Song FI, Inc. v. Google, Inc.

          ORDER GRANTING IN PART MOTION FOR SANCTIONS (DOCKET NOS. 114 AND 123)

          CLAUDIA WILKEN United States District Judge

         Defendants Google, Inc. and YouTube LLC move for sanctions against Plaintiffs' counsel under Federal Rule of Civil Procedure 11 for allegations made in the Third Amended Complaint (3AC). Defendants wish to strike several enumerated paragraphs within Plaintiffs' 3AC. They also seek reimbursement for litigation expenses incurred as a result of the Rule 11 violations. As described below, the Court GRANTS in part Defendants' motion.^[1]

         BACKGROUND

         Descriptions of Plaintiffs' allegations can be found in the Court's Order Granting Motion to Dismiss Second Amended Complaint and Order on Motion to Dismiss Third Amended Complaint. The disputed allegations were part of Plaintiffs' Cartwright Act and fraud claims, which the Court dismissed with prejudice as the parties were briefing this motion.

         LEGAL STANDARD

         Federal Rule of Civil Procedure 11 permits a court to impose sanctions on an attorney when he or she has signed and submitted to the court a pleading that is not, to the attorney's knowledge, information and belief after reasonable inquiry, presented for a proper purpose, warranted by existing law or by a non-frivolous argument for altering the law, or supported or likely to be supported with evidence. Fed.R.Civ.P. 11. Awarding sanctions under Rule 11 "raises two competing concerns: the desire to avoid abusive use of the judicial process and to avoid chilling zealous advocacy." Hudson v. Moore Business Forms, Inc., 836 F.2d 1156, 1159-60 (9th Cir. 1987). An award of sanctions is "an extraordinary remedy, one to be exercised with extreme caution." Operating Eng'rs Pension Trust v. A-C Co., 859 F.2d 1336, 1345 (9th Cir. 1988). The moving party bears the burden to demonstrate why sanctions are justified. See Tom Growney Equip., Inc. v. Shelly Irrigation Dev., Inc., 834 F.2d 833, 837 (9th Cir. 1987).

         Where a complaint is the primary focus of a Rule 11 motion, a court must determine that 1) the complaint is legally or factually baseless from an objective perspective and 2) the attorney has not conducted a reasonable and competent inquiry before signing and filing it. Holgate v. Baldwin, 425 F.3d 671, 676 (9th Cir. 2005); In re Keegan Mgmt. Co., Sec. Litig., 78 F.3d 431, 434 (9th Cir. 1996). The standard is objective, examined at the time of signing. W. Coast Theater Corp. v. City of Portland, 897 F.2d 1519, 1526 (9th Cir. 1990). The existence of a non-frivolous claim in a complaint does not immunize it from Rule 11 sanctions. Holgate, 425 F.3d at 677.

         A claim is well grounded in fact if an independent examination reveals some credible evidence in support of a party’s statements. Himaka v. Buddhist Churches of Am., 917 F.Supp. 698, 710 (N.D. Cal. 1995). A claim that has some plausible basis, even a weak one, is sufficient to avoid sanctions under Rule 11. See United Nat'l Ins. Co. v. R&D Latex Corp., 242 F.3d 1102, 1117-18 (9th Cir. 2001). "The reasonable inquiry test is meant to assist courts in discovering whether an attorney, after conducting an objectively reasonable inquiry into the facts and law, would have found the complaint to be well-founded." Holgate, 425 F.3d at 677.

         DISCUSSION

         Defendants argue that four sets of allegations were baseless: that YouTube conspired to allow view count manipulation, that Defendants and their senior executives conspired to remove music videos by independent artists, that Defendants and their senior executives fail to combat view count gaming and how YouTube calculates view counts. I. Alleged conspiracy to allow view count manipulation Defendants take issue with paragraphs 19(a), 22-24, 30, 38, 44, 91, 92, 103, 109 and 110 of Plaintiffs' 3AC. Together, these paragraphs alleged that Defendants and their named executives agreed to permit certain record labels to game the view count without enforcement. First, Defendants argue that Plaintiffs have no evidentiary basis for this theory. Plaintiffs respond that significant circumstantial evidence supported their theory. For example, the 3AC described very high view counts for certain videos, and noted that Defendants would have benefitted from such a conspiracy because they shared in advertising revenue. The Court concludes that it was baseless to allege that Defendants conspired to game view counts--the circumstantial evidence does not provide a basis for such an allegation. These allegations violate Rule 11.

         Second, Defendants argue that, contrary to Plaintiffs' allegations, YouTube has taken action against the alleged conspirator record labels. See 3AC ¶ 22 (alleging that "G-Y and the G-Y Executives refrain from 4H TOS enforcement action against the Major Labels and the other Conspiring Entities"). Publicly-available information demonstrates that Plaintiffs' counsel could not have undertaken an objectively reasonable inquiry before presenting this allegation. For example, Defendants submit an online news article entitled: "YouTube cancels billions of music industry video views after finding that they were fake or 'dead, '" discussing a video by Rihanna, a Universal artist. Haas Dec. Ex. 5. Huffington Post published a similar story the following day. Id. Ex. 6. Paragraph 22 violates Rule 11.

         Third, Defendants argue that Plaintiffs have insufficient factual support for their allegations regarding Google and YouTube executives' actions. Plaintiffs make two arguments in response. They argue that David Drummond's inaction following Plaintiffs' counsel's May 12, 2014 letter to him outlining the sequence of events giving rise to their legal claims could be construed as evidence of his and others' prior awareness of the conspiracy. See Docket No. 101-9. The lack of response to this letter does not serve as a basis for Plaintiffs' specific claims about Defendants' executives' participation in and knowledge of a view count gaming conspiracy. Next, Plaintiffs argue that, if there were a conspiracy, it must have been at the direction of senior management. However, as explained above, there was no basis to allege the view count gaming conspiracy. For these reasons, the allegations pertaining to the actions and knowledge of particular Google and YouTube executives violate Rule 11. II. Allegations regarding removal of independent music videos According to the 3AC, the alleged conspiracy was "designed to prevent the Independent Artists from competing fairly in the relevant market." 3AC ¶ 35. In furtherance of the conspiracy, Defendants allegedly accused these artists of violating the terms of service, removed their videos and associated view counts and posted in their place a defamatory notice still at issue in this case. Id. ¶¶ 23, 80. Defendants argue that these allegations violate Rule 11.

         Plaintiffs justify their allegations citing Darnaa v. Google, Inc., 2015 WL 7753406 (N.D. Cal.), and Bartholomew v. Youtube, LLC, No. 15-275833 (Cal. Super. Ct. 2015). Joyce Bartholomew is a musician who creates and publishes original Christian ministry music, Docket No. 78-2, and Darnaa is the name of both an independent recording artist and the music label that promotes Darnaa's music, Darnaa, 2015 WL 7753406, at *1. Like Plaintiffs here, the two cases allege libel claims based on the notice that replaced the artists' removed videos stating that they violated YouTube's terms of service.

         Plaintiffs' allegations that other independent artists experienced a similar sequence of events are not baseless. However, their allegations regarding the motivations and machinations undergirding this repeated take-down sequence are objectively baseless. Plaintiffs present no evidence to support that the events were conspiratorial. Further, that treatment of independent artists stemmed from a conspiracy was not the only logical inference to make in light of Dar ...