DARNAA, LLC v. Google, Inc. et al

Filing 87

ORDER DENYING MOTION TO ALTER THE JUDGMENT by Hon. William Alsup denying 81 Motion to Alter Judgment.(whalc1, COURT STAFF) (Filed on 5/16/2017)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA
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DARNAA, LLC,

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For the Northern District of California

United States District Court

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Plaintiff,
v.
GOOGLE INC. and YOUTUBE, LLC,

ORDER DENYING MOTION
TO ALTER THE JUDGMENT

Defendants.
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No. C 15-03221 WHA

INTRODUCTION
In this action claiming breach of the implied covenant of good faith and fair dealing,

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judgment has been entered against plaintiff. Plaintiff now moves to alter the judgment pursuant

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to FRCP 59(e). For the reasons stated below, the motion is DENIED.

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STATEMENT
The facts of this case have been set forth in a prior order and need not be repeated in

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detail herein (Dkt. No. 79). Briefly, this action involves a dispute about a music video that

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plaintiff Darnaa, LLC, posted on defendant YouTube, LLC’s website and promoted on various

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platforms such as Internet, print, and radio ads, all in March 2014. Defendant Google Inc. is

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Darnaa’s parent company. Defendants removed the video later that month due to alleged

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violations of its terms-of-service agreement to which Darnaa indicated its assent upon creating

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an account with YouTube. Specifically, defendants removed the video because Darnaa

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allegedly violated the prohibition on using automated systems to artificially inflate video view
counts on the YouTube website.

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After an order dismissed Darnaa’s initial action in Los Angeles County Superior Court

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pursuant to a forum-selection clause in the terms-of-service agreement, Darnaa filed the instant

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action against Google in federal court in San Jose, where it was assigned to Judge Ronald

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Whyte. Judge Whyte twice dismissed Darnaa’s complaint, each time with leave to amend (Dkt.

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No. 56; Dkt. No. 26). The first amended complaint added YouTube as a defendant (Dkt. No.

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29).

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In November 2016, upon Judge Whyte’s retirement, the action was reassigned to the

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undersigned. Less than two weeks later, Darnaa moved for partial reconsideration of

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Judge Whyte’s decision (both initially and upon a prior request for reconsideration) that various
provisions in the YouTube terms-of-service agreement could be enforced (Dkt. No. 59).

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For the Northern District of California

United States District Court

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(Darnaa contended those provisions were unconscionable.) An order denied Darnaa’s request

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for leave to move for partial reconsideration of the ruling “twice stated by Judge Whyte” (Dkt.

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No. 60).

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Shortly thereafter, Darnaa filed its second amended complaint, asserting a single claim

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for breach of the covenant of good faith and fair dealing (Dkt. No. 62). Defendants moved to

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dismiss, contending, inter alia, that a limitation-of-liability clause in the terms-of-service

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agreement precluded Darnaa’s sole surviving claim. The provision at issue stated, in pertinent

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part “in no event shall YouTube . . . be liable to [Darnaa] for any direct, indirect, incidental,

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special, punitive, or consequential damages resulting from . . . any interruption or cessation of

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transmission to or from [YouTube’s] services” (Second Amd. Compl., Exh. 1 § 10) (original in

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all caps).

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Darnaa contended that limitation-of-liability provision could not be enforced under

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California Civil Code Section 1668, which provides “all contracts which have for their

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objective, directly or indirectly, to exempt anyone from responsibility for his own fraud, or

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willful injury to the person or property of another, or violation of law, whether willful or

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negligent, are against the policy of the law” and unenforceable.

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After full briefing and oral argument, an order dismissed the complaint on that theory,
without leave to amend (Dkt. No. 79). Judgment followed (Dkt. No. 80).
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Darnaa now moves to alter the judgment pursuant to FRCP 59(e). This order follows
full briefing and oral argument.

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ANALYSIS

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Pursuant to FRCP 59(e), a motion to alter the judgment can only be granted if the

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district court is presented with newly discovered evidence, the district court committed clear

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error, or if there is an intervening change of law. Ybarra v. McDaniel, 656 F.3d 984, 998

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(9th Cir. 2011). The court of appeals will find clear error only upon “a definite and firm

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conviction that a mistake has been committed.” United States v. Ruiz-Gaxiola, 623 F.3d 684,

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693 (9th Cir. 2010). If a court “got the law right” and “did not clearly err in its factual
determinations,” then clear error was not committed — even if another reasonable judicial body

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For the Northern District of California

United States District Court

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“would have arrived at a different result.” Alliance for the Wild Rockies v. Cottrell, 632 F.3d

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1127, 1331 (9th Cir. 2011). Here, Darnaa claims the order dismissing its second amended

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complaint erroneously declined to apply Section 1668 to its claim for breach of the implied

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covenant of good faith and fair dealing.

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The order dismissing Darnaa’s claims cited binding and persuasive California law in

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holding (1) that a breach of the implied covenant of good faith and fair dealing is “nothing

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more than a cause of action for breach of contract” and (2) that Section 1668, by its own terms,

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only applies to a contract claim when the contract in question is unconscionable or insulates the

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contractor from its own fraud. Food Safety Net Services v. Eco Safe Sys. USA, Inc., 209 Cal.

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App. 4th 1118, 1126 (2012); Habitat Trust Wildfire, Inc. v. City of Rancho Cucamonga, 175

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Cal. App. 4th 1306, 1344 (2009).

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Each and every argument that Darnaa now raises could have been raised in response to

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Google’s prior motion to dismiss, and most were so raised. Darnaa’s motion could be denied

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for that reason alone. Nevertheless, this order considers Darnaa’s primary argument on the

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merits and reaffirms holding of the previous order.*

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*
This order does not address several of Darnaa’s weakest arguments. This order declines Darnaa’s
fourth invitation to reconsider the rejection of the argument that the limitation-of-liability clause is
unconscionable or its dispute with clear and binding California case law — discussed in the prior order and on
the briefing on the prior motion — interpreting Section 1668 as applying to contract claims only where the

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Darnaa argues that Section 1668 should apply to preserve its complaint notwithstanding

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that the sole claim is for breach of the implied covenant — a contract theory — because its

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complaint includes “all allegations necessary to establish a claim for intentional interference

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with prospective economic advantage,” though it does not expressly plead that claim. Thus,

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Darnaa argues, to preclude this claim on the basis of the limitation-of-liability claim would

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insulate defendants from liability their own intentional torts, which Darnaa contends is

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equivalent to insulating it from fraud.

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Darnaa’s characterization of its complaint as containing an unpled intentional tort claim
is disingenuous. The complaint formerly included such a claim, but Judge Whyte held it was
precluded by Section 230(c)(1) of the Communications Decency Act because it sought “to hold

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For the Northern District of California

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defendants liable for ‘an action that is quintessentially that of a publisher,’ regardless of

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defendants’ alleged motive” (Dkt. No. 56 at 13) (quoting Barnes v. Yahoo!, Inc., 570 F.3d 1096,

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1003 (9th Cir. 2009), as amended (Sept. 28, 2009)). Indeed, Judge Whyte allowed Darnaa to

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replead its claim for breach of the implied covenant because “the source of defendants’ alleged

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liability [was] different” from that of their intentional tort claim inasmuch as it addressed their

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contractual obligation.

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Darnaa now seeks to analogize our case to NavCom Tech., Inc. v. Oki Electric Indus.

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Co., Ltd., No. 12-04175, 2014 WL 991102 (N.D. Cal. Mar. 11, 2014) (Judge Edward Davila),

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and Civic Ctr. Drive Apartments Ltd. Partn. v. S.W. Bell Video Services, 295 F. Supp. 2d 1091,

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1106 (N.D. Cal. 2003) (Judge Joseph Spero) — two decisions it failed to address in its

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opposition to Google’s motion, but which were addressed and distinguished in the order

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dismissing the second amended complaint. Darnaa’s arguments fall flat.

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Civic Center involved allegations that the defendant fraudulently concealed its failure to

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perform its duties under the contract (not merely that it failed to adequately perform) and held

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that the resulting contract claim warranted the protection of Section 1668. NavCom involved

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clause is unconscionable or exempts the contracting party from liability from its own fraud. See Food Safety
Net, 209 Cal. App. 4th at 1126. Additionally, Darnaa is simply incorrect in its assertion that a breach of
contract constitutes a violation of statutory law warranting application of Section 1668. Smith v. Wells Fargo
Bank, N.A., 135 Cal. App. 4th 1463, 1484 (2005).

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allegations of fraudulent inducement of the underlying contract, though Section 1668 did not

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apply because the plaintiffs continued to perform under the contract even after discovering the

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fraud, thereby waiving any claim based thereon.

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Here, Darnaa’s damages, if any, stemmed purely from defendants’ performance under

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the contract, whether or not defendants intended any failure of performance. Indeed, Darnaa

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specifically limits its theory of recovery to contract damages. (As stated, Darnaa’s contract

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claim only survived before Judge Whyte because Darnaa disclaimed any characterization of that

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claim as sounding in tort.) This allegation of a simple breach of contract, even if intentional, is

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simply not the kind of fraudulent conduct that Section 1668 precludes from insulation.
Plaintiffs fail to point to any persuasive authority in support of their position, much less

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For the Northern District of California

United States District Court

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authority demonstrating the manifest error necessary to support their motion at this posture.

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Perhaps regrettably, plaintiff has found itself caught between the rock of the limitations-of-

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liability clause in defendants’ terms-of-service agreement and the hard place of the

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Communications Decency Act; but that risk was apparent when Darnaa elected to rely on a free

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video-hosting platform as the foundation for its extensive promotional campaign.

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This case is ready for the court of appeals.

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CONCLUSION
For the foregoing reasons, plaintiff’s motion is DENIED. On appeal, please be candid
about what points were made after judgment.

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IT IS SO ORDERED.

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Dated: May 16, 2017.

WILLIAM ALSUP
UNITED STATES DISTRICT JUDGE

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