Facebook, Inc. v. MaxBounty, Inc

Filing 42

RESPONSE (re 39 MOTION to Dismiss and Notice of Motion ) Plaintiff Facebook, Inc.'s Opposition to MaxBounty, Inc.'s Motion to Dismiss Counts I, II, and III of Facebook's First Amended Complaint filed byFacebook, Inc.. (Attachments: # 1 Proposed Order Denying MaxBounty, Inc.'s Motion to Dismiss Counts I, II, and III of Facebook's First Amended Complaint)(McCullagh, James) (Filed on 6/17/2011)

1
2
3
4
5
6
7
8
9
10

Brian P. Hennessy, State Bar No. 226721
[e-mail]
PERKINS COIE LLP
3150 Porter Drive
Palo Alto, CA 94304-1212
Telephone: [phone]
Facsimile: 650.838.4350
James R. McCullagh, pro hac vice
[e-mail]
Joseph P. Cutler, pro hac vice
[e-mail]
PERKINS COIE LLP
1201 Third Avenue, Suite 4800
Seattle, WA 98101
Telephone: [phone]
Facsimile: 206.359.9000
Attorneys for Plaintiff
FACEBOOK, INC.

11
12

UNITED STATES DISTRICT COURT

13

NORTHERN DISTRICT OF CALIFORNIA

14

SAN JOSE DIVISION

15
16

FACEBOOK, INC., a Delaware
corporation,

17
18
19
20
21

Plaintiff,
v.

Case No. 10-CV-4712-JF
PLAINTIFF FACEBOOK, INC.'S
OPPOSITION TO MAXBOUNTY, INC.'S
MOTION TO DISMISS COUNTS I, II
AND III OF FACEBOOK'S FIRST
AMENDED COMPLAINT

MAXBOUNTY, INC., a Canadian
corporation,
Defendant.

Hearing Date: July 8, 2011
Time: 9:00 a.m.

22
23
24
25
26
27
28
FACEBOOK, INC.'S OPPOSITION TO
MAXBOUNTY, INC'S MOTION TO DISMISS
COUNTS I, II, AND III OF THE FAC

Case No. 10-CV-4712-JF

1

TABLE OF CONTENTS

2
3
4

Page
I.
II.
III.

5

INTRODUCTION .............................................................................................................. 1
FACTS ................................................................................................................................ 1
ARGUMENT ...................................................................................................................... 2
A.

12

MaxBounty's Motion For Reconsideration of Facebook's
CAN-SPAM and CFAA Claims Fails to Comply with L.R.
7-9 and Must Be Denied ......................................................................................... 2
1.
Legal Standard ............................................................................................ 2
2.
MaxBounty's Motion for Reconsideration of
Facebook's CAN-SPAM and CFAA Claims Is
Procedurally Deficient ................................................................................ 2
3.
MaxBounty Has Identified No Grounds on Which a
Motion for Reconsideration Could be Permitted as to
Facebook's CAN-SPAM or CFAA Claims................................................. 3
Even If Not an Improper Request for Reconsideration,
MaxBounty's Request to Dismiss Facebook's CAN-SPAM
and CFAA Claims Fail on the Merits ..................................................................... 4

13

1.

6
7
8
9
10
11

B.

14
2.

15
C.

16
17

MaxBounty's Request to Dismiss Facebook's CANSPAM Claim Is Contrary to the Plain Language of
the Act ......................................................................................................... 4
MaxBounty's CFAA Argument Ignores Ninth
Circuit Precedent......................................................................................... 6

IV.

Facebook's First Amended Complaint Pleads Fraud with
Particularity ............................................................................................................. 7
CONCLUSION ................................................................................................................. 11

18
19
20
21
22
23
24
25
26
27
28
FACEBOOK, INC.'S OPPOSITION TO
MAXBOUNTY, INC'S MOTION TO DISMISS
COUNTS I, II, AND III OF THE FAC

Case No. 10-CV-4712-JF

-i-

1

TABLE OF AUTHORITIES

2

Page

3
4
5
6
7
8

FEDERAL CASES
Ashcroft v. Iqbal,
129 S. Ct. 1937 (U.S. 2009) .................................................................................................. 6, 8
AtPac, Inc. v. Aptitude Solutions, Inc.,
730 F.Supp.2d 1174 (E.D. Cal. 2010)....................................................................................... 6
Bangura v. Hansen,
434 F.3d 487 (6th Cir. 2006)..................................................................................................... 8

9
10
11
12
13
14
15
16
17
18
19

Bell Atl. Corp. v. Twombly,
550 U.S. 544 (2007) .............................................................................................................. 6, 8
Bowoto v. Chevron Corp.,
No. C 99-02506 SI, 2007 WL 2349338
(N.D. Cal. Aug. 14, 2007)......................................................................................................... 2
Hedges v. United States,
404 F.3d 744 (3d Cir. 2005)...................................................................................................... 8
In re Gilead Scis. Sec. Litig.,
536 F.3d 1049 (9th Cir. 2008)................................................................................................... 8
Liao v. Ashcroft,
No. C 08-2776PJH, 2009 WL 1033393
(N.D. Cal. Apr. 16, 2009).......................................................................................................... 2
LVRC Holdings, LLC v. Brekka,
581 F.3d 1127 (9th Cir. 2009)............................................................................................... 6, 7

20
21
22
23

Odom v. Microsoft Corp.,
486 F.3d 541 (9th Cir. 2007)............................................................................................... 8, 11
Patito v. Downey Savings & Loan Ass'n, F.A.,
No. C 09-03574 JF (HRL), 2010 WL 476723
(N.D. Cal. Feb 3, 2010)............................................................................................................. 2

24
25
26
27
28

Spinedex Physical Therapy USA, Inc. v.
United Healthcare of Ariz., Inc.,
661 F. Supp. 2d 1076 (D. Ariz. 2009)....................................................................................... 8
Taylor v. Higgins,
No. C 07-5295 MHP (PR), 2009 WL 224953
(N.D. Cal. Jan. 29, 2009) .......................................................................................................... 3
FACEBOOK, INC.'S OPPOSITION TO
MAXBOUNTY, INC'S MOTION TO DISMISS
COUNTS I, II, AND III OF THE FAC

Case No. 10-CV-4712-JF

-ii-

1

TABLE OF AUTHORITIES
(continued)

2
3
4
5

Page
U.S. v. Nosal,
__ F. 3d __, 2011 WL 1585600 (9th Cir. Apr. 28, 2011) ......................................................... 7
FEDERAL STATUTES

6

15 U.S.C. § 7702(9) ........................................................................................................................ 4

7

15 U.S.C. § 7702(12) ...................................................................................................................... 4

8

15 U.S.C. § 7704(a) ........................................................................................................................ 4

9

17 U.S.C. § 7704(a)(2).................................................................................................................... 6

10

18 U.S.C. § 1030(a)(4).................................................................................................................... 6

11

RULES

12

Civ. L.R. 7-9 ............................................................................................................................... 2, 3

13
14
15

Civ. L.R. 7–9(b) .............................................................................................................................. 2
Civ. L.R. 7–9(b)(3) ......................................................................................................................... 2
Civ. L.R. 7–9(c) .............................................................................................................................. 2

16
OTHER AUTHORITIES
17
18
19
20

2 James Wm. Moore, Moore's Federal Practice § 12.34[1][a] at 1273 (2008 ed.) ............................................................................................................................. 8
Federal Trade Commission, "16 CFR pt. 316 Definitions and
Implementation Under the CAN-SPAM Act; Final Rule,"
Federal Register, Vol. 73, No. 99 (May 21, 2008).................................................................... 5

21
22
23
24
25
26
27
28
FACEBOOK, INC.'S OPPOSITION TO
MAXBOUNTY, INC'S MOTION TO DISMISS
COUNTS I, II, AND III OF THE FAC

Case No. 10-CV-4712-JF

-iii-

1
I.
2
3
4
5
6
7
8
9
10
11

INTRODUCTION

Undeterred by the Court's prior denial of its request for dismissal of Facebook's CANSPAM Act and Computer Fraud and Abuse Act ("CFAA") claims, MaxBounty has now
improperly dressed up a motion for reconsideration as a motion to dismiss. MaxBounty's attempt
for a second bite at the apple is improper and should be denied. MaxBounty's renewed motion to
dismiss Facebook's fraud claim should also be denied. Facebook's First Amended Complaint
("FAC") includes specific allegations addressing each of the items identified by the Court's March
28, 2011 Order. Faced with specific facts identifying specific individuals and specific examples
of MaxBounty's complicity with the fraud perpetrated on Facebook, MaxBounty stubbornly
argues that even this level of specificity is not enough. MaxBounty's motion to dismiss is a
dilatory tactic that should be denied.

12
II.
13
14
15
16
17
18
19
20
21
22
23

FACTS

MaxBounty first sought dismissal of Facebook's CAN-SPAM, CFAA and fraud claims in
December 2010. Dkt. 11. The Court denied MaxBounty's request to dismiss Facebook's CANSPAM and CFAA claims, finding that Facebook sufficiently pleaded both. Order Granting in
Part and Denying in Part Motion to Dismiss (Dkt. 35) ("Order") at 8, 9. The Court granted
MaxBounty's motion to dismiss Facebook's common law fraud claim with leave to amend,
finding that the claim needed additional specificity.
On April 19, 2011, Facebook filed its FAC. Dkt. 36. Facebook provided additional,
specific, and detailed facts to support its fraud claim, but made no substantive changes to its
CAN-SPAM or CFAA claims. Compare Dkt. 1 to Dkt. 36. On May 13, 2011, MaxBounty filed
a second motion to dismiss the same three claims addressed in its first motion to dismiss. Dkt. 40
("Motion").

24
25
26
27
28
FACEBOOK, INC.'S OPPOSITION TO
MAXBOUNTY, INC'S MOTION TO DISMISS
COUNTS I, II, AND III OF THE FAC

Case No. 10-CV-4712-JF

-1-

1
2

III.
A.

ARGUMENT

MaxBounty's Motion For Reconsideration of Facebook's CAN-SPAM and CFAA
Claims Fails to Comply with L.R. 7-9 and Must Be Denied.

3
1.
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22

Legal Standard

MaxBounty couches its motion as a "motion to dismiss"; however, as to Facebook's CANSPAM and CFAA claims MaxBounty's motion is nothing more than a motion for reconsideration.
MaxBounty did not request leave to file such a motion. Moreover, MaxBounty has not satisfied
any of the limited grounds on which a motion for reconsideration would be permitted.
Motions for reconsideration are governed by Civil Local Rule ("L.R.") 7-9, which
mandates that "no party may notice a motion for reconsideration without first obtaining leave of
court . . ." L.R. 7-9 also provides that a motion for reconsideration must make a specific showing
that: (1) a material difference in fact or law exists from that which was presented to the Court
before entry of the first order, and that despite reasonable diligence the moving party did not
know of this fact or law; (2) new material facts or a change of law occurred after the first order;
or (3) the court's prior order was manifestly unjust. L.R. 7-9(b). Furthermore, the motion may
not repeat any oral or written argument previously made with respect to the interlocutory order
that the party seeks to have reconsidered. L.R. 7-9(c). If a party fails to present in its initial
motion an argument that it could have raised, that argument is deemed waived for purposes of the
motion for reconsideration. See Bowoto v. Chevron Corp., No. C 99-02506 SI, 2007 WL
2349338, at *7 (N.D. Cal. Aug. 14, 2007) ("[t]he rationale underlying Local Rule 7-9(b)(3) is
clear: in our system it is the job of the advocates, not the court, to find and apply relevant law to
the facts of a particular case. If an advocate fails to do so, the court cannot be faulted for reaching
an erroneous conclusion, and the advocate should not be given a 'second bite at the apple.'").

23
24

2.

MaxBounty's Motion for Reconsideration of Facebook's CAN-SPAM and
CFAA Claims Is Procedurally Deficient.

25

MaxBounty's motion should be denied because it has failed to meet the prerequisite of

26

requesting leave to file a motion for reconsideration. See Patito v. Downey Savings & Loan

27

Ass'n, F.A., No. C 09-03574 JF (HRL), 2010 WL 476723, at *1 (N.D. Cal. Feb 3, 2010) (finding

28

motion procedurally improper, but pro se plaintiff allowed to proceed); Liao v. Ashcroft,
FACEBOOK, INC.'S OPPOSITION TO
MAXBOUNTY, INC'S MOTION TO DISMISS
COUNTS I, II, AND III OF THE FAC

Case No. 10-CV-4712-JF

-2-

1

No. C 08-2776PJH, 2009 WL 1033393 (N.D. Cal. Apr. 16, 2009) (denying motion outright for

2

failure to request leave).

3

However, even if the Court allows MaxBounty's motion to proceed as a request for leave

4

to file a motion for reconsideration, its request should be denied because MaxBounty has not

5

identified a single basis upon which a motion for reconsideration could be granted.

6
7
8
9
10

3.

MaxBounty Has Identified No Grounds on Which a Motion for
Reconsideration Could be Permitted As To Facebook's CAN-SPAM or CFAA
Claims.

The Court previously denied MaxBounty's request to dismiss Facebook's CAN-SPAM
Act and CFAA claims. Nothing has changed since the Court's Order. The sufficiency of
Facebook's pleadings as to these claims has already been decided.

11

In its first motion to dismiss, MaxBounty chose to argue only that communications on

12

Facebook's website are not "electronic mail messages" within the meaning of the CAN-SPAM

13

Act. Dkt. 11 at 3-4. Having failed on that argument, MaxBounty now tries a new argument

14

targeting the exact same allegations that were previously found to sufficiently plead a CAN-

15

SPAM cause of action. Compare Complaint (Dkt. 1) ¶¶ 58-74 with FAC (Dkt. 36) ¶¶ 63-80.

16

And, MaxBounty now requests dismissal of Facebook's CFAA claim on the grounds that the

17

complained-of actions did not "exceed[] authorized access." Motion at 4-5. MaxBounty's motion

18

relies on no new facts, and MaxBounty cites to no new law that was not available to it when it

19

originally moved to dismiss this claim.

20

None of the new arguments submitted by MaxBounty satisfy any of the limited

21

circumstances in which a party may request reconsideration. MaxBounty provides no explanation

22

as to why it did not present the pre-existing case law it now relies upon in its prior motion to

23

dismiss. Nor has it presented any evidence that a new material fact or change in law emerged

24

following the initial order, or that the Court's Order was manifestly unjust. See L.R. 7-9.

25

MaxBounty has no grounds for reconsideration of the prior Order. See Taylor v. Higgins, No. C

26

07-5295 MHP (PR), 2009 WL 224953, at *4 (N.D. Cal. Jan. 29, 2009) (denying motion to

27

dismiss as an invalid motion for reconsideration where the court had previously found that

28

plaintiff's complaint stated a claim on which relief could be granted).
FACEBOOK, INC.'S OPPOSITION TO
MAXBOUNTY, INC'S MOTION TO DISMISS
COUNTS I, II, AND III OF THE FAC

Case No. 10-CV-4712-JF

-3-

1

B.

Even If Not an Improper Request for Reconsideration, MaxBounty's Request to
Dismiss Facebook's CAN-SPAM and CFAA Claims Fails on the Merits.

2
1.
3
4
5
6

MaxBounty's Request to Dismiss Facebook's CAN-SPAM Claim Is Contrary
to the Plain Language of the Act.

While the Court need not address MaxBounty's belated arguments on dismissal of
Facebook's CAN-SPAM claim, they are easily dispatched.
MaxBounty first claims that Facebook has failed to state a claim because it has alleged

7

that the victims of MaxBounty's scam, who MaxBounty does not know, ultimately send the

8

subject messages. This ignores Facebook's allegations that (a) at least one of its affiliates,

9

Mitchell Fillmore, sent subject messages; and (b) affiliates like Mr. Fillmore, in turn, duped

10

Facebook users into sending additional messages. FAC ¶¶ 50-53. The CAN-SPAM Act's

11

initiator liability provisions prevent MaxBounty from using victims of its viral schemes as

12

shields.

13

The CAN-SPAM Act makes it unlawful for a person to "initiate the transmission" of a

14

"commercial electronic mail message" that contains false or misleading header information or

15

subject lines. 15 U.S.C. § 7704(a). Under the Act, "initiate" means "to originate or transmit such

16

message or to procure the origination or transmission of such message." 15 U.S.C. § 7702(9)

17

(emphasis added). To "procure" the origination or transmission of a message means

18

"intentionally to pay or provide other consideration to, or induce, another person to initiate such a

19

message on one's behalf." 15 U.S.C. § 7702(12).

20

The claims in both the Complaint and the FAC are the same with respect to allegations

21

that MaxBounty initiated the transmission of unsolicited electronic mail messages to Facebook

22

users. At MaxBounty's direction, Mr. Fillmore and other affiliates, who are Facebook users, sent

23

such messages to other Facebook users, and so on and so forth. Complaint ¶ 49; FAC ¶ 54.

24

Indeed, Facebook addressed this very issue in its opposition to MaxBounty's first motion to

25

dismiss. See Dkt. 31 at 3-4. Facebook's complaint alleges that "Defendant encourages its

26

affiliates to deceptively induce Facebook users to send unsolicited commercial messages (spam)

27

to their friends" and "trick[s] Facebook users into executing malicious computer code that

28

cause[s] messages to be automatically sent to all their Facebook friends." Complaint ¶ 49; FAC
FACEBOOK, INC.'S OPPOSITION TO
MAXBOUNTY, INC'S MOTION TO DISMISS
COUNTS I, II, AND III OF THE FAC

Case No. 10-CV-4712-JF

-4-

1

¶ 54. Facebook further alleges that MaxBounty provides compensation to its affiliates for

2

inducing Facebook users to send these messages to their friends. Complaint ¶ 42; FAC ¶ 42.

3

MaxBounty pays its affiliates based on the amount of traffic driven to its customers' websites,

4

which creates an incentive for MaxBounty's affiliates to maximize the number of Facebook users

5

who are ultimately fed bogus offers. Complaint ¶ 42; FAC ¶ 42. MaxBounty is aware that its

6

affiliates use Facebook to direct traffic to its customers' websites and pays its affiliates to do so.

7

Complaint ¶¶ 43-44; FAC ¶¶ 49-53.

8
9

Through these acts, MaxBounty has "procured the origination or transmission" of the
messages at issue. Indeed, the Federal Trade Commission, in fulfilling its rule-making duties,

10

explains that the definition of "initiate" in the Act is expressly intended to include actions of

11

affiliate marketers like MaxBounty:

12
13
14
15

By agreeing in advance to pay an affiliate for sales to persons who
come to a marketer's website as a result of an affiliate's referral, a
seller or marketer creates an inducement for the affiliate to originate
or transmit commercial email messages to the public. In the
language of the Act, the seller induces another person — the
affiliate — to initiate messages on the seller's behalf.
See Federal Trade Commission, 16 CFR Part 316 Definitions and Implementation Under the

16
CAN-SPAM Act; Final Rule, 73 Fed. Reg. 29661 (May 21, 2008) (emphasis added).
17
The Complaint and the FAC both allege that MaxBounty is compensating its affiliates,
18
and thereby inducing them to take the actions described in the complaint. Complaint ¶¶ 42-43;
19
FAC ¶¶ 42-53. MaxBounty asserts that it cannot be liable because it simply hosts computer
20
servers "behind the scenes" to manage Internet traffic between Internet advertisers and merchants
21
who sell goods and services on the Internet in order to "ensure that the Internet advertisers who
22
refer buying customers to merchants are paid appropriate referral fees." Motion at 4. This is
23
directly contrary to the allegations in the complaint. Facebook has asserted that MaxBounty
24
promised to provide advance payments to affiliates who engaged in deceptive campaigns on
25
Facebook. Complaint ¶ 44; FAC ¶ 52. In Mr. Fillmore's case, he was offered an advance
26
payment of $30,000 if he would agree to continue driving viral Facebook campaigns despite
27
actual knowledge that Facebook had removed prior campaigns. FAC ¶ 52. MaxBounty's attempt
28
FACEBOOK, INC.'S OPPOSITION TO
MAXBOUNTY, INC'S MOTION TO DISMISS
COUNTS I, II, AND III OF THE FAC

Case No. 10-CV-4712-JF

-5-

1

to twist Twombly notwithstanding, at this stage all reasonable inferences from the allegations in

2

the complaint are to be taken as true. Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (U.S. 2009).

3

Next, MaxBounty belatedly argues that since Facebook has not provided the exact header

4

information in its Complaint or FAC, it cannot state a claim under the CAN-SPAM Act. First,

5

Facebook has properly alleged that MaxBounty initiated messages sent to Facebook users in the

6

campaigns. Complaint ¶¶ 46-48; FAC ¶¶ 44-48; see also Complaint ¶ 49; FAC ¶ 54

7

("Defendant's affiliates accomplish this by inducing Facebook users to send the messages, by

8

stating on the Facebook Page that users will not receive their free gift unless they send such a

9

message to ALL their Facebook friends, and by tricking Facebook users into executing malicious

10

computer code that causes messages to be automatically sent to all their Facebook friends.").

11

Facebook alleged that none of the messages associated with these campaigns identify MaxBounty

12

as the initiator despite the fact that MaxBounty initiated the messages. Complaint ¶ 49; FAC

13

¶ 54. By definition, each message contains false header information.1 Second, MaxBounty

14

ignores Facebook's allegations regarding deceptive subject lines (Complaint ¶ 66; FAC ¶ 72),

15

which provide an independent basis for liability. See 17 U.S.C. § 7704(a)(2).

16

2.

17

MaxBounty's Motion ignores recent Ninth Circuit case law that effectively negates its

MaxBounty's CFAA Argument Ignores Ninth Circuit Precedent.

18

argument regarding Facebook's CFAA claim.2 MaxBounty argues that, as Facebook users, both it

19

and its affiliates have been granted access to the Facebook site and therefore cannot "exceed[]

20

authorized access" within the meaning of 18 U.S.C. § 1030(a)(4), even if MaxBounty and its

21

affiliates take actions that violate Facebook's terms of use. Motion at 7-9 (citing LVRC Holdings,

22

LLC v. Brekka, 581 F.Supp.2d 1127 (9th Cir. 2009); AtPac, Inc. v. Aptitude Solutions, Inc., 730

23

F.Supp.2d 1174 (E.D. Cal. 2010)). However, on April 28, 2011, the Ninth Circuit held that an

24
1

25
26
27
28

MaxBounty's application of Facebook v. ConnectU (489 F.Supp.2d 1087 (N.D. Cal. 2007)) is
baffling. There, the court dismissed the CAN-SPAM claims with leave to amend because Facebook did
not allege that the "headers were misleading or false as to the source from which they originated, or in any
other manner." Id.at 1094-95 (emphasis in original). Here, Facebook has alleged that messages associated
with at least two campaigns initiated by MaxBounty were false and misleading, as they did not identify
MaxBounty as the source.
2
Notably, MaxBounty relies only on case law that existed prior to filing its first motion to dismiss
in order to make this new argument.
FACEBOOK, INC.'S OPPOSITION TO
MAXBOUNTY, INC'S MOTION TO DISMISS
COUNTS I, II, AND III OF THE FAC

Case No. 10-CV-4712-JF

-6-

1

employee can, in fact, exceed authorized access under the CFAA by violating the employer's

2

computer use restrictions. U.S. v. Nosal, __ F. 3d __, 2011 WL 1585600, at *1 (9th Cir. Apr. 28,

3

2011). Nosal distinguished Brekka, finding that the employer in Brekka had placed no use

4

restrictions on the employee's access to its computers, and so the employee did in fact have

5

authorization. Id. at *6. In contrast, the employer in Nosal had placed significant use restrictions

6

on its employees' use of computer resources, which the employees knowingly exceeded. Id.

7

As applied to this matter, Nosal supports the Court's prior denial of MaxBounty's motion

8

to dismiss. As it stands, the FAC asserts, and MaxBounty concedes, that it and its affiliates

9

registered for Facebook accounts and accepted Facebook's terms of use, which placed restrictions

10

on their use of the Facebook site. See Complaint ¶¶ 12, 31-39; FAC ¶¶ 12, 31-40. Facebook's

11

allegations are unchanged in alleging MaxBounty knowingly exceeded their authorized access,

12

with the specific intent to defraud Facebook and its users by inducing its affiliates to engage in

13

illegal spamming campaigns that required Facebook users to send deceptive messages regarding

14

deceptive Facebook pages to all their friends, and by taking other actions prohibited by

15

Facebook's Statement of Rights and Responsibilities. Complaint ¶¶ 41-52; FAC ¶¶ 42-57.

16

Moreover, as Facebook alleges, MaxBounty solicited at least Fillmore to recreate illegal

17

spam campaigns specifically designed to defraud Facebook users and did so knowing that those

18

prior campaigns had been detected and shut down by Facebook. FAC ¶ 53. In discovery,

19

Facebook expects to uncover the specific techniques created and offered by MaxBounty that were

20

designed to spread spam and evade Facebook’s detection and abatement efforts.

21

Irrespective of Maxbounty’s defective and untimely request for the court to reconsider its

22

prior ruling, Facebook has adequately pled a claim for relief under both CAN-SPAM and the

23

CFAA. MaxBounty's renewed motion on these claims should be denied.

24

C.

Facebook's First Amended Complaint Pleads Fraud with Particularity

25

In granting Facebook leave to amend its complaint to perfect its common law fraud claim,

26

the Court identified six specific areas where Facebook’s complaint lacked sufficient particularity.

27

Those six areas were:

28

1.

facts identifying who at MaxBounty had knowledge of the alleged scheme;

FACEBOOK, INC.'S OPPOSITION TO
MAXBOUNTY, INC'S MOTION TO DISMISS
COUNTS I, II, AND III OF THE FAC

Case No. 10-CV-4712-JF

-7-

1

2.

facts identifying what the individuals at MaxBounty knew;

2

3.

facts identifying how MaxBounty contributed to the alleged fraud;

3

4.

facts identifying any of the affiliates responsible for creating the Facebook pages

4
5

at issue;
5.

facts showing that MaxBounty had actual knowledge of the wrongful activity, its

6

role in furthering the fraud or how MaxBounty provided substantial assistance in

7

the wrongful activity; and

8

6.

9

Order at 10-11.

10

facts supporting Facebook's allegations of conspiracy.

Facebook addressed each of these areas in its FAC, but MaxBounty stubbornly argues that

11

these detailed allegations still lack the specificity necessary to plead a claim for common law

12

fraud. Motion at 10-12. MaxBounty is wrong.

13

A motion to dismiss a complaint should not be granted unless, after taking all allegations

14

in the complaint and the reasonable inferences to be drawn from those allegations as true, it

15

appears beyond a doubt that the plaintiff can prove no set of facts in support of its claim that

16

would entitle it to relief. Iqbal, 129 S. Ct. at 1949; Odom v. Microsoft Corp., 486 F.3d 541, 545

17

(9th Cir. 2007). A complaint cannot be dismissed based on the court's assessment that a plaintiff

18

will fail to find evidentiary support for his allegations or fail to prove his claim to the satisfaction

19

of the factfinder. In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1057 (9th Cir. 2008) (citing Bell

20

Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007)). Instead, the defendant bears the extremely

21

high burden of proving that no legally cognizable claim for relief exists. Spinedex Physical

22

Therapy USA, Inc. v. United Healthcare of Ariz., Inc., 661 F. Supp. 2d 1076, 1083 (D. Ariz.

23

2009) (citing Hedges v. United States, 404 F.3d 744, 750 (3d Cir. 2005)); 2 James Wm. Moore et

24

al., Moore's Federal Practice § 12.34[1][a] (3d ed. 2008)).

25
26
27
28

MaxBounty cannot meet this burden, as the FAC addresses each of the areas identified by
the Court with more than a minimum level of specificity to present a cognizable claim for fraud.
1.

Who at MaxBounty had knowledge of the alleged scheme, what did those

individuals know, and how did MaxBounty contribute to the fraud:
FACEBOOK, INC.'S OPPOSITION TO
MAXBOUNTY, INC'S MOTION TO DISMISS
COUNTS I, II, AND III OF THE FAC

Case No. 10-CV-4712-JF

-8-

1
2

Facebook added the following allegations to the FAC that directly address each of these
questions with specificity:

3

49. Defendant, through its employees, knowingly assists its
affiliates in creating these Pages. For example, one of Defendant's
employees, Adam Harrison, contacts affiliates who use Facebook
Pages to generate customer traffic, identifies himself as
Defendant's Facebook Affiliate Manager, and encourages and
directs these affiliates to make specific changes to their
promotional Facebook Pages in order to make them more
profitable to Defendant.

4
5
6
7

50. Defendant's employees, including at least Mr. Harrison and
likely others, directly encourage certain of its affiliates to generate
traffic for its contracting advertisers through fraudulent and
deceptive means, including posting false and deceptive promotions
on the Facebook site.

8
9
10

51. In order to accomplish this, Defendant's employees, including
at least Mr. Harrison and likely others, mislead its affiliates into
believing that Defendant's campaigns are approved by Facebook,
provide instruction and support on how to design these
unauthorized Facebook campaigns, and provide substantial advance
payments to its affiliates that agree to participate in these
campaigns.

11
12
13
14

FAC ¶¶ 49-51 (emphasis added).
15
2.

Identify affiliates responsible for creating the Facebook pages at issue:

16
The following allegations of the FAC identify at least one affiliate responsible for creating
17
the Facebook pages at issue.
18
19
20
21
22
23
24
25
26
27
28

52. For example, in March 2010, one of Defendant's affiliates,
Mitchell Fillmore, created Facebook Pages that offered a free
IKEA gift card using the same scheme as generally described in the
paragraphs 44-48 above. Mr. Fillmore was then contacted by Mr.
Harrison, who informed Mr. Fillmore that he was a MaxBounty
Affiliate Manager for affiliates who create Pages on Facebook. Mr.
Harrison provided Mr. Fillmore with technical help for designing
Facebook Pages and for increasing the number of Facebook users
who would receive notice and act upon the offers presented in Mr.
Fillmore's Facebook Pages. Mr. Harrison also encouraged Mr.
Fillmore to run other Facebook campaigns for other similar offers
and to use techniques that were designed to increase the
effectiveness of these campaigns.
53. Mr. Fillmore followed the advice given by Mr. Harrison, but
noticed many of his Facebook Pages were taken down by Facebook
not long after they were posted. Mr. Fillmore grew concerned that
his campaigns were not permitted by Facebook. When Mr.
Fillmore raised these concerns to Mr. Harrison, Mr. Harrison
assured Mr. Fillmore that MaxBounty approved of the
FACEBOOK, INC.'S OPPOSITION TO
MAXBOUNTY, INC'S MOTION TO DISMISS
COUNTS I, II, AND III OF THE FAC

Case No. 10-CV-4712-JF

-9-

1

techniques used by Mr. Fillmore. He also offered Mr. Fillmore
a $30,000 cash advance to continue creating similar Facebook
Pages.

2
3
4
5
6

FAC ¶¶ 52-53 (emphasis added).
3.

Identify MaxBounty's knowledge of the wrong, MaxBounty's role in furthering the

wrong, and MaxBounty's substantial assistance in the wrong:
With respect to Facebook's allegation that MaxBounty aided and abetted in the fraudulent

7

schemes, the Court found that Facebook's original complaint had specifically described the

8

primary wrong but that it had not sufficiently shown how MaxBounty knew that its affiliates were

9

creating misleading Facebook pages or how it provided assistance to its affiliates. Order at 10.

10

The FAC provides specifics of at least one instance in which an affiliate approached Adam

11

Harrison, a MaxBounty employee and authorized agent for MaxBounty, with concerns that his

12

techniques were not approved by Facebook, only to be reassured verbally (and with a promise of

13

a $30,000 advance payment from MaxBounty) that MaxBounty approved of the specific

14

techniques that the affiliate had used. FAC ¶¶ 49-53.

15
16

4.

Factual support demonstrating an agreement between MaxBounty and its affiliates

to engage in a fraudulent scheme:

17

The Court stated that in order to allege conspiracy to commit fraud, Facebook's complaint

18

must include factual support demonstrating an agreement between MaxBounty and its affiliates to

19

engage in a fraudulent scheme. Order at 11. The FAC explains that not only was Adam

20

Harrison—a MaxBounty "Facebook Affiliate Manager"—aware of the types of deceptive

21

campaigns being promoted by Mr. Fillmore and other affiliates on Facebook, he in fact helped

22

Mr. Fillmore perfect his fraudulent schemes. FAC ¶¶ 52-53. When Mr. Fillmore became

23

concerned about the legitimacy of the schemes, MaxBounty offered to pay Mr. Fillmore in

24

advance if he would continue to create fraudulent pages. Id.

25

In short, Facebook has now provided detailed and specific facts concerning MaxBounty's

26

involvement and complicity in just one of many deceptive and fraudulent Facebook schemes that

27

were run through, and ultimately by, MaxBounty. The FAC also includes allegations describing

28

two specific examples of deceptive and fraudulent schemes run by MaxBounty and its affiliates.
FACEBOOK, INC.'S OPPOSITION TO
MAXBOUNTY, INC'S MOTION TO DISMISS
COUNTS I, II, AND III OF THE FAC

Case No. 10-CV-4712-JF

-10-

1

The primary purpose of the particularity requirement in pleading fraud is not to require a

2

plaintiff to prove its case, but rather to provide notice to allow defendant to "prepare an adequate

3

answer from the allegations." Odom v. Microsoft Corp., 486 F.3d at 553 (internal quotation

4

marks and citation omitted). Facebook's allegations in the FAC are more than sufficient for

5

MaxBounty to prepare an answer. Indeed, it bears mention that the particularity and specific facts

6

regarding MaxBounty's involvement in deceptive and fraudulent activities on Facebook that are

7

included in the FAC were developed without any discovery directly from MaxBounty. Given the

8

strong likelihood that MaxBounty possesses additional evidence related to its Facebook affiliate

9

program, Facebook expects that it will uncover additional evidence of MaxBounty's involvement

10

and complicity in the deceptive and fraudulent schemes through discovery.

11

IV.

CONCLUSION

12

Facebook has amended its complaint and added ample detail to support its fraud claim,

13

which is the only claim that is properly before the Court. MaxBounty's effort to again dismiss

14

Facebook's CAN-SPAM and CFAA claims are procedurally improper and substantively deficient

15

and should be denied. Facebook respectfully requests that the Court deny the MaxBounty's

16

motion and allow Facebook to proceed with discovery on all seven claims as pled in the FAC.

17

DATED: June 17, 2011

PERKINS COIE LLP

18
By: James R. McCullagh__________
James R. McCullagh, pro hac vice
[e-mail]
Brian P. Hennessy, Bar No. 226721
[e-mail]
Joseph P. Cutler, pro hac vice
[e-mail]
3150 Porter Drive
Palo Alto, CA 94304-1212
Telephone: [phone]
Facsimile: 650.838.4350

19
20
21
22
23
24

Attorneys for Facebook, Inc.

25
26
27
28
FACEBOOK, INC.'S OPPOSITION TO
MAXBOUNTY, INC'S MOTION TO DISMISS
COUNTS I, II, AND III OF THE FAC

Case No. 10-CV-4712-JF

-11-