Dana Soft Pty Ltd v. Meta Platforms, Inc.

Background

Dana Soft Pty Ltd alleged that Meta Platforms, Inc. breached the parties’ Audience Network Terms. Dana enrolled in Meta’s Audience Network program in April 2023 and used its mobile applications to display advertisements. Dana alleged that Meta later blocked several applications, restricted Dana’s payment account, and withheld all advertising revenue accrued for July 2023. Dana alleged that the withheld revenue exceeded $395,000.

Dana’s amended complaint asserted two claims under California law: breach of contract and breach of the implied covenant of good faith and fair dealing. Dana alleged that it complied with the agreement and related policy, that its advertising traffic was organic, and that Meta withheld the revenue without identifying the alleged invalid activity or providing an accounting.

Rule 12(b)(6) standard

Meta moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint states a legally sufficient claim. At this stage, the court accepts factual allegations as true and asks whether the alleged facts plausibly support relief. The court does not decide whether the allegations are ultimately proven.

Breach-of-contract claim

Meta argued that the Audience Network Terms allowed it to withhold payment when Meta determined that a publisher had engaged in misconduct or breached the agreement or policy. Dana argued that the agreement allowed withholding only amounts connected to fraudulent or invalid activity or an actual breach, not all accrued revenue.

The court concluded that Dana plausibly alleged a breach-of-contract claim. It read the payment provisions as addressing payments based on fraudulent or invalid activity and breaches, while not expressly giving Meta discretion to withhold revenue for any reason. The court also noted that the agreement apportioned payments by month, publisher property, and advertisements, supporting Dana’s allegation that revenue unrelated to improper activity could be separately owed.

The court therefore DENIES Meta’s motion to dismiss Dana’s Breach of Contract claim. The court did not reach Dana’s arguments concerning unconscionability or liquidated damages because its ruling made that unnecessary.

Implied-covenant claim

California law implies a covenant of good faith and fair dealing in contracts. The court explained that the covenant prevents one party from unfairly frustrating the other party’s right to receive the benefits of the agreement and requires contractual discretion affecting the other party’s rights to be exercised in good faith.

Meta argued that Dana’s claim failed because the agreement expressly permitted the withholding and because Dana had not alleged bad faith. The court rejected those arguments at the pleading stage. It distinguished between whether Meta had discretion to withhold revenue and whether Meta exercised any such discretion arbitrarily, in a self-serving manner, or contrary to the parties’ expectations.

The court found Dana’s allegations sufficient to support an inference of bad faith, including allegations that Meta withheld all accrued revenue without identifying invalid activity, acted after allowing the revenue to accrue for months, and invoked unspecified policy violations. The court also concluded that the implied-covenant claim was not necessarily duplicative of the contract claim because Dana alleged both that Meta breached the payment terms and that Meta abused contractual discretion in bad faith.

The court therefore DENIES Meta’s motion to dismiss Dana’s Breach of Implied Covenant of Good Faith and Fair Dealing claim. The order denies Meta’s Rule 12(b)(6) motion; it does not decide whether Dana will ultimately prove either claim.