Dreamstime.com, LLC v. Google, LLC, No. 3:2018cv01910 - Document 85 (N.D. Cal. 2019)
Court Description: ORDER GRANTING IN PART AND DENYING IN PART 75 MOTION FOR JUDGMENT ON THE PLEADINGS. By Judge Alsup. (whalc3, COURT STAFF) (Filed on 6/5/2019)
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Dreamstime.com, LLC v. Google, LLC Doc. 85 1 2 3 4 5 6 7 8 IN THE UNITED STATES DISTRICT COURT 9 FOR THE NORTHERN DISTRICT OF CALIFORNIA 11 For the Northern District of California United States District Court 10 12 DREAMSTIME.COM, LLC, a Florida LLC, 13 14 15 16 17 No. C 18-01910 WHA Plaintiff, v. GOOGLE, LLC, a Delaware LLC; and DOES 1-10, ORDER GRANTING IN PART AND DENYING IN PART MOTION FOR PARTIAL JUDGMENT ON THE PLEADINGS Defendants. / 18 INTRODUCTION 19 20 21 Defendant Google moves under Rule 12(c) for partial final judgment on the pleadings. Google’s motion is GRANTED IN PART AND DENIED IN PART. STATEMENT 22 23 A prior order provided the facts alleged in the amended complaint (Dkt. No. 72). In 24 brief, the amended complaint averred that Google manipulated search results, search 25 advertisements, and mobile applications to Dreamstime’s detriment (and to Dreamstime’s 26 competitor’s benefit). 27 28 For years, Dreamstime had been near the top of every search engine’s search results. Starting in approximately 2015, however, Dreamstime’s ranking significantly dropped on Google’s search engine. This drop coincided with a licensing agreement Google had entered Dockets.Justia.com 1 into with Dreamstime’s main competitor. Subsequent efforts by Dreamstime to return to the top 2 of Google’s search results did not succeed and Dreamstime remains practically irrelevant on 3 Google. Dreamstime’s competitor, by contrast, remains at the top of Google’s search results 4 (Dkt. No. 50 ¶¶ 38–60). For the Northern District of California United States District Court 5 When Dreamstime increased its advertising on Google to help compensate for its lost 6 search ranking, Google obstructed Dreamstime’s efforts. For example, Google purportedly 7 cancelled Dreamstime’s most successful advertising campaigns without notice or explanation, 8 suspended Dreamstime’s account based on unfounded accusations of policy violations, and 9 prevented Dreamstime from running its advertisements altogether (while simultaneously 10 allowing the exact same advertisements to be placed by Dreamstime’s competitor). 11 Dreamstime’s mobile applications faced similar conduct. Google allegedly removed 12 Dreamstime’s mobile application because it featured lingerie photographs. By contrast, 13 Dreamstime’s competitor remained active despite featuring explicitly nude photographs (id. ¶¶ 14 77–95). 15 Both the original and an amended complaint alleged four claims: (i) unlawful 16 monopolization under Section 2 of the Sherman Act; (ii) breach of contract; (iii) breach of 17 implied covenant of good faith and fair dealing; and (iv) various claims under Section 17200 of 18 the California Business and Professions Code. The parties engaged in protracted Rule 12(b) 19 motion practice. An order subsequently dismissed the unlawful monopolization claim without 20 leave to amend but concluded the other three claims had been plausibly alleged (Dkt. No. 72). 21 Now, Google brings this motion under Rule 12(c) for partial judgment on the pleadings. 22 The substantive issues raised are twofold. First, Google argues that Dreamstime’s claims may 23 not encompass allegations about the content or arrangement of Google’s search results. Second, 24 Google argues that Dreamstime is limited to certain damages on its contract claim and not the 25 full breadth of damages Dreamstime’s amended complaint has sought. After full briefing (Dkt. 26 Nos. 75, 78, 79), including supplemental briefing (Dkt. Nos. 81, 82), and oral argument, this 27 order follows. 28 2 1 2 For the Northern District of California Rule 12(c) provides: “[a]fter the pleadings are closed — but early enough not to delay 3 trial — a party may move for judgment on the pleadings.” The analysis under Rule 12(c) is 4 “substantially identical to [the] analysis under Rule 12(b)(6).” Chavez v. United States, 683 5 F.3d 1102, 1108 (9th Cir. 2012) (internal quotation marks and citation omitted). Specifically, 6 all factual allegations in the complaint must be accepted as true and construed in the light most 7 favorable to the non-moving party. Turner v. Cook, 362 F.3d 1219, 1225 (9th Cir. 2004). 8 “Judgment on the pleadings is properly granted when there is no issue of material fact in 9 dispute, and the moving party is entitled to judgment as a matter of law.” Fleming v. Pickard, 10 United States District Court ANALYSIS 581 F.3d 922, 925 (9th Cir. 2009) (citation and footnote omitted). 11 1. ONLINE SEARCH. 12 Google seeks “judgment” on all of Dreamstime’s allegations which derive from the 13 content or arrangement of Google’s search results. The First Amendment protects publishers 14 when they exercise editorial control and judgment. Miami Herald Publ’g Co. v. Tornillo, 418 15 U.S. 241, 258 (1974). Two district court decisions have applied this protection to conclude that 16 “the First Amendment protects as speech the results produced by an [i]nternet search engine.” 17 Zhang v. Baidu.com, Inc., 10 F. Supp. 3d 433, 435 (S.D.N.Y. 2014) (Judge Jesse Furman); see 18 also e-ventures Worldwide, LLC v. Google, Inc., 2017 WL 2210029, at *4 (M.D. Fla. Feb. 8, 19 2017) (Judge Paul Magnuson). Two more district court decisions have concluded generally that 20 search engine results are independently protected by the First Amendment. See Langdon v. 21 Google, 474 F. Supp. 2d 622, 629–30 (D. Del. 2007) (Judge Joseph James Farnan Jr.); Search 22 King, Inc. v. Google Tech., Inc., 2003 WL 21464568, at *3–4 (W.D. Okla. 2003) (Judge Vicki 23 Miles-LaGrange). No appellate decision has considered the issue. 24 Even assuming the First Amendment generally protects search engines, Google’s 25 argument fails. The amended complaint alleged that Google “manipulated Dreamstime’s 26 organic search ranking unfairly and illegally to force Dreamstime to spend an unreasonable 27 amount of money on additional AdWords campaigns that would not otherwise have been 28 necessary” (Dkt. No. 50 ¶ 169). Just like a fast-talking con-artist cannot hide behind the First 3 1 Amendment, neither can Google. “It is . . . beyond dispute that the publisher of a newspaper 2 has no special immunity from the application of general laws. He has no special privilege to 3 invade the rights and liberties of others.” Cohen v. Cowles Media Co., 501 U.S. 663, 670 4 (1991) (quotations omitted). Victims can sue all day long. 5 6 Specifically, Google admitted that if Google “had promised to rank Dreamstime in a certain 7 way, and then broke that promise, that conduct theoretically could state a claim for breach of 8 contract or promissory estoppel” (Dkt. No. 79 at 9). The basis of the breach of contract claim 9 remains that Google broke its contractual promise to Dreamstime. It makes no difference that 10 11 For the Northern District of California United States District Court Google even conceded that online search results can form the basis of legal action. Google did not make any specific promises related to search results. Google argues that Dreamstime must aver more than a mere subjective belief that it 12 should rank higher. Yet, an issue of material fact exists as to the reason Dreamstime had 13 formerly been highly ranked on Google, remains highly ranked on other search engines, and has 14 become practically non-existent on Google despite engaging in a mishmash of attempted fixes. 15 Perhaps the reason is that Google torpedoed Dreamstime’s organic search ranking to boost 16 advertising revenue. Perhaps it is not. Discovery will tease out what occurred here. As to this 17 issue, Google’s motion is DENIED. 18 2. 19 As to the second issue raised, Google argues that Dreamstime is limited to certain 20 damages on its contract claim due to a limitation of liability clause. Perhaps regrettably, “[w]ith 21 respect to claims for breach of contract, limitation of liability clauses are enforceable unless 22 they are unconscionable, that is, the improper result of unequal bargaining power or contrary to 23 public policy.” Food Safety Net Servs. v. Eco Safe Sys. USA, Inc., 209 Cal. App. 4th 1118, 24 1126 (2012). Dreamstime alleged Google breached two contracts: (A) the AdWords 25 Agreement and (B) the Google Play Agreement. The amended complaint included both 26 agreements as exhibits and so are properly analyzed by this order without converting to 27 summary judgment (Dkt. No. 50 at Exh. F; Exh. O). LIMITATION OF LIABILITY CLAUSES. 28 4 1 2 Under the AdWords Agreement, Dreamstime alleged that Google breached its contract by providing Dreamstime advertising campaigns that did not work and did not meet 4 Dreamstime’s expectations, torpedoed search results, applied its policies and procedures 5 unevenly towards Dreamstime, cancelled some of Dreamstime’s ad campaigns for violating 6 stated policies that the ad campaigns did not violate, and overcharged and overdelivered the ad 7 campaigns (id. ¶ 169). 9 10 11 For the Northern District of California AdWords Agreement. 3 8 United States District Court A. 12 13 14 15 16 17 18 19 20 21 22 23 24 The Limitation of Liability section of the AdWords Agreement provides in full (capitalization in original) (emphasis added): EXCEPT FOR SECTION 11 AND CUSTOMER’S BREACHES OF SECTIONS 3(A), 14(E) OR THE LAST SENTENCE OF SECTION 1, TO THE FULLEST EXTENT PERMITTED BY LAW REGARDLESS OF THE THEORY OR TYPE OF CLAIM: (a) GOOGLE, CUSTOMER, AND THEIR RESPECTIVE AFFILIATES WILL NOT BE HELD LIABLE UNDER THESE TERMS OR ARISING OUT OF OR RELATED TO THESE TERMS FOR ANY DAMAGES OTHER THAN DIRECT DAMAGES, EVEN IF THE PARTY IS AWARE OR SHOULD KNOW THAT SUCH OTHER TYPES OF DAMAGES ARE POSSIBLE AND EVEN IF DIRECT DAMAGES DO NOT SATISFY A REMEDY; AND (b) OTHER THAN CUSTOMER’S PAYMENT OBLIGATIONS UNDER THESE TERMS, GOOGLE, CUSTOMER, AND THEIR RESPECTIVE AFFILIATES WILL NOT BE HELD LIABLE FOR DAMAGES UNDER THESE TERMS OR ARISING OUT OF OR RELATED TO PERFORMANCE OF THESE TERMS FOR ANY GIVEN EVENT OR SERIES OF CONNECTED EVENTS IN THE AGGREGATE OF MORE THAN THE AMOUNT PAYABLE TO GOOGLE BY CUSTOMER UNDER THE TERMS IN THE THIRTY DAYS BEFORE THE DATE OF THE ACTIVITY FIRST GIVING RISE TO THE CLAIM. Put otherwise, the limitation of liability clause does not foreclose direct damages. Accordingly, the parties’ disagreement is premature. Dreamstime may still collect some 25 damages under the agreement, so the liability clause does not preclude Dreamstime from 26 pressing forward with its breach of contract claim. At this early stage, there is no reason to sort 27 which damages apply. 28 5 1 B. 2 As to the Google Play Agreement, Dreamstime alleged that Google breached the 3 agreement both by removing Dreamstime’s mobile Buyer App from the Google Play app store 4 unfairly and by de-indexing Dreamstime’s Buyer App for common search terms (Dkt. No. 50 ¶ 5 171). 6 7 The Limitation of Liability section of the Google Play Agreement provides in full (capitalization in original) (emphasis added): 8 13.1 TO THE MAXIMUM EXTENT PERMITTED BY LAW, YOU UNDERSTAND AND EXPRESSLY AGREE THAT GOOGLE, ITS SUBSIDIARIES AND AFFILIATES, AND ITS LICENSORS WILL NOT BE LIABLE TO YOU UNDER ANY THEORY OF LIABILITY FOR ANY DIRECT, INDIRECT, INCIDENTAL, SPECIAL, CONSEQUENTIAL, OR EXEMPLARY DAMAGES THAT MAY BE INCURRED BY YOU, INCLUDING ANY LOSS OF DATA, WHETHER OR NOT GOOGLE OR ITS REPRESENTATIVES HAVE BEEN ADVISED OF OR SHOULD HAVE BEEN AWARE OF THE POSSIBILITY OF ANY SUCH LOSSES ARISING. 9 10 11 For the Northern District of California United States District Court Google Play Agreement. 12 13 In other words, the limitation of liability clause is a showstopper here. It forecloses all 14 damages. 15 Because damages is an element for a breach of contract claim, this would bar 16 Dreamstime from recovery under the contract unless the contract was found unconscionable. 17 Dreamstime has the burden of proof to assert unconscionability. See Sanchez v. Valencia 18 Holding Co., LLC, 61 Cal. 4th 899, 911 (2015). Yet, Dreamstime does not argue that the 19 provision here is unconscionable. 20 Instead, Dreamstime attempts to shoehorn allegations of fraud into this breach of 21 contract claim. California Civil Code Section 1668 provides: “[a]ll contracts which have for 22 their object, directly or indirectly, to exempt anyone from responsibility for his own fraud, or 23 willful injury to the person or property of another, or violation of law, whether willful or 24 negligent, are against the policy of the law” (emphasis added). In other words, “limitation of 25 liability clauses are ineffective with respect to claims for fraud and misrepresentation.” Food 26 Safety Net Servs., 209 Cal. App. 4th at 1126 (citation omitted). Some decisions have held that a 27 breach of contract claim which sounds in fraud remains similarly ineffective. See, e.g., Civic 28 Ctr. Drive Apartments Ltd. Partn. v. S.W. Bell Video Servs., 295 F. Supp. 2d 1091, 1106 (N.D. 6 1 Cal. 2003) (Judge Joseph Spero). Dreamstime attempts to rely on this decision to save its 2 claims. The claim for breach of the Google Play Agreement, however, does not sound in fraud. 3 4 The amended complaint contained a single conclusory paragraph which attempted to tie fraud to 5 the de-indexing of Dreamstime’s Buyer App. Yet, this alleged fraud purportedly occurred 6 months after the de-indexing occurred. Specifically, the de-indexing occurred in July 2018 7 whereas certain purported omissions and misrepresentations by Google staff occurred in 8 September 2018 (Dkt. No. 50 ¶¶ 94, 95). To establish a claim of fraudulent inducement, 9 however, one must show that the defendant did not intend to honor its contractual promises For the Northern District of California United States District Court 10 when they were made. Tenzer v. Superscope, Inc., 39 Cal. 3d 18, 30 (1985). 11 The amended complaint does not even attempt to make such a showing. The amended 12 complaint alleged no fraud to the de-indexing of Dreamstime’s app. For this reason, this order 13 rules for Google that no theory of recovery based on the Google Play Agreement can go 14 forward with the exception of any claim excluded by Section 1668 of the California Civil Code. “A motion for judgment on the pleadings is designed to dispose of cases where the 15 16 material facts are not in dispute and a judgment on the merits can be rendered by looking to the 17 substance of the pleadings and any judicially-noticed facts.” Holloway v. Best Buy Co., Inc., 18 2009 WL 1533668, at *4 (N.D. Cal. May 28, 2009) (citation omitted) (Judge Phyllis Hamilton). 19 In light of this purpose, and given that the claims under the Google Play Agreement can be 20 construed as separate claims from those under the AdWords Agreement, Google’s motion as to 21 the breach of contract and breach of implied covenant claims arising from the Google Play 22 Agreement is GRANTED.* CONCLUSION 23 For the foregoing reasons, Google’s motion is GRANTED IN PART AND DENIED IN PART. 24 25 The motion is granted as to the breach of contract and breach of the implied covenant claims 26 under the Google Play Agreement. The motion is denied as to the rest. There shall be no more 27 * 28 Google’s motion notes that Dreamstime’s amended initial disclosures did not assign specific numerical values for most categories of claimed damages (Dkt. No. 75 at 7 n.2). Any disclosures not in compliance with Rule 26(a)(1)(A)(iii) will likely be struck at trial. 7 1 Rule 12 practice in this case. All summary judgment motions must await the completion of 2 discovery. 3 4 IT IS SO ORDERED. 5 6 Dated: June 5, 2019. WILLIAM ALSUP UNITED STATES DISTRICT JUDGE 7 8 9 11 For the Northern District of California United States District Court 10 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 8
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