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Schellenbach v. LLC

United States District Court, D. Arizona

January 18, 2017

Mark Schellenbach, et al., Plaintiffs,
v. LLC, Defendant.


          David G. Campbell United States District Judge

         Plaintiffs Mark Schellenbach and William Ryder, on behalf of themselves and all others similarly situated, filed a complaint against Defendant, LLC. Docs. 1, 33. Plaintiffs seek monetary and injunctive relief for alleged violations of Arizona and California law. Id. Defendant has filed a motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. Doc. 43. The motion is fully briefed (Docs. 43, 52, 61), and neither party has requested oral argument. For the reasons set forth below, the Court will grant Defendant's motion as to the negligent misrepresentation claim and deny it as to all other claims.

         I. Background.

         Defendant is a large technology provider incorporated in Delaware and headquartered in Scottsdale, Arizona. Doc. 33, ¶ 7. It sells a variety of services to small businesses, including internet domain registrations, web-based business applications, and forms of server access. Id., ¶¶ 1-3; Doc. 43 at 11. On October 31, 2014, Defendant issued a press release titled “GoDaddy Launches New Dedicated and VPS Servers with Added Support for Designers and Developers.” Doc. 33, ¶ 16; Doc. 52-3 at 2. Named Plaintiffs are website designers based in Los Angeles, California. Doc. 33, ¶¶ 8-9. In December 2014 and continuing thereafter, they both purchased a “Dedicated Server” hosting plan maintained by Defendant. Doc. 33, ¶ 29. Plaintiffs allege that, after experiencing “crippling performance issues relating to the server[, ]” they hired an independent server expert to diagnose and resolve those issues. Id., ¶¶ 29, 31. Plaintiffs learned from this expert that they were actually being provided with a virtualized server. Id., ¶ 31. Defendant does not dispute that its Dedicated Server product is virtualized. Doc. 43 at 11. Rather, Defendant argues that this information was “clearly and publicly disclose[d].” Id. at 10. Plaintiffs argue that they “were misled by [Defendant's] omission of material facts, i.e. that the ‘Dedicated Servers' marketed and sold by [Defendant] were, in fact, virtualized.” Doc. 52 at 7.

         II. Legal Standard.

         A successful motion to dismiss under Rule 12(b)(6) must show either that the complaint lacks a cognizable legal theory or fails to allege facts sufficient to support its theory. Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990). A complaint that sets forth a cognizable legal theory will survive a motion to dismiss as long as it contains “sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim has facial plausibility when “the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id., 556 U.S. at 678 (citing Twombly, 550 U.S. at 556). “The plausibility standard is not akin to a ‘probability requirement, ' but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. (citing Twombly, 550 U.S. at 556).

         Rule 9(b) requires a party alleging fraud to “state with particularity the circumstances constituting fraud or mistake.” Fed.R.Civ.P. 9(b). The complaint “must state the time, place, and specific content of the false representations as well as the identities of the parties to the misrepresentation.” Schreiber Distrib. Co. v. Serv-Well Furniture Co., 806 F.2d 1393, 1401 (9th Cir. 1986) (citations omitted). A complaint of fraud must specify “the who, what, when, where, and how” of the alleged misconduct. Vess v. Ciba-Geigy Corp., 317 F.3d 1097, 1106 (9th Cir. 2003). “[A] plaintiff in a fraud-by-omission suit faces a slightly more relaxed burden, due to the fraud-by-omission plaintiff's inherent inability to specify the time, place, and specific content of an omission in quite as precise a manner.” Tait v. BSH Home Appliances Corp., No. SACV 10-00711 DOC, 2011 WL 3941387, at *2 (C.D. Cal. Aug. 31, 2011); see also Falk v. Gen. Motors Corp., 496 F.Supp.2d 1088, 1098-99 (N.D. Cal. 2007).

         III. Analysis.

         Plaintiffs bring claims alleging fraudulent concealment under Arizona law, negligent misrepresentation under California law, violations of the Arizona Consumer Fraud Act (“ACFA”), and violations of California's false advertising and unfair competition laws. Doc. 33.

         A. Scope of Review and Judicial Notice.

         Defendant asks the Court to take judicial notice of four exhibits containing images of Defendant's website. Doc. 43-1. In making this request, Defendant confuses the doctrine of incorporation by reference with judicial notice. “Although often conflated, the doctrine of incorporation by reference is distinct from judicial notice.” Hsu v. Puma Biotechnology, Inc., No. SACV150865AGJCGX, 2016 WL 5859000, at *4 (C.D. Cal. Sept. 30, 2016) (quoting Gammel v. Hewlett-Packard Co., 905 F.Supp.2d 1052, 1061 (C.D. Cal. 2012)) (alterations and quotation marks omitted). Judicial notice is permitted by the rules of evidence and allows a court to take notice of facts that cannot reasonably be disputed. See Fed. R. Evid. 201(b). Incorporation by reference concerns information a court may considered when ruling on a motion under Rule 12(b)(6), and permits the court to consider materials attached to the complaint that are referenced in the complaint. Hsu, 2016 WL 5859000, at *4. In fact, “[a] copy of a written instrument that is an exhibit to a pleading is a part of the pleading for all purposes.” Fed.R.Civ.P. 10.

         Incorporation by reference also allows a court to consider certain documents referred to or relied upon in a complaint. Knievel v. ESPN, 393 F.3d 1068, 1076 (9th Cir. 2005). The Ninth Circuit has provided this explanation:

Generally, the scope of review on a motion to dismiss for failure to state a claim is limited to the contents of the complaint. A court may consider evidence on which the complaint necessarily relies if: (1) the complaint refers to the document; (2) the document is central to the plaintiff's claim; and (3) no party questions the authenticity of the copy attached to the 12(b)(6) motion. The court may treat such a document as part of the complaint, and thus may assume that its contents are true for purposes of a motion to dismiss under Rule 12(b)(6).

Marder v. Lopez, 450 F.3d 445, 448 (9th Cir. 2006) (internal quotations marks and citations omitted). See also Harris v. Cty. of Orange, 682 F.3d 1126, 1132 (9th Cir. 2012); Coto Settlement v. Eisenberg, 593 F.3d 1031, 1038 (9th Cir. 2010).

         Defendant argues that the Court may “take judicial notice” of the contents of its website because Plaintiffs incorporated the website in their Amended Complaint. Doc. 43-1 at 3. Defendant further contends that “[t]here is no dispute regarding the accuracy or authenticity of the” webpage copies attached to its motion to dismiss. Id. at 4. Plaintiffs do not appear to dispute that the Court may consider two of Defendant's exhibits (C and D) which contain images of Defendant's website and a compilation of images included in Plaintiffs' Amended Complaint, respectively. Id. at 2. These webpages and images are specifically referred to and relied upon in Plaintiffs' Amended Complaint, and Plaintiffs do not dispute their authenticity. Doc. 52 at 13; Doc. 33, ¶¶ 19-24. The Court will consider Exhibits C and D in ruling on the motion to dismiss.[1]

         Plaintiffs argue, however, that the Court should not consider Exhibits A and B, which are two other webpage copies, because they are not mentioned or relied upon in the Amended Complaint. Doc. 52 at 10. Exhibit A contains a copy of a webpage as saved on and dated December 26, 2014. Doc. 43-1 at 2. Exhibit B contains a copy of a webpage as it allegedly appeared on September 28, 2016. Id. Plaintiffs contend that Defendant has not authenticated these exhibits, nor shown that they were active or accessible to Plaintiffs when they purchased their Dedicated Servers. Id. at 11. Although Plaintiffs refer to these webpages in their Amended Complaint (Doc. 33., ¶ 3 n.1&2), Plaintiffs dispute the authenticity of the copies attached to Defendant's motion to dismiss, and whether they were accessible to Plaintiffs. Doc. 52 at 11-13.

         Defendant argues that Plaintiffs' challenge to Exhibits A and B as unauthenticated is without merit given that the Amended Complaint quotes from the webpages and Plaintiffs admit that they relied on an archived version of a different page on Defendant's website. Doc. 61 at 4 n.1. But a court may grant a motion to dismiss under the doctrine of incorporation by reference only when the authenticity of the evidence is not questioned. Coto Settlement, 593 F.3d at 1038. Plaintiffs clearly dispute the authenticity of Exhibits A and B, and their citation to an archived version of another of Defendant's webpages does not change that fact.

         Moreover, even if Exhibits A and B had been authenticated, Defendant has not shown that they are central or even relevant to Plaintiffs' claims. Exhibit B is an alleged copy of Defendant's webpage from September, 2016. Plaintiffs' Amended Complaint states that Plaintiffs had already stopped using Defendant's hosting services at that time. Doc. 33, ¶ 34. Exhibit A is an alleged copy of Defendant's webpage from December 26, 2014. Plaintiffs claim that they purchased Defendant's Dedicated Server plan in December 2014, leaving doubt as to whether the webpage was accessible to Plaintiffs at the time of purchase. Additionally, Plaintiffs' only refer to the webpage in the introduction section of their Amended Complaint in order to support a statement concerning the types of sever products that Defendant offers. Doc. 33, ¶ 3 n.1 & 2. In contrast, the factual allegations section of the Amended Complaint relies on images and quotations from Defendant's October 31, 2014 press release, the webpage referenced on that press release (the same webpage reflected in Exhibits C and D), and a separate webpage. Id., ¶¶ 16-24. The factual allegations section does not contain any reference to the webpages in Exhibits A and B, or any indication that Plaintiffs reviewed or relied upon them in making their purchases.

         Exhibits C and D do not contain any explicit statement of the Dedicated Server product's virtualized character. Doc. 43-4, 43-5. Defendant's cite Exhibit C to suggest that its identification of the Dedicated Server as a “single-tenant VM” constitutes a clear disclaimer of the virtualized nature of the Dedication Server. Doc. 43 at 12; Doc. 43-4 at 5. Defendant provides nothing to show that the meaning of “VM” was understood by Plaintiffs or other ...

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