United States District Court, S.D. California
SATMODO, LLC, a California limited liability company, Plaintiff,
WHENEVER COMMUNICATIONS, LLC, d.b.a. StatellitePhoneStore.com, a Nevada limited liability company, HENAA BLANCO, an individual, and DOES 1 through 50, inclusive, Defendants.
ORDER GRANTING IN PART AND DENYING IN PART
DEFENDANTS' MOTION TO DISMISS
Anthony J. Battaglia United States District Judge.
before the Court is Defendants' Whenever Communications,
LLC, d.b.a. SatellitePhoneStore.com and Henaa Blanco,
(collectively “Defendants”), motion to dismiss
Plaintiff's Satmodo, LLC, (“Plaintiff”)
complaint. (Doc. No. 9.) Having reviewed the parties'
arguments and controlling legal authority, the Court finds
this motion suitable for determination on the papers and
without oral argument. Accordingly, the motion hearing
presently set for April 20, 2017 at 2:00 p.m. is VACATED
pursuant to Local Rule 7.1.d.1. For the reasons set forth
below, the Court GRANTS IN PART AND DENIES IN PART
Defendants' motion to dismiss.
following facts are taken from Plaintiff's complaint and
accepted as true for the limited purpose of resolving the
pending motion before the Court. See Vasquez v. L.A.
Cnty., 487 F.3d 1246, 1249 (9th Cir. 2007) (noting a
court must “accept all material allegations of fact as
true” when ruling on a motion to dismiss).
present action arises out of an intentional and systematic
“click fraud” scheme, wherein Defendants clicked
on Plaintiff's paid online advertisements with the intent
to harm Plaintiff. (Doc. No. 1 ¶ 9.) Plaintiff and
Defendant Whenever Communications are two of the largest
competitors in the business of online sale and rental of
satellite phones. (Id. ¶ 12.) These companies
buy satellite phones at wholesale and then sell or rent the
phones to online customers. (Id.) Within this
industry, sales and rentals are heavily reliant on a
company's online presence. (Id. ¶ 14.) To
promote their online presence, competing companies, including
Plaintiff and Defendant Whenever Communications, take part in
advertisements via search engines. (Id.) Each time a
customer clicks on a company's advertisement through a
search engine, the company pays for the click through a set
daily advertising budget. (Id. ¶ 9.) Once a
company's set daily advertising budget has been met, the
search engine will stop publishing the company's
advertisement for that day. (Id.)
2016 to 2017, Defendant Whenever Communications, in part
through its agent Defendant Henna Blanco, intentionally
sought out Plaintiff's advertisements on search engines
including Google, Yahoo!, and Bing, to carry out their
“click fraud” scheme. (Id. ¶¶
9-11, 20.) “Click fraud” is the practice of
fraudulently or maliciously clicking the online search
advertisements of an advertiser to force the advertiser to
pay for the click while having no intention of buying the
advertised services or products. (Id. ¶ 10.)
Defendants intentionally clicked on Plaintiff's
advertisements to push Plaintiff out of the market and to
receive a better advertising rank over Plaintiff.
(Id. ¶¶ 18-19.) Plaintiff observed the use
of multiple IP addresses used to commit this click fraud
scheme and believes the addresses were tied to Defendants.
(Id. ¶¶ 25, 28, 31.) Plaintiff believes
that Defendants are utilizing automated means and rotating
through proxy servers in order to avoid detection.
(Id. ¶ 27.) Specifically, on August 22, 2016,
Plaintiff observed Defendants use automated means to click on
Plaintiff's homepage approximately 96 times within a few
minutes. (Id. ¶¶ 25-27.) At times where
the IP addresses were unmasked by proxy servers, Plaintiff
observed fraudulent clicks and chat requests originating from
Lakeland, Florida, Las Vegas, Nevada, and San Diego,
California, which are all locations where Whenever
Communications maintains offices. (Id. ¶ 31.)
In response to these observations, Plaintiff blocked several
IP addresses associated with Defendants. (Id. ¶
29.) In September 2016, Plaintiff's counsel sent a cease
and desist letter to Defendants and asked Defendants to stop
their click fraud scheme. (Id. ¶ 32.) However,
instead of ceasing, Defendants used proxy servers to
circumvent Plaintiff's online blockade and continued to
engage in their click fraud scheme. (Id. ¶ 29,
32.) Plaintiff alleges it has been damaged in that it paid
for clicks that Defendants fraudulently created and lost
sales from being forced out of the market prematurely.
(Id. ¶ 34.)
February 1, 2017, Plaintiff filed a complaint seeking
compensatory damages and injunctive relief for
Defendants' alleged click fraud scheme. (Doc. No. 1.)
Plaintiff alleged four causes of actions in its complaint:
(1) violation of the Computer Fraud and Abuse Act
(“CFAA”); (2) violation of California's
Comprehensive Computer Data Access and Fraud Act
(“CDAFA”); (3) intentional interference with
prospective economic relations; and (4) violation of
California's Unfair Competition Law, Business and
Professions Code Section 17200 ("UCL"). Presently
before the Court is Defendants' amended motion to
dismiss, which was filed on February 27, 2017. (Doc. No. 9.)
Plaintiff filed an opposition on March 10, 2017, (Doc. No.
10), and Defendants replied on March 16, 2017, (Doc. No. 12).
motion to dismiss under Federal Rule of Civil Procedure
12(b)(6) tests the legal sufficiency of a plaintiff's
complaint and allows a court to dismiss a complaint upon a
finding that the plaintiff has failed to state a claim upon
which relief may be granted. See Navarro v. Block,
250 F.3d 729, 732 (9th Cir. 2001). “[A] court may
dismiss a complaint as a matter of law for (1) lack of a
cognizable legal theory or (2) insufficient facts under a
cognizable legal claim.” SmileCare Dental Grp. v.
Delta Dental Plan of Cal., Inc., 88 F.3d 780, 783 (9th
Cir. 1996) (internal quotations and citation omitted).
However, a complaint will survive a motion to dismiss if it
contains “enough facts to state a claim to relief that
is plausible on its face.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007). In making this
determination, a court reviews the contents of the complaint,
accepting all factual allegations as true, and drawing all
reasonable inferences in favor of the nonmoving party.
Cedars-Sinai Med. Ctr. v. Nat'l League of Postmasters
of U.S., 497 F.3d 972, 975 (9th Cir. 2007).
this deference, the reviewing court need not accept
“legal conclusions” as true. Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009). It is also improper for
a court to assume “the [plaintiff] can prove facts that
[he or she] has not alleged.” Associated Gen.
Contractors of Cal., Inc. v. Cal. State Council of
Carpenters, 459 U.S. 519, 526 (1983). However,
“[w]hen 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.”
Iqbal, 556 U.S. at 679.
factual allegations must meet the requisite level of
specificity. See Kearns v. Ford Motor Co., 567 F.3d
1120, 1124 (9th Cir. 2009). Federal Rule of Civil Procedure
8(a)(2) requires a party's pleading to contain “a
short and plain statement of the claim showing that the
pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2).
However, Rule 9(b) requires that, when fraud is alleged,
“a party must state with particularity the
circumstances constituting fraud . . . .” Fed.R.Civ.P.
9(b). When fraud is not a necessary element of a claim, a
plaintiff may choose to allege a unified course of fraudulent
conduct and rely entirely on that course of conduct as the
basis of a claim. Vess v. Ciba-Geigy Corp. USA, 317
F.3d 1097, 1103 (9th Cir. 2003). In such event, “the
claim is said to be ‘grounded in fraud' or to
‘sound in fraud, ' and the pleading of that claim
as a whole must satisfy the particularity requirement of Rule
9(b).” Id. at 1103-04. Rule 9(b) demands that
the circumstances constituting the alleged fraud “be
‘specific enough to give defendants notice of the
particular misconduct . . . so that they can defend against
the charge and not just deny that they have done anything
wrong.'” Bly-Magee v. California, 236 F.3d
1014, 1019 (9th Cir. 2001) (quoting Neubronner v.
Milken, 6 F.3d 666, 672 (9th Cir. 1993)).
Rule 9(b) Heightened Pleading Standard
preliminary matter, the Court will address to what extent
Plaintiff's claims are subject to the heightened pleading
requirements of Federal Rule of Civil Procedure 9(b).
Defendants contend that all of Plaintiff's claims are
subject to Rule 9(b) because each claim is based upon a
fraudulent course of conduct. (Doc. No. 9 at 11-12, 14, 16,
18.) Plaintiff counters that only specific averments of fraud
must be pled with particularity and that, even if the Court
disagrees, the complaint meets the heightened pleading
standard. (Doc. No. 10 at 15-18, 19-20, 21, 23.) The Court
finds that each of Plaintiff's claims are subject to the
Rule 9(b) pleading standard.
Plaintiff's claims against Defendants arise from the
alleged click fraud scheme. (See generally Doc. No.
1.) Plaintiff defines click fraud as “generating clicks
with a fraudulent or malicious intent . . . despite the fact
that the person or entity making the click has no intention
of buying the advertised services or products.” (Doc.
No. 1 ¶ 10.) Moreover, when Plaintiff alleges how
Defendants implemented the scheme, it explains that
“Defendants intentionally sought out Plaintiff's
ads, clicking on them to present the false impression that
they were intended customers.” (Doc. No. 1 ¶ 19.)
Plaintiff makes these allegations in support of its CFAA,
CDAFA, UCL, and intentional interference with prospective
economic relations claims; thus, it follows that all claims
rely on a unified fraudulent course of conduct. See
Kearns, 567 F.3d at 1125-26.
the Court finds that Plaintiff's complaint alleges a
unified course of fraudulent conduct.
Computer Fraud and Abuse Act
alleges Defendants violated four subsections of the CFAA,
sections 1030(a)(4) and (5)(A)-(C), when they accessed
Plaintiff's computers without authorization by logging
onto the search engine website and making fraudulent clicks,
or alternatively, when they exceeded their authorized access
after being put on notice of their wrongful conduct in
September 2016. (Doc. No. 1 ¶¶ 37, 39.) Plaintiff
alleges damages and economic loss exceeding $75, 000 based on
the costs incurred in paying for invalid clicks and the loss
of sales and profits from those clicks after Plaintiff was
prematurely kicked out of the market. (Id. ¶
39(d).) Defendants argue for dismissal because the alleged
conduct does not conform to the criminal
“anti-hacking” conduct that the CFAA was designed
to prevent. Specifically, Defendants contend that each of
Plaintiff's claims must fail because Plaintiff (1) has
not shown how accessing Plaintiff's website through a
publicly available third-party search engine is a recognized
violation under the CFAA, (2) has not alleged sufficient
facts for the requirement of loss or damage, and (3) fails to
comply with Rule 9(b). (Doc. No. 9 at 8-12.) As explained
below, the Court agrees with Defendants and will address each
CFAA was first enacted to enhance the government's
ability to prosecute computer crimes and to "target
hackers who accessed computers to steal information or to
disrupt or destroy computer functionality, as well as
criminals who possessed the capacity to access and control
high technology processes vital to our everyday lives."
LVRC Holdings LLC v. Brekka, 581 F.3d 1127, 1130
(9th Cir. 2009) (internal quotation marks and citation
omitted). “The CFAA prohibits a number of different
computer crimes, the majority of which involve accessing
computers without authorization or excess of authorization,
and then taking specific forbidden actions, ranging from
obtaining information to damaging a computer or computer
data.” Id. at 1131. Any individual may bring a
private civil cause of action under the CFAA for damages and
equitable relief if he or she suffers damages or loss as a
result of a violation of these provisions. 18 U.S.C. §
1030(g). Within this context, the statute “targets the
unauthorized procurement or alteration of information, not
its misuse or ...