Gaby's Bags, LLC v. Mercari, Inc.

Background

Mercari, Inc. promoted Mercari.com as a marketplace where “anyone can sell.” Gaby’s Bags, LLC sold handbags through the platform and generated nearly $400,000 over two years, according to the complaint. Mercari then terminated Gaby’s Bags’ account, separated it from its customer base, and prevented further sales.

The complaint asserted unfair-competition claims under Florida’s Deceptive and Unfair Trade Practices Act, Florida’s false-advertising statute, Florida Civil RICO, and the Lanham Act’s false-advertising provision. The case was transferred from the Middle District of Florida to the Northern District of California because of a mandatory forum-selection clause in Mercari’s Terms of Service.

Mercari’s motion

Mercari sought judgment on the pleadings, which is a decision based on the parties’ filed pleadings when there is no material factual dispute and the moving party is entitled to judgment as a matter of law. Mercari argued that “anyone” clearly meant any individual, not a business such as an LLC, and that the Terms of Service barred business accounts and allowed Mercari to terminate an account at any time.

The court considered the full Terms of Service because the complaint referred to them. The terms stated that the service was for individual use, that Mercari did not offer business accounts, and that California law governed and interpreted the agreement.

Analysis

The court rejected Mercari’s argument that the Terms of Service clearly prevented Gaby’s Bags from bringing its claims. It found the statement that Mercari did not offer business accounts imprecise. The court also noted that the account was not unusual for the website and that Mercari had featured Gaby’s Bags’ business in advertisements. Under the rule that ambiguities are read against the drafter, the court could not resolve the issue in Mercari’s favor at this stage.

The court applied the California choice-of-law provision broadly to claims arising from or related to the contract. It held that California law governed the claims under Florida’s Deceptive and Unfair Trade Practices Act, Florida’s false-advertising statute, and Florida Civil RICO. Those three claims were extinguished.

The court allowed the Lanham Act false-advertising claim to proceed. It concluded that the complaint alleged the required elements, including a false statement in commercial advertising, likely deception, materiality, interstate commerce, and injury. Whether “anyone can sell” was deceptive rather than merely promotional language was a factual question that could not be resolved from the pleadings alone.

Disposition

Judge William Alsup granted Mercari judgment on the pleadings with prejudice as to the claims under the Florida Deceptive and Unfair Trade Practices Act, Florida’s false-advertising statute, and Florida Civil RICO. The order otherwise denied Mercari’s motion, leaving the Lanham Act claim remaining.