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LLC v. Rakuten, Inc.

United States District Court, D. Massachusetts

September 15, 2014

RAKUTEN, INC., et al., Defendants.


DENISE J. CASPER, District Judge.

I. Introduction

Plaintiff Licensed 2 Thrill, LLC ("L2T") brings this lawsuit against Defendants Rakuten, Inc. ("Rakuten"), Rakuten USA, Inc. ("Rakuten USA") and FreeCause, Inc. ("FreeCause") asserting a number of claims arising from the parties' affiliate marketing agreement. D. 15. L2T has asserted claims for breach of contract against FreeCause (Count I); violation of Mass. Gen. L. c. 93A, § 2 against FreeCause (Counts II and III); tortious interference with contractual relations against Rakuten and Rakuten USA (Count IV); fraudulent misrepresentation against FreeCause (Count V); aiding and abetting fraud against Rakuten and Rakuten USA (Count VI); civil conspiracy against all Defendants (Count VII); unjust enrichment against all Defendants (Count VIII); and quantum meruit against FreeCause (Count IX). D. 15 at 7, 10-12, 15-17. Rakuten USA and FreeCause have moved to dismiss all counts of the amended complaint against them.[1] D. 19. For the reasons discussed below, the Court ALLOWS IN PART and DENIES IN PART the motion to dismiss, D. 19.

II. Factual Allegations

The facts recited here are as alleged in the amended complaint, D. 15.

Internet search engines and online retailers form affiliations with third parties to direct Internet customers to certain websites. D. 15 ¶ 8. Affiliate marketers assist companies, including search engines and online retailers, in directing online customers to click on sponsored links, thereafter earning a commission from such companies if consumers click on these sponsored links. Id.

The Defendants are related companies that provide online affiliate marketing services. Id . Rakuten operates businesses and networks that coordinate affiliate marketing businesses. Id . ¶ 9. Rakuten USA, which purchased FreeCause in 2009, is a wholly owned subsidiary of Rakuten. Id . ¶ 10. FreeCause is an affiliate marketing company that "induce[s] online consumers to engage in search and shop activities, " generating commission and revenues. Id . ¶ 11.

In 2008, FreeCause developed a software that allows Internet users to opt into loyalty/affinity programs for popular brands and charities. Id . ¶ 12. Once the shopper downloads such software, FreeCause gains revenue from search engines and retailers affiliated with Rakuten-owned and operated affiliate marketers. Id . At the time this software was developed, FreeCause did not have "high level access to causes, organizations or brands to promote its software." Id . ¶ 14.

L2T is a company engaged in business development, sales and marketing. Id . ¶ 13. L2T "builds customer relationship by using contacts to produce business opportunities, develop sales channels and assist in market planning and execution for its clients, " thus developing access to "high level" contacts at a number of organizations. Id . ¶ 15. On December 28, 2008, L2T and FreeCause entered into a Referral Partner Program Agreement ("RPP Agreement"). Id . ¶ 16. Under the RPP Agreement, L2T would introduce to FreeCause certain businesses and then FreeCause would promote its software to these businesses. Id . ¶ 17. If the introduction to a business resulted in FreeCause's software being downloaded (and thereby generating revenue for FreeCause), L2T would receive a ten percent commission from the gross revenues. Id . Under the terms of the RPP Agreement, such contacts were deemed "Prospective Leads, " i.e., "third parties who may wish for [FreeCause] to provide them with FreeCause products." D. 15-1 at 3. The RPP Agreement also provided that after L2T identified a Prospective Lead, it would provide FreeCause with a completed "Lead Activity Form" describing the Prospective Lead. Id . After receiving the Lead Activity Form, the contract allowed FreeCause seven business days to "formally accept a lead" to be delivered to L2T "via U.S. mail, email or facsimile." Id . "If accepted by FreeCause, the Prospective Lead will then constitute a "Qualified Lead." Id . The contract provided that if FreeCause declined a Prospective Lead, it did not "have any obligation to [L2T] under this Agreement or Program, or otherwise with respect to such Prospective Lead." Id . The contract also provided that if a Prospective Lead had not previously entered into an agreement with FreeCause, had not previously been referred to or introduced to FreeCause by someone else, and FreeCause entered into an agreement with the Prospective Lead within sixty days of L2T's referral, the Prospective Lead would be considered a "User" and FreeCause would pay L2T a royalty per the terms of the RPP Agreement. Id.

L2T asserts that before and after entering into the RPP Agreement, principals from FreeCause represented to L2T that the company could expect to receive, on average, nearly thirty cents in commission per month for each computer user who downloaded the software. D. 15 ¶ 18.

In late 2008, L2T began introducing FreeCause to its business contacts. Id . ¶ 19. L2T asserts that several such leads became Qualified Leads and that L2T was to earn commissions for those leads. Id . ¶ 20. By late 2009, L2T alleges, it had introduced FreeCause to dozens of contacts, including CBS Sports, which signed a contract with FreeCause around 2008 or 2009. Id . ¶ 21. L2T alleges, upon information and belief, that within one year of the signing of such contract, "there were more than 160, 000 FreeCause software downloads to accounts associated with CBS Sports." Id . L2T asserts that it should have received $48, 000 per month in commissions as a result of the CBS Sports lead alone, totaling more than $500, 000 to date. Id . ¶ 22. L2T alleges that FreeCause has paid only about $50, 000 total for all of the contacts L2T provided to it. Id.

III. Procedural History

L2T filed suit on May 23, 2013 against Rakuten, Rakuten USA, FreeCause, CauseLoyalty, LLC and OneCause Loyalty Inc. D. 1. FreeCause, CauseLoyalty, LLC and Rakuten USA moved to dismiss the original complaint. D. 10. L2T filed an amended complaint against only Rakuten, Rakuten USA and FreeCause on August 15, 2013, D. 15, which is the operative complaint in this case. Rakuten USA and FreeCause have now moved to dismiss all ...

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