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Loot Box Case Against Google Dismissed with Leave to Amend
THE BIG PICTURE
Game publishing platforms are immune from liability for in-game mechanics such as loot boxes under Section 230 of the CDA, at least for now.
In a case we’ve mentioned before (Coffee et al. v. Google, 20-cv-3901 (N.D. Cal.)), Google won a motion to dismiss the putative class action (though without prejudice). As a quick recap, this class action essentially claims that Google is liable for the presence of loot box games in the Google Play Store and that the games constitute illegal gambling under California gambling statutes.
SECTION 230 OF THE COMMUNICATIONS DECENCY ACT AND GAMBLING
Google’s main arguments for dismissing the complaints were that: (1) it is immune for liability under Section 230 of the Communications Decent Act; and (2) loot boxes are not illegal under California’s gambling laws.
On the issue of Section 230 immunity, the court went through the three-prong test set forth by the Ninth Circuit in Barnes v. Yahoo!, Inc., 570 F.3d 1096 (9th Cir. 2009), which provides immunity from liability for:
a provider or user of an interactive computer service
whom a plaintiff seeks to treat, under a state law cause of action, as a publisher or speaker
of information provided by another information content provider.
On the first prong, the court found that Google’s provision of the Google Apps store qualified it as an interactive computer service provider.
On the second prong, the court looked to the Ninth Circuit case Fair Hous. Council of San Fernando Valley v. Roommates.Com, 521 F.3d 1157 (9th Cir. 2008), where the Ninth Circuit found that publication was “any activity to boiled down to deciding whether to exclude material that third parties seek to post online.” In this case, plaintiffs sought to hold Google liable for failing to exclude loot box games, and the court found that the second prong was met. Plaintiffs had argued that Section 230 applies only to “speech” and does not apply to publishing computer applications. However, the court found precedent from another Northern District of California case applying Section 230 to computer applications. Plaintiffs also argued that Section 230 does not insulate Google for liability for its own wrongful conduct that goes beyond mere publication. However, plaintiffs relied on a case where Yahoo was held liable for failing to remove content after promising to do so, which took it beyond Section 230 immunity. The court found that Google made no similar promise. There’s some level of perverse incentive here where promising to take action on problematic content opens one up for liability, but remaining silent or refusing to do so does not.
On the final prong, plaintiffs argued that Google served as a co-developer of the video game apps and therefore the information was not merely “provided by another,” as required. In particular, plaintiffs pointed to Google’s requirements that developers disclose loot box odds, that Google provides ESRB-based age ratings, but Google does not require developers to provide notice that a game contains loot box mechanics. The court did not find that any of those activities constitute Google’s development of the content.
Finding that all three prongs had been met, the court granted Google’s motion to dismiss all claims on the basis that it is immune from liability under Section 230. The court also stated that even if the loot boxes were gambling under California law, Google would still be immune from liability, so it punted on the issue.
UNFAIR BUSINESS PRACTICES
Google also moved to dismiss the complaint on the basis that the plaintiffs did not allege the essential elements of their claims with respect to: (1) California’s Unfair Competition Law; (2) the California Consumer Legal Remedies Act; and (3) Unjust Enrichment.
On the UCL, plaintiffs’ claims related to the UCL’s prohibition on unlawful business practices and unfair business practices. Google argued in part that the complaint didn’t allege facts showing economic injury, which is required for a UCL violation. The court found this persuasive because Google’s only real involvement with the players was the initial purchase of virtual currency, but the plaintiffs did not explain how their purchases of the virtual currency resulted in an economic loss (such as receiving fewer of the loot box “prize” than the amount that they paid for). The court also stated that any loss the plaintiffs suffered due to the in-game purchases were not attributable to Google and that plaintiffs could spend the virtual currency on other items in-game, not just loot boxes. For these reasons, the court separately dismissed this claim.
On the CLRA claim, plaintiffs alleged that Google violated the CLRA by presenting loot boxes as potentially giving rights to valuable prizes when those loot boxes were gambling as prohibited by law. The CLRA protects against “unfair methods of competition and unfair or deceptive acts or practices undertaken by any person in a transaction intended to result or which results in the sale or lease of goods or services to any consumer.” Google argued that virtual currencies are not “goods or services” as defined by the CLRA and that plaintiffs failed to allege any specific representations by Google with respect to loot boxes. The court found these arguments persuasive as the games at issue were downloaded for free and the sale of virtual currency is not a good or service under the CLRA (though if the games had been pay games, it’s unclear if this analysis changes). The court also agreed with Google that the plaintiffs did not identify any specific representations by Google in the complaint and separately dismissed plaintiffs’ CLRA claim as well.
On the unjust enrichment claim, Google moved to dismiss this claim because the plaintiffs did not identify any applicable state law, and the court agreed.
The court did leave open the possibility that the plaintiffs could amend the complaint sufficiently to show that Google’s content goes beyond that of a mere publisher and therefore Section 230 immunity would not apply. The court also mentioned that the Ninth Circuit decision in HomeAway.com, Inc. v. City of Santa Monica, 918 F.3d 676 (9th Cir. 2019) might provide plaintffs’ claims some support, but that plaintiffs failed to adequately brief or argue the issue. Ultimately, I think we’ll see an amended complaint come through, but don’t think plaintiffs will find long term success absent some not-generally-known facts about Google’s operations.