Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—N.D. Cal.: LinkedIn may be liable for misrepresenting security protocols, (Apr 1, 2014)

By Jody Coultas, J.D.

A LinkedIn user had standing to assert California Unfair Competition Law (UCL) and False Advertising Law (FAL) claims against LinkedIn Corporation based on its allegedly deceptive privacy policy, the federal district court in San Jose has held (In re LinkedIn User Privacy Litigation, March 28, 2014, Davila, E.).

In 2012, hackers infiltrated LinkedIn’s computer systems and posted approximately 6.5 million stolen LinkedIn users’ passwords on the Internet. The user alleged that she paid for a premium subscription after reading LinkedIn’s User Agreement and Privacy Policy. Had LinkedIn disclosed its lax security practices, she would have either have attempted to purchase a premium subscription at a lower price or not at all.

Standing. A consumer who purchases merchandise on the basis of false price information, and would not made the purchase but for the misrepresentation, has standing to sue under the UCL and FAL because he has suffered an economic injury. Similar allegations meet the requirements for Article III standing.

The user had standing to assert the UCL and FAL claims, according to the court. LinkedIn argued that the economic injury standard for standing did not apply because the representation in the Privacy Policy was not contained in a label or an advertisement. Although there were significant differences between LinkedIn’s Privacy Policy and labels and advertisements, LinkedIn’s representations fell within the scope of the labeling/advertising cases. The user alleged she would not have purchased her premium subscription but for LinkedIn’s misrepresentation and that her injury was fairly traceable to LinkedIn’s conduct. The injury was likely to be redressed by a favorable decision because restitution is an available remedy under the UCL.

Fraudulent claim. The court held that the user had stated a fraudulent business practices claim under the UCL. The user alleged that the representation in the Privacy Policy was likely to deceive the public because consumers would believe that LinkedIn used a more effective method of securing its users’ data than it actually did. A representation is material if a reasonable consumer would attach importance to it or if the maker of the representation knows or has reason to know that its recipient regards or is likely to regard the matter as important in determining his choice of action. The representation at issue was available for the public to read, and could have plausibly deceived the public. The user also plausibly alleged that she read the Privacy Policy, that LinkedIn’s security measures failed to meet industry standards, and did not receive all of the benefits she bargained for.

The case is No. 5:12-CV-03088-EJD.

Attorneys: J. Dominick Larry (Edelson LLC) for Khalilah Wright. Michael Graham Rhodes (Cooley LLP) for Linkedin Corp.

Companies: LinkedIn Corporation

Cases: Advertising Privacy StateUnfairTradePractices CaliforniaNews