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Earlier this month, Judge William Alsop of the U.S. District Court for the Northern District of California <a href="http://www.scribd.com/doc/154165377/Instagram-Class-Action-Dismissed">dismissed a proposed class action lawsuit</a> against Instagram. The complaint alleged that certain changes to Instagram’s terms of use, announced in December of 2012 and effective January 19th, 2013, misappropriated users’ rights to their photos.

The lawsuit, brought by Lucy Funes (later substituted for Lucy Rodriguez) took issue with several revised provisions in particular, including a term granting Instagram a “non-exclusive, fully paid and royalty-free, transferable, sub-licensable, worldwide license” to use Instagram users’ content, a term limiting possible monetary damages, and certain terms allegedly giving Instagram the right to perpetually control user submitted content even after a user has stopped using the service.  Readers may remember that these changes briefly <a href="http://blogs.wsj.com/digits/2012/12/18/instagram-no-we-arent-going-to-sell-your-photos/">caused an outcry</a> and much media attention last December when critics assailed the revisions as Instagram exploiting customers’ photos to generate advertising revenue.  The fallout forced Instagram to issue several immediate clarifications and even <a href="http://blog.instagram.com/post/38421250999/updated-terms-of-service-based-on-your-feedback">roll back some changes</a> to the advertising section of its terms. But Instagram’s capitulation did not dissuade Funes from filing her proposed class action on behalf of her and all “similarly situated California residents” on December 21st, 2012.

Funes’ federal complaint included claims for breach of contract, violations of <a href="http://www.leginfo.ca.gov/cgi-bin/displaycode?section=bpc&amp;group=17001-18000&amp;file=17200-17210">Section 17200</a> of the California Business and Professions Code, promissory estoppel, and declaratory and injunctive relief—all under California law.  Judge Alsup, however, never reached these substantive issues in his July 12th decision, instead summarily dismissing the case for lack of federal subject matter jurisdiction. In his dismissal, Judge Alsup held that while there was “minimal diversity” under the <a href="http://www.gpo.gov/fdsys/pkg/PLAW-109publ2/pdf/PLAW-109publ2.pdf">Class Action Fairness Act</a> (CAFA), because more than two-thirds of the class was comprised of California residents, the “Home-State Controversy” exception to the CAFA applied.  Accordingly, federal jurisdiction was not proper and the case was dismissed with prejudice.

Undeterred by Judge Alsup’s decision, plaintiff Lucy Rodriguez (replacing Funes as lead plaintiff) and her law firm Finkelstein &amp; Krinsk LLP, <a href="http://www.law360.com/articles/457884/instagram-hit-with-state-class-action-over-new-user-policy?article_related_content=1">filed a similar proposed class action</a> in the Superior Court of California County of San Francisco just a few days after the proposed federal class action was dismissed. (Lucy Rodriguez v. Instagram LLC, CGC-13-532875).

Whether the lawsuit stands a better chance in state court is unclear.  Many of the terms at issue are similar to those on other popular social media websites. Further, as Judge Alsup pointed out in his dismissal, the pre-January 19th terms included an explicit “change-of-terms” provision, putting users on notice that Instagram could change its policy at any time and that it was then users’ responsibility to deactivate if they did not agree with the changes.   Even if Instagram emerges successful in state court, the two lawsuits as well as the public scrutiny to which Instagram’s terms have been subjected emphasize how important it is for social media companies to have easy to understand and well-defined policies.  Just as important, social media companies must clearly communicate how those policies and any updates affect their users.   Consumers are more protective than ever over their user submitted content, and as Instagram is learning, may litigate to protect it.

Instagram Federal Class Action Over User Terms Dismissed; Plaintiffs Switch to State Court