Click-Fraud Class Action Stated Claim for Breach of Contract and Breach of Implied Covenant of Good Faith and Fair Dealing, but Under New York Law Remaining Claims in Class Action Complaint Fail
Plaintiff, an advertising customer, filed a putative class action against Findwhat.com, an Internet search engine operator, and Advertising.com, an Internet advertising provider, alleging that defendants “engaged in ‘click fraud’ by employing individuals and ‘robot’ computer programs (commonly called ‘bots’) to click on Payday's hyperlinked advertisements and thereby caused Payday to incur inflated charges under its agreement with Findwhat.” Payday Advance Plus, Inc. v. Findwhat.Com, Inc., 478 F.Supp.,2d 496, 499 (S.D.N.Y. 2007). The class action complaint alleged causes of action for breach of contract, unjust enrichment, negligence and conspiracy, as well as two claims based on an alleged joint venture. Id. The defense moved to dismiss the class action complaint for failure to state a claim, id. The district court granted the defense motion as to most of the claims in the complaint, but refused to dismiss the class action claims alleging breach of contract.
Plaintiff contracted with Findwhat to provide Internet advertising services. Findwhat offers advertising services in connection with its Internet search engine, and utilizes a “pay-per-click” formula for charging its customers: “Under this formula, an advertising customer bids on one or more keywords which, when entered into Findwhat's search engine by Internet users, will return a hyperlink . . . to the advertising customer's web site alongside the search results returned by the search engine.” Payday, at 500. Each time an Internet user clicks on a customer’s link, a fee is charged ranging from 50 cents per click to more than $100 per click for “the most sought-after keywords.” Id. Defendant Advertising developed “ClickTracker,” a software program that tracks and measures Internet sales. Id., at 501. According to the class action complaint, Findwhat and Advertising entered into a business relationship to split revenue from their Internet advertising activities, and then conspired to artificially inflate the price of popular keywords. Id. Additionally, plaintiff alleged that Findwhat hired people to click on advertising links in order to increase revenue at the cost of the customer, and that Advertising used computer programs to “click continuously and systematically” on customer links in order to increase revenue. Id.
The class action complaint named only Findwhat as a defendant on the breach of contract claim, and alleged that the Findwhat contract only permitted a charge for “the actual click through advertising from actual consumers” but that Findwhat charged for “advertising and/or services that were not generated from potential consumers, but from individuals, ‘robot’ programs and other software employed by the Defendants solely designed to increase traffic to Plaintiff's website and drive up revenue.” Payday, at 502. Defense attorneys disagreed, arguing that the terms of the contract are not as restrictive as plaintiff claims, id. Under New York law, the court resolved the contract interpretation issue as a matter of law, id. However, plaintiff never signed the contract relied upon by Findwhat and refused to acknowledge that the terms of the unsigned agreement proffered by Findwhat was the “actual agreement of the parties”: “Because there has been no agreement on the language that reflects the contract terms, and because there is a reasonable dispute as to the meaning of the terms relating to the ‘clicks’ for which Payday owed payments, the Court cannot find as a matter of law that the contract is unambiguous.” Id.
Continue reading "Class Action Defense Cases-Payday v. Findwhat.Com: New York Federal Court Grants Defense Motion In Click-Fraud Class Action To Dismiss Unjust Enrichment, Negligence And Civil Conspiracy Claims But Denies Motion As To Breach Of Contract Claim" »