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

Filing 115

ORDER ON MOTION TO DISMISS THIRD AMENDED COMPLAINT by Judge Claudia Wilken granting in part and denying in part 107 Motion to Dismiss. (napS, COURT STAFF) (Filed on 6/27/2016)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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SONG FI, INC., JOSEPH N.
BROTHERTON, LISA M. PELLEGRINO,
N.G.B., RASTA ROCK, INC.,

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Plaintiffs,

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v.

United States District Court
For the Northern District of California

ORDER ON MOTION TO
DISMISS THIRD
AMENDED COMPLAINT
(Docket No. 107)

GOOGLE, INC., YOUTUBE LLC,

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No. C 14-5080 CW

Defendants.
________________________________/

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Defendants Google, Inc. and YouTube LLC move to dismiss

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Plaintiffs' Third Amended Complaint (3AC).

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Defendants' motion in part, and denies it in part.

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The Court grants

BACKGROUND
The Court described this case's factual and procedural

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background in its order granting Defendants' motion to dismiss

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Plaintiffs' Second Amended Complaint (2AC).

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dismissed Plaintiffs' Cartwright Act, fraudulent concealment,

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libel per quod and tortious interference claims, with leave to

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amend.

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claims.

The Court ruled that Plaintiffs may not add further
Plaintiffs filed timely their 3AC.

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There, the Court

LEGAL STANDARD
A complaint must contain a “short and plain statement of the

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claim showing that the pleader is entitled to relief.”

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Civ. P. 8(a).

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state a claim, dismissal is appropriate only when the complaint

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does not give the defendant fair notice of a legally cognizable

Fed. R.

On a motion under Rule 12(b)(6) for failure to

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claim and the grounds on which it rests.

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

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complaint is sufficient to state a claim, the court will take all

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material allegations as true and construe them in the light most

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favorable to the plaintiff.

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896, 898 (9th Cir. 1986).

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to legal conclusions.

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cause of action, supported by mere conclusory statements," are not

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taken as true.

United States District Court
For the Northern District of California

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Bell Atl. Corp. v.

In considering whether the

NL Indus., Inc. v. Kaplan, 792 F.2d

However, this principle is inapplicable

"Threadbare recitals of the elements of a

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)

(citing Twombly, 550 U.S. at 555).

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In Iqbal, 556 U.S. at 679, the Supreme Court laid out the

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following approach for assessing the adequacy of a plaintiff’s

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complaint:

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a court considering a motion to dismiss can choose to begin
by identifying pleadings that, because they are no more than
conclusions, are not entitled to the assumption of truth.
While legal conclusions can provide the framework of a
complaint, they must be supported by factual allegations.
When there are well-pleaded factual allegations, a court
should assume their veracity and then determine whether they
plausibly give rise to an entitlement to relief.

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A claim has facial plausibility “when the plaintiff pleads factual
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content that allows the court to draw the reasonable inference
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that the defendant is liable for the misconduct alleged.”

Id. at

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678.

“The plausibility standard is not akin to a ‘probability

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requirement,’ but it asks for more than a sheer possibility that a
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defendant has acted unlawfully.”

Id. (quoting Twombly, 550 U.S.

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at 556).

Determining whether a complaint states a plausible claim

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for relief is “a context-specific task that requires the reviewing
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court to draw on its judicial experience and common sense.”
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at 679.
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Id.

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When granting a motion to dismiss, the court is generally

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required to grant the plaintiff leave to amend, even if no request

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to amend the pleading was made, unless amendment would be futile.

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Cook, Perkiss & Liehe, Inc. v. N. Cal. Collection Serv. Inc., 911

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F.2d 242, 247 (9th Cir. 1990).

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would be futile, the court examines whether the complaint could be

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amended to cure the defect requiring dismissal "without

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contradicting any of the allegations of [the] original complaint."

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Reddy v. Litton Indus., Inc., 912 F.2d 291, 296 (9th Cir. 1990).

In determining whether amendment

United States District Court
For the Northern District of California

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Leave to amend should be liberally granted, but an amended

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complaint cannot allege facts inconsistent with the challenged

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pleading.

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have previously amended the complaint in determining whether to

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grant leave to amend.

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Loan Bank of S.F., 792 F.2d 1432, 1438 (9th Cir. 1986) ("The

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district court's discretion to deny leave to amend is particularly

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broad where the court has already given the plaintiff an

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opportunity to amend his complaint.").

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DISCUSSION

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I.

Id. at 296-97.

Courts consider whether the plaintiffs

See, e.g., Fid. Fin. Corp. v. Fed. Home

Cartwright Act
In its previous order, the Court dismissed Plaintiffs'

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Cartwright Act claim because it did not support that

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1) Plaintiffs' injuries were proximately caused by the alleged

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conspiracy for view count inflation; 2) the conspiracy harmed

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competition; and 3) Defendants were involved in the conspiracy or

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worked with other alleged conspirators.

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In the 3AC, Plaintiffs reframe the alleged conspiracy as
follows.

The conspiring entities include Defendants, at the
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direction of various executives; Universal Music Group and its

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subsidiaries, associated record labels and distribution partners;

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other major music labels, referred to as "Major Labels"; Raymond

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Braun Media Group and Scooter Braun personally; and the Fake View

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Facilitators.1

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following market: "the sale, promotion, and distribution of

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recorded music and music videos in the United States."

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They did so largely by manipulating view counts on YouTube.

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Plaintiffs allege that Defendants, through YouTube, are "the

Together, these parties conspired to restrain the

3AC ¶ 17.

United States District Court
For the Northern District of California

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dominant provider of online video hosting services" and that there

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is "no other music or video website operating anywhere in the

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world that remotely rivals Youtube's viewership, market share,

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profitability, and name recognition."

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Plaintiffs' description of YouTube does not connect YouTube to the

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relevant market or describe its share of that market.

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conspiracy allegedly benefitted the conspirators to the detriment

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of advertisers on YouTube as well as Plaintiffs and others in the

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independent artist community.

Id. ¶ 15.

Notably,

The

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The conspiracy began in 2006, when Google acquired YouTube

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and transformed it into a vehicle to effectuate the conspiracy.

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At this point, Google entered into contracts with the Major

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Labels, "which called for the splitting of advertising revenues

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from Major Label videos posted on YouTube."

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Id. ¶ 28.

Under these contractual agreements, Defendants and the Major
Labels split revenue from the pay-per-click advertisements that

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Fake View Facilitators are shell companies set up by the
conspirators so hackers can create fake views. Id. ¶¶ 76-77.

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run alongside the music videos.

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the conspiracy included selectively enforcing the Terms of Service

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by allowing fake views to inflate Major Labels' artists' view

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counts and collecting the money from the advertisers.

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did not enforce Term of Service § 4H, the prohibition of automated

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view counts, against the Major Labels and their artists.

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Defendants' executives refused to implement any fake view count

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filter.

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. . and purchase Fake Views by sending payment to the service

Id. ¶ 29.

Defendants' role in

Defendants

YouTube's set-up allowed "anyone to simply copy the URL .

United States District Court
For the Northern District of California

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provider."

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views are counted, which supported the conspiracy.

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Defendants split the money from the advertisers with the

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conspiring entities.

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Id. ¶ 38.

Defendants publish no guidelines as to how
Finally,

The inflated view counts also changed the perceived

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popularity of the Major Labels' artists, which encouraged

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purchases that may not have otherwise occurred.

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"the Independent Artists from competing fairly in the relevant

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market."

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popularity of independent artists in relation to the Major Labels'

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artists.

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aggressive and contrived enforcement action against Plaintiffs and

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others in the Independent Artist community" by accusing them of

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violating § 4H, removing their view counts, likes and public

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comments, and then libeling them.

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aim of the conspiracy with the defrauding of the YouTube

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advertisers by describing Defendants as "holding members of the

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Independent Artist community down and using them as diversionary

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scapegoats."

Id. ¶ 35.

Id. ¶ 31.

This prevented

The conspirators aimed to minimize the

To this end, Defendants "employ[ed]

Id. ¶ 23.

Id. ¶ 24.
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Plaintiffs link this

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Plaintiffs allege that they suffered the following damages

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proximately caused by this two-pronged conspiracy: loss to the

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value of the "Respect and Love Manifesto" and the music and film

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score "Rasta Rock Opera"; and loss of funds owed to Song fi and

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Rasta Rock as a result of the termination of funding arrangements

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by Precision Contracting Solutions (PCS).2

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Id. ¶ 85.

Plaintiffs attempt to bolster the plausibility of this two-

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part conspiracy in several ways.

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article that they cited in the 2AC.

First, they attach the Vocativ
See id. ¶ 33; Ex. 2.

The

United States District Court
For the Northern District of California

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article explains that "YouTube views . . . can make or break a new

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career - and add a lot of money to the bank accounts of existing

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stars."

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Plaintiffs.

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article, stated: "We do not want any traces or any low-quality

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views that can get us in trouble."

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mentions a "Google crackdown," and that companies are "trying to

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stay one step ahead of YouTube."

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make it plausible that Defendants were part of this alleged

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conspiracy in the ways alleged.

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Exhibit 3, which contains print-outs of advertisements for fake

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view facilitators.

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paragraph "proves" that Defendants were selling sponsored ads to

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companies in the business of selling fake views.

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3 evinces no link to Google; nor does it show that YouTube was

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involved in any conspiracy.

3AC ¶ 33 (quoting Ex. 2).

This article does not help

The email from Scooter Braun, described in the

Id. ¶ 39.

Ex. 2.

Id.

The article also

These statements do not

Second, the 3AC incorporates

According to Plaintiffs, this

However, Exhibit

Third, Plaintiff Brotherton has

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Plaintiffs also claim a loss in "live performance revenues
for shows that were canceled," but the only show specifically
alleged, the Nike show, did not involve revenue.
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allegedly tested the claim that view counts count actual views;

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when he has watched videos multiple times, the view count

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increases by one.

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Id. ¶ 47.3

A. Injuries and proximate cause
Plaintiffs' alleged injuries do not fall within the "target

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area" of the antitrust claim.

Kolling v. Dow Jones & Co., 137

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Cal. App. 3d 709, 723 (1982).

In the 3AC, Plaintiffs describe the

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alleged conspiracy as promoting Major Labels' artists while

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suppressing independent artists' participation by removing videos

United States District Court
For the Northern District of California

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and selectively enforcing the Terms of Service.

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allegations suggest that Defendants' goal in the alleged

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conspiracy was to defraud advertisers in order to make more money,

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not to suppress competition within the music market.

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plausible that Defendants intended to defame independent artists

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as part of this conspiracy.

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However, the

It is not

B. Harm to competition
In addition to the flaws described above, the 3AC fails to

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allege with sufficient particularity how the conspiracy harmed

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competition.

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Injuries to Plaintiffs are insufficient to demonstrate that

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competition was harmed.

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YouTube's position in the relevant market is inadequate.

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YouTube's prominence as a "music or video website" does not

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explain its market share in "the sale, promotion, and distribution

Antitrust law protects competition, not competitors.

Further, Plaintiffs' description of

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Defendants argue that Plaintiffs' allegation that view
counts represent users and not views is false. However, in a
motion to dismiss the Court takes as true all of Plaintiffs'
allegations.
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of recorded music and music videos in the United States."

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¶¶ 15, 17.

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conspiracy harmed competition in the relevant market.

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3AC

Plaintiffs failed to allege plausibly that this

Because the 3AC is still flawed with respect to proximate

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cause and harm to competition, the Court need not discuss

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Defendants' involvement with the conspiracy.

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Defendants' motion to dismiss Plaintiffs' Cartwright Act claim,

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without leave to amend, because Plaintiffs have already had an

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opportunity to amend.

United States District Court
For the Northern District of California

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II.

The Court GRANTS

See Fid. Fin. Corp., 792 F.2d at 1438.

Fraud

In their 2AC, Plaintiffs alleged a count of "Concealment

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Fraud."

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claim with leave to amend, but stated that Plaintiffs could not

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add further claims.

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concealment claim, Plaintiffs plead one count of fraud, which

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encompasses two new theories: intentional fraud and promissory

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fraud.

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claims.

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This Court dismissed Plaintiffs' fraudulent concealment

Rather than amending their fraudulent

3AC ¶¶ 88-121.

It is too late for Plaintiffs to add new

Plaintiffs argue that they are reverting to their Proposed

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Second Amended Complaint, Docket No. 54-1.

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contained a fraud claim that described both an "intentional

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misrepresentation" and an implicit representation.

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granted leave to file a revised version of the Proposed Second

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Amended Complaint.

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2AC, which this Court dismissed.

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promissory fraud and intentional fraud in their Second Amended

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Complaint.

Docket No. 67.

That proposal

Judge Conti

Plaintiffs then filed their

Plaintiffs did not include

They cannot incorporate these new theories now.

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Additionally, the new theories' allegations are insufficient.

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Under the intentional fraud theory, Plaintiffs base their reliance

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on a view count free from outside manipulation "on the security

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safeguards of other G-Y services, such as G-mail."

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is not plausible that users would extrapolate from G-mail

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safeguards that view counts would be accurate or rely on that

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conclusion in posting videos to YouTube.

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describe an implied promise that YouTube would be free from fake

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views.

3AC ¶ 96.

It

Further, Plaintiffs

Plaintiffs allegedly found this implied promise in section

United States District Court
For the Northern District of California

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4H of the terms of service, the absence of any disclosure

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statement alerting users that the view count might be inaccurate

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and Defendants' control over the view count.

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are not sufficiently particular under Federal Rule of Civil

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Procedure 9 to claim an implied promise that was false when made.

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These allegations

These new theories also fail for some of the same reasons

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Plaintiffs' fraudulent concealment claim failed.

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do not allege out-of-pocket damages.

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the following proposed damages: payments to technical personnel to

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convert, condense and upload the LuvYa video and manage comments

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and responses on the Stevie Marco YouTube channel; loss of

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advertising expenses paid to Facebook to promote LuvYa; the

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"views, likes, and favorable public comments that are the property

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of Plaintiffs"; the fair market value of these likes and comments;

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and attorneys' fees.

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damages, nor any other damages listed in the 3AC, reflect "the

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difference in actual value at the time of the transaction between

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what the plaintiff gave and what he received" due to the allegedly

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fraudulent nature of the transaction.
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3AC ¶ 117.

Plaintiffs still

Their allegations include

None of these enumerated alleged

See Order Dismissing 2AC at

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18 (quoting All. Mortg. Co. v. Rothwell, 10 Cal. 4th 1226, 1240

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(1995)).4

Further, the 3AC still fails to allege detrimental

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reliance.

See Order Dismissing 2AC at 20.

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Plaintiffs' 3AC does "not allege the more advantageous marketing

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they would have pursued had they not posted LuvYa on YouTube."

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Id.

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Like the 2AC,

The Court GRANTS Defendants' motion to dismiss Plaintiffs'
fraud claim, without leave to amend.
III. Libel Per Quod

United States District Court
For the Northern District of California

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Libel per quod requires that a defamatory statement is

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capable of being understood to refer to each plaintiff and was so

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understood.

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concerning" requirement for a libel per quod claim.

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Dismissing 2AC at 24-25.

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regarding this requirement as follows.

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Plaintiffs previously failed to satisfy this "of and
Order

The 3AC elaborates their allegations

On February 14, 2014, Plaintiffs uploaded LuvYa to YouTube.

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The "Title" and "More" section of the video on YouTube "listed

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Song fi, the Rasta Rock Opera, young N.G.B, and musicians from the

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Rasta Rock Opera musical group, including Plaintiff Joe

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Brotherton, as performers."

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various forms of dissemination, and attach emails and Facebook

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messages.

Id. ¶ 124.

Plaintiffs describe the

Exhibit 5 is an email that Brotherton sent to N.G.B.'s

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Plaintiffs argue that the damages for their fraud claim
should be calculated under California Civil Code section 3333,
which "will compensate for all the detriment proximately caused
thereby, whether it could have been anticipated or not." This
section applies to non-contract torts in general, whereas Alliance
Mortgage squarely discusses the monetary loss that a plaintiff
alleging fraud must suffer for relief.
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teacher, identifying N.G.B.

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the Rasta Rock Opera.

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Stevie Marco (a member of the Rasta Rock Opera) that share the

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video link.

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Exhibit 7 contains emails from Brotherton disseminating the video

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link, stating that he and N.G.B. are in the video together, and

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that the song in the video is part of the Rasta Rock Opera album.

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Song fi and Rasta Rock Opera also disseminated printed materials

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at shows, which stated, "Song fi, in association with the Rasta

The forwarded message also mentions

Exhibit 6 contains several emails sent by

These emails mention Rasta Rock Opera and N.G.B.

United States District Court
For the Northern District of California

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Rock Opera present 'LuvYa,'" and instructed attendees to log onto

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the Stevie Marco Channel on YouTube to view it.

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3AC ¶ 130.

On April 18, 2014, Defendants took down LuvYa and posted the

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allegedly defamatory notice.

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"what was the problem with the content of the 'LuvYa' video

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involving young kids."

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the original LuvYa link until August 11, 2014.

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Id. ¶ 135.

Id. ¶ 131.

Fans asked Brotherton

The notice remained "live" on
Id. ¶ 150.

These allegations are sufficient to show that the notice was

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capable of being understood to refer to each Plaintiff, and that

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it actually was so understood.

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(quoting SDV/ACCI, Inc. v. AT&T Corp., 522 F.3d 955, 960 (9th Cir.

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2008)).

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LuvYa video link before Defendants replaced the video with the

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notice.

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content, which demonstrates that third parties connected the

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notice to Brotherton.

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alleges that N.G.B. had an agreement with PCS to perform in a

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series of commercials on the company's webpage.

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was "cancelled when PCS clients saw the Notice on the original
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See Order Dismissing 2AC at 24

Plaintiffs identified themselves when circulating the

Fans asked Brotherton about the problem with the video's

See 3AC ¶ 131.

Additionally, the 3AC

The performance

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'LuvYa' video link."

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PCS saw the notice and attributed it to N.G.B.

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(explaining that Nike saw the notice and canceled a Rasta Rock

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Opera event because it did not want to be associated with

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inappropriate children's content).

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3AC ¶ 153(b).

The inference here is that
See also id. ¶ 167

Defendants argue that the defamatory statement must say

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something about Plaintiffs, rather than about the video itself.

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However, as the California Court of Appeal has recognized,

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statements may simultaneously result in "personal aspersion and

United States District Court
For the Northern District of California

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commercial disparagement."

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170 Cal. App. 3d 543, 550 (1985).

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implicated in the notice list many forms of depravity that may

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appear in a video; an average reader may find defamatory meaning

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in an accusation of posting a video that violates these

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guidelines.

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Polygram Records, Inc. v. Super. Ct.,
Here, the Community Guidelines

See Order Dismissing 2AC at 24.

Defendants also argue that Plaintiffs manufactured a libel

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claim by disseminating the link in emails and messages naming

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Plaintiffs.

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link before Defendants replaced the video with the notice.

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However, as explained above, Plaintiffs spread the

The Court DENIES Defendants' motion to dismiss Plaintiffs'
libel per quod claim.
IV.

Tortious Interference with Business Relationships

Plaintiffs Song fi and Rasta Rock allege that Defendants

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intentionally interfered with their business relationships "with

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the Nike Corporation and with other business partners, both

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existing and in negotiation and with Precision Contracting

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Solutions ('PCS'), the funding entity for Song fi and Rasta Rock."

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3AC ¶ 160.

David Drummond, Defendants' Chief Legal Officer, Board
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Member and Executive was notified in writing on May 12, 2014 about

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the impact that the allegedly libelous notice was having on Song

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fi's and Rasta Rock's business relationships.

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The letter states that the removal interfered, "without

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justification, with Song fi and Mr. Marco's prospective economic

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relationships."

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economic relationships.

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Id. Ex. 9.

Id. ¶ 161; Ex. 9.

The letter mentions no specific

Economic relationships "were seriously damaged, and in some
cases destroyed, as a result of [Defendants'] false and defamatory

United States District Court
For the Northern District of California

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Notice."

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promoted LuvYa in persuading Nike to allow Stevie Marco to perform

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the Star Spangled Banner on July 4, 2014 on the roof of its store

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in Georgetown.

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learned of the notice "and as a result was unwilling to risk a

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possible image problem in associating Nike with inappropriate

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children's content."

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PCS notified Song fi and Rasta Rock that it was suspending all

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further funding until the notice was retracted.

Id. ¶ 164.

For example, Song fi and Rasta Rock had

Id. ¶ 165.

Nike called off the event because it

Id. ¶ 167.

Additionally, on May 10, 2014,

Id. ¶ 171.

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Under California law, a claim for tortious interference

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requires: "(1) an economic relationship between the plaintiff and

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some third party, with the probability of future economic benefit

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to the plaintiff; (2) the defendant's knowledge of the

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relationship; (3) intentional acts on the part of the defendant

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designed to disrupt the relationship; (4) actual disruption of the

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relationship; and (5) economic harm to the plaintiff proximately

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caused by the acts of the defendant."

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Lockheed Martin Corp., 29 Cal. 4th 1134, 1153 (2003).

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Plaintiffs' libel per quod claim survives this motion to dismiss,
13

Korea Supply Co. v.
Because

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Plaintiffs have sufficiently alleged that YouTube's conduct was

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"wrongful by some legal measure other than the fact of

3

interference itself."

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Inc., 11 Cal. 4th 376, 393 (1995).

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Della Penna v. Toyota Motor Sales, U.S.A.,

Here, Song fi's and Rasta Rock's allegations are sufficient

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to support that some economic relationship existed, at least as to

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PCS, which was funding them.

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actual disruption of the relationship and economic harm

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proximately caused by Defendants' acts.

They are also sufficient to convey

Further, as Judge Conti

United States District Court
For the Northern District of California

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concluded in his order dismissing the First Amended Complaint,

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Plaintiffs' allegations could satisfy the knowledge and

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intentional act requirements.

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Defendants' motion to dismiss Song fi's and Rasta Rock's tortious

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interference claim.

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For these reasons, the Court DENIES

CONCLUSION
The Court GRANTS Defendants' motion to dismiss Plaintiffs'

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Cartwright Act claim and fraud claim, without leave to amend.

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DENIES Defendants' motion to dismiss Plaintiffs' libel per quod

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claim and the claim for tortious interference with business

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relations.

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IT IS SO ORDERED.

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Dated: June 27, 2016
CLAUDIA WILKEN
United States District Judge

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It