Crowder v. LinkedIn Corp.

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TODD CROWDER, et al., Plaintiffs, v. LINKEDIN CORPORATION, Defendant.

No. 22-cv-00237-HSG

United States District Court, N.D. California

March 8, 2023

ORDER GRANTING MOTION TO DISMISS AND MOTION TO STAY DISCOVERY RE: DKT. NOS. 27, 51

HAYWOOD S. GILLIAM, JR., United States District Judge

Before the Court are Defendant's motion to dismiss and motion to stay discovery. Dkt. Nos. 27, 51. The Court held a hearing on the motion to dismiss. Dkt. No. 42. The Court finds the motion to stay discovery appropriate for disposition without oral argument and the matter is deemed submitted. See Civil L.R. 7-1(b). The Court GRANTS the motions.

I. BACKGROUND

This is an antitrust proposed class action against LinkedIn, an online social network that focuses on professional connections. See Dkt. No. 1 (“Compl.”) ¶¶ 1, 51. Plaintiffs subscribe to LinkedIn Premium Career, which provides paying users with additional features. Id. ¶¶ 42-44, 47. Plaintiffs assert that LinkedIn has a monopoly in the professional social networking market, allowing it to overcharge Premium subscribers. Id. ¶¶ 40, 373, 381-432.

Plaintiffs allege that LinkedIn's monopoly is protected by a powerful barrier to market entry comprising LinkedIn's “data centralization and aggregation, its machine learning and AI infrastructure, and the inferred data it produce[s].” Id. ¶¶ 2, 208-11. This allegedly prevents would-be rivals from entering the market because “[w]ithout these three components, a new entrant could not viably compete with LinkedIn.” Id. ¶ 210.

Defendant allegedly strengthens this barrier and maintains its monopoly through four categories of anticompetitive conduct. Id. ¶ 260. First, Defendant sells private user data through application programming interfaces (“API”) to exclusive third parties called “partners.” Id. ¶¶ 22-24, 261-87. Second, Defendant uses “technological countermeasures” to limit access to public user information. Id. ¶¶ 25, 288-99. Third, Defendant integrated its user data with Microsoft's Azure cloud computing system. Id. ¶¶ 26-27, 300-16. Fourth, Defendant agreed with Facebook to divide markets to ensure Facebook would not develop a competing product. Id. ¶¶ 28-37, 317-72.

Plaintiffs bring claims under Sections 1 and 2 of the Sherman Act for monopolization, attempted monopolization, and market division. 15 U.S.C. §§ 1, 2; Compl. ¶¶ 487-523.

II. MOTION TO DISMISS

A. Legal Standard

Federal Rule of Civil Procedure 8(a) requires that a complaint contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). A defendant may move to dismiss a complaint for failing to state a claim upon which relief can be granted under Federal Rule of Civil Procedure 12(b)(6). “Dismissal under Rule 12(b)(6) is appropriate only where the complaint lacks a cognizable legal theory or sufficient facts to support a cognizable legal theory.” Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th Cir. 2008). To survive a Rule 12(b)(6) motion, a plaintiff need only plead “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim is facially plausible when a plaintiff pleads “factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

In reviewing the plausibility of a complaint, courts “accept factual allegations in the complaint as true and construe the pleadings in the light most favorable to the nonmoving party.” Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008). Nevertheless, courts do not “accept as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences.” In re Gilead Scis. Secs. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008) (quoting Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001)).

If the court concludes that a 12(b)(6) motion should be granted, the “court should grant leave to amend even if no request to amend the pleading was made, unless it determines that the pleading could not possibly be cured by the allegation of other facts.” Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000) (en banc) (quotation omitted).

B. Discussion

i. Section 1 Liability for Market Division

Section 1 of the Sherman Act prohibits “[e]very contract, combination . . . or conspiracy, in restraint of trade ....” 15 U.S.C. § 1. To establish Section 1 liability, a plaintiff must prove (1) the existence of an agreement, and (2) that the agreement was an “unreasonable” restraint of trade. Aerotec Int'l, Inc. v. Honeywell Int'l, Inc., 836 F.3d 1171, 1178 (9th Cir. 2016).

Plaintiffs' Section 1 claim is based on an alleged agreement between LinkedIn and Facebook to ensure Facebook did not enter the professional social networking market. Compl. ¶ 317. Specifically, Plaintiffs allege that Facebook unexpectedly pivoted from developing a product called Facebook at Work-described by Forbes as “pos[ing] a threat to LinkedIn”-and released a product that stayed “out of LinkedIn's lane.” Id. ¶¶ 318-27, 348. According to Plaintiffs, competition “stopped in its tracks” after Facebook grew concerned about LinkedIn accessing Facebook's user data, and the two companies began negotiating a data access agreement. Id. ¶¶ 328-63. Given that Facebook was imminently positioned to enter the market, has otherwise “aggressively entered almost every conceivable Internet application market,” and has reportedly entered into other market division agreements, Plaintiffs assert that a non-compete agreement between the two companies is the “most plausible inference.” Id. ¶¶ 351, 355-57.

Defendant argues that (1) the Section 1 claim is time-barred and (2) the alleged circumstantial evidence does not plausibly establish a market division agreement between Facebook and LinkedIn. See Dkt. No. 27 at 18-24. a. Statute of Limitations

“A district court may dismiss a claim if the running of the statute is apparent on the face of the complaint.” Cervantes v. Countrywide Home Loans, Inc., 656 F.3d 1034, 1045 (9th Cir. 2011) (quotation omitted). Antitrust claims are governed by a four-year statute of limitations. See Samsung Elecs. Co. v. Panasonic Corp., 747 F.3d 1199, 1202 (9th Cir. 2014) (citing 15 U.S.C. § 15b). However, there is an exception for “continuing violations.” Id. To plead a continuing violation, a plaintiff must allege “an overt act during the limitations period that meets two criteria: 1) it must be a new and independent act that is not merely a reaffirmation of a previous act; and 2) it must inflict new and accumulating injury on the plaintiff.” Id. (quotation omitted).

The Court finds that Plaintiffs' claim based on the agreement between Facebook and LinkedIn is time-barred. The agreement allegedly happened “between 2013 and 2016,” necessarily more than four years before the complaint was filed. Compl. ¶ 37. Plaintiffs argue that there was a continuing violation because the agreement persisted into the limitations period and caused consumers to be overcharged. See Dkt. No. 38 (“Opp.”) at 25. But courts have found similar allegations insufficient. Reveal Chat Holdco LLC v. Facebook, Inc., No. 20-CV-00363-BLF, 2021 WL 1615349, at *6 (N.D. Cal. Apr. 26, 2021) (finding the “continued existence” of data sharing agreements did “not constitute new and independent acts”); Garrison v. Oracle Corp., 159 F.Supp.3d 1044, 1071 (N.D. Cal. 2016) (plaintiffs failed to allege overt acts beyond the initial agreement); Ryan v. Microsoft Corp., 147 F.Supp.3d 868, 884-85 (N.D. Cal. 2015) (“Maintaining and reaffirming prior agreements do not suffice to show an overt act.”); MedioStream, Inc. v. Microsoft Corp., 869 F.Supp.2d 1095, 1105 (N.D. Cal. 2012) (noting “mere fulfillment of the terms of a ‘permanent' agreement executed outside the limitations period” is insufficient).

Though “active enforcement” of an agreement may constitute an overt act, “passive receipt of profits” does not. Eichman v. Fotomat Corp., 880 F.2d 149, 160 (9th Cir. 1989); see also Samsung Elecs. Co., 747 F.3d at 1204 (“We have repeatedly held that acts taken to enforce a contract were overt acts that restarted the statute of limitations.”). Plaintiffs' cited cases concern price fixing and “pay for delay” conspiracies and do not stand for the proposition that each payment of a monopoly price, on its own, gives rise to a continuing violation. See In re Glumetza Antitrust Litig., --- F.Supp.3d ---, 2020 WL 1066934, at *6 (N.D. Cal. 2020); Oliver v. SD-3C LLC, 751 F.3d 1081, 1086 (9th Cir. 2014). As one of those cases acknowledges, the mere charging of monopoly prices is not unlawful. In re Glumetza Antitrust Litig., 2020 WL 1066934, at *5. Plaintiffs' interpretation would unduly expand the continuing violations exception in the antitrust context.

Because Plaintiffs have not pled a continuing violation, the Court DISMISSES the Section 1 claim with leave to amend. To overcome the statute of limitations, Plaintiffs must allege an “overt act” that occurred on or after January 13, 2018. Because the Court finds the Section 1 claim as pled time-barred, it does not reach Defendant's remaining argument.

ii. Section II Liability for Monopolization

Under Section 2 of the Sherman Act, it is unlawful to “monopolize, or attempt to monopolize . . . any part of the trade or commerce among the several States ....” 15 U.S.C. § 2.

To establish Section 2 liability, a plaintiff must show: (1) possession of monopoly power in the relevant market; (2) willful acquisition or maintenance of that power; and (3) causal antitrust injury. Fed. Trade Comm'n v. Qualcomm Inc., 969 F.3d 974, 990 (9th Cir. 2020).

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