Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—9^th Cir.: Dismissal of seller’s fraudulent misrepresentation claims against eBay upheld, (Apr 2, 2014)

By Linda O’Brien, J.D., LL.M.

In a putative class action against an online auction and shopping website provider, a seller’s fraudulent misrepresentations claims in relation to the provider’s online auction bidding system were properly dismissed, the U.S. Court of Appeals in San Francisco has ruled (Block v. eBay, Inc., April 1, 2014, Farris, J).

Goods can be sold on eBay through traditional auctions, which are conducted through its automatic bidding system. In the system, a bidder submits the maximum amount he is willing to pay for an item, which is kept confidential from other bidders and the seller. eBay software enters bids on behalf of the bidder in predetermined increments above the current bid, until the user wins the auction or would need to exceed his maximum. Marshall Block, a seller on eBay, filed a putative class action suit, alleging that eBay’s automatic bidding system breached two provisions of the eBay user agreement in violation of California’s Unfair Competition Law (UCL). Block asserted that the systems violate the provisions that (1) limit liability by stating that eBay is not involved in the actual transaction between buyer and seller and (2) state that there is no agency, partnership, joint venture, employee-employer, or franchisor-franchisee relationship intended or created by the user agreement. A district court granted eBay’s motion to dismiss Block’s claims, and Block appealed.

The district court properly found that Block failed to state a claim under the UCL. To bring suit under the UCL, the plaintiff must allege actual reliance that the defendant’s misrepresentation was an immediate cause of the plaintiff’s injury-producing conduct. Block contended that the two provisions fraudulently misrepresented that eBay was acting as a neutral venue that accurately transmitted bids for bidders to the seller and he reasonably relied on those representations. According to the court, Block’s argument failed because he could not have relied on the alleged misrepresentations and because they were not material. His complaint conceded that the automatic bidding system was described on eBay’s website, and a version of the pertinent pages was attached as an exhibit. The system specified that it would be used in all traditional auctions.

Additionally, Block did not allege that the disclosures were not available at the time he executed the user agreement or that he was unaware of the automatic bidding system. Even if the user agreement had represented that eBay would directly transmit bids to sellers, Block did not plausibly allege that he relied on such representation. Finally, since a reasonable person in Block’s position would not have relied on such a representation, it would not have been material, the court concluded.

The case is No. 12-16527.

Attorneys: Roy A. Katriel (The Katriel Law Firm) for Marshall Block. John Charles Dwyer and Michael G. Rhodes (Cooley LLP) for eBay, Inc.

Companies: eBay, Inc.

Cases: StateUnfairTradePractices AlaskaNews ArizonaNews CaliforniaNews HawaiiNews IdahoNews MontanaNews NevadaNews OregonNews WashingtonNews