Buckeye Tree Lodge and Sequoia Village Inn, LLC v. Expedia, Inc. et al

Filing 164

ORDER GRANTING IN PART AND DENYING IN PART 126 RENEWED MOTION TO CERTIFY CLASS AND RE OTHER MISCELLANEOUS MOTIONS. Granting 125 Administrative Motion to File Under Seal; granting as modified 148 Administrative Motion to File Under Seal; gran ting 152 , 157 Motions for Leave to File Surreply and Sur-surreply; and denying 154 , 155 Motions for Leave to File Amicus Curiae Briefs. A Further Case Management Conference is set for 4/23/2019 01:30 PM in San Francisco, Courtroom 04, 17th Floor. A Case Management Statement is due by 4/16/2019. Signed by Judge Vince Chhabria on March 13, 2019. (vclc2S, COURT STAFF) (Filed on 3/13/2019)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA

BUCKEYE TREE LODGE AND
SEQUOIA VILLAGE INN, LLC, et al.,

Case No. 16-cv-04721-VC

Plaintiffs,

ORDER GRANTING IN PART AND
DENYING IN PART THE RENEWED
MOTION TO CERTIFY CLASS AND
RE OTHER MISCELLANEOUS
MOTIONS

v.
EXPEDIA, INC., et al.,
Defendants.

Re: Dkt. No. 126

Expedia is an online travel agency that offers hotel bookings on its websites. The
plaintiffs are owners of hotels that are not available through Expedia. They allege that when
customers search for their hotels on Google or within one of Expedia’s websites, Expedia falsely
suggests that these hotels can generally be booked on the websites, but they are “sold out” for the
period that the customer wants to book them. The plaintiffs further allege that Expedia then
steers customers to similar hotels that are, in fact, available on its websites, thus depriving the
plaintiffs of business they would have received if Expedia had not misdirected the customers.
The plaintiffs have moved to certify a class of hotel owners to seek an injunction to put a stop to
this practice. That motion is granted, although for a narrower class than the one the plaintiffs
sought to certify. The plaintiffs have also moved to certify a class to seek monetary relief, but
that motion is denied.
I.
A.
Sometimes, even when a hotel has not contracted with Expedia, that hotel’s information

finds its way onto one of the numerous websites Expedia operates, including Expedia.com,
Hotels.com, Orbitz.com, and Travelocity.com. Expedia can’t actually book rooms at many of
these hotels, but it tells customers – in one way or another – “we are sold out.” By doing so, the
plaintiffs allege, customers are misled into thinking that although the hotels are generally
available on Expedia’s websites, they are fully booked for the desired nights.
One version of the alleged deception begins on a search engine like Google, where a
potential customer may search the name of a hotel. An ad may appear in conjunction with the
search results that offers a customer the chance to book a room at the searched hotel through
Expedia’s websites, even if that hotel is not capable of being booked through Expedia. See
Goddard Decl., Ex. 11, at 2, Dkt. No. 130-11. That potential customer then clicks on the ad and
navigates to the “infosite” page for that hotel on Expedia’s sites. That infosite page displays a
picture of the hotel, provides a map of where it’s located, depicts a star rating, and gives details
about the property’s amenities, like parking, wifi, and breakfast. See, e.g., id. at 14-17, 33-37.
Next to the hotel’s name and information, the website will communicate some variation of the
message: “We are sold out.” See Jolin Decl. ¶ 4-6, Dkt. No. 104-13.
Other customers might begin their search within one of Expedia’s websites. They search
a specific hotel or a geographic location, which will bring them to a search results page within
the site. See Goddard Decl., Ex. 11, at 4-5, 21, Dkt. No. 130-11. Again, even if the hotel cannot
be booked through Expedia, the search may result in a display of the hotel’s name, photos, a star
rating, and abbreviated amenities information. Next to this display, Expedia communicates, “We
are sold out.” See Jolin Decl. ¶ 4, Dkt. No. 104-13.
The plaintiffs allege that this type of unavailability messaging misleads customers into
believing that their desired hotel has no availability and steers them to hotels that have
relationships with Expedia.
Expedia also lists a phone number with each hotel, both on the infosite and search results
pages, for customers to call. See, e.g., Goddard Decl., Ex. 11, at 4, 14, Dkt. No. 130-11. The
numbers simply connect to the Expedia call center, where call center employees are trained on

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how to handle “customers [who] think they are calling the hotel directly,” “[b]ecause . . . the
placement of our phone numbers within the hotel search results or on the hotel details page of the
website[ leads] some customers [to] think they are calling the hotel directly.” Id., Ex. 14, at 5,
Dkt. No. 130-14. The employees are further instructed to encourage callers to book at hotels that
have booking agreements with the company. Id. at 5-6.
B.
The four named plaintiffs – owners of Buckeye Tree Lodge, The Mansion, Shiloh
Morning Inn, and Prospect Historic Hotel – discovered that Expedia’s websites were
misdirecting their potential customers in the manner described above. For example, visitors to
the Mansion’s property told its managers they tried to book stays there, but the hotel was
consistently sold out. See Goddard Decl., Ex. 9, at 3-4, Dkt. No. 130-9. It turned out that Expedia
had been listing the Mansion as sold out, even though the Mansion had no booking agreement
with Expedia. Buckeye was also allegedly informed of its appearance on Expedia’s websites by
potential customers. See id. at 3-6, Dkt. No. 130-5. Although Buckeye could not be booked on
those websites, from January 2015 through August 2016, 149 people landed on the Buckeye
infosite page on Expedia; four of those people subsequently made a reservation with another
hotel during the same visit to the website. Id., Ex. 7 ¶ 4, Dkt. No. 130-7.
Only the Mansion was able to get itself removed from Expedia’s websites before joining
this lawsuit. See Goddard Decl., Ex. 8 ¶ 34, Dkt. No. 130-8. Buckeye, on the other hand, tried to
get Expedia to remove its information from its websites, but it wasn’t until the day after Buckeye
sued that Expedia did so. See id., Ex. 8 ¶ 29. Shiloh and Prospect moved to intervene in the suit
on August 17, 2018. One week later, Expedia removed Shiloh from its websites. See Nadkarmi
Decl. ¶ 13, Dkt. No. 145-13. And one month later, Prospect was removed. See id. ¶ 18.
The plaintiffs initially moved to certify a class of both “affiliated” and “unaffiliated”
hotels – that is, hotels that had direct contractual arrangements with Expedia and hotels that
didn’t. Although the named plaintiffs were unaffiliated, they contended that they could also
represent affiliated hotels, on the theory that Expedia was also making misleading statements

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about availability at those hotels. The Court concluded that this proposed class was too broad,
and denied the motion without prejudice to filing a renewed motion to certify a narrower class.
The plaintiffs now move to certify a class of hotels that have no direct contractual arrangement
with Expedia. They seek certification of this class to pursue injunctive relief under Rule 23(b)(2),
and disgorgement of Expedia’s profits under Rule 23(b)(3). In the alternative to a disgorgement
class, the plaintiffs seek to certify a common issues class under Rule 23(c)(4).
II.
To certify a Rule 23(b)(2) class to pursue injunctive relief, the plaintiffs must first
establish standing to seek this relief. Then they must affirmatively demonstrate that the
requirements of Rule 23 are met. See Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 350 (2011).
A.
In general, at least one named plaintiff must demonstrate a “likelihood of future injury”
for the class to have standing to sue for injunctive relief. Hodgers-Durgin v. De La Vina, 199
F.3d 1037, 1039 (9th Cir. 1999). Expedia argues that the named plaintiffs lack standing because
they are not listed on the websites anymore. But the Supreme Court and Ninth Circuit have
consistently denied attempts by defendants to rob a court of jurisdiction by taking strategic
unilateral action to moot a plaintiff’s claims before the plaintiff has had the opportunity to seek
class certification. See Campbell-Ewald Co. v. Gomez, 136 S. Ct. 663, 672 (2016); Chen v.
Allstate Insurance Co., 819 F.3d 1136, 1142-43 (9th Cir. 2016). A named plaintiff’s claim may
be “‘transitory in nature and may otherwise evade review’ in light of a defendant’s tactic of
‘picking off’ lead plaintiffs to avoid a class action.” Chen, 819 F.3d at 1142-43 (quoting Pitts v.
Terrible Herbst, Inc., 653 F.3d 1081, 1091 (9th Cir. 2011)). Courts make an exception to the
general rules of justiciability for claims like this where a defendant is likely to continue engaging
in its conduct but also evade review as soon as a plaintiff files suit. That’s not to say a defendant
can’t unilaterally remedy its behavior upon receiving a legal complaint, but for a defendant to do
so, its reform must be genuine, irrefutably demonstrated, and comprehensive. See Polo Fashions,
Inc. v. Dick Bruhn, Inc., 793 F.2d 1132, 1135 (9th Cir. 1986); see also Ang v. Bimbo Bakeries

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USA, Inc., No. 13-CV-01196-HSG, 2018 WL 4181896, at *11 (N.D. Cal. Aug. 31, 2018).
There is no evidence that Expedia has made a meaningful attempt to ensure that its
website will stop suggesting that hotels it cannot book are sold out. Indeed, given the absence of
evidence that Expedia has instituted reforms to prevent itself from listing hotels whose rooms are
not available on its websites, there is reason to believe that the named plaintiffs themselves could
end up on those websites again. Therefore, the named plaintiffs have standing to seek injunctive
relief.
B.
Next, the plaintiffs must satisfy the preliminary requirements of Rule 23(a) – numerosity,
commonality, typicality, and adequacy of representation – and Rule 23(b)(2)’s condition that the
plaintiffs seek “uniform relief from a practice applicable” to the whole class. Rodriguez v. Hayes,
591 F.3d 1105, 1122, 1125 (9th Cir. 2010). They have satisfied these requirements, but for an
even narrower class than the one they proposed: owners of hotels that do not have booking
agreements with Expedia and are not capable of being booked through Expedia, but appear on
Expedia’s websites.
The plaintiffs contend that Expedia falsely advertised the information of hotels for which
it could not book rooms in violation of the Lanham Act. See 15 U.S.C. § 1125(a)(1)(B). A false
advertising claim consists of the following elements:
(1) a false statement of fact by the defendant in a commercial advertisement
about its own or another’s product; (2) the statement actually deceived or
has the tendency to deceive a substantial segment of its audience; (3) the
deception is material, in that it is likely to influence the purchasing decision;
(4) the defendant caused its false statement to enter interstate commerce;
and (5) the plaintiff has been or is likely to be injured as a result of the false
statement, either by direct diversion of sales from itself to defendant or by
a lessening of the goodwill associated with its products.
Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134, 1139 (9th Cir. 1997).1 With respect to
the initial Rule 23(a) requirements, the only meaningful disputes are whether the named
1

The plaintiffs essentially abandon their false association claim. They tacitly concede that the
claim is not susceptible of class resolution. See Reply at 9-11, Dkt. No. 149. The Court agrees.

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plaintiffs have identified common questions that will yield common answers, and whether the
named plaintiffs are typical of the class.
The plaintiffs have demonstrated that there are common questions of fact and law such
that proceeding as a class will generate common answers, at least as to class members whose
properties aren’t bookable with Expedia but whose properties are (with the exception of those
removed in response to the litigation) listed on Expedia’s websites as sold out. Expedia’s searchengine ads lure potential customers to its websites, and then the websites use language that could
mislead customers into thinking that the class members’ hotels are generally available on the
sites but booked for the nights the customers want. Alongside details about the amenities and
features of the properties, Expedia lists a phone number that customers might believe is a number
for the hotel, but that actually connects customers to its own call center.
This evidence raises common questions about whether Expedia is violating the Lanham
Act’s prohibition on false advertising. For example, does Expedia’s use of messaging like “We
are sold out” mislead the reasonable consumer to think that the hotels are fully booked? And if
customers are misled, are the hotels likely to lose business due to Expedia’s conduct? These
questions are susceptible to proof through, for instance, consumer research or surveys, and the
answers will apply to each class member. Cf. Skydive Arizona, Inc. v. Quattrocchi, 673 F.3d
1105, 1110 (9th Cir. 2012). The plaintiffs have already presented some evidence that potential
customers have been misled by Expedia’s messaging attached to their hotels online. See, e.g.,
Goddard Decl., Ex. 9, at 3-4, Dkt. No. 130-9. The Court is convinced that the parties can proffer
evidence on a classwide basis that tends to prove or disprove that customers are misled or likely
to be misled by Expedia’s common messaging. Also, because the plaintiffs need to prove only
that they’re likely to lose business as a result of Expedia’s conduct to secure injunctive relief, that
question can also be demonstrated through evidence such as consumer research or surveys. See
Southland Sod Farms, 108 F.3d at 1145-46; see, e.g., TrafficSchool.com, Inc. v. Edriver Inc., 653
F.3d 820, 829, 831 (9th Cir. 2011). See also Dkt. No. 106-3, at 10.
Expedia argues that the answers to the above questions won’t be common across the class

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in part because the language its websites used to communicate unavailability during the class
period changed over time. For example, at different times the websites displayed, “We have no
rooms available for your selected dates . . .”, “No rooms available on our site for the selected
dates . . .”, or “Sorry, the [hotel name] is not available on Hotels.com for your travel dates. You
may choose alternative travel dates OR select from the hotels below.” Goddard Decl., Ex. 8 ¶ 4,
Dkt. No. 130-8; Jay Decl. ¶ 4, Dkt. No. 104-12. Expedia argues that because it doesn’t track
which unavailability messages were displayed to which customers, the plaintiffs will not be able
to evaluate the websites’ violation of the Lanham Act through common evidence. This argument
is something of a red herring, however. First, three of the websites used the same unavailability
message on their “search results” page throughout the class period: “We are sold out.” See Jolin
Decl. ¶ 6, Dkt. No. 104-13. Second, the messages are not so different or so numerous that they
can’t be evaluated through common proof. And because a class is being certified only for
injunctive relief, the plaintiffs may only need to evaluate the messages Expedia currently uses.
Similar to commonality, the typicality inquiry looks to whether class members’ claims
arise from the same course of events and whether they will make the same arguments as to the
defendants’ liability. See Rodriguez, 591 F.3d at 1124. Expedia argues that in this case, typicality
is defeated by the myriad unique ways through which the plaintiffs’ information landed on the
websites. For example, Buckeye had begun the onboarding process to create an account with
Expedia, but ultimately did not go through with the agreement. See Goddard Decl., Ex. 8 ¶ 21,
Dkt. No. 130-8. But before the onboarding process was terminated, Expedia created a profile for
Buckeye that was inadvertently viewable by the public and depicted the hotel as sold out. Id.
¶ 23. The Mansion’s information, on the other hand, was disseminated to Expedia because the
hotel had contracted to share its information with a third party, TravelClick, that itself
disseminated the information to three distribution systems, which in turn gave the information to
Expedia. See id. ¶ 31; Oatis Decl., Ex. 6, Dkt. No. 145-9. When the Mansion ended its
relationship with TravelClick, two of the distribution systems failed to communicate to Expedia
that it would no longer be providing the Mansion’s data, so the hotel remained viewable on

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Expedia’s websites even though Expedia had no inventory for it. Similar to the Mansion, Shiloh
and Prospect also have complicated stories of sharing their data with third and fourth parties who
ultimately gave the information to Expedia. These differences do, as discussed previously,
highlight the problem with the plaintiffs’ proposed class definition. But they do not preclude
certification of an injunctive relief class altogether.
The plaintiffs are proposing a class of all hotels that lack a direct contractual relationship
with Expedia but whose information was represented on Expedia’s websites. The problem is that
Expedia is actually capable of booking rooms at some of those hotels – specifically, the hotels
whose owners made bookings available to third party vendors who in turn made bookings
available to Expedia. A hotel that is capable of being booked through Expedia is in a very
different position, from a Lanham Act perspective, from a hotel that is not capable of being
booked on Expedia. The “sold out” messages may not be misleading for the former category of
hotels, while they may well be misleading for the latter category. Therefore, the question of
whether injunctive relief is appropriate, and the question of what type of injunctive relief is
appropriate, is not common across the class the plaintiffs have proposed.
However, a narrower class – one that consists of hotels that appear on Expedia’s websites
even though they are not capable of being booked on those sites – is amenable to certification.
The primary question for those hotels is: Are the messages misleading given that the hotels are
not capable of being booked through Expedia? The answer to that question will be the same for
any hotel that cannot be booked through Expedia, regardless of how the hotel ended up on
Expedia. And there’s another set of questions that can be answered for this narrower class
without regard to Expedia’s concerns about typicality: Given the automated-but-disorganized
nature of the online travel industry, does the Lanham Act impose on Expedia an affirmative
obligation to institute controls to ensure that its systems are not causing customers to be misled
about availability at unaffiliated hotels? And if so, is Expedia satisfying this affirmative
obligation?
Lastly, injunctive relief would uniformly benefit the members of the class. Rodriguez,

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591 F.3d at 1125. If the Court were to determine that Expedia’s messaging was misleading in
violation of the Lanham Act, an injunction that required Expedia to communicate more clearly
when it didn’t have the power to book rooms at a given hotel may be warranted. Expedia could
also be required to clearly indicate when listed phone numbers connect directly to its call centers.
It could be enjoined to ensure that Google ads pertaining to unbookable hotels clearly say as
much. And, as mentioned in the previous section, Expedia could be ordered to take measures to
better comb its system to ensure that unaffiliated hotels are not being listed in the first place.2
III.
A.
The plaintiffs also move to certify a Rule 23(b)(3) class to seek disgorgement of the
profits Expedia earned through its alleged false advertisement. In addition to satisfying the
preliminary requirements of Rule 23(a), which are discussed above, the plaintiffs must
demonstrate that the common questions predominate over individual ones, and that treatment of
the claims in a class action is superior to individual adjudication of members’ claims. See Fed. R.
Civ. P. 23(b)(3). The plaintiffs cannot satisfy the requirement of predominance.
In seeking disgorgement of Expedia’s profits, the plaintiffs failed to proffer a model or a
legitimate theory for how those damages would be estimated, let alone disseminated among class
members. See Comcast Corp. v. Behrend, 569 U.S. 27, 34 (2013). Curiously, the plaintiffs
presented a model in connection with their previous motion for class certification, but in their
renewed motion, they provide none. Instead, the motion conclusively asserts that the plaintiffs
need to “prove defendant’s sales only.” Renewed Mot. for Class Cert. at 22, Dkt. No. 126-1
(quoting 15 U.S.C. § 1117(a)). As the plaintiffs concede, however, the sales must relate to
Expedia’s false advertising, and they fail to present a method for estimating that amount. Even if
it were proper to consider the model submitted with the initial motion – as the plaintiffs asked
2

Because this is merely a motion for class certification and not an actual request for an
injunction, Expedia will remain able to argue that injunctive relief, either in general or in
particular forms, is not appropriate. The point now is simply that the case is amenable to various
forms of injunctive relief on a classwide basis.

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the Court to do in its Reply and at the hearing – the plaintiffs would still fail to meet their
burden. See Hearing Tr. at 43-44, Dkt. No. 163. The model estimates the percentage of all hotels
in Expedia’s inventory that are actually unaffiliated and are marked, like the plaintiffs’ hotels
were, as “sold out.” For example, if Expedia has 50,000 hotels in its inventory and 1,000 of them
are shell pages for hotels it can’t sell but are labeled “sold out,” then the percentage value is 2%.
Plaintiffs’ counsel then proposed that their disgorgement award should be 2% of Expedia’s total
revenue generated over the course of the class period. Id. at 44. Although a disgorgement model
doesn’t need to be mathematically precise, it needs to be logically sound. This model doesn’t
have anything to do with Expedia’s alleged conduct in this case – it doesn’t reflect customers’
response to messages of “sold out” or their rate of booking referred nearby hotels.
Because the plaintiffs failed to adequately present a classwide disgorgement model, it is
inevitable that individual questions of damages will “overwhelm questions common to the
class.” Comcast, 569 U.S. at 34. The motion to certify a Rule 23(b)(3) class is therefore denied.
B.
The plaintiffs contend that, in the event they can’t get certification of a disgorgement
class, the Court should certify a limited class action to decide common issues of liability. See
Fed. R. Civ. P. 23(c)(4). But the plaintiffs have failed to show that such a class would materially
advance the disposition of the case(s) as a whole as compared to merely certifying an injunctive
relief class. Therefore, the motion to certify a Rule 23(c)(4) class is denied.
IV.
1. The Renewed Motion for Class Certification is granted in part and denied in part. A
further case management conference is scheduled for Tuesday, April 23, 2019 at 1:30pm in
Courtroom 4, Floor 17. A joint case management statement, including a proposed schedule for
the duration of the case, is due Tuesday, April 16, 2019.
2. The first motion to seal (Dkt. No. 125) is granted. Villavicencio’s Declaration (Dkt.
No. 126-3) is reasonably redacted to omit financial information pertaining to the sale of the
Buckeye Tree Lodge. And Exhibit 15 (Dkt. No. 130-15) details Expedia’s Google ad

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expenditures – the Court sealed this identical document in an earlier sealing motion (Dkt. No.
113).
2. The second motion to seal (Dkt. No. 148) is granted as modified by the Court. Exhibit
38 (Dkt. No. 148-6) will remain under seal and the Reply brief will remain redacted at pages 3-4,
and 14 (Dkt. No. 149). The plaintiffs are ordered to file a redacted Reply brief in accordance
with this order within 7 days. Exhibit 42 will also be unsealed. (Dkt. No. 148-8).
3. The motions for leave to file a surreply (Dkt. No. 152) and a sur-surreply (Dkt. No.
157) are granted. The filings were considered by the Court in deciding this order.
4. The motions for leave to file amicus briefs (Dkt. Nos. 154, 155) are denied. They were
filed too late for the defendants to have a meaningful opportunity to respond.
IT IS SO ORDERED.
Dated: March 13, 2019
______________________________________
VINCE CHHABRIA
United States District Judge

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