Holden v. Fluent, Inc.

Background

The action was removed from San Mateo County Superior Court based on diversity jurisdiction. Coquese Holden and ten other individuals sued Fluent, Inc., Fluent, LLC, and fifty defendants identified as Does 1–50. Plaintiffs alleged that Fluent sent them at least 1,300 unsolicited commercial emails that used misleading names, subject lines, domain names, and header information to promote purported rewards and obtain personal information.

The First Amended Complaint asserted three California-law claims: violation of California Business and Professions Code section 17529.5, intentional misrepresentation, and negligent misrepresentation. The California Email Law claim relied on two theories: allegedly falsified or misrepresented header information and use of third-party domain names without permission.

Motion and Pleading Standard

Fluent moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint states a legally sufficient claim. Alternatively, Fluent sought a more definite statement under Rule 12(e). Fluent argued that all claims were based on alleged fraud and therefore had to satisfy Rule 9(b), which requires a complaint to describe the alleged fraud with particularity, including the who, what, when, where, and how.

Plaintiffs did not dispute that Rule 9(b) applied to their claims. They argued that the First Amended Complaint, sample emails, and a forensic investigator’s declaration provided enough detail. They also argued that they had supplied Fluent with a substantial sample of the emails and that discovery would provide additional information.

Court’s Analysis

The court held that Rule 9(b) applied to all three claims because each claim sounded in fraud. The court concluded that the two sample emails were described with sufficient specificity, but that the allegations concerning the remaining emails were not. Plaintiffs did not allege that the samples represented the other emails, when the other emails were sent, or what feature of each email was allegedly unlawful. The court therefore held that all claims were insufficiently pleaded under Rule 9(b).

As to the California Email Law claim based on third-party domain names, the court rejected Fluent’s argument that liability was limited to entities that actually sent or initiated the emails. The statute applies to an entity that advertises in the emails. However, the court found that Plaintiffs identified only the domain names shown in the sample emails and did not allege facts showing that those domain names belonged to third parties or were used without authorization. The court held that the allegations were conclusory and did not state a claim under section 17529.5(a)(1).

As to the claim based on falsified or misrepresented header information, the court explained that header information includes source, destination, routing, originating-domain, and originating-email information, as well as information identifying or purporting to identify the person who initiated the message. The court found that Plaintiffs’ supporting allegations addressed subject lines rather than header information. Because the court concluded that subject lines are covered separately by section 17529.5(a)(3), not section 17529.5(a)(2), it held that the section 17529.5(a)(2) claim was insufficiently pleaded.

The court also held that the intentional and negligent misrepresentation claims did not adequately allege justifiable reliance resulting in actual damage. Plaintiffs’ theory was that misleading email features caused them to believe the offers were legitimate, click links, and complete surveys. But Plaintiffs did not allege that they suffered damage from spending time completing surveys or from not receiving the promised rewards. The court rejected reliance on the volume of spam emails or on a spam filter’s alleged reliance, finding that those allegations did not establish the required reliance and resulting damage.

Disposition

The court granted Fluent’s motion to dismiss. It dismissed all of Plaintiffs’ claims with leave to amend. The court did not require Plaintiffs to attach all 1,300 emails. Instead, an amended complaint could provide representative examples and plead that they represented the remaining emails, or include a detailed appendix identifying when the emails were sent and the specific features alleged to be unlawful. The court ordered Plaintiffs to file a second amended complaint by December 21, 2020. Judge Joseph C. Spero signed the order.