15-3751
L.S. v. Webloyalty.com, Inc. et al.

                             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 TO 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
Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the
20th day of December, two thousand sixteen.

Present:
            DENNIS JACOBS,
            BARRINGTON D. PARKER,
            DEBRA ANN LIVINGSTON,
                  Circuit Judges.
_____________________________________

L.S., a minor, by P.S., his parent and next friend, on
behalf of himself and all others similarly situated

                            Plaintiff-Appellant,

                  v.                                                      15-3751

WEBLOYALTY.COM, INC., VISA INC., GAMESTOP
CORPORATION,
                 Defendants-Appellees,

AMAZON.COM, INC.
                  Defendant.*
_____________________________________

For Plaintiff-Appellant:                           DAVID C. KATZ, WeissLaw LLP, New York, New
                                                   York

*
  The Clerk of Court is respectfully directed to amend the official caption in this case to conform with the
caption above.


                                                       1
 For Defendants-Appellees                   JAMES W. PRENDERGAST (John J. Regan, Anant K.
 Webloyalty.com, Inc. and                   Saraswat, on the brief), Wilmer Cutler Pickering Hale
 GameStop Corporation:                      and Dorr LLP, Boston, Massachusetts

                                            James E. Nealon, Withers Bergman LLP, Greenwich,
                                            Connecticut, on the brief

 For Defendant-Appellee                     ROBERT C. MASON, Arnold & Porter, LLP, New York,
 Visa, Inc.:                                New York, (Matthew Eisenstein, Washington, DC, on
                                            the brief)

                                            Jonathan B. Orleans, Pullman & Comley LLC,
                                            Bridgeport, CT, on the brief

       Appeal from a judgment of the United States District Court for the District of

Connecticut (Haight, J.).

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

DECREED that the judgment of the district court is AFFIRMED in part, VACATED in part

and REMANDED for further proceedings consistent with this order.

       Plaintiff-Appellant L.S., a minor at the time of the transaction at issue in this case,

appeals from a judgment of the United States District Court for the District of Connecticut

(Haight, J.) granting the motion to dismiss by Defendants-Appellees Webloyalty.com, Inc.

(“Webloyalty”), GameStop Corporation (“GameStop”), and Visa, Inc. (“Visa”). We assume

the parties’ familiarity with the facts, procedural history of the case, and the issues on appeal.

       A. Background

       This appeal stems from the dismissal of a putative class action filed against Webloyalty,

an online discount savings website, GameStop, an online retailer, and Visa, a major global

payment services company.      Appellant’s case, though styled as a putative class action, turns on

a single transaction in which he was allegedly deceived into enrolling in a fee-based monthly

discount club operated by Webloyalty.       The transaction occurred in late 2009, when appellant


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purchased a video game from the website GameStop.com.                       In the course of executing his

purchase, appellant alleges that he unwittingly registered for Webloyalty’s “Shopper Discounts”

program by entering his personal information on a webpage integrated into the GameStop

check-out process.        The Webloyalty enrollment page (the “Enrollment Page”) advertised a $20

GameStop coupon and included references to GameStop throughout its description of

Webloyalty’s membership program.              The page at issue required appellant to enter the last four

digits of his debit card number and to enter and verify his email.                He apparently did so, and

GameStop thereafter transferred appellant’s full billing information on to Webloyalty.1

          After a thirty-day “free trial” period had elapsed, Webloyalty debited the first of what

would be several $12 monthly membership fees from appellant’s account, with “Shopper

Discounts” noted as the payee.         Appellant claims that Webloyalty offered the free trial period to

ensure that the debit it made from his account a month later went unnoticed.2                   The debits

continued in the months thereafter, though in April 2010, when appellant’s account had

insufficient funds, no debit was made.          Webloyalty did not flag that payment as past due either

with Visa, appellant’s debit card company, or with appellant’s bank.

          These debits continued through August 2010, when appellant filed the instant action.

Appellant’s complaint alleges, inter alia, that he was not aware that he had been enrolled in the

Webloyalty monthly membership program, that he never received the promised $20 Gamestop

coupon, and that he in no way benefitted from his membership or the discounts it claimed to

offer.     Appellant complains that his allegedly unauthorized enrollment in the Webloyalty

membership program, and the deceptive tactics Webloyalty and Gamestop used to induce it,

1
  Appellant, following terminology adopted by a report issued by the Senate on similar marketing practices
(the “Senate Report”), terms this a “data pass.”
2
    Appellant, again following the Senate Report, terms this the “free-to-pay conversion.”


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violated federal and state law.     As relevant here, his complaint alleges (1) fraud (against

Webloyalty and GameStop); (2) unfair or deceptive trade practices in violation of the

Connecticut Unfair Trade Practices Act (“CUTPA”), Conn. Gen. Stat. §§ 42-110a – 42-100q

(against Webloyalty, GameStop and Visa); and (3) violations of the Electronic Funds Transfer

Act (“EFTA”), 15 U.S.C. §§ 1693 – 1693r (against Webloyalty and Visa). Defendants moved

to dismiss, the district court granted this motion with respect to all appellant’s claims, and this

appeal followed.

       We review the district court’s dismissal of a complaint de novo, accepting all factual

allegations in the complaint as true and drawing all reasonable inferences in favor of the plaintiff.

Schlessinger v. Valspar Corp., 686 F.3d 81, 85 (2d Cir. 2012).          Because the details of the

Enrollment Page were integral to, and implicitly relied on throughout, appellant’s complaint, the

district court properly considered the Enrollment Page in evaluating the merits of the motion to

dismiss.   See Chambers v. Time Warner, Inc., 282 F.3d 147, 153 (2d Cir. 2002). We similarly

look to the Enrollment Page in adjudicating this appeal.

       B. Fraud

       The district court dismissed appellant’s fraud claim on the ground that the allegations in

his complaint were not pled with the particularity Federal Rule of Civil Procedure 9(b) requires.

Rule 9(b) “requires that the plaintiff (1) detail the statements (or omissions) that the plaintiff

contends are fraudulent, (2) identify the speaker, (3) state where and when the statements (or

omissions) were made, and (4) explain why the statements (or omissions) are fraudulent.” Fin.

Guar. Ins. Co. v. Putnam Advisory Co., LLC, 783 F.3d 395, 403 (2d Cir. 2015).

       The district court correctly held that none of appellant’s allegations, which focused

heavily on the design of the Enrollment Page, are sufficient to ground his fraud claim. For


                                                 4
instance, appellant makes much of the fact that the Enrollment Page mentions GameStop

eighteen separate times.        But appellant does not contest GameStop’s connection to the

membership program.         In fact, appellant’s own allegations suggest that GameStop had a

financial interest in helping Webloyalty enroll members, as GameStop received a fee for each

member registering through its website.          Similarly, appellant alleges that GameStop directed

him to the Enrollment Page prior to the completion of the checkout process, and that other

elements of the webpage’s design fraudulently induced him to sign up for Webloyalty’s program.

But, as the district court correctly observed, the Enrollment Page is nothing more than what it

claims to be: an offer to join Webloyalty’s discount and rewards program.               Absent allegations

of specific fraudulent statements by Webloyalty or GameStop, appellant’s claim for fraud fails

the Rule 9(b) analysis.

          Appellant also complains that he was deceived by the representation on the Enrollment

Page that registering for the Webloyalty program would make him eligible for a $20 GameStop

coupon, which, he alleges, he never received.        But appellant does not allege that he relied on the

coupon offer in enrolling for the program.        Moreover, because the core of appellant’s allegation

is that GameStop and Webloyalty fraudulently enrolled him in a program he knew nothing about,

he cannot simultaneously claim that he relied on the details of Webloyalty’s offer in deciding to

enroll.     To succeed on his fraud claim, appellant must clearly allege his reliance on

representations made by the defendants in deciding to register for the Webloyalty membership

program.     See Weinstein v. Weinstein, 882 A.2d 53, 63 (Conn. 2005).            Because appellant does

not, and cannot, do so here, the district court properly dismissed his fraud claim.3

3
  A similar point holds for appellant’s allegations regarding Webloyalty’s use of the free-to-pay conversion.
Appellant cannot ground a fraud claim in elements of a membership program he claims he was entirely
unfamiliar with.


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       C. Connecticut Unfair Trade Practices Act

       Once the district court concluded that appellant’s fraud claims failed to allege a violation

with the particularity Rule 9(b) requires, it dismissed the CUTPA claim without separate

analysis, on the basis that the facts supporting this claim were identical to those grounding

appellant’s fraud claims.   Specifically, after concluding in its analysis of appellant’s fraud claim

that he had implicitly authorized Webloyalty’s monthly charges to his account, the district court

held that, because appellant had authorized the Webloyalty charges, his CUTPA claims were not

viable. In the circumstances of this case, this approach was erroneous.

       A deceptive practice violates CUTPA if its use is liable to cause substantial injury to

consumers.   See De La Concha of Hartford, Inc. v. Aetna Life Ins. Co., 849 A.2d 382, 388

(Conn. 2004).    Certain deceptive practices may cause substantial injury to consumers even if

these practices do not constitute common-law fraud, and it is therefore well-established under

Connecticut law that a plaintiff bringing a CUTPA claim is not required to either allege or prove

fraud or a predicate misrepresentation. See Willow Springs Condo. Ass’n, Inc. v. Seventh BRT

Dev. Corp., 717 A.2d 77, 100 (Conn. 1998).        Though complaints alleging CUTPA violations

may frequently lay out facts that the plaintiff contends support both common-law claims and

claims under CUTPA, the standards governing the two sets of claims are not always the same.

See Associated Inv. Co. Ltd. P’ship v. Williams Assocs. IV, 645 A.2d 505, 510 (Conn. 1994)

(listing differences between a CUTPA claim and certain corresponding claims framed under the

common law).     To the extent that they diverge, dismissal of a plaintiff’s CUTPA claim is not

warranted unless the facts as alleged do not independently support a CUTPA claim.

       Here, appellant alleges facts with respect to Webloyalty and GameStop supporting an

independent CUTPA claim.        First, appellant alleges not only that Webloyalty and GameStop


                                                 6
had designed the Enrollment Page to deceive GameStop customers into enrolling in

Webloyalty’s membership program, but also that GameStop and Webloyalty employed the data

pass to enable them to convey his personal financial information without his direct knowledge

and utilized the free-to-pay conversion to move him from the free trial period into the paid

membership program without his consent.         Neither appellant’s complaints about the data pass

nor his complaints about the free-to-pay conversion can fairly be termed “grounded in fraud,” as

opposed to unfair trade practices, as these allegations are not tied to specific representations

made by Webloyalty or GameStop.          We are doubtful that, even assuming Rule 9(b) applies to

certain CUTPA claims, Rule 9(b)’s particularity requirement would apply to a CUTPA claim

premised on these facts. But, assuming arguendo that Rule 9(b)’s pleading standards would

apply, appellant’s allegations with respect to these practices and their use are detailed enough to

successfully plead this claim.

        Further, though appellant’s allegations about the Enrollment Page turn on his

characterization of certain representations made therein, to the extent that the fault with his fraud

claim lies in his failure adequately to allege reliance, that issue does not affect the viability of his

CUTPA claim.      See Associated Investment, 645 A.2d at 510 (observing that reliance is not an

element of a CUTPA claim).        For instance, even if appellant did not rely on the representation

that he would receive a $20 GameStop coupon in registering for Webloyalty membership

(because he was not aware that he was registering for Webloyalty membership), the coupon offer

might have encouraged him to disclose his personal information to GameStop via the Enrollment

Page.   Because appellant alleges that neither Webloyalty nor GameStop ever supplied the

promised coupon, his underlying contention, which is that he was effectively the victim of a

coordinated bait and switch, is sufficient to frame his claim that Webloyalty and GameStop’s


                                                   7
actions were “unfair and deceptive” in violation of CUTPA. See Willow Springs, 717 A.2d at

100 (holding that a defendant’s failure to communicate known environmental issues with a

condominium development to the plaintiff could reasonably be held deceptive under CUTPA).

The district court therefore erred in dismissing appellant’s CUTPA claim against Webloyalty and

GameStop, and, accordingly, we vacate its entry of judgment on this claim with respect to

Webloyalty and GameStop.4

        D. The Electronic Funds Transfer Act

        Appellant’s complaint also alleges two violations of EFTA by Webloyalty.5                        First,

appellant claims that Webloyalty violated EFTA by receiving unauthorized electronic fund

transfers in violation of 15 U.S.C. § 1693e(a).             Second, appellant alleges that Webloyalty

violated EFTA by failing to provide him a copy of the authorization for the transfer, also in

violation of 15 U.S.C. § 1693e(a).

        Appellant’s first claim was properly dismissed.                Because appellant authorized the

transfer of funds to Webloyalty, the transfer of funds itself did not violate EFTA. The relevant

section of EFTA provides that “[a] preauthorized electronic fund transfer from a consumer's

account may be authorized by the consumer only in writing.”                        15 U.S.C. § 1693e(a).

Appellant clearly gave written authorization for the transfer of funds from his account by

entering his personal information – including his name and the last four digits of his debit card –

on the Enrollment Page.         The Enrollment Page specifically noted the terms of the transfer,
4
  By contrast, the district court properly dismissed appellant’s CUTPA claim against Visa. With respect to
Visa, appellant’s complaint alleges, at worst, a violation of Visa’s internal rules for monitoring accounts.
But, even assuming the truth of appellant’s allegation, this claim fails in the face of Connecticut law holding
that, for a plaintiff to prevail on a CUTPA claim, the defendant must have been the proximate cause of the
plaintiff’s injuries. See Abrahams v. Young & Rubicam, Inc., 692 A.2d 709, 712 (Conn. 1997).
5
  Appellant’s EFTA claim against Visa was properly dismissed. Only the financial institution that is the
custodian of the consumer’s account or the recipient of the funds transfer can be subject to liability under the
statute. See 15 U.S.C. §§ 1693a(9); 1693e. Visa is neither.


                                                       8
including the amount to be deducted from appellant’s account and the frequency with which the

scheduled debits would take place.         To the extent regulatory guidance is relevant here, this

disclosure also appears to be in full compliance with applicable guidance from the Federal

Reserve. See 12 C.F.R. § 1005, supp. I, cmt. 10(b)-6 (staff interpretations) (providing that an

“authorization is valid if it is readily identifiable as such and the terms of the preauthorized

transfer are clear and readily understandable”). Because appellant authorized a transfer of

funds in accordance with the terms disclosed on the Enrollment Page, Webloyalty did not violate

EFTA in debiting appellant’s account accordingly.6

        However, appellant’s second claim, that Webloyalty failed to provide him with a copy of

his funds transfer authorization, was not properly adjudicated at the motion to dismiss stage.            In

ruling on this claim, the district court looked primarily at a separate document, an email

allegedly later sent to appellant regarding his Webloyalty membership, and held that some of the

language contained therein was sufficient to satisfy EFTA’s requirement that “a copy of [the

consumer’s written] authorization shall be provided to the consumer when made.” See 15

U.S.C. § 1693e(a).      We express no view as to the merits of that determination, but merely

reiterate that, under Federal Rule of Civil Procedure 12(d), before a district court may evaluate

the legal effect of documents not integral to the complaint, it is “obligated to convert the motion

to one for summary judgment and give the parties an opportunity to conduct appropriate

discovery and submit the additional supporting material contemplated by Rule 56.” Chambers,

282 F.3d at 154.

6
   Appellant argues that the transfers from his account were “unauthorized” under EFTA because Webloyalty
did not have actual authority to debit his account under applicable agency law. However, in support of this
proposition, appellant cites only to the EFTA’s definitional section – which includes a background definition
of “unauthorized electronic fund transfers” relevant to a different section of the statute. See 15 U.S.C. §§
1693a(12); 1693g. We do not find this definition relevant or helpful in interpreting the section of EFTA that
is actually at issue in this case.


                                                     9
       This rule is applicable here.    In defending against appellant’s EFTA copy requirement

claim, appellees introduced an email describing the benefits of Webloyalty membership and

including, in a footer, details about the debits they argued that appellant had authorized.

However, this email was not referenced in appellant’s complaint, not relied on in the course of

the complaint’s allegations, and appellant contends that he never saw it.     To the extent that the

district court relied on the affidavits submitted by Webloyalty employees authenticating the

email to justify a ruling on the email’s legal effect, this was a determination properly made on

summary judgment, not in response to a motion to dismiss.        DiFolco v. MSNBC Cable L.L.C.,

622 F.3d 104, 111 (2d Cir. 2010).

       If, given the arguments of the parties and the documents submitted to the court, the

district court believed that the matter was ripe for summary judgment, it should have converted

the motion to dismiss into one for summary judgment. Friedl v. City of New York, 210 F.3d 79,

83 (2d Cir. 2000).      The safety valve of Rule 12(d), which permits conversion so long as the

district court permits parties the “opportunity to present all the material that is pertinent” to the

specific issue that is before the court on the motion to dismiss, is designed for just such a

situation. The fact that the district court had already allowed some discovery here does not

change this analysis.     To the contrary, if, in the district court’s assessment, discovery on the

relevant claims was properly closed, it could have exercised its authority to convert and then

evaluated whether Webloyalty’s email sufficed to meet with its statutory obligations in light of

all the undisputed facts. Since that was not done, we vacate as to the grant of the motion to

dismiss on appellant’s second claim that Webloyalty violated EFTA by failing to provide him

with a copy of his funds transfer authorization.

                                          *        *     *


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       We have considered appellant’s remaining arguments and find them to be without merit.

Accordingly, we AFFIRM the judgment of the district court in part, VACATE in part, and

REMAND for further proceedings consistent with this order.

                                                 FOR THE COURT:
                                                 Catherine O’Hagan Wolfe, Clerk




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