Fasugbe et al v. 1524948 Alberta LTD

Filing 44

ORDER signed by Judge William B. Shubb on 05/25/11 ORDERING that Jesse Willms's 35 Motion to Dismiss and to Strike plf's First Amended Complaint is GRANTED on the ground that the court does not have personal jurisdiction over Willms and D ENIED as moot in all other respects; Terra Marketing and Sphere Media's 34 Motion to Dismiss plf's First Amended Complaint is GRANTED and their Motion to Strike the Class Action allegations is DENIED as moot. Plaintiffs have 20 days to file an amended complaint. (Benson, A.)

1
2
3
4
5
6
7
8

UNITED STATES DISTRICT COURT

9

EASTERN DISTRICT OF CALIFORNIA

10

----oo0oo----

11
12
13

NO. CIV. 2:10-2320 WBS KJN

OLUWASEUN FASUGBE and LUKE
HUCKABA, on behalf of
themselves and all others
similarly situated,

MEMORANDUM AND ORDER RE:
MOTIONS TO DISMISS AND TO
STRIKE

14
Plaintiffs,
15
v.
16
17
18
19
20
21

JESSE WILLMS, an individual,
1524948 ALBERTA LTD., a
Canadian corporation d/b/a
TERRA MARKETING GROUP d/b/a
SWIPEBIDS.COM, SPHERE MEDIA,
LCC, a Nevada limited
liability company, and JOHN
DOES 1-50 inclusive,
Defendants.
/

22
23
24

----oo0oo---Plaintiffs Oluwaseun Fasugbe and Luke Huckaba brought

25

this action against defendants Jesse Willms, 1524948 Alberta Ltd.

26

d/b/a Terra Marketing Group d/b/a Swipebids.com (“Terra

27

Marketing”), and Sphere Media, LLC (“Sphere Media”), alleging

28

violations of California’s False Advertising Law (“FAL”), Cal.
1

1

Bus. & Prof. Code §§ 17500-17606, Consumer Legal Remedies Act

2

(“CLRA”), Cal. Civ. Code §§ 1750-1785, and Unfair Competition Law

3

(“UCL”), Cal. Bus. & Prof. Code §§ 17200-17210, as well as fraud

4

in the inducement, conspiracy to commit fraud in the inducement,

5

and “restitution/unjust enrichment.”

6

upon diversity of citizenship, 28 U.S.C. § 1332.

7

and Sphere Media now move to dismiss plaintiffs’ First Amended

8

Complaint (“FAC”) for failure to state a claim pursuant to

9

Federal Rule of Civil Procedure 12(b)(6) and to strike

10

plaintiffs’ class allegations pursuant to Rule 12(f).

11

moves to dismiss and to strike on the same grounds and also moves

12

to dismiss pursuant to Rule 12(b)(2) on the ground that the court

13

lacks personal jurisdiction over him.

14

I.

Jurisdiction is predicated
Terra Marketing

Willms

Factual and Procedural Background

15

Terra Marketing is a seller of online auction currency,

16

or “bids,” which consumers use to bid on products in online

17

auctions.

18

allegedly a “principal” of Terra Marketing and Sphere Media.

19

(Id. ¶ 3.)

20

Marketing and is based in Nevada.

(FAC ¶¶ 4, 16.)

Willms, a citizen of Canada, is

Sphere Media is allegedly a subsidiary of Terra
(Id. ¶ 5.)

Plaintiffs allege that defendants run an online auction

21
22

website, SwipeBids.com, which is advertised via sponsored links,

23

banner advertisements, and links in fake news articles and fake

24

blogs.

25

titled “SwipeBids Registration,” which explains the steps

26

consumers must take to “win” “government auctions,” “warehouse

(Id. ¶¶ 16-24.)

The links direct consumers to a webpage1

27
1

28

Plaintiffs provided screenshots of the relevant
webpages in their FAC. (FAC ¶ 25.)
2

1

clearance auctions,” and “overstocked surplus auctions.”

(Id. ¶

2

25.)

3

Easy: Step 1: JOIN & RECEIVE BIDS Step 2: PLACE BIDS on AUCTIONS

4

Step 3: WIN GREAT PRODUCTS!”

5

Great Prizes at Incredible Prices!,” with an arrow pointing to

6

the right side of the page stating “Register Now!

7

(Id.)

8

gender, e-mail address, create a username and password, and then

9

click “Continue.”

A graphic in the middle of the page states: “Winning is

(Id.)

Below, the page states: “WIN

It’s Easy!”

On the right, consumers are prompted to enter their name,

(Id.)

Consumers are then brought to another page that states

10
11

“STEP 2 OF 2: Congratulations, final step!

12

registering.”

13

repeated, with a few additional images.

14

“SwipeBids Member Wins New 2010 Honda Civic” and describes

15

someone who “Spends $150 to get $16,356 Civic” and in smaller

16

print states as a testimonial “I spent $150 on a membership, and

17

now I’m driving a $16,356 Honda Civic that I won on SwipeBids.

18

The membership has really paid off in so many ways . . . .”

19

(Id.)

20

INCREDIBLE SAVINGS Our Members Recently Got” with a list of

21

products that were recently purchased, and then states “Savings

22

Could Be Yours!

23

not include any fields in which credit card information could be

24

entered.

25

induced to enter their credit and bank account information in

26

order to pay for their ‘Winning Auctions,’” when in fact they are

27

charged an initial “membership” fee.

28

(Id.)

Scroll down to finish

A number of images from the first page are
One image states

Below, another graphic states “Check Out Some of These

Membership $250 $150.”

(Id.)

The webpage does

The FAC only alleges that “consumers are deceptively

(Id. ¶¶ 26-27.)

Consumers who complain about SwipeBids allegedly often
3

1

do so by way of an online chat with a SwipeBids representative.

2

(Id. ¶ 31.)

3

link to a transaction page SwipeBids contends is the page on

4

which the consumer initially entered their payment information.

5

(Id.)

6

directing complaining consumers to a page that is not the page

7

viewed by consumers when they initially registered with

8

SwipeBids.

9

essentially the same as the one plaintiffs alleged they initially

10

visited but with certain different graphics and with one addition

11

near the bottom of the second page: a section with two columns in

12

which consumers are directed to submit their credit card

13

information.

14

Details” and describes “SwipeBids Access (Includes 300 Bids)” as

15

costing “53¢/bid ($159 Total),” and states below that “ONLY $159

16

GRANTS YOU ACCESS TO” government auctions and other deals.2

17

(Id. ¶ 32.)

18

Winning Auctions?,” below which it states “INCREDIBLE SAVINGS

19

Could Be Yours!

20

It then asks for “Shipping Information,” including name and

21

address, and “Payment Information,” including credit card type

22

and number.

23

Bidding,” the page states “By clicking below you will be charged

24

$159 and receive 300 bids.”

That representative allegedly sends the consumer a

Plaintiffs allege that defendants are fraudulently

(Id. ¶ 35.)

That allegedly fraudulent page is

The left column is titled “SwipeBids Access

On the right, a field asks “Where Do We Send Your

SwipeBids Access Just $250 $159 Today!”

(Id.)

(Id.)

Directly above a button that states “Start

(Id.)

Plaintiff Fasugbe allegedly clicked on an advertisement

25
26
27
28

2

Plaintiffs do not allege that the discrepancy between
the $150 charge and the $159 charge is relevant. It appears that
SwipeBids simply raised the cost of membership.
4

1

displayed in an Internet search page while looking for a discount

2

on a flat-screen television, which directed him to an allegedly

3

fake news article describing the benefits to be gained by bidding

4

on items through SwipeBids.

5

link routing Fasugbe to SwipeBids.

6

submitted his credit card information to SwipeBids, allegedly

7

believing that this would allow him to bid on SwipeBids items.

8

(Id. ¶¶ 43-44.)

9

not yet received a refund.

(Id. ¶ 40.)

This site contained a

(Id. ¶ 42.)

Fasugbe

SwipeBids immediately charged him $150; he has
(Id. ¶¶ 45-48.)

Plaintiff Huckaba allegedly responded to an online

10
11

advertisement offering a code that, upon registering with

12

SwipeBids, promised to provide him with a free $25 Wal-Mart gift

13

card and 1000 free bids.

14

when he registered.

15

the 1000 “free” bids, but never won an auction and never received

16

the free gift card.

17

refund.

(Id. ¶ 49.)

(Id. ¶ 51.)

SwipeBids charged him $150

He bid on several items using

(Id. ¶ 52.)

He has not yet received a

(Id. ¶ 54.)

18

Plaintiffs bring this suit as a putative class action

19

with two classes: “Swipebids Class: All residents of the United

20

States who were charged a membership fee by Defendant Swipebids,”

21

and “John Doe Defendant Subclass: All residents of the United

22

States who were directed to a Swipebids.com landing page by the

23

John Doe Defendant advertising network and were charged a

24

membership fee by Swipebids.com.”

25

II.

26
27
28

(Id. ¶ 55.)

Discussion
A.

Personal Jurisdiction over Willms
A plaintiff has the burden of establishing that the

court has personal jurisdiction over a defendant.
5

Doe v. Unocal

1

Corp., 248 F.3d 915, 922 (9th Cir. 2001).

On a motion to

2

dismiss, a plaintiff “need make only a prima facie showing of

3

jurisdictional facts . . . .

4

demonstrate facts that if true would support jurisdiction over

5

the defendant.”

6

1498 (9th Cir. 1995)).

7

plaintiff’s version of the facts must be taken as true, and

8

conflicts between the facts contained in the parties’ affidavits

9

should be resolved in favor of the plaintiff.

That is, the plaintiff need only

Id. (quoting Ballard v. Savage, 65 F.3d 1495,
When not directly controverted, a

Id.

Once a

10

defendant has contradicted the allegations contained in the

11

complaint, however, a plaintiff may not rest on the pleadings,

12

but must present evidence which, if true, would support the

13

exercise of personal jurisdiction.

14

Assocs., Inc., 557 F.2d 1280, 1284-85 (9th Cir. 1977).

15

Data Disc, Inc. v. Sys. Tech.

Only Willms moves to dismiss for lack of personal

16

jurisdiction; the corporate defendants do not dispute whether

17

they are properly subject to jurisdiction in this court.

18

Plaintiffs argue that the court has personal jurisdiction over

19

Willms because the corporate defendants are alter egos of Willms.

20

The fiduciary shield doctrine provides that “a person’s

21

mere association with a corporation that causes injury in the

22

forum state is not sufficient in itself to permit that forum to

23

assert jurisdiction over the person.”

24

Inc., 885 F.2d 515, 520 (9th Cir. 1989).

25

mere fact that a corporation is subject to local jurisdiction

26

does not necessarily mean its nonresident officers, directors,

27

agents, and employees are suable locally as well.”

28

Inc. v. Badpuppy Enter., 75 F. Supp. 2d 1104, 1111 (C.D. Cal.
6

Davis v. Metro Prods.,
In other words, “[t]he

Colt Studio,

1

1999).

2

in a given jurisdiction due to the contacts of their employers,

3

“their status as employees does not somehow insulate them from

4

jurisdiction.

5

must be assessed individually.”

6

790 (1984).

7

Though employees are not necessarily subject to liability

Each defendant’s contacts with the forum State
Calder v. Jones, 465 U.S. 783,

The corporate form shielding an individual associated

8

with the corporation from personal jurisdiction may be ignored in

9

two circumstances: (1) where the corporation is the agent or

10

alter ego of the individual defendant; or (2) by virtue of the

11

individual’s control of and direct participation in the alleged

12

activities.

13

1072 (C.D. Cal. 2004).

14

“one of the primary architects of the fraudulent scheme,” (FAC ¶

15

3), plaintiffs have not alleged that Willms controlled or

16

directly participated in the alleged activities, and they do not

17

argue in opposition to Willms’ motion that he is subject to

18

personal jurisdiction by virtue of his direct participation in

19

the alleged activities.

20

whether it has personal jurisdiction over Willms pursuant to the

21

alter ego theory.

22

Wolf Designs, Inc. v. DHR Co., 322 F. Supp. 2d 1065,
Here, other than alleging that Willms was

Therefore, the court will only consider

In diversity actions, federal courts look to state law

23

to determine whether the alter ego doctrine applies.

24

Arntz, 320 Fed. App’x 799, 800 (9th Cir. 2009).

25

doctrine may be invoked where (1) “there is such a unity of

26

interest and ownership that the individuality, or separateness,

27

of the [defendant] and corporation has ceased” and (2) “the facts

28

are such that an adherence to the fiction of the separate
7

Whitney v.

The alter ego

1

existence of the corporation would, under the particular

2

circumstances, sanction a fraud or promote injustice.”3

3

Elling Corp., 20 Cal. 3d 353, 365 n.9 (1977) (emphasis omitted).

4

Wood v.

In order to determine whether the requisite unity of

5

interest and ownership exists, courts look to a variety of

6

factors, including the level of control exerted by the supposed

7

alter ego, the level of ownership, commingling of funds, failure

8

to observe corporate formalities, and undercapitalization.

9

See Nilsson, Robbins, Dalgarn, Berliner, Carson & Wurst v. La.

10

Hydrolec, 854 F.2d 1538, 1543-44 (9th Cir. 1988) (applying

11

California law); RRX Indus., Inc. v. Lab-Con, Inc., 772 F.2d 543,

12

545 (9th Cir. 1985) (applying California law and holding

13

individual liable under an alter ego theory where he acted as the

14

president and sole officer, director, and stockholder of the

15

corporation at issue); Associated Vendors, Inc. v. Oakland Meat

16

Co., 210 Cal. App. 2d 825, 837-38 (1st Dist. 1963).

17

Plaintiffs do not set forth sufficient facts regarding

18

the requisite unity of interest and ownership between Willms and

19

Terra Marketing that, if true, would support a finding of

20

personal jurisdiction over Willms.

See Doe, 248 F.3d at 922.

21
22
23
24
3

25
26
27
28

The alter ego doctrine can be used to “‘pierce the
corporate veil’ jurisdictionally” to determine whether a
corporation’s contacts are attributable to an individual or
another corporation, ADO Fin., AG v. McDonnell Douglas Corp., 931
F. Supp. 711, 715 (C.D. Cal. 1996), or to establish that an
individual or another corporation is liable for the acts of its
alter ego corporation, RRX Indus., Inc. v. Lab-Con, Inc., 772
F.2d 543, 545-46 (9th Cir. 1985).
8

1

Willms is allegedly the “principal” of Terra Marketing.4

2

However, Terra Marketing had 18-20 employees during the relevant

3

period (Willms Decl. in Supp. of Mot. to Dismiss & to Strike ¶

4

5), and there is no evidence that Willms commingled Terra

5

Marketing’s funds with his own, treated the assets of the

6

corporation as his own, or ignored corporate formalities in any

7

other way.

8

Plaintiffs have provided nothing beyond conclusory allegations

9

that Willms “ignored any corporate formalities and fraudulently

See Minton v. Cavaney, 56 Cal. 2d 576, 579-80 (1961).

10

misused the corporate forms.”

11

plaintiffs have not demonstrated that the court has personal

12

jurisdiction over Willms and his motion to dismiss for lack of

13

jurisdiction will be granted.

14

B.

15

(FAC ¶ 3.)

Accordingly,

Motions to Dismiss under Rule 12(b)(6)
On a motion to dismiss, the court must accept the

16

allegations in the complaint as true and draw all reasonable

17

inferences in favor of the plaintiff.

18

U.S. 232, 236 (1974), overruled on other grounds by Davis v.

19

Scherer, 468 U.S. 183 (1984); Cruz v. Beto, 405 U.S. 319, 322

20

(1972).

21

contain sufficient factual matter, accepted as true, to ‘state a

22

claim to relief that is plausible on its face.’”

23

Iqbal, --- U.S. ----, ----, 129 S. Ct. 1937, 1949 (2009) (quoting

24

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).

Scheuer v. Rhodes, 416

“To survive a motion to dismiss, a complaint must

Ashcroft v.

This

25
26
27
28

4

Plaintiffs allege that Willms is also a principal of
Sphere Media (FAC ¶ 3), which Willms denies. (Willms Decl. in
Supp. of Mot. to Dismiss & to Strike ¶¶ 5, 8.) Plaintiffs
provide no facts beyond this conclusory allegation that could
show that Sphere Media is an alter ego of Willms.
9

1

“plausibility standard,” however, “asks for more than a sheer

2

possibility that a defendant has acted unlawfully,” and “[w]here

3

a complaint pleads facts that are ‘merely consistent with’ a

4

defendant’s liability, it ‘stops short of the line between

5

possibility and plausibility of entitlement to relief.’”

6

129 S. Ct. at 1949 (quoting Twombly, 550 U.S. at 556-57).

Iqbal,

Defendants argue that plaintiffs’ FAC contradicts their

7
8

Complaint.

The court acknowledges that “there is nothing in the

9

Federal Rules of Civil Procedure to prevent a party from filing

10

successive pleadings that make inconsistent or even contradictory

11

allegations.”

12

856, 860 (9th Cir. 2007); id. at 859 (the court “has no free-

13

standing authority to strike pleadings simply because it believes

14

that a party has taken inconsistent positions in the litigation”)

15

(emphasis added).

16

allegations in determining the plausibility of the current

17

pleadings.

18

-- F. Supp. 2d ----, ----, 2011 WL 1677957, at *13 (E.D. Cal.

19

2011) (O’Neill, J.) (noting that plausibility of Second Amended

20

Complaint, which alleged that agreement occurred in 2006, was

21

affected by allegation in First Amended Complaint that agreement

22

occurred in 1986, when First Amended Complaint was dismissed on

23

statute of limitations grounds); Cole v. Sunnyvale, No. C-08-

24

05017, 2010 WL 532428, at *4 (N.D. Cal. Feb. 9, 2010) (“The court

25

may . . . consider the prior allegations [in the original

26

complaint] as part of its ‘context-specific’ inquiry based on its

27

judicial experience and common sense to assess whether the Third

28

Amended Complaint plausibly suggests an entitlement to relief, as

PAE Gov’t Servs., Inc. v. MPRI, Inc., 514 F.3d

However, the court need not ignore the prior

See Stanislaus Food Prods. Co. v. USS-POSCO Indus., -

10

1

required under Iqbal, 129 S. Ct. at 1950.”).

2

may alter their allegations in an amended complaint, but the

3

court may properly consider the plausibility of the FAC in light

4

of the prior allegations.

5

Thus, plaintiffs

The screenshot of the SwipeBids website in the

6

Complaint is identical to the screenshot in the FAC, with one

7

exception: Near the bottom of the webpage, the Complaint contains

8

a section for submitting payment information.

9

FAC ¶ 25.)

(See Compl. ¶ 17;

That section is similar but not identical to the

10

payment section in the version to which plaintiffs state they

11

were directed after complaining about the fee.

12

is titled “Membership Details” and describes “1-Year Membership

13

(Includes 300 Bids)” as costing “50¢/bid ($150 Total),” and

14

states below that “ONLY $150 GRANTS YOU ACCESS TO” government

15

auctions and other deals.

16

asks “Where Do We Send Your Winning Auctions?”

17

asks for “Shipping Information,” including name and address, and

18

“Payment Information,” including credit card type and number.

19

(Id.)

22
23
24
25

On the right, a field
(Id.)

A button at the bottom states “Start Bidding.”5

20
21

(Compl. ¶ 17.)

The left column

It then

(Id.)

Plaintiffs attempt to explain the discrepancy between
the Complaint and the FAC:
[The Complaint version of] the screenshot depicts yet
another of the fabricated websites to which Swipebids
representatives direct customers after they complain that
membership fees levied against them were unauthorized.
The subject screenshot was a duplicate of the screenshots
already found on pages 16-19 of the amended Complaint
[regarding the fabricated websites to which customers
were sent after complaining], and was included in the

26
27
28

5

Plaintiffs admit that the Complaint version “actually
discloses a $150 membership fee.” (Pls.’ Opp’n at 8:19-20
(Docket No. 38).)
11

1

original complaint in error.

2

(Pls.’ Opp’n at 9:1-4 (Docket No. 38).)

3

Plaintiffs’ explanation is not plausible.

The FAC

4

version is identical to the Complaint version with the sole

5

omission of the payment fields.

6

allegedly “optimized” to change color, words used, placement of

7

words, font size, and placement of the Terms of Service, (FAC ¶

8

22), are identical.

9

Complaint version is not identical or even particularly similar

10

to the version to which customers were sent after complaining.

11

Furthermore, plaintiffs’ allegations simply do not make sense if

12

the screenshot in the FAC is an accurate, complete version, as

13

plaintiffs contend.

14

enter their payment information, they could not have been

15

“deceptively induced to enter their credit and bank account

16

information,” (id. ¶ 26), because they could not have entered

17

that information anywhere.

18

Even the graphics, which are

Contrary to plaintiffs’ explanation, the

Without a field in which plaintiffs could

The court is thus faced with two possibilities: Either

19

the screenshot in the Complaint is accurate and plaintiffs

20

altered it in the FAC, or the screenshot in the FAC is accurate

21

and the webpage plaintiffs visited did not contain a payment

22

field and thus did not charge them $150.

23

speculate as to what actually happened, but under either

24

scenario, plaintiffs’ allegations that they were charged a $150

25

membership fee without proper disclosures simply fail to state

26

any plausible claim to relief.

27
28

The court will not

Plaintiffs’ claims for violations of the FAL and UCL,
fraud in the inducement, conspiracy to commit fraud in the
12

1

inducement, “restitution/unjust enrichment,” and portions of

2

their claim for violations of the CLRA all depend on the

3

allegations that defendants charged an undisclosed membership

4

fee.

5

plaintiffs have not plausibly alleged that defendants charged an

6

undisclosed membership fee, they have failed to state a plausible

7

claim to relief.

8

motion to dismiss these claims.

(See FAC ¶¶ 64, 73, 83-85, 90-101, 109-110, 116.)

9

Because

Accordingly, the court will grant defendants’

The CLRA prohibits particular “unfair methods of

10

competition and unfair or deceptive acts or practices undertaken

11

by any person in a transaction intended to result or which

12

results in the sale or lease of goods or services to any

13

consumer.”

14

distinct from the others because, in addition to allegations

15

regarding nondisclosure of the membership fee, plaintiffs allege

16

that defendants violated the CLRA by “using false testimonials to

17

misrepresent the source, sponsorship, approval, or certification

18

of Defendants’ goods or services” and “misrepresenting the

19

affiliation, connection, or association with, or certification

20

by, third party news organizations and others in relation to

21

Defendants’ products.”

22

Cal. Civ. Code § 1770.

Plaintiffs’ CLRA claim is

(FAC ¶ 73.)

“Claims under the CLRA require proof of causation,

23

reliance and damages.”

Campion v. Old Republic Home Prot. Co.,

24

Inc., --- F.R.D. ----, ----, 2011 WL 42759, at *16 (S.D. Cal.

25

2011); see Cal. Civ. Code § 1780(a) (“Any consumer who suffers

26

any damage as a result of the use or employment by any person of

27

a method, act, or practice declared to be unlawful by [California

28

Civil Code] Section 1770 may bring an action against that
13

1

person.”); Henderson v. Gruma Corp., No. CV 10–04173, 2011 WL

2

1362188, at *6 (C.D. Cal. Apr. 11, 2011) (“The CLRA requires a

3

demonstration of actual reliance for standing purposes.”); Cattie

4

v. Wal–Mart Stores, Inc., 504 F. Supp. 2d 939, 946 (S.D. Cal.

5

2007) (“California requires a plaintiff suing under the CLRA for

6

misrepresentations in connection with a sale to plead and prove

7

she relied on a material misrepresentation.”).

8

alleged reliance and injury related to the representations about

9

the cost of membership, not the testimonials and news articles.

Plaintiffs’ only

10

Plaintiffs have not alleged sufficient facts to state a plausible

11

claim for relief under the CLRA, and thus the court will grant

12

defendants’ motion to dismiss that claim.

13

IT IS THEREFORE ORDERED that Jesse Willms’s motion to

14

dismiss and to strike plaintiffs’ First Amended Complaint be, and

15

the same hereby is, GRANTED on the ground that the court does not

16

have personal jurisdiction over Willms and DENIED as moot in all

17

other respects.

18

IT IS FURTHER ORDERED that Terra Marketing and Sphere

19

Media’s motion to dismiss plaintiffs’ First Amended Complaint be,

20

and the same hereby is, GRANTED, and their motion to strike the

21

class action allegations is DENIED as moot.

22

Plaintiffs have twenty days from the date of this Order

23

to file an amended complaint, if they can do so consistent with

24

this Order.

25

DATED:

May 25, 2011

26
27
28
14