Opinion
Case No. CV 12-09201 DDP (AJWx)
11-12-2013
AVID LIFE MEDIA, INC., an Ontario corporation; AVID DATING LIFE, INC., an Ontario corporation dba ASHLEY MADISON adn ESTABLISHED MEN, INC., an Ontario corporation, Plaintiffs, v. INFOSTREAM GROUP, INC., dba SeekingArrangement.com and WhatsYourPrice.com, et al. Defendants.
NO JS-6
ORDER GRANTING DEFENDANT'S MOTION
TO DISMISS AND MOTION TO STRIKE
IN PART AND DENYING IN PART AND
GRANTING PLAINTIFFS' MOTION TO
DISMISS FRAUD COUNTERCLAIM
[Dkt Nos. 30, 42, 44]
Presently before the court are Defendant Infostream Group, Inc. ("Infostream") and Lead Wey ("Wey")'s Motion to Dismiss and Special Motion to Strike Plaintiffs' First Amended Complaint ("FAC"), as well as Defendants' Motion to Dismiss Defendants' fraud counterclaim. Having considered the submissions of the parties and heard oral argument, the court grants the motions in part and denies in part, dismisses Plaintiffs' defamation claim and Defendants' fraud counterclaim, and adopts the following order.
I. Background
A. The parties
Plaintiff Avid Dating Life, Inc., doing business as Ashley Madison, operates the online dating website www.ashleymadison.com. (FAC ¶ 4.) Plaintiff Established Men,Inc. ("EMI") operates online dating websites, including www.establishedmen.com and www.arrangementfinders.com. (Id. ¶ 5.) EMI formerly operated www.arrangementseekers.com. (Id.) Plaintiff Avid Life Media, Inc. (collectively with Ashley Madison and EMI,"Avid") owns both Ashley Madison and EMI. (Id. ¶¶ 3-5.)
Ashley Madison was launched in 2002; it is designed to facilitate discreet, extra-marital relationships in an online environment, with the possibility that the online relationship will mature into a physical meeting. (Id. ¶ 18; Declaration of Noel Biderman in Opposition to the Motion to Strike ¶ 6; Declaration of Rizwan Jiwan in Opposition to the Motion to Strike ¶ 4.) The website attracts approximately 72 million United States visitors each year. (FAC ¶ 18.) Avid claims that Ashley Madison has designed and developed, and is the owner of, a famous, non-functional trade dress to promote Ashley Madison on print, Internet, and billboard advertisements throughout the United States. (Id. ¶¶ 19-21.) Specifically, the trade dress depicts a woman with her finger press against her sealed lips (the "Shush Image") (Id. ¶ 20; Biderman Decl. ¶ 7; Jiwan Decl. ¶ 4.) Avid claims that the Shush Image is inherently distinctive and has acquired secondary meaning, and that a substantial segment of the consuming public makes a mental association between the Shush Image and Ashley Madison. (FAC ¶¶ 21, 23.)
EMI's online dating website, www.arrangementfinders.com, is designed to facilitate men and women entering into mutually beneficial "social arrangements." (Id. ¶ 25.) Avid claims that EMI has used the term "Arrangement Finders" as a source identifier and as a trademark in connection with its services and website since 2011. (Id.)
Defendant Infostream Group, Inc. operates dating websites, including seekingarrangement.com and whatsyourprice.com. (Id. ¶6.) Defendant Lead Wey, also known as, Brandon Wade, (collectively with Infostream Group, "Infostream") is the founder and CEO of Infostream Group. (Id. at ¶ 7.) Infostream owns the registered trademarks "Seeking Arrangement" and "Mutually Beneficial Relationships" in the United States and uses those marks in connection with its services and websites. (See Settlement Agreement, Mot. to Dismiss, Ex. A.) Infostream launched seekingarrangement.com in 2006 to promote "mutually beneficial relationships" between members who are referred to as either sugar daddies, sugar mommies, or sugar babies. (FAC ¶ 26.) In 2011, Infostream launched whatsyourprice.com, which allows its members to buy and sell the opportunity of going out on a first date. (Id.)
B. Prior Litigation and the Settlement Agreement
In 2010, Infostream sued Avid in the United States District Court for the Central District of California for, among other things, trademark infringement, trademark dilution, and unfair competition based on Avid's alleged use of Infostream's "Seeking Arrangement"and "Mutually Beneficial Relationships" marks. (See generally No.CV 10-05166 VBF (FMO)). Avid filed counterclaims for cancellation of trademark and a separate actiona gainst Infostream in Canada for breach of contract. (SAC ¶ 40). The parties ultimately dismissed all claims against each other, pursuant to a written settlement agreement (the "Agreement" or "Settlement Agreement").
Under the Settlement Agreement, neither party admitted any liability, obligation, misconduct, or wrongdoing of any kind in connection with the underlying claims. (Id. ¶ 10.) The Settlement Agreement further stated that the parties denied and contested the claims and that the parties entered into the Settlement Agreement "entirely as a compromise for the purpose of settlement of the disputes . . . , to avoid the annoyance and expense of disputation or litigation and to compromise, settle and extinguish all claims, acts, damages, demands, rights of action and causes of action." (Id.)
The Agreement provided that Avid would pay Infostream sixty thousand dollars. (Id. ¶ 2.) Avid further agreed not to challenge the validity of Infostream's "Seeking Arrangement" mark or the "Mutually Beneficial Relationships" mark "so long as those marks are used only within the 'Sugar Daddy' vertical market." (Id. ¶ 1.) Avid also agreed to discontinue using the terms "'ArrangementSeekers' (or an iteration or confusing similar combination of the words 'arrangement' and 'seek') and 'Mutually Beneficial Relationship' in any manner." (Id. ¶ 2.) Avid further covenanted to transfer the domains "arrangementseekers.com" and"arrangementseekers.net" to Infostream. (Id. ¶ 2.) The Parties expressly agreed that "(1) the name 'Arrangement Finders' shall serve as a suitable alternative which does not infringe upon the Seeking Arrangement Mark; and (2) the term 'Mutually Beneficial Arrangements' shall serve as a suitable alternative which does not infringe upon the Mutually Beneficial Relationships Mark." (Id.)
Infostream, for its part, agreed to discontinue using "any of [Avid]'s Intellectual property including . . . brand images, trademarks (including, without limitation the Ashley Madison Mark .. . , Established Men, confusingly similar website layouts, and/or trade dress . . . ." (Id. ¶ 3.)
As defined by the Agreement, the term "using" was to have "the broadest interpretation possible," and included any commercial use of prohibited terms. "Using" also included, but was not limited to, imitating and copying prohibited terms, employing prohibited terms as meta-tags or in keyword stuffing, and advertising, e.g., through Google Adwords, with the prohibited terms. (Id. ¶ 4.) The Agreement included a further, catch-all definition of "using" as "engaging in any other activity constitution an infringement of the other Party's intellectual property rights." (Id. ¶ 4(f).) The Parties also mutually agreed to "cease and desist from making public disparaging comments about each other's businesses, reputations, websites or services" and not to "defame or imply negative information via internet, in person or [] through any other media and digital media means." (Id. ¶ 5.)
Avid maintains that the Settlement Agreement is confidential. (FAC ¶ 35.) The Settlement Agreement does not contain a confidentiality or non-disclosure provision, but does include preambulatory language stating, "THIS CONFIDENTIAL AGREEMENT (the"Agreement) is made" by and between Infostream and AvId. (DE 44-1at 1.) In addition, the Settlement Agreement further states that "[t]he terms of the mutual release . . . shall not affect or in any way alter the parties' rights, obligations, covenants, promises or interests created under or pursuant to this Agreement (including in particular, but without limitation, any obligation to . . . keep confidential this Agreement or the terms thereof) . . . ." (Id. ¶8.)
C. Alleged Breaches
Avid alleges that Infostream breached the Settlement Agreement by displaying Ashley Madison's trade dress, specifically the Shush Image, on the seekingarrangement.com website, and by repeating and publicizing that website through the press. (FAC ¶¶ 37, 38 and Ex."B.")
Avid also alleges that Infostream breached the Settlement Agreement by displaying and bidding on Avid's intellectual property in internet advertising. (Id. ¶ 39.) For example, the FAC alleges that a Google search for Avid's term "arrangementfinders" resulted in the display of a paid advertisement for Infostream's www.seekingarrangement.com website. (Id.) Avid alleges that the use of Avid's "arrangement finders" intellectual property is likely to create a false impression that seekingarrangement.com is affiliated with Avid. (Id.)
The FAC further alleges that Infostream breached its obligations under the Settlement Agreement by disclosing the terms of the Settlement Agreement and making disparaging and negative statements about Avid in a separate lawsuit against PayPal, Inc. (Id. ¶¶ 40-43.) Avid alleges that Infostream falsely accused Avid of running the same types of businesses as Infostream, engaging in illegal conduct, forming an anti-competitive economic relationship with PayPal, and facilitating antitrust violations. (Id. ¶¶ 41-43.) Avid also alleges that Infostream further breached the Settlement Agreement by actively disseminating its statements and implications made in the PayPal litigation to the press and other non-participants in the PayPal litigation via the Internet, in person, or through media or digital means. (Id. ¶¶ 44-47.)
The FAC also alleges that Defendant Wey gave an interview, subsequently posted online, in which he stated that "[Infostream] ha[s] sued a huge company, Ashley Madison, in federal court for infringing on our trademark. The fact that we are building such a brand implies that we need to protect it. We are successful in stopping them from using a website that was too similar to ours." (Id. ¶ 51.)
Avid alleges that it gave notice to Infostream demanding that Infostream cure the breach pursuant to paragraph 15 of the Settlement Agreement. Infostream did not respond to the demand. (Id. ¶ 50.) Avid then filed the instant action, which asserts claims against Infostream for (1) breach of written contract, (2)defamation, and (3) declaratory relief. Infostream now moves to dismiss, and to strike pursuant to California's Anti-SLAPP statute.
II. Legal Standard
A complaint will survive a motion to dismiss when 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) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). When considering a Rule 12(b)(6) motion, a court must "accept as true all allegations of material fact and must construe those facts in the light most favorable to the plaintiff." Resnick v. Hayes, 213 F.3d 443, 447 (9th Cir. 2000). Although a complaint need not include "detailed factual allegations," it must offer"more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Iqbal, 556 U.S. at 678. Conclusory allegations or allegations that are no more than a statement of a legal conclusion "are not entitled to the assumption of truth." Id. at 679. In other words, a pleading that merely offers "labels and conclusions," a "formulaic recitation of the elements," or "naked assertions" will not be sufficient to state a claim upon which relief can be granted. Id. at 678 (citations and internalquotation marks omitted).
"When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement of relief." Id. at 679. Plaintiffs must allege "plausible grounds to infer" that their claims rise"above the speculative level." Twombly, 550 U.S. at 555. "Determining whether a complaint states a plausible claim for relief" is a "context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Iqbal, 556 U.S. at 679.
III. Discussion
A. Breach of Contract Claim
1. Performance
The elements of a cause of action for breach of contract are 1) the existence of a contract, 2) plaintiff's performance or excuse for nonperformance, 3) defendant's breach, and 4) damages. Reichert v. Gen. Ins. Co. of Am., 68 Cal.2d 822, 830 (1968). The FAC alleges that Avid performed all conditions under the Agreement, except those excused by Infostream's conduct. (SAC ¶ 57.) Infostream argues that Avid's averments of performance are insufficient. (Reply at 3.)
"[T]his court need not accept as true conclusory allegations that are contradicted by documents referred to in the complaint." Colony Cove Properties, LLC v. City of Carson, 640 F.3d 948, 955 (9th Cir. 2011). Infostream points to a variety of documents that, it argues, establish that Avid failed to perform its obligations under the Agreements. First, Infostream cites to Exhibits A and B of the FAC. Exhibits A and B are Avid's and Infostream's respective uses of an image of a woman holding her index finger to her pursed lips (i.e., the Shush Image). The FAC alleges that the Shush image is Avid's trade dress. (FAC ¶ 20).
Rather than accept that allegation as true, Infostream argues that it is the owner of the Shush Image trade dress. (Mot. at 12.) It is unclear to the court, however, how Exhibit B, which Avid alleges to be Infostream's infringing use of the Shush Image, contradicts Avid's allegation of trade dress ownership. Infostream attempts to bolster its argument by asking this court to take judicial notice of a more or less identical image pulled from an Infostream website in 2006. The mere fact that an image was displayed on a website at a certain time, however, cannot conclusively establish ownership of the trade dress one way or another. While the disputed fact of ownership may or may not be resolvable on summary judgment, it cannot be determined at this stage.
Infostream also attempts to establish Avid's nonperformance by requesting judicial notice of other documents. Specifically, Infostream asks that this court take notice of its own Second Amended Complaint in a related case, No. CV 12-9315 (DDP), briefs filed in that related case, and several screenshots of search results taken from various websites at various times. (RJN at 3-4.)
As an initial matter, arguments made by Avid's counsel in support of a motion to dismiss in the related case, wherein Avid was required to accept Infostream's allegations as true, do not constitute admissions. See Shiley, Inc. v. Bentley Labs., Inc., 115 F.R.D. 169, 171 (C.D. Cal. 1987). Furthermore, the search engine results, which purportedly demonstrate Avid ads resulting from a search for Infostream marks, do not necessarily establish that Avid breached the Agreement by purchasing Infostream marks as keywords. In the absence of any documents clearly contradicting Avid's allegations of performance, those allegations are entitled to the presumption of truth.
The court also notes that when asked whether the FAC alleges that Avid performed for at least some period subsequent to the signing of the Agreement, Defendants' counsel responded that the answer involves an issue of fact.
2. Breach
Infostream further argues that the FAC fails to adequately allege that Infostream breached the Settlement Agreement.
a. Nondisparagement
i. The Paypal Litigation
In the Settlement Agreement, the parties agreed to "cease and desist from making public disparaging comments about each other's businesses, reputations, websites or services" and not to "defame or imply negative information via internet, in person or [] through any other media and digital media means." The FAC alleges that Infostream breached this nondisparagement clause. In a suit against PayPal, to which Avid was not a party, Infostream alleged in its pleadings that Avid, among other things, engaged in anticompetitive behavior. The FAC also alleges that Infostream repeated comments suggesting that Avid facilitates prostitution, that Infostream disseminated these disparaging statements to the press in person, on the internet, and on the radio. (FAC ¶¶ 40-46, Opp. At 9.)
Infostream argues that its statements related to the PayPal action are protected by the litigation privilege. California's litigation privilege applies to communications "(1) made in judicial or quasi-judicial proceedings; (2) by litigants or other participants authorized by law; (3) to achieve the objects of the litigation; and (4) that have some connection or logical relation to the action." Wentland v. Wass, 126 Cal.App.4th 1484, 1490 (2005); Cal. Civil Code § 47(b). While communications to news media are not necessarily protected, publication of statements outside the courtroom may be privileged to the extent they discuss the pendency of the litigation. See Epicor Sofware Corp. V. Alternative Tech. Solutions, Inc., No. SACV 13-448-CJC, 2013 WL 3930545 at *5 (C.D. Cal. June 21, 2013). Parties may, however, waive the protections of the privilege by contract. Wentland, 126 Cal.App.4th at 1494.
This is not to say that the privilege immunizes all communication made in relation to litigation, nor that contractual language will always trump the litigation privilege. See Id. ("The litigation privilege has never shielded one from all liability."); T.T. ex rel. Susan T. v. County of Marin, No. C. 12- 2349 WHA, 2013 WL 308908 at *5 (N.D. Cal. Jan. 25, 2013) ("Where the communication at issue is a separate promise independent of the litigation . . . the litigation privilege may not apply."); Zopatti v. Rancho Dorado Homeowners Assoc., No. 10CV10 91 DMS, 2010 WL 5174534 at *3 (S.D. Cal. Dec. 15, 2010) (finding litigation privilege inapplicable to breach of contract claim). Rather, "whether the litigation privilege applies to an action for breach of contract turns on whether its application furthers the policies underlying the privilege." Wentland, 126 Cal.App.4th at 1492. These policies include the promotion of full and truthful testimony, zealous advocacy, free access to the courts, and the finality of judgments. Id.
Here, to immunize Infostream's disparaging statements would not further the policies underlying the litigation privilege. The language of the Settlement Agreement makes clear that the parties intended it be comprehensive, releasing each other from all claims "known and unknown, accrued or unaccrued, of every nature and kind whatsover . . . arising from or in any way connected with any events, facts, or circumstances . . . pertaining to those events, facts or circumstances alleged (or which could have been alleged in)" the prior litigation. (Agreement at 4 ¶ 7.) Nevertheless, less than four months after entering into the Agreement, Infostream proceeded to make disparaging remarks regarding alleged acts committed by Avid prior to the Agreenent's recent execution. To insulate these statements with the litigation privilege would render the Agreement largely meaningless, would ignore the comprehensive language therein, and would hardly promote the finality of the judgment resulting therefrom. Further, Infostream does not adequately explain how its explicit references to Avid were necessary to or aided its efforts against PayPal. Because application of the litigation privilege here would frustrate rather than further its underlying policies, Avid's breach of contract claim is not barred.
ii. The Wey Interview
In a seven-page interview posted to an internet website, Defendant Lead Wey said, "[Infostream] ha[s] sued a huge company, Ashley Madison, in federal court for infringing on our trademark. The fact that we are building such a brand implies that we need to protect it. We are successful in stopping them from using a website that was too similar to ours." The FAC alleges that these statements also constituted a breach of the Agreement's non-disparagement provision. (FAC ¶ 51.) Though Infostream argues that the FAC insufficiently pleads breach, it focuses its argument on the statements related to the PayPal litigation, with no discussion of Avid's allegations that Wey's interview statements also constituted a breach of the Agreement. Instead, Infostream discusses Wey's statements in the context of Avid's Second Cause of Action for defamation, discussed below.
b. Confidentiality
The FAC alleges that Infostream breached its confidentiality obligations under the Agreement. (FAC ¶ 60.) Infostream's Motion contends that the Agreement is not confidential, pointing to the lack of any confidentiality provision. Avid's opposition does not address the confidentiality issue or oppose Infostream's motion to dismiss the confidentiality claim. Accordingly, Avid's claim for breach of contract based on breach of confidentiality is dismissed.
c. Use of Keywords
Infostream also argues that the FAC does not sufficiently allege breach based on Infostream's alleged use of Avid's intellectual property in keyword advertising. (Mot. At 17.) Infostream argues that such claims must be supported by screenshots of advertisements appearing when users search for a protected mark. (Id.) Infostream is mistaken. While some plausible claim of consumer confusion is necessary to maintain a claim for trademark infringement, Avid brings no such claims here. See Network Automation Inc. v. Advanced Sys. Concepts, Inc., 638 F.3d 1137,1153 (9th Cir. 2011). Avid's claim for breach of the Agreement's non-use provisions is adequately pled.
d. Trade Dress
Lastly, Infostream argues that Avid's breach of contract claim based on Infostream's alleged use of Avid's Shush Image trade dress must be dismissed because Infostream owns the trade dress. As explained above, absent any documents conclusively contradicting Avid's ownership claim, this court must accept all of Avid's allegations as true.
For these reasons, Infostream's Motion to Dismiss the breach of contract claim is denied, in substantial part. The motion is granted, however, with respect to Avid's claim based upon breach of confidentiality, which is dismissed.
B. Defamation Claim
As described above, Wey gave an interview in which he stated, "[Infostream] ha[s] sued a huge company, Ashley Madison, in federal court for infringing on our trademark. The fact that we are building such a brand implies that we need to protect it. We were successful in stopping them from using a website that was too similar to ours." Avid alleges that this statement is defamatory.
Defamation involves the intentional publication of a false, unprivileged, injurious statement. Smith v. Maldonado, 72 Cal.App.4th 637, 645 (1999). Truth of the allegedly defamatory statement is, therefore, a complete defense. Harrel v. George, No. CIV S-55-036 MCE DAD, 2012 WL 3647941 at *9 (E.D. Cal. Aug. 22, 2012). "[I]t is sufficient if the defendant proves true the substance of the charge, irrespective of slight inaccuracy in the details, so long as the imputation is substantially true so as to justify the gist or sting of the remark." Id. (internal quotations and citations omitted). A statement is not substantially true, however, if it would have a different effect on the mind of the audience from that which the pleaded truth would have produced. Masson v. New Yorker Magazine, Inc., 504 U.S. 496, 517 (1991); Metabolife Int'l, Inc. v. Wornick, 264 F. 3d 832, 849 (9th Cir. 2001).
The FAC alleges that "Defendants were not successful in any litigation with Ashley Madison for infringing Defendants' trademark and Defendants were not successful in any litigation with Ashley Madison by stopping Ashley Madison from 'using a website that was too similar to' Defendants website." (FAC ¶ 69.) The crux of Avid's defamation claim, therefore, is Wey's statement that, "We were successful in stopping [Ashley Madison] from using a website that was too similar to ours."
Avid argues that a true statement would have read something like, "Infostream sued Avid Life Media, Ashley Madison, and EMI in federal court for trademark infringement, and they settled the lawsuit where the parties each received benefits and had obligations. Included in the settlement was the transfer of certain domains from EMI." (Opp. at 21.) While Wey did not explicitly mention the settlement, nor did he, as Avid would suggest, state that Infostream was successful in its litigation against Ashley Madison. Rather, Wey stated that Infostream stopped Ashley Madison from using a website similar to Infostream's.
Avid argues that Infostream only stopped EMI, not Ashley Madison, from using a website. (Opp. at 18.) That characterization, however, is not entirely accurate. "Ashley Madison" is the business name of Plaintiff Avid Dating Life, Inc. The Settlement Agreement states that Avid Dating Life, Inc., Avid Life Media Inc., and EMI may collectively be referred to as the "Avid Parties." Under the Agreement, the "Avid Parties," which includes both EMI and Ashley Madison, agreed to assign all rights to arrangementseekers.com and arrangementseekers.net to Infostream. Thus, while the Agreement may not have stopped Ashley Madison from using certain websites in the sense of forcing Ashley Madison to cease current operations, it did prevent Ashley Madison from prospectively using the websites at issue. Under such circumstances, any slight inaccuracies in Wey's statements regarding the distinction between EMI and Ashley Madison did not produce a different effect than a more precise statement would have. Because Wey's statement was substantially true, Avid's defamation claim must be dismissed.
C. Declaratory Judgment Claim
Because Avid's breach of contract claim will resolve all claims regarding the contract and may provide Avid with the relief it seeks with respect thereto, Avid's claim for a declaratory judgment is dismissed. See Streamcast Networks, Inc. v. IBIS LLC, No. CV 05-4239 MMM, 2006 WL 5720345 at *3-4 (C.D. Cal. May 2, 2006).
D. Anti-SLAPP
The court does not separately address the arguments raised with respect to Defendants' anti-SLAPP Special Motion to Strike because the outcome would be the same as under the Rule 12(b)(6) analysis. A motion to dismiss and an anti-SLAPP motion may be, but are not necessarily, intertwined. Hilton v. Hallmark Cards, 599 F.3d 894, 902 (9th Cir. 2010)1; See, e.g., Davis v. Electronic Arts Inc., No. 10-3328 RS, 2012 WL 3860819 (N.D. Cal. Mar. 29, 2012). Under California Code of Civil Procedure Section 425.16, a defendant must first make a showing that the plaintiff's suit arises from some protected activity. Zamani v. Carnes, 491 F.3d 990, 994 (9th Cir. 2007). Once defendant makes such a showing, the burden shifts to the plaintiff to make a prima facie case that he will prevail. Id.
Here, the facts and arguments at issue in the two motions overlap almost completely. Even assuming that all of Avid's claims arise from Infostream's protected activities, Avid has demonstrated a likelihood of prevailing on the contract claim, but not on the defamation claim, for the reasons stated above.
E. Fraud Counterclaim
Infostream also brings a counterclaim for fraud against AvId. Infostream alleges that in the course of the settlement negotiations that ultimately led to the Agreement, Avid misrepresented its earnings. But for those misrepresentations, Infostream alleges, Infostream would have required a larger financial payment from AvId.
As discussed above, the Agreement includes a mutual release from "any and all claims . . ., known or unknown, accrued or unaccrued, of every nature and kind whatsover, which they or any of them ever had . . . or may in the future have . . . arising from or in any way connected with any events . . . through the present . . ." (Agreement ¶ 7.) The parties also expressly agreed to waive any undiscovered claims and any rights under California Civil Code Section 1542, which otherwise excepts undiscovered claims from general releases. The Agreement further states that it "represents the entire understanding of the parties with respect to its subject matter and supersedes all previous representations," and that the parties each "had the opportunity to seek the benefit of independent legal counsel . . . regarding the substance of this Agreement." (Id. ¶¶ 11, 19.) Both parties were represented by counsel. (Id. ¶ 18.)
"The elements of a fraud claim are false representation, knowledge of falsity, intent to defraud, justifiable reliance, and damages." City of Oceanside v. AELD, LLC, 740 F.Supp.2d 1183, 1191 (S.D. Cal. 2010). Avid argues that Infostream could not have justifiably relied on any alleged misrepresentations regarding Avid's earnings in light of the Agreement's specific language superseding all prior representations and releasing Avid from all claims of any nature whatsoever, including undiscovered claims.
This court agrees with Avid, and with those courts that have held that express written language contradicting alleged oral misrepresentations precludes a showing of justifiable reliance, particularly where a reasonably diligent party could have ascertained the truth. See Omni Home Financing, Inc. v. Hartford Life and Annuity Insurance Co., No. 06cv0921 IEG, 2008 WL 1985248 at *4-5 (S.D. Cal. Apr. 29, 2008). This is particularly so where the written provisions at issue are contained in a global settlement agreement between sophisticated parties, which "cannot reasonably be interpreted as leaving the door open to litigation about the settlement negotiation process." Facebook, Inc. v. Pacific Northwest Software, Inc., 640 F.3d 1034, 140 (9th Cir. 2011); See also Facebook, Inc. v. ConnectU, Inc., No. C 07-1389 JW, 2008 WL 8820476 at *5 (N.D. Cal. June 25, 2008) ("Where a party is represented by counsel, or where the alleged misrepresentation was made by an adversary during the course of negotiations, courts have held that reliance is unjustifiable."); Salehi v. Surfside III Condominium Owners' Ass'n., 200 Cal.App.4th 1146, 1160 (2011). In light of the all-encompassing language of the Settlement Agreement, which was drafted by counsel in the course of adversarial litigation, Infostream cannot demonstrate justifiable reliance on misrepresentations made during settlement negotiations. Infostream's fraud counterclaim is dismissed with prejudice.
IV. Conclusion
For the reasons stated above, Defendants' Motion to Dismiss and Motion to Strike are GRANTED, in part, and DENIED, in part. Plaintiffs' breach of contract claim is DISMISSED only with respect to breach of confidentiality. Plaintiffs' defamation claim, however, is DISMISSED in its entirety, with prejudice. Defendants' fraud counterclaim is also DISMISSED with prejudice. IT IS SO ORDERED.
DEAN D. PREGERSON
United States District Judge