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Singh v. Google, Inc.

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

June 2, 2017

GURMINDER SINGH, on behalf of himself and others similarly situated, Plaintiff,
GOOGLE INC., Defendant.


          BETH LABSON FREEMAN United States District Judge.

         This case deals with something we have all experienced-“click ads.” Through this action, Plaintiff Gurminder Singh alleges that Defendant Google Inc. (“Google”) engages in a scheme of employing false and misleading advertisements and promotional materials to induce small businesses to participate in its online advertising program known as Google AdWords (“AdWords”), which results in demand for payment for invalid clicks. Second Am. Compl. (“SAC”) ¶ 1, ECF 44. Singh asserts four claims against Google arising from this alleged scheme: (1) breach of the implied covenant of good faith and fair dealing; (2) violations of California's unfair competition law (“UCL”), Cal. Bus. & Prof. Code §§ 17200, et seq.; (3) violations of California's false advertising law (“FAL”), Cal. Bus. & Prof. Code §§ 17500, et seq.; and (4) fraud in the inducement. See generally SAC.

         Presently before the Court is Defendant's motion to dismiss Plaintiff's SAC. See generally Mot., ECF 47. The Court heard argument on the motion on May 11, 2017. For the reasons stated herein and on the record, the Court GRANTS Defendant's motion WITH LEAVE TO AMEND.

         I. BACKGROUND

         Google is an online service provider whose offerings include various online advertising programs including the one at issue, AdWords. AdWords is an online platform that Google makes available for advertisers to have their ads displayed on various Google properties, including Google Search and YouTube, and other websites. SAC ¶¶ 1, 23. Advertisers pay each time their ad is “clicked, ” meaning the ads are “pay-per-click” ads. Id. ¶ 1. The relationship between Google and AdWords advertisers is governed by the Google Inc. Advertising Program Terms (the “Agreement”). Id. ¶ 10; Ex. 1 & 2 to Bish Decl. ISO Mot., ECF 47-2, 47-3.

         Because AdWords advertisers are charged by the click, Google maintains policies to prevent “click fraud, ” which it defines as “clicks generated with malicious or fraudulent intent.”[1]Ex. 3 to Bish Decl. ISO Mot. (“Ex. 3”) 1-2, ECF 47-4. The “Google Ad Traffic Quality Resource Center” refers to “clicks and impressions on AdWords that Google suspects not to be the result of genuine user interest” as “invalid clicks” Id. at 1. The Google Ad Traffic Quality Resource Center states that “advertisers are not charged for [invalid] clicks or impressions.” Id. Google has undertaken various efforts in an attempt to address click fraud and limit its effect on AdWords advertisers. For example, Google has “a global team which is dedicated to staying on top of [advertisers'] concerns, monitoring traffic across Google's ad network, and preventing advertisers from paying for invalid traffic.” SAC ¶ 46. This team “work[s] to isolate and filter out potentially invalid clicks” before the advertiser is charged for any invalid clicks. Ex. 3, at 3.

         Singh signed up for an AdWords account in January 2008. SAC ¶ 14. He alleges that he has continued to use AdWords since that time, and now manages three separate AdWords accounts. Id. ¶¶ 57, 59. Singh avers that in early 2016, he began to suspect that third-party publishers and/or website owners were fraudulently manipulating certain of his advertisements. Id. ¶ 60. In this lawsuit, Singh challenges Google's “pay-per-click” AdWords Program as unfair, unlawful, and fraudulent. Singh contends that Google's representations that “click-fraud” occurs infrequently and that Google has robust systems in place to effectively filter out the “vast majority” of invalid clicks and prevent customers for being charged for those clicks are false and misleading, and are made to induce individuals and small business to participate in the AdWords program notwithstanding the possibility that they may be charged for fraudulent or “invalid” clicks. Opp'n 1, ECF 53. Singh asserts four causes of action: (1) breach of the implied covenant of good faith and fair dealing; (2) unfair, unlawful, and fraudulent competition; (3) false advertising; and (4) fraudulent inducement.


         “A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted ‘tests the legal sufficiency of a claim.'” Conservation Force v. Salazar, 646 F.3d 1240, 1241-42 (9th Cir. 2011) (quoting Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001)). When determining whether a claim has been stated, the Court accepts as true all well-pled factual allegations and construes them in the light most favorable to the plaintiff. Reese v. BP Exploration (Alaska) Inc., 643 F.3d 681, 690 (9th Cir. 2011). However, the Court need not “accept as true allegations that contradict matters properly subject to judicial notice” or “allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences.” In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008) (internal quotation marks and citations omitted). While a complaint need not contain detailed factual allegations, it “must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is facially plausible when it “allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id.

         On a motion to dismiss, the Court's review is limited to the face of the complaint and matters judicially noticeable. MGIC Indem. Corp. v. Weisman, 803 F.2d 500, 504 (9th Cir. 1986); N. Star Int'l v. Ariz. Corp. Comm'n, 720 F.2d 578, 581 (9th Cir. 1983). However, under the “incorporation by reference” doctrine, the Court also may consider documents which are referenced extensively in the complaint and which are accepted by all parties as authentic. In re Silicon Graphics, Inc. Sec. Litig., 183 F.3d 970, 986 (9th Cir. 1999), abrogated on other grounds by S. Ferry LP, No. 2 v. Killinger, 542 F.3d 776, 784 (9th Cir. 2008).


         Google moves to dismiss Singh's SAC on two separate grounds. First, Google argues that Section 7 of the AdWords Agreement applies here to bar any claims arising from charges for allegedly invalid clicks that Singh failed to submit through Google's internal claims process. See Mot. 9-12. Second, Google contends that the SAC fails to state a claim under which relief may be granted. The Court addresses each in turn below.

         A. AdWords Agreement

         Google first argues that the Agreement bars all claims that Singh did not submit to Google through the claims process. Mot. 9-10 (citing SAC ¶¶ 10, 14, 78); Ex. 2 to Bish Decl. (“2006 Agreement”) §§ 5, 7, ECF 47-3 (“[The c]ustomer's exclusive remedy, and Google's exclusive liability, for suspected invalid impressions or clicks is for [c]ustomer to make a claim for a refund in the form of advertising credits for Google Properties within [60 days]. Any refunds for suspected invalid impressions or clicks are within Google's sole discretion.”); Ex. 1 to Bish Decl. (“2013 Agreement”) §7, ECF 47-2 (“Customer understands that third parties may generate impressions or clicks on Customer's Ads for prohibited or improper purposes and that its sole remedy is to make a claim for advertising credits within the Claim Period, after which Google will issue the credits following claim validation which must be used by the Use By Date.”). In response, Plaintiff argues that Google's position is unavailing for three reasons: (1) waiver is an affirmative defense not ordinarily cognizable at the pleading stage; (2) waiver is an equitable defense that is not a complete defense to claims under ...

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