Criteo S.A. v. Steel House, Inc.

NOTICE OF MOTION AND MOTION to Dismiss Amended Counterclaims And Strike Affirmative Defenses

C.D. Cal.October 4, 2016

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Criteo S.A.’s Motion To Dismiss Amended Counterclaims And Strike Affirmative Defenses JACK P. DICANIO (SBN 138782) Jack.DiCanio@skadden.com JAMES P. SCHAEFER (SBN 250417) James.Schaefer@skadden.com SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 525 University Avenue, Suite 1400 Palo Alto, California 94301 Telephone: (650) 470-4500 Facsimile: (650) 470-4570 Attorneys for Plaintiff and Counter-Defendant Criteo S.A. (Additional Counsel On Following Page) UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA WESTERN DIVISION CRITEO S.A., Plaintiff, v. STEEL HOUSE, INC., Defendant. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) CASE NO.: 2:16-cv-4207-SVW-MRW 1) CRITEO S.A.’S NOTICE OF MOTION AND MOTION TO DISMISS AMENDED COUNTERCLAIMS AND STRIKE AFFIRMATIVE DEFENSES; 2) MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT THEREOF; and FILED/LODGED UNDER SEPARATE COVER: 3) [PROPOSED] ORDER GRANTING MOTION TO DISMISS AND TO STRIKE. Hearing Date: November 7, 2016 Time: 1:30 p.m. Courtroom: 6 Judge: Hon. Stephen V. Wilson Complaint Filed: June 13, 2016 STEEL HOUSE, INC., Counter-Claimant, v. CRITEO S.A., Counter-Defendant. Case 2:16-cv-04207-SVW-MRW Document 40 Filed 10/04/16 Page 1 of 35 Page ID #:743 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Criteo S.A.’s Motion To Dismiss Amended Counterclaims And Strike Affirmative Defenses ABRAHAM A. TABAIE (SBN 260727) Abraham.Tabaie@skadden.com WINSTON P. HSIAO (SBN 273638) Winston.Hsiao@skadden.com MATTHEW J. TAKO (SBN 307013) Matthew.Tako@skadden.com SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 300 South Grand Avenue, Suite 3400 Los Angeles, California 90071-3144 Telephone: (213) 687-5000 Facsimile: (213) 687-5600 Attorneys for Plaintiff and Counter-Defendant Criteo S.A. Case 2:16-cv-04207-SVW-MRW Document 40 Filed 10/04/16 Page 2 of 35 Page ID #:744 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Criteo S.A.’s Motion To Dismiss Counterclaims And Strike Affirmative Defenses NOTICE OF MOTION AND MOTION TO ALL PARTIES AND THEIR ATTORNEYS OF RECORD: PLEASE TAKE NOTICE that on November 7, 2016, at 1:30 p.m., or at the nearest available date at which counsel may be heard, before the Honorable Stephen V. Wilson, in Courtroom 6 of the above-referenced Court located at 312 N. Spring Street, Los Angeles, CA 90012-4701, Criteo S.A. (“Criteo”) will, and hereby does, move the Court for an order dismissing Steel House, Inc.’s (d/b/a SteelHouse (“SteelHouse”)) amended counterclaims and striking SteelHouse’s affirmative defenses with prejudice. This Motion is made pursuant to Federal Rules of Civil Procedure 8, 9(b), and 12(b)(6) for failure to state a claim and pursuant to Rule 12(f) for pleading insufficient defenses. This Motion is based on this Notice of Motion and Motion to Dismiss SteelHouse’s Amended Counterclaims and Strike Affirmative Defenses, the accompanying Memorandum of Points and Authorities, all pleadings and papers filed in this action, all matters of which this Court may take judicial notice, and such additional papers and arguments as may be presented to the Court at or in connection with the hearing on this Motion. This Motion is made following a conference of counsel pursuant to Local Rule 7-3, which took place on September 27, 2016, more than seven days prior to the last day for filing the Motion. (See C.D. Cal. L.R. 7-3.) DATED: October 4, 2016 Respectfully submitted, By: /s/ Jack P. DiCanio JACK P. DICANIO SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP Attorneys for Plaintiff and Counter-Defendant Criteo S.A. Case 2:16-cv-04207-SVW-MRW Document 40 Filed 10/04/16 Page 3 of 35 Page ID #:745 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 i Criteo S.A.’s Motion To Dismiss Amended Counterclaims And Strike Affirmative Defenses TABLE OF CONTENTS Page TABLE OF AUTHORITIES ......................................................................................... i I. INTRODUCTION .............................................................................................. 1 II. BACKGROUND ................................................................................................ 4 III. ARGUMENT...................................................................................................... 5 A. All Six Of SteelHouse’s Counterclaims Should Be Dismissed ............... 5 1. SteelHouse Failed To State A Lanham Act Claim ........................ 7 2. SteelHouse Failed To State A § 17500 False Advertising Claim ........................................................................................... 10 3. SteelHouse Failed To State A UCL Claim .................................. 12 a. SteelHouse Failed To Allege Unlawful Conduct .............. 13 b. SteelHouse Failed To Adequately Allege Fraud ............... 13 c. SteelHouse’s Reliance, Causation And Damages Allegations Are Implausible .............................................. 13 4. SteelHouse Failed To State A Contract Interference Claim ........ 14 a. SteelHouse Failed To Allege A Valid Contractual Relationship Existed Between Itself And A Third Party ................................................................................. 14 b. SteelHouse Failed To Allege A Breach ............................ 15 5. SteelHouse Failed To Allege A Claim For Intentional Interference With Prospective Economic Advantage .................. 16 6. SteelHouse Fails To Allege A Trade Libel Claim ....................... 17 a. Criteo’s alleged advertising concerning its own click count numbers does not support a trade libel claim. ......... 17 b. Criteo’s alleged statements to SteelHouse customers also do not support a trade libel claim. .............................. 18 c. SteelHouse’s trade libel claims also fail because SteelHouse failed to allege special damages. .................... 20 7. The Court Should Dismiss The ACC With Prejudice ................. 21 B. SteelHouse’s Affirmative Defenses Should Be Stricken ....................... 21 IV. CONCLUSION ................................................................................................ 25 Case 2:16-cv-04207-SVW-MRW Document 40 Filed 10/04/16 Page 4 of 35 Page ID #:746 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 i Criteo S.A.’s Motion To Dismiss Amended Counterclaims And Strike Affirmative Defenses TABLE OF AUTHORITIES CASES PAGES Ashcroft v. Iqbal, 556 U.S. 662 (2009) ................................................................................... 2, 5, 6 Azco Biotech Inc. v. Qiagen, N.V., No. 12-CV-2599 BEN (DHB), 2013 WL 4500782 (S.D. Cal. Aug. 20, 2013) ................................................. 19 Beachbody, LLC v. Universal Nutrients, LLC, No. CV 16-02015-R, 2016 WL 3912014 (C.D. Cal. July 18, 2016) .................................................... 7 Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) ..................................................................................... 5, 12 In re Centerstone Diamonds, Inc., Nos. 2:09-bk-23945-PC, 2:13-ap-02040-PC, 2014 WL 1330186 (Bankr. C.D. Cal. Apr. 2, 2014) ........................................ 16 Code Rebel, LLC v. Aqua Connect, Inc., No. CV 13-4539 RSWL (MANx), 2013 WL 5405706 (C.D. Cal. Sept. 24, 2013) ................................................. 20 Couveau v. American Airlines, Inc., 218 F.3d 1078 (9th Cir. 2000) ...................................................................... 3, 24 CTF Development, Inc. v. Penta Hospitality, LLC, No. C 09-02429 WHA, 2009 WL 3517617 (N.D. Cal. Oct. 26, 2009) .................................................. 22 Davidson v. Kimberly-Clark Corp., 76 F. Supp. 3d 964 (N.D. Cal. 2014)............................................................ 7, 10 Della Penna v. Toyota Motor Sales, U.S.A., Inc., 11 Cal. 4th 376 (1995) .................................................................................. 3, 16 Delphix Corp. v. Actifo, Inc., No. C 13-4613 RS, 2014 WL 4628490 (N.D. Cal. Mar. 19, 2014) ................... 7 Desert European Motorcars, Ltd. v. Desert European Motorcars, Inc., No. EDCV 11-197 RSWL (DTBx), 2011 WL 3809933 (C.D. Cal. Aug. 25, 2011) ................................................. 23 Dodson v. CSK Auto, Inc., No. 2:13-cv-00346-GEB-AC, 2013 WL 3942002 (E.D. Cal. July 30, 2013) .................................................. 22 Durell v. Sharp Healthcare, 183 Cal. App. 4th 1350 (2010) ......................................................................... 14 Case 2:16-cv-04207-SVW-MRW Document 40 Filed 10/04/16 Page 5 of 35 Page ID #:747 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 ii Criteo S.A.’s Motion To Dismiss Amended Counterclaims And Strike Affirmative Defenses E & J Gallo Winery v. Grenade Beverage, LLC, No. 1:13-cv-00770-AWI-SAB, 2014 WL 1747688 (E.D. Cal. Apr. 30, 2014) .................................................. 23 First Advantage Background Services Corp. v. Private Eyes, Inc., 569 F. Supp. 2d 929 (N.D. Cal. 2008) ................................................... 3, 17, 19 Foster v. Metropolitan Life Insurance Co., 243 F. App’x. 208 (9th Cir. 2007) .................................................................... 24 G & G Closed Circuit Events, LLC v. Nguyen, No. 10-CV-00168-LHK, 2010 WL 3749284 (N.D. Cal. Sept. 23, 2010) ................................................. 22 In re Gilead Sciences Securities Litigation, 536 F.3d 1049 (9th Cir. 2008) .......................................................................... 12 Gonzalez v. Preferred Freezer Services, LBF, LLC, No. CV 12-3467 ODW (FMO), 2012 WL 2602882 (C.D. Cal. July 5, 2012) .................................................... 23 Gospel Missions of American v. City of L.A., 328 F.3d 548 (9th Cir. 2003) .............................................................................. 1 Grodzitsky v. American Honda Motor Co., No. 2:12-cv-1142-SVW-PLA, 2013 WL 2631326 n.4 (C.D. Cal. June 12, 2013) ............................................ 13 Guess, Inc. v. Superior Court, 176 Cal. App. 3d 473 (1986) ............................................................................ 17 Guttman v. La Tapatia Tortilleria, Inc., No. 15-cv-02042-SI, 2015 WL 7283024 (N.D. Cal. Nov. 18, 2015) ..................................... 11, 12, 14 Harrison Ventures, LLC v. Alta Mira Treatment Center, LLC, No. C 10-00188 RS, 2010 WL 1929566 (N.D. Cal. May 12, 2010) ................................................. 15 Heartland Payment Systems, Inc. v. Mercury Payment Systems LLC, No. CV C 14-0437 CW, 2014 WL 5812294 (N.D. Cal. Nov. 7, 2014) ............................................. 13, 16 Hernandez v. Select Portfolio, Inc., No. CV 15-01896 MMM (AJWx), 2015 WL 3914741 (C.D. Cal. June 25, 2015) .................................................. 11 Homeland Housewares, LLC v. Euro-Pro Operating, LLC, No. CV 14-03954 DDP (MANx), 2015 WL 476287 (C.D. Cal. Feb. 5, 2015) ........................................................ 7 I.B. ex rel. Fife v. Facebook, Inc., 905 F. Supp. 2d 989 (N.D. Cal. 2012) ............................................................. 14 Case 2:16-cv-04207-SVW-MRW Document 40 Filed 10/04/16 Page 6 of 35 Page ID #:748 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 iii Criteo S.A.’s Motion To Dismiss Amended Counterclaims And Strike Affirmative Defenses Implant Direct Sybron International v. Zest IP Holdings, LLC, No. 11-CV-2247-LAB-WVG, 2012 WL 1969292 (S.D. Cal. June 1, 2012) .................................................... 18 Ingels v. Westwood One Broadcasting Services, Inc., 129 Cal. App. 4th 1050 (2005) ......................................................................... 13 J & J Sports Productions, Inc. v. Jimenez, No. 10cv0866 DMS (RBB), 2010 WL 5173717 (S.D. Cal. Dec. 15, 2010) ........................................ 4, 22, 23 Jackson v. City of Inglewood, No. CV 07-05311 (TJH (AJW), 2009 WL 699948 (C.D. Cal. Mar. 12, 2009) ..................................................... 1 Jarrow Formulas, Inc. v. LaMarche, 31 Cal. 4th 728 (2003) ...................................................................................... 20 Joseph v. Kaye, No. CV 16-01245 SJO (GJSx), 2016 WL 3677142 (C.D. Cal. July 7, 2016) .................................................... 13 Kane v. Bosco, No. 10-CV-01787-PHX-JAT, 2010 WL 4879177 (D. Ariz. Nov. 23, 2010) ..................................................... 8 Karl Storz Endoscopy-America, Inc. v. Surgical Technologies, Inc., 285 F.3d 848 (9th Cir. 2002) ............................................................................ 25 Kendall v. Visa U.S.A., Inc., 518 F.3d 1042 (9th Cir. 2008) .......................................................................... 21 Korea Supply Co. v. Lockheed Martin, Co., 29 Cal. 4th 1134 (Cal. 2003) ............................................................................ 16 Mallen v. Alphatec Holdings, Inc., 861 F. Supp. 2d 1111 (S.D. Cal. 2012), aff’d sub. nom. Fresno County Employees’ Retirement Association v. Alphatec Holdings, Inc., 607 F. App’x 694 (9th Cir. 2015) ........................... 9 Mangindin v. Washington Mutual Bank, 637 F. Supp. 2d 700 (N.D. Cal. 2009) ............................................................. 10 Mario v. Primuth, No. 82-0456-E, 1982 WL 1378 (S.D. Cal. Sept. 1, 1982) ........................................................... 8 McGraw Co. v. Aegis General Insurance Agency, Inc., No. 16-cv-00274-LB, 2016 WL 3745063 (N.D. Cal. July 13, 2016) .................................................... 6 Melaleuca, Inc. v. Clark, 66 Cal. App. 4th 1344 (1998) ....................................................................... 3, 18 Case 2:16-cv-04207-SVW-MRW Document 40 Filed 10/04/16 Page 7 of 35 Page ID #:749 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 iv Criteo S.A.’s Motion To Dismiss Amended Counterclaims And Strike Affirmative Defenses Microtec Research, Inc. v. Nationwide Mutual Insurance Co., 40 F.3d 968 (9th Cir. 1994) .................................................................... 3, 17, 18 Moenig v. Bank of America, N.A., No. 2:14-cv-01399-KJM-EFB, 2015 WL 2185245 (E.D.Cal. May 8, 2015) ..................................................... 12 Moss v. U.S. Secret Service, 572 F.3d 962 (9th Cir. 2009) .............................................................................. 5 Naylor v. Flavan, No. CV 08-03746 GAF (AJW), 2009 WL 1468708 (C.D. Cal. May 19, 2009) .................................................... 1 Neubronner v. Milken, 6 F.3d 666 (9th Cir. 1993) .................................................................................. 8 New Show Studios LLC v. Needle, No. 2:14-cv-01250-CAS(MRWx), 2014 WL 2988271 (C.D. Cal. June 30, 2014) .................................................. 11 New.Net, Inc. v. Lavasoft, 356 F. Supp. 2d 1090 (C.D. Cal. 2004) ............................................................ 20 Oak Grove Investors v. Travelers Insurance Co., No. C 92-3326 BAC, 1993 WL 137302 (N.D. Cal. Apr. 28, 1993) ..................................................... 8 O’Connor v.Uber Technologies, Inc., 58 F. Supp. 3d 989 (N.D. Cal. 2014)................................................................ 13 Openwave Messaging, Inc. v. Open-Xchange, Inc., No. 16-cv-00253-WHP, 2016 WL 2621872 n.7 (N.D. Cal. May 9, 2016) ............................................... 6 Pacific Gas & Electric Co. v. Bear Stearns & Co., 50 Cal. 3d 1118 (1990) ............................................................................... 14, 15 Piping Rock Partners, Inc. v. David Lerner Associates, Inc., 946 F. Supp. 2d 957 (N.D. Cal. 2013) ................................................... 3, 17, 19 Rael v. Dooney & Bourke, Inc., No. 16cv0371 JM (DHB), 2016 WL 3952219 (S.D. Cal. July 22, 2016) ........................................... 7, 9, 10 Republic Molding Corp. v. B.W. Photo Utilities, 319 F.2d 347 (9th Cir. 1963) ............................................................................ 24 Robinson v. HSBC Bank USA, 732 F. Supp. 2d 976 (N.D. Cal. 2010) ............................................................. 17 Rombach v. Chang, 355 F.3d 164 (2d Cir. 2008), aff’d 355 F.3d 164 (2d Cir.) ............................... 2 Case 2:16-cv-04207-SVW-MRW Document 40 Filed 10/04/16 Page 8 of 35 Page ID #:750 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 v Criteo S.A.’s Motion To Dismiss Amended Counterclaims And Strike Affirmative Defenses Rosenthal v. Irell & Manella, 135 Cal. App. 3d 121 (1982) ............................................................................ 20 SB Diversified Products, Inc. v. Murchison, No. 12cv2328 JAH (MDD), 2014 WL 3894353 (S.D. Cal. July 28, 2014) ................................................... 20 Security People v. Classic Woodworking, LLC, No. C-04-3133 MMC, 2005 WL 645592 (N.D. Cal. Mar. 4, 2005) ..................................................... 23 Segura v. Felker, No.CIV S-08-2137-SPG (PC), 2010 WL 1689160 (E.D. Cal. Apr. 26, 2010) .................................................. 21 Solis v. Couturier, No. 2:08-cv-02732-RRB-GGH, 2009 WL 2022343 (E.D. Cal. July 8, 2009) .................................................... 24 Somers v. Apple, Inc., 729 F.3d 953 (9th Cir. 2013) .............................................................................. 6 Spann v. J.C. Penney Corp., No. SA CV 12-0215 FMO (RNBx), 2015 WL 11072165 (C.D. Cal. July 6, 2015) .................................................. 22 State of California ex rel. State Lands Commission v. United States, 512 F. Supp. 36 (N.D. Cal. 1981) ..................................................................... 21 Tobacco II Cases, 46 Cal. 4th 298 (2009) ...................................................................................... 14 TransFresh Corp.v. Ganzerla & Associates, Inc., 862 F. Supp. 2d 1009 (N.D. 2012) ..................................................................... 6 UMG Recordings, Inc. v. Global Eagle Entertainment, Inc., 117 F. Supp. 3d 1092 (C.D. Cal. 2015) ..................................................... passim United National Maintenance, Inc. v. San Diego Convention Centre, Inc., 766 F.3d 1002 (9th Cir. 2014), cert. denied, 135 S. Ct. 980 (2015) ................ 15 Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097 (9th Cir. 2003) ............................................................................ 6 Vogel v. Huntington Oaks Delaware Partners, LLC, 291 F.R.D. 438 (C.D. Cal. 2013) ....................................................................... 3 Vogel v. OM ABS, Inc., No. CV 13-01797 RSWL (JEMx), 2014 WL 340662 (C.D. Cal. Jan. 30, 2014) ..................................................... 22 W. Sugar Co-op. v. Archer-Daniels-Midland Co., No. CV 11-3473 CBM (MANx), 2012 WL 3101659 (C.D. Cal. July 31, 2012) .................................................... 8 Case 2:16-cv-04207-SVW-MRW Document 40 Filed 10/04/16 Page 9 of 35 Page ID #:751 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 vi Criteo S.A.’s Motion To Dismiss Amended Counterclaims And Strike Affirmative Defenses Warner v. Tinder Inc., 105 F. Supp. 3d 1083 (C.D. Cal. 2015) ........................................................ 2, 11 Watson v. Bank of America, N.A., No. 16cv513-GPC(MDD), 2016 WL 3552061 (S.D. Cal. June 30, 2016) .................................................. 13 Wofford v. Apple Inc., No. 11-CV-0034 AJB NLS, 2011 WL 5445054 (S.D. Cal. Nov. 9, 2011) ..................................................... 6 Xilinx, Inc. v. Altera Corp., No. C 93-20709-RMW (EAI), 1994 WL 782236 (N.D. Cal. Feb. 8, 1994) ...................................................... 25 Yagman v. Galipo, No. CV 12-7908-GW(SHx), 2013 WL 1287409 (C.D. Cal. Mar. 25, 2013) ............................................. 3, 16 Zatkin v. Primuth, 551 F. Supp. 39 (S.D. Cal. 1982) ....................................................................... 1 Zef Scientific, Inc. v. Shimadzu Scientific Instruments, Inc., No. 14CV1758 JAH (RBB), 2016 WL 1255787 (S.D. Cal. Mar. 31, 2016) .................................................. 17 RULES Fed. R. Civ. P. 8(a) ....................................................................................................... 5 Fed. R. Civ. P. 9(b) .............................................................................................. passim Fed. R. Civ. P. 12(b) ..................................................................................................... 5 Fed. R. Civ. P. 12(f) .................................................................................................... 21 Case 2:16-cv-04207-SVW-MRW Document 40 Filed 10/04/16 Page 10 of 35 Page ID #:752 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1 Criteo S.A.’s Motion To Dismiss Amended Counterclaims And Strike Affirmative Defenses I. INTRODUCTION Criteo sued SteelHouse to put an end to a counterfeit click fraud scheme perpetrated by SteelHouse to steal credit for online sales attributable to Criteo and other participants in the performance-based online marketing industry. (Dkt. 1.) On July 26, 2016, to divert attention from its own misconduct, SteelHouse filed baseless and fundamentally flawed counterclaims against Criteo. (Dkt. 21.) On August 15, 2016, Criteo moved to dismiss SteelHouse’s Counter- Complaint. (Dkt. 23.) SteelHouse did not oppose Criteo’s motion to dismiss. Instead, effectively conceding that its counterclaims were fatally flawed, SteelHouse elected to file amended counterclaims (the “ACC”). (Dkt. 36.) SteelHouse’s ACC contains the same baseless counterclaims that SteelHouse knows to be false and that should be dismissed for multiple reasons. First, SteelHouse’s counterclaims are based, in whole or in part, on the conclusory allegations that Criteo “generates fake clicks” or is “counterfeiting clicks” to inflate its click count numbers. SteelHouse’s ACC fails, however, to allege facts that support these false allegations. Instead, SteelHouse alleges “[o]n information and belief, Criteo’s click rate is fraudulent . . . as a result of adware, click bots . . ., or code” injected or created by either Criteo or unidentified “affiliates.” (ACC ¶ 22.) “Allegations of fraud based on information and belief usually do not satisfy the degree of particularity required under Rule 9(b).” Zatkin v. Primuth, 551 F. Supp. 39, 42 (S.D. Cal. 1982). This is particularly true in this case because SteelHouse’s own CEO affirms his own belief that adware and bots are a ubiquitous part of the internet. 1 1 In opposing Criteo’s Motion for Preliminary Injunction, SteelHouse’s CEO Mark Douglas acknowledged that all participants in the online ad industry suffer from third-party adware and bot traffic. (7/25/16 Decl. of Mark Douglas (Dkt. 19-1) (“Douglas Decl.”) ¶ 28.) Courts can “consider a statement made in briefs to be a judicial admission.” Gospel Missions of Am. v. City of L.A., 328 F.3d 548, 557 (9th Cir. 2003). This includes declarations filed by a party in the same matter, and, thus, courts consider previously filed declaration statements by the plaintiff as binding on the plaintiff at the pleading stage. See Jackson v. City of Inglewood, 2009 WL 699948, at *2, *6 n. 4-5 (C.D. Cal. Mar. 12, 2009) (statements in plaintiff’s declaration in support of opposition to motion to dismiss previous complaint constitute judicial admissions and can be considered in motion to dismiss subsequent complaint); see also Naylor v. Flavan, 2009 WL 1468708, at *5 (C.D. Cal. May 19, Case 2:16-cv-04207-SVW-MRW Document 40 Filed 10/04/16 Page 11 of 35 Page ID #:753 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2 Criteo S.A.’s Motion To Dismiss Amended Counterclaims And Strike Affirmative Defenses Thus, the absence of factual allegations supporting SteelHouse’s speculation that Criteo uses adware and bots is fatal to SteelHouse’s claims. Second, SteelHouse speculates that Criteo must be engaged in fraud because: (1) SteelHouse cannot determine from the data available to it the source of every click attributed to Criteo; (2) an allegedly large percentage of clicks attributed to Criteo occurred after a user made a purchase on an e-tailer’s website; and (3) multiple clicks attributed to Criteo occur within short periods of time. Such speculation does not come close to satisfying the pleading requirements of either Rule 8 or 9(b) of the Federal Rules of Civil Procedure. See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (pleading under Rule 8 “demands more than an unadorned, the-defendant-unlawfully- harmed-me accusation” and rejects “‘naked assertion[s]’ devoid of ‘further factual enhancement’”) (citation omitted); Rombach v. Chang, 355 F.3d 164, 175 (2d Cir. 2004) (explaining that to satisfy Rule 9(b) “plaintiffs cannot rest on their say-so that these statements are fraudulent; they must explain why”). Third, SteelHouse’s § 17500 and UCL claims fail because SteelHouse’s reliance, causation and damages allegations are fundamentally inconsistent and inherently implausible. SteelHouse’s allegation that Criteo’s allegedly inflated click count numbers detrimentally caused SteelHouse to develop a non-click based business model is simply incompatible with the position SteelHouse has taken throughout this litigation: that its “innovative” business model is the secret to its alleged success and the reason why Criteo engaged in its alleged click count fraud, not the other way around. See Warner v. Tinder Inc., 105 F. Supp. 3d 1083, 1098 (C.D. Cal. 2015). Fourth, SteelHouse’s contract interference claim fails because SteelHouse does not allege: (i) the “nature and extent” of the supposed contracts that Criteo allegedly interfered with, UMG Recordings, Inc. v. Global Eagle Entertainment, Inc., 117 F. Supp. 3d 1092, 1115 (C.D. Cal. 2015); or (ii) that Criteo’s conduct actually induced a 2009) (considering plaintiff’s declaration in related case as judicial admission for purposes of evaluating defendant’s motion to dismiss). Case 2:16-cv-04207-SVW-MRW Document 40 Filed 10/04/16 Page 12 of 35 Page ID #:754 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3 Criteo S.A.’s Motion To Dismiss Amended Counterclaims And Strike Affirmative Defenses breach of any existing contractual obligations owed to SteelHouse, Yagman v. Galipo, 2013 WL 1287409, at *5 (C.D. Cal. Mar. 25, 2013). Fifth, SteelHouse’s intentional interference with prospective economic advantage claim fails because SteelHouse does not adequately allege that Criteo engaged in independently wrongful and actionable conduct that interfered with SteelHouse’s alleged business relationships. Della Penna v. Toyota Motor Sales, U.S.A., Inc., 11 Cal. 4th 376, 392-93 (1995). Sixth, SteelHouse fails to adequately allege either theory of trade libel asserted in its ACC. As to its false advertising-based trade libel claim, SteelHouse does not adequately allege that the Criteo advertisements underlying SteelHouse’s claim are false or actually disparage SteelHouse’s products. See Microtec Research, Inc. v. Nationwide Mut. Ins. Co., 40 F.3d 968, 972-73 (9th Cir. 1994). As to its trade libel claim based on Criteo allegedly making false and disparaging statements to SteelHouse’s clients about SteelHouse’s misconduct, SteelHouse does not adequately allege that: (1) Criteo’s statements were false, id.; (2) Criteo knew or should have known its alleged statements about SteelHouse’s misconduct were false, Melaleuca, Inc. v. Clark, 66 Cal. App. 4th 1344, 1350 (1998); (3) SteelHouse actually lost customers or suffered any other damages as a result of the alleged statements, Piping Rock Partners, Inc. v. David Lerner Associates, Inc., 946 F. Supp. 2d 957, 981 (N.D. Cal. 2013), aff’d, 609 F. App’x 497 (9th Cir. 2015); or (4) what was said, who said it, when it was said, or who it was said to, First Advantage Background Services Corp. v. Private Eyes, Inc., 569 F. Supp. 2d 929, 938 (N.D. Cal. 2008). In addition, both theories of trade libel fail because SteelHouse does not allege special damages with the required specificity. Id. Finally, SteelHouse’s affirmative defenses fail because: (1) eight are not even affirmative defenses; (2) SteelHouse did not allege any facts to support two of them; and (3) the facts alleged are insufficient to support the remaining two. See Couveau v. Am. Airlines, Inc., 218 F.3d 1078, 1083 (9th Cir. 2000); Vogel v. Huntington Oaks Case 2:16-cv-04207-SVW-MRW Document 40 Filed 10/04/16 Page 13 of 35 Page ID #:755 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 4 Criteo S.A.’s Motion To Dismiss Amended Counterclaims And Strike Affirmative Defenses Delaware Partners, LLC, 291 F.R.D. 438, 441 (C.D. Cal. 2013); J & J Sports Prods., Inc. v. Jimenez, 2010 WL 5173717, at *2 (S.D. Cal. Dec. 15, 2010). For these reasons and those discussed below, SteelHouse’s counterclaims should be dismissed and its affirmative defenses should be stricken with prejudice. II. BACKGROUND Criteo was founded in 2005 by a small group of innovators at a start-up incubator in Paris. In just over ten years, it has become the global leader in digital performance advertising: Criteo has nearly 12,000 clients, delivers personalized ads to over 130 countries, served 710 billion ads in 2015, has 1.2 billion unique internet users per month, and in the past 12 months has generated roughly $22 billion in post- click sales for its clients. Criteo drives sales for e-commerce businesses by intelligently converting shoppers into purchasers with dynamic personalized ads. This is achieved by: (1) accurately recommending the best offer from an entire product catalog; (2) precisely predicting purchase intent; and (3) optimizing campaign performance by dynamically selecting the creative components that will drive the most user interaction with ads. The Criteo Engine that enables this performance analyzes data from over 1.1 billion users each month, continuously sharpening its prediction, recommendation, and bidding algorithms to maximize advertising campaign results. Ignoring Criteo’s tech superiority, creativity, and data-rich customer insights, SteelHouse conclusorily alleges that Criteo’s superior performance is simply too good to be true and, therefore, must result from Criteo using bots and adware to fraudulently inflate its click-count numbers. (ACC ¶¶ 4-5.) Specifically, SteelHouse speculates that Criteo must be engaged in fraud because: (1) SteelHouse cannot determine from the data available to it the source of every click attributed to Criteo; (2) an allegedly large percentage of clicks attributed to Criteo occurred after a user made a purchase on an e-tailer’s website; and (3) multiple clicks attributed to Criteo occur within short periods of time. (Id. ¶¶ 22-44.) SteelHouse alleges no facts, Case 2:16-cv-04207-SVW-MRW Document 40 Filed 10/04/16 Page 14 of 35 Page ID #:756 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 5 Criteo S.A.’s Motion To Dismiss Amended Counterclaims And Strike Affirmative Defenses however, showing that Criteo actually uses bots and adware to inflate its click-count. In support of its intentional interference and trade libel claims, SteelHouse also alleges that Criteo “intentionally made false and misleading statements” accusing SteelHouse of misconduct. (Id. ¶¶ 97, 105, 110.) Specifically, SteelHouse alleges that Criteo employees made references to SteelHouse’s “inflated . . . performance levels,” “artificially positive performance results,” and “inflated click and post-click volumes.” (Id. ¶¶ 58-62.) These references cannot sustain either intentional interference or trade libel claims because SteelHouse has acknowledged in this case that its click-count numbers were inflated. (Id. ¶ 56.) 2 SteelHouse also alleges that Criteo falsely “accused SteelHouse of fraud and deceptive business practices.” (Id. ¶ 62.) SteelHouse’s ACC fails, however, to allege necessary facts, such as who made those statements, to whom they were made, when they were made, or even what was said. III. ARGUMENT A. All Six Of SteelHouse’s Counterclaims Should Be Dismissed A complaint cannot survive a Rule 12(b)(6) motion to dismiss if it does not contain factual allegations sufficient to “state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “[A] plaintiff’s obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Id. at 555 (quoting Fed. R. Civ. P. 8(a)). Rule 8 “demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation” and rejects “‘naked assertion[s]’ devoid of ‘further factual enhancement.’” Iqbal, 556 U.S. at 678 (citation omitted). Rather, “for a complaint to survive a motion to dismiss, the non- conclusory ‘factual content,’ and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief.” (citation omitted) 2 SteelHouse’s CEO has admitted both that its click-count numbers were inflated and that it engaged in the conduct alleged in Criteo’s complaint. (Douglas Decl. ¶¶ 49-51.) Case 2:16-cv-04207-SVW-MRW Document 40 Filed 10/04/16 Page 15 of 35 Page ID #:757 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 6 Criteo S.A.’s Motion To Dismiss Amended Counterclaims And Strike Affirmative Defenses Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009) (citing Iqbal, 556 U.S. at 678 (“Where a complaint pleads facts that are merely consistent with a defendant’s liability, it stops short of the line between possibility and plausibility of entitlement to relief.”)); Somers v. Apple, Inc., 729 F.3d 953, 960 (9th Cir. 2013) (factual allegations “must rise above the mere conceivability or possibility of unlawful conduct that entitles the pleader to relief”). Furthermore, counterclaims that sound in fraud are subject to “the heightened pleading requirements of Rule 9(b).” TransFresh Corp. v. Ganzerla & Assocs. Inc., 862 F. Supp. 2d 1009, 1018 (N.D. Cal. 2012); Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1102-05 (9th Cir. 2003) (holding that Rule 9(b) applies to §17500 and UCL claims when a “unified course of fraudulent conduct” provides the basis for the claims); Openwave Messaging, Inc. v. Open-Xchange, Inc., 2016 WL 2621872, at *5 n.7 (N.D. Cal. May 9, 2016) (applying Rule 9(b) to Lanham Act false advertising claim); UMG Recordings, Inc., 117 F. Supp. 3d at 1117 (applying Rule 9(b) to intentional interference with prospective economic advantage claim when act involves fraud and misrepresentation); Wofford v. Apple Inc., 2011 WL 5445054, at *3 (S.D. Cal. Nov. 9, 2011) (applying Rule 9(b) to intentional interference with contract claim); McGraw Co. v. Aegis Gen. Ins. Agency, Inc., 2016 WL 3745063, at *3 (N.D. Cal. July 13, 2016) (applying 9(b) to trade libel claim sounding in fraud). “To satisfy Rule 9(b), the plaintiff must include the who, what, when, where, and how of the fraud.” TransFresh, 862 F. Supp. 2d at 1017 (citation omitted). “The plaintiff must set forth what is false or misleading about a statement, and why it is false.” Id. (citation omitted). “[O]n a motion to dismiss, if particular averments of fraud are insufficiently pled under Rule 9(b), a district court should disregard those averments, or strip them from the claim . . . [and] then examine the allegations that remain to determine whether they state a claim.” Id. (second alteration in original) (citations omitted). Here, all six of SteelHouse’s counterclaims are premised on the allegation that Case 2:16-cv-04207-SVW-MRW Document 40 Filed 10/04/16 Page 16 of 35 Page ID #:758 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 7 Criteo S.A.’s Motion To Dismiss Amended Counterclaims And Strike Affirmative Defenses Criteo fraudulently inflated and promoted its click count numbers in order to “deceive and defraud SteelHouse and e-tailers.” (ACC ¶¶ 68-69, 77-79, 87-89, 95, 105, 108- 19.) In addition, three of SteelHouse’s six counterclaims are also premised on the allegation that Criteo “intentionally made false and misleading statements about SteelHouse’s attribution method to SteelHouse’s e-tail clients.” (Id. ¶¶ 97, 105, 110.) SteelHouse was required to satisfy the heightened pleading requirements of Rule 9(b). 1. SteelHouse Failed To State A Lanham Act Claim To state a Lanham Act false advertising claim, SteelHouse was required to plead that Criteo made a false statement of fact in a commercial advertisement about its own or another’s product. See Beachbody, LLC v. Universal Nutrients, LLC, 2016 WL 3912014, at *3 (C.D. Cal. July 18, 2016). Specifically, SteelHouse was required to allege that Criteo made statements that either: (1) were literally false; or (2) misled, confused, or deceived the public. See Homeland Housewares, LLC v. Euro-Pro Operating, LLC, 2015 WL 476287, at *3 (C.D. Cal. Feb. 5, 2015). At the motion to dismiss stage, “[i]t is not enough . . . to simply claim that [an advertisement] is false - [the plaintiff] must allege facts showing why it is false.” Davidson v. Kimberly-Clark Corp., 76 F. Supp. 3d 964, 974 (N.D. Cal. 2014) (emphasis in original); Rael v. Dooney & Bourke, Inc., 2016 WL 3952219, at *3 (S.D. Cal. July 22, 2016) (dismissing false advertising claims based on misleading prices where plaintiff relies on “say-so and conclusory allegations instead of facts”). Here, SteelHouse fails to adequately allege facts showing that Criteo made any false statement. Instead, SteelHouse alleges “[on] information and belief, Criteo’s click rate is fraudulent . . . as a result of adware, click bots . . ., or code created by Criteo or its affiliates to manufacture fake clicks and mask the source of these clicks” (ACC ¶ 22 (emphasis added)), and, therefore, Criteo’s statements regarding its click- count numbers are false. (Id. ¶¶ 22, 27.) Fraud allegations based on “information and belief” do not satisfy Rule 9(b). See, e.g., Delphix Corp. v. Actifo, Inc., 2014 WL 4628490, at *2 (N.D. Cal. Mar. 19, Case 2:16-cv-04207-SVW-MRW Document 40 Filed 10/04/16 Page 17 of 35 Page ID #:759 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 8 Criteo S.A.’s Motion To Dismiss Amended Counterclaims And Strike Affirmative Defenses 2014) (allegation upon “information and belief” “creates a further inference that plaintiff likely lacks knowledge of underlying facts to support the assertion, and is instead engaging in speculation to an undue degree”); W. Sugar Co-op. v. Archer- Daniels-Midland Co., 2012 WL 3101659, at *4 (C.D. Cal. July 31, 2012) (allegations “upon information and belief” are not “sufficient to inform any [defendants] of their fraudulent conduct”); Oak Grove Inv’rs v. Travelers Ins. Co., 1993 WL 137302, at *1 (N.D. Cal. Apr. 28, 1993) (dismissing fraud claims where allegations “based on information and belief and fail[] to attribute particular fraudulent statements or acts to particular individuals”); Mario v. Primuth, 1982 WL 1378, at *1 (S.D. Cal. Sept. 1, 1982) (“Allegations of fraud based on information and belief usually do not satisfy the degree of particularity required under Rule 9(b).”). This is particularly true here because SteelHouse does not allege facts as to: (1) who, when, where, or how Criteo used adware, bots or “code” - let alone what type of “code” was allegedly used; and (2) who Criteo’s unidentified “affiliates” are, their relationship with Criteo, whether they are even controlled by Criteo, and when, where, or how they used adware, bots or code at Criteo’s direction. Accordingly, SteelHouse’s claim should be dismissed as a matter of law. See Neubronner v. Milken, 6 F.3d 666, 672 (9th Cir. 1993) (rejecting fraud allegations based upon information and belief where plaintiff “allege[s] no more than ‘suspicious circumstances’; those circumstances . . . do not constitute a sufficient factual basis for allegations of insider trading”); Kane v. Bosco, 2010 WL 4879177, at *10 (D. Ariz. Nov. 23, 2010) (“Plaintiffs base their allegations of fraud on information and belief, and fail to attribute particular fraudulent statements or acts to specific defendants. Consequently, Plaintiffs’ allegations of fraud are subject to dismissal.”). The ACC is not saved by its speculation that Criteo must be engaged in fraud because: (1) SteelHouse cannot determine from the data available to it the source of every click attributed to Criteo; (2) an allegedly large percentage of clicks attributed to Case 2:16-cv-04207-SVW-MRW Document 40 Filed 10/04/16 Page 18 of 35 Page ID #:760 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 9 Criteo S.A.’s Motion To Dismiss Amended Counterclaims And Strike Affirmative Defenses Criteo occurred after a user made a purchase on an e-tailer’s website; and (3) some clicks attributed to Criteo occur within short periods of time. (ACC ¶¶ 24-31.) First, SteelHouse’s inability to determine the source of a click from the data available to it does not mean that the click is fake or counterfeit. SteelHouse cannot rely on its own “say-so and conclusory allegations instead of facts” to allege that Criteo’s click count numbers are false. Rael, 2016 WL 3952219, at *3 (rejecting allegation that reduced sales prices were misleading because the handbags were substandard, holding “Plaintiff alleges no facts or legal authority to explain why Defendant’s assertion that all items sold at the outlet store are ‘over-runs, discounted, or irregular’ conclusively establishes that these products are inherently ‘substandard’ or inferior”); Mallen v. Alphatec Holdings, Inc., 861 F. Supp. 2d 1111, 1130 (S.D. Cal. 2012) (mere allegation that there is “indication” that there “may have been” channel stuffing insufficient to plead that sales results were in fact false or misleading), aff’d sub. nom. Fresno Cty. Emps.’ Ret. Ass’n v. Alphatec Holdings, Inc., 607 F. App’x 694 (9th Cir. 2015). While SteelHouse alleges that its inability to determine the source of Criteo’s clicks “suggests” that the “clicks are fake” or “not generated by actual human users” (ACC ¶ 25 (emphasis added)), SteelHouse does not allege facts supporting this inference, or showing how the lack of attributable source in the data available to SteelHouse shows that Criteo generates fraudulent clicks. Second, SteelHouse’s own allegations explain why the fact that Criteo continues to “generate[] clicks after consumers purchase a product” does not show such clicks are fake. (Id. ¶ 27.) Specifically, SteelHouse alleges that, unlike other advertisers, Criteo continues to serve actual advertisements to an internet user after he or she has made a purchase. (Id.) That Criteo seeks to drive incremental sales by serving ads to internet users after they have made a purchase does not make actual clicks by those internet users - or the resulting additional incremental sales that follow - fake. Indeed, in so alleging, SteelHouse ignores marketing studies and common sense that indicate that displaying ads to internet shoppers who have demonstrated a propensity Case 2:16-cv-04207-SVW-MRW Document 40 Filed 10/04/16 Page 19 of 35 Page ID #:761 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 10 Criteo S.A.’s Motion To Dismiss Amended Counterclaims And Strike Affirmative Defenses to buy by already making a purchase is an effective means of driving incremental sales. SteelHouse’s conclusory allegation that Criteo’s click count statements are falsely inflated because its click count numbers include actual clicks, on actual ads, by actual internet users makes no sense and should be disregarded. See, e.g., Davidson, 76 F. Supp. 3d at 974-75 (“vague” references to defendant’s alleged statements “lacking in detail” “do not satisfy plaintiff’s obligation to plead with specificity how the . . . representation was false and caused the damage . . . [w]ithout those details, plaintiff’s [allegation] . . . is nothing more than an unwarranted conclusion”). Third, SteelHouse alleges Criteo’s click numbers may be inflated because for 99 out of Criteo’s over 12,000 clients, “44.9% of Criteo’s apparent clicks are from users clicking the same advertisement within a 30-minute period,” which is allegedly “thirteen times the industry standard.” (ACC ¶ 31.) SteelHouse stops short of alleging that these clicks are in fact fake, simply alleging that these clusters “indicate[]” these clicks are not “authentic.” (Id. ¶ 32 (emphasis added).) Moreover, SteelHouse alleges no facts showing that these clicks are actually fake, much less that Criteo is the source of such clicks. In short, SteelHouse asks the Court to conclude based on its “say-so” that such clicks mean that Criteo has committed fraud. Such allegations are insufficient and the claims should be dismissed. See Rael, 2016 WL 3952219, at *3. 2. SteelHouse Failed To State A § 17500 False Advertising Claim Section 17500 prohibits a business from disseminating “any statement ‘which is untrue or misleading, and which is known, or which by the exercise of reasonable care should be known, to be untrue or misleading.’” Mangindin v. Wash. Mut. Bank, 637 F. Supp. 2d 700, 709 (N.D. Cal. 2009) (citation omitted). As with the Lanham Act, to adequately plead falsity under § 17500, SteelHouse was required to plead facts showing that either Criteo’s statements: (1) are literally false; or (2) misled, confused, or deceived the public. Id. SteelHouse failed to do so. Instead, it relies on the same deficient allegations underlying its Lanham Act claim. Thus, SteelHouse fails to allege falsity under Case 2:16-cv-04207-SVW-MRW Document 40 Filed 10/04/16 Page 20 of 35 Page ID #:762 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 11 Criteo S.A.’s Motion To Dismiss Amended Counterclaims And Strike Affirmative Defenses § 17500 for the same reasons it fails to do so under the Lanham Act. In addition, “[t]o plead a claim for false advertising under [§ 17500], a plaintiff must allege that a defendant publicly disseminated advertising that [is] false or misleading, and which the defendant knew or reasonably should have known was untrue or misleading.” New Show Studios LLC v. Needle, 2014 WL 2988271, at *17 (C.D. Cal. June 30, 2014). SteelHouse failed to do so. SteelHouse does not allege Criteo knew, or even should have known, that its click count numbers were inflated. SteelHouse’s failure to do so is consistent with its failure to allege facts showing that Criteo inflated its click count numbers. SteelHouse also failed to adequately allege that it “relied on [Criteo]’s purported misrepresentation and suffered economic injury as a result.” Guttman v. La Tapatia Tortilleria, Inc., 2015 WL 7283024, at *3, *5 (N.D. Cal. Nov. 18, 2015) (granting motion to dismiss where plaintiff failed to allege actual reliance). Indeed, SteelHouse’s allegation that it detrimentally relied on Criteo’s statements is internally inconsistent and implausible. SteelHouse alleges it “relied on Criteo’s statements about its click count rates in making business decisions,” including its selection of a non-click based business model. (ACC ¶ 88 (“[T]o combat the emphasis of clicks, SteelHouse has focused on creating distinct products and services, including its new Creative Ad Suite.”). However, throughout this litigation, including in the ACC, SteelHouse has criticized Criteo’s click-based business model as “archaic,” while championing itself as an “innovative newcomer that has taken the Ad Tech industry by storm,” with a creative ad suite that is “unlike anything ever before offered in the industry.” (Id. ¶¶ 1-2.) SteelHouse’s allegation that it relied on Criteo’s click-count statements when selecting a business model cannot be reconciled with its allegations that Criteo’s supposed click-count scheme was implemented in response to SteelHouse’s “innovative” business model. (Id. ¶ 3.) Courts routinely reject “[c]ontradictory allegations such as these [that] are inherently implausible, and fail to comply with Case 2:16-cv-04207-SVW-MRW Document 40 Filed 10/04/16 Page 21 of 35 Page ID #:763 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 12 Criteo S.A.’s Motion To Dismiss Amended Counterclaims And Strike Affirmative Defenses Rule 8, Twombly, and Iqbal.” Hernandez v. Select Portfolio, Inc., 2015 WL 3914741, at *10 (C.D. Cal. June 25, 2015); Twombly, 550 U.S. at 570 (in order to survive motion to dismiss, plaintiff must state a “claim for relief that is plausible on its face”); Warner, 105 F. Supp. 3d at 1098 (“allegations are inherently contradictory, which warrants dismissal”); Moenig v. Bank of Am., N.A., 2015 WL 2185245, at *4 (E.D. Cal. May 8, 2015) (“These contradictory factual allegations do not meet Rule 8”). Similarly, SteelHouse has not alleged, and cannot adequately allege, that its purported reliance on Criteo’s advertisements caused “economic injury as a result.” Guttman, 2015 WL 7283024, at *3. In fact, SteelHouse proclaims the opposite, that SteelHouse’s “innovative” model-purportedly adopted in reliance on Criteo’s false advertisement-has “taken the Ad Tech industry by storm.” Elsewhere in this litigation, SteelHouse has gone so far as to claim that it has experienced 150% growth as a result of its “innovative” business model. (Douglas Decl. ¶ 10.) Accordingly, SteelHouse’s contradictory and implausible theory of reliance, causation, and damages collapses on itself and warrants dismissal with prejudice. See, e.g., In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1057 (9th Cir. 2008) (plaintiffs must allege facts that support a theory of causation that is facially plausible). 3. SteelHouse Failed To State A UCL Claim The UCL prohibits unlawful, unfair, or fraudulent business acts or practices. Joseph v. Kaye, 2016 WL 3677142, at *9 (C.D. Cal. July 7, 2016). SteelHouse attempts to allege a UCL claim under the unlawful and fraudulent act prongs. (Dkt. 21 at 40 ¶¶ 54-59.) The unlawful prong UCL claim fails, however, because it has not adequately pled any of its other four counterclaims, as discussed above and below. The fraud prong UCL claim also fails because SteelHouse has not adequately pled that Criteo engaged in fraudulent conduct. See Grodzitsky v. Am. Honda Motor Co., 2013 WL 2631326, at *4 n.4 (C.D. Cal. June 12, 2013) (Wilson, J.) (applying Rule 9(b) to UCL fraud prong claim). SteelHouse’s failure to plead actual reliance on any alleged conduct by Criteo is also fatal to its UCL claim. Case 2:16-cv-04207-SVW-MRW Document 40 Filed 10/04/16 Page 22 of 35 Page ID #:764 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 13 Criteo S.A.’s Motion To Dismiss Amended Counterclaims And Strike Affirmative Defenses a. SteelHouse Failed To Allege Unlawful Conduct “A defendant cannot be liable under § 17200 for committing ‘unlawful business practices’ without having violated another law. . . . If the [underlying] claim is dismissed, then there is no ‘unlawful’ act upon which to base[] the derivative [UCL] claim.” Ingels v. Westwood One Broad. Servs., Inc., 129 Cal. App. 4th 1050, 1060 (2005) (second alteration in original) (citation omitted); Heartland Payment Sys., Inc. v. Mercury Payment Sys., LLC, 2014 WL 5812294, at *7 (N.D. Cal. Nov. 7, 2014) (dismissing UCL claim under unlawful prong where court found underlying Lanham Act and § 17500 claims insufficiently pled). Here, SteelHouse’s allegation of unlawful conduct is premised on its other four counterclaims. But, as discussed above and below, SteelHouse has not adequately pled any of these claims. As such, its derivative unlawful prong UCL claim should be dismissed with prejudice. b. SteelHouse Failed To Adequately Allege Fraud In order to plead a fraud-based UCL claim, SteelHouse must “set forth ‘the time, place, and specific content of the false representations as well as the identities of the parties to the misrepresentation.’” Watson v. Bank of Am., N.A., 2016 WL 3552061, at *17 (S.D. Cal. June 30, 2016) (citation omitted). Failure to “allege the who, what, when, and where concerning the misrepresentations and/or fraudulent conduct” is fatal to a fraud prong UCL claim. Id. Here, SteelHouse’s fraud prong UCL claim is based on its conclusory allegations that Criteo “generates fake clicks” or is “counterfeiting clicks” to inflate its click count numbers. However, as discussed above, SteelHouse failed to plead facts, as opposed to conclusions, supporting these conclusory allegations. Thus, its fraud-based UCL claim should be dismissed. c. SteelHouse’s Reliance, Causation And Damages Allegations Are Implausible To establish standing to bring a fraud-based UCL claim, SteelHouse must plead and prove its “own reliance - not the reliance of third parties.” O’Connor v. Uber Techs., Inc., 58 F. Supp. 3d 989, 1002 (N.D. Cal. 2014) (emphasis in original). Case 2:16-cv-04207-SVW-MRW Document 40 Filed 10/04/16 Page 23 of 35 Page ID #:765 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 14 Criteo S.A.’s Motion To Dismiss Amended Counterclaims And Strike Affirmative Defenses This standing requirement extends to “claims under the unlawful prong . . . that are based . . . on allegations of misrepresentation and deception.” Guttman, 2015 WL 7283024, at *3; Durell v. Sharp Healthcare, 183 Cal. App. 4th 1350, 1363-64 (2010) (affirming demurrer of a UCL claim under the unlawful prong when plaintiff failed to plead actual reliance). Moreover, plaintiff “must show that he personally lost money or property because of his own actual and reasonable reliance on the allegedly untrue or misleading statements.” In re Tobacco II Cases, 46 Cal. 4th 298, 326 (2009); I.B. ex rel. Fife v. Facebook, Inc., 905 F. Supp. 2d 989, 1012 (N.D. Cal. 2012) (“Reliance is proved by showing that the [unlawful or fraudulent conduct] was an ‘immediate cause’ of the plaintiff’s injury-producing conduct.”) (citing In re Tobacco II). As noted, SteelHouse alleges that it relied on Criteo’s advertisements “in making business decisions,” namely, not pursuing a click-count business model and instead “focus[ing] on creating distinct products and services.” (ACC ¶ 88.) As shown above, SteelHouse’s reliance, causation, and damages allegations are all inherently inconsistent and implausible and should be dismissed with prejudice. (See Douglas Decl. ¶ 10 (claiming that SteelHouse has experienced 150% growth as a result of its “innovative” business model).) 4. SteelHouse Failed To State A Contract Interference Claim To state a claim for intentional interference with contractual relations, SteelHouse is required to plead facts showing: “(1) a valid contract between [SteelHouse] and a third party; (2) [Criteo]’s knowledge of this contract; (3) [Criteo]’s intentional acts designed to induce a breach or disruption of the contractual relationship; (4) actual breach or disruption of the contractual relationship; and (5) resulting damage.” Pacific Gas & Elec. Co. v. Bear Stearns & Co., 50 Cal. 3d 1118, 1126 (1990). SteelHouse failed to do so for several reasons. a. SteelHouse Failed To Allege A Valid Contractual Relationship Existed Between Itself And A Third Party To adequately plead an intentional interference with contractual relations claim, Case 2:16-cv-04207-SVW-MRW Document 40 Filed 10/04/16 Page 24 of 35 Page ID #:766 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 15 Criteo S.A.’s Motion To Dismiss Amended Counterclaims And Strike Affirmative Defenses “counterclaimants must identify the third party or parties with whom they contracted, and the nature and extent of their relationship with that party or parties.” UMG Recordings, Inc., 117 F. Supp. 3d at 1115. Failure to do so “requires dismissal of the claim, because ‘to understand whether [counterclaimants’] performance was disrupted require[s] the district court to determine what contractual rights [they] possessed.’” Id. (alterations in original) (quoting United Nat’l Maint., Inc. v. San Diego Convention Ctr., Inc., 766 F.3d 1002, 1009 (9th Cir. 2014)). Here, SteelHouse merely alleges that Criteo’s conduct caused SteelHouse to “los[e] actual customers with whom it had contractual relationships including, but not limited to Nike, VistaPrint, Bodybuilding.com, and TOMS.” (ACC ¶ 98.) However, while the ACC now specifically identifies some, but not all, of the clients Criteo allegedly interfered with, SteelHouse still fails to provide any facts to demonstrate the “nature and extent” of those supposed contracts. UMG Recordings, Inc., 117 F. Supp. 3d at 1115. SteelHouse’s intentional interference with contractual relations claim should be dismissed with prejudice for this reason alone. Id.; In re Centerstone Diamonds, Inc., 2014 WL 1330186, at *6 (Bankr. C.D. Cal. Apr. 2, 2014) (dismissing intentional interference with contractual relations claim where the “Complaint states only that ‘there were valid contractual relationships’” but “does not allege facts identifying a specific contract, the parties thereto, or the substance and date thereof”). b. SteelHouse Failed To Allege A Breach In an addition to pleading the “nature and extent” of the allegedly interfered contracts, SteelHouse is also required to plead an actual breach or disruption of those identified contracts in order to state a contract interference claim. See Pac. Gas & Elec. Co., 50 Cal. 3d at 1126. Here, SteelHouse vaguely alleges that it “lost” customers due to Criteo’s alleged conduct. SteelHouse fails, however, to allege facts showing any contractual relationship between SteelHouse and a third party was actually breached or disrupted. See, e.g., Harrison Ventures, LLC v. Alta Mira Treatment Ctr., LLC, 2010 WL Case 2:16-cv-04207-SVW-MRW Document 40 Filed 10/04/16 Page 25 of 35 Page ID #:767 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 16 Criteo S.A.’s Motion To Dismiss Amended Counterclaims And Strike Affirmative Defenses 1929566, at *5 (N.D. Cal. May 12, 2010) (“When, as here, the complaint fails to allege an underlying breach, no claim for intentional interference can be stated.”); Heartland, 2014 WL 5812294, at *8 (dismissing contract interference claim while plaintiff alleged and identified “merchants who have left [plaintiff] for [defendant]” but plaintiff “does not allege that any of its contracts with any former merchant have actually been breached, much less breached because of interference by [defendant]” (citation omitted)); Yagman, 2013 WL 1287409, at *5 (interference claim fails where the complaint “fails to set forth the terms of the agreement, explain exactly which terms were breached, or allege plausible facts indicating that [defendant’s] actions were intentionally designed to cause that breach”). 5. SteelHouse Failed To Allege A Claim For Intentional Interference With Prospective Economic Advantage To state a claim for intentional interference with prospective economic advantage, SteelHouse was required to allege facts showing: (1) an economic relationship between SteelHouse and some third party, with the probability of future economic benefit to the plaintiff; (2) Criteo’s knowledge of the relationship; (3) intentional and wrongful conduct designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) proximately caused economic harm. Korea Supply Co. v. Lockheed Martin Corp., 29 Cal. 4th 1134, 1153 (Cal. 2003). Moreover, a “plaintiff seeking to recover for alleged interference with prospective economic relations has the burden of pleading and proving that the defendant’s interference was wrongful ‘by some measure beyond the fact of the interference itself.’” Della Penna, 11 Cal. 4th at 392-93 (citation omitted). The interfering conduct must be “independently actionable.” Korea Supply Co., 29 Cal. 4th at 1158-59; see also UMG Recordings, Inc., 117 F. Supp. 3d at 1117 (“Because counterclaimants have not adequately pled a separate cause of action . . . as the basis of independently wrongful conduct, they fail to allege a cause of action for” intentional interference (alterations in original omitted) (citation omitted)). Case 2:16-cv-04207-SVW-MRW Document 40 Filed 10/04/16 Page 26 of 35 Page ID #:768 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 17 Criteo S.A.’s Motion To Dismiss Amended Counterclaims And Strike Affirmative Defenses Here, SteelHouse relies on its false advertising and UCL claims to allege that Criteo performed an independently wrongful act when allegedly interfering with SteelHouse’s business prospects. However, as shown above, SteelHouse has failed to adequately plead those claims. UMG Recordings, Inc., 117 F. Supp. 3d at 1116; Zef Sci., Inc. v. Shimadzu Sci. Instruments, Inc., 2016 WL 1255787, at *6 (S.D. Cal. Mar. 31, 2016) (dismissing tortious interference claim based on alleged antitrust violations where plaintiff “did not factually allege an antitrust injury as required for its claims under the Sherman Act, Cartwright Act, and UCL”). Thus, because SteelHouse has not adequately alleged independently wrongful conduct, its interference with prospective economic advantage claim should be dismissed. 6. SteelHouse Failed To Allege A Trade Libel Claim “Trade libel is an intentional disparagement of the quality of property which results in pecuniary damage to plaintiff.” Robinson v. HSBC Bank USA, 732 F. Supp. 2d 976, 984-85 (N.D. Cal. 2010). SteelHouse must allege: (1) a false disparaging statement about its product, Microtec Research, Inc., 40 F.3d at 972-73; (2) that “played a material and substantial part in inducing others not to deal with [SteelHouse],” Piping Rock Partners, Inc., 946 F. Supp. 2d at 981 (citation omitted); (3) causing “special damages in the form of pecuniary loss,” First Advantage, 569 F. Supp. 2d at 938. The ACC alleges Criteo committed trade libel in two ways, neither of which is sufficient as a matter of law. a. Criteo’s alleged advertising concerning its own click count numbers does not support a trade libel claim. SteelHouse alleges that Criteo’s allegedly false advertisements promoting its click count numbers constitute trade libel. The allegations fail for several reasons. First, as shown above, SteelHouse fails to adequately allege that Criteo’s statements concerning its click count numbers were in fact false. This alone precludes SteelHouse’s trade libel claim. Guess, Inc. v. Superior Court, 176 Cal. App. 3d 473, 479 (1986) (“[P]laintiff seeking damages for trade libel must . . . carry the burden of Case 2:16-cv-04207-SVW-MRW Document 40 Filed 10/04/16 Page 27 of 35 Page ID #:769 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 18 Criteo S.A.’s Motion To Dismiss Amended Counterclaims And Strike Affirmative Defenses proving that the disparaging statement is false[.]”). Second, while SteelHouse identifies statements by Criteo promoting its click count rates (see ACC ¶¶ 18-22), not a single one of these statements even mentions SteelHouse, let alone disparages its product. SteelHouse simply does not explain how Criteo’s promotion of its own statistics constitutes a disparaging statement about a competitor’s product, let alone specifically SteelHouse’s product. See Microtec Research, Inc., 40 F.3d at 972-73. The Court should dismiss the trade libel claims premised on Criteo’s own alleged advertisements about its own click count rate. b. Criteo’s alleged statements to SteelHouse customers also do not support a trade libel claim. SteelHouse identifies four statements in May 2016 allegedly made by Criteo employees to unidentified SteelHouse customers concerning SteelHouse’s inflated click count numbers. These allegations also fail to establish a trade libel cause of action for several reasons. First, as the ACC itself makes clear, each of the four specific statements made by Criteo employees simply referenced SteelHouse’s “inflated . . . performance levels,” “artificially positive performance results,” and “inflated click and post-click volumes.” (ACC ¶¶ 58-62.) But, SteelHouse alleges no facts demonstrating why these statements concerning its inflated click count numbers were, in fact, false. See Implant Direct Sybron Int’l v. Zest IP Holdings, LLC, 2012 WL 1969292, at *6 (S.D. Cal. June 1, 2012) (dismissing trade libel claim where plaintiff does not allege why statement was false). Indeed, the ACC concedes that SteelHouse’s click count numbers were, in fact, inflated but contends the inflation was “inadvertent and not intentional.” (ACC ¶ 56.) Thus, as a matter of law, SteelHouse’s trade libel claim fails because SteelHouse admits the truth of these statements. Second, to establish a trade libel claim the claimant must allege and prove the “publisher either knows the statement is false or has some serious subjective doubt about the truth of the statement.” Melaleuca, Inc., 66 Cal. App. 4th at 1350. Here, Case 2:16-cv-04207-SVW-MRW Document 40 Filed 10/04/16 Page 28 of 35 Page ID #:770 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 19 Criteo S.A.’s Motion To Dismiss Amended Counterclaims And Strike Affirmative Defenses while SteelHouse alleges in conclusory fashion that “Criteo knew or should have known that its statements were false and/or misleading” (ACC ¶ 63), SteelHouse does not allege a single fact demonstrating that Criteo knew or should have known that SteelHouse’s click count numbers were not in fact inflated-especially since SteelHouse itself admits its own numbers were “inadvertent[ly]” inflated. (Id. ¶ 56.) Third, tellingly absent from SteelHouse’s allegations concerning the four statements made by Criteo employees is any factual allegation that the unidentified SteelHouse customers on the receiving end of those alleged statements actually left SteelHouse or otherwise reduced their business with SteelHouse as a result of those statements. Indeed, the ACC does not even allege if or how those specific unidentified customers reacted to the alleged statements at all. Thus, SteelHouse cannot “also prove that the statement played a material and substantial part in inducing others not to deal with [SteelHouse]” Piping Rock Partners, Inc., 946 F. Supp. 2d at 981 (internal quotation omitted), when SteelHouse does not even allege that those specific customers did in fact stop dealing with SteelHouse. Finally, the ACC nakedly asserts that Criteo has “accuse[d] SteelHouse of fraud and deceptive business practices.” (ACC ¶ 62.) SteelHouse fails to allege who made these statements, to whom they were made, when they were made, or what was even said. “Without this information, the claim is deficient. This alone is sufficient basis to grant the motion.” First Advantage, 569 F. Supp. 2d at 937 (dismissing alleged trade libel where “[n]othing in the First Amended Counterclaim gives any indication of who from [counter defendant] made those statements, when they made the statements, or what exactly they said. Without this information, the claim is deficient. This alone is sufficient basis to grant the motion [to dismiss]”); Azco Biotech Inc. v. Qiagen, N.V., 2013 WL 4500782, at *13 (S.D. Cal. Aug. 20, 2013) (rejecting general trade libel allegation that defendants “published ‘various defamatory statements’ to ‘numerous individuals and entities in the biotech and life sciences industry’” where complaint does not allege “the particulars, i.e. the time and place of the alleged Case 2:16-cv-04207-SVW-MRW Document 40 Filed 10/04/16 Page 29 of 35 Page ID #:771 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 20 Criteo S.A.’s Motion To Dismiss Amended Counterclaims And Strike Affirmative Defenses publications, the identities of the speakers, and specific recipients”). 3 c. SteelHouse’s trade libel claims also fail because SteelHouse failed to allege special damages. As to both of SteelHouse’s apparent allegations of trade libel, it is axiomatic that a “bare allegation of the amount of pecuniary loss is insufficient for the pleading of a trade libel claim.” New.Net, Inc. v. Lavasoft, 356 F. Supp. 2d 1090, 1113 (C.D. Cal. 2004) (citation omitted). Thus, a plaintiff must plead special damages with specificity and “could not satisfy the special damages requirement for trade libel by simply referring to an amount to be ascertained at trial rather than specifying the amount of damage.” Code Rebel, LLC v. Aqua Connect, Inc., 2013 WL 5405706, at *5 (C.D. Cal. Sept. 24, 2013); SB Diversified Prods., Inc. v. Murchison, 2014 WL 3894353, at *9 (S.D. Cal. July 28, 2014) (collecting cases holding same). Specifically, “[I]f the plaintiff desired to predicate its right to recover damages upon general loss of custom[ers], it should have alleged facts showing an established business, the amount of sales for a substantial period preceding the publication, the amount of sales subsequent to the publication, [and] facts showing that such loss in sales were the natural and probable result of such publication.” New.Net, Inc., 356 F. Supp. 2d at 1113 (alterations in original) (citation omitted). Here, SteelHouse only alleges it has “lost clients, lost advertising budgets, and los[t] potential clients” and seeks “actual and special damages in an amount to be proven at trial.” (ACC ¶ 113.) The allegations are the exact type of trade libel damages allegations routinely rejected by the courts. See, e.g., New.Net, Inc., 356 F. Supp. 2d at 1113; Code Rebel, LLC, 2013 WL 5405706, at *5 (rejecting allegation 3 To the extent SteelHouse’s conclusory allegations are based on the allegations Criteo makes in its complaint in this case, SteelHouse’s trade libel claim would plainly run afoul of the absolute litigation privilege afforded to allegations in a complaint. See, e.g., Jarrow Formulas, Inc. v. LaMarche, 31 Cal. 4th 728, 744 (2003) (the “litigation privilege ‘poses a clear bar’ to actions based on statements made in litigation”); Rosenthal v. Irell & Manella, 135 Cal. App. 3d 121, 125 (1982) (noting that absolute litigation privilege bars interference with contract or prospective economic advantage claims premised on statements in judicial proceedings). Case 2:16-cv-04207-SVW-MRW Document 40 Filed 10/04/16 Page 30 of 35 Page ID #:772 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 21 Criteo S.A.’s Motion To Dismiss Amended Counterclaims And Strike Affirmative Defenses plaintiff “sustain[ed] damages in excess of $100,000.00,” where plaintiff “acknowledges that the exact amount will be proven at trial,” and “does not allege the amount of business it had prior to Defendant allegedly making these statements, how much it had after those statements were made, or the value of the business”). 7. The Court Should Dismiss The ACC With Prejudice The deficiencies in the ACC warrant dismissal with prejudice. The parties have met and conferred twice on SteelHouse’s counterclaims. Criteo moved to dismiss the Counter-Complaint which SteelHouse chose not to oppose, conceding the defects in the Counter-Complaint. However, as shown above, the ACC suffers from many of the same defects identified in Criteo’s first motion to dismiss, including but not limited to: (1) failure to plead adequately that Criteo fraudulently inflates its click count numbers; (2) failure to sufficiently allege SteelHouse relied on any alleged false advertisements by Criteo; (3) failure to allege Criteo actually induced a breach of specific contractual obligations owed by e-tail clients to SteelHouse; (4) failure to allege an independently wrongful act to support its claim for intentional interference with prospective business relations; and (5) failure to plead adequately that Criteo made false statements to SteelHouse customers about SteelHouse’s admitted misconduct. These continued deficiencies warrant dismissal with prejudice. See, e.g., Kendall v. Visa U.S.A., Inc., 518 F.3d 1042, 1051-52 (9th Cir. 2008) (holding amendment would be futile where plaintiff was granted leave to amend once and amended complaint contained same defects as the prior complaint); Segura v. Felker, 2010 WL 1689160, at *4 (E.D. Cal. Apr. 26, 2010) (same). B. SteelHouse’s Affirmative Defenses Should Be Stricken A motion to strike under Federal Rule of Civil Procedure 12(f) is well taken when it has “the effect of making the trial of the action less complicated, or ha[s] the effect of otherwise streamlining the ultimate resolution of the action.” State of Cal. ex rel. State Lands Comm’n v. United States, 512 F. Supp. 36, 38 (N.D. Cal. 1981). First, SteelHouse’s First, Fourth, Fifth, Sixth, Seventh, Eighth, Ninth, and Tenth Case 2:16-cv-04207-SVW-MRW Document 40 Filed 10/04/16 Page 31 of 35 Page ID #:773 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 22 Criteo S.A.’s Motion To Dismiss Amended Counterclaims And Strike Affirmative Defenses Affirmative Defenses should be stricken because they are not actually affirmative defenses. 4 See Vogel v. OM ABS, Inc., 2014 WL 340662, at *3 (C.D. Cal. Jan. 30, 2014). “Affirmative defenses plead matters extraneous to the plaintiff’s prima facie case, which deny the plaintiff’s right to recover even if the allegations of the complaint are true.” J & J Sports, 2010 WL 5173717, at *2. An assertion that a plaintiff has not met its burden of proof is not an affirmative defense. Id. Second, SteelHouse’s Eleventh and Twelfth Affirmative Defenses should be stricken because SteelHouse failed to allege facts satisfying the pleading requirements of Federal Rule of Civil Procedure 8 as articulated in Iqbal and Twombly. See Spann v. J.C. Penney Corp., 2015 WL 11072165, at *3 (C.D. Cal. July 16, 2015) (“‘The court can see no reason why the same principles applied to pleading claims should not apply to the pleading of affirmative defenses which are also governed by Rule 8.’” (citation omitted)). “Under the Iqbal standard, the burden is on the defendant to proffer sufficient facts and law to support an affirmative defense, and not on the plaintiff to gamble on interpreting an insufficient defense in the manner defendant intended.” CTF Dev., Inc. v. Penta Hosp., LLC, 2009 WL 3517617, at *8 (N.D. Cal. Oct. 26, 2009) (emphasis in original). Thus, SteelHouse was required: (1) to plead facts that support its affirmative defenses, see, e.g., OM ABS, 2014 WL 340662, at *2; and (2) to inform Criteo as to which claim(s) each affirmative defense applies, see, e.g., Gonzalez v. Preferred 4 See UMG Recordings, Inc., 117 F. Supp. 3d at 1116-17 (competition privilege not an affirmative defense because it is “plaintiff’s burden to prove, as an element of the cause of action itself, that the defendant’s conduct was independently wrongful.”) (citation omitted); OM ABS, 2014 WL 340662, at *2 (failure to state a claim not affirmative defense); Dodson v. CSK Auto, Inc., 2013 WL 3942002, at *4 (E.D. Cal. July 30, 2013) (standing not affirmative defense but an “element of plaintiff’s prima facie case”); J & J Sports, 2010 WL 5173717, at *2-3 (striking a defense of “reasonable, just, and proper acts” because it merely tries to “demonstrate[] that plaintiff has not met its burden of proof” and defenses of intervening causes and lack of causation because they simply assert that plaintiff “has not or cannot prove the element of causation”); G & G Closed Circuit Events, LLC v. Nguyen, 2010 WL 3749284, at *5 (N.D. Cal. Sept. 23, 2010) (striking “lack of damages” and “lack of allegations entitling Plaintiff to punitive damages” as “merely denials of the allegations and claims set forth in the Complaint”). Case 2:16-cv-04207-SVW-MRW Document 40 Filed 10/04/16 Page 32 of 35 Page ID #:774 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 23 Criteo S.A.’s Motion To Dismiss Amended Counterclaims And Strike Affirmative Defenses Freezer Servs., LBF, LLC, 2012 WL 2602882, at *3 (C.D. Cal. July 5, 2012) (striking affirmative defenses where defendant failed “to link its . . . defenses to the particular claims for relief to which it purportedly applies”). SteelHouse failed to do so. As to SteelHouse’s Eleventh Affirmative Defense, it does not identify the supposed indispensable third party, thus providing Criteo with no notice as to its alleged error. See Sec. People v. Classic Woodworking, LLC, 2005 WL 645592, at *5 (N.D. Cal. Mar. 4, 2005) (striking affirmative defense for failure to provide fair notice as it did not “allege the name of any party who must be joined”). As to the Twelfth Affirmative Defense, SteelHouse does not allege any facts identifying which of SteelHouse’s statements challenged in Criteo’s Complaint SteelHouse asserts were truthful. Both affirmative defenses should be stricken. Third, SteelHouse’s Second Affirmative Defense (Waiver, Estoppel, Laches) alleges that Criteo should be estopped from bringing suit because prior to the litigation, Criteo allegedly “wanted to resolve this dispute ‘amicably’ and that if SteelHouse did as Criteo wished, the dispute would go away.” (See Amended Answer ¶ 117.) SteelHouse then supposedly changed its code in reliance on this representation. (Id.) This allegation is plainly insufficient. To establish an affirmative defense of waiver, SteelHouse must show Criteo’s “intentional relinquishment of a known right with knowledge of its existence and the intent to relinquish it.” E & J Gallo Winery v. Grenade Beverage, LLC, 2014 WL 1747688, at *3 (E.D. Cal. Apr. 30, 2014) (striking an affirmative defense of waiver for insufficient pleading). The waiver must be “manifested in an unequivocal manner.” Id. SteelHouse has not alleged Criteo engaged in any “unequivocal” act to waive its ability to pursue legal claims against SteelHouse. “Without supporting factual allegations, Defendants’ assertion that the doctrine of waiver is applicable is insufficient to provide fair notice.” J & J Sports, 2010 WL 5173717, at *3-4. To establish an affirmative defense of estoppel, SteelHouse must plead and prove that Criteo “either intentionally or under circumstances that induced reliance, Case 2:16-cv-04207-SVW-MRW Document 40 Filed 10/04/16 Page 33 of 35 Page ID #:775 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 24 Criteo S.A.’s Motion To Dismiss Amended Counterclaims And Strike Affirmative Defenses engaged in conduct upon which [SteelHouse] relied and that [SteelHouse] acted or changed [its] position to [its] detriment.” Desert European Motorcars, Ltd. v. Desert European Motorcars, Inc., 2011 WL 3809933, at *3 (C.D. Cal. Aug. 25, 2011) (last two alterations in original). SteelHouse must also allege a “definite misrepresentation of fact” Criteo made to SteelHouse “with reason to believe that [SteelHouse] would rely on it.” Solis v. Couturier, 2009 WL 2022343, at *2 (E.D. Cal. July 8, 2009). SteelHouse does not adequately allege any misrepresentation. SteelHouse admits that the last statement made by Criteo prior to this litigation was a cease-and- desist letter on May 23, 2016, requesting SteelHouse to stop its ongoing misconduct. (Amended Answer ¶ 58.) Thus, any alleged representation by Criteo that “the dispute would go away” if “SteelHouse did as Criteo wished” was not a misrepresentation when Criteo continued-and still continues-to believe that SteelHouse’s misconduct has not stopped; particularly when SteelHouse itself admits it has not stopped fraudulently inflating its performance by taking click credit for direct internet traffic to an e-tailers website (see Douglas Decl. ¶¶ 30, 45-46, 49-51). Nor does SteelHouse allege detrimental reliance. SteelHouse admits that its tracking pixel conflicted with Criteo’s (Amended Answer ¶ 53) and that there was “an inadvertent bug.” (7/25/16 Decl. of Christopher Innes (Dkt. 19-6) ¶ 29.) Thus, any alleged reliance on Criteo’s representations that involved changing SteelHouse’s code was not to SteelHouse’s detriment; rather, by its own admission, it involved correcting a “bug,” thereby allowing SteelHouse to improve its own coding operations. As to laches, this is “an equitable affirmative defense available for actions that do not have a specific applicable statute of limitations.” Foster v. Metro. Life Ins. Co., 243 F. App’x 208, 209-10 (9th Cir. 2007). Here, SteelHouse does not allege that any of Criteo’s causes of action are not subject to statute of limitations. In any event, even if SteelHouse made such a showing, “[t]o establish laches a defendant must prove both an unreasonable delay by the plaintiff and prejudice to itself.” Couveau, 218 F.3d at 1083. Here, SteelHouse alleges Criteo delayed bringing Case 2:16-cv-04207-SVW-MRW Document 40 Filed 10/04/16 Page 34 of 35 Page ID #:776 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 25 Criteo S.A.’s Motion To Dismiss Amended Counterclaims And Strike Affirmative Defenses suit “for months.” (Amended Answer ¶ 117.) Case law dictates that a few months is insufficient to constitute an unreasonable delay. See, e.g., Karl Storz Endoscopy-Am., Inc. v. Surgical Techs., Inc., 285 F.3d 848, 857 (9th Cir. 2002) (two years not unreasonable delay to bring Lanham Act and UCL claims). SteelHouse also fails to plead any facts suggesting how this delay has been prejudicial, because it cannot. SteelHouse’s Second Affirmative Defense should be stricken. Fourth, Steel House’s Third Affirmative Defense (Unclean Hands) should be stricken because any alleged wrongdoing by Criteo is wholly separate from SteelHouse’s unlawful acts. This affirmative defense is defective because “[m]isconduct . . . unrelated to the claim to which it is asserted as a defense[], does not constitute unclean hands . . . What is material is not that the plaintiff’s hands are dirtied, but that he dirtied them in acquiring the right he now seeks to assert.” Xilinx, Inc. v. Altera Corp., 1994 WL 782236, at *3-4 (N.D. Cal. Feb. 8, 1994) (citing Republic Molding Corp. v. B.W. Photo Utils., 319 F.2d 347, 349 (9th Cir. 1963)). SteelHouse’s claims allege independent misconduct by Criteo that is completely separate from the claims in Criteo’s Complaint. SteelHouse makes no assertion that Criteo “dirtied” its hands via SteelHouse’s counterfeit click fraud or SteelHouse’s dissemination of false advertisements trumpeting the results of tainted head-to-head competitions. IV. CONCLUSION For the foregoing reasons, Criteo respectfully requests that this Court grant Criteo’s motion to dismiss SteelHouse’s Amended Counterclaims and to strike SteelHouse’s affirmative defenses. DATED: October 4, 2016 Respectfully submitted, By: /s/ Jack P. DiCanio JACK P. DICANIO SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP Attorneys for Plaintiff and Counter-Defendant Criteo S.A. Case 2:16-cv-04207-SVW-MRW Document 40 Filed 10/04/16 Page 35 of 35 Page ID #:777 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA WESTERN DIVISION CRITEO S.A., Plaintiff, v. STEEL HOUSE, INC., Defendant. ) ) ) ) ) ) ) ) ) ) ) ) CASE NO.: 2:16-cv-4207-SVW-MRW [PROPOSED] ORDER GRANTING MOTION TO DISMISS AMENDED COUNTERCLAIMS AND STRIKE AFFIRMATIVE DEFENSES STEEL HOUSE, INC., Counter-Claimant, v. CRITEO S.A., Counter-Defendant. ) ) ) ) ) ) ) ) ) ) ) Case 2:16-cv-04207-SVW-MRW Document 40-1 Filed 10/04/16 Page 1 of 2 Page ID #:778 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1 The Court, having considered the Motion to Dismiss Amended Counterclaims and Strike Affirmative Defenses, filed by Plaintiff and Counter-Defendant Criteo S.A. (“Criteo”), and all papers filed in support thereof and in opposition thereto, and the argument of counsel, and good cause appearing, hereby GRANTS the Motion. Defendant and Counter-Complainant Steel House Inc.’s (“SteelHouse”) Counter Complaint is dismissed in its entirety with prejudice, and SteelHouse’s Affirmative Defenses to Criteo’s Complaint are stricken from SteelHouse’s Answer. IT IS SO ORDERED. DATED: __________ By: HONORABLE STEPHEN V. WILSON UNITED STATES DISTRICT COURT JUDGE Case 2:16-cv-04207-SVW-MRW Document 40-1 Filed 10/04/16 Page 2 of 2 Page ID #:779