Stemmelin v. Matterport, Inc.

Background

John Stemmelin sued Matterport, Inc., and its officers in a putative class action concerning Matterport’s Matterport Service Partner program. Matterport marketed cameras, related software and storage services, and a program allowing camera purchasers to start businesses selling three-dimensional scans. Stemmelin alleged that Matterport’s advertising made material misrepresentations and omissions about members’ ability to build a “lucrative, self-owned business.” He alleged that, after spending many hours learning the cameras and trying to start a business, he had spent tens of thousands of dollars with little to show for it.

The remaining claims involved California Civil Code Sections 17200 and 17500, the Illinois Consumer Fraud and Deceptive Business Practices Act, the Illinois Business Opportunity Sales Law, the California Seller-Assisted Marketing Plan Act, and breach of the implied covenant of good faith and fair dealing. Stemmelin voluntarily withdrew the Illinois claims. An earlier order had denied certification of an Illinois class and a national class.

Matterport moved for partial summary judgment on the California claims, the implied-covenant claim, and Stemmelin’s requested equitable relief. Summary judgment is appropriate when there is no genuine dispute of material fact and the moving party is entitled to judgment under the law.

Equitable Relief and Adequate Remedy at Law

Matterport argued that Stemmelin’s California Sections 17200 and 17500 claims failed because he had an adequate remedy through monetary damages. The court rejected that argument. It distinguished a prior appellate decision involving a plaintiff who had dropped an otherwise valid damages claim and sought restitution for the same harm. Here, Stemmelin said his Illinois damages claims were inapplicable because the contracts required application of California law, and he had withdrawn those claims.

The court concluded that California law applied under the contracts’ choice-of-law provisions. Because the withdrawn Illinois claim did not provide a valid damages remedy in this case, the court found that Stemmelin lacked an adequate remedy at law and could seek equitable restitution. The court also stated that the same reasoning applied to other equitable relief, including prospective injunctions. It therefore denied Matterport’s motion as to the Sections 17200 and 17500 claims and equitable relief generally.

Standing for Prospective Relief

Matterport argued that Stemmelin lacked Article III standing to seek prospective equitable relief. Stemmelin no longer sought injunctions concerning advertising the Service Partner program or compliance with the withdrawn business-opportunity claim because Matterport was no longer accepting new program members.

The court found that Stemmelin had standing to seek an injunction preventing Matterport from competing against Service Partners for 3D-scanning business. His deposition testimony and Matterport’s continued operation of its own capture-services business showed an adequate risk of future harm. The court said questions about the proper geographic or substantive scope of a possible injunction had to wait for another stage of the case.

The court reached the opposite conclusion concerning Stemmelin’s request for a declaration that he owned his scanned images. It found no adequately pleaded dispute about image ownership and noted that Stemmelin had not asserted a copyright claim. The court therefore granted Matterport’s motion as to that declaratory remedy. The opinion’s conclusion refers to Article II standing, while the standing analysis refers to Article III standing.

Implied Covenant Claim

Matterport argued that summary judgment was proper on Stemmelin’s implied covenant of good faith and fair dealing claim because the agreement expressly authorized Matterport’s conduct. Stemmelin alleged that Matterport frustrated the agreement’s purpose by competing with Service Partners, including by selling cameras to prospective leads and clients.

The agreement said Matterport might provide leads or marketing assistance, and separately stated that Matterport did not warrant that the program would increase a partner’s business or revenue or the number of leads it would generate. The court found ambiguity about whether those provisions gave Matterport discretion over providing leads or instead only disclaimed a guarantee about their number. Stemmelin’s allegations also concerned the quality of leads and Matterport’s conduct after providing a potential lead, not merely the number of leads. Because further evidence was necessary and a genuine dispute of material fact remained, the court denied Matterport’s motion on this claim.

Disposition

The court stated that Matterport’s motion for summary judgment was GRANTED IN PART and DENIED IN PART. It was denied as to Stemmelin’s Sections 17200 and 17500 claims, denied as to his request for injunctive relief, and denied as to his breach-of-implied-covenant claim. It was granted as to his request for declaratory relief concerning ownership of his scanned images.