May v. Google LLC

1

JUDY MAY, Plaintiff, v. GOOGLE LLC, et al., Defendants.

No. 24-cv-01314-BLF

United States District Court, N.D. California, San Jose Division

November 4, 2024

ORDER GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS

[RE: ECF NO. 39]

BETH LABSON FREEMAN UNITED STATES DISTRICT JUDGE

This class action suit is brought by Plaintiff Judy May (“May”), individually, and on behalf of all others similarly situated (collectively “Plaintiffs”). May filed a Class Action Complaint (“CAC”) in this matter against Google LLC, Google Arizona LLC, Google Payment Corp., Alphabet Inc., and Does 1-10. ECF 1. In the CAC, May asserts the following claims: 1) unfair practices in violation of the California Consumers Legal Remedies Act (“CLRA”), Cal. Civ. Code § 1750 et seq.; 2) unlawful practices in violation of the CLRA; 3) unfair practices in violation of the California Unfair Competition Law (“UCL”), Cal. Bus. &amp Prof. Code §17200; 4) unlawful practices in violation of the UCL; 5) receiving, retaining, withholding, or concealing stolen property in violation of California Penal Code § 496 (“Penal Code § 496”); 6) conversion; and 7) declaratory judgment under 28 U.S.C. § 2201. ECF 1.

Pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure Google LLC, Google Arizona LLC, Google Payment Corp., Alphabet Inc., and Does 1-10 seek to dismiss all causes of action in the CAC. ECF 39. May opposes. ECF 45. Pursuant to the parties' stipulation, the Court dismissed without prejudice defendant Alphabet Inc. from this action. ECF 52. Google LLC, Google Arizona LLC, Google Payment Corp., and Does 1-10 (collectively, “Google”) filed a reply. ECF 55. The Court has considered the moving and responding papers, the relevant portions of the record, and arguments made during a hearing on the motion to dismiss on September 26, 2024. For the reasons described below, the Court GRANTS Google's motion to dismiss WITH LEAVE TO AMEND IN PART and WITHOUT LEAVE TO AMEND IN PART, and DENIES Google's motion to dismiss IN PART.

I. BACKGROUND

The following allegations are taken from the CAC and taken as true for the purposes of this motion.

A. Google's Digital Platforms and Their Developers

Google owns and operates the Google Play Store, which hosts millions of mobile apps and digital multimedia content for consumers to purchase and download. ECF 1, ¶¶ 18-19. Google implements a service fee structure where Google charges a commission of approximately 15-30% on all paid apps, in-app purchases, and app subscriptions. Id., ¶ 23. This commission applies to all monetary transactions conducted through the platform, including those made with Google Play gift cards. Id. Consumers must establish a Google Account with detailed personal information to access and purchase apps and content from the Google Play Store. Id., ¶ 25. This includes providing their name, email address, billing information, and phone verification. Id.

Individuals and companies can develop apps for distribution on the Google Play Store as developers. Id., ¶ 27. For developers interested in distributing their applications on the platform, Google has established specific requirements. Id., ¶ 28. These include creating a Google Account, accepting the Developer Distribution Agreement, and paying a $25 registration fee. Id., ¶ 27. Additional requirements may include providing government identification, a credit card under the developer's legal name, bank account information, physical address, and contact details. Id., ¶ 27.

The payment process between Google and the developers follows a structured timeline. After a consumer makes a purchase, Google implements a two-hour cancellation window before processing the charge. Id., ¶ 30. Developer payments are then processed after the 15th of the following month, provided they meet the minimum payment threshold. Id. This creates a typical delay of at least two weeks between when a consumer makes a purchase and when the developer receives payment. Id.

B. Google Play Gift Cards

Through retail partners, Google offers prepaid Google Play gift cards that allow consumers to make purchases both on the Google Play Store and within apps downloaded from the platform. Id., ¶¶ 31-32. Each Google Play gift card features a unique redemption code and remains dormant until activated at the point of sale, with Google tracking the exact moment of purchase and activation. Id., ¶ 33. To use these gift cards, consumers must have a valid Google Account. Id., ¶ 34. When redeeming the Google Play gift cards, consumers log into their Google Accounts and enter the Google Play gift card's redemption code, which transfers the stored value to their Google Account for immediate use. Id., ¶¶ 34-35. Once redeemed, the physical card holds no further value Id., ¶ 35. Google maintains detailed tracking of all redemption codes and serial numbers of Google Play gift cards, each redemption, and its corresponding Google Account. Id., ¶ 36.

The Google Play gift cards come with basic terms and conditions on their packaging, which are recited as:

“Terms and Conditions: See play.google.com/us-card-terms for full terms. Must be 13+ years of age, U.S. resident. Google Play card is issued by Google Arizona LLC (“GAZ”). Requires Google Payments account and Internet access to redeem. Redeemed balance is maintained by GAZ's affiliate, Google Payment Corp. (“GPC”), in your Google Payments account. Usable for purchases of eligible items on Google Play only. Not useable for hardware and certain subscriptions. Other limits may apply. No fees or expiration dates. Except as required by law, card not redeemable cash or other cards; not reloadable or refundable; cannot be combined with other non-Google Play balances in your Google Payments account, resold, exchanged or transferred for value. User responsible for loss of card. For assistance or to view your Google Play card balance, visit support.google.com/googleplay/go/cardhelp. To speak to customer care call us at 1-855-466-4438.”

Id., ¶ 37. The full terms of conditions for Google Play gift cards (the “Online Terms and Conditions”) are available online. Id., ¶ 38. Plaintiffs argue in the CAC that despite knowing that scammers often deceive consumers by creating artificial urgency and presenting gift cards as the only payment option, Google does not provide adequate warnings on retail packaging to prevent scams. Id., ¶¶ 41-44.

C. Google Play Gift Card Scams

While the FTC reported $433.5 million in total gift card scams from 2018-2021, this figure likely represents only a fraction of actual cases, given that many consumers either do not know how to report scams or choose not to due to privacy concerns and the time-consuming reporting process. Id., ¶ 50. According to FTC data, Google Play gift card scams accounted for 20% of reported cases, totaling $86.7 million over the four years from 2018-2021 (approximately $21.675 million annually). Id., ¶ 51.

Google Play gift card scams typically involve four steps. First, scammers convince victims to purchase Google Play gift cards to pay for something outside of the Google Play Store. Id., ¶ 54. For instance, scammers may impersonate agents from a government agency (e.g., the IRS) and demand payment to avoid trouble (e.g., arrest, seizure of property). Id. Once scammers successfully convince a victim to buy a Google Play gift card, they will pressure the victim to reveal its redemption code and purchase more Google Play gift cards. Id., ¶ 55. Second, the scammers redeem the Google Play gift cards and transfer the stored value into scammer-controlled Google Accounts. Id., ¶¶ 56-57. Alternatively, the scammers may resell the redemption codes. Id., ¶ 58. Third, the scammers spend the redeemed value by purchasing apps or making in-app purchases on the Google Play Store. Id., ¶¶ 59-60. Fourth, Google pays its developers 70%-85% of the purchases and keeps the remainder as its own commissions. Id., ¶¶ 62-63.

Google has the technical means to track transactional information related to the Google Play gift cards, including 1) purchase information, such as the location, the date and time, and the value of the purchase; 2) the identity of the Google Account(s) that redeemed the Google Play gift cards; and 3) Google Play purchases made with the Google Play gift cards. Id., ¶ 61. Nonetheless, Google imposes a “no refund” policy on its Google Play gift cards. Id., ¶¶ 67, 92. When victims of scams contact Google for a refund of their Google Play gift cards, they are frequently advised that the funds in the Google Play gift cards have been spent, and there is nothing Google can do. Id., ¶¶ 74-78.

D. Judy May

In April 2021, May fell victim to a gift card scam involving Google Play gift cards. ECF 1, ¶ 95. The scam began when May received a message from someone posing as a family member, directing her to contact a supposed government agent about grant money from the U.S. Department of Health and Human Services (“HHS”). Id. The scammer, pretending to be a government agent, told May she was eligible for an HHS grant but needed to cover certain costs upfront to receive same-day delivery of the grant money. Id., ¶¶ 95-96. May was instructed to purchase Google Play gift cards and provide the codes on the back to cover these alleged costs, with the promise of reimbursement. Id., ¶ 96.

On April 1, 2021, May bought a $200 gift card from Family Dollar in Connersville, Indiana, and shared the code with the scammer. Id., ¶ 97. The next day, she purchased four more $200 gift cards from a CVS Pharmacy in Connersville, Indiana, and again shared the codes with the scammer. Id., ¶ 98. Although May read the language on the gift cards, she was unaware of the nature and prevalence of Google Play gift card scams and did not realize she...