RingCentral, Inc. v. Nextiva, Inc.

Background

RingCentral, Inc. brought claims against Nextiva, Inc. and UnitedWeb, Inc. arising from alleged fake online personas, fake online businesses, and reviews posted on review platforms. According to the second amended complaint, the defendants used those personas and businesses to praise Nextiva’s services and criticize RingCentral’s services. RingCentral alleged that it lost at least one existing customer and several prospective customers because of online reviews.

RingCentral asserted claims for interference with prospective economic advantage, trade libel, defamation, and unfair competition under California law. The defendants moved to dismiss the second amended complaint for failure to state a claim. The court noted that it had already addressed RingCentral’s defamation claim in a prior order and declined to reconsider the defendants’ arguments concerning that claim.

Trade Libel

The court held that RingCentral plausibly alleged trade libel, which involves intentional disparagement of property resulting in financial harm. RingCentral identified alleged reviews, alleged facts allowing a reasonable inference that the defendants or their agents created the fake domains and posted the reviews, and identified a customer and prospective customers who allegedly declined to deal with RingCentral because of online reviews.

The court also rejected the argument that the reviews were protected opinions. The reviews purported to come from actual RingCentral clients and made statements about prices, canceled lines, and billing that could be proven true or false. Although RingCentral would eventually need to prove that the affected customers read the defendants’ reviews and that those reviews materially influenced their decisions, the court found the allegations sufficient at the motion-to-dismiss stage. The court denied the motion to dismiss the trade-libel claim.

Interference with Prospective Economic Advantage

The court held that RingCentral plausibly alleged interference with prospective economic advantage. RingCentral identified an existing customer that allegedly canceled its account because of negative online reviews and potential customers who allegedly did not purchase its services because of such reviews. The court found that the alleged underlying conduct—trade libel and defamation—could qualify as independently wrongful conduct, as required for this claim. The court denied the motion to dismiss this claim.

Unfair Competition

RingCentral’s unfair-competition claim arose under California’s law prohibiting unlawful, unfair, or fraudulent business acts or practices. Because the court found that RingCentral had stated claims for trade libel, defamation, and interference with prospective economic advantage, it allowed the unfair-competition claim to proceed and denied the motion to dismiss it.

Alter-Ego Liability

The defendants argued that UnitedWeb should be dismissed because RingCentral had not adequately alleged that UnitedWeb was Nextiva’s alter ego. Alter-ego liability is a doctrine that can treat two legally separate entities as connected when there is such a unity of ownership and interest that their separate identities have effectively ceased, and respecting the separate identities would result in fraud or injustice.

RingCentral alleged that UnitedWeb and Nextiva shared multiple executives, a place of business, principal shareholders, and annual-report filing dates. The court found those allegations insufficient because they did not suggest that the companies commingled funds or disregarded corporate formalities. The court granted the defendants’ motion to dismiss UnitedWeb. It stated that RingCentral could seek leave to amend if it discovered facts suggesting an alter-ego relationship.

Disposition

The court granted in part the defendants’ motion to dismiss UnitedWeb and otherwise denied in part the motion to dismiss RingCentral’s second amended complaint. RingCentral could not add new claims or parties without further leave of the court.