A judge in the Eastern District of California recently dismissed a class action filed against LogMeIn based on the company’s decision to terminate its free app, which allowed users to access a remote desktop computer via a virtual private network. Handy v. LogMeIn, Inc., Case No. 1:14-cv-01355-JLT (E.D. Cal. Jan. 27, 2016). The court held that Plaintiff failed to show that LogMeIn misrepresented the discontinuance of the free app or that it misled users into believing that the free app and paid subscription were “companion products” such that discontinuation of the app made the other products less valuable.
LogMeIn’s Products. LogMeIn offered a free app, as well as a second product, Ignition, which allowed users access to the app using a table or smartphone for a one-time fee of $29.99. In 2014, LogMeIn notified users of the free app and Ignition that it would no longer offer the free product and was planning to migrate all users to a paid subscription service, which offered a few extra amenities. Plaintiff—a user of the free app and purchaser of Ignition—brought suit under California’s Unfair Competition Law (UCL) and False Advertising Law (FAL), alleging that the company failed to properly notify users that it would discontinue its products and that, had he known LogMeIn would do so, he would not have purchased Ignition.
LogMeIn filed a motion to dismiss Plaintiff’s claims and a motion for summary judgment. Since the court considered evidence outside the pleadings, it applied summary judgment standards and ruled in favor of LogMeIn.
Failure to Identify Any Affirmative Misrepresentation. The court found that Plaintiff claimed the following: (1) LogMeIn led consumers to believe that the free app was being discontinued and that users had to pay for an annual subscription if they wanted to use the services provided by the app; and (2) LogMeIn led users to believe that the free app and the paid subscription were “companion services” and failed to inform users that the discontinuation of the free app would make the subscription app less valuable. The court rejected both theories.
First, the court held that LogMeIn did not misrepresent its intention to discontinue its free app and the Ignition product. LogMeIn explained its migration plan and offered consumers a six-month free subscription to the new subscription-based service. It further explained that, regardless of whether users accepted the complementary subscription, they could continue to use Ignition until it was discontinued. This is exactly what Plaintiff did: he continued to use the Ignition product throughout 2014 and 2015. Because Plaintiff was not “tricked” by LogMeIn’s statement and did not buy the new subscription-based product because of any alleged misrepresentation, he could not base a claim on this statement. The court noted:
While he may be outraged by what he feels occurred to others, the Court is not clear why he believed that this outrage makes him aggrieved such that he can vindicate this grievance in this litigation.
Second, the court held that Plaintiff failed to show that the free app and Ignition were “companion services” such that Ignition was less valuable without the free app. It noted that Plaintiff used the free app for more than a year before buying Ignition and then used Ignition for more than a year after the free app had been discontinued. The products, therefore, were not dependent on one another.
Takeaway. Fraud-based claims under the UCL and FAL are subject to heightened pleading requirements. Plaintiffs must allege reliance on specific statements and injury in fact as a result. Courts are increasingly dismissing claims that fail to allege such individualized reliance and injury.