Block v. Ebay, Inc.

Justia.com Opinion Summary: Plaintiff appealed the dismissal of his putative class action alleging that ebay.com's Automatic Bidding system breached two provisions of eBay's User Agreement, violated California's Unfair Competition Law (UCL), Cal. Bus. Prof. Code 17204, and constituted intentional interference with prospective economic advantage. The court concluded that the district court properly dismissed plaintiff's claim for breach of contract where the two provisions at issue in the User Agreement did not constitute an enforceable promise by eBay. The court also concluded that plaintiff failed to state a claim under the UCL where, even if the User Agreement had represented that eBay would directly transmit bids to sellers, plaintiff has not plausibly alleged that he relied on this representation. Moreover, since a reasonable person in plaintiff's position could not have relied on such a representation, it would not have been material. Finally, the court concluded that plaintiff failed to set forth a claim for intentional interference with prospective economic advantage. Accordingly, the court affirmed the judgment of the district court.

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Court Description:

California Law. The  panel  affirmed  the  district  court’s  Fed.  R.  Civ.  P. 12(b)(6)  dismissal  of  Marshall  Block’s  diversity  putative class  action,  alleging  that  ebay.com’s  Automatic  Bidding system breached two provisions of eBay’s User Agreement in violation of California law. The  panel  held  that  Block  failed  to  state  a  claim  for breach  of  contract  because  under  California  law  the  two challenged  provisions  in  the  User  Agreement  did  not constitute enforceable promises by eBay.  The panel also held that Block failed to state a claim under California’s Unfair Competition Law and failed to state a claim for intentional interference with prospective economic advantage.

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FOR PUBLICATION UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT MARSHALL BLOCK, On Behalf of Himself and All Others Similarly Situated, Plaintiff-Appellant, No. 12-16527 D.C. No. 3:11-cv-06718CRB v. EBAY, INC., OPINION Defendant-Appellee. Appeal from the United States District Court for the Northern District of California Charles R. Breyer, Senior District Judge, Presiding Argued and Submitted March 12, 2014âSan Francisco, California Filed April 1, 2014 Before: Jerome Farris and Stephen Reinhardt, Circuit Judges, and Paul C. Huck, Senior District Judge.* Opinion by Judge Farris * The Honorable Paul C. Huck, Senior District Judge for the U.S. District Court for Southern Florida, sitting by designation. 2 BLOCK V. EBAY SUMMARY** California Law The panel affirmed the district courtâs Fed. R. Civ. P. 12(b)(6) dismissal of Marshall Blockâs diversity putative class action, alleging that ebay.comâs Automatic Bidding system breached two provisions of eBayâs User Agreement in violation of California law. The panel held that Block failed to state a claim for breach of contract because under California law the two challenged provisions in the User Agreement did not constitute enforceable promises by eBay. The panel also held that Block failed to state a claim under Californiaâs Unfair Competition Law and failed to state a claim for intentional interference with prospective economic advantage. COUNSEL Roy A. Katriel (argued), The Katriel Law Firm, San Diego, California, for Plaintiff-Appellant. John Charles Dwyer (argued), Cooley LLP, Palo Alto, California; Michael G. Rhodes and Benjamin F. Chapman, Cooley LLP, San Diego, California, for Defendant-Appellee. ** This summary constitutes no part of the opinion of the court. It has been prepared by court staff for the convenience of the reader. BLOCK V. EBAY 3 OPINION FARRIS, Senior Circuit Judge: Marshall Block argues that ebay.comâs Automatic Bidding system breaches two provisions of eBayâs User Agreement, violates Californiaâs Unfair Competition Law, and constitutes intentional interference with prospective economic advantage.1 The district court dismissed Blockâs complaint pursuant to Rule 12(b)(6). We have jurisdiction under 28 U.S.C. § 1291, and we affirm. I. One of the ways in which goods are sold on eBay, possibly the âworldâs largest online marketplace,â is through traditional auctions. Bidding in traditional auctions is conducted through eBayâs Automatic Bidding system. In this system, a bidder submits the maximum amount he is willing to pay for an item, and this amount is kept confidential from other bidders and the seller. eBayâs software then enters bids on behalf of the bidder, at predetermined increments above the current bid, until the user wins the auction or would need to exceed his maximum. Block, a seller on eBay, argues that the Automatic Bidding system violates two provisions of the eBay User Agreement, entered into by each eBay user. First, a provision in the âLimitation of Liabilityâ section states: âWe are not involved in the actual transaction between buyers and 1 In his complaint, Block also asserted a cause of action for unjust enrichment, but he does not appeal the district courtâs dismissal of that claim. 4 BLOCK V. EBAY sellers.â Second, the contract provides: âNo agency, partnership, joint venture, employee-employer or franchiserfranchisee relationship is intended or created by this Agreement.â On behalf of himself and similarly situated sellers, Block filed suit on December 30, 2011. On May 7, 2012, the district court granted eBayâs motion to dismiss Blockâs complaint. The court granted Block leave to amend his complaint with regard to his intentional interference and UCL claims, though Block declined to amend. The district court entered judgment on June 18, 2012, and Block timely appealed. II. A. We review the dismissal of a complaint pursuant to Rule 12(b)(6) de novo. See Zadrozny v. Bank of N.Y. Mellon, 720 F.3d 1163, 1167 (9th Cir. 2013). âTo 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.â Salameh v. Tarsadia Hotel, 726 F.3d 1124, 1129 (9th Cir. 2013) (quoting Zixiang Li v. Kerry, 710 F.3d 995, 999 (9th Cir. 2013)). B. We begin with Blockâs claim for breach of contract. Under California law, â[a] contract must be so interpreted as to give effect to the mutual intention of the parties as it existed at the time of contracting, so far as the same is ascertainable and lawful.â Cal. Civ. Code § 1636; see also BLOCK V. EBAY 5 Reilly v. Inquest Tech., Inc., 160 Cal. Rptr. 3d 236, 249 (Ct. App. 2013). It is not the partiesâ subjective intent that matters, but rather their âobjective intent, as evidenced by the words of the contract.â Reilly, 160 Cal. Rptr. 3d at 249 (quoting Founding Members of the Newport Beach Country Club v. Newport Beach Country Club, Inc., 109 Cal. App. 4th 944, 956 (2003)). If a contract is reduced to writing, âthe intention of the parties is to be ascertained from the writing alone,â Cal. Civ. Code § 1639, the words being interpreted in their âordinary and popular sense,â id. § 1644, provided that the language âis clear and explicit, and does not involve an absurdity,â id. § 1638. Finally, â[t]he whole of a contract is to be taken together, so as to give effect to every part, if reasonably practicable, each clause helping to interpret the other.â Id. § 1641; see also Serv. Employees Intâl Union, Local 99 v. Options â A Child Care & Human Servs. Agency, 133 Cal. Rptr. 3d 73, 79â80 (Ct. App. 2011). Block argues that the Automatic Bidding system violates two provisions in the User Agreement. However, as the district court ruled, neither provision constitutes an enforceable promise by eBay. 1. The first statement â âWe are not involved in the actual transaction between buyers and sellersâ â contains no promissory language. See Souza v. Westlands Water Dist., 38 Cal. Rptr. 3d 78, 89 (Ct. App. 2006) (âIf a contract is to be a basis of liability for the [defendant]âs violation of [a rule] . . . it must be a contract in which the [defendant] promises to abide by [that rule].â). Rather, the statement is simply a general description of how eBayâs auction system works. Although Block cites Lavi v. Pelican Investment Corp., 36 F. 6 BLOCK V. EBAY Appâx 923 (9th Cir. 2002), and Multimatic, Inc. v. Faurecia Interior Systems USA, Inc., 358 F. Appâx 643 (6th Cir. 2009), in arguing that legal obligations can be created through present-tense statements, these cases are distinguishable. See Lavi, 36 F. Appâx at 924 (holding, in a context in which it was clear that the pertinent statements conveyed promises, a contract describing the sale of land in the present tense intended the property to be transferred in the future); Multimatic, 358 F. Appâx at 647â48 (interpreting a confidentiality agreement protecting trade secrets each side âpossessesâ to cover both pre-existing and future trade secrets). The provisionâs explanatory function is not confusing: You will not hold eBay responsible for other usersâ content, actions or inactions, items they list or their destruction of allegedly fake items. You acknowledge that we are not a traditional auctioneer. Instead, our sites are venues to allow anyone to offer, sell, and buy just about anything, at any[]time, from anywhere, in a variety of pricing formats and locations, such as stores, fixed price formats and auction-style formats. We are not involved in the actual transaction between buyers and sellers. While we may help facilitate the resolution of disputes through various programs, we have no control over and do not guarantee the quality, safety or legality of items advertised, the truth or accuracy of usersâ content or listings, the ability of sellers to sell items, the ability of buyers to pay for items, or that a buyer or BLOCK V. EBAY 7 seller will actually complete a transaction or return an item. The provision is a broad description of the eBay marketplace designed to explain to eBayâs users why its liability is more limited than that of a âtraditional auctioneer.â Just as the sentence before the provision could hardly be read as a promise by eBay to âallow anyone to offer, sell, and buy just about anything, at any[]time, from anywhere,â the provision is not a promise ânot [to be] involved in the actual transaction between buyers and sellers.â This is consistent with provisions elsewhere in the User Agreement. Several provisions are written in an informal, conversational style, indicating that the agreement is not simply a set of legally enforceable promises, but also an introduction to the eBay marketplace for new users. The agreement opens with, âWelcome to eBay,â and later states: âBuyers and sellers share the responsibility for making sure purchases facilitated by eBay are exciting, rewarding and hassle-free.â In contrast to the provision in question, other clauses in the agreement contain explicit promissory language. These communicate promises both by the user (e.g., âWhile using eBay sites, services and tools, you will not . . . violate any laws . . . .â), and by eBay (e.g., âIf we resolve a dispute in the buyerâs favor, we will refund the buyer for the full cost of the item . . . .â). Block argues that interpreting the ânot involvedâ provision to be unenforceable yields an absurd outcome, as nothing in the contract would prevent eBay from blatantly manipulating auctions. We reject the argument. Even if 8 BLOCK V. EBAY auction manipulation by eBay could not be remedied through an action for breach of contract, it might be the proper subject of a suit on other grounds. On Blockâs reading, any time the eBay platform functioned in a manner that was not purely neutral, whether through deliberate interference or an unintended software defect, eBay would violate the provision. We conclude that the provision can be plausibly read only as a general description of eBayâs services intended to focus the user on the Limitation of Liability section. 2. The second provision â âNo agency . . . relationship is intended or created by this Agreementâ â purports only to limit the relationships created by the agreement. It contains no promise by eBay not to enter into agency relationships with its users. Contrary to Blockâs argument, it is irrelevant to interpretation of this provision that, to qualify for an exemption from a Chicago tax, eBay certified to the State of Illinois that it âdoes not act as an agent of users who sell items on its website, and acts only as a venue for user transactions.â City of Chicago, IL v. eBay, Inc., No. 08 C 3281, 2009 WL 5184016, at *3 (N.D. Ill. Dec. 21, 2009). This statement is not part of the User Agreement and is not made in a contractual context. Neither the ânot involvedâ provision, nor the âno agencyâ provision, constitutes an enforceable promise by eBay. The district court properly dismissed Blockâs claim for breach of contract. BLOCK V. EBAY 9 C. The Californiaâs Unfair Competition Law authorizes suit by âa person who has suffered injury in fact . . . as a result of . . . unfair competition,â Cal. Bus. & Prof. Code § 17204, which includes âany unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising,â id. § 17200. Block argues that eBay committed unlawful conduct through 1) breach of contract and 2) intentional interference with prospective economic advantage. Neither of these alleged violations is adequately pled. He also alleged that eBay violated Californiaâs False Advertising Law and engaged in a fraudulent business act or practice. These theories turn on the same analysis, see In re Tobacco II Cases, 207 P.3d 20, 29 & n.8 (Cal. 2009), and each requires only that âmembers of the public are likely to be âdeceived,ââ id. at 29 (quoting Kasky v. Nike, Inc., 27 Cal. 4th 939, 951 (2002)). However, for a private plaintiff to bring suit under the UCL, he must also allege âactual reliance,â id. at 39: that âthe defendantâs misrepresentation or nondisclosure was âan immediate causeâ of the plaintiffâs injury-producing conduct . . . [such that] in its absence the plaintiff âin all reasonable probabilityâ would not have engaged in the injury-producing conduct,â id. (quoting Mirkin v. Wasserman, 5 Cal. 4th 1082, 1111 (1993) (Kennard, J., concurring in part and dissenting in part)). There is âa presumption, or at least an inference, of reliance . . . wherever there is a showing that a misrepresentation was material.â Id. (quoting Engalla v. Permanente Med. Grp., Inc., 938 P.2d 903, 919 (Cal. 1997)). A misrepresentation is material if âa reasonable [person] would attach importance to its existence 10 BLOCK V. EBAY or nonexistence in determining his choice of action in the transaction in question.â Id. (quoting Engalla, 938 P.2d at 919). Further, when a UCL claim rests on allegations of fraud, it must satisfy Rule 9(b). Kearns v. Ford Motor Co., 567 F.3d 1120, 1125 (9th Cir. 2009). Block alleged that the ânot involvedâ and âno agencyâ provisions fraudulently misrepresent that eBay âis acting as merely a neutral venue that is accurately transmitting bids for bidders to the seller.â According to Block, he âreasonably relied on [these] representations and assurances.â Block does not allege reliance with greater specificity, but argues that eBayâs misrepresentations were material, thus reliance can be presumed. Blockâs argument fails: he could not have relied on the alleged misrepresentations, nor would they have been material. As the complaint concedes, the Automatic Bidding system is described on eBayâs website. Further, in a version of the pertinent page attached to the complaint, eBay makes clear that the Automatic Bidding system will be used in all traditional auctions. Block does not allege that, at the time he executed the User Agreement, these disclosures were unavailable, or that he was unaware of the Automatic Bidding system. Thus, even if the User Agreement had represented that eBay would directly transmit bids to sellers, Block has not plausibly alleged that he relied on this representation. Moreover, since a reasonable person in Blockâs position could not have relied on such a representation, it would not have been material. Block fails to state a claim under the UCL. BLOCK V. EBAY 11 D. Finally, we consider Blockâs claim for intentional interference with prospective economic advantage. To state a claim for intentional interference under California law, a plaintiff must allege, inter alia, that âthe defendant engaged in an independently wrongful act,â understood as an act âproscribed by some constitutional, statutory, regulatory, common law, or other determinable legal standard.â Korea Supply Co. v. Lockheed Martin Corp., 63 P.3d 937, 953â54 (Cal. 2003). Block argues that eBay committed two independently wrongful acts: breach of contract and violation of the UCL. He fails to set forth a claim in either respect. He has not stated a claim for intentional interference. AFFIRMED.