Mizera v. Google

Filing 31

Mizera v. Google

Doc. 31 Att. 2

Case 5:05-cv-02885-RMW

Document 31-3

Filed 03/29/2006

Page 1 of 8

EXHIBIT B

Dockets.Justia.com

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BRIAN S. KABATECK, SBN 152054 RICHARD L. KELLNER, SBN 171416 2 KABA TECK BROWN KELLNER LLP
350 South Grand Avenue, 39th Floor
3 Los Angeles, California 90071-3801

Telephone: [phone]
4 Facsimile: [phone]

DARRN T. KAPLAN (Admitted Pro Hac Vice) 5 GREGORY E. KELLER (To be admitted Pro Hac Vice)

CHITWOOD HAEY HARNS LLP
6 2300 Promenade II

1230 Peachtree Street, NE
7 Atlanta, Georgia 30309

Telephone: [phone]
8 Facsimile: [phone]

9 LA W OFFICES OF SHAWN KHORR
14550 Haynes Street, Third Floor 10 Van Nuys, California 91411 Telephone: [phone]
11 Facsimile: [phone]

SHAWN KHORRMI, SBN 180411

12 Attorneys for Plaintiffs
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14

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION

15 ADVANCED INTERNT TECHNOLOGIES,
16 INC., a North Carolina corporation, individually and on behalf of all others

Case No. 5:05 -cv-02885 RMW

E-FILING
PLAIIFF'S OPPOSITION TO DEFENDANT'S MOTION FOR STAY
Judge:

18

17 similarly situated, Plaintiff,
vs.
and DOES 1 through 100, Inclusive,

19 GOOGLE, INC., a Delaware Corporation,
20
21

Hon. Ronald M. Whyte
June 17,2005

Defendants. STEVE MIZERA, an Individual, individually and on behalf of all others similarly situated,
Plaintiff,

Date Compo Filed:

22

Trial Date:

None Set

23 vS.
24 GOOGLE,througha100, Inclusive, DOES 1 INC., Delaware Corporation, and
25

Defendants
Plaintiffs Advanced Internet Technologies, Inc. ("AIT") and Steve Mizera ("Mizera") submit
points and authorities in opposition to defendant Google, Inco's

26

27 the following memorandum of

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("Google") Motion for Stay.
o
OPPOSITION TO MOTION FOR STAY
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MEMORAUM OF POINTS AND AUTHORITIES
2 Four days after AIT fied its motion for class certification, Google has fied an administrative

3 motion to stay this action based upon a proposed class action settlement it negotiated in an Arkansas
4 state court proceeding entitled Lane's Gifs and Collectibles, LLC, et al. v. Yahoo! Inc., et al. (Miler

5 County, Ark., Case No. Civ-2005-52-1)("Lane's Gifs"). Google's motion is procedurally defective,)
6 and is not supported by good cause.

7 The proposed class action settlement that Google has negotiated with Lane's Gifs' attorneys

8 has all the hallmarks of a "reverse auction" settlement, and it is speculative (at best) to suggest that it
9 wil be finally approved. From statements made by Google and Lane's Gifs' attorneys to the media,
10 the proposed settlement amounts to this: (a) rather than pay cash or provide any meaningful relief

to

11 the class, Google has agreed to waive a 60 day contractual period contained in its customer's contracts
12 to challenge any charges for invalid clicks; (b) to the extent that Google accepts any of

those

13 challenges, it wil provide credits (instead of cash) for future online advertising in an amount that wil
14 be capped at $90 milion minus any payments made to Lane's Gifs attorneys; and (c) Lane's Gifs
15 attorneys wil receive an attorney fee in cash, the amount of

which wil reduce the cap on the $90

16 milion credit. (Kellner Decl., para. 6.)
17 What Google fails to mention, however, is that AIT and its counsel (the only plaintiffs'
18 repre~entative with significant bargaining leverage) were excluded from any settlement negotiations
19 (Kellner Decl., para. 7), and that

from the outset, the Lane's Gifts action was jurisdictionally

20 defective and subject to dismissal at any time.2

21 In an effort to divert the Court's attention from the collusive nature of its proposed settlement,

22 AIT offers the spurious accusation that AIT is prosecuting a "copycat" class action in this Court to the
23 Lane's Gifs action. (Google Mot., p. 1.) Nothing could be further from the truth. AIT has the only
24

Google's motion to stay this action must be denied because it was not fied as a properly
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27
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noticed motion. Google maintains that it can request a stay under the guise of Local Rule 7-11 - which is limited to "administrative motions." This is not an administrative motion, which Local Rule 7-11 defines as motions such as those ''to exceed applicable page limitations or motions to fie documents this case to an Arkansas state court. under seaL." Instead, Google asks this Court to cede jurisdiction of For that kind of relief, Google must fie a properly noticed motion that affords AIT a fair and full opportunity to respond. Google's motion must be denied in all respects. 2 Lane's Gifs was filed in the Circuit Court of Miler County, Arkansas on February 4, 2005.
1

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properly venued class action, and Google has a pending, seemingly unassailable motion to dismiss the

2 Lane's Gifs action based upon the fact that the putative class (including the class representatives)
3 entered standardized contracts that require adjudication of disputes in Santa Clara County,
4 California. (Kellner Decl., para. 4.) As Google cogently argues in its pending motion to dismiss the

5 Lane's Gifs action, Arkansas law abides by contractual forum selection clauses - unless it would
6 effectively deprive the litigants of

their fair day in court. (See, Exhibit A, at p. 4, citing BAAN, Us.A.

7 v. USA Truck, Inc., 82 Ark.App. 202, 206 (2003).) Google also acknowledges in its pending motion
8 (as it must) that the AIT action in this Court provides the putative class with a fair forum to adjudicate

9 the class action allegations. (See Exhibit A, at p. 5.) The hearing on Google's motion was scheduled to

10 be heard in July 2006. In the absence of a quick settlement, the Lane's Gifs action was destined for
11 dismissaL.

12 In the AIT action, unlike the Arkansas action, Google finds itself in an extremely precarious
13 position. As demonstrated in AIT's pending motion for class certification, AIT represents a putative
14 class comprised of tens ofthousands of advertisers who.

participate in Google's AdWords program by

15 entering into on-line form contracts with Google for United States advertising. The on-lineform
16 contracts all provide that AdWords advertisers wil not be charged for "invalid clicks.,,3 Since Google

17 . maintains that it employs the same computerized programs and fiters to ostensibly detect "invalid

18 clicks" on a system-wide basis, class certification appears assured because: (a) the same form contracts
19 terms provide that class members wil not be charged for "invalid clicks"; and (b) Google's alleged
20 systemic attempts to prevent the class from being charged for invalid clicks apply to all members of
21 the class. See, Kleiner v. First Nato Bank

of Atlanta, 97 F.R.D. 683, 692 (N.D.Ga. 1983)("When

22 viewed in light of

Rule 23, claims arising from interpretations of a form contract appear to present the

23 classic case for treatment as a class action, and breach of contract cases are routinely certified as
24 such"); Keele v. Wexler, 149 F.3d 589,594 (7th Cir. 1998).

25 AIT has conducted substantial discovery in this action, including the review of hundreds of
26 thousands of pages of documents and the deposition of the Google employees in charge of invalid click

27
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3

Google defines "invalid clicks" as including clicks created by "automated tools, robots or other

deceptive softare" and "manual clicks intended to increase (AdWords Advertisers') advertising costs
2 OPPOSITION TO MOTION FOR STAY
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detection, and has fied a compelling motion for class certification. (Kellner Decl., para. 8.)

2 Meanwhile, the Lane's Gifs action has languished on the precipice of dismissal with the attorneys for
3 Lane's Gifs having failed to examine a single Google document or depose a single Google witness.

4 In reality, Google seeks to forestall and circumvent the class certification proceedings in the

5 only venue it claims is proper - this Court. By excluding AIT and its experienced class counsel from
6 negotiations for a settlement for the significant claims in these cases, Google has excluded from the
7 negotiating process the one plaintiff

with substantial negotiating leverage. It has also excluded the one

8 plaintiff

who is litigating in the proper contractual venue. The result is predictable - a "global"

9 settlement that pays the attorneys with milions of dollars, but leaves the class with virtually no relief.

10 The proposed settlement in Lane's Gifs has all the hallmarks of a "reverse auction," As
11 described in Reynoldsvo Beneficial Nato Bank, 288 F.3d 277, 282 (7th Cir. 2002), a "reverse auction is:

12 "the practice whereby the defendant in a series of class actions picks the most
ineffectual class lawyers to negotiate a settlement with in the hope that the district court
13 wil approve a weak settlement that wil preclude other claims against the defendant.

Blyden v. Mancusi, 186 F.3d 252, 270 n. 9 (2d Cir. 1999); Coffee, supra, at 392; 14 Samuel Issacharoff "Governance and Legitimacy in the Law 0/ Class Actions, "1999 Sup.Ct. Rev. 337, 388; Marcel Kahan & Linda Silberman, "The Inadequate Search/or
in Class Actions: A Critique 0/ Epstein v. MCA, Inc.," 73 N.YoU. L.Rev. 765, 775 (1998); John C. Coffee, Jr., "Class Wars: The Dilemma of the Mass Tort lawyers are 16 Class Action," 95 Colum. L.Rev. 1343, 1370-73 (1995). The ineffectual
15 'Adequacy'

happy to sell out a class they anyway can't do much for in exchange for generous 17 attorneys' fees, and the defendants are happy to pay generous attorneys' fees since all
they care about is the bottom line--the sum ofthe settlement and the attorneys' fees--and 18 not the allocation of money between the two categories of expense."

19 Google is seeking this Court's aid in the reverse auction process by staying the only action competing

20 with the "winner" of the reverse auction.

21 If it is likely that the Lane's Gifs action would have been dismissed in the Arkansas state court,
22 why would Google negotiate a settlement agreement with the Arkansas attorneys who brought the
23 jurisdictionally defective Lane's Gifs action? The reports of

the settlement that have been leaked by

24 Google and the Lane's Gifs' attorneys provide the answer. Google has managed to negotiate a
25 settlement in which it will pay nothing to the class.

26 The stock analysts have rightly viewed the proposed settlement as a financial bonanza for
27 Google. (Exhibit D.) The web advertising industry itself

has also recognized the settlement as being

28

or to increase profits for website owners hosting (AdWords customers') ads."
3

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extremely favorable to Google and less than favorable to Google's advertisers. By way of example,
2 John Battele wrote on his influential SearchBlog that the settlement was a "major victory for Google."
3 (Post from SearchBlog annexed hereto as Exhibit E.) Search Engine marketing consultant Joe

4 Holcomb is quoted in the New York Post to the effect that "Google is getting out ofthis on the cheap."
5 (Article annexed hereto as Exhibit F.)

6 The industry is quickly realizing that the proposed settlement offers a paltry amount in
7 comparison to the amount of revenue that Google has actually derived from charging advertisers for
8 fraudulent clicks. The search advertising industr is well aware of a study conducted by Incubeta.com
9 and reported by MarketingExperiments.com of

three separate Google ad campaigns in 2005 which
the

10 found that Google failed to detect and credit invalid clicks representing between 8% and 29.5% of

11 total clicks. (See "Documented Click Fraud in Three Google AdWords Campaigns" at page 5 ofthe

12 document annexed hereto as Exhibit C.) Google's reported revenue from pay-per-click advertising in

13 2005 was approximately $6 bilion, so applying the same percentages for invalid clicks paid by the
14 class to Google range between $480 milion and $1.7 bilion in 2005 alone. In fact, dozens oflarge

15 customers of Google have already contacted counsel for AIT expressing concern about the proposed
16 settlement. (Kellner Decl., para. 13.)

17 Significantly, the credit for the future advertising provided by the proposed settlement does

18 little to remedy the large percentage of "invalid click" biling that has taken place. Instead, the
19 putative class wil apparently make the same applications in a vacuum (without any meaningful

20 discovery or disclosure) that they were previously able to make when they suspected they were

21 charged for invalid clicks. In other words, the class wil be in a worse position than they were in
22 before the filing of

the class action, where they had a contractual right to demand cash refunds of

23 invalid click charges.
24 Courts have held that "the moving part bears a heavy burden to show why a stay should be
25 granted absent statutory authorization. . . ." Coastal (Bermuda) Ltd. vo E. W. Savbolt & Co., 761 F.2d

26 198,204 n. 6 (5th Cir. 1985); see also Sierra Rutile Ltd. vo Katz., 937 F.2d 743, 750 (2nd Cir. 1991)

27 ("the movant bears a heavy burden of showing necessity for the stay"). Google has not attempted to
28 satisfy that burden, and its suggestion that the principles of judicial comity require that this action be
4
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stayed is without merit. The mere possibility of a preclusive effect in the future is not suffcient to
2 warrant a stay. See Sandpiper Vilage Condo. Ass'n., Inc. v. Louisiana-Pacifc Corp., 428 F.3d 831, 3 844 (9th Cir. 2005) (quoting Kline v. Burke Constr. Co., 260 U.S. 226, 232 (1922)).
4 Google misconstrues Sandpiper Vilage Condo, which involved a federal court's interest in
5 ensuring that a federal class action settlement not be circumvented by a subsequent settlement in a
6 parallel state court proceeding. Here, contrary interests are invoked. Google is seeking to enter a

7 collusive settlement with attorneys in a jurisdictionally defective state court action, in order to

8 circumvent a federal class action.4
9 It has long been the law that "if

there is even a fair possibility" that a requested stay wil
hardship or inequity in

10 prejudice the nonmoving part, the applicant "must make out a clear case of

1 1 being required to go forward." Landis v. NorthAm. Co., 299 U.S. 248, 255 (1936). The Ninth Circuit

12 has reaffirmed that "(i)f a stay('s) . . . term is indefinite, we require a greater showing to justify it."
13 Hoeun Yong v. INS, 208 F.3d 1116, 1119 (9th Cir. 2000). Google fall far short of

this standard.5

14 AIT and the putative class wil be prejudiced ifthe class certification motion is not permitted to
15 go forward. While Google may want to avoid this Court's consideration of

the class certification

16 motion, it has not provided good cause for a stay.

17 Google's motion should be denied in all respects.
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In this regard, Google has truly boxed itself into a corner. By trying to pass through the "collusive" settlement in Arkansas, Google has necessarily taken the position that class action treatment is appropriate for the adjudication of the putative class' claims that Google breached its
contractual obligation to no charge for "invalid clicks." Bollard v. Martin, 349 Ark. 564 (2002).

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5 Google makes the absurd argument that it needs to conduct substantial discovery in connection with its opposition to the motion for class certification. This argument is a complete "red herring." First, by virtue of entering a settlement agreement in Arkansas in which it tacitly acknowledges that class treatment is appropriate for the adjudication of a virtually identical class action claims, Google wil be hard-pressed to formulate any opposition to AIT's motion for class certification. Second, because the only class representative that is being proffered in the certification proceeding is AIT, Google's discovery wil probably be limited to the deposition of AIT and document requests. Google's opposition is due on April 3, 2006. Accordingly, it is doubtful that Google can or will serve
any additional document requests. (See Kellner Decl., para. 14-15.)

5 OPPOSITION TO MOTION FOR STAY
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Dated: March 13,2006
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Respectfully submitted,

KABA TECK BROWN KELLNER LLP

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By: Is Richard L. Kellner RICHARD L. KELLNER

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And CHITWOOD HAEY HAS LLP
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and THE LAW OFFICES OF SHAWN

KHORRMI, Attorneys for Plaintiffs
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6 OPPOSITION TO MOTION FOR STAY
CASE NO. C 05 02579 RMW