July 15, 2005
Lane's Gift Click Fraud Complaint
Lane's Gifts and Collectibles LLC v. Yahoo! Inc., Case No. CV-2005-52-1 (Ark. Cir. Ct. complaint filed Feb. 17, 2005).
After parsing the Click Defense complaint last week, I was finally able to get my hands on one of the complaints in the Lane's Gift click fraud lawsuit. This particular version is a second amended complaint in state court, but I'm not sure if this is the "latest" complaint as the case has been bouncing between state and federal court. I heard today that the case was sent back to state court in the last week, but I haven't been able to confirm that.
This particular version of the complaint alleges three causes of action:
* breach of contract
* unjust enrichment (and various related theories)
* civil conspiracy
I have no idea what the "civil conspiracy" cause of action means. This is an odd cause of action; maybe there's something very specific in Arkansas law. It reads almost like an antitrust claim: "This is an industry wide conspiracy in which all search engines have worked together to develop and/or create a market which allows for over billing and/or overcharging of businesses and/or entities which purchase online PPC advertising." (Para. 47)
An antitrust angle to the click fraud lawsuits would be an interesting development and would potentially raise the stakes significantly for Google and Yahoo. On that front, I had a telephone conversation today with Click Defense's counsel and he used a lot of rhetoric that implied monopolistic practices. I asked him point blank if Click Defense was planning to amend its complaint to add an antitrust complaint and I got a non-commital response, but it seems like a logical move.
As I mentioned in my analysis of the Click Defense complaint, the unjust enrichment claim will likely stand or fall with the other causes of action.
That leaves the breach of contract action. This particular complaint is thinner in describing the basis of the breach of contract than the Click Defense complaint. As I mentioned there, a plaintiff is not required to show all of its cards in the complaint, although this one might be too thin. I could see a judge requiring clearer allegations of exactly how the defendants breached a contract than the very high level allegation made here: "Defendants either expressly and/or implicitly, contractually agreed to provide Internet PPC advertising and/or services to Plaintiffs and only charge for the actual click thruogh advertising from actual customers. Defendants breached that contract by collecting revenues for services which were not provided." (Para. 44)
As I said, it's very possible that there are newer versions of the complaint than this one. If anyone has a newer version, I'd be grateful for a copy.
I'm now scheduled to speak on click fraud at Search Engine Strategies in San Jose next month. If you're interested in the topic, I hope to see you there. (I believe everyone else on the panel has their knives ready to carve up the search engines like a turkey, so it should be an interesting event!).
I am making an assumption here, but when I listened to one of the attorneys from Lost Clicks give a presentation at a DFWSEM Association meeting on 6/18/05, the "civil conspiracy" and "antitrust" approaches may be due to the fact that there are many search engines accused of click fraud, there are many advertisers that are affected by it, and there is no "court decision" legal definition of the many different kinds of "click fraud" as of yet. I think he said that the attorney's are going to have to start the industry standard of the many definitions of click fraud, and the courts will confirm on a case by case basis. Maybe the "antitrust" approach would help force the federal courts to make those legal definitions?
Posted by: Bill Kelm at July 18, 2005 12:40 PM
Possibly, although the fact that industry players have different definitions of "clicks" and "click fraud" might indicate a lack of coordinated activity, which would undercut the antitrust claim. Note that my main point is that an antitrust claim (if supportable) would give the plaintiffs a powerful new lever point against the defendants, which would have a lot more benefit than some of the junky/easily-dismissed claims the plaintiffs have made. Eric.
Posted by: Eric Goldman at July 19, 2005 09:28 AM