Reveal Chat Holdco LLC et al v. Facebook, Inc.

Filing 115

ORDER GRANTING 71 MOTION TO DISMISS. Signed by Judge Beth Labson Freeman on 4/26/2021. (blflc2S, COURT STAFF) (Filed on 4/26/2021)

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Case 5:20-cv-00363-BLF Document 115 Filed 04/26/21 Page 1 of 17 1 2 3 UNITED STATES DISTRICT COURT 4 NORTHERN DISTRICT OF CALIFORNIA 5 SAN JOSE DIVISION 6 7 REVEAL CHAT HOLDCO LLC, et al., 8 Plaintiffs, 10 FACEBOOK, INC., [Re: ECF 71] Defendant. 11 United States District Court Northern District of California ORDER GRANTING MOTION TO DISMISS v. 9 Case No. 20-cv-00363-BLF 12 Three web developers—Reveal Chat Holdco LLC (“Reveal Chat”), USA Technology and 13 14 Management Services, Inc. (“Lenddo”), and Beehive Biometric, Inc. (“Beehive”) (collectively 15 “Plaintiffs”)—have brought this lawsuit against Defendant Facebook, Inc. (“Facebook”) for 16 removing access to a set of application programming interfaces (“APIs”) in 2015 that Plaintiffs 17 relied on for their mobile applications. See Am. Compl., ECF 62. Plaintiffs allege that Facebook’s 18 removal of these APIs was part of an elaborate scheme that violates Section 2 of the Sherman Act. 19 See id. The Court previously found that Plaintiffs’ claims were time-barred and granted them leave 20 to amend their complaint. See Order (“Prior MTD order”), ECF 61. Facebook has again filed a 21 motion to dismiss that includes the threshold issue of whether Plaintiff’s claims are time-barred. 22 See Mot., ECF 71. Plaintiffs oppose this motion. See Opp’n, ECF 73. The Court held a two-hour 23 oral argument on December 3, 2020, giving Plaintiffs ample opportunity to discuss the viability of 24 their claims. See Min Entry, ECF 78. For the reasons detailed below, the Court GRANTS 25 Facebook’s motion. 26 27 28 I. BACKGROUND Plaintiffs allege that between 2004 and 2010, Facebook vanquished a number of rivals in order to emerge as the dominant social network in the United States. Am. Compl. ¶ 76. “By 2010, Case 5:20-cv-00363-BLF Document 115 Filed 04/26/21 Page 2 of 17 1 Facebook stood alone as the dominant player in the newly emergent market for social data (the 2 ‘Social Data Market’)—a market in which Facebook’s own users provided Facebook with a 3 constant stream of uniquely valuable information, which Facebook in turn monetized through the 4 sale of social data (for example, through advertising, monetizing APIs, or other forms of 5 commercializing access to Facebook’s network).” Am. Compl. ¶ 90. Facebook sold access to 6 social data to developers and sold advertisements targeting Facebook’s network of engaged and 7 active users. Am. Compl. ¶ 91. Because user data made Facebook’s network more valuable and 8 thus attracted more customers, which then led to more data and more customers, a feedback loop 9 emerged. Am. Compl. ¶¶ 92-95. Data provided by users made Facebook’s network more valuable, thereby attracting more users to the network. Am. Compl. ¶ 92. A barrier to entry emerged from 11 United States District Court Northern District of California 10 this feedback loop—to compete with Facebook, a new entrant would have to rapidly replicate both 12 the breadth and value of the Facebook network by building its own vast network and duplicating 13 the active user engagement on the same massive scale. Am. Compl. ¶ 95. Plaintiffs allege that this 14 “Social Data Barrier to Entry” allows Facebook to control and increase prices in the Social Data 15 and Social Advertising Markets without the pressures of price competition from existing 16 competitors or new entrants. Am. Compl. ¶ 96. 17 In 2012, Facebook coined the term “Open Graph” “to describe a set of tools developers 18 could use to traverse Facebook’s network of users, including the social data that resulted from user 19 engagement.” Am. Compl. ¶ 131. Open Graph contained a set of APIs, which “allowed those 20 creating their own social applications to query the Facebook network for information.” Am. 21 Compl. ¶ 132. Beginning in the fall of 2011, to allegedly address the threat posed by mobile 22 applications, Facebook devised a scheme to attract third-party developers to build for their 23 platform and then remove access to the APIs that were central to these applications. Am. Compl. ¶ 24 157. For example, the “Friends API” allowed third-party developers to search through a user’s 25 friends, as well as their friends of friends. Am. Compl. ¶ 158. Plaintiffs consider the Friends API, 26 News Feed API, and certain Messaging APIs the “Core APIs.” Am. Compl. ¶ 5. Without access to 27 this data, third-party applications “would be abruptly left with none of the social data they needed 28 to function.” Am. Compl. ¶ 159. By August 2012, Facebook planned to prevent competitive third2 Case 5:20-cv-00363-BLF Document 115 Filed 04/26/21 Page 3 of 17 1 party applications from buying social data from Facebook. Am. Compl. ¶ 167. Facebook even 2 identified direct, horizontal competitors in the Social Data and Social Advertising Markets. Am. 3 Compl. ¶ 168. In November 2012, Facebook announced that it would block competitors or require 4 full data reciprocity for continued access to its data. Am. Compl. ¶ 176. Plaintiffs allege that 5 Facebook’s statements from September 2011 through April 2014 about the functionality of the 6 Core APIs were false, half-truths that created a duty to speak fully and truthfully about the Core 7 APIs. Am. Compl. ¶ 450. 8 In April 2014, Facebook announced that it would remove access to several “rarely used” 9 APIs, including the Friends and News Feed APIs. Am. Compl. ¶ 242. Plaintiffs allege that these APIs were in fact quite popular and relied on by tens of thousands of third-party applications. Am. 11 United States District Court Northern District of California 10 Compl. ¶ 243. After this announcement and through the full removal of the APIs in April 2015, 12 Facebook entered into Whitelist and Data Sharing Agreements with certain third-party developers 13 that allowed continued access to the Friends or News Feed APIs and included a provision 14 acknowledging that the covered APIs were not available to the general public. Am. Compl. ¶¶ 15 247-248. These agreements “were only offered in exchange for massive purchases of Facebook’s 16 social data through mobile advertising and/or through the provision of the developer’s own social 17 data back to Facebook (so-called ‘reciprocity’).” Am. Compl. ¶ 249. Plaintiffs allege that 18 Facebook covered up the real reason for the removal of the APIs—while Facebook publicly stated 19 that the change was made to give users more control over their data, Plaintiffs allege that the real 20 reason for the change was to kill applications that were competitive or potentially competitive 21 with Facebook. Am. Compl. ¶¶ 461-62, 469. Plaintiffs allege that they first learned that 22 Facebook’s purported reasons for the removal of the APIs was false on November 6, 2019, when 23 NBC News posted a trove of internal Facebook documents seized by the United Kingdom 24 Parliament that allegedly showed that Facebook internally viewed the purported withdrawal as 25 lacking any legitimate business or technical justification and that the scheme had a broad impact 26 on competition. Am. Compl. ¶ 475. 27 28 3 Case 5:20-cv-00363-BLF Document 115 Filed 04/26/21 Page 4 of 17 A. 1 2 Reveal Chat Plaintiff Reveal Chat1 was a dating platform whose business model was to consume social data through Facebook’s APIs to provide match-making services and create a platform from which 3 it could sell advertising. Am. Compl. ¶ 21. Reveal Chat learned in late 2014 that Facebook had 4 slated APIs it relied on for removal. Am. Compl. ¶ 24. In 2015, Reveal Chat allegedly contacted 5 Facebook “to determine if there was a way forward.” Am. Compl. ¶ 25. Facebook allegedly 6 referred Reveal Chat to its official policy documents and developer documentation, which 7 suggested that the APIs were being removed for user control and privacy reasons. Am. Compl. ¶ 8 25. Reveal Chat then allegedly “contacted acquaintances that worked at Facebook to get more 9 clarity as to the APIs and to determine whether [Reveal Chat] could obtain an exemption from the 10 decision.” Am. Compl. ¶ 26. Reveal Chat never obtained an exception and accepted Facebook’s 11 United States District Court Northern District of California explanation that the APIs were being removed due to user privacy concerns. Am. Compl. ¶ 27. 12 One of Reveal Chat’s founders reviewed Facebook’s blog post in December 2018, which 13 responded to documents released as part of a United Kingdom Parliament investigation that again 14 allegedly misled him into believing the APIs had been removed due to user privacy and control 15 concerns. Am. Compl. ¶ 30. Reveal Chat alleges that it did not and could not learn the true reasons 16 for the removal of the APIs until November 6, 2019, when internal Facebook documents were 17 publicly released. Am. Compl. ¶ 31. 18 B. 19 20 21 Lenddo Plaintiff Lenddo developed a mobile application that used social data to assess a user’s creditworthiness based on studies showing that a person’s network of associations is predictive as to credit risk, fraud, and likelihood of loan repayment. Am. Compl. ¶¶ 32-33. Lenddo’s business 22 model was based on consuming social data from Facebook. Am. Compl. ¶ 39. Lenddo learned in 23 April 2015 that Facebook was eliminating the Core APIs and the Messaging APIs for all 24 companies that were not given exemptions. Am. Compl. ¶ 43. On April 23, 2015, Lenddo entered 25 a developer ticket, seeking to obtain an exemption from the new policy. Am. Compl. ¶ 44. Lenddo 26 27 28 1 Reveal Chat is the successor in interest to Reveal Chat, Inc. (f/k/a LikeBright, Inc.), pursuant to an April 2015 merger between Reveal Chat and Reveal Chat, Inc. Am. Compl. ¶ 18. The Court will refer to this company both pre- and post-merger as Reveal Chat. 4 Case 5:20-cv-00363-BLF Document 115 Filed 04/26/21 Page 5 of 17 1 alleges it communicated with Facebook’s Neil Hiltz and Simon Cross, and Cross informed 2 Lenddo that it could not have access to the Core APIs and the Messaging APIs because the its 3 application was credit-related and was part of a business that provided credit. Am. Compl. ¶¶ 45- 4 46. Lenddo alleges that this explanation is false, as Royal Bank of Canada had allegedly obtained 5 an exemption after having purchased large amounts of advertising from Facebook. Am. Compl. ¶ 6 47. Lenddo allegedly spoke with other developers, reviewed documentation from Facebook, and 7 spoke to “other acquaintances at Facebook” and concluded that Facebook’s policy change was for 8 legitimate reasons. Am. Compl. ¶ 48. Lenddo alleges that it did not and could not learn the true 9 reasons for the removal of the APIs until 2019 when internal Facebook documents were publicly 10 released. Am. Compl. ¶ 52. United States District Court Northern District of California 11 C. 12 Plaintiff Beehive had devised an algorithm that would analyze a user’s social connections Beehive 13 and interactions to determine whether the individual’s identification was authentic and thus 14 establish whether a Facebook user was a real person. Am. Compl. ¶¶ 55-56. Beehive targeted its 15 product to dating sites, and as a result, the dating sites saw immediate increases in reliability of 16 users on their platforms and a significant drop in fraud risk. Am. Compl. ¶ 58. Beehive’s business 17 was halted in 2015 when it discovered that Facebook was removing the APIs, including the 18 Friends and News Feed APIs, that Beehive’s business depended on for its functionality. Am. 19 Compl. ¶ 60. Beehive sought an exemption from Facebook but never received a response. Am. 20 Compl. ¶ 61. “Beehive sought an exemption from Facebook but received no answer. Beehive then 21 contacted an acquaintance that worked at Facebook, who advised them that they would never 22 receive an exemption.” Am. Compl. ¶ 61. Beehive allegedly spoke to other developers, read 23 documentation by Facebook, and viewed developer message boards and did not find any 24 explanation other than the one Facebook had offered regarding user privacy for the API removals. 25 Am. Compl. ¶ 63. Beehive alleges that it did not and could not learn the true reasons for the 26 removal of the APIs until 2019 when internal Facebook documents were publicly released. Am. 27 Compl. ¶ 65. 28 5 Case 5:20-cv-00363-BLF Document 115 Filed 04/26/21 Page 6 of 17 D. 1 Prior Order Granting Facebook’s Motion to Dismiss This Court previously granted a motion to dismiss filed by Facebook on July 8, 2020. See 2 Prior MTD Order; see also Reveal Chat Holdco, LLC v. Facebook, Inc., 471 F. Supp. 3d 981 3 (N.D. Cal. 2020). The Court found as a matter of law that Plaintiffs’ claims were time-barred by 4 the four-year statute of limitations for antitrust claims and that Plaintiffs had not adequately pled 5 fraudulent concealment in part because they had not plausibly alleged they were without actual or 6 constructive knowledge of the facts giving rise to their claims. Prior MTD Order 10, 14. The Court 7 8 found that, “[t]o allege fraudulent concealment, Plaintiffs must establish that ‘its failure to have notice of its claim was the result of [Facebook’s] affirmative conduct.’” Prior MTD Order 9 9 (quoting Conmar Corp. v. Mitsui & Co. (U.S.A.), 858 F.2d 499, 505 (9th Cir. 1988)). The Court 10 found that Plaintiffs had notice as of April 30, 2014, that access to the Friends and News Feed 11 United States District Court Northern District of California APIs would be removed, and Plaintiffs had notice of the Whitelist and Data Sharing Agreements 12 13 14 15 in September 2015 via an article published in the Wall Street Journal. Prior MTD Order 10. “Thus, at the very least, Plaintiffs had constructive knowledge of the facts that give rise to their claims.” Prior MTD Order 10. The Court also found that Facebook’s decision to keep “tightly underwraps” the “real reason for the removal of the APIs” is not affirmative conduct that necessarily tolls the 16 statute of limitations. Prior MTD Order 10. 17 The Court further found that Plaintiffs had failed to allege how they had acted diligently in 18 19 trying to uncover facts giving rise to their claims. Prior MTD Order 10-11. “Here, the publicly available facts regarding Facebook’s allegedly anticompetitive conduct would excite the inquiry of 20 a reasonable person, and therefore Plaintiffs must plead diligence with particularity. They have 21 failed to do so here.” Prior MTD Order 11. The Court granted Plaintiffs leave to amend on the 22 issue of fraudulent concealment, which if applicable, would toll the statute of limitations. Prior 23 MTD Order 14. 24 25 26 27 II. LEGAL STANDARD A. Rule 12(b)(6) “A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) for failure to state a 28 6 Case 5:20-cv-00363-BLF Document 115 Filed 04/26/21 Page 7 of 17 1 claim upon which relief can be granted ‘tests the legal sufficiency of a claim.’” Conservation 2 Force v. Salazar, 646 F.3d 1240, 1241-42 (9th Cir. 2011) (quoting Navarro v. Block, 250 F.3d 3 729, 732 (9th Cir. 2001)). When determining whether a claim has been stated, the Court accepts as 4 true all well-pled factual allegations and construes them in the light most favorable to the plaintiff. 5 Reese v. BP Exploration (Alaska) Inc., 643 F.3d 681, 690 (9th Cir. 2011). However, the Court 6 need not “accept as true allegations that contradict matters properly subject to judicial notice” or 7 “allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable 8 inferences.” In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008) (internal quotation 9 marks and citations omitted). While a complaint need not contain detailed factual allegations, it “must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible 11 United States District Court Northern District of California 10 on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 12 U.S. 544, 570 (2007)). A claim is facially plausible when it “allows the court to draw the 13 reasonable inference that the defendant is liable for the misconduct alleged.” Id. “However, as the 14 Supreme Court has noted precisely in the context of private antitrust litigation, ‘it is one thing to 15 be cautious before dismissing an antitrust complaint in advance of discovery, but quite another to 16 forget that proceeding to antitrust discovery can be expensive.’” Feitelson v. Google Inc., 80 F. 17 Supp. 3d 1019, 1025 (N.D. Cal. 2015) (quoting Twombly, 550 U.S. at 558-59). “As such, ‘a 18 district court must retain the power to insist upon some specificity in pleading before allowing a 19 potentially massive factual controversy to proceed.’” Feitelson, 80 F. Supp. 3d at 1025–26 20 (quoting Associated Gen. Contractors of Cal., Inc. v. Carpenters, 459 U.S. 519, 528 n.17 (1983) 21 quoted with approval in Twombly, 550 U.S. at 559). On a motion to dismiss, the Court’s review is 22 limited to the face of the complaint and matters judicially noticeable. MGIC Indem. Corp. v. 23 Weisman, 803 F.2d 500, 504 (9th Cir. 1986); N. Star Int’l v. Ariz. Corp. Comm’n, 720 F.2d 578, 24 581 (9th Cir. 1983). 25 In deciding whether to grant leave to amend, the Court must consider the factors set forth 26 by the Supreme Court in Foman v. Davis, 371 U.S. 178 (1962), and discussed at length by the 27 Ninth Circuit in Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048 (9th Cir. 2009). A district 28 court ordinarily must grant leave to amend unless one or more of the Foman factors is present: (1) 7 Case 5:20-cv-00363-BLF Document 115 Filed 04/26/21 Page 8 of 17 1 undue delay, (2) bad faith or dilatory motive, (3) repeated failure to cure deficiencies by 2 amendment, (4) undue prejudice to the opposing party, or (5) futility of amendment. Eminence 3 Capital, 316 F.3d at 1052. “[I]t is the consideration of prejudice to the opposing party that carries 4 the greatest weight.” Id. However, a strong showing with respect to one of the other factors may 5 warrant denial of leave to amend. Id. 6 B. 7 Claims sounding in fraud are subject to the heightened pleading requirements of Federal Rule 9(b) Rule of Civil Procedure 9(b), which require that a plaintiff alleging fraud “must state with 9 particularity the circumstances constituting fraud.” Fed. R. Civ. P. 9(b); see also Kearns v. Ford 10 Motor Co., 567 F.3d 1120, 1124 (9th Cir. 2009). To satisfy the heightened standard under Rule 11 United States District Court Northern District of California 8 9(b), the allegations must be “specific enough to give defendants notice of the particular 12 misconduct which is alleged to constitute the fraud charged so that they can defend against the 13 charge and not just deny that they have done anything wrong.” Semegen v. Weidner, 780 F.2d 727, 14 731 (9th Cir. 1985). Thus, claims sounding in fraud must allege “an account of the time, place, 15 and specific content of the false representations as well as the identities of the parties to the 16 misrepresentations.” Swartz v. KPMG LLP, 476 F.3d 756, 764 (9th Cir. 2007) (per curiam) 17 (citation omitted). “A plaintiff must set forth what is false or misleading about a statement, and 18 why it is false.” In re GlenFed, Inc. Secs. Litig., 42 F.3d 1541, 1548 (9th Cir. 1994) (en banc), 19 superseded by statute on other grounds as stated in SEC v. Todd, 642 F.3d 1207, 1216 (9th 20 Cir.2011). However, “intent, knowledge, and other conditions of a person’s mind” need not be 21 stated with particularity, and “may be alleged generally.” Fed. R. Civ. P. 9(b). 22 23 24 25 III. DISCUSSION A. Request for Judicial Notice Defendants request judicial notice of three documents: the Complaint in Six4Three, LLC v. 26 Facebook, Inc, No. CIV 533328 (San Mateo Cnty. Super. Ct. April 10, 2015), see Ex. 1, State 27 Court Complaint, ECF 71-2; a September 21, 2015 Wall Street Journal article, Facebook’s 28 Restrictions on User Data Cast a Long Shadow, see Ex. 2, Data Sharing Article, ECF 71-3; and an 8 Case 5:20-cv-00363-BLF Document 115 Filed 04/26/21 Page 9 of 17 1 October 20, 2020 Wall Street Journal article, Snapchat Nears 250 Million Daily Users as 2 Advertisers Lift Spending on Platform, see Ex. 1, Snapchat Article, ECF 74-2. Courts may take 3 judicial notice of matters either that are “generally known within the trial court’s territorial 4 jurisdiction” or that “can be accurately and readily determined from sources whose accuracy 5 cannot reasonably be questioned.” Fed. R. Evid. 201(b). “Specifically, a court may take judicial 6 notice: (1) of matters of public record, (2) that the market was aware of information contained in 7 news articles, and (3) publicly accessible websites whose accuracy and authenticity is not subject 8 to dispute.” In re Facebook, Inc. Sec. Litig., 405 F. Supp. 3d 809, 827 (N.D. Cal. 2019) (internal 9 citations and quotation marks omitted). Plaintiffs do not object to judicial notice of these documents. The Court grants Defendants’ request and finds the state court complaint judicially 11 United States District Court Northern District of California 10 noticeable as a publicly available court document, see Reyn’s Pasta Bella, LLC v. Visa USA, Inc., 12 442 F.3d 741, 746 n.6 (9th Cir. 2006) and the Wall Street Journal articles judicially noticeable “as 13 an indication of what information was in the public realm at the time,” see Van Saher v. Norton 14 Simon Museum of Art at Pasadena, 592 F.3d 954, 960 (9th Cir. 2010). 15 B. 16 Facebook argues that Plaintiffs’ claims are time-barred, as the Court found in its prior Statute of Limitations 17 order, and the amendments do not cure the identified deficiencies in the pleading. Mot. 4-5. 18 Plaintiffs chose to not address this threshold issue until the last section of their brief and argue that 19 there is an intra-circuit split as to whether a “discovery rule” or an “injury rule” applies to antitrust 20 claims, and if this Court chooses the discovery rule, then Plaintiffs’ claims have not accrued. 21 Opp’n 20-21. 22 The Court disagrees with Plaintiffs and finds that the Supreme Court and Ninth Circuit 23 have clearly stated that the injury rule applies to antitrust cases. See Klehr v. A.O. Smith Corp., 24 521 U.S. 179, 188 (1997) (finding that the ordinary Clayton Act rule, applicable in private 25 antitrust treble damages actions holds “a cause of action accrues and the statute begins to run when 26 a defendant commits an act that injures a plaintiff’s business.”) (quoting Zenith Radio Corp. v. 27 Hazeltine Research, Inc., 401 U.S. 321, 338 (1971)); Hexcel Corp. v. Ineos Polymers, Inc., 681 28 F.3d 1055, 1060 (9th Cir. 2012) (“We do not require a plaintiff to actually discover its antitrust 9 Case 5:20-cv-00363-BLF Document 115 Filed 04/26/21 Page 10 of 17 1 claims before the statute of limitations begins to run.”) (citing Beneficial Standard Life Ins., Co. v. 2 Madariaga, 851 F.2d 271, 274–75 (9th Cir. 1988)). The statute of limitations under the Sherman 3 Act is four years. Hexcel, 681 F.3d at 1057 (citing 15 U.S.C. § 15b). To the extent that Plaintiffs 4 are seeking injunctive relief, the Court reiterates its previous finding that “the doctrine of laches 5 applies to the instant case”, Prior MTD Order 7, and the same “four-year statute of limitations in 6 15 U.S.C. § 15b furnishes a guideline for computation of the laches period.” Prior MTD Order 7 7 (quoting Samsung Elecs. Co. v. Panasonic Corp., 747 F.3d 1199, 1205 (9th Cir. 2014)). Plaintiffs admit that they had notice of their injury by April 30, 2015 when the Core APIs 8 9 that their businesses relied on were withdrawn. Am. Compl. ¶¶ 6, 13, 245.2 Plaintiffs did not commence this lawsuit until January 16, 2020. See Compl., ECF 1. Therefore, Plaintiffs’ claims 11 United States District Court Northern District of California 10 are time barred unless the Sherman Act statute of limitations is properly tolled. The Court finds 12 that it is not. 13 Continuing Violation Plaintiffs argue that Facebook’s conduct restarted the statute of limitations under the 14 15 “continuing violation” doctrine. Opp’n 21-22. Plaintiffs argue that Facebook continued to operate 16 its Onavo spyware to spy on mobile application users as part of its scheme to prevent the advent of 17 a rival social advertising platform or generator of social data. Opp’n 21. This allegedly prevented 18 Snapchat from evolving into a viable platform that would allow Plaintiffs to reacquire the social 19 data they needed for their original business models, as Facebook “cloned” Snapchat’s 20 functionality in 2016. Opp’n 21-22. Plaintiffs also argue that Facebook continued to operate under 21 Whitelist and Data Sharing Agreements that allowed some companies to continue having access to 22 the necessary APIs in exchange for social data sharing or advertising purposes. Opp’n 22. 23 Facebook argues that Plaintiffs did not allege in their complaint that Facebook’s purported 24 “cloning” of Snapchat’s features caused them injury. Reply 4, ECF 74. Facebook argues that since 25 Plaintiffs were already allegedly excluded from the social data market as of April 2015, when they 26 27 28 2 Plaintiffs do not allege that they signed any Whitelist or Data Sharing Agreements with Facebook, but they had notice of those agreements by September 2015. See Prior MTD Order 10; Ex. 2, Data Sharing Article, ECF 71-3. 10 Case 5:20-cv-00363-BLF Document 115 Filed 04/26/21 Page 11 of 17 1 lost access to the Core APIs, Plaintiffs have failed to plead how any alleged cloning in 2016 2 somehow worsened their pre-existing injury or constituted a new injury. Reply 4. Facebook also 3 argues that the continued existence of the Data Sharing Agreements, which Plaintiff had notice of 4 by September 2015, do not establish a continuing violation. Reply 4. 5 “To state a continuing violation of the antitrust laws in the Ninth Circuit, a plaintiff must 6 allege that a defendant completed an overt act during the limitations period that meets two criteria: 7 1) It must be a new and independent act that is not merely a reaffirmation of a previous act; and 2) 8 it must inflict new and accumulating injury on the plaintiff.” Samsung Elecs. Co. v. Panasonic 9 Corp., 747 F.3d at 1202 (9th Cir. 2014); accord Oliver v. SD-3C LLC, 751 F.3d 1081, 1086 (9th Cir. 2014) (stating limitations begins to run from date of each “new overt act causing injury”). 11 United States District Court Northern District of California 10 Here, Plaintiffs were allegedly injured when they were excluded from the social data 12 market by virtue of losing access to the Core APIs by April 30, 2015. Am. Compl. ¶¶ 6, 13, 245 13 The Court has reviewed the allegations concerning Facebook cloning Snapchat features, see Am. 14 Compl. ¶¶ 311-12 and agrees with Facebook that Plaintiffs have not pled facts demonstrating that 15 this alleged cloning inflicted any new and accumulating injury on Plaintiffs beyond their pre- 16 existing injury via exclusion in April 2015. Accordingly, these allegations do not constitute a 17 “continuing violation.” 18 The Court also agrees with Facebook that the relevant act concerning the Data Sharing 19 Agreements occurred in April 2015, the latest start date Plaintiffs allege for the agreements. Am. 20 Compl. ¶¶ 247, 256. Accordingly, the continued existence of these Data Sharing Agreements does 21 not constitute new and independent acts that restart the statute of limitations. See Ryan v. 22 Microsoft Corp. (“Ryan II”), 147 F. Supp. 3d 868, 884 (N.D. Cal. 2015) (where the defendant 23 entered into an allegedly unlawful contract prior to the limitations period, the defendant still must 24 take an unlawful ‘new and independent act that is not merely a reaffirmation of a previous act’ 25 during the limitations period.”) (citing Pace Indus. v. Three Phoenix Co., 813 F.2d 234, 237 (9th 26 Cir.1987)). 27 28 In conclusion, the Court does not find that the continuing violation doctrine applies here to toll the statute of limitations. Plaintiffs already received an opportunity to amend their complaint 11 Case 5:20-cv-00363-BLF Document 115 Filed 04/26/21 Page 12 of 17 1 to properly plead this theory, and they have not suggested that a third attempt would be more 2 productive than the first two. The Court finds that further amendment would be futile and 3 accordingly dismisses this theory with prejudice. 4 5 Fraudulent Concealment Plaintiffs argue that the doctrine of fraudulent concealment applies to toll the statute of 6 limitations in this case. Opp’n 22-25. Plaintiffs allege that Facebook had a duty to speak fully and 7 truthfully about its plans for removing the APIs, and Facebook affirmatively lied about the real 8 reasons for removing the APIs. Opp’n 22-24. Plaintiffs also argue that, if the Court finds that 9 “facts exist that would excite the inquiry of a reasonable person” regarding Facebook’s misconduct, they were diligent in trying to discover the misconduct. Opp’n 25. Facebook argues 11 United States District Court Northern District of California 10 that Plaintiffs have not cured the deficiencies the Court identified in its prior order finding that the 12 doctrine of fraudulent concealment does not apply. Mot. 5-11, Reply 5-8. Specifically, Facebook 13 argues that Plaintiffs have not pled affirmative acts Facebook took to mislead them Mot. 5-11. 14 Facebook argues that Plaintiffs knew of their injuries by April 2015, and the fact that they were 15 allegedly unaware of Facebook’s motives for the removal of the APIs does not impact the 16 fraudulent concealment analysis. Mot. 6, 8-9. Facebook also argues that Plaintiffs have not 17 adequately alleged that they were diligent after learning of their injuries. Mot. 11. 18 “A statute of limitations may be tolled if the defendant fraudulently concealed the 19 existence of a cause of action in such a way that the plaintiff, acting as a reasonable person, did 20 not know of its existence.” Hexcel, 681 F.3d at 1060. “The plaintiff carries the burden of pleading 21 and proving fraudulent concealment.” Id. (brackets and internal quotation marks omitted). “To 22 plead fraudulent concealment, the plaintiff must allege that: (1) the defendant took affirmative acts 23 to mislead the plaintiff; (2) the plaintiff did not have ‘actual or constructive knowledge of the facts 24 giving rise to its claim’; and (3) the plaintiff acted diligently in trying to uncover the facts giving 25 rise to its claim.” In re Animation Workers Antitrust Litig. (“Animation Workers II”), 123 F. Supp. 26 3d 1175, 1194 (N.D. Cal. 2015) (quoting Hexcel, 681 F.3d at 1060)). Thus, “[a] fraudulent 27 concealment defense requires a showing both that the defendant used fraudulent means to keep the 28 plaintiff unaware of his cause of action, and also that the plaintiff was, in fact, ignorant of the 12 Case 5:20-cv-00363-BLF Document 115 Filed 04/26/21 Page 13 of 17 1 existence of his cause of action.” Wood v. Santa Barbara Chamber of Commerce, Inc., 705 F.2d 2 1515, 1521 (9th Cir. 1983). “The plaintiff is deemed to have had constructive knowledge if it had 3 enough information to warrant an investigation which, if reasonably diligent, would have led to 4 discovery of the fraud.” Beneficial Standard Life Ins. Co. v. Madariaga, 851 F.2d 271, 275 (9th 5 Cir. 1988). “It is enough that the plaintiff should have been alerted to facts that, following duly 6 diligent inquiry, could have advised it of its claim.” Hexcel, 681 F.3d at 1060 (internal quotation 7 marks omitted). “Moreover, allegations of fraudulent concealment must be pled with particularity.” Ryan 8 9 II, 147 F. Supp. 3d at 885. “Although it is generally inappropriate to resolve the fact-intensive allegations of fraudulent concealment at the motion to dismiss stage, Plaintiffs nevertheless must 11 United States District Court Northern District of California 10 allege specific factual allegations of fraudulent concealment to survive a motion to dismiss,” 12 Garrison v. Oracle Corp. (“Garrison II”), 159 F. Supp. 3d 1044, 1073 (N.D. Cal. 2016) (granting 13 a motion to dismiss with prejudice and finding that plaintiffs had failed to adequately plead 14 fraudulent concealment). “Conclusory statements are not enough.” Conmar Corp., 858 F.2d at 15 502. 16 In Hexcel, the Ninth Circuit emphasized that if a plaintiff has actual or constructive 17 knowledge of the facts giving rise to his claim, then fraudulent concealment does not apply. 18 Hexcel, 681 F.3d at 1060. Plaintiffs do not attempt to contest that they knew of their alleged 19 exclusion by Facebook by April 30, 2015, when Facebook removed access to the Core APIs. 20 Rather, Plaintiffs argue that without the knowledge of Facebook’s true motives for removing the 21 APIs, they could not know they were injured. However, the “failure to own up to illegal conduct” 22 is not sufficient for fraudulent concealment, “and to find otherwise ‘would effectively nullify the 23 statute of limitations in these cases.’” Garrison II, 159 F. Supp. 3d at 1077 (quoting Pocahontas 24 Supreme Coal Co. v. Bethlehem Steel Corp., 828 F.2d 211, 218–19 (4th Cir. 1987)); see 25 also Conmar, 858 F.2d at 505 (citing favorably Pocahontas, 828 F.2d at 218); In re Animation 26 Workers Antitrust Litig. (“Animation Workers I”), 87 F. Supp. 3d 1195, 1216 (N.D. Cal. 2015) 27 (“That Defendants did not affirmatively disclose the details of their allegedly unlawful conspiracy 28 13 Case 5:20-cv-00363-BLF Document 115 Filed 04/26/21 Page 14 of 17 1 to Plaintiffs is neither surprising nor sufficient to constitute ‘affirmative steps to mislead.’”)3 2 (citing Conmar, 858 F.2d at 505)). Under Hexcel, what is important is the facts that give rise to 3 Plaintiffs’ claims. The critical fact was losing access to the Core APIs in April 2015. The Court finds the primary cases Plaintiffs rely on, Animation Workers II and In re 4 Glumetza Antitrust Lit., 2020 WL 1066934, at *6 (N.D. Cal. Mar 5, 2020), distinguishable from 6 this case. As Facebook notes, these cases involve allegations of illegal price-fixing, a different 7 antitrust violation than what Plaintiffs have alleged here. Both cases allege a conspiracy, which is 8 also absent in this case. These different factual scenarios are meaningful in terms of evaluating 9 whether Plaintiffs have sufficiently pled fraudulent concealment. The Court agrees with Facebook 10 that “In a price-fixing case, concealing the reasons a price is set at a given level obscures not only 11 United States District Court Northern District of California 5 the defendant’s intent but also the fact that a potential plaintiff has been injured at all—i.e., that 12 prices are the result of collusion rather than market forces.” Mot. 8. Here, by contrast, the injury of 13 lost API access was clear to Plaintiffs when it occurred. See Phillip E. Areeda & Herbert 14 Hovenkamp, Antitrust Law: An Analysis of Antitrust Principles and Their Application ¶ 320a (4th 15 ed., last updated Sept. 2020) (“[I]n the typical refusal to deal, tying, or exclusive dealing case, the 16 injured party and likely plaintiff has virtually immediate knowledge of the unlawful act.”). The Court also finds that Plaintiffs have failed to plead affirmative conduct on the part of 17 18 Facebook with the requisite particularity that Rule 9(b) requires. “[T]o plead fraudulent 19 concealment in accordance with Rule 9(b), Plaintiffs must allege an account of the time, place, and 20 specific content of the false representations as well as the identities of the parties to the 21 misrepresentations.” Garrison II, 159 F. Supp 3d at 1075 (internal quotation and citation omitted). 22 Many of the statements cited by Plaintiffs were not made to these particular Plaintiffs. See, e.g., 23 Am. Compl. ¶¶ 464-65 (statements to developers at Microsoft and Airbiquity); Am. Compl. ¶ 466 24 (statements to unspecified, unnamed developers). Statements made before Plaintiffs were 25 26 27 28 3 The Court acknowledges that the Animation Workers plaintiffs were ultimately able to plead sufficient facts to establish fraudulent concealment at the motion to dismiss stage after Judge Koh gave them one opportunity to amend their complaint. See Animation Workers II, 124 F. Supp 3d at 1193-1205. Even under Animation Workers II, the facts pled by Plaintiffs after their opportunity to amend are not sufficient to plausibly plead fraudulent concealment. 14 Case 5:20-cv-00363-BLF Document 115 Filed 04/26/21 Page 15 of 17 1 allegedly injured in April 2015 necessarily cannot toll the statute of limitations, see Am. Compl. 2 ¶¶ 459-60. Plaintiffs also allege a “code of silence” internally at Facebook, Am. Compl. ¶¶ 454- 3 58, but this Court has already rejected Plaintiffs’ attempts to rely on Facebook’s private actions as 4 affirmative misconduct that specifically misled them. Prior MTD Order 9-10. 5 Plaintiffs allege that Facebook misrepresented the real goal of the API withdrawal in an 6 April 30, 2015 blog post, Am. Compl. ¶ 467, but Plaintiffs do not allege that any of them read or 7 relied on this statement. The March 26, 2018 statement of senior executive Ime Archibong, Am. 8 Compl. ¶ 472, suffers from the same deficiency. Plaintiffs also refer to unspecified Facebook 9 “documentation and FAQ,” publicized by Facebook employee Simon Cross on an unspecified message board on an unspecified date, that was false and misleading, Am. Compl. ¶ 468, but this 11 United States District Court Northern District of California 10 type of allegation is wholly insufficient under Rule 9(b). See Animation Workers I, 87 F. Supp. 3d 12 at 1217 (“Plaintiffs offer no specific facts showing the ‘who, what, where, when’ of these alleged 13 incomplete or materially false statements.”) (citing Swartz v. KPMG LLP, 476 F.3d 756, 764 (9th 14 Cir. 2007) (per curiam)). Plaintiffs’ allegations that Reveal Chat and Beehive “frequented those 15 sources of information as a matter of course” and read the posts and accepted the pretextual reason 16 for the API removal, Am. Compl. ¶ 471, is not the type of allegation of fraud “specific enough to 17 give defendants notice of the particular misconduct which is alleged to constitute the fraud 18 charged so that they can defend against the charge.” Garrison II, 159 F. Supp 3d at 1075 (citing 19 Swartz, 476 F.3d at 764). Defendants also allege that December 5, 2018 blog post by Facebook 20 misrepresented the reasons for the API withdrawal and Data Sharing Agreements, and this post 21 was read by one of the founders of Reveal Chat. Am. Compl. ¶¶ 30, 474. However, the Complaint 22 does not specifically identify this founder, or how many founders Reveal Chat and its predecessor 23 company claim. These allegations are significantly less particular than those held sufficient in 24 Animation Workers II, where those plaintiffs alleged facts such as “Lucasfilm made ‘affirmative 25 efforts to eliminate a paper trail regarding its code-named ‘DNR’ agreements,’ including a 26 requirement that “all discussions of ‘DNR’ needed to be conducted over the phone ... [i]f you see 27 an email forward to Steve and one of our lawyers.” 123 F. Supp. 3d at 1201. Despite a previous 28 warning from the Court that the alleged affirmative acts need to be specifically pled, see Prior 15 Case 5:20-cv-00363-BLF Document 115 Filed 04/26/21 Page 16 of 17 1 2 MTD Order 9-10, Plaintiffs have still not cured this deficiency. Finally, Plaintiffs have failed to plead their diligence in trying to uncover the facts giving 3 rise to its claim with particularity. “Diligent inquiry is required where facts exist that would excite 4 the inquiry of a reasonable person,” and diligence must be pled with particularity. Glumetza, 2020 5 WL 1066934, at *6 (citing Conmar, 858 F.2d at 502, 504). Allegations such as “[Reveal Chat] 6 then contacted acquaintances that worked at Facebook to get more clarity as to the APIs and to 7 determine whether [Reveal Chat] could obtain an exemption from the decision,” Am. Compl. ¶ 26 8 (emphasis added) fall woefully short of the particularity required to plead diligence. Beehive 9 likewise “contacted an acquaintance that worked at Facebook, who advised them that they would never receive an exemption.” Am. Compl. ¶ 61 (emphasis added). Lenddo alleges that it spoke 11 United States District Court Northern District of California 10 with Facebook’s Simon Cross and Neil Hiltz about an exemption to the policy withdrawing access 12 to the Core APIs, and Cross told them they would not be receiving an exemption. Am. Compl. ¶¶ 13 44-46, 476. Plaintiff has not pled how seeking an exemption to a policy constitutes diligence in 14 attempting to determine if the API withdrawal was unlawful. Plaintiffs also claim they read two 15 Facebook blog posts from 2015 and 2018 and unspecified message board posts, but “[o]nce 16 [parties] had clear knowledge of their claims, it was not reasonable for them to rely on reassuring 17 comments from [Defendant].” Volk v. D.A. Davidson & Co., 816 F.2d 1406, 1416 (9th Cir. 1987) 18 (citation omitted). Accordingly, the Court finds that Plaintiffs have failed to plead sufficient facts 19 alleging they acted diligently in trying to uncover the facts giving rise to their claim. 20 21 Conclusion The Court is mindful that resolution of statute of limitations challenges are generally 22 deferred until a presentation of a more developed record, but this is one of the rare cases where 23 Plaintiffs’ entire theory of liability is based on completed acts by Facebook beyond the limitations 24 period. By their own pleading, Plaintiffs have exposed the tardiness of their claims, their 25 knowledge of their injury, and the absence of diligence. Thus, the Court finds that the four-year 26 statute of limitations applies to this case, and Plaintiffs have not adequately pled a tolling theory 27 under the continuing violation or fraudulent concealment doctrines. The Court put Plaintiffs on 28 notice in its first order granting Facebook’s motion to dismiss that “allegations of fraudulent 16 Case 5:20-cv-00363-BLF Document 115 Filed 04/26/21 Page 17 of 17 1 concealment must be pled with particularity.” Prior Order 8 (citing Ryan II, 147 F. Supp. 3d at 2 885). Despite this notice, Plaintiffs’ allegations are wholly inadequate to meet the pleading 3 standard for fraud claims under Rule 9(b). Given Plaintiffs’ adequate notice of the need to plead 4 with particularity and their continued failure to do so, the Court finds that further amendment 5 would be futile and will GRANT Facebook’s motion to dismiss WITH PREJUDICE. Facebook’s Remaining Arguments 6 C. 7 Facebook argues several other grounds for dismissal, including that Plaintiffs have not 8 plausibly alleged an antitrust injury and have failed to state a claim establishing a violation of 9 Section 2 of the Sherman Act. Mot. 11-25. However, because this case is being dismissed under the statute of limitations, the Court need not reach these arguments. 11 United States District Court Northern District of California 10 IV. 12 13 ORDER For the foregoing reasons, IT IS HEREBY ORDERED that Facebook’s motion to dismiss is GRANTED WITH PREJUDICE. 14 15 16 17 Dated: April 26, 2021 ______________________________________ BETH LABSON FREEMAN United States District Judge 18 19 20 21 22 23 24 25 26 27 28 17

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