Strauss v. Angie's List, Inc.
| Decision Date | 01 November 2018 |
| Docket Number | Case No. 2:17-CV-02560-HLT-TJJ |
| Parties | STEVE STRAUSS d/b/a CLASSIC TREE CARE, et al., Plaintiffs, v. ANGIE'S LIST, INC., Defendant. |
| Court | U.S. District Court — District of Kansas |
Plaintiff Steve Strauss filed this putative class action against Defendant Angie's List, Inc. asserting violations of the Lanham Act, 15 U.S.C. §§ 1501-114n (2012), and the Kansas Consumer Protection Act ("KCPA"), §§ 50-623 to -643 (West 2018). The claims hinge on allegations Defendant routinely engages in false advertising and deceptive trade practices through statements published on its website and other forms of media. Before the Court are: (1) Defendant's motion seeking dismissal of Plaintiff's Class Action Complaint ("Original Complaint") for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6); and (2) Plaintiff Strauss's request for leave to file a First Amended Class Action Complaint ("Amended Complaint"). Docs. 11, 43.
The vast majority of Plaintiff Strauss's Lanham Act and KCPA claims are time-barred. Those that are not time-barred fail to satisfy at least one essential element of each claim. For these reasons, Plaintiff Strauss's well-pleaded allegations do not plausibly give rise to an entitlement to relief under the Lanham Act or KCPA and Defendant's motion to dismiss (Doc. 11) is granted. The Amended Complaint does not remedy the Original Complaint's shortcomings and Plaintiff Strauss's motion to amend (Doc. 43) is, therefore, denied. If permitted, Plaintiff Strauss's claims under the Amended Complaint would still be subject to immediate dismissal. The only remaining claims would then be those of David Garner, the additional plaintiff sought to be added through the Amended Complaint ("Proposed-Plaintiff Garner"). Because the Court could not exercise personal jurisdiction over Defendant absent Plaintiff Strauss, the Amended Complaint is futile in its entirety. The Court's analysis of and conclusions regarding Defendant's motion to dismiss and Plaintiff Strauss's request for leave to amend are discussed at length below.
Plaintiff Strauss filed his Original Complaint on September 22, 2017, asserting: (1) false advertising claims under section 43(a) of the Lanham Act; and (2) unfair, deceptive, or unconscionable practices claims under sections 4 and 5 of KCPA. Doc. 1 ¶¶ 75-87; see also 15 U.S.C. § 1125 (2012); K.S.A. §§ 50-626, -627 (West 2018). He also seeks class certification of nationwide (Lanham Act) and Kansas-based (KCPA) claims. The Original Complaint contains seventy-four paragraphs of factual allegations—several of which include multiple subparagraphs—exclusive of the counts alleged and prayers for relief. Id. ¶¶ 1-75.
On November 20, 2017, Defendant moved to dismiss the Original Complaint under Rule 12(b)(6) on numerous grounds, including laches (Lanham Act claims), statute of limitations (KCPA claims), failure to plead with sufficient particularity as required by Rule 9(b) (Lanham Act and KCPA claims), and failure to plausibly plead one or more essential elements of the claim (Lanham Act and KCPA claims). Doc. 11 at 1-2; Doc. 12 at 9-27. Defendant's supporting memorandum is twenty-seven pages. Doc. 12 at 1-27. Plaintiff Strauss responded to the numerous issues raised in Defendant's motion to dismiss on December 26, 2017, in a fifty-four-page brief. Doc. 23 at 1-54. Defendant then filed its reply in a twenty-three-page brief on January 19, 2018. Doc. 25 at 1-23.
Almost two months after Defendant's motion to dismiss was fully briefed, on March 12, 2018, Plaintiff Strauss sought leave to amend his Original Complaint for purposes of joining Proposed-Plaintiff Garner. Doc. 43 at 1, 9. Plaintiff Strauss's Amended Complaint is nearly identical to his Original Complaint, save the specific factual allegations concerning Proposed-Plaintiff Garner's personal experience with Defendant and the addition of an individual claim on Proposed-Plaintiff Garner's behalf for unfair, deceptive, or unconscionable acts or practices under the Maryland Consumer Protection Act ("MCPA"), Md. Code Ann. §§ 13-301 to -408 (West 2018). Doc. 43-1 ¶¶ 56-74, 109-115. The Amended Complaint does not alter any allegations against Defendant with respect to Plaintiff Strauss. Compare Doc. 1, with Doc. 43-1; see also Doc. 43 ¶¶ 41-43 (). Defendant opposed Plaintiff Strauss's request to amend on April 11, 2018, in a twenty-seven-page brief, arguing largely that the amendment did not address the shortcomings of the Original Complaint and would therefore be futile as to Plaintiff Strauss, and that the Court would then lack jurisdiction over the only remaining plaintiff, Proposed-Plaintiff Garner. Doc. 47 at 9-14.1 Plaintiff Strauss filed his thirty-two-page reply on April 27, 2018. Doc. 50.
In total, exclusive of tables of contents and authorities, the parties submitted over 270 pages for the Court's consideration in ruling on the pending motions. Docs. 1, 11-12, 23, 25, 43, 47, 50. The briefs raise numerous legal issues irrelevant to the Court's disposition of Defendant's motion to dismiss and Plaintiff Strauss's request for leave to amend. The factual allegations are alsovoluminous, and many are immaterial to the Court's ultimate legal conclusions. Those allegations that are relevant to the Court's ruling on the pending motions are collected and distilled below.
The following facts are taken from the well-pleaded allegations of the Original Complaint and, consistent with the well-established standards for evaluating motions to dismiss under Rule 12(b)(6), the Court assumes the truth of these facts for purposes of analyzing Defendant's motion to dismiss. Facts unique to the Amended Complaint but necessary to the Court's consideration of Plaintiff Strauss's request for leave to amend are identified as such.
Defendant is a corporation organized under Delaware state law. Doc. ¶ 2. It has its principal place of business in Indianapolis, Indiana, and is licensed to conduct business in Kansas. Id. Defendant, in fact, conducts business in Kansas. Id. Since its establishment in 1995, Defendant has become one of the leading internet-based consumer ratings services. Id. ¶¶ 6, 13. It primarily serves consumers through its website,2 which it markets as a forum for the viewing and posting of first-hand, consumer-generated reviews of service providers. Id. At its most basic level, Defendant's website functions as a search engine. Id. ¶¶ 15, 18-22. A consumer in need of goods or services can search Defendant's website and rely on the actual experience of other consumers—displayed on the website through a letter-grade rating and narrative reviews—to identify the service provider best suited to assist with the consumer's needs. Id. ¶¶ 6, 13, 15, 17-22.
Consumers are led to believe that a search of Defendant's website will return a list of potential service providers, in ranked order, based on the first-hand experience of other consumers. Id. ¶¶ 6-7, 10-11, 13, 15, 17-22. But the order in which Defendant displays service providers withinsearch results is not based solely on consumer-generated ratings and reviews. Id. ¶¶ 8-9, 12, 15, 23-25. Defendant also receives substantial revenue from providing advertising services to service providers who appear on its website. Id. ¶¶ 6, 14, 61-64. And whether a service provider pays Defendant to advertise directly affects its position within search results. Id. ¶¶ 8-9, 12, 15, 23-25, 62-63. An advertising (i.e., fee-paying) service provider is listed at the top of search results and may be listed above a non-advertising (i.e., non-fee-paying) service provider—even if the non-advertising service provider has a higher rating and better reviews. Id. But Defendant does not make this clear to consumers. Id.
Defendant's general advertising misleads consumers. Id. ¶¶ 11, 18. Through advertising and promotion of its business, Defendant represents to consumers that "[c]ompanies cannot pay to be on [Defendant's website]" and that service providers "don't pay" to be on Defendant's website. Id. ¶¶ 11(a)-(b). Defendant touts itself as a business driven by a "consumer first philosophy" and an "unwavering commitment" to place "the interests of the consumer first." Id. ¶ 11(c). It advertises its website as the place where consumers can find the service provider best suited to satisfy their needs. Id.
In Defendant's Membership Agreement, which fee-paying consumers must sign to access the full benefits of Defendant's website, Defendant states that the ratings and reviews displayed on Defendant's website are "based upon the actual first-hand experiences [consumers] have had with [service providers]." Id. ¶ 17. Defendant's website FAQs also state that a service provider's position in search results is determined by their recent grades and number of reviews and companies with the best ratings will appear first. Id. ¶ 21. Companies with a poor rating will appear lower on the list after businesses who have earned good ratings for superior work. Id. ¶ 22.
In reality, search list order or ranking is not based purely on consumer ratings and reviews. Id. ¶¶ 8-9, 12, 15, 23-25, 62-63. Service providers can artificially manipulate where they appear in search results by paying to advertise with Defendant. Id. Defendant's marketing materials directed to service providers reflect this disparity. Id. ¶¶ 12, 24, 62. Service providers are clearly told that advertising on Defendant's website "exponentially increases [their] exposure to [consumers] . . . ." Id. ¶ 24(a). More specifically, Defendant markets premium advertising options that allow service providers to "[a]ppear on the first page of search results so members can easily find and access [their] review[s]." Id. ¶ 24(c).
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