Coffee v. Google LLC

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5 UNITED STATES DISTRICT COURT

6 NORTHERN DISTRICT OF CALIFORNIA

7 SAN JOSE DIVISION

8

JOHN COFFEE, MEI-LING MONTANEZ,

9 AND S.M., a minor by MEI-LING Case No. 20-cv-03901-BLF

MONTANEZ, S.M.’S parent and guardian,

10 on behalf of themselves and all others ORDER GRANTING MOTION TO

similarly situated, DISMISS COMPLAINT WITH LEAVE

11 TO AMEND

Plaintiffs,

12

v. [Re: ECF 17]

13

GOOGLE, LLC,

14

Defendant.

15

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17 In this putative nationwide class action, Plaintiffs allege that Loot Boxes – a feature of

18 certain video games – constitute illegal “slot machines or devices” under California’s gambling

19 laws. Compl. ¶ 7, ECF 1. Loot Boxes may be purchased during game play, using virtual

20 currency. Each Loot Box offers a randomized chance at receiving an item designed to enhance

21 game play, such as a better weapon, faster car, or more desirable player appearance (“skin”).

22 Plaintiffs characterize buying a Loot Box as “a gamble, because the player does not know what the

23 Loot Box actually contains until it is opened.” Compl. ¶ 4.

24 Defendant Google, LLC operates the Google Play store from which software applications

25 (“apps”), including video games containing Loot Boxes, may be downloaded. Google does not

26 create the video game apps or Loot Boxes. Plaintiffs nonetheless allege that Google violates state

27 consumer protection laws by offering video games containing Loot Boxes in its Google Play store

1 Google moves to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6),

2 arguing that it is immune from liability under Section 230 of the Communications Decency Act of

3 1996 (“CDA”), 47 U.S.C. § 230; Plaintiffs’ core premise that Loot Boxes are illegal under

4 California’s gambling laws lacks merit; and Plaintiffs have not alleged essential elements of their

5 claims. Plaintiffs oppose dismissal. The Court has considered the briefing, oral argument, and

6 relevant legal authorities.

7 The motion to dismiss is GRANTED WITH LEAVE TO AMEND.

8 I. BACKGROUND

9 Plaintiffs are John Coffee (“Coffee”), Mei-Ling Montanez (“Montanez”), and Montanez’s

10 minor son, S.M. Coffee is a citizen and resident of California, while Montanez and S.M. are

11 citizens and residents of New York. Compl. ¶¶ 14-16, ECF 1. Although the complaint describes

12 numerous video games, only two are identified as having been downloaded from the Google Play

13 store by Plaintiffs. Coffee downloaded Final Fantasy Brave Exvius (“Final Fantasy”) from the

14 Google Play store onto his Android mobile device in 2018. Compl. ¶ 14. S.M. downloaded

15 Dragon Ball Z Dokkan Battle (“Dragon Ball Z”) from the Google Play store onto a Samsung

16 smartphone in 2019. Compl. ¶ 16.

17 Final Fantasy, the app downloaded by Coffee, is a free “role-playing game where players

18 command their characters to attack and move through a series of stages until they encounter and

19 defeat the boss.” Compl. ¶ 66. Within the game, virtual currency called “Lapis Crystals” may be

20 used to “summon” a single, randomized character. Compl. ¶ 67. “Summons are the in-game Loot

21 Boxes that offer random rewards and characters.” Id. “The best characters are the most rare and

22 difficult to get in the summons.” Id. Players may obtain the Lapis Crystals necessary to buy a

23 summons either as a reward for game play or by purchasing them with real money. Compl. ¶¶ 13,

24 67-68. Coffee allegedly was “induced to spend money to purchase ‘Loot Boxes’ in-game” while

25 playing Final Fantasy and other video games. Compl. ¶ 14. “Coffee estimates he has spent in

26 excess of $500 on in-game Loot Boxes.” Id.

27 Dragon Ball Z, the app downloaded by S.M., “is a free-to-play mobile game based on the

1 levels that work similarly to board games, with spots dedicated to items, power-ups, traps, and

2 fights.” Compl. ¶ 73. “Gamers can unlock new characters with ‘Summons,’ which are the in-

3 game Loot Boxes that offer random rewards and characters.” Id. “The best characters are most

4 rare and difficult to get in the Summons.” Id. Players must use virtual currency called “dragon

5 stones” to purchase summons. Id. Dragon stones may be earned through game play or purchased

6 with real money. Compl. ¶ 74. S.M. allegedly “has been induced to spend his parents’ money to

7 purchase ‘Loot Boxes’ in-game” while playing Dragon Ball Z. Compl. ¶ 17. “Montanez

8 estimates S.M. has spent more than $100 on in-game purchases including Loot Boxes.” Compl. ¶

9 18.

10 “Google does not itself create these games and the Loot Box mechanism.” Compl. ¶ 13.

11 Most of the video games available for download from the Google Play store are free, including the

12 two apps downloaded by Plaintiffs. Compl. ¶¶ 24, 66, 72. Plaintiffs allege that Google

13 nonetheless profits from apps containing Loot Boxes because “[p]ayment for the Apps, including

14 all in-game purchases after the game is downloaded by the consumer (e.g., Loot Boxes), is

15 controlled entirely by Google.” Compl. ¶ 28. Plaintiffs allege that payments for in-game

16 purchases are made “[u]sing Google Play’s payment system, the payments go directly to Google

17 and, after Google takes its 30% of the total, the remainder is distributed to the App developer.” Id.

18 Thus, according to Plaintiffs, “for every Loot Box sale in a game downloaded from the Google

19 Play store, Google receives 30% of the revenue before the developer gets any money at all.” Id.

20 These and other allegations suggest that players buy Loot Boxes directly from Google with

21 real money. See, e.g., Compl. ¶ 4 (“Loot Boxes are purchased using real money”). However, the

22 complaint makes clear that Loot Boxes may be purchased only in-game, and only with virtual

23 currency. See Compl. ¶¶ 67 (alleging that in Final Fantasy a summons must be purchased with

24 virtual currency called Lapis Crystals), 73 (alleging that in Dragon Ball Z “Summons can only be

25 purchased with the in-game currency, called ‘dragon stones’”). Reading the complaint as a whole,

26 the Court understands Plaintiffs to allege that players may use Google Play’s payment system to

27 buy virtual currency from an app developer; Google takes a 30% commission and transmits the

1 for in-app purchases of items such as Loot Boxes. See Compl. ¶¶ 26-28, 67, 73.

2 Plaintiffs assert that “Google’s predatory Loot Box scheme” entices consumers, including

3 children, to engage in gambling and similar addictive conduct. Compl. ¶¶ 1, 18. According to

4 Plaintiffs, “Loot Boxes have all the hallmarks of a Las Vegas-style slot machine, including the

5 psychological aspects to encourage and create addiction – especially among adolescents.” Compl.

6 ¶ 7. In fact, Plaintiffs assert that under California law Loot Boxes “constitute illegal ‘slot

7 machines or devices’ when played on a mobile phone, tablet, computer, or other similar device.”

8 Id. Plaintiffs allege that “Governments, regulators, and psychologists all agree that Loot Boxes,

9 like the ones in games Defendant offers through its Google Play store, operate as gambling

10 devices for those that play the game, including minors, and that they create and reinforce addictive

11 behaviors.” Compl. ¶ 8. Comparing Google’s conduct to the “Joe Camel” advertising campaign,

12 Plaintiffs contend that “Google relies on creating addictive behaviors in kids to generate huge

13 profits for the Company.” Compl. ¶ 2.

14 Plaintiffs assert three state law claims against Google: (1) unlawful and unfair business

15 practices in violation of California’s Unfair Competition Law (“UCL”), Cal. Bus. & Prof. Code §

16 17200, et seq.; (2) unfair and deceptive acts and practices in violation of California’s Consumers

17 Legal Remedies Act (“CLRA”), Cal. Civ. Code § 1750, et seq.; and (3) unjust enrichment under

18 unspecified state law. Google seeks dismissal of all three claims under Rule 12(b)(6).

19 II. LEGAL STANDARD

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

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

22 v. Salazar, 646 F.3d 1240, 1241-42 (9th Cir. 2011) (quotation marks and citation omitted). While

23 a complaint need not contain detailed factual allegations, it “must contain sufficient factual matter,

24 accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556

25 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is

26 facially plausible when it “allows the court to draw the reasonable inference that the defendant is

27 liable for the misconduct alleged.” Id. When evaluating a Rule 12(b)(6) motion, the district court

1 reference, and matters which are subject to judicial notice. See Louisiana Mun. Police Employees’

2 Ret. Sys. v. Wynn, 829 F.3d 1048, 1063 (9th Cir. 2016) (citing Tellabs, Inc. v. Makor Issues &

3 Rights, Ltd., 551 U.S. 308, 322 (2007)).

4 III. DISCUSSION

5 Google disputes Plaintiffs’ characterization of Loot Boxes as illegal slot machines or

6 devices under California’s gambling laws. However, Google argues that the Court need not reach

7 the legality of Loot Boxes in order to grant the motion to dismiss, because Google is immune from

8 liability under Section 230 of the CDA. Google also asserts that Plaintiffs have not alleged

9 essential elements of their claims. In opposition, Plaintiffs argue that Google is not immune from

10 liability under the CDA, that Loot Boxes constitute illegal slot machines or devices under

11 California law, and that all claims in the complaint are adequately alleged.

12 At the hearing, the Court indicated that it would dismiss the complaint on immunity

13 grounds under Section 230 of the CDA, with leave to amend, and that it might defer to a later

14 stage of the proceedings the question of whether Loot Boxes constitute illegal gambling devices.

15 That question presents several thorny issues, the resolution of which could have a profound impact

16 on video games, developers, and players. The Court concludes that it would be imprudent to

17 address those issues on the scant record before it, particularly when all claims in the complaint are

18 subject to dismissal on other grounds. For purposes of the present motion, it is unnecessary to

19 determine whether Loot Boxes are illegal slot machines or devices under California’s gambling

20 laws.1

21 Accordingly, the Court limits its evaluation of the motion to Google’s arguments that it is

22 entitled to immunity under the CDA and that Plaintiffs have not alleged essential elements of their

23 claims. Before taking up those arguments, however, the Court addresses the parties’ requests for

24 judicial notice.

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1 The Court’s decision to defer consideration of issues relating to Loot Boxes’ alleged illegality

does not preclude Plaintiffs from amending their allegations regarding illegality, with the caveat

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that Plaintiffs may not add new claims or parties absent prior leave of the Court. At the hearing,

1 A. Judicial Notice

2 Under Federal Rule of Evidence 201(b), the Court can take judicial notice of any fact that

3 is “not subject to reasonable dispute because it . . . can be accurately and readily determined from

4 sources whose accuracy cannot reasonably be questioned.” Fed. R. Evid. 201(b). Both parties

5 request that the Court take judicial notice of certain of Google’s terms of service.

6 1. Google’s Request

7 Google asks the Court to take judicial notice of the Google Play Terms of Service, and in

8 particular language prohibiting the sale or transfer of game content. See Michaud Decl. Ex. A

9 (Google Play Terms of Service) § 4 (Rights and Restrictions), ECF 17-2. Google offers this

10 language in response to Plaintiffs’ allegation that high-demand Loot Box items may be considered

11 so valuable that they are bought and sold outside the game in a “gray market.” See Compl. ¶ 6.

12 Plaintiffs oppose Google’s request for judicial notice, arguing that Google is asking the Court to

13 accept the Google Play Terms of Service as proof that gamers cannot sell Loot Box items outside

14 the game. Plaintiffs argue that Google is relying on the document to prove the truth of the matters

15 asserted therein, which is not an appropriate use of judicial notice. Plaintiffs dispute Google’s

16 assertion that the Google Play Terms of Service are incorporated by reference into the complaint,

17 pointing out that Google cites to a paragraph of the complaint mentioning the Google Terms of

18 Service, not the Google Play Terms of Service. See Compl. ¶ 22. In reply, Google asserts that it

19 does not rely on the Google Play Terms of Service to prove that players do not trade game items in

20 a gray market, but it does seek to show that such trading is prohibited under the governing terms

21 of service.

22 Other courts in this district have found it appropriate to take judicial notice of Google’s

23 public terms of service. See Matera v. Google Inc., No. 15-CV-04062-LHK, 2016 WL 8200619,

24 at *5 (N.D. Cal. Aug. 12, 2016). Plaintiffs do not dispute the authenticity or accuracy of the copy

25 of the Google Play Terms of Service submitted to the Court. Accordingly, Google’s request for

26 judicial notice as to the existence and contents of the Google Play Terms of Service is

27 GRANTED.

1 2. Plaintiffs’ Request

2 Plaintiffs request judicial notice of the Google Terms of Service. Specifically, Plaintiffs

3 ask the Court to take notice of language providing that “California law will govern all disputes

4 arising out of or relating to these terms, service-specific additional terms, or any related services,

5 regardless of conflict of laws rules,” and that “[t]hese disputes will be resolved exclusively in the

6 federal or state courts of Santa Clara County, California, USA.” Blood Decl. Exh. A (Google

7 Terms of Service) at 12, ECF 28-2. Plaintiffs point out that the Google Terms of Service are

8 expressly referenced in the complaint. See Compl. ¶ 22. Google does not oppose Plaintiffs’

9 request. Under the reasoning set forth above with respect to Google’s request for judicial notice,

10 Plaintiffs’ request for judicial notice of the Google Terms of Service is GRANTED.

11 B. Section 230 of the CDA

12 Google argues that it is immune from liability under Section 230 of the CDA. Plaintiffs

13 contend that Google is not entitled to immunity under Section 230.

14 1. Applicable Law

15 Section 230 of the CDA “protects certain internet-based actors from certain kinds of

16 lawsuits.” Barnes v. Yahoo!, Inc., 570 F.3d 1096, 1099 (9th Cir. 2009), as amended (Sept. 28,

17 2009). As relevant here, Section 230(c)(1) provides that “[n]o provider or user of an interactive

18 computer service shall be treated as the publisher or speaker of any information provided by

19 another information content provider.” 47 U.S.C. § 230(c)(1). “No cause of action may be

20 brought and no liability may be imposed under any State or local law that is inconsistent with this

21 section.” 47 U.S.C. § 203(e)(3).2

22 “The majority of federal circuits have interpreted the CDA to establish broad federal

23 immunity to any cause of action that would make service providers liable for information

24 originating with a third-party user of the service.” Perfect 10, Inc. v. CCBill LLC, 488 F.3d 1102,

25 1118 (9th Cir. 2007) (quotation marks and citation omitted). The Ninth Circuit has characterized

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2 Section 230’s protection also extends to federal law claims. See Fair Hous. Council of San

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Fernando Valley v. Roommates.Com, 521 F.3d 1157 (9th Cir. 2008) (applying Section 230 to

1 the immunity as “quite robust.” Carafano v. Metrosplash.com, Inc., 339 F.3d 1119, 1123 (9th Cir.

2 2003). Moreover, district courts within the Ninth Circuit have held that the immunity extends to

3 all claims stemming from an interactive computer service provider’s publication of content created

4 by third parties. See, e.g., Evans v. Hewlett-Packard Co., No. C 13-02477 WHA, 2013 WL

5 4426359, at *2 (N.D. Cal. Aug. 15, 2013) (“[T]he CDA safe harbor protects internet service

6 providers from being sued based on material published by content providers.”); Goddard v.

7 Google, Inc., No. C 08-2738 JF (PVT), 2008 WL 5245490, at *2 (N.D. Cal. Dec. 17, 2008)

8 (“[P]arties complaining that they were harmed by a Web site’s publication of user-generated

9 content . . . may sue the third-party user who generated the content, but not the interactive

10 computer service that enabled them to publish the content online.” (quotation marks and citation

11 omitted)).

12 “This grant of immunity applies only if the interactive computer service provider is not

13 also an ‘information content provider,’ which is defined as someone who is ‘responsible, in whole

14 or in part, for the creation or development of’ the offending content. Fair Hous. Council of San

15 Fernando Valley v. Roommates.Com, LLC, 521 F.3d 1157, 1162 (9th Cir. 2008) (quoting §

16 230(f)(3)). “A website operator can be both a service provider and a content provider.” Id. “If it

17 passively displays content that is created entirely by third parties, then it is only a service provider

18 with respect to that content.” Id. “But as to content that it creates itself, or is responsible, in

19 whole or in part for creating or developing, the website is also a content provider.” Id. (quotation

20 marks omitted). “Thus, a website may be immune from liability for some of the content it

21 displays to the public but be subject to liability for other content.” Id.

22 In Barnes, the Ninth Circuit created a three-prong test for Section 230 immunity. See

23 Dyroff v. Ultimate Software Grp., Inc., 934 F.3d 1093, 1097 (9th Cir. 2019) (discussing Barnes

24 test). “Immunity from liability exists for ‘(1) a provider or user of an interactive computer service

25 (2) whom a plaintiff seeks to treat, under a state law cause of action, as a publisher or speaker (3)

26 of information provided by another information content provider.’” Id. (quoting Barnes, 570 F.3d

27 at 1100-01). “When a plaintiff cannot allege enough facts to overcome Section 230 immunity, a

1 2. Application of Section 230 to Facts Alleged in this Case

2 Google argues that it appears on the face of the complaint that this test is satisfied. As

3 Plaintiffs’ claims are presently framed, the Court agrees.

4 a. Interactive Computer Service Provider

5 Under the first prong of the Barnes test, the Court must determine whether Plaintiffs’

6 allegations establish that Google is an interactive computer service provider. “The term

7 ‘interactive computer service’ means any information service, system, or access software provider

8 that provides or enables computer access by multiple users to a computer server, including

9 specifically a service or system that provides access to the Internet and such systems operated or

10 services offered by libraries or educational institutions.” 47 U.S.C. § 230(f)(2). “Websites are the

11 most common interactive computer services.” Dyroff, 934 F.3d at 1097; see also Roommates.com,

12 521 F.3d at 1162 n.6 (“[t]oday, the most common interactive computer services are websites”).

13 Courts “interpret the term ‘interactive computer service’ expansively.” Dyroff, 934 F.3d at 1097.

14 Plaintiffs allege that “Google creates and maintains a virtual online ‘store’ where it makes

15 available to consumers various software applications (‘Apps’) that are generally . . . created by

16 other developers.” Compl. ¶ 23. These allegations are sufficient to satisfy the first prong of the

17 Barnes test. Plaintiffs do not dispute Google’s status as an interactive computer service provider

18 as that term is used in Section 230.

19 b. Seek to Treat as a Publisher or Speaker

20 Under the second prong of the test, the Court must determine whether Plaintiffs’

21 allegations show that Plaintiffs seek to treat Google as a publisher or speaker with respect to

22 content on the Google Play store. In Barnes, the Ninth Circuit addressed “how to determine when,

23 for purposes of this statute, a plaintiff’s theory of liability would treat a defendant as a publisher or

24 speaker of third-party content.” Barnes, 570 F.3d at 1101. While acknowledging that defamation

25 is the most common claim to be discussed in Section 230 cases, the Ninth Circuit made clear that

26 “many causes of action might be premised on the publication or speaking of what one might call

27 ‘information content.’” Id. Examples include claims for discrimination against an operator of an

1 network; for false light against the First Lady and campaign aids; and for negligent publication of

2 advertisements that cause harm to third parties. See id. (collecting cases). “[W]hat matters is

3 whether the cause of action inherently requires the court to treat the defendant as the ‘publisher or

4 speaker’ of content provided by another.” Id. at 1102.

5 For purposes of the CDA, a “publisher” may be defined as “‘the reproducer of a work

6 intended for public consumption’ and also as ‘one whose business is publication.’” Barnes, 570

7 F.3d at 1102 (quoting Webster’s Third New International Dictionary 1837 (Philip Babcock Gove

8 ed., 1986)). Publication includes “any activity that can be boiled down to deciding whether to

9 exclude material that third parties seek to post online.” Roommates, 521 F.3d at 1170-71. Here,

10 all of Plaintiffs’ claims are grounded in video game apps intended for public consumption that

11 Google chooses to place “on the virtual shelves of its Google Play store.” Compl. ¶ 27. Plaintiffs

12 seek to impose liability on Google for the content of those apps that contain Loot Boxes. See

13 Compl. ¶¶ 115-118 (UCL); 124-128 (CLRA); 137-138 (unjust enrichment). Part of the relief

14 sought is an order enjoining Google “from continuing the unlawful practices.” Compl. Prayer. It

15 is unclear exactly what Plaintiffs seek by this request, but presumably they seek an order requiring

16 Google to screen apps offered through its Google Play store and exclude those containing Loot

17 Boxes – conduct that is squarely within the role of a publisher under Roommates. Accordingly, it

18 appears from the face of the complaint that Plaintiffs seek to treat Google as the publisher of the

19 video game apps in question.

20 At the hearing, Plaintiffs’ counsel argued that Section 230 offers protection only to

21 publishers of “speech,” and that because the content published in this case is video game apps, the

22 statute does not apply. Counsel did not cite any authority to support that argument, and at least

23 one court in this district has applied Section 230 where the published content was an app. In

24 Evans, the plaintiff’s claims arose from “The Chubby Checker” app, which was offered for sale

25 and download from a web-based store operated by the defendants, Hewlett-Packard Company and

26 one of its subsidiaries (collectively, “HP”). See Evans, 2013 WL 5594717, at *1. The app

27 “purport[ed] to estimate the size of a man’s genitals based on his shoe size.” Id. The plaintiff, a

1 trademark infringement, unfair competition, and related claims. Id. The district court found the

2 plaintiff’s state law claims to be barred by Section 230, noting that a third party “provided the

3 published content” and HP engaged only in “editorial conduct within the duties of service

4 providers.” Id. at *4. This Court likewise concludes that Section 230 may apply when the

5 published content is an app.

6 Plaintiffs also argue that they do not seek to treat Google as a publisher of another’s

7 content, but rather “seek to hold Google accountable for permitting and facilitating illegal

8 gambling.” Opp. at 5, ECF 28. Plaintiffs cite Barnes for the proposition that Section 230 does not

9 insulate interactive computer service providers from liability for their own wrongful conduct that

10 goes beyond merely publishing another’s content. In Barnes, the plaintiff’s ex-boyfriend posted

11 profiles about her on a website operated by the defendant, Yahoo!, Inc. (“Yahoo”). See Barnes,

12 570 F.3d at 1098. The profiles included nude photographs of the plaintiff, solicitations to engage

13 in sexual intercourse purporting to be from the plaintiff, and contact information for the plaintiff.

14 See id. The plaintiff was subjected to undesirable advances from unknown men over a period of

15 months, during which she asked Yahoo several to remove the unauthorized profiles, to no avail.

16 Id. Finally, when a news program prepared a broadcast about the story, a representative of Yahoo

17 contacted the plaintiff and assured her the matter would be taken care of. Id. at 1099. The

18 plaintiff claimed that she relied on that assurance and took no further action while she waited for

19 Yahoo to remove the profiles. Id. After months without word or action from Yahoo, the plaintiff

20 sued Yahoo for negligence and promissory estoppel, and at that point the profiles were removed.

21 Id.

22 The district court dismissed the suit after concluding that the CDA rendered Yahoo!

23 immune from liability for content posted by the plaintiff’s ex-boyfriend. Barnes, 570 F.3d at

24 1099. On appeal, the Ninth Circuit held that the plaintiff’s claim for negligent provision of

25 services fell within the scope of the immunity afforded to Yahoo under Section 230, but her claim

26 for promissory estoppel did not. See id. at 1105-06, 1109. The Ninth Circuit held that while the

27 negligence claim sought to hold Yahoo liable for ordinary conduct of a publisher, liability on the

1 manifest intention to be legally obligated to do something, which happens to be removal of

2 material from publication.” Id. at 1107.

3 In the present case, Plaintiffs do not allege that Google made them a promise akin to the

4 one made by Yahoo in Barnes. Nor do Plaintiffs allege any other conduct by Google showing its

5 “manifest intention to be legally obligated to do something” for Plaintiffs. While Plaintiffs argue

6 that they seek to hold Google liable for its own conduct in “permitting and facilitating illegal

7 gambling,” it is unclear from the complaint what conduct that might be. Neither the word

8 “permitting” nor the word “facilitating” appears in the complaint. Plaintiffs argue that Google is

9 acting as an unlicensed “casino” by offering video games containing Loot Boxes and converting

10 real money to virtual game currency that is used like poker chips during game play. However,

11 while the opposition brief compares Google to a casino more than a dozen times, the complaint

12 uses the word “casino” only once, in a footnote, and not in reference to Google.

13 The Court concludes that, as currently framed, the complaint does not allege claims based

14 on conduct that goes beyond Google’s role as a publisher of third party content. The second prong

15 of the Barnes test therefore is satisfied.

16 c. Information Provided by Another Content Provider

17 Under the third prong of the Barnes test, the Court must determine whether Plaintiffs’

18 allegations show that the published material – the video game apps containing Loot Boxes – was

19 provided by another content provider. Plaintiffs allege expressly that “Google does not itself

20 create these games and the Loot Box mechanism.” Compl. ¶ 13. The two apps downloaded by

21 Plaintiffs, Final Fantasy and Dragon Ball Z, were created by third party developers and were

22 downloaded by Plaintiffs for free. Compl. ¶¶ 13, 66, 72. These allegations are sufficient to satisfy

23 the test’s third prong.

24 Plaintiffs contend that this prong is not met because Google is a co-developer of the video

25 game apps. As discussed above, “[a] website operator can be both a service provider and a

26 content provider.” Roommates, 521 F.3d at 1162. A website operator is immune only with

27 respect to content created entirely by third parties. See id. However, a website operator is not

1 creating or developing.” Id. (quotation marks omitted). The Ninth Circuit clarified this distinction

2 in Roommates, as follows: “We believe that both the immunity for passive conduits and the

3 exception for co-developers must be given their proper scope and, to that end, we interpret the

4 term ‘development’ as referring not merely to augmenting the content generally, but to materially

5 contributing to its alleged unlawfulness.” Id. at 1167-68. “In other words, a website helps to

6 develop unlawful content, and thus falls within the exception to section 230, if it contributes

7 materially to the alleged illegality of the conduct.” Id. at 1168 (emphasis added).

8 Plaintiffs argue that the following conduct of Google contributes materially to the alleged

9 illegality of video games containing Loot Boxes. First, Plaintiffs allege that Google requires app

10 developers “to disclose the ‘odds of winning’ particular items in the Loot Boxes for the games it

11 distributes.” Compl. ¶ 12. Plaintiffs do not explain how disclosure of odds contributes to the

12 alleged illegality of Loot Boxes, and the Court is at a loss to understand how Google’s conduct in

13 requiring such disclosure contributes to the alleged illegality. Plaintiffs also allege that Google

14 provides “ESRB-based age-ratings for games in its Google Play store.” Compl. ¶ 94. Plaintiffs

15 explain that “[i]n the United States, the videogame industry ‘self-regulates’ through the

16 Entertainment Software Ratings Board (‘ESRB’).” Compl. ¶ 93. “According to the ESRB’s

17 website, ESRB ratings provide information about what’s in a game or app so parents and

18 consumers can make informed choices about which games are right for their family.” Id.

19 “Ratings have 3 parts: Rating Categories, Content Descriptors, and Interactive Elements.” Id.

20 Plaintiffs do not explain how providing industry-standard app ratings contributes materially to the

21 illegality of Loot Boxes. Finally, Plaintiffs allege that while Google discloses that games allow in-

22 app purchases, “there is no notice – and no requirement of any notice by Google – to the parent or

23 the child that a game contains Loot Boxes or other gambling mechanisms.” Compl. ¶ 95.

24 Plaintiffs cite no authority for the proposition that omission of information can constitute

25 “development” of content.

26 The Court finds that Plaintiffs have failed to allege conduct that would render Google a

27 content provider with respect to video game apps containing Loot Boxes. Because it appears that

1 d. Conclusion

2 Under the facts as currently pled, the Court concludes that Google is entitled to CDA

3 immunity as to all of Plaintiffs’ claims. Even if the Court were to find that Loot Boxes constitute

4 illegal slot machines or devices under California’s gambling laws, and that Google knew as much,

5 the immunity applies because Plaintiffs have alleged no more than Google’s “passive

6 acquiescence in the misconduct of its users.” Roommates, 521 F.3d at 1169 n.24. Google cannot

7 be held liable for merely allowing video game developers to provide apps to users through the

8 Google Play store, as “providing third parties with neutral tools to create web content is

9 considered to be squarely within the protections of § 230.” Goddard, 2008 WL 5245490, at *3.

10 “Moreover, even if a service provider knows that third parties are using such tools to create illegal

11 content, the service’s provider’s failure to intervene is immunized.” Id. The Ninth Circuit

12 emphasized the importance of these safeguards for websites in Roommates, stating that “close

13 cases, we believe, must be resolved in favor of immunity, lest we cut the heart out of section 230

14 by forcing websites to face death by ten thousand duck-bites, fighting off claims that they

15 promoted or encouraged – or at least tacitly assented to – the illegality of third parties.”

16 Roommates, 521 F.3d at 1174.

17 It is possible that Plaintiffs could amend their claims to show that Google’s conduct goes

18 beyond the mere publishing of third party content. Plaintiffs make reference to “Google’s

19 predatory Loot Box scheme” in their complaint. Compl. ¶¶ 14, 18. Plaintiffs may be able to

20 allege more facts to support that characterization of Google’s conduct. Moreover, at the hearing,

21 Plaintiffs’ counsel made a passing suggestion that Plaintiffs’ claims find support in the Ninth

22 Circuit’s decision in HomeAway.com, Inc. v. City of Santa Monica, 918 F.3d 676, 681 (9th Cir.

23 2019). Counsel did not elaborate on that argument, and Plaintiffs’ opposition brief devotes only a

24 single sentence to HomeAway, stating that “Airbnb was not immune under § 230 for allowing its

25 website to facilitate unlicensed booking transactions.” Opp. at 6, ECF 28. As discussed above,

26 the complaint does not explain with sufficient specificity how Google facilitates unlicensed

27 gambling. Accordingly, while the Court finds that the complaint as currently framed gives rise to

1 Accordingly, all claims of the complaint are DISMISSED WITH LEAVE TO AMEND.

2 C. Elements of Claims

3 As a separate basis for dismissal, Google argues that Plaintiffs have not alleged the

4 essential elements of their claims. Plaintiffs assert that their claims are adequately alleged.

5 1. Claim 1 – UCL

6 Claim 1 alleges violation of California’s UCL, which in relevant part prohibits an

7 individual or entity from engaging in any “unlawful, unfair or fraudulent business act or practice.”

8 Cal. Bus. & Prof. Code § 17200. “Because the statute is written in the disjunctive, it is violated

9 where a defendant’s act or practice violates any of the foregoing prongs.” Davis v. HSBC Bank

10 Nevada, N.A., 691 F.3d 1152, 1168 (9th Cir. 2012). A private person has statutory standing under

11 the UCL only if he or she “has suffered injury in fact and has lost money or property as a result of

12 the unfair competition.” Cal. Bus. & Prof. Code § 17204; see also Hawkins v. Kroger Co., 906

13 F.3d 763, 768 (9th Cir. 2018). “A plaintiff is required to show some form of economic injury as a

14 result of his transactions with the defendant.” Hawkins, 906 F.3d at 768.

15 Plaintiffs assert UCL claims under the unlawful and unfair prongs of § 17200. “By

16 proscribing any unlawful business practice, section 17200 borrows violations of other laws and

17 treats them as unlawful practices that the unfair competition law makes independently actionable.”

18 Chabner v. United of Omaha Life Ins. Co., 225 F.3d 1042, 1048 (9th Cir. 2000) (internal quotation

19 marks and citation omitted). Plaintiffs’ claim under the unlawful prong is based on Google’s

20 alleged violation of state and federal gambling laws. See Compl. ¶ 115. Plaintiffs’ claim under

21 the unfair prong is based on the same alleged violations of law and related state legislative

22 policies. See Compl. ¶¶ 116-17.

23 Google challenges Plaintiffs’ UCL claim on several grounds. First, Google argues that

24 Plaintiffs Montanez and S.M. lack standing to bring suit under the UCL because they are New

25 York residents and they do not allege injuries occurring in California. Second, Google argues that

26 Plaintiffs lack statutory standing because they no not allege economic injury or causation, which

27 are essential elements of a UCL claim. Third, Google argues that Plaintiffs do not allege any

1 Google’s first and third arguments are disposed of easily. As Plaintiffs point out, the

2 Google Terms of Service provide that “California law will govern all disputes arising out of or

3 relating to these terms, service-specific additional terms, or any related services, regardless of

4 conflict of laws rules,” and that “[t]hese disputes will be resolved exclusively in the federal or

5 state courts of Santa Clara County, California, USA.” Blood Decl. Exh. A (Google Terms of

6 Service) at 12, ECF 28-2. Under these provisions, it appears that Plaintiffs Montanez and S.M.

7 may assert a UCL claim in this case. Google abandons its residency-based standing argument in

8 its reply brief. With respect to Google’s argument that Loot Boxes do not constitute illegal

9 gambling, the Court defers that issue to a later stage of the proceedings for the reasons discussed

10 above. Accordingly, the Court declines to dismiss the UCL claim on either of these grounds.

11 Google’s second argument is meritorious, however, as the complaint does not allege facts

12 showing economic injury or causation, both of which are required for statutory standing.

13 Plaintiffs assert that the economic injury requirement is met by allegations that “Plaintiff Coffee

14 estimates he has spent in excess of $500 on in-game Loot Boxes in exchange for the random-

15 chance possibility of winning valuable items,” and “Mei-Ling Montanez estimates S.M. has spent

16 more than $100 on in-game purchases including Loot Boxes.” Compl. ¶¶ 14, 18. However, when

17 the complaint is read as a whole, what Plaintiffs actually allege are two-part transactions in which

18 Coffee and S.M. first purchased virtual currency for $500 (Coffee) and $100 (S.M.), and then

19 “spent” virtual currency to acquire Loot Boxes. See Compl. ¶¶ 67 (alleging that in Final Fantasy a

20 summons must be purchased with virtual currency called Lapis Crystals), 73 (alleging that in

21 Dragon Ball Z “Summons can only be purchased with the in-game currency, called ‘dragon

22 stones’”).

23 While not entirely clear from the complaint, it appears that Google was involved only in

24 the first part of Plaintiffs’ transactions, that is, Plaintiffs’ purchases of virtual currency. Although

25 Plaintiffs do not specifically allege that they bought virtual currency from Google, their purchases

26 of virtual currency from Google reasonably may be inferred from Plaintiffs’ allegations that all in-

27 game purchases are made through Google Play’s payment system. See Compl. ¶ 28. However,

1 example, Plaintiffs do not allege that they received fewer Lapis Crystals (Final Fantasy) or dragon

2 stones (Dragon Ball Z) than the amount for which they paid. See Lozano v. AT & T Wireless

3 Servs., Inc., 504 F.3d 718, 734 (9th Cir. 2007) (plaintiff established economic injury under the

4 UCL where he did not receive the full number of agreed-upon minutes he purchased in a wireless

5 agreement). Nor do Plaintiffs allege that Google made misrepresentations regarding the virtual

6 currency, or “that they were deprived of an agreed-upon benefit in purchasing” the virtual

7 currency. Birdsong v. Apple, Inc., 590 F.3d 955, 961 (9th Cir. 2009) (plaintiffs failed to establish

8 economic injury in suit against Apple for alleged defect in iPods where plaintiffs alleged neither

9 that Apple made any misrepresentations about the iPod nor that they were deprived of an agreed-

10 upon benefit in purchasing their iPods). “If one gets the benefit of his bargain, he has no standing

11 under the UCL.” Johnson v. Mitsubishi Digital Elecs. Am., Inc., 365 F. App’x 830, 832 (9th Cir.

12 2010).

13 Plaintiffs’ reliance on cases involving fraud-based UCL claims is misplaced. In Hansen,

14 the plaintiffs alleged that an internet electronics retailer advertised fictitious former price and

15 discount information. See Hansen v. Newegg.com Americas, Inc., 25 Cal. App. 5th 714, 731

16 (2018). The state appellate court rejected the defendant’s argument that “a consumer who pays the

17 specified price for a product and receives that product has obtained the benefit of the bargain and

18 cannot therefore show an economic injury – absent specific allegations such as the product was

19 different than it was represented to be, unsatisfactory in some manner, or worth less than the

20 amount paid.” Id. (quotation marks and citation omitted). The court held that “the ‘benefit of the

21 bargain’ theory has no relevance when the misrepresentation underlying the UCL claim is material

22 in nature.” Id. For purposes of a UCL claim based on false advertising, “a consumer need only

23 allege that he or she relied on a misrepresentation when purchasing the product, and that he or she

24 would not have purchased the product but for the representation.” Id. at 733. In the present case,

25 Plaintiffs do not assert a claim under the UCL’s fraud prong, and they do not allege that Google

26 engaged in false advertising regarding the purchase of virtual currency or, indeed, that Google

27 made any representations upon which Plaintiffs relied. Hansen and other cases addressing fraud-

1 1107 (9th Cir. 2013), as amended on denial of reh’g and reh’g en banc (July 8, 2013) (finding that

2 “the district court’s determination that Hinojos has suffered no economic injury because he

3 received the ‘benefit of the bargain’ is contrary to Kwikset because Hinojos alleges that Kohl’s

4 made material misrepresentations that induced him to buy products he would not otherwise have

5 purchased”).

6 To the extent the second part of the transactions, Plaintiffs’ in-game purchases of Loot

7 Boxes using virtual currency, resulted in economic injury, Plaintiffs do not allege facts showing

8 that such injury is attributable to Google. As far as the Court can tell, the in-app purchase of a

9 Loot Box is a transaction between the player and the app developer, in which Google is not

10 involved. Plaintiffs argue that Google may be held liable for the in-app purchase of Loot Boxes

11 based on their allegations that “as a result of Defendant’s conduct” they “were induced to spend

12 money” on Loot Boxes. Compl. ¶¶ 14-18, 130. Those allegations are conclusory and therefore

13 are insufficient to allege economic loss resulting from Google’s conduct. As discussed above,

14 Plaintiffs argue throughout their opposition brief that Google may be held liable for in-app

15 purchases of Loot Boxes based on the theory that Google acts as an unlicensed “casino” that

16 “facilitates” illegal gambling via Loot Boxes by converting real money to virtual game currency

17 that is used like poker chips during game play. However, that theory is not alleged in the

18 complaint, which uses neither the words “casino” nor “facilitates” in reference to Google.

19 Moreover, as Google points out, Plaintiffs’ casino analogy does not address the fact that

20 virtual currency may be used to make in-app purchases other than Loot Boxes. The complaint

21 indicates that virtual currency may be used to acquire “various products” in video games, Compl.

22 ¶ 59 (discussing virtual currency in the game Roblox), and that S.M. used the virtual currency he

23 purchased for use in Dragon Ball Z on “in-game purchases including Loot Boxes,” Compl. ¶ 18

24 (emphasis added). Google asserts that in many games, players may use virtual currency for direct

25 purchase of Loot Box items, e.g., 500 rubies for a battle-axe or 200 gems for a dwarf warrior. See

26 Mot. at 5, ECF 17. While the latter assertion is outside the scope of Plaintiffs’ complaint,

27 Plaintiffs do not dispute that virtual currency may be used for in-app purchases wholly unrelated

1 competition against Google based on its role in converting real money into virtual currency,

2 Plaintiffs must address the fact that players can choose to “spend” virtual currency on a variety of

3 game items other than Loot Boxes, and that Google does not appear to have any role in those

4 choices.

5 Google’s motion to dismiss Claim 1 for failure to state a claim is GRANTED WITH

6 LEAVE TO AMEND.

7 2. Claim 2 – CLRA

8 Claim 2 alleges a violation of the CLRA, which makes unlawful “unfair methods of

9 competition and unfair or deceptive acts or practices undertaken by any person in a transaction

10 intended to result or which results in the sale or lease of goods or services to any consumer.” Cal.

11 Civ. Code § 1770(a); see also Meyer v. Sprint Spectrum L.P., 45 Cal. 4th 634, 639 (2009). “Any

12 consumer who suffers any damage as a result of the use or employment by any person of a

13 method, act, or practice declared to be unlawful” under the CLRA may bring suit. Cal. Civ. Code

14 § 1780(a). Thus, “in order to bring a CLRA action, not only must a consumer be exposed to an

15 unlawful practice, but some kind of damage must result.” Meyer, 45 Cal. 4th at 641.

16 Plaintiffs allege that “Defendant violated the CLRA by representing to Plaintiffs and Class

17 members transactions involving Loot Boxes confer or involve rights to potentially valuable prizes,

18 when in fact these transactions constitute unlawful gambling transactions that are prohibited by

19 law.” Compl. ¶ 128. Plaintiffs further allege that “Defendant’s violations of the CLRA

20 proximately caused injury in fact to Plaintiffs and the Class.” Compl. ¶ 129. Google asserts that

21 these allegations fail to state a claim for several reasons. First, Google argues that Plaintiffs

22 Montanez and S.M. lack standing to bring suit under the CLRA because they are New York

23 residents and they do not allege injuries occurring in California. Second, Google argues that

24 virtual currency is neither a good nor a service under the CLRA. Third, Google asserts that the

25 Complaint does not identify any representations by Google regarding Loot Boxes. Fourth, Google

26 argues that Loot Boxes do not qualify as illegal slot machines under California gambling laws.

27 Google’s first and fourth arguments do not constitute grounds for dismissal for the reasons

1 arguments are meritorious. It appears from the complaint that the only transactions between

2 Plaintiffs and Google were the free downloads of the games Final Fantasy and Dragon Ball Z, and

3 purchases of virtual currency through the Google Play store. Plaintiffs do not allege that the free

4 download of video games qualifies as “the sale or lease of goods or services” under the CLRA.

5 Moreover, courts in this district have held that virtual currency is not a good or service for

6 purposes of the CLRA. See, e.g, Doe v. Epic Games, Inc., 435 F. Supp. 3d 1024, 1046 (N.D. Cal.

7 2020) (“ Plaintiff’s CLRA claim therefore fails because the virtual currency at issue is not a good

8 or service.”); I.B. ex rel. Fife v. Facebook, Inc., 905 F. Supp. 2d 989, 1008 (N.D. Cal. 2012)

9 (holding that Facebook Credits, a virtual currency, are not covered by the CLRA). Plaintiffs argue

10 that the “services” provided by Google are akin to those offered by a casino, and must be viewed

11 in that broader context. However, even assuming for purposes of this motion that Loot Boxes

12 themselves constitute illegal gambling, Plaintiffs have not alleged facts to support their casino

13 theory of liability under the CLRA. Moreover, Plaintiffs have failed to identify any

14 misrepresentations, or indeed any representations at all, made by Google about Loot Boxes.

15 Google’s motion to dismiss Claim 2 for failure to state a claim is GRANTED WITH

16 LEAVE TO AMEND.

17 3. Claim 3 – Unjust Enrichment

18 Claim 3 is a claim for unjust enrichment under unspecified state law. Plaintiffs allege that

19 “Google was unjustly enriched as a result of the compensation it received from marketing and

20 selling the unlawful and unfair Loot Boxes to Plaintiffs and the Class.” Compl. ¶ 137. Plaintiffs

21 “seek restitution from Google and seek an order of this Court disgorging all profits, benefits, and

22 other compensation obtained by Google from its wrongful conduct.” Compl. ¶ 138. Google

23 argues that these allegations fail to state a claim for relief because Plaintiffs do not specify which

24 state’s law applies, Plaintiffs cannot maintain an unjust enrichment claim under California law,

25 and the unjust enrichment claim is duplicative of their UCL and CLRA claims.

26 The Court agrees with Google that Plaintiffs cannot proceed on an unjust enrichment

27 theory without specifying which state’s law they seek to apply. See In re Nexus 6P Prod. Liab.

1 have recognized, due to variances among state laws, failure to allege which state law governs a

2 common law claim is grounds for dismissal.” (quotation marks and citation omitted)); In re TFT-

3 LCD (Flat Panel) Antitrust Litig., 781 F. Supp. 2d 955, 966 (N.D. Cal. 2011) (“Dell must specify

4 || the state laws under which it is asserting claims for unjust enrichment.”). Having made this

5 determination, the Court need not reach Google’s additional arguments regarding Plaintiffs’ unjust

6 || enrichment claim.

7 Google’s motion to dismiss Claim 3 for failure to state a claim is GRANTED WITH

8 || LEAVE TO AMEND.

9 IV. ORDER

10 (1) Google’s motion to dismiss is GRANTED WITH LEAVE TO AMEND.

11 (2) Any amended complaint shall be filed on or before March 12, 2021.

12 (3) Leave to amend is limited to the claims alleged in the complaint; Plaintiffs may not

5 13 add new claims or parties without obtaining leave of the Court.

14 (4) This order terminates ECF 17.

heh Lu henner)

2 15 Dated: February 10, 2021

BETH LABSON FREEMAN

= 16 United States District Judge

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