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Oluwaseun Fasugbe and Luke Huckaba, On Behalf of Themselves and All Others Similarly Situated v. Jesse Willms

August 19, 2011

OLUWASEUN FASUGBE AND LUKE HUCKABA, ON BEHALF OF THEMSELVES AND ALL OTHERS SIMILARLY SITUATED
PLAINTIFFS,
v.
JESSE WILLMS, AN INDIVIDUAL, 1524948 ALBERTA LTD., A CANADIAN CORPORATION D/B/A
TERRA MARKETING GROUP D/B/A SWIPEBIDS.COM,
SPHERE MEDIA, LCC, A NEVADA LIMITED LIABILITY COMPANY, AND JOHN DOES 1-50 INCLUSIVE, DEFENDANTS.



MEMORANDUM AND ORDER RE: MOTION TO DISMISS AND TO STRIKE

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 Swipebids.com ("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." On May 25, 2011, the court granted defendants' motions to dismiss the First Amended Complaint ("FAC") for failure to allege personal jurisdiction over Willms and failure to state a claim. (Docket No. 44.) Plaintiffs filed their Second Amended Complaint ("SAC") on June 15, 2011. (Docket No. 45.) Defendants now move to dismiss plaintiffs' SAC for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6) and on the ground that the court lacks personal jurisdiction over Willms pursuant to Rule 12(b)(2). Defendants also move to strike plaintiffs' class allegations pursuant to Rule 12(f).

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. (SAC ¶¶ 4, 20.) Willms, a citizen of Canada, is allegedly the Chief Executive Officer 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, SwipeBids.com, which is advertised via sponsored links, banner advertisements, and links in fake news articles and fake blogs. (Id. ¶¶ 20-28.) The links direct consumers to a webpage*fn1 titled "SwipeBids Registration," which states near the top of the page: "STEP 1 OF 2: Scroll down to register." (Id. ¶ 29.) 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 several consumer testimonials, 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.)

Plaintiffs allege that, after clicking "Continue," consumers are directed to a "credit card submit" page. (Id. ¶ 32.) Plaintiffs allege that "on the credit card submit page, Swipebids represents that the consumers' account information is only necessary in order to pay for 'winning auctions,'" but that the page "fails to disclose the existence of its membership fees." (Id. ¶¶ 33-34.) Once a consumer completes the registration process by submitting their credit card information, SwipeBids allegedly charges them a membership fee of $150 or $159. (Id. ¶¶ 27, 35.)

Consumers who complain about SwipeBids allegedly often do so by way of an online chat with a SwipeBids representative. (Id. ¶ 42.) 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 fraudulently direct complaining consumers to a page that is not the page viewed by consumers when they initially register with SwipeBids. (Id. ¶ 43.) The page to which consumers are allegedly sent after complaining discloses the fact that a membership fee will be charged. (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. ¶ 51.) This site contained a link routing Fasugbe to SwipeBids. (Id. ¶ 53.) Fasugbe submitted his credit card information to SwipeBids, allegedly believing that this would allow him to bid on SwipeBids items. (Id. ¶ 54.) SwipeBids immediately charged him $150; he has not received a refund. (Id. ¶¶ 55-58.)

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. ¶ 59.) SwipeBids charged him $150 when he registered. (Id. ¶ 61.) He bid on several items using the 1000 "free" bids, but never won an auction and never received the free gift card. (Id. ¶ 62.) He has not received a refund. (Id. ¶ 64.)

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 Swipebids.com landing page by the John Doe Defendant advertising network and were charged a membership fee by Swipebids.com." (Id. ¶ 65.)

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. Unocal Corp., 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.

The fiduciary shield doctrine provides that "a person's mere association with a corporation that causes injury in the forum state is not sufficient in itself to permit that forum to assert jurisdiction over the person." Davis v. Metro Prods., Inc., 885 F.2d 515, 520 (9th Cir. 1989). In other words, "[t]he mere fact that a corporation is subject to local jurisdiction does not necessarily mean its nonresident officers, directors, agents, and employees are suable locally as well." Colt Studio, Inc. v. Badpuppy Enter., 75 F. Supp. 2d 1104, 1111 (C.D. Cal. 1999). Though employees are not necessarily subject to liability in a given jurisdiction due to the contacts of their employers, "their status as ...


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