Contract Breach Claims Against Google Survive First Amendment Defense–Dreamstime v. Google
Dreamstime sells stock photos. It alleges that Google partnered with its competitors and then maliciously downgraded Dreamstime’s visibility, first in organic search results and then in keyword ads. Google allegedly also kicked Dreamstime’s app out of Google Play. Dreamstime sued Google for antitrust violations but that claim was dismissed. Dreamstime also sued Google for contract breach and related claims. Those claims survived a motion to dismiss and now partially survive a 12(c) motion for judgment on the pleadings.
The First Amendment
Google defended that the First Amendment precludes any suit over how it handles its search results, building on Zhang v. Baidu, e-Ventures v. Google, Langdon v. Google, and Search King v. Google. Judge Alsup tartly responds:
The amended complaint alleged that Google “manipulated Dreamstime’s organic search ranking unfairly and illegally to force Dreamstime to spend an unreasonable amount of money on additional AdWords campaigns that would not otherwise have been necessary”. Just like a fast-talking con-artist cannot hide behind the First Amendment, neither can Google….The basis of the breach of contract claim remains that Google broke its contractual promise to Dreamstime. It makes no difference that Google did not make any specific promises related to search results….
Google argues that Dreamstime must aver more than a mere subjective belief that it should rank higher. Yet, an issue of material fact exists as to the reason Dreamstime had formerly been highly ranked on Google, remains highly ranked on other search engines, and has become practically non-existent on Google despite engaging in a mishmash of attempted fixes. Perhaps the reason is that Google torpedoed Dreamstime’s organic search ranking to boost advertising revenue. Perhaps it is not. Discovery will tease out what occurred here.
This kind of stuff makes my head hurt. We all know that Dreamstime objects to Google’s indexing and ranking editorial decisions. Shoehorning that complaint into a contract claim makes the legal questions more abstract–but doesn’t change their ultimate goal of curbing Google’s editorial independence. Ideally the system could elegantly recognize the First Amendment in these backdoor claims (something that Section 230 does well, as I discuss here). Furthermore, this maneuvering puts Dreamstime into a likely impossible position. Google surely didn’t promise to index or prominently rank Dreamstime, so what promise can Dreamstime enforce that will give it any remedy over being downranked/deindexed? Judge Alsup lets Dreamstime indulge in discovery, but I think we’d all be shocked if Dreamstime found a dispositive smoking gun.
Contract Limitations of Liability
Both the Google AdWords and Google Play contracts contained standard limitations of liability provisions. The AdWords contract eliminated indirect damages. The fact that direct damages are still in play is good enough for Judge Alsup to let the claim proceed. In contrast, the Google Play contract waives all damages, direct and indirect. Judge Alsup says “the limitation of liability clause is a showstopper here. It forecloses all damages.” Without damages, Dreamstime can’t satisfy the prima facie elements of a contract breach claim. Dreamstime sought a fraud workaround to the Google Play contract, but its pleadings aren’t strong enough on the fraud front. So the Google Play-related contract claims are struck.
Dreamstime’s PR firm sent me the following statement from Serban Enache, CEO of Dreamstime:
For years, Dreamstime has sought answers and remedies for Google’s dramatic demotion of Dreamstime’s search ranking for the most common searches for stock photos, which was occasioned by Google’s promotion of its competing Google Images service and its strategic partnerships with Dreamstime’s two largest competitors, both actions leading to Google’s world dominance for image distribution. We are pleased that the Court has allowed Dreamstime to discover the necessary facts and evidence to support its allegations that Google’s online search practices were unfair, unlawful and/or fraudulent as applied to Dreamstime and most other stock photo agencies. The Court’s ruling, and the recent reporting suggesting that the Department of Justice is in the process of opening an antitrust investigation into Google’s practices, are critical steps in Dreamstime’s quest for an even playing field in online search and search advertising.
I’m pretty sure the DOJ won’t be investigating Dreamstime’s problem. Instead, this case reminds me a lot of the e-Ventures case, also involving allegations of competitive downranking/de-indexing. e-Ventures survived Google’s motion to dismiss but then got shut down on summary judgment. I think it’s pretty clear Dreamstime will suffer the same fate, especially given the low odds it will find anything close to the smoking gun it seeks. Unfortunately, it will take lots of money on discovery to reach this seemingly inevitable outcome.
Case citation: Dreamstime.com, Inc. v. Google LLC, 2019 WL 2372280 (N.D. Cal. June 5, 2019)