Lawsuit Against Google Over Invalid Clicks and Special Partner Advertising Dismissed — Woods v. Google

[Post by Venkat Balasubramani with comments from Eric]

Woods v. Google, 5:10-cv-1263-JF (N.D. Cal.; Aug 10, 2011)

This is an advertiser vs. Google lawsuit where the plaintiff argued on behalf of a putative class that (1) he was improperly charged by Google for “invalid clicks,” (2) he did not receive a “smart pricing” discount that Google allegedly promised to all of its advertisers, and (3) Google entered into deals with “special partners” allowing the special partners “to place advertisements in ways that are prohibited to other . . . publishers.” Here is Eric’s recap of the complaint: “Another Advertiser Class Action Lawsuit Filed Against Google–Woods v. Google.”

Invalid clicks: The crux of the “invalid clicks” claim was that generally applicable Google policies, FAQs, and explanations, state that invalid clicks are prohibited, and advertisers would not be charged for invalid clicks. Woods argued that these policy statements were incorporated into the contract. According to the court, there are several problems with this argument. First, the agreement in place states that the advertiser’s sole remedy is to seek a refund, and in order to do so, the advertiser must raise the issue within 60 days. Woods did not allege that he did either of these.

Second, whether a click is “invalid” is (according to the documentation cited by plaintiff) something that Google will determine (those clicks “that [Google] suspects may constitute click fraud”). According to the court, this means that Google was vested with discretion in determining whether a click was invalid, and there was no allegation in the complaint that Google “acted beyond its discretion” in administering this policy.

The final overarching problem with Woods’s claim with respect to invalid clicks is that Woods cited to documentation outside the agreement and argued that statements made in the documentation was incorporated (as contractual terms) into the agreement. The court walks through the placement of the various statements and concludes that Google’s “policy statements” regarding invalid clicks is not incorporated into the AdWords agreement. The AdWords agreement contained a statement that the “program” was “subject to all applicable Google and Partner policies, including without limitation, the Editorial Guidelines, Google Privacy Policy, and Trademark Guidelines, and Google and Partner ad specification requirements.” Notwithstanding this “clear and unequivocal” statement of intent to incorporate “all applicable Google policies,” the court declines to find that the policies are incorporated into the agreement because the “invalid clicks policy” which plaintiff pointed to was not “known or easily available to the contracting parties.”

Special Partner sweetheart deals: Woods alleged that Google allowed its special partners to generate clicks in a way that its regular customers were not allowed to, but the court does not give this argument much credence.

“Smart Pricing” discount: Woods made a similar argument with respect to the smart pricing discount, arguing that language in the “Adwords Help Center” indicated that Google “promised to apply its Smart Pricing discount to all advertisements generated from its Adsense publishers.” He did not argue that the help center language was expressly incorporated. He pointed to sections in the agreement which stated that the program was subject to “all Google policies,” and a statement in the agreement that payment was to be made by advertisers “in accordance with the payment terms in the . . . Program FAQ.” The court accepts Google’s argument that the reference to the “Program FAQ” in the agreement was intended to only incorporate terms relating to payment options and not any terms which relate to how Google calculates the charges. The court also holds that even if the Adwords Help Center language is deemed to be incorporated into the agreement, the complaint is value about what Google’s obligations were exactly to apply the smart pricing discount to all advertisements.

Breach of the duty of good faith: The court acknowledges that Woods can bring an action for the breach of the duty of good faith “irrespective of whether [Google] breached its contractual obligations directly.” Notwithstanding, the court notes that Woods failed to allege that “Google deprived Woods of a benefit to which he was entitled under the Agreement.” The court says that Google is vested with “wide latitude” in administering its Adwords program, but at the same time, this discretion is not unlimited: Google must carry out its responsibilities in good faith. Woods’s vague allegations of a conspiracy between Google and its Special Partners are insufficient in the court’s view to suggest bad faith.

Unfair competition, false advertising, and fraudulent business practices claims: Finally, the court also pokes holes in the legal elements of Woods’s unfair competition and false advertising claims. It states that unless Woods can show that he had a legal right to the smart pricing discounts and to not be charged for invalid clicks (so-called “Banned Ad Implementations”) he can’t show any cognizable injury. The fraud claims do not satisfy Rule 9(b)’s particularity requirement.

Finally, the court questions whether Woods has standing to bring misrepresentation claims. The Adwords Agreement expressly indicates that the contracting parties have not relied on any outside statements or promises in entering into the agreement. Woods argues that UCL liability may exist where a party to a contract makes “contradictory or misleading representations in order to obfuscate or obscure the actual terms of the contract.” The court rejects this argument:

the issue is whether ‘a reasonable jury could find’ that Woods was reasonable in relying upon the extraneous statements notwithstanding an unambiguous disclaimer . . . [i]n light of Woods’s sophistication as an attorney and the complaint’s lack of particularity with respect to the statements that were alleged to have induced his reliance, the Court concludes that Woods has not alleged facts sufficient to support such a claim.

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It’s disheartening to see lawyer-plaintiffs get no love in the courts!

Seriously, Google nicely dodged a bullet here. As online agreements have become “longer and more byzantine,” and often cross reference other terms and policies, the possibilities of online agreement circuits getting crossed increases. (We recently saw GoDaddy be deprived of an easy contractual defense due to a cross-reference gaffe: “GoDaddy Mis-Manages Its User Agreements.”) While the court rejects Woods’s claims on the merits, it also made clear that the various policies and FAQs referenced in Google’s agreement were not incorporated and made a part of the contract terms.

There is some tension inherent in Google saying that it is the sole arbiter of what constitutes a valid click. I sense an illusory contract term lurking in the background here. What is an “invalid click”? The court ends up saying that it’s whatever Google says it is. The court does pay lip service to the fact that Google’s discretion is not unbounded in this regard, but you don’t get the sense that Woods will be able to allege any sort of bad faith sufficient to get the court’s attention here.

Woods made a valiant effort to argue that whatever the metric was for determining an invalid click, Google did not apply it equally across the board, but the court gives this argument little or no credence. This was one of the more intriguing aspects of Woods’ claims, but the court expresses serious reluctance to allow Woods’ claims to move forward and allow Woods discovery into Google’s business practices in this area. (This would have been a big hassle for Google and I’m sure it’s breathing a sigh of relief for not having to respond to Woods’ discovery.)

The court gives Woods leave to amend. Let’s see if his amended complaint adds any clarity to the allegations.

[This case languished in the blogging queue. In the time between when it was added to the “to blog” list and I actually wrote this blog post, Woods already filed an amended complaint and Google filed a motion to dismiss. You can access those documents here (amended complaint) and here (motion to dismiss).]

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Eric’s Comments:

I can’t believe people are still suing Google for click fraud, especially after Google buttoned up its legal agreements to prevent further click fraud suits. Then again, Judge Fogel recently let a click fraud lawsuit against Facebook keep going when he probably shouldn’t have. This one won’t get that far. [However, Judge Fogel is giving up his docket for an administrative appointment in DC, so perhaps the successor judge who inherits this case will be more receptive.]

I think the best part of this opinion is when Judge Fogel rejects the plaintiffs’ efforts to cut-and-paste various statements from Google’s support materials to manufacture a purported contract breach. The plaintiffs worked really hard to find contrary statements from Google’s website as an end-run around the contract’s plain language (plain, in the sense that it says plaintiffs should lose). Judge Fogel has none of it:

The complaint refers to more than a dozen pages in both the AdWords Help Center and AdSense Help Center that allegedly identify Google’s obligations under the invalid clicks policy, including a video clip and an expert report from another lawsuit, both of which are linked to the AdWords Help Center.(See Compl. ¶¶ 77-93.) The fact that statements about invalid clicks are spread across a variety of pages in a variety of formats make it difficult to identify the terms of any actual and unambiguous contractual obligations. This stands in sharp contrast to other Google policies,which include clear terms.

I think it’s become de rigeur in the plaintiff community to slice-and-dice every public statement a company has ever made through its entire history, looking for anything that could be construed as false. But when the contract makes it really, really clear that Google isn’t on the hook for click fraud, it would take a really strong and prominent contrary statement to trump it. The plaintiffs apparently fell far short of finding such a smoking gun, and the slicing-and-dicing just made them look silly. Note to plaintiffs: if you have to work that hard to find snippets that purportedly trump the plain language of a contract, you’re probably overthinking things. My recommendation is to let such complaints go, although I know you won’t heed that advice.

I do agree with Venkat that websites should try to consolidate their sprawling expanse of legal T&Cs documents. As the number of these documents grows, the odds grow exponentially that at least one of the linkages will fail. I bet Google would benefit from putting its legal T&Cs on a strict diet and chopping the number of words in half (or more). This would streamline the documents and perhaps make it easier to consolidate documents.

Venkat also notes that the named plaintiff, Woods, is an attorney. I used to keep a running count of all of the lawyer-as-plaintiff lawsuits against Google. For reasons I’ve never understood, Google’s run-ins with lawyers-as-plaintiffs seem disproportionately frequent. (Please email me if you have any hypotheses). And, even more embarrassing for the legal profession, the lawyer-as-plaintiff cases seems to fare especially poorly against Google, usually getting soundly thumped.