Lona's Lil Eats, LLC v. DoorDash, Inc.

Background

Lona’s Lil Eats, LLC brought a proposed class action against DoorDash, Inc. Lona’s alleged that DoorDash created public “landing pages” for restaurants that had not partnered with DoorDash, including pages displaying the restaurants’ menus and DoorDash branding. According to Lona’s, DoorDash’s website and mobile application represented that Lona’s was “closed,” “unavailable,” or “too far away” for delivery and pickup, even though Lona’s was open and offered curbside pickup. Lona’s alleged that these representations directed potential customers to DoorDash’s partner restaurants and caused Lona’s to lose business.

The amended complaint asserted three claims: false advertising under section 43(a) of the federal Lanham Act, violation of California’s False Advertising Law, and violation of California’s Unfair Competition Law. Lona’s also sought injunctive relief, which is a court order requiring a party to stop or refrain from conduct.

DoorDash’s Motion

DoorDash moved to dismiss under Federal Rule of Civil Procedure 12(b)(1), which concerns the court’s subject-matter jurisdiction, and Rule 12(b)(6), which concerns whether a complaint states a legally sufficient claim. DoorDash argued that Lona’s had not pleaded the alleged statements with the particularity required for fraud claims; had not shown that the statements were commercial advertising or promotion; had not adequately alleged consumer deception or injury; lacked standing under the California statutes; and had not shown a sufficient basis for injunctive relief.

Lanham Act Claim

The court held that Lona’s had pleaded the alleged false statements with sufficient detail under Rule 9(b). The complaint identified DoorDash as the speaker, potential Lona’s customers as the audience, the statements that Lona’s was “closed,” “unavailable,” or “too far away,” the DoorDash website and mobile application as the locations, and June 2020, August 18, 2020, and November 11, 2020, as relevant dates. The complaint also included screenshots and alleged why the statements were false or misleading.

The court further held that Lona’s plausibly alleged that the statements were commercial advertising or promotion. The allegations supported an inference that DoorDash used the restaurant pages and availability messages to influence consumers to use DoorDash’s services and to redirect them to DoorDash’s partner restaurants. The court also found that the alleged statements were disseminated sufficiently to the relevant purchasing public because Lona’s alleged that DoorDash’s marketing and search placement directed potential customers to the pages.

The court rejected DoorDash’s argument that Lona’s had not adequately alleged deception. Lona’s alleged that several customers were misled by the “closed” designation and contacted Lona’s to ask whether it was open. At the motion-to-dismiss stage, the court explained, Lona’s did not need to provide evidentiary proof of actual deception; it needed to plead specific misleading statements and explain why they were misleading.

The court also found that Lona’s adequately alleged injury. Lona’s claimed lost business, monetary damages, loss of market position, reputation, and goodwill resulting from DoorDash’s alleged redirection of customers. The court rejected DoorDash’s argument that Lona’s could not sue because DoorDash was not a direct competitor, explaining that the Supreme Court’s decision in Lexmark did not require direct competition for a Lanham Act false-advertising claim.

California False Advertising and Unfair Competition Claims

The court held that Lona’s had standing under California’s False Advertising Law and Unfair Competition Law. Although courts differed over whether a competitor must allege its own reliance on a challenged statement, Judge Hixson adopted the view that a non-consumer plaintiff need not allege its own reliance when it pleads a sufficient causal connection between the challenged advertising and its economic injury. The court found that Lona’s had alleged that DoorDash’s advertising caused economic injury.

The court also concluded that Lona’s had adequately pleaded its False Advertising Law claim with the required specificity. Because the Lanham Act-related arguments concerning the statements and advertising were insufficient to support dismissal, they did not support dismissal of the California claim either.

As to the Unfair Competition Law claim, the court rejected DoorDash’s arguments concerning the statute’s “unlawful,” “unfair,” and “fraudulent” theories. The court found that Lona’s had adequately pleaded the underlying Lanham Act and False Advertising Law violations, alleged conduct that could qualify as unfair or misleading advertising, and pleaded the alleged fraud with sufficient particularity.

Injunctive Relief and Disposition

The court held that Lona’s had adequately alleged standing to seek injunctive relief. Although Lona’s alleged that DoorDash had removed the “closed” designation, it also alleged that the application continued to show Lona’s as outside the delivery area through at least November 11, 2020. The court found that these allegations plausibly showed a realistic threat that the alleged misrepresentations could recur.

The court denied DoorDash’s Motion to Dismiss. It ordered DoorDash to file an answer to the amended complaint within 14 days, excluding the holiday. The ruling addressed whether Lona’s allegations were sufficient to proceed; it did not decide whether the alleged statements were ultimately false, whether DoorDash was liable, or whether the proposed class would be certified.