152498 Alberta LTD v. Lee

• Decision Date: 15 July 2011
• Docket Number: CIVIL ACTION NO. 1:10-CV-02735-RWS
• Parties: 1524948 ALBERTA LTD., an Alberta, Canada corporation d/b/a Terra Marketing Group, Plaintiff, v. AMANDA LEE, an individual; JOHN DOES 1 through 50, real names unknown, the owner(s), proprietor(s), and/or author(s) of the website known as "pennyauctionwatch.com," Defendants.
• Court: U.S. District Court — Northern District of Georgia

1524948 ALBERTA LTD., an Alberta, Canada corporation d/b/a Terra Marketing Group, Plaintiff, v. AMANDA LEE,

an individual; JOHN DOES 1 through 50,

real names unknown,

the owner(s), proprietor(s),

and/or author(s) of the website known as "pennyauctionwatch.com," Defendants.

CIVIL ACTION NO. 1:10-CV-02735-RWS

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION

Dated: July 15, 2011

ORDER

This case is before the Court for consideration of Defendant's Motion to Dismiss Plaintiff's Complaint [13]. After reviewing the record, the Court enters the following Order.

Background

This case revolves around a recent phenomenon of the Internet: the "penny auction" website. "Penny auctions are online auctions in which consumers must purchase bids, usually for $0.50 or $1 each." Phil Mulkins,'Free' Home Trial Offers Cost Unwary Consumers a Bundle, Tulsa World, May 29, 2011, at E2. Consumers place bids on individual items until a clock—which increases when bids are placed—runs out and there is a winner. (Dkt. No. [13] at 3-4). Normally, unsuccessful bidders must pay for their placed bids. (Id. at 4). Plaintiff 1524948 Alberta Ltd. d/b/a Terra Marketing Group ("Plaintiff' or "Terra"), a company incorporated in Alberta, Canada, owns and operates a penny auction site that conducts business under the name SwipeBids at the web address www.SwipeBids.com. (Dkt. No. [1] at ¶ 9).

Defendant¹ Amanda Lee ("Defendant" or "Lee") owns and operates a website located at www.pennyauctionwatch.com ("PAW"). (Id. at ¶ 2). Defendant says PAW is "a clearinghouse of information, comments and education on the penny auction industry" that "posts news, reviews and other reports of penny auction websites." (Dkt. No. [13] at 5). Plaintiff disputes this characterization, claiming that PAW's portrayal "as a consumer protection website is simply a marketing gimmick[; i]n reality, Defendants generaterevenue[] . . . by selling advertising space . . . to other penny auction site operations and third party affiliates . . . ." (Dkt. No. [1] at ¶ 19). Lee admits that PAW accepts advertisers, but she says that PAW "does not endorse any advertiser and will remove advertisers who are found to engage in unfair or fraudulent practices." (Dkt. No. [13] at 5-6).

The dispute arises from content posted on PAW about SwipeBids, and an alleged conspiracy against SwipeBids between PAW and others in the penny auction industry. Plaintiff says PAW is a "fake gripe site," "a website that purports to be a neutral or consumer-oriented online forum for the exchange of information about a particular industry sector or business, but which in reality is just a tool for dishonest businesses and persons to disseminate false and damaging statements about a competitor." (Dkt. No. [1] at ¶¶ 1-2). As such a site, PAW allegedly made defamatory statements about SwipeBids with the intent to divert potential customers to other penny auctioneers who advertise on PAW. (Id. at ¶ 11). Furthermore, Plaintiff states that PAW directs customers to buy "bid packs" associated with PAW's sponsors, who then pay PAW a fee. (Id. at ¶ 29). According to Terra, "Defendants create the illusion that [PAW's] message board is populated primarily with the posts of customers[, but] most of the postings are from the Defendants themselves . under multiple fictitioususer names." (Id. at 1¶ 32). Lastly, Terra alleges that PAW uses a "search engine spam" technique—in which trademarks are used in, inter alia, HTML files to cause search engines to index a website higher in a search result than it would be otherwise—to attract hits when Internet users search for Plaintiff's trademark. (Id. at ¶¶ 20-21).

Plaintiff says that "[t]he sum total of Defendants' actionable statements about Plaintiff and SwipeBids . are far too numerous to include in [the] Complaint." (Id. at ¶ 27). However, Terra mentions several examples of defamatory statements that allegedly caused lost business and Plaintiff's credit card processor to cancel its contract with Plaintiff, resulting in millions of dollars worth of damages. (Id.). Most importantly to Terra, PAW contains material that accuses Plaintiff of engaging in "bot bidding," in which the penny auction operator runs a program to artificially increase the numbers of bids on a product to the detriment of legitimate bidders. (Id. at ¶¶ 23-24). Bot bidding is a form of fraud and may damage a penny auction website's reputation. (Id.). Other defamatory statements include that SwipeBids consists of "THIEVES" and that customers never receive products even if they win an auction. (Id. at 11 25-27).

In August 2010 Plaintiff filed a Complaint [1] alleging multiple violations of the Lanham Act, including false advertising, unfair competition, and trade libel. (Id. at ¶¶ 39-58). The Complaint [1] also alleges defamation, intentional interference with contractual relationships, negligent interference with contractual relationships, and tortious interference with potential business relations. (Id. at ¶¶ 59-85). Plaintiff seeks "$6 million in actual damages and at least $12 million in punitive damages" as a result of Defendants' alleged wrongdoing. (Id. at ¶¶ 4, 38).

On November 22, 2010, Lee filed her Motion to Dismiss Plaintiff's Complaint [13].

Discussion

I. Anti-SLAPP Statute is Inapplicable

Lee argues that Plaintiff's Complaint fails to comply with the verification requirements of Georgia's anti-SLAPP statute, O.C.G.A. § 9-11-11.1. (Dkt. No. [13] at 1). Terra responds that (1) the statute does not apply because it directly conflicts with the Federal Rules of Civil Procedure and (2) the statute does not protect Lee's defamatory statements. (Dkt. No. [14] at 10-19). For reasons discussed in Adventure Outdoors, Inc. v. Bloomberg, 519 F. Supp. 2d 1258(N.D. Ga. 2007), the Court holds that Georgia's anti-SLAPP statute does not apply to this case.

Georgia's anti-SLAPP statute was enacted to ensure "that the valid exercise of the constitutional rights of freedom of speech and the right to petition government for a redress of grievances [are] not . chilled through abuse of the judicial process." O.C.G.A. § 9-11-11.1(a). To further this goal, the statute requires "that the claimant file a written verification containing several certifications." Atlanta Humane Soc'y v. Harkins, 603 S.E.2d 289, 292 (Ga. 2004). If a claim is not verified, then the Court must strike the claim "unless it is verified within ten days after the omission is called to the attention of the party asserting the claim." O.C.G.A. § 9-11-11.1(b).

In Bloomberg, this Court held that the statute was procedural and directly conflicted with Federal Rule of Civil Procedure 8(a):

If a direct conflict exists, then the Federal Rule controls unless it is found unconstitutional or found to modify, enlarge, or abridge any substantive rights under the Rules Enabling Act, 28 U.S.C. § 2072. The Federal Rules of Civil Procedure are granted presumptive validity under this test and never have been found to violate this provision of the Supreme Court's test, either collectively or independently. See Hanna, 380 U.S. at 472-74 . . . . Where no direct conflict exists, the state statute controls only if failure to apply it will thwart the "twin aims" of Erie by promoting forum shopping or unfairly discriminating against residents of the forum state. See Hanna, 380 U.S. at 468 . . . .

Under Hanna, the court finds that the verification provision of O.C.G.A. § 9-11-11.1 is contrary to the Federal Rules of Civil Procedure and does not apply in this case. Section 9-11-11.1 is certainly procedural. See Providence Construction Co. v. Bauer, . . . 494 S.E.2d 527 (Ga. Ct. App. 1997) (describing [the] anti-SLAPP statute's "several procedural safeguards"). Further, it also applies a heightened pleading requirement on plaintiffs in a defamation action, such that it conflicts with Federal Rule of Civil Procedure 8(a) which requires only "a short and plain statement of the claim showing that the pleader is entitled to relief." Rule 8(a) is constitutional and falls within the scope of the Rules Enabling Act. See Caster v. Hennessey, 781 F.2d 1569, 1570 (11th Cir. 1986) (holding that under Hanna [the] federal court should follow Rule 8(a) rather than [the] state's strict pleading requirements). See also Baird v. Celis, 41 F. Supp. 2d 1358, 1362 (N.D. Ga. 1999) (Camp, J.) (holding that [the] affidavit requirement of O.C.G.A. §9-11-9.1 in medical malpractice actions does not apply to [a] case brought in federal court). For the foregoing reasons, the court will not apply the procedural aspects of Georgia's anti-SLAPP statute to this litigation, and the court finds that any failure of Plaintiffs to "verify" their complaint under the requirements of O.C.G.A. § 9-11-11.1(b) is not grounds for dismissal in federal court. See, e.g., Stuborn Ltd. Partnership v. Bernstein, 245 F. Supp. 2d 312 (D. Mass. 2003) (refusing to apply procedural rules of [the] Massachusetts anti-SLAPP statute in federal court).

519 F. Supp. 2d at 1278. The court noted that it disagreed with the analysis in Buckley v. DIRECTV, Inc., 276 F. Supp. 2d 1271, 1275 n.5 (N.D. Ga. 2003), and other cases, which applied Ninth Circuit precedent to find "that there was no Erie conflict between the Federal Rules and the procedural aspects of Georgia's anti-SLAPP statute." Bloomberg, 519 F. Supp. 2d at 1278 n.8.

Indeed, the relied-upon Ninth Circuit precedent interprets California's anti-SLAPP statute, Section 425.16, which is different from Georgia's anti-SLAPP statute. Newsham v. Lockheed Missiles & Space Co., 190 F.3d 963, 970-73 (9th Cir. 1999) (finding California's anti-SLAPP statute to not directly conflict with the Federal Rules of Civil Procedure). Most notably, while California's statute permits a party to bring a motion to strike within 60 days of a complaint being served or later at the court's discretion, Georgia's statute requires the court to strike a claim "unless it is verified within ten days...