A complaint filed in July 2015 in the Southern District of New York alleged that, beginning in 2014, Sling Media began placing unsolicited advertisements next to streaming content transmissions being viewed by consumers, without first disclosing in the software license that it intended to do so. Plaintiffs alleged that certain advertisements would disappear if an app was purchased to disable the advertisements, in violation of the consumer protection laws of numerous states, including New York General Business Law § 349.
A New York federal judge has now dismissed the lawsuit. In doing so, the court held that the plaintiff failed to plead facts sufficient to establish that Slingbox made any representations regarding ad-free content, that the company actually planned to include advertisements at the time when the plaintiffs’ bought the streaming services or that any actual damages were suffered. Additionally, the software license permitted Sling Media to modify the software.
Specifically, the court stated that “[b]ecause this court is left speculating as to whether Sling Media had knowledge of the information plaintiffs allege it failed to disclose at the time plaintiffs made their purchases, plaintiffs have failed to adequately plead that they were victims of a deceptive or misleading act or practice.”
Interestingly, Sling Media also asserted that the lawsuit should be dismissed because the consumers were improperly attempting to assess liability pursuant to California consumer protection and unfair business practice laws, despite the fact that the consumers purchased the devices in New York and resided in New York. The court agreed that New York law governed. Despite plaintiffs’ argument that the end user license agreement contained a California choice of law provision, the court concluded that the gravamen of the case was compliance with California’s consumer protection laws, not breach of contract.
With respect to the damages issue, there was no allegation that the plaintiffs’ incurred additional costs or were unable to utilize the product for its intended purpose. The court wrote that the class action complaint “is devoid of any allegations regarding how this alteration, which may be beneficial, detrimental or of no consequence based on consumers’ personal tastes, likes, or dislikes, constituted or caused plaintiffs’ the type of harm that might qualify as an ‘actual injury’ within the meaning of GBL § 349.”
While this decision was rendered pursuant to New York’s consumer fraud statute, in conjunction with a motion to dismiss (plaintiffs may very well amend), there is a reasonable takeaway. The sale of an advertising-free consumer device that is subsequently transformed into an advertising platform without first disclosing same does not appear to violate New York law if no contrary representations were made, up-front. Of course, query whether the injection of advertisements interferes with intended functions or imposes additional costs.
Please contact an advertising compliance lawyer to discuss this ruling in further detail, including the implementation of legally binding arbitration and class action waiver provisions.
HINCH NEWMAN LLP. ADVERTISING MATERIAL. These materials are provided for informational purposes only and are not to be considered legal advice, nor do they create a lawyer-client relationship. No person should act or rely on any information in this article without seeking the advice of an attorney. Information on previous case results does not guarantee a similar future result.
