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`
`LATHAM & WATKINS LLP
`Elizabeth L. Deeley (CA Bar No. 230798)
`elizabeth.deeley@lw.com
`Nicole C. Valco (CA Bar No. 258506)
`nicole.valco@lw.com
`505 Montgomery Street, Suite 2000
`San Francisco, CA 94111-6538
`Telephone: +1.415.391.0600
`Facsimile: +1.415.395.8095
`
`Susan E. Engel (pro hac vice)
`susan.engel@lw.com
`555 Eleventh Street, N.W., Suite 1000
`Washington, D.C. 20004-1304
`Telephone: +1.202.637.2200
`Facsimile: +1.202.637.2201
`
`Hilary H. Mattis (CA Bar No. 271498)
`hilary.mattis@lw.com
`140 Scott Drive
`Menlo Park, CA 94025-1008
`Telephone: +1.650.328.4600
`Facsimile: +1.650.463.2600
`
`Attorneys for Defendant Facebook, Inc.
`
`
`
`UNITED STATES DISTRICT COURT
`NORTHERN DISTRICT OF CALIFORNIA
`SAN FRANCISCO DIVISION
`
` DZ RESERVE and CAIN MAXWELL (d/b/a
`MAX MARTIALIS), individually and on
`behalf of all others similarly situated,
`Plaintiffs,
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`v.
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`FACEBOOK, INC.,
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`Defendant.
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` Case No. 3:18-cv-04978 JD
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`FACEBOOK, INC.’S NOTICE OF MOTION
`AND MOTION TO DISMISS THE THIRD
`AMENDED CONSOLIDATED CLASS
`ACTION COMPLAINT; MEMORANDUM OF
`POINTS AND AUTHORITIES IN SUPPORT
`
`Date: July 30, 2020
`Time: 10:00 a.m.
`Court: Courtroom 11, 19th Floor
`Hon. James Donato
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`FACEBOOK’S MOT. TO DISMISS
`THIRD AM. CONSOL. COMPL.
`CASE NO. 3:18-cv-04978-JD
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`Case 3:18-cv-04978-JD Document 177 Filed 05/14/20 Page 2 of 23
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`NOTICE OF MOTION AND MOTION TO DISMISS
`TO PLAINTIFFS AND TO THEIR ATTORNEYS OF RECORD:
`PLEASE TAKE NOTICE that on July 30, 2020, at 10:00 a.m. in Courtroom 11 of the
`United States District Court for the Northern District of California, located at 450 Golden Gate
`Avenue, San Francisco, California, Defendant Facebook, Inc. (“Facebook”) will and hereby does
`move for an order dismissing Plaintiffs’ Third Amended Consolidated Class Action Complaint
`(“Third Amended Complaint” or “TAC”), Dkt. 166. This motion is made pursuant to Federal
`Rules of Civil Procedure Rules 9(b) and 12(b)(6), on the grounds that (1) the breach of the implied
`covenant of good faith and fair dealing and quasi-contract claims in the TAC fail to state a claim
`as a matter of law under Federal Rule of Civil Procedure 12(b)(6); (2) the breach of the implied
`covenant of good faith and fair dealing claim is time-barred to the extent it is based on ad
`campaigns begun before August 15, 2014; (3) Plaintiffs fail to state a claim for fraudulent
`misrepresentation or fraudulent concealment under Federal Rule of Civil Procedure 9(b) or
`12(b)(6); (4) the quasi-contract claim is time-barred to the extent it is based on ad campaigns begun
`before August 15, 2016; and (5) the fraudulent misrepresentation and fraudulent concealment
`claims are time-barred to the extent they are based on ad campaigns begun before April 15, 2017.
`This motion is based on this Notice of Motion and Motion, the Memorandum of Points and
`Authorities, Facebook, Inc.’s Request for Judicial Notice in Support of Its Motion to Dismiss the
`Third Amended Consolidated Class Action Complaint (“Request for Judicial Notice”) and the
`Declaration of Nicole C. Valco Support of Facebook, Inc.’s Motion to Dismiss the Third Amended
`Consolidated Class Action Complaint (“Valco Decl.”) filed therewith, the pleadings and papers on
`file in this action, the arguments of counsel, and any other matter that the Court may properly
`consider.
`
`STATEMENT OF RELIEF SOUGHT
`Facebook seeks an order pursuant to Federal Rules of Civil Procedure 9(b) and 12(b)(6)
`dismissing with prejudice Plaintiffs’ claims for breach of the implied covenant of good faith and
`fair dealing, quasi-contract, fraudulent concealment, and fraudulent misrepresentation in their
`entirety and for failure to state a claim upon which relief can be granted.
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`FACEBOOK’S MOT. TO DISMISS
`THIRD AM. CONSOL. COMPL.
`CASE NO. 3:18-cv-04978-JD
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`Case 3:18-cv-04978-JD Document 177 Filed 05/14/20 Page 3 of 23
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`Dated: May 14, 2020
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` LATHAM & WATKINS LLP
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` By: /s/ Elizabeth L. Deeley
`Elizabeth L. Deeley (CA Bar No. 230798)
`Nicole C. Valco (CA Bar No. 258506)
`505 Montgomery Street, Suite 2000
`San Francisco, CA 94111-6538
`Telephone: +1.415.391.0600
`Facsimile: +1.415.395.8095
`elizabeth.deeley@lw.com
`nicole.valco@lw.com
`
`Susan E. Engel (pro hac vice)
`555 Eleventh Street, N.W., Suite 1000
`Washington, D.C. 20004-1304
`Telephone: +1.202.637.2200
`Facsimile: +1.202.637.2201
`susan.engel@lw.com
`
`Hilary H. Mattis (CA Bar No. 271498)
`140 Scott Drive
`Menlo Park, CA 94025-1008
`Telephone: +1.650.328.4600
`Facsimile: +1.650.463.2600
`hilary.mattis@lw.com
`Attorneys for Defendant Facebook, Inc.
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`FACEBOOK’S MOT. TO DISMISS
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`CASE NO. 3:18-cv-04978-JD
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`Case 3:18-cv-04978-JD Document 177 Filed 05/14/20 Page 4 of 23
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`TABLE OF CONTENTS
`
`INTRODUCTION ............................................................................................................. 1
`BACKGROUND ............................................................................................................... 3
`A.
`“Potential Reach” And “Estimated Daily Reach” Estimates ................................. 3
`B.
`The Parties’ Integrated Contract ............................................................................ 4
`C.
`Plaintiffs’ Contract-Based Allegations .................................................................. 5
`D.
`Plaintiffs’ Fraud-Based Allegations ....................................................................... 6
`ARGUMENT ..................................................................................................................... 6
`A.
`Plaintiffs Still Fail To State An Implied Covenant Claim. .................................... 6
`1.
`Plaintiffs’ implied covenant claim is a repackaged version
`of their dismissed breach of contract claim that fails to
`identify any specific contract term that was frustrated. ............................. 6
`The implied duty alleged by Plaintiffs would contravene
`the express terms of the parties’ contract. .................................................. 8
`Plaintiffs Still Fail To State A Quasi-Contract Claim. .......................................... 8
`1.
`The quasi-contract claim is barred by the parties’ express
`contract. ...................................................................................................... 9
`Plaintiffs do not allege that Facebook unjustly retained a
`benefit. ..................................................................................................... 10
`Plaintiffs Fail To State A Claim For Fraudulent Misrepresentation. ................... 11
`Plaintiffs Fail To State A Claim For Fraudulent Concealment. ........................... 13
`Claims Based On Ads Outside The Limitations Period Are Time-
`Barred. .................................................................................................................. 15
`CONCLUSION ................................................................................................................ 15
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`2.
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`2.
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`B.
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`C.
`D.
`E.
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`I.
`II.
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`III.
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`IV.
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`FACEBOOK’S MOT. TO DISMISS
`THIRD AM. CONSOL. COMPL.
`CASE NO. 3:18-cv-04978-JD
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`Case 3:18-cv-04978-JD Document 177 Filed 05/14/20 Page 5 of 23
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`TABLE OF AUTHORITIES
`
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`Page(s)
`
`Cases
`
`Ahern v. Apple Inc.,
`411 F. Supp. 3d 541 (N.D. Cal. 2019) ...........................................................................3, 13, 14
`
`Balthazar v. Apple, Inc.,
`No. 10-cv-3231-JF, 2011 WL 588209 (N.D. Cal. Feb. 10, 2011) ...........................................12
`
`Berkla v. Corel Corp.,
`302 F.3d 909 (9th Cir. 2002) .....................................................................................................2
`
`Careau & Co. v. Sec. Pac. Bus. Credit, Inc.,
`222 Cal. App. 3d 1371 (1990) ...................................................................................................7
`
`Deras v. Volkswagen Grp. of Am., Inc.,
`No. 17-CV-05452-JST, 2018 WL 2267448 (N.D. Cal. May 17, 2018) ..................................10
`
`Edwards v. Marin Park, Inc.,
`356 F.3d 1058 (9th Cir. 2004) .................................................................................................12
`
`Ellis v. JPMorgan Chase & Co.,
`752 F. App’x 380 (9th Cir. 2018) ..............................................................................................9
`
`In re Facebook, Inc. Internet Tracking Litig.,
`No. 17-17486, 2020 WL 1807978 (9th Cir. Apr. 9, 2020) ................................................2, 6, 7
`
`FormFactor, Inc. v. MarTek, Inc.,
`No. 14-cv-01122-JD, 2015 WL 367653 (N.D. Cal. Jan. 28, 2015) ...........................................8
`
`Guz v. Bechtel Nat. Inc.,
`24 Cal. 4th 317 (2000) ...............................................................................................................8
`
`Hall v. SeaWorld Entm’t, Inc.,
`747 F. App’x 449 (9th Cir. 2018) ............................................................................................13
`
`Hedging Concepts, Inc. v. First All. Mortg. Co.,
`41 Cal. App. 4th 1410 (1996) ....................................................................................................9
`
`Hodsdon v. Mars, Inc.,
`891 F.3d 857 (9th Cir. 2018) .........................................................................................3, 13, 14
`
`In Taiwan Civil Rights Litig. Org. v. Kuomintang Bus. Mgmt Comm.,
`No. C 10-00362 JW, 2011 WL 5023397 (N.D. Cal. Oct. 13, 2011) .......................................15
`
`In re iPhone 4s Cons. Litig.,
`637 Fed. App’x 414 (9th Cir. 2016) ........................................................................................11
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`FACEBOOK’S MOT. TO DISMISS
`THIRD AM. CONSOL. COMPL.
`CASE NO. 3:18-cv-04978-JD
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`Case 3:18-cv-04978-JD Document 177 Filed 05/14/20 Page 6 of 23
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`Kearns v. Ford Motor Co.,
`567 F.3d 1120 (9th Cir. 2009) .......................................................................................3, 11, 12
`
`Knowles v. Arris Int’l PLC,
`No. 17-CV-01834-LHK, 2019 WL 3934781 (N.D. Cal. Aug. 20, 2019) ................................13
`
`Lance Camper Mfg. Corp. v. Republic Indem. Co.,
`44 Cal. App. 4th 194 (1996) ......................................................................................................9
`
`Lectrodryer v. SeoulBank,
`77 Cal. App. 4th 723 (2000) ....................................................................................................10
`
`Letizia v. Facebook Inc.,
`267 F. Supp. 3d 1235 (N.D. Cal. 2017) ...............................................................................9, 10
`
`Love v. Fire Ins. Exchange,
`221 Cal. App. 3d 1136 (1990) .................................................................................................15
`
`Mirkin v. Wasserman,
`5 Cal. 4th 1082 (1993) .............................................................................................................15
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`Morawski v. Lightstorm Entm’t, Inc.,
`599 F. App’x 779 (9th Cir. 2015) ..............................................................................................9
`
`Nein v. HostPro, Inc.,
`174 Cal. App. 4th 833 (2009) ....................................................................................................8
`
`Overton v. Uber Techs., Inc.,
`333 F. Supp. 3d 927 (N.D. Cal. 2018) .....................................................................................10
`
`Pierry, Inc. v. Thirty-One Gifts, LLC,
`No. 17-cv-03074-MEJ, 2017 WL 4236934 (N.D. Cal. Sept. 25, 2017) ....................................7
`
`Plastino v. Wells Fargo Bank,
`873 F. Supp. 2d 1179 (N.D. Cal. 2012) .....................................................................................7
`
`Platt Elec. Supply, Inc. v. EOFF Elec., Inc.,
`522 F.3d 1049 (9th Cir. 2008) .................................................................................................15
`
`Richter v. CC-Palo Alto, Inc.,
`176 F. Supp. 3d 877 (N.D. Cal. 2016) .....................................................................................15
`
`Robinson Helicopter Co. v. Dana Corp.,
`34 Cal. 979 (2004) ...................................................................................................................14
`
`Rojas v. Bosch Solar Energy Corp.,
`386 F. Supp. 3d 1116 (N.D. Cal. 2019) ...................................................................................11
`
`Sharp v. Nationstar Mortg., LLC,
`701 F. App’x 596 (9th Cir. 2017) ..........................................................................................6, 7
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`FACEBOOK’S MOT. TO DISMISS
`THIRD AM. CONSOL. COMPL.
`CASE NO. 3:18-cv-04978-JD
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`Case 3:18-cv-04978-JD Document 177 Filed 05/14/20 Page 7 of 23
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`Sloan v. Gen. Motors, LLC,
`No. 16-cv-07244-EMC, 2020 WL 1955643 (N.D. Cal. Apr. 23, 2020) ..............................3, 14
`
`Sussex Fin. Enterprises, Inc. v. Bayerische Hypo-Und Vereinsbank AG,
`460 F. App’x 709 (9th Cir. 2011) ............................................................................................12
`
`Total Coverage, Inc. v. Cendant Settlement Serv. Group, Inc.,
`252 F. App’x 123 (9th Cir. 2007) ..............................................................................................9
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`Viacom Int’l, Inc. v. MGA Entm’t, Inc.,
`730 F. App’x 470 (9th Cir. 2018) ..............................................................................................6
`
`Vu Nguyen v. Aurora Loan Servs., LLC,
`614 F. App’x 881 (9th Cir. 2015) ..........................................................................................2, 7
`
`Young v. Facebook, Inc.,
`790 F. Supp. 2d 1110 (N.D. Cal. 2011) .....................................................................................6
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`FACEBOOK’S MOT. TO DISMISS
`THIRD AM. CONSOL. COMPL.
`CASE NO. 3:18-cv-04978-JD
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`Case 3:18-cv-04978-JD Document 177 Filed 05/14/20 Page 8 of 23
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`I.
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`MEMORANDUM OF POINTS AND AUTHORITIES
`INTRODUCTION
`Plaintiffs’ Third Amended Consolidated Class Action Complaint (“Third Amended
`Complaint” or “TAC”) is the fifth complaint filed in this action. Plaintiffs continue to allege that
`Facebook overstated the Potential Reach estimates for their ad campaigns, misleading them into
`believing their ads might reach more people than they actually did. This Court has already held
`that Facebook’s contract with Plaintiffs “explicitly disclaims an audience reach or target
`guarantee.” Minute Entry for October 17, 2019 Hearing (“MTD II Order”), Dkt. 130 at 1. Yet
`Plaintiffs still make no effort to explain how they could have believed that their ads would reach
`the Potential Reach estimates (that they purportedly saw but still have not identified). Potential
`Reach is simply a free tool to estimate the number of people in an advertiser’s entire “target
`audience,” i.e., the universe of people who might fall within the advertiser’s targeting and
`placement choices. TAC ¶ 36 & fig.4. As Plaintiffs acknowledge, Facebook’s Ads Manager
`interface disclosed that “[t]he number of people [Plaintiffs] actually end up reaching depends on
`[their] budget and performance.” Id. ¶ 36 (emphasis added). Advertisers are not charged based
`on Potential Reach or Estimated Daily Reach1 (together, “reach estimates”), Ex. A at 2,2 and reach
`estimates do not affect the number of people to whom their ads are actually delivered, TAC ¶ 36
`fig.4. Advertisers are only “charged for the number of clicks or the number of impressions [their]
`ad received.” Ex. B at 2. Despite this, Plaintiffs make no effort to cure the deficiencies previously
`identified in their implied covenant and quasi-contract claims, and they add two new fraud-based
`claims that also ignore basic pleading requirements. Plaintiffs should not get a sixth bite at the
`apple nearly two years into this litigation; each of these claims should be dismissed with prejudice.
`
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`1 Estimated Daily Reach estimates “give[] [advertisers] an idea of how many of the people in
`[their] target audience . . . [they] may be able to reach on a given day,” TAC ¶¶ 3, 27, based on
`“factors like [their] bid and budget.” TAC Ex. 1, Dkt. 166-1 at 3. Only Plaintiffs’ implied
`covenant claim contains allegations related to Estimated Daily Reach.
`2 Each exhibit citation in this motion is to an exhibit attached to the Valco Decl. filed herewith,
`except for citations to “TAC Ex. 1,” which is a citation to Exhibit 1 to the TAC, Dkt. 166-1. See
`Request for Judicial Notice filed herewith.
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`Case 3:18-cv-04978-JD Document 177 Filed 05/14/20 Page 9 of 23
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`First, Plaintiffs’ implied covenant claim fails because it is nothing more than a repackaged
`version of their failed breach of contract claim, which this Court has dismissed. MTD II Order,
`Dkt. 130 at 1; see also In re Facebook, Inc. Internet Tracking Litig., No. 17-17486, 2020 WL
`1807978, at *15 (9th Cir. Apr. 9, 2020) (affirming dismissal of implied covenant claim where “the
`allegations did not go beyond the [also dismissed] breach of contract theories asserted by
`Plaintiffs”). The TAC still does not identify any contractual promise that Plaintiffs claim was
`frustrated by Facebook. Instead, Plaintiffs’ implied covenant claim is still based on extra-
`contractual reach estimates. TAC ¶¶ 137-38. But as the Court already held, the parties’ contract
`“does not create a contractual obligation as to the accuracy of the Potential Reach or Estimated
`Daily Reach,” and in fact “explicitly disclaims an audience reach or target guarantee.” MTD II
`Order, Dkt. 130 at 1. Without any contractual provision on which to hinge an implied duty, the
`implied covenant claim should be dismissed. See Vu Nguyen v. Aurora Loan Servs., LLC, 614 F.
`App’x 881, 883 (9th Cir. 2015) (affirming dismissal of implied covenant claim for failure to
`identify an express contract term that was frustrated).
`Second, Plaintiffs’ quasi-contract claim, which is substantially the same as the quasi-
`contract claim the Court previously dismissed, fails again because the parties have an express
`contract that governs their advertising relationship. It is well settled under California law that
`“‘[t]here cannot be a valid, express contract and an implied contract, each embracing the same
`subject matter, existing at the same time.’” Berkla v. Corel Corp., 302 F.3d 909, 918 (9th Cir.
`2002) (citation omitted; emphasis added). There is no dispute that there is a valid, express contract
`that governs the parties’ advertising relationship. That is dispositive. So too is Plaintiffs’ failure
`to address the flaws in their factual allegations that the Court previously identified in dismissing
`the quasi-contract claim. See Minute Entry for May 16, 2019 Hearing (“MTD I Order”), Dkt. 83
`at 1 (dismissing quasi-contract claim on the ground that “[t]he allegations are not specific enough
`on the elements of the claims, such as what the contract terms were, how they were breached, how
`plaintiffs were damaged and in what amount.”). Instead of adding factual allegations to salvage
`this claim, the only amendment Plaintiffs made was to label it as pleaded “in the alternative,” TAC
`¶ 131. That cannot save this claim from dismissal where Plaintiffs have admitted—and the Court
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`FACEBOOK’S MOT. TO DISMISS
`THIRD AM. CONSOL. COMPL.
`CASE NO. 3:18-cv-04978-JD
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`Case 3:18-cv-04978-JD Document 177 Filed 05/14/20 Page 10 of 23
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`has held, see MTD II Order, Dkt. 130 at 1—that the parties have an express contract governing
`their claims.
`Third, Plaintiffs’ fraudulent misrepresentation claim fails because Plaintiffs do not allege
`the specific content of the misstatements or how and why the statements misled them into buying
`more ad campaigns or paying a higher price, much less with Rule 9(b) specificity. See Kearns v.
`Ford Motor Co., 567 F.3d 1120, 1125-26 (9th Cir. 2009). Two years into the litigation, Facebook
`is entitled to know the specific Potential Reach estimates Plaintiffs allege are fraudulent. See id.
`Finally, Plaintiffs’ fraudulent concealment claim fails to satisfy Rule 9(b) for the same
`reasons as the misrepresentation claim, and it also fails for two independent reasons. Plaintiffs fail
`to allege, as required for a concealment claim, an omission of a fact that “relate[s] to the central
`functionality” of an ad campaign, Hodsdon v. Mars, Inc., 891 F.3d 857, 863 (9th Cir. 2018), and
`rendered Plaintiffs’ ad campaigns “unusable,” see, e.g., Ahern v. Apple Inc., 411 F. Supp. 3d 541,
`567 (N.D. Cal. 2019). In addition, the economic loss rule bars the claim. See Sloan v. Gen. Motors,
`LLC, No. 16-cv-07244-EMC, 2020 WL 1955643, at *24 (N.D. Cal. Apr. 23, 2020).
`II.
`BACKGROUND
`A.
`“Potential Reach” And “Estimated Daily Reach” Estimates
`Facebook provides reach estimates for free to anyone who uses Ads Manager, an
`interactive online interface that allows potential advertisers to target ads to a particular audience
`based on a wide variety of criteria, including location, age, gender, and various demographics,
`interests, and behaviors. TAC ¶¶ 29-34. Potential Reach is an estimate of the number of people
`in an advertiser’s entire “target audience,” i.e., the universe of people who might fall within the
`advertiser’s targeting and placement choices. Id. ¶ 36 & fig.4. Potential Reach estimates “update[]
`in real time” in response to advertisers’ changes to “targeting and placement choices,” and help
`potential advertisers understand how their choices make that group narrower or broader. Id.
`Estimated Daily Reach “gives [advertisers] an idea of how many of the people in [their] target
`audience . . . [they] may be able to reach on a given day,” id. ¶¶ 3, 27, based on “factors like [their]
`bid and budget,” TAC Ex. 1 at 3. As described in the Facebook Advertiser Help Center page that
`Plaintiffs cite and rely upon, Potential Reach and Estimated Daily Reach are “estimations” that
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`FACEBOOK’S MOT. TO DISMISS
`THIRD AM. CONSOL. COMPL.
`CASE NO. 3:18-cv-04978-JD
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`Case 3:18-cv-04978-JD Document 177 Filed 05/14/20 Page 11 of 23
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`“don’t represent actual campaign reach or campaign reporting.” See Ex. A at 2 (cited at TAC ¶ 3
`& n.5, ¶ 27 & n.21).
`Facebook provides Potential Reach and Estimated Daily Reach before an advertiser makes
`a purchase, TAC ¶¶ 3, 31, and regardless of whether a purchase is ever made. Any user with a
`Facebook account can go to Ads Manager, select targeting and placement criteria, and view
`Potential Reach and Estimated Daily Reach for an ad campaign without making a purchase. If a
`potential advertiser decides to purchase an ad set, the advertiser is not charged based on Potential
`Reach or Estimated Daily Reach, Ex. A at 2, and these estimates do not affect the number of people
`to whom its ad is actually delivered, TAC ¶ 36 fig.4. An advertiser is only “charged for the number
`of clicks or the number of impressions [its] ad received.” Ex. B at 2. Facebook does “not guarantee
`the reach or performance that [advertisers’] ads will receive, such as the number of people who
`will see your ads or the number of clicks your ads will get.” Ex. F § 8 (Self-Serve Ad Terms); see
`also Ex. D (Terms of Service) §§ 4, 5 (incorporating Self-Serve Ad Terms).
`B.
`The Parties’ Integrated Contract
`Any time an advertiser purchases a Facebook advertisement, it agrees to Facebook’s Terms
`of Service (“TOS”), which contains an integration clause. Ex. D (TOS) §§ 4, 5. The TOS
`expressly incorporates the terms that govern advertisers’ use of Facebook’s “self-serve advertising
`interface[],” Ads Manager, i.e., the Self-Service Ad Terms (“SSAT”). Id. § 5. The SSAT applies
`to the use of Ads Manager and all ad orders placed using it. Ex. F § 1 (SSAT). Plaintiffs admit
`both that they purchased ads on Facebook and that the TOS and SSAT govern this action. TAC
`¶ 8, p. 24 n.40 (alleging TOS requires application of California law and provide for venue in this
`District); see also Oct. 17, 2019 Hr’g Tr., Dkt. 129 at 5:11-16 (stating that the TOS and the SSAT
`are part of Plaintiffs’ contract). Neither the TOS nor the SSAT contain any promise relating to
`Potential Reach or Estimated Daily Reach. To the contrary, the SSAT expressly provides that
`Facebook “do[es] not guarantee the reach or performance that your ads will receive, such as the
`number of people who will see your ads or the number of clicks your ads will get.” Ex. F (SSAT)
`§ 8. Facebook requires advertisers to dispute any “unauthorized or otherwise problematic
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`FACEBOOK’S MOT. TO DISMISS
`THIRD AM. CONSOL. COMPL.
`CASE NO. 3:18-cv-04978-JD
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`Case 3:18-cv-04978-JD Document 177 Filed 05/14/20 Page 12 of 23
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`transaction” within 30 days of the charge. Ex. G § 4.3 (Payment Terms); see also Ex. F (SSAT)
`§ 4.a (requiring advertisers to comply with the Payment Terms).
`C.
`Plaintiffs’ Contract-Based Allegations
`For the first year of this litigation, Plaintiffs tried through multiple complaints to make out
`a breach of contract claim. See Dkts. 1, 9, 55, 89. Plaintiffs alleged that Facebook had a contractual
`obligation to provide potential advertisers with accurate Potential Reach and Estimated Daily
`Reach estimates, and that Facebook breached that obligation by providing Plaintiffs with
`supposedly inaccurate estimates. The Court dismissed Plaintiffs’ contract and quasi-contract
`claims in the Consolidated Amended Class Action Complaint (“CAC”), Dkt. 55, for failure to state
`a claim because Plaintiffs had not plausibly alleged “what the contract terms were, how they were
`breached, and how plaintiffs were damaged and in what amount.” MTD I Order, Dkt. 83 at 1.
`Although the minute entry for the May 16, 2019 hearing did not specifically address Plaintiffs’
`implied covenant claim, the Court took the implied covenant claim under submission following
`the October 17, 2019 hearing. See MTD II Order, Dkt. 130 at 1.
`Plaintiffs purportedly filed the Second Amended Consolidated Class Action Complaint
`(“SAC”), Dkt. 89, to cure the defects identified by the Court, but the only amendment Plaintiffs
`made to their contract-based claims was to clarify that the quasi-contract claim is alleged in the
`alternative in case the Court “determines that a contract did not exist between Plaintiffs and
`Facebook.” SAC ¶ 127. Plaintiffs did not amend their implied covenant claim.
`Plaintiffs’ Third Amended Complaint (“TAC”) is substantially the same as the SAC, but
`removes Plaintiffs’ breach of contract claim. The implied covenant and quasi-contract claims in
`the TAC are identical to the SAC, and Plaintiffs did not amend or add new factual allegations to
`support those claims. Compare TAC ¶¶ 130-141, with SAC ¶¶ 126-138. Plaintiffs do not allege
`they ever disputed any charge pursuant to the contractually-required claim process. Payment
`Terms § 4.3 (“Unless you submit the claim to us within 30 days after the charge, you will have
`waived, to the fullest extent permitted by law, all claims against us arising out of or otherwise
`related to the transaction.”).
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`FACEBOOK’S MOT. TO DISMISS
`THIRD AM. CONSOL. COMPL.
`CASE NO. 3:18-cv-04978-JD
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`Case 3:18-cv-04978-JD Document 177 Filed 05/14/20 Page 13 of 23
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`D.
`Plaintiffs’ Fraud-Based Allegations
`The TAC adds new claims for fraudulent misrepresentation and fraudulent concealment.
`TAC ¶¶ 142-160. In the fraudulent misrepresentation claim, Plaintiffs allege that Facebook
`misrepresented: (1) the Potential Reach of Plaintiffs’ advertisements and (2) that Potential Reach
`estimates were the number of people (instead of accounts) in an ad set’s target audience. Id.
`¶¶ 143-44. In the fraudulent concealment claim, Plaintiffs allege that Facebook failed to disclose
`that Potential Reach estimates were inflated and misleading, that Potential Reach is inflated in part
`because of duplicate and fake accounts, and that Potential Reach is calculated based on the number
`of accounts (as opposed to people) in an ad set’s target audience. Id. ¶ 150.
`III. ARGUMENT
`A.
`Plaintiffs Still Fail To State An Implied Covenant Claim.
`Despite numerous opportunities to salvage their implied covenant claim, Plaintiffs fail to
`identify any express contract term that Facebook frustrated. Instead, they still claim that Facebook
`breach its implied covenant to “carry[] out its contractual obligations to provide Plaintiffs … with
`accurate Potential Reach and Estimated Daily Reach.” TAC ¶ 137. But this Court already held
`the parties’ contract does not “does not create a contractual obligation as to the accuracy of the
`Potential Reach or Estimated Daily Reach” and “explicitly disclaims an audience reach or target
`guarantee.” MTD II Order, Dkt. 130 at 1. The Ninth Circuit has recently reiterated that where an
`implied covenant claim does “not go beyond” an already-dismissed contract claim, it should be
`dismissed. Internet Tracking Litig., 2020 WL 1807978, at *15; see also Sharp v. Nationstar
`Mortg., LLC, 701 F. App’x 596, 598 (9th Cir. 2017) (affirming dismissal of implied covenant
`claim “materially identical to the [dismissed] breach of contract claim”).
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`Plaintiffs’ implied covenant claim is a repackaged version of their
`dismissed breach of contract claim that fails to identify any specific
`contract term that was frustrated.
`To plead an implied covenant claim, Plaintiffs must identify the specific contractual
`provision that was frustrated. See Viacom Int’l, Inc. v. MGA Entm’t, Inc., 730 F. App’x 470, 471
`(9th Cir. 2018) (holding that the implied covenant “cannot impose substantive terms and
`conditions beyond those to which the contracting parties actually agreed”); see also Young v.
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`1.
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`FACEBOOK’S MOT. TO DISMISS
`THIRD AM. CONSOL. COMPL.
`CASE NO. 3:18-cv-04978-JD
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`Case 3:18-cv-04978-JD Document 177 Filed 05/14/20 Page 14 of 23
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`Facebook, Inc., 790 F. Supp. 2d 1110, 1117 (N.D. Cal. 2011) (“The implied covenant will not
`apply where ‘no express term exists on which to hinge an implied duty….’”) (citation omitted).
`The TOS is the contract between the parties, see MTD II Order, Dkt. 130 at 1, and is fully
`integrated. See Ex. D (TOS) § 4.5. Plaintiffs have not alleged a specific term of the TOS that was
`frustrated. Instead, Plaintiffs’ implied covenant claim continues to be premised on Facebook’s
`purported obligation to provide accurate Potential Reach and Estimated Daily Reach estimates
`(TAC ¶¶ 137-38), which the Court already held Facebook does not have a contractual obligation
`to provide. See MTD II Order, Dkt. 130 at 1. Accordingly, Plaintiffs’ claim that Faceb