Dreamstime.com, LLC v. Google, LLC

Background

Dreamstime.com, LLC operated a stock-images website that had generally ranked among Google’s top search results for important industry terms. Beginning around October 2015, its unpaid, or “organic,” search rankings and related traffic declined. Dreamstime also purchased advertising through Google’s advertising service.

Dreamstime initially alleged that Google deliberately damaged its search rankings to gain a competitive advantage. Earlier orders dismissed those antitrust claims and entered judgment for Google on claims arising from one of the parties’ two contracts. The claims remaining for decision were a claim under Section 17200, California’s statute addressing unlawful, unfair, and fraudulent business practices, and a claim that Google breached the implied duty of good faith and fair dealing in the advertising agreement.

Dreamstime argued that Google concealed information about a late-2015 change to its “salient terms” search algorithm. According to Dreamstime, Google knew that the change harmed at least one Dreamstime webpage but did not disclose that information, leading Dreamstime to spend more on Google advertising and website improvements. Dreamstime also pursued claims based on alleged misrepresentations about how particular advertising campaigns worked. Google moved for summary judgment, which is a ruling without a trial when the evidence shows no genuine dispute over a fact that could affect the outcome.

Search-related claims

The court held that the advertising agreement governed access to Google’s advertising network and products, not Google’s separate organic search engine. The agreement contained no promise about organic search rankings. The implied duty of good faith and fair dealing could not add a search-related duty or promise that was outside the agreement. The court also found that the agreement neither required nor gave Google contractual discretion to provide Dreamstime with a dedicated support team or search-related assistance. It therefore granted summary judgment on the search-related implied-covenant claim.

For the Section 17200 claim, the court stated that Dreamstime’s unlawful theory was based on the alleged contract breach and its unfairness theory was likewise tied to that claim, so both failed with the implied-covenant theory. The court separately considered the fraud theory. Although a Section 17200 fraudulent-business-practice claim does not require proof of common-law fraud, an omission theory requires the defendant to have actual knowledge of the concealed fact.

The court found that Dreamstime’s evidence did not show that anyone at Google believed the salient-terms update caused Dreamstime’s ranking decline. A launch report showed that some organic-search employees knew testing indicated a possible negative effect on one Dreamstime product page as to the algorithm, but the report did not establish that the update caused a decline in Dreamstime’s overall search ranking. Contemporaneous notes stated that there was no correlation between the change and any effect on ranking. The court also found that Google’s suggestion of an outside search-engine-optimization consultant did not establish that Google controlled or adopted the consultant’s analysis. Finally, the court held that Google’s refusal to provide confidential information about a global algorithm update was not likely to deceive members of the public.

Advertising-based claims

The advertising agreement stated that Google made no guarantee about the programs or their results, provided the services at the customer’s own risk, and made no promise to inform the customer about defects or errors. Dreamstime did not directly challenge the enforceability of that disclaimer. The court concluded that treating alleged statements about specific advertising campaigns as implied contractual promises would conflict with the agreement’s express no-guarantee provision. The court also rejected Dreamstime’s argument that the implied covenant applied through a discretionary contract provision because the no-guarantee provision did not give either party discretion to perform or not perform a contractual obligation.

Disposition

The court granted summary judgment in favor of Google on all of Dreamstime’s remaining claims. It ordered the clerk to close the file. Judge William Alsup signed the order on July 3, 2020.