Court: District Court, N.D. California; May 15, 2019; Federal District Court
The case involves a contractual dispute between Plaintiffs, eOnline Global, Inc., Sonoran Online Marketing, LLC, and Four Peaks Online Marketing, LLC, and Defendant Google LLC regarding the AdSense advertising program. Plaintiffs, who operate as website publishers, allege breach of contract, breach of the implied covenant of good faith and fair dealing, and seek declaratory relief following Google's termination of their advertising accounts and withholding of over $400,000 in payments.
Google operates AdSense to connect advertisers with publishers, providing code to display ads on publishers' websites. Publishers earn revenue based on user interactions with the ads, with Google retaining 32% of the revenue generated from clicks. The contract governing this relationship is composed of the Google AdSense Online Terms of Service (TOS) and the AdSense Program Policies, which collectively outline payment structures, content requirements, and termination rights for either party.
The TOS specifies that Google may withhold payments if the agreement is terminated due to a publisher's breach or invalid activity. Plaintiffs created multiple companies to bypass a limit of 500 URLs per AdSense account, a practice they undertook based on advice from a Google employee. The Court has ruled in favor of Google by granting its motion for summary judgment and denying Plaintiffs' cross-motion, indicating that the claims brought by Plaintiffs do not succeed based on the terms of the Agreement.
Plaintiff companies participated in Google's AdSense program from 2008 to 2015, generating revenue until their accounts were terminated in July 2016. Google had linked the accounts for evaluation purposes and issued multiple warnings about policy violations related to ad placements on mobile sites prior to termination. The termination notice cited non-compliance with AdSense policies, emphasizing the need for original and relevant content on sites displaying ads. Following the termination, Plaintiffs had $404,433.44 in unpaid earnings, which Google refunded to advertisers. The legal standard for summary judgment requires that the moving party demonstrate there is no genuine dispute over material facts and is entitled to judgment as a matter of law. A dispute is considered "genuine" if a reasonable fact finder could favor the nonmoving party, with material facts potentially altering the case's outcome. The burden of production lies with the moving party, who must negate essential elements of the nonmoving party's claims or show insufficient evidence. If the moving party meets this burden, the nonmoving party must then present specific evidence to create a genuine dispute, or the motion will prevail.
For motions where the moving party bears the ultimate burden of proof at trial, the moving party must demonstrate each essential element of their claims through undisputed facts to succeed. This requires evidence sufficient for the court to conclude that no reasonable trier of fact could rule otherwise. Only after this threshold is met does the nonmoving party need to present significant probative evidence supporting their claim or defense. The nonmoving party's evidence must be adequate for a jury to potentially return a verdict in their favor; if it is merely colorable or not significantly probative, summary judgment may be granted.
In the context of Google's motion, they must either negate an essential element of Plaintiffs' claims or demonstrate that Plaintiffs cannot produce sufficient evidence to meet their burden at trial. If Google achieves this, Plaintiffs can still counter by generating a genuine issue of material fact. Conversely, for Plaintiffs to succeed in their cross motion, they need to show that no reasonable fact finder could rule in favor of Google on any element of their claims, which Google can contest by introducing evidence that raises a genuine issue of material fact.
Plaintiffs assert that Google breached the Agreement by withholding unpaid funds when Plaintiffs' termination was not due to any breach by them. The elements required to establish a breach of contract include the existence of the contract, the plaintiff's performance or justification for nonperformance, the defendant's breach, and the resultant damages. Google argues that Plaintiffs cannot demonstrate their performance under the Agreement, effectively negating that element. Google has provided sufficient evidence to meet its initial burden, while Plaintiffs have not successfully presented evidence to create a genuine dispute regarding their performance, and their arguments on this point lack persuasiveness.
The Agreement is governed by California law. A fundamental principle in California contract law is that a party seeking to enforce a contract must demonstrate compliance with its own contractual obligations. A plaintiff who has materially breached or failed to perform their contractual duties cannot pursue a breach of contract claim against the other party. Recovery for breach is contingent upon the plaintiff fulfilling their obligations or being excused from performance. For a breach to excuse performance by one party, the breach by the other must be material. Determining whether a breach is material is typically a factual matter, but can be resolved as a matter of law if reasonable minds cannot differ. A breach is considered material if it frustrates the contract's purpose. Summary judgment is appropriate when there is no genuine dispute that the complaining party failed to perform, as seen in cases where the plaintiff's nonperformance bars their breach of contract claim.
Plaintiffs breached the Agreement with Google in two significant ways, both undisputed. First, they created websites specifically designed for running ads, which is prohibited by Google's Program Policies that state ads cannot be placed on pages created solely for that purpose. Evidence indicates Plaintiffs deliberately selected website topics based on potential profitability, focusing on anticipated visitor traffic and ad-click revenue. They planned to publish a website featuring content about "free website hosting" while running ads that did not offer free services, knowingly misleading visitors.
Plaintiffs utilized keyword phrases like "bad credit loans" to attract high-paying advertisements, generating numerous article titles based on these keywords, which were then written by Textbroker. They directed the content creation to ensure keyword repetition, often producing low-value, duplicative articles. For instance, multiple articles on their site NoCreditUSA addressed obtaining credit cards despite bad credit without providing substantive guidance. Although Fishman reviewed the articles for basic English compliance, there was no quality or accuracy control, leading to visitor complaints about inaccurate and conflicting information. This pattern of behavior demonstrates a calculated effort by Plaintiffs to publish content solely to generate ad revenue, constituting a clear violation of the Program Policies.
Plaintiffs acknowledge that their websites employed intentionally deceptive practices, violating Program Policies that prohibit such methods to generate clicks. They created content designed to mislead users into thinking there was an active community of genuine visitors, as illustrated by an email from Ashworth instructing Fishman to log in under multiple identities to distribute articles across different accounts. Google has demonstrated that Plaintiffs breached the Agreement by failing to perform material obligations, particularly through deceptive content that undermined the Agreement's purpose. The NoCreditUSA website alone accounted for over 44% of Plaintiffs' earnings in the six weeks leading up to their termination, supporting Google's claim.
Plaintiffs' attempts to counter Google's arguments lack merit. They fail to provide evidence or dispute the facts presented, instead raising four additional arguments. First, they claim they did not commit the specific breaches mentioned by Google, but this does not address whether they fulfilled their contractual obligations. Second, they argue that many breaches cited by Google were based on documents outside the Terms of Service (TOS) or Program Policies; however, since Plaintiffs accepted these policies as binding, the court finds this argument unnecessary, confirming their breach of the Program Policies.
Plaintiffs contest allegations of breach of contract by asserting a lack of causal connection to Google's withholding of funds. However, they must demonstrate independent performance under the Agreement, which they fail to do, as they do not dispute their breaches of specific Program Policies. Consequently, the Court grants Google's motion on the breach of contract claim.
Under California law, every contract includes an implied covenant of good faith and fair dealing, which protects mutual expectations. A breach of this covenant constitutes a breach of contract. Plaintiffs must prove a contract exists, their performance under it, deprivation of a benefit due to the defendant's actions, and resultant damages. The Court finds that Plaintiffs did not perform under the contract, thus granting summary judgment to Google on this claim as well.
Regarding Plaintiffs' claim for declaratory relief against the Limitation of Liability provision based on unconscionability, Google argues that Plaintiffs lack standing since their other claims are unsuccessful. The Court agrees, citing the necessity of showing actual injury, traceability to the defendant's conduct, and potential redress from the court. Consequently, the Court grants Google's motion regarding the declaratory relief claim.
In conclusion, the Court grants Google's motion for summary judgment on all claims made by Plaintiffs and denies their cross motion for summary judgment.
