Case 3:17-cv-00359-WHA Document 22-4 Filed 02/09/17 Page 1 of 18

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Basil P. Fthenakis, Esq. (88399)
CRITERION LAW
2225 E. Bayshore Road, Suite 200
Palo Alto, California 94303
Tel. (650) 352-8400
Fax. (650) 352-8408
Of counsel:
David S. Godkin (Admitted pro hac vice)
James E. Kruzer (Admitted pro hac vice)
BIRNBAUM & GODKIN, LLP
280 Summer Street
Boston, MA 02210
(617) 307-6100
godkin@birnbaumgodkin.com
kruzer@birnbaumgodkin.com
Attorneys for Plaintiff,
SIX4THREE, LLC, a Delaware
limited liability company

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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SIX4THREE, LLC, a Delaware limited
liability company,
Plaintiff,

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v.

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FACEBOOK, INC., a Delaware corporation
and DOES 1 through 50, inclusive

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Defendants.

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Case No. 3:17-cv-00359-WHA
REPLY TO DEFENDANT’S OPPOSITION
TO PLAINTIFF’S NOTICE OF MOTION
TO REMAND FOR LACK OF FEDERAL
JURISDICTION AND AWARD OF FEES
AND COSTS
Date: February 16, 2017
Time: 8:00AM
Ctrm: 8
Judge: Honorable William H. Alsup

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TABLE OF CONTENTS

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Page

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I. ARGUMENT ............................................................................................................................ 1
A. Plaintiff’s Claim Under the “Unlawful” Prong of Cal. Bus & Prof. Code § 17200
and Its Discovery Responses Have Not Focused on Sherman Act Conduct ..................... 1
B. To the Extent Monopolistic Conduct is Implicated by Plaintiff’s Second Amended

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Complaint, Facebook’s Removal Petition Was Filed Too Late......................................... 8
C. There is No Exclusive Federal Jurisdiction Because Numerous State and Common Law
Claims are Asserted ........................................................................................................... 9
D. It Remains Premature to Determine the Full Nature of Potential Antitrust Claims as
Discovery in Superior Court is Ongoing, but Ample Evidence of Cartwright Act

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Violations Has Been Found in Facebook’s Files. ............................................................ 10

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II. CONCLUSION ..................................................................................................................... 15

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TABLE OF AUTHORITIES

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Cases

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Asahi Kasei Pharma Corp. v. CoTherix, Inc., 204 Cal. App. 4th 1 (2012) ....................... 15
California v. Pinnacle Sec. CA LP, 746 F. Supp. 2d 1129 (N.D. Cal. 2010) .................. 6,8

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Corwin v. Los Angeles Newspaper Serv. Bureau, Inc., 4 Cal. 3d 842 (1971). ................. 15

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Dimidowich v. Bell & Howell, 803 F.2d 1473 (9th Cir. 1986) .......................................... 14

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Hendricks v. Dynegy Power Marketing, 160 F. Supp. 2d 1155 (S.D. Cal. 2001) ...... 6, 7, 8
In re Nat’l Football Leagues Sunday Ticket Antitrust Litig., 2016 U.S. Dist. LEXIS
41639 (C.D. Cal. Mar. 28, 2016) ................................................................................ 3, 4, 9

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In re Sony Grand WEGA KDF-E A10/A20 Series Rear Projection HDTV Litig., 758
F. Supp. 2d 1077 (S.D.Cal. 2010) ....................................................................................... 9

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Kasky v. Nike, Inc., 27 Cal. 4th 939 (2002) ...................................................................... 10

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Khoury v. Maly’s of California, Inc., 14 Cal. App. 4th 612 (1993)..................................... 9

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Lippitt v. Raymond James Fin. Servs., 340 F.3d 1033 (9th Cir. 2003) ........................ 6, 7, 8

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Kolling v. Dow Jones & Co., 137 Cal. App. 3d 709 (1982). ............................................ 15
Moss v. Infinity Ins. Co., 2015 U.S. Dist. LEXIS 158059 (N.D. Cal. Nov. 20, 2015) ..... 10
National Credit Reporting Ass’n v. Experian Info. Solutions, Inc., 2004 U.S. Dist.
LEXIS 17303 (N.D. Cal. July 21, 2004) ................................................................. 3, 4, 8, 9
Nevada v. Bank of Am. Corp., 672 F.3d 661 (9th Cir. Nev. 2012) ...................................... 1
People v. Dollar Rent-A-Car Systems, Inc., 211 Cal. App. 3d 119 (1989) ...................... 10
Spanos v. Bancorp, 2015 U.S. Dist. LEXIS 14785 (C.D. Cal. Feb. 6, 2015) ..................... 2

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Other Authorities

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28 U.S.C. § 1446 ................................................................................................................. 8
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28 U.S.C. § 1447 ............................................................................................................... 15

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Cal. Bus. & Prof. Code § 17200 ................................................................................ 1-9, 15

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Cal. Bus. & Prof. Code § 17500 ................................................................................... 9, 10

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Cal. Bus. & Prof. Code § 16720 ............................................................................. 4, 14, 15

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I. ARGUMENT
a. Plaintiff’s Claim Under the “Unlawful” Prong of Cal. Bus & Prof. Code § 17200
and its Discovery Responses Have Not Focused on Sherman Act Conduct.
Facebook’s Opposition rests on a plainly false assertion: “The bottom line is that

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unilateral monopoly is the focus of the operative complaint.” See Defendant’s Opposition to

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Motion to Remand (“Opposition”), at 1-2. The gravamen of Plaintiff’s Second Amended

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Complaint (“SAC”) is not grounded in antitrust at all. Rather than focusing on monopoly

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position, market power and other federal antitrust questions, the SAC alleges common law and

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state law claims related to deceptive, unfair, fraudulent, tortious and collusive conduct
surrounding Facebook’s decision to deliberately misrepresent its intentions with its operating
system. The SAC focuses almost entirely on the pattern of clear and unambiguous promises by

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Facebook over many years to demonstrate the reasonability of Plaintiff’s reliance in investing

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time and capital in building an application on Facebook’s operating system. Indeed, over half

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of the paragraphs in the SAC focus on these repeated, clear and unambiguous promises made

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by Facebook and its partners to establish the reasonableness of Plaintiff’s reliance. See ECF

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No. 1-2, ¶¶ 1-53, ¶¶ 67-72. The SAC focuses on this to ground the elements of its alleged

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causes of action, including intentional interference with contract, intentional interference with
prospective business relations, negligent misrepresentation, and Section 17200 violations of
unfair, deceptive or unlawful conduct.

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In addition, Plaintiff never characterizes Facebook’s anti-competitive conduct as

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unilateral and makes clear that the conduct in question is not unilateral. The SAC specifically

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references a Wall Street Journal investigative report that demonstrates that Facebook and

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Tinder reached an “unspecified compromise” to give Tinder an unfair competitive advantage

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that Facebook refused to offer to Plaintiff, violating promises that Facebook would maintain a

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fair operating system. See ECF No. 1-2, ¶¶ 103-104.
Notably, the SAC does not invoke the concepts of federal antitrust law described by
terms like “monopoly power,” “market power” or “unilateral”. The SAC refers to Facebook as

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a “monopolist” only once and further notes that Facebook “monopolized for itself” the image

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search market: “In sum, Facebook acts as a platform when it wants to exploit Developer

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creativity and resources, and a monopolist when it wants to secure areas of the ecosystem for

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itself once developer creativity and resources have been invested.” See ECF No. 1-2, ¶¶ 107,
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116. This reference to Facebook as a “monopolist” and as “monopolizing for itself” is not
sufficient to make any reasonable determination as to whether Facebook’s conduct was

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unilateral or in concert with other partners with which it executed binding agreements to extract
large advertising payments in exchange for their continued access to data that had been shut off

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to all other companies, thereby giving these partners an insurmountable competitive advantage

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in various software markets.

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Instead, Facebook quotes the Superior Court’s June 28, 2016 Ruling on Demurrer

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permitting Plaintiff to proceed under its Section 17200 claim: “Plaintiff has specifically alleged

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that it was a victim to a Facebook practice/scheme to lure in developers, generate additional
advertising revenue by enhancing the user’s experience, and then monopolize for itself the

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market for image search capabilities.” See Opposition, at 9. Remarkably, Facebook contends
that this phrase used by the Superior Court – “monopolize for itself” – is somehow dispositive

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that Plaintiff is unequivocally alleging unilateral monopoly conduct when the gravamen of the

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SAC and its discovery responses contradict this baseless conclusion. The phrase “monopolize

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for itself” is not remotely sufficient to determine whether Facebook’s conduct created a

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monopoly or an oligopoly in any specific market for software applications (e.g. photo sharing

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applications) or whether Facebook acted on its own or in concert with others to create a
monopoly or oligopoly.1

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As such, Facebook’s reliance on National Credit Reporting Ass’n v. Experian Info Sols.
Inc., No. C04-01661 WHA, 2004 WL 1888769 (N.D. Cal. July 21, 2004) and In re Nat’l

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Football Leagues Sunday Ticket Antitrust Litig., 2016 U.S. Dist. LEXIS 41639 (C.D. Cal. Mar.

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28, 2016) is entirely misplaced. National Credit and National Football Leagues apply only if

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the SAC in fact “alleges unilateral monopolistic conduct by Facebook” and “the only law

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identified by [Plaintiff] that prohibits the alleged conduct is Section 2 of the Sherman Act”. See

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Opposition, at 11. In National Credit and National Football Leagues, the plaintiffs repeatedly
alleged federal antitrust violations in their complaints, acknowledged that these violations were

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the sole basis for their “unlawful” claims under Section 17200, and did not rely upon any other
actionable state or common law claims that did not require resolution of the Sherman Act

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To be clear, the following four scenarios are possible for each software market affected by Facebook’s anticompetitive conduct: (1) Facebook acted unilaterally to monopolize the market; (2) Facebook acted unilaterally to
oligopolize the market; (3) Facebook acted in concert with other large companies to monopolize the market; or (4)
Facebook acted in concert with other large companies to oligopolize the market. Facebook’s interpretation of
“monopolize for itself” somehow concludes that only scenario (1) is a possibility here, notwithstanding that

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violation. In National Credit, the plaintiff alleged a single cause of action that was hollow in
the absence of a determination of unilateral abuse of market power as virtually every paragraph

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of its complaint borrowed the language of federal antitrust law.2
The National Football Leagues complaint is replete with allegations that DirecTV is a

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monopoly that uses its market power to impose supra-competitive prices on consumers. See

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Godkin Reply Decl., Exhibit 2, ¶¶ 7-9, 27-28, 35-42, 57-60, 72, 77. The language used to

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describe the allegations is borrowed heavily from federal antitrust law and the allegations could

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not have been made without reference to federal antitrust law.3 Moreover, the conduct at issue

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centered on unilateral price fixing, for which there is no actionable basis in California antitrust
law. The National Football Leagues court denied remand because the plaintiffs did not have an

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adequate state law basis for their allegations, since price fixing is not prohibited by state law,
and necessarily had to reach a federal question to prevail on the merits of any of their claims:

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“If the Court were to disregard the allegations regarding Defendants’ alleged ‘monopoly

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position’ and ‘supra-competitive prices’, no alternative and independent unconscionability

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theory would remain.” See National Football Leagues, 2016 U.S. Dist. LEXIS 41639, at 11.

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Here, the Superior Court could entirely disregard considerations of Facebook’s market power,

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which is not even mentioned in the SAC, and Plaintiff’s one reference to Facebook being a
“monopolist,” and still find numerous violations of state and common law related to

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Facebook’s campaign of promising from 2007 to 2014 that it would maintain a fair operating
system in order to induce investment by startups and then engaging in schemes with large

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companies beginning at least by 2012 to reap the benefits of the startups’ investments upon

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shutting off their access to the operating system in 2015. In sharp contrast to National Credit

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and National Football Leagues, a big leap is required to conclude that the Sherman Act is the

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exclusive means through which Facebook’s alleged conduct can be regulated, particularly

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when discovery is ongoing regarding the nature of that conduct and has already provided clear
evidence of entirely independent state and common law violations.

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Plaintiff’s discovery to date has uncovered specific evidence that scenario (4) occurred in a number of software
markets affected by Facebook’s anti-competitive behavior.
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The National Credit complaint asserts, among other things, that “defendants possess virtually 100% of the
market for the provision of consumer credit reports,” “each of the defendants has and exercises monopolistic
market power over buyers of consumer credit reports,” and defendants’ conduct increases “above competitive
levels, the prices of credit reports,” thereby violating “state and federal antitrust laws” See Declaration of David S.
Godkin In Support of Plaintiff’s Reply to Opposition (“Godkin Reply Decl.”), Exhibit 1, ¶¶ 15, 56.
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Terms like “monopoly power,” “monopoly position,” and “market power” blanket the National Football
Leagues complaint. See Godkin Reply Decl., Exhibit 2, ¶¶ 7, 9, 11, 27, 28, 35, 36, 38, 39, 41, 58, 59, 60, 67,78.

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Further, at no time since filing the SAC has Plaintiff affirmatively stated that it seeks to

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pursue federal antitrust claims as predicate violations of Section 17200. Plaintiff answered
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Facebook’s interrogatory by first stating that its “analysis, investigation and discovery are
ongoing and it does not intend to limit evidence at trial to matters stated herein.” See ECF No.

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1-3 at 3, 5. Plaintiff then provided a comprehensive list of all potential laws Facebook’s

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conduct may have violated in order to ensure it would not be precluded from alleging any of

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the listed violations upon completing discovery. Plaintiff is entirely within its rights to preserve

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its ability to allege any of the listed violations in its interrogatory response after reviewing

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relevant documents of key Facebook executives it has moved to compel in Superior Court. That
Plaintiff might allege a federal antitrust violation under the “unlawful” prong of Section 17200

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is not sufficient to provide exclusive federal jurisdiction, particularly when Plaintiff has also
asserted that it might allege entirely independent state and common law violations, particularly

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violations of the Cartwright Act.4 Plaintiff has consistently stated that it reserves its rights

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regarding the predicate violations it will rely upon until it reviews the discovery that is central

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to the conduct at issue.
Because it would not be prudent to determine the predicate violations before completing

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discovery, Facebook is left putting words in Plaintiff’s mouth. Facebook repeatedly attempts to
recharacterize Plaintiff’s silence or inaction as affirmative intent. For instance, Facebook states

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that Plaintiff “made clear that it was sticking with that approach and would not be withdrawing
its federal claims”. See Opposition, at 2. The act to which Facebook refers in which Plaintiff

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“made clear” its intent was Plaintiff’s decision not to respond to an email from Facebook

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requiring that Plaintiff confirm or disavow any federal causes of action. Importantly, Plaintiff

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has no obligation to confirm or disavow any causes of action and its silence in response to an

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email from Facebook attempting to bait Plaintiff further cannot be construed as an affirmative

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intent to pursue any specific causes of action.
Facebook mischaracterizes Plaintiff’s interrogatory response in other ways. It claims

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that Plaintiff’s interrogatory response “makes clear that [the Sherman Act] is not an alternative
theory or among a list of predicate violations of law set forth in the disjunctive.” See

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Opposition, at 1. Further, Plaintiff has “unequivocally stated that its Section 17200 theory turns

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on allegations that Facebook violated federal antitrust law.” See Opposition, at 1-2. Plaintiff

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Plaintiff’s interrogatory response explicitly states: “Facebook’s conduct further repeatedly violates the
Cartwright Act” and “include numerous per se violations resulting from tying agreements with a host of third

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disputes that its interrogatory response expressed specific intent regarding the use of
conjunctive adjectives simply because words like “also” and “further” were used. Defendant

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asked for “ALL laws”; Plaintiff provided a list of “ALL laws”. It would be a curious result if
this case could be removed to federal court simply because Defendant is permitted to impute

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intent regarding the conjunctive when Plaintiff took itself to be providing a list of predicate

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violations in the disjunctive. Plaintiff further disputes that it has made an “unequivocal”

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statement that the Superior Court must decide on federal antitrust law before finding an

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“unlawful” violation under Section 17200. Finally, Facebook states that Plaintiff “continues to

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decline to disavow reliance on Section 2 of the Sherman Act,” again attempting to impute
affirmative intent from the decision not to respond to a baiting email. See Opposition, at 8.

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Plaintiff has no obligation to “disavow” its reliance on Section 2 of the Sherman Act. Plaintiff’s
position has remained consistent: Plaintiff reserves its rights to allege any number of state,

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common or federal causes of action and will do so after it is able to access and review the

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documents of key Facebook executives that it moved to compel Facebook to produce months

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ago.

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Facebook has gone to great lengths to recast Plaintiff’s silence and inaction as clear,
unequivocal and affirmative intent to make a Sherman Act bed.5 But Plaintiff’s SAC and
discovery responses make clear how far Facebook is stretching. For example, Plaintiff

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responded on December 13, 2016 to other interrogatories requesting that it state the complete
factual basis for the causes of action alleged in its complaint. Interrogatory No. 9 sought the

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complete factual basis to support the Section 17200 claim, Interrogatory No. 10 for negligent

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misrepresentation, Interrogatory No. 11 for intentional interference with contract, and

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Interrogatory No. 12 for intentional interference with prospective business relations. Plaintiff’s

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response to these interrogatories borrows nothing from federal antitrust law, but instead focus

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on Facebook’s failure to provide notice to Plaintiff of its decision to close Graph API once

parties.” See ECF No. 1-3 at 6.
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Facebook further makes much of the definition of “contention” in attempting to use Plaintiff’s interrogatory
response regarding “ALL laws” to recharacterize Plaintiff’s causes of action as necessarily relying on federal
antitrust law. See Opposition, at 7. Facebook conveniently ignores that Plaintiff began its response to the
interrogatory by explicitly stating that its discovery was ongoing and it was not intending to limit its discussion of
matters at trial to the responses therein, and that Plaintiff reserved the right to update its responses in the future.
Plaintiff does not dispute the meaning of “contention”. Plaintiff simply asserts that its intent in responding to the
interrogatory was to contend that any one of the listed predicate violations may be asserted, not that Plaintiff
intended to assert all of the predicate violations, particularly since Plaintiff has not obtained discovery necessary
to determine if the elements of all of the predicate violations are established. Plaintiff has never affirmatively
stated it intends to assert all of the predicate violations, though it reserves its rights to do so.

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Facebook made the decision.6 Such notice, had it been provided, would have put Plaintiff on
notice to cease making further investments in building applications on Facebook’s operating

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system. Plaintiff states as the factual basis for its Section 17200 claim the following:

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Facebook did not notify [Plaintiff] of the shutting down of Graph API…until
January 20, 2015. Between April 30, 2014 and January 20, 2015, [Plaintiff]
received numerous emails from Facebook, none of which ever mentioned
that 643’s App would be shut down on April 30, 2015. In fact, many of the
emails sent by Facebook provided updates…to ensure that [Plaintiff] could
continue to use Facebook Platform…. That Facebook continued to entice
[Plaintiff] to invest in Facebook Platform while deliberately withholding
updates to [Plaintiff] of perhaps the most significant change to Facebook
Platform since it was launched in 2007, is direct evidence in support of
[Plaintiff’s] claim that Facebook violated Business and Professions Code
17200 et seq. See ECF No. 20-2 at 21-23.

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It stretches the imagination to suggest, particularly prior to completing necessary discovery,

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that the kind of conduct described in this interrogatory response as the basis for the Section

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17200 claim necessarily implicates Section 2 of the Sherman Act.

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For this reason, Facebook’s attempt to distinguish Lippitt, Hendricks and Pinnacle falls

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short.7 Facebook argues that the dispositive question for the Lippitt court was the fact that the
plaintiff in Lippitt “disclaimed that his complaint sought to enforce any federal statute or
regulation, and instead only relied on false advertising as the basis for his Section 17200 claim.

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Here, not only has [Plaintiff] not disclaimed a significant federal question, it has expressly

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alleged a violation of Section 2 of the Sherman Act, as well as violations of several other

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federal antitrust provisions.” See Opposition at 11-12 (referencing Lippitt, 340 F.3d at 1040).

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The Lippitt court’s language that Facebook references is as follows: “Lippitt contends that his

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complaint has been misinterpreted by Defendants and by the district court…. What the

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complaint seeks, according to Lippitt, is not a ban on the instrument itself, but rather a ban on
false advertising…. While the complaint is the exact opposite of a model of clarity, it can be

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Facebook’s Opposition references an October 31, 2016 response to Interrogatory No. 9 that borrows the
language of the Superior Court Order on Demurrer in using the phrase “monopolize for itself”. See Opposition, at
5. Facebook attempts again to rely on this phrase to argue that Plaintiff has alleged unilateral monopoly behavior
under the Sherman Act all along. It should be noted that Facebook takes this quotation and Plaintiff’s reference to
the Antitrust Subcommittee of the U.S. House of Representatives from Plaintiff’s response entirely out of context.
Plaintiff states prior to the quoted section: “This type of conduct and the harm it caused 643 is by no means
isolated.” See ECF No. 20-2 at 19-20. The reference to “monopolize for itself” was not even referring to the
conduct alleged in the SAC. It was referring to examples of other conduct. Surely this is not sufficient to establish
Facebook’s argument that Plaintiff’s sole basis for the Section 17200 claim is Section 2 of the Sherman Act.

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read in the way Lippitt asserts. Because Lippitt has disclaimed a broader reach, we need not
consider whether a state court action that seeks to ban the sale of a given investment instrument

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altogether would necessarily be subject to federal jurisdiction.” Lippitt, 340 F.3d at 1040. Here,
Plaintiff certainly contends that its SAC is being misinterpreted by Facebook. Plaintiff further

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contends that the SAC “can be read in the way [Plaintiff] asserts”. Plaintiff contends that the

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conduct described in the SAC entails a scheme whereby Facebook falsely advertises its

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“revolutionary” new operating system from 2007 to 2014. Finally, the plaintiff in Lippitt

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“disclaimed” the defendant’s interpretation of his complaint in a reply brief in that matter.

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Plaintiff here is doing the same. And, perhaps most importantly, the Lippitt court’s decision did
not in fact turn on whether plaintiff proactively took measures to explicitly disavow specific

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federal causes of action and waive its right to raise them in the future. The Lippitt court hinged
its decision entirely on the fact that the “state court need not inquire into NYSE regulations, or

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even refer to federal law, in the case before us.” Lippitt, 340 F.3d at 1045. Here, the Superior

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Court can avoid reference to federal law and Plaintiff can prevail on each of its causes of

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action, including the “unlawful” claim under Section 17200.
Facebook’s attempt to distinguish Hendricks similarly falls short. Facebook argues that

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Plaintiff has alleged state and federal law violations whereas the plaintiff in Hendricks only
alleged state law violations. As Plaintiff has stated repeatedly, it disputes that it has made any

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affirmative statement regarding the arguments it intends to raise at trial and should be taken to
have contended that it has reserved its rights to pursue any number of common, state and

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federal law violations. Even so, the court’s decision in Hendricks did not turn on the mere

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presence of federal antitrust issues. The decision specifically turned on whether the plaintiff in

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Hendricks could establish the “unlawful” prong of Section 17200 without determining a federal

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question. Hendricks, 160 F. Supp. 2d at 1156. In this important respect, Hendricks is precisely

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on point. Hendricks, along with Pinnacle, further supports Plaintiff’s position that just because
Plaintiff “might” pursue violations of federal law, a conclusion Plaintiff has repeatedly stated it

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will not reach until it completes discovery, this fact in no way requires the Superior Court to
reach a federal question. Id. at 1163. Facebook attempts to distinguish Pinnacle along the same

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lines by attempting to recharacterize the dispositive question on whether any state or federal

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law is implicated or alleged on the face of a plaintiff’s complaint. However, in none of these

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See California v. Pinnacle Sec. CA LP, 746 F. Supp.2d 1129 (N.D. Cal. 2010); Hendricks v. Dynegy Power
Marketing, 160 F. Supp. 2d 1155 (S.D. Cal. 2001); Lippitt v. Raymond James Fin. Servs., 340 F.3d 1033 (9th Cir.

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cases is that the dispositive question. The fundamental question in Lippitt, Hendricks, Pinnacle,
National Credit, and National Football League is whether it is possible for the Superior Court

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to disregard federal law without hollowing out any of Plaintiff’s causes of action. Here, it is
abundantly clear that questions of federal antitrust law could be disregarded entirely without
hollowing out any of Plaintiff’s claims.

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b. To the Extent Monopolistic Conduct is Implicated by Plaintiff’s Second
Amended Complaint, Facebook’s Removal Petition Was Filed Too Late.

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Facebook’s Opposition suffers from a fatal flaw in relying repeatedly on statements and

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actions by Plaintiff that are many months old. In relying upon these statements and actions,
Facebook clearly fails to meet the deadline for removal under 28 U.S.C. § 1446(b)(3).

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Facebook repeatedly attempts to characterize the SAC, filed almost one year ago on February
26, 2016, as describing unilateral monopoly conduct under the exclusive jurisdiction of the

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Sherman Act. See Opposition, at 3-4. To the extent the SAC is really about unilateral

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monopolistic behavior, an assertion that Plaintiff emphatically rejects, then Plaintiff’s

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interrogatory response provided no new information and Facebook is more than 10 months late

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in filing its removal petition. Further, Facebook relies on Plaintiff’s interrogatory response of

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October 31, 2016 noting that Facebook sought to “monopolize the market for itself”. See
Opposition, at 5. Again, this quotation is taken out of context, but regardless, if it has the

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meaning Facebook purports it to have, then Plaintiff’s Third Supplemental Interrogatory
Response provides no new information and Facebook’s removal petition is almost two months

18

late. In order to avoid remand, Facebook must assert that the merits of Plaintiff’s causes of

19

action necessarily hinge on Section 2 of the Sherman Act and that Plaintiff is now taking

20

“belated efforts” to recharacterize its claims under state law. See Opposition, at 13. However,

21

by citing to the SAC and Plaintiff’s earlier discovery responses, Facebook necessarily concedes

22

that it had ample basis to remove this case long ago, but missed the deadline.
c. There is No Exclusive Federal Jurisdiction Because Numerous State and

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Common Law Claims are Asserted.

24

Facebook’s Opposition depends entirely on its argument that the only cognizable

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predicate for Plaintiff’s “unlawful” claim under Section 17200 is Section 2 of the Sherman Act.

26

This is not true. Facebook conveniently ignores entirely that in its interrogatory response

27

Plaintiff reserves its right to assert that Facebook’s conduct violates the “unlawful” prong of

28

2003).

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Section 17200 “by reason of its tortious conduct, including but not limited to constructive
fraud, negligent misrepresentation of material fact, intentional interference with contract and

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3

intentional interference with prospective business relations.” See ECF No. 1-3 at 6. Plaintiff
need not reach any federal question in order to establish the elements of such violations based

4

on the conduct it has described – conduct that need not rely on questions under which federal

5

law asserts exclusive jurisdiction, such as unilateral supra-competitive pricing, as in National

6

Credit and National Football Leagues.

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8
9

Further, Plaintiff may pursue the “unlawful” prong of Section 17200 via Section 17500
false advertising prohibition. Facebook’s reliance on Khoury v. Maly’s of California, Inc., 14
Cal. App. 4th 612 (1993) is inapposite. In Khoury, the appellant “[failed] to describe with any
reasonable particularity the facts supporting violation…nor [did] the facts explain the manner

10

of misleading appellant’s customers” Khoury, 14 Cal. App. 4th at 619. Here, Plaintiff devotes

11

much of its SAC to detailing specific false representations at specific dates and times while

12

demonstrating that it relied on those false representations and that such reliance was

13

reasonable. See ECF No. 1-2, ¶¶ 1-53, ¶¶ 67-72. In its Section 17200 count, Plaintiff

14

specifically incorporates these repeated false statements and misrepresentations. Id., ¶ 110. A

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Section 17500 claim “need be alleged only with ‘reasonable particularity’” and “must allege
actual reliance”. See In re Sony Grand WEGA KDF-E A10/A20 Series Rear Projection HDTV

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17
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Litig., 758 F.Supp.2d 1077, 1093 (S.D.Cal. 2010) (quoting Khoury, 14 Cal. App. 4th at 619).
The SAC meets both of these requirements.
Further, Facebook’s narrow construal of advertising and its limitation to the offering of

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selling real property is belied by the language of Section 17500 and the case law surrounding it.

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The Section 17500 language is explicitly not limited to “real or personal property” but applies

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to “services, professional or otherwise, or anything of any nature whatsoever…in any other

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manner or means whatever…concerning any circumstance or matter or fact connected with the
proposed performance or disposition thereof, which is untrue or misleading.” See Cal. Bus. &

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Prof. Code ¶ 17500 et seq. The case law strongly supports the view that when a company
makes representations of fact about its own business operations for the purpose of promoting

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sales of its products, these messages are commercial speech for purposes of applying state laws

26

barring false and misleading commercial messages. See, e.g., Kasky v. Nike, Inc., 27 Cal. 4th

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939 (2002). For seven years, Facebook made false statements with the intention of increasing

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adoption of its operating system to generate substantial revenues for it and its partners. Clearly
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commercial statements intentionally designed to mislead companies and consumers to
participate in Facebook’s operating system and purchase advertisements in the operating

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system, which Plaintiff and many other businesses in fact did, fall squarely under the purview
of Section 17500 as its prohibition “extends to the use of false or misleading oral statements”

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and to recover under Section 17500 “it is necessary to show only that members of the public

5

are likely to be deceived.” See People v. Dollar Rent-A-Car Systems, Inc., 211 Cal. App. 3d

6

119, 129 (1989); see also Moss v. Infinity Ins. Co., 2015 U.S. Dist. LEXIS 158059; Kasky, 27

7

Cal. 4th at 951 (“Thus, to state a claim under either the UCL or the false advertising law, based

8

on false advertising or promotional practices, it is necessary only to show that members of the
public are likely to be deceived”) (quotations omitted).

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d. It is Premature to Determine the Full Nature of Potential Antitrust Claims as
Discovery in Superior Court is Ongoing, but Ample Evidence of Potential
Cartwright Act Violations Has Been Found in Facebook’s Files.
Facebook filed its removal petition on the eve of its deadline to serve its motions for

13

summary judgment and mere days before the Superior Court’s ruling on Plaintiff’s discovery

14

motions to obtain information from key Facebook executives, including Chief Executive

15

Zuckerberg, regarding the decision to close Graph API that shut down Plaintiff’s business and
many others. Plaintiff’s discovery to date provides evidence suggesting that the decision to shut

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down Graph API was made: (1) for anticompetitive reasons; (2) in concert with other large
companies; (3) prior to October 2012 (even though Facebook waited to announce the decision

18

until April 2014); (4) by Mr. Zuckerberg; and (5) with the active participation of at least six

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other individuals who reported directly to Mr. Zuckerberg. See Godkin Reply Decl. Exhibit 3,

20

at 1-4. Plaintiff has yet to receive information regarding this decision that shut down its

21

business. Rather, Facebook has produced documents only from low-level employees that

22

Facebook unilaterally selected as custodians and who clearly had no involvement in the
decision that shut down Plaintiff’s business.

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Nonetheless, Plaintiff has found in the files of these low-level employees clear evidence
that beginning at least by 2012 and likely earlier, Facebook engaged in a scheme to trade

25

access to data in its operating system on advantageous terms in order to extract large payments

26

from collusive partners who sought to stifle competition in the various software markets in

27

which they operated. Plaintiff has found direct evidence of agreements in which large

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companies agreed to spend substantial sums of money on advertising with Facebook in
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exchange for Facebook providing an uneven playing field granting these companies a strong
competitive advantage for their software applications by accessing data that Facebook shut off

2

to over 40,000 other companies on April 30, 2015, a decision which is at the heart of Plaintiff’s

3

SAC.8 These agreements were entered into in violation of Facebook’s repeated promises over a

4

period of many years that this data would be accessible on a level playing field to all

5

companies, promises upon which Facebook built its globally dominant advertising business and

6

upon which Plaintiff relied in building its own business.
On October 30, 2012, Facebook Vice President of Engineering, Michael Vernal, sent a

7
8

note to certain employees stating that after discussing with Mr. Zuckerberg, Facebook has
decided to “limit the ability for competitive networks to use our platform without a formal deal

9
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in place” and that Facebook is going to “require that all platform partners agree to data
reciprocity.” Mr. Vernal then describes a whitelisting system Facebook will implement, and did

11

in fact implement, to determine data access based on this “reciprocity principle.” See Godkin

12

Reply Decl., Exhibit 5 at FB-00423235-FB-00423236. The reciprocity principle is

13

subsequently defined and discussed among Facebook employees on numerous occasions as

14

shutting down access “in one-go to all apps that don’t spend…at least $250k a year to maintain

15

access to the data.” See Godkin Reply Decl., Exhibit 6 at FB-00061251. Facebook then
embarks on a campaign to reach out to large companies and extract significant payments from

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17

them with the threat that they will otherwise turn off the company’s data access. However, if a
company were to agree to provide significant payments to Facebook, then Facebook would

18

offer it an enormous advantage relative to its competitors. Facebook employees routinely

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discuss this fact in their email exchanges: “Removing access to all_friends lists seems more

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like an indirect way to drive NEKO adoption.” See Godkin Reply Decl., Exhibit 7 at FB-

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00061439. In other words, Facebook’s decision to close access to data in its operating system

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(“removing access to all_friends_lists”), which shut down Plaintiff’s business, was designed to
generate increased revenues on Facebook’s advertising platform (“drive NEKO adoption”) by

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24

offering an unfair competitive advantage to companies from which Facebook could extract
large payments.

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26
27
28

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Email from a Facebook employee on August 21, 2013: “Simon managed to pull a list of 40k+ apps that request
and make use of the friends_permissions.” See Godkin Reply Decl., Exhibit 4 at FB-00061367. This means at
least 40,000 software applications, and likely many more, were impacted by Facebook’s decision to turn an
operating system around which it previously promised to maintain a level playing field into a pay-to-play scheme
for its advertising business.

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Facebook’s files are replete with examples where it negotiates multiple contracts with
each partner in executing this deceptive campaign to tie access to data that it previously

2
3

promised would be available on fair and neutral terms to the amount of advertising revenue it
could extract from the partner. For instance, in August 2013, the Royal Bank of Canada

4

expressed concern to Facebook around its continued access to Graph API data. A Facebook

5

employee then asks internally whether Royal Bank of Canada has an agreement requiring a

6

certain advertising spend each year. Another employee responds: “I believe it will be one of the

7

biggest NEKO campaigns ever run in Canada.” See Godkin Reply Decl., Exhibit 8 at FB-

8

00427404 - FB-00427406. Facebook employees then confirm the existence of a contract for a
large advertising expenditure, and then ask their legal department to release an Extended API

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10

Agreement to Royal Bank of Canada, which gives it access to the Graph API data Facebook
shut off to other companies like Plaintiff. After this is complete, a Facebook employee then

11

responds to Royal Bank of Canada assuring them their access to data will not be impacted. Id.

12

Similarly, in April 2013, a Facebook employee asks when negotiating a whitelist with Amazon:

13

“are [we] granting them these permissions only if they give in on our asks or are we going to let

14

them utilize these GET permissions regardless of any concessions to our asks?” (“GET

15

permissions” allowed companies to read Facebook’s data and were used by Plaintiff
extensively.) Another Facebook employee responds: “Given we’re deprecating the majority of

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17

these permissions, we’ll need to either have a disappointing conversation with Amazon or a
strategic conversation in the context of the broader deal discussions.” See Godkin Reply Decl.,

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Exhibit 9 at FB-00427604 - FB-00427604. In other words, one Facebook employee tells

19

another not to promise Amazon that it will continue to have access to this data after Facebook

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shuts it down until Facebook can extract monetary consideration from Amazon, thereby

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holding Amazon hostage as its app would not function without access to the data.

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There are numerous other examples where Facebook invokes this “reciprocity
principle” to whitelist certain companies to the great detriment of others based on Facebook’s

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24

ability to extract payments or other valuable consideration from them. For instance, in an email
on April 30, 2015, a Facebook employee confirms that an application developed by

25

Chrysler/Fiat had been whitelisted to continue to receive data that was shut off to everyone

26

else. See Godkin Reply Decl., Exhibit 10 at FB-00031050, FB-00043519. The agreement

27

defines “Private Extended APIs” as “a set of APIs and services provided by FB to Developer

28

that enables Developer to retrieve data or functionality relating to Facebook that is not
12
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generally available under Platform.” See Godkin Reply Decl., Exhibit 11 at FB-00043886
(emphasis added).

2
3

On March 30, 2015, Nissan was granted a whitelist extension to access friends
permissions until at least June 30, 2015. See Godkin Reply Decl., Exhibit 12 at FB-00042856.

4

That same day, Lyft received “Special API access” via the whitelisting process to access

5

friends permissions. See Godkin Reply Decl., Exhibit 13 at FB-00042899. On April 15, 2015,

6

Facebook discusses a whitelist agreement with GoDaddy in exchange for access to GoDaddy’s

7

Places of Interest (POI) data. See Godkin Reply Decl., Exhibit 14 at FB-00042373. On March

8

18, 2015, AirBnB is whitelisted. See Godkin Reply Decl., Exhibit 15 at FB-00043830. On
February 18, 2015, Facebook and Netflix discuss their whitelist agreement to give Netflix

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10

access to “all friends, not just connected friends,” which is one of the access points that
Facebook removed that caused Plaintiff’s app to cease functioning. See Godkin Reply Decl.,

11

Exhibit 16 at FB-00045735. In each of these cases, Facebook seems to base its decision to

12

grant or deny these companies an unfair competitive advantage based on its ability to extract

13

payment or other valuable consideration.

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15

As reported in the Wall Street Journal, Facebook went to great lengths to provide an
unfair competitive advantage to Tinder to access Graph API data after it was closed to most
other developers. See Godkin Reply Decl., Exhibit 17 at FB-00047134 - FB-00047134; Exhibit

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17

18 at FB-00047035 - FB-00047035. Facebook did this in substantial part because Tinder was
the owner of the United States trademark in “Moments”, which was the name Facebook hoped

18

to give and in fact gave to its new photo sharing application, which it launched less than two

19

months after shutting off Plaintiff’s access to the photo sharing market on Facebook Platform.

20

This quid pro quo arrangement with Tinder is evident from a lengthy negotiation over email

21

where a Facebook employee attempts to trade the ability to use “Moments” as the name of

22

Facebook’s photo application for Tinder’s continued access to data that was shut off to Plaintiff
and over 40,000 other companies. See Godkin Reply Decl., Exhibit 19 at FB-00044220-FB-

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24

00044227. The Facebook employee explicitly asks for use of Tinder’s trademark in “Moments”
for Facebook’s new photo sharing app (an app directly competitive with Plaintiff’s app), in

25

consideration of the fact that Facebook has “developed two new APIs that effectively allow

26

Tinder to maintain parity of the product in the new API world.” Id. at FB-00044224. By

27

“parity,” the Facebook employee clearly means that Tinder’s app will continue to work as

28

intended, while other apps, like Plaintiff’s app, will be forced to shut down.
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Tinder, along with a number of other companies that rely upon photo or friend
information from Facebook and executed whitelist agreements under Facebook’s “reciprocity

2
3

principle,” are competitors of Plaintiff. It is entirely plausible that Facebook and each of these
entities constitute a trust under the Cartwright Act as they engaged in “a combination of capital,

4

skill, or acts by two or more persons to achieve an anticompetitive end.” The anticompetitive

5

ends encompass restrictions in trade or commerce, the reduced production of a commodity and

6

contracts to preclude free competition, and the combination of interests in connection with a

7

sale of advertising. For instance, the number and kinds of software applications from which

8

consumers could choose decreased precipitously once Facebook shut down access to its data.
Consumers were forced to choose from a much smaller pool of applications – those developed

9
10
11

exclusively by Facebook or companies from which Facebook could extract large advertising
payments.
Dimidowich v. Bell & Howell makes abundantly clear that “a claim for conspiracy to

12

monopolize is cognizable under the Cartwright Act because it alleges the requisite combination

13

of actors.” Dimidowich v. Bell & Howell, 803 F.2d 1473, 1475 (9th Cir. 1986). Further, “[s]ince

14

it is often difficult to show direct evidence of a combination or conspiracy, concerted action

15

may be inferred from circumstantial evidence of the antitrust defendant's conduct and course of
dealings. However, to survive a motion for summary judgment, a plaintiff must present

16
17

evidence that tends to exclude the possibility that the alleged conspirators acted
independently.” Dimidowich, 803 F.2d at 1475. Plaintiff’s SAC and its discovery motions

18

continually refer to concerted action and circumstantial evidence suggesting Facebook

19

conspired with other companies. Plaintiff’s review of Facebook’s files confirms this suspicion

20

and reveals abundant evidence specifically describing the negotiation of multiple, tied contracts

21

(at least one contract

22
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26
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to extract advertising payments and another to provide special data access).9 Facebook’s files
further confirm that significant engineering effort and capital was deployed in executing these

2
3

contracts. As such, Facebook and its partners are separate entities undertaking acts in concert
which caused proximate harm to Plaintiff, other companies, and the public by actually

4

depriving the marketplace of competition. See Asahi Kasei Pharma Corp. v. CoTherix, Inc.,

5

204 Cal. App. 4th 1, 8 (2012) (“To maintain an action for a combination in restraint of trade

6

under the Cartwright Act, ‘the following elements must be established: (1) the formation and

7

operation of the conspiracy; (2) illegal acts done pursuant thereto; and (3) damage proximately

8

caused by such acts.” (quoting Kolling v. Dow Jones & Co., 137 Cal.App.3d 709, 718 (1982)).
For these reasons, Facebook’s argument that Plaintiff “has neither the facts nor even a plausible

9
10

story to assert a Cartwright Act claim in good faith” is simply not true. See Opposition, at 16.
Plaintiff has found ample evidence and awaits completion of discovery before deciding

11

whether to name additional defendants and assert predicate violations of its Section 17200

12

claim.

13

II.

For all of the foregoing reasons, Plaintiff respectfully requests that the Court remand

14
15

CONCLUSION

this matter back to the Superior Court. Additionally, as set forth above, Facebook did not have
an objectively reasonable basis for removal. Therefore, Plaintiff respectfully requests an award

16
17

of its costs and fees in accordance with 28 U.S.C. § 1447(c).
Dated: February 9, 2017

CRITERION LAW

18

BIRNBAUM & GODKIN, LLP

19

By:

20
21
22
23
24
25
26
27
28

/s/ David S. Godkin
Basil P. Fthenakis, Esq.
David S. Godkin (pro hac vice)
James E. Kruzer (pro hac vice)
Attorneys for Plaintiff Six4Three, LLC

9

As Facebook notes in its Opposition, a tying agreement is “an agreement by a party to sell one product but only
on the condition that the buyer also purchases a different (or tied) product, or at least agrees that he will not
purchase that product from any other supplier… They deny competitors free access to the market for the tied
product, not because the party imposing the tying requirements has a better product or a lower price but because
of his power or leverage in another market. At the same time buyers are forced to forego their free choice between
competing products.” See Corwin v. Los Angeles Newspaper Serv. Bureau, Inc., 4 Cal. 3d 842, 856 (1971). In this
instance, Facebook agreed to offer its data, providing an enormous competitive advantage, “only on the condition
that the buyer also purchases a different product,” in this case advertising expenditures that may be entirely
unrelated to the data access. Such “buyers are forced to forego their free choice between competing products”
because Facebook will cause their software applications to shut down if they do not comply. Buyers who could
not meet the arbitrary minimum requirements set by Facebook were shut out of the market, as was the case with
Plaintiff since it could not afford to spend $250,000 per year on unrelated advertising expenses with Facebook.
Plaintiff’s annual advertising budget was far lower than this arbitrary minimum.

15
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