Pulaski & Middleman, LLC v. Google, Inc.

802 F.3d 979, 92 Fed. R. Serv. 3d 1200, 2015 U.S. App. LEXIS 16723, 2015 WL 5515617
CourtCourt of Appeals for the Ninth Circuit
DecidedSeptember 21, 2015
Docket12-16752
StatusPublished
Cited by105 cases

This text of 802 F.3d 979 (Pulaski & Middleman, LLC v. Google, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Ninth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Pulaski & Middleman, LLC v. Google, Inc., 802 F.3d 979, 92 Fed. R. Serv. 3d 1200, 2015 U.S. App. LEXIS 16723, 2015 WL 5515617 (9th Cir. 2015).

Opinion

OPINION

PAEZ, Circuit Judge:

Between 2004 and 2008, many online internet advertisers used Google, Inc.’s (“Google”) AdWords program, an auction-based program through which advertisers would bid for Google to place their advertisements on websites. Pulaski & Middleman, LLC and several other named plaintiffs (“Pulaski”) 1 brought this putative class action under California’s Unfair Competition and Fair Advertising Laws, alleging that Google misled them as to the types of websites on which their advertise *982 ments could appear. The putative class initially sought injunctive and restitution-ary relief. After Google changed certain features of the AdWords program, Pulaski, upon filing a Third Amended Consolidated Class Action Complaint, abandoned the claim for injunctive relief. The only relief the putative class now seeks is the equitable remedy of restitution.

Pulaski appeals the district court’s denial of class certification. The district court held that on the claim for restitution, common questions did hot predominate over questions affecting individual class members. In denying certification, the court reasoned that it was not bound by our decision in Yokoyama v. Midland National Life Insurance Co., 594 F.3d 1087, 1094 (9th Cir.2010). It then explained that determining which class members are entitled to restitution and what amount each class member should receive would require individual inquiries that “permeate the class claims.”

Pulaski argues that the district court erred in failing to follow Yokoyama. As explained below, we agree. We therefore reverse the denial of class certification and remand for further proceedings.

I. Background

A.

This case concerns Google’s AdWords program, an auction-based program through which Google served as an intermediary between website hosts and advertisers. Through AdWords, internet advertisers provided advertisements to Google and its third party website-owner partners. To participate, advertisers entered Google-defined variables into the AdWords interface on Google’s website, including the maximum price per ad they would be willing to pay and their overall budget. They also selected which Google-defined categories of websites they wanted to display the ad. Afterwards, using an auction-based algorithm, AdWords determined the online placement and price of the ad. Thus, during the class period, advertisers did not know in advance exactly where their ads would appear.

Advertisers paid a particular price to Google each time an Internet user “clicked” on their displayed ad. The price of a particular click depended on several factors: the maximum bids of other Ad-Words customers for clicks based on the same search term, a “quality score” of the advertisement, and a “Smart Pricing” discount applied to the website where the ad had been placed. Google created and instituted Smart Pricing, an internally-calculated. price adjustment, to adjust the advertiser’s bids to the same levels that a “rational advertiser” would bid if the rational advertiser had sufficient data about the performance of ads on each website. Smart Pricing is a ratio calculated by dividing the conversion rate 2 for the lower-quality website by the conversion rate for the same ad on google.com.

There are several categories of websites in play. During the class period, an advertiser using AdWords could request that its ads appear on Search Feed sites, Content Network sites, or both. Search Feed sites display AdWords ads along with search results after a user searches for information using a particular search term. After entering a particular term, a user would be presented with both ordinary search results and ads related to the search term. Content Network websites, on the other hand, are full content sites, like ny- *983 times.com, that publish information independent of search results. Ads would appear on these sites if the ad’s keywords matched those of the website.

There are other categories of sites that did not appear in the AdWords registration process: parked domains and error pages. Parked domain pages are undeveloped domains whose pages appear when users type generic terms into a web browser. These are pages of ads without content. Error pages appear when a person inputs an unregistered web address, or something other than a web address, into a web browser’s address bar. Typing this information into an address bar used to result in error messages, but during the class period inputting this information resulted in error pages that offered ads. Even though only Search Feed and Content Network websites were listed in the AdWords registration process, AdWords ads appeared on both parked domains and error pages.

B.

Pulaski alleges that Google misled advertisers, violating California’s Unfair Competition Law (“UCL”), Cal Bus. & Prof.Code § 17200 et seq., 3 and California’s Fair Advertising Law (“FAL”), § 17500 et seq., by failing to disclose the placement of AdWords ads on parked domains and error pages. The putative class consists of “[a]ll persons or entities located within the United States who, from July 11, 2004 through March 31, 2008 ... had an Ad-Words account with Google and were charged for clicks on advertisements appearing on parked domain and/or error page websites,” with exclusions. 4 Pulaski, on behalf of the putative class, seeks restitution of moneys Google wrongfully obtained from the putative class.

Pulaski moved for class certification pursuant to Rule 23 of the Federal Rules of Civil Procedure (“Rule 23”) for a Rule 23(b)(3) class. Pulaski proposed three different methods for calculating restitution, all of which were based on a “but for” or “out-of-pocket loss” calculation: the difference between what advertisers actually paid and what they would have paid had Google informed them that their ads were being placed on parked domains and error pages. The first approach is based on Google’s Smart Pricing formula as . described above. The amount of restitution owed a class member would be the difference between the amount the advertiser actually paid and the amount paid reduced by the Smart Pricing discount ratio. The second method is the Content Pricing approach, 5 which factors in the lower bidding that would have occurred had advertisers been allowed to bid separately on parked domains and error pages. Search Feed clicks were priced higher than Content Network clicks, which in turn were considered more desirable than parked domains and error pages.

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802 F.3d 979, 92 Fed. R. Serv. 3d 1200, 2015 U.S. App. LEXIS 16723, 2015 WL 5515617, Counsel Stack Legal Research, https://law.counselstack.com/opinion/pulaski-middleman-llc-v-google-inc-ca9-2015.