RingCentral, Inc. v. Nextiva, Inc.

Background

RingCentral, Inc. and Nextiva, Inc. compete in providing similar services. Nextiva alleged that RingCentral published false and derogatory reviews and maintained comparison webpages that made inaccurate statements about the companies’ services and prices. Among other allegations, Nextiva claimed that RingCentral stated that Nextiva’s lowest-tier plan cost $22.95 per month instead of $19.95, and that RingCentral’s $19.99 plan included unlimited conferencing even though it did not.

Nextiva alleged that it lost more than 200 prospective customers because of RingCentral’s statements, identifying four of those prospective customers by name. Nextiva asserted five counterclaims: unfair competition under California law, false advertising under California law, false advertising under the Lanham Act, trade libel, and intentional interference with prospective economic advantage. RingCentral moved to dismiss and strike the counterclaims.

False Advertising and Unfair Competition

The court held that Nextiva sufficiently pleaded both false-advertising claims. Because the allegations sounded in fraud, Nextiva had to meet the heightened pleading standard requiring the complaint to identify the who, what, when, where, and how of the alleged misconduct. The court found that Nextiva identified who made the statements, what the statements said, how they were false, and the webpage and date involved.

The court also found sufficient allegations that the statements could deceive the public, were material, and could injure Nextiva by reducing goodwill or influencing customers’ purchasing decisions. The court treated the specific pricing statements as factual claims rather than nonactionable advertising exaggerations. It therefore denied RingCentral’s motion to dismiss the false-advertising claims.

Because Nextiva adequately alleged false advertising, the court also held that its unfair-competition claim under California’s Unfair Competition Law could proceed. The court denied RingCentral’s motion to dismiss that claim.

Trade Libel

The court granted RingCentral’s motion to dismiss Nextiva’s trade-libel claim with leave to amend. Trade libel requires, among other things, specifically identified financial harm caused by the allegedly defamatory statements. The court found that Nextiva’s reference to more than 200 prospective customers did not explain which transactions were lost or how the customers were connected to particular sales.

Although Nextiva identified four prospective customers, the court found those allegations conclusory. Nextiva did not allege facts showing that those customers knew about RingCentral’s statements or intended to do business with Nextiva, or that the statements materially and substantially caused them not to do so.

Interference with Prospective Economic Advantage

The court also granted RingCentral’s motion to dismiss Nextiva’s intentional-interference claim with leave to amend. This claim required facts showing a specific economic relationship with a third party and a probability of future economic benefit. The court found that general allegations about prospective customers were insufficient.

Nextiva alleged, on information and belief, that it lost more than 200 prospective customers because they viewed RingCentral’s comparison webpage. The court held that Nextiva had not supplied specific facts allowing a plausible inference that these customers would have dealt with Nextiva without RingCentral’s alleged interference.

Motion to Strike and Disposition

The court denied RingCentral’s motion to strike portions of Nextiva’s counterclaims. It found that the challenged allegations concerned the dispute, could bear on Nextiva’s claims, and had not been shown to cause prejudice. Motions to strike are generally disfavored when the challenged material may be relevant.

Overall, the court granted in part and denied in part RingCentral’s motion to dismiss Nextiva’s counterclaims. It granted the motion as to the trade-libel and intentional-interference claims, denied it as to the false-advertising and unfair-competition claims, and denied the motion to strike. The court permitted Nextiva to file amended counterclaims by August 3, 2020, but stated that any additional claims or parties required further permission from the court.