UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

scheme of employing false and misleading advertisements and promotional materials to induce

small businesses to participate in its online advertising program known as Google AdWords

(“AdWords”), which results in demand for payment for invalid clicks. Second Am. Compl.

(“SAC”) ¶ 1, ECF 44. Singh asserts four claims against Google arising from this alleged scheme:

(1) breach of the implied covenant of good faith and fair dealing; (2) violations of California’s

unfair competition law (“UCL”), Cal. Bus. & Prof. Code §§ 17200, et seq.; (3) violations of

California’s false advertising law (“FAL”), Cal. Bus. & Prof. Code §§ 17500, et seq.; and (4)

fraud in the inducement. See generally SAC.

Presently before the Court is Defendant’s motion to dismiss Plaintiff’s SAC. See generally

Mot., ECF 47. The Court heard argument on the motion on May 11, 2017. For the reasons stated

available for advertisers to have their ads displayed on various Google properties, including

Google Search and YouTube, and other websites. SAC ¶¶ 1, 23. Advertisers pay each time their

ad is “clicked,” meaning the ads are “pay-per-click” ads. Id. ¶ 1. The relationship between

Google and AdWords advertisers is governed by the Google Inc. Advertising Program Terms (the

“Agreement”). Id. ¶ 10; Ex. 1 & 2 to Bish Decl. ISO Mot., ECF 47-2, 47-3.

Because AdWords advertisers are charged by the click, Google maintains policies to

prevent “click fraud,” which it defines as “clicks generated with malicious or fraudulent intent.”

Ex. 3 to Bish Decl. ISO Mot. (“Ex. 3”) 1–2, ECF 47-4. The “Google Ad Traffic Quality Resource

Center” refers to “clicks and impressions on AdWords that Google suspects not to be the result of

invalid clicks” before the advertiser is charged for any invalid clicks. Ex. 3, at 3.

The Google Ad Traffic Quality Resource Center, while not referenced as an exhibit, is

mentioned repeatedly in the complaint. See, e.g., SAC ¶¶ 45–50, 79. The page appears to contain

the fullest discussion of invalid clicks on one page. Plaintiff does not contest the accuracy of these

documents and objects only insofar as Google is asking the Court to take the contents as true,

which it is not. See Opp’n 3. Accordingly, the Court takes judicial notice of the statements on

that URL: https://www.google.com/intl/en_ALL/ads/adtrafficquality/index.html (“Ad Traffic

Resource Center”). See Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir. 1994), overruled on other

Singh signed up for an AdWords account in January 2008. SAC ¶ 14. He alleges that he

has continued to use AdWords since that time, and now manages three separate AdWords

accounts. Id. ¶¶ 57, 59. Singh avers that in early 2016, he began to suspect that third-party

publishers and/or website owners were fraudulently manipulating certain of his advertisements.

Id. ¶ 60. In this lawsuit, Singh challenges Google’s “pay-per-click” AdWords Program as unfair,

unlawful, and fraudulent. Singh contends that Google’s representations that “click-fraud” occurs

majority” of invalid clicks and prevent customers for being charged for those clicks are false and

advertising; and (4) fraudulent inducement.

“A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) for failure to state a

claim upon which relief can be granted ‘tests the legal sufficiency of a claim.’” Conservation

Force v. Salazar, 646 F.3d 1240, 1241–42 (9th Cir. 2011) (quoting Navarro v. Block, 250 F.3d

729, 732 (9th Cir. 2001)). When determining whether a claim has been stated, the Court accepts

as true all well-pled factual allegations and construes them in the light most favorable to the

plaintiff. Reese v. BP Exploration (Alaska) Inc., 643 F.3d 681, 690 (9th Cir. 2011). However, the

Court need not “accept as true allegations that contradict matters properly subject to judicial

On a motion to dismiss, the Court's review is limited to the face of the complaint and

matters judicially noticeable. MGIC Indem. Corp. v. Weisman, 803 F.2d 500, 504 (9th Cir. 1986);

N. Star Int’l v. Ariz. Corp. Comm’n, 720 F.2d 578, 581 (9th Cir. 1983). However, under the

referenced extensively in the complaint and which are accepted by all parties as authentic. In re

Silicon Graphics, Inc. Sec. Litig., 183 F.3d 970, 986 (9th Cir. 1999), abrogated on other grounds

by S. Ferry LP, No. 2 v. Killinger, 542 F.3d 776, 784 (9th Cir. 2008).

III. DISCUSSION

granted. The Court addresses each in turn below.

Google first argues that the Agreement bars all claims that Singh did not submit to Google

through the claims process. Mot. 9–10 (citing SAC ¶¶ 10, 14, 78); Ex. 2 to Bish Decl. (“2006

Agreement”) §§ 5, 7, ECF 47-3 (“[The c]ustomer’s exclusive remedy, and Google’s exclusive

liability, for suspected invalid impressions or clicks is for [c]ustomer to make a claim for a refund

in the form of advertising credits for Google Properties within [60 days]. Any refunds for

suspected invalid impressions or clicks are within Google’s sole discretion.”); Ex. 1 to Bish Decl.

(“2013 Agreement”) §7, ECF 47-2 (“Customer understands that third parties may generate

impressions or clicks on Customer’s Ads for prohibited or improper purposes and that its sole

suspect or questionable. Opp’n 23–24. In light of the deficiencies in Plaintiff’s SAC, as discussed

below, the Court declines to address these arguments at this point in the litigation.

Google argues that Singh fails to state a claim for breach of the implied covenant of good

faith and fair dealing because the AdWords Agreement includes no promise that Google will

protect advertisers from being charged for fraudulent clicks and because Singh fails to plausibly

allege that Google acted unreasonably or in bad faith. Mot. at 12–17. Singh opposes Google’s

motion, and contends that he has sufficiently alleged that Google breached the implied covenant of

faith through its inaction, lack of diligence, and evasion of the spirit of the bargain. Id. at 6–7.

requires that a contract exists between the parties, that the plaintiff performed his contractual

duties or was excused from nonperformance, that the defendant deprived the plaintiff of a benefit

conferred by the contract in violation of the parties’ expectations at the time of contracting, and

that the plaintiff’s damages resulted from the defendant’s actions.” Avila v. Countrywide Home

Loans, No. 10-CV-05485, 2010 WL 5071714, at *5 (N.D. Cal. Dec. 7, 2010). Although a “breach

of a specific provision of the contract is not a necessary prerequisite” to a claim for breach of the

implied covenant, Carma Developers (Cal.), Inc. v. Marathon Dev. Cal., Inc., 2 Cal. 4th 342, 373

(1992) the implied covenant “cannot impose substantive limits or duties on the contracting parties

Plaintiff’s counsel confirmed at the hearing. Indeed, Singh could not make such a claim because

Google acknowledges the existence of click fraud and the possibility that an advertiser would be

charged for fraudulent clicks. See, e.g., 2013 Agreement § 7. Additionally, Plaintiff’s allegations

relating to this claim include various allegations of fraud. See, e.g., SAC ¶¶ 100–01. This

impermissibly expands the scope of Google’s duties under the contract. See Damabeh, 2013 WL

1915867, at *6. Plaintiff suggests that the Court’s assessment that he impermissibly seeks to

expand the scope of Google’s contractual duties is inaccurate because the implied covenant covers

frustration of purpose, and his expectations were informed by the false and misleading

Second, Plaintiff cannot use the covenant to “rewrite” the parties’ contract “to include provisions

entirely foreign to . . . the original.” See Tollefson v. Roman Catholic Bishop, 219 Cal. App. 3d

843, 854 (1990), disapproved of on other grounds by Scott v. Pac. Gas & Elec. Co., 11 Cal. 4th

454, 474 n.5 (1995). For these reasons, the Court GRANTS Defendant’s motion to dismiss

Plaintiff’s claim for breach of the implied covenant of good faith and fair dealing WITH LEAVE

TO AMEND.

The UCL prohibits any “unlawful, unfair or fraudulent business practices.” Cal. Bus. &

Prof. Code § 17200; see also Cel–Tech Commc’ns, Inc. v. Los Angeles Cellular Tel. Co., 20 Cal.

4th 163, 180 (1999). Because the statute is written in the disjunctive, it applies separately to

The Court notes that in addition to the deficiencies outlined below, it is not clear that Plaintiff

has standing under the UCL.

under the unlawful prong of the UCL is based on Google’s alleged breach of the implied covenant.

Because a UCL claim cannot rest on a claim for breach of the implied covenant, the Court

GRANTS Google’s motion to dismiss on this ground WITH LEAVE TO AMEND.

“An act or practice is unfair if the consumer injury [1] is substantial, [2] is not outweighed

by any countervailing benefit to consumers or to competition, and [3] is not an injury the

consumers themselves could reasonably have avoided.” Daugherty v. Am. Honda Motor Co., 144

Cal. App. 4th 824, 839 (2006). Plaintiff must allege facts to support all three elements of a UCL

unfair business practice claim. Id.

analyzes his claims thereunder, but does not suggest that is the proper test.

Singh contends that he has stated a claim under the unfair prong of the UCL through

invalid clicks and the efficacy of its filtering efforts. Opp’n 18. Specifically, he alleges that

Google misrepresented the likelihood that customers would actually incur charges for a significant

volume of invalid clicks by assuring them that (1) such clicks represent a small percentage of all

clicks; (2) that Google filters out the “vast majority” of all such clicks; and (3) customers would

only pay when interested individuals click on their ad. Id. As Google correctly contends,

claim under unfair prong of UCL because the defendant’s communications warned that the

charges at issue would apply and because the plaintiff had an opportunity to avoid the charges by

canceling within 90 days). And, as discussed below, there is no factual support for Plaintiff’s

assertion that Google misrepresented the likelihood that customers would actually incur charges

for a significant volume of invalid clicks. See also Reply ISO Mot. 8. The Court is also

concerned that Singh ignores the claims process detailed in the Agreement. Plaintiff’s conclusory

allegations that the claims process is illusory are insufficient; to rely on this theory, Plaintiff must

provide additional factual allegations. For these reasons, the Court GRANTS Google’s motion to

dismiss Singh’s claim under the unfair prong WITH LEAVE TO AMEND.

advertised with Google had he known those representations were false. Opp’n 8, 19–20. He also

contends that his claims under the fraudulent prong are not precluded by the language of the of the

AdWords agreement. Id. at 12.

“Generally, to be actionable under the UCL, a concealed fact must be material in the sense

that it is likely to deceive a reasonable consumer.” Clemens v. DaimlerChrysler Corp., 534 F.3d

1017, 1025–26 (9th Cir. 2008) (citing Aron v. U–Haul Co. of Cal., 143 Cal. App. 4th 796, 806

(2006)). “[T]he plaintiff must produce evidence showing ‘a likelihood of confounding an

appreciable number of reasonably prudent purchasers exercising ordinary care.’” Id. (quoting

or nondisclosure was an immediate cause of the plaintiff’s injury-producing conduct. A plaintiff

may establish that the defendant’s misrepresentation is an immediate cause of the plaintiff’s

conduct by showing that in its absence the plaintiff in all reasonable probability would not have

engaged in the injury-producing conduct.” Id. at 326 (citation and internal quotation marks

omitted).

A cause of action for fraud is further subject to the heightened pleading requirements of

Fed. R. Civ. P. 9(b). Rule 9(b) requires a plaintiff to be “specific enough to

give defendants notice of the particular misconduct which is alleged to constitute the fraud

charged so that they can defend against the charge and not just deny that they have done anything

No. 11-cv-1263, 2011 WL 3501403, at *8 (N.D. Cal. Aug. 10, 2011) (applying Rule 9(b) standard

to claims under the fraudulent prong of the UCL).