Gaby's Bags, LLC v. Mercari, Inc. ( 2020 )

1 2 3 4 5 6 UNITED STATES DISTRICT COURT 7 NORTHERN DISTRICT OF CALIFORNIA 8 9 10 GABY'S BAGS, LLC, 11 Plaintiff, No. C 20-00734 WHA 12 v. 13 MERCARI, INC., ORDER GRANTING DEFENDANT’S MOTION FOR SUMMARY 14 Defendant. JUDGMENT 15 16 The facts of this action have been stated in detail in prior orders and need not be 17 discussed herein (Dkt. No. 111). In brief, defendant Mercari, Inc. promoted its web platform 18 called Mercari.com for commerce in miscellaneous goods as a venue where “anyone can sell.” 19 Relying on such statements, plaintiff Gaby’s Bags, LLC opened a Mercari account and began 20 selling handbags on Mercari’s platform. In doing so, plaintiff generated nearly $400,000 over 21 a two-year period until Mercari terminated plaintiff’s account for violating its terms of service 22 — which barred “business accounts.” 23 Plaintiff then brought this action in Florida state court alleging unfair competition under 24 various Florida statutes and the Lanham Act, 15 U.S.C. § 1125(a). After removal to United 25 States District Court for the Middle District of Florida, the action came here pursuant to a 26 mandatory forum-selection clause. Mercari then filed a motion for judgment on the pleadings, 27 asserting that the word “anyone” clearly indicated any individual. Thus, plaintiff — acting 1 at 5–6). A prior order then granted in part and denied in part Mercari’s motion for judgment 2 on the pleadings. Finding the choice-of-law provision in the terms of service controlled — 3 requiring the terms to be “governed and construed under the laws of California” — that order 4 dismissed the Florida claims, leaving only plaintiff’s claim under the Lanham Act. 5 Mercari asserted that the terms of service barred plaintiff’s Lanham Act claim because it 6 explicitly provided that Mercari’s service was for “individual” use and thus barred “business 7 accounts” like plaintiff’s. Finding that the terms of service was not “so clear cut as to allow 8 judgment on the pleadings,” however, that order allowed plaintiff’s claim to go forward. 9 Moreover, that order held that plaintiff had sufficiently pled a false advertising claim under the 10 Lanham Act. But that order did not address whether or not plaintiff had standing to sue under 11 the Lanham Act. 12 Mercari now brings a motion for summary judgment arguing, among other things, that 13 plaintiff does not have standing under the Lanham Act. For the following reasons, this order 14 agrees. 15 In Lexmark Int’l, Inc. v. Static Control Components, Inc., 572 U.S. 118 (2014), the 16 Supreme Court elucidated a two-part test for determining whether or not a plaintiff has 17 standing under the Lanham Act to bring a false advertising claim. First, the plaintiff’s interests 18 must fall within the “zone of interests” protected by the Lanham Act. In order “to come within 19 the zone of interests in a suit for false advertising under § 1125(a), a plaintiff must allege an 20 injury to a commercial interest in reputation or sales.” Competitors, not consumers, can bring 21 a claim under the Lanham Act. Id. at 131–32. 22 Second, the plaintiff must demonstrate proximate causation. That is, “a plaintiff suing 23 under § 1125(a) ordinarily must show economic or reputational injury flowing directly from 24 the deception wrought by the defendant's advertising; and that that occurs when deception of 25 consumers causes them to withhold trade from the plaintiff.” Id. at 133. 26 Here, plaintiff has failed to show it has standing to sue under the Lanham Act because 27 neither prong is met. For one thing, plaintiff sustained his complained of harm as a consumer 1 consumer-to-consumer platform that does not itself sell any goods (Dkt. No. 7-2). Though 2 plaintiff’s opposition brief conclusory disputes these facts, it fails to offer any evidence to the 3 contrary. Even if Mercari and plaintiff could be considered competitors of sorts, plaintiff’s 4 complained of harm arises out of its relationship with Mercari as a consumer given that the 5 statements at issue — that “anyone can sell” — related to the type of platform Mercari 6 provided, not any other products (e.g., handbags) available on Mercari. As Mercari contends, 7 therefore, plaintiff’s injuries arose from its relationship with Mercari as a consumer — a party 8 who used Mercari’s platform — and not as a competitor. But a claim for relief under the 9 Lanham Act “is for competitors, not consumers.” POM Wonderful LLC v. Coca-Cola Co., 573 10 U.S. 102, 107 (2014). And, “[a] consumer who is hoodwinked into purchasing a disappointing 11 product may well have an injury-in-fact cognizable under Article III, but he cannot invoke the 12 protection of the Lanham Act[.]” Lexmark, at 131–32. 13 For another, plaintiff has failed to show proximate cause. Specifically, it has failed to 14 show how Mercari’s statement that “anyone can sell” on Mercari’s platform deceived 15 consumers to withhold trade from plaintiff. This order thus agrees with Mercari’s contention 16 that “Mercari’s advertising about who can sell on Mercari has nothing to do with whether 17 buyers will purchase from [p]laintiff” (Dkt. No. 140 at 11) (emphasis omitted). Instead, 18 plaintiff’s theory is that itself, not any consumer, was deceived into opening a Mercari account 19 as a result of Mercari’s statements. Indeed, the declaration of Kody Yates, plaintiff’s operating 20 member, affirms this point (see Decl. Yates ¶ 13) (“Mercari’s advertisements that ‘anyone’ can 21 sell misled, deceived, and confused Gaby’s Bags.”). Thus, plaintiff cannot and has not shown 22 proximate causation. Accordingly, this order GRANTS Mercari’s motion for summary 23 judgment seeking dismissal of plaintiff’s sole remaining claim under the Lanham Act for lack 24 of statutory standing. 25 Lastly, plaintiff’s Rule 56(d) request to deny or defer ruling on Mercari’s motion to allow 26 for more discovery is DENIED. No amount of discovery can cure the fundamental flaw here — 27 how Mercari’s statement that “anyone can sell” on its platform proximately caused consumers 1 to withhold trade from plaintiff or caused plaintiff any competitive injury protected under the 2 Lanham Act. 3 Plaintiff is invited to move for leave to amend his complaint by OCTOBER 21, 4 2020, AT NOON. Plaintiff must plead its best case. Its motion should affirmatively 5 demonstrate how the proposed amended complaint corrects the deficiencies identified in this 6 order, as well as any other deficiencies raised in Mercari’s motion but not addressed herein. 7 The motion should be accompanied by a redlined copy of the amended complaint. 8 IT IS SO ORDERED. 9 Dated: October 7, 2020. 10 A ] | . □ LIAM ALSUP 11 UNITED STATES DISTRICT JUDGE 12 13 © 15 16 = 17 Z 18 19 20 21 22 23 24 25 26 27 28