Coffee v. Google LLC

Background

This was a proposed nationwide class action brought by John Coffee, Mei-Ling Montanez, and Montanez’s minor son, S.M. Coffee is identified as a California citizen and resident; Montanez and S.M. are identified as New York citizens and residents. Coffee downloaded Final Fantasy Brave Exvius from Google Play in 2018, and S.M. downloaded Dragon Ball Z Dokkan Battle in 2019. Both games used randomized “Summons,” or Loot Boxes, that could provide characters or other rewards. Players could obtain the games’ virtual currencies through gameplay or purchase them with real money.

The plaintiffs alleged that Google profited from these transactions because Google Play processed payments, retained 30 percent, and distributed the remainder to app developers. They asserted claims under California’s Unfair Competition Law, the California Consumers Legal Remedies Act, and an unspecified state-law theory of unjust enrichment. Google moved to dismiss the complaint for failure to state a claim, arguing that Section 230 of the Communications Decency Act protected it from liability, that the plaintiffs’ theory about illegal gambling was legally insufficient, and that the complaint did not allege required elements of the claims.

Judicial Notice

The court granted Google’s request to take judicial notice of the existence and contents of the Google Play Terms of Service. It also granted the plaintiffs’ request to take judicial notice of the Google Terms of Service, including provisions stating that California law governs disputes relating to the terms and that those disputes must be resolved in federal or state courts in Santa Clara County, California.

Section 230 Immunity

Section 230 generally protects an interactive computer service from being treated as the publisher or speaker of information supplied by another content provider. The court applied the Ninth Circuit’s three-part test: whether the defendant is an interactive computer service provider, whether the claims treat it as a publisher or speaker, and whether the relevant content was provided by another content provider.

The court found the first requirement satisfied because Google operated an online store that made applications created by other developers available to consumers. The second requirement was also satisfied because the plaintiffs’ claims were based on Google’s placing video-game apps containing Loot Boxes in the Google Play store. The requested injunction appeared to seek an order requiring Google to screen out apps containing Loot Boxes, which the court viewed as conduct within a publisher’s role.

The court also found the third requirement satisfied. The complaint expressly alleged that Google did not create the games or the Loot Box mechanism, and that the two games downloaded by the plaintiffs were created by third-party developers. The plaintiffs argued that Google materially contributed to the alleged illegality by requiring disclosure of Loot Box odds, providing age ratings, and failing to require notice that a game contained Loot Boxes. The court found that the plaintiffs had not explained how those actions materially contributed to the alleged illegality.

The court concluded that, as currently framed, the complaint alleged no more than Google’s passive allowance of third-party developers’ apps through Google Play. The court therefore held that Google was entitled to Section 230 immunity as to all three claims. The court did not decide whether Loot Boxes were illegal slot machines or devices under California gambling laws, stating that the issue could be considered later and that the record was too limited for that question at this stage.

The court allowed amendment because the plaintiffs might be able to allege additional facts showing that Google’s conduct went beyond publishing third-party content. The order did not permit new claims or parties without prior court permission.

Claim-Specific Pleading Defects

Claim 1: Unfair Competition Law. The plaintiffs alleged unlawful and unfair business practices based on alleged violations of state and federal gambling laws. The court declined to dismiss the claim based on the argument that Montanez and S.M. could not sue under California law because they lived in New York, noting the Google Terms of Service. It also deferred the question whether Loot Boxes were illegal gambling devices.

The court nevertheless found that the complaint did not adequately allege the economic injury and causation required for statutory standing under California’s Unfair Competition Law. The complaint described Coffee and S.M. as spending money on Loot Boxes, but the court read the allegations as describing two transactions: first, purchases of virtual currency, and second, use of that currency to obtain Loot Boxes. The complaint did not allege that the plaintiffs received less virtual currency than they paid for, that Google misrepresented the currency, or that the plaintiffs were deprived of an agreed benefit. To the extent the plaintiffs were injured by buying Loot Boxes with virtual currency, the complaint did not adequately connect that injury to Google. The motion to dismiss Claim 1 was granted with leave to amend.

Claim 2: Consumers Legal Remedies Act. The plaintiffs alleged that Google misrepresented that Loot Box transactions provided rights to potentially valuable prizes when, they claimed, the transactions were illegal gambling. The court found that the complaint did not identify any representation by Google about Loot Boxes. It also found that the complaint did not allege a qualifying sale or lease of goods or services between the plaintiffs and Google. The court stated that the alleged free game downloads did not qualify on the allegations presented and that courts in the district had held that virtual currency was not a good or service covered by this statute. Even assuming Loot Boxes were illegal gambling, the complaint did not adequately plead the plaintiffs’ theory that Google was acting like a casino. The motion to dismiss Claim 2 was granted with leave to amend.

Claim 3: Unjust Enrichment. The plaintiffs alleged that Google was unjustly enriched by compensation from marketing and selling unlawful Loot Boxes and sought restitution and disgorgement of Google’s profits. The court held that the plaintiffs could not proceed on an unjust-enrichment theory without specifying which state’s law applied. The court therefore did not reach Google’s additional arguments that the claim could not proceed under California law or duplicated the other claims. The motion to dismiss Claim 3 was granted with leave to amend.

Disposition

The court granted Google’s motion to dismiss with leave to amend and dismissed all claims in the complaint with leave to amend. Any amended complaint had to be filed by March 12, 2021. Amendment was limited to the claims already alleged, and new claims or parties required court permission.