District Court (Cal.) Says Aggregation of Small Business Plaintiffs is Neither the “General Public” Nor Consumers Entitled to Protection under B&P Code 17200

In TopDevz, LLC v. LinkedIn Corp., No. 20-cv-08324-SVK, 2021 U.S. Dist. LEXIS 145186, at *9 (N.D. Cal. Aug. 3, 2021), Judge Van Keulen dismissed with leave to amend a group of small businesses’ challenge to LinkedIn’s charges overstating the level of actual user engagement with ads placed on the LinkedIn platform in order to charge premium rates to advertisers.  The Court found that the small businesses were not “consumers” under the UCL, nor was the aggregation of small businesses the “general public”.

Some courts have held that “where a UCL action is based on contracts not involving either the public in general or individual consumers who are parties to the contract, a corporate plaintiff may not rely on the UCL for the relief it seeks.” Linear Tech. Corp. v. Applied Materials, Inc., 152 Cal. App. 4th 115, 135, 61 Cal. Rptr. 3d 221 (Cal. Ct. App. 2007); see also Rosenbluth Internat., Inc. v. Sup. Ct., 101 Cal. App. 4th 1073, 1077, 124 Cal. Rptr. 2d 844 (Cal. Ct. App. 2002) (“a UCL action based on a contract is not appropriate where the public in general is not harmed by the defendant’s unlawful practices). However, courts have also held that “Linear Tech. does not prevent all corporate plaintiffs from proceeding under the UCL where the contract-at-issue does not involve either the public or individual consumers, but rather Linear Tech. only  precludes sophisticated corporations or large corporations from seeking such relief.” AdTrader, Inc. v. Google LLC, No. 17-cv-07082-BLF, 2019 U.S. Dist. LEXIS 68151, 2019 WL 1767206, at *10 (N.D. Cal. Apr. 22, 2019) (internal quotation marks and citations omitted).  The LinkedIn Ads Agreement at issue here does not involve either the general public or individual consumers. Accordingly, whether Plaintiffs may bring a UCL claim depends on whether they are sophisticated or large corporations or are instead small and unsophisticated entities. The Consolidated Complaint states that “[m]ost LinkedIn advertisers are small businesses.” Cons. Comp. ¶ 28. It describes each named Plaintiff as a corporation or limited liability company. Cons. Comp. ¶¶ 16-18. Although the Consolidated Complaint contains a conclusory and somewhat ambiguous allegation that one of the named Plaintiffs, TopDevz, is “a small-business team” (id. ¶ 102), Plaintiffs do not plead any facts (such as their employee headcounts or other attributes) establishing that they are small and/or unsophisticated entities. See AdTrader, 2019 U.S. Dist. LEXIS 68151, 2019 WL 1767206, at *10. The Court also notes that the putative class includes all persons or entities who paid for the placement of advertisements on LinkedIn’s platform, without limitation as to the size or sophistication of such persons or entities. Cons. Comp. ¶ 132.  Plaintiffs alternatively argue that they have pleaded a connection to public protection. Opp. at 6-7. Some courts have held that “[t]he relative size of the plaintiff companies … is secondary to the analysis of whether, as a result of the alleged unfair or fraudulent business practice, consumers are adversely affected.” In re Webkinz Antitrust Litig., 695 F. Supp. 2d 987, 998-99 (N.D. Cal. 2010). However, Plaintiffs’ allegations of harm to the public are vague and conclusory. See Cons. Comp. ¶ 11 (“Given LinkedIn’s conceded position as the leading online network for business professionals, LinkedIn’s systemically inflated ad metrics and inflated advertising costs have broad impact on the public”); id. (“Paying inflated advertising costs on LinkedIn also leaves advertisers with less money to spend on other aspects of their businesses, including the content and quality of their ads (which diminishes LinkedIn users’ experience on the platform), and their product and service offerings, which diminishes overall consumer welfare”); ¶ 82 (“LinkedIn’s misconduct harmed and continue [sic] to harm advertisers and the public in violation of state policies prohibiting such dishonest conduct”); ¶ 163 (“LinkedIn’s unlawful, fraudulent, and unfair business acts harm the public and the economy”) ¶ 164 (similar to ¶ 11, discussed above). These allegations lack the necessary factual support. Moreover, because of the vagueness of these allegations, the Court cannot conclude that Plaintiffs have made actionable UCL allegations that extend “beyond the scope of the parties’ contractual relationship,” as Plaintiffs contend. Opp. at 7.  Accordingly, the UCL claim is DISMISSED WITH LEAVE TO AMEND on the ground that Plaintiffs have not pleaded facts showing either that they are small and unsophisticated entities or that LinkedIn’s alleged conduct affected the public at large or consumers generally.