Terms of Service Changes at Instagram Duck Suit


     SAN FRANCISCO (CN) - Instagram should not face a federal class action over its controversial changes to the photo-sharing website's terms of service, a federal judge ruled.
     Initial uproar over the changes Instagram proposed on Dec. 17, 2012, actually led the company to backpedal and remove the ambiguous language that many feared would let it sell photos that users uploaded for profit to third-party advertisers.
     Lucy Funes had filed the putative federal class action against Instagram on Dec. 21, just one day after the company announced the revised changes, which ultimately took effect Jan. 16.
     The new terms included an arbitration agreement with an opt-out process and modified Instagram's license over users' pictures and other content. The terms of service also included a provision citing California as choice-of-law.
     Lucy Rodriguez substituted for Funes as the lead plaintiff in the first amended complaint filed with the Northern District of California in March, but Instagram said Rodriguez failed to plead injury-in-fact under Article III to give the court subject-matter jurisdiction.
     Rodriguez requested to file a second amended complaint that would remove the promissory estoppel claim and seek relief on behalf of a nationwide class, with a California subclass.
     U.S. District William Alsup concluded Friday, however, that "the sole purpose of the amendment would be to contrive federal subject-matter jurisdiction."
     Under the home state controversy exception to the Class Action Fairness Act, U.S. district courts must decline to exercise jurisdiction over cases where two-thirds of the proposed plaintiff class and the primary defendant are citizens of the state where the action was filed.
     Here, the operative complaint asserts a class of California residents and Instagram is headquartered in San Francisco, the court found.
     "This order finds that a consumer class defined as California residents is, by and large, a class of California domiciles and that the aberrated case wherein a California resident is domiciled elsewhere is so rare as to fall far short of the one-third needed to defeat the exception," Alsup wrote. "The aberrated case could be, for example, a soldier stationed in California (and thus a resident) but whose domicile is New Mexico," Alsup wrote. "Yes, there will be some of those but they will be few and far between. The idea that at least one-third of all California residents claim a domicile elsewhere is fanciful. This order holds that for a class of consumers residing in California, at least two out of three are also California citizens."
     Letting Rodriguez allege a nationwide class in a second amended complaint "would skirt around the home-state controversy," Alsup added.
     The amendment in question is not aimed at the merits, but instead "at contriving subject-matter jurisdiction where none previously existed," according to the ruling. "The contrived character of the amendment seems plain. It is one thing to apply California law to adjudicate the claims of a California class (this is a normal occurrence) but quite another to apply California law to adjudicate the rights of the residents of the other 49 states."
     Although Instagram's new terms of use select California as the choice of law, the old terms of use did not, the court found.
     "The putative nationwide class would therefore likely require a choice-of-law analysis for all 50 states and would further necessitate the application of contract law for all 50 states," Alsup wrote. "As such, it would be futile to allow plaintiff to amend to a putative nationwide class where plaintiff's overreaching will almost certainly be denied at the class certification stage."