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Walsh v. Microsoft Corp.

United States District Court, W.D. Washington

October 21, 2014

DENNIS WALSH, et al., Plaintiffs,

Decided October 20, 2014

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For Dennis Walsh, Dezra Guthrie, Frank Ortega, Leslie Sweeney-Fagan, John Sweeney, Plaintiffs: Lish Whitson, LEAD ATTORNEY, Kristy Lee Stell, LISH WHITSON PLLC, SEATTLE, WA; Omar W. Rosales, LEAD ATTORNEY, PRO HAC VICE, THE ROSALES LAW FIRM, LLC, HARLINGEN, TX.

For Microsoft Corporation, Defendant: Rebecca J. Francis, Stephen M. Rummage, LEAD ATTORNEYS, Fred B Burnside, DAVIS WRIGHT TREMAINE (SEA), SEATTLE, WA; Matthew K Hansen, Locke Lord et al, PENDING PRO HAC VICE, Dallas, TX.

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Marsha J. Pechman, Chief United States District Judge.

THIS MATTER comes before the Court on Defendant's Motion to Dismiss Under Rules 12(b)(1) and 12(b)(6). (Dkt. No. 51.) Having reviewed the Parties' briefing and all related papers, the Court GRANTS in part and DENIES in part Defendant's motion.


This motion is part of a putative class action by subscribers of Microsoft's X-Box LIVE streaming media service alleging Microsoft deceptively made unauthorized charges to their credit cards in connection with their streaming media subscriptions. (Dkt. No. 11.) The case was transferred to this Court from the District Court for the Southern District of Texas (Brownsville Division) pursuant to Defendant's Motion to Transfer Venue under 28 U.S.C. § 1404(a) to enforce a forum-selection clause contained in X-Box LIVE's " clickwrap" contract, or Terms of Use. (Dkt. No. 15.) Judge Saldaña found that the Terms of Use constituted a valid, governing contract between the parties, and that the forum-selection clause should be enforced. (Dkt. No. 28.)

Plaintiffs reside in five different states, and allege violations of the federal Computer Fraud and Abuse Act and Magnuson-Moss Warranty Act in addition to violations

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of state laws. The Terms of Use specify that the laws of a subscriber's home state govern any dispute between the subscriber and Microsoft. Consequently, Plaintiffs plan state-specific subclasses, composed of consumers who reside in that state, which would bring actions under the applicable state laws in addition to the federal claims, which apply nationwide.


I. Legal Standards

A complaint must be dismissed under Fed.R.Civ.P. 12(b)(1) if, considering the factual allegations in the light most favorable to the plaintiff, the action: (1) does not arise under the Constitution, laws, or treaties of the United States, or does not fall within one of the other enumerated categories of Article III, Section 2, of the Constitution; (2) is not a case or controversy within the meaning of the Constitution; or (3) is not one described by any jurisdictional statute. Baker v. Carr, 369 U.S. 186, 198, 82 S.Ct. 691, 7 L.Ed.2d 663 (1962); D.G. Rung Indus., Inc. v. Tinnerman, 626 F.Supp. 1062, 1063 (W.D. Wash. 1986).

Under Fed.R.Civ.P. 12(b)(6), the Court may dismiss a complaint for " failure to state a claim upon which relief can be granted." In ruling on a motion to dismiss, the Court must construe the complaint in the light most favorable to the non-moving party. Livid Holdings Ltd. v. Salomon Smith Barney, Inc., 416 F.3d 940, 946 (9th Cir. 2005). The Court must accept all well-pleaded allegations of material fact as true and draw all reasonable inferences in favor of the plaintiff. Wyler Summit P'ship v. Turner Broad. Sys., 135 F.3d 658, 661 (9th Cir. 1998).

Dismissal is appropriate where a complaint fails to allege " enough facts to state a claim to relief that is plausible on its face." Bell A. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A claim is plausible on its face " when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). As a result, a complaint must contain " more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555.

II. Fed.R.Civ.P. 12(b)(1): No Jurisdiction Because Plaintiffs Lack Standing

Microsoft argues that Plaintiffs' claims should be dismissed pursuant to Fed.R.Civ.P. 12(b)(1) because Plaintiffs lack standing. Specifically, Microsoft contends that Plaintiffs Ortega, Ortiz, and Sweeney-Fagan never subscribed to X-Box LIVE and therefore lack standing to bring suit over a service they never purchased. (Dkt. No. 51 at 5.) Additionally, Microsoft argues that all Plaintiffs except Walsh lack Article III standing because they have not alleged a particularized injury and thus do not allege injury-in-fact. (Dkt. No. 51 at 6.) The Court GRANTS the motion as to Plaintiffs Ortiz and Sweeney-Fagan and DENIES the motion as to Plaintiffs Ortega and Sweeney.

A. No X-Box LIVE account

Microsoft contends Plaintiffs Ortiz, Ortega, and Sweeney-Fagan never had X-Box LIVE accounts, and thus lack standing to sue over a product they never purchased.

To establish standing, Plaintiffs must show they have actually been injured by Defendant's alleged conduct. Lee v. Am. Nat. Ins. Co., 260 F.3d 997, 1001 (9th Cir. 2001). Plaintiffs lack standing to pursue

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claims based on products they did not purchase because they have not suffered an injury. Id. When considering a Fed.R.Civ.P. 12(b)(1) motion to dismiss, the Court is not restricted to the face of the pleadings, but may review any evidence to resolve factual disputes concerning the existence of jurisdiction. McCarthy v. United States, 850 F.2d 558, 560 (9th Cir. 1988). A Fed.R.Civ.P. 12(b)(1) motion can attack the substance of a complaint's jurisdictional allegations despite their formal sufficiency, and in so doing, may rely on affidavits or any other evidence properly before the court. St. Clair v. City of Chico, 880 F.2d 199, 201 (9th Cir. 1989).

In support of its contentions, Microsoft submitted a declaration from Jason Coon, senior enforcement program manager, who searched for but did not find records of Plaintiffs' accounts. (Dkt. No. 52.) Plaintiffs urge the Court not to consider the declaration of Mr. Coon because external evidence is not properly considered at the motion to dismiss stage. (Dkt. No. 54 at 13.) This is incorrect. See McCarthy, 850 F.2d at 560.

Plaintiffs also dispute the validity of Mr. Coon's declaration, arguing it does not meet the requirements of FRE 803(6), the rule for admitting records of a regularly conducted activity. Specifically, Plaintiffs contend that Mr. Coon is not a " custodian of records," was not subject to cross-examination, and did not provide details on when the records were made. (Dkt. No. 54 at 13.)

" A witness does not have to be the custodian of documents offered into evidence to establish Rule 803(6)'s foundational requirements. The phrase 'other qualified witness' is broadly interpreted to require only that the witness understand the record-keeping system." United States v. Childs, 5 F.3d 1328, 1334 (9th Cir. 1993) (citations omitted). Mr. Coon submitted a sworn declaration stating that he understands the record-keeping system and performed a diligent search of Microsoft's records. Mr. Coon satisfies this requirement of FRE 803(6).

Plaintiffs also argue that because Mr. Coon was not subject to cross-examination, the reliability of the record search must be called into question. (Dkt. No. 54 at 13.) Defendant responds by arguing that courts have admitted evidence under the business records rule despite some records being missing or unavailable. (Dkt. No. 56 at 2.)

Plaintiffs bear the burden of establishing jurisdiction, commensurate with the level of proof required at each stage of the proceeding. Lujan v. Defenders of Wildlife,504 U.S. 555, 561, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992). While the probative value of Mr. Coon's declaration may be attacked, Plaintiffs Ortiz and Sweeney-Fagan have submitted no evidence of their own to contravene Microsoft's evidence. Plaintiff Ortega has provided the Court with a sworn declaration that he subscribed to X-Box LIVE under the handle " Sebian09" in related case Mendoza v. Microsoft, Case No. 2:14-cv-316-MJP, Dkt. No. 54-8 at 2, (W.D. Wash. ...

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