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Rackemann v. LISNR, Inc.

United States District Court, S.D. Indiana, Indianapolis Division

September 29, 2017

ALAN RACKEMANN, individually and on behalf of all others similarly situated, Plaintiff,
v.
LISNR, INC., ADEPT MOBILE, LLC, and INDIANAPOLIS COLTS, INC., an Indiana Corporation, Defendants.

          ENTRY ON DEFENDANTS' MOTIONS TO DISMISS

          TANYA WALTON PRATT, JUDGE.

         Plaintiff Alan Rackemann (“Rackemann”), on behalf of himself and others similarly situated, alleges that Defendants LISNR, Inc., (“LISNR”), Adept Mobile, LLC (“Adept Mobile”), and the Indianapolis Colts, Inc. (“the Colts”) (collectively, “Defendants”), violated federal anti-wiretapping laws in their operation of a Colts' mobile application. Rackemann alleges that Defendants unlawfully intercepted and unlawfully used his private communications. Specifically, he alleges the Defendants hijack users' smartphones and turn them into listening devices. Defendants have each filed Motions to Dismiss. (Filing No. 30; Filing No. 31; Filing No. 34.) For the reasons that follow, the Court denies the Defendants' Motions regarding Rackemann's interception claims, and the Court grants without prejudice Defendants' Motions regarding the use claims.

         I. BACKGROUND

         The following facts are not necessarily objectively true. But as required when reviewing a motion to dismiss, the Court accepts as true all factual allegations in the Second Amended Complaint and draws all reasonable inferences in favor of Rackemann as the non-moving party. See Bielanski v. County of Kane, 550 F.3d 632, 633 (7th Cir. 2008).

         The Colts are a professional football team in the National Football League. (Filing No. 1 at 1.) The Colts offer a mobile application (the “App”) that allows fans to “stay up-to-date on everything Colts with breaking news, game highlights, player interviews, cheerleader photographs and more.” (Filing No. 1 at 7.) The App is available for free download in the Google Play Store, and to date, it has been downloaded between 100, 000 and 500, 000 times. (Filing No. 1 at 6-7.)

         LISNR and Adept Mobile are both audio technology development companies. In 2016, the Colts partnered with LISNR and Adept Mobile to further develop the App. (Filing No. 1 at 2.) LISNR has developed a specific type of “beacon technology” that enables an app to ascertain a consumer's physical location through sounds rather than through means such as radio signals. (Filing No. 1 at 6.) LISNR partners with entities such as the Colts to place speakers throughout designated geographic locations. (Filing No. 1 at 6.) These speakers emit unique, inaudible audio signals that are detectable by, for example, the microphones of smartphones that are nearby. (Filing No. 1 at 6.) However, in order for the technology to work, a device's microphone must be turned on to listen for these audio signals. (Filing No. 1 at 6.) When a customer downloads the App, he is asked to provide certain “permissions, ” including whether the App can access the device's microphone. (Filing No. 1 at 7.) The App is programmed to contact a server owned and operated by LISNR and to await instructions on how and when a particular device's microphone should be activated. (Filing No. 1 at 8.) LISNR's server then responds with “listening rules, ” which are themselves provided by the Colts or Adept Mobile, that designate different date and time intervals during which the “listening” function should be activated by the App. (Filing No. 1 at 8.)

         During those specified periods, the App activates the device's microphone. (Filing No. 1 at 8.) When the microphone is activated, the App temporarily records portions of the audio it hears in order to monitor it for any of the LISNR beacon tones. (Filing No. 1 at 9.) When a beacon tone is identified, the App will respond by, for instance, displaying banner advertisements to the user or by showing highlights or other information. (Filing No. 1 at 9.) The App is able to continuously listen on command, even when the App is not open but is running in the background of a user's smartphone. (Filing No. 1 at 9.) The App does not obtain the user's consent or otherwise notify the user prior to each activation of the device's microphone. (Filing No. 1 at 9.) The App's “Terms of Service Privacy Policy” does not disclose the App's use of beacon technology, and the App does not otherwise disclose that information. (Filing No. 1 at 8.) The App also does not disclose that it activates the device's microphone specifically for the purpose of “listening in.” (Filing No. 1 at 8.)

         Adept Mobile developed and maintained the code base of the App and ensures the deliverability of the App to the Google Play Store. (Filing No. 1 at 17.) Adept Mobile also integrated the LISNR beacon technology into the App, conducted testing and analysis, and issued the App for distribution through the Google Play Store to consumers. (Filing No. 1 at 17.)

         Rackemann downloaded the App sometime in 2012 from the Google Play store, and it remained on his smartphone through mid-September 2016. (Filing No. 1 at 10.) During that time, Rackemann used the App to follow the Colts, and the App was regularly updated. (Filing No. 1 at 10.) During this time, Rackemann carried his smartphone on his person, and would take his smartphone to places where he would not invite other people, and to places where he would have private conversations. (Filing No. 1 at 10.) As a result, the App, when it was activated, listened in on Rackemann's private conversations. (Filing No. 1 at 9.)

         On November 18, 2016, Rackemann filed this lawsuit against Defendants in the District of Massachusetts, on behalf of himself and two putative classes of plaintiffs. (Filing No. 1.) Defendants filed motions to transfer the case to this Court, or in the alternative, to dismiss. (Filing No. 30; Filing No. 31; Filing No. 34.) Those motions were fully briefed, and a district court judge in the District of Massachusetts granted Defendants' Motion to Transfer the case to this court, based on a stipulation by the parties. (Filing No. 48.) The parties filed position statements pursuant to Local Rule 16-2, all stating that the Court should rule upon the previously filed Motions to Dismiss. (Filing No. 73 through Filing No. 76.) Those Motions are now ripe for review.

         II. LEGAL STANDARD

         Federal Rule of Civil Procedure 12(b)(6) allows a defendant to move to dismiss a complaint that has failed to “state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). When deciding a motion to dismiss under Rule 12(b)(6), the court accepts as true all factual allegations in the complaint and draws all reasonable inferences in favor of the plaintiff. Bielanski v. County of Kane, 550 F.3d at 633 (7th Cir. 2008). However, courts “are not obliged to accept as true legal conclusions or unsupported conclusions of fact.” Hickey v. O'Bannon, 287 F.3d 656, 658 (7th Cir. 2002).

         The complaint must contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). In Bell Atlantic Corp. v. Twombly, the Supreme Court explained that the complaint must allege facts that are “enough to raise a right to relief above the speculative level.” 550 U.S. 544, 555 (2007). Although “detailed factual allegations” are not required, mere “labels, ” “conclusions, ” or “formulaic recitation[s] of the elements of a cause of action” are insufficient. Id.; see also Bissessur v. Ind. Univ. Bd. of Trs., 581 F.3d 599, 603 (7th Cir. 2009) (“it is not enough to give a threadbare recitation of the elements of a claim without factual support”). The allegations must “give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.” Twombly, 550 U.S. at 555. Stated differently, the complaint must include “enough facts to state a claim to relief that is plausible on its face.” Hecker v. Deere & Co., 556 F.3d 575, 580 (7th Cir. 2009) (citation and quotation omitted). To be facially plausible, the complaint must allow “the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556).

         III. DISCUSSION

         Rackemann's Complaint raises two causes of action, one on behalf of the first class of plaintiffs against LISNR, and the other on behalf of the second class against all Defendants. In each count, Rackemann alleges that Defendants have violated 18 U.S.C. §§ 2510 et seq., (the “Wiretap Act”) in that they have intercepted (by listening to and recording) Rackemann's “private conversations, including oral communications, where [Rackemann] and the [class] exhibited expectations that such communications were to remain private and would not otherwise be subject to interception under circumstances justifying such expectation.” (Filing No. 1 at 14-17.) Rackemann also alleges that Defendants used those intercepted communications to their economic benefit, including for marketing purposes. (Filing No. 1 at 16.) The Defendants raise several arguments in support of their motions to dismiss, and to varying degrees, join in each other's briefing. The Court addresses those arguments below.

         A. Standing

         The Colts and Adept Mobile first argue that Rackemann's claims must be dismissed because he lacks standing to bring them. (Filing No. 32 at 21; Filing No. 33 at 14.) They contend that Rackemann has failed to plead a cognizable injury in fact. (Filing No. 32 at 21; Filing No. 33 at 14.)

         The “irreducible constitutional minimum of standing consists of three elements. The plaintiff must have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision.” Spokeo, Inc. v. Robins, 136 S.Ct. 1540, 1547 (2016), as revised (May 24, 2016) (citation omitted). “The plaintiff, as the party invoking federal jurisdiction, bears the burden of establishing these elements. Where, as here, a case is at the pleading stage, the plaintiff must clearly allege facts demonstrating each element.” Id. (citation and quotation omitted). As to the injury-in-fact element, “a plaintiff must show that he or she suffered an invasion of a legally protected interest that is concrete and particularized and actual or imminent, not conjectural or hypothetical.” Id. (citation and quotation omitted).

         The Colts and Adept Mobile both focus their standing arguments on Rackemann's allegations that the App's use of his smartphone's microphone caused battery usage and wear and tear to his smartphone. They argue that these allegations are not sufficient to demonstrate a concrete injury. Rackemann responds, however, that his Complaint “is premised on an invasion of [his] substantive interest, protected by the Wiretap Act, in the privacy of his private communications.” (Filing No. 61 at 12.) The Court agrees that Rackemann has sufficiently identified as an injury the violation of his substantive interest in the privacy of his communications. See, e.g., Filing No. 1 (“LISNR intercepted…[Rackemann's] and the LISNR Class's private conversations, including oral communications, where [Rackemann] and the LISNR Class exhibited expectations that such communications were to remain private and would not otherwise be subject to interception under circumstances justifying such expectation.”).

         The question is whether such an invasion of privacy constitutes an injury in fact sufficient to confer standing to Rackemann under Article ...


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