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Khoday v. Symantec Corp.

United States District Court, D. Minnesota

March 19, 2015

DEVI KHODAY and DANISE TOWNSEND, individually and on behalf of the class they represent, Plaintiffs,
v.
SYMANTEC CORP. and DIGITAL RIVER, INC., Defendants

As Amended April 27, 2015.

As Amended April 15, 2015.

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[Copyrighted Material Omitted]

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[Copyrighted Material Omitted]

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For Plaintiffs: Douglas J. McNamara and Andrew N. Friedman, COHEN, MILSTEIN, SELLERS & TOLL PLLC, Washington, DC; Kate M. Baxter-Kauf, LOCKRIDGE GRINDAL NAUEN PLLP, Minneapolis, MN.

For Symantec Corp., Defendant: Patrick E. Gibbs, LATHAM & WATKINS, LLP, Menlo Park, CA; Steve W. Gaskins, GASKINS, BENNETT, BIRRELL, SCHUPP, LLP, Minneapolis, MN.

For Digital River, Inc., Defendant: Charles Smith, Amy Van Gelder, Jessica Frogge, and Marcella L. Lape, SKADDEN, ARPS, SLATE, MEAGHER & FLOM, Chicago, IL.

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SECOND AMENDED MEMORANDUM OPINION AND ORDER

JOHN R. TUNHEIM, United States District Judge.

Named Plaintiffs Devi Khoday and Denise Townsend bring this class action against Defendants Symantec Corporation (" Symantec" ) and Digital River, Inc. (" Digital River" ) (collectively, " Defendants" ) for misrepresentations the Plaintiffs allege Defendants made in connection with the sale of download insurance between 2005 and 2011. The Plaintiffs allege violations of California's Unfair Competition Law (" UCL" ), California's Consumers Legal Remedies Act (" CLRA" ), the Minnesota Consumer Fraud Act, and unjust enrichment. This matter is now before the Court on Symantec's motion for summary judgment, the Plaintiffs' and Defendants'

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motions to exclude expert reports and testimony, and the Plaintiffs' unopposed motion to modify the class Order.

Viewing the facts in the light most favorable to the nonmoving party, the Court finds that genuine issues of material fact remain as to whether Defendants made misrepresentations or omissions upon which the Plaintiffs relied to their detriment. The Court also finds that the conclusions of each challenged expert are, at least in part, permissible under Rule 702 and Daubert. Finally, the Court finds that the two proposed modifications to the class certification Order are appropriate. Accordingly, the Court will deny Symantec's motion for summary judgment, deny or deny in part each of the pending Daubert motions, and grant the Plaintiffs' motion to modify the class certification Order.

BACKGROUND[1]

I. PARTIES

Defendant Symantec is a software company that sells internet security software products under the Norton brand. (Decl. of Patrick E. Gibbs (" Gibbs Decl." ), Ex. 1 at 3, 6, Aug. 23, 2013, Docket No. 217; [2] Am. Compl. ¶ 2, Apr. 14, 2011, Docket No. 40.) Defendant Digital River is an ecommerce website designer for online retailers. (Decl. of Amy L. Van Gelder (" Second Van Gelder Decl." ), Ex. 1 (Decl. of Andrew Carrane (" Carrane Decl." )) ¶ 2, Aug. 23, 2013, Docket No. 215.) From 2000 through June 2010, Digital River managed the online storefront through which Symantec sold its Norton products. (Decl. of Douglas J. McNamara (" Second McNamara Decl." ), Tab 1 at 12:16-18, 15:3-20, June 26, 2013, Docket No. 183; Gibbs Decl., Ex. 4 at 38:7-39:3.)

During that time, Symantec authorized Digital River to offer a download insurance product called Electronic Download Service (" EDS" ) through the Symantec storefront. (Second McNamara Decl., Tab 2 at DR-0054170.) EDS allowed customers who purchased Norton software to redownload that software for up to one year after purchase in the event they lost the original software by purchasing a new computer or if their computer crashed. ( Id., Tab 10; Gibbs Decl., Ex. 18 at 197:10-25.) Beginning in October 2009, when Symantec started the transition from Digital River managing the Symantec storefront to Symantec managing its own storefront, it began offering a product called Norton Download Insurance (" NDI" ), which operated very similarly to EDS. (Gibbs Decl., Ex. 4 (Dep. of James P. Renalds) at 38:15-39:3; id., Ex. 5 (Dep. of Krysten Thompson) at 21:18-22:10; id., Ex. 8 at 39.)

Named Plaintiffs Khoday and Townsend purchased download insurance from Defendants during the relevant class period, from January 2005 to March 2011. Khoday v. Symantec Corp., No. 11-180, 2014 WL 1281600, at *36 (D. Minn. Mar. 31, 2014). Townsend purchased EDS from Defendant Digital River on multiple occasions, including June 7, 2006. (Second McNamara Decl., Tab 41 at 53.) When she purchased Norton antivirus software, EDS was automatically added to her shopping cart, and she agreed to purchase it for $8.99 because she believed it would be necessary if she wanted to redownload the Norton software after the first sixty days post-purchase. ( Id.; id., Tab 42 at 46:2-20.) For similar reasons, Khoday purchased NDI from Symantec in February

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2010 at the time she purchased Norton 360 software. ( Id., Tab 43 at 60:3-61:18; id., Tab 44 at 74.)

II. DOWNLOAD INSURANCE

During the relevant time period, a customer using Symantec's online storefront to purchase Norton software would obtain a hyperlink that the customer could click to begin the software's automatic download. (Gibbs Decl., Ex. 7 at 56-57; id., Ex. 8 at 60.) Clicking on the hyperlink, which appeared as a large, electronic " Download" button, would cause the software to automatically download and install upon the customer's computer. ( Id., Ex. 8 at 60, 65.) The customer would have sixty days after purchasing the product to use the hyperlink to download and install the product. ( Id., Ex. 14 (Dep. of James P. Renalds) at 62:9-12; id., Ex. 15 (Dep. of Nat Maple) at 53:11-13.) During this sixty-day window, customers could redownload the product an unlimited number of times by logging in to their Norton account and reinitiating the automatic download process. ( Id., Ex. 14 at 62:9-12.)

The function of a download software product like EDS or NDI was to enable customers to continue to redownload and install a purchased Norton software product even after the sixty-day window had expired. EDS allowed customers to redownload the exact version of Norton software they had originally purchased after the original sixty-day period had expired. (Second McNamara Decl., Tab 10; Digital River's Answer and Affirmative Defenses to Pls.' Am. Compl. (" Digital River's Answer" ) at 3-4, Apr. 11, 2012, Docket No. 86; Gibbs Decl., Ex. 19 at 134:12-135:6.) NDI operated almost identically to EDS, except customers could select one, two, or three years of extended redownloads. (Gibbs Decl., Ex. 22 at 26:10-15; id., Ex. 26 at 281:1-10.) Additionally, NDI would download the most recent edition of the product the consumer had originally purchased, whereas EDS only redownloaded the exact version of the software the customer originally purchased. ( Id., Ex. 22 at 26:6-15; id., Ex. 23 at 35.)

Download insurance was automatically added to a customer's shopping cart at the time a customer purchased Norton software through Symantec's online storefront. ( See id., Ex. 8 at 74; id., Ex. 29 at 66.) To refrain from purchasing EDS or NDI, a customer would have to affirmatively " opt out" of the download insurance purchase and remove it from the cart. (Second Van Gelder Decl., Ex. 12 at 50:4-16; Second McNamara Decl., Ex. 2 at DR-0054171.) Defendants charged between $4.99 and $16.99 for the download insurance products, depending on the value Defendants believed customers would be willing to pay for download insurance for a particular type of Norton software. (Carrane Decl. ¶ 4; Second McNamara Decl., Tab 25 at 138; id., Tab 6 at 20.)

When download insurance was automatically added to a customer's shopping cart, it was generally displayed along with a link saying, " What's this" or " What is the Extended Download Service" . (Gibbs Decl., Ex. 8 at 39; id., Ex. 29 at 66; Second Van Gelder Decl., Ex. 2 at 23:14-19.) From 2004 to approximately August 2008, clicking on the " What's this" link led to a pop-up description, (Second Van Gelder Decl., Ex. 7 at 95:17-25), stating:

What is the Extended Download Service?
When you order a downloadable product from the Symantec Store you are automatically granted a 60 day window in which your purchase can be redownloaded at any time. After this 60 day window has passed your download will no longer be available unless the Extended Download Service is also purchased. When this service is purchased, we will keep a backup copy of your file on our

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server for one full year after the date of purchase, meaning that you can redownload whenever necessary during that extended period.

( Gibbs Decl., Ex. 29 at 66.) In 2008, Digital River amended the description to:

What is the Extended Download Service?
When you purchase downloadable software from Symantec's online store, Digital River, Symantec's authorized online retailer, automatically grants you 60 days from the date of purchase to download your software order.
If you add Extended Download Service to your downloadable software purchase order, Digital River will keep a backup of all the software on your order for ONE YEAR[.] If you need to re-download your software, or access your Serial Key, it will be available 24 hours a day, 7 days a week for ONE YEAR from the date of purchase by going to www.findmyorder.com.

( Gibbs Decl., Ex. 29 at 67 (formatting omitted).)[3]

To learn more about download insurance, customers could contact customer service. (Gibbs Decl., Ex. 32 at 19:8-13; id., Ex. 33 at 19:12-25.) If customers called customer service, Digital River representatives consistently told customers to purchase download insurance if they wished to be able to download their software more than sixty days after purchase. (Second McNamara Decl., Tab 1 at 224:9-14.)

If a customer emailed customer service regarding the purchase of EDS, they would receive a form e-mail stating:

Thank you for choosing Symantec store. When you order a downloadable product from the Symantec store, you are automatically granted a 60-day window in which your purchase can be re-downloaded at any time. After the 60-day window has passed, your download will no longer be available unless the Extended Download Service is also purchased. When . . . the service is purchased, we will keep a backup copy of your file on our server for one full year after the date of purchase, meaning that you could re-download it whenever necessary during that extended time period.

( Id., Tab 11 at 116:9-117:6; id., Tab 18 at 93.)

In August 2006, Symantec moved from Digital River to third party customer service vendors. (Gibbs Decl., Ex. 32 at 19:8-13; id., Ex. 33 at 19:12-20:25.) The third party vendors did not follow a consistent practice with respect to download insurance inquiries. Some representatives informed customers that download insurance was optional, but did not tell customers that other mechanisms were available for redownloading their software after the sixty-day window elapsed. ( See id., Exs. 44-45.) Other representatives told customers

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that trialware would allow customers to redownload a Norton product, explaining that the only advantage of purchasing download insurance was to save time. ( Id., Ex. 46.) Many representatives appear to have attempted to sell customers download insurance as a first resort, and then suggest trialware or another download alternative only if a customer refused to purchase EDS. (Second McNamara Decl., Tab 11 at 81:24-82:6.) Beginning in November 2007, customers could also visit Symantec's " FAQ" website to learn more about download insurance, by clicking on " I want to re-download my Norton product." (Gibbs Decl., Ex. 47 at 9.)

III. ALTERNATIVES TO DOWNLOAD INSURANCE

The Plaintiffs argue that there were multiple alternative options for customers to redownload purchased Norton software at no cost. One option was trialware, a free version of Norton software available through Symantec's website and storefront. (Second McNamara Decl., Tab 20 at 15:23-17:8; id., Tab 24 at 132.) Trialware was not available for some software products, however, if the version of the software the customer purchased was different from the current version offered through trialware. (Gibbs Decl., Ex. 59 at 81:3-18.)

Second, a customer could purchase EDS later, after the point of sale but before their Norton software subscription ended. (Second McNamara Decl., Tab 37; id., Tab 40 at 70:11-21.) This option was only available for EDS, as NDI was not available post-purchase. (Gibbs Decl., Ex. 73 at 53:13-25.) Third, customers could call Symantec customer service, and customer service representatives had discretion to allow free redownloads of software, even without download insurance, after the sixty-day window had expired. ( Id., Ex. 68 at 86:13-87:20.) After October 2007, a fourth alternative was for customers to redownload a purchased Norton software product through Symantec's support website. ( Id., Ex 81 at 127:7-23.)

IV. PROCEDURAL HISTORY

On March 31, 2014, the Court granted the Plaintiffs' motion for class certification, certifying the following class:

All persons in the United States who [p]urchased Extended Download Service (" EDS" ) for Norton products or Norton Download Insurance (" NDI" ) between January 24, 2005 and March 10, 2011.
January 24, 2005 -- October 26, 2009 -- Claims against Digital River under the Minnesota Consumer Fraud Act and False Statement in Advertising Act, or Unjust Enrichment;
January 24, 2007 -- March 10, 2011 -- Claims against Symantec under California Unfair Competition Law, or Unjust Enrichment;
January 24, 2008 -- March 10, 2011 -- Claims against Symantec under California Consumer Legal Remedies Act, for only those class members defined as " consumers" under the CLRA.

Khoday, 2014 WL 1281600, at *36.

In April 2014, the parties filed several motions to exclude expert witness reports and testimony at trial. (Pls.' Mot. to Exclude Certain Testimony of Defs.' Expert Witnesses Bobby Stephens and Kirthi Kalyanam, Apr. 15, 2014, Docket No. 276; Defs.' Daubert Mot. to Exclude the Report & Testimony of Pls.' Expert, Steven Gaskin, Apr. 15, 2014, Docket No. 279; Defs.' Daubert Mot. to Exclude the Report & Testimony of Pls.' Expert, Nicholas Taylor, Apr. 15, 2014, Docket No. 285; Symantec's Daubert Mot. to Exclude Portions of the Report & Testimony of Pls.' Expert, Steven ...


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