Wednesday, November 25, 2009

Central District Grants Class Certification of Nationwide Internet Pay-Per-Click Advertising Action: Menagerie Prods. v. Citysearch

On November 9, 2009, Judge Christina A. Snyder of the Central District granted in part plaintiff’s motion to certify a nation-wide pay-per-click advertising class action in Menagerie Prods. v. Citysearch, 2009 U.S. Dist. LEXIS 108768 (C.D. Cal. Nov. 9, 2009). Plaintiffs’ complaint alleged various claims for breach of contract and unfair and deceptive business practices based on defendant Citysearch’s alleged systemic practice of billing clients for fraudulent “clicks” on prepaid internet advertisements purchased through defendant on a per-click basis. See id., at 11-12.

With regard to plaintiff’s’ breach of contract claim the Court concluded that common issues predominated because plaintiffs’ claim was predicated upon a standard form contract used by defendant as to all advertisers, and that to the extent necessary, any issues regarding interpretation would be based on common representations made by defendant on its website. See Citysearch, 2009 U.S. Dist. LEXIS 108768, at 36-37. Similarly, the Court also concluded that common issues predominated as to plaintiffs’ claim for breach of the implied covenant of good faith and fair dealing because “the alleged breach of contract--namely failing to filter and otherwise monitor for click fraud--if proven, is objectively unreasonable conduct that can be established without resort to individualized proof.” See id., at 38-41.

However, the Court split on plaintiffs’ claims under the UCL. With regard to plaintiff’s claims under the fraudulent prong, the court concluded that common issues predominated because defendant uniformly failed to disclose that it would charge clients for fraudulent clicks, and that, post Tobacco II, the defendant's conduct must be adjudicated under the objective "reasonable consumer" standard rather than by examining the individual circumstances of each class member:
The Court agrees with plaintiffs that common issues predominate with regard to plaintiffs' claim of a common classwide omission under the "fraudulent" prong of the UCL. See Day, 63 Cal. App. 4th at 332-334 (finding defendant liable for failing to disclose material information to all class members under the "fraudulent" prong of the UCL). This UCL claim will be adjudicated under the "reasonable consumer" standard rather than by examining the individual circumstances of each plaintiff. The "reasonable consumer" standard requires plaintiffs to "show that members of the public are likely to be deceived." Williams, 523 F.3d at 938. Here, the "focus is on the defendant's conduct, rather than the plaintiff's damages." In re Tobacco II Cases, 46 Cal. 4th at 312, 320 ("relief under the UCL is available without individualized proof of deception, reliance and injury"). Because the UCL claim arises out of Citysearch's common course of conduct towards all class members, and the "reasonable consumer" standard is employed to adjudicate the claim, the Court finds that predominance prong is met with regards to plaintiffs' claim under the "fraudulent" prong of the UCL.
Citysearch, 2009 U.S. Dist. LEXIS 108768, at 44-45.

With regard to plaintiffs’ claims under the unfair prong, however, the Court concluded that common issues did not predominate.  As reasoned by the Court, the requisite unfairness balancing test (which involves an examination of the practice's impact on its alleged victim, balanced against the reasons, justifications and motives of the alleged wrongdoer), would entail individualized inquiry into each class member’s expectations about the challenged business practice to determine the extent of harm. See id., at 48.

Finally, the Court concluded that certification of nationwide contract and UCL claims was appropriate insofar as (1) all versions of the contract between the class and Citysearch in force during the class period contain a choice of law clause stating that California law governs the contract, and (2) defendant’s challenged conduct originated and emanated from California. See id., at 49-52.

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