Tuesday, June 19, 2012

Claim proceeds against alleged mastermind of fake download sites

Yordy v. Plimus, Inc., No. 3:12-cv-00229-TEH (N.D. Cal. June 14, 2012)

Plimus provides payment processing and other services for online retailers.  Yordy alleged that it worked with third parties, known as the Unlimited Download Websites to promote, facilitate and thereby profit from the sales of membership to these sites. “The UDWs offer unlimited downloads of digital goods, such as books, movies, television programs, and video games, in exchange for the consumer paying a one-time membership fee.”  Yordy alleged that Plimus provided marketing assistance to the UDWs in the form of Affiliate Managers and Account Managers assigned to each UDW “and tasked with providing assistance with marketing strategies, creation of online advertisements and on-site representations, and assisting in promotion of the site.” (Plimus denied these allegations.)

Yordy clicked on an ad for TheNovelNetwork.com, which she alleges promised unlimited downloads of best-selling books in “eBook” form. “She paid $49.99 to Plimus, and was given access to the site only to discover that it did not, in fact, have digital books available to download, but, rather, had only links to books that were already available elsewhere on the internet for free.” She alleged that TheNovelNetwork.com was one of many UDWs utilizing the same marketing scheme, which Plimus ultimately created and influences.

Yordy sued on behalf of herself and all others who paid a fee to Plimus to access UDWs for the usual California statutory and common-law fraud claims.  Rule 9(b) applied, but Yordy satisfied it by clearly alleging the who, what, where, when, why and how.  The complaint alleged that the ads offered unlimited downloads of popular media including Harry Potter, Girl With The Dragon Tattoo, etc., which were not, in fact, available through the site. The allegations were specific enough to give defendants notice of the particular misconduct alleged to constitute the fraud.

(The website currently offers this howler: “Currently, The Novel Network does not have a list of eBooks available for non-members as there are over 3 million titles, and thousands of eBooks are being added to the database on a daily basis, making it extremely difficult to keep an up to date list of all those books for the general public.” I wonder how this information is made available to members? Perhaps there is a magical search engine that only works for members. I also wonder why a representative list isn’t available. Pictures on the site, however, suggest that bestsellers by James Patterson etc. are available, and the testimonials explicitly say so; one claimed to have retrieved the whole Twilight series through the site. There are also a significant number of hilarious affiliate marketers depressingly successful at populating “Novel Network scam” search results, even though the “reviews” I looked at don’t even manage to identify what’s actually available through the site. Ask Metafilter also reports that the "people" providing testimonials on the website claimed to have downloaded Harry Potter e-books through the site years before they were available in legitimate e-book form. I don’t know whether I think Google should clean up these results more than I think the FTC should look into this, or vice versa.)

Plimus alleged that Yordy didn’t have standing to allege claims on behalf of people who visited websites other than TheNovelNetwork.com; the differences between her claims and the claims of other users were simply too great to allow her standing for all of them. Yordy argued that the ads for all UDWs were substantially identical, and that Plimus, the sole defendant in this action, was responsible for creating them, so she had standing.  The court agreed with Yordy: she wasn’t suing separate UDWs to which she hadn’t lost money or property; she was suing Plimus for its role in creating and disseminating ads for all the UDWs, which she alleged were uniform in their creation and in their falsity. Since she alleged that Plimus uniformly controlled the misleading statements issued by its affiliate retailers, she alleged an actual, personal injury in fact that was fairly traceable to Plimus’s challenged actions and was likely to be redressed by a decision in her favor.

Plimus argued that the complaint failed to allege Plimus’s role with sufficient particularity.  There’s no vicarious liability under the CLRA.  But the complaint extensively alleged Plimus’s control: that Plimus’s employees work directly with the retailers to make recommendations about marketing offers, design marketing materials, etc.; that Plimus creates fake testimonials advertising the UDWs; that Plimus Account Managers actually modify the representations made on the UDWs; and even more.  That was sufficient.

Likewise, the fraud allegations were specific enough.  The image/text interaction was properly alleged to be fraudulent: “The affirmative misrepresentation which Defendant argues is not alleged is, in fact, inherent in the juxtaposition of popular books and movies alongside the advertisements for sites that did not offer these products, a juxtaposition dictated by the code Plaintiff alleges Plimus wrote and provided to the UDWs.”  The representations of “unlimited” access to digital goods had to be contrasted to the goods represented in the ads, which weren’t in fact provided by the UDWs.

The court did dismiss the unjust enrichment claim, which isn’t a separate cause of action in California.

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