California's Automatic Renewal Law (ARL), Business and Professions Code Section 17600 et seq., has been a new and potent weapon for the plaintiffs' bar in recent years. The ARL requires a business to clearly and conspicuously disclose the offer terms and cancellation policy in any automatic renewal offer. It also requires companies to obtain consumers' affirmative consent and to provide an "acknowledgment" with the offer terms and cancellation information. Countless lawsuits have been filed against all manner of companies on behalf of hypothetical classes of "victims." The suits invariably seek refunds of all amounts ever paid by putative class members for subscription or recurring services. Many of the targeted companies have settled claims, often for significant amounts.

On August 22, 2016, in a case of first impression—Kissel v. Omega Natural Science, Inc.—Judge George H. Wu of the U.S. District Court for the Central District of California dismissed the plaintiff's ARL claims for failure to allege the concrete injury required by the U.S. Supreme Court's recent decision in Spokeo, Inc. v. Robins. The plaintiff in Kissel purchased supplements from Omega Natural Science on a subscription basis and received the promised goods at the promised price. Omega clearly disclosed the offer terms and obtained customers’ affirmative consent. Nevertheless, the plaintiff claimed that under the ARL, she was entitled to a refund of all amounts she paid because Omega failed to provide her with an acknowledgment of the subscription terms in the email confirmation it send after she made her purchase. The plaintiff argued that she suffered an "informational injury" by virtue of failing to receive the acknowledgement, but notably did not claim that she did not understand the terms of the offer or that she would have acted differently had she received the acknowledgement.

In his order, Judge Wu relied on Spokeo to conclude that the plaintiff's bare allegation of a statutory violation was insufficient to establish Article III standing to pursue her claim. The judge dismissed the complaint, but afforded the plaintiff an opportunity to try to plead facts demonstrating the concrete injury required for standing under Article III of the U.S. Constitution. Judge Wu's decision is not only the first to reject an ARL claim for lack of Article III standing, but is likely to help other courts wrestling with the proper application of the Spokeo decision.

Wilson Sonsini was counsel for Omega Natural Science in the case, and a copy of the Kissel court's order can be found here. Previously, WSGR was counsel for Google Inc. in another case of first impression under the ARL—Mayron v. Google Inc.—in which Santa Clara Superior Court Judge Peter Kirwan dismissed, with prejudice, the plaintiff's ARL claim and found that the ARL does not create its own private right of action. He also held that Section 17603, which deems goods sent in violation of the ARL to be unconditional "gifts," is only a shield to protect the consumer from having to pay the sender for those goods and is not a sword to bring an affirmative claim. Finally, Judge Kirwan dismissed, without prejudice, the plaintiff's claim under the UCL, finding that the plaintiff lacked standing under the UCL absent allegations that the supposed ARL violation caused him to lose money or property. A copy of the Mayron court's order can be found here.

Together, the courts' decisions in Kissel and Mayron significantly raise the bar for plaintiffs seeking windfall payments from companies based on supposed ARL violations.

The Wilson Sonsini team representing Omega Natural Science in the case includes partners Brian Willen and David Kramer.