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Think Computer Corporation v. Dwolla, Inc.

United States District Court, N.D. California, San Jose Division

March 24, 2014

THINK COMPUTER CORPORATION, Plaintiff,
v.
DWOLLA, INC., ET AL. Defendants.

ORDER GRANTING DEFENDANTS' MOTIONS TO DISMISS [Re: Docket Item Nos. 91, 99, 128, 132]

EDWARD J. DAVILA, District Judge.

Presently before the Court are three Motions to Dismiss Plaintiff's First Amended Complaint ("FAC") filed by Defendants. The first is a Motion to Dismiss Plaintiff's first and second claims filed by the majority of the Defendants. See Motion to Dismiss ("primary Motion to Dismiss"), Docket Item No. 91. The second is a Motion to Dismiss Plaintiff's third claim and joinder in the primary Motion to Dismiss brought by Coinbase, Inc. ("Coinbase"), Dwolla, Inc. ("Dwolla"), and Stripe, Inc. ("Stripe"). See Joinder and Motion to Dismiss ("MTD 2"), Docket Item No. 99. The third is a Motion to Dismiss and joinder in the primary Motion to Dismiss filed by ActBlue, LLC ("ActBlue"). See Motion to Dismiss Plaintiff's FAC and Joinder ("MTD 3"), Docket Item No. 128. Additionally, Defendants have filed a Motion for Sanctions against Plaintiff.

This case is presently before this Court based on federal question jurisdiction, 28 U.S.C. § 1331.

I. BACKGROUND

Plaintiff is a Palo Alto-based money service business ("MSB") and developer of a mobile payment system platform called FaceCash, which was launched in April 2010. Defendants fall into two groups: companies that Plaintiff claims are money transmitters ("MSB Defendants") and venture capital funds and individual investors ("Investor Defendants"). The MSB Defendants include Airbnb, Inc.; ActBlue, LLC; Balanced, Inc.; Clinkle Corp.; Coinbase, Inc.; CoinLab, Inc.; Dwolla, Inc.; Facebook, Inc.; Facebook Payments, Inc.; GoPago, Inc.; Gumroad, Inc.; Square, Inc.; Stripe, Inc.; and The Board of Trustees of the Leland Stanford Junior University. Investor Defendants include A-Grade Investments LLC (and an A-Grade fund); Andreessen Horowitz, LLC (and a number of Andreesseen Horowitz funds); Digital Sky Technologies, Limited (and a number of DST funds); Kleiner Perkins Caufield & Byers, LLC (and a number of KPCB funds); Sequoia Capital, LLC (and other Sequoia funds); Union Square Ventures, LLC (and Union Square funds); Y Combinator, LLC (and Y Combinator Funds); Brian Chesky; Max Levchin; Yuri Milner; and Yishan Wong.

Plaintiff contends that MSB Defendants are organizations that hold and transmit funds on behalf of third parties and, by virtue of their direct involvement in the payment industry, are direct competitors of Plaintiff. Plaintiff states that MSB Defendants operated without the requisite money transmitter licenses after July 1, 2011, in violation of the California Money Transmitter Act ("MTA"), Cal. Fin. Code §§ 2000 et seq. The MTA, which imposes certain licensing, capitalization, and insurance requirements on money transmitting businesses, became enforceable on July 1, 2011. Plaintiff contends that Investor Defendants invested their money in, supervised, directed, participated in the business activities of, and controlled the business operations of MSB Defendants with the intent of helping them to violate state and federal law.

Plaintiff did not acquire the necessary license required under the MTA and voluntarily pulled its FaceCash service from all its customers as of June 30, 2011, the day before the MTA went into effect. Although it continues to operate its FaceCash platform, Plaintiff has no paying customers for payment services.

Plaintiff filed a complaint on May 6, 2013. See Docket Item No. 1. Plaintiff's FAC, filed on June 21, 2013, alleges the following causes of action: violation of the California Unfair Competition Law ("UCL"), Cal. Bus. & Prof. Code § 17200, against all Defendants, unjust enrichment against all Defendants, and violation of the Lanham Act, 15 U.S.C. §§ 1051 et seq., against Defendants Dwolla, Stripe, and Coinbase. Dkt. No. 76. The primary Motion to Dismiss was filed on August 8, 2013 by Defendants Airbnb, Balanced, CoinLab, Facebook, Facebook Payments, Gumroad, Square, The Board of Trustees of the Leland Stanford Junior University, A-Grade Investments, Andreessen Horowitz, Digital Sky Technologies, Kleiner Perkins Caufield & Byers, Sequoia Capital, Union Square Ventures, Y Combinator, Brian Chesky; Max Levchin, Yuri Milner, and Yishan Wong. Dkt. No. 91. Defendants Dwolla, Stripe, and Coinbase joined the primary Motion to Dismiss and filed their own Motion to Dismiss. Dkt. No. 99. Defendant ActBlue filed a separate Motion to Dismiss and joined the primary Motion to Dismiss on August 26, 2013. Dkt. No. 128. Defendant GoPago filed a Joinder in Defendants' motion on September 26, 2013. See Docket Item No. 148. The Investor Defendants filed a Motion for Sanctions on September 5, 2013. See Docket Item No. 132.

II. LEGAL STANDARD

An Article III federal court must first ask whether a plaintiff has suffered sufficient injury to satisfy the "case or controversy" requirement of Article III of the U.S. Constitution. To satisfy Article III standing, a plaintiff must allege: (1) an injury in fact that is concrete and particularized, as well as actual and imminent; (2) that the injury is fairly traceable to the challenged action of the defendant; and (3) that it is likely (not merely speculative) that injury will be redressed by a favorable decision. Friends of the Earth, Inc. v. Laidlaw Envtl. Servs., Inc. , 528 U.S. 167, 180-81 (2000); Lujan v. Defenders of Wildlife , 504 U.S. 555, 561-62 (1992). A suit brought by a plaintiff without Article III standing is not a "case or controversy, " and an Article III federal court therefore lacks subject matter jurisdiction over the suit. "A party invoking the federal court's jurisdiction has the burden of proving the actual existence of subject matter jurisdiction." Thompson v. McCombe , 99 F.3d 352, 353 (9th Cir. 1996). Federal courts are courts of limited jurisdiction, adjudicating only cases which the Constitution and Congress authorize. Kokkonen v. Guardian Life Ins. Co. of America , 511 U.S. 375, 377 (1994). If a court determines that it lacks subject matter jurisdiction, the court must dismiss the action. Fed.R.Civ.P. 12(h)(3).

III. DISCUSSION

Defendants contend that Plaintiff's claims must be dismissed because Plaintiff does not have standing to pursue its federal law claim, this Court does not have subject matter jurisdiction over Plaintiff's state law claims, and Plaintiff fails to state a claim both in its federal and state law causes of action.

A. Federal Law Claim

The Court begins by analyzing Plaintiff's third claim for violations of the Lanham Act, 15 U.S.C. §§ 1051 et seq., as this is Plaintiff's only claim based on federal law. The "false advertising" prong of the Lanham Act provides: "[a]ny person who, on or in connection with any goods or services... uses in commerce any... false or misleading description of fact, or false or misleading representation of fact... shall be liable in a civil action by any person who believes that he or she is likely to be damaged by such act." 15 U.S.C. §1125(a). Plaintiff alleges that statements made by Dwolla in three publications and statements made by Stripe and Coinbase in their terms of service were false and caused injury ...


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