In Re Facebook Ppc Advertising Litigation.

• Decision Date: 22 April 2010
• Docket Number: 5:09-cv-03430-JF,Case No. 5:09-cv-03043-JF,5:09-cv-03519-JF.
• Citation: 709 F.Supp.2d 762
• Parties: In re FACEBOOK PPC ADVERTISING LITIGATION.
• Court: U.S. District Court — Northern District of California

709 F.Supp.2d 762

In re FACEBOOK PPC ADVERTISING LITIGATION.

Case Nos. 5:09-cv-03043-JF, 5:09-cv-03430-JF, 5:09-cv-03519-JF.

United States District Court,

N.D. California,

San Jose Division.

April 22, 2010.

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Alfredo Torrijos, Brian Stephen Kabateck, Michael Vincent Storti, Richard L. Kellner, Kabateck Brown Kellner, LLP, Los Angeles, CA, Eric David Freed, Jeffrey Leon, Freed & Weiss LLC, Chicago, IL, Jonathan Shub, Shublaw LLC, Philadelphia, PA, Rosemary M. Rivas, Finkelstein Thompson LLP, San Francisco, CA, Steven N. Berk, Berk Law LLC, Washington, DC, Terrianne Benedetto, Seeger Weiss LLP, Philadelphia, PA, J. Paul Gignac, Kiley Lynn Grombacher, Arias, Ozzello & Gignac LLP, Santa Barbara, CA, Melissa Meeker Harnett, Wasserman Comden Casselman & Esensten, L.L.P., Tarzana, CA, Mickel Montalban Arias, Arias Ozzello & Gignac, Los Angeles, CA, Gordon M. Fauth, Jr., Litigation Law Group, Alameda, CA, for Plaintiff.

Whitty Somvichian, Cooley Godward Kronish LLP, San Francisco, CA, for Defendant.

ORDER ¹ GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS AND DENYING MOTION TO STRIKE

JEREMY FOGEL, District Judge.

Defendant moves to dismiss Plaintiffs' complaint pursuant to Fed.R.Civ.P. 12(b)(6) for failure to state a claim upon which relief may be granted and to strike portions of the complaint pursuant to Fed.R.Civ.P. 12(f). The Court has considered the moving and responding papers and the oral argument of counsel presented at the hearing on March 5, 2010. For the reasons discussed below, the motion to dismiss will be granted in part and denied in part, with leave to amend. The motion to strike will be denied.

I. BACKGROUND

This putative class action arises out of individual contracts between Defendant Facebook PPC (“Defendant”) and Plaintiffs RootZoo, Inc., Matthew Smith, and Steven Price (collectively, “Plaintiffs”). Defendant operates a popular social networking website: www. facebook. com. Complaint ¶ 20. Plaintiffs individually entered into contracts with Defendant for advertising on the website. Complaint ¶¶ 50, 60, and 69. Plaintiffs' advertisements appeared alongside Defendant's social networking content. Complaint ¶ 24.

To place an advertisement on Defendant's website, a potential advertiser must select the budget for its advertising campaign and the pricing mechanism that will be used. Complaint ¶ 31. Defendant provides two options for paying for an advertising campaign: cost per click (“CPC”) or cost per thousand impressions (“CPM”). Complaint ¶ 29. Plaintiffs each entered into CPC contracts. Complaint ¶¶ 50, 61, and 69. From the web page that directs the potential advertiser to choose the budget and pricing options, Defendant provides links to other web pages on which Defendant makes representations that it will charge only for “legitimate clicks”. Complaint Ex. A. Such representations are found in Defendant's “Help Center”, which contains links to web pages entitled “Ads: Glossary of Ad Terms”, “Ads: Campaign Costs and Budgeting”, and “Ads: Advertising Credits and Coupons” (collectively, “the Extrinsic Evidence”). Complaint Exhs. B-E.

The “Ads: Glossary of Ad Terms” web page contains the following statement with respect to “clicks”:

We have a variety of measures in place to ensure that we only report and charge advertisers for legitimate clicks, and not clicks that come from automated programs, or clicks that may be repetitive, abusive, or otherwise inauthentic. Due to the proprietary nature of our technology, we're not able to give you more specific information about these systems.

Complaint Ex. B (emphasis added). The “Ads: Glossary of Ad Terms” page also contains a statement that “CPC stands for Cost Per Click. If your ads are bid on a CPC basis, you will be charged when users click on your ads and visit your website.” Complaint Ex. C (emphasis added). Finally, the complaint alleges that Defendant made additional public statements indicating that it had taken measures to identify “suspicious” clicks. Complaint ¶ 46.

An advertiser also must agree to Defendant's Advertising Terms and Conditions (“the Written Agreement”). Complaint ¶ 88. The Written Agreement includes the following disclaimer:

I [PLAINTIFF] UNDERSTAND THAT THIRD PARTIES MAY GENERATE IMPRESSIONS, CLICKS OR OTHER ACTIONS AFFECTING THE COST OF THE ADVERTISING FOR FRAUDULENT OR IMPROPER PURPOSES, AND I ACCEPT THE RISK OF ANY SUCH IMPRESSIONS, CLICKS, OR OTHER ACTIONS. FACEBOOK SHALL HAVE NO RESPONSIBILITY OR LIABILITY TO ME IN CONNECTION WITH ANY THIRD PARTY CLICK FRAUD OR OTHER IMPROPER ACTIONS THAT MAY OCCUR

Howitson Decl. Exhs. 1-2 at “Indemnification” section (“the Disclaimer”). ²

Plaintiffs allege they have been charged for “invalid clicks” and “fraudulent clicks”. Complaint ¶¶ 51, 63, and 71. The complaint attributes these clicks to “(a) technical problems; (b) system implementation errors; (c) various types of unintentional clicks; (d) incomplete clicks that fail to open the advertiser's web page; and (e) improperly recorded or unreadable clicks originating in some cases from an invalid proxy server or unknown browser types.” Complaint ¶ 4. The complaint describes “click fraud” as the “result of a competitor clicking on an advertiser's ad in order to drive up the cost of an ad or deplete the competitor's budget for placing ads.” Complaint ¶ 36.

Plaintiffs filed the instant action on July 7, 2009, seeking relief under California's Unfair Competition Law (“UCL”), Cal. Bus. Prof.Code § 17200 et seq. ; remedies for breach of contract and the implied covenant of good faith and fair dealing; a judicial declaration of the rights and obligations of the parties under the subject contracts; and remedies for unjust enrichment.

II. MOTION TO DISMISS

A. Legal standard

“Dismissal under Rule 12(b)(6) is appropriate only where the complaint lacks a cognizable legal theory or sufficient facts to support a cognizable legal theory.” Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th Cir.2008). For purposes of a motion to dismiss, the plaintiff's allegations are taken as true, and the court must construe the complaint in the light most favorable to the plaintiff. Jenkins v. McKeithen, 395 U.S. 411, 421, 89 S.Ct. 1843, 23 L.Ed.2d 404 (1969). “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, ---U.S. ----, ----, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). Thus, a court need not accept as true conclusory allegations, unreasonable inferences, legal characterizations, or unwarranted deductions of fact contained in the complaint. Clegg v. Cult Awareness Network, 18 F.3d 752, 754-755 (9th Cir.1994).

Leave to amend must be granted unless it is clear that the complaint's deficiencies cannot be cured by amendment. Lucas v. Dep't of Corr., 66 F.3d 245, 248 (9th Cir.1995). When amendment would be futile, however, dismissal may be ordered with prejudice. Dumas v. Kipp, 90 F.3d 386, 393 (9th Cir.1996).

B. Documents considered

Plaintiffs attach several documents to their complaint. Such documents may be considered on a motion to dismiss. Fed.R.Civ.P. 10(b). Defendant provides copies of the Advertising Terms and Conditions in effect at the times that Plaintiffs placed their first advertisements on Defendant's website. Howitson Decl. Exhs. 1 and 2. The complaint alleges the contents of at least a portion of these exhibits. Complaint ¶ 3. Plaintiffs dispute that all of the terms set forth in the documents actually are present in the Written Agreement between the parties, but they do not question the authenticity of Defendant's exhibits and respond to the instant motion as if the terms were included in the Written Agreement. Accordingly, the Court also may consider these documents. See Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir.1994) overruled on other grounds by Galbraith v. County of Santa Clara, 307 F.3d 1119, 1127 (9th Cir.2002) (holding that “documents whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached to the pleading, may be considered in ruling on a Rule 12(b)(6) motion to dismiss”); and In re Stac Elcs. Sec. Litig., 89 F.3d 1399, 1405 n. 4 (9th Cir.1996) (noting that complete copies of documents whose contents are alleged in the complaint may be considered in connection with a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6)).

C. Breach of Contract Claims

Defendant argues that Plaintiffs have failed to state a claim for breach of contract because the contract expressly waives Defendant's liability for third-party click fraud. Plaintiffs argue that the Written Agreement is ambiguous. Under California law, interpretation of a contract is a two-step process:

“First the court provisionally receives (without actually admitting) all credible evidence concerning the parties' intentions to determine ‘ambiguity,’ i.e., whether the language is ‘reasonably susceptible’ to the interpretation urged by a party. If in light of the extrinsic evidence the court decides the language is ‘reasonably susceptible’ to the interpretation urged, the extrinsic evidence is then admitted to aid in the second step-interpreting the contract.”

Wolf v. Superior Court, 114 Cal.App.4th 1343, 1351, 8 Cal.Rptr.3d 649 (Cal.App.2d Dist.2004). However, while the California rule governing consideration of extrinsic evidence is rather relaxed, “[t]his rule must be restricted to its stated bounds; it does no more than allow extrinsic evidence of the parties' understanding and intended meaning of the words used in their...