Thursday, May 31, 2012

eBay case involving pay-for-featured-status program survives motion to dismiss

Custom LED, LLC v. eBay, Inc., 2012 WL 1909333 (N.D. Cal.)

Plaintiff sued eBay, Inc. (and a couple of international eBay versions that were dismissed from the case) for breach of contract and fraud related to “Featured Plus!” listings on eBay sites.  It alleged that eBay uses entry points including,,, etc.  These are interconnected, and a search for an item on eBay Motors can begin from many pages, including; consumers can’t readily tell which subsite they’re using.  The eBay Motors fee schedule includes optional fees, including Featured Plus!, which costs as much as $39.95 per listing.  The description: “Your item appears in the Featured Items section at the top of the search results list page.”

Plaintiff argued that the plain meaning of this was that any Featured Plus! Item should appear in the Featured Items section at the top of any search list, whether the search was conducted from eBay Motors,, or some other subsite.  But, plaintiff alleged, Featured Plus! didn’t actually work that way; if a consumer searched from no Featured Plus! items would be shown at the top of the search list, even though eBay Motors listings would be displaye, and if a search conducted from eBay Motors was for products across all categories, the result was the same.  Further, if an eBay Motors searcher chose to view results by any criteria other than “Best Match,” no Featured Plus! entries would be shown at the top.  Plaintiff also alleged that for certain periods, including the second half of 2011, Feature Plus! didn’t work, but eBay continued to market it.  Plaintiff filed a putative class action alleging breach of contract, unfair competition/false advertising, and unjust enrichment.

The court found the contract language ambiguous.  The parties didn’t identify any provision of the contract defining Featured Plus! or how it was supposed to operate.  eBay’s argument that the contract didn’t promise priority if consumers used or sorted by anything other than Best Match ignored that the terms did promise to list Featured Plus! items in a “section at the top of the search results page” without any limitation or description.  True, this was part of the “eBay Motors listing upgrades” and was included only on eBay Motors' Fees Schedule, but that didn’t make the meaning of “Featured Items section at the top of the search results page” unambiguous. Further factual development of the objectively reasonable expectations of eBay sellers (and perhaps eBay consumers, though I don’t see why) was required.

The court turned to the UCL/FAL/fraud claims.  eBay argued that plaintiff couldn’t allege justifiable reliance because of the plain terms of the contract—but the terms were ambiguous.  The UCL/FAL claims survived, but not the common law fraud and deceit claims because plaintiff didn’t identify any damage other than that caused by the alleged breach of contract, which is just economic loss and not actionable in fraud.  The unjust enrichment claim also failed because such claims don’t work where a plaintiff alleges that there is a valid and enforceable contract between the parties.

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