Joseph Shofet et al. v. Zillow Inc. et al. (2024)

Proceedings: ORDER GRANTING DEFENDANT'S MOTION TO DISMISS [12]

I. Introduction

Before the Court is a motion to dismiss filed by defendants Zillow, Inc., Zillow Group Inc., Zillow Group Marketplace Inc., Zillow Closing and Escrow Services CA, Inc., and Trulia, LLC. For the following reasons, Defendants' motion is GRANTED.

II. Factual and Procedural Background

A. Procedural History

Plaintiffs Joseph Shofet, Keyonne Brooks, Grace Lau, Eric Chiusolo, and Damien Montoya (collectively, “Plaintiffs”) filed this class action lawsuit against defendants Zillow, Inc., Zillow Group Inc., Zillow Group Marketplace Inc., and Trulia, LLC, in Los Angeles Superior Court on November 21, 2023. See Compl., ECF No. 1-1. Plaintiffs filed their First Amended Complaint in Los Angeles Superior Court on December 19, 2023. See First Am. Compl. (“FAC”), ECF No. 1-12. Plaintiffs added Daniel Fefferman as a plaintiff and Zillow Closing and Escrow Services CA, Inc. as a defendant (together with previously mentioned entities, “Defendants”).

Defendants removed the case to federal court on January 4, 2024, and filed a motion to dismiss on January 11, 2024. ECF Nos. 1, 12. The parties stipulated to have the Court defer ruling on this motion to dismiss until it had resolved a motion for remand which Plaintiffs filed on February 2, 2024. ECF Nos. 14, 16. The Court denied the motion to remand on March 27, 2024. ECF No. 25. The Court then took the motion to dismiss under submission on July 19, 2024. ECF No. 36.

B. Facts Alleged

Defendants are “related corporate entities” which run Zillow, a collection of various platforms that constitute “the most-visited real estate website in the United States.” FAC ¶ 18, ECF No. 1-12. Zillow offers “customers an on-demand experience to assist consumers who are interested in selling, buying, renting and/or financing [real] properties.” Id. Plaintiffs are California residents who used Zillow. Id. ¶¶ 12–17. Plaintiffs allege that Defendants have “engaged in an intentional business strategy to silence each and every customer or potential customer who visits [Zillow] by purporting to bind users to its Terms—immediately upon accessing any of its Platforms.” Id. ¶ 22. Plaintiffs' complaint alleges a single cause of action against all Defendants: violation of Cal. Civ. Code § 1670.8 (the “Yelp Law”). Id. ¶¶ 48–56.

Cal. Civ. Code § 1670.8 contains two key subsections. First, “[a] contract or proposed contract for the sale or lease of consumer goods or services may not include a provision waiving the consumer's right to make any statement regarding the seller or lessor or its employees or agents, or concerning the goods or services.” § 1670.8(a)(1). Second, “[i]t shall be unlawful to threaten or to seek to enforce a provision made unlawful under this section, or to otherwise penalize a consumer for making any statement protected under this section.” § 1670.8(a)(2).

Plaintiffs argue that the following terms included in Defendants' Terms of Use (“TOU”) violate § 1670.8. First, users must agree not to “use the Services in any way that is unlawful, or harms the Zillow Companies, its service providers, suppliers, affiliates, or any other user.” Defs.' Mot. to Dismiss, Schwartz Deck Ex. A (Terms of Use) at § 5, ECF No. 12-2. Second, users must agree not to “post, reproduce, publicly display, or otherwise make accessible any content, which we, in our sole judgement and discretion, consider illegal, offensive or objectionable including without limitation content that harasses, discriminates, demeans, threatens or disparages any individual or class of individuals.” Id.

Plaintiffs further allege that Defendants make the following threats to individuals who violate the TOU. First, “[i]f you violate any provision of these Terms of Use, your permission from the Zillow Companies to use the Services will terminate automatically. In addition, we may, in our sole discretion, deactivate, suspend, or terminate your access to your account and the Services at any time for any reason, with or without notice. We may alter, suspend, or discontinue the Services or any portion of the Services without notice.” Id. at § 12. Second, “[w]e may, however, at any time and without prior notice, screen, remove, edit, or block any User content on the Services, including User Materials, that in our sole judgment violates these Terms of Use or we find otherwise objectionable, including any violation of our Good Neighbor Policy, described in Section 13(B).” Id. at § 7(B). That Good Neighbor Policy contains various provisions encouraging respectful interactions among users and discouraging discriminatory and/or illegal conduct. It is summarized as follows: “If we feel any content is inappropriate or off-topic, we reserve the right to remove it and, if we deem necessary, restrict access. Basically, respect other folks on the site. Be a good neighbor. And, if you see anything that is inappropriate, please report it. That's it! We enjoy having you here and want to thank you for helping make Zillow more useful for everyone.” Good Neighbor Policy, Zillow, https://www.zillow.com/z/info/good-neiglrbor-policy (https://perma.cc/K5ZX-ZN38).

The named plaintiffs all claim to have “visited and used Defendants' Platforms.” FAC ¶¶12–17. One of the named plaintiffs, Daniel Fefferman, “paid money to [Defendants] in exchange for services offered for sale through [Zillow].” Id. ¶ 50.

III. Legal Standard

A motion to dismiss under Rule 12(b)(6) challenges the legal sufficiency of the claims stated in the complaint. See Fed. R. Civ. P. 12(b)(6). To sruvive a motion to dismiss, the plaintiff's complaint “must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.” ’ Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). 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. A complaint that offers mere “labels and conclusions” or “a formulaic recitation of the elements of a cause of action will not do.” Id.; see also Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009) (citing Iqbal, 556 U.S. at 678).

In reviewing a Rule 12(b)(6) motion, a court “must accept as true all factual allegations in the complaint and draw all reasonable inferences in favor of the nonmoving party.” Retail Prop. Trust v. United Bhd. of Carpenters & Joiners of Am., 768 F.3d 938, 945 (9th Cir. 2014). Thus, “[w]hile legal conclusions can provide the complaint's framework, they must be supported by factual allegations. When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief.” Iqbal, 556 U.S. at 679.

IV. Discussion

A. Plaintiffs Have Failed to Allege That the TOU Constitutes a Contract for the Sale or Lease of Goods, as Required by Cal. Civ. Code § 1670.8

Caselaw is unanimous that the text of Cal. Civ. Code § 1670.8 means what it says: the statute only applies to “[a] contract or proposed contract for the sale or lease of consumer goods or services.” Cal. Civ. Code § 1670.8(a)(1). Roldan v. Bank of Am., Nat'l Ass'n. No. 2:24-cv-00136-SPG-PD, 2024 U.S. Dist. LEXIS 49882, 2024 WL 1430251, at *8 (C.D. Cal. Mar. 19, 2024) (“As the text of the code makes clear, Section 1670.8 applies only to contracts for the sale or lease of goods or services.”); Masry v. Lowe's Co., No. 24-cv-00750-CRB, 2024 U.S. Dist. LEXIS 114764, 2024 WL 3228086, at *18 (N.D. Cal. June 28, 2024) (quoting Roldan for the same statutory construction); Lardizabal v. Vanguard Grp., Inc., No. 24-1577, 2024 U.S. Dist. LEXIS 100579, 2024 WL 2867786, at *11 (E.D. Pa. June 6, 2024) (“[U]nder the clear terms of the statute, Section 1670.8 applies only to contracts or proposed contracts for the sale or lease of goods or services. ”);¹ Anderson v. UPS of Am., Inc., No. 2:24-cv-00096-DSF-SSC, ___ F. Supp. 3d. ___, 2024 U.S. Dist. LEXIS 89527, at *6 (C.D. Cal. May 17, 2024) (“As the text of the statute makes clear, § 1670.8 applies to contracts for the sale or lease of goods or services only.”).

Despite this textual clarity, Plaintiffs make unpersuasive arguments invoking legislative history to argue that § 1670.8 can be applied to free online services. Pls.' Opp'n to Defs.' Mot. to Dismiss 18–20, ECF No. 27. The California Supreme Court has stated that if a statute's language “is clear, courts must generally follow its plain meaning unless a literal interpretation would result in absurd consequences the Legislature did not intend.” City of San Jose v. Superior Ct., 389 P.3d 848, 852–53 (2017). This Court finds no absurd results in following the statute's plain text and therefore joins the many other courts that have interpreted the statute in the same way. Therefore, in order for Plaintiffs to state a valid claim under § 1670.8, they must allege the existence of “[a] contract or proposed contract for the sale or lease of consumer goods or services.” § 1670.8(a)(1). Plaintiffs have failed to do so here.

Cases that have considered similar claims have uniformly concluded that a § 1670.8 claim fails without details specifying (1) what goods or services were purchased and (2) how the contract containing the disputed terms governed the purchase of those goods or services. The principal case here is Roldan v. Bank of Am., Nat'l Ass'n, No. 2:24-cv-00136-SPG-PD, 2024 U.S. Dist. LEXIS 49882, 2024 WL 1430251 (C.D. Cal. Mar. 19, 2024). The allegations in Roldan were remarkably similar to those alleged here. To use Bank of America's online banking services, users had to agree to the Bank's Online Banking Service Agreement (“OBSA”). 2024 U.S. Dist. LEXIS 49882, 2024 WL 1430251, at *3. The OBSA prohibited users from using Bank of America's products (namely a digital payment system called Zelle) in ways that were reputationally harmful or brand damaging to Bank of America, which it defined as monetary transactions related to, e.g., illegal activity, pornography, sex work, terrorism, fraud, money laundering, etc. Id. at *3–6. The plaintiffs in Roldan merely alleged that they had purchased goods or services from Bank of America via its online services. They did not identify what those goods or services were, and they did not identify how the OBSA governed their alleged purchases. The Roldan court found its plaintiffs' complaint to be deficient due to its ambiguity between two possibilities: “(1) Plaintiffs contracted with Defendant Bank to purchase goods or services and the OBSA agreement is the contract (or a part of the contract): and (2) Plaintiffs used the Bank's mobile-banking services to purchase other ‘goods or services.’ Under this second interpretation, although Plaintiffs' use of the Bank's mobile-banking services would be covered by the OBSA, the purchased ‘goods or services’ likely would be governed by separate sales contracts.” Id. at *9.

Numerous courts have adopted the reasoning in Roldan to dismiss similarly defective claims. E.g., Masry v. Lowe's Co., No. 24-cv-00750-CRB, 2024 U.S. Dist. LEXIS 114764, 2024 WL 3228086, at *19 (N.D. Cal. June 28, 2024) (accepting the reasoning in Roldan and noting that the plaintiffs in this case “do not explain why a contract that applies regardless of whether a purchase or sale is contemplated is a contract ‘for the purchase or sale’ of goods”); Lardizabal v. Vanguard Grp., Inc., No. 24-1577, 2024 U.S. Dist. LEXIS 100579, 2024 WL 2867786, at *12 (E.D. Pa. June 6, 2024) (similarly accepting the reasoning in Roldan that “the Online Terms of Use govern the use of the website itself as opposed to the ‘sale or lease of goods,’ as required by Section 1670.8,” and applying it to a situation in which plaintiffs had alleged engaging in transactions with a securities broker):² Anderson v. UPS of Am., Inc., No. 2:24-cv-00096-DSF-SSC, ___ F. Supp. 3d. ___, 2024 U.S. Dist. LEXIS 89527, at *7 (C.D. Cal. May 17, 2024) (“Plaintiffs have not provided sufficient facts to allege that the Terms are a contract for the sale or lease of goods or services.”).

Here, Plaintiffs' complaint suffers from the same deficiencies identified in Roldan and the other cases that have cited it. Only one named plaintiff claims to have paid any money to Defendants. However, that plaintiff (Fefferman) merely alleges that he “visited and used Defendants' Platforms, and paid money to Zillow in exchange for services offered for sale on the Platforms.” FAC ¶ 17. Plaintiffs do not identify what services Fefferman purchased.³ More importantly, they do not identify how the TOU acts as a contract for the sale or lease of goods or services. Because Plaintiffs have failed to make these key allegations, they have failed to allege a valid § 1670.8 claim.

Masry astutely explains why it is insufficient for Plaintiffs to allege that (1) they bought something on Defendants' website and (2) use of the website is governed by the TOU. The Court quotes at length:

That Plaintiffs fail to allege a violation of Section 1670.8 is even clearer when comparing Section 1670.8 to other statutes. For example, the federal Consumer Review Fairness Act of 2016 (CRFA) prohibits any use of a ‘form contract’ to ban consumer reviews, defining a form contract as one used by a person ‘in the course’ of selling or leasing goods or services. 15 U.S.C. § 45b(a)(3) (emphasis added). Because terms of services may be used in the course of selling goods or services, the CRFA plausibly prohibits Defendants' alleged conduct here. See Federal Trade Commission, Consumer Review Fairness Act: What Businesses Need to Know (last accessed June 4, 2024), https ://www.ftc.gov/business-guidance/resources/consumer-review-faimess-act-what-businesses-need-know (explaining that the CRFA was passed in response to reports that businesses put contract provisions in their online terms and conditions that prevent consumers from posting negative reviews). However, Section 1670.8(a)(1) does not apply to form contracts used in the course of selling or leasing goods or services; it applies only to form contracts for the sale of goods or services. Plaintiffs fail to sufficiently allege that the website terms of use are a contract for the sale of goods or services, and therefore fail to allege that the non-disparagement clause in the terms of use would violate Section 1670.8(a)(1).

2024 U.S. Dist. LEXIS 114764, 2024 WL 3228086, at *19–20 (footnote omitted). In other words, a contract “that applies regardless of whether a purchase or sale is contemplated” is not a contract for the purchase or sale of goods. Id. at *19. Pursuant to this distinction, courts have routinely denied similar claims even when plaintiffs have alleged spending money on a website whose terms of use they thought violated § 1670.8. E.g., id. at *18–19 (dismissing § 1670.8 challenge to Lowe's terms of service even though plaintiffs claimed to have bought unspecified goods on Lowe's platforms); Roldan, 2024 U.S. Dist. LEXIS 49882, 2024 WL 1430251, at *8–9 (dismissing § 1670.8 challenge to Bank of America's terms of service even though plaintiffs claim to have taken part in unspecified transactions on Bank of America's platforms; Lardizabal, 2024 U.S. Dist. LEXIS 100579, 2024 WL 2867786, at *12-13 (dismissing § 1670.8 challenge to Vanguard's terms of service even though plaintiffs claimed to have taken part in unspecified transactions on Vanguard's platforms).

Courts that have dismissed similar complaints on this basis often grant plaintiffs leave to amend their complaints to address these deficiencies rooted in vagueness. E.g., Roldan, 2024 U.S. Dist. LEXIS 49882, 2024 WL 1430251, at *10; Masry, 2024 U.S. Dist. LEXIS 114764, 2024 WL 3228086, at *22; Lardizabal 2024 U.S. Dist. LEXIS 100579, 2024 WL 2867786, at *13; Anderson, ___ F. Supp. 3d. ___. 2024 U.S. Dist. LEXIS 89527, at *12. The Court would grant Plaintiffs leave to amend if it were dismissing solely on this basis; however, Defendants have identified an irreparable flaw in Plaintiffs' complaint, as explained below.

B. The TOU Does Not Contain a Non-Disparagement Clause

Even if Plaintiffs managed to allege (1) what goods or services Fefferman purchased and (2) how the TOU governed that purchase, they would still fail to state a § 1670.8 claim because the TOU does not contain a non-disparagement clause.

Defendants argue that the TOU does not prohibit users from making statements about Defendants because it only applies to individuals. Defs.' Mot. to Dismiss 12, ECF No. 12. Specifically, they point to the following agreement in the TOU: users must agree not to “post, reproduce, publicly display, or otherwise make accessible any content, which we, in our sole judgement and discretion, consider illegal, offensive or objectionable including without limitation content that harasses, discriminates, demeans, threatens or disparages any individual or class of individuals.” Defs.' Mot. to Dismiss, Schwartz Decl. Ex. A (Terms of Use) at § 5, ECF No. 12-2 (emphasis added). According to Defendants, the objected-to contractual provisions do not “waive or limit any rights of users to communicate negatively about Zillow. Rather, the provisions all govern how visitors may use Zillow 's platforms, and enshrine Zillow's right to protect its Platforms from unlawful or harmful activity and content that is objectionable.” Defs.' Mot. to Dismiss 11, ECF No. 12 (emphasis in original).

Plaintiffs counter that Defendants' construction of the language above, particularly the focus on whether Defendants are ‘individuals,’ ignores other language included in the TOU. Specifically, Plaintiffs point to the fact that users must agree not to “use the Services in any way that is unlawful, or harms the Zillow Companies, its service providers, suppliers, affiliates, or any other user.” Defs.' Mot. to Dismiss, Schwartz Decl. Ex. A (Terms of Use) at § 5, ECF No. 12-2 (emphasis added). Plaintiffs argue that these provisions, when read together, “unmistakably show that Zillow's terms force customers to waive their rights to make statements about Zillow.” Pls.' Opp'n to Defs.' Mot. to Dismiss 14, ECF No. 27.

“Resolution of contractual claims on a motion to dismiss is proper if the terms of the contract are unambiguous.” Monaco v. Bear Stearns Residential Mortg. Corp., 554 F. Supp. 2d 1034, 1040 (C.D. Cal. 2008) (quoting Bedrosian v. Tenet Healthcare Corp., 208 F.3d 220 (9th Cir. 2000)). “Under California law, ․ the determination of whether a contract is ambiguous presents a question of law.” Airborne Freight Corp. v. McPherson, 427 F.2d 1283, 1285 (9th Cir. 1970) (citing Gardiner v. Gaither, 329 P.2d 22 (Cal. 1958)). “A contract provision will be considered ambiguous when it is capable of two or more reasonable interpretations.” Monaco, 554 F. Supp. 2d at 1040 (citing Bay Cities Paving & Grading, Inc. v. Lawyers' Mut. Ins. Co., 855 P.2d 1263, 1271 (Cal. 1993)). “Language in a contract must be interpreted as a whole and in the circumstances of the case.” Monaco, 554 F. Supp. 2d at 1040 (citing Bank of W. v. Superior Ct., 833 P.2d 545, 552 (Cal. 1992)). “Where the language ‘leaves doubt as to the parties' intent,’ the motion to dismiss must be denied.” Id. (internal citations omitted) (citing Consul Ltd. v. Solide Enters., Inc., 802 F.2d 1143, 1149 (9th Cir. 1986)).

Plaintiffs' attempt to manufacture a non-disparagement clause fails. Reading the document as a whole, it is obvious that the objected-to language in the TOU is aimed at preserving Defendants' ability to moderate Zillow to keep it free or illegal or hateful comments. Read in this context, the objected-to terms in the TOU do not prohibit users from disparaging Defendants. Plaintiffs seek to insert such a prohibition from the language prohibiting users from “harm[ing] the Zillow Companies,” but their attempt to do so is unpersuasive. “Specific terms of a contract govern inconsistent, more general terms.” Idaho v. Shoshone-Bannock Tribes, 465 F.3d 1095, 1099 (9th Cir. 2006) (citing S. Cal. Gas Co. v. City of Santa Ana, 336 F.3d 885, 891 (9th Cir. 2003) (per curiam); Restatement (Second) of Contracts § 203 (Am. L. Inst. 1981)). The TOU contains a general statement that users may not harm Defendants. That general statement cannot convert the TOU's prohibition on making disparaging remarks about individuals into a prohibition on making disparaging remarks about Defendants.

By way of comparison, a genuine non-disparagement clause might look like the one challenged in Masry. In that case, the defendant's terms of service required “users to agree they will not post any content to the Sites that ‘defame[s], misrepresent[s], or contain[s] disparaging remarks about Lowe's Organization or its products, or other people, products, services, or companies․” 2024 U.S. Dist. LEXIS 114764, 2024 WL 3228086, at *3 (alterations in original).⁴ Here, the TOU contains no language whatsoever stating that Plaintiffs may not make disparaging remarks about Defendants.

Plaintiffs will not be able to manufacture a non-disparagement clause where none exists in an amended complaint; leave to amend will be futile to correct this fundamental deficiency.

C. Even if the TOU Contained a Non-Disparagement Clause, Plaintiffs Have Failed to Allege that Defendants Attempted or Threatened to Enforce the TOU

Lastly, Plaintiffs have failed to allege that Defendants attempted to enforce or threatened to enforce the TOU. Because the Court finds § 1670.8 to only create a private right of action when a defendant does so, Plaintiffs further fail to state a claim.

The parties differ on the question of how § 1670.8 should be interpreted. Defendants believe that the statute is written in such a way that a private right of action only exists under subsection (a)(2), and not subsection (a)(1). Defs.' Mot. to Dismiss 12, ECF No. 12. Specifically, Defendants argue that only § 1670.8(2) contains language that describes unlawful behavior. Defs.' Reply ISO Mot. to Dismiss 6–7, ECF No. 29. The relevant subsections are reproduced below:

(1) A contract or proposed contract for the sale or lease of consumer goods or services may not include a provision waiving the consumer's right to make any statement regarding the seller or lessor or its employees or agents, or concerning the goods or services.

(2) It shall be unlawful to threaten or to seek to enforce a provision made unlawful under this section, or to otherwise penalize a consumer for making any statement protected under this section.

§ 1670.8(a)(1)–(2) (emphasis added). Defendants' argument is that only § 1670.8(a)(2) describes behavior that gives rise to a cause of action: “If the legislature wanted the mere inclusion of such a contractual provision [i.e., what is described in § 1670.8(a)(1)] to be actionable, it could have said so. It did not.” Defs.' Reply ISO Mot. to Dismiss 7, ECF No. 29.

Plaintiffs counter with an appeal to legislative purpose and history. Pls.' Opp'n to Defs.' Mot. to Dismiss 15–17. First, they claim that the statute is meant to have a preventative purpose and should be read accordingly. Second, they argue that a description of the bill from the California Senate Judiciary committee supports the argument that the statute makes two distinct behaviors unlawful:

This bill would provide that a contract or proposed contract for the sale or lease of consumer goods or services is unlawful if it includes a provision requiring the consumer to waive his or her right to make any statement regarding the consumer's experience with the seller or lessor or its employees or agents, unless the waiver of this right was knowing, voluntary, and intelligent. The bill would also make it unlawful for a party to threaten or to seek to enforce a provision in violation of the above, or to otherwise penalize a consumer for making any statement regarding the consumer's experience with a seller or lessor, or its employees or agent, unless the consumer has knowingly, voluntarily, and intelligently waived his or her right to do so.

Request for Judicial Notice, Ex. C (California Senate Judiciary Committee Report), ECF No. 28-3 (emphasis added).⁵

The only case to have addressed a similar argument so far is Anderson. The Anderson defendants moved to dismiss the plaintiffs' complaint on numerous grounds; the Anderson court granted dismissal based on several of them. Broadly, this Court agrees with the analysis in Anderson, which is fully consistent with the Court's analysis in Section IV-A supra. However, Anderson rejected its defendants' argument that there is no private right of action under § 1670.8(a)(1). Instead, the Anderson court found that “§ 1670.8 does not require Plaintiffs to allege a threat or penalty in order to state a claim. An individual or entity can violate § 1670.8 simply by including a non-disparagement clause in a contract or proposed contract for the sale or lease of consumer goods or services. The Court interprets subsection (a)(1) of the statute to stand on its own.” ___ F. Supp. 3d. ___, 2024 U.S. Dist. LEXIS 89527, at *8 On this point—and only this point—the Court disagrees with the Anderson court. The Anderson court did not explain how it arrived at this conclusion. For the following reasons, the Court is persuaded by Defendants' arguments that § 1670.8(a)(1) does not create a private right of action.

Defendants' reading of the statute is more in line with the statutory text and accounts for the variation in language between § 1670.8(a)(1) and § 1670.8(a)(2). Under this reading, subsection (a)(1) voids non-disparagement clauses in contracts for the sale or lease of goods and services, while subsection (a)(2) creates a cause of action against those who attempt to enforce the clauses voided by subsection (a)(1). This distinction comes from the fact that only subsection (a)(2) contains language referring to unlawful conduct. See Gaines v. Fid. Nat'l Title Ins. Co., 365 P.3d 904, 926 (2016) (“As a general rule, when a legislature includes particular language in one section of a statute but omits it in another section of the same Act, it is generally presumed that it acts intentionally and purposely in the disparate inclusion or exclusion.”) (internal quotations and alterations omitted) (citing Russello v. United States, 464 U.S. 16, 23 (1983); People v. Trevino, 27 P.3d 283, 285 (Cal. 2001)). Additionally, if the mere inclusion of a non-disparagement clause is actionable under subsection (a)(1), then subsection (a)(2)'s prohibition on threatening to enforce such a clause becomes superfluous; all such instances would already be captured by subsection (a)(1). “The California Supreme Court has long made clear that ‘interpretations which render any part of a statute superfluous are to be avoided.’ ” Curtis v. Irwin Indus., 913 F.3d 1146, 1154 (9th Cir. 2019) (citing Wells v. One2One Learning Found., 141 P.3d 225, 248 (Cal. 2006), as modified (Oct. 25, 2006)). While this reading may result in the statute having a slightly less preventative impact, it is truer to the words chosen by the California legislature.

Applying this construction, Plaintiffs have failed to allege a threat to enforce the objected-to language. Plaintiffs argue that the following TOU terms constitute threats. First, “[i]f you violate any provision of these Terms of Use, your permission from the Zillow Companies to use the Services will terminate automatically. In addition, we may. hr our sole discretion, deactivate, suspend, or terminate your access to your account and the Services at any time for any reason, with or without notice. We may alter, suspend, or discontinue the Services or any portion of the Services without notice.” Defs. ' Mot. to Dismiss, Schwartz Decl. Ex. A (Terms of Use) at § 12, ECF No. 12-2. Second, “[w]e may, however, at any time and without prior notice, screen, remove, edit, or block any User content on the Services, including User Materials, that in our sole judgment violates these Terms of Use or we find otherwise objectionable, including any violation of our Good Neighbor Policy, described in Section 13(B).” Id. at 7(b). The Court rejects Plaintiffs' argument that a contract including language that outlines what is to happen in the event of a contractual breach is equivalent to a threat to enforce that contract. If that argument were correct, all contracts could be characterized as a series of mutual threats, rather than agreements to allocate risk; such an understanding would run contrary to the basic principles of contract law. A threat to enforce a contract must come from an action outside the contract. Defendants properly characterize these TOU terms not as a threat, but as “a general reservation of Zillow's right to remove users and content from its platform for violations of the Terms that govern the Platforms.” Defs.' Reply ISO Mot. to Dismiss 7, ECF No. 29.

While Plaintiffs have not alleged that Defendants attempted to or threatened to enforce the TOU, such allegations could be included in an amended complaint. If the Court were dismissing on this basis alone, it would giant Plaintiffs leave to amend.

D. The Court Declines to Consider Defendants' Arguments Regarding the First Amendment and § 230 of the Communications Decency Act

Because the Court finds that there are three separate bases on which to dismiss Plaintiffs' case, the Court declines to evaluate Defendants' arguments regarding the First Amendment and § 230 of the Communications Decency Act.

E. Plaintiffs Are Denied Leave to Amend

“Leave to amend shall be freely given when justice so requires, and this policy is to be applied with extreme liberality.” Desertrain v. City of L.A., 754 F.3d 1147, 1154 (9th Cir. 2014) (citing Fed. R. Civ. P. 15(a); Morongo Band of Mission Indians v. Rose, 893 F.2d 1074, 1079 (9th Cir. 1990)). “This is especially so where ․ the pleader has never been afforded an opportunity to amend.” Deutsche Bank Nat'l Tr. Co. v. Fid. Nat'l Title Ins. Co., No. 20-15849, 2021 U.S. App. LEXIS 32311, 2021 WL 5002215, at *4 (9th Cir. Oct. 28, 2021) (citing Fontana v. Haskin, 262 F.3d 871, 877 n.3 (9th Cir. 2001)). However, “[l]eave to amend may be denied if the proposed amendment is futile or would be subject to dismissal.” Wheeler v. City of Santa Clara, 894 F.3d 1046, 1059 (9th Cir. 2018) (citing Carrico v. City and Cnty. of S.F., 656 F.3d 1002, 1008 (9th Cir. 2011)).

Here, the Court has identified three reasons that Plaintiffs' complaint must be dismissed. First, Plaintiffs have failed to allege both what goods or services they purchased from Defendants and that the TOU constitutes a contract for the sale or lease of goods as required for a cause of action under Cal. Civ. Code § 1670.8. Second, Plaintiffs have failed to identify a non-disparagement clause in the TOU. And third, even if the TOU did contain a non-disparagement clause, Plaintiffs have failed to allege that Defendants attempted or threatened to enforce the TOU. Failures one and three could be corrected in an amended complaint; failure two cannot be corrected. Leave to amend would therefore be futile, so the Court dismisses Plaintiffs' complaint with prejudice.

V. Conclusion

For the reasons outlined above, Defendants' motion is GRANTED and Plaintiffs' complaint is DISMISSED with prejudice.

IT IS SO ORDERED.

___ ___

Initials of Preparer PMC

FOOTNOTES

1.   Lardizabal was decided by a federal court in Pennsylvania pursuant to a motion to transfer, but the case interpreted Cal. Civ. Code § 1670.8.

2.   Lardizabal was decided by a federal court in Pennsylvania pursuant to a motion to transfer, but the case interpreted Cal. Civ. Code § 1670.8.

3.   Plaintiffs' contention that they have explained what services Fefferman purchased because they have explained that Defendants operate a real estate website are unconvincing. Pls.' Opp'n to Defs.' Mot. to Dismiss 18, ECF No. 27.

4.   Masry dismissed its plaintiffs' complaint on the grounds that “Plaintiffs fail to allege that the website terms of use governed their purchases on the website.” For that reason, it did not evaluate whether this clause was. in fact, a non-disparagement clause. However, it plainly appears to be such a clause, and the Court finds it to be a useful point of comparison. 2024 U.S. Dist. LEXIS 114764. 2024 WL 3228086, at *19 (N.D. Cal. June 28. 2024)

5.   Plaintiffs' request for judicial notice of this information is GRANTED. “Judicial notice of the legislative history of state statutes is appropriate under Federal Rule of Evidence 201.” Cal. Pac. Reg 7 Med. Ctr. v. Glob. Excel Mgmt., No. 13-cv-00540 NC, 2013 U.S. Dist. LEXIS 78520. 2013 WL 2436602, at *5 (N.D. Cal. June 4, 2013). Defendants do not oppose this request. Defendants' other requests for judicial notice, also related to documents pertaining to legislative history, are DENIED AS MOOT because the Court did not rely on those documents in reaching its decision.

The Honorable STEPHEN V. WILSON, U.S. DISTRICT JUDGE