3:23-cv-02538
N.D. Cal.Dec 8, 2023Background
- Faire Wholesale operates an online wholesale marketplace with password‑protected accounts; only logged‑in users can access nonpublic inventory, pricing, contact, and order information.
- Faire’s service terms prohibit sharing passwords and include an arbitration clause applying to disputes "arising out of or relating to these Terms."
- Tundra created Wholesale Co‑Op, solicited Faire users to provide login credentials (offering cash‑back), solicited Faire sellers for Faire Direct links (charging fees), and used those credentials to access and scrape nonpublic Faire data.
- Faire sued Tundra for CFAA violations, California Penal Code § 502 violations, tortious interference, UCL violations, and Lanham Act false‑advertising; Tundra moved to compel arbitration and to dismiss.
- The court denied Tundra’s motion to compel arbitration because Tundra is a nonsignatory and Faire’s remaining claims are not “intimately founded in and intertwined with” Faire’s service terms.
- The court granted dismissal with leave to amend as to the CFAA claim (due to a mis‑cited statute), the § 502 claim (insufficient allegations of knowing disruption), and the UCL to the extent based on those computer‑abuse statutes; it denied dismissal as to the Lanham Act claim and the UCL claims based on Lanham Act allegations.
Issues
| Issue | Plaintiff's Argument (Faire) | Defendant's Argument (Tundra) | Held |
|---|---|---|---|
| Whether nonsignatory Tundra can compel arbitration of Faire’s remaining claims via equitable estoppel | Faire: Claims (CFAA, §502, Lanham, UCL) do not depend on Faire’s service terms | Tundra: Faire’s claims rely on users breaching service terms; equitable estoppel permits nonsignatory to enforce arbitration clause | Denied — Tundra failed to show Faire must rely on service terms; court decides arbitrability because parties did not agree to arbitrate arbitrability with nonsignatory |
| Sufficiency of CFAA claim and correct statutory basis | Faire: Alleged Tundra accessed protected computers using credentials and copied nonpublic data (intends §1030(a)(2)(C)) | Tundra: Complaint cites wrong CFAA subsection and copied public info, so claim fails | Dismissed with leave to amend — plaintiff may not amend claim via opposition; current pleading cites inapplicable subsection |
| Sufficiency of California Penal Code §502 claim (disruption/knowledge) | Faire: Tundra caused user lockouts, login issues, and unauthorized‑login notices; scheme ongoing after C&D | Tundra: Faire fails to plausibly allege disruption or that Tundra knowingly caused it | Dismissed with leave to amend as to §502(c)(5) — allegations of disruption are plausible but allegations of Tundra’s knowledge are insufficient |
| Lanham Act and UCL (fraudulent & unlawful prongs): standing, deception, materiality, and Rule 9(b) | Faire: Tundra falsely advertised Faire’s endorsement (website screenshot, emails, phone representations), causing consumer reliance and diversion; UCL claim based on Lanham Act and computer statutes | Tundra: Advertising statements not commercial ads; not likely to deceive a substantial segment; insufficient particularity under Rule 9(b) | Denied as to Lanham Act and UCL fraudulent prong based on advertising — allegations (screenshot, targeted emails/calls, specific employee statements) suffice to plead commercial promotion, likelihood of deception, and materiality; UCL unlawful prong survives to extent based on Lanham Act but is dismissed insofar as premised on the computer statutes pending amendment |
Key Cases Cited
- Lim v. TForce Logistics, LLC, 8 F.4th 992 (9th Cir. 2021) (arbitrability requires court to assess existence and scope of arbitration agreement)
- Kramer v. Toyota Motor Corp., 705 F.3d 1122 (9th Cir. 2013) (nonsignatory cannot compel arbitration absent clear agreement to arbitrate arbitrability or reliance/intertwining)
- AT&T Technologies, Inc. v. Communications Workers of America, 475 U.S. 643 (U.S. 1986) (arbitration is a matter of contract; one cannot be compelled to arbitrate without agreement)
- GE Energy Power Conversion France SAS v. Outokumpu Stainless USA, LLC, 140 S. Ct. 1637 (U.S. 2020) (nonsignatory may enforce arbitration clause under state‑law equitable estoppel doctrines)
- Facebook, Inc. v. Power Ventures, Inc., 844 F.3d 1058 (9th Cir. 2016) (violations of website terms alone do not establish CFAA liability; unauthorized access requires revocation of permission)
- hiQ Labs, Inc. v. LinkedIn Corp., 31 F.4th 1180 (9th Cir. 2022) (distinguishes publicly accessible scraping from access to protected resources)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (pleading must state a plausible claim)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (court need not accept legal conclusions or conclusory allegations)
- Kwikset Corp. v. Superior Court, 51 Cal. 4th 310 (Cal. 2011) (UCL standing and reliance requirements for misrepresentation‑based claims)
- Jarrow Formulas, Inc. v. Nutrition Now, Inc., 304 F.3d 829 (9th Cir. 2002) (elements required to plead a Lanham Act false advertising claim)