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DORSEY & WHITNEY LLP Jonathan M. Herman Christopher G. Karagheuzoff Jonathan Montcalm 51 West 52nd Street New York, New York 10019 (212) 415-9200 Attorneys for Defendants Penguin Group (USA) Inc. and Author Solutions, Inc. UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

KELVIN JAMES, JODI FOSTER, AND TERRY HARDY, on behalf of themselves and all others similarly situated,

Plaintiffs, v. PENGUIN GROUP (USA) INC. and AUTHOR SOLUTIONS,

Defendants.

x : : : : : : : : : : : x

Case No. 13 CV 2801 (DLC) ECF Case

MEMORANDUM OF LAW IN SUPPORT OF DEFENDANTS’ MOTION TO DISMISS

DORSEY & WHITNEY LLP 51 West 52nd Street New York, NY 10019 (212) 415-9200 (Phone) (212) 953-7201 (Fax)

Case 1:13-cv-02801-DLC Document 9 Filed 06/21/13 of 33

TABLE OF CONTENTS

PRELIMINARY STATEMENT ....................................................................................................... 1

FACTUAL BACKGROUND ........................................................................................................... 3

ARGUMENT .................................................................................................................................... 4

I. AS AGAINST PENGUIN, THE COMPLAINT FAILS TO STATE ANY CLAIM AND SHOULD THEREFORE BE DISMISSED ................................................................. 5

II. HARDY’S CLAIMS SHOULD BE DISMISSED BECAUSE HIS CONTRACT REQUIRES HIS SUIT TO HAVE BEEN BROUGHT IN THE INDIANA COURTS ....... 6

III. BECAUSE THE LAW IS WELL-SETTLED THAT AN UNJUST ENRICHMENT CLAIM MAY NOT LIE WHERE PLAINTIFFS ALLEGE THE EXISTENCE OF A CONTRACT, PLAINTIFFS’ UNJUST ENRICHMENT CLAIMS SHOULD BE DISMISSED .......................................................................................................................... 8

IV. FOSTER FAILS TO STATE A CLAIM UNDER THE CALIFORNIA CONSUMER PROTECTION LAWS .......................................................................................................... 9

A. Foster Lacks Standing Under the FAL and UCL ......................................................... 9

B. Because Foster Fails to Satisfy the Heightened Pleading Standards of Rule 9(b), Her California Claims Should Be Dismissed ...................................................... 11

1. Foster’s California Claims Must be Pled With Particularity Under Rule 9(b). ..................................................................................................................... 11

2. Foster Has Not Met the Rule 9(b) Standard. ....................................................... 12

C. Foster Fails to State a Claim Under the FAL ............................................................... 15

D. Foster Fails to State a Claim Under the UCL ............................................................... 18

1. Unlawful Business Practice ................................................................................. 18

2. Unfair Business Practice ..................................................................................... 19

3. Fraudulent Business Practice .............................................................................. 21

V. JAMES FAILS TO STATE A CLAIM UNDER N.Y.G.B.L. § 349 .................................... 22

CONCLUSION ................................................................................................................................. 25


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TABLE OF AUTHORITIES

Page(s) CASES

Anunziato v. eMachines, Inc., 402 F. Supp. 2d 1133 (C.D. Cal. 2005) ......................................................................................... 17

Ashcroft v. Iqbal, 556 U.S. 662 (2009) .................................................................................................................... 4, 5

Azby Brokerage, Inc. v. Allstate Ins. Co., 681 F. Supp. 1084 (S.D.N.Y. 1988) .............................................................................................. 23

Baosteel Am., Inc. v. M/V “OCEAN LORD”, 257 F. Supp. 2d 687 (S.D.N.Y. 2003) ............................................................................................. 7

Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) ........................................................................................................................ 5

Beth Israel Med. Ctr. V. Horizon Blue Cross and Blue Shield of N.J., Inc., 448 F.3d 573 (2d Cir. 2006) ............................................................................................................ 8

Birdsong v. Apple, Inc., 590 F.3d 955 (9th Cir. 2009) ......................................................................................................... 18

Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585 (1991) ........................................................................................................................ 7

Cel-Tech Commc’ns, Inc. v. Los Angeles Cellular Tel. Co., 20 Cal. 4th 163 (Cal. 1999) ........................................................................................................... 18

Cfirstclass Corp. v. Silverjet PLC, 560 F. Supp. 2d 324 (S.D.N.Y. 2008) ............................................................................................. 7

Chambers v. Time Warner, Inc., 282 F.3d 147 (2d Cir. 2002) ............................................................................................................ 4

Chevy’s Int’l, Inc. v. Sal De Enters., Inc., 697 F. Supp. 110 (E.D.N.Y. 1998) ................................................................................................ 23

Cook, Perkiss & Liehe, Inc. v. N. Cal. Collection Serv., 911 F.2d 242 (9th Cir. 1990) ................................................................................................... 16, 18

Crucible Materials Corp. v. Aetna Casualty and Surety Co., No. 97 CV 759, 1998 WL 404239 (N.D.N.Y. July 15, 1998) ...................................................... 14

Cruz v. NYNEX Info. Res., 703 N.Y.S.2d 103 (1st Dep’t 2000) .............................................................................................. 23


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Cytyc Corp. v. Neuromedical Sys., Inc., 12 F. Supp. 2d 296 (S.D.N.Y. 1998) ............................................................................................. 23

Daniels v. Provident Life & Cas. Ins. Co., 00-CV-668E, 2001 WL 877329 (W.D.N.Y. July 25, 2001) ......................................................... 25

Davis v. HSBC Bank Nevada, N.A., 691 F.3d 1152 (9th Cir. 2012) ........................................................................................... 18, 21, 22

Delacruz v. Cytosport, Inc., No. C 11-3532 CW, 2012 WL 1215243 (N.D. Cal. Apr. 11, 2012) ....................................... 12, 14

DiVittorio v. Equidyne Extractive Indus., Inc., 822 F.2d 1242 (2d Cir. 1987) ........................................................................................................ 12

Eckler v. Wal-Mart Stores, Inc., No. 12-CV-727-LAB-MDD, 2012 WL 5382218 (S.D. Cal. Nov. 1, 2012) ........................... 11, 20

Effron v. Sun Line Cruises, Inc., 67 F.3d 7 (2d Cir. 1995) .................................................................................................................. 7

Fink v. Time Warner Cable, 810 F. Supp. 2d 633 (S.D.N.Y. 2011) ......................................................................... 17, 19, 20, 23

Fletcher v. Atex, 68 F.3d 1451 (2d Cir. 1995) ............................................................................................................ 5

Fteja v. Facebook, Inc., 841 F. Supp. 2d 829 (S.D.N.Y. 2012) ............................................................................................. 7

Garcia v. Sony Computer Entertainment Am., LLC, 859 F. Supp. 2d 1056 (N.D. Cal. 2012) ........................................................................................ 21

Glen Holly Entertainment, Inc. v. Tektronix Inc., 343 F.3d 1000 (9th Cir. 2003) ....................................................................................................... 16

Hartless v. Clorox Co., No. 06–CV–2705 JAH(CAB), 2007 WL 3245260 (S.D. Cal. Nov. 2, 2007) ............................... 18

Haskell v. Time, Inc., 857 F. Supp. 1392 (E.D. Cal. 1994) .............................................................................................. 18

Hughes v. Ester C Co., NBTY, Inc., No. 12-CV-0041 (JFB)(ETB), -- F. Supp. 2d --, 2013 WL 1080533 (E.D.N.Y. March 15, 2013) .................................................................................................................................. 11, 12, 15

In re Digital Music Antitrust Litigation, 812 F. Supp. 2d 390 (S.D.N.Y. 2011) ......................................................................................... 5, 6


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In re Horton, 372 B.R. 349 (Bkrtcy. W.D. Ky. 2007) ........................................................................................ 14

In re Salomon Analyst Level 3 Litig., 350 F. Supp. 2d 477 (S.D.N.Y. 2004) ........................................................................................... 10

In re Scotts EZ Seed Litig., No. 12 CV 4727 (VB), 2013 WL 2303727 (S.D.N.Y. May 22, 2013) ......................................... 11

In re Sony Grand Wega KDF-E A10/A20 Series Rear Proj. HDTV Telev. Litig., 758 F. Supp. 2d 1077 (S.D. Cal. 2010) ......................................................................................... 15

In re Tobacco II Cases, 46 Cal. 4th 298 (Cal. 2009) ........................................................................................................... 21

In re Toyota Motor Corp. Unintended Acceleration Marketing, Sales Practices, and Prods. Liability Litig., 754 F. Supp. 2d 1145 (C.D. Cal. 2010) ......................................................................................... 16

In re WellPoint, Inc. Out-of-Network UCR Rates Litig., 865 F. Supp. 2d 1002 (C.D. Cal. 2011) ......................................................................................... 11

Interbank Invs., LLC v. Eagle River Water & Sanitation Dist., 77 P.3d 814 (Colo. App. 2003) ....................................................................................................... 9

Kearns v. Ford Motor Co., 567 F.3d 1120 (9th Cir. 2009) ....................................................................................................... 11

King County Wash. v. IKB Deutsche Industriebank AG, Nos. 09 Civ. 8387 (SAS), 09 Civ. 8822 (SAS), 2010 WL 2010943 (S.D.N.Y. May 18, 2010) .............................................................................................................................................. 10

King’s Choice Neckwear, Inc. v. Pitney Bowes, Inc., No. 09 Civ. 3980 (DLC), 2009 WL 5033960 (S.D.N.Y. Dec. 23, 2009) ....................................... 8

Klein v. Chevron U.S.A., Inc., 202 Cal. App. 4th 1342 (Cal. App. Ct. 2012) ................................................................................. 9

Kohl’s Ind. L.P v. Owens, 979 N.E.2d 159 (Ind. Ct. App. 2012) .............................................................................................. 9

Kowalsky v. Hewlett-Packard Co., 771 F. Supp. 2d 1138 (N.D. Cal. 2010) .................................................................................. 16, 20

Kunert v. Mission Financial Services Corp., 110 Cal. App. 4th 242 (Cal. App. Ct. 2003) ................................................................................. 20

Kwikset Corp. v. Superior Court, 51 Cal. 4th 310 (Cal. 2011) ........................................................................................................... 10


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Lacoff v. Buena Vista Publ’g, Inc., 183 Misc.2d 600, 705 N.Y.S.2d 183 (N.Y. Sup. Ct. 2000) .......................................................... 23

Laster v. T-Mobile USA, Inc., 407 F. Supp. 2d 1181 (S.D. Cal. 2005) ......................................................................................... 10

Lavie v. Procter & Gamble Co., 105 Cal. App. 4th 496 (Cal. App. Ct. 2003) ................................................................................. 21

Lerner v. Fleet Bank, N.A., 459 F.3d 273 (2d Cir. 2006) .......................................................................................................... 12

Levitin v. PaineWebber, Inc., 159 F.3d 698 (2d Cir. 1998) ............................................................................................................ 4

Liu v. Beth Israel Medical Center, No. 02 Civ. 2034 (DLC), 2003 WL 21488081 (S.D.N.Y. June 26, 2003)...................................... 8

Lozano v. AT & T Wireless Servs., Inc., 504 F.3d 718 (9th Cir.2007) .......................................................................................................... 19

MaGee v. Paul Revere Life Ins. Co., 954 F. Supp. 582 (E.D.N.Y. 1997) ................................................................................................ 25

McKell v. Washington Mutual, Inc., 142 Cal. App. 4th 1457 (Cal. App. Ct. 2006) ............................................................................... 21

Morgan v. AT&T Wireless Servs., Inc., 177 Cal. App. 4th 1235 (Cal. App. Ct. 2009) ............................................................................... 21

Northwestern Mutual Life Ins. Co. v. Wender, 940 F. Supp. 62 (S.D.N.Y. 1996) .................................................................................................. 25

O’Shea v. Littleton, 414 U.S. 488 (1974) ........................................................................................................................ 9

Oestreicher v. Alienware Corp., 544 F. Supp. 2d 964 (N.D. Cal. 2008) .......................................................................................... 17

Osborne v. Subaru of America, Inc., 198 Cal. App. 3d 646 (Cal. Ct. App. 1988) ................................................................................... 17

Oswego Laborers’ Local 214 Pension Fund v. Marine Midland Bank, 85 N.Y.2d 20 (N.Y. 1995) ....................................................................................................... 22, 23

People ex rel. Bill Lockyer v. Fremont Life Ins. Co., 104 Cal. App. 4th 508 (Cal. App. Ct. 2002) ................................................................................. 19

Phillips v. Audio Active Ltd., 494 F.3d 378 (2d Cir. 2007) ........................................................................................................ 6, 7


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Pirozzi v. Apple Inc., No. 12-CV-01529 YGR, 2012 WL 6652453 (N.D. Cal. Dec. 20, 2012) ...................................... 10

Progressive West Ins. Co. v. Yolo County Superior Court, 135 Cal. App. 4th, 263 (Cal. App. Ct. 2005) ................................................................................ 18

Quinn v. Thomas H. Lee Co., 61 F. Supp.2d 13 (S.D.N.Y. 1999) .................................................................................................. 5

Randhawa v. Skylux Inc., No. CIV. 2:09-02304 (WBS) (DAD), 2013 WL 178182 (E.D. Cal. Jan. 16, 2013) ............... 12, 14

Rice v. Sunbeam Prods., Inc., No. CV 12-7923-CAS-(AJW), 2013 WL 146270 (C.D. Cal. Jan. 7, 2013) ................................. 20

Roby v. Corp. of Lloyd’s, 996 F.2d 1353 (2d Cir. 1993) ...................................................................................................... 6, 7

Rubio v. Capital One Bank, 613 F.3d 1195 (9th Cir. 2010) ....................................................................................................... 21

Securitron Magnalock Corp. v. Schnabolk, 65 F.3d 256 (2d Cir. 1995) ............................................................................................................ 23

Software for Moving, Inc. v. Frid, No. 09 Civ 4341 (DLC), 2010 WL 2143670 (S.D.N.Y. May 23, 2009) ........................................ 8

Stearns v. Select Comfort Retail Corp., No. 08-2746 JF, 2009 WL 1635931 (N.D. Cal. June 5, 2009) ............................................... 17, 19

Stutman v. Chem. Bank, 95 N.Y.2d 24 (N.Y. 2000) ............................................................................................................. 23

Tasini v. AOL, Inc., 851 F. Supp. 2d 734 (S.D.N.Y. 2012) ........................................................................................... 24

Tayag v. Nat’l City Bank, No. C 09–667 SBA, 2009 WL 943897 (N.D. Cal. Apr. 7, 2009) ................................................. 15

Tropp v. Corp. of Lloyd’s, 385 Fed. Appx. 36 (2d Cir. 2010) ................................................................................................... 7

Troyk v. Farmers Group, Inc., 171 Cal. App. 4th 1305 (Cal. Ct. App. 2009) ............................................................................... 10

United States v. Bestfoods, 524 U.S. 51 (1998) .......................................................................................................................... 5

Vess v. Ciba–Geigy Corp. USA, 317 F.3d 1097 (9th Cir. 2003) ....................................................................................................... 12


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VP Racing Fuels, Inc. v. Gen. Petroleum Corp., 673 F. Supp. 2d 1073(E.D. Cal. 2009) .......................................................................................... 15

Wang & Wang LLP v. Bando do Brasil, S.A., No. Civ. S-06-00761 DFL KJM, 2007 WL 915232 (E.D. Cal. Mar. 26, 2007) ........................... 19

Warth v. Seldin, 422 U.S. 490 (1975) ........................................................................................................................ 9

Williams v. Gerber Prods. Co., 552 F.3d 934 (9th Cir. 2008) ......................................................................................................... 16

Wood v. Motorola Mobility, Inc., No. C-11-04409-YGR, 2012 WL 892166 (N.D. Cal. Mar. 14, 2012) ............................................ 9

STATUTES

Cal. Bus. & Prof. Code § 17200 ................................................................................................... passim

Cal. Bus. & Prof. Code § 17500 ................................................................................................... passim

N.Y.G.B.L. § 349 ......................................................................................................................... passim

OTHER AUTHORITIES

Fed. R. Civ. P. 8(a) ............................................................................................................................ 2, 5

Fed. R. Civ. P. 9(b) ....................................................................................................................... passim

Fed. R. Civ. P. 12(b)(6) ..................................................................................................................... 1, 4


PRELIMINARY STATEMENT

Plaintiffs are three authors who allege dissatisfaction with the self-publication and marketing

services provided by defendant Author Solutions, Inc. (“ASI”). They seek to represent a class (and

subclasses) of authors with similar and different complaints against ASI. However, their Complaint

is a misguided attempt to make a federal class action out of a series of gripes by two of them about

alleged typographical and formatting errors and supposed delays in publishing their books, and out

of complaints by the three of them concerning alleged errors associated with royalty payments owed

on some, but not all, of their books published under ASI imprints. While plaintiffs may pursue

individual claims – which sound in contract and nothing more – based upon supposed errors, delays,

or underpayments, the remainder of the Complaint should be dismissed.

Kelvin James (“James”), Jodi Foster (“Foster”) and Terry Hardy (“Hardy”), on their behalf

and on behalf of a purported nationwide class (and, through Foster and James, statewide subclasses)

of authors, allege causes of action against ASI and Penguin Group (USA) Inc. (“Penguin”) for

breach of contract, unjust enrichment, violations of Sections 17200, et seq. (the “UCL,” or Unfair

Competition Law”) and 17500, et seq. (the “FAL,” or the False Advertising Law) of the California

Business & Professions Code, and breach of Section 349 of the New York General Business Law

(“Section 349”), which prohibits deceptive practices directed at New York consumers. Plaintiffs

allege no specific misconduct by Penguin, which appears to have been sued based solely upon its

status as corporate parent of ASI.

Although vigorously disputed by Defendants, Plaintiffs’ breach of contract claims, other

than those of Hardy (whose claims should be dismissed pursuant to an Indiana forum-selection

clause contained in his publishing agreement), are not susceptible to a Rule 12(b)(6) motion.

However, all of the Plaintiffs’ remaining claims are defective on their face and should be dismissed.

Plaintiffs’ claim for unjust enrichment, which asserts that it would be inequitable for ASI to retain

unpaid royalties and fees charged for publishing services that Plaintiffs allege were not performed


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as promised, should be dismissed because it is well-settled that where, as Plaintiffs allege here, a

contract governs the relationship between the parties, no claim for unjust enrichment may lie.

Foster’s FAL and UCL claims (her “California Claims”), brought on her behalf and that of a

subclass of California authors, are subject to dismissal on several independent grounds. First, to

adequately plead causation, as required for Article III standing, Foster must allege that her

economic injury was caused by her reliance on false advertising or the unfair, unlawful, or

fraudulent business practice at issue. Because Foster does not plead that she initially decided to

publish with ASI imprint iUniverse based on an actionable misrepresentation, and because she fails

to allege which specific statements she found material to her subsequent decision to purchase

additional services, she has not adequately pled causation through reliance, and thus lacks standing

under the California statutes. Second, Foster has not even begun to satisfy the heightened pleading

Rule 9(b) standard to which she must adhere, which is applicable to her false advertising and unfair

business practices claims. Indeed, not only does Foster fail to identify where, when and by whom

many of the misstatements she alleges were made, but when she does more specifically identify

certain misstatements, she fails to allege that those statements were actually false. Third, even if

Foster had standing and had satisfied the stringent requirements of Rule 9(b), she fails to satisfy

basic pleading standards under Rule 8(a) and cannot state a claim under the FAL and UCL for the

reasons detailed below, including but not limited to the nature of the alleged statements upon which

she relies, which amount to no more than mere puffing, and thus are not actionable.

James’ claim under Section 349 of the New York General Business Law (“Section 349”)

brought on his behalf and on behalf of a subclass of New York authors, fares no better. To state a

claim under Section 349, the conduct at issue must be directed at “consumers,” and the gravamen of

the complaint must be consumer injury or harm to the public interest. James, who submitted

content to a self-publishing service with the hope that such content would be purchased by a large


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audience, and who expected to earn royalties from the same, is not a “consumer” under Section 349.

Moreover, James alleges that he and the authors he purports to represent are the consumers harmed

by the defendants’ conduct, and not the general public. Indeed, none of James’ allegations pertains

to any representations or statements made to the public at large. Like Foster’s California Claims,

James’ cause of action for violation of Section 349 is a dressed-up contract claim brought by a party

to a services agreement who was dissatisfied with certain aspects of those services.

For these reasons, and those set forth in detail below, the Complaint should be dismissed in

its entirety as against Penguin, and as set forth below as against ASI.

FACTUAL BACKGROUND

As noted above, ASI provides publishing and marketing services to authors who wish to

self-publish. Each of the Plaintiffs alleges that he or she published one or more titles with ASI.

(See Compl. ¶¶ 7, 12-15.)

Each of the Plaintiffs takes issue with the non-payment of royalties allegedly owed to them

on sales of the books that ASI enabled them to self-publish.1 (See id. ¶¶ 54-59, 86, 92-97.) James

and Foster also each allege that their books contained typographical and formatting errors. (Id. ¶¶

41, 53, 83.) Curiously, although James alleges dissatisfaction with the publication of his first book

by ASI imprint iUniverse in June 2009, in August 2010, after purportedly receiving assurances

concerning “improve[ments]” in iUniverse “practices,” he elected to publish a second book with

iUniverse, which was released in or about April 2011. (Id. ¶¶ 41, 43, 53, 83.) Foster, in sum,

alleges that (1) she purchased certain editorial services from iUniverse with the expectation that

they would improve her manuscript and result in the recognition of her book as an “Editor’s

Choice” and her as a “Rising Star” by iUniverse; (2) she in fact received those recognitions; (3) she

purchased certain additional marketing services, with which she was dissatisfied and for which her 1 Hardy claims to have published three books with ASI imprint “AuthorHouse” in November 2010, May 2011

and April 2012. However, he only asserts breach of contract and unjust enrichment claims premised on the alleged non-payment of royalties on his third book. (See Compl. ¶¶ 89, 91.)


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money was refunded; and (4) a purported delay in making her book (which “dealt with the

paranormal”) available before Halloween resulted in lost book sales. (Id. ¶¶ 68-84.)

Based on the aforementioned conduct, James, Foster, and Hardy assert claims for breach of

contract and unjust enrichment on behalf of themselves and a nationwide class of authors. (Id. ¶¶

107-17.) Foster also alleges violations of the FAL and UCL (id. ¶¶ 118-54) on behalf of herself and

a subclass of California authors, and James alleges a violation of Section 349 (id. ¶¶ 155-62) on

behalf of himself and a subclass of New York authors. Notably, Plaintiffs do not allege that they

themselves were actually deceived by the marketing or purchased certain of the services about

which they generally complain.

Apart from the identification of ASI by Plaintiffs as a Penguin “member” and an otherwise

naked allegation that Penguin “operate[s]” ASI (see id. ¶15), the Complaint makes no specific

allegations against Penguin. Additionally, the publishing agreement for Hardy’s third book, which

he admits can be viewed in his online account with AuthorHouse (id. ¶ 90), contains an Indiana

forum-selection clause. See Declaration of Eugene Hopkins, dated June 19, 2013 (“Hopkins Dec.”),

Exhibit (“Ex.”) A (the “Hardy Agreement”).2

ARGUMENT

When deciding a Rule 12(b)(6) motion, courts evaluate the sufficiency of the complaint

under the approach set forth in Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). A plaintiff’s legal

conclusions and “[t]hreadbare recitals of the elements of a cause of action, supported by mere

conclusory statements,” are not entitled to the assumption of truth and are by themselves

insufficient to state a claim. Id. at 678. Only well-pleaded factual allegations are assumed to be

true and then analyzed “to determine whether they plausibly give rise to an entitlement to relief.”

Id. at 679. The allegations in the Complaint must thus meet a standard of “plausibility.” Id. at 678; 2 Where, as in this case, a contract is integral to the complaint, it is well-settled that the court may consider the

contract in deciding the merits of a Rule 12(b)(6) motion. Chambers v. Time Warner, Inc., 282 F.3d 147, 152-53 (2d Cir. 2002); Levitin v. PaineWebber, Inc., 159 F.3d 698, 702 n.4 (2d Cir. 1998).


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Bell Atl. Corp. v. Twombly, 550 U.S. 544, 564 (2007); see also Fed. R. Civ. P. 8(a). A claim is

facially plausible “when the plaintiff pleads factual content that allows the court to draw the

reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678.

“The plausibility standard is not akin to a ‘probability requirement,’ but it asks for more than a

sheer possibility that a defendant has acted unlawfully.” Id.

I. AS AGAINST PENGUIN, THE COMPLAINT FAILS TO STATE ANY CLAIM AND SHOULD THEREFORE BE DISMISSED

Although Plaintiffs bring their purported class action against both ASI and Penguin,

Plaintiffs fail to allege conduct on the part of Penguin that could give rise to any of their claims. In

fact, other than identifying Penguin as the parent corporation of ASI – Plaintiffs describe ASI as “a

Penguin company” (Compl. at p. 1 (introductory paragraph)), and a Penguin “member” (id. ¶15) –

and an otherwise naked allegation that Penguin “operate[s]” ASI (id.), the Complaint is completely

devoid of any factual allegations as against Penguin. As a result, Plaintiffs’ claims against Penguin

should be dismissed entirely.

As a matter of law, Penguin’s mere status as the corporate parent of ASI does not furnish a

basis for the maintenance of Plaintiffs’ claims against Penguin.3 Indeed, it is well-settled that a

parent corporation is generally not liable for the acts of its subsidiary corporation. United States v.

Bestfoods, 524 U.S. 51, 61 (1998). Moreover, rote allegations of control over a subsidiary, such as

those made here, are plainly insufficient. See, e.g., In re Digital Music Antitrust Litigation, 812 F.

Supp. 2d 390, 417 (S.D.N.Y. 2011) (“[t]he unadorned invocation of dominion and control is simply

not enough [to establish a parent’s liability]”) (citations omitted). Similarly, general references in a

complaint to “defendants” in describing the offending conduct are not enough to implicate a parent.

3 Penguin is incorporated in the state of Delaware, but has its principal place of business in New York. Under

New York’s choice of law rules, the law of the state of incorporation governs questions of parent/subsidiary liability. See Fletcher v. Atex, 68 F.3d 1451, 1456 (2d Cir. 1995). However, in similar contexts it appears that some courts have applied New York law with little explanation. See, e.g., Quinn v. Thomas H. Lee Co., 61 F. Supp.2d 13, 20 n.5 (S.D.N.Y. 1999) (“The parties do not dispute the application of New York law”). In any event, as New York law and Delaware law are in accord, the result is the same.


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See id. (“The complaint alleges direct involvement of the Parent Companies by way of generic

references to ‘defendants.’ . . . This approach is insufficient.”) (citations omitted).

Thus, in order to hold Penguin liable for the acts of ASI, Plaintiffs must pierce the corporate

veil or otherwise establish an agency relationship between ASI and Penguin, such that ASI is

deemed to have acted on behalf of its corporate parent. The Complaint does not reference veil-

piercing or an agency relationship, or contain allegations that would even arguably support either.

As a result of the foregoing, the Complaint, as against Penguin, should be dismissed in its entirety.

II. HARDY’S CLAIMS SHOULD BE DISMISSED BECAUSE HIS CONTRACT REQUIRES HIS SUIT TO HAVE BEEN BROUGHT IN THE INDIANA COURTS

As set forth above, although Hardy published three books with AuthorHouse, his claims of

breach of contract and unjust enrichment pertain only to his third book, which was published in

April 2012. (Compl. ¶¶ 89, 91.) Hardy asserts that, even though copies of his book were sold, and

despite his inquiries to AuthorHouse, he was not paid royalties that he is owed. (See id. ¶¶92-97.)

The Hardy Agreement, which Hardy admits can be viewed in his online account with

AuthorHouse (id. ¶ 90), contains a forum-selection clause. Paragraph 26 thereof states “AUTHOR

hereby agrees and consents to the exclusive jurisdiction of the courts of the State of Indiana, in the

United States of America, for any disputes relating to this Agreement.” Hopkins Dec., Ex. A.

The Second Circuit has a “strong policy” favoring enforcement of forum-selection

agreements. Roby v. Corp. of Lloyd’s, 996 F.2d 1353, 1361 (2d Cir. 1993). Indeed, such clauses

are presumptively enforceable so long as (1) the clause was reasonably communicated to the party

resisting enforcement, (2) the clause has mandatory force, and (3) the plaintiff’s claims are covered

by the clause. See Phillips v. Audio Active Ltd., 494 F.3d 378, 383-84 (2d Cir. 2007). The forum-

selection clause contained in the Hardy Agreement easily meets these standards.

First, because Hardy can view the Hardy Agreement in his online account with

AuthorHouse (Compl. ¶ 90), there is no question that the forum-selection clause contained in the


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contract on which he sues has been reasonably communicated to him.4 Second, the forum-selection

clause at issue here is undoubtedly mandatory, because it grants exclusive jurisdiction to the courts

of the State of Indiana. See, e.g., Baosteel Am., Inc. v. M/V “OCEAN LORD”, 257 F. Supp. 2d

687, 689 (S.D.N.Y. 2003) (“[a] mandatory forum selection clause grants exclusive jurisdiction to a

selected forum”). Finally, both Hardy’s breach of contract claim and his duplicative unjust

enrichment claim are covered by the forum-selection clause, which governs “any disputes relating

to this agreement.” See Roby, 996 F.2d at 1361 (the scope of a forum-selection clause is not limited

solely to claims for breach of contract); see also Cfirstclass Corp. v. Silverjet PLC, 560 F. Supp. 2d

324, 330 (S.D.N.Y. 2008) (forum-selection clause applied to unjust enrichment claim that was

premised on assertions pertaining to the parties’ rights under the contract and that would require

analysis of those rights).

As such, the forum-selection clause contained in the Hardy Agreement is presumptively

enforceable, 5 and his claims should be dismissed. See Phillips, 494 F.3d at 384.

4 See, e.g., Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 587 (1991) (upholding forum-selection clause in

fine print on back of cruise ticket even though the clause became binding upon purchase and ticket was received only sometime later); Effron v. Sun Line Cruises, Inc., 67 F.3d 7, 8 (2d Cir. 1995) (passengers that were referred to the forum-selection clause instead of affirmatively shown those terms were bound by clause); Fteja v. Facebook, Inc., 841 F. Supp. 2d 829, 834-41 (S.D.N.Y. 2012) (Facebook user bound by terms of use, including forum-selection clause, that were available through hyperlink).

5 To overcome the presumption of enforceability, Hardy would have to demonstrate that enforcement would be

“unreasonable” or “unjust,” or demonstrate “that the clause was invalid for such reasons as fraud or overreaching.” Phillips v. Audio Active Ltd., 494 F.3d 378, 383 (2d Cir. 2007) (citations omitted). These exceptions are narrowly construed, and Hardy cannot avail himself of them. See, e.g., Tropp v. Corp. of Lloyd’s, 385 Fed. Appx. 36, 37 (2d Cir. 2010). Indeed, there are no concerns about the fairness, convenience or contravention of public policy by forcing Hardy to litigate his claims in Indiana instead of New York—nor would Hardy be deprived of his day in court should the forum-selection clause be enforced. See Roby, 996 F.2d at 1353 (listing examples of exceptions to the presumption of enforceability including whether the plaintiff would be effectively deprived of his day in court, whether enforcing the selected forum’s law would contravene public policy, and whether the selected forum would be gravely inconvenient or unfair).


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III. BECAUSE THE LAW IS WELL-SETTLED THAT AN UNJUST ENRICHMENT CLAIM MAY NOT LIE WHERE PLAINTIFFS ALLEGE THE EXISTENCE OF A CONTRACT, PLAINTIFFS’ UNJUST ENRICHMENT CLAIMS SHOULD BE DISMISSED

Plaintiffs assert a cause of action for unjust enrichment premised upon ASI’s alleged failure

to properly perform the services Plaintiffs claim they were promised. (Compl. ¶¶ 112 - 117.) But

because an equitable claim for unjust enrichment is only available where there is no enforceable

agreement otherwise governing the parties’ relationship, and Plaintiffs assert the existence of such

contracts here (see id. ¶¶ 107 - 111), their claim for unjust enrichment should be dismissed.

For example, in King’s Choice Neckwear, Inc. v. Pitney Bowes, Inc., No. 09 Civ. 3980

(DLC), 2009 WL 5033960 (S.D.N.Y. Dec. 23, 2009), the plaintiff, after having been charged a fee

following termination of an equipment lease, brought a class action asserting, among other things, a

claim for unjust enrichment. In granting the defendants’ motion to dismiss, this Court instructed

that under “New York law, recovery under the theory of unjust enrichment is available only in the

absence of an enforceable agreement.” Id. at *7 (citation omitted). Because the enforceability of

the lease agreement between the parties was “undisputed,” a cause of action for unjust enrichment

could not be maintained. Id. Here, Plaintiffs each allege the breach of enforceable publishing

agreements. (Compl. ¶¶ 107-111.) Thus, like the plaintiff in King’s Choice Neckwear, they are

precluded from recovery under an unjust enrichment theory.6 Moreover, the fate of Plaintiffs’

unjust enrichment claims does not depend upon the disposition of their breach of contract claims.

As this Court has instructed on several occasions, “[u]njust enrichment may be plead in the

alternative where the plaintiff challenges the validity of the contract; it may not be plead in the

alternative alongside a claim that the defendant breached an enforceable contract.” Kings Choice

Neckwear, 2009 WL 5033960 at *7 (emphasis supplied); accord Software for Moving, Inc. v. Frid, 6 Accord Liu v. Beth Israel Medical Center, No. 02 Civ. 2034 (DLC), 2003 WL 21488081, at *4-5 (S.D.N.Y.

June 26, 2003) (dismissing unjust enrichment case where valid contract existed between plaintiff and his former employer); see also Beth Israel Med. Ctr. V. Horizon Blue Cross and Blue Shield of N.J., Inc., 448 F.3d 573, 586 (2d Cir. 2006).


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No. 09 Civ 4341 (DLC), 2010 WL 2143670, at *4 (S.D.N.Y. May 23, 2009) (same).7 As such,

Plaintiffs cause of action for unjust enrichment should be dismissed.

IV. FOSTER FAILS TO STATE A CLAIM UNDER THE CALIFORNIA CONSUMER PROTECTION LAWS

On behalf of herself and a purported subclass of California residents that purchased services

from ASI since April 26, 2009, Plaintiff Foster asserts violations of the UCL and FAL (See Compl.

¶¶ 100, 118-154.) More specifically, she alleges that ASI violated Section 17500 of the FAL

governing false advertising, and all three prongs of Section 17200 of the UCL prohibiting unlawful,

unfair and fraudulent business acts and practices. (Compl. ¶¶ 118-154.) As set forth below,

Foster—who is the only purported class representative residing in California—fails for multiple

reasons to state a claim for any of these violations.

A. Foster Lacks Standing Under the FAL and UCL

Because “California’s consumer protection statutes do not reach conduct outside of

California that is not directed at one of California’s residents,” Wood v. Motorola Mobility, Inc., No.

C-11-04409-YGR, 2012 WL 892166, at *7 (N.D. Cal. Mar. 14, 2012), Foster is the only named

plaintiff who brings the California Claims.

It is axiomatic that named plaintiffs in a class action must establish Article III standing in

order to seek relief on their own behalf and on behalf of the class. See Warth v. Seldin, 422 U.S.

490, 502 (1975); see also O’Shea v. Littleton, 414 U.S. 488, 494 (1974) (“[I]f none of the named

plaintiffs purporting to represent a class establishes the requisite of a case or controversy with the

defendants, none may seek relief on behalf of himself or any other member of the class.”). When

there are multiple claims in a class action, at least one named plaintiff must have standing with

7 To the extent the Court determines that (1) the laws of Colorado and California apply, respectively, to Hardy

and Foster, or (2) the laws of Indiana (where ASI resides) control as to all Plaintiffs, the result would not differ. See Interbank Invs., LLC v. Eagle River Water & Sanitation Dist., 77 P.3d 814, 816 (Colo. App. 2003); Klein v. Chevron U.S.A., Inc., 202 Cal. App. 4th 1342, 1389-90 (Cal. App. Ct. 2012); Kohl’s Ind. L.P v. Owens, 979 N.E.2d 159, 166 (Ind. Ct. App. 2012).


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respect to each claim. See In re Salomon Analyst Level 3 Litig., 350 F. Supp. 2d 477, 496 (S.D.N.Y.

2004). If Foster lacks standing, the California Claims must be dismissed. See King County Wash.

v. IKB Deutsche Industriebank AG, Nos. 09 Civ. 8387 (SAS), 09 Civ. 8822 (SAS), 2010 WL

2010943, at *1-2 (S.D.N.Y. May 18, 2010).

To have standing under either the UCL or FAL, a plaintiff must have “suffered injury in fact

and [ ] lost money or property.” Kwikset Corp. v. Superior Court, 51 Cal. 4th 310, 321-22 (Cal.

2011). Stated differently, plaintiffs alleging violations of the UCL or FAL must “(1) establish a loss

or deprivation of money or property sufficient to qualify as injury in fact, i.e., economic injury, and

(2) show that that economic injury was the result of, i.e., caused by, the unfair business practice or

false advertising that is the gravamen of the claim.” Id. (Emphasis in original.) By requiring

economic injury, the FAL and UCL impose a “more stringent” standard for alleging standing than

the federal standing requirements. Id. at 324 (quoting Troyk v. Farmers Group, Inc., 171 Cal. App.

4th 1305, 1348 n.31 (Cal. Ct. App. 2009)).

To adequately plead causation, claimants must allege that their economic injury was caused

by their reliance on the allegedly false advertising or the unfair, unlawful or fraudulent business

practice. See, e.g., Laster v. T-Mobile USA, Inc., 407 F. Supp. 2d 1181, 1194 (S.D. Cal. 2005)

(dismissing FAL and UCL claims where none of the representative plaintiffs alleged that they

purchased the phone package as a result of the allegedly false advertisements). Foster has not

adequately pled causation through such reliance. Nowhere in the Complaint does she plead that she

initially decided to publish with iUniverse based on an actionable misrepresentation. And although

Foster implies that she relied upon statements from the Editorial Consultant and Marketing

Consultant to purchase extra services from ASI, she fails to allege which specific statements she

found material to her purchasing decision. See Pirozzi v. Apple Inc., No. 12-CV-01529 YGR, 2012

WL 6652453, at *4 (N.D. Cal. Dec. 20, 2012) (by not alleging which statements made by Apple the


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plaintiff found to be material to her decision to purchase an Apple device, she failed to allege that

her injury was caused by the complained-of conduct). Accordingly, Foster lacks standing, and all

of the California Claims must be dismissed.

B. Because Foster Fails to Satisfy the Heightened Pleading Standards of Rule 9(b), Her California Claims Should Be Dismissed

Even if, arguendo, Foster had standing under the FAL and UCL, those claims should still be

dismissed because she fails to satisfy the heightened pleading standards of Fed. R. Civ. P. 9(b).

1. Foster’s California Claims Must be Pled With Particularity Under Rule 9(b).

Where, as here, FAL and UCL claims generally sound in fraud, they must be pled with

particularity in accordance with Rule 9(b). See, e.g., In re Scotts EZ Seed Litig., No. 12 CV 4727

(VB), 2013 WL 2303727, at *10 (S.D.N.Y. May 22, 2013) (applying heightened pleading standard

to UCL and FAL claims); In re WellPoint, Inc. Out-of-Network UCR Rates Litig., 865 F. Supp. 2d

1002, 1049 (C.D. Cal. 2011) (FAL claims are grounded in fraud and thus subject to heightened

pleading requirements). Claims are “grounded in fraud” or “sound in fraud” when they are based

on alleged fraudulent conduct on the part of the defendant such as false advertising. Kearns v. Ford

Motor Co., 567 F.3d 1120, 1125 (9th Cir. 2009); see also Eckler v. Wal-Mart Stores, Inc., No. 12-

CV-727-LAB-MDD, 2012 WL 5382218, at *5 (S.D. Cal. Nov. 1, 2012) (where the core of the UCL

claim is that representations are false and misleading and likely to deceive the public, the claim is

grounded in fraud and the heightened pleading standard applies). In that situation, the pleading as a

whole must satisfy the particularity requirements of Rule 9(b). Kearns, 56 F.3d at 1125; see also

Hughes v. Ester C Co., NBTY, Inc., No. 12-CV-0041 (JFB)(ETB), -- F. Supp. 2d --, 2013 WL

1080533, at *18 (E.D.N.Y. March 15, 2013) (citing Kearns and applying heightened pleading

standard to FAL and UCL claims). Because all of the California Claims arise out of the allegedly

fraudulent statements made to Foster by ASI, those claims “sound in fraud” and must be pled with

particularity under Rule 9(b).


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Rule 9(b) provides that: “[i]in alleging fraud or mistake, a party must state with particularity

the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of

a person’s mind may be alleged generally.” Fed. R. Civ. P. 9(b). The Second Circuit has

elaborated on this standard, stating that to survive scrutiny under Rule 9(b), “fraud allegations ought

to specify the time, place, speaker and content of the alleged misrepresentations.” DiVittorio v.

Equidyne Extractive Indus., Inc., 822 F.2d 1242, 1247 (2d Cir. 1987); see also Hughes, 2013 WL

1080533, at *18 (analyzing claims under the FAL and UCL and noting that the plaintiff provided

the “who, what, when, where, and how” of the alleged fraud) (citations and quotation marks

omitted). The complaint “must [also] set forth what is false or misleading about a statement, and

why it is false.” Vess v. Ciba–Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003).8

2. Foster Has Not Met the Rule 9(b) Standard.

None of the allegations made by Foster in connection with the California Claims meets the

heightened pleading standard required under Rule 9(b). Indeed, many of them do not even rise

above the level of general conclusory allegations, which are entitled to no weight on a motion to

dismiss. See, e.g., Lerner v. Fleet Bank, N.A., 459 F.3d 273, 293 (2d Cir. 2006) (affirming

dismissal where knowledge element of fraud was only alleged in conclusory fashion).

Foster’s catalogue of purported representations made by ASI falls into two categories. The

first category does not withstand Rule 9(b) scrutiny because it consists of statements that merely

summarize misimpressions that ASI has purportedly conveyed, and fails to specifically identify the

alleged misstatements themselves, as well as the where, when and by whom they were made. They

include the following:

• Defendants market themselves as an independent publisher with a reputation for outstanding quality and for impressive book sales. (Compl. ¶¶ 120, 131.)

8 See also, e.g., Randhawa v. Skylux Inc., No. CIV. 2:09-02304 (WBS) (DAD), 2013 WL 178182, at *3-4 (E.D.

Cal. Jan. 16, 2013) (applying standard in UCL context); Delacruz v. Cytosport, Inc., No. C 11-3532 CW, 2012 WL 1215243, at *5 (N.D. Cal. Apr. 11, 2012) (applying standard in UCL and FAL context).


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• Defendants market themselves as an independent publisher designed to offer its authors the same quality product as a traditional publisher, for a fee, but with greater speed, higher royalties, and more control for its authors. (Id. ¶¶ 120, 148.)

• Defendants have made these representations on their website, email

correspondence with its authors, other written materials, and through telephone communications with Foster and other members of the class. (Id. ¶ 121.)

• Defendants sold publishing services to Foster by falsely claiming or conveying

the impression that such services could create a book of equal quality to that of a traditional publisher. (Id. ¶ 123.)

• Defendants sold marketing services to Foster by falsely claiming or conveying

the impression that such services would enhance the author’s reputation or increase book sales. (Id. ¶ 124.)

The second category consists of more detailed statements that Foster alleges were made by

ASI. They include the following:

• On 6/17/09, upon contacting iUniverse herself, an email was sent to Foster promising that they would “ensure that your book is polished and presented in a way that is highly competitive for the marketplace.” (Compl. ¶ 61.)

• On 8/13/10 Foster was informed via email that she had been flagged for a possible Editor’s Choice designation. That same email claimed that the most significant benefit of that designation was the leverage it provides for increasing book sales and eligibility for the Rising Star program. (Id. ¶ 69.)

• Around August 2010, Foster was told on the phone by an Editorial Consultant

that the Editor’s Choice designation would significantly help promote her book and generate sales. During that same conversation, Foster was informed that she would have to purchase additional editing services to remain eligible for the Editor’s Choice designation. (See id. ¶ 70.)

• One of the additional editing services purchased by Foster was the Content Edit,

which was supposed to address grammatical errors, dialogue attribution and formatting. (Id. ¶ 72.)

• On 6/21/11, after having been selected a Rising Star, the Rising Star board

explained that the benefits of that designation included free book returnability, the Rising Star logo, and the chance to have Foster’s book presented to national retail, wholesale and independent book accounts. (Id. ¶ 76.)

This second category of statements fails to meet the heightened pleading requirements because


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nowhere does Foster allege that they were actually false or why they were false. See Randhawa,

2013 WL 178182, at *3-4 (dismissing UCL claim for failure to meet Rule 9(b) requirements where

plaintiff failed to plead, inter alia, why the alleged misrepresentations were fraudulent); see also

Delacruz, 2012 WL 1215243, at *7 (dismissing UCL and FAL claims pertaining to certain

advertisements where the plaintiff failed to “specify what has been concealed and why it is

material”). For example, although Foster complains about errors contained in her book (see Compl.

¶ 83), she never alleges, either as a result of her initial purchase or from her purchase of additional

services, that she was promised a final product free from any typographical errors or misprints. Nor

does she allege that a book cannot be “polished” or “highly competitive” if it contains such errors.

With respect to the Rising Star and Editor’s Choice designations, Foster never alleges that she could

have received these designations without having purchased the editorial services for which she paid,

nor provides any additional allegations demonstrating how or why the statements concerning the

same were false.

Indeed, Foster’s allegations have nothing to do with false statements. At most, the

Complaint paints a picture of a dissatisfied party to a services contract. Without more, however,

this dissatisfaction merely sounds in contract, and does not rise to the level of fraudulent

misrepresentation.9 Because a complaint must actually set forth what is false or misleading in the

statements at issue, in addition to alleging why those statements are false, and because Foster fails

to actually allege why the specific statements she quotes are false, much less to identify what

portions of those statements are false, her claims must be dismissed.

9 Cf. Crucible Materials Corp. v. Aetna Casualty and Surety Co., No. 97 CV 759, 1998 WL 404239, at *5

(N.D.N.Y. July 15, 1998) (“Crucible may be extraordinarily dissatisfied with Travelers’ actions, but dissatisfaction with an insurer’s performance of a contract alone cannot give rise to a tort claim in New York.”); In re Horton, 372 B.R. 349, 357 (Bkrtcy. W.D. Ky. 2007) (noting that the proof required to show substandard work does not equate to proof of fraudulent intent, and to so find would elevate every breach of contract claim to actionable fraud).


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C. Foster Fails to State a Claim Under the FAL

Even if Foster had standing to assert an FAL claim and had pled her FAL claims with

sufficient particularity pursuant to Rule 9(b), she fails to state a claim under the FAL.

The FAL makes it unlawful for any person to “induce the public to enter into any

obligation” based on a statement that is “untrue or misleading, and which is known, or which by the

exercise of reasonable care should be known, to be untrue or misleading.” Cal. Bus. & Prof. Code

§ 17500. To successfully plead a claim for violation of the FAL, a plaintiff must allege that “(1)

statements in the advertising are untrue or misleading, and (2) defendant knew, or by the exercise of

reasonable care should have known, that the statements were untrue or misleading.” Hughes, 2013

WL 1080533, at *20 (quoting VP Racing Fuels, Inc. v. Gen. Petroleum Corp., 673 F. Supp. 2d

1073, 1088 (E.D. Cal. 2009)). Foster’s allegations fail on both fronts.

The first element—that a plaintiff allege that statements in the advertising are untrue or

misleading—dovetails with the requirement that Foster plead her allegations of fraudulent

misrepresentation with particularity. As set forth above, Foster never alleges that any specific

statements made by ASI were actually untrue or misleading. Although she makes general claims

that ASI gave her the false impression that the books were of equal quality to those published by

traditional publishers, that ASI’s services would enhance her reputation, and that purchasing

services from ASI would increase her book sales (see Compl. ¶¶ 123-24), none of these generalized

allegations of falsity is connected to any specific statements alleged to be untrue or misleading. For

this reason alone, Foster has failed to state a claim under the FAL. See In re Sony Grand Wega

KDF-E A10/A20 Series Rear Proj. HDTV Telev. Litig., 758 F. Supp. 2d 1077, 1093 (S.D. Cal.

2010) (FAL claims failed where plaintiff did not identify specific false statements or why those

statements were untrue or misleading); see also Tayag v. Nat’l City Bank, No. C 09–667 SBA, 2009


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WL 943897, at *2 (N.D. Cal. Apr. 7, 2009) (for FAL or UCL claims rooted in fraud, “[t]he content

of the alleged misrepresentation is necessary to state a claim”).

Second, Foster never alleges that the Defendants knew or should have known that the

allegedly false statements were untrue or misleading. This, in and of itself, furnishes a sufficient

basis upon which to conclude that the FAL claim should be dismissed. See, e.g., Kowalsky v.

Hewlett-Packard Co., 771 F. Supp. 2d 1138, 1151 (N.D. Cal. 2010), vacated on rec’n on other

grounds, 771 F. Supp. 2d 1156 (dismissing FAL claim where plaintiff failed to sufficiently allege

that defendant knew or should have known that its representations were untrue or misleading).

Even assuming, arguendo, that Foster sufficiently alleged the existence of untrue or

misleading statements and ASI’s knowledge thereof, her FAL claim must still fail because she

cannot demonstrate that a reasonable consumer would be misled by any of these statements.

Whether an advertisement is “misleading” under the FAL must be judged by the effect it would

have on a reasonable consumer. Williams v. Gerber Prods. Co., 552 F.3d 934, 938 (9th Cir. 2008).

To prevail under this standard, a plaintiff must “show that members of the public are likely to be

deceived” by the advertisement. Id. (citation and quotation marks omitted); see also In re Toyota

Motor Corp. Unintended Acceleration Marketing, Sales Practices, and Prods. Liability Litig., 754

F. Supp. 2d 1145, 1176 (C.D. Cal. 2010) (to state a claim under the FAL, a plaintiff must allege that

members of the public are likely to be deceived).

Although some courts have noted that the question of whether a reasonable consumer is

likely to be deceived is typically not appropriate for decision on a motion to dismiss, see id., courts

routinely dismiss FAL claims that are based on statements that constitute mere puffery. See Cook,

Perkiss & Liehe, Inc. v. N. Cal. Collection Serv., 911 F.2d 242, 245 (9th Cir. 1990) (whether a

statement is puffery may be decided as a matter of law on a motion to dismiss). They do so because


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reasonable consumers could not rely on such “generalized, vague and unspecified assertions.” See

Glen Holly Entertainment, Inc. v. Tektronix Inc., 343 F.3d 1000, 1005 (9th Cir. 2003).10

Here, the false statements allegedly made by ASI are not actionable because they amount to

nothing more than puffery. For example, Foster makes several allegations concerning ASI’s

representations regarding the quality of their products. (See, e.g., Compl. ¶ 61 (Foster was promised

in an email that her book would be “polished”); id. ¶ 120 (general allegation that ASI markets itself

has having a reputation for quality); id. ¶ 121 (general allegation that products have the same quality

as those produced by traditional publishers); id. ¶ 123 (same).) Such alleged general statements

about the quality of one’s products constitute permissible puffery that will not deceive the

reasonable consumer. See Anunziato v. eMachines, Inc., 402 F. Supp. 2d 1133, 1140 (C.D. Cal.

2005) (finding that the word “quality” is non-actionable puffery); see also id. (quoting Osborne v.

Subaru of America, Inc., 198 Cal. App. 3d 646, 660 (Cal. Ct. App. 1988) (“Sellers are permitted to

‘puff’ their products by stating opinions about the quality of the goods so long as they don’t cross

the line and make factual representations about important characteristics like a product’s safety”)).

For these same reasons, none of the other alleged false statements made by ASI could

deceive a reasonable consumer. First, the few specific statements contained in the Complaint (see

supra, p. 13) all involve general claims by ASI about the quality or superiority of their services.

(See, e.g., Compl. ¶ 69 (Editor’s Choice designation would provide leverage for increased book

sales); id. ¶ 70 (Editor’s Choice designation would help promote the book and generate sales).)

Such general claims of superiority, which are both vague and unverifiable, are categorized as mere

permissible puffery under applicable jurisprudence. See Stearns v. Select Comfort Retail Corp., No.

10 Examples of statements that have been deemed puffery and hence not actionable include: “superb,

uncompromising quality,” “faster, more powerful, and more innovative than competing machines,” “high performance,” “top of the line,” and “faster access to data.” See Oestreicher v. Alienware Corp., 544 F. Supp. 2d 964, 973 (N.D. Cal. 2008) (listing examples); see also Fink v. Time Warner Cable, 810 F. Supp. 2d 633, 644, 646 (S.D.N.Y. 2011) (dismissing New York Section 349 and California FAL claims where alleged misstatements about the “blazing fast” speed of Internet connection were mere puffery).


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08-2746 JF, 2009 WL 1635931, at * 16 (N.D. Cal. June 5, 2009) (dismissing as puffery

“generalized assertions” that are “not easily verifiable as fact”); Oestreicher, 544 F. Supp. 2d at

(“generalized and vague statements of product superiority” are not actionable under the FAL).

Second, not only are Foster’s other allegations exceedingly general and vague (i.e., they do not

allege specific statements made by ASI), but they also concern only general claims of superiority

and quality that again constitute puffery. In other words, these allegations suffer from two levels of

generality, making it even less likely that a reasonable consumer would be deceived. See Cook, 911

F.2d at 246 (“consumer reliance [on allegedly false advertisements] will be induced by specific

rather than general assertions”); accord Haskell v. Time, Inc., 857 F. Supp. 1392, 1399 (E.D. Cal.

1994) (same).

D. Foster Fails to State a Claim Under the UCL

Similarly, even if Foster had standing to assert a UCL claim and had pled her UCL claims

with sufficient particularity, she fails to state a claim under the UCL. The UCL makes actionable

any “unlawful, unfair or fraudulent business act or practice.” Cal. Bus. & Prof. Code § 17200.

“Each prong of the UCL is a separate and distinct theory of liability.” Birdsong v. Apple, Inc., 590

F.3d 955, 959 (9th Cir. 2009). Foster has failed to state a claim under any of them.

1. Unlawful Business Practice

An “unlawful business practice” under the UCL is “an act or practice, committed pursuant to

business activity, that is at the same time forbidden by law.” Progressive West Ins. Co. v. Yolo

County Superior Court, 135 Cal. App. 4th, 263, 287 (Cal. App. Ct. 2005) (citation and emphasis

omitted). To form the basis for such a claim, the business activity at issue must violate some other

law. See Davis v. HSBC Bank Nevada, N.A., 691 F.3d 1152, 1168 (9th Cir. 2012) (citing Cel-Tech

Commc’ns, Inc. v. Los Angeles Cellular Tel. Co., 20 Cal. 4th 163, 180 (Cal. 1999) (“[S]ection

17200 borrows violations of other laws and treats them as unlawful practices that the unfair

competition law makes independently actionable.”)). Although “virtually any state, federal or local


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law can serve as the predicate for an action under section 17200,” People ex rel. Bill Lockyer v.

Fremont Life Ins. Co., 104 Cal. App. 4th 508, 515 (Cal. App. Ct. 2002) (citation and quotation

marks omitted), common-law claims do not suffice, Hartless v. Clorox Co., No. 06–CV–2705

JAH(CAB), 2007 WL 3245260, at *5 (S.D. Cal. Nov. 2, 2007); see also Wang & Wang LLP v.

Bando do Brasil, S.A., No. Civ. S-06-00761 DFL KJM, 2007 WL 915232 *4 (E.D. Cal. Mar. 26,

2007) (“all that remains is a naked claim for breach of contract, which, standing alone, is an

insufficient basis for a § 17200 claim.”).

As a result, Foster’s FAL claim is the only claim that could form the basis for her unlawful

business practice claim under the UCL. Because, for the reasons set forth above, Foster’s FAL

claim must be dismissed, her UCL claim based on the “unlawful business practice” prong of the

statute must also be dismissed. See, e.g., Stearns, 2009 WL 1635931, at *16 (where plaintiff failed

to state FAL claim, amongst others, UCL unlawful business practice claim must also be dismissed).

2. Unfair Business Practice

“California courts define an ‘unfair business practice’ as either: (1) a practice that

undermines a legislatively declared policy or threatens competition, or (2) a practice that has an

impact on its alleged victim that outweighs the reasons, justifications, and motives of the alleged

wrongdoer.” Fink, 810 F. Supp. 2d at 647 (citing Lozano v. AT & T Wireless Servs., Inc., 504 F.3d

718, 736 (9th Cir. 2007)). Stated differently, an unfair business practice occurs if that practice

offends an established public policy or if it is immoral, unethical, oppressive, unscrupulous or

substantially injurious to consumers. Lozano, 504 F.3d at 736. The allegations in the Complaint

fail to meet both of these tests.

First, because Foster does not allege a “practice that undermines a legislatively declared

policy or threatens competition,” only the second test – whether a practice has an impact on its

alleged victim that outweighs the reasons, justifications, and motives of the alleged wrongdoer – is


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implicated. See Kowalsky, 771 F. Supp. 2d at 1151 n.6 (where no legislative or other public policy

was identified by the plaintiff, only the balancing test was analyzed). Foster fails this test because

she has not alleged that ASI took any actions knowingly. Failure to allege such knowledge warrants

dismissal where, as here, there are no other allegations suggesting that ASI’s allegedly false

statements should be considered “immoral, unethical, oppressive or unscrupulous.” See Kowalsky,

771 F. Supp. at 1151; accord Rice v. Sunbeam Prods., Inc., No. CV 12-7923-CAS-(AJW), 2013

WL 146270, at *9 (C.D. Cal. Jan. 7, 2013) (unfair business practice claim dismissed because

allegations lacking knowledge could not serve as a basis for finding that conduct was

“unscrupulous” or “substantially injurious to consumers”). Moreover, allegations that an allegedly

unfair action was motivated by a desire to maximize profit, without more, are also insufficient. See

Fink, 810 F. Supp. 2d at 647 (citing Kunert v. Mission Financial Services Corp., 110 Cal. App. 4th

242, 265 (Cal. App. Ct. 2003) (business enterprises have a legitimate interest in seeking profit)).

Second, it is telling that Foster makes no allegations relevant to either of these definitional

tests, except to conclusorily allege that ASI’s acts are unfair and substantially harm the public

because (1) members of the public purchase publishing packages or marketing services that they

would not have purchased but for ASI’s allegedly unfair advertising (Compl. ¶ 139), and (2)

without ASI’s aggressive tactics, these books could have otherwise been published through vanity

presses or other self-publishing companies (id. ¶ 142). Notably, Foster makes no allegations that

she was lured by ASI’s actions into believing that it was a vanity press—she only alleges that she

believed that iUniverse was not part of the ASI family. (Id. ¶ 60.) Where there are so few

allegations discussing how the “unfair” prong of the UCL was violated, and where the gravamen of

the complaint is that the defendant made false representations, the claim is most properly viewed as

only a claim for fraudulent misrepresentation under the UCL, and dismissal of the claim under the

unfair prong is appropriate. See Eckler, 2012 WL 5382218, at *5 (claim of unfair business practices


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dismissed where allegations that the misrepresentations are unfair “seem to be thrown in just to

plead the claim exhaustively”); cf. Morgan v. AT&T Wireless Servs., Inc., 177 Cal. App. 4th 1235,

1255 (Cal. App. Ct. 2009) (declining to decide whether alleged conduct met either definition of

“unfair” because plaintiffs successfully alleged a fraudulent business practice under the UCL).

3. Fraudulent Business Practice

To state a claim under the fraudulent business practice prong of the UCL, Foster must show

“that members of the public are likely to be deceived” by the business practice or advertising at

issue. In re Tobacco II Cases, 46 Cal. 4th 298, 312 (Cal. 2009) (quotation marks and citation

omitted); see also Rubio v. Capital One Bank, 613 F.3d 1195, 1204 (9th Cir. 2010) (“This prong of

the UCL is governed by the reasonable consumer test: a plaintiff may demonstrate a violation by

showing that reasonable members of the public are likely to be deceived.”) (quotation marks and

brackets omitted). The advertising can be likely to deceive because it is untrue or because it tends

to mislead or deceive by, e.g., failing to disclose relevant information. McKell v. Washington

Mutual, Inc., 142 Cal. App. 4th 1457, 1471 (Cal. App. Ct. 2006). However, there must be more

“than a mere possibility” that the advertisement “might conceivably be misunderstood by some few

consumers viewing it in an unreasonable manner.” Garcia v. Sony Computer Entertainment Am.,

LLC, 859 F. Supp. 2d 1056, 1062 (N.D. Cal. 2012) (quoting Lavie v. Procter & Gamble Co., 105

Cal. App. 4th 496, 508 (Cal. App. Ct. 2003)). Instead, it must be “probable that a significant

portion of the general consuming public . . . could be misled.” Id.

Importantly here, when a court determines that an FAL claim should be dismissed because

the plaintiff has failed to plead facts sufficient to demonstrate that a reasonable consumer is likely to

be deceived, a UCL fraudulent practices claim should also be dismissed. See, e.g., Davis, 691 F.3d

at 1161-62, 1169 (upholding dismissal of FAL claim where no reasonable consumer could have

believed that credit card would contain no annual fee and applying this conclusion to dismiss UCL


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fraudulent practices claim). Foster’s allegations with respect to this cause of action allege no

additional “fraudulent conduct” beyond that described above. As such, for the same reasons that

Foster’s allegations fail to state a claim under the FAL, i.e., that—to the extent they even allege

specific misrepresentations—the alleged statements are so general and vague so as to constitute

non-actionable puffery (see supra, pp. 16-18), they fail to state a claim under the fraudulent

practices prong of the UCL. See Davis, 691 F.3d at 1169.

V. JAMES FAILS TO STATE A CLAIM UNDER N.Y.G.B.L. § 349

Plaintiff James asserts a violation of Section 349, which prohibits deceptive business

practices, on behalf of himself and a purported subclass of New York authors who purchased

services from ASI since April 26, 2010. (See Compl. ¶¶ 155-62.) The Section 349 claim fails for

multiple reasons—most of which are grounded in the fact that James’ allegations pertain to his

individual relationship with ASI, and thus do not implicate public concerns. Like Foster, James is

simply a dissatisfied contractor whose grievances are more properly addressed through his breach of

contract claims.

As an initial matter, James has failed to specifically identify any misstatements that caused

him to be deceived, although his primary complaint, apart from the alleged non-payment of

royalties due to him, appears to be that iUniverse was “slow,” contrary to “representations on its

website and its emails.” Id. ¶ 50. However, a “prima facie [Section 349] case requires . . . a

showing that defendant is engaging in an act or practice that is deceptive or misleading in a material

way and that plaintiff has been injured by reason thereof.” Oswego Laborers’ Local 214 Pension

Fund v. Marine Midland Bank, 85 N.Y.2d 20, 25 (N.Y. 1995). The deceptive acts and/or practices

are actionable only if “likely to mislead a reasonable consumer acting reasonably under the

circumstances.” To the extent that James complains generally about the quality or performance

speed of the publishing services furnished to him by ASI, they furnish no basis for his claim. As


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with Foster’s UCL and FAL claims, under Section 349, alleged statements of puffery, opinion, or

future representations are not actionable, because a statement of “puffing . . . does not rise to the

level of consumer deception.” Chevy’s Int’l, Inc. v. Sal De Enters., Inc., 697 F. Supp. 110, 112

(E.D.N.Y. 1998); accord Fink v. Time Warner Cable, 810 F. Supp. 2d at 644, 646 (S.D.N.Y.

2011).11

In any event, to be entitled to relief under Section 349, a plaintiff must not merely show that

the act, practice, or advertisement was misleading in a material respect and caused him or her

injury, but that “the challenged act or practice was consumer-oriented.” Stutman v. Chem. Bank, 95

N.Y.2d 24, 29 (N.Y. 2000). Here, the Section 349 claim must be dismissed because James has not

alleged facts that suggest that the actions of which he complains were “consumer-oriented.”

Because “the statute is, at its core, a consumer protection device,” Securitron Magnalock

Corp. v. Schnabolk, 65 F.3d 256, 264 (2d Cir. 1995), to state a claim under Section 349, the conduct

at issue must be directed at “consumers.” Oswego, 85 N.Y.2d at 25. Further, when alleging a

violation of Section 349, the “gravamen of the complaint must be consumer injury or harm to the

public interest.” Securitron Magnalock Corp., 65 F.3d at 264 (quoting Azby Brokerage, Inc. v.

Allstate Ins. Co., 681 F. Supp. 1084, 1089 n.6 (S.D.N.Y. 1988)). For the purposes of the statute,

courts have defined “consumers” as typically persons “who purchase[] goods, services or property

primarily for personal, family or household purposes.” Cruz v. NYNEX Info. Res., 703 N.Y.S.2d

103, 106 (1st Dep’t 2000) (citations omitted). Further, courts have stated consistently that

“[p]rivate contract disputes” that are “unique to the parties,” Oswego, 85 N.Y.2d at 25, are not

consumer-oriented and do not fall under the statute.

11 See also Lacoff v. Buena Vista Publ’g, Inc., 183 Misc.2d 600, 610, 705 N.Y.S.2d 183, 191 (N.Y. Sup. Ct.

2000) (granting motion to dismiss claims under Section 349, holding that representation that product contained a “‘secret recipe for investment success’ is not actionable, as it is simply puffery or opinion”); Cytyc Corp. v. Neuromedical Sys., Inc., 12 F. Supp. 2d 296, 301 (S.D.N.Y. 1998) (dismissing claims under Section 349, because “many of the challenged statements are either opinion or puffing, neither of which is actionable”).


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Tasini v. AOL, Inc., 851 F. Supp. 2d 734 (S.D.N.Y. 2012), is instructive. There, the

plaintiffs were Huffington Post bloggers who asserted a violation of Section 349 after allegedly

being deceived into submitting content to the Huffington Post. Id. at 743. The Court found that the

plaintiffs did not properly allege a violation of Section 349. Id. Specifically, the Court found that

the harm alleged was (1) “restricted to the plaintiffs and other similarly-situated content providers”

and (2) that the plaintiffs were not “consumers,” but rather were “participa[nts] in producing the

content that is consumed by visitors to The Huffington Post.” Id. The Court held that “those who

produce content for others to consume cannot be said to be “purchas[ers of] goods and services.” Id.

(citation omitted).

James falls outside the ambit of the definition of “consumer.” As in Tasini, he submitted

content to a self-publishing service with the hope that such content would be consumed by a large

audience. He also expected to earn royalties from the same. Thus, James was not “purchas[ing]

goods, services or property primarily for personal, family or household purposes[.]” Oxford Health

Plans, Inc., 790 N.Y.S.2d at 80. Rather he “produc[ed] content for others to consume,” Tasini, 851

F. Supp. 2d at 743, with the expectation of earning royalties.

Moreover, much like the plaintiffs whose claims were dismissed in Tasini, James and the

class of persons he purports to represent are “alleging that they themselves are the consumers

harmed by the defendants’ conduct, not the general public.” Id. Specifically, Plaintiffs allege that

“Defendants’ conduct was consumer-oriented in that James and the [New York] Class are ‘persons’

within the meaning of NY GBL § 349(h).” (Compl. ¶ 158.) As the Tasini Court made clear,

because the harm plaintiffs identify to “consumers” is actually harm to their personal interests

arising out of a private business arrangement, and not to the consuming public at large for whom

they produced content, their claim should be dismissed.


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Just as with Foster, James’ claims more appropriately sound in contract because they reveal

nothing more than an author who entered into a services agreement and is dissatisfied with his

purchase. James’ allegations pertaining to the assurances he received before purchasing his second

publishing package (see Compl. ¶ 43), and the issues he experienced obtaining sales statements and

royalty payments (see Compl. ¶¶ 54-59), do not implicate the public. Indeed, none of James’

allegations pertain to any representations or statements made to the public at large. Rather, they

reflect private contractual disputes that are not properly brought under Section 349.12 Accordingly,

the Section 349 claim should also be dismissed.

CONCLUSION

For the foregoing reasons, Defendants Penguin and ASI respectfully request that this Court

grant their motion in its entirety.

Dated: New York, New York June 21, 2013 Respectfully Submitted, DORSEY & WHITNEY LLP

By /s Jonathan M. Herman Christopher G. Karagheuzoff Jonathan Montcalm

51 West 52nd Street New York, NY 10019 (212) 415-9200

Attorneys for Defendants Penguin Group (USA) Inc. and Author Solutions, Inc.

12 See, e.g., Daniels v. Provident Life & Cas. Ins. Co., 00-CV-668E, 2001 WL 877329, at *8 (W.D.N.Y. July 25,

2001) (noting that “private contract disputes between the insured and insurer over policy coverage or the processing of claims are not covered by [Section 349] because such disputes do not affect the consuming public at large”); MaGee v. Paul Revere Life Ins. Co., 954 F. Supp. 582, 586 (E.D.N.Y. 1997) (holding that under Section 349, “the [alleged] injury must be to the public generally as distinguished from the plaintiff alone”); Northwestern Mutual Life Ins. Co. v. Wender, 940 F. Supp. 62, 65 (S.D.N.Y. 1996) (dismissing for failure to allege deceptive practices an insured’s Section 349 claim of improper cessation of benefit payments and stating, “this is essentially a private contract dispute relating to the specific facts at hand”).


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