Class Action Brought by “Lonely and Vulnerable” Men Against Online Cupid Site Moves Forward — Badella v. Deniro Mktg.

[Post by Venkat Balasubramani with some comments by Eric]

Badella v. Deniro Marketing LLC, 10-03908 CRB (N.D. Cal.; Jan 24, 2011)

This is a good one.

A group of plaintiffs brought a putative class action against an online dating website that they alleged contained predominately fake profiles. As Judge Breyer describes it in more colorful language:

This is a putative class action purportedly a vast, fraudulent scheme centered around an internet dating website that lures ‘often lonely and vulnerable men’ into joining . . . with the false promise that they are communicating with real women in their area who are interested in dating and/or intimate relationships.

Plaintiffs brought claims for fraud, RICO and California’s anti-spam statute against multiple defendants. They alleged that they were “drawn” to the website fraudulently (e.g., via “spam, internet pop-up ads, or social networking scams”), induced to sign up for free, and then induced to upgrade to paid memberships.

Fraud: With respect to the fraud claim, defendants argued that the website terms of use undermined plaintiffs’ reliance on any purported misstatements. The website terms stated:

This Service is for Amusement Purposes only.
You understand and accept that our site, while built in the form of a personals service, is an entertainment service. . . You are not guaranteed that you will find a date, a companion, or an activity partner, or that you will meet any of our members in person.
Online CupidTM Communications: You understand, acknowledge and agree that some of the user profiles posted on this site may be fictitious, and are associated with . . . our “Online CupidsTM”, (“OC”). Our OC’s work for the Site in an effort to stimulate conversation with users, in order to encourage further and broader participation in all of our Site’s services, including the posting of additional information a.or pictures to the users’ profiles.

Judge Breyer found that the terms did not undercut reliance for three reasons: (1) plaintiffs alleged that nearly all (as opposed to some) of the profiles are fictitious; (2) the fake profiles were not always labeled “OC,” as promised; and (3) the plaintiffs alleged a “widespread and pervasive effort on Defendants’ part to make the website appear to be a legitimate dating service.” The disclaimer did not defeat reliance because defendants allegedly used a “wealth of information” to create a false impression, and the disclaimer was not as prominent as the information which created the false impression. In rejecting the claims, the court suggested what an appropriate disclaimer would look like, and contrasted this with the one from the website terms:

THIS WEBSITE USES FICTITIOUS PROFILES – READ THIS DISCLAIMER [or] THE MAJORITY OF PROFILES YOU SEE WILL NOT CORRESPOND TO ACTUAL WOMEN – READ THIS DISCLAIMER.

Disclaimers have achieved mixed results against claims of misleading website practices. (See, e.g., Vistaprint; Easysaver Rewards; Duffy v. The Ticketreserve, Inc.) I found the court’s conclusion plausible, although a part of me said that an average person reading this disclaimer would conclude that they weren’t visiting a typical dating website. Maybe the court figured – as many people do – that people rarely read or digest website terms?

Defendants also argued that the fraud claims were not pled with particularity. The court held that with respect to initially being drawn to the site, the plaintiffs failed to allege the particulars of how they were fraudulently drawn to the site. With respect to being persuaded to register and upgrade to paid memberships, the court held that these allegations were pled with particularity, since plaintiffs’ allegations referenced specific messages sent by fake profiles which were not so labeled. Interestingly, plaintiffs alleged that in order to make the fake profile messages more compelling, defendants did not rely on “canned or automatic messages . . . [they employed] actual individuals who control hundreds of fictitious profiles.” [Reasonable minds can disagree about the quality of the copy, but my feeling was that anyone who has ever moderated blog comments or been exposed to blog spam would be able to spot this as the same type of copy from a mile away.]

RICO: For the RICO claim, plaintiffs argued that defendants engaged in a conspiracy to commit wire fraud and access device fraud. The underlying fraud plaintiffs alleged was that defendants set up numerous entities to fraudulently obtain merchant accounts and then used these merchant accounts to process credit card payment for the websites in question.

The court does not give defendants’ argument much credit here and declines to dismiss the RICO claims. I didn’t check to see whether RICO claims have been successfully brought in the online context, but this seems like a way to attack a bunch of people in the chain of a transaction and drastically expand the scope of liability. A charge of conspiracy was successfully brought by the government in Kilbride, a criminal CAN-SPAM case. “Defendants Convicted in 1st Criminal CAN-SPAM Trial.” There, among other things the government alleged that defendants used fictitious entities to register domain names. The court in Kilbride also relied on the use of privacy protection services to register the domain names. The RICO claims will have to be fleshed out and no one knows how they will fare, but plaintiffs’ theory sounds pretty expansive.

Spam claims: Plaintiffs brought claims under California’s spam statute. The court concludes that these claims are barred by the one year statute of limitations, thus avoiding the preemption question that has been plaguing California courts for some time, including in Reunion.com, another case where plaintiffs alleged they were induced to sign up (and upgrade) using unsolicited messages and allegedly bogus “friend messages.” (“Reunion.com Revisited Again: Claims Under CA Spam Law Not Preempted by CAN-SPAM — Hoang v. Reunion.com.”) Interestingly, an appeals court in California recently held that under the California statute claims for actual damages must be brought within three years of the receipt of the emails, while claims for statutory damages can only be brought one year within the receipt of the emails. The court’s opinion here does not contain a discussion of whether plaintiffs sought actual or statutory damages, but if they sought actual damages, the dismissal does not jibe with the recent appeals court ruling in Hypertouch. (“CA Appeals Court: Claims Under State Spam Statute Not Preempted by CAN-SPAM – Hypertouch v. Valueclick.”)

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It’s hard to not be judgmental about this suit. People – specifically “lonely and vulnerable men” – sign up for these random “dating” websites and then complain because a greater than anticipated number of the profiles are fake (??). I can just picture one of the plaintiffs saying: “I’m playing the odds by going on this site. I don’t know what the odds are (no one does), but they were different from what you promised!” It’s also hard to fault the court for deferring the underlying issue of whether the users were misled to the factfinder, but unless the plaintiffs are chosen carefully, they are not going to have an easy time credibly explaining how they were misled. In the meantime, we can take comfort that the interests of lonely and vulnerable men trolling internet dating sites for dates can be protected.

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Comments by Eric: It’s interesting how Venkat concludes his post, because in fact I have zero sympathy for the website (treating the allegations as true, as the court was required to do on this motion to dismiss). I’m trying to imagine a world where customers would pay substantial fees to a “dating” site where much/most of the interaction was with automated scripts. (I also couldn’t get Austin Power’s “fembots” out of my mind reading this case). The silly disclaimers–that the site was for “amusement” and that paying customers should expect automated interactions–clearly weren’t likely to be read by anyone who actually paid money to the site. So it seems axiomatic to me that the only people who paid should have been the people who didn’t get the message.

Thus, this seems like one of those cases where the fine print (“we’re just going to send you canned messages if you pay us a lot of money”) is designed to completely contradict the big print (“we’re a dating site”). You can’t do that.

This case brought to mind the old Anthony v. Yahoo case, where Yahoo allegedly retained profiles of expired/terminated members so that it looked like it had a bigger dating pool. (Yahoo ultimately settled for up to $4M). We talk about how it can be a jungle out there for single people, but oh man, at least their dating services shouldn’t be lying to them. Clearly, before you starting “dating” your dating site, you need to diligence it too.

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Related (coverage of a recently filed class action against Match.com over an alleged excessive number of inactive or fake profiles):

Lawsuit Claims More Than Half Of Match.com Profiles Are Inactive Or Fake” (Joe Mullin)

Love’s Labour’s Lost in Cyberspace” (Danielle Citron/Concurring Opinions)

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