11-0121-cv
Kaufman v. Sirius XM Radio
                              UNITED STATES COURT OF APPEALS
                                  FOR THE SECOND CIRCUIT

                                        SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A
SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY
FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN
CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE
EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION
“SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY
PARTY NOT REPRESENTED BY COUNSEL.

      At a stated term of the United States Court of Appeals for the Second Circuit, held at
the Daniel Patrick Moynihan United States Courthouse, 500 Pearl Street, in the City of New
York, on the 4th day of April, two thousand twelve.

PRESENT: JOSEPH M. McLAUGHLIN,
         GUIDO CALABRESI,
         REENA RAGGI,
                   Circuit Judges.

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ALVIN KAUFMAN, individually, and on behalf of all
others similarly situated, RICHARD LALUNA,
individually, and on behalf of all others similarly situated,
                                 Plaintiffs-Appellants,

                             v.                                          No.   11-0121-cv

SIRIUS XM RADIO, INC.,
                      Defendant-Appellee.

SIRIUS XM SATELLITE RADIO, INC.,
                                 Defendant.
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APPEARING FOR APPELLANTS:                         VALENTINA TEJERA (D. Michael Campbell,
                                                  David B. Mishael, on the brief), Mase Lara
                                                  Eversole, P.A., Miami, Florida.


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APPEARING FOR APPELLEE:                      MICHAEL S. OBERMAN (Peter A. Abruzzese,
                                             Robin W. Wilcox, Adina C. Levine, on the brief),
                                             Kramer Levin Naftalis & Frankel LLP, New
                                             York, New York.

       Appeal from the United States District Court for the Southern District of New York

(Victor Marrero, Judge).

       UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND

DECREED that the judgment entered on November 10, 2010, is AFFIRMED.

       Plaintiffs Alvin Kaufman, a Nevada resident, and Richard LaLuna, a New York

resident, appeal the dismissal of their putative class action complaint for lack of subject

matter jurisdiction, after the district court’s Fed. R. Civ. P. 12(b)(6) dismissal of claims under

New York General Business Law (“GBL”) § 349 by non-New York plaintiffs defeated

diversity. Plaintiffs contend that the district court (1) erred in concluding that non-New York

resident Kaufman (and those similarly situated) failed adequately to state a claim under GBL

§ 349, and (2) abused its discretion in denying plaintiffs leave to file a fourth amended

complaint. We assume the parties’ familiarity with the facts and record of prior proceedings,

which we reference only as necessary to explain our decision to affirm.

       1.      GBL § 349

       GBL § 349 prohibits “[d]eceptive acts or practices in the conduct of any business,

trade or commerce or in the furnishing of any service in this state.” In Goshen v. Mutual Life

Insurance Co. of New York, 98 N.Y.2d 314, 325, 746 N.Y.S.2d 858, 864 (2002), the New

York Court of Appeals ruled that, “to qualify as a prohibited act under the statute, the


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deception of a consumer must occur in New York.” Thus, in the two cases consolidated for

review, the Court of Appeals concluded that (1) non-New York plaintiffs who purchased an

insurance policy from a representative in Florida of a defendant insurer whose deceptive

scheme was allegedly conceived and orchestrated in New York failed to state a GBL § 349

claim, see Goshen v. Mut. Life Ins. Co. of N.Y., 286 A.D.2d 229, 730 N.Y.S.2d 46 (1st Dep’t

2001), aff’d, 98 N.Y.2d 314, 746 N.Y.S.2d 858, and (2) non-New York plaintiffs who

alleged that defendant’s marketing misrepresentations induced them to purchase Digital

Subscriber Line service failed to state a GBL § 349 claim, see Scott v. Bell Atl. Corp., 282

A.D.2d 180, 726 N.Y.S.2d 60 (1st Dep’t 2001), aff’d, Goshen v. Mut. Life Ins. Co. of N.Y.,

98 N.Y.2d 314, 746 N.Y.S.2d 858.

       Plaintiffs assert that the district court misapplied Goshen to require non-New York

plaintiffs to allege facts sufficient to show “that the deception they allege having experienced

occurred in New York.” Kaufman v. Sirius XM Radio, Inc., 751 F. Supp. 2d 681, 688

(S.D.N.Y. 2010). Relying on Goshen’s language that “the transaction in which the consumer

is deceived must occur in New York,” Goshen v. Mut. Life Ins. Co. of N.Y., 98 N.Y.2d at

324, 746 N.Y.S.2d at 863 (emphasis added), plaintiffs contend that their complaint is

sufficient because they allege that “[t]he transaction between Sirius and Plaintiffs and other

members of the class of providing services in exchange for the payment of services and

invoice fees occurred in New York.” Third Am. Compl. ¶ 41. This allegation is conclusory,

however, and cannot save plaintiffs’ complaint from dismissal. See Ashcroft v. Iqbal, 556

U.S. 662, 129 S. Ct. 1937, 1949–50 (2009) (“Threadbare recitals of the elements of a cause

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of action, supported by mere conclusory statements, do not suffice. . . . [Rule 8] does not

unlock the doors of discovery for a plaintiff armed with nothing more than conclusions.”).

       Nor does the complaint allege nonconclusory facts that could “plausibly give rise to

an entitlement to relief” under GBL § 349. Id. at 1950. To the extent plaintiffs allege that

Sirius formulated the scheme to charge the fee in New York, the insufficiency of such a

pleading is made clear by Goshen. See Goshen v. Mut. Life Ins. Co. of N.Y., 98 N.Y.2d at

325–26, 746 N.Y.S.2d at 864 (concluding that invention of scheme or marketing strategy in

New York is not sufficient to state claim under GBL § 349). Goshen similarly forecloses

plaintiffs’ reliance on allegations that deceptive terms and conditions were published on a

website controlled from New York, when there is no further allegation of plaintiffs’ receipt

of this information in New York. See id., 98 N.Y.2d at 326, 746 N.Y.S.2d at 864 (noting that

plaintiff conceded he did not receive the information in New York).

       What remains are plaintiffs’ allegations that Sirius “deceived Plaintiffs and other

members of the class when it directly invoiced and retained payment of the $2.00 Invoice

Administration Fee in contravention with its terms and conditions,” and that “Sirius

collected, assimilated, and accounted the unauthorized and unlawful Invoice Administration

Fees by and through its corporate management in New York.” Third Am. Compl. ¶ 42-43

(emphases omitted). Plaintiffs contend that Sirius’s allegedly deceptive collection and

retention of the fee in New York is the “transaction” that distinguishes their complaint from

those rejected by Goshen. We are not persuaded.



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       First, Goshen’s reasoning precludes extending GBL § 349 to encompass these

allegations. Goshen relied on legislative history describing GBL § 349 “as adding significant

new protection to consumers in this state’” and suggesting the law was meant to apply to

“intrastate transactions in New York.” 98 N.Y.2d at 325, 746 N.Y.S.2d at 864 (internal

quotation marks omitted; emphases added). The Court of Appeals thus concluded that, “[t]o

apply the statute to out-of-state transactions in the case before us would lead to an

unwarranted expansive reading of the statute, contrary to legislative intent, and potentially

leading to the nationwide, if not global application of General Business Law § 349.” Id. The

Court of Appeals added that “the interpretation out-of-state plaintiffs would have us adopt

would tread on the ability of other states to regulate their own markets and enforce their own

consumer protection laws.” Id. This reasoning squarely applies to the allegations in this

case. Kaufman is not a “consumer[] in this state” and plaintiffs do not allege any “intrastate

transaction” that caused him harm.1 Accepting plaintiffs’ position would permit global

coverage of GBL § 349 any time a New York corporation charged and retained an improper

fee from non-New York consumers through use of deception. Goshen forecloses such a

reading of GBL § 349.




       1
         Of course, as Goshen makes clear, the “analysis does not turn on the residency of
the parties,” and GBL § 349 was not intended “to function as a per se bar to out-of-state
plaintiffs’ claims of deceptive acts leading to transactions within the state.” Goshen v. Mut.
Life Ins. Co. of N.Y., 98 N.Y.2d at 325, 746 N.Y.S.2d at 864. We rely not on the non-New
York plaintiffs’ residency but on the lack of any plausible claim that they engaged in a
transaction with Sirius within New York.

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       Second, plaintiffs fail to distinguish Goshen on the facts. Although plaintiffs take

pains to distinguish their complaint from that part of Goshen involving purchase of an

allegedly deceptive policy in Florida from a representative of a New York company, they

cannot meaningfully distinguish their fact pattern from the companion Scott case—which

Goshen also concluded failed to state a claim—in which non-New York plaintiffs were

induced to purchase DSL service by a deceptive marketing campaign originating in New

York. See Goshen v. Mut. Life Ins. Co. of N.Y., 98 N.Y.2d at 326, 746 N.Y.S.2d at 864.

Here, as in Scott, the non-New York plaintiffs “cannot allege that they were deceived in New

York.” Id. Plaintiffs seek to distinguish Scott as involving deceptive misrepresentations

rather than deceptive transactions. They point to nothing in Goshen or any other New York

law to support a conclusion that such a distinction excuses non-New York plaintiffs from

having to plead that they were deceived in New York.

       For these reasons, we affirm the district court’s conclusion that the non-New York

plaintiffs failed to state a claim under GBL § 349 and that it lacked diversity jurisdiction to

hear such a claim by only New York plaintiffs.

       2.     Leave to Amend

       The district court did not abuse its discretion in denying plaintiffs leave to file a fourth

amended complaint in order to reinstate an unjust enrichment claim that would revive

diversity jurisdiction. See McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 200 (2d Cir.

2007) (“[I]t is within the sound discretion of the district court to grant or deny leave to

amend” the complaint).

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       Plaintiffs pleaded unjust enrichment in their original complaint, omitted this claim

from their amended complaint, and did not reinstate the claim in their second or third

amended complaints. Plaintiffs assert that they omitted the unjust enrichment claim to

“reframe[] the factual allegations as a breach of contract claim,” Appellant Br. at 18, a claim

the dismissal of which they do not challenge on appeal. But nothing prevented plaintiffs

from pleading unjust enrichment in the alternative to breach of contract. See Newman &

Schwartz v. Asplundh Tree Expert Co., 102 F.3d 660, 663 (2d Cir. 1996). In these

circumstances, we cannot conclude that the district court was compelled to grant leave to

amend for a fourth time.

       The judgment of the district court dismissing plaintiffs’ complaint is AFFIRMED.

                                           FOR THE COURT:
                                           CATHERINE O’HAGAN WOLFE, Clerk of Court




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