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Oluwaseun Fasugbe and Luke Huckaba, On v. Jesse Willms

May 25, 2011



Plaintiffs Oluwaseun Fasugbe and Luke Huckaba brought this action against defendants Jesse Willms, 1524948 Alberta Ltd. d/b/a Terra Marketing Group d/b/a ("Terra Marketing"), and Sphere Media, LLC ("Sphere Media"), alleging violations of California's False Advertising Law ("FAL"), Cal.Bus. & Prof. Code §§ 17500-17606, Consumer Legal Remedies Act ("CLRA"), Cal. Civ. Code §§ 1750-1785, and Unfair Competition Law ("UCL"), Cal. Bus. & Prof. Code §§ 17200-17210, as well as fraud in the inducement, conspiracy to commit fraud in the inducement, and "restitution/unjust enrichment." Jurisdiction is predicated upon diversity of citizenship, 28 U.S.C. § 1332. Terra Marketing and Sphere Media now move to dismiss plaintiffs' First Amended Complaint ("FAC") for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6) and to strike plaintiffs' class allegations pursuant to Rule 12(f). Willms moves to dismiss and to strike on the same grounds and also moves to dismiss pursuant to Rule 12(b)(2) on the ground that the court lacks personal jurisdiction over him.

I. Factual and Procedural Background

Terra Marketing is a seller of online auction currency, or "bids," which consumers use to bid on products in online auctions. (FAC ¶¶ 4, 16.) Willms, a citizen of Canada, is allegedly a "principal" of Terra Marketing and Sphere Media. (Id. ¶ 3.) Sphere Media is allegedly a subsidiary of Terra Marketing and is based in Nevada. (Id. ¶ 5.)

Plaintiffs allege that defendants run an online auction website,, which is advertised via sponsored links, banner advertisements, and links in fake news articles and fake blogs. (Id. ¶¶ 16-24.) The links direct consumers to a webpage*fn1 titled "SwipeBids Registration," which explains the steps consumers must take to "win" "government auctions," "warehouse clearance auctions," and "overstocked surplus auctions." (Id. ¶ 25.) A graphic in the middle of the page states: "Winning is Easy: Step 1: JOIN & RECEIVE BIDS Step 2: PLACE BIDS on AUCTIONS Step 3: WIN GREAT PRODUCTS!" (Id.) Below, the page states: "WIN Great Prizes at Incredible Prices!," with an arrow pointing to the right side of the page stating "Register Now! It's Easy!" (Id.) On the right, consumers are prompted to enter their name, gender, e-mail address, create a username and password, and then click "Continue." (Id.)

Consumers are then brought to another page that states "STEP 2 OF 2: Congratulations, final step! Scroll down to finish registering." (Id.) A number of images from the first page are repeated, with a few additional images. One image states "SwipeBids Member Wins New 2010 Honda Civic" and describes someone who "Spends $150 to get $16,356 Civic" and in smaller print states as a testimonial "I spent $150 on a membership, and now I'm driving a $16,356 Honda Civic that I won on SwipeBids. The membership has really paid off in so many ways . . . ." (Id.) Below, another graphic states "Check Out Some of These INCREDIBLE SAVINGS Our Members Recently Got" with a list of products that were recently purchased, and then states "Savings Could Be Yours! Membership $250 $150." (Id.) The webpage does not include any fields in which credit card information could be entered. The FAC only alleges that "consumers are deceptively induced to enter their credit and bank account information in order to pay for their 'Winning Auctions,'" when in fact they are charged an initial "membership" fee. (Id. ¶¶ 26-27.)

Consumers who complain about SwipeBids allegedly oftendo so by way of an online chat with a SwipeBids representative. (Id. ¶ 31.) That representative allegedly sends the consumer a link to a transaction page SwipeBids contends is the page on which the consumer initially entered their payment information. (Id.) Plaintiffs allege that defendants are fraudulently directing complaining consumers to a page that is not the page viewed by consumers when they initially registered with SwipeBids. (Id. ¶ 35.) That allegedly fraudulent page is essentially the same as the one plaintiffs alleged they initially visited but with certain different graphics and with one addition near the bottom of the second page: a section with two columns in which consumers are directed to submit their credit card information. The left column is titled "SwipeBids Access Details" and describes "SwipeBids Access (Includes 300 Bids)" as costing "53 /bid ($159 Total)," and states below that "ONLY $159 GRANTS YOU ACCESS TO" government auctions and other deals.*fn2

(Id. ¶ 32.) On the right, a field asks "Where Do We Send Your Winning Auctions?," below which it states "INCREDIBLE SAVINGS Could Be Yours! SwipeBids Access Just $250 $159 Today!" (Id.) It then asks for "Shipping Information," including name and address, and "Payment Information," including credit card type and number. (Id.) Directly above a button that states "Start Bidding," the page states "By clicking below you will be charged $159 and receive 300 bids." (Id.)

Plaintiff Fasugbe allegedly clicked on an advertisement displayed in an Internet search page while looking for a discount on a flat-screen television, which directed him to an allegedly fake news article describing the benefits to be gained by bidding on items through SwipeBids. (Id. ¶ 40.) This site contained a link routing Fasugbe to SwipeBids. (Id. ¶ 42.) Fasugbe submitted his credit card information to SwipeBids, allegedly believing that this would allow him to bid on SwipeBids items. (Id. ¶¶ 43-44.) SwipeBids immediately charged him $150; he has not yet received a refund. (Id. ¶¶ 45-48.)

Plaintiff Huckaba allegedly responded to an online advertisement offering a code that, upon registering with SwipeBids, promised to provide him with a free $25 Wal-Mart gift card and 1000 free bids. (Id. ¶ 49.) SwipeBids charged him $150 when he registered. (Id. ¶ 51.) He bid on several items using the 1000 "free" bids, but never won an auction and never received the free gift card. (Id. ¶ 52.) He has not yet received a refund. (Id. ¶ 54.)

Plaintiffs bring this suit as a putative class action with two classes: "Swipebids Class: All residents of the United States who were charged a membership fee by Defendant Swipebids," and "John Doe Defendant Subclass: All residents of the United States who were directed to a landing page by the John Doe Defendant advertising network and were charged a membership fee by" (Id. ¶ 55.)

II. Discussion

A. Personal Jurisdiction over Willms

A plaintiff has the burden of establishing that the court has personal jurisdiction over a defendant. Doe v. UnocalCorp., 248 F.3d 915, 922 (9th Cir. 2001). On a motion to dismiss, a plaintiff "need make only a prima facie showing of jurisdictional facts . . . . That is, the plaintiff need only demonstrate facts that if true would support jurisdiction over the defendant." Id. (quoting Ballard v. Savage, 65 F.3d 1495, 1498 (9th Cir. 1995)). When not directly controverted, a plaintiff's version of the facts must be taken as true, and conflicts between the facts contained in the parties' affidavits should be resolved in favor of the plaintiff. Id. Once a defendant has contradicted the allegations contained in the complaint, however, a plaintiff may not rest on the pleadings, but must present evidence which, if true, would support the exercise of personal jurisdiction. Data Disc, Inc. v. Sys. Tech. Assocs., Inc., 557 F.2d 1280, 1284-85 (9th Cir. 1977).

Only Willms moves to dismiss for lack of personal jurisdiction; the corporate defendants do not dispute whether they are properly subject to jurisdiction in this court. Plaintiffs argue that the court has personal jurisdiction over ...

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