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

Filing 97

ORDER GRANTING MOTION TO DISMISS SECOND AMENDED COMPLAINT by Judge Claudia Wilken granting 77 Motion to Dismiss. (jebS, COURT STAFF) (Filed on 4/4/2016)

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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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United States District Court
For the Northern District of California

ORDER GRANTING
MOTION TO DISMISS
SECOND AMENDED
COMPLAINT

v.
(Docket No. 77)
GOOGLE, INC., YOUTUBE LLC,

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No. C 14-5080 CW

Defendants.
________________________________/

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Song fi, Inc., the Rasta Rock Corporation, Joseph N.

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Brotherton, president of both Song fi and Rasta Rock, and

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Brotherton's six-year-old son N.G.B. (collectively Plaintiffs)1

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filed a complaint against Google, Inc. and YouTube, LLC.2

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Defendants moved to dismiss the 2AC under Federal Rule of Civil

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Procedure 12(b)(6).

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amend.

The Court grants the motion, with leave to

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BACKGROUND
I.

Google, YouTube and the alleged conspiracy
This case concerns Defendants' removal of a music video

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entitled "LuvYa LuvYa LuvYa" (hereafter LuvYa) from its original

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page on YouTube's website.

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in the 2AC, Docket No. 70.

The Court recites the facts as alleged

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26

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Lisa Pellegrino, N.G.B.'s mother, is no longer a plaintiff.

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YouTube is wholly owned and operated by Google.

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Defendant Google, through Defendant YouTube's website, is

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"the dominant provider of on-line video hosting as well as a major

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advertising platform for industry and consumer ads, using music

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and entertainment videos as the magnet for consumer traffic."

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¶ 15.

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by selling pay-per-click advertising at prices that are based on

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the number of times a given video has been viewed, tracked by the

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visible "view count."

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view count, id. ¶ 62, and also receive money from advertisers, id.

United States District Court
For the Northern District of California

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2AC

Defendants profit from contributors' uploaded video content

Id. ¶ 17-19, 26.

Defendants control this

¶ 63.
Before interacting with YouTube's website, users must assent

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to a Terms of Service Agreement.

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"You agree not to use or launch any automated system, including

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without limitation, 'robots,' 'spiders,' or 'offline readers,'

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that accesses the Service in a manner that sends more request

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messages to YouTube servers in a given period of time than a human

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can reasonably produce in the same period by using a conventional

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on-line web browser."

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Id. ¶ 21.

It states, in part:

Id. ¶ 23.

View counts can be inflated by the use of such automated

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systems.

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"invoicing for fake robotic views" that they know "are fake and

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that consist of millisecond duration times."

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Defendants sell "sponsored ads" to organizations they promote;

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these organizations profit from robotic view count fraud that

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Defendants do not attempt to eliminate.

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promoted organizations include Universal Music Group (Universal),

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School Boy Records and Raymond Braun Media Group, all of which

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allegedly conspired to promote certain artists signed to
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Plaintiffs allege that Defendants commit fraud by

Id. ¶ 31.

Id. ¶¶ 36-37.

These

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Universal.

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2AC names Susan Wojcicki, Larry Page and Sergey Brin, who

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allegedly have direct knowledge of Defendants' participation in

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the view count fraud.

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fraud is not disclosed on Defendants' websites or within the Terms

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of Service.

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Id. ¶ 58.

On Defendants' side of the conspiracy, the

Id. ¶ 59.

The existence of view count

Id. ¶¶ 42-44.

According to Plaintiffs, this conspiracy benefits the

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conspirators to the detriment of Plaintiffs, the independent

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artist community and any artist not signed to Universal or other

United States District Court
For the Northern District of California

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aligned companies.

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relevant markets . . . music and video distribution in California

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and the United States."

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that the conspiracy allows Defendants "to restrain trade by

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'fixing' perceived public popularity through intentionally false,

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deceptive, and manipulated View Counts."

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Id. ¶¶ 65-66, 69.

The 2AC names as "the

Id. ¶ 57; see also id. ¶ 65.

It alleges

Id. ¶ 67.

As examples, the 2AC points to Justin Bieber's "Baby" and

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Psy's "Gangnam Style" videos, both of which achieved fame on

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YouTube.

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Bieber's "Baby" video was uploaded, Defendants agreed to allow

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Universal and Bieber's manager, Scooter Braun, "to robotically and

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systematically inflate the 'Baby' View Count to over a billion

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views."

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comparing the "Baby" view count to Bieber's record sales, the view

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count for Michael Jackson's "Thriller" video and the populations

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of the United States, the world and Bieber's target audience.

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¶¶ 76-80.

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2.4 billion view count displayed for Psy's "Gangnam Style" video.

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Id. ¶¶ 81-82.

Plaintiffs allege that, on or before the date that

Id. ¶¶ 70-75.

Plaintiffs bolster this allegation by

Id.

Even more incredible, according to Plaintiffs, is the

The alleged conspiracy among Braun's management
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1

company, with whom Psy signed, Universal and Defendants permitted

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robotic view count inflation.

Id. ¶¶ 83-89.

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As further proof of the conspiracy, Plaintiffs mention an

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article entitled "Psy, Bieber and My Journey Into the World of

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Fake YouTube Views."

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possibly purchasing 200 million YouTube views for $150,000.

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¶¶ 90-91.

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having "been scamming billions from advertisers with fake views."

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Id. ¶ 93.

United States District Court
For the Northern District of California

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Id. ¶ 90.

The article describes Braun
Id.

The article further describes the "YouTube industry" as

Plaintiffs do not attach the article or explain how its

author obtained this information.
In furtherance of this conspiracy, Defendants remove videos

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from artists not signed with conspirators and post false and

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defamatory notices about them "to keep videos of smaller record

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labels and the independent artist community from competing with

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videos of those in the Conspiracy."

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II.

Id. ¶ 94.

Plaintiffs' LuvYa Video

Plaintiffs uploaded LuvYa, "a children's Valentine's Day

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video" on February 14, 2014.

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members of a musical group called the Rasta Rock Opera.

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explains that the Rasta Rock Corporation does business as the

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Rasta Rock Opera.

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Brotherton played the trumpet.

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Rock's publisher and distributor.

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the publishing and distribution rights for all music, video

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productions and other intellectual property created by Rasta Rock.

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2AC ¶ 184.

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Id. ¶ 95.

The video featured

The video starred Plaintiff N.G.B.
Id. ¶ 110.

The 2AC

Id.

Song fi is Rasta

Song fi owns fifty percent of

Plaintiffs allege that, in deciding to assent to the Terms of
Service and to post LuvYa on YouTube, they relied on Defendants'
4

1

"indication of its intent to police View Count fraud" and to

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enforce the Terms of Service "fairly among all users in an open,

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honest and non-prejudicial manner."3

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Id. ¶¶ 45-53.

Brotherton and N.G.B.'s mother shared the video with family

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and friends; Rasta Rock and Song fi shared it as well.

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99.

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public comments, "all of which were earned without any robotic

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enhancement or any violation" of the Terms of Service.

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Id. ¶¶ 96-

The video ultimately gathered over 23,000 views, likes and

Id. ¶ 100.

Song fi and Rasta Rock promoted LuvYa "in negotiations with

United States District Court
For the Northern District of California

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potential funders, business partners, sponsors and media

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organizations."

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Rasta Rock secure a sponsorship from Nike for a planned July 4,

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2014 performance by Stevie Marco, a member of the Rasta Rock Opera

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musical group, on the roof of Nike's Georgetown store in

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Washington, D.C.

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payment was anticipated for this performance.

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Id. ¶ 122.

Id. ¶ 124.

In particular, promoting LuvYa helped

The 2AC does not allege that any

In April 2014, a Google representative contacted Song fi and

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Rasta Rock to persuade them to advertise on YouTube, an offer that

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Song fi and Rasta Rock refused.

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Defendants removed LuvYa and posted a notice in its place that

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stated: "This video has been removed because its content violates

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YouTube's Terms of Service . . . Sorry about that."

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The notice contained a link to the Terms of Service.

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Service contained a link to and incorporated the Community

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Guidelines, which described "content violations as including child

Id. ¶ 103.

Thereafter,

Id. ¶ 104.
The Terms of

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3

Plaintiffs make these characterizations, but the Terms of
Service do not include these representations.
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pornography, child abuse, animal abuse, drug abuse, under-age

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drinking, under-age smoking, bomb making and terrorist activity."

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Id. ¶¶ 107-08.

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address of the music video.

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LuvYa did not violate any content prohibitions, id. ¶ 109, and

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that they have never violated any aspect of the Terms of Service,

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id. ¶ 24.

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clarified that LuvYa was removed because its view count was

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improperly inflated in violation of the Terms of Service.

United States District Court
For the Northern District of California

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The notice was "kept live" on the original web
Id. ¶ 106.

Plaintiffs allege that

Defendants sent a private email to Plaintiffs that

Id.

¶ 113.
Following the video removal, Nike cancelled Marco's Fourth of

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July performance citing "a possible image problem in associating

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Nike with inappropriate children's content."

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Additionally, Song fi's funder, a construction firm which had

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shared LuvYa to highlight its investment in the arts and family

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values, suspended all funding until the notice could be retracted.

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Id. ¶ 129.

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Id. ¶ 126.

III. Procedural History
Plaintiffs originally filed their complaint in the District

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Court for the District of Columbia.

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moved to enforce the contract's forum selection clause, which

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required that all disputes be decided in Santa Clara County in

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California.

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including both the forum selection clause and the Terms of

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Service, was unconscionable.

Docket No. 1.

Defendants

Plaintiffs argued that the contract with YouTube,

Applying the law of the District of

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Columbia,4 Docket No. 19, District of Columbia Opinion at 11, the

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District of Columbia court concluded that the Terms of Service

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were not unconscionable, and that the venue selection clause

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requiring litigation in Santa Clara County was enforceable, id. at

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14-15.

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California.

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The court transferred the case to the Northern District of
Id. at 16.

On June 10, 2015, Northern District of California Judge Conti

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ruled on Defendants' motion to dismiss Plaintiffs' First Amended

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Complaint, which Plaintiffs filed before the case was transferred.

United States District Court
For the Northern District of California

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Docket No. 53, Order Dismissing First Amended Complaint (1AC).

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That complaint alleged five causes of action: libel, breach of

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express contract, breach of implied contract, tortious

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interference with business relationships, and violations of the

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D.C. Consumer Protection Procedures Act.

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Id. at 6.

The court dismissed the breach of express and implied

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contract claims.

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YouTube to remove 'Luv ya' and eliminate its view count, likes,

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and comments."

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"Plaintiffs cannot state a claim for breach of the Terms of

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Service in removing the video, because conduct authorized by a

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contract cannot give rise to a claim for breach of the agreement."

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Id.

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of contract based on the video's relocation because, under the

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Terms of Service, "the specific location of a video is an aspect

It found that "the Terms of Service permitted

Id. at 13.

"As a result," the court concluded,

Further, Plaintiffs did not have a cause of action for breach

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4

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The District of Columbia court concluded that "California
and District of Columbia law on the issue of unconscionability do
not conflict." D.C. Opinion at 11.
7

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of YouTube's 'Service' that it retains the right to discontinue at

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any time."

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Id. at 14.

Regarding the libel claim, the court found "that YouTube's

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allegedly libelous statement is not libelous on its face . . .

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Instead, to the extent Plaintiffs have an actionable libel claim

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it is a claim for libel per quod."

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quod requires pleading special damages, the court dismissed

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Plaintiffs' libel claims but granted leave to amend.

Id. at 16.

Because libel per

Id. at 17.

A tortious interference claim requires an allegation that the

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United States District Court
For the Northern District of California

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defendant's conduct was "wrongful by some legal measure other than

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the fact of interference itself."

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v. Toyota Motor Sales, U.S.A., Inc., 11 Cal. 4th 376, 385 (1995)).

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Because Plaintiffs had not adequately alleged any of their other

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legal theories, Judge Conti concluded that they did not satisfy

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this element.

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interference claim, too.

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Columbia Consumer Protection Procedures Act claim, but granted

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leave to amend to plead a similar California consumer protection

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claim.

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Id. at 18 (quoting Della Penna

The court granted leave to amend the tortious
The court also dismissed the District of

Id. at 20.

In July 2015, Plaintiffs filed a motion for leave further to

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amend their complaint by adding a fraud claim, a California

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Cartwright Act claim and a California Consumer Legal Remedies Act

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claim.

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interference claim and the libel claim.

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to amend to allow the additional claims, but stated that "allowing

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additional new claims after this amendment would be too

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prejudicial to Defendants and no longer in the interests of

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justice, and cautions Plaintiffs against any such future request."
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The proposed complaint still contained the tortious
The court granted leave

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Docket No. 67, Order on Motion to File Second Amended Complaint at

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8.

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transferred to a new judge, the court declined to make any

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findings with respect to the sufficiency of the fraud and

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Cartwright Act claims in the proposed Second Amended Complaint

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filed with the motion.

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the proposed complaint attached to the motion to allow counsel "a

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chance to ensure that the actual [2AC] filed is refined in light

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of arguments by counsel and law cited by the Court."

Because Judge Conti was about to retire and the case would be

Id.

The court also granted leave to amend

Id.

United States District Court
For the Northern District of California

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Plaintiffs' 2AC does add factual allegations beyond those in the

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proposed amended complaint filed with their motion for leave to

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amend.

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insufficient to state a claim.

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However, as discussed below, their allegations are still

Plaintiffs allege five legal claims: fraudulent concealment,

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violation of the Cartwright Act, libel per quod, tortious

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interference and violation of the California Consumers Legal

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Remedies Act.

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77, Plaintiffs responded, and Defendants replied.

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oral argument on February 23, 2016.

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Defendants filed this motion to dismiss, Docket No.
The Court held

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

22

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

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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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Fed. R.

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

Bell Atl. Corp. v.

In considering whether the

1

material allegations as true and construe them in the light most

2

favorable to the plaintiff.

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896, 898 (9th Cir. 1986).

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to legal conclusions.

5

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

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taken as true.

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

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)

8

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

9

following approach for assessing the adequacy of a plaintiff’s

United States District Court
For the Northern District of California

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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.

12
13
14
15

A claim has facial plausibility “when the plaintiff pleads factual
16
content that allows the court to draw the reasonable inference
17
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

19
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.

21
at 556).

Determining whether a complaint states a plausible claim

22
for relief is “a context-specific task that requires the reviewing
23
court to draw on its judicial experience and common sense.”

Id.

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at 679.
25
When granting a motion to dismiss, the court is generally
26
required to grant the plaintiff leave to amend, even if no request
27
to amend the pleading was made, unless amendment would be futile.
28
10

1

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

2

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

3

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

4

amended to cure the defect requiring dismissal "without

5

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

6

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

7

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.

Id. at 296-97.

In determining whether amendment

Courts consider whether the plaintiffs

United States District Court
For the Northern District of California

10

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

13

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

14

broad where the court has already given the plaintiff an

15

opportunity to amend his complaint.").

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DISCUSSION

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I.

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

Preliminary Matters
Plaintiffs allege that the Court has diversity jurisdiction

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over this lawsuit.

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the assertion that Brotherton and N.G.B. are "residents" of

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Washington, D.C.

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an allegation of citizenship, rather than mere residency.

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Mantin v. Broad. Music, Inc., 248 F.2d 530, 531 (9th Cir. 1957).

24

Individual residents of Washington, D.C. can be citizens of

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Washington, D.C. for diversity jurisdiction purposes and must so

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allege.

27

F.3d 452, 454 n.1 (D.C. Cir. 2008) (granting an unopposed motion

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to amend the complaint to state that an individual "resides in,
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2AC ¶ 7.

Id. ¶¶ 3-4.

This allegation is based in part on

However, the Ninth Circuit requires
See

See Draim v. Virtual Geosatellite Holdings, Inc., 522

1

and is a citizen of, Washington, D.C.").

2

jurisdiction to be proper, Plaintiffs must allege that Brotherton

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and N.G.B. are citizens of Washington, D.C.

Thus, for the Court's

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In addition, if N.G.B. is to continue as a plaintiff, a

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qualified adult must move the court to be appointed N.G.B.'s

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guardian ad litem.

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II.

Cartwright Act

The Cartwright Act, codified at California Business and
Professions Code section 16700 et seq., was "enacted to promote

United States District Court
For the Northern District of California

10

free market competition and to prevent conspiracies or agreements

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in restraint or monopolization of trade."

Exxon Corp. v. Super.

12

Ct., 51 Cal. App. 4th 1672, 1680 (1997).

To state a claim under

13

the Cartwright Act, Plaintiffs must allege: "(1) the formation and

14

operation of the conspiracy; (2) illegal acts done pursuant

15

thereto; and (3) damage proximately caused by such acts."

16

High-Tech Emp. Antitrust Litig., 856 F. Supp. 2d 1103, 1126 (N.D.

17

Cal. 2012) (quoting Kolling v. Dow Jones & Co., 137 Cal. App. 3d

18

709, 718 (1982)).

19

'where the complaint makes conclusory allegations of a combination

20

and does not allege with factual particularity that separate

21

entities maintaining separate and independent interests combined

22

for the purpose to restrain trade.'"

23

Litig., 506 F. Supp. 2d 308, 320 (N.D. Cal. 2007) (quoting Freeman

24

v. San Diego Ass'n of Realtors, 77 Cal. App. 4th 171, 189 (1999));

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see also Medina v. Microsoft Corp, 2014 WL 4243992, at *3 (N.D.

26

Cal.) ("Litigants must plead Cartwright Act violations with a high

27

degree of particularity, alleging factual allegations of specific

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conduct directed toward the furtherance of the conspiracy, in more
12

In re

"Cartwright Act claims are properly dismissed

In re Netflix Antitrust

1

than conclusory terms." (citing G.H.I.I. v. MTS, Inc., 147 Cal.

2

App. 3d 256, 265-66 (1978))).

3

Defendants argue that the Cartwright Act allegations in the
2AC are insufficient with respect to causation and damages.

5

Plaintiffs respond that part of the alleged conspiracy was that

6

Defendants removed videos of artists not signed with their co-

7

conspirators; allegedly, Plaintiffs were injured by both the

8

removal of the video and the devaluation of their intellectual

9

property resulting from inflated view counts of other videos.

10
United States District Court
For the Northern District of California

4

2AC ¶ 94 ("While G-Y and the named G-Y individuals allow the

11

Conspirators to robotically inflate the View Count of certain

12

videos in violation of 4H of the TOS with impunity, G-Y at its

13

whim removes certain videos of artists not signed to the

14

Conspirators and who have not violated the TOS.").5

15

See

Under the Cartwright Act, a proximate cause requirement,

16

frequently referred to as the "standing to sue" requirement,

17

requires that the party bringing the action must be within the

18

"target area" of the antitrust violation rather than "incidentally

19

injured thereby."

20

must be the "direct result of the unlawful conduct," rather than

21

"secondary," "consequential" or "remote."

22

words, an antitrust plaintiff "must show that it was injured by

23

the anticompetitive aspects or effects of the defendant's conduct,

24

as opposed to being injured by the conduct's neutral or even

25

procompetitive aspects."

26

Century Theatres, Inc., 198 Cal. App. 4th 1366, 1380 (2011).

Kolling, 137 Cal. App. 3d at 723.

Id. at 724.

5

In other

Flagship Theatres of Palm Desert, LLC v.

27
28

The injury

The 2AC refers to Defendants as "G-Y."
13

1

For example, consumers who alleged paying excessive prices

2

for cellular service due to a price fixing agreement claimed a

3

direct injury.

4

1224, 1234-35 (1993).

5

impacted by a price fixing agreement likewise alleged injury

6

adequately.

7

claiming sales were lost due to price fixing" have necessarily

8

suffered a direct antitrust injury.

9

Cellular Plus v. Super. Ct., 14 Cal. App. 4th
Corporations that effected sales that were

Id. at 1235.

However, "not all business entities

Id.

The allegations in the 2AC do not support that Plaintiffs'

United States District Court
For the Northern District of California

10

injuries were proximately caused by the alleged conspiracy.

11

facts alleged in the 2AC relate to a conspiracy to inflate the

12

YouTube view counts of Universal artists such as Psy and Justin

13

Bieber.

14

also agreed to remove music videos from non-Universal artists.

15

Thus, the 2AC does not allege that the conspiracy directly injured

16

Plaintiffs.

17

The

No factual allegations support that these conspirators

Plaintiffs have also insufficiently alleged that the alleged

18

conspiracy caused harm to competition.

19

at the hearing that YouTube is an important vehicle for music

20

distribution, the conspiracy allegations relate not to YouTube as

21

a whole but to view count manipulation.

22

with greater particularity how the view count manipulation

23

conspiracy allegedly harmed competition.

24

Although Plaintiffs argued

Plaintiffs must allege

In addition to alleging harm stemming from the video's

25

removal, Plaintiffs allege that they are entitled to damages based

26

on their "intellectual property . . . that was devalued by

27

defendants' antitrust violations under the Cartwright Act."

28

¶ 168.

Plaintiffs' devaluation theory goes as follows.
14

2AC

1

Defendants permitted their co-conspirators to use robotic view

2

count inflation for some videos, like "Baby" and "Gangnam Style."

3

This caused other videos, like Plaintiffs', to appear by

4

comparison less popular than they otherwise would.

5

would reduce future sales of other music that Plaintiffs would try

6

to sell.

7

theory are, at most, remote and speculative.

8
9

This in turn

The Court concludes that any damages alleged under this

Further, the Court finds that the factual allegations are
insufficient to support a claim that Google or YouTube were

United States District Court
For the Northern District of California

10

involved in a conspiracy to inflate view counts.

11

Corp. v. Twombly, 550 U.S. 544, 556 (2007) (holding that stating a

12

claim under the Sherman Act "requires a complaint with enough

13

factual matter (taken as true) to suggest that an agreement was

14

made").

15

supporting that Google or YouTube entered into the conspiracy.

16

Further, it does not allege sufficiently how Defendants worked

17

with the other alleged conspirators.

18

description of view counts suggests that the number of "views" is

19

equal to the number of viewers.

20

counts encapsulate more views than viewers because viewers may

21

view a video multiple times.

22

See Bell Atl.

The 2AC fails to provide facts with any particularity

Finally, Plaintiffs'

It is probable that these view

Because Plaintiffs have failed to allege facts supporting

23

that the alleged antitrust violation proximately caused them

24

injury, and failed to allege facts with particularity that would

25

support a conspiracy including Defendants, Defendants' motion to

26

dismiss Plaintiffs' Cartwright Act claim is GRANTED with leave to

27

amend.

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15

1
2

III. Fraudulent Concealment6
“In alleging fraud or mistake, a party must state with
particularity the circumstances constituting fraud or mistake.”

4

Fed. R. Civ. P. 9(b).

5

give defendants notice of the particular misconduct which is

6

alleged to constitute the fraud charged so that they can defend

7

against the charge and not just deny that they have done anything

8

wrong.”

9

Statements of the time, place and nature of the alleged fraudulent

10
United States District Court
For the Northern District of California

3

activities are sufficient, id. at 735, provided the plaintiff sets

11

forth “what is false or misleading about a statement, and why it

12

is false.”

13

Scienter may be averred generally, simply by saying that it

14

existed.

15

2007) (en banc); Fed. R. Civ. P. 9(b) (“Malice, intent, knowledge,

16

and other conditions of a person's mind may be alleged

17

generally”).

18

knowledge, pleadings based on information and belief may satisfy

19

Rule 9(b) if they also state the facts on which the belief is

20

founded.

21

540 (9th Cir. 1989).

22

The allegations must be “specific enough to

Semegen v. Weidner, 780 F.2d 727, 731 (9th Cir. 1985).

Ebeid v. Lungwitz, 616 F.3d 993, 998 (9th Cir. 2010).

See Odom v. Microsoft Corp., 486 F.3d 541, 554 (9th Cir.

As to matters peculiarly within the opposing party’s

Moore v. Kayport Package Express, Inc., 885 F.2d 531,

To be liable for fraudulent concealment under California law,

23

“(1) the defendant must have concealed or suppressed a material

24

fact, (2) the defendant must have been under a duty to disclose

25
26
27
28

6

Defendants state that Plaintiffs "vacillate between
advancing an implied misrepresentation and a fraudulent
concealment theory." Reply Br. at 6. Because there is no implied
misrepresentation theory in the 2AC, the Court discusses only the
fraudulent concealment theory.
16

1

the fact to the plaintiff, (3) the defendant must have

2

intentionally concealed or suppressed the fact with the intent to

3

defraud the plaintiff, (4) the plaintiff must have been unaware of

4

the fact and would not have acted as he did if he had known of the

5

concealed or suppressed fact, and (5) as a result of the

6

concealment or suppression of the fact, the plaintiff must have

7

sustained damage.”

8

(2007).

9

Hahn v. Mirda, 147 Cal. App. 4th 740, 748

Plaintiffs must plead facts supporting these elements.

A duty may arise where there is a fiduciary or confidential

United States District Court
For the Northern District of California

10

relationship, where a defendant does not disclose facts that

11

materially qualify a separate disclosure or render that disclosure

12

likely to mislead, where a defendant knows that facts not

13

reasonably discoverable by the plaintiff are only known or

14

accessible to the defendant, and where a defendant actively

15

conceals discovery from the plaintiff.

16

City of L.A., 2 Cal. 3d 285, 294 (1970).

17

fiduciary or confidential relationship, there must be "some

18

relationship between the parties which gives rise to a duty to

19

disclose such known facts."

20

App. 4th 1178, 1187 (2014) (emphasis in original).

21

arise from the relationship between . . . parties entering into

22

any kind of contractual agreement."

23

contractual relationship may lay the groundwork for a duty to

24

disclose, it does not necessarily create a fiduciary duty.

25

Warner Constr. Corp. v.
Where there is no

Hoffman v. 162 N. Wolfe LLC, 228 Cal.

Id.

This duty "may

Thus, although a

Defendants argue that Plaintiffs did not properly plead

26

damages from the fraudulent concealment.

27

when no fiduciary relationship exists, a fraudulent concealment

28

plaintiff may only recover out-of-pocket losses.
17

Under California law,

Daly v. Viacom,

1

Inc., 238 F. Supp. 2d 1118, 1126 (N.D. Cal. 2002); see also

2

Alliance Mortg. Co. v. Rothwell, 10 Cal. 4th 1226, 1240 (1995)

3

("In California, a defrauded party is ordinarily limited to

4

recovering his 'out-of-pocket' loss.").

5

"directed to restoring the plaintiff to the financial position

6

enjoyed by him prior to the fraudulent transaction, and thus

7

awards the difference in actual value at the time of the

8

transaction between what the plaintiff gave and what he received."

9

Alliance Mortg., 10 Cal. 4th at 1240; see also Fladeboe v. Am.

Out-of-pocket damages are

United States District Court
For the Northern District of California

10

Isuzu Motors Inc., 150 Cal. App. 4th 42, 66 (2007).

11

damages are usually calculated as of the time of the transaction.

12

Ambassador Hotel Co. v. Wei-Chuan Inv., 189 F.3d 1017, 1032 (9th

13

Cir. 1999) (citing Salahutdin v. Valley of Cal., Inc., 24 Cal.

14

App. 4th 555, 568 (1994)); see also Negrete v. Allianz Life Ins.

15

Co. of N. Am., 2011 WL 4852314, at *9 (C.D. Cal.).

16

Out-of-pocket

As a threshold matter, the 2AC does not support that

17

Plaintiffs and Defendants were in a fiduciary relationship.

18

2AC states that a fiduciary relationship "is present here in the

19

form of a [Terms of Service] contract."

2AC ¶ 20.

20

legal conclusion that does not suffice.

Further, under California

21

law, a contract, without more, does not create a fiduciary

22

relationship.

The

This is a

Oakland Raiders v. Nat'l Football League, 131 Cal.

23
24
25
26
27
28
18

1

App. 4th 621, 633-34 (2005) (collecting cases).7

2

contract may have created a relationship from which a duty to

3

disclose arises, Plaintiffs have not properly alleged a fiduciary

4

duty.

5

the damages element of fraudulent concealment.

6

Although the

Thus, the 2AC must allege out-of-pocket losses to satisfy

Plaintiffs do not allege any out-of-pocket damages from

7

Defendants' alleged fraudulent concealment of inflated view

8

counts.

9

throughout the 2AC constitute legal conclusions.

The mentions of "out of pocket" damages and expenses
See, e.g., 2AC

United States District Court
For the Northern District of California

10

¶¶ 159; 203-206.

11

out-of-pocket damages because they do not reflect the difference

12

between what Plaintiffs paid YouTube and what they received.

13

Instead, they relate to potential losses of future income and

14

financial relationships with others.

15

("devaluation of plaintiffs' intellectual property and the market

16

value of plaintiffs' live performances"), 203-04 (money lost from

17

Rasta Rock's arrangement with its construction firm funder).

18

of the damages alleged reflect money that Plaintiffs paid after

19

they agreed to the Terms of Service.

20

(discussing money paid in preparation for the July 4, 2014

21

performance on Nike's roof).

22

Plaintiffs, if any, suffered any alleged out-of-pocket damages.

The damages Plaintiffs describe do not amount to

See, e.g., 2AC ¶¶ 160

Some

See id. ¶¶ 205-06

Finally, it is not clear which

23
7

24
25
26
27
28

Indeed, the California Court of Appeal held that a typical
film distribution contract does not create a fiduciary
relationship between the owner of the film and the distributor.
Recorded Picture Co. v. Nelson Entm't, Inc., 53 Cal. App. 4th 350,
370 (1997). In light of this conclusion, it cannot be said that
Plaintiffs and Defendants were in a fiduciary relationship based
on a contract that permitted Plaintiffs to upload a video onto
YouTube for public viewing.
19

1

In sum, no damages alleged constitute out-of-pocket losses

2

proximately caused by Defendants' alleged concealment of their own

3

complicity in and facilitation of artificial view count inflation.

4

See 2AC ¶¶ 42-44.

5

caused by the video's removal and the notice.

6

Rather, any damages were allegedly proximately

Plaintiffs make two additional arguments regarding the

7

damages they plead.

8

precise calculation of damages and that they are entitled to

9

exemplary damages under California Civil Code section 3343.

They argue that a complaint need not allege a

United States District Court
For the Northern District of California

10

Neither argument circumvents the out-of-pocket damages

11

requirement.

12

In addition, Plaintiffs' allegations of fraudulent

13

concealment are not particular enough to satisfy Rule 9(b).

14

2AC states that Defendants promote companies that robotically

15

inflate their view counts, 2AC ¶¶ 35-36, 42, but it is not clear

16

which companies these are.

17

alleged fraudulent scheme began.

18

out at the hearing, the 2AC does not sufficiently allege

19

detrimental reliance.

20

they would not have used YouTube as a central component of their

21

promotional efforts had they known of Defendants' view count

22

practices, but they do not allege the more advantageous marketing

23

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

24
25
26

The

Plaintiffs fail to allege when the
Further, as the Court pointed

Plaintiffs explained at the hearing that

Plaintiffs also fail to allege that they were unaware of the
facts that Defendants concealed.
For these reasons, Defendants' motion to dismiss with respect

27

to the fraudulent concealment claim is GRANTED with leave to

28

amend.
20

1

IV.

Libel Per Quod

2

"Libel is a false and unprivileged publication by writing,

3

printing, picture, effigy, or other fixed representation to the

4

eye, which exposes any person to hatred, contempt, ridicule, or

5

obloquy, or which causes him to be shunned or avoided, or which

6

has a tendency to injure him in his occupation."

7

§ 45.

8

per quod, "is not actionable unless the plaintiff alleges . . .

9

that he has suffered special damage as a proximate result

Cal. Civ. Code

Libel that is not defamatory on its face, that is, libel

United States District Court
For the Northern District of California

10

thereof."

11

allegations were not defamatory per se, and explained that this

12

claim could move forward only if Plaintiffs properly plead special

13

damages.8

14

Coors Co., 157 F.3d 686, 694 (9th Cir. 1998) (explaining that,

15

under California law, "a plaintiff may only prevail on a claim for

16

libel if the publication is libelous on its face or if special

17

damages have been proven").

18

Plaintiffs plead special damages in the 2AC.

19

Reply Br. at 10.

20

Id. § 45a.

Judge Conti found that the libel

Order Dismissing 1AC at 16-17; see Newcombe v. Adolf

Defendants do not dispute that
See Docket No. 80,

However, Defendants argue that the 2AC pleads insufficient

21

facts to allege both defamatory meaning and reference to

22

Plaintiffs.

23

//

24

//

25
26
27
28

8

Plaintiffs argue that Judge Conti implicitly found that
"the [1AC] as pled adequately established the capacity of the
Notice to be defamatory." Response Br. at 19. The Court reads no
such implicit ruling into Judge Conti's order.
21

1

A. Defamatory Meaning

2

Defamatory meaning deals with "the impact of communications

3

between ordinary human beings."

4

Cal. 2d 536, 550 (1959).

5

natural and probable effect upon the mind of the average reader."

6

Id. at 551.

7

is "room for an innocent interpretation."

8
9

MacLeod v. Tribune Pub. Co., 52

The meaning must be measured "by the

Implied defamatory meaning may exist even when there
Id. at 549.

Although the existence of a defamatory meaning is generally a
question of fact for the jury, federal courts may consider the

United States District Court
For the Northern District of California

10

issue at the motion to dismiss stage.

11

Cal. v. Flynn, 744 F.2d 694, 696 (9th Cir. 1984) (citing Forsher

12

v. Bugliosi, 26 Cal. 3d 792, 803, 806 (1980)).

13

a district court to dismiss a complaint for lack of defamatory

14

meaning if "by reasonable implication a defamatory meaning may be

15

found in the communication."

16

806).

17

Church of Scientology of

It is improper for

Id. (quoting Forsher, 26 Cal. 3d at

At the outset, Judge Conti explained in his order that the

18

Community Guidelines "are incorporated in the Terms of Service by

19

reference."

20

considers the Community Guidelines, to which Plaintiffs refer in

21

the operative complaint.

22

contain a bullet point list of "some common-sense rules that will

23

help you steer clear of trouble."

24

Ex. 1, Community Guidelines.

25

the following topics: "pornography or sexually explicit content,"

26

"bad stuff like animal abuse, drug abuse, under-age drinking and

27

smoking, or bomb making," "[g]raphic or gratuitous violence,"

Order Dismissing 1AC at 21.

See 2AC ¶ 108.

Thus, this Court

The Community Guidelines

Docket No. 78, Veltman Dec.,

In order, the bullet points discuss

28
22

1

"gross-out videos . . . intended to shock or disgust," copyright

2

violations, "hate speech," "predatory behavior," and spam.

3

Id.

Defendants mention two related California Superior Court

4

cases which concluded that no reasonable reader would find a

5

defamatory meaning in the Community Guidelines.

6

YouTube, LLC, No. 15-275833 (Cal. Super. Ct. 2015) (Bartholomew

7

I), the court dismissed a claim for libel per se based on these

8

Community Guidelines.

9

assuming the Community Guidelines were not extrinsic evidence, "a

Veltman Dec. Ex. 2.

In Bartholomew v.

It reasoned that, even

United States District Court
For the Northern District of California

10

reasonable reader would not infer that the Video contained the

11

specific kinds of improper content mentioned in the 'Community

12

Guideline Tips' subsection because the subsection explicitly

13

states that the categories listed are merely examples set forth."

14

Id. at 8 (emphasis in original).

15

is "readily apparent" that the examples "do not constitute an

16

exhaustive list."

17

Id.

Further, the court explained, it

Finally, the list includes spam.

Id.

Thereafter, Bartholomew amended her complaint to include a

18

libel per quod claim.

19

(Bartholomew II) sustained YouTube's demurrer, this time without

20

leave to amend, for several reasons.

21

it stated that the notice on the web page referred to YouTube's

22

Terms of Service, rather than its Community Guidelines.

23

As explained above, this Court finds this distinction

24

unpersuasive.

25

some categories on the list could be deemed libelous, such as "Sex

26

and Nudity" and "Hate Speech," other categories, such as

27

"Children," "Copyright" and "Privacy," do not necessarily evoke

28

offensiveness.

The Superior Court's August 5, 2015 order

Veltman Dec. Ex. 3.

First,

Id. at 2.

Second, the Superior Court explained that although

Id. at 2-3.

Ultimately, the court held that a
23

1

reference to the Community Guidelines as a whole is not reasonably

2

susceptible to a defamatory interpretation.

3

Id. at 3.

This Court disagrees; it would not be unreasonable for an

4

average reader to find defamatory meaning in an accusation of

5

violation of the Community Guidelines.

6

listed, the first four mention pornography, child exploitation,

7

animal abuse, bomb making, violence and intent to shock or

8

disgust.

9

as well as "predatory behavior, stalking, threats, harassment,

Of the eight bullet points

The sixth and seventh bullet points mention hate speech,

United States District Court
For the Northern District of California

10

intimidation, invading privacy, revealing other people's personal

11

information, and inciting others to commit violent acts."

12

Community Guidelines.

13

refer to copyright violations and spam does not render the other

14

six bullet points non-defamatory.

15

nature of the list obviate any defamatory meaning.

16

could reasonably infer defamatory meaning here.

17

F.2d at 696 (citing Forsher, 26 Cal. 3d at 806).

That the fifth and eighth bullet points

Nor does the non-exhaustive
A fact-finder

See Flynn, 744

18

B. Reference to Plaintiffs

19

Plaintiffs must plead that the allegedly defamatory

20

statements are "of and concerning" them.

21

A "defamatory statement that is ambiguous as to its target not

22

only must be capable of being understood to refer to the

23

plaintiff, but also must be shown actually to have been so

24

understood by a third party."

25

F.3d 955, 960 (9th Cir. 2008).

26

Flynn, 744 F.2d at 697.

SDV/ACCI, Inc. v. AT&T Corp., 522

Here, Plaintiffs have not alleged facts sufficient to satisfy

27

these requirements.

28

notice in the music video's original place, 2AC ¶ 104, and that
24

Plaintiffs allege that Defendants posted the

1

the notice remained "live" there, id. ¶ 106.

2

clear from the complaint who kept the notice "live" or for how

3

long.

4

acting performance "[o]n the 'LuvYa' video link," id. ¶ 96, and

5

that Song fi had "promoted" the link "aggressively through e-mail

6

chains and social network platforms wherein N.G.B. was identified

7

as being the star of the 'LuvYa' music video along with the Rasta

8

Rock Opera musical group," id. at 98.

9

from these allegations how a third party viewer would have

However, it is not

Plaintiffs also allege that N.G.B. was credited for his

However, it is not clear

United States District Court
For the Northern District of California

10

connected each Plaintiff to the video and the notice or how a

11

third party would have arrived at the video's original web page

12

and then associated the notice with each Plaintiff.

13

should quote or attach the emails and Facebook messages that

14

disseminated the link to the web page that contained the notice,

15

as well as any relevant text that remained on the web page along

16

with the notice after the video's removal, that could link each

17

Plaintiff to the notice.

18

7753406, at *9-*10 (N.D. Cal.) (granting leave to amend in a libel

19

per quod claim where plaintiff did not allege how YouTube notice

20

identified plaintiff).

21
22
23
24

Plaintiffs

See Darnaa LLC v. Google, 2015 WL

The Court GRANTS Defendants' motion to dismiss Plaintiffs'
libel per quod claim, with leave to amend.
V.

California Consumer Legal Remedies Act (CLRA)
“The CLRA makes unlawful certain ‘unfair methods of

25

competition and unfair or deceptive acts or practices' used in the

26

sale of goods or services to a consumer.”

27

Grp., Inc., 120 Cal. App. 4th 746, 753 (2003) (quoting Cal. Civ.

28

Code § 1770(a)).

Wilens v. TD Waterhouse

"By definition, the CLRA does not apply to
25

1

unfair or deceptive practices that occur after the sale or lease

2

has occurred."

3

(N.D. Cal. 2014) (collecting cases) (emphasis in original).

4

Section 1780(a) provides, “Any consumer who suffers any damage as

5

a result of the use or employment by any person of a method, act,

6

or practice declared to be unlawful by Section 1770 may bring an

7

action” under the CLRA.

8

must have been “exposed to an unlawful practice” and “some kind of

9

damage must result.”

United States District Court
For the Northern District of California

10
11

Moore v. Apple, Inc., 73 F. Supp. 3d 1191, 1201

Thus, to pursue a CLRA claim, plaintiffs

Meyer v. Sprint Spectrum L.P., 45 Cal. 4th

634, 641 (2009).
To state a claim under the CLRA, plaintiffs must be

12

"consumers."

13

acquires, by purchase or lease, any goods or services for

14

personal, family, or household purposes."

15

§ 1761(d).

16

use primarily for personal, family, or household purposes."

17

§ 1761(a).

18

services for other than a commercial or business use, including

19

services furnished in connection with the sale or repair of

20

goods."

21

"Consumer" is defined as "an individual who seeks or

Cal. Civ. Code

"Goods" are "tangible chattels bought or leased for
Id.

The CLRA defines "services" as "work, labor, and

Id. § 1761(b).

Plaintiffs Brotherton and N.G.B. allege that YouTube provides

22

consumer services, 2AC ¶ 137, and that they purchased or leased

23

the services by providing consideration in the form of

24

"plaintiffs' consumer traffic on the YouTube website," id. ¶ 139.

25

Plaintiffs' allegations do not support standing for their CLRA

26

claim.

27
28

Plaintiffs have not alleged facts sufficient to support that
YouTube provides a service under the CLRA.
26

Although Plaintiffs

1

may have entered into a contract with YouTube, not all contracts

2

are for goods or services.

3

Ins. Co. of Am., 171 Cal. App. 4th 912, 924-25 (2009) (concluding

4

that insurance agreements are not "services furnished in

5

connection with the sale or repair of goods" because they "are

6

simply agreements to pay if and when an identifiable event

7

occurs").

8

of a service.

9

tangible good or service for the purposes of the CLRA."

See, e.g., Broberg v. Guardian Life

Nor is Plaintiffs' use of the YouTube website the use
"California law is clear that software is not a
In re

United States District Court
For the Northern District of California

10

Sony Gaming Networks & Customer Data Sec. Breach Litig., 903 F.

11

Supp. 2d 942, 972 (S.D. Cal. 2012) (holding that the computer

12

network system used to provide PlayStation Network services, which

13

permitted access to various third party services, did not

14

constitute a "service" under the CLRA).

15

Even if YouTube provided a service, Plaintiffs did not use

16

YouTube "for other than a commercial or business use."

17

Code § 1761(b).

18

the video and promoted it for commercial purposes.

19

contains no facts supporting that Plaintiffs uploaded the video

20

for any other purpose.

21

832941, at *7 (N.D. Cal.) (holding that because plaintiff's stated

22

purpose for using a computer program was commercial and political,

23

plaintiff was not a consumer and did not have standing under the

24

CLRA).

25

Cal. Civ.

The thrust of the 2AC is that Plaintiffs uploaded
The 2AC

See, e.g., Pers. v. Google, Inc., 2007 WL

Further, the facts alleged do not support that Plaintiffs

26

entered into the relationship with YouTube "by purchase or lease."

27

Cal. Civ. Code § 1761(d).

28

phrase 'purchase' or 'lease' contemplates any less than tangible
27

The "more generalized notion that the

1

form of payment--finds no support under the specific statutory

2

language of the CLRA."

3

855, 864 (N.D. Cal. 2011); see also In re Zynga Privacy Litig.,

4

2011 WL 7479170, at *1-*2 (N.D. Cal.) (granting motion to dismiss

5

a CLRA claim where the plaintiffs "alleged that they received

6

Facebook's services 'free of charge'").

7

traffic for YouTube, Plaintiffs' alleged consideration, is

8

certainly a less than tangible form of payment.

9

v. Pandora Media, Inc., 2013 WL 1282980, at *12 (N.D. Cal.)

Claridge v. RockYou, Inc., 785 F. Supp. 2d

Providing consumer

See, e.g., Yunker

United States District Court
For the Northern District of California

10

(concluding that plaintiff lacked standing because the personally

11

identifiable information that Pandora gathered when plaintiff

12

registered for Pandora was a "less than tangible form of

13

payment").

14

allege facts sufficient to support CLRA standing.

15

So is uploading the video.

Plaintiffs have failed to

The 2AC's CLRA allegations are insufficient in other ways,

16

too.

17

2AC ¶ 149-50 (alleging that false view counts deceive consumers,

18

thereby representing that videos have characteristics that they do

19

not have).

20

Rule 9(b) enunciated above.

21

The CLRA claim contains allegations of fraud.

See, e.g.,

The fraud-based portion does not meet the standards of

In addition, Plaintiffs cannot base a CLRA claim on an

22

allegedly unconscionable contract clause.

23

(alleging that the following clause is unconscionable: "YouTube

24

reserves the right to discontinue any aspect of the Service at any

25

time.").

26

"discontinue service" provision of the contract is not

27

unconscionable, District of Columbia Opinion at 13, and Judge

28

Conti reasoned that this clause supported dismissing Plaintiffs'
28

See id. ¶¶ 154-55

The District of Columbia court ruled that the

1

breach of contract claim.

2

not plausible that this contract term is unconscionable because no

3

allegations support that the term is "so one-sided as to 'shock

4

the conscience.'"

5

Dev. (US), LLC, 55 Cal. 4th 223, 246 (2012) (quoting 24 Hour

6

Fitness, Inc. v. Super. Ct., 66 Cal. App. 4th 1199, 1213 (1998)).

7

Further, applying California law, it is

Pinnacle Museum Tower Ass'n v. Pinnacle Market

For all these reasons, the Court GRANTS Defendants' motion to

8

dismiss Plaintiffs' CLRA claim.

9

facts which would establish their standing, dismissal is without

United States District Court
For the Northern District of California

10
11
12

Because Plaintiffs cannot allege

leave to amend.
VI.

Tortious Interference with Business Relationships

Judge Conti outlined the elements for a tortious interference

13

claim.

14

allege any wrongful conduct other than the fact of interference

15

itself, although they may be able to remedy this shortcoming.

16

Thus, the Court GRANTS Defendants' motion to dismiss Plaintiffs'

17

tortious interference claim, with leave to amend.

18

move forward on this claim if they successfully allege one of the

19

remaining causes of action.

Order Dismissing 1AC at 18.

20

Plaintiffs still fail to

Plaintiffs may

CONCLUSION

21

The Court GRANTS Defendants' motion to dismiss Plaintiffs'

22

Cartwright Act claim, Plaintiffs' fraudulent concealment claim,

23

Plaintiffs' libel per quod claim and Plaintiffs' tortious

24

interference with business relationships claim, with leave to

25

amend; Plaintiffs' CLRA claim is dismissed without leave to amend.

26

Within fourteen days of the date of this order, Plaintiffs

27

may file an amended complaint to remedy the deficiencies

28

identified above.

They may not add further claims.
29

If Plaintiffs

1

file an amended complaint, Defendants shall respond to it within

2

fourteen days after it is filed.

3

dismiss, Plaintiffs shall respond to the motion within fourteen

4

days after it is filed.

5

due seven days thereafter.

6

on the papers.

7

If Defendants file a motion to

Defendants' reply, if necessary, shall be
Any motion to dismiss will be decided

IT IS SO ORDERED.

8
9

United States District Court
For the Northern District of California

10

Dated: April 4, 2016
CLAUDIA WILKEN
United States District Judge

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