Free Range Content, Inc. v. Google Inc.

RESPONSE

N.D. Cal.November 10, 2015

010450-11 828263 V1 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 Steve W. Berman (pro hac vice) Robert F. Lopez (pro hac vice) HAGENS BERMAN SOBOL SHAPIRO LLP 1918 Eighth Avenue, Suite 3300 Seattle, WA 98101 Telephone: (206) 623-7292 Facsimile: (206) 623-0594 steve@hbsslaw.com robl@hbsslaw.com Jeff D. Friedman HAGENS BERMAN SOBOL SHAPIRO LLP 715 Hearst Avenue, Suite 202 Berkeley, CA 94710 Telephone: (510) 725-3000 Facsimile: (510) 725-3001 jefff@hbsslaw.com Attorneys for Plaintiffs and the Proposed Class UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION FREE RANGE CONTENT, INC., a California corporation, COCONUT ISLAND SOFTWARE, INC., a Hawaii corporation, TAYLOR CHOSE, a Minnesota resident, and MATTHEW SIMPSON, a British Columbia, Canada resident, on behalf of themselves and all others similarly situated, Plaintiffs, v. GOOGLE INC., a Delaware corporation, Defendant. No. 5:14-cv-02329-BLF PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO GOOGLE INC.’S MOTION TO DISMISS PLAINTIFFS’ THIRD AMENDED CLASS ACTION COMPLAINT Case 5:14-cv-02329-BLF Document 99 Filed 11/10/15 Page 1 of 34 010450-11 828263 V1 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 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO GOOGLE INC.’S MOTION TO DISMISS PLAINTIFFS’ THIRD AMENDED CLASS ACTION COMPLAINT - i Case No. 5:14-cv-02329-BLF TABLE OF CONTENTS Page I. INTRODUCTION ................................................................................................................... 1 II. STATEMENT OF FACTS ...................................................................................................... 1 III. ARGUMENT ........................................................................................................................... 1 A. Plaintiffs have pled adequately a claim for breach of contract. ..................................... 1 1. Plaintiffs have pled their performance adequately. ........................................... 2 a. Plaintiff FRC ........................................................................................ 4 b. Plaintiffs CIS, Chose, and Simpson ...................................................... 5 2. Alternatively, plaintiffs’ performance was excused. ......................................... 7 3. In any event, Google cannot withhold payment for all ad serves. ..................... 9 B. Plaintiffs have pled adequately their claims of unconscionability. ............................... 9 C. Plaintiffs have alleged adequately a liquidated damages provision that is invalid and unenforceable. ......................................................................................... 11 1. Plaintiffs have pled adequately a liquidated damages provision. .................... 12 2. Plaintiffs have pled unreasonableness adequately. ......................................... 15 D. Plaintiffs Chose and Simpson have not waived their rights to bring this case. ........... 16 1. Plaintiffs Chose and Simpson were not required to “appeal.” ........................ 16 2. Google cannot enforce its contractual limitations period here. ....................... 18 E. Plaintiffs have pled adequately a claim in the alternative for breach of the implied covenant of good faith and fair dealing. ................................................... 20 F. Plaintiffs adequately allege their unjust enrichment claim. ......................................... 21 G. Plaintiffs allege adequately claims pursuant to the UCL. ........................................... 22 1. Plaintiffs have standing to sue under the UCL. .............................................. 22 2. Plaintiffs state a claim under the UCL’s fraudulent prong. ............................. 24 3. Plaintiffs state a claim under the UCL’s unlawful prong. ............................... 24 4. Plaintiffs state a claim under the UCL’s unfair prong. ................................... 25 H. Plaintiffs allege adequately their remaining claims. ................................................... 25 IV. CONCLUSION ...................................................................................................................... 25 Case 5:14-cv-02329-BLF Document 99 Filed 11/10/15 Page 2 of 34 010450-11 828263 V1 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 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO GOOGLE INC.’S MOTION TO DISMISS PLAINTIFFS’ THIRD AMENDED CLASS ACTION COMPLAINT - ii Case No. 5:14-cv-02329-BLF TABLE OF AUTHORITIES Page(s) CASES Am. Software, Inc. v. Ali, 46 Cal. App. 4th 1386 (1996) .......................................................................................................... 11 Assaad v. Am. Nat. Ins. Co., 2010 WL 541841 (N.D. Cal. Dec. 23, 2010) .................................................................................. 19 Bayol v. Zipcar, Inc., 78 F. Supp. 3d 1252 (N.D. Cal. 2015) ................................................................................. 14, 15, 16 Bear, LLC v. Marine Grp. Boat Works, LLC, 2015 WL 4255061 (S.D. Cal. July 14, 2015) .................................................................................. 22 Bondanza v. Peninsula Hosp. & Med. Ctr., 23 Cal. 3d 260 (1979) ....................................................................................................................... 15 Bridge Fund Capital Corp. v. Fastbucks Franchise Corp., 622 F.3d 996 (9th Cir. 2010) ........................................................................................................... 10 Britz Fertilizers, Inc. v. Bayer Corp., 665 F. Supp. 2d 1142 (E.D. Cal. 2009) ......................................................................................... 4, 7 Builders Bank v. Oreland, LLC, 2015 WL 1383308 (C.D. Cal. Mar. 23, 2015) .................................................................................. 3 City and Cty. of San Francisco v. Tutor-Saliba Corp., 2005 WL 645389 (N.D. Cal. Mar. 17, 2005) ................................................................................ 4, 7 Cook, Perkiss & Liehe, Inc. v. N. California Collection Serv., Inc., 911 F.2d 242 (9th Cir. 1990) ............................................................................................................. 8 Dean Witter Reynolds, Inc. v. Superior Court, 211 Cal. App. 3d 758 (1989) ........................................................................................................... 11 Doe v. Successfulmatch.com, 70 F. Supp. 3d 1066, 1076 (N.D. Cal. 2014) ................................................................................... 24 Dollar Tree Stores, Inc. v. Toyama Partners LLC, 875 F. Supp. 2d 1058 (N.D. Cal. 2012) ..................................................................................... 15, 23 Edwards v. Princess Cruise Lines, Ltd., 371 Fed. Appx. 768 (9th Cir. 2010) ................................................................................................. 18 Ellis v. U.S. Security Associates, 224 Cal. App. 4th 1213 (2010) ........................................................................................................ 19 Case 5:14-cv-02329-BLF Document 99 Filed 11/10/15 Page 3 of 34 010450-11 828263 V1 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 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO GOOGLE INC.’S MOTION TO DISMISS PLAINTIFFS’ THIRD AMENDED CLASS ACTION COMPLAINT - iii Case No. 5:14-cv-02329-BLF Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048 (9th Cir. 2003) ........................................................................................................... 1 Ewert v. eBay, Inc., 2010 WL 4269259 (N.D. Cal. Oct. 25, 2010) ................................................................................. 23 Feldman v. Google, Inc., 513 F. Supp. 2d 229 (E.D. Pa. 2007) ............................................................................................... 18 Filet Menu, Inc. v. C.C.L. & G., Inc., 79 Cal. App. 4th 852 (2000) .......................................................................................................... 5, 9 Flores v. Transamerica HomeFirst, Inc., 93 Cal. App. 4th 846 (2001) ............................................................................................................ 10 Free Range Content, Inc. v. Google Inc., 2015 WL 5029480 (N.D. Cal. Aug. 25, 2015) .................................................................... 12, 14, 15 In re Google, Inc. Privacy Policy Litig., 58 F. Supp. 3d 968, 984 (N.D. Cal. 2014) ....................................................................................... 25 Google, Inc. v. Jackman, 2011 WL 3267907 (N.D. Cal. July 28, 2011) ............................................................................... 2, 3 Hahn v. Massage Envy Franchising, LLC, 2014 WL 5100220 (S.D. Cal. Sept. 25, 2014) .................................................................... 11, 14, 22 Han v. Mobil Oil Corp., 73 F.3d 872 (9th Cir. 1995).............................................................................................................. 20 Harvey G. Ottovich Revocable Living Trust v. Washington Mut., Inc., 2010 WL 3769459 (N.D. Cal. Sept. 22, 2010) ................................................................................ 20 Hawthorne v. Umpqua Bank, 2012 WL 1458194 (N.D. Cal. Apr. 26, 2012) ................................................................................ 21 Hernandez v. Path, Inc., 2012 WL 5194120 (N.D. Cal. Oct. 19, 2012) ................................................................................. 21 Jackson v. S.A.W. Entm’t, Ltd., 629 F. Supp. 2d 1018 (N.D. Cal. 2009), abrogation on other bases recognized by Iskanian v. CLS Transp. Los Angeles, LLC, 59 Cal. 4th 348 (2014) ............................................... 19 Klein v. Chevron U.S.A., Inc., 202 Cal. App. 4th 1342 (2012) ........................................................................................................ 21 Kodiak 1981 Drilling P’ship v. Delhi Gas Pipeline Corp., 736 S.W.2d 715 (Tex. App. 1987)..................................................................................................... 8 Case 5:14-cv-02329-BLF Document 99 Filed 11/10/15 Page 4 of 34 010450-11 828263 V1 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 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO GOOGLE INC.’S MOTION TO DISMISS PLAINTIFFS’ THIRD AMENDED CLASS ACTION COMPLAINT - iv Case No. 5:14-cv-02329-BLF Linear Tech. Corp. v. Applied Materials, Inc., 152 Cal. App. 4th 115 (2007) .......................................................................................................... 23 Martinez v. Extra Space Storage, Inc., 2013 WL 3889221 (N.D. Cal. July 26, 2013) ........................................................................... 19, 20 Moreno v. Sanchez, 106 Cal. App. 4th 1415 (2003) ........................................................................................................ 19 Newton v. Am. Debt. Servs., Inc., 854 F. Supp. 2d 712 (N.D. Cal. 2012) ......................................................................................... 9, 10 Novak v. Overture Servs., Inc., 309 F. Supp. 2d 446 (E.D.N.Y. 2004) ............................................................................................... 9 Oculus Innovative Sciences, Inc. v. Nofil Corp., 2007 WL 2600746 (N.D. Cal. Sept. 10, 2007) ................................................................................ 20 Perlman v. Pioneer Limited P’ship, 918 F.2d 1244 (5th Cir.1990) ............................................................................................................ 8 Petersen v. Hartell, 40 Cal. 3d 102 (1985) ......................................................................................................................... 1 Plotnik v. Meihaus, 208 Cal. App. 4th 1590 (2012) .......................................................................................................... 2 Press Rentals, Inc. v. Genesis Fluid Solutions, Ltd., 2014 WL 31251 (N.D. Cal. Jan. 3, 2014) ........................................................................................ 13 Pulaski & Middleman, LLC v. Google, Inc., 802 F.3d 979 (9th Cir. 2015) ........................................................................................................... 22 Ramos v. Citimortgage, Inc., 2009 WL 86744 (E.D. Cal. Jan. 8, 2009) .................................................................................... 9, 20 Reddy v. Litton Indus., 912 F.2d 291 (9th Cir. 1990) ............................................................................................................. 4 Ridgley v. Topa Thrift & Loan Ass'n, 17 Cal. 4th 970 (1998) ..................................................................................................................... 11 Rosenbluth Int’l v. Superior Court, 101 Cal. App. 4th 1073 (2002) ........................................................................................................ 23 Ruiz Food Prods., Inc. v. Catlin Underwriting U.S., Inc., 2011 WL 3323046 (E.D. Cal. Aug. 2, 2011) .................................................................................... 3 Ruwe v. Cellco P’ship, 613 F. Supp. 2d 1191 (N.D. Cal. 2009) ........................................................................................... 13 Case 5:14-cv-02329-BLF Document 99 Filed 11/10/15 Page 5 of 34 010450-11 828263 V1 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 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO GOOGLE INC.’S MOTION TO DISMISS PLAINTIFFS’ THIRD AMENDED CLASS ACTION COMPLAINT - v Case No. 5:14-cv-02329-BLF Sabine Corp. v. ONG Western, Inc., 725 F. Supp. 1157 (W.D. Okla. 1989) ............................................................................................... 8 Schoettler v. Wachovia Corp., 2008 WL 5101367 (E.D. Cal. Dec. 3, 2008) ................................................................................... 18 Schuman v. Ikon Office Solutions, Inc., 232 Fed. Appx. 659 (9th Cir. 1997) ................................................................................................. 11 Shroyer v. New Cingular Wireless Servs., Inc., 498 F.3d 976 (9th Cir. 2007), abrogated on other grounds, AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011) .................................................................................................... 10 Smith v. Simmons, 2007 WL 2815033 (E.D. Cal. Sept. 25, 2007) .................................................................................. 2 Smith v. Wal-Mart Stores, 2006 WL 2711468 (N.D. Cal. Sept. 20, 2006) .................................................................................. 3 Starr v. Baca, 652 F.3d 1202 (9th Cir. 2011) ........................................................................................................... 5 Stonebrae, L.P. v. Toll Bros., Inc., No. C08-0221 EMC, 2009 WL 1082067 (N.D. Cal. Apr. 22, 2009) ............................................... 3 Storek & Storek, Inc. v. Citicorp Real Estate, Inc., 100 Cal. App. 4th 44 (2002) (1992) ................................................................................................ 21 Sunstone Behavioral Health, Inc. v. Alameda Cty. Med. Ctr., 2008 WL 2510876 (E.D. Cal. June 19, 2008) ............................................................................... 5, 6 Textainer Equip. Mgmt. (U.S.) Ltd. v. TRS Inc., 2007 WL 1795695 (N.D. Cal. June 20, 2007) .................................................................................. 3 In re Tobacco II Cases, 46 Cal. 4th 298 (2009) ..................................................................................................................... 24 Toyrrific, LLC v. Karapetian, 2012 WL 3542578 (C.D. Cal. Aug.16, 2012) ................................................................................... 3 TradeComet.com, LLC v. Google, Inc., 693 F. Supp. 2d 370 (S.D.N.Y. 2010) ............................................................................................... 9 Ubaldi v. SLM Corp., 852 F. Supp. 2d 1190 (N.D. Cal. 2012) ........................................................................................... 25 Union Bond & Trust Co. v. Blue Creek Redwood Co., 128 F. Supp. 709 (N.D. Cal. 1955) .................................................................................................. 16 Case 5:14-cv-02329-BLF Document 99 Filed 11/10/15 Page 6 of 34 010450-11 828263 V1 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 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO GOOGLE INC.’S MOTION TO DISMISS PLAINTIFFS’ THIRD AMENDED CLASS ACTION COMPLAINT - vi Case No. 5:14-cv-02329-BLF Watson Labs., Inc. v. Rhone-Poulenc Rorer, Inc., 178 F. Supp. 2d 1099 (C.D. Cal. 2001) ............................................................................................. 8 In re Webkinz Antitrust Litig., 695 F. Supp. 2d 987 (N.D. Cal. 2010) ............................................................................................. 23 Wolschlager v. Fidelity Nat. Title Ins. Co., 111 Cal. App. 4th 784 (2003) ............................................................................................................ 6 Woods v. Google Inc., 889 F. Supp. 2d 1182 (N.D. Cal. 2012) ........................................................................................... 10 In re Yahoo! Litig., 251 F.R.D. 459 (C.D. Cal. 2008) ..................................................................................................... 23 STATUTES Cal. Civ. Code § 1442 ............................................................................................................................. 18 Cal. Civ. Code § 1670.5 ............................................................................................................. 11, 22, 24 Cal. Civ. Code § 1671 .......................................................................................................... 16, 19, 24, 25 Cal. Civ. Code § 1709 ............................................................................................................................ 24 Cal. Civ. Code § 1710 ............................................................................................................................ 24 Cal. Civ. Code, § 3294 ........................................................................................................................... 16 Cal. Civ. Proc. Code § 1856 ................................................................................................................... 14 OTHER AUTHORITIES 15 Williston on Contracts § 45:18 (4th ed.)............................................................................................. 9 Restatement (Second) Contracts § 240 .................................................................................................... 9 Restatement (Third) of Restitution and Unjust Enrichment § 36(1) (2011) ......................................... 22 Case 5:14-cv-02329-BLF Document 99 Filed 11/10/15 Page 7 of 34 010450-11 828263 V1 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 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO GOOGLE INC.’S MOTION TO DISMISS PLAINTIFFS’ THIRD AMENDED CLASS ACTION COMPLAINT - 1 Case No. 5:14-cv-02329-BLF I. INTRODUCTION The question posed by plaintiffs’ case is whether it is lawful for Google Inc. to withhold earned but unpaid program funds from AdSense publishers when it terminates them for supposed breach of contract. Plaintiffs contend that it is not-California law does not permit a company to react to a claimed breach of contract by extracting punitive damages from the opposite party.1 Plaintiffs meet the applicable pleading standards for each of their causes of action, so they ask that the Court deny Google’s motion in its entirety. They also respectfully seek leave to amend where, in the Court’s view, such amendment is needed to survive dismissal of any of their claims.2 II. STATEMENT OF FACTS Each plaintiff was an AdSense publisher. (TAC (Dkt. No. 92), ¶¶ 14-17.) Each dutifully served ads, providing value to Google and to advertisers. (TAC, ¶¶52, 66, 76, 88.) Each thereby accrued “earnings” in his or her publisher’s account. (TAC, ¶¶ 57, 71, 80, 93.) Each endeavored to comply with the AdSense contract, and none is aware of violating it. (TAC, ¶¶ 51, 67-68, 76-77, 88- 89.) All plaintiffs allege that Google terminated their AdSense accounts. (TAC, ¶¶ 58, 70, 79, 91.) All allege that upon doing so, Google suddenly withheld 100% of all funds that Google itself had reported to be net but unpaid earnings. (TAC, ¶¶ 61, 72, 81, 94.) III. ARGUMENT A. Plaintiffs have pled adequately a claim for breach of contract. Plaintiffs provided a valuable service to Google and its AdWords advertisers by displaying the ads that Google sent them. (TAC, ¶¶ 51, 68-69, 76, 78, 88-90.) For providing this valuable 1 See, e.g., Petersen v. Hartell, 40 Cal. 3d 102, 108 (1985) (“We concluded that the prohibition of punitive damages for breach of contract (Civ. Code, § 3294), the strict limitations on the right to provide for liquidated damages (Civ. Code, §§ 1670, 1671), and the provision that ‘Neither specific nor preventive relief can be granted to enforce a penalty or forfeiture in any case . . .’ (Civ. Code, § 3369) together established a policy that precludes any forfeiture having no reasonable relation to the damage caused [by a contractual breach].”) (emphasis added). 2 “Dismissal with prejudice and without leave to amend is not appropriate unless it is clear . . . that the complaint could not be saved by amendment.” Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003). Because Google would suffer no prejudice as a result of any such amendment, the liberal policy regarding amendment should be observed as necessary to save plaintiffs’ complaint. E.g., id. Case 5:14-cv-02329-BLF Document 99 Filed 11/10/15 Page 8 of 34 010450-11 828263 V1 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 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO GOOGLE INC.’S MOTION TO DISMISS PLAINTIFFS’ THIRD AMENDED CLASS ACTION COMPLAINT - 2 Case No. 5:14-cv-02329-BLF service, plaintiffs accrued “earnings”-Google’s own consistent characterization of the funds at issue-in their publisher accounts. (TAC, ¶¶ 25, 40-44, 57, 71, 80, 93.) Google regularly reports gross and net earnings figures to publishers, the latter taking account of dynamic adjustments it makes to gross earnings. (TAC, ¶¶ 44, 54.) Google has admitted repeatedly that it withheld these net earnings (i.e., the earnings in plaintiffs’ account as of the time of termination) as a matter of contractual right. (TAC, ¶¶ 25, 35, 40-41.) That is correct in one sense: Google definitely withheld 100% of unpaid earnings based on a contractual provision. But that contractual provision, a liquidated damages term, is unreasonable, invalid, and unenforceable. When that term drops out of the contract, what is left are the other provisions mandating payment for services rendered. Google violated these. This is the gravamen of plaintiffs’ claim for breach of contract as to funds withheld.3 Even if, for the sake of argument, the Court assumed that each plaintiff breached Google’s AdSense contract materially-a fact-laden proposition4 that cannot be decided on a motion to dismiss-such a breach would not entitle Google to withhold all net funds each earned by serving ads. Plaintiffs explain further below. 1. Plaintiffs have pled their performance adequately. One of the elements of a breach-of-contract claim, as frequently pled,5 is an allegation of “plaintiff’s performance or excuse for non-performance.” Google, Inc. v. Jackman, 2011 WL 3267907, at *4 (N.D. Cal. July 28, 2011) (citation omitted). Google argues that plaintiffs have pled their performance insufficiently. (MTD (current motion-Dkt No. 94) at 7-10.) But in fact, all 3 But also, the AdSense contracts provide that Google may terminate publishers “for any reason” -not for “no reason.” (TAC Exs. A and C, ¶ 10.) Based on this provision and the circumstances of their terminations, plaintiffs have pled breach of contract and breach of the implied covenant of good faith and fair dealing. (TAC, ¶¶ 133, 151.) Google asserts that it did not terminate plaintiffs for “no reason.” (MTD at 17-18.) Plaintiffs, however, have pled that Google offered no meaningful reason for terminating them, and Google itself admits that its termination notices are purposely vague. (TAC, ¶¶ 58, 91, 133, 151.) In light of plaintiffs’ allegations that they endeavored to comply with all Ad- Sense rules and that they are aware of no violations, certainly there are questions of fact as to whether Google terminated them for “any” reason, or, perhaps, if a Google machine issued a termination notice accidentally. (TAC, ¶¶ 3, 53.) These questions preclude dismissal on the pleadings. 4 See Plotnik v. Meihaus, 208 Cal. App. 4th 1590, 1602-03 (2012) (“‘Normally the question of whether a breach of an obligation is a material breach, so as to excuse performance by the other party, is a question of fact.’”) (citations omitted). 5 Pleading a mere “common count” of breach of contract-a statement of indebtedness, consideration, and nonpayment-also suffices under both California law and Fed. R. Civ. P. 8(a). Smith v. Simmons, 2007 WL 2815033, at *5, n.1 (E.D. Cal. Sept. 25, 2007) (citation omitted). Case 5:14-cv-02329-BLF Document 99 Filed 11/10/15 Page 9 of 34 010450-11 828263 V1 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 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO GOOGLE INC.’S MOTION TO DISMISS PLAINTIFFS’ THIRD AMENDED CLASS ACTION COMPLAINT - 3 Case No. 5:14-cv-02329-BLF plaintiffs have alleged plainly that they performed their contractual duties by dutifully serving ads.6 (TAC, ¶¶ 52, 66, 76, 88.) Pleading thus is sufficient pursuant to Rule 87-and it comports with Google’s own pleading practice.8 Google itself has referred to the AdSense program as “simple,” MTD/FAC (previous motion to dismiss-Dkt. No. 38) at 4, 23; given Google’s own description, plaintiffs’ performance also is a simple concept.9 Further, to the extent that any of plaintiffs’ duties under the AdSense contract could be deemed conditions precedent to payment, plaintiffs’ allegations also suffice.10 In this manner, too, plaintiffs’ breach of contract claim is not deficient.11 Plaintiffs need do no more than allege generally their performance of conditions precedent to payment, which they have done amply.12 Nonetheless, Google seeks impermissible factual determinations as to performance.13 6 Additionally, all plaintiffs have alleged in detail that in serving ads, they did not act or omit in various other manners that Google might now claim, however groundlessly, to bear on the performance element of their breach-of-contract claims. (TAC, ¶¶ 51, 67-68, 76-77, 88-89.) 7 See Fed. R. Civ. P. 8(a)(2) (requiring a “short and plain statement of the claim”). 8 See Jackman, 2011 WL 3267907, at *4 (holding Google’s allegation that it “performed by offering and allowing the posting of Defendant’s ads through the AdWords program” sufficient for purposes of pleading a claim for breach of contract) (citations omitted). 9 Indeed, “the Ninth Circuit has held that ‘fair notice’ [to a defendant] does not require that the party ‘plead all the elements of a prima facie case,’ Wong v. United States, 373 F.3d 952, 969 (9th Cir. 2004) . . . .” Smith v. Wal-Mart Stores, 2006 WL 2711468, at *13 (N.D. Cal. Sept. 20, 2006) (emphasis added) (citing Galbraith v. Cty. of Santa Clara, 307 F.3d 1119, 1125 (9th Cir. 2002)). Here, Google has fair notice of plaintiffs’ claim for breach of contract, including plaintiffs’ assertions that they successfully served ads, giving rise to Google’s duty to pay. Accordingly, the Court should not dismiss any of plaintiffs’ breach of contract claims. See, e.g., Toyrrific, LLC v. Karapetian, 2012 WL 3542578, at *6 (C.D. Cal. Aug.16, 2012) (denying motion to dismiss breach of contract claim where claimant generally alleged that it performed all required conditions under the contract); accord, Textainer Equip. Mgmt. (U.S.) Ltd. v. TRS Inc., 2007 WL 1795695, at *2 (N.D. Cal. June 20, 2007). 10 Fed. R. Civ. P. 9(c) (“In pleading conditions precedent, it suffices to allege generally that all conditions precedent have occurred or been performed.”) (emphasis added); see also Builders Bank v. Oreland, LLC, 2015 WL 1383308, at *2 (C.D. Cal. Mar. 23, 2015) (“Rule 9(c) is ‘intended to . . . allow[ ] claimants in breach of contract cases to generally aver the performance of all “conditions precedent,” including all terms and obligations (promissory conditions) that plaintiffs must perform when suing for breach of bilateral contracts . . . .’”) (citation omitted). 11 See Ruiz Food Prods., Inc. v. Catlin Underwriting U.S., Inc., 2011 WL 3323046, at *3 (E.D. Cal. Aug. 2, 2011) (“‘Neither Rule 9(c) nor Rule 8(a)(2) expressly requires that the performance or occurrence of conditions precedent be pled at all by a claimant.’”) (citing, inter alia, Kiernan v. Zurich Cos., 150 F.3d 1120, 1123-24 (9th Cir. 1998)). 12 It is Google, when it answers, that must plead any denial of plaintiffs’ performance with particularity. Fed. R. Civ. P. 9(c). 13 “Generally, whether a party has performed as required by a contract, or breached it, is a question of fact. See Stonebrae, L.P. v. Toll Bros., Inc., No. C08-0221 EMC, 2009 WL 1082067, at *5 (N.D. Cal. Apr. 22, 2009) (‘Ordinarily, whether a party has performed as required under a contract is a Case 5:14-cv-02329-BLF Document 99 Filed 11/10/15 Page 10 of 34 010450-11 828263 V1 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 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO GOOGLE INC.’S MOTION TO DISMISS PLAINTIFFS’ THIRD AMENDED CLASS ACTION COMPLAINT - 4 Case No. 5:14-cv-02329-BLF a. Plaintiff FRC Plaintiffs’ amended complaint adds extra, elucidating details that do not contradict its earlier allegations. Google’s authority, Reddy v. Litton Indus., 912 F.2d 291 (9th Cir. 1990), in no way precludes the additional detail that FRC has provided.14 Again, Google disingenuously argues that “FRC itself believed that only about a quarter of clicks in the final pay period were genuine.” (MTD at 8.) But that is not what FRC has alleged, now or previously.15 Consistent with its initial complaint, FRC alleges in the TAC that as a good AdSense publisher, it self-reported to Google an increase in gross earnings. (TAC, ¶¶ 53-54.) To FRC, the $40,000 gross figure reported by Google seemed high, based on FRC’s history with the program, but FRC did not know if the increase in gross earnings was due to anything problematic, which is why it contacted Google for help.16 (TAC, ¶¶ 54, 57.) FRC’s reference to an “$8,000 to $11,000 range,” from which Google extrapolates its “quarter of clicks” contention, is what FRC recalls that Google reported as net earnings in the pertinent pay period prior to termination. (TAC, ¶ 57.) Google compares these gross and net figures and comes up with 25%-but these are its own numbers. There is no FRC admission here. Google also wishes the Court to determine factually that one or more of the websites on question of fact for a jury, not a judge, to decide.’) . . . .” Britz Fertilizers, Inc. v. Bayer Corp., 665 F. Supp. 2d 1142, 1161 (E.D. Cal. 2009); accord, City and Cty. of San Francisco v. Tutor-Saliba Corp., 2005 WL 645389, at *18-20 (N.D. Cal. Mar. 17, 2005). 14 Cf. id. at 296-97 (“It would not be possible for Reddy to amend his complaint to allege a completely new injury that would confer standing to sue without contradicting any of the allegations of his original complaint.”). 15 Google states, MTD at 8, that FRC alleged in its original complaint “that its clicks ‘seemed far too high’”-but FRC did not allege that. It alleged that its “earnings” seemed too high, “based on its history with the program.” (Dkt. No. 1, ¶ 22.) This is an important distinction because in footnote 12 of its current motion, Google attempts to mislead the Court into believing that FRC itself admitted “invalid activity” comprised of “invalid clicks,” when in fact it did not admit either “invalid activity” or “invalid clicks” and denies knowing of any. (See id.; TAC, ¶¶ 54, 57.) The existence of a factual question as to whether any “invalid activity” took place on FRC’s account means there can be no determination at this stage of whether FRC’s thoroughly valid click activity was “co-mingled with a significant amount” of invalid activity as described in Paragraph 5 of the AdSense contract. 16 Google has never told FRC if it deemed any part of its final earnings to be problematic due to what Google might deem invalid clicks. (TAC, ¶¶ 54, 57, 59.) Importantly, FRC’s notice of termination referred only to “invalid activity,” which, by Google’s own definition, might have meant activity other than supposedly “invalid clicks,” a term that is not itself defined. (TAC, ¶ 58.) For example, the AdSense contract provides that “invalid activity” can include “[a]ds served to end users whose browsers have JavaScript disabled,” “spam,” or “invalid queries” (whatever those latter terms mean). (Id. and TAC Exs. A and C, ¶ 5.) Case 5:14-cv-02329-BLF Document 99 Filed 11/10/15 Page 11 of 34 010450-11 828263 V1 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 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO GOOGLE INC.’S MOTION TO DISMISS PLAINTIFFS’ THIRD AMENDED CLASS ACTION COMPLAINT - 5 Case No. 5:14-cv-02329-BLF which FRC facilitated ad serves-which is permitted by Google’s terms and conditions-was not “in compliance with [Google’s] program policies,” even though there are no allegations to that effect. (See MTD at 8.) It then asks the Court to find a failure to perform on plaintiff FRC’s part by suggesting the Court jump with it to the factual conclusion that FRC facilitated the display of AdSense ads on “‘100,000 domains,’” such that FRC could not possibly have monitored participating sites for compliance with AdSense policies. (See id. (citation omitted).) But the Court cannot make this leap on a motion to dismiss. As to both of these attempted attacks on the sufficiency of FRC’s breach-of-contract claim, Google evidently means to assert that the supposedly admitted behavior it posits constitutes a prior breach by FRC of the AdSense terms and conditions, such that Google owes it nothing. But not only does Google ask the Court to engage in impermissible fact finding with respect to this supposed behavior; additionally, as with its last motion to dismiss, Google utterly fails to engage in an analysis as to whether FRC’s supposed breach constitutes a material breach, the only kind sufficient to excuse Google’s own performance in turn.17 Google merely asserts, in conclusory fashion, material breach on the part of FRC, MTD at 8, but this is not enough to overcome FRC’s allegation that it performed, such that Google must pay it.18 b. Plaintiffs CIS, Chose, and Simpson Google also claims prior breach on the part of plaintiffs CIS, Chose, and Simpson. But as to these plaintiffs, it does not even assert material breach, MTD at 9, let alone undertake the required 17 See, e.g., Filet Menu, Inc. v. C.C.L. & G., Inc., 79 Cal. App. 4th 852, 861 (2000) (to excuse performance/duty to pay, other party’s breach must be material) (citation omitted); Sunstone Behavioral Health, Inc. v. Alameda Cty. Med. Ctr., 2008 WL 2510876, at *7 (E.D. Cal. June 19, 2008) (setting forth six fact-intensive “[f]actors to consider in determining whether a failure to fully perform constitutes a material breach of the contract,” and noting further that “‘[w]hether a breach constitutes a failure of consideration sufficient to be deemed material . . . is a question of fact . . . .’”) (citations omitted). 18 Also, there is nothing “conclusory” about FRC’s allegations of performance. Nothing requires plaintiffs to engage in a guessing game as to what Google may consider material aspects of performance, and then to plead them. Here, FRC has alleged that it did what the contract required it to do in order to get paid, TAC, ¶¶ 51-52, and it has offered further details surrounding that performance, id. That is enough. See, e.g., Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011) (“[T]o be entitled to the presumption of truth, allegations in a complaint or counterclaim may not simply recite the elements of a cause of action, but must contain sufficient allegations of underlying facts to give fair notice and to enable the opposing party to defend itself effectively.”). Case 5:14-cv-02329-BLF Document 99 Filed 11/10/15 Page 12 of 34 010450-11 828263 V1 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 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO GOOGLE INC.’S MOTION TO DISMISS PLAINTIFFS’ THIRD AMENDED CLASS ACTION COMPLAINT - 6 Case No. 5:14-cv-02329-BLF analysis to demonstrate it. See Sunstone, 2008 WL 2510876, at *7. Moreover, each of its contentions, to be accepted, would require the Court to resolve significant questions of fact. Like FRC, CIS has pled its performance. (TAC, ¶¶ 66-67.) Nonetheless, Google invites the Court to engage in a “simple comparison”-really an impermissible factual analysis-of what it says were CIS’s “ad placements” with exemplar placements presented as “unacceptable implementations” in Google’s placement policies. (MTD at 9.) Evidently, this is supposed to demonstrate that CIS’s allegations are conclusory, such that they should be disregarded. But according to counsel’s declaration, Mr. Wong allegedly viewed CIS’s websites on October 14, 2014, which is almost two years after Google terminated CIS’s account in November 2012. (Wong Decl. (Dkt. No. 95), ¶¶ 14- 15; TAC, ¶ 70.) This says nothing about ad placement at any time at or before the date on which Google terminated CIS’s account. Further, Google’s Mr. Gray has declared that there was no link in the 2012-2013 Program Policies to the “full Ad placement policies article” referenced by Google in its current motion to dismiss. (Gray Decl. (Dkt. No. 94), ¶ 5.) But this is of no import, he implies, because he was “informed that Google does not cite those policies in connection with the plaintiffs terminated at that time”-except that in fact Google now does cite and rely on those policies with respect to plaintiff CIS. (Id.) Given Google’s admission that the AdSense terms and conditions did not link to the “full Ad placement policies article” in 2012, when Google terminated CIS’s account, the Court cannot deem the particular placement policies now relied upon by Google to have been a part of the AdSense contract in effect when CIS was an active publisher.19 In sum, Google’s argument as to CIS is misleading and groundless,20 and it ought to be emphatically rejected. 19 E.g., Wolschlager v. Fidelity Nat. Title Ins. Co., 111 Cal. App. 4th 784, 790 (2003) (reference to document supposedly incorporated into a contract “must be clear and unequivocal”; “reference must be called to the attention of the other party and he must consent thereto”; and “the terms of the incorporated document must be known or easily available to the contracting parties.”). 20 In addition to making another comment about ad placement, Google also refers to portions of the termination notice it sent to CIS. (MTD at 6.) It lists three excerpts from the termination notice, apparently to illustrate that CIS also violated certain other “Program Policies.” But it does not even bother to say which specific webpages supposedly violated any specific “Program Policy,” or which specific policy it is talking about (not to mention whether it was in effect at pertinent times). Google, therefore, has not met its burden to support its own motion adequately. In any event, the excerpts to which Google cites are wholly subjective and fact-intensive (example: “provide a good user Case 5:14-cv-02329-BLF Document 99 Filed 11/10/15 Page 13 of 34 010450-11 828263 V1 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 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO GOOGLE INC.’S MOTION TO DISMISS PLAINTIFFS’ THIRD AMENDED CLASS ACTION COMPLAINT - 7 Case No. 5:14-cv-02329-BLF As for Ms. Chose, Google seems to argue that, in spite of her allegations of performance, TAC, ¶¶ 77-78, screen grabs of her website, as it allegedly appeared on a day in November 2013, demonstrate conclusively that she did not perform because she supposedly breached Google’s “Program Policies” by presenting “scraped content.” (MTD at 9; Wong Decl., ¶ 16.) But regarding its supposed policy as to “scraped content,” Google points to a mere “help page” from October 2014, which post-dates Ms. Chose’s account termination in November 2013 by almost a year.21 What is more, its cited “help page” does not even purport to prohibit “scraped content.” (Gray Decl., ¶ 9 and Ex. 6.) So yes, contrary to what Google argues, Ms. Chose does “refute the fact that her website is composed of little but scraped content, in clear violation of the Program Policies.” (See MTD at 9.) In sum, Google’s argument as to Ms. Chose, like its arguments as to FRC and CIS, is misleading and groundless,22 and it ought to be emphatically rejected.23 2. Alternatively, plaintiffs’ performance was excused. Plaintiffs also have pled alternatively that any failure in performance was excused, including under the broad force majeure clause of the AdSense contract. As for their general allegations of experience through clear navigation and organization”), see MTD at 6, and they cannot negate CIS’s allegations of performance on a motion to dismiss. E.g., Britz Fertilizers, 665 F. Supp. 2d at 1161; Tutor-Saliba, 2005 WL 645389, at *18-20. 21 Google nowhere establishes that this “help page” existed as of November 2013 or before then, let alone that it was part of the AdSense contract during the pertinent time period (in October 2014, Google admits that it was two links away from Google’s program policies (Gray Decl., ¶ 9)), such that Google cannot use it as a basis for Ms. Chose’s breach of contract. Furthermore, Google does not explain how the webpages it references bear “scraped content”-certainly nothing is obvious when one compares the pages to the content of Google’s proffered “help page.” 22 In addition to making another comment about ad placement, Google also refers to portions of the termination notice it sent to Ms. Chose. (MTD at 6.) But it does not even bother to say which specific webpages supposedly violated any specific policy, “help article,” or “guideline,” or which specific aspect of these that it might be talking about (not to mention whether it was in effect at pertinent times, or whether it properly forms a part of the AdSense contract). Again, Google, has not met its burden to support its own motion properly. In any event, the excerpts to which Google cites are wholly subjective and fact-intensive (example: “provide unique and relevant content”), see MTD at 6, and they cannot negate Ms. Chose’s allegations of performance on Rule 12 motion. 23 As for Mr. Simpson, Google merely disputes his allegations of performance. (MTD at 9.) Google also notes that Mr. Simpson has alleged that he is unaware of invalid activity on his site, and that he certainly never caused any. (TAC, ¶ 91.) Supposedly, though, Mr. Simpson’s allegations are too “conclusory” to be credited because he had a “rarely-updated website.” Google, however, does not here tie this subjective assertion to violation of any supposed contractual term. Moreover, as demonstrated by plaintiffs’ analysis above, Mr. Simpson’s allegations of performance, TAC, ¶¶ 88-91, are adequate, and they certainly cannot be extinguished, given the inherent factual disputes, on a motion to dismiss. E.g., Britz Fertilizers, 665 F. Supp. 2d at 1161. Case 5:14-cv-02329-BLF Document 99 Filed 11/10/15 Page 14 of 34 010450-11 828263 V1 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 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO GOOGLE INC.’S MOTION TO DISMISS PLAINTIFFS’ THIRD AMENDED CLASS ACTION COMPLAINT - 8 Case No. 5:14-cv-02329-BLF excuse, TAC, ¶¶ 55, 68, 76, 92, these entail questions of fact (for example: which traffic was allegedly “invalid”; how and why; and could FRC or Mr. Simpson have reasonably prevented it?) not appropriate for resolution on a motion to dismiss.24 As for plaintiffs’ allegations that invoke the force majeure clause of the contract, TAC Exs. A and C, ¶ 14, Google argues, based on citation to one non-binding authority, that because in its view: plaintiffs “undeniably” knew of “the risk of invalid activity”; because it was their duty “to prevent it”; and because “Plaintiffs accepted the risk of the consequences if they failed to do so,” then the broad force majeure provision it drafted cannot possibly apply. (MTD at 10 (citing Gulf Oil. Corp. v. FERC, 706 F.2d 444, 452-54 (3d Cir. 1983)).) But here, the force majeure provision says nothing about foreseeability.25 Instead, it speaks only to inadequate performance caused by conditions “beyond the party’s reasonable control,” which plaintiffs have pled here.26 (TAC, ¶¶ 55, 68, 76, 92.) Google’s authority on foreseeability, Gulf Oil, which is not based on California law, states but one view on whether a lack of foreseeability is required for reliance on a force majeure provision. There are several authorities to the contrary, 27 and these are the better authorities because they do not 24 See, e.g, Cook, Perkiss & Liehe, Inc. v. N. California Collection Serv., Inc., 911 F.2d 242, 245 (9th Cir. 1990) (“It is well-established that questions of fact cannot be resolved or determined on a motion to dismiss for failure to state a claim upon which relief can be granted.”) (citation omitted). 25 See TAC Exs. A and C, ¶ 14 (“Neither party will be liable for inadequate performance to the extent caused by a condition (for example, natural disaster, act of war or terrorism, riot, labor condition, governmental action, and Internet disturbance) that was beyond the party’s reasonable control.”). 26 Whether an event is beyond the reasonable control of a party is a question of fact that is inappropriate for resolution on a motion for summary judgment, see Watson Labs., Inc. v. Rhone- Poulenc Rorer, Inc., 178 F. Supp. 2d 1099, 1109-11 (C.D. Cal. 2001); a fortiori, the question also would be inappropriate for resolution on a motion to dismiss (but note that Google does not attempt to argue reasonable control here). (See MTD at 10.) 27 See, e.g., Perlman v. Pioneer Limited P’ship, 918 F.2d 1244, 1248 (5th Cir.1990) (“Because the clause labelled ‘force majeure ’ in the Lease does not mandate that the force majeure event be unforeseeable or beyond the control of [the nonperforming party] before performance is excused, the district court erred when it supplied those terms as a rule of law.”); accord, Sabine Corp. v. ONG Western, Inc., 725 F. Supp. 1157, 1170 (W.D. Okla. 1989); Kodiak 1981 Drilling P’ship v. Delhi Gas Pipeline Corp., 736 S.W.2d 715, 720-21 (Tex. App. 1987). Furthermore, the rationale for reading a foreseeability requirement into a force majeure clause “‘is the view that a promisor can protect himself against foreseeable events by means of an express provision in an agreement.’” Watson Labs., 178 F. Supp. 2d at 1112 (citation omitted). Here, however, plaintiffs were in no position to do so; they were given no opportunity to negotiate, and they had no power to insist on, any terms with Google. But even if Google’s view of the law were correct, there are factual questions bound up with foreseeability, starting with the most basic one: what, exactly, is the “invalid activity” to which Google refers? “Invalid activity” does not mean any one Case 5:14-cv-02329-BLF Document 99 Filed 11/10/15 Page 15 of 34 010450-11 828263 V1 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 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO GOOGLE INC.’S MOTION TO DISMISS PLAINTIFFS’ THIRD AMENDED CLASS ACTION COMPLAINT - 9 Case No. 5:14-cv-02329-BLF read into a provision language that is not present. 3. In any event, Google cannot withhold payment for all ad serves. In any event, even if Google could demonstrate that plaintiffs materially breached as to certain ad serves, it cannot withhold payment for all the other ad serves. As illustrated by the fact that Google as a matter of course dynamically separates out what it deems to be problematic ad serves but pays for the others, TAC, ¶¶ 3, 32, 44, and that divisibility is contemplated by the contract itself, TAC Exs. A and C, ¶ 5, Google cannot avoid paying net earnings at termination.28 B. Plaintiffs have pled adequately their claims of unconscionability. California law utilizes a “sliding scale” approach to analyzing claims of unconscionability, where the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required, and vice versa. See Newton v. Am. Debt. Servs., Inc., 854 F. Supp. 2d 712, 722 (N.D. Cal. 2012). Further, it is not appropriate to dismiss these sorts of claims on a motion to dismiss.29 thing according to Google, TAC, ¶ 58, and Google has never told FRC and Mr. Simpson what it meant by referring to “invalid activity” in their termination notices. 28 See, e.g., Filet Menu, 79 Cal. App. 4th 852, 860 (2000), as modified Apr. 6, 2000 (“Thus, if a party has breached one part of a divisible contract, he or she is not precluded from obtaining the consideration that was allocated to that portion of the contract that he or she performed.”) (citation omitted); Restatement (Second) Contracts § 240 (“If the performances to be exchanged under an exchange of promises can be apportioned into corresponding pairs of part performances so that the parts of each pair are properly regarded as agreed equivalents, a party’s performance of his part of such a pair has the same effect on the other's duties to render performance of the agreed equivalent as it would have if only that pair of performances had been promised.”); 15 Williston on Contracts § 45:18 (4th ed.) (“Where there has been a breach of a divisible portion of a divisible contract, the injured or nonbreaching party can recover damages for that portion of the contract, but its remaining contractual duties are not necessarily discharged. In other words, a breach by one party of its part of one or more pairs of corresponding part performances, which may be deemed agreed equivalents, will not, by itself, excuse performance of the injured party’s duties with regard to other such pairs although it may give rise to a cause of action for damages.”). 29 See, e.g., Ramos v. Citimortgage, Inc., 2009 WL 86744, at *7 (E.D. Cal. Jan. 8, 2009) (inappropriate to dismiss claim of unconscionability on motion to dismiss) (citing, inter alia, Cal. Civ. Code § 1670.5 (where a contract is alleged to be unconscionable, “the parties shall be afforded a reasonable opportunity to present evidence as to its commercial setting, purpose, and effect to aid the court in making the determination.”)). Google states that it is “routine” to decide unconscionability on the pleadings. But the cases it cites, including two involving “various of Google’s terms,” MTD at 11, do not resemble the allegations or circumstances here. See TradeComet.com, LLC v. Google, Inc., 693 F. Supp. 2d 370, 380 (S.D.N.Y. 2010) (run-of-the-mill forum selection clause, with nothing offered to support claim of unconscionability-and not decided under California law regarding unconscionability); Novak v. Case 5:14-cv-02329-BLF Document 99 Filed 11/10/15 Page 16 of 34 010450-11 828263 V1 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 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO GOOGLE INC.’S MOTION TO DISMISS PLAINTIFFS’ THIRD AMENDED CLASS ACTION COMPLAINT - 10 Case No. 5:14-cv-02329-BLF First, plaintiffs allege procedural unconscionability sufficiently. Analysis of procedural unconscionability begins with an inquiry into whether the contract is one of adhesion.30 Here, the agreement is a form contract of adhesion, offered on a take-it-or-leave it basis. (TAC, ¶¶ 62, 65, 75, 87, 140.) It is oppressive in light of the manifest inequality of bargaining power between Google on the one hand, and each of these plaintiffs on the other, which resulted in a complete inability of these former publishers to negotiate any of their terms. Thus, the adhesive nature of Google’s contracts fulfills the requirement of procedural unconscionability.31 Newton, 854 F. Supp. 2d at 723. Second, plaintiffs also allege sufficiently that the contract terms at issue are substantively unconscionable. Substantive unconscionability focuses on “the effects of the contractual terms and whether they are overly harsh or one-sided.” Flores, 93 Cal. App. 4th at 853. The AdSense contract purports to give Google the right to withhold all earned but unpaid funds owed to publishers at termination. But AdWords advertisers at most may seek credits for ads associated with invalid clicks or other activities-not for ads run on non-problematic pages.32 Nonetheless, Google behaves as though advertisers were entitled to refunds, without even asking, and even with respect to ads run on perfectly conforming properties-and it takes publishers’ earned funds in the process. In fact, Google admits by necessary inference (to which plaintiffs are entitled here) that if one page out of 1,000 on a terminated publisher’s website is, in its view, problematic, its contract nevertheless entitles it to withhold payment associated not only with the ads served on that one page, Overture Servs., Inc., 309 F. Supp. 2d 446, 452 (E.D.N.Y. 2004) (same, and not decided under California law). 30 Flores v. Transamerica HomeFirst, Inc., 93 Cal. App. 4th 846, 853 (2001). “California law treats contracts of adhesion, or at least terms over which a party of lesser bargaining power had no opportunity to negotiate, as procedurally unconscionable to at least some degree.” Bridge Fund Capital Corp. v. Fastbucks Franchise Corp., 622 F.3d 996, 1004 (9th Cir. 2010) (citing Armendariz v. Found. Health Psychcare Servs., Inc., 6 P.3d 669, 690 (Cal. 2000)); Newton, 854 F. Supp. 2d at 723. 31 Further, plaintiffs need not plead that there were no alternatives to AdSense, given Google’s power relative to plaintiffs and its presentation of a take-it-or-leave-it contract to them. Shroyer v. New Cingular Wireless Servs., Inc., 498 F.3d 976, 985 (9th Cir. 2007), abrogated on other grounds, AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011). But plaintiffs have pled that Google itself deems AdSense sui generis, such that there is no genuine alternative. (TAC, ¶ 20.) 32 See Woods v. Google Inc., 889 F. Supp. 2d 1182, 1188 (N.D. Cal. 2012) (“The ‘[c]ustomer’s exclusive remedy, and Google’s exclusive liability, for suspected invalid impressions or clicks is for [c]ustomer to make a claim for a refund in the form of advertising credits.’”); TAC, ¶ 25. Case 5:14-cv-02329-BLF Document 99 Filed 11/10/15 Page 17 of 34 010450-11 828263 V1 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 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO GOOGLE INC.’S MOTION TO DISMISS PLAINTIFFS’ THIRD AMENDED CLASS ACTION COMPLAINT - 11 Case No. 5:14-cv-02329-BLF but also the earnings associated with the ads served on the other 999 pages. (TAC, ¶¶ 25, 41, 134 (alleging by way of Google’s statements that its policy is to withhold all unpaid earnings whenever a publisher is terminated).) Furthermore, contrary to what Google said in Court, it regularly withholds for periods closer to two months rather than one, TAC, ¶ 6, and its draconian refusals to pay result in publishers losing all the money they earned by serving ads, from hundreds, to hundreds of thousands, of dollars and more, TAC, ¶ 7, all with little if any meaningful explanation as to why. (TAC, ¶¶ 7, 58.) These terms are the definition of harsh and one-sided, especially when Google can segregate the supposedly tainted from the untainted (TAC, ¶ 32).33 In sum, because the terms at issue are both procedurally and substantively unconscionable, they cannot be enforced.34 Instead, they drop out of the AdSense contracts. Cal. Civ. Code § 1670.5(a). C. Plaintiffs have alleged adequately a liquidated damages provision that is invalid and unenforceable. Like Google, plaintiffs focus on Paragraph 10 of the AdSense contract. But as plaintiffs have pled, TAC, ¶ 36, to the extent Google relies upon Paragraph 5 of the contract to withhold publishers’ reported net earnings upon termination for supposed breach, then the language it cites there, too, is 33 See Dean Witter Reynolds, Inc. v. Superior Court, 211 Cal. App. 3d 758, 768 (1989) (“‘Substantive’ unconscionability consists of an allocation of risks or costs which is overly harsh or one-sided and is not justified by the circumstances in which the contract was made.”) (citation omitted); see also Hahn v. Massage Envy Franchising, LLC, 2014 WL 5100220, at *9-11 (S.D. Cal. Sept. 25, 2014) (under California law, substantive unconscionability does not require “the degree of one-sidedness that shocks the conscience”; it is concerned “with terms that are unreasonably favorable to the more powerful party”-and finding contract that contained penalizing liquidated damages provision substantively unconscionable). As in Hahn, the liquidated damages term here at issue “negates the reasonable expectation” that a party will be paid for valuable services rendered. See Hahn, 2014 WL 5100220, at *9. 34 Google’s terms are not similar to “terms courts have upheld.” (MTD at 13.) See Am. Software, Inc. v. Ali, 46 Cal. App. 4th 1386, 1388-93 (1996) (unlike here, plaintiff was paid base salary for her performance in any event; plus, commissions were withheld where next salesperson would have to provide service for the customer; also, the risk of overpayment or underpayment was shared); Schuman v. Ikon Office Solutions, Inc., 232 Fed. Appx. 659, 661-63 (9th Cir. 1997) (salesperson paid for six months at 30% of commission rate even after being removed from account; also, court determined that the contract did not generate revenue; that the salesperson was not replaced arbitrarily; and that the commissions did not revert to the employer but were paid to the salesperson’s successor, who would have serviced the account). Case 5:14-cv-02329-BLF Document 99 Filed 11/10/15 Page 18 of 34 010450-11 828263 V1 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 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO GOOGLE INC.’S MOTION TO DISMISS PLAINTIFFS’ THIRD AMENDED CLASS ACTION COMPLAINT - 12 Case No. 5:14-cv-02329-BLF operating as a liquidated damages provision, and the same analysis applies.35 1. Plaintiffs have pled adequately a liquidated damages provision. Recall what Google always has claimed: that in withholding plaintiffs’ earned but unpaid funds at termination, it did exactly what the contract said it could do. (E.g., TAC, ¶ 41.) In other words, Google exercised its liquidated damages provision. Plaintiffs have pled this term adequately. (TAC, ¶ 126.) As this Court has written, “California courts have defined liquidated damages as ‘an amount of compensation to be paid in the event of a breach of contract, the sum of which is fixed and certain . . . .’” Free Range Content, Inc. v. Google Inc., 2015 WL 5029480, at *3 (N.D. Cal. Aug. 25, 2015) (citations omitted). “Thus, to allege that Google’s withholding of ‘unpaid amounts’ at termination constitutes liquidated damages, Plaintiffs must allege that the contractual provision authorizing withholding (1) arises from a breach; and (2) provides a fixed a certain sum.” Id. (citing, inter alia, Ruwe v. Cellco P’ship, 613 F. Supp. 2d 1191, 1196 (N.D. Cal. 2009)). Plaintiffs have alleged both of these elements, including specifically that the withholdings resulted from purported contractual breaches by all four plaintiffs, per Google itself.36 (TAC, ¶¶ 38-41.) As for the second element, “‘[t]o be sufficiently fixed and certain to qualify as “liquidated damages,” a provision must either set the exact amount (i.e., a single number), or provide some formula by which the amount is “certain or readily ascertainable.”’” Id. at *4 (citing, inter alia, 35 See, e.g., Ridgley v. Topa Thrift & Loan Ass'n, 17 Cal. 4th 970, 979 (1998) (“We have consistently ignored form and sought out the substance of arrangements which purport to legitimate penalties and forfeitures.”); see also Gray Decl., ¶ 3. 36 In its order on plaintiffs’ motion for reconsideration regarding liquidated damages, the Court noted that in its view, plaintiffs FRC and Simpson, whose accounts Google terminated for (unspecified) “invalid activity,” could not meet the first element because they were not terminated for breach of contract. Id. But as plaintiffs have alleged, Google has repeatedly represented, and therefore admitted, that in fact it purports to have terminated all plaintiffs, including specifically FRC and Simpson, for breach of contract. (TAC, ¶¶ 38-41.) Also, plaintiffs have provided references to Google documents illustrating that in its view, “invalid activity” constitutes breach of contract. (Id.) Furthermore, Google has never, and does not now in its instant motion, challenge FRC and Mr. Simpson’s liquidated damages-based claims on the theory that they were terminated on a basis not constituting breach of contract. Accordingly, as with plaintiffs CIS and Chose, where the Court “infers that the withholding from [those two plaintiffs] was done on account of breach of contract”- and again, where Google has represented and admitted the same, id. -Google terminated plaintiffs FRC and Mr. Simpson for breach of contract. FRC and Mr. Simpson, therefore, like plaintiffs CIS and Chose, have “surpassed the first hurdle,” i.e., have met the first element, in pleading successfully a liquidated damages provision. Free Range Content, 2015 WL 5029480, at *4. Case 5:14-cv-02329-BLF Document 99 Filed 11/10/15 Page 19 of 34 010450-11 828263 V1 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 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO GOOGLE INC.’S MOTION TO DISMISS PLAINTIFFS’ THIRD AMENDED CLASS ACTION COMPLAINT - 13 Case No. 5:14-cv-02329-BLF Bayol v. Zipcar, Inc., 78 F. Supp. 3d 1252, 1256 (N.D. Cal. 2015)). Here, plaintiffs have pled that the AdSense contract so provides: it purports to give Google the right to withhold 100% of a terminated publisher’s earned but unpaid funds, which Google holds for publishers pending regular, periodic payments to them. (TAC, ¶¶ 6, 38-41, 52.) It is difficult to conceive of language designating a more fixed and certain sum than this: “If we terminate the Agreement due to your breach . . . we may [meaning, we have the right to] withhold unpaid amounts . . . .” (TAC, ¶ 35.) And Google itself agrees with this reading of the contract. In its motion to dismiss plaintiffs’ first amended complaint, it admitted: “Here, the amount of ‘damages’ was limited and capped, and the Terms expressly provide the amount Google may withhold.” (MTD/FAC at 12 (emphasis added).) Moreover, whether Google has the discretion37 to withhold less from a given publisher (which it never does) is irrelevant to the analysis38-a non-breaching party may always opt to take less than the maximum sum permitted39; the question is whether the clause puts publishers on notice that Google has the (purported) right to withhold all unpaid earnings at termination for breach.40 That it does. Google itself repeatedly, and exclusively, refers to these monies as the publisher’s “earnings,” including in its termination notices to plaintiffs. (TAC, ¶¶ 25, 44, 83, 96.) And this terminology is functional: plaintiffs have served ads, and Google itself has strongly emphasized to 37 Google argues that plaintiffs “effectively concede” that there is no “automatic holdback” called for by the contract. (MTD at 15.) Plaintiffs do not, as Google states, allege a “liquidated damages provision ‘as a matter of extra-contractual policy.’” (Id.) To the contrary, plaintiffs allege that the contract purports to give Google the right to withhold all earned, unpaid funds at termination for breach. (E.g., TAC, ¶ 35.) They also allege that, as a matter of policy, Google shows no mercy in application of this purported contractual right; it always withholds 100% of these funds. (TAC, ¶ 25.) 38 So is whether Google permitted appeals, though as discussed below, the contract does not provide for appeals from Google’s withholding decisions. 39 See Ruwe, 613 F. Supp. 2d at 1198 (“Verizon Wireless argues the manner in which the reconnect fee is applied is neither fixed nor certain . . . . The Court finds that the fixed and certain requirement, as articulated by California case law, concerns the sum, and not the application, of liquidated damages.”) (citation omitted). 40 See Press Rentals, Inc. v. Genesis Fluid Solutions, Ltd., 2014 WL 31251, at *9 (N.D. Cal. Jan. 3, 2014) (“The requirement that liquidated damages be fixed and certain arises out of the concern that parties possess some degree of certainty regarding their liability in the event of a breach.”) (citing Ruwe, 613 F. Supp. 2d at 1198). Case 5:14-cv-02329-BLF Document 99 Filed 11/10/15 Page 20 of 34 010450-11 828263 V1 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 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO GOOGLE INC.’S MOTION TO DISMISS PLAINTIFFS’ THIRD AMENDED CLASS ACTION COMPLAINT - 14 Case No. 5:14-cv-02329-BLF advertisers and the world, including in court, the value of displayed ads,41 even where the ads have been presented on error pages or webpages with no content at all. (TAC, ¶ 48.) Thus, by serving ads, publishers earn funds that Google holds for regular, periodic payment.42 So, as a matter of course, Google tallies and dynamically reports a publisher’s (1) gross earnings; and (2) net, adjusted “earnings” for serving ads in the publisher’s account. (TAC, ¶¶ 32, 53-54, 57.) But at the moment of termination, whatever dollar figure appears as net earnings Google sweeps away completely, 100% of it, without any sort of further adjustment, as a penalty for the publisher’s purported breach of contract. (TAC, ¶ 44.) Again, Google itself states that it always withholds these “earnings” from terminated publishers, as the contract permits it to do. (E.g., TAC, ¶ 25.) This course of dealing, or course of performance, which the Court may look to here,43 comports precisely with plaintiffs’ allegations that Google is exercising its purported rights under a liquidated damages provision providing for withholding of a fixed and certain sum, or pursuant to a formula specified by the contract.44 Finally, citing to Bayol, Google argues that because the amount of unpaid earnings at termination may be large or small, covering a short or long period of ad serves, or a large part of what the publisher has previously earned, then there is no formula in the contract. (MTD at 15.) But to 41 Google’s house-painting analogy, MTD at 14, fails because it does not comport with plaintiffs’ allegations. In Google’s hypothetical, it discovered belatedly that the painter had used the purportedly wrong paint over the whole exterior structure. On this motion to dismiss, the analogy is missing the detail that the painter denies having used the wrong paint anywhere. And critically, to square with plaintiffs’ allegations, the analogy would have to include the proviso that the painter used the right paint for at least some of the discrete exterior walls, yet Google refused to pay for that perfectly good work. 42 The Court itself has observed that the term “unpaid amounts” in Paragraph 10, containing what plaintiffs allege to be a liquidated damages provision, “could mean an ‘earned balance’ that is unpaid, as the same provision also states that ‘[a]ny earned balance below the applicable threshold will remain unpaid.’” Free Range Content, 2015 WL 5029480, at *4 (emphasis in original) (citation omitted); see also Google’s Motion to Dismiss in Super Cray Inc. v. Google Inc., 2015 WL 3604019, at p. 5 (N.D. Cal. Apr. 16, 2015) (referring to Paragraph 10, Google wrote: “It also explicitly authorizes Google to withhold final payments to publishers if Google detects invalid activity or a policy violation . . . .”). If there were no earnings in the account, there could be no “final payments” to withhold. 43 See Cal. Civ. Proc. Code § 1856(c) (“The terms set forth in a writing described in subsection (a) [a “writing intended by the parties as a final expression of their agreement”] may be explained or supplemented by course of dealing or usage of trade or by course of performance.”). The contract here purports to be such a writing. (TAC Exs. A and C, ¶ 14.) 44 It supports plaintiffs’ reading of the contract that “[Google] may withhold ‘unpaid amounts’ at its election, [and] the ‘unpaid amounts’ refers to the entirety of a terminated publisher’s last month of unpaid earned balance.” Free Range Content, 2015 WL 5029480, at *4. Case 5:14-cv-02329-BLF Document 99 Filed 11/10/15 Page 21 of 34 010450-11 828263 V1 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 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO GOOGLE INC.’S MOTION TO DISMISS PLAINTIFFS’ THIRD AMENDED CLASS ACTION COMPLAINT - 15 Case No. 5:14-cv-02329-BLF reiterate: as Bayol and the other cases make plain,45 there can be either an “exact amount” or a “formula” in a liquidated damages provision. While the AdSense contract does not specify a $500 withholding for everyone, it most certainly specifies a formula: 1.00 x earnings at termination. The authorities, including Bayol, do not support Google’s argument.46 2. Plaintiffs have pled unreasonableness adequately. As with the existence of the liquidated damages provisions, plaintiffs also have pled adequately that the term is unreasonable. No matter the magnitude of the breach, whether Google claims that one ad was served in violation of its contract, or 1,000 ads, the contract purports to give Google the right to withhold all earned but unpaid program funds47-no matter how many ads were served without issue, for periods approaching two months. (TAC, ¶¶ 6, 134.) And Google admits it acts accordingly, in all instances. (TAC, ¶¶ 25, 32, 40, 83.) Google’s term purports to allow it to withhold all funds at termination for purported breach despite its proclamations that it can separate good ad serves from problematic ones. (TAC, ¶ 32.) It purports to allow Google to act in this manner despite Google’s insistence to advertisers that all ads served have value, TAC, ¶ 48, and in spite of its lack of liability to advertisers, with whom its 45 E.g., Hahn, 2014 WL 5100220, at *12 (“When a contract provides a formula to calculate liquidated damages based on profits, and damages can be calculated after breach when the profits had been earned, the provision is for liquidated damages, even if the actual amount cannot be calculated at the time of contract formation.”) (citing Higgins v. Desert Breamar, Inc., 219 Cal. App. 2d 744, 752 (1963)). 46 See, e.g., Bondanza v. Peninsula Hosp. & Med. Ctr., 23 Cal. 3d 260, 263, 266-67 (1979) (finding a liquidated damages provision (albeit an unenforceable one) where a patient entered into an “admission agreement” with a hospital that called for her to pay “‘reasonable attorney’s fees and collection expense’” if her account were referred to a collection agency or attorney; where the sum upon which the liquidated damages were to be calculated was the “amount due at the time of assignment”; and where the sum due as liquidated damages was to be based on an undisclosed contract with a collection agency that called for payment of “one-third of the amount owed at the time of the assignment, plus any accrued interest thereafter collected”); Free Range Content, 2015 WL 5029480, at *4 (if plaintiffs’ reading is correct-which they respectfully assert to be the case-“then a breaching publisher’s liability could be reasonably certain at the outset: in the event of a termination, Google may elect to withhold the entire unpaid balance owed to the publisher, whether it be $0 or $1,000.”). In fact, that Google’s liquidated damages provision can, as written, result in enormous or small withholdings, whatever the magnitude of the alleged breach, is actually an argument for why the liquidated damages provision is unreasonable and unenforceable. 47 California law provides, however, that “[w]here a fixed sum is agreed upon as liquidated damages for one of several breaches of varying degree, it is to be inferred that a penalty was intended.” See, e.g., Dollar Tree Stores, Inc. v. Toyama Partners LLC, 875 F. Supp. 2d 1058, 1072 (N.D. Cal. 2012) (emphasis added) (citing Smith v. Royal Mfg. Co., 185 Cal. App. 2d 315, 324 (1960)). Case 5:14-cv-02329-BLF Document 99 Filed 11/10/15 Page 22 of 34 010450-11 828263 V1 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 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO GOOGLE INC.’S MOTION TO DISMISS PLAINTIFFS’ THIRD AMENDED CLASS ACTION COMPLAINT - 16 Case No. 5:14-cv-02329-BLF contracts provide that at most, an advertiser may “request” credits, that may or may not be given to them. (Id.) Furthermore, Google’s takings occur in an atmosphere where advertisers are not claiming issues with ad serves in the first place. “[T]he validity of a liquidated damages provision is a fact-based inquiry not appropriately determined on a motion to dismiss . . . .” Bayol, 78 F. Supp. 3d at 1255 (citations omitted). Google’s defenses patently are factual in nature. (See MTD at 16.48) Also, as the Law Revision Commission Comments to Cal. Civ. Code § 1671 make plain, the liquidated damages called for here-100% of all earned but unpaid funds-must be assessed in terms of several fact-based considerations, all of which favor the plaintiffs.49 In sum, plaintiffs have pled adequately that Google has withheld their funds pursuant to a liquidated damages provision that is unreasonable under the circumstances existing at the time the contract was made; this provision is a punitive term that is invalid and unenforceable under California law.50 D. Plaintiffs Chose and Simpson have not waived their rights to bring this case. 1. Plaintiffs Chose and Simpson were not required to “appeal.” Relying on Paragraph 5 of its contract, Google again contends that plaintiffs Chose and Simpson waived their rights to proceed with this action because they failed to “appeal” their 48 See id. (whether “a publisher whose policy-violating site receives heavy traffic, on average, does more damages to advertisers”-if any; and whether “on average, high levels of invalid activity detected on sites do more damages to Google than they do when detected on rarely visited sites”-if any; and whether there are “plainly negative [] effects of invalid click activity and publisher policy violations”-whatever the violation might be, and however picayune). 49 The Comments provide: All the circumstances existing at the time of the making of the contract are considered, including the relationship that the damages provided in the contract bear to the range of harm that reasonably could be anticipated at the time of the making of the contract. Other relevant considerations in the determination of whether the amount of liquidated damages is so high or so low as to be unreasonable include, but are not limited to, such matters as the relative equality of the bargaining power of the parties, whether the parties were represented by lawyers at the time the contract was made, the anticipation of the parties that proof of actual damages would be costly or inconvenient, the difficulty of proving causation and foreseeability, and whether the liquidated damages provision is included in a form contract. 50 See Cal. Civ. Code § 1671(b); Union Bond & Trust Co. v. Blue Creek Redwood Co., 128 F. Supp. 709, 712 (N.D. Cal. 1955) (citing Cal. Civ. Code § 3294(a), and stating: “Section 3294 expresses the policy of the law against the allowance of exemplary damages for breach of contract regardless of the nature of the breach.”). Case 5:14-cv-02329-BLF Document 99 Filed 11/10/15 Page 23 of 34 010450-11 828263 V1 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 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO GOOGLE INC.’S MOTION TO DISMISS PLAINTIFFS’ THIRD AMENDED CLASS ACTION COMPLAINT - 17 Case No. 5:14-cv-02329-BLF withholdings.51 The provision itself, however, does not provide for an appeal of a withholding decision.52 (TAC Exs. A and C, ¶ 5.) In fact, Google has stated explicitly that withholdings of earnings, which supposedly are returned to advertisers, cannot be appealed.53 (TAC, ¶¶ 83, 96.) Also, as Ms. Chose and Mr. Simpson allege in the TAC, neither the AdSense contract nor their termination notices told them that an “appeal” of funds withheld was possible. (TAC, ¶¶ 82-83, 95-96.) And nowhere in the AdSense contract or in their termination notices did Google provide an address to “dispute any payment made or withheld relating to the Services,” nor did it do so in their termination notices.54 (TAC, ¶¶ 82, 95.) In fact, Ms. Chose’s notice told her that no action was required. (TAC, ¶ 82.) Also, neither Ms. Chose nor Mr. Simpson had access to their publisher numbers upon termination and lock-out from their accounts, and it was their understanding that a publisher needs that number to communicate with Google about his or her account. (TAC, ¶¶ 82, 95.) Additionally, the termination notices to Ms. Chose and Mr. Simpson were so opaque as to give them no meaningful information on which to base an appeal regarding the withholding of their funds. (Id.) Google’s reading of the contract would work a forfeiture of Ms. Chose and Ms. Simpson’s 51 Plaintiffs respectfully re-assert that this provision relates to active publishers, and not to Ms. Chose or Mr. Simpson, given that it appears in the “Payments” section of the contract, and given Google’s dynamic adjustments to earnings for active publishers. (TAC Exs. A and C, ¶ 5 and ¶¶ 32, 44.) The Court can, of course, modify its non-final prior ruling on this subject pursuant to Fed. R. Civ. P. 54(b), and plaintiffs respectfully urge it to do so. 52 Google cites to Mr. Simpson’s termination notice as advising that he could appeal-but note the language and context: it is referring to an appeal of the decision to terminate the account, not an appeal of Google’s withholding of earnings (which Google at first said it credited to advertisers, and now says it merely “endeavors” so to do). (Gray Decl. Ex. 12 (“In some cases, publishers can make significant changes to correct the violation and are willing to comply with the AdSense program policies . . . . For this reason, we offer an appeals process . . . .”).) 53 In a help article entitled “Deductions from earnings FAQs,” Google states that when it makes deductions from earnings “for invalid click activity or for activity that was not in compliance with Google policy,” it “adjust[s] [the publisher’s] earnings and reimburse[s] the advertisers who paid for these clicks.” (https://support.google.com/adsense/answer/2808531?hl=en (last accessed February 17, 2015).) This is what Google told Ms. Chose and Mr. Simpson it was doing upon termination of their accounts. (TAC, ¶¶ 83, 96 (“As your account has been permanently disabled, we will withhold payment of your account balance . . . . The earnings on your account will be returned to the affected advertisers.”).) And in the “Deductions from earnings FAQs,” Google explicitly states in answer to the question, “I’d like to appeal the deduction. Can I do so?” as “Unfortunately you can’t appeal the deduction.” (https://support.google.com/adsense/answer/2808531?hl=en (emphasis added).) (TAC, ¶¶ 83, 96.) 54 Mr. Simpson’s termination notice provides a web address for an appeal of termination, Gray Decl., Ex. 12, but not of any funds or payments withheld. Case 5:14-cv-02329-BLF Document 99 Filed 11/10/15 Page 24 of 34 010450-11 828263 V1 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 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO GOOGLE INC.’S MOTION TO DISMISS PLAINTIFFS’ THIRD AMENDED CLASS ACTION COMPLAINT - 18 Case No. 5:14-cv-02329-BLF earned but unpaid funds though they did not mean to waive or forfeit their rights to maintain this action in court. (TAC, ¶¶ 82, 95.) Here, where plaintiffs have raised serious questions as to whether Ms. Chose and Mr. Simpson were required to, or even could, “appeal” from funds withheld at termination, there should be no forfeiture of these plaintiffs’ right to maintain this suit.55 Certainly the Court should not dismiss their claims on this basis at the pleadings stage. 2. Google cannot enforce its contractual limitations period here. Furthermore, the language at issue is really a private, or contractual, statute of limitations. Defenses based on statutes of limitations, including contractual or private statutes of limitations, are affirmative defenses.56 And, it is the defendant that “bear[s] the burden of establishing” that affirmative defense. Schoettler, 2008 WL 5101367, at *7 (citations omitted). But here, Google has never identified the term at issue as a contractual statute of limitations or argued it as such, nor has it now offered, nor did it with its previous motion to dismiss offer, any authorities in aid of analyzing whether it, as a contractual statute of limitations, is reasonable and enforceable.57 Accordingly, Google has never met its burden in establishing it as a valid limitation on Ms. Chose and Mr. Simpson’s right to maintain this suit. Respectfully, the Court should consider the clause’s enforceability on that basis now, especially where enforcing the provision as Google requests would result in dismissal of these two plaintiffs’ claims, while on the other hand, undertaking this analysis will not prejudice Google, given that the parties are at the inception of the case. Whereas the law provides for four-year statutes of limitations for plaintiffs’ breach-of- contract and UCL claims, for example, the language at issue purports to limit the publisher to 30 days to notify Google of the referenced disputes under penalty of waiving its claims. See Feldman v. Google, Inc., 513 F. Supp. 2d 229, 243 (E.D. Pa. 2007) (considering provision in AdWords contract 55 See Cal. Civ. Code § 1442 (“CONDITIONS INVOLVING FORFEITURE, HOW CONSTRUED. A condition involving a forfeiture must be strictly interpreted against the party for whose benefit it is created.”). 56 E.g., Edwards v. Princess Cruise Lines, Ltd., 371 Fed. Appx. 768, 769 (9th Cir. 2010) (“Invocation of a contractual limitations period to bar a claim is an affirmative defense.”) (citation omitted); Schoettler v. Wachovia Corp., 2008 WL 5101367, at *7 (E.D. Cal. Dec. 3, 2008) (citations omitted). 57 Cf. Fed. R. Civ. P. 8(c)(1) (“In responding to a pleading, a party must affirmatively state any avoidance or affirmative defense, including: . . . statute of limitations . . . .”) (emphasis added). Case 5:14-cv-02329-BLF Document 99 Filed 11/10/15 Page 25 of 34 010450-11 828263 V1 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 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO GOOGLE INC.’S MOTION TO DISMISS PLAINTIFFS’ THIRD AMENDED CLASS ACTION COMPLAINT - 19 Case No. 5:14-cv-02329-BLF stating: “You waive all claims relating to charges unless claimed within 60 days after the charge . . . .”). This provision, however, is unconscionable, and it cannot be enforced here. While such contractual limitations periods-at least as to non-statutory claims58-can be enforceable under California law if reasonable, e.g., id. (citations omitted), here, the 30-day limit set forth in Paragraph 5 is unreasonable.59 The AdSense contract purports to give Google the right to withhold a publisher’s earnings upon termination. A publisher will not have the innate understanding that perhaps he or she can challenge this withholding as done pursuant to an invalid liquidated damages provision, and in violation of Cal. Civ. Code § 1671(b) or other statutes such as the UCL. 30 days is not a reasonable time period for a terminated publisher to consult with legal counsel and to determine if he or she might have claims, under penalty of waiving them, especially in light of the legislature’s grant of four-year statutes of limitation. Additionally, 30 days is not sufficient when, as alleged, the termination notices were so non-specific as to what exactly led to plaintiffs’ account closures, and where the notices indicated that Ms. Chose and Mr. Simpson’s earnings already had been returned to advertisers.60 Furthermore, the provision here is unilateral. Only publishers are purportedly subject to waiving claims if they do not notify Google of disputes within 30 days, not Google vis-à-vis publishers. This demonstrates substantive unconscionability.61 58 See Jackson v. S.A.W. Entm’t, Ltd., 629 F. Supp. 2d 1018, 1028 (N.D. Cal. 2009), abrogation on other bases recognized by Iskanian v. CLS Transp. Los Angeles, LLC, 59 Cal. 4th 348 (2014) (“Contractual agreements to shorten the statute of limitations period are generally disfavored because they ‘derogate’ statutory intent.”). In Jackson, the court held substantively unconscionable (and procedurally as well) a “6 month” limitation, where statutes whose violation the plaintiff claimed afforded three- and four-year statutes of limitation. Id. at 1028-29. 59 Assaad v. Am. Nat. Ins. Co., 2010 WL 541841, at *7 (N.D. Cal. Dec. 23, 2010) (30-day contractual limitations period substantively unconscionable as “‘trap for the unwary’” that limits “‘ability to consult counsel’”) (citation omitted); Ellis v. U.S. Security Associates, 224 Cal. App. 4th 1213, 1222-1226 (2010) (six-month period unreasonable; it “d[id] not provide ‘sufficient time for the effective pursuit of the judicial remedy.’”) (citation omitted); Moreno v. Sanchez, 106 Cal. App. 4th 1415, 1430-32 (2003) (one-year contractual statute of limitations unreasonably short; shortened period may not be “‘so unreasonable as to show imposition or undue advantage in some way.’”) (citation omitted). 60 And again, as alleged in the TAC, Ms. Chose’s notice told her that no “[a]ction [was] required,” TAC, ¶ 82, while Mr. Simpson’s notice only referred to “invalid activity,” without indicating what that meant and where it might have occurred, TAC, ¶ 91. 61 In Martinez v. Extra Space Storage, Inc., 2013 WL 3889221, at *3-4 (N.D. Cal. July 26, 2013), the court considered a challenge to a one-year private statute of limitations on an unconscionability Case 5:14-cv-02329-BLF Document 99 Filed 11/10/15 Page 26 of 34 010450-11 828263 V1 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 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO GOOGLE INC.’S MOTION TO DISMISS PLAINTIFFS’ THIRD AMENDED CLASS ACTION COMPLAINT - 20 Case No. 5:14-cv-02329-BLF Whether analyzed on the basis of unconscionability, or solely on the basis of its unreasonableness,62 the 30-day private/contractual statute-of-limitations period in the contract should not work a waiver or dismissal of plaintiffs Chose and Simpson’s claims. Other than Google’s conclusory and improper factual assertion that large service providers “rely upon prompt appeals to ensure that claims from closed accounts do not remain a potential liability for years” (which begs the question why Google needs a 30-day period, including in light of the 60-day term in its contract with advertisers), MTD at 18 (emphasis added), Google offers no rationale for why it ought to be able to extinguish an unwary publisher’s claims in one month’s time. While the Court can find here as a matter of law that the provision is unreasonable and unenforceable as a matter of law, the Court should not find the provision conscionable and enforceable as a matter of law.63 E. Plaintiffs have pled adequately a claim in the alternative for breach of the implied covenant of good faith and fair dealing. Plaintiffs also state a claim for breach of the implied covenant of good faith and fair dealing.64 Google argues that plaintiffs “have no factual basis to claim that Google exercised its termination and withholding rights in bad faith (for example, because of a personal feud . . . .).” But plaintiffs have alleged that Google terminated publishers, including CIS and Ms. Chose, for supposed policy violations, while leaving publishers with the same types of displays active. (TAC, ¶¶ 70, 79 theory. Id. at 3. After determining that the plaintiff had shown procedural unconscionability because the contract was one of adhesion, as here, the court turned to substantive unconscionability and noted that a “‘paramount consideration’ is mutuality.” Id. (citation omitted). Because the clause there was unilateral, as here, the court found “that plaintiff has therefore demonstrated important elements of both procedural and substantive unconscionability.” Id. And where, as in this case, “[t]he facts that must be shown to establish whether plaintiffs [sic] could have reasonably discerned and brought her claims within one year . . . present disputed factual issues,” the court held it to be “inappropriate to decide on a motion for judgment on the pleadings.” Id. at *4. 62 See Han v. Mobil Oil Corp., 73 F.3d 872, 877 (9th Cir. 1995) (discussing as reasonable a 12- month contractual limitation under the circumstances there, but noting that the plaintiff “d[id] not dispute the reasonableness of the provision.”). 63 Martinez, 2013 WL 3889221, at *4; see also Ramos, 2009 WL 86744, at *7 (inappropriate to dismiss claim of unconscionability on motion to dismiss) (citations omitted). 64 “To establish this claim, a plaintiff must establish the existence of a contractual obligation, the identities of the parties involved, and conduct that impedes the other party’s rights to benefit from the contract.” Harvey G. Ottovich Revocable Living Trust v. Washington Mut., Inc., 2010 WL 3769459, at *3 (N.D. Cal. Sept. 22, 2010); accord, Oculus Innovative Sciences, Inc. v. Nofil Corp., 2007 WL 2600746, at *3 (N.D. Cal. Sept. 10, 2007) (citation omitted). Case 5:14-cv-02329-BLF Document 99 Filed 11/10/15 Page 27 of 34 010450-11 828263 V1 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 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO GOOGLE INC.’S MOTION TO DISMISS PLAINTIFFS’ THIRD AMENDED CLASS ACTION COMPLAINT - 21 Case No. 5:14-cv-02329-BLF and Ex. D.) This displays bad faith on Google’s part, in violation of the implied covenant.65 As for the use of the phrase “may withhold unpaid amounts” in the contract, Google agrees that this language gave it absolute discretion to withhold all unearned payments from terminated publishers. But the only consideration it offered or gave to plaintiffs at any time was payment for ads served. Given these circumstances, under pain of rendering the contract “‘an unenforceable, illusory agreement,’” Google had an obligation to act in good faith in exercising that discretion.66 Here, plaintiffs have alleged that it did not. (TAC, ¶¶ 29, 137.) Finally, Google contends that plaintiffs “are only entitled to be paid if they comply with Google’s Terms.” (MTD at 14.) This is the language of a condition precedent. Under this alternative framework, Google, in terms of its contractual statement that it “may withhold unpaid amounts” from terminated publishers, had the obligation to determine if the conditions for payment at termination were met “in accordance with an objective standard of reasonableness” or, alternatively, it might have been able to exercise its discretion subjectively, but only if it did so in good faith. Storek & Storek, 100 Cal. App. 4th at 58-63 (citations omitted). But plaintiffs allege that Google did neither. (TAC, ¶¶ 29, 137.) For this reason, too, plaintiffs’ claim survives. F. Plaintiffs adequately allege their unjust enrichment claim. Under California law, unjust enrichment is a distinct cause of action; also, plaintiffs are allowed to plead inconsistent theories for relief (i.e., entitlement to damages under a contract or a remedy for unjust enrichment).67 In its ruling on Google’s last motion to dismiss, the Court gave plaintiffs leave to amend with respect to this claim, in order to comply with the rule of Klein v. Chevron U.S.A., Inc., 202 Cal. App. 4th 1342 (2012). 65 Google also attempts to overcome plaintiffs’ allegation of fact that Google, as a matter of course, and based on its own statements, always withholds 100% of unpaid earnings from publishers upon termination for breach. (MTD at 21 and n.22; TAC, ¶ 25.) The Court cannot resolve any such dispute on a motion to dismiss. But in any event, Google’s posited reading of one of its statements is completely untenable. When it tells publishers that “[t]he earnings on your account will be properly returned to the affected advertisers,” it means exactly that, as plaintiffs have alleged; and the phrase “may not” in the preceding sentence plainly means in that context “you are not authorized to.” (MTD at n.22.) 66 Storek & Storek, Inc. v. Citicorp Real Estate, Inc., 100 Cal. App. 4th 44, 55-58 (2002) (citations omitted). 67 Hawthorne v. Umpqua Bank, 2012 WL 1458194, at *2-3 (N.D. Cal. Apr. 26, 2012) (tentative ruling); Hernandez v. Path, Inc., 2012 WL 5194120, at *8 (N.D. Cal. Oct. 19, 2012). Case 5:14-cv-02329-BLF Document 99 Filed 11/10/15 Page 28 of 34 010450-11 828263 V1 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 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO GOOGLE INC.’S MOTION TO DISMISS PLAINTIFFS’ THIRD AMENDED CLASS ACTION COMPLAINT - 22 Case No. 5:14-cv-02329-BLF Plaintiffs have amended to strengthen their liquidated damages-based claims and claims alleging unconscionability. (TAC, ¶¶ 45-47, 127, 139-41.) Because the former claim alleges that the withholding term is an invalid and unenforceable liquidated damages provision, and because the latter claim asks that the provision be stricken as unconscionable pursuant to Cal. Civ. Code § 1670.5(a),68 plaintiffs’ unjust enrichment claim comports with Klein in the same manner the counterclaim-plaintiff’s claim did in the recent case of Bear, LLC v. Marine Grp. Boat Works, LLC, 2015 WL 4255061, at *5 (S.D. Cal. July 14, 2015) (holding claim sustainable under Klein where plaintiff “contest[ed] the validity of at least some of the Contract’s terms . . . .”). Also, as in Bear, plaintiffs here allege that their opposing party accepted or received the benefit of work and services that they performed. (TAC, ¶¶ 48-49.) This entitles them to seek restitution of the same.69 Plaintiffs’ unjust enrichment claim survives. G. Plaintiffs allege adequately claims pursuant to the UCL. 1. Plaintiffs have standing to sue under the UCL. Google claims that plaintiffs lack standing to maintain their UCL claims because they purportedly are not consumers; because Google claims that AdSense is a “business-to-business program”; because plaintiffs supposedly are “‘corporate’”; and because Google’s contract, it asserts, does not “‘implicate the public in general or individual consumers.’”70 (Google MTD at 22-23.) But in fact, by Google’s own admission, AdSense is a “service offered by Google that allows website publishers of all sizes to earn money by displaying Google-supplied ads on their sites.” (MTD/FAC 68 Plaintiffs’ new allegation, which plaintiffs state in the alternative, TAC, ¶ 159, denying the enforceability of the agreement as a whole, ties to their unconscionability claims. Cal. Civ. Code § 1670.5(a) provides that when there is an unconscionable term in a contract, a court can refuse to enforce the contract either as to that term or as a whole. Hence, the alternative allegation at TAC, ¶ 159. See also Hahn, 2014 WL 5100220, at *6 (granting summary judgment to plaintiffs where they “claim[ed] the membership agreements [there at issue, which they contended to contain a liquidated damages provision] [we]re unconscionable under Civil Code § 1670.5(a) to the extent they effect[ed] a forfeiture of unused prepaid massage services.”). 69 2015 WL 4255061, at *5; see also Restatement (Third) of Restitution and Unjust Enrichment § 36(1) (2011) (“A performing party whose material breach prevents a recovery on the contract has a claim in restitution against the recipient of performance, as necessary to prevent unjust enrichment.”). (Of course, plaintiffs deny material breach.) 70 The same might be said of the AdWords program, and yet plaintiffs’ UCL claims have proceeded through the class certification process. See Pulaski & Middleman, LLC v. Google, Inc., 802 F.3d 979, 981-84 (9th Cir. 2015). Case 5:14-cv-02329-BLF Document 99 Filed 11/10/15 Page 29 of 34 010450-11 828263 V1 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 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO GOOGLE INC.’S MOTION TO DISMISS PLAINTIFFS’ THIRD AMENDED CLASS ACTION COMPLAINT - 23 Case No. 5:14-cv-02329-BLF at 4 (emphasis added).) According to Google, “AdSense affords all types of publishers (including thousands of small businesses, individual bloggers, and other content producers who may lack dedicated advertising sales teams) access to a large pool of advertisers . . . .” (Id. (emphasis added).) The foregoing descriptions underscore that one aspect of the Google-publisher relationship is of a consumer nature; that AdSense is not merely a “business-to-business” program, but one that is available to individuals including plaintiffs Chose and Simpson, who are decidedly not “corporate”; and that AdSense, given its broad reach and the sheer numbers involved, absolutely “implicates the public in general [and] individual consumers.” (Cf. Google MTD at 22.) Accordingly, each plaintiff has standing to bring a UCL claim on the facts alleged. The court in Ewert v. eBay, Inc., 2010 WL 4269259, at *8-9 (N.D. Cal. Oct. 25, 2010), rejected contentions similar to Google’s. There, as here, plaintiffs were both corporations and individuals, and there, plaintiffs were decidedly engaged in business.71 Also, this action, too, “deals exclusively with form contracts.” It also “involves individual consumers,” i.e., not only the plaintiff and class consumers of Google’s AdSense “service,” to use Google’s own term, MTD/FAC at 4, but also the consumers who click on AdSense ads on the plaintiffs’ and class members’ web pages. (TAC, ¶¶ 32, 167.) Under the facts presented here, where the plaintiffs and a significant portion of the class are well likely not large, sophisticated corporations, plaintiffs’ UCL claims survive.72 71 Id. at *1-2. The eBay court explained that there is no broad, general proscription on corporations and business entities seeking relief under the UCL. Id. at *8. It also distinguished Google’s authority here, Linear Tech. Corp. v. Applied Materials, Inc., 152 Cal. App. 4th 115, 135 (2007), by nothing that it dealt with “‘sophisticated corporate customers who have entered or will enter their own contracts with [defendants].’” 2010 WL 4269259, at *8 (citing 152 Cal. App. 4th at 135 (emphasis in original)). It noted that Linear Tech relied on Rosenbluth Int’l v. Superior Court, 101 Cal. App. 4th 1073, 1078 (2002), but that in Rosenbluth, the court was focused on representing victims “who were ‘sophisticated corporations, most in the Fortune 1000, each of which negotiate[d] contracts individually with [the defendant].’” 2010 WL 4269259, at *8 (emphasis in original). 72 Cf. In re Yahoo! Litig., 251 F.R.D. 459, 474-75 (C.D. Cal. 2008) (noting that Proposition 64 changed the standing requirement articulated in Linear Tech., and also noting that “[t]he holdings of both Linear Tech. and Rosenbluth turn less on the fact that the alleged victims in those cases were businesses, and more on the fact that these entities were sophisticated and individually capable of seeking relief for their injuries.”). Google’s reliance on its other cited authorities is also misplaced. See In re Webkinz Antitrust Litig., 695 F. Supp. 2d 987, 998-99 (N.D. Cal. 2010) (relying on Linear Tech. and Rosenbluth, and granting dismissal of UCL claim with leave to amend to “set out the requisite factual connection to the general public or to individual consumer’s interest”); Dollar Tree, 875 F. Supp. 2d at 1083 (on motion for summary judgment, court dismissed UCL claim where claim was “based on a breach of a contract Case 5:14-cv-02329-BLF Document 99 Filed 11/10/15 Page 30 of 34 010450-11 828263 V1 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 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO GOOGLE INC.’S MOTION TO DISMISS PLAINTIFFS’ THIRD AMENDED CLASS ACTION COMPLAINT - 24 Case No. 5:14-cv-02329-BLF 2. Plaintiffs state a claim under the UCL’s fraudulent prong. Google’s AdSense contract tells publishers that it “may withhold unpaid amounts” upon termination for supposed breach. (TAC Exs. A and C, ¶ 10.) This advised publishers that Google purportedly had a right to do so on their accounts, but it did not tell them that Google would show no mercy and do this in every single instance, as plaintiffs have pled that Google actually does, by its admission. (TAC, ¶¶ 25, 32, 134, 171.) This is a material omission, and plaintiffs need show no specific duty to them given that it is a truth omitted from a positive statement. See, e.g., Doe v. Successfulmatch.com, 70 F. Supp. 3d 1066, 1076 (N.D. Cal. 2014). As for reliance, plaintiffs have pled that they reviewed the AdSense contract before signing up and periodically thereafter; that “they would have behaved differently” had the truth been known to them; and that they would not have expended time, energy, and money in their websites serving AdSense program ads if they had known that Google would always withhold 100% of their unpaid program earnings if it terminated their accounts.” (TAC, ¶ 171.) This is sufficient under California law.73 However much Google wishes to scoff at the notion that its publishers might actually consider it a strong, behavior-influencing matter of principle that contract language should mean fully what it says, it cannot extinguish plaintiffs’ claims by bald assertion and snark.74 Each plaintiff cares enough to have shown the courage to file this suit. Plaintiffs’ claim under the fraud prong should survive. 3. Plaintiffs state a claim under the UCL’s unlawful prong. Plaintiffs’ claims under the unlawful prong survive as well. Plaintiffs have pled unconscionability and violation thereby of Cal. Civ. Code § 1670.5(a), as well as an invalid, that does not implicate the public in general or individual consumers”) (citing Linear Tech., 152 Cal. App. 4th at 135). 73 Cf. In re Tobacco II Cases, 46 Cal. 4th 298, 326 (2009) (“[R]eliance is proved by showing that the defendant's misrepresentation or nondisclosure was ‘an immediate cause’ of the plaintiff's injury- producing conduct.”) (emphasis added) (citation omitted). The parties are at the pleadings stage; plaintiffs are not required to prove their claims at this point in time, but to allege them adequately, which they have. 74 Google’s attack on Mr. Simpson, supported by an improper assertion of fact that he signed up anew under the AdSense program, does not even account for the obvious possibility that Google’s policy of always withholding 100% of unpaid earnings at termination was discovered after the event that Google asserts to have occurred. Case 5:14-cv-02329-BLF Document 99 Filed 11/10/15 Page 31 of 34 010450-11 828263 V1 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 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO GOOGLE INC.’S MOTION TO DISMISS PLAINTIFFS’ THIRD AMENDED CLASS ACTION COMPLAINT - 25 Case No. 5:14-cv-02329-BLF penalizing liquidated damages provision pursuant to Cal. Civ. Code § 1671(b). Additionally, they have pled violation of Cal. Civ. Code § 1709 (Deceit); see also Cal. Civ. Code § 1710 (defining “Deceit”). This UCL claim should survive accordingly. 4. Plaintiffs state a claim under the UCL’s unfair prong. With respect to plaintiffs’ claims under the UCL’s unfair prong, California courts of appeal do not agree on what exactly this prong covers, but Google’s cases rely on language and concepts that are outside the statute. The better standard comports with the statutory language itself: that an “unfair business practice under the UCL is ‘one that either offends an established public policy or is immoral, unethical, oppressive, unscrupulous, or substantially injurious to users.’”75 Google’s unreasonable, punitive liquidated damages term offends the public policy expressed in the liquidated damages statute, Cal. Civ. Code § 1671(b), and its actions as alleged in the TAC are immoral, unethical, oppressive, unscrupulous, and substantially injurious to plaintiffs and the proposed class. There is no good reason or justification for Google’s action; it is a sharp practice grounded in Google’s unwillingness to segregate good ad serves from those it might contend to be bad, and to pay accordingly. For these reasons, plaintiffs’ claim under the unfair prong survives.76 H. Plaintiffs allege adequately their remaining claims. For the reasons set forth above, plaintiffs allege adequately claims for equitable relief pursuant both to the federal and California Declaratory Judgment Acts (Counts VI and VII). Also, as set forth above, plaintiffs allege adequately their liquidated-damages-based claim (Count I and otherwise) pursuant to Cal. Civ. Code § 1671. IV. CONCLUSION For all of the foregoing reasons, plaintiffs respectfully ask the Court to deny Google’s motion in its entirety, and, as needed to save their claims, for leave to amend. 75 In re Google, Inc. Privacy Policy Litig., 58 F. Supp. 3d 968, 984 (N.D. Cal. 2014) (citation omitted). “To determine whether a business practice is unfair, a court should consider ‘the impact of the practice or act on its victim, balanced against the reasons, justifications and motives of the alleged wrongdoer;’ this prong of the UCL should be used to ‘enjoin deceptive or sharp practices.’” Id. (citation omitted). 76 See Ubaldi v. SLM Corp., 852 F. Supp. 2d 1190, 1203 (N.D. Cal. 2012) (refusing to dismiss claim based on wrongful use of liquidated damages provision that allegedly constituted unfair behavior under the UCL). Case 5:14-cv-02329-BLF Document 99 Filed 11/10/15 Page 32 of 34 010450-11 828263 V1 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 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO GOOGLE INC.’S MOTION TO DISMISS PLAINTIFFS’ THIRD AMENDED CLASS ACTION COMPLAINT - 26 Case No. 5:14-cv-02329-BLF DATED: November 10, 2015 HAGENS BERMAN SOBOL SHAPIRO LLP By /s/ Steve W. Berman Steve W. Berman (pro hac vice) Robert F. Lopez (pro hac vice) 1918 Eighth Avenue, Suite 3300 Seattle, WA 98101 Telephone: (206) 623-7292 Facsimile: (206) 623-0594 steve@hbsslaw.com robl@hbsslaw.com Jeff D. Friedman 715 Hearst Avenue, Suite 202 Berkeley, CA 94710 Telephone: (510) 725-3000 Facsimile: (510) 725-3001 jefff@hbsslaw.com Attorneys for Plaintiffs and the Proposed Class Case 5:14-cv-02329-BLF Document 99 Filed 11/10/15 Page 33 of 34 010450-11 828263 V1 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 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO GOOGLE INC.’S MOTION TO DISMISS PLAINTIFFS’ THIRD AMENDED CLASS ACTION COMPLAINT - 27 Case No. 5:14-cv-02329-BLF CERTIFICATE OF SERVICE I hereby certify that on November 10, 2015, I electronically filed the foregoing document using the CM/ECF system which will send notification of such filing to the email addresses registered in the CM/ECF system, as denoted on the Electronic Mail Notice List, and I hereby certify that I have caused to be mailed a paper copy of the foregoing document via the United States Postal Service to the non-CM/ECF participants indicated on the Manual Notice List generated by the CM/ECF system. Dated: November 10, 2015 /s/ Steve W. Berman Steve W. Berman Case 5:14-cv-02329-BLF Document 99 Filed 11/10/15 Page 34 of 34