SONG FI, INC. v. GOOGLE, INC. et al

Filing 67

Order by Hon. Samuel Conti granting 54 Motion for Leave to File. (sclc2, COURT STAFF) (Filed on 10/29/2015)

1
2
3
4
5
6

IN THE UNITED STATES DISTRICT COURT

7

FOR THE NORTHERN DISTRICT OF CALIFORNIA

8
SONG FI, et al.,
Plaintiffs,

10
For the Northern District of California

United States District Court

9

v.

11
12

GOOGLE, INC. and YOUTUBE, LLC,

13

Defendants.

14

) Case No. 14-5080 SC
)
) ORDER ON MOTION TO FILE
) SECOND AMENDED COMPLAINT
)
)
)
)
)
)

15
16

I.

17

INTRODUCTION
Now before the Court is a motion to file a Second Amended

18

Complaint ("SAC").

See ECF No. 54 ("Mot.").

A Proposed SAC is

19

attached to the motion.

20

fully briefed,1 and appropriate for resolution without oral

21

argument under Civil Local Rule 7-1(b).

22

below, the motion is GRANTED.

See ECF No. 54-1 ("PSAC").

The motion is

For the reasons set forth

23
24

II.

BACKGROUND
This suit was originally filed in the United States District

25
26

for the District of Columbia, but transferred to this Judicial

27

District pursuant to an agreed forum selection clause.

28

1

ECF Nos. 57 ("Opp'n"), 62 ("Reply").

See ECF No.

1

19.

On June 10, 2015, the Court dismissed the First Amended

2

Complaint ("FAC") in this case with leave to amend certain counts.

3

See ECF No. 53 ("MTD Order").

4

a motion within the period otherwise allotted to amend, requesting

5

permission to add two additional claims into their otherwise

6

permitted amendment.

7

California's Cartwright Act, both alleging violations of California

8

laws that Plaintiffs did not realize would be applicable when the

9

case was first filed in Washington, D.C.

Song fi, et al. ("Plaintiffs") filed

These claims are for fraud and violations of

YouTube, LLC ("YouTube")

United States District Court

For the Northern District of California

10

and its parent company, Google, Inc. ("Google") (collectively,

11

"Defendants"),2 oppose.
The underlying dispute arose when YouTube removed or otherwise

12
13

relocated a video posted by Plaintiffs.

A more complete version of

14

these facts, well known to the parties, can be found in the MTD

15

Order at 2-5.

16

produced a video entitled "LuvYa."

17

the video on YouTube on February 14, 2014, in the process agreeing

18

to the Terms of Service ("TOS").

19

2014, YouTube removed the video from where it had originally been

20

publically available on YouTube, posting in its place a notice that

21

the video had been removed for a violation of the TOS.

22

88-89.

By way of summary, Plaintiffs performed in and
PSAC ¶¶ 2-4.

Id. ¶¶ 36, 67.

Plaintiffs posted

On April 18,

Id. ¶¶

Plaintiffs allege this (tacitly or otherwise) suggested to the

23
24

public that the LuvYa video contained inappropriate content.

25

e.g., id. ¶¶ 90-95.

26

harm and impacted their ability to sell their product(s) to third

27

2

28

See,

This, in turn, caused Plaintiffs reputational

Google has restructured and is now a wholly owned subsidiary of
Alphabet Inc., but YouTube remains a wholly-owned subsidiary of
Google. ECF No. 66. This case is therefore not affected.

2

1

parties and sponsors.

2

that the view count is used within the industry to determine the

3

true popularity of artists and accordingly impacts sales and

4

advertising rates.

5

See id. 110-116.

Plaintiffs also complain

Id. ¶¶ 41, 120.

Defendants allegedly removed the video because Plaintiffs used

6

some form of automated means to artificially raise the view count

7

to over 23,000, in violation of the TOS.

8

deny artificially inflating the view count, and in the PSAC allege

9

facts suggesting how the views were legitimately obtained.

United States District Court

For the Northern District of California

10
11

See id. ¶ 99.

Plaintiffs

See id.

¶¶ 68-84, 100.
Plaintiffs now seek leave to amend to suggest that Defendants

12

have a conspiracy-style deal in place with larger production

13

companies to permit such companies to inflate their view counts

14

artificially while actively preventing smaller production companies

15

(like Plaintiffs) from growing too large via ungrounded

16

"enforcement" of the TOS.

17

appears to be the basis for one or both new claims Plaintiffs now

18

seek to add.

See id. ¶¶ 40-65.

This alleged deal

See id. ¶¶ 117-125, 149-157.

19
20

III. LEGAL STANDARD

21

A.

Leave To Amend

22

A party may amend its pleading once as a matter of course

23

during a certain period of time.

24

that, however, "a party may amend its pleading only with the

25

opposing party's written consent or the court's leave."

26

Civ. P. 15(a)(2).

27

so requires."

28

to amend is generous."

Id.

Fed. R. Civ. P. 15(a)(1).

After

Fed. R.

"The court should freely give leave when justice
Accordingly, "[t]he standard for granting leave
Balistreri v. Pacifica Police Dep't, 901

3

1

F.2d 696, 701 (9th Cir. 1988).

2

in deciding whether to grant leave to amend are "bad faith, undue

3

delay, prejudice to the opposing party, futility of amendment, and

4

whether the plaintiff has previously amended the complaint."

5

United States v. Corinthian Colleges, 655 F.3d 984, 995 (9th Cir.

6

2011).

7

The five factors a court considers

Where an amendment would be an "exercise in futility," or

8

where an "amended complaint would also be subject to dismissal," a

9

court need not grant leave to amend.

In re Fritz Cos. Sec. Litig.,

United States District Court

For the Northern District of California

10

282 F. Supp. 2d 1105, 1111 (N.D. Cal. 2003) (citing Steckman v.

11

Hart Brewing Co., 143 F.3d 1293, 1297 (9th Cir. 1998)).

12

applies whether a motion to dismiss would be pursuant to Rule

13

12(b)(6) or Rule 9(b).

14

(citing Moore v. Kayport Package Express, 885 F.2d 531, 540-41 (9th

15

Cir. 1989)).

16

B.

17

A motion to dismiss under Federal Rule of Civil Procedure

This

In re Fritz, 282 F. Supp. 2d at 1111

Federal Rule of Civil Procedure 12(b)(6)

18

12(b)(6) "tests the legal sufficiency of a claim."

Navarro v.

19

Block, 250 F.3d 729, 732 (9th Cir. 2001).

20

on the lack of a cognizable legal theory or the absence of

21

sufficient facts alleged under a cognizable legal theory."

22

Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir.

23

1988).

24

should assume their veracity and then determine whether they

25

plausibly give rise to an entitlement to relief."

26

Iqbal, 556 U.S. 662, 664 (2009).

27

must accept as true all of the allegations contained in a complaint

28

is inapplicable to legal conclusions.

"Dismissal can be based

"When there are well-pleaded factual allegations, a court

Ashcroft v.

However, "the tenet that a court

4

Threadbare recitals of the

1

elements of a cause of action, supported by mere conclusory

2

statements, do not suffice."

3

Twombly, 550 U.S. 544, 555 (2007)).

4

Id. at 678 (citing Bell Atl. Corp. v.

To be entitled to a presumption of truth, the allegations made

5

in a complaint must be "sufficient allegations of underlying facts

6

to give fair notice and to enable the opposing party to defend

7

itself effectively" and "must plausibly suggest an entitlement to

8

relief" such that "it is not unfair to require the opposing party

9

to be subjected to the expense of discovery and continued

United States District Court

For the Northern District of California

10

litigation."

Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011);

11

see also Eclectic Properties E., LLC v. Marcus & Millichap Co., 751

12

F.3d 990, 996 (9th Cir. May 7, 2014) (quoting Starr, 652 F.3d at

13

1216).

14

defendant's innocuous alternative explanation" may be sufficient to

15

take a claim from conceivable to plausible, showing only "a

16

'possible' entitlement to relief" is not.

17

751 F.3d at 998 (contrasting Starr with In re Century Aluminum Co.

18

Secs. Litig., 729 F.3d 1104, 1108 (9th Cir. 2013)); see also

19

Twombly, 550 U.S. at 570.

While offering facts "that tend[] to exclude the

See Eclectic Properties,

20

C.

Federal Rule of Civil Procedure 9(b)

21

Claims sounding in fraud are subject to the heightened

22

pleading requirements of Federal Rule of Civil Procedure 9(b),

23

which requires that a plaintiff alleging fraud "must state with

24

particularity the circumstances constituting fraud."

See Kearns v.

25

Ford Motor Co., 567 F.3d 1120, 1124 (9th Cir. 2009).

"To satisfy

26

Rule 9(b), a pleading must identify the who, what, when, where, and

27

how of the misconduct charged, as well as what is false or

28

misleading about [the purportedly fraudulent] statement, and why it

5

1

is false."

Cafasso ex rel. United States v. Gen. Dynamics C4 Sys.,

2

Inc., 637 F.3d 1047, 1055 (9th Cir. 2011) (internal quotation marks

3

and citations omitted) (alteration in original).

4

D.

The California Cartwright Act

5

California’s Cartwright Act is codified at Business &

6

Professions Code § 16720 et seq.

The antitrust statute prohibits

7

unreasonable restraints on trade.

See, e.g., Morrison v. Viacom,

8

Inc., 66 Cal. App. 4th 534, 540 (1998) (citing Bert G. Gianelli

9

Distributing Co. v. Beck & Co., 172 Cal. App. 3d 1020, 1042

United States District Court

For the Northern District of California

10

(1985)).

11

unreasonable restraints on trade are judged under a "rule of

12

reason."

13

1081, 1092 (N.D. Cal. 2007).

14

Section I of the Sherman Act, and thus decisions interpreting that

15

federal statute may be instructive for the Court in considering

16

Cartwright Act claims.

17

845 F.2d 802, 811 n.4 (9th Cir. 1988).

18

As applicable to this motion, agreements alleged to be

See, e.g., Parrish v. NFL Players Ass’n, 534 F. Supp. 2d
The Cartwright Act is analogous to

See, e.g., McGlinchy v. Shell Chem. Co.,

A complaint must allege three prongs to state a claim under

19

the Cartwright Act: "(1) the formation and operation of a

20

conspiracy; (2) a wrongful act or acts done pursuant to the

21

conspiracy; and (3) damage resulting from those wrongful acts."

22

Cellular Plus, Inc. v. Superior Court, 14 Cal. App. 4th 1224, 18

23

Cal.Rptr.2d 308 (Cal. Ct. App. 1993).

24

require "a high degree of particularity in the pleading[s.]"

25

G.H.I.I. v. MTS, Inc., 147 Cal. App. 3d 256, 265 (Cal. Ct. App.

26

1983).

27

statement of facts constituting the conspiracy and explaining its

28

objectives and impact in restraint of trade will not suffice."

Cartwright Act violations

"[G]eneral allegations of a conspiracy unaccompanied by a

6

Id.

1

"The complaint must allege facts such as a specific time, place, or

2

person involved in the alleged conspiracies to give a defendant

3

seeking to respond to allegations of a conspiracy an idea of where

4

to begin."

5

Dist. LEXIS 162497, *2 (C.D. Cal. Oct. 23, 2014) (citing Kendall v.

6

Visa USA, Inc., 518 F.3d 1042, 1046-47 (9th Cir. 2008)); see also

7

In re Musical Instruments & Equip. Antitrust Litig., 798 F.3d 1186

8

(9th Cir. Aug. 25, 2015) ("'Allegations of facts that could just as

9

easily suggest rational, legal business behavior by the defendants

Starlight Cinemas v. Regal Entm't Group, 2014 U.S.

United States District Court

For the Northern District of California

10

as they could suggest an illegal conspiracy' are insufficient to

11

plead a § 1 [Sherman Act] violation.") (quoting Kendall, 518 F.3d

12

at 1049).

13

with whom), where, and when?"

14

Healthcare, Inc., 596 F. App'x 580, 581 (9th Cir. Mar. 9, 2015)

15

(quoting Kendall, 518 F.3d at 1048).

A complaint must specify "who, did what, to whom (or
Pharmarx Pharm., Inc. v. GE

16
17
18

IV.

DISCUSSION
The Court has reviewed the First Amended Complaint ("FAC"),

19

ECF No. 13, and finds that the facts alleged therein are

20

sufficiently similar to those alleged in the PSAC that the new

21

claims for fraud and antitrust violations are part of the same set

22

of facts which gave rise to the original complaint in this case.

23

Defendant has been on notice of allegations of some type of fraud

24

and of some form of improper agreement with "Major Labels" since

25

the FAC.

26

in its previous MTD Order on the basis that California's law

27

governed rather than Washington, D.C.'s law.

28

the Plaintiffs to amend to include alleged violations of

See FAC ¶¶ 17-30.

The Court dismissed at least one claim

7

Therefore, permitting

1

California's law (the state to which the case has been transferred

2

since the FAC was first filed) is in the interests of justice.

3

Court will thus entertain the two new claims and GRANTS leave to

4

amend.

5

claims after this amendment would be too prejudicial to Defendants

6

and no longer in the interests of justice, and cautions Plaintiffs

7

against any such future request.

The

However, the Court finds that allowing additional new

8

The Court would normally now consider each claim to determine

9

whether permitting the amendment as drafted in the present edition

United States District Court

For the Northern District of California

10

of the PSAC would be in line with the five factors of Corinthian

11

Colleges, 655 F.3d at 995, or would be an exercise in futility.

12

The Court's own prima facie review of the PSAC based on the law

13

cited by counsel and herein suggests that both allegations might

14

lack enough detail to survive a review under Federal Rule of Civil

15

Procedure 12(b)(6).

16

and the case will be transferred to be heard by another Judge.

17

as not to limit the discretion of the next Judge to preside over

18

the case and rule upon the whole of the SAC, the Court declines to

19

make any findings with respect to the sufficiency of the fraud and

20

Cartwright Act claims as proposed in the current edition of the

21

PSAC.

22

when the Court is preliminarily concerned it may include legal

23

flaws, in addition to leave to amend to file the PSAC, the Court

24

GRANTS leave to amend the present edition of the PSAC.

25

meant to promote judicial economy by allowing counsel a chance to

26

ensure that the actual SAC filed is refined in light of arguments

27

by counsel and law cited by the Court.

28

///

However, the undersigned is retiring shortly
So

Yet rather than require the filing of the PSAC as drafted

8

This is

1

V.

CONCLUSION

2

Leave to amend to include the two new claims is GRANTED.

3

However, the Court will not permit any additional new claims to be

4

added.

5

the Court does not rule on this matter in deference to the Judge

6

who will receive this case when the undersigned retires.

7

Therefore, leave is GRANTED to file a revised edition of the

8

current PSAC within 30 days of the date of this Order.

9

is transferred to another Judge before the SAC is filed, Plaintiffs

The PSAC as drafted may (or may not) be insufficient, but

If the case

United States District Court

For the Northern District of California

10

are ORDERED to notify that court -- prior to or contemporaneously

11

with their filing -- that leave to file a SAC has already been

12

granted.

13
14

IT IS SO ORDERED.

15
16
17

Dated: October 29, 2015
UNITED STATES DISTRICT JUDGE

18
19
20
21
22
23
24
25
26
27
28

9