Opinion
24-cv-02760-WHO
12-17-2024
LEVELFIELDS, INC., Plaintiff, v. REDDIT, INC., Defendant.
ORDER GRANTING MOTION TO DISMISS WITH PREJUDICE
RE: DKT. NO. 37
WILLIAM H. ORRICK UNITED STATES DISTRICT JUDGE
In its First Amended Complaint (“FAC”), plaintiff LevelFields, Inc. asserts a sole breach of contract claim against Reddit, Inc. Dkt. No. 34. It alleges that Reddit breached the terms of the parties' contract, the Reddit Ad Platform Agreement (“Agreement”). The breach occurred, according to LevelFields, because Reddit charged it for “clicks” on its advertisements (“ads”) on Reddit's platform advertisements that did not generate traffic on LevelFields' servers. This theory of breach, however, is foreclosed by the unambiguous terms of the Agreement itself. LevelFields' amended breach claim is DISMISSED. As LevelFields was unable to plead around the express terms of the contract, after being given leave to amend on the last round of motion practice, the FAC is dismissed without leave to amend.
The background and facts alleged by plaintiff are discussed in the August 27, 2024 Order (“August Order,” Dkt. No. 32) and are incorporated herein.
In the FAC, LevelFields asserts two theories of express breach of contract. First, “Reddit breached its contracts with Plaintiff and the Class by charging for clicks on pay-per-clicks ads that either did not occur, were not initiated by a user or did not result in a user being taken to the corresponding landing page or comment linked in that ad.” FAC ¶ 41. Second, “[a]dditionally and alternatively, Reddit breached its contracts with Plaintiff and the Class by failing to use reasonable means to ensure that the clicks on ads paid for by Plaintiff and Class members were delivered according to the advertiser's criteria.” Id. ¶ 42.
Both theories fail under the plain, unambiguous language of the Agreement. As an initial matter, in the August Order, I directed LevelFields to identify the particular language in the Agreement it contends that Reddit breached and provide support for its interpretation of the term “deliver ads” to mean “ads that are clicked by users.” August Order at 5. LevelFields' FAC fails to do either.
With respect to the contract provisions LevelFields asserts were breached, it simply cites to Section 3 of the Agreement. That section (“Payments and Orders”) provides in pertinent part:
When you use the Platform to submit an Ad, you will tell us the information required to initiate and target your campaign, which may include the type of advertising you want to buy, the target audience, the maximum amount you want to spend, the start and any end date of your campaign, your objective, and your maximum bid, your daily budget, and total budget. Once your Ad is approved, Reddit will serve the Ad when inventory on the Platform becomes available that matches the criteria associated with your Ad, including your bid. When serving your Ad, Reddit will use reasonable means to ensure that the Ad is delivered according to your criteria, but Reddit does not guarantee in every instance that your Ad will reach users with your selected criteria, reach the users that you intended when you selected the criteria, and/or deliver any specific result. You will pay for your use of the Platform after your Ad is delivered based on Reddit's calculation of amounts due and Reddit's measurement of the applicable billing metrics, such as impressions, views or clicks. Amounts due are exclusive of taxes.
You will not and will not authorize any third party to generate invalid or fraudulent impressions, clicks, or other desired actions with respect to the Platform or to use any unauthorized means to extract advertising or performance-related data from the Platform. You acknowledge that third parties may generate impressions, clicks, or other desired actions with respect to your advertisements for prohibited or improper purposes.
FAC ¶ 16.
LevelFields argues that under these Terms, and because it asked Reddit to bill it based on the “clicks” metric (as opposed to the impressions or views metrics), it should have been charged “only when a user actually clicks on the ad and is taken to the advertiser's website or landing page.” Id. ¶ 19; see also ¶ 23 (“Plaintiff utilized the Reddit Ad Platform to advertise with clickthrough ads, meaning Plaintiff would only pay if and when a user clicked its ads.”). Because LevelFields asserts that it was being “charged for ‘clicks' that did not correspond to traffic on Plaintiff's servers” - without providing any metrics of its own in support, like the frequency or percentage of Reddit's charged clicks that did not correspond to traffic on its servers - LevelFields contends the Agreement was breached. Id. ¶ 25.
In the FAC, LevelFields outlines this theory of breach: “Reddit breached its contracts with Plaintiff and the Class by charging for clicks on pay-per-clicks ads that either [1] did not occur, [2] were not initiated by a user or [3] did not result in a user being taken to the corresponding landing page or comment linked in that ad.” FAC ¶ 41 (as edited). However, in its opposition, LevelFields narrows this theory to the last clause; “Plaintiff is not alleging that Reddit's Ad Server miscalculated the clicks,” instead it is alleging that “Reddit's Ad Server measured the wrong type of ‘click,'” meaning clicks that did not result in traffic measurable on LevelFields' servers. Oppo. at 4-5. It no longer maintains that Reddit is charging for clicks that did not occur or were not initiated by a user. Id.
This narrowed first theory of breach depends upon the Agreement defining chargeable “clicks” as only those that successfully delivered users to LevelFields' site and resulted in measurable traffic to its servers. See id. at 5 (“Reddit all but ignore the obligations imposed on it [in] this provision: (1) that Reddit will use reasonable means to ensure that the Ad is delivered according to [plaintiff's] criteria; and (2) that Plaintiff will pay when an “Ad is delivered.” (emphasis in original). LevelFields, however, points to no support in the Agreement or the other disclosures made by Reddit to advertisers for its definition of deliver. Its definition is implausible in the context of the entire Agreement.
“Deliver” as used in the Agreement refers to the “serving” of the ad by Reddit, according to the criteria selected by the advertiser, and not as the measure of when a “click” will be charged to an advertiser. Section 3 of the Platform Terms, Reddit states:
Reddit will use reasonable means to ensure that your Ad is delivered according to your criteria, but Reddit does not guarantee in every instance that you Ad will reach users with your selected criteria, reach the users that you intend when you selected the criteria, and/or deliver any specific result. You will pay for your use of the Platform after your Ad is delivered based on Reddit's calculation of amounts due and Reddit's measurement of the applicable billing metrics, such as impressions, views or clicks.(Emphasis added). Delivered, as used in the Agreement, refers to Reddit serving an advertiser's ads on Reddit's site to the target audiences or locations according to the criteria advertisers select.
The delivery of those ads according to selected criteria does not support LevelFields' argument; it is a separate promise that Reddit is making to advertisers. There is no support in the contract for LevelFields' position that “clicks” can only result in charges to advertisers when the users actually reach an advertiser's site. That is obvious because Section 3 of the Agreement discusses billing metrics other than “clicks,” including billing based on impressions and views. FAC ¶¶ 17-19 (discussing billing based on impressions versus clicks). Delivery of the ad is step one. There is no allegation that Reddit did not in fact deliver LevelFields' ads according to the criteria LevelFields selected. After delivery comes step two; billing the client according to the client's selected metric - clicks or impressions, or views.
Separate from the term deliver, LevelFields points to no support within the Agreement for its proposed definition of “clicks” to mean only clicks that resulted in actual traffic to LevelFields' sites measurable by LevelFields' servers. Clicks is unambiguous term that simply means, as LevelFields otherwise admits, when a legitimate user or a bot or a fraudster “clicks” on an ad. That is it. Compare Agreement § 3 (“You will not and will not authorize any third party to generate invalid or fraudulent impressions, clicks, or other desired actions with respect to the Platform or to use any unauthorized means to extract advertising or performance-related data from the Platform. You acknowledge that third parties may generate impressions, clicks, or other desired actions with respect to your advertisements for prohibited or improper purposes. Your sole remedy for any prohibited or improper third-party conduct with respect to the Platform is to make a claim for advertising credit within 45 days of the applicable invoice date (the “Claim Period”).” (emphasis added)); with FAC ¶ 10 (“Click-through fraud perpetrators exploit the nature of pay-per-click advertising to increase the pay-per-click fees paid by competitors and boost the placement of their own advertisements. Many of these fraudulent clickers use software programs that automatically click on ads hundreds or thousands of times.” (emphasis added)).
Without support in the Agreement itself, LevelFields turns to extraneous evidence to support its broadened definition of chargeable clicks. It points to an email between a Reddit customer service representative and LevelFields' CEO. FAC ¶¶ 24-25. That email, even if relevant to the disputed meaning of a contract entered into years before, does not support LevelFields.
The parties dispute whether extrinsic evidence - especially extrinsic evidence that postdates the parties entering into the Agreement - is relevant to defining deliver or clicks. I consider the email and LevelFields' arguments in support, although I do not find the Agreement's terms ambiguous. See Skilstaf, Inc. v. CVS Caremark Corp., 669 F.3d 1005, 1015 (9th Cir. 2012) (noting under California law, courts may consider extrinsic evidence to help determine “the context in which the words are written” but also that where a “court decides that the contract is not reasonably susceptible to more than one interpretation, the court can reject the assertion of ambiguity” based on extrinsic evidence).
In response to the CEO's request that Reddit “confirm the definition of a click” the representative responds:
Certainly! Below follows a definition of a click on Reddit;
We track total clicks on your headline area and on your image (if you include one). We do not break out the clicks on individual links within your text based post.
Regarding the Reddit Ads Dashboard, we define clicks as follows:
For link post ads with outbound links, any click that takes a user to your landing page is tracked as a click.
For text post ads, any click that takes a user to your post's comments page is tracked as a click. However, any clicks on Comments are not tracked as clicks.
FAC ¶ 24. The response first confirms that clicks are tracked based on clicking on the ad itself, and not broken out for the “individual links” within the text of the ad that might send users to different parts of an advertiser's site. The response then goes on to highlight the differences between the link post ads, where the links are directed to the advertiser's selected “landing page,” and the text post ads where clicks take users to the advertisers' comments page. Nothing in the email supports a definition of clicks that are chargeable only if they result in measurable activity on an advertiser's site or creates ambiguity in the contract.
Although I do not need to, I note that other provisions in the Agreement support Reddit, including the statement that “Reddit's Ad Server shall be the controlling measurement by which your campaign is billed.” Agreement, § 3. LevelFields does not suggest a plausible theory of how Reddit's Ad Server would be able to know if 1000s or 10000s of clicks each resulted in “measurable” traffic on each advertiser's site in order to bill for those clicks. Relatedly, the Agreement requires advertisers to acknowledge that fraudulent activity might occur and the sole remedy for “any prohibited or improper third-party conduct with respect to the Platform is to make a claim for advertising credit within 45 days of the applicable invoice date (the “Claim Period”).” Id. The Agreement to which LevelFields agreed expressly discloses that fraudulent clicks or impressions might occur and that the remedy for that fraud or mistake is not requiring Reddit to verify that traffic reached an advertisers site before charging for clicks, but the claims process. Singh v. Google Inc., No. 16-CV-03734-BLF, 2017 WL 2404986, at *3 (N.D. Cal. June 2, 2017) (“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.”).
Plaintiff's second theory of breach - that Reddit was not using “reasonable means” to prevent clicks from fraud or otherwise prevent clicks that do not result in traffic to an advertiser's site from being billed - also fails. The “reasonable means” clause quoted above discusses using reasonable means in “serving” and “delivering” ads on the Reddit site according to the criteria an advertiser selects. See Agreement § 3. (“When serving your Ad, Reddit will use reasonable means to ensure that the Ad is delivered according to your criteria, but Reddit does not guarantee in every instance that your Ad will reach users with your selected criteria, reach the users that you intended when you selected the criteria, and/or deliver any specific result. You will pay for your use of the Platform after your Ad is delivered based on Reddit's calculation of amounts due and Reddit's measurement of the applicable billing metrics, such as impressions, views or clicks.” (emphasis added)). LevelFields admits that it is not alleging that Reddit did not use reasonable means to serve LevelFields' ads according to the criteria LevelFields' selected. Oppo. at 8. There is no basis to read into the reasonable means provision something not expressly covered (such as a requirement that Reddit employ some unidentified “reasonable means” to ensure each click results in traffic to an advertiser's website).
The breach of contract claim is DISMISSED. As LevelFields already amended its initial complaint in order to clarify the basis of its breach claim, and the FAC did so but the amended breach of contract claim still fails given the unambiguous language of the Agreement, the dismissal is WITH PREJUDICE.
I need not reach Reddit's other arguments for why the breach claim must be dismissed as a matter of law, including the exclusive claims process remedy and lack of standing.
CONCLUSION
The sole claim for breach of contract is DISMISSED WITH PREJUDICE.
IT IS SO ORDERED.