Lambotte’s Click Fraud Lawsuit Against IAC Survives Motion to Dismiss

By Eric Goldman

Lambotte v. IAC/InterActiveCorp, 2008 WL 4829882 (C.D. Cal. Nov. 4, 2008). Initial blog post on the filing of the first complaint.

Lambotte filed this putative class action lawsuit against IAC in May based on alleged click fraud. In July, the court granted summary judgment to dismiss portions of the lawsuit. Lambotte and two new named plaintiffs then filed an amended complaint in September. IAC moved to dismiss. This ruling largely rejects that motion.

The plaintiffs argued that the contract says that IAC would charge for clicks by “users,” and reasonable advertisers would assume that “users” are “potential clients” for the advertiser, not bogus clickers. The judge is rightly skeptical of this argument, saying that the plaintiffs’ definitions “may not be the most reasonable interpretations.” At the same time, California law has a liberal parol evidence rule, so the judge gives the plaintiffs a chance to introduce evidence to support their aggressive definitions. I would be surprised if this claim ultimately prevails, but the plaintiffs can try.

The plaintiffs also argue that the implied covenant of good faith and fair dealing effectively requires IAC to prevent click fraud, and thus IAC breached that obligation. The court, citing In re Yahoo, says that this allegation survives a motion to dismiss.

As with In re Yahoo, this ruling is a win for the plaintiffs because they get to keep litigating the case. However, there remains some basic problems with the plaintiffs’ allegations that should ultimately doom the lawsuit. If in fact the plaintiffs do lose the lawsuit, it’s unfortunate that everyone had to incur the extra adjudication costs. More likely, if the lawsuit can survive another few rounds, IAC probably cuts a check to end the threat regardless of substantive legal merit.

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