Volks USA, Inc. v. A2 Hosting, Inc.

NOTICE OF MOTION AND MOTION to Dismiss Plaintiff's First Amended Complaint

C.D. Cal.September 21, 2016

H IL L, F A R R ER & B U R R IL L LL P A L IM IT E D L IA BI LI TY P A R TN E R S H IP A TT O R N E Y S A T LA W O N E C A LI FO R N IA P LA ZA , 3 7T H F LO O R 30 0 S O U TH G R A N D A V E N U E LO S A N G E LE S, C A LI FO R N IA 9 00 71 -3 14 7 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 DEFENDANT’S NOTICE OF MOTION AND MOTION TO DISMISS PLAINTIFF’S FIRST AMENDED COMPLAINT HILL, FARRER & BURRILL LLP Neil D. Martin (Bar No. 094121) Email: nmartin@hillfarrer.com Clayton J. Hix (Bar No. 236718) Email: chix@hillfarrer.com One California Plaza, 37th Floor 300 South Grand Avenue Los Angeles, CA 90071-3147 Tel: (213) 620-0460 Fax: (213) 624-4840 BODMAN PLC Dennis J. Levasseur Email: dlevasseur@bodmanlaw.com 6th Floor at Ford Field 1901 St. Antoine Street Detroit, Michigan 48226 Tel: (313) 393-7596 Fax: (313) 393-7579 Admitted pro hac vice Attorneys for Defendant A2 Hosting, Inc. UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA VOLKS USA, INC., a California corporation, Plaintiff, vs. A2 HOSTING, INC., a Michigan corporation, Defendant. CASE NO. 2:16-cv-04277-CAS-E DEFENDANT’S NOTICE OF MOTION AND MOTION TO DISMISS PLAINTIFF’S FIRST AMENDED COMPLAINT Date: October 24, 2016 Time: 10:00 a.m. Judge: Hon. Christina A. Snyder Courtroom 5, 2nd Floor Case 2:16-cv-04277-CAS-E Document 22 Filed 09/21/16 Page 1 of 36 Page ID #:469 H IL L, F A R R ER & B U R R IL L LL P A L IM IT E D L IA BI LI TY P A R TN E R S H IP A TT O R N E Y S A T LA W O N E C A LI FO R N IA P LA ZA , 3 7T H F LO O R 30 0 S O U TH G R A N D A V E N U E LO S A N G E LE S, C A LI FO R N IA 9 00 71 -3 14 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 2 - DEFENDANT’S NOTICE OF MOTION AND MOTION TO DISMISS PLAINTIFF’S FIRST AMENDED COMPLAINT TO THE COURT, ALL PARTIES, AND THEIR COUNSEL OF RECORD: PLEASE TAKE NOTICE that on October 24, 2016 at 10:00 a.m., or as soon thereafter as the matter may be heard, in Courtroom 5 of the United States District Court for the Central District of California, located at 312 N. Spring St., 2nd Floor, Los Angeles, CA 90012, Defendant A2 Hosting, Inc. (“A2” or “Defendant”) will move to dismiss the First Amended Complaint under Fed. R. Civ. Proc. 12(b)(6) on the grounds the first amended complaint fails to state a claim upon which relief can be granted. This motion will be based upon this notice of motion, the attached memorandum of points and authorities, the first amended complaint, all pleadings and records on file in this action, any reply brief that may be filed, and on such other and further evidence as may be presented at the hearing of this motion. This motion is made following the conference of counsel pursuant to L.R. 7-3 which took place on September 14, 2016 and was continued on September 20, 2016. DATED: September 21, 2016 HILL, FARRER & BURRILL LLP By: /s/ Clayton J. Hix CLAYTON J. HIX Attorneys for Defendant A2 Hosting, Inc. Case 2:16-cv-04277-CAS-E Document 22 Filed 09/21/16 Page 2 of 36 Page ID #:470 H IL L, F A R R ER & B U R R IL L LL P A L IM IT E D L IA BI LI TY P A R TN E R S H IP A TT O R N E Y S A T LA W O N E C A LI FO R N IA P LA ZA , 3 7T H F LO O R 30 0 S O U TH G R A N D A V E N U E LO S A N G E LE S, C A LI FO R N IA 9 00 71 -3 14 7 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 TABLE OF CONTENTS Page - i - I. INTRODUCTION ........................................................................................... 1 II. STATEMENT OF FACTS .............................................................................. 1 A. The Parties. ............................................................................................ 1 B. The Contract. ......................................................................................... 1 C. Plaintiff’s Complaints. .......................................................................... 6 III. ARGUMENT .................................................................................................. 7 A. Standard for Rule 12(b)(6) Motions. .................................................... 7 B. Plaintiff Has Failed to State a Claim for False Advertising Under The Lanham Act......................................................................... 9 C. Plaintiff Has Failed to State a Claim Under the FAL. ........................ 12 D. Plaintiff Has Failed to State a Claim Under the CFAA. ..................... 15 E. Plaintiff Has Failed to State a Claim Under Cal. Penal Code §502. .................................................................................................... 16 F. Plaintiff Has Failed to State a Claim Under the UCL. ....................... 18 G. Plaintiff Has Failed to State a Claim for Breach of Contract ............. 22 H. Plaintiff’s Breach of Warranty Claim Should be Dismissed. ............. 23 I. Plaintiff’s Negligence Claim Should be Dismissed. ........................... 24 J. Plaintiff has Failed to State a Claim for Trespass to Chattel .............. 25 K. Plaintiff’s Negligent Misrepresentation Claim Should be Dismissed. ........................................................................................... 26 L. Plaintiff Has Failed to State a Tortious Interference Claim. .............. 27 IV. CONCLUSION ............................................................................................. 29 Case 2:16-cv-04277-CAS-E Document 22 Filed 09/21/16 Page 3 of 36 Page ID #:471 H IL L, F A R R ER & B U R R IL L LL P A L IM IT E D L IA BI LI TY P A R TN E R S H IP A TT O R N E Y S A T LA W O N E C A LI FO R N IA P LA ZA , 3 7T H F LO O R 30 0 S O U TH G R A N D A V E N U E LO S A N G E LE S, C A LI FO R N IA 9 00 71 -3 14 7 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 TABLE OF AUTHORITIES Page - ii - Cases 3P.M., Inc. v. Basic Four Corp. 591 F. Supp. 1350 (E.D. Mich. 1984) ................................................................... 27 Abat v. Chase Bank 738 F. Supp. 2d 1093 (C.D. Cal. 2010) ................................................................ 12 Abear v. Teveliet, 2006 WL 2473481, at *3 (W.D. Wash. 8/28/06) ........................................................................................... 10 Associated Gen. Contractors of Cal. v. Cal. State Council of Carpenters 459 U.S. 519 (1983) ................................................................................................ 8 Badiee v. Brighton Area Schools 265 Mich. App. 343 695 N.W. 2d 521 (2005) ....................................................................................... 28 Barrus v. Sylvania, 55 F.3d 468 (9th Cir. 1995) ................................................................................... 10 Bell Atlantic v. Twombly, 550 U.S. 544 (2007). ............................................................................................... 8 Bernard v. Donat, 2012 WL 525533 at *3 (N.D. Cal. 02/16/12), ....................................................................................... 10, 11 Bonelli v. Volkswagen 166 Mich. App. 483 421 N.W. 2d 483 (1988). ...................................................................................... 28 Brookwood v. Bank of America 45 Cal. App. 4th 1667 (1996) ............................................................................... 15 Brown v. Wells Fargo Bank, N.A. 168 Cal. App. 4th 938 (2008) ............................................................................... 15 Cahill v. Liberty Mut. Ins. 80 F.3d 336 (9th Cir. 1996) ..................................................................................... 7 Casey v. Auto-Owners Ins. Co. 273 Mich. App. 388 729 N.W. 2d 277 (2006). ...................................................................................... 24 Cipai v. Bellingham Frozen Foods, Inc. 29 Mich. App. 1 596 N.W. 2d 620 (1999) ....................................................................................... 24 CMI Intern, Inc. v. Intermet Int’l. Corp. 251 Mich. App. 125 649 N.W. 2d 808 (2002) ....................................................................................... 28 Colgan v. Leatherman Tool Grp., Inc. 135 Cal. Rptr. 4th 663 (Cal. App. 2006). .............................................................. 13 Cooper v. Pickett 137 F.3d 616 (9th Cir. 1997) ................................................................................... 8 Case 2:16-cv-04277-CAS-E Document 22 Filed 09/21/16 Page 4 of 36 Page ID #:472 H IL L, F A R R ER & B U R R IL L LL P A L IM IT E D L IA BI LI TY P A R TN E R S H IP A TT O R N E Y S A T LA W O N E C A LI FO R N IA P LA ZA , 3 7T H F LO O R 30 0 S O U TH G R A N D A V E N U E LO S A N G E LE S, C A LI FO R N IA 9 00 71 -3 14 7 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 TABLE OF AUTHORITIES (continued) Page - iii - Della Penna v. Toyota Motor Sales, U.S.A., Inc. 902 P.2d 740 (Cal. 1995) ................................................................................ 27, 28 eBay v. Bidder’s Edge 100 F. Supp. 2d 1058 (N.D. Cal. 2000) ................................................................ 25 Eddy v. Sharp, 199 Cal. App. 3d 858 (1988) ........................................................................... 24, 26 Ehrlich v. Menezes 21 Cal. 4th 543 (1999) .......................................................................................... 24 Facebook v. Power Ventures, Inc. 844 F. Supp.2d 1025 (N.D. Cal. 2012) ................................................................. 17 Farmers Ins. Exch. v. Superior Court 2 Cal. 4th 382 826 P.2d 730, 734 (Cal. 1992) .............................................................................. 19 Frederickson & Watson Const. v. Dept. Pub. Works 28 Cal. App. 3d 514 (1972) ................................................................................... 24 Fultz v. Union Commerce Assoc. 470 Mich. 460, 467 683 N.W. 2d 587 (2004) ....................................................................................... 24 Halicki v. United Artists Commc'ns, Inc. 812 F.2d 1213 (9th Cir. 1987) ................................................................................. 9 Johnson v. Bobbie’s Party Store 189 Mich. App. 652 473 N.W. 2d 796 (1991) ....................................................................................... 24 Jurin v. Google, Inc., 768 F. Supp. 2d 1064 (S.D. Cal. 2011) ................................................................. 11 Kasky v. Nike, Inc. 27 Cal. 4th 939 45 P.3d 243 (2002) ................................................................................................ 18 Kearns v. Ford Motor Co. 567 F.3d 1120 (9th Cir. 2009) ................................................................................. 8 Korea Supply Co. v. Lockhead Martin Corp. 29 Cal. 4th 1134 63 P.2d 937 (2003) ................................................................................................ 18 Korea Supply Co. v. Lockheed Martin Corp. 63 P.3d 937 (Cal. 2003). ....................................................................................... 19 Land v. Del Mar Turf Club 120 Cal. App. 2d 829 262 P.2d 54 (1953) ................................................................................................ 24 Law Offices of Lawrence S. Stochler, P.C. v. Rose 174 Mich. App. 14 436 N.W. 2d 70 (1983) ......................................................................................... 26 Case 2:16-cv-04277-CAS-E Document 22 Filed 09/21/16 Page 5 of 36 Page ID #:473 H IL L, F A R R ER & B U R R IL L LL P A L IM IT E D L IA BI LI TY P A R TN E R S H IP A TT O R N E Y S A T LA W O N E C A LI FO R N IA P LA ZA , 3 7T H F LO O R 30 0 S O U TH G R A N D A V E N U E LO S A N G E LE S, C A LI FO R N IA 9 00 71 -3 14 7 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 TABLE OF AUTHORITIES (continued) Page - iv - Lexmark Int’l, Inc. v. Static Control Components, Inc. ___ U.S. __, 134 S.Ct. 1377 (2014). ................................................................. 9. 10 LVRC Holdings LLC v. Brekka 581 F.3d 1127 (9th Cir. 2009) ............................................................................... 16 McIntyre v. Colonies-Pac., LLC 175 Cal. Rptr. 3d 440 (Cal. Ct. App. 2014) .......................................................... 24 MediMatch, Inc. v. Lucent 120 F. Supp. 2d 842 (N.D. Cal. 2000) .................................................................. 12 Michigan National Bank v. St. Paul Fire & Marine Ins. Co. 223 Mich. App. 19 566 N.W.2d 7 (1997) ............................................................................................ 25 Mino v. Clio School Dist. 255 Mich. App. 60 661 N.W. 2d. 583 (2003) ...................................................................................... 28 Misc. Serv. Workers, Drivers & Helpers v. Philco-Ford Corp. 661 F.2d 776 (9th Cir. 1981) ................................................................................... 8 Navarro v. Block 250 F.3d 729 (9th Cir. 2001) ................................................................................... 7 Nedlloyd Lines B.V. v. Superior Court 3 Cal. 4th 459 834 P.2d 1148 (1992) ............................................................................................ 12 Oasis W. Realty, LLC v. Goldman 250 P.3d 1115 (Cal. 2011) .................................................................................... 22 Perez v. CitiMortgage, Inc. 2014 WL 2609656, at *6 (C.D. Cal. 06/10/14) .............................................................................................. 26 Pulaski & Middleman, LLC v. Google, Inc. 802 F.3d 979 (9th Cir. 2015) ................................................................................. 19 Saunders v. Superior Court 27 Cal. App. 4th 837 33 Cal. Rptr. 438 (Cal. Ct. App. 1994). ................................................................ 18 Synthe Spine Co., LP v. Calvert 270 F. Supp.2d 909 (E.D. Mich. 2003) ................................................................. 22 Trepel v. Pontiac Osteopathic Hospital 135 Mich. App. 361 421 N.W. 2d 483 (1984) ....................................................................................... 28 United States v. Nosel 676 F3d 854 (9th Cir. 2012) .................................................................................. 16 Vess v. Ciba-Geigy Corp USA, 317 F.3d 1097 (9th Cir. 2003) ................................................................................. 8 Von Grabe v. Sprint PCS 312 F. Supp. 2d 1285 (S.D. Cal. 2003) ................................................................. 10 Case 2:16-cv-04277-CAS-E Document 22 Filed 09/21/16 Page 6 of 36 Page ID #:474 H IL L, F A R R ER & B U R R IL L LL P A L IM IT E D L IA BI LI TY P A R TN E R S H IP A TT O R N E Y S A T LA W O N E C A LI FO R N IA P LA ZA , 3 7T H F LO O R 30 0 S O U TH G R A N D A V E N U E LO S A N G E LE S, C A LI FO R N IA 9 00 71 -3 14 7 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 TABLE OF AUTHORITIES (continued) Page - v - W. Minim Council v. Watt 643 F.2d 618 (9th Cir. 1981) ................................................................................... 8 Wang Labs v. Kagan 990 F.2d 1126 (9th Cir. 1993) ............................................................................... 12 Warner v. Tinder Inc., 105 F. Supp. 3d 1083 (C.D. Cal. 2015) .......................................................... 13, 14 Webb v. First of Michigan Corp. 195 Mich. App. 470 491 N.W. 2d 851 (1992) ....................................................................................... 27 Wong v. Tenneco, 39 Cal. 3d 126 702 P2d 570 (1985) ............................................................................................... 12 Statutes 15 U.S.C. §1125 .......................................................................................................... 9 15 U.S.C. §1125(a) ............................................................................................... 9, 11 15 U.S.C. §1127 .......................................................................................................... 9 18 U.S.C. §1030(a) ................................................................................................... 16 Cal. Bus. & Prof. Code §17601(c)............................................................................ 21 California Penal Code §502(a) ........................................................................... 16, 17 California Penal Code §502(b)(1), (3), (4), (5), and (7) ........................................... 17 California Penal Code §502(b)(i) ............................................................................. 18 Fed.R.Civ.P. 12(b)(6) ................................................................................................. 7 Other Authorities Cal. Bus. & Prof. Code § 17601(b) .......................................................................... 20 Cal. Bus. & Prof. Code §17200 .......................................................................... 18, 19 Cal. Bus. & Prof. Code §17500 .................................................................... 12, 13, 18 Cal. Bus. & Prof. Code §17600 ................................................................................ 20 Cal. Bus. & Prof. Code §17601(d) ........................................................................... 20 Case 2:16-cv-04277-CAS-E Document 22 Filed 09/21/16 Page 7 of 36 Page ID #:475 H IL L, F A R R ER & B U R R IL L LL P A L IM IT E D L IA BI LI TY P A R TN E R S H IP A TT O R N E Y S A T LA W O N E C A LI FO R N IA P LA ZA , 3 7T H F LO O R 30 0 S O U TH G R A N D A V E N U E LO S A N G E LE S, C A LI FO R N IA 9 00 71 -3 14 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 1 - DEFENDANT’S NOTICE OF MOTION AND MOTION TO DISMISS PLAINTIFF’S FIRST AMENDED COMPLAINT MEMORANDUM OF POINTS & AUTHORITIES I. INTRODUCTION Defendant A2 Hosting, Inc. submits this memorandum in support of its motion to dismiss plaintiff’s first amended complaint (“FAC”). Despite the fact that this is a garden variety contract dispute between a vendor and a customer that was to be governed by Michigan law, plaintiff filed a FAC that asserts 11 counts asserting claims under the Lanham Act for unfair competition, the Computer Fraud and Abuse Act (“CFAA”), three California statutes (including a criminal statute), and numerous common law tort and contract claims. As demonstrated below, not only does plaintiff lack standing to assert some of its claims but plaintiff’s agreement to apply Michigan law and its express contractual limitations on liability are fatal to the others. Consequently, plaintiff’s FAC should be dismissed. II. STATEMENT OF FACTS A. The Parties. Plaintiff Volks USA, Inc. is a wholly owned subsidiary of a Japanese corporation that sells toys and hobby materials. See, FAC, ¶8. According to its FAC, plaintiff operates two websites: (1) an online webstore to sell goods (“Web Store”) and (2) an informational website (“Info Site”) that provides promotions and information on its goods. Id., ¶9. Most of plaintiffs’ claims arise out of the deletion of data in one of the websites that plaintiff contracted with A2 to host. A2 is a website hosting service headquartered in Ann Arbor, Michigan that charges its customers a fee to host their data. B. The Contract. Plaintiff alleges that in 2015 it contacted A2 through A2’s website to host plaintiff’s two websites. Id., ¶18. Before plaintiff could complete its order with A2, it acknowledged that it “read and agree[d] to the Terms of Service”. Id., ¶20. The Terms of Service (“TOS”) begins by stating that it “is a contract between you Case 2:16-cv-04277-CAS-E Document 22 Filed 09/21/16 Page 8 of 36 Page ID #:476 H IL L, F A R R ER & B U R R IL L LL P A L IM IT E D L IA BI LI TY P A R TN E R S H IP A TT O R N E Y S A T LA W O N E C A LI FO R N IA P LA ZA , 3 7T H F LO O R 30 0 S O U TH G R A N D A V E N U E LO S A N G E LE S, C A LI FO R N IA 9 00 71 -3 14 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 2 - DEFENDANT’S NOTICE OF MOTION AND MOTION TO DISMISS PLAINTIFF’S FIRST AMENDED COMPLAINT [plaintiff] and A2 Hosting, Inc. (A2 Hosting, A2, we, us, or our). All clients of A2 Hosting agree to abide by those policies.” See, Ex. B, p. 1; emphasis added. Plaintiff admits that it executed the TOS. See, FAC, ¶19. The TOS describes, in Section 1 entitled “SERVICES,” the services A2 would provide: “A2 Hosting provides a number of services to its customers. The services and products provided to you by A2 Hosting, as set out on our website, are referred to as the Services. We provide the Services to you based on the description of them on our website as of the Effective Date. * * *.” See, Ex. B., p. 3.1 As to the Money Back Guaranty, that plaintiff repeatedly mischaracterizes in its FAC, the TOS clearly provides as follows: “7. MONEY BACK GUARANTY “Hosting services carry an unconditional 30 day satisfaction guarantee. To cancel your hosting services and receive a refund, you must contact us within 30 days from the Effective Date of the particular Service you wish to cancel. Only your monthly fees are refundable. Set up, domain name registration, SSL Certificate, and other one-time fees are not refundable. If you paid us by credit card we will credit the card on file, Paypal payments will be refunded on-line. Payments made by check are not refundable. Any custom orders or configuration setups are non-refundable.” Id., p. 7; emphasis added. The TOS expressly limited A2’s Representations and Warranty as follows: “10. A2 HOSTING’S REPRESENTATIONS AND WARRANTY “A2 Hosting warrants that it will perform the Services in accordance with other similarly situated companies. To 1 Contrary to the allegations in the FAC, “migration” of data was a service described on A2 website. See, FAC, Ex 1 – 28 (“Free Account Migration”) Ex 2 – 35 (“Free Account Migration”). Case 2:16-cv-04277-CAS-E Document 22 Filed 09/21/16 Page 9 of 36 Page ID #:477 H IL L, F A R R ER & B U R R IL L LL P A L IM IT E D L IA BI LI TY P A R TN E R S H IP A TT O R N E Y S A T LA W O N E C A LI FO R N IA P LA ZA , 3 7T H F LO O R 30 0 S O U TH G R A N D A V E N U E LO S A N G E LE S, C A LI FO R N IA 9 00 71 -3 14 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 3 - DEFENDANT’S NOTICE OF MOTION AND MOTION TO DISMISS PLAINTIFF’S FIRST AMENDED COMPLAINT make a warranty claim, you must notify A2 Hosting in writing within 30 days of the date A2 Hosting’s alleged breach. Your exclusive remedy, and A2 Hosting’s sole obligation, in the case of a breach of warranty is, at A2 Hosting’s option, to (i) reperform the Service; or (ii) issue you a credit based on the amount of time the Services were not in conformity with this warranty, subtracted (‘pro-rated’) by the amount of time they were in conformance. For the purposes of A2 Hosting’s warranty, the following issues shall not constitute services within the definition of ‘similarly situated companies’: ‘up-time guarantees’ or other items for which A2 Hosting provides a service level agreement, regardless of whether a service level agreement is, or was, available for the Services.” Id., pp. 10-11; emphasis added. In Section 11 of the TOS, plaintiff represented and warranted to A2, that it “[understood] and appreciate[d] the risks inherent to you, your business, and your person, that come from using the Services in particular, and doing business on the Internet in general * * *.” Id., p. 11; emphasis added. Although plaintiff repeatedly complains that A2 Hosting represented that it provided a “Anytime Money Back Guaranty” that was ‘risk free,’” the TOS that plaintiff expressly disclaimed any express or implied warranties: “12. DISCLAIMERS “THE SERVICES ARE PROVIDED ON AN AS-IS AND AS-AVAILABLE BASIS. OTHER THAN AS EXPRESSLY SET OUT HEREIN, A2 HOSTING HAS NOT, AND DOES NOT, MAKE ANY WARRANTIES WHETHER EXPRESS OR IMPLIED. THIS DISCLAIMER INCLUDES, BUT IS NOT LIMITED TO THE WARRANTIES OF NON-INFRINGEMENT, FITNESS FOR A PARTICULAR PURPOSE, WARRANTIES OF MERCHANTABILITY, AND TITLE. A2 HOSTING DOES NOT WARRANT THAT THE SERVICES WILL BE UNINTERRUPTED, ERROR-FREE, SECURE OR Case 2:16-cv-04277-CAS-E Document 22 Filed 09/21/16 Page 10 of 36 Page ID #:478 H IL L, F A R R ER & B U R R IL L LL P A L IM IT E D L IA BI LI TY P A R TN E R S H IP A TT O R N E Y S A T LA W O N E C A LI FO R N IA P LA ZA , 3 7T H F LO O R 30 0 S O U TH G R A N D A V E N U E LO S A N G E LE S, C A LI FO R N IA 9 00 71 -3 14 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 4 - DEFENDANT’S NOTICE OF MOTION AND MOTION TO DISMISS PLAINTIFF’S FIRST AMENDED COMPLAINT FREE FROM VIRUSES OR OTHER HARMFUL COMPONENTS. A2 HOSTING IS NOT LIABLE, AND EXPRESSLY DISCLAIMS ANY LIABILITY, FOR THE CONTENT OF ANY DATA TRANSFERRED EITHER TO, OR FROM, YOU OR STORED BY YOUR OR ANY OF YOUR CUSTOMERS VIA THE SERVICES PROVIDED BY US.* * *.” Id.; emphasis added. In Section 13 of the TOS, A2 disclaimed any written information plaintiff may have received from A2 Hosting or others. In particular, “THIS WARRANTY DISCLAIMER EXTENDS TO ANY ORAL OR WRITTEN INFORMATION YOU MAY HAVE RECEIVED FROM A2 HOSTING, ITS EMPLOYEES, THIRD-PARTY VENDORS, AGENTS OR AFFILIATES. YOU MAY NOT RELY ON SUCH INFORMATION. SOME STATES DO NOT ALLOW A2 HOSTING TO EXCLUDE CERTAIN WARRANTIES. IF THIS APPLIES TO YOU, YOUR WARRANTY IS LIMITED TO 90 DAYS FROM THE EFFECTIVE DATE.” Id., pp. 11-12; emphasis added. The TOS also contained a broad limitation of liability provision that states as follows: “13. LIMITATION OF LIABILITY It is your obligation to ensure the accuracy, integrity, title or ownership, and security of anything you receive from the Internet. You agree that A2 Hosting has no liability, or any sort, for content you or your customers access from the Internet. A2 Hosting provides no guarantee that the Services will be uninterrupted, or continuous, that you will be able to access A2 Hosting’s network at a particular time, that any data transmitted by A2 Hosting is accurate, error free, virus free, secure, or inoffensive. You acknowledge that Case 2:16-cv-04277-CAS-E Document 22 Filed 09/21/16 Page 11 of 36 Page ID #:479 H IL L, F A R R ER & B U R R IL L LL P A L IM IT E D L IA BI LI TY P A R TN E R S H IP A TT O R N E Y S A T LA W O N E C A LI FO R N IA P LA ZA , 3 7T H F LO O R 30 0 S O U TH G R A N D A V E N U E LO S A N G E LE S, C A LI FO R N IA 9 00 71 -3 14 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 5 - DEFENDANT’S NOTICE OF MOTION AND MOTION TO DISMISS PLAINTIFF’S FIRST AMENDED COMPLAINT it is your responsibility to keep back-up copies of your data. A2 Hosting is not liable for unauthorized access to, or any corruption, erasure, theft, destruction, alteration or inadvertent disclosure of, data, information or content, transmitted, received, or stored on its network. IN NO EVENT WILL A2 HOSTING’S LIABILITY HEREUNDER EXCEED THE AGGREGATE FEES ACTUALLY RECEIVED BY A2 HOSTING FROM YOUR FOR THE 3 MONTH PERIOD IMMEDIATELY PRECEDING THE EVENT GIVING RISE TO SUCH LIABILITY. * * *. YOU AGREE THAT, TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, YOU WILL NOT UNDER ANY CIRCUMSTANCES INCLUDING, BUT NOT LIMITED TO, NEGLIGENCE, HOLD A2 HOSTING * * * LIABLE FOR ANY INDIRECT, INCIDENTAL, SPECIAL, CONSEQUENTIAL OR PUNITIVE DAMAGES WHATSOEVER INCLUDING, BUT NOT LIMITED TO, DAMAGES FOR LOSS OF PROFITS, COST SAVINGS, REVENUE, BUSINESS, DATA OR USE, OR ANY OTHER PECUNIARY LOSS BY YOU, ANY OF YOUR END USERS OR ANY OTHER THIRD PARTY. YOU AGREE THAT THE FOREGOING LIMITATIONS APPLY WHETHER IN AN ACTION IN CONTRACT OR TORT OR ANY OTHER LEGAL THEORY AND APPLY EVEN IF A2 HOSTING HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. SOME JURISDICTIONS DO NOT ALLOW THE LIMITATION OR EXCLUSION OF LIABILITY FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES; YOU AGREE THAT IN THOSE JURISDICTIONS OUR LIABILITY WILL BE LIMITED TO THE EXTENT PERMITTED BY LAW.” Id., pp. 13-14; emphasis added. As to the choice of law, the TOS provides that Michigan law applies. Case 2:16-cv-04277-CAS-E Document 22 Filed 09/21/16 Page 12 of 36 Page ID #:480 H IL L, F A R R ER & B U R R IL L LL P A L IM IT E D L IA BI LI TY P A R TN E R S H IP A TT O R N E Y S A T LA W O N E C A LI FO R N IA P LA ZA , 3 7T H F LO O R 30 0 S O U TH G R A N D A V E N U E LO S A N G E LE S, C A LI FO R N IA 9 00 71 -3 14 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 6 - DEFENDANT’S NOTICE OF MOTION AND MOTION TO DISMISS PLAINTIFF’S FIRST AMENDED COMPLAINT “18. CHOICE OF LAW, JURISDICTION AND VENUE “The validity, interpretation, and performance of this TOS, and of the agreements and policies that apply to the Services, shall be controlled by and construed under the laws of the State of Michigan, United States of America, as if performed wholly within the state and without giving effect to the principles of conflicts of law. You agree that jurisdiction and venue are proper in the state courts located in Ann Arbor, Michigan, or the U.S. District Court for the Eastern District of Michigan located in Ann Arbor Michigan. * * *.” Id., p. 17; emphasis added. C. Plaintiff’s Complaints. As part of taking advantage of A2’s hosting services, plaintiff provided information regarding its sites including passwords to plaintiffs’ accounts. See, FAC, Ex. 5. On March 4, 2016, plaintiff asked A2 (with the re-line “Please help me trasfer [sic] the data and mail accounts from previous server to new server on A2 Hosting”) to “2. “Change our domain ‘www.volksusatest.com’ to ‘www.volksusastore.com’.” and “3. Transfer our SSL Certificate from ‘www.volksusatest’ to ‘www.volksusastore.com.’” Id., pp. 42-43. Volksusastore.com is what plaintiff’s FAC refers to as the Web Store site. Id., ¶9. A2 responded that it could migrate plaintiff’s account to a different server and advised plaintiff of issues that may occur “during and after the migration.” Id., Ex. 6, p. 45. Plaintiff responded on March 5, 2016 stating, among other things, ‘[p]lease process as soon as possible.”2 2 Plaintiff’s FAC asserts that it requested that A2 assist it in migrating data for the Info Site – not the Web Store site. See, FAC, ¶¶32-35. Yet, the documents attached to its FAC show that plaintiff wanted A2’s assistance in migrating the data on the Web Store. At a minimum, plaintiff created confusion about its request. Nevertheless, the documents attached to its FAC show that plaintiff did give A2 access to both web sites and that A2 had, in fact, had migrated the data to A2’s servers. Case 2:16-cv-04277-CAS-E Document 22 Filed 09/21/16 Page 13 of 36 Page ID #:481 H IL L, F A R R ER & B U R R IL L LL P A L IM IT E D L IA BI LI TY P A R TN E R S H IP A TT O R N E Y S A T LA W O N E C A LI FO R N IA P LA ZA , 3 7T H F LO O R 30 0 S O U TH G R A N D A V E N U E LO S A N G E LE S, C A LI FO R N IA 9 00 71 -3 14 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 7 - DEFENDANT’S NOTICE OF MOTION AND MOTION TO DISMISS PLAINTIFF’S FIRST AMENDED COMPLAINT According to plaintiff’s FAC, A2 then allegedly deleted the data from the Web Store without making a backup. In a March 6, 2016 e-mail, plaintiff after the alleged deletion, plaintiff acknowledged that the both of its sites (including volksusastore.com) were being hosted by A2. See, FAC, Ex. 8, p. 52. Despite the fact that the TOS includes the above broad “Limitation of Liability” section that clearly states that plaintiff “acknowledge[ed] that it is [its] responsibility to keep back-up copies of [its] data” and that “A2 Hosting is not responsible for any loss of data, for any reason” (see, Ex. B, p. 13; emphasis added), plaintiff filed a complaint that asserted a laundry list of causes of action from false advertising under the Lanham Act to tortious interference with prospective economic relations. After A2 moved to dismiss plaintiff’s original complaint, plaintiff filed its FAC dropping several of its claims (including its fraud claim) and adding claims under the CFAA – Count III; Section 502 of the California Penal Code – Count IV; and trespass to chattels - Count IX. Plaintiff also added certain new factual allegations to, among other things, attempt to get around the clear language of the TOS, including that it never read the TOS. See, FAC, ¶¶21-22. III. ARGUMENT A. Standard for Rule 12(b)(6) Motions. A Rule 12(b)(6) motion tests the legal sufficiency of the claims in a complaint. Fed.R.Civ.P. 12(b)(6); Navarro v. Block, 250 F.3d 729, 731 (9th Cir. 2001). When ruling on a motion to dismiss under Rule 12(b)(6), the court must accept all factual allegations pleaded in the complaint as true, and must construe them and draw all reasonable inferences from them in favor of the nonmoving party. Cahill v. Liberty Mut. Ins., 80 F.3d 336, 337-338 (9th Cir. 1996). In doing so however, this Court is not bound to accept “legal conclusions.” Id. Courts may not accept as true unreasonable inferences or conclusory legal allegations cast in the Case 2:16-cv-04277-CAS-E Document 22 Filed 09/21/16 Page 14 of 36 Page ID #:482 H IL L, F A R R ER & B U R R IL L LL P A L IM IT E D L IA BI LI TY P A R TN E R S H IP A TT O R N E Y S A T LA W O N E C A LI FO R N IA P LA ZA , 3 7T H F LO O R 30 0 S O U TH G R A N D A V E N U E LO S A N G E LE S, C A LI FO R N IA 9 00 71 -3 14 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 8 - DEFENDANT’S NOTICE OF MOTION AND MOTION TO DISMISS PLAINTIFF’S FIRST AMENDED COMPLAINT form of factual allegations. W. Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir. 1981). To avoid dismissal, a complaint must plead “enough facts to state a claim to relief that is plausible on its face.” Bell Atlantic v. Twombly, 550 U.S. 544, 557 (2007). A claim has “facial plausibility when plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678. “The plausibility standard is not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. “Where a complaint pleads facts that are ‘merely consistent with’ a defendant’s liability, it ‘stops short of the line between possibility and plausibility of entitlement to relief.’” Id., quoting, Twombly, 550 U.S. at 557. As a result, it is not proper for the court to assume that “the [plaintiff] can prove facts that [he or she] has not alleged or that defendants have violated * * * laws in ways that have not been alleged.” Asso. Gen. Contractors of Cal. v. Cal. State Council of Carpenters, 459 U.S. 519, 526 (1983). Complaints alleging fraud must satisfy the heightened pleading requirements of Rule 9(b). Rule 9(b) requires that in all averments of fraud, the circumstances constituting fraud should be stated with particularity. A pleading is only sufficient under Rule 9(b) if it “state[s] the time, place[,] and specific content of the false representations as well as the identities of the parties to the misrepresentation.” Misc. Serv. Workers, v. Philco-Ford Corp., 661 F.2d 776, 782 (9th Cir. 1981); citations omitted. See, also, Vess v. Ciba-Geigy Corp., 317 F.3d 1097, 1106 (9th Cir. 2003), quoting, Cooper v. Pickett, 137 F.3d 616, 627 (9th Cir. 1997). Regardless of the title given to a particular claim, allegations grounded in fraud are subject to Rule 9(b). Vess, 317 F.3d at 1103-04; Kearns v. Ford Motor Co., 567 F.3d 1120, 1125 (9th Cir. 2009). Case 2:16-cv-04277-CAS-E Document 22 Filed 09/21/16 Page 15 of 36 Page ID #:483 H IL L, F A R R ER & B U R R IL L LL P A L IM IT E D L IA BI LI TY P A R TN E R S H IP A TT O R N E Y S A T LA W O N E C A LI FO R N IA P LA ZA , 3 7T H F LO O R 30 0 S O U TH G R A N D A V E N U E LO S A N G E LE S, C A LI FO R N IA 9 00 71 -3 14 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 9 - DEFENDANT’S NOTICE OF MOTION AND MOTION TO DISMISS PLAINTIFF’S FIRST AMENDED COMPLAINT B. Plaintiff Has Failed to State a Claim for False Advertising Under The Lanham Act Court I of the FAC, plaintiff alleges what it characterizes as the “Risk Free” “Anytime Money Back Guarantee” was false and violated 15 U.S.C. §1125 because A2 refused to reimburse plaintiff for its claimed business losses. See, FAC., ¶61. Plaintiff also alleges that A2 represented that it had “ultra-reliable servers” (even though plaintiff’s FAC does not contend that there was anything wrong with A2’s servers) and that A2 had a “knowledgeable support team” (which is clearly puffing and, therefore, not actionable). Id., ¶65. Plaintiff alleges that A2’s representations deceived it and, in the most bald and conclusory manner, claims that the representations would have a strong tendency to deceive any reasonable person in a similar position. Id., ¶66. Plaintiff lacks standing to sue under the Lanham Act for the events described in its FAC. The Lanham Act “protects persons engaged in * * * commerce against unfair competition.” Halicki v. United Artists Commc'ns, Inc., 812 F.2d 1213, 1214 (9th Cir. 1987). To have standing under §1125(a), a plaintiff must plead: (1) an “injury to a commercial interest in sales or business reputation”; (2) that is “proximately caused by [A2’s] misrepresentations.” Lexmark Int’l, Inc. v. Static Control Components, Inc., ___ U.S. __, 134 S.Ct. 1377, 1395 (2014). In Lexmark, Justice Scalia described the first prong of Lanham Act standing as the “zone-of-interests” test, that “forecloses suit only when a plaintiff’s interests are so marginally related to or inconsistent with the purposes implicit in the statute that it cannot reasonably be assumed that Congress authorized that plaintiff to sue.” Id., pp. 1388-1389. The Lanham Act explicitly states that the intended purposes and goal for false advertising claims is to “protect persons engaged in [commerce within the control of Congress] against unfair competition.” Id., quoting, 15 U.S.C. §1127. “Despite the broad language, the focus of the [Lanham Act] is on anti- competitive conduct in a commercial context, and the statute limits standing to a Case 2:16-cv-04277-CAS-E Document 22 Filed 09/21/16 Page 16 of 36 Page ID #:484 H IL L, F A R R ER & B U R R IL L LL P A L IM IT E D L IA BI LI TY P A R TN E R S H IP A TT O R N E Y S A T LA W O N E C A LI FO R N IA P LA ZA , 3 7T H F LO O R 30 0 S O U TH G R A N D A V E N U E LO S A N G E LE S, C A LI FO R N IA 9 00 71 -3 14 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 10 - DEFENDANT’S NOTICE OF MOTION AND MOTION TO DISMISS PLAINTIFF’S FIRST AMENDED COMPLAINT narrow class of potential plaintiffs possessing competitive or commercial interests harmed by the targeted conduct.” Abear v. Teveliet, 2006 WL 2473481, at *3 (W.D. Wash. 8/28/06). “[C]onsumers do not meet the standing requirement for the Lanham Act” because consumers cannot allege any “commercial or competitive injury.” Von Grabe v. Sprint PCS, 312 F. Supp. 2d 1285, 1302 (S.D. Cal. 2003), citing, Barrus v. Sylvania, 55 F.3d 468, 470 (9th Cir. 1995). In other words, “consumers” cannot bring False Advertising claims when they do not have any “competitive or commercial interests harmed by the targeted conduct.” Id. Plaintiff is barred from claiming false advertising under the Lanham Act. Plaintiff admits as much by comparing itself to other website management “customers,” and by agreeing to the TOS which identifies A2’s “services” to be performed for the “customer,” i.e., plaintiff. See, FAC, ¶135. These facts are analogous to Von Grabe v. Sprint PCS, supra, where the court found that the plaintiff was a consumer and lacked standing under the Lanham Act. There, like here, the Lanham Act claim arose “solely from [plaintiff’s] relationship with [defendant] as a consumer.” Specifically, “[p]laintiff alleges facts which speak to purchasing” from defendant “through retail channels and communications with [defendant’s] representatives.” Von Grabe, 312 F.Supp. 2d at 1302; see, FAC., ¶¶19-20, Exs. 4-6 (purchasing A2’s services and communications with A2’s customer support). “A consumer who is [allegedly] hoodwinked,” as plaintiff claims to have been, “cannot invoke the protection of the Lanham Act – a conclusion reached by every Circuit to consider the question.” Lexmark Int’l., Inc., 134 S.Ct. at 1390. Bernard v. Donat, 2012 WL 525533, at *3 (N.D. Cal. 02/16/12), also supports dismissal of Count I. In Bernard, plaintiff was a business consultant in the hunting industry. Id., p. 1. Defendant was an attorney who authored a negative blog post about plaintiff. Plaintiff sued under the Lanham Act and claimed that defendant’s blog post constituted a false advertisement. Id. The court held that Case 2:16-cv-04277-CAS-E Document 22 Filed 09/21/16 Page 17 of 36 Page ID #:485 H IL L, F A R R ER & B U R R IL L LL P A L IM IT E D L IA BI LI TY P A R TN E R S H IP A TT O R N E Y S A T LA W O N E C A LI FO R N IA P LA ZA , 3 7T H F LO O R 30 0 S O U TH G R A N D A V E N U E LO S A N G E LE S, C A LI FO R N IA 9 00 71 -3 14 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 11 - DEFENDANT’S NOTICE OF MOTION AND MOTION TO DISMISS PLAINTIFF’S FIRST AMENDED COMPLAINT plaintiff did not have standing under the Lanham Act because it failed to allege a “competitive injury.” Id., p. 2. The court held that plaintiff’s claim was not cognizable under the Lanham Act because plaintiff and defendant were not competitors. Id. Plaintiff cannot establish a “competitive injury” when it was not A2’s competitor. “A ‘competitive injury’ occurs when a direct competitor, defendant, harms the plaintiff’s ability to compete with it in their shared marketplace.” Jurin v. Google, Inc., 768 F. Supp. 2d 1064, 1072 (S.D. Cal. 2011). Plaintiff cannot plausibly argue that the parties are competitors because plaintiff “manufactures and sells specialized toys and hobby materials” and A2 hosts website. See, FAC., ¶¶8- 14. Count I also fails under the second prong for Lanham Act standing. “[A] plaintiff suing under §1125(a) ordinarily must show economic or reputational injury flowing directly from the deception wrought by the defendant’s advertising; and that that occurs when deception of consumers causes them to withhold trade from the plaintiff.” Lexmark, 1345 S. Ct. at 1391. Here, plaintiff has not alleged that its alleged injury flowed directly from deception of consumers causing them to withhold trade from plaintiff. The alleged injury was “loss of computer code,” “expense of rebuilding the Web Store,” “lost sales,” and the rather absurd, confusing, and conclusory assertion of “commercial and reputational harm resulting from the fact that defendant’s services were in extricably intertwined with plaintiff’s brand.” See, FAC, ¶¶48-49. Plaintiff has it backwards. Its alleged injury stems from its own view of A2’s advertising and not its customers’ view of A2’s advertising. Id., ¶646 (“These statements actually deceived Plaintiff, and would have a strong tendency to deceive any reasonable person in Plaintiff’s position”). Emphasis added. Therefore, Count I should be dismissed. Case 2:16-cv-04277-CAS-E Document 22 Filed 09/21/16 Page 18 of 36 Page ID #:486 H IL L, F A R R ER & B U R R IL L LL P A L IM IT E D L IA BI LI TY P A R TN E R S H IP A TT O R N E Y S A T LA W O N E C A LI FO R N IA P LA ZA , 3 7T H F LO O R 30 0 S O U TH G R A N D A V E N U E LO S A N G E LE S, C A LI FO R N IA 9 00 71 -3 14 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 12 - DEFENDANT’S NOTICE OF MOTION AND MOTION TO DISMISS PLAINTIFF’S FIRST AMENDED COMPLAINT C. Plaintiff Has Failed to State a Claim Under the FAL. Count II alleges that A2 violated Cal. Bus. & Prof. Code §17500 (the “FAL”) when it allegedly made false or misleading statements regarding an “Anytime Money Back Guarantee” that was “risk free.” Count II should be dismissed for several reasons. First, Section 18 of the TOS provided that Michigan law applies to the parties’ relationship. See, Ex. B, p. 17 (“The validity, interpretation, and performance of this TOS, and of the agreements and policies that apply to the Services, shall be controlled and construed under the laws of the State of Michigan * * * as if performed wholly within the state * * *”). Emphasis added. Under California law, a choice of law made by commercial parties (such as plaintiff and A2) through arms length negotiations will be enforced unless the choice law conflicts with a fundamental public policy of California. See, Nedlloyd Lines B.V. v. Superior Court, 3 Cal. 4th 459, 465-466; 834 P.2d 1148 (1992). The fact that the chosen law provides greater or lesser protection than does California law, are not reasons for applying California law. See, Wong v. Tenneco, 39 Cal. 3d 126, 135-136; 702 P.2d 570 (1985) (standard is whether the chosen law is so offensive to California’s public policy as to be “prejudicial to recognized standards of morality and to the general interest of the citizens * * *”). There is nothing about this case that makes it necessary to apply California law. Indeed, in Wang Labs v. Kagan, 990 F.2d 1126, 1129 (9th Cir. 1993), the Ninth Circuit noted the importance of enforcing choice of law provisions for businesses with nationwide customers to limit the risk and expenses of litigation under different laws of every state. Consequently, plaintiff cannot pursue a claim under the FAL. See, e.g., MediMatch, Inc. v. Lucent, 120 F. Supp. 2d 842, 861-862 (N.D. Cal. 2000) (UCL action could not proceed where contract provided for New Jersey law); Abat v. Chase Bank, 738 F. Supp. 2d 1093, 1094-1096 (C.D. Cal. 2010) (UCL and CLRA claims barred by choice of law clause that selected Delaware law). Case 2:16-cv-04277-CAS-E Document 22 Filed 09/21/16 Page 19 of 36 Page ID #:487 H IL L, F A R R ER & B U R R IL L LL P A L IM IT E D L IA BI LI TY P A R TN E R S H IP A TT O R N E Y S A T LA W O N E C A LI FO R N IA P LA ZA , 3 7T H F LO O R 30 0 S O U TH G R A N D A V E N U E LO S A N G E LE S, C A LI FO R N IA 9 00 71 -3 14 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 13 - DEFENDANT’S NOTICE OF MOTION AND MOTION TO DISMISS PLAINTIFF’S FIRST AMENDED COMPLAINT Second, plaintiff has not stated a claim under the FAL. Section 17500 states, in relevant part, that: “It is unlawful for any * * * corporation or * * * with intent directly or indirectly * * * to perform services, professional or otherwise * * * to induce the public to enter into any obligation relating thereto, to make or disseminate or cause to be made or disseminated before the public in this state, or to make or disseminate or cause to be made or disseminated from this state before the public in any state * * * or any advertising device * * * or in any other manner or means whatever, including over the Internet, any statement, concerning * * * those services * * * which is untrue or misleading, and which is known, or which by the exercise of reasonable care should be known, to be untrue or misleading.” Cal. Bus. & Prof. Code §17500. In determining whether a statement is misleading under the FAL, the primary evidence is the advertising itself. Colgan v. Leatherman Tool, Inc., 135 Cal. Rptr. 4th 663, 687-688 (Cal. App. 2006). The “misleading character” of a given representation “appears on applying its words to the facts.” Id. Warner v. Tinder Inc., 105 F. Supp. 3d 1083, 1091 (C.D. Cal. 2015), is an example of a court granting a defendant’s motion to dismiss because the plaintiff failed to plausibly allege that the defendant made a misrepresentation. In Warner, when plaintiff downloaded defendant’s phone application at no cost, the application, defendant’s website and advertisements stated that the application was a “free online dating app.” Id., p. 1088. Plaintiff had unlimited free access to defendant’s app for 15 months until defendant only allowed unlimited access to users with a subscription for a fee. Id. Defendant’s app was still free for customers to download with limited access. Id. Plaintiff sued, alleging that defendant’s “free online dating app” representation violated Cal. Bus. & Prof. Code §17500. Id. p. 1086. The Case 2:16-cv-04277-CAS-E Document 22 Filed 09/21/16 Page 20 of 36 Page ID #:488 H IL L, F A R R ER & B U R R IL L LL P A L IM IT E D L IA BI LI TY P A R TN E R S H IP A TT O R N E Y S A T LA W O N E C A LI FO R N IA P LA ZA , 3 7T H F LO O R 30 0 S O U TH G R A N D A V E N U E LO S A N G E LE S, C A LI FO R N IA 9 00 71 -3 14 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 14 - DEFENDANT’S NOTICE OF MOTION AND MOTION TO DISMISS PLAINTIFF’S FIRST AMENDED COMPLAINT court held that plaintiff failed to plausibly allege that defendant misrepresented that its app was free. Id., p. 1097. The Warner court noted that: “[W]hether a practice is deceptive, fraudulent, or unfair is generally a question of fact that is not appropriate for resolution on the pleadings. However, the court may in certain circumstances consider the viability of the alleged consumer law claims based on its review of the purportedly misleading representations. Thus, where a court can conclude as a matter of law that members of the public are not likely to be deceived * * * dismissal is appropriate.” Id., p. 1092; emphasis added. The court held that plaintiff failed to allege any facts that suggested that defendant represented that its app would always be free and unlimited. Id., p. 1093. The court also stated that it could not conclude that defendant’s representation— that it was a “free online dating app”— would have misled an ordinary consumer. Id. Here, this Court should dismiss plaintiff’s FAL claim because A2 did not represent that the “Anytime Money Back Guarantee” was unlimited or the quality of its services would be performed flawlessly. According to the FAC, A2’s website advertised an “Anytime Money Back Guarantee,” with a subtitle that a potential customer could “give [its] high speed hosting service a try completely risk free.” An ordinary consumer would not be misled by those statements because the language clearly concerns “trying” A2’s service. Additionally, an ordinary consumer would not expect its money back at “anytime” because the consumer would have known when it read and agreed to the TOS before it signed up that A2’s “Anytime Money Back Guarantee” only guaranteed reimbursement within 30 days from a customer’s Effective Date. See, Ex. B, p. 7. Plaintiff did not request reimbursement within 30 days from the Effective Date (December 2015) because it Case 2:16-cv-04277-CAS-E Document 22 Filed 09/21/16 Page 21 of 36 Page ID #:489 H IL L, F A R R ER & B U R R IL L LL P A L IM IT E D L IA BI LI TY P A R TN E R S H IP A TT O R N E Y S A T LA W O N E C A LI FO R N IA P LA ZA , 3 7T H F LO O R 30 0 S O U TH G R A N D A V E N U E LO S A N G E LE S, C A LI FO R N IA 9 00 71 -3 14 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 15 - DEFENDANT’S NOTICE OF MOTION AND MOTION TO DISMISS PLAINTIFF’S FIRST AMENDED COMPLAINT sent its demand letter on March 25, 2016. See, FAC Ex. 21. Therefore, this Court should dismiss Count II. Moreover, plaintiff cannot escape the fact that the TOS described what plaintiff was contractually entitled to by claiming, in its FAC and after A2 filed its initial motion to dismiss, that it didn’t read the TOS or agreed to abide by it. California law is clear that “[r]easonable diligence requires the reading of a contract before signing it.” Brookwood v. Bank of America, 45 Cal. App. 4th 1667, 1674 (1996). It is “not reasonable to fail to read a contract; this is true even if the plaintiff relied on the defendant’s assertion that it was not reasonable to read the contract.” Brown v. Wells Fargo Bank, N.A., 168 Cal. App. 4th 938, 959 (2008). D. Plaintiff Has Failed to State a Claim Under the CFAA. Count III alleges a violation of the CFAA that provides, in relevant part, that: “(a) Whoever – * * * (2) Intentionally accesses a computer without authorization or exceeds authorized access, and thereby obtains – * * * (c) information from any protected computer if the conduct involved an interstate or foreign communication; * * * (5)(A) Knowingly causes the transmission of a program information, code, or command, and as a result of such conduct, intentionally causes damage without authorization, to a protected computer; (B) Intentionally access a protected computer without Case 2:16-cv-04277-CAS-E Document 22 Filed 09/21/16 Page 22 of 36 Page ID #:490 H IL L, F A R R ER & B U R R IL L LL P A L IM IT E D L IA BI LI TY P A R TN E R S H IP A TT O R N E Y S A T LA W O N E C A LI FO R N IA P LA ZA , 3 7T H F LO O R 30 0 S O U TH G R A N D A V E N U E LO S A N G E LE S, C A LI FO R N IA 9 00 71 -3 14 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 16 - DEFENDANT’S NOTICE OF MOTION AND MOTION TO DISMISS PLAINTIFF’S FIRST AMENDED COMPLAINT authorization, and as a result of such conduct, recklessly causes damage; or (C) Intentionally accesses a protected computer without authorization, and as a result of such conduct, causes damage; * * *.” 18 U.S.C. §1030(a); emphasis added. The CFAA permits civil recovery where a plaintiff can show that a defendant: “(1) intentionally accessed a computer, (2) without authorization or exceeding authorized access, and that [the defendant] (3) thereby obtained information (4) from any protected computer * * * and that (5) there was loss to one or more persons during any one-year period aggregating at least $5,000 in value. LVRC Holdings LLC v. Brekka, 581 F.3d 1127, 1132 (9th Cir. 2009). Plaintiffs CFAA claim should be dismissed for several reasons. First, the broad exculpatory language in the TOS is dispositive of that claim. Second, as documented in plaintiffs’ complaint and the exhibits thereto, A2 did have authorization to access the data and, in fact, had transferred that data to its servers as directed. Consequently, under United States v. Nosel, 676 F3d 854, 863 (9th Cir. 2012), plaintiff cannot state a claim under the CFAA because the CFAA only prohibits accessing a protected computer without permission. In other words, the CFAA is an anti-hacking statute and A2 did not hack into plaintiffs’ computer system or anyone else’s computer system. Although A2 is alleged to have had deleted information, that is a matter of contract. Therefore, the CFAA claim should be dismissed. E. Plaintiff Has Failed to State a Claim Under Cal. Penal Code §502. Count IV alleges a violation of California Penal Code §502. Section 502(a) states that: “(a) It is the intent of the Legislature in enacting this section to expand the degree of protection afforded to * * * businesses * * * from tampering, interference, damage, Case 2:16-cv-04277-CAS-E Document 22 Filed 09/21/16 Page 23 of 36 Page ID #:491 H IL L, F A R R ER & B U R R IL L LL P A L IM IT E D L IA BI LI TY P A R TN E R S H IP A TT O R N E Y S A T LA W O N E C A LI FO R N IA P LA ZA , 3 7T H F LO O R 30 0 S O U TH G R A N D A V E N U E LO S A N G E LE S, C A LI FO R N IA 9 00 71 -3 14 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 17 - DEFENDANT’S NOTICE OF MOTION AND MOTION TO DISMISS PLAINTIFF’S FIRST AMENDED COMPLAINT and unauthorized access to lawfully created computer data and computer systems. * * *.” Plaintiff’s FAC (incompletely) quotes from §502(b)(1), (3), (4), (5), and (7) which makes it a crime to: “(1) Knowingly accesses and without permission alters, damages, deletes, destroys, or otherwise uses any data, computer system, or computer network in order to either (A) devise or execute any scheme or artiface to defraud, deceive, or extort, or (b) wrongfully control or obtain money, property, or data. * * * “(3) Knowingly and without permission uses or causes to be used computer services. “(4) Knowingly accesses and without permission adds, alters, damages, deletes, or destroys any data, computer software, or computer programs which reside or exist internal or external to a computer, computer system, or computer network. “(5) Knowingly and without permission disrupts or causes the disruption of computer services or denies or causes the denial of computer services to an authorized user of a computer, computer system, or computer network. * * * “(7) Knowingly and without permission accesses or causes to be accessed any computer, computer system, or computer network.” Emphasis added. Count IV should be dismissed for several reasons. First, as demonstrated above, because Michigan law applies to the parties’ relationship, plaintiff cannot assert a claim under §502. Second, §502 is clearly an anti-hacking statute and there is no allegation (nor could there be) that A2 hacked into plaintiff’s computer system. As the court noted in Facebook v. Power Ventures, Inc., 844 F. Supp.2d 1025, 1036 (N.D. Cal. 2012), a violation of terms of use is insufficient to establish that the use was “without permission” under §502. However, a party who accesses a system in a manner that circumvents technical or code-based barrier in place acts without permission. In fact, plaintiff (falsely) accuses A2 of accessing Former Case 2:16-cv-04277-CAS-E Document 22 Filed 09/21/16 Page 24 of 36 Page ID #:492 H IL L, F A R R ER & B U R R IL L LL P A L IM IT E D L IA BI LI TY P A R TN E R S H IP A TT O R N E Y S A T LA W O N E C A LI FO R N IA P LA ZA , 3 7T H F LO O R 30 0 S O U TH G R A N D A V E N U E LO S A N G E LE S, C A LI FO R N IA 9 00 71 -3 14 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 18 - DEFENDANT’S NOTICE OF MOTION AND MOTION TO DISMISS PLAINTIFF’S FIRST AMENDED COMPLAINT Host’s servers. See, Ex. FAC, ¶93.3 But it is clear from plaintiffs’ FAC and exhibits thereto that A2 had permission to access plaintiff’s data. If A2 improperly deleted data, that is a matter covered by the TOS. Third, Section §502(b)(i) does not apply because A2 is not alleged to have accessed data on a computer system in order to defraud, deceive, or extort, or to wrongfully control or obtain money, property or data. F. Plaintiff Has Failed to State a Claim Under the UCL. In Count V, plaintiff alleges that A2 violated Cal. Bus. & Prof. Code §17200 (“UCL”) by publishing false and misleading statements on its website about the “Anytime Money Back Guarantee” that was “risk free.” Plaintiff claims that the alleged violation caused it to sustain damages in the form of “payments for contracts.” Count V should be dismissed for several reasons. First, as demonstrated above, because Michigan law applies to the parties’ relationship, plaintiff cannot assert a claim under the UCL. Second, plaintiff cannot state a claim under the UCL even if California law applied. Section §17200 states that unfair competition shall mean and include any “unlawful, unfair or fraudulent business acts or practice and unfair, deceptive, untrue or misleading advertising and any act prohibited by Chapter 1 (commencing with §17500) of Part of Part 3 of Division 7 of the Business and Professions Code.” The “unlawful” practices prohibited by the UCL are any practices forbidden by law, be it civil or criminal, federal, state, or municipal, statutory, regulatory, or court-made. Saunders v. Superior Court, 27 Cal. App. 4th 837; 33 Cal. Rptr. 438 (Cal. Ct. App. 1994). 4 In essence, an action based on the UCL to redress an unlawful business 3 IF that was the case, plaintiff does not have standing. 4 Moreover, the purpose of UCL “is to protect both consumers and competitors in promoting fair competition in commercial markets for goods and services.” Kasky v. Nike, Inc., 27 Cal. 4th 939, 949; 45 P.3d 243 (2002). The UCL is not a substitute for a tort or contract claim. Korea Supply Co. v. Lockhead Martin Corp., 29 Cal. 4th 1134, 1143; 63 P.2d 937 (2003). Plaintiff is not a competitor of A2 and, therefore, plaintiff lacks standing. Rather, plaintiff is trying to shoehorn what is purely a contract action into a consumer rights’ action. Case 2:16-cv-04277-CAS-E Document 22 Filed 09/21/16 Page 25 of 36 Page ID #:493 H IL L, F A R R ER & B U R R IL L LL P A L IM IT E D L IA BI LI TY P A R TN E R S H IP A TT O R N E Y S A T LA W O N E C A LI FO R N IA P LA ZA , 3 7T H F LO O R 30 0 S O U TH G R A N D A V E N U E LO S A N G E LE S, C A LI FO R N IA 9 00 71 -3 14 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 19 - DEFENDANT’S NOTICE OF MOTION AND MOTION TO DISMISS PLAINTIFF’S FIRST AMENDED COMPLAINT practice “borrows” violations of other laws and treats these violations, when committed under business activity, as unlawful practices independently actionable under §17200. Farmers Ins. v. Superior Court, 2 Cal. 4th 382; 826 P.2d 730, 734 (Cal. 1992).5 Plaintiff claims that A2 violated §17200 because it violated the FAL and Automatic Renewal Act (the “ARA”, which plaintiff’s FAC dropped as an independent count). Plaintiff pleads no other facts that could state a claim for a violation of §17200. Therefore, the Court of IV should be dismissed because, as demonstrated above, plaintiff cannot state a claim under the FAL. Moreover, plaintiff’s ARA allegations fail. The ARA states, in relevant part, that: “It shall be unlawful for any business making an automatic renewal * * * offer to a consumer in this state to * * * (1) fail to present the automatic renewal offer terms * * * in a clear and conspicuous manner before the * * * purchasing agreement is fulfilled and in visual proximity * * * to the request for consent to the offer * * * or (3) fail to provide an acknowledgment that includes the automatic renewal * * * offer terms, cancellation policy, and information regarding how to cancel in a manner that is capable of being retained by the consumer.” Cal. Bus. & Prof. Code §17602(a); emphasis added. Plaintiff cannot plead or prove a claim under the ARA. As with Count II, the fact that the parties agreed to Michigan law as to the validity, interpretation, and performance of the TOS is fatal to plaintiff’s ARA claim. Moreover, plaintiff does not have standing to assert a claim under the ARA. The term “consumer” is 5 Prevailing plaintiffs are limited to injunctive relief and restitution. Korea Supply Co. v. Lockheed Martin Corp., 63 P.3d 937 (Cal. 2003). As stated above, restitution is the return of the excess of what the plaintiff gave the defendant over the value of what the plaintiff received. Pulaski & Middleman, LLC v. Google, Inc., 802 F.3d 979, 988 (9th Cir. 2015). Case 2:16-cv-04277-CAS-E Document 22 Filed 09/21/16 Page 26 of 36 Page ID #:494 H IL L, F A R R ER & B U R R IL L LL P A L IM IT E D L IA BI LI TY P A R TN E R S H IP A TT O R N E Y S A T LA W O N E C A LI FO R N IA P LA ZA , 3 7T H F LO O R 30 0 S O U TH G R A N D A V E N U E LO S A N G E LE S, C A LI FO R N IA 9 00 71 -3 14 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 20 - DEFENDANT’S NOTICE OF MOTION AND MOTION TO DISMISS PLAINTIFF’S FIRST AMENDED COMPLAINT defined in the ARA as “any individual who seeks or acquires, by purchase * * * any goods, services, money, or credit for personal, family, or household purposes.” Cal. Bus. & Prof. Code §17601(d); emphasis added. The legislative intent was to “end the practice of ongoing charging of consumer credit or debit cards or third party payment accounts without the consumers' explicit consent for ongoing shipments of a product or ongoing deliveries of service.” Cal. Bus. & Prof. Code §17600. Plaintiff is not “consumer” because it is not an “individual” who made a purchase of services for “personal, family, or household purposes.” Rather, plaintiff is a corporation that operates a commercial enterprise which did not purchase services from A2 for “personal, family, or household purposes.” Furthermore, A2 did not violate the ARA. Plaintiff claims that: (1) A2 did not present its automatic renewal terms before plaintiff completed the transaction; (2) A2’s automatic renewal terms were not in visual proximity to the request for assent; (3) A2’s automatic renewal terms were not “clear and conspicuous;” and (4) A2 failed to provide an acknowledgement with the required information. Plaintiff is wrong. Cal. Bus. & Prof. Code § 17601(b) states that: “Automatic renewal offer terms’ means the following clear and conspicuous disclosures: (1) That the subscription or purchasing agreement will continue until the consumer cancels. (2) The description of the cancellation policy that applies to the offer. (3) The recurring charges that will be charged to the consumer's credit or debit card or payment account with a third party as part of the automatic renewal plan or arrangement, and that the amount of the charge may change, if that is the case, and the amount to which the charge will change, if known. Case 2:16-cv-04277-CAS-E Document 22 Filed 09/21/16 Page 27 of 36 Page ID #:495 H IL L, F A R R ER & B U R R IL L LL P A L IM IT E D L IA BI LI TY P A R TN E R S H IP A TT O R N E Y S A T LA W O N E C A LI FO R N IA P LA ZA , 3 7T H F LO O R 30 0 S O U TH G R A N D A V E N U E LO S A N G E LE S, C A LI FO R N IA 9 00 71 -3 14 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 21 - DEFENDANT’S NOTICE OF MOTION AND MOTION TO DISMISS PLAINTIFF’S FIRST AMENDED COMPLAINT (4) The length of the automatic renewal term or that the service is continuous, unless the length of the term is chosen by the consumer. (5) The minimum purchase obligation, if any.” The ARA defines “clear and conspicuous” to mean “in larger type than the surrounding text, or in contrasting type, font, or color to the surrounding text of the same size, or set off from the surrounding text of the same size by symbols or other marks, in a manner that clearly calls attention to the language.” Id., §17601(c) Plaintiff’s four claims of A2’s alleged automatic renewal policy violations are all contrary to the TOS. A2 did present plaintiff with its Automatic Renewal Offer Terms before plaintiff completed the transaction because it required plaintiff to confirm that it had read and agreed to the TOS (see, FAC, ¶20), that contained the Automatic Renewal Offer Terms. The TOS provided plaintiff with all relevant information for its Automatic Renewal. See, FAC, Ex. 12 (TOS, §§3-6: Term, Payment, Termination, Cancellation). Next, A2’s automatic renewal terms were in visual proximity to the request for consent to the offer because A2 required plaintiff to acknowledge that it read and agreed to the TOS before it consented to the offer. See, FAC, ¶28 and Ex. 2 (Acknowledgement of Automatic Renewal). Next, A2’s automatic renewal terms were “clear and conspicuous” because the TOS had a table of contents that described the specific locations of the “term,” “payment,” and “cancellation,” and each of those sections had headings that were in a different font and size. Id., Ex. 12, at 59. Finally, A2 did not fail to provide an acknowledgement with the required information because it sent plaintiff a confirmation that included hyperlinks to “detailed” account information that plaintiff could have accessed and retained. Id., Ex. 3. In fact, plaintiff was told how to cancel if it was “Not Interested in Renewing.” Id. Case 2:16-cv-04277-CAS-E Document 22 Filed 09/21/16 Page 28 of 36 Page ID #:496 H IL L, F A R R ER & B U R R IL L LL P A L IM IT E D L IA BI LI TY P A R TN E R S H IP A TT O R N E Y S A T LA W O N E C A LI FO R N IA P LA ZA , 3 7T H F LO O R 30 0 S O U TH G R A N D A V E N U E LO S A N G E LE S, C A LI FO R N IA 9 00 71 -3 14 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 22 - DEFENDANT’S NOTICE OF MOTION AND MOTION TO DISMISS PLAINTIFF’S FIRST AMENDED COMPLAINT Third, plaintiff’s assertion that the “Anytime Money Back Guarantee” that was not “risk free” are entirely disposed of by the TOS. The clear and ambiguous TOS makes it obvious what those terms mean, and clearly provide that there was no guarantee that the services would be uninterrupted, that it was plaintiff’s responsibility to keep back-up copies of its data, that A2 was not responsible for any loss of data, “for any reason,” and that A2 was not liable for the destruction of any data. Furthermore, the Money Back Guarantee is described in Section 7 of the TOS (“Hosting services carry an unconditioned 30 day satisfaction guarantee. To cancel your hosting services and receive a refund, you must contact us within 30 days from the Effective date of the particular services you wish to cancel. Only your monthly fees are refundable”). See, Ex. B, p.7. Plaintiff represented that it read and agreed to all of those terms before it put its money or data at risk. Consequently, plaintiff would not have been mislead by the internet advertisement. Therefore, Count V should be dismissed. G. Plaintiff Has Failed to State a Claim for Breach of Contract In Count VI of its FAC, plaintiff alleges that A2 breached the contract (the TOS) when it allegedly deleted plaintiff’s data. Based on the TOS, plaintiff cannot prevail on a breach of contract claim under either Michigan and California law. The elements of a breach of contract claim include defendant’s breach of the terms of a contract and resulting damages to the plaintiff. Oasis W. Realty, LLC v. Goldman, 250 P.3d 1115, 1121 (Cal. 2011) (California); Synthe Spine Co., v. Calvert, 270 F. Supp.2d 909, 942 (E.D. Mich. 2003) (Michigan). Plaintiff claims that A2 breached the contract (or TOS) because it allegedly deleted plaintiff’s data and that action was not “in accordance with other similarly situated companies.” Yet, A2 only agreed that it would perform the “Services”— i.e. TOS Section 1 services (including Domain Names, Virtual Private Servers, and cPanels) — in “accordance with other similarly situated companies.” A2 did not breach the TOS because it was not required to perform the data migration “in Case 2:16-cv-04277-CAS-E Document 22 Filed 09/21/16 Page 29 of 36 Page ID #:497 H IL L, F A R R ER & B U R R IL L LL P A L IM IT E D L IA BI LI TY P A R TN E R S H IP A TT O R N E Y S A T LA W O N E C A LI FO R N IA P LA ZA , 3 7T H F LO O R 30 0 S O U TH G R A N D A V E N U E LO S A N G E LE S, C A LI FO R N IA 9 00 71 -3 14 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 23 - DEFENDANT’S NOTICE OF MOTION AND MOTION TO DISMISS PLAINTIFF’S FIRST AMENDED COMPLAINT accordance with other similarly situated companies” because Section 10 of the TOS states that “items for which A2 Hosting provides a service level agreement,” that “shall not constitute services within the definition of ‘similarly situated companies.’” See, Ex. B, pp. 10-11; emphasis added. Moreover, plaintiff and A2 agreed in Section 13 of the TOS that it was plaintiff’s “responsibility to keep back-up copies of its data” and that “A2 is not responsible for any loss of data, for any reason.” Id., p. 13; emphasis added. Therefore, plaintiff’s breach of contract claim should be dismissed because plaintiff expressly agreed that the loss of data as alleged in its FAC would not be a breach of contract and that A2 otherwise had no responsibility for the loss of data. Plaintiff tries to avoid the TOS by claiming that “migration services” are not mentioned in the TOS or A2’s web pages. That argument is nonsensical. Migration of date is a necessary component of plaintiff’s hosting data on its websites. Otherwise, there would be nothing to host. Moreover, even plaintiff’s own exhibits show that migration was a service that plaintiff received for free. See FAC, Ex. 1-28, Ex. 2-35. H. Plaintiff’s Breach of Warranty Claim Should be Dismissed. In Count VII, plaintiff alleges that A2 breached the implied warranties of merchantability and fitness for a particular purpose when it allegedly deleted data from the Web Store. This Court should dismiss plaintiff’s warranty claim because A2 and plaintiff excluded any implied warranties in the TOS. Section 12 of the TOS states that “THE SERVICES ARE PROVIDED ON AN AS-IS AND AS- AVAILABLE BASIS. OTHER THAN EXPRESSLY SET OUT HEREIN, A2 HOSTING HAS NOT, AND DOES NOT, MAKE ANY WARRANTIES WHETHER EXPRESS OR IMPLIED.” See, Ex. B, p. 12. This clear and conspicuous disclaimer includes the “IMPLIED WARRANTIES OF * * * FITNESS FOR A PARTICULAR PURPOSE * * * [AND] WARRANTIES OF MERCHANTABILITY * * *.” Id.; emphasis added. A warranty is not implied Case 2:16-cv-04277-CAS-E Document 22 Filed 09/21/16 Page 30 of 36 Page ID #:498 H IL L, F A R R ER & B U R R IL L LL P A L IM IT E D L IA BI LI TY P A R TN E R S H IP A TT O R N E Y S A T LA W O N E C A LI FO R N IA P LA ZA , 3 7T H F LO O R 30 0 S O U TH G R A N D A V E N U E LO S A N G E LE S, C A LI FO R N IA 9 00 71 -3 14 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 24 - DEFENDANT’S NOTICE OF MOTION AND MOTION TO DISMISS PLAINTIFF’S FIRST AMENDED COMPLAINT where the contract expressly stipulates against its existence. Frederickson & Watson Const. v. Dept. Pub. Works, 28 Cal. App. 3d 514, 518 (1972); Land v. Del Mar Turf Club, 120 Cal. App. 2d 829; 262 P.2d 54 (1953). Therefore, this Court should dismiss Count VII. I. Plaintiff’s Negligence Claim Should be Dismissed. In Count VIII, plaintiff claims that A2 was negligent for deleting data from the Web Store. Plaintiff claims that A2 owed it a duty and a heightened standard of care that A2 allegedly breached by the deletion of the data. The elements of negligence under Michigan and California law are: (1) the existence of a legal duty of care, (2) a breach of that duty, (3) and proximate cause (4) resulting in injury. McIntyre v. Colonies-Pac., LLC, 175 Cal. Rptr. 3d 440, 444 (Cal. Ct. App. 2014) (California); Johnson v. Bobbie’s Party Store, 189 Mich. App. 652; 473 N.W. 2d 796 (1991) (Michigan). This Court should dismiss Count VIII because A2 did not owe plaintiff a legal duty of care independent of the contract or TOS. Moreover, plaintiff pleads no facts to support its conclusory allegation that “[A2] owed [Volks] a heightened standard of care.” See, FAC, ¶150. Indeed, A2 did not owe plaintiff a legal duty or a “heightened standard of care” with respect to any of plaintiff’s data because A2 expressly waived any legal obligation with regard to the loss of plaintiff’s data under the express language of the TOS. The existence of legal duty is a question of law. Cipai v. Bellingham Frozen Foods, Inc., 29 Mich. App. 1, 14; 596 N.W. 2d 620 (1999) (Michigan); Eddy v. Sharp, 199 Cal. App. 3d 858, 864 (1988) (California). A plaintiff cannot maintain an action in tort for nonperformance of a contract. Casey v. Auto-Owners Ins. Co., 273 Mich. App. 388, 401; 729 N.W. 2d 277 (2006). In other words, failure to properly perform under a contract does not give rise to the negligence claim. Fultz v. Union Commerce Assoc., 470 Mich. 460, 467; 683 N.W. 2d 587 (2004). See, also, Ehrlich v. Menezes, 21 Cal. 4th 543, 558 (1999) (“[C]onduct amounting Case 2:16-cv-04277-CAS-E Document 22 Filed 09/21/16 Page 31 of 36 Page ID #:499 H IL L, F A R R ER & B U R R IL L LL P A L IM IT E D L IA BI LI TY P A R TN E R S H IP A TT O R N E Y S A T LA W O N E C A LI FO R N IA P LA ZA , 3 7T H F LO O R 30 0 S O U TH G R A N D A V E N U E LO S A N G E LE S, C A LI FO R N IA 9 00 71 -3 14 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 25 - DEFENDANT’S NOTICE OF MOTION AND MOTION TO DISMISS PLAINTIFF’S FIRST AMENDED COMPLAINT to a breach of contract becomes tortious only when it also violates a duty independent of the contract arising from principles of tort law”). Under the TOS, plaintiff agreed that A2 hosting “has no liability, of any sort, for content [it] or [its] customer’s access from the internet.” Plaintiff acknowledged that “A2 is not responsible for any loss of data, for any reason.” Plaintiff also acknowledge that “A2 is not liable for * * * any * * * erasure of * * * data, information or content * * * stored on its network.” It is not against California or Michigan public policy for a party to contract against liability for damages caused by ordinary negligence See, e.g., Michigan National Bank v. St. Paul Fire & Marine Ins. Co., 223 Mich. App. 19; 566 N.W.2d 7 (1997). Therefore, this Court should dismiss plaintiff’s negligence claim. As to A2’s data migration, plaintiff’s claim fails for the same reason. In particular, the TOS provided that “[plaintiff] should * * * be aware that there may be issues during and after the migration.” See, Ex. B, p. 13. Moreover, in the TOS expressly represented that “it is your [Plaintiff’s] responsibility to keep back-up copies of your data” and that “A2 is not responsible for any loss of data, for any reason.” Id.; emphasis added. Therefore, this Court should dismiss Count IX because plaintiff cannot, as a matter of law, plead justifiable reliance on any alleged misrepresentation that is expressly contradicted by the TOS. J. Plaintiff has Failed to State a Claim for Trespass to Chattel Count IX of plaintiff’s FAC alleges that it leased space on Former Host server to store date for the Web Store and that A2 accessed it and took actions that deprived plaintiff of the ability to exercise control over the data. See, FAC, ¶¶168- 170. To prevail on a claim for “trespass based on accessing a computer system, the plaintiff must establish: (1) defendant intentionally and without authorization interfered with plaintiff’s possessory intent in the computer system, and (2) defendant’s unauthorized use proximately resulted in damage to plaintiff.” eBay v. Bidder’s Edge, 100 F. Supp. 2d 1058, 1069-1070 (N.D. Cal. 2000). Case 2:16-cv-04277-CAS-E Document 22 Filed 09/21/16 Page 32 of 36 Page ID #:500 H IL L, F A R R ER & B U R R IL L LL P A L IM IT E D L IA BI LI TY P A R TN E R S H IP A TT O R N E Y S A T LA W O N E C A LI FO R N IA P LA ZA , 3 7T H F LO O R 30 0 S O U TH G R A N D A V E N U E LO S A N G E LE S, C A LI FO R N IA 9 00 71 -3 14 7 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 - 26 - DEFENDANT’S NOTICE OF MOTION AND MOTION TO DISMISS PLAINTIFF’S FIRST AMENDED COMPLAINT Plaintiff’s trespass to chattels claim should be dismissed for the simple reason that plaintiff gave A2 access to the Web Store and the data therein. That the data was deleted only gives rise to a contract action – not a tort claim. Therefore, Count IX should be dismissed. K. Plaintiff’s Negligent Misrepresentation Claim Should be Dismissed. Court X of plaintiff’s FAC, claims that A2 is liable for negligent misrepresentation because of its alleged misrepresentations that it was capable of its data migration services and “Anytime Money Back Guarantee.” Count IX should be dismissed for several reasons. First, as shown above, plaintiff agreed in the TOS that A2 would not be responsible for “any loss of data, for any reason.” See, Ex. B, p. 13; emphasis added. Second, the elements of negligent misrepresentation consist of: (1) a misrepresentation of a past or existing material fact, (2) without reasonable grounds for believing it to be true, (3) with intent to induce another's reliance on the fact misrepresented, (4) ignorance of the truth and justifiable reliance on the misrepresentation by the party to whom the misrepresentation was directed, and (5) damages. Perez v. CitiMortgage, Inc., 2014 WL 2609656, at *6 (C.D. Cal. 06/10/14). See, also, Law Offices of Lawrence S. Stochler, P.C. v. Rose, 174 Mich. App. 14, 30; 436 N.W. 2d 70 (1983) (Michigan). A claim for negligent misrepresentation rests upon the existence of a legal duty, imposed by contract, statute, or otherwise is, owed by a defendant to the injured person. Eddy v. Sharp, 199 Cal. App. 3d 858, 864 (1988). Whether a duty exists is a question of law. Id. This Court should dismiss plaintiff’s negligent misrepresentation claim because it has failed to plead facts with particularity that show A2’s knowledge of falsity, A2’s intent to defraud, and plaintiff’s justifiable reliance. Plaintiff makes conclusory allegations about A2’s “Anytime Money Back Guarantee” and data migration services. Yet,” the TOS expressly limited the Money Back Guarantee to Case 2:16-cv-04277-CAS-E Document 22 Filed 09/21/16 Page 33 of 36 Page ID #:501 H IL L, F A R R ER & B U R R IL L LL P A L IM IT E D L IA BI LI TY P A R TN E R S H IP A TT O R N E Y S A T LA W O N E C A LI FO R N IA P LA ZA , 3 7T H F LO O R 30 0 S O U TH G R A N D A V E N U E LO S A N G E LE S, C A LI FO R N IA 9 00 71 -3 14 7 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 - 27 - DEFENDANT’S NOTICE OF MOTION AND MOTION TO DISMISS PLAINTIFF’S FIRST AMENDED COMPLAINT a 30-day period after the Effective Date. Therefore, plaintiff cannot plead justifiable reliance because it acknowledged that it read and agreed to the TOS before entering into the TOS. Plaintiff may not rely on prior statements that contradict the terms of a written contract. See, e.g., 3P.M., Inc. v. Basic Four Corp., 591 F. Supp. 1350, 1366 (E.D. Mich. 1984). See, also, Webb v. First of Michigan Corp., 195 Mich. App. 470, 474; 491 N.W. 2d 851 (1992) (“there can be no fraud where the means of knowledge regarding the truthfulness of the representation are available to the plaintiff and the degree of their utilization has not been prohibited by the defendant”). Moreover, plaintiff has not alleged the existence of a duty that could give rise to a negligence misrepresentation claim. L. Plaintiff Has Failed to State a Tortious Interference Claim. In Count XI, plaintiff claims that A2 is liable for tortious interference with prospective economic relations because of its alleged failure to migrate plaintiff’s data allegedly interfered with its probable economic benefits from the Web Store. Count XI should be dismissed for several reasons. First, as demonstrated above, plaintiff agreed in the TOS that A2 would not be responsible for “any loss of data, for any reason.” See, Ex. B, p. 13. Second, plaintiff has failed to plead a claim for tortious interference under California or Michigan law. To establish a claim for tortious interference with prospective economic relations, a plaintiff must show, inter alia, that the interference was wrongful by some measure beyond the fact of the interference itself. See, Della Penna v. Toyota Motor Sales, U.S.A., Inc., 902 P.2d 740, 746 (Cal. 1995) (plaintiff seeking to recover for alleged interference with prospective economic relations has the burden of pleading and proving that the defendant's interference was wrongful by some measure beyond the fact of the interference itself). A plaintiff must plead that either (1) the defendant had an improper Case 2:16-cv-04277-CAS-E Document 22 Filed 09/21/16 Page 34 of 36 Page ID #:502 H IL L, F A R R ER & B U R R IL L LL P A L IM IT E D L IA BI LI TY P A R TN E R S H IP A TT O R N E Y S A T LA W O N E C A LI FO R N IA P LA ZA , 3 7T H F LO O R 30 0 S O U TH G R A N D A V E N U E LO S A N G E LE S, C A LI FO R N IA 9 00 71 -3 14 7 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 - 28 - DEFENDANT’S NOTICE OF MOTION AND MOTION TO DISMISS PLAINTIFF’S FIRST AMENDED COMPLAINT objective or purpose to harm the plaintiff; or (2) the defendant used wrongful means to cause injury to the prospective business relationship. Id.6 This Court should dismiss plaintiff’s tortious interference claim because it has not plead that A2 had an improper objective or purpose to harm plaintiff, or that A2 used wrongful means to cause injury to a prospective business relationship. Although plaintiff has alleged that A2’s alleged deletion of data was harmful to prospective economic relations, plaintiff must plead that the interference was wrongful by some measure beyond the fact of the interference itself. Plaintiff’s failure to do so should result in the dismissal of Count X. 6 Michigan law is similar. The elements of tortious interference with a business expectancy include an intentional interference by the defendant inducing or causing a breach or termination of the relationship or expectancy. Mino v. Clio School Dist., 255 Mich. App. 60, 78; 661 N.W. 2d. 583 (2003). In addition to requiring proof of an actual contract or expectancy, Michigan courts have held that a plaintiff must establish that the defendant induced a party not to enter into or continue a business relationship or prevented a person continuing a business relationship with another. Bonelli v. Volkswagen, 166 Mich. App. 483, 496; 421 N.W. 2d 483 (1988). Further, a plaintiff must demonstrate specific, affirmative acts by the defendant that demonstrate an improper motive for the interference. Badiee v. Brighton Area Schools, 265 Mich. App. 343, 366; 695 N.W. 2d 521 (2005). The plaintiff must “allege the intentional doing of a per se wrongful act or the doing of a lawsuit act with malice and unjustified in law for the purpose of invading the * * * business relation of another.” CMI Intern, Inc. v. Intermet Int’l. Corp., 251 Mich. App. 125, 131; 649 N.W. 2d 808 (2002). In this context, “improper” is defined as “illegal, unethical, or fraudulent.” Trepel v. Pontiac Osteopathic Hospital, 135 Mich. App. 361, 376; 421 N.W. 2d 483 (1984). Plaintiff’s FAC does not contain any such allegations and, therefore, Count XI should be dismissed. Case 2:16-cv-04277-CAS-E Document 22 Filed 09/21/16 Page 35 of 36 Page ID #:503 H IL L, F A R R ER & B U R R IL L LL P A L IM IT E D L IA BI LI TY P A R TN E R S H IP A TT O R N E Y S A T LA W O N E C A LI FO R N IA P LA ZA , 3 7T H F LO O R 30 0 S O U TH G R A N D A V E N U E LO S A N G E LE S, C A LI FO R N IA 9 00 71 -3 14 7 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 - 29 - DEFENDANT’S NOTICE OF MOTION AND MOTION TO DISMISS PLAINTIFF’S FIRST AMENDED COMPLAINT IV. CONCLUSION For the reasons stated above, A2 respectfully requests that this Honorable Court grant this motion and dismiss plaintiff’s FAC in its entirety. Moreover, this Court should award A2’s its attorney fees and costs incurred in this action under Section 19 of the TOS which provides that “If you file a claim contrary to this TOS, we may recover attorney fees and costs.” See, Ex. B, p. 21. DATED: September 21, 2016 HILL, FARRER & BURRILL LLP By: /s/ Clayton J. Hix CLAYTON J. HIX Attorneys for Defendant A2 Hosting, Inc. HFB 1699838.1 A0120002 Case 2:16-cv-04277-CAS-E Document 22 Filed 09/21/16 Page 36 of 36 Page ID #:504