CLRB Hanson Industries, LLC et al v. Google Inc.

Filing 52

First MOTION to Dismiss Plaintiffs' Unjust Enrichment Claim in the Second Amended Complaint filed by Google Inc.. Motion Hearing set for 6/26/2006 09:00 AM in Courtroom 8, 4th Floor, San Jose. (Jhang, Christopher) (Filed on 5/18/2006)

CLRB Hanson Industries, LLC et al v. Google Inc.

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DAVID T. BIDERMAN, Bar No. 101577 JUDITH B. GITTERMAN, Bar No. 115661 M. CHRISTOPHER JHANG, Bar No. 211463 PERKINS COIE LLP 180 Townsend Street, 3rd Floor San Francisco, CA 94107-1909 Telephone: [phone] Facsimile: [phone] Email: [e-mail] Email: [e-mail] Email: [e-mail] Attorneys for Defendant Google, Inc. UNITED STATES DISTRICT COURT

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DEFENDANT GOOGLE, INC.'S NOTICE OF MOTION AND MOTION TO DISMISS PLAINTIFFS' UNJUST ENRICHMENT CLAIM IN THE SECOND AMENDED COMPLAINT CASE NO. 05-03649

NORTHERN DISTRICT OF CALIFORNIA, SAN JOSE DIVISION

CLRB HANSON INDUSTRIES, LLC d/b/a INDUSTRIAL PRINTING, and HOWARD STERN, on behalf of themselves and all others similarly situated, Plaintiffs, v.

CASE NO. C O5-03649 JW DEFENDANT GOOGLE, INC.'S NOTICE OF MOTION AND MOTION TO DISMISS PLAINTIFFS' UNJUST ENRICHMENT CLAIM IN THE SECOND AMENDED COMPLAINT Fed. R. Civ. P. 12(b)(6)

GOOGLE, INC., Defendant. Date: Time: Place: Judge: June 26, 2006 9:00 a.m. Courtroom 8 Honorable James Ware

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NOTICE OF MOTION AND MOTION TO DISMISS TO PLAINTIFFS AND THEIR ATTORNEYS OF RECORD: PLEASE TAKE NOTICE that on June 26, 2006, at 9:00 a.m., or as soon thereafter as this matter may be heard, in Courtroom 8 of the United States District Court for the Northern District of California, San Jose Division, defendant Google, Inc. ("Google") will, and hereby does, move the Court to dismiss plaintiffs CLRB Hanson Industries LLC d/b/a Industrial Printing and Howard Stern's ("plaintiffs") claim for unjust enrichment pursuant to Federal Rules of Civil Procedure 12(b)(6). Plaintiffs have failed to adequately plead an essential element of the unjust enrichment claim. This motion is based upon this notice of motion and motion, the attached memorandum of points and authorities, the Court's record, and such other matters and arguments as may be presented to the Court prior to or at the hearing on the motion. Dated: May 18, 2006 PERKINS COIE LLP By: ____________/S/________________________ David T. Biderman Attorneys for Defendant GOOGLE, INC.

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MEMORANDUM OF POINTS AND AUTHORITIES I. INTRODUCTION

Plaintiffs CLRB Hanson Industries LLC d/b/a Industrial Printing and Howard Stern ("plaintiffs") have improperly pled, for the third time, their unjust enrichment claim against defendant Google, Inc. ("Google"). This Court dismissed plaintiffs' prior unjust enrichment claim due to plaintiffs' failure to allege that their contract with Google "was procured by fraud or is unenforceable or ineffective for some other reason." In response, plaintiffs amended their claim to include an allegation that their contract is "voidable or otherwise unenforceable" due to "material misrepresentations" that they claim were made by Google. The amended allegations are inadequate as a matter of law to support plaintiffs' unjust enrichment claim. Plaintiffs have failed to include any allegation that the purported misrepresentations induced plaintiffs to assent to the contract or that the contract was procured as a result of fraud. In order for a contract to be void as a result of fraud, it must be alleged that the fraud induced the plaintiff to enter into the contract. Plaintiffs, however, are unable to properly allege fraudulent inducement. Indeed, they withdrew their fraud claims in the original complaint as a result of Google's motion to dismiss for failure to adequately plead that cause of action and failure to plead with specificity. Plaintiffs' repeated failure to properly plead their unjust enrichment claim should preclude them from further asserting this claim. Accordingly, their unjust enrichment claim should be dismissed without leave to amend. II. PROCEDURAL HISTORY

Plaintiffs' initial Complaint, filed on August 3, 2005, alleged causes of action for unjust enrichment, breach of contract, breach of implied covenant of good faith and fair dealing, violation of California Bus. & Prof. Code §17200 et seq., negligent misrepresentation, imposition of a constructive trust, fraud-promise without intent to perform, and injunctive and/or declaratory relief. On October 12, 2005, Google filed a motion to dismiss plaintiffs' Complaint

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based, among other grounds, on plaintiffs' failure to alternatively plead in their unjust enrichment claim the non-existence of a binding contract between the parties, plaintiffs' inability to establish in their fraud and misrepresentation claims that Google made false representations or concealments, and their failure to plead the fraud and misrepresentation claims with specificity. In response to this motion, on November 14, 2005, plaintiffs filed their First Amended Complaint ("FAC"), which withdrew their claims based on fraud and misrepresentation and included a new claim for violation of California Bus. & Prof. Code §17500 et seq. In addition, plaintiffs re-alleged their claim for unjust enrichment unchanged and without any allegation that their purported agreement with Google was not valid. On January 3, 2006, Google filed a motion to dismiss the unjust enrichment claim based on plaintiffs' failure to allege that the parties' agreement is not valid and their incorporation of allegations in this claim that an express, valid agreement exists between the parties. On April 12, 2006, the Court granted Google's motion to dismiss, with leave to amend, holding that the unjust enrichment claim "cannot include allegations that an express contract governs the parties' rights, unless it also alleges that the express contract was procured by fraud or is otherwise unenforceable or ineffective." Court's April 12, 2006 Order Granting Defendant's Motion to Dismiss Plaintiff's Unjust Enrichment Claim with Leave to Amend ("Order"), p. 5. On May 4, 2006, plaintiffs filed their Second Amended Complaint ("SAC"), alleging claims for breach of contract, breach of implied covenant of good faith and fair dealing, violation of California Bus. & Prof. Code §17200 et seq., violation of California Bus. & Prof. Code §17500 et seq., and unjust enrichment. Their amended unjust enrichment claim alleges in the alternative that if the parties have entered into an express contract, "plaintiffs are still entitled to restitution benefits" and that "[s]uch contract is voidable and otherwise unenforceable given Google's material misrepresentations that advertisers may pause their ad without being charged for those days, and that advertisers would not be billed more than their daily budget for those
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days that their ad runs." SAC, ¶123. Nowhere in this claim do plaintiffs allege that the misrepresentations induced them to assent to the parties' agreement, which is defined by plaintiffs in the SAC at ¶ 19 as a form agreement consisting of "Google Inc. AdWords Program Terms" and the "Frequently Asked Questions. . . which further explains the program and can be accessed from Google's AdWords site." III. A. ARGUMENT

Plaintiffs' Failure To Allege Inducement And Plead With Specificity Is Fatal to Their Unjust Enrichment Claim. Under Rule 12(b)(6), dismissal is appropriate as a matter of law where the complaint

shows either a "(1) lack of a cognizable legal theory or (2) insufficient facts stated under a cognizable theory." See Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530, 534 (9th Cir. 1984). Plaintiffs' amended unjust enrichment claim falls under both of these categories. In order to claim unjust enrichment, plaintiffs must allege that the express contract was procured by fraud or is otherwise unenforceable or ineffective. See Lance Camper Mfg. Corp. v. Republic Indemnity Co. of Amer., 44 Cal. App. 4th 194, 203 (plaintiff must allege that an express contract is void or rescinded to proceed with its unjust enrichment claim); see also SMC Corp. v. PeopleSoft U.S.A. Inc., 2004 WL 2538641, at *3 (S.D. Ind. Oct. 12, 2004). Plaintiffs allege that their express contract with Google is "voidable and otherwise unenforceable given Google's material misrepresentations." These purported "material misrepresentations" are allegations of actual fraud, and comprise the entire basis for plaintiffs' claim that their contract with Google is "voidable or otherwise unenforceable." The allegation of fraud is insufficient to allege a voidable contract, because plaintiffs fail to include any allegation that the misrepresentations induced them to enter the Agreement or that the Agreement was "procured" by fraud. See Wilke v. Coinway, Inc., 257 Cal. App. 2d 126, 136 (1967) (plaintiffs must show that they were induced by fraudulent misrepresentations in order to set a contract aside); McBride v. Boughton, 123 Cal.App.4th 379, 388 (2004) ("Restitution may be awarded in
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lieu of breach of contract damages when the parties had an express contract, but it was procured by fraud or is unenforceable or ineffective for some reason.") The allegations of fraud are also insufficient under Federal Rule of Civil Procedure 9(b), which provides that "[i]n all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity." To properly plead fraud, the pleading "must state precisely the time, place, and nature of the misleading statements, misrepresentations, and specific acts of fraud." Kaplan v. Rose, 49 F.3d 1363, 1370 (9th Cir. 1994); Williams v. WMX Technologies, Inc., 112 F.3d 175, 178 (5th Cir. 1997) ("the who, what, when, and where must be laid before access to the discovery process is granted"). Conclusory allegations are insufficient to meet this heightened pleading requirement and need not be accepted as true absent supporting allegations establishing why it was "fraudulent." Moore v. Kayport Package Express, Inc., 885 F.2d 531, 540 (9th Cir. 1987). Here, plaintiffs' allegations that Google misrepresented the accrual of charges during pauses and misrepresented limits on advertisers' daily budgets fail to meet the requisite specificity. Plaintiffs provide virtually no information about which of their campaigns were purportedly overcharged, if and when they paused their advertising campaigns, how long they paused their campaigns or why the campaigns were paused, when their daily budgets were exceeded, and the amounts by which the daily budgets were purportedly exceeded. They provide only a few examples of alleged overcharges in February, March, and April 2005, despite their claim that they have been advertising on AdWords for years. SAC, ¶¶57-61, 63-68. In fact, plaintiffs fail to expressly allege whether they even paused any of their campaigns. Id. The new allegations of "material misrepresentations" appear to be an attempt by plaintiffs to re-assert, without properly pleading, the fraud and misrepresentation claims that they previously withdrew from their original Complaint. If plaintiffs intend to allege claims of fraud and misrepresentation, they must do so in compliance with federal pleading requirements. As it

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stands, plaintiffs' misrepresentation allegations are improperly pled, and the unjust enrichment claim should be dismissed for failure to state a cause of action. B. Plaintiffs' Unjust Enrichment Claim Should Be Dismissed Without Leave To Amend. A court's discretion to deny leave to amend is particularly broad where plaintiff has previously amended the complaint. Ascon Properties, Inc. v. Mobil Oil Co., 866 F.2d 1149, 1160 (9th Cir. 1989). Courts may deny leave to amend where the plaintiff has previously amended the complaint and where the amendment is sought in bad faith, would be futile, would cause undue delay, or would prejudice the opposing party. Id., at 1160-61. Each of these factors is present here. Plaintiffs cannot offer a good faith basis for denying that express contracts govern their rights, since the liability they claim against Google appears to be entirely predicated on the existence of a valid contract between the parties, which they contend was breached or misleading. Moreover, their attempt to re-assert, without properly pleading, misrepresentation claims that they had previously withdrawn appears to be in bad faith. Plaintiffs' repeated inability to allege their unjust enrichment claim indicates that the claim is futile. Accordingly, the unjust enrichment claim should be dismissed without leave to amend. IV. CONCLUSION

For the above stated reasons, Google respectfully requests that pursuant to Federal Rules of Civil Procedure 12(b)(6), the Court dismiss plaintiffs' unjust enrichment cause of action without leave to amend. Dated: May 18, 2006 PERKINS COIE LLP By:_____________/S/_________________ David T. Biderman Attorneys for Defendant GOOGLE, INC.

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DATED: May 18, 2006. I, Susan E. Daniels, declare:

PROOF OF SERVICE

I am a citizen of the United States and am employed in the County of San Francisco, State of California. I am over the age of 18 years and am not a party to the within action. My business address is Perkins Coie LLP, 180 Townsend Street, 3rd Floor, San Francisco, California 94107-1909. I am personally familiar with the business practice of Perkins Coie LLP. On May 18, 2006, I served the following document(s):

DEFENDANT GOOGLE, INC.'S NOTICE OF MOTION AND MOTION TO DISMISS PLAINTIFF'S UNJUST ENRICHMENT CLAIM IN THE SECOND AMENDED COMPLAINT
by placing a true copy thereof enclosed in a sealed envelope addressed to the following parties: William M. Audet, Esq. Ryan M. Hagan, Esq. Jason Baker, Esq. ALEXANDER, HAWES & AUDET, LLP 152 North Third Street, Suite 600 San Jose, CA 95112 Tel: [phone]; Fax: [phone] Lester L. Levy, Esq. Michele F. Raphael, Esq. Renee L. Karalian, Esq. WOLF POPPER LLP 845 Third Avenue New York, NY 10022 Tel: [phone]; Fax: [phone] Attorney for Plaintiffs

Attorney for Plaintiffs

XXX (By Mail) I caused each envelope with postage fully prepaid to be placed for collection and mailing following the ordinary business practices of Perkins Coie LLP. I declare under penalty of perjury under the laws of the State of California that the above is true and correct and that this declaration was executed at San Francisco, California.

/S/ Susan E. Daniels

DEFENDANT GOOGLE, INC.'S NOTICE OF MOTION AND MOTION TO DISMISS PLAINTIFFS' UNJUST ENRICHMENT CLAIM IN THE SECOND AMENDED COMPLAINT CASE NO. 05-03649

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