A Complaint’s Silence About Section 230 Helps It Survive Judgment on the Pleadings–Moretti v. Hertz

This is a class action lawsuit against car rental companies for an alleged “currency exchange rate scam.” Allegedly, the rental car companies quote foreign rentals in dollars but then actually charge customers in the local currency at an inflated exchange rate. Also, the rental car companies allegedly didn’t disclose that liability insurance was mandatory in some places.

This post focuses on Hotwire’s liability as an online travel agency, though the opinion never uses that term. The allegations against Hotwire include that “Hotwire continued to [publish misleading information] despite consumer complaints and Hotwire’s knowledge of the information’s fraudulent content….Hotwire [w]as a willing and ratifying participant in this arrangement, and… Hotwire ‘directly profit[s]’ from the scheme.”

Hotwire moved for judgment on the pleadings on Section 230 grounds. We know Section 230 can be resolved via a judgment on the pleadings because the seminal Zeran case ruled on that basis. The court also cites the Obado and DiMeo Third Circuit rulings and the Kabbaj ruling from the District of Delaware, all Section 230 12(b)(6) dismissals. In a footnote, the court adds additional citations that Section 230 is an immunity from suit, including the Nemet Chevrolet, MA v. Village Voice, Evans v. HP and Goddard v. Google cases. Given this stack of precedents, you’d think Hotwire was in good shape.

Here, the plaintiffs didn’t make allegations in the complaint that Hotwire is disqualified from Section 230, i.e., the complaint did not anticipatorily rebut Hotwire’s Section 230’s defense. The court treats Section 230 as an affirmative defense, so the complaint’s silence about Section 230 is OK:

Taking the well-pleaded factual allegations as true, there is no basis in the Complaint from which the Court could conclude that Hotwire did not function as an ICP and did not contribute materially to the alleged misrepresentations.

The court summarizes:

Plaintiff’s allegations are such that there is, based solely on the face of the Complaint, a factual dispute as to the nature and degree of Hotwire’s involvement in the allegedly misleading statement. Under the circumstances here, the Court cannot treat the Complaint’s silence as to whether Hotwire materially contributed to the false statement as an affirmative allegation that Hotwire did not do so.

In support of rejecting Section 230 on a motion to dismiss, the court cites Swift v. Zynga, Chang v. Wozo, Cybersitter v. Google, and Perfect 10 v. Google (the 2006 district court ruling).

There are several moving parts to the court’s double-negative treatment of this issue. First, as the court acknowledges, many other courts have said Section 230 isn’t an affirmative defense; it’s an immunity from liability, in which case the plaintiff bears the pleading burden. Second, even if Section 230 is an affirmative defense, the court doesn’t distinguish between a 12(b)(6) and a motion for judgment on the pleadings. Hotwire’s answer and supporting filings may be sufficient to establish the prima facie elements of the affirmative defense, shifting the burden back onto the plaintiff to rebut the defense or lose. Unfortunately, the way the court phrased its discussion, it implies that a plaintiff’s complaint will survive a judgment on the pleadings so long as it’s murky and ambiguous enough that the court can’t tell whether or not Section 230 might apply. If that’s the court’s true holding, it would reward poor pleading by the plaintiffs and extend–at substantial cost to the parties–cases that may ultimately be governed by Section 230.

Apparently the judge was partially influenced by unspecified representations of plaintiffs’ counsel during oral arguments that they had facts disqualifying Hotwire from Section 230’s coverage. To get those facts into the pleadings, the court requires the plaintiffs to file an amended complaint “to include any specifics which are in his possession that help to show why Plaintiff believes Hotwire is not immune.” I don’t recall seeing a court require an amended complaint in a ruling the plaintiffs won, but it’s a logical step to get the salient facts into the record so Hotwire can contest them.

The court doesn’t get into Section 230’s substantive standards in much detail. In a footnote, the court cryptically suggests that “whether Hotwire is an ICP (and therefore not entitled to Section 230 immunity) will depend on whether there is a sufficient nexus between Hotwire’s conduct and the allegedly misleading nature of the information supplied by Hertz Defendants and displayed on Hotwire’s site.” The court doesn’t address whether Hotwire functions as the retailer or a travel agent rather than just an ad-supported content publisher, but that issue may come up.

BONUS RANT: The case doesn’t directly implicate resort fees, though the allegedly undisclosed mandatory obligation to procure liability insurance is analogous. Any mandatory fee not disclosed as part of the base price is BOGUS. Worse, the FTC knows it’s bogus yet continues to do nothing. I doubt this case will have any implications for resort fees, but if this case can finally stop hotels from imposing resort fees, I’m all for it.

Case citation: Moretti v. The Hertz Corp., 2017 WL 1032783 (D. Del. March 17, 2017). I previously blogged the venue selection ruling in this case.