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From Antitrust Law Daily, January 16, 2018

CDA immunizes search engines from locksmiths’ class action

By Cheryl Beise, J.D.

A class action lawsuit filed by licensed locksmiths against Internet search engines for colluding to publish scam locksmith information in search results has been dismissed by the federal district court in Washington, D.C. The Communications Decency Act immunized the search providers from liability from the locksmiths’ claims for false advertising under the Lanham Act, violations of the Sherman Act, and state tort claims because the allegedly false information published by the search providers was wholly created by third-parties. The search providers’ addition of location and mapping information did not materially contribute to the alleged unlawfulness of the underlying information. The plaintiffs’ breach of contract claim, while not precluded by the CDA, was nevertheless dismissed for failure to identify any specific contract with the defendants (Baldino’s Lock & Key Service, Inc. v. Google, Inc., January 12, 2018, McFadden, T.).

In 2016, Baldino’s Lock & Key Service, Inc., ("Baldino’s") brought a putative class action lawsuit, on behalf of locksmiths nationwide, against Internet search engine providers Google, Inc., Yahoo! Inc., and Microsoft Corporation (the "providers"), for allegedly burying search results for legitimate, or certified, locksmiths below those of scam locksmiths, forcing legitimate locksmiths to pay for premium advertising slots or face the reality of an eroding customer base. Thirteen additional locksmith plaintiffs were added to the suit. The locksmiths claimed that they lost 30-60% of their gross revenue since 2009 as a result of the defendants’ practices. The complaint asserted claims for false advertising under Section 43(a) of the Lanham Act, violations of the Sherman Act, and state law causes of action for fraud, tortious interference with an economic advantage, unfair competition, breach of contract, and conspiracy. According to the locksmiths, the providers colluded in adopting a policy of publishing scam locksmith search results, thus abusing their monopoly power and restraining trade in violation of the Sherman Act. The providers also allegedly violated the Lanham Act by making false representations pertaining to the scam locksmiths.

This was not the first lawsuit Baldino’s had filed over Internet search results. In 2014, Baldino’s sued Google and two Internet directory listing providers (Yellowbook and Ziplocal), alleging violations of the Racketeer Influenced and Corrupt Organizations Act (RICO) and false advertising in violation of the Lanham Act. The district court granted the defendants’ motions to dismiss both claims for failure to state a claim. The court also found that the provider defendants were immune from liability under Section 230 of the CDA. Baldino’s challenged the dismissal of its false adverting claim for failure to state a claim. The Fourth Circuit affirmed the district court’s decision, noting that Baldino’s failed to demonstrate that the defendants were responsible for alleged misrepresentations made by competing locksmiths.

Before the court was the providers’ motion to dismiss the plaintiffs’ claims for failure to state a claim and based on service provider immunity under Section 230 of the Communications Decency Act (CDA). The court previously granted Microsoft's motion to stay the claims against it made by Baldino’s and another plaintiff (Joe East Enterprises), pending a decision on the motion to dismiss, on the ground that contracts with those parties arguably required that all the asserted claims be decided in arbitration.

CDA Immunity. Section 230(c) of the CDA provides that interactive computer service providers shall not be held liable for any state law cause of action that seeks to hold them liable as the publisher or speaker of content created by third parties. The CDA provides three exceptions to immunity—for content that violates the Electronic Communications Privacy Act of 1986, federal criminal law, and intellectual property law—but none of the exceptions applied in this case.

The providers argued that they were immune from liability for seven of the plaintiffs’ eight claims under the CDA because the locksmiths were seeking to hold them liable for publishing content created by third-parties, namely, information regarding scam or unlicensed locksmiths that competed with the plaintiffs. The locksmiths countered that they were seeking to hold the providers liable not for publishing false content created by the scam locksmiths, but for knowingly enhancing that content by creating original false content relating to location and mapping information. The original content allegedly created by the providers included "fictitious addresses, photos, map locations, and map pinpoints for scam locksmiths as well as driving directions to and from the fictitious locations."

The court rejected the locksmiths’ argument. In Fair Housing Council of San Fernando Valley v., LLC, 521 F.3d 1157, 1167-68 (9th Cir. 2008), the Ninth Circuit explained that a service provider’s "development" of content is "not merely . . . augmenting the content generally, but . . . materially contributing to its alleged unlawfulness." The court found the Ninth Circuit’s reasoning to be persuasive. Applying it to the facts of this case, the court concluded that the providers’ mapping information did not materially contribute to the alleged unlawfulness of the underlying information. It was the scam locksmiths who provided the original false location information and the providers’ extra information was wholly dependent on the original location claim. All of the locksmiths’ claims were dismissed with prejudice as barred by the CDA, except for their breach of contract claim.

Breach of contract. The locksmiths’ breach of contract claim asserted a violation of the "implied duty of good faith and fair dealing." The amended complaint also alleged that the plaintiffs have "contracted some of listed defendants for paid advertising services." While it seemed that Microsoft had entered into contracts with Baldino’s and Joe’s East Enterprises, those claims were not included in the present motion because they had been referred to arbitration. Because the plaintiffs did not provide any information regarding any other actual contracts, the court dismissed the breach of contract claim for failure to state a claim, but the dismissal was without prejudice.

The case is No. 1:16-cv-02360-TNM.

Attorneys: Jeffrey Waintroob Roberts (Roberts Attorneys, PA) for Baldino's Lock & Key Service, Inc. Kathleen E. McCarthy (King & Spalding LLC) for Google, LLC.

Companies: Baldino's Lock & Key Service, Inc.; Google, LLC

MainStory: TopStory Antitrust DistrictofColumbiaNews

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