dotStrategy, Co. v. Twitter Inc

Background

Twitter sells advertising and charges advertisers based on interactions with promoted accounts or content. The opinion says Twitter represented that advertisers would be charged only when “people” followed, retweeted, replied to, favorited, or clicked on promoted content. DotStrategy alleged that it placed 34 ads between October 2013 and December 2016 and paid $2,220.76.

DotStrategy alleged that it was charged for interactions with “fake” accounts, including automated accounts, or bots. It also alleged that Twitter deleted 70 million accounts in July 2018 that it considered spammy, inactive, or likely to be bots, and that 480 of dotStrategy’s followers were deleted around the same time. DotStrategy sued under California’s Unfair Competition Law, alleging that Twitter’s representations were false and that it did not refund charges for bot interactions.

Twitter’s Arguments

Twitter moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal when a complaint does not adequately state a legally recognized claim. Twitter argued that dotStrategy had not pleaded false statements with the particularity required for fraud claims, had not adequately alleged reliance, was barred by disclaimers in the Twitter Advertising Terms, and lacked standing under the Unfair Competition Law.

False-Statement Allegations

The court held that dotStrategy did not adequately define the broader category of “fake,” “false,” or “spam” accounts that were controlled by people. The First Amended Complaint therefore did not give Twitter adequate notice of which statements were allegedly false. The court also found that Twitter’s general statements about building an engaged audience could not reasonably be understood as a promise not to charge for interactions with human-controlled accounts, even if those accounts violated Twitter’s rules or otherwise qualified as “fake.”

The court separately held that dotStrategy adequately alleged a claim based on interactions with bots. The statements promising that advertisers would pay only for interactions with “people” could reasonably be understood to mean that advertisers would not be charged—or would receive refunds—for interactions Twitter knew involved automated accounts. The court found the allegations about the deleted followers, Twitter’s bot purge, the number of automated accounts, and the absence of reimbursement sufficient to make it plausible that dotStrategy paid for at least some bot interactions.

The court excused dotStrategy’s failure to identify each bot account and each charge with greater precision because Twitter controlled information that became unavailable after account deletions. The court noted that Twitter itself agreed dotStrategy did not need to identify every account and the precise date and time of every allegedly improper charge at the pleading stage.

Reliance and Contract Disclaimers

The court found that dotStrategy adequately alleged reliance because it identified specific Twitter representations, alleged that it reviewed them between October 2013 and December 2016, and alleged that it relied on them when placing ads. DotStrategy’s continued advertising after agreeing to the Advertising Terms did not defeat reliance because the complaint alleged that it continued placing ads and could have relied on later representations when incurring additional charges.

The court also rejected Twitter’s reliance on two contractual provisions: a disclaimer of guarantees about the quality of user actions and a provision stating that charges were based solely on Twitter’s measurements. The court concluded that these provisions were not irreconcilable with the understanding that Twitter would not charge for bot interactions. In the court’s view, the disclaimers were ambiguous and did not correct Twitter’s allegedly clear representations about charges for interactions with automated accounts.

Standing and Disposition

Standing is the legal requirement that a plaintiff show an injury connected to the challenged conduct. The court held that dotStrategy adequately alleged economic injury because it claimed that it paid for ads it would not have purchased had it known the truth. The court also rejected Twitter’s arguments that dotStrategy had not shown a causal connection between the alleged misrepresentations and its loss.

The court’s order granted in part and denied in part Twitter’s motion to dismiss. It granted the motion as to allegations that dotStrategy was charged for interactions with fake accounts controlled by humans. It denied the motion as to allegations that dotStrategy was charged for interactions with accounts controlled by bots. The opinion does not state whether the dismissed allegations could be amended.