriers. Mot. at 13. However, the cases cited by UPS found that the state laws were preempted because they were significantly related to the “rates, routes, or services” of the carriers. See, e.g., In re Korean Air Lines Co. Ltd., 642 F.3d 685, 689 (9th Cir. 2011) (finding preemption when claims related to allegations of excessive fare prices); Ellenburg v. PODS Enters., LLC, 473 F. Supp. 3d 1095, 1098 (E.D. Cal. 2020) (finding preemption to the extent plaintiff's claims challenged defendant's transportation fee). Unlike the present case, it was clear in those cases how the state law at issue would impact the defendants' “rates, routes, or services.” Even though § 1670.8 may impact UPS's contracts with its consumers, UPS has not established how the state law relates to the actual services UPS provides.

Therefore, the Court finds that Plaintiffs' § 1670.8 claim is not preempted by the FAAAA.

IV. CONCLUSION

For the reasons stated above, the Motion to Dismiss is granted with leave to amend. An amended complaint must be filed by June 17, 2024. Leave to amend is granted only to address the specific issues raised in this order. Leave to add new defendants or claims not discussed in this order must be sought by a separate, properly-noticed motion. Plaintiffs must provide a redlined version of the amended complaint to the Court's general chambers email. Failure to file an amended complaint by the ordered date will waive Plaintiffs' right to do so and the claims will be dismissed with prejudice.

IT IS SO ORDERED.

FOOTNOTES

2.   The Court also rejects UPS's argument that because the statute was “inspired by” a certain event that the purpose is therefore limited to protect only instances of similar events. See Reply at 9. Just because an event was the impetus for legislation does not mean that the Legislature intended the legislation to apply to that limited scope only.

Dale S. Fischer, United States District Judge