Meta Platforms, Inc. v. BrandTotal Ltd.

Background

Facebook, Inc. sued BrandTotal Ltd. and Unimania, Inc., collectively called “BrandTotal,” alleging that they improperly collected data from Facebook’s social networks. BrandTotal analyzes advertising data from social-media websites and brought counterclaims based on Facebook’s efforts to stop that data collection.

BrandTotal’s UpVoice program used a browser extension that panelists voluntarily installed. The extension tracked advertisements shown to panelists, and BrandTotal compensated them with gift cards. Before the litigation began, the extension also automatically collected certain demographic information from Facebook. On September 21, 2020, Facebook told Google that UpVoice was improperly collecting users’ personal information without adequate disclosure. Google then removed UpVoice from its Chrome web store. Facebook also removed BrandTotal’s accounts from its networks.

The court had previously dismissed BrandTotal’s counterclaim under the “unfair” part of California’s Unfair Competition Law, allowing amendment. BrandTotal filed second amended counterclaims that included an amended unfairness counterclaim and a new defamation counterclaim. The motions addressed in this order were BrandTotal’s request for permission to add the defamation counterclaim and Facebook’s motion to dismiss the amended unfairness counterclaim.

Request to Add the Defamation Counterclaim

Because BrandTotal sought to change the case after the scheduling-order deadline, the court applied Federal Rule of Civil Procedure 16(b)(4). That rule allows modification of a scheduling order only for good cause and with the judge’s consent. The main question was whether BrandTotal had acted diligently.

BrandTotal acknowledged that it learned through discovery in December 2020 or January 2021 about Facebook’s statement to Google, but it did not seek to add the defamation claim until June 2021. The court found that BrandTotal already had the facts supporting the proposed claim when it filed its first amended counterclaims on March 5, 2021. BrandTotal also could have sought an extension before the May 21, 2021 amendment deadline.

The court rejected BrandTotal’s arguments that the case’s complexity, or its earlier decision to pursue a claim under the UCL’s “fraudulent” prong, established good cause. The court concluded that BrandTotal had not shown diligence. It therefore denied the motion for leave to add the defamation counterclaim and to expand the UCL’s “unlawful” counterclaim to use defamation as a basis. The court did not decide whether the proposed amendment would have been legally futile.

Motion to Dismiss the UCL Unfairness Counterclaim

A motion under Rule 12(b)(6) tests whether the pleading states a legally sufficient claim. At this stage, the court treated factual allegations as true and viewed them favorably to BrandTotal, but it did not have to accept unsupported legal conclusions.

For a competitor’s claim under the UCL’s unfairness prong, the alleged conduct generally must threaten an antitrust violation, violate the policy or spirit of antitrust laws in a comparable way, or significantly threaten or harm competition. The court considered BrandTotal’s theories that Facebook improperly refused permission to access advertising data, deactivated BrandTotal’s accounts and refused to accept its advertising, and contacted Google to have UpVoice removed.

The court rejected the theory that Facebook’s refusal to provide access to advertising data violated the spirit of antitrust laws. A business generally has the right to refuse to deal with competitors, subject to a limited exception involving termination of a prior course of dealing. The court found that this exception did not apply to advertising data that Facebook had never authorized anyone to access. BrandTotal also had not identified a California legislative policy relating to competition that Facebook’s conduct implicated. The California Consumer Privacy Act’s definition of personal information and the Federal Trade Commission’s privacy order concerning Facebook did not require Facebook to provide BrandTotal access to advertising data or show that access was required to protect competition. The court granted the motion to dismiss to the extent the unfairness counterclaim rested on that theory.

The court separately considered whether BrandTotal had pleaded an actual or threatened antitrust violation based on Facebook’s account deactivations, refusal to permit advertising, and contact with Google. It assumed for purposes of the motion that BrandTotal’s proposed markets for third-party commercial advertising information were sufficiently plausible. But BrandTotal failed to plead facts plausibly showing that Facebook had monopoly power in the alleged advertising-analytics market. Its allegation that Facebook controlled 95 percent of social media did not establish control of the different market for advertising analytics. BrandTotal did not adequately address Facebook’s share of the alleged market, the existence of other competitors, or whether Facebook could restrict the market’s overall output. The court granted Facebook’s motion to dismiss for failure to plead plausible market power.

Disposition

BrandTotal had made three unsuccessful attempts to state a UCL unfairness claim. The court found that BrandTotal had not identified specific additional allegations that would cure the defects. Further amendment would also require extending the amendment deadline and delaying discovery, which would prejudice Facebook. The court therefore denied leave to amend further and dismissed BrandTotal’s counterclaim under the UCL’s unfairness prong with prejudice.

The court denied BrandTotal’s motion for leave to add the defamation counterclaim, including its request to expand the UCL’s unlawful counterclaim to encompass defamation. It granted Facebook’s motion to dismiss BrandTotal’s unfairness counterclaim with prejudice. The surviving counterclaims were not affected, and Facebook was ordered to answer them by September 14, 2021.