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Mazur v. eBay Inc.

July 23, 2008

MICHELE MAZUR, INDIVIDUALLY AND FOR ALL OTHERS SIMILARLY SITUATED, PLAINTIFF,
v.
EBAY INC., HOT JEWELRY AUCTIONS.COM D/B/A JEWELRY RICO AND CONTRACT CLAIMS OVERSTOCK AUCTIONS D/B/A PARAMOUNT AUCTIONS, NIEMANS JEWELRY, GOANTIQUES.COM AND DOES 1-200, INCLUSIVE, DEFENDANTS.



The opinion of the court was delivered by: Marilyn Hall Patel United States District Court Judge

MEMORANDUM & ORDER

Re: Defendant eBay's Motion to Dismiss

On August 2, 2007 plaintiff Michele Mazur, on behalf of herself and others similarly situated, brought suit against eBay Inc. ("eBay") and others, including Hot Jewelry Auctions.com ("HJA"), accusing the latter of shill bidding and the former of acquiescing in the same. On March 4, 2008 this court issued an order regarding motions to stay and dismiss. See Docket No. 55. On April 3, 2008 plaintiff filed her first amended complaint ("FAC"). See Docket No. 56. Now before the court is eBay's motion to dismiss plaintiff's contract based claims and claims based on the Racketeer Influence and Corrupt Organizations Act ("RICO"). The court has considered the parties' arguments fully, and for the reasons set forth below, the court rules as follows.

BACKGROUND*fn1

eBay is the world's largest online auction hosting service. It strictly prohibits shill bidding-the practice of entering fake bids-on its website. Amongst the many services it provides, eBay also provides the Live Auction service, which allows eBay users to place bids on live auctions being held by third party auction houses. This service allows eBay users to compete with floor bidders at those auction houses. The offline bids made by the floor bidders are reflected online, but eBay users are not provided any details regarding the bidder. Plaintiff seeks to hold eBay liable for participating in the alleged fraud of the third party auction houses that sold goods via the Live Auction service. She contends that HJA and others like HJA conspired to engage in shill bidding. She further alleges that eBay participated in this conspiracy by: 1) providing a portal for this activity; 2) disseminating misleading statements regarding the safety of Live Auctions; 3) coordinating and organizing the fraud; and 4) reinvesting profits from the scheme back into the enterprise. The subject of the instant motion are some of the contract and statutory claims against eBay.

LEGAL STANDARD

I. Rule 12(b)

A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) "tests the legal sufficiency of a claim." Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). Because Rule 12(b)(6) focuses on the "sufficiency" of a claim-and not the claim's substantive merits-"a court may [typically] look only at the face of the complaint to decide a motion to dismiss." Van Buskirk v. Cable News Network, Inc., 284 F.3d 977, 980 (9th Cir. 2002). Although the court is generally confined to consideration of the allegations in the pleadings, when the complaint is accompanied by attached documents, such documents are deemed part of the complaint and may be considered in evaluating the merits of a Rule 12(b)(6) motion. Durning v. First Boston Corp., 815 F.2d 1265, 1267 (9th Cir. 1987). A motion to dismiss should be granted if plaintiff fails to proffer "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 127 S.Ct. 1955, 1974 (2007). Dismissal can be based on the lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory. Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990). Allegations of material fact are taken as true and construed in the light most favorable to the nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337--38 (9th Cir. 1996). The court need not, however, accept as true allegations that are conclusory, legal conclusions, unwarranted deductions of fact or unreasonable inferences. See Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001); Clegg v. Cult Awareness Network, 18 F.3d 752, 754--55 (9th Cir. 1994).

II. Fraud-based Claims

A plaintiff alleging fraud must satisfy a heightened pleading standard that requires circumstances constituting fraud be pled with particularity. Fed. R. Civ. P. 9(b). Specifically, "[t]he pleadings 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), cert. denied, 516 U.S. 810 (1995). In addition, plaintiffs seeking to satisfy Rule 9(b) must "set forth an explanation as to why the statement or omission complained of was false and misleading." In re GlenFed, Inc. Sec. Litig., 42 F.3d 1541, 1548 (9th Cir. 1994) (en banc); see Fecht v. Price Co., 70 F.3d 1078, 1082 (9th Cir. 1995), cert. denied, 517 U.S. 1136 (1996). The pleading must be "specific enough to give defendants notice of the particular misconduct . . . so that they can defend against the charge and not just deny that they have done anything wrong." Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003) (internal quotation omitted). Finally, a plaintiff seeking to state a claim for fraud must also plead knowledge of falsity, or scienter. See GlenFed, 42 F.3d at 1546. The requirement for pleading scienter is less rigorous than that which applies to allegations regarding the "circumstances that constitute fraud" because "malice, intent, knowledge, and other condition of mind of a person may be averred generally." Fed. R. Civ. P. 9(b). Nonetheless, nothing in the Federal Rules of Civil Procedure relieves a plaintiff of the obligation to "set forth facts from which an inference of scienter could be drawn." Cooper v. Pickett, 137 F.3d 616, 628 (9th Cir. 1997) (quoting GlenFed, 42 F.3d at 1546).

This heightened pleading standards applies to allegations of fraud and allegations that sound in fraud, including false misrepresentations. Vess, 317 F.3d at 1106--07; see also Meridian Project Sys., Inc. v. Hardin Constr. Co., LLC, 404 F. Supp. 2d 1214, 1219 (E.D. Cal. 2005) ("It is well settled in the Ninth Circuit that misrepresentation claims are a species of fraud, which must meet Rule 9(b)'s particularity requirement."); Neilson v. Union Bank of Cal., N.A., 290 F. Supp. 2d 1101, 1141 (C.D. Cal. 2003) (same).

DISCUSSION

eBay moves to dismiss counts 7, 35, 36 and 37 of plaintiff's FAC as they pertain to eBay. Specifically, eBay claims that plaintiff has not alleged:

1) that she was harmed by the investment of racketeering proceeds as required under section 1962(a); 2) a "pattern of racketeering activity" under section 1962(c) as to eBay; and 3) a claim for RICO conspiracy under 1962(d) as to eBay.*fn2 eBay also claims that plaintiff cannot pursue a breach of contract claim where the alleged breach consists of the same acts that form the basis for plaintiff's negligence claims. The court discusses each contention in turn. Before doing so, the court notes that it has already recognized that the heightened ...


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