DZ Reserve v. Meta Platforms, Inc.
- James Donato
- 3:18-cv-04978
- U.S. District Court · Northern District of California
- 3
In DZ Reserve v. Facebook, Judge Donato denied fraud dismissals, dismissed two contract-related claims with prejudice, and limited fraud claims to events after August 15, 2015.
The plaintiffs’ fraud claims against Facebook may proceed, subject to the August 15, 2015 cutoff, while their implied-covenant and quasi-contract claims were dismissed with prejudice. Facebook prevailed on those dismissed claims but must continue defending the fraud claims.
What happened
In DZ Reserve and Cain Maxwell v. Facebook, Inc., the plaintiffs alleged that Facebook’s Potential Reach advertising metric was inflated and that Facebook concealed problems with it. Facebook asked the court to dismiss the fraud and contract-related claims in the third amended complaint.
The court granted and denied Facebook’s motion in part. It allowed the fraudulent misrepresentation and fraudulent concealment claims to proceed because the allegations were specific enough. It dismissed the claims for breach of the implied covenant of good faith and fair dealing and quasi-contract with prejudice. The fraud claims were limited to events occurring on or after August 15, 2015.
Judge Donato said the pleadings were in final form, so the case could proceed toward trial or possibly summary judgment.
The detailed version
- DZ Reserve v. Meta Platforms, Inc. · No. 3:18-cv-04978
- James Donato
- Feb. 12, 2021
Background
This order addressed Facebook’s motion to dismiss claims in the plaintiffs’ third amended complaint. Facebook sought dismissal of the fraud and contract-related claims under Federal Rule of Civil Procedure 9(b), which requires fraud to be pleaded with particularity, and Rule 12(b)(6), which permits dismissal when a complaint does not adequately state a legal claim.
The plaintiffs alleged that Facebook’s Potential Reach metric was inflated, that the inflation mattered to potential advertising customers, that Facebook knew about problems with the metric and tried to conceal them, and that the plaintiffs relied on the metric when purchasing advertisements.
Rulings
The court denied Facebook’s request to dismiss the fraudulent misrepresentation and fraudulent concealment claims under Rule 9(b). It concluded that the allegations were concrete and specific enough to give Facebook notice of the alleged misconduct. The court also noted that it had previously found adequate similar fraud allegations supporting the plaintiffs’ claim under California’s Unfair Competition Law.
The court dismissed with prejudice the claim for breach of the implied covenant of good faith and fair dealing. It reasoned that this claim did not go beyond the breach-of-contract claim that the court had dismissed with prejudice in an earlier order and could not be used to replead that claim.
The court also dismissed with prejudice the quasi-contract claim. The plaintiffs alleged that they had an express advertising-services contract with Facebook. Because the quasi-contract claim covered the same subject matter as that contract, the court concluded that the claim could not proceed.
Time Limit and Disposition
The plaintiffs agreed not to pursue fraud claims based on events before August 15, 2015, and Facebook accepted that date. The court therefore limited the fraud claims accordingly.
The court stated that the motion to dismiss was granted and denied in part. It said the pleadings were in final form and that the next stage could be trial or, if the requirements of Rule 56 were met, summary judgment. The court also reminded the parties to consider its decision in FTC v. D-Link Systems, Inc.
Read the full 3-page opinion on CourtListener, the free public archive maintained by the Free Law Project.