RingCentral, Inc. v. Nextiva, Inc.
| Decision Date | 17 June 2021 |
| Docket Number | Case No. 19-cv-02626-NC |
| Court | U.S. District Court — Northern District of California |
| Parties | RINGCENTRAL, INC., Plaintiff, v. NEXTIVA, INC., et al., Defendants. |
It is a rainy day for cloud-based communications companies. Before the Court are two motions for summary judgment in this business torts case: first, plaintiff and counterclaim-defendant RingCentral, Inc.'s motion for summary judgment on Nextiva's counterclaim, and second, defendant and counterclaimant Nextiva, Inc.'s motion for summary judgment on RingCentral's complaint. See Dkt. Nos. 202 ("Nextiva MSJ"), 204 ("RC MSJ"). The Court finds that as to RingCentral's motion, there are triable issues of fact pertaining to all of Nextiva's counterclaims. As to Nextiva's motion, the Court finds that there is no genuine dispute as to the claims involving allegedly false positive reviews of Nextiva, but there are triable issues of fact as to all of RingCentral's remaining claims.
Accordingly, the Court DENIES RingCentral's motion for summary judgment in its entirety, and GRANTS IN PART and DENIES IN PART Nextiva's motion for summary judgment.
Plaintiff and counterclaim-defendant RingCentral is a Delaware corporation, with a principal place of business in Belmont, California. Dkt. No. 116 ("TAC") ¶ 4. RingCentral provides cloud-based unified communications as a service. Id. ¶ 13. Its software-as-a-service communications platform provides a comprehensive set of business communications features for voice, virtual private branch exchange, audio and video conferencing, messaging, contact center collaboration, SMS, online meetings, contact center, and fax. Id.
Defendant and counterclaimant Nextiva, Inc. is an Arizona corporation, with a principal place of business in Scottsdale, Arizona. TAC ¶ 6. Nextiva also provides a cloud-based unified communications market with business phone solutions including voice, video, and messaging. TAC ¶ 14.
On May 14, 2019, RingCentral filed its initial complaint, alleging claims against unnamed defendants for tortious interference, trade libel, unfair competition, and trademark infringement. Dkt. No. 1. Nextiva first moved to dismiss the complaint for a more definite statement and failure to state a claim, and the Court granted dismissal with leave to amend. Dkt. Nos. 44, 53. Nextiva later moved to dismiss the second amended complaint, and the Court dismissed defendant UnitedWeb, but otherwise denied the motion. Dkt. Nos. 57, 65. On December 31, 2020, RingCentral filed its third amended complaint for (1) tortious interference, (2) defamation, (3) trade libel, (4) unfair competition, and (5) cybersquatting under the Lanham Act, 15 U.S.C. § 1125(d). See generally TAC.
Nextiva filed its answer on May 12, 2020, and raised five counterclaims against RingCentral: (1) unfair competition under Cal. Bus. & Prof. Code § 17200; (2) false advertising under Cal. Bus. & Prof. Code § 17500; (3) false advertising under the LanhamAct, 15 U.S.C. § 1125(a); (4) trade libel; and (5) intentional interference with prospective economic advantage. Dkt. No. 67 ("Counterclaim"). RingCentral moved to dismiss and strike the counterclaims. Dkt. No. 72. On July 17, 2020, this Court dismissed Nextiva's trade libel and intentional interference counterclaims. Dkt. No. 81. All parties have consented to the jurisdiction of a magistrate judge under 28 U.S.C. § 636(c). See Dkt. Nos. 9, 51.
RingCentral and Nextiva are competitors in the cloud-based unified communications market. TAC ¶ 14. According to RingCentral, beginning in mid-2018, Nextiva initiated a widespread scheme to deliberately and maliciously defame RingCentral and wrongfully interfere with its business opportunities, with the goal of improving Nextiva's competitive standing. TAC ¶ 21. RingCentral alleges that Nextiva engaged in a broad-based internet campaign of falsehoods against RingCentral to wrongfully damage its reputation and steer potential business toward Nextiva. Id. Specifically, RingCentral alleges — and Nextiva admits — that Nextiva's independent contractor, Baruch Labunski, fabricated fictitious online personas of RingCentral personnel, registered domain names using fake contact information, and created fraudulent websites associated with those domains for the purpose of redirecting users away from RingCentral, and toward unrelated business websites. Id. ¶ 22; Dkt. No. 133 ("Answer") ¶ 29.
Furthermore, RingCentral alleges that Nextiva posted public reviews on several independent online communications and collaboration review websites using fake personas and misleading email addresses. TAC ¶ 24. RingCentral alleges that the fake negative reviews of RingCentral accused them of providing poor services and engaging in dishonest business practices, while the fake positive reviews of Nextiva harmed RingCentral because it furnished Nextiva with a perfect 5-star rating, casting RingCentral in a bad light. See id. ¶ 25 (emphasis added).
Similarly, Nextiva alleges that RingCentral carried out a wide-ranging and persistent scheme to disseminate false and derogatory reviews on the internet aboutNextiva and other competitors, and posted false reviews to inflate RingCentral's own performance. See Counterclaim ¶¶ 13-17. According to Nextiva, RingCentral allegedly carried out its scheme by creating and maintaining its own comparison webpage (the "/compare page") using third-party sponsored websites containing a comparison of services and prices between RingCentral and Nextiva. Id. ¶ 26-29. It also created a customer review page (the "/review page"), which aggregates data from other review sources and allows visitors to read reviews from RingCentral's customers. Id. ¶ 37. Nextiva alleges, however, that the /review page, is misleading. "While each of the sourced websites . . . contain numerous negative reviews of RingCentral when visited directly, no negative reviews appear when viewed through RingCentral's website." Id.
RingCentral filed a motion for summary judgment on Nextiva's counterclaims, and Nextiva filed a motion for summary judgment on RingCentral's complaint. While these were pending, Nextiva noticed the Court saying it no longer intends to pursue its counterclaim theory that arises out of RingCentral's comparative pricing page. Dkt. No. 287.
Summary judgment may be granted only when, drawing all inferences and resolving all doubts in favor of the nonmoving party, there is no genuine dispute as to any material fact. Fed. R. Civ. P. 56(a); Tolan v. Cotton, 572 U.S. 650, 651 (2014); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). A fact is material when, under governing substantive law, it could affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute about a material fact is genuine if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id. Bald assertions that genuine issues of material fact exist are insufficient. Galen v. Cnty. of L.A., 477 F.3d 652, 658 (9th Cir. 2007).
The moving party bears the burden of identifying those portions of the pleadings, discovery, and affidavits that demonstrate the absence of a genuine issue of material fact. Celotex, 477 U.S. at 323. Once the moving party meets its initial burden, the nonmovingparty must go beyond the pleadings, and, by its own affidavits or discovery, set forth specific facts showing that a genuine issue of fact exists for trial. Fed. R. Civ. P. 56(c); Barthelemy v. Air Lines Pilots Ass'n, 897 F.2d 999, 1004 (9th Cir. 1990) (citing Steckl v. Motorola, Inc., 703 F.2d 392, 393 (9th Cir. 1983)). All justifiable inferences, however, must be drawn in the light most favorable to the nonmoving party. Tolan, 572 U.S. 651 (citing Liberty Lobby, 477 U.S. at 255).
Nextiva filed a counterclaim for false advertising and unfair competition under California law, as well as false advertising under the Lanham Act. See Counterclaim ¶¶ 63-88. RingCentral moves for summary judgment on all counterclaims. See generally RC MSJ; see Dkt. No. 210 ("Answer") at 24-25. The Court finds that there are genuine issues of material fact on all issues raised, and therefore DENIES RingCentral's motion for summary judgment.
Nextiva's counterclaim is based on five forms of alleged misconduct, but the parties ultimately dispute only two of them in their briefing: (1) that on its /compare page, RingCentral makes false claims about its own services and Nextiva's services, and (2) that RingCentral promotes false star ratings and manipulates its reviews on the /review page. See generally Counterclaim; see also Dkt. No. 226 ("Nextiva Opp'n") at 2, 5; see also Dkt. No. 245-5 ("RC Reply") at 3. RingCentral moves for summary judgment on the grounds that Nextiva cannot prove falsity, causation, or economic injury, and that Nextiva's claims are barred by the unclean hands doctrine.
Claims for false advertising and unfair competition under California law are "substantially congruent" to claims made under the Lanham Act, and require the same proof. See Spy Phone Labs LLC v. Google Inc., No. 15-cv-3756-KAW, 2016 WL 6025469, at *13 (N.D. Cal. Oct. 14, 2016); see also Walker & Zanger, Inc. v. Paragon Indus., Inc., 549 F. Supp. 2d 1168, 1182 (N.D. Cal. 2007). To bring a false advertisingclaim under the Lanham Act, the plaintiff must allege: "(1) a false statement of fact by the defendant in a commercial advertisement about its own or another's product; (2) the statement actually deceived or has the tendency to deceive a substantial segment of its audience; ...
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