Song FI, Inc. v. Google, Inc.

          ORDER ON MOTION TO DISMISS THIRD AMENDED COMPLAINT (DOCKET NO. 107)

          CLAUDIA WILKEN United States District Judge.

         Defendants Google, Inc. and YouTube LLC move to dismiss Plaintiffs' Third Amended Complaint (3AC). The Court grants Defendants' motion in part, and denies it in part.

         BACKGROUND

         The Court described this case's factual and procedural background in its order granting Defendants' motion to dismiss Plaintiffs' Second Amended Complaint (2AC). There, the Court dismissed Plaintiffs' Cartwright Act, fraudulent concealment, libel per quod and tortious interference claims, with leave to amend. The Court ruled that Plaintiffs may not add further claims. Plaintiffs filed timely their 3AC.

         LEGAL STANDARD

         A complaint must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a). On a motion under Rule 12(b)(6) for failure to state a claim, dismissal is appropriate only when the complaint does not give the defendant fair notice of a legally cognizable claim and the grounds on which it rests. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). In considering whether the complaint is sufficient to state a claim, the court will take all material allegations as true and construe them in the light most favorable to the plaintiff. NL Indus., Inc. v. Kaplan, 792 F.2d 896, 898 (9th Cir. 1986). However, this principle is inapplicable to legal conclusions. "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, " are not taken as true. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 555).

         In Iqbal, 556 U.S. at 679, the Supreme Court laid out the following approach for assessing the adequacy of a plaintiff's complaint:

a court considering a motion to dismiss can choose to begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth. While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations. When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief.

         A claim has facial plausibility "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. at 678. "The plausibility standard is not akin to a ‘probability requirement, ' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id. (quoting Twombly, 550 U.S. at 556). Determining whether a complaint states a plausible claim for relief is "a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. at 679.

         When granting a motion to dismiss, the court is generally required to grant the plaintiff leave to amend, even if no request to amend the pleading was made, unless amendment would be futile. Cook, Perkiss & Liehe, Inc. v. N. Cal. Collection Serv. Inc., 911 F.2d 242, 247 (9th Cir. 1990). In determining whether amendment would be futile, the court examines whether the complaint could be amended to cure the defect requiring dismissal "without contradicting any of the allegations of [the] original complaint." Reddy v. Litton Indus., Inc., 912 F.2d 291, 296 (9th Cir. 1990). Leave to amend should be liberally granted, but an amended complaint cannot allege facts inconsistent with the challenged pleading. Id. at 296-97. Courts consider whether the plaintiffs have previously amended the complaint in determining whether to grant leave to amend. See, e.g., Fid. Fin. Corp. v. Fed. Home Loan Bank of S.F., 792 F.2d 1432, 1438 (9th Cir. 1986) ("The district court's discretion to deny leave to amend is particularly broad where the court has already given the plaintiff an opportunity to amend his complaint.").

         DISCUSSION

         I. Cartwright Act

         In its previous order, the Court dismissed Plaintiffs' Cartwright Act claim because it did not support that 1) Plaintiffs' injuries were proximately caused by the alleged conspiracy for view count inflation; 2) the conspiracy harmed competition; and 3) Defendants were involved in the conspiracy or worked with other alleged conspirators.

         In the 3AC, Plaintiffs reframe the alleged conspiracy as follows. The conspiring entities include Defendants, at the direction of various executives; Universal Music Group and its subsidiaries, associated record labels and distribution partners; other major music labels, referred to as "Major Labels"; Raymond Braun Media Group and Scooter Braun personally; and the Fake View Facilitators.^[1] Together, these parties conspired to restrain the following market: "the sale, promotion, and distribution of recorded music and music videos in the United States." 3AC ¶ 17. They did so largely by manipulating view counts on YouTube. Plaintiffs allege that Defendants, through YouTube, are "the dominant provider of online video hosting services" and that there is "no other music or video website operating anywhere in the world that remotely rivals Youtube's viewership, market share, profitability, and name recognition." Id. ¶ 15. Notably, Plaintiffs' description of YouTube does not connect YouTube to the relevant market or describe its share of that market. The conspiracy allegedly benefitted the conspirators to the detriment of advertisers on YouTube as well as Plaintiffs and others in the independent artist community.

         The conspiracy began in 2006, when Google acquired YouTube and transformed it into a vehicle to effectuate the conspiracy. At this point, Google entered into contracts with the Major Labels, "which called for the splitting of advertising ...