267 F. Supp. 3d 1235
N.D. Cal.2017Background
- Facebook provided free video-advertising with accompanying performance metrics (including ADW and APW) to advertisers from May 4, 2014 through Sept. 23, 2016; advertisers allege they relied on those metrics when purchasing ads.
- In Aug–Sept 2016 Facebook disclosed a miscalculation: ADW excluded viewers under 3 seconds, inflating ADW/APW (Facebook told some advertisers inflation was ~60–80%).
- Plaintiffs (advertisers/marketing entities) filed a consolidated class action alleging: violation of California Unfair Competition Law (UCL), breach of an implied duty to perform with reasonable care, and quasi-contract/restitution; they seek monetary relief and injunctive relief (audits, disclosures, corrective measures).
- Facebook moved to dismiss and sought judicial notice of several contractual and help-center documents; the court took judicial notice of Facebook’s contractual documents but denied notice of a Facebook post by David Fischer asserting the error was fixed and did not affect billing.
- The court dismissed plaintiffs’ UCL claim for failure to allege actual reliance and dismissed plaintiffs’ request for injunctive relief for lack of standing (both without prejudice), denied dismissal of the breach-of-implied-duty claim, and dismissed the quasi-contract claim with prejudice.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing for UCL (actual reliance) | Plaintiffs say they were "induced" by metrics and thus relied on them when buying/continuing ads | Facebook: plaintiffs do not allege they actually saw the miscalculated metrics or relied on any specific representation | Court: Plaintiffs failed to allege they actually viewed and relied on the metrics; UCL dismissed without prejudice |
| UCL pleadings under Rule 9(b) | Plaintiffs say complaint identifies the two misleading metrics, timeframe, and how metrics were false | Facebook contends plaintiffs lack the who/what/when/where/how specifics required by Rule 9(b) | Court: Plaintiffs met Rule 9(b) specificity for the metrics claim; dismissal on this ground denied |
| UCL unfair-prong (balancing test) | Plaintiffs allege failure to audit/verify metrics gave Facebook unfair advantage and harmed consumers | Facebook says its broad SRR disclaimer/terms preclude an "unfair" claim because users were warned of errors/risks | Court: Disclaimer too vague to foreclose the balancing inquiry at pleading stage; unfair-prong claim survives dismissal challenge |
| Standing for injunctive relief | Plaintiffs seek audits, disclosures, and prohibitions on conduct | Facebook: Plaintiffs lack Article III standing because they do not allege intent to repurchase or a real/immediate threat of future injury | Court: Plaintiffs lack standing to seek injunctive relief absent a plausible future purchase intent; injunctive-relief claim dismissed without prejudice |
| Breach of implied duty to perform with reasonable care | Plaintiffs allege course of performance and contract references to performance metrics created an implied duty to provide accurate metrics | Facebook argues integration and reservation clauses preclude implied duties and that implied-care doctrine applies only to express terms | Court: Course of performance can supplement integrated contracts; plaintiffs sufficiently allege a duty to provide accurate metrics; claim survives |
| Quasi-contract / unjust enrichment | Plaintiffs argue Facebook was unjustly enriched by overcharging for inflated metrics | Facebook: An enforceable contract governs advertising services, so quasi-contract is barred | Court: Because an express contract covers the subject matter, quasi-contract claim is barred; dismissal with prejudice |
Key Cases Cited
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (pleading must state a plausible claim)
- Ashcroft v. Iqbal, 556 U.S. 662 (plausibility standard for pleadings)
- Van Buskirk v. Cable News Network, 284 F.3d 977 (documents attached to complaint may be considered on 12(b)(6))
- United States v. Ritchie, 342 F.3d 903 (incorporation by reference and judicial notice on motion to dismiss)
- Cel-Tech Commc’ns, Inc. v. L.A. Cellular Tel. Co., 20 Cal.4th 163 (UCL disjunctive prongs and standards)
- In re Tobacco II Cases, 46 Cal.4th 298 (actual reliance requirement under UCL for misrepresentation-based claims)
- Durell v. Sharp Healthcare, 183 Cal.App.4th 1350 (affirming need to allege actual viewing/reliance for UCL claims)
- Davis v. HSBC Bank Nevada, N.A., 691 F.3d 1152 (disclaimer may defeat unfair-prong UCL claim at pleading stage when disclosure clearly warns of risk)