California Crane School, Inc. v. Google LLC

1

2

3

4 UNITED STATES DISTRICT COURT

5 NORTHERN DISTRICT OF CALIFORNIA

6

7 CALIFORNIA CRANE SCHOOL, INC., Case No. 21-cv-10001-PCP

8 Plaintiff,

ORDER GRANTING IN PART

9 v. GOOGLE’S MOTION TO COMPEL

ARBITRATION AND GRANTING

10 GOOGLE LLC, et al., DEFENDANTS’ MOTIONS TO

DISMISS

Defendants.

11

Re: Dkt. Nos. 114, 115

12

13 In this class action lawsuit against defendants Google LLC, Alphabet Inc., XXVI Holdings

14 Inc., Google CEO Sundar Pichai, and former Google CEO Eric Schmidt (collectively, the Google

15 defendants), as well as Apple Inc. and Apple CEO Tim Cook (collectively, the Apple defendants),

16 plaintiff California Crane School, Inc. (CCS) alleges that Google and Apple unlawfully agreed to

17 divide the online search and search advertising markets in violation of federal and state antitrust

18 laws. The Google defendants now move to compel arbitration, and all defendants move to dismiss

19 the complaint. For the reasons that follow, the Court grants in part Google’s motion to compel

20 arbitration, denying the motion only as to CCS’s claim for public injunctive relief under

21 California’s Unfair Competition Law. The Court grants Google’s motion to dismiss that remaining

22 claim, and grants Apple’s motion to dismiss all of the claims against the Apple defendants.

23 BACKGROUND

24 CCS is a crane operating school that advertises its services on Google. CCS alleges that

25 Google and Apple have unlawfully agreed to divide the markets for search and search advertising.

26 Specifically, CCS alleges that since 2005 Apple and Google have agreed that Apple will not enter

27 the search and search advertising markets and will instead make Google the default search engine

1 alleges that CEOs Pichai and Cook secretly met several times to continue this unlawful agreement.

2 In its first amended complaint, CCS asserted violations of Sections 1 and 2 of the Sherman

3 Act. Dkt. No. 39.1 The Google defendants moved to compel arbitration in March 2022, and the

4 Court granted that motion. Cal. Crane Sch., Inc. v. Google LLC, 621 F. Supp. 3d 1024 (N.D. Cal.

5 2022) (“Crane I”). In Crane I, the Court held that CCS had accepted Google’s 2017 and 2018

6 Advertising Program Terms of Service, and that because CCS had been provided with an

7 opportunity to opt out of arbitration but did not do so, the arbitration agreement was not adhesive.

8 Id. at 1030. The Court further held that the language of the Terms encompassed the claims in the

9 then-operative complaint. Id. The Court also held that while California’s McGill rule makes an

10 arbitration provision that waives a party’s ability to seek public injunctive relief in any forum

11 invalid and unenforceable, see McGill v. Citibank, N.A., 2 Cal.5th 945 (2017), such relief could

12 not be sought on the federal law claims in the complaint. Crane I, 621 F. Supp. 3d at 1031.

13 Finally, the Court suggested that even if CCS were to amend its complaint to include state law

14 claims for public injunctive relief, CCS was seeking relief on behalf of itself and a “discrete subset

15 of similarly situated” consumers who paid Google for advertising services, and “public injunctive

16 relief cannot be sought in pursuit of representative claims.” Id. at 1032.

17 The Google and Apple defendants separately moved to dismiss the first amended

18 complaint, and the Court also granted that motion. The Court held that CCS had failed to

19 adequately plead antitrust injury, to plead facts plausibly alleging an antitrust conspiracy, or to

20 plead fraudulent concealment with particularity. Cal. Crane Sch., Inc. v. Google LLC, 2023 WL

21 2769096 (N.D. Cal. Mar. 31, 2023) (“Crane II”). Regarding antitrust injury, the Court found a

22 “mismatch,” noting that CCS “alleges that it was harmed in the search advertising market” while

23 CSS’s claims arose from “Apple’s decision not to enter the search market.” Id. at *3 (emphasis

24 added). Regarding the alleged antitrust conspiracy, the Court held that the complaint did not

25 include enough direct or circumstantial evidence of the purported agreement between Google and

26 Apple to make CCS’s allegations regarding the existence of that agreement plausible. Id. at *5–6.

27

1 After the Crane I and Crane II decisions, CCS filed the now-operative second amended

2 complaint adding three state law claims. Dkt. No. 112. The second amended complaint asserts

3 class claims for: (1) violation of Section 1 of the Sherman Act by entering a profit-sharing non-

4 compete agreement; (2) violation of Section 2 of the Sherman Act by conspiring to monopolize;

5 (3) violation of California’s Cartwright Act by restraining trade and commerce; (4) violation of the

6 UCL by unfairly restricting competition; and (5) unjust enrichment for unlawfully inflating prices

7 and profits. CCS seeks an order voiding the purported agreement between Google and Apple,

8 granting injunctive relief under the UCL enjoining defendants from entering future non-compete

9 agreements, and awarding treble damages for the class, disgorgement, and divestiture.

10 The Google defendants now renew their motion to compel arbitration, arguing that CCS is

11 required to arbitrate all disputes with Google per its contractual obligations. Google argues that its

12 Terms of Service, which CCS purportedly accepted in 2017 and 2018, require the use of binding

13 individual arbitration, rather than jury trials or class actions, to resolve disputes. Dkt. No. 32-2, at

14 2. The Google defendants contend that the additional state law claims in the second amended

15 complaint do not support a claim for public injunctive relief under the McGill rule given the issues

16 identified by the Court in Crane I.

17 The Google and Apple defendants separately move to dismiss CCS’s second amended

18 complaint under Federal Rule of Civil Procedure 12(b)(6). They argue that the complaint fails to

19 state a claim under Sections 1 and 2 of the Sherman Act, that CCS lacks antitrust standing, that the

20 state law claims should be dismissed because the predicate federal violations are insufficiently

21 pleaded, and that claims for damages predating December 27, 2017 (four years before the filing of

22 the initial complaint on December 27, 2021) are time-barred. 15 U.S.C. § 15b.

23 LEGAL STANDARDS

24 The Federal Arbitration Act (FAA) provides that a “written provision in … a contract

25 evidencing a transaction involving commerce to settle by arbitration a controversy thereafter

26 arising out of such contract or transaction … shall be valid, irrevocable, and enforceable, save

27 upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. As

1 Coinbase, Inc., 87 F.4th 1003, 1009 (9th Cir. 2023). And like other contracts, arbitration

2 agreements are subject to “generally applicable contract defenses” like “fraud, duress, or

3 unconscionability.” Lim v. TForce Logs., LLC, 8 F.4th 992, 999 (9th Cir. 2021).

4 When a party moves to compel arbitration, the court must first determine “whether a valid

5 arbitration agreement exists” and “whether the agreement encompasses the dispute at issue.”

6 Lifescan, Inc. v. Premier Diabetic Servs., Inc., 363 F.3d 1010, 1012 (9th Cir. 2004).2 If the court is

7 “satisfied that the making of the agreement for arbitration … is not in issue,” it must “make an

8 order directing the parties to proceed to arbitration.” 9 U.S.C. § 4. The summary judgment

9 standard applies to such motions. Hansen v. LMB Mortg. Servs., Inc., 1 F.4th 667, 670 (9th Cir.

10 2021). Thus, the court must “give to the opposing party the benefit of all reasonable doubts and

11 inferences.” Sanford v. MemberWorks, Inc., 483 F.3d 956, 963 (9th Cir. 2007).

12 The Federal Rules require a complaint to include only a “short and plain statement of the

13 claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). In considering a Rule

14 12(b)(6) motion contending that a complaint fails to state a claim, the Court must “accept all

15 factual allegations in the complaint as true and construe the pleadings in the light most favorable”

16 to the non-moving party. Rowe v. Educ. Credit Mgmt. Corp., 559 F.3d 1028, 1029 (9th Cir. 2009).

17 Dismissal is required if the plaintiff fails to allege facts allowing the Court to “draw the reasonable

18 inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662,

19 663 (2009). While legal conclusions “can provide the complaint’s framework,” the Court will not

20 assume they are correct unless adequately “supported by factual allegations.” Id. at 664.

21 Under the law of the case doctrine, a court generally will not reconsider “an issue

22 previously decided by the same court, or a higher court in the identical case.” United States v.

23 Lummi Indian Tribe, 235 F.3d 443, 452 (9th Cir. 2000). For the doctrine to apply, the issue in

24 question must have been “decided explicitly or by necessary implication in [the] previous

25 disposition.” Id. (citing Liberty Mutual Ins. Co. v. EEOC, 691 F.2d 438, 441 (9th Cir. 1982)).

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2 The arbitration agreement at issue here expressly assigns these issues of enforceability and scope

1 “Application of the doctrine is discretionary.” Lummi Indian Tribe, 235 F.3d at 452.

2 ANALYSIS

3 I. The Google Defendants’ Motion To Compel Arbitration Is Granted in Part.

4 The Google defendants move to compel arbitration of CCS’s claims pursuant to an

5 arbitration clause in Google’s Terms of Service. CCS responds that Google imposed “adhesive

6 terms” through its agreement, Dkt. No. 118, at 9, and that this unlawful adhesion constitutes

7 grounds for revocation of the contract under the FAA’s saving clause, 9 U.S.C. § 2. See Kilgore v.

8 KeyBank, Nat. Ass’n, 718 F.3d 1052, 1058 (9th Cir. 2013) (noting that the FAA’s savings clause

9 “preserves generally applicable contract defenses”). CCS also responds that Google’s arbitration

10 agreement is unenforceable because it waives public injunctive relief in violation of the California

11 Supreme Court’s McGill rule. Dkt. No. 118, at 12.3

12 Google’s Terms of Service contain an unambiguous opt out provision, allowing an

13 advertiser to opt out of the arbitration provision within 30 days of entering into the contract with

14 Google. Dkt. No. 32-2, at 2 (“If Customer wishes, Customer may opt out of the requirement to

15 arbitrate disputes by following the instructions in Section 13(F) below within 30 days of the first

16 acceptance date of any version of these Terms containing an arbitration provision.”). As the Court

17 previously held in Crane I, 621 F. Supp. 3d at 1030, the opt out provision in Google’s Terms of

18 Service defeats CCS’s argument that the arbitration agreement is adhesive. See Trudeau v. Google

19 LLC, 349 F. Supp. 3d 869, 877 (N.D. Cal. 2018) (“This Court finds that the 2017 [Terms]

20 provided a meaningful opportunity to opt out of the arbitration provision.”), aff’d, 816 F. App’x 68

21 (9th Cir. 2020). The ability to opt out of arbitration within a reasonable timeframe fatally

22 undermines CCS’s position that the arbitration agreement imposes adhesive terms on customers.

23 In support of its contrary argument, CCS cites Chavarria v. Ralphs Grocery Co., 733 F.3d

24 916, 923 (9th Cir. 2013), in which the Ninth Circuit held that “where … [an individual] is facing

25 [a corporation] with overwhelming bargaining power who drafted the contract … on a take-it-or-

26

27 3 CCS does not contest that the arbitration agreement, if found to be valid and enforceable,

encompasses all of its federal and state law claims.

1 leave-it basis, the [arbitration] clause is procedurally unconscionable.” Google’s opt-out provision,

2 however, undercuts CCS’s position that Google had overwhelming bargaining power with respect

3 to the arbitration agreement. In contrast to an unconscionable take-it-or-leave-it contract, the

4 arbitration agreement here allowed a customer to take-it, opt-out-of-arbitration-and-then-take-it, or

5 leave-it. Even if other terms of Google’s Terms of Service were found to be adhesive, the same

6 cannot be said of the Terms’ arbitration provisions, which the Court must consider separate and

7 apart from the remainder of the contract. See Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S.

8 440, 445 (2006) (“[A]s a matter of substantive federal arbitration law, an arbitration provision is

9 severable from the remainder of the contract.”).4

10 CCS also argues that it opted out of arbitration by timely filing suit and opposing

11 arbitration. Dkt. No. 118, at 22. It cites language from the Terms of Service stating that “[n]either

12 party will be treated as having waived any rights by not exercising (or by delaying the exercise of)

13 any rights under these Terms.” Dkt. No. 32-2, at 8. But “[i]t is a standard rule of contract

14 interpretetation that specific terms control over general ones.” Shivkov v. Artex Risk Sols., Inc.,

15 974 F.3d 1051, 1063 (9th Cir. 2020). Here, the specific 30-day opt-out period governing the

16 arbitration agreement controls over the more general reservation of rights provision. Because CCS

17 failed to opt out of arbitration within 30 days of agreeing to the Terms, it cannot exercise that right

18 thereafter.

19 CCS further contends that the Google defendants waived arbitration by filing a motion to

20 dismiss. See Newirth ex re. Newirth v. Aegis Senior Comtys., 931 F.3d 935, 941 (9th Cir. 2019)

21 (“Seeking a decision on the merits of a key issue in a case indicates an intentional and strategic

22 decision to take advantage of the judicial forum.”). But the Google defendants moved to compel

23 arbitration before ever moving to dismiss, and by doing so preserved their position that the issues

24 in this case should be decided by an arbitrator rather than by the Court.5

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26 4 Because of this substantive federal law, an arbitration provision can be valid and enforceable

even if other parts of the contract it is in are not and even if the state law of severability would not

27 provide for severance of the arbitration provision from the unenforceable portions of the contract.

1 Finally, CCS argues that the arbitration agreement waives its ability to pursue public

2 injunctive relief, making it unenforceable under the California Supreme Court’s decision in

3 McGill v. Citibank, N.A., 2 Cal.5th 945 (2017). Google’s Terms state that the “arbitrator may

4 award declaratory or injunctive relief only in favor of the individual party seeking relief and only

5 to the extent necessary to provide relief warranted by that party’s individual claim.” Dkt. No. 32-2,

6 at 5 (emphasis added). Because the Terms purportedly require arbitration of all disputes but also

7 preclude the arbitrator from awarding public relief, CCS argues that the provision runs afoul of the

8 McGill rule.

9 The McGill rule is a generally applicable contract defense not preempted by the FAA. See

10 Blair v. Rent-A-Center, Inc., 928 F.3d 819, 827 (9th Cir. 2019); see also McBurnie v. RAC

11 Acceptance East, LLC, No. 22-16868, at *12 (9th Cir. Mar. 14, 2024) (reaffirming Blair in light of

12 intervening Supreme Court precedent). The parties disagree, however, about whether the

13 injunctive relief CCS seeks under the UCL—specifically, an injunction preventing Google and

14 Apple from entering future non-compete agreements with respect to the search and search

15 advertising markets, Dkt. No. 112, at 58—constitutes public injunctive relief.

16 The Ninth Circuit provided guidance on this issue in two recent decisions. In Blair v. Rent-

17 a-Center, the plaintiffs alleged that Rent-A-Center’s rent-to-own pricing scheme for household

18 items violated state consumer protection laws that set maximums on the total amount of

19 installment payments for rent-to-own items and on the final cash price to purchase such items.

20 Blair, 928 F.3d at 823. The Blair class action plaintiffs sought an order “on behalf of the people of

21 California” enjoining Rent-A-Center’s use of the purportedly unlawful pricing structure in the

22 future. Id. The Court found that the rent-to-own agreement at issue, which required arbitration of

23 all disputes “on an individual basis,” was unenforceable because it waived the right to seek public

24 injunctive relief under the UCL in any forum in violation of the McGill rule. Id. In doing so, the

25 Court held that the relief sought properly amounted to a public injunction because “Blair [sought]

26

has expressly held that a party can contractually waive its constitutional right to a jury trial in civil

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cases. Hodges v. Easton, 106 U.S. 408, 412 (1882). The Ninth Circuit has acknowledged that the

1 to enjoin future violations of California’s consumer protection statutes, relief oriented to and for

2 the benefit of the general public.” Id. at 831 n.3.

3 In Hodges v. Comcast Cable Communications, LLC, 21 F.4th 535 (9th Cir. 2021), the

4 Ninth Circuit clarified the meaning of public injunctive relief, holding that such relief must have

5 the primary purpose and effect of prohibiting unlawful acts that threaten future injury to the

6 general public, cannot constitute the pursuit of representative claims or relief on behalf of others,

7 and should present diffuse benefits to the general public as a whole. Id. at 541–42. The Court

8 stated that public injunctive relief within the meaning of McGill is “limited to forward-looking

9 injunctions that seek to prevent future violations of law for the benefit of the general public as a

10 whole, as opposed to a particular class of persons, and that do so without the need to consider the

11 individual claims of any non-party.” Id. at 542. “[I]n explaining why the relief sought in Blair

12 included public injunctive relief, [the Court] noted that it sought to stop Rent-A-Center from using

13 an unlawful pricing structure” in a manner that “diffusely benefitted the general public as a

14 whole.” Id. at 544. By contrast, the relief sought in Hodges could not be defined as public

15 injunctive relief because the relief would only benefit Comcast’s cable subscribers, a “group of

16 individuals similarly situated to the plaintiff.” Id. at 549.

17 Here, CCS purports to bring its UCL claim against Google and Apple “for public

18 injunctive relief for the benefit of the general public as a whole, and not as a class action or as a

19 representative action, to restore competition in the market for search advertising.” Dkt. No. 112, at

20 49. CCS alleges that “Google’s and Apple’s conduct has harmed the general public by reducing

21 the quality of general search services in relation to privacy, data protection, and use of consumer

22 data, by lessening choice in general search services, and by impeding innovation.” Id.

23 The Court agrees that this relief would benefit the general public as a whole rather than

24 providing benefits to only a specific and identifiable subset of the population. Unlike the class-

25 specific relief sought in Hodges, the relief here would provide diffuse benefits to the public by

26 potentially bolstering competition in the search and search advertising markets, increasing

27 consumer choice, improving data privacy, and decreasing costs for both general search engine

1 users and digital advertisers like CCS.6 Greater competition could also accelerate innovation,

2 bringing positive downstream effects on internet users as a whole. Indeed, the injunctive relief

3 sought by CCS here arguably provides even more diffuse benefits to the public as a whole than the

4 relief in Blair, which would have benefitted only those members of the public who entered into

5 future rent-to-own agreements with Rent-A-Center. Blair, 928 F.3d at 823. The injunctive relief

6 CCS seeks under the UCL thus constitutes public injunctive relief for the purposes of McGill.7

7 Because Google’s arbitration agreement prohibits CCS from seeking this public injunctive

8 relief under the UCL in any forum, it violates the McGill rule and is unenforceable as to CCS’s

9 UCL claim for public injunctive relief.

10 Google’s Terms of Service explicitly state that “[i]f a court decides that applicable law

11 precludes enforcement of any of this subsection’s limitations as to a particular claim for relief,

12 then that claim (and only that claim) must be severed from the arbitration and may be brought in

13 court.” Dkt. No. 32-2, at 7. The Court therefore severs the UCL claim from the arbitration

14 agreement and will allow that claim to proceed in this Court. See Blair, 928 F.3d at 831 (severing

15 the claim for public injunctive relief from the scope of arbitration after finding a violation of the

16 McGill rule). Because the Court finds the arbitration agreement to be otherwise valid and

17 enforceable and because it encompasses CCS’s remaining claims against the Google defendants,

18 the Court grants the Google defendants’ motion to compel arbitration of those claims.

19 II. Defendants’ Motion To Dismiss Is Granted.

20 While the Court compels arbitration of four claims against the Google defendants, the

21 Google defendants’ motion to dismiss the remaining UCL claim for public injunctive relief

22 remains before this Court, and the Apple defendants have moved to dismiss all of CCS’s claims

23

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6 Whether CCS has standing to bring a claim for public injunctive relief on behalf of general

25 search engine users is a different question that goes to the adequacy of that claim under Rule

12(b)(6) rather than the arbitration agreement’s enforceability as to the UCL claim.

26

7 Because the Court in Crane I did not have any UCL claim for public injunctive relief before it, it

did not decide “explicitly or by necessary implication” that the McGill rule would not apply to

27

such a claim. Lummi Indian Tribe, 235 F.3d at 452. Regardless, application of the law of the case

1 against them. The Court must therefore address both of the pending motions to dismiss CCS’s

2 second amended complaint, which contend that the revised complaint “does nothing to remedy the

3 multiple defects the Court identified in Plaintiff’s First Amended Complaint.” Dkt. No. 115, at 11.

4 The Court agrees that the second amended complaint, like the prior complaint, fails to state any

5 plausible claim for relief.

6 A. CCS Fails To Adequately Plead Claims Under the Sherman Act.

7 “Section 1 of the Sherman Act … has been interpreted as outlawing only unreasonable

8 restraints of trade.” In re Nat’l Football League’s Sunday Ticket Antitrust Litig., 933 F.3d 1136,

9 1149 (9th Cir. 2019) (cleaned up). To state a claim under Section 1, a plaintiff “must plead not just

10 ultimate facts (such as a conspiracy), but evidentiary facts which, if true, will prove: (1) a contract,

11 combination or conspiracy among two or more persons or distinct business entities; (2) by which

12 the persons or entities intended to harm or restrain trade or commerce among the several States, or

13 with foreign nations; (3) which actually injures competition.” Kendall v. Visa U.S.A., Inc., 518

14 F.3d 1042, 1047 (9th Cir. 2008). “It is not enough merely to include conclusory allegations that

15 certain actions were the result of a conspiracy; the plaintiff must allege facts that make the

16 conclusion plausible.” Name.Space, Inc. v. Internet Corp. for Assigned Names & Numbers, 795

17 F.3d 1124, 1129 (9th Cir. 2015).

18 “A plaintiff can establish a conspiracy through direct evidence, circumstantial evidence, or

19 both.” Honey Bum, LLC v. Fashion Nova, Inc., 2023 WL 2592287, at *5 (9th Cir. Mar. 22, 2023).

20 When presenting circumstantial evidence, “plaintiffs must allege something more than conduct

21 merely consistent with agreement in order to nudge their claims across the line from conceivable

22 to plausible.” In re Dynamic Random Access Memory (DRAM) Indirect Purchaser Antitrust

23 Litigation, 28 F.4th 42, 47 (9th Cir. 2022). “Something more” includes “[p]lus factors [that] are

24 often economic actions and outcomes that are largely inconsistent with unilateral conduct but

25 largely consistent with explicitly coordinated action.” Id.

26 In its second amended complaint, as in the prior complaint, CCS fails to provide direct

27 evidence of the purported non-compete agreements between Google and Apple. CCS alleges “a

1 against Google and that Google will pay Apple not to compete.” Dkt. No. 112, at 4.8 But CCS

2 admits that it “has been prevented from obtaining the written Google-Apple agreements which set

3 out the combination and conspiracy in detail.” Id. While alleging that “Apple and Google have

4 agreed in various writings, including in their written Revenue Sharing Agreement and in their

5 written Pre-Installation Agreement that Apple would not compete in the search business and the

6 search advertising market,” CCS has included neither written agreement in its second amended

7 complaint. Id.

8 Instead, CCS alleges in a vague and conclusory manner that these “written agreements

9 were formed, confirmed, reconfirmed, and negotiated from time to time in private, secret, and

10 clandestine personal meetings between the Chief Executive Officers and Chairmen of Apple and

11 Google.” Id. at 9. A “formal [written] agreement is not necessary” to adequately allege a

12 conspiracy, simply “a conscious commitment to a common scheme designed to achieve an

13 unlawful objective.” PLS.Com, LLC v. Nat’l Ass’n of Realtors, 32 F.4th 824, 842 (9th Cir. 2022)

14 (cleaned up). Yet CCS concedes that it does “not know when the secret meetings began but

15 allege[s] that they began with Messrs. Jobs and Schmidt and that they have continued in force

16 under Messrs. Cook and Pichai.” Id. at 10. Such allegations, without any evidence of the

17 underlying written or oral agreement to an anti-competitive scheme, are “plainly insufficient” to

18 meet Rule 12(b)(6)’s pleading standards. Crane II, 2023 WL 2769096, at *5.

19 Without any direct evidence of the alleged agreements, CCS must provide circumstantial

20 evidence plausibly suggesting the existence of the purported conspiracy. See In re Musical

21 Instruments & Equip. Antitrust Litig., 798 F.3d 1186, 1193, 1194 n.6 (9th Cir. 2015) (noting that

22 plaintiffs can plead “evidentiary facts” that “provide a plausible basis” to “infer the alleged

23 agreements’ existence.”); see also Copeland v. Energizer Holdings, Inc., 2024 WL 511224, at *4

24 (N.D. Cal. Feb. 9, 2024). CCS, however, fails to plead evidentiary facts showing the kind of “plus

25

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8 Although the parties do not dispute that Google and Apple entered into an agreement to make

27

Google’s search engine the default search engine for certain Apple products, CCS’s claims are not

1 factors” necessary to make its conspiracy claims plausible. DRAM, 28 F.4th at 47 (“[P]laintiffs

2 must allege something more than conduct merely consistent with agreement in order to nudge

3 their claims across the line from conceivable to plausible.”) (citation and alteration omitted).

4 First, CCS provides photographs of Google CEO Pichai and Apple CEO Cook having

5 dinner together. But this evidence alone is inadequate to allege a conspiracy for the purposes of

6 Section 1 of the Sherman Act. Rather, these photographs “could just as easily suggest rational,

7 legal business behavior by the defendants.” Kendall, 518 F.3d at 1049; see also Crane II, 2023

8 WL 2769096, at *5.

9 Likewise, Google’s dominance in the search and search advertising markets alone is

10 insufficient to allege that Google and Apple are engaged in a horizontal antitrust conspiracy, as its

11 dominance could rationally be attributed to a number of other market factors. Cf. Abbyy USA

12 Software House, Inc. v. Nuance Commc’ns Inc., 2008 WL 4830740, at *2 (N.D. Cal. Nov. 6,

13 2008) (“[A]bsent well-pleaded allegations of anticompetitive conduct, [plaintiff] may not maintain

14 a cause of action for monopolization, even considering its allegations of large market share.”).

15 CCS also claims that “Apple had actively worked on developing its own general search

16 engine as a potential competitor to Google that would replace Google as the default search engine

17 on its device,” Dkt. No. 112, at 29; that this project was abandoned at some point; and that a

18 former Google executive described the potential loss of its search engine’s default placement on

19 Apple products as a “Code Red,” id. at 30. But again, these facts are consistent with each party

20 pursuing its own rational economic self-interest. Google pays Apple billions of dollars in return

21 for Apple making Google the default search engine on all of its devices, which CCS itself

22 contends is highly valuable to Google.9 This mutually beneficial relationship could just as easily

23 suggest rational unilateral behavior by both companies (which each profit from the arrangement)

24 as it could suggest the existence of an unlawful conspiracy to refrain from competing with one

25

26

9 To be certain, the Court takes judicial notice of the fact that the federal government is currently

pursuing a Section 2 claim against Google based in part upon its default search engine agreement

27

with Apple. United States v. Google LLC, Case No. 20-cv-03010 (D.D.C.). Notably, however, the

1 another in the search and search advertising markets. Similarly, Apple’s purported decision to

2 abandon its search engine project years ago could just as easily be attributed to business factors,

3 such as the actual and opportunity costs of developing a search engine, the difficulty of competing

4 with existing search engines, or the benefit of receiving substantial ongoing payments from

5 Google without having to invest any resources to generate that passive income, as to the existence

6 of an unlawful conspiracy.

7 Because CCS still has not pleaded evidentiary facts sufficient to plausibly suggest the

8 existence of the purported conspiracy between Apple and Google, the Court grants the Apple

9 defendants’ motion to dismiss the Section 1 claim. And because CCS had an opportunity to amend

10 its complaint to address these deficiencies but failed to do so, the dismissal is without leave to

11 amend.10

12 To state a conspiracy to monopolize claim under Section 2 of the Sherman Act, a plaintiff

13 must plausibly show: (1) the existence of a combination or conspiracy to monopolize; (2) one or

14 more overt acts in furtherance of the conspiracy; (3) a specific intent to monopolize; and (4) causal

15 antitrust injury. Paladin Assocs., Inc. v. Montana Power, Co., 328 F.3d 1145, 1158 (9th Cir.

16 2003). CCS’s Section 2 claims fails for largely the same reasons as its Section 1 claim. CCS fails

17 to include in its complaint the requisite agreement between Google and Apple and, for the reasons

18 noted above, fails to plead evidentiary facts sufficient to plausibly allege an agreement or

19 conspiracy between Google and Apple. CCS’s Section 2 claim additionally fails because the

20 second amended complaint does not plead facts establishing a specific intent by the Apple

21 defendants to enable Google’s monopolization of the market. The Court therefore grants the Apple

22

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10 CCS’s allegations might very well have been sufficient to state a claim under the notice

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pleading standards that prevailed before the Supreme Court’s decisions in Twombly and Iqbal.

Since those decisions, however, Rule 12 has required more than conclusory allegations and instead

25

demands the pleading of evidentiary facts plausibly suggesting the existence of an alleged

conspiracy. Indeed, Twombly dealt with the precise issue here—whether the plaintiffs’ bare

26

allegation of an alleged antitrust conspiracy provided “plausible grounds to infer an agreement”

under Rule 12. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007). The Court held that it did

27

not. Though CCS argues that it should be permitted to undertake discovery to obtain the facts

1 defendants’ motion to dismiss the Section 2 claim, again without leave to amend.

2 B. CCS Fails To Adequately Plead State Law Claims.

3 Defendants argue that CCS’s new state law claims under the Cartwright Act, under the

4 UCL, and for unjust enrichment should be dismissed because they are each predicated on the

5 inadequately pleaded federal law claims. The Court agrees.

6 “[T]he requirements for a claim under California’s Cartwright Act are identical to those for

7 a claim under the Sherman Act.” Colonial Med. Grp., Inc. v. Cath. Health Care W., 444 F. App’x

8 937, 939 (9th Cir. 2011) (“[B]ecause we affirm the district court’s dismissal of [plaintiff’s]

9 Sherman Act claims, we also affirm its dismissal of [plaintiff’s] Cartwright Act claims.”). CCS

10 acknowledges this parallelism between the state and federal antitrust laws. Dkt. No. 119, at 26

11 (“Typically, if a plaintiff is capable of maintaining a Sherman Act claim, the plaintiff is capable of

12 maintaining a similar Cartwright Act claim.”). Because the Cartwright Act claim has the same

13 elements as a Sherman Act violation, the Court grants the Apple defendants’ motion to dismiss the

14 Cartwright Act claim without leave to amend.

15 The UCL prohibits unfair competition, which means “any unlawful, unfair, or fraudulent

16 business act or practice.” Cal. Bus. & Prof. Code § 17200. When assessing a UCL claim, courts

17 consider each of three prongs—unlawful, fraudulent, and unfair—to determine whether a practice

18 constitutes unfair competition, and “a claim that sufficiently pleads any of these prongs survives a

19 motion to dismiss.” MacDonald v. Ford Motor Co., 37 F.Supp.3d 1087, 1097 (N.D. Cal. 2014).

20 The unlawful prong requires a predicate legal violation (e.g., a Sherman Act or Cartwright Act

21 violation), the fraudulent prong requires a showing of fraudulent conduct pleaded with

22 particularity under Federal Rule of Civil Procedure 9(b), and the unfair prong requires a showing

23 of substantial injury not outweighed by countervailing benefits to consumers or competition that

24 could not have been reasonably avoided by consumers. Id. at 1098. As an alternative to this

25 balancing approach to the unfair prong, courts in the Ninth Circuit sometimes consider: (1)

26 whether the challenged conduct is “tethered to any underlying constitutional, statutory or

27 regulatory provision, or that it threatens an incipient violation of an antitrust law, or violates the

1 unscrupulous or substantially injurious to consumers.” Doe v. CVS Pharmacy, Inc., 982 F.3d

2 1204, 1215 (9th Cir. 2020).

3 Because CCS fails to adequately plead claims under the Sherman Act and Cartwright Act

4 and has not identified any other unlawfulness in the defendants’ alleged conduct, it cannot bring a

5 UCL claim under the unlawful prong. DRAM, 28 F.4th at 54 n.7 (dismissing plaintiffs’ UCL claim

6 because it was “premised upon the existence of an antitrust conspiracy, and therefore [should] rise

7 and fall with the Sherman Act claim.”). As indicated by CCS at the February 8, 2024 motion

8 hearing and as suggested by defendants in their briefing, Dkt. No. 115, at 28 n.8, CCS appears to

9 be asserting a UCL claim predicated solely on the defendants’ alleged violation of these antitrust

10 laws. The Court’s dismissal of those antitrust claims therefore requires dismissal of CCS’s UCL

11 claim as well. Because the Court dismisses the predicate antitrust claims without leave to amend,

12 it will also dismiss the UCL claim without leave to amend.

13 Even if CCS were pursuing a claim under one of the other prongs, its UCL claim would

14 have to be dismissed. As this Court noted in Crane II, CCS fails to plead with particularity under

15 Rule 9(b) the circumstances of any asserted fraudulent concealment. Crane II, 2023 WL 2769096,

16 at *7 (citing Conmar Corp. v. Mitsui & Co. (USA), 858 F.2d 499, 502 (9th Cir. 1988)). CCS

17 similarly fails to plead facts supporting any of the three Ninth Circuit tests for unfairness. Under

18 the cost-benefit balancing test, CCS fails to establish that the utility of defendants’ conduct is

19 outweighed by the alleged harm to consumers.11 Applying the tethering test, CCS’s claim fails

20 because the underlying Sherman Act and Cartwright Act claims are not adequately pleaded and

21 CCS has not shown that defendants’ conduct threatens an incipient violation of or “violates the

22 policy or spirit” of any antitrust law—which, as relevant here, target agreements and conspiracies

23

24

11 CCS does not address the possible benefits to consumers from Apple and Google’s business

relationship. If Google’s market dominance results from the strength of its search engine,

25

consumers may benefit from having Google serve as the default search engine on Apple devices.

In addition, to demonstrate harm to consumers, CCS would need to plausibly allege that, in the

26

absence of the alleged agreement, Apple would be successful in developing a competitive search

engine notwithstanding that other large corporations like Microsoft have faced difficulty in doing

27

so. Demonstrating harm to consumers in the search advertising market would be an even greater

1 in restraint of trade rather than merely unilateral conduct. Dkt. No. 119, at 27; CVS Pharmacy, 982

2 F.3d at 1215; see also The Jeanery, Inc. v. James Jeans, Inc., 849 F.2d 1148, 1152 (9th Cir. 1988)

3 (“Unilateral conduct by a single firm, even if it appears to restrain trade unreasonably, is not

4 unlawful under section 1.”) (cleaned up). Likewise, there is no plausible showing that the alleged

5 practice is immoral, unethical, or oppressive to consumers. See supra note 11.

6 CCS’s final claim is for unjust enrichment.12 “When a plaintiff alleges unjust enrichment, a

7 court may construe the cause of action as a quasi-contract claim seeking restitution.” Astiana v.

8 Hain Celestial Group, Inc., 783 F.3d 753, 762 (9th Cir. 2015). To adequately allege unjust

9 enrichment as a quasi-contract claim for restitution, “a plaintiff must show that the defendant

10 received and unjustly retained benefit at the plaintiff’s expense.” ESG Capital Partners, LP v.

11 Stratos, 828 F.3d 1023, 1038 (9th Cir. 2016). In support of its unjust enrichment claim, CCS

12 alleges only that both the Google defendants and the Apple defendants have been unjustly

13 enriched “[a]s a result of their unlawful conduct described above” and “from their unlawful acts.”

14 Dkt. No. 112, at 55. Crucially, CCS does not identify what benefit the Apple defendants received

15 from CSS that should be returned to CSS. To the contrary, CCS alleges that its payments were

16 made solely to Google. Further, CCS’s claim is by its own terms premised on the unlawfulness of

17 the defendants’ conduct, and the Court has already concluded that the second amended complaint

18 fails to state a valid claim of unlawfulness under any other state or federal law. The Court

19 therefore grants the Apple defendants’ motion to dismiss CCS’s unjust enrichment claim without

20 leave to amend.13

21

22 12 The Apple defendants contend that California law generally does not provide such a standalone

cause of action. Dkt. No. 115, at 30–31; see Astiana v. Hain Celestial Group, Inc., 783 F.3d 753,

23 762 (9th Cir. 2015). On the basis of intervening California Supreme Court authority, however, the

Ninth Circuit has more recently acknowledged (in a nonprecedential opinion) that unjust

24 enrichment may constitute a standalone cause of action under California law. Bruton v. Gerber

Products Co., 703 F. App’x 468, 470 (9th Cir. 2017) (citing Hartford Casualty Ins. Co. v. J.R.

25 Mktg., LLC, 61 Cal.4th 988, 998 (2015), which noted that the “law implies a restitutionary

obligation” where the doctrine of unjust enrichment applies). Because CCS has not pleaded the

26 elements of a claim for unjust enrichment or restitution, the Court need not resolve this issue.

13 Where a plaintiff has had numerous opportunities to amend their complaint but has failed to

27

identify any viable legal theories, the district court has discretion to dismiss without leave to

1 CONCLUSION

2 For the foregoing reasons, the Court grants the Google defendants’ motion to compel

3 arbitration of all claims except CCS’s UCL claim for public injunctive relief. The Court grants

4 || without leave to amend the Google and Apple defendants’ motions to dismiss the UCL claim and

5 || the Apple defendants’ motion to dismiss the remaining claims.

6

7 IT IS SO ORDERED.

8 || Dated: March 21, 2024 Ay Za,

9

P. Casey Pitts

10 United States District Judge

11

12

15

16

= 17

Z 18

19

20

21

22

23

24

25

26

27

28 court may deny leave to amend where a plaintiff has repeatedly failed to cure deficiencies by

amendments previously allowed.”) (cleaned up).