Fox Test Prep, et al v. Facebook, Inc.

Filing 1

FILED ON 04/27/2012 PETITION FOR PERMISSION TO APPEAL PURSUANT TO RULE 23(f). SERVED ON 04/27/2012. [8158000] (HC)

No. _______________
________________________________________________________

IN THE UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
_____________________________________________________
In re: FACEBOOK PPC ADVERTISING LITIGATION
_________________________________________________________
Appeal from the United States District Court
for the Northern District of California
Honorable Phyllis J. Hamilton
CASE No. C 09-3043 PJH
_________________________________________________________
PLAINTIFFS’ PETITION FOR PERMISSION TO APPEAL DENIAL OF
CLASS CERTIFICATION PURSUANT TO FED. R. CIV. P. 23(f)
__________________________________________________________

Jonathan Shub (SBN 237708)
[e-mail]
SEEGER WEISS LLP
1515 Market Street, Suite 1380
Philadelphia, PA 19102
Telephone: [phone]
Facsimile: [phone]

Rosemary M. Rivas (SBN 209147)
[e-mail]
FINKELSTEIN THOMPSON LLP
100 Bush Street, Suite 1450
San Francisco, CA 94104
Telephone: [phone]
Facsimilie: [phone]

Counsel for Plaintiffs-Petitioners Fox Test Prep and Steven Price

CORPORATE DISCLOSURE STATEMENT
Pursuant to Fed. R. App. Proc. 26.1, Plaintiffs and Petitioners state that
no Petitioner is a nongovernmental corporate party.

ii

TABLE OF CONTENTS
I.

INTRODUCTION ..........................................................................................1

II.

RELIEF SOUGHT ..........................................................................................2

III.

QUESTIONS PRESENTED ...........................................................................2

IV.

STATEMENT OF THE CASE ....................................................................... 3
A. The Contract Between Advertisers and Facebook .................................... 3
B. A Plausible Method Exists for Determining Liability and Damages on a
Class-wide Basis Using Facebook’s Click Data........................................ 5
C. The Named Plaintiffs’ Experiences Exemplify Facebook’s Liability and
the Damages Suffered ................................................................................ 6

V.

THE DISTRICT COURT’S CLASS CERTIFICATION ORDER ................. 6

VI.

THIS COURT SHOULD REVIEW THE MANIFESTLY ERRONEOUS
CERTIFICATION ORDER…………………………………………………9
A. The District Court Improperly Evaluated the Merits of the
Case in Deciding Class Certification………………………………10
B. The District Court Manifestly Erred in Failing to Consider
Objective Extrinsic Evidence and Instead Considered Plaintiffs’
Subjective Intent………………………………………………………..14
C. The District Court Failed to Apply the Correct Standard
of Proof With Respect to Plaintiffs’ Methodologies for
Establishing Class-Wide Liability and Damages……………................17
D. The Named Plaintiffs Are Adequate …………………………………..19

VII. CONCLUSION .............................................................................................20

iii

TABLE OF AUTHORITIES
Cases

Page(s)

Atlanta Cancer Care, P.C. v. Amgen, Inc.,
359 Fed. Appx. 714 (9th Cir. 2009) .....................................................................15
Ballew v. Matrixx Initiatives, Inc.,
2008 WL 4831481 (E.D. Wash. Oct. 31, 2008) ...................................................11
Berrien v. New Raintree Resorts Int’l, LLC,
276 F.R.D. 355 (N.D. Cal. 2011) .........................................................................15
Blackie v. Barrack,
524 F.2d 891 (9th Cir. 1975) ................................................................................12
Brazil v. Dell Inc.,
No. C-07-01700 RMW, 2010 WL 5387831 (N.D. Cal. Dec. 21, 2010) ..............19
Cal. Lettuce Growers v. Union Sugar Co.,
45 Cal. 2d 474 (1955) ..........................................................................................13
Carma Developers (Cal.), Inc. v. Marathon Dev. of California, Inc.,
2 Cal. 4th 342 (1992) ............................................................................................14
Chamberlan v. Ford Motor Co.,
402 F.3d 952 (9th Cir. 2005) ..................................................................................9
Ewert v. eBay, Inc.
2010 WL 4269259 (N.D. Cal. Oct. 25, 2010) ......................................................15
Fireman's Fund Ins. Cos., v. Ex-Cell-O Corp.,
702 F. Supp. 1317 (E.D. Mich. 1988) ..................................................................14
In re Aftermarket Auto. Lighting Prod. Antitrust Litig.,
2011 WL 3204588 (C.D. Cal. July 25, 2011) ......................................................10
In re Checking Account Overdraft Litig.,
275 F.R.D. 666 (S.D. Fla. 2011) ..........................................................................14
iv

In re Conseco Life Ins. Sales & Marketing Litig.,
270 F.R.D. 521 (N.D. Cal. 2010) .........................................................................15
In re Cooper Cos. Sec. Litig.,
254 F.R.D. 628 (C.D. Cal. 2009)..........................................................................11
In re Med. Capital Sec. Litig.,
2011 WL 5067208 (C.D. Cal. July 26, 2011)......................................................14
In Re Online DVD Rental Antitrust Litig.,
2010 WL 5396064 (N.D. Cal. Dec. 23, 2010) ....................................................18
In re Western Asbestos Co.,
416 B.R. 670 (N.D. Cal. 2009) .............................................................................15
Marlo v. United Parcel Service, Inc.,
639 F.3d 942 (9th Cir. 2011) ................................................................................13
Menagerie Prods. v. Citysearch,
2009 WL 3770668 (C.D. Cal. Nov. 9, 2009) ................................................ 16, 18
Moore v. Hughes Helicopters, Inc.,
708 F.2d 475 (9th Cir. 1983) ................................................................................13
Pina v. Con-Way Freight, Inc.,
2012 WL 1278301 (N.D. Cal. Apr. 12, 2012)......................................................10
Sacred Heart Health Sys., Inc. v. Humana Military Healthcare Serv., Inc.,
601 F.3d 1159 (11th Cir. 2010) ............................................................................14
Smilow v. Sw. Bell Mobile Sys., Inc.,
323 F.3d 32, 41 (1st Cir. 2003)............................................................................14
Toll Bros. v. Chang Su-O Lin,
2011 WL 3839761 (9th Cir. Aug. 31, 2011) ........................................................13
United Steel v. Conoco Phillips,
593 F.3d 802 (9th Cir. 2010) ..................................................................................9
v

Vedachalam v. Tata Consultancy Services, Ltd,
2012 WL 1110004 (N.D. Cal. Apr. 2, 2012)........................................................15
Wal-Mart Stores, Inc. v. Dukes,
131 S. Ct. 2541 .....................................................................................................10
Wolf v. Sup. Ct.,
114 Cal. App. 4th 1343 (2005) .............................................................................15
Wolin v. Jaguar Land Rover North America,
617 F.3d 1168 (9th Cir. 2010) ..........................................................................9, 12
Woods v. Google, Inc.,
2011 WL 3501403 (N.D. Cal. Aug. 10, 2001) .....................................................16
Yokoyama v. Midland Nat'l Life Ins. Co.,
594 F.3d 1087 (9th Cir. 2010) ................................................................................9
Statutes
Cal. Bus. & Prof. Code §§ 17200, et seq. ..................................................................6
Rules
FED. R. CIV. P. 23 .......................................................................................... passim
FED. R. CIV. P. 23(a)(4)...........................................................................................2
FED. R. CIV. P. 23(b)(3).....................................................................................2, 12
FED. R. CIV. P. 23(f) ................................................................................. 1, 2, 8, 21
Other
Restatement (Second) of Contracts.........................................................................15

vi

I.

INTRODUCTION
Plaintiffs’ petition meets the requirements for review, under Fed. R. Civ.

Proc. 23(f), of the district court's manifestly erroneous decision denying class
certification. At the core of this case is Facebook’s online “click-through”
agreement with thousands of large and small advertisers (the “proposed Class
members” or “advertisers”) who posted advertisements for display to Facebook
users on the well-known website, www.facebook.com. Under the standardized
online contract, advertisers agreed to pay Facebook on a “cost-per-click” basis,
i.e., when a Facebook user clicks on a Class member’s advertisement. The
district court abused its discretion by failing to recognize that the predominant
issue at trial would be whether, under the form contract, Facebook breached
the contract with its advertisers by overcharging for clicks.
The court instead erroneously concluded that Plaintiffs failed to establish
a contract imposing a duty on Facebook to charge only for valid clicks. Even
assuming the court’s decision could be read to find the existence of a contract,
its holding that the contract gives Facebook unbridled discretion to charge for
every “click” (such as numerous repeated clicks in rapid succession by a
Facebook user who is impatient with the speed of his or her Internet browser),
is wrong. It is black letter law in California that there is an implied covenant

-1-

of good faith and fair dealing in every contract that requires Facebook here to
exercise its discretion in good faith. Moreover, the industry custom requires
such good faith on the part of the sellers of Internet advertising. Finally, the
ruling was plain error because the court held Plaintiffs to a higher (and
incorrect) standard under Ninth Circuit law regarding adequacy under Rule
23(a)(4) and with regard to their proposed damages methodology under Rule
23(b)(3). Thus, review under Rule 23(f) is necessary to correct the district
court’s manifest errors in denying class certification.
II.

RELIEF SOUGHT
Plaintiffs seek leave to appeal the order denying class certification. (Exh. A)

III.

QUESTIONS PRESENTED
1.

Whether the district court erred in denying class certification because

it determined that Plaintiffs failed to prove either the existence of a contract or a
contract obligating Facebook to charge only for valid clicks;
2.

Whether the district court misapplied the standard of proof to

Plaintiffs’ liability and damages methodology; and
3.

Whether the district court erred in finding that Plaintiffs were

inadequate under Rule 23(a)(4).

-2-

IV.

STATEMENT OF THE CASE
A.

The Contract Between Advertisers and Facebook

Online contracts are commonplace and are subject to the same rules of
interpretation as traditional paper contracts. This is a class action arising out of an
alleged breach of an online contract. Facebook used a standardized, nonnegotiable Internet form contract to sell advertising whereby advertisers agreed to
pay Facebook on a “cost-per-click” basis. The contract consisted of a simple,
electronic “click-through” agreement whereby advertisers assent by completing
and clicking on a series of Internet pages on the Facebook website.
The meaning of a “click” is at the heart of the agreement as it is the event
that triggers the obligation to pay Facebook; yet it is not a defined term set out on
the web pages that comprise the contract. Facebook, however, has defined the
term "click” elsewhere on its website in a glossary as follows:
Clicks are counted each time a user clicks through your ad to your
landing page.
We [Facebook] have a variety of measures in place to ensure that we
only report and charge advertisers for legitimate clicks, and not clicks
that come from automated programs, or clicks that may be repetitive,
abusive, or otherwise inauthentic. Due to the proprietary nature of our
technology, we’re not able to give you more specific information
about these systems. (emphasis added).

Facebook, like the rest of the online advertising industry (which includes
-3-

Google and Microsoft), implements algorithmic-based “rules” that serve as a proxy
for determining a Facebook user’s intent to view an advertisement. These
algorithmic rules, known in the industry as click “filters,” determine on a per-click
basis the objective characteristics of a click that show whether a click should be
billed or not. Thus, if a click violates a rule because of certain characteristics—i.e.,
clicks were made repeatedly in rapid succession —the click is categorized by the
algorithm as “invalid” and is not billed to advertisers.
The rules that Facebook uses to determine which clicks are legitimate or
valid (and thus billable) are identical for all advertisers irrespective of their size,
industry, or any factor unique to a particular advertiser. Facebook, however, never
informs advertisers of the specific rules that it uses to determine what it considers a
“legitimate” click because to do so would expose Facebook to potential fraud and
compromise the rules it has devised. Thus, advertisers trust Facebook to implement
its rules in good faith.
Plaintiffs presented significant evidence showing that Facebook abused that
trust by charging advertisers for invalid clicks. The evidence made clear that
Facebook breached the contract in two different, but related ways: (1) by setting
and modifying its secret click rules in a manner designed to enhance revenue rather
than protect advertisers from paying for invalid clicks; and (2) by failing to employ

-4-

reasonable measures used in the industry to determine and “audit” its click rules.
This is akin to where a purchaser contracts to buy apples with the understanding
that the purchaser will purchase them sight unseen. If the evidence showed that
the apple seller abused its discretion and knowingly sold non-edible apples because
it knew that the buyer agreed to buy them without a prior inspection, the buyer
could proceed with a breach of contract action. This case is about the parties’
differing interpretation of what constitutes an “edible” apple, i.e. a valid (and
billable) click.
B.

A Plausible Method Exists for Determining Liability and
Damages on a Class-wide Basis Using Facebook’s Click Data

Plaintiffs’ expert, Dr. Markus Jakobsson, Ph.D., a computer scientist, opined
that algorithms could be written reclassifying, on a click by click basis, whether a
particular click should have been billable or not. The reclassification would reflect
the rules Facebook should have used had it exercised good faith in making click
validity determinations. As Dr. Jakobsson described, he would use Facebook’s
historical click data by inputting it into rule-based algorithms created to reflect
objectively reasonable filtration rules. The resulting damages involve a simple
arithmetic equation reflecting the difference between what advertisers paid and
what they should have paid if Plaintiffs’ rules governed click validity.

-5-

C.

The Named Plaintiffs’ Experiences Exemplify Facebook’s
Liability and the Damages Suffered

Plaintiff Fox Test Prep (“Fox”) offers LSAT and GMAT instruction and
tutoring in San Francisco. Fox started buying cost-per-click advertising from
Facebook in July 2009 and paid Facebook a total of $1,058.13. While Fox
continues to buy cost-per-click advertising, it stopped buying it from Facebook
after Fox suspected charges for invalid clicks based on tracking software.
Plaintiff Steven Price has a website offering services to car buyers and
sellers. He started buying cost-per-click advertising from Facebook in May 2009
and paid Facebook a total of $697.12. Based on tracking software, Price
determined that two-thirds of the clicks from Facebook were invalid.
Plaintiffs’ expert testified that both Plaintiffs were charged for invalid clicks.
Plaintiffs attached to their class certification motion expert analysis demonstrating
that they were charged for invalid clicks.
V.

THE DISTRICT COURT’S CLASS CERTIFICATION ORDER
The court denied class certification of Plaintiffs’ breach of contract and

unfair business practices claims under Cal. Bus. & Prof. Code §§ 17200, et seq.
Exhibit A hereto (the “Order”). Despite Plaintiffs’ unrebutted evidence that all
Class members using Facebook’s “self serve” Internet process were subject to

-6-

identical online contracts, the court leaped beyond the requirements of Rule 23.
The court stated, “[a]s an initial matter, it is still not clear exactly what comprises
the contract,” despite a prior motion to dismiss ruling that Plaintiffs did in fact,
state a claim for breach of contract for invalid clicks. (Order at 14.) The court
denied certification of the contract claim, finding that Plaintiffs “failed to establish
that the terms of the contract that were allegedly breached by Facebook are part of
any contract between CPC advertisers and Facebook[.]” (Id.)
The district court engaged in further contract interpretation, rejecting
Plaintiffs’ alternative argument that, if Facebook’s click definition was not part of
the contract, it should be considered objective extrinsic evidence of the meaning of
a “click” under the uniform “cost-per-click” contract. The court concluded, “[i]f
the contract at issue were truly a standardized form contract, plaintiffs’ argument
would have more merit. But where, as here, the contract presents such a moving
target, the court cannot find that class certification is appropriate.” (Order at 16.)
The court then rejected the proposition that extrinsic evidence may be used
to interpret the term “click,” ruling that Plaintiffs were attempting to add additional
terms to the contract as opposed to defining an ambiguous term. 1 In rejecting

The district court’s order was contrary to a prior ruling by a different judge
denying Facebook’s motion to dismiss on the ground that the online contract was
ambiguous. In the order denying the motion to dismiss, Judge Jeremy Fogel held
that Plaintiffs stated a claim for breach of contract based on invalid click charges
-7-

1

Plaintiffs’ position that Facebook’s click definition was extrinsic evidence of the
types of clicks billable under the contract, the court again engaged in merits-based
contract interpretation, erroneously finding that Facebook’s integration clause
“preclude[d] a finding that the ‘click definition’ statements outside of the SRR can
be used to impose additional contract obligations on Facebook.” (Order at 16.)
Despite Dr. Jakobsson’s expert report proffering a methodology for
analyzing liability and determining damages on a class wide basis, the district court
ruled that Plaintiffs’ expert’s methodology did not demonstrate that common issues
predominated. Finally, the court ruled that Plaintiffs were inadequate, finding that
they were subject to unique defenses and failed to show “any concrete injury from
specific ‘invalid’ clicks” even though Plaintiffs submitted an expert report
demonstrating charges for such clicks. (Order at 10).
VI.

THIS COURT SHOULD REVIEW THE MANIFESTLY
ERRONEOUS CERTIFICATION ORDER
Rule 23(f) of the Federal Rules of Civil Procedure provides for interlocutory

appeal of class certification orders. Interlocutory appeals are ordinarily granted
where, as here, one or more of the following factors have been established:

notwithstanding a provision disclaiming liability for “click fraud or other improper
actions.” According to Judge Fogel, the contract was susceptible to Plaintiffs’
interpretation that Facebook did not disclaim liability for all invalid clicks, such as
double-clicks occurring within a certain time frame, especially in light of
Facebook’s click definition.
-8-

(1) the district court’s class certification decision is manifestly
erroneous in some way; (2) the certification decision presents an
unsettled and fundamental issue of law relating to class actions,
important both to the specific litigation and generally, that is likely to
evade end-of-the-case review; or (3) there is a death-knell situation for
either the plaintiff or defendant that is independent of the merits of the
underlying claims.
Chamberlan v. Ford Motor Co., 402 F.3d 952, 959 (9th Cir. 2005).
A class certification order is manifestly erroneous where “the district
court applies an incorrect Rule 23 standard or ignores a directly controlling
case.” Id. at 962 (citations omitted). If the district court's determination was
premised on a legal error, that is a per se abuse of discretion. Yokoyama v.
Midland Nat'l Life Ins. Co., 594 F.3d 1087, 1091 (9th Cir. 2010). Finally, a
district court abuses its discretion when its class certification order is based
on a conclusion that the plaintiff will not prevail on the legal theories. See
United Steel v. Conoco Phillips, 593 F.3d 802 (9th Cir. 2010); Wolin v.
Jaguar Land Rover North America, 617 F.3d 1168, 1173 (9th Cir. 2010).
As Plaintiffs show, the Order is manifestly erroneous and conflicts
with the decisions of its sister courts finding that extrinsic evidence of the
defendant’s intent can be used in interpreting ambiguous terms in a
standardized online contract. Thus, review is warranted and appropriate.

-9-

A.

The District Court Improperly Evaluated the Merits of
the Case in Deciding Class Certification

When deciding a motion for class certification, courts must conduct a
“rigorous analysis” to determine “the capacity of a class wide proceeding to
generate common answers apt to drive the resolution of the litigation.” Wal-Mart
Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2551–52 (2011); Ellis v. Costco Wholesale
Corp., 657 F.3d 970, 980 (9th Cir. 2011). Frequently, “that ‘rigorous analysis' will
entail some overlap with the merits of the plaintiff's underlying claim.” Ellis, 657
F.3d at 980 (citing Dukes, 131 S. Ct. at 2551).
As this Court recently explained in Ellis, to the extent the merits do not
overlap with class certification issues, they should not be considered. Id., 657 F.3d
at 983 (emphasis added). This distinction between analyzing the merits of the
claim to determine the Rule 23 criteria and pre-judging plaintiffs’ ability to prove
his case must be maintained to comply with Dukes while at the same time
respecting that Rule 23 does not require a plaintiff to prove his causes of action.
Nothing in Dukes changes the basic principle that in reviewing a motion for
class certification, “the court generally is bound to take the substantive allegations
of the complaint as true.” Pina v. Con-Way Freight, Inc., No. C 10-00100 JW,
2012 WL 1278301, at *2 (N.D. Cal. Apr. 12, 2012) (citation omitted). Moreover,
-10-

courts are not permitted to turn the Rule 23 certification motion into a summary
judgment exercise. See In re Aftermarket Auto. Lighting Prod. Antitrust Litig.,
No. 09 MDL 2007-GW (PJWx), 2011 WL 3204588, at *3, n.2 (C.D. Cal. July 25,
2011) (interpreting Dukes and explaining that plaintiff is not required to prove
class-wide injury at class certification); In re Cooper Cos. Sec. Litig., 254 F.R.D.
628, 641, n. 7 (C.D. Cal. 2009) (courts must consider evidence relating to the Rule
23 determination, but “[a]t the same time, the inclusion of evidence that may speak
to the merits of a case does not mean that a district court should mistake class
action certification for summary judgment”); Ballew v. Matrixx Initiatives, Inc.,
No. CV-07-267, 2008 WL 4831481, at *2 (E.D. Wash. Oct. 31, 2008) (“the Court
is not resolving whether Plaintiff can establish that she can prove her case. Rather,
the narrow question before the Court is whether, under Fed. R. Civ. P. 23, a class
action is a proper vehicle for litigating the products liability claims[.]”).
Here, however, the court below ignored these basic principles and made
manifestly erroneous factual and legal findings that prejudged Plaintiffs’ claims.
Plaintiffs’ class certification motion was based on a breach of a standardized
online contract between advertisers and Facebook to charge Plaintiffs for a certain
type of “click,” i.e., one that Facebook determined in its discretion to be
“legitimate.” Plaintiffs proffered undisputed evidence that Facebook used identical

-11-

rules in determining a “legitimate” click for each advertiser pursuant to the
standard contract. Plaintiffs also proffered unrebutted evidence that the data
required to identify invalid clicks was in Facebook’s possession.
In denying Plaintiffs’ motion under Rule 23(b)(3), the court concluded that
Plaintiffs proffered insufficient evidence to establish that under the form contract
Facebook was obligated to charge advertisers only for legitimate clicks. (Order at
10-13) (“The court finds that the proposed class cannot be certified under Rule
23(b(3)…In particular, plaintiffs have failed to establish that the terms of the
contract allegedly breached by Facebook are part of any contract between CPC
advertisers and Facebook.”). In several other parts of the court’s decision, the
court raised doubts about the existence of the contract and Facebook’s obligations
under it. (Order at 18) (“…it is unclear that the contract is …”). Thus, the court’s
rejection of the motion was driven by its view that Plaintiffs had failed to establish
that the contract obligated Facebook to charge only for legitimate clicks, contrary
to a prior ruling denying Facebook’s motion to dismiss.
The court committed manifest error by prejudging Plaintiffs’ ability to prove
that the contract obligated Facebook to charge only for certain types of clicks. See
Wolin, 617 F.3d at 1173 (citing Blackie v. Barrack, 524 F.2d 891, 901 (9th
Cir.1975) (that plaintiff will be unable to prove allegations is not a basis for

-12-

declining to certify a class)); Marlo v. United Parcel Service, Inc., 639 F.3d 942,
949 (9th Cir. 2011) (citing Moore v. Hughes Helicopters, Inc., 708 F.2d 475, 480
(9th Cir. 1983) (noting that a decision on the merits was an improper basis to
adjudge class certification)). Rather than analyzing whether the contract at issue
was indeed a “form” contract imposing the identical obligations on Facebook and
Class members, the court engaged in a summary judgment analysis of the
contractual provisions. Id.
Moreover, the court’s interpretation of Facebook’s obligations (or lack
thereof) failed to apply the hornbook principle that, where, as here, one contracting
party is given discretion to determine the obligations of the other party, it must be
exercised reasonably and in good faith. See Toll Bros. v. Chang Su-O Lin, No. 0916955, 2011 WL 3839761, at *4 (9th Cir. Aug. 31, 2011) (“‘[e]very contract
[under California law] imposes upon each party a duty of good faith and fair
dealing in its performance and its enforcement’”) (citing Restatement (Second) of
Contracts § 205); Cal. Lettuce Growers v. Union Sugar Co., 45 Cal. 2d 474, 484
(1955) (“[W]here a contract confers on one party a discretionary power affecting
the rights of the other, a duty is imposed to exercise that discretion in good faith
and in accordance with fair dealing.”).2 Further, had the court properly analyzed

2

See also Carma Developers (Cal.), Inc. v. Marathon Dev. of California, Inc., 2
Cal. 4th 342, 373 (1992) (stating that breach of a specific contract provision is not
-13-

the contract and found it uniform and standardized, it would have followed the
many decisions holding that breach of such a contract is a paradigmatic claim for
class action treatment. 3
B.

The District Court Manifestly Erred in Failing to Consider
Objective Extrinsic Evidence and Instead Considered Plaintiffs’
Subjective Intent

The court also committed manifest error with respect to its legal conclusion
that extrinsic evidence, namely, Facebook’s own explanation of the types of
“clicks” for which advertisers would be charged, could not be used to interpret the
parties’ obligations under the contract. While the court was correct that “extrinsic
evidence is not admissible to add to, detract from, or vary the terms of a written
[integrated] contract,” Plaintiffs did not offer extrinsic evidence for that purpose;
rather, they proffered extrinsic evidence only to aid in interpreting the ambiguous
necessary to a breach of the implied covenant of good faith and fair dealing; “the
covenant can be breached for objectively unreasonable conduct, regardless of the
actor’s motive.”).
3

See, e.g., Sacred Heart Health Sys., Inc. v. Humana Military Healthcare Serv.,
Inc., 601 F.3d 1159, 1171 (11th Cir. 2010); Smilow v. Sw. Bell Mobile Sys., Inc.,
323 F.3d 32, 41 (1st Cir. 2003); In re Med. Capital Sec. Litig., No. SAML 10-2145
DOC, 2011 WL 5067208, at * 3 (C.D. Cal. July 26, 2011); Ewert v. eBay, Inc.,
Nos. C-07-02198 RMW, C-07-04487-RMW, 2010 WL 4269259, at *1 (N.D. Cal.
Oct. 25, 2010); In re Checking Account Overdraft Litig., 275 F.R.D. 666, 674 (S.D.
Fla. 2011) Berrien v. New Raintree Resorts Int’l, LLC, 276 F.R.D. 355, 362 (N.D.
Cal. 2011); Fireman’s Fund Ins. Cos., v. Ex-Cell-O Corp., 702 F. Supp. 1317,
1326 (E.D. Mich. 1988) (citing Restatement § 211, holding that “[s]tandarized
agreements should be interpreted similarly”).
-14-

term “click.” Moreover, the court’s observation that class members would have
had to be “exposed” to or “reviewed” the extrinsic evidence is manifest error. 4 As
numerous courts have explained, under California law, a contract “is interpreted
whenever reasonable treating alike all similarly situated, without regard to their
knowledge or understanding of the standard terms of the writing.” Restatement
(Second) of Contracts, § 211(2); Vedachalam v. Tata Consultancy Services, Ltd,
No. C 06-0963 CW, 2012 WL 1110004, at *9 (N.D. Cal. Apr. 2, 2012); Ewert v.
eBay, 2010 WL 4269259, at *7; see also Berrien, 276 F.R.D. at 362; In re Conseco
Life Ins. Sales & Marketing Litig., 270 F.R.D. 521, 530 (2010) (contract claim
would “not be proved based on each policyholder’s understanding of the terms of
the policies, but based on the face of the policy documents themselves.”). 5
The district court ignored a case directly on point involving a breach of
standardized cost-per-click contract, Menagerie Prods. v. Citysearch, No. 08-4263

4

In re Western Asbestos Co., 416 B.R. 670, 694 (N.D. Cal. 2009) (“The mutual
intention to which the courts give effect is determined by the objective
manifestations of the parties’ intent, including the words used in the agreement, as
well as extrinsic evidence of such objective matters surrounding the circumstances
under which the parties negotiated or entered the contract; the object, nature, and
subject matter of the contract; and the subsequent conduct of the parties.”).

See also Atlanta Cancer Care, P.C. v. Amgen, Inc., 359 Fed. Appx. 714, 716 (9th
Cir. 2009) (“Indeed, it is reversible error for a trial court to refuse to consider
extrinsic evidence on the basis of the trial court’s own conclusion that the language
of the contract appears to be clear and unambiguous on its face.”) (citing Wolf v.
Sup. Ct., 114 Cal. App. 4th 1343, (2005)).
-155

CAS (FMO), 2009 WL 3770668 (C.D. Cal. Nov. 9, 2009). In Citysearch, the
district court certified the class over the defense arguments that extrinsic evidence
of which clicks should be billed under the contract made the case inappropriate for
class treatment. As here, the parties disputed whether advertisers were charged for
invalid clicks pursuant to a form cost-per-click contract. As the Citysearch court
concluded: “[E]xtrinsic evidence that the Court would consider in making this
determination, such as representations on Citysearch's website [about which clicks
are billable], can be established on a class wide basis.” Id. at *10. Thus, the court’s
consideration of whether a particular class member was exposed to or reviewed the
extrinsic evidence, or their understanding of it, is an improper basis for denying
certification of a breach of contract claim. See Rodman v. Safeway, Inc., No. C 1103003 JSW, 2011WL 5241113, at *4-5 (N.D. Cal. Nov. 1, 2011) (in breach of
contract case, FAQ was relevant extrinsic evidence regarding the terms of the
online contract without consideration of plaintiff’s review or exposure to FAQ);
Woods v. Google, Inc., No. 05:11–cv–1263–JF, 2011 WL 3501403, at *3-4 (N.D.
Cal. Aug. 10, 2001) (analyzing issue of extrinsic evidence and incorporation by
reference of an alleged breach of an online advertising contract without reference
to whether advertisers read or reviewed the evidence). It is clear the district court
improperly reviewed the evidence as if Plaintiffs were pursuing a fraud claim.

-16-

C.

The District Court Failed to Apply the Correct Standard
of Proof With Respect to Plaintiffs’ Methodologies for
Establishing Class-Wide Liability and Damages

The District Court also erred in failing to apply the correct standard of proof
with respect to demonstrating that liability can be established on a class wide basis.
Plaintiffs’ expert opined that he would construct algorithms that would reflect the
rules that Facebook should have employed during the class period had it been
exercising its discretion in good faith. 6 This algorithmic approach for determining
whether a click should be billed is identical to how Facebook makes its
determinations of click validity, the only difference being that Plaintiffs would
change certain rule parameters to reflect the proper exercise of discretion in
determining click validity. Thus, Dr. Jakobsson opined that he could develop
algorithms that would distinguish between valid and invalid clicks, using reliable
and generally accepted principles in the computer science community, to determine
the extent to which Facebook charged advertisers per click in conformity with its
obligations. He further opined that he could design algorithms to identify clicks
based on fraud (referred to as “click fraud” and not part of the case) and invalid

6

Although the court concluded that Dr. Jakobsson's analysis could not predict the
rate of false positives, the court failed to consider that Facebook's methodology in
charging advertisers presents the same issues. (Order at 19.) Moreover, false
positives cannot be predicted until the algorithms are actually drafted.
-17-

clicks that are not. As Dr Jakobsson opined, “one can determine for each such
click log entry whether it is filtered out due to suspicion of ‘click fraud’ or is
invalid for other reasons.” In fact, Dr. Jakobsson’s opinion clearly stated he would
write such algorithms for the merits part of this case.
The district court misapplied the standard for considering expert
testimony in the context of a Rule 23 motion in the Ninth Circuit. See In Re
Online DVD Rental Antitrust Litig., No. M 09-2029 PJH, 2010 WL 5396064, at
*10 (N.D. Cal. Dec. 23, 2010) (“The court must thus ultimately leave disputes
over the results reached and assumptions made with respect to competing
methodologies to the trier of fact, and discern only whether the plaintiffs have
advanced a plausible methodology to demonstrate that antitrust injury can be
proved on a class-wide basis.’…plaintiffs need not supply a “‘precise damage
formula,’” but must simply offer a plausible method for determining damages that
is not “‘so insubstantial as to amount to no method at all.’”) (citation omitted). In
certifying the breach of contract claims in Citysearch, the court there found that the
plaintiffs’ proposed three-step method for establishing liability and calculating
damages was at least “plausible” and thus met the requirements for class
certification. Citysearch, 2009 WL 3770668, at *16-17. Dr. Jakobsson’s
methodology is identical to methodology and damages model approved in

-18-

Citysearch. He proposes to create algorithms to reflect the rules that Plaintiffs
claim should have been implemented but were not and, as in Citysearch, to plug
Facebook’s click log data into these new algorithms to ascertain whether Facebook
charged for clicks that were categorized as illegimate pursuant to the new
algorithms. Moreover, unlike in Citysearch, Dr. Jakobsson’s methodology has
already been employed in real life conditions by Facebook, which employs a thirdparty entity to perform bi-annual and independent click-by-click analyses of
Facebook’s clicks to determine their legitimacy. Facebook’s commissioned work
shows the plausibility of Dr. Jakobsson’s approach. More is not required at the
certification stage. See Brazil v. Dell Inc., No. C-07-01700 RMW, 2010 WL
5387831, at *5 (N.D. Cal. Dec. 21, 2010). The court’s detailed criticisms of
Plaintiffs’ expert’s opinion go to the weight of the expert evidence, not to whether
the opinion is plausible in the Rule 23 context.
D.

The Named Plaintiffs Are Adequate

The court’s order was also manifestly erroneous because it found that
Plaintiffs were subject to unique defenses, namely, the failure to comply with a
provision requiring advertisers to dispute any charges within 60 days. Plaintiffs
were no longer advertisers with Facebook when it added that provision to its
online contract in 2011. Moreover, the waiver issue is clearly a class-wide one.

-19-

Further, Plaintiffs’ deposition testimony showed that each knew about the case and
about their duties as class representatives. The court’s failure to consider this
evidence was a clear abuse of discretion. (Order at 10-11.) Finally, Plaintiffs
submitted data and expert analysis showing they were charged for clicks that
should have been deemed invalid and not billable. Facebook did not rebut this
testimony. Thus, the court erred by concluding that Plaintiffs failed to demonstrate
that they suffered a concrete injury. (Order at 10.)
VII. CONCLUSION
For the foregoing reasons, the Court should grant leave to appeal the denial
of class certification on behalf of the Plaintiff.
Dated: April 27, 2012

Respectfully submitted,

By: /s/ Jonathan Shub
Jonathan Shub

By: /s/ Rosemary M. Rivas
Rosemary M. Rivas

SEEGER WEISS
1515 Market Street, Suite 1380
Philadelphia, Pennsylvania 19102
Telephone: [phone]
Facsimile: 215-851-8029

FINKELSTEIN THOMPSON LLP
100 Bush Street, Suite 1450
San Francisco, California 94104
Telephone: [phone]
Facsimile: [phone]

Counsel for Plaintiffs-Petitioners Counsel for Plaintiffs-Petitioners Fox
Fox Test Prep and Steven Price
Test Prep and Steven Price

-20-

CERTIFICATE OF SERVICE
I, Bita Assad, declare as follows:
I am employed by Finkelstein Thompson, 100 Bush Street, Suite 1450, San
Francisco, California 94104. I am over the age of eighteen years and am not a party
to this action. On April 27, 2012, I served the following document(s):
PLAINTIFFS’ PETITION FOR PERMISSION TO APPEAL DENIAL
OF CLASS CERTIFICATION PURSUANT TO FED. R. CIV. P. 23(f)
_X_

BY ELECTRONIC SERVICE: I caused the forgoing to be sent to
the persons at the electronic notification addresses listed below.
See attached service list.

_X_

BY U.S. MAIL: I mailed the foregoing via first-class U.S. mail,
postage prepaid, to the participants at the addresses listed below.
See attached service list.

I declare under penalty of perjury under the laws of the State of California
and the United States of America and that the above is true and correct. Executed
this 27th day of April 2012 at San Francisco, California.

/s/ Bita Assad
Bita Assad

Service List
Michael G. Rhodes
Whitty Somvichian
Matthew Michael Brown
Cooley Godward Kronish
101 California Street, 5th Floor
San Francisco, CA 94111
Telephone: [phone]
Facsimile: [phone] (fax)
[e-mail]
[e-mail]
[e-mail]
Counsel for Respondent Facebook, Inc.
J. Paul Gignac
ARIAS OZZELLO & GIGNAC LLP
115 S. La Cumbre, Suite 300
Santa Barbara, California 93105
Telephone: [phone]
Facsimile: [phone]
Email: [e-mail]
Counsel for Petitioners
Christopher A. Seeger
David R. Buchanan
TerriAnne Benedetto
SEEGER WEISS LLP
1515 Market Street, Suite 1380
Philadelphia, PA 19102
Telephone: [phone]
Facsimile: [phone]
[e-mail]
[e-mail]
[e-mail]
Counsel for Petitioners

Jeffrey Leon
Julie Miller
FREED & WEISS LLC
111 West Washington Street, Suite 1311
Chicago, IL 60602
Telephone: [phone]
Facsimile: [phone]
[e-mail]
[e-mail]
Counsel for Petitioners
Steven Berk
BERK LAW PLLC
2002 Massachusetts Ave. NW, Suite 100
Washington, D.C. 20036
Telephone: [phone]
Facsimile: [phone]
Email: [e-mail]
Counsel for Petitioners
Gordon M. Fauth, Jr.
LITIGATION LAW GROUP
1801 Clement Avenue, Suite 101
Alamada, CA 94501
Telephone: [phone]
Facsimile: [phone]
Email: [e-mail]
Counsel for Petitioners
Brian S. Kabateck
KABATECK BROWN KELLNER LLP
664 S. Figueroa Street
Los Angeles, CA 90017
Telephone: [phone]
Facsimile: [phone]
Email: [e-mail]
Counsel for Petitioners

Melissa Meeker Harnett
WASSERMAN, COMDEN & CASSLEMAN, LLP
5567 Reseda Boulevard, Suite 330
Tarzana, CA 91357-7033
Telephone: [phone]
Facsimile: [phone]
Email: [e-mail]
Counsel for Petitioners