Taboola, Inc. v. Ezoic Inc.

Background

Taboola provides targeted digital advertising and content-recommendation technology. It alleged that it had written agreements with eight website publishers—Julio Garcia Network, Swing by Swing Golf, Inc., Precision Creations, LLC, TechSoft IT Solutions, Asian Hobbyist, Popdust, Inc., Productions Hard Line, Inc., and Lake and McHenry County Scanner. The agreements allegedly required the publishers to display Taboola’s technology during their contract terms and generally prohibited them from using competing content-recommendation technology.

Taboola alleged that Ezoic Inc. and its CEO, Dwayne Lafleur, breached Ezoic’s own contract with Taboola. It also alleged that Ezoic knowingly and intentionally caused the publishers to breach their contracts by encouraging them to remove Taboola’s technology, making statements about Taboola’s products and Google advertising policies, and configuring Ezoic software to block Taboola’s technology. Taboola sought damages and injunctive relief.

An earlier judge had denied Ezoic’s motion to dismiss Taboola’s first amended complaint, holding that Taboola had plausibly pleaded breach of contract and tortious interference under New York law. Taboola later filed a second amended complaint adding allegations involving four additional publishers. Ezoic again moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint alleges enough facts to support a legally plausible claim.

Court’s analysis

The court applied New York law. For tortious interference with contract, the required allegations included a valid contract between the plaintiff and a third party, the defendant’s knowledge of that contract and its relevant terms, intentional conduct that caused the third party to breach, and resulting damages. The complaint also had to allege that the breach would not have occurred without the defendant’s conduct.

The court concluded that Taboola adequately alleged valid, existing agreements with the four newly added publishers even though it did not attach or quote the agreements. The alleged execution dates, expiration dates, and material terms were enough at the pleading stage. The court also held that Taboola adequately alleged Ezoic’s actual knowledge based on the alleged similarity between Ezoic’s own agreement and the publisher agreements, Taboola’s published terms, communications with the publishers, cease-and-desist letters, and Ezoic’s business dealings with Taboola.

The court further held that Taboola plausibly alleged intentional interference. The allegations included statements to Asian Hobbyist and Popdust about Google policies, and allegations that Ezoic software blocked Taboola’s technology on the websites of Productions Hard Line and Lake and McHenry County Scanner. The court found that Taboola had also plausibly alleged damages because removing Taboola’s technology could cause it to lose advertising revenue. Together with the allegations concerning the four publishers addressed in the earlier complaint, the second amended complaint stated a plausible tortious-interference claim as to all eight publisher agreements.

The court separately concluded that Taboola adequately alleged breach of Ezoic’s own contract. The allegations addressed the existence of an agreement, Taboola’s performance, Ezoic’s alleged breaches—including failure to display Taboola’s technology, disparagement, and modification or interference with the technology—and damages. The court rejected Ezoic’s brief argument that the contract was anticompetitive and contrary to public policy, describing that argument as conclusory and not properly raised in the earlier motion.

Ruling and effect

The court denied Ezoic’s motion to dismiss the second amended complaint. The order did not decide whether Taboola will ultimately prove its allegations; it held only that the pleaded claims were sufficient to continue past the dismissal stage. The clerk was directed to terminate the motions pending at docket numbers 77, 80, and 100.