Faire Wholesale, Inc. v. Tundra, Inc.

Background

Faire operates an online marketplace for wholesalers and retailers. Users must create password-protected accounts to access information such as inventory, pricing, and contact information. Faire alleged that Tundra created a comparison tool called Wholesale Co-Op that encouraged users to provide their Faire login credentials. Faire alleged that Tundra then used those credentials to access protected portions of Faire’s platform, copy non-public information, and market Wholesale Co-Op.

Faire brought claims under the Computer Fraud and Abuse Act, California’s Comprehensive Computer Data Access and Fraud Act, California’s Unfair Competition Law (UCL), and the Lanham Act. It also brought interference claims, which Faire agreed to arbitrate. Tundra moved to compel arbitration of the remaining claims and moved to dismiss them.

Arbitration

The court denied Tundra’s motion to compel arbitration. Tundra was not a signer of Faire’s service terms, which contained the arbitration agreement. Tundra relied on equitable estoppel, a doctrine that can sometimes allow a non-signer to enforce an arbitration agreement when the plaintiff’s claims depend on that agreement.

The court held that Faire did not need to rely on its service terms to assert the remaining computer-access, UCL, and Lanham Act claims. The Computer Fraud and Abuse Act claim depended on whether Tundra’s access was authorized, not on whether users violated Faire’s password-disclosure rules. The court also found that the California computer-data claim and Lanham Act claim did not require proof that Faire’s service terms were violated. Because the UCL claim was based on those claims, Tundra also failed to show that equitable estoppel applied to it.

Motion to Dismiss

The court granted Tundra’s motion to dismiss with leave to amend as to the Computer Fraud and Abuse Act claim. Faire cited a statutory subsection that did not apply and another subsection that does not exist. Although Faire argued in its opposition brief that it intended to cite a different subsection, the court ruled that Faire could not amend its complaint through a brief. The court noted that Faire alleged access to password-protected, non-public information, rather than publicly available information, but those allegations did not cure the pleading error.

The court also granted Tundra’s motion to dismiss with leave to amend as to Faire’s California Comprehensive Computer Data Access and Fraud Act claim. Faire plausibly alleged that Tundra caused users to be locked out, experience login problems, and receive warnings about possible unauthorized login attempts. But Faire did not plausibly allege that Tundra knowingly caused the disruption or denial of service to authorized users.

The court granted Tundra’s motion to dismiss in part and denied it in part as to the UCL claim. It denied dismissal based on statutory standing, meaning the requirement that Faire allege an injury in fact and lost money or property caused by the alleged unfair competition. The court found that Faire plausibly alleged reliance on Tundra’s representations that it was an authorized user and that Faire had approved Tundra’s practices. The court also held that Faire adequately alleged consumer reliance on Tundra’s advertising representations.

The court dismissed with leave to amend the UCL claim to the extent it was based on the two computer-access claims. It denied dismissal of the portion based on the Lanham Act claim. The court also denied dismissal of Faire’s UCL fraudulent-practices theory because Faire plausibly alleged that Tundra’s representations were likely to deceive retailers and brands into believing that Tundra was partnered with or approved by Faire.

Finally, the court denied Tundra’s motion to dismiss the Lanham Act claim. Faire plausibly alleged that Tundra made false statements in website advertising, emails, and phone solicitations claiming that Faire knew about and approved Tundra’s scheme. The court found those allegations sufficient at this stage to support commercial advertising, a tendency to deceive a substantial segment of the audience, and material deception likely to influence purchasing decisions.

Disposition

The motion to compel arbitration was denied. The motion to dismiss was granted with leave to amend as to the Computer Fraud and Abuse Act claim, the California Comprehensive Computer Data Access and Fraud Act claim, and the UCL claim to the extent based on those two claims. The motion to dismiss was denied as to the remainder of the UCL claim and the Lanham Act claim. The court stated that Faire could file an amended complaint by December 15, 2024.