Cruz v. Townsquare Media, Inc

Background

Jonathan Cruz and Cruz Collaborative Architecture, LLC sued Townsquare Interactive, Townsquare Media, Inc., and Townsquare Interactive’s General Manager and President Tim Pirrone. The claims arose from a November 2022 agreement between Cruz and Townsquare Interactive for website design and search-engine optimization services at a rate of $199 per month.

Plaintiffs alleged that the website was launched prematurely and contained problems including low-resolution images, improperly centered text, potentially problematic language, nonfunctional buttons, incorrect titles, and restricted access. They also alleged that the problems disrupted email communications and caused them to lose a long-term client and expected revenue. The court noted that the complaint did not explain which contract provisions were breached or how the alleged problems caused the claimed financial loss.

This was plaintiffs’ second similar lawsuit. The court had dismissed the earlier case without prejudice in August 2024 for failure to prosecute. In this case, plaintiffs filed their opposition to the defendants’ dismissal motion almost a month late. Judge Orrick nevertheless considered their arguments instead of granting the motion solely because the opposition was late.

Court’s Analysis

The court treated the signed agreement as part of the complaint and took judicial notice of Townsquare Interactive’s separate online Terms of Service. It rejected defendants’ argument that the Terms of Service limited damages to fees paid during the preceding three months. The signed agreement referred to terms “included in this document,” while the Terms of Service appeared only through an inconspicuous hyperlink. The court concluded that Cruz was not given adequate notice of, and did not assent to, the separate liability limitation.

The court nevertheless dismissed the breach-of-contract claim because plaintiffs did not identify the contract provisions that Townsquare Interactive allegedly violated. The agreement did not require the defendants to obtain plaintiffs’ express approval before launching the website, and it did not appear to promise a particular level of quality, timeline, or degree of plaintiffs’ involvement. Plaintiffs also needed to explain more specifically how the alleged conduct caused the loss of revenue or other injury.

The court dismissed the implied-covenant claim because it relied on the same conduct as the contract claim and did not identify specific acts showing bad faith. It dismissed the fraudulent-deceit claim because the allegations did not specify what representations were made, when they were made, to whom, or how they were false. It dismissed the promissory-fraud claim because plaintiffs did not identify a false promise or provide facts showing that defendants intended not to perform when they made any promise.

The court also dismissed the negligence and intentional-infliction-of-emotional-distress claims under the economic-loss rule as pleaded. The negligence claim repackaged the alleged contract breach, and the emotional-distress claim added no new allegations. The court said plaintiffs had not alleged harm beyond disappointed contractual expectations and had not adequately pleaded the required elements of negligence or outrageous conduct for emotional distress.

Disposition

The court granted the motion to dismiss. The order states that plaintiffs may file an amended complaint within 20 days. The court granted the dismissal of the implied-covenant, fraudulent-deceit, promissory-fraud, negligence, and intentional-infliction-of-emotional-distress claims with leave to amend; the order’s conclusion also permits an amended complaint addressing the deficiencies identified in the contract claim.