Michigan Court Holds That Pandora Users Are Not Customers Under State Law, Further Narrowing Streaming Privacy Laws

King & Spalding

On July 6, 2016, the Michigan Supreme Court held that a Pandora user was not a “customer” allowed to bring a class action under the Video Rental Privacy Act (“VRPA”) in Michigan. 

Plaintiff Peter Deacon brought a class action in the United States District Court for the Northern District of California against Pandora, claiming that the music-streaming company violated Michigan’s video privacy law by posting his music preferences on Facebook and making his preferences available via an internet search. The federal district court ruled in favor of Pandora, and on appeal, the U.S. Court of Appeals for the Ninth Circuit certified the following question to the Michigan Supreme Court:

“Has Deacon stated a claim against Pandora for violation of the VRPA by adequately alleging that Pandora is [in] the business of “renting” or “lending” sound recordings, and that he is a “customer” of Pandora because he “rents” or “borrows” sound recordings from Pandora?”

In a unanimous decision, the seven members of the Michigan court held that Deacon was not a “customer” under the VRPA because he neither rented nor borrowed anything from Pandora. The act is “intended to preserve personal privacy with respect to the purchase, rental, or borrowing of certain materials,” and prohibits the release of any information that indicates the identity of a customer. Accordingly, only customers can sue under the act. A customer is “a person who purchases, rents, or borrows a book or other written material, or a sound recording, or a video recording.”

Relying on a modern dictionary, the court held that Deacon failed to show that he met the requirement that renters contemplate some form of payment for services or goods rendered because he used the free Pandora streaming subscription. The court also held that he was not a borrower because he never intended to, nor actually returned, anything.

The court’s holding was narrow in that it did not address whether individuals who pay for subscriptions to Pandora’s commercial-free service are customers. The court also did not decide whether Pandora itself engages in the business of renting or lending music under the state law. As such, the court did not establish whether streaming is or should be considered “lending.” At oral arguments before the Ninth Circuit in February 2015, the plaintiff claimed that Pandora should be defined as a lender because users listen to songs on Pandora, but do not keep them permanently. In response, Pandora urged the Ninth Circuit to instead think of Pandora as a disc jockey who plays music for party-goers but does not lend them music.

The Michigan court’s holding is in line with those of the Third and Eleventh Circuits  (see Ellis v. Cartoon Network, Inc., 803 F.3d 1251 (11th Cir. 2015); In re Nickelodeon Consumer Privacy Litig., No. 15-1441, 2016 WL 3513782 (3d Cir. June 27, 2016)) on analogous state laws, limiting the expansion of decades-old privacy laws from only covering entities like Blockbuster to a wider range of emerging streaming services. But at least one other court has been more receptive to efforts to broaden privacy laws. The U.S. Court of Appeals for the First Circuit, for example, held in April 2016 that a USA Today app user whose information was disclosed was a “subscriber,” unlike a web user, and could bring a putative class action under the federal Video Privacy Protection Act against the newspaper’s parent company. The court defined a subscription as “[a]n agreement to receive or be given access to electronic texts or services,” and reasoned that the user subscribed by accepting the paper’s offer to download its app and directly receive texts and videos on the app, even though the user never paid for the app.

The Pandora case will now return to the Ninth Circuit, which will accept or reject the Michigan court’s interpretation.

The Michigan case is In Re Certified Question from the United States Court of Appeals for the Ninth Circuit (Deacon v. Pandora Media, Inc.), docket number 151104. The First Circuit case is Yershov v. Gannett Satellite Information Network, case number 15-1719.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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